OIG No. 23-24: Lincoln Place Ground Lease Agreement Compliance AuditTO:
FROM:
DATE:
PROJECT:
PERIOD:
Joseph M. Centorino, Inspector General
Honorable Mayor and Members of the City Commission
Joseph Centorino, Inspector General
November 30, 2023
Lincoln Place Ground Lease Agreement Compliance Audit
OIG No. 23-24
January 1, 2019, through December 31, 2022
An audit was completed by the City of Miami Beach Office of the Inspector General {OIG) that
focused primarily on determining the timeliness, accuracy, and completeness of the base rent
and percentage rent payments remitted to the City during the audit period related to the Ground
Lease Agreement between the City and two tenants at a City-owned property, Lincoln Place,
located at 1601 Washington Avenue (see picture below). Additional testing was performed to
determine the tenants' compliance with other selected provisions in its Ground Lease Agreement
with the City.
During the audit period, Lincoln Place had two successive tenants. The building was occupied by
the former Tenant, 16" Street Partners, LLC, from the beginning of the audit period on January
1, 2017, until June 30, 2021, followed by the current tenant, NG 1601 Washington Ave. LLC. The
OIG Auditor also examined the related performance of the City Fleet and Facilities Management
Department Asset Management Division, which is responsible for overseeing the executed
agreement and monitoring the tenants' performance pursuant to the Ground Lease Agreement.
All provided documents and transactions related to the January 1, 2019, through December 31,
2022 audit period were examined.
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INTRODUCTION
On September 1, 1999, the City entered into a Ground Lease Agreement with 16" Street Partners,
LLC, to develop and operate a mixed-use project on land leased from the City located at
Washington Avenue and 16" Street. This project, called Lincoln Place, comprises an eight-story,
high-rise building with 111,591 rentable square feet of office space, 28,483 rentable square feet
of retail space, and a 493-space parking garage.
16" Street Partners, LLC was initially formed by LNR 16" Street, Inc. in partnership with Lincoln
Place Partners, LLC and Comras 16" Street, Inc. Effective May 24, 2006, 16" Street Partners,
LLC entered into an Assignment and Assumption of Lessee's Interest in Ground Lease
Agreement with TAG Lincoln Place LLC, a wholly-owned subsidiary of The Andalex Group, LLC.
On December 6, 2013, Andalex Holdings LLC, through the sale of its 100% ownership of TAG
membership interest to PKY Lincoln Place Holdings, LLC, entered into a Master Sublease for the
entire Project. Pursuant to the Master Sublease, 16" Street, as the master subtenant, was
responsible for the payment of all obligations of the tenant to the City under the Ground Lease.
Subsequently, PKY and Parkway Properties, Inc. merged with Cousins Properties Inc. Pursuant
to the merger, PKY assigned 100% of its interest to Cousins Lincoln Place Holdings.
On December 23, 2016, Lincoln Place interest was sold as follows: 87.20% to NG 1601
Washington Ave. LLC, indirectly controlled by The Nightingale Group LLC, a commercial real
estate firm; 8.86% to JBL 1601 Washington, LLC; and 3.94% to Review Avenue Miami LLC. As
per the Master Lease, 16th Street Partners, LLC continues as a master subtenant, leasing all
property as part of a sale-leaseback transaction completed in 2006 for a 15-year term that expired
on June 30, 2021. A sale-leaseback transaction occurs when an entity sells an asset it owns and
immediately leases the asset back from the buyer. The seller then becomes the lessee, and the
buyer becomes the lessor.
As 16" Street Partners LLC's 15-year master lease term expired on June 30, 2021, NG 1601
Washington Ave. LLC was responsible for the payment of all obligations to the City for the
remainder of the audit period.
Lincoln Place Leasehold Interest Ownership Timeline
1999 2006 2013 2016 2016-Present a
16h street
Partner, LLC
On September 1,
1999, 1he City
entered into a Lease
Agreement with 1%
Street Partners to
create a mixed-use
project on land
"eased from the cay.
•
TAG Lincoln Place
LLC
PKY Lincoln Place
Holdings, LLC
£2.2:" ±% leasehold interest to
TAG and entered a 100% of the membership interest Master Sublease for the 3fTAG, sold seh entire Project. Although 16 Street sold the interest to PKY. After
l hold· ·. the sale, TAG easenol mnterest, t chaned its name to
0 conrmued as a master 4 • PKr1incoln Place, z:±.
June 30. 2021
Cousins Lincoln
Place Holding, LLC
PKY and Parkway
Properties, Inc.
merged with Cousins
Properties, Inc.
Pursuant to the
merger. PKY assigned
/00% of its interest to
Cousins Lincoln
@ Place Holdings, and
PKY changed its
name to Cousin
Lincoln Place.
NG 1601
Washington Ave LLC
Cousins Lincoln Place
Sold Transferred the Leasehold
Interest in the project at
87.20% to NG 160I
Washington, indrectly
controlled by the Nightingale
Group. LLC, 8.86% to JGL
1601 Washington, LI.C. and
3.94% to Review Avenue Mam
LLC
•
The term of the Ground Lease Agreement was from the Commencement Date (September 1,
1999) continuing until the fiftieth (50) anniversary of the September 1, 2002, Delay Date, with
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two additional terms providing for 20-year extension options. Given the complexity of the payment
calculations and their cumulative nature since the commencement of the Ground Lease
Agreement, the OIG Auditor has included below the corresponding amounts due and/or received
by the City to provide context:
• The Tenant shall pay the base rent in monthly installments equal to one-twelfth (1/12) of
the applicable annual rent, payable in advance on the first day of each calendar month.
• The base rent will be $250,000 for lease years 1 through 5 (September 1, 2002, through
December 31, 2007), increasing to $300,000 per annum, commencing on the first month
of the sixth through the tenth lease years (January 1, 2008, through December 31, 2012).
• The monthly base rent was to be adjusted every five lease years thereafter, starting on
January 1, 2013, or lease year 11, based upon the lesser of 12% or the cumulative CPI
over the previous five-year period.
• In addition to the monthly base rent payments, the Tenant must also remit annual
percentage rent payments to the City for each lease year during the term of the Ground
Lease Agreement. This percentage rent payment is equal to 2.5% of the amount of project
revenue for each lease year.
• Project revenue is defined as all revenue, payments, income received, escalation
adjustments, rental and operating cost reimbursements reserved under any lease,
sublease, concession, license, or other arrangement or from the operation of the Project
(including any reimbursements for operating expenses and common area maintenance)
and paid to Tenant for the use or occupancy of any portion of the Project.
• As summarized in Section 4.1 of the Ground Lease Agreement, if the Tenant fails to make
any payment of base rent, percentage rent, or other rental and/or imposition within thirty
(30) days after the due date, the late payment bears interest from the date due until the
date paid at a rate equal to the lesser of (a) four percent (4%) per annum in excess of the
prime rate in effect from time to time at Citibank N.A. (or The Chase Manhattan Bank, N.A,
if Citibank shall not then have an established prime rate and (b) the maximum interest rate
permitted by law. The OIG Auditor determined that interest rates ranged from a high of
9.50% for 2018 to a low of 7 .25% for 2021 during the audit period for late payments, which
consisted of 4.00% + prime rate in effect %.
The Munis system is the City enterprise resource planning system. The following table, obtained
from its General Ledger module, indicates the base rent and percentage rent payments, including
penalties and Florida Sales tax, received by the City for each examined lease/calendar year:
Category 2019 2020 2021 2022 Total
Base Rent* $372,869.67 $186,207.69 $372,048.45 $372,170.76 $1,303,296.57
Percentage Rent * $175,770.60 $184,955.88 $159,938.34 $176,138.97 $696,803.79
Total Rent $548,640.27 $371,163.57 $531,986.79 $548,309.73 $2,000,100.36
The above figures are based on the month and/or year that the Tenant made the payment while the City recognized
the payment in the fiscal year received, so timing differences would exist if this table were reconciled to the
lease/calendar year payments. For example, the $175,770.60 percentage rent payment for the 2018 calendar year
was received on April 18, 2019 and was included in the 2019 fiscal year entries. In addition, the base rent payment
for the year 20202 is lesser than other years during the audit period since the City Commission granted six months'
rent relief due to the economic impact caused by the COVID-19 pandemic.
OVERALL OPINION
Based upon an examination of the furnished records for the audit period of January 1, 2019,
through December 31, 2022, the OIG Auditor identified deficiencies which resulted in total
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underpayments to the City of $58,344.28 ($9,922.96 finding #1 + $45,692.14 finding #2 +
$2,729.18 finding #3). Additional amounts may be owed to the City for percentage rent payments
occurring during the audit period, but some could not be calculated, as not all the requested
records, required by the Ground Lease Agreement, were provided to the OIG despite multiple
requests (findings # 4 and 5). The OIG Auditor also encountered difficulties in determining the
completeness and verifying the accuracy of the information contained in the Project Revenue per
Ground Lease Worksheet due to incomplete supporting documentation. The Asset Management
Division staff's inability to previously identify these deficiencies and/or make the proper
corrections and the Tenant's failure to provide all the required documentation for review as
required per the Ground Lease Agreement, have created a scope limitation and raised concerns
regarding other deficiencies that may exist.
The following shortcomings were noted during the audit period:
1. The City was underpaid $9,922.96 in base rent including $488.20 in Florida Sales tax due
to incorrect calculations involving the cumulative CPI adjustments pursuant to Section 3
of the Ground Lease Agreement.
2. Florida Sales tax on commercial rent was not correctly applied to the percentage rent
payments received resulting in a $45,692.14 underbilling which includes $2,048.42 due to
the State.
