229-96 RDA
RESOLUTION NO.
229-96
A RESOLUTION OF THE CHAIRMAN AND MEMBERS OF THE MIAMI
BEACH REDEVELOPMENT AGENCY AUTHORIZING AND DIRECTING
THE CHAIRMAN AND SECRETARY TO EXECUTE THE A TT ACHED
SECOND AMENDMENT TO THAT CERTAIN LETTER OF INTENT BY
AND BETWEEN THE MIAMI BEACH REDEVELOPMENT AGENCY, THE
CITY OF MIAMI BEACH, FLORIDA, ST. MORITZ HOTEL
CORPORATION AND LOEWS HOTELS HOLDING CORPORATION,
PERTAINING TO THE DEVELOPMENT OF A CONVENTION CENTER
HOTEL AND PARKING GARAGE.
WHEREAS, S1. Moritz Hotel Corporation ("SMHC") was the winning bidder in response
to the Convention Center Hotel Request for Proposals; and
WHEREAS, the Miami Beach Redevelopment Agency (the "RDA"), the City of Miami
Beach, Florida (the "City"), SMHC and Loews Hotels Holding Corporation ("LHHC") executed a
Letter of Intent (the "LOI") pertaining to, among other things, the development of an approximately
800 room hotel (the "Hotel") at and near 16th Street east of Collins Avenue, Miami Beach and an
approximately 800 car garage (the "Garage") at or near 16th Street between Collins and Washington
A venues, Miami Beach; and
WHEREAS, negotiations are proceeding on numerous agreements relating to the
development of the Hotel and Garage; and
WHEREAS, the LOI originally provided, among other things, that ifthe agreements for the
development of the Hotel and Garage and related matters were not executed by the RDA and SMHC
prior to December 15, 1995, the RDA or the City may be responsible to reimburse SMHC for certain
design expenses for the development of the Hotel and the Garage; and
WHEREAS, the RDA, the City, SMHC and LHHC executed that certain Amendment to the
LOI, dated as of December 6, 1995, extending, among other things, the date referenced in the
preceding paragraph to January 11, 1996; and
WHEREAS, due to, among other things, the work and time involved in connection with the
negotiation of numerous agreements, a bond issuance, bank financing and property acquisition, the
RDA, the City, SMHC and LHHC would like to execute the attached Second Amendment to the LOI
to extend further the time by which the agreements must be executed and when liability for
reimbursement of design expenses might apply; and
WHEREAS, Section 12(h) of the LOI, as amended, provides that the LOI, as amended, may
be modified by a written agreement executed by both of SMHC and the RDA.
NOW, THEREFORE, BE IT DULY RESOLVED BY THE CHAIRMAN AND
MEMBERS OF THE ~HAMI BEACH REDEVELOPMENT AGENCY as follows:
1. The Chairman and Secretary are authorized and directed to execute the attached
Second Amendment to that certain Letter ofIntent by and between the Miami Beach Redevelopment
Agency, the City of Miami Beach, Florida, St. Moritz Hotel Corporation and Loews Hotels Holding
Corporation.
2. This Resolution shall take effect immediately upon its passage.
PASSED AND ADOPTED this lath day of
ATTEST:
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SECRETARY
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FORM APPROVED
REDEVELOPMENT AGENCY
GENERAL COU SE
By
Date -YJ-:/ q5
2
Miami Beach
Redevelopment Agency
1700 Convention Center Drive
Miami Beach, Florida 33139
Telephone: (305) 673-7193
Fax: (305) 673-7772
REDEVELOPMENT AGENCY MEMORANDUM NO. 96-1
DATE:
January 10, 1996
TO:
Chairman and Members of the Board
of the Redevelopment Agency
FROM:
Jose Garcia-Pedrosa ~
Executive Director~~_~
A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY
OF MIAMI BEACH, FLORIDA, AUTHORIZING AND DIRECTING THE
MAYOR AND CITY CLERK TO EXECUTE THE ATTACHED SECOND
AMENDMENT TO THAT CERTAIN LETTER OF INTENT BY AND BETWEEN
THE MIAMI EACH REDEVELOPMENT AGENCY, THE CITY OF MIAMI
BEACH, FLORIDA, ST. MORITZ HOTEL CORPORATION AND LOEWS
HOTELS HOLDING CORPORATION, PERTAINING TO THE DEVELOPMENT
OF A CONVENTION CENTER HOTEL AND PARKING GARAGE.
SUBJECT:
RECOMMENDATION:
It is recommended that the City Commission/Redevelopment Agency
Board approve the Resolution.
BACKGROUND:
At its December 6, 1995 meeting, the City Commission/Redevelopment
Agency Board approved an extension of the Letter of Intent for the
convention hotel and garage from its initial December 15, 1995,
date to January 11, 1996.
ANALYSIS:
Negotiations are proceeding on numerous agreements relating to the
hotel and garage. Due to the work and time involved in connection
with the negotiation of these agreements, bond issuance, bank
financing and property acquisition, additional time is required.
S()UTti f)()I~1:
l?edevel()pment Uistrict
CITY CI:~TI:l?
l?edevel()pment Uimict
At this time, the Administration is asking for a two-week extension
to January 24, 1996, in order for the Chairman of the Negotiating
Team to be present and to discuss the status of the negotiations.
At the January 24, 1996 meeting, the Chairman of the Negotiating
Team will recommend a final extension date for the Letter of
Intent, based on the progress of the negotiations at that time.
CONCLUSION:
The City Commission/Redevelopment Agency Board should adopt the
Resolution.
JGPjHSM:jph ~
Attachments
SECOND AMENDMENT
This is a Second Amendment (the "Second Amendment" ), dated as of January 10,1996,
to that certain Letter of rntent (the "LOr"), dated as of May 3, 1995, a copy of which is attached
hereto as Exhibit "A" and incorporated herein, as amended by that certain Amendment to the Lor
(the "Amendment"), dated as of December 6, 1995, a copy of which is attached hereto as Exhibit"B"
and incorporated herein. The Second Amendment, the Amendment and the LOr are by and between
the Miami Beach Redevelopment Agency, a public body corporate and politic (the "RDA"); the City
of Miami Beach, Florida, a Florida municipal corporation (the "City"); St. Moritz Hotel Corporation,
a Florida corporation ("SMHC"); and Loews Hotels Holding Corporation, a Delaware corporation
("LHHC"). The LOr, as amended by the Amendment, is referred to herein as the "LOr, as
amended. "
RECIT ALS
\VHEREAS, SMHC was the winning bidder in response to the Convention Center Hotel
Request for Proposals; and
WHEREAS, the RDA, the City, SMHC and LHHC executed tQe LOI, pertaining to, among
other things, the development of an approximately 800 room hotel (the "Hotel") at and near 16th
Street east of Collins Avenue, Miami Beach and an approximately 800 car garage (the "Garage") to
be located at or near 16th Street between Collins and Washington Avenues, Miami Beach; and
WHEREAS, negotiations are proceeding on numerous agreements relating to the
development of the Hotel and Garage; and
\VHEREAS, the LOr originally provided, among other things, that if the agreements for the
development of the Hotel and Garage and related matters were not executed by the RDA and SMHC
prior to December 15, 1995, the RDA or the City may be responsible to reimburse SMHC for certain
design expenses for the development of the Hotel and the Garage; and
\VHEREAS, the RDA, the City, SMHC and LHHC executed the Amendment, extending,
among other things, the date referenced in the preceding paragraph to January 11, 1996; and
WHEREAS, due to, among other things, the work and time involved in connection with the
negotiation of numerous agreements, a bond issuance, bank financing and property acquisition, the
RDA, the City, SMHC and LHHC would like to amend the LOr, as amended, to extend further the
time by which agreements must be executed and liability for reimbursement of design expenses
might apply; and
WHEREAS, Paragraph 12(h) of the LOr, as amended, provides that the LOr, as amended,
may be modified by a written agreement executed by both of SMHC and the RDA.
NOW THEREFORE, in exchange for the mutual promises contained herein, and other
good and valuable consideration, the receipt and adequacy of which is hereby conclusively
acknowledged, the parties agree as follows:
1. ABOVE RECITALS.
The above recitals are true and correct and are incorporated as a part of this
Second Amendment.
2. MODIFICATIONS.
a) Paragraph 11 of the LOr, as amended, entitled "Design Development Expense
Reimbursement", is modified as follows:
1) All references to "January 11, 1996" are changed to "January 25,
1996."
2) All references to "January 31, 1996" are changed to "February 9,
1996."
b) Paragraph 12(f) of the LOI, as amended, entitled "Termination" is modified
as follows:
The reference to "January 11, 1996" is changed to "January 25, 1996."
3. OTHER PROVISIONS.
The other provisions of the LOI, as amended, are unchanged.
4. RATIFICATION.
The RDA, the City, SMHC and LHHC ratify their agreement with the terms
of the LOI, as amended, as modified by this Second Amendment.
5. GOVERNING LAW.
This Second Amendment shall be governed by and construed in accordance
with the laws of the State of Florida, without reference to principles of conflicts of law.
