In any event, the Baron had telephoned Pierre to ask him if he had any clients who might be interested in purchasing any of the Baron’s condo units in Brighton, a neighborhood of Boston filled with college students and recent graduates. The neighborhood bordered Brookline, where Pierre’s office was located, and he did much of his business there. “I just closed last week and I’m starting to fix ’em up right away.”
“You mean full renovation—new systems, updated kitchens and baths?”
“No, no, none of that fancy stuff. You know, fresh paint to cover up the smell of the cockroaches and cigarette smoke. Maybe a few bucks into the foyer so it looks okay.”
Pierre had agreed to go look at the units and meet with the Baron, partly because he had no other appointments scheduled that afternoon, but more because it was so out of character for the Baron to be calling a lowly broker in hopes of making a sale. When Pierre arrived a few minutes early to scout out the building by himself, the Baron was already there, seated in a canvas director’s chair in a vacant first-floor apartment, a rectangular folding table separating him from a group of eight or nine other men seated in folding chairs opposite him.
The Baron was a burly middle-aged man with an orange-glow tan and wavy dark hair pulled back into a ponytail. He wore a shimmering Italian-cut silk suit, and Pierre could see that he was acutely aware that the paint dust floating in the air was coating the suit with a white film. Every few seconds, he wiped his pant leg or his lapel with a handkerchief, trying to keep it clean. The men sitting across from him were apparently members of a painting or construction crew, their clothes and hair speckled with spackle and white paint. The men, eating sandwiches and drinking Pepsis, were on their lunch break, and they were listening with varying degrees of attentiveness to the Baron as he gave them a quick lesson in the joyous profitability of owning real estate. Pierre stood in the doorway and listened, careful not to brush up against the still-sticky paint on the door frame.
“Now, this here building you guys are painting, there are 36 units. They’re all one-bedrooms. I’m selling ’em for $80,000 each. I’ve already sold three. Here’s how it works, so listen up.” The Baron perspired in the August heat, and his delivery lacked much of the punch Pierre would have expected from an aristocratic mouthpiece.
“You guys can each buy one, and it won’t cost you a penny. Did you hear me? Not a penny. I’ve got a bank that will give you a mortgage for $60,000. I’ll lend you the other 20 grand and pay the closing costs. You’ll own the unit, with the tenant already in place, and all you have to do is sit back and collect the rent. In a couple of years, the thing will be worth $120,000. Easy. Sell it and put $40,000 in your pocket.”
The Baron paused here for effect, knowing that $40,000 was two years’ pay for most of these guys, and brushed off his suit. “Of course, it might be worth even more than $120,000—who knows? Also, anybody that refers a buddy to me who buys a unit gets a grand in cash. Any questions?”
A hand went up, attached to a middle-aged man with thick glasses. The Baron nodded to him. He spoke slowly, struggling in a thick Russian accent. “Mr. Napolitano, excuse me. I come to this country only this winter. I have not any money. A bank will lend to me all this sixty thousand dollars?” Pierre had noticed more and more Russian immigrants in the area. Many were engineers or doctors by trade, but were working here in construction or as other laborers. Many he had met were saving, almost obsessively, to buy real estate.
The Baron was nodding impatiently even before the Russian finished asking the question. “I’ve got it worked out. As long as you haven’t gone bankrupt, you’re okay. The bank has a special program. It doesn’t matter how much money you make. All that matters is that you have $20,000 for the down payment—which I’m going to lend to you—and that an appraiser says the property is worth the $80,000 purchase price.”
Pierre smiled to himself—you could get an appraiser to agree to anything these days. It was how the system worked. If the appraiser gave too low an appraisal, it would kill the deal. The next time around, the loan officer, working on commission, would hire a different appraiser. Pierre always thought it a rather incestuous relationship, but that’s the way it was.
The Russian man spoke again. “How do we know the rents will be big enough to pay the bank and other costs every month?”
The Baron sighed patiently, as if he understood the difficulty children have with simple arithmetic. He passed out a single piece of paper, heavy bond with three-color graphics. “This here sheet of paper shows the rents for the last three years and the rents projected by my accountants for the next three years.” Pierre couldn’t see the figures, but it didn’t take a rocket scientist to see that the Baron—with the help of his accountants, plural—was projecting that rents would continue to rise.
Pierre knew better. And he was sure the Baron knew better, too. Did the workers? When the meeting had broken up, Pierre followed one of the crew outside, sat with him on the cement step.
“What did you think of the Baron’s sales pitch?”
The man eyed Pierre cautiously, but Pierre had one of those faces that didn’t threaten—round and soft, with large brown eyes and an easy smile. “Look, I’ve been working for the scumbag for three years. But I’ve seen him make a ton of money, and so have a lot of his people. I’m not saying it’s right, you know, but that’s the game.”
“Are you gonna buy any condos?”
“Probably—I’ve already got two. And I put six of my buddies into deals, too.”
“Making any money?”
