This Consolidated Commission Memorandum related to RFP 2021-173-KB for mixed-use developments incorporating Class A office space with respect to City-owned surface parking lots P27 (Lincoln Lane Project— TPC) (the “Project”), has been prepared in connection with:

•  the first reading/public hearing of the Development Agreement (R7C),
• the first reading/public hearing of the Ground Lease (R7D), and
• the second reading/public hearings for three related land use amendments:
  • the Comprehensive Plan amendment for Lincoln Lane North PF Properties (R5G),
  • the ordinance amendments to parking regulations for Lincoln Lane North GU properties (R5H), and
  • the ordinance amendment to height regulations for Lincoln Lane North GU properties (R5I).

A Consolidated Commission Memorandum pertaining to the Integra proposal for surface parking lots P25 and P26 appear separately under agenda items R7A and R7B.

The Administration recommends that the Mayor and City Commission approve on first reading the Development Agreement and Ground Lease with 1664 Meridian Avenue, LLC, and schedule a second reading/public hearing for July 20, 2022, subject to any direction as to the policy and business issues outlined in this Memorandum, or otherwise.

The proposed transaction is intended to:

•  diversify the economy and grow the economic base and to reduce dependency on the tourism and hospitality industries;
• create a more resilient economy able to withstand unforeseeable shocks and circumstances;  

• develop sustainable, efficient parking facilities to promote day and evening activation;
• provide local employment opportunities, attract and retain talent, and promote a live-work-play atmosphere.
• transition and promote a Miami Beach image, brand, and reputation as an economic and cultural center;
• improve and sustain Lincoln Road as a commercial hub for residents, tourists, and visitors;
• connect the Lincoln Road corridor with the Convention Center Campus, to enhance the City Center district as the City establishes itself as a mecca for industry-leading business convenings, exhibitions, and conferences; and
• and generate substantial lease and other revenues for the City.

If approved by a majority of the voters in a City-wide referendum, the Project transaction will collectively result, among other terms, in the following benefits for the City:

• payment to the City of at least $143 million (and up to $345 million) for the lease of Project site, with the City to annually receive the greater of the Minimum Annual Guaranteed Rent or Percentage  Rent including a $2 million lump sum payment.
• development of sustainable parking facilities with full replacement of 151 existing public parking spaces, at no cost to the City, to remain available to the public at municipal rates in perpetuity;
• retention of net parking revenues for replacement parking facilities;
• construction of a new Class A office facility, at no cost to the City, with Developer to spend a minimum of $100 million in capital improvements and additional public benefits;
• approximately $500,000-$600,000 in ad valorem property taxes to the City annually; and
• approximately 1,000 local jobs.

The City Commission has expressed an interest in diversifying the City’s economy and its revenue sources by capitalizing on economic growth opportunities presented by the current and projected business growth in the region, particularly by making a concerted effort to increase Class A office space inventory throughout the City to attract targeted industries.

At its December 11, 2019 meeting, the City Commission discussed the possibility of making available surface parking lots along Lincoln Lane North to promote the development of Class A office space in the city center/Lincoln Road area. To gauge interest from the development community, the City Commission directed staff to issue a request for letters of interest (RFLI) for the development of Class A office space on surface parking lots immediately north of Lincoln Lane.

On October 9, 2020, the Administration issued RFLI 2021-029-KB seeking expression of interest from developers interested in building Class A office developments on surface parking lots P25, P26, and P27. The RFLI yielded expression of interest from eighteen (18) respondents.

Based on the results of the RFLI, on February 19, 2021, the Finance and Economic Resiliency Committee (FERC or the Committee) recommended the Administration seek City Commission authorization to prepare a Request for Proposals (RFP) for ground leases and development agreements for the development of Class A office space on three Lincoln Lane surface parking lots (P25, P26, and P27). On February 24, 2021, the City Commission discussed the results of the RFLI, accepted the FERC’s recommendation, and directed the Administration to include all three surface parking lots as well as the 17^th Street parking garage (parking garage G5) in a forthcoming RFP.

