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A landlord dropped a bomb on Kensington. It could happen again.

by Isaiah Thompson

Neal Santos NEIGHBORHOOD ON THE BRINK: Kensington has some of the city's highest rates of vacant houses, and, not coincidentally, some of the highest rates of violent crime and drug use.

Three years ago, Jamie Moffett, a budding documentary filmmaker, bought a small, two-story house on East Westmoreland Avenue, just a block off Allegheny, in Philadelphia's long-blighted West Kensington neighborhood, for $50,000, to use as a studio.

Even before he moved in, Moffett discovered a problem — the house next door. It was vacant and abandoned, a prime spot for drug dealers and a haven for drug users.

"Out in front, people would use the porch to deal drugs, and then in back you could see people go in and out of the back door and climb through the back window," he says. "They'd either squat there or use drugs, I assume. It was an abandominium."

Abandoned properties and crime go hand in hand. Kensington — West Kensington, in particular — boasts one of the highest rates of vacant property in the city and, not coincidentally, some of the highest rates of drug use, violent crime and murder.

So, Moffett figured it was in his interest to buy the house and fix it up himself. Besides, how much could it possibly cost?

The house belonged to a company called Landvest LLP, which had purchased it for $8,500 in 1998, and was located right down the street from him on Allegheny Avenue. He called to inquire about the property, but Landvest owner Robert N. Coyle Sr. seemed uninterested. "He pretty much just threw out some number, like, 'Give me 40,000 and I'll sell you the house as-is.' I thought it was totally nuts," Moffett says.

The average price for a decent house in that neighborhood is about $40,000.

Perplexed, Moffett began asking around about Coyle to neighbors and a friend who worked for a nearby community development corporation. The Landvest proprietor, he was told, had a reputation as a problem landlord who owned a small empire of properties in Kensington, many of them vacant or in disrepair. There were rumors that Coyle was under investigation, and that Coyle's office had been raided by the District Attorney's Office. Both of those rumors are true.

Last October, Daily News reporters Barbara Laker and Wendy Ruderman — recent recipients of the Pulitzer Prize — broke the story of Robert Coyle, whom they deigned Kensington's "slumlord millionaire." They revealed that Coyle was under federal and state investigation — sources tell City Paper that a grand jury has been impaneled, though it is unclear whether it is state or federal — and detailed Coyle's many alleged malfeasances: He ignored his rental properties' horrendous conditions; failed to pay taxes and utility bills, telling tenants that water was included in their rent only to let them find out it wasn't when theirs was turned off; submitted bogus city rental licenses during eviction proceedings; and, perhaps most egregiously, told some tenants they were signing "rent to own" agreements that would give them possession of their house after they paid rent for a specified (and usually suspiciously short) period of time.

Coyle, the Daily News reported, had also defaulted on millions of dollars in loans, leaving hundreds of renters — virtually a small neighborhood's worth of tenants — facing eviction even if they'd paid their rent on time. Eight months later, no one's sure what will happen to them.

Meanwhile, Coyle's rise and fall raises vexing questions, both for the future of Kensington and other neighborhoods ravaged by slumlords: How could the institutions that were supposed to protect the public have failed so miserably? And most importantly, could this happen again?

A City Paper investigation reveals that it could. And it will. And it is.

Coyle operated with impunity for so long because the institutions that were supposed to act as safeguards instead greased the wheels in Coyle's favor: Banks had conflicting interests that motivated them to turn a blind eye to Coyle's doings; the city's landlord-tenant court is predisposed toward landlords; and the city lacks a system to check landlord abuse. Since the Daily News report, none of this has changed.

In fact, some of the players who contributed to and benefited from Coyle's operations are still active in Kensington.

Azavea A graphical representation of Coyle's hundreds of properties.

Coyle's whereabouts, activities and assets are something of a mystery these days — since the Daily News story, he has lived largely in the shadows and City Paper was unable to reach him for comment. But he left behind a long trail of public records — deeds, mortgages and lawsuits — which tell the story of the rise, and fall, of his empire.

For decades, Coyle, now in his mid-60s, was a well-known Kensington realtor who sold real estate with at least one of his sons, Robert Jr., and, at one time or another, employed many of the neighborhood's plumbers and tradesmen to work on his properties. His early companies, Robert N. Coyle Sr. & Sons Real Estate Inc. and Apple Development Corp., operated almost exclusively in Kensington and northwestern Port Richmond throughout the 1990s and 2000s. They often bought properties from those leaving the neighborhood and sold or rented them to newcomers.

