The URL can be used to link to this page

Home My WebLink AboutM-88-0436Iow CITY OF MIAMI, PLORIUA ��` i�t l � MEMORANDUM TO Nlatty Hirai i�3 NAY11n,F: May 18i 188 City C -�rk ;��W 1 ` ; i?=1� sVe,r ., GItY CLERKCity Commission Meeting# tfi t ` ��iANdFLA. May 12j 1988 FROM (+ Augherty RFI"P:N£,NC.0 Item 38 j Landmark Proposal/ City Attorney Olympia Building ENCiCSURF: S: Due to the lack of complete information concerning the proposal under deliberations by the City Commission, the conditional approval of the Commission in its vote at the May 12, 1988 Commission meeting requires that the Commission's action on this Item be considered a Motion (Instead of Resolution No. 88- 436), and your records should so reflect this fact. RFC/LAD/rcl/P079 cc: Hon. Mayor, and Members of a City Commission Cesar H. Odio, City Manager NOTION -- 88-436 A MOTION APPROVING, IN PRINCIPLE, THE RECOMMENDATION OF THE CITY MANAGER FOR THE PROPOSED RENOVATION AND REDEVELOPMENT OF THE GUSMAN CULTURAL CENTER/OLYMPIA BUILDING AT A COST NOT TO EXCEED $6.121 MILLION; AUTHORIZING THE CITY MANAGER TO FINALIZE NEGOTIATIONS WITH FLAGLER LANDMARK ASSOCIATES CONCERNING SUCH PROJECT AND INSTRUCTING THE CITY MANAGER TO BRING BACK THE PROPOSED FLAGLER LANDMARK ASSOCIATES AGREEMENT TO THE CITY COMMISSION FOR THEIR APPROVAL PRIOR TO ITS EXECUTION; AUTHORIZING THE CITY MANAGER TO NEGOTIATE THE TERMS OF AN AGREEMENT WITH THE DEPARTMENT OF OFF-STREET PARKING AND INSTRUCTING THE CITY MANAGER TO BRING BACK THE PROPOSED AGREEMENT WITH SAID DEPARTMENT TO THE CITY COMMISSION FOR THEIR APPROVAL PRIOR TO ITS EXECUTION, WHICH AGREEMENT SHALL PROVIDE FOR THE PROPORTIONAL SHARING OF ALL COSTS ASSOCIATED WITH THE OPERATIONS, MAINTENANCE, AND DEBT SERVICE INVOLVED IN THE PROJECT PURSUANT TO THE AVAILABILITY OF A FINANCING MECHANISM WHICH MUST BE ACCEPTABLE IN ALL RESPECTS TO THE CITY COMMISSION. GMM/rcl/P082 35—% 1t CITY OF MIAMI. FLORIDA INTER -OFFICE MEMORANDUM 35 TO Honorable Mayor and Members DATE May 6, 1988 FILE of the City Commission SUBJECT Gusman Cultural Center/ Olympia Building Renovation Project FROM � � REFERENCES Cesar H. L•rY City Manager ENCLOSURES RECOMMENDATION It is requested that the City Commission review and approve the attached resolution for the proposed renovation and redevelopment of the existing Gusman Cultural Center/Olympia Building (not including any other properties, i.e., Nathan Rok property), at a project cost not to exceed $6.121 million; and authorizing the City Manager to finalize negotiations with Flagler Landmark Associates (which includes, Al Cardenas, Jim Beauchamp, Jaime Borelli, and Art Hill as principals), and to bring it back to the City Commission for approval prior to its execution. The total cost of the project, as proposed by the City administration, is $6,121,000 and is proposed to be financed with a loan not to exceed $7,200,000 through the Sunshine State Government Financing Commission. The repayment of the Sunshine State Loan wil•1 be secured by the rental payments of the City and Department of Off -Street Parking (DOSP) for the lease of office space which totals approximately 35,000 square feet, of which 25,000 square feet would be occupied by DOSP, and the balance, approximately 10,000 square feet, would be occupied by the City. Proceeds from the currently leased retail area of approximately 3,000 square feet will be applied to the project costs. The rental rates to be paid annually by the City and DOSP will be determined by the debt service requirements of the variable rate Sunshine State borrowing, plus operation and maintenance expenses. The term of the City and DOSP leases will run concurrently with the term of the loan, estimated to be approximately 24 years. The agreement defining these terms between City and DOSP will be brought back to the City Commission prior to its execution. This proposal is recommended as the most economically and financially advantageous for the City of Miami, while accomplishing the goal of restoring and improving these two historically significant buildings. 