6. HEADINGS.
Headings in this Second Amendment are only for convenience, are not a
substantive part of this Second Amendment or the LOI, as amended, and do not affect the meaning
of any provision of this Second Amendment or the LOr, as amended.
2
IN WITNESS \VHEREOF, the parties hereto have caused this Second Amendment to be
executed by their appropriate officials.
ATTEST:
By: i tlJ.u.t PM~
.:JfleJ.t-L-ubif\;Iftt~f'tm Secretary
Robert Parcher,
Date: '/2-).../4 ~
ATTEST:
By: JL4u~ ~~
Ja~k.LubiR,Int~fim City Clerk
Robert Parcher,
Date: 1!z.-2-j1/?
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FORM APPROVED
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LE'M"ER OF I1ITEN1:
Hay.3., 1995
Re: Loe~s Miami Beach Hotel
I~ Feb~arf 1993, the City Cente~/Hiscoric Convention Village
Redevelopment and Revitalization Area was officially esc.ablished by
the adoption of a Redevelopmect plan (the "Redevelopu-ent Plan").
The Redevelopme!lt Plan was the result of the combined effort of the
City of Miami Beacl1 (the "City"}, Miami Beach Redevelopment Agency
(the "Agency"), Metropolitan Dade County and the State of florida.
The Redevelo?ment Plan. represents the effort and commitment of the
Agency and the City to foster the development of convention quality
hotels, ancillary improvements and facilities, and necess~~
linkages co the Convention Cente:::'. E:ursuant to this Plan, the
Agency has acquired the land, k-,own. as site I-A., which it has
agreed to ma~e available for a coavention headquarters hotel which
will serve as the cornerstone of the Redevelopment Plan.
In furtherance of the Redevelopment plan, the City published
a Request for Proposal ("RFP") dated November 29, 1993.
In a resolution dated July 21, 1994, after a public ~eview
process, the Agency selected St. Moritz Hotel Co=p. ("SMBC~) from
among the groups which submitted proposals pursuant to the RFP and
directed representatives of the AgenCY to negotiate the terms under
which SMHC would develoo, construct, own and ooerate the convention
headquarters hotel ref~rred to above (the wHotel-) in accord.ance
with the requirements of the RFl'. This letter sets forth the
understanding reached as a result of such negotiations.
~_ The Hotel
The Hotel will be an approximately aOO-room headquarters
convent~on hotel to be constructed on Site I-A desc~ibed in tbe
RFP _ The Hot.el will be a first class, ~pscale property with
suitable convention, conference and meet.ing space and appropriate
amenities meeting the standards of the Loews Hotel chain and those
standards set forth in the Ground Lease (as hereinafter defined) .
It will be developed based upon the concept presented in SMHC's
response to the RFP, dated March 7, 1994, 51.1bject to the definitive
agreements to be entered into between the Agency and/or City (as
applicable) and SMEC (collectively, the "AgreementsW), the form and
substance of which shall be acceotable to SMHC's lender, SMEC, the
Agency, the City and their respective counsel. SMHC shall be
obligated to develop, construct, furnish and equip che Hotel in
accordance with plans established pursuant to the Agreements which
shall include approximately ~90 on-site parking spaces. The Hotel
shall be cOr'.strucced in accordance wich all applicable zouing,
1
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EXHIBIT "A"
bu~lding, environme~tal, safety and other governmental la~s, rules
and regulations.
2. Costs and Financinq of the Hotel
The preliminary estimated budget for the developmenc of the
Hotel, and the financing sources, are as follows:
a . COSTS
~.
Hard costs, such as excavation,
construction, building materials,
contractor fees, etc.
2.
Hotel furniture and equipment
Soft costs such as architectural and
design fees, consultants, legal
fees, hotel operator technical ser-
vices and pre-opening costs and
services, developer fees, site manage-
ment fees, pre-opening insurance,
and initial working capital
3.
4.
Financing costs such as construction
incerest, commitment fees, other
bank costs and fees, legal fees,
etc.
Subtotal:
5.
Operating deficit guarantee .
Mortgage debt service guarantee
6.
Total:
DO' I [~,sa .DOC.I<UJ.'OllSJ KD'OS_DIS":lU1II:7r:~.
2
$ 66,400,000
1.9,500,000
1.7,600,000
6,500,000
S1.10 ,000, 000
1.0,000,000
15,000,000
$13S, 000 , 000
b. SOURCES
S 66,000,000
~.
First mortgage
2.
Initial equity provided by SMHC,
which W'ill be funded prior to first
mortgage funding
15,000,000
3.
Agency's share of project costs
(exclusive of land valued at
$24,000,000 and other Agency and/or
City Actions described below) ,
which will be funded as described
below
subtotal:
29,000,000
~0,000,000
4. 'Operating deficit guarantee provided
by SHEC's pa=ent, LoeW's corporation,
for the benefit of and as required
by first mortgage ~ender
5 . Mortgage debt service guarantee
pro'V'ided by SMIlC's parent, Loe'llS
corporation, for the benefit of and
as required by first mortgage..
lender
10,000,000
Total:
J.5,000,000
$13S, 000 , 000
c. fUNDING OF AGENCY" S SF~
At the time of, or prior to, the execution of the
Agreements. the Agency will have taken a1.l action required by
law to authorize, and will have sold a,::ld issued, in the manner
to be set forth in the Agreements, $29,000,000 of bonds or
will have incurred other debt: resulting in net available funds
of $29,000,000 (which bonds or debt may be restricted to uses
permitted by law, now or at the ti.me of such funding), less .
the net atDOunt of U.S. Department of Housing and Urban
Development Section 108 loan proceeds available for
development of the Hotel (which funds the Agency shall use its
good faith efforts to obtain, and which funds shall not be
restricted to the construction of the publi.c areas of the
Hotel) .
The Agreements will provide that such funds shall be
disbursed to SMHC's construction lender on or about the
commencement of construction, together with SMHC's Funded
EquitY (as hereinafter defined). and shall be app~ied in
accordance with applicable laws. The application of funds in
accordance with applicable laW's shall be supported by
3
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aooropriate cocumen~a~io:"... The public areas of t:-.e ~o~el
shall be owned and operated in accordance wich all ap?licable
laws.
3. Aqency and/or Cicv Actions
At the time of, or prior to, the execution of the Agreeme~ts,
the Agency and/or City, as a??licable, will have taken all action
::-equi:red by law to auchori ze, and will have sold and issued, in the
m~ner to be set forth i~ the Agreements, bonds in a suffic~e~t
arn01..L"1t, or will r.ave incu.=:red other debt in a sufficie-'1.t amount, to
ensure thac che following actions will be substantially com?leced
prior to the opening date of the Hotel as defined L."1. the Hotel
Management Ag=eement (as hereinafter defined) (the "Hotel Opening
Date ") _ The Agreements will include a timetable commitment for the
completion of these actions as well as a requirement that they be
implemented in coordination with SMHC.
(a) Municioal Garace: As provided in Section 4 of tbis
letter.
(b) Site Improveme...'"lts and BroadTJalk: The Agency and/or
city shall provide up to $3,000,000 which shall be applied
solely to the cost of legally permissible exte=ior
improvements to the public areas and public access areas
relating to the Sotel and .to that portion of the construction
of an Agency and/or City owned and maintained exterrsion of the
existing boardwalk or broadwalk (subj ect to a?plicable
environmental laws) on or immediately east of Site I-A.
for
and
from
The Agency and/or CitY shall also be responsible
maintenance of the beachfront adjacent to the Hotel
construction and maint~'1.ance of the boardwalk or broadwalk
2J.st Street to the northern boundary of Lummus Park.
In addition, the Agency and/or city shall use good faith
efforts to cause the implemencation and completion of ~e
previously planned State of Florida streetscape improvements on
collins Avenue (A:lA) frOm Lincoln Road to 15th Street and
connecting to Ocean Drive, so that these impro'V'ements are completed
prior to the Hotel Opening Date. SMHC will work with the Agency
and/or Cicy in this regard.
The Agency and/or City shall perfor:n the foregoing actions in
accordance with the standa=ds set forth in the Agreements.
4. Municioal Garacre
(a) Acrencv or City to Build Garaqe.: The Agency or City
shall be responsible for the construction and cna..intenance (for
so long as the land subj ect t.o the Ground Lease and the
improvements thereon are operaced as a hotel or the parking
4
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spaces a;:e required for: the use of st;ch la~d a.,d th.
,mpr:ovemencs the;:eo<1 by S1'llC ll.'\der: applicable law) of an
approximately aOO-car mU<1icipal gar:age ("Garage") on a City-
owned site withi<1 an area bounded by Washington and C~lli~S
hvenues between 15th and 17ch Streecs. i<1cluding extension of
~6th Street leading to t~e Hotel main e~t;:ance across Collins
Avenue. The Age<1cy a<1d/o;: City shall perform the for.go~~g
ac::ions in accordance with the scandarC:s see fo;:th in the
Ag=eements. S~~C shall act as develope;: of the Garage for a
fee of 3 ~ of the p::::-oj ect. cose, plus OUe. -0: -pocket. e.:<?er:se5,
pu~suanc t.o a development. agreement. mutually sat.isfact.o~f to
the part.ies. In addition, any retail or accesso=y t:.Ses
included in the Garage st~Jcture will be compatible w~th ~~d
e!'...ha..T1ce the Hotel and its vicinity in accordance wich tee
standards set forth in the Agreements. The Garage will be
completed a~d ready for use not later than the anticipated
Hotel opening Date. The Agency and/or City scali coc, for 50
long as the Hotel is operated as a hotel, increase the height
of the Garage so as to adversely affect the useful ~jot~ent
of the hotel swimming pool.
