LTC 195-2004 Loews Hotel Buyout of City/RDA Interest in Premises
CITY OF MIAMI BEACH
Office of the City Manager
Letter to Commission No. 195-2004
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From:
Mayor David Dermer and Date: July 27,2004
Members of the City ~O;;)miSSiOn
Jorge M, Gonzalez a
City Manager ,
LOEWS HOTEL YOUT OF CITY/RDA INTEREST IN PREMISES
To:
Subject:
Article 36 of the Agreement of Lease between the Miami Beach Redevelopment Agency
("RDA"), City of Miami Beach ("City"), and Miami Beach Redevelopment Inc. ("Loews"),
dated September 20, 1996, provides the Loews' an Option to Purchase the City/RDA's
interest in the land and improvements, including the public areas and the hotel (the
"Premises").
As reported in November 2003, the Loews had been evaluating, and expressed their
preliminary intent, to exercise their Option to Purchase, prior to the December 1,2004 date
provided for in the Lease. Pursuant to Section 36.2 of the existing Lease, the Loews has
the right and option to buy the City/RDA interest in the Premises while the Redevelopment
Agency's Series 1993 Tax Increment Bonds (the "Bonds") are outstanding, at a price that is
equal to the greater of (a) the appraised fair market value of our interest in the Premises
(according to an appraisal procedure specified in the Lease; Article 31) or (b) the amount
determined by a formula that returns an 8% return on the Land with a fixed value of
$24,000,000 to the Redevelopment Agency. After December 1, 2004, the purchase price
is calculated only on (b) above without consideration of an appraisal. The outstanding
amount of these bonds as of December 1 ,2003, was $20,075,000. In the end, the Loews
did not exercise its Option to Purchase at that time.
However, on June 24, 2004, the Loews provided the City with confirmation of its intent to
proceed with "a Notice of Intent to Exercise on Approximately July 30, 2004," with an
exercise/closing date of December 2,2004 (see attached correspondence). The relevant
sections of the Agreement of Lease are attached as well as the option purchase price, as
calculated by Loews as set forth in Section 36.2(b)(i)(y)(1) of the Ground Lease, based on
this calculation, the purchase price would amount to $28,009,178.
On Monday, July 26,2004, the Loews verbally advised it was proceeding with the notice
and payment on July 30th.
The Administration, City Attorney, and Bond Counsel are reviewing the tax implications and
permitted uses of the proceeds the City will receive from the Loews purchase option. In
connection therewith, the City/RDA has engaged Integra Realty Resources (Michael
Cannon) to conduct a Fair Market Value Appraisal which will be utilized to address bond
counsel requirements for tax analysis purposes, to determine eligible proceed uses and is
not relevant or related in any way to the Option to Purchase clause in the Agreement of
Lease.
July 27, 2004
Loews Hotel Buyout - LTC
Page 2 of 2
If you have any questions, please contact me.
JMG\CMC\rar
F:\cmgr\$ALL\L TC.04\Loews Buyout.doc
c: Patricia Walker, Chief Financial Officer
Christina M. Cuervo, Assistant City Manager
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LOEWS HOTELS
Vinetnt F Dun/cal')'
EXECUTIVE VIC.E PRESIDENT - FINANCE
CHIEF FINANCIAL. OFF'ICER
June 24, 2004
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Ms. Trish Walker
Director of Finance
City of Miami Beach
1700 Convention Center Drive
Miami Beach, FL 33139
Dear Trish:
As you and J have discussed, Loews Hotels is planning to exercise its option to
acquire the land underlying the Loews Miami Beach hotel. In order to accomplish that
objective, we would need to do a variety of things prior to the exercise/closing date, To
allow both of us to plan accordingly, J thought it would be useful to outline the requisite
steps to be taken and to provide you with our calculation of the option purchase price,
Bill Weber, our counsel, and Luis Reiter with Squire Sanders, the City's bond counsel,
both of whom worked on the Ground Lease provisions, have already spoken about this,
and J am sending a copy of this letter to them and to Murray Dubbin, City Attomey, as
well.
Assuming we proceed with the option exercise:
I. MB Redevelopment Corp. (MB) would give the Miami Beach Redevelopment
Agency (the Agency) a Notice of Intent to Exercise on approximately July
30th, which is more than l22 days prior to the date of exercise/closing
(December 2nd) as provided in Section 36.2(b )(ii) of the Ground Lease.
