Issues of Compliance
The City continues to monitor the agency’s financial standing. On April 29, 2020, MBCDC provided the FY 20 cash flow projections for its umbrella organization. City staff discussed the projections with MBCDC, to clarify reasons costs were not delineated for repairs and maintenance, elevator maintenance, building permits and utility costs. MBCDC staff explained that these costs are accounted for in each property’s corresponding budget.
On September 10, 2020, MBCDC provided Consolidated Financial Statements for 2019. The statements delineated a continued deficit and highlighted the subsequent events that have impacted the organization’s financial capacity and compliance with federal programs. The report also listed a variety of current material weaknesses and significant deficiencies in connection to the agency’s internal controls, accounting processes and tenant management that have persisted for five (5) years. MBCDC provided a response that included corrective actions as part of a corrective action plan within the report.
The Building Department inspected the Jefferson Apartments and issued a violation on August 15, 2019 due to observation of structure deterioration on the first floor. The relocation process for all tenants on the first floor began in March 2020. Tenants have been temporarily relocated to hotels or other units within the portfolio. MBCDC retained an engineering firm for the scope of work and subsequently bid out the project and selected a contractor. The building permit was issued on May 26, 2020. The repairs are estimated to be complete by March 12th. The vacant units on the first floor will be ready to be rented on April 1st.
Units at the Shelbourne Apartments require extensive rehabilitation. Since March 2020, 19 residents have been permanently relocated to other units within the portfolio. MBCDC has advised that they currently do not have a concrete plan of action in regard to the rehabilitation and reopening of the Shelbourne Apartments. They have advised the City that they are seeking co-development partners to recapitalize their entire portfolio inclusive of the Shelbourne Apartments. Please note that the business plan that had been promised to the City in May of 2019 was never submitted. MBCDC has advised that the business plan would be contingent on the possible partnership with a co-development partner. In a February 2021 meeting, MBCDC informed that the Office of General Counsel at HUD advised MBCDC, that due to the type of funding received at this property (HUD Section 811) they cannot simply refinance. MBCDC continues to meet with HUD officials and counsel to discuss options to refinance despite the HUD Section 811 encumbrances.
The resulting vacancies at both the Shelbourne and the Jefferson Apartments result in an adverse financial impact for the agency.
1551 Pennsylvania Ave
A Notice of Violation was issued to 1551 Pennsylvania Ave. on September 15, 2020. The findings included evidence of water intrusion observed in the living room and bedroom ceilings in units 202, 203, 205, and 207. The permit to repair the roof was issued on January 12, 2021, and the roof replacement was completed on February 22nd.
Florida Housing Finance Corporation
MBCDC has asserted to the Mayor and Commission that it is currently in compliance with all grant agreements. According to the Florida Housing Finance Corporation, MBCDC has not been in compliance since 2013 and owes $10,584 plus a 5% late charge of $529.20 for the annual EHCL sinking fund due August 31, 2013 and a late fee for late payment of 2019 servicing fee. MBCDC has a Demonstration Loan through FHFC for Meridian Place Apartments. The loan matured April 4, 2020. The Board approved a one-year extension on December 17, 2020. The last demand letter by Florida Housing Finance was sent on December 30, 2020.
Miami-Dade County Public Housing and Community Development (PHCD) continues to express concern with MBCDC’s financial and operational capacity. On February 5, 2021, Mr. Michael Liu, director for Miami-Dade County Public Housing and Community Development, provided the following timeline of events between the County and MBCDC:
2012 - MBCDC requests assistance from the County to address inability to pay its obligations on outstanding loans. The County permits a "one-time" agreement where past due interest and late charges were added to the principal of the loans all due as a balloon payment at the various maturity dates for the loans.
2015 - MBCDC requests ability to sell off 10 units at the Knightsbridge building as condominium units in order to pay off the County loan and extinguish affordability requirements; agreed to accept reinstatement of the County loan on the Jefferson which was in default; and agreed to provide the County with 10% of the sales proceeds of the sale of each unit. MBCDC represented that the revenues generated would stabilize its financial situation.
2017 - MBCDC requests a deferment of loan payments for all of its County Surtax loans due to "continuing operating deficit” and asserted its “...inability to continue operations past 2018."
2017 - MBCDC in violation of its Rental Regulatory Agreement (RRA) evicts all the tenants from the Crespi Park Apartments, so as to reset rents at a higher level. This violation triggered MBCDC becoming in default of its loan agreement.
2018 - (February): The County offers to assume the entire loan portfolio and associated assets of MBCDC with the goal of preserving the affordable units. The County also offered to provide operating expenses covering staff salaries and benefits for 90 days after execution of an agreement to allow for a fair transition. This offer was refused by MBCDC.
2018 - (March): MBCDC defaults on its loan with the Madison Apartments.
2018 - (October): PHCD takes over daily operations of the Madison Apartments.
(2018-early 2019): MBCDC and PHCD reach agreement whereby MBCDC will retain the Crespi Park Apartments with the promise to make the needed repairs and hire qualified property management firm. PHCD County will retain ownership of the Madison Apartments.
2020 - PHCD engages with the County's Department of Audit Management Services to conduct a full operations review of MBCDC. The work continues but expected to be completed soon.
2020 - (December): PHCD sends correspondence to the City of Miami Beach expressing continued concerns about MBCDC's viability, although it is still current on its loans. A 100% inspection of units ordered. Contracting processes puts start of inspection by April 2021.
2021 - PHCD is willing to discuss with MBCDC and the City of Miami Beach the same offer that was made in early 2018 regarding assuming MBCDC's loan obligations and transferring ownership of the properties to the County. PHCD would collaborate with the City in the transfer and operations of the properties.
The attached graph demonstrates the reduction of MBCDC’s portfolio and affordable units since 2014 and includes the sale of multiple assets by the agency to raise operating capital.
- In 2015, the agency sold 10 units at The Knightsbridge to stabilize its financial situation. The agency never provided the City or the County an accounting for the use of these proceeds as promised.
- As a result of non-compliance with Federal rules and regulations, MBCDC returned five (5) properties acquired with City funds in 2014-2015 to help mitigate the City’s financial exposure to HUD and the agency’s inability to properly manage the properties in compliance with HUD rules. Furthermore, during the City’s due diligence in acquiring these properties it was discovered that MBCDC had listed the Barclay Apartments on multiple hotel registration sites in violation of its funding agreements with the City.
- In 2019, MBCDC turned over the Madison Apartment to the County and sold the Seymour building (a non-housing asset previously assisted by the City). MBCDC has not provided an accounting for the use of these proceeds.
Correspondence from MBCDC
On February 24, 2021, Ahmed Martin, Executive Director of MBCDC sent a letter to Assistant City Manager Alina Hudak making various requests of the City. The letter has been attached for the Committee’s review.