Art Basel, Jorge Perez, Genting and the Miami Art Museum ... by gimleteye

It is fitting that the controversy over the naming of the Miami Art Museum after fallen real estate billionaire Jorge Perez (who says there are no third acts?) comes during Art Basel. In major respects-- including political ones-- Miami is the epicenter of the housing boom and bust in Florida and the nation, and yet the atmospherics surrounding Art Basel and its billions of dollars seem to operate in a parallel universe from the economic calamity befalling the city and county's budgets and the nation's debt crisis. Look no further than the Miami skyline and the ghost suburbs of West and South Dade for clues and fingerprints of the worm-hole connecting them. One who travels freely back and forth through that worm-hole is once-billionaire-now-mere-centi-millionaire Jorge Perez.

Perez is at the center of a nasty controversy over his gift of $35 million (in cash and art-- though the art is not disclosed) to the Miami Art Museum so that it would bear his name until the seas rise and claim Biscayne again.

Here is part of the backstory. On Sept. 14, 2011 the Miami Herald reported that Genting-- the casino to be-- purchased a $161 million note on the Omni Center from a partnership including Jorge Perez, Jimmy Tate and Sergio Rok. 

The note was purchased by the Perez investors less than six months earlier, for a reported $100 million. The original 2007 mortgage was for $220 million from Capmark Financial that had a note extension through June 2012. The Perez investment represented 78 percent of the total senior debt. (Capmark Financial had declared bankruptcy in 2009 and was reorganizing at the time of the note purchase. It was founded by an investment group including KKR, Goldman Sachs, and hedge fund investors.)

Was the timing of the Perez purchase coincidental? On May 27, the Miami Herald announced the Genting purchase of the 13.9 acre Miami Herald site for a cool $236 million. Only 10 days earlier, the press reported the purchase of the Omni debt by the Perez group. Genting intends the Omni for its first casino phase, a development it assumes it will get from the Florida legislature.

There are a few ways to look at the $60 million dollar profit turned by Perez and investors. Perez told the Wall Street Journal he was "saddened" that he would be unable to build the project he had planned. To the Real Deal Online, he said, "First of all, we don't know if casinos are going to happen in Miami. The legislature hasn't approved it, and that's still a debatable question. I don't see the opposition that we saw in past year -- it's not been as vociferous as in the past. I have not taken a position on gambling. I, like every citizen, need to weigh the short-term benefits of increased employment and maybe some trade and tourism with the long-term consequences that could be negative." 

One could venture, however, that Perez and certain Genting advisors were deeply involved in mapping out the strategy for the real estate play long before the May public announcements. No one has asked Capmark Financial if it would have held onto its note, had the managers known what was going down at One Herald Square. But that is irrelevant: the Perez investors bought low and sold high (each netting $20 million if they were 1/3 partners in the note) and that from a certain point of view, Genting's name ought to be right alongside Perez' on the new Miami Art Museum.