2. At that time, MB would prepay Base Rent and Percentage Rent under the
Ground Lease sufficient to redeem the Agency's $25 million of 1993 Bonds.
This amount, including the income generated on these funds from the
prepayment date through closing, would be applied to the option purchase
price paid at the closing. Based on information available to us, the prepayment
amount would be $19,852,303. Our calculation of this amount is provided on
the spreadsheet attached to this letter.
3. MB would give the Agency an Exercise Notice on or around October 1 st
establishing December 2nd as the exercise/closing date.
667 MADISON AVENUE. NEW YORK. NY 10021~B087
PHONF: 212.!=i.21.2831 . F"AX ?12.S21.2QQ4
.Ms. Trish Walker
June 24,2004
Page 2
4. The purchase would be closed and funded, and title passed to MB, on
December 2, 2004.
By following this procedure, the option purchase price would be calculated under
Section 36.2(b)(i)(y)(1) of the Ground Lease. Based on this calculation the purchase price
would amount to $28,009,178. Our calculation of the purcbase price is also set out in the
attached spreadsheet.
I will plan to give you a call after the July 41h holiday to go over any questions
you may have so tbat we can be in a position to move forward with the notice and
payment on July 301h. Of course, if you have any questions, please do not hesitate to caB
me.
Very truly yours,
1bJ ~7
Vincent F. Dunleavy
cc: Mr. Jack Adler .
Gary W. Garson, Esq.
Kenneth J. Zinghini, Esq.
Mun'ay H. Dubbin, Esq.v/
Luis Reiter, Esq,
William J, Weber, Esq.
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Loews Miami Beach
Lease Buyout - December 2004 - Schedule II
Inyestment &
Base Rent "10 Rent Total Rent f!ri.2s! Factor IRR Calc Annual Rent
0,006434
Iniliallnyestment (24,000,000) (24,000,000)
1999 Jan 52,627 52,627 1 1.006434 52,290.56
Feb 41,667 41,667 2 1,012909 41,135.96
Mar 41,667 41,667 3 1.019426 40,872,98
~r 41,667 41,667 4 1,025985 40,611.69
May 41,667 41,667 5 1.032587 40,35206
Jun 41,667 41,667 6 1.039230 40,094.10
Jul 41,667 41,667 7 1,045917 39,837,78
Aug 41,667 41,667 8 1,052646 39,583,10
Sep 41,667 41,667 9 1,059419 39,330,05
Oct 41,667 41,667 10 1,066235 39,078.62
Nay 41,667 41,667 11 1,073095 38,828,80
Dec 41,663 41,663 12 1,080000 38,576,87 510,960
2000 Jan 41,667 41,667 13 1,086948 38,333,93
Feb 41,667 41,667 14 1,093942 38,088,87
Mar 41,667 41,667 15 1,100980 37,845.37
~r 41.667 252,973 294,640 16 1,108064 265,905,25
May 41,667 41,667 17 1.115193 37,363.03
Jun 41,667 41,667 18 1.122368 37,124,18
Jul 41,667 41,667 19 1,129590 36,886,85
Aug 41,667 41,667 20 1.136857 36,651,03
Sep 41,667 41,667 21 1,144172 36,416.73
Oct 41,667 41,667 22 1,151534 36,183.92
Nay 41,667 41,667 23 1.158943 35,952,60
Dec 41,663 41,663 24 1.166399 35,719.33 752,973
2001 Jan 41,667 41,667 25 1,173904 35,494.39
Feb 41,667 41,667 26 1.181457 35,267,48
Mar 41,667 41,667 27 1.189058 35,042.02
~r 41,667 2,054,967 2,096,634 28 1,196709 1,752,000,50 $2,054,967,00 Paid 3/30/01
May 41,667 41,667 29 1,204408 34,595,41
Jun 41,667 41,667 30 1.212157 34,374.25
Jul 41,667 41,667 31 1.219956 34,154.50
Aug 41,667 41,667 32 1.227806 33,936,15
Sep 41,667 41,667 33 1.235705 33,719.21
Ocl 41,667 41,667 34 1.243656 33,503,64
Nay 41,667 41,667 35 1,251657 33,289,46
Dec 41,663 41,663 36 1,259711 33,073.47 2,554,967
2002 Jan 41,667 41,667 37 1,267816 32,865.19
Feb 41,667 41,667 38 1.275973 32,655.09
Mar 41,667 41,667 39 1.284182 32,446.33
Apr 41,667 41,667 40 1.292445 32.23890
May 41,667 41,667 41 1.300760 32,032,80
