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HomeMy WebLinkAboutMOU - Memorandum of UnderstandingTuitg of fflian-ti March 21, 2017 Tiffany Leadbetter Donato Senior Vice President Capital Strategy, Real Estate Transactions Hyatt Hotels Corporation 71 South Wacker Drive Chicago, EL 60606 Re: Memorandum of Understanding: (1) Amended and Restated Land Lease Dear Mrs. Donato: Hyatt Equities, L.L.C. ("Hyatt") and the City of Miami ("C") (collectively, the "Parties") desire to amend and restate their existing land lease relationship, and have Hyatt redevelop the Property (as anticipated and defined in the Term Sheet attached hereto), upon which the existing Hyatt Regency Hotel and James L Knight convention center occupy. The following paragraphs set forth the basic terms and conditions upon which said relationship shall be structured subject to the negotiation and execution of an amended and restated land lease (the "New Lease"), and the other terms and conditions contained in the Term Sheet. At the minimum, said agreement is anticipated to incorporate the following: 1) The Parties will enter into an interim agreement with respect to the Existing Ground Lease (as defined in the Term Sheet) to address certain immediate needs of the Hotel between the date of such agreement until the New Lease is entered into and the redevelopment process commences, including, without limitation, an agreement on the payment of certain shared expenses on a going - forward basis and an agreement of the Parties to stay current on such obligations during the interim period. 2) The Parties shall intend to modify the Existing Ground Lease, including, without limitation, to: a. Extend the land lease term plus extensions to a total of 99 years; b. Expand the leased premises to include the James L Knight convention center/meeting space; c. Amend and restate the parking agreement to accommodate a. and b. above; d. In conjunction with the New Lease and upon termination of the Existing Ground Lease, as agreed by both Parties, resolve and absolve (except to the extent the Parties resolve to have continuing obligations thereafter, such as a payment plan) the Parties from, current disputed financial obligations for capital improvement projects undertaken, revenue and expense sharing agreements and other matters. Any agreed upon payment plan for such outstanding amounts shall be attached to the New Lease and each Party shall comply with such payment plan and other agreements made between the Parties in resolution of such outstanding amounts owed between the Parties. e. Hyatt shall redevelop the Property subject to the following: i. Hyatt shall explore the use of the additional development rights on the Property; ii. Hyatt shall engage directly CBRE, Inc. to seek qualified development partners to maximize the Property's development potential and density; additional development could include but not be limited to residential, office, retail, and/or parking; iii. Seek possible development partners, taking into consideration the qualifications and financial capacity of said partners, programmatic and aesthetic design, and financial benefit anticipated to inure to the benefit of Hyatt and the City. iv. The Parties will mutually agree upon a Master Plan (as defined in the Term Sheet) for the redevelopment of the Property. When fully executed, this Memorandum of Understanding (together with the term sheet attached hereto as "Attachment A" and incorporated herein (the "Term Sheet"), the "MOU") shall reflect the expression of Hyatt's and the City's desire to proceed with the negotiation and possible execution of a New Lease to include the redevelopment of the Property. New Lease. Subject to certain conditions as set forth in the MOU being satisfied, the New Lease will be negotiated to reflect the intended deal terms set forth in the MOU. Exclusivity. From the date hereof through March 31, 2017 (the "Exclusivity Period'), City shall negotiate exclusively with Hyatt for the redevelopment of these parcels; provided, however, that in the event the Parties mutually agree in writing, or Hyatt notifies City in writing of its intention to cease the negotiations prior to such date, then the Exclusivity Period shall expire on the date of cessation of negotiations. Confidentiality. The terms of this MOU and the New Lease, as well as any non-public information related to the transactions shall be maintained as confidential by the Parties, except for (i) disclosures required by law (specifically including Florida Statute Chapter 119) or rules of applicable securities exchanges, (ii) disclosures to the Parties' respective board members, agents, employees, attorneys, accountants, brokers, contractors, lenders, prospective