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HomeMy WebLinkAboutR-83-1164F f J-83-1098(r) 12/ 13 /8 3 S:3—'1164 RESOLUTION NO. A RESOLUTION ACCEPTING THE RECOMMENDATION OF THE CITY MANAGER FOR THE SELECTION OF THE ROUSE COMPANY PROPOSAL FOR THE PLANNING AND DESIGN, CONSTRUCTION, LEASING AND MANAGEMENT OF A SPECIALTY CENTER TO BE KNOWN AS "BAYSIDE SPECIALTY CENTER" LOCATED ON A CITY -OWNED LAND PARCEL CONTAINING APPROXIMATELY SIXTEEN ACRES ADJACENT `1'O BISCAYNE BOULEVARD, AND 1NC:LUDING IIIAMAkINA AND A PORTION OF SAYFROWT PARK; AUTHORIZING AND DIRECTING THE CITY MANAGER AND THE CITY ATTORNEY TO NEGOTIATE A CONTRACT WITH THE ROUSE COMPANY, SUBJECT TO THE CONDITION THAT THE TERMS OF THE; CONTRACT RESULT IN A FAIR RETURN TO THE CITY BASED ON TWO (2) INDEPENDENT APPRAISALS AND COMPLY WITH THE OTHER ENUMERATED REQUIREMENTS FOR THE: COMMERCIAL USE AND MANAGEMENT OF THE CITY'S WATERFRONT PROPERTY AS SET FORTH IN THE CITY CHARTER; AND FURTHER DIRECTING THE CITY MANAGER TO PRESENT THE NEGOTIATED CONTRACT TO THE. CITY COMMISSION AS SOON AS PRACTICABLE FOR CONSIDERATION AND APPROVAL BY THE CITY COMMISSION PRIOR TO THE EXECUTION THEREOF. WHEREAS, the City Commission determined in March, 1983 that it is advantageous to the City to develop the City -owned land parcel containing approximately 16 acres located adjacent to Biscayne Boulevard and including Miamarina and a portion of Bayfront Park 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 com- mittee; and WHEREAS, the request for proposals for the unified develop- ment project contained specific evaluation criteria to be used by the certified public accounting firm and the review committee; and WHEREAS, two proposals were received by the City in response to the request for proposals on September 19, 1983, the pub- lished 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 CITY COMMISSION 1WEETING OF DEC 15 IM3 on ft.— viability of the proposed development teams and their proposed financial strategies, assessed comparatively the short -and long-range economic and fiscal returns to the City, assessed the proposers' market analyses and conclusions regarding scale and mix of commercial and public facilities, evaluated the economic feasibility of the proposed developments, written report to the City Manager; and and rendered its WHEREAS, the review committee received the presentations of the proposers and input from the public, and, after extensive analysis and discussion of the two proposals, rendered a written report to the City Manager containing an evaluation of each proposal based on the specific evaluation criteria included in the request for proposals; and WHEREAS, the committee adjudged The Rouse Company proposal to be superior; and WHEREAS, the City Manager, taking into consideration the findings of the certified public accounting firm and the evaluations of the review committee, recommended the acceptance of The Rouse Company proposal for the Bayside Specialty Center; NOW, THEREFORE, BE IT RESOLVED BY THE COMMISSION OF THE CITY OF MIAMI, FLORIDA. Section 1. The recommendation of the City Manager that The Rouse Company be selected for the planning and design, construction, leasing and management of a specialty center to be known as "Bayside Specialty Center" on a City -owned land parcel of approximately 16 acres located adjacent to Biscayne Boulevard and including Miamarina and a portion of Bayfront Park is hereby accepted. Section 2. The City Manager and the City Attorney are hereby authorized and directed to negotiate a contract with The Rouse Company for the planning and design, construction, leasing and management of a specialty center to be known as "Bayside Specialty Center" subject to the condition that the terms of the contract result in a fair return to the City based.on two (2) independent appraisals and comply with the other enumerated requirements for the commercial use or management of the City's 2 83-1164 waterfront property as set forth in the City Charter. Section 3. The City Manager is further directed to present the negotiated contract to the City Commission as soon as practicable for consideration and approval by the City Commission prior to execution thereof. PASSED AND ADOPTED this 15 RALPH G. ONGIE ITY CLERK PREPARED AND APPROVED BY: G. MIRIAM MAER ASSISTANT CITY ATTORNEY day Of December MAURICE A. F13RRE MAURICE A. FERRE MAYOR APPROVED AS TO FORM AND CORRECTNESS: SAE ITY ATTORNEY GMM/wpc/ab/169 91 1983. 3 83-1164 01 I le,-3 � s OV �n , threat ction that ;a r!y ' 84 views. An article in the rri- c 'Fork Times and The Miami .change. ?nt Saturday, the general sug- :i been a misunderstanding and his staff to avoid commenting him unless they were present asked him directly to confirm )r,fusion apparently arose when ter's question at the art exhibi- e let the peace process work, A•here we stand early next year. A•ould be pure speculation." ` MSS' Q9"EMI •� IG PON13 TABLE 1RDABLE PRICE EUROPEAN Nest Germany pUAlt�y tributor S 5�' .nd installed) ist Price $745 R® SUPPLY, INC. ith St. at 195 688-2661 NOTICE TO THE PUBLOU NOTICE OF CITY COMMISSION ACTION CITY OF MIAM Ij ©ADF. COUNTYY, FLORIDA THE MIAMI CITY COMMISSION WILL CONSIDER AND TAKE ACTION ON THE RECOMMENDATIONS OF THE CITY MANAGER FOR THE DEVELOPMENT OF A SPECIALTY CENTER TO BE KNOWN AS BAY - SIDE ON A CITY -OWNED LAND PARCEL OF AP- PROXIMATELY 16 ACRES ADJACENT TO MIAMAR- INA AND BAYFRONT PARK AT 10:00 A.M., THURS- DAY, DECEMBER 15, 1983 AT CITY HALL, 3500 PAN AMERICAN DRIVE, DINNER KEY, MIAMI, FLORIDA AT THE REGULARLY SCHEDULED CITY COMMIS- SION MEETING. RALPH G. ONGIE CITY CLERK (# 1746) cq Chuckle with Erma Bombeck each Monday, Wednesday an Friday in LIFESTYLE: 4 V ""I - I = P. iiIiiiiq t PT.044 �J t M ` � 1 erg watu, sp�e eldej L40S eoe 1!Z) uleu fin' IMS ; Se a�. fi b� 0 le is i t 06 CITY OF MIAMI. FLORIDA INTER -OFFICE MEMORANDUM TO Honorable Mayor and Members of the City Commission FROM Howard V. Gary City Manager DATE December 141, 1983 FILE SUBJECT Second and Final Report of Most Advantageous Bid for REFERENCES Development of Bayside ENCLOSURES 2 It is recommended that the City Commission accept the proposal of the Rouse Company as the most advantageous bid for the development of the City's 20 acre site within the Bayfront Park system and authorize me to begin contract negotiations for the development of same. Once completed this project will include restaurants, fast-food services, retail boutiques, markets and entertainment areas responsive to Miami's urban waterfront. It should be noted that my conclusions and recommendations are the same as those of the City's Bayside Review Committee and Coopers and Lybrand, the external financial consultants. As you are aware this project is the first to be considered under the City's new Unified Development Process which was approved by the voters as a Charter amendment in November, 1982. This process requires that interested developers respond to a specific request for proposals and undergo three series of stringent reviews before the City Manager makes a final recommendation to the City Commission, which must make the final decision. The City Commission should be commended for developing such an open, fair, and objective process for evaluating development proposals. And a special commendation should be given to the Bayside Review Committee, and particularly its chairperson, Mr. David Weaver. They not only did a professional job in carrying out their function, but had the extra burden of creating history in an environment that is usually skeptical about governmental decision making. I would be remiss if I did not say that the new process has worked extremely well. On March 18, 1983, the City Commission declared 20 acres of the Bayfront Park system as a unified development project and authorized the City Manager to appoint a review committee consisting of a majority of private citizens with varied experiences that would be needed to effectively evaluate a complex proposal. This action was followed by the selection of Coopers and Lybrand on July 18, 1983 to assist the selection committee and the City Manager in the analysis and review of the Bayside Specialty Center proposals. 83-1164 Two proposals were received and opened on September 19, 1983. The bidders were JMB/Federated and the Rouse Company. Oral presentations were held by the Review Committee on October 4, 1983 and October 24, 1983. The Review Committee met eight times since April of 1983 regarding the review process. And on Monday, October 24, 1983 the eleven member review committee voted 10 to 1 in favor of the Rouse Company as its selection for the development of the Bayside Special Center. It has been contended that the 10 to 1 vote is not reflective of the difference between the Rouse and JMB/Federated proposals. Rather it has been contended that the difference between the two proposals is much closer as represented by the 58%-42% ratio of the actual voting tabulations. It should be noted that the contention is false based on the voting procedures established by the review committee. In an attempt to avoid the skewing of votes, the review committee decided that after the numerical tabulations were completed, a final vote would be taken whereby each individual member would vote his or her preference. Therefore the 10 to 1 vote represents the Committee's choice of the Rouse proposal as clearly superior to the JMB proposal. The Committee's full report to me on its evaluation and recommendation is attached for your review. The following is a summary of that report as well as the Coopers & Lybrand analysis, my own evaluation, and a discussion of the selection criteria. The Committee's directive was to evaluate each proposal based on five (5) criteria established by the Request for Proposals. The applicable criteria and weighting, as well as the percentages received by each bidder from the Review Committee are as follows: Rouse Company JMB/Federated Total Points Points Points #1 Development Team 164 59.6 111 40.4 275 Experience (25%) #2 Financial Capabil 161.5 58.7 113.5 41.3 275 ity & Return to City (25%) #3 Project Design (25%) 158 57.45 117 42.55 275 #4 Management Plan 93 56.36 72 43.64 165 (15%) #5 Minority Participa- 62 56.36 48 43.64 110 tion (10%) TOTALS 100% 638.5 58% 461.5 42% 1100 Page 2 of 7 83-1164 IF, As reflected in the above voting tabulation, the Rouse Company proposal was adjudged superior to the JMB/Federated proposal with respect to each criterion in the Request for Proposals. The rationale for the Committee's vote as it relates to each criterion is included in its report to me dated November 7, 1983. These criterion will be discussed later in this report. The evaluation and analysis of both proposals by Coopers & Lybrand concluded that the bid submitted by The Rouse Company provides greater benefits to City of Miami than that of JMB/Federated. A copy of Coopers & Lybrand's complete report was submitted to the City Commission on December 13, 1983• Their detailed conclusions are as follows: "Based on our analysis of each proposal, and our review of the local market forces in Miami, we believe that the Rouse proposal, particularly Option B, provides greater potential benefits to the City of Miami. This conclusion is a result of our consideration of the following factors: 1. Our analysis indicates that the market will support higher rents per square foot and, with aggressive operations and leasing, is capable of generating the sales projections estimated in the Rouse proposal. 2. The Project design of the Rouse proposal lends itself to greater activity, greater security and a more casual environment. This would have a positive effect on sales and strengthen the overall project viability. The JMB/Federated design is more consistent with an upscale specialty center, and would thus be more appropriate to their lower sales projections and lower market share projections. 3. Our financial analysis indicates that under both Option A and Option B, the Rouse proposal offers greater returns to the City for the base case. Even under adverse conditions (a revenue loss of 10%) Option A exceeds the base case for JMB/Federated. 4. Over the longer, 45 year term, both Option A and Option B substantially exceed the potential return from the JMB/Federated proposal. Since the Rouse projections for rental rates and sales volumes are so much greater than are those for JMB/Federated, and would be expected to grow proportionately, the Rouse project provides greater return. Under our sensitivity analysis, the Rouse proposals exceeds the projected returns form JMB/Federated even when the Rouse projections are decreased by 25% and the JMB/Federated projections are increased by 25%. 5. Coopers & Lybrand is not in a position to evaluate the City's willingness to take 'risk', that is, to anticipate its payments from returns which result from profits rather than as a percentage of gross receipts. Page 3 of 7 53-1164 011 6. Coopers & Lybrand has evaluated and analyzed both proposals carefully. However, this analysis should not be construed to represent a full feasibility study, nor may this analysis be used to generated and external financing." My evaluation of each proposal using the criteria in the Requests for Proposals results in the same conclusion reached by the Review Committee and Coopers & Lybrand - the Rouse Company's proposal is far superior than that of JMB/Federated. Rouse Company Development Team Experience Financial Capability/Returns Project Design Project Management Plan Minority Participation 15 20 20 10 5 70 JMB/Federated 10 5 5 5 5 f' Since each of the evaluators has reached the same conclusion regarding the most advantageous bid and primarily for the same reasons, the following comments about each criterion reflects a combination of thoughts and opinions by the three evaluators. Experience Both firms have extensive past retail experience. However, the Rouse Company has a clearly established track record of success in developing and operating urban waterfront specialty centers versus the predominantly suburban retail experience of JMB/Federated. The concern about Rouse's commitment to Miami because of its numerous other projects has been alleviated by the Rouse Company itself but this issue will be more comprehensively addressed during contract negotiations. Financial Capability And Return Both firms have the capability to finance such a major project as demonstrated by their past performances but that is where the similarity ends. All parties have concluded that the Rouse Company offers a considerably better medium and long-term financial return to the City. During the first ten years the City would receive roughly equivalent benefits from either proposer. However, over 45 years, Rouse's Option A generates significantly higher benefits for the City than does the JMB/Federated proposal. Table IV of Coopers & Lybrand report reveals that under the less risky Option A of Rouse, the City would receive approximately $22 million compared to JMB/Federated's $11 million. With the inclusion of JMB/Federated's Trust Fund the Rouse proposal still returns a greater amount - $21.7 million versus $15.5 million. Page 4 of 7 83-1164 01 F It should be noted that during my evaluation I noted that both the Review Committee and Coopers & Lybrand had failed to credit Rouse with $4 million of benefits to the City. These benefits should accrue to Rouse because it proposed to contribute $4 million toward the City's proposed $8 million of improvements to the 20 acre site. This new found $4 million benefit makes Rouse's short and medium term benefits financial returns superior to that of JMB/Federated. Overall Project Design Project design is often considered to be subjective and dependent on personal taste. Both designs were well -thought out and deserve meritorious recognition. The elegance, sophistication and uniqueness of JMB/Federated's "crystal palace" is characteristic of the brick and glass structures being erected in the downtown and Brickell Avenue area. However, the concept itself seems to be out of character with the waterfront and the outdoor nature that is expected of a project abutting the waterfront and a park. Such a concept would probably be great if it was more oriented to the waterfront and if there was less uncertainty about JMB/Federated's planned use for a considerable portion of the 20 acre site. Too much emphasis was placed on the glass structure and too little placed on the surrounding area. The Rouse proposal on the other hand reflects a festive indoor/outdoor experience oriented to the waterfront and the park. The total concept provides a bridge between the waterfront and the park. Furthermore it makes better utilization of the entire 20 acre site. The design and land utilization permits a continuous band of people, shops and restaurants versus the nodes of activity concept envisioned by the JMB/Federated design and land utilization proposal. The node concept does not generate the same feeling of security and safety as that of a more continuously active space. Project Management Plan It is clear that both proposers have tremendous experience in the planning, implementation and operation of retail -oriented projects. However, the Rouse group, due largely to its experience in developing and managing urban specialty centers, has an edge over the JMB/Federated group. Minority Participation Both groups made a commendable effort toward involving minorities in their proposals. However, the Rouse Company's proposal provides a greater percentage of minority participation in all areas, with the exception of one component where they both proposed the same percentage. Finally, a number of issues have been raised about the selection process that must be addressed. The first issue relates to Rouse's compliance with the requirements of the Requests for Proposals (RFP). JMB/Federated has challenged the Rouse's proposal for being in non-compliance with the RFP. Specifically Page 5 of 7 83-1164 Ok 1 they contend that Rouse's use of net revenues versus gross revenues for calculating returns to the City is in direct violation of the proposal requirements. The City Attorney has opined that both proposals have minor deviations from the RFP, but that both proposals are capable of acceptance by the City and do not directly conflict with any statutory or code provisions. Attached are copies of the opinions rendered by the City Attorney addressing this issue. The issue of net versus gross must be considered within the content of the RFP intent, which is to establish a calculation method that would ensure the highest return to the City of Miami. In all cases, Rouse's proposal will return a greater financial return to the City. Should gross revenues drop by either 10% or 25% in the first 10 years, under Option A, Rouse's discounted results still show a slightly higher return to the City. Even in the worst case scenario of a depression where sales are non-existent, the Rouse Company's financial returns to the City would be greater than JMB/Federated under the guaranteed minimum provision - $650,000 versus $250,000. The second issue raised about the selection process is that the 10 to 1 vote is not reflective