99-23268 RESO
RESOLUTION NO. 99-23268
A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF
THE CITY OF MIAMI BEACH, FLORIDA, AUTHORIZING AND
DIRECTING THE ADMINISTRATION TO NEGOTIATE A
DEVELOPMENTAGREEMENTANDLEASEAGREEMENT~TH
PARK ONE, INC. FOR THE DEVELOPMENT OF A PARKING
GARAGE AT 10TH STREET AND COLLINS AVENUE IN
ACCORDANCE ~TH THE TERMS SET FORTH IN THIS
COMMISSION MEMORANDUM AND REFERENCED AS THE
"CITY'S POSITION", IF A SETTLEMENT AGREEMENT IS
APPROVED AND EXECUTED BETWEEN THE CITY OF MIAMI
BEACH AND KTKL.
WHEREAS, on January 5, 1998, pursuant to the authorization of the Mayor and City
Commission, the Administration issued a Request for Proposals for the development of public-
private parking facilities in the area south of Dade Boulevard (the "RFP"); and
WHEREAS, the City issued the RFP in order to solicit qualified development teams to bid
on certain publicly-owned sites identified in the RFP and/or to propose the development of parking
on privately owned property; and
WHEREAS, on April 6, 1998, the City received proposals from five (5) different
development teams for various sites throughout the South Beach area; and
WHEREAS, on June 30, 1998, an Evaluation Committee appointed by the City Manager
and approved by the Mayor and City Commission, heard presentations from five teams; and
WHEREAS, in accordance with the criteria identified in the RFP, the Evaluation Committee
ranked the proposals and provided their recommendations to the City Manager; and
WHEREAS, on July 15, 1998, the City Commission adopted Resolution No.98-22857,
authorizing the Administration to negotiate with Park One, Inc., with regard to the site located at 10'"
Street and Collins Avenue in the City.
WHEREAS, on May 26, 1999, the City Commission directed the Administration to
negotiate the terms of a Development and Lease Agreement and to present the negotiated terms to
the City Commission on June 9, 1999; and
WHEREAS, on June 9, 1999, the City Commission directed the Administration to
reconvene further negotiations with Park One in order to reach closure on the financial issues; and
WHEREAS, on June 9, 1999, the City Commission motion stated that Park One, Inc. has
been advised, and is aware of pending litigation involving the property which pending litigation may
present or have an effect on the contents of the Lease Agreement and Development Agreement to
be entered into; and
WHEREAS, on June 23, 1999, the Commission deferred any action on the proposed
resolution pending the outcome of the existing litigation between the City and KTKL; and
WHEREAS, the Administration and Park One will pay for any delays over a 30 month
period of construction, will provide a security deposit to secure any delay in the event of an early
termination the term of the lease will not exceed 50 years and Park One will be responsible for
payment of real estate taxes.
NOW, THEREFORE, BE IT DULY RESOLVED BY THE MAYOR AND CITY
COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, that the Mayor and City
Commission hereby authorize and direct the Administration to negotiate a Development Agreement
and Lease Agreement with Park One, Inc. for the development of a parking garage at lOth Street and
Collins Avenue in accordance with the terms set forth in the attached Commission Memo, if a
settlement agreement is approved and executed between the City of Miami Beach and KTKL.
PASSED and ADOPTED this 21st day of July, 1999.
1JJ
MAYOR
ATTEST:
~!f~
CITY CLERK
SR/CMC/rar
APPROVED ,.10
FORM &LANGUAGI
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CITY OF MIAMI BEACH
CITY HALL 1700 CONVENTION CENTER DRIVE MIAMI BEACH, FLORIDA 33139
http:\\ci.mlamH>each.fl.us
COMMISSION MEMORANDUM NO.
5<i? 1-9~
TO:
Mayor Neisen O. Kasdin and
Members of the City C mission
DATE: July 21, 1999
FROM:
Sergio Rodriguez
City Manager
SUBJECT:
A RESOL ION OF THE MAYOR AND CITY COMMISSION OF THE
CITY OF MIAMI BEACH, FLORIDA, AUTHORIZING AND DIRECTING
THE ADMINISTRATION TO NEGOTIATE -A DEVELOPMENT
AGREEMENT AND LEASE AGREEMENT WITH PARK ONE, INC. FOR
THE DEVELOPMENT OF A PARKING GARAGE AT 10TH STREET AND
COLLINS AVENUE IN ACCORDANCE WITH THE TERMS SET FORTH
IN THIS COMMISSION MEMORANDUM AND REFERENCED AS THE
"CITY'S POSITION", IF A SETTLEMENT AGREEMENT IS APPROVED
AND EXECUTED BETWEEN THE CITY OF MIAMI BEACH AND KTKL.