(b) Garaqe Ooerator: The Agency or City shall designate
the operator of the Garage, which designee shall be selected
from a list of nadonaJ.ly recognized garage operators mutually
satisfactory to the AgenCY and/or City and SMEC, and which
operator shall be subject to the a~proval of SMHC.
(c) Hotel Use: _ Approximately 560 parking spaces shall
be a'V'ailable for priority use (as defined below) by the Hotel
(including provisions for Hotel valet parking arrangements) .
Hotel user parking rates shall be established by the-garage
operator, subject to the Agency'S or City'S approval,
provided, however charges to SMHC for valet parki.J>g shall not
exceed 50% of the self -park rate a>>d tharges for ao~el
employee parking shall not exceed the lo~er of (i) monthly
parking ra~e, (ii) 50% of self-parking rate or (iii) contract
parking rate. SMHC shall udlize the available parking spaces
at the Garage prior to utilizing other off-site parking
facilities.
apriority use- shall mean the garage operator shall set
aside solely for sotel use such number of the allocated
parking spaces as note~ Operator sha~l request from time to
time upon not less chan 24 hours prior notice to the garage
operator.
(d) Hotel Ga7:'acre Rent: SMEC shall pay annual :::-ent,
payab~e monthly, e<<ual to S500, 000 for the use of the 560
priority Sote~ parking sPaces. subject to pa....~graph (e), beloW
(the -Garage Rent-) .
5
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(e) Facilitv Osaae PaYment: In consideration of S~~C's
agreement co utilize the G~age on a requirements basis, as
provided above, SMHC shall be paid monchly a perce.ncage of t.ee
annual gross revenues of the garage as follows (the "Facility
Usage payment"), the first:. $500,000 of which shall be a?plied
as a credit against the Garage Rent each year:
(i) 41.7~ of a~~ual groSS revenues wit:.h res?ec: to
the first $1,200,000 of gross revenues; ar.d
(ii) 28% of an.."1.ual gross reve:1ues 1..:': excess of
$1,200,000.
(f) Limitation on Losses: In the event. cumulative
Garage Re..'1.t payments less the cumulative Facility Usage
Payments made by SMHC exceed $1,000,000, t.he Facility Usage
payr.tent will be the great.er of $500,000 a......d the amount
calculac.ed in accordance with subparagraph (e) above.
(g) Street Extension: The City shall extend 16th Street
from Washington Avenue to Collins Avenue.
(h) Enforceabilit.v: Appropriate provision will be made,
by easement or other covenant, to ensure the enforceability of
the Hotel's rights to the Garage. The Agency will ensure that
the development of so-called Phase B, the area on the north
side of ~6th Street, will be compatible with and enhance the
Hotel and its 'Vicinity.
5. Ground tease
The land comprising Site I-A, on which the Hotel will be
constructed, will be leased to 5MBC by the Agency pursuant to a
ground lease (the -Ground Lease-) hav-ing the following provisions:
(a) Title: 'the execution of the Agreements by SMHC will
be conditioned upon fee title to the land being satisfactory
co SMHC. AXter execution of the Agreements, the Agency will
not further encumber such title to the land" exceot with
respec~ to those 'matters (such as utility easements and non-
monetary reciprocal easement agreements) reasonably approved
by SMHC and which do not adversely affect the operation or
development of the Hotel as called for herein. Title to the
existing improvements on tbe land will be con'Veyed to SMEC on
an "as is. basis at the time of execution of the Ground Lease.
(b) Term: 99 years
$500,000 per year commencing on the
Base R~~t shall be increased every 10
Opening Date in the same proportion as
in the then appraised fair ma=ket ~ue
(c) Base Rent:
Hocel Opening Date.
years from the Hotel
the increase, if any,
6
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of ~he land (on a vacant and u~i~p~oved basis) bears co a base
value of $24,000,000, subject to a ca~ for each escalation
equal to the ap9licable change in the GDP implicit pr:::e
deflator index. In no event shall Base Rent during an
escalation period be less than the Base Rent during the prior
period.
(d) Additional Rene: Net Cas~ Flow af~er Debc Service
(as herei~afte~ defined) shall be distributed a~ually
pursuant co the following Tie~s:
Tier J..
100~ to SXEC until funded operati~g shortfall
reserve (up to $10 million) plus interest at
15~ oer annum as calculated from the later to
occ~ of the date such amounts are funded and
the Hocel Oper:ing Date (cumulative and
compounded) is repaid.
100~ to sMHC until SMHC receives a 15% per
annum cumulative (not compounded) prefer-=ed
return on the $15 million initial equity as
calculated from the later to occur of the date
such amounts are funded and the Hotel Opening
Date (the "Funded Equi~y.) .
Tier 2.
Tier 3.
100% to SMHC as interest at 15~ per annum
cumulative (not compounded) on funds provided
by SMHC to meet:. development cost overruns,
subject:. to a cap of $11,000,000, and up to $5
million of additional operating shortfalls, as
calculated from. the later to occur of the date
such amounts are funded and the Eotel Opening
Date.
80% to SMHC and 20% to the Agency until SMHC
has (i) received 25% Inte-YDal Rate of Return
(as such ter:n is defined in the Agreements,
hereinafcer referred to as .IR.~ft) (cumulative
and cOlIlpOunded return 00. and return of), on
it:.s Funded Equity ($15,000,000) as calculated
from the later to occur of the dace such
amoU!lts are funded and the Hotel Opening Date,
not including the shortfall reserve, actually
funded and (ii) been repaid cost overruns and
operating shortfalls referred to in Tier 3.
20% to SMHC and 80% to the Agency until
Agency has received (as calculated from
Hotel opening Dace and including Base Rent
Additional Reo.t actually paid) an 8%
(cumulative and compounded return on
the
the
and
IRR
and
Tier 4.
:
Tier s.
7
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return of) itS land at a fixed value o~
$24,000,000.
Tie::: 6.
85~ to SMHC, lS~ co the Agency.
(e) Non-Subordination: The Ground Lease will not oe
subo:::dinated to the first mortgase or to any othe::: financins
agreements.
(f) Real Estate Taxes: The Eotel, including the land,
will be subject to ad valorem real escate t~xes levied by the
City a:ld other governmental authorities in accordance with
law _ SMEC will be enti tIed to the benefit of any tax
abatements and reductions as are, or may become availal:>le
u-~der applicable la~, as if it were the fee owner of the land.
(g) Environmental Indemnity: The Agency will provide an.
indemnity to SXEC with resoect to the remediation, as
described in the Agreements, of environmental matte:::s
affecting the land and the improvements thereon W'hich exist
prio= to the execution of the Ground Lease, except as to those
matters disclosed to SMHC in the environmental audits provided
to or obtained by SMF.C prior to the execution of the
Agreements.
SMHC will provide an indemnity to the Agency .....ith respect
to the remediation, as described in the Agreements, of
environmental matters affecting the land and the improvements
thereon arising from and after the e.:x:.ecution of the Ground
Lease and/or relating to the mitigation of the environmental
matters disclosed to SMHC in the environmental audits provided
to or obtained by SMEIC prior to the execution of the
Agreements.
No limitations of liability will apply with respect to
the foregoing indemnities.
(h) Financina: Ar..y financing secured by the Ground
Lease or Hotel, and any refinancings thereof, rill be provided
by inst.itutional financing sources or, subject to the "Deemed
Debt- provisions herein, an affiliate of SMHC. Without
obtaining the Agency's consent, the principal amount of the
initial financing or any refinancing of the Hotel shall not
exceed Deemed Debt, as hereinafter defined ~ The Agency will
not be called U"QOO to subordinate it:.s interest under the
Ground Lease' in c.onnection with any financing or refi.nancing.
Loews Corporation (or an entity acceptable to the first
mortgage lender (s) and the Agency) shall fu.-...-nish a completion
guaranty for the benefit of the construction lender and the
Agency-
8
00" (~7S..PXS.~'oUSI~_D~Ctf.
