On November 9, 2016, the City Commission established the Collins Park Arts District Overlay via Ordinance No. 2016-4061, in response to an expressed desire by the Collins Park Neighborhood Association to incentivize arts and entertainment-related uses. Today, the Collins Park neighborhood is home to cultural institutions including the Bass Museum of Art, the Miami City Ballet, and the Regional Library.

The recently completed Collins Park Garage, located at 340 23rd St., Miami Beach, Fl., spans an entire block of 23rd Street between Park Avenue and the vacated Liberty Avenue. The Collins Park Garage is located immediately adjacent to the Miami City Ballet headquarters and the future site of the City’s public-private artist and educator workforce housing project. The parking structure’s ground floor includes approximately 16,000 gross sq. ft. of unfinished interior commercial space with an elevated exterior terrace providing access from the street.

On May 22, 2020, the Finance and Economic Resiliency Committee (the “FERC”) discussed tenant programming for the unleased commercial space of the Collins Park Garage, emphasizing the importance of community engagement and neighborhood enhancement, and the possibility of using City funds to curate cultural activation.

On July 29, 2020, Miami New Drama, Inc. (“Miami New Drama” or “MIND”) presented the City Commission with an unsolicited proposal to program the tenant space of the Collins Park Garage as a flexible black box studio. The City Commission directed FERC to examine the financial feasibility of the activation once MIND prepared a cost estimate and further developed its proposal.

On December 18, 2020, MIND presented FERC with an unsolicited proposal featuring a Concept Plan, which is attached as Exhibit A. As communicated by the Administration to FERC via the memo dated December 18, 2020 attached as Exhibit B, Miami New Drama’s Construction Budget Cost Estimate projected $4.8 million (which has since been reduced to $4.75 million) for hard costs. The memo noted that this rough estimate would likely change upon preparation of architectural plans. In light of the fact that MIND had not yet identified any outside funding sources to facilitate project development, the Committee recommended preparation of an RFP to solicit interest from cultural arts institutions who may offer independent financial support without relying solely on the City to subsidize construction.

On January 27, 2021, upon review of the Administration’s draft RFP for the Collins Park Cultural Arts Facility and MIND’s unsolicited proposal, the City Commission found that the City’s best interests were served by waiving formal competitive bidding in favor of MIND’s unsolicited proposal. The City Commission adopted Resolution No. 2021-31568, authorizing negotiation of a term sheet with MIND to include the following material terms:

• Miami New Drama must remain functionally located within the City of Miami Beach, with Miami Beach as its primary performance venue;
•  Existing principal directors Michel Hausman, Moises Kaufman, and Nicholas Richberg must remain directly involved with Miami New Drama;
• Miami New Drama’s board of directors must include voting representation by the City of Miami Beach;
• Miami New Drama’s subleasing of any restaurant or retail component must be negotiated at market rates.

On March 26, 2021, following its review of a previous term sheet, the FERC provided direction surrounding four salient remaining issues for further negotiation:

i.   Third renewal term;
ii.   Allocation of risk for construction cost overruns;
iii.  Minimum days of Facility operation; and
iv.  Restricting MIND’s application for the City’s cultural arts grants related to programming at the Facility.

MIND’s Colony Theatre Management Agreement

Since 2016, Miami New Drama has successfully activated the Colony Theatre pursuant to a Management Agreement that provides an annual operating subsidy from the City. Pursuant to the terms of the Management Agreement, which expires in September 2023, MIND has received a cumulative amount of $2 million since the inception of the Management Agreement in 2016.  

In addition, notwithstanding the City’s obligations per the Management Agreement, MIND receives Cultural Arts Council (CAC) grant funding that is not tied to the Management Agreement nor MIND’s operation at the Colony, but is available to MIND because it is a nonprofit operating within Miami Beach.

(Note: The Colony Theatre has been closed since March 12, 2020, which prevented the run of two major productions. MIND pivoted to virtual programming, reaching some 7,000 people online, and recently completed an acclaimed production of 7 Deadly Sins on the 1200 block of Lincoln Road.)

Term Sheet dated March 19, 2021

The Administration has negotiated a Term Sheet based on the unsolicited proposal presented on December 18, 2020 to the Finance Committee, as refined by Resolution No. 2021-31568. The Term Sheet is attached as Exhibit “C”.

Project Delivery Structure

Since MIND’s original proposal, the Concept Plan featured an architectural design by Mexico-based TEN Arquitectos, whose founder, Enrique Norten, serves on MIND’s board of directors. According to MIND, TEN Arquitectos has agreed to considerably reduce the cost of its services to MIND, which will enable the design of a world-class cultural facility from a prominent architect at an attractive price. Given that the City is responsible for construction costs, the property is City-owned and will be leased rent free, the City would typically prefer to control all aspects of design and development. However, considering that MIND has agreed to fund all design-related services and soft costs for developing a superior facility (that the City will own and control upon lease expiration), the Administration will accept MIND’s proposed arrangement, if the City retains control of construction management for the Project and retains the ability to reasonably approve the design of the project. Although MIND initially requested control of construction, MIND has consented to this compromise since the City is funding the balance of hard costs.

