Chair Seiler confirmed each member of the Board received an email from CBRE concerning this item.
Commissioner Trantalis stated he was uncomfortable with the terms of the Lease Agreement (Lease), including the abatement of rent during the first three years. Executive Director Feldman explained this item is the CRA's Joinder and Consent to the Lease, stating the only item the CRA is paying for is the construction trailer and has nothing to do with the parking garage that is relocating to where the Marine Services Center is currently located.
In response to Commissioner Trantalis's request to explain the Lease arrangement for the first three years, Executive Director Feldman explained the way the Request for Proposal was structured, Las Olas SMI, LLC (Suntex) payment of rent would be an average of the first ten years equal to the minimum rent. Over the first ten-year period, the minimum rent requirement will have been reached, receiving less on the front and more on the back end. Discussions ensued on the rent amounts to be paid during in the Lease. City Auditor Herbst reviewed the lease base rent payments over the first ten years, explaining both the base rent and the percentage rent. Commissioner Rogers confirmed under the terms of the lease, Suntex is requried to negotiate an agreement with The Boat Show. City Auditor Herbst confirmed the total amount of revenue from the Lease over the first ten years should be $18,500,000. Further comments and discussions continued on the calculations of percentage rents to be received. Executive Director Feldman confirmed the City's right to have the lessee provide an independent audit of percentage rent calculations.
Commissioner Rogers asked about Section 6.4 of the Lease dealing with submerged lands and issues related to notice to the City should the subtenant default. Assistant City Attorney Lynn Solomon confirmed language could be added to the Lease to protect the City, explaining the City is the tenant under the submerged land lease and the State is not releasing the City from liability. Should there be a default, the State would send notice to the City.
Commissioner Trantalis discussed Section 8.3, Ownership of Improvements, confirming whomever does an improvement is the owner of the improvement, confirming Suntex will own the results of the dredging, i.e., the dock and upland improvements. As such, they will be responsible for the ongoing maintenance of these areas to ensure serviceability. He noted concern about the Lease being mortgageable. Ms. Solomon noted that this issue was discussed with outside counsel, stating her concern with minimizing the cure rights of the retail mortgage. Further discussions ensued on Section 8.3. Ms. Solomon referred to the bold face type on page 41 of the lease agreement in Section 14.6, confirming this language addresses and minimizes what is allowable in the Non-Disturbance Agreement with the leasehold mortgagee, noting examples and confirming there would be a contractual agreement with the leasehold mortgagee. In response to Commissioner Trantalis, Ms. Solomon confirmed the City is not subordinating the City's fee interest to any mortgage. Commissioner Rogers confirmed the Lease will be recorded. Chair Seiler said liens could not be placed. Further comments, questions discussions ensued on this topic, City ownership of the upland area, and the City's lease of the marina with the State of Florida that expires in 2021. The new marina where the dredged out parking is located will be owned by the City in fee.
Commissioner Trantalis commented on his concern about Suntex taking the Lease under a shell corporation and consequences should they default. Executive Director Feldman confirmed there will be a performance and payment bond. Commissioner Trantalis asked Executive Director Feldman to make sure the payments to the surety for the performance and payment bonds are paid in advance and the City is protected should the lessee goes into default. Assistant City Attorney Solomon referenced the members of the Suntex entity as noted on page 37, Section 14.1.
Commissioner Trantalis asked about the City's position as a sovereign entity should the lessee declare bankruptcy, i.e., would the City be a secured creditor and if a Trustee could terminate the Lease. Assistant City Attorney Solomon referred to the Bankruptcy Section of the Lease Agreement, stating the lessee must continue to maintain lease payments. Discussions continued on a worst case scenario and minimizing risk by ensuring the Surety Performance and Payment Bond Premium is paid for the first five years.
Chair Seiler asked if there were any other questions. There were none.
Commissioner Trantalis made a motion to approve this item, subject to approval by the City Commission, and was seconded by Vice Chair Roberts.