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HomeMy WebLinkAboutReso 2008-1218 RESOLUTION NO. 2008-J.2..l..8. A RESOLUTION OF THE CITY COMMISSION OF THE CITY OF SUNNY ISLES BEACH, FLORIDA; APPROVING A SETTLEMENT IN THE CASE OF CITY OF SUNNY ISLES BEACH VS. 18100 COLLINS AVENUE SHOPPING CENTER, LTD, ET. AL., CASE NO. 04-12891 CA 10; PROVIDING FOR THE CITY MANAGER AND THE CITY ATTORNEY WITH THE AUTHORITY TO DO ALL NECESSARY THINGS TO EFFECTUATE THIS RESOLUTION; PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, in June 2003, the City filed a petition with the Circuit Court to acquire the property located at 18080 Collins pursuant to its statutory eminent domain powers; WHEREAS, on or about March 24, 2005, the Circuit Court issued an Order of Taking granting the City with legal title to the property; and WHEREAS, the Circuit Court has scheduled a trial for February 11, 2008, to resolve the valuation aspect of eminent domain petition filed by the City; and WHEREAS, the City Commission wishes to approve a settlement recommended by the City's eminent domain counsel involving the case of City of Sunny Isles Beach vs. 18100 Collins Avenue Shopping Center, Ltd. NOW THEREFORE, BE IT RESOLVED BY THE CITY COMMISSION OF THE CITY OF SUNNY ISLES BEACH, FLORIDA, AS FOLLOWS: Section 1. Incorporation of Recitals. The recitals set forth hereinabove are hereby incorporated herein by reference. Section 2. Approval of Settlement. The City Commission hereby approves the settlement as outlined in the reports of the City's eminent domain counsel and the City Attorney attached hereto as Exhibit "A". Section 3. Authorization of City Manager and City Attornev. The City Manager and the City Attorney are hereby authorized to do all things necessary to effectuate this Resolution and the Settlement. Section 4. Effective Date. This Resolution shall become effective upon execution by all of the parties thereto. PASSED AND ADOPTED this 8th day of February 2008. , '. . ( .' . -, t, . ~ ;) I . , , .~~~ ';'h ,~ ~A~ Jane A. Hines, ,CMC, City Clerk APPROVED AS TO FORM AND LEG FFICIENCY: Moved by: Co~ ~~Z)1'0 Seconded by: '../ \ a. M ~ '<"W Ai ~ > Vote: 5-b Mayor Ede1cup Vice Mayor Thaler Commissioner Brezin Commissioner Goodman Commissioner Scholl -.0Yes) 0Yes) v(Yes) ~~s) ---0Yes) (No) (No) _(No) _(No) _(No) 2 City of Sunny Isles Beach 18070 Collins Avenue Sunny Isles Beach, Florida 33 160 (305) 947-0606 City Hall (305) 949-3 II 3 Fax (305) 947-2150 Building Department (305) 947-5107 Fax City Commission Norman S. Edelcup, Mayor Lewis J. Thaler, Vice Mayor Gerry Goodman, Commissioner Roslyn Brezin, Commissioner George "Bud" Scholl, Commissioner A. John Szerlag, City Manager Hans Ottinot, City Attorney Jane A. Hines, CMc, City Clerk MEMORANDUM TO: The Honorable City Commission A. John Szerlag, City Manager FROM: Hans Ottinot, City Attorney DATE: February 8, 2008 RE: City of Sunny Isles Beach v. 18100 Collins Avenue Shopping Center, Ltd. As you know, the City has been involved in three (3) years of protracted litigation to finalize the condemnation of the property located at 18080 Collins Avenue. A trial for the case is scheduled for Monday, February 11, 2008. Prior to the scheduled trial, an amicable settlement has been reached between the City and the property owner of the aforementioned property. As required, I am presenting the settlement for approval by the City Commission. This settlement was reached after several mediations and numerous settlement meetings between city officials and the property owner and his attorneys. As indicated in the attached report from the City's eminent domain counsel, the City has agreed to settle the case for $7.0 million dollars inclusive of all fees and costs. In addition to the monetary compensation, the City has agreed to provide the following non-monetary benefits to the property (1) release and waiver of existing code enforcement fines (approximate amount is $336,400) levied against RK Associates and related entities; (2) naming the internal street, which separates the RK Associates Shopping Centers located between 170 and 171 Streets, "Ranaan Katz Boulevard"; and (4) allowing RK Associates with the ability to use two (2) colors for reverse channel signs located at its shopping centers. Clearly, the above settlement will end almost three years of protracted and expensive litigation involving the City and RK Associates. I certainly believe that this settlement brings an end to the growing expenses associated with condemning the aforementioned property. In his report, the City's eminent domain counsel recommends approval of the settlement. I concur with his recommendation. It is important to note that he City has deposited $2,250,000.00 into the Court registry at the time the Court had awarded legal title of property to the City. As such, the City is now only required