Going for Broke

The last squatter at 841 Collins Ave. in Miami Beach walks out of the dimness of the once bright and cheery Art Deco building to confront the two men he believes own the property. Ricardo is on his way to work as a cook at a local restaurant, and he has a litany of complaints to deliver. Every night when he returns home he must face crackheads and prostitutes sprawled out in the adjoining apartments. He has complained to anyone who would listen about his leaky ceiling and the putrid water on his bathroom floor. The only response he's gotten has been a bang on the door at 11:30 p.m. A some new face demanding more rent. And tonight? Tonight he is forced to step into the light of a street lamp to ensure his cook's coat is clean because electricity in the building has been turned off. "I show you the rent receipt, what I have," protests Ricardo, whose mixed Italian and Colombian heritage have matched Dean Martin's face with a Latin accent. "I am a citizen here."

Ricardo towers over Ed Aubrey and Dick Berneche, the partners who actually sold the 841 Collins building ten months ago. Friends from childhood, they look like a pair of gnomish, middle-age twins, but with very different temperaments. The blond Berneche, his face perpetually flushed, has thrown up his hands in frustration and paces agitatedly in a circle, his outrage for once beyond words. Aubrey, usually the more taciturn, can't hold back this time: "You moved in here with your two eyes open!" he exclaims. "If you couldn't see this was trouble, I can't help you."

Ricardo doesn't know the half of it. Yes, he is aware of the official city notice, posted November 21, declaring the building unsafe for habitation and giving occupants seven days to vacate. That, however, was weeks ago. And yes, he also knows the rent receipt protects him from being summarily thrown out. (Like the other squatters who already have left, Ricardo has played the legal stalemate for all it's worth. He hasn't paid rent for the past three months.) But when Aubrey and Berneche tell him that the young man to whom he paid rent was never the real manager, and that they are not the current owners of the building, Ricardo seems puzzled and suspicious.

If Aubrey and Berneche are not the owners, then why are they always here? They've been keeping a constant watch on the building, cajoling and pleading with squatters to leave. When they succeeded, one apartment at a time, they would cart out the crack pipes, discarded clothing, and dingy mattresses, then change the lock on the door. Ricardo is no crackhead, but he is the final remaining interloper. He walks away after admitting that even if they don't own the building, these two men in their tank tops, baggy shorts, and sandals have been the nicest among the cavalcade of people who have shown up at the building claiming some sort of authority. Two more nights, he adds, and he'll be out.

Berneche has stopped his pacing, but only long enough to erupt in a fit of sputtering. Aubrey tries to calm him. "Until this last one, Ricardo, leaves, we're still stuck with them," Berneche grumbles as he points to two Miami Beach firefighters who sit on a wall next to the building. City inspectors have found so many code violations, including a broken fire alarm, that as long as people continue to inhabit the place, it will remain under a fire watch. Berneche agonizes over the cost -- $60 per hour -- because in these confusing circumstances, he may end up having to pay it.

The situation at 841 Collins may be confusing, but it's a uniquely South Beach sort of confusion. Another business venture gone sour among the real estate pipe dreams that haunt the Art Deco District, this one has drawn together a rogue's gallery of Beach types: the snowbird dreamers from up north, the rich kid playing out a fantasy of money and glamour, the cold-blooded banker with his immutable bottom line, and the ever-present tribe of vagrants who live in the shadows of Beach glitz and prosperity. This particular cast of characters, however, is unusually interesting. Aubrey and Berneche, the dreamers, aren't the cynical speculators whose commitment to the neighborhood can be measured by the rise and fall of interest rates. The rich kid happens to be the son of the bottom-line banker. And one of the vagrants, a prominent player in this melodrama, comes from a wealthy Miami family shattered by an infamous murder.

As for the building itself, the glory of its 1936 heritage, once on the verge of being revived, has now faded beyond recognition. Among its neighbors are several newly enlivened renovations: the enormous Casa Grande across the alley, the Armani Exchange across the street, and the bright yellow Lily guesthouse next door, where the considerable expense of restoration has finally begun to pay off.

In the months the Lily has been coming back to life, Aubrey and Berneche have watched helplessly as their six-year struggle to rehabilitate 841 Collins has crumbled before their eyes. What was supposed to be a pleasant, twenty-unit lodge instead has become an blemish seemingly under no one's control. Since they sold the building for $875,000 this past February, its slide into decrepitude has pushed them to the brink of financial ruin. In August, after making only five monthly mortgage payments, the new owner gave up and simply walked away, taking Aubrey and Berneche's future with him. Now almost penniless, their last hope is to find a buyer with enough money to clean up the place, attract trustworthy tenants, and generate sufficient income to pay the mortgage and keep them from starving.