(i) Pu=chase Ootio~' while the Agency'S Ta~ Inc<emeno
Revenue Bonds, Series 1993 ( tC~ · Bones" I have not been
retired, SxHC will have an option to purchase the l~~d at a
price eq~al to the greater of (1) the then appraised fair
market value of the Agency's interest in the l~~d based u?On
an arm's l~gth sale to a third party buye= not affiliated
with SM:~C ta~ing into account the then current state of title
as well as the continued existence of the Ground Lease and t~e
Hotel Manage=,ent Agreement as then in effect, or (2) coe
amo~~e dete~ned as folloWS:
a. for all fiscal years until Additional Rent paymen's
have reached Tier 5, an ~~ount to retu--Q to t~e
Agency an 8~ 1RR (which calculation will include
Base R=t and A<!ditiocal Rent payments made to the
AgencY) on the land value fiXed at $24,000,000.
b. For fiscal years in which Additional Rent is being
paid at Tier 5, but not Tier 6' an amount equal to
the greater of (i) an amount to retUrn to the
Ag=CY an 8% IRR (which calculation will include
Base Rent a>>d Add.itiona~ Rerit payments made to the
Agency) on the land value fiXed at $24,000.000 or
(ii) a ten times I"<Ultiple of the average Base Rent
and Additional Rent paid to the Agency during the
prior three full fiscal years.
c. For fiscal years in w~~ch Additional Rent is being
paid at Tier 6, an amount equal to a ten times
multiple of the lesser of (i) average Base Rent and
Additional Rent paid to the AgenCY during the prior
three fiscal yearS, or (ii) ave=age Base Rent and
Tier 6 Additional Rent which would have been
payable to the AgenCY during the prior three full
fiscal years determined as if payments were due in
Tier 6 for each of such three fiscal years-
provided, hoWever. that (xl the purchaSe price with
respect to the exercise of the purchase option after December
~, 200" shall be computed pursuant to (i) (2l above (without
regard to (i) (1) above) if at least 122 dayS prior to the
exercise of such option, SMHC shall have given the AgenCY
notice of intent to exercise itS purchase option and
unconditionallY prepaid rent under the Ground Lease in an
amount sufficient to redeem the Bonds in accordance with their
terms prior to the exercise of such purc~Ase option. which
amount shall upon exercise of such purchase option be credited
against the purchase price thereof, and (y) the purchase price
with respect to the exercise of the pu=chase option at any
time after the holders of the Bonds have been paid in full all
principal of and interest thereon and the BOods have been
retired (other than as a result of (xl above) shall be
9
1)0" CO~7S' .t:lOCS.KUU.'Ol:..sII'lD<'S_O~OIIl.
. --- -.... .
COffi?uted p~suant to (i}(21 above (witcout regard to (el (11
above) and the requiremen~s of (~) above shall not apply to
the exercise of such purchase option.
The parties acknowledge that clause (1) of this paragraph
(i) has been included based upon the present interp"etation of
section 1~4(c) (2) of the I~ce~al Reve~ue Code (the "code") in
"elateon to the Bonds bv co~~sel to the Agency. The pa=ties
ag"ee that sucn clause (,) shall not apply if at ar.y time SMl'C
provides an opinion of t~X co~~sel knowledgeable with respect
to the tax aspects of cax-exe~t bonds, in form and subs~ance
satisfactory to the Agency and its counsel, to the effect that
the exercise of the purchase option at the price determined
p=suant to clause (2) ..ill not adverselY affect the exclusion
fro~ grosS income for federal income tax purposes of interest
on. t.he Bonds-
In ~e event, within 12 months following the exe=cise by
SMHC of the purchase option (the date of exe::cise being called
the ftExercise DateN), SMHC shall consummate the sale of the
fiotel to an unaffiliated third party (a 'Post-Option Sale')
with whom SMliC had reached an agreement in principle,
evidenced in writing, at any time during the 6-month period
prior to the Exercise Date. the ~06t-Option sale shall be
deemed to have taken place on the Exercise Date and the Net
Proceeds shall be distributed as Net proceeds' in accordance
with ~aragraph 7, subject to a credit in favor of SMEC in an
amount equal to the option purchase price theretofore paid to
the Agency.
(j) Lease a.tld Transfer of Hotel Pul>lic as. In
consideration of (1) the varioUS taxes generated, and to be
generated, by the ownership a>>d operation of the Hotel,. (2) .
the support of the Convention Center by the Hotel pursuant to
the agreement described in paragraph (11 beloW and (3) SMIlC
providing the Funded squitY ($~5,OOO,OOO), the Agency shall
(A) lease to SMP.C for a tezm coterminous with the Ground Lease
all of the publ.ic areas of the Hot:el owned by the AgenCY and
(S) upon consummation of the purchase option de6cribed in
subparagraph (i) above. transfer all of its right, title and
interest in. the !:Iotel, including the public areas the=eof, to
SMEC.
(k) Right of First Refusal. In the event: the Agency
shall desire to accept "" offer for sale of all of its
interest in the land CUld the Hotel, including the public areas
of the Hotel, sMHC shall have a right to purchase such
interest upon the same terms and conditio~s as the same are
offered and in accordance with the Agreements. The Agency
shall not 6ell less than its entire interest in the land and
the Hotel.
10
:>0" t (k 7S' .:xx::s .l'\D1 a ollS)l1DOS _0 t.r.1UOTXClC.
(1) Cor.ve~tion Cen~e~: SMHC will enter into an
agreement W'ith the Ci~v oursuant to which the improvements
~ill be operated as a h~t~l a~d rooms will be made available
to suPQort Convention Center eventS according tOa fo~.ula to
be negotiated. The fo=rr.ula will cove~ the number of rooms
committed, rate structu~e, and timing of release of rooms f=om
the City's rights pursuant to such agreement. This ag=eement
will also provide for joi:::t ma::::-keting arrangements between the
Hotel a~d the City and for the desigr.ation of the Eotel as a
primary supplier of hotel se=vices to SUP?D=t the Conver-tion
Center. The te:::m of t::e agree",ent shall expire upon the
earlier to occur of (l) ce=mination of the Redevelopm~~t Plan
(without regard to any exter~ions thereof) or (2) the City's
failure to maintain the Convention Cente::::- at its present
location in at least its present size.
(m) The Agreements will include customary provisions and
such other provisions mutually sa~isfactory to the pa::::-~ies.
6. Definition of Net Cash FloW after Debt Service
"Net Cash FloW' after Debt service" will be defined as 8Hotel
Ope-~t~g Profit. after deduction of Debt Service.
"Hotel Operating Profit. will be defined as total revenue from
operation of the Hotel from and "after ~he Hotel Opening Date
("Hotel Revenue _) less all costs and eX?enses incurred in owning,
maintaining, conducting and operating the Hotel, other than Debt
Service, depreciation and amortization. These costs would include,
without limitation, all operacing costs, such as wages and
benefits, the cost of goods, supplies, utilities and services,
repairs and maintenance, the llase Rent. all liotel Operator fees and
payments, capital additions and improvements (othe:::: than those
funded through the reserv'e for additions to furnishings and
equipment, and except that no deduction shall be permitted for
capital additions and im.pro~ements which under the Agreem~?J.ts
require the consent of the Agency, unless such consent has been
obta.i.ned or is deemed to have been obtained), all insurance
premiums, paymentS under equipment ~eases, rea~ estate taxes'-and
assessments, and all payments into the rese=ve for additions,
subscitutions and replacements to furnishings and equipment.
"Debt Service- will be defined as all payments in respect of
principal and interest on "Deemed Debt.-
-Deemed Debt" will be defined as the principal amount of
$66,000,000 for so long as SMEC is the owner of the Eotel and after
a sale of the Hotel by SMHC, the p=incipal amount equal to the
greater of ,66,000.000 or the actual principa~ amount not to exceed
7S~ of the sale price (including assumed debt). To the extent
amounts of Deemed Debt a::::e not held by an institutional fin~~cing
source, debt service shall be calculated assuming interest payments
11
00', (C>47S.. oocs.~'01.:..s1 ~_OIS"':'1UJIar:::Od.
ac. the citibanx, N .A. prime rate aod principal payme:1ts ::..n
accordance with a 20 yea~ amortization schedule.
7. Apolication of Ne't p'!:"oceeds from Sale of the Hotel
In the event of a sale or refinancing, Net Proceeds would be
cetermir.ed as if such Net Proceeds were Net Cash Flow in the vea~
of the sale or refinancing anc will be cistributed to SMF.C or' it;
successO= and the Agency in acco=dance with the various Tie=s, as
if such Net p=oceeds were Acditional Rent as provided in Pa=agraph
sed). For pu-~ses 0: calculating Net Proceeds, the grosS p=oceeds
::-eceived from such sale will be deemed to include any amounts
received by an affiliated hotel operator fo~ the transfer of aay
interest of such hotel operator in the Eocel Management A~eement.
Subsequent to any sale or refinancing, Net Cash FloW' would continue
to be distributed in the same manner as prior to the sale or
refinancing, but after taking into account the distributic:: of Net
Proceeds in payment of tbe variouS Tiers under Additional Rent to
SMHC or its successo~ and the Agency, as set forth above.
"Net Proceeds" will be defined as the proceeds from a sale
less debt repaid and all reasonable and customa.:z:y transaction
costs.
For purposes of tbis paragraph 7. a sale shall be deemed to
mean any transfer by operation of law or ot)lerwise by SMHC of a
greater than ~O% iuterest in the Hotel or the Ground Lease or any
transfer, by operation of law or otheI:Wise, by SMHC's parent, of a
greater than ~O% equity. interest in SMHC, in eit.her case to a
person who is not a controlled affiliate of the Loews Hotels chain.