Jun 41,667 41,667 42 1,309129 31.828.02
Jul 41,667 41,667 43 1,317552 31,624,55
Aug 41,667 41,667 44 1,326030 31,422.38
Sep 41,667 41,667 45 1,334561 31,221.50
Oct 41,667 41,667 46 1.343148 31,021,90
Nav 41,667 41,667 47 1.351790 30,823.58
Dec 41,663 41,663 48 1,360487 30,623,59 500,000
2003 Jan 41,667 41,667 49 1.369240 30,430,74
Feb 41,667 41,667 50 1,378050 30.236,20
Mar 41.667 41,667 51 1,386916 30,042,91
Apr 41.667 647,041 688,708 52 1.395840 493,400,44 $647,041 Paid 4/22/2003
May 41,667 41,667 53 1,404821 29,660,01
Jun 41,667 41,667 54 1,413859 29,470,40
Jul 41.667 41,667 55 1.422956 29.282,00
Aug 41,667 41,667 56 1,432111 29,094.80
Sep 41,667 41,667 57 1.441326 28,908.80
Oct 41,667 41,667 58 1,450599 28.723,99
Nav 41,667 41,667 59 1.459932 28,540,37
Dec 41,663 41.663 60 1.469325 28.355,19
2004 Jan 41,667 41,667 61 1,478779 28,176,62
Feb 41.667 41.667 62 1488294 27,996.49
Mar 41,667 41,667 63 1,497869 27.817,52
~r 41,667 2,313.249 2,354,916 64 1.507507 1,562,126,58 Acl 2003 % Rent
May 41,667 41,667 65 1.517206 27,462.98
Jun 41,667 41,667 66 1 ,526968 27,287.42
Jul 41,667 41,667 67 1,536792 27,112.97
Aug 41,667 41,667 68 1.546680 26,939,64
Sep 41,667 41.667 69 1,556631 26,767,42
Oct 41,667 41,667 70 1,566646 26,596.30
Nav 41,667 41,667 71 1,576726 26,426.27
Dee 41,663 41.663 72 1,586871 26,254,81
Sum of above (17,650,571.16)
Amounltor CF to = 0 17,650,571.16
X 1.586871 28,009,177.83 Amount due, after 2004 Base Renl
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ARTICLE 31.
APPRAISAL AND ARBITRATION
Section 31.1. Procedure for Appraisals.
In each instance under this Lease where appraisal is necessary or required, such
appraisal shall be conducted as follows:
(a) The party desiring such appraisal shall give notice to that effect to the other
party, specifying therein the name and address of the person designated to act as appraiser on
its behalf, and, within fifteen (15) days after the service of such notice, the other party shall
give notice to the first party specifying the name and address of the person designated to act
as appraiser on its behalf. If either party fails to notify the other party of the appointment of
its appraiser, as aforesaid, within or by the time above specified, then the appointment of the
second appraiser shall be made in the same manner as hereinafter provided for the appointment
of a third appraiser in a case where the two appraisers appointed hereunder and the parties are
unable to agree upon such appointment.
(b) As soon as practicable, but in no event later than ninety (90) days after
appointment of the appraisers as aforesaid, each appraiser shall notify Owner and Tenant of
the appraisal value determined by such appraiser.
(c) If the lower of the two appraisal values is within ten percent (10 %) of the higher
appraisal value, the appraisal value finally adopted shall be the average of the two appraisal
values. If the difference between the lower appraisal value and the higher appraisal value is
greater than ten percent (10%) of the higher appraised value, then Owner and Tenant may
either agree on the valuation in question, or themselves appoint a third appraiser, in which case
each of Owner and Tenant shall submit to such third appraiser its appraisal value. Within a
period of thirty (30) days after the appointment of such third appraiser, such third appraiser
shall select one of the two values submitted by Owner and Tenant and such appraisal value
shall be binding on the parties.
