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2000-23816 RESO RESOLUTION NO. 2000-23816 A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, ACCEPTING THE RECOMMENDATION OF THE EVALUATION COMMITTEE RELATIVE TO THE PROPOSALS RECEIVED AND AUTHORIZING THE ADMINISTRATION TO ENTER INTO NEGOTIATIONS WITH THE ONLY RANKED FIRM, THE POINTE AT NORTH BEACH, PURSUANT TO REQUEST FOR PROPOSALS (RFP) NO. 42-98/99 FOR DEVELOPMENT OF APPROXIMATELY FOUR (4) ACRES OF CITY -OWNED PROPERTY KNOWN AS THE "nND STREET SITE", LOCATED BETWEEN COLLINS AND HARDING AVENUES, FROM nND TO 73RD STREETS, FURTHER APPROVING AND AUTHORIZING SAID NEGOTIATIONS SUBJECT TO CERTAIN CONDITIONS, AS SET FORTH IN THIS RESOLUTION. WHEREAS, on February 9, 2000, the City Commission deferred this resolution to February 23,2000 to allow the proposers to make a brief presentation, to solicit input from the community, to obtain the City's consultants' evaluations and for general discussion by the City Commission at a Commission workshop scheduled on February 22, 2000; and WHEREAS, during discussions surrounding a Request for Proposals for development of the 17th Street Site in mid-1998, the Administration also identified the City-owned four (4) acre site, located between Collins and Harding Avenues, and nnd and 73 nl Streets (the "n nd Street Site"), as an important parcel in the future redevelopment of North Beach, and recommended a planning study as a precursor to a Request for Proposals ("RFP"); and WHEREAS, on November 4, 1998, the Mayor and City Commission discussed a request from the North Beach Development Corporation ("NBDC"), that the City conduct a planning and economic development study for the nnd Street Site as a possible development and economic generator for the commercial area, from 71" to 7'5h Streets, that would serve as a basis for the issuance of an RFP; and WHEREAS, at the January 6, 1999 meeting, Commissioner Martin Shapiro suggested that the City issue an RFP for the nnd Street Site, and that said RFP be aimed at encouraging a mixed-use project, and on January 20, 1999, the Mayor and City Commission adopted Resolution No. 99- 23048, authorizing the issuance of said RFP; and WHEREAS, the nnd Street Site is approximately four (4) acres and is currently used as a public surface parking lot with 306 spaces, that has generated between $8,300 - $11,600 in annual parking revenues over the past four (4) years; an amount that must be replenished to the City's Parking System, if developed; and WHEREAS, the RFP was issued on May 19, 1999, with an opening date of October 26, 1999, which was later extended to December 13, 1999; and WHEREAS, four hundred and thirty (430) specifications were issued, resulting in the receipt of responsive proposals from the firms of The Pointe at North Beach (Equity One, Inc./Zyscovich) and North Beach/nnd, Inc.(Taylor Development and Land Co./BVT Development Partners II, LLI); and WHEREAS, on January 10, 2000, and January 20, 2000, an Evaluation Committee met for over nine (9) hours to review and discuss the proposals; and WHEREAS, the Evaluation Committee evaluated both proposals based upon the experience and track record of the proposer; the financial capability and level of financial commitment; and the extent to which the proposed project would meet City planning objectives; and WHEREAS, the City's consultants, Barry Abramson (Abramson & Associates, Inc.) and Michael Cannon (AREEA), also provided their comments and observations relative to both proposals; and WHEREAS, the Evaluation Committee deemed that both developers demonstrated the adequate experience and track record and reflected the financial wherewithal to develop the Site as proposed, but found that the project submitted by the Pointe at North Beach was more complementary to the adjacent commercial areas, and that it has the following attributes: . provides a greater number of parking spaces; . provides a pedestrian link between 71 st Street to 73,d Street; . introduces a new element to the area with the inclusion of the cinema that will act as a catalyst and anchor the area; and . provides an option to the City to elect to include a Community Theater thereby directly addressing the urban needs and potential future appropriate uses set forth in the RFP; and WHEREAS, the North Beach/nnd, Inc. proposal, while more aggressive in its proposed financial return to the City, was found to be more speculative in nature, incompatible with the surrounding commercial district, both from a design perspective (no sidewalk level pedestrian access) and from a competitive nature (may detract from adjacent commercial uses), and was generally viewed as a more risky concept; and WHEREAS, as a result, the Evaluation Committee recommended, by a vote of 8-1, the Pointe at North Beach, as the only ranked firm, and recommended against ranking North Beach/nnd, Inc. second, and further supported the option to include the Community Theater as part of the development proposal; and WHEREAS, in accordance with the terms of the RFP, the Administration has reviewed the Evaluation Committee's recommendation and concurs with its recommendation; and WHEREAS, the Administration recommends that the City Commission authorize the Administration to negotiate with the Pointe at North Beach Development team, subject to the . following conditions: . The City shall direct the selected North Beach