Miami-Dade County

Punished for inflating costs on a housing project, developer set to get more tax money

From left, David O. Deutch, Mitchell M. Friedman, partners at Pinnacle Housing Group, join Miami-Dade officials for a 2013 opening of a subsidized Pinnacle project, Kings Terrace, near Opa-locka. An affiliate of the company later ran afoul of state and federal regulators over alleged padding of contracts, including one using Miami-Dade tax dollars. In 2018, the company is up for more county dollars. Also in the picture, Russell Benford, center, then a deputy county mayor, and Miami-Dade Commissioner Jean Monestime, far right. They’re greeting young resident Joshua Hamilton, age 9, inside his sister's room at the family’s new home.
From left, David O. Deutch, Mitchell M. Friedman, partners at Pinnacle Housing Group, join Miami-Dade officials for a 2013 opening of a subsidized Pinnacle project, Kings Terrace, near Opa-locka. An affiliate of the company later ran afoul of state and federal regulators over alleged padding of contracts, including one using Miami-Dade tax dollars. In 2018, the company is up for more county dollars. Also in the picture, Russell Benford, center, then a deputy county mayor, and Miami-Dade Commissioner Jean Monestime, far right. They’re greeting young resident Joshua Hamilton, age 9, inside his sister's room at the family’s new home. FOR THE MIAMI HERALD

Pinnacle Housing, a developer tied to a federal criminal probe of inflated construction expenses on affordable-housing contracts, is up for nearly $4 million in funding from Miami-Dade County.

Mayor Carlos Gimenez recommended a Pinnacle project for $3.7 million in county low-interest loans in a deal that includes a requirement that the developer pay $320,000 to cover “inflated costs” from its construction of a different affordable-housing complex it built in Miami seven years ago with county subsidies.

A memo from Deputy Mayor Maurice Kemp said Pinnacle’s new project, the Verbena apartment complex in the Homestead area, initially was rejected by the county over a Pinnacle affiliate’s settlement with federal prosecutors over the alleged contract padding with a Miami-Dade project called Vista Mar and three others built during the recession. In that agreement, Pinnacle’s partners repaid the profits to the federal government along with a $1 million penalty and federal prosecutors agreed to dismiss the case against the company.

But under “a directive from the Mayor,” Kemp wrote, Pinnacle partners negotiated a series of concessions in exchange for the county’s Housing Department and Gimenez recommending the company for the $3.7 million. The memo said Miami-Dade wanted to pursue the project with Pinnacle because the complex has lined up hard-to-secure federal housing credits to produce much-needed affordable housing projects.

That Pinnacle still has the state-administered federal credits locked up speaks to the rebound of the developer after a year of bad press. It’s still eligible for federal and state funding, despite a string of settlement deals that had it pay millions in fines and agree to penalties in future deals.

“The Florida Housing matter was amicably resolved in September 2017, with the complete withdrawal of all claims against Pinnacle Housing Group and no suspension of its development activities,” Pinnacle lawyer Alan Rosenthal, of Miami’s Carlton Fields, said in a statement. The developer “continues to pursue market rate and affordable housing development opportunities across Florida.”

If approved by the County Commission for the money, Pinnacle will cut its developer fee from $3.8 million to $2.8 million. It also will collect a general-contractor fee reduced from $2.2 million to $1.8 million. Both fees are key sources of profits for affordable-housing developers, and the concessions package amounts to a savings of about $1.4 million for the government.

“Bad behavior has consequences,” said Michael Liu, Miami-Dade’s housing director. But the county deal “also recognizes that 9 percent tax credits are hard to come by.”

The $3.6 million county financing package is just a portion of the funding mix of dollars for a project that would build two mid-rise residential towers with 110 low-income rental units. The full price of the project is not included in the county memo requesting the subsidy, which is up for an initial vote Monday before the commission’s Housing committee. Liu said the complex at Southwest 282nd Street and South Dixie Highway should cost about $28 million to build.

Though Pinnacle agreed to a two-year restriction on some fees with the state’s housing board, regulators had already agreed to let the Verbena project move forward outside of the settlement, according to the county memo. Four other projects were also excluded from the funding ban. The county memo said the state settlement, which lifted a prior suspension on funding, should be treated as if “the suspension and administrative complaint [were] void from the start as though they never existed.”

Pinnacle and partners David Deutch, Michael Wohl, Louis Wolfson III and Mitchell Friedman are mainstays on the county fundraising circuit. They gave about $91,000 to Gimenez and county commissioners in the last four years.

A Pinnacle affiliate, DAXC, which was partially owned by Pinnacle’s partners, was charged with theft of federal funds in March 2017 over an alleged $4.2 million earned through cost inflating under the recession-era contracts. Pinnacle maintained the arrangement was not illegal. A 2017 settlement with federal prosecutors had Pinnacle partners pay back the $4.2 million, plus a $1 million penalty.

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