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1A-Execute Lease Amendment No 1 With 1560 Collins Avenue Inc D-B-A ShanREDEVELOPMENT AGENCY ITEM SUMMARY Condensed Title: A Resolution approving the execution of Amendment No. 1 to the Retail Lease Agreement between the Miami Beach Redevelopment Agency ("Landlord") and 1560 Collins Avenue. Inc. d/b/a Shan ("Tenant") for Space in the Anchor Shops, located at 1560 Collins Ave, Suite 2, Miami Beach, Florida ("Space"), exercising the Renewal Option Period for the five (5) year period commencing March 19, 2013 and ending March 18, 2018, based upon the renewal rent schedule approved by the city's Finance and C~ide Projects committee ("FCWPC"). Key Intended Outcome Supported: Increase resident satisfaction with the level of services and facilities. Supporting Data (Surveys, Environmental Scan, etc.): Approximately 40% of retail businesses surveyed, rank Miami Beach as one of the best places to do business and 61% of the same group would recommend Miami Beach as a place to do business. Issue: Shall the RDA approve the Renewal Option Period for this Space, based upon the negotiated Renewal Rent approved b FCWPC? Item Summa /Recommendation: Tenant has proposed to exercise it five (5) year Renewal Option under the lease, for the period from March 19, 2013 through March 18,2018. During negotiations, Tenant has been paying Minimum Rent, based upon its current rate ($47.50/psf); however, upon approval of the Renewal Option/Renewal Rent structure, commencing November 1, 2013, Tenant shall pay the negotiated Rent, as follows: Shan Prooosal wjth Miniumum 3% Escalations Annual Rent Optionvrs. is.Q..ft. Rent/Sg,Ft. ·Collected Year1 3-19-13/10-31-13 2697 $ 47.50 $ 78,892.87 Year 1 1.1.~.1~.1N2~2?-14 I 2697 .$ ... 66.41 $ 59,702~?~ Year2 3-1-2014/2-28-2015 2697 $ 68.40 $ 184,481.00 Year3 '3-1-2015/2-28-2016 2697 .~ .. 70.45 _$ 190,015.43 -F' Year4 3-1-.2016/2-28-2017 ; 2697 $ 72.57 $ 195,715.90 YearS . 3-l-.2017/3-18-2018 . 2697 $ 74.75 $ 201,587.37 *Six Month Recapture $ 25,500. Total Benefit to Keeping Shan at its current location $ 935,896 • •••uo•o•• "'~'' . Monthly Rent AllDYal B~Dl • (Rh.!5 :tale5 taxl $ 128,107 $10,675.58 $ p9,1~8 $ 14,925.65 ... $ 184,481 $15,373.42 $ 190,015 $15!834.62 s 195,716 $16,309.66 $ 201,58~-$16,798.95 " ~ 'Gross Gross Gross Gross Gross ,Gross Shan's Lease does not include CAM so Shan has increased the rent to $66.41/psf to match the US Vintage Offer. • During year one of the Lease, Shan will commence paying the new rate of $66.41/psf on November 1, 2013; however, under the US Vintage Proposal, the RDA would have had to give Shan a six notice ' uo -· • • •• •• • to move, at Shan's current lease rate of $47.50/psf ("Current Rent"), . . . . . . . . • Six Month Recapture-Sa\Angs by lea\oing Shan in the current space w. accepting the US Vintage Proposal $14,925.65-$10,675.58 = $4,250.07 X 6= $25,500.42 Pursuant to the recommendation of the FCWPC, having considered the US Vintage Proposal, a 7-Eieven Corporation proposal and a comparison proposal, based upon current market rental rates, the FCWPC and the Administration recommend executing Amendment No. 1, approving the Renewal Option Period, based upon the Renewal Rent schedule set forth herein, effective November 1, 2013, and as incorporated in the proposed Amendment No. 1. Financial Information: Source of Funds: n/a I I Amount I I n/a Financial Impact Summary: C9 MIAMI BEACH · Manager 1082 I Account I City AGENDA ITEM ____,:/~A..L...-_ DATE (()-/lr I~ - (9 MIAMIBEACH City of Miami Beach, 1700 Convention Center Drive, Miomi Beoch, Florido 33139, www.miomibeochfl.gov REDEVELOPMENT AGENCY MEMORANDUM TO: Chairperson and Members of the Mi FROM: Jimmy L. Morales, City Manager DATE: October 16, 2013 SUBJECT: A RESOLUTION OF THE CH MIAMI BEACH REDEVELO ENT AGENCY ("RDA") ACCEPTING THE RECOMMENDATION OF THE CITY'S FINANCE AND CITYWIDE PROJECTS COMMITTEE ("FCWPC") PERTAINING TO THE LEASE AGREEMENT BETWEEN THE MIAMI BEACH REDEVELOPMENT AGENCY ("LANDLORD") AND 1560 COLLINS AVENUE, INC. D/B/A SHAN ("TENANT"), IN CONNECTION WITH THE USE OF SUITES B AND C IN THE ANCHOR SHOPS, LOCATED AT 1560 COLLINS AVENUE, SUITE NO. 2, MIAMI BEACH, FLORIDA ("SPACE") AND APPROVING AND AUTHORIZING THE CHAIRPERSON TO EXECUTE LEASE AMENDMENT NO. 1, EXERCISING THE RENEWAL OPTION PERIOD, FOR THE FIVE (5) YEAR PERIOD COMMENCING MARCH 19, 2013 AND ENDING MARCH 18, 2018, BASED UPON THE RENEWAL RENT SCHEDULE APPROVED BY FCWPC. ADMINISTRATION RECOMMENDATION Adopt the resolution. BACKGROUND On March 20, 2002, the RDA authorized an assignment of the Lease from Flagler System Management, Inc., to COP Capital/Montreal Mode lnvestissements, under the name of 1560 Collins Avenue, Inc., involving the operation of Absolutely Suitable, one of the first retail businesses to occupy the Anchor Shops since its opening in December, 1998. Absolutely Suitable, which has since been re-branded under the name of Shan Swimwear, occupies a space having 2,697 square feet, fronting on Collins Avenue, across the street from the Loews Hotel, selling high-end swimwear and related apparel, including sun-tanning accessories, hats, skin-care products and sunglasses. At the time of the assignment, only six years remained on the original lease term, resulting in the Tenant's request to enter into a new lease, which was approved by the RDA on October 17, 2007 ("Lease"), with an initial term of five (5) years commencing on March 19, 2008 and expiring on March 18, 2013, with one (1) renewal option for an additional five (5) years, upon the expiration of the initial term ("Renewal Option Period"). At the end of the initial term, the gross rent payment was $47.50 per square foot or $10,667.00 per month, $128,004.00, annually. Since the current Lease does not address rent during the renewal term, the rent structure resets to the prevailing market rent. It should be noted that since negotiations 