area economic development plan consultant and the City's appraiser, Michael Cannon, to evaluate the recommended proposal relative to its financial feasibility, compatibility with the area needs, and its sustainability and viability as part of North Beach's economic revitalization strategy, including a recommendation realtive to the Community Theater option. The consultant's findings will be reported to the City Commission prior to entering into negotiations with the selected proposer; . A "value in use" appraisal is being conducted based upon the Pointe at North Beach proposal that has preliminarily resulted in a $2.5 million - $3.5 million value range. The Administration's recommendation is subject to obtaining an equitable return to the City consisting of an equitable base rent and percentage of gross revenues from the developer; . Obtaining an executed acknowledgment and agreement from the Proposer agreeing; that the City Commission's selection of its proposal is subject to review and evaluation by the City's independent consultant; that a final decision will not be made until the consultant conducts the evaluation of the proposal and makes its final recommendation; that the City may determine not to go forward with negotiations and that the City shall not be liable to said Proposer ifthe proposal is ultimately rejected by the City; . The proposer will evidence a lease with a viable movie theater operator and a commitment from Publix prior to final approval of a ground lease with the City; and . The proposer will give preference for jobs to Miami Beach residents. NOW, THEREFORE, BE IT DULY RESOLVED BY THE MAYOR AND THE CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, that the Mayor and City Commission hereby accept the recommendation of the Evaluation Committee relative to the proposals received and authorize the Administration to enter into negotiations with the only ranked firm, the Pointe at North Beach, pursuant to Request for Proposals (RFP) No. 42-98/99 for development of approximately four (4) acres of City-owned property known as the "nnd Street Site", located between Collins and Harding Avenues, from nnd to 7Jd Streets, Miami Beach, Florida further approve and authorize said negotiations subject to those certain conditions, as set forth in this Resolution. PASSED and ADOPTED this 23'd day of February, 2000. I1J11 MAYOR ATTEST: ~tf~ CITY CLERK APPROVED AS TO FORM & LANGUAGE a. FOR EXECUTION LAL/CMC/rar T:\AGENDA\2000\FEB2300\REGULAR\72NDRFP_RES 3-1 J-o( l..... - CITY HALL 1700 CONVENTION CENTER DRIVE MIAMI BEACH, FLORIDA 33139 http:\\ci.miami-beach.f1.us CITY OF MIAMI BEACH TO: FROM: SUBJECT: COMMISSION MEMORANDUM NO. J:J..k.::Qb Mayor Neisen O. Kasdin and Members of the City Commission Lawrence A. Levy~ City Manager DATE: February 23, 2000 A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, ACCEPTING THE RECOMMENDATION OF THE EVALUATION COMMITTEE RELATIVE TO THE PROPOSALS RECEIVED AND AUTHORIZING THE ADMINISTRATION TO ENTER INTO NEGOTIATIONS WITH THE ONLY RANKED FIRM, THE POINTE AT NORTH BEACH, PURSUANT TO REQUEST FOR PROPOSALS (RFP) NO. 42-98/99 FOR DEVELOPMENT OF APPROXIMATELY FOUR (4) ACRES OF CITY-OWNED PROPERTY KNOWN AS THE "72ND STREET SITE", LOCATED BETWEEN COLLINS AND HARDING AVENUES, FROM 72ND TO 73 RD STREETS, FURTHER APPROVING AND AUTHORIZING SAID NEGOTIATIONS SUBJECT TO CERTAIN CONDITIONS, AS SET FORTH IN THIS RESOLUTION. ADMINISTRATION RECOMMENDATION Adopt the Resolution. ANALYSIS On February 9, 2000, the City Commission deferred this Resolution to February 23, 2000 to allow the proposers to make a brief presentation, to solicit input from the community, to obtain the City's consultants' evaluations and for general discussion by the City Commission at a Commission workshop scheduled on February 22, 2000. By way of background, when discussions surrounding a Request for Proposals for development of the 1711> Street Site took place in mid-1998, the Administration also identified the City-owned four (4) acre site, located between Collins and Harding Avenues, and nnd and 73 ,d Streets, (the "n nd Street Site"), as an important parcel in the future redevelopment of North Beach, and recommended a planning study as a precursor to a Request for Proposals ("RFP"). The Commission did not take action at that time. AGENDA ITEM R1C 2-2 3~oo T,IAGENDAI2000\fED2300\lU!GULAR\72NORFP,CM DATE 72nd Street RFP February 23, 2000 Commission Memorandum Page 2 On November 4, 1998, the City Commission discussed a request from the North Beach Development Corporation ("NBDC"), that the City conduct a planning and economic development study for the nnd Street Site as a possible development and economic generator for the commercial area, from 71 ,t to 75ili Streets. The study would serve as a basis for the issuance of an RFP. Additionally, NBDC requested that the study of the area reference the prior findings ofthe North Shore Development Plan from the 1980's and the Design Guidelines for the North Beach neighborhood prepared by the architectural firm of Duany/Plater-Zyberk in 1994. In response to said discussion, the Administration developed a general study outline, timetable, community participation, and funding strategy in order to accomplish certain goals for North Beach in general. This item was discussed by the City Commission, the Land Use and Development Committee, the Neighborhoods Committee, and North