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HomeMy WebLinkAboutNew Facility Term SheetTerm Sheet for the Site Selection, Design, Financing, Construction and Conveyance of the new City of Miami Administration Building This Term Sheet (the "Term Sheet") details the proposed terms and, conditions to complete the design, permitting, financing, construction and conveyance of the new City of Miami Administration building and parking facilities (collectively, "New Facility", to be incorporated into a larger mixed -use project, consisting of two towers (one tower containing not less than 300 residential dwelling units), ground -floor retail and parking (the "Overall Project"), to be constructed on certain real property owned by Developer (as defined below) being the area along the Miami River to the frontage along SW 2nd Ave and SW 3rd street located adjacent to (and not including) the Miami Riverside Center located at 444 SW 2nd Ave., Miami, Florida 33130 or any other real property which the City deems acceptable for the location of the New Facility (the "Property") as further detailed in this Term Sheet. 1 Parties. 1.1. City. City of Miami. 1.2. Developer. Lancelot Miami River, LLC, a Florida limited liability company, an affiliate of Adler Development, LLC, a Florida limited liability company, and/or its affiliates. 2. Incorporation of RFP. The terms and conditions of the City's Request for Proposals RFP #15-16-009 and addenda thereto (collectively, the "RFP") are incorporated into this Term Sheet. In the event of a conflict between, the RFP, this Term Sheet, and the final negotiated Agreements (as defined below) between the City and the Developer relating to the New Facility, the terms of this Term Sheet and thereafter the Agreements shall govern. 3. Exclusive Engagement of Developer by City. In furtherance of the goals and objectives of the RFP and this Term Sheet, the City hereby engages Developer, to, inter alia, to be responsible for the design, permitting, financing, construction and/or leasing of the New Facility on the Property. The City shall work exclusively with the Developer in connection with the transactions and the subject matter detailed in this Term Sheet and shall continue to work exclusively with the Developer until completion of the New Facility; provided, however, the Agreements shall include language giving the City reasonable rights to terminate the relationship with Developer in the event that Developer (i) fails to secure the financing as described in Section 4.5 below within twenty eight (28) months from the date of execution of the Agreements as defined in Section 6 hereof, or (ii) fails to commence construction of the New Facility within thirty two (32) months from the date of execution of the Agreements. 4. New Facility. Based on direction from the City, the Developer will design and construct the New Facility on the Property. The City anticipates that the New Facility will contain 230,000 +/- usable square feet of space for the use by the City (using BOMA measurement standards) with a minimum of a 15% core factor, plus a minimum total of 1,000 parking spaces in a parking structure located at the Property of which not less than 610 spaces shall be dedicated for use by employees and visitors of the New Facility and the remaining 390 will be dedicated to the remainder of the Overall Project. The Agreements shall also contain a provision providing for mutually acceptable parking sharing arrangement. The New Facility will also include ground floor space (not included in the 230,000 square feet of space referenced above) that the City intends to lease to third parties to derive additional revenue from the New Facility. The City, the Developer and CBRE, acting as advisor to the City, forecast annual revenue to the City through the lease of such space and other ancillary income to approach $ 800,000. All references in this Term Sheet to the New Facility shall include employee and visitor parking together, with any retail space the City directs the Developer and the Developer's consultants to design and construct. The New Facility will be leased by Developer to the City on the terms and conditions set forth in a mutually acceptable lease agreement (the "New Facility Lease"). The Developer may submit the Overall Project to a condominium form of ownership in which case the New Facility would be a condominium unit and the City would own fee simple title to said unit, or create separate parcels within the Overall Project via a declaration, in which event the New Facility would be a separate parcel and the City would own fee simple title to said parcel. The City shall also have fee simple title to its dedicated portion of the parking structure to be mutually determined upon finalization of the design and legal structure of ownership of the Overall Project. In either case, the City and the Developer shall work together to agree upon a condominium declaration or declaration creating parcels, as the case may be, and a shared -use parking structure, all of which are financially and operationally acceptable to the City. Notwithstanding anything to the contrary herein, the parking facility for the MRC shall not be demolished before the shared parking facility is operational and receives a Temporary Certificate of Occupancy. 4.1. Lease Term. The Term of the New Facility Lease with Developer, which will be a credit tenant lease, will be a fully -amortizing thirty (30) year agreement, (the "New Facility Lease Term"). Annual Lease payments from the City (as tenant) to the Developer (as landlord) shall be secured by a covenant to appropriate funds necessary to fund the City's financial obligations under the New Facility Lease, etc. which shall be subject to approval by the City Commission. 4.2. Lease Payments & New Facility Ownership. The New Facility shall be financed through a fully amortizing credit tenant lease, or similar lease structure. The City shall have the right to purchase the New Facility for an amount equal to the remaining unamortized amount, together with any commercially reasonable defeasance or prepayment penalties that may be incurred throughout the New Facility Lease Term or extensions thereof. At the expiration of the initial thirty (30) year lease term, the City will own the (i) building, condominium unit or parcel, as the case may be, (ii) allocated parking and (iii) real property, the condominium unit or the parcel upon which, or in which, the New Facility is constructed free and clear of any financial encumbrances whatsoever. 