2012-03-09 12:00:00 AM
The title of Jimmy Buffett’s 1981 song “Somewhere Over China” seems especially appropriate as the developer of the Margaritaville Hollywood Beach Resort turns to that nation for funding to build the long-discussed oceanfront project.
Buffett, a minority owner, and Hollywood developer Lon Tabatchnick are seeking to raise $75 million from 150
investors at $500,000 apiece, said Tabatchnick, a principal with Hollywood Resort Partners. He is also president of the Lojeta development firm in Hollywood.
“We have 25 percent already committed” from Chinese investors, said Tabatchnick, sitting in his conference room with a six-inch binder spelling out U.S. government rules on how to handle foreign investment. “Raising the first $25 million is the toughest. Raising the last $25 million is easy.”
The question is whether Tabatchnick will be able to raise the funds quickly enough to meet a May 15 deadline.
The city, which owns the land that Margaritaville will be built on, set that date for the developer to line up all the financing for the project. Tabatchnick said that won’t be a problem because he is in the process of securing gap financing, such as a letter of credit or a bridge loan. He declined to provide additional details. The gap financing would give him time to recruit all the needed investors from China.
Tabatchnick is courting Chinese investors through the EB-5 Visa program. The program requires foreign
investors to invest $500,000 in a U.S. government-approved project and for the developer to create or preserve 10 jobs per applicant.
In exchange, the investors receive an EB-5 visa, which could lead to permanent U.S. residency for the them andtheir families.
Construction of Margaritaville is estimated to cost $131 million. If he raises the required money, Tabatchnick plans to start construction of the 360-room resort in June. The project, at A1A and Johnson Street along Hollywood Beach’s Broadwalk, would also include multiple restaurants and bars, including one named after Buffett’s duet with Alan Jackson, “It’s Five O’Clock Somewhere.”
The city of Hollywood signed a 99-year lease with Tabatchnick’s company a year ago to redevelop the site, now home to parking lots and a garage.
The developer is to receive building permits on March 15. But before the city turns control of the land over to him, Tabatchnick needs to meet several financial conditions.
He has to invest at least $10 million in the project, of which he has already spent about $7 million. He also needs to have the $75 million from EB-5 investors or gap financing in place, said Cathy Swanson-Rivenbark, Hollywood’s assistant city manager.
“EB-5 financing is more affordable than traditional financing, so there is an incentive on his part to get the EB-5, but he doesn’t want to delay to take possession [of the site] and commence construction,” Swanson-Rivenbark said.
In addition to Tabatchnick’s obligations, a community development district, which will issue $38 million in bonds, was approved in Broward Circuit Court on Feb. 29.
Tabatchnick said he will meet the May 15 deadline.
“Once we have all the permits, the necessary funds will come available,” he said. “We are very confident we are going to start construction in June.”
Tabatchnick is running a bit behind the schedule established in the 2011 lease.
Swanson-Rivenbark said Tabatchnick is to ask the City Commission at a March 21 meeting to push back Margaritaville’s opening from January 2014 to August 2014.
“We don’t look at it as a sign that the project is in jeopardy, instead, it is a sign that the project is almost ready to commence construction,” she said.
Life Science Project
If successful, Margaritaville would be one of the few real estate projects in South Florida to be funded through the EB-5 program.
The University of Miami Life Science & Technology Park west of downtown Miami was partially built with funds from EB-5 investors, said Fred Burgess, who helps match EB-5 investors in government approved projects across the country, specially South Florida.
He helped raise a “substantial” amount of the $20 million raised through the EB-5 program to fund the nearly $140 million UM building during the recession.
Since construction financing is difficult to obtain, “there are a lot of projects looking for money,” he said.
But landing capital from China, isn’t easy. (To read the entire article visit http://www.dailybusinessreview.com)
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