Grand Prix organizers still awaiting loan for roadwork

By Paola Iuspa
   The City of Miami agency in charge of promoting and underwriting sports events postponed a decision on lending $3.2 million to organizers of a downtown street race.
   Raceworks, the promoter of the Grand Prix of the Americas said they could wait for a later meeting, tentatively scheduled for Friday or Monday. Architect and developer Willy Bermello, a principal in the venture, said the group hopes to get a city permit Friday to start $1.1 million worth of required road repairs.
   "We have the money to do that," he said Tuesday.
   With a Jan. 18 deadline, the group is applying to the Miami Sports & Exhibition Authority for a $3.2 million loan. Part of it would buy safety barricades and continue road improvements around Bayfront Park and Biscayne Boulevard where the race would take place.
   The Le Mans race is scheduled for April 5-7.
   Authority board members canceled a meeting on the loan planned earlier this week because they had not received enough information to determine the collateral that is needed from the organizer, said Ferey Kian, the authority's director of finance. And both parties still have to agree on the interest rate, he said.
   Currently, the promoter is negotiating some of the authority's conditions, such as having access to event revenues, ticket sales and getting first-lien rights over Raceworks' property to guarantee the loan tentatively at 4.3%.
   "I think we agreed to the prime rate," he said. "The same rate that commercial banks are asking for."
   Mr. Bermello said he and his partner would not mind offering personal guarantees to back the debt.
   Originally, Raceworks had welcomed a proposed $3.2 million loan program that called for a higher interest rate and a 15% revenue share with the authority. In return, the promoter was asked to guarantee part of the loan.
   "In that proposal, it was more of an investment, which implies more risk," he said. "But the authority just wants to be a lender."
   Authority board members rejected the plan three weeks ago because they wanted the loan secured.
   "The board's position is they don't want to make any money out of the loan," Mr. Kian said. "They just want to make sure they won't lose any of it. They are taking a conservative approach."
   Of the proposed $3.2 million credit, about $1.2 million would be paid for with money from the county's convention development tax. The county transfers about $900,000 annually in the tax to the authority to help run the Miami Arena and would have to OK using those funds for the race, Mr. Kian said. The rest of the money would come from the authority's reserve.
   Mr. Kian said the delay in reaching an agreement was due in part to the holidays and people involved in the negotiations taking time off. But also, he said, it was because Raceworks' principals seemed reluctant to submit information such as personal financial statements, cash-flow projections and sponsorship agreements. He said those would be needed to help the authority come up with a loan-collateral plan.
   "They know that anything they submit to us will become public records," Mr. Kian said.
   In another setback for the event, a Miami-Dade judge ruled Friday that Homestead Miami Speedway had legal grounds to sue the City of Miami for having granted Raceworks a license to hold the race on public land without the usual bidding process.
   The suit, now pending, also challenges the city for reportedly not having held its negotiations with Raceworks in the open.
   Jorge Luis Lopez with the law firm of Steel Hector & Davis, which represents the speedway and the City of Homestead, said the trial could start in a month. If the city is found to have acted in error, it could have to withdraw the 25-year license it gave to Raceworks to hold the event, Mr. Lopez said.
   Mr. Kian said the authority is closely following the legal battle.
   "It is another factor to take into consideration," he said.
   With the license-revocation threat looming on the horizon, Mr. Kian said, the sports authority would have to be very careful how it would disperse the loan if it were approved.
   He said the authority would not give the $3.2 million at once. Raceworks would have to submit invoices of expenses incurred for the race and then the authority would release that amount, Mr. Kian said.