1083 October 16, 2013 Redevelopment Agency Memorandum Anchor Shops -Shan Swimwear Amendment No. 1 Page 2 ofS with the Tenant have extended past the March 18, 2013 expiration date of the initial Lease term, pursuant to the provisions in the Lease, the Term has been extended on a month-to-month basis at the current rental rate until revised terms are approved by the RDA for the remaining five-year renewal option. Based upon an internal analysis of prevailing rents in the area between Collins and Washington Avenues, between 15th Street and Lincoln Road, as well as along Collins Avenue, from 1ih Street through Lincoln Rd., rents for available retail space range from a low of $55 to a high of $125 per square foot, with an average of $89.35 per square foot, quoted on a triple net basis ("Fair Market Rent"), as follows: Comearable Market Rents for Shan Memo as of July 15,2013 (Between 15th St. and Lincoln Rd.; from Washington Ave to Collins Ave.; Along Collins Ave., from 12th St. through Lincoln Rd. Address: Sq.Ft Rent/sq. ft. Annual Rent Type Term Use 1200Collins Ave 3000 $ 100.00 $ 300,000 NNN NA Retail 1208 Collins Ave 5376 $ 111.61 $ 600,015 NNN NA Retail 1351 Collins Ave 4500 $ 85.00 $ 382,500 NNN NA Retail 1656Collins Ave 3000 $ 125.00 $ 375,000 NNN NA Other 1610Washington Ave 1847 $ 75.00 $ 138,525 NNN NA Retail 1601 Washington Ave 3,917 $ 55.00 $ 215,435 NNN NA Retail 1542 Washington Ave 5500 $ 82.91 $ 456,005 NNN NA Retail 1502 Washington Ave 1741 $ 65.00 $ 113,165 NNN NA Retail Total 28881" $ 89.35 $ 2,580,645 Source: Loop Net * Com parables attached hereto as Exhibit "1" For further consideration, Staff is providing the RDA with an Anchor Shops -Retail Tenant Profile as of 10/01/2013, attached hereto as Exhibit "2". You will note that of the remaining six leases, Vacation Tours located on the corner of Washington and 161n Street is scheduled to expire in 2014, with no renewal options available; ArtConnectlon International, located on 16th Street, is scheduled to expire in 2015, with no renewal option; Liquor Lounge will expire in five years and has two (2) remaining five (5) year options and BBQ Beach, Inc. will expire in three years, with one remaining ten (10) year option. US Vintage, Inc., located on Collins Avenue next to the Tenant, is in the process of executing a new triple net lease, which was approved by the RDA on September 11, 2013, having an initial term of three years with two additional renewals of 3 years and 3 years and 364 days, respectively, at the initial base rent of $65/psf, with minimum annual rent escalations by the greater of CPI or 3%, plus CAM at the initial rate of $1.41/psf. It is important to differentiate the only other recent triple net lease agreement at the Anchor Shops, dated October 2, 2012, between the RDA and tenant, Mr. R. Sports, Inc., leasing space at 100 16th Street, Suites 1-4, Miami Beach, FL 33139, at the current rate of $31.00 per square foot. This tenant's rent is lower than the Fair Market Rent for said Space because Mr. R. Sports, Inc's location fronts 16th Street, instead of Collins Avenue. In addition, at the time Mr. R. Sports, Inc. negotiated its lease, the space had been vacant for a period in excess of a year and a half. Mr. R. Sports, Inc. had a successful 1084 October 16, 2013 Redevelopment Agency Memorandum Anchor Shops-Shan Swimwear Amendment No. 1 Page 3 of5 track record at its prior location on Lincoln Road, with a strong following in the sports shoe industry, bringing his brand name recognition as an asset to the Anchor Shops. At the July 25, 2013 Finance and Citywide Projects Committee ("FCWPC") meeting, the discussion with respect to the rent for the Renewal Option Period was considered for the first time by FCWPC. Tenant, citing a reduction in sales since their income stream from the years prior to 2008, claimed that it could not afford to pay the Fair Market Rent and proposed to pay gross rent, in the amount of $48.00 per square foot during the first year, with annual increases thereafter, based upon the CPI index but not to exceed 3% from the previous year's rent ("Initial Shan Offer"}. At this time, US Vintage also presented Staff with an offer to lease the Tenant's space for $65.00 per square feet, on a triple net basis, with annual rent increases, by the greater of 3% or CPI, based upon a lease term of ten years ("US Vintage Proposal"). US Vintage is already leasing the space abutting Tenant's current space and sells clothing for men, women and juniors, weekend wear, designer shoes, perfumes, eyewear, and Miami Beach souvenirs. The US Vintage Proposal was recommended by FCWPC. Thereafter, Tenant's Montreal-based parent company made the business decision to keep its presence in Miami Beach, Florida and fund any shortages which Shan may have during the renewal term, as they had seen steady increases in the gross revenues in the past months. Based upon this decision, at the September 19, 2013 FCWPC meeting, Tenant submitted a proposal to renew its Lease ("Shan Proposal"}, based upon comparable rental terms to those of the US Vintage Proposal ("Renewal Rent"), as follows: Sbsm PrQRQ:ii!l witb Mioiuml!m 326 l:::iti!li!til:!n:i A!ll:!!.!ill Htmt MQntbly Bel:!t OotiQD Yrs, Sg._fl. Rent/Sg.R Cc!llected ADDLiil Bent l12lu:~ :iille:i tsnd hRe. Year1 3-19-13/10-31-13 2697 $ 47.50 $ 78,892.87 $ 128,107 $10,675.58 Gross Year 1 11-1-13/2-28-14 2697 $ 66.41 $ 59,702.59 $ 179,108 $14,925.65 Gross Year2 3-1-2014/2-28-2015 2697 $ 68.40 $ 184,481.00 $ 184,481 $15,373.42 Gross Year3 3-1-2015/2-28-2016 2697 $ 70.45 $ 190,015.43 $ 190,015 $15,834.62 Gross Year4 3-1-2016/2-28-2017 2697 $ 72.57 $ 195,715.90 $ 195,716 $16,309.66 Gross YearS 3-1-2017/3-18-2018 2697 $ 74.75 $ 201,587.37 $ 201,587 $16,798.95 Gross * Six Month Recapture $ 25,500 Total Benefit to Keeping Shan at its current location $ 935,896 Shan's Lease does not include CAM so Shan has increased the rent to $66.41/psf