Beach Development Corporation in order to reach a consensus on a plan of action as to how to proceed with this effort. On January 6,1999, the City Commission discussed a report from the Neighborhoods Committee meeting of December 17, 1998, regarding the proposed North Beach Master Plan and the Normandy Isle Master Plan. The report indicated that the proposed studies would be further discussed with the North Beach Development Corporation on January 19, 1999 for further input, and that the general consensus on a plan of action would be reported back to the City Commission on January 20,1999. At the same January 6, 1999 meeting, Commissioner Shapiro suggested that the City issue an RFP for the nnd Street Site, and that said RFP be aimed at encouraging a mixed-use project. Pursuant to that suggestion, Commissioner Shapiro requested that the Administration prepare a Resolution authorizing the issuance of an RFP for the Site. On January 20, 1999, the City Commission adopted Resolution No. 99-23048, authorizing the Administration to issue an RFP for the development of the nnd Street Site. The nnd Street Site is approximately four (4) acres and is currently used as a public surface parking lot with 306 spaces. Over the past four (4) years, the site has generated between $8,300 - $11,600 in annual parking revenues that must be replenished to the parking system if developed. As previously stated, part of the strategy described by the Administration was to undertake a professional planning process for the subject Site as part of the larger area to determine its best long range use. While the Administration repeatedly noted that it would be preferable to undertake the process described above prior to the issuance of an RFP, on May 12, 1999, the City Commission authorized the Administration to issue an RFP for the nnd Street Site. T;\AOENDA\2000\PEB23001REGUl.AR\72NDllFP,CM 72nd Street RFP February 23, 2000 Commission Memorandum Page 3 The RFP was issued on May 19, 1999, with an opening date of October 26,1999, which was later extended to December 13, 1999. The RFP was advertised in the following publications: - Urban Land Institute - Daily Business Review - Miami Herald - New York Times - Wall Street Journal - South Florida Business Journal - Miami Today - Internet Four hundred and thirty (430) specifications were issued, resulting in the receipt of responsive proposals from the following two (2) firms: . The Pointe at North Beach (Equity One, Inc./Zyscovich) . North Beach/nnd, Inc. (Taylor Development and Land Co./BVT Development Partners II, LLI) On December 14, 1999, Miami-Dade Community College submitted a letter of interest to develop the nnd Street Site as a permanent Miami-Dade Community College educational center for Miami Beach. Said letter was deemed non-responsive to the RFP as it was submitted after the expiration of the deadline for receipt of proposals, and further did not contain any of the required information pursuant to the RFP. T:\AGENDA'QOOO\I'EB2300\REGULAk\72NDRFP.CM 72nd Street RFP February 23. 2000 Commission Memorandum Page 4 The Pointe at North Beach and North Beach/nnd, Inc. proposals consisted of the following components: Project Pointe @ North Beach North Beach/72"" Inc. Components: Publix 51,500 sf 44,000 sf Retail/Restaurants 36,500 sf 95,400 sf Cinema 81,465 sf(2,150 seats) Community 12,940 sf* (optional) Theater * Office Building 53,059 sf Visitor Center 1,250 sf Parking 906 spaces 654 spaces Development Cost $26,067,000 $35,266,000 Proposed Return $50,000 In year 4* (with $75,000 in each of year 1 & 2 to the City Community Theater) $200,000 in each of year 3 & 4 $150,000 In year 4 (without $300,000 year 5 - 9 Community Theater) -escalations every 10th year@ CPI -escalations annually @ CPI or 3% -2.5% of gross revenues -parking reimbursement $15,000/year * Option: * Community Theater is optional. Base rent offered is $50,000 if community theater option is selected. Absent community theater, rent would be $150,000. T,\AGENDA\2000\PEB2300\REGULAR\72NDRFl'.CM 72nd Street RFP February 23, 2000 Commission Memorandum Page 5 On January 10,2000 and January 20, 2000, an Evaluation Committee composed of the following persons met for over nine (9) hours to review and discuss the proposals: Ronnie Singer, Executive Assistant to the City Manager Patricia Walker, Finance Director Joyce Meyers, North Beach Planning Coordinator and William Cary, Director of Design, Preservation & Neighborhood Planning Division Donald Shockey, North Beach Development Corporation . Regina Berman, North Beach Resident Marty Hyman, Architect Larry Herrup, Chairman, Budget Advisory Committee Jerry Libbin, North Beach Resident Larry Fuller, North Beach Resident The proposals were evaluated based on the selection criteria established within the RFP. The Evaluation Committee evaluated both proposals based upon the experience and track record of the proposer; the financial capability and level of financial commitment; and the extent to which the proposed project would meet City planning objectives, Additionally, the City's consultants, Barry Abramson (Abramson & Associates, Inc.) and Michael Cannon (AREEA), provided their comments and observations relative to both proposals. In summary, the Evaluation Committee deemed that both developers demonstrated the adequate experience and track record and reflected the financial wherewithal to develop