11/12/08 - Developer Term Sheet

November 12, 2008

CMPA Board of Directors

PO Box 12910

Pensacola, FL 32521

RE: DEVELOPER TERM SHEET

CMPA Board Members,

I am sometimes conflicted about writing letters to this Board because doing so has resulted in some local individuals holding the opinion that I am anti-park. I believe several of the CMPA Board members are struggling with a similar problem. Basically, there is a desire to negotiate a good deal for CMPA and the City of Pensacola with a Master Developer for the creation of the Maritime Park, but there is a fear that unless a number of incentives are given to the Master Developer, negotiations may break down and the Master Developer may walk. This prospect is especially troubling to those that seem to equate the creation of the Maritime Park with the selection of a Master Developer.

I believe this fear is unfounded if we step back and view the situation as follows:

The CMPA Board needs a construction manager or construction management firm to manage the General Contractors and handle everything else that is necessary in order to get the public portions of the park built and operational while adhering to the terms of the Covenant with the Community. The Board can either hire one of the Master Developer candidates to act as the construction manager or it can hire another group to do so. In my opinion, there are only two questions that need to be answered before this decision is made:

1.) Is the entity that is being considered qualified to act as the construction manager for this project?

2.) What is the proposed fee and how does this fee compare with the competition?

I believe Dr. Beitsch has stated that both Master Developer candidates are qualified to manage the project in his opinion, so that leaves the task of addressing question number two. The Summary of Term Sheet delivered by Dr. Beitsch on October 6, 2008 sets forth several terms that represent a value or a form of compensation to the primary Master Developer candidate. These terms follow:

1.) 5,000 square feet of office space in City Hall for five years for $5.

2.) Except for the UWF sublease, the Private Development parcels will be leased to the Master Developer at the rate of 6% per year applied to the estimated value of the unimproved property as described in Abramson & Associates Report dated December 6, 2005. These Sub-Lease payments shall begin upon the issuance of a Certificate of Occupancy by the City Inspection Services department.

3.) The Master Developer shall be paid a development fee equal to 3% of the cost of the public improvements, a property management fee equal to 4% of the cost of all office, classroom or other income (not stadium), an operations and maintenance fee equal to 10% of costs, an event production fee equal to 10% of gross revenues and an annual facility management fee of $250,000 with annual CPI adjustments.

These terms make up the fee requested by the primary Master Developer candidate. The challenge is estimating the actual cost to the City of Pensacola and CMPA which these requested terms represent. In order to do so, I recommend the following steps:

1.) Hire a qualified appraiser to estimate the market lease rate for 5,000 square feet of office space at City Hall.

2.) Hire a qualified appraiser to estimate the market value of the private development parcels, as depicted in the Design Criteria Package delivered in November of 2007, with the public portions of the park in place, including roads and infrastructure. The Abramson Report should not be used to assess the value of the private development parcels, as it was prepared almost two years before the completion of the Design Criteria Package and the estimated land values within the report are low, vague and open to interpretation.

3.) Have Dr. Beitsch or another individual selected by the Board obtain bids from entities qualified to perform the construction management, property management, event production or facilities management for this project in order to determine the customary fees.

In my opinion, until these steps are taken, it will be difficult to calculate the true cost of the Master Developer's proposal and challenging to determine what incentives you may be willing to offer the Master Developer. In addition, these steps will result in a stronger negotiating position for CMPA, as the Board's documentation of estimated property values and other bids will be an incentive to the Master Developer candidate to offer their services for a fee that is customary.

During these negotiations, I believe the Board needs to hope for the best but plan for the worst. This is also true of the public relations effort. While the actions taken to increase visibility on the City website are a step in the right direction, it has been suggested that CMPA should hold off on pursuing public relations assistance since the Master Developer candidate has already partnered with a public relations firm. This is dangerous in my opinion because this public relations firm represents the interests of the Master Developer candidate. In the event a fair agreement can not be reached with the Master Developer candidate, CMPA will need a public relations firm to represent its own interests.

I am excited that we are so close to moving forward with the park. I write this with concern for the City and the CMPA Board. Thank you again for your time and consideration. I wish you much success during the negotiation process.

Sincerely,

Fred Gunther, CCIM

cc: Dr. Owen Beitsch

Mr. Ed Spears