of the difference between the Rouse and JMB/Federated proposals. Rather it has been contended that the difference between the two proposals is much closer as represented by the 58 - 42% ratio of the actual voting tabulations. As stated earlier, this contention is incorrect based on the voting procedures established by the Review Committee. In an attempt to avoid the skewing of votes, the Review Committee decided that after the numerical tabulations were completed, a final vote would be taken whereby each individual member would vote his or her preference. Therefore, the 10 to 1 vote represents the Committee's choice of the Rouse proposal as clearly superior to the JMB proposal. The third issue relates to the voting of the Director of Off - Street Parking. It was implied that the Director voted in favor of Rouse because Rouse's proposal provided his agency with benefits that were not provided in the JMB/Federated proposal. The Director of Off -Street Parking has assured me that the Rouse proposal to build a garage and guarantee debt service coverage in no way affected his voting. He also stated that both firms were given the opportunity to discuss parking issues in the Bayfront area and both elected to exercise that opportunity. It should also be noted that the Rouse Company was not given credit for its parking proposal, which was estimated to be worth $2.2 million for the first 10 years. This decision was made prior to the committee voting. Page 6 of 7 83••-1164 4% Finally, as stated earlier, I noticed that the Review Committee and Coopers & Lybrand had failed to give the Rouse Company a $4 million credit for its contribution to the City's proposed $$ million of improvements to the 20 acre site. This $4 million contribution reduces the City's potential exposure by a like amount. Therefore, the Rouse Company is hereby credited with $4 million toward Criterion 112, Financial Returns, which improves its current superior rating in this category. I #1 0' C CITY OF MIAMI, FLOR10A INTER -OFFICE MEMORANDUM TO Honorable Mayor and Members of the City Commission Howard V. Gary City Manager DATE- De c e mb e r 13, 1983 RILE: SUBJECT: Selection of Most Advantageous Bid for Development of Bayside REFERENCES: ENCLOSURES. At the December 15, 1983, City Commission Meeting I will be recommending that the Rouse Company be selected as the most advantageous bid for development of the twenty (20) acre site within the Bayfront Park system. My conclusions and recommenda- tions are the same as those of the City's Bayside Selection Committee and Coopers and Lybrand, the City's external financial consultant to this project. My final report to you will be forth- coming on or before Thursday, December 15, 1983. This report is not in compliance with the five-day rule due to the rescheduling of the last City Commission Meeting one week earlier, but the item is scheduled on the December 15, 1983 Agenda. A copy of the two proposals for development of Bayside - JMB/ Federated and the Rouse Company - was delivered to the Mayor and each Commissioner the week of September 19, 1983. However, I thought it might be useful for you to have a copy of the Coopers and Lybrand evaluation and analysis of both proposals pending my final report. This evaluation analyzes each proposal and makes a recommendation for consideration by the City of Miami. For the purpose of assisting you in utilizing your valuable time, may I suggest that you read the following sections and pages which I have identified with red markings: 1. Similar Development Experience - Pages 3, 7, 8 & 9 2. Experience of the Team Members - Page 12 3. Overall Project Design - Pages 14, 15 & 16 4'. Project Management Plan - Page 20 5. Minority Participation - Pages 22, 23 & 24 6. Financial Viability - Page 26 7. Short and Long Term Economic and Fiscal Returns - Pages 32 (paragraphs 2 & 3), 33 (paragraphs 1 & 2) & 38 (Table IV) 83-1164 Honorable Mayor and Members of The City Commission B. Market Analysis - Pages 52 & 53 9. Conclusions - Page 59 - (This section includes a recommendation and the reasons for same) 0 83-1164 November 7, 1983 Mr. Howard V. Gary City Manager P. 0. Box 330708 Miami, FL 33133 Dear Mr. Gary: Bayside - the 200,000 square foot specialty retail -and food center to be located in the marina area of Bayfront Park - is the first City of Miami project to be developed under the Unified Development guidelines specified in the City's Charter as amended by referendum in November, 1982. The amended charter requires that developers interested in any Unified Development project must respond in writing to a City Request for Proposals and then submit to a stringent review, recommendation, and decision process. This process includes a Citizens' Review Committee which must evaluate and rank all proposals received, the City Manager who must recommend his choice to the City Commission, and the City Commission which must make the final decision. As you know, City of Miami officials had hoped that several well- known and experienced Specialty Center developers would submit Bayside proposals. Although interest was shown by numerous firms at the outset of the process, only two final proposals were submitted - those of JMB/Federated Realty and The Rouse Company. The City is. extremely fortunate to have received proposals from two such eminently qualified proposers, each of which has presented an exciting and viable project which, in almost every respect, is dramatically different, one from the other. The Bayside Specialty Center Citizens' Review Committee has now met seven times since April of 1983. The first two meetings were concerned with procedural matters. The last five have been to receive and evaluate the proposals and to make a recommendation to the City Manager. The Committee met on Monday, October 24, 1983 and, after extended analysis and discussion, voted to rank the two proposals as'follows: Proposer Ranking The Rouse Company Number One JMB/Federated Number Two Overall Votes Points 10 58 percent 1 42 percent 83-1164 0 or November 7, 1983 Mr. Howard V. Gary City Manager P. 0. Box 330708 Miami, FL 33133 Dear Mr. Gary: Bayside - the 200,000 square foot specialty retail and food center to be located in the marina area of Bayfront Park - is the first City of Miami project to be developed under the Unified Development guidelines specified in the City's Charter as amended by referendum in November, 1982. The amended charter requires that developers interested in any Unified Development project must respond in writing to a City Request j for Proposals and then submit to a stringent review, recommendation, and decision process. This process includes a Citizens' Review Committee which must evaluate and rank all proposals received, the City Manager who must recommend his choice to the City Commission, and the City Commission which must make the final decision. As you know, City of Miami officials had hoped that several well- known and experienced Specialty Center developers would submit Bayside proposals. Although interest was shown by numerous firms at the outset of the process, only two final proposals were submitted - those of JMB/Federated Realty and The Rouse Company. The City is. extremely fortunate to have received proposals from two such eminently qualified proposers, each of which has presented an exciting and viable project which, in almost every respect, is dramatically different, one from the other. The Bayside Specialty Center seven times since April of 1983. with procedural matters. The las the proposals and to make a recomi The Committee met on Monday, analysis and discussion, voted to Proposer Ranking The Rouse Company Number One JMB/Federated Number Two Citizens' Review Committee has now met The first two meetings were concerned t five have been to receive and evaluate nendation to the City Manager. October 24, 1983 and, after extended rank the two proposals as -follows: Overall Votes Points 10 58 percent 1 42 percent 83-1164 e f The enclosed report reflects the uncertainties inherent in any decision -making process and attempts to present a balanced summary of the Committee's deliberations and conclusions. The recommendation of the Review Committee is clear and unequivocal. The Rouse Company proposal was adjudged superior to the JMB/Federated proposal with respect to each criterion specified and weighted in the City's Bayside Request for Proposals. The enclosed report assumes your familiarity with both proposals and with the Coopers and Lybrand Report To The Review Committee. We have not attempted to duplicate or restate information contained in any of the above mentioned documents. This report includes background information about the.Review Committee, apprises you of our thinking with respect to each criterion, and submits the Committee's recommen- dations regarding the terms of the selected developer's contract with the City. Finally, it includes suggestions for improving certain aspects of the Review Committee process. Each of us on the Review Committee has appreciated the opportunity to participate with you in helping bring Bayside to Miami. Even more important, we thank you, the Mayor, and the City Commission for your unwavering support of the Unified Development process. We are certain that continued application of this process will ultimately benefit all citizens of this City. Sincerely, David Blumberg Roger Carlton T. Willard Fair Carlos Garcia Tina Hills Roy Kenzie Herbert Leeds Adrienne Macbeth Dan Pau Sergio Rodriguez David Weaver, Chairman 83-1164 I' s The Bayside Specialty Center Citizens' Review Committee Name David Blumberg Roger Carlton T. Willard Fair Carlos Garcia Tina Hills Roy Kenzie Herbert Leeds Adrienne Macbeth Dan Paul Sergio Rodriguez David Weaver, Chairman Affiliation Planned Development Corporation Department of Offstreet Parking Urban League City of Miami - Finance Department Friends of Bayfront Parks Committee Downtown Development Authority Leeds Business Counseling, Inc. City of Miami - Manager's Office Paul & Burt City of Miami - Planning Department Intercap Investments, Inc. 83-1164 01 The Review Committee The Bayside Specialty Center Citizens' Review Committee, as required by the City's amended charter, is comprised of six members from the private sector and five members from the public sector. Private sector members were chosen because of their community standing, their knowledge and expressed interest in the Bayside project, and their long involvement I in evaluating and promoting a Bayside-type project either through the Downtown Development Authority or the New World Center Action Committee of the Greater Miami Chamber of Commerce. Public sector members were appointed for their specific expertise with respect to finance, parking, planning, downtown development, and minority involvement. From the outset - in addition to the requirements of the Sunshine Law and Public Records Act - the Committee expressed its determination to observe voluntary guidelines proposed by the City Attorney. Any contacts between the Committee and potential proposers were effected directly in committee meeting or through the Chairman and confirmed by him via written communication. No gifts, compensation, or expense reimbursement were to be accepted from any potential proposer. All communications with the media were through the Chairman. The Committee determined that it would vote to rank the two pro- posals and have its report prepared by the Chairman. The report would then be discussed and approved or modified by the Committee. Any dissenting opinions would be included in a separate section of the final report. -1- - 83-1164 4T. Review Committee Methodology After studying the two Bayside proposals received on September 19, 1983, two meetings of the Review Committee were held with representatives of both JMB/Federated Realty and The Rouse Company. The first meeting was held on October 4, 1983 to hear presentations by and to ask questions of both proposers. The second meeting, held on October 24, 1983, was to hear Coopers and Lybrand's analysis of its Report To The Review Committee, to hear final presentations from both proposers, to question both Coopers j and Lybrand and the proposers, and to vote on a final ranking. The first hour of the October 24, 1983 meeting was set aside and duly adver- tised as a public hearing. Several members of the public availed themselves of the opportunity to speak. In each meeting, presentations and discussion were divided into segments corresponding to each of the Evaluation Criteria defined in the IRequest for Proposals. Assurances were obtained from both proposers that all relevant information had been presented. An opportunity was I given for each proposer to. rebut statements made by the other. Opportunity was provided for each Committee member to ask questions, discuss, or make statements about either proposal. All comments to the press were channeled through the Chairman. All meetings were open and all pertinent data was automatically transmitted to interested members of the various media. 83-1164 -2- r r Anal vsi s The Bayside Request for Proposals requires the Citizens' Review Committee to "evaluate each proposal based only on the evaluation criteria applicable to said review committee." The applicable criteria and weighting are as follow: 1 I. Experience of the development team, including j specific experience on similar projects . . . . . . . . . 2571, 2. Financial capability, level of financial commitment and anticipated financial return to the City. . . 25% 3. Overall project design . . . . . . . . . . . . . . . . . 250' 4. Project management plan . . . . . . . . . . . . . . . . . 150,1 S. Extent of minority participation (Latin/Black) . . . . . l00 The analysis which follows first presents the Committee's voting results and then attempts to synthesize the Committee members' majority position vis-a-vis each criterion. Where applicable, dissenting opinions have been submitted and are included herein. 83-1164 -3- f EVALUATION CRITERION 1 25% THE EXPERIENCE OF THE DEVELOPMENT TEAM, INCLUDING SPECIFIC EXPERIENCE ON SIMILAR DEVELOPMENTS 8 s-1164 f Evaluation Criterion I 25°, ,o THE EXPERIENCE OF THE DEVELOPMENT TEAM, INCLUDING SPECIFIC EXPERIENCE ON SIMILAR DEVELOPMENTS David Blumberg Roger Carlton T. Willard Fair Carlos Garcia Tina Hills 1 Roy Kenzie Herbert Leeds Adrienne Macbeth Dan Paul I Sergio Rodriguez David Weaver Total Points Percent The Vote JMB/Federated Realty The Rouse Company 12 13 5 20 12 13 10 15 10 15 10 15 10 15 12 13 10 15 10 15 10 15 111 164 40.4% 59.6 0 -4- 83--1164 Evaluation Criterion 1 Experience 25ro The Committee's vote of 59.67101 in favor of The Rouse Company reflected Rouse's clearly -established track record of success in developing and operating waterfront specialty centers. Although JMB/Federated Realty did not have specific experience in Bayside-type waterfront projects, the Committee awarded the firm a sub- stantial number of points (111 out of 275 total). The Committee believes JMB/Federated to be capable of developing the Bayside project and the vote reflects the respect which the Committee has for the firm's manage- ment and development team. It is, however, clear that Rouse has had numerous previous oppor- tunities to develop this specific kind of project while JMB/Federated would need to work its way through the Bayside project on a first-time basis. We have felt that Rouse's proven track record in this specific area of expertise must take precedence over JMB/Federated's equally - proven, but far more general track record in the development of more broadly-based retail projects. Of major concern to the Committee was the fact that Rouse is currently involved in numerous other specialty center projects around the country. At the same time, the Committee received assurances from JMB/Federated that it would devote a major part of its top management -5- 8�-1�.�i4 0 time and energy to assuring that Bayside - as its first-time showplace - would be a clear success. It was only after intensively interrogating Rouse officials on this subject that the Committee became confident that Rouse considers Bayside to be a major, top priority project for its organization. Rouse management reminded the Committee that the Rouse Company has a reputation to uphold and that it would not have undertaken ! this project unless confident of success. It was clear to the Committee that all members of both project teams, as well as their architects, engineers, planners and other• con- sultants were exceptionally well -qualified. It should be noted that three of the Committee members rated the experience criterion as a near "tie" between the two proposers. The 13 point to 12 point votes of these three members in favor of Rouse indi- cated the importance they placed on Rouse's proven track record. It also indicated their concern that Rouse could be close to fully extended Iin its ability to give full attention to the Bayside project. Should Rouse be selected by the City Commission to develop Bayside, careful attention should be given in the City's negotiations with -Rouse to identifying specific performance criteria throughout the development process. It is imperative that the City have available appropriate means to assure that a full and adequate measure of Rouse's corporate attention be devoted to the Bayside project. -6- 53-1164 r f EVALUATION CRITERION 2 25% FINANCIAL CAPABILITY, LEVEL OF FINANCIAL COMMITMENT AND ANTICIPATED FINANCIAL RETURN TO THE CITY 83-1164 r Evaluation Criterion 2 25 a FINANCIAL CAPABILITY, LEVEL OF FINANCIAL COMMITMENT AND ANTICIPATED FINANCIAL RETURN TO THE CITY The Vote JMB/Federated Realty David Blumberg 11 Roger Carlton 7.5 T. Willard Fair 12.5 Carlos Garcia 10 Tina Hills 10 Roy Kenzie 12 Herbert Leeds 12 Adrienne Macbeth 10 Dan Paul 12.5 Sergio Rodriguez 11 David Weaver 5 Total Points 113.5 Percent 41.31 The Rouse Company 14 17.5 12.5 15 15 13 13 15 12.5 .14 20 161.5 of 58.710 -7- 83-1164 P Evaluation Criterion 2 r Financial Capability, Level of Financial Commitment And Anticipated Financial Return to the City 25% The Committee's vote on this criterion of 58.71 for Rouse to 41.3°0 for JMB/Federated mirrors the Committee's belief that the Rouse proposal i offers superior medium and long-term financial benefits to the City. However, the fact that four Committee members divided their votes almost equally between the two proposers reflects a degree of uncertainty with respect to the conclusions presented by Coopers and Lybrand. The Coopers and Lybrand report and its conclusions carried substantial weight ht for all Committee members. The accountants' report stated that: - "There are no significant differences in the financial 1 viability of either bidder which would hinder the successful I execution of Bayside." I "The general financing strategies proposed by the respective I companies are achievable, and unless there is major deterio- ration in the financial markets between the review process and the construction of the project, obtaining financing under any of the proposed methods should be possible." -8- 83-1164 0 "Financial analysis indicates that under both Option A and Option B, the Rouse proposal offers greater returns to the City for the base case." (Although there is greater uncertainty under Option B) "Even under adverse conditions (a revenue loss of 10") Option A exceeds the base case for JMB/Federated." i The Committee evaluated and discussed several concerns: 1. A clear-cut analysis of the financial plans, as presented, is exceptionally complex, and is made more complex by comparing JMB/Federated's Percentage of Gross Revenues with Rouse's Percentage of Net Revenues after Debt Service and Operating IExpenses. Coopers and Lybrand's decision to exclude from the analysis the economic impact of JMB/Federated's trust fund, Rouse's UDAG proposal, and Rouse's parking proposal makes the evaluation even more difficult. 