BRADENTON, Fla. — Hollywood, Fla.'s plan to sell $37 million of taxable bonds in January isn't a big deal by market standards but it will help make Jimmy Buffett's Parrothead fans happier.
The bonds will help finance 600 public parking spaces in a 1,056-space parking garage for Buffett's latest Margaritaville resort along the 2.5-mile Hollywood "Broadwalk" next to the Atlantic Ocean.
Work on the 17-story, 350-room luxury hotel began in July. It is being built by developer Lon Tabatchnick, who is leasing the city-owned land for 99 years.
The Hollywood Community Redevelopment Agency will pay $23 million in cash from tax increment financing to contribute $10 million for furniture, fixtures and equipment and $13 million toward construction and street improvements, according to CRA Director Jorge Camejo.
The city has created the Hollywood Beach Community Development District I to sell the $37 million of taxable revenue bonds to build the public portion of the parking garage.
The pricing date has not been announced and the preliminary official statement had not been released by press time.
The bonds will be secured by net public parking revenues.
If revenues fall short of debt service needs a 1% to 2% user fee can be imposed on sales such as rooms, merchandize, food and beverage.
As a secondary backup pledge, the city has covenanted to budget and appropriate funds to replace the debt service reserve if necessary, according to Hollywood Finance Director Matt Lalla.
"From the city's point of view, this is a deal in which our exposure is very limited," he said, adding that if the debt service reserve is tapped and not repaid the city can take ownership of the property. "This project pretty much stands on its own."
Moody's Investors Service has assigned an A2 rating to the Hollywood Beach CDD bonds, which is the only rating that will be sought.
Bond proceeds will be used to capitalize interest for 24 months, cash fund the indenture reserve account in an amount equal to maximum annual debt service, and deposit $28.4 million to the acquisition and construction fund, Moody's said.
The proceeds will remain in trust until substantial completion of the garage, and turned over to the developer who will convey to the CDD a land easement and the public garage improvements through a special warranty deed.
Moody's said the A2 rating reflects the ultimate affordability of the obligation if the city had to absorb bond payments into its budget due to notifications required under the guaranty.
The rating also considers sufficient levels of legally available non-ad valorem revenues and general fund liquidity in the months following payment dates, as well as the city's improved financial flexibility to manage the obligation.
Additionally, the rating recognizes the strength of legal provisions contained in the development agreement, ground lease and trust indentures, which Moody's said it believes sufficiently insulates the city from risks commonly associated with such a development.
"This is not a huge transaction for a taxable deal," Lalla said, adding that he does not believe many hotel projects have been started in Florida, or come to the market the past several years.
"To get this kind of project going in this type of market is pretty encouraging," he said. "This does have a bit of novelty to it with [the association of] Margaritaville and Jimmy Buffett."
HJ Sims & Co. will be the book-runner for the transaction. Citi will also underwrite the deal.
Public Financial Management Inc. is financial advisor.
Greenberg Traurig LLP is bond counsel for the transaction. Akerman Senterfitt LLP is underwriter' counsel. Bryant Miller Olive PA is bond counsel to the CDD.
Mainland Hollywood is about 11 miles south of Fort Lauderdale, and the beach is along the famed ocean-front State Road A1A.
When complete in early 2015, Margaritaville "promises to bring Changes in Latitudes and Changes in Attitude," in the words of another popular Buffett song, to central Hollywood Beach, according to the city's website.
It is also believed that Buffett will attend the opening festivities.
The singer-songwriter has parlayed his relaxed tropical party anthems into a devoted fan base of hard-partying Parrotheads, and further leveraged that image into business ventures that include Margaritaville, a chain of restaurants named after his best-known song that has grown to include three casino hotels and two other hotel resorts, plus the third planned for Hollywood.
The Hollywood resort will include seven restaurants and bars, including Jimmy Buffett's Margaritaville Café and Landshark Bar & Grill, which is named after his own beer label.
There will also be ocean-side pools, a FlowRider wave ride, spa and fitness center, and 35,000 square feet of convention space.
"Hollywood Beach is probably one of the most significant hidden treasures in south Florida," said CRA Director Camejo. "People see photos of Hollywood Beach and don't know where it is."
The city and CRA have been working to change that image by improving the beach and working the past several years on the Margaritaville project.
The Beach District CRA sold $40 million of bonds in 2007 to upgrade a 27-foot-wide, 2.5-mile-long asphalt strip along the ocean they call the "Broadwalk" with colorful brick pavers, build a parking garage and community center, upgrade water and sewer lines, and fund other capital improvements.
The Broadwalk was third on the American Planning Association's top 10 public spaces on its Great Places in America list in 2013. It is lined with outdoor cafes, small and large hotels.
"This is exclusively for pedestrians and bicyclists on the dunes," said Camejo. "It's very unique."
Margaritaville is being built along the Broadwalk, and will be one of its larger hotels.
While Margaritaville name brings to mind Parrotheads, tropical cocktails, sandals and the beach, Camejo said, "it will provide a quality, family oriented experience for folks visiting Hollywood Beach, and it fits perfectly with the whole shoreline beach experience."