2011-27728 Reso RESOLUTION NO 2011 -27728
A RESOLUTION OF THE MAYOR AND THE CITY COMMISSION OF THE
CITY OF MIAMI BEACH, FLORIDA, APPROVING AND AUTHORIZING
THE MAYOR AND CITY CLERK TO EXECUTE AMENDMENT NO. 2 TO
THE MANAGEMENT AGREEMENT BETWEEN THE CITY OF MIAMI
BEACH AND GLOBAL SPECTRUM, L.P. FOR THE MIAMI BEACH
CONVENTION CENTER AND COLONY THEATER AND BYRON
CARLYLE THEATER.
WHEREAS, the City and Global Spectrum, L.P. (Global) are parties to a Management
Agreement, dated October 1, 2008, pursuant to which the City engaged Global to manage and
operate the Miami Beach Convention Center, Colony Theatre, and Byron Carlyle Theater; which
Agreement was amended by an Amendment No. 1, dated April 14, 2010, and further modified by an
exchange of letters in April, 2011, terminating Global's rights and responsibilities with respect to the
Byron Carlyle Theater (the Management Agreement, as so amended and modified, is referred to
herein as the Agreement); and
WHEREAS, the initial term of the Agreement was three (3) years, ending on September 30,
2011, subject to the City's right to extend the term for an additional two (2) years; and
WHEREAS, pursuant to Section 3.2 of the Agreement, the City desires to exercise its right to
extend the term of the Agreement for an additional two (2) years (the Renewal Term), commencing
on October 1, 2011, and ending on September 30, 2013, subject to making further amendments to
the Agreement, as set forth in the attached Amendment, and Global desires to accept such
amendments and extension of the term as provided herein.
NOW, THEREFORE, BE IT DULY RESOLVED BY THE MAYOR AND CITY COMMISSION OF
THE CITY OF MIAMI BEACH, FLORIDA, that the Mayor and City Commission hereby approve and
authorize the Mayor and City Clerk to execute the attached Amendment No. 2 to the Management
Agreement between the City of Miami Beach, Florida and Global Spectrum, L.P. for the Miami Beach
Convention Center, Colony Theater, and Byron Carlyle Theater.
PASSED AND ADOPTED this 14th day of , 'September , 2011.
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COMMISSION ITEM SUMMARY
Condensed Title:
A Resolution approving and authorizing the Mayor and City Clerk to execute Amendment No. 2 to the Management Agreement between the
City of Miami Beach and Global Spectrum, L.P. for the Miami Beach Convention Center and Colony Theater and Byron Carlyle Theater.
Key Intended Outcome Supported:
Improve the convention center facility
Supporting Data (Surveys, Environmental Scan, etc.): The 2009 Community Satisfaction Survey reported more than two - thirds of
residential respondents, 69.2 %, suggested the tourism industry in Miami Beach contributes "about the right amount" to the quality of life for
residents. Additionally, resident respondents said they attended events at the Miami Beach Convention Center on average 2.70 times per
year.
Issue:
Shall the City Commission approve a renewal for two (2) additional years to the Management Agreement Between the City and Global
Spectrum?
Item Summary /Recommendation:
On September 10, 2008, the City Commission approved Resolution No. 2008 -26888 which approved an agreement between the City and
Global Spectrum, L.P. for the Management of the Miami Beach Convention Center, Colony Theater, and Byron Carlyle Theater. The
Agreement was for an initial three (3) year term commencing on October 1, 2008, and ending on September 30, 2011, with two (2) one -year
renewal options, exercisable with ninety (90) days prior written notice, at the sole and absolute discretion of the City. The Base Management
Fee in the first year was $275,000. Additionally, Global Spectrum is entitled to an incentive that cannot exceed an amount equal to 100% of i
the base fee, which is capped at the greater of CPI or 3 %. Global Spectrum also provided the City with the following contributions: Capital
contribution (one- time), $375,000; and Scholarship contribution (annual), $ 12,500. Global Spectrum and the City have been negotiating the
contract renewal since March 2011. Among the negotiated terms:
- Eliminate the Net Performance Improvement and guarantee and have GS guarantee improvements against its own annually City- approved
budget;
- Allow any payment of the required guarantee in the current Term to be used on mutually agreed upon revenue - generating improvements to
the Facility
- Require the continued partnership between Global and Messe Schweiz for international sales efforts, as well as on -going participation in the
Executive Management Committee (without any further Guarantee tied to the M.S. owned /produced shows)
- Amend the current Incentive Fee structure
A detailed amendment is provided in the attached Amendment No. 2 for your review.
