As a veteran builder and real-estate developer, Julio Laguarta may have seemed like an ideal choice to run the day-to-day operations for Houston Renaissance, the city-sanctioned, nonprofit corporation that plans to rebuild the Fourth Ward.
Unfortunately, Laguarta brought a mountain of unfinished personal business to the Renaissance effort, the worst of which is documented in the builder's pending Chapter 7 bankruptcy filing. Six weeks ago, Laguarta's troubled past collided head-on with his present duties on behalf of Houston Renaissance when the nonprofit used city housing funds to buy land from a self-described "real-estate speculator" to whom Laguarta owes more than $104,000.
Renaissance's purchase price of $114,495 helped turn a nifty profit for construction contractor Mike Garver, who was a business partner with Laguarta in November 1994, when he paid $62,500 in cash for three residential tracts along Taft Street.
To the embarrassment of Renaissance's politically connected board of directors, Laguarta never bothered to reveal that he had an unsettled debt with Garver, or that they had been in business together when Laguarta started drawing paychecks as Renaissance's real-estate broker (he gets a 3 percent commission on each Renaissance land buy).
"I personally don't know anything about it," admitted Renaissance chairman Frank Kelly.
Beyond Laguarta's failure to keep the Renaissance board fully informed is the question of whether Garver was acting on inside information when he bought the land out of receivership from the Federal Deposit Insurance Corporation.
Garver, whose BRH-Garver Inc. receives millions in road and sewer contracts from the city each year, denies that Laguarta advised him that the land was for sale or that Houston Renaissance would be in the market to buy it from him later.
"I just thought it looked like a good buy," said Garver, who added that he was unaware Laguarta was then "involved" with the Fourth Ward redevelopment project. "I didn't think it had started at that time," he said.
Officially, it hadn't. But two weeks after Garver made his "good buy," Laguarta incorporated Houston Renaissance and announced the group's intentions to pursue nearly every piece of dirt between West Dallas and West Gray from Taft Street east to Heiner and Interstate 45.
Houston Renaissance also began preparing an application for nonprofit, tax-exempt status that would be instrumental in securing millions in government housing subsidies for the project. In March, Renaissance started using funds provided by the quasi-governmental Houston Housing Finance Corporation to buy land in the Fourth Ward, including Garver's.
Laguarta was out of town late last week and unavailable for comment. But a Renaissance board member said he spoke to Laguarta by phone: "Julio assures me that there is no financial link between our purchase of Garver's property and his financial dealings with Garver individually," the board member said.
For his part, Garver denies he was ever a partner with Laguarta. "Where does it say that?" he asked.
When reminded that certificates of ownership were recorded in February 1994 attesting to his joint ventures with Laguarta, Garver shrugged it off. "Well, that was never a joint venture," he said, "but whatever."
Garver explained that he, along with Southwest Bank of Texas, provided financial backing for Laguarta to build a house in West University Place and another in Bellaire, each priced to sell for about $400,000. The venture was a loser, however: In the summer of 1995, the houses sold for just $266,000 and $292,000. The bank's investment was covered; Garver's wasn't. In November 1995, two months after the second home sold at a loss, Garver loaned Laguarta $96,000 "in consideration of amounts due" on the joint ventures, according to the promissory note. The note was never filed at the Harris County Clerk's Office, as is customary to document business transactions for the public record.
Less than a year later, in August 1996, Laguarta filed for bankruptcy, and Garver was listed among the 25 or so creditors, including the IRS, owed money by the builder. By then, interest had swelled Garver's claim against Laguarta's fractured estate to more than $104,000.
Garver never sued Laguarta for the money, nor did he file a lien against him. Not that either step would have amounted to much. As an unsecured creditor, Garver acknowledged, "I don't expect to collect much" on the debt.
The $52,000 profit he made off the sale of his Taft Street land no doubt helps ease Garver's burden. But when asked to comment on the transaction last week, Garver was in no mood to gloat. He refused to reveal how much he paid for the property back in 1994, and, perhaps aware that the purchase price was not on the deed filed with the county clerk, said, "If you can dig it out, go for it."
A call to the FDIC in Dallas confirmed what Garver probably knew way back in November 1994: At $62,500, the land was a bargain, particularly with talk circulating of a major redevelopment of the surrounding area.
Yet Garver said he isn't all that pleased with the deal he made with Laguarta, figuring the Taft Street lots are already worth more than Houston Renaissance paid him for it. He only agreed to the sale at the urging of the Lanier administration.
"They wanted it," he said. "It was part of their deal and if they didn't get X number of acres or lots, their deal wouldn't work. They asked me if I would sell, and I said, 'Okay, I will.' "
That's a peculiar admission from someone who describes himself as a "real-estate speculator." If Garver's worth anything in that capacity, he won't often roll over against his will on real-estate deals, and indeed, the city's willingness to almost double his original investment was likely the only incentive he needed.
There is, however, the question of what motivated Houston Renaissance, especially since it's questionable whether the nonprofit really needs Garver's land. The property is located on the westernmost edge of the redevelopment zone, blocks away from the heart of the proposed project. Moreover, the tracts are situated along a pleasant stretch of Taft that bears no resemblance to the blight Renaissance vows to erase in the rest of the area.
Though he professed ignorance of the whole affair, Renaissance board chairman Frank Kelly insisted there was "no sweetheart deal" between the nonprofit and Garver, and he seemed offended that anyone might think otherwise.
"These are a bunch of good folks busting their cans, spending hundreds of hours of free time, trying to do something worthwhile down there," Kelly groused. "We're not a bunch of crooks."
But as Kelly should be aware, the use of public money by the nonprofit demands a higher ethical standard than Laguarta may be used to in his private dealings. And the fact of the matter is that Houston Renaissance, which is promoted as a "public-private partnership" with the city, is surviving almost exclusively on the dole. Renaissance's bank financing currently hangs in limbo because board members and the city housing officials cannot come to terms on a $3.4 million federal grant City Council approved for the group last October. Private philanthropies, such as the Wortham Foundation and the Houston Endowment, have withheld their financial support as well.
So, to keep the Fourth Ward plan moving forward, Renaissance has tapped the Houston Housing Finance Corporation for more than $2.5 million in tax-exempt housing bond proceeds to buy land and cover costs, including Laguarta's $6,000 per month consulting fee.
One person who does seem concerned about the Taft Street deal is Michael Stevens, president of the HHFC and Mayor Bob Lanier's unpaid redevelopment advisor. Stevens said he was unaware of Laguarta's business relationship with Garver, but vowed to "do a little checking" to make sure the transaction was on the level.
"I pride myself," he said, "on making sure that none of that stuff gets near me."
Houston Renaissance might try keeping a similar distance.
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