Miami-Dade County

Is $31M deal right for Little Haiti? Miami commission weighs Magic City development

Magic City Innovation District is coming to Little Haiti

Neil Fairman, chairman of Plaza Equity Partners, one of the developers of the Magic City Innovation District, leads a tour of the site of the mixed-use development in Miami's Little Haiti neighborhood on Monday, Sept. 10, 2018.
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Neil Fairman, chairman of Plaza Equity Partners, one of the developers of the Magic City Innovation District, leads a tour of the site of the mixed-use development in Miami's Little Haiti neighborhood on Monday, Sept. 10, 2018.

As the Miami Commission readies itself for an oft-delayed vote on a massive and controversial office, retail and residential project in the heart of impoverished Little Haiti, the debate Thursday is likely to hinge on one key question:

How much bang will Little Haiti get out of $31 million?

That’s how much Miami Commissioner Keon Hardemon, who represents Little Haiti, says he wrangled from the developers of the proposed Magic City Innovation District project in pledged cash payments to benefit the neighborhood, which is undergoing sweeping gentrification. And on the eve of the commission’s scheduled, critical first-reading vote, the answer to the question still appears unclear.

The deal was worked out entirely behind closed doors between the developers and Hardemon, who in characteristic fashion has played his cards close to his vest. Little Haiti activists and community groups that had been speaking with the developers for months about a package of “community benefits,” including some who support the project, say they were shut out of the discussions between Hardemon and the developers earlier this year.

Veteran activist Gepsie Metellus and other members of one newly formed group, Concerned Leaders of Little Haiti, which has publicly supported the agreement, nonetheless complained that Hardemon would not return their calls or agree to meet in the months leading up to his negotiations with the developers. Metellus said they became aware of the new agreement only after the negotiations were concluded.

Hardemon publicly unveiled the proposed benefits agreement from the dais last month as the commission was about to start a public hearing that would have led to the first vote on Magic City. Instead it unraveled abruptly amid questions over precisely what the document entailed and whether the agreement represented a real improvement over the developers’ previous promises of aid to Little Haiti. Though some commissioners were briefed on the agreement beforehand, none had seen it until Magic City attorney Neisen Kasdin handed out hard copies at the opening of the hearing.

At first, commissioners seemed pleased by the multi-million-dollar agreement. But when skeptical activists and Commission Chairman Ken Russell began asking pointed questions in the course of a hearing that splayed over several hours, it became clear the $31 million figure might represent less than first meets the eye.

One salient issue: the Hardemon agreement relieved the developers of a previous commitment to build hundreds of below-market-rent apartments as part of the project.

The $31 million did not represent an entirely new offer by the developers, in fact. A previous version of a community benefits agreement committed the developers to $41 million in community benefits, including construction of some 550 units of affordable and workforce housing within their nearly 18-acre development. That agreement was never voted on because the city commission postponed its scheduled November vote at Hardemon’s behest. Hardemon said that deal did not provide enough help for Little Haiti residents.

On Wednesday, developers’ representatives said that $41 million figure represented not just the value of their workforce and affordable housing investment, but also a credit for a projected loss of $10 million — representing the difference in rents to be collected for workforce and affordable housing and average market rents.

In addition, the $41 million valuation included some $20 million in credits for the developers’ building office space, public green space and making accommodations for transit, including city trolleys and a possible future commuter train station, the developers said. Such complex development agreements are typically part of the planning and zoning approvals for large-scale projects like Magic City, classified as a Special Area Plan because it occupies more than nine acres.

The developers are a trio of Miami-based real estate firms behind the Magic City Innovation District — Plaza Equity Partners (led by Neil Fairman), Metro 1 (led by Tony Cho) and Dragon Global — a company led by Robert Zangrillo. On Wednesday it was announced that Zangrillo, primarily an investor in the project who was recently ensnared in a national college admissions scandal, was no longer representing Dragon Global’s share of Magic City.

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A conceptual rendering depicts the Northeast Third Avenue entrance of the Magic City Innovation District development in Miami’s Little Haiti neighborhood. Plaza Equity Partners

Under the new Hardemon deal, the developers say, those credits are no longer available to the developers, who must still provide those features. That means, they say, that the deal negotiated by Hardemon increases the cost to the developers by over $10 million.

If that accounting is accurate, it was evidently not clear to commissioners at last month’s hearing. It was Russell who then called off the vote, citing a rule that allows any commissioner to postpone consideration of a matter when new documents have been provided less than five days in advance of a scheduled hearing. An upset Hardemon then began loudly berating Russell and critics in the audience who were heckling him.

Since that tense hearing, concerns over the the $31 million deal have stirred debate inside Miami’s government. Sources familiar with city planners’ analysis of the deal have said there are concerns that the sum might not be worth as much because the money, not guaranteed and set to be disbursed in phases if and when construction milestones are met, would lose actual value over time.

The discussion continued at City Hall late Wednesday afternoon. Planning Director Francisco Garcia met with Hardemon to talk about the plan. It was unclear if the deal would be amended before Thursday’s vote.

“There is still information being exchanged and the issue pertaining to affordability remains unresolved,” said city spokeswoman Stephanie Severino. “We continue to work on this matter and will update the Miami City Commission tomorrow regarding the latest findings. We will continue to work towards ensuring this development proposal will yield the most robust housing affordability strategy feasible.”

Hardemon
Miami Commission Chairman Keon Hardemon C.M. GUERRERO cmguerrero@elnuevoherald.com

Hardemon did not immediately respond to a request for an interview on Wednesday. But after last month’s postponement, the commissioner said the deal he worked out was advantageous because it would guarantee a cash infusion “up front” from the developers for Little Haiti, instead of waiting for them to build below-market-rate apartments at some future date.

