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RESOLUTION NO.
A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF
THE CITY OF SOUTH MIAMI, FLORIDA, RELATING TO
LITIGATION; APPROVING A SETTLEMENT AGREEMENT
BETWEEN THE CITY AND MARK RICHMAN PROPERTIES, INC.;
PROVIDING AN EFFECTIVE DATE.
WHEREAS, Mark Richman Properties, Inc. (MRP) filed a complaint against the
city, styled Mark Richman Properties, Inc. v. City of South Miami, Case no. 03-07058 -
CA-24 (Fla. 11th Cir. Ct. 2003), alleging the breach of a contract to jointly develop a
mixed use parking garage and retail building; and
WHEREAS, the city denies the material allegations of the complaint but,
nevertheless, desires to avoid protracted and expensive litigation; and,
WHEREAS, the parties desire to settle the claims on the basis of allowing MRP
to develop the mixed use facility in a manner consistent with the terms and conditions set
forth in the Settlement Agreement.
NOW THEREFORE BE IT RESOLVED BY THE MAYOR AND CITY
COMMISSION OF THE CITY OF SOUTH MIAMI, FLORIDA;
Section 1. The settlement agreement dated February 1, 2005, which is
annexed and made a part of this resolution as App.1 is approved. The city manager is
authorized to execute the settlement agreement on behalf of the city.
Section 2. This resolution shall take effect immediately upon approval.
PASSED AND ADOPTED this day of February, 2005.
ATTEST:
CITY CLERK
READ AND APPROVED AS TO FORM:
CITY ATTORNEY
"C• "D
MAYOR
COMMISSION VOTE:
Mayor Russell:
Vice Mayor Palmer:
Commissioner Birts- Cooper:
Commissioner Sherar:
Commissioner Wiscombe:
Additions shown by underlining and deletions shown by o °r g.
Jlj
CONFIDENTIAL, PROTECTED BY THE
ATTORNEY- CLIENT WORK PRODUCT DOCTRINE
EXEMPT FROM PUBLIC RECORDS
MEMORANDUM
TO: Maria V. Davis
FROM: Luis R. Figueredo, City Attorney's Office
DATE: January 27, 2005
RE: Proposed Framework for the Settlement of the MRP Litigation and
Lease Agreement.
Mark Richman Properties initiated a civil action against the city on March 21, 2003,
for breach of contract to jointly develop a mixed use parking garage and retail building.
MRP seeks a court order to compel the city to perform under the agreement to build the
facility, or $4.5 million in damages. The risk is not insured. The case is filed in state
circuit court and is assigned to judge Michael A. Genden. The city engaged Mr. Steve
Weinger, of Kurzban, Kurzban & Weinger, to serve as special counsel.
To establish entitlement to damages, MRP must prove: (1) there was a valid
contract between the parties; (2) the city breached the contract; and (3) compensatory
damages as a result of the breach. The major component of MRP's claim for damages is
lost profits.
The contract with MRP called for the parties to jointly be responsible for
development costs associated with the project. Both the city and MRP incurred costs
associated for the design of the building. In December 2002, the city commission elected
not to proceed with the development. We are very concerned that the election to not
proceed with the project was a breach of contract. We have directed special counsel to
analyze all possible theories for denial or avoidance of the claim.
MRP seeks reimbursement of expenses and lost profits it speculates it would have
earned over a 50 -year period. MRP's principal, Mr. Richman, provided a spreadsheet on
expenses and lost profits, which has been evaluated by our firm. Certain premises are
incorrect and result in over - stating the projected profits. Lost profits may be awarded only
when they can be proved with reasonable certainty. Special counsel provided a
memorandum to the commission on the evidence necessary to establish a claim for lost
profits. In essence, MRP might be able to establish lost profits for a reasonably short
period of time. It is doubtful that MRP can establish lost profits for a 50 -year period.
At the request of the city commission, the Mayor, the city manager and our office
engaged in settlement discussions with MRP. The parties agreed to a "stand still" on the
litigation to minimize legal costs while the parties engaged in the settlement discussions.
