Miami commissioners approve Adler’s mixed-use project on city property

City’s finance committee chairman said taxpayers could be on the hook for $150M in bond payments should Adler not complete the project
By Francisco Alvarado | June 28, 2019 04:30PM

Michael Adler and a rendering of Miami Riverside Center  

Michael Adler and a rendering of Miami Riverside Center

A deal by the Adler Group to redevelop the city of Miami-owned Miami Riverside Center won narrow approval by commissioners, despite criticism tied to the developer building a new city administrative building.

The Miami City Commission voted 3-2 on Thursday to approve the 99-year lease agreement with Lancelot Miami River LLC to replace the 27-year-old building at 444 Southwest Second Avenue. The new project will have four towers with a mix of residential, office and hotel uses, as well as roughly 37,000 square feet of retail and a parking garage with a minimum of 1,000 spaces. The project’s footprint would also include land owned by another Adler affiliate at 230 Southwest Third Street, where the developer is proposing to build the city’s new headquarters.

As part of the approval, the city plans to issue $150 million in bonds to finance the construction of its new office building, which includes a 4 percent developer’s fee.

Lancelot, whose president is Michael Adler, agreed to pay the city $3.6 million in annual rent or 3 percent of its annual gross revenues, whichever is greater. The rent would increase annually by 1.5 percent in the sixth year, and Lancelot has an option to buy the property for about $70 million. The city would also get a 2 percent fee from any condos Lancelot develops and sells.

The broad terms of the deal were approved by 64 percent of Miami voters in November, but the ballot language did not include anything about issuing $150 million in bonds — a new wrinkle that led commissioners Joe Carrollo and Manolo Reyes to criticize and vote against the agreement.

“The Marlins [stadium] was a bad deal for the city and this is a bad deal for the city,” Carollo said. “No one is going to change my mind about it.”

Carollo and Reyes weren’t alone in their opposition. During the discussion, Eric Zichella, a lobbyist who chairs the city’s citizen finance committee, told commissioners that taxpayers would be on the hook for the bond payments should Lancelot not complete the project due to a market downturn, for instance. The finance committee voted 3-1 to recommend denial of the lease agreement.

“The city is taking a risk in selling bonds well before the developer has any obligation to perform,” Zichella said. “And the concern is about potential disruptions to the marketplace.”

Zichella said the city would be better protected by selling the bonds after the developer completes the city administration building. Daniel Rotenberg, director of Miami’s real estate and asset management office, said since the finance committee hearing, city officials included protections in the event of a “market deviation.” “We listened to what [Zichella] said,” Rotenberg said.

Following the commission’s vote, Greenberg Traurig attorneys for Lancelot said in a statement that the developer expects to begin construction of the project’s first phase in the fourth quarter of 2020 and that the entire development will take five to seven years to complete. The first phase will include the city’s new office building to minimize any disruption to municipal services, said Ryan D. Bailine, one of two Greenberg Traurig shareholders representing Lancelot.