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2015-29118 Reso RESOLUTION NO. 2015-29118 A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, APPROVING AND AUTHORIZING THE MAYOR AND CITY CLERK TO EXECUTE A SETTLEMENT AGREEMENT BETWEEN THE CITY (OWNER), PKY LINCOLN PLACE, LLC (TENANT), AND 16TH STREET PARTNERS, LLC (MASTER SUBTENANT), RELATING TO THAT CERTAIN AGREEMENT OF LEASE (GROUND LEASE), DATED SEPTEMBER 1, 1999, FOR THE LINCOLN PLACE GARAGE, LOCATED AT 1601 WASHINGTON AVENUE. WHEREAS, on June 23, 1999, the City Commission adopted Resolution No. 99- 23222 approving the development agreement with 16th Street Partners, LLC, a Florida limited liability company (16th Street), to create a mixed use project on land leased from the City located at Washington Avenue and 16th Street (the Project); and WHEREAS, in connection with said development agreement, on or about September 1, 1999, the City and 16th Street executed a ground lease (Ground Lease); and WHEREAS, the Project was constructed as an eight story, high rise building with approximately 105,652 rentable square feet of office space, 28,483 rentable square feet of retail space and a 493 space parking garage (Garage); and WHEREAS, Effective May 2 1 th ay 25, 006, 16th Street entered into a sales leaseback agreement (Master Sublease) with TAG Lincoln Place LLC, a Delaware limited liability company (TAG), a wholly owned subsidiary of The Andalex Group, LLC, a Delaware limited liability company, which remained relatively unchanged until TAG transferred/sold its 100% ownership in the Project to PKY Lincoln Place Holdings, LLC, a Delaware limited liability company, on December 6, 2013. Thereafter, TAG changed its name to PKY Lincoln Place, LLC (PKY or Tenant); and WHEREAS, PKY, as successor tenant/Master Sublandlord, leases the entire Project to 16th Street pursuant to a Master Sublease, and pursuant to the terms of the Master Lease, 16th Street agreed to be responsible for the payment of all obligations of PKY to the City under the Ground Lease; and WHEREAS, 16th Street and its affiliate, LNR 16th Street, LLC, occupied the majority of the Project's office space and the parking spaces in the Garage (16th Street's Exclusive Spaces); however, there was no sublease or other occupancy agreement between 16th Street and its affiliates for the use of 16th Street's Exclusive Spaces, and 16th Street does not impose or collect any rent or other charges for such use; and WHEREAS, pursuant to said Ground Lease, the City is entitled to receive base rent, on a monthly basis, which escalates every five years, plus an annual payment of Percentage Rent, based upon 2.5% of the gross revenues generated by the Project for the particular Lease Year (Percentage Rent); and WHEREAS, responding to an inquiry by the City's Leasing Specialist, the City's Internal Auditors confirmed the omission of Percentage Rent based upon the use of the office space by 16th Street and its affiliate, and also noted that the tenant was not remitting sufficient Percentage Rent payments on the parking garage revenues and common area maintenance charges (the Dispute); and WHEREAS, the parties resolved the Dispute, based upon the following essential terms: (i) a settlement payment from 16th Street to the City in consideration of a settlement of the Dispute and a full and final release of the outstanding claims prior to 2014, in the sum of Four Hundred Thousand and No/100 Dollars ($400,000.00), (ii) an agreed upon construction of the Percentage Rent provisions of the Ground Lease as they shall apply to 16th Street and its affiliates for the period from January 1, 2014 through the duration of the Master Lease term; (iii) an agreement between the City and PKY as to reasonable conditions for approval by the City of a future Master Sublease; (iv) acknowledgement the actual number of parking spaces in the Garage is four hundred and ninety-three (493), and (v) solely during the term of the Master Lease, the City agrees to (1) abate the enforcement of this provision contained in Section 6.1(b) of the Ground Lease; (2) permit the reallocation of the total number of public parking spaces that must be available to the general public on weekdays from 7:00 A.M. to 6:30 P.M. (Office Hours) from 100 to 20 spaces; and (3) increase the number of public parking that must be available for use by members of the general public, after Office Hours on weekdays and at all times during weekends, to 300 spaces. WHEREAS, the Administration recommends that the City execute the Settlement Agreement, attached hereto and incorporated herein by reference as Exhibit A. NOW, THEREFORE, BE IT DULY RESOLVED BY THE MAYOR AND CITY COMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, that the Mayor and City Commission hereby approve and authorize the Mayor and City Clerk to execute a settlement agreement, in the form attached hereto and incorporated herein by reference as Exhibit A, between the City (Owner), PKY Lincoln Place, LLC (Tenant), and 16th Street Partners, LLC (Master Subtenant), relating to that certain Agreement of Lease (Ground Lease), dated September 1, 1999, for the Lincoln Place Garage, located at 1601 Washington Avenue. PASSED AND ADOPTED this oZ day of S)-edrfrill be r , 2015. ATTEST: RFi Philip Le •ne, .4 re. .� A, Raf 1:6/ el E. Granado, City lerk NCORF ORATED: 4 <r) ' APPROVED ASTO �;` �'— FORM & LANGUAGE y (;. & FOR EXECUTION "-"Q-- A LL City Att" =y (,f f Dote T:WGENDA\2015\September\TCED\PKY Settlement\PKY Settlement Reso 9-2-2015.docx COMMISSION ITEM SUMMARY Condensed Title: A Resolution Approving And Authorizing The Mayor And City Clerk To Execute A Settlement Agreement Between The City(Owner), Pky Lincoln Place, LLC(Tenant),And 16th Street Partners, LLC(Master Subtenant), Relating To That Certain Agreement Of Lease (Ground Lease), Dated September 1, 1999, For The Lincoln Place Garage, Located At 1601 Washington Avenue. Key Intended Outcome Supported: Ensure Expenditure Trends Are Sustainable Over The Long Term Item Summary/Recommendation: On June 23, 1999, the City Commission adopted Resolution No. 99-23222 approving the development agreement with 16th Street Partners, LLC, a Florida limited liability company, to create a mixed use project on land leased from the City located at Washington Avenue and 16th Street (the Project). The Project is an eight story, high rise building with approximately 134,135 rentable square feet of office space, 28,483 rentable square feet of retail space and a 493 space parking garage(Garage). Effective May 25, 2006, 16th Street Partners, LLC entered into a sales leaseback agreement(Master Sublease) with TAG Lincoln Place LLC (TAG) (until TAG transferred/sold its 100% ownership in the property to PKY Lincoln Place Holdings, LLC, in December 2013. Thereafter, TAG changed its name to PKY Lincoln Place, LLC (PKY or Tenant). Under said land lease,the City is entitled to receive base rent of$29,020.27/month or$348,243.24 annually(includes 7%state sales tax) pus 2.5 per cent of the gross Project Revenues from the income of the Project. Under the Master Sublease, PKY, as successor tenant/Master Sublandlord, leases the entire Project to 16th Street and 16th Street is responsible for the payment of all obligations of PKY to the City. There is no sublease or other occupancy agreement between 16th Street and its affiliates for the use of office space in the building or parking spaces in the Garage (collectively referred to herein as 16th Street's Exclusive Spaces), and 16th Street does not impose or collect any rent for such use. In 2013, the City's Leasing Specialist, tasked with monitoring this lease agreement, became concerned that the tenant was not remitting 2.5% of all their applicable revenues(Percentage Rent)to the City as she believed that they were incorrectly excluding rents paid by their parent company (LNR 16th Street, LLC) which occupied a majority of Lincoln Place's office space. As a result, Internal Audit was requested to review the documentation provided and to determine the validity of these concerns. In addition to subsequently confirming the omission of parental company rents, Internal Audit also noted that the tenant was not remitting sufficient percentage rent payments on the parking garage revenues and common area maintenance charges. Thereafter,the parties reached a Settlement Agreement. SETTLEMENT AGREEMENT (i) a settlement payment from 16th Street to the City for the outstanding claims prior to 2014, in the sum of $400,000.00, and mutual release, (ii) an agreed upon construction of the Percentage Rent provisions of the Ground Lease as they shall apply to 16th Street and its affiliates for the period January 1, 2014 through the duration of the Master Lease Term; (iii) an agreement between the City and PKY as to reasonable conditions for approval by the City of a future Master