Okaloosa County BOCC — August 2, 2016 — Assignment of Lease on Okaloosa Island — agenda request

BOARD OF COUNTY COMMISSIONERS AGENDA REQUEST DATE: August 2, 2016 TO: Honorable Chairman and Members of the Board FROM: Jason Autrey SUBJECT: Assignment of Lease on Okaloosa Island DEPARTMENT: Public Works BCC DISTRICT: STATEMENT OF ISSUE: Counsel representing DB Entertainment Productions, LLC (DB) has submitted a request to assign the lease currently held by Gulf Coast Marine Life Center, Inc. (GCMLC) with Okaloosa County for 4.4 acres +/- on Okaloosa Island. The assignment request presented calls for assignment of the lease from GCMLC to DB, an extension to the current construction timeline, and an alteration to the lease fee structure. BACKGROUND: On August 21, 2012 the lease between GCMLC and Okaloosa County for approximately 4.4 acres of land on Okaloosa Island became effective. As approved the lease was for ten (10) years plus two (2) additional ten (10) year terms (for a total of 30 years), has a base fee of $75,000 with an annual CPI adjustment, a construction commencement within two (2) years, and a completion of an operational facility within four (4) years. Additionally, any assignment of the lease requires Board of County Commissioners’ approval. To date GCMLC is compliant with the terms of the lease. A development order was issued and construction consistent with that order has been performed. However, a completed project will not be operational by the end of the four (4) year - August 21, 2016. Due to various circumstances surrounding the permitting aspect of the originally proposed project by GCMLC, they are seeking options for assignment of the lease; specifically with DB. DB is an extension of the entity responsible for the lease that operates as Wild Willy’s Adventure Zone. The assignment requested by the leaseholder includes the following modifications to the lease: 1) Assignment and assumption of the lease from GCMLC to DB (Section 2 of the provided document). Such assignment requires approval by the Board of County Commissioners per the existing lease and would effectively alter the entity responsible for the terms of the lease with the County. Staff has no objection to this request. To date GCMLC has complied with the terms of the contract (provided rent payments, received a development order and performed a portion of the construction), but apparent permitting problems have halted further development of the project. Assignment of the lease to DB, an entity affiliated with an adjacent leaseholder that is also compliant with the terms of their lease, does not cause concern among staff. 2) Alteration of the lease fee (rent) structure (Section 5A): The current lease rent fee is based on a base fee of $75,000 in year one, adjusted annually based on specified Consumer Price Index (CPI) factor. To date the adjustment factor has averaged around 1.6% for the first three years of the lease. The new rent structure proposed is to be the greater of either a) the current rate structure; a base rate of $75,000 with annual CPI  adjustments or b) 3% of the gross receipts for the improvements on the 4.4 acre parcel. Staff has no objection to this request. Staff’s ability to determine revenue projections are limited. Without a known site plan or a comparable product it is not possible to develop high confidence revenue projections with respect to a 3% portion of gross receipts. However, the alternative rate structure is identical to what is currently in place on the parcel. Therefore, the expectation would be that the current anticipated revenue stream would serve as a minimum. 3) Allow for the expansion of Wild Willy’s Adventure Zone on to the lease parcel by restating the allowable use of the premises (Section 5B). The proposed expansion would