It’s a puzzle, really, about who can be trusted to help the poor. Can a profit-seeker in the private sector ever do anything altruistic, or is altruism the exclusive province of elected officials and nonprofit do-gooders? It’s a hard question that tends to shove people violently to one side or the other.
Born in London, product of the prestigious and private Greenhill School in Dallas, and owner of multiple graduate business degrees from the University of Texas, Khraish stands now on a truly precarious line in the pantheon of Dallas’ public figures: He's either the greatest thing since sliced bread, or he’s the worst.
On the best-thing side, Khraish is rolling out a program to provide affordable housing in West Dallas for police officers and firefighters, part of his plan to stabilize neighborhoods threatened by wildfire gentrification. And that’s only his latest good thing.
Last year, after he sold more than 100 rental houses to his tenants, the national convention of the League of United Latin American Citizens conferred on Khraish a rare national commendation for his work in creating homeownership among the working poor. It was an exceptional honor, in no small part because it gave credit to a for-profit landlord for resolving an affordable housing crisis that seemed to have been created by the city’s public sector and nonprofit do-gooders. So already, even in praising him, LULAC was helping tp create a Khraish narrative heavy on cognitive dissonance.
On the worst-thing-since-sliced-bread side, two legal aid groups came forward last week to accuse Khraish of duplicitously victimizing the defenseless poor in his housing sales. Rather than helping the poor, he was conning them to fatten his own pockets, according to the federal lawsuit filed by the two groups.Rather than helping the poor, Khraish Khraish was conning them to fatten his own pockets, according to the federal lawsuit filed by the two legal aid groups.
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The suit accuses Khraish of duping poor, unsuspecting, non-English-speaking tenants into signing fake purchase agreements that the suit says put the so-called purchasers “in a position no more secure than renting, and with the added burden of having to pay for repairs themselves.”
This may look like a puzzle too tangled to be solved, but one thread snaking through both sides of the conundrum may offer at least an organizing theme, if not an answer: land. In red-hot gentrifying West Dallas, if it’s not always all about land, it’s at least always a lot about land.
Last week, when I met with half a dozen representatives of the two legal groups behind the lawsuit, I was surprised to find sitting at the end of the conference table one John Greenan, executive director of Central Dallas Community Development Corp. I have known Greenan a little bit in person for decades, but I know him better for his reputation. Greenan is one of the city’s most successful developers of affordable housing, widely respected for his expertise.
But Greenan has a way of popping up in the Khraish saga. Two years ago, when Khraish was summoned to City Hall for a very unsuccessful “mediation” ordered by Mayor Mike Rawlings, Khraish was surprised, as I was last week, to find Greenan in the room. The mayor was eager for Khraish, whom he was publicly condemning as a slumlord, to sell his 400-plus West Dallas rental properties to … somebody.
Khraish drew the clear impression that the mayor’s favored somebody was some combination of Greenan and Larry James, CEO of the housing nonprofit group CitySquare. James also was at the meeting, to Khraish’s surprise. Both Greenan and James later denied they were there to help the mayor strong-arm Khraish into selling.
Anyway, Kraish, son of a strong-willed Lebanese immigrant who made a fortune in real estate in the United Arab Emirates, London and Houston before moving to Dallas, doesn’t strong-arm. He walked out of the mayor’s meeting after secretly taping it and sharing the tape with me. Things between him and the mayor have been cool since.
I asked Greenan why he was there last week at my meeting with the lawsuit lawyers and whether he has any development interest in the matter. He said no, that he was there only as an adviser.
A major sticking point, however, in what the lawyers wanted to talk to me about in the meeting had to do with a thing called “right of first refusal,” which I will come back to and explain later after you’ve already quit reading. It’s technical. (You’ll miss out!)
Khraish assures me the right of first refusal issue is a matter that would be important only to a would-be developer. In fact, he tells me he insisted on giving himself that right in all of his sales contracts with former tenants as a defense against predatory developers.
Khraish financed all of his sales himself. If a buyer wants to sell a Khraish house later, the contract says he has to give Khraish first shot at bidding on it, but the seller doesn’t have to accept Khraish’s bid.