3s-1 Page 2 FINANCIAL ASPECTS OF THE PROJECT In the last set of negotiations between the Flagler Landmark Associates and DOSP, Flagler Landmark submitted a proposed construction budget of $10.5 million for this project that included Nathan Rok's property (see Exhibit 1 for background information). However, based on the limited availability of funds and restrictions due to the tax-exempt nature of the Sunshine State Governmental Financing Commission, which set aside approximately $7.2 million for a public project, the City Administration requested that Flagler Landmark Associates scale down the project to meet the $7.2 million loan amount. In response to the City's request, Flagler Landmark submitted a scaled down project construction budget (Budget A) of $6,694,000, as shown below. The Flagler Landmark Associates construction budget was reviewed and further scaled back by City staff. The City's revised project budget reflects the scaled down project with the same hard construction costs; however, the City's proposal includes reduced line items for interior tenant finishes, ar�ifectural/engineering fees, management costs, legal services, insurance and accounting/audit expenses and developer fees. The City has also proposed increasing the amount available for contingencies and other costs. —TFie revised City budget is $6,121,000, and is shown below under Budget B. Budget A Budget B F.L.A City Staff (1) Gusman Cultural Theater Renovation $1,390,000. 1,390,000. (2) Olympia Building and Shops 2.292,000. 2,292,000. (3) Interior Finishes 809,000. 744,000. (4) Architect/Engineering Fees 449,000. 310,000. (6) Management Costs 250,000. -0- (6) Legal Services 225,000. 75,000. ,(7) Insurance/FLA liability 50,000. -0- (8) Accounting 30,000. -0- (9) Developer Fees 549,000. 481,000. (10) Contingency and Other Costs 650,000. 829,000. $6,694,000. $6,121,000. 3S- Z 88-43s,- ,100N Page 3 On April 27, 1988, the Board of Directors of the Department of Off -Street Parking agreed to participate with the City for the renovation and redevelopment of the existing Gusman Cultural Center/Olympia Building in accordance with the City staff revised line item budget as shown under Budget B, and to enter into a long term agreement of 70/30 responsibility for debt service and maintenance and operation costs for the term of the loan agreement. The City and DOSP comma ttment to rent the renovated space will be required to be in effect until the Sunshine State Loan is paid back. It is anticipated that this loan payment will initially cost approximately $573,000 per year, subject to annual interest rate adjustments. Approximately $120,000 will be available from the retail space lease and will be applied to the annual loan repayment and the remainder of the costs will be split on a 70/30 basis between DOSP and the City, respectively. Additional costs include an estimated $400,000 per year in operation and maintenance, as estimated by DOSP, also to be split on a 70/30 basis. In addition to the Sunshine State loan pool, city staff has reviewed other financing options such as private placement borrowing and certificates of participation. These alternatives have proven to be significantly more expensive. The alternatives are shown in Exhibit 3. Additionally, City staff reviewed the development alternative which included the expansion of the project through the inclusion of the Nathan Rok property. The Sunshine State Loan Pool and all other tax exempt financing alternatives would not allow the inclusion of this additional, privately controlled property in this renovation project. 