|By Douglas Hanks III, The Miami Herald|
Knight Ridder/Tribune Business News
July 28, 2004 - The Loews hotel plans to pay $28 million to buy out Miami Beach's share in the partnership that built the oceanfront resort six years ago, a venture that cost the city nearly $60 million, city officials said Tuesday.
The hotel's 1996 lease with the city sets a value of $24 million for the city-owned land, based on the appreciation schedule written into the deal. The lease's pricing formula would add $4 million to the purchase price this year, based on the hotel's profit.
The price becomes available to Loews on Dec. 1 and represents a deep discount for one of the region's choicest pieces of real estate, at 16th Street and Collins Avenue. Property-tax records show the hotel valued at more than $90 million.
But city officials note that the steep appreciation occurred, in large part, thanks to the Loews venture. It was the first large hotel to go up in Miami Beach in 30 years and has been credited with helping to launch a building boom of resort properties that lured the Four Seasons, Ritz-Carlton and other marquee chains to the area.
"There's a huge economic stimulus with this project. It was an amazing deal," said Patricia Walker, Miami Beach finance director.
She estimated that the Loews has paid about $23 million in taxes and rent to the city since the hotel's 1998 opening.
Miami Beach paid $21.7 million to buy the Loews site and spent another $38 million inside and outside the new hotel, sprucing up the grounds, the ballroom and other common areas. The Beach had been struggling to rent out its convention center because there was no nearby hotel capable of housing large business groups.
The 790-room Loews Miami Beach and, soon after that, the 417-room Royal Palm Crowne Plaza Resort were the two subsidized hotels designed to ease the Beach's conventioneer squeeze. Both projects drew criticism for funding private ventures with public dollars -- and Loews' decision to exercise its purchase option is bound to revive questions about the deals.
"You'll have people tell you it was worth it as a stimulant for tourism, for other hotels opening in the area," Miami Beach Mayor David Dermer said. Others, he said, will make the case that "you had one of the prime pieces of land on the Eastern Seaboard" and that hotels "were lining up to do it."
Miami Beach funded the land purchase with $25 million in bonds, and 10 years after the bonds were issued, Loews had the option of paying market price for the city land. After that, the $24 million price for the property kicked in. The 10-year mark arrives Dec. 1, and the buyout deal would close Dec. 2.
The Royal Palm also has a buyout option, but developer R. Donahue Peebles complained Tuesday that he was required to pay back all of the $10 million the city invested in the Royal Palm.
"The city did the right thing with the Loews deal," Peebles said of the Miami Beach subsidy. "They just didn't treat us equally."
Miami Beach could use the bulk of the $28 million from Loews to pay off its debt on the bonds, which amounts to about $19.8 million, or it could continue paying about $1.8 million a year in loan payments on the bonds and spend the $28 million on other things, Walker said.
The buyout will end the Loews' rent payments to the city, revenue based on profit and that hit a high-water mark last year of $2.3 million.
City Commissioner Jose Smith, who was not in office when the original lease was negotiated, said he saw the Loews venture as a stimulus, not a revenue source.
"While you can wonder about the specifics of the Loews deal itself, what was it the city was trying to accomplish 10 years ago?" he asked. "It was an economic deal."
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