Settlement Agreement with PKY Lincoln Place, LLC and 16th Street Partners, LLC 01-015--0Z9//g
SETTLEMENT AGREEMENT
PARTIES:
THIS SETTLEMENT AGREEMENT (this "Agreement") is made this \ So
day of Sa p-r• , 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-use project containing a parking
garage,office space, and retail and/or commercial 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 1, 1999, and recorded in Official Records Book
18770, Page 46, of the Public Records of Miami-Dade County, Florida (the "Public
Records"), as modified by that certain First Amendment to Agreement of Lease dated as of
November 8,2000, and recorded in Official Records Book 19395,Page 1106,of the Public
Records (as amended, the "Ground Lease"), as assigned to TAG Lincoln Pace LLC
("TAG") pursuant to an Assignment and Assumption of Lessee's Interest in Lease dated
May 24, 2006, and recorded in Official Records Book 24598, Page 2948, of the Public
Records; and further assigned to PKY, through the sale of the 100% ownership interest in
TAG to PKY Lincoln Place Holdings, LLC, a Delaware limited liability company,
pursuant to an Assignment of Membership Interest, dated as of December 6, 2013, and the
subsequent name change of TAG to PKY Lincoln Place, LLC; and
WHEREAS, PKY leases the entire Project to 16th Street pursuant to that certain
Master Sublease, titled Lease Agreement, dated March 25, 2006 (the "Master Lease") a
short form of which is recorded as a Memorandum of Lease, dated May 25, 2006, and
recorded in Official Records Book 24598, Page 3094, of the Public Records (the
"Memorandum of Lease"); and
WHEREAS, pursuant to the terms of the Master Lease, 16th Street agreed to be
responsible for the payment of all obligations of PKY to the Owner (as defined in the
Ground Lease)under the Ground 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
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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 Outstanding Claims, (ii) an agreed upon
construction of the Percentage Rent provisions of the Ground Lease as they shall apply to
16th Street's Exclusive Spaces for the period commencing on January 1, 2014 through the
duration of the Master Lease Term; (iii) an agreement between the Owner and PKY as to
reasonable conditions for approval by the Owner of a future Master Sublease; and (iii)
certain agreements regarding the Garage through the duration of the Master Lease Term.
TERMS AND CONDITIONS:
NOW, THEREFORE, in consideration of the above recitals and the promises,
agreements and releases contained herein, as well as for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the parties
agree as follows:
1. Recitals Incorporated; Definitions. The above recitals are incorporated
herein by reference. Unless otherwise defined herein, defined terms (as indicated by an
initial capital letter) shall have the meaning ascribed to them in the Ground Lease.
2. City Commission Approval Contingency. The parties hereto understand
and agree that this Agreement will not be binding upon the parties to this Agreement until
such time as the City Commission of the City of Miami Beach has approved same, and the
Agreement is fully executed by the parties to the Agreement. City Commission approval is
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 Outstanding Claims and Mutual Release. In resolution of the
Dispute and in consideration of a full and final settlement of the Outstanding Claims,
contemporaneously upon full execution of this Settlement Agreement, 16th 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.
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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. 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
this 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.