Any cransfer to a controlled affiliate of tbe Loews Hotels chain
W'ill not constitute a sale. I:o addition, wit..~ respect to any
mortgage held by an institutional financing source. prorision will
be made so that (i) the transfer to a purchaser at a foreclosure
sale, (ii) a deed in lieu of foreclosure or other transfer to a
mortgagee, or (iii) a sale by such mortgagee would not constitute
a sale.
8 . AgenCV APproval Riaht~
The Agreements will 'Orovide the following approval rights for
the Agency: -
(a) plans: The Agreements will include preliminary
plans and specificatioo.s resulting from the expenditure of
Design costs described in paragraph 1~ (the "Preliminary
Plans") for the construction of the Hotel, a pre_construction
budget: and development budget which will have bee..'1 app::-oved by
the Agency and SMHC jointly as part of the negotiation of the
Agreements. The budgets will include all of SMaC'S (and its
affiliates') development fees, reimbursables, paymen.ts to
affiliaces and such other items reasonably requested by the
12
00" (O.47S& .tx:lCJ.~IlOll.SI~_O~:C2(.
Ag~.cy. The Agreements ~ill include a timetable for
submission and a~proval 0: final plans. SMHC ~ill provide to
the Agency a critical-pat". schedule prior to the staoct of
const.rucc.ion.
The l'gency ~ill hav"" the right to approve mate::ial
changes. additions a..-,d alte::ations contained in the final
plans to the extent sc:ch Hnal plans do not substantially
comply wioh the app::oved p::elimina;::Y Pla~s. The Agency may
not object to ch,,".ges req~i::ed to comply with applicable laws
in sO fa:: as such objection relates to cost over;::uDs. Any
objections by the Agency to material changes. additions and
alterations will be reasonable and specific, and, at the
Age>CY's option.. may include alternate choices which ~ouJ.d not
result i.ll e:ct::a cost. If t~"" AgenCY validly and appropriately
objects to a change proposed by SMHC and. such obj ection is
upheld follo~i"g bindir.g arbitocation, if any, SM:"C may. to the
extent pe-~ssible unde:: applicable laws. nevertheless
implement the change, but any resulting budget ove~ ~ould
not be reimbursable as Additional- Rent or otherwise. exceot as
provided for in the Agreements. If the Agency approves a
change but at a justified lower cost than proposed by SMRC,
only the cost approved by the Agency (or as established
fqllowing bind.i.ng arbitration) will be included in SMHC'S
allowed overrun (see "AcidiFional- Rent"). Notwithstanding the
Agency's approval of any plans or specifications a..~d changes
thereto, SMRC ~ill be required to comply with all applicable
laws with respect to the construction and operation of the
Rotel, includ.i.ng, ~ithout limitation, the obtai.ning of any
required consents and permits required under applicable laws.
The AgenCY's approval rights will not cover areas of
interior design and decor except to the extent reflected in
the approved prelimiDary Pla>>s. The AgenCY' wi~l have the
right to inspect the project during construction and to have
an on-site representative at its sole cOst and expense. SMRC
wiH nOlO commence construction on a portion of the Elotel until
any required approvaJ. of applicable final- plans has been
obtained fl:olU the Agency.
(bl Finans:ial statement.!!.' SMHC will deliver to the
Agency monthly unaudited and annual audited financial
statements. In addition, the Agency will be provided all!lually
~ith an information copy of a projected income statement
reflectL'1.g the budget for the upcoming year. All financial
statementS will be prepared in accordance with the Unifortn
system of AccountS for gotels (8th Revised Edition) ("USAH") .
All financial statementS and bookS of account re~ating to
operation of the gotel a..'1.dfor determination of rent will be
available .for audit and eXamination. The Agency will have the
right to challenge anY expenditure that is not properly
calculated. which represents an overhead cost properlY
13
00': tI)47sa.:lOCS.MI].l'OUSll'tC'PS_OI~CIf.
charge~le to the management como~Y's home office (includi~g
subsidia:-ies and affiliates of- the management company) as
opposed to the Hotel, or any costs fraudulently incurred.
Provision will be made to attempt: to ensure confidential
treatment of all inio~tion relating to competitive 0:-
proprietary info;;macion. In the event the Age:lcy's audit
sho'....s tr.at d:.e P-.gency's sbare 0 E Additional Rene has been
understated by 3~ or mo:-e, chen S~~C will pay to tbe Agency
the cost of such audit i~ additio~ to ~y deficiency payment
required.
(c) Sale of the Hocel.: A sale (as defined below) of tr:.e
Hotel or SM:~C'S interest in tee Ground Lease shall be subject
to the Agency'S approval. For pu...-rposes of this Paragraph
8 (c), a sale shall be c.eemed to meaIl any transfer by operation
of law or other~ise by SMHC of a g=eater than 50~ interest in
the Hotel or the Ground Lease or a.::y transfer, by operacion of
law or otherwise, by SMF.C's parent, of ~ g=eater than 50%
equit:y interest: in SMHC, in either case to a person who is not
a controlled affiliate of the L<>eWS Hotels chain. Any
transfer to a controlled affiliate of the Loews Hotels chain
will not: constitute a sale. In addition, with respect to any
mortgage held by an institutional financing source, provision
will be made so that (i) the transfer to a purchaser at a
foreclosur~ sale, (ii) a deed in lieu of foreclosure or other
transfer to a mortgagee, or (iii) a sale by such. mortgagee
would not constitute a sale.
The Agency reserves the right to disapprove the sale of
the Hotel to a foreign government or instrUme;1tality thereof
or an entity controlled thereby.
Not:withstanding the foregoing, a sale of the Hotel to a
Qualified Purchaser (as hereinafter defined) shall be deemed
reasonable and not reqc..ire the consent of the AgenCY.
A nQualified Purchaser- for purposes of this section
shall mean a purchaser that: (i) is (a) a pe:!:1I1itted Operator,
as hereinafter defined, or (b) a fi.Il.aD.ciaJ. institution
(including, but not limited to, banks, life insu=ance
companies, or pension funds) or an institutional i1r<restor in
real property or interests in real property (such as a REIT,
REMIC or other public or privat.e investment fund), which has
engaged a Permitted Operator; (ii) is Dot a foreign government
or instrumentality thereof or an entity controlled therebYi
and (iii) agrees to be bound by all the terms and conditions
of all the Agreements.
(d) New Management Como any , The AgenCY will have the
right to approve a ne~ hotel operator (:including the sale or
transfer of more tha>> a 50% interest in the =re:lt Eotel
Operator) . The Agency reserves the right to d:isapprove a
14:
DO" (~"TS"DOCS .1Ull.ou.:sl~_otsnu::wrtoar.
hotel ooerator cootrolled by a foreign govercment or
iustrume~calitY thereof.
l'otwithstallding the foregoing. a challge in the Hotel
Operator shall be deemed reasonable and not require consent of
the AgenCY if the- resulting hotel operator is a Permitted
Operator. A" pe=itted operator" for the purposes of this
section is an entity which (il is not a foreign government or
inst~mentalitY thereof cr an entity controlled thereby; and
(iil together with its a:filiateS, (al has be"" engaged in the
operation or management of hotels for at least five years and
has operated or managed during such s-year period at least one
convention hotel (i.e., 600 or more rooms and 40,000 or more
square feet of meeting space) which meetS the quality
stand=cs set forth in. the Ground Lease, and (bl has a
national marJeeting operation under a JOational flag or has
_ entered into an agreement ,,~th a hotel chain which has a
nat~onal marJeeting operation under a national flag.
(el Ri,aht to Cure; The AgenCY will have the r~ght to
cure defaults by SMRC under any mortgage, the llotel Management
Agreement and such otb.er agreements as the parties may agree
upon, and all such agreements wi11 so provide.
(f) N>oroval l'otine~; (1) Neither the AgenCY nor SMHC
shall unreasonably delay. "ithhold or condition any requested
approval required under any of the Agreements or this Letter
of Intent. If a request by SMHC relateS to the approval of
certain _JOterS to be mutually agreed upon by the part~es,
such as the sale of the !lotel or change in the !lotel Operator
as aforesaid, and the AgenCY fans to respond ..;.thin the
provided t~me period, then after the expi-~tion of such time
period SMHC may resubmit its request to the Agency, and
provided such request <and the envelope in which such request
is transmittedl conspicuously bearS the following legend, the
matter stated in the ):equest shall be deemed approved by the
1\.~ency if the A<;J=Y shall fail to disapprove such second
request within 3.0 days after receipt thereof:
-PAILURE TO RESPOND TO TIllS REQUEST WITHIN 30 DAYS SWILL
CONSTITUTE AUTOMATIC APPROVJ>L oP n<E MATTERS DESCRI3ED ro;:R5lN
WIT!! RESPEct TO pARJIGRAPR OF THS [IO\MR OF AGREE:ME:NT]
~
DATED ' BE'I.'W"".r$ (DESCRIBE pA.~TIES].
(2) It is contemplated that the Agreements will provide
for an expedited approval process during the period pr~or to
the Hotel Opening Date.
