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Home My WebLink AboutR-93-0179J-93-176 3/11/93 93- 179 RESOLUTION NO. A RESOLUTION CONDITIONALLY ACCEPTING, SUBJECT, AMONG OTHER PREREQUISITES, TO THE SUBSEQUENT APPROVAL OF A CONTRACT AS SET FORTH HEREIN, AND WITHOUT GRANTING ANY VESTED RIGHTS OR OTHER RIGHT, TITLE OR INTEREST OF 4 ANY HIND TO THE PROPOSER HEREINAFTER NAMED BY VIRTUE OF THIS RESOLUTION OR OTHERWISE, THE AMENDED PROPOSAL OF GUSMAN CENTER -PARTNERS FOR THE UNIFIED DEVELOPMENT, INCLUDING PLANNING AND DESIGN, CONSTRUCTION, LEASING AND MANAGEMENT, OF THE OLYMPIA BUILDING, LOCATED ON CITY -OWNED PROPERTY AT 174 EAST FLAGLER STREET, MIAMI, FLORIDA, FOR RESIDENTIAL AND ANCILLARY RETAIL USE OF APPROXIMATELY 46,000 SQUARE FEET (THE "DEVELOPMENT"); AUTHORIZING AND DIRECTING THE CITY MANAGER AND THE CITY ATTORNEY TO NEGOTIATE A PROPOSED CONTRACT WITH GUSMAN CENTER -PARTNERS FOR SAID DEVELOPMENT, SUCH PROPOSED CONTRACT TO PROVIDE FOR RENTAL PAYMENTS TO THE CITY TO BE A PERCENTAGE OF GROSS REVENUES OF THE DEVELOPMENT, SUBJECT FURTHER TO THE REQUIREMENTS SET FORTH IN THE REQUEST FOR PROPOSAL AND IN THE CITY CHARTER; AND FURTHER DIRECTING THE CITY MANAGER TO PRESENT THE NEGOTIATED PROPOSED CONTRACT TO THE CITY COMMISSION AS SOON AS PRACTICABLE FOR CONSIDERATION AND, IF DEEMED ACCEPTABLE BY THE CITY COMMISSION, APPROVAL AND AWARD OF THE FINAL CONTRACT BY THE CITY COMMISSION PRIOR TO THE EXECUTION THEREOF. WHEREAS, the City Commission determined in October, 1992, that it is advantageous to the City to redevelop the City -owned Olympia Building containing approximately 45,000 square feet as a unified development project, and authorized the issuance of a request for proposals, selected a certified public accounting firm and appointed members of a review committee; and CITY COMMISSION MEETING OF MAR 1 1 1993 FASautim No. 93- 179 WHEREAS, the request for proposals for the unified development project contained speoifio evaluation criteria to be used by the certified public accounting firm and the review oommittee; and WHEREAS, one proposal was reoeived by Miami Parking System in response to the request for proposals on January 22, 1993, the published date for receipt of proposals; and WHEREAS, the certified public accounting firm's report to the City Manager analyzed the proposals based on the financial viability of the proposed development team and its proposed financial strategy, assessed the short and long range economic and fiscal returns to the City, assessed the proposer's market analysis and conclusions regarding scale and mix of commercial and residential facilities, evaluated the economic feasibility of the proposed developments, and rendered its written report to the City Manager; and WHEREAS, the review committee received the presentation of the proposer and input from the public, and, after extensive analysis and discussion of the proposal, rendered a written report to the City Manager containing an evaluation of the proposal based on the specific evaluation criteria included in the request for proposals; and WHEREAS, the committee recommended that the GBSMAN CENTER -PARTNERS proposal be selected by the City Manager to continue through the unified development process, subject to certain caveats as set forth in its committee report; and 99- 179 -2- WHEREAS, the City Manager, El taping into consideration the findings of the certified public accounting firm and the evaluations of the review committee, recommended the acceptance of the GUSMAN CENTER -PARTNERS proposal for the Olympia Building redevelopment; NOW, THEREFORE, BE IT RESOLVED BY THE COMMISSION OF THE CITY OF MIAMI, FLORIDA: Section 1. The recitals and findings contained in the Preamble to this Resolution are hereby adopted by reference thereto and incorporated herein as if fully set forth in this Section. Section a. The amended proposal of GUSMAN CENTER -PARTNERS for the unified development, including planning and design, construction, leasing and management, of the Olympia Building, looated on City -owned property at 174 East Flagler Street, Miami, Florida, for residential and ancillary retail use for approximately 45,000 square feet, is hereby conditionally accepted, without granting any vested rights or other right, title or interest of any kind to the proposer by virtue of this Resolution or otherwise, and without awarding the contract to the proposer, subjeot, among other prerequisites, to the subsequent approval by the City Commission of a proposed contract as set forth herein. Section 3. The City Manager and the City Attorney are hereby authorized and directed to negotiate a proposed contract with GUSMAN CENTER -PARTNERS for said development, subjeot to the requirements set forth in the Request for Proposal and the City 93- 179 r- Charter, and further subject to the requirement that the proposed contract shall provide that rental payments to the City shall be — — a percentage of the gross revenues of the development. Section 4. The City Manager is further directed to present the negotiated proposed contract to the City Commission as Boon as practicable for consideration and, if deemed acceptable by the City Commission, approval and "ard of the final contract to the GUSMAN CENTER -PARTNERS by the City - Commission prior to the execution thereof. Section S. This Resolution shall become effective` immediately upon its adoption. PASSED AND ADOPTED this _11th day of KAVIER L. SUARE MAYOR = ATTE - i MATTY HIRAI -_ CITY CLERK PREPARED AND APPROVED BY: MIRIAM IAER CHIEF ASSISTANT CITY ATTORNEY APPROVED AS TO FORM AND CORRECTNESS: -- 4AQ r MOS, III CITY ATTO Y'- Nit bss:osk:M3468 .- -i 93- 179 -4- '� • 37 TOz Honorable Mayor and Memb*jW of the City Commission Cit Miami FROM: Cesar Odio City Manager City of Miami DATE: February 25,1993 SUBJECT: Award of Bid for Unified Developmment of Olympia Building It is respectfully recommended that the City Commission adopt the attached resolution, with attachments, authorizing acceptance of the proposal from Guemtan Center Partners to redevelop the Olympia Building. krurther authorizing the City Manager and the City Attorney to proceed with contract negotiations with said company. On October 8, 1992, the City of Miami Commission adopted Resolution No. 92-649 which authorized the issuance of a Request for Proposals for the Unified Development of the Olympia Building. One proposal, from Gusman Center Partners, was received by the submittal deadline of January 22, 1993. The City Attorneys Office determined that the bid was responsive and it was submitted to the Review Committee established by the Commission for their -consideration. . After reviewing the proposal, the Committee met on February 10 and 17, 1993, foi discussion and evaluation. Representatives from Gusman tenter Partners were at the second meeting and answered questions from the Committee and the certified public accounting firm of KPMG Peat Marwick. At the conclusion of that meeting the Committee voted unanimously to recommend acceptance of the proposal. The City Manager has reviewed the Committee Report and the report from KPMG Peat Marwick concurs with their recommendation. 93- 179 ,37- l 0 E Unified Development Proposal for the YMPIA Bi.,ILDING 174 East I+'lagler Street Downtown Miami REVIEW COMMITTEE FINAL REPORT To The CITY MANAGER March 1, 1993 93- 179 3 K February 26, 1993 Mr. Cesar H. ©dio City Manager City of Miami P.O. Box 330708 Miami, FL 33133 Dear Mr. Odio: At the direction of the City of Miami Commission, the Miami Parking System issued a Request for Proposals for a Unified Development Project (UDP) for the Olympia Building component of Gusman Center for the Performing Arts. The purpose of the UDP was for adaptive reuse of the Olympia Building as affordable housing plus ancillary retail, restaurant, and cultural use. Several submissions were anticipated; however, only one was presented by the deadline of January 22, 1993, from Gusman Center Partners. The proposer plans to completely rehabilitate floors three through ten of the Olympia Building into a total of 96 single- and double - occupancy residence units; to restore the structure's facade to the high standards required for its National Register of Historic Places status; and to revamp the Olympia entrance, storefronts and retail spaces. Residential units will rent for $399.00. It is assumed that lease rates on ground floor retail will be increased to full market rates once leases expire in 1995 and 1996. The plan includes complete electrical system replacement, with the addition of a vault separating the Olympia's power from that of the Theater; revamped plumbing systems, which will also be separate from the Theater; and new, central HVAC. The eleven -person Review Committee appointed by the City Commission convened twice, concluding its evaluation on February 17, 1993. The enclosed Final Report summarizes the Committee's deliberations and conclusions. In carrying out its responsibilities in accordance withsection 53(c) of the City Charter and Code, the Review Committee evaluated criteria specified in the Request for Proposals. Financial aspects of the GCP proposal have been evaluated independently by the accounting firm KPMG Peat Marwick, whose report is being submitted to the Commission separately. After thorough analysis and discussion, the Review Committee voted a unanimously to recommend that Guzman Center Partners' proposal be selected by the City Commission to continue through the UDP process, subject to certain caveats enumerated in the attached Committee Report. ell, Chairm n - ling UDP Review Committee 93- 179 Olympia Building Unified Development Proposal MEMBERS OF THE REVIEW COMMITTEE Members of the Public: Michael Maxwell, Chairman Michael Maxwell Associates and Friends of Gunman Seth Gordon Seth Gordon Associates Terry V. Percy, Esq. Sergio Rok Kathy Sigler Raul Tercilla Ralph Diaz Sarah Eaton Jack Luft Eduardo Rodriguez._ Arlene Weintraub City Attorney G. Miriam Maer Attorney at Law Rok Enterprises (for appointee Natan Rok) Miami Dade Community College, Wolfson Campus Bayside / Rouse Management and DMBA City Attorney f s Office Historic Preservation Off. Urban Design Division Finance Department Neighborhood Enhancement Team City Attorney"s office Agcountant KPGM Peat Marwick, in association with Grau & Co. 99=- 179 Wi TABLE OF CONTENTS EXECUTIVESUIIMARY.....................................»...Rage 2 GENERALS V i`L[7AStY • . • • e • • . • • w • • • • • • • • • • • • • . . • • V • • . • • • • • • w • • • • 4 PROCEEDINGS ................ 5 EVALUATIONMETHODOLOGY ..............•...,................. 7 VOTINGPROCESS AND RESULTS .......... ...................... 8 DISCUSSION..................... s 1. Experience of Proposer and Capability of Development Team ................................ e 2. Financial Capability, Level of Financial Commitment .......................... •........ ... 11 3• Financial Return to the City ...................... 12 4. Overall Project Design ............................ 15 5. Accomodation for Gusman Administrative Offices and Arts Tenants ................................ 17 f. Extent of Minority Participation.................. is APPENDIX Notices and Transcripts of Review Committee Meetings. A-1 Questions to Proposer with Proposers Answers........ A-2 Subsequent Proposer Responses ........................ A-3 93- 179 �0 EXECUTIVE SUMMARY O rm ice. a Building_An led Devel ent�. ev era Committee An January 22, 1993, Miami Parking System received one proposal for the redevelopment of the Olympia Building from Gusman Center Partners (GCP) as a unified Development Project. a GCP to convert eight floors of the 10--story Olympia Building into 96 affordable housing units, (269 to 412 square -foot efficiency and one -bedroom apartments) at an average rent of $399/month. Target market: student populations at Miami Dade/Wolfson, New World School, and Jackson Memorial/Medical Campus. Lease rates for ground floor retail will increase to market rates (estimated at $87/foot) in 1994 and 1995. o Total project cost estimated at $4.5 million. Total capital contribution is $2,242,000, consisting of $242,000 cash from partnership and $2,000,000 cash proceeds from sale of tax credits. Debt to equity is 50%. o Improvements include upgrade of all major systems including elevator, plumbing, HVAC, electrical and fire protection systems. Operationally and functionally, the Olympia Building and Gusman Theater would separate. The Review Committee met twice in February to evaluate the proposal's responsiveness to six established criteria. Committee's findings were as follows: o EXPERIENCE AND CAPABILITY. GCP's ability to execute the project successfully was deemed very strong. - The developer, Seaboard Capital, completed projects totalling over $85 million including affordable housing and conversion of historic properties. - Strong local team with national reputation: MorseDiesel (contractor), R.J. Heisenbottle (architect), CM properties (leasing management company), and Arva Parks (historical consultant). o FINANCIAL CAPABILITY AND COMMITMENT: KPMG Peat Marwick is forwarding a separate report to the City Manager for review. - GCP has demonstrated success in obtaining construction financing, and housing and historic preservation tax credits "Letter of interest" from of Homes of South Florida to T provide financing o FINANCIAL RETURN TO THE CITY: KPMG Peat Marwick's report addresses this issue in detail. 