2. The Gross Revenues projected by Rouse were considerably higher i than those projected by JMB/Federated. Coopers and Lybrand's conclusions were based on The Rouse Company achieving its "aggressive (but) not unreasonable" projections. Table 1 of the Coopers and Lybrand Report makes a presentation that the Rouse projections generate superior discounted results for the City under Option A of approximately $0.3 million over -9- 83-1164 r the first ten years. Under Option B, the Rouse proposal generates $1 million more than JMB/Federated. Should gross revenues drop by either 100 or.25°', under Option A, Rouse's discounted results still show a slightly higher return to the City. Under Option B - because of the l lower base rent and higher dependency on a percentage of net cash flow after debt service, the Rouse proposal cannot sustain seriously reduced gross revenues: discounted returns to the City become significantly less than in the JMB/Federated proposal. 3. JMB/Federated noted that the Coopers and Lybrand study did not Iinclude the benefits to the City of JMB/Federated's trust fund (80 of project equity). Both parties agreed in the October 24, 1 1983 meeting of the Review Committee that - if payments to the trust were included - overall discounted ten year benefits to the City from the JMB/Federated proposal could increase by an amount ranging from $464,000 to $776,000, depending upon the financing approach taken. This would make the two proposals roughly equivalent during the first ten years - with perhaps a slight numerical edge going to JMB/Federated's proposal. 4 4. JMB/Federated noted that both Rouse's options pay a percentage I of net cash flow after debt service rather than a percentage of gross revenues. This was interpreted to mean that the City could be "at risk" with respect to Rouse's operating expenses. and financing costs. -1 o- 83-1164 f r 5. Rouse noted that benefits to the City resulting from its specific parking proposal and its UDAG funding approach were excluded from the Coopers and Lybrand analysis. Rouse estimates the net present value to the City of the first ten years of the parking proposal to be approximately $2.2 million and of the UDAG approach to be $4 million. Were these items to be included, the Rouse proposal would demonstrate clear financial 1 superiority. Conclusions• Based upon the results of the analyses performed both by Coopers and Lybrand and by individual members of the Committee, we conclude that Rouse offers a superior medium and long-term financial return to the ICity. We recommend that the Manager, in order to even further clarify the comparative financial benefits of the two proposals, should accept for evaluation by his professional staff any additional financial infor- mation which may be submitted by either firm. 1. During the first ten years under Rouse's Option A, including I the agreed -upon valuation for JMB/Federated's trust fund, but not including Rouse's parking or UDAG approaches, the City would receive roughly equivalent benefits from either proposer. I This conclusion appears to be valid for Rouse regardless of debt service or operating expense considerations since, during this period, Rouse's payments to the City derive almost entirely from its $650,000 guaranteed minimum rent and, except for year -11- 83-11.6 ten, not from a percentage of net revenue. In fact, during this ten year period, the Rouse proposal could be characterized as the relatively less risky proposition since JMB/Federated's proposal depends to a greater extent on achieving projected gross rental revenues. (See Coopers and Lybrand Table III, Page 38, Report to the Review Committee) 2. Over time, (more than ten years), Rouse's Option A generates significantly higher benefits for the City than does the JMB/Federated proposal. Coopers and Lybrands' Table IV (page 30) dramatically illustrates this conclusion even after including the benefits of JMB/Federated's trust fund. In this example, over 45 years, JMB/Federated's proposal would generate a net present value benefit to the City of $15.5 million while Rouse's proposal would produce $21.7 million without including additional benefits from Rouse's parking or UDAG proposals. 3. Rouse's Option B is clearly more risky than its Option A, and + is significantly more sensitive to reduced gross revenue, as well as higher -than -projected operating expenses and debt carrying costs. However, it should be noted that 92 to 95 percent of all Rouse Net Rental Income is projected to be available for debt service since most operating expenses are shown as being passed through to tenants. This would mean that the final, negotiated level of debt carrying costs could assume great significance for the City in arriving at a decision to proceed with Option A or Option B. It should be _ 12_ 83-1164 r possible to ascertain with reasonable certainty both the validity of Rouse's history of passing through operating expenses to its tenants and, within a fairly narrow range, the likely cost of debt. Much of the comparative risk would, thereby, be eliminated. l Option B is, of course, far more profitable to the City than either Option A or the JMB/Federated proposal if Rouse's gross revenue, operating expense, and financing projections are, in fact, achieved. 4. Since benefits to the City are roughly equivalent under Rouse's Option A and JMB/Federated's proposal; since Rouse's Option A produces higher returns to the City in the longer term, after participation rental begins to exceed guaranteed minimum Irental; and since the risk for the City enters into the picture only in Rouse's Option B, (and only to the extent that the 1 ultimate financing package is considerably less favorable to I Rouse than that projected), the Committee concludes that: f a. The Rouse proposal has significantly better overall potential return for the City, and b. The City should decide whether to choose Option A or Option B only after the terms of a firm financing commit- ment have been obtained from an acceptable financial institution or only after Rouse has agreed that the City may have the right to approve or disapprove the ultimate financing package. 83-1164 -13- OVERALL PROJECT DESIGN 83-1164 0 Evaluation Criterion 3 25 0 OVERALL PROJECT DESIGN The Vote JMB/Federated Realty The Rouse Comoany David Blumberg 11 14 Roger Carlton 0 25 T. Willard Fair 11 14 Carlos Garcia 10 15 Tina Hills 12 13 Roy Kenzie 10 15 Herbert Leeds 15 ✓ 10 Adrienne Macbeth 15 f 10 Dan Paul 10 15 Sergio Rodriguez 10 15 David Weaver 13•) 12 Total Points 117 158 Percent 42.55% 57.4510 -1n- 83-1164 Evaluation Criterion 3 Overall Project Design 25 0 Of the five evaluation criteria, overall project design is, of 4 course, the most subject to personal tastes. This subjectivity was reflected in the voting. Three members allocated more points to JMB/Federated. One gave almost equal weighting to both designs. One gave all points to Rouse. The remainder allocated just under 60711 of the available points to Rouse. i The Committee recognizes the very careful and professional planning Iwhich went into both proposals, as well as the commitment of both to support the arts in terms of Noguchi's Park design and the amphitheatre. - I It is clear that both designs were specifically planned for and that each could work in the Miami context. For some, the elegance and sophis- tication of JMB/Federated's "crystal palace" was a bold statement of what Miami is destined to be rather than a contemporary interpretation f of what it is today or has been in the past. The idea of Miami's Sayside being a totally different concept than Baltimore's Harborplace was appealing to those who felt Miami's project should become an archi- tectural as well as a geographical alternative destination point. JMB/Federated's'design includes the innovativeness of a beautiful glass structure having a strong relationship with the City and B.iscayne Boulevard and a reasonable approach to security considerations. In 0 c .r_-- .' _ - __ .. - .-.. _ .. _ter' - _ M^ .. W_r .. rC �... 1.1.-�. i - �.-� - _- _•• - S3-1164 0 4 Finally, and as may have affected the voting on more than one of the applicable criteria, several members simply felt safer going with a proven design concept. Committee members knew that Rouse's Bayside would work. 83-1164 -17- 0 c EVALUATION CRITERION 4 15% PROJECT MANAGEMENT PLAN 83-1164 0 David Blumberg Roger Carlton T. Willard Fair Carlos Garcia Tina Hills Roy Kenzie Herbert Leeds Adrienne Macbeth Dan Paul Sergio Rodriguez David Weaver Total Points Percent 4 Evaluation Criterion 4 15 PROJECT MANAGEMENT PLAN JMB/Federated Realty 8 7.5 5 5 5 6 7.5 7.5 5 7.5 8 72 _4�-:•6�49� y 3.. q The Vote The Rouse Company 7 7.5 10 10 10 9 7.5 7.5 10 7.5 7 93 56.36 -18- 83-1164 0 4 Evaluation Criterion 4 ' Project Management Plan 15% Both proposers brought to the Committee meetings many of their very competent personnel. Committee members could see and evaluate on a first-hand basis the management teams. While the percentage in favor of I the Rouse Company was 56.36°0' to 43.640, two members felt that JMB/Federated Realty had better project management, four thought they were equal, and five thought the Rouse Company management team was better. The Committee was generally comfortable with both proposals with respect to their space marketing plans, marketing/tenant mix, and promotional programs. It was clear that both proposers have tremendous depth of experience in the planning and execution of retail -oriented l development projects. Committee members focused on numerous aspects of managing an urban Specialty Center including when and how garbage would be removed, deliveries made, security enforced and the park cleaned. The responses to such detailed questions by both proposers gave the Committee insight into the handling of a broad range of operating problems by each team. i Generally, the Rouse team, due largely to its experience in other cities, 1 impressed the Committee with its depth of understanding of the problems of managing an urban Specialty Center. Committee members were concerned about JMB/Federated's ability to translate their suburban experience into an urban environment. The Committee was also concerned with the -19- 83-1164 0 4 depth of Rouse's very experienced management team since it is involved in so many current projects. The Committee's vote was reflective of these concerns and the manner in which they were addressed by the proposers. 83-1164 -20- 1 1 1 0 6 EVALUATION CRITERION 5 10% MINORITY PARTICIPATION 83-1164 0 6 Evaluation Criterion 5 l0u EXTENT OF MINORITY PARTICIPATION (LATIN/BLACK) David Blumberg Roger Carlton T. Millard Fair Carlos Garcia Tina Hills Roy Kenzie Herbert Leeds Adrienne Macbeth Dan Paul Sergio Rodriguez David Weaver Total Points Percent JMB/Federated Realty 6 5 4 3 0 4 5 8 5 3 5 48 43.64 0 The Vote The Rouse Company 4 5 6 7 10 6 5 2 5 7 5 62 56.36 -21- 53-1164 0 6 Evaluation Criterion 5 Minority Participation 100, I 1 The Committee members, as requested, were made aware of the City Manager's letter of September 23, 1983 in which he instructed the Committee not to take into account the influence or community standing Iof the individuals associated with the applicants. The Committee com- plied with that request. Both firms extensively involved minorities in their proposals. The Committee recognized this in its voting results. Four members split the points in this category equally between the two proposers. Five voted in favor of The Rouse Company and two in favor of JMB/Federated. The distribution of individual points was closer on this criterion than any other - although with 56.36o in favor of the Rouse Company, the total vote was equal to that for the Management Plan. IThe Committee focused on the two proposers' very different approaches I to minority equity participation. The Rouse Company's four minority partners, who have a combined interest of 20%, are full risk and reward partners. JMB/Federated required a maximum contribution and risk of $10,000 cash, and were prepared to loan the eleven locally -prominent partners $9,000 of their total contribution as non -recourse loans. The IRouse minority partners contended that only by being full risk and reward partners could they impact the project to the extent they deemed 1 -22- - 64 83 11 necessary. JMB/Federated Realty contended that the no -risk (other than the $10,000) positions offered to minorities was the only way many of -� them could participate in such a project. The Committee's vote reflects a degree of ambivalence about the approach taken by both proposers to the issue of minority equity parti- cipation. Committee members expressed concern that neither firm's approach is particularly beneficial to the black or latin communities at large and that neither succeeds in helping or motivating young minority entrepreneurs. It was generally recognized that this area was not clearly defined in the Request for Proposals, and it was noted that minority equity participation was included in the RFP although it is specifically not required in the amended City Charter. Several members felt that a more positive equity participation approach would be to provide equity purchase opportunities for those black and latin archi- tects, engineers, contractors, managers and even shopowner/tenants who would be involved in the various stages of planning, construction, and operation of the project. The Committee felt that both proposers responded in an -encouraging and enlightened manner to the issues of minority participation in employment opportunities, leasing opportunities, and project management. Both firms included minority -owned professional firms in their development and planning process. Both have committed to use minority construction firms, to provide a significant number of construction jobs to the minority communities, to provide extensive, subsidized leasing opportunities for black and latin merchants, to provide venture capital and business assistance 83-1164 -23- i to such merchants, and to target a significant number of project operating positions to be held by minority individuals. In addition, the proposers established foundations or funds for -i minority development. The Rouse Company proposed that 10% of the cash 4 flow of the project be used to establish a minority development founda- tion governed by a 15 person Board of Directors, some appointed by the City Commission and The Rouse Company, and others to be elected at large. JMB/Federated proposed that 80 of the ownership of the project be owned by a trust fund for the use of established federally tax-exempt community -based organizations selected by the City Commission. Both proposers demonstrated significant prior experience in pro- viding for minority employment and opportunity in their projects to date. The Committee sought and received assurances of such prior experience in addition to the pledge of both proposers to meet or exceed 1 the minority participation standards established by the ordinance for the construction, management and operation of the project. The Committee Ifelt confident that both proposers plan to include minorities to a significantly greater extent than that required by the Request for Proposals. -24- 83-1164 SUGGESTED NEGOTIATING CONSIDERATIONS i J l 83-1164 0 4 Suggested Negotiating Considerations This section presumes that both the City Manager and the City l Commission will concur with the Committee's recommendation of The Rouse ! Company as developer of the Bayside project. However, most of the Ifollowing comments could apply to negotiation of either proposal. + 1. Performance Bond A performance bond should be negotiated with respect to project schedule and compliance with all major, specific commitments made f to the City in the proposal. Specific penalties should be levied for failure to comply. 1 2. Management Commitment and Availability A specific schedule should be agreed upon with the developer's top management for monthly, one -day meetings between top Rouse managers ( and top City officials. I3. Rouse Financing, Operating Expenses, and City Approvals Rouse's proposal is based upon payment to the City of a guaranteed minimum rental plus a percentage of net revenues after specified operating expenses and debt service. The City should not select Option A or Option B until clear indications are available regarding debt service costs and until detailed and specific operating budgets have been prepared. Rouse should be prepared to guarantee its operating expense projections, and the City should have the right to independently determine the reasonableness of such projections before executing the contract. 83-1164 -25- c 4. Environmental Compliance A detailed analysis should be performed by the City to determine compliance with all environment regulations. In particular, 1 analysis should be made of building heights, tree removal and relocation, view corridors/obstructions, and the impact of any structures on the Bay, Bayfront Park, and the proposed amphi- theatre. Any modifications required for compliance should be included as terms of the City's contract with the developer. 5. Marina Flushina Channel 1 Garbage and other waste materials are being trapped inside the marina. JMB/Federated's proposal of a flushing channel for the marina merits immediate and serious consideration. Action should be taken to correct this situation as part of the City's financial participation in the Bayside project. 6. Charter Fishing Fleet Thirty-three charter fishing boats operate out of Miamarina. This "Pier Five" charter boat base should be preserved as suggested in the JMB/Federated proposal. 7. Water Taxi Base i Bayside will be an ideal location for a water taxi base. Provision should be made to include this final designs. 8. Sensitivity to Architectural History Committee members requested that the developer revisit the entire question of construction materials in order to ensure a sensitive -26- 83-1164 0 response to concerns that local materials be used and that Miami's l local architectural heritage be observed and respected. I 9. Speedy Negotiations It is clearly in the best interest of both the City and the developer that contract negotiations be expedited. We recommend that the Manager establish his negotiating procedures at the earliest opportunity, j perform immediate due diligence with respect to similar contract Ii negotiations in other cities, and initiate discussions with the selected developer immediately after the City Commission's decision. 