(3l If the AgenCY's or SMHC's approval is requ~red under
any of the Agreements. upon disapproval of a request, the
d~sapproving partY will provide written reasons supporting
such party's disapproval of such matter to the other party.
15
00' , t 04 ~. . cocs .KI).J. .OUS!1'lD'OS _ D~qt"tClf .
Each party shall deliver to the other party itS approval or
di.sapptoval of any request for approval pursuant to the
Agreements within the applicable time period. If a party does
not provide a response to a request for an approval within the
time period set forth in the Agreements (..,hether such approval
request requires a single or double notice), such request
shall be deemed approved.
9. liot.el Ma..T1aaeme:1t. Aqreeme~
PuXsua>>t to a management agreement (t te " ~o tel Management
Agreement"). the Hotel ..,ill be operated by an affiliate of Lee..,s
Hotels, Inc. ("Hotel Operator") as a first class. upscale
convention property in the Loews Hotels chain in accordance with
che followi~g p~ovisions:
(al ",anaqement' The Hotel will be ma.,aged by Hotel
Operator as part of the Loews Hotels chaL, in accord~~ce ~th
the standards set forth in the Ground Lease. Eotel Operator
w-ill have exclusive authority to operate the Hotel in the name
and for the account of SMHC.
(b) ~chnical Service,,-' Eotel Operator will provide
technical services to assist SMHC in the construction.
fu.....ushing and equipping of the Hotel. These services will
include, among other th.iD.gs, (i) review and approval of
architectural. plans, plans for design and decor a>>d plans for
furnishing all of which will be subject to Hotel Operator's
approval to ensure that the Hotel willllleet the standards set
forth in the Ground Lease; (H) develOP criteria for fu..--niture
and equipment and assistance in obtaining sources of supply;
and (Hil assistance in coordinating purchases and
installation of furnish.iD.gs a>>d equiplll8X1t. llotel Operator
will be paid a one-time fee of $300,000 by SMHC for providing
technical. services, p~us reimbursement of actual costs (which
will not include executive time) in providing technical
se..-vi.ces during the pre-opening period. These costS and fees
are included i.n the estimated budget referred to in paragraph
8 of this letter.
(c) pre-poenipa services' gctel Operator will provide
required services to SMHC to prepare the Hotel for opening,
including among other things. (i) recruiting, training and
employing (in the name of SMEC) notel staff; (ii) pre-opening
marketing and advertising; (Hil negotiating contracts for
stores. concessions, leases, supplies and similar items, (iv)
assistance in obtaining necessary licenses and permits, and
(v) assistance in purchasing initial. operating supplies.
aotel Operator will be reimbursed by Sl<1iC for the cost of
providing these pre-opening services. including executive and
staff time. and out_of-pocket eXpenses. These costs and fees
16
00" [04'7S..lXlCS.XI).:.'OUSll'Q'OS-O~af.
are included in the estimated budgec, referred to in pa~aga?h
8 of this lette:-.
(d) Ter:n: 30 years, W'ith four renewal options of 15
yea~s each and one final renewal option of 9 years. The Hotel
Operator may not, without the consent of the Agency, exe~cise
a renewal option unl~ss the Agency has received an 8% per
annum c~~ulative (not cornpo~~ced) retu-~ (i.e., Base Rent a~d
Additional Rent) on the la~d value fixed at $24,000,000;
p~ovided, however, that the foregoing requirement will cease
t.o be applicable once the Agency has received an 8 ~ IR.q,
(inclucing Base Rent a!ld Additional Rent act.ually paid) on the
land value (fixed at $24,000,000) - Hotel Operator will have
the right to cure any shortfall with respect to the required
8% cumulative return by direct payment to the Agency, with any
such direct payment being deemed Additional Rent.
(e) Manacement Fee:
~. Base Fee: 3% of Hotel Revenue (calculated in
accordance with USAH) .
2. GrouP Marketinq Fee: 1. 25\" of Hotel Re'Venue.
The Group Marketing Fee represents payment for chain ride
advertising and marketing services provided by the Loews
home office, includi.n9 overhead expenses of regional
sales offices. These se-...-vices will include a central
sales and marketing operation supported by regional. sales
offices and nationwide corporate advertising, m.a.rketing
and promotion programs. The Hotel Operator will provide
these services to the Hotel on the same basis as it
provides similar services to ocher hotels in its chain.
3. Reservation Fee~: The cost of centralized
reservatioo services provided by the aotel Operator (or
th=ough a third party service provider) shall be
allocated to che Hotel on a pass-through basis with no
mark-up, but in no event shall ~he cost per booking
increase by more than the system-wide increase charged to
other hotels in the chaLa.
4 . Franchise Fee: upon the execu~ion of a neW'
management agreell1ent with a new hotel operator , such
hotel franchisor's usual and customary franchise fee, not
to exceed 2% of rooms revenue.
In addition, Hotel Operator shall be reimbursed for out-
of-pocket expenditures reasonably and properly incurred in the
course of the management and operation of the Hotel, as to be
set forth in more detail in the Hotel Management Agreement.
This .....ould include, among other things, cravel and
17
00': (Q~7~' .oocs.MD.l'Ql1S1~J)~ClC'.
encerc.air-.menc., c.eleohor:e a...'1d oc.h~r incidental exper:ses of
'employees in performing services actually and specifically
~ncurred in CO~'1ectioa with the Hoc.~l. In no evenC. will OU:-
of-pocket expendic.ures include regula= overhead expenses oE
Hotel Operator's corporate facilic.ies or compensation of home
office employees.
Notwithst~~ding the provisions of subparagraphs (e) (1)
and (el (21 above, in the event a management agreement shall be
entered into with a new hotel operator. the combined Base Fee
and Group Karketing Fee shall not exceed 4.25% of Eotel
Revenues.
(f) pualitv Stacdard: Hotel Operator will be required
to operate the Hotel as a first class I upscale convention
center hotel, including high-quality b~quet, conv~~tion and
meeting se~ices and facilities, roulciple-food and beve=age
outlets, room service, bell se~ice, laundry and valet
services, a health and fitness facilicy, a..T1d such other
services as are generallY provided by comparable upscale
convention center hotels of national repute, consistent with
the Hotel's physical facilities, and in any event, the quality
of the Hotel operations and facilities (consistent with the
Hotel' s physical facilities as they then exist) will be
comparable to not lesS than 3 or more than 5 convention center
hotels (or such other comparable. hotels which the parties
shall mutuallY select pursuant to the Agreements) to be agreed
on by the parties. The comparable convention center hotels
will be rees~ablished by agreement between the parties every
~O years. The failure to operate the Hotel as required above
will constitute an event of default under the Ground Lease
and, if not cured, the AgenCY will be entitled to enforce this
provision with appropriate remedies. including termination
and/or =e rights. Notwithstanding the foregoing. Hotel
Operator will not be required to fund monies other than those
required to be in the FF&E Reserve for the replacement of
furniture and equipment necessary to meet the foregoing
standard. The foregoing shal,l not be deemed to diminish
SMHC's obligation to maintain the Hotel consistent with the
physical facilities of the Hotel as constructed pursuant to
the Agreements.
(g) FF&E Reserve, Hotel operator will be required to
establish a rese:::-ve for replacement: and additions to fu-...-,:riture
and equipment initially funded at n of Hotel Revenue in the
first fiscal year, increasing to 2\' in the second fiscal year,
3% i.n the third fiscal year and H in the fourth and each
fiscal year thereafter. The FF&Z Reserve will be he~d in a
seg'regated account and such funds shall only be used for
replacements and additions as aforesaid.
~8
1>0,: (~1S' .oocs .~'QUSI ~sJ)tS"ou..gcn;CK.
(h) Radius RestrictiQU' Without the prior consent 0:
the Agency, Eotel Operator ",ill not 09erate a conventiOC
property (i.e., 600 or more rooms and 40,000 or more square
feet of meetL"1g soace; M::-einafter, a "convention hotel"
(ir..cluding a>>Y meeting s9ace available to Hotel Operator
pursuant to a~y license 0::- shared facilities agreemer..ts or
other.ise)) within the area ('Ter::-itOry') comprised of Dace
county north to and including the City of Ft. Lauderdale,
provided ho,.ever,that this provision will in no event be more
restrictive (or shall nO longer be applicable, as the case may
be) than any ::-adius rescriction (or lack of restriction)
regarding any other hotel r..o'" or hereafter located in the area
north of 5th Street and south of 44th Street receiving ~
excess of $5,000,000 in value of Agency or City funds (or
funds conGOlled thereby, i~cludi.n9 tax benefits). The
Hotel's radius rest::-ictior.. will terminate or exclude certain
prope::-ties as described below, as applicable, upon t!:e
occ~=ence of any of the follow~ng eventS:
(i) if the Hotel is acquired by a purchaser who is
part of a hotel chain ( i . e., t"" or more hotels) or SMliC
purchases a hotel chain and in either event such chain
has one or more properties in the Territory, then such
properties shall be excluded from the radius restriction;
(ii) the purchase of the ~genCY's interest in the
Hotel, including the la>>d, by SM!!C; and'
(iii) the termination of the Redevelooll1ent Plan
(without regard to any extension thereof) . -
~O. site I-S
The AgenCY will enter intO a>> agreement with SME:C with regard
to Site l-B (i.e., the lot presently owned by the AgenCY and the
second lot if subsequently acquired bY the Agency) providing
developmeI>.t on each lot will confortll to applicable zoning lawS a>>d
requests for proposals applicable to such development and such
other tnatters as the parties may determine, if a>>Y, by mutually
acceptable agreement.