4.3. New Facility Rent. The Annual Rent shall be determined by Market Conditions based on a formula. Market Conditions shall include interest rates, the City's credit rating, to the extent Developer is required to invest capital in order to obtain the financing for the construction of the New Facility, a reasonable return on any Developer equity, and a final development budget. Merely, by way of example of the formula, using a 30-year fully -amortizing loan at a 4.6% interest rate and $140MM construction budget, the Annual Rent payment for the New Facility would be Eight Million Seven -Hundred Thousand dollars ($8,700,000.00). The prior example is subject to change based on Market Conditions at the time of closing. 4.4. Total Development Cost. "Total Development Cost" shall be the sum of (i) the cost of any portion of the land upon which the Overall Project is to be developed that is allocated to the City in connection with the New Facility, (ii) the total of all soft and hard costs to design, permit, finance, construct, complete and deliver the New Facility to the City pursuant to the Agreements, including a Four (4%) percent development fee (calculated as Total Development Costs less the cost of the land described in clause (i) above); and the costs of (iii) all furniture, fixtures and equipment selected by the City and installed in the New Facility. Developer estimates the Total Development Cost of the New Facility, including the cost of the land described in clause (i) above is forecast to be One Hundred Forty Million Dollars ($140,000,000). The Total Development Cost is also subject to, and may be adjusted based on Market Conditions at the time of execution of the New Facility Lease. 4.5. Capital for New Facility. Developer shall arrange for all financing from the capital markets for 100% of the Total Development Cost and shall make commercially reasonable efforts to bifurcate any overall financing for the Overall Project so that the financing for the New Facility is a separate loan. Developer may be required to finance between five to ten (5%-10%) percent of the Total Development Cost and to provide reasonable and customary guarantees to construct a building similar to the New Facility, including a completion guaranty. If Developer is required to invest capital towards the Total Development Cost, then Developer shall receive a reasonable return on any Developer equity based on current market returns for similar projects (in any case not to exceed a per annum return of 12%) and customary fees for any Developer -backed guarantees required to obtain financing (not to exceed 2% of the amount guaranteed). 4.6. Design and Construction of New Facility. Developer will design and construct the New Facility substantially in accordance with the "Office Building Plan and Description" set forth on pages 8 through 17 of Developer's response to the RFP entitled Nexus Riverside Central, dated June 16, 2016. To the extent any subsequent plans or construction drawings approved by the City vary from the plans and descriptions set forth in the RFP, subsequent plans will prevail. 4.7. City Participation in Design Process. The City and the City's Project Manager shall participate in the design process for the New Facility, including the review and approval of conceptual, design, development, and construction documents. The City and Developer will agree to a submission, review and approval mechanism for the New Facility in the Agreements, together with a schedule detailing regular meetings between the City and Developer which meetings shall take place (i) at least once every Thirty (30) days prior to commencement of construction of the New Facility, and (ii) thereafter, on an as -needed basis until the issuance of the CO for the New Facility. 4.8. Development Rights. Developer shall retain all rights to construct additional development projects on the Property, to the extent that such additional development projects do not adversely or unreasonably impact the City's use of the New Facility. It is anticipated that the Developer (or an affiliate) will develop not less than 300 residential dwelling units together with ancillary on -site parking and retail space on the Property, which development project will share parking with the New Facility. 4.9. Development Cost. The hard costs of the New Facility will be determined by the Developer (with the review and consultation with the City's Project Manager) through a competitive process once the City approves the construction plans and specifications for the New Facility. Developer shall submit plans for the New Facility to not less than three (3) general contractors that are reasonably acceptable to the City and the City' s Project Manager. The City and its Project Manager shall have the right to review all bids received by the Developer and the City shall consult with the City' s Project Manager regarding the selection of the general contractor. Developer and City' s Project Manager shall select the general contractor from one of the three described above. 4.10. Construction Schedule. As part of their bids, the general contractors will provide a construction schedule for the New Facility. 4.11. Construction Contract. Developer will enter into a contract with the selected general contractor for the construction of the New Facility. The proposed construction contract shall be submitted to the City' s Project Manager for review prior to execution and the Project Manager may submit comments to Developer. The selected contractor shall provide a payment and performance bond for the full cost of construction in substantially the form required by 255.05, Florida Statutes. 4.12. Operating, Maintenance and Capital Expenditure Costs. The New Facility Lease shall be a so-called "bonded lease" with all costs and expenses of operating, maintaining, repairing, insuring and replacing the New Facility to be borne by the City upon the issuance of a final certificate of occupancy for the New Facility. 