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
D e v e l o p m e n t
C o r p o r a t i o n
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
D e v e l o p m e n t
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
D e v e l o p m e n t
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-
d e v e l o p m e n t
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
1m
17:
41
FAX
3059955340
PAD
C 1 4 1 0 0 2L
eebles
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
10 0
S
E
S e c o n d Sree
461h
Foo
M i a m i ,
FL
3 3 1 3 1
3 0 5
995
5330
305
995
5 3 4 0
Fax
J a n u a r y5
9 9 9 Ms . Chr i s t i na
C u e r v o
A s s i s t a n t
Cty
M a n a g e r
CtY of
Miam i
Beach,
Forida
Dea
Ms.
Cuervo:
ThiS letter
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
8/15/2019 002-1999 LTC
6/10
12
28/
9 8
M O N
12 :
37
A X
3059955340
P~
0 0 1
P E E B L E S
A
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
N A T I O N S B A N K
TOWER
100
S
E .
S E C O N D
S T R E E T
S U I T E
4 6 5 0
M I A M I ,
F L O R I D A
3 3 1 3 1
T E L E P H O N E :
3 0 5 ~
9 9 5 ~
5 3 3 0
F A C S I M I L E
0 5 -
995-
5 3 4 0
D A T E : '2.
12.
11 ~
f
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7/10
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12
3
A X
3059955340
PAD
C
141002
P 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 f i o n
1 0 0S
E
e c o n d
S t r e e t
46h
Floo
Mam.
F
33131
305
995
5330
3 0 5
995
5340
F a x
D e c e m b e r
22
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 -
d e v e l o p m e n t
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
d e v e l o p m e n t
proects.
R e g a r d i n g
project
timng,
gven
the
yriad of
d e v e l o p m e n t
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
d e v e l o p m e n t
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
d e v e l o p m e n t
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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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 v e l o p m e n t
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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