Lauren Ritchie: Official’s rental plan doesn’t add up.
Seminole Tax Collector Joel Greenberg got a hostile reception this week when he asked county commissioners to bless a scheme to sell four county properties for $13.2 million so he can buy dying strip shopping centers and convert them into moneymakers that pay not only for themselves but for some of his office overhead.
Perhaps he got snubbed because this deal is wonderful for the buyer of the properties at the expense of the taxpayer. It guaranteed a Chicago investment firm an annual return of between 7 percent and 8 percent because the deal calls for the county to lease back the properties above the market value. Instead, commissioners pointed out, Greenberg simply could borrow the same amount of money for less than 4 percent interest and keep the properties, whose values are escalating.
Of course, that would involve the tax collector having to explain why he’s horsetrading publicly owned property and rushing into risky land speculation when his elected purpose is to collect taxes.
This deal has too many moving parts to count, but here is the basic structure:
Greenberg wants to sell the properties to get enough cash to buy five “distressed” strip centers that he believes will not only cover the $1 million annual cost of leasing back the four original properties, but will earn an additional $400,000 to $500,000 for taxpayers. But he failed to present even a basic business plan showing how it could be accomplished, let alone any back-up evidence such as signed leases.
The tax collector’s sketchy, poorly documented proposal didn’t win itself any supporters when commissioners learned that Greenberg had already started the several-step plan back in May with a land purchase that made him look like he deliberately threw $130,000 in tax money to a former bar operator or that he was the dupe of the consultants hired to cut the deal for him. Greenberg bought a former bank — one of the four properties he now wants to sell — for $810,000 just hours after Shooters Orlando Inc. paid $680,000 for it May 11. That’s a 19 percent profit in the same day. No appraisal. How did that even happen? Greenberg said he doesn’t have to get appraisals, and the only thing he knows about the deal is that he delegated to consultants the job of finding a potential office in a particular area within budget. This parcel already happened to have a contract on it, but it met his criteria anyway, he said.
He said what appears to be profit for the seller was the cost of “due diligence.” Shooters president James Adamczyk didn’t respond to a phone call asking how much he’d spent to close this deal.
“I don’t know very much about real estate. I was told these types of transactions are very common,” the
Through the magic of subtraction, it’s easy to learn that Greenberg’s risky plan — he’s betting there won’t be another downturn and that he’ll be a successful landlord — will cost $8.8 million more than just borrowing the money.
tax collector said. “I had nine things going on at once. It looked sound, so I signed off on it.”
Greenberg, 32, get points for trying in an innovative way to lessen the burden on taxpayers. The goal is worthy. This deal he has concocted is not. He says he can still get out of it, but commissioners and their lawyer doubt it.
Seminole County’s financial staffers calculated Friday that Greenberg would pay $12.9 million to lease back the four offices, plus roughly $3.9 million in property taxes, insurance and maintenance for a total of $16.8 million over the 13-year life of the lease.
The Chicago buyer gets a guaranteed profit of 7.1 percent and keeps the properties, which are expected to be worth $9.6 million by then. Nice. For the buyer. If Greenberg simply borrowed $13.2 million to do what he wants, staffers estimated he’d have payments of $17.2 million over 13 years plus insurance and maintenance costs — no taxes because his office is a government agency — of roughly $1.2 million for a total of $18.4 million. However, the county would still own land worth the same estimated $9.6 million.
Through the magic of subtraction, it’s easy to learn that Greenberg’s risky game plan — he’s betting that there won’t be another downturn and that he’ll be a successful landlord — will cost $8.8 million more than just borrowing the money. And that’s if everything goes without a hiccup.
He insisted that this was a “sound” opportunity that had been solidly vetted.
Commissioner Brenda Carey called it Greenberg “playing real-estate mogul.”
At the heart of this dispute is a philosophy that he wants the county to adopt, and it’s this: It’s OK to take chances with taxpayer dollars.
Commission Chair John Horan doesn’t want in: “It’s a risky investment. You’re in real estate speculation, and that’s not what government does.”
Horan is right. Greenberg must get out of this mess. It is not the best interest of taxpayers.