Jamie,

Any idea if this could turn out to be anything better than a property swap between slumlords?

Any reason to think that anyone with a shred of responsibility might do something positive with most of these properties?

BPW, it seems like a wait-and-see situation -- unless neighbors have a property owner in mind that they'd like to see buy the portfolio, in which case it's a lobby-like-crazy-and-offer-assistance situation.

So it appears this entire portfolio is north of Eastern Avenue and the vast majority of it is north of Lombard? That is a tough area. Most of the homes are clustered around Fayette St. A potential bidder better havea strong stomach to deal with tenants in that area. Also, I'd want to see proof of the "extensive renovations" because you're talking about 50+ yr old rowhouses, probably 100 yrs+ in many cases.

The city changes drastically when you go north of Lombard, at least on the east side.

I know that area well - anything north of Baltimore St. is some seriously rough turf. I find it hard to believe that the average unit rent is $975 per. It would be a full-time job just to chase deadbeat tenants, while taking your life in your own hands. This group of properties is not for the faint of heart. Ideal new owner: Pit Bull bail bondsman with a heart of coal.

Chappy,

When was the last time that you drove through this area? If you drive anywhere between Clinton St, Patterson Park Ave, Fayette St, and Lombard St, you will many people who are invested in their community. I won't say that it's perfect, but if you have any idea what this area was like 15 years ago, you will see that it has improved dramatically.

I drive through that area all the time. As in, several times a week. Have you seen what Fayette Street is like after 8PM in that stretch of area? Ever talked to police who work that area? I live just to the other side of Eastern Avenue and know the area well, thank you very much. As an added bonus, I'm a lawyer and a landlord along Eastern Avenue and have had plenty of insight into the problems the new owner is going to be dealing with.
I am sorry if I offended you personally, as that was not my intention. No one said that entire area is bad--there are nice areas in pockets along there. In fact, there are a good number of beautiful houses. However, the majority of that stretch is a no-go area when it's dark and blighted even when it's light out. And this is coming from someone who a) knows the area and b) loves Baltimore.

It's a rough area, but $975 is believable given Section 8 pays the rent for 6000 units in the city. North of the park is good if you're still on the block adjacent to the park, but these things are north of Fairmount. There's probably only about a half dozen that I'd even feel comfortable parking my car at overnight. The point that I've raised several times before is that Section 8 creates an artificial floor, raises rents, and perpetuates its own need by pricing lower incomes out of the housing market if they don't use it.

But what strikes me most on this deal is a question I'm often faced with: How did someone so stupid get so much money? Selling these units off en masse greatly limits the market for them and guarantees they will sell at a lower unit price than they otherwise would. You can't get commercial financing for something like this, which means you're talking an all cash buyer. There's absolutely no reason for this unless someone's kids have been kidnapped and are being held ransom, they need to raise cash yesterday, and are willing to accept a Greek bailout type of haircut to get that cash.

This auction will be more entertaining than the Pier Homes Auction where you had 25 yo girls buying 800k row homes with their dad's money because while they were vacationing their world on their dad's money they learned how to spot a great real estate deal.

You guys never fail to inform/entertain. Reading the comments is half the fun of running this blog.

Plus, regarding Section 8, every time the rents are raised, it raises the net worth of these slum lords (pardon my use of your intellectual property MCG) because the value of their property is derived from their net operating income divided by their capitalization rate. Raise rent, and you raise the NOI, thus raising the value.

By the way, just to give some context to people from other areas of the city or outside the city... the areas right around Patterson Park are quite lovely and some of the most improved parts of the city in the past 10-20 years. In fact, a lot of the areas on that map include houses that sell for 500k+, even with city taxes. Beautiful old houses with features you'd never see these days... often rehabbed beautifully. However, the map is misleading, bc the map takes in a big area but the red dots are concentrated in just 2 or 3 areas.

That corridor along Fayette Street from Highland Avenue all the way to the left and basically all the way to Central Avenue (near the main Baltimore post office) is one of the most troubled areas of the city. At the east end, you have a bunch of hotels/motels with very high drug activity, near where the Pulaski Hwy comes in from the eastern county area. Lots of prostitution and drug dealing. I have friends who are cops and I'm a lawyer, trust me when I say that area keeps all of us busy, but on different sides of the law.