It’s a way for Khraish to prevent a speculative developer from sneaking in behind him and talking all of his buyers into flipping their properties en masse behind his back. He says his goal in selling 120 houses to former tenants was to stabilize the neighborhood, not make the neighborhood a soft target for gentrifying real estate sharks.
Before we get any deeper, we need to go back to the best thing since sliced bread and talk about Khraish’s plan to stabilize West Dallas by offering the city’s police and fire officers good deals on new houses.
His plan is to offer the city’s police and fire officers mortgages they can afford for quality-built new houses and condos as a way to get them to live inside the city and stay on the payroll. Why is that his job? It’s not. But it’s also not hard to see what he gets out of it.
Omar Narvaez stands with Khraish in the photo that defined the District 6 City Council race.
Jim Schutze
So what happens when a bunch of cops and firefighters start moving into the neighborhood? Hey, most of us know that one. In fact, the real question isn’t about a bunch of them. One will do. Cop moves in. Bad guys move out.
"You have a police car parked in front of the neighborhood. So, yeah, that will send a loud message to gang members, drug dealers, et cetera.” — Dallas police Sgt. George Aranda
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Cops know how this works, and they know exactly why Khraish wants to attract them to his part of town. I spoke recently with Dallas police Sgt. George Aranda, president of the Dallas branch of the National Latino Law Enforcement Organization, who has seen Khraish’s full presentation. Aranda even spent four hours driving a map of more than 100 properties under consideration.
Aranda sees a natural link between Khraish’s affordable housing plan and another initiative under consideration by the police department, also aimed at keeping cops on the force and in the city, that would allow officers to drive patrol vehicles home at the ends of their shifts. The condition for taking the cars home is that the officers would have to live within the city limits.
Aranda thinks the presence of cops and cop cars on a block can’t help but make a difference.
“So now you have a police officer living in the neighborhood,” he says, “and you have a police car parked in front of the neighborhood. So, yeah, that will send a loud message to gang members, drug dealers, et cetera.”
Housing in Dallas is becoming prohibitively expensive for public servants. Khraish intends to sell to them at price points that will be very attractive. Attractive enough to overcome the area’s negatives? Time will tell.
Dallas Police Chief U. Renee Hall acknowledges that Khraish has met with her to present his idea. Her spokesperson said, “The chief has not had time to discuss this possible opportunity with leadership from City Hall. At this time it would not be appropriate to participate in any media discussion about this meeting.”
Which makes sense. This involves land use, housing policy and economic development, areas outside the chief’s responsibilities. Khraish is, after all, the most controversial figure in the city right now, and I have been pretty much a cheerleader for him in the past, so maybe, although it grieves me to admit, the chief is smart not to meet with me about it just yet.
As envisioned by Khraish, however, a major benefit to the city would be the proposal’s value as a tool to retain cops and firefighters at a time when the troops are still defecting from the city in droves and when recruitment of new hires has been tough. And then there is the value to the whole city.
Since World War II, West Dallas has been a haven for working-class families, mostly but not entirely black and Hispanic, who couldn’t afford to live anywhere else. Those families have formed a solid base that has always defended itself vigorously against the forces of crime and dissolution. In only the last few years, the old families have found themselves facing an even more powerful foe in the form of ruthless high-end gentrification — condos that none of them could ever dream of affording, soaring taxes they soon won’t be able to pay.
Khraish believes bringing police and fire officers into this part of town is a way to provide a stabilizing path between the longtime solid-citizen residents and the more affluent newcomers. And what does he get out of it, again?
He owns a whole lot of land in West Dallas, and it’s all paid for. He and his father bought it for cash years ago. He’s not in the same squeeze as the hurry-up gentrification developers. They have to borrow mountains of money to get their deals going, and then they have to build mountains of luxury condos to pay off their loans.
Khraish can make his money in more modest increments. When his long plan works and the whole area improves because of it, he’ll probably wind up making more money than the borrower-builders. His scheme is built on saving his money, paying cash, not borrowing, not getting hip-deep in public subsidies and politics, instead patiently waiting for a far-off payday when the community has strengthened itself.