Advisory Board Recommendation:
The Finance and Citywide Projects met on February 24, 2011 and discussed whether the City should exercise its renewal options in its
agreement with Global Spectrum for the Management of the Miami Beach Convention Center. The Committee unanimously recommended a
renewal of the two (2) one -year renewal options and directed the Administration to negotiate with Global. The Finance and Citywide
Committee's report was present to the City Commission on April 13, 2011. It is important to also note that the Convention Center Advisory
Board (CCAB) considered the item and recommended a renewal of both one -year options.
Financial Information:
Source of Funds: Amount Account Approved
1
Financial Impact Summary: The City will continue to pay Global a base Management Fee of approximately $265,000 for the Convention
Center and Colony Theater. They are eligible to receive an incentive fee equal to 100% of the base Management Fee. The Incentive Fee has
averaged $144,000 in during the first 3 years of the Agreement.
City Clerk's Office Legislative Tracking:
Max Sklar, Ext. 6116
Sign -Offs:
e artm - t j� ector Assistant City Manager City Manager
1 1
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CA AA I AGENDA ITEM C 7 W
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' el MIAMIBEACH
City of Miami Beach, 1700 Convention Center Drive, Miami Beach, Florida 33139, www.miamibeachfl.gov
COMMISSION MEMORANDUM
TO: Mayor Matti Herrera Bower and Members of the City C - mission
FROM: Jorge M. Gonzalez, City Manager
DATE: September 14, 2011
SUBJECT: A RESOLUTION OF THE MAYOR AND THE CITY COMMISSION OF THE CITY OF MIAMI
BEACH, FLORIDA, APPROVING AND AUTHORIZING THE MAYOR AND CITY CLERK TO
EXECUTE AMENDMENT NO. 2 TO THE MANAGEMENT AGREEMENT BETWEEN THE
CITY OF MIAMI BEACH AND GLOBAL SPECTRUM, L.P. FOR THE MIAMI BEACH
CONVENTION CENTER AND COLONY THEATER AND BYRON CARLYLE THEATER.
ADMINISTRATION RECOMMENDATION:
The Administration recommends that the Mayor and Commission approve an Amendment to the Management
Agreement between the City and Global Spectrum.
BACKGROUND
On September 10, 2008, the City Commission approved Resolution No. 2008 -26888 which approved an
agreement between the City and Global Spectrum, L.P. for the Management of the Miami Beach Convention
Center, Colony Theater, and Byron Carlyle Theater. The Agreement was for an initial three (3) year term
commencing on October 1, 2008, and ending on September 30, 2011, with two (2) one -year renewal options,
exercisable with ninety (90) days prior written notice, at the sole and absolute discretion of the City.
Agreement Terms — Fees, Incentive And Contributions
The Base Management Fee in the first year was $275,000 (inclusive of the Colony and Byron Carlyle theaters).
As you are aware, Global no longer manages the Byron Carlyle Theater. Additionally, Global Spectrum is
entitled to an incentive that cannot exceed an amount equal to 100% of the base fee, which is capped at the
greater of CPI or 3 %. Global Spectrum also provided the City with the following contributions:
• Capital contribution (one -time) = $375,000
• Scholarship contribution (annual) = $ 12,500
The following chart details the payments made to and from Global Spectrum during the first two years of the
initial term, as well as projections for the third year.
