Who Owns Peary Court?

Posted on by Martha K. Huggins

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by Martha K. Huggins, Ph.D……..

A burning question was finally asked on Wednesday (2/3/2016) in a Key West Citizen Editorial—“Who is White Street Partners?” Well, that’s the wrong question if you’re after Peary Court’s current owners. Peary Court Holdings, LP (a Delaware limited partnership)– registered in Florida as a “foreign partnership”– is Peary Court’s owner of record. However, in fact, the current partners with financial interests in Key West’s Peary Court–who together constitute its owners, include: Peary Court Holdings, LP; White St Partners; and the Wexford Spectrum Fund, a hedge fund managed by Wexford Capital (Greenwich, CT)[i]  You can look up each of these entities, but I do not recommend doing so after a big meal and too many drinks: This is a complicated set of entities, sub-entities, and derived entities.

skeleton danceRemember the “Skeleton Dance”? : “The thigh bone’s connected to the hip bone. The hip bone’s connected to the backbone. The backbone’s connected to the neck bone,” and so on.[ii] That’s what it’s like to trace the holding companies, corporations, and Principles, now involved in one way or another with Peary Court.

Peary Court Holdings, LP is a ‘Foreign Limited Partnership.’ A ‘holding company,[iii]’ such as Peary Court Holdings, LP, controls—“usually through a majority shareholding, another company or companies.[iv] A holding company “is a business that doesn’t do anything itself,” [v] it owns investments, such as stocks, bonds, mutual funds,…real estate, … private businesses, or…anything of value.”  Warren Buffet’s Berkshire Hathaway is perhaps the best-known holding company.”[vi]

Peary Court Holdings LP, as its name suggests, is a limited partnership (LP), which means that it delegates “management control [to its members, who] share the right to use partnership property, share the profits of the firm in predefined proportions, and have joint and several liability for the debts of the partnership.”[vii] A holding company’s “limited partners: (1) cannot, in any way, control or participate in the management[viii] of the partnership (otherwise they will lose their limited liability protection), (2) are liable only up to the sums invested by them, and (3) cannot withdraw their investments without the consent of the general partners.”[ix]

Peary Court Holdings, a “Foreign Partnership,” was created in one state—Delaware—which is not the state where Peary Court Holdings needs to do business–Florida. This renders Peary Court Holdings a ‘foreign-designated’ US business. Once so registered Peary Court Holdings can seek investors from anywhere, including internationally.

Peary Court’s current owners—form an unequal triumvirate consisting of Peary Court Holdings, LP; White St Partners, LLC; and the Wexford Spectrum Fund. They are in a power relationship with one another, within which, ‘Some animals are more equal than others.’ To wit: Peary Court Holdings calls the shots as the triumvirate’s “general partner.” It very likely holds a majority of White St Partner’s original financial investment in Peary Court, the property. For its part, White St Partners has “limited partner” status—an outcome that White Street seemingly considers an acceptable constriction of its previous role in managing and controlling Peary Court property. In compensation, the diminishing of White St Partners’ control over Peary Court property was traded for their getting out from under some financial losses created when they were blocked from accomplishing a ‘Millionaires’ Paradise’ on Peary Court land. Likewise, White St Partners gained enhanced liability protection in the event that new financial looses or other liabilities crop up.

Who are White St[x] Partners?

Super wealthy Brazilian, Paulo H. Tavares de Melo, and his two executive-level associates, Nelson Stabile[xi] and Victor Ballestas,[xii] are the Principles in Tavares de Melo’s Integra Investments, LLC and Integra Real Estate, LLC. Paulo Melo’s Integra Real Estate joins Everett Atwell’s Ironwood VG, LLC to become the corporate foundation of White St Partners. We’ll talk later about Wexford Spectrum Fund, the third entity in Peary Court’s ownership.

Key West’s own, Everett Atwell, the local face of White St Partners, is a KeyWester to the core: Born and raised in Key West, a graduate of Key West High School, Atwell left the Island briefly to get a Bachelor of Science degree in electrical engineering. Graduating from Notre Dame University, Atwell returned to Key West, becoming “Director of Substation engineering for the City of Key West electric utility. … Capitaliz [ing]… on his local knowledge to acquire …waterfront real estate. [Atwell then]…. Partner[ed with]…KeysCaribbean properties.”[xiii]

Never mind that Atwell’s notorious “Watermark” project—the poster child for bad planning and ignoring laws, “became a center of controversy in 2005,” even before construction had begun. Watermark’s neighbors objected to the size of the proposed development, saying it was out of scale with the surrounding community and violated height restriction code. When “construction of 32 luxury town houses stalled in the wake of the real estate market crash and economic downturn,…one model home stood deserted in the midst of an empty lot surrounded by an 8-foot-tall construction wall.” And Atwell’s Cortex Corporation was facing its fourth foreclosure.  In 2009 Wachovia Bank filed bankruptcy proceedings against Everett Atwell’s then company, Cortex Acquisition Group, LLC. Facing default on its Wachovia $15.3 million loan to build Angler’s Reef[xiv]–a high-end gated community located at mile marker 85—Atwell resolved, “”to spend 10 to 12 months trying to sell the homes.””

