Summary of Pompano Pier Development Agreement Provisions for January 8, 2013 Commission Meeting

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1 Summary of Pompano Pier Development Agreement Provisions for January 8, 2013 Commission Meeting The City of Pompano Beach is entering into a Development Agreement with Pompano Pier Associates, LLC ( Developer ) for the development of the approximately 6 acre parcel that currently includes the existing parking lot between NE 2 nd Street and NE 3 rd Street, the existing concession stand, a lift station, fire station, library, and the portion of the beach lying west of the Erosion Control Line (collectively, the Property ). The Property will be developed with a mix of restaurants and retail, in accordance with a conceptual site plan ( Site Plan ) attached as an exhibit to the Development Agreement. The Developer will develop the Property in phases over a period of approximately six years. Because of the constraints of Section 250 of the City Charter, the Developer cannot do one ground lease for the entire site. Instead, the Developer will enter into seven separate Parcel Ground Leases, one for each of the building sites shown on the Site Plan. The Parcel Ground Leases will each have a term of 50 years and will be identical in form, with the only significant differences being the legal descriptions of the Parcels (to be created by the Developer), the square footage to be developed, and the minimum and percentage rent amounts. The key elements of the Development Agreement and the form of Parcel Ground Lease are as follows: Phases of Development/ Parcel Ground Leases Parcel E the renovation of the existing concession stand. City will continue to maintain the restrooms, but Developer will provide the utility service. o Completion no later than March 2015 o Minimum Rent - $12,000 per year, payable quarterly in advance beginning 90 days after issuance of certificate of occupancy o Percentage rent of 1.25% of annual Gross Revenue in excess of $960,000. o Minimum cost of renovations to existing improvements $250,000. o Decorative Arch to be constructed as part of Parcel E Parcels R1, R2 and R3 approximately 7,500 square feet of restaurant and/or retail each o Completion no later than April 2016, April 2017, and April o Minimum rent per parcel - $60,000 per year, payable quarterly in advance beginning 90 days after issuance of a certificate of occupancy o Percentage rent per parcel % of annual Gross Revenue in excess of $4,800,000. Parcel R4 approximately 10,000 square feet of restaurant and/or retail o Completion no later than April o Minimum rent - $60,000 per year, payable quarterly in advance beginning 90 days after issuance of a certificate of occupancy. o Percentage rent 1.25% of annual Gross Revenue in excess of $4,800,000. 1

2 o A covered structure with seating that may be used as a bus shelter ( Pavilion ) and a paved open area to be used as an open-air market and plaza ( Marketplace ) to be constructed as part of Parcel R4. Parcel R5 - approximately 10,000 square feet of restaurant and/or retail. If Developer is able to secure a hotel use, not to exceed five floors and 150 rooms, Developer will need City Commission approval. o Completion no later than April o Minimum rent - $60,000 per year, payable quarterly in advance beginning 90 days after issuance of a certificate of occupancy. o Percentage rent 1.25% of annual Gross Revenue in excess of $4,800,000. o A grassed area to be used for weddings and other activities ( Ceremonial Garden ) will be included in Parcel R5 if it is developed as a hotel. R Parcels Generally o Parcels R1, R2 R3, R4 and R5 can be developed in any order. o Pier Street Extension must be completed prior to issuance of certificate of occupancy for the third of Parcels R1, R2 R3, R4 or R5 to be developed. Parcel C - approximately 6000 square feet of retail or café use. Parcel is located east of the Coastal Construction Line and will take additional time for permitting. o Completion no later than July o Minimum rent - $30,000 per year, payable quarterly in advance beginning 90 days after issuance of a certificate of occupancy o Percentage rent 1.25% of annual Gross Revenue of Parcel C in excess of $2,400,000. o If Parcel C can be developed with an independent, fully-enclosed, air conditioned restaurant similar in size, scale and construction to the Improvements on Parcel R1, R2 or R3, minimum rent will be $60,000 per year payable quarterly in advance beginning 90 days after issuance of a certificate of occupancy, and percentage rent will be 1.25% of annual Gross Revenue in excess of $4,800,000. Rent Increases Beginning in the 6 th year of each lease term, and every 5 years thereafter, minimum rent and the percentage rent threshold will increase by 7.5%. Conditions Precedent to Development Inspection Period. Developer has a period of 90 days after the Development Agreement is signed to investigate the condition of the Property (including title). If Developer determines that the Property is not suitable for the development of the project or that title to the Property is not acceptable, Developer has the right to terminate the Agreement. Lift Station and Fire Station. City to demolish the existing lift station and fire station by the later of December 31, 2013, or 30 days after the Developer submits a building permit application for any one of Parcels R1, R2, R3 or R4. 2