83-1164 0 DISSENTING REPORT 83-1164 i CITY OF MIAMI BAYSIDE SELECTION COMMITTEE REPORT REPORT OF DISSENTING VOTE 1 INTRODUCTION This report of the one dissenting vote of the Bayside Selection Committee's selection, by a vote of 10-1, of the Rouse Company's proposal is submitted at the reauest of the -� Committee's Chairman. _i THE VOTE The single vote cast for the JMB/Federated proposal was based upon the following: the City of Miami Code, the Evaluation Criteria and Process and the status of the Say - side Project as the City's first Unified Development, as well as its first try I at effecting its Minority set -aside goals. The vote is consistent with the almost equal overall potential expressed in the initial Coopers 8 Lybrand findings, as well as in the minor oversights surfaced I during the oral deliberations of the committee. Included were: an exclusion of Rouse's Parking Garage proposal, an exclusion of a cash reflection for the JMB/Federated Gross Equity Return to the Minority Foundation, no discussion of the cash difference between Rouse's net based projected returns and JMB/Federated's gross based projected returns and a discussion of corporate ownership of the garage versus public control. Further in support of this vote is the result of a brief analysis of the total voting of the Committee. Of the total of 1,100 total votes cast by the members, the JMB/Federated proposal received approximately 41.9%. Noteworthy also is the result that two committee members rated the.JMB/Federated within four points of the total of the one dissenting vote, i.e. 52.5, 49.5 and 48.0. . Finally, when Committee voting patterns are considered in relation to the Evaluation Criteria, note that of the total of 55 points possible in the five categories, the Rouse Co. received 67.3%, JMB/Federated 12.7% and an additional 20% were tied votes, Financial Plan, Management Plan and Minority Participation being the categories in which ties occurred. EVALUATION CRITERIA ANALYSIS OF DISSENTING VOTE 1. Experience I rated the Rouse Co. slightly ° Experience of Development Team higher because of their specific ° Specific Similar Developmen Experience experience in specialties. *Coopers & Lybrand indicated that both firms are capable of carrying out this project in a professional and responsible manner. 2. Financial ° Financial Capability ° Level of Financial Commitment l ° City's Anticipated Return ° Financial Strategy *Coopers & Lybrand indicated that there were I rated the proposers almost equally preferring JMB/Federated's local minority investors scheme, their gross based projections, and city control of the parking facility RV !Tan??T8ap�4aA i FFV9R8es in M0 83-1164 1 1 P-ge 2 100 of Dissenting Vote Bayside Selection Committee Report the financial viability of either bidder which would hinder the successful implementation of Bayside. 3. Overall Project Design ° Siting ° Service/Access ° Servicibility ° Design Aesthetics & Compatability o I rated the JMB/Federated slightly higher, preferring the projects desion statement, its relationship to the bay and to downtown Miami, its openess and its compatability with current and proposed downtown development. *Coopers b Lybrand indicated that the Rouse design may be more consistent with the marketing and merchandising mix proposed for Bayside. 4. Project Management Plan ° Manaaement Team ° Marketing Strategy ° Tourist Development ° Maintenance ° Food Matters ° Security Proposers were rated equally with consideration given to JMB/Federated for their marketing analysis, mer- chandise mix, plan for the inclusion of existing charter fleets, inclusion of the Maritime Museum, and their proposed tenant support plan. *Coopers 3 Lybrand indicated that while both developers would be expected to do a good job, that Rouse had an edge in experience. 5. Minority involvement ° Participation in Design/Development ° Equity Participation ° Construction Employment ° MBE Development ° Training Opportunities I rated JMB/Federated higher because of their considerable minority involve- ment in the design, for their minority cash flow sharing plan, for tht(tr Lena! assistance and training plan, and for their proposed MBE development oppor- tunities. I*Coopers E Lybrand indicated that while both firms had a good record of past minority utilization, employment and project involvement, that Rouse had more ex- perience and appeared to have taken an "Active role in specific measures en- couraging and increasing the liklihood of success for minority involvement." R' Zf u l I ubm i tted tiorienne M. Macbeth. Selection Committee Member Bayside Project -29- 83-1164 .14066. 0 1 • COMMENTS ON THE SELECTION PROCESS 83-1164 0 Comments on the Selection Process The Committee was generally pleased and encouraged by the review process. Committee members made several suggestions which might be helpful in future selection: i1. Requests for Proposals a. Separate Weighting of Financial Criteria Concern was expressed that a future proposer might make an attractive financial offer to the City, but that his financial 1 capability or financing strategy might be inadequate to support proposed payments to the City. For this reason, it is recom- mended that future RFP's should weight independently IFinancial Viability and Financing Strategy and Anticioated Financial Return to the City. 1 b. More Specific RFP's In the future, City officials should exercise great caution that RFP's contain even clearer and more specific guidelines - particularly with respect to the financial and minority parti- cipation criteria - so proposers will better understand what i the City expects from them in these areas. If creativity J is to be encouraged, the RFP should say so. If conformity to 1 a specific format is required, the RFP should provide detailed forms for proposers to submit. - 30- ,-414k. 0 0 2. The Accountant's Role The Review Committee asked Coopers and Lybrand to perform a broad - ranging analysis which extended beyond the requirements both of the i City Charter and the 6ayside Request for Proposals. The Committee commends Coopers and Lybrand for its responsiveness to the assign- ment, but agrees with the firm that in the future, the certified public accountant's role should be more restrictively defined in order to avoid duplication with those areas of evaluation assigned specifically to the Review Committee. The primary focus of the accountant should be on the issues of "financial viability, proposed financing strategies, and antici- pated short and long range return to the City." The accountant's report should limit itself to making qualified comparisons in the 1 financial area without editorial declaration of preference, recom- mendation, or ranking. The accountant should not be asked to perform or subcontract marketing or other analyses which would normally be outside the I Accountant's sphere of competence. Should the Manager or the Committee require such special analyses, experts in those fields should be employed directly by the City. In the Committee's opinion, the very careful financial analysis performed by Coopers and Lybrand would have been more effective had pertinent calculations been shown in the accountant's report and if the analytical methodology utilized had been more exhaustively explained and demonstrated. - 31- 83-1164 3. The Citv Attorney's Role The Committee recommends that, in the future, each proposal should be analyzed by the City Attorney and evaluated for compliance 1 with the RFP before the Review Committee initiates its deliberations. The attorney should catalogue any deviations from the terms and conditions of the RFP and state whether or not each proposal is "capable of acceptance." ?. The Votina Process 'he Committee recommends that an appropriate committee voting 1 procedure be researched and specified in future RFP's. -he Committee's decision to allocate points first and then make a final, overall decision based upon each member's personal inter- ipretation appears intuitively correct and should be -Formalized f if such research so indicates. S. Pollina the Committee The Committee recommends that the Chair should not simply read the results of the voting process. Each member should be asked to discuss his overall vote, criterion by criterion, taking the opportunity to explain the reason for his allocation of points. 1 This would further open the process and would make the final 1 written report more directly reflective of each member's view. J ea-iisa 6. Time Commitment for Committee Members The legal prohibitions of the Sunshine Law and Public Records Act regarding discussions between Committee members themselves or between Committee members and proposers and proposers' representatives imposes a very real business hardship when taken with the degree of seriousness demonstrated by this Committee. The Committee recommends that the operational time for future Review Committees be limited to the minimum possible. This will assure availability of quality private sector members. -33- 83-1164 CITY OF MIAMI BAYSIDE SPECIALTY CENTER REPORT TO THE REVIEW COMMITTEE Coopers & Lybrand October, 1983 83-1164 Coopers &Lybrand r $%d public accountants 1800 M Street NW Washington D.0 20036 telephone (2021 822-4000 twx 710 822-0140 cables Cotybrand October 19, 1983 Mr. David R. Weaver, Chairman Bayside Specialty Center Review Committee c/o Intercap Investments, Inc. I 800 B rickell Avenue Miami, Florida 33131 Dear Mr. Weaver: in principal areas of the world Enclosed is our Report containing our evaluation and analysis of the two Bayside proposals. The proposals, submitted by JMB/Federated Realty and The Rouse Company, present two highly qualified and professional teams, both capable of developing the Bayside project. Our challenge has been to draw the distinctions between the two teams in certain specified areas as outlined in this Request for Proposals, and to analyze their projected financial returns to the City. Part One: Response to the Review Committee Requests This part contains our analysis and comments on the criteria outlined in the Request for Proposals document: (developer's similar experience, experience of the team members, overall project design, project management plan and extent of minority participation). Part Two: Financial Analysis and Evaluation This part contains our discussion of the financial viability, financing strategies, short and long range economic and fiscal returns to the City, market analysis, scale and mix of the development proposal and conclusions. } Part Two is being forwarded, under separate cover, to the City Manager, in fulfillment of our obligations under the Request for Proposals. Our report is based on the materials and information con- tained in the two proposals; material presented by the developers at the oral interviews and subsequent clarification of data; and our independent analysis and field research. We have been assisted by two subcontractors: W.B. Koon, CPA, and James B. McComb & Associates. 83-1164 W Mr. David R. Weaver October 19, 1983 Page Two Based on the above data sources, the review criteri-a in the Request for Proposals, and verified by our financial modeling and simulation, we conclude that the Rouse Company proposal offers the opportunity for greater financial and economic returns to the City. While we have made every effort to test the reasonableness of projections and assumptions used in both proposals, our purpose has not been to validate each individual number or assumption, but to evaluate the proposal's in broader financial terms as specified in the Request for Proposals. Therefore, this report should• not be construed as a full feasibility study. Coopers & -1 Lybrand does not warrant or guarantee that any of the results J projected are the most probable or most reasonable future projec- tions for the Bayside project. Our report may not be used for any future financing. It should also be noted that our proposal does not address the appropriateness for the City to assume any risks associated with the project. We have no basis to judge the willingness of the City to accept a lower minimum return in 1 anticipation of larger cash flow from profit distributions. This issue is obviously critical in the evaluation of the Rouse proposal, but will have to be addressed by public officials and staff. We have appreciated the opportunity to work with the Review Committee on this important project. Any questions you may have, please direct them to Dr. Richard Cooper, Partner, or Maureen McAvey, Manager, of our Washington, D.C. office at (202) 822- 4 000. Very truly yours, RVLC/MLM lwg 83-1164 I TABLE OF CONTENTS INTRODUCTION PART ONE: RESPONSE TO REVIEW COMMITTEE REQUESTS A. SIMILAR DEVELOPMENT EXPERIENCE B. EXPERIENCE OF THE TEAM MEMBERS C. OVERALL PROJECT DESIGN D. PROJECT MANAGEMENT PLAN E.. MINORITY PARTICIPATION PART TWO: FINANCIAL AND ECONOMIC ANALYSIS A. FINANCIAL VIABILITY B. FINANCING STRATEGY C. SHORT AND LONG-TERM ECONOMIC AND FISCAL RETURNS D. MARKET ANALYSIS E. SCALE AND MIX OF COMMERCIAL AND PUBLIC FACILITIES F . CONCLUSIONS PAGE 1 3 10 13 17 21 25 27 29 51 57 59 83-1164 I INTRODUCTION 83-1164 INTRODUCTION The City of Miami currently owns a 20 acre site adjacent to the Miamarina, within the downtown Bayfront Park system. The City has sought development proposals to create a specialty retail center of approximately 200,000 square fee`_ of new restaurants, retail, market and public Spaces on this Bayside ` property. Under the procedures established in Ordinance too. 9572 for unified development projects, the City of Miami issued a Request for Proposals in March 1983 which outlined bid require- ments and established specific selection criteria for proposal evaluation. Following the unified development ordinance, the City of Miami Commission approved a Resolution on March 18, 1983 appointing the Bayside Specialty Center Review Committee. This eleven member committee is charged with evaluating each proposal within the criteria established by the Request for Proposals. The Review Committee will then provide a written report to the City Manager. As further specified in the ordinance, the City of Miami is required to appoint a certified public accounting firm to analyze each proposal relative to certain criteria as described within the Request for Proposals. Coopers & Lybrand was appointed on July 18, 1983, by the City of Miami Commission to assist in the analysis and review of the Bayside Specialty Center proposals per the guidelines established in the Request for Proposals. Coopers & Lybrand is assisted in l this engagement by two subcontractors, W. B. Koon, CPA, a local minority CPA firm, and James B. McComb and Associates, a con- sulting firm with special expertise in retail market analysis. Two proposals were received and opened by the City Clerk on September 19, 1983. The bidders were JMB/Federated Realty and The Rouse Company. In the opinion of the City Attorney, both + proposals were determined to meet the qualifications set forth in the Request for Proposals and were therefore deemed "qualified bidders". Oral presentations and interviews were held by the Review Committee on October 4, 1983. 1 83-1164 This report is based on the proposal documents, the informa- tion and data presented by each of the bidders at the oral interview, and the independent research and documentation of Coopers & Lybrand and its subcontractors. --I This report contains two parts: Part One: Response to Review Committee Requests Part Two: Financial and Economic Analysis Part One addresses the requests made to Coopers & Lybrand by the Review Committee for evaluation of the proposers': 1) Similar development experience 2) Experience of the team members 3) Overall project design t 4) Project management plan I 5) Extent of minority participation t 1 Part Two, addressed to the City Manager, evaluates the proposals based on the following criteria (drawn from the Request for Proposals): 1) Financial viability of the development teams 2) Financing strategies 3) Short and long-range economic and fiscal returns to the City 4) Market analysis l 5) Scale and mix of commercial and public facilities f 6) Conclusions 2 l 53-1164 Is 83-1164 83-1164 e4 I A. SIMILAR DEVELOPMENT EXPERIENCE REQUEST FOR PROPOSAL GUIDELINES The Request for Proposals (p. 2) states the City's desire to: "create the most active and productive use of this premier site. The project will include restaurants, fast-food services, retail boutiques, markets and entertainment areas responsive to the urban, environ- mental and design factors inherent to the Miami waterfront and the Bayfront Park system. As an urban specialty center..." The Request for Proposals further states (p.3), "The Bayside Waterfront complex should be designed to attract all segments of the two million resident community as well as South Florida visitors, a market currently in excess of twelve million annually." Page 24 of the Request for Proposals requires each bidder to submit the following: Describe in detail the duration and extent of your business experience with special emphasis upon exper- ience related to commercial developments, restaurants and shopping centers. Also state in detail the names and pertinent experience of the persons who will be directly involved in development and management of the business. List the names and locations of restaurants and shopping centers currently owned and your percentage ownership, restaurants and shoppings centers currently managed. In addition, please also provide photographs or other illustrative material depicting projects that will demonstrate your ability to complete a quality development for each project identified as well as persons familiar with the development who will respond to inquiries from the City. You should also identify your specific role in each project. JMB/FEDE RATED REALTY JMB/Federated Realty Associates, Ltd. (JMB/Federated) is a newly created entity (April, 1983) combining the former Federated Stores Realty, (FSR) Inc., an affiliation with Federated Department Stores and JMB Realty Corporation. Both Federated 3 83-1164 ' ' e4 I Department Stores and FSR have extensive experience in retail i development, and management and operations. Page 19 of the JMB/Federated proposal cites FSR's past experience in the development of 8 regional malls with over 6.5 million square feet of retail space. Both with the strength of Federated's department stores and the experience of FSR in attracting over 1,000 mall tenants, JMB/Federated is clearly one of the national leaders in retail development. The proposal document (p. 19) indicates that FSR, under Federated's sole ownership, was precluded from building free- standing specialty retail projects. Thus, the two specialty projects (Collin Creek and Town Center at Boca Raton) which are presented by JMB/Federated as examples of similar experience are specialty shopping areas related to larger, regional malls. JMB/Federated presents general background data on pp. 19-22 of its proposal relative to the following items listed in the Miami Request for Proposals: JMB/Federated# restaurants: 31 major deals, 200,000 square feet. Major food service space. No locations given fast-food service: 100 different operators covering 65,000 sq. ft. in food clusters. No specific locations given. retail boutiques: "millions of square feet to hundreds of different retail tenants" including special assistance to small tenants. markets: no specific data given entertainment: no specific data given specific projects: Town Center at Boca Raton, FLA } Collin Creek Mall, Dallas, TX +� Includes experience of FSR as stated in proposal. 