RECOMMENDATION:
Adopt the Resolution.
BACKGROUND:
On January 5, 1998, the City of Miami Beach issued RFP 20-97/98, seeking proposals for the
development of Public-Private Parking facilities. On April 6, 1998, proposals from five (5) different
development teams were submitted and evaluated by an Evaluation Committee. On July 15, 1998,
the City Commission authorized negotiations commence with four (4) of the proposed development
projects as follows:
Site 1: Municipal Parking Systems
Site 2: Municipal Parking Systems
Site 3: Park One, Inc.
Site 4: Lincoln Place
-Michigan and 17th Street
-Lenox Avenue and 17th Street
-Collins Avenue and 10th Street
-Washington Avenue and 16th Street
On September 10,1998, the City issued RFP 111-97/98, to evaluate the four (4) municipal surface
parking lots proposed for the development of Public-Private Parking facilities. On September 23,
1998, the City Commission authorized the Administration to contract with HNTB to conduct such
an evaluation of the proposed developments. On February 3, 1999, the City Commission referred
Phase I ofHNTB's report and recommendations, regarding the proposed Public-Private Development
Proposals, to the Finance and Citywide Projects Committee, which met on February 25, 1999.
AGENDA ITEM
Rl ::J
1-2\,~.:i
435
DATE
July 21, 1999
Park One, Inc.
Commission Memorandum
Page 2
On March 3, 1999, the City Commission accepted the Finance and Citywide Projects Committee's
report to phase the development projects and directed the Administration to begin negotiations for
Site 1 and Site 4 and to begin discussions with the developer for Site 3 to try to work out the
differences and allow for possible agreement on terms that could be presented back to the
Committee. On April 14, 1999, following the recommendation from the City not to enter into this
agreement, the City Commission directed the Administration to negotiate with Park One for the 10th
Street Public-Parking Garage site while stating that the City was not waiving its rights to proceed
on its own, should the negotiations not result in an agreement that is beneficial to the City.
On May 26, 1999, after further recommendations from the City not to enter into the proposed
agreement with Park One, the Commission further directed the Administration to negotiate the terms
of a Development and Lease Agreement and to present the negotiated terms at the June 9, 1999
Commission Meeting. On June 9,1999, the City Commission directed staff to convene further
negotiations with Park One in order to reach closure on the financial issues. On June 23, 1999, the
re-negotiated terms were presented to the City Commission, at which time the resolution was
deferred pending the outcome of the KTKL litigation.
The City Commission further requested that Larry Herrup, an independent Certified Public
Accountant and Chairman of the City's Budget Advisory Committee, review the financial projections
presented by the City and altematively by Park One. On July 12, 1999, Larry Herrup, City staff and
Park One met to discuss the City vs. Park One's projections and areas in which agreement had not
been reached.
Larry Herrup has reviewed the City's projections and compared them with actual results from other
City parking facilities and concurs with the City's proforma. Alternatively, Larry Herrup has
reviewed Park One's projections and questioned the increase in construction costs. As of the date
of this writing, Park One has not submitted the back-up justifying the increase in costs. Larry
Herrup did confirm Park One's higher costs such as labor costs, insurance and real estate taxes when
compared with the City's operating expenses. Larry Herrup will be at the July 21, 1999 meeting to
present his findings to the City Commission.
Status of KTKL Lawsuit/Settlement:
The City Attorney has noticed the subject case for trial on the City's motion for summary judgement
and the hearing date ofJuly 7,1999 was postponed to July 27,1999. Affidavits have been obtained
from Roger Carlton, Harry Mavrogenes and Jose Garcia-Pedrosa in support of the motion for
summary judgement. On May 19, 1999, KTKL submitted a settlement proposal that was discussed
at executive session on June 9, 1999. On July 7, 1999, a revised settlement offer was presented to
the City Commission and the Commission deferred any action to be discussed at Executive Session
on July 20, 1999. If the proposed settlement agreement is approved, it is imperative that the City
Commission expeditiously (1) approve the terms of the proposed agreement with Park One on an
obligated basis, or (2) authorize the City to revise existing plans for submittal to the Design Review
Board and obtain construction bids subsequent thereto.
