Originally published April 5, 1995
We pay cash for houses--fast cash.
The story of Gary Waicker begins with this advertisement. These words, written in bold blue letters, hung on a sign outside Waicker's real-estate offices on Erdman Avenue in the Belair-Edison community for close to a decade.
Waicker, who owns Cavalier Realty, Monopoly Realty, and Investment Realty Specialists, is not a slumlord in the typical sense of the word: He doesn't focus on accumulating a mass of low-income, bottom-of-the-barrel houses. Both his friends and foes describe him in pleasant terms: "professional," "a supernice guy," even "adorable."
But Waicker's critics charge that he has done more damage to Baltimore communities than any slumlord in the city.
"He is almost single-handedly responsible for the destruction of East Baltimore," says one of Waicker's most vocal critics, Ed Rutkowski.
Rutkowski should know. Waicker's real-estate operation constitutes one of the biggest forces Rutkowski faces in his job as director of Patterson Park Neighborhoods Initiative (PPNI), a neighborhood revitalization project. Since PPNI started in 1991, one of its primary objectives has been to keep the community stable. In his efforts to reach those goals, Rutkowski has come across Waicker's real-estate operation more times than he cares to count.
"From looking at real-estate transactions, from talking to owners, from just looking at the physical condition of the houses that [Waicker's] corporations have been involved in, I'd have to say from sheer volume that they have been almost single-handedly responsible for the deterioration of these neighborhoods," Rutkowski says.
Waicker declined to be interviewed for this story, but City Paper learned from land records and other sources that his operation, in a nutshell, is buying, selling, and managing single-family rowhouses in the city. More specifically, land records show that Waicker buys properties at below-market prices, sells them at inflated prices to investors (often suburbanites who don't know Baltimore City's real-estate market), and then manages the properties for those investors.
The management component is key because Waicker promises potential investors he will get Section 8 tenants to rent their houses. (Section 8 is the federal rent subsidy program for the poor.) That's a big incentive for investors because Section 8 tenants pay hundreds of dollars more per month--or more accurately, the government shells out hundreds of dollars more per month on their behalf--for apartments than regular tenants do. (By law, landlords are not supposed to be able to charge Section 8 tenants more rent, but according to investors who've worked with Waicker, they do.)
But Section 8 isn't just a boon for the investors. It's also a potential windfall for Waicker.
By bringing Section 8 tenants into a neighborhood, Waicker's critics charge that he is practicing a subtle, 1990s form of blockbusting--the 1950s- and 1960s-era practice of moving African Americans into all-white neighborhoods to provoke "white flight" and drive down property prices.
Realtors dreamed up this scheme, writes Edward Orser in his book Blockbusting in Baltimore (the University Press of Kentucky, 1994), "in order to make excessive profits by buying low from those who fled and selling high to those who sought access to new housing opportunities." Blockbusters relied upon "African American housing needs and white racial fears to manipulate the process of racial change for their own ends," Orser writes. "In doing so, they provided a commodity to African Americans that they previously had been illegitimately denied. But the transaction typically was exploitative, victimizing both buyers and sellers."
No one believes Waicker is practicing the same blatant blockbusting tactics that the others did in past decades. But at best, critics say, Waicker makes a handsome profit by convincing sellers, sometimes with scare tactics, that their houses are worth less than the true market value, and then persuades buyers to pay more than they should; in that process, he leaves neighborhoods to deal with the loss of homeownership and leads some unsophisticated investors into deep financial trouble. At worst, his critics say, Waicker uses this exploitive practice to make property values in certain neighborhoods plummet--in a manner that is sometimes strikingly similar to the blockbusting of past decades.
According to Waicker's critics, his scheme works like this: He targets a neighborhood (land records indicate that he's focused primarily on two communities, Belair-Edison and the area around Patterson Park) and begins buying houses. He then rents out some houses and sells others to investors and manages the properties for them.
This sparks the beginning of a pattern of decline for a neighborhood. When people see their neighbors moving and selling their houses to absentee landlords or investors, they tend to get a little worried. Suburban investors buying up properties in a neighborhood means fewer homeowners, and fewer homeowners in a neighborhood means less stability, says Vincent Quayle, director of St. Ambrose Housing Aid Center, a nonprofit group that works on housing issues, including helping low-income people purchase homes.
More important, however, is that the investors Waicker attracts often don't pay close attention to how their property is managed--they are absentee landlords who are concerned primarily with making money, not with the condition of their properties, the safety of their tenants, or the stability of the neighborhood. And people like Rutkowski, who monitor properties in their neighborhoods, say that when Waicker manages properties, they deteriorate quickly.
If those trends are accompanied by an influx of poor, minority tenants into a community, that worry can quickly become panic.
