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RESOLUTION APPROVING AND AUTORIIZING THE COUNTY MAYOR OR THE COUNTY MAYOR�S DESIGNEE TO EXECUTE A PREFERENTIAL BERTHING AGREEMENT BETWEEN MIAMI-DADE COUNTY AND VIRGIN CRUISES INTERMEDIATE LIMITED; DELEGATING AUTHORITY TO THE COUNTY MAYOR OR MAYOR�S DESIGNEE TO APPROVE OR DENY ADDITIONAL VESSEL BERTHING REQUESTS, CRUISE TERMINAL IMPROVEMENT REQUESTS UP TO $1.5 MILLION, AND EARLY COMMENCEMENT REQUESTS; AND AUTHORIZING THE COUNTY MAYOR OR COUNTY MAYOR�S DESIGNEE TO EXERCISE ALL CANCELLATION, TERMINATION, AND OTHER RIGHTS THEREIN

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WHEREAS, this Board desires to accomplish the purposes outlined in the accompanying memorandum, a copy of which is incorporated herein by reference,

NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF COUNTY COMMISSIONERS OF MIAMI-DADE COUNTY, FLORIDA, that this Board:

Section 1. Approves the Preferential Berthing Agreement (�Agreement�) between Miami-Dade County and Virgin Cruises Intermediate Limited (�Virgin�) in substantially the form attached hereto; and

Section 2. Authorizes the County Mayor or the County Mayor�s designee to execute this Agreement in substantially the form attached hereto for and on behalf of Miami-Dade County after review and approval by the County Attorney�s Office and to exercise, approve, or deny (as applicable) any cancellation rights, termination rights, additional vessel berthing requests, cruise terminal improvement requests (not to exceed $1.5 million), early commencement requests, and/or other County rights contained in the Agreement.

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Date:

To: Honorable Chairman Jean Monestime
and Members, Board of County Commissioners

From: Carlos A. Gimenez
Mayor

Subject: Resolution Approving and Authorizing Execution of a Preferential Berthing Agreement
between Miami-Dade County and Virgin Cruises Intermediate Limited

STAFF RECOMMENDATION
Recommendation
It is recommended the Board of County Commissioners (�Board�) approve the accompanying resolution approving and authorizing the execution of a Preferential Berthing Agreement between Miami-Dade County (�County�) and Virgin Cruises Intermediate Limited (�Virgin�).

Scope
PortMiami is located within District 5, which is represented by Commissioner Bruno A. Barreiro. The impact of this agenda item is countywide as PortMiami is a regional asset and generates employment for residents throughout Miami-Dade County.

Fiscal Impact/Funding Source
Commencing during Fiscal Year 2019/20, Virgin will homeport its first 2,800 passenger newbuild vessel at PortMiami with year-round service. In consideration of the County providing Virgin with preferential berthing rights, Virgin shall guarantee the County minimum passenger annualized revenues ranging from $2.9 million in Fiscal Year 2019/20 (to be prorated based on actual commencement date) to $3.6 million in Fiscal Year 2023/24 based on minimum annual passenger guarantees of 233,000 passenger moves to 256,000 passenger moves per fiscal year. As Virgin is anticipated to make 52 calls per year, actual Port gross revenues from passenger wharfage and dockage are expected to range from $5.2 million in Fiscal Year 2019/20 (as prorated to actual commencement date) to $7.1 million in Fiscal Year 2023/24, subject to Virgin�s early termination rights described below.

The recommended Agreement is for an initial term of five (5) years, with Virgin having one (1) option to extend for an additional five (5) years. Should Virgin extend the term, anticipated Port gross revenues are expected to range from $7.2 million to $8.1 million during each of the extension years.

In exchange for Virgin�s guarantees, the County shall pay Virgin an annual incentive payment from passenger parking revenues (paid quarterly) based on the proportion of Virgin�s multi-day passenger embarkations to the Port�s overall multi-day passenger embarkations (similar to other cruise agreements). Based on Virgin�s anticipated annual passenger throughput, the amount of this County parking revenue incentive payment to Virgin is estimated to be in the range of $775,000 per fiscal year.

Thus, should Virgin�s renewal rights be exercised, potential net revenues to the County (after deducting parking incentive payments) would total approximately $63 million over the Agreement�s potential ten (10) year term.

