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Of all the plans to inject more revenue into PortMiami’s strapped finances, none has the sizzle of David Beckham’s personal soccer team. But can the most indebted port on the East Coast afford the fun and games?
That’s a central question facing elected leaders as they consider Beckham’s offer to bring professional soccer back to Miami in exchange for a stadium site at the port.
The nine acres he wants near the shallows of PortMiami’s southwest corner would upend the port’s own detailed plans for millions of dollars in new real estate income from a proposed trade and tourism center that could contain as much as 7 million square feet of new revenue-generating space. The controversial venture, opposed by Miami’s commercial real estate industry, was designed to help PortMiami create a new profit source as it manages a debt load quickly nearing the $1 billion mark.
The port’s financial challenges — Moody’s downgraded its credit rating last fall, citing concerns about a cash squeeze — raise the stakes for Beckham as his team pursues a stadium footprint that would account for about 25 percent of the land the port wants for commercial development. Miami-Dade Mayor Carlos Gimenez has said he will insist on compensation for any stadium land, but the deal could hinge on just how bullish the county should be on the port’s ability to be downtown’s next big commercial district.
“The conversation about soccer has never been just about soccer,” Gimenez said Saturday. “If a stadium can be a catalyst to development, we’re interested. If a stadium is going to be a hindrance, we’re not interested.”
Soccer backers see the port’s commercial strategy as too ambitious, and argue that a stadium with Beckham’s cachet can deliver both the foot traffic and the political support that PortMiami needs to bring private development to its island home.
“The port will achieve a greater return sooner because of the higher value of the real estate that remains for development,” said Neisen Kasdin, the former Miami Beach mayor and lawyer leading Beckham’s negotiating team.
Supporters of the port’s growth blueprint see the world’s most famous soccer star robbing PortMiami of crucial real-estate dollars in the coming years.
“That is precious, precious property,” said Frank Nero, former head of Miami-Dade’s Beacon Council, a tax-funded economic development agency. “That site is an ideal site to attract commercial development, there is no doubt about it. That site could be some of the most valuable land in the state of Florida.”
A Nov. 20 memo from port financial consultant Paul Lambert estimates the land Beckham wants for a stadium could generate at least $3 million a year in rent. His analysis assumed the real estate was used for a commercial center filled with hotels, office space, restaurants and shops as envisioned in the port’s pre-soccer 2011 master plan.
That’s sizable rent for a stadium deal. A new Major League Soccer team in Orlando agreed to pay about $600,000 a year for its government-financed stadium, while the Miami Heat’s agreement with Miami-Dade has only yielded a single payment of $257,134 after 13 years in the county-owned AmericanAirlines Arena. And that’s with a $6 million yearly subsidy from county hotel taxes.
It’s unlikely Beckham’s team would agree to paying Miami-Dade $3 million a year, especially since Beckham said he will not seek local tax dollars, said Irwin P. Raij, a stadium-finance attorney at Foley & Lardner.
“If I was a soccer team, I would be concerned about what kind of strain that would put on the model,” said Raij, who represented Major League Baseball in the 2009 Miami Marlins deal. “That could be a heavy lift for a stadium by itself.”
Beckham’s Miami soccer designs come at a delicate time for the port, as it prepares to add about $350 million in the coming years to a debt load that Moody’s says is already the fourth largest among U.S ports, behind Los Angeles, Long Beach, Calif, and Tacoma, Wash. Most of the $200 million in bonds set to be sold this year will go to pay Miami-Dade’s $309 million tab for the tunnel opening in May to link PortMiami to the MacArthur Causeway.
About half of the port’s current $920 million debt is backed by fees it charges to cruise operators and cargo ships, with $444 million backed by the county’s overall taxing power. PortMiami, a county department, uses its revenues to make payments on both categories of debt, but Moody’s warned in September that a coming cash squeeze could leave the port short of the income needed to meet its obligations for the county portion.
Port executives plan to use cash surpluses to fund the gap, Moody’s said, but they face tough competition for cargo and cruise dollars from Port Everglades and beyond.
And while recently negotiated leases with cruiseship companies and cargo operators are set to yield more revenue long term, PortMiami risks losing business if it increases dockage fees to cover mounting debt costs.
That leaves real estate development as a key source of new revenue, port executives said, particularly if the cruise or cargo industry takes a dive.
“As you can see, we are on the edge financially,” Kevin T. Lynskey, assistant port director for business initiatives, said of PortMiami’s remaining $400 million tab for the tunnel and other expansion projects. “And I think we all view the potential of the southwest corner as a buffer against any downturn.”
Amid budget pressures, the push for a soccer stadium is causing tension among the port’s existing tenants. Emails show the operator of a fuel-spill facility insisting on protection against soccer traffic in its new lease agreement. And in a Dec. 19 email to deputy port director Juan Kuryla, a top Norwegian Cruise Line executive expressed shock that some Miami-Dade commissioners backed a soccer stadium at a facility that handles more than 4 million cruise passengers a year.