As for Atwell’s Cortex Acquisition Group—Atwell was listed in late 2012 as head of Atwell Holdings[xv]–that entity was “administratively dissolved” by 2013 or 2014.”[xvi] Between 2011 and 2014, Atwell co-managed Ironwood VG, a limited liability corporation whose “management” he shared with Denise Atwell (Ann Rozelle was the entity’s “registered agent).”[xvii] In 2014, Ironwood VG fell into “administrative dissolution,” which in corporation legal-eze means that a limited liability corporation ‘kinda’ still exists even though it doesn’t. Here’s how such a somewhat liminal status comes about: if a corporation does not submit its annual report to Florida State by May 1, the entity gets a $400 fine; if the fine is not paid by the third Friday in September, the entity is “administratively dissolved” by the state. Such an ‘inactive’ corporation “continues its corporate existence [but]…may not carry on any business except that necessary to wind up and liquidate its business….” The corporation’s director is personally liable for [all] debts, obligations, and liabilities of the corporation….”[xviii]

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I have a burning question: Can Peary Court Holdings LP legally list Everett Atwell’s Ironwood VG, LLC as a corporate limited liability corporation of White St Partners, when Florida State has administratively dissolved Ironwood VG?[xix]

White St Partner’s Paulo Tavares de Melo, Chief Operating Officer of his own Peary Court-related corporations–Integra Investments and Integra Real Estate –is  the wealthy scion of an old and very rich Northeastern (Pernambuco State) Brazilian family. Paulo Melo, who “holds an MBA in finance from the University of Miami and a Bachelor’s Degree in Business Administration from Nicholls State University,”[xx] was chief executive officer of his family’s Brazil-based conglomerate, Grupo Tavares de Melo.[xxi] Connected to his native Brazil by the family’s money that, as Integra’s own website statement confirms, flows from northeast Brazil to South Florida. As Integra’s web pitch explains, in 2001, after Paulo Melo had established his own investment company in Miami,

“Paulo…started investing in real estate opportunities for [his Brazilian family’s multinational,] Grupo Tavares de Melo, one of Brazil’s leading privately held conglomerates. From 2001 to 2008, Paulo spearheaded the group’s [Grupo Tavares de Melo] initiatives and completed multiple successful investment cycles [in Miami] through a land banking business model. In 2009, as the Florida real estate market became abundant with opportunities, Nelson Stabile joined Paulo Melo to enhance the team’s execution capabilities and pursue a more comprehensive investment strategy.”[xxii]

Paulo Melo’s “land banking business model,” involves “the practice of aggregating parcels of land for future sale or development,” usually through “quasi-governmental entities created by counties or municipalities to effectively manage and repurpose an inventory of underused, abandoned, or foreclosed property.[xxiii] Land banking is ripe for such real estate scams as when, “large areas of Florida swampland…were… sold as suitable for real estate.”[xxiv]

In 2007, Paulo Melo’s brother, Marcelo Tavares de Melo, then head of the Grupo Tavares de Melo’s northeast Brazilian enterprises, was jailed for corruption. After almost a decade of investigation by Brazil’s Polícia Federal (roughly like the FBI), Marcelo was charged[xxv] with being the king-pin of an illegal cartel—dubbed the “Gasoline Cartel”–that had been manipulating, upwards, the price of gasoline sold to gas stations and at the pumps. Marcelo Tavares de Melo’s family’s business “controls innumerable gasoline-related businesses, including the Ello-Puma gasoline distribution company in northeast Brazil.”

northeast brazilThe price altering of gasoline resulted in the cost of gasoline raising as much as 127% within a 24-hour period, which negatively impacted bus passengers and car drivers’ pocket books in some of Brazil’s poorest cities.

Now, let me be clear: Paulo Melo’s brother’s involvement in an illegal gasoline price fixing cartel that enhanced the Grupo Tavares de Melo’s revenues, would have no negative implications for Paulo Tavares de Melo’s Integra Group’s Miami operations, if his Integra, LLC were not investing Grupo Tavares de Melo’s money in Florida real estate. However, it appears that such investment may have taken place: This question of ‘fruit of the poisonous tree’ could be a serious concern for Florida and the US government corporate regulators. Was ‘bad money’ involved in the purchase of Peary Court? We may never know without further investigation.

Wexford Spectrum Fund

The final entity associated with Peary Court’s ownership, the Wexford Spectrum Fund, is a hedge fund managed by Wexford Capital (Greenwich, CT).[xxvi]   According to a CliffWater[xxvii] 2011 Report, Wexford Capital LP …was founded by Charles Davidson and Joseph Jacobs in 1994. The firm currently manages $7.0 billion, including $4.6 billion in three hedge funds.” One of these, Wexford’s Spectrum fund, in 2011 had assets amounting to $3.8 Billion. By including a corporate hedge fund — ‘which is a limited partnership of investors that uses high-risk methods, such as investing with borrowed money, in hopes of realizing large capital gains’ —in the ownership of Peary Court property, the new owners of Peary Court property are faithfully retaining the ‘snatch, grab, and sell’ business practices of White (Street’s) Partners whose business model links piracy and capitalism. The triumvirate will be well-served by account executives at the Wexford Spectrum Fund. Being “relatively unregulated, hedge funds…are best known for using more sophisticated (and risky) investments and techniques.” This to me smacks of ‘high-risk’ sport!

Peary Court’s triumvirate—a pack of quick-buck, slight-of-hand, investors who don’t even really trust one another, must unload their “white (Street) elephant” : Will voters keep Key West government from becoming a sucker to high-risk piracy capitalism?

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[i] See “Ownership Certification”:
http://www.cityofkeywest-fl.gov/egov/documents/1453745141_58428.pdf

[ii] http://supersimplelearning.com/resource-center/skeleton-coloring-page/

[iii] http://www.encyclopedia.com/topic/Bank_holding_companies.aspx

[iv] http://legal-dictionary.thefreedictionary.com/Holding+Company

[v] Ibid

[vi] http://www.joshuakennon.com/how-a-holding-company-works/

[vii] Limited partnerships: https://en.wikipedia.org/wiki/Limited_partnership

[viii] A limited partnership (LP) is usually formed by “at least one general partner (or full partner) and at least one limited partner (or nominal partner). General partners… control and manage the partnership, and are jointly and severally liable for all its debts and obligations.   Limited partners (1) cannot, in any way, control or participate in the management of the partnership (emphasis added to distinguish between of their own entity and of the Holding company)…otherwise they will lose their limited liability protection, (2) [Limited partners} are liable only up to the sums invested by them, and (3) cannot withdraw their investments without the consent of the general partners.”

[ix] http://www.businessdictionary.com/definition/limited-partnership.html

What started out as White Street Partners changed at some point to White St Partners–to look up the latter you’ll need to use the name as just written.

