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230-96 RDA RESOLUTION NO. 230-96 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 THIRD 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, PERT AINING 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 Avenues, 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 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 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, the RDA, the City, SMHC and LHHC executed that certain Second Amendment to the LOI, dated as of January 10, 1996, extending, among other things, the January 11, 1996 date referenced in the preceding paragraph to January 25, 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 Third 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 MIAMI BEACH REDEVELOPMENT AGENCY as follows: 1. The Chairman and Secretary are authorized and directed to execute the attached Third 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. 2. This Resolution shall take effect immediately upon its passage. PASSED AND ADOPTED this 24 th day of 7 January ATTEST: FORM APPROVED REDEVELOPMENT AGENCY GENERAL COUNSEL By AJjIll/~ Date )/./tj,lc) ^ joW-tlf~~ SECRETARY AITlkw c:\ wpwin60\resos\3 amdagmt.rda 2 Miami Beach Redevelopment Agency 1700 Convention Center Drive Miami Beach, Florida 33139 Telephone: (305) 673-7193 Fax: (305) 673-7172 REDEVELOPMENT AGENCY MEMORANDUM NO. 96-2 DATE: January 24, 1996 TO: Chairman and Members of the Board of the Redevelopment Agency Jose Garcia-Pedrosa ~~ ~~ Executive Directo~ '\ FROM: SUBJECT: A RESOLUTION OF THE CHAIRMAN AND MEMBERS OF THE MIAMI BEACH REDEVELOPMENT AGENCY AUTHORIZING AND DIRECTING THE CHAIRMAN AND SECRETARY TO EXECUTE THE ATTACHED THIRD 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. At the request of the Mayor/Chairman who will not be present at the January 24, 1996, meeting, it is recommended that the attached Resolution extending the L.O.I an additional two weeks under the same terms and conditions as before be approved. At the February 7, 1996, City Commission/Redevelopment Agency Meeting, the Chairman of the Negotiating Team will address the Mayor and Commission/Chairman and Agency Board on the progress and further extension of the L.O.I. JGP:HSM/jph'~/ Attachment 1 ~()1JTti V()I~I: l?edevelvpment I)istnet CIIT CI:~TI:l? l?edevelvpment l)istJiet AGENDA ITEM 2-A January 24, 1996 THIRD AMENDMENT This is a Third Amendment ( the "Third Amendment" ), dated as of January 24, 1996, to that certain Letter of Intent (the "LOI"), 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 LOI (the "Amendment"), dated as of December 6, 1995, a copy of which is attached hereto as Exhibit "B" and incorporated herein, and as further amended by that certain Second Amendment to the La! (the "Second Amendment"), dated as of January 1 0, 1996, a copy of which is attached hereto as Exhibit "C" and incorporated herein. The Third Amendment, the Second Amendment, the Amendment and the LO! are by and between the Miami Beach Redevelopment Agency, a public body corporate and politic (the "RDA"); the City of Mianli Beach, Florida, a Florida municipal corporation (the "City"); S1. Moritz Hotel Corporation, a Florida corporation ("SMHC"); and Loews Hotels Holding Corporation, a Delaware corporation ("LHHC"). The LO!, as amended by the Second Amendment and the Amendment, is referred to herein as the "La!, as amended." RECIT ALS WHEREAS, 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 the LO!, 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 La! 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 WHEREAS, 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, the RDA, the City, SMHC and LHHC executed the Second Amendment, extending, among other things, the date referenced in the preceding paragraph to January 25, 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 LO!, 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 LaI, as amended, provides that the LaI, 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 Third Amendment. 2. MODIFICATIONS. a) Paragraph 11 of the LaI, as amended, entitled "Design Development Expense Reimbursement", is modified as follows: 1) All references to "January 25, 1996" are changed to "February 8, 1996." 2) All references to "February 9, 1996" are changed to "February 22, 1996". b) Paragraph 12(1) of the LaI, as amended, entitled "Termination" is modified as follows: The reference to "January 25,1996" is changed to "February 8,1996." 3. OTHER PROVISIONS. The other provisions of the LaI, 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 Third Amendment. 5. GOVERNING LAW. This Third 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. 2 6. HEADINGS. Headings in this Third Amendment are only for convenience, are not a substantive part of this Third Amendment or the LOI, as amended, and do not affect the meaning of any provision of this Third Amendment or the LOI, as amended. IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to be executed by their appropriate officials. ATTEST: By: ~o~r p~ Robert Parcher, Secretary Date: _~Ih.-"- By: Date: D r Gelber, ChairmRflDEVELOPMENT AGENCY GENERAL COUNSEL ByAJ/ ~. Y19/ ~~ FORM APPROVED DEPT. By 1JJ;(!!J~ Date 1//9/1 G ST. MORITZ HOTEL CORPORATION Date: ATTEST: By: Ro~ p~ Robert Parcher, City Clerk Date: .~ By: ATTEST: i \ \ ;\ \ ( i l\-_ By: / (''\I \..-\:..-. ~.'_----- , By: ck S. Adler J r Print Name and Title Gary W. Garson Print Name Date: 1/25/96 Date: 1/25/96 LOEWS HOTELS HOLDING CORPORATION ATTEST: ! \ ( (- '. . -: I \.~ By: ;' v"",y ~ / i ; By: S. Adler Iv ( Print Name and Title Gary W. Garson Print Name Date: 1/25/96 Date: 1/25/96 AIT:kw:c :wpwin60\ait\smhclhhc.3am 3 . I . , LETTER OF ~ May S' 1995 Re: LoeW's Miami Beach Hotel In February 1993, the City center/Historic Convention village Redevelopment and Revit.alization Area was officially established by the adoption of a Redevelopment plan (the "Redevelopment Plan"). The Redevelopment plan was the result of the combined effort of. the City of Miami Beach (the uCityU), Miami Beach Redevelopment Agency (the "Agency"), Metropolitan Dade County and the State of Florida. The Redevelopment 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 necessary linkages to the convention center. Pursuant to this Plan, the Agency has acquired the land, known as site I-A, which it has agreed to make available for a convention 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 corp. ('SMHCO) from alDOng the groupS which submitted proposals pursuant to the RFP and directed representatives of the Agency to negotiate the terms under which SMHC would develop, construct, own and operate the convention headquarters hotel referred to above (the "Hotel') in accordance wic.h the requirements of the RFP. This letter sets forth the understanding reached as a result of such negotiations. ~. The Hotel The Hotel will be an approximat.ely aOO-room headquarters convention hotel to be constructed on Site I-A described in the RFP. The Hotel will be a first class, upscale property with suitable conventiOn, conference and meeting space and appropriate amenities meeting the standards of t.he 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, elated March 7, B94, subject to the definitive agreements to be entered into between the Agency and/or City (as applicable) and SMHC (collectively, the 'Agreements'), the form and substance of which shall be acceptable to SMHC's lender, SMHC, the AgencY, the City and their respective counsel. SMHC shall be obligated to develOP, construct, furnish and equiP the Hotel in accordance with clans established pursuant to the Agreements which shall include approximately 190 on-site carking spaces. The Hotel shall be constructed in accordance with all applicab1e zoning, 1. t>O', (()47S' .DOCS.KLU'OLl.5)I'lIiJ1OS_o~::0Il. EXHIBIT "All . , . ' building, environmental, safety and other governmental laws, rules and regulations. 