83-1164 114 A COT me nt s No specific information is given by JMB/Federated as to their experience in attracting visitors and/or residents to their _ developments. While it is true that 0Y.2/Federated has not had so exhaustive i experience in market/festival shotping as The Rouse Company, the 1 Miami Request for Propcsals stated a desire for an urban, specialty center capable of drawing and serving all segments Of the residential and visitor market. JMB/Federated presents impressive data as to their underlying capability in the key areas of foot service, smaller tenants and effective leasing and management. Their lack of specific experience in festival marketplaces is not a criterion of the City and does not preclude them from being successful in Miami Bayside. jOf concern, however, is their limited experience in urban (downtown) :nixed use projects and in projects which seek to draw 1 from a multi -ethnic, mixed economic clientele. The Town Center in Boca Raton is in one of the wealthiest communities in the country and geared to serve customers with large disposable incomes. Collin Creek is approximately 18 miles from downtown Dallas and is a traditional, suburban, regional mall, anchored by Sanger Harris, Sears, Lord & Taylor, Pennys and Dillard's. The Village Walk project is part of the Collin Creek development, in an adjacent building. I THE ROUSE COMPANY The proposal is submitted by a partnership consisting of The Rouse Company and four local Miami residents. The Rouse Company is publicly owned and also has extensive experience in retail J development. The Rouse proposal presents data (pp. 22-37) on the following j projects relative to the Request for Proposals requirements: 83-1164 ""A I restaurants: Ifast food service: retail boutiques: and markets and entertainment: The Rouse Company restaurant square footage is not separately described but is included in the following figures: - Faneuil Hall Market, Boston, 220,000 square feet, total - Gallery at Market East, Philadelphia, no specific restaurant square footage - Harborplaee, Baltimore 142,000 square feet retail and restaurants, 12 restaurants and cafes, 25 other eating places - The Grand Avenue, Milwaukee 245,000 square feet including restaurants and retail - South Street Seaport, NYC 242,000 square feet, retail, restaurants and market. No specific breakdown is given for the above projects. Fast food service is included in the above projects. Categories not specifically broken down, included in above numbers. - Faneuil Hall - 220,000 sq . f t . 170 merchant tenants. - Gallery East - 2109000 square feet total (excluding department stores) ' - Santa Monica Place - 5689000 square feet including two department stores. - Cross Keys, 65,000 square feet total retail and restaurants, 20 market merchants, 75 other establishments ' 6 83-1164 The Rouse Company (Cont'd) - Grand Ave. - 2459000 square feet total retail (excluding dept. stores) South St. Seaport - 242,000 square feet, retail, t restaurants and market. 1 Comments The Rouse Company has extensive experience in specialty retailing, urban retail and festival market experiences. Further, Rouse provides information regarding other aspects of mixed -use development which may be of interest to the City of Miami regarding Bayside. Specifically, Rouse has experience in development and management of such public spaces/activity centers ` as: i - South St. Seaport Museum, 105,000 square feet j - "Please Touch" Children's Museum at the Gallery j - Visual Arts Center, Children's Zoo and Music Pavilion in Columbia, MD. 0 The Rouse proposal cites past experience in generating a major draw to both tourists and local residents; as an example Faneuil Hall attracts - 15 million people per year (p. 24), Harborplace attracted 18 million people in 1982 (p.15). In addition, Rouse cites experience in working with local and federal governments in accomplishing public/ private development, specifically having generated $53 million in Urban Development Action Grant (UDAG) funding through the U.S. Department of Housing & Urban Development (HUD) and established working relationships with local governmental entities in Boston, -New York, Philadelphia, Baltimore and Milwaukee. The Rouse Company also has experience in waterfront development both in Harborplace and South St. Seaport. 7 83-1164 Of concern, perhaps, in The Rouse Company proposal may be the large number of additional projects currently underway and/or committed to by the company. The 1982 Annual Report of The Rouse Company indicates that: The Rouse Company now operates 57 retail centers con- taining over 36 million square feet of retail space. Approximately 20 million square feet of this space is occupied by 120 of America's leading department stores, with the balance being leased by the company to more than 5,500 small merchants. The company developed 36 of these 57 retail centers, while the remaining 21 were acquired through the Acquisition/Management Program j begun five years ago. (p. 4) Their Bayside proposal states that they are committed to complete the following projects in the mid-19801s: - The Gallery - Phase II - South St. Seaport - Phase II - Downtown Washington, D.C. Tabor Center, Denver - Navy Pier, Chicago ` _ Yerba Buena, San Francisco New Orleans riverfront - Union Station, St. Louis Harborplace, Area 5 Downtown Portland, Oregon - Downtown Seattle 1 The Rouse Company is thus committed to eleven new or expanding projects over the next 3-5 years. It is unclear whether Rouse will be able to accomplish such growth without a loss in quality and/or timely execution of projects. SUMMARY Both JMB/Federated and Rouse have extensive past retail experience. Relative to the criteria or considerations listed in the City's Request for Proposals document, the two proposals might be summarized as follows: P 83-1164 JMB/Federated Similar Experience - extensive small shop development and tenant experience, predominately in suburban malls - extensive restaurant and food service experience Issues/Concerns ' - no waterfront experience cited - 'past experience is predominately suburban rather than urban - past experience is more traditional, retailing - oriented with department stores as anchor tenants - no clear experience in attracting tourists or visitors - no public/private joint development experience or UDAG experience The Rouse Company Similar Ex erience - waterfront experience (Harborplace, South St. Seaport) - retail, restaurant and fast food experience - market and entertainment experience - public/private experience - experience in urban projects - experience in development and operation of I public/visitor attractions Issues/Concern 1 - ability to execute so many new projects in a timely fashion 9 83-1164 B . EXPERIENCE OF THE TEAM MEMBERS REQUEST FOR PROPOSAL GUIDELINFS On p. 11 of the Request for Proposals the Review Committee is charged with: "Assessing qualifications and experience of project leaders, team members and consultants." Section VI of the Request for Proposals document requests specific data regarding past experience of the proposer and team members (p. 24); p. 27-28 of the Request for Proposals requests similar specific data from the proposer's architect. JMB/FEDERATED JMB/Federated, through the experience of FSR has extensive qualifications and experience in retail development, operations, leasing and management. In addition, JMB Realty Corporation provides financial strength and the ability to provide equity investment through syndication. As stated on page 11 of the proposal, JMB's net worth, based on market valuation of their investments, exceeds $290 million. FSR, the predecessor of JMB/Federated Realty Associates, has developed over 6.5 million square feet of space in the last three years. The individual team members of JMB/Federated Realty also bring considerable retail and real estate expertise. Mr. John Boorn has very strong academic and professional qualifications as outlined on pp. 12-13 of the proposal. Mr. Boorn's former experience with The Rouse Company and Faneuil Hall, his'experi- ence in Providence, RI and his experience since joining FSR all indicate a level of strong expertise in the field. Mr. Boorn is assisted by other staff as outlined on pp. 13-15 of their proposal. Based on the academic qualifications and professional experience of the individuals named, JMB/Federated has an impressive and very competent team identified as principals for the Bayside project. 10 83-1164 B . EXPERIENCE OF THE TEAM MEMBERS 83-1164 The architectural firm of RTKL has a notable background and set of qualifications. RTKL has specific retail design experience with The Rouse Company and Mel Simon and Associates. RTKL was the principal design firm for the Gallery project in Philadelphia, developed by The Rouse Company. The other firms identified in the proposal all appear to have strong qualifica- tions and backgrounds appropriate to this project. Of note, the Sasaki architectural firm has done design and landscape architec- ture for several waterfront projects including the Boston Waterfront Park and Harbor Town of Hilton Head Island, SC. This may partially offset the lack of direct waterfront development experience of JMB/Federated. Of note, the JMB/Federated proposal indicates that Mr. John Boorn will personally function as Bayside Development Director. The following other individuals are specifically identified with functions and/or responsibilities for Bayside: Individual Company Responsibility Eugent Saenger JMB/Federated Project Mgr: Pre -Development Thomas Brown JMB/Federated Project Planning Construction Joseph Johnson JMB/Federated Negotiations with the city Rohan Andrew JMB/Federated Market Research W. Richard Wilke JMB/Federated Proj. Supervisor: Implementation James Czech JMB/Federated CFO, Financing Arrangements Gary Bowden RTKL Principal Architect Frank Taliaferro RTKL Design While the above list may not fully reflect the roles and responsibilities of all individuals, it does indicate to the Review Committee the backgrounds, qualifications and experience of senior staff for Bayside. Job descriptions can be found on pages 42-45 of the JMB/Federated proposal. 11 83-1164 10 THE ROUSE COMPANY The Rouse Company has listed their qualifications and assembled a group of experienced subcontractors to carry out the Bayside project, if selected. Their team is outlined on pages 21 through 38 of their proposal. Without repeating the particulars of the qualifications and experience of The Rouse Company or their subcontractors, it is apparent that each of the firms identified has sufficient background to contribute to the successful completion of the Bayside project. However, Rouse has not specifically identified the individuals who will have specific project management, supervisory and/or design responsibilities for the Bayside project. COMMENTS REGARDING BOTH PROPOSALS In our opinion both bidders have assembled highly competent teams to pursue the development of Bayside. Since the full identification of team members, not only at the supervisory level, but also at the day-to-day operational level is lacking, it is impossible to make meaningful comparisons between the two proposals in this particular respect. Both of the principal firms, JMB/Federated and The Rouse Company, have demonstrated capability in all phases of retail development, design, construction, leasing and management. The subcontractors, particularly the principal architects of the bidders (RTKL and Ben Thompson and Assoc.), also have excellent reputations and very strong track records for retail design. Given the high quality and stature of the teams, it is our judgement upon review of the proposal documents and verification of some of the data contained therein, that both firms are capable of carrying out this project in a professional and responsible manner. 12 83-1164 r C. OVERALL PROJECT DESIGN 83-1164 0 0 C: OVERALL PROJECT DESIGN REQUEST FOR PROPOSAL GUIDELINES The Review Committee is requested in the Request for Proposals to consider the overall project design. The specific + guidelines suggested by the Request for Proposals include the following: 1 Overall Project Design 1 - Assess the innovative and imaginative siting of facilities -- Resolution of access and service Aesthetic qualities and compatibility of design with waterfront and park setting -- Innovative and imaginative design features _ -- Security, energy efficiency, accessibility for the handicapped, imaginative and creative use of graphics, lighting, landscaping, water features, l public spaces and pedestrian areas. The experience and expertise of Coopers & Lybrand and its subcontractors is not that of architectural design critics or design consultants. Therefore, we have agreed to address the overall project design issue from a limited vantage point. Given the financial nature of our expertise, we will concentrate on the impact design considerations may have on financial and economic returns to the City. We have relied for much of the data in this section on the extensive retail expertise of our subcontractor, James B. McComb & Associates, and the manager/consultant assigned to this project l from McComb, Ms. Carol Perry. Ms. Perry has over 13 years of retail experience, including seven years with the Dayton -Hudson Corporation, where she held various executive positions in merchandising. Ms. Perry has assisted several developers and cities in evaluating and improving the design and organization of I their retail and specialty centers for better merchandising and improved financial return. 13 83-1164 Miami Market Overview The Miami retail market is dominated by traditional retail centers. There is a good representation of regional malls, e.g., Aventura and Dadeland; there are up -scale specialty centers, e.g., Mayfair in the Grove and Bal Harbour; there are shopping -� areas which serve the urban core and tourist trade, e.g., the Miami Beach area and Little Havanna; the Omni International and Flagler Street serve the urban core as well as international visitors. Although each of these retail complexes/areas have advantages and exciting components, none of them offers the 1 mecca/marketplace/festival environment where one goes to be both entertained and to experience a unique collection of merchandise, food and activities envisioned for Bayside. If Bayside is to succeed in the larger, regional retail environment, it must distinguish itself from the more traditional shopping centers and I provide this exciting destination place for the consumer. Both the JMB/Federated and Rouse proposals address this need within their market and merchandising descriptions. Both the overall project design and the activities and events within the buildings must provide a feeling of excitement and a level of comfort for the consumer. Given the wide range of economic groups for which Bayside is targeted, the shopping experience must present an array of merchandise at varying prices, but must also be sufficiently casual and comfortable to appeal to a wide band of consumers. Without these criteria being met, the sales forecasts may not be achievable. The merchandise mix should bring something new to the Miami area with its content and presentation. Activities should be ongoing at Bayside, be they merchants selling wares from a pushcart, the floating band I pavillion or the maritime museum. t General Design Comments JMB/Federated design drawings of the Bayside project follow the concept of the conservatory, the glass house in the Park, and are appropriate to the natural setting of the Bayside Park and to 14 83-1164 Miami. Both the International Food Festival and the Palm House on Festival Plaza have a feeling of a beautiful greenhouse with wide open spaces, tremendous light sources and verdant foliage. _ The atmosphere is, perhaps, more appropriate to a better priced, traditional specialty center than to an urban activity center. The feeling generated by the architectural renderings and the ti overall design is sophisticated, upscale and somewhat formal. In JMB/Federated's description of Bayside, they use verbage such as "customers will find themselves immersed in the middle of huge lively •urban markets for food, fishmongers, fruit vendors, coffee roasters, butchers, etc; all shouting for attention and hawking their goods; Cabrito's will roast on spits over open mesquite fires". All these activities sound exciting and very consistent with the marketing strategy of the urban activity center. Yet they seem in conflict with the somewhat formal, "conservatory, gem -in -the -Park" quality of the JMB/Federated design. The Rouse design portrays the North Pavilion Shopping Street and the Open Market Building with tin roofs, awnings, fish hanging from the ceiling, and people attired in casual clothing. The general design conjures up the urban market, informal, casual, geared to people from all incomes and backgrounds. Rather than glass being the dominant material used in the design, shed roofs of corrugated metal are dominant. Both materials and design features are more common, informal and lend themselves to a more accessible, casual experience. Security Another concern which might affect the design choice is security. The Miami 1982 Retail Trade Survey stated that there is a perceived concern with the level of security in the central business district. It is critical to the success of Bayside, being in a downtown location and open nights, to be perceived as a safe, welcoming environment. The JMB/Federated design has nodes of activity, rather than a continous band of people, shops, restaurants, etc. The spaces between these nodes are devoted to 15 83-1164 I a planting and more passive activity. While this would undoubtedly be very attractive and could be well lighted and patroled by a security force, it does not generate the same feeling of security and safety that a more continuously active space does. The Rouse concept, utilizing the band of shops and activities wrapped around the site, may lend itself to a greater perception of j safety. SUMMARY OF COMMENTS For the Bayside project to achieve the highest sales and rental forecasts, the physical design of the space must reinforce the proposed activities and uses. It is our opinion that the Rouse design may be more consistent with the marketing and merchandising mix proposed for Bayside. This design may also lend itself to a greater perception of safety by consumers. Both these factors together may help, or if not present, hinder, the achievability of rental rates and sales income. 