CINCINNATI — Blue Tide Partners, a residential real estate company partly owned by former Cincinnati Bengals placekicker Doug Pelfrey, is drowning in red ink after losing a $39.9 million foreclosure judgment in Hamilton County Common Pleas Court earlier this month.
The ruling puts more than 500 apartment units in Hamilton County under duress and makes it harder for Pelfrey to achieve the real estate goals he articulated to the WCPO 9 I-Team in 2019.
“I’m not in this to be a landlord,” Pelfrey said at the time. “I’m in this to change people's lives.”
Pelfrey said his goal was to help renters advance toward self-sufficiency through partnerships that he’s worked with since leaving the Bengals in 1999. But a series of setbacks - including the COVID-19 pandemic - made life difficult for landlords and tenants alike and saddled Pelfrey’s Covington-based company with mounting legal woes.
Pelfrey declined to be interviewed for this story but texted a statement.
“We have experienced some short-term disruptions in cash flow,” Pelfrey wrote. “This has been further aggravated by taking on some very challenging development projects that entail community involvement and approval. While it is true that the court has handed down a ruling, we have chosen not to file for bankruptcy with the goal of enacting a solution which shall be satisfactory to all of the parties.”
Tenants are worried about possible changes at 759 Ridgeway, a 34-unit Avondale complex that lost its on-site property manager in April as problems piled up.
“We had one incident where a group of young men jumped one of my neighbors,” said Kimberly Flowers, a five-year resident of the Ridgeway property. “We have people coming in here off the street like a bat out of you-know-where. And they were supposed to put a gate up that would help stop that because we have kids that play out here.”
Alexis Gibson said maintenance has deteriorated since April, when a court-appointed receiver, Prodigy Properties, replaced Blue Tide Partners as the building’s manager.
“Management doesn’t really come to the property," Gibson said. "They don’t make sure it’s clean. During the summer, when it was like 90 degrees, my AC went out. And they were not in a rush to get it fixed at all until I told them I have kids here and I would not be paying the rent until it’s fixed.”
In a July 26 report to Hamilton County Common Pleas Judge Robert Ruehlman, Prodigy Properties principal Jeff Lane pointed to future problems ahead for Blue Tide Partners tenants.
“Cincinnati Metropolitan Housing Authority has informed the receiver that it will not be able to renew existing tenants vouchers due to the foreclosure proceeding and the past-due taxes on the properties,” Lane wrote. “The collective past-due real estate taxes are almost $1 million.”
Beyond the unpaid taxes and the $39.9 million foreclosure judgment Ruehlman approved on Sept. 13, Blue Tide Partners and its affiliates face nearly $5 million in additional payments ordered by local courts in 2021.
- Hamilton County Judge Melba Marsh ordered a $1.2 million payment on Sept. 21 to Boenning & Scattergood Inc., a Columbus-based broker dealer that claims it was never paid for helping Blue Tide Partners arrange financing between 2016 and 2019.
- Hamilton County Judge Wende Cross awarded a $552,784 judgment on July 7 to the city of Cincinnati, which sued Blue Tide Partners over unpaid water bills and building code citations in 2020.
- Butler County Judge Noah Powers awarded a $2.55 million judgment on May 13 to Spade Contracting LLC, which alleged it wasn’t paid most of what it was owed from a $3.1 million construction contract it signed with Blue Tide in 2020.
- Kenton County Judge Patricia Summe approved an agreed judgment on March 31 requiring Blue Tide Partners to pay $657,625 to Ashley Moser of Union, Kentucky.
The Kenton County ruling came five days after an affiliate of Columbia Pacific Advisors filed its foreclosure suit against Blue Tide Partners Hamilton LLC, seeking the appointment of a receiver to manage 25 properties that were pledged as collateral for a $26 million mortgage issued in 2018.
Pelfrey’s company has been in default since January 2019, but a series of forbearance agreements delayed foreclosure actions through October 2020, according to an affidavit filed with the complaint. In the March 26 foreclosure suit, a Columbia Pacific affiliate claimed Blue Tide Partners Hamilton LLC owed $39.9 million with interest accruing at nearly $18,788 per day since Feb. 21.
Prodigy Properties gave a sobering account of property conditions at the 25 buildings caught in the foreclosure.
“Many of the properties were not adequately insured,” Lane wrote in his July 26 report. “Many of the mechanicals in the occupied properties have not been maintained or are beyond their useful life, which will mean a significant capital investment is in the future.”
Ten of the buildings have no occupants, because their renovations are unfinished or never started. Six buildings have vacancy rates higher than 20%. Of the 515 units in all 26 properties, 260 were occupied as of July 26. Lane said he was reviewing options for the sale of all but two hotel properties in the portfolio.
Pelfrey planned to convert the Carrousel Inn and Drake Motel to housing for veterans when Blue Tide bought the Reading Road properties in 2018. But he was unable to secure Sycamore Township zoning approvals for the project. The buildings have deteriorated since.
The Carrousel was in “absolutely atrocious condition,” said Prodigy’s report. “There is fire damage, water damage, vandalism, evidence of squatters and a myriad of code violations … it appears the defendant received a fire damage insurance payment of approximately $100,000, but did not repair the building.”
The Drake Motel was “in complete disrepair,” the report added. “At takeover by the receiver, many of the doors were opened and one unit was packed with used tires … the receiver has been unable to secure insurance given the condition of the property and the premises.”
The 43-unit Ridgeway property is one of the best-performing complexes in the Blue Tide Partners portfolio. The three-building complex, “is approximately 90% occupied by market and subsidized renters,” Prodigy reported.
But that won’t keep the complex from losing tenants like Di Nelson, who wants a bigger place to share with her 4-month-old son, Adrian. Like Ridgeway tenants Gibson and Flowers, Nelson noticed a decline in safety and maintenance because of the foreclosure.
“This is probably not the best area to raise children, that’s for sure,” Nelson said.