R7I - Approve Lincoln Road Improvement Agreement

Resolutions - R7 R7I

COMMISSION MEMORANDUM

RECOMMENDATION

The Administration recommends that the Mayor and City Commission (City Commission) adopt the Resolution.

BACKGROUND/HISTORY

On September 14, 2022, at the request of Commissioner Alex Fernandez, the City Commission referred a discussion item (C4 AB) to the Land Use and Sustainability Committee (LUSC), the Public Safety Neighborhood and Quality of Life Committee (PSNQLC), and the Finance and Economic Resiliency Committee (FERC), regarding the possibility enhancing the pedestrian and vehicular experience through improvements to the 100-300 blocks of Lincoln Road, with the vision of revitalizing the area.

Di Lido Beach Resort LLC, the owner of 1 Lincoln Road (Ritz-Carlton Hotel, South Beach) and EBJ Sagamore LLC, owner of 1671 Collins Avenue (Sagamore Hotel South Beach) (“Developer” or “Sponsor Affiliates”), seeing an opportunity to partner with the City toward this vision, proposed a renovation and expansion to the existing properties. As part of their redevelopment plan, the Owners proposed to design and engineer, subject to direction from and approval by the City, certain pedestrian, vehicular and other improvements within the Lincoln Road right-of-way from Washington Avenue east to the Beachwalk.

The improvements are intended to beautify and transform the 100-300 blocks of Lincoln Road into a robust pedestrian plaza (200-300 block) and to allow for a more convenient and safe connection for the public from the 100 Block of Lincoln Road to the beachwalk, including additional enhancements associated with pedestrian and vehicular entry, access, and loading for the Ritz- Carlton.

At the November 14, 2022 FERC meeting, following a presentation by the Developer, the Committee transmitted a motion favorably recommending the proposed improvements to the December 14, 2022 City Commission meeting. More specifically, the Committee recommended (1) that the Administration enter into negotiations with the Developer with regard to a Development Agreement (DA) to be approved by the City Commission at a later date, (2) that the Commission adopt a resolution supporting the closure of the 200 and 300 blocks of Lincoln Road to vehicular traffic and the partial closure of the 100 Block subject to certain conditions and approval of a traffic

study, and (3) that the Administration work with the Developer on a maintenance agreement for the maintenance of the 100 Block and the beachwalk.

At the November 18, 2022 LUSC meeting, the LUSC discussed this item and passed a motion favorably recommending the item to the City Commission. The LUSC recommended that the Administration (1) work with the Developer to finalize the traffic study and conduct the associated peer review, (2) verify the estimated construction costs, and (3) enter into negotiations with the Developer on the terms of a DA.

At the November 30, 2022 PSNQLC meeting, the PSNQLC discussed this item and passed a motion favorably recommending the item to the December 14, 2022 City Commission meeting. The PSNQLC recommended that the Administration enter into negotiations with the Developer with regard to a DA and a maintenance agreement and finalize the traffic study.

On December 14, 2022, the City Commission unanimously adopted Resolution No. 2022-32444, authorizing the Administration to engage in negotiations with the Developer in regard to a DA which would, among other terms, memorialize the framework for the Lincoln Road improvements, and further, directed the Administration to further analyze all aspects of the potential pedestrianization of the 200 and 300 blocks of Lincoln Road, between Washington Avenue and Collins Avenue and the reduction of vehicular traffic east of Collins Avenue.

On June 23, 2023, the FERC discussed the proposed improvements to the 100-300 Blocks of Lincoln Road and provided feedback as to monetary obligations and project funding sources and the parties' enduring maintenance and contractual responsibilities relative to improvements. The FERC unanimously recommended that the City Commission approve the proposed term sheet and proceed to negotiate an Improvement and Maintenance Agreement. Specifically, the Committee recommended that the City Commission (1) allocate the proposed $4 million City Contribution as part of the Fiscal Year 2024 Budget process, (2) accept the Developer's "Morris Lapidus Arch" -inspired aesthetic design feature for compliance with the City Code's Art in Public Places Program, (3) determine that the proposed Concession Agreement with Developer be coterminous with the term of the Developer's Phase 1 Project (100 block of Lincoln Road) (City Project) maintenance obligation, subject to further limitations including, but not limited to, a termination for default provision, which, if invoked by the City, would not result in termination of the Developer's maintenance obligations, and (4) determine that the term for the Developer's Phase 1 Project, maintenance obligation be limited to fifteen (15) years.