to deposit $4,750,000.00 into the court Registry for full settlement of the case. EXHIBIT "A" Thank you for your consideration in this matter. cc: Fernando Amechastegui, Assistant City Attorney Doug Haag, Assistant City Manager /attachment HO/jb SH~TTS BOWEN LLP ATIORNEYS AND COUNSELLORS AT LAW SIDNEY C, CALLOW A Y Member Florida Bar (954) 847-3833 Direct Telephone (954) 888-3063 Direct Facsimile E-MAlL ADD,RESS: scalloway@shutts-law,com February 7, 2008 VIA FACSIMILE AND MAIL (305) 957-1312 Hans Ottinot, City Attorney City of Sunny I~les Beach 18070 Collins Avenue, 4th Floor Sunny Isles Beach, FL 33160 Re: Case Name: City of Sunny Isles Beach v. 18100 Collins A venue Shopping Center, Ltd, et al 2004-12891-CA-10 1 27169.0001 Case No.: Parcel No.: Client-Matter No.: Dear Hans/l~"7 Please allow this letter to serve as a follow up to our most recent discussions regarding the proposed settlement of the above-styled case. You have my most recent opinion and assessment of the above-styled case, with specific emphasis on the legal and economic risks to the City, which were associated with resolving the parties' legal and factual dispute concerning the valuation of the subject property. As previously indicated this case is currendy set as the number one case of the Court's two-week trial docket beginning Monday, FebroalY 11, 2008, and the parties have ceased formal discovelY and are currently completing file work for began trial on Monday. As I have stated before, my assessment of the City's legal position has not changed in any significant way, however the Court's delays in forcing this matter to jury trial before now has increased the City's legal and financial exposure, due ahnost exclusively to the additional time from which pre- judgment interest would be calculated on the basis of the time in which a final judgment is entered. Simply put, prejudgment interest that the City may ultimately owe to the respondent - il1:espective of the final judgment amount has increased significandy since March, 2007 - the approximate time in which you assigned this case to me. The Respondents' real estate appraiser has submitted a report and is prepared to testify that his opinion of value of Parcell is $12 million, On behalf of the City, we are prepared to present a FTLDOCS 5289886 1 200 EAST BROWARD BOULEVARD . SUITE 2100 . FORT LAUDERDALE, FLORIDA 33301 . TELEPHONE (954) 524-5505 . FACSIMILE (954) 524-5506 . WEBSITE: www,shutts-Iaw,com I I MlAMl FORT LAUDERDALE WEST PALM BEACH ORLANDO TAMPA TALlAHASSEE AMS'reRDAM LONDON Hans Ottinot, City Attorney February 7,2008 Page 2 highly credible expert real estate appraisal analysis and an opinion to a twelve (12) person jury that the fee simple market value of Parcell is not $12,000,000,00 but $3,750,000.00. This $3,750,000.00 amount represents "full compensation" to Respondents for the taking of Parcel 1. Please be reminded that this amount onlY refers to the value of Parcel 1 and specifically does not include prejudgment interest, attorneys fees or the Respondent's costs incurred in connection with this lawsuit. The amounts associated with these elements of full compensation would be added to the amount established for the value of Parcell. Given the above, kindly find for your review and information the following assessment of the legal and economic risks facing the City as a result of the instant valuation dispute with the Respondent, 18100 Collins Avenue ShoppingCenter, LTD, based upon the following facts: PROCEDURAL FACTUAL BACKGROUND' The City of Sunny Isles Beach, due to resident population growth and a con:esponding need for increased City services, detetmined that it needed to acquire property to develop its planned public works facility. In or around 2003, the City undertook appropriate action to identify and acquire suitable property and ultimately determined that the property immediately adjacent to the northern boundaty of its new City Hall property was the most preferred site. The site, which is also known as ''Parcell'' was owned at the time by Mitsubishi Corporation of America, whose United States corporate offices is located in the State of California. Parcell has about 100 feet of frontage along the western side of Collins Avenue and is about 450 feet in depth, which equates to about 40,000 square feet or .93 acres. At all times relevant, Parcell was improved with a 300 square foot building that was being used by Alamo Rent A Ca1:, the then current tenant, who held a 20 year lease to Pa1:cel 1. Alamo's leasehold interest was later acquired by Vangua1:d Car Rental. At all times relevant, however both Alamo and/Vangua1:d were in full compliance with the terms and conditions of their Lease with Mitsubishi Corp. In June 2003, the City tendered an offer to purchase Parcell from Mitsubishi Cmp. for $1,570,000; however the City learned