lenders, investors, prospective investors, consultants, advisors or other representatives, and (iii) disclosures that the Parties mutually agree in advance are required or desirable to advance Zoning Entitlements (as defined in the Term Sheet) or other public approvals or concessions or information that otherwise advances the planned development. The foregoing notwithstanding, the Parties agree that any public announcement of an executed transaction (i.e., executed New Lease) shall be mutually agreed upon by the Parties prior to any public announcement. Non-Bindine. This MOU shall not create any legally binding obligations on the Parties, other than with regard to the Exclusivity and Confidentiality provisions set forth above. Except for such provisions, City and Hyatt shall not have any obligations to each other unless and until full execution of the New Lease. If a New Lease is not executed by expiration of the Exclusivity Period, unless otherwise agreed to by the Parties in writing, this MOU shall automatically terminate, other than the above Confidentiality provision, which shall survive termination for one (1) year. In addition, this MOU shall terminate in its entirety upon the full execution of the New Lease. For the purposes of this discussion, this MOU and subsequent contract documents will require approval of the City Commission. That process may include the item being placed on the Commission Agenda, I" and 2°d readings and then final approval. The final New Lease shall also require approval by the voters at Referendum. Each of the City and Hyatt, and their respective affiliates, representatives, and associated entities shall use commercially reasonable efforts to comply, in all material respects, with all applicable laws, rules, regulation, disclosures, and statutes (whether local, state, or federal), to include the Miami 21 zoning ordinance, in the performance of this or any agreement, instrument, or action(s) relative to the MOU or New Lease. The City shall cooperate with Hyatt, its affiliates, representatives and associated entities to facilitate and expedite approvals and conformance with local, state, or federal ordinances as may be reasonably required. The Parties understand that this MOU and any subsequent contract documents will require the applicable internal approvals of Hyatt, including the approval of Hyatt's Development Committee, the Finance Committee of Hyatt's Board of Directors, and Hyatt's Board of Directors. If you are in agreement with the terms of this MOU, please indicate same by counter -signing where indicated below. We look forward to moving forward with you on this important project. Sincerely, CITY OF MIAMI, a municipal corporation of the State of Florida By: Daniel J. Alfonso City Manager Accepted and Agreed to: HYATT EQUITIES, L.L.C. By: Name: Title: ATTACHMENT A TERM SHEET This term sheet ("Term Sheet"), dated this day of , 2016, is a proposal only, and is not contractually or legally binding. It represents only an expression of the parties' present desire and intention to enter into negotiations of a possible agreement to lease the Property (as defined below) by Hyatt (defined below) from City (defined below). City and Hyatt are sometimes collectively referred to herein as the "Parties" or individually as a 'Tar '. The outline of the general terms and conditions are as follows: 1. GENERAL: LL . PARTIES TO NEW LEASE: 1.1.1. Hyatt Equities, L.L.C., or an affiliate thereof, as ground lessee and developer, if applicable ("Hyatt" ; Hyatt may enter into subsequent agreements, with City of Miami ("City") approval as may be required under the New Lease or by applicable law, including, without limitation, joint venture agreements, development agreements or subleases with prospective partners, developers or other third parties in connection with the performance of its duties under the New Lease; and I.1.2. City of Miami, as ground lessor ("Qijf" 1.2. THE PROPERTY: City and Hyatt will enter into an amended and restated lease (the "New Lcase") of the existing Ground Lease pursuant to which Lessee currently leases from Lessor the real property (the "Hotel Land") upon which the Hyatt Regency Miami (the "Hotel') is located (the "Existing Ground Lease"). Pursuant to the New Lease, (i) the City will continue to lease to Hyatt, and Hyatt will continue to lease from the City, all of the City's right, title and interest in the Hotel Land, including any City interest in the Hotel and any other improvements, furniture, fixtures, and personal property located on the Hotel Land and any additional development, air or other rights appurtenant to the Hotel Land not currently provided in the existing land lease, as agreed by the City pursuant to the approved Master Plan, and (ii) the City will agree to lease to Hyatt, and Hyatt will agree to lease from the City, the real property upon which The James L. Knight Miami Convention Center (the "Convention Center") is located (the "Convention Center Land"), including, without limitation, the Convention Center and all other improvements located on the Convention Center Land, any City interest in the furniture, fixtures, improvements and personal property located on the Convention Center Land and any additional development, air or other rights appurtenant to the Convention Center Land as agreed by the City pursuant to the approved Master Plan ((i) and (ii) are collectively referred to herein as the "Pro er "). 