HISTORY:
North Beach Town Center Development, LLC (“Developer” or “NBTC”) initially proposed for the City to convey two of its Parking Lots (P80 and P84) in North Beach to the Developer, in exchange for the Developer’s conveyance to the City of a separate, stand-alone public parking garage unit or structure, which would be constructed as part of the Developer’s proposed mixed use project between Abbott Avenue and Byron Avenue. The City currently owns the five parcels outlined in red on Exhibit "A" (Parcel Map), which contain 83 surface parking spaces, and the Developer owns the parcels outlined in yellow. The Developer would convey its five parcels outlined in blue to the City for use for the Town Center Garage.
The appraisal submitted by the City’s appraiser estimated the value of the two City parking lots at $10 million, and the value of the Developer parcels at $9.2 million, resulting in a variance of $800,000 between the City properties and Developer properties.
Until April 6, 2018, Developer’s concept plan for the Project assumed that Developer would have ownership of property the Developer currently does not own (the Prima Pasta site). The prior versions of the term sheet reviewed by Finance and Citywide projects Committee (FCWPC) at its February 23, 2018, March 13, 2018, and March 26, 2018 meeting, involved, among other terms, the following:
(1) an exchange of Developer and City parcels, with developer to pay the City at closing for the difference in the appraised values between the properties being exchanged;
(2) the project would be developed as two separate building structures, to include 126,627 SF of retail use and 459 parking spaces, with 359 parking spaces to be owned and operated by the City as a municipal parking garage, and 100 parking spaces to be owned and operated by the Developer for the benefit of its retail tenants;
(3) City to provide limited two hour free parking rights at the municipal parking garage for up to ten (10) years for the benefit of Developer’s retail tenants, through a parking validation system, with Developer to make operating payments to the City, to replace lost revenue and the estimated losses that the City anticipates would be experienced at the garage as a result of the two hour free parking;
(4) City to pay Developer for the City’s portion of the design and construction costs for the Project, pursuant to separate stand-alone contracts for design and construction of the City garage, to avoid a commingling of funds and a separation of responsibilities (including separate performance bond, etc.) for the City’s portion of the project; and
(5) The garage would be designed in accordance with City’s design criteria for convertibility to other uses (to take into account anticipated continued declines in parking demand), with no convertibility in the first ten years following the opening of the garage, and thresholds (limits) on any potential conversion by the City, between the tenth and twentieth year following opening of the garage; and
(6) At completion of construction, at which time the garage project would be condominiumized, with the City to own the City parking garage condominium unit, and Developer to own the remaining condo units within the garage for retail and loading.
At the April 11, 2018 City Commission meeting, consideration of the proposed transaction was deferred, as the Developer submitted that he no longer anticipated having control of the Prima Pasta site.
As part of a supplemental memorandum to Item R7E on the April 11, 2018 City Commission agenda, which was subsequently withdrawn, the Administration outlined the various issues implicated by the new proposal, all of which would need to be addressed and negotiated in revisions to the term sheet and concept plan, including, without limitation, ensuring that any new project that excluded the Prima Pasta site would address any life safety, loading and other potential operational issues.
Subsequently, the City has met multiple times with the Developer, its legal counsel and architects. On May 30, 2018, the Administration met with NBTC to discuss its latest submittal. At the meeting, NBTC presented a revised concept plan which represented significant changes from the discussions to date. Subsequent to the meeting, on June 20, 2018, NBTC provided a revised concept plan and term sheet. On June 27, 2018, the City provided updated comments to NBTC, including comments from Legal and Planning.
On July 19, 2018, NBTC provided a revised concept plan and a Summary of Land Swap and Retail Condo Values attached hereto as Exhibits “B” and “C”. NBTC provided the most recent term sheet on July 20, 2018, attached hereto as Exhibit “D”. Some of the noteworthy changes from prior versions of the term sheet reviewed by Finance Committee include, but are not limited to, the items below:
(1) The Developer is now proposing for the project between Abbott Avenue and Byron Avenue to be constructed as a single building structure (as opposed to two building structures) with condominiums containing 80,378 s.f. of retail owned by the developer and 287 parking spaces, all owned by the City. The single structure of retail and parking would no longer be considered a main use garage. After the proposed swap, the underlying land would remain separately owned by Developer and the City until the project is completed and condominiumized.
(2) Instead of Developer providing a minimum of 100 parking spaces, which would be located on the 2nd floor and dedicated to the grocer tenant, Developer has proposed that it be responsible for zero parking spaces for the entire project, with the City to pay for the entire cost of all parking to support Developer’s mixed use project. . Instead, Developer has proposed to build approximately 41,000 SF of retail space on the entire 2nd floor, with parking to now be located on Floors 3, 4 and 5, and containing 287 spaces.