35--3 .;=Z11N BACKGROUND EXHIBIT 1 In 1975, the Department of Off -Street Parking (DOSP) assumed management responsibility for the Gusman Cultural Center for the Performing Arts and the Olympia Building as a result of a conveyance from Maurice Gusman Cultural Center to the City of Miami. DOSP operated the Center as a "passive house" until 1991 when a change of direction was approved by the DOSP Board and the City Commission. The essential elements of that change of direction were to retain a new Managing Director with the ability to produce events culminating in the "Eight Singular Sensations" and other productions; the establishment of a fund-raising group known as the Friends and Founders of Gusman Cultural Center; and the initiation of a redevelopment program for a ympia Building and Gusman Cultural Center utilizing the City of Miami Unified Development process. On July 18, 1985, the City Commission approved the issuance of a Request for a Unified Development Proposal for the restoration/redevelopment and lease operation of the Olympia Building/Gusman.. Cultural Center Complex, which is owned by the City and managed by Department of Off -Street Parking. The sole bid, received on November 28, 1985, was Flagler Landmark Associates which includes Al Cardenas, Jim Beauchamp, JaImF Bore i, and Art Hill as principals. On July 24, 1986, the City Commission adopted Motion No. 86-528, authorizing and directing the City Manager to negotiate an agreement with Flagler Landmark Associates in connection with the proposed redevelopment of the Olympia Building and Gusman Cultural Center and further directed the City Manager to come back to the City Commission for final approval. The project, approved conceptually by the DOSP Board and the City Commission in 1986, envisioned investment of approximately $9.5 million for the restoration of the Olympia Building and Gusman Cultural Center with the City of Miami and DOSP occupying all available office space (currently, the retail space is leased with an average of eight years remaining on the leases.) 3s-4 88-436. . I^ Page 2 In July, 1986, the City Commission granted approval to move forward with negotiations with Flagler Landmark Associates and the initial draft of the agreement was delivered to Flagler Landmark Associates during October, 1986. The predominant reason for the time lapse was negotiations with Nathan Rok to obtain the contiguous land necessary to expand the Olympia Building and improve the Gusman Cultural Center dressing rooms. DOSP reviewed the document submitted by Flagler Landmark Associates and determined, in conjunction with their Legal Counsel, to prepare a new draft of the agreement. The new draft of the agreement was delivered to Flagler Landmark Associates in late January, 1987. Flagler Landmark Associates then requested an increase to approximately $29 per square foot from the original $22 per square foot. DOSP informed Flagler Landmark Associates that the S29 per square foot rental payment for the Olympia Building office space was unacceptable. After much deliberation and several meetings, DOSP determined that the best strategy, short of terminating negotiations, would be to enter into a unified development contract pursuant to which Flagler Landmark would perform the planning, design, and construction phases, and would secure executed leases with cabaret and restaurant tenants, and would then upon completion of the renovation of the Gusman Cultural Center and the Olympia Building assign its remaining interest in the contract (the leasing and management functions) to the Department of Off -Street Parking. Upon review by City and DOSP legal counsel, Flagler Landmark was required to indemnify the City and the Department of Off -Street Parking and hold both harmless against any claims or causes of action arising out of the execution of the contracts, including attorneys' fees, costs, and expenses. Also, Flagler Landmark Associates would be required to agree to a "No Recourse" clause with regard to the City and the Department of Off -Street Parking. The entire development package would have had to be delivered for an agreed upon maximum price. Subsequent to the assignment to Flagler Landmark Associates, Flagler Landmark Associates would contract with DOSP to manage the operation. DOSP in conjunction with the City of Miami would be required to secure project financing. This arrangement was acceptable in concept to both Flagler Landmark Associates and the DOSP Board, which would have allowed the City of Miami and DOSP to rent the newly -renovated office space at a cost closer to the previously estimated cost of $22 per square foot (as compared to Flagler Landmark's revised $29 per square foot rate). 