3. Percentage rent payments were remitted to the City after the due dates specified in the
Ground Lease Agreement, but late fees were not accurately charged, resulting in
$2,729.19 due, which includes $642.89 in Florida Sales tax.
4. The Tenant did not submit all the required reports for the percentage rent payments by
the designated due dates specified in the Ground Lease Agreement.
5. Percentage rent payments could not be verified due to insufficient supporting
documentation to meet the requirements of the Ground Lease Agreement.
6. The Tenant was not compliant with some insurance requirements under to Article 7 of the
Ground Lease Agreement.
In addition, the OIG has suggested the following opportunities for improvement:
1. Accounting method inconsistencies between the computation of project revenue on a cash
basis and the preparation of financial statements for audit on an accrual basis hindered the
reconciliation process.
2. The executed Ground Lease Agreement does not provide any specific
consequence/penalty for not timely submitting all required reports.
SCOPE, OBJECTIVES, AND METHODOLOGY
The primary scope of this audit was to determine whether the Tenant complied with selected
terms of the Ground Lease Agreement, including accurately calculating and timely remitting base
rent and percentage rent payments due to the City of Miami Beach related to the Lincoln Place
project during the specified audit period.
The audit focused on the following general objectives:
• To determine whether the Tenant timely submitted to the City all reports and records
required in the Ground Lease Agreement.
• To determine whether Facilities and Fleet Management Department Asset Management
Division staff accurately billed the Tenant pursuant to the Ground Lease Agreement.
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• To determine whether the Tenant timely and fully remitted all tested payments due to the
City. If not, were the appropriate late charges timely and accurately billed to the Tenant?
• To determine whether the Tenant maintained the required insurance coverage.
• To determine whether the Tenant complied with other selected provisions of the Ground
Lease Agreement.
• To determine whether examined payments received were accurately recorded in the City
Financial System.
• Other audit procedures as deemed necessary.
The audit methodology included the following:
• Reviewed the executed Ground Lease and Settlement Agreements between the City and
the Tenant;
• Interviewed and made inquiries of City and Tenant staff to gain an understanding of
internal controls, assess control risk, and plan audit procedures;
• Performed substantive testing consistent with the audit objectives, including, but not
limited to, examination of applicable transactions and records;
• Drew conclusions based on the results of testing with corresponding recommendations
and obtained auditee responses and corrective action plans; and
• Performed other audit procedures as deemed necessary.
FINDINGS, RECOMMENDATIONS, AND RESPONSES
1. THE CITY WAS UNDERPAID $9,922.96 IN BASE RENT INCLUDING $488.20 IN
FLORIDA SALES TAX DUE TO INCORRECT CALCULATIONS INVOLVING THE
CUMULATIVE CPI ADJUSTMENTS PURSUANT TO SECTION 3 OF THE GROUND
LEASE AGREEMENT.
Section 3.2( c) of the Ground Lease Agreement entitled "Rent After the Delay Date" states:
Tenant shall pay Owner annual rent for each Lease Year, including any adjustments
thereto (the "Base Rent''), during the Term commencing on the Delay Date. The initial
Base Rent shall be Two Hundred Fifty Thousand Dollars ($250,000), and shall be
increased as described in Sections 3.2(d), 3.2(e), and 3.2(f} hereof, until the Expiration of
the Term. In no event shall Base Rent during an adjustment period be less than the Base
Rent during any prior period.
Section 3.2 (d) "Adjustments to Base Rent" states: (i) The Base Rent shall be increased
to Three Hundred Thousand Dollars ($300,000) per annum, commencing on the first
month of the sixth (6th) Lease Year, and (ii) the Base Rent shall be further increased by
the lesser of twelve percent (12%) or the cumulative CPI over the previous five (5) year
period and shall be adjusted commencing with the first (1st) month of the eleventh (11th)
Lease Year and every five (5) Lease Years thereafter.
Section 3.2 (g) "Payment of Rent and Base Rent" states: On and after the Possession
Date, rent and Base Rent shall be paid in monthly installments equal to one-twelfth of the
then applicable annual rent and Base Rent and shall be paid in advance, on the first day
of each and every calendar month thereafter during the Term. All rent and Base Rent
which is due for any period of less than a full month or a full calendar year shall be
appropriately apportioned.
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In sum, the total annual base rent due to the City was $267,500.00_for lease years 1
through 5 (September 1, 2002, through December 31, 2007), which was comprised of
$250,000.00 in annual base rent plus $17,500.00 in Florida Sales tax ($250,000.00 x
1.07). Consequently, the Tenant was to remit monthly base rent of $22,291.67
($267,500.00/12 months) during this five-year period.
For lease years 6 through 10 (January 1, 2008 through December 31, 2012), the annual
base rent due increased to $321,000.00 ($300,000.00 base rent x 1.07 Florida Sales tax),
which equals $26,750.00 per month ($321,000.00/12 months).
Testing determined that Asset Management Division staff had accurately billed the Tenant
through lease year 10, as no differences were found. However, starting on January 1,
2013, the rent was to be adjusted, and every fifth lease year after that, based upon the
lesser of 12% or the cumulative CPI over the previous five-year period.
The OIG Auditor noted that, starting on January 1, 2013, Asset Management Division staff
incorrectly applied a cumulative CPI increase of 8.487%. As a result, the Tenant's annual
base rent payments due increased to $348,243.27 ($300,000.00 x 1.08487 CPI x 1.07
Florida Sales tax) for lease years 11 through 15 (January 1, 2013, through December 31,
2017), which equals $29,020.27 per month ($348,243.27)/12 months). However, the OIG
Auditor determined that the cumulative CPI was 9.315% as reported for the same period
using data from Consumer Price Index for All Urban Consumers for the United States, all
items, index base period 1982-84=100 ( commonly referred to as CPI-U) as required per
the Ground Lease Agreement. Consequently, the monthly base rent due starting on
January 1, 2013, and ending on December 31, 2017, was $29,241.78 (($300,000.00 x
1.09315 CPI x 1.07 Florida sales tax)/12 months) or $350,901.37 annually.
As a result the OIG Auditor calculated that annual base rent was underpaid by $2,658.10
annually ($350,901.37 - $348,243.27), including 7% Florida Sales tax, for a total of
$13,290.52 ($2,658.10 x 5 lease years) from January 1, 2013, through December 31,
2017. This underbilling occurred prior to the designated audit period and is important to
note because it affects prospective base year calculations.
For lease years 16 through 20 (January 1, 2018, through December 31, 2022), Asset
Management Division staff correctly calculated that the cumulative CPI increased by
7.371 %. However, the increase is cumulative and since the prior years were calculated
incorrectly, the base rent was understated. As a result, the Tenant's annual base rent
starting in January 2018 (lease year 16) increased to $373,219.19 ($325,467.24 x 1.07371
CPI x 1.068 Florida Sales tax) or $31,101.60 per month including a 6.8% Florida Sales
tax.
Thereafter, the Florida Sales tax due for commercial rental was reduced to 6.7% for 2019
and 6.5% for 2020. Consequently, the 2019 annual base rent (lease year 17) decreased
to $372,869.73 or $31,072.48 per month ($325,467.24 x 1.07371 CPI x 1.067 Florida
Sales tax)/12 months). For the lease years occurring January 1, 2020, through December
31, 2022, the annual base rent decreased to $372,170.82 annually or $31,014.24 per
month ($325,467.24 x 1.07371 CPI x 1.065 Florida Sales tax)/12 months).
The OIG Auditor computed the base rent for lease years 16 through 20 (January 1, 2018,
through December 31, 2022) using the CPI increase of 7.371% It was concluded that the
monthly base rent payments due starting on January 1, 2018, for lease year 16 should
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have been $31,338.39 ($327,945.21 x 1.07371 CPI x 1.068 Florida Sales tax)/12 months)
or $376,060.72 annually including 6.8% Florida Sales tax, instead of the $373,219.19
charged to the Tenant. For lease year 17 starting on January 1, 2019, the base rent
payment due decreased because of the lower effective Florida Sales tax rate to
$31,309.05 ($327,945.21 x 1.07371 CPI x 1.067 Florida Sales tax)/12 months) or
$375,708.60 annually, instead of $372,869.73. For lease years 18 through 20 covering
January 1, 2020, through December 31, 2022, the base rent payment due decreased to
$31,250.36 per month ($327,945.21 x 1.07371 CPI x 1.065 Florida Sales tax)/12 months)
or $375,004.37 annually, instead of $372,170.82.
It was also determined that the cumulative CPI calculation for lease years 21 through 25
(January 1, 2023, through December 31, 2027) was 20.393%, more than 12%. As a result,
the Tenant's annual base rent should only increase by 12% starting in January 1, 2023 to
$35,000.41 per month ($352,116.78 x 1.12 CPI x 1.065 Florida Sales tax)/12 months) or
$420,004.90 annually.
In conclusion, as a result of the OIG Auditor calculations the total base rent underpayment
during the January 1, 2019, through December 31, 2022, audit period was calculated to
be $9,922.96 including $488.20 in Florida Sales tax as shown in the table below:
As Computed By OIG As Paid in Munis Differences
Year Base Rent Sales Tax Total Rent Base Rent Sales Tax Total Rent Base Rent Sales Tax Total Rent
2019 $352,116.78 $23,591.82 $375,708.60 $349,456.08 $23,413.59 $372,869.67 $2,660.70 $178.23 $2,838.93
2020 $176,058.39 $11,443.80 $187,502.19 $174,728.04 $11,479.65 $186,207.69 $1,330.35 -$35.85 $1,294.50
2021 $352,116.78 $22,887.59 $375,004.37 $349,456.08 $22,714.68 $372,048.45 $2,783.01 $172.91 $2,955.92
2022 $352,116.78 $22,887.59 $375,004.37 $349,456.08 $22,714.68 $372,170.76 $2,660.70 $172.91 $2,833.61
Total $1,232,408.73 $80,810.80 $1,313,219.53 $1,223,096.28 $80,322.60 $1,303,296.57 $9,434.76 $488.20 $9,922.96
2.