Subsequently, on June 28, 2023, the City Commission adopted Resolution No. 2023-32629 (Exhibit A), directing the Administration to negotiate an Improvement and Maintenance Agreement for the 100-300 blocks of the Lincoln Road right-of-way, consistent with the term sheet negotiated pursuant to Resolution No. 2022-32444, with the final agreement subject to the prior approval of the City Commission. The Resolution further authorized the City Manager to execute the necessary Land Use Board applications related to the proposed improvements in accordance with the concept plans attached to the term sheet.

The Developer is the fee simple owner of the northern half of the right-of-way in the 100 Block of Lincoln Road, adjacent to the Walgreens property and extending from Collins Avenue to the beachwalk. In 1999, the Developer granted the City perpetual easements over and across this property for vehicular and pedestrian access and includes a pedestrian pathway to the beach walk. The City maintains ownership of the southern half of the 100 Block.

The 100-300 blocks of Lincoln Road fall within a local historic district, therefore improvements require approval from the Historic Preservation Board (HPB). The Developer submitted two separate, but related, applications for HPB review.

The Private Project involves the redevelopment of the Ritz-Carlton and Sagamore properties which includes the construction of a new 15-story ground level tower addition behind the existing Sagamore Hotel and cantilevered over the existing Ritz-Carlton cabana building, and the construction of a 1-story rooftop addition proposed to be located on top of an existing 4-story cabana building located on the north side of Ritz-Carlton building. The project also incorporates renovation of the lobby and exterior areas including the pool deck, ground level improvements to the existing hotel entrance, arrival and driveway area, and changes to the parking garage and loading entrance.

The City Project (100 block of Lincoln Road) includes modifications to the Lincoln Road public right-of-way west of Collins Avenue and the Ritz-Carlton property as well as the beachwalk area. Specifically, the proposed plan (Exhibit B) includes the following improvements to the public portion: • Relocation and redesign of pedestrian paths and vehicular access from Collins Avenue to the beachwalk. • Installation of landscaping features along the pedestrian paths and within the median. • Installation of a "Morris Lapidus Arch"-inspired aesthetic design feature at the eastern edge of the Lincoln Road right of way. • Construction of a public green amenity at the intersection of the beach access walk and beachwalk. • The replacement of water and sewer lines and improvements to the stormwater collection system.

Contingent upon conditions precedent including but not limited to, satisfactory completion, peer review and approval of a traffic study, preparation of a Phase 2 Project Concept Plan and securing dedicated funding sources to cover all of the hard costs within 10 years of execution of the Agreement, the parties may proceed with the Phase 2 Project for the 200- 300 Blocks, which shall include:

• •

The pedestrianization of the 200-300 blocks of Lincoln Road through the removal of vehicular travel lanes, the relocation of the pedestrian access rights-of-way, alterations to the medians and incorporation of pedestrian pavement markings. Installation of landscaping features along the pedestrian path. Subject to obtaining the necessary approvals from the City and Miami-Dade County, Florida (the "County"), the installation of two (2) new bus shelters on Washington Avenue to replace the bus stops along the 300 block of Lincoln Road.

• •

The Private Project was approved by the Historic Preservation Board (HPB) in October 2023, and the City Project was approved in December 2023.

ANALYSIS

The public portion of the City Project includes the improvements for the 100 Block of Lincoln Road between Collins Avenue and the Beachwalk was estimated not to exceed $12 million. The City and the Developer agreed to cooperate in seeking funding from other agencies including, but not limited to, the State of Florida, to cover some of the costs for this project. The City applied for grant funding and was awarded a grant by the State of Florida in the amount of $4,850,000.

