DETROIT

Spaulding Court, Historic North Corktown Apartment Complex, Faces Financial Shortfall

07/19/2012 09:08 am ET | Updated Jul 19, 2012

In June, a Detroit community group dedicated to rehabilitating a historic North Corktown apartment complex named Spaulding Court celebrated the building's 100th anniversary with an all-day neighborhood party. It was a festive and hopeful moment for the distinctive limestone-capped structure, which over the years had fallen into disrepair and developed a reputation as a hotspot for drugs and crime.

But for the nonprofit organization rehabbing the buildings, the Friends of Spaulding Court, this celebration has been short lived. After a recent examination of their finances, the organization has realized they are in danger of losing the building.

"There is a very big possibility this could be put up at the [Wayne County] property auction in September or October," Jon Koller, 27, the group's president, told The Huffington Post. "We don't want that, but if we don't pay the county the 2009 [back taxes] for the building, we will lose the building."

In a letter sent out Tuesday, Koller laid out the situation to the group's membership and supporters. They need to raise $7,000 by the end of the month to keep the building from foreclosure and $3,000 in the next four weeks to stay up to date on their 2012 taxes. The group also needs to refinance $36,000 in short term construction debt by the end of next month. Currently Friends of Spaulding Court has put $125,000 in capital investment into the structure and are gearing up to invest another $350,000 into the building through spring of 2013.

Ironically, the project is very close to being financially viable. Koller estimates that rental income will cover the group's expenses by January. Three units are currently occupied and two more are expected to be completed around the beginning of next year.

The group purchased Spaulding Court for $1,000 in 2010. It had gone up for auction by the county following a nuisance abatement claim filed by the Corktown Residents Council -- the group from which Koller's organization emerged. Friends of Spaulding Court are organized as nonprofit corporation dedicated to providing decent, low cost housing and spurring neighborhood revitalization. The group is run by a board and all members live within a mile of the apartment complex.

So far, Friends of Spaulding Court has paid for renovations and other expenses through a combination of donations and microloans. Because the project was launched following the foreclosure crisis of 2008, members have been skeptical of seeking out financing through large banks. The microfinance ethic runs pretty deep at Spaulding Court, which is also home to a monthly dinner called Soup that offers micro-grants for creative projects in the city. The question facing the group now is whether its membership can rally enough support to keep control of the building. Koller is hopeful this last fundraising push will finally put Spaulding Court on stable financial ground.

"The danger is: are we going to raise the money or not?" he said, "We're committed to raising it!"

Ultimately it may be interest in Spaulding Court's distinctive look and long history that saves it from foreclosure.

The apartment complex is composed of a pair of buildings that gaze inward at each other over a stone courtyard, rather than out towards the street. According to Koller, it was constructed by William Dubois, a contractor who built a lot of brick and stone infrastructure for the city of Detroit, as a residence for his employees.

Timothy Boscarino, 31, an architectural historian and historical preservationist who lives in Detroit, has long been curious about the unusual structure. He told The Huffington Post that distinctive buildings such as Spaulding Court can play a key role in revitalizing a neighborhood.

"A unique and interesting place like that is really the kind of thing that forms the focus of a community like that. It makes it a place where people want to come," he said. "If the effort were to fail financially, it would be a real big loss from that perspective."

Boscarino called the organization's micro-financing model "innovative," but added that historical preservation projects tend have have an "out-of-the-box" approach to fundraising that often rely on multiple sources of revenue. He is unsure of what would happen to Spaulding Court if it went to auction.

"For a building of that configuration, it's hard to make a guess," he said. "I obviously hope they keep the building. But if they don't, I hope it's picked up by someone who would take care of it and had the same vision."

For more information about Spaulding Court visit spauldingcourt.com or view their recent fundraising drive letter.

UPDATE: 2:15 p.m. -- In an email, Koller further explained the reasons for Spaulding Court's current financial issues:

We purchased the building and incurred two years of back taxes (2008 and 2009). Since then, we've incurred taxes in 2010, 2011 and soon 2012. We've paid all our taxes except the 2009 taxes (we've paid
about $1500 towards them so far). There are very significant fees for letting current taxes get late and we've prioritized paying our current taxes over our back taxes.

Regarding our other expenditures, we've been in a stabilization mode. Frankly, when you're wondering if you should focus on stopping violence in the neighborhood or on paying down back taxes, the choice is pretty obvious. I suppose you can look back and say, "hey, why not just put aside the money for the 2009 taxes" but the reality is that two years ago, bullets were flying, our water service was constantly exploding, the electrical service was perpetually on fire and we had no income to cover our monthly costs.

All of this in an environment where even people with jobs and good credit scores can't find a loan to purchase a home. We tried to refinance our debt last summer, got a tepid response, and decided to focus on organizing so that the effort this year would be more successful.

We're still ironing out our plans for this coming season (we've got 66 days to go) but it likely it will be a combination of grants and loans. Foundations and socially minded banks are more interested in funding something new than refinancing existing debt. The extremely tight time table for paying down our taxes lead us to decouple this capitalization effort from our plans we'll be presenting late September. Additionally, we thought this would be an excellent opportunity to develop fundraising competencies among the new members of our organization.

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