The settlement discussions yielded a tentative settlement that generally consists of the
following terms:
(i) MRP lease agreement dated March 5, 2002 will be cancelled and each party
will release the other from any and all obligations there under and all claims
of any kind and causes of action related in any manner to the cancelled lease
agreement and/or related in any manner to the lawsuit bearing Case Number
03- 07058- CA -24.
(ii) The lawsuit will be dismissed with prejudice by MRP immediately upon the
execution of the new Lease Agreement and the issuance of the building
permit.
(iii) The city would contribute $1,000,000 towards the design and construction of
the project. The city will receive credit for project costs expended.
(iv) The project would consist of 5 levels. Approximately 24,500 square feet of
retail space and 380 parking spaces.
(v) MRP would pay the city a minimum guaranteed rent equal to $76,000 per
year and a 12.5% of the annual gross parking revenue in excess of $150,000.
(vi) MRP would assume full responsibility for repaying the entire project
financing less the city's share of $1,000,000.
(vii) The City authorizes an additional 2.5 million in project funding in addition
to the 8.5 million previously authorized to cover increased costs of
construction.
(viii) MRP guarantees the cost of construction to complete the project.
(ix) The Project debt service shall be repaid by MRP and it shall also be
guaranteed by the Lease and Mark Richman's Property.
(x) MRP is required to complete construction and obtain a temporary or
permanent certificate of occupancy no later than 18 months from the date of
issuance of the building permit. In the event MRP fails to meet this
deadline, MRP shall pay the city $26,916.00 per month until the
certificate(s) of occupancy are issued.
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(xi) NW agrees that it will not perform any site work that interferes with the
operation of the existing city parking lot prior to dismissing the lawsuit
referenced in this paragraph. The city and MRP shall join in a formal stay of
Case Number 03- 07058 -CA -24 pending the execution of the Lease
Agreement and the issuing of the building permit or the termination of this
Agreement.
The salient terms of the Lease Agreement provides as follows:
1. Building Lease. The City, as landlord, and MRP, as tenant, will enter into a
new lease agreement (the "Lease ") for the subject property.
2. Development. NW will work with the City to complete the design and
plans for the parking garage structure.
The Project will consist of a five level mixed -use retail and parking garage facility
consisting of approximately 24,500 ( + / -) square feet of retail space and approximately 380
parking spaces.
The ground level floor shall be comprised of retail space with a minimum of 11 -17
parking spaces dedicated to short-term parking.
3. Rent. MRP shall pay the City an annual retail rent payment equal to
$76,000, payable on a monthly basis equal to $6,333 per month. NW shall also pay
Additional Rent equal to 12.5% of all gross parking revenues in excess of $150,000
annually.
4. City Retail Space Rent. City retail space rent shall be one (1) dollar per
year until the completion of debt service. Commencing on the first day of the month
immediately following the month in which the Tenant makes the final debt service
payment, Tenant shall pay Landlord, on an annualized basis, eighteen (18) percent of the
gross revenue (less CAM) realized on the city owned retail space.
5. Parking and Ticket Revenue. CSM will retain a percentage of the parking
revenue as provided for in sub- paragraph 3 above, and the ticket revenue.
Included below is an example to better illustrate the revenues that may be generated
under this Settlement Proposal. Based on the financial projections prepared by Mr.
Oshikoya, below are the total revenues and obligations for year 2 (the first full year of
operation).
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YEAR 2
Retail Rent Payment $76,000.00
Gross Parking Revenue (60% usage) $33,262.50
Parking Ticket Revenue $153,000.00
TOTAL INCOME $2629262.50
(Before Debt Service and Operating Costs)
DEBT SERVICE $65,002.80
1.0 million 4.8%
28 years
Operating Costs $ 0
Lost Parking Lot and Ticket $195,000.00
Revenue Currently Generated
TOTAL $2609002.80
CSM would receive approximately $2,559.70 in additional revenue during the second year
(the first year of operation).