In August 2024, FDOT advised City staff of the approved funding in the amount of $4,850,000 which includes $4,000,000 in funding towards the City Project, and $850,000 for security bollards at locations along the Beachwalk.

The Administration and the City Attorney’s Office have prepared a Summary of the Material Terms (Exhibit C) of the negotiated draft Improvement and Maintenance Agreement (Agreement) for the City Project (Exhibit D) with the Developer.

Material terms detailed in the Agreement are summarized as follows:

Key Obligations of both Parties:

1. Parties collaborate to agree on the Final City Project Budget, not to exceed $12,000,000 (subject to increase by lesser of CPI and 3%) and CPM Schedule (Sections 4.b, 4.e and 15). 2. Funding for the City Project consists of the following (Section 9): a. $4,000,000 in funding from the State of Florida solely for payment of hard costs b. Up to $4,000,000 in funding from the City plus, if the City so elects, additional funding towards the costs of water and sewer improvements to the extent those costs exceed $1,000,000. c. Up to $4,000,000 in funding from the Developer for soft costs, permitting costs, construction administration costs and hard costs in excess of State funding and City contribution up to $4,000,000. d. Developer’s contribution will match the City’s contribution, not including any amounts in excess of $1,000,000 that the City may elect, in its sole discretion, to contribute toward the costs of water and sewer improvements. 3. Parties agree to cooperate to coordinate CPM schedule for the City Project and the schedule for the Private Project on the Di Lido Property and the Sagamore property pursuant to the Order approving the Private Project HPB application dated October 13, 2023, including improvements to improve life-safety conditions and improve general traffic circulation and congestion consistent with the City Project. (Section 15) 4. To avoid conflicting construction activity between the City Project and the Private Project, the City shall reasonably consider permitting construction vehicle access for the Private Project over and through 17th Street and/or Lincoln Road. If the City determines that construction access is best suited to Lincoln Road, the Private Project will commence construction prior to the City Project, and the Private Project shall commence not later than February 1, 2027, and construction of the City Project shall commence when the Private Project work no longer requires construction vehicles to access Lincoln Road in a manner that would negatively impact development of the City Project and not later than 90 days before issuance of a temporary certificate of occupancy for the Private Project. The Private Project construction commencement date shall be subject to extensions for up to six months, as reasonably approved by the City Manager, provided the Developer is diligently pursuing permitting and financing of construction and is further subject to tolling for a period, not to exceed two years in the aggregate, for any third party lawsuit; provided that if the lawsuit has been finally resolved (after the expiration of all appeals periods) prior to commencement of construction of the Private Project, the maximum tolling will be 180 days after final resolution of such lawsuit. (Section 15) 5. In addition, following commencement of construction of the City Project, in the event of a conflict between the City Project and the Private Project for ground level improvements to the Development Property along Lincoln Road, including redesign of existing hotel entrance, construction of new porte cochere structure and changes to parking garage and loading entrance, the City Project will have priority and Developer will be responsible for

City’s costs, including any costs of delay if applicable under any construction agreements. (Section 15)

Key Obligations of the City prior to and during construction

1. City will enter into the construction manager at risk agreement with a Guaranteed Maximum Price for the predevelopment services and construction of the City Project (the “Construction Contract”). Developer has the right to review and recommend changes. (Section 14)

Key Obligations of City after construction

1. Maintenance and repair of damaged portions of Lincoln Road vehicular travel lanes, sidewalks and pedestrian pathways (provided cost of materials is comparable to the cost City would incur to repair stamped concrete or asphalt) and monthly power washing of sidewalks on South side of the 100 block of the Lincoln Road right-of-way, the beach access pedestrian path and the Beachwalk, and maintenance of landscaping within the beachwalk. (Section 33)

Key Obligations of the Developer prior to and during construction

1. Developer will enter into design professional agreements (the “Developer Design Professional Agreements”) and cause the design development plans and construction documents, including permit plans, to be prepared. (Section 4.d) 2. Developer to deliver to the City a Guaranty made by Di Lido Beach Resort, LLC in favor of the City. (Section 6.a) 3. If Developer defaults, Developer will deliver a Letter of Credit to the City, and the City can draw on the Letter of Credit payments due from the Developer, if not timely made. (Section 6.b) 4. Within 60 days after signing, Developer shall commence design development and construction documents, including design and permit plans. 5. Developer shall submit design development and construction documents to City for approval at 50% and 100% stages of completion; City has 60 days to review documents at each stage of completion. 6. Developer has 18 months after the date of signing within which to prepare the construction documents and obtain permits for the City Project, subject to extension for force majeure, City delays in reviewing construction documents, State delays in reviewing construction documents and/or as reasonably agreed by the Parties.

