The Real Deal Miami

Related at the center of federal affordable housing investigation in South Florida

Sources say Related pocketed hundreds of thousands of dollars in unspent funds

Edificio Pineiro senior housing in Shenandoah. Inset: Jorge Pérez

UPDATED 5 p.m., June 16: South Florida’s biggest developer is being investigated by the U.S. Attorney’s Office as part of an expanding probe into South Florida’s affordable housing industry.

Federal authorities are looking into whether Related Group‘s affordable housing arm, Related Urban, pocketed money from boosting construction costs on a senior housing project in Miami’s Shenandoah neighborhood. The focus on Related is part of a larger investigation examining at least a dozen publicly subsidized developments by other developers, according to the Miami Herald.

Related Vice Chairman Adolfo Henriques and the developer’s attorney said Related is not a “target” of the investigation, but the newspaper reported that prosecutors are working to build a potentially criminal case against the developers.

Related disputed the assertion that it was the focus of the investigation.

“Given recent events involving other companies in our industry, we understand that they are taking a close look at the entire affordable housing sector,” Related spokesperson Bruce Rubin said. “We believe this is the right thing to do and we have been working cooperatively with them. Because we are working with them, it would be inappropriate to comment further.”

The feds are determining whether Related profited from alleged misreported construction costs via its Related-owned contractor and subcontractor instead of returning money to the county to build other affordable housing developments.

Sources told the Herald that the developer, its general contractor or an affiliate pocketed hundreds of thousands of dollars in unspent funds intended for the 34-unit senior apartment complex at 1176 Southwest 20th Avenue.

It wouldn’t be the first time a South Florida developer is in the hot seat for affordable housing abuse and fraud.

Last year, former Carlisle Development Group executives were convicted of stealing $34 million in subsidies by inflating construction costs for more than a dozen affordable housing developments in Miami-Dade County. In another more recent case, Pinnacle Housing Group principals settled with federal prosecutors for $5.2 million after the government accused them of inflating costs for low-income housing projects.

In addition to dominating condo development in the region, Related has also been very active in affordable housing. Last summer, the county commission unanimously supported Related Urban’s bid to redevelop Liberty Square and Lincoln Gardens into one of the largest affordable housing developments in Miami-Dade County. [Miami Herald] – Katherine Kallergis

This story was updated to include a statement from the Related Group.