Miamis Plans To Sell Knight Center North Side Assets Stall Again
Written by Yudislaidy Fernandez on December 25, 2008
By Yudislaidy Fernandez
Plans to sell a portion of the Knight Center are once again stalled.
Acquisition of the real estate firm the city assigned to sell the assets and holes in the brokerage agreement have slammed the brakes on the City of Miami’s plans to put the money-losing property up for sale.
In 2006, the city hired consultant Staubach Co. Northeast to assist in the sale of the Knight Center complex’s north side assets and to advise and represent the city in negotiating the transactions.
The Knight Center’s north assets are: a parking garage at 100 SE Second St., on the north side of the I-95 ramp, and the land underneath the Bank of America office tower and ground-floor retail.
This June, Chicago-based Jones Lang LaSalle, a global commercial real estate firm, acquired Dallas-based Staubach.
The contract, originally signed with Staubach, has been shown to have several flaws, according to a legal opinion by the City Attorney’s Office.
The legal department’s opinion concluded that Staubach was not licensed in Florida when the agreement was signed, which makes the agreement invalid, and the city is not obligated to make any more payments to Staubach.
But the firm’s new owner, Jones Lang LaSalle, is licensed in the state and already does business with the city.
Miami hired Jones Lang to redevelop the Orange Bowl site in Little Havana. The company is assisting to complete architectural work on the parking garages for the planned Marlins baseball stadium and preparing the city’s mixed-use special permit application.
The city has long contemplated the idea of selling off portions of the complex due to increasing losses.
This year, the city subsidized the Knight Center’s operations by about $2.5 million, a sum that could increase next year, city officials said. Last year, another $1.9 million was lost on the complex.
City Commissioner Marc Sarnoff agrees with selling the assets but said it’s unnecessary to pay a firm $1 million-plus in brokerage fee based on the services they have provided.
"This makes very little sense to allow citizens of Miami to pay that fee," he said at a commission meeting in October.
Mr. Sarnoff argues that with only a few known bidders showing interest to buy the property, why pay a high brokerage fee?
He suggested reassigning the contract to another commercial real estate company willing to offer better brokerage terms for making the sale.
But city administrators say they are willing to work with Jones Lang.
City Manager Pete Hernandez said the city is strategizing how to move forward but plans to do so with Jones Lang, since it’s fully licensed in Florida.
He said he is negotiating a more favorable deal with Jones Lang.
John Paccione, managing director of Jones Lang, said he held a meeting earlier this month with city administrators to look at the contract and hear what the city wants out of it.
He hopes the two entities can agree on a strategy.
"We feel we have a great relationship with the city and we feel we can continue to provide services to the community," Mr. Paccione said.
The biggest struggle is the market, he said, which is much different now than a year ago.
Jones Lang knows that well as the firm is facing reorganization after taking a hit from the global financial downturn.
The commercial property broker has lost more than half of its market value this year, forcing it to reorganize in order to help banks, insurers and local governments withstand the credit crisis, Bloomberg reported last month.
Mr. Paccione said he is advising the city to re-evaluate the property’s value.
Miami’s CFO Larry Spring agrees.
The market value of the property has probably changed since the appraisal was conducted, he said.
"The market price has diminished somewhat," he said, adding so has the ability of potential buyers to finance the purchase.
Mr. Spring said the city is to consider changes to the contract such as a new rate or requiring the real estate firm to proffer a minimum number of buyers.
Any revisions to the agreement would require commission approval.
City officials may disagree on who should be selling the property, but concur on putting the garage and tower’s air rights up for sale this year.
Mr. Spring said he hopes to bring the contract back to the city commission in January to ask commissioners to re-assign the contract to Jones Lang and vote on modified terms.