almost immediately that Mitsubishi Corp. had sold Pa1:cel 1 to the Respondent for $1,900,000. Consequendy, the City tendered the same offer amount to Respondent, who rejected the same. The City filed its Petition in Circuit Court to acquire Parcel 1 in its entirety ("total take") pursuant to its statutOlY eminent domain powers. The Court ultimately granted th~ ' City's Motion for an Order of Taking as to Parcel 1. On or about April 1, the City ratified its tide and interest in Parcell by depositing $2,250,000 in the Court Regisuy. In January, 2007, the Court issued its Order, which among other things placed this case on its two week trial docket beginning May 7, 2007. ' LEGAL AND RISK ANALYSIS The core factual dispute between the parties concerns the issue of the value of Parcel 1. At the present time, the City maintains that the fair market value of the fee simple interest in Parcel 1 is $3,750,000. Respondent, on the other hand claims that fair market value of the subject parcel ranges FTLDOCS 5289886 1 MIAMI FORT LAUDERDALE SHUTIS & BOWEN LLP WEST PALM BEACH ORLANDO TAMPA TALLAHASSEE AMSTERDAM LONDON Hans Ottinot, City Attorney February 7, 2008 Page 3 between $8,000,000 and $12,000,000. Both parties have supported their valuation of Parcel 1 through the use of a state certified real estate appraiser. While a number of other individuals have been listed by each side as potential witnesses in the instant jury trial, the key witness for each party is the respective appraisers, Barry Diskin for the Respondent and J. Mark Quinlivan, for the City. As for Parcell, Mr. Quinlivan originally appraised it in or around January, 2003 and opined that the fair market value of the Parcel was $1,570,000. Quinlivan later appraised the subject parcel in about February, 2004, and opined that its fair market value was $2,250,000: His most recent appraisal of the subject parcel establishes the fair market value at $3,750,000 for its fee simple interest. For our pmposes, the fee simple interest typically represents the value of the total bundle of property rights inherent in a property. It is important to note, however, that after filing its eminent domain Petition, but before the Court entered the Order of Taking, the City successfully negotiated the acquisition of Vanguud Car Rental's leasehold interest in Parcel 1 for the sum of $450,000. That settlement essentially left Respondent's leased fee interest, as the remaining valuation issue. Quinlivan was specifically tasked with providing a valuation opinion of Respondent's leased fee interest in Parcel 1. He is expected to testify, however, that the professional appraisal standards required him to appraise Parcel l's fee simple interest as a prerequisite for opining the value of the leased fee. As such, he will further testify that the fee simple value of the suiject properry as of April 1, 2005 is $377507000 and the leased fee value of the suiject Parcell, as of April 1, 2005, is $371007000. These are the amounts that will be presented to the JUry as the reasonable and fair compensation that is owed to the Respondent. To date, I have worked closely with Quinlivan to prepare for this case and remain confident that Quinlivan's substantial experience in performing as an expert appraisal witness, along with his legal training and personal demeanor will serve both he and the City well at trial. On the other hand, as indicated above, I expect that Respondents' appraiser - Barry Diskin - will proffer his professional opinion that the fee simple market value of Parcell is $12 million. The more striking aspect of his appraisal analysis and opinion is that it relies upon three (3) land sales comparables - all of which were used in Respondent's prior appraisal. Our pretrial work and legal strategy has all but eliminated any prospect that Respondents will attempt to proffer any value related testimony or documents associated with "Transferable Development Rights ("TDRs"). To that end, I fully expect to prevail in a pretrial Motion in Limine to exclude any testimony or documents by Diskin or any other witness (es) which -either relies upon or considers TDRs or a so called "alternative valuation methodology" using transferable development rights transactions as a basis for opining on the fair market valuation or full compensation due to Respondent. In order to support his opinion that the fair market value of Parcell is $12,000,000 the first of Diskin's land sales comparables is a purchase option contract transaction, dated November, 2005, and which actually did not close until January, 2007 for $12,000,000. The property that was the subject of the option contract is located at 17150 Collins Avenue, on the west side and directly abuts the lUscal Plaza Restaurant (17190 Collins Avenue). The seller of this slightly less than one acre parcel (hereinafter "the