[xi] Nelson Stabile[xi], “received his Master’s degree in Engineering and Construction Management from Florida International University, with a Bachelor’s degree from the University of Miami in Business Administration, with a concentration in International Finance and Marketing. Stabile who is fluent in English, Spanish and Portuguese,” may have Latin American roots as well. KeyWesters who attended the HARC meetings that eventually killed Paulo Tavares de Melo’s dreams for Peary Court, may remember Nelson Stabile. A seasoned real estate developer for Integra, and active in eight other Miami companies, Stabile also heads his own Miami-based general construction company, Estrutura, LLC.

[xii] Victor M. Ballestas, not listed among White Street Partners’ members, is however, a finance and real estate executive Integra. Slected in 2012 as one of the Miami region’s “100 Power Leaders,” Ballestas has a Bachelor’s degree in Finance from Florida International University and a Master’s degree in Real Estate Finance. Described on Integra’s corporate site as having been “Immersed in the real estate industry for most of his life,”[xii] Ballestas cut his teeth on buying up and turning around “distressed properties.” In 2012, Ballestas–along with Stabile and Tavares de Melo—when they were Principles in yet another LLC–Biscayne Brickell, LLLP (a Limited Domestic Partnership), scored big from the foreclosure of Miami’s 14-story Chase Bank office building. The building was “surrendered…[to Biscayne Brickell] in a deed in lieu of foreclosure.” That is, the ‘underwater’ Chase Bank sold its $16.5 million dollar loan to Biscane Brickell, “which took ownership of the building in exchange for forgiving the… building’s …loan debt.” Biscayne Brickell, LLLP, which was “Managed” at the time by Victor Ballestas, Nelson Stabile and PauloMelo, was described in the press as “affiliated with the Brazilian investment group Integra Solutions….”[xii] In its 2014 Florida State corporate filing, Biscayne Brickell, whose registered agent was “BCRA, LLC,” contained Paulo Tavares de Melo’s signature. I could not find any solid finance information about Biscayne Brickell, a private holding company.

[xiii] See what it now has: http://www.keyscaribbean.com/ownership.php

[xiv] Angler’s Reef “community is located on Old Highway and the Atlantic Ocean at mile marker 85.

[xv]http://search.sunbiz.org/Inquiry/CorporationSearch/ConvertTiffToPDF?storagePath=COR%5C2010%5C0422%5C77093219.tif&documentNumber=P00000105379

[xvi]http://search.sunbiz.org/Inquiry/CorporationSearch/ConvertTiffToPDF?storagePath=COR\2012\1025\40797269.Tif&documentNumber=L01000009378; http://search.sunbiz.org/Inquiry/CorporationSearch/SearchResultDetail?inquirytype=EntityName&directionType=Initial&searchNameOrder=CORTEXACQUISITIONGROUP%20L010000093780&aggregateId=flal-l01000009378-38532427-dbfe-49ed-b08d-ddf4bba8cda2&searchTerm=Cortex%20Acquisition%20Group&listNameOrder=CORTEXACQUISITIONGROUP%20L010000093780

[xvii] http://search.sunbiz.org/Inquiry/CorporationSearch/GetDocument?aggregateId=flal-l11000023524-3cc4da5c-961e-4251-95d5-9bdbcbd06a62&transactionId=l11000023524-004d005b-cb8c-46c4-b094-5204e87b549a&formatType=PDF

[xviii] Houghtonpa.com/administrative-dissolution-in-florida/

[xix] http://search.sunbiz.org/Inquiry/CorporationSearch/GetDocument?aggregateId=flal-l12000026626-706392a9-a454-452b-93eb-b3a6689b0550&transactionId=l12000026626-c03c3efb-2e54-46d6-9c64-c67c8260cb70&formatType=PDF

[xx] http://www.integrafl.com/v1/index.php/paulo-tavares-de-melo

[xxi] Grupo Tavares de Melo: http://www.tavaresdemelo.com.br/pt/

[xxii] http://www.integrafl.com/v1/index.php/company

[xxiii] https://en.wikipedia.org/wiki/Land_banking

[xxiv] Ibid, see reference ‘xxiv’ for more such scams

[xxv] http://acertodecontas.blog.br/atualidades/pf-pede-e-justica-mantem-prisao-de-marcelo-tavares-de-melo-e-mais-tres-empresarios/

[xxvi] See “Ownership Certification”:
http://www.cityofkeywest-fl.gov/egov/documents/1453745141_58428.pdf

[xxvii] http://data.treasury.ri.gov/dataset/96dcb86f-e97e-4b05-8ce2-a40289e477a6/resource/ff46cbd7-ccaa-4fb5-a178-18d22a613f67/download/Wexford-Cliffwater-Investment-Due-Diligence-ReportRedacted.pdf

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49 thoughts on “Who Owns Peary Court?”

  1. Do some of these guys remind me of the drug company hedge fund guy who raised the price of an AIDS drug by 5000% recently? Opportunists or pirates? Do we just accept that this as the way big business only cares about its investors and show them our money? ( The 55 million )

    Thanks for doing the research. We are not amused.

  2. ms Martha the ‘hydra’ you researched was surely tedious and beyond the reach until it seen your detailed and refined scrutiny. i cheer you with a many hats off and a bow dear lady for a most excellent investigative report. wjm

  3. Dear Dr. Huggins, Wow! Again a phenomenal piece! So much info to process… The list of “legal” capitalist shenanigans is endless and numbs the mind. Something tells me the average Key West City Commissioner is not up to playing ball with the likes of the “White Street Partners”..Our dear bubbas are way out of their league…They might as well be dealing with Martin Shkreli…https://www.youtube.com/watch?v=YmmKj7-O3Kk
    Again, thank you for your brilliant research and insight into this and other corporate state sanctioned abominations…..