Recommendation(s):
Asset Management Division staff should perform its own calculations and determine
whether it agrees with the OIG Auditor's calculations of $9,922.96 in base rent due to the
City for the audit period. Once completed, it should invoice the Tenant accordingly. As the
base rent, including Florida Sales tax, is based on the prior years' calculations, the monthly
charges invoiced for future lease years starting with January 1, 2023, through December
31, 2023, should be reviewed and adjusted, as needed.
Facilities and Fleet Management Department Response:
The Asset Management Division acknowledges the miscalculation from 2013 that created
a domino effect thereafter. As a result, we recalculated and properly adjusted the historical
billings from 2013 through 2022, as well as on current billings.
FLORIDA SALES TAX ON COMMERCIAL RENT WAS NOT CORRECTLY APPLIED
TO THE PERCENTAGE RENT PAYMENTS RECEIVED RESULTING IN A $45,692.14
UNDERBILL/NG INCLUDING $2,048.42 DUE TO THE STATE.
Section 3.3 of the Ground Lease Agreement entitled "Percentage Rent states: Tenant
shall pay the Owner annual percentage rent for each Lease Year (the "Percentage Rent")
during the Term in an amount equal to two and one-half percent (2 ½%)of the amount of
Project Revenue for each Lease Year commencing on the earlier to occur of (i) the ninth
(9th) Lease Year or (ii) the Sale Date; provided, however, for the initial and final Lease
Years, the Percentage Rent shall be prorated according to the actual number of days in
such Lease Year.
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(a) Payment of Percentage Rent. Tenant shall pay the full amount of Percentage Rent
due in annual installments, in arrears, within sixty (60) days after the end of each
Lease Year for the preceding Lease Year; provided, however, that in the event that
Project Revenue in the ninth (9th) Lease Year is less than Seven Million Eight
Hundred Thousand Dollars ($7,800,000), the Percentage Rent that accrues in the
ninth (9th) Lease Year shall be payable in five (5) equal annual installments,
without interest. Each of such five (5) annual installments of the Percentage Rent
for the ninth (9th) Lease Year shall be paid to Owner at the same time as the
Percentage Rent that is due and payable for the tenth (10th) through fourteenth
(14th) Lease Years is paid pursuant to this Section 3.3(b). The obligation to pay
Percentage Rent shall survive Expiration of the Term as to Percentage Rent which
accrued prior to the Expiration of the Term, subject to Article 28.
(b) The following shall, however, be excluded from Project Revenue:
(1) Federal, state and municipal excise, sales, resort, use, and other taxes
collected from patrons or guests as a part of or based upon the sales price
of any goods or services, including with limitation, gross receipts, room,
bed, admission, cabaret, or similar taxes;
In addition, the 2022 Florida Statutes 212.031-Tax on rental or license fee for use of real
property states: (1)(a) It is declared to be the legislative intent that every person is
exercising a taxable privilege who engages in the business of renting, leasing, letting, or
granting a license for the use of any real property...
(1)(a)13.(c) states: For the exercise of such privilege, a tax is levied at the rate of 5.5
percent of and on the total rent or license fee charged for such real property by the person
charging or collecting the rental or license fee. The total rent or license fee charged for
such real property shall include payments for the granting of a privilege to use or occupy
real property for any purpose and shall include base rent, percentage rents, or similar
charges.
(e) The tax rate in effect at the time that the Tenant or person occupies, uses, or is
entitled to occupy or use the real property is the tax rate applicable to the transaction
taxable under this section, regardless of when a rent or license fee payment is due or paid.
The applicable tax rate may not be avoided by delaying or accelerating rent or license fee
payments.
(2)(a) The Tenant or person actually occupying, using, or entitled to the use of any
property from which the rental or license fee is subject to taxation under this section shall
pay the tax to his or her immediate landlord or other person granting the right to such
Tenant or person to occupy or use such real property.
(3) The tax imposed by this section shall be in addition to the total amount of the rental
or license fee, shall be charged by the lessor or person receiving the rent or payment in
and by a rental or license fee arrangement with the lessee or person paying the rental or
license fee, and shall be due and payable at the time of the receipt of such rental or license
fee payment by the lessor or other person who receives the rental or payment. The owner,
lessor, or person receiving the rent or license fee shall remit the tax to the department at
the times and in the manner hereinafter provided for dealers to remit taxes under this
chapter.
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212.055 Discretionary sales surtaxes; legislative intent; authorization and use of
proceeds.-lt is the legislative intent that any authorization for imposition of a discretionary
sales surtax shall be published in the Florida Statutes as a subsection of this section,
irrespective of the duration of the levy.
212.055 (1) (b) The rate shall be up to 1 percent.
Florida Administrative Code 124-1.070 Leases and Licenses of Real Property; Storage of
Boats and Aircraft.
(1)(a) Every person who rents or leases any real property or who grants a license to use,
occupy, or enter upon any real property is exercising a taxable privilege...
(4)(a) The Tenant or person actually occupying, using, or entitled to use any real property
from which rental or license fee is subject to taxation under Section 212.031, F.S., shall
pay the tax to his immediate landlord or other person granting the right to such Tenant or
person to occupy or use such real property.
(b) The tax shall be paid on all considerations due and payable by the Tenant or other
person actually occupying, using, or entitled to use any real property to his landlord or
other person for the privilege of use, occupancy, or the right to use or occupy any real
property for any purpose.
Florida Sales tax, plus any applicable discretionary sales surtax, is due on the total rent
charged for renting, leasing, or granting a license to use commercial real property in
Florida. The discretionary sales surtax rate is the tax rate imposed by the county where
the real property is located. The total rent charged includes all consideration due and
payable by the tenant to the landlord for the privilege or right to use or occupy the real
property.
Based on the sales data obtained from the Munis system for the audit period, the OIG
Auditor calculated an additional $45,692.14_in_Florida Sales tax due on the following
percentage rent paid by the tenants to the City (see the table below):
Calendar Lease Invoice No. Date Paid Percentage Florida Sales Florida Sales
Year Year Rent Paid Tax Rate Tax Due
2018 16 19960 4/18/2019 $175,770.60 6.8% $11,952.40
2019 17 26132 4/7/2020 $184,955.88 6.7% $12,392.04
2020 18 30594 3/26/2021 $159,938.34 6.5% $10,395.99
2021 19 38751 8/25/2022 $168,487.78 6.5% $10,951.71
Total $689,152.60 $45,692.14
An examination of the percentage rent invoices determined that the Florida Sales tax paid,
as shown in the table below, was deducted from the percentage rent payments received
from tenants and paid to the State instead of applying the corresponding Florida Sales tax
to the total rental consideration received from tenants.
Calendar Lease Invoice Date Paid Percentage Florida Sales Total Invoice
Year Year No. Rent Paid Tax Paid
2018 16 19960 4/18/2019 $164,271.59 $11,499.01 $175,770.60
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2019 17 26132 4/7/2020 $172,855.96 $12,099.92 $184,955.88
2020 18 30594 3/26/2021 $150,176.84 $9,761.50 $159,938.34
2021 19 38751 8/25/2022 $158,204.49 $10,283.29 $168,487.78
Total $645,508.88 $43,643.72 $689,152.60
As shown in the table above, the total amount of Florida Sales tax deducted from the
percentage rent payment and remitted to the State was $43,643.72. As a result, the City's
revenue was incorrectly reduced by $43,643.72 during the audit period and the State of
Florida Department of Revenue is due $2,048.42 ($45,692.12 - 43,643.72).
Recommendation(s):
The Asset Management Division should examine the OIG's calculations and determine
whether they agree with them. Once completed, it should promptly invoice the Tenant
accordingly. The difference between the Florida Sales tax paid and the corresponding tax
due should be included in the City's next payment to the State of Florida Department of
Revenue. Furthermore, Asset Management Division staff should review its general ledger
account distributions related to the percentage rent payments outside the designated audit
period, and promptly make any needed corrections.
Facilities and Fleet Management Department Response:
The Asset Management Division acknowledges the error and is currently collaborating
with the Finance Department to include the difference for Sales Tax in the amount of
$2,048.42 to the State of Florida Department of Revenue. The Asset Management
Division identified and had corrected this issue with the 2022 percentage rent payment.
3. PERCENTAGE RENT PAYMENTS WERE REMITTED TO THE CITY AFTER THE DUE
DA TES SPECIFIED IN THE GROUND LEASE AGREEMENT, BUT LA TE FEES WERE
NOT ACCURATELY CHARGED, RESULTING IN $2,729.19 DUE, WHICH INCLUDES
$642.89 IN FLORIDA SALES TAX.
The City and PKY Lincoln Place, LLC and 16" Street Partners, LLC executed a Settlement
Agreement effective September 16, 2015. Among other agreed upon provisions, Section
5 entitled "Percentage Rent Payment/Additional Documentation states: ...effective as of
the 2015 calendar year, through the end of the Master Lease Term, solely, the process
for submitting the Percentage Rent payment, as required under Section 3.3(b) of the
Ground Lease, shall be modified as follows: 16th Street Partners shall submit an estimated
Percentage Rent payment, along with the back-up information, within sixty (60) days from
the end of each Lease Year, subject to finalizing the audited financial statement for said
particular Lease Year, with the adjusted/final payment due within one hundred fifty (150)
days from the end of each Lease Year. As long as 16th Street follows this modified
procedure, no penalties shall accrue to PKY under the Ground Lease.
