Comment Up
Back in March of this year, City Manager Bornstein said, "The way the casino building is operating now, is a broken business plan." I would say that just about everyone got offended with this statement other than Scott Maxwell and Pam Triolo. From inception, we had many experts working on this and even hired Fishkind & Associates to do a Pro-Forma Analysis on the redevelopment of the Lake Worth casino. The Finance Advisory board was heavily involved in the process as was our Finance Director, Steven Carr. Staff and the FAB wanted to be fair and ensure that the building would be a success; they were not out to gouge prospective tenants as the city's goal was to cover expenses.
How broken is it? We were told originally that it would take several years for it to start operating smoothly and that it would take one full year of operations to estimate the CAM correctly. We counted on the upstairs vacant space to be leased out. For some reason, even after hiring two real estate companies with the final one being Anderson & Carr as the exclusive
firm to broker the deal and find a client, they never did. The city maintains the 2nd floor ballroom and it is doing well with private parties and weddings.
As an example of a lease, Mamma Mia's is for ten years with two, 5 year renewal options. The rents escalate at 3.5% a year starting from a $35.00 a s.f or $3,885 a month on up to $47.696 a s.f. or $5,294.26 a month.
Last night the mayor complained that the CAM was only $7 for the tenants at our casino which is common area maintenance and a pass through expense. Originally, the consultants projected the CAM at $6.89 a s.f. before the building was even a reality. CAM means all of the costs borne by the city relative to the operation of the building: maintenance, repair, and a slew of other expenses such as garbage removal, materials, tools, supplies, roof repairs and the list goes on. By September 30 of each year, the city estimates the CAM and the tenant pays a certain percentage of that total based on his leased square footage. That wordage is in all leases and I am assuming it still applies.
Our failure to rent the upstairs vacant space has not helped the business model but to say it is a failure is an exaggeration. The pool was never included in the business plan and all sorts of expenses are dumped into that line item. The pool has never been marketed. If you talk to old timers they all will tell you about the college meets we used to have and the pool was rented out regularly and making money. Now management likes to tell you that swim meets are not working anymore or our pool is outdated, etc. which is untrue. Wellington is getting the business. Or they tell you that we have a "white elephant" when in fact it is one beautiful Olympic pool on the ocean. What town can claim that? We need to hire someone who has an interest in making our pool a success.
To continue to blame any failure, perceived or real, on failed business plans is a cop-out. The only thing that has failed here is management and the on-going dispute in order to solve various problems with the building and with the contractor, Morganti. If we handed it over to Hudson Holdings as an example, we would only get $550,00 a year out of the deal on the first 20 year lease minus a day.
My suggestion would be to continue negotiations with Oceanside Grill excluding the ballroom space and eliminate the pushcarts and a few other incidentals. The only thing we need to do in the immediate future is to get a tenant for the upstairs space. Although not thrilled with the proposal, we do have someone interested so let's work with him...get it done and hold onto control of our valuable beach complex. We should be making the money, not a developer.
What do you all think?
