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RESOLUTION NO. 13,621
2
3 A RESOLUTION TO AUTHORIZE A LETTER OF INTENT TO FWH II
4 LITTLE ROCK, LLC, TO ENTER INTO A LEASE AND CONCESSION
5 AGREEMENT WITH THE CITY OF LITTLE ROCK, ARKANSAS, AND
6 THE LITTLE ROCK ADVERTISING & PROMOTION COMMISSION,
7 FOR THE PROPERTY COMMONLY REFERRED TO AS THE
8 PEABODY HOTEL AND STATEHOUSE CONVENTION CENTER; AND
9 FOR OTHER PURPOSES.
10
11 WHEREAS, the City has earlier received information that the current lessee of the hotel and
12 convention center facilities, and operator concessions, in the are commonly referred to as the Peabody
13 Hotel and the Statehouse Convention Center, wished to terminate its agreement with the City; and,
14 WHEREAS, there have been ongoing negotiations with Fairwood Hospitality Investors II, LLC, and
15 that a letter of intent has been received from FWH II LITTLE ROCK, LLC, has been received which sets
16 forth the basic terms and conditions for a formal lease agreement; and,
17 WHEREAS, the Little Rock Advertising & Promotion Commission has reviewed a proposed letter of
18 intent and recommends that it be executed and forwarded; and,
19 WHEREAS, the Board of Directors finds that this letter of intent is acceptable, and that a formal
20 lease agreement with FWH LITTLE ROCK, LLC, should be entered negotiated and entered if possible;
21 NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE CITY
22 OF LITTLE ROCK, ARKANSAS:
23 Section 1. The Mayor is authorized to execute a letter of intent to enter into a lease and concession
24 agreement with FWH II LITTLE ROCK, LLC, in substantially the same form as that attached as Exhibit
25 1 to this Resolution.
26 Section 2. The Mayor, City Manager, City Attorney, and any other necessary City Officials, are
27 authorized to enter into formal lease negotiations with FWH II LITTLE ROCK, LLC, to accomplish a
28 lease that is substantially in accordance with the provisions of Exhibit 1.
29 Section 3. Severability. In the event any title, section, paragraph, item, sentence, clause, phrase, or
30 word of this resolution is declared or adjudged to be invalid or unconstitutional, such declaration or
31 adjudication shall not affect the remaining portions of the resolution which shall remain in full force and
32 effect as if the portion so declared or adjudged invalid or unconstitutional were not originally a part of the
33 resolution.
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Section 4. Repealer. All laws, ordinances, resolutions, or parts of the same, that are inconsistent
with the provisions of this resolution, are hereby repealed to the extent of such inconsistency.
ADOPTED: December 18, 2012
ATTEST✓-1 APPROVED:
'Sdisa to gle City Clerk
APP D TO LEGAL FORM:
Thomas M. Carpenter, City orney
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December , 2012
Mr. Robert M. Solmson
FWH II Little Rock
c/o Fairwood Capital, LLC
850 Ridge Lake Blvd., Suite 220
Memphis, Tennessee 38120
RE: Little Rock Hotel Lease
Dear Mr. Solmson:
This non- binding letter of intent ( "LOI ") expresses the intention of the City of Little Rock ( "City ")
and the Little Rock Advertising & Promotion Commission ( "Commission "), as agent for the City, to enter
into a lease and concession agreement ( "Lease ") with FWH II Little Rock, LLC, a Delaware limited
liability company ( "FWH "), on substantially the following terms:
1. Pro e . 418 -key hotel property currently known as The Peabody located at Three Statehouse Plaza,
Little Rock, Arkansas 72201.
2. Term. Initial term of forty (40) years with two (2) optional renewal terms of twenty -five (25) years
each.
3. Rent. Annual rent as follows:
Year Rent
2013 $85,000
2014 $90,000
2015 $95,000
2016 $105,000
2017 $120,000
2018 $135,000
2019 through December 31, 2052 $150,000
4. Rent Structure for option terms:
The parties shall negotiate in good faith annual rent to be fixed for each renewal term;
provided, however, that the annual rent shall not exceed the greater of $400,000 per year or
1% of total gross revenue of the hotel, as reported, for the last full operating year preceding
the subject renewal term.
