COMMISSION ITEM SUMMARY

Condensed Title:

A Resolution approving, following a duly noticed public hearing, the following agreements pertaining to a proposed Lease Agreement having a term of nine (9) years and 364 days, between the City and Pennsylvania Avenue, LLC D/B/A Gigi, for use of approximately 7,000 square feet of ground level retail space at the Pennsylvania Avenue Garage, 1661 Pennsylvania Avenue, Miami Beach, Florida for a high-quality restaurant (primary use), with ancillary uses for a high-quality bakery, bar/cafe and book and gift shop: 1) a Letter of Intent (LOI) setting forth the substantive business terms ofthe Lease; 2) a Pre-Lease Due Diligence Review Agreement; and 3) a draft, in substantial form, of the proposed lease; and authorizing the City Manager to execute the Pre-Lease Due Diligence Review Agreement; authorizing the Mayor and City Clerk to execute the final lease based upon the business terms in the LOI and subject to the final review by the City manager and the City Attorney's Office; and further waiving by 5/7ths vote the competitive bid requirement.

Key_Intended Outcome Supported:

Increase resident satisfaction with the level of services and facilities.

Supporting Data (Surveys, Environmental Scan, etc.):

Approximately 40% of retail businesses surveyed, rank Miami Beach as one of the best places to do business and 61 % of the same group would recommend Miami Beach as a place to do business.

I Shall the City Commission approve the Lease Agreement?

Issue:

Item Summary/Recommendation:

PUBLIC HEARING

On February 14, 2011, Koniver Stern, the City's Real Estate Broker, presented the City with a proposed Letter of Intent (LOI) from Mr. Amir Ben Zion, to lease approximately 7,000 square feet of ground floor retail space in the recently completed Pennsylvania Avenue Garage, located at 1661 Pennsylvania Avenue. The prospective tenant is planning to open a second version of its highly acclaimed Gigi's Restaurant currently operating in Miami's Wynwood district. Based on preliminary estimates, the Tenant's cost to build out the shell space is anticipated to cost approximately $2.5 Million. Due to the nature of the City's charter involving the lease of city-owned property, the maximum allowable term under the charter is nine (9) years and three hundred and sixty four (364) days. In consideration ofthese circumstances, the prospective tenant has requested a six (6) month due diligence review period to precede the actual lease commencement date, in order to allow them to reserve leasing rights while advancing design and plan development in order to ascertain the feasibility of obtaining a full building permit prior to commencement of the lease. On March 14,2011, the City's Finance Committee approved in concept the terms and conditions related to a Pre-Lease Due Diligence Agreement and a Lease Agreement, provided for in the attached Letter of Intent (LOI), as follows:

The Pre-Lease Due Diligence Agreement reserves the retail space for a maximum of six (6) months, to commence immediately upon approval of the proposed lease by the City Commission and terminate upon the earlier of six months or the date on which the tenant is ready to obtain a full building permit for the proposed improvements to the space. As a condition for reserving the space during this period the prospective tenant shall post a $25,000 fee with the City. The proposed lease generally provides for a term of nine years and 364 days, at an initial base rent of $75.00 per square foot (adjusted by 3% annually commencing during the third year); percentage rent; and a proportionate share of Common Area Maintenance costs (taxes and insurance), projected at $10.00 per square foot during the first year of the lease.

The Administration recommends approval, following a duly noticed public hearing, of the proposed Pre-Lease Due Diligence Review Agreement and the Letter of Intent (LOI), setting forth the SUbstantive business terms of the Lease Agreement between the City and Pennsylvania Avenue, LLC., and further authorizinq the Mayor and City Commission to execute the Final Lease, based upon the business terms in the LOI and subject to final review by the City Manager and the City Attorney's Office.

Financial Information:

Source of Funds: n/a

I I Amount

I Account

I 1 In/a

I

Financial Impact Summary:

Department Director

City Manager

AP _

ce MIAMIBEACH

485

AGENDA ITEM R { !3 DATE 4-13- 1/

~ MIAMI BEACH

City of Miami Beach, 1700 Convention Center Drive, Miami Beach, Florida 33139, www.miamibeachfl.gov

COMMISSION MEMORANDUM

TO: Mayor Matti Herrera Bower and Members of the City Commission

FROM:

Jorge M. Gonzalez, City Manager ~ ~y April 13, 2011 () U

PUBLIC HEARING

DATE:

SUBJECT: A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, APPROVING, FOLLOWING A DULY NOTICED PUBLIC HEARING, THE FOLLOWING AGREEMENTS PERTAINING TO THE PROPOSED LEASE AGREEMENT (THE LEASE), HAVING A TERM OF NINE (9) YEARS AND 364 DAYS, BETWEEN THE CITY AND PENNSYLVANIA AVENUE LLC, D/B/A GIG I, FOR THE USE OF APPROXIMATELY 7000 SQUARE FEET OF GROUND LEVEL RETAIL SPACE ATTHE PENNSYLVANIA AVENUE GARAGE, 1661 PENNSYLVANIA AVENUE, MIAMI BEACH, FLORIDA, FOR A HIGHQUALITY RESTAURANT (PRIMARY USE), WITH ANCILLARY USES FOR A HIGH-QUALITY BAKERY, BAR/CAFE, AND BOOK AND GIFT SHOP: 1) A LETTER OF INTENT (LOI), SETTING FORTH THE SUBSTANTIVE BUSINESS TERMS OF THE LEASE; 2) A PRE-LEASE DUE DILLIGENCE REVIEW AGREEMENT; AND 3) A DRAFT, IN SUBSTANTIAL FORM, OF THE PROPOSED LEASE; AUTHORIZING THE CITY MANAGER TO EXECUTE THE PRE-LEASE DUE DILLIGENCE REVIEW AGREEMENT; AUTHORIZING THE MAYOR AND CITY CLERK TO EXECUTE THE FINAL LEASE, BASED UPON THE BUSINESS TERMS IN THE LOI AND SUBJECT TO FINAL REVIEW BY THE CITY MANAGER AND CITY ATTORNEY'S OFFICE; AND FURTHER WAIVING, BY 5/7THS VOTE, THE COMPETITIVE BIDDING AND APPRAISAL REQUIRMENTS (AS PERMITTED PURSUANT TO SECTION 82-39 OF THE CITY CODE), FINDING SUCH WAIVER TO BE IN THE BEST INTEREST OF THE CITY.

ADMINISTRATION RECOMMENDA liON Adopt the Resolution.

KEY INTENDED OUTCOMES SUPPORTED

Increase resident satisfaction with the level of services and facilities.

BACKGROUND

As you are aware, the recently completed Pennsylvania Avenue Garage located at 1661 Pennsylvania Avenue (the Garage) was built with approximately 7,000 square feet of retail space. The Administration has been working with the Koniver Stern Group (KSG), the City's contracted real estate broker, to market this space as available for lease. The space is available in its entirety, or can be sub-divided into smaller spaces. KSG researched and marketed the space according to industry standard.

486

Commission Memorandum GIGI's

April 13, 2011 Page 2 of4

The space has been available since the CO was issued for the building on October 29,2010. The City, via KSG, has shown the space to several restaurateurs and retail operations. While showing the space, prospective tenants were informed that it is not the City's intention to provide or fund any of the necessary improvements for prospective tenants, which will include, among other things, installation of HVAC, bathrooms, lighting, dry wall, flooring, etc. Further, the space was not built with any venting system or grease trap to support a restaurant tenant.

In addition, pursuant to City Code, lease terms beyond ten years require a referendum. As a result, the maximum lease term for the space without a referendum in nine years, 364 days. In discussing potential prospects for this space with KSG, the City was advised that the short term restriction may present an issue for certain tenants, as the necessary build-out for certain uses (such as a restaurant) can be extensive, which in turn would drive up the cost of amortizing the capital investment over the shorter term. By comparison, private landlords can often offer terms far exceeding ten years to accommodate sizeable tenant investment in the space. As a result, in order to be more competitive with private market landlords, the City would need to consider other ways of making a potential lease more favorable.

ANALYSIS

On February 14, 2011, KSG presented the City with a proposed Letter of Intent (LOI) from Mr. Amir Ben Zion, of Pennsylvania Avenue, LLC D/B/A Gigi (tenant or Gigi), to lease approximately 7,000 square feet of ground floor retail space available in the recently completed Pennsylvania Avenue Garage, located at 1661 Pennsylvania Avenue. The prospective tenant is planning to open a second version of its highly acclaimed Gigi's Restaurant currently operating in Miami's Wynwood district. As indicated in the attached concept proposal from Gigi, Amir Ben Zion has an extensive background in the restaurant industry and has created many landmark culinary and hospitality landmarks in Miami and Miami Beach, including, but not limited to, The Townhouse Hotel and Bond Street Japanese Restaurant on 20th Street, Miss Yip Chinese Cafe on Lincoln Road and Sra. Martinez in the Design District. The tenant's plan which generally encompasses the entire retail space of the Garage, provides for an eclectic mix of uses, which will include Gigi's noodles, buns and BBQ, Gigi's burgers and beers, Gigi's coffee and bakery and the Gigi mini bar. A copy of the tenant's preliminary concept plan is included as "Exhibit An to this memorandum.