Example:
By way of illustration of the foregoing, and utilizing the fair market annual base
rental for the 2017 calendar year, in the amount of$33.23 per rentable square foot, and
assuming for purposes of example that 16th Street and its affiliates actually occupy and use
90,000 square feet of office space in the Project during such year, the implied Project
Revenue and Percentage Rent attributable to 16th Street and its affiliates'occupancy would
be as follows:
Base Rent Per Square Feet of Implied Project Percentage
Square Foot Space Occupied Revenue Per Rent
Per Year Year (2.5%)
$33.23 90,000 $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 ("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
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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:
By way of illustration of the foregoing, assuming for purposes of example that in
calendar year 2017, 16th Street and its affiliates occupy 90,000 square feet of the total
134,135 rentable square feet of office space at the Project, 16th Street's pro rata share would
be 67.10% (90,000/134,135 = .067096), and assuming 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 $1,000,000.00; and (c) Insurance $400,000.00;
utilizing the agreed upon Base Expenses as set forth below, the implied Project Revenue
and Percentage Rent due thereon would be calculated as follows:
Expense
Expense 2017 2017 Expense Pro Recovery Percentage
Category Expense Base Expense Less Base Rata (Implied Rent
Expense Share Project (2.5%)
Revenue)
Op. Exp. $2,000,0 $2,456,911.19 $-0- 67.10 $-0- $-0-
00.00 /o
Insurance $400,00 $186,879.43 $213,120.57 67.10 $143,003. $3,575.10
0.00 /0 90
Taxes $1,000,0 $922,423,83 $77,576.20 67.10 $52,053.6 $1,301.34
00.00 /0 3
If the expenses for any of the categories for Office Reimbursable Expenses for a
particular calendar year are less than the Base Expenses, then, in that case, no Percentage
Rent shall be due and no credit 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
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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, assuming for purposes of example that 16th
Street and its affiliates use 300 parking spaces at the Garage for each month of the 2017
calendar year on a monthly basis (by virtue of the use of monthly parking cards for access
to the Garage),the implied Project Revenue and Percentage Rent attributable to 16th Street
and its affiliates'use would be as follows:
Parking Charge Annual Number Implied Project Percentage
Per Month Per of Parking Revenue Rent
Space Spaces (300 (2.5%)
monthly x 12)
$107.00 3,600 $385,200.00 $9,630.00
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 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
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•
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 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. 16t 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. Solely during the Master Lease Term,
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 any future 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 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
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values for parking spaces in the Garage which maybe 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
Revenue),Percentage Rent on implied Project Revenue for 16th Street's Exclusive Spaces
based upon the terms of this Agreement(i.e.,Percentage Rent of$62,641.56 attributable to
Base Rent, $3,196.71 attributable to Office Reimbursable 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 and satisfies the
Percentage Rent payment due for the 16th Street Exclusive Spaces for the 2014 calendar
year.
(b) 16th Street's agreement to pay the Settlement Amount to the Owner in full
and final satisfaction of the Outstanding Claims has been made in order to avoid litigation,
and shall not be construed as an admission or evidence of liability,responsibility, or fault
of any kind by 16th Street or PKY.
(c) The parties hereto stipulate and agree that this Settlement Agreement
represents the entire agreement by, between and among them with respect to the subject
matter hereof, and the provisions contained herein may not be changed or altered without
the express written consent of all of the parties.
(d) All of the parties hereto participated in the preparation of this Settlement
Agreement and in the process of preparation thereof, each and all of the parties
acknowledge hereby that each party was fully and adequately represented by its own
respective legal counsel and has received legal advice from its own respective legal
counsel.
(e) In the event of any litigation arising out of this Settlement Agreement, this
Settlement Agreement shall not be construed in favor or against any party by reason of its
process or preparation.
(f) 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.
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(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]
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•
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 Stag f
Florida
,„ ,
Rafael E. Granado, City ler V>. `' .•°•.: i •��i.e:they, ' y•r
N .,}
INCORP! ORATE ``
4,
ATTEST: �S !A� P.KYLINCOLN PLACE, LLC,
-J
phi g/5 T.••°`° °,a 'Delaware limited liability company
By: By: ■ !*. : .■
Name: To cf /(AC u��'I Name: -Exocit. - ice President
Title: Di Q-- r o �rt..�� � Title:
and General G�uriSe�
Date:
B •
Title:
Date:
ATTEST: 16TH STREET PARTNERS, LLC,
a Florida limited liability company
By: LNR Property LLC,
a Delaware limited liability company
By: By -
Name: v i.1 c.tn+ P.(C4 (i4ltcr-- Name: Steve. Rivers
Title: Tr 4�s%%fe c Title: General Counsel
Date:
APPROVED AS TO
FORM & LANGUAGE
,2t F R ECUTION
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(.38j' "C7—' 61112
City Attorney Dote