16 83-1164 I a 1 D. PROJECT MANAGEMENT PLAN I 83-1164 D. PROJECT MANAGEMENT PLAN REQUEST FOR PROPOSAL GUIDELINES The Request for Proposals directs the Review Committee to review the project management plan of each of the bidders. On page 11 of the Request for Proposals, the following guidelines are suggested as items for consideration: Project Management Plan Assess quality and organization of management team, marketing strategy for space, consumer sales and attracting tourists, tenant mix, including rationale for specific food programs; methods of providing maintenance, food supply handling and storage methods and special security arrangements, etc. General Comments Both JMB/Federated and The Rouse Company have broad experi- ence in the operations and management of retail centers. Their past experience and the descriptions of their management plans in the proposals indicate that both firms have sufficient capability to professionally manage the Bayside project. Given this general comment regarding the organizational and management components, we will focus on some of the areas where there may be differences within the two proposals. Merchandise/Mix The JMB/Federated proposal calls for 176 tenants with an average square footage of 1 , 136. JMB/Federated looks at a breakdown of 50% of the square footage allocated to food, generating 54% of its volume. The Rouse Company is proposing 55% of its square footage in food, generating 55% of the revenue; 45% of the space would be in retail goods, generating 45% of the sales. Thus, the breakdown of food/retail between JMB/Federated and Rouse is very close. The merchandise breakdown is very similar as well. The main categories being: -- general retailing -- restaurants 17 83-1164 i -- cafes and bars -- fast food -- market/gourmet food -- pushcart/kiosk businesses In the area of general retailing and restaurants, cafes and bars, it is our opinion that both firms would do equally well. Both JMB/Federated and The Rouse Company have impressive records in retailing and general food service. In the areas of market operations and pushcarts, there may be some differences between the firms. Pushcarts/small vendors have been tried in several parts of the country unsuccessfully. Because they are unique to a retail center and complex in their operation (often high turnover, with special needs for servicing), pushcarts and kiosks may require different management skills and merchandise/ market understanding than traditional tenants in a center. The Rouse Company has a proven track record in this area, whereas JMB/ Federated does not have a broad history in this aspect of retailing. Entertainment Both JMB/Federated and The Rouse Company have done a commendable job of generating entertainment and attraction ideas for the Bayside project. The success of JMB/Federated in promotion and marketing is recognized by their award of MAXI's from the International Council of Shopping Centers. JMB/ Federated has recommendations for a pontoon -barge water shuttle that would take customers across the marina basin between the Ship's Chandlery and marina pier; creating a new identity and excitement for Miami's charter fishing fleet; and for getting the Maritime Museum to participate in setting up operations and displays inside several antique sailing vessels. All of these ideas, their past use of arts oriented events and community based festivals and promotions indicate their understanding of the need for entertainment and events to draw consumers. 18 83-1164 The Rouse Company also has proven expertise in the area of promotion and entertainment. Rouse proposes a floating bank pavilion for use by community cultural groups and for special promotional activities; and the active inclusion of the amphitheater as part of the redevelopment plan and the UDAG. Rouse cities their past success in the Art in the Marketplace 1 program as evidence of their understanding and past success at providing entertainment and attractions to shoppers and visitors alike. Both development teams have done a good job of identi- fying attractions and event opportunities. In our judgement, both developers would do a good job of planning and executing events. Maintenance The Bayside project is anticipated to draw millions of consumers a year. With high pedestrian traffic, tremendous activity, a high percentage of food related businessses and jpushcart/vendor operations, good maintenance is critical. While the regional malls and the specialty centers in Miami have a high level of maintenance, downtown Miami, Lincoln Road Mall, Little Havana, Miracle Mile, etc., have significantly lower levels of maintenance. Poor maintenance/housekeeping cleanliness is seen as a detriment to retailing and, if it occurred at Bayside, would have a negative impact on sales. While Rouse has a history of l the maintenance requirements associated with the market type of retail, the high quality of maintenance of the Federated/FSR projects would lead to the presumption that both developers would maintain the project in a first class manner. Security As stated in the design section, the Miami 1982 Retail Trade Survey stated that there is a perceived concern with the level of 1 security in the central business district. The need for an l adequately trained, highly visible yet not obtrusive, security 1 force will be particularly important for the Bayside project. 1 19 83-1164 0 i Rouse has had experience with urban centers and the difficulty in overcoming customers' initial concerns regarding the safety of downtown at night. Additionally, The Rouse Company has experience in estimating the number of security people required, and the level of training needed. While JMB/Federated recognizes the need to make B ayside a safe and open environment, the requirements of Bayside will be substantially different than i those of a suburban shopping center. SUMMARY COMMENTS While both developers would be expected to do a good job in the project management area, the two areas where there may be a difference are: - pushcart/small vendor operators. Rouse has successful experience in this area. JMB/Federated does not. - security. The security requirements of an urban, heavily used center are different than the needs of a 1 suburban center. Again, Rouse has successful exper- ience and JMB/Federated does not. Whereas JMB/Federated does not have proven experience in these certain areas, their overall excellence in retail would indicate that they would probably be successful in these areas. 20 83-1164 C 19 E. MINORITY PARTICIPATION 83--1164 E. MINORITY PARTICIPATION REQUEST FOR PROPOSAL GUIDELINES 1 On pages 11 and 12, the Request for Proposals for the Bayside Specialty Center Review Committee charges the committee with evaluating developer proposals based on the "extent of minority participation (Latin and Black)". This evaluation is to include assessment of: - participation of design development team and equity -� participation. - hiring during the construction phase. - special business development opportunities for minorities and hiring outreach and training opportunities in relation to operation and i maintenance of facilities. Both proposals commit to a number of target goals for the Bayside project, and each proposal lists specific minority involvement already retained during the development phase of the project. The basic proposals of the two firms are summarized in Chart I, following. The actual details of how goals and commitments will be translated into working programs are specifics that must be negotiated by the City with the firm chosen to develop the Bayside project. However, both firms have presented a series of specific commitments that should allow for substantive minority participation regardless of which developer is selected. JMB/Federated proposes to have 20% minority equity participa- tion. An additional 8% ownership interest is to be set aside in a 1 trust company to be distributed to local tax exempt organizations. 1 The Rouse Company proposes to have 20% minority equity parti- cipation. In addition, the greater of 10% of the cash flow, prior to returns to the equity partners, or $100,000 per year is to be contributed to a foundation for the benefit of minorities. 21 83-1164 0 40 a Equity Participation 'full risk & reward' foundation/ trust Fmploymerit support services development construction management operations leasing other Chart I Ba side Project Minority Participation Proposal Comparison Overview* JMB/Federated 20% 8%** prin. design arch. assoc. design arch. project attorney project accounting advertising firm local bank lead engineer 20% minimum 2 asst. managers mgmt. training for other positions no specific numeric committment 25% of total $1 million special allowances Rouse 20% 10%** assoc. project arch. public relations market research local bank 35% minimum 50% of all construc- tion employment 50% of key mgmt. (5 supervisory) 75% of personnel 50% of total ---75% of tenant employment w/ referral service *This summary table provides highlights of some of the major minority participation features contained in the respective proposals. **JMB/Federated commits an 8% limited partnership interest to a trust. Rouse commits 10% of net cash flow before returns to the partnership. 22 f33-11�i4 Rouse has established specific, minimum minority partici- pation goals in the areas of: construction, construction employ- ment; project management; employment in project operations; tenant employment and project tenancy. JMB/Federated has established specific, minimum minority participation goals in the areas of: constructor; project management; and project tenancy. SFUMMARY COMMENTS Three significant differences between the proposals should be noted. First, Rouse specifically commits to employment goals not only in project management, but also in terms of project opera- tions, construction employment and employment by tenants of the project. The JMB/Federated proposal mentions specific employment i commitments only in the area of project management. Second, the Rouse proposal for funding a foundation by setting aside 10% of net cash flow contains a guarantee that a minimum of $100,000 per year will be available, and that this money will be used to benefit minority programs. The JMB/ Federated commitment to set aside an 8% ownership portion in a trust company specifies, on page 65, that disbursements from that trust are to be made by a City Commission "...and the commission coal shall be to see that distributions are made to organizations in a manner to reflect, to the reasonable extent possible, the ethnic mix of the population of Miami". While the JMB/Federated proposal does specify that the trust shall share in the proceeds if the project is sold, it is unclear whether any negative cash flows that might be anticipated by equity participants in the early years of the project will be charged against future earnings of the proposed trust. Third, JMB/Federated offers to commit $1 million dollars in special tenant allowances for use by minority tenants. The Rouse Company proposal mentions a number of programs designed to assist minority project tenants, including assistance with leasehold improvements, but no definite goals or amounts are specified. 83-11 23 116 1 f Both firms have a good record of minority employment and minority project involvement. However, given the urban location and the public/private nature of many of its major projects, The Rouse Company appears to have more experience and to have taken an active role in specific measures encouraging and increasing the likelihood of success for minority involvement. u 24 83-116 4 83-1164 83-1164 0 0 A. FINANCIAL VIABILITY The two development companies who have bid on the Bayside project have both been actively involved in the construction of major retail projects during the past years. For this project, each developer has proposed the formation of a local partnership with the development company serving in the capacity of general partner. JMB/Federated Realty was established in April of 1983. It 1 represents a joint venture between a large real estate investment and management firm, JMB Realty Corporation, and one of the nation's largest department store retailing companies, Federated Department Stores. The joint venture is an evolution of Federated Stores Realty (FSR), a wholly owned subsidiary of Federated Department Stores. As a privately field company, I information regarding JMB/Federated Realty's net worth and financial position is not public. However, based on independent verification and the strength of the two parent firms (JMB and Federated Department Stores), the financial resources that are required for the Bayside project should be readily available to JMB/Federated Realty. On page 59 of their proposal, JMB/ Federated notes that the company currently has in excess of $70 million in outstanding construction and development credits. Page 12 of their proposal indicates that FSR developed 6.5 million square feet over the last three years, valued in excess of $450 million. JMB Realty reports their net worth, on a market value basis, to exceed $290 million (page 11). i The Rouse Company is also one of the major developers in the country. It has completed a number of major urban projects on a scale similar to the Bayside project involving both substantial private and public monies. It currently has nearly $200 million in financing for projects under construction, and has substantial lines of credit and sources for additional funds. The Rouse Company states in their proposal that they have successfully 25 83-1164 0 11 arranged $450 million in permanent financing and raised over $200 million in equity capital over the last five years (pages 53-54) Both companies have sufficient financial resources to adequately finance a project such as Bayside. Both companies have exhibited considerable success in securing substantial financing and in meeting their financial commitments. In our opinion, there are not significant differences in the financial viability of either bidder which would hinder the successful -� execution of Bays ide. 26 4 83-1164 B. FINANCING STRATEGY 83-1164 B. FINANCING STRATEGY In the absence of obtaining a commitment from the City, the financing strategies contained in the two proposals should be viewed as tentative approaches to obtaining the necessary resources. The actual financing strategy used by the successful bidder may be altered due to: changes in the financial markets; the availability of new funding sources; changes in the financing requirements once the scale of public investment in the project I has been determined (availability and amount of UDAG funding, i parking bonds, etc.); and other similar factors. JMB/Federated's approach to financing Bayside would involve two parts. First, a first mortgage would be sought for approxi- mately 75% of the required financing. Second, the remaining equity financing would be sought from an institutional investor I (page 59 of proposal). While JMB/Federated does not provide additional detail concerning their financing strategy, given the resources of the firm and their experience with financing major projects, this strategy should be workable. It should also be remembered that returns to the City, other than monies available for the trust fund, are not contingent on net cash flow, so the j general financing strategy is of less immediate concern to the City as long as it does not endanger the success of the project. The Rouse Company proposes two approaches to financing the Bayside project. The first is the use of a 'bullet' loan; that r is, a medium term note based either on a long-term amortization I schedule or providing for interest -only payments during the term of the loan. The second is to secure a participating mortgage i with an institutional lender providing for a long-term, interest - only loan with lender participation in cash flow. 4 The first form of loan, a 'bullet' loan, is generally used when interest rates are high and funds are difficult to obtain. The advantage of this form of financing is that it provides necessary financing at a lower cost than longer term financing i 27 would require. It also provides the borrower with a reasonable period of time to seek long-term refinancing. A participating mortgage with an institutional lender has been an increasingly popular financing vehicle in recent years. Because the lender participates in cash flow, it is often possible to obtain long-term financing at rates several points below that available from other sources. A disadvantage of this type of financing is that it is often necessary to commit a j significant portion of net cash flow to the lender. However, if a project is particularly successful, it is sometimes possible to refinance the project and receive more favorable terms. Both of the strategies mentioned by Rouse are reasonable and achievable given the current financial markets. In their pro- posal, Rouse provides an example of the second strategy with the following terms: i - 30 year non -amortizing loan. 1 - 10.75% interest charge. 25% participation in net cash flow after debt -service and before other distributions. While it cannot be guaranteed that these terms will be avail- able if Rouse is the successful bidder and seeks financing for li the Bayside project, the terms cited are possible in the current financial markets. In conclusion, the general financing strategies proposed by the respective companies are achievable, and unless there is major deterioration in the financial markets between the review process and the construction of the project, obtaining financing Iunder any of the proposed methods should be possible. 