Stupid Numbers Used By Developer To Justify SkyRise in Miami: When Too Good To Be True Nail Clipper Observation Tower IS Too Good To Be True! … by gimleteye

The following is a great letter analyzing the claims made by a Miami developer for an outlandish observation tower on Biscayne Bay. Call it: the Nail Clipper Tower. Summer is the stupid time of year in Florida. Lots of bad projects get approved while saner minds are on vacation in North Carolina or cooler climates. To be economic, Charles Corda writes in an "open letter" that the proposed SkyRise would have to be the most successful observation tower in the world. He compares the claims of attendance to the real data from the world's top observation attractions in Tokyo, New York and Paris. And if the Miami boondoggle is not economically viable? Well, then expect the developer to make a future plea to city commissioners to "convert" the use to "something else". Something like a hotel or -- when gambling is approved by the idiotic Florida legislature -- a casino. These land use changes happen all the time. It is a common tactic at the urban development boundary where developers leap over objectors' concerns (ie. Armando Codina and Beacon Lakes) about major impacts by obtaining approval for lesser project scope, then apply for a land use change after the fact, pleading whatever. Let's hope that city elected leaders will take the time to actually study the numbers, instead of default to accepting whatever numbers a wealthy, well-heeled supplicant brings to the table (as in the Marlins Stadium deal). If it sounds too good to be true, and the numbers show it is too good to be true, it is too good to be true.

Muse for Tower

RE: SkyRise Miami
Dear Friends, Neighbors and Colleagues;

For the record, I do not object to the construction of an “Observation Tower” within the City of Miami. However, I do object to the proposed “SkyRise” Observation Tower and possible future Casino, being constructed on Publicly Owned land.

If Mr. Berkowitz , the developer of “SkyRise”, planned to construct this project on privately owned land I would not be writing you.
As it is the intent of Mr. Berkowitz to construct this project on property owned by the City of Miami citizenry, I believe we have the right to pose reasonable and fair questions about this proposal.

As such, I have spent some time looking over Mr. Berkowitz’s “SkyRise” “Pro Forma” Spreadsheet. Doing so has given me some serious concerns about its viability.

(For those interested I have attached the “SkyRise” Pro Forma to the end of this letter.)

NUMBER OF VISITORS
Mr. Berkowitz has declared that “SkyRise” will attract 3,200,000. “visitors” per year. That number breaks down to 8,767 “visitors” per day to “SkyRise”.

This number was the first thing that caught my eye regarding this project. 8,767 Visitors Per Day “ seemed to me to be somewhat optimistic given the size of our resident population and the number of visitors to “Miami and the Beaches”.

According to the Visitor and Convention Bureau , 14,200,000 people visited “Miami and The Beaches” last year. The 2013 Census puts the Population of Miami-Dade County at 2,617,176. The Combined Total of Residents and Visitors to Dade County, “ Miami and the Beaches” = 16,817,176 people

As such Mr. Berkowitz anticipates 3,200,000 visitors a year to “SkyRise” equaling a yearly “capture rate” of better than 19% of the combined resident and visitor populations.

Mr. Berkowitz also believes this to be a “conservative” projection and by way of example cites the number of visitors to similar structures around the world including The Empire State Building, The Eiffel Tower, The Statue of Liberty and the Tokyo “Sky Tree” Tower.

I decided to look at those particular structures and run some numbers. The following information comes directly from the respective websites of these named structures and their respective locations.

The Tokyo SkyTree
Visitors Per Year: 6,000,000.
Tokyo Resident Population = 35,000,000.
Tokyo Visitors = 426,000,000 per year (approx.) An astounding number compared to just about anywhere else.
Combined Visitor and Resident Population = 461,000,000. SkyTree Capture Rate = 1.3%
Extrapolated to South Florida
16,817,176 x 1.3% =218,623 Visitors to SkyRise

Clearly this is far less than Mr. Berkowitz’s projection of 3,200,000.visitors.

The Eiffel Tower
Visitors Per Year: 7,000,000.
Paris Resident Population = 2,340,000.
Paris Visitors = 70,000,000 per year (approx.)
Combined Visitor and Resident Population = 72,340,000. a year
Eiffel Tower Capture Rate = 9.7%
Extrapolated to South Florida 16,817,176 x 9.7% =1,631,266 Visitors to SkyRise
Clearly this is far less than Mr. Berkowitz’s projection of 3,200,000.visitors to SkyRise.

