Jane Musgrave
Joel EngelhardtCounty would buy land from Related Ross, which would build the second convention center hotel, make payments over 99 years and cut the county in on gross revenues.
Related Ross would pay the county a minimum of $1 billion over the next century under the preliminary terms of a deal to build a second convention center hotel in downtown West Palm Beach.
And the bottom line, which works out to about $10 million a year, could grow to $4 billion if the hotel maintains an average revenue growth rate of 4%, County Administrator Joe Abruzzo told Stet News.
Additionally, the deal Abruzzo and county officials hammered out with the city’s biggest developer calls for an immediate $4 million payment, even before construction begins.
In return, the county would buy the 1.8-acre site for $26 million, taking it off the tax rolls, a potential savings of $1.6 million a year for Related, but giving the county more say over the site.
Abruzzo must still bring the deal, now being crafted by lawyers, to the County Commission for approval. It is based on negotiations that recognize Related’s unique position as owner of the lone undeveloped block next to the existing hotel and convention center south of Okeechobee Boulevard.
Its ownership gave Related leverage no other hotel developer could match. But the county held a wild card. In a past agreement, Related pledged to use its 1.8-acre block for 630 parking spaces for the first convention center hotel, limiting Related’s options on the site.
Under the preliminary deal’s terms, as soon as ground is broken for the 23-story, 400-room hotel, the company headed by Palm Beach billionaire and Miami Dolphins owner Stephen Ross would have to pony up $300,000 annually.
Once the estimated $310 million Curio by Hilton hotel opens, Related would pay the county $1.8 million a year, including $100 per space monthly to rent 590 spaces in the lightly used county-owned convention center parking garage. Related could use the spaces in the 2,550-space garage for the new hotel and the existing one it owns next door.
Currently, the proposed second hotel site provides a surface parking lot with 255 spaces for the first hotel.
Related’s payments to the county would increase by 3% a year over the life of the 99-year contract, generating more than $1 billion.
The payments are required even if a pandemic or other unforeseen event forces the hotel to shut down, Abruzzo said.
If instead, as hoped, business at the long-struggling convention center picks up, filling rooms at Related’s two hotels, the county would share in the success.
If gross revenues at the new hotel increase by 4% a year, a possibility if the county doubles the size of its 100,000-square-foot convention center exhibit floor, the county would earn $4 billion over the life of the contract, Abruzzo said.
Money for convention center expansion would come from the county’s hotel bed tax.
If revenues increase by 5% a year, the deal would be worth $7 billion, he said.
Abruzzo told Stet he entered negotiations wary of handing the developer a sweetheart deal.
“I feel the administration has negotiated a deal that’s the furthest thing from a giveaway,” Abruzzo said. “The minimum $1 billion is a good return for the taxpayers of Palm Beach County.”
Like Abruzzo, executives at Related were reluctant to talk about the terms but they confirmed Abruzzo’s account.
“We continue to believe this is an opportunity to craft an agreement that will be a win-win for everyone,” Eric Silagy, vice chairman of Related, told Stet.
Deal eliminates property taxes
The deal is a far cry from what Related said it was seeking in its initial proposal and much different than the one it got 10 years ago when it built the 400-room Hilton West Palm Beach across Rosemary Avenue. But, the developer landed one of its key demands: no property taxes.
Instead of accepting the company’s offer to sell the land east of the existing hotel to the county for $1, as it did when it built the first hotel, county negotiators offered to buy the land for $26 million in exchange for the other concessions. That means the county controls the land if, for some reason, the deal with Related falls through.
Abruzzo said the amount is subject to appraisals, which he anticipated would come in much higher than $26 million.
Since the land beneath the hotel would be owned by the county and the hotel would be built as a public-private partnership, Related wouldn’t have to pay property taxes. Based on the value of similar properties, taxes could amount to as much as $1.6 million annually.
The county wouldn’t have gotten any of the tax proceeds anyway. The property is in the city’s downtown community redevelopment district. City and county taxes generated in the district go to the city’s Community Redevelopment Agency, which must use them on projects downtown.
