Lone bank offering to finance Peary Court purchase thrown out

BY PRU SOWERS

KONK LIFE STAFF WRITER

Left with little choice, Key West City Commissioners on Feb. 17 unanimously rejected the one mortgage bid the city had received to finance a proposed $55 million purchase of the Peary Court housing development.

That leaves the city with no mortgage bank willing to finance a purchase aimed at preserving moderate income housing in Key West. After using $10 million from the Monroe County Land Authority fund, the city needs to a loan of approximately $46 million after including $1 million in closing costs. And there is no time before the March 15 election when voters will decide whether to give city officials the go-ahead to negotiate the purchase to look for another bank willing to accept the deal.

But even if there were more time, city Finance Director Mark Finigan told city commissioners at their Feb. 17 meeting, it would be difficult to find a bank that didn’t already know about the mortgage request. When city officials first put the deal out to bid, it was advertised in local newspapers, put up on the city website and posted on DemandStar, the internet program that links government agencies looking for financing with the banking industry. Finigan said 181 banks were notified, 14 downloaded the bid proposal and only one, Centennial Bank, offered to finance the deal.

In addition, Finigan said, city officials personally contacted another 49 area lending institutions. Six of them wrote back with questions but again, Centennial was the only bank to offer a mortgage.

“You had over 300 lending institutions [notified] with only Centennial responding,” Finigan told commissioners. “I don’t see the problem as being the industry not being notified.”

The problem that scared off all but one bank is that the March 15 ballot referendum states that the mortgage payments will be paid solely by rents received from Peary Court tenants. Centennial’s proposal requires the city to guarantee the mortgage with other revenue in case the monthly rent payments are not enough. But that is impossible because the ballot referendum wording guarantees taxpayers that none of their money will go towards the project, only Peary Court rent collection. And that is why commissioners had to reject the Centennial bid.

“Of course we have no course but to reject this,” Commissioner Sam Kaufman said about the Centennial bid. “It’s not responsive.”

That leaves city officials scrambling for ways to revise the bid proposal to assure banks that the $46 million mortgage will be paid. Finigan said one possibility being kicked around is for the city to pledge future Land Authority money towards the loan. Key West collects approximately $2 million each year from county Land Authority, which collects bed tax revenues that can be used towards affordable housing projects. But if the city commits that money to Peary Court, it won’t have any bed tax money to use for other affordable or workforce projects in Key West.

“From the fact that only one bank responded, to me is indicative [banks] just didn’t want to go after the business,” said Commissioner Margaret Romero.

Although a local political action committee supported by Commissioner Jimmy Weekley has been holding meetings to convince voters to pass the March 15 referendum, the purchase recently had another setback, when an appraisal company that had bid $30,000 to inspect 19 of the Peary Court apartments refused to do a more limited inspection for $15,000 after commissioners balked at paying the higher fee. As a result, the only information about the physical condition of the units – and the potential future repair bills of the housing complex – will come from an inspection done in 2013 by the current owner of the property.

The owner, White Street Partners, purchased the 24-acre, 157-unit complex for $35 million in 2013. Last year Weekley helped broker a deal where White Street Partners offered to sell the property to the city for $55 million after its plan to turn the complex into luxury housing was rejected by the Historic Architectural Review Commission (HARC).

At least one inspector is concerned about the condition of the Peary Court apartments, however. Hugh Johnson, a certified mold assessor and thermographer for Inspect Key West, Inc., submitted mold inspection reports to Konk Life, pointing out that he has frequently found significant mold problems in several of the apartments. In one unit, he found a humidity level over 70 percent despite the air conditioner being set at 77 degrees.

“The recommended relative humidity level inside a home on a hot day, while the AC is working is 50 – 55 percent,” Johnson said. “The condensate line from the A/C air handler appeared to be clogged as condensate was not draining properly, thereby adding moisture to the air passing through the air handler. The condensate line from the air handler was poorly designed, as it travels below the cement slab and then up onto the ground outside, thereby encouraging blockage due to a lengthy pipe always filled with water and algae growth.”

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