Based on preliminary estimates, the Tenant's cost to build out the shell space is anticipated to cost approximately $2.5 Million, which includes the installation of a grease trap, additional sub-grade plumbing and kitchen exhaust venting, none of which are provided for in the current design of the building. Typically, a build-out of this nature would command a term in excess of ten years in order to amortize the capital investment in the project. However, due to the City's charter involving the lease of city-owned property, the tenant will instead agree to the maximum allowable term under the charter of nine (9) years and three hundred and sixty four (364) days. The prospective tenant is nonetheless committing to a minimum capital investment of $1.2 million as a condition of the Lease.

However, the prospective tenant has requested consideration of a six (6) month due diligence period to precede the actual lease commencement date, in order to allow them to reserve leasing rights while advancing design and plan development and consulting with the City's Planning and Building Departments in order to ascertain the feasibility of obtaining a full building permit prior to commencement of the Lease. The prospective tenant is willing to invest a considerable sum and time necessary to develop full plans without the full benefit and security of an executed lease, while posting a $25,000 fee with the City, which will be refundable in the event the prospective tenant is unable to obtain a full building permit within six months in spite of reasonable and verifiable efforts to do so. During the six-month due diligence period, the City retains the right to continue to market the

487

Commission Memorandum GIGI's

April 13, 2011 Page 3 of 4

property and accept back-up offers to lease the site. Pursuant to direction from the City Attorney's Office, the Administration has negotiated two separate instruments which were presented to the City's Finance and Citywide Projects Committee for its consideration on March 24, 2011, as follows:

Pre-Lease Due Diligence Period

The first item is a "Pre-Lease Due Diligence Period," outlined in the attached Letter of Intent (LOI), which is attached hereto as "Exhibit B." This document reserves the retail space for a maximum of six (6) months, to commence immediately upon approval of the proposed lease by the City Commission. The Pre-Lease Due Diligence Period will terminate upon the earlier of six months after the approval date of the Lease terms by the City Commission, or the date on which the tenant is ready to obtain a full building permit for the proposed improvements to the space, in which case the $25,000 security for the Pre-Lease Agreement shall be credited towards the Tenant's Minimum Security Deposit. Under the terms of this Agreement, the Tenant may choose to proceed with the Lease at the end of the six months, even if they haven't obtained a full building permit. However, at that time, the Tenant would be subject to the full terms of the Lease. It should further be noted that all costs incurred during the due diligence period are borne by the Tenant.

Proposed Lease Terms

The second item involves the actual terms of the proposed Lease which are also set forth in the attached LOI. In recognition of the sizeable capital investment by the prospective tenant, the Administration is recommending the maximum allowable lease term of nine years and 364 days. The proposed Lease includes a base rent (adjusted annually, commencing the third Lease Year), as well as a percentage of gross, with rent commencement to occur on the earlier of six months after Lease Commencement or ninety days from the sooner of the either the TCO or the opening of the business. A full year rent payment under these terms represents approximately $525,000 in rental income to the City (pending verification of actual square footage and exclusive of any percentage of gross collected and CAM to be charged).

While there are few market com parables for retail spaces on 17th Street in the immediate vicinity, the proposed base rent of $75 per square foot is above the $60 per square foot asking rent for the comparable retail space at 1677-1681 Lenox Avenue. Furthermore, and as noted above, the Administration has required that, in addition to the base rent, the prospective tenant will pay to the City a percentage of gross revenues, equivalent to two (2%) percent of revenues in excess of $8 million and three (3%) of revenues in excess of $9 million. Gross revenues will not include tips or taxes. In addition to base and percentage rent, the prospective tenant will pay is prorated share of Common Area Maintenance (CAM) costs, including any real estate taxes assessed in the future. The first year's CAM costs are projected at $10.00 per square foot or $70,000 annually.

