A Crash Course in Dealmaking

"There's no question the city is losing low-income housing," said Eric Rome, a tenant attorney for two decades, who said that personal interest typically trumps the public good.

"The question is, would you rather take fifteen, twenty or thirty thousand dollars or end up with nothing," he said. "I might politically or socially believe in retaining affordable housing. But my only job is to maximize the interest of the client, and that often is not in harmony with preserving affordable housing."

But in such gentrifying communities as Mount Pleasant and Columbia Heights, there are increasing reports to civil rights groups, including the Central American Resource Center in Mount Pleasant, of renters being harassed and threatened to get them to leave. Grudgingly, many residents -- particularly those in the country illegally -- leave to avoid drawing the attention of authorities, said Christy Hogan, who heads CARECEN's housing program.

"In some way or another, they want to get rid of the tenants so they can get more money for the unit," Hogan said.

The Washington Interfaith Network, a low-income housing advocacy group, has found hundreds in its member congregations who feel taken by the system.

One of them is Amanda DeLeon, a 68-year-old grandmother who moved to the United States from Guatemala more than three decades ago and settled at 1833 New Hampshire Ave. NW. In 2002, DeLeon said she accepted $13,000 from her landlord to leave because the place was being renovated as luxury rentals, and all her neighbors had accepted buyouts. Her rent at her new apartment at 14th and N streets NW is $900, up from $386 a month.

"In one year," she said of the buyout, "it's gone."

'The Best Deal'

Staying put was on Thaia Grace's mind when she received notice of a pending sale of 1020 Monroe Street in late 2003. She had visions of residents pooling their money to form a co-op, but knew from an aborted sale in 1989 that the first step was organizing. She put up fliers, knocked on doors and cobbled together a tenant association.

While many tenants groups fail because of the work involved or dissension in the ranks, those at 1020 Monroe stayed together. They scrounged together the $750 to file necessary papers and place a good-faith deposit. Soon, the suits began showing up.

There were presentations from the Jair Lynch Group, Tenacity, Fleetwood Management and the Development Corp. of Columbia Heights. Many of the presenters, while professional, turned off Grace and other residents. Either they were too expensive, too slow to follow up or unwilling to take the time to address residents' concerns.

"Everyone seemed like a predator," said Hasinatu Camara, a public school teacher known as Mama, who had lived in the building for five years.

After hearing from the big companies -- most of whom could write checks immediately -- in walked Rob Hall, a 32-year-old with a boyish face, big plans and zero projects of this size under his belt. But having grown up on welfare and in foster homes, he was intriguing.

Hall said he didn't flinch when roaches crawled up the wall as he talked to residents. All around them, new communities, with fancy decks, were rising in former drug havens like Clifton Terrace. Boarded-up buildings, even on their own block, turned into a specialty sandwich and coffee shop. The changes scared them.

"I used to wonder, 'Why is everyone so up in arms about repairing torn-up neighborhoods and making them new?' " Hall said. "Then I realized that . . . the issue was not that I didn't want this place to be nicer, but that I couldn't afford it once it was."

Hall's pledge to residents was that his organization, Hope 7, was different. He offered to let them buy their apartments -- updated with such high-end fixtures as marble counters -- for $80,000. Renters not interested in returning would get $20,000 to leave.

Residents were sold. So in March 2004, they signed over to Hall their rights to purchase, and develop, the property. As many as 10 tenants plan to stay, while others have moved or will soon take buyouts. "He had the best feeling and the best deal," said Grace, an 18-year resident of the building.

Hall was also a wild card. Unlike some of the larger companies with financing lined up, Hall had to pull together the $1 million purchase price after residents gave him the okay. What's more, it soon became clear that looming legal questions could endanger the deal.

In September 2004, as Hall was headed to settlement, the Securities and Exchange Commission charged him and an associate in a company named First United Financial Group with running a pyramid, or Ponzi, scheme. The men, according to that civil complaint, allegedly sought out 150 investors in 18 states, promising annual profits of up to 180 percent.

Initial investors, lured with the idea of financing low-income housing in poor communities, put in at least $2,500, prosecutors allege. Early investors were paid some "capital gains" with money collected from new investors.

The scheme, from June 2001 to August 2003, targeted African Americans, eventually bilking them of nearly $750,000, the U.S. Department of Justice alleged in a criminal complaint in January. Hall's former colleague, Carletus Willis, pleaded guilty to mail fraud and conspiracy to commit mail fraud in December and is awaiting sentencing.

But Hall, facing up to 50 years in prison, maintains his innocence, saying his current project is proof that he always had a plan to invest in gentrifying communities. A trial date has not been set. When the charges were announced, his initial lender refused to honor his financing to buy 1020 Monroe, but Hall scrambled and found another lender. The case "does hamper me," he said, "but it's not going to stop me."

Grace and Hall talked about the allegations soon after they were filed. She began working for him -- answering phones and recruiting other tenant groups -- before the allegations came to light. Her neighbors, she said, took the allegations in stride.

Camara is among the residents who have been pleased that Hall has cleaned up the building, set up shop in a commercial space on the first floor and set in motion plans to overhaul apartments and add amenities including elevators, trash chutes and a rooftop deck. Construction is scheduled to begin in August and continue for nine months. Sight unseen, people have begun offering Hall money for the commercial and residential units. Camara hopes that Hall's legal troubles won't kill their deal.

"I'm hopeful and I'm scared," Camara said. "If he ain't serious, he's doing a big ol' fake job."