The Commission’s Finance Committee discussed terms at its meeting last month with two Commissioners expressing frustration at the pace of the negotiations. Finance Committee Chair Ricky Arriola who has championed redevelopment of the site said his highest priority is “getting a deal done that will provide the community with the finest cultural building that we can get.” The other uses – workforce housing and retail – are secondary, he said.
“My concern is that this deal is dragging on with no end in sight,” Arriola said. “We’re going to possibly lose this developer and that building’s going to lay dormant for years or perhaps another decade and that’s not going to serve the public interest. I’m growing frustrated that it’s taken this long and we still have this many open items on what should be a relatively straightforward deal.” His goal, he said, is “within three years’ time” the community can “go back to enjoying that cultural space that they’ve enjoyed for decades.”
Commissioner David Richardson said, “I share your frustration, Chair, and your urgency to get something done.” Addressing the nostalgia that members of the community have for the theater, he added, “The memories are worth saving, the building is not. It’s in disrepair. It’s a blight on the community and I, too, would like to see some development.”
The City purchased the Byron Carlyle in 2001 for $1.7 million. According to a 2014 memo, “the Byron Carlyle has yielded operating deficits every single year of operation since acquisition by the City” reaching as high as $195,000 per year. The City provided the last operator of the Byron Carlyle, O Cinema, with a $100,000 annual subsidy and $50,000 for facility maintenance and repair.
A prior City Commission began discussing redevelopment plans in earnest in 2018 for the theater which, by that time, had fallen into serious disrepair. When a Request for Letters of Interest to get market feedback for future uses of the site received no responses, the Administration tried a more formal process, issuing a Request for Proposals (RFP) in January 2019 for development of a mixed-use project with a required cultural space.
In July 2019, the City’s Building Official declared the building unfit for occupancy, citing life safety concerns and the inability to meet 50-year certification requirements for structural soundness and electrical safety. While O Cinema was only occupying a small part of the building, serious concerns were raised over the “severe flooding” of the subterranean electrical room and O Cinema was forced to vacate the space a few months later.
There were two respondents to the RFP, Pacific Star Capital which proposed a hotel on the site and the joint proposal from KGTC (Cohen) and Menin Hospitality (Galbut). The Commission directed negotiations with both proposers but, in August of this year, Pacific Star Capital withdrew its hotel proposal.
In a memo accompanying the item for the December Commission meeting, City Manager Jimmy Morales outlined proposed deal terms and sticking points.
Summary of the developers’ proposal:
- A 99-year lease with a 30-year restrictive covenant for workforce housing
- 151 workforce housing units
- 124,230 total sq ft (including +14,000 sq ft of FAR from adjacent property)
- 9,000 sq ft of retail space
- 10,500 sq ft for a cultural component of the City’s choosing
- Height: No more than 125 feet
- No parking is proposed
- $1 per year lease payment throughout the term of the lease; no percentage of rent
Sticking points include the lack of parking, length of time the project remains as workforce housing and rent payments by the developer when the housing goes to market rates, what will be provided by the developer in the “shell” for the cultural space (e.g. utility hookups, etc.), and the ability of the developers to add 14,000 sq ft of additional FAR (floor area ratio) from an adjacent property.
A financial analysis detailing the value of the lease to both the City and developer will need to be conducted once the deal terms are set and prior to first reading of the development agreement and ground lease at City Commission.
Also, to be determined, the income mix of tenants. City Code defines “workforce” households as those with total household income between 65% and 140% of area median income (AMI) for Miami-Dade County which currently is $59,100. Morales noted in his memo that the 2019 median household income in North Beach was $43,439. The developers are proposing a tenant mix with at least 20% of tenants at 100% AMI or less and all other housing units capped at 140%. According to Morales’s memo, if the project were leased today, most of the households as proposed would be single-person households with an annual income of $89,600 (140% AMI in 2020). A 2019 Environmental Scan of the City indicated nearly 71% of North Beach households of all sizes earned under $75,000.
“The Administration recognizes that the Developer deserves credit for proposing to introduce workforce housing in North Beach, but the proposed tenant income mix reflects above-market rates for North Beach,” Morales wrote. The Administration is recommending the lease include provisions to “ensure the Project is accessible to workforce housing tenants across a mix of income ranges.”
Cohen and Galbut are proposing tenants be selected via a lottery or another equitable process approved by the City with first priority given to City employees, teachers working in Miami Beach (in either public or private schools), and medical personnel working in Miami Beach. If there are not enough income-eligible applicants in that group, the units would be open to all other income-eligible tenants.
Cohen said, “95% of our employees don’t live in our city and that was really the driving force… You want the people that work in the city to have a vested interest, not only as a job but as a place to live.”
At the Finance Committee meeting, the focus was on the public benefit of the cultural component. Public comment was split on redeveloping the theater or coming up with a plan to renovate it. The City estimates just bringing the building up to Code will cost in excess of $3 million. That does not include improvements to make it a fully functioning arts space as suggested by a group of residents that has started a “Save the Byron Carlyle” effort. They suggest using money generated from a newly designated Community Redevelopment Agency (CRA) for the project, though Assistant City Manager Eric Carpenter said he did not know how long it would take for the CRA to begin generating significant dollars.
