Monday, June 23, 2014

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.)

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.

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
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.


Anonymous said...

wow a little web search and some 8th grade math deflates “a very detailed study done by an independent leading company in the attraction and entertainment space"

So it's all smoke and mirrors political hype, a total boondoggle, the media's asleep at the switch, but this being Miami I guess the only question is when do we start?

Oh we already have?

Never mind..

Anonymous said...
This comment has been removed by a blog administrator.
Anonymous said...

The Eiffel Tower was not without doubters and opponents and it’s now the world’s most valuable landmark. Sometimes you have to have vision. See: A History of the Eiffel Tower, by Robert Wilde,

Noting that: ‘The Tower is now considered a historical milestone in design and construction, a masterpiece for its day, the start of a new revolution in building. At the time, however, there was opposition, not least from people horrified at the aesthetic implications of such a large structure on the Champ-de-Mars. On February 14th 1887, while construction was ongoing, a statement of complaint was issued by “personalities from the world of arts and letters”. Other people were skeptical that the project would work. Eiffel had to fight his corner, but was successful and the tower went ahead.’

The Eiffel Tower was attacked by many NIMBYs who were pissed that this grotesque tower would spoil their view.

Every project has its skeptics and opponents. There are no guarantees, but look at how the Eiffel Tower turned out: Eiffel Tower is Europe’s most valuable monument, bringing in £344bn yearly:

Anonymous said...

Charles Corba and no one else is attacking the Eiffel Tower. What Mr Corba is asking is why Mr Berkowitz thinks his building in lowly Miami will generate 50% to 100% MORE visitors than iconic towers in busier cities? And what happens if Berkowitz only gets 1.5 million annual visitors, or 2 million, not the 3.2 million he is projecting?

Al Crespo said...

I beg to differ with the above post. I've written 12 stories about the Skyrise project, and spent at least 100 hours and several hundred dollars in paying for public records to back up my stories. Others have also written about this project. Charlie's email was an important contribution, but don't think that this is a story that has just come to light. A small handful of folks have been to the City Commission meetings to challenge this as well. If people are really upset about this then they need to stand up and be counted. There is a City Commission meeting this Thursday to approve the contracts. Show up!

Anonymous said...

You obviously missed my point. Or you simply refuse to acknowledge the point that sometimes those who propose projects miss their mark while other times it is the naysayers who are far off the mark.

The Eiffel Tower is probably the best example of a project that was nearly doomed through NIMBY opposition, but ultimately became one of, if not the world's greatest success story due to politicians having vision.

No one is say that the nail clipper will be the next Eiffel Tower, but you also cannot guarentee that it will not be sucessful.

We certainly do not need another Hard Rock there. Bar food and tacky wall hangings will not create a desirable downtown. Downtowns do not work limited to 2to 4 stories.

Parks are great, but they need to be there to serve the people that live and/or work nearby, not be simply code word for land banks.

And what happens if he exceeds the number of visitors? What happens if downtown Miami becomes a real and thriving living downtown and this project is part of it. Then the parks become filled with those who choose to give up their gentrified 1/2 acre land suburban lifestyles and going the green movement to move vertical, rather than continue to sprawl horizontally. Miami has never had a real attempt at becoming an urban center. Sprawl started for the City of Miami one it's day one.

This is not a stadium, it is a real investment in locating people downtown.

Besides, where else will people be able to go to avoid the sea rise?

Anonymous said...

To anonymous above,
You realize that many New Yorkers have never visited the Empire State Building or the Statue of Liberty? Are you seriously holding out this nail clipper as something downtown residents will visit regularly? As if the nail clipper was a Starbucks or their local dry cleaner? Please bear in mind that every public/private scam the City has entered into in the past 25 years has ended in disaster - for the taxpayers.

Anonymous said...

Sorry Al. You do great. Just I'll never considered the blogosphere "The media" . More like media 2.0, the next-generation. These days true news junkies are on the web and blogs before going to the old mainstream print and broadcast. Keep up the good work.
Still amazed what simple math it took to bring down this snowjob.

Al Crespo said...

Simple math hasn't accomplished anything yet except hopefully open some eyes. If you are concerned about Charlie's numbers then you need to contact the 5 members of the Miami City Commission and let them know that you are opposed. Between now and Thursday a lot of folks need to have their eyes opened and then prodded into actually doing something concrete like telling their City Commissioner this is a bad deal.

Geniusofdespair said...

Why were you deleted? For saying shame on you...shame on you for expecting us to do your work for you. We are not paid ... You can't google a name yourself?

Anonymous said...

So do we stop trying? No everything has been a disaster, it just seems to be that way.

The success of the Empire State Building has never been dependent upon whether the locals visit it. It is just one of many, many successful landmarks. In fact, it is interesting that you bring up the Empire State Building. Check the history. Many people were firm in their belief that so tall a tower should not have been built in what they felt was the wrong place; that it would not work. But it did and it does still today where it continues to overshadow its surroundings.

