Amended ground lease
MSC Cruises could potentially have its financing period extended to Feb. 15, 2021, by Miami-Dade County, while the ground lease for the facility would amend the port’s turnover date to not before April 15, 2021, and not later than May 15, 2021. Moreover, the amended ground lease would require the project to contain facilities for Disney Cruise Line, including pier work for Berth 10.
In September 2019, the County Board of Commissioners approved a ground lease for the design, construction, operation and maintenance of a new mega cruise terminal for Berths 8 and 9 at the easternmost end of the port. MSC Cruises’ investment was anticipated to be at least $300m for a state-of-the-art complex, including two berths for vessels with a capacity of up to 7,000 passengers each; parking, intermodal areas and roadway infrastructure; provisioning and ground transportation facilities; and offices to serve as MSC’s US headquarters.
Land lease rent
MSC Cruises would pay the county land lease rent beginning in fiscal 2023 at $15.2m annually and increasing by 1.5% annually the first 20 years, increasing 3% each year for the next 20 years and then increasing at a price index calculation for the remainder of the term. The county would be obligated to make contributions of approximately $35m for environmental mitigation, capital contributions and other costs.
Under the ground lease, the county is required to turn over the premises to MSC by Oct. 15, 2020, for the commencement of construction, and the substantial completion date for the terminal was estimated for Oct. 15, 2022. The ground lease further granted MSC a right of termination if it was unable to find acceptable financing on or before July 31, 2020.
COVID-19 disrupts plans
The COVID-19 pandemic has suspended cruising and disrupted the proposed timelines and costs for several planned capital projects at the port, including the MSC terminal complex. On March 26, the county and MSC entered into a standstill agreement to allow both parties time to consider and negotiate a revised project schedule while also avoiding either party from issuing force majeure notices yet preserving all their respective rights.
The county and MSC have agreed, in principle, to make certain amendments to the ground lease as set out in a resolution to be considered by county commissioners on Sept. 1.
It gives MSC more time to secure financing and more time for the port to deliver a clean site to MSC. And it ensures the MSC project includes facilities for Disney, however the time extension isn’t contingent upon the county and MSC reaching an agreement about Disney’s use of the facility.
The resolution also directs the county to negotiate a further amendment to the ground lease based on the revised project scope with changes that may include revised financing and payment terms, changes to the project footprint and such other infrastructure changes as may be necessary to accommodate three cruise ships.
Berthing rights agreement with Disney
An accompanying resolution will further require the county to negotiate a preferential berthing rights agreement with Disney based on this multi-berth shared facility proposal.
The intent of a multi-berth shared facility is a cost-savings from the county’s previously contemplated proposal for a new Disney terminal. In September 2018, the Board of County Commissioners approved a memorandum of understanding with Disney establishing a framework for the design and construction of a new Disney terminal.
Costly split operation
Due to land constraints, the project required a split operation with a waterside berth and landing facility and a landside terminal in the interior of the port, including parking and ground transportation areas. The project would have also required a secure roadway connecting the two facilities.
The merger of the MSC and Disney projects creates the opportunity for savings to the county on the costs associated with elements that would have been part of the separate split Disney terminal project.