Howie was silent for a moment. Pierre knew he was excited about buying foreclosure property with Pierre—Pierre had proven his trustworthiness, and Bruce was a valuable connection. And he must have understood that Pierre needed to eat. “Okay, Pierre. My money’s just sitting in a money market anyway. But I want twenty-two percent, and only for six months.”
“Twenty-two’s a bit steep, Howie.”
“Not really. It’s the same as some credit cards, and it comes out to only fourteen after taxes. Look, Pierre, I want to help you out, but business is business.”
Business is business? Anybody remember a certain $45,000 commission I sacrificed? “All right.”
“I’ll call Bruce and ask him to draft the paperwork. Then I’ll just send you a check.”
Pierre hung up the phone. He had just added $400 to his monthly debt.
* * *
Over the next few weeks, Bruce scrambled to consummate the purchase of the Marlborough Street condo. He drove to New York late one Friday night and opened a bank account the next morning. He deposited a total of $73,000, the sum of his credit lines and savings. The name on the account was Arab Acquisitions, with himself as the sole signatory. He knew the account could be traced to him if somebody looked hard enough, but by putting the money in an out of state bank under the Arab Acquisition name, and by using only bank cashier checks, he hoped to gain a measure of anonymity.
While in New York, he also rented a post office box and made arrangements with a telephone answering service to provide Arab Acquisitions with a private line that an operator would answer during business hours.
He also called the law office in Springfield. He adopted a Middle-Eastern accent, hoping that not too many Egyptians or Syrians passed through Springfield. The receptionist put him through to a lawyer.
“Hello, yes, excuse me, I am looking for a lawyer who can assist me in a real estate purchase in Massachusetts. In the city of Boston.”
“Well, you know we’re located in Springfield, right?”
“Oh, my mistake. I am terribly sorry. An associate of mine referred you to me—I am new in this country. This Springfield is far from Boston?”
The attorney backtracked. Business was slow right now, especially for a real estate lawyer. “Well, not too far. Maybe we can help you. What do you need?”
“Thank you. My name is Ahmed Bahery. My company is Arab Acquisitions. I am buying properties for my family in Saudi Arabia. I am successful bidder at auction for foreclosure. The property is condominium on Marlborough Street in Boston. You can help me with the closing?”
“Yes, I’m sure we can. When are you available to come to Springfield to meet with me?”
“Oh, yes, that is the problem. I am traveling very much—to California and also to the Middle East. I am leaving tomorrow for one or two months.”
“Well, when is the closing?”
“I believe in two weeks—yes, in sixteen days.”
“So you would need me to attend the closing in your absence?”
“Yes. I suppose I need many services from you. In California, my attorney has formed a trust for me and he is the trustee. That way he can control the property while I am away. Is this possible?”
“I suppose so, although most attorneys don’t like to act as trustees in real estate deals. Too much liability.”
Bruce could tell the lawyer was torn between servicing his new client and a hesitancy to assume the risk of having his name on the deed. “I have bought insurance for my California attorney to deal with any liabilities. Also, I pay him a monthly fee for being trustee.” That should tip the balance—remove risk from one side and add money to the other. “But if you are not comfortable, you can perhaps recommend another attorney for me?”
“No, what you’ve proposed sounds like an acceptable arrangement. Why don’t you send me the documents, and I’ll get started. I’ll need a retainer—say, $5,000?”
Why not stick it to the rich Arab? Maybe I should have been Norwegian instead. “Of course, that is more than fair. I will send it to you by Federal Express.”
They exchanged additional information, and Bruce hung up. According to the public records, the condo would be owned by a trust, the trustee of which was a Springfield attorney. And the attorney believed his client was some rich Arab in New York who paid all his bills with bank cashier checks. Bruce’s involvement was completely hidden. After the closing, he would instruct the Springfield attorney to hire a real estate broker to sell the property. Even after paying the broker’s commission, the attorney’s fees and the 16 percent interest on the lines of credit, Bruce was confident that his profit on the deal would approach $40,000.