Section 4.1 "Late Charges" states: If Tenant shall fail to make any payment of Base Rent,
Percentage Rent, or other Rental and/or Impositions within thirty (30) days after the same
shall be due, the late payment shall bear interest from the date due until the date paid at
a rate (the "Late Charge Rate'') equal to the lesser of (a) Four Percent ( 4%) per annum
in excess of the prime rate in effect from time to time at Citibank, N .A. ( or The Chase
Manhattan Bank, N .A., if Citibank, N .A. shall not then have an established prime rate; or
the prime rate of any major banking institution doing business in New York City, as
selected by Owner, if none of the aforementioned banks shall be in existence or have an
established prime rate) and (b) the maximum interest rate permitted by law. All interest
Page 10 of 27
payable under this Section 4. 1 shall be deemed Rental (but shall not be compounded)
and shall be due and payable by Tenant on fifteen (15) days demand. The collection by
Owner of any interest under this Section 4. 1 shall not be construed as a waiver of Tenant's
default or of Tenant's obligation to perform any term, covenant or condition of this Lease
nor shall it affect any other right or remedy of Owner under this Lease.
Florida Statute 212.031 (3)- Tax on rental or license fee for use of real property states:
The tax imposed by this section shall be in addition to the total amount of the rental or
license fee, shall be charged by the lessor or person receiving the rent or payment in and
by a rental or license fee arrangement with the lessee or person paying the rental or
license fee, and shall be due and payable at the time of the receipt of such rental or license
fee payment by the lessor or other person who receives the rental or payment. The owner,
lessor, or person receiving the rent or license fee shall remit the tax to the department at
the times and in the manner hereinafter provided for dealers to remit taxes under this
chapter.
Examination of the Munis system indicated that the Tenant remitted the following
percentage rent payments after the established due dates resulting in late charges due to
the City of $9,737.48 (see the table below):
Calendar Lease Percentage Payment Payment Number of Interest Late
Year Year Rent Paid Due Date Date Days Late Rate Charges
Due
2018 16 $175,770.60 03/01/2019 04/18/2019 48 9.50% $2,195.93
2019 17 $184,955.88 02/29/2020 04/07/2020 38 8.75% $1,684.87
2020 18 $159,938.34 03/01/2021 03/26/2021 25 7.25% $0.00
2021 19 $168,487.78 03/01/2022 08/23/2022 175 7.25% $5,856.68
Total $689,152.60 $9,737.48
The late payments ranged from 25 to 175 days; however, late charges are only imposed
when the Tenant fails to make any payment within thirty days after the designated due
date. Therefore, there is no late charge for the percentage rent payment received for the
2020 calendar year (lease year 18), as it was received 25 days after the due date.
In addition, the Ground Lease Agreement specifies that late payments shall bear interest
from the date due until the date paid at a rate equal to (a) the lesser of four percent per
annum in excess of the prime rate in effect and (b) the maximum interest rate permitted
by law. For 2018, the OIG Auditor calculated that a 9.50% interest rate was applicable,
consisting of 4.00% + 5.50% prime rate. It was also determined that a 7.25% interest rate
was applicable for the 2020 and 2021 calendar years, which consisted of 4.00% + 3.25%
prime rate in effect from time to time at JP Morgan Chase & Co.
The former Tenant, 16" Street Partners, LLC, was not billed late charges of $2,195.93
and $1,684.87 related to its 2018 and 2019 percentage rent payments respectively.
Conversely, the current Tenant, NG 1601 Washington Ave. LLC, was mistakenly
overbilled a net late charge fee of $1,794.51 ($7,651.19 billed - $5,856.68 late charge due)
related to the 2021 calendar year. The audit period total net late charge of $2,086.29 is
currently due to the City ($2,195.93 + $1,684.87 -$1,794.51).
Florida Sales tax is due on the total rental, lease, or license fee paid for the right to use or
occupy the real property. It is imposed not only on percentage rent payments, but also on
any additional rent or any consideration required to be paid by the tenant as a condition
of occupancy. Examination of the Munis system indicated that the City did not charge or
Page 11 of 27
remit Florida Sales tax to the State of Florida Department of Revenue on any late charges
paid by the Tenant during the audit period. As a result, Florida Sales tax of $642.89 is also
due on the late charges (see the table below):
Calendar Year Lease Year Late Charges Due Florida Sales Tax Rate Florida Sales Tax
Due on Late Charaes
2018 16 $2,195.93 6.8% $149.32
2019 17 $1,684.87 6.7% $112.89
2021 19 $5,856.68 6.5% $380.68
Total $9,737.48 $642.89
Recommendation(s):
The Asset Management Division should ensure that future percentage rent payments are
remitted timely pursuant to the Ground Lease Agreement. If not, the specified late charges
should be promptly and accurately billed.
The Asset Management Division should review the OIG calculations, and if it agrees,
credit the current Tenant in the amount of $1,413.83 ($7,651.19 billed - $5,856.68 due -
$380.68 Florida Sales tax due) related to its 2021 calendar year payment and remit
$380.68 to the State related to the percentage rent late fee collected during the audit
period. In addition, the Asset Management Division should invoice the former tenant, 16"
Street Partners, LLC, for the identified late charges plus Florida Sales tax of $2,345.25 for
2018 and $1,797.76 for 2019.
Facilities and Fleet Management Department Responses:
The current Asset Management Division staff has no history of the previous management
company (LNR) to confirm if those late fees were waived by the City. Since LNR is no
longer managing this property, the Asset Management Division does not agree with back
billing these late fees. On August 25, 2022, the Asset Management Division billed and
collected the late fee for the 2021 period where the Tenant was 175 days late in the
amount of $7,651.19. However, in reviewing the late fee charged, it was not calculated
correctly. The Asset Management Division also reviewed the OIG's calculation, and after
consulting with the City Attorney's Office as well as the Finance Department, it was
determined the OIG based the prime interest rate calculation solely on the rate in effect
on the first day the payment was late. However, in accordance to section 4.1 "Late
Charges", "...the late payment shall bear interest from the date due until the date paid at
a rate (the "Late Charge Rate") equal to the lesser of (a) Four Percent ( 4%) per annum
in excess of the prime rate in effect from time to time..." Since the prime rate changed four
( 4) times over the 175 days the Tenant was late, the amount due by Tenant would be
$6,629.88 plus sales tax of $430.94, for a total of $7,060.82. This would leave the Tenant
a net credit of -$590.37. See chart below:
Page 12 of 27
Finance Calculation - Late Charge
$168,487.78
Prime Rate # of Days in PR PR plus Per Sales Tax Sales Tax Total Late Payment of Balance
(PR) range range 4% Anum Late Fee % Due Fee Due 8/25/22 Due
03/01/22 03/16/22 15 0.0725 365 502.00 6.50% 32.63 534.63
03/17/22 05/04/22 49 0.0750 365 1,696.42 6.50% 110.27 1,806.69
05/05/22 06/15/22 42 0.0800 365 1,551.01 6.50% 100.82 1,651.83
06/16/22 07/27/22 42 0.0875 365 1,696.42 6.50% 110.27 1,806.69
07 /28/22 08/23/22 27 0.0950 365 1,184.03 6.50% 76.96 1,260.99
$6,629.88 $430.94 $7,060.82 ($7,651.19) ($590.37)
4. THE TENANT DID NOT SUBMIT ALL THE REQUIRED REPORTS FOR THE
PERCENTAGE RENT PAYMENTS BY THE DESIGNATED DUE DA TES SPECIFIED IN
THE GROUND LEASE AGREEMENT.
Section 3.3 entitled "Percentage Rent" of the Ground Lease Agreement states:
(a) "Tenant shall pay Owner annual percentage rent for each Lease Year (the
"Percentage Rent") during the Term in an amount equal to two and one-half percent
(2 ½%)of the amount of Project Revenue for each Lease Year commencing on the
earlier to occur of (i) the ninth (9th) Lease Year or (ii) the Sale Date; provided, however,
for the initial and final Lease Years, the Percentage Rent shall be prorated according
to the actual number of days in such Lease Year."
Settlement Agreement dated September 16, 2015, Section 5 - Percentage Rent
Payment/Additional Documentation states: ...effective as of the 2015 calendar year,
through the end of the Master Lease Term, solely, the process for submitting the
Percentage Rent payment, as required under Section 3.3(b) of the Ground Lease, shall
be modified as follows: 16th Street Partners shall submit an estimated Percentage Rent
payment, along with the back-up information, within sixty (60) days from the end of each
Lease Year, subject to finalizing the audited financial statement for said particular Lease
Year, with the adjusted/final payment due within one hundred fifty (150) days from the end
of each Lease Year. As long as 16th Street follows this modified procedure, no penalties
shall accrue to PKY under the Ground Lease.
16th Street agrees, for the duration of the Master Lease Term, to include, along with the
audited financial statement and each final payment of Percentage Rent (including
Percentage Rent from the lease of space to third parties and other parking revenue in
accordance with the provisions of the Ground Lease), shall provide the Owner with the
following: (i) a report with the floor plans reflecting the total square feet of space in the
Project actually occupied and used by 16th Street or its affiliates during the prior Lease
Year (which Owner may verify through a site visit); (ii) the actual Third Party Reimbursable
Expenses and the 16th Street Reimbursable Expenses, as well as the corresponding
reconciliations for said expenses for the prior Lease Year; (iii) the number of monthly
parking passes or access cards issued to and actually used by employees of 16" Street
and its affiliates; (iv) a copy of the insurance bil/(s) paid and covering the prior Lease Year;
and (v) proof of payment of real estate taxes paid and covering the prior Lease Year.
