The Miami-Dade County Commission has given zoning approval to Triple Five Worldwide Group’s plan to build American Dream Miami which will be the largest mall in North America. To call American Dream Miami a mall is not a fair description. It will be a 6 million square foot theme park, office, retail, shopping and entertainment complex. Plans call for 2000 hotel rooms, an ice climbing wall, an indoor ski slope, a water park with submarine rides, shopping, dining, a performing arts center and offices. The project will be built on 175 acres at the intersection of I-75, the Florida Turnpike and Miami Gardens Drive, just south of the Miami-Dade – Broward County line.

In addition, Graham Companies, which is selling a portion of the property to Triple Five, received approval to develop 300 acres to the south of a larger commercial and residential project, containing 3 million square feet of office, 1 million square feet of retail and 2,000 rental units to be developed over the next 20 years.   The American Dream project is expected to add nearly 100,000 trips per day to area roads. The Graham project would add over 50,000 trips per day.

While local leaders are very excited about the potential economic impact of these 2 projects and tout tax revenues and job creation, the traffic congestion is one area where major disagreement exists. While Miami-Dade County will address traffic issues in the approval process, Broward County and cities near the county line have expressed concern. In Miami-Dade County, the developers will have to improve or pay for improvements to state roads affected which the state does not address or pay for. However, Triple Five claims that there will be no impact, or minimal impact at most, to Broward County roads. The developer’s claims are ridiculous. Studies show major traffic diversions to Broward County roads including the Turnpike extension and Miramar Parkway. The complex is 1 mile from the county line and common sense dictates that a high percentage of visitors will be coming from the north. Any market study would compare visitors to Hard Rock Stadium, also on the county line, for Dolphins games, soccer games and concerts, and see how many people come from Broward and north. Countless comparisons in Broward and Miami-Dade could be made. The American Dream Mall would not survive without visitors outside Miami-Dade County.

Prior to Miami-Dade’s approval, Broward threatened to file a lawsuit unless the developer agreed to make improvements to Broward roads impacted by American Dream Miami. Negotiations ensued and Triple Five agreed to spend $650,000 on modernization of traffic lights on Miramar Parkway.   This conciliation is not enough and Broward continues to push for more but won’t find support from its counterparts in Miami-Dade. In a letter to Broward Mayor Beam Furr, Miami-Dade Mayor Carlos Gimenez wrote that Miami-Dade County had found no evidence that the American Dream Miami and Graham projects combined would contribute more than 5% of the daily traffic on any Broward roads which would be the trigger to demand fees from the developers. Mayor Gimenez’ conclusion comes despite several reports showing a high impact in Broward County.

American Dream Mall and the Graham Project demonstrate a total lack of regional cooperation in planning. While Triple Five can save a few dollars by not paying fees to Broward to mitigate potential traffic impact, their reluctance to pay is not only cheap, it is shortsighted. The expected price tag of the Triple Five project is $4 Billion.   There is no estimate yet for the Graham Company project. However, adding a few million dollars for traffic mitigation in Broward County is meaningless for either party. The shortsightedness is hard to understand. Clearly, the developers know that the visitors will be coming to this theme park from Broward and the north, whether they are residents or tourists. These visitors will make up a huge percentage of the annual visitors to American Dream Miami. They will be sitting in traffic unnecessarily and starting their experience poorly. This could be avoided, or made better. Triple Five, Graham Companies, Miami-Dade County…. Think bigger.

I recently came across a blog post on Honestbuilding.com that was so true, it was funny and made me laugh. 6 Absurd Things CRE Teams Say About Approvals and How to Address Them describes excuses we have all heard about why applications and the documents that go with them are delayed. These excuses are also used when you’re waiting for any documents, whether its signed contracts, draft loan documents or due diligence packages.

