Karmel Mall owner faces foreclosure suit against his Minneapolis apartments over maintenance issues

Two of developer Basim Sabri’s south Minneapolis apartment buildings are facing mortgage foreclosures because they allegedly failed to make more than $530,000 in required repairs.

Fannie Mae, a mortgage company sponsored by the federal government, on Friday sued to foreclose on Rana Village and Karmel Village.

Fannie Mae is asking Hennepin County District Court to grant the foreclosures and appoint receivers over both properties, which are located on the 2900 block of Pleasant Avenue S.

Sabri said in an interview on Wednesday that some of the biggest repairs demanded by Fannie Mae aren’t needed, and those that were necessary have been mostly completed.

“We could have done better with the maintenance,” he said. “But does this warrant foreclosure? Absolutely not. They are not being reasonable.”

He called Fannie Mae’s $537,000 repair estimate “crazy.”

Sabri, a prominent and controversial Minneapolis developer, is best known for developing Karmel Plaza, where scores of Somali Minnesotans run shops and restaurants.

The Karmel Mall and other Sabri developments take up much of Pleasant and Pillsbury avenues between the Midtown Greenway and W. Lake Street. Karmel Plaza is not party to the lawsuits.

Rana Village was completed in 2020 and has 113 units, while Karmel Village opened in 2010 and has 92 units. They respectively owe Fannie Mae about $19 million and $8 million.

Sabri said he is current on his loan payments, and would pay off the mortgages if pressed to stop foreclosure proceedings.

On Nov. 20, Sabri was informed that both properties failed to meet maintenance requirements outlined in loan agreements.

Fannie Mae in the suit said when the issues weren’t fixed, it put the Rana and Karmel loans into default, asking for immediate and full payment.

Without the required repairs, the apartments’ “value will be significantly reduced,” Fannie Mae says in the suit.

Furthermore, “borrowers’ failure to undertake and complete the required repairs has put the health and safety of all residents and guests at risk,” Fannie Mae claims.

Rana Village needs repairs totaling $272,950, including $250,000 to fix the building’s exterior “cladding,” according to a consultant’s assessment filed in court. The “cladding is in overall fair to poor condition,” and the consultant noted “poor installation practices and possibly substandard building material.”

Sabri contested that claim.

“I wrote them back and said, ‘Look, I think your inspector has made substantial mistakes about how the siding of Rana was installed. It was properly installed and there is no repair needed,’” he said.

Karmel Village needs $263,700 in repairs, including $75,000 for cladding and painting and $72,000 to replace small sections of flat roofing that are damaged, a court filing said.

Sabri said the roofing has been fixed.

Also, the consultant found that Karmel Village and Rana Village needed to remedy a mice infestation to the tune of $5,000 per building.

Sabri said that mice have been “truly a problem and we could have done better. ... We are declaring war on mice and have aggressively dealt with the mice problem.”

The city of Minneapolis has cited both Rana Village and Karmel Village in the past two years for several code violations, including for rodents and trash, rubble and tree removal, according to city spokesperson Jess Olstad.

Karmel Village also was cited for lacking smoke detectors and missing fire extinguishers. Sabri said those issues were attended to “immediately.”

Sabri, a Palestinian immigrant, started in development by rehabbing a small Minneapolis apartment building where he was living about 30 years ago. He quickly moved into commercial property, and became a visionary presence on Lake Street.

Karmel Plaza is a hive of entrepreneurship, and Sabri’s complex of buildings near Lake Street houses one of the Twin Cities biggest mosques.

He has also clashed with city leaders over the years, usually over building code violations, and spent 18 months in a federal prison in the mid-2000s for bribing a city councilor.

Sabri said that Rana Village is “immaculate — a very beautiful building.”

Karmel Village is older, and ”is not really run down, but not to my standards," he said. “So I did a whole face-lift to the inside of the building … not for Fannie Mae, but for my tenants and prospective tenants."