1.3. DUE DILIGENCE: Hyatt shall complete all due diligence work it deems necessary or advisable on the Property prior to its execution of the New Lease, at its sole cost and expense, including without limitation, title, survey, soils, environmental and all feasibility studies and tests. City and Hyatt shall execute a separate commercially reasonable access agreement granting Hyatt and its agents and consultants access to the Property in order to conduct the requisite tests and studies, subject to customary release, indemnification, insurance, notice and repair requirements. Upon its completion and receipt thereof, and upon request from the City, Hyatt shall deliver to City copies of all third -party environmental, property condition and soil reports, surveys and title reports resulting from its due diligence activities related to the Property. Subject to such access agreement, City will grant Hyatt immediate and reasonable access to the Property, the Parking Garage, the Property records, and the Convention Center management team and other employees for the purpose of inspecting the physical condition of the Property (including for the purpose of soil and other environmental tests and mechanical and other inspections) and evaluating the Convention Center business, in Hyatt's sole discretion. The City shall deliver copies to or provide access to Hyatt of all Property records within City's possession, or the possession of its Convention Center manager, affiliates, consultants, agents, representatives or employees, including, without limitation, environmental reports, property reports, title commitments and policies, surveys, building plans, correspondence with or notices from any governmental agencies, information pertaining to any lawsuit(s) pending against the Convention Center, the Hotel or the Property, and any other information reasonably requested by Hyatt. 2. REDEVELOPMENT: 2.1. Within [twelve (12)] months of execution of this Term Sheet, Hyatt shall prepare, and deliver to the City for its review, a master plan (the "Master Plan") for the redevelopment of the Property (the "Project"). The Master Plan shall include, among other components: parcel development plans (for a Hyatt hotel, meeting space and other typical hotel amenities, and expanded mixed use development that may occur on the site), financing/ equity plans for the Project; strategy for the use of public funds, public funding mechanisms or public assets including use plans, desired densities, design criteria for base buildings and public spaces, a proposed streetscape, a retail merchandising plan to the extent retail is an element of the development, an infrastructure plan and a parking plan. The Master Plan should include proposed development that maximizes the site's density and proposed Project phasing. If agreed upon, the Master Plan approved by the City and Hyatt shall be attached to the New Lease and Hyatt shall develop the Property in accordance with the Master Plan agreed to and approved by the City. 2.2. If Hyatt and the City, in their discretion, determine to proceed with the Project based upon an agreed upon Master Plan and terms to the New Lease, Hyatt's obligations under the New Lease shall include, among other requirements: (i) to redevelop the Property as contemplated by the Master Plan; (ii) to obtain Zoning Entitlements (defined below) as necessary, for the Property to permit development of same: (iii) to secure the requisite equity investment and financing necessary for the Project within the parameters set forth in the New Lease; (iv) to adequately address all infrastructure requirements necessary for the timely development of the Property, (v) to develop a plan to adequately address parking requirements for the Project (vi) to construct the improvements in accordance with the Master Plan and plans otherwise approved by the City pursuant to the normal planning and permitting process; and (vii) to operate and maintain the buildings, grounds, and infrastructure in the manner prescribed by the New Lease throughout the term of the New Lease. 