002-1999 LTC

8/15/2019 002-1999 LTC

1/10

CTY

OF

MAM

BEACH

ITY HALL

1700

ONVENT ION

C E N T E R

DRIVE MIAMI

BEACH,

F L O R I D A

3 3 1 3 9 htp\\c.

i a m i -

b e a c h .

f1.

s L.

T

C

o.

1999

L E T T E R

TO

O M M I S S I O N

J a n u a r y

6

99 9

TO

a y o r

N e i s e n

O

a s d i n

and

Members

o

the

City

C

msson

FROM:

Sergio

Rodriguez

Cty

Manager

SUBJECT:

R O Y A L

PALM

C R O W N

PLAZA

E S O R T

Attached

you

ill

find

o r r e s p o n d e n c e

from

Rchard

M a t l o f

o

e e b l e s

A t l a n t i c

D e v e l o p m e n t

C o r p o r a t i o n

in

onnection

w i t h

the

o y a l

Palm

Hotel

D e v e l o p m e n t .

In

ummary ,

the

o y a l

P a l m

is

e q u e s t i n g

c e r t a i n

m o d i f i c a t i o n s

to

he

Gound

e a s e

to

provide

for

the

a b a t e m e n t

o

a

o r t i o n

o

he

rental

provisions.

A l t h o u g h

the

letter

dated

Janua r y

5 9 9 9

requests

tha

he

Cty

n o t

r e s p o n d

to th e

original

c o r r e s p o n d e n c e d a t e d

Decembe

22

1998

I

fee

it

s

i m p o r t a n t

that

the

d m i n i s t r a t i o n

c l e a r l y

articulate

its

poston.

A c c o r d i n g l y ,

a t t a c h e d

you

ll

also

find

y

response

and

e c o m m e n d a t i o n thatthe

e d e v e l o p m e n t

Agency not

c o n s i d e r th e requested

m o d i f i c a t i o n s to

the

Ground L e a s e .

Please feel

free

to

c o n t a c t

m

if

you

wsh

to

iscuss

ths

u r t h e r .

SRlCMC/

jph

A t t a c h m e n t s (

3

8/15/2019 002-1999 LTC

2/10

CTY HALL

1700ONVENT ION

C EN T ER

DRIVE

MIAMI

BEACH

FLORIDA

33139 CTY

OF

MIAMI B E A C H

O F F I C E

OF

THE

CTY

M A N A G E R

T E L E P H O N E : (

305)

673-0 1 0 FAX (

305)

673-

7782anuary

8,

1 9 9 9

M.ichard

A.

Matlof

Peeb les

A t l a n t i c



100

Second

Avenue

46th

Floor

Mam,

FL

3131

Re

oyal P a l m Crowne

P l a z a

Resort

DeaMr.Matlof,

C O R R E C T E D

FIRST

PAGE)

o u r

lettersoe c e m b e r

22

9 9 8

a nd

January

5

999,

d d r e s s e d to

Assistant

C i t y

Manager

C h r i s t i n a M

Cuervo

h a v e

been b r o u g h t to

my

t t e n t i o n .

Athough

y o u r

letteroa n u a r y

5h

states

h a t

the

e c e m b e r

22nd l e t t e r

is

ar a f t

for d i s c u s s i o n ,I

ee

t h a t

a

written

r e s p o n s e is

ecessary

in

rder

to

r y s t a l i z e

s o m e

o f

th e

issues

i n v o l v e d .

WheIm

s y m p a t h e t i c

to

he

i t u a t i o n

resul t ing

from

delays

in

the

pre-

d e v e l o p m e n t

s c h e d u l e

for

c o n s t r u c t i o n

of

theoyal

P a l m

Crowne

P l a z a

Resort (

he

Project ),

I

mo

i l l i n g

a

hsime

toe c o m m e n d t h a t

the

h a i r m a n and

D i r e c t o r s

o

am

B e a c h

Redevelopment

A g e n c y (the

Agency")