the Site as proposed, Extensive discussions followed regarding the projects' compatibility with the area and overall viability, The Evaluation Committee found that the project submitted by the Pointe at North Beach was more complementary to the adjacent commercial areas, and that it has the following attributes: . provides a greater number of parking spaces on-site; . provides a pedestrian link between 71 'I Street to 73m Street; . introduces a new element to the area with the inclusion of the cinema that will act as a catalyst and anchor the area; and . provides an option to the City to elect to include a Community Theater thereby directly addressing the urban needs and potential future appropriate uses set forth in the RFP. The North Beachl72nd, Inc. proposal, while more aggressive in its proposed financial return to the City, was found to be more speculative in nature, incompatible with the surrounding commercial district, both from a design perspective (no sidewalk level pedestrian access) and from a competitive nature (may detract from adjacent commercial uses), and was generally viewed as a more risky concept. T,\A(jEND^\201l1111'EB2JOll\REGUlAR\72NDRFP,CM 72nd Street RFP February 23, 2000 Commission Memorandum Page 6 As a result, the Evaluation Committee recommended, by a vote of 8-1, the Pointe at North Beach, as the only ranked firm, and recommended against ranking North Beach/nnd, Inc. second. The Evaluation Committee further supported the option to include the Community Theater as part of the development proposal. In accordance with the terms of the RFP, the Administration has reviewed the Evaluation Committee's recommendation and concurs with its recommendation, as a result of the following additional findings: Findings: . Due to its prime location at the crossroads of the commercial district and North Shore Park, it was expected that a number of creative, mixed use development proposals from the private sector would be submitted. Nonetheless, only two (2) proposals were submitted and both include a Publix supermarket. The two proposals differed in that one contained a movie cinema and a 36,500 sf retail area while the second contained an office building and a larger, 95,400 sfretail area. . Conversations with residential developers that attended the pre-proposal conference and did not submit proposals indicate that a residential project is not economically viable under present market conditions in the North Beach area. . Publix representatives assert that Publix's needs for expansion are dire and many alternate sites have been evaluated, resulting in the nnd Street site being the most desirable and prime location for a new facility. Publix also confirmed, that similar to South Beach, it is their intention to maintain both stores open. The existing Publix at Collins and 67ili is under a long term lease with 22 years remaining. . The proposed cinema is complementary to the area, in light of the targeted closure of the Byron-Carlyle and the Bay Harbor Cinema. Regal Cinemas has both properties on their disposition list and are evaluating their options relative to those sites. The proposed cinema lies strategically between the 18 screen Regal South Beach Cinema and the 24 screen AMC A ventura Cinema. . The Pointe at North Beach proposal contains almost 50% more parking (i.e. 906 cars vs. 654 cars) that provides a greater number of parking spaces to benefit not only the commercial site but provides off-street parking supportive of the adjacent commercial and retail uses, the bandshell, the beach area, and the park. T:\AGENOA\2OOmFEB2JOO\REGlILAA\72NDRFP.CM 72nd Street RFP February 23. 2000 Commission Memorandum Page 7 . The Pointe at North Beach development team consists of Equity One Inc. as the developer, Zyscovich Inc. as the architect and Centex Rooney as the contractor. Equity One is a Real Estate Investment Trust, publicly traded on the N. Y. Stock Exchange with over $200 million in assets, consisting of more than 25 retail centers and over 3.1 million square feet. (List of properties is attached.) . Proposal evaluation (see attachment) prepared by Barry Abramson provides a financial evaluation, a project viability and risk analysis and describes the impact on the commercial district, further supporting the Administration's recommendation. . During the Evaluation Committee meeting, and at the North Beach Development Corp. community meeting held January 24, 2000, public comment and input was accepted and indicated majority support for the Pointe at North Beach proposal. . On February 1, 2000, NBDC Board of Directors voted 17-2 (with I abstention) to endorse the Pointe at North Beach proposal. . Any delay in selecting a proposal, could jeopardize HUD's approval of the $1 million Economic Development Initiative Grant (EDI) that has been applied for by the City in conjunction with the $4 million Section 108 Loan application. The $1 million EDI is intended to reduce the City's debt service requirements in connection with the $4 million Section 108 Loan, of which $1 million is earmarked for street improvements around the Site. . On December 1, 1999, pursuant to Resolution No. 99-23408, the Mayor and City Commission authorized the Administration to issue an RFP for professional services to prepare a market analysis and economic development plan for the North Beach area. Three proposals have been received from