(d) In the event the two parties are unable to agree upon the appointment of a third
appraiser within fifteen (15) days after their being unable to agree upon a valuation, then either
party, on behalf of both, may apply to the Circuit Court of Dade County, Florida for the
appointment of such third appraiser, and the other party shall not raise any question as to that
court's full power and jurisdiction to entertain the application and make the appointment.
(e) Any appraiser selected or appointed pursuant to this Section shall be a member
of the American Institute of Real Estate Appraisers (or a successor organization), shall be an
appraiser, and shall have been doing business as such in the greater Miami, Florida area for
a period of at least the fifteen (15) years immediately preceding the date of this appointment.
All appraisers chosen or appointed pursuant to this Section shall be sworn fairly and impartially
to perform their duties as such appraiser. In the event of the failure, refusal or inability of any
appraiser to act, his successor shall be appointed within ten (10) days by the party who
DOB: (04984. DOCS.MIAMI]GLEASE_9-19-96
- 129 -
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originally appointed him; in the event such party fails so to appoint such successor, and in the
case of the third appraiser, his successor shall be appointed as hereinabove provided.
(f) Each party shall pay the costs associated with the appraiser acting on such
party's behalf and the parties shall share equally the costs attributable to any third appraiser
appointed pursuant to this Section.
Section 31.2. Arbitration.
(a) Any dispute, disagreement, controversy or claim between Owner, Tenant and/or
the City arising out of or relating to this Lease, or the breach hereof (a "Dispute") (except (i)
for Development Disputes, as defined in the Hotel Development Agreement, to which
expedited arbitration is applicable pursuant to the Hotel Development Agreement and (ii) as
otherwise expressly set forth in the last paragraph of Section 25.1, above, and Section 31.3,
below), shall be resolved by arbitration administered by the American Arbitration Association
("AAA") as provided in this Section 31.2 and the Commercial Arbitration Rules of the AAA
(the II AAA Rules ") in effect as of the commencement of the applicable arbitration proceeding,
except to the extent the then current AAA Rules are inconsistent with the provisions of this
Section 31.2, in which event the terms hereof shall control. The arbitration shall be governed
by the United States Arbitration Act and the Florida Arbitration Code to the extent the Florida
Arbitration Code is not inconsistent with the United States Arbitration Act and this Section
31.2, and judgment upon the award entered by the arbitrators may be entered in any court
having jurisdiction.
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(b) Any arbitration pursuant to this Section 31.2 shall be conducted in Dade County ,
Florida, but the arbitrators may direct that one or more hearings be held in New York City or
such other place as they believe appropriate.
(c) (i) The arbitration shall be conducted by three (3) arbitrators, which
arbitrators shall be selected in accordance with the AAA Rules, and at least one (1) of whom
(but no more than two (2) of whom) shall have had experience in the management and/or
operation of hotels, or as a consultant in connection with the management andlor operation of
hotels.
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(ii) Notwithstanding Subsection(c)(i) above, if the Dispute at issue is for a
liquidated amount not in excess of $100,000, adjusted for inflation, then the arbitration shall
be conducted by one (1) arbitrator in accordance with the AAA Rules for Expedited
Procedures, which arbitrator shall be selected in accordance with the AAA Rules for Expedited
Procedures, and which arbitrator shall have had experience in the management and/or operation
of hotels, or as a consultant in connection with the management and/or operation of hotels.
(iii) In connection with any arbitration proceeding pursuant to this Section
31.2: (A) No arbitrator shall have been employed or engaged by a party hereto or its hotel
consultants within the previous five (5) year period; (B) Each arbitrator shall be neutral and
independent of the parties to this Lease and their respective hotel consultants; (C) No arbitrator
shall be affiliated with either party's auditors; (D) No arbitrator shall be employed by any hotel
DOB:{04984,DOCS.MIAMI)OLEASE _9--19--96
- 130 -
operator or an Affiliate of any hotel operator; and (E) No arbitrator shall have a conflict of
interest with (including, without limitation, any bias towards or against) a party hereto or its
then current hotel consultants. As used in this Lease, the term "arbitrator" or "arbitrators"
shall mean the one (1) member arbitration panel or the three (3) member arbitration panel, as
applicable, described herein.
(d) The award of the arbitrators shall be accompanied by a statement of the reasons
upon which the award is based. The arbitrators shall not have the power to modify this Lease.