This Agreement also authorizes the Port Director to approve and undertake, in accordance with applicable procurement requirements and procedures, up to $1.5 million of non-structural cruise terminal improvements to the terminal ultimately selected by the Port Director for Virgin�s use, to be paid from Seaport revenues. The determination of whether to make such requested improvements shall be delegated to the Port Director and decided no later than twenty-four (24) months prior to the arrival of Virgin�s first Miami vessel call.

Virgin has a limited opt-out right to terminate this Agreement in the sole event that Virgin is unable to execute a written contract with a vessel shipyard by January 15, 2016. Additionally, in consideration of Virgin being a start-up company, after the first year of operation, Virgin shall have a limited and conditioned right to terminate this Agreement upon twenty-seven (27) months prior notice to the County.

Track Record/Monitor
The Seaport Department staff members responsible for monitoring the Agreement are Juan Kuryla, Port Director; Kevin Lynskey, Deputy Port Director; and Hydi Webb, Acting Assistant Director, Business Development & Marketing.

Background
Virgin is a leading international investment group and one of the world's well recognized consumer brands. Created in 1970 by Sir Richard Branson, the Virgin Group has grown successful businesses in sectors ranging from mobile phones, travel, financial services, leisure, music, holidays, and health and wellness. Virgin employs more than 50,000 people around the world and operates in more than 50 countries.�

Virgin Cruises is the Virgin Group�s newest venture and plans to build and operate world-class ships. Virgin Cruises has an exciting new build program and intends to introduce its first large ship (yet to be named and details forthcoming) in early 2020. Should this Agreement be approved, PortMiami will be the year-round homeport for Virgin�s first vessel. The company intends to announce further deployment details for this vessel in 2018.�

Virgin, based in South Florida, aims to broaden the appeal of cruise vacations to attract new travelers to the industry. The company is committed to great quality and value, all delivered with the famed Virgin service.

Virgin�s lead investment partner is Bain Capital,�one of the world's leading private, alternative asset management firms, with approximately $80 billion in assets under management. The company�s CEO and President is�industry veteran Tom McAlpin, who was part of the founding�management team at Disney Cruise Line and formerly President of The World (Residences At Sea).

Substantive Contract Terms:
Under the terms of this proposed Agreement, Virgin will homeport its first cruise ship in Miami with year-round sailings no later than February 9, 2020. However, there are contract provisions that allow for both earlier and later delivery of the vessel. These provisions include notification deadlines and additional Virgin payment obligations in the event the Virgin vessel arrives late without proper notice to the Port.

The County shall provide Virgin with preferential berthing rights at either Terminal F or G on Sundays for the operating term of this Agreement. The choice of terminal F or G shall be determined by the Port Director in consultation with Virgin. Should Virgin not include the use of the selected terminal on a Sunday in its deployment schedule, the County shall have the right to allow other cruise vessels use of the facility. Should Virgin wish to berth additional cruise vessels at the Port, Virgin must submit an additional vessel berthing request to the Director, who may grant or deny such request in his sole discretion, provided that if the requested durational term of the request exceeds the amount of time left in the term of the Agreement, then, as to the post-contract portion of said request, the Director shall only have discretion to either deny the post-contract portion or approve same at standard Port Tariff rates, without discounts or incentives.

Virgin commits PortMiami as its exclusive year-round homeport in South Florida for its first cruise vessel, which includes Broward, Palm Beach, Monroe, Brevard, and Miami-Dade Counties.

Virgin shall pay passenger wharfage and dockage rates as set forth in the Port of Miami Terminal Tariff No. 010 (�Tariff�) during Fiscal Year 2015 subject to annual increases of three percent (3%) per year compounded. The passenger wharfage rate chargeable to Virgin to the County in Fiscal Year 2019/20 (when Virgin�s new vessel is expected to arrive in Miami) is expected to be $12.74 per each passenger embarkation and each passenger debarkation (based on increases of current wharfage rates of three percent (3%) per year). The dockage rate chargeable by the County to Virgin in Fiscal Year 2019/20 is expected to be $ .39 per gross registered ton (based on increases of current dockage rates of three percent (3%) per year). The County may increase the annual passenger wharfage and dockage rates that apply to Virgin no more than three percent (3%) per year (compounded) and such rate shall not be increased more than one time in a twelve month period. Aside from wharfage and dockage rates, all other applicable Port fees due to the County from Virgin shall be billed as per Tariff.

