BALANCE SHEET BLOG – HOLLYWOOD, FL


ArtsPark Village: Due Diligence
September 1, 2008, 6:12 PM
Filed under: City Commission, City Staff, CRA Districts, Development, Young Circle

September 1, 2008

When four commissioners sealed the deal in July with developer WSG for the downtown mega-development ArtsPark Village, no one mentioned publicly that the developer was in default on its Miami Beach project, Canyon Ranches. And this default was with the same lender WSG claimed was to finance ArtsPark Village at Young Circle. Instead, the deal’s supporters repeatedly touted WSG as a successful, well-funded developer with a solid track record.

Now we learn from the Daily Business Review that back in 2006, WSG defaulted on loans from Lehman Brothers for its Miami Beach project. We learn too that Lehman sold those loans to an investment group that specializes in buying bad debt and other distressed assets.

Investment Bank Crisis: Lehman Brothers is facing its own major crisis as a result of its involvement in the subprime mortgage and related debacle. News reports indicate Lehman is actively seeking a multi-billion-dollar cash infusion from Korea, China, and Middle Eastern sovereign funds in order to avoid the fate of Bear Stearns.

In Hollywood, WSG pressed for rezoning and huge financial incentives from the city commission with the oft-repeated justification that WSG would lose its Lehman financing commitment for ArtsPark Village unless the city approved the project NOW.

Failure to repay loans when due is not WSG’s only problem. The Daily Business Review tells of unpaid lien holders also — contractors claiming over $16 million from WSG for materials and work on the Miami Beach project.

The news report of WSG’s “meltdown” in Miami Beach leaves many unanswered questions. If our elected officials knew WSG had problems in Miami Beach, did they probe the depths of those problems before approving the Hollywood project? Why was none of this made public during the public hearings on the project? And what convinced the four Commissioners who supported the project (Asseff, Blattner, Furr, and Sherwood) that WSG’s loan defaults and unpaid lien disputes in Miami Beach had no bearing on Hollywood’s ArtsPark Village?

If, on the other hand, our elected officials did not know of these problems when they voted to approve and subsidize WSG, why were they kept in the dark? Where was the due diligence Hollywood citizens have a right to expect from city government?

Does the City Commission have grounds for revisiting the ArtsPark Village project? Let’s hope they take a close look in order to protect Hollywood’s interests.

Finally, there is another reason approval of this project was unwise. Recently, the City Commission voted unanimously to spend $200,500 to hire a planning and design consultant to create a vision and zoning regulations for development around the ArtsPark. Given the developer-driven hodgepodge that is beginning to rise around the circle, this seemed like a good idea.

But then, little more than a month later, a bare majority of our elected officials voted to approve ArtsPark Village, paying no heed to the recommendation of the consultant they had just hired for the Young Circle vision and zoning. He told them that approval of this project would have a negative impact on plans for future Young Circle development. An economic consultant then told them that their stated desire for “luxury market-rate rental housing”at ArtsPark Village was not guaranteed in the WSG agreements. Indeed, they were told, low-income housing tax credits may well have to be used to finance the project. We can’t help but ask the question whether a majority of the City Commission is wasting our money by first hiring a consultant to develop a Young Circle vision and then directly undermining the work of the consultant by approving ArtsPark Village.

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