The Empire State Building
3,500,000. Visitors a year
New York City Resident Population = 8,475, 500
New York City Visitors = 48,700,000 per year (2010 approx.)
Combined Visitor and Resident Population = 57,175,500. Empire State Building Capture Rate = 6.1%
Extrapolated to South Florida
16,817,176 x 6.1% =1,025,848 Visitors to SkyRise
Clearly this is far less than Mr. Berkowitz’s projection of 3,200,000.visitors to SkyRise

The Statue of Liberty
Visitors Per Year: 4,200,000.
New York City Resident Population = 8,475, 500
New York City Visitors = 48,700,000 per year (2010 approx.)
Combined Visitor and Resident Population = 57,175,500. Statue of Liberty Capture Rate = 7.3%
Extrapolated to South Florida
16,817,176 x 7.3% =1,227,654 Visitors to SkyRise

Clearly this is far less than Mr. Berkowitz’s projection of 3,200,000.visitors to SkyRise

Giving Mr. Berkowitz the full benefit of the doubt and even throwing in a slightly higher number for argument sake let’s say that “SkyRise” becomes the most successful Observation Tower on earth having a projected capture rate of 10%.

10% of the combined Visitor and Resident population of Miami-Dade County “Miami and The Beaches” would be 1,681,718. people
Clearly this is far less than Mr. Berkowitz’s projection of 3,200,000.visitors to SkyRise.

In point of fact it is almost 50% less than Mr. Berkowitz’s projections.

BASIC ECONOMICS
TAKEN DIRECT FROM Mr. Berkowitz’s Spreadsheet (attached below) YEAR 5 ( First Full Year of Operation)
TOTAL Revenue
Expenses Before Debt Service
Cash Flow before Debt Service
Debt Service
Projected NET Cash Flow
$99,998,062
$57,838,755
$42,149,307
$18,325,000
$23,140,479
Yearly Expense = 57,838,755. + Debt Service of $18,325,000. =
Total YEARLY Expense of $76,163,755 or $208,667.82 PER DAY
Total Revenue Per Person = $99,998,062 divided by 3,200,000 Projected
Visitors = $31.25 PER Visitor PER Visit
Assuming Mr. Berkowitz is correct that 3,200,000 People will Visit SkyRise The project will do quite well and show a considerable profit.
If however the number of visitors is more in line with similar structures around the world, at a max. of 10% of combined visitor and resident populations Mr. Berkowitz will be in dire straights.
Extrapolating from Mr. Berkowitz’s own projections he MUST have 6,677 Visitors PER DAY just to break even.
6,677 Visitors x $31.25= $208,656.25 Gross Income per Day - approximately equal to his projected expenses of $208,667.82 PER DAY
IF his actual Visits are more in line with similar structures around the world (adjusted by available Population/Visitors), the project will be bankrupt almost immediately upon opening.
Combined Dade County/ ”Miami and the Beaches ” Resident/Visitor Population = 16,817,176 x 10 % =1,681,717. Per Year Divided by 365 days = 4,607 Visitors per day.
4607 Visitors per Day x $31.25 Per Visitor = $143,969. PER DAY GROSS REVENUE
With Expenses Fixed at $208,656.25 vs Gross Revenue of $143,969. means “SkyRise” Loses $64,687 PER DAY.
The Question then simply becomes “will this project “SkyRise” capture a greater percentage of the available population than the most Iconic Structures on Earth?
In point of fact “SkyRise will have to capture approximately 150% More of the available population and visitors than the above noted structures to break even.
As such it seems to be that Mr. Berkowitz’s financial projections are highly optimistic at best.
If his actual visitor numbers are in line with other similar yet more iconic structures around the world, as adjusted by available populations and visitors, this project will bleed red ink to the tune of approx. $64,000 PER DAY starting on day one..
I doubt if even Mr. Berkowitz, a renown and respected developer, can weather that storm for very long.
.
At that rate the project loses $23,360,000. in the first year of operation. I would assume that well before that occurs the project goes into bankruptcy.

In summary, all of the above numbers, except those related to extant observation towers, are of a conjectural nature. No one can predict with absolute certainty how many people will visit this project each day. Not I. Not Mr. Berkowitz, nor his consultants. However if similar projects around the world are used as a guide for analysis, this project is doomed to failure.

In the end We,The Citizens of Miami will have a 1000 Foot high problem on our hands. The costs to the City of Miami can be astronomical if this project does not perform as Mr. Berkowitz currently projects.

In the final Analysis this clearly appears to be a high risk project on Publicly Owned Land.

Due to the possible extraordinary expenses the City may incur if this project fails, I respectfully suggest that Mr. Berkowitz build his project somewhere else and certainly not on our Public Land.

I urge the Miami City Commission to reject this proposal.

Sincerely, Charles Corda

A note regarding “Gambling”
The Sub Lease between the owners of Bayside and “SkyRise” , pending Approval by the Miami City Commission, specifically allows Gambling, if approved in Florida, within the SkyRise Tower.