CONCLUSION

Section 82-37 of the Miami Beach City Code, governing the salellease of public property, as amended by the City Commission on September 15, 2010, provides that the lease of any Cityowned property for a term of ten (10) years or less (including renewal option periods) requires the following:

1) the proposed lease shall be transmitted by the City Manager (without need for referral by the City Commission) to the Finance and Citywide Projects Committee (F&CPC), for review; and

488

Commission Memorandum GIGl's

April 13, 2011 Page 4 of4

2) City Commission approval accompanied by a public hearing, which may be set by the City Manager and shall be advertised not less than seven (7) days prior to said hearing in order to obtain citizen input into the proposed lease.

Sections 82-39 further provides for the waiver of the competitive bidding requirement, by 5/7t'I1S vote of the City Commission, upon a finding by the City Commission that the public interest would be served by waiving such condition.

On March 24, 2011, the F&CPC recommended in favor of the proposed lease and directed staff to work with the City's broker and the prospective tenant to finalize the terms and conditions pertaining to the Pre-Lease Due Diligence Period and the Lease Agreement for approval by the full City Commission.

The prospective tenant's proposed use is desirable for the available retail space in the City-owned Garage, providing an attractive variety of uses under the auspices, development and management of an experienced operator. The Administration therefore recommends that the Mayor and City Commission approve, following a duly notice public hearing, the proposed Pre-Lease Due Diligence Review Agreement and the Letter of Intent (LOI) setting forth the substantive business terms of the Lease Agreement between the City and Pennsylvania Avenue, LLC., and further authorizing the Mayor and City Commission to execute the Final Lease, based upon the business terms in the LOI and subject to final review by the City Manager and the City Attorney's Office.

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GIGI LEASE

"EXHIBIT B" LETTER OF INTENT PLACEHOLDER INSERT - PENDING FROM KONIVER STERN

496

RESOLUTION NO. _

A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, APPROVING, FOLLOWING A DULY NOTICED PUBLIC HEARING, THE FOLLOWING AGREEMENTS PERTAINING TO THE PROPOSED LEASE AGREEMENT (THE LEASE), HAVING A TERM OF NINE (9) YEARS AND 364 DAYS, BETWEEN THE CITY AND PENNSYLVANIA AVENUE LLC, D/B/A GIG I, FOR THE USE OF APPROXIMATELY 7000 SQUARE FEET OF GROUND LEVEL RETAIL SPACE AT THE PENNSYLVANIA AVENUE GARAGE, 1661 PENNSYLVANIA AVENUE, MIAMI BEACH, FLORIDA, FOR A HIGHQUALITY RESTAURANT (PRIMARY USE), WITH ANCILLARY USES FOR A HIGH-QUALITY BAKERY, BAR/CAFE, AND BOOK AND GIFT SHOP: 1) A LETTER OF INTENT (LOI), SETTING FORTH THE SUBSTANTIVE BUSINESS TERMS OF THE LEASE; 2) A PRE-LEASE DUE DILLIGENCE REVIEW AGREEMENT; AND 3) A DRAFT, IN SUBSTANTIAL FORM, OF THE PROPOSED LEASE; AUTHORIZING THE CITY MANAGER TO EXECUTE THE PRE-LEASE DUE DILLIGENCE REVIEW AGREEMENT; AUTHORIZING THE MAYOR AND CITY CLERK TO EXECUTE THE FINAL LEASE, BASED UPON THE BUSINESS TERMS IN THE LOI AND SUBJECT TO FINAL REVIEW BY THE CITY MANAGER AND CITY ATTORNEY'S OFFICE; AND FURTHER WAIVING, BY 5/7THS VOTE, THE COMPETITIVE BIDDING AND APPRAISAL REQUIRMENTS (AS PERMITTED PURSUANT TO SECTION 82-39 OF THE CITY CODE), FINDING SUCH WAIVER TO BE IN THE BEST INTEREST OF THE CITY.