2 93- 179 �'.` - Cumulative $650,000 guaranteed full recourse lease payment over first four years; thereafter City/GCP split net operating profit 50-50. -- Building's emergency need for major cash infusion ($3..1 million minimum) is key reason to pursue this venture. Committee recommends short-term cash flow &nd need for capital improvements must be considered jointly in determining whether to move forward - Benefits to City include positive impact of downtown housing, 24-hour activity, and preservation of an important historic structure o PROJECT DESIGN: Committee approved design concept with some reservations to be addressed in lease negotiation. - Need greater attention to innovative space planning and design for units of such limited size - GCP to work closely with Miami/Dade and Gusman Center to develop an attractive amenities package including rooftop facilities (if structurally viable), hi -tech security systems, and an amenities package to make units competitive with other properties available to the student market. o ACCOMMODATION OF GUSMAN OFFICES AND ARTS TENANTS: - GCP committed to assisting Gusman Center with finding office space in close proximity to the theater, GCP will assist arts tenants in locating comparable space within the vicinity of Gusman Center and to provide them reasonable financial assistance for the replacement of tenant improvements they have made to the Olympia Building. o KINORITY PARTICIPATION: Committee stressed that lease agreement must hold GCP to compliance with all City minority procurement legislation. Although none of the firms on the development team were certified as minority - owned firms by the City prior to the submission deadline, Committee generally approved of the team's minority representation. - Of total partnership equity, 25% is held by a minority or female partner. - GCP fully commits in the proposal to comply with City Ordinance No. 10538. Several proposed sub -contractors a are minority firms. Based on the above, the Review Committee voted unanimously to recommend the GCP proposal to the City Manager, with the stipulation that all concerns voiced by the Committee during its deliberations would be addressed satisfactorily by the proposer prior tb'executing a final lease agreement. =' 3 93- 179 GVNEPAL SUMMARY =j On October B, 1992, by Resolution No. 92-649, the City Commission authorized issuance of a Request for Proposals (RFP) for a Unified Development Project (UDP) for the adaptive reuse of the Olympia Building component of the Gusman Center into affordable housing and ancillary retail, restaurant, a►nd cultural use. This Resolution also appointed eleven members to a Review Committee to evaluate proposals and to render a written report of its findings to the— J City Manager, as required by Section 53(c) of the City Charter and Code for Unified Development Projects. The UDP process for the Olympia Building anticipated several - -• submissions in response to the RFP•: However, only one proposal was submitted on January 22, 1993, the published date of receipt for proposals, and was delivered by Gusman Center Partners (GCP). In - accordance with Section 53(c) of the City Charter and Code, the Review Committee evaluated the proposal based on the criteria - r �! specified in the RFP. (Because the project is designed as -== affordable housing, the City's three -bid rule does not apply. This = point was clearly stated for all possible applicants in the RFP, Section II, Page 2.) The Committee determined at its first meeting on February 10, 1993, that the proposed point system would not be - an effective method of scoring since only one proposal was - received, and there was no basis for comparative assessment. _ However, the Committee agreed to prepare a narrative assessment and -� 4 _= 93- 179 evaluation of the proposal based on the criteria outlined in the RFP, and to forward this report to the City Manager. The Review Committee voted unanimously to recommend to the City Manager that the proposal submitted by Gasman Center Partners be sselocted by the City Commission to continue through the Unified Development Process. This Final Report includes information about the Review Committee, its proceedings, deliberations, and comments to be considered as a part of the negotiations for a lease agreement that would be executed between Gusman Center Partners and the City of Miami. PROCEEDINGS Throughout the proceedings, the Committee observed requirements as set forth in the "Government in the Sunshine" Law and "Public Records" Act. A 10-day rule for public notice of scheduled meeting dates was observed. All meetings were duly recorded. Summary transcripts of the meetings are included in the Appendix: refer to The Review Committee net wtice. The first meeting, on February 10, 1993, dealt with procedural matters; presentation of initial staff analysis of the proposal; presentation of initial findings by the certified public accounting firm; and developed a list of questions 5 I D 93-- 179. for the proposer to answer at the subsequent Committee meeting. The second meeting was held on February li, 1993. it was determined that the Connitee would finalize its decision on this day. The certified public accounting firm of KPMG Peat Marwick introduced its analysis of the proposal, and remained available for questions from the Committee. GCP then made a verbal presentations as had been requested in writing, and addressed the specific questions developed by the — Committee at its first meeting (see Appendices A-1 and A-2). Further dialogue between the Committee and proposer about the issues involved prompted a mutual agreement for the proposer to respond in writing with clarifications and more in-depth -a information on certain points (see Appendix A-�3). The Committee then voted unanimously to recommend the proposal from Gusman Center Partners to the City Commission for completion of the UDP process, with the stipulation that all points raised by the Committee be addressed satisfactorily prior to a final lease agreement. Staff was directed to prepare the required report for signature by the Review Commttee Chairman, for review by the City Attorney, and to submit it to the City Manager by March 1, 1993, so the Manager's recommendation can go before the City Commission on March 11, 1993. 6 93- 179 LI EVALUATION METHODOLOGY The City of Miami Charter and Code, Section 53(c), Unified Development Projects (UDP), requires the Review Committee to "evaluate each proposal based solely on the evaluation criteria applicable to said Review Committee contained in the Request for Proposals." The applicable criteria and percentage weighting as issued in the RFP were as follows: 1. Experience of the proposer and capability of the development team .................. ..........20%(20 pts.) 2. Financial capability, level of financial commitment.................................20% (20 pts.) 3. Financial return to the City.................25% (25 pts.) 4. Overall project design .......................15% (15 pts.) 5. Accomodation for Gusman administrative offices and arts tenants.....................5% (5 pts.) 6. Extent of minority participation ............. 15% (15 pts.) Because only one proposal was submitted, the Committee determined that it would formulate a narrative assessment (rather than a rank order based on weighted percentage points) as to whether the l proposal should be recommended to the City Manager. All evaluation criteria specified in the RFP were considered by each Committee member prior to voting. - 4 lti 93- 179 dr- VOTI iG PROCESS AND RESULTS The Review Committee voted unanimously, 11 - 0, to recommend to the City Manager that the proposal submitted by Gusman Center Partners be selected by the City Commission to move forward through the Unified Development process. As each member cast his and her respective vote in favor of the project, the opportunity was taken to state any reservations or concerns that should be incorporated in the Committee report. DISCUSSION The following is organized by the evaluation criteria issued in the Request for Proposals, and summarizes the Committee's reasoning substantiating its recommendations for acceptance of the Gusman Center Partners proposal. Comments and concerns previously discussed and expressed when the final vote was taken are incorporated. It should be noted that comments included do not ref lect Committee action by vote of its members, but were presented as topics for consideration in the lease negotiation process. 3r . tea. lot Qualifications of the proposer team were well supported in the proposal. Although Gusman Center Partners is a business entity newly-forned for this project, its partners, architect, general s 99— 179 13 l VOTING PROCESS BIND RESULTS The Review Committee voted unanimously, 11 - 01 to recommend to the City Manager that the proposal submitted by Gusman Center Partners be selected by the City Commission to move forward through the Unified Development process. As each member cast his and her respective vote in favor of the project, the opportunity was taken to state any reservations or concerns that should be incorporated in the Committee report. DISCUSSION The following is organized by the evaluation criteria issued in the Request for Proposals, and summarizes the Committee's reasoning substantiating its recommendations for acceptance of the Gusman Center Partners proposal. Comments and concerns previously discussed and expressed when the final vote was taken are incorporated. It should be noted that comments included do not reflect Committee action by vote of its members, but were presented as topics for consideration in the lease negotiation process. 1. Experience of the ur0R01er and capability of the developmgnt team: 20% Qualifications of the proposer team were well supported in the proposal. Although Gusman Center Partners is a business entity newly -formed for this project, its partners, architect, general 8 93-- 1'79 13 i -16 contractor and sub -contractors provide the necessary expertise and track records in all phases of the project. Mr. Patrick Gallagher, principal of Seaboard Capital Group, Inc., the major (49%) limited partner, has completed renovation and conversion projects to residential and commercial use in recent years with a combined value in excess of $85 million, primarily in the Chicago area. Several of these projects involve affordable housing or historic properties, and entailed the use of housing and historic preservation tax credits. Mr. Gallagher also has experience in the Miami CBD, having purchased and sold the DuPont Building across F'lagler Street from the Olympia. Mr. Emilio Cruz, a 22.5% partner, has experience in the Miami are in developing affordable housing. Project architect R.J. Heisenbottle Architects, P.A., has performed an impressive range of restoration and adaptive reuse projects, is widely published as a restoration architect and has worked with several of South Floridal's important historic structures, including the Freedom Tower, and continues to serve as chief restoration architect for Gusman Center for the Performing Arts. Over the past five years, he has provided architectural services for over $3.5 million in historic restoration and theatrical improvements at Gusman Center. Maurice Gray Associates, the project"s civil and structural 9 j-. 