On March 17, 2021, the City Commission adopted Resolution No. 2021-31617, authorizing the preparation of a RFP for mixed-use development incorporating Class A office space at three City-owned sites along Lincoln Lane North as well as the 17th Street parking garage (G5).

On June 23, 2021, the City Commission approved the issuance of Request for Proposals (RFP) 2021-173-KB for mixed-use developments incorporating Class A office space and retail on City-owned parking lots P25, P26, P27, and parking garage G5. The RFP included multiple site options for proposed development.  

The goals of the RFP included:

1. Encouraging development of Class A office space to meet growing demand;
2. Maintaining parking capacity while providing alternative and sustainable transportation and mobility options;
3. Transforming and activating North Lincoln Lane from a service alley to a vibrant and pedestrian-friendly street with amenities that will enhance the urban experience; and
4. Connecting the Convention Center District with Lincoln Road.

Current Office Market Conditions

The Class A office sector, in Miami Beach and Miami-Dade County at large, has been particularly resilient throughout the pandemic and thereafter. LTC 165-2021 provided comprehensive data and analysis demonstrating favorable market trends and the influx of targeted business industry, all of which provided support for the City’s initiatives to attract office users and new development including the RFP. Today, current market conditions continue to suggest a favorable market outlook. Although vacancy for Class A office space in Miami Beach has increased from 10.1% in Q4 2021 to 16.8% in Q1 2022 according to Jones Lang LaSalle[1], this is representative of new offerings coming online, for example, Starwood’s relocation to its new headquarters at 2340 Collins Avenue meant vacating its previous location at Lincoln Place, 1601 Washington.

A more noteworthy market indicator is Miami Beach’s sustained growth in asking rents month after month. In 2022, JLL reports that average asking rent for Class A office space in the city has increased more than 28% over the previous quarter, from $63.12 in Q4 2021 to $81.08 in Q1 2022. This growth is demonstrated by Deco Capital’s Eighteen Sunset project at 1845 Purdy Avenue, where asking leasing rates have surpassed $100 per square foot according to the South Florida Business Journal [2] , a record rental rate on par with New York City and witnessed for the first time only recently in Miami-Dade County.

Sustained strong demand and continued migration of people and businesses to the region appear to reinforce Miami Beach’s growth trajectory. Robust demand and the scarcity of prime real estate available for development explains why the City received proposals from established real estate development teams with experience in the Miami Beach office development market.

1   “Q1 2022 Office Market Report”. Jones Lang LaSalle. https://www.us.jll.com/en/trends-and-insights/research/office-market-statistics-trends/miami. (April 7, 2022)

2 “Eighteen Sunset developers snag $60M in construction funding.” South Florida Business Journal https://www.bizjournals.com/southflorida/news/2022/02/01/60-million-mortgage-for-eighteen-sunset.html. (February 1, 2022)

Award & Authorization to Negotiate

RFP responses were due and received on January 12, 2022. The City received proposals from three (3) firms: Infinity Collective LLC, Lincoln Road Holdings LLC, and Lincoln Road Property Owners, L.P. On February 1, 2022, the Evaluation Committee reviewed and evaluated all proposals. Upon review of the results of the Evaluation Committee and an assessment of the proposals, the City Manager recommended that the Mayor and City Commission authorize the City Administration to:

• Negotiate with Lincoln Road Property Owner, L.P., (a joint venture among Integra Investments, Starwood Capital Group, and The Comras Company (“Integra”) with regards to P25 and P26 (Option 5), and, if the Administration is not successful in negotiating an agreement with Integra in respect to these lots, authorizing the Administration to negotiate with TPC; and
• Negotiate with Lincoln Road Holdings LLC, now referred to as 1664 Meridian Avenue, LLC (a joint venture among The Peebles Corporation, Scott Robins Companies, Inc., and the Baron Corporation) (“TPC”) with regards to P27 (Option 3). Additionally, if the Administration is not successful in negotiating an agreement with TPC with regard to lot P27, authorizing the Administration to negotiate with Integra in regard to this option.