5. Brandin s. The Property shall be initially rebranded as a full - service Marriott hotel and shall at all times
while it is so branded maintain Marriott performance standards. Subject to Marriott approval, which
shall be in its sole discretion, the actual hotel name shall include the words "Little Rock Riverfront ".
IPage 3 of 71
I Other approved full- service brands shall include the following: Hilton, Hyatt, Marriott, and selected
2 Starwood full service brands with such approved list to reviewed by both parties every five (5) years.
3 6. Property Improvements. In conformance with the Marriott Property Improvement Plan, FWH shall
4 make interior and exterior renovations to the Property including but not limited to new case goods and
5 soft goods in the guest rooms and renovations to the lobby and meeting rooms. The cost of such
6 Property Improvements is currently estimated by FWH to be approximately Sixteen Million Dollars
7 ($16,000,000). Within 180 days after execution of a lease agreement, FWH shall submit to the
8 Commission a detailed and comprehensive plan of work for proposed renovations along with cost
9 estimates and such other information reasonably requested by the Commission for such renovations.
10 7. Concession Fee. FWH shall be granted the exclusive right to offer food/beverage and alcoholic
11 beverage catering services within the Statehouse Convention Center. In consideration of such
12 exclusive catering right, FWH shall initially pay to the Little Rock Convention and Visitors Bureau
13 ( "LRCVB ") a concession fee equal to 4% of gross receipts derived from the sale and service of all
14 concessions through September 30, 2015. Commencing on October 1, 2015, and thereafter throughout
15 the remaining term of the Lease, the concession fee shall be fixed at 5 %.
16 8. Mechanical Renovations. FWH shall bear 1/2 the cost, but not to exceed Three Hundred Fifty
17 Thousand Dollars ($350,000), of (i) installation of the final metering phase and mechanical control
18 system for the heated and chilled water system serving the Property, and (ii) replacement of the
19 conference center water chiller. Such installation and replacement of such mechanical control systems
20 shall be competitively bid and subject to the mutual approval of both parties.
21 9. Facility Maintenance Surcharge. FWH shall pay to the Commission a facilities maintenance surcharge
22 to offset maintenance expenses resulting from (i) central plant property and casualty insurance
23 premiums, (ii) central plant preventive maintenance contracts; and (iii) water treatment. The surcharge
24 shall be initially set at $7,195 per month of which $3,077 is a fixed equipment depreciation expense for
25 twenty-five (25) years and $4,118 is a variable amount based on 71 % of the actual costs delineated in
26 (i), (ii) and (iii) above for 2012. If in subsequent years said costs increase to levels in excess of the
27 levels of 2012, Lessee shall reimburse, within thirty (30) days following the end of each calendar year,
28 Lessor for its share of said costs. However, the increase assessed to Lessee shall not exceed the prior
29 year's amount plus 1%. For example, if in the 2nd year of the lease, Lessee's share of reimbursable
30 costs is $7,500 and the CPI increases 2% then Lessee's share of such costs shall be $7,410.85 ($7,195 x
31 1.03). Should the cost of preventive maintenance contracts result in an overall increase in the facilities
32 maintenance surcharge exceeding 5% in any given year, or in the event that new maintenance contracts
33 are necessary after any applicable warranty periods expire, upon request from FWH the Commission
34 shall seek bids from alternative providers for consideration by both parties. LRCVB is obligated to
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I maintain the facility plant in good working condition; annual inspections of the central plant shall be
2 conducted by FWH and the Commission representatives, and the current mechanical preventative
3 maintenance contractors to determine the upkeep and efficiency of the central plant, relating to heated
4 and chilled water. Any deficiencies will be noted and addressed within sixty (60) days by the LRCVB,
5 with resolution in writing, to the Commission and FWH. Any maintenance expense savings realized
6 from the replacement of heated and chilled water equipment will be applied to reduce the facilities
7 surcharge. In addition, each party shall make a monthly payment of $1,000 that shall be deposited into
8 a joint account for central plant mechanical expenditures related to heated and chilled water systems
9 not covered by preventive maintenance contracts.
