HomeMy WebLinkAboutLetter from Brian Tague
TEW CARDENAS LLP
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CONFIDENTIAL
ATTORNEY-CLIENT PRIVILEGE
MEMORANDUM
To:
Jorge Gonzalez
Raul Aguila
Tim Hemstreet
From:
Brian Tague
Re:
June 17, 2005
5th and Alton
Date:
At your request, I reviewed the Development Agreement ("Development Agreement") between City
of Miami Beach, Florida ("City") and AR&J SoBe, LLC ("Developer").
The Development Agreement is in acceptable legal form and is consistent with the terms negotiated
between the City and the Developer.
You previously prepared for the City Commission a summary ofthe basic terms ofthe Agreement. I
will not repeat those terms here. I do, however, want to call your attention to the following legal
points:
I. The Developer is a newly-formed limited liability company whose sole asset is its
equity in the Land which is the subject of the Development Agreement.
2. The City's Contribution will be disbursed during construction of the Project along
with the proceeds of the Developer's construction loan (on a proportionate pari passu
basis). The City does not have any lien rights to secure the City Contribution.
Instead, the City has the following security: (a) the obligation of the Developer to
complete the Project lien free; (b) the Guaranty of Lien Completion of Messrs
Berkowitz, Potamkin and Potamkin (but no financial review was done with respect to
these individuals); (c) payment and performance bond for the general contract; and
(d) prior to any foreclosure of the construction loan, the lender must agree either to
Memorandum to Jose Ganzalez, Tim Hemstreet, Raul Aguila
June 17, 2005
Re 5th and Alton
Page 2
(i) repay the City Contribution plus interest or (ii) complete the Project and honor the
City's rights under the Development Agreement.
3. If the Developer defaults under the Development Agreement, the City has the
following remedies: (a) specific performance and other equitable relief; or (b)
damages. The City has agreed, however, that in no event will damages exceed a
return of the City Contribution plus interest, upon payment of which the City's
interest in the Project will cease (except that there is no limitation on damages as to
certain indemnity obligations of the Developer).
4. After the Project is completed the Developer has certain rights to terminate the
arrangement with the City if operational problems are encountered. The conditions
for exercising the termination right are set forth in the Declaration. If termination
occurs, the Developer must repay the City Contribution plus interest or (after a
period specified in the Declaration) an amount equal to 56% (the "Fraction") of the
Fair Market Value of the City Spaces, if higher. (Note: the City agreed to the
Fraction based upon the premise that the City Contribution is 56% ofthe value of the
City Spaces being acquired by the City after taking into consideration all benefits and
burdens resulting from the Declaration).
5. If the City desires to sell its spaces, the Developer has the first right to buy them for
the greater ofthe City Contribution attributable to such spaces (without interest) or
56% of the Fair Market Value of the spaces.
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