Joseph Cranney , joey.cranney@naplesnews.com; 239-213-60354:56 p.m. EDT November 5, 2016
Naples City Councilman Sam Saad lobbied to accelerate taxpayer-funded improvements in the same low-income area where his business partner manages properties for a company that has hired Saad's law firm for real estate work.
Saad said he asked the city’s attorney about the potential conflict. But emails obtained by the Naples Daily News show Saad didn’t disclose details of his work with Matt Pikus, Saad’s longtime real-estate investment partner, or his firm's legal work for the New York-based Axonic Capital investment group.
Pikus is Axonic's real-estate manager for Collier County residential and commercial properties, including those purchased in the city's River Park neighborhood, where Axonic is now the largest landowner.
Axonic began its River Park purchases in March 2014, two months after Saad persuaded the council to declare the neighborhood a higher priority for city-funded street, landscaping and lighting improvements, local projects that Saad said were needed to increase distressed land values.
Axonic bought nine waterfront homes, a 96-unit apartment complex and two commercial lots in River Park. Axonic sold one property, a shopping strip at Fifth Avenue North and Goodlette-Frank Road, as part of a redevelopment into a 7-Eleven that was approved by Saad and other council members in May.
Before voting on the 7-Eleven project, which passed by a 4-3 vote, Saad didn’t publicly disclose his business with Pikus investing in distressed property, which dates back to at least 2011. He also didn't disclose the legal work he has done for Axonic on properties outside the city. Saad did offer the city attorney some information about Pikus, but not details about their business.
Saad said he did not have to make the disclosures because he and Pikus do not have a stake in Axonic’s properties.
“The test is whether I or my business partner had a pecuniary interest in the outcome of the vote,” Saad said about the 7-Eleven project, which included a contract to sell the property to the convenience-store chain. “The answer to that question is no.”
The Daily News identified 16 of Axonic’s property transactions in 2012 handled by Saad's law firm or title company. Nine Axonic land trusts also listed addresses at Saad’s legal office in 2012, court records show.
It's not clear how much money Saad received from Axonic for his work.
Saad said he stopped working for Axonic in 2012 after a dispute with Jonathan Shechtman, Axonic’s portfolio manager and longtime friend to Pikus. There’s no evidence that Saad handled any work for Axonic on the River Park properties.
But court records show Saad’s law firm representing Pikus in an eviction case for a county property owned by Axonic this April, a month before the vote on the 7-Eleven. Saad said he thought the work handled by one of his firm’s two other attorneys was for a property owned by Pikus.
“I didn’t know Axonic was the landlord,” Saad said.
Shechtman declined an interview, but said, “There is no Saad investment with Axonic.”
Pikus said Saad’s push for public improvements in River Park had “no bearing” on Axonic’s decision to acquire property there. He said the firm targeted other properties in the neighborhood after agreeing to buy the Gordon River Apartments to generate rental income.
“In reality the value of the apartment complex is based predominately on the income it produces,” Pikus said. “If (Axonic) knew at the time there were going to be improvements to the surrounding streets, that would have had a very minor effect on their opinion because it would have a minor impact on rental rates.”
Pikus declined to discuss his investments with Saad through their real estate investment company, PISA Acquisitions, LLC.
“I really don’t want to talk about that company,” he said. “It really doesn’t have to do with the 7-Eleven.”
Pikus added: "If you have one degree of separation, OK, maybe that's something that should be considered. We really have two degrees of separation between Sam and Axonic."
Sam Saad (Photo: David Albers/Naples Daily News)
Pikus said he has played a limited role with Axonic as a property manager for more than 100 properties in Collier County, including those in the city.
“I don’t own any of those properties or have a financial interest in the land,” Pikus said. “I’m just a service provider.”
But a Daily News review of thousands of business, court and property records shows Pikus serving as more than a landlord for Axonic. He has overseen many of the local property investments of Axonic hedge funds for the past several years, either as Axonic’s sales broker or as bidder at auctions to acquire foreclosed properties.
Pikus declined to disclose his commissions earned on the transactions. But sale records and real estate listings obtained by the Daily News that show commissions paid on each transaction suggest his Pikus Realty earned more than $100,000 on Axonic’s River Park purchases.
Those purchases in River Park, the largest residential area in the city’s redevelopment district, came just after Saad, as chair of the district, convinced the council to move $600,000 in River Park improvements from a 30-year plan onto a 10-year projects list. The council voted 6-1 for the change as part of a Community Redevelopment Agency master plan.
Saad said he wanted those projects, including an estimated $300,000 in the neighborhood Axonic later targeted for purchases, to be “addressed up front.”
“I would like to put a statement in here that the priority focus needs to be on Anthony Park and River Park,” Saad said during the council’s review of the master plan in December 2013.
“The only reason I mention it is because the areas that have the lowest land values in the city should be considered because if you bring up the lowest, you bring up the average,” he continued. “And one of my goals, and I think one of the CRA’s goals, should be to raise land values across the city.”
Saad said in an interview that he understands how his advocacy for River Park improvements just before Axonic's investments could be perceived as a conflict.
“I get it,” he said. “I’m not naïve.”
