Miami turns to Jorge Perez, Stephen Ross to carry out long-stalled Watson Island redevelopment
06/19/2013 7:15 PM
06/20/2013 8:26 AM
Can superstar developers Jorge Perez and Stephen Ross reignite long-stalled plans to build a luxury hotel complex, shopping center and mega marina on Watson Island?
The Miami City Commission is willing to bet on it.
Last week, the commission voted to give the project’s original developer, Flagstone Island Gardens, a lease extension that grants additional time to start construction. The move will allow Perez’s Related Group of Florida and Ross’s New-York based Related Companies to become co-developers on the project, which they say will cost more than $1 billion.
Related is pitching dramatic changes to the 12-year-old redevelopment plans. Among them: increasing the amount of retail space from about 220,000 to 500,000 square feet; increasing the number of hotel beds from 605 to 705; and adding 100,000 square feet of new convention center space to tiny Watson Island.
Most members of the Miami City Commission embrace the new vision.
“This is a project we’ve been working on for a long time,” Vice Chairman Willy Gort said Thursday. “Finally, we have someone local who is going to get it done.”
But Commissioner Frank Carollo raised concerns about delaying construction, noting that the project has already dragged on for 12 years without breaking ground — or bringing in the revenue that was once promised.
“We’re giving yet another extension and realistically, we’re getting nothing in return,” Carollo said, before casting the lone vote against the delay. He also pointed out Miami’s reputation for cutting sweetheart deals with developers, and went as far as to suggest that the project be rebid and put out to public referendum again.
Flagstone, led by Mehmet Bayraktar, won the right to develop Watson Island in 2001. The original proposal was based around the marina and hotels, and included a modest shopping area. The plans were approved by referendum — a requirement for all public-private waterfront development deals in Miami.
Flagstone has since been paying rent on the vacant land. Though the annual rate has fluctuated, it currently stands at $750,000. The rent was set to increase to $1 million annually when construction began, and rise again — and include a portion of gross sales — when the development opened for business.
Despite high hopes, the project stalled almost immediately. The developers blamed the 9/11 terrorist attacks, the economic downturn and later, construction on MacArthur Causeway. Bayraktar fell behind on rent more than once, prompting threats from city leaders to kill the project.
Flagstone managed to hang on to the lease. Construction on the marina was supposed to begin in September, with the remaining work being completed in phases over the next decade.
City commissioners welcomed the news that Related signed a letter of intent to join the project. Perez’s Related Group is considered one of the top builders of high-rise condos in the Southeast. And the affiliated Related Companies, run by Ross, built the Time Warner Center in New York and CityPlace in West Palm Beach.
“Finally, I think everyone is more comfortable with the project now,” Commissioner Michelle Spence-Jones said.
Speaking to the commission Thursday, Perez laid out his vision for waterfront shops that would become a tourist destination and also serve the residents of downtown Miami. The final product, Perez said, would fall “somewhere between Bal Harbor and the Dadeland Mall” in terms of luxury shopping, and include the convention center space, two high-end hotels and park space.
The architects behind the sleek, tropical design showcased in preliminary renderings: Nichols Brosch Wurst Wolfe & Associates, of Coral Gables.
“This is a crowning achievement for me,” Perez said.
Perez said he would need another six to nine months to finalize commitments from retailers and work out some details. By June 2014, the developers will be ready to break ground on the marina and the retail area, he said.
Construction would likely be finished by 2017, he added.
In negotiating the new construction timeline, city officials raised the monthly rent from $62,500 to $83,333 from September until construction is complete, director of public facilities Henry Torre said.
The city is also negotiating a new contract with the developers outlining how much money Miami would receive once the development is up and running. The new terms are expected to reflect a higher percentage of retail rental payments and sales.
Torre cast the project as a smart investment that could bring $200 million to Miami city coffers over the next 75 years. “We have a very exciting opportunity here, one that I think we should take advantage of,” he told commissioners. “Rest assured, we will look to maximize revenues to the city of Miami.”
Perez said the city would make more money over time now that Related is involved, because there would be more retail space, and a portion of the rent payments to the city would be based on sales.
Spence-Jones gave another reason to support the expanded project: It would create 4,000 new jobs, at least 40 percent of which would be set aside for Miami residents, according to an economic impact study she quoted.
Still, Carollo, who has been critical of other waterfront deals, said the city didn’t have to budge on the timetable, and ought to negotiate a better payoff for the city in light of the new development plans. “We have a long history of our most-precious lands being leased and the city not obtaining fair market value,” he said.
Frank Rollason, a former assistant city manager, agreed.
“They have come back to the well three or four times asking for extensions,” he said. “To me, it’s time for the city to cut its losses and put the thing out for bid for somebody else to develop.”
But City Manager Johnny Martinez said the city didn’t consider rebidding the project because the additions proposed by Related are confined to the project’s original footprint and don’t require any zoning changes.
“Now that they are bringing in their power partner, we see this as an opportunity to improve on our existing deal,” Martinez added.
Flagstone isn’t the only Watson Island development project to fall behind schedule.
Last year, Miami granted New Jersey-based Linden Airport Services a new 30-year lease so the company could build a heliport on Watson Island. Linden won the original contract a decade ago, but construction had been held up as the scope of the project kept changing.
Carollo rebuked the commission for not rebidding the project last year, and for setting the rent for the first two years at $2,200 a month or a percentage of gross revenues, which he thought was too low.
The nearby aviary attraction known as Jungle Island also drew controversy last year, when owner Bern Levine threatened to leave Miami on the hook for a $25 million federal loan unless the theme park received a 50-year extension on its lease. City officials refused, and Levine found a way to begin making the loan payments.
Last week, Perez gave his word that the Flagstone project would be different.
“It’s really the most complicated job I have ever been involved in,” Perez said. “I will put 1,000 percent of my effort to make it a reality.”
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