Sublease; (iv) acknowledgement the actual number of parking spaces in the Garage is four hundred and ninety-three (493), and (v) solely during the term of the Master Lease, the Owner agrees to (1) abate the enforcement of this provision contained in Section 6.1 of the Ground Lease; (2) permit the reallocation of the total number of public parking spaces that must be available to the general public on weekdays from 7:00 A.M. to 6:30 P.M. (Office Hours) from 100 to 20 spaces; and (3) increase the number of public parking after Office Hours on weekdays and at all times during weekends,to 300 spaces. Advisory Board Recommendation: It is recommended that the City adopt the proposed resolution. Financial Information: Source of Amount Account Funds: 1 2 OBPI Total Financial Impact Summary: City Clerk's Office Legislative Tracking: Max A. Sklar, Tourism, Culture and Economic Development Director Sign-Offs: Depart - t Director ACM/ ,~• City M : ager MAS I KGB ./j> JLM 4'., rgyv T:\AGENDA\2015\September\TCE)"KY Settlement-Item Summary.docx MIAMI BEACH AGENDA ITEM Al F DATE 4 a 1 s MIAM BEACH City of Miami Beach, 1700 Convention Center Drive, Miami Beach, Florida 33139, www.miamibeachfl.gov COMMISSION ME l ORANDUM TO: Honorable Mayor Philip Levine and embers of tr''- City Commission FROM: Jimmy L. Morales, City Manager DATE: September 2, 2015 SUBJECT:A RESOLUTION OF THE MAYOR A', D CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, APPRO ING AND AUTHORIZING THE MAYOR AND CITY CLERK TO EXECUTE A TTLEMENT AGREEMENT BETWEEN THE CITY (OWNER), PKY LINCOLN PLACE, LLC (TENANT), AND 16TH STREET PARTNERS, LLC (MASTER SUBTENANT), RELATING TO THAT CERTAIN AGREEMENT OF LEASE(GROUND LEASE),DATED SEPTEMBER 1, 1999, FOR THE LINCOLN PLACE GARAGE, LOCATED AT 1601 WASHINGTON AVENUE. RECOMMENDATION Adopt the Resolution. BACKGROUND Pursuant to RFP 20-97/98, which sought proposals for the development of public-private parking facilities, on June 23, 1999,the City Commission adopted Resolution No.99-23222 approving the development agreement with 16th Street Partners, LLC, a Florida limited liability company (16th Street), to create a mixed use project on land leased from the City located at Washington Avenue and 16th Street (Lincoln Place or the Project). Once constructed, Lincoln Place became an eight story, high rise building with approximately 134,135 rentable square feet of office space, 28,483 rentable square feet of retail space and a 493 space parking garage (Garage). 16th Street was originally formed by LNR 16th Street, Inc. in partnership with Lincoln Place Partners, LLC and Comras 16th Street, Inc. Effective May 25, 2006, 16th Street Partners, LLC entered into a sales leaseback agreement(Master Sublease), having a term of fifteen years with TAG Lincoln Place LLC, a Delaware limited liability company (tenant), a wholly owned subsidiary of The Andalex Group, LLC, a Delaware limited liability company, which remained relatively unchanged until TAG transferred/sold their 100% ownership in the property to PKY Lincoln Place Holdings, LLC, a Delaware limited liability company, in December 2013. Thereafter, TAG Lincoln Place LLC changed its name to PKY Lincoln Place, LLC (PKY or Tenant). In connection with the development of the Project, 16th Street, as tenant, and the City (Owner)executed a ground lease(Ground Lease), in effect from September 1, 1999 through November 2052, with two (2) 20 year extension options, and which included among other items the following lease payment terms: • The Tenant shall pay the base rent in monthly installments equal to one-twelfth of the then applicable annual rent payable in advance on the first day of each calendar PKY Lincoln Place Settlement Agreement City Commission Meeting September 2, 2015 Page 2 of 6 month. • The base rent will be $250,000 for lease years 1 through 5 (September 1, 2002 through December 31, 2007) increasing to $300,000 for lease years 6 through 10 (January 1, 2008 through December 31, 2012). Adjusting these base rent payments for 7%state sales tax,the tenant was to remit$26,750($300,000 x 1.07 state sales tax)/12 months) from the beginning of the audit period (January 1, 2009) through December 31, 2012. • The monthly base rent was to be adjusted on every fifth lease year thereafter based upon the lesser of 12% or the cumulative CPI over the previous five year period. It was subsequently determined that the cumulative CPI grew by less than the 12% during the preceding five years resulting in the tenant's monthly base rent payments increasing to $29,020.27 or $348,243.24 annually (includes 7% state sales tax) starting in January 2013. • The tenant shall also pay the City annual percentage rent for each lease year during the term in an amount equal to 2.5% of the amount of Project Revenue. The following table lists the rounded amount of base and percentage rent revenues received from the tenant for each calendar year from 2009: 2009 2010 2011 2012 2013 Total Base Rent* $321,000 $321,000 $321,000 $321,000 $348,243 $1,632,243 Percentage $48,480 $52,191 $48,832 $48,172 $51,626 $249,301 Rent* Total Rent $369,480 $373,191 $369,832 $369,172 $399,869 $1,881,544 * The above figures represent the month and/or year that the tenant made the payment for while the City recognized the payment in the fiscal year that it was received so differences would exist if this table was reconciled to the City's Financial System entries. For example, the $48,480 percentage rent payment for the 2009 calendar year was actually received on June 3, 2010 and was included in the 2009/10 fiscal year entries. In 2013, the City's Leasing Specialist tasked with monitoring this Ground Lease became concerned that the tenant was not remitting 2.5%of all their applicable revenues to the City as she believed that 16th Street was incorrectly excluding rents paid by 16th Street's affiliated company(LNR 16th Street, LLC)which occupied a majority of Lincoln Place's office space. As a result, Internal Audit was requested to review the documentation provided and to determine the validity of these concerns. In addition to subsequently confirming the omission of rents from 16th Street's affiliates, Internal Audit also noted that 16th Street was not remitting sufficient Percentage Rent payments on the parking garage revenues and common area maintenance charges. PKY, as successor tenant/Master Sublandlord, leases the entire Project to 16th Street pursuant to a Master Sublease, and pursuant to the terms of the Master Sublease, 16th Street agreed to be responsible for the payment of all obligations of PKY to the City (as defined in the Ground Lease) under the Ground Lease. There is no sublease or other occupancy agreement between 16th Street and its affiliates for the use of office space in the building or parking spaces in the Garage (collectively referred to herein as 16th Street's Exclusive Spaces), and 16th Street does not impose or collect any rent or other charges for such use. The City claims that unpaid Percentage Rent(as defined in the Ground Lease) has accrued PKY Lincoln Place Settlement Agreement City Commission Meeting September 2, 2015 Page 3 of 6 and remains due and payable to the City by virtue of the use by 16th Street and its affiliates of 16th Street's Exclusive Spaces at the Project for the period prior to January 1,2014,which claims are disputed and denied by 16th Street. Additionally, the Ground Lease does not accurately reflect the actual number of parking spaces in the Garage. In connection with negotiating the terms of the settlement, in light of the fact that 16th Street's Exclusive Spaces were not being rented at market rates, the Director of Tourism, Culture and Economic Development secured a Fair Market Rental Analysis, a copy of which is attached hereto and incorporated herein as Exhibit B. The parties reached an agreement with respect (i) to a settlement payment from 16th Street to the City in consideration of a settlement of the dispute and a full and final release of the outstanding claims, (ii)an agreed upon construction of the Percentage Rent provisions of the Ground Lease as they shall apply to 16th Street and its affiliates for the period January 1, 2014 through the duration of the Master Lease Term (as defined in Section 4 of the Agreement); (iii) an agreement between the City and PKY as to reasonable conditions for approval by the City of a future Master Sublease; and (iii)certain agreements regarding the Garage through the duration of the Master Lease term. SETTLEMENT AGREEMENT A copy of the Settlement Agreement is attached hereto and incorporated herein by reference PY 9 P Y as Exhibit "A". A summary of those items is as follows: 1. Settlement of Outstanding Claims and Mutual Release: In resolution of the Dispute and in consideration of a full and final settlement of the Outstanding Claims, 16th Street will pay to the City the sum of Four Hundred Thousand and No/100 Dollars ($400,000.00) (the "Settlement Payment"), the parties agree to mutually release each other from any and all claims or liability, past, present or future, of whatsoever kind or character, by reason of or arising out of or existing in connection with the Dispute or the Outstanding Claims. 