Not bad for a start. But Bruce hadn’t sacrificed the last four years of his life for a five-figure, or even a six-figure, payoff. Bruce needed at least a million. Invested conservatively at ten percent, he could live off of the $100,000 yearly income and never have to work again. He would buy a large sailboat, moor it on the Boston waterfront, and live on it year-round. In the winter, he could rent a furnished apartment for a few months to escape the cold, maybe do some volunteer work at a museum. And when he found the right woman, he’d settle down, have 2.2 children and live the yacht club life in Marblehead. But whatever he did, he would have money in his pocket, and money in the bank. And he would answer to nobody.
But first, he needed to find his million.
PIGEON ON THE BOW
CHAPTER 23
[February 8, 1990]
Bruce knew he was tapped-out for a while, and regretted having rushed to hold the foreclosure sales on the other Nickel Bank properties so quickly. If he had held one or two properties back for a few months, he could have rolled the profits from the first deal into a second one.
As it stood now, he had scheduled two auctions in early February and one in early March. All of the properties were solid properties in good locations, and all of them had been under-valued by Leumas and thus would be under-bid by the bank. What had originally seemed like a sound strategy was becoming a problem for Bruce—he did not want these properties to sell at a substantial discount. If word got out that investors were scoring big profits at Nickel’s auctions, Bruce would never be able to duplicate his Marlborough Street coup. Yet to keep Chris Jones satisfied, he needed to sell the properties.
The first of the auctions was scheduled for later that day. The property was a three-family brownstone in the Back Bay section of Boston, which had been converted to three condominium units by a small developer. Because the developer had not yet obtained the bank’s permission to convert the building to condominiums, Nickel’s foreclosure would “wipe out” the condominium conversion. After the auction the building would legally revert back to apartment status.
Bruce understood the ramifications of this. In an effort to protect tenants, Boston made it extremely difficult to convert apartment buildings to condominiums—in fact, it was the cost and delay occasioned by the conversion process which pushed the developer into foreclosure. As a result, a three-unit condominium building was far more valuable that an identical three-unit apartment building. The Leumas appraisal (valued the property as an apartment building, at Bruce’s instruction) placed the market value at $270,000, which meant the bank’s bid would be $190,000. Bruce wished he could have kept this one for himself, but he did not have enough money and did not dare bringing in a partner who might later turn on him. But it was tempting—Bruce estimated that building was worth $300,000 as an apartment building and almost $400,000 as three condominiums. It killed him to think that so much money was just sitting there, and he couldn’t grab it.
Unlike the last auction, the weather was clear and comfortable. Seven people registered to bid. Bruce recognized Pierre among them and nodded a return to Pierre’s wave. Bruce didn’t want to speak to Pierre just yet, so he grabbed the auctioneer and huddled in a conference.
Bruce stayed huddled with the auctioneer until it was time for the auctioneer to read the legal announcements. Even t
hen, Bruce’s body language made it clear to Pierre and the other bidders that he did not want to be approached. When the auctioneer finished his readings, Bruce stepped forward.
“I have an announcement to make. Just so there is no confusion here today, the mortgage being foreclosed on is senior to the condominium conversion documents filed for this property. What that means is that this foreclosure will legally wipe out the condominium status of this building and what you’ll be left with is an apartment building. Is that clear to everyone?”
The bidders and hangers-on seemed satisfied with this statement, so Bruce stepped aside to let the auctioneer continue with a few more announcements. Bruce caught Pierre’s eye and moved away from the group. Pierre understood and followed.
Bruce wanted to help Pierre without being too obvious about it. “Hi, Pierre, how are you?”
“Great, thanks. And thanks for doing those loan documents for Howie so quickly. I appreciate it.”
“No problem. Hey, I’m curious—what do you think this property’s worth?”
