Miami-Dade County

Did Flagstone Island Gardens just break ground? Or break its lease?

Utility excavation work at Flagstone Island Gardens, the island Shangri-la promised 15 years ago on Watson Island and never delivered, was enough to keep the developer in its lease with the city. A photo taken on May 5, looking west toward downtown Miami, shows the property in its current state.
Utility excavation work at Flagstone Island Gardens, the island Shangri-la promised 15 years ago on Watson Island and never delivered, was enough to keep the developer in its lease with the city. A photo taken on May 5, looking west toward downtown Miami, shows the property in its current state.

It seems like it should have been big news.

In the waning days of April, an excavator rumbled over to the southwest corner of Watson Island and dug a hole. And just like that, Island Gardens, a planned $1 billion complex of hotels and waterfront shops promised Miami’s voters back in 2001 by Mehmet Bayraktar’s Flagstone Property Group, had finally broken ground.

At least on paper, anyway.

With only hours to spare before running up against a deadline to begin construction on the upland portion of the island enclave, a contractor operating on a temporary public works permit opened a trench in the earth and began the process of excavating utility lines. The developer has yet to obtain a permit to build, or even settle on a final project design, but it was enough action to get an all-clear from Miami’s real estate and legal departments.

“Flagstone continues to diligently work towards meeting all their deadlines,” Aldo Bustamante, assistant real estate director, assured the Miami Herald.

But did Flagstone break ground? Or its contract?

Though city and Flagstone representatives say everything is on schedule, a group of Venetian Island residents locked in years of litigation with the developer believes it couldn’t be clearer that Flagstone has violated its contract, giving the city another chance to back out of a below-market deal. In their eyes, it’s the latest example of how Miami’s government bends over backward to accommodate a developer that since taking hold of one of Miami’s most valuable pieces of land has missed rent payments, blown deadlines and even operated an illegal restaurant on the water.

“The failure to meet the May 1 deadline for the start of construction on the Watson Island Gardens mega-project gives commissioners a clear-cut decision: Do they support the public or the lobbyists? The law or money?” said Roger Craver, the head of an activist coalition created solely to fight Flagstone. “Enough is enough.”

According to Flagstone’s oft-amended contract with the city, and a recent extension, the developer had to start construction on a parking garage and retail center by the first of May. The agreement defines commencement of construction as having “all material plans and permits” issued and having begun “the act of physical construction.” Blow the deadline, and the city can cut ties — something Miami’s commissioners have threatened frequently over the years.

Citing a different portion of the agreement related to execution and delivery of ground leases, Bustamante said Flagstone’s application for a foundation permit and the excavation work was enough to meet contractual obligations. “The city does not believe they are in default of any of the lease requirements at this time,” he said.

Then again, even as Flagstone’s city agreement has spawned multiple real estate reforms at the ballot box, Miami has always found reasons to stay in the relationship. In the late 2000s, amid a financial crisis, Bayraktar was forgiven for falling behind on $100,000 in rent payments. Three years ago, when commissioners gave Flagstone until June 2 to begin construction of its megayacht marina, Miami’s attorneys opined that Flagstone met the deadline by sending divers into the water to map corals and seagrass ahead of dredging.

Meanwhile, though two recent appraisals found Miami could fetch $7 million a year from the developer, its lease calls for an annual $2 million rent by 2020. The developer paid about $1 million last year.

Flagstone did finally open the marina, where gleaming yachts are docked by the dozens on any given day. It even opened an outdoor restaurant called The Deck at Island Gardens in early 2015 — not that the results of that venture ended well.

Public records kept by the city and the state show that diners munching on oysters and sliced chateaubriand beneath white canvas were doing so at an illegal restaurant. For months, The Deck cooked food inside an un-permitted kitchen operating out of a trailer until the state’s Department of Business and Professional Regulation shut it down on March 29 — hours after Flagstone attorney Nathalie Goulet offered to host a fundraiser at the venue for Mayor Tomás Regalado’s favorite charity.

Blogger Al Crespo, who has written several times about the permitting problems at The Deck at Island Gardens, posted Goulet’s fundraiser invitation on his website under the headline “You can’t make this crazy s--- up.” Commissioner Frank Carollo, who has pushed unsuccessfully to sever ties with Flagstone, says the city seems to do everything in its power to preserve the agreement instead of parting ways and finding a new partner.

“All we’re asking is that they do what they originally promised the voters. It’s what, 15 years later?” said Carollo. “Voter approval isn’t for eternity.”

But that’s exactly what Flagstone is trying to do, said Bryan May, a lobbyist for the developer. May, who said the problems with Flagstone’s restaurant were due to a misunderstanding, says the developer has steadily made progress over the last three years on the project. Bayraktar has nailed down letters of interest for hotel flags and retailers and secured much of the financing, May said, though he declined to elaborate.

Flagstone blamed previous delays on the collapse of the real estate market and 9/11. But May now says the worst delays for the project are related to Craver’s Coalition against Causeway, a 501c(4) nonprofit created to place political pressure on Flagstone. Members of the group have sued the city over both the legality of the project and the withholding of public records several times over the last decade. Now, Flagstone has sued Craver and coalition member Stephen Herbits personally over claims of tortious interference.

“On the one hand they’re complaining about delays, but on the other hand they’re causing delays,” May said. “Because of the coalition, we can’t even get our stuff processed. You can’t have it both ways.”

The controversy seems destined for a debate at the City Commission next week. Commissioner Ken Russell, who represents Watson Island, said he’s asked Miami’s planning director and legal staff to explain the status of Flagstone’s project and application to change its design. In the meantime, May said Flagstone continues to push toward finishing the whole deal by 2020 — and said the company will make an announcement when there’s something to celebrate.

“When the foundation is poured, I’m sure there will be an event around that,” he said.