28 83-1164 f f C. SHORT AND LONG-TERM ECONOMIC AND FISCAL RETURNS 83-1164 C. SHORT AND LONG-TERM ECONOMIC AND FISCAL RETURNS ANALYSIS ASSUMPTIONS AND PROPOSAL COMPARISON ISSUES The JMB/Federated and The Rouse Company proposals provide different underlying assumptions and different methodologies for providing financial returns to the City. Obvious differences include the assessments of the market potential of the site (potential sales per square foot), different assumptions con- ( cerning the parking facility construction costs, operation and revenues, and differing assessments of the retail/food mix that is appropriate for the site. In addition, the two proposals present different methods for providing returns to the City. In the Rouse proposal, the City would receive its return in two basic forms -- a guaranteed minimum annual return and a share of the net cash flow available for distribution after all expenses and contingent returns to equity and debt sources of project financing. In the JMB/Federated proposal, the City would receive a percentage of net rental income (gross rental income less vacancy) and a guranteed annual land rent payment. From a financial perspective, they proposals provide the City with the opportunity to choose payments from gross receipts, or to choose payment from a share in the 'profits'. In addition to the basic formulas for determining the 'cash' return to the City, the two proposals provide various other direct and indirect returns that must be evaluated. For ( instance, JMB/Federated provides a guaranteed annual contribution for events to take place in the adjacent amphitheater. They also propose several cash payments prior to the opening of the project, and rent-free space to the City in the B ayside project. Rouse proposes to provide a contribution towards construction of the amphitheater and to establish a minority foundation funded, in part, by a guaranteed minimum or, if greater, a percentage of the cash flow available for distribution prior to returns to the partnership. Rouse also details a plan for operating parking facilities associated with the project and estimates returns 29 83-1164 0 t available to the City from these operations; however, because such detail is lacking in the JMB/Federated proposal and because this income should be considered as separate from the primary project, these returns have not been included in this report. Given the differences noted above, the City has an opportunity to evaluate both the 'risk' involved in these returns and the relative value of different types of returns. In what follows, an attempt will be made to measure the magnitude of i these returns, analyze a set of senstivity assumptions, p.g., 'what if' sales increase or decrease by 10% or 25%, and to tie the risks inherent in selecting one set of returns to the underlying assumptions of the analysis. The measurement of returns is based on assumptions given in each proposal. Where possible and within the confines of this study, these assumptions have been examined for reasonableness. However, their ultimate accuracy or probability of occurring cannot be guaranteed. Also, this section of the report provides measurements in terms of dollar amounts; however, the relative value of 'cash' and 'non -cash' sources of return is an assessment that is properly left with the Bayside Specialty Center Review Committtee, the City Manager and other responsible officials. The sources of return to the City provided in the JMB/Federated proposal include: - a contribution to the arts amounting to 1.5% of 'hard' construction costs. { - a percentage -of rental income (adjusted for vacancy loss) . - the greater of a guaranteed minimum or .5% of rental income (adjusted for vacancy loss) as annual j contribution for amphitheater events. J - 4300 square feet of office/retail space for use by the City. pre -opening payments to the City including an initial lease signing payment, annual payments until opening and payments during the period required for conversion of the "Reflections" restaurant. 30 83-1164 V r The sources of return to the City provided in The Rouse Company proposal include: - a contribution to the arts amounting to 1.5% of 'hard' construction costs. - a guaranteed annual minimum lease payment. - a *1 million contribution towards construction of the amphitheater. - a contingent, supplemental lease payment based on a percentage of the cash flow available for final distribution. •the greater of a specific annual amount or a I percentage of the cash flow available for final distribution to be dedicated to a minority foundation. Results of C&L's Analysis To develop estimates of the returns to the City, pro forma statements based on each of the proposals were developed. Our initial 1986-1996 pro formas are based both on analysis of those fprovided by the respective developers and on the clarifications obtained from the developers in their October 3, 1983 written responses to written questions from Coopers & Lybrand and the Bayside Specialty Center Review Committee. Extensions of those pro formas past 1996 were derived in two manners: first, the 1986-1997 'stabilized' escalation rates for various income and expense categories were used for the remaining period; and second, for JMB/Federated, rental income was assumed to increase 6% per annum, and for Rouse, adjusted income and total expenses were assumed to increase at 6% per annum. Summary The results of C&L's financial analysis of the two proposals is presented in Tables I -II. These summary tables are obtained from computer simulations which consider the assumptions under- lying the two proposals, and on tests of those assumptions for sensitivity. Our initial effort was to model, as accurately as possible, the pro forma statements provided in the initial bid 31 83-11f 4 proposals. Exhibits I -II provide a summary of the assumptions used in recreating those pro formals. Tables III -XI provide a breakdown of the sources of return that are summarized in Tables I & II. Table XII illustrates the differences between the estimates of return calculated by the respective bidders as compared to those calculated by Coopers & Lybrand. Divergences in the 45- year return calculations are large in terms of magnitude, but produce the same ranking that would be obtained by use of each developer's presentation of their own position. As neither developer provided a detailed set of assumptions used for their calculations of 45-year estimates of project returns, a fuller examination of the divergences was not possible. Table I illustrates that the JMB/Federated proposal and the Rouse Option A proposal are estimated to have relatively similar returns to the City during the initial 1986-1996 period with Rouse's Option A providing somewhat greater estimated returns when: - the level of rental income is decreased by 10% and 25%. - vacancy is increased to 10% per annum. the interest charge assumed in Rouse's proposal is increased from 10.75% to 11.5% and 12.25% (with lender participation in cash flow at 25%). For the same period, Rouse's Option B provides substantially greater estimated returns than does the JMB/Federate proposal, both for the base case and when rental income is assumed to increase. The Rouse Option B is estimated to result in somewhat lower returns than would the JMB/Federated proposal if: - debt service increases 1.5 points to 12.25%. - project vacancy is at 10% or higher. rental income decreases 10% or more. 32 83-1164 If rental income is decreased 25%, the estimated return from Rouse Option B is substantially lower than the estimated return from the JMB/Federated proposal given a similar decrease. Table II illustrates that in similar circumstances the returns from either option of the Rouse proposal are estimated to • be greater than those from the JMB/Federated proposal during the initial lease term of 45 years. In fact, the returns from Rouse's Option A (the less 'risky' Rouse alternative) -- given a 25% decrease in rental income -- are estimated to exceed those from the JMB/Federated proposal -- given a 25% increase in rental income. Table II also illustrates that the level of estimated return from the Rouse proposal is highly sensitive to fluctuations in individual key variables. This is a direct result of the basic , formula for computing returns to the City: JMB/Federated pro- I vides return from gross receipts whereas Rouse provides returns 'below the line', from profit. However, the substantial amount by which the estimated returns for the Rouse proposal exceed the estimated returns for the JMB/Federated proposal, indicate that even a combination of negative key variables (for example: 10% vacancy and 10a decrease in rental income) may affect the magni- tude of the difference, but not the ranking of the returns from tthe two proposals. In addition to providing greater estimated returns over the initial 45-year lease term, the Rouse proposal also indicates a commitment on the part of the developer to use only $4 million of the anticipated $8 million UDAG monies for construction of the main project. The remaining $4 million is to be available to the 1 City to offset construction costs for the amphitheater. Given the uncertain nature of the UDAG grant process, this potential benefit has not been included in our calculation. Since the major sources of return from the Rouse proposal involve percent- age shares in cash flow remaining after debt service, the assump- tions underlying debt service expense are important. As The Rouse Company notes in their initial proposal and in their 33 83-1164 t October 3, 1983 response to the Bayside Speciality Center Review Committee, the exact financing requirements can not be determined in the absence of an actual project to finance. For our analyis, we verified that the financing assumptions used in generating the initial pro formas (an annual interest payment on a nonamortizing 30-year note with 25% participation in cash flow prior to other distributions) were reasonable given current market conditions. j For purposes of this analysis, we assumed that these financing terms would be extended throughout the 45-year initial lease f term. While it is quite likely that the initial note would be paid off earlier than 45 years, or that the project would be sold or refinanced, the continuance of a debt service obligation throughout the 45 year term is a conservative assumption. Terms of any future refinancing cannot reasonably be calculated at this time. This assumption is conservative, given the magnitude of the estimated returns, and provides a substantial margin for refinancing and/or for providing capital improvements to the project. The assumptions used for this financial analysis are based on financial and economic assumptions underlying the original JMB/Federated and Rouse proposals. These original assumptions were specified both in the original proposals and in the market analyses accompanying those proposals. Upon examination of those studies, we have concluded that they appear reasonable. Several things should be noted when examining these results: I -- estimating beyond the initial ten year period is subject to increasing uncertainty. -- estimations of returns are based on projections into the future of revenue and cost estimates made by*the developers. Questions of the reasonableness of these estimates are addressed in the market analysis section of this report. -- these estimated returns are based on computing values not only for 'cash' payment that the City would receive directly, but also for other direct and indirect benefits. The indirect and non -cash benefits included in this analysis are: 34 83-1 t64 cash to be contributed for a minority foundation. the value of office/retail space set aside for use by the City. contributions to the arts. The relative values of these other 'cash' and 'non - cash' benefits to the City must be addressed by those charged with deciding which proposal to accept. The estimated amount of the various components of returns to the City are shown in Table III -XI. Other Long Term Financial and Economic Benefits Among the other long term financial and economic benefits that the City can anticipate from the Bayside Project are: - increased real estate taxes. - revenues from parking facilities constructed with the project. - increased employment opportunities. - increase tourism and tourist spending. - increased activity in the Central Business District. City of Miami real estate taxation for commercial projects } such as Bayside is computed by an income approach that is reviewed annually. Based on sales estimates, it is anticipated that the Rouse project will provide somewhat greater tax benefits than would the JMB/Federated project. However, given the lack of data concerning the actual revenues, operating expenses and debt service requirements for each of the proposals, the magnitude of this difference, if any would exist, can not be calculated. The effects that each project will have on the other benefits categories should also be considered by the City in making its decision; however, without more detailed data on the operating characteristics and a more comprehensive study period, both the magnitude of these benefits and the differential between the two proposals can only be evaluated on general grounds. i 35 83-1164 ►mil Table I Estimates of Discounted Total Returns 1986 - 1997* Summary of Tables MOWS) Table VI Tables VIII & IX Rental Income JMB /Federated Rouse _ (+ or -) Option_A Option B -25% $5,611 $59657 $3,818 -10% 5,807 51926 5,407 Base Case 5,933 69251 6,975 +10% 61056 61758 81807 +25% 6,231 79780 119842 Other Variables Debt at 11.5% 5,933(1) 61100 6,282 Debt at 12.25% 5, 933(1) 59983 59667 ? Vacancy at 10% 51836 5,864 5,046 (1) Since the JMB/Federated proposal is based on gross rental income, the base case values are inserted here for purposes of comparison. All values discounted to 1/1/86 with a 10% discount factor. 36 83-1164 Tab le I I Estimates of Discounted_ Total Returns-45 Year Period* Summary of Tables VI -XI 000's Past-1996 Stabilized Escalation Rates Post-1996 6% Annual Escalation_ Table VI Tables VIII & IX Table VII Table X & XI Rental Incase JIB/,Federated Rouse JMB/Federated Rouse (+ or -) Option A Option B Opt ion A Opt ion B -25% 10,046 15,569 219820 9,668 14,508 19,886 -10% 10,552 19,111 29,596 10,089 17,591 26,864 Base Case 109884 219735 35,299 10,363 19,912 32,026 +10% 119211 24,525 41,237 109631 221415 37,442 +25% 11,696 28,986 50,467 119077 26,433 45,874 Other Variables ui Debt at 11.5% 10,884(1) 21,247 34,003 10, 363(1) 199433 30,740 Debt at 12.25% 10,884(1) 201801 32,796 10,363(1) 18,987 29,534 Vacancy at 10% 109630 18,795 27,621 10,153 16,991 25,509 All values discounted to 1/1/86 with a 10% discount factor. (1) Since the JMB/Federated proposal is based on gross rental income, the base case values are inserted here for purposes of comparison. 37 Table III JMB - Federated and Rouse Comparison Base Case 10 Year Discounted Values (1) 000's (post - 1996 Increases of 6% Per Annum) Rouse(3) JMB-Federated (2) Option A Options B Contribute to Arts 346(4) 356(5) 356(5) Contribute to Amphitheater 1,624 909(6) go9(6) Space Provided City 783(7) - - Pre -payments* 283(8) - - Lease Payments and/or Cash Flow Distribution 29897 31812 49419 Proceeds to Foundation - 1,174 1,291 5,933 6,251 $5,975 (1) Values include 1987 - 1996 plus 1986 partial year of operations. All payments are assumed to be end of period i (2) and are discounted to 1/1/86. Based on values and assumptions specified in JMB - Federated's original proposal and 10/3/83 responses to the j Bayside Specialty Review Committee. 44 (3) Based on values and assumptions specified in Rouse's original proposal and 10/3/83 responses to the Bayside (4) Specialty Review Committee. Based on $25.4 million in 'hard' construction costs cited by JMB-Federated in 10/3/83 responses to Bayside specialty (5) Center Review Committee, page 2. Discounted to 1/1/86. Based on $26.1 million of building construction costs, not including parking facilities. (6) Based on $1 million contribution specified in Rouse proposal discounted to beginning of 1986. (7) See JMB/Federated response to Bayside Specialty Center (8) Review Committe, page 3. Estimated from JMB-Federated "Bayside In the Park" proposal, pages 53-54 (a) Assume lease executed 1/1/85 $25,000 future valued to 1/1/86 at 10% = 27,500 (b) Assume annual minimum to opening (2 years) at 1/1/86 value = 105,000 (c) assume payments for 'Reflections' for one year = 150 000 33 83-1164 Table IV JMB/Federated & Rouse Comparison ase Case $000's 45 - Year Discounted Values Rouse JMB/Federated Option A Option B Contribution to Arts $ 346 $ 356 $ 356 1 Contribution to Amphitheater 29577 909 909 Space Provided to City 1,571 - - 1 Prepayments 283 - - Lease Payments &/or 61107 13,104 269449 Cash Flow Distribution Proceeds to Foundation - 71366 71585 I 10 884 21 $35. Note: JMB/Federated assumes post - 1986 rental income to increase 8% per annum. For Rouse, it was assumed post - 1986 rental income increases 7% per annum; this is the pre-1997 stabilized rate of increase, other income and expense categories increase at stabilized rates established during the 1986-1996 period. 39 83-11+64 TABLE V JMB/Federated & Rouse Comparison(1) ase ase $000`s 45 - Year Discounted Values (Post 1996 Increase of 6% Per Annum) Rouse JMB/Federated OptionA Option B contribution to Arts $ 346 $ 356 $ 356 i Contribution to Amphitheater 29493 909 909 Space Provided to City 11571 - - 1 Prepayments 283 - - Lease Payments &/or 5,670 12,008 23,903 Cash Flow Distribution Proceeds to Foundation - 6,639 10 6 119,912 Note: JMB/Federated assumes post-1996 rental income to increase 8% per annum; for this comparison post-1996 rental income was increased 6% per annum for JMB/Federated. For j Rouse, post-1996 adjusted income and expenses were increased 6% per annum. A 6,858 3 40 83-1164 Table VI _ Net Present Value Anaysis JMB/Federated Proposal ($0001s) (1) Estimated Cash -Return to City(2) Value of Amphitheater Contribution Rental Income (+ or -) 45 years 10 .years (3) 45 years 10 years (3) -25% $59325 $2,575 $2,521 $19624 i -10% 5,799 2,771 2,553 19624 Base Case 6,107 2,897 2,577 1,624 +10% 6,408 3,020 21603 1,624 +25% 6,850 3,195 29646 1,624 10% Vacancy 5,871 21800 2,559 19624 Estimates of Other Values Not Directly Sensitive to Income Fluctuations 45 years 10 vea rs (3 ) Value of Space $1,571 $783 Value of Arts Contribution 346 346 Pre -Opening Contribution 283 283 (1) Discounted at 10%. All payments assumed to be received at end of period; all values discounted to 1/1/86 with 10% discount factor'. (2) Includes base rent and land rent as computed from formulas set forth in JMB/Federated original proposal and in 10/3/83 responses to B ayside Specialty Center Review Committee. (3) Includes partial year for 1986 plus 1987-1996. �! 1 1 83-1164 IRental Income 0 0 Net Present Value Analysis e era a roposa Post 1-996 Increase o —per Annum ($0001s) (1) Estimated Cash Return to City(2) Value of Amphitheater Contribution (+ or -) 45 years 10 years(3) 45 years i -25% $4,993 $2,575 $2,475 -10% 5,405 2,771 29484 Base Case 5,670 21897 29493 +10% 5,928 39020 2,503 +25% 6,351 3,195 2,526 10% Vacancy 5,467 22800 29486 Estimates of Other Values Not Direct y Sensitive to ncome uctuations 45 years 10 years(3) Value of Space $1,571 $783 Value of Arts Contribution 346 346 Pre -Opening Contribution 283 283 (1) Discounted at 10%. All payments assumed to be received at end of period; all values discounted to 1/1/86 with 10% discount factor. Note: post-1996 rental income inflated at 6% per annum rather than the 8% p.a. used in the original JMB/Federated proposal. (2) Includes base rent and land rent as computed from formulas set forth in JMB/Federated original proposal and in 10/3/83 responses to Bayside Specialty Center Review Committee. (3) Includes partial year for 1986 plus 1987-1996. 