2. Costs and Financinq of the Hotel The preliminary estimated budget for the development of the Hotel, and the financing sources, are as follows: a . COSTS 1. 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 interest, commitment fees, other bank costs and fees, legal fees, etc. Subtotal: s. Operating deficit guarantee . Mortgage debt service guarantee 6. Total: DO"co.'sa.DOCS.~'O~SlHEHOS_PIStRI>>OT1~. 2 $ 66,400,000 1.9,500,000 17,600,000 6,500,000 $110.000,000 10,000,000 J.5, 000 , 000 $135,000,000 b. SOURCE~ 1.. 2. 3. 4_ 5. $ 66,000,000 First mortgage Initial equity provided by SMHC, which W'ill be funded prior to first mortgage funding 15,000,000 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 29.000,000 ~O.OOO.OOO subtotal: Operating deficit guarantee provided by SMHC's parent, Loews corporation, for the benefit of and as required by first mortgage ~ender 10,000,000 Mortgage debt service guarantee pro'V'ided by SMHC's parent, LoeWS corporation, for the benefit of and as required by first mortgage lender J.5,000.000 $135,000. OOQ Total: c. FmmING OF AGENcY' S S~ At the time of, or prior to, the execution of the Agreements, the AgenCY will have taken all action required by law to authorize, and will have sold and issued, in the manner to be set forth in the Agreements, $29,000,000 of bonds or will have incurred other debc 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 time of such funding), lesS the net a1llOunt of U.S. Department of Housing and Urban j)evelop.,ent Section 108 loan proceeds available for developmenC 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 public 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 applied in accordance with applicable laws. The application of funds in accordance with applicable lawS shall be supported by OO':tO.7S..COCS.MIAl'O~1S1~-PI~~' 3 appropriate documentatio~. The public areas of the Hotel shall be owned and operated in accordance with all applicable laws. 3. AgencY and/or City ~ctiOn5 At the time of, or prior to, the execution of the Agreements, the Agency and/or City, as applicable, will have taken all action required by law to authorize, and will have sold and issued, in the manner to be set forth in the Agreements, bonds in a suffic~ent amount, or will have incurred other debt in a sufficient amount to ensure that the following actions will be substantially comol~ted prior to tbe opening date of the Hotel as defined in the - Hotel Management Agreement (as hereinafter defined) (the "Hotel Open.ing Date") _ The Agreements will include a timetable COrmTIitment for the completion of these actions as well as a requirement that they be implemented in coordination with SMHC. (a) Municioal Garaae: As provided in Section 4 of this letter. (b) Site Improvements and Broadwalk: The Agency and/or City shall provide up to $3,000,000 which shall be applied solely to the cost of legally permissible exterior improvements to the public areas and public access areas relating to the Hotel and .to that portion of the construction of an Agency and/or city owned and maintained exteIl'Sion of the existing boardwalk or broadwalk (subj ect to applicable 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 maintenance of the boardwalk or broadwalk 21st Street to the northern boundary of Lummus Park. In addition, the Agency and/or city shall use good faith efforts to cause the implementation and completion of the previously planned State of Florida streetscape impro'V'ements on Collins Avenue (AlA) from Lincoln Road to 15th Street and connecting to Ocean Drive, so that these improvements are completed prior t.o the Hotel Opening Date. SMHC will work with the Agency and/or City in this regard. The Agency and/or City shall perform the foregoing actions in accordance with the standards set forth in the Agreements. 4. Municipal Garaae (a) Aaencv or City to Build Gara~: The Agency or City shall be responsible for the construction and maintenance (for so l.ong as the land subj ect to the Ground Lease and the improvements thereon are operated as a hotel or the pa~king 4 OO':[O'7S..DOCS.~'O~~SJKEHOS_O~ON. spaces are required for the use of such land and the improvements thereon by SM!lC under applicable law) of an approximately BOO-car municipal garage ("Garage") on a Citv- owned site within an area bounded by Washington and colli;'S Avenues between 15th and 17th StreetS, including extension of 16th Street leading to the Hotel main entrance across Collins Avenue. The Agency and/or City shall perform the foregoing actions in accordance with the standards set: forth in the Agreements. SMHC shall act as developer of the Garage for a fee of 3% of the project cost:, plus out-of-pocket expenses, pursuant to a development: agreement mutually satisfactory to the parties. In addition, any retail or accessory uses included in the Garage structure will be compatible with ~~d enhance the Hotel and its vicinity in accordance with the standards set forth in the Agreements. The Garage will be completed and ready for use not later than the anticipated Hotel opening Date. The Agency and/or City shall not, for so long as the Hotel is operated as a hotel, increase the height of the Garage so as to adversely affect the useful enjoyment of the hotel swimming pool. (b) Garaqe operator: The Agency or City shall designate the operator of the Garage, which designee shall be selected from a list of nationally recognized garage operators mutually sacisfactory to the Agency and/or City and SMHC, and which operator shall be subject to the awproval of SMHC. (c) liotel Use: Approximately 560 parking spaces shall be available 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 parking shall not exceed 50% of the self-park rate and charges for Hotel employee parking shall not exceed the lower of (i) monthly parking rate, (ii) 50% of self-parking rate or (iii) contract parking rate. SMHC shall utilize the available parking spaces at the Garage prior to utilizing other off-site parking facilities. .Priority useR shall mean the garage operator shall set aside solely for liotel use such number of the allocated parking spaces as Hotel operator shall request from time to time upon not lesS chan 24 hours prior notice to the garage operator. (d) Hotel GaraO"e Rent..: SMHC shall pay annual rent, payable monthly, equal to $500,000 for the use of the 560 priority Hotel parking spaces, subject to paragraph (e), below (the "Garage Rent-) . 