EDA W, Lambert Advisory LLC and the Chesapeake Group, Inc., which are being evaluated by a selection committee, the outcome of which has not been determined as of the date of this writing. If the City Commission concurs with the Administration's recommendation, the selected consultant's scope of services will be amended to address the proposed project's impact on the surrounding commercial neighborhoods and its role in North Beach's future development. The consultant's review will be fast-tracked so as to not adversely impact the project's implementation. The appraisal of the Site and project will include a compatibility assessment and feasibility study of the proposed project in context with the North Beach market, specifically addressing the following concerns: . Assuring that the proj ect' s configuration enhances the adj acent commercial areas and meets the expectations ofthe surrounding market. T:\AGENDA\2000\FEB23001REGULAR\72NDllFP,CM 72nd Street RFP February 23, 2000 Commission Memorandum Page 8 . Optimizing the project components to assure that the North Beach market can sustain the proposed development. . Specifically analyze the option to include a Community Theater and recommend the maximum benefit to the community. RECOMMENDATION The City Administration recommends that the City Commission authorize the Administration to negotiate with the Pointe at North Beach Development team, subject to the following conditions: . The City shall direct the selected North Beach area economic development plan consultant and the City's appraiser, Michael Cannon, to evaluate the recommended proposal relative to its financial feasibility, compatibility with the area needs, and its sustainability and viability as part of North Beach's economic revitalization strategy, including a recommendation relative to the Community Theater option. The consultant's findings will be reported to the City Commission prior to entering into negotiations with the selected proposer. . A "value in use" appraisal is being conducted based upon the Pointe at North Beach proposal that has preliminarily resulted in a $2.5 million - $3.5 million value range. The Administration's recommendation is subject to obtaining an equitable return to the City consisting of an equitable base rent and percentage of gross revenues from the Developer. . Obtaining an executed acknowledgment and agreement from the Proposer agreeing; that the City Commission's selection of its proposal is subject to review and evaluation by the City's independent consultant; that a final decision will not be made until the consultant conducts the evaluation of the proposal and makes its final recommendation; that the City may determine not to go forward with negotiations and that the City shall not be liable to said Proposer if the proposal is ultimately rejected by the City. LAL/ct1cJt: T:\AGENDA\2000\FEB2300\REGULAR\72NDRFP.CM attachment ~ ~o ~e o~ ~~ ~~ no ~~ oo~ FILE No.445 02/02 '00 11:59 ID: all H Ui- --! IP ~ tt~'S1 >> U::f .. !.:~ . fall ~ tJ~I~ l .. 'S~ h z ~ i jlL" "r;j.IlII;::l Ie ~ !i ~U)O< .:" l- 6 i .2 ~ .:J -= .- !l';;;'-~" li & ;< ~'-,;! .. 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Real Estate Advisory Services MEMORANDUM TO: FROM: SUBJECT: DATE: Christina Cuervo, City of Miami Beach Barry Abramson Evaluation of Development Proposals for nod Street RFP February 4, 2000 Executive Summary Background: The evaluation summarized below and detailed in the following exhibits was prepared to assist the City in understanding the real estate and financial implications of the development proposals received in response to the City's RFP, issued on May 19, 1999, for an approximately 4-acre City-owned site, bounded by 72"d and 73,d Streets and Collins and Harding Avenues in the North Beach area of the City of Miami Beach, Qualified proposals were received from: (1) Taylor Development & Land Company in joint venture with BVT Development Partners, LLP; and (2) EquityOne, Inc.. 'I:he exhibit on the following page summarizes the proposed projects and financial proposals. Direct Financial Benefits: Assuming the project would be viable, the Taylor proposal would provide far greater lease revenues, while the two projects would be anticipated to provide comparable real estate tax benefits. Estimates of financial benefit to the City are meaningful only to the extent that a project can be successfully financed, developed, leased and operated. If selected, the EquityOne project could be able to afford significantly higher land lease payments. Potential Project Viability and Risk: The EquityOne proposal appears to present significantly less risk than the Taylor proposal with regard to its likelihood of implementability and continued successful operation. This is due primarily to the high proportion of anchor tenanting and ground floor orientation of commercial space in the EquityOne proposal versus the extensive amount of effectively unanchored retail/restaurant space located on upper levels in the Taylor proposal. Impact on Commercial District: The EquityOne proposal would appear more likely to generate an increase in activity and business in the surrounding commercial district than would the Taylor proposal. The primary reasons for this are: (1) the EquityOne project's cinema and community theater would have a strong destinational appeal, likely drawing more new retail and restaurant