Clarity needed for Maritime Park leasing

  • July 31, 2015
  • /   Shannon Nickinson
  • /   community-dashboard

A rendering of the University of West Florida Center for Entrepreneurship as proposed at the Community Maritime Park.

As it seems that the University of West Florida Center For Entrepreneurship will move forward somewhere other than the Community Maritime Park, the City of Pensacola is beginning work on clarifying the leasing process for the downtown waterfront redevelopment project.

Plans for the Center, proposed as a partnership among UWF and businessman Quint Studer, are moving forward and other locations for the center are possible. The center aims to build a hub of community education, research and undergraduate instruction to grow entrepreneurship and innovative thinking in Pensacola.

It would have been built on parcel 6 of the Maritime Park, along with investments on other parcels in a conference center and a child-care facility.

None of that will happen on the park site now, as Pensacola Mayor Ashton Hayward and City Council President Andy Terhaar announced by news release that the council would not accept the leases as approved by the Community Maritime Park board.

The dissolving of the deal highlighted flaws in the process of leasing space at the park site.

Hayward did not return a message seeking his comment for this story. City public information officer Vernon Stewart said the mayor was not available this afternoon when reached by email.

Tamara Fountain, the city’s chief operating officer, said the city’s next step will be putting together a template lease to try to avoid the confusions that marred the latest effort by the Studers to lease space at the park.

“We have to lay out the process for people, of where do you start and once you start, how do we handle the fact the leases still have to go to Council after they come from the CMPA," Fountain said.

“We need to put together a template lease, so people know up front what do we as a city expect you to bring us,” she said. “And all of this needs to be available on the website for everyone to see.”

Right, now property at the Maritime Park “is not being marketed at this point,” Fountain said. “CBRE’s agreement was renewed for port and airport, and not for the park. So we have to figure out whose is going to market it.”

CBRE is the national real estate brokerage firm hired by the city to market vacant parcels at the Maritime Park, the port and the airport.

Fountain said that as it stands there are three paths a potential tenant can take when they first decide to try to lease at the park: Through the office of the mayor, through the CMPA directly or through City Council.

“I think that’s very confusing,” Fountain said. “and where you start is a conversation you have with council, and with CMPA — I don’t think you can cut a stakeholder out — about how to make that easier for people.”

The CMPA is the leasing agent — whatever path you start with, the CMPA is ultimately the first gatekeeper. Once the CMPA negotiations are completed, Pensacola City Council then has a turn.

“That’s the part we’re trying to work through so that we don’t run people off,” Fountain said. ‘Council can vote it up or down, that is an option, but they also can modify it.”

The city attorney Lysia Bowling is reviewing whether that “two bites at the apple” component — negotiating a lease twice with two separate governmental entities — can be changed.

But Fountain notes, “we have to have a conversation with Council about whether they would even be willing to eliminate it.”

It was there, that the Studer leases for parcels 3, 6, and 9 met a roadblock they couldn’t overcome.

How we got here

CBRE put out a request for proposals for the park site in September.

The first deadline for responses was Nov. 14 due to Ed Spears and copied to Lee Ann Korst at CBRE in Tallahassee. That deadline was extended and as of Dec. 3, two responses came in:

— One from Studer Community Investments for parcels 3 and 9. Plans for one parcel would build additional baseball-related facilities, the other would have seen a daycare facility built on site.

The proposal at that time called for a 54-year ground lease for both parcels. It also said that the Studers company would begin paying rent immediately. By Studer’s proposed calculations annual rent for Parcel 3 would total $20,633 with a built-in increase of 7 percent every five years.

For Parcel 9 Studer proposed annual rent of $31,610 with the same 7 percent increase every five years.

A lease with CMPA would include exclusive use of 50 existing surface parking spaces for Parcel 3 and 75 parking spaces for Parcel 9.

— MCM-BAP, a Miami-area joint venture between Munilla Construction Management and Bermello, Ajamil and Partners. MCM-BAP was also joined by the Winokur Group as an associate investor.

The MCM-BAP plans included a hotel, boutique housing and retail space on the park property.

At a CMPA meeting on Dec. 17, the discussion among board members made it clear they had little interest in pursuing the offer Studer Community Investment made for parcels 3 and 9.

The board set aside their January meeting to hear from MCM-BAP and the Studers to elaborate on their proposals to develop the park.

The Studers’ lawyer, Scott Remington, sent a letter on Dec. 18 to Ed Spears and the CMPA’s lawyer, Lisa Minshew, saying his client was withdrawing the response to the RFP based on the tenor of that discussion.

On Jan. 28, the CMPA board heard from MCM-BAP about their $65 million vision for the vacant parcels on the park property. And they seemed to like what the Miami-based company put forth.

