Buffalo building inspectors are moving to demolish at least four more houses flipped by AbdulAziz HouHou as they check out all 160 houses bought, sold or brokered by the imprisoned Kuwait real estate executive and his associates.
The move comes in response to a Buffalo News story detailing how the houses were swept up in what Kuwaiti authorities describe as a $140 million to $240 million international fraud and money laundering scheme that HouHou spearheaded.
"We are going to check all of them to make sure we're not missing anything," said Louis Petrucci, assistant director of the city's Department of Permits and Inspections. "We want to make sure of the status of all the properties."
Already, the inspectors identified 43 Goembel Ave. on the city's East Side, 148 Thompson St. in Black Rock, and 25 Mesmer Ave. and 1408 South Park Ave. in South Buffalo as needing to come down.
43 Goembel Ave.: Glebova Realty Group of the Town of Tonawanda bought the house for $2,500 in 2014, then immediately flipped the property to a Kuwaiti investor with HouHou's organization brokering the sale and handling property management. The city was prepared to knock down the house last year, but the demolition was halted in court after the Kuwaiti owner sold the property to a Brooklyn investor, city officials said. But over a year since the sale, the house has no doors or windows, its interior appears ransacked, and debris is piling up outside.
148 Thompson St.: A HouHou company bought the house in 2015 then flipped it to a Kuwaiti investor eight months later. The house was vacant for about four years, and was being used by prostitutes, squatters and drug users before the city boarded it up about two years ago, a neighbor said. The city foreclosed, and is in the process of taking ownership of the property. Inspectors said the house is filled with needles.
25 Mesmer Ave.: HouHou bought the house from a bank in early 2015 and flipped it to a Kuwaiti investor. The house has been largely vacant since then, and the Kuwaiti owner says costs associated with the house are so high that his family decided to let the city foreclose on the property. Over the years, pipes froze, the basement flooded, and rats took over the house, neighbors said.
1408 South Park Ave.: HouHou purchased the house for $65,500 in 2015, then flipped it nine months later to a Kuwaiti investor. The house, vacant for the past two years, is partially boarded up, with broken windows and indications squatters have gotten inside. Neighbors say it's a fire hazard, and they fear it will end up burning down if the city doesn't demolish it first.
If these four houses get demolished it will bring to 21 the number of Buffalo houses flipped by HouHou that ended up being torn down, usually at public expense, The News found. That would be 13 percent of the 160 houses The News identified as being sold or brokered by HouHou or one of his companies between 2013 and 2016.
In addition to demolitions, the city has foreclosed on at least half the HouHou-flipped houses since the Kuwaiti broker's house-buying spree began in Buffalo. Inspectors have cited almost two-thirds of the 160 houses for code violations since 2016, records show. There are currently court judgments against at least a quarter of the houses, The News found.
But after The News published stories on HouHou, the city's Permits and Inspections department wanted to make sure it had not missed any HouHou houses, and decided to update its reports and inspections, Petrucci said.
That will involve checking houses for violations as well as checking current ownership. If warranted, additional charges will be filed against new owners if violations from prior owners exist, Petrucci said.
The News reported HouHou directly bought and sold about 80 houses in Buffalo, and that his real estate companies brokered another 80 sales, mostly through the Glebova Real Estate Group.
The Buffalo sales were part of a Ponzi scheme that was financed by as many as 2,000 unsuspecting investors who bought as many as 3,000 properties, mostly in the United States, said Ali Al-Attar, an attorney representing some investors. In addition to Buffalo, Houhou and his associates were flipping houses in Rochester, Detroit, Cleveland and Dayton, Ohio, as well as vacant lots in Florida and North Carolina, according to court records and government documents.
HouHou's operation marketed the houses as "attractive rental properties," with guaranteed rents, but investors say many of the houses were run-down, vacant, and in troubled neighborhoods.
Houhou was convicted in a Kuwaiti court last year of fraud and money laundering, and was sentenced to 10 years in prison and a $16 million fine. Six of his associates, including his wife, were convicted of fraud, and each sentenced to three-year terms.
Buffalo: City has limited power
Buffalo officials said the city is limited in what it can do to prevent flipping schemes such as HouHou's because it involved private sales. Buffalo has more leverage, the officials said, with houses purchased from the city, including at foreclosure auctions.
The city, for example, prohibits property purchased at its foreclosure auctions from being resold within six months, Petrucci said. Buffalo also imposes a residency requirement on individuals who buy houses from city agencies or participate in city programs, he said. State and federal programs have similar requirements, he said.
Such programs are designed to promote home ownership and prevent someone from buying and quickly flipping a property or using public dollars to flip properties, he said.
But HouHou did not buy or broker any Buffalo houses sold by the city or at city auctions. The houses he and his organization flipped were purchased privately from banks, individuals, or real estate firms.
City lawmakers agreed Buffalo's influence over private sales is limited.
"It's buyer beware," said North District Councilman Joseph Golombek Jr.
The city "doesn't have a hammer" over privately purchased houses being flipped, Lovejoy Council Richard A. Fontana said.
Some city officials also said the HouHou flipping scheme adds to their concerns over out-of-town investors purchasing Buffalo properties.
"One of our worst problems is absentee landlords," said Fillmore District Councilman David A. Franczyk. "I don't like when even they are from New York City. I don't think those across the world should own income property in struggling Buffalo neighborhoods. You have to be hands-on. How can you going to be accountable? It's why we have the demolitions."
Franczyk also said buying properties 6,000 miles away, as the Kuwaitis did – without first visiting Buffalo to see what they were buying – is a "recipe for disaster."
More international buyers
The number of investors from outside the United States buying income properties in Buffalo is relatively small, but growing, Petrucci said.
Such investors face challenges finding good property management companies as well as hiring good contractors, he said.
It's also more challenging for the city to enforce housing laws when investors live outside the country, he said.
Kuwaiti investors say they were victimized by HouHou and his firms, which had promised to provide property managers to ensure their investment properties were properly maintained.
They trusted the promises being made by HouHou and his associates, several Kuwaitis told The News, because they were familiar with the HouHou company name, and the company was marketing U.S. properties at real estate exhibitions that are well-regarded in Kuwait, and sanctioned by government offices there.
Investors also said HouHou's Middle East affiliation with RE/MAX – a Denver-based real estate agency – added to their confidence in the Kuwaiti realtor. RE/MAX ended its association with HouHou in March 2017 citing a "breach of contract." RE/MAX officials would not elaborate.
Kuwaiti investors have suggested "stringent rules" are needed to restore Kuwaiti confidence in the United States as a safe place to invest or buy property. Kuwaiti investors have also asked the FBI to investigate whether any U.S. companies were complicit in HouHou's scheme.
The FBI has not said whether it is investigating, but a Buffalo attorney told The News concerns about HouHou's Buffalo sales were forwarded to the U.S. Attorney's Office in 2015.
Story topics: watchdog