WHEREAS, on February 14, 2011, the City's broker, Koniver Stem, presented the City with a proposed Letter of Intent (LOI) from Mr. Amir Ben Zion, of Pennsylvania Avenue, LLC D/B/A Gigi (Tenant), to lease approximately 7,000 square feet of ground floor retail space in the recently completed Pennsylvania Avenue Garage, located at 1661 Pennsylvania Avenue; and

WHEREAS, the Tenant is planning to open a second version of its highly acclaimed Gigi's Restaurant, currently operating in Miami's Wynwood district; and

WHEREAS, based on preliminary estimates, the Tenant's cost to build out the vanilla shell space is anticipated to cost approximately $2.5 million, which will have to include the installation of a grease trap, additional sub-grade plumbing, and kitchen exhaust venting; and

WHEREAS, in consideration of these circumstances, the Tenant has requested a six (6) month "pre-lease" due diligence review period (to precede the actual Lease commencement date) in order to ascertain the feasibility of obtaining a Full Building Permit prior to entering into the Lease; and

WHEREAS, Section 82-37 of the Miami Beach City Code, governing the lease of public property for a term of ten (10) years or less requires review by the Finance and Citywide Projects Committee, and City Commission approval, accompanied by a public hearing; and

WHEREAS, Section 82-39 of the City Code further provides for the waiver of the competitive bidding and appraisal requirements, by 5/7ths vote of the City Commission, upon a finding by the Mayor and City Commission that the public interest would be served by waiving such conditions; the Administration would hereby recommend that the Mayor and City Commission approve said waiver; and

497

WHEREAS, on March 14, 2011, the City's Finance and Citywide Projects Committee considered the proposed business terms of the aforestated Lease, including Tenant's request for the Pre-Lease due diligence review, and recommended that the City Commission approve same, subject to negotiation of final Lease; and

WHEREAS, at its regular meeting on April 13, 2011, and as required pursuant to Section 82- 39 of the City Code, the Mayor and City Commission held a duly noticed public hearing to hear public comment as to the proposed Lease.

NOW, THEREFORE, BE IT DULY RESOLVED BY THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, that the Mayor and City Commission hereby approve, following a duly noticed public hearing, the following agreements pertaining to a proposed Lease Agreement (the Lease), having a term of nine (9) years and 364 days, between the City and Pennsylvania Avenue, LLC, D/B/A Gigi, for use of approximately 7,000 square feet of ground level retail space at the Pennsylvania Avenue Garage, 1661 Pennsylvania Avenue, Miami Beach, Florida, for a restaurant (primary use), with ancillary uses for a bakery, a bar/cafe, and a book and gift shop: 1) a Letter of Intent (LOI), setting forth the substantive business terms of the Lease; 2) a Pre-Lease Due Diligence Review Agreement; and 3) a draft, in substantial form, of the proposed Lease; authorizing the City Manager to execute the Pre-Lease Due Diligence Review Agreement; authorizing the Mayor and City Clerk to execute the final Lease, based upon the business terms in the LOI, and subject to final review by the City Manager and the City Attorney's Office; and further waiving, by 517ths vote, the competitive bidding and appraisal requirements (as permitted pursuant to Section 82-39 of the City Code), finding such waiver to be in the best interest of the City.

PASSED and ADOPTED this 13th day of April, 2011.

ATTEST:

Robert Parcher, CITY CLERK

Matti Herrera-Bower, MAYOR

JMG\HMF\AP\KOB

T:IAGENDA120111Apri1131RegulanGiGi Lease Reso.doc

APPROVED AS TO FORM & LANGUAGE ~FO CUllON

498

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April 4, 2011

Amir Ben-Zion Pennsylvania 17 LLC 5700 Collins Ave. PH A Miami Beach, FL 33140

Re: Pennsylvania Avenue Garage 1661 Pennsylvania Avenue

Miami Beach, FL 33139 (the Property)

Dear Amir:

On behalf of the City of Miami Beach (City), as owner of the above referenced Property, I am pleased to present the following Letter of Intent (LOI), setting forth the substantive business terms under which the City would enter into a lease agreement (the Lease) with Pennsylvania 17 LLC (Tenant), for the Premises (as described below). Notwithstanding the preceding, this LOI is subject to and conditioned upon the following:

1. approval of the LOI by the Mayor and City Commission;

2. approval of the Pre-Lease Due Diligence Review Period Agreement (as described below) by the Mayor and City Commission, and execution of same by Tenant and the City; and

3. approval, in substantial form, of the Lease by the Mayor and City Commission, and execution of the final negotiated Lease by Tenant and the City.

Property:

Pennsylvania Avenue Garage, 1661 Pennsylvania Avenue, Miami Beach, Florida.

Premises:

Approximately 7,000 sq ft of ground floor retail space on the Property, to be leased in "AS IS" 'WHERE IS" condition.

