2003-25419 Reso
RESOLUTION NO.
2003-25419
A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF
THE CITY OF MIAMI BEACH, FLORIDA AUTHORIZING THE
MAYOR AND CITY CLERK TO EXECUTE THE LETTER OF
INTENT NEGOTIATED BETWEEN THE CITY OF MIAMI BEACH,
THE MIAMI BEACH REDEVELOPMENT AGENCY AND RDP
ROYAL PALM HOTEL LIMITED PARTNERSHIP ("RDP") AND
FURTHER AUTHORIZING THE PREPARATION OF THE CLOSING
DOCUMENTS TO REFLECT THE TERMS OUTLINED IN THE
LETTER OF INTENT.
WHEREAS, over the past year, the Administration, and the Commission Iiaison(s)
(initially Commissioner Simon Cruz and presently Commissioner Jose Cruz), as appointed
liaison by the Miami Beach Redevelopment Agency (RDA), the City Attorney and outside
counsel, Joel Minsker, have met with Don Peebles and his representatives to address the
outstanding issues in connection with the Royal Palm Crowne Plaza Hotel (RDP); and
WHEREAS, on November 13, 2002, the RDA Board discussed the progress of the
negotiations, was provided a summary of the outstanding issues at that time and on April
30, 2003, the RDA Board considered approval of a Letter of Intent ("LOI") subject to certain
amendments which were not accepted by Don Peebles; and
WHEREAS, on June 11, 2003, the RDA Board directed the Manager, with
Commissioner Jose Smith as liaison, to continue negotiations subject to certain guidance;
and
WHEREAS, the LOI addresses: 1) Back Rent/Environmental Delay Claim/Sales
Taxes; 2) Future Rental, and Repayment of the Return, Conditions upon Sale of the Hotel
and Extension of the Fixed Expiration Date and Mandatory Purchase; 3) Conversion of the
Shorecrest Hotel to condominiumlhotelltimeshare upon payment of the Purchase Price in
full, (i.e. $10,000,000 plus the annual return); 4) amending the Convention Center
Agreement to reduce the Room Block requirement, as defined, from 350 rooms to 257
rooms per day, as the Royal Palm contains 257 rooms; 5) Refinancing; 6) FFE Reserve; 7)
Amendment to Lease Agreement regarding Town Park as Hotel Manager; 8) Outstanding
Disputes; 9) Restaurant Agreement; 10) Release of all Claims by RDP, RDA and City of
Miami Beach; 11) Amendments to the Garage Easement Agreement to eliminate the
payment of a Use Fee from RDP to Agency and a Facility Usage Payment from Agency to
RDP annually, deleting the provision that requires RDP's approval of the garage operator,
and defining the Self Park Rate; 12) Beach Concession Agreement; 13) Attorneys Fees;
14) Special Indemnification; 15) Termination; and 16) providing the Recognized Mortgage
consent letter to be provided within 30 days of execution of the LOI; and
WHEREAS, on November 18, 2003 the RDAlCity received a letter from Union
Planters withdrawing its August 8, 2003 Letter to RDP Royal Palm Hotel Limited
Partnership; and
WHEREAS, based upon the resolution of all outstanding claims and issues, pending
the settlement with Clark Construction, and the agreement to allow the conversion of the
Shorecrest Hotel to a condominiumlhotel/timeshare, only upon payment in full of the
Purchase Price, it is recommended the Chairman and Members of the Board adopt the
attached resolution.
NOW, THEREFORE, BE IT DULY RESOLVED BYTHE MAYOR AND MEMBERS
OF THE MIAMI BEACH CITY COMMISSION, that the Mayor and City Commission hereby
approve and authorize the Mayor and City Clerk to execute the Letter of Intent negotiated
between the City of Miami Beach, the Miami Beach Redevelopment Agency and RDP
Royal Palm Hotel Limited Partnership and further authorize the preparation of closing
documents to reflect the terms outlined in the Letter of Intent.
PASSED and ADOPTED this 25th day.
