Milepost 5 and the Affordable Housing Grift

How an International Hedge Fund Took Portland artists and Taxpayers for a Ride

When I first heard about Milepost 5 back in 2010, I considered the idea of the community to be a Godsend for Portland’s artist community. When I moved to Portland as a young musician back in 1994, rents were the most affordable of any city on the west coast. My first apartment I rented in Raleigh Hills was $525 per month for a two-bedroom. I remember a friend who would make his rent by playing a few gigs per month, selling a little weed, and giving blood at the local clinic.

By 2010, rents had more than doubled, and young artists, trying to make it in the very difficult and competitive artist and musician scene, were no longer able to afford to live in the city. Portland’s mayor at the time, Sam Adams, wanted to fix that problem with Milepost 5, one of his pet projects. A local development company, Beam Development, a Portland company, in partnership with an affordable housing trust, looked to convert a former nursing home on Northwest 82^nd Avenue, called Baptist Manor, to a residence of dorms and communal spaces that artists could rent cheaply and showcase their talents. The price of the sale was $2.2 million, and with a $250,000 investment from the city, Milepost 5 began to move in residents in 2010.

The community spaces had residents’ art hung on the walls, and the courtyard would have theater and music productions. In the time that Beam Development ran the communal atmosphere at Milepost 5, the dream of a vibrant artist community was a reality.

In 2018, that all changed. Beam Development decided to sell the property to a California developer specializing in properties designed for low-income renters, Community Development Partners, or CDP. In 2019, CDP petitioned the Oregon Housing and Community Services to further develop Milepost 5 as an affordable housing property in exchange for federal tax credits. Unfortunately, this meant that roughly 25 residents who had too high of an income for the units were evicted since their financial position didn’t coincide with affordable housing requirements. It is unclear if any of those evicted were compensated with moving expenses. Soon after these evictions, the artist community was replaced with an entirely different set of renters.

The original funding of the building was supported by $7.1 million in tax exempt bonds, $500,000 in taxable bonds, and $2.1 million in tax credits. Also, CDP received a loan of $5.6 million from California Bank and Trust.

Since then, the woes at Milepost 5 have been widely reported by several media outlets including OPB, KATU, and the Willamette Week. Many media outlets have reported on the atrocious living conditions at the property, which include cockroaches, non-working facilities, and even exposed asbestos. Communal spaces were at times locked up, and kitchen facilities were in disrepair. The property has been overrun by drug users and dealers, as well as squatters. Interestingly, none of the above news outlets have dug in to why the property went downhill after CDP purchased it.

Although CDP technically owns Milepost 5, they only own 1/10 of 1% of the property, just enough to be listed as the owner. On the Multnomah County property tax website, the owner is listed as MP5 LP with an address in Folsom, CA that is listed to FPI Properties, a low-income property management company. FPI has 455 reviews on Yelp, with an average review of 1.4. FPI is just a property management firm, albeit a poor one, the actual owner, that owns 99.9% of that property is Aegon Asset Management. Aegon is an international hedge fund and according to its website, “Aegon Asset Management has 385 investment professionals who manage and advise $337 billion across a range of fixed income, equity, real asset and multi-asset strategies for clients around the world.” Aegon’s US operations is run out of San Francisco, but they have offices everywhere from Baltimore, to London, to Budapest, to even Cedar Rapids, Iowa.

Records show in 2019, CDP requested even more federal funds. These funds were earmarked for improvements to the property, for such things as new plumbing and electrical, a new roof, and new windows. Between 2019 and 2023 very few visible renovations took place. In 2023, CDP received $3.3 million in the form of a NOFA for the improvements on Milepost 5 that CDP had neglected with the first round of funds in the proceeding 4 years. CDP used a part of the funding for a new roof, but issues in the building still exist, as indicated above with a significant vermin problem. CDP claims that they were required to do seismic updates on the property shortly after receiving these funds, and they claimed that much of the $3.3 million were needed for those updates. However, according to records we received from a public records request, these seismic improvements had an estimated cost of $350,000 by the city, a fraction of the money CDP and Aegon received from the federal government for the initial improvements. Transparency around Milepost 5 finances via public records requests with OHCS has not been forthcoming.

