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New landlord turning slum into gem

10/28/02
Michael O’Malley Plain Dealer Reporter

One of Cleveland’s biggest and most dangerous slums – a 484-unit housing complex where generations of kids have played on hard dirt and broken glass in the shadows of ugly buildings and lurking drug dealers – is undergoing extensive renovation.

In fact, Rainbow Terrace off East 79th Street, home to hundreds of poor people, mostly women and children, can no longer be called a slum. New construction and restoration – nearly half done – show promises of a dramatic transformation.

And the change is not just new bricks and mortar.

Each apartment is being equipped with high-speed Internet access. Tenants will receive free service and a new, free computer when they complete an on-site computer training course.

Behind this venture is Vesta Corp., a Connecticut real estate company that bought the troubled 24-building complex a year ago and is pumping more than $50 million in public and private dollars into it.

The for-profit company has a contract with the Department of Housing and Urban Development, under the so-called Section 8 program, to provide “decent, safe and sanitary” housing for Rainbow’s low income tenants in exchange for rent subsidies.

But Vesta owner Arthur Greenblatt is going beyond that. Using HUD money, he has built a learning center that includes a computer lab, a day-care center and classrooms for after-school tutoring.

“It’s the right thing to do,” he said. “Why shouldn’t these kids who live in Section 8 housing be given the same opportunities as my kids?”

“Now, do you want to hear the selfish piece to all this? We get rental money if we can keep everybody happy. And when everybody’s happy, there’s going to be less vandalism.”

Signs of hope are everywhere among the three-story, flat-roofed boxes that not long ago looked like a bombed-out barracks.

Vesta has been evicting troublemaker tenants. Work crews are removing hazardous window bars, planting trees and flowers and erecting buildings on the 30-acre site.

Some tenants, entrenched in poverty and squalor for decades, have begun moving into bright, clean places equipped with air conditioning and shiny new appliances.

“When I walked into my new apartment, I started to cry,” said resident Diana Stradford. “I took my shoes off.”

Greenblatt has put together an education partnership made up of Vesta, HUD, Cuyahoga Community College and nearby Anton Grdina Elementary School.

Besides teaching basic computer skills, it will initially provide specialized reading and math programs for children and high school equivalency classes.

“To have choice, you have to have income,” Greenblatt told a tenants meeting at Rainbow this month. “Income comes from education.”

Computers are scheduled to be installed this week. And Vesta has hired the Kerry Co., a computer consulting firm in Washington, to build a Rainbow Terrace Web site with links to social-service agencies.

“I think this stands to be a national model,” said L. Tiffany Barnes, director of libraries and technology at CCC. “It provides the type of training that people need to succeed. But it just doesn’t end with basic computer skills. It’ll whet the appetite for lifelong learning.”

Greenblatt recently conducted a tour for tenants at the new learning center. While trying to find the right key for the right door, he walked across a newly seeded lawn, prompting a tenant to yell, “Don’t walk on the grass, Mr. Greenblatt.” The landlord, who preferred the use of his first name, turned to the tenant and said, “Arthur.”

Greenblatt’s approach to Rainbow Terrace is in stark contrast to its previous owner, Associated Estates Realty Corp., a giant national firm based in Beachwood and headed by Jeffrey Friedman of Hunting Valley.

Because of slum conditions, HUD in 1998 declared its contract with Associated Estates in default and forced the company to give up the property, but not before paying the landlord $1.78 million to walk away from Rainbow and two other Cleveland slums the company operated.

The deal – secretly hammered out by Associated Estates and HUD officials in Washington – was exposed by The Plain Dealer in 1999, forcing a HUD lawyer to admit that the deal was so bad for taxpayers, the HUD official who signed it “held his nose.”

Associated Estates has argued that it had pumped millions of dollars into the properties in an attempt to turn them around and that the $1.78 million was back rent payments that HUD had owed the company.

“Associated Estates’ commitment to the underprivileged and disadvantaged of Cleveland is a matter of record, and that record is long and proud,” the company said in a statement this week.

The government deal said Associated Estates had to find a new owner for Rainbow Terrace or it would not be paid. But the company never found the owner and still got the money.

HUD also forgave a $1.9 million mortgage on the property.

Now HUD is carrying a new mortgage – $14.8 million – for Vesta and has awarded an $11.7 million grant to the project. Greenblatt has secured tax credits and investment income that puts the total package at about $52 million.

Greenblatt intends to keep the complex at 484 units. So far, 150 of them – 24 new and 126 renovated – are completed. The entire project is scheduled to be completed by 2003.

To reach this Plain Dealer reporter: momalley@plaind.com, 216-999-4893

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