The terms of the proposed settlement agreement or the outcome of the KTKL lawsuit will
impact the financial terms offered by Park One.
436
July 21, 1999
Park One, Inc.
Commission Memorandum
Page 3
Development Regulations:
The subject City land is presently zoned Government Use (GU), The proposed public-private
developments represent private or joint government/private uses in the G.U. district. Pursuant to
Section 142-423 of the City Code, any such use requires review by the Planning Board prior to
approval by the City Commission.
Pursuant to Section 142-425 of the City Code, the City Commission must confirm the development
regulations that apply as a result of such proposed private or joint government/private use to be the
average of the requirements in the surrounding districts, as determined by the Planning and Zoning
Director. The Planning and Zoning Director has determined that the development regulations for
MXE will apply to this site.
APPRAISALS:
The appraisals ofthe Public-Private Parking projects were completed on March 19, 1999, by J. B.
AIhale & Associates Inc., and are based on the highest and best use of the property as of March 15,
1999.
Site 1: Michigan Site 2: Site 3: Site 4: Washington
& 17'" St. Lenox & 17'" St. CoUins & 10'" St. & 16'" St.
Appraised Value: $5,070,000 $2,800,000 $2,600,000 $3,900,000
Highest & Best
Use @ 3/15/99
Proposed Less than highest TBD Less than highest Site has limitations
Development: and best use and best use affecting ability to
develop the highest
and best use
without additional
land.
As reported on April 28, 1999, staff prepared a projected project cashflow analysis to reconcile the
fair market value and the base rent return to the City based upon the proposed value in use. As a
result of the less intensive proposed use for this site and the limited revenue potential of a parking
facility with minimal retail space, the property's value based on a "value in use" would be less than
the fair market value.
CONSULTANT RECOMMENDATIONS:
HNTB evaluated the proposals and recommended that the City should not sell its property and
recommends that:
. the City should strongly consider building a 100% public/municipal Garage at the lOth Street
site. The site should be constructed as soon as possible and prior to the other public/private
garages. The highest priority should be given to constructing the lOth Street garage.
. a supply/demand analysis indicated that the lOth Street site would likely experience the
greatest overall external demand for parking.
437
July 21, 1999
Park One, Inc.
Commission Memorandum
Page 4
TERMS:
Following City Commission direction on April 14, May 26, and June 9, to finalize negotiations with
Park One, the Administration and Park One have agreed on the financial terms but have been unable
to reach mutual agreement on the lease term and the responsibility for payment of real estate taxes
on the land. On June 23, 1999, the City Commission further deferred action pending the outcome
of the KTKL litigation. City staff, together with Larry Herrup, met with Park One on July 12 to
discuss the impact of the financial terms if a settlement is reached with KTKL or not. Park One
made no financial concessions in light of the proposed settlement and the negotiated financial terms
remain unchanged from what was presented on June 23, 1999.
The negotiated financial terms are outlined below and the remaining differences are shaded below:
TERMS:
Owner:
Developer:
Project
Description:
Lease Term:
Fee upon Execution:
Rent during
Possession Date thru
Construction Period:
Base Rent and
Additional Rent:
Base Rent
Adjustments
Percentage Rent:
(as a percentage of
gross revenues):
Re-appraisals:
Subordination:
CITY'S POSITION:
City of Miami Beach
Park One, Inc.
294 space garage
3,500 sf retail
PARK ONE POSmON:
City of Miami Beach
Park One, Inc.
294 space garage
3,500 sf retail
Amount equal to City's out of pocket
costs, not to exceed $50,000.
$43,000
$75,000 Year I, and every year thereafter.
The base rent will be adjusted every five
(5) years at the lesser of either cumulative
CPI increases over the prior five year
period, or twelve (12%) percent.
Lessee shall pay percentage rent equal to
2.5% of gross revenues, commencing once
project revenues exceed $1,090,000 and
every year thereafter.
If developer exercises extension options,
the land will be re-appraised to determine
the new base rent during the extension
period, based upon the value in use the
year prior to the extension option.
City agrees to subordinate percentage rent
to debt service payments on first mortgage.
438
Amount equal to City's out of pocket
costs, not to exceed $50,000.
$43,000
$75,000 Year I, and every year thereafter.
The base rent will be adjusted every five
(5) years at the lesser of either cumulative
CPI increases over the prior five year
period, or twelve (12%) percent.
Lessee shall pay percentage rent equal to
2.5% of gross revenues, commencing once
project revenues exceed $1,090,000 and
every year thereafter.