In the meantime, it appears that CDP’s bank loan with CBT that it took out in 2019 is in arrears. The $5.6 million the company owed on the property is now over $6 million. Visible in the public record, CDP also mentioned receiving a $86,000 NOFA for Milepost 5 in December of 2022, supposedly from the Landlord Compensation Fund, which was a Covid-era program, which ended nearly a year and a half prior to the funds being distributed. OHCS still hasn’t provided details of this public funding award after several requests.

Another strange development occurred shortly after CDP took over. The affordable rents at the property were found to be not so affordable. In a piece written in early 2020 by Willamette Week writer Rachel Monahan, showed that local rental watchdog group, Portland Tenants United, found that CDP was charging rents nearly 20% over the hard cap rental price of $693/month for a single room at the property. Tenants reported paying rents as high as $825 for these rooms. Considering a typical room is 150 square feet or less, it would be like paying around $2500/month for a 600 square foot apartment, based on the rent/square foot cost. PTU’s complaints apparently fell on deaf ears over at OHCS until Willamette Week called them out about writing the story. Shortly afterwards, CDP reduced the rents for these apartments back to the cap rate of $693/month.

milepost5apts.com

A former neighbor of Milepost 5, Neil Whitacre, who previously lived in the Loft Condos next to Milepost 5, started to ask questions once the building fell into disrepair. He and other neighbors also saw an alarming rise in drug dealing/use, and crime emanating from the property. Once the drug dealers and users took over the property, squatters began to arrive, making the property more and more dangerous for everyone. At one point, three of the doors to the property wouldn’t lock, so anyone walking down 82^nd Avenue could access the building any time they wanted.

Neighbors and residents began to speak to other tenants about the disrepair they experienced in the building and in their units and how many of the units had become uninhabitable. These neighbors and tenants decided to alert CDP about the issues and, over the last 2 and a half years, have attempted to engage with everyone from CDP CEO Eric Paine, to the Director of OHCS, Natasha Detweiler-Bady, to Oregon Rep. Mark Gamba’s office. Some improvements have been made but Neil says it’s still a blighted property with no accountability from CDP or OHCS. Since none of these individuals have been willing to speak to anyone directly, the only information that has been discovered is through endless requests for public records.

According to Neil, the property management company must have stopped doing background checks on potential tenants or simply botched several criminal screenings. The drug dealing became so excessive at the property, that dealers were selling drugs out of their first-floor windows. Neil says that on the south side of the building, there was a window that dealt heroin. On the north side, there was a window that dealt fentanyl and meth – a veritable McDonald’s drive-through for dangerous narcotics.

Notices, Narcan & Evictions

After Neil engaged with local police about the problem, an agent from Homeland Security Investigations (HIS) contacted him about one individual in particular: Harold Anthony Davis Jr. Davis was on probation for multiple felonies and was even required to wear an ankle monitor. Davis was also one of the primary drug dealers at Milepost 5. He gained access to the property because his uncle was a resident, and he began squatting in his uncle’s unit while his uncle was away at rehab. Davis Jr. was also one of the individuals dealing out of ground-floor windows. After an investigation was conducted, HSI raided the building and hit more than one unit, making three arrests.

Harold Anthony Davis Jr. has an extensive criminal background

Another criminal who embedded himself into the property at Milepost 5 was Richard Batista. Batista has an extensive criminal record including a disturbing history of abusing women, but he was also arrested just prior to becoming a resident at Milepost 5 saying Bautista was “armed with a chain and was chasing people and screaming racial slurs. By the time deputies arrived, they said the suspect had shattered glass on the shelter and set it on fire,” according to a KATU article published on June 2^nd, 2023. After Batista also terrified Milepost 5 residents for months, CDP finally evicted him. According to neighbors, Batista trashed his unit so badly that they unit still is uninhabitable and has been sealed up for as long as a year.

Richard Batista in a 2022 Multnomah County Mugshot

Milepost 5, being a LIHTC property (Low-Income Housing Tax Credit) has rules for who they allow to be a tenant based upon HUD housing rules. There are certain felony convictions surrounding violence and drug dealing or manufacturing that automatically exclude individuals with those types of criminality in their background. OHCS is required to monitor Milepost 5’s tenant screening process criteria that were to be conducted through FPI, the property management company. Per conversations acquired by public records requests, OHCS, in actual conversations, decided to look the other way for 8-10 months while FPI allowed many incoming tenants to rent units without the required background screening.

