LTC 232-2013 Miami Beach Convention Center - Revised LOI's iB EACH
'OFFICE OF THE CITY MANAGER
NO. LTC # 232 -2013 LETTER TO COMMISSION M
TO: Mayor Matti Herrera Bower and M bers of e City Commission
FROM: Jimmy L. Morales, City Manager _
'DATE: July 8, 2013
SUBJECT: Miami Beach Convention Cente Revised LOI's
_ 1
The purpose of this LTC is to provide information in anticipation of the review of the City
Manager's program recommendation by the Land Use and Development Committee. Last week
the City asked each team to provide a revised lease proposal assuming the recommendation
:was adopted. The purpose was to give the Commission the fullest information possible in order
to evaluate the recommendation. The responses were due Friday July 5 at 5pm. Both teams
submitted by the deadline.
;Upon review of the submittals, we noticed that there were divergent responses to the retail
lease offers. Portman and Tishman interpreted the recommendation language differently,
'thereby offering divergent proposals. Portman provided a follow up letter on July 8 assuming
the same structure as Tishman. It should be noted that neither team has been provided the
other's response at this point in time. However, this will occur upon the release of this memo to
you. It should also be noted that both teams are committed to developing the project if the
Commission adopts the City Manager's recommendation.
This information will be incorporated into the City Manager's recommendation targeted to be
sent July 10, in advance of the July 12 workshop.
Team responses are summarized below:
Portman Tishman
Hotel The greater of 4% of gross The greater of 4% of gross
revenues or a fixed annual revenues or the following fixed
payment of $2.95m, payments:
increasing 2% annually.
• Year 1: $1.5m
Beginning in year 31 (after
the City bonds are retired) • Year 2: $3.Om
and every 10 years
thereafter, the fixed payment • Year 3 -10 $3.5M
is adjusted to be 3% of gross
revenues. • Year 11 -20 $4.5m, increasing
10% every 10 years
Miami Beach Convention Center- Revised LOI's
July 8, 2013
;Page 2 of 2
'Retail in 17 Street The greater of 25% of gross The greater of 25% of gross
,Garage revenues or a fixed annual revenues or a fixed annual
payment of $67.46/sf (upon payment of $65.00 /sf (upon
opening in 2018), increasing opening in 2018), increasing
2% annually. 10% every 10 years.
The fixed payments equate to The fixed payments equate to
$4,722,200 in the first year $4,550,000 in the first year open.
open.
Proposes the same
adjustment as outlined about
beginning in year 31.
Retail North of 17 th The greater of 25% of gross The greater of 25% of gross
Street revenues or a fixed annual revenues or a fixed annual
payment of $25 /sf (upon payment of $30 /sf (upon opening
opening in 2017), increasing in 2018), increasing 10% every
2% annually. 10 years.
The fixed payments equate to The fixed payments equate to
$500,000 in the first year $600,000 in the first year open.
open.
Proposes the same
adjustment as outlined about
beginning in year 31.
Attachments: South Beach ACE revised proposal.
Portman CIVIC revised proposal.
JLM:MH
South
Beach
ACE
Tishman
UTA
OMA
July 5, 2013
Dear Mr. Morales, Mayor Bower, Commissioners, and City Staff:
On Tuesday, July 2nd, we received instructions to modify by Friday, July 5th the Letter of Intent we submitted to
the City on May 3, 2013. The modification that the City has requested is in response to the City Manager's July
1st Memorandum regarding program components for the Miami Beach Convention Center Master Plan. Since
May 3rd, the City staff and their consultants have been analyzing our Letter of Intent. With the limited time given
to analyze the Memorandum's complex impact on the South Beach ACE master plan proposal, we answer the
below questions to the best of the team's ability given the City's scheduled July 8th Special Land Use and
Development Committee Meeting at which the Memorandum will be discussed. We continue to analyze the many
effects of this Memorandum, and will keep the City Commission and City Staff aware of all changes that arise
from the City's recent change in programming. We would also like to better understand the City's plans to finance
the public components of the project as the success of the deal outlined below is dependent on the City's ability to
secure the necessary funds. Please see our preliminary responses below:
1. Q. A'statement as to your commitment to develop the project as proposed by the City Manager if the
Commission approves the program outlined in the Memorandum.