Early this year, when 30-year-old Jonathan Katcher arrived on the scene as a potential buyer, he hardly seemed capable of producing such a calamity. To Aubrey and Berneche he was an energetic young man in search of a mission, someone who shared their enthusiasm for the building's endearing character: twenty units linked by a gated walkway and a series of arched exterior doors, the first accented by inlaid Spanish tile and leading to a three-story section of one-bedroom apartments topped by a penthouse, which Aubrey and Berneche kept for themselves. Efficiencies stretched to the rear in an intimate two-story wing. What the smaller apartments lacked in spaciousness they made up for in style: hardwood floors, gas fireplaces embellished with tropical flora and fauna, bathrooms with classic porcelain fixtures and original tilework. The walls were sturdy and thick, lending a sense of privacy, but the tenants A many of whom had lived there for years -- contributed a feeling of community. During the time Aubrey and Berneche owned the building, the apartments seemed more like staterooms on a happy-go-lucky cruise ship. Young Jonathan Katcher understood the spirit of the place, Berneche remembers, and he promised not to evict any of the long-time tenants.

Katcher's sympathetic sensibilities were not the only qualities that made him an ideal buyer. His family name was equally reassuring. "I had never heard of him before," Berneche recalls, "but everyone said, 'You've got a safe deal because his father is a big man in the financial world.'"

Gerald Katcher is the 68-year-old chairman of United National Bank, one of Miami's most profitable midsize financial institutions. Its clientele is specialized -- attorneys and other professionals. With his partner Howard Scharlin, he had already founded and sold one bank, then bought Southeast National of North Dade and renamed it United National. In 1993 the bank earned $11 million.

Aubrey and Berneche say they were initially unsure of Gerald Katcher's involvement in the proposed sale of 841 Collins, but he did show up at the building one day to inspect it with his son. They later learned the banker loaned his son $535,000 for a first mortgage. The money came from Royal Investment Company, a private firm Katcher owned with his partner Scharlin. To make the sale, Aubrey and Berneche would be required to finance the rest of the $875,000 purchase price by accepting a second mortgage in lieu of cash. It wasn't the best possible deal, but foreclosure on their building was looming. They had little choice but to accept. In effect they were gambling that Jonathan Katcher's good family name was solid insurance that payments would be made promptly. They would have a monthly income of $2700, and a balloon payment of $321,000 after five years that would provide for their retirement.

So it was a shock, to say the least, when in August young Katcher calmly told Aubrey and Berneche he would not be making any more mortgage payments and that he and his wife were taking off for France. "When Jonathan left with his brown briefcase for the French Riviera, I never saw him again," Aubrey recalls plaintively. "I said, 'Jon, who is going to be responsible for the building?'"

Ed Aubrey and Dick Berneche are hardly real estate tycoons, but they have had some experience renovating old buildings in their hometown of Springfield, Massachusetts. The path to their careers as small-time developers was delightfully serendipitous. They had been waiting on tables in the late 1960s when they decided to spend their savings on travel -- across Europe all the way to India. By the time they got to Bombay, they were broke, but eventually they managed to hire on with a freighter heading back to the States. When they arrived home, they once again had money in their pockets and began looking for opportunities to invest it.

"We each had $1500," Berneche remembers, "and we always thought Mattoon Street was a place to start." Mattoon was lined with Victorian mansions that ran up the hill from the center of the old factory town. They had once been the in-town homes of wealthy businessmen, but the street had declined along with the fortunes of Springfield and other northeastern industrial centers. When the two young men decided to take a stab at real estate in 1971, Mattoon had become a home to the drug trade, and the venerable homes had been converted into boarding houses.

They put down $800 on a $5000 house and went back to waiting on tables while gradually restoring the interior to its former splendor, replete with winding staircases and filigreed ceilings. When work was complete, they sold the finished product as a single-family home for the princely sum of $35,000, and then bought the house across the street. Over time they purchased and rehabilitated four houses on Mattoon Street, and were given credit for sparking the neighborhood's revival and ultimately its designation as a historic district.