It was, demographically speaking, a brilliant business model. White, middle-class families who had been sustained for generations by factory jobs were leaving in droves; low- and middle-income Hispanics who needed affordable housing were moving in. Coyle bought houses from McBrides, Sloans and Myerses and sold them to Felicianos, Colons and Lopezes.

For much of his career, these transactions were straightforward: Coyle bought for less and sold, or rented, for more.

But in the mid-'90s, his business model began to change in a profound way. This change coincided with the rise of the housing bubble, as banks came to see property not as actual houses with actual people paying actual mortgages, but as abstract commodities to be sliced and sold — commodities that, the thinking went, could only increase in value.

In 1996, Coyle began taking out second mortgages on his properties and using them as collateral for cash loans. He began bundling his properties: He took out a mortgage on five properties from Fidelity Federal Savings and Loan in August 1996; a mortgage on nine houses from First Executive Bank in January 1997; a mortgage on 17 more houses from Republic First two weeks later. And even as Apple Development began to rack up debt, another newly formed Coyle company — Landvest LLP — bought up more properties as quickly as it could, and took out large mortgages on those, too.

Coyle was, in economic lingo, "highly leveraged." Yet the banks with which Coyle dealt were willing to grant him more and ever-bigger loans.

The banks contacted for this story — East River Bank, Pennsylvania Business Bank (now Nova), Earthstar Bank and Republic First — declined to comment, but there are a few likely explanations why: For starters, Coyle didn't appear to be a bad debtor. He made regular-enough payments on his mortgages to satisfy the banks. And as he took out new loans, Coyle was careful to satisfy previous mortgages.

On paper, Coyle was a model investor. So long as he had enough money flowing in, he could buy more properties that he then mortgaged for more cash to pay the mortgages on his other properties. And so long as the checks cleared, the banks didn't seem to care about details of Coyle's financial dealings.

After all, they were making money, too.

Among Coyle's transactions with the banks, one stands out: a $6.6 million second mortgage he took out in June 2007 with the Philadelphia-based Republic First against more than 100 properties — at the time, almost certainly the largest of all his mass mortgages to date — and one of at least four mass mortgages on which he would later default.

Why Republic First handed over so much money to Coyle isn't clear. Even putting aside the debt attached to many of these houses in the form of tax liens and unpaid utilities, the bank offered Coyle about $56,000 per house in a neighborhood where houses often sell for considerably less.

Most experts contacted for this story chock it up to the housing bubble; the Daily News ascribed the banks' decisions to the "trust" they had in Coyle.

Neal Santos THE AFTERMATH: Many of Coyle's Kensington properties, like this one, sit vacant and boarded up. The banks now have to figure out what to do with them. (CLICK IMAGE FOR LARGER VERSION)

Both explanations are probably true, but they don't tell the whole story.

On Nov. 14, 2008, after it became clear that Coyle had defaulted on his $6.6 million loan, Republic First sued, seeking to enforce a "confession of judgment" clause in his mortgage that would allow the bank to immediately auction those properties at sheriff's sale.

In December, Coyle submitted an affidavit to the Court of Common Pleas, offering his own version of the transaction-gone-bad. In it, Republic First is anything but a naïve victim.

According to Coyle, he and the bank were in talks over a large mortgage deal when Republic First "requested that [I] take on additional properties" — properties that belonged to Robert Coyle Jr., his son, under various company names — "which had existing debt in excess of [$2 million] ... at a price higher than their true value so [Republic First] would not have to take a write-off."

In exchange for taking his son's bad debt off the bank's hands — records show that in 2006, Republic First sued Coyle Jr. for $2.3 million — Coyle alleges, the bank agreed to steer title insurance business to Coyle's company, National Abstract Savings, to the tune of $20,000 per month. Moreover, Coyle says that Republic First intentionally inflated the value of his homes to make them seem worthier of the loans.

It's worth noting that Coyle, the man making these claims, is under investigation for fraud and being sued by the very bank against which he is levying charges. That said, e-mails between Coyle and bank officials submitted with the affidavit support at least parts of his story.

In a November 2007 e-mail, for example, Coyle's accountant asks about "the title business promised before and after the [June 29, 2007] closing." Then-President and Chief Operating Officer Louis DeCesare, who has since left the company, responds, "We have been very slow in new loan closings, but I think things will pick up soon." DeCesare adds: "I thought a good next step would be to have you and [Coyle's accountant] meet with ... me to make sure work starts coming your way."

In January 2008, in response to an e-mail from Coyle, Republic First Assistant Vice President Ramzi Dagher writes, "I am doing everything in my power to get you title work."

