$20M Settlement Would Revive Miami's Stalled Watson Island Makeover

A long-stalled commercial makeover envisioned for Miami’s Watson Island might be revived after years in litigation limbo.

The city plans a closed-door session Wednesday on a proposed $20 million settlement with Flagstone Island Gardens LLC, which would allow developer Mehmet Bayraktar to resume construction. His company won bidding in 2001 to build a megayacht marina with hotels and retail

The city-owned property lease offered 10.8 acres of land and 13.35 acres of adjacent submerged land on the northwest side of the island along MacArthur Causeway. The Jungle Island attraction and Miami Children’s Museum are on the largely undeveloped island with stunning views of the Miami skyline and Miami Beach.

Flagstone Island Gardens finished its 50-slip megayacht marina but not the landside segment. The rest of the project is poised to rise, if the settlement is approved.

City commissioners, staff members and attorneys are set to meet Wednesday, and the City Commission is poised for an up-or-down vote Thursday.

The agreement calls for the city to pay Flagstone Island Gardens $5 million upfront and $2.5 million payments in the next fiscal year and the year after. The city also would erase $10 million in rent that otherwise would be due over 10 years.

The city and its outside counsel didn’t respond to requests for comment by deadline.

The settlement would eliminate a trial on Flagstone’s claim for damages against the city.

Flagstone won a major portion of its case last year when Miami-Dade Circuit Judge William Thomas ruled the company complied with city agreements and started work by deadline. The city was found at fault for delaying approval of a project adjustment and then ending Flagstone’s lease on the deadline question.

The city and Flagstone signed off on the development agreement in 2003 after voters two years earlier approved the lease and development of the waterfront site. The project stalled for some time during the real estate market crash.

Once it was revived, Flagstone sought to tweak the look of the garage from a seven-story structure to less conspicuous parking spread throughout the project footprint of the project, all in an effort to comply with the Miami 21 zoning code, Flagstone attorney Eugene Stearns said Friday.

In his order, Thomas said the city staff found the parking change desirable, and planners kept telling Flagstone that approval was forthcoming. Years passed.

Thomas noted the Coalition Against Causeway Chaos submitted multiple letters to the city in early 2017 raising issues with the major use special permit.

“CACC was quite effective. In fact, the City Commission, which is supposed to play an appellate role in the modification process, suspended the normal administrative process, as it relates to Flagstone, and decided that the commission, rather than the Planning and Zoning Department, would review applications related to Flagstone,” the judge wrote.

The City Commission declared the project in default for failing to begin construction by an April 30, 2017, deadline for the retail and hotel portions and voted to end the Flagstone lease.

Flagstone sued the city in June 2017, and the city countersued, claiming Flagstone repeatedly missed project deadlines, necessitating multiple changes to the development agreement.

If the city approves the settlement, things will go back to the same place as when the garage design change was in play.

“We do not anticipate any problems, but it is a step that has to be taken,” said Stearns of Stearns Weaver Miller Weissler Alhadeff & Sitterson in Miami.

If the case went to trial, Stearns said Flagstone could claim nearly $200 million in damages.

Plans call for a 535-foot hotel with 305 rooms, 200 of which will be traditional hotel rooms and 105 timeshares, and a 375-foot hotel with 300 rooms. The retail portion would be 221,000 square feet, and the parking garage would be up to three stories high with 1,500 spaces.

Stroock & Stroock & Lavan partner Laura Besvinick, special counsel Julie Nevins and Hans Hertell and associate Christina Himmel, all in Miami, represent the city.

Dorta Law partners Gonzalo Dorta and Matias Dorta of Coral Gables also worked on behalf of the city.