409-2002 RDA Reso
-"
RESOLUTION NO. 409-2002
A RESOLUTION OF THE CHAIRMAN AND MEMBERS OF THE
REDEVELOPMENT AGENCY OF THE CITY OF MIAMI BEACH,
APPROPRIATING $450,000 FROM THE CITY CENTER
REDEVELOPMENT AREA TAX INCREMENT FUNDS REPRESENTING
THE SETTLEMENT COSTS IN CONNECTION WITH GAZIT
O\'IERIDIAN). INC. VS. THE CITY OF MIAMI BEACH LAWSUIT.
WHEREAS, on October 17,2001, the Mayor and City Commission of the City of Miami
Beach passed Resolution No. 2001-24661 which authorized the execution of the Agreement for
Purchase and Sale for the City's purchase of the property located at 1701 and 1721 Meridian
Avenue, Miami Beach, Florida which is also known as 777 17th Street (the Equity One Building and
parking lot located adjacent thereto)(the "Subject Property"); and
WHEREAS, Resolution No. 2001-24661 also authorized the City Manager to negotiate the
terms of the Settlement Agreement whereby the owner of the Subject Property Gazit (Meridian), Inc.
will dismiss with prejudice its pending lawsuit in Gazit (Meridian). Inc. vs. City of Miami Beach,
11 th Judicial Circuit Court Case No. 00-30164 CA 24; and
WHEREAS, City Manager has negotiated the aforesaid Settlement Agreement; and
WHEREAS, said Settlement Agreement requires the payment of the costs, expenses and fees
of the plaintiff in the aforesaid litigation, in the amount of $450,000.
NOW, THEREFORE, BE IT DULY RESOLVED BY THE CHAIRMAN AND
MEMBERS OF THE MIAMI BEACH REDEVELOPMENT AGENCY that there is hereby
appropriated from the tax increment funds in the Redevelopment Trust Fund for the City
CenterIHistoric Convention Village Redevelopment Area the amount of $450,000 for the purpose
of paying full and complete compensation for all costs, expenses, including attorney's fees in the
I
'1
litigation styled Gazit (Meridian). Inc. vs. City of Miami Beach, 11th Judicial Circuit Court Case No.
00-30164 CA 24 and in the proceedings on the Petition for Certiorari, including appraisals.
PASSED and ADOPTED THIS
ATTEST:
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SECRETARY
P,IA TIOILBVLIRESO&ORDIGAZITM-l.WPD
N'FfOIf!IJM1O
FORM&1.ANGUAG8
& FOR EXECUTION
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GenIiIII CauniII .,
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MAMI BEACH
REDEVELOPI\IENT AGENCY ITEM SUMMARY
m
Condensed Title:
A Resolution of the Chairman and Members of the Redevelopment Agency of the City of Miami Beach,
appropriating $450,000 from the City Center Redevelopment Area Tax Increment Funds representing the
settlement costs in connection with Gazit Meridian, Inc. vs. the City of Miami Beach lawsuit.
Issue:
Should the City enter into a Settlement Agreement relative to the Gazit Meridian, Inc. VS. the City of Miami
Beach lawsuit.
Item Summary/Recommendation:
Adopt the Resolution.
Flnanciallnfonnatlon:
Amountto be expended:
Source of
Funds:
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Finance Dept.
T:\AGENDA\2002'JAN3002\REGULARlGazitROA.SUM.doc
AGENDA ITEM
DATE
3D
I~-<JL
CITY OF MIAMI BEACH
CITY HALL 1700 CONVENTION CENTER DRIVE MIAMI BEACH, FLORIDA 33139
www.ci.miami-beach.f1.us
REDEVELOPMENT AGENCY MEMORANDUM
To:
Chairman David Dermer and
Members of the Redevelopment Agency
d~.
Jorge M. Gonzalez
Executive Director
Date: January 30, 2002
From:
Subject:
A RESOLUTION OF THE CHAIRMAN AND MEMBERS OF THE REDEVELOPMENT
AGENCY OF THE CITY OF MIAMI BEACH, APPROPRIATING $450,000 FROM THE CITY
CENTER REDEVELOPMENT AREA TAX INCREMENT FUNDS REPRESENTING THE
SETTLEMENT COSTS IN CONNECTION WITH GAZIT MERIDIAN, INC. VS. THE CITY OF
MIAMI BEACH LAWSUIT.
RECOMMENDATION
Adopt the Resolution
ANALYSIS
On September 20, 2001, an executive session was held to discuss settlement options
regarding the Gazit Meridian Inc. (the "Developer") vs. the City of Miami Beach lawsuit and
the potential sale of the Gazit Meridian Building located at 1701 and 1721 Meridian Avenue
a/k1a "777 17th Street/Equity One Building". In accordance with direction received at the
executive session, staff performed due diligence relative to the building acquisition and
negotiated a Settlement Agreement. On October 17, 2001, the results of the
Administration's due diligence together with a negotiated Purchase and Sale Agreement
for the purchase of the property and parking lot were approved by the Mayor and City
Commission pursuant to Resolution No. 2001-24661. Together with said approval, the City
appropriated $350,000 for the deposit and due diligence expenses.