p p r o v e any a m e n d m e n t s

to

he

G round

L e a s e a nd

Hotel


A g r e e m e n t

in

o n n e c t i o n

w i t h

the

roject, o the r thanhose

n e c e s s a r y

to

r e f l e c t

tha

the

o y a l

P a l m

Hoe

u i l d i n g

wll

be

r e p l i c a t e d rather than

renovated,

n d

toeflect

a n y

n e c e s s a r y

c h a n g e s

to

he


Cost

Budgetas

a

result

t h e r e o f

Throughout

th e

negotiations a m o n g

the

Cyhe

A g e n c y

and

RD P

Royal

Palm

Hotel

Limi ted P a r t n e r s h i p (the

Developer )

ino n n e c t i o n

w i t h

the

d o c u m e n t a t i o n

fo r

the

roject,

the

Loews

M i a m i B e a c h

Hote ("

o e w s

Hote")r a n s a c t i o n

was

cited

by

the

e v e l o p e r '

s

egotiating

team

as

r e c e d e n t for

thee v e l o p e r

s

egotia t ing

p o i n t s .

Theity' se g o t i a t i n g

team

x p l a i n e d c o u n t l e s s

times

t h a t

the

wo

t r a n s a c t i o n s

are

s u b s t a n t i a l l y

different

in

s t r u c t u r e

and

cannot

be

c o m p a r e d

on

a

ollar-

fo-

o l l a r

b a s i s .In

the

o e w s

t r a n s a c t i o n

ther ound

l e a s e

p a y m e n t s

to

he

A g e n c y

are

ot

s u b o r d i n a t e dto

he

bank

f i n a n c i n g

fo

the

Loews

H o t e l . Inhe

c a s e

o

he

P r o j e c t ,

the

A g e n c y a g r e e d

to

u b o r d i n a t e

the r o u n d

8/15/2019 002-1999 LTC

3/10

Mr.

Richard

A

Matlof

Peebles

Atlantic

Deve lopmen t

Corporat ion

Janua ry

8

1999Page2

A n o t h e r

d i f f e r e n c e

is

ha

inhe

Loews

t ransact ion,

h e

A g e n c y

participates

inthe

revenueso

he

L o e w s Hotel on

the

asis of

different tiers

o

e v e n u e l e v e l s

on

an

on-

going

b a s i s

With

regard

to

the

roect, h e

Agency

r e c e i v e sa

r o u n d

rent

h a t

is

capped

a

an

8%

e t u r n

on

h e

A g e n c y

s

0,

000,

0 0 i n v e s t m e n t

in

he

P r o j e c t

ste.

h e r e

is

nor o v i s i o n

fo

a

return on

the

u n d s

in

e x c e s s

o $

10

0 0 ,

00 0

that

the

Agency

and

the

Cty

ave i n v e s t e d

in

he

P r o j e c t .

The

e v e l o p e r

has

een aware

since

the

day

that

h e

Requestfor

P r o p o s a l s

was

made

p u b l i c

that

the

g e n c y

s

c o m m i t m e n t

tohe Proect

w o u l d be $

10,000000.

he

A g e n c y

h a s

e x p e n d e d

more

h a n

t h a t

a m o u n t

onhe

Project,

n c l u d i n g

among

t h e r

t h i n g s ,the

ega

expenses (

e

.,

e g a l

fees

n d

e x p e n s e s

oe f e n d a n t s

inhe

eminent

doma i n

p r o c e e d i n g s )

i n c u r r e d

in

h e a c q u i s i t i o n

o

he

S h o r e c r e s t

H o t e l

whch

th e

Agency

would

no

av e

i n c u r r e d

if

he

D e v e l o p e r

had

l o s e d

its

c o n t r a c t

to

urchase t h a t

p r o p e r t y

on

i m e l y bassn

d d i t i o n

to

u b s t a n t i a l legal

fees

incurredinhe

negotiation

of

the

t r a n s a c t i o n

an d

the

d r a f t i n g

o

he

e g a l

documents

for

the

t r a n s a c t i o n , the

Agency

a g r e e d

to

pay,

o

o b t a i n

waivers

o,

u b s t a n t i a l

C i t y

and

Miami-Dade

C o u n t y

fees.

Inhis

r e g a r d ,

th e

A g e n c y

wll

a v e

to pay

p a r k i n g

i m p a c t

f e e s ( c u r r e n t l y

e s t i m a t e d toben

the

m a g n i t u d e

o

535

000)

tohe

Cty

s

a

esultohe

demoition

o

the

o y a l

P a l m

Hotel.