That success, however, did not always extend to the business side of their efforts; they lost money on at least two of the houses after jumping at questionable deals during a period of high interest rates. But the spiritual aspect of saving old properties suited them, particularly Berneche, who came back from India with an affinity for Eastern philosophy. Even the financial motive behind the purchase of 841 Collins had a higher purpose for Berneche A he hoped the profits would subsidize his interest in practicing a psychotherapeutic form of chiropractic known as "spinology," which itself it not profitable. The apartment building, he says, "was the financial dream so I could do my work without being financially dependent and compromise my professional ethics."

The partners knew nothing about South Beach's Art Deco district until Aubrey's sister, who owns a condo in the area, got them to come down for a vacation in late 1987 and witness the neighborhood's renaissance. "We got the fever in a big way," Berneche recalls. "A place to live so close to the ocean, a community that spelled excitement. It reminded me of Mattoon Street -- derelict and needing to be turned around. The block was all old Jewish retirees or derelicts. There was no in-between."

A Russian woman sold them the building in 1988 for $308,500. Out of their $90,000 nest egg, they put down $80,000 and set aside the rest to begin renovations. When that ran out, they went to the bank and reworked the mortgage in hopes that enough tenants would sign up to keep them afloat. Fortunately, the apartments quickly filled with an eclectic mix of artists and professionals attracted to the charm of a well-maintained old building in a neighborhood just beginning to realize its potential. Says Berneche: "People felt that we had given the street soul."

After five years, the friendly ambiance was blown away by dust and noise carried across the rear alley by the protracted construction project at Ocean Drive's Casa Grande Hotel. Tenants left, and the vacancies upset Aubrey and Berneche's delicate balance of income and expenses. But when construction ended in the summer of 1993, they managed to fill all twenty units within a couple of months. By then, however, they had fallen three months behind in their mortgage payments and had borrowed all they could from family and friends. The bank had initiated foreclosure proceedings just as the sale to Jonathan Katcher was completed this past February.

Shawn Cohen was the first to notice when Katcher's resolve began to waver. Through his wife, the young investor had met Cohen socially in Coconut Grove, and in April hired him to be a live-in manager and work on upgrading the apartments. But Katcher took an interest in the neighboring Lily, which was being converted at substantial cost from apartments to a guesthouse that held the prospect of seasonal vacationers paying up to $800 per week. Katcher quickly abandoned any plans to maintain 841 Collins as rental property, and in doing so, he also reneged on his promise to keep the long-time tenants; they had to be moved out as quickly as possible so Cohen could begin renovating the apartments in time for the coming winter season.

Out came the old porcelain fixtures and in went new everything -- stylish furniture, TVs, VCRs, stereos. Katcher had spent more than $200,000 from a trust fund before Cohen says he began to get nervous. The Lily had opened in June, but after a month of operation it had attracted very few guests. Recalls Cohen: "Jon said, 'The Lily is crazy. I'm crazy for thinking people will pay this kind of money. I'm getting out while the getting is good.'"

Cohen says he wasn't so surprised to learn that he might soon be out of a job. "Jon is the kind of guy who never had to worry about getting the things others struggled for," he observes. "I've been in bad spots before." Indeed, Cohen has experienced more of life's extremes in his 26 years than most people ever do. His mother was a former secretary who married Miami millionaire builder Stanley Cohen. Shawn was adopted by Cohen and moved into a Coconut Grove mansion with two new brothers and a new sister. Then one morning in March 1986, when Shawn was seventeen years old, Stanley Cohen was found dead in his bedroom. Shawn's mother was eventually charged and in November 1989 convicted of hiring hit men to kill him. Shawn went from a life of luxury to near poverty, from an opulent home to a trailer, as he spent a large portion of his inheritance on lawyers for his mother's appeal.

Hooking up with Katcher and getting involved in the 841 Collins project was a respite of sorts for Cohen. "The building was right behind Cafe Milano, where there is a waitress I have been in love with for years," he sighs. "Everything was falling into place: a job and the kind of atmosphere I love. Now I can't wait to leave and put it all behind me."

On August 12, two days after Katcher missed his scheduled mortgage payment, Aubrey and Berneche noticed him moving appliances from the apartment building to his car. With their attorneys, they rushed to the county courthouse just before it closed to begin foreclosure and to quickly obtain a restraining order to prevent what they believed was an attempt by Katcher to strip the building.

The next day Aubrey called police when he discovered that a truck in the alley behind 841 Collins was being loaded with appliances and furniture from the building. Katcher protested he was removing only property that rightfully belonged to him, but the police pointed to the restraining order and forced him to return everything to the building.