On November 28, 2001, another Executive Session was held. An extension of the closing
date was requested at City Commission direction to allow for public comment and a
publicly noticed educational workshop. As such, the closing date was extended to
February 1, 2002 and the Termination after Inspection Period was extended to January 31,
2002.
As part of the City's due diligence, an appraisal was ordered and prepared by J. Mark
Quinlivan as of October 8, 2001, valuing the property as follows:
. Office Building
. Parking Lot
Total
$3,850,000
$2.200.000
$6,050,000
On October 17, 2001, the Mayor and City Commission asked the Administration to request
an update to the appraisal report to reflect any adjustment to the building value as a result
of the September 11, 2001 terrorist attacks. Said update letter is attached and reflects no
change in value estimate.
January 30, 2002
City Commission Memorandum
777-11" Street/Equity One Bui/ding - RDA
Page 2 of 5
At the public workshop held on January 10, 2002, the Mayor and City Commission
requested a further update to the October 8, 2001 appraisal report as a result of the impact
of September 11, 2001 and incorporated current office vacancy factors. On January 24,
2002, Quinlivan provided an updated value of $6,050,000, again reflecting no change in
value.
The Settlement/Purchase and Sale Contract Provisions substantially include the following:
Purchase Price:
Inspection Period:
Termination after Inspection Period:
Closing:
Condition Precedent:
(Settlement Costs)
BACKGROUND
$6.05 million
Expires November 30,2001
Agreement may be terminated between
December 1, 2001 - December 20, 2001
upon payment of $15,000 (extended to
January 31, 2002).
Closing shall take place on or before
December 21,2001 (extended to February 1,
2002).
Execution by Seller of a Settlement Agreement
dismissing the outstanding lawsuit and
provides for payment of an additional
$450,000 from Buyer to Seller for legal costs
and expenses associated with the lawsuit.
On September 23, 1998, the Mayor and City Commission requested that the Administration
provide a comprehensive report on City-owned property and capital expended to lease
property from the private sector. On November 18, 1998 this matter was referred to the
Finance and Citywide Projects Committee. On December 22, 1998 the Committee
discussed the matter and recommended that the City seek altemative sites for the cultural
organizations and other not-for-profit groups which leased space from the City.
On March 17, 1999, the Administration ~roposed a Relocation Plan that contemplated the
transfer of City offices to the 555-17 h Street and Historic City Hall. I n accordance
therewith, and as a result of the City's acquisition of the Byron-Carlyle, the Cultural users
at 555-1ih Street were relocated to the Byron-Carlyle and the City appropriated funding
to renovate the 555-1 ih Street building for its own use.
At this time, if the proposed acquisition of the Equity One Building is consummated, the
City's office of Asset Management, Economic Development Division, Redevelopment
Agency, Human Resources, Labor Relations, Risk Management can be relocated to 555-
17th Street. If the Equity One Building is not acquired, then the aforementioned users may
not all be accommodated at the 555-17th Street due to increased space requirements of
the City offices and the need to retain the Credit Union at its present location. If the Equity
January 30, 2002
City Commission Memorandum
777-11h Street/Equity One Building - RDA
Page 3 of 5
One Street Building is acquired, it is proposed that the Credit Union be relocated to the
vacant retail space at the eastern end of the building.
As part of the $515,890 appropriation for the 555 17th Street building approved on July 18,
2001 pursuant to Resolution 2001-24504, funding was allocated for interior improvements
including roof replacement and telecommunications/data wiring. The most recent bid for
roof and HVAC replacement came in $25,000 under estimated improvement cost. The
Administration deems that aggregate funding appropriated for the 555-17th Street and the
funding proposed in the accompanying City resolution for improvements presented in this
agenda, combined, will be sufficient to effectuate the City office improvements at both the
555 and 777 1 ih Street buildings.
Prooertv Condition:
During its due diligence of the 777 17th Street building, the City procured an independent
roof and an asbestos survey. The HVAC system was also inspected and ADA compliance
was reviewed by Property Management. A summary of the results of these surveys is
attached and reflect the following:
. Of the 8,267 sf "roof' area, the area with moisture content represents only 1,052 sf of
the total area. Being unable to determine if the moisture content is as a result of a
failure of the roofs, HV AC or poor maintenance/warranty overview, it is estimated that
$25,000 will need to be allocated to replace the moisture damaged roofs and
insulations and for routine maintenance and repairs.
. Small amounts of asbestos exist in the building. Abatement of asbestos is estimated
to cost $9,582. Property Management does not recommend said abatement be
performed at this time. Abatement will occur concurrent with future interior
improvements.
. HVAC equipment was found to be in reasonably fair condition.
. Minor ADA improvements will be necessitated estimated not to exceed $25,000.