    1. Our very able commissioners have the help of our two City attorneys and City Manager, whom they
      chose. Further they have the help of the head of the Key West Housing Authority who has been doing this sort of thing for thirty years, i.e., evaluating, buying, and managing property, federally funded, and independent of City government. I know what they have done on Peary Court and what they are still doing as the loan negotiations continue, and I am amazed at how
      well and with what great strategy they have done it.
      Further, instead of worrying about the sellers making a profit, we should be concentrating on the opportunity to own and control a 19 acre property with 157 1283′ units that will remain worker housing in perpetuity, pay for itself, and accommodate an additional 48 units the current owners are OBLIGATED to build. In spite of the rampant speculation you have heard, these units need very little maintenance touch-ups. The current owners were obligated to spend over $500,000 when they bought it, bringing everything up to code, before they were granted a certificate of occupancy. The units never took on an inch of water – not one single unit in Wilma – note the drainage pattern and two retention ponds. No wind damage in 8 hurricanes -note the roof angles – also great for low maintenance. I’ve been here over 20 yrs and all I ever hear about is how the City has blown opportunities for permanently deed restricted worker housing. We have no one to blame this time but ourselves if we vote NO. The referendum is only “should” the City attempt to purchase it. If YES, they are committed to do it only with a fixed rate, and all expenses paid for by the rents, so that
      nothing can fall on us taxpayers. The 10m downpay comes from tourist taxes. The rents pay everything including the City’s lost share of property tax. There’s 500k set aside from the getgo to cover maintenance problems, and $1400 per unit set aside yearly for same. “Well what if we have another recession?” The units were 98.5% occupied throughout the recession..Look for the truth at the City’s own website, and check out the
      Housing First PAC website: WorkerHousingKW.org

          1. I feel like I came into this discussion about GO bonds late. I have been following the mess that Chicago is in and doing an article on it, thus I am reading up on General Obligation and Revenue Bonds I find Faithful Reader’s comment above confusing and possibly wrong.
            There are General Obligation (GO) and Revenue Bonds (securitized by revenues from the project financed with the bonds, such as Peary Court rents). Each type of bond (GO and Revenue) is “securitized” by different kinds of funds. (GO Bonds are “securitized” (backed by), taxation– income taxes, property taxes, sales taxes, etc.

            If KW issues a GO bond to fund a loan to purchase Peary Court it could securitize it through property taxes (the revenues from them do not seem to have gone up much over the past three years, which can be a worry for GO lenders and impact upwards the interest on the bond loan, as can our city government’s level of indebtedness (you might want to look into that before voting) –we already have debts being paid by property taxes so can we handle more debt securitized by them? Will KW TAXES have to be increased again? Then there is the March referendum to raise sales taxes–these taxes can be used as well to securitize a GO Bond and could off set any investor concerns about slow raising property revenues) I suspect that the sales tax initiative to be on the March ballot would really go in part toward a GO bond loan, which is not being said, of course. The second way to pay our 50+M for the Peary Court purchase would to purchase a Revenue Bond, “securitized” by Peary Court rents. But can rents increase sufficiently to meet debt and interest obligations IF WE ARE REALLY GOING TO DEDICATE SOME DWELLINGS TO WORKFORCE HOUSING? Will their rents have to increase as well? How much? would such increases render the workforce units NOT workforce units? I fear that the city will float a GO bond to pay for a Peary Court loan. No matter what kind of loan is secured, remember that the cost of Peary Court will increase by the cost to taxpayers and renters of the interest on the of loan, whether GO or Revenue. And then there’s the million or so cost for the managers who over see the loan for the city.

            Now as for the level of the interest on either loan, my reading says that the interest rate we would receive would be linked to our city’s “creditworthiness.” (the word “obligation” is useless here in understanding our possible interests rate on a loan). In Chicago’s recent case their GO loan, is carrying an interest rate above the average for such loans: they have too much debt and a rather stagnant pool of property tax revenues: lots of debt and slow raising revenues to pay them. Do not say, well we are not Chicago, look at the city’s budget and find out where we might stand. BTW Chicago’s Mayor Rham, as soon as he was reelected increased property taxes. My understanding is that a loan is fixed or variable in part as a result of the ‘conversation’ between lenders and borrower: Of course the banks want variable, but not all GO bonds are obtained through banks. As I understand, a GO or Revenue bond can be obtained without its being attached to a bank loan. KW could work through entities that could structure such a loan and seek the investors. In Chicago’s case–and this is very much true for other cities, especially where property revenues are not increasing “sufficiently” for lenders to be “comfortable” with a loan, there will be (as in Chicago) a fat increase in property taxes, before or immediately after a GO loan is secured. BYW, a property tax increase will impact renters as well–a city’s workforce. Landlords in Chicago, for example, fold their new property tax costs into the renter’s monthly rent. And we already know that the poorer KeyWesters will be
            hit hardest by the proposed sales tax increases–a regressive tax to be sure–that can also securitize a GO bond. BOTTOM LINE: No one should vote until all of the facts about the way that KW will fund a possible loan–will it be a GO or Revenue and how will either impact workforce housing? , The loan’s interest rate and how this will increase the cost of our already obscenely high purchase cost, length of pay-off time, and the city’s current level of indebtedness relative to revenues.

            Best, thanks for discussing this, Martha

      2. Er, and these rents a bit higher than most workers can afford, but then, maybe the definition or workers has been changed to mean something different form what most people view as workers. Anyway, here’s a link to the breakdown of Peary Court tenants by professions:

        https://drive.google.com/file/d/0B6CIxVRXBk88YW1tWEtfUHB0a2s/view?usp=sharing

        If the referendum passes, I look forward to watching the city run off the tenants who don’t “qualify” to live there. .