Tenant:

Pennsylvania Avenue LLC, DBA Gigi.

Use:

The main/primary use of the Premises shall be for the operation of a high quality restaurant, similar in menu/service to Gigi Restaurant (located at 3470 North Miami Avenue, Miami, Florida), as well as secondary ancillary uses for a high quality bakery, small bar/cafe, and book & gift shop.

1665 Washington Avenue, Penthouse, Miami Beach, Florida 33139 Telephone (305} 532-6100 Fax (305) 532-610 1

499

Additional Area (Dry Storage):

Outdoor Seating (Sidewalk Cafe):

Flood Panels:

Tenant has identified an additional unused space underneath the garage ramp of the Property as possible space for dry storage (the Additional Area). Tenant, at Tenant's sole cost and expense, shall build-out the entire Additional Area in order to make said Area usable for its intended purpose, which will include, without limitation, installing door access and pouring flooring. The square footage for Tenant's portion of the Additional Area shall be included (as additional square footage) in the Premises above, and shall also be included for purposes of calculating Tenant's payment of any additional real estate taxes and insurance charges (on that additional square footage), but not for purposes of calculating (additional) Base Rent. In consideration of this, the Tenant shall utilize fifty (50%) percent of the Additional Area (a minimum of 500 SF), and shall allow the balance to be used by the City, at no charge to City.

Subject to City approval and (if approved) Tenant's compliance with all applicable government requirements including, without limitation, the City's Sidewalk Cafe Ordinance (as same may be amended from time to time), Tenant shall be entitled to use an outside area adjacent to and fronting the Premises (as further determined by the City's Public Works Director) for use as an outdoor sidewalk cafe. Tenant acknowledges that any such outdoor seating area must be approved, and subject to annual renewal, by the City pursuant to the City's Sidewalk Cafe Permit procedures, and shall not be as a matter of right under the Lease. Further, any such Sidewalk Cafe Permit will be issued as a revocable license consistent with other sidewalk cafe permits in the City, and there will be the standard fees and costs associated with that Permit (in addition to the Rent and other charges described in this LOI).

Tenant acknowledges that in the event the City determines, in its sole and reasonable discretion, that a condition arises that requires the installation of flood panels on the Premises, then Tenant will assume sole and immediate responsibility for installation of same. Once the City determines (also in its sole and reasonable discretion) that the condition necessitating the installation has passed, Tenant shall also assume sole and immediate responsibility for removal and storage of the flood panels.

Tenant Investment: As an added inducement to have City enter into the Lease, Tenant covenants and agrees that it will invest, or cause to be invested, no less than $1,200,000 in hard construction costs onlto the Premises

2 500

Construction Escrow and Guaranties:

Term:

including, without limitation, the following fixed, non-removable improvements: grease trap; HVAC units and distribution; plumbing installed and distributed for kitchen and bathrooms; completed bathrooms for not less than 200 patrons; and electrical system installed with distribution. As a condition of issuance of the Temporary Certificate of Occupancy (TCO) for the Premises, Tenant shall first certify to the City that it has, in fact, expended not less than the required aforestated amount(s) for hard construction costs.

Following Lease execution, and issuance by the City of Tenant's Full Building Permit, and prior to commencement of construction, Tenant shall deposit, in cash or through a Letter of Credit (in a form reasonably acceptable to and approved by the City), construction funds, in the amount of the cost of the work (as such amount is set forth in the construction contract between Tenant and its General Contractor) for the build-out of the Premises for the intended Use(s), which will be deposited into Tenant's attorney's escrow account to guarantee the diligent and timely prosecution of construction. At its sole discretion, the City may also require that Tenant's General Contractor (G.C.) furnish the City with a Construction Completion Guaranty, and/or require Tenant's G.C. to furnish a Payment and Performance Bond (in a form reasonably acceptable to and approved by the City), guaranteeing the performance of the G.C. under the construction contract. The City shall be named as a dual obligee under such Bond.

Nine (9) years and 364 days.

Initial Base Rent: Year 1:

$75.00 psf.

Increases: Three (3%) percent, per year commencing with Year 3 of the Lease.

Additional Rent: Tenant shall pay its proportionate share of Common Area Maintenance share of (CAM), real estate taxes, and insurance for the Property (which is projected to be $10.00 psf for Year 1 of the Lease).

