Signing Margaritaville Development Agreement and Ground Lease, and related documents
on February 9, 2011

Margaritaville Land Lease (and related documents) approved 7-0 by Hollywood City Commission on January 19, 2011. Minutes to follow.

Click here to view City Attorney's video presentation which summarizes the deal

Click here for the Sun Sentinel article (January 19, 2011)

Click here for a Margaritaville Fact Sheet

Click here for Margaritaville Renderings

In Summer, 2009, the Hollywood City Commission authorized the issuance of a two-stage competitive Request for Proposal process for the private redevelopment of a six acre, City-owned, beachfront property between Johnson Street and Michigan Avenue on AIA. As a result of this process, the City Commission authorized City staff to commence negotiations with Margaritaville Hollywood Beach Resort for a 350 room hotel and 1056 space parking garage. A Memorandum of Understanding was executed in July, 2010 which outlined business terms and provided the framework for a 99 year lease agreement between the City of Hollywood and the Developer. Click here for a copy of the Memorandum of Understanding and a copy of a consultant report which summarized the business deal.

As negotiations moved forward, the Developer applied for Site plan approval. The project was reviewed by the City Manager's Roundtable, TAC, Development Review Board, and the Planning and Zoning Board. The project received site plan approval and an allocation of 39 additional bonus hotel density rooms from the "Hollywood Beach Hotel Room Pool" pursuant to the City's Comprehensive Plan at the December 15, 2010 City Commission meeting. Click here for the Site Plan

The long-awaited Development Agreement and Ground Lease has been drafted and will be presented to the City Commission/CRA Board for consideration at a special joint meeting on Wednesday, January 19, 2011 at 2 pm in the City Commission Chambers (room 219). Included in the Ground Lease is a Beach Services Agreement (Exhibit F) to allow the hotel to rent cabanas and chairs to hotel guests and the public on the beach between Johnson Street and Michigan and a framework for a Community Development District (CDD) to fund and operate the public parking in the parking garage. Several companion documents will be presented including a $5 million CRA Funding Agreement to transform the public rights of way and Bandshell area immediately north of the project area, a $10 million CRA Loan Agreement for a ten year period at an interest rate of 5 per cent for furniture, fixtures, and equipment (FFE), along with the requisite Promissory Note and Leasehold Mortgage. In addition, a 5 year License agreement for the programming and management of the Johnson Street right of way and Band Shell area will be presented along with a separate License Agreement for the city-owned Intracoastal property for boat access and management.

Click on the links below to look at the executed documents:

1. Development Agreement & Ground Lease

2. Agreement for Beach Services

3. License Agreement Johnson Street

4. License Agreement Intracoastal Parcel

5. CRA Funding Agreement

6. Loan Agreement
    

Summary Highlights of the proposed 99 year Development Agreement and Ground Lease between Margaritaville Hollywood Beach Resort, LLC and City of Hollywood

Note: There will be several companion documents including the CRA Loan Document for $10 million for FFE (ten years for ten million dollars at 5 per cent interest), a 5 year Johnson Street License Agreement, an Intracoastal License Agreement, and a Beach Services Agreement (which will be listed as an Exhibit F in the Development Agreement and Ground Lease).

Recitals - Provides a history of the solicitation process, including reference to executed Memorandum of Understanding which outlined the business terms and established a framework for the lease agreement.

Article I: Exhibits and Definitions

Key Definitions

Acceptable Owner - found in Exhibit A, lists qualifications and conditions for Acceptable (future) Owner of the lease

CRA Loan - construction loan made by CRA to Developer. (Loan is a $10 million loan at 5% due in 10 years with monies to be used for Furniture, Fixtures and Equipment)

Developer Investment- you will recall they had a minimum $10 million equity requirement. We are allowing up to $3million of the requirement to be actual construction or management fees paid to Developer or Affiliates

EB-5 Contributions-a funding source ($75 million) thru the Immigration Act of 1990 allowing someone to secure a green card by investing $500,000 in an economic development project that would generate new jobs. Must meet specific guidelines. Click here for more information on EB-5.

Hotel - refers to Margaritaville Hollywood Beach Resort Hotel consisting of approx 350 guest rooms, 35,000 sq ft of convention space, 30,000 sq ft of restaurant/bar, 6,500 sq ft of retail, a boat landing, and other amenities and related improvements. We tie improvements to the approved set of plans.