business to the commercial district than would the Taylor project; (2) the much lower level of small retail and restaurant space included in the EquityOne project as opposed to the Taylor project would absorb less of the new business drawn by the project and offer less competition for existing neighborhood space; and (3) the EquityOne project's ground level frontage on Collins Avenue would encourage a 79 Milk Street! Suile 8111 Boston, MA 02109/tel (617) 423-5697 I fax (617) 423-5680 spin-off of activity and business to the rest of the commercial district, whereas the design of the Taylor project would indicate a greater propensity for customers drawn to the project to remain in it, as opposed to continuing on to the rest of the district. Financial Evaluation The exhibit on the foIlowing page summarizes the direct financial benefits to the City, in terms of lease revenues and the City's share of real estate taxes, for the 3'" and lOth year of operation, of each proposed project, assuming each could be successfuIly implemented and operated. The bases and assumptions underlying the financial analysis are presented in a technical section later in this memorandum and in accompanying exhibits. Assuming the project would be viable, the Taylor proposal would provide far greater lease revenues, while the two projects would be anticipated to provide comparable real estate tax benefits. The assumptions utilized in the two proposals' financial pro formas varied significantly in that the tenant rental rates assumed by Taylor tended to be on the aggressive side, while those utilized by EquityOne appear to have been on the conservative side. The Taylor project certainly would have room to realize somewhat lower rental rates than projected and still be able to afford the proposed land lease payments. However, leasing up and maintaining acceptable occupancy, even at the lower end of the rental range required for feasibility, is considered problematic given the questions concerning concept, programming and design addressed in the foIlowing section. If selected, the EquityOne project, ifit can achieve the kind of market rents that appear reasonable and recognize the revenue potential from its parking component (which is not adequately accounted for in its current pro forma), should be able to afford significantly higher land lease payments. Achieving significantly higher land lease payments would be an objective of negotiations with EquityOne, could the City choose to enter into negotiations with them. Potential Project Viability and Risk However, it is essential to note that the above mentioned estimates of financial benefit to the City are meaningful only to the extent that a project can be successfuIly financed, developed, leased and operated. Financing and developing the project would likely require significant preleasing. If the project were to be developed and then run into leasing and financial trouble, it is likely that the City could continue to receive unsubordinated base rents, but percentage rents and real estate taxes could suffer greatly. Accordingly, the evaluation also focussed upon the potential viability of the two proposed projects in this regard. 2 , Both developers appear to have considerable successful experience in developing and financing development projects, though in both cases the bulk of this experience is in more suburban style retail projects. The difference between the proposals lies in the project concept, programming and design. In summary, the EquityOne proposal appears to present significantly less risk than the Taylor proposal with regard to its likelihood of implement ability and continued successful operation. The implementability of the EquityOne project also would likely be more readily confirmed. The bases for these conclusions are as follows: The essential issue in implementability is the ability of the developer to lease up (largely on a prelease basis) the project at terms sufficient to make the project feasible and financable. Both proposals include a letter of interest from Publix to locate a supermarket in the project (44,000 net square feet in the Taylor proposal and 51,500 net square feet in the EquityOne proposal). In both projects, the Publix serves as an anchor more from the standpoint of providing a credit lease for a large block of space as opposed to its ability to "anchor" (or generate traffic for) other retail space, which would be limited by the Publix being distinct from the other retail space in terms of physical orientation and access as well as the marketing orientation. In addition to the Publix, the EquityOne proposal includes a letter of interest from Consolidated Theatres to operate a 3,200 seat multiplex cinema occupying 81,465 net square feet. Combined, the two anchor tenants would account for 78% of the private market leasable area of the project. The remaining private market space in the EquityOne project, 36,500 net square feet of retail and restaurant space, would present a very strong prospect for lease-up and ongoing viability, given the strong anchoring of the cinema complex, in particular, which would generate considerable visitation to the project, as well as the placement of all ofthe retail/restaurant space with frontage and first floor access on Collins Avenue, along with the cinema. Accordingly, ifleases could be signed with the two anchors, there would be relatively little risk concerning the EquityOne project's ability to lease the remaining space at acceptable terms, get financing, be developed and operate successfully for the foreseeable future. While attempts to contact a representative of Consolidated Theatres were unsuccessful within the timeframe of the evaluation period, the letter of interest appears to be supported by the current trend of state-of-the-art multiplexes being developed as smaller old-line movie theaters are closed, as well as the increasing interest of cinema operators in active urban locations. Determining whether the participation of a cinema operator in the project could be solidified likely would be doable within a relatively short period oftime. 