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Front Page » Top Stories » Citystate Rent Tiff Could Sink Megayacht Complex

Citystate Rent Tiff Could Sink Megayacht Complex

Written by on February 24, 2011

By Jacquelyn Weiner
After securing a hard-fought go-ahead from Miami commissioners in September, developer Flagstone Property Group has hit another barrier to building its Watson Island project.

A state waiver allowing for commercial development on the city-owned property just offshore from downtown must be secured by month’s end or the project could be kaput.

Voters approved Flagstone’s Island Gardens project, a luxury hotel, retail and mega-yacht marina complex, in 2001.

Miami gave Flagstone a 75-year lease that year and a building permit in 2004.

Since then, the city has granted the developer four extensions.

The project sits on an island the state gave to Miami in 1949 for public use, so any commercial development requires state approval.

The state granted a waiver in 2004, but a new agreement is needed because the developer’s contract with the city has since changed significantly.

Under the development agreement with Miami inked in September — the latest in a string of extensions since voters approved the project — the city was to seek the waiver within 45 days.

But the state and city failed to forge an agreement and on Feb. 1, "the City provided Flagstone notice that the conditions being imposed by the State are unacceptable," Madeline Valdes, Miami’s director of public facilities, wrote in an e-mail.

"Flagstone has 30 days in which to resolve the dispute as it related to the conditions of the State Waiver."

The issue: the state wants Miami to begin paying a portion of its rent revenues on the property immediately, Ms. Valdes said in an interview.

Flagstone paid $200,000 in back rent when the city approved the latest agreement. Annual rent started with a $300,000 payment in 2010 and is to jump to $2 million by 2018.

Under the past waiver, Miami was to pay the state 15% of base rent, or $300,000 of its $2 million annual rent annually. Base rent kicks in after construction ends.

The state is now asking that the city "put up more money than anticipated in the original deal," Ms. Valdes said, which it doesn’t want to do.

However, Flagstone says it’s willing to pitch in the money in the interim to get the project moving.

"We think that the issues actually between the state and the city are agreeable," said Brian May, lobbyist for Flagstone.

The key is to ensure that Flagstone doesn’t pay more than its fair share, he said.

Company Chairman and CEO Mehmet Bayraktar "doesn’t want to fund the 15% that the city would pay to the state once a component of the project is built."

Mr. Bayraktar could not be reached.

Mr. May said he expects the issues to be resolved by the 30-day deadline.

Even if the state does grant the waiver, city commissioners must OK the project again for it to go forward.

And if it doesn’t, it wouldn’t be a total loss for the city. The agreement allows the city to terminate its lease agreement with Flagstone if the waiver isn’t secured by month’s end.

Miami would also hold on to the $200,000 in back rent it collected as a term of approving the agreement and would be able to seek other uses and developers for the waterfront property.

Miami-Dade County is asking for $4.2 million to avoid layoffs. Read the complete story in e-Miami Today.