It’s hard to think of a philosophy or a business plan that is less Dallas — that is more anti-Dallas, in fact — than refusing to borrow huge sums of money, refusing to clear the ground, failing to build high and fancy, then stubbornly finding ways to keep poor people and working people in a neighborhood when everyone knows it’s time for them to go.
Unless that’s not what he’s doing. The lawsuit, brought in the names of two of Khraish’s buyers by Legal Aid of Northwest Texas in Dallas and the Texas Legal Services Center in Austin, argues that the Khraish program of home sales was a scheme to continue holding property at a low cost to Khraish by off-shoring maintenance. The suit says his sales deals put all responsibility for keeping the properties in line with city building codes on the buyers’ shoulders.
The suit says Khraish used “a novel mortgage loan that would get [Khraish] the best of both worlds — steady monthly payments without the need to make any repairs whatsoever to dilapidated properties. This move would allow [Khraish] to continue collecting money from tenants while forcing the responsibility of badly needed home repairs on them.
“All the defendant [Khraish] had to do,” the suit alleges, “was convince tenants that they would become homeowners if they agreed to stop being renters.”
The backstory here, not addressed by the lawsuit, is that Khraish was one of a number of large-scale low-rent landlords in the city singled out by the mayor in 2015 as slumlords who failed to keep their properties in good condition in compliance with city codes. But at the City Hall meeting secretly recorded by Khraish, the mayor brushed off Khraish’s attempts to discuss the building code issue. He pushed Khraish instead to say he would consider selling all of his rental properties.
“If we put a program in place that allowed people to buy your homes,” the mayor asked Khraish, “and gave you a fair profit for it, not saying you would give these homes away, is that, would that be just, say, ‘No, we’re not interested in selling, we like this whole thing,’ or would you say, ‘Yeah, we would take some money off the table and let these people buy their homes’? What’s your attitude about that?”
Khraish and his father were skeptical. Publicly, the mayor framed his issue as having to do with housing conditions, but behind closed doors, he seemed to be pushing the Khraishes to do a real estate deal.
The land all around the Khraish properties was and still is soaring in value. Socially powerful developers such as former Dallas Cowboy Roger Staubach were receiving huge tax subsidies at the time to build high-end apartment and condo projects in West Dallas, displacing longtime poor and working-class residents.
Unwilling to sell or be pushed out, the Khraishes came up with a program of their own. And their program does, indeed, accomplish just what the new federal lawsuit accuses them of. They turned their tenants into homeowners by selling them their houses. Then the Khraishes financed the deals themselves, in part because none of their tenants could qualify for conventional mortgages.
By selling to their tenants, they did escape an aggressive city code enforcement campaign aimed at them by the mayor. Their sales deals effectively transferred maintenance and code responsibilities to the newly minted homeowners. The Khraishes, meanwhile, continued to collect roughly the same income from their properties, now as mortgage payments rather than rent.
And the younger Khraish, who now runs the family business by himself, also maintained a degree of control over the land although he had sold it, mainly through two mechanisms singled out in the lawsuit. One is the right of first refusal, which I promised earlier I would explain.
It’s basically a permanent option. If I own a Khraish house and want to sell it, my purchase contract with him says I have to go back to Khraish first and give him a chance to make me an offer.
Let’s say he offers me $100,000. If I have an offer elsewhere for $110,000 and he won’t meet it, I can tell Khraish to take a hike, and I can go sell my house to the other guy.
But here’s the deal: I had to tell him. I had to inform Khraish I was thinking of selling, and maybe I had to tell him there was a guy going around making offers.
The right of first refusal is really aimed at that guy, not me. It’s a defense against the land flipper or developer who starts popping up in the ’hood all of a sudden, seeking to block up land behind Khraish’s back. The right of first refusal is protection against that guy.
It was jarring to see Greenan at the end of the table last week when I met with the lawyers because Greenan and James keep popping up in the Khraish saga, with the mayor hugging their shoulders. But the lawsuit also zeroes in on a second provision of the Khraish contact that is knottier than the right of first refusal.