:LL J?esi,m, De..elooment ExPense Reimburse",enJ;.
The parties acknowledge that SMEC will, of necessity, incur
significant out-of-pocket costS for professional architectural
design, engineering and other technical advice and services in
'conneCtion with the design, const~ction and permitting of the
Hotel ('Design CostS') prior to the execUtion of the Ag::-eements.
In consideration of the foregoing, and in order to insure the
timely consummation of the transactions contemplated herebY, SMEC
and the Agency have agreed that sue!:. costS will be subject to
reimbursemenc as follows:
~9
DO" {().4.,sl.ooCS,~'OUS1)Q'OS_t)t~:ar.
(al if the Agec.cy or the City. as applicable, haS cct,
prior to December 15. 1995, entered intO binding agreements to
raise the funds c.ecessary to meet its obligations as
contemplated by paragraph 2 (bl (31 and parag::aphs 3 (al and (bl.
then the Ageccy shall. no late:: than December 31, 1995, pay to
SMliC the Qualified Design costS (as hereinafte:: deficedl ;
(b) if 5MHC has uot by December 15, 1995 entered into
binding fic.ancial commitmentS to obtain the first mortgage
financing as contemplated by paragraph 2(bJ (1), 5MHC shall
bear all Design Costs incurred by it; a3d
(c) if the Agreements are not in fina~ fo~ acceptable
to the parties for eXecution by December 15, 1995, for any
reason ~hatsoeve::, inc~uding the mutual failu::e of 5MHC and
the AgencY .(or the city, as the case may bel to obtain
financicg commitmentS pu.rsuant to (al and (b) above, 5MHC
shall bear one half of the Qualified Design costs a..'1d the
Agency shall, nO later than December 31, ~995, reimbu::se SMHC
for one half of t:.he QUalified Design Costs.
The te~ 'QUalified Design coses' shall mean Design costS in
an amount not to exceed $~ , 600 , 000 ; provided, however, that if
becween JulY 15, H95 and )\Ugust :I., :1.995 the AgenCY notifies S!<HC
thaC it wishes SMHC co suspend fu;rther design worle, QUalified
Design Costs shall not exceed $1,090,000.
1.2 _ General
(a) Arbitration, AnY contrOverSY or claim relating to any
of the Agreements (or the breach thereof) will be settled by
arbitration in accordance wieh standardS a>>d methodology to be
negotiated between the AgenCY and 5MHC. The AgenCY a>>d sMHC will
negotiate an expedited arbitration regime with respect to pre-l!otel
Opening matters, which regime may include the advance appointment
of a qualified arbitrator_",
. (bl L; obilitJ!:' The AgreementS will incorporate provisions
wo.th respect to the U.u.taeion of 5MHC's, the AgenCY's a>>d the
Ci ty' s liability thereunder, as app~icable, mutua.:L:l.y acceptable to
the parties, .nth the same providing for reasonable damages, but no
punitive damages.
(c) Definitive Aareements' Ooon execution of tlUS Letter of
Intent by SMHC and approval of -the terms hereof by the appropriate
AgenCY and city bodies, the AgenCY' s counsel will d...-aft the
Agreements (other than the Hotel Management Agreement, agreementS
co which the AgeACY or city is not a party and other agreements a6
the pa-~ies may agree). The Agreements ~i].]. contain, among other
chings, representations. warranties, . conditions, covenants and
indemnities and the like typical in simi~ar transactions, subject
to the terms hereof. The consummation of the transactions
20
00': (()47S..00cs.l'Cu.aUSI~-l)I~cec.
contemplated hereby is conditioned upon the negotiation and
execution of the Agreements with terms, provisions and conditions
mutually acceptable to SMHC, the Agency and the City as well as the
obtaining of all necessary financing and the satisfaction of the
parties with all other agreements and matters necessary or
desirable with respect to the transactions contemplated hereby.
The parties shall comply with all applicable laws, statutes,
regulations and requirements and performance by the Agency, the
City and SMHC under t~is Letter of Intent and the Agreements shall
be subj ect thereto." -
(d) Structure of Lessee: The entity constituting lessee and
developer will be ME Redevelopment, Inc., HCV, Inc., VRA, Inc. SMR
Redevelopment, Inc. and/or THR Redevelopment, Inc. or partnerships
of which one or more of the foregoing will be general partners.
The Agency and SMHC will cooperate in structuring the transactions
contemplated hereby accordingly.
(e) Assignment by Aaency: In the event the Agency ceases to
exist, the Agreements will provide that the rights granted to the
Agency will inure to the benefit of the City and the City will te
bound to perform the obligations therein.
(f) Termination: Subject to the terms of Paragraph 11, this
Letter of Intent may be terminated by either party if the
Agreements have not ~een completed by December 15, 1995.
(g) Non-binding: Subject to the terms of Paragraph 11,
neither party shall have any legally binding obligation to the
other until such time as the Agreements are executed by all parties
thereto.
(h) This Letter of Intent may be amended by a written
agreement executed by both of SMHC and the Agency.
AGREED AND ACKNOWLEDGED:
S-/3/c;S
Date.
HIAMI! BEA~ ~7fiIlAG~CY r h h 5
J(...,(,<;~~ (.....I~ Date
c.l.....t ~ ...,,:.,.,)
~ [SIGNATURES CONTINUED ON FOLLOWING PAGE]
21
:
}.2E'ROVED AS VRl(:. _"
BY'V~~
Laurence Feingo ,
General counsel
tf / JP/1c[
Da~e .
A'2E'ROVKD:
By
1)0" [OdS' .t<<S.)Qo1'01.1S11C'OS-1)~~'
5'/3b5
Date
5) !, I c:r S.
Date
~/)Jl-/9C
Dal:.e ' ,
. FO~~OVED "
~L~
~~te v;:o/
22
RESOLUTION NO. 228-95
A RESOLUTION OF THE CHAIRMAN AND MEMBERS OF THE ML-\MI
BEACH REDEVELOPMENT AGENCY AUTHORIZING AND DIRECTING
THE CHAIRMAN AND SECRETARY TO EXECUTE THE ATTACHED
A~IENDMENT TO THAT CERT..\.IN' LEITER OF INTENT BY AND
BET\VEEN THE MIA..Ml BEACH REDEVELOPMINT AGENCY, THE CITY
OF l\'IIAl\H BEACH, FLORIDA, ST. MORITZ HOTEL CORPOR-\TION
AND LOEWS HOTELS HOLDING CORPORATION, PERTAINING TO THE
DEVELOPl\'IENT OF A CONVENTION CENTER HOTEL AND PARKING
GARAGE.
WHEREAS, St. Moritz Hotel Corporation (ItSM:HCIt) was the winning bidder in response
to the Convention Center Hotel Request for Proposals; and
WHEREAS, the Mami Beach Redevelopment Agency (the "RDAM), the City of Miami
Beach., Florida (the "CityM), SMHC and Loews Hotels Holding Corporation ("LHHC") executed a
Letter of Intent (the "LOllt) pertaining to the development of an approximately 800 room hotel (the
"Hotellt) at and near 16th Street east of Collins Avenue, :Miami Beach and an approximately 800 car
garage (the "Garage") at or near 16th Street between Collins and Washington Avenues, Mami Beach;
and
WHEREAS, negotIatIons are proceeding on numerous agreements relating to the
development of the Hotel and Garage; and
WHEREAS, the LOI provides that if the agreements for the development of the Hotel and
Garage are not executed by the RDA and SWIC prior to December 15, 1995, the RDA or the City
may be responstble to reimburse SMHC for certain design expenses for the development of the Hotel
and the Garage; and
WHEREAS, due to, among other things, the work and time involved in connection with the
negotiation of numerous agreements, a bond issuance, bank financing and property acquisition related
to the Garage, the RDA, the City, SMHC and LHHC would like to execute the attached Amendment
to the LOI to extend the time by which the agreements must be executed and when liability for
reimbursement of design expenses might apply; and
WHEREAS, Section 12(h) of the LOI provides that the LOI may be amended by a written
agreement executed by both ofSMHC and the RDA.
NOW, THEREFORE, BE IT DULY RESOLVED BY THE CHAIRMAN AND
MEMBERS OF THE MIAMI BEACH REDEVELOPMENT AGENCY as follows:
1. The Chairman and Secretary are authorized and directed to execute the attached
Amendment to that certain Letter of Intent by and between the Miami Beach Redevelopment Agency,
the City of Mami Beach, Florida, St. Moritz Hotel Corporation and Loews Hotels Holding
Corporation.
