Capitan Development A Field Of Dreams No More

El Capitan Crossings was supposed to be a place where needy families could realize the American dream of home ownership.

But two-and-a-half years after developer Sylvia Alvarez launched the project, the weed-covered building site in Town 'N Country is in foreclosure.

Before the project stalled, Alvarez spent about $1.5 million in borrowed money on the land and site work, including a $500,000 loan from the Florida Housing Finance Corp., a state agency.

Those taxpayer dollars are probably lost: Florida Housing stands second in line for repayment behind a nonprofit organization, Neighborhood Lending Partners, which has a $1 million first mortgage and has filed for foreclosure in circuit court, seeking to take control of the property.

"It's not an ideal position to be in as far as getting our money back," said Rob Dearduff, special program administrator for Florida Housing.

Alvarez initially planned to build 36 town homes using low-interest loans and state and federal housing grants, and then to sell the homes to needy families. For the project to work, the buyers would have to get state and federal subsidies for down payments and closing costs.

As the homes were sold, Alvarez would pay back loans from Florida Housing and Neighborhood Lending Partners. She would keep a development fee, but only after the loans were repaid.

Multiple Problems

Why did the project fail? Alvarez did not return phone messages, but public records and interviews with people familiar with the project give some inkling:

•Alvarez paid $1 million for the 4.8-acre tract when property values were at their zenith. Real estate professionals say the land is worth one-half to one-third of that now.

•As foreclosures flooded the market and land values dropped, the price Alvarez planned to charge for the homes was no longer competitive for lower-income buyers.

•The project was slow getting going and crippled by escalating construction costs.

•Records show Alvarez told lenders in 2005 she had a commitment from Hillsborough County for a $610,000 housing grant. But officials at the county Affordable Housing Office say they never made that commitment.

"I remember I had issues with El Capitan," said Dexter Barge, the county code enforcement director. "They didn't have experience in developing property. I personally know I had some concerns."

Controversial Figure

Alvarez, 59, started a nonprofit agency called Housing & Education Alliance in February 2002, and later created a for-profit development company and bought a mortgage company owned by her fiance. Records show her businesses received more than $5.2 million in state and federal affordable housing grants over four years.

She made headlines in May when her complaints against three county employees triggered a federal investigation of Hillsborough's Affordable Housing Office. She alleged the employees damaged her business to further their own financial plans.

The employees countered that they had questioned whether she had steered low-income homebuyers to her fiance's mortgage company. A Nov. 16 article in The Tampa Tribune showed the mortgage company netted $170,000 from low-income buyers by adding a mortgage fee the county now bans.

As for El Capitan, records show Florida Housing approved a $500,000 loan in April 2006. Six months later, Neighborhood Lending Partners approved a $1 million loan as well as a $900,000 revolving line of credit for construction.

Alvarez spent $1 million to buy the property from Hung Mai, a civil engineer, and Bob O'Shaughnessy, a real estate agent and developer. Records show the men had purchased the property two years earlier for $145,000. Neither returned phone messages for this story.

Bill Eshenbaugh, a real estate agent and developer familiar with the area, said the property today might be worth $300,000.

"In 2006, $1 million wasn't a crazy number," Eshenbaugh said. "It wouldn't work today."

Douglas McCree, president of the Tampa underwriting firm First Housing, was hired by the state to evaluate El Capitan. McCree said the project looked doable in early 2006 and the $500,000 was a relatively small sum to put at risk.

Problems Started Early

Five months into the project Alvarez told lenders her original calculations wouldn't work. She estimated her development costs had risen 26 percent, to $7.67 million. Among other things, she cited higher-than-expected construction costs and changes she wanted to make to the town homes, including higher ceilings and a half-bath not previously included. She also increased her developer fee, which covers staff and expenses, from $460,000 to $600,000.

The increased costs raised the average sales price per unit from $155,000 to $213,000 for three-bedroom town homes. That amount was within purchase price limits set by the state and federal governments for affordable housing units, but the higher prices narrowed the pool of families able to buy. The higher prices also increased the amount of government subsidies the home-buyers would need to buy the homes.

Alvarez's timing couldn't have been worse. Housing prices were dropping as foreclosures increased and investors left the market. That made the proposed prices for the El Capitan town homes higher than other houses on the market.

To make matters worse, credit tightened. That made it harder, especially for low-income families, to qualify for mortgages, said Stan Fitterman, a senior technical advisor for the nonprofit Florida Housing Coalition.

"Previously loans were easy to get for people who had some dings on their credit reports," Fitterman said. "In the past maybe they were a little bit late or slow to pay and those are all factors in people's credit scores. So we had a more difficult time for them to get to qualify for this mortgage."

Alvarez asked lenders to increase the number of town homes she could build from 36 to 44. She also wanted the loan guidelines changed so she could sell half the units to families with higher incomes, thus widening the pool of potential buyers.

Florida Housing's board granted the changes. The board tightened the loan agreement, however, requiring that Alvarez pay off the loan after 27 town homes were sold, rather than after the last sale.

Alvarez spent the initial $500,000 she had for site preparation, such as clearing, drainage and water pipes. When she couldn't find other funding, contractors started filing liens for nonpayment. Records show eight companies filed liens against the property totaling about $250,000. One of the lien holders was Hung Mai, who sold the land to Alvarez, then did engineering work at the site.

As of last week, Alvarez had paid about $192,000 of the delinquent charges, court records show.

In July, Alvarez renamed the project Esperanza, Spanish for "hope," and applied for $880,000 in federal funding through the county's Affordable Housing office. The county instead chose two other projects for the funding.

One of the county employees who graded the project applications gave Alvarez low scores for her ability to finish the project and her experience with similar projects. In remarks, the scorer said Alvarez's business plan was incomplete.

But Fitterman said Alvarez was the victim of bad timing, like many other Florida developers.

"It was a double whammy," Fitterman said.