2. Base Rent Fair Market Rental Value: For purposes of determining an implied Project Revenue for office space occupied by 16th Street or its affiliates at the Project, the parties agree that the base rent fair market rental value (including operating expenses for the 2006 base year operating expenses for all office space tenants at the Project)shall be deemed to be$30.41 per rentable square foot effective January 1, 2014, which shall escalate annually at the rate of three percent(3%) on January 1st of each year thereafter for the duration of the Master Lease Term.Simultaneously with the execution of the Settlement Agreement, 16th Street shall reimburse the Owner for the cost of the appraisal utilized to determine the base rent fair market rental value, for the year 2014, in the amount of$3,000.00. 3. Reimbursement of Operating Expenses: For purposes of determining an implied Project Revenue for reimbursable operating expenses,applicable to the office space occupied by 16th Street or its affiliates at the Project ("16th Street Reimbursable Expenses"), for the period from January 1, 2014 through the end of the Master Lease Term, the parties agree that said operating expenses which are subject to reimbursement from third-party office tenants("Office Reimbursable Expenses")for the applicable Lease Year at the Project(calculated in a manner consistent with the Office Reimbursable Expenses for prior Lease Years at the Project, based upon the 95% grossed-up operating expenses passed through to the other office tenants for the applicable Lease Year,the actual insurance expenses paid during the applicable Lease Year, and the actual real estate tax bills paid for the applicable Lease Year, PKY Lincoln Place Settlement Agreement City Commission Meeting September 2, 2015 Page 4 of 6 copies of which have been furnished to the City), shall be used as the basis for determining implied Project Revenue as well as Percentage Rent due under the Ground Lease for the office space occupied by 16th Street or its affiliates at the Project to the extent that any of the categories of the Office Reimbursable Expenses exceeds the operating expenses for the 2006 base year. 4. Parking Spaces: For purposes of determining an implied Project Revenue and calculating Percentage Rent thereon for parking spaces actually used by 16th Street or its affiliates at the Garage, the parties agree that the fair market value shall be deemed to be$107.00 per space, per month, commencing on January 1,2014,and for the duration of the Master Lease Term. 5. Percentage Rent Payment/Additional Documentation: Effective as of the 2015 calendar year, through the end of the Master Lease Term, solely, the process for submitting the Percentage Rent payment, as required under Section 3.3(b) of the Ground Lease, shall be modified as follows: 16th Street Partners shall submit an estimated Percentage Rent payment, along with the back-up information, within sixty (60) days from the end of each Lease Year, subject to finalizing the audited financial statement for said particular Lease Year,with the adjusted/final payment due within one hundred fifty (150) days from the end of each Lease Year. As long as 16th Street follows this modified procedure, no penalties shall accrue to PKY under the Ground Lease. 16th Street agrees, for the duration of the Master Lease Term, to include, along with the audited financial statement and each final payment of Percentage Rent (including Percentage Rent from the lease of space to third parties and other parking revenue in accordance with the provisions of the Ground Lease), shall provide the following: • a report,with updated floor plans,to the City of the total square feet of space in the Project actually occupied and used by 16th Street or its affiliates during the prior Lease Year (which Cityr may verify through a site visit); • the actual Third Party Reimbursable Expenses and the 16th Street Reimbursable Expenses, as well as the corresponding reconciliations for said expenses for the prior Lease Year; • the number of monthly parking passes or access cards issued to and actually used by employees of 16th Street and its affiliates; • a copy of the insurance bill(s) paid and covering the prior Lease Year; and, • proof of payment of real estate taxes paid and covering the prior Lease Year. 6. Agreement Regarding Parking Garage Provisions. (a) Recognition of Number of Parking Spaces as Constructed in the Garage:. The parties recognize that the Ground Lease provides that the Garage shall contain a minimum number of six hundred (600) parking spaces. The parties acknowledge, however, that the actual number of parking spaces in the Garage is four hundred and ninety-three (493). PKY Lincoln Place Settlement Agreement City Commission Meeting September 2, 2015 Page 5 of 6 (b) Temporary Abatement of Enforcement of the Public Parking Requirements: The parties acknowledge that Section 6.1(b) of the Ground Lease requires 100 public parking spaces in the Garage to be made available at all times for use by the general public, and that said provision under the Ground Lease is not being modified. 16th Street has represented that this restriction impairs its ability to lease space to Tenants of the Project, and that the demand for public parking is greater during periods after regular office hours on weekdays and all times during weekends. The parties consider it in the best interests of the Project and the Owner to abate enforcement of this public parking requirement in the Garage, on a temporary basis. Soley during the term of the Master Lease,the Owner agrees to(i) abate the enforcement of this provision contained in Section 6.1(b) of the Ground Lease; (ii) permit the reallocation of the total number of public parking spaces that must be available to the general public on weekdays from 7:00 A.M. to 6:30 P.M. (Office Hours)from 100 to 20 spaces; and(iii)increase the number of public parking that must be available for use by members of the general public, after Office Hours on weekdays and at all times during weekends, to 300 spaces. This temporary abatement of enforcement of the public parking requirement shall not affect the requirement to maintain ten (10)parking spaces for monthly parking for members of the general public. 7. Future Master Sublease Approvals: Pursuant to Section 3.3 of the Ground Lease, the City is entitled to receive Percentage Rent on the basis of Project Revenue derived from operation of the Project by the"Tenant"thereunder, or by the"Master Subtenant" under a Master Sublease of all or substantially all of the Project or of twenty percent (20%) or more of the Garage to a single tenant. The parties acknowledge that under circumstances in which the Master Subtenant and/or its related entities occupy space in the Project for no rental or at a rental rate substantially below market rental rates then in effect(an"Under-market Sublease"), Project Revenue may be adversely affected. As such, in connection with the approval of a proposed Master Sublease, and to the extent the City has approval rights over any proposed "Master Sublease" (as such term is defined in Section 10.2(f), of the Ground Lease) pursuant to the Ground Lease, and in addition to any other documents which City may be entitled pursuant to the terms of the Ground Lease, Tenant shall provide the City with the following documents, in connection with the approval of such proposed Master Sublease: (1)a copy of the Master Sublease; PP P P ( ) PY , (2)the Master Subtenant's business plan(including proposed market rental value for the spaces under said Master Sublease; proposed operating expenses for the spaces under said Master Sublease; and proposed market rental values for parking spaces in the Garage which may be the subject of said Master Sublease); (3) an acknowledgment from the Master Subtenant, as to whether or not any of the spaces, which are the subject of said Master Sublease, will be occupied by the Master Subtenant or its related entity for its exclusive use; and (4) Master Subtenant's financial statements. 16th Street, in good faith, has paid the 2014 Percentage Rent, in the amount of$140,410.31, which includes the implied Project Revenue for 16th Street's Exclusive Spaces, based upon the terms of the Settlement Agreement, contingent upon approval of said Settlement Agreement by the City Commission. CONCLUSION The Administration recommends that the City Commission adopt the resolution approving and authorizing the Mayor and City Clerk to execute the settlement agreement, as being in the best • PKY Lincoln Place Settlement Agreement , City Commission,Meeting . September 2; 20. 