The language of the lawsuit calls it a “snatch-back clause.” Khraish’s lawyer, John Carney, talked to me about it a year ago and called it a “nervous clause.” It’s a clause saying Khraish can “call the note” — demand full payment — at any time. Carney told me that in a part of the city that still has some serious crime problems and other social issues, Khraish needed an extra ability to step in and rescue bad situations.
The clause, which is in all of Kharish’s contracts, says, “This note is callable at the option of lender from the date hereof until maturity. It is payable in full upon the earlier of 1) when called by the lender, if called by the lender, or 2) at maturity.”
Wayne Krause Yang, an attorney with Texas Legal Services Center, told me the problem is not that the buyers did not receive a legal title to their houses. It’s more that the deal by which they received that title is unsafe for them.
"The owner could exercise that clause and make the entire loan due, even if it has been paid off 90 percent. Our clients are on a fixed income and living paycheck to paycheck.” — Wayne Krause Yang, Texas Legal Services Center
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“The issue here is not like they didn’t go through the steps to transfer the title,” he said. “It’s that at any time for any reason, the owner could exercise that clause and make the entire loan due, even if it has been paid off 90 percent.
“Our clients are on a fixed income and living paycheck to paycheck. They won’t be able to pay it.”
Greenan spoke up at that point and said, “Part of the issue is that this is commercial paper that can be sold or come to the successor of Mr. Khraish. So even if he didn’t have the intention to exercise that clause, it’s not a safe transaction from an economic standpoint.”
If the snatch-back or nervous clause is the poison pill, I asked the legal aid lawyers if taking it away, crossing it out, eliminating that one provision would remedy the contracts to their satisfaction. They said that the right of first refusal must go, too.
Later that day, I asked Khraish and Carney why they thought the legal aid lawyers were focused on the right of first refusal. That provision doesn’t seem as if it would impede the ability of a homeowner to sell to the highest bidder.
Khraish visits with Henry Cisneros, former Housing and Urban Development secretary and San Antonio mayor, at the national LULAC convention in San Antonio.
John Carney
Khraish said, “I have to be informed. I have to be part of it, and they don’t want me to. I could buy back a property and totally screw up their development plan by buying the middle lot, so to speak.”
This chapter began when the City Council passed a new, much tougher building code for rental properties without giving even the slightest consideration to the possibility that the new code might cause displacement. The council at the time passed no provisions to slow the enforcement process down if it was going to result in people being thrown out on the street, provided no moving assistance — gave no thought, in other words, to the human beings involved.
Khraish and his father were looking at the possibility of million-dollar-a-day fines if they failed to bring their properties up to the new code. They decided to cut bait, evict their hundreds of tenants and convert their land to other uses.
The response of the city and the advocacy groups from the beginning has been to try to get the courts to order the Khraishes not to do what they want to do with their property. The city’s effort to persuade a judge to order the Khraishes never to evict their tenants wound down into a desultory courthouse farce, an utter defeat for the city.
But the Khraishes decided not to evict after all. They sold their houses instead to their tenants. Now the same parties who fought them on evictions are back in the trenches to take another shot at them. The Texas Tenants Union and the Texas Organizing Project, which fought the Khraishes on evictions, brought these two plaintiffs to the two legal aid groups, the lawyers told me, and persuaded the legal groups to file this new lawsuit attacking Khraish.
Khraish says he has an answer, relayed to me by Carney, his lawyer.
“Anyone who doesn’t like the terms of his contract can bring us the keys to the property,” Carney said, “and we will return all of the principal that that person has paid to date.”
He said Khraish has already made the calculation for the two plaintiffs, who have owned their houses for less than a year. One would receive $2,400 in principal paid and the other $1,200. The houses would revert to Khraish. The plaintiffs would move out.
And here we are right back at sliced bread. Khraish is in business. He’s smart. He’s tough. He doesn’t let himself get pushed around, and he’s not going to allow anyone to take his property away from him. But he’s the one keeping people in their houses.
We should assume that the legal aid lawyers suing him, like the City Council members who passed a tougher housing code, mean well, that they sincerely want to help these families. But if their path is taken to its ultimate conclusion, if Khraish’s contracts are voided somehow, then all of these people are suddenly homeless.
