Last week’s decision by the Miami Beach City Commission to extend the schedule for making a decision on which of two competing groups will have the opportunity to redevelop the Miami Beach Convention Center site is unlikely to quell the various controversies surrounding the $1 billion development deal, but it will give both bidders a chance to clarify information and perspectives circulating among the public and inside city hall.
For one group, the delay in the decision – now expected in July – provides an opportunity to potentially play catch-up with the other, which on paper offers a less expensive, less time-consuming plan with less risk in terms of potential burden on taxpayers.
“We’ve been frustrated at how [plan details] have been presented and we think they have been expressed in a way that is not accurate,” said Paul Diamond, vice president with Tishman, part of the South Beach ACE team. “We keep hearing that [rival bidder] Portman CMC is paying more and has a better economic plan.”
Jeffrey Weinstein, director of development for UIA Management, another South Beach ACE partner, says that a straight-up comparison between his team’s plan and that of Portman CMC is, “comparing apples to oranges.
“We have 59,500 square feet of retail and they have 125,000 square feet in their plan, so there is a huge difference in that program,” Weinstein added. “To level [the comparative bids], you have to compare by taking a qualitative look at the different proposals.”
Neither Diamond nor Weinstein was willing to be critical of the city’s consultant, Jeffrey Sachs of SAG, the group charged with evaluating and reporting to the city on the proposals.
“We prefer not to comment on that,” Weinstein said.
While a qualitative – and thus, subjective – evaluation of the top-sheet numbers could be relevant to decision-makers, when it comes to the bottom line – project cost, timeline and the security of taxpayer investment – Portman CMC has a clear advantage according to comparative studies prepared by the City of Miami Beach.
A City comparison of the two bids, presented on May 22, 2013, demonstrates that the Portman proposal costs $73.4 million less in terms of public capital, would cost approximately $8.8 million less in fees, would be completed 19 months quicker without the need to invest in temporary structures, and would return a notable $81 million more to the City in terms of lease payments. South Beach ACE does project higher tax revenue from the private development components, but even were those projections entirely accurate, Portman comes out on top by more than $20 million in terms of return-on-investment including lease and tax revenue.
Charles Pinkham III, Portman Holdings vice president, development, explained that there is a reason for South Beach ACE’s higher tax revenue. “They can offer more in taxes because they have positioned their hotel program as a high-end luxury product,” he said. “Ours is an upscale convention hotel. The reason we did that is because the number one aspect when it comes to the planners making decisions on convention sites is cost. If the cost is higher than [other venues], they will go somewhere else.”
Besides lower cost, faster timeline and greater return on investment for the city, Pinkham also cited the Portman team proposal’s conservatism. “Our plan is very safe because we will be able to pay debt service with a fixed revenue stream,” he said. “Our competitor’s debt service relies on about $61 million in variable revenue streams – that exposes the city to unnecessary risk.”
South Beach ACE’s claim of considerably less retail is also called into question by Pinkham. He pointed out that the square footage total cited by South Beach ACE does not include in its citation a 40,000 square-foot freestanding food and beverage site in its plan that is included in the proposal as part of the hotel program as opposed to its retail program.
“They continue to discuss it as if it is part of the hotel program, but in my view a freestanding food and beverage building is retail,” Pinkham said. “Their offer is to pay the City 10 percent on their 59,500 square-foot retail program but only 3-3 ½ percent on the hotel program. It appears to me to hide the 40,000 square feet of food and beverage. So the true retail comparison is more like our 125,000 square-feet to their 99,000 or so.”
Pinkham additionally cited three times as much space being created in its cultural program and making space available for institutions at about one-third of the retail rate, as well as considerably more open and green space at ground level.
Issues such as the retail components of the rival plans, their cultural programs and landscape design are key to South Beach ACE’s hopes to overcome what appears on paper to be the not-inconsequential financial advantage held by Portman.
“The RFQ (Request for Proposals) as originally drafted was not all about financials,” said Diamond. “There were a number of things required in the RFQ not related to finances. One requirement, for example, was to improve connectivity. We shrunk the footprint of the convention center by effectively turning it to increase east-west connectivity. We have also buried a lot of programs under park space.”
The retail component is important because of the development’s proximity to Lincoln Road, whose property owners have historically resisted the addition of off-Road retail in its vicinity. Diamond said he considers the retail in the South Beach ACE proposal “complementary” to Lincoln Road, while intimating that the retail in the Portman plan will be competitive.
“We have a lot of Lincoln Road property owners who endorse our plan – they don’t,” Weinstein said.
Pinkham pointed out that most of Lincoln Road’s retail is food and beverage – and that when you take into consideration the 40,000 square-foot food and beverage component in South Beach ACE’s plan – making an argument about a major difference in the plans’ retail programs doesn’t hold water.