to match the US Vintage Offer. *During year one of the Lease, Shan will commence paying the new rate of $66.41/psf on Nouember 1, 2013; howe..er, under the US Vintage Proposal, the RDA would hao,e had to gio,e Shan a six notice to moue, at Shan's current lease rate of $47 .50/psf ("Current Rent"), * Six Month Recapture -Savings by leaving Shan in the current space w. accepting the US Vintage Proposal $14,925.65-$10,675.58 = $4,250.07 X 6= $25,500.42 At the September 19, 2013 FCWPC meeting, Staff additionally presented the US Vintage Proposal; a New Tenant Proposal, based upon Fair Market Rent; and a previously submitted proposal from 7-11, Inc,, all based upon a five year period, as follows: 1085 October 16, 2013 Redevelopment Agency Memorandum Anchor Shops-Shan Swimwear Amendment No. 1 Page 4 of5 US Vintage prooosal with Minimum 3% Annual Escalations Years 1 Years 2 Years 3 Years 4 Years 5 Total SQJL Rent/Sq.Ft. 2697 $ 65.00 2697 $ 66.95 2697 $ 68.96 2697 $ 71.03 2697 $ 73.16 $ 175,305 NNN $ 180,564 NNN $ 185,981 NNN $ 191,561 NNN $ 197,307 NNN $ 930,718 In addition, US Vintage would be paying CAM at the initial rate of $1.41/psf, which makes the total payment for the first year $66.41/psf. Retail Retail Retail Retail Retail New Tenant Proposal -Best Case Scenario, based ypon fjye year lease with 3% CPI increases Sq. Ft. Rent/Sq.ft. Rent Type Use Years 1 2697 $ 89.35 $ 240,977 NNN Retail Years 2 2697 $ 92.03 $ 248,206 Years 3 2697 $ 94.79 $ 255,652 Years4 2697 $ 97.64 $ 263,322 Years 5 2697 $ 100.56 $ 271,222 Total Rent for Five years $ 1,279,379 Less Commissions $ (51,175.17) Less Six months of Rent Concess $ (120,488.48) Less nine month vacancy during marketing $ ( 180,732. 71) Less Built Out Concessions $ (50,000.00) Net Rent to City at end of 10 years $ 876,983 On or about September 22, 2012, staff received a letter of Intent, for a proposed lease between the City and 7-Eieven, Inc. ("7-11 Offer''), in connection with the subject Space, for an initial lease term of five years, with four additional lease options of five years each (with a 10% rent increase during each renewal term), for a total maximum lease term of twenty-five years. The proposal was based upon a site with 2,000 square feet; however, the subject site has 2,697 square feet. The proposed rent for the initial five years is $73.00 per square foot, on a triple net basis. Assuming the offer applied to the entire space, triple net rent, pursuant to the 7-11 Offer, would be $196,881.00/year and $16,406.75/mo, with a total five year rental income of $984,405.00. Total Rental Income for five years: $984,405.00 Less expenses in connection with said five years: 1. Landlord Construction allowance $ 50,000.00; 2. Rent Commencement delay of six months $ 98,440.50; 3. Real estate commission for initial five year lease term (4%) $ 39.376.20; Total Expenses $187,816.70 Net Rental Income at end of the initial five year term: $796,588.30 Based upon the aforementioned, FCWPC recommend moving forward with the Tenant's Proposed Renewal Rent schedule, in that, monetarily the Shan Proposal matches the US Vintage Proposal and it would keep the diversity of merchandise being sold at the 1086 October 16, 2013 Redevelopment Agency Memorandum Anchor Shops -Shan Swimwear Amendment No. 1 Page 5of5 Anchor Shops, while at the same time diversifying the risk of a default. Shan is current in its leasehold obligations and has been a compliant Tenant throughout its tenancy. RECOMMENDATION The Administration recommends that the Chairperson and Members of the Miami Beach Redevelopment Agency approve a resolution accepting the recommendation of the City's Finance and Citywide Projects Committee, approving and authorizing the Chairperson to execute Amendment No. 1 to the Lease between the Miami Beach Redevelopment Agency ("Landlord") and 1560 Collins Avenue, Inc. d/b/a Shan ("Tenant"), involving Suites B and C in the Anchor Shops, having a physical address of 1560 Collins Avenue, Suite 2, Miami Beach, Florida 33139 {"Space"), exercising the Renewal Option Period, for the five (5) year period commencing March 19, 2013 and ending March 18, 2018, based upon the Renewal Rent schedule approved by FCWPC. A copy of the proposed Amendment No. 1 to the Lease is attached hereto and made a part hereof as Exhibit "4". It should further be noted that since Anchor Garage and Shops is owned by the RDA, it is not subject to the public hearing requirements set forth under Section 82-39 of the City Code that would normally apply to the lease of City property. Proposed retail leases involving the Anchor Shops may be approved during and as part of the RDA Board's reg ult:Jgenda. JLM/:Jpi~~NT F:I$AII\RHCD~n:or_Ret\Absolutely Suitable_Shan/Shan RDA Renewal Memo 10162013 Enclosures: -Market Comparable Summary Matrix-Exhibit "1" -Anchor Shops Retail Tenant Profiles as of 0410112013-Exhibit "2" -Letter of Intent from 7-Efeven, Inc. -Exhibit "3" -Proposed Amendment No. 1 to Retail Lease Agreement-Exhibit "4" 1087 t, 'i ~ ' ' ' ·~ II ' I J t ' I 'l ~ ,. PNI)alred for 7/1512013 Propertl• for Lu•• Addrne ProJMI'ty Type 11,318 SF Bldg APN/.....-ID AeklngRent $111.61 /SffVr Space. 1 Space p,._rty -lcanle l1lnd IIane Dellc:rtlltfon ...... building In lhe heart or South beeCh ·lnc:ndlile llflllllty and' frDntllge Dll Colh Ave-Flo« ta ceiling wlndowt with ... Location ..JIIelrb)r ........ DHcrtptlon lnclul:llt: Berney'~ Co-cp. GUNI, Puma. BaniNI Republic, Dlelel, AmllniNX. Qulc:lallver. Vlclorta'l s~t • Next door to luxury mull-brand boullque, The Well&tal Motel 1,741 Sf Bldg 166/SFffr 1SpiCI Flltt' bull OUI I'UIIIUI'IIIIIPICI wRh Ill Impact fell paiclldlll c:d ''*' wllh 1arve outdoor IHIIn; .... AdjiiCint ta Five~ Burgert and Fries ... ~ rencMted bulcllng Nllr Lh:dn lad and lhe City Centlr area wKh lbundllnt office IPfiCI and holell in the lrnmecfllte .... P,.unted by Glaela TorrH Miami Beach • Olllce ot Real Estate. Houllng & Convnunly DIMIIclprnenl (305) 673-7000 giselatones0mlamlbeadl11.goy 5.822SFGLA 11!,000 SF Bldg 16.72G Sf Bldg 1941 155/SFfYr 1100 ISFfYr S121l ISFJYr 2Spacee 1 Space 1 SpKII L.oc:allad 0118 blocll Grwt lumlley clul \NIIh fron&ege along IOIMI of Unc:oln A IHtiUfiN ljiiCI Colh Avenue. thil Rolcl. Wthln In lhe hNrt ot newlyavallble walking dlltance of lOUth beech. Tile Subleue IJ*8 -· thoplllnd Md"' Holll II one '-dediclled reataur~nta. at the world HVAC, Eleelrlc:, famous 1c:on1 on Balhroonll, Store Mlemi e.:lllllld Enlnlnee ll'ld more. 110111 flr ... Spacewat ... Onthe~t Mn Hotel at the Acrou tile llrtet cometd corner d Colnt from the RIZ w.hlngton Awnue and 12th Carlon and step~ A ... IIUiand 1tllh Jtraet awar rrom many of StiMI the Wolld't ludlng hotels. Partclng I& IVIlllble n numerous nearby lois. On the comer of Uncoln R08d 8o ColOna Avenue EXHIBIT 1 C2Cil 01181• Totfll. M.wn. B•adl Ofhc-t ol R.-_. ESieloe l~uUI'III &. Co4nm"""''r 0.\e'-Vp-t'·•n~ 1088 18.118 SF Bldg 7,000SF SF 185/SFJYr 1 Spaw Nearly 40 .... or ffontagt on Colina Avenue. H;tl ~to the 27.000 Clrl that ,,. ..... ~thll pnm.y Ncd\ISouth corridor Cia~. Adj-mtotha Cllflclnand r.elghbortng 18Wral other hoCell lncUIIng lhe Buchoombet'. South Belc:h Pllu. Ol8lm South BMch, Kent llld Lordi. One blodl -•tofOcean Orkle. CHill block ~'-''""""""""'----~*·-· ----------~-----···~·--·-- AddNII v .. BuiN No. &tort. Lotllzl APN I Pln:IIIID AllllngRent $711/SFffr 182.91/SFffr ..... 1 Spece 1 Space PropertJ From.,. 8llln; ....... Deecrtptlon Wlthlnglon I'HtiU111ntlprivlle Awnue. Space club. All new buill· 0011111ta of • out kitchen with ground floot lnd equlpmenli100K meaanlne lllllel for granla I!Mue. 1101111 of1,847 water Rill pool. tqUnfMt.Co-*'-IIMCI wood tentncy Wfth and granb lloo ... McOonlllh ... Lo08tlon l.aCac.d one flajf llllrnl Baa prbMI Dwcrtpllon blodc flom LlnCDin location wtlhln Aoa:l. Projec:l Rlklng clltance to includes 1 new the beach, Lincoln 500-tploe paddng ROid and Eljllllall 01'9· Strang Wrf. pedllltiln trafllc: 20,Cl00 at the comer of Unccln Road and Wlltq1Dn Avenua. NoiM 1089 ... ·-··-· -· ._.,.._ ------··-·· Sh Retail T t Profil -------f 1 0/01/2013 Square Start Expire Base Renewal Current Current Contract Name Location Footage Date Date Term Option(s) Base Rent Base Rent 1560 Collins Ave, Suite #C2 1X5 Inc., Fiducie Plage (B/C) 2,697 03/19/08 03/18/13 5YRS Years $10,675/mo $47.50/sq.ft Sud d/b/a Shan Liquor Lounge, Inc. A Suite 2,250 12/20/08 12/19/18 12YRS Two (2) 5 $10,733.74/ $57 .25/sq.ft #C1(A) Yrs ea mo 1x3 US Vintage, Inc. Suite #C3 4,236 10/01/13 09/30/16 3YRS yrs;1x 3 $22,945/mo $65/sq.ft (DIE) yrs and 364 days Mr. R. Sports Suite #S1-4 2,884 10/02/12 10/01/15 3YRS 2 X3 YRS $7,450/mo $31/sq.ft (F,G,H & I) Vacation Tours of Suite #S1-5 721 03/18/99 03/17/14 15YRS N/A $1 ,602.24/m $26.67/sq.ft South Beach (J) 0 Art Connection lnt'l Suite #S1-6 721 11/10/04 11/09/15 11 YRS N/A $2,129/mo $35.43/sq.ft (K) BBQ Beach, Inc. Suite #W1 1 X 10 $12,874.77/ d/b/a Austen's Brew 6,217 03/01/06 02/28/16 10YRS $24.85/sq.ft &Chew C6(L, M &N) YRS mo --··---All tenants pay rent on gross basis, with exception of Liquor Lounge, Inc., which pays an additional $1-39 per square foot for CAM expenses; Mr. R. Sports, which pays an additional $1.41 per square foot for CAM e~tpenses; and US Vintage, which pays $1.61 per square foot for CAM expenses. C'-1 1--aJ :I: >< UJ 0 0) 0 "'C""" September 22nd, 2012 CityofMiami Beach CITY HALL 7-Eieven, Inc. 1700 CONVENTION CENTER DR MIAMI BEACH FL 33139-1819 Rc: Letter of Intent-BuDding Lease 1560 Collins Ave. Miami Beach, FL-Space currently occupied by Shan Swimwear in the building commonly known as Anchor Shops Dear City of Miami Beach, The following is a SUillJlWY of prospective terms and conditions relative to a proposed lease agreement between City of Miami Beach ("Landlord") and 7-Eievcn, Inc. (''Tcnant'1. This Letter of Intent has been prepared to set forth the business terms that will form the basis of ~otiatioo of an agreement between the parties and thiJ Letter of Intent is not intended to create a legally-binding obligation or commitment on the part of either party hereto. LANDLORD: TENANT: LEASE: BUilDING: PREMISES: SITE PLAN: LEASE TERM: 1P~69625613AG87S09. 0001 City of Miami Beach 7-Eleven, Inc. One Arts Plaza 1722 Routh Street, Suite 1000 Dallas, Texas 75201~2506 Tenant form of Building Lease 1560 Collins Ave, Miami Beach, FL. as shown on the Preliminary Site/Floor Plan attached hereto as Exhibit A. Approximately 2,000 square feet of ground floor retail space as shown on the Preliminary Site/Floor Plan. Landlord and Tenant will confer and agree on a mutually acceptable final site plan(s) for the Premises. 5 years In the event that Tenant is delayed in its construction or build-out of the Premises due to any act or omission of Landlord, its agents, contractors or employees, or as a result of any condition existing at the Shopping Center as of the date hereof(a "Landlord Delay''), then the aforementioned (60) day period shall be extended three (3) days for every day of Landlord Delay, or Tenant may terminate the Lease and be reimbursed all expenses in pursuing the lease. EXHIBIT 3 1 1091 OPTION FOR EXTENDED TERMS: BASE RENT: RENT COMMENCEMENT: USE: CONDmONS EXCLUSIVES: LANDLORD'S WORK: TENANT IMPROVEMENT ALLOWANCE: JPEARCEI6962S67.3/087S09. 