Thus

h i l e

the

D e v e l o p e r

h as

e x p e r i e n c e d

s o m e

level

o

isappointment

wth

egard

to

he

p r o j e c t e d e c o n o m i c s

o

th e

Proect,

he A g e n c y

has

ls o experienced s u b s t a n t i a l u n a n t i c i p a t e d

additional

e x p e n s e s a s s o c i a t e dwthhe P r o j e c t .

In

a d d i t i o n

to

he

o r e g o i n g ,

the

e l e c t i o n

o

he

D e v e l o p e r

was

the

u l m i n a t i o n

o

a

e q u e s t

for

p r o p o s a l s

process

in

w h i c h

the

mount of

the

annua l

g r o u n d

l e a s e

payment

and

the

a t e

o

e t u r n

to

the

g e n c y wa s

aa j o r factor

in the

d e c i s i o n -

m a k i n g

p r o c e s s . A

e d u c t i o n

in

hat

a y m e n t o r

the

rateo

reurn

o

theit y

may (

a

ot

be

legal, nd /

or (

b

ive

the

t h e r

p r o p o s e r s

a

cause

o

action

against

th e

Ctyand

r

thegency. The

A g e n c y 'sequest fo

proposals (

RFP )

l e a r l y

outlined

a

inancial

s t r u c t u r e far d i f f e r e n t from

t h a t

of

the

Loews

H o t e l

t r a n s a c t i o n ,

and

the

eveloper

v o l u n t a r i l y r e s p o n d ~

d

o

the

RFP

F~

y

wthe g a r d

to

any

excessive

d e l a y s

a s s o c i a t e d

wth

the

r o t r a c t e d pre-


schedule that

are

ment ioned

in

the

irst

p a r a g r a p h oo u r letter,l e a s e notethaelays resulted from

the

D e v e l o p e r '

s

f a i l u r e

to

cose

on

ts

c o n t r a c t

on

he

h o r e c r e s t

w h i c h

r e s u l t e d

no

onyin

deays,

ut

in

d d i t i o n a l

expense

to

he

Agency

b e c a u s e

it

ad

to

initiate

e m i n e n t

doman

r o c e e d i n g s

to

bta in

the

property);

ro m

the

e v e l o p e r

s

epeated f a i l u r e

toeliver

its

o c u m e n t a t i o n

w h e n promsed;

f r o m the

Developer's

hange

o

o t e l

f r a n c h i s e s ;

and

f r o m o t h e r

c h a n g e s in

he

structure

of

theransaction

tha

e r e originated

by

he

D e v e l o p e r .

It

s

l e a r

that

the

g e n c y

has

already

s u b s t n t i l l y i n c r e a s e d its

i n v e s t m e n t

b e y o n d

its r i g i n a l t c o m m i t m e n t . A l t h o u g h

I

am

o g n i z a n t

ohe

D e v e l o p e r

8/15/2019 002-1999 LTC

4/10

Mr.

Richard

A

Matlof

Peebles

Atlantic

Deve lopmen t

Corporation

Janua ry

8

1999

P a g e

3

r o j e c t

I

a n n o t , in

vew

ohe s u b s t a n t i a l

amounts

that

the

A g e n c y

and

the

Cty

av e

a l r e a d y

c o m m i t t e d

to

he

Proect,

ecommend th e

r e q u e s t e d m o d i f i c a t i o n sto

he

G r o u n d

Lease

to

theh a i r m a n an d

Directors

ohe

Agency .

Very

truyo u r s ,

cch a i r m a n

a nd

Directors

o

he

Agency

Christina

Muervo,

Assistant

C i t y

Man a g e r

M u r r a y

H

D u b b i n , C i t y

Attorney

Joel

N.Mnsker,

Esq

R D o n a h u e

P e e b l e s

8/15/2019 002-1999 LTC

5/10

01 /

05

99

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Beach,

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Ms.

Cuervo:

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is

o

n f o r m

you

ha t

mypio

letter

to

ou dated

e c e m b e r

22

998

o n c e r n i n g

the Royal

Palm

Hotel d e v e l o p m e n t

should

be considered

a

r a f t

d o c u m e n t

intended

o n l y

to

acilitate

a

o n t i n u i n g

dialogue

on

the

various

ponts

a i s e d therein.