However, the plan would eliminate taxes paid to the school district and other taxing districts, as well as West Palm Beach’s CRA.
Related doesn’t pay taxes on the existing hotel because it, too, was built in a partnership with the county.
The hotel’s tax-exempt status was a major sticking point in 2012 as Related sought both city and county approvals to build it.
Ultimately, West Palm Beach city commissioners, serving as the CRA board, persuaded Related to kick in money to help retire bonds that were used for public improvements at CityPlace, which Related owns. Those bonds, coincidentally, were paid off on Friday.
City officials didn’t respond to questions about whether they would object if the second hotel is exempt from taxes. The city, which still would have to approve building plans for the hotel, has been a supporter of Related in many downtown transactions but it was not part of these negotiations.
County hasn’t made a dime
When he began the talks, Abruzzo said he quickly realized that he didn’t want a carbon copy of the first hotel agreement.
While Related agreed to share its profits from the first hotel with the county, in the nine years since it opened, the county hasn’t made a dime, Abruzzo said. The terms of the contract made it impossible for the county to challenge the company’s claims that it wasn’t making any money.
The proposed contract for the second hotel calls for Related to share a percentage of its gross revenues, not its profits. Further, it calls for a minimum $1.8 million per year, with an automatic 3% increase.
Another key difference is that aside from the land buy, no county money is involved. When plans for the first hotel stalled for years, county commissioners agreed to spend $27 million to make it reality.
Most other convention center hotels are built with public subsidies. In a move that attracted national scrutiny, Broward County allocated $140 million in federal COVID-19 relief funds toward the construction of the 800-room Omni Fort Lauderdale Hotel at the county-owned Greater Fort Lauderdale Broward County Convention Center.
The Miami Beach Redevelopment Agency and Miami-Dade County Commission in 2024 gave at least $75 million to the developers of the 800-room Grand Hyatt Miami Beach to serve the city-owned Miami Beach Convention Center.
Need for second hotel
Talk of the need for a second convention center hotel has been brewing for years.
The first hotel had barely welcomed its first guest when tourism and business leaders began insisting its 400 rooms weren’t enough to jump-start business at the convention center.
After the Hilton West Palm Beach opened in 2016, the county’s $84 million convention center, for the first time in 12 years, turned a profit. But it still struggled.
A study by the county’s tourism arm recommended that a second hotel be built. The report was released in September 2020 when the pandemic had brought tourism overall, and the convention business in particular, to a standstill.
Convention-goers want to stay within walking distance of the meetings. Convention planners don’t like to book rooms at multiple locations. The 400-room Hilton simply didn’t have enough rooms to attract national conventions.
In October 2023, the county sought bids from developers to add an additional 600 hotel rooms. Related and two other firms submitted proposals. Related’s competitors were disqualified because they didn’t provide documentation of their financial wherewithal. In April 2024, Related was tapped to build the second hotel, proposing 400 rooms.
Negotiations, however, broke down over the company’s request for a tax break and its request to restructure the deal in light of rising costs associated with President Donald Trump’s tariffs.
Related seeks new deal
Finally, in February, county commissioners agreed to negotiate solely with Related.
Related officials have been making the rounds to fill in commissioners on the proposed deal. Whether commissioners will approve it is unclear. Commissioners could not be reached last week.
At the February meeting, all the commissioners voiced slightly different views about what the second hotel should include. But, they all said the second hotel was needed.
Commissioner Maria Marino has long been a big supporter. “If we have more hotel rooms, the opportunity for national conventions is there,” she said last year when, as county mayor, she chaired the county’s Tourist Development Council. “We can’t even go to that market because we don’t have the rooms.”
Related said construction of a second convention center hotel can be a significant economic engine. Benefits include: $123 million in annual visitor spending, $3.7 million in bed and sales tax revenue, 255 permanent jobs and 766 construction jobs.
A second hotel also would help bring more customers to stores and restaurants in CityPlace.
“This hotel unlocks a huge amount of value that’s potentially there,” Silagy said.
