The Slumlord of SouthMinneapolisRodent and roach infestations.Overflowing dumpsters. Frigidheating vents. Meet SpirosZorbalas.By Jonathan Kaminskypublished: January 30, 2008Will StaehleDetails:See an INTERACTIVEMAP of SpirosZorbalas's propertiesand VIEW LEGALIN A BASEMENTAPARTMENT on 22ndAvenue in south Minneapolis,a round-faced woman six months removed from Mexico fries chiles on herstove. Despite the welcome heat from cooking, Maria, who asked that herlast name be withheld, says there's a downside to spending too much time inthe kitchen: "It's really gross to be making dinner when the roaches comeout," she says, pointing to a cockroach crawling on the countertop.Living one flight up is Fabiola Rojas, a pretty young woman raisingtwo-year-old Emiliano. In addition to roaches and mice, Rojas's apartmenthas flaking lead paint, and little Emiliano recently tested positive for leadpoisoning.Both women say the building lacks heat, and on a 25-degree afternoon theirvents felt cool to the touch.In a building across the street, the situation is similarly grim. One woman, atired-looking cleaning lady who wouldn't give her name for fear of eviction,pertaining to thisshares a one-bedroom apartment with her three children. Aside from a TVstory.on a small desk and a thin mattress on the floor, her living room has nofurniture. She had to throw it all out, she explains, because of the bedbugsthat infested the apartment in the fall. She vacuums daily and has tried allthe pest killers she can find, but the bugs remain.DOCUMENTS"If we get something new," she says, "it'll just fill up with bedbugs again."These are not isolated incidents, and the tenants share one common denominator: Spiros Zorbalas,the brash bon vivant who owns and manages their buildings, along with more than 40 others in southMinneapolis. Many of the more than 700 units of housing he owns, particularly those occupied bypoor, Hispanic tenants, are notorious for rodent and roach infestations, boarded windows, brokenappliances, water-logged and crumbling floors and ceilings, overflowing dumpsters, drug activity, andlack of heat in winter.
Since arriving on the local real estate scene in the late 1990s, Zorbalas has been sued more than 200times, primarily by tenants demanding repairs or former tenants seeking the return of their securitydeposits. Zorbalas has also had one rental license revoked for ignoring drug dealing, and been forcedto pay 13,000 to a carpet-cleaning company for a year's worth of unpaid services and another 15,000 when a mother holding her infant son slipped and fell on a loose plastic runner in one of hisstairwells.City leaders do not disguise their disdain for Zorbalas. Councilman Gary Schiff, who has many ofZorbalas's most dilapidated properties in his south Minneapolis ward, says he is the worst landlord inthe city. "This guy has lowered the bar for slumlords," Schiff fumes.But while city officials insist steps have been taken to guard against landlords like Zorbalas, the trim,olive-skinned 44-year-old, who spends most of his time at his 5.5 million beachfront estate in Naples,Florida, remains one of the largest rental property owners in Minneapolis.For his part, Zorbalas says he takes care of his tenants, and that those with grievances are but a vocalfew. He also says that anything written in City Pages will have no impact on his bottom line. "There'llbe a little hoopla for a week," he says. "Big deal. We're going to keep running our business." And in anycase, he says, "I have nothing to hide."THE SON OF GREEK IMMIGRANTS who moved to the East Coast after World War II, Zorbalasgot a dubious start to his business career. Court records show that at the precocious age of 22, andfresh out of Dartmouth College, Zorbalas was convicted of possession of cocaine with intent todistribute. Although the available records—a plea agreement from a later case—do not elaborate, theynote that due in part to a previous conviction for larceny, he was handed a five-to-ten-year prisonsentence, of which he would serve 18 months. (Despite signing the plea agreement, Zorbalas nowclaims he's innocent of the charges. "I don't believe there's anything to that," he says.)In 1988, shortly after getting out of prison, Zorbalas moved to Minneapolis and bought a house onHolmes Avenue. But the now 25-year-old had barely had a chance to adjust to the weather before hewas back in trouble with the law.Earlier that year, Zorbalas had purchased a 10-year-old, jet-black BMW. On a trip to Chicago less thana month later, he reported it stolen. After he filed a claim with American Family Insurance, thecompany reimbursed Zorbalas 18,380 for the car, along with 600 to Snappy Car Rental for his useof a loaner.But that September, a suspicious insurance investigator spotted the BMW parked down the streetfrom Zorbalas's house, according to court records. The investigator contacted the police, which hadthe BMW towed and impounded. That night, someone cut through the fence at the impound lot, beatup the security dog, and stole the car. A month later, police officers found the BMW parked threedoors down from Zorbalas's house. When they swooped in to arrest him, he tried to run away.While waiting for the charges to be filed against him, Zorbalas decided to become more acquaintedwith the legal system, enrolling at the University of Minnesota Law School. In October 1989, just twomonths into his first semester, Zorbalas was served with a federal indictment. Charged with fivecounts of mail fraud, he copped to one, admitting to filing a false insurance claim. Pleading guilty instate court to possession of stolen property, Zorbalas acknowledged an added deception: In order tomaximize his insurance check, he'd altered the sales receipt of the car from 21,500 to 24,500.
