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Ten acres of dirt, concrete and warehouse space at the port of Miami have turned Royal Caribbean Cruises Ltd. and billionaire car dealer Norman Braman against soccer star David Beckham.
Beckham, 38, wants to use the land for a $250 million stadium for a Major League Soccer expansion team. Miami-based Royal Caribbean and Braman, 81, a civic activist who has opposed publicly financed stadiums, welcome Beckham’s team. They just want it to steer clear of the world’s largest cruise-ship hub.
A decision on the land by Miami-Dade County commissioners and Mayor Carlos Gimenez will help determine how much revenue the port has to pay down debt that will exceed a record $1 billion after a scheduled tax-exempt bond sale next week.
“While it sat empty for years, that land’s suddenly become very precious,” said Jack McCabe, a real estate consultant in nearby Deerfield Beach. “It’s amazing what celebrity interest will do.”
Miami is borrowing to help its port — a man-made island in Biscayne Bay that’s shaped like a cruise ship — prepare for the widening of the Panama Canal. The municipality wants to compete with other U.S. cities to attract larger ships after an expansion to the canal scheduled to be finished by 2016.
The standoff risks raising the county’s borrowing costs for the port as officials predict the facility’s revenue will rise enough to pay off a mounting debt burden.
“There are these high hopes, and what if they don’t come to fruition?” said Justin Land, who helps manage $3 billion of municipal bonds at Naples, Florida-based Wasmer, Schroeder & Co.
“With the yields as low as they are today in general, I just can’t imagine it will price at a level where we would be compensated for all the future unknowns,” said Land, whose firm is avoiding the seaport’s debt. Benchmark muni yields are close to 10-month lows.
Revenue from cruise and cargo operations fell short of promised levels last year and Moody’s Investors Service said in August that the port wasn’t bringing in enough money to cover future debt service.
Investors have demanded about 1.5 percentage points of extra yield this year on average to buy Miami-Dade County seaport bonds maturing in October 2029 instead of benchmark debt, data compiled by Bloomberg show. That’s almost double the average spread on revenue debt graded one step higher.
Miami-Dade issued $383 million of debt in September that PortMiami used to fund a $2 billion renovation scheduled for completion next year. Those funds, along with next week’s debt, will go toward deepening water and building a tunnel facilitating truck access to nearby highways.
The county, which owns the port, plans to sell $206 million in tax-exempt revenue bonds May 6 that will be repaid with port proceeds, said Frank Hinton, director of bond administration for Miami-Dade. The sale will put debt above $1.1 billion, pushing the port to seek new revenue. The total includes about $696 million in direct port debt and about $454 million in loans and bonds that Miami-Dade has issued on PortMiami’s behalf.
Major League Soccer in February awarded Beckham a Miami expansion team that will play its first season in 2016. The former English captain played six seasons with MLS’s Los Angeles Galaxy and retired from the sport last year.
Before he proposed the stadium last year, officials at the downtown port crafted a plan calling for the land to be used for offices, hotels and retail.
A soccer team that will pay rent to the county for the land is a better option, said John Alschuler, chairman of HR&A Advisors, who is working with Beckham on the stadium. That money can help the port repay its bonds, he said.
“We’re the only idea out there ready to come tomorrow, pay market rent and help the port meet its debts,” he said.
Simon Oliveira, a Beckham spokesman in London, didn’t respond to requests for comment on the stadium.
As Royal Caribbean and Braman lobby against them, Alschuler and Beckham are negotiating with the mayor and commissioners, who will decide whether to approve a 25,000-seat stadium on the county-owned land. The team isn’t seeking tax dollars from the county for the stadium, Alschuler said.
“This is the only port we have and we think it’s real estate that ought to be preserved for port-related purposes,” said Rob Zeiger, a spokesman for Royal Caribbean. “We don’t see how trying to bring 30,000 people into this area on a regular basis can do anything but create traffic problems.”
Royal Caribbean supports a Miami team, just not at the port, Zeiger said. Braman and other critics echo that view.
Mayor Gimenez has signaled that he’s open to a stadium at the site. Commissioners have raised concern over traffic and costs.
Port improvements in Miami, Baltimore and other cities will accommodate cargo ships carrying the equivalent of 13,000 20- foot containers via the Panama Canal. That’s more than twice the capacity of current ships passing through the canal.
Sixty-three of 82 ports surveyed by the American Association of Port Authorities planned to invest $46 billion on infrastructure from 2012 through 2016, according to Randy Gerardes, an analyst with Wells Fargo Securities. That compares with a combined $30.1 billion spent from 1946 through 2005.
PortMiami had the fourth-most debt among U.S. ports after Los Angeles; Tacoma, Washington; and Long Beach, California, according to a January Moody’s report. The review of 27 ports didn’t include the Port Authority of New York and New Jersey because it gets more revenue from airports than seaports.
Moody’s cut PortMiami’s rating to four steps above junk in August. Projected revenue wasn’t sufficient to make payments on the growing debt and the port would have to draw from reserves by 2017, Moody’s said.
On April 3, Miami-Dade County alerted investors that its auditors discovered an accounting error that pushed net revenue for 2013 below the $45.3 million floor promised in offering documents for last year’s bonds.
Moody’s said the alert wouldn’t immediately affect the port’s rating. The port had enough revenue for debt service even after the shortfall, Miami-Dade County Deputy Mayor Ed Marquez wrote in a letter to investors.
Operating income fell 2 percent to $43.2 million in fiscal 2013, the first decline since 2009.
A July report commissioned by the port projected that revenue from cruises and cargo shipping would help boost operating income by 10 percent annually through 2018. Growth in operating income averaged 4.9 percent annually from 2003 through September 2012.
Annual debt service, which is paid from operating income, will be about $48.3 million this year, reaching $63.3 million by 2018, according to county records.
Andria Muniz-Amador, a PortMiami spokeswoman, didn’t return calls seeking comment on the stadium plan.
Royal Caribbean, the world’s second-largest cruise line, is helping rally opposition to the port stadium. The company, whose headquarters is at the port, is part of the Miami Seaport Alliance, a group led by former Royal Caribbean Vice President John Fox that paid for anti-stadium ads in the Miami Herald.
“The alliance cannot understand what putting a soccer stadium in the middle of a busy port can do to further business and create jobs,” Fox said.
Braman has opposed publicly financed stadium deals for Miami teams. He helped defeat the Miami Dolphins’ quest for tax dollars to upgrade a football stadium last year. Braman said that while Beckham’s group hasn’t requested local tax dollars, it would be unwise for the county to give up land at a port that has been renovated with taxpayer funds.
“Next to tourism, the port is the major source of industry and commerce,” he said. Putting a soccer stadium there “just doesn’t make sense,” he said.
A former owner of the National Football League’s Philadelphia Eagles, Braman said he’s willing to tap his fortune to defeat the stadium plan. He said nobody has asked him to do that — yet.
With assistance from Bill Faries in Miami.
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