Hollywood leaders want out of deal to redevelop downtown
An ambitious project to redevelop downtown into an arts center became `the biggest mistake the City Commission has ever made'

Article Courtesy of The Sun Sentinel

By John Holland

Published January 08, 2007


HOLLYWOOD -- He had a bold idea, but needed money to make it work. City Commissioners liked the idea, and had the money.

That's how Gary Posner and the Hollywood Community Redevelopment Agency (CRA) became partners three years ago in an ambitious and, city leaders now admit, flawed plan to transform a chunk of downtown Hollywood into a center for the performing arts.

Today, both sides want out of the deal, hopes for a theater, trendy galleries and chic condos are all but dead and the city is trying to explain why it loaned $5.2 million to a man who had never attempted a major urban project. Commissioners didn't even ask for a credit check before approving the loans.

"This is, without a doubt, the biggest mistake the City Commission has ever made," Commissioner Cathy Anderson said of the development project known as the HART District. "It's been a fiasco from the very beginning, and we all voted for it."

At the height of South Florida's construction boom three years ago, Mayor Mara Giulianti and her colleagues on the commission approved a $7 million package of loans and cash to help Posner clean up a decrepit block on the southeast corner of Young Circle. The playhouse and an arts charter school were the priorities, and commissioners were willing to spend taxpayer money to get them, according to CRA records and interviews with city officials.

Things quickly unraveled, beginning when Posner, with a city mortgage, paid $2.7 million for a parking garage the seller didn't own. A two-year court fight with two groups claiming ownership followed, and construction costs doubled before Posner finally was awarded the garage and its prime property.

A review of records, along with interviews with Posner and Hollywood officials, show problems with the HART District may have gone much deeper. The city commission never conducted a study to determine if Posner's plan made economic sense, and it never asked him or his company, HART District, for financial statements and bank records to show he could make it work.

If they had looked, commissioners would have found that Posner filed for personal bankruptcy that was finalized in 1992, something several said should have been discovered by the city and could have affected their votes.

Hollywood still has no written policies detailing how financial incentives are doled out, although CRA director Neil Fritz said he's now ordering financial checks on all potential developers. That HART got approval in the first place has some commissioners questioning their decision.

In recent interviews and at the time of the November 2003 vote, commissioners said they were enamored with plans for the theater, 250 upscale condos and 30,000 feet of retail space and galleries -- just part of their dream of transforming downtown Hollywood into a cultural center.

"The playhouse and the idea of Hollywood as an arts center were the carrots, so that may be why we didn't look at this as critically as we should have," Commissioner Beam Furr said. "We didn't do enough due diligence on Posner himself or look at his finances, and that was a mistake.

"There's a big difference between asking whether a project can work, as opposed to asking whether this developer can make it work," Furr said. "Obviously, we didn't ask the right questions."

So far only the school -- Hollywood Academy of Arts and Science -- has been built. In December, the Home Towers Condo Association filed a lawsuit to foreclose on the school, claiming HART District hasn't paid association fees and other costs.

The development agreement called for Posner to buy land and buildings on Harrison and Van Buren streets off the circle, including four floors of the Home Tower office building that would house the school. City commissioners acting as the CRA board gave him $2 million for initial land costs, along with more than $5 million in loans and a promise to take by eminent domain any land he couldn't buy himself.

Posner and HART would get another $3 million when they completed the theater.

Within a year of approval, HART started missing construction deadlines and didn't pay the first $1.8 million in installments on the loan from the city. Still, Hollywood took no steps to recover the money and kept paying an additional $270,000 a year it owed HART for building the school.

"It's not the type of deal I would have wanted. I just don't think the city should be acting like a bank and loaning out millions of dollars," said Fritz, who was hired two years after the 2003 agreement. "But I don't want to look back. It's time to look forward and see what is in the best interests of the CRA and the city."

Fritz is actively courting developers to take over for Posner, who says he has never attempted such an expensive or difficult project. Late last year, Posner added a new partner, HART Development, headed by South American businessman Marcell Saiegh, who paid the arrears, bringing all the loans up to date.

Posner's largest prior project was Treasure Cove in Dania Beach, a community of 52 townhouses completed in 2003 with units that cost between $249,000 and $359,000. His minority partner in HART, former Hollywood Arts & Cultural Center marketing director Patricia Peretz, also had no experience with urban development, Posner said.

"It's been a lot tougher than we thought, mostly because it costs us a lot more for land than we counted on," Posner said. "The city wanted this to work and so do we, and if it wasn't for the lawsuit [over the garage], we'd be a lot further along. I'm not ready to give up, but if somebody wants to come in and buy me out, I'm not going to stand in the way."

Hollywood officials say they won't, either. City and court records show officials did nothing as Posner repeatedly missed deadlines and obligations spelled out in the development agreement.

For example:
The city was supposed to receive first mortgages on three loans totaling more than $4 million, but instead accepted second or third mortgages without taking any public vote. That means if the properties are foreclosed, Hollywood taxpayers would be last to get paid.

Posner and his company never submitted audited statements documenting how he spent the money constructing the school, as required.

HART District missed all permit and construction deadlines for the theater and condos and missed its first two loan payments, totaling $1.8 million.

Just months after signing the developer agreement in 2003, Posner told the CRA he didn't have the money to build a theater, which was the main reason he got the contract to begin with, according to commissioners. So far, only Mayor Giulianti and suspended commissioner Keith Wasserstrom have agreed to let him out of the theater obligation, while the other five commissioners insist he honor the entire contract.

Wasserstrom and Giulianti could not be reached for comment.

Fritz and Posner were quick to point out what they called Posner's two main successes on the project.

First, HART District did build the charter school on four floors of the downtown Home building with $1.3 million of city money. Besides the $270,000 annually he receives from the city for building it, he collects all rent from the school.

Fritz and Posner also say that, along with partner HART Development, Posner assembled a large block of land on the southeast corner of Young Circle. According to Broward County property records and Posner's own accounting, he and HART Development bought a total of 13 adjoining parcels for about $18 million.

No city official interviewed about the project said Posner acted in bad faith. The 65-year-old Aventura man simply brought commissioners a plan that was much more elaborate than anything he had ever done, and they gave him the money without questioning whether it could work, according to Posner and minutes of CRA meetings approving the deal.

"Gary Posner said the right things. He brought up the idea of a charter school, knowing that is what they were interested in to begin with," Fritz said recently. "Now, a more experienced developer would have realized that something like that might not have been profitable, or even economically viable."

Today, much of the corner Posner was supposed to transform sits vacant and decaying. Linda's Restaurant and the Hollywood Theater are boarded up, strewn with litter. Beer cans and socks fill back allies that have become a haven for the homeless, just steps from the charter school playground.

The project had technical problems from the outset, Fritz and commissioners said, beginning with the fact that a theater and charter school would be a financial drain on the entire project. Also, putting a theater and charter school in such a dense area was not wise, said Fritz, who is hoping to relocate the school and eventually find a better location for a new playhouse.

Posner said he would like to stay on until the project is complete, but is realistic.

"I never look back, and it was an experience," Posner said. "Let somebody else step in and worry about it now. I'll make some money out of the deal, so that's OK too."