The award may not include, and the parties specifically waive, any award of punitive damages
or attorneys' fees and costs. Accordingly, each party shall bear its own attorneys' fees and
costs incurred in connection with any arbitration proceeding. The fees and costs of the
arbitrators shall be borne equally by the parties.
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(e) The arbitrators may consolidate proceedings with respect to any Dispute under
this Lease with proceedings with respect to any related controversy, provided that any parties
to such controversy who are not parties to this Lease consent to such consolidation.
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(t) The parties will cooperate in the exchange of documents relevant to any Dispute.
Deposition or interrogatory discovery may be conducted only by agreement of the parties or
if ordered by the arbitrators. In considering a request for such deposition or interrogatory
discovery, the arbitrators shall take into account that the parties are seeking to avoid protracted
discovery in connection with any arbitration proceeding hereunder.
Section 31.3. Election of Remedies.
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(a) If an Event of Default Notice states that Owner has elected to seek the remedy
of termination of this Lease, then Section 31.2 shall not be applicable. In such event, Owner
shall be required to commence a proceeding against Tenant within sixty (60) days after
Tenant's receipt of the Event of Default Notice, in the Circuit Court in and for Dade County,
Florida, which court shall have the same power to review the arbitration award fmding the
existence of the Default (or in the case of Section 2S.1(c), the "Event of Default" under the
Hotel Development Agreement) that is the subject of the Event of Default Notice that a court
of appeals would have with respect to the judgment of a trial court sitting without a jury. Such
proceeding shall expressly seek, as an initial request for relief, among other relief not
prohibited by this Lease that may be requested at the discretion of Owner, an equitable
determination by the court that an Event of Default exists under the terms of this Lease and
an award of termination of this Lease. Tenant shall have the right to assert any counterclaim
it may have against Owner in any such proceeding. Such proceeding shall be commenced by
Owner in the Circuit Court in and for Dade County, Florida. If it is determined that the
Circuit Court does not have subject matter jurisdiction over such proceeding, then Owner shall
dismiss such action and the matter shall be submitted to arbitration in accordance with Section
31.2.
(b) If an Event of Default Notice does not state that Owner has elected to seek the
remedy of termination of this Lease, then any Dispute arising therefrom shall be subject to
arbitration in accordance with Section 31.2. If Tenant shall dispute Owner's assertion that
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such Event of Default has occurred, Tenant shall, within ten (10) business days after Tenant's
receipt of the Event of Default Notice, commence an arbitration proceeding regarding such
Dispute. In such event, an Event of Default shall not be deemed to have occurred and Owner
shall not be permitted to exercise any rights against Tenant pursuant to Section 25.2(a) or
Section 2S.2(b) until such time as the arbitrators have detennined that an Event of Default has
occurred.
Section 31.4. Emer2encv Provisional Relief.
If a party determines that a Dispute presents such party with an extraordinary situation
that requires it to seek emergency provisional relief prior to the appointment of the arbitrators
who will determine such Dispute, it may seek such emergency provisional relief from any court
having jurisdiction~ provided, however, that (i) in order to obtain any such relief, the court
shall determine that such party has met any applicable standards imposed by the law applicable
to the relief requested with respect to such party's rights to such relief and (ii) such relief may
only be sought and obtained on the condition that any order entered by the court will expire
ten (10) days after the appointment of the arbitrators unless the party that sought the order
renews its application for emergency provisional relief to the arbitrators within such ten (10)
day period, which arbitrators shall then make de novo any findings of fact that may be required
in ruling on such renewed application.
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ARTICLE 36.
OPTION TO PURCHASE; RIGHT OF FIRST REFUSAL
Section 36.1. Right of First Refusal.
(a) Definitions.
"Option Interest" means all of the Equity Interests in Owner.
"Option Premises" means the entire Owner's Interest in the Premises.
"Option Transaction" means the sale, conveyance or other transfer, directly or
indirectly, of (i) all of Owner's estate in and to the Option Premises or (ii) all of the estate of
the holders of the Option Interest in and to such Option Interest.
(b) If, during the Term, Owner, or any successor owner of the Option Premises,
or the holder of any Option Interest, shall have received and shall desire to accept a bona fide
offer from a bona fide third party offeror (the "Outside Offer") with respect to an Option
Transaction, Owner or such holder (each an "Offeree Owner") shall first deliver to Tenant
a copy of a fully executed letter of intent or purchase contract setting forth the material terms
of such Outside Offer (including, but not limited to, the purchase price, method of payment
and financing arrangements and the closing date (which shall not be less than sixty (60) or
more than one hundred eighty (180) days from the date of the Outside Offer Notice)) and
stating that Offeree Owner desires to accept such Outside Offer (an "Outside Offer Notice").