Let’s stick with development approvals for this post. Luckily, most of the development teams I work with are prompt and professional. We meet regularly, if not in person, by conference call or e-mail. One person, usually the land planner, keeps us on task and assures that we have what we need on time and deadlines aren’t missed. We are all accountable to each other. However, when the team is spread out around the state or the country for a project that is not local, we come across these kinds of problems from time to time.  The person who is most harmed by this is the client, the developer, as deadlines are missed. When a purchase agreement is contingent upon obtaining approvals and there is an outside date to obtain the approvals, it is often difficult to obtain the extension due to someone failing to submit a document because an administrative assistant was unavailable to send the Fed Ex.

But I want to focus this post on some of the strange, sometimes outrageous requests that the municipalities place on the development team in order to obtain the approvals. We generally spend a great deal of time reviewing ordinances and code requirements before submitting an application for approval. We will have met with planning and zoning staff to get thoughts and ideas as to what is likely to be approved and what the requirements will be so that our applications will be as close to perfect as possible and that the review staff won’t be surprised when they see the application. And, when possible, we meet with elected officials to assure that there will be support at the board level when the time comes. Nevertheless, when applications are submitted, the comments, generally technical requirements, are often laughable.

For example, one application we are working on came back with comments reminding us that the Owners & Encumbrance Report (the title report submitted with the application) must include the names of the current owner and all mortgagees. I scratched my head because if the O&E didn’t do that already, then what did it do? The same report noted that our plan showed the storage/janitor’s closet but that it did not show a mop sink. We’re asked to confirm, following application review, that we aren’t seeking variances, when the application does not ask for variances.

The point here is that in reviewing development applications, most municipalities have set processes and checklists.  There are boxes to check and even if it should be apparent that the boxes have been checked when the application is submitted, it is our job, as the representatives of the developer, to make sure that the staff receiving the application understands that all of the boxes have been properly checked off and all requirements satisfied. If a request seems silly, we have to grin and bear it. Fix the problem and move on to the next one!

At the end of every year, every one has a Top 10 list. As 2017 ends and we begin 2018, Florida Real Estate Law and Investment Blog is pleased to present its first ever Top 10.  This is my own Top 10 list of my favorite posts from 2017.  It is not based on number of hits or any other qualitative data that I received over the year.  Rather, it is my own list of favorite postings, the ones that I most enjoyed writing and the ones that I think might have the most impact or meaning.  I did receive a lot of positive feed back on many of these posts and, if you haven’t read them, I encourage you to do so.  They are worth a re-read.  I’d love your thoughts this time around.  Looking forward to 2018!

#10 – Proper Zoning Determines Property Value – Posted March 7, 2017. A simple discussion about the correlation between a property’s zoning and the value of the property and how knowing the zoning prior to entering a contract can help in negotiations.

#9 – Renewal Option Language Often Overlooked – Posted July 24, 2017. Lease renewal option language is important for tenants in planning for the future.  It should not be overlooked when negotiating the original lease.

#8 – Offset Language Puts Lender’s Hands in the Cookie Jar – Posted May 22, 2017. I liked this post because it told a good story about a good client to work for, the Girl Scouts.  We had a problem with the loan documents that could adversely affect thousands of girls and their cookie money which no one intended or wanted – and we solved it.

#7 – Could the Grenfell Tower Disaster Happen in the United States? – Posted July 3, 2017. After the fire, many of us wondered how something like this could ever happen and whether it could happen in the US.  The post looked at US building and fire codes in the projects.  Despite our laws and codes, are we protected?  As I am finishing this post, a tragic apartment fire killed 12 people in the Bronx.  The investigation is just beginning, but I think the answer is that we are not fully protected in older buildings.

#6 – 6 Protections for Real Estate Partnerships – Posted July 31, 2017. We talk about real estate every day.  This post outlines some of the protections that should be included when we form entities with partners to invest in real estate.

#5 – US Withdrawal From Paris Climate Accord Met With Resistance From Local Leaders – Posted June 15, 2017. I have blogged many times about climate change and sea level rise and will continue to do so.  This is a particularly important topic to us in South Florida.  South Florida leaders in particular reacted to the news when President Trump announced the US was withdrawing from the Paris Accord.  South Florida will continue to abide by the Accord as it battles rising seas and climate change.