5 I>O': (0475 I . OOCS . KD\.1.IOUS J MD105 _ot STRIJll:lTIOtr . (e) Facility Usaae Payment: In consideration of SM:~C's agreement to utilize the Garage on a requirements basis, as provided above, SMHC shall be paid monthly a percentage of tr:e annual grosS revenues of the garage as follows (the "Facility Usage payment"), the first $500,000 of which shall be applied as a c~edit against the Garage Rent each year: (i) 41.7t of annual gross revenues with respect to the first $1,200,000 of gross revenues; and (ii) 28% of annual gross revenues in excess of $1,200,000. (f) Limitation on Losses: In the event cumulative Garage Rent payments less the cumulative Facility Usage Payments made by SMHC exceed $1,000,000, the Facility Usage Payment will be the greater of $500,000 and the amount calculated in accordance with subparagraph (e) above. (g) Street Extension: The City shall extend 16th Street from Washington Avenue to Collins Avenue. (h) Enforceability:: 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 00. the north side of 16th Street, will be compatible with and enhance the Hotel and its 'Vicinity. s. Ground Leas~ The land comprising Site I-A, on W'hich the Hotel will be constructed, will be leased to SMHC by the Agency pursuant to a ground lease (the 'Ground Lease') having the following provisions: (a) Title.: The execution of the Agreements by SMHC will be conditioned upon fee title to the land being satisfactory to SMHC. After execution of the Agreements, the Agency will not further en~rober such title to the land except 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 the land will be conveyed to SMHC 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 Rent shall be increased every ~o Opening Date in the same proportion as in the then appraised fair market value (c) Base Rent: Hotel Opening Date. years from the Hotel the increase, if any, 6 DO': C047S..DOCS.~eOllSl~_D~~' of the land (on a vacant and unimproved basis) bears to a base value of $24,000,000, subject to a cap for each escalation equal to the applicable change in the GDP implicit price deflator index. In no event shall Base Rent during an escalation period be less than the Base Rent during the prior period. (d) Additional Rent: Net Cash Flow after Debt Service (as hereinafter defined) shall be distributed annually pursuant to the following Tiers: Tier~. 100% to SMHC until funded operating shortfall reserve (up to $10 million) plus interest at lS~ per annum as calculated from the later to occur of the date such amounts are funded and the Hotel Opening Date (cumulative and compounded) is repaid. Tier 2. 100~ to sMHC until SMHC receives a 15% 'per annum cumulative (not compounded) preferred 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 Equity.) . Tier 3. 100% to SMHC as interest at 15~ per annum cumulative (not compounded) on funds prorided 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 Hotel Opening Date. Tier 4. 80% to SMHC and 20% to the Agency until SMHC has (i) received 25~ Internal Rate of Return (as such tertll is defined in the Agreements, hereinafter referred to as -IRR") (cumulative and compounded return on and return of), on its Funded Equity ($15,000,000) as calculated from the later to occur of the dat.e such amounts 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. Tier 5. 20% to SMHC and 80% to the Agency until Agency has received (as calculated from Hotel opening Date and including Base Rent Additional Rent actually paid) an 8% (cumulati'Ve and compounded return on the the and IRR and 7 DO' : [04 7 Sol . DOCS . KIJ-l,lousl /'Illl'CS _PXsnXBOTIOII. ....- -.. return of} itS land at a fixed value of $24,000,000. Tier 6. 85% to SMHC, 15% to the Agency. (e) Non-Subordination: The Ground Lease will not be subordinated to the first mortgage or to any other financing agreements. (f) Real Estate Taxes: The Hotel, including the land, will be subject to ad valorem real estate taxes levied by the City and other governmental authorities in accordance with law. SMHC will be entitled to the benefit of any tax abatements and reductions as are, or may become available under applicable law, as if it were the fee owner of the land. (g) Environmental Indemnity.: The Agency will provide an indemnity to SMHC with respect to the remediation, as described in the Agreements, of environmental matters affecting the land and the improvements thereon which exist prior to the execution of the Ground Lease, except as to those matters disclosed to SMHC in the environmental audits pro'Vided to or obtained by SMHC prior to the execution of the Agreements. SMIlC will pro'Vide an indemnity to the Agency with respect to the remediation, as described in the Agreements, of environmental matters affecting the land and the improvements thereon arising from and after the execution 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 SMIiC prior to the execution of the Agreements. No limitations of liability will apply with respect to the foregoing indemnities. (h) Financinq: Any financing secured by the Ground Lease or Hotel, and any refinancings thereof, will be provided by institutional 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 call~d upon to subordinate its interest under the Ground Lease in connection with any financing or refi.D.anci.D.g. Loews corporation (or an entity acceptable to the first mortgage lender(s) and the Agency) shall furnish a completion guaranty for the benefit of the construction lender and the Agency. 8 DO.' (01. 7S I. oocs .XI.AJ.I 01.15 1 ~ _DJ:StRXDOTXOlI. (i) Pu~chase Ootior., while che ~gency's TaX Inc~ement Revenue Bonds, Series 1993 (the "Bonds") have not been retired, SMHC will have an option to purchase the land at a price equal to the greater of (1) the then appraised fair market value of che Agency's interest in the land based upon an arm's length sale to a third party buyer not affiliated with SHHC taking intO account the then current state of title as well as the continued existence of the Ground Lease and the llotel Management Agreement as then in effect, or (2) t::e amount determined as follows: a. For all fiscal years until ~dditional Rent payments have reached Tier 5' an amount to return to the ~gency an 8~ IRR (which calculation will include Base Rent and Additional Rent payments made to the ~gency) on the land value fixed at $24,000,000. b. For fiscal years in whfch Additional Rent is being paid at Tier 5, but not Tier 6' a>> amount equal to the greater of (il an amount to return to the AgencY an 8~ IRR (which calculation will include Base Rent and ~dditional Rent payments made to the Agency) on the land value fixed at $24,000,000 or (iil a ten times multiple of the average Base Rent and Additional Rent paid to the AgenCY during the prior three full fiscal years. c. For fiscal years in which 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 t~ee fiscal years, or (ii) average 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 1., 2004 shall be computed pursuant to (i) (2) above (without regard to (i) (1) abovel 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 accorda>>ce with their terms prior to the exercise of such purcr~se 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 purchase option at any time after the holderS of the Bonds have been paid in full all principal of and interest thereon a>>d the Bonds have bee."