Margaritaville on the Beach
A team of city staff members, with help from financial, legal, and hospitality consultants, has come up with a strong set of business terms for the proposed Margaritaville Resort Hotel project on Hollywood Beach.
If the developer fails to build the project or attempts a "bait and switch," the city will have a range of remedies to protect our interests and keep us from being "whacked" as the Mayor once lamented about past agreements. But it will be up to the City Commission to utilize the many "teeth" that staff are drafting to protect the city, the CRA and above all the taxpayer. If our elected officials can summon the will to do so, they will be sending a strong signal that a new and better day has arrived for Hollywood development.
The negotiating team, in concert with the developer, has produced a Memorandum of Understanding (MOU) that sets out timelines, construction, financing, operational and other requirements for the project. It not only provides for numerous revenue streams and many protections for the city but is also fair to the developer.
Separate from the MOU negotiations, the city's Planning Department has been working on all aspects of the site plan. We will need to keep an eye trained on the Planning Department to be sure the project retains many amenities for the public to enjoy.
The MOU will come before a joint session of the City and CRA for approval at 4 PM on Wed., July 7. It is not a contract, but it does set out many provisions that the developer and the city have agreed to include in the binding legal documents that will be drafted once the City Commission approves the MOU. We believe the Commission/CRA Board should promptly approve it as drafted, so that staff can begin immediately to negotiate the necessary developer agreements to get the project moving by October 1, 2010.
A few examples of MOU provisions are the following :
- The developer must pay the city up to $300,000 to reimburse us for the cost of consultants we have hired to assist in contract negotiations.
- The hotel will have 360 rooms, 35,000 sq. ft. of convention space, 30,000 sq. ft. of restaurant/bar and 6,500 sq. ft of retail, plus a boat landing on the Intracoastal.
- The parking garage will have 1,056 spaces, 600 for the public, 456 for the hotel.
- The public right-of-way on Johnson Street will include a public amphitheater with "great lawn" seating, dance area, walkway and breezeway, shelter and trolley stop, and public restrooms.
- The developer must secure performance and payment bonds to assure completion of the project.
- The developer must secure all financing and permits before taking possession of the property which is to occur not later than October 2011.
- The developer must begin construction within 30 days of taking possession of the property.
- One or more representatives of the City/CRA will be advised of and entitled to attend all meetings of the developer and the contractor or subcontractor.
- Construction period rent, minimum guaranteed rent, participation rent, and transaction rent are all specified in the MOU along with other sources of revenue that the project will provide the city.
The project's cost is $126 million, with funds coming from several sources. As you can see, the developer's earlier request that the City pony up $30 million for the project has been scrapped. Our negotiating team hung tough.
- $ 10,000,000 - Developer equity
- $ 75,000,000 - EB-5 financing (federal program)
- $ 31,000,000 - Community Development District bonds
- $ 10,000,000 - CRA loan (5% interest, 10-year term, priority repayment) subject to draws for equipment and furnishings only, presumably after the hotel is built
In addition, the CRA will pay up to $5 million for public improvements on Johnson and Michigan Streets and AIA. These will include burying the power lines on both Johnson and Michigan (already budgeted at $2 million) plus landscaping and the public amenities on Johnson (new bandshell, seating, restrooms, etc.)
Sending a New Signal to Prospective Developers
This MOU is significant because it sets a new standard for development agreements in Hollywood. It is strong in protecting city, CRA, and taxpayer interests. Over and done with is showering the developer with millions of dollars in future tax revenue that rightly belongs to the public. No longer will the developer be allowed to sit on city-approved plans without building the project and then require city compensation for its own failure to perform.
For their work in crafting this MOU that protects our interests in a variety of creative and interlocking ways, we thank City Manager Cameron Benson, Assistant City Manager Cathy Swanson-Rivenbark, CRA Director Charlotte Burnett, Finance Director Carlos Garcia, and City Attorney Jeff Sheffel as well as the financial and hospitality consultants who assisted them in negotiating this document. So far, they have done an outstanding job.
Final Note: While originally there were two proposals, the second choice, Planet Hollywood, has now withdrawn.
