By Joseph Cranney of the Naples Daily News
Posted: July 09, 2016
A private New York investment group has quietly purchased a dozen properties in the last affordable neighborhood in Naples, where residents of the city's mostly black community fear they will be pushed out for more profitable development.
The $8.2 million in purchases that began in River Park in 2014 — the largest land acquisition by one group in the neighborhood's history — include nine single-family homes, two commercial lots and the 96-unit Gordon River Apartments.
For residents who have seen smaller investment efforts in the past, common control of such a large swath of the neighborhood heightens concerns that the investment group could corner the River Park housing market.
"I don't think the value of the property could be maximized unless the entire neighborhood goes," said Willie Anthony, a longtime neighborhood resident and activist. "It's a concern especially if it's some kind of hedge fund who's not concerned about the neighborhood, but only what it could be if the whole neighborhood flips."
Photos: River Park Community
Jonathan Shechtman, who manages the private hedge funds that bought the properties, said his investors are not targeting the neighborhood for redevelopment.
"We're not developers," he said. "We're buying apartment complexes and single-family homes all across Florida. We own in many areas of Naples. We look all over Naples."
Just who bought the River Park properties is not clear in land records, which identify the buyers as various limited liability companies and land trusts. The Naples Daily News identified the investment group's common ownership of the properties through mortgage documents, business records and city correspondence from Shechtman.
Shechtman oversees the hedge funds as a portfolio manager for Axonic Capital LLC, a private Manhattan real-estate investment adviser firm that claims on its website $2.6 billion in assets.
The firm identifies the goal of "ultimate sale of multiple family residential properties" in its stated strategy for real-estate investment, according to a March filing with the U.S. Securities and Exchange Commission.
River Park, built as a segregated community in the 1960s to house black workers, has long been the only place within the city known for its wealth where a family could live on a low income.
With news that an investment group's hedge funds have been buying up the properties, some residents said they worry they soon will not be able to afford the neighborhood.
"The taxes are going to go up," said Tonge Lawson, who lives on 13th Street North. "A hedge fund isn't going to sell a part. They want to sell a package deal."
"These people are in fear that they have nowhere else to go," she said of her neighbors.
In the past, the city has discouraged similar investment groups from acquiring large swaths of property in River Park because there was a recognized need to protect the area's residents and maintain workforce housing, said Susan Golden, a planner who worked for the city for more than 20 years.
"We would say, 'Here's what we'd like to see in this neighborhood,'" Golden said. "'Here's the comp plan, here's the zoning. We think it'd be better for your business if you go [elsewhere]."
"We'd let them know that it's a low-income neighborhood that's historically been low income and these units are needed for the workforce in town," she added.
Golden, who also kept a close relationship with River Park residents through her role as grant coordinator, left her city job in 2004.
During the housing bubble, scores of River Park homeowners financed their properties with new mortgages. But many of the loans defaulted after the economy collapsed.
More than a dozen River Park properties were foreclosed on in the past 10 years. Including the Gordon River Apartments, Shechtman's operation bought half of them.
In the 1990s, under then-Mayor Paul Muenzer, the Naples City Council approved the construction of the Jasmine Cay apartments and renovations to the River Park apartments, both affordable housing projects.
But affordable housing "went out the door in Naples many years ago" due to the area's high land values, Mayor Bill Barnett said.
"It just became not something the city could do," Barnett said. "The problem is where do you think you're going to find someone who will develop it and what is the cost of developing it?"
Now, there are waiting lists at the George Washington Carver apartments — the only Section 8 housing complex in Collier County — and at the rent-controlled Jasmine Cay apartments. Rents aren't controlled at the newly renovated River Park apartments, which recently reopened as the Jade Apartments.
In March, Councilman Doug Finlay persuaded council members to hold an affordable housing workshop this fall.
"Adding affordable housing is an impossibility," Finlay said. "But losing affordable housing is unfortunate."
The area that includes River Park, where close to 90 percent of the city's black residents live, has a median income of about $23,300, according to census estimates. Many are paying more for housing than federal housing guidelines suggest they can afford, based on income levels.
