A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, APPROVING, FOLLOWING SECOND READING/PUBLIC HEARING, A LEASE AGREEMENT (“LEASE”), AS AUTHORIZED UNDER SECTION 82-37 OF THE CITY CODE AND SECTION 1.03(B)(4) OF THE CITY CHARTER, BETWEEN THE CITY OF MIAMI BEACH (“CITY”) AND MIAMI NEW DRAMA, INC., A FLORIDA NOT-FOR-PROFIT CORPORATION (“LESSEE”), OF A PORTION OF THE CITY-OWNED COLLINS PARK GARAGE LOCATED AT 340 23RD STREET (THE “PROPERTY”), FOR THE DEVELOPMENT AND OPERATION OF THE COLLINS PARK CULTURAL ARTS FACILITY, WHICH LEASE SHALL INCLUDE THE FOLLOWING USES: (1) A THEATER FOR PRODUCTION OF LIVE THEATRICAL PERFORMANCES AND USES ANCILLARY THERETO; (2) ADMINISTRATIVE AND BUSINESS FUNCTIONS AND REHEARSAL, COSTUME, AND SET DESIGN FACILITIES FOR PERFORMANCES; AND (3) A RESTAURANT CAFÉ PURSUANT TO A SUBLEASE TO A THIRD-PARTY OPERATOR (COLLECTIVELY, THE “PROJECT”); FURTHER, WAIVING, BY 5/7TH VOTE THE COMPETITIVE BIDDING AND APPRAISAL REQUIREMENTS OF SECTION 82-39 OF THE CITY CODE, FINDING THE PUBLIC INTEREST TO BE SERVED BY WAIVING SUCH REQUIREMENTS; PROVIDING FOR AN INITIAL TERM OF FIVE (5) YEARS, WITH UP TO THREE (3) RENEWAL TERMS FOR A PERIOD OF FIVE (5) YEARS EACH; FURTHER, PROVIDING THAT THE LEASE IS SUBJECT TO AND CONTINGENT UPON AN APPROPRIATION OF FUNDS BY THE CITY COMMISSION, AT ITS SOLE DISCRETION, IN THE AMOUNT OF $4,750,000 ON OR BEFORE OCTOBER 1, 2024; FURTHER, AUTHORIZING AN AMENDMENT TO THE MANAGEMENT AGREEMENT BETWEEN THE CITY AND MIAMI NEW DRAMA, INC. FOR THE COLONY THEATRE (“MANAGEMENT AGREEMENT”), TO EXTEND THE TERM OF THE MANAGEMENT AGREEMENT FOR A PERIOD TO RUN COTERMINOUS WITH THE TERM OF THE LEASE AND FURTHER, AUTHORIZING THE MAYOR AND CITY CLERK TO EXECUTE THE FINAL NEGOTIATED AGREEMENTS.

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. In addition, the Collins Park neighborhood will become home to Starwood Capital’s headquarters currently under construction at 2340 Collins Avenue.

The recently completed Collins Park garage, located at 340 23rd Street, 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 space with an elevated exterior terrace providing access from the street.

On May 22, 2020, the Finance and Economic Resiliency Committee (the “FERC” or “Committee”) 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 “Project”). 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. In light of the fact that MIND had not yet identified any outside funding sources, 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 (“Term Sheet”):

• 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; and
• Miami New Drama’s sublease of any restaurant or retail component must be negotiated at market rates.

On March 26, 2021, the FERC reviewed a draft of the proposed Term Sheet and provided direction to the Administration regarding four salient issues, which subsequently were resolved by the parties and incorporated into the Term Sheet (i.e., trigger for the third renewal term; allocation of risk for construction cost overruns; minimum days of Facility operation; and allowing MIND to apply for the City’s cultural arts grants in relation to programming at the Facility.)

On April 30, 2021, the FERC voted to move the item as presented for review by the City Commission, with requests for continued negotiation on two topics: (i) further development of Miami Beach-specific branding for the Facility and (ii) incorporation of a deadline for the City to identify sufficient Project funding.