#4 – House Flipper’s Attempted Purchase Exploits Elderly Woman – Posted December 18, 2017. Posted just a few weeks ago, this article has touched a nerve with many of my friends and colleagues.  We see and read so much about exploitation of the elderly, and this post talks about how the real estate industry is also involved.  Beware.

#3 – Riding Out Hurricane Irma – Posted September 18, 2017. This was the single biggest news event in South Florida in 2017. We were fortunate, compared to the people on the west coast and those in Houston and Puerto Rico and elsewhere in the Caribbean.  Nevertheless, we had our story to tell.

#2 – Smart Houses Make Me Feel Dumb – Or At Least Unsafe – Posted October 30, 2017. Amazon Key was the inspiration for this post, but it encompassed all the products that make your house “smart”.  How secure are these products?  I expressed fear about a loss of privacy, not to mention trepidation about Amazon’s physical access to your house.  A few weeks ago, there were news reports of the first hacks into Amazon Key.

#1 – Email Scam/Wire Fraud Hits Close to Home – Posted July 10, 2017. This post has probably generated the most attention.  Hopefully, everyone in real estate will be more diligent and we can stop the fraud and the scammers.  I should put a note on my calendar to re-post this at least once a year as a reminder.

Happy New Year everyone!

00186110

        I love having a good commercial broker on my team. A good broker is much more knowledgeable about the economics of a potential deal than I will ever be and understands the market better than me. A broker who knows his or her stuff will have done the heavy lifting on putting the deal together, negotiating the essential terms and completing initial due diligence before I am brought into prepare the operative documents and close the transaction. When we get to sticky issues, the best brokers can play good cop to my bad cop or vice versa.

             But sometimes, you get agents, and I am purposefully switching to the term agent here, who get in over their head. These agents should not be handling commercial deals. I am talking specifically the agents who are residential agents who attempt to get involved in commercial deals. Either they see an opportunity for a bigger commission and believe that commercial deals are no different than the house closings they are used to closing or, they are working with a friend or relative “as a favor” (and the commission is an added bonus). When a residential agent is involved in a commercial transaction, I, as the attorney, have to take extra special care with my client because I know that the client has not been represented well before engaging me and is likely not sophisticated in the world of real estate.

             Just the other day, I got a call from an agent who was referred to me by a friend of a friend. She was representing a client who was going to open a new café in the Edgewater area of Miami and needed a lease reviewed. Of course, this was an “urgent” matter and the lease had to be signed by the end of the week. The agent wanted to know if I could review the lease by the end of the day. My alarms started ringing. I asked the agent why the rush. She told me that the landlord had a lot of interest in the space and the shopping center was very desirable. I told the agent that I could begin reviewing the lease that day, but there was no way that I could finish it by the end of the day. Without asking, I told her that I could surmise the length of the lease and that to give it a thorough review, I could not read it that quickly. But more importantly, I asked the agent if she had done any due diligence on the property. She was befuddled. What did I mean? I asked her if the space was zoned for a restaurant. She told me that it was previously used as a Papa Johns so zoning wasn’t an issue. When I told her that because Papa Johns generally had no seating and that because the client’s café likely would, zoning might be an issue. In addition, if any alcohol was going to be served, zoning and use issues could also be an issue, not to mention liquor licensing. Had she checked any of those questions? The agent said she had not. I asked her who was going to be paying for the TI and how long the TI would take. Did the client need the pizza oven? She had no answer.

             We chatted a little longer about other issues that might come up in the lease and I explained that these were just a few of the reasons why it might take me longer than the day to review the lease. She thought that these were very good reasons and that she would definitely give my name to the client for her to call me to discuss my fees. I never heard from the agent again, nor did I hear from the client. I can only wonder whether the agent ever related my concerns or whether she was too embarrassed to let the client know that if she signed the lease, she was setting herself up for big time failure.