15 - Page 6of6 interest of the City. - . JLM/ B f`: V T:\AGEND a • 5\S-ptember\TCED\PKY Settlement Agreement MEM.doc • • • • • • • • • . SETTLEMENT AGREEMENT PARTIES: THIS SETTLEMENT AGREEMENT (this "Agreement") is made this day of , 2015 ("Effective Date"), by, between and among the CITY OF MIAMI BEACH, FLORIDA, a municipal corporation (the "City" or "Owner"), PKY LINCOLN PLACE, LLC, a Delaware limited liability company ("PKY"), and 16TH STREET PARTNERS, LLC, a Florida limited liability company ("16th Street"). RECITALS: WHEREAS, the City is the fee simple owner-- of the land (the "Premises") underlying the improvements, consisting of a mixed-usetproject containing a parking r garage, office space,and retail and/or commercial-'s.7"-space(the "Project")presently known as Lincoln Place,having an address of 1601 Washington Avenue, Miami Beach, Florida; and WHEREAS, the City leases the'Premises to PKY pursuant to that certain Agreement of Lease dated as of September I,`19`9.,and recorded in OffEalRecords Book 18770, Page 46, of the Public:Records of Miami-Dade-County, Florida?(the "Public Records"), as modified by that certain i I irst Amendment to Agreement of Lease dated as of November 8,2000, and recorded in Off cial Records Book 19395,Page 1106,of the Public Records (as amended, the "Ground`=:Lease ) =as assigned%rto TAG Lincoln Pace LLC ("TAG") pursuant to an=Assignment and Assumption of Lessee's Interest in Lease dated May 24, 2006, and e orded:.in Official:Records Book42_4598, Page 2948, of the Public Records; and further assignedtto:PKY, through the sale of the 100% ownership interest in TAG to PKY Lincoln Place`Holdings Itre a Delaware limited liability company, pursuant to an Assignment of Membership Interest dated as of December 6, 2013, and the fi� �a,� �:=L'� --. > > > subsea ue�nt,name.change of TAG to PY Lincoln-place, LLC; and �.u�7N'�'+s :•_- � HEREAS` 'PKY leases the entire?°roject to 16th Street pursuant to that certain Master.Sublease, titledLease Agreement, dated March 25, 2006 (the "Master Lease") a short-form of which is recorded a:s<na_Memorandum of Lease, dated May 25, 2006, and recorded in. Official Records Book 24598, Page 3094, of the Public Records (the "Memorandum of Lease"); d WHEREAS, pursuant-to the terms of the Master Lease, 16th Street agreed to be responsible for thal5ayme_iletf all obligations of PKY to the Owner (as defined in the Ground Lease) under thefGround Lease; and WHEREAS,there is no sublease or other occupancy agreement between 16th Street and its affiliates for the use of office space in the building or parking spaces in the Garage, and 16th Street does not impose or collect any rent or other charges for such use; and WHEREAS, the Owner claims that unpaid Percentage Rent (as defined in the Ground Lease)has accrued and remains due and payable to the Owner by virtue of the use by 16th Street and its affiliates of a portion of the office space in the building and parking spaces in the Garage at the Project (collectively, "16th Street's Exclusive Spaces") for the EXHIBIT Pagelof9 - I 4 period prior to January 1, 2014 (the "Outstanding Claims"), which claims are disputed and denied by 16th Street (the "Dispute"); and WHEREAS, the Ground Lease does not accurately reflect the actual number of parking spaces in the Garage, and the parties recognize and agree that it is in the best interests of the Project and the Owner to reallocate the minimum public parking requirements currently set forth under the Ground Lease,exclusively during the duration of the Master Lease Term(as defined in Section 4 of this Agreement); and WHEREAS, upon the terms and conditions set forth below,the parties have agreed (i)to a settlement payment from 16th Street to the Owner in consideration of a settlement of the Dispute and a full and final release of the Outstandi-ngClaims, (ii) an agreed upon construction of the Percentage Rent provisions of the Ground Lease as they shall apply to 16th Exclusive Spaces for the period commend=ng-on January 1, 2014 through the duration of the Master Lease Term; (iii) an agreement between the Owner and PKY as to reasonable conditions fora approval by the Owner)of a futureMaster Sublease; and (iii) Y ( ) certain agreements regarding the Garage through the duration of the Lease Term. .4 :3*A Lf1 TERMS AND CON;DITION84:_ •-: NOW, THEREFORE, ui"consideration ofitheq above recitals and the promises, agreements and releases contained y;herein, as well gas for other good and valuable consideration, the receipt and suff ciency-€4 which is hereby acknowledged, the parties agree as follows: � r x r 1. RecifalsIncorporated; Def nitionsThe rabove:recitals are incorporated herein by referenee: 'Unless otherwise defined herein, de pined terms (as indicated by an initial capital letter.)`shall have t1 a meaning:ascribed to them in the Ground Lease. 2. City Con mission Approval O ntingency. The parties hereto understand and agree= a. .t is,Agreeemmentwi'll not be ding upon the parties to this Agreement until such time as the C'.ty Commiss � of the C f Miami Beach has approved same, and the A `eeinent is fully executed b the arties to tire Agreement. City Commission approval is �' Y y`= �P g Y pp a material condition precedent to',the execution and enforceability of this Agreement, without which the City does,not agree.to and is not subject to the terms and conditions contained herein. 3. Settlement of® utstanding Claims and Mutual Release. In resolution of the p r of a full and final settlement of the Outstanding Claims, Dispute and in consrderati�®nJ contemporaneously uofull execution of this Settlement Agreement, l6th Street has paid to the City the sum of Four Hundred Thousand and No/100 Dollars ($400,000.00) (the "Settlement Payment"), and the Owner accepts the Settlement Payment in full and final satisfaction of the Outstanding Claims. Additionally, each and all of the parties to this Agreement, and the parent companies, subsidiaries, divisions, affiliates, owners, officers, directors, agents, commissioners, employees, subcontractors, representatives, successor and assigns of each and all of them are released from any and all claims of liability, past, present or futures,of whatsoever kind or character,by reason of or arising out of or existing in connection with the Dispute or the Outstanding Claims. Page 2 of 9 4. Agreed-Upon Construction of Percentage Rent Provisions. The parties have agreed upon the interpretation of the Percentage Rent provisions of the Ground Lease (including the definition of"Project Revenue") as they relate to the use and occupancy of 16th Street's Exclusive Spaces for the period commencing on January 1, 2014, and terminating on June 30, 2021 (the expiration of the current term of the Master Lease), or any earlier termination of the Master Lease (the "Master Lease Term") as hereinafter set forth. The parties acknowledge and agree that the interpretations set forth herein shall not be used to interpret, nor shall they modify the Percentage Rent provisions of the Ground Lease as they apply to any other Tenant(including the definition of Project Revenue), or to any future Master Subtenant of the Project. -� (a) Base Rent Fair Market Rental Value. s{For"`purposes of determining an implied Project Revenue for office space occupied b$y 16 Street or its affiliates at the Project, the parties agree that the base rent fair market rental-:value (including operating expenses for the 2006 base year operating exPlnses for all?office space tenants at the Project) shall be deemed to be $30.41 per rentable square foot effective January 1, 2014, which shall escalate annually at the rate of three percent (3%) on January 1st of each year thereafter for the duration of the Master LeasetTerm. Simultaneously withthe execution of this Agreement, 16th Street shall reimburse the-'®caner fo rthe cost of the•appraisal utilized to determine the base rent fair market rental value l for;the year 2014, in the amount of $3,000.00. 044 . s. as `. Example .'r2 eY',,?^ F•5.i e 4 1'. '�"c04?