That combination--fewer homeowners, lax investors, deteriorating property, and a demographic shift--can send a neighborhood into a downward spiral, Quayle says. He and others believe that once a neighborhood begins to decline, Waicker plays on the fears of those who worry that their neighborhood is changing racially or economically--and that therefore their property values will drop.
To understand Quayle's argument (Quayle was only one of many community and housing activists to make the connection between Waicker and subtle blockbusting), it is helpful to first look at what happened in this city in the 1950s and 1960s, a period Orser calls the "zenith of blockbusting."
With realtors in that era, it was "absolute lawlessness," says Quayle, a former Catholic priest who got his start in housing issues by organizing against Baltimore's big blockbusters.
"These guys would go and scare the hell out of the old white people," Quayle says. "They'd knock on doors, they'd call them in the middle of the night, they'd put fliers under their doors, they'd pay black kids just to walk up and down the street--knowing that would scare [residents]."
In the fliers and phone calls, realtors would tell neighborhood residents, "`This is a changing neighborhood. I can give you some good money for your house right now. Next year I'm not going to be able to give you anything for it,'" Quayle says. "These guys would buy homes for $5,000 from the white folks and sell them the same day for $15,000 to the black folks."
Today, Quayle says, no real-estate agent could get away with the "panic peddling" that sparked such dramatic white flight in past decades. But he and others say that these practices continue today, in much quieter, more shrouded ways.
Although the federal 1968 Fair Housing Act was designed to stop blockbusting, Orser writes in his book, "enforcement has proved problematic, and some forms of these abuses continue to exist, usually in much more subtle fashion than before the act was passed."
To examine what similarities exist between the blockbusters of the past and those of today, it's good to start by asking what elements foster blockbusting. In his book, Ed Orser says three things are key:
There's no doubt in Quayle's mind that the first of these three ingredients is as plentiful today as it was 40 years ago. Even though studies show property values don't drop as a result of racial change, "we have these tapes playing in our heads" of what happened decades ago, Quayle says. People learn about blockbusting and white flight "from their parents and their grandparents, and they believe that if a neighborhood is changing racially, it's going to go down, it's going to bring violence, crime, and the rest of it."
Orser's second element, a dire need in the African-American community for housing, is less of a problem today, Quayle says. "That's been one of the changes," he says. "Twenty-five years ago, the black community was limited to three huge ghettos in Baltimore, and there were laws to keep them there. I don't think we have anything near that pressure today. Certainly, for middle-income black folks, the opportunity is there [to move]."
But housing pressure still exists in poor, inner-city communities, Quayle says. "I think the housing pressure that's left is among poor black folks. With the crime in the real inner-city neighborhoods, the folks with the resources would like to get out." The city's public-housing waiting list, for example, has 30,000 families on it and is "growing every day," says Daniel P. Henson III, executive director of the Housing Authority of Baltimore City.
The Section 8 certificates are an indication of that pressure. The idea behind Section 8 is to give public-housing tenants a chance to move out of the projects and to disperse the pockets of poverty created by public-housing developments.
The last element is where Gary Waicker comes in. Those who know him don't doubt that he's willing to take advantage of folks on both ends of a real-estate deal if it means big bucks for him.
Christopher J. Seling, an accountant who bought about a dozen properties from Waicker, compares Waicker to someone who "comes in and shoots the wounded."
"I'm sure he makes them think that he's doing them a favor, but I've learned that Gary only helps Gary," Seling says. "And I've learned that in a very painful way."
How did the old blockbusters operate? How did they get whites to sell at bargain prices and then get blacks to buy at inflated prices?
In the mid-'50s, Orser says, realtors would buy property in stable neighborhoods and then put in "undesirable" tenants. Typically, Orser says, a realtor might put a tenant in a newly purchased house at little or no rent--the type of tenant who longtime residents would consider "undesirable neighbors no matter what the race, religion, or origin."
Then, the realtors would canvass the neighborhood, making "veiled and not-so-veiled references to impending racial change and lowered property values." That would spread panic and residents would begin to sell--accepting extremely low sale prices for their homes.
Once they were getting houses cheap, the realtors would find African-Americans who were desperate to move out of poverty-stricken areas into nicer, more "suburban" neighborhoods.
With each sale, except perhaps the first, the blockbuster is "profiting at the expense of both populations," Orser writes.
The scare tactics and door-to-door solicitation realtors used in the past to spread fear are now illegal. But Quayle says Waicker has found other, less explicit ways to get the message across.
The fast cash sign played a pivotal role, he says. "What this says is, `I can get you out of here in two weeks.'"
