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An unsolicited proposal to redevelop a parking garage on 13th Street and Collins Avenue that promises to quadruple revenue after a ten-year period has sparked interest from the City of Miami Beach.
Location Ventures – which is currently developing a $60 million co-living, co-working building on Washington Avenue called URBIN – proposed to the city, in an unsolicited bid, the redevelopment of the Collins Parking Lot with ground floor for commercial use, 169 parking spaces, and a top floor for office space, fully financed by the real estate developer.
The current parking lot at 1262 Collins Ave. is 21,000 square feet with about 60 parking spaces. The proposed garage would become a 75-foot-tall mixed-use office and retail building with five or six levels of parking under the office suites and its large terrace, all designed by Reinaldo Borges from Borges Architects. Each floor would have 8,000 to 8,500 square feet.
Location Ventures proposed a 99-year lease from the city to build the garage using its own funds. Once built, the company would operate it for about 10 years until its investment is returned, said Michael W. Larkin from development law firm Bercow Radell Fernandez Larkin & Tapanes, who prepared a presentation to the city’s Finance and Resiliency Committee on March 30. Afterwards, the property would return to be a city-owned and -operated garage, retail and office asset.
“They would be collecting 11% of all revenues for the first ten years, plus a 10% internal rate of return,” said Osvaldo Dominguez, asset management division director for the city.
To satisfy the goal of diversifying the district into a variety of uses, said CEO and founder of Location Ventures Rishi Kapoor to the committee, “we’re willing to do the job at zero markup, zero profit and overhead, and 100% at cost. The goal here is to see this get built as we think the area needs.”
If approved, the first year of development, 2022, would consist of getting all city and county permits. During the second year, construction would begin. In the third year, Location Ventures would start operating the property and refinancing its investment, until the tenth year. By then, the city would be able to take over the garage to operate it.
“The goal behind the plan is to show that we’re putting our money where our mouth is, believing in the community and helping to do something that we think will be beneficial for all of these uses,” said Mr. Kapoor. “The idea is that we just want to see something happen that is meaningful and impactful for this region where we have become a heavy investor.”
The cost is estimated at $19,210,226, funded partially by the company’s equity and a construction loan. Once the construction is completed, said Leonard Roberts, vice president of development at Location Ventures, the company would refinance the debt into a permanent loan.
“The income generated from the actual parking garage and the commercial space would pay down the debt,” he said. “By the time that 10-year period (eight years of operation and two years of getting it ready) the loan outstanding would be $12,320,520.”
After those ten years, when the city takes over the garage, Mr. Kapoor said, the property would be valued, based on market cap rates, at “something north of $40 million.”
Each floor of office space – the current proposal is one floor of about 8,500 square feet – would generate about $1 million. If an updated design traded a floor of parking for a second floor of office space, the project would lose $90,000 of revenue per year, but gain that $1 million, explained Mr. Larkin.
“We’re offering a smaller building block to redevelop this parking lot, but the uses that we’re offering – the class A office use above, the much better quality retail on the ground floor and the restaurant uses,” he said, “we think are in the best interest of the city. Once we’ve paid back our investment, the city would get at least quadruple the revenue that it has now.”
To accomplish this project, Location Ventures has requested the city to waive competitive bidding, to allow construction of 75 feet of height and to reserve 60 parking spaces, rented at market rate, for its URBAN development office use at Washington Avenue and 13th Street.
Mr. Roberts said the company anticipates parking garage revenue from the proposed 169 spaces, utilizing permits and transient use, from the ground retail floor and from the office space rentals to be about $1.5 million the first year. The parking component alone would be $874,800.
“The current income of the 60-plus spaces was $372,610 in 2016,” he explained. “In 2020 we approximate [a revenue of] about $420,000. We look at the current income in today’s dollars and that’s roughly about $2 million. If we were to take those same 60 spaces, after this project is done, and we run it for 10 years, you’re looking at about $4 million of today’s money. If we do this garage… those $4 million could potentially grow to $26 million of value.”
Commissioner David Richardson expressed concerns about the loss of cashflow during those ten years and asked the Location Ventures team if there would be another way to structure the deal. He requested more time for the full commission to evaluate the proposal and asked the company to return for the special commission meeting April 19 to further discuss the project. In the meantime, Location Ventures plans to reach out to the Ocean Drive Preservation Association for community input.
“I can tell you that we need parking in that area,” said Monica Beltran, city parking director. “Bringing parking to that area will revitalize Washington Avenue.”
https://www.miamitodaynews.com/2022/04/05/garage-bid-offers-miami-beach-parking-plus-windfall/