If developer exercises extension options,
the land will be re-appraised to detennine
the new base rent during the extension
period, based upon the value in use the
year prior to the extension option.
City agrees to subordinate percentage rent
to debt service payments on first mortgage.
July 21, 1999
Park One, Inc.
Commission Memorandum
Page 5
Right of First Refusal
City has right of fIrst refusal to purchase
lessee's interest in the Project.
Lessee shall be responsible for all real
estate taxes associated with 1I1e property
improvements and underlying land.
Real Estate
Taxes:
Real Estate Taxes will
defined as Additional
event taxes are abated, IIlV or
exempted. If taxes are reduced as a result
of decline in property values in the area,
this provision will not apply.
Environmental
Matters:
Property is leased "as is" and developer is
responsible for remediation.
City is unable to deliver clear tide as a
result of outstanding litigation. Absent
existing litigation with KTKL, City would
deliver clear title.
Property is leased "as is" and developer is
responsible for remediation.
City is unable to deliver clear tide as a
result of outstanding litigation. Absent
existing litigation with KTKL, City would
deliver clear title.
.Lessor..$I1a1l.retafu.obligatioll.....
Tide:
KTKL Litigation:
.,.--" ...... .,'.,,>.:.
Lessee sha 11 assume oougation.
p
ANALYSIS:
(1) Term:
As directed by the City Commission, a longer than the Administration's preferred 30 year term is
being proposed. The new term being offered is a lease term of 40 years, plus one (1) to-year
extension option due to 1) the relatively smaller required investment in the project, and 2) the
demonstrated return of 100% of the project costs in the first 10 years of operation (as reflected in
Exhibit 1). Unlike the previously negotiated agreements with 16th St. Partners LLC and Lincoln
Plaza Partners LLC, Park One's investment cost is considerably less and no additional land is being
contributed toward the project. Park One is now requesting a 50 year lease term, with one (1) 10-
year extension option despite their initial proposal which contained a 55 year lease term. The
difference in the lease term proposed by the City and Park One is 10 years resulting in a further
revenue loss to the City.
(2) Financial Return to the City:
As previously described, the fair market value of the land as of March 15, 1999, is $2,600,000, based
on the highest and best use. As a result of the less intensive proposed use for this site and the limited
revenue potential of a parking facility with minimal retail space, the property's value based on a
"value in use" would be less than the fair market value. Attached hereto, as Exhibit 1, is a 10 year
operating proforma prepared by Park One based upon 270 revenue producing parking spaces and
Park One's operating costs.
439
July 21, 1999
Park One, Inc.
Commission Memorandum
Page 6
Pursuant to the June 9th City Commission direction to convene and finalize negotiations on the
financial terms, City staff reviewed Park One's revised financial projections based on 270 spaces and
as a result of Park One's estimated higher operating costs, the negotiated base rent has been reduced
to $75,000 a year. At the $75,000 base rent level, Park One is able to achieve a 10% return due to
their higher operating expenses including payroll, insurance and property taxes. Additionally, a
percentage rent of2.5% of project revenues has been negotiated once the project exceeds a project
revenue threshold of $ 1.090 million, At the $1.090 million project revenue threshold, Park One is
achieving its minimum desired return and the City can begin to receive a percentage share in project
revenues. Likewise, the project revenue threshold will allow the City to share in revenues if the
project is permitted for more than 270 spaces.
Note: it should be noted that the financial return proposed herein, does not contemplate the
outcome of the KTKL lawsuit/settlement. The outcome of the KTKL lawsuit/settlement will
impact the financial terms offered by Park One. Based upon the settlement agreement
proffered by KTKL, dated June 23, 1999, the impact on the City would represent a cost of, at
a minimum, $28,000 a year. Such a cost would further reduce the return to the City.
(3) Real Estate Taxes
The City will benefit from the projected annual real estate taxes that will be paid to the City. It is
projected that of an estimated total project hard cost of$3,074,275, the approximate total initial tax
bill will total $83,251, of which $23,053 will represent the City's portion. It is proposed that any
abatement or waiver of real estate taxes will be paid as "Additional Rent" to the City in the event that
tax exemptions are granted for the land and improvements. Park One has not agreed to assume
payment responsibility for any tax assessment on the land, which is a point of disagreement between
the City and Park One. Park One is requesting that the City assume responsibility for the payment
of the City's portion of taxes assessed on the land (essentially a wash) and payment responsibilities
for the remaining taxes assessed on the land would be shared equally by the City and Park One. Park
One's logic is that the City can utilize the tax revenue generated by the improvements to assume
payment responsibility for any non-City taxes assessed on the land. The City is opposed to such an
arrangement because if the City were to assume responsibility for the taxes assessed on the land as
a result of Park One's use of the site, such obligations would further reduce the City's return.