10 10. Right of First Refusal. The Commission is the owner of a certain parking lot defined as the Northeast
11 quarter of Block 2, City of Little Rock (the "Parking Lot Parcel "). The Commission shall grant to
12 FWH a right of first refusal ( "ROFR ") to acquire or lease the Parking Lot Parcel, but only in the event
13 that the Commission receives a bona fide offer during the term of the Lease to sell or lease the
14 Parking Lot Parcel for the purpose of (i) the development of a hotel, or (ii) development of a parking
15 structure, or portion thereof, for use in conjunction with a hotel, and the Commission desires to accept
16 such offer. Thereafter, FWH shall have thirty (30) days to determine its desire to acquire or lease the
17 property on the same terms and conditions. If FWH determines to exercise its rights hereunder and
18 acquire the property, said closing shall occur not later than sixty (60) days following the election.. In
19 the event of a mixed -use development that includes a hotel and /or parking, the ROFR shall only
20 extend to that portion of the property developed as a hotel and /or parking for use in conjunction with
21 a hotel.
22 In the event that FWH exercises the ROFR, as outlined above, and FWH plans to develop parking on
23 the site, parking considerations for up to ten reserved spaces in any proposed parking facility owned
24 and /or operated by FWH and/ or their designated representative, will be offered to LRCVB (but not
25 any of its assigns or designees without FWH's consent not to be unreasonably withheld)
26 complimentary, for the duration of this lease term.
27 11. Conditions. The obligation of the parties to consummate the Lease is subject to the fulfillment of all of
28 the following conditions to the reasonable satisfaction of the parties:
29 a. Execution of a definitive lease agreement and other related documents including,
30 but not limited to, assignment of existing parking agreements, on or before
31 February 15, 2013, containing covenants, agreements, indemnities and conditions
32 customary for a transaction of this type, which shall be mutually agreed upon by
33 the parties and reasonably satisfactory to their legal counsel.
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b. Obtaining of all approvals, consents, and waivers from third parties which are
necessary to be obtained prior to the consummation of the Lease.
C. No investigation, action, suit or proceeding shall be pending or threatened before
any court or governmental body which seeks to restrain, prohibit or otherwise
challenge or interfere with the consummation of the Lease.
d. Mutually satisfactory resolution of all legal, tax, accounting, regulatory or other
similar matters to be considered by each of the parties.
e. Such other conditions as the parties hereto may mutually agree.
12. Expenses. Except as otherwise provided, regardless of whether or not the Lease is consummated, each
party hereto shall bear its own costs and expenses (including attorneys' fees).
13. Good Faith Negotiation. The parties hereto agree to negotiate the Lease in good faith.
This LOI may be executed in multiple counterparts, each of which shall be deemed an original
but all of which together shall constitute a single instrument. Electronic or facsimile copies of the
executed LOI shall be enforceable as originals.
If the foregoing correctly reflects our understanding, please execute the enclosed counterpart of
this letter on or before 5:00 P.M. CST on December 19, 2012, whereupon each of the undersigned will
proceed in good faith to effect the transactions contemplated by this LOI. It is understood, however, that
this is not a binding agreement of any of the undersigned, but merely an agreement in principle to be
utilized by each of the undersigned in proceeding forward in this transaction and the undersigned will not
be legally bound in connection herewith; any binding legal agreement to be contained only in the Lease.
Very truly yours,
CITY OF LITTLE ROCK
By:
Mark Stodola, Mayor
LITTLE ROCK ADVERTISING
& PROMOTION COMMISSION
By:
Philip Tappan, Chairman
31 Agreed and Accepted by
32 FWH H LITTLE ROCK, LLC
33 By: Fairwood Hospitality Investors 11, L.L.C., its member
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By: Fairwood Investors I1, LLC, its Manager
By:
Name: Robert M. Solmson
Title:
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