Tuesday, January 29, 2008

Gloom in the Sunshine State, by gimleteye

In the growing universe of local bloggers, Miami realtor Lucas Lechuga carved out an early space. He is a real estate professional who writes a blog to enlighten readers and inquisitive, prospective buyers and sellers of his opinions about the real state of the condo market in one of the nation's most overbuilt cities.

Mr. Lechuga has been sued by Miami condo developer Tibor Hollo for $25 million for expressing his view on the fate of a particular Hollo development and also, according to the developer, for making a false statement about his financial condition decades ago.

As a result, Mr. Lechuga also lost his job with the Miami realtor, Esslinger Wooten Maxwell.

The story made the inside pages of the Herald B section, read by a few thousand people, and the front page of Yahoo! News this morning, read by millions of people everywhere: an interesting juxtaposition of place.

This blog, eyeonmiami, has often made the argument that Miami is the epicenter of both the housing market crash and the world-wide credit crisis.

At the Davos World Economic Forum, the financier George Soros aimed toward the topic, “The current crisis is not only the bust that follows the housing boom, it's basically the end of a 60-year period of continuing credit expansion based on the dollar as the reserve currency… Now the rest of the world is increasingly unwilling to accumulate dollars.''

In real estate terms (Mr. Soros is a big investor on Key Biscayne, one of the wealthiest satellite cities of Miami), the world isn't buying what the United States is selling and not just in terms of services, manufactured goods, condos or platted subdivisions: it is more along the lines of confidence.

And it was along the lines of confidence in real estate, or lack thereof, that Mr. Lechuga ran up against Mr. Hollo. It is a subplot, though, to a much bigger drama.

South Florida is the place that wrapped up the ambitions of political fundraising (mostly Republican), local zoning councils and legislatures, the development industry, lobbyists and Wall Street financiers who spun more than a trillion dollars worth of debt confection for which billions in fees have already been paid.

When Soros says the world is increasingly unwilling to accumulate dollars what he means is: investors have lost confidence in the formula for construction and development perfected in South Florida that looks more and more like a Ponzi scheme.

Those billions of losses, announced virtually daily, have real consequences. The owners of that debt do not have the same confidence in the US dollar as when they bought investments assured to be predictable and relatively safe. They will resist ponying up to the dollar until the US gets its own economic house in order.

That is the story writ large in c-thru condos sprouting on the Miami skyline and half-full platted subdivisions in South Dade farmland.

Ron Shuffield, president of the real estate firm that terminated its contract with Mr. Lechuga told The Miami Herald, "''We just don't condone making statements, especially negative statements, about anyone, so we have terminated our relationship with our associate."

That's how it goes in the Sunshine State, where we have a condo to sell you.

Miami blog postings spark $25 million lawsuit
Posted on Tue, Jan. 29, 2008
Developer Tibor Hollo has filed a $25 million defamation lawsuit against a Miami real estate agent who blogged that the octogenarian went bankrupt in the 1980s and is headed for a fall with the upheaval in the condo market.

Hollo last week sued agent Lucas Lechuga and the Coral Gables brokerage Esslinger-Wooten-Maxwell alleging they have engaged in a smear campaign against him and his Opera Tower condo development on Lechuga's Miami Condo Investments blog.

On Monday, the postings cost Lechuga his job.

''We just don't condone making statements, especially negative statements, about anyone, so we have terminated our relationship with our associate,'' said EWM President Ron Shuffield. Its agents are independent contractors, not employees.
Lechuga, 29, predicted on the blog that at least half of the buyers in the 635-unit Opera Tower at 1750 Bayshore Dr. would default and the units would be taken over by the project's lender.

''My opinion is that this development is doomed,'' he wrote on Jan. 10.

That followed this Nov. 25 post: ``This developer went bankrupt in the 1980's and I think we'll see a repeat performance within the next 6 months. What do I know, though? I'm no real estate oracle.''

An angry Hollo said neither he nor any of his companies ever filed for bankruptcy.

''I guess when you're running a blog [you] think [you] can say anything about anybody, and that's just not true,'' Hollo said. He called the postings ``plain, unadulterated lies.''

The suit was filed in Miami-Dade Circuit Court. Hollo declined to say how he arrived at the $25 million damage claim.
Lechuga said he was exercising his constitutional rights in musing about Opera Tower.

''Like any other blog out there, it's a collection of my unbiased opinions and thoughts,'' he said. ``I have buyers all over the world who go to my blog. They know I'm not going to sugarcoat the market.''

Lechuga removed the Nov. 25 post after learning of the lawsuit, but later reposted it without the reference to Hollo going ''bankrupt.'' He said he would have removed it sooner had he known it was wrong. He said a few people who told him about it may not have meant Hollo literally filed for bankruptcy, rather that Hollo had financial troubles of some kind.
Hollo lost some properties to lenders in the early 1990s, The Miami Herald reported at the time.

''In those days, I lost lots of money of mine, tens of millions of dollars,'' Hollo said. ``I didn't lose anybody else's money. That's all I can tell you about it.''

Hollo deemed Opera Tower a success, with the entire project sold out. Closings began this months, with about 40 units deeded to buyers so far, he said. At least 11 lawsuits have been filed in Miami federal court by buyers seeking to rescind their purchase contracts, however.

Robert Jarvis, a constitutional law and ethics professor at Nova Southeastern University, who isn't involved in the case, said he doubts Lechuga will be held liable.

''Courts understand [blogs] are written in unedited, unvetted fashion,'' Jarvis said. ``There's a lot of hyperbole. That's why it's so difficult to win defamation lawsuits.''

Plus, Jarvis said Lechuga could argue Hollo is a ''limited public figure'' -- making it harder for Hollo to claim he was defamed.
None of the legal arguments make any difference to EWM's Shuffield.

''I viewed these statements to be more negative in tone than just providing information,'' Shuffield said, adding the firm wouldn't have hired Lechuga had it known had known about the blog.

Shuffield said he feels like he's been caught in a dispute he has nothing to do with. He said he expects there will be discussion with the company's 800 associates about what they can post to blogs.

''We want to encourage associates to be a positive source of information,'' Shuffield said.

© 2008 Miami Herald Media Company. All Rights Reserved.


Anonymous said...

This developer went bankrupt in the 1980's

Wouldn't this statement be easy enough to prove or disprove?

Anonymous said...

Soros is the same guy many people credit with creating a finacial disaster after he bet against the British Pound, made a gargantuan fortune and derailed their and many other world economies as a result. The US Dollar will bounce back just like the economy and real estate markets. It will take time, but like every trend that comes up, people get a whiff of the money and flood the market.

Anonymous said...

what happened to Hollo's nose?