As part of the Ground Lease Agreement, the Tenant is required to submit audited financial
statements along with back-up information in order to calculate the Percentage Rent due
to the City pursuant Section 3.3 (b). Timely receipt of these required reports is essential
Page 13 of 27
for City staff to calculate the percentage rent due and to make informed decisions related
to the Ground Lease Agreement. Consequently, the OIG Auditor requested the related
financial records and reports furnished to the Asset Management Division by the Tenant
during the audit period.
The Asset Management Division made the following Tenant provided records available
for examination:
• 2019 Project Revenue per Ground Lease Worksheet, Base Rent Calculation,
Common Area Maintenance (CAM) Reimbursement Calculation, Parking revenue
calculation, and 2019 Trial Balance.
• 2020 Project Revenue per Ground Lease Worksheet with Base Rent Calculation,
CAM Reimbursement Calculation, and Parking revenue calculation.
• 2021 Project Revenue per Ground Lease Worksheet and Cash Management
Ledger.
None of these reports contained evidence indicating the report issue dates and/or dates
received by the Asset Management Division.
Additional details regarding the required supporting documentation for the percentage rent
payments under Section 3.3(b) of the Ground Lease Agreement are presented in the
following bullets:
• The Audited Financial Statements required pursuant to the Ground Lease
Agreement for 2018, 2019, and 2020 were submitted during the audit process. In
addition, the 2021 Audited Financial Statements had not been provided to the
Asset Management Division, as the current tenant did not issue Audited Financial
Statements for The Lincoln Place.
• The 2018 Project Revenue per Ground Lease Worksheet, back-up supporting
documentation, and the 2021 Project Revenue per Ground Lease back-up
supporting documentation for January 2021 -- June 2021 were unavailable for
examination.
• The Floor Plans report, copies of the insurance bill, and proof of payment of real
estate taxes paid were not furnished to the Asset Management Division for the
audit period.
Recommendation( s):
The Tenant should timely submit all required reports to the City Asset Management
Division pursuant to the Ground Lease Agreement. All reports should be time/date
stamped upon receipt by the City to document whether the Tenant complies with
established due dates. If not timely received, the Asset Management Division should
document the deficiency, follow up with the Tenant, and implement any enforcement
actions available in the Ground Lease Agreement, where applicable.
Facilities and Fleet Management Department Response:
The Asset Management Division has no reason to believe the reports mentioned above
were delivered late to the City. The current Asset Management team has been maintaining
time/date stamps on received documents, despite it not being a lease requirement. The
team follows up with tenants for their deliverables and implements the appropriate
enforcement per the lease. Asset Management follows-up with Tenants consistently to
ensure the delivery of timely documents and lease requirements.
Page 14 of 27
OIG Response:
The documentation received from the Asset Management Division, along with the
responses obtained from its key staff members, was used to support this finding. As
such, OIG's finding #4 is based on evidence and is sufficiently supported and can be
viewed upon request. Except for the 2018 and 2020 Audited Financial Statements signed
and dated by the independent accounting firm and 2019 Trial Balance showing report
run date/time, which does not necessarily represent the date received by the City, none
of the other reports and worksheets provided to the OIG Auditor were time/date stamped
or contain other evidence indicating the report issue and/or receipt dates.
The OIG Auditor sent emails dated 10/26/2022, 11/30/2022, 12/06/2022, 12/23/2022,
01/18/2023, and 02/23/2023, requesting documentation needed from the Asset
Management Division to complete the audit. Although some was subsequently provided,
the following requested records were not made available by the Asset Management
Division to the OIG Auditor for examination during the audit process despite multiple
requests:
• The 2018 Project Revenue per Ground Lease Worksheet and backup supporting
documentation.
• The 2021 Project Revenue per Ground Lease backup supporting documentation
for January 2021 -- June 2021.
• The 2021 Audited Financial Statements.
• 2018 through 06/2021 Tenant Rosters showing the detailed rent (period, rate,
square feet) collected from subtenants and affiliate occupancy.
• The Floor Plans report, copies of the insurance bill, and proof of payment of real
estate taxes paid for the entire audit period.
In response to the missing documentation requested in the earlier mentioned emails,
Asset Management staff responded indicating that they are "working on getting these
documents", "are unable to locate" and "have not received the outstanding items
requested by the OIG Auditor. Based on these documented email responses and the
failure to provide the requested documents to the OIG Auditor during the audit process
and prior to the issuance of the draft report, one would safely assume that the Asset
Management had not received these records. Furthermore, the missing documents were
also not provided to the OIG Auditor during the 30-working day response period pursuant
to City Code Section 2-256(h), or as of the issuance of this audit report, which further
supports the OIG's previous assumption, and is contrary to the response received above
from the City Asset Management Division.
5. PERCENTAGE RENT PAYMENTS COULD NOT BE VERIFIED DUE TO INSUFFICIENT
SUPPORTING DOCUMENTATION AS REQUIRED PER THE GROUND LEASE
AGREEMENT.
Section 3.3 of the Ground Lease Agreement states:
(a) "Tenant shall pay Owner annual percentage rent for each Lease Year (the "Percentage
Rent") during the Term in an amount equal to two and one-half percent (2 ½ %) of the
amount of Project Revenue for each Lease Year commencing on the earlier to occur of (i)
the ninth (9th) Lease Year or (ii) the Sale Date; provided, however, for the initial and final
Lease Years, the Percentage Rent shall be prorated according to the actual number of
Page 15 of 27
days in such Lease Year."
(b) "Payment of Percentage Rent. Tenant shall pay the full amount of Percentage Rent
due in annual installments, in arrears, within sixty (60) days after the end of each Lease
Year for the preceding Lease Year."
Meanwhile, the Settlement Agreement dated September 16, 2015, Section 5- Percentage
Rent Payment/Additional Documentation, states: ...effective as of the 2015 calendar year,
through the end of the Master Lease Term, solely, the process for submitting the
Percentage Rent payment, as required under Section 3.3(b) of the Ground Lease, shall
be modified as follows: 16th Street Partners shall submit an estimated Percentage Rent
payment, along with the back-up information, within sixty (60) days from the end of each
Lease Year, subject to finalizing the audited financial statement for said particular Lease
Year, with the adjusted/final payment due within one hundred fifty (150) days from the end
of each Lease Year. As long as 16th Street follows this modified procedure, no penalties
shall accrue to PKY under the Ground Lease.
The Munis system indicated that the Tenant remitted the following total percentage rent
payments to the City during the audit period:
Calendar Year Lease Year Payment Date Percentage Rent Paid
2018 16 04/18/2019 $175,770.60
2019 17 04/07/2020 $184,955.88
2020 18 03/26/2021 $159,938.34
2021 19 08/23/2022 $168,487.78
Total $689,152.60
During the audit period, Lincoln Place was occupied by two tenants, the former, 16 Street
Partners, LLC, and the current Tenant, NG 1601 Washington Ave. LLC. The percentage
rent payments for the 2018 through 2020 calendar years were remitted by 16th Street
Partners, LLC, the former Tenant. Meanwhile, the 2021 percentage rent payment was
remitted to the City by NG 1601 Washington Ave. LLC; however, it included monies owed
by former Tenant 16th Street Partners, LLC during the first halfof 2021 (January 1, 2021,
through June 30, 2021 ).
As noted in Finding #4, the Tenant did not submit some of the required financial
statements and back-up reports required in the Ground Lease Agreement to the City Asset
Management Division related to the percentage rent payment calculations. In its absence,
the OIG Auditor requested the required missing documentation from the Tenant. 16th
Street Partners, LLC, the former Tenant that occupied the property from the beginning of
the audit period until June 30, 2021, has not responded to requests to provide the back-
up documentation regarding the figures reported for the Project Revenue Worksheet
calculation. In addition, 16th Street Partners, LLC supposedly did not provide the current
Tenant with any financials and back-up documentation when NG 1601 Washington Ave.
LLC took control of Lincoln Place on July 1, 2021.
Although the annual percentage rent calculations as per the Project Revenue per Ground
Lease Worksheets provided by 16th Street Partners, LLC was consistently calculated by
the Tenant, the Asset Management Division did not have the necessary supporting
documentation to validate the amounts paid to the City. The Audited Financial Statements
required pursuant to the Ground Lease Agreement for 2018, 2019, and 2020 were
submitted. However, the supporting documentation, such as the floor plans report, copy
of the insurance bill, proof of payment of real estate taxes paid, 2018 Project Revenue per
Page 16 of 27
Ground Lease Worksheet, and back-up documentation, were not furnished for
examination.
The current Tenant, NG 1601 Washington Ave. LLC, provided supporting documentation
to verify the percentage rent payment for the second half of 2021 ( July through December).
However, as stated by the Tenant, it did not issue audited financial statements for this
property; instead it issued internally prepared Unaudited Financial Statements.
In addition, the current Tenant expressed concern about which accounting basis to follow
regarding the provision of required reports due to accounting method inconsistencies
between the computation of project revenue on a cash basis and the preparation of
financial statements for audit on an accrual basis as required per the Ground Lease
Agreement. Audited financial statements prepared by an independent CPA firm would
increase the City's confidence that the reported figures in the Project Revenue
Worksheets are complete and accurate.