2.3. If the Parties elect to proceed with the Project, Hyatt shall take the lead, at its expense, in obtaining all entitlements for the Property to accommodate the approved Master Plan ("Zoning Entitlements"). The City shall use its best efforts to assist and reasonably cooperate with Hyatt throughout the Zoning and Entitlement process. 2.4. In the event that the Parties elect, or either Party elects, to not proceed with the Project, the Parties shall have no obligations hereunder other than the confidentiality provisions. 2 3. NEW LEASE: 3. 1. EFFECTIVE DATE OF LEASE; TERM: The New Lease shall be effective (the "Effective Date") upon execution by the Parties, and each Party having obtained all necessary approvals as set forth in the MOU and this Term Sheet and the Parties having agreed upon the Master Plan, which will be attached to the New Lease. The initial term for the New Lease shall be from the date of ground lease execution ("Commencement Date") through December 31 of the year that contains the 99`x' anniversary of the Commencement Date. 3.2. GROUND RENT: a. Hyatt Hotel and Adjoining lames L Knight Convention Center On or before January 15t of each lease year, Hyatt shall pay to the City base rent ("Base Rent") for the Property as follows: During the construction period: Base Rent (to be paid by Hyatt, or the developer of the Project, during the construction period) for the Property shall be the following: Year one (1) during the construction period $0 Year two (2) during the construction period $500,000 Year three (3) during the construction period $500,000 Thereafter and ongoing, Hyatt shall pay to the City not less than: Two million dollars ($2,000,000) per year (as may be escalated from year to year), or, ii. The mathematical average of two appraisals commissioned by the City for the land under which the hotel is constructed plus space occupied by the James L. Knight convention center. The formula for the establishment of base rent for the hotel property and James L. Knight center shall be five percent (5%) multiplied by the mathematical average of appraised value. Should 5% of the mathematical average of two appraisal exceed two million $(2,000,000) per year (as may be escalated from year to year), Hyatt shall be required to pay up to, but not more than iii. Seven percent (7%) of gross room and meeting receipts of the Property plus 5% of gross beverage receipts, plus 3% of food receipts, plus a to be determined percentage of other gross income receipts, as agreed upon the parties once such other income sources at the Property are determined. For the avoidance of doubt, Hyatt shall not pay any other rent or fees to the City for space utilized in the operation of the Hotel and meeting space on the Property. b. Profits Participation for Expanded Development on the Property In addition to Base Rent for the Hotel and meeting space, after the construction period, the owner of the non -Hotel components of the Project shall pay to the City a profit participation rent ("Participation Rent") with respect to the other income producing areas of the Property, other than the Hotel and Hotel Land and meeting space, determined as the greater of: 1) A to be determined percentage of gross profit associated with expanded development on the Property as defined in the agreement for the redevelopment of the Property; and 2) Rent formulaically determined by: i. A current appraisal of the property occupied by the Hotel and James L. Knight Convention Center as a "going concern" shall be performed. ii. An appraisal of the land area of the Hotel and James L. Knight Convention Center land and all appurtenant air rights shall be performed and determined for "highest and best use" iii. The difference between highest and best use value of the Motel and .lames L. Knight Convention Center land and value of going concern of the Hotel and Convention Center shall be the City's financial contribution to the expanded development. See Below Example for Demonstration Purposes Only: Highest & Best Use Value X $100,000,000 of Hotel and Convention Center Land Less: Value of Hotel and Y $60,000,000 Convention Center as Going Concern Equals: City Contribution Z $40,000,000 City's Contribution shall be treated as a limited partner equity investment. Notwithstanding the foregoing, the City shall not be a joint venturer or partner with Hyatt; any references to partner equity investment and similar terms are solely for purposes of calculating Participation Rent. `therefore, if the total investment for the expanded development is A $200,000,000 then City's profit participation using the example above shall be 20% of Z ($40,000,000) divided by A ($200,000,000) . The numerator is equal to Z ($40,000,000) and the denominator is A ($200,000,000) which produces the City's equity contribution of 20%. 