The Portman team also bristles at the idea of endorsements for the dueling projects. According to the team, Portman’s plan has been endorsed by Stephen Cushman, Cush Enterprises, former Chairman of the Board of Commissioners, Port of San Diego, with whom Portman has worked; Freeman, the largest producer of trade shows in the country and Reed, the biggest owner/producer of trade shows in the world; as well as prominent local luminaries such as Barton Goldberg, Liliam Lopez, Judy Drucker, Harvey Burstein and parttime resident Stanley Shenkman, owner of the Toronto Convention Center and retired architect, among numerous others.
Others, unrelated to either development team, question whether the South Beach ACE plan to underground some of its programs is feasible or desirable.
“I think the Tishman berm may be a problem involving feasibility, cost, maintenance cost, function, and intrusion of the hill into the landscape,” said longtime community activist Frank Del Vecchio, a critic of many aspects of the redevelopment plan overall.
Others with environmental concerns voice a similar sentiment, such as Sheryl Gold, co-founder of GTAG- Greenspace/Tree Advocacy Group.
“Portman provides over 26 usable acres of public space; with over 23 acres at street level. Tishman’s plan calls for 28.6 acres, but 8.76 acres of that (over 30%) is elevated above street level and on top of parking decks. (The “berm” is 5.7 acres.),” Gold noted in a June 3 email co-signed by Gary Hunt, the organization’s other co-founder. Among the problems this causes, according to Gold in the email: “It is relatively easy to plant shrubs and grasses on structure, and maybe even palm trees, but it is extremely challenging to plant shade trees of any significance on structure. Trees need soils and good drainage. It is expensive and challenging to create a successful structured environment, as proposed. We feel it is misleading for Tishman to show what appear to be 40 – 50′ diameter shade trees on an extreme slope in their renderings, when that will be impossible. More importantly, there are few, if any, successful examples of a landscape of this scale on structure.”
Gold told SunPost that she hopes the process is fair and results based on merit – which she said rests predominantly with the Portman proposal. “I truly hope it is based on merit and not politics,” she said. With two selection committees having previously ranked Portman CMC’s as the top proposal and the financial data similarly looking favorable to the group, Gold said she clearly believes it the superior option with the best return to the taxpayers.
Politics and the Process
While the two remaining bidders can each correctly cite the differences in their respective plans, to many people not well-versed in real estate development, the proposed end results would offer similar programs – a modern, revitalized convention center, parking, greenspace, cultural components, retail, residential and of course a convention center hotel. Portman CMC cites its plan’s financial superiority while South Beach ACE hopes to ride its asserted “qualitative” advantages.
But in the end, politics could well come into play – as it has the two other times in the past two decades when city hall convinced the public to invest in two previous convention hotels that were allegedly going to revitalize the Beach convention market.
Already the process is under the shadow of corruption because of the arrest of the City’s former procurement director. While authorities found no evidence that the convention center selection process was tainted by what turned out to be considerable public corruption in city hall, some critics have continued questioning the process. Commissioner Jonah Wolfson, who opposes the redevelopment plan, has called for a binding public referendum – and any development that calls for construction on the convention center surface parking lots will face a public referendum as called for by the City Charter.
More directly related to the convention center is the fading away of the perspective of Tomas Mobley. Mobley heads the convention center division of Global Spectrum, the company the city hired to run the MBCC. In advising the city commission, Mobley pointed out several key factors that demonstrated the superiority of the Portman CMC proposal. However, when commissioners pointed out a link between Mobley and a lobbyist for Portman – albeit with no accusation of favoritism – Global Spectrum’s analysis all but disappeared from the debate.
More than one observer of the process have been quietly questioning whether or not the city commission will apply the same careful prudence to its own connections to those involved in the competitive process. Along with property owners, lobbyists and attorneys retained on either side – in an election year no less – a former commission colleague also plays a role with the South Beach ACE team. Attorney Victor Diaz, an early proponent of redeveloping the site and later identified in media reports as a lobbyist for South Beach ACE, sat briefly on the city commission with several current members of that body – and has been a longtime ally of Mayor Matti Bower.
After initially agreeing to speak to SunPost, Diaz did not respond to an attempt to schedule an interview. South Beach ACE described Diaz’s role as “community outreach consultant and principal of Miami Beach-based Diaz Partners.”
While no accusation of impropriety had been leveled and certainly none is apparent, off the record, observers of the process wonder if Bower and perhaps others should recues themselves from the process because of their ties to the longtime community activist and former commissioner.
Still, it is the content of their proposals and not politics that have the principals for both of the bidders confident that they offer Miami Beach the best vision for the redevelopment of the convention center site.
“We think we are more in touch with what the market wants,” said Weinstein.
Pinkham pointed out the basic similarities between the two proposals.
“Both are offering a convention center that is upgraded and cutting edge, green, public and cultural space – only our proposal is less expensive, has cheaper fees, is quicker, has less risk to the city and at the end of the day, it’s about budget and ours is less to deliver the same basic project components,” Pinkham said.