Obviously there are far too many people that are of the build nothing anywhere near anyone mindset. I want to see a properly developed downtown that is a magnet for bringing people back from the suburbs.

There are also far too many contrarians who summarily dismiss the numbers from developers they don't like, but place blind faith in the equally subjective numbers of the opposition simply because they like the results.

I choose to be a proponent for smart growth, rather than simply no growth. I wish that everyone who arrived after 1957 would leave and we could return South Florida to what it was back then. That is not going to happen, no matter how hard I wish for it to be so.

Anonymous said...

I've been to the Eiffel Tower. This is no Eiffel Tower. Thanks, eyeonmiami, crespogram and Charles corda for exposing this for what it is, a deal worse than the marlins stadium.

Anonymous said...

Hi - Above you say that over 400 Million people visit Tokyo per year. What do you mean when you say that? Per the Japan National Tourism Organization, the entire country welcomed 10 Million Visitors. Am I missing something? and

Anonymous said...

The tower is much more than an observation tower. It is also an amusement park ride, a potential casino, and a potential advertisement billboard. Hard Rock is right next door and I see no provision in this agreement for disallowing gambling or sharing in those revenues for the city. Then there is nothing in the agreement to forbid Mr Berkowitz from plastering the tower with lighted advertisement or the city to share in that revenue. The Children's Museum is lit up with advertisement dollars and lights. And finally I see nothing in the agreement for who bears the liability costs when someone falls off of the bungee jump or has a heart attack up there. These people will surely include the City of Miami in their lawsuit as the landlord. Bad deal all around beside being god awful fugly.

Anonymous said...

This is from Miami Wiki which agrees with your number of residents in dade county but does not agree with your visitor number of just over 14 million - "Tourism is also an important industry in Miami. Along with finance and business, the beaches, conventions, festivals and events draw over 38 million visitors annually into the city, from across the country and around the world."

To be honest, I am on the fence about this whole project, but what I have seen from supporters and detractors are numbers all over the place. Its really hard to tell who is telling the truth. Using 38 Million in your calculations provides for a much more supportive argument for the Skyrise building to be completed.

Anonymous said...

Just looking at the location of this proposed tower raises a multitude of questions. Like how do over 8'000 people a day get there? Walking trough a obstacle course of tourist rip offs at the end of a pier? Very limited and expensive parking. Public transportation, please!, I all ready go very seldom to Bayside because of these issues. Rater go to Hollywood Beach, very pleasant atmosphere and human scale.

8'767. Now lets see. This would mean every 5 minutes a group of 30 people, like a school class, would march out to the end of the pier around the clock for 24 four hours a day to reach 8'640. And of course 30 a fife minute would be walking back round the clock.

Maybe on the day after a major hurricane to see the devastation far and wide, but Daily?

I expect most other towers are on private property, don't know if the Eiffel tower is on public ground, hidden behind a sublease! Most other towers benefit from good public transportation!

Next I would expect the port, the access bridge to port and the adjacent down town structures to demand a hefty wind storm insurance to hold harmless their structures in case of a toppling of this wet dream.

I do like an observation tower down town ON PRIVATE OWNED property. Then let the private market decide its viability or success. No need for sticky fingers in my pocket.

Anonymous said...

All the projects you mention are either completely private enterprises or completely public projects which went through a long bid and vetting process by LOTS of experts.
This is neither. This is some one man band with a fancy powerpoint and pocket full of politicians trying to pull a fast one.

He needs waterfront? Go partner with Genting, if this is such a slam dunk business venture they will be thrilled to see him.

Anonymous said...

These so called public/private scams are just that, scams. Shysters covet the public's property and then through lots of campaign contributions politicians give up the land. Then the shyster keeps all the money and the taxpayers get all the losses.

Anonymous said...

These so called public/private scams are just that, scams. Shysters covet the public's property and then through lots of campaign contributions politicians give up the land. Then the shyster keeps all the money and the taxpayers get all the losses.

Anonymous said...

Simple math and research exposes the real intent of The nail clipper: Gambling casino .. Same as the soccer stadium .. As Richard Fain printed out 250 million plus .. Plus for a stadium does not pencil out at 25 games a yea. These proposals are relying on fact that our officials appointed and elected are either too dumb. Incompetent. Corrupt. Or inexperienced or all of the above to realize the real intent of these hustles.

Anonymous said...

Analyzing the numbers and reviewing the documents require education, experience and a strong sense of what is best for the taxpayers of the City of Miami. Too bad these qualities are lacking in City staff and City politicians.

SEFTA South East Florida Transit Alternatives said...

The Eiffel Tower was an architectural icon. It was erected in 1889 to be the entrance arch to the 1889 World's Fair. It was not intended to be permanent. It was kept because liked it. I say we do the same thing. Let him build it. If we dont't lik it, we tear it down. It's on our land! This is a huge smoke screen, just to build a casino.