„;1„, srfw { 'S f44TA T. 6 By way of�i1lustr>ation of the foregoing,,and�uti1irzing the fair market annual base xrr rental for the 201.:f_calendar `ear in then ounftof$33243 ?er rentable square foot, and �•y yW� tr►r ��P q assuming for purposes of exam that 16 Seet and its affiliates actually occupy and use _ 90,000 square feet of Hoff ce space in the Proe�ct during such year, the implied Project Revenue and Percentage`Rent attr�ibutable to 16--;Street and its affiliates' occupancy would be as follows:'-.1sVg_ ' Base Rent Per Square Feet of Implied Project Percentage Square Foot Space Occupied Revenue Per Rent Per Year Year (2.5%) $33.23 '' 9001RT $2,990,700.00 $74,767.50 (b) Reimbursement of Operating Expenses. For purposes of determining an implied Project Revenue for reimbursable operating expenses, applicable to the office space occupied by 16th Street or its affiliates at the Project C`16th Street Reimbursable Expenses"),for the period from January 1,2014 through the end of the Master Lease Term, the parties agree that said operating expenses which are subject to reimbursement from third-party office tenants("Office Reimbursable Expenses") for the applicable Lease Year at the Project (calculated in a manner consistent with the Office Reimbursable Expenses for prior Lease Years at the Project, based upon the 95% grossed-up operating expenses Page 3 of 9 passed through to the other office tenants for the applicable Lease Year, the actual insurance expenses paid during the applicable Lease Year, and the actual real estate tax bills paid for the applicable Lease Year, copies of which have been furnished to the Owner), shall be used as the basis for determining implied Project Revenue as well as Percentage Rent due under the Ground Lease for the office space occupied by 16th Street or its affiliates at the Project to the extent that any of the categories of the Office Reimbursable Expenses exceeds the following base amounts ("Base Expenses"): (a) Operating Expense Base Amount: $2,456,911.19; (b)Tax Base Amount: $922,423.83;and (c) Insurance Base Amount: $186,879.43. Example. = purposes of example h� By way of illustration of the foregoing, assunn for u le that in gf p calendar year 2017, 16th Street and its affiliates occupy`90;900 square feet of the total 134,135 rentable square feet of office space at thePro ect, 16t"Street's pro rata share would be 67.10% (90,000/134,135 = .067096), andRassuming for purposes of example that the Office Reimbursable Expenses for the Project for 2017 calendar year are (a) Operating Expenses $2,000,000.00; (b) Taxes $1,00000.00; and (c) Insurance $400,000.00; utilizing the agreed upon Base Expenses as settforth below'; the implied'Froject Revenue and Percentage Rent due thereon would be calculated as :ollows: .�:�� wow ti�•w �y'.•l.�JL �••' • mot +u� } Expense Expense 2017 2017 Expense Pro Recovery Percentage Category Expense Base Expense Less Base Rata (Implied Rent Expense Share Project (2.5/o) Revenue) Op. Exp` v$2,000,61:!:$,2,4561-9,049_ 67.10 $-0- $-0- $-0- Ins ra ce --$4760T00 $186;879.43 - 67.10 $143,003. 4:- 0 ' �, $2413` 120.57 % 90 $3,575.10 .00 x. �., " pikes $1,000,0'''-x:_:$922 47J. 67.10 $52 053.6 $77,576.20 ° $1,301.34 --rzt, 00.00,:_, /0 > , he. • If the exiles for any of the categories for Office Reimbursable Expenses for a pparticular calendar ear,are-less than the Base Expenses, then, in that case, no Percentage y-:�:.�����r- P g Rent shall be due andnoredit to 16th Street will be due for that particular category. With respect to the Office Reimbursable Expenses, and the operating expenses which are subject to reimbursement from third party ground floor retail tenants ("Retail Reimbursable Expenses") (the Office Reimbursable Expenses and Retail Reimbursable Expenses shall be collectively referred to as"Third Party Reimbursable Expenses"),for the period from January 1, 2014 through the end of the Master Lease Term, the parties agree that said Third Party Reimbursable Expenses shall be calculated in a manner consistent with the Third Party Reimbursable Expenses for prior years at the Project(copies of which have been furnished to the Owner). Additionally, 16th Street shall report said Third Party Page 4 of 9 Reimbursable Expenses as a line item in the audited financial statements, under the Revenue category, commencing with the 2014 audited financial statement. (c) Parking Spaces. For purposes of determining an implied Project Revenue and calculating Percentage Rent thereon for parking spaces actually used by 16th Street or its affiliates at the Garage,the parties agree that the fair market value shall be deemed to be $107.00 per space,per month,commencing on January 1,2014, and for the duration of the Master Lease Term. Example: By way of illustration of the foregoing, assumingfor purposes of example that 16th Street and its affiliates use 300 parking spaces at the iarage for each month of the 2017 rS:-'fr calendar year on a monthly basis (by virtue of the usejof monthly parking cards for access to the Garage),the implied Project Revenue andl Percentage Rent attributable to 16th Street and its affiliates' use would be as follows: .�_s' `- 1 . • ' eR =' :- Parkin Charge Annual Number lied--=Pr Parking g p Fo�ect Percentage Per Month Per o.P rking Revenue Rent Space Spac es-(600.r ` ' (2.5%)? mont ly x 12). = -:4k. $107.00 y�ry 3,6µO= et.$385,200700 � $9,630.00 ter .#--.. 3t t{'E'' Iti, �r = ,,,,!..0..:44-,-,r r t _' ".<16, 5. Percentage Rent'Payment/Additional Documentation. Effective as of the 2015 calendar year t o`ugh. r lendof the •Master Lease Term, solely, the process for submitting the=Percentage`Rent payment,;as.requ�i�red under Section 3.3(b) of the Ground .0-,:-:::;- ., Lease,`shall be modified as follows: 16t Street Partners shall submit an estimated Percentage Rent payment;.along with the back-up information,within sixty(60)days from the end of each Lease r;,subject for finalizing the audited financial statement for said particular ase Year, wit l e adjusted/final payment due within one hundred fifty (150) days from 4e1end of each`tease Year As long as 16th Street follows this modified procedure, no penalties shall°accrue to PKY under the Ground Lease. Street agre 16th es;for'the duration of the Master Lease Term,to include, along with the audited financial statement and each final payment of Percentage Rent (including Percentage Rent from the lease of space to third parties and other parking revenue in accordance with the provisions of the Ground Lease), shall provide the Owner with the following: (i) a report with the floor plans reflecting the total square feet of space in the Project actually occupied and used by 16th Street or its affiliates during the prior Lease Year (which Owner may verify through a site visit); (ii) the actual Third Party Reimbursable Expenses and the 16th Street Reimbursable Expenses, as well as the corresponding reconciliations for said expenses for the prior Lease Year; (iii) the number of monthly parking passes or access cards issued to and actually used by employees of 16th Page 5 of 9 Street and its affiliates; (iv)a copy of the insurance bill(s)paid and covering the prior Lease Year; and(v)proof of payment of real estate taxes paid and covering the prior Lease Year. 6. Agreement Regarding Parking Garage Provisions. (a) Recognition of Number of Parking Spaces as Constructed in the Garage. The parties recognize that the Ground Lease provides that the Garage shall contain a minimum number of six hundred (600) parking spaces. The parties acknowledge, however, that the actual number of parking spaces in the Garage is four hundred and ninety-three (493). (b) Temporary Abatement of EnforcementFofithe Public Parking Requirements. The parties acknowledge that Section 6.1(b) of theor nd Lease requires 100 public parking spaces in the Garage to be made available at all Mimes for use by the eneral public, and that said provision under the Groun Lease is not being modified. 16' Street has represented that this restriction impairs yits ability to leasjiiace to Tenants of the Project, and that the demand for public parking is greater during-periods after regular office hours on weekdays and all times during weekends: The parties:consider it in the } - ,�x{ best interests of the Project and the Owner td ate bate enforcement of this 1p lic parking requirement in the Garage, on;a}temporary basis. �Solel y during the Master Lease Term, the Owner agrees to (i) abate the`-enforcement of+thks.,provision contained in section 6.1(b) of the Ground Lease; (ii) rmihereallocation of the total number of public parking spaces that must be availablezto the general public-pp.-weekdays from 7:00 A.M. to 6:30 P.M. (Office s ry qrs)from 100 to-20 spaces; and(iii) increase the number of public parking that must:3be avarlable for use by members ofrthe. general public, after Office Hours on weekday?sue`. and at all=:times during :weekends, 'tic 300 spaces. This temporary abatement of enforcement of the public=Yking requirement shall not affect the requirement to mainta ten.