UPDATED: Read the first part in this series on how taxpayers are helping billionaire Jorge Pérez get rich off affordable housing.
If not for the Spanish-speaking 60-somethings lounging about, the room could pass for the lobby of a Ramada Inn: flat-screen TV set on one wall, nature art adorning another, plush furniture arranged throughout.
But it's no hotel. The newly renovated apartment building in Miami's Shenandoah neighborhood is actually a publicly funded affordable-housing project called Edificio Piñeiro.
"Look at all this... So much luxury!" says 63-year-old Emilio Victores, a former Fisher Island maintenance worker who lives on disability checks, before gesturing to an adjoining room with a bank of computers. "Everything here is perfect, perfect, perfect! Everybody wants to know one thing: Can they move in too?"
Though the 34-unit building may be perfect for residents, taxpayers aren't so lucky. It cost $7.6 million to purchase and renovate, but county administrators who blessed the no-bid deal at the request of Miami-Dade Commissioner Bruno Barreiro — and his commission colleagues who approved it — did so without evaluating competing proposals or hearing public input.
Yet it appears it be a very good deal for Jorge Pérez, the developer whose affordable-housing company, Related Urban Development Group (RUDG), is receiving millions to convert this and another nearby building to housing for low-income seniors.
RUDG paid $1.25 million for the building in 2012. Construction costs to renovate came in about $4.2 million, the bulk of which was paid to Fortune Construction — which is owned by the Related Group, the largest Hispanic-owned business in the United States, where Pérez is the founder, chairman, and CEO. (Approached on a soccer field this past weekend, Pérez declined to comment on the deal. "Your paper is sensationalist," he said. Pushed further for comment, he looked annoyed and said, "It's my Sunday.")
According to a report by an independent underwriter hired by the county, public bond money was tapped for much of those construction costs, as well as RUDG's accounting fees ($30,000), legal services ($100,000), architectural and planning fees ($200,000), and an administrative fee for filling out applications for loans from the City of Miami ($80,000).
Beyond all of that, Pérez's group will also receive a fee of slightly more than $1 million from county bond money. Jose Galan, the Miami-Dade Internal Services Department administrator who oversees such requests, could not explain the purpose of the fee or how it was determined.
Bond-allocation payments to developers are typically staggered over a number of years, and as of late April, about half the $5.5 million award for Edificio Piñeiro had been disbursed to Pérez's affordable-housing venture. Galan says the project is ongoing and he's unsure when the remaining payments will be made.
Despite all of this public money, the title rests with a joint venture formed between RUDG and another affordable-housing player, Miami Beach Community Development Corporation (MBCDC). This venture collects rent — estimated by auditors to be about $175,000 in its first year — plus maintenance and some administrative fees. (MBCDC itself is not without controversy. In late 2013, the group's longtime president and CEO, along with other employees, resigned amid an investigation and scandal involving alleged misuse of affordable-housing loans.)
A chunk of the county bond money is also earmarked to pay off $3.6 million in City of Miami loans for Edificio Piñeiro, potentially wiping such debt off the books with taxpayer funds.
But county documents raise the possibility that these loans — from a federal program administered by the city — may never come due even though county funds have been allocated to Pérez's group to pay them off. The underwriter's reports note that both principal and interest on the loans are due in 2042 and can be forgiven at the city's discretion: "The City may, in accordance with the Loan Agreement, waive any or all payments of principal and/or interest due on the loan."
Galan, who helps draft bond-allocation agreements between the county and developers, says he was not directly involved with this deal. He declined to answer questions about RUDG's loan terms and referred all inquiries to the City of Miami.
Alfredo Duran, the city's deputy director of community development, is more forthcoming. He describes one of the loans — for $1.5 million — as "permanent," meaning the city indeed will forgive it entirely, assuming the property continues to fit the criteria for affordable housing. There are no immediate plans to waive payment on the other loan, for $2.1 million, he adds, despite wording in the loan agreement that leaves open that possibility. He believes payment is due upon completion of the building, not in 2042, which the agreement stipulates. Reminded that construction was complete last September and the loan remains outstanding, he acknowledges the deal's cloudy terms. "It seems the city and the county may be analyzing [the contract] differently."
That possibility would come as little surprise to Nan Markowitz, Miami-Dade's bond program coordinator. She winces at any references to affordable housing. "With that, there is no process," she says, leaning forward in her chair as if telling a secret. "It's whatever the commissioners want."
And as with much else in South Florida, there is a political component to what commissioners want. Pérez and Alberto Milo, vice president of RUDG, helped raise funds for Barreiro's 2012 District 5 reelection campaign; both served on the host committee of a $500-a-head fundraiser on exclusive Indian Creek Island. Barreiro says he does not recall how much the event raised, but according to county campaign records, checks totaling $25,300 were written to Barreiro's campaign the day of the event.
Throughout the election cycle, various individuals and entities that share an address with the Related Group's Biscayne Boulevard headquarters wrote 37 separate checks to Barreiro's campaign for $500 (the maximum allowable under law), totaling $18,500.
Barreiro, however, brushes aside notions of any possible conflicts of interest, noting that plenty of other developers contribute to his campaigns. He says politics played no role in the deal.
Edificio Piñeiro wasn't the first affordable-housing deal brokered for Pérez by Barreiro. In 2012, in the midst of his reelection battle, Barreiro steered nearly $3.5 million in bond money to RUDG to convert a 24-unit apartment building in Little Havana — Edificio Camacho — for affordable housing. The award is described in county documents as a loan that will be forgiven.
RUDG also received City of Miami loans totaling close to $1 million. Those too will be forgiven, internal documents and the City of Miami's Duran confirm. Auditors conclude that the $4.5 million in public money awarded to Pérez's group will cover the entire cost of the project — land, building acquisition, construction, hard and soft costs, and a $600,000 "developer's fee."
The seven-story Edificio Camacho opened in 2011. Barreiro named it for a friend and business associate, Jose Camacho Lagos. As with the other deal, Pérez's group owns the building and collects rental income and management fees. Its tax bill — around $20,000 in 2012 — is now zero thanks to the county's low-income-housing exemptions.
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And while a recent rent roll shows that tenants in the building were financially needy upon moving in, apartment managers have failed to recertify their income status, as is required annually under county rules for affordable housing. (The county's Housing and Community Development Department is charged with ensuring that affordable housing projects — even the public-private partnerships — remain affordable, with property managers charging approved rates to qualified tenants.)
Of the roughly $200 million in bond money voters approved for affordable-housing projects in 2004, less than $7 million remains, county records show. As Miami-Dade's affordability crisis worsens (the county has fewer affordable-housing units per capita than a decade ago), the commissioners' housing kitties are running dry. Barreiro still has about $1.1 million left.
Last October, toward the western end of SW Eighth Street, near 127th Avenue, county officials quietly celebrated the opening of another affordable-housing project. It too was financed by the county bond program. But unlike Barreiro's projects, this one — Gran Via — was designed and built by the county's housing department rather than by a private developer. The county remains the building's owner. Rent collected covers upkeep and maintenance and pays an outside company to manage the 104-unit building. With an outlay of around $13 million, the county paid about $125,000 per unit — 35 percent less than the $192,000-per-unit cost of Edificio Camacho and 44 percent less than the $224,000 per unit paid for Edificio Piñeiro.
Former Miami-Dade Commissioner Katy Sorenson, who oversees the Good Government Initiative at the University of Miami, says it is not too late to fix the system. "If commissioners see a need for affordable housing in their districts, they should say so and then open it up to competitive bidding," she suggests. "Just make it a competitive process. It wouldn't be hard to do."