'Unusual Opportunity' Near Patterson Park

12 Cdc Houses Sold At Auction In One Day After Nonprofit Sought Bankruptcy Protection

August 28, 2009|By Jamie Smith Hopkins | Jamie Smith Hopkins,jamie.smith.hopkins@baltsun.com

It was, the auctioneer said, "a very unusual opportunity" - 12 renovated rowhouses in and around Baltimore's Patterson Park neighborhood, for sale in whirlwind back-to-back auctions.

But then, the reason they were up for grabs is very unusual, too.

They belonged to the Patterson Park Community Development Corp., a nonprofit group that helped the East Baltimore neighborhood take a stunning U-turn from rapid decline into a hot place to live. The group countered blight and flight by snapping up vacant homes, rehabbing the properties and selling some while renting out others. It was so successful, it was thinking of moving on to new neighborhoods - and then the housing slump hit. In February, its sizable portfolio of real estate proving more albatross than asset, the CDC filed for Chapter 11 bankruptcy protection.

The dozen homes auctioned off Thursday, with the bankruptcy court's permission, went for an average of $70,000 each. Investors at the auction said the homes would easily have brought twice that amount before the housing bubble popped.

"We bought them to keep them out of bad hands, we held on to them - and we didn't get rid of them quite fast enough," said Ed Rutkowski, who founded the CDC in 1996 and remains a member of the board. He estimated that the group still owns about 100 properties.

The homes auctioned off on Thursday had been refinanced as a package in early 2007 for $1.33 million. They sold for a total of $843,000. But the prices were about 30 percent more than auctioneer A.J. Billig & Co. had expected.

"All of a sudden, the market has become very active," said Daniel Billig, a partner with the company and the auctioneer at Thursday's events. "The prices are certainly lower than they were a couple of years ago, but people are buying, which shows there's some confidence in the market."

Residents were anxious that the bankruptcy would mean CDC properties hitting the market all at once, but they say the reality has been more trickle than flood. Homes have gone up for sale mostly in ones and twos, said Kimi Aghevli, a real estate agent who is also a vice president of the Patterson Park Neighborhood Association. Twelve in one day is the exception.

"It's not like they've had a million at once, which is good," she said. "It's helped preserve the neighborhood's values."

But Matt Gonter, treasurer of the neighborhood association, was dismayed to hear that local landlord Tom Karle was the winning bidder in nine of the auctions Thursday. Karle's tenants are causing problems in the area, Gonter said.

"I don't think he's doing any kind of screening," Gonter said. "Our worst-case scenario is that he acquires most of the CDC's properties."

Karle said he removes tenants when he gets evidence proving breach of lease and did so this week in one case. He said he wants the neighborhood to go in the right direction, just as residents do.

"I'm invested heavily," said Karle, who owns 350 homes in the area by himself and with partners. He picked up two other CDC properties at auctions on Tuesday.

Thursday's auctions were held on the steps of each rowhouse, a movable feast of bidding that started on Port Street and ended on Roberts Place. Nearly 30 people registered, some walking from event to event, some driving. Karle brought his chocolate Labrador, Fuzzball.

Joe Haney, an investor who bid against Karle for many of the homes and managed to snag one, shook his hand as the auctions wound down.

"Sorry we met on these terms," Karle said, grinning. "Cost me so much money."

Most of the properties were occupied. Veronica Flores and her extended family wanted to stay in their rowhouse and were delighted to hear that the investor who bought it for $73,000 wanted them to stay.

"I want to assure you, don't worry," said Daniel Smelkinson, standing in their neat living room. "Live here forever."

Candace Mack-Chandler, who lives in a home bought Thursday by Karle, had started packing before the auction because she was told she'd have to get out soon. After a winter with a broken heater and a summer with a broken air-conditioner, she's ready to leave. But the timing is bad. She said she needs a few months to get her affairs in order.

"I honestly don't understand," she said of the CDC's bankruptcy. "Was it because the tenants weren't paying their rent?"

It was home sales, said Chris Ryer, president of the Southeast Community Development Corp., a fellow nonprofit. The Patterson Park CDC didn't get much government money and was dependent on a business plan of selling homes it had rehabbed. "When the sales stopped, they stopped," he said.

Aggravating the housing slump problem was a lack of rainy-day savings, he said. That's because the CDC was putting its money where its mission was: the neighborhood.

"I don't think any CDC in Baltimore history has had as big of an impact as they have," Ryer said. "They were a phenomenon."

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