Site work on $640 million Island Gardens could begin in summer
By Yudislaidy Fernandez
Flagstone Property Group's $640 million hotel, retail and mega-yacht project in Watson Island — close to 10 years in the making — hopes to begin site construction this summer, developer says.
Summer also will bring a rent increase to $1 million annually for Flagstone Property Group.
Aside from delays in permitting and a lawsuit, getting construction financing for the more than $500 million project has been a slow process for Flagstone, especially after credit markets began tightening and the economy worsened.
The 11-acre Island Gardens is to encompass a 50-slip marina with room for yachts up to 450 feet long and a Shangri-La hotel with 150 guest rooms and suites and 98 residences. A second hotel is also planned but a hotel management company has yet to be announced.
Miami Beach developer Mehmet Bayraktar, Flagstone chairman and CEO, said he is seeking syndication from the financial markets to obtain loans to build the four main components: marina, retail and parking, and each hotel.
He said the financing to build the mega-yacht marina is already in place and he is in the process of obtaining backing for the retail component.
He said he still working on getting financing for lifestyle and five-star hotels and hopes to do so in the upcoming months.
"Even with these difficult times, we have been able to move with two of the four," he said, referring to the loan components.
Flagstone helped solidify its financial picture in 2007 by securing ING Clarion Partners as an investment partner in the more than half-billion-dollar project.
Mr. Bayraktar said he plans to begin developing the site this summer and doing the dredging for the marina.
Before laying the foundation, he said utility lines that pass through the development must be relocated, which he expects to take five to six months.
Once work begins this summer, he said Flagstone will take over the ground lease, paying $1 million in construction rent annually to the city and $2 million after construction is completed.
Last June, the Miami City Commission granted Flagstone a third extension of 18 months to defer paying on the lease.
In return, the company is paying the city $50,000 monthly for the first 12 months and $83,300 a month for the remaining six months.
The commission gave Mr. Bayraktar the go-ahead to develop in 2001.
Since then, the large-scale project has experienced several delays that Flagstone attributes to setbacks in getting permit approvals from the city and Miami-Dade County. A lawsuit by a former tenant on the property also delayed plans, taking more than a year to settle.
The underdeveloped Watson Island on Biscayne Bay — connected to Miami and Miami Beach by the MacArthur Causeway — has remained underused for close to a decade with themed park Jungle Island and the Miami Children's Museum the only existing operations.
Now, these bayfront attractions are facing financial struggles of their own.
Neighboring Jungle Island got from the city commission this month an $800,000 loan to pay off unpaid taxes and a 48-month rent deferment totaling $1.6 million.
Theme park owners last year announced plans to expand — adding a themed family-style hotel and entertainment center — to attract more visitors and earn more revenues, but those plans haven't taken off.
Jungle Island co-owner Ronald Krongold said he is in talks with investors — but no contracts have been inked.
Across the MacArthur Causeway, the Miami Children's Museum is seeking $400,000 to make a debt payment due May 1.
With fewer donations and government grants coming its way, the museum is turning to the city to help make its next debt payment, a request city officials are analyzing.