As developer Flagstone Property Group begins work on its massive mixed-use development on Miami’s Watson Island, an ardent project opponent is claiming city officials hid from the public a real estate appraisal proving taxpayers are getting stiffed on millions of dollars in annual rent, The Real Deal has learned.
A draft of the appraisal, completed by Coral Gables real estate consulting firm Joseph J. Blake & Associates, was submitted to Henry Torre, the city’s public facilities director, on April 30. A copy obtained by TRD shows the fair market value of the guaranteed minimum payment Flagstone pays the city should be $6.1 million in today’s market. The analysis also estimates Flagstone will collect at least $36 million in retail and hotel revenue in 2018, when the project is complete. By 2036, the annual revenue is projected to exceed $150 million.
Under its current agreement with the city, Flagstone’s annual rent is $2 million, plus 1 percent of retail and hotel revenue.
“The latest appraisal information, which the city has concealed from the public, confirms that city commissioners are prepared to lavish multi-million dollar subsidies for a private developer to build a commercial project on Watson Island,” Stephen Herbits, a resident of the 1000 Venetian Way condominium and project opponent, told TRD.
Led by Turkish developer Mehmet Bayraktar, Flagstone won the rights to develop the project, called Island Gardens, in 2001. Voters approved it later that year, but the plans came to a grinding halt after the Sept. 11, 2001 attacks and last decade’s economic downturn. Flagstone was also mired in lawsuits from vendors and residents of nearby condos, including Herbits.
Last year, Flagstone joined forces with the Related Group to pitch a renewed and larger version of Island Gardens. But when the proposal was met with stiff opposition from Miami Beach residents and officials, Related backed out.
Bayraktar, who did not respond to multiple messages seeking comment, decided to move forward on his own. Flagstone has since reverted back to its 2001 footprint.
Herbits claims the Blake appraisal should have been disclosed during a May 8 city commission hearing when Flagstone won approval to modify its deed with Miami. At the hearing, Herbits and his lawyer, Sam Dubbin, argued the city gave away valuable public property at outdated rates based on appraisals completed 10 years ago. The commission’s unanimous vote paved the way for Gov. Rick Scott to sign off on the $575 million project two weeks later.
To obtain the appraisal document, Herbits said his attorney had to file legal motions against the city.
“It is outrageous that the city has repeatedly hidden vital documents while moving to approve this development,” he said. “The taxpayers are entitled to know all of the impacts — on traffic, on the environment, on the downtown Miami businesses whose customers will be diverted to Watson Island, and on the taxes we all have to pay.”
At least one commissioner, Francis Suarez, said he didn’t know anything about the Blake appraisal.
“I have not seen it,” Suarez told TRD. “And I have not heard about any appraisal being done.”
Suarez declined to comment on whether the appraisal would have changed his vote.
Torre and City Manager Daniel Alfonso did not return several messages requesting comment.
Flagstone lobbyist Brian May told TRD that Herbits is being disingenuous about his motives.
“His desire to kill the project has nothing to do with fair market value,” May said. “He doesn’t want Island Gardens, because it would obstruct the views from his condominium balcony across the water on the Venetian Causeway.”
May said he has not seen the Blake appraisal, which he considers a non-issue. He believes an appraisal should have been done in 2010, when Flagstone renegotiated its lease with the city.
“We have paid $2.2 million without ever putting a shovel on the ground,” May said. “That was done for the purpose of continuing to move forward until the economy and development environment improved.”
Flagstone is moving ahead with the project. May said the developer started environmental mitigation — removing sea grass in preparation for the marina component.
“Dredging for the mega-yacht marina will start in 60-to-90 days,” he said. “We are underway.”