“What are they thinking??” wrote Colin P. Murphy, vice president of strategic development for Norwegian. “Can I assume we have nothing to worry about with this? Or could it happen?”
With Beckham enjoying initial support from Gimenez and county commissioners, port executives have been looking at options to make the sports venue more compatible with the original plan, according to internal emails provided to the Miami Herald as part of a public-records request for port documents related to the soccer proposal.
One Nov. 12 email chain shows Port Director Bill Johnson and his senior staff preparing for a meeting on soccer with Gimenez.
Under the heading “Issues surrounding the fiscal impact of the stadium on the Port’s fiscal plan,” the summary notes: “The proposed stadium site cuts the SWC [southwest corner] in half with a structure nearly identical to the AAA arena, leaving 2 separate developable pods that would be very hard to integrate in a meaningful way.”
The meeting summary also included the pros and cons of using underwater dirt from the upcoming dredging of PortMiami to add 12 acres to the southwest corner — a costly option that would create more than enough extra land to accommodate the soccer stadium and the original development plan. Another section discussed filling in a large boat basin next to the AmericanAirlines Arena to create more frontage on the bay. A third scenario involves moving the stadium east of the current headquarters of Royal Caribbean. That scenario would remove soccer from the port’s development area.
Having “an anchor on the furthest East portion of the site, such as the Beckham Stadium, would be a tremendous attribute. You could not ask for something better,” Miami architect Chad Oppenheim, a port consultant, wrote in a Nov. 27 email to Johnson and others. “Albeit, the stadium would be less central (which I believe we all feel unanimously is a positive).”
One scenario under consideration would make Beckham’s team the master developer of all or part of the site, according to emails and interviews with people familiar with the talks. That could be challenging, given the millions of dollars up for grabs in building out the land. Richard D. Fain, CEO of Royal Caribbean, wrote Gimenez to say he could support a soccer stadium, but also noted the site may be a factor as RCL decides where to berth its ships in later years.
We “have been evaluating expanding our future large ship presence here at PortMiami, and possibly making significant investments in port infrastructure and our corporate campus,” Fain wrote in a Dec. 13 letter. “We welcome the opportunity to discuss this further.”
While Beckham’s negotiators are mostly staying quiet publicly, they’ve found allies in Miami’s commercial real estate industry, which largely opposes the port’s plan to be a new player in the city’s development sector. In December, the city’s tax-funded Downtown Development Authority wrote to PortMiami protesting its planned commercial development, as others warn of an ill-fated venture that would flood an already glutted market.
The latest development study funded by the port contains a far more ambitious blueprint than the 23-acre mix of hotel rooms, office and yacht slips sketched out in PortMiami’s official master plan released to the public in December 2011.
Drafted by Oppenheim and other consultants, the 2013 plan depicts a 40-acre expanse of glass-walled office buildings and hotels, including a 20-story convention center and headquarters hotel, and a 60-story high-rise filled with condos and more hotel rooms. It fronts a luxury marina, and joins Bayside with the same pedestrian footbridge Beckham wants to link his soccer stadium with the mainland.
Dubbed the World Trade Center Miami, it would take about 20 years to build and includes 1.2 million square feet of hotel space, nearly 1 million square feet of residential, and more than 4.5 million square feet of office. Port executives said the Oppenheim plan has not been made public until now.
Port executives also caution against seeing the plan as more than just a possible vision for the property. But the detailed plan, jointly funded by the non-profit World Trade Center Miami organization, reflects the uphill fight that the port’s development plan faces with Miami’s commercial landlords and builders.
“We have a 12 percent vacancy rate right now, and a market is considered healthy at 5 percent. We have a long way to go,” said Jack Lowell, vice president at Flagler Real Estate Services. “There are a lot of private developers that would be affected by a major commercial development by the port.”
Political pressure in Miami may prove a significant advantage for Beckham, since the city of Miami gave the county the port island with the condition that it always be used for port purposes. By shifting the development plan to more of an entertainment destination surrounding a soccer stadium, the port could mollify foes on the commercial side and still generate revenue from hotels, shops and restaurants built on the site.
And with a recent Beckham sweep through Miami leaving behind a wake of cellphone “selfies” with the county’s political and business leadership, his star power offers the prospect of PortMiami winning quicker approval to start building something on the southwest corner.
“It’s really a question of opportunity. Do we punt [on soccer] and wait for the retail to come, or do we take the bird in hand?” said Steven Medwin, managing director of the Jones Lang LaSalle commercial brokerage in Miami. “Having an anchor with a stadium, assuming it doesn’t take up all the land, might be the play there over time…. You don’t always get a second bite of the apple.”