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As if the Broward County Convention Center hotel deal in Fort Lauderdale, Fla., isn’t complicated enough, there’s a seemingly mundane issue that’s escaped much public attention — property taxes. But it could be crucial enough to kill Miami developer R. Donahue Peebles’ plan to build the hotel. The tax issue also faces real estate insiders interested in purchasing the adjacent Northport Marketplace complex, which Peebles has said he wants to do as well. Both sites, along Fort Lauderdale’s 17th Street Causeway at Port Everglades, sit on county-owned land. Whoever buys Northport and whoever builds a convention center hotel will be subject to hefty real estate taxes. Won’t they? That’s a key question with no certain answer, thanks to a 5-year-old pending lawsuit between the Broward County government and Property Appraiser William Markham. The county’s position is that property leased to for-profit developers is immune from real estate tax payments. Markham’s stance is that such a deal gives an unfair advantage to those businesses. At Northport, real estate taxes haven’t been paid for five years because of the suit, though Markham has continued to assess the property. Last year, the complex and land were assessed at $11.46 million, with property taxes totaling $292,284. The 4.1-acre convention center hotel site, included in the same parcel and development of regional impact designation as Northport, could be assessed at about $1.2 million, with possible property taxes of almost $30,000 on the unimproved land — using the same property valuations and millage rates as Northport. According to two real estate insiders familiar with the hotel and Northport properties, and who spoke on condition of anonymity, the tax issue is a significant one for developer Peebles. Peebles has an agreement with the county to begin construction on the convention center hotel by July. While Peebles has a $54.5 million loan commitment on the hotel project from Fremont Investment & Loan in California, the agreement has several key conditions that must be met or resolved first. One of those is the tax issue. “That’s a condition of the Fremont letter — to get a waiver of that,” said one of the sources. If that doesn’t happen, “taxes could have serious repercussions on what Fremont will lend.” Peebles said Tuesday that he would not discuss the loan commitment publicly, but he added that the lender has asked for what’s called an estoppel certificate, which would warrant the stated mortgage and prevent any future contention of a different amount. But, according to a May 24 memo to Peebles from Mary Frances Bakke, the county’s administration director, the county won’t give Fremont that assurance. The memo, in fact, includes a statement that “no opinion or certificate will be provided by the county attorney’s office regarding the state of the law or outcome of the tax litigation.” If the county wins the suit, though, “it would mean Peebles’ hotel can compete against hotels like Pier 66 and be able to undercut their rate by about 15 percent because they wouldn’t have to pay taxes,” said Fort Lauderdale lawyer Gaylord Wood, who represents appraiser Markham. Not so, said Peebles. “Pier 66′s cost basis is considerably less than mine because it was built 15 years ago, and they’re waterfront with significant government subsidies, by the way,” he added. At Northport, the tax issue warrants an entire explanatory page in the information package real estate broker J. Brett Houston sends to prospective buyers. “That’s a big issue for anyone looking. … It causes a lot of uncertainty for any buyer of the property,” said Houston, of Resource Real Estate Group Inc. in Miami, the court-appointed receiver for Northport. The property was sold in foreclosure early last month to Lend Lease Real Estate Investments Inc. of Atlanta, a unit of Lend Lease Corp. Ltd. of Sydney, Australia. “I’ve talked to the county and the appraiser, and each is sure they’ll win the suit,” he said. The county, which also has indicated an interest in acquiring Northport, is certain it would not have to pay taxes on the property because the government is not a private developer, Houston added. The property taxes “would be a real concern for us,” Peebles said. “Something would have to be adjusted for us to go forward on a project where we have to block out some of our rooms two years in advance at a set rate for convention center business — they are fixing my rates and revenue — without any subsidy. I would have to pay taxes, even though it was represented to me I wouldn’t. It would be changing the rules in the middle of the process.” Deputy county attorney Noel Pfeffer, however, said he didn’t know who at the county would make that representation to Peebles. “The lease agreement is unequivocal and clear in requiring that any real estate taxes, or any taxes of any nature, which are charged against this property as being the responsibility of the tenant,” he said. “Peebles understands that. He is hopeful that the county will prevail in the suit so that no taxes ultimately will be due.” But unless the lease is amended, Pfeffer said, “there is no relief for him.”

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