4.13. Capital Replacement Reserve. Developer and City will agree on the establishment of a reasonable capital replacement reserve that will be included in the City's New Facility Rent payment. Developer will hold the reserve funds in escrow and will use the funds for replacement of capital improvements to the New Facility for the entirety of the New Facility Lease Term. Upon either the City' s purchase of the New Facility, or the City' s vacation of the New Facility, in the event the City elects not to own the New Facility, any reserve funds then being held by the Developer, shall be paid to the City, so long as the City is not in default under the New Facility Lease. 4.14. New Facility Project Manager. Within the Agreements, the City shall designate an individual (referred to herein as the "City' s Project Manager" or the "Project Manager") who will act on behalf of the City in connection with review and approval of plans and drawings, together with other aspects relating to the design and construction of the New Facility. Such individual shall be the main point of contact for Developer, and will be the City's liaison with the Developer for the New Facility. 4.15. City Manager's Ability to Make Design Changes. The Agreements shall grant the City Manager, or his/her designee, with authority to make any changes to the plans/drawings on behalf of the City, so long as any individual change will not have a financial impact to the City in excess of Two Hundred Fifty Thousand ($250,000.00) dollars. For purposes of clarity, the above financial threshold is on a per item or per change basis, and is not to be construed or considered with the cost of other changes with respect to the New Facility. 5. Predevelopment Activities and Costs. Developer shall prepare a detailed development budget and schedule for the New Facility. As part of Developer's pre -development efforts following execution of this Term Sheet, Developer shall have authority to enter into contracts with development consultants and design professionals necessary for the planning and design of the New Facility. Developer has allocated $150,000 to the foregoing predevelopment activities and expenses ("Predevelopment Budget"). The City agrees to credit Developer (on a dollar -for -dollar basis) $150,000 against the Declaration of Restrictive Covenants between River Tower, LLC and the City dated April 7, 2015 and recorded in Official records Book 29173, Page 3365, Public Records of Miami -Dade County, Florida. The transaction detailed in this Term Sheet is related to a separate transaction between the City and the Developer involving the City' s administrative building, commonly known as the MRC (the "MRC Transaction") The MRC Transaction requires approval by the City of Miami voters, at public referendum. Following approval of the MRC Transaction by the City's voters the project detailed in this Term Sheet shall move forward. In connection therewith, all predevelopment costs shall be a part of Total Development Cost and financed through the Credit Tenant Lease mechanism described in this Term Sheet. In the event that the City does not proceed, then the City shall be responsible to reimburse Developer for an amount not to exceed 50% of the actual predevelopment expenses up to $1,810,000. By way of example, if the City does not proceed with the project and Developer incurs actual predevelopment expenses in the amount of $1,810,000 then the City would be responsible to reimburse Developer for $905,000.00. 6. Documentation. The development and leasing of the New Facility, will require the preparation and finalization of a series of definitive agreements, including but not limited to a Development Agreement, and/or New Facility Lease, together with other routine and customary financing and construction documents (collectively, the "Agreements"), setting forth in detail the relationship of the parties, their respective rights and obligations, the timing of Developer's development and delivery of the New Facility. 7 Execution of Agreements. The Agreements will be executed and delivered by the City and Developer on or before the date that is Ninety (90) days after the Agreements for the New Facility are approved by the City Commission, including the expiration of all approval periods. The various Closings and Closing dates that need to be identified in connection with the matters detailed in this Term Sheet will be further defined in the Agreements between the parties. 8. Provision Required by City. The Agreements to which the City is a party must include the following provisions: 8.1. Limitation of Liability. The City's liability for any claim for injury or damages will be subject to the limitations set forth in Section 768.28 of the Florida Statutes. The City's sovereign immunity will not be waived or abridged 8.2. No Delegation of Governmental Authority. Nothing in any of the Agreements is intended to be a delegation of the City's governmental or regulatory authority. 9. Brokers. Developer will be responsible for funding to CBRE the brokerage commission set forth in the November 27, 2017 letter from the City of Miami to CBRE, a copy of which has been provided to Developer. City and Developer agree that the amount of the brokerage commissions will be included in the "Total Development Cost" as that term is defined in the Agreements to be entered into by the City and the Developer. 10. Term Sheet Not Comprehensive. This Term Sheet is not intended to be comprehensive, nor shall it be interpreted as addressing every matter that may be included in the Agreements. The contents of this Term Sheet will not limit the parties from including any other provisions in the Agreements. 11. New Facility Term Sheet Subject to MRC Term Sheet. City and Developer acknowledge that this New Facility Term Sheet shall not become effective until such time as City and Developer execute a separate term sheet pertaining to the proposed terms and conditions to effect the disposition of the City of Miami's current administration building, parking garage, and adjacent land parcel, identified by tax folio numbers 01-4137-038- 0020 and 01-4137-038-0010 and commonly known as the Miami Riverside Center. 12. Controlling Law. This Term Sheet (and the Agreements) shall be interpreted under the laws of the State of Florida. Developer: LANCELOT MIAMI RIVER, LLC, a Florida limited liability company By: Print Name: Title: City: CITY OF MIAMI, a Florida municipal corporation By: Attest: Approved for legal form and sufficiency for the use and benefit of the City By: