Flagstone CEO Mehmet Bayraktar, still behind in rent on Watson Island, has eye on the big picture
By Risa Polansky
The would-be developer of a luxury marina, hotel and retail complex on Watson Island is months behind in rent to the City of Miami — but he says he has his eye on the "big picture" and hopes his track record will prevail as he continues to push the project forward.
"Whether I pay today, next month, or I catch up two months later or six months later is not really the problem," said Mehmet Bayraktar, chairman and CEO of Flagstone Property Group, tapped eight years ago to build the voter-approved development on the city-owned island.
The problem, he said, is the financial market.
Large projects like his and others, he says, have been forced to hold up because of the lack of financing available.
"It has nothing to do with the project… they [lenders] cannot do it. There is a bigger problem with the system," Mr. Bayraktar said.
ING Clarion Partners in 2007 agreed to invest in the project but this year pulled out.
At one point, he says, a "major bank" was all but lined up to make a construction loan.
"That was the time Flagstone agreed to this imposed agreement," Mr. Bayraktar said, referring to the rent payments to the city.
In allowing the developer more time to get the project started, commissioners last year demanded Flagstone pay monthly to use the property.
The city — which uses the term "consideration for use" payments, not rent — charged $50,000 a month through July.
The fee jumped to $83,000 in August.
Flagstone has yet to pay that month and beyond.
Mr. Bayraktar said he's not focused on the month-to-month right now and noted several times that the city-imposed payments were not included in the 2001 request for proposals or in the original deal for the project.
Still, the company agreed to the payments, and a notice of default is in draft form and on its way to Flagstone.
"Upon execution of the letter by the City Manager, the letter will be forwarded to Flagstone Island Gardens with an October 1, 2009 date," city Real Estate Manager Aldo Bustamante said via e-mail.
An Aug. 31 past-due notice gave the developer a month to pay up.
That deadline passed last week.
The notice of default allows another 30 days before the city would take legal action — which could include killing the agreement with the company.
The decision would be up to city commissioners.
Mr. Bayraktar said he's aware the city could nix the project because of the non-payments.
But, he said, "do you think it's possible in this environment to get someone to come in three months later or six months later or even a year later to be able to restructure what we have done and then start the construction?"
The developer has until Feb. 1 to cement financing, enter into a ground lease with the city and get building.
That's the date Mr. Bayraktar says he has his eye on as he continues pursuing financing and working to get the long-planned project out of the ground.
Until then, he said, "the idea is not not to pay and just sit here and do nothing here… maybe it will come a point where this will be all history," he said.
The company in August paid $100,000 in June and July back rent.
But a month before that, Mr. Bayraktar said, he went personally to tell city officials that "we wouldn't be in a position to pay."
Still, he later came through with the money.
He stressed his track record of keeping his word on all commitments to the city over the past eight years, pinning project delays on an old lawsuit, a lengthy permitting process and now the financial market meltdown.
"Whatever I had told, promised and signed to do with the city I have delivered, done, completed, finalized and finished and secured with writing," he said.
His plan, regardless of whether he makes monthly payments along the way, is to come to the city before or on Feb. 1 ready to build.
"And then they have to make a decision."