0001 Four (4) options periods offive (5) )'1mS consecutive, each exercisable upon no less than 120 days prior written notice. Tenant shall have 6 months free rent as a remodel allowance in years 11 and 21 ifoption(s) to extend is/are exercised Years 1-5: $147,000/yr (based on 2,000 sq ft) Tenant shall be provided a rent reduction if the Building is Jess than seventy percent (7Qi'A,) leased. Base Rent shall increase ten percent (J OOA.) following the primmy term and upon every five (5) years thereafter. Rent will commence one hundred eighty (180) days following the latter of(a) the date all necessary permits for construction of the Premises are obtained (see conditions} or (b) the date of Delivery (as defined in attached Construction Addendum). The Premises may be used up to twenty-four (24) hours per day for the retail sale, rental or provision of merchandise and services customarily sold, rented or provided from time to time, at stores operated or fraDc1Dsed by Tenant or any other lawful purpose which is not in direct conflict with any exclusive uses granted to other tenants or occupants of the Building prior to 1he parties oommencement of Lease negotiations. This lease is subject to Tenant's ability to satisfY i1s conditions for coostruction and opening of a 7 -Eleven Store in the Premises. Conditions: a. Receipt of all permits and licenses to open and openlte a 7 -Eleven Store. b. Property to be delivemi clear and free of all hazardous materials per Tenant's satisfaction. c. Landlord to deliver a clean Title R~rt to Tenant Tenant will have the limited right to enter upon the premises during negotiation of the lease to conduct such testing as may be appropriate to satisfY the above conditions. If Tenant does not indicate satisfaction with the conditions within 60 days of Lease execution, either party may terminate 1he Lease. landlord will not permit any occupant of the Building. other than existing tcoants identified in the Lease and Tenant, to (i) operate a business which provides or offers, banking or other fi.rumcial services or (ii) offers for sale or rental, in connection with all or any part of its business operations, any grocery items. including snacks, foods and beverages commonly sold at a first class convenience store cigarettes and tobacco products, tmless vended by machine; beer and wine for off premise consumption; health and beawy aids; frozen or semi-frozen carbonated bevcntgcs; candy, unless gift boxed or sold in bulk; coffee or hot chocolate by the cup, newspapers, magazines and paperback books; lottery ticket, money orders, phone cards; and gift I cash cards (other than gift cards for the particular business occupying the space) .. Landlord's work at the Premises wiD be constructed in accordance with the Construction Addendum attached hereto. Landlord shall deliver the Premises to Tenant with Landlord's Work complete on or before the date that is 60 days following Tenant's satisfaction or wavier of the Conditions, with late delivery subject to some of all ofthe following consequences to be specified more fully in the lease: three (3) days free rent for every day Landlord is late, termination and reimbursement to Tenant ofTenant's expenses incurred in pursuing the Lease, and the right of Tenant to assume the work and be reimbursed fully by Landlord plus an administrative fee. Landlord will contribute to Tenant's construction costs an allowance of$25.00 per square foot of the Premises. 2 1092 TENANT'S IMPROVEMENTS: Tenant may make alterations, and install such improvements and FF&E in the Premises as Tenant deems necessary or desirable for Tenant's operations, consistent with Tenant's cummt trade dress and standards. Tenant may remove its improvements and FF&E when it vacates the Premises. MAINTENANCE: Landlord will maintain at its sole expense the exterior, roof, foundation, slab and structural so~ of the Building, and any heating and air conditioning equipment (unless installed by Tenant). TAXES: UTILITIES: COMMON EXPENSES: SIGN AGE: ASSIGNMENT AND SUBLETTING: SALE OF PREMISES: BROKER: Tenant will maintain in good repair, at Tenant's sole expense the interior and exterior non· structural portions of the Building, including electrical, plumbing, heating and air conditioning equipment (if installed by Tenant). Tenant shall pay all taxes on its personal property. Tenant shall reimburse landlord for all taxes and assessments levied against the Premises, based on the square footage of the Premises in proportion to the total square footage of all buildings within the applicable tax parcel (Pro Rata Share). Tenant shall pay all charges for electric, gas (if applicable), water, sewer, cable and telephone utilities serving the Premises. Landlord shall provide separate utility company meters or sub-meter (excluding telephone and sewer) to the Premises. Tenant shall pay its pro rata share of common area maintenance charges ("Common Expenses"), The estimated expenses for Common Expense& (including taxes and insurance) are currently $3.00 per square foot annually. The first year of Common Expcoscs shall not exceed such estimate and annual increases in Common ExpcDSCB shall not exceed 3% on a non-cumulative basis. Common Expenses shall not include any management or administrative fees and shall be determined in accordance with Generally Accepted Accounting Principals (GAAP). Capital expenditures that do not pertain to common area maintenance shall not be charged to Tenant in any manner. Tenant shall not share in any expenses for elevators, stairwells or other common areas that arc not used by Tenant. Tenant shall have audit rights as provided in the Lease. Subject to Tenant's receipt of any required local governmental approvals, Tenant may install its standard signage. Tenant shall share in all common signage, and shall be allowed promotional banners and awnings in and around the Premises and common area in connection with its grand opening programs during the first 12 months of the Tenn. Tenant shall have the right to assign the Lease or sublease the whole or any part of the Premises, provided Tenant shall remain primarily liable for the payment and performance obligations under the Lease. If Landlord decides to market the Premises for sale, Landlord shall notify Tenant on or before listing the Premises for sale and provide Tenant a right of first refusal. Landlord and Tenant warrant that they have had no dealings with any real estate brokcr(s) or agent(s) in connection with tbe negotiation of this transaction except for Behar Real Estate Group, Inc. who represent the Tenant. Behar Real Estate Group. Inc. shall be compensated by Landlord per separate agreement. Within 5 days following the date of Landlord's execution of this Letter of Intent, Landlord shall provide Tenant with copies of the following, to the extent in landlord's possession: (i) all surveys pertaining to the Premises and the Building; (ii) all JPEARCE/6962567.31087509. 