('l®)p eking spaceskfor monthly parking for members of the general public.m.hr == , Future Master ublea�se Approvals. Pursuant to Section 3.3 of the Ground Lease;th^e City is entitled.to receive:Percentage Rent on the basis of Project Revenue derived from operation ofthe Project by the "Tenant" thereunder, or by the "Master Subtenant"iunder a Master Sblease of all or substantially all of the Project or of twenty percent (20%) ormore of Garage to a single tenant. The parties acknowledge that under circumstances in which any future Master Subtenant and/or its related entities occupy space in the Prct for no rental or at a rental rate substantially below market rental rates then in effect (an "Under-market Sublease") Project Revenue may be adversely affected. As such, in connection with the approval of a proposed Master Sublease and to the extent the Owner has approval rights under any proposed "Master Sublease" (as such term is defined Section 10.2(f), of the Ground Lease) pursuant to the Ground Lease, and in addition to any other documents which Owner may be entitled pursuant to the terms of the Ground Lease, Tenant shall provide the Owner with the following documents, in connection with the approval of such proposed Master Sublease: (1) a copy of the Master Sublease; (2) the Master Subtenant's business plan (including proposed market rental value for the spaces under said Master Sublease; proposed operating expenses for the spaces under said Master Sublease; and proposed market rental Page 6 of 9 values for parking spaces in the Garage which may be the subject of said Master Sublease; (3) an acknowledgement from the Master Subtenant, as to whether or not any of the spaces, which are the subject of said Master Sublease, will be occupied by the Master Subtenant or its related entity for its exclusive use; and (4) Master Subtenant's financial statements. 8. Miscellaneous. (a) On or about June 12, 2015, 16th Street calculated calendar year 2014 Project Revenue and paid Owner 2014 calendar year Percentage Rent in the total amount of$140,410.31, which amount includes (in addition to Percentage Rent on direct Project �(r Revenue), Percentage Rent on implied Project Revenue 'I6th Street's Exclusive Spaces based upon the terms of this Agreement(i.e.,Percenge*nt of$62,641.56 attributable to Base Rent, $3,196.71 attributable to Office ReimbursableI-Expenses, and $9,983.10 attributable to parking), and the City acknowledges that the method of calculation and amount of Percentage Rent paid by 16th Street for 16th Street's Exclusive Spaces for the calendar year 2014 complies with the provisions of this Agreement=rand satisfies the Percentage Rent payment due for the 16th Street.Exclusive Spaces for tle.2014 calendar year (b) 16t Street's agreementto.pay the Settlement Amount to the Owner in full and final satisfaction of the Outstaannding-Clkaims has been made in order to avoid litigation, and shall not be construed as an admission or evidence oflliability, responsibility, or fault of any kind by 16th Street or PKY. =ter +g tv (c) Th.[[epartiesreto stipulate and=agree<that this Settlement Agreement represents the entire agreementby, between and among them with respect to the subject matter hereof, and e provisions containedlerein may not be changed or altered without the expresswritten consent of�all of the parties ,N r ,a rr'�.,sue ,„,.,. �?`'• (d) All-of the parties:hereto participated in the preparation of this Settlement Agreement and in the .process Hof preparation thereof, each and all of the parties acknowledge hereby that°='each party was fully and adequately represented by its own ~ { { ^NY F s,+ respective: legal counsel and has received legal advice from its own respective legal counsel. P Ikea. (e) In the•4event offany litigation arising out of this Settlement Agreement, this Settlement Agreemehtsl all not be construed in favor or against any party by reason of its vv�_ process or preparation: (0 If any legal action, proceeding, or hearing is brought by any of the undersigned parties to enforce the terms of this Agreement, then the prevailing party shall be entitled to recover legal costs and reasonable attorneys' fees incurred in connection with said action. All parties to this Agreement shall bear their own respective legal costs and attorneys' fees in connection with the Dispute or Outstanding Claims through the Effective Date of this Agreement. Page 7 of 9 (g) This Settlement Agreement shall be signed in counterpart originals by each and all of the parties hereto and each such counterpart original shall be deemed an original for all purposes. [SIGNATURE PAGES FOLLOW] fi o F2,, 4 r`G } crrfa 4r T' - ' x E � M`] 4X6-4:411.v r t p _'Sj r ? :et,..-t _1 s ,�f ;� fi V $ F_ Pik}-� • -, v .....M.,. , ':.:1-4,,, + Page 8 of 9 IN WITNESS WHEREOF, the parties have executed this Settlement Agreement effective as of the day and year first set forth above. ATTEST: CITY OF MIAMI BEACH,FLORIDA, a municipal corporation of the State of Florida Rafael E. Granado, City Clerk Philip Levine,Mayor Date: ATTEST: PKY LINCOLN PLACE, LLC, a Delaware limited liabilitycompany By: � By: Name: Title: Title: Date By `Name: - , Title: -Date: ATTEST: 16TH STREET PARTNERS, LLC, • a Florida limited liability company By LNR Property LLC, a Delaware limited liability company By: By: Name: Name: Title: Title: Date: Page 9 of 9 COUNSELING REPORT MARKET RENT ANALYSIS FOR OFFICE SPACE Lincoln Place 1601 Washington Ave. Miami Beach,FL 33139 Report 201541 PREPARED FOR City of Miami Beach Mark Milisits Asset Manager Tourism,Culture and Economic Development Department Office of Real Estate 1755 Meridian Ave. Miami Beach,FL 33139 PREPARED BY BLAZEJACK& COMPANY 172 W Flagler Street, Suite 340 Miami,Florida 33130 Phone: (305)372-0211 Fax: (305)374-1948 EXHIBIT BLAZEJACK & COMPANY REAL ESTATE COUNSELORS June 25,2015 City of Miami Beach Mark Milisits Asset Manager Tourism,Culture and Economic Development Department Office of Real Estate 1755 Meridian Ave. Miami Beach,FL 33139 Re: Appraisal of Real Property-201541 Fair Market Rent analysis for occupied office spaces by LNR. Lincoln Place 1601 Washington Ave. Miami Beach,FL 33139 Dear Mr.Milisits: At your request,we have completed a retrospective analysis of the market rent as of January 2014 of the above referenced property,to various Assumptions and Limiting Conditions set forth in the accompanying report. The physical inspection and analysis that form the basis of the report has been conducted by the undersigned. Our analyses have been prepared in compliance with the standards and regulations of the Uniform Standards of Professional Practice (USPAP). The accompanying report includes pertinent data secured in our investigation, exhibits and the details of the processes used to arrive at our conclusion of value. As a result of the examination and study made, it is my opinion that the Fair Market Rent for small spaces, subject to economic conditions prevailing,as of January 1,2014,the date of the analysis was: Market Rent as of January 2014 Property Address Market Type Total Operating Rent of Rent Expenses Office 1601 Washington Ave. $32 FS $11.36 Respectfully submitted, BLAZEJACK&COMPANY , g Jose Wong Senior Consultant Cert Gen RZ-2797 172 W FLAGLER STREET,SUITE 340,MIAMI,FLORIDA 33130•PHONE(305)372-0211*FAX(305)374-1948 1601 Washington Ave REPORT 201541 SUMMARY OF FACTS AND CONCLUSIONS i ,014ithi, • is Property Name: Lincoln Place Property Type: Office Location: 1601 Washington Ave. Miami Beach FL 33139 Parcel Identification 02-3234-919-0840 Source:Miami Dade Public Records Owner: City of Miami Beach Client: City of Miami Beach Interest Appraised: Fair Market Rent Date of Appraisal: January 1,2014 Dates of Inspection: June 22,2015 Date of Report: June 25,2015 Property Size: 78,168 SF(space occupied by LNR) Highest and Best Use: As Vacant: Mixed-Use Building Development As Improved: Continued use as Mixed-Use Building Retrospective Market Rent Indication,as of January 1,2014: Market Rent as of January 2014 Property Address Market Type Total Operating Rent of Rent Expenses Office 1601 Washington Ave. $32 FS $11.36 BLAZEJACK& COMPANY REAL ESTATE COUNSELORS 1601 Washington Ave REPORT 201541 TABLE OF CONTENTS CERTIFICATE OF VALUE 1 ASSUMPTIONS AND LIMITING CONDITIONS 2 MARKET RENT ANALYSIS 3 IDENTIFICATION OF THE PROPERTY 4 PURPOSE DATE AND FUNCTION OF THE REPORT 5 SCOPE OF THE ASSIGNMENT 5 LEGAL DESCRIPTION 5 PROPERTY HISTORY 6 DEFINITIONS OF VALUE AND INTEREST APPRAISED 6 MARKET RENT ANALYSIS 7 CONCLUSION OF MARKET RENT 11 ADDENDA • Exhibit A Subject Plans and Photographs Exhibit B Comparable Rent Photographs Exhibit C Engagement Letter Exhibit D Qualifications of the Appraiser BLAZEJACK & COMPANY REAL ESTATE COUNSELORS 1601 Washington Ave REPORT 201541 CERTIFICATE OF VALUE I certify that,to the best of my knowledge and belief, • the statements of fact contained in this report are true and correct. • the reported analyses,opinions,and conclusions are limited only by the reported assumptions and limiting conditions,and are my personal,unbiased professional analyses,opinions,and conclusions. • We have no present or prospective interest in the property that is the subject of this report,and no personal interest with respect to the parties involved. • We have performed no services regarding the property that is the subject of this report within