Miami-Dade, Royal Caribbean float $2.8B PortMiami deal – Florida Politics

The deal is projected to create 12,000 permanent cruise-related jobs, including 1,000 new positions at Royal Caribbean’s Miami headquarters.

Miami-Dade Commissioners will decide Tuesday whether to OK a development and lease agreement with Royal Caribbean Cruises projected to net the county $2.8 billion over half a century.

The arrangement includes construction of a new Terminal G for exclusive use by Royal Caribbean and its subsidiary companies, including Celebrity Cruises, and its lease there for at least 36 years.

It also involves the continued redevelopment of Royal Caribbean’s global headquarters at the seaport, which began before the pandemic, and an extension to its lease through at least 2072.

The terminal lease includes three seven-year renewal options, while the campus lease has two five-year renewal options, according to a memo from Miami-Dade Chief Operations Officer Jimmy Morales.

The deal, sponsored by Commissioner Rebeca Sosa, also provides for Royal Caribbean’s shared use of a PortMiami terminal set for completion in October 2028 called Berth 10. Its partner there is MSC Cruises.

Floridian Partners Ad

If approved, the deal will replace the company’s existing pact with Miami-Dade set to expire in 2033 and is expected to generate an additional $2.5 billion from Terminal G usage and $260 million from the campus lease.

It’ll also create 12,000 permanent jobs related to the cruise industry, the memo said, including roughly 1,000 additional Royal Caribbean positions — a 50% increase over its current staff count there.

Royal Caribbean said the jobs will pay average salaries of more than $100,000. It also anticipates needing 9,634 construction jobs for the project.

The project entails demolishing PortMiami’s administrative complex, built in 1963, to make room for the new terminal, and the completion of Royal Caribbean’s upgraded headquarters.

During construction, Royal Caribbean will allow PortMiami staff to use space within the company’s two other office towers at the seaport or in its buildings downtown.

Buchanan Squares Ad Campaign FL GR Run of Site S2 728x90 002

While talks around the new Terminal G deal began around a year ago in anticipation of massive Royal Caribbean ships now being built, the headquarters redevelopment portion is an update to an earlier arrangement between the company and county.

By May 2020, Royal Caribbean had already spent $70 million to upgrade its PortMiami headquarters before halting construction to mitigate financial shortfalls during the pandemic.

In January, the company successfully sought an extension to the project deadline from Miami-Dade. The new deal Commissioners will weigh Tuesday would amend Royal Caribbean’s existing development and lease agreements while transferring the burden of the remaining upfront costs to the county.

Under the proposed arrangement, Miami-Dade would finance completion of the company headquarters and Terminal G’s construction. To do so, the county plans to issue bonds and employ “the strategic use of (Seaport Department) funds, commercial paper and other short-term financial instruments,” Morales wrote.

The new Terminal G would be built in accordance with Miami-Dade’s “Sustainable Building Ordinance” and include solar panels, a multi-level shared parking garage with a ground-level intermodal facility, connecting roadways and a provisioning building necessary to accommodate Royal Caribbean’s “newer, state-of-the-art” Icon-class vessels capable of accommodating up to 7,000 passengers.

“In contrast, the existing (Terminal G) is capable of accommodating vessels with capacities of approximately 4,000 passengers,” Morales wrote.

As is the case with its current arrangement with the cruise line, Miami-Dade will continue to provide Royal Caribbean with parking revenues. They’ll start at about $1.4 million yearly at the beginning of the deal and end at $4.9 million. An annual marketing incentive starting at $2.9 million will rise to $6.4 million yearly.

Royal Caribbean, in turn, has agreed to a minimum annual guarantee (MAG) ranging from 600,000 passenger movements per year during the reconstruction of Terminal G to 1.5 million passenger movements yearly once it reaches “substantial completion,” estimated to be in 2027.

From Year 11 of the deal to Year 36, Royal Caribbean has committed to a MAG of 2.1 million annual passenger movements. That rate — which will go unchanged unless renegotiated — plus the company’s 1.55 million annual passenger movements at PortMiami’s Terminal A will result in a 22% increase in total passenger movements over the port’s record in pre-pandemic 2019.

Royal Caribbean would repay Miami-Dade the cost of finishing development of its headquarters through an increased lease and pay the county back up to 53% — $172.25 million — of terminal-redevelopment costs. That doesn’t include another $2 million the company agreed to pay for U.S. Customs and Border Protection security equipment needed at Terminal G, plus an estimated $77,000 yearly for upgrades.

For the first five years of the deal, Royal Caribbean has agreed the proposed arrangement with PortMiami will be the largest revenue deal it has with any port in the Caribbean Basin.

The company also agreed to use shore power — hooking up to the port’s electricity rather than using fuel while idling at port — and reimburse the county for all related expenses.

The second-largest cruise operator worldwide, with a 24% market share and a fleet of 64 ships and counting, Royal Caribbean has homeported in Miami-Dade for more than 50 years. Over that time, it has expanded its cruise presence to become one of the county’s top 15 employer, according to Morales.

“The cruise terminal usage agreement will represent (Royal Caribbean’s) largest annual minimum passenger commitment between any cruise line and any port worldwide,” he wrote. During the term of the deal, he added, Royal Caribbean’s total annual passenger guarantees “will reach a level that surpasses any other cruise line’s … at PortMiami by 62%.”

Shortly after the pandemic struck in March 2020, PortMiami scrambled to redraw agreements with several of its cruise partners worth billions. It included throwing the companies a monumental lifeline — an up to $285.5 million bailout in which the port agreed to waive roughly $7 million per month in otherwise guaranteed cruise revenues for up to two years or until full sailings recommenced.

That has since happened, Morales said, and the consensus among industry experts is that passenger numbers will surpass pre-pandemic levels by the end of next year.

In an earnings call Nov. 3, Royal Caribbean reported its vessel occupancy for the Caribbean Basin is now full.

“(In) 2019, PortMiami’s record-breaking year, PortMiami welcomed approximately 6.8 million passengers,” Morales wrote. “Upon approval of (Royal Caribbean’s terminal use agreement), by 2031, PortMiami’s partner cruise lines will collectively guarantee 10.2 million passengers.”

Post Views: 0