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Eye of the beholder: seedy rental properties may not be pretty, but for landlords the lucrative income is.

DAN BAKER GAINED notoriety as Little Rock's premier slumlord, although his actual ownership was often minimal, if any existed at all.

News accounts have associated Baker with 15 different properties, but other sources place the number as high as 87.

The shooting death of this controversial businessman, allegedly at the hands of investor and car dealer Herbert Jones Sr., has focused attention on the risks and rewards of renting property to low-income tenants.

"It's a market that no one wants to deal with, and that's where you make money," says one former low-rent landlord. "I was doing what Dan Baker was doing, but I quit in time before I got shot.

"The way to make money is to keep a low profile and not get crossways with city hall. You have to deal with regulatory authority or have anarchy."

This diplomatic philosophy contrasts sharply with Baker's combative approach of constantly running afoul of building codes and suing city officials who enforced the regulations.

Baker deemed code enforcement as illegal governmental meddling and made it a personal crusade to fight a system that infringed on his avowed rights to achieve maximum return on rental property.

"He resented the regulatory process that we represented," says Jim Hathcock, manager of Little Rock's Neighborhood Programs. "Let me count the times he's sued me -- five. He's sued me in every conceivable way, including personally and as a city employee."

One man's over-regulation is another man's opportunity.

Code enforcement action by the city of Little Rock is described as the catalyst that made Al Owens a millionaire and bankrolled his idyllic retirement in the Ozark Mountains.

His primary strategy was to purchase run-down residential properties from owners who couldn't afford or wouldn't spend the money needed to bring the houses into compliance with city building codes. Owens then would rehabilitate the structures to meet minimum standards and sell the improved projects as rental units to investors.

On a secondary level, Owens kept some rental properties for himself. His operation was backed by his own construction crew, which kept busy patching up houses.

At its peak, Owens rented 300 units in downtown Little Rock. His big payday came in May 1982, when he sold his real estate holdings for a reported $1.74 million.

The buyer was Hardman Ketchum & Baker Properties of Arkadelphia. And no, the Baker in this group isn't Dan Baker, although he did have a management relationship with HK&B. The players in this investment trio are William Hardman, Wendell Ketchum and George Baker.

"We have sold most of our property or sold it on contract since 1987," Ketchum says. "We were active in the market during 1985-87. The big change from then is that we didn't have near the drug problem there is now."

The dangers of dealing with impoverished tenants who rented by the week prompted Baker to pack firearms to help safeguard lucrative collections and speedy evictions.

In an interesting twist, Dan Baker approached Owens about buying his properties, a real estate source says. But Baker was an unknown quantity unwilling to be more forthcoming about his financial staying power, and Owens gave him the brush-off before selling his portfolio to the Arkadelphia group.

Undeterred, Baker eventually hooked up with HK&B to manage these rental units. Several properties such as Luxor Apartments eventually were shut down by the city because of Baker's numerous code violations.

"If he would've just kissed a** at city hall, he would've been OK," says one low-rent landlord. "You've got to get along with them. If you can't make money without breaking the law, you don't do it."

Cutting Corners

Baker's big problem, city code enforcement officials say, was taking a property that had gone through the city hall review process to allow a set number of units and then covertly dividing it into more apartments.

With the higher density of residents came a whole new set of requirements for fire codes, electrical systems and plumbing. All of this illegal construction was accomplished with unauthorized personnel instead of licensed electricians and plumbers, according to the city officials.

"There is becoming a keen awareness of code enforcement by citizens regardless of whether they're low-income owners or renters," Hathcock says. "The day of the Baker-type operation is on the wane."

"People looking for a quick return on their investment without taking the residents into consideration are looking at finding themselves in a real bad condition."

"Mr. Baker's sole motivation was the financial aspect of it, and he said that on several occasions."

Even if properties meet the city's minimum standards, houses or apartments may still be considered eyesores. To people desperate for a roof over their heads, the physical appearance of an abode is a low priority.

"Codes don't regulate ugly," Hathcock says. "How it looks doesn't concern us. The health, safety and welfare aspect of it does.

"We work with the understanding that the owner is ultimately responsible. They can't subordinate their responsibilities legally."

This year, the city began turning up the heat on Herbert Jones Sr. to clean up his two large projects in southwest Little Rock managed by Baker -- Merrivale Apartments and Butler Road Apartments.

Baker was involved with the Butler Road project as early as May 1983, when Michael McFarland bought the project from E.E. Purdom in a reported $1.1 million deal.

The apartments went through foreclosure under the ownership of George Pike Jr. Jones picked up the 2.87-acre development for an undisclosed price, financed by a $225,000 loan.

Baker also brought Merrivale Apartments to Jones after it had gone through foreclosure. That $388,000 buy was made through Jones' Tennarktex Inc. and backed by a $450,000 loan.

The title of slumlord has followed Baker to his grave while the real property owners, like Jones, have managed to remain aloof from such designations.

This feat will be more difficult to attain as public scrutiny of low-rent property grows.
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Author:Waldon, George
Publication:Arkansas Business
Date:Jun 21, 1993
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