Zorbalas was sentenced to nine months in the Duluth federal workhouse. While there, he did his bestto keep his education from suffering. He got permission for a weeklong transfer to a halfway house inMinneapolis to take his finals. (Zorbalas claims he never served time, though in a June 27, 1990, letterhe wrote that "I am presently in custody" in Duluth.)Perhaps recognizing that his rap sheet would make getting admitted to the bar something of a longshot, Zorbalas soon shifted his career focus. After getting out of prison, he quit law school and focusedhis attention instead on the U of M's Carlson School of Management.Shortly after graduating with an MBA in 1993, he took a consulting job at Arthur Anderson, thenow-shuttered firm made infamous by its pliant Enron audits. Zorbalas eventually opened his ownconsulting firm based in Atlanta, but by 1999, Zorbalas recalled in an interview with a Florida paper,he was burned out from the traveling. He decided to try his hand at real estate.BY THE TIME HIS FIRST MARRIAGE ended in 1996, divorce records show, Zorbalas owned twohouses and a duplex in Minneapolis, as well as a partial share of a building in Florida. In 1999 he gotserious about real estate, founding Uptown Classic Properties and snapping up a dozen apartmentbuildings.He'd chosen an opportune time to invest. With rental vacancy rates hovering at 1.5 percent, it was alandlord's market. And Zorbalas quickly went about capitalizing—or, as he put it in a newspaperinterview at the time, buying buildings "that have values that can be unleashed.""When he came into town, he was willing to pay more than we thought the properties warranted," saysHarold Teasdale, president of St. Louis Park-based Minnesota Brokerage Group, whose firm soldZorbalas several buildings. "As it turned out, he was right in that properties did increase in value.Particularly during the condo-conversion craze."Some of Zorbalas's new tenants saw a 60 percent hike in their rent from one month to the next, as CityPages first reported in a 1999 article. Those living at 905 E. Franklin Ave. were also subjected toZorbalas's profound hatred of pigeons. They told of seeing Zorbalas wander their apartment complexwith a BB gun. One woman saw Zorbalas with the gun when she left for work, then returned thatevening to find a hole in her window and broken glass on her floor.Yet Zorbalas continued to expand his real estate empire. In 2001 and 2002, he spent more than 30million on another 29 buildings, almost all of them in south Minneapolis. With these new investments,Zorbalas modified his strategy. While he maintained relatively high-rent buildings in Uptown,Zorbalas was now in the business of down-market properties in the poor, minority neighborhoodsflanking East Lake Street. And Zorbalas established novel ways of milking his new tenants, such ascharging upward of 100 extra for "non-emergency" maintenance work done on weekends anddemanding 80 a day in penalties for late rent.The complaints soon followed. By the end of '02, Zorbalas and his company faced 50 lawsuits inconciliation court, mainly over unreturned security deposits. The landlord also racked up hundreds ofcomplaints to city inspectors—everything from outbreaks of mold to small armies of roaches and mice.At the end of 2002 Zorbalas shuttered Uptown Classic Properties, shifting ownership of the buildingsinto a series of new companies with obscure names like SZ112 Inc., R110 Inc., and S1322 Inc. He spunthe property management component of Uptown Classic Properties into UPi Property ManagementCompany.