14 93- 179 engineering firm, has worked on the same buildings, as well as on _ the amain building of Ellis Island in NYC. Mechanical engineering will be handled by Lagomasino, Vital Associates, P.A., who have worked locally on Coral Gables' New French Village, the Coronado Towers Condominium, and others. Interior design firm Howard-Luares Associates numbers Williams Island, Norwegian Cruise Lines and worldwide association with Sheraton, Marriott and Hilton Hotels among its clientele. Arva Parks & Company has been involved in historic preservation in South Florida since 1970, including recent -- work on Harry Truman's "Little White House" in Key West, the Charles Deering Estate, the Barnacle and on the Florida Governor's Mansion. MorseDiesel International, the project's general contractor, has built projects from coast to coast totalling in excess of $& billion. Included have been Avery Fisher Hall, the National Gallery of Art, Chicago's .Sears Tower, and the Doral Saturnia Spa. C.I. Properties' lease/management qualifications include over fourteen years' experience in the management of residential and retail properties in South Florida (see Appendix A-3). Although a restaurant component was included as a possibility in the RFP, GCP elected to hold off on redeveloping the ground level retail spaces until current leaseholds run out, and thus is not in a position to suggest a restaurant possibility, or restauranteur. 10 93- 179 /S 2—. Financial capability, Jeygi_pf f nanciai commitment: 20 Gusman Center Partners is a Florida partnership newly formed specifically for this project, and as such has no track record. However, as has been pointed out, its principals have successful experience with many similar development projects. The equity capital contribution is proposed as $242,000 from the general and limited partners, which represents 5% of the total project. The financial statements submitted for limited partners Daniel Mones, Richard and Shari Wiles, and Emilio Cruz, III, were reviewed by KPMG Peat Marwick to determine the partnershipfs access to capital (see KPMG Peat Marwick Report). A letter from Homes for South Florida, a consortium of thirteen banks providing financing for community, affordable housing and economic development, states its interest in "reviewing and considering the provision of appropriate private (bank) financing" for this project. Federal investment tax credits are available for this project in two areas: affordable housing, and historic preservation. It is understood that once acquired by GCP, these tax credits will be ,sold for approximately $2 million, or 44% of the total project. The proceeds will be used for equity capital for construction costs; conventional (bank) financing of approximately $2,228,000 will be 11 � f s 1 93- 179 sought, accounting for 49% of the total project. KPMG Peat Marwick reported a preliminary favorable review of the projectfs financial feasibility, based on the proposal's documentation. Several individual Committee members concurred with, this analysis. Because the proposed strategy, including use of investment tax credits, has been employed successfully on numerous projects by Mr. Gallagher, principal of the Seaboard Capital Group, Inc., the financing strategy was deemed sound by the Review Committee and was accepted, with the caveat that KPMG Peat Marwick forward a written final report to the City Manager for his consideration. A Certificate of Insurance in the amount of $5 million for general aggregate coverage of MorseDiesel was included in the proposal, as required. The Committee also deemed the project timetable submitted with the proposal as reasonable and achievable. 3. Financial return to the City: 25% Two options were presented as pro-formas for consideration: the first assumed a "Taxable Leasehold Estate," and the second a "Non - Taxable Leasehold Estate." Assuming no ad -valorem taxes are in place for the property, the Committee responses are based on the proposer's pro -forma 2. 1.2 93-- 179 t WN MI"M Pro -forma 2 guarantees return to the City in the first four years of the project in the amounts of $125,000 in year one, $150,000 in year two, $175,000 in year three, and $200,000 in year four, totalling $650,000. Thereafter, the City and GCP will split net operating profit 50-50. Given all financial considerations, the Committee perceived this amount as "generous," amounting to 30.25% of gross anticipated rental revenues and approximately 50% of net cash flow before lease payments after the first four years. Total estimated cost of the project is $4.5 million. The proposed lease term is 40 years, although GCP indicated a need to negotiate a longer lease term (50 years) if such becomes a requirement for acquiring the tax credits available. GCP has guaranteed that no debt subordination will occur, and that full recourse to the partners is assured for the first four years' $650,000 lease payment to the City. Also, while no capital replacement reserve was initially proposed, GCP stated that the margin of return for the partners will be satisfactory enough for them to commit to building a capital reserve fund. GCP proposes to restructure floors three through ten of the Olympia Building into 96 units of affordable housing, ranging from 296 to 412 square feet per unit, at rental rate of $399 per month. The ground floor retail areas on Plagler and SE 2nd Avenue will be restored as currant leases expire, with new lease rates proposed that are within established downtown CBD parameters. 13 fig' 93- 179 w The focus of marketing efforts will be the downtown student population, specifically of Miami Dade Wolfson Campus. Committee member Dx. Kathy Sigler of MDCC stressed the serious need for student housing for her campus's 20,000 students, reiterating the College's inability to provide living quarters. She indicated that the proximity of the Olympia project is most favorable. Acceptance of this proposal will provide the City of Miami with important benefits beyond the cash income, as was made clear by several Committee members. The thrust of their comments came in answer to the "what if we don't proceed" question based on a recent study by Maurice Gray Associates indicating the Olympia required some $3.1 million to bring it to useable quality. The Committee pointed out in discussion that: +� First, the present deteriorated condition of the Olympia Building demands replacement of its aged infrastructure if it is to have any kind of viable life, whatever its intended use. * Second, continued deterioration means more, and more costly, repairs (the manually -operated elevators, as but one example) on an ongoing basis. * Third, because of the building's continually -escalating poor condition, the City runs a growing risk of liability. * And fourth, as a property listed on the stational Register of Historic Places and an integral part of the history of Miami, the further risk of losing one of the most important structures in all of South Florida looms if the Olympia remains neglected. In short, 14 . 93- 179 �n the Review Committee believes that removing all these risk factors from City responsibility alone provides a compelling argument in - 4 favor of accepting this proposal. 3 Other benefits to the City include: seriously -reduced utilit6 costs providing significant savings to Gusman Center; Gusman staffs ability to concentrate all its efforts on Theater — operations and maintenance, creating manpower and outside services _ savings plus more efficient management; Theater improvement and restoration becoming concentrated projects not entangled with the - Olympia Building component, improving funding as well as marketing _ positions; and the enhancement to downtown in general from a _F restored facade and addition of the CBD's first 24-hour residential life. _ -= The development schedule as presented poses no unmanageable problems to the operation of Gusman Center and the Theater, with the construction phase set to begin (at the earliest) in July, _ 1993, and continue to completion in April, 1994. July/August are traditional "down times" used for Theater restoration, so the start date for construction can be flexible. — 4. Overall project design: 15% =f The Committee found that the proposal fulfilled the project design objectives as stated in the RFP. Further, the Downtown Master Plan, - - -p -� 15 - 93- 179. upon which certain assumptions in the RFP were based, includes a strong plea for residential units in the CBD to create a 24-hour living presence. The GCPJUDP proposal fits directly into the Plan; the Committee feels this project can in fact serve an a catalyst for more downtown residential development, which in turn will spawn needs for support services. Separation of the Olympia's utilities from those of the Gusman Center Theater is part of the plan, and complete replacement of all electrical, plumbing and HVAC, along with interior historic and other mechanical (replacement of the elevators, e.g.) and cosmetic treatment, will also be accomplished. While the apartments were understood to be small in square footage, their design includes individual -unit baths and kitchens, with charred laundry facilities and trash disposal services. The Committee suggested GCP flesh out its proposal to include an amenities package for tenants, which should include attention to the roof as a sundeck, certain "mental amenities" such as computer hook-up, and reduced -cost parking. These points were subsequently addressed by GCP, in Appendix A-3. A quality security system to protect the tenant population was also discussed at. length. Understanding that security design is premature at this stage, the Committee urged GDC to implement a thorough system, properly monitored, including both electronic and human guard elements. The proposer agreed to this serious consideration, and will make 16 93- 179 Ipt installation, monitoring and maintenance of security a high - priority. The Olympia facade will be repaired and revised according to the Secretary of the Interior's standards for Rehabilitation, which will include restoration of street -level storefronts (including returning of the Olympia entrance to its original, 2nd Avenue position), and replacement of all window units to original design. All this is complementary to the Theater, and is welcomed by staff, the City and the State of Florida Historic Preservation officers, and by the local historic preservation community. The Committee unanimously endorsed the general concept, including the apartments, the historic restoration plan and the separation of utilities. Some items in the list of 14 questions drafted in the first Commitee meeting pointed up design concerns, which were addressed (see. Appendix A-1). An additional list of eight items (some regarding design) was suggested for further attention by the proposer, who subsequently responded, and that information is included as Appendix A-3. 