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HomeMy WebLinkAboutItem #47 - Discussion Itemw a TO. FROM: 0 CITY OF MIAMI, FLORIDA INTER -OFFICE MEMORANDUM Honorable Mayor and Members of the City Commission E ward Marq ez City Manager • 17 7 DATE: "� ! . �`'`' FILE: SUBJECT: Discussion Item Regarding 1000 South Miami Avenue - Firehouse Four Restaurant REFERENCES:- City Commission Agenda ENCLOSURES: October 28, 1997 At the City Commission meeting of October 14, 1997, Carlos Alamilla was instructed to present a formal and final offer for the City -owned property located at 1000 South Miami Avenue, formerly known as Firehouse Four Restaurant, to the City Manager for presentation to the City Commission. The following is a summary of pertinent terms contained in the proposed Lease Agreement submitted by Alamilla & Associates, Inc. on October 17, 1097. Proposed Lease Terms: • . Lease entity shall possess adequate financial resources for proper performance of all tenant obligations under the Lease • Leasehold improvements are $316,000 • Rent: Comments: No evidence of financing as required in the RFP. Staff recommends that a firm commitment should be in place from the lending institution based on terms outlined in Mr. Alamilla's Lease,. subject to execution of the Lease and personal guarantees. Above RFP response • Minimum Annual Rent Monthly Payment Upon possession of premises and full Commencement Date is the first day of execution of Lease, Alamilla & Assoc. the 7th month of the Lease will pay $19,125. which is the first six months rent. This amount represents 50% reduction in rent as provided for in the RFP. • 50% reduction in rent for the first six months of the lease term • Seeks rent abatement for up to 60 days until completion of leasehold improvements In accord with the RFP No explanation is provided as to how this abatement is to be taken S s • Security Deposit • Lien for Rent • Payment and Performance Bond • Letter of Credit for Furniture, Fixtures and Equipment • Transfer • Leasehold Mortgage Provision None Leasehold improvements shall serve as security deposit.. However, lease also states that leasehold improvements be used as collateral for leasehold mortgage. This would put the City in second position behind the leasehold mortgage. Wants City to waive the lien for rent in favor of lending institution. City would have to subordinate its right to lien the personal property to the lending institution. City does not have right to approve source of bond. Does not provide for payment to City for all losses, damages, expenses, costs and attorneys fees that City sustains because of a default by tenant. None Tenant wants permission to assign the lease without meeting applicable criteria and going through the appropriate City review. - Any transfer must be subject to City's review and consent. City reserves the right to review and modify. The items above represent major business points for the City. Should the City Commission authorize staff to proceed with finalizing a lease agreement with Alamilla & Associates Inc., all other . portions of his proposed lease would be subject to legal review and further negotiations. �i5rsa5S�— 2 0 CITY OF MIAMI, FLORIDA • INTER -OFFICE MEMORANDUM TO: Honorable Mayor and Members DATE: of the City Commission SUBJECT: 00 � FROM: V REFERENCES: Edward Ma q Z ENCLOSURES: City Mana OCT n I !99 FILE 1000 South Miami Avenue (Firehouse Four) In the event the City Commission elects not to proceed to negotiate a lease with Alamilla and Associates, Inc. for the leasing of the property located at 1000 South Miami Avenue, Miami, Florida (the "Property"), it is hereby recommended that the City Commission authorize the administration to prepare a Request for Proposal (RFP) for the leasing of the Property. After reviewing the benefits and disadvantages associated with a sale or lease of the Property, I have determined that. leasing the Property is more advantageous. Attached hereto is a summary of the issues reviewed and the concerns related to each issue. While leasing the Property does increase the risk associated to the City, the risk is viewed as minimal due to the positive market conditions and the anticipated growth of the. area. Additionally, based on previous directives from the Commission to investigate the hiring of brokers, I recommend employing a broker under a phased contract basis to be paid a flat fee in an amount not to exceed $45,000. The broker would be paid in phases as follows: 1) Upon providing input in the appraisal process, assisting in drafting the RFP and preparing marketing literature 2) Upon marketing the Property to prospective lessees. 3) Upon receipt of three bids by the City. SALE VS. LEASE 1000 SOUTH MIAMI AVENUE (FIREHOUSE FOUR) ISSUE SALE LEASE ECONOMIC RETURN TO CITY Immediate Return at Closing Estimated 10% return on investment over 15 year lease term while retaining real estate asset. Sharing in business success could increase return to City. SHARE IN BUSINESS SUCCESS None a) Yes when property is used as restaurant. By establishing percentage rent to share in gross revenues after an established breakpoint, City can share in business success. b) No sharing in business success if property is used for offices. RECURRING REVENUE STREAM None Continuous return during lease term RISK Minimal; risk ends at closing On -going risk. Business Risk None. Poor management skills particularly in marketing and financial management and responding to market demands by tenant Economic Risk Risk ends at closing Economic changes including changes in demographics, income levels and population could affect business gross revenues Financial Risk Risk ends at closing Ability of lessee to secure capital for improvements and have sufficient reserves to meet cash flows particularly during start-up of business and during downtimes in market REAL ESTATE MARKET Strong; good potential to close sale Strong; good potential to execute lease with favorable returns to City. Proposers view City more optimistically than at time initial RFP was issued DISPOSITION PROCESS Requires issuance of Invitation to Bid which Same as sale. must be out for 90 days. CITY EXPENSE One-time cost related to issuance of bid. Minimal costs incurred related to issuance of bid plus minimal ongoing costs related to management of lease agreement, ie. rent collection and monitoring compliance with lease TAXES Taxable Taxable Ul Page 1 11 •