On February 23, 2022, via Resolution No. 2022-32054, the City Commission accepted the recommendation of the City Manager and authorized the Administration to negotiate with the proposers. In addition to referring any potential amendments to the City Code (or otherwise) to appropriate land use boards, the Resolution also referred an item to the FERC to discuss the negotiations as a means of providing the Administration with direction during the negotiation phase. Although the RFP invited proposals to develop four sites (P25, P26, P27, and G5, or a combination thereof), at present, negotiations concern only three sites: P25 and P26 combined, and P27.

On March 30, 2022, the FERC received an update on the negotiations, during which the Committee posed questions to the Administration regarding the preparation of the ballot referendum questions and requested that subsequent agenda items present the proposed projects’ terms in tandem side-by-side to facilitate the Committee’s comparison of both projects.

Proposed Land Use Amendments

In accordance with the City Code’s provision allowing for zoning criteria to be determined by a development agreement, the RFP stated that “Proposals shall be guided by the Land Development Regulations [LDRs], however, proposed changes to the Land Development Regulations will be considered.” On April 8, 2022, the Land Use and Sustainability Committee (“LUSC”) provided feedback on three legislative amendments requested in support of the two projects:

1. An amendment to Policy RLU 1.1.17 of the 2040 Comprehensive Plan, to allow for all residential uses (currently, only workforce and affordable housing are permitted), as well as mixed-use developments, as an allowable use in the Public Facility Government Uses (PF) future land use category. This ordinance amendment (R5G) allows TPC to move forward with 43 market-rate units and has no bearing on Integra’s project as Integra does not propose residential uses.
2. An amendment to Chapter 130 of the LDRs to create a minimum off-street public parking requirement for projects pursuant to development agreements on City-owned land in parking district No. 2. Effectively, this ensures that the public-serving Replacement Parking Component (a required component) does not count towards FAR. Additionally, the proposal creates the ability for developments in parking districts No. 2 and No. 3 to provide additional parking spaces in accordance with the minimum requirements set forth in parking district No. 1. As proposed in their RFP proposal, Integra’s project complies with existing off-street parking regulations whether or not the City Commission adopts the parking-related ordinance amendment (R5H), however, Integra will nonetheless benefit from the amendment as the Replacement Parking will not diminish its allowable floor area.
3. An amendment to Chapter 142 of the LDRs to allow for a maximum building height of 100 feet (in lieu of 75-85 feet) for GU properties developed by the private sector and incorporating public parking spaces owned by and/or operated for the City. The applicable area for the proposed height increase is bounded by 17th Street on the north, Lincoln Lane North on the south, Alton Road on the west, and Washington Avenue on the east. Although Integra’s initial proposal does not need the height increase, the amendment will allow Integra to incorporate additional floor-to-ceiling height on P25 and an additional convertible office floor on P26. As a result, the additional level of office space will generate greater revenue to the City (based on Effective Gross Income (EGI)), without creating a height increase that is out of scale with neighboring structures.  

By vote of acclamation at the April 8, 2022 meeting, the LUSC transmitted the proposed parking ordinance and the Comprehensive Plan amendment with a favorable recommendation, with the caveat that the LUSC recommended limiting the applicability of the Comprehensive Plan amendment to only those developments within the City Center area. The LUSC voted 2-1 to transmit the height ordinance to the City without any recommendation. The Administration is supportive of the subject ordinances as they would enhance the leasable spaces within each project, thereby attracting higher quality tenants—a main objective of the RFP—and, ultimately, offering a better financial return to the City.

On April 19, 2022, the FERC reviewed the draft Term Sheets and provided feedback on the Projects as proposed. Among the issues discussed by the Committee were the appraised land value of each of the three sites, the Proposers’ estimated construction cost per space of the Replacement Parking component to be developed for and delivered to the City, and the Committee’s desire to see unique and/or independent commercial businesses as the Projects’ retail tenants. The Committee noted that Lincoln Road’s character was fundamentally altered as international retail brands overtook smaller, local retailers and the Committee expressed a desire for the developments on P25, P26, and P27 to seek retail tenants that would bring back some of Lincoln Road’s prior charm.