        1. Sloan, I just read the article in the Key West Chamber of Commerce about Peary Court that contained some interesting information from the Key West Housing Authority Executive Director Manuel Castillo:

          http://www.keywestchamber.org/uploads/4/6/5/2/46520599/chowder_2-2016.pdf

          On page 3, Mr. Castillo noted that: “According to our current calculations, it looks as if there are 10 or 12 current residents who would exceed the city’s income requirements.” That indicates there is a MAXIMUM allowable income for a family to rent a $2,358 apartment at Peary Court. The article went on to write: “All residents would have to qualify for a rental unit and meet the city’s income requirements for low-income, moderate and median income workers.” My question today is if there is a MINIMUM income requirement for someone to rent one of the $2,358 units? The pro formas I have seen show that 120% AMI apartments will encompass the vast majority of the Peary Court inventory. Exactly what is that minimum income level for the current Peary Court renters who would fall into the 120% AMI category? Will it follow the KWHA chart or will there be any flexibility? For example, if someone is earning $5,000 a month, then $2,358 in rent plus utilities would require about 50% of their income. Would the city rent to that person? Exactly how little can a person earn and still rent a $2,358 Peary Court apartment?

          That is the dirty truth about Peary Court. The residents there think they will all be able to stay since they have already shown their capability to pay the rent, but I have the feeling that since there is means testing on MAXIMUM income, then there will also be means testing on MINIMUM income.

          For example, according to the Key West Work Force Housing Chart, a 2 person married or domestic partner household would need to earn between $93,200 and $111,840 to live in 120% AMI housing. How many of the 30 apartments where the occupation is shown as server or bartender are earning that much? They may be pocketing extra money in cash tips that is not reported, but they will need to show tax returns to verify their income to the city. Right? As such, they won’t be able to show that they qualify for 120% AMI income bracket, and they will need to leave because they don’t earn enough. The irony is that most of the current Peary Court residents would be able to live there longer if it remains under private ownership than if the city buys.

          That is the story no one on the pro-Peary Court side wants to tell.

          1. Colby, I have not seen any indication that the income verification has a “minimum” income requirement. Have you seen anything that points to a “minimum” income requirement in our code?

          2. I see it as more of an ethical than a legal/statutory matter. Shouldn’t the city have an ethical obligation not to rent to a person who cannot afford to pay the price? That is why I asked “Exactly how little can a person earn and still rent a $2,358 Peary Court apartment?”

          3. Oh, ethics in government… I see. 🙂 On that note. Why are the 48 existing deed restricted units at Peary Court allowed to rent at the moderate-income [+10%] level instead of the 10% low-come [16 low-income] and 20% median-income [32 median-income] that is found in the code and that the Planner and City Attorney [at one point] decided was the proper interpretation of what the zoning requires? I did send an inquiry to our current Planner, copies to the City Attorney and City Manager…. no response.

        2. Yup, Sloan, the rents are already high for city wages and as my prior posting argues, they will likely have to get higher if the city floats a Revenue bond. There may be an inherent contradiction between ‘workforce housing rents and the need for capital (in rents) to pay the principle and interest on a Revenue Bond. Thanks Sloan

      3. Dear Faithful Reader, I appreciate your commitment to workforce housing, I am with you there. However, I am against purchasing Peary Court for 55M to achieve that. I say let the owners sit on the failed investment for a while and let’s put on our thinking caps and find another way to provide for our fine workers. Martha

      4. My article in no way stated that our city government is not up to the task of meeting head on the lawyered up triumvirate, but rather to drive home how disgusting this has all become to me. As for your statement that:
        “The irony is that most of the current Peary Court residents would be able to live there longer if it remains under private ownership than if the city buys,” — no way that private “enterprise” will do the right thing and keep rents low.

        1. Martha, my point is not about the rents that will be charged. If the city becomes the owner, then they will force people to leave based solely upon a person’s annual earnings. Someone who earns too much will have to leave. Someone who doesn’t earn enough will have to leave. At least a private owner will allow the renter to determine for themselves whether the rent is affordable for their own situation.

    2. Alex, thanks so much. After an article like that I feel unclean and exhausted. I had begun the Brazil part of the research last spring, sensing that there may be international money involved. I know well the companies of the familia Tavares de Melo from having lived in Pernambuco–Recife, for two years. There is much more of a story there, but that’s for another time (or not). As always, thanks for your support.

  4. Thank you, Martha. These folks and their locations and backgrounds needed to be made public. Don’t know about you, although maybe I can make a good guess, but I’m having trouble getting all choked up inside for these poor, hapless investors/developers’ (the people, not their lawyer’s paperwork) predicament. but you left our who has been advising them: our own Jim Hendrick.

    I don’t know why the local mullet wrappers and news outlets still are not pointing out that the Peary Court developers’ profit, by their own calculations, is at least $32 million in the deal: $55 million sales price, less $35 million they paid for it, plus the 48 free “affordable” building rights the city GAVE the developers, which the developers valued at $12 million during the “negotiations”. All according to Key West Housing Authority Director Manny Costillo at City Commissioner Jimmy Weekley’s Peary Court purchase town hall meeting. Manny said he told the developers the city could not earn rent off of the 48 building rights. So the developers said, okay, they keep the 48 building rights and build 48 rental dwellings at Peary Court, and the city can have the rest of Peary Court for $55 million. The city’s crack negotiating team, consisting of Costillo, Jimmy Weekley and City Manager Jim Scholl, say okay. The city’s crack negotiating team agrees to the developers’ asking price for the existing 157 units, and the 3 units which had burned and could be rebuilt. The developers keep the 48 building rights, which are “called” affordable building rights, which they intend to use to build 48 new units on the Peary Court land, whether the referendum passes or not. It came out during the 2nd most previous city commission meeting that the 48 building rights effective are for 48 new MARKET RATE units. Also during that commission meeting, it was explained by Donna Bosold, representing the developers, with her husband and business partner Jim Hendrick sitting beside her in the audience before she went to the speaker station, that the new 48 units would be built in clusters throughout Peary Court. That also was explained by City Commissioner Margaret Romero. Until then, the mayor and other city commissioners and the public had thought the 48 new units would be built on 2-plus acres inside of Peary Court, not scattered all throughout it. Until then, Commissioner Weekley had maintained Jim Hendrick was not representing the developers. In fact, Hendrick represented the developers before the city’s Historical Architectural Review Commission (HARC), and he has represented them ever since. In fact, anyone who does business with someone represented by Jim Hendrick gets fleeced. He’s that smart, clever and good at what he does. Michael Milier, a local architect, lives in one of the Peary Court units. Miller sits on the HARC board. He was chairman of the HARC board when Jim Hendrick represented the developers before HARC. Miller told me the developers did not maintain the Peary Court units after purchasing them, the buildings have mold, and the $55 million price is too high. The buildings are mostly wood frame and plywood, which termites love. Termites are a problem everywhere in Key West. Manny Costillo said at public meetings that all of the appliances in the units probably need replacing. I suppose that’s stoves, refrigerators, dishwashers, washers and dryers, air conditioning units, etc. For $55 million, the city at the very least should have gotten all of Peary Court, including the 48 building rights it had GIVEN the developers.