ATTEST:
_Wwt f~Lk
CITY CLERK
JMG/CMC/rar
T:\AGENDA\2003\n0v2503\regular\RoyalPalm LOI.CITY.RES.doc
APPROVED NJ TO
FORM & LANGUAGE
& FOR EXECUTION
~/t/hti>:1
City Date
CllY OF MIAMI BEACH
COIVMISSION ITEM SUMMARY
m
Condensed Title:
A Resolution authorizing the Mayor and City Clerk to execute the Letter of Intent negotiated between the
City of Miami Beach, the Miami Beach Redevelopment Agency and RDP Royal Palm Hotel Limited
Partnership ("RDP") and further authorizing the preparation of the closing documents to reflect the terms
outlined in the Letter of Intent.
Issue:
Shall the City Commission approve the execution of the Letter of Intent and authorize the preparation of
closing documents to reflect the terms outlined in the Letter of Intent?
Item Summa IRecommendation:
Based upon the resolution of all outstanding claims and issues, pending the settlement with Clark
Construction, and the agreement to allow the conversion of the Shorecrest Hotel to a
condominium/hotel/timeshare, only upon payment in full of the Purchase Price, it is recommended the
Ma or and Members of the Ci Commission ado t the attached resolution.
Advisory Board Recommendation:
IN/A
Financial Information:
Source of
Funds:
D
Finance Dept.
City Clerk's Office Legislative Tracking:
I Christina M. Cuervo
Si n-Offs:
OepartmerifOirector
T:\AGENDA\2003\nov2503\regular\RoyaIPalm LOI.CITY.SUM.doc
AGENDA ITEM R7B
DATE 11-;1.$"'0'1
CITY OF MIAMI BEACH
CITY HALL 1700 CONVENTION CENTER DRIVE MIAMI BEACH, FLORIDA 33139
www.miamibeachfl.gov
COMMISSION MEMORANDUM
From:
Mayor David Dermer and
Members of the City Commission
Jorge M. Gonzalez ~
City Manager 0 . U
Date: November 25, 2003
To:
Subject:
A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY
OF MIAMI BEACH, FLORIDA AUTHORIZING THE MAYOR AND CITY
CLERK TO EXECUTE THE LETTER OF INTENT NEGOTIATED BETWEEN
THE CITY OF MIAMI BEACH, THE MIAMI BEACH REDEVELOPMENT
AGENCY AND RDP ROYAL PALM HOTEL LIMITED PARTNERSHIP
("RDP") AND FURTHER AUTHORIZING THE PREPARATION OF THE
CLOSING DOCUMENTS TO REFLECT THE TERMS OUTLINED IN THE
LETTER OF INTENT.
ANALYSIS:
Over the past year and a half, the Administration, and the Commission liaison(s) (initially
Commissioner Simon Cruz and presently Commissioner Jose Smith), as appointed liaison
by the Redevelopment Agency (RDA), the City Attomey, and outside counsel, Joel Minsker,
have met with Don Peebles and his representatives to address the outstanding issues in
connection with the Royal Palm Crowne Plaza Hotel (RDP).
On November 13, 2002, the RDA Board discussed the progress of the negotiations, was
provided a summary of the outstanding issues at that time and directed negotiations to
continue. On April 30, 2003, the RDA Board considered approval of a Letter of Intent
("LOI") subject to certain amendments which were not accepted by Don Peebles.
On June 11, 2003, the RDA Board directed the Manager, with Commissioner Jose Smith
as liaison, to execute the Tolling Agreement and to continue negotiations subject to the
following guidance:
1. Explore extending the term of the contract from 25 years to some other period,
perhaps 99 years. Periodic payments of the Return to the RDAlCity should be
addressed in the negotiations. The RDAlCity may want to define periods of when
the RDAlCity will receive the 8% accrued and unpaid interest.
2. Relative to the Rental, there is no sentiment on the Commission to reduce the rent,
but there is some flexibility on ramping up and making it up along the way (relatively
short period of time, may be a year or two). There needs to be discussion on how
the rent for the period of time between May 15, 2002 until June 1, 2003 will be paid.
3. The 4/30 LOI will serve as the basis for the negotiations.
4. The rent (1/12 of the $490,000) will be paid beginning June 2003 and prospectively.
5. The Administration is to report back on September 10 or, because of travel
schedules, the second meeting in September with a final agreement.
November 25, 2003
Commission Memorandum
Royal Palm - Letter of Intent
Page 2 of 5
6. Whatever rights the City has today will continue (rights as of today will not be
adversely affected) and as such, a Tolling Agreement was executed by the parties
in June 2003.