In a Housing Stability Council (HSC) special meeting put on by OHCS on January 22^nd of 2024, Neil and several Milepost 5 residents testified. Neil is cut off less than 2 minutes into his testimony by the moderator, Claire Hall, who is the Chair of the HSC council. A few other residents spoke in exasperated tones about the continued issues at the property. If you are dedicated, here is the 43 minute Youtube, Neil’s testimony starts around 15:00, the CEO Eric at 38:50.

At one point, Eric Paine takes over the conversation and speaks for several minutes about how CDP “makes commitments and bends over backwards to meet them. We are fully aware of the challenges of the neighbors and the members within the Milepost 5 community. Their concerns are a high priority.”

This meeting was called for one reason: for the committee to approve funding of CDP’s new property, Julia West - by the OHCS. Although the OHCS threatened to refuse to fund the project until the issues at Milepost 5 were resolved, OHCS came back two weeks later and provided CDP with funding to the tune of $43.6 million. Local KATU wrote an article, Oregon housing council makes empty threat to withhold $43M from low-income developer

After the meeting on January 22nd, the HSC petitioned the Department of Justice to stop allowing public testimony at their meetings, and the DOJ incredulously, granted the request.

The City of Portland, to their credit, did try to step in regarding the issues Milepost 5. A city inspector visited the property multiple times between July and October of 2023. The city sent CDP a notice of violation of the city’s property maintenance code. The list of violations totaled 25, including electrical issues, issues in the bathrooms and kitchens, and several health violations. The city gave the property 30 and 60 days, depending on the violation, to resolve the issues. It appears that CDP didn’t resolve all of the issues, and beginning on February 18^th, 2024, the city began to fine CDP by placing liens on the property at an average of around $2000/month. By October of 2024, CDP had only paid $1810.60 of a $17,000+ bill.

Portland seems to have an affordable housing dilemma. Too often, these properties are built by prioritized developers, primarily with government money, then they shoehorn as many tenants into these properties, regardless of background. Within a few years, the properties become veritable slums and centers of dangerous criminal behavior. In the meantime, companies like CDP make millions from government dollars, all the while claiming they provide “housing for low-income families with 25 properties in Oregon…many of them challenging,” as Eric Paine stated in his testimony.

Affordable housing is a buzzword that is echoed to the top of the Oregon government food chain. Governor Tina Kotek regularly speaks publicly about “Oregon’s housing crisis.” One of highest priorities Kotek had entering office was building housing at the clip of 36,000 units per year, all while population, especially in cities such as Portland, nosedives.

CDP is just a symptom of Oregon’s insistence on stubbornly following the Housing First model[1], which is meted out literally. All that apparently matters is that Oregon bureaucrats can claim that they house people. It truly doesn’t matter what these individuals’ lives are like, or the day-to-day suffering they may experience after they are thrown into these challenging properties. Ultimately, the issue, like so many in Portland and in Oregon, isn’t that there isn’t enough money for these problems. The issue is that the money is not used correctly or efficiently, or potentially, even legally. If these properties were indeed above board, then why the lack of financial transparency?

I reached out to both CEO Eric Paine and Natasha Detweiler-Daby, the Director of Affordable Rental Housing at OHCS, for this story. Eric Paine did attempt to call me back; however, after I missed his call, I received a call from his attorney, John DiLorenzo, instead. According to DiLorenzo, a settlement of a lawsuit had been reached between CDP and a tenant plaintiff and the terms included a non-disclosure agreement. Although the lawsuit began was originally filed as a class action, the class action claims were dropped by the other tenants in the building. DiLorenzo remarked that the present affordable housing model is fraught with landlord challenges that include crime and illegal drug use and dealing, and suggested that Milepost 5 did the best they could under these conditions.

One final thought: It’s truly a disturbing model that hedge funds are investing in government sponsored housing apparently in order to receive government funds to raise their bottom line while people suffer in the housing they own and are supposed to service, all the while state agencies like OHCS, who are supposed to monitor these development companies, look the other way.

[1] Housing First is a philosophy and a service model whose proponents believe providing permanent housing to the homeless is the priority, because they believe that a person must first have a safe place to live before the person can address his or her other issues.

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