             It is nice to be able to throw business to your friends and family. But it is more important to have the right people working for you. Your friends, if they are really friends, should refer you to someone with the proper experience to help you properly. In the case I just mentioned, the agent should have referred her client to an experienced commercial broker who specialized in restaurant leases. A good broker not only would have steered the client into a proper property and lease and at least done some preliminary due diligence, but he would have likely paid the agent a referral fee. Everyone wins in that situation.

00181595

        Commercial leases contain many important dates that trigger landlord’s and tenant’s obligations. Three important dates that are related to each other that are sometimes confused, but are separate and distinct, are the commencement date, the delivery date and the rent commencement date. In a very simple lease, all 3 of these dates can fall on the same date – perhaps the date that the lease is executed. However, in many leases, these are separate events and have important meanings to both landlord and tenant and should be carefully considered during lease negotiations.

             Commencement Date: The date that the lease becomes a legally binding obligation of landlord and tenant. Usually, this is the date that the lease is fully executed by both landlord and tenant. The commencement date can be used as an anchor date for many dates going forward. But, do not confuse the commencement date with the rent commencement date unless the lease specifically states that tenant’s obligation to begin paying rent begins on the commencement date. Further, determine whether the term is calculated from the commencement date or the rent commencement date. This will affect when rental increases occur and when renewal terms begin.

             Delivery Date: The date that landlord delivers possession of the premises to tenant. While this date can be the commencement date or the rent commencement date, it does not have to be either date because in many leases, landlord has to finish building the premises or the tenant has improvements to complete or approvals or permits to obtain before its obligations commence. Where tenant is responsible for obtaining approvals or completing buildout, the delivery date is generally the triggering date for the completion of tenant’s obligations and ultimately, the rent commencement date.

             Rent Commencement Date: The date that tenant is obligated to begin paying rent. Here, landlord and tenant have different goals. Tenants want as much flexibility as possible in establishing the rent commencement date in order to account for the delivery of the premises from landlord, landlord’s work, landlord’s approval of tenant’s plans, governmental approvals for commencement of tenant’s work (including building permit) as well as completion of work (including C.O.) and, tenant’s opening for business. On the other hand, landlords prefer that the rent commencement date be a set date. Landlord must consider timing, prior occupancy of the premises, likelihood of success of obtaining permits and how desirable the tenant is and tenant’s bargaining power.

             In a recent negotiation on behalf of a tenant, my client was obligated to do 100% of the buildout at an estimated cost of $600,000. Landlord insisted that the rent commencement date occur 1 year following the commencement date, which was also the delivery date. In our due diligence prior to lease execution, we determined that the zoning was not correct for the client’s intended use and landlord’s assumptions for the time required were therefore incorrect. As a result, completion of the space would take at least an additional 3 months past the rent commencement date. I argued that the rent commencement date should be 30 days following C.O. and offered to shorten the construction period by 90 days following completion of zoning. We anticipated this would put the rent commencement date at about 14 months instead of the original 12, but it would be a floating date and give us comfort. And, the time table would be less than the 15-16 months that would be required because of our discovery. Unfortunately, Landlord refused to make the change and my client, anxious to lock up the property, buckled and will likely pay rent for 90-120 days prior to opening for business. Clearly, this is not the perfect situation but it is an excellent example of the importance of understanding the difference between commencement date and rent commencement date. When negotiating these dates, understand your needs and do your due diligence prior to signing your lease.

    Get Blog Updates

    Get news, insights, and commentary delivered straight to your inbox!
    Click Here

    About Us

    Welcome to Assouline & Berlowe’s Florida Real Estate Law and Investment Blog with news, insights, and commentary for investors, developers, and their advisors.

    Topics

    Recent Updates

    Archives

    Stay ConnectedLinkedIn

    STAY TUNED!
    Get Blog Updates
    We'll send you an email whenever we add a new post.
    Stay Updated
    Give it a try, you can unsubscribe anytime.
    close-link
    Get news, insights, and commentary delivered straight to your inbox!
    Click Here
    close-link