069-2001 LTCCITY OF MIAMI BEACH
CITY HALL 1700 CONVENTION CENTER DRIVE MIAMI BEACH, FLORIDA 33139
http:\\ci .miami-beach .fi .us
No.
LETTER TO COMMISSION
April 5, 2001
TO: Mayor Neisen O. Kasdin and
Members of the City Commission
FROM: Jorge M. Gonzalez ~N~ eq~
City Manager
SUBJECT: Loews Hotel Percentage Rent for Lease Year 2000 - $2,054,000
On September 20, 1996, the Miami Beach Redevelopment Agency (RDA) entered into a Lease
Agreement with Miami Beach Redevelopment, Inc. (MBRD, a fully owned subsidiary of Loews
Hotels. The Agreement defines the terms under which the RDA receives rent revenues for the
Loews Miami Beach Hotel. Loews' annual rent currently consists of a base rent of $500,000 and
percentage rent as determined by a seven tier system. The tiers are prompted primarily by altemafmg
thresholds of defined internal rates of return, funded equity returns for MBRI, and land value returns
for the RDA.
A profit projection for the Loews, prepared by Tishman, the City's former hotel consultant, indicated
that the hotel would not reach profitability within its first years of operation and, likewise, the RDA
would not receive percentage rent. Loews has already far exceeded these expectations. For Loews'
first year of operation in 1999, the RDA received percentage rent in the mount of $252,973, as
determined by Tier 4 of the Agreement, and a base rent in the mount of $500,000. The total annual
rent for 1999 was $752,973.
For lease year 2000, the RDA received a percentage rent check totaling $2,054,967, achieving Tier
5A of the Agreement. Tier 5A requires that the RDA receives an 8% internal rate of return on the
value of the land, which at the time of the agreement was fixed at $24,000,000. Total annual rent
received for 2000 is $2,554,967, reflecting a 300% increase over the prior year.
JMG:C~C:K?sk~
c: Christina M. Cuervo, Assistant City Manager
Pah'icia Walker, Finance Director
Kent Bonde, Redevelopmerit Coordinator
Manuel Marquez, Finance Department
Stacy IGlroy, Redvelopment Agency