Key Obligations of Developer after construction

1. Maintaining the landscaping of the City Project, west of the beachwalk, in first class condition and in compliance with all laws, including maintaining the irrigation system, annual refreshing of landscaping not to exceed $30,000 annually (subject to increase based on lesser of CPI and 3%), replacement of dead or dying landscaping and repairing any damage caused by negligence or willful misconduct of Developer or its contractors. (Section 27, 28) 2. Developer shall perform monthly power washing of North Side of the 100 block of the Lincoln Road right-of-way. (Section 27)

3. To the extent Developer selects materials for the vehicular traffic lanes, sidewalks and pedestrian pathways that are more costly to maintain than stamped concrete, Developer shall pay such increased costs. (Section 27) 4. If Developer fails to perform its maintenance obligations, City has the right to do so at Developer’s cost. (Section 32) 5. Provision of security services or devices by the Developer are not contemplated under the Agreement.

Term

1. Term commences upon signing and ends on the 15th anniversary of the later of (a) substantial completion of the City Project work and (b) the opening of the last of all Lincoln Road vehicular travel lanes, pedestrian walkways, beach access, and beachwalk improvements to pedestrian and vehicular traffic. (Section 34)

Improvements to the 200-300 Blocks of Lincoln Road (Exhibit E) are subject to the identification and allocation of dedicated funding for the related hard costs, previously estimated to be approximately $14.6 million. Contingent on the City and the Developer securing dedicated funding sources to cover all of the hard costs, within the ten (10) year period following the execution of the Agreement, the Developer will be responsible for the preparation and processing of the necessary HPB application, preparation of the design and construction documents and for funding the cost of the work of all design professionals. Subject to obtaining the State’s and County’s agreement to close 200-300 blocks to vehicular traffic, the City and Developer will enter into a separate agreement for the Phase 2 improvements.

Subsequent to the approval of the Agreement by the City Commission in July 2025, the design of the City Project will commence and is anticipated to be completed in Spring 2026, followed by permitting. Construction is anticipated to start in the Spring 2027 and substantial completion by Spring 2028. However, the commencement of construction for the City Project may be extended as a result of limited access to the Private Project improvements, construction schedule coordination and any delays resulting from third party litigation.

FISCAL IMPACT STATEMENT

The total estimated cost for the City Project is $12 million. The City’s contribution in the amount of $4 million has been appropriated in the Capital Budget. The City has received the grant agreement from FDOT in the amount of $4 million for the City Project.

Does this Ordinance require a Business Impact Estimate? (FOR ORDINANCES ONLY)

If applicable, the Business Impact Estimate (BIE) was published on: See BIE at: https://www.miamibeachfl.gov/city-hall/city-clerk/meeting-notices/

FINANCIAL INFORMATION

N/A

CONCLUSION

The Administration recommends that the City Commission approve the resolution.

Applicable Area

South Beach

Was this Agenda Item initially requested by a lobbyist which, as defined in Code Sec. 2-481, includes a principal engaged in lobbying?

If so, specify the name of lobbyist(s) and principal(s):

Michael W Larkin, Bercow Radell Fernandez Larkin & Tapanes

Department

Capital Improvement Projects

Sponsor(s)

Commissioner Alex Fernandez

Co-Sponsor(s)

Commissioner Joseph Magazine

Condensed Title

Execute Improvement & Maintenance Agmt, 100-300 Blocks of Lincoln Road. (Fernandez/Magazine) CIP

Previous Action (For City Clerk Use Only)