On June 23, 2021, the City Commission unanimously adopted Resolution 2021-31749, accepting the recommendation of the FERC at its April 30, 2021 meeting, relating to a proposed lease agreement between the City and MIND, for the development and operation of a Collins Park Cultural Arts Facility within the City owned Collins Park garage (the "Lease"), and approving the Term Sheet for the Lease; further, directing the Administration to draft and finalize the Lease consistent with the Term Sheet, with the Lease subject to approval by a 4/7th vote of the Planning Board and a 6/7th vote of the City Commission, pursuant to section 1.03(b)(4) of the City Charter; and further, referring the proposed Lease to the Planning Board for review, in accordance with the requirements of the City Charter and City Code.

On July 27, 2021, the Planning Board reviewed the Term Sheet for the Lease and passed a motion to approve the Lease as proposed, in accordance with the requirements of section 1.03(b)(4) of the City Charter, which requires a 4/7th vote of approval by the Planning Board.

On October 13, 2021, the City Commission unanimously adopted a resolution to approve the Lease on first reading, waiving the competitive bidding and appraisal requirements of Section 82-39 of the City Code, explicitly providing that the Lease is subject to and contingent upon an appropriation of funds by the City Commission, at its sole discretion, in the amount of $4,750,000 on or before October 1, 2024, authorizing an amendment to the management agreement between the City and Miami New Drama for the Colony Theatre (“Colony Management Agreement”) to extend the term of the Colony Management Agreement for a period to run co-terminous with the term of the Lease and further, setting the second reading/public hearing of the Lease for a time certain.

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 (“Colony Management Agreement”). Pursuant to the terms of the Colony Management Agreement, which expires in September 2023, MIND has received a cumulative amount of $2 million since the inception of the Colony Management Agreement in 2016. 

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

Due to the pandemic, the Colony Theatre was closed from March 2020 to August 2021, which prevented the run of two major productions. MIND pivoted to virtual programming, reaching some 7,000 people online, and completed an acclaimed production of 7 Deadly Sins on Lincoln Road. Earlier this year, the production was awarded the Drama League Award for Outstanding Interactive or Socially Distanced Theater at the 2021 Drama League Awards.  According to MIND, they are the first theater company in Florida to be nominated for and to win this award.

Lease Terms stemming from Term Sheet dated June 9, 2021

The Administration has negotiated a proposed Lease based on MIND’s unsolicited proposal and as further refined by City Commission Resolutions No. 2021-31568 and 2021-31749. Attached as Exhibit B, the Lease incorporates the final guidance provided by the FERC and the City Commission when it authorized negotiations based on the Term Sheet on June 23, 2021.

Project Delivery Structure

MIND’s original proposal and 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 services to MIND, which will enable the design of a world-class cultural facility by 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 for $1 per year, the City would typically prefer to control all aspects of design and construction.

However, considering that MIND has agreed to fund all design-related services and costs in furtherance of a superior facility (that the City will own and control upon lease expiration), the Administration recommended acceptance of MIND’s proposed arrangement, as long as 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 consented to this compromise since the City agreed to seek to identify the funding for the balance of hard costs. The Lease provides that the City will utilize a Construction Manager at Risk with Guaranteed Maximum Price (“GMP”) delivery method for the construction of the Project.

In addition to MIND’s allowing the City and City’s construction manager’s reasonable design input, with approvals at the 30%, 60% and 90% design stages, the City will also require MIND 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. The Lease requires that MIND raise all 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 Lease if, after 12 months of Lease approval by the City Commission, MIND is unable to demonstrate that it has secured and deposited this funding and entered into contract with the architect. MIND has agreed to deposit the funds for the Tenant Contribution into an escrow or restricted account until needed for the Project.

City Financial Contribution

To address potential City exposure for unanticipated construction costs, the parties have mutually agreed to the City’s guaranteed maximum contribution amount of $4.75 million for the cost of construction. In order to protect the City against project over-runs, the Lease provides that the parties enter into a Guaranteed Maximum Price Agreement and the schedule of values attached thereto or contained therein (collectively, the “GMP Agreement”) shall: (i) contain a contingency line item equal to ten percent (10%) of the overall project costs of the Buildout Improvements and (ii) not exceed the amount of the Landlord Contribution. In no event shall the use of the contingency cause for the 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), 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 (and to the extent not exceeding $200,000, 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 additional 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 had been agreed to in the Term Sheet. This is important considering that MIND will not cause to be created the architectural plans, which can be used to better estimate construction costs, until such time as the Lease is definitively negotiated and approved.