    1. Sloan, wonderful work above analyzing the pit we are in. All I can say is, if we pay 55$million for Peary Court we are absolutely stupid. I say wait and let the fancy pants investors put the heat on the Holding company and all others now associated with ownership of Peary Court. The fact that these people have a history noted in their portfolios of purchasing “distressed” properties may speak volumes about the actual quality of PC. We will surely have to purchase it ‘as is’ even if we do pay a high price. thanks for your kindness and your vision. Martha

  5. Martha,

    Masterfully presented. Breathtaking research and details. Perhaps in the hands of the right people, a legal review of this data will hold all accountable, as the information is publicly disseminated.

    Blessings & Respect…

    1. Dear John, you are very kind and I appreciate so much your support. I wish there were a legal review but I am sure that all would be declared “legal.” that is the distressing part, that it has all become legal!!! best, Martha

    1. Dear margiebargie, thanks it took me almost 2 weeks to get the information such that I could ‘kinda’ understand it and then to try to now bore people to death who read it. well precision took priority so I guess boredom followed. Glad for your comments, best Martha

  7. Martha, To be honest, I am at a loss for words (can you believe it?) What you set forth is really how the world of business works. This is not just something happening here (but we all know that, don;t we?). But your work shows us just how byzantine it all is. Mind boggling attempts to mask everything that happens in this world, so much so, that even one such as I find it hard to believe. Imagine what kind of a wonderful world this would be if these financial worms used their brains for something worthwhile? If I really believed in omnipotent Deities, I’d say you are doing God’s work. Whatever it is, keep doing it. ciao, Jerome

    1. Dear Colby, thanks for weighing in. Nice work there. Rents will increase if the city takes out a Revenue Bond, even for workforce renters. I appreciate your information about rentals, thanks, Martha

    2. Dear Jerome, I was at a loss for words which is why I am just responding now. Your words are charms and I appreciate them so much. Your statement: “Imagine what kind of a wonderful world this would be if these financial worms used their brains for something worthwhile?” Horrors, Donald Trump thinks he is doing that. Anyway, thanks for the “god’s work” thought, I guess that god will just have to weigh in, if she wants. Actually, Feb 2 is Imanja day in Brazil and I celebrate it. Best, Martha

      1. Jerome, You said it so well. Martha deftly exposes the “byzantine” shell game that is “business”. Crime has been massaged into legality.This is a global disease transmitted to us by unregulated hyper-capitalism that is mother’s milk to the well dressed sociopathic savages of the world. The TPP is the crown jewel of the Capitalist Totalitarian paradigm. We ain’t seen nothin’ yet. “White Street Partners” are simply doing what they are allowed to do…I will be voting NO.

      2. Martha, I think you overestimate Mr. Trump and his motivations. He knows what kind of slime he is doing, even if he can rationalize it to himself to some extent. In truth, much of the plutocrat class does this. Some day I’ll post an essay I wrote called “The PGA and Charity”. Rationalizing dubious behavior is an art form for the super rich. Whatever … this article deserves the response it has gotten. Congratulations and thanks, ciao, Jerome

  8. I like the idea of investigating this whole whole deal and how it happened that the City was conveniently kept out of the deal by so called ” confidentiality” as if it had no stake in the consequences. The recent editorial by the Key West Citizen correctly asked this , but I think
    there’s not been enough scrutiny as to why the Navy’s housing was sold before being offered to the City that supports it. It might have even become a partnership had they had the courtesy to give us a heads up since a lot of military people could have rented there at a reasonable rate if the price was not so profit driven, but 55 million, no thanks.

    2. zobop, I want those answers too. In addition, before anyone votes they need to ask for the legally-mandated guarantees that a certain proportion of Peary Court housing will be dedicated to workforce housing, AND what will be the proportion. Then we need evidence that the city can pay its bond principle and interest with different proportions of rentals–20%, 25%–being set aside as lower rent costs for workforce housing AND the guarantee of how long a renter can expect to go without a rent increase–2 year cycles, 3 year cycles?

  9. Wow! Allow me to join in the chorus, Dr. Huggins! Well deserved recognition for an exceedingly well-done piece, in every regard! Your research efforts are commendable…admirable, in fact! Keep up this fabulous work! It should be enlightening to everyone even remotely interested in this boondoggle (I’m being charitable — it’s Sunday as I write this).

    Some (minor) clarifications are in order:

    1. A limited partnership is usually formed by a general partner (individual or corporation) with little or no ‘skin in the game’. Contrary to popular opinion, the GP rarely contracts liability beyond the usual limits. Originally, the primary purpose of limited partnerships (called Subchapter S Corps) was to provide “tax shelter” to it’s investors…the “limited partners”. This shelter idea worked beautifully, in that “losses”, whether actually realized or merely reserved for…could pass through the corporation to individuals needing an offset to profits realized elsewhere. As time passed, if the property involved was sold, any gains were taxed as capital gains…roughly half the rate of ordinary income. Win-win! Further…any real money at risk in the proposition is OPM…other people’s money.

