Real Estate Boom for McHenry

Posted October 19, 2007 at 6:18pm

Rep. Patrick McHenry (R-N.C.) took to the House floor late last spring and ripped into Democrats for blocking his proposal requiring Members to disclose the existence and value of their personal residences.

“We’ve seen in recent Washington scandals the results of this loophole that allows Members to hide ownership of properties,” McHenry said.

But according to a Roll Call analysis of public records, McHenry has taken considerable liberty himself with the House’s personal property exemption, not disclosing at least three pieces of North Carolina property that he owns worth more than $300,000 combined.

In addition, since he was first elected in 2004, McHenry’s financial statements overall offer only vague hints into myriad land deals that are transforming Congress’ youngest Member from a college student, who is a licensed real estate agent, into a prosperous man in less than a decade.

For example, on this year’s forms McHenry disclosed his October 2006 purchase of a house in central North Carolina. Public records show McHenry paid $87,500 for the property, which he bought from a local politician. Within months of the sale, tax assessors determined the house was worth 30 percent more.

And last summer McHenry, his four siblings and a business partner sold a 40-acre plot to a local developer for $1.5 million. The developer, Charlotte-based E.C. Griffith Co., plans to soon break ground on a 1,000-plus-unit suburban housing development. McHenry made a short-term profit of at least 200 percent on the deal.

According to a Roll Call analysis of public records, McHenry this year held properties worth roughly $850,000 combined. McHenry also owns natural gas stakes worth about $15,000 and draws on bank accounts holding $16,000 to $65,000.

McHenry is hardly Congress’ wealthiest Member — far from it. He borrowed heavily to finance the deals and also went into debt to pay for his first Congressional campaign. But his relatively paltry net worth on paper belies the brisk appreciation of his modest nest egg, providing a rare glimpse at a junior Member who has proved to be adept at the real estate game.

“I am proud of the success I have had in real estate,” the Congressman said in a statement provided to Roll Call. “I’m a capitalist.”

Growing a Nest Egg

McHenry at first made money the old-fashioned way: He inherited it. The lawmaker declined to value his portion of the family estate, which he received when his father, who owned a commercial lawn-mowing company, died in 2000.

Using current property values, the real estate holdings McHenry inherited from his father and still owns are now worth about $275,000 — a sum likely worth far less when he signed on as a Bush administration political appointee in early 2001.

A little more than a year after graduating from college at the end of 1999, McHenry began what would become a short-term stint at the Labor Department. Needing a place to live, in early 2001 McHenry and a friend purchased a home for $285,000 in the now-booming eastern portion of Washington, D.C.’s Capitol Hill neighborhood.

Within a year, McHenry and his friend had sold the property. Their take on the flip: about $50,000.

In 2002, McHenry was elected to a seat in the North Carolina House of Representatives and began investing heavily in Gaston County-area real estate. The area, once flush with steady factory work, was hemorrhaging manufacturing jobs. Media reports at the time claim that from 1999 to 2002, Gaston County alone lost more than 7,000 textile jobs. From 2001 to 2002, the county’s residential foreclosure rate doubled.

In an interview, one local real estate agent described the local housing market around 2003 as “terrible.”

“We were predominantly textile [mills],” the Gaston County real estate agent said. “Almost all of the textile plants have moved to other countries.”

McHenry made his move, plowing the $25,000 profit from his Washington, D.C., home sale into a three-bedroom, two-bath Gaston County house at 1426 Buckingham Ave., which he purchased in November 2001 for $80,000. After some light remodeling, McHenry sold the property two years later for $110,000.

By 2003, McHenry was serving his first term in the North Carolina Legislature. The year before, McHenry, with his older brother, William, purchased a 12-unit apartment building in Gaston County for $312,000. The building, located at 215 Robinson Road in Gaston County, was last purchased in 1986 for $286,000.

In 2003, property records also show the McHenry brothers purchased a two-bedroom, one-bath house located at 621 W. Garrison Blvd., also in Gaston County, for $25,000.