7. Allowance for turning the Shorecrest Hotel into condominium units which is in the
April 30 LOI will continue to be a relevant term. This is where a lot of the equity
could be extracted to makeup the overrun.
8. Commissioner Smith will act as the liaison to the negotiations.
Since that date, the parties have continued to address the salient issues and the proposed
negotiated terms, in addition to those presented on April 30, 2003 (see attached April 30,
2003 memorandum) are summarized below and reflected in the attached Letter of Intent
(LOI).
1)
The Lease will be amended to provide that the Base Rent and Additional Rent due
from Hotel Opening Date of May 15, 2002 to May 15, 2003 will be deferred and
payable over a 10 year period commencing in Lease Year5through Lease Year 14.
(Refer to attached Exhibit)
2)
The Lease will be amended to provide that the Additional Rent and Incentive Rent
due in Lease Year 2,3,4 and 5, will be deferred and payable over a 10 year period
commencing in Lease Year 6 through Lease Year 15. (Refer to attached Exhibit)
3)
Beginning in Lease Year 2, Base Rent shall be due and payable in accordance with
the Lease terms.
4)
The Lease will be amended to provide that the outside date for payment of the
Purchase Price (which includes the 8% return) will be extended from 25 to 99 years.
5)
The Refinancing Times stated in Section 11.13( a) of the Lease shall be changed to
on or prior to the beginning of the fifth (5th) year after the Hotel Opening Date ("First
Refinancing"); on or prior to ten (10) years after the closing of the First Refinancing
("Second Refinancing") and then every tenth (10th) anniversary of the Second
Refinancing thereafter provided that the maturity date of any refinancing that
extends beyond the next required Refinancing will not have to be repaid prior to its
maturity provided said maturity date is no later than twenty (20) years from the last
refinancing; provided further however, that when Tenant refinances the Balance of
its Debt, the Net Refinancing Proceeds, as defined in Section 11.13(b) of the Lease
shall be applied to the extent available in the following order:
A. To Owner to pay the deferred Rental described in items 1 and 2 above;
B. 50% to Owner to pay the 8% return applicable as part of the Purchase Price
accrued and unpaid to date; and 50% to Tenant to repay Town Park
(Management Company) for Cost Overruns* paid by Town Park (estimated
at $5 million).
C. To Owner to pay the balance of the 8% return applicable as part of the
Purchase Price accrued and unpaid to date;
November 25, 2003
Commission Memorandum
Royal Palm - Letter of Intent
Page 3 of 5
D. 50% to Owner to pay the Purchase Price (which includes the 8% return) for
Owner's Interest in the Premises; and 50% to Tenant for Tenant Cost
Overruns* paid by Tenant (estimated at $2 million);
E. To Owner to pay the balance of the Purchase Price (which includes the 8%
return) for Owner's Interest in the Premises;
F. To Tenant if any funds remain after paying in full the amounts in 6A-6E
above.
*Any Cost Overruns will be calculated net of (1) any Clark settlement proceeds paid
to Tenant, directly or indirectly but (a) net of attorneys and other professional fees
and court costs not reflected in Tenant's cost overrun calculation and not advanced
by Town Park and (b) the Clark Credit to the extent paid to Owner, and (2) any prior
overrun or equity repayments from the two (2) prior future advances paid to Tenant.
Cost Overruns will be subject to a full accounting and review by the Owner, with the
exact amounts in 58 and 50 to be agreed upon by the parties.
6) In Lease Year 25, and every 10 years thereafter, Tenant shall pay Owner any
accrued and unpaid portion of the 8% return as follows:
A. Any and all unpaid portions of the 8% return accrued in Lease Years 1-25 will
be amortized and paid over 10 years in Lease Years 26-35.
B. Any and all unpaid portions of the 8% return accrued in subsequent 10 Lease
Year increments (i.e. Lease Years 26-35,36-45,46-55,56-65,66-75,76-85,
86-95, and 95- expiration will be amortized and paid over 10 years in the
respective succeeding 10 year Lease Term periods (i.e. Lease Years 36-45,
46-55,56-65.66-75, 76-85, 86-95, and 95-expiration, respectively) and will
be referred to as (the "Amortized Return").