5% Accomodating Gusman administration with approximately 2,500 square feet for its offices and operations cannot be done within the 17 �r i or Olympia Building, for economic reasons. GCP has attempted to work through this situation by exploring office facilities in close -= proximity to the Theater that could provide the needed apace 73 without creating a distance problem. (See Appendix A-3.) The arts colony tenants' current spaces also cannot be accomodated for economic reasons. The initial GCP proposal suggests three alternatives, none that appear economically feasibile for the arts groups. However, in Appendix A-3, GCP states its willingness to provide a reasonmable amount of financial assistance to arts colony tenants, particularly where money has been spent on improvements, some of it in the form of grants. Nearly 25% (in dollars) of the Gusman Center Partnerst partnership percentage includes Latin and female minorities, which are equity holdings. On the development team, Afro-American, Latin and/or female participation includes as principals: the civil engineer, the mechanical -electrical engineer, the historic preservation consultant, and the lease -management services company. In Appendices A-1 and A-3, GCP responds to this issue further. It was the wish of the Committee that GCP aggressively pursue and adhere to all aspects of minority participation, including procurement policies. While GCP cited time restraints in not being able to obtain City 18 93- 1'79 9 , 2. certification of minority participation forms prior to submission as requested in the RFF, included in the proposal and in their presentation was acknowledgement of receipt and intent to.comply with all provisions of City ordinance No. 10538. E M APPENDIX A-1 3 - 9 179 MEMORANDUM J&UUary 22, 1992 TO: REVIEW COMMITTEE MEMBERS -^- HAND DELIVERED RPMG PEAT MARWICK AND GRAD AND COMPANY CITY ATTORNEY FROM: CLARK GOOK, EXECUTIVE DIRECTOR, MIAMI PARKING SYSTEM AB►OUTs OLYMPIA BUILDING REDEVELOPMENT / REQUEST FOR PROPOSALS SCHEDULE OF MEETINGS Following the passing of Resolution No. 92-859 by the City of Miami Off -Street Parking Board on July 29, 1992, the City of Miami Commission adopted Resolution No. 92-6+49 on October 8, 1992, authorizing the above -referenced Request for Proposals; and the Resolution also appointed a nine -member Review Committee and provided for the appointment of KPGM Peat Marwick and Grau and Company to evaluate proposal submissions and report findings to the City Manager. You have been selected as a member of the Review Committee. If you are unable to serve, please designate a representative who will attend all meetings. Please forward that individual's name to my office as soon as possible. The following schedule has been developed to encourage a successful outcome of the evaluation process: JAN. 22, 2:OOPM: DEADLINE, RFP Submission to MPS Offices; to KPMG Peat Marwick/Grau for initial review. FEB. 10, B:OOAM: MEETING, MPS Board Room: Review Comm., City (Full Day) Atty., KPMG Peat Marwick/Grau to discuss initial review of RFP proposals and details, scoring process, etc. (See attached.) Length of meeting depends on number of submissions. FEB. 178 8:OOAM: MEETING, MPS Board Room: Rev. Comm, City Atty., (Full Day) KPMG Peat Marwick/Grau FINAL REVIEW. PROPOSER INTERVIEWS HELD AT THIS MEETING IF REQUESTED. (Meeting length dependent on submissions, interviews.) MAR. 8: Recommendations to City Manager. MAR. 11 QR 25: Recommendation(s) from City Manager to City Commission (Commission meeting). t T-continued- 93- 179 OLYMPIA BLDG. RFP Reviser Comm. schedule 1/22/92 Review Committee members must have no vested interest with any of the teams or individuals being considered for selection. You must indicate if a conflict of interest exists. Please notify Nancy Skinner or Paul Thompson at Gusman Center (374- 2444, fax 374-0303) regarding any possible conflict of interest, or if you cannot participate in a meeting. Thank you for your interest in this worthwhile project. Enc.: List of Review Committee members; Olympia Bldg. RIP book; Lists of possible participants; Minutes, pre -submission meeting; Review Committee procedures; Evaluation worksheets I OFFICIAL REVIEW COMMITTEE MEETING OLYMPIA REDEVELOPMENT PROPOSALS WEDNESDAY, FEBRUARY 10, 1993 The meeting was called to order at 8:15 by Mr. Clark Cook, Executive Director of Miami Parking Systems. Mr. Cook introduced Ms. Nancy Sullivan Skinner, Managing Director of Gusman Center for the Performing Arts. Attendees then introduced themselves, as follows: Mr. Michael Maxwell, Friend of Gusman Board Member; Ms. Sarah Eaton, Historic Preservation officer for the City of Miami; Ms. Arlene Weintraub, Neighborhood Enhancement Team for the City of Miami; No. Miriam Maer, Advisor from the City of Miami; Mr. Sergio Rok, representing Natan Rok of Rok Enterprises; Mr. Jerry Guarch, representing Kathy Sigler for Miami Dade Cwmnity College; Mr. Terry Percy, Esquire; Mr. Jack Luft, Urban Design Division of the City of Miami; Mr. Eduardo Rodriguez, Finance Department of the City of Miami; Mr. Raul Tercilla from the Downtown Business Association; and Mr. Seth Gordon of Seth Gordon Associates. After introductions, Mr. Cook reviewed the proposes] schedule for the Review Committee meetings. After some discussion, it was decided to maintain the established schedule with the second meeting slated for 8:00 AM on Wednesday, February 17, 1993. Mr. Cook, as acting Chairman, then suggested that the Committee =! select a permanent Chairperson. Mr. Luft nominated Mr. Maxwell. The nomination was seconded by Mr. Tercilla and agreed to by the Committee. r. - Ms. Maer was then introduced and discussed Committee procedures, including compliance with the rules of local government, The Public Records Act, The Sunshine Law, and conflict of interest disclosure. Ms. Skinner then led the discussion regarding the scoring procedures for the RlF'P. As there was only one RFP submitted, there was a general consensus that the actual point system was going to be less relevant, although it would be necessary for the Committee to document their assessment and make a final determination of whether — = the proposed had sufficient merit to recomueend it to the City Commission. i a p, ?ij s Page 2 Ms. Skinner then discussed the staff analysis of the RF'P. Although the staff feels the proposal is capable of being accepted by The Review Committee and substantially meets all the requirements set forth in the RF'P, there are some qualifying factors which need to be addressed: * Minority participation on this and future projects by the developer * There is a letter of interest, not a letter of intent from financial backers for the project * Accommodation for Cusman offices and Arts Tenant 0 Storage space for theater equipment * Building access to theater personnel There was consensus that these and some other issues needed to be addressed by the developer prior to the Committee's recommendation to the City Manager and City Commission. Mr. Cook then presented the financial parameters for the project, including the existing operating deficit and projected revenues in the future. Financial projections were given based on status quo versus proceeding with the Redevelopment Project. Jon Simon and Brian Coan then gave some preliminary findings from Peat Marwick, the Management Consultant Company advising the Staff and Committee on this project. They plan to have a final draft of their recommendations available prior to the next Review Committee meeting. Mr. Maxwell then polled the Committee for concerns they may have about the submitted proposal. It was agreed that these concerns will _ be drawn up and presented to the Proposer prior to the February 17 meeting. A summary of the questions that will be proposed to GCP is attached. At that time, the Proposer will have an opportunity to address the Committee for 30-45 minutes, with a 30-45 minute question and answer period to follow. The meeting was adjourned at 10:45 AM. Respectfully submitted, .J4.. ., Nan,y Sullivan Skinner Managing Director 93- 1'79 ?.-7 MEMORANDUM February 12, 1993 TO: GUSMAN CENTER PARTNERS FROM: Nancy Sullivan Skinner, Managing Director Gusman Center for the Performing Arts RE: 1. MINUTES OF 2 / 10 OLYMPIA UDP PROPOSAL. REVIEW COMKITTEE MEETING 2. QUESTIONS FOR GUSMAN CENTER PARTNERS Enclosed are the minutes of the first Review Committee meeting, for your information. Several questions were raised in the meeting that will best be answered by Gusman Center Partners (GCP) in the presence of the Committee. In keeping with the Committee's legal role, your are requested not to contact its members directly. Please plan to attend the next and final meeting on WEDNESDAY, FEBRUARY 17, 1993# 9 AN MIAMI PARKING BYSTffid BOARD ROOM The committee meeting will commence at 8 AM. GCP is requested to make a 30-minute presentation beginning at 9 AM that will include its response to the questions listed below. A question and answer period will follow. 1. Who will live in the building (market profile) and how does GCP intend to target market the residential component? 2. What types of tenancy does GCP plan for the retail spaces? What assurances can GCP make that 24-hour activities will be provided? 3. Who guarantees the lease payment? Recourse or non -recourse? 4. How does GCP plan to meet the minority participation re- quirements to receive City of Miami goals and certification? 5. What are the management objectives/metlhodologies regarding tenancy that will stabilize the projected market profile over time, maintaining a quality residential environment? What experience with managing this type of tenancy does GCP bring to the task? 6. No amenities other than downtown living appear in the pro- posal. What does GCP plan to encourage the student market to rent? 7. What is GCP's capital improvement plan regarding the buildout and capital reserve replacement? -continued- 93- 179 0 GCP Olympia UD7P 2/12/93 Page 2 8. Do GCP's plans comply with State of Florida historic pres- ervation guidelines (evidence from FL HP office)? 9. Is GCP considered as an individual or a corporate entity? 10. What evidence can GCP show regarding its eligibility for, and the saleability of, the investment tax credits? Will GCP use an agent? 11. What is GCP's capability of addressing unanticipated capital needs? 12. What happens when a shortfall of cash flow occurs? Whose responsibility is it to meet all payments, and how will the City be affected? 13. What evidence of financing for leasehold improvements can GCP provide? What subordination is entailed? 14. What plan does GCP have to assist with staff offices for Gusman Center? Thank you for your attention to these matters, and we look forward to your presentation. 93- 179 31 OFFICIAL REVIEW COMMITTEE MEETING OLYMPIA REDEVELOPMENT PROPOSALS MAY, FEBRUARY 17, 1993 The meeting was called to order at 8:20 by Mr. Michael Maxwell, Committee Chairman. The attendees then introduced themselves, Including: Ms.Eathy Sigler, Head of Student Administration at Miami Dade Community College, Ms. Sarah Eaton, Historic Preservation Officer for the CIty of Miami; Mr. Sergio Rok, representing Rok Enterprises; Mr. Michael Maxwell, Chairman of the Review Committee and Friends of Gusman Board Member; Mr. Raul Tercilla, Chairman of the Downtown Business Association; Mr. Jack Luft, Urban Design Division of the City of Miami; Mr. Clark Cook, Executive Director of Miami Parking System; Mr. Rafael Diaz, Deputy City Attorney for the City of Miami; Ms. Miriam Maer, from the City Attorney's Office of Miami; Ms. Nancy Skinner, Managing Director of Gunman Center; Mr. Terry Percy, Esquire; Ms. Pilar Saenx, representing Mr. Eduardo Rodriguez from the Finance Department, City of Miami, and Mr. Jon Simon and Mr. Brian Coan, representing Peat Marwick. Also attending were Mr. Hal Manasa, Chief Financial Officer from Miami Parking Systems, and Mr. David Willis. Mitchell Zidel, an intern from the City of Miami Law Department was ,also in attendance. Mr. Cook reviewed the agenda and reminded the Committee that, if the Committee chose to recommend GCP to the City Manager, it would need to decide this by the end of the meeting in order to meet the deadlines for the March 11 City Commission agenda. The Committee approved the minutes from the February 10, 1993 meeting. The list of questions provided to the proposer for discussion and response were incorporated into the record. =; Mr. Simon then presented the preliminary results of the KPMG Peat Marwick study. Mr. Simon and various members of the Committee raised 4 several issues that required further clarification from the proposer. These included the actual amount of retail space that would be available, the rental costs, particularly for the =? residential units coapared to existing units currently available, the amenities of fared to residents, and the seemingly low budget for E: long-term maintenance and repair. Mr. Maxwell then introduced the Committee members to the proposer. Present to represent GCP was Mr. Pat Gallagher, who was accoManied by the following team members: Mr. Thomas Choy, Chief Financial 4. Officer of Seaboard Capital Group; Mr. Jinn Somrak, also representing Seaboard; and Mr. Richard Heisenbottle and Mr. Arthur Dearborn representing Heisenbottle Architects. Also attending was Mr. Jack Lowell of Sumtma Pr . operties. Mr. Heisenbottle made a brief presentation of the architectural plans for the redevelopment and fielded questions from the Committee. The Committee members then addressed their questions directly to ?'' 93® 179 GCP. The following issues were addressed during GCP's presentation and the subsequent Committee discussion. (the questions follow the order in which they were referenced in minutes from the February 10, 1993 meeting): 1) Specifically, what student populations is GCP targeting for occupancy in the Olympia Building, and what is their size? Mr. Gallagher clarified that the students were representative of Miami/Dade Wolfson Campus, The New World School, of the Arts, and the Jackson/Medical School populations. Mr. Maxwell wondered how Mr. Gallagher planned to market the units to the tenants. Mr. Gallagher feels that 40% of the 40,000 students in the area will be eligible for tenancy based on federal low-income housing standards. A secondary market would be downtown employees not making executive salaries who would prefer to live in the downtown area, rather than commute as many now do. Mr. Luft asked about screening applicants, and Mr. Gallagher assured the group that as long as the screening process complied with Federal Law, it was possible to perform credit checks and other routine screenings. 