Rascal Plaza transaction") was Babsky and the purchaser was Isaac Starkman. The sworn testimony of Mr. Starkman confirms my earlier assessment that this transaction was, in fact, atypical and dominated by the investment considerations of Starkman ,in the I i I FTLDOCS 5289886 1 SHUTIS & BOWEN LLP MIAMI' FORT LAUDERDALE WEST PALM BEACH ORLANDO TAMPA TALLAHASSEE AMSTERDAM LONDON Hans Ottinot, City Attorney February 7,2008 Page 4 context of the parcel's unique and critical relation to three other adjacent lots that were already assembled by Starkman for development as the Epicure Project. The Epicure Project, which includes the contested parcel, has received the necessary governmental zoning approvals to develop approximately 241 condominiums in a lS-story building, but also over 77,000 square feet of office space and over 22,000 square feet of retail space. While I expect that the Court should have little doubt for finding a legal basis to grant our Motion in Limine to exclude all testimony and evidence relying upon this transaction as a basis for establishing the fair market value of Parcel 1, there is some possibility that the Court may choose to let this evidence in on the basis of it going to the "weight of the evidence" in addition to eliminating this as a post-trial appellate issue for the Respondents. It is also somewhat likely that Respondents will also attempt to introduce evidence of a real estate appraisal, which purported to value the entire three (3) sites known as the "Epicure Project". This particular appraisal was performed on behalf of Wachovia Bank, who apparently was the lender that financed Starkman's purchase of the Rascal Plaza transaction. That financing transaction encompassed funding to satisfy the outstanding mortgage on Starkman's earlier purchase of three lots (roughly $5-6 million) as well as additional money to purchase transferable development rights from another sender site. The TDRs were needed to accomplish the Epicure Project development goals. In essence the Wachovia appraisal for the Epicure Project opined that the fair market value of the assembled three (3) plus acres was $47,000,000. A subsequent addendum to the appraisal, by the same appraiser, then carves out, the fair market value for the three lots, excluding the Rascal Plaza transaction, at $33,000,000. I fully expect to prevail in another Motion in Limine to exclude all testimony or documentary evidence that relies upon or considers this appraisal or facts surrounding such to support valuation of Parcell or compensation to Respondent. In addition to Diskin's use of the Rascal Plaza transaction, he also used two (2) other expanding land sales to support his valuation opinion. I am aware that each of these land sales are transactions involving assemblage of a parcel to be used in, connection with major condominium/hotel developments on Miami Beach. The second land sale comparable was a site needed for additional parking supply to support the development of the Fountain Bleau hotel! condominium project at 43rdStreet and Collins Avenue. The third land sale occurred at Alton Road on Miami Beach and was also hinged on satisfying a unique development goal for the purchaser. Both, of these sales also are residential/apartment related transactions and have little relation to office or retail-type development. It is also important to note that Diskin's appraisal hinges on land sales with a significant, if not, exclusive residential component. LEGAL OPINION ON CASE VALUE AND SETTLEMENT In sum, in trial, I expect that Respondent's factual basis to support a $12,000,000 valuation opinion to be severelY dependent upon .convincing a jury that, as of April 2005, it was entirely reasonable to expect that Parcell would be maximally developed with a significant residential component. On the other hand, it is my opinion that a jury will more likely find it reasonable to believe Parcel 1 would be developed, if at all, primarily as an office type use with a limited retail component. To that end, I am confident that we can present a reasoned, practical and easy-to-understand case for why the jury FTLDOCS 5289886 1 SHUTIS & BOWEN LLP MIAMI FORT LAUDERDALE WEST PALM BEACH ORLANDO TAMPA TALLAHASSEE AMSTERDAM LONDON Hans Ottinot, City Attorney February 7,2008 Page 5 should award Respondent not more than $3,750,000 as the fee simple market value and $3,100,000 for the leased fee value of Parcell as full compensation for the City's acquisition of ParcelL It is important, however, to understand that jury trials can be and often are very complex and unpredictable. There are many dynamics in any given case that could sway a jury to "split the baby" or give an extreme verdict. It is not outside the realm of reasonableness that a jury in this case might award Respondents between six million and seven million dollars