They voted to send the proposal in concept, on to the Pensacola City Council for approval. At the time, City officials indicated the MCM-BAP memorandum of understanding could be before Council at their April meeting.

Studer offer resurfaces

On April 9, the Studers again submitted a proposal to develop parcels 3 and 9 at the Community Maritime Park.

This time their proposal included Parcel 6 — the lot nearest Main Street and DeVilliers on the park’s western edge. At the time, the Studers did not indicate there was a specific use in mind for that parcel.

“We believe improving access across Main Street also creates innovative parking solutions that can alleviate the parking burden at CMP…we believe there are opportunities for professional office space, retail and other uses. However at present, there is no immediate plan for the site.”

The couple purchased the old Main Street sewer plant site from the Emerald Coast Utilities Authority for $5.2 million cash. That sale closed on March 6.

When the Studers made the ECUA purchase, they mentioned a desire to put recreation, parking and other public amenities there. No firm public plans have been announced for that property.

Part of it is now graveled over and used for parking during Wahoos games. Another section of the property has fill dirt piling up on it.

The April proposal noted the Studers immediately would begin paying ground rent on all three parcels totaling $109,258, with an increase of 5 percent every seven years. Common area maintenance fees would total $11,302.50 annually, with an increase of 5 percent every seven years.

Common area maintenance fees go directly to CMPA. Rent goes to city and by agreement the city returns approximately 75 percent of that to the CMPA.

— The proposal seeks the nonexclusive use of 95 parking spaces at the park site for all three parcels.

— The Studers agree to pay commission due to any broker on the deal. “In the event we are asked, or required, to pay a ‘success fee’ or other atypical brokerage payment, then the amount we are willing to pay for a long term ground rent will be materially reduced to reflect such payment,” the proposal says.

A CMPA briefing in May

On May 27, the CMPA board seemed moved to a change of heart compared to the reception the first Studer proposal for the parcels received.

They voted to move the Studer proposals forward to City Council for Council’s June 18 meeting.

The MCM-BAP proposal, at that time, seemed somewhat in limbo.

During that May 27 CMPA meeting, the board’s attorney, Lisa Minshew, stepped out of the meeting to call MCM-BAP. She and city staffer Mandy Bills spoke with Erick Valderrama, a principle in the company, to answer some CMPA board members questions about how leasing those three parcels to the Studer would impact the MCM-BAP’s plans.

Minshew said that Valderrama said a memorandum of understanding (MOU) has been prepared and was submitted to CBRE.

City of Pensacola Chief Operating Officer Tamara Fountain said she didn’t have such a document from CBRE.

Fountain did have a memo dated May 1 from Michael McShea and Lee Ann Korst of CBRE titled: “Update to Development Strategies for Community Maritime Park.”

In it, McShea and Korst write that MCM-BAP LLC says “bad press” has made its partners in the joint venture decide to pass on the project.

That has prompted BAP to seek substantial decreases in the proposed minimum rents they will pay on parcels where a hotel and boutique housing would be sought,  among other changes.

The memo says, “bad press endured in the last 30 days has evoked some trepidation on the part of BAP and their development partners.”

That bad press is probably the dispute over whether CBRE is owed a success fee. That was a fee that would have seen the developer of the parcel pay the real estate broker (CBRE) 4 percent of the post-development value of a project. Ultimately Mayor Ashton Hayward III said that he negotiated with CBRE to cap the fee at $1.5 million, a $1 million reduction from what they initially proposed.

It may also refer to disputes between the CMPA board and City Council that peaked when council discussed disbanding the CMPA board.

The memo says that BAP’s joint venture partners “have taken a pass at becoming involved in an untested tertiary market.”

BAP still is interested in taking on the project, with different partners. Those partners are not named in the memo.

June briefing for City Council

At a June 18 City Council workshop, Studer and Remington and MCM-BAP principle Erik Valderrama presented their proposals.

Studer’s plans for parcels 3, 6 and 9 included a School of Entrepreneurship that would focus on community building, research and supporting small business development. It would restore the educational and community building components missing from the project since the University of West Florida withdrew from the original plans for the park that included research space, classrooms and a maritime museum.

McShae of CBRE sat with Valderrama during his presentation.

Valderrama said MCM-BAP was willing to discuss modifying its proposal for rent, common area maintenance fees and taxes to be paid on the sites.

He said then that a new proposal for rent and fees could be ready in three weeks.

That time frame ended July 9. Fountain said on July 31 she had not heard back from MCM-BAP.

Studer at the time reiterated that he and his wife were ready to begin paying rent immediately.

