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The city of Albert Lea last month reached a settlement with the former owner of two houses in Albert Lea who was unable to meet the terms of a development agreement with the city to renovate and turn them into veterans housing.

Kevin Chapman purchased the properties at 604 Giles Place and 110 N. Second Ave. from the city in 2023 but has since sold them.

The settlement called for Chapman to pay $12,000 for the house on Giles Place and $3,000 for the Second Avenue house based on the city’s remaining interest in the properties and outcomes of the property sales. The amounts will be given to local veterans groups in the coming weeks.

Albert Lea City Attorney Joel Holstad said the city had sold the properties to Chapman in 2023 as it sought to return the properties to the housing stock after it acquired them through tax forfeiture.

“It is a very genuine interest of the city of Albert Lea to create more housing,” Holstad said, noting Chapman’s proposal for veterans housing struck a chord with the Albert Lea City Council. Chapman also received significant community support for the project, including donated materials and labor. Renewal by Andersen in July 2023 donated all of the labor and materials to install windows, entry doors and gutters. Home Depot and Jacobson Construction and Design LLC were two others that donated services later that year.

Chapman originally paid $18,000 for the house on Giles Place and $14,000 for the house on Second Avenue, according to documents filed with the Freeborn County Recorder’s Office. He had submitted proposals for work on the houses, along with the timeline of when work was to be completed, and his proposals were accepted.

Holstad said Chapman was unable to complete the project and had put the houses on the market. The city then filed a notice of reversionary interest, which stated that Chapman had not made the required improvements to make the houses occupant-ready under the city’s building codes and rental ordinance within the time frame indicated in the agreement.

Some of the improvements needed in the house on Giles Place included abating all mold in the house, replacing damaged lumber and drywall, installing new flooring, installing a new or updated kitchen, among others. The home had previously been damaged by a house fire, and the city had cleared the fire debris and took the house down to the studs.

With the notice, the titles were marked, and the city had the opportunity to have a say in who they were sold to, Holstad said. It could have — but did not — get to the point where it could have regained ownership of the house.

Both properties have since sold to parties the city believes are capable, interested and motivated to return the houses to the housing market for general housing, Holstad said.

By reaching the settlement with Chapman, it will allow the properties to get back into the housing stock significantly earlier than if the city had to take Chapman to court.

The settlement payment covers what Holstad described as a “substantial contribution” that the community put toward the homes, and that with such, the intent of the donors would still be “substantially met.” The amount was a negotiated compromise between both parties and was determined after analyzing the tasks that were performed and the services contributed toward the project.

“The city is happy that the community effort resulted in a benefit to veterans organizations,” Holstad said.

Chapman, when contacted about the agreement this week, said there were many reasons he was not able to complete the projects, noting there were other circumstances that brought the Chapman House Foundation back to the southeastern part of the country. He also noted high construction costs and lack of tradespeople in Minnesota.

He said labor costs in Minnesota are three to five times higher than projects they have done in other parts of the country and that if he were to do the projects over again, he would have found houses that didn’t need as much work and purchased them from a private party.

The Giles Place house sold May 14 for $135,000 to Charles Merritt Homes Inc., and the Second Avenue house sold in December to CCH Rental Services LLC for $39,500.

While they were not able to complete the houses as originally intended, Chapman estimated that the Giles Place property was about 80 to 85 percent complete.

“It’s just unfortunate that the project didn’t go forward because there are a lot of veterans in Minnesota who were counting on us being there,” he said.

He estimated there had been over $160,000 put into the house on Giles when all was said and done.

Chapman still owns a house on Meredith Road and said he would be in and out of the community as he works with a few other nonprofits in Minnesota that specialize in helping veterans.