Then, claiming that Uptown Classic Properties no longer existed and had no successors, he set abouttrying to get all claims against the company thrown out of court.It worked in many of his cases, but when a Somali immigrant named Mohamed Ali Mohamed sued toget his security deposit back in late 2002, the judge in the case saw Zorbalas's gambit for what it was.Uptown Classic Properties, S1322, and UPi, wrote Judge John Holahan, "are all shells established byMr. Zorbalas in an attempt to avoid creditors. In fact all of these companies are alter egos of Mr.Zorbalas." The judge ordered Zorbalas to pay Mohamed the deposit and more than 1,000 inpenalties."The judge was pontificating," Zorbalas counters. "He had no facts. He was 100 percent wrong." Inspite of the judge's ruling, Zorbalas insists he won the case.Tenants weren't the only ones suing Zorbalas. In 2002, he hired AL Cleaning Services, run by VioletaLopez, to vacuum carpets in his buildings. According to the complaint Lopez filed in 2004 inHennepin County District Court, Zorbalas didn't pay her for more than a year's worth of work, andstopped returning her calls and emails. "From the beginning he never paid me on time," shecomplained. After a year and a half of legal wrangling, Zorbalas eventually settled, agreeing to payLopez 13,000.She wasn't the only worker he stiffed. In May 2002, Jilene McMillion, an office manager working forZorbalas, quit her job to spend more time with her mother. When her final paycheck arrived weekslate and hundreds of dollars short, she sued. Zorbalas forced the case to arbitration, where he wasordered to pay McMillion 2,200.The same month, Zorbalas fired Cody Forester, a handyman who'd worked for his company for morethan a year and who'd repeatedly complained about not having his taxes withheld from his paycheck.Forester filed a lawsuit for wrongful termination and accused Zorbalas of illegally keeping him off thebooks for tax purposes. Zorbalas quickly settled the case on confidential terms."I don't comment on employees," Zorbalas says.Even as he mistreated tenants, eluded creditors, and shortchanged his workers, Zorbalas presented aclean-cut image when he went before St. Paul city leaders asking for taxpayers' money. After teamingwith two other developers in downtown St. Paul to construct The Aberdeen—a 57-unit luxury condobuilding—in the spring of 2004, Zorbalas moved ahead with plans to erect a 259-unit luxuryeight-story building on Jackson Street. Even though his project allowed for a mere 12 units ofaffordable housing—a stated city priority—Zorbalas hooked city leaders on it. In July 2004, St. Paul'sHousing and Redevelopment Authority, which is made up of members of the City Council, voted togrant Zorbalas 3.99 million in forgivable loans for the project.But in fall 2004, with evidence of a coming downturn in the market mounting, Zorbalas pulled theplug on the Jackson Street Lofts, as he'd dubbed them.IN NOVEMBER 2004, POLICE WERE called to 3121 Cedar Avenue, a rundown three-storybuilding owned by Zorbalas. Inside an apartment on the third floor, a pair of officers found abedraggled, stringy-haired man who told them he'd been smoking crack there for two days straight.The police department sent a certified letter to Zorbalas warning him to straighten up the building orrisk losing his rental license.
The letter was returned unopened. Twice more in the following weeks, cops showed up at the sameapartment complex, each time to serve search warrants on khat dealers working out of the building.After each incident, the city mailed letters to Zorbalas's office demanding that he take action to rid theproperty of drug dealers. Each time, the letters were returned unopened.When the city finally revoked Zorbalas's rental license, he cried foul, insisting the city hadn't given himproper notice. After more than a year of unsuccessful appeals, during which Zobalas explained thathe'd instructed employees not to accept any mail for him, he gave up and sold the building.At about the same time, Family and Children's Service, a nonprofit social services agency in southMinneapolis, began a push to organize Zorbalas's tenants. Two of the agency's workers went door todoor, talking to tenants and drawing up a sobering list of complaints.One of the buildings organized was 3100 Bloomington Ave., where Angelina Ardid lived with herhusband and two-year-old son, Manases Ruiz. On September 14, 2004, as Ardid carried youngManases in her arms, she tripped on a loose plastic runner on the hallway stairs. The toddler took thebrunt of the fall, suffering a broken