Payment to Global Actual Actual Projected
2008/09 2009/10 2010/11
MBCC $ 241,600.00 $ 241,600.00 $ 244,257.60
Colony $ 16,700.00 $ 16,700.00 $ 16,883.70
Byron $ 16,700.00 $ 16,700.00 $ 9,848.86
Incentive * * ** $ 148,500.00
_ $ 140,250.00 $ -
Total $ 423,500.00 $ 415,250.00 $ 270,990.16
Payment to CMB
Performance
Guarantee — $ 76,897.00 $ - $ 643,624.78
Capital $ 375,000.00
Scholarship $ 12,500.00 $ 12,500.00 $ 12,500.00
i
Total $ 464,397.00 $ 12,500.00 $ 656,124.78
— In FY 08/09, the Incentive Fee was equal to 54% of Base Fee. There was no CPI Adjustment in FY 09/10, and the Incentive Fee was equal to 51% of
Base Fee. For FY 10/11 we are projecting a 1.1% CPI Adjustment and an Incentive Fee projected at 70 %.
Global Spectrum Amendment No. 2
September 14, 2011
Page 2 of 5
Net Performance Improvement
Pursuant to the Agreement, Global Spectrum guaranteed a Net Performance Improvement, which is defined as
the "Required Improvement" on the Fiscal Year (FY) 08/09 budgeted net deficit of $1,492,134 (which includes
both the FY08 /09 budgeted net operating deficit and includes Executive Salaries and Benefits). As per the
Agreement, the Required Improvement over the net deficit of $1,492,134 for each Contract Year is as follows:
• FY 08/09 = $ 500,000 (or a resulting net operating loss of $992,134)
• FY 09/10 = $1,000,000 (or a resulting net operating loss of $492,134)
• FY 10/11 = $1,500,000 (or a resulting net profit of $7,866)
On March 1, 2010, the City Commission adopted Resolution No. 2010- 27372, which approved an amendment
to the Agreement adjusting the Net Performance Improvement by $50,301.20 in each year due to a an interest
shortfall credit which resulted from the City's requirement for Global Spectrum to change banking institutions.
The requirement for Global Spectrum to make a $500,000, $1,000,000 and $1,500,000 improvement over the
net deficit did not change. The adjustment is only to the starting net deficit amount. For example, this
Amendment changed the Required Improvement over the net deficit of $1,542,435 (instead of $1,492,134).
In the first year of the initial Term, to the extent the actual improvement achieved in the Fiscal Year was less
than the Required Improvement, as set forth above, the City could draw against a required $500,000 Letter of
Credit (LOC) provided by Global for any difference between the Required Improvement and the actual
improvement. The contract also allows Global to bank or apply any excess improvement from year one to any
shortfall of their required improvement in year two (up to the value of their Incentive Pay). The Line of Credit
provides a venue for the City to collect if there are subsequent shortfalls on their Required Improvements.
The following summaries the Net Operating Income for the first two (2) years of Global's management of the
Convention Center:
Net Operating Net Operating
Income /(Loss) Income /(Loss) Variance
ACTUAL BUDGET
FY 2008/09 ($1,119,332) ($1,042,435) ($76,897)
FY 2009/10 ($327,990) ($542,435) $214,445
* Please note: Net Operating Income does not include transition costs or non- operating (City) revenues or expenses that
are part of the MBCC Enterprise Fund.
Following the end of FY 2009, Global Spectrum paid the City $76,897, which represents the shortfall from the
"Required Improvement." This also included uncollected bad debt. In FY 2010 Global Spectrum surpassed the
"Required Improvement" by $214,445. Over the first two years of the Agreement, Global Spectrum has reduced
the operating loss of the MBCC by $1,214,445. However, it should be noted that bookings for the current fiscal
year (FY 2011) are not as strong and Global Spectrum is not projected to achieve the same level of savings. In
fact, the Operating Loss for the current Fiscal Year is projected to be $1,165,000.
