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4/10/05 - South Florida Business Journal

Hotels turn into homes

By Susan Stabley

Three former hotels in booming downtown Miami and on Miami Beach are slated for redevelopment as low-rent housing for the formerly homeless.

The planned projects - located just blocks away from million-dollar condos and pricey hotels - would be used by Carrfour Supportive Housing to take the homeless off the streets and into apartments at rents as low as $140 a month.

The nonprofit said its ability to afford properties in prime locations was possible by reclaiming derelict buildings.

Carrfour bought the 65-year-old Sun South Place at 530 Meridian Ave., in the heart of South Beach, in 2001 for $1.65 million. Last year, Carrfour acquired for $3.62 million the Paradise Inn - a 1950s-era motel that will be renamed Harding Village - at 8540 Harding Ave. in North Beach, near Surfside.

The Royalton - a historic Miami hotel that fell into disrepair and became a flophouse offering rooms by the hour - was bought for $3.5 million in December in a partnership with Carlisle Development Group, a for-profit builder of multifamily affordable housing. Work will begin within a few months for the property at 131 S.E. First St., east of the county's government center and courthouses.

"It's a bigger gamble than normal," Carlisle COO Matthew Greer said of the Royalton project, which is a departure from the rental apartments the company typically develops.

Creating this kind of housing can be politically thorny and Greer credits officials like Miami City Commissioner Johnny Winton and Miami-Dade County Commissioner Barbara Carey-Shuler for their support.

Outside of the challenge to find sites that are both appropriate and inexpensive, Carlisle and Carrfour will seek money from at least six different sources to finance the $13 million Royalton project. Carlisle is not involved in Carrfour's other projects.

"It's the most complicated financing in real estate," said Doug Mayer, Carrfour VP of housing development. "There are multiple levels of funding, all with slightly different requirements."

Funding includes about $500,000 from the Federal Home Loan Bank of Atlanta's Affordable Housing Program. Another source eyed is Miami-Dade County's Documentary Stamp Surtax Program, collected from commercial real estate transactions, plus other county and city of Miami programs that can result in chunks of funding in the hundreds of thousands of dollars.

Most of the money - as much as $8 million - will come from a federal Section 42 tax credit program for low-income housing, Greer said. Carlisle sends the credits to syndicates to create equity. Syndicates sell the credits to corporations, which then deduct the dollars directly from federal tax payments.
Role of private builders

Private builders - not the government - then find the land, secure the loans and build the buildings, he explained. They own it and manage it and can still bring in a profit. Development fees are restricted to a maximum of 16 percent of the total project cost.

"It's one of the things Carlisle brings to the table," Mayer said. "They are one of the largest developers of affordable housing in the state, if not the largest. They have financial depth we don't have."

A tax credit program for restoring old buildings will also be tapped to return the Royalton to its former 1920s-era glory.

"It's a two-for-one," Greer said. "We provide housing and we save a historic building."

Of the Royalton's 100 units, 80 will be for the formerly homeless. Carrfour wants the other 20 for those who qualify for affordable housing and possibly a floor for young adults exiting the foster care system.

The nonprofit has a 96 percent success rate for residents, meaning the majority stays at a Carrfour housing unit or moves on to a home of their own choosing. Four percent leave for reasons like relapse and referral to residential treatment or eviction if rent is not paid.

Those who qualify to stay at one of the three projects must have already moved through Carrfour's program and must have been clean and sober for a minimum of six months. Tenants in the programs go through required random drug testing and work with staff who help them get education and training. Residents pay rent tied to how much they make - typically $300 to $400 a month, but never more than one-third of their income.

Carrfour also targets the homeless in a project's community.

"We're not bringing in the homeless," Mayer said. "We're taking them off the street and housing them. Providing people with a decent place to live isn't just good for the soul. It's good for business."

Business members of the Greater Miami Chamber of Commerce's Homeless Committee created Carrfour in 1993. Since then, Carrfour has assembled more than $70 million to create and run 700 units of supportive housing. It currently operates 426 units housing 813 people, 330 of whom are children. An additional 338 units are under development to house 562 people, including 200 children.

Solving the homeless problem is critical for Miami and Miami Beach, where tourism is vital to the economy, Carrfour President and CEO Maria Pellerin Barcus said.

Pellerin Barcus said her nonprofit wouldn't flip the properties for a profit.

Besides, it's almost impossible. The tax credit programs have 15-year requirements from the federal government to keep the properties affordable for those with very low incomes. State requirements bump those commitments up to 50 years.

"It's only getting more difficult," she said. "This is about it on Miami Beach. There's no motivation to sell."