the three- year period immediately preceding acceptance of this assignment. • We have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. • Our engagement in this assignment was not contingent upon developing or reporting predetermined results. • our compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion,the attainment of a stipulated result,or the occurrence of subsequent event directly related to the intended use of this appraisal. • Our analyses,opinions,and conclusions were developed,and this report has been prepared,in conformity with the Uniform Standards of Professional Appraisal Practice. • Jose Wong has made a personal inspection of the property that is the subject of this report. • No one provided significant real property appraisal assistance to the persons signing this certification. • The reported analyses,opinions, and conclusions were developed, and this report has been prepared, in conformity with the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. • The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representative. • As the date of this report Jose Wong has completed the continuing education program of the Appraisal Institute as a Practicing Affiliate member. BLAZEJACK&COMPANY f Jose Wong Senior Consultant Cert Gen RZ-2797 BLAZEJACK& COMPANY 1 CERTIFICATE 1 1601 Washington Ave REPORT 201541 ASSUMPTIONS AND LIMITING CONDITIONS The appraisal is subject to the following assumptions and limiting conditions: I No survey of the subject property was undertaken. 2 The subject property is free and clear of all liens except as herein described. No responsibility is assumed by the appraisers for matters, which are of a legal nature, nor is any opinion on the title rendered herewith. Good and marketable title is assumed. 3 The information contained herein has been gathered from sources deemed to be reliable. No responsibility can be taken by the appraisers for its accuracy. Correctness of estimates, opinions, dimensions, sketches and other exhibits which have been furnished and have been used in this report are not guaranteed. The value estimate rendered herein is considered reliable and valid only as of the date of the appraisal,due to rapid changes in the external factors that can significantly affect the property value. 4 This study is to be used in whole and not in part. No part of it shall be used in conjunction with any other appraisal. Publication of this report or any portion thereof without the written consent of the appraiser is not permitted. 5 The appraisers herein,by reason of this report,are not required to give testimony in court with reference to the property appraised unless notice and proper arrangements have been previously made therefore. 6 The value estimate assumes responsible ownership and competent management. The appraiser assumes no responsibility for any hidden or in apparent conditions of the property,subsoil,or structures,which would render it more or less valuable. No responsibility is assumed for engineering, which might be required to discover such factors. 7 Neither all nor any part of the contents of this report shall be conveyed to the public through advertising, public relations, news, sales or other media without the written consent and approval of the authors, particularly as to valuation conclusions, the identity of the appraisers or firm with which they are connected,or any reference to the Appraisal Institute. 8 Any exhibits in the report are intended to assist the reader in visualizing the property and its surroundings. The drawings are not intended as surveys and no responsibility is assumed for their cartographic accuracy. Any drawings are not intended to be exact in size, scale,or detail. Areas and dimensions of the property may or may not have been physically measured. If furnished by the principal or from plot plans or surveys furnished by the principal,or from public records, we assume them to be reasonably accurate. No responsibility is assumed for discrepancies, which may become evident from a licensed survey of the property. 9 The Americans with Disabilities Act(ADA)became effective January 26, 1992 sets strict and specific standards for handicapped access to and within most commercial and industrial buildings. Determination of compliance with these standards is beyond appraisal expertise and,therefore,has not been attempted by the appraisers. For purposes of this appraisal, we are assuming the building is in compliance; however, we recommend an architectural inspection of the building to determine compliance or requirements for compliance. BLAZEJACK& COMPANY 2 ASSUMPTIONS AND LIMITING CONDITIONS 1601 Washington Ave REPORT 201541 MARKET RENT ANALYSIS BLAZEJACK& COMPANY 3 MARKET RENT ANALYSIS iI 1601 Washington Ave REPORT 201541 IDENTIFICATION OF THE PROPERTY The property under analysis in this report is located at 1601 Washington Ave. Miami Beach, FL 33139,at the NEC of Washington Avenue and 16th Street. The building comprises about 105,194 SF of office space in 8 floors and 28,941 SF of retail space on the ground. The site is owned by the City of Miami Beach,according to the Public Records of Miami Dade County,as folio No. 02-3234-919-0840. We have been retained to make a market rent study of 78,168 SF of office space occupied by LNR,on floors 5th, 6`",7th& 8th(19,542 SF/floor). The owner of the building is held in the name of 16th Street partners LLC c/o The Comras Company of Florida Inc. The folio of the leasehold is No.02-3234-919-0842. .. ,- i , . .. . Inii -, (ED _ � ‹ l j !1C.C?t N R[? 1INCULtV R ., . - -----— - Pt . : Ill - • ...„rti r =. ,fir, ■• LLr ., 4 .s y Z a a ,• - .• , - , — _., . _ ,.. -, - c, „:,....., ..„, „,. _ .. w E _ __ _____ _,, #,x - . %.. ., , 0 ,.._- ,,.,, - „, .„ _ , z ... .,,, „ ,i- _ • A 1 Iiik , -#1 6 T li s T — - �,rr aa3 h' n s+ !�f Y Y t s. T 2 tip ittr - '' ' ' . RANI_ _1 , e Y Y y k A ac. — < r 0 0 BLAZEJACK& COMPANY 4 MARKET RENT ANALYSIS 1601 Washington Ave REPORT 201541 PURPOSE DATE AND FUNCTION OF THE REPORT The purpose of this report is to estimate the Fair Market Rent for the office space occupied by LNR. The date of the analysis was January 1, 2014. It is understood that the function of this report is for internal asset management for lease negotiations. SCOPE OF THE ASSIGNMENT This is a complete appraisal presented in a narrative, summary format. USPAP defines scope of the work as the type and extent of research and analysis in an assignment. The scope of this analysis was to inspect the property,consider market characteristics and trends,collect and analyze pertinent data,develop a conclusion and estimate the property's market rent. During the course of this assignment,we developed and analyzed current office space rents located in the Miami Beach area. The extent of verification consisted of assembling and analyzing raw data gathered from a variety of sources including public records data services, news periodicals, broker or knowledgeable third parties when available, and in-houses files. LEGAL DESCRIPTION FULL LEGAL DESCRIPTION 0 FULL LEGAL DESCRIPTION ALTON BEACH 1ST SUB N OF LO I 1/LESS ESUl-I &LESS 13E6 PB 2-77 SW COR OF LOT 16 TH S 00 DEG W LOTS 17&18&20 FT ALLEY LYG N 116.79FT N 89 DEG E 85.20FT N 00 OF LOT 17 LESS E6OFT&LESS BEG DEG E 116.70FT N 89 DEG W 85.19FT SW COR OF LOT 16TH S 00 DEG W TO POB&ALL LOTS 19 THRU 22& 116.79FT N 89 DEG E 85.20FT N 00 AIR RIGHTS DESC IN OR 19236-4458 DEG E 116.70FT N 89 DEG W 85.19FT LOT SIZE 64740 SOFT TO POB&ALL LOTS 19 THRU 22& AS PER LEASE AGREEMENT WITH AIR RIGHTS DESC IN OR 19236-4458 CITY OF MIAMI BEACH LOT SIZE 64740 SQ FT F/A/U 02-3234-019-0840 Folio No.02-3234-019-0840 Folio No.02-3234-019-0842 BLAZEJACK& COMPANY 5 MARKET RENT ANALYSIS 1601 Washington Ave REPORT 201541 PROPERTY HISTORY The property site is held in the name of City of Miami Beach according to the Public Records of Miami Dade County. We are not aware of any transfer of the property or purchase listing or offering within the past five years. Folio No. 02-3234-019-0842: The property is a leasehold interest owned by 16th Street Partners LLC c/o The Comras Company of Fla Inc. DEFINITIONS OF VALUE AND INTEREST APPRAISED According to the Code of Federal Regulations, Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), and according to the 12th Edition of The Appraisal of Real Estate, market value is defined as follows: Market Value The most probable price,which a property should bring in competitive and open market under all conditions requisite to a fair sale,the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 1 Buyer and seller are typically motivated. 2 Both parties are well informed or well advised,and acting in what they consider their own best interests; 3 A reasonable time is allowed for exposure on the open market. 