Two weeks ago, after years of community pressure and some recent media attention, Waicker took the sign down. But his strategy for getting houses cheaply goes far beyond the sign. Take the example of a Belair-Edison resident who decided to call Cavalier Realty seeking a home appraisal.
"She wasn't really looking to sell, but she was curious about what the value was so she called them," says Gary Gillespie, former director of the Belair-Edison Housing Service Inc. (BEHS), an organization that provides homeownership counseling, credit counseling, and other housing services. "They came out and told her over and over, `The neighborhood is changing, the neighborhood is changing.' They also told her that her house wouldn't be worth much because many things needed to be replaced or repaired. She knew it wasn't true [because she'd just had repairs done], and she was just outraged, so she called us afterward to tell us what had happened."
The neighborhood community association started doing "some preliminary research," Gillespie says, and "saw more and more properties being bought by investors, and particularly Cavalier Realty."
Tracy Ward Durkin, BEHS's current director, says Waicker "started operating in Belair-Edison at least 15 years ago and probably before that. The only thing that alerted people was they looked at Lusk's [an annual record of property ownership and real-estate transactions] and started noticing transfers of property for much less than market values. They started investigating and found that a lot of times it was a senior citizen who didn't know the value of her home and liked the idea of getting cash."
The investigators discovered so many incidences of this practice that the neighborhood association decided to set up BEHS, and enlisted the help of St. Ambrose. They also eventually started an "intervention buying" program, in which they try to reach home sellers before the investors get to them. That way, they can fix up the properties and make sure they are resold to new landlords. "This organization was formed largely as a result of steering [the realtor practice of directing blacks and whites to different neighborhoods] and blockbusting," Durkin says. "The project was dreamed up to combat Gary Waicker tactics."
If Waicker was following in the footsteps of the blockbusters, the next step would be to move in a tenant who will worry other neighbors. And although it is hard to prove definitively that Waicker tries to find the poorest, loudest, or most irresponsible tenant he can to move into a new block, those who monitor his activities believe it is the way he operates.
"Do they take a block they want to destroy and put their worst family in there?" Rutkowski asks. "Anecdotally, I think it's quite possible. Whether it actually happens, I don't know."
He does know, however, that for a "period of three or four months, every time I turned around there was a problem" with a Waicker-owned or Waicker-managed house. Whether the problem was loud tenants, a vacated or dilapidated property, or a series of tenants getting evicted from the same house over and over again, the end result was the same: instability in the neighborhood and fear and irritation on the part of the neighbors."
Durkin is more certain of Waicker's attempts to drive down property values. "It's definitely a mode of operating," she says. "He puts lousy tenants in and hangs back and waits for a few more homeowners to drop, and makes $15,000 a pop."
"Rapid change," Durkin adds, "is not good for any neighborhood. Unfortunately, the race card is a really easy way to incite that rapid change, and these landlords know how to use it."
McElderry Park, in 1980 already a neighborhood in economic and ethnic flux, was by 1990 atrophied as a rising tide of young, poor renters moved into deteriorating housing. A ride through the neighborhood these days will attract the solicitous attention of many a drug dealer lurking amid the trash and boarded-up houses.
William Mosley, a former Waicker property manager who owns about a dozen houses in McElderry Park, has lost his shirt in real-estate investment in the area. He is one of many smaller investors who say they've gotten into serious financial straits because of declining property values, increasing crime, irresponsible tenants, and mounting lawsuits. "Properties I spent $20,000 for down there four or five years ago, you know what they are worth now? About $6,000, $7,000, $8,000," he says. He attributes his woes not to people like Waicker but to drugs and uncaring residents. "Even up to three years ago, it was a pretty solid neighborhood, but the drugs have really run rampant in the last three years. Nobody cares about the neighborhood. They dump trash. It is a destitute situation."
Just east of McElderry Park is Ellwood Park/Monument, where things are more stable, but changes are escalating quickly. Traditionally a neighborhood of older white homeowners, since 1980 it has been attracting a more diverse mix of younger renters. Rutkowski says in the last five years "the racial characteristics of the [Ellwood Park/Monument] population changed extremely rapidly."
In October 1993, McElderry-Decker Community Association President Keith Noel surveyed the neighborhood's housing, counting 109 houses either vacant or for sale. Longtime residents look at nearby McElderry Park, remember what it was like in the old days, and wonder whether they want to remain in the face of such dubious prospects. Still, residents organize actively, riding the cops to be vigilant (residents made more than 3,600 calls to the police in a recent 28-day period, according to officer Joel Clements of the Southeastern District) and holding neighborhood cleanups two or three times a month.