NG 1601 Washington Ave. LLC had a net lease with the prior Tenant, 16th Street Partners,
LLC, through June 30, 2021, where 16th Street Partners, LLC was responsible for directly
paying all obligations, including percentage rent and providing the required documentation
to the City. The current Tenant's Vice President of Accounting told the OIG Auditor they
were unaware of the existence of any financial or Tenant rosters from 16th Street Partners,
LLC, while they occupied the property. Also, their lease with 16th Street Partners, LLC,
supposedly did not require their tenant to provide them with management reports as
landlords. In addition, they have communicated with their contact at 16th Street Partners,
LLC, and they claim that no response has been received. The missing supporting
documentation was not furnished as of the completion of this report.
Recommendation(s):
The Tenant should timely submit all required financial statements and back-up
documentation to the Asset Management Division under the executed Ground Lease
Agreement. In addition, the Asset Management Division should validate the corresponding
figures as per the supporting documentation to those reported in the annual percentage
rent calculations provided by the Tenant. If the documentation still needs to be received
as part of submitting the percentage rent payments, the Asset Management Division
should promptly notify the Tenant of the deficiency in writing and implement any
disciplinary actions available in the Ground Lease Agreement.
Facilities and Fleet Management Department Response:
These processes and procedures have been in effect since 2022, which is prior to the
commencement of this audit. Unfortunately, we cannot comment on anything prior.
6. FINDING: TENANT WAS NOT COMPLIANT WITH ALL INSURANCE REQUIREMENTS
PURSUANT TO ARTICLE 7 OF THE GROUND LEASE AGREEMENT FOR MOST OF
THE AUDIT PERIOD.
Section 7.1 "Insurance Requirements" states:
(a) Liability Insurance. At all times during the Term, Tenant, at its sole cost and expense,
shall carry or cause to be carried insurance against liability with respect to the Premises
and the operations related thereto, whether conducted on or off the Premises in an amount
of not less than Twenty-Five Million Dollars ($25,000,000) per occurrence, subject to
adjustment for inflation, combined single limit, and designating Tenant as a named
Page 17 of 27
insured, and Owner and, if required by Recognized Mortgage, a Recognized Mortgagee
as additional insureds. Such insurance shall meet all of the standards, limits, minimums
and requirements described in Section 7. 7.
(b) Property Insurance. At all times during the Term, Tenant at its sole cost and expense,
shall carry or cause to be carried "All Risk" (or its equivalent) property damage insurance
protecting Tenant, Owner and any Recognized Mortgagees as their interests may appear
against loss to the Premises and Improvements and meeting all of the standards, limits,
minimums and requirements described in Section 7 . 8.
(c) Other Insurance. At all times during the Term, Tenant shall procure and carry insurance
meeting all of the standards, limits, minimums, and requirements described in Section
7.9.
(d) Construction Insurance. Prior to the commencement of any Construction Work, Tenant
shall procure or cause to be procured, and after such dates shall carry or cause to be
carried, until final completion of such work, in addition to and not in lieu of the insurance
required by the foregoing subsections (a), (b), and (c), the insurance described in Section
7.10.
(e) Garage Liability/Garage keeper's Liability Insurance. From and after the CO Date,
Tenant shall procure or cause to be procured, and after such date shall carry or cause to
be carried with respect to the Garage, Garage keeper's legal liability coverage in an
amount not less than Five Million Dollars ($5,000,000), subject to adjustment for inflation,
per occurrence, with a deductible determined by Owner, but not more than Fifty Thousand
Dollars ($50,000) per loss subject to adjustment for inflation; and (ii) automobile liability
insurance covering any automobile owned, non-owned or hired in an amount not less than
Twenty-Five Million Dollars ($25,000,000), subject to adjustment for inflation, per
occurrence, with a deductible determined by Tenant of not more than Ten Thousand
Dollars ($10,000) per loss, subject to adjustment for inflation.
Section 7.6 Blanket or Umbrella Policies.
The insurance required to be carried by Tenant pursuant to the provisions of this Lease
may, at Tenant's election, be effected by blanket, wrap-up and/or umbrella policies issued
to Tenant covering the Premises and other properties owned or leased by Tenant or its
Affiliates, provided such policies otherwise comply with the provisions of this Lease and
allocate to the Premises the specified coverage, including, without limitation, the specified
coverage for all insureds required to be named as insureds or additional insureds
hereunder, without possibility of reduction or coinsurance by reason of, or because of
damage to, any other properties named therein. If the insurance required by this Lease
shall be effected by any such blanket or umbrella policies, Tenant shall furnish to Owner,
upon Owner's request, certificates of insurance and copies (certified by Tenant to be true,
complete and correct) of such policies as provided in Section 7.3(c), together with
schedules annexed thereto setting forth the amount of insurance applicable to the
Premises.
Section 7.8 Property Insurance Requirements.
The insurance required by Section 7.l(b) shall consist at least of property damage
insurance under an "All Risk" policy or its equivalent covering the Premises and all
Improvements with replacement cost valuation and an Agreed Amount Endorsement (to
be effective not later than promptly following the CO Date) in an amount not less than the
Page 18 of 27
full Replacement Value ( determined in accordance with Section 7. 12) and including the
following coverages or clauses:
(a) coverage for physical loss or damage to the Improvements;
(b) a replacement cost valuation without depreciation or obsolescence clause;
(c) debris removal coverage;
(d) provision for a deductible determined by Tenant, but not more than Fifty Thousand
Dollars ($50,000) per loss (for other than flood or windstorm, with regard to which the
deductible shall be a commercially reasonable amount), subject to adjustment for
inflation;
(e) contingent liability from operation of building laws;
(f) demolition cost for undamaged portion coverage;
(g) increased cost of construction coverage;
(h) an Agreed Amount Endorsement (to be effective not later than promptly following the
CO Date) in an amount not less than the full Replacement Value negating any
coinsurance clauses;
(i) flood coverage
(j) windstorm coverage
(k) coverage for explosion caused by steam pressure-fired vessels (which coverage may
be provided under a separate policy reasonably approved by Owner);
(I) business interruption coverage in accordance with Section 7.9;
(m) a clause designating Owner and a Recognized Mortgagee as additional insureds, as
their interests may appear; and
(n) contain no exclusions unless approved in writing by Owner, other than the industry
standard exclusions for projects of similar size and location.
Tenant shall be named insured, and Owner and any Recognized Mortgagee shall be
additional insureds, as their interests may appear. The Recognized Mortgagee or Owner
shall be designated loss payee on such ''All Risk" policy for the benefit of Owner, Tenant
and any Recognized Mortgagee. If not included within the "All Risk" coverage above,
Tenant shall also carry or cause to be carried coverage against damage due to (i) water
and sprinkler leakage and collapse, which shall be written with limits of coverage of not
less than the full Replacement Value per occurrence, with a deductible of not more than
Fifty Thousand Dollars ($50,000), subject to adjustment for inflation and (ii) flood, which
shall be written with limits of coverage of not less than Twenty-Five Million Dollars
($25,000,000), with a deductible of not more than Two Hundred Fifty Thousand Dollars
($250,000), subject to adjustment for inflation, to the extent available at commercially
reasonable rates and deductibles.
If Tenant elects to insure Tenant's personal property used in connection with the Premises,
the replacement value of such personal property shall be added to the amount of
insurance required by this Section.
For the purposes of this Section 7.8, any rate, limit or deductible shall be "commercially
reasonable" if such rate, limit or deductible is comparable to the rates, limits or deductibles
in the insurance carried by similar projects in South Florida of a size, nature and character
similar to the size, nature and character of the Project.
Section 7.9 Other Insurance Requirements.
The insurance required by Section 7. 1 (c) shall consist at least of the following:
(a) Business Interruption Insurance to include Rent Insurance on an ''All Risk" basis in an
amount equal to (i) prior to the CO Date, not less than the annual Base Rent and (ii)
Page 19 of 27
following the CO Date, not less than the aggregate amount of annual Rental and/or
Impositions. The insurance specified in this subsection shall:
(i) provide coverage against all reasonably insurable risks of physical loss or
damage to the Improvements;
(ii) Extra Expense coverage, with a limit of at least One Million Dollars ($1,000,000),
adjusted for inflation, to cover overtime and other extra costs incurred to expedite
repairing or rebuilding the damaged portion of the Premises;
(iii) provide for coverage through the attainment of pre-existing business levels;
(iv) contain flood and windstorm coverage to the extent available at commercially
reasonable rates, limits, and deductibles;
(v) contain explosion caused by steam pressure fired vessels coverage (which
coverage may be provided under a separate policy reasonably approved by
Owner);
(vi) provide for a deductible determined by Tenant, but for not more than Fifty
Thousand Dollars ($50,000) per loss (other than for flood or windstorm, with
regard to which the deductible shall be a commercially reasonable amount),
subject to adjustment for inflation;
(vii) designate Owner, Tenant and any Recognized Mortgagee as loss payee but shall
be payable only to Tenant with respect to Business Interruption proceeds not
exceeding One Hundred Thousand Dollars ($100,000), subject to adjustment for
inflation, per occurrence; and
(viii) contain no exclusions, unless approved by Owner, other than industry standard
exclusions for projects of similar size and location.
(b) Statutory Workers' Compensation and any other insurance required by law covering
all employees of Tenant or any entity performing work on or for the Premises or the
Improvements (unless and to the extent provided by such other parties), including
Employers Liability coverage, all in amounts not less than the statutory minimum,
except that Employers Liability coverage shall be in an amount not less than One
Million Dollars ($1,000,000), subject to adjustment for inflation.
(c) After CO Date, Boiler and Machinery Insurance, covering the entire heating, ventilating
and air-conditioning systems, in all its applicable forms, including Broad Form, boiler
explosion, extra expense and loss of use in an amount not less than the replacement
cost of such heating, ventilating and air conditioning systems, located on any portion
of the Premises and other machinery located on any portion of the Premises, which
shall designate Tenant as named insured and loss payee and designate Owner and
any Recognized Mortgagee as additional insureds.