Hotel Standards- means the standards set forth in Exhibit B-Hotel has to meet and maintain the AAA standards of a 4 diamond hotel (they don't actually have to receive the designation, just meet it-if we disagree there is a procedure which ultimately can require them to secure and maintain the actual rating.)

Market Area- for this lease we look at market area as 10 miles for restaurants so a Margaritaville café or bar cannot be closer than 10 miles and a Mville hotel cannot be in Palm Beach, Broward or Dade for 5 years after opening date and not in Broward or Dade for the balance of the term except for the "carve out" provision allowing one non-oceanfront existing pari-mutuel in Broward.

Minimum Rent Commencement Date-New rent commencement date is at Certificate of Occupancy (expected March 2014). However, upon lease execution developer must reimburse the City for 3rd consultant expenses up to $300,000. A prepossession payment will commence in July 2011 at $20 K per month. Same payment continues at possession (and property taxes begin). Payments continue through construction. At Certificate of Occupancy (expected March 2014), an annual rent payment of $500,000 begins with 3% increases. Note: Even though the Hotel Parcel is public property, property taxes will be charged with most going to the Beach CRA.

Parking Garage- 1056 parking spaces. 600 are public. Lease has parking standards for public spaces which CDD will manage but Mville will manage their own 456 spaces which will be valet-hotel guests and public can valet too as well as employee parking. Their parking is on floors 3 and 8, the public parking is 4, 5, 6, and 7. In the CDD document we have to (reluctantly) allow a hotel guest to self park in the public portion but they pay the hourly rate, not the valet rate so it is more expensive given their length of stay. As noted in the CDD document, the 600 spaces are for short term visitors, not permit or resident parking and must be priced comparable to other publicly available parking on the barrier island (whether city controlled or privately managed).

Definitions also include different types of rent-guaranteed base rent, participation rent, and transaction rent (section 2.4)

Section 1.1 Exhibits

Exhibits

Exhibit A Acceptable Owner Definition - standards required for an "acceptable owner" including those with as little as 10 percent equity interest in the project/experience, reputation, financial resources, etc. Even if a prospective owner meets all the criteria stipulated they still need to be approved by the City. Criteria must continue to be satisfied throughout the lease.

Exhibit B Hotel Standards - must meet and maintain the standards of a AAA Diamond Rating and if we prove they are not they have to apply, receive, and maintain the designation. We no longer have the Competitive Set provisions-the standard is the 4 Diamond.

Exhibit C-1 Budgeted Improvement Costs - needs to be completed but it is how much Margaritaville will spend on the project (including EB 5 and CDD-around $127.5million) Note it does not include the CRA Public Improvements

Exhibit C-2 CRA Funding Agreement - $5 million for Johnson and Michigan (normal streetscape and street end improvements have been running $2million but this also does all of Johnson Street, not just sidewalks, and renovates existing bandshell so we aren't really "giving them" much-just the management of the construction. They will also have to maintain these improvements (above the CRA baseline) and do programming thru the license agreement which is a separate document.

Exhibit D Operating Agreement (between developer ownership-Margaritaville - 50% and Lojeta/Tabatchnick 50%, not us)

Exhibit E-1 Legal Description of the Hotel Parcel

Exhibit E-2 Legal Description of Developer Initial Parcel-this is a small sliver of land immediately leased to the Developer so it can apply to establish the CDD district. Anything goes contrary to plan, it immediately reverts back to us.

Exhibit F Agreement for Beach Services - allows Developer to rent cabanas and chairs and sell other products (non-consumable) to hotel guests and the public on the Beach between the Johnson Street and Michigan Street lifeguard stands-approval runs with the lease as long as chairs and cabanas are allowed on the beach.

Exhibit G Parking Garage Standards

Exhibit H Site Plan (which was approved on Dec 15, 2010)

Exhibit I Schedule of Performance (timetable for development)

Exhibit J Transfers (of Ownership Interests in Developer)

Exhibit K CDD Financing Structure. City Manager sits on the board (or designee). City has to guarantee to pay debt service of CDD garage bonds but if we are in that scenario we also owning the project. (Lender will step in to prevent this-viewed at low risk) The CDD is for 30 years and then the garage becomes the City of Hollywood's and is leased to Mville. The CDD Board is an independent board-needs to be this to meet IRS code. Note: The Developer's original proposal asked for a $31 million CRA incentive to pay for the Public Parking component. Because the City/CRA did not want to agree to this, an independent CDD is being formed to pay for the construction of the public spaces through a hotel assessment fee and parking revenues collected on site.