The foregoing considerations pertain to cost overrun contingencies which would only be implicated once the City commits the funding for the Landlord Contribution and following the commencement of construction. At the present time, the City has not yet identified any funding sources for the $4.75 million Landlord Contribution. It is for this reason that the Lease provides that the Project is contingent upon the City Commission identifying a budgetary source for and appropriating the entire $4.75 million construction costs. The Administration is supportive of this unique opportunity for a resident cultural partner to further activate the Collins Park cultural campus, however, budgetary limitations present a crucial obstacle which must be overcome in order to proceed with the Project. In the event that the City Commission, in its sole discretion, does not appropriate sufficient funds for the Buildout Improvements by October 1, 2024, the Lease will not become effective and either party may terminate the Lease for convenience.

April 30, 2021 FERC Meeting

Notwithstanding the significant issue related to yet-to-be identified funding for the Project, the FERC passed a motion to move the Term Sheet for review and approval by the City Commission. The FERC also provided certain direction at the April 30, 2021 meeting, which the Administration incorporated into the Term Sheet thereafter presented to the City Commission:

• First, the Committee requested further development of Miami Beach-specific branding for the Facility. In response, MIND offered to develop site-specific branding for the Facility with a new logo that will be utilized in all literature associated with the Facility.
• Second, the Committee requested incorporation of a deadline by which the City must identify and allocate sufficient Project funding. In response, the Administration recommended that the City Commission have until October 1, 2024 to identify and appropriate the full amount of the Landlord Contribution. If the total funding is not identified by this date, the Lease would not be effective.
• Third, the Committee addressed continuous activation of the commercial restaurant space if Miami New Drama is nonoperational or unsuccessful. As standard practice, City agreements require the assignment of agreements with any vendors, subcontractors, sublessors, or subtenants should the lease be terminated. This will enable the City to keep the Facility active by assigning restaurant operations to another entity in the event Miami New Drama is unable to manage the Facility or Café successfully.

June 23, 2021 City Commission Meeting

On June 23, 2021, via Resolution No. 2021-31749, the City Commission unanimously voted to accept the FERC’s April 30, 2021 recommendation and approved the Term Sheet. The resolution directed preparation of a Lease and referred the agreement for review by the Planning Board, as required under section 1.03(b)(4) of the City Charter. The City Commission also provided additional direction which the Administration incorporated into the Lease, as follows:

• First, the City Commission requested that MIND place the funds it raises for the Tenant Contribution in the amount of $250,000 into an escrow account or otherwise restricted account, with limitations placed on use of the funds for any purpose other than as specifically intended by the Lease. MIND committed to this request during the City Commission meeting and also committed to providing notice to the City once this step is accomplished.
• Second, the City Commission requested that MIND further develop its commitments related to marketing and branding, including the extent to which MIND can highlight its partnership with Miami Beach.  MIND has agreed that the Lease will specify that the words “Miami Beach” appear in or be incorporated as an element of the company’s logo, as may be refined and updated from time to time.  
• Third, as indicated in section 17 of the Term Sheet, MIND and the Administration further developed additional community benefit proffers to benefit the public at the Collins Park facility (“Community Benefits”). These will include, but are not limited to, 500 annual free or discounted tickets for Miami Beach students at Miami Beach public schools; 250 annual free or discounted tickets available for Miami Beach senior citizens; ten percent (10%) discount for Miami Beach residents on tickets and educational programming and five percent (5%) discount on fee membership programs; participation in Cultural Crawl and other cultural community initiatives; commitment to collaborate with community organizations in providing senior-specific programming; and a commitment to offer winter and spring break camps commencing in Lease year 2. Notably, MIND will also contribute a portion of each ticket sale to contribute to the Community Benefit Fund. MIND will join Live Nation as the City’s only tenants who financially contribute to this important cultural arts program. The full list of MIND’s Community Benefits appear as Exhibit D to the Lease.