A side-by-side comparison of 1980 and 1990 U.S. Census data for the two neighborhoods brings the pattern of change into stark contrast. During the '80s, McElderry Park went from three-quarters to 45 percent white, from two-thirds to three-quarters under age 45, and from 60 percent to less than half owner-occupied housing. Ellwood Park/Monument, meanwhile, went from nearly 100 percent to a little more than half white, from 60 percent to 70 percent under age 45, and from three-quarters to 70 percent owner-occupied housing. Anecdotal evidence suggests the trends have continued apace since the 1990 Census in both communities.
As these changes have mounted since the '70s, investors have been buying up properties in the area. In McElderry Park, for example, 35 of 46 properties sold in 1991 were purchased by investors, according to sales data of Baltimore City properties. And the names of Gary Waicker and his companies have been showing up with growing regularity in the land records for the area. He acquired 24 deeds to properties in the 35-block area between 1977 and 1998, and 38 deeds between 1989 and 1993. Waicker is but one of many investors in the area, but, as PPNI's Ed Rutkowski puts it, he is "far and away the biggest investor" and his real-estate practices "are destructive of the community."
Those 66 deed acquisitions since 1977 have been followed by a more recent period of liquidation. Since 1989, Monopoly Realty alone has sold off at least 27 properties in the same cluster, according to a database of real-estate transactions maintained by the PPNI. According to Mosley, Rutkowski, and Quayle, Waicker in recent years has been liquidating his property holdings in the area, wisely preferring to manage them and collect fees and ground rents rather than hold title on depreciating properties.
Waicker's buy-low, sell-high technique is very much the profitable American way, but he rakes in even more profits by marketing an investment package to suburban investors. And the Section 8 rental-subsidy program has been the perfect bait to hook investors to his depreciating properties because the rent is guaranteed and somewhat higher than the market rate.
Christopher Seling took that bait, and his story illustrated how Waicker's "Section 8 Program" takes its toll--on both the investors and the neighborhoods they invest in. Seling thought he was going to make a small fortune investing in Baltimore City real estate--a stash of money to keep him and his wife comfortable in their old age. Instead, he's neck-deep in debt and on the verge of a financial catastrophe.
Sitting behind his desk at his Bel Air office, Seling looks calm given the circumstances. The chubby, 50-year-old suburbanite is decked out in a red V-neck sweater with a golf ball embroidered in the left corner and gray corduroy pants patterned with red, white, and blue lines.
In his hands, he holds a thick, green binder stuffed with copies of the mortgages he's taken out in the last five years--on his own home and on properties he bought from Waicker.
"I've been borrowing money all over the place--losing my shirt," Seling says. "In 1994, I borrowed $40,000 [from a friend], and in 1994, I put a $41,000 line of credit second mortgage on my house--just to get through 1994."
Seling has had to pour that money into a set of East Baltimore properties, most of them in the Patterson Park neighborhood, that Waicker sold him between 1989 and 1992. Even with that $80,000-plus cash infusion, the properties are still costing Seling more money than they are bringing in--and Seling seems to be slipping further into debt each day.
It's just a nightmare," he says. "The whole thing's a nightmare."
Seling doesn't blame Gary Waicker for his mounting debt. But he does feel like he was misled and "horribly ripped off" by Waicker.
Seling first heard Waicker's name in the late 1980s, when he was looking for a company to manage an apartment building he'd bought in Highlandtown. "Someone recommended Investment Realty as a property manager," he recalls. So he called Waicker and eventually hired Investment Realty (IR) for the job.
After a short time, the folks at IR convinced Seling that buying apartment buildings was not the best way to invest his money. (The staff at IR, Monopoly, and Cavalier includes Waicker, two of his sisters, his father, his mother, and others.)
Seling could make much more money, Waicker and his co-workers suggested, by buying houses in East Baltimore and renting them to Section 8 tenants. Waicker even offered to help Seling arrange a deal, picking out houses, finding Section 8 tenants, and managing the properties at a bargain fee. (As long as Seling bought the properties from Waicker, IR offered to manage them for 4 percent of the rental income the first year, and 8 percent after that. To manage a house Seling bought from someone else, IR's fee was 10 percent.)
The suburban accountant soon discovered that this "rowhouse and Section 8 tenant" combination was Gary Waicker's "specialty"--a "Section 8 Program" offered to certain investors like himself.
"One day, I was in the office, and Kathy Smith [Gary Waicker's sister] said to me, `The only way to go is single-family rowhouses and Section 8 [tenants].' She went through the whole program," Seling says, explaining that "the government pays the rent, [so] you're guaranteed to get the rent. And if a house is trashed by a tenant, the government reimburses you."
Most important, Smith told Seling he would get more money from Section 8 tenants because they pay more than other renters. For example, in one house, Seling got $631 per month when it was occupied by a Section 8 tenant; with a regular tenant he's now getting $400.
Floryne Howard, the housing assistance payments program officer for the city's Section 8 office, says that shouldn't happen. Section 8 tenants should pay no more than the fair market value of an apartment. But Seling and other investors say it does happen--and it's the main reason they seek out Section 8 tenants.
"I said, `Wow, that's sounds great,'" Seling recalls. So IR showed him four houses in the neighborhoods surrounding Patterson Park, and promised to get Section 8 tenants for him.
Seling was sold. He formed a company called Comprehensive Real Estate and signed on the dotted line. "Kathy showed me the numbers. She was very good at selling me on how good the numbers looked," Seling says.
"At the beginning, [the properties] did very nicely. The cash flows were very good," he says.
So good, in fact, that Seling decided to get his friends and relatives in on the deal. "I thought this was such a good program that I had Kathy and her father, Bill Waicker, come out and kind of do a seminar" for five friends. (Those friends included Seling's mother-in-law and his wife's aunt, who is no longer speaking to him.)
Seling's friends formed another company, Retirement Planning Properties (RPP), and bought eight more houses, also in the Patterson Park area, from Waicker. Some of the investors, Seling says, didn't even look at the properties they had purchased. When they finally saw them, years after the purchase date, they were shocked, he says.
As with Seling, IR promised to find RPP Section 8 tenants. Those promises made the investors less concerned about how much they were paying for the houses, and about the massive mortgages they were taking out.
"You didn't care what you paid for the house, you didn't care so much that you were leveraging the house," Seling says. "Kathy and Gary both said, `You're making money--what do you care?' And I kind of said to them, `Yeah, you're right.'"
Persuaded by that argument, both Seling and his friends took out big mortgages so that Seling would only have to come up with 10 percent of the sale price for the down payment of a house. In other words, Seling could buy a house without having to come up with very much of his own cash.
If bank officials were wary of a second mortgage, Seling says, Waicker would lend him the money, and after the bank had approved the loan, draw up a second mortgage to attach to the property.
Waicker also offered to secure private financing from other investors. When Seling's five friends got involved, their "loan package was unbelievable," Seling says, because the bank wanted personal financial statements on each investor. "It was taking months [for the bank to approve it], and Gary didn't want to wait." Instead, Waicker offered to find private investors who would loan them the money so they could bypass the bank.
"No one knew who those private investors were--no one had a clue," Seling says. "They didn't care," he says, because the terms looked good. The financier Waicker hooked them up with, a man named Al Slitzer, offered them the loan at higher interest than the bank but without appraisal or other costs, Seling says. That also meant, of course, there was no independent appraisal of the property--which would make it easier for Waicker to sell at inflated prices. Seling later learned that Slitzer, owner of Slitzer Realty, is Waicker's father-in-law.
With all of Waicker's financing help Seling bought about a dozen houses and his friends bought eight. They all soon found themselves holding massive mortgages on properties that were worth neither the amount of the mortgages nor the amount they had originally paid.
On one house, at 137 N. Rose St., for example, Seling has not two but three mortgages. He got the first mortgage from a bank. Waicker gave him a second mortgage to provide cash to buy two more houses, and then a third mortgage so he could buy yet another.
"I owe more on Rose than I could sell for," Seling says.
When Seling's friend in RPP tried to get rid of the eight houses they'd bought from Waicker, the best offer they got was $35,000 for three of them, on which they owe $90,000. They're still stuck with the others.
And soon, the "cash flows" that had enticed the buying and borrowing frenzy were no longer so sweet. Tenants vacated some houses and IR couldn't find replacements. In others, Seling was getting lots of repair bills. (The government did not, as IR had explained, reimburse him for all repair costs).
The bills for Seling's friend in RPP started to pile up so high that they didn't want to pay them to Waicker. Waicker, however, had a solution for them: they could simply buy more houses, and he would roll debt into the mortgage on the new purchases. "That was Gary's way of getting paid," Seling says.
With the numerous repairs, Seling started to get a little suspicious. In one house, he says, "I saw a repair bill as, `patching and repairing a hole in the wall.' Somebody had literally stuck their hand in a bucket of drywall, thrown it at the hole, washed their hands, and left. It was pathetic."
Since his "investment" started spiraling, Seling has stopped using IR as the management company for some, but not all, of his properties. "I took several away from Investment Realty because it was terrible, just terrible. If I had more time, and if money was not an issue, Investment Realty or any other company would not have any of my houses. That's a given." He says he'd prefer to manage them all himself, because he hasn't been satisfied with any company he's hired.
