A stray cat inside Terrace Manor, one of Sanford Capitals properties.s properties. Credit: Darrow Montgomery

Tivoli Gardens, a 49-unit apartment complex on North Capitol Street NE, presents a puzzle. It is almost fully occupied, and residents pay an average of $1,120 a month for small one-bedroom units. Several pay more than $1,300. Yet the living conditions are desperate. Mice scamper the halls and climb over each other on the shelves of a common area closet. Residents feed stray cats because they kill the mice. Stairwell windows are broken, and none of the outer doors lock. Some don’t even have doorknobs.

Is Tivoli Gardens a cash cow for its owner, given that tenants are paying near market rent and the company does little to maintain it? How does a landlord make money off a property in such terrible condition? Why do residents stay?

The District has its share of troubled buildings. In January alone, D.C.’s Department of Consumer and Regulatory Affairs filed 61 “wrongful housing” liens against private properties. In December, the agency filed 86 such liens. Last November, 88. Vermin infestations, walls blackened with mold, lack of heat, and broken appliances are among the conditions at these properties.

A. Carter Nowell‘s company Sanford Capital owns Tivoli Gardens. In researching this giant D.C. slumlord for a recent cover storyCity Paper found different profit scenarios at its various properties. Some squalid Sanford-owned buildings were nearly vacant, more valuable to a future developer empty. Some were full of low-income tenants with government-issued housing vouchers, guaranteeing regular rent payments.  

So what’s the profit scenario at Tivoli? We drew up an interactive cash flow spreadsheet based on what we know. In real estate and finance speak, this spreadsheet is called a pro forma. Some of the numbers in our pro forma for Tivoli Gardens are fact, while others are educated guesses. Nowell, who surely has accurate numbers, did not respond to interview requests for our original article.

You can play with the numbers below to see how different choices impact cash flow. Use the glossary to see what each term means. If you’re looking to go deeper, the U.S. Department of Housing and Urban Development offers a more detailed pro forma for download.

Fee income:Sanford charges tenants a fee if rent is more than five days late at some of its properties. Residents at Tivoli Gardens report the fee is $100. At Belmont Crossing, it’s $20. Residents are charged other seemingly random fees as well. Tujuanda Blalock at Congress Heights says she was once charged a $400 parking fee. At Belmont Crossing, tenants received notices that they would be fined for sitting on building stoops.

Units vacant:Also known as “vacancy rate.” According to a recent rent roll for Tivoli Gardens obtained by City Paper, the property is about 10 percent vacant. Residents say most units are usually occupied.

Rent going unpaid:In a real pro forma, this would be called “bad debt,” a term that generally means rent a landlord can’t collect. Landlords want to keep this number low, and one way to do that is to evict tenants who are behind on their rent payments.

Operating expenses:Utility bills, pest control, treating mold infestations, regular trash removal, washer/dryer maintenance, and pay for employees who do maintenance work all count as operating expenses. Per unit per year, an estimated $7,200 would keep Tivoli Gardens in decent shape, given that the buildings are old and that heat and electricity are included in rent. Since the property is not in decent shape, and some tenants complain they have no heat, it may be that Sanford spends much less in this category.

Capital improvements:Also known as RFR, or “reserved for replacement,” this category includes big-ticket items that need to be replaced—broken building doors and locks, broken stoves and windows, and common area lights. The mortgage lender often defines what’s included in this category. Per unit per year, $300 is a responsible and typical amount to set aside, but building conditions suggest Sanford spends less. Multiple residents at Sanford properties report receiving used items when their appliances break, and broken doors are common at several Sanford properties.

Purchase price: This is public information available atpropertyquest.dc.gov.

Mortgage financing:Also known as the “loan to value” (LTV) ratio, it describes what percentage of the total purchase price was covered by bank loans. The city’s Recorder of Deeds makes mortgage documents (called “deeds of trust” in D.C.) available to the public online. Since Sanford actually took out more than 100 percent of the property’s purchase price in loans, and Nowell has since refinanced, this number is complicated. In addition, interest rates have fluctuated since Sanford purchased Tivoli in 2010. And though the Federal Reserve sets target interest rates, the exact rate on a given loan is not available to the public. So to keep it simple, we used an LTV of 75 percent and an interest rate of 6 percent. 

Taxes: In D.C. the tax rate for a multifamily residential property is $0.85 per $100 in current value. The city’s property value assessments are also available atpropertyquest.dc.gov.

So is Tivoli Gardens a cash cow? The short answer: probably not. The property appears to generate income, but not a ton of it.

The pro forma shows something different. Owners can increase cash flow by skimping on repairs and nickel-and-diming residents at every turn—at least in this model. Collecting late rent fees, reducing maintenance costs (such as asking residents to kill mice on landlord-provided sticky pads rather than hiring an exterminator), and avoiding capital expenditures all add up.

Can Sanford profit off Tivoli? The old adage “location, location, location” applies here. The buildings comprising Tivoli have increased in value by more than $1 million over the last year alone. Sanford purchased Tivoli for $2.1 million in 2010. Now it’s worth nearly $4 million, according to the District’s latest assessment. Abutting properties have also increased in value. The complex is an 11-minute walk from the Fort Totten Metro station and about a mile and a half from the new Walmart on Georgia Avenue NW.

Tivoli Gardens is currently for sale.

Without Sanford Capital’s financials in hand, it’s impossible to know if, how, and how much the company makes on Tivoli Gardens. This exercise provides insight into the possibilities.

And why do tenants stay? Residents deal with terrible conditions at several buildings owned by Sanford Capital. In some cases residents have lived in the same place for decades. Remembering better days, they opt to fight for good conditions rather than leave. Others are there to assert their right to stay in a gentrifying city. 

At Tivoli Gardens residents are majority Latino, with many speaking only Spanish. Despite terrible conditions, life there has its joys. Kids play outside together after school and on the weekends. One woman keeps an elaborate vegetable garden in the complex yard. Some neighbors have known each other for many years.

“Most of the people here see what work needs to be done,” says resident Esmerelda Posadas. “They’ll say, ‘I’ll do it myself.’ But those are small fixes.”