LTC 032-2023 Collins Park Artist Workforce Housing Project Update032-2023
MIAMI BEACH
OFFICE OF THE CITY MANAGER
NO. LTC# LETTER TO COMMISSION
TO:
FROM:
DATE:
Honorable Mayor Dan Gelber and Members of the City Commission
Alina T. Hudak, City Mana~
January 25, 2023
SUBJECT: Collins Park Artist Workforce Housing Project Update
This Letter to Commission ("L TC") provides a status update regarding the Collins Park Artist
Workforce Housing Project (the "Project").
Background
On January 13, 2021, the Mayor and City Commission adopted Resolutions 2021-31553 and
2021-31555, approving, respectively, the Development Agreement and Ground Lease for the
Project, located at 224 23 rd Street in the Collins Park Cultural District. The residential housing
component will incorporate 80 workforce housing units with tenant selection prioritized among
income-eligible artists, educators, City employees, veterans, and other members of the City's
workforce. The ?-story, mixed-use Project will also include dormitory space for Miami City Ballet's
dance education program and street-level retail space for cultural activation. Project development
costs will largely be funded by proceeds from the issuance of Miami-Dade County Industrial
Development Authority revenue bonds (the "IDA Bond Issuance"), as approved by the Miami-
Dade County Board of County Commissioners pursuant to Resolution R-1050-21. The innovative
public private partnership (P3) structure relies on the City for a conservative portion of
developments costs, with residual income and building ownership transferring to the City following
satisfaction of debt service obligations.
Due to an increased development budget attributable to the increased cost of construction
materials and labor, on February 23, 2022, the City Commission approved a revision to the
Ground Lease, via Resolution 2022-32053 modifying the unit composition to designate all 80 units
for households earning up to 120% of the Area Median Income ("AMI"). The City Commission
also discussed the need for greater action to reduce permitting costs and other obstacles to the
development of affordable and workforce housing throughout the city. Subsequently, both Miami-
Dade County (the "County") and the City Commission enacted legislation to exempt affordable
and workforce projects from certain development fees. Collectively, the County and City
legislation resulted in a reduction in the Project's permitting fees of approximately $1.59 million.
As construction costs continued to escalate and interest rates began to climb, Servitas, LLC, the
Project developer ("Developer"), sought additional funding from the County and the City to close
the financing gap. On August 26, 2022, Servitas LLC, the Project developer, submitted an
application for a loan in the amount of $2,000,000 pursuant to Miami-Dade County's FY2022
Documentary Stamp Surtax Funding Program (the "Surtax Loan").
Collins Park Artist Workforce Housing Project Update
January 25, 2023
Page 2 of 2
Later, on November 16, 2022, via Resolution 2022-32411, the City Commission authorized a
second Ground Lease revision that committed additional funding to the Project including: (1) a
reimbursable direct contribution of $2.85 million, as approved in the FY 2023 Capital Budget (the
and (2) a non-reimbursable $4 million contribution (grant) utilizing proceeds from the Arts and
Culture General Obligation (G.O.) Bond, as approved by the Miami Beach electorate in the
November 8, 2022 Special Election (collectively, the "City Contribution"). Resolution 2022-32411
stipulated that the City Contribution would be contingent upon the elimination of any existing
financing gap through the Surtax Loan or any other funding source.
Status and Next Steps
On January 12, 2023, the County's Public Housing and Community Development Department
notified Servitas that its application for the Surtax Loan would not be considered for an award in
the current cycle due to failure to meet certain requirements. However, as recent market
conditions for projects of this nature have yielded lower interest rates and construction costs have
remained stable, Servitas and bond underwriter CitiGroup, Inc. are cautiously optimistic that
existing funding sources, including the IDA Bond Issuance and the City Contribution, could cover
Project development costs, including the costs associated with the IDA Bond Issuance, without
the Surtax Loan . Although cognizant that progress will remain sensitive to market volatility, the
development team believes that preparing a limited public offering to institutional and accredited
investors is prudent at this time. The strategy includes preparing a preliminary offering
memorandum for marketing to potential investors in the coming weeks. If the marketing of the
bond offering is successful, Servitas estimates that financial closing could occur as soon as March
2023 . Upon reaching this development milestone , the Ground Lease and guaranteed maximum
price (GMP) construction agreement will be executed, with groundbreaking to occur promptly
thereafter.
The Administration will continue to update the City Commission regarding any progress toward
financial closing of the Project.
Questions regarding the foregoing may be directed to Rickelle Williams, Assistant City Manager,
rickellewilliams@miamibeachfl.gov.
RW/HS/JK