CRESPOGRAM REPORT
MAY 16, 2014
BARRED FROM NUMEROUS GOVERNMENTAL COMPUTER NETWORKS FOR TELLING THE TRUTH
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Because of the time that had passed, and the failure of the City in the intervening years to try and collect this money, the multi-year negotiations with a mediator to in an effort to try and resolve these lost revenues resulted in a 2008 negotiated agreement that Bayside would pay $500,000 in a series of $100,000 installments.  It also led to a conviction among some within the City that at the first opportunity they would try to renegotiate that lease in order to remove the language that precluded the City from receiving its fair share of the moneys generated by both the retail rents and parking revenues.


That opportunity seems to have come along with the decision by GGP to sub-lease the 2 acre portion of the property to Berkowitz for his Skyrise Tower.


From the beginning however, things did not go well. In a June 21, 2013 email from Henry Torre, the Director of Facilities Management to Matthew Beverly representing GGP, Torre responded to GGP’s proposed terms by stating that  that at least one of them was a “deal breaker.”


This was GGP’s offer:

ANOTHER BAD DEAL FOR MIAMI
THE MIAMI MARINA AT BAYSIDE COULD BECOME THE FIRST CASUALTY OF SKYRISE
A NEW PART II

From: Bogner, Stephen

Sent: Thursday, October 17, 2013 3:28 PM

To: Torre, Henry; Bustamante, Aldo

Cc: Muelhaupt, Daniel

Subject: Meeting w/ Fred Blitstein/Skyrise Miami 10/16/13

 

Yesterday Daniel and I met with Fred Blitstein and Andrew Berkowitz to discuss the group’s progress in securing marina construction permitting and formulate a timeline for construction of proposed improvements to the marina, relocation of marina facilities, customers, and vessels, and other logistical issues. Also in attendance was Bob Waddle from Marina Power, Inc., to discuss relocation of electrical services throughout the property as part of the project. Following are pertinent points discussed in yesterday’s meeting:

 

·         Fred indicated that he had secured the FDEP permit for construction, and that it had been sent to Henry some time ago. He indicated that DERM (RER) and city permits for construction were imminent. He said that there would be a public announcement regarding the project within a month, and indicated that he was looking for construction to commence in January or February, 2014. We discussed our prior commitment to the Boat Show, and Fred indicated that startup in March 2014 would not be a problem.


·         I told Fred that I was not aware that the city had formally approved of the project; Fred indicated that he has a signed agreement with GGP/Bayside in place, and indicated that he has had prior discussions with Henry and Aldo re: moving forward.


·         Fred indicated that the “Plan B’ redevelopment (city contribution of $500K toward electrical improvements, revenue sharing with SM, return on investment, etc.) was currently off the table so he elaborated on what the “no frills” reconstruction of the marina would entail (see attached plans): they would replace our 100’ floating dock w/ a fixed dock, where they would create 5 permanent slips on the north side (for 5 slips they would displace for construction); the other side would site a marina office barge, a restroom/shower barge, and a construction office barge. The total combined length of the 3 barges is 240’. The other approx.. 14 vessels that would be displaced from the slips that are in the construction zone would be absorbed into our transient slip inventory. I stressed to Fred the potential negative impact to revenues from lost slip and short-term dockage use that needed to be addressed.


·         As part of the construction of the tower, Fred stated that it would be necessary to relocate the 6 commercial vessels sited on the ICW sea wall for a period of from between 6 months to 1 year; Fred indicated that he had discussed this with Henry and that terminating License Agreements and then bringing them back after construction might be 1 option. He also offered that they might be re-sited to somewhere inside the basin during construction. He was not specific with details.


·         Fred stated that the project at this time did not contemplate construction of a parking garage in Bayfront Park; he indicated that it might be in the plans to add 1 or 2 floors to the Bayside Parking Garage. He stated that GGP/Bayside was working closely with him on all details of the project, and that they were “on board”.

 

Fred was not specific on many details as to how the relocation would impact the marina and our customers; I advised him that I needed specifics as soon as feasible in order to communicate them to you and provide feedback to the construction team.

 

I did not state this to the team in the meeting, but almost every single aspect of this project, as laid out and if carried out as proposed, would severely impact operations and revenue generation in an adverse way. I’ve previously provided my input on the proposal by Mr. Berkowitz, as well as the potential impacts on revenue that might be brought on by reconfiguration of the marina. When last we spoke of this project, you indicated that it appeared to be dead due to Bayside’s withdrawal of a proposed lease extension. I’ve not heard anything from anybody since that time, until Fred’s push for a meeting to discuss “next steps”.

 

I would appreciate your thoughts here, as I am unsure on how to proceed. I would say the SM is spending a great deal of money on permitting, design, and engineering for this project; and they are proceeding as if they have been greenlighted by the city to construct the tower and reconfigure the marina.

 

Thanks, SHB

City emails obtained from October of 2013 to April 2nd of this year produced a 10 Year Financial Summary prepared by Berkowitz’s company indicating that the Marina over a 10 year period would lose a projected total of $179,993. The first three years while construction of the Tower was going on would create $842,020 in losses.


That amount was offset by a claim that Berkowitz would spend a total of $2,433,786 on Electrical Upgrades and the construction of new Pier D.

Those projections have now changed in response to design changes, and a requested financing plan from Berkowitz that would have provided detailed information on these changes which was requested by the City Manager of Miami have yet to be submitted, thereby leaving an updated projection of permanent losses to be $305,206.


