LTC 123-2003 CITY OF MIAMI BEACH
Office of the City Manager
Letter to Commission No.
To:
From:
Subject:
Mayor David Dermer and
Members of the City Commission
Jorge M. Gonzalez ~ ~
City Manager
Loews Hotel Percentage Rent
Date: May 20, 2003
On September 20, 1996, the Miami Beach Redevelopment Agency (RDA) entered into a
Lease Agreement with Miami Beach Redevelopment, Inc., (MBRI), a fully owned subsidiary
of Loews Hotels. The Agreement defines the terms under which the RDA receives rent
revenues for the Loews Miami Beach Hotel. Loews' rent currently consists of a base rent of
$500,000 and percentage rent determined by a seven tier system. The tiers are prompted
primarily by alternating thresholds of internal rates of return, funded equity returns for
MBRI, and land value returns for the RDA.
A profit projection for the Loews, prepared by Tishman, the City's former hotel consultant,
indicated that the hotel would not reach profitability within its first years of operation and,
likewise, the RDA would not receive percentage rent. However, Loews has already far
exceeded these expectations. For Loews' first year of operation in 1999, the RDA received
percentage rent in the amount of $252,973, as determined by Tier4 of the Agreement. In
2000, the RDA received $2,054,967, achieving Tier 5A. In 2001, MBRI refinanced its debt
structure as permitted in the Hotel Lease Agreement, resulting in no percentage rent being
owed. On April 22, 2003, the RDA received a check in the amount of $647,041 for
incentive rent for lease year 2002, again representing Tier 4 of the Agreement.
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F:~DDHPlSAll\RDA~Loews~incentive_rent. LTC.doc
c: Christina M. Cuervo, Assistant City Manager
Kent Bonde, Redevelopment Coordinator
CITY OF MIAMI BEACH
Office of the City Manager
Letter to Commission No.
To:
Mayor David Dermer and
Members of the City Commission
From: Jorge M. Gonzalez
City Manager
Subject:
Loews Hotel Percentage Rent
Date: May 16, 2003
On September 20, 1996, the Miami Beach Redevelopment Agency (RDA) entered into a
Lease Agreement with Miami Beach Redevelopment, Inc., (MBRI), a fully owned subsidiary
of Loews Hotels. The Agreement defines the terms under which the RDA receives rent
revenues for the Loews Miami Beach Hotel. Loews' rent currently consists of a base rent of
$500,000 and percentage rent determined by a seven tier system. The tiers are prompted
primarily by alternating thresholds of internal rates of return, funded equity returns for
MBRI, and land value returns for the RDA.
A profit projection for the Loews, prepared by Tishman, the City's former hotel consultant,
indicated that the hotel would not reach profitability within its first years of operation and,
likewise, the RDA would not receive pementage rent. However, Loews has already far
exceeded these expectations. For Loews' first year of operation in 1999, the RDA received
percentage rent in the amount of $252,973, as determined by Tier 4 of the Agreement. In
2000, the RDA received $2,054,967, achieving Tier 5A. in 2001, MBRI refinanced its debt
structure,~re.suLtiP~i~J~Q.~rcentage rent being owed. On April 22, 2003, the RDA received
a check ~e year 200__~n the amount of $647,041(, again representing Tier 4 of the
Agreemerft~ J ~, r'. ~ /
c: C ~ristina M. Cuervo, Assistant City Manager
K ;nt Bonde, Redevelopment Coordinator