3 In contrast to the EquityOne proposal, the Taylor proposal identifies no anchor other than the Publix. It includes an additional 89,700 net square feet of retail and restaurant space. The marketing orientation ofthe retail space was presented as fashion and specialty shops. All of the retail and restaurant space in the Taylor project is proposed to be on the second and third levels of the project. The first level frontage along Collins Avenue would primarily comprise a solid wall and a cascade of steps up to plaza areas on the second and third levels. The developer believes that retail customers and restaurant patrons will be drawn up to the upper level space by the outdoor plaza spaces which, on the Collins Avenue frontage, would have clear views of the beachfront park and the beach beyond. This could be a very meaningful amenity for restaurants with space fronting on the plaza areas. However, it is questionable whether a sufficient number of customers would be drawn up to the second and third levels to visit the non-restaurant businesses, the destinational appeal of which could not be relied upon, given the lack of an identified anchor. Further, perhaps half of the upper level space does not front on the Collins- oriented plazas and is accessed by a circulation system that does not appear to provide a meaningful motivation to attract those customers who might get up to those levels to patronize the rear space in the project. The poor experience of upper level space in many unanchored, multi-level, specialty retail centers, both nationally and locally, provides further cause for concern about the viability of this concept. The Taylor proposal also includes 48,000 net square feet of office space to be targeted to tenants in the film industry. The prospects for the office component would benefit from the attractiveness of the proposed design and proposed amenities as well as the fact that the office market in Miami Beach is reported to be tight. However, the preference of the target market and many other firms would be a location in South Beach or as close as they could be to it. Accordingly, the office component might lease up if there is insufficient space available in better locations. However, it would be vulnerable to competition from existing or proposed properties in preferable locations. Other better located office projects are reported to be in various stages of the planning and development process and it is unclear whether future demand would be sufficient to compensate for the proposed project's competitive disadvantage. Additionally, the lack of a letter of interest from any office tenant and the lack of experience of the developer in this market sector are further causes for concern about the viability of this component. The above factors do not rule out the potential viability of the proposed Taylor project, but they certainly indicate a significant potential that the project could have difficulty in leasing up and being developed, and if it were to be leased up and developed, could subsequently run into trouble. 4 Impact on Commercial District Another important factor in the evaluation of the proposed projects is their potential impact on the surrounding commercial district. In this regard, as well, the EquityOne proposal would appear to provide a more advantageous prospect for the City and neighborhood. The reasons for this conclusion are as follows: The EquityOne project's cinema would be anticipated to generate a considerable number of new visitors to the district who would add demand for restaurants and retail businesses, both within the project and in the adjoining area. The community theater would further increase the area's destinational appeal. The much lower level of small retail and restaurant space included in the EquityOne project as opposed to the Taylor project (36,500 net square feet versus 89,700 net square feet) would offer far less competition for existing neighborhood space. The EquityOne project, by fronting and accessing all of its commercial space (other than the supermarket) at grade on Collins Avenue would reinforce the continuity and activity of this street as a primary commercial corridor and would enhance the prospect of visitors drawn by the project also patronizing other area businesses. In contrast, the lack of street level retail/restaurant frontage on Collins Avenue and the internally oriented circulation of the Taylor project would indicate a greater propensity for customers drawn to the project to remain in it, as opposed to continuing on to the rest of the district. The above factors would indicate that the EquityOne project would be more likely