“Not yet, other than the six grand for lining up my buddies. But what do I care?” He took a deep drag on his cigarette. “Ever been to Atlantic City?” Pierre nodded. “See, I’m playing with the house’s money—the bank gave me the mortgage and the Baron gave me the down payment. I got no money in. If property values go up, I make a nice profit. If not, I collect the rents for a few months until the bank gets around to foreclosing—maybe make five or ten grand per unit in the meantime. Then I’ll just walk away. Let ’em chase me if they want—can’t get blood from a stone, you know? Same deal for my buddies.”
“Sounds like a pretty good deal. Or at least a good bet. What about your credit getting ruined?”
He gave a short laugh. “What do I care? I never had credit before, so what I am losing? Besides, my old lady’s got a credit card if we need it.”
Pierre had heard enough. He thanked the man for his time and walked toward his car. He wiped the paint dust and sweat off his face with a handkerchief, started to head back to his office, and instead went home to take a shower.
* * *
The scene had amazed Pierre—the sight of the Baron hawking condos to his painting crew during their lunch hour kept replaying in his mind.
What had happened to the real estate market as he knew it? He thought back over the sales he had made over the past six years—sales to doctors and professors and engineers and bond traders, deals negotiated in downtown office towers and four-star restaurants. Had the market come to this? Were these guys the only buyers left? He remembered a story he heard once about Joseph Kennedy, patriarch of the famous political family, who had sold all of his stock just days before the 1929 stock market crash. When asked why, Kennedy told the story of a shoeshine boy complaining that his stock portfolio had been under-performing the rest of the market. Where would additional demand come from, Kennedy wondered, when even the shoeshine boy owned a stock portfolio? Kennedy reasoned that without fresh demand to buy in the future, smart money should sell in the present.
Had that happened here? Had the real estate market maxed out on the demand side? Was there anyone left who didn’t already own real estate in Boston?
The sound of the phones not ringing echoed off the walls in Pierre’s office.
* * *
[August 22, 1989]
Pierre tossed and turned all night. By morning, though bleary-eyed, he thought he had a clearer view of things.
He ha
d always been an independent thinker, and had realized after his first year of college that the orthodoxy of the classroom served him poorly. He was far more interested, for example, in driving to Washington to watch Congress in session than he was in reading a political science textbook. Similarly, the years he spent hanging around and working in his parents’ real estate brokerage office gave him an almost intuitive sense of how the market ebbed and flowed. So while he was the first to admit that the absence of a college degree put him at a professional disadvantage at times, he also had learned that his gut was a far better gauge of the psychology of the market than was the statistical data being put forth in the popular press.
In this case, the press was reporting that the market had slowed and that further real estate price appreciation would be modest or even negligible. But the press was just echoing the words of the real estate industry spokespeople, many of whom, Pierre knew, hadn’t even been around for the last recession and wouldn’t know what a bust looked like if they fell into one. This theory of flat prices was based on traditional economic models—prices would become stable at the point where supply and demand had reached an equilibrium. Under this theory, the market had appreciated to the present point of equilibrium, and prices would now remain fairly constant.
But Pierre’s experience with the boom and bust cycles of the real estate market told him that the market rarely behaved in a predictable fashion. Unlike the decision whether to buy a new television set or even a new car, the decision to buy a new home was largely an emotional one—it was an investment in the community. As a result, Pierre discounted any market analysis based on economic models. Instead, Pierre viewed the market metaphorically. The market had been flying high, but Pierre’s gut told him its engine was now stalling. Like an airplane, a market at this altitude would descend once it lost forward momentum. At best, it would glide slowly and steadily downward. At worst, it would spiral to the ground in a fiery mass of destruction.
It was only 5:30 A.M. Pierre tiptoed out of the bedroom. He could hear Valerie beginning to stir, so he scooped her up, brought her into the kitchen, and warmed up a bottle of formula. She drank greedily, pausing only to reward her father an occasional milky smile. When she finished, he quickly changed her diaper—what an expert he had become in only eight months. Maybe they would make it an Olympic sport. He brought her back to the living room and sat on the couch. She grabbed his nose with her tiny fingers—poking and pulling and twisting—as he watched the sun rise over the trees across the street from their condominium.
Just before eight o’clock Carla came shuffling into the living room, wearing only one of Pierre’s T-shirts. Pierre was physically fit but not large, and Carla’s breasts swelled under the cotton. “Wow. I feel drugged. I haven’t slept this late in months, and my body isn’t sure how to handle it.” She leaned over and kissed Pierre on the mouth, lingering for a second before lifting Valerie off of his lap.
Pierre smiled up at her, gave his daily thanks to the gods of love. Average Joes like him weren’t supposed to marry women like Carla. “Are you complaining?”
“No, not at all. Thanks for letting me sleep. It was glorious, but now that I remember what it’s like, I want more.”
“Actually, I’m glad you’re awake. There’s something I want to bounce off you. But first, give me back my baby—you can’t just come in here like some conquering warrior and grab all the village treasures.”
“Tough luck. You had her all morning—I need my huggles. What did you want to talk about?”
He described his encounter with the Baron and his entourage. “And you know that things have been really slow at the office. I’m really convinced that this is more than just a ‘pause’ in the market. That’s what they call it in the newspapers—a ‘pause.’”
“Why do you think that? Wait, before you answer, can you get me a cup of coffee? I can see this is going to be more than just one of your silly questions like who’d win a fight between a shark and an alligator.”