On April 26, 2022, the Planning Board reviewed the three ordinances and transmitted them to the City Commission with a favorable recommendation. The Planning Board also recommended that any market rate residential housing development also incorporate a portion of workforce and/or affordable housing.

On April 29, 2022, the FERC again discussed the negotiations and transmitted both Term Sheets to the City Commission with a favorable recommendation for preparation of Development Agreements and Ground Leases.

On May 4, 2022, via Resolution Nos. 2022-32163 and 2022-32164, the Mayor and City Commission accepted the recommendation of the FERC, approved both Term Sheets, directed the Administration to negotiate separate Development Agreements and Ground Leases with the respective parties, and referred the proposed Projects to the Planning Board for review in accordance with the requirements of the City Charter and City Code. In addition, all three land use amendment ordinances were adopted on first reading and the second reading public hearings were scheduled for June 22, 2022.  

On May 24, 2022, the Planning Board reviewed the proposed uses of both projects and favorably recommended their approval (5-1). The Planning Board adopted 6-0 a second motion recommending that: (1) the City Commission consider devoting a portion of revenues generated from any project incorporating solely market rate residential uses be devoted to funding workforce housing initiatives; (2) the prohibition of big-box retail establishments in the Ground Leases; and (3) where possible, provision that underutilized parking spaces required for the projects’ private components (e.g. office uses) be made available for use by the public during nonpeak hours.

A list of Public Meetings and Public Communications and Information associated with the RFP and the Projects is attached as an exhibit.

Conducting development and lease negotiations with separate proposers on two complex development projects has been challenging in light of the July 29, 2022 deadline for placing these items on the November 2022 ballot. With a view toward finalizing Development Agreements and Ground Leases with both Proposer teams by such date, the Administration and City Attorney’s Office have dedicated considerable staff resources and participate in regularly scheduled meetings with both Proposer teams multiple times per week to establish and refine the deal terms. TPC's proposed Development Agreement is attached as Exhibit A and the proposed Ground Lease is attached as Exhibit B.

Pursuant to City Commission direction provided on May 4, 2022, outstanding items requiring further discussion:

1.      Transaction Fee to City upon Leasehold Sale

At the May 4, 2022 meeting, the City Commission expressed a desire that if, at a later date following construction of the Projects, the Ground Lessees decide to sell or transfer their leasehold interest in the properties, then the City should stand to benefit from the profits inuring to the Ground Lessee from the sale. It is important to note that the Development Agreement does not permit the Developers to transfer a property or their leasehold interest until completion of project construction. Thereafter, limited transfer of interests may be allowed, subject to restrictions enumerated in the Ground Leases. Of course, any corresponding increase in rents paid to the Ground Lessee by retail or office tenants following such a transfer means that the City stands to receive a greater participation in rental proceeds; therefore, transfers increase property values that in turn benefit the City as landlord. Payment of a Transaction Fee to the City remains as an open item for further discussion between First and Second Reading.   

2.      Replacement of City Parking Revenue during Construction

TPCs parking mitigation strategy includes utilization of parking facilities within the area of the Project site including public and private parking facilities. With Integra’s proposed construction phasing, the existing supply of municipal parking presently available today will remain operational at all times during Integra’s construction process. Throughout the pre-development and construction process, the Administration and the Developer must continue to discuss, plan, and refine the strategy and implementation required for parking mitigation at interdependent public parking facilities as well as private parking facilities to ensure limited disruption to parking access and revenue generation. Replacement and payment of parking revenue during construction remains as an open item for further discussion between First and Second Reading.