2) What is GCP's plan for tenancy in the retail space? GCP emphasized that it would work cooperatively with Gusman management to determine appropriate tenants for the retail space. The RFP stipulated that Miami Parking System and Gusman Center management would have veto rights over the uses allowed in the retail space. ` 3) Is there recourse t6 -the partners for the guaranteed lease payment? Mr. Gallagher went on record that the lease guarantees were recourse. 4) How will GCP meet minority participation requirements? Mr. Gallagher responded that the partnership already meets all basic minority participation requirements, and that GCP would be seeking out minority firms for subcontracting work on the redevelopment. 5) What is GCP's experience in managing affordable housing properties of the type proposed for the Olympia? Mr. Gallagher responded that CM Properties, the leasing and managing company that will provide these services to the Olympia project, currently manages 182 affordable housing units in Miami. The Committee asked for specific names and addresses to contact individuals associated with these housing units for additional information. Mr. Gallagher agreed to provide this information. 6) What provision is there in the project design for an amenity package? The Goamittee was concerned that the project's marketability would be severely hampered by a lack of amenities such as parking, workout rooms, social rooms, etc. Mr. Maxwell suggested that security would be an important issue. Mr. Luft also felt that GCP needed to address the issue of parking and a rooftop recreation area for the tenants in order to remain competitive. Another suggestion was a computer hook-up in all living quarters. Mr. Gallagher agreed that security would be a critical factor in .. 93- 179 33 successfully leasing the property. He stated that the Building's design constraints, and the project's economics, trade it difficult to build in common spaces (pools, r.,ec rooms, workout rooms, etc.). He expressed a commitment to work closely with Miami,/Dade and with Gusman Center to explore all possible means of offering a "mental amenities" package. 7) ghat provision has GCP Heide to build a capital replacement fund sufficient to maintain the property in the long term? GCP stated that the pro formas did not contain any provision for a capital replacement fund, but that the profit margin was sufficient to carve out an allocation. GCP committed to responding to the Caanittee in writing on this point. B) What effort had GCP made to ensure its design was in compliance with state guidelines for historic properties? GCP stated that Mr. Heisenbottle had submitted the plans to the Division of Historic Resources for its comments and review. Ms. Eaton said she was satisfied with that action. 9) Is GCP considered an individual or business entity. GCP stated that it is considered a business entity. ® 10) What assurances can GCP give that the tax credits can be obtained? Mr. Gallagher stated that, in order to file the application for tax credits, a lease had to be signed by April 1, 1993. He reviewed his past success in obtaining tax credits, including when he sold tax credits for the development of the Dupont Building to Mobil Oil last year. He clarified that any property must be in service at least 15 years to be eligible for tax credits. A 11-12) If unanticipated capital needs arise, how will GCP fund them? Mr. Gallagher indicated that the partners are obligated to meet — anticipated and unanticipated capital needs as the; arise. 13) What evidence of financing for leasehold improvements can GCP provide? GCP responded that any leasehold improvements to be considered or negotiated on the first floor retail space will be built at the expense of the partnership and recovered over the lease term of the tenant in the form of increased rental. 14) How will GCP accomodate the need for permanent storage space for — the use of Gusman Center on site and for office space in close proximity to the theater? GCP stated it would assist Gusman Center and the arts tenants in finding comparable space near the theater at reasonable cost. In addition, it agreed to work with Gusman Center _ staff to identify apace within the Olympia for approximately 1,200 square feet of on -site storage. After discussion of these issues, Mr. Cook reviewed the timetable for the remainder of the UDP process. As stated previously, he stressed that the C mmittee needed to reach a recommendation for the City Manager by the and of today's meeting. Under the direction of the - Committee Chairman, the staff will write up a recommendation based 93- 179 34 on these discussions, submit the recomanendation to the Committee for approval, and then submit the recommendation to the City Manager. The City Manager mist have this information by March 1, 1993 and, if he concurs, will make his recommendation to the City Commission on March 11, 1993. Mr. Tercilla moved to .recommend this GCP proposal to the City Manager, with the provision that the issues raised by the Committee be addressed satisfactorily before executing a final Lease Agreement. Ms. Sigler seconded the motion with the same stipulations. Mr. Maxwell asked for any further discussion. Mr. Luft mentioned that the Development Proposal has a more than fair profit margin, and that he would like to see the Proposer make additional investments in upgrading the facility to maintain long-term tenancies. The Committee unanimously voted to recommend the GCP proposal to the City Manager, subject to the provision referenced above. Mr. Maxwell then adjourned the meeting at 11:30 am. Respectfully, submitted, c llivan Skinner Manag ng Director 93- 179 35 GUSMAN CENTER PARTNERS QUESTIONS FOR GUSMAN CENTER PARTNERS 1. Who will live in the building (market prof le) and how does GCP intend to target market the residential component? HM122M Within two blocks of the Gusman/Oiympia Building, two of Miami's local colleges (Miami/Dade Community College and Miami/Dade Center for the Arts) are located. The Wolfson Campus of Miami/Dade Community College has an enrollment of approximately 20,000 students, the New World Campus has an enrollment of approximately 6,500 students and the Miami/Dade Center for the Arts has approximately 7,000 students. GCP intends to target its marketing efforts for the residential units to be constructed to the student population of these schools. This marketing effort will be accomplished through advertisements on campus and in the school newspapers. Additional marketing could be accomplished by the presence of a leasing office on campus, although it is anticipated that the units will be leased without establishing such an office. In the event that the 96 units are not fully leased within the student population of the above -named schools as anticipated, the residential units will be marketed to the employees of the various governmental and office buildings in the immediate locale. The Miami/Dade Courthouse, Columbus Bazaar, Bayside Marketplace and numerous office buildings are all located within a few blocks of the Olympia Building and should provide a sufficient number of potential affordable housing candidates for the 96 units in the proposed project. These marketing efforts, if necessary, will be performed by the Management Company. 2. What types of tenancy does GCP plan for the retail spaces? What assurances can GCP make that 24-hour activities will be provided? $wogse The pro -forma for the retail space is based on the partnership receiving current market rates. As mentioned in the proposal, current comparable retail rents in the Miami CBD range from $50 to $100 per square foot. It is difficult to give any assurances that compatible, 24-hour activity, tenants with the theater will pay this amount. While it is the intent of GCP to seek out the compatible activities, the rent received will be the deciding factor which must be considered to ensure the financial viability of the project. 93- 179 Aloll Is. 93-- 179 t'"rt ni 3. Who guarantees the lease payment? Recourse or non -recourse? ftagga;S The lease payment is guaranteed by the Gusrnan Center Partners and is non -recourse. In submitting the RFP, the guarantee amount presented was $650,000 for the first four years and a 50150 split of cash flows thereafter. The specifics are reflected in the rental guarantee statement contained in the RFP. 4. How does GCP plan to meet the minority participation requirements to receive City of Miami goals and certification? - $nse The objective of the city is to achieve a goal of awarding a minimum of 51% of the total annual dollar volume of all procurement expenditures to Black, Hispanic, and Woman -Owned small business enterprises to be apportioned as follows: 17% to Blacks, 17% to Hispanics, 17% to Women; such goals are applied to all city bids and contracts. This is taken directly from Ordinance 162 dealing with minority/women business affairs procurement established by the City of Miami. Gusman Center Partners exceeds the City's minority goal with respect to the Hispanic requirement since 22% of the partnership is owned by Emilio Cruz III, and 2 1/2% is owned by Marta Cruz. With Mrs. Crt&s ownership, GCP has also fulfilled a portion of the female requirement. It should also be noted that the Architectural and Engineering team is comprised of certain Black and Hispanic participation. GCP will seek out minority sub -contractors in the process of completing all phases of construction and renovation of the Olympia Building. 5. What are the management objectives/methodologies regarding tenancy that will stabilize the projected market profile over time, maintaining a quality residential environment? What experience with managing this type of tenancy does GCP bring to the task? R As previously stated, the local student population should provide a sufficient market to rent the projected 96 residential units. "The management company will screen all residential unit applicants by performing the necessary employment verification, credit check, and contact with previous landlord and references. Working in conjunction with the Admission Offices of the various colleges previously mentioned, we anticipate the ability to prescreen potential residents through the application process at those schools. This would also provide a constant list of potential occupants which will yield a lower vacancy factor. 93- 1.79 The selected management company, CM Properties, has experience in leasing and managing affordable housing projects (182 units) in the Miami area. 6. No amenities other than downtown living appear in the proposal. What does GCP plan to encourage the student market to rent? &spQ,nse To ensure the financial feasibility of the project, the maximum number of rental units must be developed and few amenities, if any, can be accommodated for the residents. It is even more critical that the first floor retail space be fully leased at the projected rents for the project to remain economically feasible. GCP anticipates the residential units to be fully rented to students in the above mentioned Miami schools, who should continue to utilize the amenities and various conveniences located on the school campus. Additionally, Miami's Aayside Marketplace is within walking distance and easy access of the project. Furthermore, the downtown Metro rail station is within two blocks of the project which will provide the occupants relatively easy access to all of the Miami area. 7. What is GCP's capital improvement plan regarding the buildout and capital reserve replacement? &V2= A capital improvement plan regarding buildout will be established upon the re negotiation of all existing leases of the first floor retail space. It is anticipated that any capital improvements to such space will not exceed $25.00 per foot or a total of approximately $100,000. Any costs associated with these capital improvements will be factored into the re negotiated leases and recovered over a reasonable period of time thereafter. Although the projections did not include a capital replacement reserve, it anticipated that such a reserve will be established in the amount of approximately $200 per annum per residential unit, or an annual total of approximately $20,000. This reserve should be sufficient to include any annual repairs and/or maintenance required on the residential units, considering that the target market for the units is the Miami college student population and the likelihood that the units may turn over on an annual basis. 