The city of Miami last week lost a lawsuit against the developer of Flagstone Island Gardens, a US$1bn development that included a superyacht marina and luxury apartment complexes on 24 acres of publicly owned Watson Island. The Turkish company received permission to build the marina and other buildings in 2001, but only the marina and a restaurant have been completed during that time.
Last May, Miami City Commission unanimously voted that Flagstone was in breach of the original contract to develop a resort on the island because it had taken too many years to proceed. On-land facilities remained unfinished 16 years after the measure was approved by voters. The Miami Commission said that Flagstone should be evicted from the island.
In response, Flagstone sued the city for US$122m.
Last week, Judge William Thomas ruled in favour of Flagstone on all counts after a seven-day trial. The judge said that the city did not give Flagstone time to cure any alleged default before demanding that it leave the island. Thomas stated that his ruling only had to do with the liability of the case. Damages will be determined in a future hearing. The lawsuit has already cost the city more than US$1m in fees but could cost it many more if there is no appeal.
Flagstone lawyer Eugene Stearns told the South Florida Business Journal that Flagstone has spent more than US$120m on the project. “The city’s attempt to confiscate the huge investment this family made in this property has been revoked,” Stearns said in a statement.
City Attorney Victoria Mendez told the Miami Herald the city “was weighing its options” about whether to appeal the case.
Other city commissioners stood by their May decision to evict. Mayor Francis Suarez had voted to declare a breach of contract. Suarez said Flagstone did not demonstrate its financial ability to fund the US$31m parking garage and retail facility required to begin construction under the terms of the contract. He said the developer had never secured a loan for that phase of construction.
The judge ruled that the city failed to prove that Flagstone lacked the finances to build the project.
“It’s very obvious that we’re dealing with a bad faith partner who never built what was promised to the voters 17 years ago,” said Ken Russell, the Miami Commissioner who originally set up the May vote to remove Flagstone. “Anyone who drives across the MacArthur Causeway can see the vacant rubble. At the end of the day, the commission made the right decision and our case is very strong on appeal. The developer was in default and the contract was broken.”
Last week’s ruling gives the developer a green-light to proceed with continuing to build the complex.