Based on current year -end Net Operating Loss projections, Global Spectrum will be required to pay the City
$500,000, plus the earned annual incentive fee at the conclusion of FY 2010 -11. As previously stated, Global is
required to achieve an annual Net Performance Improvement as specified in the Agreement. As a penalty for
not achieving the annual improvement, the City could draw against the $500,000 Letter of Credit (LOC) provided
by Global for any difference between the Required Improvement and the actual improvement. In the final year of
the Agreement, if the LOC does not cover the shortfall, the City can draw against the earned Incentive Fee from
that Fiscal Year. Global is not responsible for any additional shortfall beyond the LOC and Incentive Fee.
The City has agreed to use these funds on mutually agreed upon revenue - generating improvements to the
Facility, which may (but not necessarily shall) include financing the cost to take IT /Telecommunications in-
house. Global will remit the payment for the Improvement Shortfall to the City within 120 days following the end
of the Contract Year ending September 30, 2011. The City may use any funds remaining following the
implementation of the above - referenced mutual agreed upon revenue - generating improvements, for any other
capital improvements for the Facility, to be determined at the City's sole discretion and judgment.
Global Spectrum Amendment No. 2
September 14, 2011
Page 3 of 5
New Messe Schweiz Show
As you may recall, the Management Agreement also has a requirement for Messe Schweiz (M.S.), in
partnership with Global Spectrum, within the initial term and subject to the existing booking policies and
commercial viability to do the following:
1. Use best efforts to book and actualize, one (1) M.S. owned show or event during the initial term
of the Agreement.
2. Use best efforts to book and actualize during the initial term of the Agreement, which can occur
after the initial Term, one (1) (non -M.S. owned) international show or event.
Global Spectrum rovided a Corporate Guarantee, on behalf of M.S. for $275 000 for the City to draw upon if,
p p y p ,
notwithstanding M.S. "best efforts," as provided for in the Management Agreement, M.S. failed to book and
actualize shows or events as required. The March 2010 Amendment gave Global Spectrum until the end of the
third contract year (September, 30, 2011) to book and actualize one M.S. produced /owned show or event before
the $250,000 Guarantee is due to the City.
Global and M.S. also must book, during the initial Term, one non -M.S. produced /owned international show or
event, or an additional $25,000 is due to the City. This show or event may be actualized at any time up to 24
months following the end of the Term if, during such period, the Corporate Guarantee provided by Global to
secure this obligation remains in effect, unaffected by the termination or expiration of this Agreement.
As required, Global Spectrum has booked and actualized a Messe Schweiz owned show (Animalia) during the
initial term of the Agreement. Animalia was successful in its first year and will recur annually. Global also has a
non -M.S. international show booked for 2012. Global must actualize the non -M.S. shows during the renewal
term. Additionally, Global Spectrum, in partnership with Messe Schweiz (MCH), developed new collateral
material, which outlines the business industry and related selling points strictly devoted to the European market.
MCH also launched additional web pages within their website that includes sales brochures and additional
information regarding the MBCC and the destination.
Other Operational Highlights
As you know, Global Spectrum officially assumed management responsibility for the Miami Beach Convention
Center (MBCC), Colony Theatre and Byron Carlyle Theater on October 1, 2008. Global originally successfully
transitioned 63 of the 77 full -time employees (81 %). The transition of management was seamless and without
any interruption to services. In fact, International BoatBuilders' Exhibition and Conference (IBEX), the first event
in the building following the transition, sent Global Spectrum a letter commending them on their efforts and its
contribution toward a successful show. Global dealt with a significant power failure in Hall C during IBEX and
successfully provided temporary power for the show.
The MBCC operated at 61% occupancy in each of the first two fiscal years of the agreement. This includes
more than 698,840 people attending 184 events FY 2009 and 518,835 people attending 125 events in FY 2010.
The MBCC initially experienced very few cancellations because of the economic downturn. However, IBEX and
Shoe Market have since left the MBCC for other venues. Additionally, the Graphics of America Show and IDEA
will use the MBCC every other year instead of annually. This is a loss of $2.075 million in annual gross
revenue. Several events also reduced the amount of square footage rented, which resulted in a reduction in
rental revenue. Additionally, service revenue (food and beverage, electric, A/V, etc) was lower than anticipated.