At the time, Republic First was negotiating a merger with another bank; getting bad debt off its books was in Republic First's best interest. That merger deal has since fallen through. Republic First CEO Harry Madonna did not return multiple phone calls seeking comment.

On a mid-May morning, Barbara Montanez, a soft-spoken woman in her 30s, showed up to Room 4B of the Philadelphia Municipal Court building looking understandably nervous: Her family was facing eviction and a judgment for $10,000 for 10 months of unpaid rent and other fees.

The city's specialized landlord-tenant court is supposed to help both landlords and renters seek justice more efficiently — but efficiency has an ugly side. Failure to be present at 9 a.m., when the day's roster is called out, usually means an automatic default judgment. The landlords or their attorneys are usually there. Tenants, especially those without cars, had better hope the buses are running on time.

Critics have long argued that the system favors landlords and facilitates evictions. Only a handful of each day's 50 or so cases are ever heard by a judge. Instead, defendants (almost always the tenants) are instructed to try to reach an agreement with their landlord (or their landlord's attorney) — a situation that tenant advocates say leads to unnecessary concessions by tenants.

After all, the lawyers know the law; the tenants usually don't. These lawyers are a specialized group of attorneys who appear before the same judges, arguing the same types of cases, in the same courtroom, day in and day out. And had Montanez not secured pro bono legal assistance from Jennifer Kates, a legislative assistant in Councilwoman Maria Quiñones-Sánchez's office, it's highly unlikely the case would have gone in her favor.

Neal Santos ABANDOMINIUM: Homeowner Jamie Moffett says Coyle wanted $40,000 for this house, which has become a haven for drug dealers and squatters. (CLICK IMAGE FOR LARGER VERSION)

But she got lucky. The day before, Montanez contacted lawyers at Community Legal Services of Philadelphia (CLS), who contacted Kates, who took up Montanez's case.

That morning, Montanez walked into the courtroom carrying a blue three-ring binder filled with photographs documenting the hell in which she'd lived for nearly two years. When she and her family — her husband, Juan, and their six children — moved into their home on the 2000 block of Elkhart Street in August 2008, it was already a dump. The bedrooms didn't have doors, and there were entire walls missing in the kitchen. The water heater leaked, as did the roof, spilling water along walls when it rained, which, in turn, led to mold.

The place was a mess, but a man known only as George, a manager for the landlord — Landvest LLP, a Coyle company — promised them the place would soon be fixed up. He added a special enticement, the Montanezes say: If they paid their rent, $600 a month, for one year, they'd own the place, which the Board of Revision of Taxes website assesses at a market value of $20,400. The agreement was not put in writing.

After the Daily News exposé, Coyle's "rent to own" promises became well-known to his tenants. But at the time, it seemed like a hell of a deal.

Before long, the Montanezes say, it became apparent that Landvest had little interest in fixing up their place. And after that first year came and went, they discovered that the rent-to-own promise was empty. A new management company — Apex Property Solutions, run by Robert Coyle Jr. — refused to honor their claim to the house, they say.

The Montanezes stopped paying rent. Anticipating an eviction notice, Juan Montanez reported his house's conditions to the Department of Licenses and Inspections (L&I). On April 4, L&I filed a complaint against KMF Associates — a company that purchased the Montanezes' house along with 16 others for just over $1 million from Ralcram LLC, another Coyle company, in October 2004 — for a litany of code violations.

A few days earlier, on March 29, Montanez and his wife were served with the expected eviction notice. So here they were, appearing in front of Supervising Judge Bradley K. Moss.

Moss, it seems, had a beef with Coyle. As the Daily News reported, Moss had earlier discovered via a tip that Coyle had submitted forged rental licenses to his court. And when he learned that the Montanez case was associated with Coyle, the judge demanded to KMF's attorney to see the property's owner in court.

That afternoon, Robert Coyle Jr. showed up. When Moss asked him if he represented KMF, he answered affirmatively.

In Montanez's case, the rental license included in the court docket was legitimate. But Kates' last-minute inquiry found open L&I violations on the property — something the landlords had denied when they filled out the eviction complaint. Moss dismissed the case.

It was a victory for the Montanez family — which is now seeking other housing — but a narrow one. Though the Montanezes had a legitimate defense against eviction, they almost certainly wouldn't have known it without legal help.

While laws exist on the city's books to protect tenants living in squalid conditions, there are virtually no mechanisms in place to make sure eviction cases are cross-referenced with L&I complaints. And if no one checks, there's nothing stopping landlords from lying on their eviction complaints.