- retired (other than as a result of (x) above) shall be 9 ~" (O.7S,.I;iOCS.~'OlUI/'lD'QS-O~0II. computed pursuant to (i) (2) abOve (without regard to (i) (11 abovel and the requirements of (~) abOve shall not apply to the exercise of such purchase option. " The parties acknowledge that clause (1) of this paragraph (1) has been included based upon the present interpretation of Section 144 (cl (2) of the Internal Revenue Code (the "code") in relation to the Bonds by counsel to the Agency. The p~ties agree that such clause (1) shall not apply if at any time SMHC provides an opinion of tax counsel knowledgeable with resoect to the tax aspects of tax-exempt bonds, in form and substance satisfactory to the Agency and its counsel. to the effect that the exercise of the purchase option at the price determined pursuant to clause (2) will not adverselY affect the exclusion from groSS income for federal income tax purposes of interest on the Bonds. In the event, within 12 months following the exercise by 5MBC of the purchase option (the date of exercise being called the "EXercise Date"), SMHC shall consummate the sale of the Hotel to an unaffiliated third party (a "Post-Option sale") with whom SMHC had reached an agreement in principle, evidenced in writing, at any time during the 6-month period prior to the EJ<ercise Date, the Post _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 SMHC in an alllOunt equal to the option purchase price theretofore paid to the .A.gency. (j) Lease a>>d Transfer of Hotel Public as. In consideration of (1) the varioUS taxes generated, and to be generated, by the ownership and operation of the Hotel," (2) the support of the convention Center by the Hotel pursuant to the agreement described in paragraph (1) below and (3) SMHC providing the Funded EquitY ($15,000,000), the AgenCY shall ()\.) lease to SMHC for a term coterminous with the Ground Lease all of the public areas of the Hotel owned by the Agency and (B) upon consummation of the purchase option described in subparagraph (i) above, transfer all of its right, title and interest in the Hotel, including the public areas thereof, to SMRC. (kl Riqht of First Refusal. In the event the Agency shal1 desire to accept an offer for sale of all of its interest in the land and the Hotel, including the public areas of the Hotel, SMHC shall have a right to purchase such interest upon the sa~ termS and conditions as the same are offered and in accordance with the Agreements. The Agency shall not sell less thaD its entire interest in the land and the Hotel. 10 DO~: (~(S,.pocS.~80~JMtMOS_O~t~. (1) Cor.vention Cente~: SMHC will enter into an a~reement with the City pursuant to which the improvem~ts ~~11 be operated as a hotel and rooms will be made available to support Convention center eventS according tOa formula to be negotiated. The formula ~ill cove~ the number of rooms committed, rate structure, and timing of release of rooms f~om the City's rights pursuant to such agreement. This a~eement will also provide for joint marketing arrangements between t.he Hotel and the City and for the designation of the Hotel as a primary supplier of hotel services to support the Convention Center. The term of the agreement shall expire upon the earlier to occur of (1) termination of the Redevelopm~~t Plan (without regard to any extensions thereof) or (2) the City's failure to maintain the Convention Center at its present location in at least its present size. (m) The Agreements will include customary provisions and such other provisiOns mutually satisfactory to the parties. 6. Definition of Net Cash Flow after Debt Service "Net Cash Flow after Debt Service" will be defined as "Hotel Operating Profit- after deduction of Debt Service. "Hotel Operating Profit. will be defined as -total revenue from operation of the Hotel from and after the Hotel Opening Date ("Hotel Revenue") less all costs and expenses incurred in owning, maintaining, conducting and operating the Hotel, other than Debt Service, depreciation and amortization. These costs would include, without limitation, all operating costs. such as wages and benefits, the cost of goods, supplies, utilities and services, repairs and maintenance, the Base Rent, all Hotel Operator fees and payments, capital additions and improvements (other than those funded through the reserve for addi dons to furnishings and equipment, and except that no deduction shall be permitted for capital additioIlS and improvements which under the Agreements require the consent of the AgenCY, unless such consent has been obtained or is deemed to have been obtained), all insurance premiWllS, paymentS =der equipment leases, real estate taxes and assessmentS, and all payments into the reserve for additions, substitutions and replacements to furnishings and equipment. "Deb~ 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 Hotel and after a sale of the Hotel by SMHC, the principal amount equal to the greater of $66,000,000 or the actual principal amount not to exceed 75~ of the sale price (including assumed debt). To the extent amounts of Deemed Debt are not held by an institutional financing source, debt service shall be calculated assuming iuterest payments 11 00'; {047S1 .oocs.t<V-l'o1.1.S1~_DIS"T1l-!JIcnOfl. at: the Citibank, N .A. prime race and principal payments in accordance with a 20 year amortization schedule. 