0001 3 1093 association requirements, declarations, covenants and/or rules (if any) governing the Premises and Building; (iii) the most current title commitments or binders pertaining to the Premises and Building; (iv) all environmental reports and records applicable to the Premises. Landlord agrees not to negotiate with any othec prospective tenant for the Premises while negotiating the lease agreement with Tenant I look forwud to your confirmation of these terms and to proceeding with the preparation of a formal lease agreement. Approved this 241h day of September, 2012 LANDLORD: City ofMiami Beach By. ____________________________ __ Name: Title:--------------------------- Sincerely, ~~~ 7~Eicven Real Estate Manager 4 1094 f f I LANDLORD'S WORK AND CONDinON OF PREMISES Conditions of Premises: Tenant will provide the Landlord notice, in writing, the scope of work and specifications for the following requirements, outlining the details of the existing conditions for each Item listed that Landlord will be required to repair prior to delivery of the Premises. Tenant shall deliver notice to Landlord prior to the expiration of the Preliminary Term of the Lease. • STRUCTURAL: Landlord shall be responsible for the baseline structural integrity of the building and structures to be used by, surrounding, or affected by, Tenant, their use, equipment and loading. Minimum load to meet or exceed building codes when built for retail floor space {100 lbs. per square foot minimum.) • ROOF: Landlord shall be responsible for maintaining the roof and building such that Tenant's space and common areas remain watertight. Landlord shall provide roof certification providing the results of a water tightness test and roof inspection. • ENTRANCES, EGRESSES AND COMMON AREAS: Landlord shall be responsible for maintaining all building entrances and egresses, including stairs, walkways, sidewalks, and common spaces. Landlord shall upgrade, maintain and irrigate the landscaping throughout the center with low maintenance plantings. Landlord shall repair any cracks in the parking lot, repave and restripe the parking Jot. Landlord to provide exterior lighting and lighting of the exterior signage from dusk to dawn with the maximum allowable foot-candles by code or average 10 luminaries per square foot throughout the parking Jot. Landlord warrants to the best of their knowledge that all handicap ramps and Shopping Center are ADA compliant. Landlord shall repair and damaged fascia and soffit directly around the Premises. Landlord shall repaint the exterior of the Shopping Center every two years and prior to Tenant's acceptance of the Premises. Landlord's Work: The following work outlined will be considered Landlord's Work to demise the Premises for Tenant's use of the Premises. The following work will be permitted and constructed by Landlord at Landlord's expense as part of the Delivery Date. • ELECTRICAL SERVICE: Landlord to provide Tenant with separately metered dedicated 600 amp, 120/208 volts, 3-phase, and 4-wire electrical service to be located in Tenant's space. Service to be brought to a MDP (main disconnect panel) with service disconnect. • ENVIRONMENTAL SURVEYS AND ABATEMENT: The Landlord to provide Tenant's environmental consultant access to all areas to be disturbed by Tenant construction activities including the lease area, common areas and areas for utility/HVAC and refrigeration equipment and penetrations, mechanical, electrical and plumbing lines and penetrations, sign/exterior lighting facades and penetrations, etc. Tenant's consultant may provide a lead JPEARCE16962567.3A:>87509. 0001 5 1095 and asbestos survey at Tenant's expense. Landlord shall be responsible for abatement of lead and asbestos as Identified to be abated and shall provide Tenant with a confirmatory report before acceptance of Premises in accordance with State guidelines. • WATER SERVICE: Landlord shall provide Tenant with a dedicated water service and water meter. Service size and type shall be one inch (1 ") copper or PE. Service upgrades shall be the responsibility of the Landlord, the location shall be mutually agreed to between the Landlord and Tenant Details of existing service to be provided by Landlord including service type, size, age, condition, account number, configuration by providing the As-Built surveys for the Center. The Landlord to provide access to Tenant and their contractor to investigate the adequacy of the service. • STORM AND SANITARY SEWER SERVICE: Landlord to provide sanitary waste disposal systems and grease trap with adequate capacity to accommodate unimpeded flows from Tenant's restrooms, equipment and floor drains as required by code and Tenant's development plans. Minimum service size and slopes shall accommodate 20 gallons per minute sanitary waste flow. Location for connections to services to be identified by the Landlord on plans. Any modifications or tie-ins outside the demised space will be the Landlord's responsibility. Modifications, connections or disconnects of any roof or storm drains will ba the responsibility of the Landlord. • HEATING/COOLING AND REFRIGERAT10N EQUIPMENT: Landlord to provide 15 tons of HVAC equipment and duct work as specified by Tenant Landlord will allow Tenant roof access for its remote condensing units for refrigeration and HVAC units. • FIRE PROTECTION SYSTEMS AND ALARMS AND BUILDING IMPROVEMENTS: Landlord will be responsible for designing, permitting, connections, installations, testing and certifications of all fire alarm and central monitoring systems as required by applicable codes, laws, regulations and/or jurisdictional agencies. Landlord to provide: alarm plans, current fire alarm tests and certifications by licensed fire alarm and the contact information for the Landlord's alarm and central monitoring contractors. • TRASH: landlord to provide 2 dumpsters to accommodate recycling and regular trash. DEMISING WALLS: Landlord shall provide demising walls to the underside of the roof with metal studs and drywall taped and sanded to the floor. Walls shall carry a fire rating as per local code. Walls shall be insulated {R19}. JPEARCE16962567.3.UI!7509. 