A. Based upon our initial review of the City Manager's July 1st Memorandum, South Beach ACE would
like to express its continued interest in the redevelopment of the Convention Center District, subject to
further discussions with the Commission and upon further review of the Memorandum's impact on the
many elements of this project. Given our present understanding of the project and limited review time, we
are committed to developing a project as proposed by the City Manager, if the Commission approves the
program outlined in the Memorandum (subject to the aforementioned continued discussion with the
Commission and subject to additional analysis).
2. Q. Hotel — Any changes to your proposed hotel lease fixed payments or percentage rent.
A. The hotel's fixed payment remains as calculated in our LOI, while the percentage rent has been
increased to 4% of Hotel Gross Revenues:
Base Rent:
Year 1 of Operations: $1,500,000
Year 2 of Operations: $3,000,000
Years 3 -10 of Operations: $3,500,000
Years 11 -20 of Operations: $4,500,000
Thereafter: Increases 10% every 10 years
Percentage Rent:
Years 1 of Operations and thereafter: 4.0% of Hotel Gross Revenues
3. Q. 17 Street Garage Retail — A revised fixed payment and percentage rent proposal assuming the
approach in the Memorandum. Please provide the fixed rent on a per square foot basis for the opening
year (stating the year) and the escalation formula. Percentage rent should be based on the rent received,
excluding any pass through charges.
A. Given the suggestion to demolish the existing 17 Street Garage, and to redevelop the garage as a
last phase of the project, we propose to lease the retail shell space from the City for 99 years at the
greater of (i) fixed rent of $65 per FAR sf increasing 10% every 10 years or (ii) 25% of rent received
(excluding any pass through charges), with lease payments beginning upon delivery of the retail shell and
full certificate(s) of occupancy to the Master Developer. The opening year is preliminarily estimated to be
2018. The aforementioned lease proposal is subject to further discussions with the City Commission and
subject to further analysis of the impact the Memorandum has on the demand generated by the new
limited Master Plan Program Components, the total amount of retail frontage available in the plan and the
location of proposed retail.
4. Q. Retail .North of 17` — A revised fixed payment and percentage rent proposal assuming the approach in
the Memorandum. This component must be a separate lease proposal and not combined with the hotel
lease. Please provide the fixed rent on a per square foot basis for the opening year (stating the year) and
the escalation formula. Percentage rent should be based on the rent received, excluding any pass
through charges.
A. Given the suggestion to limit retail located north of 17 Street to 20,000 square feet of food & beverage
and limited retail, with no establishment occupying more than 10,000 square feet, we propose to lease
the space from the City for 99 years at the greater of (i) fixed rent of $30 per FAR sf increasing 10% every
10 years or (ii) 25% of rent received (excluding any pass through charges), with lease payments
beginning upon delivery of the retail shell and full certificate(s) of occupancy to the Master Developer.
The opening year is preliminarily estimated to be 2018. The aforementioned lease proposal is subject.to
further discussions with the City Commission and subject to further analysis of the impact this
Memorandum has on the demand generated by the new limited Master Plan Program Components, the
total amount of retail frontage available in the plan and the location of proposed retail.
5. Q. Other hotel — No need to propose anything related to this new element at this time
A. N /A.
6. Q. Public Amenities — An order of magnitude estimate of the revised cost of Public Amenities (ie park
areas) given the reduction of program. Please provide the gross cost, do not net out the Public Amenity
Contribution.
A. We do not propose to change the cost of public amenities due to the City Manager's Memorandum.
The gross cost of public amenities (not netting out the Master Developer's contribution to public
amenities) will remain at approximately $71.2M.
7. Q. Public Amenity Contribution — A revised proposal of your contribution to the Public Amenities.
` A. We do not propose to change the Master Developer's contribution to public amenities. It will remain at
approximately $10.5M.
8. Q: A summary of any other change to the LOI driven by the change in program.
A. The 348 parking spaces dedicated to the hotel, but located in the 1,388 shared convention center and
hotel parking facility, will no longer be paid for by the City and the City will no longer keep the revenues
associated with the hotel's 348 parking spaces. To reduce the overall public cost of development, Master
Developer will pay for the construction of the 348 hotel parking spaces (which will continue to be located
in the 1,388 shared convention center and hotel parking facility) and Master Developer will retain all
revenues associated with the hotel's spaces. The cost savings to the City is estimated at approximately
$14.5M.
We welcome the opportunity to discuss in more detail with the City Commission and City Staff the impact of the
Memorandum on our proposal as we continue to analyze its effects. We look forward to working through these
issues with you post Master Developer selection.