Pierre yelled from the kitchen. “I thought we resolved that. Pound for pound, the alligator is tougher. He can hurt you with both his teeth and his tail. But if the shark gets him in deep water, and the gator can’t come up for air, it’s goodnight gator.”
“Thank you, Jacques Cousteau.” Pierre handed her a cup of coffee, which she held away from Valerie’s curious fingers as she sipped. “Okay, now why do you think the real estate market’s in such trouble?”
“Well, what happens to the guy who buys one of the Baron’s units when rents go down next month? There’s no way he’s gonna be able to pay the mortgage. I mean, he may be a good guy, but he’s still only making six bucks an hour slapping paint on the wall.”
“Maybe rents won’t go down.”
“No, they definitely will. I’m seeing it already. And the Baron’s not stupid. He knows how soft the rental market is—that’s why he’s pushing so hard for sales now. And what scares me is how many of these guys Baron has sold units to. They probably hadn’t even thought about buying a condo until the Baron dumped one in their lap.”
“The banks are lending to these guys?”
“They’ll lend to anybody.”
“If the Baron figured it out, other people probably did also. I mean, if you were a developer, it sounds like a pretty easy way to sell your units.”
“Exactly.” Pierre leaned over and gave Carla a quick kiss. As he did so, he snatched Valerie off of her lap. “My turn. Anyway, my theory is that there are hundreds of these owners out there who will walk away from their properties as soon as things start to go bad.”
“Okay. So then the banks foreclose.”
“Which floods the market with more properties. But it’s even worse than that. What about the psychology of this market? People seem to have forgotten that real estate is cyclical. How many times have you heard somebody say, ‘Real estate always goes up in value’?”
“I heard it just a few days ago at the health club.”
“But think about the people who bought homes recently—they’re young, successful, smart. And very leveraged. I’m not talking about the guys the Baron is selling to right now. I’m talking about the Yuppie couple who bought a condo in the Back Bay, or maybe the young guy who bought a condo for an investment because his buddy made a big score. They scraped together all their savings, sold stocks, borrowed from parents. Right?”
“Yeah. Sounds like us.”
“Don’t remind me. But I’ve been thinking a lot. I wonder if everyone will panic if the market starts to go down.”
“Do you think our generation has that little tolerance for risk?”
Pierre smiled at Carla. “I like the way you put that—‘tolerance for risk.’ But no, I don’t think we necessarily have a low tolerance for risk. I think the point is that we bought our homes thinking that real estate was risk-free. We thought that real estate was a sure thing. Once the market starts to dip, I’m worried that everyone’s gonna feel cheated.”
“And angry.”
“Yup. Will they be patient and wait for the next cycle? Or will they panic? My feeling is that the word ‘patience’ is not one that many people would use to describe the Eighties generation.”
“Yeah, I see your point. ‘Instant gratification’ comes more to mind.”
“So you think I might be right?”
“About Armageddon?”
“No, Smart-ass, it won’t be that bad. But do you think there might be a bit of panic?”
“You know, Pierre, seriously, you could be right. I think a lot of it depends on how many of these scam buyers there are. If you’re right and there’s a lot of them, and if the banks do foreclose and flood the market with properties, then prices will definitely come down. I could see that being the trigger for a bit of a panic mentality. Because you’re right—real estate is just not supposed to go down.”
Pierre handed Valerie back to Carla. “I’m gonna run with this for a while, see what else I can find out about our Baron frie
nd. I mean, how many units has he sold to his painting crews? If it’s just a few, then it’s probably no big deal. But if he’s been doing this for a while, I’d like to know about it. Because if the market’s going to crash, I don’t plan on being at the bottom of the pile.” He kissed them each, then headed for the door.
“Maybe I’ll try to come home for lunch.”
“Good. Maybe Valerie will be napping.”
CHAPTER 5
[August 24, 1989]
Charese stepped off the subway and onto the escalator. The warm summer wind blew down toward her, billowing her dress up and away from her freshly shaven legs. She smiled as a man on the opposite escalator checked her out as he descended past, happy that she could still both fool and attract men.
Charese had made a tactical decision, electing to attend this meeting in her female persona. Even though Lawyers Advocating for the Poor was a liberal group that likely supported gay and lesbian causes, she guessed that most of the LAP lawyers had never actually sat down for a meeting with a transvestite. Simple curiosity, Charese hoped, would ensure that her request for free legal representation would at least be heard.
In fact, Charese was fairly confident of persuading them to take her case. She had always had an intuitive sense of the spice her transvestite status added to people’s lives. She imagined the LAP lawyers getting a charge out of regaling their friends with cocktail party stories. Yeah, I’m representing some black transvestite suing a white blue blood for refusing to pay for her sex-change operation.
Actually, Charese wasn’t even really black. Her hairdressing background had taught her how to kink her hair, and, though only olive-skinned, she was rarely challenged for claiming a status most of society saw as disadvantageous. And being black was one more check mark in her favor on the liberal agenda checklist, one more reason for LAP to take her case.
[Boston Law 01.0] Unlawful Deeds Page 4