“Empty lots don’t employ people,” he said.

UWF Center For Entrepreneurship

On July 3, the Studers announced that the University of West Florida would be their partner in the Center For Entrepreneurship.

University director of Communications Megan Gonzalez said the UWF College of Business is developing degree and certificate programs in entrepreneurship and will launch an MBA with an emphasis on entrepreneurship in the fall.

While some efforts related to the Center will be at UWF’s main campus, putting the school’s hub downtown improves the connections to industry and community partners.

It also gives UWF a link to their Innovation Institute in the DeVillers Square building, some eight blocks north of the new campus.

A news conference at the Voices of Pensacola facility highlighted the importance the university placed on being in the downtown business core and the excitement it felt about the project.

The Studers announced a seed donation of $1 million toward the project. Hayward said then that the plan was to have the leases to City Council for their approval on July 9, but the leases did not appear on the agenda for the regular July 16 council meeting.

On July 13, a notice of a special council meeting to discuss the leases went out. It was set for July 16, just before the regular council meeting was to begin.

Another stop at CMPA

At the July 15 CMPA meeting, the board brought up the leases as revised by Lisa Minshew under old business.

They were not listed as new business on the meeting agenda.

Remington had been to the CMPA’s design committee meeting on July 9 to review the concepts for the parcels, which now included the Center For Entrepreneurship. The design committee OK’d those.

Board chairman Jim Reeves asked Remington if the City Council “liked the concepts presented by the Studers. We had no concepts when it came to us.”

Remington said Council President Terhaar told him in June to work with the CMPA on a lease and bring it to council.

“We’re not clear if we’re being asked to start over” at the July 16 special council meeting, Remington said, indicating he learned about it from media reports.

Reeves said, “City Council has approved every lease we’ve sent them. The reason they had to be a party to the Beck lease was Beck was putting in condominiums, and they were asking for 99 years. There is provision in our agreement that says if they’re going to have a longer term (than 54 years), we have to recommend that to the City Council.

“We’re supposed to negotiate the deal and they’re going to approve or reject it.”

Notes board member Ann Hill: “That’s what you would think, but I don’t know that that’s what’s going to happen.”

Board member Fred Gunther noted the leases, as revised by Minshew, arrived only hours before the meeting.

“We’re considering taking action on something that arrived right before the meeting,” Gunther said. “We say we want public input. How would the public even know to show up?”

His motion to table the discussion dies for lack of a second and CMPA board members later approve sending the leases as revised by Minshew to Council.

A deal unravels

While clearly councilmembers felt their resolution of support — including measures to take those three parcels off the market and work within 60 days to finalize the leases — was a good thing, Studer didn’t see it that way.

In the letter he read from the podium he cautioned that if he was forced to start the negotiating process over again with the City — a process he felt had already been completed with the CMPA board.

“We can move forward quickly to approve these subleases and declare victory or you can try to send us back to the drawing table to start over — the choice is yours. Please choose wisely. If we are asked to start negotiation anew, we will not promise to continue with our proposal. This process has become so cumbersome, and the outcome so uncertain, that Rishy and I may decide to put our time, energy and resources elsewhere. Perhaps there is someone else who can more effectively navigate the bureaucracy.”

On July 22, John Daniel of Beggs & Lane, and Scott Remington of Clark, Partington, Hart, Larry, Bond & Stackhouse were to meet to talk about the leases. Among the issues the city had with the leases were a clearer explanation of parking and the specific name of the LLC that would lease the parcels.

“We are looking forward to it because it will be the first time we have received any substantive comments to the proposed leases we sent them on June 19 & 25,” Remington said.

After that meeting, Remington told Daniel he would take the city’s 22 issues to his client at their standing Monday meeting (on July 27) and get back to him on July 28.

On July 23, the city launched a “Transparent Pensacola” page on the website that would focus on “hot topics.” The first topic it focused on was the Studer leases.

Later that afternoon, the city issued a news release quoting Hayward and Terhaar that said it would not accept the Studer leases as approved by the CMPA.

That evening, the Studers announced they were withdrawing their plans.

Terhaar told InWeekly he thought the press release was part of the negotiating process and expected the Studers to respond with a counteroffer. He hoped they would reconsider, he wrote in an email to Studer.

The couple clearly didn’t view it as part of a negotiating strategy. Instead, the move eroded their faith in the process and City Hall.

“In a lease, how the process is handled is a good indication of how a relationship would go after a lease is completed,” Studer wrote in response to Terhaar’s email. “We wish the mayor’s office, advisors and council nothing but the best.”

The Studers now are considering other locations for the Center For Entrepreneurship, saying they are focused on moving forward and remain committed to the community.