It's a testament to how areas change over time and how going a few blocks one way or the other can make a huge difference. If you go south of Baltimore Street, you get some nice areas. If you go in the area immediately around Santonis (the supermarket at Lombard and Highland), it's pretty good, too. And once you get south of Eastern avenue, you're near the waterfront, so you have Canton, Brewer's Hill, Greektown, which is a nice range of working class and even some upper class areas. But you really don't want to go more than a block north of Patterson Park, not because the park is bad, but rather because there is that corridor of drug related activity and blight a few blocks to the north.

Again, I'm not trying to diss any areas, just offer some context of why that map might be misleading. If the red dots were a few blocks south, these properties would sell for 2-3x more money.

"investor properties" sounds a lot like unrehabbed houses.And unrehabbed houses in those areas dont go for $100,000.They usually go for $60,000-$80,000.And in some of the northern areas on the map they go for $40,000.

$975 rent for rowhouse in that area is about right though

As far as Patterson Park CDC auctions, i think the figure of $70,000 was skewed by some of thier bigger buildings like thier old office at the corner of Linwood and Baltimore. I was at the auction of one of CDC's old proerties by Fayette and Curly and that house sold at auction for $15,000. fifteen grand is a lot less then 70 grand

Noland Henson
Henson Property Management
I do not get all the negativety
If these are rehab properties they are well worth the money. I all so no that are and I could rent those for any of my owners quickly
I think the negativety is uncalled for
That is where I rent properies every day at thoes location anything under the 300 block is good and all of those are 300 or under. tell the inestors call me I will get them rented for them

Amazing thing is aside from "inestors," spell check wouldn't have flagged a single thing in that post.

Well, I for one am NOT in favor of section-8 housing. How about housing that's affordable w/o subsidies?

I honestly hope the section-8 program is one that's cut by the Federal government in the coming months. If not, prices for the properties will be artificially high, and any actual homeowners in the area will suffer.

Why turn the entire area into section-8. The landlord could probably sell the houses if they're honestly livable to Regular homebuyers for $50,000 a pop and possibly improve the area. No offense, but section 8 tenants tend to be not so wonderful.

What's wrong w/ selling these properties to normal people? A lot of potential buyers would love to have a $600 or $700 per month mortgage for a house. The government subsidies are simply making the houses unaffordable (who is going to buy a million-dollar PACKAGE of houses?) for normal people and making the neighborhood less desirable. Ugh

Juanita, I don't think anyone who has commented here has spoken out in favor of Section 8. One commenter mentioned how Section 8 in this city is bad because it creates an artificial rent floor (which I happen to agree with) and thus prices middle class renters out of the market.

Based on my experience in dealing with Harbor House, I would venture to guess that half of their properties are Section 8 while the other half are rented to Latino immigrant families- as opposed to it being 100% Section 8 rentals about 5 years ago. If this auction had taken place 5 years ago, I would have been celebrating in the streets, but now I'm not so sure. They own four houses on my block- two of which were drug nuisances while they were Section 8. Now, all four are rented to Latino families who are friendly and have participated in neighborhood cleanups and tree plantings. I know of one landlord with a large portfolio of properties here who loves Section 8 but refuses to rent to Latinos- so my biggest fear is that he acquires these properties and removes the current tenants so that he can move more Section 8 families here.

Those properties are "extensively renovated" if you consider having a working shower as a luxury item. The actual rents in that area for renovated homes are closer to $1400/month for a house with decent amenities, the Harbor House homes are just crappy.

The "north of Baltimore" crowd are just listening to their racist grandparents, I make good money off renting to Hopkins students and young professionals around the Fayette corridor. Let them think that way, I can buy the houses cheaper and with less competition and make a larger profit. By all means, please consider that area a slum as I laugh my way to the bank.

This is what passes for reporting? This article has no concept of any of the real estate development industry or what the proper land uses for this rough area of Baltimore should be. A $975/rent row home is not a market opportunity!

Calvin, you notice I'm not saying this is an opportunity -- I'm saying the auction is happening (and noting what the auctioneer is saying about it from a marketing perspective). A lot of people live in and around Patterson Park, so I figured they'd be interested to know that a major landlord is selling.

People who read this blog are generally pretty sophisticated when it comes to real estate. They can judge whether something is a good deal or not, and they've been weighing in above, as you can see.