Four days later Royal Investment Company, owned by Katcher's father, demanded immediate and full payment of its mortgage loan, and boosted the interest rate from eight percent to the maximum allowable twenty-five percent. At that new rate Katcher's indebtedness to Royal was skyrocketing, and in the process Aubrey and Berneche's chances of recovering the value of their second mortgage were plummeting. Every dollar added to Royal's mortgage, which would have to be paid off first in any sale, meant there would be less money left for the second mortgage.

Aubrey and Berneche, their monthly income halted and now at risk of losing their investment entirely, tried to buy time while they hunted for someone to purchase the property. They sent Royal Investment a check they thought would cover Jonathan Katcher's mortgage payment for the month. "We forwarded $4000, more than due for August," says Barbara Gimenez, one of Aubrey and Berneche's attorneys. "They sent it back saying, 'We don't want the money.... If you want to pay the whole amount [the loan plus interest], okay. Otherwise, sorry Charlie.'" (Gerald Katcher says the check was returned because it was not for the full amount.)

Aubrey and Berneche were stunned. They realized that loaning Jonathan Katcher the balance of the purchase price had been risky, but Gerald Katcher's wealth and reputation had put them at ease. "Everyone told us Katcher was a millionaire," Berneche recounts with disbelief."We were sure no father would let his son go down the tubes."

Their attorneys, however, saw something sinister in the unforgiving stance taken by Royal Investment. In a counterclaim filed against Royal, they alleged that Jonathan Katcher's default and his father's foreclosure were premeditated, and were part of a scheme to turn a profit on their investment at the expense of Aubrey and Berneche. According to the counterclaim, Jonathan Katcher stripped 841 Collins of its appliances and furniture in order to ensure that the building could not produce income for the mortgage payments. Aubrey and Berneche could either pay Royal Investment in full or watch as the debt soared dramatically -- and the eventual purchase price with it. Then, at a court-ordered auction, Royal or some other Katcher company could presumably "end up with the property for $535,000 instead of the purchase price of $875,000." If Royal were outbid, at least it would get back its investment plus a healthy bonus from the interest.

Aubrey and Berneche's real estate dream once again seemed to be disappearing into the abyss. Their confidence in the sale to Jonathan Katcher had led them to purchase a nearby four-unit apartment building, and they planned to move there themselves in a few months. Katcher's monthly payments of $2700 were supposed to cover the mortgage. "We closed on August 6 and Jonathan reneged on the tenth," Berneche says angrily. "This guy brought us to our knees."

United National Bank's headquarters is located in a stylish concrete building tucked into an elbow of the downtown Metromover at the corner of SW Fourteenth Street and SW First Avenue. Mirrored windows look out on a brick parking area and a red metal sculpture. The bank's chairman, Gerald Katcher, is as businesslike as his office.

His son, he begins, is somewhere in the South Pacific and unfortunately isn't available to speak for himself. But the failure of the 841 Collins project, his first business venture, has devastated him. "Jonathan is a free spirit in many ways," Katcher says quietly. "I think he just needed to get away from what he felt was a very unhappy situation for him."

But the father's role as a first mortgagee is strictly business. "I am not interested in owning that building," Katcher asserts, dismissing the allegation that he is trying to squeeze out Aubrey and Berneche. "I was not interested in the first place. I am a lender, I am not interested in owning anything. Just pay me."

When he visited the property with his son, he recalls, he didn't see the spirit Aubrey and Berneche held so dear. What he saw was a rundown old building that he doubted his son could handle. "I thought it was a bad property to buy because he had no experience and he was paying top dollar for it," Katcher says. He only reluctantly agreed to help Jonathan with a mortgage, but says he warned him to try operating the building as rental apartments before investing in the conversion to a guesthouse. "He was going to try to prove he could do it," Katcher explains. "I was very much the distant father in terms of this deal. Jon was going to work this out himself." Ed Aubrey and Dick Berneche, he adds, knew of his son's inexperience and the risk of taking a second position behind such a large first mortgage.

However, Aubrey and Berneche were mistaken, Katcher continues, if they believed he was personally guaranteeing his son's venture. The mortgage was approved "to help my son, not to foreclose on him or the second [mortgagees]," Katcher states. But when Jonathan began to see he had made a mistake, he came to his father for advice. "He was at a point where he had invested $240,000 and he could not make this deal economically viable," Katcher continues. "My advice was to sell and stop investing any more dollars, including not paying the mortgages."