93- 179 LIJ 12 8. Do GCP's plans comply with State of Florida historic preservation guidelines (evidence from FL HP office)? &jponsg The preliminary building plans have been forwarded to David Ferro at the Preservation Office for the State of Florida for his review. We are confident that the plans as submitted will be in compliance with the Department of Interior and Preservation Office guidelines as well as the historical preservation guidelines dictated by the local historical agencies. 9. Is GCP considered as an individual or a corporate entity? Response GCP will be a Florida Limited Partnership formed for the sole purpose of restoration, renovation, development and operation of the Gusman/Olympia Building project. A copy of the Partnership Agreement was submitted with the RFP response. 10. What evidence can GCP show regarding its eligibility for, and the saleability of, the investment tax credits? Will GCP use an agent? $moons As stated in question 8 above, GCP is extremely confident that the rehabilitation will comply with all federal, state and local historical guidelines which will snake the property eligible for the appropriate low-income housing and investment tax credits. It is the proposer's opinion that tax credits similar to those which will be generated by the rehabilitation of the subject property are extremely marketable. In 1993, approximately $265 Million in such tax credits will be awarded in the State of Florida for development which qualifies as Historical Rehabilitation under the appropriate tax regulations. GCP does plan on using an agent (Related Companies, New York , New York) which specializes in the sale of tax credits. 11. What is GCP's capability of addressing unanticipated capital needs? R=nse The financial partners included in GCP have committed to fund the partnership as necessary to develop the project as intended. The Partnership Agreement will require the partners to snake the necessary capital contributions as the partnership's financial position dictates. The endWs formation will include a level of capital investment from the partners to meet the anticipated cash flow requirements as presented in the financial projections and any unanticipated requisite capital will _ be funded as such needs arise. 9= t 93-- 179.Ta �= Lk6 � .0 , Awk As presented in the Unified Development Proposal, the financial partners of GCP have a combined net worth exceeding $8 Million and are financially committed to the Olympia Building project. They will essentially guarantee the payment of any unanticipated capital requirements required buy the partnership. 12. What happens when a shortfall of cash flow occurs? Whose responsibility is it to meet all payments, and how will the City be affected? B posse In the event of an unanticipated cash flow shortfall, a capital infusion will be made by the financial partners in the partnership. It will be the responsibility of the GCP partnership to absorb any cash shortages encountered during the first four years subsequent to completion of the residential units. During that four years, the City will be guaranteed the annual rental amount as reflected in the pro -forma projections i.e., $650,000, regardless of any cash shortfall. After that four year period, it is expected that the City will participate with GCP on a 50-50 basis in the net cash flow from the project. Hence, any cash shortfall (less than the projected amounts) will reduce the City's participation in such cash flow. However, in the unlikely event of a period of negative cash flow from the project, such negative amount would be funded by the financial partners of GCP. 13. What evidence of financing for a leasehold improvements can GCP provide? What subordination is entailed? giponse Any leasehold improvements to be considered or negotiated on the first floor retail space will be built at the expense of the partnership and recovered over the lease tern of the tenant in the form of increased rental. Since the financing of such costs is not anticipated, there will be no subordination of these costs. 14. What plan does GCP have to assist with staff offices for Gusman Center? EManse If staff offices for Gusman Center cannot be accommodated within the Olympia building, then GCP will assist in the location of office space to fulfill such office needs. Due to the availability of office space in the immediate vicinity, such as the Dupont Building, GCP does not anticipate any problem in locating the netesmy office spare at a reasonable cost to the Gusman Center to accommodate any displaced. Buff personnel. 93- 179 t(/ LJ APPENDIX A=3 1 APITAI_. IV 1 GM*1V LM ae«u cdhm Boors SIMS-M a,�a�oero-�t� ioo�erob��wnw amr eaa , Inc. February 25, 1993 Ms. Nancy Sullivan Skinner Managing Director Gusman Center for the Performing Arts 174 East Flagler Street Miami, FL 33131 Dear Nancy: The following is our response on behalf of Gusman Center -Partners ("GCP") to the items included in my letter of February 18, 1993 relating to the Olympia Building RtFP: (1) A request was made for GCP to provide a listing of specific properties with addmies which are presently managed by C.M. Properties. ,$gg= - A hating of residential properties presently managed by C.M. Properties is as follows: at (a) Gvertown Apartments; 208 units. Addresses are as, fobtws: 419/429 N.W. ath Street Miami, FI. 33136 439/449 N.W. 8th Street hiiarni, FL 33136 467 N X Sth Street Miami, FL 33136 560 I+1.W. 7th Street Miami, FL 33136 561 N.W. 6th Street Miarni, FL 33136 (b) Consolidated li.eal Estate, 928 urdu 11239 N.W. 4th Terrace Miami, FL 33172 1540 N.W. 1 at Court Miami, FL 33136 1550 N.W. 1st Court Miami, FL 33136 1560 N.W. I st Court Mani. FL 33136 1445 N.W. Ist Court . Miami, FL 33136 93-- 179 Ms. Nancd Sullivan nner February 25, 1993 Page 2 In addition to the above lasting, C.M. Properties presently manages various commercial properties in the Miami area. (2) It was suggested that GCP attempt to contact Mlami/Dade = Community College and develop a package of "mental amenities" which would be available to the prospective tenants of the building. This package would _ include a possible computer network linking the building tenants to the campus computer facilities. Resgow - During the design/development stage of the project, the wiring of the residential units will be designed to accommodate the computer networking of each residential unit which could be utilized by each tenant who is a college student. Such tenants will be allowed to link their own personal computer with the main college campus or with other student tenants in the building. Such networking will allow these students to access any information made available through the college computer system or to communicate with other student's computers within the building. (3) GCP was requested to make a "legitimate effort" to provide a deck on the roof of the building as an additional amenity for the tenants. BlIgM - GCP will use its best efforts to provide roof -top facilities for the building tenants. The feasibility of such amenities from both a structural and financial perspective will be determined during the design/development stage of the project. GCP will attempt to providd facilities which will include a community roost, physical fitness facilities and an outside deck and spa. Unfortunately, it appears that any such facilities would only be accessible by stairway due to the prohibitive cost of extending the elevator to the roof. (4) GCP was requested to address the relocation of the Arts tenants and spe+citicaUy respond to the possibility of ienancial assistance relating to the tenant improverents which have boon made by those tenants. Responn - GCP has unsuccessfully attempted to obtain the amount of the tenant improvements made by the Arts tenants, particularly the Miami Skyline Theatre and Momentum Dance. GCP has previously agreed to assist the Arts Colony tenants In their effort to locate comparable apace within the vicinity of the Gus nun Theatre. Additionally, GCP will commit to provide a reasonable amount of financial assistance to the Arts Colony tenants for the replacement of the tenant improvements made by them in their faeilities in the Olympia Building. 93- 179- 49 F.4 7 N-Is Nancy Suiliv810inner Febtviiry 25. 1993 Page 3 (6) Certain comments and questions were made relating to the parking arrangements which could be made for tenants. Although this Issue was discussed in the original proposal made by GCP, we were requested to readdress this issue and seek out such arrangements., $g2gise - It was stated in the proposal by GCP that parking spaces for the tenants could be obtained in Garage #3 and #4 of the Miami Parking System. In the event that GCP is awarded the bid to develop the Olympia Building, it is GCP'a intention to negotiate parking arrangements for the future building tenants with the Miami Parking System at favorable monthly rates. It is anticipated that a monthly parking rate of approximately $45.00 per month can be negotiated for the building tenants. (6) With respect to the relocation of the Gusman administrative offices, GCP was requested to assist the Gusman staff its locating "free" office space in the immediate vicinity to the Gusman Theatre. aggan - GCP will, once again, commit to usisting the Gusman management in their effort to locate office space to accommodate the Gusman adMM—strative offices. It is GCP's opinion that there is an abundance of reasonably priced office space within the immediate vicinity of the Gusman Theatre and, therefore, the relocation of the administrative offices should be a relatively easy transition. (7) The members of Peat !Marwick requested a breakdown of the "Management/leasing fee and payroll" expense item in the Bnanci,al projections and a description of the correlation of this amount to the Management Organization Chart in the proposal. Hjum ,g - The proposal made by GCP indicated a Management Organization Chart comprised of a property manager, site manager, once clerk, maintenance person and cleaning person. The financial projections included in the proposal reflect first year expenses in the amount of $40,000 for MamSement/leasing fee and payroll. and $5,000 for Janitorial. It is projected that C.M. Properties will be paid a fee equal to 3.5% of the gross annual revenues from all tenants, or approximately 524,008 in the first year which amount is included in the 540,000 budget amount. C.M. Properties will provide for that fee all services related to the management and leasing of the commercial space and residential units. Included in their services wU1 be the assignment of a property manager, site manager and office clerk to the Olympia Building. The remaining $16,000 in the $40,000 budgeted amount is allocated to a 93- 179 1M.s. Nancy SullivanVinner February 25, 1993 _ Page 4 maintenance person for the building. The $5,000 Janitorial budget amount should be sufficient to provide a cleaning person or janitorial firm for the Olympia Building. (8) The Gusman's requirement of 1,200 square feet of storage apace was discussed and it was suggested that GCP did not adequately respond to this requirement. Accordingly, GCP should readdress this issue. ResRonse - Pursuant to discussions between Paul Thompson and Richard Heisenbottle, it was concluded that a room on the fourth floor of the Olympia Building which was intended to be a laundry room on the original plans, would be used to provide storage space for the Gusman Theatre. This room, which is immediately adjacent to the Mezzanine level of the Theatre, could be accessed by Gusman personnel via the fire escape. GCP will accommodate the build -out of this space as requester! by Mr. Thompson which would include expansion to the west as much as possible, the addition of a new exterior hollow metal door and approximately 12 feet of exterior concrete block wail. It was also decided that the Gusman could utilize two small closets which are accessible from within the second and third Door stair tower. y +' We trust that the above responses will satisfy the request made by the Review Committee for the Olympia Building ymp' $ proposal. In the went that you are in need of additional information or require fiuther explanation of any of the above responses, please fcel free to contact us. Sincerely yours, Seaboard Capital Group, Inc. Andrew T. Choy4.._,_. Chief Financial Officer =F i . ,` 93- 179 Peat Mal lck Management Consvtttt»ts QueNty and experience for rrreasurabk resuhs Manufacturing and Technology Industries Financial Institutions Insurance Real Estate and Hospitality Health Care Government Services Higher Education and Wot for Profit Airports Retail and Wholesale Energy Utilities Environmental e 0 Management Consulting at KPMG Peat Marwick is dedicated to bringing you quality services in focused markets. In each market, we apply our experience and functional skills to delivering solutions to your business problems. As seasoned professionals, we understand the needs of executive management. Drawing on our fhn's global capabilities and resources, we address issues of any size or degree of complexity, helping to keep your organization on the critical path to success in the nineties. We tape pride in the reputation we have earned for delivering business solutions with measurable results. 