For a period of forty-five (45) days after Tenant's receipt of the Outside Offer Notice, Tenant
shall have the right to elect in writing to consummate the Option Transaction described therein
at the price and upon such other material terms set forth in the Outside Offer Notice.
(c) If Tenant shall fail to respond to Offeree Owner with respect to the offer set
forth in an Outside Offer Notice with an election pursuant to Section 36.1(b) hereof by the end
of such forty-five (45) day period, Offeree Owner shall have the right to consummate the
proposed transaction with the Person having made the Outside Offer to Offeree Owner upon
such terms and conditions as shall be no more favorable to such Person than those which are
set forth in the Outside Offer Notice, but in all cases subject to any terms of, and applicable
restrictions imposed under, this Lease, including, without limitation, the Purchase Option and
Tenant's right of frrst refusal. If Offeree Owner shall fail to consummate the Option
Transaction set forth in such Outside Offer Notice by the closing date set forth therein (subject
to reasonable extensions), the provisions of this Section 36.1 shall be applicable to any such
future Option Transaction as well regardless of whether it is the same Person and/or Outside
Offer. Notwithstanding anything to the contrary contained herein, Offeree Owner may in good
faith negotiate the terms and conditions of an Outside Offer set forth in an Outside Offer
Notice which Tenant has elected not to consummate with the Person having made the Outside
Offer, provided, however, that if the material terms of such Outside Offer are modified, then
such transaction shall be deemed a new Option Transaction and the provisions of this Section
36.1 (including, without limitation, Section 36.1(b)), shall be applicable with respect to such
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Option Transaction, Offeree Owner shall give twenty (20) days notice to Tenant of the terms
of such Outside Offer as so negotiated prior to consummating the same, so that Tenant may
detennine whether such modifications are sufficiently material that Tenant wishes to
consummate such Option Transaction.
(d) Offeree Owner and Tenant shall diligently and in good faith undertake to
consummate any Option Transaction involving Tenant under this Article 36 as soon as
practicable after Tenant's election as hereinabove described. If Tenant shall fail to negotiate
the terms of the Option Transaction in good faith or shall fail to close (except by reason of a
default by Offeree Owner) the Option Transaction in accordance with the terms thereof which
shall not be earlier than thirty (30) days from the date of Tenant's exercise of its right of first
refusal, the foregoing right of first refusal shall be null and void with respect to any future
Option Transaction.
(e) Offeree Owner shall be entitled to sell only all of its interest in the Option
Premises or the Option Interest, as the case may be. Any sale of only a portion of its interest
in the Option Premises or the Option Interest shall be null and void and of no effect.
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(0 If Tenant does not exercise its right of first refusal and Offeree Owner
consummates its Option Transaction, Offeree Owner shall deliver to Tenant, or shall cause to
be delivered to Tenant, within ten (10) business days after the execution thereof, a true,
complete and correct copy of an executed instrument of transfer and, if the Option Transaction
is a conveyance of the Option Premises, a true, complete and correct copy of an instrument
of assumption by the transferee of Offeree Owner's obligations under this Lease, the Project
Documents and any other instruments relating to Owner's Interests in the Premises to which
Owner is a party (or a successor-in-interest to a party) accruing from and after the date of such
transfer. Such transferee, if a transferee of the Option Premises, shall be deemed to assume
this Lease, the Project Documents and any other instruments relating to Owner's Interest in
the Premises to which Owner is a party (or a successor-in-interest to a party) and sball be
liable for the performance of and compliance with the terms, covenants, conditions, and
agreements contained in this Lease and the Project Documents and any other instrUDlents
relating to Owner's Interests in the Premises on the part of Owner (or any successor-in-interest
to Owner) to be performed, including, without limitation, monetary obligations. Upon the
consummation of an Option Transaction, Offeree Owner shall be and hereby is entirely freed
and relieved of all agreements, covenants and obligations of Owner to be performed under this
Lease (but not from any other Project Document and any other instn1ments relating to Owner's
Interests in the Premises, each of which shall survive (but only to the extent provided therein)
in accordance with its respective terms), accruing after the date of such Option Transaction.