7. Application of Ne't Proceeds from Sale of the Hotel In the event of a sale or refinancing, Net Proceeds would be determined as if such Net Proceeds were Net Cash Flow in the year of the sale or refinancing and will be distributed to SMHC or its successor and the Agency in accordance with the various Tiers, as if such Net Proceeds were Additional Rent as provided in Paragraph S(d). For purposes of calculating Net Proceeds, the gross proceeds received from such sale will be deemed to include any amounts received by an affiliated hotel operator for the transfer of any interest of such hotel operator in the Hotel Management Agreement. Subsequent to any sale or ref inancing I Net Cash Flow would cont inue to be distributed in the same manner as prior to the sale or refi.n.a.ncing, but after taking into account the distribution of Net Proceeds in payment of the various Tiers under Additional Rent to SMHC or its successor 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 customary traZlsaction 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 10% interest in the Hotel or the Ground Lease or any transfer I by operation of law or otherwise, by SMHC's parent, of a greater than 10% equity' interest in SMHC, in either case to a person who is not a controlled affiliate of the Loews 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 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 AoDroval Riqhts The Agreements will provide the following approval rights for tbe Agency: (a) plans: The Agreements will include preliminary plans and specifications resulting from the expenditure of Design Costs described in paragraph 11 (the "Preliminary Plans") for the construction of the Hotel, a pre-construction budget and development budget which will have been approved by the Agency and SMHC jointly as part of the negotiation of the Agreements. The budgets will inclu?e all of SMHC's (and its affiliates') development fees, re~mbursables, payments to affiliates and such other items reasonably requested by the 12 00': [04751 .oOC9.KtA180USl)lDf:)S_D~!C2f. Agency. The Agreements will include a timetable for submission and approval of final plans. SMHC will provide to the Agency a critical-path schedule prior to the start of construction. The l'gency will have the right to approV'e material changes, additions a>>d alterations contained in the final plans to the extent such final plans do not substantially comply with the approved preliminary plans. The AgenCY may not object to changes required to comply with applicable laws in sO far as such objection relates to cost overruns. Any objections by. the Agency to material changes, additions and alterations will be reasonable and specific, a>>d, at the Agency's option, may include alternate choices which would not result in e)Ctra cost. If the AgenCY validly a>>d appropriately oblects to a change proposed by SMHC and such objection is upheld following binding arbitration, if any, SMHC may, to the extent permissible under applicable laws, neV'ertheless implement the change, but any resulting budget overrun would not be reimbursable as Additional Rent or otherwise, except as provided for in the Agreements. If the Agency approves a change but at a justified lower cost than proposed by SMHC, only the cost ap\?roved by the Agency (or as established fqllowing binding arbitration) will be included in SMHC'S allowed overrun (see "Addi.tional Rent"). Notwithstanding the AgenCY's approval of any plans or specifications and changes thereto, 5MBC will be required to comply with all applicable laws with respect to the construction and operation of the Hotel, including, without limitation, the obtaining 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 preliminary pla>>s. The AgenCY. will have the right to inspect the project during construction and to have an on-site representative at its sole cost and expense. SMHC will not commence construction on a portion of the Ilotel until any required approval of applicable final plans has been obtained fI::olU the Agency, (bl Financial Statements, SMHC will deliver to the Agency monthlY unaudited and annual audited financial statements. In addition, tlle AgenCY will be provided annually with an information coPY of a projected income statement reflecting the budget for the upcoming year. All financial statements will be prepared in accordance with the Uniform system of AccountS for Ilotels (8th Revised Edition) ("USAR") . l\J.l financial statementS and boOks of account relating to operation of the Ilotel and/or 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 ~3 oO':[~7sa.~.~80~151~-~I~OM. chargeab17 to the management company's home office (iQcludi~g subs~d~ar~es 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 information relating to competitive or proprietary information. In the event the Agency's audit shows that the Agency's share of Additional Rent has been understated by 3% or mo~e, then S~~C will pay to the Agency the cost of such audit in addition to any deficiency payment required. (c) Sale of the Hotel: A sale (as defined below) of the Hotel or SMHC's interest in the Ground Lease shall be subject to the Agency'S approval. For purposes of this paragraph 8 (c), a sale shall be deemed to mean any transfer by operation of law or othe~ise by SMHC of a greater than 50% interest in the Hotel or the Ground Lease or a.l'lY transfer, by operation of law or otherwise, by SMHC's parent, of a greater than 50% equity interest in SMHC, in either case to a person who is not a controlled affiliate of the LoeWS 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, pro'Vision 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 disappro'Ve the sale of the Hotel to a foreign government or instrUmentality thereof or an entity controlled thereby. Notwithstanding the foregoing, a sale of the Hotel to a Qualified Purchaser (as hereinafter definedl shall be deemed reasonable and not require the consent of the Agency. A "Qualified Purchaser- for purposes of this section shall mean a purchaser that: (i) is (a) a permitted Operator, as hereinafter defined, or (b) a financial institution (including, but not limited to, banks, life insurance companies, or pension funds) or an institutional investor in real property or interests in rea1 property (such as a REIT, REMIC or other public or private investment fund), which has engaged a permitted Operator; (iil is not a foreign government or instrumentality thereof or an entity controlled thereby; and (iii) agrees to be bound by all the terms and conditions of all the Agreements. (d) New Mana~ement Compan~' The Agency will have the right to approve a neW hotel operator (including the sale or transfer of more than a 50% interest in the current Hotel Operator) . The Agency reserves the right to disapprove a 14 DO" t 04 7S' . DOCS . KIAU a US 1 rlSl1O'S _DtS'T1lI3O'rtOJr . hotel operator controlled by a foreign government or instrumentality thereof. Notwithstanding the foregoing, a change 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 "permitted operator" for the purposes of this section is an entity which (i) is not a foreign government or instrumentality thereof or an entity controlled thereby; and (ii) together with its affiliateS, (al has been engaged in the operation or management of hotels for at least five years and has operated 0>; ma>>aged during such 5-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 standards set forth in the Ground Lease, and (b) has a national marketing operation under a national flag or has .entered intO an agreement with a hotel chain which has a national marketing operation under a national flag. (e) Rioht to Cure, The AgenCY will have the right to cure defaults by SMHC under any mortgage, the Hotel Management Agreement and such other agreementS as the parties may agree upon, and all such agreements will so provide. (f) i'poroval Notic<>l!.' (1) Neither the AgenCY nor SMHC shall unreasonably delay, withhold 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 matters to be mutually agreed upon by the part:i.es, such as the sale of the 1I0tel or change in the 1I0tel Operator as aforesaid, and the AgenCY fails to respond withi.n the provided time period, then after the expiration of such time period SMHC may resubmit itS request to the Agency, and provided such request (a>>d the envelope in which such request is transmitted) conspicuously bears the following legend, the matter stated in the .request shall be deemed approved by the p.gency if the At.