    So…once that factor is weighed into this whole mess, it’s easy to see how the “owners” profit by losing money. Were we to be afforded a look at the real value as stated in the working books of the umbrella corp., we would find a vastly different number! Also, what’s not taken into account here is the actual benefit derived from ownership of this property to the present. To suggest that this deal smells fishy…is an insult to dead fish!

    2. Ain’t no such thing as ‘bad’ or ‘dirty’ money…that a ‘laundry’ can’t fix. That’s the critical missing element to this whole thing. The link that would catapult this whole deal into the realm of what the feds refer to as Ongoing Criminal Enterprise, together with all the natural conspiracies that attach thereto. Without that link, we must conclude, when all is said and done, that these ‘furriners’ are on the up-and-up. There is little evidence linking their purported ill-gotten gains overseas to this particular project.

    3. Overall, I think that Key West is being set up once again. Our erstwhile city leaders are simply incapable of grasping the whole picture…or, don’t want to know. Take your pick. The Citizen editorial did indeed ask the right question. It harks back to virtually the same question I asked some time ago: “Who in the hell is Cay Clubs?” Remember that doozy? That outfit swept like a tsunami over the Keys…leaving nothing but devastation. Some claims put that cost at well over $300 million.

    4. Why don’t we just give that useless euphemism “affordable housing” a proper burial and be done with it? ALL housing is “affordable”…otherwise it wouldn’t be built, bought, sold or occupied. That anyone with a sane mind would even suggest that Peary Court is “affordable” to our “workforce” is in serious need of psychiatric evaluation, at the minimum.

    Needless to say, but I’ll say it: This is only my opinion.

    1. Dear Mr. Cohn, than you so much for your kind words and rich information. The ‘general partner’ in my article uses a different word, but I get the importance of your information. Yes, Key West is being set up for the kill and we are who will be killed with more taxes. Would you please look at me note to “Faithful Reader” (pasted in below) and correct if I am wrong. There seemed to be some confusion about Bonds. Thanks so much, Martha

      I feel like I came into this discussion about GO bonds late. I have been following the mess that Chicago is in and doing an article on it, thus I am reading up on General Obligation and Revenue Bonds I find Faithful Reader’s comment above confusing and possibly wrong.
      There are General Obligation (GO) and Revenue Bonds (securitized by revenues from the project financed with the bonds, such as Peary Court rents). Each type of bond (GO and Revenue) is “securitized” by different kinds of funds. (GO Bonds are “securitized” (backed by), taxation– income taxes, property taxes, sales taxes, etc.

      If KW issues a GO bond to fund a loan to purchase Peary Court it could securitize it through property taxes (the revenues from them do not seem to have gone up much over the past three years, which can be a worry for GO lenders and impact upwards the interest on the bond loan, as can our city government’s level of indebtedness (you might want to look into that before voting) –we already have debts being paid by property taxes so can we handle more debt securitized by them? Will KW TAXES have to be increased again? Then there is the March referendum to raise sales taxes–these taxes can be used as well to securitize a GO Bond and could off set any investor concerns about slow raising property revenues) I suspect that the sales tax initiative to be on the March ballot would really go in part toward a GO bond loan, which is not being said, of course. The second way to pay our 50+M for the Peary Court purchase would to purchase a Revenue Bond, “securitized” by Peary Court rents. But can rents increase sufficiently to meet debt and interest obligations IF WE ARE REALLY GOING TO DEDICATE SOME DWELLINGS TO WORKFORCE HOUSING? Will their rents have to increase as well? How much? would such increases render the workforce units NOT workforce units? I fear that the city will float a GO bond to pay for a Peary Court loan. No matter what kind of loan is secured, remember that the cost of Peary Court will increase by the cost to taxpayers and renters of the interest on the of loan, whether GO or Revenue. And then there’s the million or so cost for the managers who over see the loan for the city.

      Now as for the level of the interest on either loan, my reading says that the interest rate we would receive would be linked to our city’s “creditworthiness.” (the word “obligation” is useless here in understanding our possible interests rate on a loan). In Chicago’s recent case their GO loan, is carrying an interest rate above the average for such loans: they have too much debt and a rather stagnant pool of property tax revenues: lots of debt and slow raising revenues to pay them. Do not say, well we are not Chicago, look at the city’s budget and find out where we might stand. BTW Chicago’s Mayor Rham, as soon as he was reelected increased property taxes. My understanding is that a loan is fixed or variable in part as a result of the ‘conversation’ between lenders and borrower: Of course the banks want variable, but not all GO bonds are obtained through banks. As I understand, a GO or Revenue bond can be obtained without its being attached to a bank loan. KW could work through entities that could structure such a loan and seek the investors. In Chicago’s case–and this is very much true for other cities, especially where property revenues are not increasing “sufficiently” for lenders to be “comfortable” with a loan, there will be (as in Chicago) a fat increase in property taxes, before or immediately after a GO loan is secured. BYW, a property tax increase will impact renters as well–a city’s workforce. Landlords in Chicago, for example, fold their new property tax costs into the renter’s monthly rent. And we already know that the poorer KeyWesters will be
      hit hardest by the proposed sales tax increases–a regressive tax to be sure–that can also securitize a GO bond. BOTTOM LINE: No one should vote until all of the facts about the way that KW will fund a possible loan–will it be a GO or Revenue and how will either impact workforce housing? , The loan’s interest rate and how this will increase the cost of our already obscenely high purchase cost, length of pay-off time, and the city’s current level of indebtedness relative to revenues.

      1. Wow! That’s a slew of questions, Martha! 😉
        But…they’re pertinent questions and need to be asked AND forthrightly answered! I will attempt to answer to the best of my ability and expertise. I hope you understand that, in the interest of brevity, the answers will be general: As you might imagine, ALL of your technical questions have a virtually endless skein of exceptions, permutations, adulterations, variations…the stuff that fills law libraries. OOPS! I’ve hit the limit here!