“Well, I was in the building last year. The units are in good shape, they did a nice job on the renovation. It all depends on whether you own the building as three condos or as just an apartment building with three units. If it’s three condos, you can sell the units off to individual buyers, so it’s probably worth close to $400,000, maybe a little more if the spring market’s any good. But if it’s just an apartment building, it’s worth high 200s maybe.”
“Wow, $100,000 difference just because you call them condos instead of apartments?”
“Yeah, it seems strange, I know. But there are a lot more people looking to buy condos than apartment buildings. I mean, every Yuppie in town wants a two-bedroom condo with a Jacuzzi and a deck. But there aren’t many people interested in being a landlord—it takes too much time, plus the city’s always busting your balls about something.”
“Why can’t somebody just buy it as an apartment building and convert it to condos?” Bruce didn’t completely understand the interplay between the legalities and the economics. And he sensed that Pierre would be a bit flattered to be relied on for the answers.
“The problem is that the conversion process is a nightmare. You have to buy out the tenants first, and that alone can cost twenty grand each. Then you have to get the conversion approved by the city’s rent board, and that can be a major hassle. When you figure in the lawyers and the architects and the delays, it adds up quickly. Maybe $100,000 is a bit overstated, but not too much.” Pierre looked past Bruce and studied the building. “It really is too bad that the conversion gets wiped out. It’s a great building for condos.”
“Well, thanks for the info. If the bank is the high bidder today, I’ll make sure to file a document consenting to the conversion. It’s any easy document to draft.” Slow, fat pitch. Now hit it, Pierre.
Pierre’s head snapped back toward Bruce. “You mean the bank could just file a document and the building would stay a condo?” He spoke in an excited whisper.
“Yeah.” Bruce paused for a moment, then laughed. “Oh, I see what you’re thinking. I hear you, Pierre, I hear you. If you’re the high bidder .... I can’t make any promises, but I don’t see why not. Okay?”
Pierre nodded, an appreciative grin on his face. Bruce smiled to himself—make a man rich, and he’ll be your friend for life.
* * *
The auctioneer announced the opening of the auction, and Bruce immediately opened the bidding at $190,000. Pierre expected the bidding to move up quickly into the $250,000 range. That would give a buyer a ten or twenty percent discount off the value of the apartment building. Pierre, on the other hand, was bidding for a three-unit condominium building, and was therefore prepared to bid higher.
Pierre decided to be aggressive in his bidding in hope of intimidating the other bidders. In a loud, clear voice, he called out his bid: “$200,000.”
After a few seconds, another bidder increased the bid to $205,000.
Before the bid was even out of the other bidder’s mouth, Pierre yelled out again: “$210,000.”
The ping pong match continued, each increasing the other’s bid by $5,000, until Pierre reached $240,000. The other bidders were now watching, hands in their pockets. Pierre’s opponent hesitated for ten or fifteen seconds, spoke to his companion, and then raised the bid by only $1,000, to $241,000.
Pierre sensed his opponent’s weakness, decided to go for broke. “Two hundred fifty-one thousand dollars.” He had raised the bid by a full $10,000. It was a bold move, since his opponent had just decreased the bidding increments to $1,000. Most bidders would have just raised by another $1,000, but Pierre had sensed his opponent’s hesitation and had decided to deliver a knockout punch. Maybe Pierre would have won the bid at $242,000 or $244,000, but it was also possible that his opponent would have continued making $1,000 increases for another twenty or thirty thousand dollars.
The other bidder turned to Pierre. “All right, buddy, obviously you want it more than me. I’m not gonna keep bidding you up. Good luck.”
Pierre had a momentary feeling of panic—why was nobody else bidding? But it quickly passed. He was a real estate professional, and he knew this was a good—no, great—deal. A $400,000 property for $251,000. Bruce came over, smiled reassuringly, and shook Pierre’s hand. “Congratulations, Pierre.”