3.3. ANNUAL ESCALATOR: On the 5`h anniversary of the commencement of the New Lease, and on each 5"' anniversary thereafter during the remaining Term or extensions thereof, the minimum Base Rent shall be the cumulative compounded increase in the Consumer Price Index for All Urban Consumers (CPI -U) Miami; provided, however, that the increase in Base Rent shall in no event be less than two percent (2.0%) per year. 4 3.4. NET LEASE: The New Lease shall be absolutely net to City, and Hyatt shall pay all real estate taxes, operating and other related expenses during the term thereof. 3.5 SUBORDINATION: The New Lease, any leasehold interests created thereby and any security interests granted therein (to lenders, equity providers and the like) shall be subordinate to City's fee interest in the subject Property at all times throughout the New Lease term or extensions thereof, provided, however, that the Parties shall record a memorandum of lease against the Property, which shall be senior in priority to any encumbrance on City's fee simple interest in the Hotel Land and Convention Center Land and reversionary interest in the improvements on such lands. 3.6 PARKING: The New Lease will provide Hyatt with all the same parking rights currently held by Hyatt with respect to the Hotel under the Existing Ground Lease. The Parties will cooperate with each other to reasonably apportion parking in the G4 Garage to provide necessary additional parking for the Project. Notwithstanding the foregoing, as part of the Project, Hyatt may propose that all or some portion of the parking requirements for the Project be met by proposed parking within the Master Plan for the Property (separate and apart from parking within the Parking Garage). 3.7 ASSIGNMENT AND DISPOSITION RIGHTS: With City's prior written approval, Hyatt may assign the New Lease to an assignee that has a net worth of [$ 1 and either holds a franchise with a First Class Hotel Company or engages a manager who is a First Class Hotel Company. A "First Class Hotel Company" is a company or product type that enjoys a reputation in the hotel industry similar to that of Hyatt Corporation and the Hyatt Regency product. Hyatt's ability to mortgage, pledge or conditionally assign the New Lease to leasehold mortgages shall be as provided in the New Lease. 3.8 MORTGAGEE PROTECTIONS: The New Lease shall include customary and commercially reasonable provisions for the benefit of Hyatt's lender, including, without limitation, the right of tender (i) to receive notices of any Hyatt defaults or termination by City, (ii) to cure any Hyatt defaults within a reasonable grace period, and (iii) upon termination of the New Lease, to enter into a new lease directly with City on the same terms and conditions as the New Lease upon lender's cure of all of Hyatt's prior defaults, to the extent susceptible of being cured. 3.9 OTHER TERMS AND CONDITIONS: The form of New Lease shall include other terms and conditions that are normal and customary for similar projects and as agreed to by Hyatt and City. 4. PUBLIC FUNDING: City shall reasonably cooperate with and assist Hyatt in obtaining available governmental incentives (such as, by way of example, sales tax relief on construction materials, TIF -type incentives, etc.) in connection with the New Lease and the investment by Hyatt in the redevelopment of the Property. 5. COMMUNITY OUTREACH AND STAKEHOLDER MEETINGS: The Ground Lease shall set forth the parameters and the Parties' respective roles and obligations related to all community outreach and stakeholder meetings to be conducted in connection with the Zoning Entitlements or otherwise related to the design and development of the Project. 6. REAL ESTATE BROKERS: CBRE was hired by the City through State of Florida Contract DMS -12113-007A. Hyatt intends to engage CBRE in connection with the Project. Other than CBRE, Inc. whose duties and loyalties are solely to the City, no other real estate broker or consultant to whom a commission or fee shall be due has been engaged by either party. Upon execution of the New Lease by the Parties, City shall be responsible to pay to CBRE, Inc. as part of its development costs a commission for the New Lease as is set forth in a separate agreement between CBRE, Inc. and the City. City and Hyatt acknowledge CBRE's representation of the City and agree that the New Lease or other agreement between the Parties to acquire the Property will include said commission agreement by reference. Hyatt shall be responsible for costs associated with Hyatt's direct engagement of CBRE for all new development (including the construction or reconstruction of a hotel and any additional development on the Property pursuant to this Term Sheet pursuant to a separate agreement between Hyatt and CBRE. 7. EXISTING LEASE TERMINATION: The Existing Ground Lease and related agreements will be terminated effective as of the Effective Date of the New Lease, with each Party releasing any claims (whether known or unknown) against the other Party. 