Saad said he didn’t know Axonic was going to invest in River Park when he was pursuing improvements for the area. He said he supports an increase in neighborhood land values that benefits all homeowners.
“The fact that I was pushing for neighborhood improvements had nothing to do with their investments,” Saad said. “The neighborhood needs to be improved. It’s the most blighted neighborhood. It’s where the drugs are. That’s the neighborhood where the problems are.”
Vice-Mayor Linda Penniman, who said she wasn’t aware of Saad’s business dealings until contacted by the Daily News, said Saad “absolutely” should not have voted on the CRA’s master plan in 2014.
She said Saad’s direction of the plan “appears to be his way of using taxpayer dollars to initiate improvements” that Axonic “would not have to make.”
“He was abdicating responsibility from the private investors and throwing it onto the taxpayers,” Penniman said.
As Axonic continued buying River Park property in 2014, Saad and Pikus were involved in a real-estate investment that benefited their company.
On June 9, 2014, Pikus won a bid at auction to acquire a single-family home in North Naples for PISA Acquisitions, court records show. PISA bought the house at 2932 Tiburon Boulevard for $11,200, also incurring nearly $900,000 in debt from the property’s mortgage. The company flipped the property three months later for $978,000, property records show.
Saad declined to discuss details of his business with PISA, which was incorporated in November 2011 with Saad listed as sole manager.
He said he and Pikus are common beneficiaries of certain land trusts, but declined to disclose how many.
“It’s not relevant,” Saad said.
Saad listed PISA as a primary source of income in his 2015 financial disclosures. But the disclosure doesn’t require noting the specific amount of income, only if the source is at least 5 percent of gross annual income.
Court records show nine transactions from 2011 to 2014 in which Saad acted as trustee for properties acquired by Pikus at foreclosure. In one of the transactions, Pikus was the bidder on the property and Roger Saad, the councilman’s brother, was the buyer, court records show. Pikus is a former roommate of Roger Saad's.
During the three-hour council hearing to review the 7-Eleven redevelopment proposal, Naples resident Emily Thoemke said during public comments that Councilman Saad should recuse himself from voting because of his business relationship with Pikus.
Saad, speaking from the dais to the room’s large group of River Park residents who opposed the project, said there wasn’t a conflict of interest.
“I did investigate any potential conflict with the city attorney and I don’t have a conflict,” Saad said during the meeting.
Saad’s correspondence with City Attorney Bob Pritt was limited to a chain of four emails before the vote, Saad said. Saad in the emails told Pritt that he and Pikus are “business partners” on investments unrelated to the 7-Eleven proposal and that Pikus didn't have an ownership stake or interest in Axonic
"Do you think I have a conflict?" Saad said in the email to Pritt sent May 17, the day before the council vote.
"It is difficult to tell," Pritt responded. outlining several issues.
"He is not getting a commission or management fee, so the property manager does not stand to gain or lose on the vote," Saad wrote back about Pikus. "Does that help?"
"Yes," Pritt wrote.
Saad didn’t tell Pritt about the work he did for Axonic after Pikus referred the firm to him in 2012.
Pritt in an interview declined to offer an opinion on additional details of Saad's business relationships.
Residents of the poor, mostly-black River Park area, wary of previous investment efforts to acquire the neighborhood’s waterfront properties, said they were concerned in July when the Daily News reported on Axonic’s $8.2 million in purchases, the largest land acquisition by one group in the neighborhood’s history.
“It’s a concern especially if it’s some kind of a hedge fund who’s not concerned about the neighborhood, but only what it could be if the whole neighborhood flips,” said Willie Anthony, a longtime neighborhood resident and activist.
But Pikus said Anthony's concern is unfounded.
“The idea that Axonic wants to go in there and has this grand master plan to redevelop a neighborhood or push anybody out of there is overblown,” Pikus said.
In filings with the U.S. Securities and Exchange Commission, Axonic identifies a real-estate investment strategy to “achieve significant current income and long-term capital appreciation through the acquisition, rental and ultimate sale of single family and multiple family” properties.
Saad’s fellow council members said they were not aware of his business ties to Pikus, and some said he should have disclosed more before the council vote on the 7-Eleven project.
Councilman Doug Finlay said Saad should have abstained at least on the “appearance” of a conflict of interest, and that Saad had a duty to disclose more details of his relationship with Pikus to the city attorney if he was seeking an opinion in good faith.
“When you’re in a gray area, you have to give full disclosure,” Finlay said about the 7-Eleven vote, which is now in litigation after a group of River Park residents sued the city.
Penniman, the vice-mayor, is calling for a change to the city’s disclosure requirements for development applications so the council knows exactly who is benefiting from projects they approve.
Her proposal, which she said she will bring up as part of the council’s Nov. 14 discussion on its ethics policy, is to adopt a process similar to Collier County’s that requires full disclosure of principals and beneficiaries for applications offered by limited liability companies or properties controlled by land trusts.
The city allows company managers to sign applications without a disclosure of ownership.
“If something is less than innocent, then that needs to come out, people need to recuse themselves and end of story,” Penniman said. “There has to be total and full disclosure, so the public — who is paying our taxes, paying our salaries — have full and complete confidence that we’re making decisions wholly on their behalf and not for personal reasons."