Percentage Rent: In addition to the annual Base Rent and Additional Rent, Tenant shall also pay an annual Percentage Rent of two percent (2%) of gross sales in excess of $8,000,000. Should sales exceed $9,000,000, the Percentage Rent shall increase to three (3%)

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Lease Commencement Date:

Rent Commencement Date:

Prepaid Rent:

Minimum Security Deposit:

Pre-Lease Due Diligence Review Period:

percent above $9,000,000. Tenant shall report sales annually on the anniversary date of the Rent Commencement Date.

The earlier of: (i) end of the six (6) month term of the Pre-Lease Agreement (as set forth below), (li) or issuance by the City of a Full Building Permit.

The earlier of: (i) 180 days from the Lease Commencement Date or; (il) 90 days from the issuance of a Temporary Certificate of Occupancy (TCO) or Tenant's opening for business, whichever is earlier.

One month of Base Rent ($43,750), due upon Lease execution

Three (3) months Base Rent ($131,250), due upon Lease execution.

It is the intent of Landlord and Tenant for Tenant to be granted a Pre-Lease Due Diligence Period based upon the following terms, which will be memorialized in a written agreement (the Pre-Lease Agreement) to be entered into between the parties, following approval of this LOI by the Mayor and City Commission:

• As a condition of the City's approval and execution of the Pre-Lease Agreement, and concurrent therewith, Tenant shall tender to the City a $25,000 deposit, which will only be refundable if, after good-faith, diligent efforts, Tenant is unable to obtain a Full Building Permit for the Premises by the end of the term of said Agreement (as set forth below). In that event, Tenant shall not be obligated to enter into the Lease; provided, however, that Tenant may elect to waive the aforestated condition and proceed to enter into the Lease, in which case the $25,000 security for the Pre-Lease Agreement shall be credited toward Tenant's Minimum Security Deposit.

• The Pre-Lease Agreement shall be for a maximum term of six (6) months, which shall commence (following approval of this LOI by the Mayor and City

r;f0V

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Sole Broker(s):

Contingency:

Commission) upon execution of the Agreement by the parties hereto; provided, however, that in the event Tenant obtains its Full Building Permit prior to the end of the maximum six (6) month term, then the PreLease Agreement shall automatically terminate and the parties shall proceed to execute the Lease; the Lease Commencement Date shall be deemed to have commenced as of the date of issuance of the Full Building Permit.

• Tenant shall be deemed to have made its "good faith, due diligence efforts" under the Pre-Lease Agreement if it satisfies the following conditions during the term of the Agreement, or with the time line expressly provided therein: (i) contract with a Florida certified and licensed architect/engineer to prepare any and all required plans and specifications for the proposed Uses on the Premises including, without limitation, such construction documents as required by the City's Building Department in order to process and review Tenant's Building Permit application; and (ii) submit a complete application (including the required plans, drawings, and construction documents) for a Building Permit, and obtain a Building Permit process number from the City's Building Department no later than four (4) months from the commencement of the term of the Pre-Lease Agreement.

• City shall agree to sign within a reasonable period of time, all documents that are required of it as Landlord/Owner in Tenant's pursuit of a Building Permit.

• Time is of the essence and it shall be a requirement of the Tenant to notify the City if for any reason it deems that it cannot construct its proposed facility.

• In consideration of Tenant's diligent pursuit of a Full Building Permit for the Premises and the expense of funds anticipated by Tenant in said pursuit, City agrees to accept only back-up contracts during the term of the Pre-Lease Agreement, and will, in good faith, continue to negotiate the Lease anticipated in this LOI.

Koniver Stern Group and City Realty Group International (Jon Jacobs, Realtor).

The terms of this LOI shall be subject to approval by the City Commission.

<

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Good Faith Negotiations:

This LOI represents some of our undertakings regarding a possible future Lease and is not intended to create a legally binding obligation on either party. Such an obligation will be created only when a proposed Lease is approved by the Mayor and City Commission and both parties execute the final Lease, covering all of the rights and obligations of the parties, which is then delivered by and between us. If the Lease is not approved by the Mayor and City Commission, and/or not executed by the parties, then neither party will be liable to the other under this document or as a result of any preliminary negotiation; provided, however, that in the event of Tenant's non-compliance with the conditions of the Pre-Lease Agreement, the City shall be entitled to retain Tenant's $25,000 deposit.

The foregoing LOI is also predicated upon receipt of acceptable personal and corporate financial and business background information.

