Another last-minute county deal with too little transparency

Miami-Dade signed away naming rights for its arena on Biscayne Boulevard too fast, with too little transparency into sponsor Kaseya or by the administration to commissioners.

The haste to OK the deal last week was so great that halfway through debate Chairman Oliver Gilbert III interrupted to have a county attorney note four more term changes beginning on page 122, additions no commissioner ever saw or understood before voting. Any ultimate impact of the alterations to the 17-year legal accord is unclear.

It was fitting that the deal is for the Miami Heat’s arena. The whole name sale and then the debate was like the last three minutes of a close basketball game with a hurry-up offense as the clock ticks down.

As county Chief Operations Officer Jimmy Morales explained to Commissioner Marleine Bastien, who was vocally distressed by lack of transparency to commissioners and shortage of due diligence, the rush to replace the name of bankrupt cryptocurrency firm FTX on the arena was intentional in order to reap as much money as fast as possible.

The county had two legal paths to do that, Mr. Morales explained: hire a broker to find a sponsor or do the job itself. It chose do-it-yourself.

A broker, Mr. Morales said, takes about 15 months to find sponsorship candidates with no guarantee that it will get any by then, plus gets up to 10% commission on a deal. The Florida Panthers hockey team, he said, is 15 months into a broker-driven sponsor hunt for its Broward County arena with still no sponsor in sight.

Mr. Morales implied his obvious point: sponsors willing to ante up $117 million for 17 years for an arena do not grow on trees, so you have to take what you can get.

That’s especially true because, as he noted, any sponsor “also has to be someone that doesn’t conflict with anybody the Heat or the NBA (National Basketball Association) has. We did have an outreach from IHeartRadio, which is a national media, but unfortunately that would have conflicted with media sponsorships the Heat and the NBA have. And we also had outreach from a broker for UBS who is in banking, but the Heat has a current banking relationship.”

That left the county with only two possible sponsors, and Aroma360 offered a lot less, so it was a one-bidder deal for Brickell-based IT management and security software provider Kaseya.

Why the big rush? As Commissioner Roberto Gonzalez noted, commissioners got only a few days to read the contract (before the four last-minute changes that he wasn’t even aware of as he spoke) “and we have therefore had very little opportunity to review this.” He said the deal was one of trust with “very little verification.” Others echoed concerns at the speed with little time for review.

Mr. Morales cited his reason to move fast: get what money the county can pocket now and hope to collect more later.

Seventeen years remain on the agreement with the Miami Heat to allow the county to sell the sponsorship on its arena (in return for which the Heat gets $2 million a year sponsorship money from the county plus a variable county payment of about $6 million). If the county didn’t sign Kaseya now, it would for sure have lost a $3.7 million June payment from Kaseya plus if it tried to seek another sponsor it might not be in time for another $3.7 million a year later. Whether or not the county gets a sponsor’s money, the county still must pay the Heat.

The other reason to move fast is the Heat’s convenience: “They’ve got to activate the building in time for the next basketball season, which is over the summer,” Mr. Morales said, “so the sooner we get that done, the sooner things can be ready to have the Kaseya Center up and running.”

The whole affair was rushed. It wasn’t even on last week’s original commission agenda, so it was no wonder that when Chairman Gilbert asked for speakers from the public he got none. The public never knew in advance so of course was not present.

From the day the courts gave the county a go-ahead to resell FTX’s arena naming rights to last week’s vote was less than 90 days. The county got five contacts in 30 to 45 days, Mr. Morales said, and then had to choose and cut a deal – with final additions midway through the commission meeting.

When Commissioner Bastien questioned Mr. Morales she still believed the county had gotten five offers complete with financial details, not two. She was properly annoyed that while the day before Mr. Morales had promised to send her the offers to compare, she never got the figures.

That is eerily reminiscent of the vote on the $3 billion Marlins Stadium deal 14 years ago, when commissioners asked the county manager for financial details for six hours on the day of the vote, he promised the figures were on their way, and ultimately commissioners got them two days after the vote was final. They were never told the total cost in advance – in fact, the word “billion” was never uttered.

Certainly, county knowledge of Brickell-based Kaseya is slimmer than a prudent official should have before such a commitment. Mayor Daniella Levine Cava cited the company’s valuation at $2 billion but officials said they had never seen the data of the privately held company.

Kaseya’s Executive Vice President Xavier Gonzalez was sketchy when Commissioner Danielle Cohen Higgins asked before voting how many of 3,400 new hires that Kaseya promised the county months ago in order to get two economic incentives packages have been made or how much of its guaranteed investment it has actually spent.

But everyone agreed the company makes good sense as a sponsor: it’s local and, hey, at least it’s not FTX, whose name, as Commissioner Keon Hardemon noted in defense of the Kaseya deal, has given commissioners a black eye.
Besides, as Mr. Morales explained, with an 18-month irrevocable letter of credit from Kaseya the county will get paid for the next 18 months no matter what happens after that.

“At least we’ve got a year-and-a-half payment there guaranteed plus we’ve got a three-year clause under the contract in any kind of bankruptcy or litigation, so we feel pretty good about it,” he said. “There are no guarantees as we know in these kind of naming transactions but hopefully we learned from the last one and have tried to apply here.”

Besides, he said, the Heat and the NBA have signed off on the deal – implying it therefore must be solid.

Faint praise indeed.

As Commissioner Bastien correctly stated, the commission should have seen all the sponsor applications with time to review them rather than have to take it all on faith: “Moving forward, we need to do due diligence and be more transparent.”

Meanwhile, enjoy Kaseya Center.