(d) Automobile liability insurance covering any automobile or other motor vehicle used in
connection with the Project in an amount not less than Twenty-Five Million Dollars
($25,000,000), subject to adjustment for inflation, per occurrence, with a deductible
determined by Tenant of not more than Ten Thousand Dollars ($10,000) per loss,
subject to adjustment for inflation.
The City entered into a Master Customer Agreement with Exigis LLC (Exigis) on July 14,
2018, to use its RiskWorks software, a proprietary web-enable Risk Management
Operating System comprising a suite of configurable web-enabled risk, insurance, and
treasury "Application Modules". One of the software's stated benefits is to centralize the
administration and automate the request, follow-up, processing, auditing, and tracking of
Certificates of Insurance.
The OIG Auditor examined Lincoln Place, LLC's insurance profile in the Exigis software
and identified the following discrepancies:
Page 20 of 27
a) The evaluations by Exigis of the Certificates of Insurance provided by the tenants for
the stated periods comprising April 1, 2018, through April 1, 2021, were deemed non-
compliant due to the following:
• Evaluation #27668, with an effective date of April 1, 2018, through April 1, 2019,
was deemed non-compliant as the Tenant did not maintain the required
Commercial General Liability insurance and did not provide proof of Workers'
Compensation coverage.
• Evaluation #36312, with an effective date of April 1, 2019, through April 1, 2020,
was non-compliant as the Tenant did not provide proof of Workers' Compensation
coverage.
• Evaluation #58117, with an effective date of April 1, 2020, through April 30, 2020,
was non-compliant as the Tenant did not provide proof of Workers' Compensation
coverage.
• Evaluation #60388, with an effective date of April 1, 2020, through April 1, 2021,
was non-compliant as the Tenant did not provide proof of Workers' Compensation
coverage and did not satisfy the Excess/Umbrella Liability requirement.
Regarding the Workers' Compensation coverage for the period of April 1, 2020, through
April 1, 2021, the Asset Management Director stated that although the Tenant did not
provide proof of Workers' Compensation coverage for evaluation, the Certificate of Liability
Insurance provided to comply with this requirement for the subsequent calendar year 2022
(01/01/2022 through 01/01/2023) shows Workers Compensation and Employer's Liability
policy number WC020734148 covering year 2021 (January 1, 2021 - January 1, 2022).
b) Even though Evaluation #79345, with an effective date of January 1, 2022, through
December 31, 2022, is listed as compliant with the Exigis parameters, the parameters
set and reviewed by Exigis were not fully aligned with the requirements in the Ground
Lease Agreement. Consequently, the listed Exigis profile may not accurately reflect
whether the Certificate of Insurance was fully compliant with all contractual
requirements.
Inquiries found that Exigis staff evaluated compliance based on the parameters
established for Type 5-Leases entered into its software by the City. Type 5-Leases
parameters are not aligned with the agreement requirements. The following are the
parameters set in the Exigis software for Lincoln Place's Certificate of Insurance
evaluation:
Commercial General Liability:
-Financial Strength Rating must be greater than or equal to B+
-Financial Size Category must be greater than or equal to VI
-Per Occurrence Limit must be greater than or equal to $1,000,000
-City of Miami Beach shown as an additional insured with respect to this coverage
-Certificate Holder name must contain City of Miami Beach
Workers Compensation/Employer Liability:
-Financial Strength Rating must be greater than or equal to B+
-Financial Size Category must be greater than or equal to VI
-Statutory Limit as required by applicable law.
Page 21 of 27
-Certificate Holder name must contain City of Miami Beach
A comparison between the above Exigis parameters and the insurance requirements
set in Article 7 of the Ground Lease Agreement resulted in the following discrepancies:
The parameter for Commercial General Liability is greater than or equal to
$1,000,000; however, the Liability Insurance requirement in the agreement is not
less than $25,000,000 per occurrence.
The parameters do not include all the insurance requirements in the agreement,
such as Automobile Insurance coverage of at least $25,000,000, Garage Keeper
Liability of not less than $5,000,000, Business Interruption Liability of $100,000,
Proceeds of Casualty Insurance of $1,000,000, Flood coverage for not less than
$25,000,000, Boiler and machinery insurance, and the Business Interruption for
one year's rental and/or imposition; for extra expense coverage, the limit of
$1,000,000.
The OIG Auditor sent emails_on December 20, 2022, and February 1, 2023, requesting
the Risk Management Division Director to review the Certificates of Insurance downloaded
from Exigis to determine their compliance with the Ground Lease Agreement.
At a February 9, 2023, meeting, the Risk Management Division Director stated that
although the Certificates of Insurance (COi) show a General Liability of $1,000,000 per
each occurrence, less than the $25,000,000 required per the agreement, the $75,000,000
per each occurrence that the COi provides as Umbrella Liability satisfied the General
Liability in accordance with Section 7.6 of the Ground Lease Agreement allows that this
coverage could be obtained through wrap/Excess/Umbrella Liability insurance coverage.
In addition, the Risk Management Division Director expressed the necessity of a
reasonable appraisal of the property to update the value for adequate insurance coverage.
Recommendation(s):
The responsible City staff should revise the Exigis software parameters related to Lincoln
Place to mirror the insurance requirements listed in Article 7, Insurance, of the Ground
Lease Agreement. Asset Management Division staff should ensure that the Certificate of
Insurance is fully compliant with the Ground Lease Agreement and consult with Risk
Management Division staff to answer any questions regarding insurance compliance. In
addition, the Asset Management Division should periodically review Exigis software to
validate that the Tenant complies with the related insurance requirements.
Facilities and Fleet Management Department Responses:
The Asset Management Division verifies the received certificates of insurance in
accordance with the lease requirements. This recommendation comes up on all audits
during the same period. Prior to the first finding of this discrepancy (for the current Asset
Staff), the Asset Management staff had no knowledge that Exigis parameters would not
necessarily mirror the lease requirements. This has been corrected and continues to be
reviewed regularly. Risk Management confirmed that tenant is in compliance with
Insurance requirements. The OIG has also brought this up to Risk Management during
several audits.
Risk Management Division Responses:
Because each lease agreement has varying insurance requirements, Risk Management
has not assigned a boilerplate insurance requirement type for compliance purposes with
'EXIGIS'. This has been a recurring issue and the Risk Management office has decided
Page 22 of 27
to track all lease agreements in-house for insurance compliance. The Risk Management
staff will perform similar services as 'EXIGIS to track compliance for all lease agreements.
Moving forward, the OIG should contact the Risk Management office upon their audit of
all lease agreements for insurance compliance reporting.
To address the specific concern noted in the audit report (page 21 of 26), the $1,000,000
primary liability limit and $75,000,000 excess liability limit that was provided to satisfy the
$25,000,000 liability requirement is an acceptable form for satisfying the insurance
requirement. It is a common and acceptable practice to provide primary and excess
coverage to satisfy limits that are required in contract agreements.
The Asset Management Division consults with the Risk Management staff to answer any
questions regarding insurance requirements and compliance.
For future audits, the Asset Management Division will include the Risk Management staff,
as all lease agreements will be maintained by this office to track compliance with insurance
requirements.
OIG SUGGESTED OPPORTUNITY FOR IMPROVEMENT
Regardless of the level of oversight exercised by the Asset Management Division staff and the
current Tenant, NG 1601 Washington Ave. LLC, opportunities for improvement may always be
explored, which is a benefit of an independent audit. The following points are presented for
evaluation purposes:
1. ACCOUNTING METHOD INCONSISTENCIES EXIST BETWEEN THE COMPUTATION
OF PROJECT REVENUE ON A CASH BASIS AND THE PREPARATION OF
FINANCIAL STATEMENTS ON AN ACCRUAL BASIS.
Section 1.1, entitled "Definitions", states: Accounting Principles" means generally
accepted accounting principles as promulgated by the American Institute of Certified
Public Accountants, except as otherwise provided by this Lease, with such changes as
Owner and Tenant shall mutually agree are consistent with this Lease in order to reflect
technologies and methodologies not addressed in the Accounting Principles.
Section 3.3. (c) "Definition" states: "Project Revenue" means (without duplication):
(i) all revenue, payments, income received, escalation adjustments, rental and
operating cost reimbursements reserved under any lease, sublease, concession, license,
or other arrangement or from the operation of the Project (including any reimbursements
for Operating Expenses and common area maintenance) and paid to Tenant for the use
or occupancy of any portion of the Project; provided, however, that for purposes of
calculating Project Revenue (i) if any space in the Project other than the Project
management office (which shall be limited to a maximum of one thousand (1,000) square
feet) is leased to, or used by, Tenant, any Affiliate of Tenant, subtenant, or any other
Person at a rental which is less than fair market rental value of such space (determined
as of the date such lease is signed}, the rent shall be increased by an amount equal to the
difference between the rent being paid and the fair market rental value; and (ii) if any
space in the Project is leased to, or used by Tenant, any Affiliate of Tenant, subtenant, or
any other Person on a basis whereby the Tenant pays real estate taxes, common area
maintenance charges or operating costs other than utilities directly to the taxing authority
or service provider rather than to Tenant, the rent under such leases shall be increased
by the amount of such taxes; common area maintenance charges and/or operating costs
Page 23 of 27
( other than utilities) paid directly to the taxing authority or service provider by the Tenant;
and
(ii) all revenue, receipts, or other income derived by Tenant from the Garage or any
other parking service, including revenue derived by Tenant from valet service; and
(iii) Proceeds of rental loss insurance to the extent that such proceeds replace items of
revenue referenced in (i) and (ii) above. Project Revenue shall be computed on a cash
basis in accordance with the Accounting Principles.
