The Retreat: Giffords calls for HUD investigation

The last resident left the financially troubled Retreat at Santa Rita Springs on Tuesday, the same day U.S. Rep. Gabrielle Giffords requested an investigation of the project’s $27 million federally guaranteed loan.

All but one of the dozen residents at the complex were turned out of their homes with 24 hours’ warning last week, but they all found places to live, mostly in Green Valley, Tucson and Phoenix, said Chris Kang, executive director of Green Valley Assistance Services.

A kidney dialysis patient took the longest. He looked at five places in Green Valley before moving to The Fountains retirement community in Tucson, Kang said.

“He decided to do it on his terms,” Kang said as GVAS employee Elizabeth Kindler helped the man pack up for good.

Giffords’ letter asked Department of Housing and Urban Development Inspector General Kenneth Donahue for a “full investigation and audit of this project to discover if there was any mismanagement.”

“The loan to finance The Retreat at Santa Rita Springs was insured by the U.S. Department of Housing and Urban Development. The project was owned, operated and developed by private interests, yet this was possible because the $27 million loan was guaranteed by the federal government with the requirement that the units be available to seniors or people with disabilities,” the letter said.

Giffords said that while there are 300 such federal loan guarantees in Arizona, “in instances where the project was mismanaged by the private sector developers, they may be liable for a portion of the debt otherwise being covered by the taxpayers.”

“While all ended well for the residents of The Retreat at Santa Rita Springs, this facility’s sudden and unexpected closure is raising serious questions about how and why the men and women who lived there were forced on to the street,” Giffords wrote.

Scott Gibson, an attorney for the investors who own The Retreat, declined comment because he had not seen Giffords’ letter and said he did not want to be sent a copy.

Some have questioned how the facility could open up Feb. 1 to residents without a central kitchen or a beauty salon, two standard items in this market. Those amenities were added in October, but that was five months after the owners last paid the management company, Watermark Communities, its monthly fee, and only weeks before the owners failed to obtain expected loan revenue and the bottom fell out entirely.

The bathrooms also lacked grab bars and were built with bath tubs whose sides had to be cut down to allow elderly residents easy access.

Nancy Engel of Green Valley said when her 92-year-old mother wanted to move from Scottsdale, “I toured The Retreat and was speechless when they told me the cost. It was ... to say the least, outrageous. The size of the apartments are very tiny, and the amenities minuscule.”

Residents said the monthly rents were between $2,100 and $3,200 depending on services.

“I was not surprised they folded,” Engel said. “Maybe they could get a hospital to buy it for a rehab facility. The rooms are about the size of those in a nursing home. Whoever designed and built this ... what were they thinking?”

Crumbling finances

The finances were shaky for months and finally crumbled Oct. 26 when income that was expected from the closing of a loan did not come through, part-owner Mike Naifeh said last week.

Watermark Communities said Oct. 29 that it was told by Naifeh that the owners could not meet the payroll, due the next day. Watermark managing director Richard Howell said Watermark paid the $20,000 two-week payroll on Oct. 30, even though that was not its responsibility, and paid for another payroll before throwing in the towel and firing the staff Nov. 6. The owners’ attorney, Gibson, said Watermark was obligated to pay the staff. He said the owners have done all they could to help residents and did not delay in telling residents they might have to leave.

Naifeh said last week the owners have not paid Watermark its monthly management fees since May. He later hired another management firm, MEB, for one week, and residents began looking for places to live after Watermark left Nov. 6. But they didn’t get the official word that they must leave until Nov. 12, and were given 24 hours to pack up.

Howell of Watermark says that the owners did not fund the project adequately, but Gibson said Watermark, which took the contract in October 2008, failed to market the property properly.

Gibson said the owners are working night and day to keep the property protected and to try to find someone who will buy it from the lender. Naifeh identified the lender as Red Mortgage, which appears to be Red Capital Mortgage of Ohio, a company that issues federally backed loans.

Watermark will be taking over management of The Fountains in Tucson early next year, Howell said, so a handful of recent residents of The Retreat will be back under that company’s care.

pfranchine@gvnews.com | 547-9738