Loading...
HomeMy WebLinkAboutExhibit BHYATT REGENCY MIAMI Summary of Joint Venture Transaction Last Updated: September 14, 2021 TRANSACTION OVERVIEW: The existing Hyatt Regency Miami Hotel (the "Hotel") is located on property that is ground leased from the City of Miami (the "City") pursuant to a ground lease between the City and Hyatt Equities, L.L.C. ("Hyatt Equities") which expires in September 2027, subject to Hyatt Equities' 45-year extension option (as amended, the "Ground Lease"). The Hotel is adjacent and connected to the James L. Knight Center (the "Convention Center"), which is owned by the City. Hyatt Equities is seeking to redevelop the Hotel and the Convention Center into a world -class, mixed use project which will include one or more high -end, Hyatt branded hotels, and potentially multi -family housing and/or retail components, such components to be determined. To facilitate a potential redevelopment, Hyatt Equities has been seeking a partnership with an experienced hotel and hospitality focused developer to help pursue, finance and facilitate the potential redevelopment project. After discussions with several potential developers, Hyatt has selected the Miami based investment firm, Gencom ("Gencom"). The Gencom family of companies is involved in the investment, development, and management of hospitality related assets. Founded in 1987 by Karim Alibhai, Gencom is one of the industry's leading luxury lodging and hospitality related residential real estate investment and development firms. Headquartered in Miami, Gencom is fully integrated and highly diversified, with expertise in every aspect of development, including acquisition, financing, design, asset management, and residential sales & marketing. Gencom's core focus involves executing turnaround and repositioning strategies as well as acquisition and development of mixed -use hotel projects with ancillary residential and retail components. See exhibit [a] for additional information and more relevant transaction history on Gencom. Affiliates of Hyatt and Gencom will form a joint venture (the "Venture") under the agreements contained in the joint venture agreement ("JVA"), as further summarized below. At the closing of the Venture, (i) Hyatt will assign the Ground Lease to a subsidiary of the Venture, which will assume the Ground Lease and enter into a new long term management agreement with Hyatt Corporation ("Hyatt") for the operation and management of the Hotel, and (ii) Gencom will invest capital to be used to (x) improve the Hotel and (y) fund predevelopment expenses in pursuit of the redevelopment. In exchange for the foregoing contributions, Gencom will receive its interests in the Venture, and Hyatt will receive its interests in the Venture and a promissory note and mortgage from the owner of the Ground Lease. Hyatt will not be paid a separate purchase price from Gencom for the acquisition of its interest in the Hotel. The new long term management agreement entered into at Venture closing will not in any way change the management and operation of the Hotel. PARTNERS / PERCENTAGE INTEREST: Affiliates of Gencom and a wholly owned subsidiary of Hyatt Equities ("Hyatt Member") will enter into the JVA. Hyatt Equities, indirectly through the Hyatt Member, will retain a 50% ownership interest, and the Gencom affiliates (the "Gencom Members"), will collectively own the other 50% ownership interest (with one Gencom affiliate owning 49.99% and the second Gencom affiliate owning 0.01 %). See the 1 742380489 20651891 organization charts for the Venture, which shows the ownership of Hyatt Member and the Gencom Members, collectively. MANAGEMENT OF JOINT VENTURE: An affiliate of the Gencom Member will act as the "Administrative Manager" of the Venture, and Hyatt Member will have approval rights over certain major decisions, including material decisions regarding the potential redevelopment. Subject to such approval rights, the Administrative Manager will have the duty to diligently pursue and manage the redevelopment project from predevelopment through completion in accordance with the business plan approved by both Hyatt Member and Gencom Member, the entitlements obtained for the project, and the documents encumbering the Hotel, including the Ground Lease. As initial steps, the Venture will spend material amounts of money to develop a proposed plan of redevelopment for consideration in referendum, and negotiate an amended and restated ground lease with the City to facilitate the redevelopment project. If certain milestones with respect to the redevelopment, including the amended and restated ground lease and referendum, are not achieved within a certain amount of time, the Venture will shift to a major renovation of the Hotel, and will seek the participation of the City in the renovation of the attached Convention Center. If neither the redevelopment nor the renovation move forward, a modest improvement plan to the Hotel will be implemented. The Venture subsidiary will continue to be responsible for all obligations under the Ground Lease. Each member of the Venture has certain obligations to contribute capital in furtherance of the project during predevelopment, and third -party financing will be obtained to fund construction of the redevelopment once all entitlements and approvals have been obtained. HYATT REGENCY MANAGEMENT AGREEMENT: The Venture will enter into a hotel services agreement with Hyatt (the same operating entity under the current hotel management agreement with current Hyatt owner / lessee) for the operation of the hotel as a Hyatt Regency before and after any potential redevelopment, which management agreement has a term of 30 years with two 10-year extensions, subject to the extension of the Ground Lease or entrance into a new ground lease with the City. Under the new hotel services agreement, the Hotel will be operated consistent with the standards applicable to other Hyatt Regency branded hotels in the U.S, and standards generally applicable to upper upscale hotels in the same market as the Hotel. Hyatt will earn a base fee and have the opportunity to earn an incentive fee once certain hurdles are met. Owner shall receive the profit of the Hotel after paying all operating expenses and capital expenses, Hyatt's fees, contributions to an FF&E reserve, insurance, real estate taxes and similar Owner expenses. The current hotel management agreement between Hyatt affiliates will be terminated. Any additional hotel on the property will be branded a Hyatt and shall be managed by Hyatt pursuant to a hotel services agreement substantially the same as the hotel services agreement for the Hyatt Regency. During predevelopment activities in furtherance of the potential redevelopment, the Hotel will operate in the ordinary course. 2 742380489 20651891