On the houses that he now manages himself, or has taken to a different company, he's either making a small profit or at least not losing lots of money. Most of the properties IR still operates for him are a financial drain.
While Seling's debt climbs, land records show that Waicker has raked in big bucks on the sales he made to Seling and other investors. Just look at the first four houses that Seling bought from him on one day in June 1989.
In that one day, Waicker made $55,720, minus whatever he spent to fix up the houses before he resold them. And Seling and other investors say that, judging from the repair bills they pay, Waicker's "fix up" costs couldn't have amounted to much.
"Not a bad deal, right?" Seling says. "It's just win-win--for him. I'd love to do this all day long myself, but I'll be honest with you, I have to sleep at night, and I just can't do that. Nothing he's doing is illegal, but I just can't do what he does."
Although Seling was the only investor who agreed to speak on the record, others told City Paper similar stories. One man, who was also referred to Waicker by a friend, says Waicker "guaranteed me Section 8 tenants. He said it would be a good program."
And like Seling, this man says Waicker tried to persuade him to buy additional properties, even if he couldn't afford them, by "helping" with the financing. "He would say, `I can get you in for no money down,'" the investor says. Buying a house with almost no out-of-pocket money sounds like a good deal, he says, "until you're in mortgages up to your nose."
This investor also started getting numerous repairs bills--a little too often and for the same things over and over again.
In any case, the real-estate endeavors are "not as profitable as they were made out to be," he says.
Another investor, who also asked to remain anonymous, is holding mortgages totaling more than $200,000 (mortgages made possible by Waicker's "private investors") on five properties worth less than half that amount.
For this investor, these properties were supposed to provide retirement money. Now, however, they are soaking up retirement savings scrimped together over a lifetime.
Land records show other examples of this same practice. For instance, Waicker picked up 3113 E. Monument St. in Ellwood Park/Monument in August 1990 from the Maryland Housing Fund for $21,250. In April 1991, he sold it and another nearby property to Leslie and Randall Winchester for $75,000, lent the new owners a $9,400 mortgage, created a ground rent, and manages the property, which has Section 8 tenants. Rather than take on the liability of property ownership, Waicker liquidates at a profit and collects ground rents, mortgage interest, and management fees.
Not all investors we spoke with were disgruntled. Several said they felt like they had gotten themselves into the situation and can't blame Waicker or anyone else for it. "We were just plain dumb," one says, "[and] maybe a little greedy."
Whether investors blame Waicker for their bad investments or not, the mark Waicker and his investors leave on the communities is deep and perhaps permanent. What these investors may not realize, Rutkowski says, is that not only are they stepping on financially shaky ground, but they are contributing heavily to the decline of Baltimore neighborhoods.
"There are two things that he [Waicker] is doing that's so destructive," Rutkowski says. "One is how he acquires the property, and the second is how he manages the property."
Waicker has used many strategies to gain an investment toehold in these neighborhoods. A classic one is to issue mortgages secure with properties, then, when the borrowers default, initiate foreclosure proceedings. When the judge orders the property to be sold at auction, Waicker buys the property at a fraction of the mortgage value, the borrowers pay the proceeds of the sale back to him, and they still owe him the balance. He gets the property and a portion of the money owed him, and he continues to collect interest on the balance.
The mortgage scenario was played out in recent years on 619 N. Rose St., which was purchased in April 1989 by Robert and Anita Seymore of Hillendale from Rebecca Mitchell. In February 1991, the Seymores took out a $15,000 mortgage from Monopoly Realty secured with the property. Two years later, having received about $700 in payments, Waicker initiated foreclosure proceedings. (According to investors interviewed by CP, Waicker makes sure the mortgages are personally guaranteed.)
The judge ordered the property to be sold at auction, with the proceedings to be put toward mortgage repayment. The court put the approximate value of the property at $25,000, but Waicker got it in December 1993 for $7,500, then sold it to Badger Properties for $10,000 on the same day. When the proceedings ended, Waicker had bought and sold the property at a substantial profit, and was still owed more than $10,500 by the Seymores, after interest and the costs of the auction.
Those sales and rentals add up quickly. This year there are 134 properties inhabited by Section 8 tenants in the 35-block study area spanning McElderry Park and Ellwood Park/Monument, according to the Section 8 office of the city Department of Housing and Community Development. The land records of 11 of them show some connection to Waicker: He either owns them, recently sold them, or holds mortgages on them.
The combination of more renters in low-end properties and rising anxiety among neighborhood homeowners puts the homeowners in a selling mood--in the same 35-block area in February of this year, 63 houses were listed for sale in the Mid-Atlantic Real Estate Information Technologies inventory.