93- 179 0 kP�G Peat la rwick Management Consultants QuOty wd experience fm meas"bk results Manufacturing and Techno ogy Industries Financial Institutions Insurance Real Estate and Hospitality Health Care Government Services WHigher o foEProfit and Aim Retail and Wholesale Energy Utilities Environmental 99 City of Marmi EVALUAnON OF IJNIF1FDD DEVELOPM[ENT PROPOSAIS FOR REDEVELOPMENT OF THE OLYNTIA BUILDING M[IA1 H, FLORIDA Lcttcr Report March 1993 kPW Peat Marwick For farther information please cmbct: Iona R. Simon, Primeipal Brian L fin► Manager Red Fataft and RogA altty CbmultbS One Bmayne Tower, Suite 2900, b iami, Florida 33131 Tekphone: C305)358-M Fscaimile: (305)381.6529 93— 179 y? Peat Oarwick Management Consultants One Biscay" Tower Suite 28M 2 South Biscayne BoWevard Miami. FL 33131 March 3,1"3 Mr. Cosw Odio city Manager City of Miami 350ii Fan American Drive Miami, Florida 33133 Dear Mr. Odio: 11 Telephone 305 358 2300 TeWex 30S 381 e529 t� M tatter completes our assignment pertaining to the review and evaluation of private sector dml% mient prowls for the Olympia Building located at 174 East Hagler Street in downtown MiamL 'lie following outlines the objectives of our assignment, our scale of services, our finding, and the conditions that govern the use of our report. OBJECTIVES KP'MC Peat Marwick and Grew & Company were selected by the City of Miami to evaluate development proposal submissions for the (Olympia Building in accordance with the City Charter art Code for Unified Development Projects. The objectives of our engagement were as follows: st To conduct an independent analysis and assessment of each responsive proposal with specific attention paid to the financial and economic aspects of each proposal To analyze the financial capability and level of financial r ammitment of the a Th evaluate the financial return to the aty SCOPE Off' SERVICES Specifically, we cow the following Foceda : a We wvievrod tte � System Request for LTniiiod DcNelapmeast p' prepared by Minns 93- 179 * V 6MG Peat Marwick Mr. Cesar Odio Laity of Miami March 3,1193 Page 2 a We reviewed the development proposal prepared by Gusman Center -Partners, tl only proposal received on the Olympia Building project o We analyzed the development and operating pro formas of anticipated project revenues and expenses projected for the first 15 years of the lease term and the related projection assumptions ■ We gathered data on the downtown Miami retail and residential markets ■ We attended Olympia Building Review Committee meetings r We prepared a written report detailing our findings MATERIAL FINDINGS The Gusman Center -Partners proposal was the only proposal under consideration. Theref+ m all of our following comments are directed toward this proposal. Our findings concerning the financial aspects, the development concept, operating pro fomtas and related projection assumptions are listed on the following pages. Flnancial Aspects rx cost to redevelop the Olympia Building as proposed by Gusman Center-PaMrrs, the development team, is approximately $4.5 million. The general basis of this financing is I described below. Low Income Housing Tax Credits The sale of historical and low income housing tax credits generated by the renovation will be ` used to partially finance the project. These tax credits are estimated by the developer to be approximately $2 million. The developer has stated that they have had discmions with "bhre chip" companies regarding the acquisition of tax credits and they believe them to be a ready market for the sale of these tax credits. As of the date of this report, the developer has not secured these credits as it is required that the project be controlled by the developer prior to application and acceptance. The concept as submitted by the developer appears to be within she general guidelines of the low income housing and historic renovation tax credit programs. The development team has stated that officials of the State of Florida have reviewed the project for compliance with tax credit guidelines. 93-- 179 St w peat Marwick Mr.. Cesar Odio City of Miami March 3,1993 Page 3 L oasehold Fimneing 14 The developer has received a letter of interest from a local bank indicating an interest in participating in the Olympia Building project. The proposal pleas for approximately $2.28 million of leasehold improvements to be financed. It is assumed that financing will be obtained through a 30-year leasehold financing at an interest rate of 8.5 percent. Projed Equky Total developer equity proposed to be invested in the project is $242,000, or approximately 5.4 percent of total project investment. The Pafership The Gusmsn Center Partnership is a newly created entity composed of five limited partners and one general partner. 7be partnership was explicitly formed for the purpose of the renovation and operation of the Olympia Building. Financial statements are not presently available for the partnership. However, the partnership represents that three of the limited partners have a combined net worth of approximately $8 million. The financial statements of these individuals are included in the partnership's development proposal. Mr. Patrick Gallagher, a member of the development team, has specialized in the renovation and _ conversion of historic buildings for modem residential and commercial use. According to the development proposal, he has been responsible for completing over 24 projects in the Chicago area, with a combined value in excess of $85 million. Mr. Gallagher was recently involved in the acquisition of the Alfted L Dupont Building located across the street from the Olympia Building in downtown Miami. According to Mr. Gal4rA his team analyzed the downtown - Miami area for approxmately nine months prior to the acquisition of the Dupont Building. The analysis conducted i by his team with regard to the Dupont Building has provided the grouted work for their development proposal for the Olympia Building. In addition, Mr. Emilio Cmnr — another member of the development team, has experience in affordable housing projects in the Miami ate& and also owns retail shoe stems on Flagler Street within close pnrzimity of the =_ Olympia wilding. - 7 U developer intends to negotiate a 40-year lease with the City. It is assumed that this lease F term would qualify the project for the appropriate tax credits. In the event the tax coedit - guidelines require an additionalYear lease term, the developer will want to negotiate this option- 93- 179 kPMG feat Marwick #I C Mr. Cesar Odic City of Miami March 3,1993 Page 4 The developer has proposed a rental guarantee to the City in the aggregate of $650,000 for the first four operating years of the lease to be paid out as follows: $125,000 in year 1, $150,000 in year 2, $175,000 in year 3, and $200,000 in year 4. Future lease payments are proposed to be 50 percent of net rash flow after debt service and income tunes for the remainder of the lease period and are not guaranteed at any level. During a question and answer session before the Olympia Building Review Committee, Mr. Gallagher indicated that the $650,000 guaranteed lease payment to the City would be full recourse to the partners. Development Concept and Pro Forms Analysis Gusman Center -Partners has conceived of a concept to renovate floors 3 through 10 of the Olympia Building into a residential rental apartment project targeting primarily the 12,5W students (full- and part-time) attending the Mitchell Wolfson New World Center Campus of Miami -Dade Community College (which also includes the New World School of the Arts and secondarily the 3,500 students attending the Medical Center Campus of Miami -Dade Community College. 7 be development plan calls for the existing retail space on the ground level of the building, to be renovated and re -leased at market rental rates upon expiration of existing leases. We have provided on the following pages some specific observations based on our analysis of the development proposal, our research and knowledge of the marketplace, and other tasks we performed. Revenues Residential Rentals Gusman Center -Partners proposes to develop 96 rental efficiency units on floors 3 though 10 of the redeveloped Olympia Building. The proposed floor plan includes a total of 12 efficiency units per floor, with 10 "stand alone" efficiency units and two "shared" efficiency units, each sharing a bathroom and kitchen facilities, Alternatively, the development team will consider renting the shared efficiency as a one -bedroom apartment, for a total of 11 rental units per floor. The proposed efficiency unit size ranges from 269 to 382 square feet, with a unit size of 412 square feet for the one -bedroom unit. Total square footage per typical floor, excluding corridor span is 3,692 square feet, or an average size of approximately 336 square feet per unit. . Residential rent per unit is projected to be $399 per month including utilities. This rent level is the maximum rent.allowed for an efficiency apartment in accordance with the Low Income Ifousing Tax'C relit Program. A► net monthly rant of approximately $369 is estimated, assuming 93- 179 kPMG Peat Marwick Mr. Cesar Clio City of Miami March 3,1993 Page 5 a utilities allowance, or cost, of approximately $30 per unit, indicating a rental rate of approximately $1.10 per square foot. v - = The 436-unit Biscayne View and 350-unit Arena Towers are the only residential rental projects located downtown. These high rise projects have been essentially 100% occupied since Hurricane Andrew. prior to the hurricane they experienced occupancy of approximately 60% and 80% respectively. Rental rates at Biscayne View range from $549 and up for a 650 square foot one -bedroom ($0.84 per square foot) and from $699 and up for a 950 square foot two - bedroom ($0.74 per square foot). Rental rates at Arena Towers range from $560 to 660 for a 793 square fit one -bedrooms ($0.71-0.83 per square foot) and from $660 to 780 for a 997 square foot two -bedroom ($0.66-0.78 per square foot). Premiums over the base rental rate are determined by view and by floor. Biscayne View and Arena Towers both provide a number of amenities, including: views, security, pools, whirlpools, exercise room/fitness centers, clubhouses, balconies, tennis (Arena Towers) and parking (one space included in rent at Arena Towers). Although it is typical for rental rates per square foot to increase as unit sizes become smaller, based on the rental rates obtained at Biscayne View and Arena Towers and the amenities of these projects, it appears that the rental rates proposed by the development team are somewhat higher than the current market. In addition, based on the pre hurricane vacancy rates at Biscayne View and Arena Towers, it may be necessary to adjust the timing of fast year residential rent tD reflect a longer lease -up period. This would impact the projected cash flow to some extent. Officials at the Wolfson New World Center Campus of Miami -Dade Community College are very enthusiaude about the potential of downtown residential development within two blocks of campus to service the needs of their students. Ihey requested that such a development provide