Reporter at News 5 Cleveland
Fourteen troubled apartment buildings near Shaker Square are set to change hands in the wake of an online auction, despite the city of Cleveland’s attempts to derail the sale.
The auction ended Wednesday afternoon with a top bid of $5.5 million. It’s too early to say who the winner is — and what the path forward looks like. Bidders were vying to step into the existing lender’s shoes, gaining the right to complete the foreclosure process and ultimately become the new landlord. The properties, north and south of Shaker Square, include 308 apartments.
They’re only 10% occupied. The auction ended a month-long standoff between the city of Cleveland and Fannie Mae, the government-sponsored mortgage giant looking to wash its hands of $22 million in bad debt on the buildings. City officials and neighbors pleaded with Fannie Mae to cancel the auction — and to sell the properties to local nonprofits or trusted stewards instead.
RELATED: Cleveland tries to stop auction of 14 troubled apartment buildings near Shaker SquareMayor Justin Bibb’s administration was worried that the buildings would fall into the wrong hands, putting more stress on a district where there’s lots of public and civic money at stake. The apartment buildings deteriorated and emptied out under the previous owner, New York-based investor Mendel Steiner, who died by suicide in January 2025. The auction, originally scheduled for December, was delayed several times.
City lawyers tried to drag Fannie Mae to the negotiating table by filing a civil nuisance lawsuit on the properties and attempting to intervene in Fannie Mae’s foreclosure litigation. Earlier this month, the city’s building department threatened to hold a hearing to condemn two vacant buildings. Fannie Mae pushed back in federal court, arguing the city was overstepping its authority.
Ultimately, a special master — an expert assigned to help a judge manage the messy case — said the auction could move forward without interference from the city. But the city will be able to conduct an evaluation of the properties after the sale, in preparation for negotiating with the buyer to fix a long list of code violations. A judge signed off on the special master’s recommendations this week.
“We will be planning the needs assessment as soon as the note closes,” Sally Martin O’Toole, the city’s building director, wrote in a text message to News 5 on Wednesday. “We will aggressively enforce the code on whoever ends up in control of the portfolio. ”The Morelands Group, a grassroots coalition of neighbors focused on strengthening the apartment market around Shaker Square, expressed disappointment with the outcome. They believe the auction website painted an overly rosy picture of the buildings.
Neighborhood activists fear the sale will just lead to another cycle of distress and a missed opportunity to restore and preserve modestly priced apartments.
“Prioritizing debt recovery over reinvestment in this context is unconscionable,” the Morelands Group wrote in a statement rebuking Fannie Mae. “Preventing decline depends on owners, lenders and the city all doing their jobs. When properties … accumulate serious violations, it is time to stop business as usual. ”Michelle Jarboe is the business growth and development reporter at News 5 Cleveland. Follow her on X @MJarboe or email her at Michelle. Jarboe@wews.com.
Cleveland Apartments Fannie Mae Fannie Mae Foreclosures Marketplace Auctions Mendel Steiner Morelands Group Shaker Square Shaker Square Apartments Foreclosure Auctions
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