Watson Island Project May Have Trouble Finding Luxury Hotel

By Susan Stabley
Building two high-end hotels for a $281 million resort project on Miami’s Watson Island may be getting more difficult as luxury lodging floods the market.

Two hotel brands that pitched for Flagstone Properties’ Watson Island plans in presentations to city officials — Regent International Hotels and Conrad Hotels – have opened properties elsewhere in Miami-Dade County. That’s likely to rule out the possibility that they would raise their flags on nearby Watson Island, industry analysts say.

On Tuesday, Regent International Hotels broke ground on its 80-suite, five-story Regent South Beach at 1458 Ocean Dr. In January, Conrad will open its first newly built freestanding hotel in the US in the nearly finished $180 million Espirito Santo Plaza building on Brickell Avenue.

Regent and Conrad had expressed interest in Island Gardens, officials from both groups said. Flagstone’s proposal, approved by voters in a November 2001 referendum, suggested both brands could be part of the project. Marketing material from June 2001 detailed the hotel’s motif under a Regent flag and a "wave"-motif hotel under a Conrad flag.

But both Conrad and Regent now say Watson Island deals are unlikely.

"We did have early discussions. The letter of interest was not really executed from our standpoint," said Tom Polski, spokesman for Minneapolis-based Carlson Hotels Worldwide, whose brands include Regent. No talks have occurred recently between Flagstone and Regent, he said Monday.

Hilton Hotel Corp. spokeswoman Jeanne Datz said Tuesday that the company met with Flagstone about Watson Island two years ago but "that’s not on our radar screen now."

"We’re not in discussion with Flagstone anymore on that particular piece of land," she said.

Island Gardens project director Joseph Herndon said Tuesday that Flagstone has been holding "in-depth discussions with major international flags" but that it was too early to say who might sign. Flagstone, led by Mehmet Bayraktar of Turkey, hopes to complete the project by 2006.

When Flagstone first proposed its project two years ago, the newest luxury hotels nearby were Mandarin Oriental and JW Marriott Hotel Miami. Four Seasons opened this fall with 221 rooms and 84 hotel-condos, also in the Brickell area. The Conrad is expected to open in April.

Christian Charre, head of the Jones Lang LaSalle Hotels Miami office, said he expects most hotel brands to wait and see how the market reacts to the many new luxury-hotels before proposing any new ventures.

"Miami first needs to absorb the current supply," Mr. Charre said Tuesday.

Mr. Charre said it would be "difficult but not impossible" for Flagstone to find a pair of four- or five-star hotels for Island Gardens.

The Peninsula Hotels, a division of Hongkong and Shanghai Hotels, and London-based Le Meridien Hotels and Resorts Ltd. are possible high-end hotel operators that could be considered for the project, he said.

Both groups are pre-approved in the lease agreement between the City of Miami and Flagstone. Also listed are Starwood Hotel & Resorts, which includes the W and St. Regis hotels, as well as Hyatt, Hilton and Six Continents Hotel among others.

Flagstone has promised that hotels in the project would be of four- to five-star caliber.

High-end hotels like to go where other high-end hotels already exist, said Peter Gluckler of Lodging Econometrics, a New Hampshire company that tracks hotel investments.

"You always go where your direct competition is," he said, "because you will draw similar clientele."

Developers of the $281 million Island Gardens project on Watson Island have begun the complicated permitting process to build a marina for ocean-sailing ships.

"It’s one of the first things started and the last things finished," said Island Gardens project director Joseph Herndon about a proposed 43-slip megayacht marina that, with the rest of the project, could be completed by 2006.

Flagstone Properties, led by Mehmet Bayraktar of Turkey, won a bid in 2001 to develop the northwestern end of the manmade Watson Island, which includes 10.8 acres of upland and 13.4 acres of submerged land. As approved in a November 2001 referendum and later by a Miami City Commission vote, Flagstone has an agreement with the city to lease the land for 45 years with an option for two 15-year renewals.

Dubbed Island Gardens, the $281 million project also proposes:

•A 300-room, 24-story hotel.

•A 175-room, 16-story "wave"-motif hotel.

•137,000 square feet of retail.

•More than a dozen restaurants.

•Public space and gardens including 6.5 acres of open-air fish market.

•Civic art, a maritime museum and other amenities.

•1,509 parking spaces.

Judy Burke of Shutts & Bowen, attorney for developer Flagstone Properties, said Monday that the project is making major progress, both on the marina and the development as a whole, refuting talk that Island Gardens has been delayed.

"It’s not stalled. You should look at my desk," Ms. Burke said.

Added Mr. Herndon, "There are lots of things happening, just nothing physical yet."

Flagstone is expected to ask city commissioners for a major use special permit in the first quarter of next year, said Ms. Burke.

Meanwhile, she said permit applications have been filed with agencies including the South Florida Water Management District, Miami-Dade County’s Department of Environmental Resources Management and the Army Corps of Engineers

The county’s environmental department has been reviewing the marina application since late July, said Susan Markley, chief of the agency’s Natural Resources Division.

For the marina to become a reality, Flagstone must pass several hurdles on the local, state and federal levels. Agencies want to know about details of how the project would affect the environment, navigation and security, she said.

Flagstone has offered a number of different design plans to the county environmental department that are now under consideration, said Ms. Markley. The marina, as proposed, would be able to accommodate ships longer than 100 feet.

Both groups have met several times, she said, with the department requesting additional information on dredging of the bay area, impact on seagrass and other habitat and potential impacts to water quality among other issues.

Ms. Markley said it is not possible to speculate if the project would be approved until the application is complete. If Flagstone’s marina involves extensive dredging or filling, the project may be required to go to a public hearing before the Miami-Dade Board of County Commissioners, she said.

There are no regulatory barriers for the marina’s permit under county laws as long as the project meets requirements and effects on the environment are mitigated.

Ms. Markley called the Flagstone project one of the "larger, more ambitious of its kind," requiring a "fairly substantial application." The process could be expedited if there were no dredging involved.

Impact to manatees and seagrass is one of the issues still under consideration before the Army Corps of Engineers can grant permits to Flagstone, according to an Army Corps spokeswoman. The agency, which regulates activity in Biscayne Bay and other navigable waterways, still needs feedback from the Environmental Protection Agency, the Florida Fish & Wildlife Conservation Commission and the National Marine Fisheries Service, before it could consider granting a permit.