No transfer shall be binding on Tenant unless and until such transferee shall enter into an
agreement containing a covenant of assumption as aforesaid.
(g) If Offeree Owner does not comply with the tenns of this Article 36, any Option
Transaction entered into by Offeree Owner shall have no validity and shall be null and void
and without effect.
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Section 36.2. Option to Purchase,
(a) Tenant shall have the right and option to purchase all of Owner's Interest in the
Premises upon the terms and conditions set forth in this Section and in Exhibit 36.2 (the
"Purchase Option"). Tenant may, at any time during the Term, exercise such right and
option pursuant to a notice (the "Exercise Notice") delivered to Owner not later than sixty (60)
days prior to the proposed closing date for such purchase.
(b) The purchase price for the Premises shall be calculated as follows:
(i) While the Agency's Tax Increment Revenue Bonds, Series 1993 (in an ~
amount not to exceed $25,000,(00) (the "Bonds") have not been retired, the purchase price
for Owner's Interest in the Premises shall be equal to the greater of (x) the then appraised fair
market value of Owner's Interest in the Premises (in accordance with Article 31 hereof) based
upon an arm's length sale to a third party buyer that is not an Affiliate of Tenant, taking into
account the then current state of title as well as the continued existence of this Lease and the
Management Agreement as then in effect, or (y) the amount determined as follows:
(1) For all Lease Years until Percentage Rent payments have reached Tier
5A: an amount to return to the Agency an 8% IRR (which calculation
will include Base Rent and Percentage Rent payments made to Owner
and Distribution Net Proceeds and Net Proceeds distributed to Owner
pursuant to Section 3.5) on the Land with a fixed value of $24,000,000.
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(2) For Lease Years in which Percentage Rent is being paid at Tier 5A, but
not Tier 5B or Tier 6: an amount equal to the greater of (i) an amount
to return to Owner an 8 % IRR (which calculation will include Base Rent
and Percentage Rent payments made to Owner and Distribution Net
Proceeds and Net Proceeds distributed to Owner pursuant to Section 3.5)
on the Land with a fixed value of $24,000,000 or (ii) a ten times
multiple of the average Base Rent and Percentage Rent paid to Owner
during the three full Lease Years immediately preceding the exercise of
the Purchase Option.
(3) For Lease Years in which Percentage Rent is being paid at Tier 5B or
Tier 6: an amount equal to the sum of (i) the balance of the amounts,
if any, payable to Owner under Tier 5B, plus (ii) a ten times multiple of
the lesser of (x) average Base Rent and Percentage Rent paid to Owner
during the three full Lease Years immediately preceding the exercise of
the Purchase Option, or (y) average Base Rent and Tier 6 Percentage
Rent which would have been payable to Owner during the three full
Lease Years immediately preceding the exercise of the Purchase Option
determined as if payments were due in Tier 6 for each of such three
Lease Years.
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(ii) Notwithstanding the foregoing, (x) the purchase price with respect to the
exercise of the Purchase Option after December 1, 2004 shall be computed pursuant to (b)(i)(y)
above (without regard to (b)(i)(x) above) if at least 122 days prior to the exercise of such
option, Tenant shall have given Owner notice (the "Notice of Intent to Exercise") of Tenant's
intent to exercise the Purchase Option and unconditionally prepay Base Rent and Percentage
Rent under this Lease in an amount sufficient to redeem the Bonds in accordance with their
terms prior to the exercise of such Purchase Option, which amount shall (to the extent the same
represents prepaid Base Rent and Percentage Rent at such time) upon the exercise of the
Purchase Option be credited against the purchase price of Owner's Interest in the Premises and
(y) the purchase price with respect to the exercise of the Purchase Option at any time after the
holders of the Bonds have been paid in full all principal and interest thereon and the Bonds
have been retired (other than as a result of (b)(ii)(x) above) shall be computed pursuant to
(b)(i)(y) above (without regard to (b)(i)(x) above) and the requirements of (b)(ii)(x) above shall
not apply to the exercise of the Purchase Option.
(iii) The purchase price with respect to each exercise of the Purchase Option
shall be determined based upon the most recent Annual Financial Statement required to be
made available to Owner under Section 28.1(c) as of the earlier of (x) the date Tenant gives
the Exercise Notice and (y) the date Tenant gives the Notice of Intent to Exercise.