0001 6 1096 JP~96256731087S09. 0001 7 1097 ··---~< "'"·-~.....--------------. ................ 11~~ •. ::...·, COMMISSION AGREEMENT THIS AGREEMENT made as of September 23, 2012 by and between City of Miami Beach (''Owner'') having ao address of 1700 Convention Center Drive Miami Beach, FL 33139 and BEHAR REAL ESTATE GROUP, INC. having an address at 18321 West Dixie Highway Suite 204 Miami, FL. 33160 ("Broker"). WITNESSETH: WHEREAS, Owner is the owner of a certain property located at 1560 Collins Ave, Miami Beach, FL 33139 (Folio #: 02-3234-019-1000; Legal Description: ALTON BEACH 1ST SUB PB 2-77 LOTS 8 THRU 13 BLK 57 AKA I.DEWS PARKING GARAGE LOT SIZE 65701 SQ Ff) WHEREAS, Broker is hereby registering and is negotiating for the benefit of Tenant a lease (''the Lease") for the certain premises (the ''Leased Premises") at the Property comprising approximately 2000 +1-Square Feet (the ''Floor Area") with 7 Eleven, Inc. and I m-assigns (The "Prospective Tenant"); and NOW • THEREFORE, in consideration of the mutual covenants herem contained and other good valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is as follows: I. Subject to the terms and conditims set forth in this Agreement; Owner (Oty of Miami Beach) shall pay Broker (Behar Real Estate Group, Inc.), and Broker (Behar Real Estate Group, Inc.) shall accept. as its full and complete compensation for procuring the Lease contemplated herein with the Prospective Tenant (7 FJeven, Inc. and I or assigns), a canmission equal to Four percent ( 4%) of the aggregate net lease value for the initial term that Owner collects R':DI (the "Commissim") which shall be payable as follows: {i) F1fty Percent (50% l of the leasing Commission sha11 be due upon full execution of the lease. (ii) Fifty Percent (50~ l of the Leasing Commission shall be due upon Tenant opening for business. In the event Tenant exercises its First Option Term, Landlord shall pay Behar Real Estate Group, Inc. a commissim equal to three percent (3%) of the aggregate net lease value for said term. In the event Owner sells Property prior to complete payment of the full Commission, said Commission balance shall be due to Broker upon sale of Property. 2 The Commissioo shal1 be earned and paid to Broker in the manner set forth above. Any amount of commission that remains unpaid for more than thirty (30) days after coming due shall bear interest at a rate of 18% until said balance (including accrued interest) is paid in full. 3 The 1ease(s) evidencing this transactim shall. provide that should any part of the Comm.issiao not be paid within fifteen (15) days from its due date, Behar Real Estate Group. Inc. may notify Prospective Tenant ofLand1ord's noo-payment and Prospective Tenaot shall have the right to pay the mpaid commission amount directly to Broker as an offset against any rent due under the Leases{s). 4 The covenants and agreements contained herein shall apply to, insure to the benefit of, and be binding upon the parties hereto and their respective heirs, personal rq>rescntatives, successors and assigns. 5 The signatories of this document each represent that he or she is an officer of the pany he or she represents, and is duly authorized. to execute this Agreement. 6 Broker represents and warrants that they are licensed in the State of Florida. 7 Owner represents that Behar Real Estate Group, Inc. represents the Ten ant and Koni ver Stern represents the Owner and are the ooly brokers that Owner bas dealt with in connectioo with this transaction and agrees to indemnify Brokers against any claims., which may be brought as a result of this transaction. 1098 8 In the event of any dispute between the parties arising out of or in connectioo with this Agreement, the prevailing party shall be entitled to recover its reasonable attaneys' fees and costs incurred in connection therewith from the other party. 9 The Florida Commercial Real Estate licensing Connnissioolien Act provides that when a lmket has earned a commission by performing licensed services under a brokecage agreement with you, the trolcer may claim a lien against your interest in the property of the broker's commission. The lroker's lien rights under the act cannot be waived before the commission is earned. 10 This Agreement contains the entire agreement between the parties hereto with respect to the subject matter hereof. This Agreement may not be modified, changed or supp1emented, and no obligatioo h«eUnder may be waived, except by a written instrument signed by the party against whom the enforcement is sought IN WITNESS WHEREOF, the parties hereto have executed this Agreement as ofthe date first above written. LANDLORD: City of Miami Beach City of Miami Beach BROKER: Behar Rea1 Estate Group, Inc. David Behar, President Behar Real Estate Group, Inc. WITNESS: Name Name WITNESSES: Name Name Faxed, Portable Document Format or eledrOII.ic signatures IU'e acceptable 1111 authentication. 1099 AMENDMENT NO.1 TO RETAIL LEASE AGREEMENT BETWEEN THE MIAMI BEACH REDEVELOPMENT AGENCY AND 1560 COLLINS AVENUE, INC .. DATED OCTOBER 17. 