8. CONVENTION CENTER MANAGER: The management agreement for the Convention Center with the current manager will be terminated as of the Effective Date of the New Lease, with Lessor paying any outstanding fees and any required termination fees. 9. PRORATIONS: Real estate taxes, special assessments, utilities, rents and other amounts will be prorated as of the Effective Date in a usual and customary manner for a transaction of this type. 10. TITLE: As of the Effective Date of the New Lease, the Property will be ]eased free of any liens and mortgages and any leases, tenancies or occupancies, or any other encumbrances, or any defect in title to the Property that are not accepted by Hyatt in accordance with the terms of the New Lease and will be subject to receipt of a satisfactory title insurance policy. 0 11. REPRESENTATIONS AND WARRANTIES: Each Party will make customary representations and warranties to the other Party for a. transaction of this type, as of the date of the execution of the New Lease. 12. COVENANTS. Each Party will agree to customary covenants for a transaction of this type. so 41rdrelf)MYWjX13 .% W Except as specifically set forth in the New Lease, the Property will be conveyed in "as is" condition. 14. TRANSACTION COSTS: The City shall be responsible for the payment of all transfer taxes and recordation fees and the title insurance premium. All other transaction costs will be paid in accordance with local custom for similar large commercial hotel transactions. Each party will pay their own attorneys' fees. 15. DELIVERIES: At or before the Effective Date of the New Lease, City will agree to properly execute and/or deliver (i) the New Lease, (ii) an assignment and assumption of intangibles, (iii) a bill of sale, (iv) an assignment and assumption of all operating agreements, equipment leases, services contracts and other leases and subleases related to the Property (to the extent accepted by Hyatt in the New Lease) (the "Agreements'), (v) estoppels for the benefit of Hyatt as reasonably requested by Hyatt, (vi) all other customary documents reasonably necessary from City to complete the New Lease. Hyatt will properly execute and/or deliver (i) an assignment and assumption of all Agreements, (ii) an assignment and assumption of intangibles, (iii) a bill of sale, and (iv) all other customary documents and funds reasonably necessary from Hyatt to complete the New Lease. 16. MISCELLANEOUS: 16.1. DEVELOPMENT PRO FORMAS: Hyatt provide the City with development pro formas for renovated existing or new hotel and any other mixed use development to occur on the site. 16.2. COMMUNICATIONS: The New Lease shall establish a communications protocol (e.g., reports, meetings, designated representatives) to maintain open and continuous lines of communication between the Parties with respect to all design, entitlement, development and programming activities related to the Property. 16.3. DISPUTES: All disputes under the New Lease shall be resolved pursuant to procedures to be set forth in the New Lease. 16.4. DEFAULTS AND REMEDIES: The New Lease will set forth provisions governing defaults by the Parties thereunder and will set forth the remedies available to the non -defaulting Party in the event of a default. 16.5. NO ASSIGNMENT: Except as set forth in Section 3.7 above, neither Party shall be permitted to assign, transfer or otherwise convey its interests, rights or obligations under the New Lease without written approval of the other Party. This Term Sheet does not constitute an offer to lease the Property and is not subject to acceptance, nor are any of the terms contained herein binding on either of the Parties. Furthermore, this Term Sheet does not obligate either Party to proceed with a transaction in any way whatsoever. There shall be agreement only when the Parties execute a New Lease. Without limitation of the foregoing (A) Hyatt and City specifically acknowledge that no party shall have any obligation of any kind or nature to the other Party unless and until such Party actually executes and delivers the New Lease and (B) Hyatt and the City reserves the right at any time to withdraw from further negotiation or consideration of the transaction contemplated hereby for any reason or for no reason in Hyatt's or the City's sole and absolute discretion without liability of any kind or nature to the other Party hereto.