. Telecommunications/data wiring needs at the 777 17th Street building are estimated at
$70,000 and include a remote telephone shelf and computer server that will
accommodate additional future City uses as they transition into the building.
Parkina Lot
The proposed acquisition of the property located at 1721 Meridian will continue to be
utilized as a surface parking lot and currently contains approximately 40 spaces. This lot
will be managed by the City's parking system.
While private tenants in the building may be relocated to the 17th Street garage, some
specific tenant needs will continue to be accommodated on a monthly permit basis at the
surface lot.
January 30, 2002
City Commission Memorandum
777-1th Street/Equity One Building - RDA
Page 4 of 5
Public Workshop Presentation:
Attached to this memorandum is the presentation presented at the public workshop held
on January 10, 2002 containing pertinent property information, the property condition,
tenant information and lease expirations, and estimated building operating expenses. The
presentation also reflected the current and future City administrative office space
requirements and the proposed users at the property and other City facilities.
Favorable public comment was received during the workshop and, to date, no significant
adverse public comment has been received.
The presentation outlined the Appraised Value vs. the Negotiated Settlement and
Financing Plan which is as follows:
Neaotiated Settlement
Office Building $3,850,000
Parking Lot $2,200,000
Settlement Costs $450,000
$6,500,000
Fundina Source
Loan from Parking Enterprise Fund to General Fund
Parking Enterprise Fund
City Center RDA
Benefits of Acauisition
In addition to the advantages of settling ongoing litigation, the acquisition of the Equity One
Building will allow the City to address its ongoing needs for administrative office expansion
on a graduated basis.
During the presentation at the public workshop on January 10, 2002, several benefits of
acquisition were articulated as follows:
. Secures final lot of City controlled block.
. City gains an asset instead of paying ongoing rent for additional office space.
. Allows gradual transition to City Office use.
. Tenant revenue provides sufficient coverage to amortize approximately 2/3 of
acquisition cost and ongoing operating costs.
. Property tax will continue to be assessed and collected (until the facility is City
occupied)
. Efficiency gain through co-location of City Administration functions.
Committee and Community SUPDort
To-date presentations to City committees and community boards expressing their support
of the proposed acquisition have occurred as follows:
. The Budget Advisory Committee (BAC) met on December 11, 2001 and January 8,
2002 and expressed their support of the building acquisition.
. The Transportation and Parking Committee met on January 7,2002 and expressed
their support of the building acquisition.
January 30, 2002
City Commission Memorandum
777-1-;h Street/Equity One Building- RDA
Page 5 of 5
. MBCDC Board submitted the attached correspondence expressing their support of the
building acquisition.
. NBDC Board adopted the attached Resolution on January 15, 2002, strongly supporting
the City's proposed building acquisition.
. On January 29, 2002, the Business Resolution Task Force will meet and review the
proposed building acquisition plan.
CONCLUSION
As is evidenced in the background section of this memorandum, since 1998, the City has
continually been striving to minimize the costs related to the leasing of privately owned
property to house City Departments and to locate affected Departments in city-owned
facilities. As the attached presentation reflects, the City has the opportunity to acquire an
asset which is attractive from a variety of perspectives and satisfy pressing administrative
space requirements necessary to effectively and efficiently operate. Moreover, the
attached operating pro-forma reflects that the cost of the asset will be fully amortized within
the 9 year timeframe, based on the current leases and assuming extensions are exercised
(exclusive of tenant improvement requirements). The alternative available to the City is to
rent additional space over the same 9 year period which would conservatively cost $2.8
million, representing a $1.1 million additional cost to the City when compared to the option
of purchasing the subject property.
Understandably, the City Commission's concern over public perception in expending tax
payer dollars for the proposed acquisition is mitigated by virtue of the income stream that
will be generated by the private tenants currently on site that will cover 62% of the
acquisition cost as well as contribute in a like percentage to the annual operating cost of
the building, and the expressed desire by many to renew their existing and soon to expire
leases which may result in greater savings to the City. Additionally, the City will be
acquiring an existing fixed asset rather than constructing a new asset that may be plagued
with cost overruns and time delays. AII-in-all, said acquisition is sound both from a fiscal
and operational perspective.
If the Mayor and City Commission do not desire to proceed with the Settlement/Purchase
and Sale Contract, it will be necessary to direct the Administration to cancel the contract
together with the payment of the $15,000 Termination after Inspection Fee.
If the Chairman and Members of the Redevelopment Agency do desire to proceed with the
Settlement/Purchase and Sale Contract, it is recommended that the Chairman and
Members of the Redevelopment Agency of the City of Miami Beach, appropriate $450,000
from the City Center Redevelopment Area Tax Increment Funds, representing the
Settlement Costs in connection with Gazit Meridian, Inc. vs. the City of Miami Beach
lawsu itn>>""
JMG/CMC/rar
T:\AGENDA\2002IJAN3002\RDAIGazltRDA.CM.doc