2007, INVOLVING THE LEASE OF APPROXIMATELY 2,697 SQUARE FEET OF GROUND FLOR RETAIL SPACE AT THE ANCHOR SHOPS GARAGE, LOCATED AT 1560 COLLINS AVENUE, SUITE NO.2, MIAMI BEACH, FLORIDA 33139 This Amendment No. 1 to Retail Lease ("Amendment"), is made and executed as of this 16th day of October, 2013 ("Effective Date"), relating to a lease dated October 17, 2007 (the "Lease"), by and between the MIAMI BEACH REDEVELOPMENT AGENCY, a public body corporate and politic ("Landlord"} and 1560 Collins Avenue, Inc., a Florida corporation, d/b/a Shan ("Tenant"), relating to approximately 2,697 square feet of ground retail space, described as Suites B and C of The Anchor Shops, having a physical address of 1560 Collins Avenue, Suite 2, Miami Beach, Florida 33139 ("Premises"). RECITALS: WHEREAS, on or about October 17, 2007, the Miami Beach Redevelopment Agency ("RDA"} executed the Lease in connection with the Premises, for an initial lease term of five (5) years , commencing on March 19, 2008 and terminating on March 18, 2013, with one (1) renewal option of five (5} years; and WHEREAS, on September 19, 2013, the Finance and Citywide Projects Commission Committee ("FCWPC") recommended that the RDA renew the Lease for the remaining five year option period, based upon an initial Minimum Rent of $66.41 per square foot with subsequent annual rent escalations by the greater of the CPI Index increase or 3% ("Renewal Rent"); and WHEREAS, during the rent negotiations, in connection with determining the Renewal Rent, Tenant has been paying the Minimum Rent, as determined for the final year of the initial lease term, in the amount of $47.50 per square foot, $11,423.00 per month, plus sales tax; and WHEREAS, on October 16, 2013, pursuant to Resolution No. ___________ , the RDA approved the recommendation of the FCWPC, authorizing the Chairperson to execute this Amendment, exercising the renewal option period, commencing March 19, 2013 and terminating March 18, 2018 ("Renewal Term"), based upon the recommended Renewal Rent. NOW THEREFORE, Landlord and Tenant, in consideration of the mutual covenants, agreements and undertakings herein contained, do by these presents mutually covenant and agree to amend the Lease, based upon the following terms and conditions: 1. Tenant hereby exercises the Renewal Option and Landlord hereby approves said Renewal Option under the Lease, pursuant to paragraph 13 of the Lease Summary, for the Renewal Term commencing March 19,2013 and terminating March 18, 2018. 2. Paragraph 14 of the Lease summary, "Minimum Rent" (section 2.2), is hereby amended to add the following: EXHIBIT 4 1100 Lease between RDA and Shan Amendment No. 1 RDA October 16,2013 RENEWAL RENT FOR RENEWAL OPTION PERIOD PERIOD ANNUAL MINIMUM RENT Option Year One March 19, 2013-October 31, 2013 November 1, 2013 -February 28, 2014, $128,106.96 $179,108.00 ($66.41/psf) MONTHLY PAYMENT (PLUS SALES TAX} $10,675.58 $14,925.65 Note (*) Beginning on March 1, 2014, and at the beginning of each succeeding year thereafter during the Renewal Term of the Lease, the Minimum Rent shall be adjusted by the greater of three (3%) annually or the CPI increase, as determined in accordance with the following formula: The CPI increase shall be determined by multiplying the Minimum Rent then being paid by a fraction, the numerator of which shall be the Consumer Price Index -U.S. City average for urban wage earners and clerical workers all items (1982-84 equals 100) ("CPI") for the third month-preceding the month of adjustment, and the denominator of which shall be the CPI for the fifteenth month preceding the month of adjustment. Should the CPI become unavailable, a reasonable substitute prepared by the U.S. Department of Labor or other source, as designated by Landlord, shall be used. Minimum Rent shall continue to be payable in monthly installments as otherwise described above until Landlord notifies Tenant of the new monthly Minimum Rent installment amount. Landlord shall attempt to so notify Tenant prior to the commencement of each adjustment date. However, failure of Landlord to timely notify Tenant of the new monthly Minimum Rent installment amount shall not be deemed a waiver by Landlord of the increased rental; the new monthly amount (or any portion to previously paid) shall be payable, retroactive to the commencement of the new adjustment date, upon notification by Landlord to Tenant of the new monthly Minimum Rent installment amount. Notwithstanding the foregoing, the annual Minimum Rent shall not be less than the Minimum Rent payable for the immediately prior year, plus the minimum three {3%) annual increase. The projected Minimum Rent for Option Years two through Five, assuming that the CPI increases, as described herein, stay below 3%, shall be as follows: :Renewal RentforRenewal Option Period OptionYrs. SQ..£1. dRe nt/sq. Ft. Annual Rent Year1 Year 1 Year 2 Year 5 .. 3-19-13/10-3~=~3 2697 $ 47.50 $ 128,107 10,675.58 11-1-13/2-28-14 2697 $ 66.41 $ 179,108 14,925.65 3-1-2014/2-28-2015 2697 $ 68.40 $ 184,481 15,373.42 . 3-1~2015/2~.~?-2016 2697 $ 70.45 $ 190,01:5 ~15,834.62 3-1-2016/2-28-2017 2697 $ 72.57 $ 195,716 ~6,309.66 3-1-2017/3-18-2018 2697 $ 74.75 $ 201,587 16,798.95 3. Except as amended herein, all other terms and conditions of the Lease shall remain in full force and effect and are hereby ratified and confirmed by the parties. 2 1101 Lease between RDA and Shan Amendment No. I RDA October 16, 2013 IN WITNESS WHEREOF, this Amendment No. 1 has been duly executed by the parties hereto as of the day and year first above written. ATTEST: Print Name: ______ _ Print Name: ______ _ Print Name: ______ _ Print Name: ------- ATTEST: Print Name: ·-------- Print Name:. _______ _ LANDLORD: MIAMI BEACH REDEVELOPMENT AGENCY Chairperson _ __ day of _____ , 2013. Secretary _ __ day of _____ , 2013. TENANT: 1560 Collins Avenue, Inc., a Florida corporation By:. ___________ _ Title: __________ _ ___ day of _____ , 2013. CORPORATE SEAL (affix here) F:\RHCD\$ALLIECONI$ALL\ASSET\Anchor Ret\Absolutely Suitable_Shan\Amendment No. 1 3 1102 RESOLUTION TO BE SUBMITTED 1103