Hyatt and the city of Miami are contemplating a deal to redevelop the chain’s Regency hotel and the city’s 35-year-old James L. Knight Center convention complex.
Under the terms of a compact being presented next week to Miami commissioners, Hyatt would have 12 months to come up with a master plan to build a new hotel with meeting space and a mixed-use development at the mouth of the Miami River. If that plan is approved, Hyatt, which has six years left on its existing lease before facing a 45-year option to renew, would execute a new and expanded 99-year agreement with the city and begin construction.
“It’s an underutilized facility and a very underutilized acreage,” City Manager Daniel Alfonso said of the 4.5-acre site. “We’re trying to get the best value for the city.”
Hyatt Hotels Corp. is currently running its 612-key hotel at 400 SE Second Ave. on an amended lease first executed in 1979 as part a $110 million public-private deal to construct the Knight Center and adjoining hotel. The agreement gives Hyatt full control over its hotel, which last year brought in $43 million in gross sales, according to an audit. The city controls the pie-shaped convention center, including the Arther Ashe Auditorium and the 4,500-seat James L. Knight Auditorium, which it subsidized last year to the tune of about $400,000.
The center is currently operated by contractor SMG.
At the time the hotel and convention center opened in 1982, the complex design was considered a feat of ingenuity and celebrated as a crucial step in downtown’s evolution. But today, even while still able to attract presidential frontrunners and some A-list celebrities, the Knight Center is generally considered somewhat of a disappointment.
Redevelopment conversations emerged 10 years ago only to sputter, and have since run hot and cold.
Karrie Dowd, Hyatt Hotels Corp. general counsel, who registered this month with the city as a lobbyist on the negotiations, did not return an email and phone call seeking comment. But it appears that Hyatt and the city resumed talks months ago about coming up with a new lease and interim agreement that would give Hyatt exclusivity for one year on an option to come up with a redevelopment plan for the entire property.
Under the terms of a term sheet and a memorandum, Hyatt would look to maximize the development capacity of the site and potentially look at new uses, including office and residential. That plan, which doesn’t specifically lay out requirements for replacing any or all of the Knight Center’s 36,000-square-feet of meeting space, calls on the hotel chain to work with city real estate consultant CBRE to find development partners and come up with a financing scheme likely to contemplate some form of public funding.
The non-binding term sheet shows that Hyatt would possibly pay an escalating base rent of at least $2 million for its new hotel, plus percentages off its other revenue-generating facilities on the property. Hyatt would also pay the city a “profit participation rent” based off either gross profit or the equity the city kicks into the project.
If a development plan is approved by commissioners, Hyatt and the city would look to execute its new lease. That agreement would have to be approved by voters in a citywide referendum in order to be final.
In the meantime, while Hyatt comes up with a development plan, an interim agreement would resolve what Alfonso said is some $1 million in disputed financial obligations.