Thursday, November 12, 2009

Followup to Anatomy of a Struggling Condo - interview with an innocent bystander

A local saying goes: "It's a small Miami". When I picked Unit 3911 in Jade at Brickell - it was random through a search of the Miami-Dade Property Tax Appraiser's office where I merely wished to find a unit sold in both 2006 and 2008 to illustrate a unit with an inflated sale and a short sale.. One of my readers introduced me to a local gentleman who actually spent a substantial amount of time inside of the unit itself as a guest of his boss in a local hedge fund who lived in the unit as a tenant!

My source no longer works for the same hedge fund, and for purposes of obscuring his identity, we'll call him Sam, and his boss, the tenant, Frank. Sam explained that the 3400 sq. ft. apartment was truly stunning, with a balcony wrapping around the southern face of the building offering city and ocean views. Its flow-through floor plan is covered wall to wall in white marble. This single family home replacement in the sky rented for a mere $8000 per month to Frank, the fund manager, after the sale from Nueva Dia, Inc. to Cellini, LLC to Gilberto Lopez.

According to public records, Frank got one heck of a deal on his rent payments. The monthly interest payments to WaMu totaled over $28,000 a month. However, Gilberto’s mortgage was one of the infamous Pay Option ARM loans which only required a monthly payment of $10,157 monthly for the first year. The total cost of ownership, with interest, tax and maintenance payments was likely in excess of $38,000 and Gilberto was losing $30,000 monthly waiting for his apartment to appreciate. Odd, right? Even for the boom times, that’s a pretty steep operating loss . . .

Frank apparently conducted quite a lot of his business from the apartment as it was in close proximity to his office and offered a spectacular view of Miami. Sam spent quite a lot of time in the unit too. As noted in the last column, the unit slid into foreclosure, and he was served with legal paperwork as the tenant.

At that point, Frank tried to contact Gilberto, in Colombia, and find out why he was not paying the maintenance. The voice on the other end of the cellphone was in the city of Cali, and sounded young and spoke limited, but passable english. . .

What Sam found unusual, was that letters started to appear which were addressed to Julian, the manager. Even more strange some letters arrived addressed to Victor Patiño, who they suspected may be a notorious trafficker with the same name who can even be found in Wikipedia. However, they never met Victor, though according to Sam – the property manager Julian bore a striking resemblance to the gentleman in Wikipedia with the same surname.

According to Sam, though the owner/landlord was Gilberto Lopez, his property manager and rent collector was in fact Julian Patiño, the Manager of Cellini, LLC. Cellini LLC bought and sold the apartment within a 3 day period at the end of November 2006 . . . This certainly could be a tipoff to a potential Straw Buyer scheme. It is highly unusual to see the seller managing property for his buyer through the years - especially when the seller only owned the property for 3 days.

Eventually, Frank grew frustrated with the uncertainty of living in an apartment with potentially unstable leasing terms and requested a personal meeting with Gilberto. According to Sam, a frail older gentleman, who spoke little English and Gilberto’s son who was a non-english speaker.

Presumably, this last meeting with Gilberto was with the actual gentleman owner. In these situations, it’s not exactly polite to ask for identification – so Sam wouldn’t say that this was certainly THE Gilberto Lopez – but he did report that this gentleman really had little clue even with the help of translation, about the apartment or it’s issues. He did however agree to a reduction in Frank’s rents to $6,000 per month... whereupon Frank found a new home fairly quickly.

None of this is material, which a court would admit, but undoubtedly, the pool table doesn’t seem to have an even roll. A semi-intelligent bank should be flying red flags any time there’s a transaction with multiple sales in a 1 week. At the end of the day, this kind of transaction was a needless loss of WaMu’s equity and debt holders who were wiped out in the collapse, and potentially a crime committed against other unit owners and lien-holders who lost dues, property values and shouldered the burden of carrying this unit without dues paid for an extended period.

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