4 Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto;and 5 The price represents a normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. Fee Simple Interest Absolute ownership unencumbered by any other interest or estate,subject only to the limitations imposed governmental powers of taxation,eminent domain,police power,and escheat. Leased Fee Interest An ownership interest held by a landlord with the right to use and occupancy conveyed by a lease to others;usually consists of the right to receive rent and the right to possession at termination of the lease. Market Rent The rental income that a property would most probably command on the open market; indicated by current rents paid and asked for comparable space as of the date of the appraisal. Source: Appraisal Institute,The Appraisal of Real Estate, 13th Edition,(Chicago,2008) BLAZEJACK& COMPANY 6 MARKET RENT ANALYSIS 1601 Washington Ave REPORT 201541 MARKET RENT ANALYSIS Office Market In order to estimate the market rent of the subject office space occupied by LNR, a rent survey of similar spaces in the Miami Beach area was conducted. The basis for classification was location,design,and quality of construction,quality of interior finishes,age,and condition. Size is also a sensible,small space with less than 6,000 SF attains higher rent than bigger spaces. The rent comparable selected give an indication of the level of rent that could be commanded by the subject if offered in the open market. The rent survey, a location map,and a table of adjustments can be found following. Photos of the comparable office spaces can be found in the Addenda. ........% 1 ■Maur. each Chamber I •Miami Beach 1 - 1 I of Cr, Convention Cent It lH' ----- 18TH YI (ami Beach Theater it of the Performing i Arta Orrice Rent 7 Vent" Warta Brach City ■Hag ,co m 235 Lincoln Rd. ■ f S351sF L it 17TH ST —- —— _ ' -Office Rent 6^ -LL Office Rent 4 �7� ---1,y. 1/" 1668 Meridian Ave. 420 Lincoln Rd. arcTriç—i \--$ _ i RD j i ony a {:enter '1 ■ .Art UOw Welcome `__A- ``fit' —_ § ■ Mice Rent 3 1101 Lincoln Rd_ Office Rent 5 53015E 1 580 Lincoln Rd. 16TH ST ___ -- !—__�J i t __" $31/5F - 1/ 1 9 Office Rent 1 n r t j°z 1601 Washington Ave. %. 532/SF 7a I l fi�$ SUBJECT-Office 1601 Washington Ave. 5TH ST _1�?N a''�__,,1-1(� ��!� Ftor'r II �X70.en--- - - - I �1 _ 71114TH PL Ounce Rent 2 1370 Washington Ave.E. 53015E L , 7[7 14TH ST ���----1 na, ..4., 1lsm ST �-- I -71iii -'1=5 __ ----ii------1 r 1Fri - f--7 - Dt l_oH;ti,r_ 14. ime — o■ mom It Data use subject to license. ©DeLorme-DeLorme Street Atlas USA®2010. 0 200 400 600 800 1000 1200 � „o��n. MN(6.3°W) Data Zoom 145 Office Comparable Location Map BLAZEJACK& COMPANY 7 MARKET RENT ANALYSIS 1601 Washington Ave REPORT 201541 All the office rates in our survey are asking rates. Leasing agents interviewed in gathering rental data indicated that no concessions were provided although some terms were negotiable depending on the size of space and length of the lease. In most cases,the rates actually achieved in leases are near the asking rates. No tenant improvements were considered, since the office space comps were in good condition. The office spaces occupied by LNR have good quality construction finish, and are in excellent condition. Comparable Office Listing Rental Summary-Miami Beach No. Property Name Vacant Year Quoted Rent Operat. Comment Location (RSF) Built Rates Type Exp Renovated S/SF 1 Lincoln Place 1,500 N/A $32 FS There are 3 spaces available.Suite 200: 1,500 SF,Suite 320: 1,480 SF, 1601 Washington Ave. 1,480 and Suite 330:2,537 SF.The building has 110,946 SF of office space, Miami Beach 2,537 and the 5-story parking structure includes 534 spaces 24/7 security on FL 33139 property.The building is located one block south from Lincoln Road.The space is listed at$36/SF.$20/SF for Tenant Improvements can be given to tenants with good credit and leases with a 5 year term. 2 1370 Washington Ave. 600 1948 $30 FS Located in the Art Deco District,in the heart of South Beach.The office Miami Beach space is in moving condition. FL 33139 3 1101-1113 Lincoln Road 736 2010 $30 FS Suite 330 has 2,019 SF office space available.The building has an 8- Miami Beach 1,169 story concrete and steel reinforced structure with a high quality space on FL 33139 South Beach.It's considered a B building Municipal parking is available nearby. 4 420 Lincoln Road 1,980 1940 $35 FS This bulding has two wings: one 7-story wing and one 4-story wing Miami Beach to There is retail on the ground level and office space on the remaining FL 33139 7,200 floors. Building underwent extensive renovations to all common areas. There are 5 spaces available on floors 2,3 and 4. 5 560 Lincoln Road 2,500 1929 $31.20 FS Fully built-out and fully furnished. The 4-story office building has Miami Beach entrance on Pennsylvania Avenue. FL 33139 6 1688 Meridian Ave. 6,333 1961 $36.00 FS $11 All new bathrooms and updated common areas. 1688 Meridian was Miami Beach 9,687 $34.00 FS designed by renowned architect Morris Lapidus. Biometric secure FL 33139 access.The building is located one block from Lincoln Road and Miami Beach Convention Center,across the street from Macy's.The space on listing is on the 6th floor. 7 235 Lincoln Road 945 1947 $35.00 FS Built out office space ready to move in.Elegant lobby and corridors.This Miami Beach is a B office building with a total of 20,000 square feet of office space. FL 33139 Everything has been updated, elevator,code entrance. Parking located adjacent.All common area charges included,and electricity is included in the pricing except for the penthouse level.The building is located in the NEC of Lincoln Rd and James Ave. SUBJECT: Lincoln Place-Office 78,168 N/A NNN The subject retail faces Washington and 16th Street.It has good quality 1601 Washington Ave. finishing and is in good condition. Miami Beach FL 33139 BLAZEJACK& COMPANY 8 MARKET RENT ANALYSIS 1601 Washington Ave REPORT 201541 OFFICE RFNTCOr 1PS AD.Jt'ST1ENT C;RID Rent $/SF '. :i lK, 11 ` Location 0% 0% 0% -5% -5% 5% -5% Building Quality 0% 10% 0% 0% 5% 0% 5% Condition 0% 5% 0% 0% 0% 0% 5% Size 0% 0% 0% 0% 0% 0% 0% Others 0% 0% 0% 0% 0% 0% 0% Overall Adjustment 0% 15% 0% -5% 0% 5% 5% Adjusted Rent $32 $35 $30 $33 $31 $37 $37 Average All Comps: $33 Chosen Office Rent($/SF)for Subject $33 Full Service as of June 2015 Chosen Office Rent($/SF)for Subject $32 Full Service as of January 2014 LEG END Comparison Adjustor' Similar to Subject = the comp does not need adjustment Inferior to Subject + the comp needs a plus adjustment Superior to Subject - the comp needs a negative adjustment Based on comparison with the market data we concluded that the market rent for small office spaces with the same finishing construction quality and excellent condition as the occupied by LNR was$32 per rentable square foot per year on a full service as of January 2014. We have considered that the market rent included a 5-year term rental lease. Market annual increases on base rent and operating expenses is 3%. Market office rent for a large office area as the subject was estimated at$30/SF full service as of January 2014. Operating Expenses The annual operating expenses of the subject property were projected in this analysis based on similar properties. BLAZEJACK& COMPANY 9 MARKET RENT ANALYSIS 1601 Washington Ave REPORT 201541 OFFICE OPER.VTINC EXPENS ES STAI'I:NIL\ I June 2015 EXPENSES: Per SF FIXED EXPENSES Property Taxes $2.68 Insurance $1.31 TOTAL FIXED EXPENSES: $3.99 VARIABLE EXPENSES Administrative&Management $2.62 Repairs/Maintenance $1.68 Utilities $2.20 Cleaning $0.72 Others $0.00 Reserves $0.15 $7.37 TOTAL.EXPENSES (11 36 Our estimated total stabilized Operating Expenses for the stabilized year for office space was$11.36 per square foot of rentable area. BLAZEJACK& COMPANY 10 MARKET RENT ANALYSIS 1601 Washington Ave REPORT 201541 CONCLUSION OF MARIET RENT Market Office Rent is estimated on full service or"gross" basis, wherein the landowner pays all expenses, including common area utilities, management, administration, common area costs,cleaning,taxes,and insurance. The tenant has to pay the electricity they consume. The market rent and operating expenses for small office spaces located at 1601 Washington Avenue in Miami Beach,as of January 01,2014 are: Market Rent as of January 2014 Property Address Market Type Total Operating Rent of Rent Expenses Office 1601 Washington Ave. $32 Gross $11.36 BLAZEJACK& COMPANY 11 MARKET RENT ANALYSIS ADDENDA f Exhibit A Subject Plans and Photographs N . r 0 N } Q' a CC o CD W J X U_ co Z 1 NE y4 wL = � \, I- D o w _II �, \ = o U _11 LI11 1 1 • C. cn -) cn :© _ I _ k ® t• ® ® E E'er 1 / r. ., . • . ,I !■ !S , 1 111 IIas III 1 Ir I�• ,, ® �� 111111111 !„.. r = mums i 1 i t• Gil raw Irmo, I . n _u al q —1 _ = . 1 ee 1 m ED 1�0 C5 it,■ , — ---)li I': !MI 071 i I • - -�� i_ I m .� ' m--rk — 1 _ 1I O m m .1 wJ •i .111W! 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