3.      Timing of Rental Resets

As presented during the May 4, 2022 City Commission meeting, the Ground Lease provides for rent resets at Lease Year 51 and Lease Year 75, with the Base Year rent amount escalated either by 2% or CPI uncapped, whichever is greater.  Restructuring of the Rental Resets remains as an open item for further discussion between First and Second Reading.

Recap of important policy considerations previously discussed with the City Commission on May 4, 2022:

        i.           Amendments to Land Development Regulations and Comprehensive Plan

Both Projects would benefit from one or more of three proposed amendments: two LDR amendments and one text amendment to the Comprehensive Plan. The LDR amendments were discussed and approved by the Planning Board on April 26, 2022. All three items were approved by the City Commission at First Reading on May 4, 2022, after which the Comprehensive Plan amendment was transmitted for review and approval by the State of Florida. The Integra Project does not require any amendment for financial terms to remain as currently reflected. If the required parking and/or Comprehensive Plan amendments do not succeed, the TPC Project will need to be adjusted by decreasing office and/or residential square footage (or by eliminating the residential component altogether) with corresponding decreases to the rental payments (to be negotiated) to remain viable.

Following the City Commission’s approval of the land use amendments on First Reading on May 4, 2022, the City transmitted the proposed amendment to the Comprehensive Plan to the State of Florida, in accordance with the requirements for expedited state review in Section 163.3184, Florida Statutes. On May 17, 2022, the Florida Department of Transportation provided written confirmation that the proposed amendment was reviewed and found the proposed amendment would not adversely impact transportation resources and facilities of State importance. On June 2, 2022, the Florida Department of Economic Opportunity (“DEO”) provided notice that it had no comment on the proposed amendment, which implies that the City may proceed with the amendment procedure and provide final notice to the DEO following adoption of the amendment.

      ii.           Land Appraisal

As required by Section 82-37(b) of the City Code governing leases of ten years or more, an independent consultant, CBRE, Inc., was selected for the appraisal following a request for quotes submitted to the City’s prequalified pool of real estate appraisers, as designated by the City Commission via Resolution No. 2018-30585. The real estate appraisal report (“Appraisal Report”) has been prepared for consideration by the City Commission in its review of the proposed Ground Leases. A preliminary draft Appraisal Report was discussed by the FERC on April 19, 2022, after which time the City’s surveyor consultant, Longitude Surveyors revised the boundary surveys, enabling edits to the Appraisal Report by CBRE, which is attached in final form as Exhibit C.

The appraiser employs a sales comparison approach to determine as-is fee simple value of each of the three sites, whereby recent comparable sales of nearby properties are directly compared to each subject site, as if vacant and available, to be put to its highest and best use, with adjustments applied to account for differences in several factors, including location, property shape, view corridors, zoning, market conditions at time of sale, etc. The sales used in this analysis are considered comparable to the subject sites, and the required adjustments were based on industry best practices. CBRE has indicated to the Administration that the required referendum assumption should not factor into the fee-simple land valuation. The sales comparison approach is considered to provide a reliable value indication for each subject property.

     iii.           Financial Terms: Rent and other Revenues

a.      Lump Sum Payment and Annual Rent

Although the financial and other terms in the RFP responses served as a starting point for negotiations between the City and Developers, such initial terms were not accepted by the City. As noted in the Appraisal Report, Lincoln Road is one of the City’s most desirable non-oceanfront locations, and high density, walkable live/work lifestyle environments are currently the highest driver for office and residential real estate assets. Both Developers has adjusted the financial terms from the offers in their RFP responses, each indicating that construction costs have increased since the time of RFP submissions, attributable to factors such as supply chain challenges, rising inflation and interest rates, and geopolitical instability. A detailed comparison of anticipated financial payments to the City from each Developer is contained in Exhibit D.