3 Library. Relocation of the existing library by June 30, If City wants Developer to demolish the library, City must notify Developer by March 30, Zoning. City to seek rezoning of Property by March 30, 2014 to permit the development of the Property for hotel uses. City s Failure to Fulfill Obligations. If City fails to demolish lift station and fire station and relocate the library by the stated deadlines, with a right to extend the deadlines for a reasonable period of time, either party can terminate the Agreement, and City will reimburse Developer for up to $150,000 of Developer s documented out-of-pocket development costs for which there is a physical work product. City s Obligations. Pier Structure. If the Pier is damaged or destroyed, City must repair or rebuild within three years of closing. If City fails to rebuild on time, Developer s minimum rent will be reduced by 25% until reopening of the Pier if Developer can demonstrate that its Gross Revenue has declined by 20% or more as a result of the Pier closing. Renaming of NE 2 nd Street. City to consider renaming the section of NE 2nd Street between A1A and Riverside Drive as Pier Street as soon as Developer completes the construction of the Pier Street Extension. Dock Space. City to apply for permits to construct dock space at Intracoastal Park within 30 days after Developer commences construction on any one of Parcels R1, R2, R3, R4 or R5. If City is obtains permits, City to construct the dock space at City s cost within one year after permitting. Developer s Obligations. Pier Street Extension. Developer must construct the Pier Street Extension (shown on the Conceptual Site Plan) prior to receiving a certificate of occupancy for the third R Parcel to be developed. Site Maintenance. Upon execution of the first Parcel Ground Lease, Developer to maintain the entire site in good, clean and safe condition, and comply with all governmental requirements. Beachfront Concessions Non-Exclusive License. Operator will have a non-exclusive license to enter into concession agreements for the Beachfront Area. The Beachfront Area includes land located east of Pompano Beach Boulevard and west of the Erosion Control Line, running 1800 feet north of NE 1 st Street. Operator cannot compete with the existing beach chair concessionaire. Percentage Rent. If Developer is receiving Percentage Rent from a concession, Developer will pay City 50% of the Percentage Rent received by Developer. Fixed Rent. If Developer is receiving a fixed rent or collecting any fees or charges under a concession or use agreement, or both, City will receive 50% of the fixed rent, fees, and charges received by Developer. Payments to City. Developer will pay concession rent to City quarterly. 3

4 Developer Right of First Refusal. If City desires to enter into a concession agreement in the Beachfront Area, Developer has right of first refusal to provide the concession use (whether a service, food, or goods) in the Beachfront Area on the same (or better) terms proposed by the third party. City Concessions. If City retains a concessionaire, City keeps 100 % of revenues. City will not directly compete with existing or proposed uses of the Parcels. Gross Revenue Reporting and Recordkeeping Both the Development Agreement and the form of Parcel Ground Lease contain detailed requirements pertaining to documentation to be submitted or available for review, and for record retention. City has a continuing right to audit all records of Developer, the Parcel Tenant under a Parcel Ground Lease and any concessionaire. Parking and Parking Garage Public Parking. All parking to be public. Rates. City will set all parking rates other than valet rates, but parking rates may not be less than the market rate for parking in comparable areas of Broward County, Florida. Enforcement. City will enforce all parking requirements (except for valet spaces) and will receive all parking ticket revenues. Maintenance. City will be responsible for maintaining, repairing and replacing all parking meters. The party receiving the parking revenue from specified parking areas will be responsible for maintaining the parking improvements in those parking areas. Developer will maintain all parking improvements after construction of the Pier Street Extension. Parking Revenues. After the Developer has broken ground for vertical construction on the first of Parcels R1, R2, or R3, parking revenue will be shared by City and Developer. City will physically collect the parking revenue, and after deducting a 15% Parking Management Fee, the parking revenue will be allocated between City and Developer according to a formula which changes over time during the term of the Agreement. Garage. Developer has the right to build a public parking garage on Parcel R4, but if Developer does not want to build, and City wants a parking garage, City will have the right to build it, and the garage portion of Parcel R4 will be removed from the Parcel R4 Ground Lease. Whoever builds the parking garage will be entitled to the garage revenues, but if Developer builds it, City will receive its 15% Parking Management Fee unless the garage is managed by a third party. If City builds the garage, 100 spaces will be leased to the Developer for valet spaces at a rate not to exceed the lowest rate then being charged by City for the lease of parking spaces to private users at Oceanside Parking Lot. Garage Required for Hotel. If a hotel is developed on Parcel R5, the parking garage must be built. City s Right to Use Portion of Garage. If the Developer builds the garage, City will at all times have the right to use a portion of the garage for civic purposes (for example, as a welcome center or information center) on terms and conditions mutually agreed upon by the parties prior to the construction of the garage. 4

5 Transfers Developer (and the Tenants of the respective Parcel Ground Leases) cannot transfer their interests to an unrelated third party unless the transferee is an Acceptable Transferee approved by the City. Default Upon failure to comply with Agreement terms, and after notice and an opportunity to cure (if applicable), each party is entitled to all legal and equitable remedies. However, a default by Developer will not cause a termination of a Parcel Ground Lease upon which construction has been commenced or completed if the Parcel is subject to a leasehold mortgage. Developer/Tenant Obligations in Parcel Ground Leases Evidence of Funding Sources. Prior to submitting an application for a building permit, Tenant must provide to City evidence satisfactory to City, in City s sole discretion, of the source of funds for the construction of the Improvements. The source of funds may be loan funds, equity investment, or a combination of both, as long as the sources of funds total 100% of the Improvement cost. Guaranty of Completion. Prior to City s issuance of a building permit for any improvement, Tenant must provide to City a form of security (performance bond, personal guaranty, letter of credit) for Tenant s obligation to complete construction of the Improvement. The security must be satisfactory to the City in its sole discretion. Parcel Improvement Cost. Tenant must expend a minimum of 50% of the Improvement cost during the first two years of the lease term, and the balance of the Improvement cost during the second two years of the lease term, as required by the City Charter. Reporting of Parcel Improvement. Beginning after each Lease Commencement Date, and until completion of the Improvements, Tenant will be required to submit to the City an Improvement Cost Report for each Parcel on or before January 30 and July 30 of each calendar year. Each Improvement Cost Report must include the cost of Improvements (or portions of Improvements) completed to date; a description of Improvements completed to date; the estimated or actual completion date for each Improvement; and copies of cancelled checks, bank statements, wire transfers or other documentation evidencing payment of the Improvement Costs shown in the Improvement Cost Report. 5