Nor does anyone check the licenses that landlords have to submit to the court to evict tenants. These licenses are doled out by L&I and, in theory, landlords must obtain them before renting a property; in practice, they're often obtained just before an eviction. In any event, the licenses aren't tied to any inspections — meaning there's no systematic process to protect tenants from slumlords.

In 2006, even as he awaited trial (and an eventual conviction) for corruption, former City Councilman Rick Mariano ushered through a so-called "rental suitability" law requiring landlords to meet minimum standards — such as resolving code violations —before L&I issued them rental licenses. Landlord associations sued after Mayor John Street signed the bill into law. In 2008, the landlord groups persuaded the new Nutter administration to suspend the law; City Solicitor Shelley Smith said the administration wanted to examine it first.

Two years later, that examination is apparently ongoing.

Neal Santos THE GOOD FIGHT: Community Legal Services attorney Kasetta Coleman is trying to work with the banks to keep Coyle's tenants in their homes.

Eight months after the Daily News exposé, a small army of city agencies and do-gooder groups — CLS, Philadelphia Volunteers for the Indigent Program, the Mayor's Office of Community Services and Office of Housing and Community Development, the city's Mortgage Foreclosure Diversion program and the office of Councilwoman Quiñones-Sánchez — are trying to work with the banks to keep people in their homes. But the effort is nascent. At this point, only one bank, Manayunk-based East River, has played ball, buying its properties back at sheriff's sale and selling a dozen or so directly to the tenants so far.

The vast majority of the people and properties remain, eight months after the Coyle fallout, in limbo.

A review of a decade's worth of deeds, mortgages, lawsuits and other public documents by City Paper, which has spent months assisting former Coyle tenants, shows that some properties once owned by Coyle are still being managed in apparent violation of city codes.

Coyle, after all, didn't conduct his business alone. City Paper talked to a half-dozen of Coyle's tenants who never met him. They instead recall interacting with his property manager, George, and Coyle Jr. It was Coyle Jr., they say, who showed them their apartments and responded to — but didn't fulfill — their repair requests.

Public documents indicate that Coyle Jr. operated his own real estate businesses — Key Investments and Independent Invest, among others — and that his properties, like his father's, weren't always up to snuff: His companies have been sued scores of times by the city for code enforcement violations and unpaid utilities.

There is evidence that Coyle Jr. not only assisted in his father's business, but benefited from it, as well.

For instance, court records indicate that Coyle Sr.'s companies did in fact take on his son's debt from Republic First, a $2.3 million mortgage on a package of properties. Within two years of taking that mortgage, the bank sued Coyle Jr. for defaulting. But when Coyle Sr. took out his $6.6 million loan from Republic First in 2007, Coyle Sr. effectively assumed his son's debt by adding his son's properties to the transaction. The bank subsequently dropped its claim against Coyle Jr.

Coyle Jr.'s former properties are now among hundreds facing foreclosure (see map above).

Then there's KMF Associates LLC, the company that tried to evict the Montanez family. When Coyle Jr. appeared in Moss' court, he claimed to represent KMF, which in 2004 purchased 17 properties from one of Coyle Sr.'s companies.

While a review of deeds shows that Robert Coyle Sr. has signed some documents as a manager of KMF Associates, another name appears as a signatory "managing member" on KMF documents: Edward G. Fitzgerald, an attorney with the Center City real estate firm Spector Gadon & Rosen, P.C.

State records list Fitzgerald as KMF Associates' president. His law firm's address, the seventh floor of 1635 Market St., is also listed in state documents as the address for KMF Associates LLC. Fitzgerald's name also appears on deed transfers and loans for Exile Associates LLC — a company with which Coyle Sr. engaged in transfers of property in 2006, and which was successfully sued by the city for nearly $20,000 in fines and unpaid utilities.

Last month, KMF Associates filed three more eviction claims, even though it, too, has faced a slew of lawsuits brought by the city for more than $16,500 in unpaid bills, taxes and code violations.

Repeated calls to Fitzgerald's office seeking clarification on his relationship to Exile Associates and KMF Associates were not returned. (A reporter who showed up at Fitzgerald's office in early June was told that he was unavailable all day.) Calls to Apex Management went unreturned, as well.

Perhaps most worrisome to tenant advocates is that, even after the Daily News report and the specter of Coyle's possible prosecution, many of the conditions that gave rise to Coyle's empire — and put hundreds of his Kensington tenants into an impossible bind — haven't changed. Recently, CLS attorney Kasetta Coleman was browsing Craigslist when she saw an ad for Kensington properties: "Rent then own ... we say yes when others say no," it said, in capital letters. "Call George."

(isaiah.thompson@citypaper.net)