Both Developers have agreed to similar rent structures: a Lump Sum Payment early in the Lease Term (described below), with Guaranteed Annual Rent commencing, in the case of Integra, 12 months from the Effective Date and in the case of TPC, at the agreed upon target date for commencement of construction, i.e., no later than 23 months from the Effective Date. Integra’s Guaranteed Minimum Rent increases progressively from $650,000 to $750,000 between years 2 and 5, followed by escalations (greater of 2% or CPI, capped at 3%) commencing in year 7. TPC’s Guaranteed Minimum Rent remains constant during its twenty-month construction period at $150,000, and then increases to $680,000 upon construction completion, with varying annual escalations throughout the initial term. In both proposals, the Developer is to pay the higher of the Guaranteed Annual Rent or Percentage Rent. Integra and TPC have agreed to Percentage Rent Participation of 5% of Effective Gross Income (EGI).

Both Developers have agreed to an Initial Lump Sum Payment: $2.5M for Integra on the Effective Date and $2M for TPC at the agreed upon target date for commencement of construction, which will occur not later than 23 months after the Effective Date. Integra has agreed to two (2) additional Lump-Sum Payments totaling $1,000,000 payable in two installments: (1) $500,000 upon issuance of Temporary Certificate of Occupancy (TCO) for P25 and (2) $500,000 upon the issuance of a TCO for P26 (based on Outside Dates, these payments will occur not later than 63 months and 82 months, respectively). TPC does not propose any additional Lump Sum Payments.

b.      Parking Component

Both the TPC and Integra Projects will contain Replacement Parking equal to the number of spaces currently existing on all three lots, and the City will be entitled to the net revenues from these spaces that are anticipated to be consistent with current collections. The table in the Background section depicting the Parking Department’s historical revenue collection for the three lots indicates that the current revenue year-to-date for 2022 could yield annual revenues on par with FY 2019 collections (pre-COVID-19).

    iv.           Project Construction Phasing and Implications for Project Development

The Administration notes that if both Projects are approved by the City Commission and by a majority of the City’s voters in the Referendum, construction of the two Projects will likely be phased. Project sequencing will take into account all appropriate factors, including impacts on parking availability in the area and other area impacts such as the construction of the Miami Beach Convention Center Hotel, provided that the City may also make a determination, in its sole, reasonable discretion, that both Projects can reasonably be constructed in tandem or otherwise simultaneously without having an adverse impact on the City’s residents, businesses, and visitors. The uncertainty at the present time as to the sequencing of the two Projects may adversely affect development and construction costs for the Projects, and both TPC and Integra have expressed concern with the possibility that their respective Projects will not be first noticed to proceed. The determination as to phasing and order of commencement (i) shall be made in the City’s sole, reasonable discretion no later than sixty (60) days following official certification of the Referendum results and (ii) shall be final and binding on the Developers with no right of appeal.  

      v.           Preliminary Analysis of Development Impacts

Not only will these developments have lasting impact on the surrounding area, but the construction process must also be planned for and managed properly, because existing parking facilities will be altered or taken offline during construction and the development of the Convention Center Hotel is accelerating. The City Commission requested proposers prepare preliminary, independent analyses to address the potential impacts upon (1) traffic, (2) parking, and (3) infrastructure, both during construction and upon development, including offering proposed mitigation strategies. Excerpts of the preliminary reports provided to the City by the Developers are included as Exhibit E and summarized as follows:

a.      Parking Mitigation – P27 only (TPC)

TPC’s mitigation strategy proposes three (3) nearby garages including two (2) City facilities: The Lincoln Garage, 1691 Michigan (privately operated), 17^th Street Garage/G5, 640 17 Street (City-owned), and Penn Garage/G9, 1661 Pennsylvania Avenue (City-owned).

Administration comments: The Parking Department has indicated that the mitigation strategy should not rely on the City’s other lots or garages and recommended that parking temporarily lost during construction be accommodated via third-party agreements between the developers and private facilities. In addition, as parking revenues must be maintained throughout construction to ensure adequate coverage for the payment of the City’s parking bond obligations, the City will need to fund any deficit in the Parking Fund out of the General Fund.  Alternatively, TPC could make additional payments to the City during construction to offset the lost parking revenues.

b.      Traffic Management – P25, P26, P27 (Integra and TPC)

Integra and TPC’s proposal: Peak-hour roadway-impact analysis for the surrounding roadway network anticipates a significant impact to Alton Road (significant impact is defined as 5% or more of the roadway’s adopted level of service capacity).

