The proposal has evolved since Martin, co-founder and President of Terra Group, first presented it, both in terms of financial benefits to the City and in its design. Initially the residential tower was to be shorter and wider but after conversations with the community and City Administration, its design became tall and slender to provide for more open view corridors and green space including the public park. The agreement increases the allowable height for the tower to a maximum of 385 feet and sets the maximum number of residential units at 60. The 275,000 sq. ft. residential portion of the building will utilize 25,500 sq. ft. from the vacation of a portion of the City’s Alton Road right of way (which will remain under the control of the City).
According to a memo from City Manager Jimmy Morales and City Attorney Raul Aguila, financial terms of the deal include:
$55 million for the air rights for the residential building.
A minimum of $22.5 million for the construction of a new 45,000 sq. ft. Miami Beach Marina facility at the base of the residential tower to replace the existing facility at no cost to the City and additional public benefits including a 1.0 acre park, resiliency improvements, and enhancements to the surrounding Baywalk and Alton Road areas. A minimum of $5 million must be spent for the public benefit improvements. The additional $17.5 million would be spent on the commercial building with a minimum of $5 million on improvements to the retail area such as higher ceilings, better quality finishes, and more architectural features. Martin has promised an enhanced retail and restaurant program that better fits with the local neighborhood.
A minimum of $40 million on additional capital improvements for the operation of the Marina and “to upgrade the marina to world-class marina standards” with $15 million to be spent in the first ten years.
99-year Marina lease agreement includes a minimum annual guaranteed rent to the City of $1.9 million, adjusted each year for inflation. The current lease contains a guaranteed $320,000 minimum annual guaranteed rent. In 2019, the City’s expenses in connection with the Marina Lease and the Marina Parking were approximately $770,000 with gross revenues of $1,742,512 for a net revenue of approximately $972,000. During four years of construction, the guaranteed rent from the developer will be $1.25 million annually.
A 1.0 acre public park, constructed by the developer, which will be owned and controlled by the City for the benefit of the general public, the value of which is not included in the numbers above, according to the City.
Two appraisals obtained by the City were updated to reflect the value of the taller building. They came in at $87 million and $70 million.
In their memo, Morales and Aguila wrote, “As a cumulative deal, the Marina Park Project makes significant financial improvements to the Existing Marina Lease. The public investments, along with the cash payments to the City, will result in nearly $120 million of value, not including the value to the City of the public park, as noted above. That value, coupled with job creation, increased ad valorem tax base, and what will likely be another more than $50 million in net present value according to the appraised Lease terms, will result in a major economic gain to the City, making the transaction worthy of consideration by the City Commission and the City’s voters.”
The agreement includes liquidated damages if improvements are not completed by agreed outside dates of construction and the construction of a $22.5 million Marina replacement facility along with the park in the event the Development Agreement is terminated.
Martin, a long-time Miami Beach resident, acknowledged how times have changed since he first presented the project pre-pandemic but, he told Mayor Dan Gelber and Commissioners, “One of the things that has not changed is my belief in the future of Miami Beach.”
The package negotiated with the City will not only create a “world class marina” through promised improvements, it will also help the City recover, he said, through the upfront cash to purchase the air rights, annual tax benefits estimated to be $3 million directly to the City, and new jobs – 2,111 non-recurring and 261 recurring.
“This Commission and City Administration has driven a hard bargain and has pushed us to the limits in terms of maximizing direct fiscal benefits and making sure that this proposal – even though it is still subject to voter approval – represents a very good deal,” Martin said.
Gelber who sponsored the proposal commended the community and City Commissioners in getting to this point. “It’s easier to do nothing than it is to do something. We could have kicked this can down the road and done absolutely nothing, but we really tried to take on something that was a ‘big idea’ and this would not have happened had the residents not engaged.”
He acknowledged not everyone would be happy “because a big idea doesn’t make everybody happy” but, he added, “There were a lot of very thoughtful residents on all sides who tried to make sure we were going to get something that worked in this community, something that really does make it better.”
Getting a good deal based on valuations was important, Gelber said, “but also I think more importantly [was to] make sure that this project reflects what our city is trying to do right now.”
“We are in a bit of a renaissance. We have 30 new acres of park projects coming on not including this acre and we have an intense amount of work on our beach and baywalk going on and I think the idea that we are animating our city’s extraordinary natural gifts is really what’s happening,” Gelber said. “We are making sure that the reasons why people probably move to our city or live here so long, namely vistas and green space and waterways, are being animated in ways that they’ve never even been thought about. One thing I really love about this project is it’s a skinny building that will allow people from Alton Road to see into the Bay.”
Gelber recalled something his father, former Mayor Seymour Gelber, used to say. “Sometimes the most important things you do you’re never going to cut the ribbon on and the truth of the matter is, most of the people on this dais won’t see this as an elected official on the Commission when it comes to fruition at the end but that’s why I’m so proud of your leadership in this in that it’s important to do things that you know down the road somebody else will probably cut the ribbon on but you’ll be very happy to know that you lit the fuse on it.”
After approving the Development Agreement, the vacation of a portion of Alton Road, and the Land Development Amendments that go along with the proposal, Commissioners also agreed on a ballot question for voters to indicate how the $55 million for the air rights purchase should be allocated. If approved, the first $15 million would be used to help replenish the reserve fund which the City has to dip into because of reduced revenue as a result of the pandemic. The additional $40 million would go towards resiliency and sustainability initiatives; affordable, workforce or teacher housing; and elderly services with each bucket being guaranteed at least $5 million, if voters agree.
If approved, the closing date on the sale of the air rights will be on or before March 15, 2021. A total of $15 million will be paid in three installments prior to September 1, 2022 with the remaining $40 million due on the date on which all of the Construction Commencement Conditions have been satisfied.
The project must go through Planning Board and Design Review Board processes following voter approval. Target date for project approvals is two years from effective date (following the election) and the target date for commencement of construction is 4 years from effective date with the outside date set at 8 years.
The Commission memorandum which compares the current marina lease and initial term sheet with the final agreement along with all supporting documents can be found here.
Rendering: Bjarke Ingels Group (BIG)