As proof that he was not scheming to foreclose on the property and then grab it cheaply at auction, Katcher notes that in late September a buyer was found and a purchase agreement signed by Aubrey, Berneche, and Royal Investment. The deal fell through, however, when the buyer could not obtain financing.

Furthermore, Katcher argues, he was not aware until recently of the deteriorating condition of 841 Collins, but in any case, its maintenance has not been his or Royal Investment's responsibility. "There is a [court-appointed] receiver and a second mortgagee who has more at stake," he points out, "and I have to assume they are acting to protect the building." (The receiver says Katcher has since paid the water bill and has agreed to provide the money necessary to secure the property.)

Aubrey and Berneche counter that they simply have not had the cash needed to maintain the building. And besides, it was a little late by the time a receiver was appointed near the end of September; much damage had already been done. In addition, Shawn Cohen had already been in business for almost a month.

When Jonathan Katcher left for France in late August, Cohen was the only person left in the building. No one seemed to be in control of the place, which Cohen viewed as an opportunity. "I saw there was money to be made," he says. He invested $300 in enough second-hand appliances to make two apartments livable, and then put out the for-rent sign. More tenants followed. At one point refrigerators lined the sidewalk as Cohen and his hired crew got them ready for installation. By November, when the receiver finally wrested control, Cohen had managed to rent seventeen apartments at $400 per month. (The tenants were protected from immediate eviction because their rent receipts, though unauthorized, entitled them to certain legal rights.) If utility workers came to shut off the water or electricity because no one was paying the bills, Cohen says he found ways to make them disappear. "They shut off the water one time by taking the meter right out of the ground," Cohen recalls, "so I had to send some boys to liberate a meter from another building."

Initially, Aubrey and Berneche didn't complain about Cohen's rental scam. At least it meant the building wasn't vacant, and that made it more attractive to a potential buyer. "The first month it was peaceful," Cohen shrugs. "All the tenants were friendly drinkers and pot smokers, not the hard-core crackheads who came in the end." But by November the building had become nothing more than a large crash pad, with Cohen and the court-appointed receiver fighting over what rent money they could finagle. Although Ed Aubrey's attorneys said he didn't have the right to step in, he couldn't stand it any longer. "That's when I started to take charge," Aubrey recalls. "There were crack cans all over, and human feces in the corners of the rooms." He did his best to make the building presentable.

The wily Cohen finally lost his battle with the receiver for control of the rental income, but he stayed in the building a while longer, saved from quick eviction by Miami Beach's tenant laws. Three weeks ago he got out, one of the last squatters to vacate. "I made about $4000," Cohen said recently while lounging in the lobby of the Franklin Hotel. "The receivers were after me to give them the money I collected. I told them to fuck off." A mugging he'd suffered a couple of nights earlier at 841 Collins had left him with a swollen lip, a desire to get out of town, and an inclination to muse: "I'm thinking now, 'What have I made out of this thing but a bunch of trouble?'"

Last week Jonathan Katcher did get a chance to speak for himself. He phoned from Fiji after learning that the saga of 841 Collins was going to see print. "This situation has caused me mental pain and problems with my family," he said. "That's why I walked away, to get the pain stopped." Like the two snowbirds from Massachusetts, Katcher was following a dream when he decided to plunge into the project. His father, it turns out, had correctly read that he was trying to prove himself. Some of his wealthy friends had made a big splash on the South Beach scene by turning old buildings into profitable guesthouses. "I was thirsting like crazy to do a deal because I was jealous ofmy friends," Katcher candidly admitted. "They were making a lot of money in a hotel deal. I thought it was going to be easy."

Katcher stressed that he never meant to hurt anyone. "I don't think Aubrey and Berneche should have to pay for my inexperience," he said. "I didn't know what I was doing. The building was serving my ego." But his father still had his eye on the proverbial bottom line. "I knew that I wanted to sell the building," young Katcher says. "I am upset at my dad -- I shouldn't say that -- because he thinks that apparently from a business point of view the lawyers can recoup some of our money." Katcher signed off after declaring he would make things right.

Two hours later he called back. He had spoken with his father. "I think we are going to sell the property without the default interest...," he announced. "We are trying to sell the building and we have changed our position and we wished we maybe had sold it a little sooner." As for his own future, Katcher said it wouldn't include any more Art Deco dreams. "I don't need deals to be productive," he concluded. "I have a Hasselblad and I am in Fiji taking pictures of the indigenous Indians. It's my art, it's what I do.


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