1n yaars(3) $1,624 1,624 1,624 1,624 1,624 1,624 42 S 83-1164 A 0 0 TABLE VIII Net Present Value Analysis Rouse Proposal(1) ($0001s)(2) Rental Income (+ or -) Option A 45 years 10 years(3) Option B 45 years 10 years(3) -25% $ 91792 $3,779 $15,907 $19906 -10% 11,690 39779 21,993 3,179 Base Case 139104 39812 260449 4,419 +10% 14,614 3,954 31,084 5,854 +25% 17,069 49345 38,281 8,239 Estimated Proceeds for Foundation Rental Income (+ or -) Option 45 years 10 A Pgrs(3) Option B 45 years .]n wfmnrg(3) -25% $ 41512 $ 613 $ 40648 $ 647 -10% 61156 882 6,338 963 Base Case 7,366 11174 7,585 1,291 +10% 8,646 1,539 8,888 1,688 +25% 10,652 29170 10,921 2,338 Rental Income (+ or -) Amphitheater Arts Contri- Value of Other Contributions Estimated Cash Return to City (3) 45 years $909 1n xPa rg(3) $909 45 years $909 i n pp r q( 3) $909 bution 356 356 356 356 j(1) Based on values and assumptions specified in Rouse original proposal and 10/3/83 responses to the Bayside Specialty Center Review Committee - except post-1996 rental income j inflates at 7% per annum, and other income and expense categories increase at 1986-1996 'stabilized' rates. (2) Payments to city assumed to be in arrears. All amounts discounted at 10% to 1/1/86. (3) Includes Base Rent and Additional Distribution of Cash Flow. 43 - 83-1164 Table IX (Continuation of Table VIII) Net Present Value Analysis Rouse Proposal (1) ` ($000's)(2) Estimated Return, to_. City (3) ti Vari ab le Opt ion A Opt ion B Changed 45 years 10 years(3) 45 years 15 years(3) Mortgage. rate increased $12,879 $3,791 $25,434 $3,873 3/4 point to 11.5% Mortgage rate increased 12,670 3,779 249482 3,382 1-112 point to 12.25% Vacancy rate at 10% 11,794 3,779 209448 2,889 for all years Base Case 13,104 3,812 26,449 41419 Estimated Proceeds for Foundations Variable Option A Options B Changed 45 vears 10 years 45 years 10 years Mortgage rate increased 3/4 point to 11.5% $7,103 $1,044 $7,304 $19144 Mortgage rate increased 1-112 points to 12.25% 69866 939 71049 11020 Vacancy rate at 10% for all years 51736 820 5,908 892 Base Case 7,366 19174 79585 19291 (1) Based on values and assumptions specified in Rouse original proposal and 10/3/83 responses to the Bayside Specialty Center Review Committee - except post-1996 rental income inflated at 7% per annum, and other income and expense categories increase at 1986-1996 'stabilized' rates. (2) Payments to city assumed to be in arrears. All amounts discounted at 10% to 1/1/86. (3) Includes Base Rent and Additional Distribution of Cash Flow. 4n 83-1164 TABLE X Net Present Value Analysis Rouse Proposal(1) Post 199b Increa--s-67-7-61Per Annum ($0009s)(2) Rental Income (+ or -) Option A 45 years 10 years(3) Option B 45 years 10 years(3) -25% $ 9,161 $3,779 $149403 $1,906 -10% 10,777 39779 19,868 3,179 Base Case 12,008 3,812 23,903 41419 +10% 13,347 3,954 289132 5,854 +25% 15,536 4,345 349709 8,239 Estimated Proceeds for Foundation I I Rental Income Option A Option B (+ or -) 45 years 10 years(3) 45 years 10 years(3) j -25% $4,082 $ 613 $49218 $ 647 -10% 51549 882 51731 963 Base Case 69639 1,174 6,858 11291 +10% 79803 19539 8,045 1,680 +25% 9,632 21170 99900 2,338 Value of Other Contributions Estimated Cash Return to City Rental Income (+ or -) 45 years 10 years 45 years 10 years(3) ` Amphitheater $909 $909 $909 $909 Arts Contri- bution 356 356 356 356 (1) Based on values and assumptions specified in Rouse original proposal and 10/3/83 responses to the Bayside Specialty Center Review Committee - post-1996 adjusted income and 1 expenses inflate at 6% per annum. (2) Payments to city assumed to be in arrears. All amounts discounted at 10% to 1/ 1/86. (3) Includes Base Rent and Additional Distribution of Cash Flow. 45 83-1164 Table XI (Continuation of Table X) Net Present Value Analysis Rouse Proposal (1) Post-1996 Increase ,4% Per Annum 000's)'- Estimated Return to City (3) Variable Opt ion A Opt ion B Changed 45 years 10 years(3) 45 years 10 yearst31 Mortgage rate increased $11,790 $39791 $22,896 $3,873 3/4 point to 11.5% Mortgage rate increased 11,580 3,779 21,945 3,3$2 1-112 point to 12.25% Vacancy rate at 10% 10,460 3,779 18,805 2,889 for all years I Base Case 12,008 3, 812 23,903 49419 Estimated Proceeds for Foundations(4) Variable Option A Options B Changed 45 years 10 years(3) 45 years 10 years(3) Mortgage rate increased 3/4 point to 11.5% $6,378 $1,044 $6,579 $10144 Mortgage rate increased 1-1 /2 points to 12.25% 69142 939 6,324 1,020 Vacancy rate at 10% for all years 5,266 820 5,439 892 ` Base Case 69639 1,174 6,858 11291 (1) Based on values assumptions specified in Rouse original proposal and 10/3/83 responses to the Bayside Specialty j Center Review Committee - except post-1996 adjusted income and expenses inflate at 6% per annum. (2) Payments to city assumed to be in arrears. All amounts discounted at 10% to 1/1/86. (3) Includes Base Rent and Additional Distribution of Cash Flow. 46 83-1164 Source: Proposal Estimated Estimated Total of Project Contributions Estimated Project Contributions Discounted at 10% Table XI I Base Cases Comparison of a Estimated 45YYear Project Returns 1 millions) ' J_MB_/Federated Rouse C&L(2) JMB(3) Option A(4) Option B(4) JMB(3) Option A Option B 83.2 200.2 462.8 85.8 284.1 510.7 12.1 14.1 27.3 8.2 15.0 1) Discount factor of 10%. (2) C&L values as of 1986: JMB: 10.9 Rouse Option A: 19.9 Rouse Option B: 32.0 (3) JMB assumes that rental income increases 8% per annum after 1996. While not specified, it is assumed that JMB/Federated values are in terms of 1983 values. (4) In its 10/3/83 response to the Bayside Specialty Center Review Committee, Rouse notes that they calculated the 45- year returns based on a 6% increase in sales and expenses. As many of the income items, other than base rent and overage, are based on passed -through expense items and, in some cases, with an additional -mark-up; C&L assumed that adjusted income and expenses would be the categories subject to the 6% annual increase. It is assumed that Rouse values are in terms of 1983 values. Gr W 1 N 47 24.0 0 0 INCURE/F]BPENSE I BEGINNING I BEGINNING I CATEDORY ( VALUE - 19M I VALUF. -1997 1 1, GROSS RMAL 1 32.6182 1 32.6182 1 INCOME/SQ. FT. I 1 I I 2, I VACANCf AUMANCE 1 I 75 1 75 1 I I 3. I 1 ON -SITE MANAGEMENT 1 50 I I I I 1 106 4. PR010TION FUND 1 700 I I 1 700 1 I I I 5. UNRECOVERABLE I I I I COMMON CHARGES 1 300 ! 1 I I I t I 1 i I I I 1 I 1 1 500 I 1 i I i I I 1 I I I 1 1 I 1 F.SCAI.ATION FACTORS JMHTF'FFjiPRATF�(lF6"AL INCOME AAG'F.71TF.t7. E PRO MfF9X-C'PATF.MF.NT ESCALATION FACTORS 1986 1 1987 1 1988 1 1989 1 1990 N59t T 1992 1 1993 1 1994 0% 1 0% I 1 5.5% I 1 5.27% 1 8% I I 1 8% I 1 8% I 1 8% I 1 8% I 0% 1 1 0% i I I 1 0% I I I I 1 0% I 0% I I 1 I I 1 Olt 1 ! 1 1 0% I I I 1 0% I 1 1 1 0% 1 I 0% I 1 0% I 1 6.06% I I 1 6.06% 1 6.06% I 1 6.06% 1 I 1 6.06% t I 1 6.06% 1 1 1 6.06% 1 0% 1 1 0% I I 1 1 0% I 1 1 1 1 03 1 6% i I I I 1 6% I I 1 6% I 1 1 6% I I 1 6% 1 1 0% I I 1 o% I I I o% 1 I i I 1 0% 1 6% I 1 1 6% I I 1 6% I I 1 6% I i 1 6% QC 1 1995 1 I 81 I I 1 0% I I I I 1 6.06% I I 6% 6% 8% 1 I I 0% 1 I I I I 6.061 1 1 6% 1 I I I I 6% 8% 2.5% 6.061 6% 6% OF THIS AlfMM, THE GROOF $250,000 FF.R ANN(M OR 5% OF GROSZ RENTAL IN(XW,, WOlMD B8 OONTRIEYRED FUR AMPHITHEATER EVENTS 11 INCOME I BEGINNING I BEGINNING i CATEGORY I VALOF. - 1986 1 VALUE -1987 1 I. GROSS RENTAL 1 35.6936 1 38.8453 1 INOOHE/SC. FT. 1 I 1 I 1 2. CQ40N FACILITIES 1 676 1 2919 1 I 3. REAL ESTATE 1 196 1 833 4. TENANT HVAC-ERMT 1 113 1 496 1 II 5. TENANT HVAC- I I MAINTENANCE 1 37 J I 160 6. TENANT POWER I 1 6 LIGHT 1 326 1 1434 7. DURANCE i 1 12 I 1 50 8. TRASH AND WATER 1 29 1 125 9. OTHER INCOME 1 i 6 I i 1 25 i i 1 W N Cl: ESCALATION FACTORS ROI-NSF. PROFO!"iAI INCOME AND F.1�TT'F:NTCFW tOFMA STATF.MF.NT F.SCALA?ION FACTORS 1986 1 1987 1 1998 1 1989 199D 1991 1 1992 t 0% 1 13.83% I 1 91 1 I ( 91 1 71 1 71 1 I I I 71 1 1 01 1 1 81 I I 1 81 1 I I I 81 1 81 1 81 1 1 1 1 81 1 1 0% 1 1 61 1 1 1 61 1 1 61 1 61 1 61 1 1 1 1 61 1 1 0% 1 1 10% I 1 1 1 10% ( 1 I 10% 1 10% 1 lOs 1 I i I 10% 1 I D% I 1 81 I I I 1 81 1 I I I I 1 81 1 81 1 81 1 I I I I 81 1 I 0% I 1 10% I I I 1 10% 1 I I I I I 10% 1 101• 1 10% 1 I 1 I I 101 1 I 0% I 1 61 I I 1 61 1 I I I 61 1 6s 1 6s 1 I I I 61 1 I I I 0% I 1 81 I 1 9% I I 1 81 1 8s 1 81 1 I I I 81 1 I I I 0% I 1 O! 1 1 91 I 1 91 1 9s 1 9s 1 71 1 9 1994 7% 81 61 101 81 101 61 81 71 7s 1 I I 81 1 1 61 1 10% 1 I 81 i 10% 61 8% 9s 71 1 I I 81 1 1 61 1 I 101 I 81 10% 61 81 91 EXHIBIT IT 71 81 61 tot es 101 61 81 91 SIN 1990 A LIMIT IS PLACED ON THE. MARK-UP 14JILT IN1OAM TENANT AND LICAT CHARD w EXPENSE I BEGINNING CATEGORY 1 VALUE - 1986 10. ONSITE MANAGEMENT 1 50 SITE 1 11. ADVERTISING 1 57 12. BUILDING I I MAINTENANCE I 15 i 13. MAINTENANCE I i OTHER 1 47 1 14. LIGHT & POWER 1 272 15. CDR" FACILITIES 1 1 588 16. GENERAL I ADMINISTRATIVE 1 89 BEGINNING I VALUE -1987 216 248 66 203 1197 2538 384 I ESCALATION FACTORS RoU: h t o 'oSAL Cont. ) INCOME. AATi E�TTsFMT7>r FR�i'FillN�'�TATF.NF,N FSCALATION FACTORS 1986 1 1987 1 1988 1 1989 1 1990 1 igi-l— 1 1992 1 Ox I 8x ! I 8% I ( 8% 1 8% 1 8% 1 I I 1 I 8% I I 1 Ox 1 1 8.94% i 1 1 8.55% I 1 I 1 I 1 8.39% 1 T.59% 1 7.33% 1 I i I 1 1 I T.22% I I Ox 1 I I Bx I I 1 I 8x 1 1 ! I I I t I t 8x t Bx I At I ! 1 1 ! I et I I 0x I 1 Ax ! I 8% I 1 I 1 1 8% 1 8% 1 8% I 1 I I 8% 1 I I ox 1 I 10% I 1 10x I I 1 10% 1 1Dx 1 10% 1 i I I 10% 1 1 I Ox I 1 1 Bx I I I Bx 1 i I ax I 8% 1 8% 1 f I I I 8% 1 I 0% 1 ex 1 ex I ax• I ex i 8% 1 8% SO 1993 1 8% 6.85% 8s 81 tox 8x 8% 1994 1 1995 I FXHiRIT It (CnntXnuMt) I t COMMPNTS P06T-1996 RATE. (Tx) IS AN ASSUMPTION MADE FOR THIS ANALYSIS 0 •ADJUST ENr IN 1989 FOR DECREASE IN ANTICIPATED HAD DEBT 0 D. MARKET ANALYSIS 83-1164 D. MARKET ANALYSIS The market analysis presented is better described as an evaluation of the market data presented by bidders and indepen- dently augmented and selectively verified by our subcontractor, James B. McComb & Associates. The scope of our engagement was not to perform a full independent market analysis. Our effort was aimed at understanding the local market well enough to allow for a reasonable analysis of the bidders merchandise mix and segmentation, and to establish current sales volume for compari- son with the bidder's future sales projections. The highlights of the market projections for each proposer are given in Table XIII. Table XIV presents a representative sample of our field interviews and review of the local market conditions. Table XV presents retail development projects currently planned for the Miami area. These projects have been planned as traditional retail centers and do not represent direct competition for the Bayside project. JMB/Federated JMB/Federated is planning sales of $86.3 million in 1986, a capture rate of 1.29 percent of the market. This equates to $432 per square foot in current dollars, with an inflation factor of 4%. Residents account for 40% of sales; downtown workers 5% of sales; and visitors 55% of sales. The rent range is projected to be $15 to $50 per square foot with an average of $36 per square foot. The Rouse Company The Rouse Company projects sales in 1986, in current dollars, of $111.5 million, including the 4% inflation rate, a capture rate of 1.8% of the market. This equates to $557 dollars per square foot. They estimate a minimum rent range of $4 2-49 per square foot for the first full year of operation, 1987. In the 51 83-1164 r � � Rouse projections, residents account for 32% of the sales; down- town workers, 12% of sales; and visitors, 56% of sales. Rouse's projected rents are thus much higher than the JMB/Federated rents. Current Market Conditions Currently, the Bal Harbour shops and Mayfair in the Grove have minimum rents of $35 to $40 per sq. ft. in 1983. In 1981, Omni International had a rent range of $16-88, with many rents falling in the $30 to $40 range. Metro Mall, a new retail center in the vicinity of Flagler Street has a rent range of $45-50 per square foot. The Flagler Street stores have rents ranging from $4 to $100 per square foot. In light of the current rental rates, and the data compiled for 1981 and 1982, the Rouse rental numbers appear realistic. When analyzing y g the projected sales per square foot data, the current and past market conditions were also reviewed. Sales per sq. ft. in the Omni International center in 1981 ranged from $80 per square foot to $2,500 per sq. ft. with many sales falling in ithe $300-500 range. In addition, several of the stores exceeded the $1,000/sq. ft. sales mark: -_ + Athietes s Foot - 1,000 sq. ft., $1,250+ per sq. ft. -- Florsheim shoes - 1,200 sq. ft., $1,250 per sq. ft. -- Famous Cookies - 96 sq. ft., $2,344 per sq. ft. -- Walden Books - 2,100 sq. ft., $2,113 per sq. ft. Summary Comments Based on the current sales per square foot figures in the Miami area, a healthy national retail trend, the high tourist trade in Miami, the current and future development in office, hotel and residential projects in downtown Miami, and the strong population growth in the greater Miami area and Florida as a whole, we believe that, although aggressive, the Rouse projec- tions are not unreasonable. 52 - 83-1164 Alp 4%k Further, we have also concluded that the differences in the underlying assumptions concerning market size and market capture rates (hence sales and rental income) reasonably reflect dif- ferences inherent in the projects themselves, both in terms of design and marketing orientation. 83-1164 53 0 Table XIII Project Comparison JMB/Federated Rouse 1986 Sales $86.3 million $111.5 million Market capture rate 1.29% 1.8% Sales per square foot $ 432 $ 557 1986 rent range $15-50 $42-49 1989 average rent $ 36 $ 46 Number of tenants 176 200 Average square feet per tenant 1,136 1,000 Space allocated to food 5 0% 55° Space allocated to retail 50% 45% Source of sales Residents 40% 32% Downtown workers 5% 12% Visitors 55% 56% Source: JMB/Federated Realty proposal and The Rouse Company proposal. 5 �. 53-1164 1 Table XIV Representative Rental Rates and Sales Miami Retail Projects ($ per square foot) Rental Rental Project Rates Range Sales Year Bal Harbour 35-40 - - 1983 Mayfair 35-40 - - 1983 Flagler Street - 4-100 80-3,500 1981 Omni International 40-40 16-88 80-2,500 1981 Metro Mall 45-50 - - 1983 Source: James B. McComb & Associates. 55 83-1164 PROJECT DEVELOPER Ultra Mont Mall Ultra Mont Properties S.E. 1st St. and S.E. 1st Ave. Southeast Financial Gerald D. Hines Center interests Biscayne Blvd. & SE 3rd St. Plaza Venetia -Phase II Florida East Coast/ 1661 N. Bayshore Dr. Marriott Corp. Kress Ctr. Nathan Rok/Ely 48/60 E. Flagler St. Klinger Metro Dade Cty Dade County NW 2nd Ave. & NW 1st St. Miami Center -Phase III Miami Joint Venture Dupont Plaza area Nasher Plaza Nasher Co. 777 Brickell St. One Brickell Station Wenzell Inv. Co. Plaza SW ist Ave & 8th St. m co; 1 r o: Table XV FUTURE PROJECTS RETAIL PROJECT OPENING SQ. FOOTAGE COST DATE COMMENTS 93,000 $4 million April 184 56 16,000 $200 million June 184 mixed -use, total project retail is ancillary 94,500 $248 million Dec. 184 mixed -use, total project traditional retail 73,400 $14 million 1984 40,000 $65 million March 185 mixed -use total project with housing, service oriented retail 96,747 $364 million summer 184 mixed -use total project 409000 $35 million - project on hold 0 1 1 E. SCALE AND MIX OF COMMERCIAL AND PUBLIC FACILITIES 83-1164 E. SCALE AND MIX OF COMMERCIAL AND PUBLIC FACILITIES Both the Rouse proposal and JMB/Federated proposal address a mix of commercial and public facilities. The distinctions between their market segmentation and merchandise mix is dis- cussed in the previous section, Market Analysis. This section will address the relationship of the retail complex to public facilities. Bath proposals discuss the need for a major parking facility, approximately 1200 stalls. Both developers suggest that the Off - Street Parking Authority own, finance and operate the parking facility and both developers indicate a willingness to provide the necessary assurances to the Off -Street Parking Authority for sale of tax-exempt bonds. The Rouse proposal provides greater detail regarding a proposed financing structure, discussing possible provisions of a capitalized lease agreement. The major difference between the JMB/Federated proposal and the Rouse jproposal is the anticipated cost of construction to produce the parking. The JMB/Federated proposal shows a cost of $6,200,000, whereas the Rouse proposal calls for a construction budget of approximately $16 million. Per our conversations with the Off-. Street Parking Authority, the average cost of construction per parking stall is between $8,000-10,000 (1983 cost figures). For a 1,200 stall facility, construction costs (in '83 dollars) would be estimated between $9,600,000 - 12,000,000. Since both t developers indicate a willingness to work with the Off -Street i Parking Authority to provide the necessary support for financing, the difference in cost may not be material. However, the Rouse cost estimate does appear more realistic. 1 Of perhaps more importance may be the desire by both developers for additional improvements and attractions in the Park and the marina. Both developers cite in excess of $8 { million in public improvements desired (amphitheater, Park improvements, marina improvements, pedestrian and public improvements to the Bayside site, etc.) . The funding for these 57 �33�11� 0 improvements is expected to come from an Urban Development Action Grant (UDAG) to be awarded by the federal government. Both developers indicate that a grant in excess of $8 million might be possible. Given the competitive nature of UDAG, it is impossible to realistically project the probability for a grant for this project. Since both projects rely on public funds, and since the project to be successful must function as a whole, alternative sources of public funds may be considered. 58 83-1164 4w F. CONCLUSIONS 83--1164 F. CONCLUSIONS Based on our analysis of each proposal, and our review of the local market forces in Miami, we believe that the Rouse proposal, _ particularly Option B, provides greater potential benefits to the City of Miami. This conclusion is a result of our consideration of the following factors: I 1. Our analysis indicates that the market will support higher rents per square foot and, with aggressive operations and leasing, is capable of generating the sales projections estimated in the Rouse proposal. 2. The project design of the Rouse proposal lends itself to greater activity, greater security and a more casual environment. This would have a positive effect on sales and strengthen the overall project viability. The JMB/Federated design is more con- sistent with an upscale specialty center, and would thus be more appropriate to their lower sales pro- jections and lower market share projections. 3. Our financial analysis indicates that under both Option A and Option B, the Rouse proposal offers greater returns to the City for the base case. Even under adverse conditions (a revenue loss of 10%) Option A exceeds the base case for JMB/Federated. 4. Over the longer, 45 year term, both Option A and Option B substantially exceed the potential returns from the JMB/Federated proposal. Since the Rouse projections for rental rates and sales volumes are so much greater than are those for JMB/Federated, and would be expected to grow proportionately, the Rouse project provides greater return. Under our sensitivity analysis, the Rouse proposal exceeds the projected returns from JMB/Federated even when the Rouse projections are decreased by 25% and the JMB/Federated projections are increased by 25%. 5.. Coopers & Lybrand is not in a position to evaluate the City's willingness to take 'risk', that is, to anticipate its payments from returns which result 1 from profits rather than as a percentage of gross J receipts. I 6. Coopers & Lybrand has evaluated and analyzed both proposals carefully. However, this analysis should not be construed to represent a full feasibility study, nor may this analysis be used to generate any external financing. 59 83-1164