The agreement calls for a $6 million payment from the developers shortly after project approval, with the balance doled out in chunks as the developer embarks on construction of different phases of the project over 16 years. But, like the November agreement, it does not guarantee that the developer will ultimately pony up the full amount should the project fail or construction otherwise come to a halt.

The developers’ plan calls for the project to be built in phases, starting shortly after approval with a pop-up theme park designed by one of the founders of the Cirque du Soleil empire. That complex would occupy vacant land once part of the old Magic City tourist campground and trailer park, after which the development is named. (The developers have also undertaken pricey renovations of about 20 existing warehouses on their property surrounding the campground site and are marketing those now for lease.)

The next phase after that, slated to begin in 2020, would be construction of new retail and office components, with housing construction not coming up until later.

Under the Hardemon deal, the developers’ payments would go into a proposed new Little Haiti Revitalization Trust — all but one of its members appointed by Hardemon or his successor — that would decide how to spend the money.

But the agreement also relieves the developers of any obligation to include affordable or workforce housing within the development — a point that even some supporters of the project find hard to accept.

The advantage of his deal, Hardemon said last month, is that the trust would have almost immediate access to $6 million and could put it to use quickly, though precisely what it would be spent on is yet to be decided.

The agreement stipulates the developers’ money would help pay for affordable housing in Little Haiti, job training or other programs to help neighborhood residents, among the city’s poorest. Well over 40 percent of Little Haiti residents live below the poverty line, according to U.S. Census statistics.

Hardemon has suggested the trust could pool money from the developers and a portion of an approved $100 million city bond program for affordable housing to build below-market-rate homes and apartments on city-owned land in Little Haiti, though no plan has been developed.

But some leading critics of the project contend Hardemon’s deal is no bargain for Little Haiti.

In a statement released Wednesday, veteran activist Marleine Bastien, director of Family Action Network Movement, said the $31 million, even if invested immediately, would produce at best some 200 apartments at what she termed a “conservative” cost estimate of $150,000 per unit.

“This deal stinks like a skunk!” Bastien wrote.

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Marleine Bastien

At the very least, she said, the developers should be required to make payments on an annual schedule, rather than as they build, to better ensure the money will be made available to Little Haiti.

But some details of the trust, hastily pulled together after the last hearing and and posted publicly online along with the agenda for Thursday’s hearing for the first time, could also raise eyebrows.

The commission is scheduled to vote on the trust Thursday separately from the Magic City proposal.

The trust would be governed by a five-person board. Four would be appointed by the commissioner representing Little Haiti, a seat Hardemon now occupies. The Miami city manager would select the fifth. All five members would be confirmed by commission vote. The trust would in turn hire an executive director.

Some skeptics are concerned that appointing four members would give Hardemon too much influence over the trust.

The Magic City proposal, first unveiled in 2017, has split Little Haiti. The developers and its backers say Magic City would produce hundreds of jobs for Little Haiti residents and inject substantial investment in a neighborhood that has been starved of resources for decades.

But activists and critics complain Magic City has already encouraged speculators to tie up properties and landlords to raise residential and commercial rents, displacing some longtime residents and businesses. They say that if it’s allowed to go forward, the development could virtually “erase” the neighborhood.

Bastien contends the developers intentionally sought to divide the community, hiring some prominent figures and enlisting the support of others by making overstated promises of assistance to the neighborhood, while marginalizing skeptics like herself by refusing to meet.

“The way Magic City has done it has been arrogant and disrespectful,” she said in an interview earlier this month. “They’ve been very successful in dividing the community.”

The developers and its backers, however, say Magic City would produce hundreds of jobs for Little Haiti residents and inject new resources into badly needed neighborhood improvements. Members of the development team say the agreement engineered by Hardemon is being “tweaked” to strengthen job and job-training guarantees.

A paragraph that would have allowed the developers to apply to the trust for funding for public aspects of the project was scratched after the Concerned Leaders group and others objected, they said.

Metellus, of the Concerned Leaders group, co-wrote a Herald op-ed this week stating her group believes the trust could not only leverage money from both the developer and the city’s pot of bond dollars to build affordable units in Little Haiti, but also to keep existing businesses running while encouraging new investment.

“Concerned Leaders considers the Little Haiti Revitalization Trust an opportunity to articulate a comprehensive community economic development plan creating an ecosystem that grows jobs, prepares longtime residents for potential employment opportunities, incubates innovative young entrepreneurs and retains and nurtures local businesses,” the statement reads.

The opposing factions in the Little Haiti community emerged after one larger coalition split over how to approach looming redevelopment of the area. A group led by Bastien outright opposes the Magic City proposal and wants the city to rewrite its rules for allowing Special Area Plan mega-developments.

“Until the process is fixed, the city should impose a moratorium on Special Area Plans,” Bastien wrote in her statement. “A functioning process wouldn’t just auction off the future of Miami to anyone who can cobble together parcels of land in low-income communities, nor would it reduce what should be community negotiations to last-minute deals.”

By contrast, the Concerned Leaders group sees the gentrification of Little Haiti as a foregone conclusion, forcing locals to consider extracting as good a deal as they can when developers roll in.

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Leonie Hermantin

“It’s a nuanced story,” said Leonie Hermantin, a Little Haiti activist and member of Concerned Leaders, in an interview. “It’s a community that has been neglected by the city. It’s a community in the throes of gentrification that precedes Magic City.

“Do we stand there and just wring our hands, or do we say, ’You have to pay for something to mitigate the impact?’ We support the project not because we love the changes it will bring to our community, but because we feel this is our last opportunity.”

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