FINANCIAL TRANSPARENCY

Disclaimer: Please note that this blog is a forum for concerned unit owners of International Village and is not meant to represent the official views of the Association and/or its Board of Directors.


A CHRONOLOGICAL HISTORY OF FINANCIAL EVENTS AT INTERNATIONAL VILLAGE  WITH RESPECT TO THE HURRICANE WILMA SPECIAL ASSESSMENT and ASSOCIATED BANK LOANS

On December 28, 2006 a line of credit of up to $7,000,000 was negotiated between I.V. and Wachovia Bank to pay for construction projects in the aftermath of the October 2005 Hurricane Wilma.  Separately the Association levied a $7,000,000 Special Assessment (SA) on the Membership in January, 2007 allowing for the immediate payment in full, or for monthly payments for 11 1/2 years ending on August 27, 2018.  During the period of construction the Association withdrew a maximum of $6,400,000 from the line of credit.  That balance was reduced by SA pre-payments and an insurance settlement.

With the recession's onset in 2008-2009 the bank insisted on a renegotiation of the original agreement. This was finalized on Feb 27, 2009.  The new promissory note began with a principal balance of $4,544,702.51 at a variable rate averaging more than 6% with a balloon payment of $3,542,884.76 due on Feb 27, 2014.    

(Special note should be made to paragraph 4 (b) section (v) of the First Amendment to the Loan Agreement which clearly states: "all prepaid special assessments, whenever collected by  Borrower, shall immediately be used to reduce the principal loan balance and shall not be retained or accrued by Borrower.")

Retrospectively, it was clear that I.V. was not in compliance with the loan agreement from the day it was signed until mid 2012.  By early 2011 Wells Fargo had taken over Wachovia and the Wilma loan had been put in the hands of its risk manager for obvious non-compliance. 

At that time I agreed to become treasurer and Charles Fitzpatrick agreed to be the financial overseer.  It took us six months to get the data collected to discern what had transpired allowing us to set up a plan for the future. That plan amounted simply to correct the financial errors that had occurred by making full restitution to the bank as soon as possible.  The ultimate goal was to assure the bank that we were credit worthy and that we could be effective and trusted when the time came to renegotiate the loan.  I developed a spread sheet which became the reporting document required by the bank to this day.

At the onset of the loan Wells Fargo drew monthly interest and principal of $36,000/month.  However, I.V. received $46,000/month from its monthly Wilma SA payers.  The difference of $10,000/month should have gone to the bank for further principal reduction but had been used over the years by all Boards (wittingly or unwittingly) to pay for operating expenses and non-budgeted projects.  Also, any unit sold by a monthly Wilma SA payer should have had the full sum-of-payments balance of the assessment removed from the proceeds of the sale and returned to the Association.  Throughout the years 2009 and 2010 (except for one $100,000 payment in Oct, 2009) not one penny of these funds was credited to the Wilma loan for principal reduction.

Once these facts became apparent, we began to redress these deficiencies.  By the end of 2011, $341,000 was sent to Wells Fargo for principal reduction.

This method has continued to the present.  The loan balance on 12/31/2011 was $3,551,226.69 and as of May 1, 2014 was approximately $1,994,000.  The question may legitimately be asked: "Where did the money come from?"   Answer: It came from all remaining funds from prior insurance settlements and from all properly allocated Wilma SA monies from 2009 to the present.

These efforts were rewarded by the bank.  In the fall of 2013 we were "promoted" from supervision by the risk manager back to the "normal" business management group.  Secondly, I was able to negotiate an extension of the loan to May 27, 2014.  Of great significance, our relatively low principal balance meant that the interest only portion of the loan that pegged our interest at about 6% was no longer demanded by the bank.  In simpler terms, as of March, we converted a $5,000 monthly interest charge into a $5,000 principal reduction!!   The May 27 date was also important.  At present we have one other bank (Banco) Popular Community Bank considering helping us but they would not comment until the annual financial report was available.  Thus we now had at least two banks hopefully looking for our business.

All this occurred without any increase in maintenance from 2007 through 2011 leaving I.V. with a huge structural deficit.  It is extremely important for all unit owners to understand where we were, what has been accomplished and what needs to be done.  Two large maintenance increases in 2012 and 2013 have righted this sinking ship.  A budgetary deficit of $1,000,000 in early 2012 was converted into a $1,000 surplus at the end of 2013.  We are finally in balance.  The heavy lifting has been done.

Yet, much remains.  The Wilma loan is due on May 27th and we have been cited for the 40-Year Re-Certification program on three of our buildings now and the others to follow next year.  In my view we have begun on an ominous note.  The new Board majority has seen fit to reward AMG - the talented and supremely competent management company that has been intricately involved in the improvement process of International Village Association - by firing them. 

This has threatened our relationship with both Wells Fargo and Popular Community Bank.  I find that deed beyond comprehension.

Sincerely yours,

Marc W. Richman, Board Member

Former Treasurer