6. MRP. MRP's responsibility for repaying 100% of project financing (10.5
million less the City's initial contribution of $1,000,000) includes MRP's existing
obligation to pay the debt service on the $2.5 million dollars already advanced. MRP's
annual payment amortized over 30 years at 4.8% will equal $603,971.45.
MRP retail rental revenues should equal $584,000.00 in year 2. MRP's parking
revenues are estimated to equal $491,400.00. MRP advises that the retail and parking
garage maintenance and operating expenses are estimated to be $200,000 per year.
7. Transfer Fee. In the event the city approves a transfer of the lease, upon
MRP's transfer of its leasehold interest in the Project, MRP shall pay the city a transfer
fee. The transfer fee shall be calculated as follows: if the net profits resulting from the
transfer equal or are less than $1,400,000, the transfer fee paid to the city shall equal 18%
of the net profits realized from the transfer of the leasehold. If the net profit from the
transfer exceeds $1,400,000 the transfer fee shall be $252,000 plus 20% of the amount by
which the net profit exceeds $1,400,000. The net profits from the transfer of the leasehold
shall be determined under Generally Accepted Accounting Principles (GAAP).
8. Facility Design. The City Manager and MRP shall agree on the conceptual
design. The design may include an arcade and other design elements to attract pedestrian
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traffic. The retail space will feature restaurants to further promote pedestrian traffic and
garage usage. MRP is under no responsibility to incorporate any design element which
causes NW's share of construction costs to exceed $ 7.5 million.
9. Term. The initial term of the Lease will be 50 years.
10. Financing. Additional financing will be required to complete the
construction of the facility and the City agrees to authorize up to an additional $2.5 million
over and above the $8.5 million in project financing approved by the commission.
11. Ownership of the Parking Structure. The City will own the parking
structure (including the air space over MRP's building).
12. Holiday Season Construction. MRP will use best efforts to minimize
impacts of construction during the holiday season.
13. Valet Parking. MRP shall apply for and obtain valet parking authorization
to operate two valet parking zones.
14. Repair and Maintenance. MRP shall repair and maintain the parking
structure.
15. Right to Transfer Leasehold. MRP or any Successor Tenant may sell,
assign or convey their leasehold interest if the City Commission is satisfied after its due
diligence that the proposed successor has the financial strength, experience, capability and
moral character to comply with the lease and the approval of the assignment is conducted
in accordance with the city charter.
16. Insurance. The insurance companies providing insurance coverage shall
have a best rating of B+ or equivalent. MRP shall at its sole cost maintain the following
coverage:
Commercial General Liability
Physical Property Damage Insurance
Builder's Risk
Two million per occurrence; Five million
in the Aggregate
100% replacement cost
(during construction) - one hundred
percent (100 %) replacement value
17. Security. MRP shall provide the City with a payment and performance
bond with a good and sufficient surety, naming the City as an obligee and a commercially
acceptable form.
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18. Signage. Signage on the facility shall comply with the applicable codes of
the City and any other jurisdiction having authority.
19. Flat Rate Parking. MRP shall be authorized to charge a flat parking rate
from 5 p.m. to 2 a.m. MRP shall authorize an automated ticketing system to provide the
City with a reliable mechanism for confirming and auditing flat rate parking revenues.
20. Dismissal of Lawsuit. MRP shall dismiss his lawsuit against the City upon
the execution of the Lease Agreement and the issuance of the building permit.
21. Work Force:In an effort to enhance job opportunities for local citizens,
MRP agrees to give a preference to job applicants residing in South Miami. In order to
maximize the pool of applicants from South Miami, the MRP has agreed to send notices to
the Community Redevelopment Agency Director of the City of South Miami, or a
substitute designee by the City Manager, regarding employment opportunities related to
any (1) construction work on the Property, (2) temporary or permanent maintenance work
on the Property, or (3) proposals for leasing of retail space or employment opportunities
associated with retail space located on the Property. MRP has also agreed to impose
similar requirements in its agreements with subtenants.
22. Hours of Operation for Retail Establishments. MRP shall require all
retail subtenants (excluding restaurants) to remain open from until 9 A.M. until 8 P.M.
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