>ency shell fail to disapprove such second request within 30 clays after receipt thereof, "PAILURE TO RESPOND TO TlIIS REQUEST WITlIIN 30 DAYS SWILL CONSTITOTE Ao-roMATIC APPROVAL OP TIlE MA'J.'TERS DESCRIBED HEREIN wrTll RESPEcT TO p1IJU',GRAP1I OF TIlE [NAME OF AGREEl'IE'lT] ~ DATED I BETWEEN (DESCRIBE: PARTIES]. (2) It is contemplated that the Agreements will provide for an expedited approval process duriug the period prior to the Hotel Opening Date. (3) I f the AgenCY's or SMHC' s approval is required under any of the Agreements, upon disapproval of a request, the disapproving partY will provide written reasons supporting such party's disapproval of such matter to the other party. ~5 00' , (04 7S 8 . DOCS .MIAlIOU51 HEI'05 _DL$t1IBOTtOft . Each party shall deliver to the other party its approval or disapproval of an.y request for approval pursuant to the Agreements within the applicable time period. If a party does not provide a response to a request for a>> approval within the time period set forth in the Agreements (whether such approval request requires a single or double notice), such request shall be deemed approved. 9. Hotel Manaaement AareemenJ;. Pursuant to a management agreement (the "Hotel Management Agreement"), the Hotel will be operated by an affiliate of Loews Hotels, Inc. ("Hotel Operator") as a first class, upscale convention property in the Loews Hotels chain in accordance with the following provisions: (a) Manaqemen!;.; The Hotel will be managed by Hotel Operator as part of the Loews Hotels chain in accordance with the standards set forth in the Ground Lease. Hotel Operator will have exclusive authority to operate the Hotel in the name and for the account of 5MBC. (b) Technical Ser'rices; Hotel Operator will provide technical services to assist SMIlC in the construction, furnishing and equipping of the Hotel. These services will include, among other things, (i) review and approval of architectural plans, plans for design a>>d decor and plans for furnishing all of which will be subject to Hotel Operator's approval to ensure that the Hotel will meet the standards set forth in the Ground Lease, (ii) develop criteria for furniture and equipment and assistance in obtaining sources of supply, and (Hi) assistanCe in coordinating purchases and installation of furnishings and equipment. Hotel Operator will be paid a one-time fee of $300,000 by SMHC for providing technical services, plUS reimbursement of actual costs (which will not include executive time) in providing technical services during the pre-opening period. These costS and fees are included in the estimated budget referred to in Paragraph 8 of this letter. (c) pre-9Penina Servicea; Hotel 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 SMHC) Hotel staff; (ii) pre-opening marketing a>>d advert ising, ( ii i) negot iating contracts for storeS, concessions, leases, supplies and similar items; (iv) assistance in obtaining necessary licenses and permitS; and (v) assistanCe in purchasing initial operating su.pp1ies. Hotel Operator will be reimbursed by SMIlC for the cost of providing these pre-opening services, including executive and staff time. and out_of-pocket expenses. These costs and fees ~6 00" (O"7s..DOCS.XIA:.801.1S1~_o~oM. are included in the estimated budget, referred to in paragaph 8 of this letter. (d) Term: 30 years, W'ith four renewal options of 15 years each and one final renewal option of 9 years. The Hotel Operator may not, without the consent of the Agency, exercise a renewal option unless the Agency has received an 8% per annum cumulative (not compounded) return (i.e., Base Rent and Additional Rent) on the land value fixed at $24,000,000; provided, however, that the foregoing requirement will cease to be applicable once the Agency bas received an 8" 1RR (including Base Rent and Additional Rent actually paid) on the land value (fixed at $24,000,000) - Hotel Operator will have the right to cure any shortfall with respect to the reauired 8% cumulative return by direct payment to the Agency, with any such direct payment being deemed Additional Rent. (e) Manaqement Fee: ~. Base Fee: 3% of Hotel Revenue (calculated in accordance with USAH) . 2. Grou? Marketinq Fe~: 1.25% of Hotel Revenue. The Group Marketing Fee represents payment for chain wide advertising and market ing services provided by the Loews home office, including overhead expenses of regional sales offices. These services will include a cencral sales and marketing operation supported by regional sales offices and nationwide corporate advertising, marketing and promotion programs. The Hotel Operator will provide. these services to the Hotel 00 the same basis as it. provides similar services to other hotels in its chain. 3. Reserv<!l.tion Fee~: The cost of centralized reservation services provided by the Hotel Operator (or through a third part:y service provider) shall be allocat.ed to the 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 chain. 4. Franchise Fee: Upon the execution of a neW' management agreement 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 exoenditures 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 would include, among other things, travel and 17 pO,: (O"7~' .oocs.KD.l'01.1S1MI:)'QS_l)~0Il'. entercainment, telephone and other incidental expenses of <:mployees in performing services actually and specifically ~ncurred in connection with the Hotel. In no event will ou~- of-pocket expenditures include regula~ overhead expenses of Hotel Operator's corporate facilities or compensation of home office employees. Notwithstanding the provisions of subparagraphs (e) (1) and (e) (2) above, in the event a mar.agement agreement shall be entered into with a new hotel operator, the combined Base Fee and GrouP Marketing Fee shall not exceed 4.25% of Eotel Revenues. (f) pualitv Standard: Hotel operator will be required to operate the Hotel as a first class, upscale convention center hotel, including high-quality banquet, convention and meeting services and facilities, multiple-food and beve~age outlets, room service, bell service, laundry and valet services, a health and fitness facility, and such ocher 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 reestablished by agreement between the parties every 10 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 cure rights. Notwithstanding the foregoing, Hotel aperator will not be required to fund monies other than those required to be in the FF&E Reserve for the replacement of fu:roiture and equipment necessary to meet the foregoing standard. The foregoing sha~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 reserve for replacement and additions to furniture and equipment initially funded at 1% of Hotel Revenue in the first fiscal year, increasing to 2% in the second fiscal year, 3% in the third fiscal year and 4% in the fourth and each fiscal year thereafter. The FP&E Reserve will be held in a segregated account a>>d such funds shall only be used for replacements and additions as aforesaid. 