In addition to MIND’s proffer to allow the City reasonable design input, with approvals at the 30%, 60% and 90% design stages, the City will also require the Tenant to include certain provisions in its Architectural/Engineering (A/E) contract that would otherwise be included in all A/E contracts to which the City is a party, i.e. the City’s minimum design standards, third-party beneficiary rights, and ownership/use rights to drawings and specifications. Due to Florida’s Consultants Competitive Negotiation Act (“CCNA”), the City cannot significantly contribute to the costs associated with the architect without violating the CCNA. Accordingly, it is imperative that MIND raise the funds necessary for architectural services, which MIND has indicated to be approximately $250,000. The parties have agreed that the City shall have the right to terminate the agreement if, after 12 months of Lease approval by the City Commission, MIND is unable to demonstrate that it has secured this funding and entered into contract with the architect.

Update: To address any potential City exposure for unanticipated construction costs, the parties have mutually agreed to the City’s guaranteed maximum contribution amount of $4.75 million cost for construction, with assurances in the Term Sheet of (i) a contingency line item equal to ten percent (10%) of the overall Project costs, (ii) which shall not exceed the amount of the Landlord Contribution.  In no event shall the use of the contingency cause for the Gross Maximum Price (GMP) to be exceeded, and the City’s Contractor shall be solely responsible for all costs that exceed the GMP, without any reimbursement from the City.

To avoid adverse cost overruns for which the City would be liable and to ensure that the City’s contribution to the Project does not exceed the amount of the agreed  Landlord Contribution (i.e., $4,750,000.00), prior to the commencement of the Buildout Improvements, the City shall cause the City’s Contractor to buy-out, at a minimum, (i) each line item of the schedule of values which exceeds $200,000.00 (and to the extent not exceeding $200,000.00, each major trade within the schedule of values), and (ii) eighty percent (80%) of the overall project costs (schedule of values), with the cost of such bought-out line items being consistent with the approved project budget (which shall not exceed the amount of the Landlord Contribution). In addition, if at any point during construction, the contingency amount drops below 20% of the initial contingency amount, the Furniture, Fixtures and Equipment (FFE) budget will be adjusted down to free up addition funds, to ensure that sufficient contingency funds remain available.  The Administration believes these provisions are sufficient to safeguard the City from incurring unanticipated costs which are grossly in excess of that which has been agreed to in the Term Sheet.

Previously Outstanding Negotiation Issues:

1. Third Renewal Term

Previously, MIND requested that the third renewal term be the same as the initial two renewal terms, which would be automatic if MIND meets its Benchmark Performance Standards and is not in default of the Lease.

Update: In contrast, MIND now agrees with the City that the third renewal term shall be conditioned upon mutual agreement of the parties.

2. Operational Hours

Following a two-year ramp up period, the City requests that MIND operate the Facility six (6) days per week with the café opened seven (7) days per week. MIND contends that market conditions could result in limited tenant interest as this is not how the restaurant industry functions and prefers that the café be required to only be open six (6) days per week with the Facility open five (5) days per week. The Administration feels that this is contrary to the direction of the Committee to activate the Collins Park Garage with public-facing uses seven (7) days a week both day and night.

Update: Rather than the operating hours discussed immediately above, the parties now mutually agree to a minimum operation of six (6) days per week for the Facility and six (6) days per week for the café, and the Facility shall not be dark on the same day that the café is closed.

3. Key Individual Clause

As part of the Resolution waiving competitive bidding and authorizing negotiation of terms, the City Commission required that the Lease stipulate that the three principal directors of MIND remain directly involved in the company throughout the Lease term. The Administration has agreed to require that only Mr. Hausmann and Mr. Richberg remain Key Individuals because Moises Kaufman is currently not a day-to-day participant at MIND and would not be considered a “Key Individual”, as defined.

Update: Previously, MIND proposed that the Key Individual may be replaced with “an artistic director with national and/or regional artistic director theater experience”, without City express approval (other than a City designee serving on a search committee to identify a replacement Key Individual). Now, both parties mutually agree that the City Manager shall have reasonable approval rights for replacement of the Key Individual. This item was resolved just prior to the March 26, 2021 FERC meeting.

4. Limitation on Grant Funding

In consideration of the substantial capital expenditure for which the City is investing into the unsolicited proposal, the City requested that MIND forgo seeking City grant funding through the Cultural Arts Council for the Buildout Improvements, maintenance and repairs of the Premises, improvements to the Premises, and programming activations to be located at the Premises.

Update: Previously, the Administration suggested that it would be unfair for MIND to be permitted to pursue the annual grant application process in light of the significant capital commitment by the City to build out the facility. According to records maintained by Cultural Affairs, MIND receives relatively modest cultural arts grants funding, in the total amount of $22,533 for FY20/21, and a mean figure of $24,379 over the previous three (3) years. On average, Cultural Arts Council (CAC) grants to Cultural Anchors range between $25,000 - $27,000, which places MIND on par with other Cultural Arts Anchors, all of whom are permitted to continue applying every year for CAC grant funding, despite residing in City properties that were built for or improved upon for use by that Cultural Anchor using City funds (which was the reason for which the Administration sought to limit MIND’s ability to apply for grant funding). The CAC selects award recipients on an annual basis and this lease in no way guarantees that MIND would receive future grant funding. However, the Administration no longer finds it necessary for the lease to preclude MIND from the ability to apply for grants in the future. Outright prohibition on participation in the application process would in essence impede the nonprofit’s ability to serve the public and provide the public benefits which serve as the basis for entering into the lease agreement. Therefore, the parties mutually agree that MIND be permitted to continue applying for City grants related to programming at the Facility.

The Administration seeks direction as to the policy and business issues outlined in this Memorandum and recommends that the Committee approve the negotiated term sheet and forward for review and approval of the City Commission.