A frequent reader in the legal profession pointed me to a potential issue involving various Hunt companies and El Paso real estate dealings. Other than buying and selling a few homes in the last few years, I do not know much about the complexity of the laws surrounding real estate transactions. What makes it even more difficult is that real estate laws are governed by federal, state and local laws. Except for federal laws, each of the other myriad of laws differ from jurisdiction to jurisdiction sometimes they go so far as to contradict each other. This makes any coherent commentary about real estate issues a difficult thing.
Two things made me take a closer look at the information brought to my attention by the reader. Woody Hunt’s real estate company was recently in the news in regards to the flag debacle at the Canutillo school under construction. That issue reminded me about the powers inherent in a homeowners association and the notion of the right to own land and property free and clear of any encumbrances from others. To me this is important because I have asserted before that one of the significant differences in the economies between the United States and Mexico lies in the ability of US citizens to leverage their homesteads towards loans.
The other item that had me thinking about this issue is that there is currently a political undercurrent discussion going on about the Public Service Board (PSB), the largest landowner in El Paso, and the potential for it to be taken over directly by city council. There are many issues about this but today I am going to focus on just two and how they relate to Hunt’s business interests.
The first is that the PSB’s land ownership makes it ideal for it to become a political football that would directly influence the business climate of the city by how and when its land may be released to buyers. The other is the water issue. Under the Caballero regime, there was an attempt to get control of the city’s water supply. There was even a fictitious water emergency declared. Woody Hunt, at that time, was buying property outside of the city limits specifically to be used for piping in water from outside of the city limits and as water farms. Recently, the El Paso Times focused on water issues in the area and the undercurrent seems to indicate that water will become another political football in the near future.
Anyone controlling water and land within the city limits can basically control the public policy of the city through imposing limits and conditions on the use of each. The forced removal of the flag on the school building is proof of this concept on a microscopic level.
The reader pointed me to a federal law titled the “Real Estate Settlement Procedures Act.” (RESPA) As best I can understand the law, I am the first one to admit that its complexities are above my ability to fully comprehend; it was created in 1974 prohibiting kickbacks between various real estate companies on a real estate transaction.
Over simplifying my understanding of RESPA, it seems that the law prohibits fees, or kickbacks, paid between developers, homebuilders, mortgage companies and third-party providers like title companies and home inspection services. For example, if I buy a house I would normally deal with a builder, a mortgage company and services providers like the title company and different inspection companies. As I understand it, RESPA is potentially violated when the buyer is forced to use a specific mortgage company along with a specific title company. It becomes a problem if, for example, a discount of the title insurance fee is offered as part of the sale when a specific home appraiser is used. If the condition of the use of the specific title company results in the buyer paying more for an appraisal then a competing appraiser is offering then the law could be violated.
Most of you likely remember the recent controversy over the flag at the school building. It was reported in the news that the homeowners association was responsible for forcing the removal of the flag. It then became clear that it was Hunt’s company at the Cimarron Development that ultimately nixed the flag colors. This got me to review the documents provided by the reader. It seems to me that there are many Hunt related entities providing services to Cimarron homebuyers.
To be clear, many businesses generate revenues from different affiliated companies in order to maximize their profits. There is nothing wrong with that. As a matter of fact, I do the same with my companies, one sells to the end user, another licenses creative content and yet another provides technical services. Each of them generates income for me and each complements the other.
What caught my attention about the Cimarron development is the numerous entities that seem affiliated to Hunt that seem to provide real estate services for homebuyers. Other than the homeowners association there are various land development companies associated to Hunt that develop and prepare the land in the development for commercial and residential development. There is also the Hunt Mortgage Capital company that provides interim loans to various homebuilders to build homes in the development and it also provides mortgage loans to homebuyers. However, it does not stop there, and this is where it got complicated.
Just a cursory look at the primary Hunt website shows many more commercial entities each complementing each other economically. Let’s go down the list.
The first one is BW Realty Advisors LLC. According to its website, it is an affiliate of Hunt. Its website states that it “is a financial advisory firm specializing in structured real estate financing.” What caught my attention about this Hunt entity is that it advices “credit-worthy governmental units, non-profit entities, corporations and other entities to monetize the value of their real estate.” In other words, the Hunt entity develops creative financing programs for its clients based on their real estate holdings. Think about the PSB land holdings and the city’s need to raise money while you digest this.
Another Hunt entity is the Hunt Mortgage Group, a full services real estate investment company targeting multifamily housing financing and investment vehicles. It seems to be used as a financial vehicle to fund developments while allowing the taxation of its revenues to be leveraged upon those earning interest instead of the financial company itself.
Hunt also is affiliated to Pinnacle, a company based on Addison Texas with offices in 25 cities managing about 135,000 apartment units across the nation. Then there is Ledic Management Group that manages rental properties, from single-family to multi-family, in 15 states. This Hunt affiliated entity is based in Memphis Tennessee.
Then there is CGL, a self-styled developer of “social infrastructure.” According to its website, CGL provides “public-private partnership (P3) development for mission-critical facilities within the criminal justice market.” Although I am sure that I will once again be accused of being a conspiracy theorist, doesn’t this company’s services squarely tie into the recent public discussion about the county’s jail system?
All of a sudden, you have a county commissioner, Vince Perez, passionate about the expense of the county’s jail. There is a trend across the nation to privatize jails. Somehow, it doesn’t seem so strange anymore that the true jail agenda is to privatize, either outright or through a private-public partnership, of course, under the guise of saving taxpayers monies.
RicciGreene Associates with offices in New York and Lexington Kentucky is a full-service architecture firm specializing in justice facilities, aka prisons. They also have been involved in courthouses. This firm is also an affiliate of Hunt.
As you can see there are many affiliated entities directly tied to Hunt but focused on real estate development on various fronts. There is nothing wrong about the interconnections and some of you may applaud them for their business acumen in maximizing profits.
The breath and scope of their operations are national.
However, just as tele-communications companies like AT&T are scrutinized for potential commercial monopolistic problems so must companies that provide the most basic of services, like housing.
Let’s focus for a moment on El Paso, Hunt’s headquarters.
I have documented how the ballpark was built on projections that are incomplete at best and outright lies at worst. The money used to build the ballpark was taxpayer monies. There are still unresolved issues such as where a new city hall will be built to replace the one that was destroyed. That is an additional cost to the taxpayers. There are serious problems with the Quality of Life Bonds; not only in the promised deliverables but also on whether there is enough money to pay for them. There is also the issue of the county’s jail and what its future costs will be for the taxpayers.
I have previously pointed out how Woody Hunt had at least one journalist fired for looking into the business practices of Hunt. I also shared with you how Hunt has involved himself numerous times in getting certain individuals into political office and how recently he is investing in suggesting whom you should vote for in the upcoming EPISD election through the chamber of commerce.
None of the examples I just shared with you include his numerous military related revenue streams. The majority of the revenue streams for Hunt affiliated companies seem to be taxpayer funded ones – from multi-family developments to prisons, to the military.
If the undercurrent rumblings about the PSB and dire water predictions hold true who is in the best position to capitalize on any or all of those potential outcomes?
My interest was piqued with potential problems with RESPA and as I researched more into the Hunt companies, their commercial reach astounded me. Their revenue streams are everywhere from the inception of the concept through recurring revenues even after the project has been completed. A captive buyer is the best customer any company could ever want. Unfortunately, I do not have the resources to investigate and tie all of the Hunt related companies to see if there is a violation of RESPA, or not. RESPA, though, is nothing compared to the scope of controlling the city’s land or water.