35-5 88-436. . A Page 3 Under this scenario, the City would have been allowed to withdraw from its lease with a one year notice, but would have been required to support any negative cash flow of the Gusman up to the City rental commitment until an alternate tenant could be found. While the City would join DOSP in the financing, the only revenue pledge required of the City would have been the annual rental payments. The reason for joining DOSP was based on the fact that the building is presently owned by the City and not DOSP. After reviewing different financing alternatives, the City staff and DOSP have determined that this arrangement is not realistic and in the best interest of the City and therefore, have recommended that the project be financed through the Sunshine State loan pool. Other financial options were explored by City staff and are reflected in Exhibit 3. However, they are not included in our recommendation because it would require additional financial commitments of the City. 3 S— !o EXHIBIT 2 COMPARATIVE CONSTRUCTION BUDGETS OPTION A FLACLER LANDMARK ASSOCIATES PRELIMINARY GUSMM BUOCET - PLAN A 6010man Theater Allowannee $1,390,000 Renovations Olympia Building Allowance =2,2929000 Renovations Interior Tenant Allowance $909,000 Finishes (Assumes $18.00 per sq. ft.) Architect/Engineers Allowance $449,000 Management Costs Allowance $250,000 Legal Services Allowance $225,000 Insurance Allowance ;50,000 (FLA Liability) Accounting Services Allowance 530,000 Sub Total $5,495,000 Contingency Fee 59 Allowance $275,000 Developers Fee 109 Allowance SS49,000 Other Costs (Owner Allowance P7S,OOO Related) - Testing, Insurance permts (29), swrveys, field offices (239), supervision (hex) Total ;b,694.000 borings, appraisals, etc. 0PTI0N B GOW THEATER RENOVATIONS BUDWT (CITY STAFF EVALUATION iummen Theater =1,390,000 Renovations Olympia Building $2,292,000 Renovations Interior Tenant Finishes $744,000 (Assumes $18.00 per sq. ft. ) Architect/Engineer 07% $310,000 Nan -go went Costs - 0 - (DOSP will manage) Legal Services 75,000 Insurance - 0 - (to be absorbed in renovations) Audit Expense - 0 - (if within 39 city pays costs, if not FLA pays and assumed in other costs) Sub Total $4,811,000 Contingency 0 10% $481,000 Developer Fee 010% $481,000 Other Costs ! i348,000 (to be approved by City) Total 121 000 EXHIBIT 3 TAX EXEMPT FINANCING OPTIONS SUNSHINE STATE GOVERNMENTAL FINANCING COMMISSION LOAN: Debt service schedule estimate is based at 6% for the term of 24 years, although this is a variable rate loan. Estimates based at 6% would result in a per year cost of $573,000. In addition, DOSP has estimated operation and maintenance charges of $400,000 per year. This would result in first year 12- month rent of approximately $26 per square foot. PRIVATE PLACEMENT OPTION (PPO): (1) At 90% of prime rate, estimated not to exceed 10.5% per annum. Avera ge annual debt service cost of $1,450,000 for ten years. Total cost $11,617,119.00. Private Placement - 10 years sq. ft. Rental Rate. (2) At 90% of prime rate, estimated not to exceed 10.5% per annum. Average annual debt service cost of $918,000 for 15 years. Total cost $13,929,628.50. Private Placement - 15 years Le s3T.T7 sq. ft. Rental Rate. CERTIFICATES OF PARTICIPATION OPTIONS (COP,S): (1) Fixed rate COP's at an interest cost of 7.98% for 24 years. Avera ge annual debt service of $785,000 for 24 years. Total cost of $18,989,615. COP - 24 years @ $31.87 sq. ft. Rentala e. (2) Fixed rate COP's at an interest rate of 7.80% for 20 years. Avera ge annual debt service of $837,000 for 20 years. Total cost of $16,879,628.75. COP - 20 years 0 $33.36 sq. ft. Rental Rate. SS-8