Beginning FY 2019/20 and continuing through the Term, Virgin commits to a Minimum Annual Passenger Wharfage Guarantee to the County based on the then-existing passenger wharfage rate times a stipulated number of annual passengers and a load factor as follows: 233,000 passenger moves in FY 2019/20; 238,784 passenger moves in FY 2020/21; 244,608 passenger moves in FY 2021/22; 250,432 passenger moves in Fiscal Year 2022/23; and 256,256 passenger moves in FY 2023/24 through the remaining fiscal years of the term. Should Virgin fail to meet its Minimum Annual Passenger Guarantee in any fiscal year, Virgin shall make a shortfall payment to the County within thirty (30) days of the end of this fiscal year in which the annual passenger wharfage guarantee was not met.

Virgin shall commit to year-round Miami service with its first vessel. If Virgin has less than fifty (50) vessel calls in any fiscal year during the Operating Term (or fewer than the prorated number of calls in the first fiscal year), then the County has the option to terminate this Agreement upon twenty-seven (27) months written notice to Virgin. If such notice is given to Virgin, however, Virgin may activate a Minimum Annual Guarantee Expansion by guaranteeing the County minimum annual dockage revenue each fiscal year through the Term and any exercised extension. This amount shall be calculated based on the then-existing Tariff dockage rate times the greater of (i) the gross registered tons (GRTs) of the Virgin vessel or (ii) 110,000 GRTs, times 42 vessel calls.

In exchange for Virgin�s annual guarantee, the County shall pay Virgin an annual parking incentive. The parking incentive shall be based on the proportion of Virgin multi-day embarkations to the Port�s overall total multi-day cruise embarkations. Parking revenue associated with port-of-call vessels, daily cruises, ferry services, or cruises less than 24 hours shall not be included in this calculation. The Port shall remit parking revenues to Virgin within sixty (60) days of the close of each fiscal quarter. This parking incentive is consistent with other cruise agreements previously approved by the Board.

Two (2) years prior to the ship�s Miami arrival, Virgin may request non-structural terminal improvements, the cost of which may not exceed $1.5 Million, for the Director�s approval. If approved by the Director, the County shall work to complete such improvements no later than the anticipated date of the ship�s arrival.

The initial operating term of this Agreement shall be for five (5) years and shall expire on May 4, 2025. Virgin shall have a conditional right to extend the term for an additional five (5) years by providing written notice to the Port Director by February 3, 2023. If exercised, the extension shall expire on May 5, 2030.

Virgin shall have a limited right to opt out of this Agreement in the sole event it is unable to execute a written contract with the shipyard for construction of its first cruise vessel, by January 15, 2016. Additionally, in consideration of Virgin�s status of a new start-up company, commencing on the first anniversary of the Operating Term, Virgin shall have a limited and conditional right to terminate this Agreement upon twenty-seven (27) months prior written notice to the County (providing Virgin is in compliance with its payment obligations under this Agreement). In the event Virgin exercises its early termination right, Virgin may not homeport its vessel in another Florida or Cuban port for the remainder of the Term.

The effective date of this Agreement shall be upon the last of (i) its execution by an authorized Virgin representative, and (ii) the approval and execution of the Agreement by the Mayor or the Mayor�s Designee following approval of the Agreement by this Board via a duly adopted and effective resolution.

Cruise start-ups with this degree of capitalization and brand awareness are a rarity. PortMiami prides itself on its diversity of cruise brands appealing to a broad range of passengers. The addition of Virgin to the Port�s line-up will strengthen Miami�s offerings with a well-recognized name and create much �buzz� of a new brand.

Delegated Authority
The resolution authorizes the County Mayor or County Mayor�s designee to execute this Preferential Berthing Agreement on behalf of Miami-Dade County and to exercise, approve, or deny (as applicable) any cancellation rights, termination rights, berthing requests, terminal improvement requests (not to exceed $1.5 million), early commencement requests, and/or other County rights conferred in the Agreement.


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Jack Osterholt, Deputy Mayor