Further evidence of real-estate instability in the area is found in the list of properties, published in The Sun in early March, for which city property taxes are due. The city claims the right to auction off thousands of tax-deficient properties each year. This year 203 of them are located in the 35-block study area.
And by using what some have deemed predatory methods and scare tactics to get properties at below market prices, Waicker tends to spread panic in communities and accelerate racial and economic change. He plays on fears of neighborhood homeowners that their property values will drop and that any demographic shift will bring crime, violence, and other social ills.
The whole process starts a "chain of events" that "breeds all kinds of problems," Rutkowski says. The first link in that chain is loss of homeownership, which housing and community activists say is one of the most vital ingredients to keeping a neighborhood stable and safe. When people like Waicker buy chunks of property to sell to investors, the homeownership base begins to erode.
Once the neighborhoods begin to see a lot of investors come in--and see things like the we pay cash for houses signs--they begin to lose faith in the neighborhood and think about leaving. (Waicker's father-in-law, Al Slitzer, uses the same tactic: He has run ads in the East Baltimore Guide that read, "Houses Wanted Any Condition," and recently ran another in The Sun which simply said: "Cash for East Balto--Slitzer Realty.")
Then comes the management key. If the investors (or the management companies they hire) don't take good care of the property, that speeds the decline. "These [investors] are suburban people who don't pay a lot of attention to what's going on here," Rutkowski says. "They would just as well never come into the city to see their property. And so what happens is the houses start deteriorating. Once Waicker starts managing the properties for these folks, the properties go to hell." That claim is buoyed by the fact that IR had the third-highest number of rent-escrow cases of any landlord, facing 17 in the first 11 months of 1994. (In a rent-escrow case, tenants who can't get their landlord to make repairs can ask a judge to put their rent in escrow.)
"If the property is not in good shape to begin with, you're not going to attract a good tenant, and that just becomes a spiral downhill for the community," Quayle says.
If there was just one Christopher Seling, it might not be such a big problem. Neighbors might be able to unite and work to get the landlord out, or make him or her more attentive to the property and the tenant. But with many investors buying many houses, neighbors tend to flee rather than fight.
And those Baltimore housing activists who have been monitoring Waicker's operation know that his is not a small-scale business. Quayle says Waicker used to advertise on the radio to attract suburban investors. The ad went something like this: "Why don't you buy a house as an investment, I'll be your agent, I'll help you do it, I'll manage the property once you buy it," Quayle says.
"This happens block after block after block, and I know he's been involved in hundreds of these in East Baltimore," Rutkowski says. "Certainly he's not the only one of these guys, but he's the only one that I know that's done it on this grand a scale."
Officials at the city's Department of Housing and Community Development agree that out-of-town investors that Waicker attracts have become one of Baltimore's most aggravating problems. In the past, a group of big-property owners, such as Willie Connolly Jr. or Max Berg (each of whom owned more than 500 properties), dominated the city's rental market.
These landlords--even if they consistently violated housing codes--were in many ways easier to deal with than the small-time folks who are investing in Baltimore real estate now, says Bob Dengler, the city director of Housing Inspection Services.
For one thing, it is easier to keep tabs on a few landlords than many little ones--especially if those little ones don't live in the city.
But more important, Dengler says, is the fact that the big-time landlords usually had the resources to fix their properties and bring them into compliance--although it often took threats of criminal prosecution to get that compliance. If landlords continued to flout the housing code in the face of that threat, the city could file a civil suit against them--as it did with Max Berg--and get rid of the problem in one fell swoop.
With the small investors, however, the city is loath to prosecute because it's often an older suburbanite who has put all of his or her savings into a few houses, hoping to build a nice retirement cushion. Instead, the person's gotten in over his or her head with inner-city real estate, which because of crime, poverty, and other social problems, is very difficult to manage.
Prosecution is not the best solution because "the small investors don't know what it takes to manage inner-city property and don't have the financial wherewithal to deal with the problems," no matter what kind of threat is dangling over their heads, Dengler says.
An investor like Seling, for example, might be financially devastated if one of his properties gets vandalized and he has to replace everything. "Those people who have a large number of properties stay on top of their complaints because they have been in the business and do it full time," Dengler says. But people "who are working with a very small margin--they don't have the money to bring the property back on line."
Of course, that means community residents are left to deal with the vacant or dilapidated properties and the financial, social, and environmental problems that follow. And folks like Ed Rutkowski have to spend much of their time and energy hunting down absentee landlords, staving off new investors, and canvassing the neighborhood looking for signs of decline.
Several months after then-editor Sono Motoyama hired me and Deirdre Shesgreen in 1994 to be City Paper's staff writers, she issued an edict: We were to become investigative journalists. Motoyama wanted to make muckrakers out of us, though she could offer little in the way of guidance, since neither she nor anyone else working at the paper at the time had any real hard investigative experience.