For example, a household earning a $23,300 annual income should only spend $582 a month on rent, according to the U.S. Department of Housing and Urban Development. At the Jade apartments, one-bedroom units start at $920 per month and two-bedroom units start at $1,200, according to Jade's website.
At the Gordon River Apartments, purchased for $5.2 million in March 2014 as part of Shechtman's operation, rents have increased by as much as $270 per month in less than three years, records show.
New leases for two-bedroom apartments range from $1,095 to $1,195 per month, said Laura Gama, of Pikus Property Management, the apartment landlord. New three-bedroom leases range from $1,175 to $1,270. Tenants renewing their leases this year are paying slightly lower rates, Gama said.
No major work has been done on the apartments since the new ownership took over, city permit records show, other than electric and plumbing repairs to a unit damaged by fire.
Matthew Pikus, the landlord company president, said he has done other repairs to the interiors of the apartments, including ceiling and roof repairs.
"I can say that the dollar amounts of repairs were significant and we have done work to over half of the units," Pikus said.
Asked to respond to concerns from residents about rising rents, Shechtman said he didn't want to discuss specifics.
"We haven't been raising rents in a way that is any different from rents across the state, basically," he said. "There is no intent to move people out of the neighborhood."
Concerns about the identity of private investors buying River Park land surfaced this spring after city officials received a proposal to build a 7-Eleven convenience store at the end of the neighborhood. At the time, residents and some city officials said the neighborhood deserved to know the property owner who was selling to 7-Eleven. The individuals who own the land couldn't be identified from a basic review of public records.
The owner is listed in land records as 499 Goodlette Road LLC, which Florida corporation records identify as managed by Florida Rental Specialists LLC.
Florida Rental Specialists, incorporated in Delaware, lists Shechtman as its manager, according to Florida corporation records.
In response to council concerns, Shechtman sent an email to council members in May offering some information about property ownership. He identified an Axonic hedge fund as the owner of the 7-Eleven property and others in River Park, but he did not identify individual investors.
Some residents viewed sale of the property to 7-Eleven as the first step toward a neighborhood-wide redevelopment of all of the recently acquired properties.
"They're not coming in to work with the neighborhood," resident Curtis Williams said. "They're coming in to destroy it and get what they can."
Though virtually all of the River Park homes are one-story shacks built in the 1960s, no one disputes the area's potential for real-estate investment.
The neighborhood was built on the Gordon River in the heart of the city. More than 60 single-family homes sit on the waterfront. And with only one way in and out of the neighborhood east of Goodlette-Frank Road on Fifth Avenue North, the area can boast a privacy that gated communities throughout Naples can only try to emulate.
Lodge McKee, a longtime member of the city's Section 8 housing board, called the River Park houses "jelly on a plate" for investors.
"They're just sitting there, quivering, because they are waterfront," he said.
McKee compared River Park to Briny Breezes, the tiny mobile-home community in Palm Beach County sandwiched between the Gulf Stream and the East Coast.
In 2005, an investment group asked to buy the 43-acre municipality for $500 million — an offer worth more than $1 million for each of the town's 488 trailers.
The group had its eyes set on building a luxury resort of high-rises — a project worth billions. But the investors pulled out after wealthy residents from two neighboring communities complained the project wasn't consistent with the area's standards of living.
"Ultimately, there was enough pressure, and the buyer backed away," McKee said.
"But that was just the first try."
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About Axonic
Axonic Capital LLC operates at least two real-estate funds, U.S. Securities and Exchange Commission records show. One of the funds, formed in 2012, has invested in more than 100 properties in Collier County, mostly in Golden Gate, but also including three River Park single-family lots, records show. The other fund was formed in February 2014, less than a month before the acquisitions began in River Park.
Each of the Axonic funds had an initial investment topping $30 million from more than two dozen investors, SEC records show. The investors are not identified in the SEC disclosure.
The minimum investment for both funds is $1 million. The funds are controlled by Clayton DeGiacinto, Axonic’s founder and a former vice president of Goldman, Sachs & Co.’s Fixed Income, Currencies and Commodities Group. He is a graduate of the U.S. Military Academy at West Point and served as a captain in the Army, according to Axonic’s website.