Miami Agrees To Let Strapped Bayside Marketplace Pay Only Half Of Unpaid Rent
Written by Yudislaidy Fernandez on December 18, 2008
By Yudislaidy Fernandez
With Bayside Marketplace’s owners financially strapped by distressed real estate holdings across the country, the City of Miami is letting the company pay only half of what it owes in unpaid rent.
The tourist-oriented mall sits on city land in the heart of downtown on the east side of Biscayne Boulevard. Chicago-based General Growth Properties acquired Bayside when it bought the Rouse Company in 2004. The nation’s second-largest shopping mall owner has several active agreements with the city: a retail lease, garage lease and minority participation agreement.
In 1985, Bayside’s original owners and the city made those agreements to develop and operate the retail mall and parking garage. The original lease stands for 45 years with two 15-year renewal terms.
A dispute arose between the city and Bayside after an audit revealed that from 1998 to 2000 Bayside had underpaid the city’s garage rent and owed about $1.2 million in rent and interest.
The city won an arbitration with the American Arbitration Association that gave it a settlement of $500,000, payable in $100,000 installments from 2009 to 2013, which commissioners approved last week.
The audit also says the company must also prove to the city that it’s been paying a set amount to Bayside Minority Foundation, a board created in the 1980s to attract minority-owned businesses to the retail complex. Under the lease, Bayside has to pay 10% of net retail income or $100,000, which ever is greater, to the foundation yearly.
General Growth has until mid-January to provide proof of payment for 2004 to 2008. Otherwise, the company is obligated to pay any outstanding amounts.
Miami CFO Larry Spring said the foundation’s leadership has changed over the past 20 years, so the city is to start monitoring its activities more closely.
Commissioner Michelle Spence-Jones agreed. She asked the city for more accountability to make sure the foundation’s money is going to struggling businesses in the area. Because of General Growth’s financial problems, the city is asking the company for monthly financial reports.
The major mall owner, with three other operations in South Florida including Coral Gables’ Merrick Park, asked creditors for an extension on $900 million in debt last week.
General Growth’s shares have lost 95% of their value in the past six months.
If the company went bankrupt, Mr. Spring said, the assets including land improvements would revert to the city. But he said the company could reorganize or get bought out.
Commissioner Marc Sarnoff, who disagrees with the settlement’s terms, said a bankruptcy could give the city new options. "Even if the company operating Bayside goes belly up, that may not be a bad thing for the city," he said.
Mr. Sarnoff suggested the city would be better off if a new operator stepped in, adding that the current leases were "horribly negotiated."
Mr. Spring said he does not think the retail complex is at risk. "I am not concerned about Bayside not being open," he said. "I don’t think that’s going to happen. The businesses are doing well, they’re not going anywhere."