Section 28.1 (a) "Books and Records; Audit Rights" states: Tenant shall at all times during
the Term of this Lease keep and maintain (separate from any of Tenant's other books,
records and accounts), and shall cause the Project Manager to keep and maintain,
accurate and complete records pertaining to the Premises related thereto, including,
without limitation, books of account reflecting the Project Revenue of the Acceptable
Operator and such other matters referenced in this Lease, in accordance with the
Accounting Principles with such exceptions as may be provided for in this Lease, and
provided that Tenant (and the Acceptable Operator) may make such reasonable
modifications in such books of account as are consistent with Acceptable Operator's
standard practice in accounting for its operations under management contracts generally.
Owner and its representatives shall have, during normal business hours and upon
reasonable advance notice, access to inspect the books and records of Tenant and the
Acceptable Operator pertaining to the Project Revenue, including, without limitation, books
of account properly reflecting the operations of the Premises, which books and records
shall be kept at the Premises. Owner shall have the right to cause an audit by Owner's
internal auditors (in accordance with the Accounting Principles) of such books and
records to be made at any time (but not more frequently than one (1) time in any twelve
(12) month period and only with respect to Project Revenue), at Owner's expense (a copy
of which shall be delivered to Tenant). Such right of inspection and audit may be exercised
at any time within three (3) years after the end of the Lease Year to which such books and
records relate, and Tenant and Acceptable Operator shall maintain all such books and
records for at least such period of time and, if any Dispute between the parties has arisen
and remains unresolved at the expiration of such period of time, for such further period of
time until the resolution of such Dispute. Notwithstanding anything to the contrary
contained herein, at Tenant's option, the audit described in this Section 28.1(a) shall be
performed by Owner's external auditors (which shall be a Recognized Accounting Firm),
in which case Tenant shall pay the reasonable fees and expenses of said external
auditors; and, provided further that in the event that Owner determines to have such audit
performed by its external auditors, Owner shall pay the fees and expenses or said external
auditors.
(c) As soon as available, but in no event later than the date which is one hundred fifty
{150) days after the end of each Lease Year, Tenant shall make available at the Premises
for inspection and examination (or photocopying) by Owner or its representatives a copy
of the annual financial statements (the "Annual Financial Statements") for such Lease
Year (which statements shall be audited by any Recognized Accounting Firm) accurately
reflecting receipt of Project Revenue prepared and certified by Tenant and such
independent certified public accountant in accordance with the Accounting Principles.
The audit and the annual financial statements, as stated above per the Ground Lease
Agreement, are to follow Generally Accepted Accounting Principles (GAAP basis/accrual
basis), while the Project Revenue is defined as cash receipts/cash basis in accordance
with the Accounting Principles. However, this is contradictory because cash basis
accounting is not acceptable under Generally Acceptable Accounting Principles (GAAP).
Page 24 of 27
The current Tenant, NG 1601 Washington Ave. LLC, expressed concern to the OIG
Auditor about which accounting basis to follow to provide the required reports in the
Ground Lease Agreement. Taking into consideration that the Tenant's books are kept on
a cash basis under the tax basis of accounting, it did not issue Audited Financial
Statements for The Lincoln Place. During a March 9, 2023, Microsoft TEAMS meeting with
the Tenant, Asset Management Division staff agreed that the Tenant would provide the
supporting documentation for the audit of the 2021 (second half) Project Revenue on a
tax basis. However, going forward, some clarity is needed on the reporting requirements
as the ground lease had conflicting definitions on whether the Financial Statement and
Project Revenue can be issued on an accrual/GAA P basis or cash basis.
Recommendation(s):
It is recommended that the Asset Management Division request a legal opinion from the
Office of the City Attorney clarifying the accounting method in which the project revenue
and audit should follow to help prevent revenue recognition issues. It is important that the
project revenue figures are accurately supported by the Tenant's audited financial
statements. In addition, the project revenue and the financial statements should be
presented in a form that allows for proper examination by the Asset Management Division
staff.
Asset Management Division Response:
The Asset Management Division conferred with the City Attorney's Office (CAO), and the
CAO advised the Asset Management Division that the Tenant may use either a cash basis
or accrual basis as long as they are consistent within each lease-year term.
2. THE AGREEMENT DOES NOT PROVIDE AN APPROPRIATE
CONSEQUENCE/PENAL TY FOR FAILURE TO TIMELY SUBMIT ALL REQUIRED
REPORTS.
As per the Settlement Agreement dated September 16, 2015, Section 5- Percentage Rent
Payment/Additional Documentation states, effective as of the 2015 calendar year, through
the end of the Master Lease Term, solely, the process for submitting the Percentage Rent
payment, as required under Section 3.3(b) of the Ground Lease, shall be modified as
follows: 16th Street Partners shall submit an estimated Percentage Rent payment, along
with the back-up information, within sixty (60) days from the end of each Lease Year,
subject to finalizing the audited financial statement for said particular Lease Year, with the
adjusted/final payment due within one hundred fifty (150) days from the end of each Lease
Year. As long as 16th Street follows this modified procedure, no penalties shall accrue to
PKY under the Ground Lease.
16th Street agrees, for the duration of the Master Lease Term, to include, along with the
audited financial statement and each final payment of Percentage Rent (including
Percentage Rent from the lease of space to third parties and other parking revenue in
accordance with the provisions of the Ground Lease), shall provide the Owner with the
following: (i) a report with the floor plans reflecting the total square feet of space in the
Project actually occupied and used by 16th Street or its affiliates during the prior Lease
Year (which Owner may verify through a site visit); (ii) the actual Third Party Reimbursable
Expenses and the 16th Street Reimbursable Expenses, as well as the corresponding
reconciliations for said expenses for the prior Lease Year; (iii) the number of monthly
parking passes or access cards issued to and actually used by employees of 16" Street
and its affiliates; (iv) a copy of the insurance bill(s) paid and covering the prior Lease Year;
Page 25 of 27
and () proof of payment of real estate taxes paid and covering the prior Lease Year.
As per the Ground Lease Agreement: Article 25- Events of Default, Conditional
Limitations, Remedies, Etc.
(b) if Tenant shall default in the observance or performance of any term, covenant or
condition of this Lease on Tenant's part to be observed or performed (other than the
covenants for the payment of Rental and/or Impositions or as expressly set forth below)
and Tenant shall fail to remedy such Default within thirty (30) days after notice by Owner
of such Default (the "Default Notice"), or if such a Default is of such a nature that it cannot
reasonably be remedied within thirty (30) days (but is otherwise susceptible to cure),
Tenant shall not (i) within thirty (30) days after the giving of such Default Notice, advise
Owner of Tenant's intention to institute all steps ( and from time to time, as reasonably
requested by Owner, Tenant shall advise Owner of the steps being taken) necessary to
remedy such Default (which such steps shall be reasonably designed to effectuate the
cure of such Default in a professional manner), and (ii) thereafter diligently prosecute to
completion all such steps necessary to remedy the same;
In the event of a Default which with the giving of notice to Tenant and the passage of time
would constitute an Event of Default, Owner's notice of such Default to Tenant shall state
with specificity the provision of this Lease under which the Default is claimed, the nature
and character of such Default, the facts giving rise to such Default, the date by which such
Default must be cured, and that the failure of Tenant to cure such Default by the date set
forth in such notice will result in Owner having the right to terminate this Lease .
As stated in Finding #4, the Tenant did not timely submit all the required financials and
back-up reports per the Ground Lease Agreement to the City's Asset Management
Division as part of the process of submitting the percentage rent payments. The OIG
Auditor reviewed the executed Ground Lease Agreement and the Settlement Agreement
regarding any consequence/penalty for not timely providing the required back-up
documentation related to the annual percentage rent lease payment remitted. No
provisions were found in the agreements, as the Ground Lease Agreement only provides
penalties for payments that were received late or after the designated due dates.
The required back-up reports validate accuracy and completeness of the percentage rent
payments received by the City. These reports must provide sufficient detail for the City to
determine the percentage rent due. As per Section 28 of the Agreement, the Tenant is
required to keep, maintain, accurate and complete records, and make them available for
examination upon request by the City and its representatives.
Although the Agreement provides for termination of the lease as a general remedy in any
case of default by a non-compliant Tenant, such action appears disproportionate to the
offense of failure to timely file a report and not geared toward efficient resolution of the
issue. Therefore, it is recommended that the City closely review the executed Ground
Lease Agreement and decide on the optimal approach for the Tenant's failure to comply
with the required reports as the agreement does not provide any specific
consequence/penalty for not timely submit all required reports to the City's Asset
Management Division. Failure to provide all required reports to verify the percentage of
rent payments should result in consequences, including fees and other disciplinary
actions.
Page 26 of 27
Asset Management Division Response:
This will be reviewed at Lease expiration, which is slated for September 2052.
All management responses received will be included in the final report pursuant to City Code
Section 2-256(h).
Respectfully submitted,
0Ge/$o3
7 Date
II-30-3033
Date
3
cc: Alina T. Hudak, City Manager
Eric Carpenter, Deputy City Manager
Mark Taxis, Assistant City Manager
Marla Alpizar, Human Resources Department Director
Elizabeth Miro, Facilities and Fleet Management Department Interim Director
Jason Greene, Chief Financial Officer
OFFICE OF THE INSPECTOR GENERAL, City of Miami Beach
1130 Washington Avenue, 6 Floor, Miami Beach, FL 33139
Tel: 305.673.7020 • Hotline: 786.897.1111
Email: CityofMiamiBeachOIG@miamibeachfl.gov
Website: www.mbinspectorgeneral.com
Page 27 of 27