Simultaneously, Global Spectrum has been able to achieve significant savings in insurance, energy
management and "Green" initiatives, trash hauling, and event labor. They have also been able to generate
additional revenue in ATM fee and sponsorship /advertising agreements. These measures have helped to off-
set the aforementioned revenue decreases.
The "Green" Initiatives implemented by Global Spectrum included the "Step Up" program (logos placed on light
switches and computers reminding employees to reduce energy when not in use); programming of major
mechanical control functions for energy reduction; single stream recycling program; and the purchasing of green
janitorial cleaning supplies, toilet tissue, paper towels and hand soap. They worked closely with Centerplate to
ensure that they are utilizing recyclable products in regards to utensils, disposable plates and paper products.
Global Spectrum Amendment No. 2
September 14, 2011
Page 4 of 5
This effort has already yielded significant results. In December, January and February, Global reduced
electrical consumption by 23% in FY 2009 and over 15% in 2010.
The Sales and Marketing Department was challenged in FY09 to produce $700,000 in new short -term business,
in the year, for the year. The MBCC sales staff exceeded this goal booking $716,756 in new business for the
fiscal year. The year was highlighted by The UM Sylvester Gala, Engineering and Land Institute, MiaGreen,
Zetabid Auction, TattoLaPalooza, Jump Miami and the Great Merchandise Sale.
For FY10 they established a goal for themselves of actualizing $1 million in new business, in the year, for the
year. The Social Venture Capital /Enterprise Conference, Wells Fargo Home Preservation Workshop, Antique
Roadshow, NACA Save the Dream, Herbalife International and Nike Launch helped push the "in the year, for
the year" bookings to $1,003,000 for the fiscal year. Record - breaking attendance, both national and
international was witnessed by citywide meetings such as the Society of Critical Care Medicine, American
Academy of Dermatology, Best Buy Company Achievers, American Institute of Architects and The International
Floriculture Expo. MBCC annual events, such as Art Basel Miami Beach, International Boat Show, Cruise
Shipping, South Florida Auto Show and all three Jeweler's International Showcase events saw, also not only
experienced an increase in attendance, but an increase in exhibitor interest.
The Event Services Department implemented procedures to increase the percentage of "positive" client survey
scores by 5 %, as well as increase ancillary revenue by 10 %. Both goals were met as "positive" survey scores
increased from 89% to 93 %, an increase of 5% with ancillary revenue increasing from a bottom line figure in
FY09 of $2,241,987 to FY10 of $2,606,634, an increase of 16 %.
FINANCE AND CITYWIDE PROJECTS COMMITTEE
The Finance and Citywide Projects met on February 24, 2011 and discussed whether the City should exercise its
renewal options in its agreement with Global Spectrum for the Management of the Miami Beach Convention Center.
The Committee unanimously recommended a renewal of the two (2) one -year renewal options and directed the
Administration to negotiate with Global. The Finance and Citywide Committee's report was present to the City
Commission on April 13, 2011. It is important to also note that the Convention Center Advisory Board (CCAB)
considered the item and recommended a renewal of both one -year options.
CHANGES NEGOTIATED
Global Spectrum and the City have been negotiating the contract renewal since March 2011. The following is a
summary of the proposed contract amendment and renewal:
1. Eliminate the Net Performance Improvement and guarantee. The requirement for Global Spectrum
to make a $500,000 (year 1), $1,000,000 (year 2) and $1,500,000 (year 3) improvement over the net
deficit was based on the 2008 -09 SMG Budget as the measure of Global Spectrum's performance.