Sincerely,
Tishman Hotel & Realty UTA Management OMA
Dan Tishman Robert Wennett Rem koolhaas
T MAN=
715 Lincoln Lane N
Miami Beach, FL 33139
wvvw. portmancmcmiamibeach. com
July 8,2013
Jeff Sachs
Strategic Advisory Group
3848 Saint Annes Court
Duluth, Georgia 30096
678 - 584 -0705
RE: LOI Revisions Based on City Manager's Proposed Program Changes, July 8, 2013 Memo to
Land Use & Development Committee
Dear Jeff,
In response to your request for clarification to our July 5 response regarding the retail, we read
paragraph b on page 7 of the above referenced memo, "It is envisioned that the City would
finance the construction of the Garage" to mean we would still be responsible to finance the
retail portion of the garage. If the City is financing the garage and retail shell, then we are able to
provide the revised lease payments as shown below in paragraph 3. With the improved
economics of the garage retail, we can also provide the revised lease terms for the retail north of
17 as shown below in paragraph 4. All other paragraphs remain as submitted.
As requested, please see below in response to each numbered paragraph.
1. A statement as to your commitment to develop the project as proposed by the City
Manager if the Commission approves the Recommendation.
• We stand by our commitment to the process and are prepared to proceed in
accordance with the program recommended by the city manager in his memo dated
July 8, 2013 to the city's Land Use & Development Committee.
2. Hotel - Any changes to your proposed hotel lease fixed payments or percentage rent.
• Per item 5 below, we've added 200 hotel rooms in lieu of the Washington Street
residential
• Lease Fixed Payment: $3,646,473 in the first twelve (12) full months of operations
($3,688,664 in the first full calendar year) increasing 2% for each twelve (12) month
period thereafter.
• Percentage Rent: 4% annually
7 ORTM N=cmc
715 Lincoln Lane N
(Miami Beach, FL 33139
mvw. portmancmcmiamibeach. corm
3. 17th Street Garage Retail - A revised fixed payment and percentage rent proposal assuming
the approach in the Recommendation. Please provide the fixed rent on a per square foot
basis for the opening year (stating the year) and the escalation formula. Percentage rent
should be based on the rent received, excluding any pass through charges.
• Lease Fixed Payment: $67.46 PSF (2018) escalating at 2%
• $4,722,070 in the first twelve (12) full months of operations ($4,800,509 in the first
full calendar year) increasing 2% for each twelve (12) month period thereafter.
• Percentage Rent: 30% annually
4. Retail North of 17 —A revised fixed payment and percentage rent proposal assuming the
approach in the Recommendation. This component must be a separate lease proposal
and not combined with the hotel lease. Please provide the fixed rent on a per square foot
basis for the opening year (stating the year) and the escalation formula. Percentage rent
should be based on the rent received, excluding any pass through charges.
• Lease Fixed Payment: $25.00 PSF (Year -End 2016) escalating at 2%
• $500,000 in the first twelve (12) full months of operations ($501,639 in the first full
calendar year) increasing 2% for each twelve (12) month period thereafter.
• Percentage Rent: 25% annually
5. Other hotel — No need to propose anything related to this new element at this time.
• We have added 200, hotel rooms in lieu of Washington residential
6. Public Amenities — An order of magnitude estimate of the revised cost of Public Amenities
(i.e. park areas) given the reduction of program. Please provide the gross cost, do not net
out the Public Amenity Contribution.
• An increase of approximately 2 acres is anticipated, taking the total budget from
$55.OM to $583M
EDO R T M AN=C-M
715 Lincoln Lane N
Miami Beach, FL 33139
www_ port man cmcmiamibeach. com
7. Public Amenity Contribution — A revised proposal of your contribution to the Public
Amenities.
• Original LOI Private Contribution: $32.1M
Less Residential Contribution: -$6.7M
Less Pro Rata Retail Contribution: -$2.2M
Add Additional Hotel Contribution: +$3.5M
Proposed Private Contribution: $26.7M
8. A summary of any other change to the LOI driven by the change in program.
• Confirming the Arts Contribution remains the same
• Confirming the BID share of gross private revenues remains the same
• The elimination of the residential along Meridian will simplify the ballroom and
central plant phasing
Best Regards,
Roger Zampell
Senior Vice President
Portman - CIVIC
CC: Jimmy Morales, Miami Beach City Manager
Maria Hernandez, Advisor to the City Manager