18 00" (C>4 ",SI.DOCS .J<tAlIOUS)lQ1:)S_OIstRrsonaK. (hl Radius Restriction: Without the prior consent 0: the Agency, Hotel Operator will not operate a conventiOC property (i.e., GOO or more rooms and 40,000 or more sQUare feet of meeting space; hereinafter, a "convention hotel" (including any meeting space available to Hotel Operator pursuant to any license or shared facilities agreements or otherwise)) within the area ("TerritOry") comprised of Dace county north to and including the City of Ft. Lauderdale; provided however, .that this provision will in no event be more restrictive (or shall no longer be applicable, as the case may be) than any radius restriction (or lack of restriction) regarding a>>y other hotel noW or hereafter located in the area north of 5th Street and south of 44th Street receiving in excess of $5,000,000 in value of Agency or city funds (or funds controlled therebY, including taX benefits). The Hotel'S radius restriction will terminate or exclude certain properties as descr:0>ed below, as applicable. upOn the occurrence of "any of the following eventS: (i) if the Hotel is acquired by a purchaser who is part of a hotel chain (i.e., tWO or more hotels) or SMHC purchases a hotel chain and in either event such chain has one or more properties in the Territory, then such properties shaJ.l be excluded from the radius restriction; (ii) the purchase of the Agency'S interest in the Botel, including the land, by SMHCi and" (iii) the termination of the Redevelopment Plan (without regard to any extension thereof) . ~O. site I-B The luJenCY will enter into an agreemen10 with SMHC with regard to site 1-B (i-e., the lot presentlY owned by the Agency and the second 1010 if subsequentlY acquired by the Agency) providing developmellt on each lot will conform to applicable zoning laws and requests for prOpOsals applicable to such development and such other matters as the par10ies may determine, if anY, by mutually acceptable agreement" 11. !J:esi<m Development F.=ense ReimbursemenJ;. The parties acknowledge that SMHC will, of necessity, incur signi.ficant out-of-pOcke1O costS for professional architectural design, engineering and other technical advice and services in . connection with the design, const:<uction and permitting of the Hotel ("Design Costs") prior to the execUtion of the Agreements. In consideration of the foregoing, and in order to insure the timely consummation of the transactions contemplated hereby, SMHC and the luJency have agreed that suer. costs will be subject to reimbursement as folloWS: ~9 1)0' , {()04. 7SI.DOCS .l'lV.J.I01.1S)lo4D"OS_~I~I()I(. (al if the Agency or the city, as applicable, has not, prior to December 15, 1995, entered into binding agreements to raise the funds necessary to meet its obligations as contemplated by paragraph 2 (b) (3) and Paragraphs 3 (a) and (bl. then the Agency shall, no later than December 31, 1995, pay to SMIlC the Qualified Design costs (as hereinafter defined) ; (b) if SMHC has not by December 15, 1995 entered into binding financial commitments to obtain the first mortgage financing as contemplated by Paragraph 2(b)(ll, SMHC shall bear all Design Costs incurred by it; and (c) if the Agreements are not in final form acceptable to the parties for execution by December 15, 1995, for any reason whatsoever, including the mutual failure of SMHC and the Agency . (or the City, as the case may bel to obtain financing commitments pursuant to (a) and (b) above, SMIlC shall bear one half of the Qualified Design Costs and the Agency shall, nO later than December 31, 1995, reimburse SHUC for one half of the Qualified Design costs. . The term "Qualified Design costs" shall mean Design costs in an amount not to exceed $1, 600 . 000 ; provided, however, that if between July 15, 1995 and August 1, 1995 the Agency notifies 5MBC that it wishes SMIlC to suspend further design work, Qualified Design Costs shall not exceed $1,090,000. ~2- General (al Arbitration, AnY controversy or claim relating to any of the Agreements (or the breach thereof) will be settled by arbitration in accordance with standards a>>d methodology to be negotiated between the AgenCY and SMHC. The Agency and SMHC will negotiate an expedited arbitration regime with respect to pre-Hotel Opening matters. which regime may include the advance appointment of a qualified arbitrator. (bl Liabilit~' The Agreements will incorporate provisions with respect to the limitation of SMIIC's, the Agency's a>>d the City's liability thereunder, as applicable, mutually acceptable to the parties, with the same providing for reasonable damages, but no punitive damages. (c) pefinitive Aareement'!.' Upon execution of this Letter of Intent by SMHC a>>d approval of the terms hereof by the appropriate Agency and City bodies, the Agency's counsel will draft the Agreements (other than the Hotel Management Agreement, agreements to which the AgenCY or city is not a party and other agreements as the pa...--ties may agreel. The Agreements will contain, among other things, representations, warranties, . conditions, covenants and indemnities and the like typical in similar transactions, subject to the terms hereof. The consummation of the transactions 20 DO': (047SI.OOCS.KIUIDU51t1VOS-t)I~0II. . . 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 MB 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 Agency: 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: Subj ect 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-J3Ic;.r Date MIAMI BEACH REDEVE7ilZO AGENCY i ~ 'j ! _' __ I t~__ fc:..,,,~~? (..:.l~ c..~.t t' ,,:,.,.,) s/~hs Date [SIGNATURES CONTINUED ON FOLLOWING PAGE] 21 : .. A:2PRoVlW }.S VRl(:. _- BY:V~~ Laurence Feiogo I General counsel ;A:2PROVED: c By %)0" to.usa .pOCS_~IlO1.151tlBP'05_t)~CIll. ~ / ~/'io Da~e . 5'N95 Date S-J~{CfS Date ~/JJl-/tjr;- Dal:.e ' , FO~~OVED . ~~ ~~te r7i/- 22 RESOLUTION NO. 228-95 A RESOLUTION OF THE CHAIRMAN AND MEMBERS OF THE MIAMI BEACH REDEVELOPMENT AGENCY AUTHORIZING AND DIRECTING THE CHAIRMAN AND SECRETARY TO EXECUTE THE ATTACHED Al\fENDMENT TO THAT CERTAIN LETTER OF INTENT BY Arr.rn BETWEEN THE MIAMI BEACH REDEVELOPl\IENT AGENCY, THE CITY OF MIAMI BEACH, FLORIDA, ST. MORITZ HOTEL CORPORATION AND LOEWS HOTELS HOLDING CORPORA nON, 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 IICity"), SMIlC and Loews Hotels Holding Corporation (IILIlliC") executed a Letter of Intent (the "LOI") pertaining to 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 IlGarage") 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 LOI provides that if the agreements for the development of the Hotel and Garage are not executed by the RDA and SMHC prior to December IS, 1995, the RDA or the City may be respollSlble 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 urnc 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 LO! provides that the LOI may be amended 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 MIAMI BEACH REDEVELOPMENT AGENCY as follows: 1. The Chairman and Secretary are authorized and directed to execute the attachedtAmendment to that certain Letter of Intent by and between the Miami Beach Redevelopment Agency, the City of Miami Beach, Florida, S1. Moritz Hotel Corporation and Loews Hotels Holding Corporation. 