(3) Due to the configuration of the parking, City now pays $4,254,640 for the real estate value of the parking condo unit located on Developer’s parcel (which adds adding approximately $15,000 per space to City’s cost of the garage, for a total of $49,000 per parking space), resulting in an total cost to the City of $9,758,000 for 287 spaces versus $12,206,000 for 359 spaces. The net out-of-pocket cost for for the 287 spaces is $9,731,480 vesus $10,459,680 for 359 spaces under the prior proposal, resulting in a significantly more expensive project for the City.
(4) Instead of providing up to ten (10) years of two-hour free parking, as previously discussed with the FCWPC, the Developer now proposes for the City to provide 2-hour free parking for up to 20 years through a ticket validation sysytem, with the Developer paying for any operating losses in the Town Center garage in additon to an annual contribution of $66,000 for replacement of the revenue associated with the City owned lots. Commencing in the 5th year, instead of Developer making validation payments for the full amount of tickets validated if retail occupancy exceeds 70%, Developer now proposes to make validation payments if retail occuancy exceeds 90 percent, a significant ly higher threshold..
(5) Instead of providing for flexibility for the City to convert the garage to other purposes after ten (10) years if parking utilization falls below specified thresholds (limits on City), Developer now proposes convertability of the garage only after a firm 20 years, and the Developer proposes that, if the City decides to convert the garage based on agreed upon occupancy thresholds, the Developer would have a right of first refusal to purchase the to-be-converted areas at fair market value, without regard to any other public uses that the City Commission may contemplate for such spaces.
(6) While NBTC has proposed accommodations in an effort to allow the Prima Pasta restaurant to continue to operate, these accommodations are not reflected in the term sheet, are pending ongoing refinement by NBTC, and are subject to review by the Fire Department and Building Department.
(7) At the request of the City, NBTC has modified the concept plan to provide for a single delivery/service drive from Abbott Avenue to Byron Avenue, to address the loading concerns previously raised by the Planning Department on multiple occasions.
(8) The Developer’s new proposal is for the project to be built as a single building structure, on land that is both publicly owned and privately owned, with the project to be condominiumized at completion. This legal structure is significantly different from the prior proposal, which contemplated the City garage being built as a separate structure, pursuant to a separate stand-alone construction contract, on separately owned land. The new structure raises certain complexities in connection with lender financing (as the project will partially be built on public land and cannot be liened or mortgaged) and in the event the Developer defaults. Developer has agreed that (1) the entire project between Abbott Avenue and Byron Avenue cannot be liened or encumbered; (2) Developer’s construction loan will identify collateral other than the Project, (3) Developer has further agreed that as a condition of closing, Developer will provide evidence of lender’s agreement to continue to fund the project (and thereby provide a “completion guarantee”) in the event the Developer defaults and the lender forecloses on that separate collateral; and (4) the Developer entity will be constituted as a “bankruptcy remote” entity with independent directors, to ensure that any decision to seek bankruptcy protection is made in good faith and is not arbitrary. In this regard, although as discussed more fully below, the Administration’s preference is for a structure that involves less development risk to the City, the Developer has attempted to address the City’s issues to the extent possible.
On July 20, 2018, the Developer submitted an Economic Assesment prepared by the RMA Economic Development Department (RMA) on behalf of Pacific Star Capital (Exhibit “E”). In summary, the highlights of the economic impacts of the Developer investments estimated by RMA are as follows:
· The estimated Ad Valorem impact to the City of Miami Beach for the project is estimated at $312,333 in the first year, and $3.5 million over 10 years.
· The proposed city investment is $9,758,480. This investment will result in both direct, and more importantly indirect and stimulated economic benefits for North Beach and the city. The total estimated cost of the project is $80 million, which will have a positive economic impact of over $92 million during construction. Following construction, the project will include retail, restaurant, office and residential uses which will generate over $59 million annually in the local economy.
· This economic activity will include an estimated almost $50 million annually in retail sales. This is retail spending that without this project, would likely occur outside of Miami Beach.
· The project is estimated to $1.115 million in from Building Permit Fees and $863,682 in Transportation Concurrency Fees, in addition to $220,000 in Art in Public Places funding. [Note: Building fees offset the cost of building permitting and inspection services and, therefore represent no net revenues to the City. Transportation Concurrency fees similarly represent the development’s share of transportation improvements associated with the number of trips generated by the development.]
The report also puts forward the premise that other projects will follow this project and may easily represent an additional $81 million in new investment into the area, creating new residential units and business opportunities, and supporting the City’s tax base with an additional +$8 million in Ad Valorem Taxes over the next twenty years.