July 27, 2021 Planning Board Meeting

On July 27, 2021, the Planning Board reviewed the Term Sheet for the Lease and recommended by a 5/7^th vote to approve the Lease as proposed. (Two of the seven Planning Board members were not present for the meeting and therefore did not partake in the vote.) The favorable review and approval of the Lease satisfies the requirement in Section 1.03(b)(4) of the City Charter that leases of ten years or longer must receive approval by a 4/7^th vote of the Planning Board.

October 13, 2021 City Commission First Reading

Pursuant to Section 82-37 of the City Code, the Lease requires two readings before the City Commission, with the second reading being a public hearing. On October 13, 2021, the City Commission unanimously adopted a resolution to approve the Lease on first reading, waiving the competitive bidding and appraisal requirements of Section 82-39 of the City Code, providing that the Lease is subject to and contingent upon an appropriation of funds by the City Commission, at its sole discretion, in the amount of $4,750,000 on or before October 1, 2024, authorizing an amendment to the management agreement between the City and Miami New Drama for the Colony Theatre (“Colony Management Agreement”) to extend the term of the Colony Management Agreement for a period to run co-terminous with the term of the Lease and further, setting the second reading/public hearing of the Lease for a time certain.

Waivers of Public Bidding Process and Independent Lease Appraisal

Section 82-39(a) of the City Code provides that for any sale or lease of City property, there must be an advertised public bidding process. Section 82-39(b) requires that for any lease of City property of more than ten years (including option periods), the City shall obtain an independent appraisal of the fair market or rental value of the property. Section 82-39 provides that both requirements may be waived by a 5/7^th vote of the City Commission, upon a finding that such waiver would serve the public interest.

After reviewing MIND’s unsolicited proposal in December 2020, the FERC emphasized the facility’s potential role in the growth and development of the Collins Park Arts District. On January 27, 2021, the City Commission approved Resolution No. 2021-31568, finding the public interest best served by authorizing negotiations with MIND in lieu of issuing an RFP. At that City Commission meeting, Miami-Dade County District 5 Commissioner Eileen Higgins and Director of the Miami-Dade County Department of Cultural Affairs Michael Spring advocated on behalf of MIND and noted that the County’s cultural arts agency does not undertake a competitive procurement process when programming its facilities, especially when an established regional cultural asset like MIND commits to partner together. Subsequently, at three publicly noticed meetings of the FERC, the Committee reviewed the Term Sheet and provided direction as to project terms and public benefits, thereby ensuring the negotiated Lease brought value to the City. Public comment has been supportive of the Project at these meetings and the Collins Park Neighborhood Association has been an enthusiastic advocate for Miami New Drama’s Lease since the beginning of the process. Finally, the City Code provides that the two requirements in Section 82-39 may be waived by an affirmative 5/7^ths vote of the City Commission, and at the October 13, 2021 first reading of the Lease, the City Commission unanimously approved waiver of these requirements by a vote of 7 to 0.

For these reasons demonstrating public interest, the Administration recommends the City Commission waive the requirements for competitive bidding and lease appraisal as permitted in City Code Section 82-39.  

As required for leases of City property longer than ten years per Section 82-38 of the City Code, the Planning Department’s written analysis of the Lease is contained in Exhibit D.

The City's financial responsibility, discussed in the foregoing Analysis section above, is $4.75 million. MIND has 12 months to demonstrate it has raised the costs associated with the design of the Project, anticipated to be $250,000.00, whereas the City has approximately three (3) years to identify and appropriate the funding associated with the hard costs of the Project. At the present time, the City has not yet identified any funding sources for the $4.75 million hard costs.

Subject to any direction as to the policy and business issues outlined in this Memorandum, the Administration recommends that the City Commission approve the attached Resolution to:

• waive the requirements for competitive bidding and independent appraisal;
• approve the Collins Park Cultural Arts Facility Lease Agreement on second reading following a public hearing;
• provide that the Lease is contingent upon the City Commission appropriating the Landlord Contribution, at its sole discretion, on or before October 1, 2024;
• authorize an amendment to the Colony Theatre Management Agreement with Miami New Drama, extending the term for a period to run co-terminous with the Lease; and
• authorize the Mayor and City Clerk to execute the final, negotiated agreements.

Pursuant to Section 1.03(b)(4) of the City Charter governing leases of ten years or longer of City-owned property, the Lease requires approval by a 6/7 vote of the City Commission.