Local officials may use a variety of means to help develop property and business opportunities in specific areas. For example, the Community Redevelopment Agency in Miami works to attract businesses that will help the city thrive. Not long ago, the agency announced a major deal with a film studio that involves public financing.
According to reports from the Miami Herald, EUE/Screen Gems signed a contract with the development authority to construct and operate a film production studio in the heart of the city. Under the agreement, the studio will receive as much as $11.5 million from property tax revenues used by the redevelopment agency. This funding will help reimburse the company's development costs.
Of course, a business transaction of this caliber involves a number of commercial real estate issues. First and foremost, the movie studio will be leasing the property for at least 10 years, according to the recently signed contract. Beyond that, the EUE/Screen Gems will have an option to extend the lease for another nine years. Annual lease rates have been negotiated at $100,000, which also includes revenue sharing.
Down the road, the studio may have to renegotiate a lease. Depending on how the market shapes up, officials may want to change the rate charged to the film studio. For the long-term success and stability of the studio's presence in Miami, negotiating this fee could be of paramount importance.
Business owners often have to look at the feasibility of developing, buying or leasing commercial property. Knowing this, the steps taken by the film studio to establish a presence in Miami could prove to be instructive.
Source: Miami Herald, "Miami's $11.5 million movie/TV studio gets green light," Evan S. Benn, March 6, 2014