Administration comments: The submitted analysis does not examine all affected intersections in the vicinity, with no mention of infrastructure needs to support anticipated demand or any multi-modal analysis. Therefore, an improved methodology must be formulated during the permitting process to sufficiently address mitigation.

c.      Civil Engineering Due Diligence – P25, P26, P27 (Integra and TPC)

Integra and TPC’s proposal: Existing water mains are sufficient for potable water, irrigation, and fire water, with no significant increase in operational demands for the applicable pump station (PS#01). No determination was possible at this time whether the existing gravity sanitary sewer collection system has sufficient available capacity to handle the developments’ anticipated load, but as with all existing infrastructure, the developers have committed to repair or replace any obsolete and undersized water, sewer, and stormwater lines, as needed and requested by the City.

Administration comments: Once utility connections and anticipated demand are more accurately established via construction documents, the City, in its regulatory capacity, will require water and sewer capacity modeling as part of the building permit process. As is customary for all construction projects in Miami Beach, the City’s concurrency regulations will require the Developer to pay for and construct any necessary upgrades and improvements as a condition of the building permit approval, e.g., replacement of all sewer laterals and water services.

    vi.           Operation of the City’s Public Parking Replacement Component

As negotiated, the City shall operate all Public Parking Replacement Components for each Project, provided that, the City shall have the right, in its sole discretion, to decide that the Developer shall operate the Public Parking Replacement Components if notice is provided to the Developer by or before sixty (60) days following official certification of the Referendum results. If the City elects to operate the Public Parking Replacement Component, applicable terms will be incorporated into a separate operating agreement. If the City requires Developer to operate the Public Parking Replacement Component, the Developer and the City will negotiate terms such as standards of operation, responsibility for costs and expenses, etc. In all circumstances, the City and Developer stipulate that parking rates for Public Parking Components shall not be higher than the City’s then-applicable rates for similar parking facilities.

In the 2019 Business Satisfaction Survey, the availability of parking was listed by respondents as the number one barrier to business prosperity in Miami Beach, with 47% of respondents selecting parking among their top choices. The 2019 Resident Satisfaction Survey found that Lincoln Road was the highest-ranking place in the city that residents enjoy visiting, with 60% of residents selecting it among their top choices.

The proposed rental payments and financial terms are detailed in the Analysis section with the proposed annual payments outlined in Exhibit D. The Development Agreement and Ground Leases stipulate that the City will not provide any funding or financing for the Project and the Administration has incorporated additional measures to limit the City’s exposure: the City’s fee simple interest in the property will not be subordinate to any mortgage, City has first priority right of payment of rent, the loan-to-cost ratio for construction financing and loan-to-value financing for permanent financing shall not exceed 90%, and the Developer must maintain 10% equity in the Project. As concerns the City’s necessary costs during negotiations, each developer has executed an agreement pledging to reimburse the City for up to $150,000 for the City’s expenses including costs related to independent consultant studies and outside counsel.

These Projects propose to meaningfully transform underutilized City parking assets into resilient, state-of-the-art LEED certified buildings offering desirable uses and amenities that will serve the public, activate the neighborhood, and spur economic development—all at zero financial cost whatsoever to taxpayers. In fact, the associated financial benefits from these Projects—in addition to the retention of existing parking revenues—will continuously grow General Fund revenues and enhance the local tax base year after year, without the City assuming any of the risks inherent to construction and operation of $100+ million mixed-use commercial developments.

Subject to direction as to the policy and business issues outlined in this Memorandum, the Administration recommends that the City Commission approve on First Reading the Development Agreement and Ground Lease and set the second reading public hearing for a time certain on July 20, 2022.

Further, the Administration recommends the City Commission adopt on Second Reading public hearing the three Project related ordinances amending the City’s land use regulations.