SUMMARY  OF  THE  OEI  POLICY  CHANGE     The   FAA   proposed   One   Engine   Inoperative   (OEI)   policy   has   not   formally   been   proposed   or   defined,   but   based   on   information   from   aviation   experts,   it   is   our   understanding   that   the   FAA   is   considering   revising  its  criteria  for  evaluating  whether  proposed  structures  (e.g.  buildings,  towers,  wind  farms),   would  pose  a  hazard  to  air  navigation.     Based  on  available  information,  it  will  likely  protect  for  airline-­‐specific  OEI  procedures  surrounding   airports.    These  airline-­‐specific  procedures  are  often  at  heights  well  below  the  current  criteria  used   to   evaluate   structures,   and   may   effectively   limit   the   heights   of   proposed   construction   to   levels   lower  than  are  presently  considered  not  to  pose  hazards  to  air  navigation.     As   an   example   of   the   potential   change,   consider   a   structure   aligned   with   an   airport   runway   centerline,   and   situated   10,000   feet   from   the   end   of   the   runway.     Under   the   current   evaluation   criteria,  the  structure  would  be  allowable  at  a  height  of  250  feet  above  ground  level.    A  proposed   change   to   the   criteria   taking   into   consideration   OEI   procedures   would   effectively   limit   the   same   structure   to   just   160   feet.     For   an   occupiable   building,   this   could   equate   to   approximately   nine   floors  constituting  the  obstruction  under  the  new  OEI  determination  criteria.     The   effect   of   the   OEI   change   would   be   that   the   economic   responsibility   to   provide   for   sufficient   flight   clearances   would   be   shifted   from   the   airlines,   where   it   has   been   since   the   FAA   began   evaluating   hazards   to   air   navigation   over   seventy   years   ago,   to   individual   property   owners.   Proposed  construction  exceeding  these  new  criteria  would  receive  FAA  determinations  of  hazard,   which   may   impact   the   ability   to   obtain   financing,   insurance,   necessary   permits,   and   comply   with   local  zoning  requirements.       While  not  likely  to  be  applied  retroactively,  the  policy  would  likely  apply  to  any  future  development   of  projects  on  sites  with  existing  FAA  determinations  of  no  hazard.    When  local  entitlement  agencies   adopt  the  FAA’s  advisory  opinions  of  “hazard”  or  “no  hazard,”  the  result  may  be  a  “downzoning”  of  a   development  site  or  a  building,  limiting  a  property’s  development  potential  and  value.     In  summary,  the  proposed  change  to  the  FAA’s  policy  related  to  the  determination  of  hazard  or  no   hazard   has   expansive   ramifications   throughout   real   estate   development   and   investment,   public-­‐ private   partnership   initiatives,   and   the   feasibility   of   operating   affected   existing   properties   in   the   long-­‐term.         There   are   real   valuation   concerns   that   property   owners   should   have   relative   to   this   potential   change,   and   it   is   our   opinion   that   the   effects   of   the   proposed   change   are   not   yet   well   understood   by   the   real   estate   community.   For   the   developers   and   investors   in   prospective   projects,   the   current   uncertainty   of   development   density   causes   expensive   delays   and   inhibits   new   investment   in   real   estate   projects   that   are   often   good   for   the   community   and   that   offer   solid   contributions   to   local   economic  development.                