facilities such that students would not have to leave the building for certain comforts and necessitie& Among those items mentioned were laundry fadlrties, security, parsing and common area space such as a recreational or fitness mom. In addition, Wolfson officials commented that the rent for Biscayne View and Arena Towers was expensive for their students and that the timing of the initial leasing of the proms did not coincide with the beginning of the school year and themfore made it difficult to attract students. Close coordination of the subject project with college officials would be very important in determining the initial levels of lease. up. 93- 179 AON G Peat Marwick ON Mr. Cesar Olio City of Mimi March 311993 Page 6 Commercial Rentals 0 According to the development proposal, approximately 300 additional square feet of amble ground floor retail space will become available, providing a 4,000 square fleet of ground floor retail space (3,664 existing square feet per Miami Parking System's rent rolls, plus an additional 300 square feet). According to the development team's drawings, only 3,225 square feet of ground floor retail space will be available. Despite the drawings, the development team has indicated that they will be able to provide 4,000 square fret of retail space and in the event they are unable to, they believe that the projected retail rental revenues are attainable for the smaller square footage. Assuming 4,000 square feet of ground floor retail space, ground floor rents are projected by the developer to increase from an average of approximately $54 per square foot in year 1, assumed to be 1995, to $105 per square foot in year 15, assumed to be 2009. Most of the existing leases expire in 1996, so 1997 (Year 3) is assumed to be the first year when all retail leases are at market rates, with .average rate per square foot of approximately $87. The developer's drawings indicate approximately 1,663 square feet, or 51.6 percent, of retail will be on Flagler Street, and 1,562 squaw feet, or 48.4 percent, will be on 2nd Avenue. Consistent with today's mmmarket rents and allowing for inflation, assuming Hagler Sheet market rentals of approximately $110 per square foot (in 1997 instated dollars) and approximately $60 per square foot (in 1997 inflated dohs) for 2nd Avenue, and a similar ratio of Nagler Street frontage for the entire 4,000 square feet, indicates an average rent of approximately $86 per square foot (in 1997 inflated dollars). Taking into consideration the effects of inflation and limited developable land in the vicinity for ground floor retail, nothing has come to our attention that would lead us to believe that these rates are not within the potential range of the market area. Operating Expense Reimbursements Time developer has projected operating expense reimbursements from retail tenants of approximately $8.25 per square foot in year 1, increasing at a rate of 5.0 percent annually. This is consistent with the developer's projection of overall operating expenses increasing at 5.0 percent annually. Again, nothing has come to our attention that would lead us to believe that these rates are not reasonable. However, it should be noted that the developer's pro forma assumptions that assume a non-taxable leasehold estate, overestimate the amount of operating expense reimbursements, as tenants would not be reimbursing the developer for property taxes. P Mfs Peat Marwick Mr. Cesar Olio City of Miami Match 3,1993 Page 7 Yocancy Albwancae r, The development team is projecting a vacancy factor of 20 percent of all residential and retail ren" throughout the projection period. This vacancy factor may be appropriate for the retail space, but is most likely low for the residential units, particularly given the seasonality and turnover of college students. ?Tenant Impr wments Alloti mee An allowance for tenant improvements is not factored into the projections. This is consistent with other downtown Miami retail centers, which are also not pmviding tenant improvement allowances. Offing EXXXS*s Operating expenses projected by the development team were projected to increase at an annual rate of 5.0 percent, with overall operating expenses increasing from $243,000 in Year 1, to $481,000 in Year 15. Operating expenses of $210,000 in Year 1, excluding the expense reimbursement from retail tenants of $33,000, represent approximately $2,188 per residential unit This appears to be somewhat lower than the market for federally assisted apartments (consistent with tax credit projects) and some upward revisions might be appropriate. The managententAeasing fee and payroll for the project are projected at M000 in year 1 and are projected to increase at 5.0 percent annually. Based on the amount of this line item and its timing, this expertise may not ncriiy reflect all residential and retail ling cx»mmisaiona and/or the tinting of retail leasing commissions. Repairs, and maintenattee are projected to be approximately $6,000 annually in year 1, or approximately $63 per residential unit, and increase at an annual rate of 5.0 parent. This may require review and upward adjustments in finalizing pro formsa related to the Olympia Building. Security and professional fees were not included as operating expert$+es for this project. In addition, a reserve fund for capital replacements was not included in the development team's projecdorta. Theft items may also require review and upward adjustments in f ndbang pro formes related to the Olympia Building. No other individual operating expenses came to our attention that appear materially divergent AIM ntarirA levels. '' 9 3 -� i'7 9 r, sb KPMG Peat Marwick Mr. Cesar Odio City of Miami March 3,1993 Page 8 Oftr Comments The development proposal's rental guarantee statement indicates that total lease payments are approximately 28 percent of total revenues over the initial 15 year lease period. However, our calculations reveal that lease payments represent only approximately 22 percent of revenues for the initial 15 year lease period. In addition, the development team has indicated that lease payments to the City beyond the initial four years of operation will be determined based on a 50-50 split of cash flow after debt service. In reviewing the developer prepared pro formas, cash flows are not split on an exact 50.50 basis. In Pro Forma 1, slightly more than 50 percent was allocated to the City, whereas in Pro Forma 2, slightly less than 50 percent was allocated to the City. This inaccuracy should be rectified by the developer. The value of the Olympia Building ranges from approximately $2 to 3 million, based on the lease payment to the City projected by the developer, using discount rates ranging from 12 to 20 percent and capitalization rates ranging t om 12 to 16 percent. A value of between $40 and $60 per square foot is indicated assuming approximately 50,600 total square feet. Other Considerations The Olympia Building is currently suf wing from long lived, incurable physical deterioration. Long-lived incurable physical deterioration is an appraisal term that can be defined as value losses attributable to the major components of a building, when age is the major contributing factor. These conditions acre ItUly to cost more to repair or renovate than the value that is added to the structure. Components of the Olympia Building that are exaarples of long lived i=mbie physical deterioration include the elevator system, elects W system, HVAC and the potential for asbestos removal. Due to the above faces, and the potential goats to the City of renovating the Olympia Building or leaving the building vacant, the City may consider the alleviation of cash flow deficits and potential capital liabilities, and the value of a renovated property to be of as great a value as the potential lease payments. Summry and Conclusions Only one proposal was received in response to the RFC'. Therefor.: our comments are geared specifically to the Oumm Center-Fartnees development dal. The development team has devised a unique concept; its goal is to serve an unfulfilled residential need of tine students of the WolfaonlA ew Wodd tenter Campus of Miami -Dade Community College. Bepmentatives of the school believe that there is a definite need for af6ordable student housing in downtown 93- 179 5) 6MG Peat Marwick Mr. Cesar Odio City of Miami March 3,1993 Page 9 Miami. In addition, the project seeks to fulfill a longtime goal of various entities within the City of Miami, namely bringing residential development to the downtown core. Representatives of the Wolfson New World Center Campus have expressed some concerns about the project, and stated that several factors need to be considered to increase the projeces chances for success,. School officials indicated that certain additional amenities such as security, common areas, recreational areas, potential computer network hookups, etc., be provided and that the project be introduced and marketed in a period coinciding with the school year. However, it should be noted that less than one percent of students at the Wolfson New World Center and Medical Center Campuses of Miami -Dade Community College would be needed as residents for the residential component to achieve 100 percent occupancy. The retail in the Olympia Building project appears to present less concern relative to its viability. Retail has long flourished along Flagler Street and this project lies within dye heart of this retail district. Assumptions used in the analysis of the retail revenue appear to fall in the general range of those being achieved currently in the area. A prince consideration in determining the feasibility of this project is that the Olympia Building is old and decaying, and in dire need of renovation. Presently, the building is a burden to die City in that its officers cannot be fay.;;ably leased, creating annual operating deficits that are not covered by theater operations and oth er income. Given the current state of the City's budget, it appears that an "entrepreneurial" mna vation of the building by the City would not receive a high priority. Assuming the absence of such i. renovation by the City or the development team, there is every reason to believe that the present situation would only deteriorate further and cause annual deficits to inc re4w even higher than their current levels. Apart from cash flow deficits, major capital expenditures in excess of $250,1-W each may be required for such thlnp as a new elevator system, a new electrical system, HVAC rtplaeement, asbestos abatement and removal, etc. Buildings as old as the Olympia Building, unless substantially renovated, can turn into *money pits," where Blinds that could more productively be employed by the City are used to patch up the Olympia Building structure. Even if the lease payments projected by the development team do not come to full fruition, considerable thought must be given to the elimination of the current deficits of the pro,, as well as the renovation of the Olympia Building by the development team, which would otherwise be the responsibility of the City. 93- 179 5� f iG Peat Marwick Mr. Cesar Olio City of Miami March 3, 1993 a Far 10 f LIMry NG COl11DMOPIS Our analysis is very preliminary in nature and does not constitute an examination or compilation of prospective financial information in accordance with standards established by the American Institute of Certified Public Accountants (AICPA). We do not express an opinion or any other form of assurance on whether the prospective financial information is presented in conformity with AICPA presentation guidelines or on whether the underlying assumptions provide a reasonable basis for the presentation. Had we performed additional procedures or had we made an examination in accordance with the standards established by the AICPA, matters might have come to our attention that would have been reported to you. Furthermore, there will usually be differences between the prospective and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material. This analysis contemplates fads and conditions existing as of the date of our report. Events and conditions subsequent to that date may have a profound efleet upon the results of our analysis. The terms of our engagement are such that we have no obligation to update this report or to revise our findings because of events and transactions occurring subsequent to the date of this report. A/P/t/6?e-otr �P— --'- 93— 179 Sc7