Deal for downtown Miami's first market-rate condo in jeopardy
By Paola Iuspa
The Housing Finance Authority of Miami-Dade County spent almost two years structuring a deal to help build downtown Miami's first market-rate condominium project, but the agreement is now in jeopardy.
The authority board members' decision not to waive $45,000 in fees prompted the developer of Flagler First Condominium, 101 E Flagler St., to say he would reject the authority's $3 million guaranty loan. The developer needs the guaranty to secure a $9.3 million construction loan from Wachovia Bank.
Rafael Kapustin and Sergio Rok, partners in the project, said last week they would reject the authority's offer.
Some authority board members who said they had been working with the developer said they were disappointed with Mr. Kapustin's decision not to accept the deal. Hector Brito, the board's vice chair, said Friday he was interested in the authority meeting again with the developer.
"The fact that we approved the guaranty loan," he said, "and we are willing to take the risk, shows our support for the project."
The authority's offer would have included a one-time $45,000 fee to cover expenses for consultants who drafted the agreement, and $30,000, or 1 point, in fees for the first year of the guaranty loan. Under the deal, another $30,000 would be charged the following year if the developer still owed Wachovia a portion of the authority-backed loan, said Patricia Braynon, the authority director.
She said it would have been the first time the public agency would have assisted a developer building a for-sale multifamily project.
If Mr. Kapustin walks away from the deal, the authority will have to absorb the $45,000 expense, which the authority board refused to waive. Because the county agency did not sign a contract with the developer, Mr. Kapustin cannot be forced to foot the bill, Ms. Braynon said.
The $15 million conversion of the former CenTrust bank building into a 90-unit condo began in June and was to be completed in 18 months. But Mr. Kapustin said the completion date could be pushed back if he is unable to find a new guarantor.
"We will continue with Flagler First," he said. "This project is too important to stop it."
While Wachovia will not provide the construction loan until Mr. Kapustin finds a replacement for the authority's guarantee loan, the developer, who was able to raise $3 million in City of Miami and Miami-Dade grants, has enough money to continue remodeling the interior of the 79-year-old office building, Mr. Kapustin said. But that could change if he does not find a private lender willing to be a guarantor.
The developer could appeal the board's decision before the Miami-Dade Commission, to whom the board reports to, Ms. Braynon said. But Mr. Kapustin said he wouldn't do it.
"I rather look for help somewhere else," he said.
He said $45,000 plus $30,000 was going to make the guaranty loan too costly, and he was not willing to pay that much. It was a matter of principle, he said.
"I can increase the price of the units to offset the cost," he said. "But I have a problem paying almost 4 points to a quasi-judicial body."
While some units will be priced beneath market rate to benefit middle- and low-income families, most will sell at an affordable market-rate starting at $106,000. Units will have one and two bedrooms and about 800 square feet, Mr. Kapustin said.
Governed by a board of 13 volunteer members appointed by Miami-Dade County commissioners, the authority was created in 1971 to alleviate the county's housing shortage. The body helps developers apply for loans to build and rehabilitate rental and single-family affordable homes.
Working as a private entrepreneur and with a $3.2 million budget, the authority raises funds through service fees it charges developers. The nine-person staff facilitates about 250 homeownership loans and 500 to 800 units of multifamily rental units annually through developers.
Some authority board members said they were willing to cooperate with the developer and were disappointed with Mr. Kapustin's decision not to accept the deal.
"The fact that we approved the guarantee loan," said Mr. Brito, "and we were willing to take the risk shows our support for the project."
Assistant County Manager Barbara Jordan asked the authority's board to consider waiving the consulting fees, calling the development a pilot project that would spur the renaissance of the decaying downtown.
After the decision, County Commission Chair Barbara Carey-Shuler said one of her priorities is to increase affordable market-rate housing and that she would ask the commission's budget and finance committee to study the way the authority charges fees.
Commissioner Jimmy Morales, who chairs the committee, said he would try to find ways to remove obstacles that may prevent the authority from assisting in the creation of market-rate housing at affordable prices.
"My committee wants to create financial vehicles for in-fill housing and moderate income housing."