IMPACTS  OF  THE  OEI  POLICY  CHANGE     1. The   prospective   change   is   incredibly   far-­‐reaching,   affecting   privately   and   publicly   owned   real  estate  near  388  different  airports  throughout  the  United  States  and  U.S.  Territories.       2. The   change   affects   primarily   proposed   and,   to   a   lesser   extent,   existing   structures,   which   are   often   located   within   or   near   central   business   districts,   airports,   and   sub-­‐markets   of   major   American   cities   that   are   important   economic   centers   for   the   metropolitan   area,   as   well   as   the  nation.     a. Locations  like  Washington,  D.C.  suburbs  in  Northern  Virginia,  Chicago’s  West  Loop   and   Near   Northwest   Suburbs,   Downtown   Boston,   Lower   Manhattan,   and   the   Downtown  and  Brickell  areas  of  Miami  would  all  be  affected.       2. Overall,   more   than   3,850   existing   structures   would   exceed   the   surfaces   of   the   proposed   OEI   policy,  meaning  that  they  fall  outside  of  allowable  redevelopment  limitations.       a. While  their  existing  use  would  not  be  affected  by  the  policy  change,  these  structures   may  not  be  able  to  be  rebuilt  to  the  same  height  or  scale  under  the  proposed  policy   should  substantial  reconstruction  or  redevelopment  be  required.       3. The   structures   affected   include   office   buildings,   residential   towers   and   single-­‐family   homes,   hotels,   bridges,   lighthouses,   utility   and   communications   towers,   and   other   types   of   structures.       a. Many  of  these  properties  have  iconic  and  cultural  significance  to  their  cities  and  to   the  nation,  beyond  their  real  estate  value  or  public  utility.     4. Limiting   density   in   the   areas   affected   by   the   policy   change   has   the   effect   of   pushing   development   outward,   encouraging   sprawl,   and   limiting   the   amount   of   space   available   in   core  employment,  residential,  and  tourism  areas.       5. The  impact  of  the  potential  policy  change  is  most  significant,  and  more  readily  determined,   for  projects  that  are  proposed  for  development.       a. The   FAA’s   formal   determinations   of   “no   hazard”   expire   after   18   months   if   construction   on   a   project   has   not   yet   begun.     If   a   proposed   development   has   received   a   determination   of   “no   hazard,”   the   developer   has   18   months   to   begin   construction,   which   in   recent   years   has   been   difficult   due   to   the   challenging   atmosphere   for   capital   investment   and   financing,   and   further   complicated   by   foreclosure   proceedings   and   litigation   related   to   property   proposed   for   development.       b. Should  delays  to  the  start  of  construction  occur,  a  developer  must  seek  an  extension   after   the   initial   18-­‐month   period   has   expired.     The   FAA   evaluates   the   extension   request  under  the  facts  and  circumstances  existing  at  the  time,  taking  into  account   current  criteria  and  air  traffic  procedures.       c. Under   the   new   criteria,   a   project   that   had   previously   received   a   determination   of   “no   hazard”   could   now   receive   a   hazard   determination   upon   request   for   the   extension  if  its  proposed  height  exceeded  the  OEI  criteria.     6. The   change   would   result   in   limits   being   placed   on   the   density   of   new   prospective   development  in  the  land  areas  affected,  limiting  the  development  potential  of  a  downtown   area  or  residential  district  versus  what  the  market  would  otherwise  have  allowed.  

a. A   skyline   of   a   city,   and   therefore   part   of   that   city’s   visual   identity,   may   be   defined   in   part   by   multiple   structures   deemed   to   be   obstructions.     Should   maintenance   or   reinvestment   in   these   structures   deteriorate   over   time,   causing   them   to   look   different  or  require  reconstruction  or  modification,  the  skyline  of  a  city  may  change.           7. New  proposed  developments  face  significant  obstacles  in  being  capitalized  with  equity  and   debt.       a. Unless   and   until   the   new   policy   is   adopted,   a   climate   of   uncertainty   would   overshadow   any   prospective   investment   deal   on   property   subject   to   the   height   limitations,   which   is   likely   to   delay   projects   that   are   presently   proposed   or   permitted,  but  that  have  not  yet  begun  construction.     8. Existing   properties   that   exceed   the   proposed   OEI   criteria   change   limitations   would   likely   face   similar   challenges   to   proposed   development,   although   the   nuances   and   effects   over   time  are  less  predictable  because  the  properties  would  be  “grandfathered-­‐in.”   a. Despite  the  FAA’s  conveyance  of  a  “no  hazard”  determination  on  existing  property,   it   would   likely   become   known   that   the   building   may   exceed   the   more   restrictive   heights   in   the   OEI   criteria   to   property   owners,   risk   managers,   and   investors   in   a   building.     