Please sign in the space indicated below, if you are in agreement with the terms stated herein, provide the required financial information, and I will forward the City's draft Lease for your review upon final approval of the L01 by the Mayor and City Commission.

If you should have any questions, please do not hesitate to contact me at 305-532- 6100.

Thank you.

Lyle Stern

Koniver Stern Group

AGREED AND ACCEPTED BY TENANT/PENN 17 LLC:

By:

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6 504

'~ MIAMIBEACH CITY OF MIAMI BEACH

PUBLIC HEARING

NOTICE IS HEREBY GIVEN that a first reading and public hearing will be' .held by the City Commission of the City of Miami Beach on WEDNESDAY, April 13, 2011 at 11 ::30 A.M. or as 'soon thereafter as possible in the City Commission Chambers, Third Floor, City Hall, located at 1700 Convention Center Drive, Miami Beach, Florida 33139 to consider:

'~"A RESOLUTION OF THE MAYOR,' AND CITY COMMISSION OF THE-CITY .or MIAMI _BEACH, FLORIDA, APPROviNG", FOLLOWING A DULY NOTICED PUBLIC HEARING,' <THE F.QLLOWING AGHEEMENTS PERTAIN'ING TO, THE PROPOSED ,LEASE AGREEMENT (THE LEASE), HAVING A TERM OF NINE(9) YEARS AND 364 DAYS, BETWEE~ THE ' CITY AND PENNSYL.VANIA AVENUE LLC; D/B/A, GIGI, 'FOR THE 'USE OF APPROXIMATELY 7000 SQUARE FEET OF GROUND LEVEL RETAIL SPACE AT THE- PENNSYI:NANIA AVENUE GARAGE;, 1661 PENNSYLVANIA AVENUE, MIAMI BEACH, FLORIDA, FOR A RESTAURANT (PRIMARY USE), WITH

, ANCILLARY USES TO INCLUDE A BAKERY, BARI CAFE, AND BOOK AND GIFT SHOP: 1.) A PR!=-LEASE DUE DILLIGENCE REVIEW AGREEMENT; 2.) A LETTER 9F INTENT (LOI), SETTING FORTH THE SUBSTANTIVE BUSINESS TERMS OF THE LEASE; AND 3.) A DRAFT" IN SUBSTANTIAL FORM, OF THE PROPOSED LEA~E; AUTHORIZING THE CITY MANAGER TO EXECUTE THE PRE-LEASE DUE DILLIGENCE REVIEW,AGREEMENT AND THE LOI, AND FURTHER AUTHORIZING THE MAYOR AND CITY CLERK TO EXECUTE THE FINAL LEASE, BASED UPON THE BUSINESS TERMS ,IN THE LOI AND SUBJECTJO ,FINAL REVIEW BY THE OITY MANAGER AND CITY, ATTORNEY'S OF~1CE; AND FURTH'ER WAIVING" BY . 5mHS '~OTE:

TH'E COMPETITIVE BIDDING-AND ',APPRAISAL REQUIRMENTS (AS PERMITTED PURSUANT TO' SECTION '82-39 OF THE CITY CODE), FINDING SUCH WAIVER TO BE IN TI;!E BEST INTEREST OF THE ~ITY.

lnquiries may be directed to the, Department of Housing/ Community Development at (305) 673-7260.

"',

All interested parties are invited to appear at this meeting or be

represented by an agent, or to express their views in writing addressed to the Planning Department, 1700 Convention Center Drive, City Hall, Miami Beach, Florida 33139. Copies otthe proposed amendments are' available in the Planning Department.

Pursuant to Florida Stat. 286.0105, the.Oltyhereby advises the public that if a person decides to appeal any decision made by the Planning Board with respect to any matter.considered at its meeting or its hearing, such person must ensure that a verbatim record of the-proceedings is made, whlchjecord must include the testimony and evidence upon which the appeal isto be based. This notice does riot constitute consent by the City for the introduction or admission of otherwise inadmissible or, irrelevant evidence, nor does. it authorize challenges or appeals not otherwise allowed by law.

'In accordance with the Americans with Disabilities Act or1990, persons needing special" accommodation to participate in this proceeding should contact the Board's Administrator no later than four days prior to the proceeding at (305) 673-7550 for assistance>; if h'o';.ing impaired. telephone the Florida Relay Service numbers,

(305) 673-721'8 'or 7'11, Tor assistance. AD #653 >, •

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