On his disclosure forms, McHenry estimated that the property is now worth $15,001 to $50,000. According to the most recent tax assessment, the home is now worth about $60,000, 140 percent more than he paid for it.

Unlike some states, county revenue departments in North Carolina are required to value property at 100 percent of a home’s market value; that is, while the assessments aren’t perfect or uniform, McHenry and other property owners generally can expect to sell their homes for at least the amount listed on their tax bills. According to the Gaston County tax assessment office, property appraisers finished their most recent round of assessments in early 2007.

A Gaston County real estate agent also said the local market has perked up dramatically since 2003 and, overall, continues to trend upward. But the agent also warned that some local sellers are now feeling the burn from tanking subprime mortgage markets, a slowdown the realtor said likely is temporary.

“We’re seeing stirring activity,” the agent said. “Things are improving.”

With McHenry and his brother making the most of a soft market, the then-state legislator also again struck out on his own, buying up at least three more properties in the area under his own name. At the time, McHenry’s only disclosed income was a $21,000 salary from the North Carolina Legislature.

In 2003 he bought another home in Gaston County, which he has never listed on Congressional disclosure statements. McHenry purchased the property, a four-bedroom, two-bath home located at 1100 Requa Road, late in the year for $110,000.

Local tax records estimate that the property was worth about $143,000 in early 2007. McHenry recently put the house on the market for $119,000.

House Ethics Rules Hazy

By 2005, McHenry was a first-term Congressman, representing a rural and suburban district sandwiched between booming Charlotte and Asheville to the west. Months after he was sworn in, he purchased a foreclosed lakefront condominium in Catawba County, the population center of his district, for $140,000.

McHenry has never disclosed purchase or ownership of the property on his financial disclosure statements.

Current House ethics rules are hazy on the exact types of properties Members must disclose on their financial disclosure statements. According to the House Ethics Manual, Members are not required to disclose primary or secondary homes they are not renting out for income, nor property not held primarily for investment purposes.

Through his father’s estate, McHenry also owns at least $40,000 worth of lakefront property in nearby Lincoln County. McHenry also has never listed the parcel, which he shares with his siblings, on his financial disclosure forms.

About one year ago, McHenry purchased another home on Requa Road in Gaston County, this time from Allen Fraley, a Gaston County commissioner. McHenry and Fraley, who privately negotiated the deal, completed the sale on Oct. 27, 2006. McHenry paid Fraley $87,500 for the home. A local revenue official appraised the property months later for about $113,000, roughly $25,000 more than the sale price of the house.

Days after the sale, campaign finance documents show that an Allen Fraley from Cherryville, N.C., gave McHenry a $500 campaign contribution. Fraley did not respond to repeated messages from Roll Call.

On his 2007 financial disclosure statement, McHenry estimated that the home was worth $50,001 to $100,000.

A Big Payday

McHenry also lists on his 2007 disclosure a property at 4211 Pete Brown Road, which he estimated was worth $100,001 to $250,000. The lawmaker owned 10 percent of the property, a 40-acre rural plot in Mecklenburg County, which McHenry’s father bought with a friend in 1988 for $73,000.

Less than three months after he filed his disclosure forms, public records show McHenry and the property’s other owners sold it for $1.5 million to Harris Woods, a company affiliated with E.C. Griffith Co., meaning McHenry’s share of the take was $150,000.

A company representative did not respond to attempts by Roll Call to discuss the deal. McHenry said he was not involved in the deal over the property at all, other than occasionally being apprised of the progress in the negotiations by his brother and sister.

The rural property had been rezoned to accommodate redevelopment by the firm, which expects to build 1,104 new homes on or near the McHenry plot. As late as May 2005, McHenry estimated on his disclosure forms that his share of the Pete Brown Road property was worth at most $50,000.

“The Congressman’s four real estate transactions since being elected were all conducted on the open market and have been fully and accurately disclosed under House rules,” McHenry’s Chief of Staff Parker Poling said in a statement. “His experience as a small businessman is an asset to the people of western North Carolina.”