After operating the facility for three (3) years, both parties agreed that Global should only guarantee
its own annually City- approved budget. To that end, however:
a. If Global misses the City- approved budget Net Operating Profit/Loss by 5 %, Global will
rebate to the City $.50 of each $1.00 in Incentive Fee they earned, capped at an amount not
to exceed 50% of the Incentive Fee earned in any given fiscal year; and
b. Global Spectrum will be required to rebate Incentive Fee only in the case where failure to
achieve the City- approved budget Net Operating Profit/Loss by 5 %, is due to reasons that
are under Global Spectrum's control. Such as: bookings for conventions, tradeshows and
corporate events within 24 months and day -to -day maintenance of the facility and its
infrastructure. Items beyond Global Spectrum's control include capital improvements due to
storms or various acts of God and new operating or maintenance requirements imposed by
the City after the current year's budget is approved.
2. Global Spectrum has met their obligation to book and actualize a Messe Schweiz owned show
(Animalia) during the initial term of the Agreement. The partnership between Global and Messe
1
Global Spectrum Amendment No. 2
September 14, 2011
Page 5 of 5
Schweiz will continue for international sales efforts, as well on -going participation on the Executive
Management Committee. The $25,000 Guarantee for the non -M.S. owned show will remain in
effect, as this show may be actualized at any time up to 24 months following the end of the initial
Term (renewal term).
3. The Incentive Fee allows Global to earn up to 100% of the base Management Fee if certain criteria
are achieved. Both parties agree the Incentive Fee is complicated and should be simplified. In fact,
this was a recommendation of the CCAB at the time they recommended in favor of renewing the
Agreement. Negotiated changes to the Incentive Fee include customer satisfaction (30 points),
financial performance (50 points), maintenance and capital improvements (15 points) and
discretionary (5 points). Please refer to the attached Exhibit A for a detailed description of the
negotiated Incentive Fee criteria.
FISCAL IMPACT STATEMENT
The City will continue to pay Global a base Management Fee of approximately $265,000 for the Convention
Center and Colony Theater. They are eligible to earn an incentive fee equal to 100% of the base Management
Fee. The Incentive Fee has averaged $144,000 in during the first 3 years of the Agreement.
CONCLUSION
Global Spectrum has performed well during the initial term of the Management Agreement as described above.
The Administration recommends that the Mayor and Commission approve a two year renewal with Global and
corresponding amendments to the Management Agreement between the City and Global Spectrum to reflect
mutually agreed -upon adjustments, as detailed in the attached Amendment No. 2.
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EXHIBIT A
Incentive Fee Proposal
Incentive Fee Calculation
Criteria
1. Customer Satisfaction Points base on aggregate positive scores for each department (10
departments):
25 points - Sales
Event Management
Operations
Food & Beverage
- IT/Telecommunications
Audio Visual
Valet Parking Services
Business Center
- Visit Miami Beach
Fire Inspector
93% and greater - 2.5 Points for each department
90% to 92% - 1 Points for each department
89% and less - 0 Point for each department
2. Completion of A total of up to five (5) percentage points will be awarded based upon
Evaluations the percentage of completed customer satisfaction surveys our of total
potential surveys received from all Events that use the Facilities as
5 points detailed below:
70% or greater completed 5 points
65% completed 3 points
55% completed 1 points
54% and lower 0 points
3. Financial Performance A total of up to fifty (50) percentage points will be awarded based upon
the percentage of annual Operating Revenue generated as detailed
50 points below:
• $16,500,000 or more 50 points
• 16,250,000 to 16,499,999 35 points
• 16,000,000 to 16,249,999 25 points
• 15,999,999 or less 0 points
4. Maintenance and A total of up to fifteen (15) percentage points will be awarded if Global
Improvement of MBCC has met or exceeded the maintenance standards set forth in Section 2.3
and Its Capital Equipment and Exhibit F hereof (including, without limitation, the Comprehensive
Preventive Maintenance Program and maintenance of Capital
15 points Equipment. The City Manager's evaluation will also take into account the
annual review by the City's Property Management Division and /or an
outside independent consultant.
5. Discretionary- A total of up to 5 percentage points may be awarded, as determined by
the City, in its sole and absolute discretion.
5 points
NOTE: "Points" = 100% of Incentive Fee Cap