Manager says millions lost to cheap rents at Port Everglades; County investigating

By Dan Christensen, FloridaBulldog.org

Port Everglades’ property manager has resigned, a month after accusing port administrators of allowing commercial tenants to dodge millions of dollars in rent by “dramatically undercharging” for port warehouse space.

Loren Fourness’ assessment is detailed in a memo contained in his county personnel jacket. Among other things, Fourness wrote last Sept. 28 that the Foreign Trade Zone’s largest tenant – International Warehouse Services Inc. (IWS) – “was occupying over 200,000 square feet yet only paying for 104,000 square feet. This equated to about $900,000 annually of lost revenues. As far as I can determine, this has been going on for the last six years.’’

If true, that means the port and the county are out about $5.4 million in additional rent that IWS should have paid during that six-year period. IWS, however, has been a trade zone tenant for decades.

Was IWS allowed to occupy nearly twice as much warehouse space as it was paying for?

Port Everglades spokeswoman Ellen Kennedy said no, adding that Fourness had “misunderstood” how warehouse space is leased and managed in the Foreign Trade Zone.

“He was confused. From what I was told when it was explained to him, he seemed surprised,” Kennedy said.

County investigation

Nevertheless, Kennedy confirmed that Fourness filed a formal complaint about the matter with the county’s Professional Standards/Human Rights Section. Professional Standards investigates allegations of gross waste of county funds or property and abuse or neglect of duty. Complaints are confidential while under investigation and a section employee declined to comment.

Fourness, 63, did not return phone calls to his home in California seeking comment.

IWS President/CEO Fred Rogacki also did not respond to a request for comment.

IWS is no stranger to controversy. In January 2017, despite concerns voiced by the county auditor, the Broward County Commission approved a no-bid deal in which IWS teamed with two other companies – the construction firm ANF Group and Treadwell Franklin Infrastructure Capital – to build the 250,000-square-foot Port Everglades International Logistics Center on 16.7 acres on McIntosh Road. Commissioners also agreed to kick in $3 million to prepare the land.

The Sun-Sentinel reported then that the developers would pay a 30-year lease for use of the land, though then-auditor Evan Lukic said the $23 million in total rent is about half what the county should demand, and that the deal would put the county in the negative until the eighth year.

Fourness’ resume shows that he had an extensive background in private sector commercial real estate and property management when he was hired as the port’s $75,000-a-year property manager in June 2017. His two-page memo details much of what he did during his first year on the job.

Response to performance review

The memo was his response to an annual performance review that was not included in his personnel file. Port spokeswoman Kennedy said it was in response to a “poor” review. Kennedy provided a copy that says Fourness was rated as “does not meet overall expectations.”

Fourness wrote that when he arrived at the port, “I was amazed to find the assets for which I am responsible to be in such a dire state of disrepair. For example, the roof covering the two main warehouse buildings, building A and A-Annex, located in the Foreign Trade Zone were so weathered and dilapidated that when it rained, the warehouse and everything stored inside was inundated and drenched with rainwater. The complaints from the tenants were constant.”

The warehouses were soon reroofed. It was during the reroofing process that Fourness noticed the discrepancy between the area leased by IWS and the actual roof area, according to a port source familiar with what happened.

In his memo, Fourness wrote that he ran a comparison of rents at Port Everglades to the market in south Broward County.

“What I discovered was the warehouse rents were thirty percent below the market due to the fact Port Everglades does not pass onto the tenants the costs for taxes, insurance and common area maintenance.” He said that amounted to a cost savings to port tenants of $2.50 to $3 per square foot per year.

“But it also means that the port has been dramatically undercharging tenants for its assets,” Fourness wrote.

Port Everglades is a self-supporting Enterprise Fund and department of Broward County government. It does not rely on local tax dollars for operations or capital improvements, nor does it contribute profits to the county’s general fund that might be used to boost underfunded programs such as libraries or reduce the property tax burden on homeowners.

Port gross profit margin $75 million

Port operations and construction projects are paid for out of annual operating revenue that is generated by user fees. In 2017 that amounted to about $160 million. The same year, the port’s reported gross profit margin was about $75 million. For additional income, the port occasionally sells revenue bonds. In 2017, the outstanding total was about $167 million.

Fourness sought to increase rents to bring the port’s warehouse and office space in line with the market. He wrote that he had the support of his supervisors who allowed him “to move forward with rent increases, albeit conservative increases, increases nonetheless.”

He focused on the Foreign Trade Zone, a secure enclave where import-export companies can reduce, defer or eliminate U.S. Customs duties on their products. He found that his predecessor had used a mechanism called “Grid Space,” an apparently generous arrangement that let tenants lease warehouse space in 10-day increments.

For example, under Grid Space tenants could lease a 20 foot by 20 foot area and pay only the 400 square feet designated within the grid area even though they might actually encumber 3,600 square feet warehouse space, Fourness wrote.

“The result was, since no one monitored grid space utilization, the tenants would conveniently fill the 3600 square feet with goods while only paying for the 400 square feet they said they leased.”

Port spokeswoman Kennedy said the Foreign Trade Zone manager monitors grid space.

When Fourness wrote his September memo, it appears he planned to stick around the port for a while and “develop a closer working relationship with my supervisor” so that “future performance reviews will be more in line with both our hopes and desires.”

Thirty-three days later, however, Fourness submitted his terse, two-sentence letter of resignation.