Miami Wants To Take Back Watson Island Land From Flagstone

After 15 years, Miami is finally trying to take back the Island Gardens property on Watson Island from a lessee who never built what was promised.

At a special meeting last week, commissioners unanimously voted to direct the city manager to issue a notice of default to Turkish developer Flagstone.

Flagstone representatives said they could cure any default or sue the city. A lender would also have priority over the city, they said.

The city has lost millions in undervalued rent for the property since agreeing to lease the land 15 years ago, according to commissioner Ken Russell, who pushed for the vote. Flagstone was supposed to have built a mixed-use property including hotel and retail.

If a new RFP was issued for the property today, Russell said it should include a a multi-modal transit hub that connects and finances the Baylink and water taxis.

 

A letter from Russell prior to the vote:

I placed this discussion item on the agenda today because I’m frustrated.

It has been more than 15 years since the City of Miami and our voters gave the right to develop our public land on Watson Island to Flagstone.

Ever since, we’ve entertained a litany of excuses as to why very little of the project voters approved has been built.

At this moment we have before us what I think is a pretty clear issue ‐‐ Flagstone had a deadline to have all its material permits approved and actually begin construction by May 1 of this year. I understand they moved some dirt around a few days before to try to convince us that construction had begun. Not the first time they’ve done that, by the way.

But their phased permit, which allows them to begin building before the master permit is finally approved, actually expired back in March and was not reinstated until May 4.

Three days late? No ‐ it’s 15 years and three days late.

Fifteen years we’ve been waiting for Flagstone to deliver what it promised.

Here’s what the Miami Herald wrote in December of 2002: “The project, approved in concept by city voters last year, would convert 10 acres of land into a bustling neighborhood ‐ with two five‐star hotels, a fish market and a yacht marina. It’s expected to be complete in about three years.”

Back then, the City was looking to attract signature projects that would pump up our local economy. Midtown didn’t yet exist. Wynwood as we know it today didn’t exist. Downtown and Brickell were a shadow of their current form. We didn’t have the arsht, the Frost, the Perez Museums. Most of all, we didn’t have the congestion and infrastructure needs that we do now. And yet here we are, 15 plus years later, still talking about Flagstone. At this point, I have to ask, is Flagstone even relevant anymore to the vision of what our public land on Watson Island could and should be? Is this project ‐ should it ever be built and I’m pretty skeptical about that ‐‐ what Miami needs and deserves?

The Voters spoke back then, but if they spoke today, what would they say? If we were to plan that space right now, I would advocate for an RFP that has the developer implementing a multimodal transit hub that connects and finances the Baylink and water taxis. It could be the point of public transit to all of the best amenities on the island. It could be a beautiful green space that would give the most amazing views of our downtown skyline. But the voters don’t have a say. Unless this developer is in default, and I believe that they are.

In Paragraph VI.a ofr the Amended and restated Agreement to enter into the Ground lease from 2010, it states, “If…the Parking/Retail Components do not Start Construction by 9/01/2016 (extended by Governor’s executive order to May 1 of this year), then Flagstone’s rights to build any Components expires and ceases, the Agreement to Enter is terminated. City retains all Prepaid Construction/Base Rent”.

The Phrase “Begins Construction” is defined in Exhibit A of Composite Attachment 3 of the same agreement. The phrase “Start Construction shall mean that all material plans and permits are approved and issued and the actual act of physical construction has begun.

Furthermore, in paragraph VII. A of the same agreement, it states that “If the Retail Parking Components do not Commence Consruction by the 72nd month from 9/01/2010 (being 8/31/2016 and now May 1, 2017) then there will be no crediting of Prepaid Construction/base Rent, The City shall keep all Prepaid Construction Base Rent Received, the City can terminate the Agreement to Enter, all Ground Leases, and the City can take back the Marina Component…and the balance of the project and the property.

The phased permit expired and was not renewed before the date. The master building permit has not yet been obtained.

The City has lost millions in undervalued rent. The only silver lining is that we can now look at the land in the context of our needs today. I hope for your support in giving the voters this long overdue chance.

I move that we direct the administration to issue a notice of default, and that our city attorney and auditor general conduct an analysis of the various agreements to see if there are other breaches as well.