9. A   condominium   tower   presents   another   important   example,   whereby   the   owners   of   individual   residential   units   may   not   be   able   to   obtain   favorable   personal   homeowners’   insurance  or  favorable  mortgage  terms,  substantially  inhibiting  the  value  of  a  home  on  the   open  market.   a. Units   located   in   sections   of   the   tower   that   exceed   the   FAA’s   height   limitation   may   not   be   approved   for   reconstruction   if   disaster   struck,   leaving   lenders   less   likely   to   finance   mortgages   at   the   upper   levels   of   the   building   than   at   the   lower   levels   where   it   is   likely   that   a   condominium   would   be   rebuilt   with   insurance   proceeds   should   the   building  have  been  largely  destroyed.       10. It   is   possible   that   the   financial   impact   of   the   policy   on   the   cash   flow   and   value   of   existing   properties   would   cause   some   owners   to   default   on   existing   debt   service   or   repayment   obligations.   a. Lenders  would  foreclose  on  affected  properties,  accepting  prospectively  significant   loan  repayment  losses  upon  resale  to  alternative  owners,  which  would  acquire  the   property   at   its   then   market   value,   taking   into   consideration   its   limited   cash   flow   potential,  risk  profile,  and  financeability.     11. Where  there  may  be  a  number  of  these  structures  in  one  location,  the  very  look  and  feel  of   that   location   or   neighborhood   could   change   over   the   long-­‐term,   also   broadly   affecting   the   value  of  nearby  properties  that  themselves  are  not  restricted  by  the  policy.       12. While   unlikely   in   most   instances,   it   is   possible   that   some   building   owners   would   become   so   desperate   to   eliminate   the   financial   challenges   posed   to   grandfathered   buildings   that   they   would  choose  to  demolish  some  portion  of  their  structure  so  that  it  conformed  to  the  height   limitations  and  was  no  longer  non-­‐conforming  or  perceived  to  be  an  obstruction  hazard  by   the  market.   a. This   would   be   an   unlikely   extreme   measure,   yet   possible   given   that   we   do   not   yet   know  how  the  markets  will  adjust  to  the  new  policy  should  it  be  implemented.      

13. Out   of   3,851   total   existing   obstacles   reported   by   the   FAA,   757   of   them   are   parts   of   occupiable   buildings.     These   buildings   are   located   in   46   U.S.   States   or   U.S.   Territories,   and   the   average   existing   non-­‐conforming   obstruction   exceeds   the   maximum   advisable   height   under   the   policy   by   over   87   feet.     This   is   roughly   the   equivalent   of   an   eight   or   nine   story   building.             14. In   addition   to   existing   structures,   there   are   an   additional   3,879   obstacles   proposed   for   development   that   exceed   the   policy’s   height   advisories.     The   FAA   does   not   report   what   type   of   structure   these   proposed   obstacles   represent,   but   they   include   everything   from   occupiable   buildings   to   wind   turbines.     These   proposed   obstacles   are   located   in   52   U.S.   States   or   U.S.   Territories,   and   they   exceed   the   policy’s   height   limitations   by   an   average   of   nearly  78  feet.                                                                                

MIAMI  AFFECTED  PROPERTIES     In   Miami,   there   are   a   number   of   major   projects   that   exceed   the   proposed   height   limitations,   and   more   that   are   presently   under   construction   or   recently   completed   where   the   policy’s   effects   may   hinder   the   financial   success   of   the   development,   putting   the   feasibility   upon   which   investment   occurred  at  risk.    Some  of  the  notable  potential  obstructions  are  summarized  as  follows.     1. The  Palmer  Lake  area  is  located  east  of  Miami  International  Airport  and  a  byproduct  of  the   creation   of   the   Miami   Intermodal   Center.     It   has   been   the   subject   of   significant   urban   planning   focus,   with   hopes   to   develop   a   mix   of   uses   all   with   access   to   mass   transit   and   in   close  proximity  to  both  the  airport  and  downtown  Miami.  Palmer  Lake  includes  about  220   acres  of  land,  and  the  master  plan  would  accommodate  office,  retail,  hotel,  and  residential   uses  located  on  the  lake  itself  as  well  as  along  the  Miami  River  and  Tamiami  Canal.    All  of  the   development   at   Palmer   Lake   would   be   at   risk   of   being   significantly   impacted   by   the   proposed  OEI  policy  change.    This  is  particularly  true  because  Palmer  Lake’s  buildings  will   be  developed  in  multiple-­‐phases.     2. Maefield   Development’s   proposed   Arsht   Center   Parking   Garage   project   would   be   an   obstruction,   even   if   located   on   a   different   nearby   site   than   originally   proposed.     