A c c o r d i n g l y .

no

o r m a l

response

to

myetter

is

n e c e s s a r y

from

he

Cty.

h a n k

you

or

y o u r

c o o p e r a t i o n

and

we

ook

o r w a r d

to

continuing

to

wok

with y o u

onaking

o u r

p r o j e c t

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1998

Ms.

hlistina

Cuervo

A s s i s t a n t

Cty

Manager

Cty

o

i am i

Beach

Re

o y a l

Pa lm

Cowne

Pla1.

3 R e s o r t

Based

on

e c e n t l y

completed

internal

analyses,

Royal

Pam

o t e l

LPhas

o n c l u d e d

tha

it

has

been

orced

to

ndure

u n d u e e c o n o m i c

hardship

c a u s e d

by

th e

e x c e s s i v e

delays a s s o c i a t e d

w i t h

the

protracted

p r e -


schedule

fothe

u b j e c t

hotel

and

Is

by

irtue

o

ts

ease

tructure,

a

a

o m p e t i t i v e

e c o n o m i c

d i s a d v a n t a g e

wth

the

Cty/

D A

supported

h o t e l


proects.

R e g a r d i n g

project

timng,

gven

the

yriad of


hurdes

imposed

by

i n v o l v e m e n t

of

and

e g o t i a t i o n

wth

umerous

m u n i c i p a l

entitles

s s o c i a t e d

with

the

e q u i r e d


p r o c e s sand

espite

th e

e x p e n d i t u r e

o

ignificant

amounts

o

e v e l o p e r '

s

quity

funds

to

s u p p o r t

theo n c e n t r a t e d

efforts

of

a

igh ly

q u a l i f i e d

project

t e a m ,

the

R o y a l P a l m

Hotel

p r o j e c t took

over

wo

yeas

to

r o c e e d

from

F P

a w a r d

to

r o u n d b r e k i n g

A

result

o

his

p r o t r a c t e d

pre

e v e l o p m e n t

t l m e f r a m e ,

the

pening

of

the

otel

is

p r o j e c t e d

fo

early

2000,

nearly

fou

ears

af te r

the

nitial

RFP

a w a r d

o

e v e l o p m e n t

righs

to

ur team.

During

h is

e l o n g a t e d


t i m e f r a m e ,we

a ve

been

forced

to

b s o r b

s e v e r a l

mateia

increasesin

he

d e v e l o p m e n t 's

roject

cost .

In

ddition,

as

ou

n o w ,

recent

on

ite

c o n s t r u c t i o n e f f o r t s

h a v e

led

to

i r c u m s t a n c e s

which

wll

likey

c a u s e

further

d e l a y s

in

roect

c o m p l e t i o n

as

wel

as

a

a t e r i a l

i n c r e a s e

in

project

cost.

u r t h e r , we

ae

al

wel

aware

that

the

ntent

o

the

Cty/

RDA

s

u p p o r t

effortsin

he

o n v e n t i o n

Center

D i s t r i c t

wth

the

o y a l

Pa lm

and

Loews

H o t e l s

was

ntended

to

allow M i a m i

B e a c h

to

recapture

a

l e a d e r s h i p

position

in

the

roup

m e e t i n g

and

o n v e n t i o n

malket.

As

such,

we

wll

be

n v o l v e d

in

oint

m a r k e t i n g

and

r o m o t i o n a l

efforts

w i t h L o e w s

fo

ignificant

g r o u p

tourism

support

a c t i v i t i e s .

H o w e v e r ,

as

llustrated

on

he a t t a c h e d

E x h i b i t

1

hereis

a

significant

d e g r e e

o

m b a l a n c e

b e t w e e n

the

Base

Rent

amounts

a s s e s s e d

onthe

o y a l

P a l m

and

Loews

Hotel

projects.

The

i f f e r e n c e s

in

ase

R e n t s

display

a n

obvious

d i s p a r i t y

w h e n

measurecf ~

n"a

er

rOom

and,

even

m o r e

so

h e n

c o m p a r e d

011

the

b a s i s

o

e r c e n t a g e

o

ity

investment.

In

addition,

the

Roya

Palm

project

is

e q u i r e d to

epay

the

Cty

its

investment

w i t h i n

25

ears,

as

o p p o s e d to

much

onge

repayment

terms

p r o v i d e d

fo

in

oher

imilar

RDA

development

projects.