For many, the building is full of nostalgia with memories of first dates, classic movies, and taking children to the theater. Daniel Ciraldo, Executive Director of the Miami Design Preservation League (MDPL) told the Committee, “MDPL supports the protection and restoration of the Byron Carlyle Theater and its enhancements as a cultural center” though, he noted, “that doesn’t mean historic designation of the property.” He suggested the developers might “keep elements of the exterior shell” as a nod to the building’s past. “Miami Beach is somewhere that likes to blend old and new.”
Arriola said it was important to separate the memories from the physical building. What is important to him, he said, is that the cultural center “meets the expectations of our community… That’s the public benefit, that we have a really great world-class space for showing movies, doing live performances, rehearsals, places where the community can gather. Once we get through this pandemic and we can get back together, that, to me is the real lynchpin.” The space, he said, would be built at the developers’ cost but will be owned by the City to program however it would like.
As to the terms of the deal, Arriola said, “The really important thing for me to get behind a project like this is are we going to get a great cultural center or not?”
Richardson agreed. “This is the most important piece of the public benefit… Workforce housing is the cream on top, if you will. This is the most important thing.” He asked for more details on the buildout for the cultural center to have a better understanding of what the City and community would be getting.
Galbut who grew up in Miami Beach said he believes there is “a misconception in the community of what we are doing. We are not doing a condo project. We are doing a workforce housing project. We are giving the community back a cultural center.” Having attended many events at the Byron Carlyle, he said, “I know its significance… There are ways we can help take the history and memory of the Byron Carlyle and work with the City to incorporate it.”
Cohen added, “What we’re really trying to do is create the spirit of embracing the nostalgia but, more importantly, the spirit of having a true cultural center in North Beach and in Town Center that will be a hub to include North Beach in the Miami Beach value proposition for arts and culture.”
Though an independent financial analysis still needs to be done, Cohen and Galbut have provided the City with their financial estimates. Direct construction costs of the cultural center are $5.1 million, $600,000 for the additional FAR to add to the project if approved, and $1.5 million in a buildout contribution. They estimate the value of the completed cultural center at $12.6 million based on a market rent of $60 psf with a capitalization rate (Cap Rate) of 5%. The City’s latest Environmental Scan indicated average retail rents citywide were $83.56 in 2019 and $54.02 in North Beach though Cohen says the North Beach rents reflect older stock versus new Class A space. According to the report, Cap Rates citywide are 5%.
They say the direct benefit to the City is approximately $41 million ($2.9 million in permit and impact fees, $1 million in infrastructure improvements, $700,000 in general utilities, $23.9 million in real estate taxes during a 30 year workforce housing period, and $12.6 million in value of the completed cultural center).
Cohen shared two architectural options for the project with RE:MiamiBeach along with two potential buildouts for the cultural space. Any design would need to be approved by the Design Review Board (DRB) if the City Commission approves a development agreement and ground lease.
“While we still have a long way towards the DRB, these concepts illustrate two different directions we are studying,” Cohen said. The top illustration uses a “wrapping concept” that could change in color for holidays and other events, similar to the Cartier building in New York City. The architect is Robert Bistry, principal of Built Form.
The original proposal submitted in response to the RFP contained 110 housing units, but Cohen said with “a more efficient design” and the additional FAR from the adjacent building, the developers are now proposing 151 units.
Though design is not part of the development agreement, separating the building from the memories as Arriola suggested may prove difficult.
Ciraldo reiterated MDPL’s position this week that “the site is culturally and historically significant as a theater and community hub.” The organization, he said, “is hopeful that the property will be preserved for that use, and that notable elements of the building structure can be maintained.”
“These buildings have many layers of historical and community significance, and the community needs to be involved in the process of determining the shape and future of the site,” Ciraldo added.
The Byron Carlyle was included in the North Beach master planning process and was identified in the 2016 plan “as a catalytic site for mixed-use redevelopment,” Morales noted in his memo to the Commission. While there was significant public input into the plan, Ciraldo said, “It seems early to award the [Byron Carlyle] contract now, given the new involvement by the public and concerns about the currently proposed plans, particularly a lack of clarity with the cultural component and the fate of the existing structure.”
Arriola said he’s not sure people fully understand the project. “I think they’re worried that the Byron Carlyle’s going to be knocked down and not replaced and that is, by agreement with the developer, not possible because the key to this whole project is building a space that is at least as large as the current Byron Carlyle and certainly better.”
The community “should be excited by this because they’re going to get what they want and more.”
“I’ve spoken to some of them and told them they have my absolute firm commitment that the Byron Carlyle Theater will be better than the one that we currently have, otherwise this project won’t go forward,” Arriola said.
If terms are reached on a development agreement and ground lease, the next stop is the Planning Board where a 4/7 vote is required then back to the City Commission for two readings which require a 6/7 vote.
The commission discussion item with details is here.
Renderings: Built Form