This amount is in the below email to Henry Torre from Marina Manager Stephen Bogner, after a meeting with representatives from Berkowitz’s company in March of this year

The deal to re-negotiate was believed to have died at this point.


On October 17, 2013, Stephen Bogner, Manager of the Miami Marina at Bayside sent an email to Henry Torre, who is the Director of Facilities Management revealing that the deal was back on as a result of the Skyrise project, and that that this might not necessarily be good for the Marina or the City.

1. Fixed ground rent (retail and garage) + minority fund payment: $2.25M with 5% bumps every 5 years


2. $5.0M upfront payment to the city upon financing


3. Major property renovation of $10.0M to be invested within 10 years


4. With the renovation, an extension of the ground lease through 2112 (99 years)


5. No transfer fee

This was the City’s repose as articulated by Henry Torre.

1- This past year the City received 2.3 million in base/participation rent.  As such, the City will not accept this rent schedule. 12/13/13 - They now state that this must include the new sq. ft for Skyrise.


2- The City cannot accept the 5 million.  While I agree that it is highly unlikely that the City would ever receive participation rent on the Retail, we would receive participation rent on the Garage.  If you were to place 160 million (estimate) of debt on the property, I estimate the City's share to be $7,152,000. 12/13/13 - They have bumped it to 7 million.


3-  We would need to see the project specifications and renderings for the 10 million dollar renovation.  The City had anticipated a higher commitment from GGP. Also, keep in mind that under the original 75 year lease, the original developer invested 85.5 million dollars on the development. Lastly, under a 75 year lease, we would need to add language insuring that the property be renovated/updated at periodic intervals throughout the term. 12/13/13 - they are preparing renderings

.

4- The City would only contemplate a 99 year term under a major redevelopment of the property. 12/13/13 - they agreed to only 27 more years.  Will make it a 75 year deal.


5- This is a deal breaker.  The City needs to get paid a percentage of the Gross proceeds on a sale or transfer of the lease.  As discussed previously, I am willing to consider a declining percent schedule over the term. 12/13/13 - they will only agree to a % to the City for 18 months.


GGP needs to consider that in 47 years (lease expiration), the property and improvements automatically vest to the City.  As such, the City will be holding a property, free of any encumbrances, with a possible value of several hundred millions of dollars. That kind of security is a consideration in this deal.

WHILE I CONTINUE TO WAIT FOR DOCUMENTS FROM THE BUILDING DEPARTMENT THAT ARE CURRENTLY STYMIEING MY ABILITY TO SORT OUT SEVERAL SEGMENTS OF THIS STORY,  INCLUDING THE ISSUANCE AND REMOVAL OF THE NOTICE OF UNSAFE STRUCTURE VIOLATION THAT WAS AT THE CENTER OF THE STORY THAT I DELINKED AFTER POSTING LAST FRIDAY, THIS SKYRISE/BAYSIDE MARKETPLACE STORY HAS SO MANY COMPONENTS THAT I’M STILL ABLE TO GENERATE OTHER STORIES WHILE I WAIT. BELOW IS ONE OF THOSE STORIES.

In a follow-up email Bogner clarified his statements on the D Pier by stating, “What I meant was that the vessels that will be in Pier D after it is built until construction is complete are already paying customers at the marina, who will be relocated over to Pier D – that’s not additional revenue, its just revenue from existing customers.”


THE OUTCOME FOR THE MARINA


No matter how you look at it, the direct impact of the Skyrise Tower to the Marina at Bayside Marketplace not only brings disruption and displacement over the 3 or so years of construction, but it threatens a permanent reduction in the amount of money that the Marina generates for the City’s General Fund.


Not withstanding all those rosy projections that Jeffrey Berkowitz paid the Washington Economic Group to generate in his glossy Project Proposal, the loss of almost $900,000 in just the first 3 years that his tower is being built is not the best indicator that this project will produce all those jobs, and all those tens of millions in revenue that he would hope.


But we’ll get to that soon enough.


It’s Miami, Bitches!

From the initial press release, accompanied by a collection of dramatic architectural renderings of a kind that are increasingly being referred to as architectural porn, questions have surrounded the decision of developer Jeffrey Berkowitz to build his Skyrise Observation Tower on waterfront city property currently leased to Bayside Marketplace.


Compounding the questions about the construction of this tower were the questions that soon started surfacing as information and documents about the current lease between the City and General Growth Partners (GGP), the Chicago company that purchased the original lease from the Rouse Company that build Bayside Marketplace almost 30 years ago became available.


Serious problems with the original Bayside contract and the subsequent amendments first came to light in a 2001 audit conducted by the City’s Independent Auditor that revealed that millions of dollars in rents had not been collected. 


The single biggest problem that bedevils the complicated deals involving sports stadiums and projects like Bayside at both the County and City and level has been the overall incompetence of the government attorneys involved in the drafting of these contracts. 


All of these deals, whether it was Bayside, The AAA Arena which is the subject of a Miami Herald story today by Doug Hanks, the Marlins Stadium or the recent efforts by the Dolphins to do a deal with the County is that the companies involved go out and get the best lawyers that money can buy to protect their interests, and the city and county are represented by “government lawyers” who are for the most part not as smart, or even worse, committed to getting the best deal for their clients, the taxpayers. 


That’s  indisputably evident by the results.


Bayside’s one-sided contract resulted in millions of dollars never collected by the City. Here is that audit so that you can read for yourselves just what a terrible job the City Attorney in charge overseeing this contract did.


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