  10. To everyone on this string of great insights:

    Now I am about to alienate some, sorry. I have a problem with aspects of the newly arrived workforce housing PAC, suspicious, I am. Recently I received a post on face book (I use my husband’s account because he abandoned it–Malcolm Willison) from them offering the following single survey question that went about like this: “Are you in favor of workforce housing and support the city’s purchasing Peary Court?” As is taught in social research methods and used by every polling agency in the US: NEVER INCLUDE TWO QUESTIONS IN ONE AND THEN ASK FOR ONE RESPONSE. Here’s where I stand: I want workforce housing (YES) but I do not accept (NO) that purchasing Peary Court at 50$million is the responsible way to achieve it. What troubles me is that this is very likely not just the error of a rank neophyte in constructing survey research questions. It is a leading question that is sent out to shape a mind set: To Wit: ‘If you want workforce housing then you need to demonstrate this by giving your vote to KW government purchasing Peary Court. Please do not let your friends and associates get pulled in by this cheap trick. The city has waited far too long to address the very important needs of its workforce. Getting indebted in ways that WILL fall hardest on the backs of the poor and middle class is not the way to address it.

    1. Martha, I think the next poll that will appear on the Worker Housing website will be something like: “Do you love puppies and want affordable worker housing at Peary Court?”

      2. YES, why not. Potential anger again: I really question the sudden appearance of this PAC just as Peary Court, the property, needs to be sold to get the buyers whose plans for PC have been thwarted, some of their investment back–or if KW gov. buys PC A WINDFALL OF PROFITS. The current owners need to unload it and how better than to attach the property to a ‘movement’ for workforce housing, they think. More than once, good thinking people have been pulled into sleazy seemingly well intentioned organizations that are NOT that at all (the organizations/PACS).

  11. Yup! You nailed it! At least, in part. This “PAC” or whatever it is, is but another distraction. It really matters not who profits or by how much. What DOES matter here is…does Key West gain anything from this proposition? On the face of it, I can only offer a resounding NO! I have seen NO proof to the contrary. NONE!

    Even as a break-even proposition, it fails miserably. And, if anything, it actually pushes the laudable objective of “affordable workforce housing” even further from attainment.

  12. by ‘this pac’ are we speaking of the one that hta/swift and jimmyboy weekly fronted with $5000 and $500 respectively? if so then what could go wrong? 😉

      1. ms Martha you have me in your power! [smile]
        published in the mullet wrapper please note last para. cheers wjm
        *****************

        New PAC pushes Peary Court buy – 01/26/2016
        Back to Search Results

        A group of locals has launched a political action committee, Housing First, in advance of the March decision Key West voters will make over whether the city offers up to $55 million to buy Peary Court.

        Housing First is the PAC behind the campaign called Worker Housing KW, which has started with a website, workerhousingkw.org, a Facebook page and a pledge that it isn’t solely about the 157-unit rental complex in Old Town, organizers said.

        “The first building block is Peary Court,” said MaryBeth McCulloch, a New Jersey native who moved to Key West 19 years ago and ran the Bottle Inn before retiring.

        City voters will settle the Peary Court purchase at the March 15 election, which is also the Florida presidential primary.

        “We’re not going to dissolve the PAC after that,” McCulloch said. “There are other options available but none so immediate.”

        The PAC is promoting a housing forum set for 6 p.m. Feb. 23 at the Harvey Government Center, 1200 Truman Ave., which is hosted by the Monroe County Democrats, and members said there will be additional events.

        City Commissioner Jimmy Weekley is a founding member of the PAC, along with Maureen Bramlage, Tony Falcone, Mike Mongo, Perry Johnston, Robert Gold, Richard Tallmadge, Ed Swift, Donna Windle and Damian Vantriglia, McCulloch said.

        City commissioners resolved to let voters make the decision on Peary Court, but have taken pre-election steps such as ordering a $15,000 inspection of a sampling of Peary Court town homes and starting the application process to tap $10 million in Key West’s land authority funds for a down payment.

        The rest of the Peary Court buy would come from a bond issue city staff describes as a loan and, as the ballot question states, the city will pay the mortgage from rents received.

        Peary Court, built in the early 1990s as Navy housing, is a collection of two-bedroom apartments renting for about $2,400 a month. White Street Partners bought the 24-acre parcel in 2013 for $35 million with plans for demolition to make way for luxury homes. But after striking out before the Historic Architectural Review Commission, developers dropped their plans and decided to remain landlords.

        Weekley and other proponents of a city purchase say Peary Court will eventually go the luxury home route if Key West doesn’t buy the complex.

        McCulloch said she has been running into locals who aren’t well-versed in the Peary Court vote March 15.

        It’s not low-income housing, McCulloch said, but rather workforce housing.

        “Everybody wants to have teachers, nurses, bartenders and servers and firefighters,” she said. “We won’t have those if we don’t have any place for them to live.”

        So far, the PAC has collected $5,500 in contributions: $5,000 from Historic Tours of America and $500 from Weekley, and spent $2,500 at National Campaign Supply, according to records at the Monroe County Supervisor of Elections.

        [email protected]

  13. Dear Everyone, Wow, what a great discussion! Very enlightening. I thank everyone for their participation, but reserve my greatest appreciation to Martha for having provoked this. One thought, perhaps a naive one, but wouldn’t the rejection of this deal by the voters be purposely interpreted as a rejection of government involvement in the “market”? Couldn’t they spin it like that and allow “them” to do whatever they wanted? How do we stave that off until a better solution, perhaps using government refereeing, can be arrived at? ciao, Jerome

  14. Colby much thanks.
    a hotelier 2 realtors and an architect for 2500 alex! some dare call it conspiracy. hehe
    and then a defunct political sign supply company to boot…bwahahahaha it doesn’t get better then that!!!! unless of course the 4 above mentioned owned the supply company. BWWWWAHAHAHAHAHA
    now move along move along nothing to see here folks…. 😉 ;(

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