Exhibit L CDD Easement Form

Exhibit M Release of CDD Easement Form

Exhibit N CDD Special Warranty Deed Form

Exhibit O Legal Description of Intracoastal Parcel

Exhibit P Legal Description of Johnson Street Parcel

Article II - General Terms of the Lease.

This is a 99 year lease agreement. Several conditions must be met before possession is allowed to occur including: CDD has had to be formed, Developer has all governmental approvals, Developer has entered in to a general contract for construction, Developer has obtained a payment and performance bond insuring project will be built as approved, 100% of EB 5 money is in place or Developer has bridge financing. Developer has to reimburse third party consultant costs to CRA (CRA fronted the money) at lease execution Outside possession date is Oct 1, 2011. City will continue to operate garage and open space until possession (and once possession occurs they have to commence construction in 30 days)

Section 2.2 provides Use Restrictions-they can only build what they say they are going to build (including no timeshare or condo).

Rent Structure (At lease signing, Developer Reimburses third party payments up to $300,000 to CRA, pre possession rent begins at $20,000/month, construction rent continues at $20,000/month, at 27 months or upon CO whichever is earlier, rent increases to $500,000 with 3% annual increases, Participation rent does not begin until 11th rental year. Begins at 1% and increases (.1%) until 4 % and stays at 4% thereafter, Transaction Rent (new owners must be approved by City) would be 7% of net sales proceeds.

Article III - Included in this section is the City's right to have a Landlord Representative at inspections, construction meetings, etc. Construction (demolition included) will take 27 months.

Article IV - Land Uses. Developer can only do what the lease says they can do. Requires City consent if want to change (another section specifically prohibits time share or condos.)

Article V Assignments and Transfers. City is entering in to this lease agreement with the Developer because of the specific experience, qualifications, and reputation of the developer. No Transfer without City approval and then only after only after Opening date. (Certain provisions have to be allowed if the Lender has to take the property due to foreclosure.)

Article VI - Mortgage Financing; Rights of Mortgagee and Developer (includes rights of Lender in the event of default); CDD Formation

Article VII - Remedies; Events of Default (Failure to pay, failure to perform, bankruptcy, other defaults, Defaults by City, Right to Cure, etc

Article VIII - Protection Against Mechanics' Liens and Other Claims; Indemnification; Environmental Matters

Article IX - Insurance General Insurance, Required Coverages, (the City's Insurance Consultant were quite involved with this language), Insurance Proceeds, etc

Article X -- Condemnation (both partial and complete, restoration after condemnation

Article XI -- Quiet Enjoyment and Ownership of Improvements. During lease, improvements are the developers (provided no default) after lease all improvements shall be delivered to the City free and clear of any liens

Article XII - Maintenance and Management- high standards for hotel and parking garage are of critical concern to the City. A change in hotel management or hotel flag must be approved by the city-criteria established. Non-compete clause for 10 mile distance for a Margaritaville Restaurant or Café (Bal Harbor is 10 miles) and three county area for first 5 years then Palm Beach is allowed but prohibition against Broward and Dade remain except for the existing pari-mutuel exemption (carve out).

Article XIII - Miscellaneous Provisions

Background

Last summer the City of Hollywood issued a two-stage Request for Proposals (RFP) for the redevelopment of the nearly 6 acres of city-owned land located at Johnson Street and A1A on Hollywood Beach. This RFP was developed after numerous community meetings to gather input from Hollywood residents and business owners about their ideas and priorities for this important beachfront site. Click here for a copy of the RFP offering, including exhibits and addenda.

The City's RFP announcement was approved by the City Commission prior to dissemination and included a statement of desired goals, an explanation of the proposed process and timelines, and detailed site information. Once the RFP was issued, a Cone of Silence became in effect preventing potential bidders from speaking with members of the City Commission or any RFP-related evaluation committee. A suggested, but not mandatory, site tour and preproposal conference was held prior to the RFP due date to allow potential teams to present questions to staff.