The first major outing was a series on so-called slumlords, which appeared in the spring of 1995. Shesgreen did two of them alone--"Scumlord," about William Connelly, and another article about Stanley Rochkind. A third we did together, about Gary W. Waicker of Cavalier Realty and other companies, who had been a major investment force in the dicey blocks just north of Patterson Park. Tasks were split up. Shesgreen talked to everyone she could find who knew Waicker's modus operandi, and I headed to the city's land records on the sixth floor of the Mitchell Courthouse, looking for Waicker acquisitions in a 35-block area since the 1970s.
Waicker's motto, "We pay cash for houses--fast cash," was widely advertised on signs in East Baltimore at the time. His game was to buy cheap and quickly resell with little or no renovation work at inflated prices to investors who thought they could make money off of government rental vouchers while Waicker managed the properties for a fee. The result was often foreclosure, when Waicker would retake title and start the cycle all over again with another buyer. Over time, this contributed to neighborhood decline, which was to Waicker's advantage, since more homeowners would sell cheaply for cash as they fled failing neighborhoods. Waicker wouldn't talk to City Paper for the story, which appeared on April 5, 1995.
Sixteen days later, Waicker sued for libel, naming as defendants CP, St. Ambrose Housing Aid Center head Vincent Quayle, and then-Belair-Edison Housing Services director Tracy Ward Durkin. Quayle and Durkin were dropped from the case as it boiled down to an argument over one word: the title of the 6,646-word piece. Since blockbusting is illegal, Waicker believed the headline, "Blockbuster," made him out to be a lawbreaker, even though the story itself repeatedly stressed the point that he was doing nothing illegal.
City Paper won, and Waicker's unsuccessful appeal ended on Feb. 5, 1997, with a precedent-setting court decision that defined "limited-purpose public figure" under Maryland law. The other useful thing that came out of the whole two-year ordeal was the fruits of "discovery," the legal process under which City Paper got copies of all of Waicker's otherwise-private business records, which confirmed the story we'd built from the public record.
A decade has passed since the Waicker case ended. Shesgreen and I are still journalists, she in Washington and I here at City Paper. Durkin is publisher of The Urbanite, and Quayle is still at St. Ambrose. But the most important source in the story, then-Patterson Park Neighborhoods Initiative director Ed Rutkowski, has had the most pertinent career since then. Rutkowski's efforts in the private-housing market in the Patterson Park area have been central to the still-struggling revival of Waicker's former territory. Portions of the neighborhoods north of Patterson Park have reversed their decline, but many still-struggling blocks remain stark. Waicker's cash for houses signs are scarce now, though their legacy continues.
When "Blockbuster" was printed, the phrase "flipping" simply meant the practice of buying houses low and quickly selling high. It tended not to help the fortunes of urban neighborhoods, but it was--and is--entirely legal. In 1999, though, it started to take on a more sinister meaning. That's when The Sun published a 4,500-word piece exposing phony appraisals and false loan documentation associated with the practice, and focused its analysis on the area north of Patterson Park--Waicker's stomping grounds, though he and his companies weren't mentioned in the coverage. "`Flipping': Quick-buck artists selling crumbling Baltimore homes at inflated prices create the illusion of a robust real estate market," read the Sun headline. A flurry of federal criminal prosecutions followed, as did anti-flipping efforts at all levels of government, aided by Rutkowski and others. All of a sudden, Waicker's corner of the real-estate industry had earned a very bad name, though Waicker himself survived unscathed--except for "Blockbuster."
Waicker had been in the limelight before "Blockbuster," but it was in a significantly more positive light. In 1979, when he was 26, he was featured in the Evening Sun as "new breed" of investor; he described himself as "a good guy" in the real-estate game. A year later, The Sun quoted him saying that he is a "harbinger of better living standards in Patterson Park." As a former president and vice president of the Property Owners Association of Greater Baltimore, he had an institutional voice in real-estate issues. As a member of the Maryland Advisory Council on Lead Poisoning, appointed by then-Gov. William Donald Schaefer, Waicker was in the room for the state's discussion about how to contend with lead-paint poisoning. Waicker had been a leader in local real-estate matters, so "Blockbuster" was a "new breed" of publicity for him.
Today, according to online court records, Waicker is listed as a defendant in nine open lead-paint cases in Baltimore City Circuit Court, and six closed cases. Perhaps that's as good a measure as any as to what the man who used to sit on the governor's lead-paint council has learned over the years. City Paper has learned something from Waicker, though: that doing investigative journalism can get you sued, even if the story is completely accurate. (Van Smith)