C. Commencing on Lease Year 35 and for each Lease Year thereafter, to the
extent that the Base Rent, Additional Rent and the "Amortized Return", in
aggregate, payable in each Lease Year is less than $800,000, as adjusted for
inflation (the "Rental Cap"), then in such Lease Year, Tenant shall pay the
difference between the "Rental Cap" less the aggregate of Base Rent,
Additional Rent and the "Amortized Return" for said Lease Year, as
Mandatory Incentive Rent (the "Mandatory Incentive Rent"). If in any such
Lease Year, on or after Lease Year 35, Incentive Rent is payable, such
Incentive Rent shall be due and payable even if such payment results in a
payment that Year in excess of the Rental Cap. "Rental Cap" is defined as
the $800,000 amount which shall be increased at the beginning of the tenth
(10th) Lease Year, and every five (5) years thereafter, in the proportion as the
percentage increase in the GDP Implicit Price Deflator Index from the Hotel
Opening Date.
7) Lease terms, such as those relating to Rental inflation increases, that are adjusted
in increments through Lease Year 25, will be extended consistent with the new 99
year Lease term.
November 25, 2003
Commission Memorandum
Royal Palm - Letter of Intent
Page 4 of 5
8) The Lease will be amended to provide that in the event of any Sale, all deferred
andlor unpaid Rental and the 8% return shall be due and payable. Any Sale will
cause all Rental, including any deferrals thereof, as stated in the Ground Lease
Amendment to revert to the original Rental without any deferrals thereof, as
provided in the original Lease.
9) All remaining terms and conditions of the April 30, 2003 LOI, not in conflict with the
terms provided for herein, shall remain unchanged and are incorporated by
reference herein.
10) As it relates to the Town Park 1% equity interest, the Lease will be amended as
follows:
A. The amendments proposed by Developer in the attached "Amendment to
Agreement of Lease" will be included in the LOI and final closing documents
and will terminate upon the Sale of the Hotel or earlier of (1) termination of
the Hotel Management Agreement between RDP and Town Park Hotel
Corporation or (2) 15 years from Hotel Opening Date.
B. Section 16.7(e) of the Lease will be deleted in its entirety
C. Any payments or costs in connection with the "Note" andlor "Loan", as
defined in "the Amendment to Agreement of Lease", will not be considered
"Operating Expenses" as defined in the Lease.
The most substantive changes from the items presented to the City Commission on April
30, 2003, relate to the CitylRDA's agreement to:
1) Extend the term to 99 years and delete the mandatory purchase in Lease Year 25.
2) Deferral of a portion of Rental and amortized over a 10 year period, primarily during
Lease years 5-15. The LOI provides that upon its execution, the deferral of rent will be
effective immediately rather than when the closing documents are signed. If closing
documents are not executed within six (6) months, any amounts deferred and unpaid
shall be paid no later than 30 days, thereafter.
3) Periodic payments of accrued and unpaid Return will be paid commencing in Lease
Year 26 and annually thereafter.
4) As previously negotiated, the release of the Shorecrest Property for
condominiumlhotelltimeshare, upon full payment of the Purchase Price in full, i.e. $10
million. Additionally, the elimination of the excess Facility Usage Payment will
represent an annual recurring savings to the Anchor Shops Garage/RDA.
5) Resolution of certain outstanding items previously listed on "Exhibit B" list of disputed
items.
On September 1 0, 2003 a status report was provided and the RDA Board requested that
prior to final approval of negotiated terms that the Administration report on the status of the
Union Planters Default notice. Attached hereto is the November 18, 2003 letter from Union
Planters withdrawing its August 8, 2003 letter to RDP Royal Palm Hotel Limited
Partnership.
November 25, 2003
Commission Memorandum
Royal Palm - Letter of Intent
Page 5 of 5
Attached, I have also provided an updated Net Present Value calculation reflecting the new
negotiated terms in comparison to the Existing Lease Terms and the April 30, 2003 LOI
Terms.
Based upon the resolution of all outstanding claims and issues, pending the settlement
with Clark Construction, and the agreement to allow the conversion of the Shorecrest Hotel
to a condominiumlhotelltimeshare, only upon payment in full of the Purchase Price, it is
recommended the Mayor and City Commission adopt the attached resolution.
JMGICMClrar
T:\AGENDA\2003\nov2503\regular\RoyaIPalm lOI.CITY.CM.doc