Watson Island developer to pay rent, buy another month
By Risa Polansky
The embattled luxury complex planned for Miami's Watson Island lives — for now.
City commissioners Tuesday agreed to allow would-be developer Flagstone Property Group to buy more time at a cost of $498,000 after considering putting the kibosh on the long-planned project last week.
The five months in back rent, along with January's $83,000 payment, buys the developer a little over a month to negotiate changes to the years-old deal that Flagstone says it can't keep up in today's rough economy.
Flagstone's Island Gardens, a planned $640 million luxury hotel, retail and mega-yacht marina complex, has been in the works nearly a decade after clinching voter approval in 2001.
Over the years, the developer has seen lenders and would-be hotel operators come and go, and the waterfront land still sits empty.
To at least make money off the prime property while the economy flounders and while Flagstone continues to fight for the project, city officials are giving the developer another in a long line of breaks.
The $498,000 covers Flagstone's debt to the city — five months in missing $83,000 rent payments — and buys time to negotiate a fourth amendment to the development deal, probably to lower rent and extend project deadlines.
Now, the developer has until Feb. 1 to sign a ground lease.
If there's no new agreement by that date, the original agreement would expire, according to legislation commissioners passed Tuesday.
In an interview after the vote, Commission Chair Marc Sarnoff likened the new plan to "nursing along an injured whale" because there's no healthy "whale" now to replace Flagstone.
Giving the developer more time rather than cutting ties at least means monthly income for the city, he said, though he's "sure" today's $83,000 rent payments will be negotiated down, as it's either less rent money or no rent money while the city figures out what's to be done with the land.
The project has long been proposed as a mega-yacht harbor, luxury residences, two upper-echelon hotels, high-end retail and dining and a waterfront promenade, among other amenities.
Mr. Sarnoff said he suspects that at this point nothing can be built beyond the planned marina, if that.
But collecting monthly rent as that shakes out means the city would make money and at the same time have a chance to explore a new procurement process or referendum if need be, he said.
Mayor Tomás Regalado supported spending the next month in negotiations, though he seemed poised recently to kill the deal altogether.
He warmed to the idea of giving it another shot after Flagstone's attorneys wrote a letter promising to pay up first.
"I think that with this letter we achieve half of what we set to do last week, and that is to have Flagstone current on the payments to the City of Miami," he told commissioners Tuesday.
New Commissioner Francis Suarez said the same in an interview.
"It seems like that's a viable temporary step in the right direction," he said. "It allows them and allows the city to negotiate under a situation where they're up to date" on payments.
But getting to the money is proving tougher than expected.
Flagstone already has $500,000 in escrow and plans to draw on that to come current with the city on rent.
But the developer's former attorney, Lillian Ser, is attempting to get at the money to cover part of the $674,000-plus she says Flagstone owes her.
Ms. Ser is one of many in a long line of people and companies claiming the developer hasn't paid for services.
City documents show $128,442 in "claims of outstanding balances," nearly $2.14 million in liens and $913,000-plus in lawsuits.
With Ms. Ser trying to draw on the money in escrow, Flagstone can't hand it to the city.
Shutts & Bowen attorneys who represent Flagstone now say the money belongs to the city, not the developer, meaning Ms. Ser has no claim to it.
But it's up to a judge to make that call.
Commissioners are pressing for an expedited hearing to clear the hurdle and pocket the $498,000.
"I want to get the taxpayers that half-million dollars as soon as possible," Mr. Sarnoff said at the meeting.
He pushed also for Flagstone to agree to essentially give up rights to sue the city over the project in the future.
Mr. Regalado promised an open discussion at the Jan. 14 commission meeting, updating commissioners on negotiations and the status of the $498,000.
In discussing the issue at a meeting last week, city officials protested taking the money out of escrow.
They bent on that issue Tuesday but say they're unwilling to amend the agreement and give Flagstone more time without assurance that meantime rent money will come in.
"They demonstrated to us that today they don't have the ability to come up with a half-million dollars," Mr. Regalado said in an interview after the meeting. But "if they don't replenish the escrow so we can assure we get paid throughout 2010, then I don't think we can offer the extension."
Mr. Sarnoff said the same.
"I have no intention of putting ourselves in a position of continuously trying to get rent out of somebody."