Stage I of the two stage process was a qualifications round in which developers submitted proposed team credentials, described previous (and hopefully relevant) projects, and provided a brief discussion (two pages, no elevations) of the proposed concept.

Generally speaking, Stage 1 required respondents to provide:

1. detailed qualifications (development track record of the entire development team proposed)

2. descriptions of representative development projects by the team (individually and collectively)

3. demonstration of ability to secure financing of large scale projects, and

4. preliminary program concept (mix, character and sizing of uses and phasing).

Four proposals were submitted by the September 30, 2009 (2:00 pm) deadline. They were submitted by Allied Capital & Development of South Florida, Margaritaville, Planet Hollywood, and Shefaor Development. Click here to view the developer credentials and the evaluation process.

After considering the findings of the Staff Evaluation Committee and consultant findings, the City Commission allowed all four groups to compete in the Stage II round by the City Commission. Click here for Stage II submittals.

Stage II submittals required conceptual site plans and design elevations, market analyses, financial proposals and other detailed considerations that are costly and cumbersome to prepare.

The Stage ll RFP responses, due Feb 18, 2010 required:

1. preliminary design concept (preliminary site plan, massing, height, physical character)

2. preliminary feasibility and marketing analyses and financing plan;

3. preliminary environmental impact and traffic analysis;

4. preliminary proposed terms for lease of the site, and

5. preliminary project implementation schedule.

Click here to view the requirements for Stage II along with an addendum. Two development teams submitted proposals: Margaritaville at Hollywood Beach and Ocean Resort and Village by Planet Hollywood. Click here to view copies of the submitted proposals along with City Reports, Analyses, and Evaluations.

On March 4th, the Stage II Johnson Street Evaluation Committee convened to hear developer presentations and listen to the findings of three expert consultants brought in by the City to analyze both proposals. After deliberations, each member of the evaluation committee scored the presentations based on the criteria provided in the RFP. Click here to view the Stage II Staff deliberations and evaluation committee scores. As a result of this information, Margaritaville received the highest number of first place votes and the highest number of overall points from the Evaluation Committee.

Prior to forwarding the Staff and Consultant recommendations to the City Commission for consideration, the City asked the two development teams, Planet Hollywood and Margaritaville, to take part in a Community Forum on Monday March 16th at 6:00 p.m. at Hollywood City Hall, Room 219, 2600 Hollywood Boulevard. The purpose of the forum was to provide the public with an opportunity to hear about and see both development proposals and ask questions about each team's project plans. Click here to view the Stage II Community Forum.

The evaluation committee's recommendation, consultant reports and community feedback were presented at the April 7th Special Joint City Commission/CRA meeting. During that meeting, the City Commission discussed the proposals and took additional public comment. At the conclusion of the meeting, the City Commission/CRA voted 7-0 to authorize staff to commence preliminary negotiations with the highest ranked firm (Margaritaville) for a 90 day period. Click here to view the proceedings or for copies of the agenda packet, as presented.

Memorandum of Understanding (MOU) Approved

On Wednesday, July 7, 2010, the Hollywood City Commission (acting also in its capacity as the Hollywood CRA Board) unanimously approved the execution of a Memorandum of Understanding between the City of Hollywood, the Hollywood Community Redevelopment Agency and Margaritaville Resort At Hollywood Beach, LLC. The Memorandum of Understanding outlined business terms for a contemplated 99 year lease agreement between the City and Margaritaville. Margaritaville was selected through a competitive RFP process. As noted in the Memorandum of Understanding, the privately developed and managed Margaritaville Resort will include 360 guest rooms, 35,000 square feet of convention space, 30,000 square feet of restaurant/bar, 6500 square feet of retail and 1056 parking spaces on a five-acre City-owned site, between Johnson Street and Michigan Street, along A1A and the award-winning Hollywood Beach Broardwalk. A boat launch is also envisioned along the Intracoastal immediately west of the project along AIA, as is a large public plaza on Johnson Street. (To view the July 7 presentation and vote, click here. For a complete copy of the materials submitted in the agenda package, including the Staff Summary/Expected Timeframes and Lease-Required Deadlines, the Memorandum of Understanding, and the detailed consultant report outlining the financial terms of the business deal, click here).