Furthermore, and of greater importance, agreeing to such an arrangement would set a precedent that
could expose the City to future liabilities.
The land is currently tax exempt but non-public uses on municipal land are expressly subject to ad
valorem taxes pursuant to Florida law. Similar to the previously negotiated agreements with 16th
St. Partners LLC and Lincoln Plaza Partners LLC, the City is attempting to ensure that this
Agreement provides that any change in this law would provide for the payment from Park One of
an equivalent amount of the taxes in the form of additional rent.
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July 21, 1999
Park One, Inc.
Commission Memorandum
Page 7
SUMMARY:
As previously highlighted, it is important to consider the following salient factors to render a final
determination:
. The City will lose control of the property for over 50 to 60 years.
. Projected return (including real estate taxes) to the City from Park One is almost equivalent to
projected City return, if the City were operating the facility.
. Comparable bottom lines are inextricably linked to Park One's payment ofreal estate taxes,
without which, a City operated parking facility would generate a greater return.
. Park One's proposal for the City to assume partial payment responsibility for taxes assessed on
the land would further reduce the City's return.
. Park One's cashflow analysis is based upon projected revenue at $2,902/space vs. City's
projected revenue at $2,370/space (comparable to 13th Street garage).
. Park One's higher projected revenue per space is based on a more aggressive rate structure,
thereby, limiting the facility's ability to meet the needs of the residential and monthly permit
parkers in the area.
. The City's projected revenue per space is based on a more conservative estimate (13th Street
Garage) and it is anticipated that revenue projections will be exceeded based upon the experience
at the 7th Street Garage and the greater overall demand in the area.
. Park One's projections are largely based on their ability to obtain approval for a 270 space garage
at the Design Review level. Any reduction in design below 265 spaces would render the project
economically unfeasible, and Park One would renegotiate the financial terms.
. The aforementioned is further exacerbated if KTKL prevails in their lawsuit with the City,
thereby reducing the income generated by 28 spaces from the garage's potential revenue. The
financial return proposed herein does not contemplate the outcome of the KTKL lawsuit.
. Alternatively, if the KTKL settlement proposal is approved, the return to the City will be reduced
at a minimum by $28,000/year.
. Park One asserts that the City's projections should reflect a 35% administrative and overhead
charge. The City's projections assume no administrative and overhead costs because the existing
Parking system will supervise said operations, capitalizing on operating efficiencies. Projections
reflect operating expenses at the same level as the 13th Street Garage. Larry Herrup is in
agreement with the City's methodology.
. Park One will have a competitive advantage over the City in achieving timely completion of the
facility.
The terms of the proposed KTKL settlement agreement, if approved will require an expedited
resolution to the private or public sector construction and operation of the 10th Street Garage as a
result oftimelines set forth in the Agreement.
For the reasons stated above, and as discussed on May 26, June 9, and June 23, 1999, the
Administration has previously recommended that the City proceed with the development and
construction of the lOth Street garage. It is clearly a policy decision as to whether the City prefers
to have a private operator, Park One, develop and operate the lOth Street Garage under a long term
lease or to direct the City to develop and operate the garage as part of the Parking system, utilizing
$3,966,933 in Parking Revenue Bonds and not\4linquishing control of the City's land.
July 21,1999
Park One, Inc.
Commission Memorandum
Page 8
RECOMMENDATION:
The City and Park One have attempted to reach mutual agreement on the outstanding issues. While
the City has compromised its position on the City's financial return, the parties have been unable to
reach mutual agreement on the lease term and payment responsibility for real estate taxes assessed
on the land. Furthermore, on June 23, 1999, the City Commission deferred any action pending the
outcome of the KTKL lawsuit. On July 20, 1999, the City Commission will consider action on the
proposed KTKL settlement agreement. Therefore, it is recommended that the City Commission
adopt the attached Resolution to negotiate a Development Agreement and Lease Agreement with
Park One, Inc. for the development of a parking garage at lOth Street and Collins Avenue in
accordance with the terms set forth in this memorandwn and referenced as the "City's Position"
including Park One's asswnption of the KTKL obligation, if a settlement agreement is approved and
executed between the City of Miami Beach and KTKL.
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