to catalyze a net increase in business to the existing commercial district. The addition of the office space in the Taylor project would certainly have a positive impact on the area. However, 48,000 square feet of office space would likely accommodate only approximately 200 to 240 employees, a number that would generate demand for only an additional few thousand square feet of retail and restaurant space. Office visitors would add marginally to this, but the level of new retail and restaurant business generated would be far less than that generated by a cinema complex. Bases of the Financial Evaluation Following is a summary of some of the major assumptions utilized in the evaluation. Other assumptions are specified in the exhibits. It is emphasized that estimates of annual returns, market values and assessed values are provided as illustrative estimates to assist the City in understanding the financial implications of the proposals and should not be viewed as constituting appraised values or the results of detailed market or cost analyses. The financial evaluation strives to treat the proposals in a consistent manner, with adjustments as warranted by the nature of the proposals. 5 It is further emphasized that the analysis is based on the assumption that each of the projects could be implemented and would maintain successful operation, which as has been discussed in this memorandum, cannot be assumed with equal confidence for the two proposals. Accordingly the estimated financial benefits should be weighed against the likelihood of their realization on a qualitative basis. An annual inflation rate of2.5% was applied to all revenues and expenses, with the exception of base rent in the EquityOne proposal which was proposed as being based on change in CPI but not to exceed 3.0%, which was considered to warrant a lower average rate - 2.0%. For purpose of calculating the participation rent in the Taylor proposal, projected retail, office and parking revenues were reduced by 25% to a level considered more realizable if the project were to be able to achieve and maintain required lease up. The resultant estimated revenues were applied to the third year of operation, with a minor downward adjustment to the first two prestabilization years of operation; retail revenues were held constant through the fifth year of operation before escalations or percentage rents were assumed to initiate annual increases. Calculation of estimated real estate taxes for each proposed project was based on the following steps: An estimated market value upon completion was estimated. For the sake of consistency, estimated market values for the projects were based on fixed per unit values applied to the square footage of supermarket, retail/restaurant, cinema and office space and the number of parking spaces. Estimated assessed value was calculated by applying a 25% reduction to the estimated market value to account for the discrepancy between market and assessed values. It is noted that property assessments in Dade County are supposed to be at full market value. While some reduction is appropriate, the 25% reduction is considered a conservative element in the evaluation. The estimated annual real estate tax benefit to the City from the project was estimated by applying the effective City millage rate as opposed to the overall tax rate to the estimated assessed value. The City's millage rate is $8.698 per $1,000 of valuation (including both operating and debt service). 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N "'83 ~ ! lfit c Ifilfi u...... Wo -' '" C 0- <( . . . '. ASSUMPTIONS AND LIMITING CONDITIONS . This analysis is based on information provided by the City, the proposers and other sources. No warranty or representation is made regarding the accuracy thereof, and is subject to errors, omissions, changes in price, rental, or other conditions. . The author assumes no responsibility for legal matters nor for any hidden or unapparent conditions of the property, subsoils, structure or other matters which would materially affect the marketability, developability or value of the property. . Estimates of annual returns, present values, market values and assessed values are provided as illustrative estimates to assist the City in understanding the financial implications of the proposals and should not be viewed as constituting appraised values or the results of detailed market or cost analyses. Accordingly, actual performance and appraised values may vary from the illustrative estimates provided herein. , . The evaluation assumes a continuation of economic and real estate market conditions prevailing in winter, 1999/2000, without any substantial improvement or degradation of such economic or market conditions. . Since any projected mathematical models are based on estimates and assumptions, which are inherently subject to uncertainty and variation depending upon evolving events, we do not represent them as results that will actually be achieved. . The analysis was undertaken to assist the City of Miami Beach in evaluating the specified proposals. It is not based on any other use, nor should it be applied for any other purpose. . This report may not be presented to third parties except in the fonn delivered to the client. No abridgment, abstracting or excerpting may be made without obtaining the permission of Abramson & Associates, Inc.. 7