“Thanks, Bruce. Thanks a lot.”
CHAPTER 24
[February 9, 1990]
Bruce held the deed to the Marlborough Street condominium in his hand. Later that day—exactly 21 days after the foreclosure sale—he would slide the deed across a mahogany table to the Springfield attorney, and the Arrujo family would once again enter the world of real estate ownership. It would be a symbolic step, like the son of a downed fighter pilot enlisting in the Air Force.
But Bruce was feeling a bit melancholy. Grandpa had been dead almost seven years. His killers? A bunch of Cambridge activists. Their weapon? The law.
Grandpa’s problems began nine years before his death, although no one knew it at the time. Grandpa lived in a triple-decker in a working class neighborhood of Cambridge, and also owned a few other investment properties in neighboring Somerville. He had owned them since before Bruce was born, and prided himself on being a caring and compassionate landlord. The properties provided him with a comfortable income, and he planned to pass them on to Bruce when he died. In the late 1960s, when Cambridge first enacted a rent control law as a curb against sky-rocketing rents, Grandpa had been unconcerned because the law specifically exempted three-family homes that were occupied by the owner.
But the hard-core tenant activists in Cambridge were fanatical. And savvy. And greedy. They wanted rent control to extend to all properties, even the small ones. At a certain point, it became almost a competition between the activists—every landlord a potential notch in their belt, every tenant paying market rent a soul to be saved, every clause in the rent control law a candidate for an Alice in Wonderland type of re-interpretation.
Then Grandpa made what turned out to be his fatal mistake: A widow who owned a small house adjacent to his approached him one day. Her husband had recently died, and she could no longer take care of the property. But she didn’t want to move out, either. Would he be willing to buy it from her and let her rent it back from him? They agreed on a fair price, and Grandpa purchased the building.
The rent control law stated that any building with three or fewer apartments that was occupied by its owner was exempt from rent control. But the drafters of the law were concerned about a situation in which a triple-decker might have a separate, detached garage that had been converted into a fourth apartment—they wanted to make sure that this type of property would be considered a four-apartment building and be subject to rent control. And so the definition of a “single building” was redefined in the statute so that it also included any adjacent building owned by the same owner.
One of the tenant activists liked to tell the story. “Late one nigh
t I was picking at cold Chinese food, poring over the property tax rolls. And I noticed that the same person owned a pair of adjoining properties. Ding! A light bulb went on!” From that moment on, Grandpa found himself trying to fight the tide with a shovel.
Grandpa was just never willing to deal rationally with the activists’ attempts to have the buildings subjected to rent control. Instead of hiring a lawyer to argue the technical interpretation of the law, Grandpa personalized the attack and reacted like an innocent man accused of child molestation. And instead of simply paying a fine and agreeing not to raise the rents above current levels, as the city proposed in an attempt to be reasonable, Grandpa dug in his heels. Bruce could still remember his words. This is a matter of principle, Brucie. A man has to stand up for what is right. These people are lunatics—how can two separate buildings be a ‘single building’ for Christ’s sake? The way to treat these people is to not even dignify their arguments with a response. Like the Israelis say, you don’t negotiate with terrorists.
But negotiation was the last thing that the most radical of the activists wanted. They wanted—and Grandpa was right here—terror. They wanted every landlord in Cambridge to fear them, every real estate investor to redline Cambridge, every tenant to see them as Robin Hood and to support them in their quest to expand rent control.
The Rent Board scheduled a hearing. Bruce couldn’t remember the brawl at the end, but he had a vivid recall of everything else:
An incessant chant filled the room: “Slumlord, slumlord, slumlord….”
Bruce bit his lip as the words assaulted Grandpa. He tasted his own blood, spat it onto the carpeted floor. He turned and glared at the activists. A few of them noticed the fire in his eyes and swallowed their taunts.
[Boston Law 01.0] Unlawful Deeds Page 15