2. This Resolution shall take effect immediately upon its passage. PASSED AND ADOPTED this 6th day of AITEST: AIT /kw c:\wpwin60\resoc\amdagrmt.rda FORM APPROVED REDEVELOPMENT AGENCY GENERAl COUNSEL By /fI4~ Date I Vgo!CjS 2 " Miami Beach Redevelopment Agency 1700 Convention Center u;-:va Miami Beach, Florida 33132 Telephone: (305) 673-71 93 Fax: (305) 673-7772 REDEVELOPMENT AGENCY MEMORANDUM NO. 95 -7 4 DATE: December 6, 1995 SUBJECT: Chairman and Members of the Miami Beach Redevelopment Agency _4 Jose Garcia-Pedrosa /1 /" Executive Director .(~~. A RESOLUTION AUTHOR~ING AND DIRECTING THE CHAIRMAN AND SECRETARY TO EXECUTE AN AMENDMENT TO THE LETTER OF INTENT WITH ST. MORITZ HOTEL CORPORATION TO: 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 (RDA's) negotiating team and St. Moritz Hotel Corporation have been diligently pursuing closure on the convention hotel legal documents. The RDA 1 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()UTti J)()I~ Vedevel{)pment Uistrict CllY CI:/lllfffl2 I)ede,,'el()pment [)istJict .., .A. 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 proved to be too ambitious d~e to the complexity and enormity 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 $l.6 million envisioned in the May LOI when a December 15, 1995 closing 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 Redevelopment Area. 2 Because the December 15, 1995 deadline is upon us, the Administration recommends an interim extension of the LOI deadline to January 11, 1996, with the understanding that prior to January 11, 1996, terms for the actual extension can be negotiated and brought back to the Commission/RDA Board. REVENUE IMPACTS TO THE CITY: The signing of the Agreements will trigger the extra one penny bed tax. The Administration had contemplated the signing of documents in December when the resort tax budget was prepared earlier this year. For this reason, the Administration is very concerned about the extent of any delay. The postponement of the deadline will cause the City's projected revenues to be reduced from the $1.6 million estimated 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: jph 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 ("SMHC"); and Loews Hotels Holding Corporation., a Delaware corporation ("LHHC"). RECITALS WHEREAS, SMHC was the wirming bidder in response to the Convention Center Hotel Request for Proposals; and WHEREAS, the RDA, the City, SMHC and lRHC executed 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") 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 LOI 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 S:MHC prior to December 15, 1995, the RDA or the City may be responsible to reimburse S:MHC 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, SMIlC and LIlliC would like to amend the LOI 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 SMIlC 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 IIBI1 2. MODIFICATIONS. a) Paragraph 11 of the LOI, entitled "Design Development Expense Reimbursement", is amended as follows: 1) All references to "December IS, 1995" are changed to "January II, 1996. " 2) All references to "December 3 I, 1995" are changed to " January 31, 1996." b) Paragraph 12(f) of the LOI, entitled "Tennination" is amended as follows: The reference to "December IS, 1995" is changed to "January II, 1996." 3. OTHER PROVISIONS OF LO!. The other provisions of the LO! are unchanged. 4. RATIFICATION OF LO!. The RDA, the City, SMHC and LHHC ratify their agreement with the tenus of the LOI, as modified by this Amendment. 5. GOVERNING LAW. TIlls 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 LOI. IN wrrNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their appropriate officials. MIAMI BEACH REDEVELOPMENT AGENCY By: By: 2 e~ Chainnan FORM APPROVED REDEVELOPMENT AGENCY s/!Jl i/J/h, Date I \i&/~ Date: A TrEST: By: Date: />-1..0 l: , I A TIEST: By: /-C~,Q~~ I G.;t U -C--L1 ('lur rint Name Date: /),k A TrEST: '_G~ By: C-{\I-~ l-J C'-a.rw rint Name Date: 11/7 kr AlT:kw:c:wp\W160\aitlsmhc\hhc.amd CITY OF MIAMI BEACH By: Date: er, Mayor FORM APPROVED LEGAL ?lPT. 8y1Jl~ ~ Date lY..$'O)?S , ST. MORITZ HOTEL CORPORATION By: ~ H () ~""f\ TI1i"tr' ., ,Xlf t 1 r {Jj . Print Name and Title Date: !~hh(~ LOEWS HOTELS HOLDING CORPORATION By: Date: It. h A \-- 3 The Letter of Intent is an Exhibit to this Amendment but has intentionally been omitted to avoid duplication, as it is already attached to the Third Amendment. SECOND AMENDMENT This is a Second Amendment ( the "Second Amendment" ), dated as of January 10, 1996, to that certain Letter of Intent (the "LOI"), 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 LOI (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 LOI are by and bet\veen the Miami Beach Redevelopment Agency, a public body corporate and politic (the "RDA"); the City ofMiarrii 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 LOI, as amended by the Amendment, is referred to herein as the "LOI, as amended. II 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 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") 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 LOI 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 WHEREAS, 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 LOI, 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 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, 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: EXHIBIT lie" 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 LOI, 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(t) 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 LOr, 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. MIAMI BEACH REDEVELOPMENT AGENCY ATTEST: By: By: Seymour Gelber Chairman FORM APPROVED "' ' REDEVELOPMENT AGENCY GENERAL COUNSEL St1A1 %ll1fi-- Jack Lubin, Interim Secretary Date: Date: CITY OF MIAl\'1I BEACH ATTEST: Date By: By: Jack Lubin, Interim City Clerk Seymour Gelber, Mayor Date: Date: ST. MORITZ HOTEL CORPORATION ATTEST: By: By: Print Name Print Name and Title Date: Date: LOEWS HOTELS HOLDING CORPORATION ATTEST: By: By: Print Name Print Name and Title Date: Date: AIT:kw:c:wpwin60\ait\smhclhhc.2am FORM APPROVED ~a1 ~P& By ~ f -- Date 3 The Letter of Intent is an Exhibit to this Second Amendment but has intentionally been omitted to avoid duplication, as it is already attached to the Third Amendment.