2. This Resolution shall take effect inunediately upon its passage.
PASSED AND ADOPTED this 6th day of
ATTEST:
AIT /kw
c:\wpwin60\re:soc\amd.ap1l.tda
FORM APPROVED
REDEVELOPMENT AGENCY
GENERAL COUNSEL
By 1I4~
Date 1\/so/~S
2
Miami Beach
Redevelopment Agency
1700 Convention Center C~:v~
Miami Beach, Florida 33~32
Telephone: (305) 673-1123
Fax: (305) 673-7712
REDEVELOPMENT AGENCY MEMORANDUM NO. 95 -74
DATE:
December 6, 1995
TO:
Chairman and Members of the
Miami Beach Redevelopment Agency
SUBJECT:
..t
Jose Garcia-Pedrosa /7 /~.
Executive Director !~~_.
A RESOLUTION AUTHORf~ING AND DIRECTING THE CHAIRMAN AND
SECRETARY TO EXECUTE AN AMENDMENT TO THE LETTER OF INTENT
WITH ST. MORITZ HOTEL CORPORATION
FROM:
RECOMMENDATION:
It is recommended that the City Commission/Redevelopment Agency
Board approve the attached Resolution amending the Letter of Intent
(LOI) to extend the date of signing of the Development Agreement
and other relevant documents with St. Moritz Hotel Corporation from
December 15, 1995, to no later than January 11, 1996.
BACKGROUND:
The Miami Beach Redevelopment Agency's (ROA's) negotiating team and
St. Moritz Hotel Corporation have been diligently pursuing closure
on the convention hotel legal documents. The RDA' s outside
counsel, Squire, Sanders and Dempsey, have prepared drafts of the
hotel lease agreement and the garage development agreement. A
major negotiating meeting will occur in New York on December 11
through December 13, 1995.
The Negotiating Team focused on resolving major substantive points
prior to full drafting of the agreements.
~
S{)urn f){)I~1:
~edevel()pment Uistrict
CIIT Cr:~1:1:?
lJedeyel()pment [)istJict
ANALYSIS:
The Letter of Intent, signed on May 3, 1995, contained a deadline
of December 15, 1995, to complete negotiations and have all
documents prepared.
This deadline has p~oved to be too ambitious due to the complexity
and eno~ity of the agreements necessary to conclude the deal. An
extension is necessary to provide sufficient time for a closing.
In the meantime, Loews will continue to expend funds for the design
development effort in order to remain on schedule to permit a
construction start in late spring and an opening by late 1997. As
a result, Loews will be committing out of pocket funding far beyond
the $1.6 million envisioned in the May LOr when a December 15, 1995
ciosing was presumed and is requesting an increase in the City's
potential liability to cover these costs. The negotiating team has
reached an agreement with Loews to defer this request until the
City Commission/Redevelopment Agency meeting on January 10~ 1996 at
which time the following should have occurred:
1) Loews will have a commitment letter for its $66 million
financial package with Bankers Trust.
2) The negotiating team will have concluded the major portion of
the ground lease during negotiation meetings in New York from
December 10 to December 13, 1995.
3) The hotel development agreement will have been drafted and
reviewed and in final stages of completion.
Therefore, at the January 10,1996 Commission/Redevelopment Agency
meeting, the negotiating team expects to be able to better advise
the Commissioners/Redevelopment Agency Board of the anticipated
timetable for closing the deal, and the increased design
development costs that will be incurred through closing to assure
a late spring start.
Additionally, Rod Eisenberg has served a Notice of Appeal regarding
the Summary Judgment granted to the City and the County in the
lawsuit he had filed contesting the establishment of the City
Center Redeve.~opment Area.
2
Because the December 15, 1995 deadline ~s upon us, the
Adminis~ration recommends an interim ex~ension of the Lor deadline
to January 11, 1996, with the understanding tha~ prior ~o January
11, 1996, terms for the ac~ual ex~ension can be nego~iated and
brought back to the Commission/RDA Board.
REVENUE IMPACTS TO THE CITY:
The signing of the Agreements will trigger the ex~ra one penny bed
tax. The Administration had contemplated the signing of documents
in December when the resort tax budget was prepared earlier ~his
year. For ~his reason, the Administra~ion is verY concerned about
~ .
the exten~ of any delay.
The postponemen~ of the deadline will cause the City's projected
revenues to be reduced from the $1.6 million es~imated in the
City's budget for this fiscal year. One half of this money is
committed to funding of the debt service for the hotel, so that the
diminution of potential revenues to the City is actually less.
This "paper impact" to the City must always be evaluated in light
of the negative consequences of rushing to negotiate to an
artificial deadline, resulting in less favorable financial terms to
the City. Nevertheless, the Administration will push aggressively
to minimize any delays.
CONCLUSION:
The City Commission/Redevelopment Agency should approve the
amendment to the Letter of Intent as recommended by the negotiating
team.
JGP /HSM : j ph
Attachments
~~
AMENDMENT
This is an Amendment ( the" Amendment" ), dated as of December 6, 1995, to that certain
Letter of Intent (the "LOI"), dated as of May 3, 1995, a copy of which is attached hereto. Both the
Amendment and the LOI are by and between the Miami Beach Redevelopment Agency, a public body
corporate and politic (the "RDA"); the City of Miami Beach, Florida, a Florida municipal corporation
(the "City"); St. Moritz Hotel Corporation. a Florida corporation ("srvrnc"); and Loews Hotels
Holding Corporation, a Delaware corporation ("LIlliC").
RECITALS
WHEREAS, Sw-IC was the winning bidder in response to the Convention Center Hotel
Request for Proposals; and
WHEREAS, the RDA, the City, SMHC and LHHC executed the LOr, pertaining to, among
other things, the development of an approximately 800 room hotel (the "Hotel") at and near 16th
Street east of Collins Avenue, Miami Beach and an approximately 800 car garage (the "Garage") to
be located at or near 16th Street between Collins and Washington Avenues, Miami Beach; and
WHEREAS, negotiations are proceeding on numerous agreements relating to the
development of the Hotel and Garage; and
WHEREAS, the LOr provides, among other things, that if the agreements for the
development of the Hotel and Garage and related matters are not executed by the RDA and Sw-IC
prior to December IS, 1995, the RDA or the City may be responsible to reimburse S?v1HC for certain
design expenses for the development of the Hotel and the Garage; and
WHEREAS, due to, among other things, the work and time involved in connection with the
negotiation of numerous agreements, a bond issuance, bank financing and property acquisition, the
RDA, the City, SMHC and LHHC would like to amend the LOr to extend the time by which
agreements must be executed and liability for reimbursement of design expenses might apply; and
WHEREAS, Paragraph 12(h) of the LOI provides that the LOI may be amended by a written
agreement executed by both of SMHe and the RDA
NOW THEREFORE, in exchange for the mutual promises contained herein, and other good
and valuable consideration, the receipt and adequacy of which is hereby conclusively acknowledged,
the parties agree as follows:
1. ABOVE RECITALS.
The above recitals are true and correct and are incorporated as a part of this
Amendment.
EXHIBIT "B"
2. MODIFICATIONS.
a) Paragraph 11 of the LOr, entitled "Design Development Expense
Reimbursement", is amended as follows:
1) All references to "December IS, 1995" are changed to "January 11,
1996."
2) All references to "December 31,1995" are changed to "January 31,
1996."
b) Paragraph 12(f) of the LOI, entitled "Tennination" is amended as follows:
The reference to "December 15, 1995" is changed to "January II, 1996."
3. OTHER PROVISIONS OF LOI.
The other provisions of the LOI are unchanged.
4. RATIFICATION OF LOI.
The RDA, the City, SMHC and Lillie ratify their agreement with the tenus
of the LOr, as modified by this Amendment.
5. GOVERNING LAW.
'This Amendment shall be governed by and construed in accordance with the
laws of the State of Florida, without reference to principles of conflicts oflaw.
6. HEADINGS.
Headings in this Amendment are only for convenience, are not a substantive
part of this Amendment or the LOI and do not affect the meaning of any provision of this Amendment
or the LOl.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
by their appropriate officials.
MITANU BEACH REDEVELOPMENT AGENCY
By:
2
By:
Date:
By
Date
A TrEST:
By:
Date:
/>-1..0 J,s
, I
A TIEST:
cl n"~
By: ~ ~~ ~m-
C--8:r y lj .(-ooor'
Print Name
Date:
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ATTEST:
:J~~
By:
C--[\\1l-J C'<-li.M
rint Name
Date:
,l/7 hi'
AlT:k.w:c:wpwin/Xl\ait\srnhclhhc.amd
CITY OF MIAMI BEACH
By:
er, Mayor FORM APPROVED
LEGAL ?1PT.
8y1l1~ ~
Date Lygo!?5
,
Date:
ST. MORITZ HOTEL CORPORATION
By:
~ H ()
~iJ'" ,11/'rP . ,{ ,Xli t 1 r eJ .
Print Name and Title
Date:
I ~h /;(~
LOEWS HOTELS HOLDING CORPORA nON
By:
~jJ,,\- I N+,J t1 i~( H I /?o
Print Name and Title '
L /" /
Date: I ' 7/! I
3
The Letter of Intent is an Exhibit to this Amendment but it has
intentionally been omitted to avoid duplication, because it is
attached to the Second Amendment.