for Parcel 1. RESPONDENTS' PROPOSED SETTLEMENT OFFER Since last week Respondent have apparently deemed it prudent to offer the City the prospect of resolving this lawsuit on the basis of the City's payment of $7,000,000 to Respondents. This amount includes not only the value of Parcel 1, but also all sums due to Respondents for prejwlgment interest, attorneys' fees and cost incurred as a result of this eminent domain lawsuit. In my earlier letter opinion I suggest to you that resolving this case at a figure representing a 25% margin above the fee simple value of Parcell ($3,750,000) would yield a reasonable negotiated settlement amount of about $4,687,500.00. The present offer by Respondent, however, should be looked upon favorably because it includes a reasonable amount for the market value of Parcel 1 at $5,250,000.00. Based upon this amount, the compensable amount due to Respondents, which represents pr~judgment interest is approximately $896,000,00. This number is based upon simple interest calcuktions for the period beginning With the City deposit of funds representing its good faith estimate of value and time in ,final judgment is reached. Please note that the interest rate used is based upon Florida Statutes has progressively changed every year since 2005, the :first year of the , taking. I also proffer that th~ attorney fees due to Respondent is also calculated in accordance with a benefits definition and established formuk that is also enumerated in the Florida Statutes which govem the award of attorneys fees in eminent domain cases. The amount associated with the attomeys fees in this cased based upon the ''benefits analysis" and the resulting statutory formula is approximately $806,000.00. The remaining compensable amount due to Respondents typically would be their costs - usually the amount incurred to retain real estate appraisers, engineers, architects, planners and others. But this amount also includes some typical cost incurred such long distance phone calls, certain travel items, facsimile, courier, certain copying costs, and the cost of depositions transcripts and court reporters who transcribe hearings and depositions. In the proposed $7,000,000.00 settlement amount includes the sum of (a) the ~arket value of Parcel 1- $5,250,000, (b) prejudgment interest - $896,000 and (c) attorneys fees - $806,000 which totals $6,952,000. Although this would effectively leave Respondents with roughly $48,0000 to pay its costs, the actual allocation of the $7,000,000.00 is not City's responsibility since Respondent has agreed to accept an all inclusive amount. In addition to the fact that the amount proposed is within the reasonable limits of what you might expect a jury to decide, the settlement also represents a cessation of the added prejudgment interest expense, which is currently being computed at the statutory rate of 11 %. Other costs and savings to FTLpOCS 5289886 1 MIAMI FORT LAUDERDALE smms & BOWEN LLP WEST PALM BEACH ORLANDO TAMPA TALLAHASSEE AMSTERDAM LONDON Hans Ottinot, City Attorney February 7, 2008 Page 6 the City that you should consider also include payment of City own litigation attorneys fees and costs for a 7-9 day trial. Whether the City wins or loses at tria~ the added expense associated with a likely appeal, taken by either the City or the Respondents further increase prospect of more fees, cost and prejudgment interest. On the basis of the aforementioned analysis and facts, I fully recommend and support the proposed settlement for $7,000,000.00. Sincerely, SCC/jl SHUTTS & BOWEN LLP ~ Cc: Rachel LeBlanc FTLDOCS 5289886 1 SHUTIS & BOWEN LLP I MIAMI FORT LAUDERDALE WEST PALM BEACH ORLANDO TAMPA TALLAHASSEE AMSTERDAM LONDON TO: FROM: DATE: RE: City of Sunny Isles Beach 18070 Collins Avenue Sunny Isles Beach, Florida 33160 (305) 947-0606 City Hall (305) 949-3 I I 3 Fax (305) 947-2 J 50 Building Department (305) 947-5107 Fax City Commission Norman S. Edelcup, Mayor Lewis J. Thaler, Vice Mayor Roslyn Brezin, Commissioner Gerry Goodman, Commissioner George "Bud" Scholl, Commissioner A. John Szerlag, City Manager Hans Ottinot, City Attorney Jane A. Hines, CMC, City Clerk MEMORANDUM Hans Ottinot, City Attorney ?uJo..Q1~ Priscilla Walker, CMC, Deputy City Clerk February 13,2008 Approval of Settlement Agreement for City of Sunny Isles Beach vs. 18080 Collins Avenue Shopping Center, Ltd. Et. AI. At a special meeting of February 8, 2008, the City Commission adopted Resolution No. 2008- 1218, which approved a settlement agreement for "City of Sunny Isles Beach vs. 18080 Collins Avenue Shopping Center, Ltd. Et. Al." Attached is a copy of the approving legislation to assist you in processing this item, Thank you. /pw Attachments cc: A. John Szerlag, City Manager Anice Paul, Administrative Assistant to Finance Department 18080 Collins Ave Settlement Agrmt Trans Memo