The   project   proposed  development  of  a  100',  8-­‐story  parking  garage,  450,000  square  feet  of  retail  space,   and  20-­‐story  electronic  signage  billboards.       3. The  Casino   Miami   Jai   Alai  project  was  completed  last  winter,  and  exceeds  the  OEI  height   limitations   by   approximately   24   feet.       ABC   Funding,   the   manager   of   the   loan   for   several   funds,  filed  a  foreclosure  lawsuit  in  September  against  Florida  Gaming  Centers  and  Florida   Gaming   Corp.   The   property’s   development   has   failed,   and   because   it   is   a   special-­‐use   property  with  a  lender  interested  in  recuperating  its  investment,  it  is  likely  that  there  is  an   alternative   highest   and   best   use   of   the   site.     The   property’s   more   feasible   redevelopment   would  likely  be  inhibited  by  the  proposed  OEI  policy  change.     4. Satander  Global  Property  plans  to  raze  the  building  at  1401  Brickell  to  construct  a  50-­‐story   tower  on  the  2.02-­‐acre  site.  The  property  holds  development  rights  for  more  than  800,000   square   feet   of   office   space,   which   would   exceed   the   OEI   policy’s   height   limitations   by   nearly   500  feet.     5. Resorts  World  Miami  is  being  proposed  for  a  30-­‐acre  site  in  downtown  Miami  by  Genting   Group.    The  project  would  include  5,000  hotel  rooms,  700,000  square  feet  of  convention  and   meeting   space,   1,000   residential   units,   and   countless   retail   stores   and   entertainment   amenities.     It   also   contributes   to   the   completion   of   the   150-­‐acre   Baywalk,   which   is   an   important   public   access   amenity   in   the   City   of   Miami.     Resorts   World   Miami’s   $3   billion   investment  would  likely  be  subject  to  the  OEI  policy  determinations,  and  because  this  is  a   multi-­‐building,   multi-­‐phased   project,   each   subsequent   phase   would   be   at   risk   of   being   limited  in  height.     6. Miami   World   Center   is   being   proposed   for   development   by   the   Falcone   Group   and   Centurion  Partners,  with  a  notable  investment  made  by  CIM  Group.    The  nine-­‐block  project   would   be   developed   in   multiple   phases,   incorporating   residential,   retail,   office,   and   hotel   spaces.    The  entire  project  would  likely  be  subject  to  the  OEI  criteria.     7. 1400   Biscayne   Center   is   being   proposed   for   development   by   Espacio   USA,   a   Spanish  

development   firm   that   has   retenented   the   existing   office   building   on   the   site,   but   now   intends  to  move  forward  with  the  site’s  redevelopment  as  originally  planned.    Espacio  has   engaged  I.M.  Pei’s  firm  to  design  a  two-­‐tower  residential  and  office  property  to  be  built  in   two   phases.     The   first   tower   will   include   office   space   in   a   173-­‐foot   structure,   while   the   second  phase  will  include  a  65-­‐floor  residential  and  office  tower  totaling  651  feet.     8. Related  has  several  projects  that  have  not  yet  begun  construction,  but  that  would  likely  be   affected   by   the   proposed   OEI   change.     These   include   IconBay,   which   is   selling   condominiums   on   a   pre-­‐construction   basis,   and   where   any   existing   determinations   may   expire.       Related   is   also   under   construction   with   other   towers,   including   MyBrickell   and   Millicento  1100  Brickell,  both  of  which  likely  exceed  the  height  limitations.    Because  these   properties   are   all   condominiums,   the   OEI   change   may   present   unique   end-­‐user   concerns   that  may  challenge  the  sellout  potential,  insurability,  or  financeability.         9. Brickell   CitiCentre   is   undergoing   site   work   by   the   developer,   Swire   Properties,   but   construction   on   its   towers   has   not   yet   begun.     Totaling   approximately   4.6   million   square   feet   comprising   a   mix   of   uses,   CitiCentre   would   be   one   of   Miami’s   largest   projects.     It   has   been   stalled   in   2008   due   to   the   recession,   and   originally   had   determinations   of   no   hazard   issued   by   the   FAA,   but   due   to   its   multi-­‐phased   nature   these   determinations   are   likely   to   expire.         10. Florid  East  Coast  Realty  is  proposing  a  redevelopment  of  1101  Brickell  with  Miami’s  tallest   building,  rising  824  feet.    While  originally  proposed  in  2006,  and  approved  for  development,   the   project   was   placed   on   hold   due   to   the   recession.     Site   work   and   demolition   of   the   existing   structures   on   the   site   has   now   begun,   although   construction   of   the   new   tower   does   not   yet   appear   to   have   started,   putting   the   height   approvals   in   jeopardy.     The   project   is   proposed  to  include  over  600  condominium  units  and  270,000  square  feet  of  office  space.    

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