C o r r e s p o n d i n g l y ,

th e

Royal

P a l m

is

a

asignificant

economic

d i s a d v a n t a g e

wth

the

L o e w s , whch

j e o p a r d i z e s

ou

e l a t i v e

e c o n o m i c

viablity

and

s

o n t r a r y

to

he spirit

o

o m b i n e d

e f f o r t s

fo

both

hote ls.

In

ddition,

we

e l i e v e

it

s

ymbolically

i m p o r t a n t

fo

he

RD A

that

th e

Royal

Pambe

seen

as

beIng

r e a t e d equally

wth

the

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12

28/

98

O N

1 2 : 7

F A X

3 0 5 9 9 5 5 3 4 0

PAD

C

I4J

003

I

s. Christina

C u e r v o

D e c e m b e r

22

998

Page

2

s

a

e a n s

to

ea

w i t h

these

s s u e s . R o y a l

Pam

Hotel

LP

onnally

r e q u e s t s

a

o d i f i c a t i o n

to

ts

Ground

Rent

s c h e d u l e , p r o v i d i n g

fo

he

f o l l o w i n g :

Aba temen t

of

Additional

R e n t

in

he

m o u n t

of $

270

0 0 per

annum

Y Abatement

of

I n c e n t i v e

Rent

in

h e

a m o u n to

00,

000

pe

n n u m

J.

b a t e m e n t

o

ook-

Back

Rent

in

h e a m o u n t

110

000

pe

annum

A b a t e m e n t

of $

20

000

o

he

20,

000

n n u a l Base

e n t

Payment

R e s u l t i n g

In

toa

r e v i s e d

Base

Rent

Payable

of $

200,

000

pe

ear.

The

e q u e s t e d

G r o u n d

Rent

reduction

is

n t e n d e d

to

p r o v i d e for

an

n c r e a s e

in

Orrowing

c a p a c i t y s u f f i c i e n t

to

uncl

the

n c r e a s e c l

costs

attributable

to

he

protracted


d e l a y s and

alow

or

the

otel

to

effectively

c o m p e t e

on

a

arity

b a s i s

wth

ts

sste

C o n v e n t i o n

C e n t e r

Hotel

property ~

As

a

ur ther

means

o

ustification

a n d as

s u m m a r t z e d

on

the

attached

Exh ib i t

2,

h e

projected

net

excess

of

Cty/

RDA

R e v e n u e

over

R D A

Bond

d e b t s e r v i c e

attributable

to

he

R o y a l

P a l m

C r o w n e

Paza

roject

is

n

x c e s s

o

0

illion

in

very

year

after

the

ul l

payment

of

debt

service

a s s o c i a t e d

wth

h e Cty'

s

investment,

e v e n

a l f e r t h e proposed

ren t

a d j u s t m e n t s

have

been

taken

h e s e

r e s u l t s

ae

he

equivalent

of

13%

ithin

the

irst

5

years

of

o p e r a t i o n

o

he

otel.

A c c o r d i n g l y ,

as

aso

h o w n

on

Exhibit

1

ven

after

i n c o r p o r a t i n g

th e

rent

r e d u c t i o n s

r e q u e s t e d

herein,

he Base

Rent.

measured

as

a

ercent

of

Cty

nvestment

r ema ins

hghe

t h a n

that

a s s e s s e d

to

the

o e w s .

We

are

ls o

awareo

the

Ci ty '

s

esire

to

ater

thec o n o m i c s

o

he current

16th

Sree

M u n i c i p a l

G a r a g e

Agreement.

In

the

pirit

o

o o p e r a t i o n ,

we

ar e

will ing

to

or k

wth

ou

on

this

issue in

o n j u n c t i o n

wth

this

request

for

base

ren

eduction

as

a

eans

to

f f set and

rebalance

th e

Cty

s

ublic

i n v e s t m e n t

and

p r o j e c t e d

r e t u r n

p o s i t i o n .

W

rus

h e

City staff

wll c o o p e r a t e

in

an

b j e c t i v e

r e v i e w of

our request

and

we

ook

forward

to

i s c u s s i n g

ths

matter

fu r ther

wth

you

at

y o u r

earliest

convenience.

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002-1999 LTC