Like dozens of other investors whose properties were severely damaged in the May riots, the Kim family was stunned to discover that the money it would collect from its insurance company for demolition won’t come close to the actual costs of doing the job. Most policies limit reimbursement to $25,000 to $50,000, but contractors have been submitting bids of $200,000 to $300,000. In many cases, the price of the work is not much lower than the actual value of the property, records show.
“I think that is price-gouging and they should contact the attorney general,” said Andrea Jenkins, vice president of the Minneapolis City Council. “That is a symbol of capitalism run amok.”
Contractors acknowledge that prices for riot-related work are far higher than usual, but they said that is because government regulations require them to treat all debris from a burned-out building as hazardous. Industry veteran Don Rachel said those rules can double demolition costs.
Islam decided to move forward on a $125,000 bid; insurance will cover just $50,000 of those costs.
“Our neighborhood looks like a war zone,” Islam said. “As a property owner, it is my moral responsibility to somehow get it done.”
The move will leave him with almost no money for rebuilding. Most of the money he got from his policy went to pay off his mortgage.
Other immigrant property owners are facing the same situation. Faisal Demaag said a contractor first offered to demolish his store, Chicago Furniture Warehouse, for $18,000. Then the company started revising the price. He is now facing a total bill of $133,000 if he moves forward.
Ade Alabi said he was billed $75,000 by the city of Minneapolis after contractors knocked down his 32,700-square-foot retail complex on East Lake Street, but he said he has struggled to find a company willing to finish the job. Two of the three contractors he contacted last month have yet to submit a bid, and the third told him last week that it will cost $363,000 just to haul away the debris.
“The guy down the road paid $114,000 for demolition and removal,” Alabi said.
Alabi said he will have just $200,000 left for rebuilding after paying off his $3.4 million mortgage — leaving him far short of what he needs to rebuild.
“I don’t know what to do,” he said. “I think the city should have helped us more, but they haven’t.”