(c) The parties acknowledge that Section 36.2(b)(i)(x) has been included based upon
the present interpretation of Section 144(c)(2) of the Internal Revenue Code of 1986, as
amended (the "Code") in relation to the Bonds by counsel to the Agency. The parties agree
that such Section 36.2(b)(i)(x) shall not apply if at any time Tenant provides an opinion of tax
counsel knowledgeable with respect to the tax aspects of tax-exempt bonds, in form and
substance satisfactory to the Agency and its counsel, to the effect that the exercise of the
Purchase Option at the price determined pursuant to Section 36.2(b)(i)(y) will not adversely
affect the exclusion from gross income for federal income tax purposes of interest on the
Bonds.
(d) In the event, within twelve (12) months following the delivery of the Exercise
Notice by Tenant (the date of such delivery being called the "Exercise Date"), Tenant, or an
Affiliate, shall consummate the Sale of the Hotel to a third party not Affiliated with Tenant (a
"Post-Option Sale") with whom Tenant had reached an agreement in principle, evidenced in
writing, at any time during the six (6) month period prior to the Exercise Date, the Post-Option
Sale shall be deemed to have taken place on the Exercise Date and the Distribution Net
Proceeds shall be distributed in the same manner as Net Cash Flow After Debt Service in
accordance with Section 3.3, subject to a credit in favor of Tenant in an amount equal to the
purchase price theretofore paid to Owner.
(e) The provisions of this Section shall survive the Expiration of the Term.
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Section 36.3. Assi~nment.
The rights of Tenant pursuant to Sections 36.1 and 36.2 above shall not be severed
from Tenant's Interest in the Premises, and shall be assigned, transferred or otherwise
conveyed to the transferee only upon a Sale of the Hotel or a Foreclosure Transfer.
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EmmIT 36.2
TERMS OF onION TO PURCHASE
1.
Purchase Price.
The Purchase Price shall be determined in accordance with Section 36.2 of this Lease and shall
be payable at the closing of the purchase by wire transfer of immediately available funds to an
account designated in writing by Owner.
2.
Closing Date.
The closing of the purchase shall take place on date designated by Owner, but in any event not
less than thirty (30) days nor more than sixty (60) days following the date Tenant exercises its
option to purchase in accordance with Section 36.2 of this Lease.
3.
Deed: Title.
At the closing of the purchase, Owner shall convey to Tenant (i) all of Owner's right, title and
interest to the Land and the condominium unit covered by the Condominium Unit Lease by one
or more special warranty deeds and (ii) all of Owner's right, title and interest in and to this
Lease and the Condominium Unit Lease by one or more assignments of lease. The forms of
such deeds and assignments of lease shall be mutually acceptable to Owner and Tenant but shall
not in any event provide for any representations by Owner other than a representation that
Owner has not theretofore transferred or assigned the items being transferred or conveyed
thereby and the representations and warranties customarily contained in a special warranty deed.
The Land, the condominium unit, the Lease and the Condominium Unit Lease shall be
conveyed to Tenant subject to all liens, encumbrances and other matters then affecting the title
thereto and any state of facts a survey may reveal (but in all cases subject to Owner's obligations
under Section 2.2 of the Lease). Owner shall also execute all other documents customarily used
in real estate transactions in Metropolitan Dade County, Florida; provided, however, that if
Owner is a Governmental Authority, (x) such documents shall not include those documents from
which Governmental Authorities are exempt pursuant to applicable Requirements and (y) with
respect to any title affidavit required of Owner, (i) Owner shall not be required to make any
statement or certification regarding parties-in-possession and (ii) any statement or certification
regarding mechanics' or materialmen's liens shall cover only work or materials directly
contracted for by Owner in writing.
4. Rent: Prorations.
At the closing of the purchase, all Base Rent and Percentage Rent shall be prorated through the
date of closing and paid to the party entitled thereto. No other prorations shall be made.
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5.
Expenses.
Each party shall pay its own attorneys' fees. All transfer taxes, title charges, recording fees,
survey ch..cges and other expenses incurred in connection with the purchase shall be paid by
Tenant; provided, however, that Owner shall pay all documentary stamp taxes and surtax, if
any, payable in connection with the purchase.
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