County floats bonds for Royal Caribbean headquarters

Some $455 million in Miami-Dade County Seaport Revenue Bonds that will help fund new county-owned facilities at PortMiami that include a new office campus for Royal Caribbean Cruise Ltd., the globe’s second-largest cruise carrier, are floating on a high bond rating.

Fitch Ratings, one of a handful of firms that rate the strength of municipal bonds, has given the bonds an A rating based in part, the firm says, on the seaport’s “fundamental operating strengths, including its global leading cruise port market position and its role as one of the largest ports in the state of Florida in terms of cargo volume.”

The world’s largest cruise corporation, Carnival Corporation, also headquartered in Miami-Dade, is based in privately owned space in Doral.

The bonds are payable solely from the port’s net revenues.

“PortMiami will fund all or a portion of the bond cost of issuance and required bond debt reserve requirement currently estimated at $43.5 million,” Edward Marquez, who was then the county’s chief financial officer, wrote in July.

The total $600 million project includes an office building, a garage, surface parking, green space, a fitness center and daycare, and renovation of Royal Caribbean’s two existing office buildings that with the new building will comprise the corporation’s global campus. The county is to finance up to $455 million of the project’s cost.

PortMiami’s operating revenues showed strong recovery in fiscal 2023, growing by 45% from $177.3 million in 2022 to $256.7 million in 2023 and up 55% compared to fiscal 2019, Fitch reported before issuance of the bonds. The revenue recovery was supported by a return of cruise activity and a continuation of strong cargo performance, Fitch said.

Cargo volumes, which increased significantly throughout the pandemic due to strong consumer demand, softened in 2022 and 2023 amidst a global slowdown of containerized cargo movement following the initial surge of demand but are expected to increase over the next few years given the addition of new services from ocean carriers, Fitch said.

Based on existing contracts for the three terminal cargo operators at PortMiami, Fitch said it expects a return to favorable cargo volume trends in 2024, while rates contractually increase by 3%.

Cruise activity ramped up significantly in 2022 and 2023, with many cruise lines rebounding to operate at or over 100% occupancy, Fitch said. PortMiami recorded a total of 7.3 million passengers in fiscal 2023, compared to 6.8 million in fiscal 2019.

The port anticipates cruise passenger moves to increase to about 9.4 million by fiscal 2028, based on cruise contract obligations and continued capital investments, Fitch said.

Royal Caribbean’s rent payments at the seaport to the county are to increase by 1.25 times the actual cost of debt service on the bonds, Mr. Marquez wrote, “which will repay any and all cash outlays through a lease increase” approved by county commissioners.

In April, the county approved bond issuance to pay the costs of the Royal Caribbean project.

The county commission in January 2022 approved the amendment to the Royal Caribbean Cruises lease to add a third Royal Caribbean office building on the port. Royal Caribbean signed the lease in May 2019, committing at least $300 million to add improvements to its global headquarters campus at PortMiami.

The work was to be done by Dec. 31, 2022. But the company temporarily suspended construction on May 15, 2020, as the industry was struggling with effects of the covid pandemic including a long-term shutdown.

As the cruise industry resumed operations in July 2021, Royal Caribbean notified PortMiami of the intent to resume construction and requested a two-year extension to complete the work, moving the completion date to Dec. 31, 2024.

The project includes a new office building, parking garage, surface parking, green space, a fitness center and daycare, and renovation of the two county-owned Royal Caribbean office buildings at 1050 and 1080 Caribbean Way on the seaport’s land.