Ocean Terrace Developers Sue Miami Beach Over Density Interpretation

Susan Askew
Susan Askew

Ocean Terrace Developers Sue Miami Beach Over Density Interpretation:

Filing Says City Breached Development Agreement

The developers of Ocean Terrace and the City of Miami Beach are locked in a battle over the definition of Floor Area, a measurement used to determine the density of a building. Ocean Terrace Holdings filed suit in Miami-Dade County claiming the City breached a development agreement by refusing to apply a more liberal definition of FAR (Floor Area Ratio) following a zoning board ruling last year. The project includes a mix of historic preservation, restoration, and new construction in a nearly full block along Ocean Terrace and Collins Avenue between 74th and 75th Streets.

The suit says the developers have incurred more than $5 million in damages – “in excess of $800,000… per month” – as a result. In addition to damages and attorneys’ fees, the developers want a ruling to force the City to apply the FAR measurement that resulted from a challenge by Russell Galbut and David Martin, the developers of 500 Alton Road. In November, the Board of Adjustment agreed with the developers and overturned more than 40 years of City precedent to include stairwells, elevator shafts, and mechanical chutes and chases in the calculation, meaning there is less habitable space available for development. The ruling said those elements should be excluded thus increasing the square footage available for habitable space.

Earlier this year, the City settled with the 500 Alton developers granting them the additional FAR through the exclusion of those building elements. Shortly after, the City Commission adopted a more specific ordinance codifying the historic definition but, in between the BOA ruling and the ordinance, Ocean Terrace Holdings filed new plans with the Historic Preservation Board (HPB) for an addition to the Broadmoor Hotel and a proposed residential tower that relied on the BOA ruling. In other words, the plans exclude stairwells, elevator shafts, and mechanical chutes and chases in the FAR calculation resulting in an additional 20,000 sq ft of habitable space.

According to the Court filing, a development agreement signed with the City in July 2019 – which gave Ocean Terrace partners Sandor Scher and Alex Blavatnick the ability to build an addition to the Broadmoor Hotel in exchange for an oceanfront park and streetscape improvements – prohibits the City from applying any changes to zoning regulations to the Ocean Terrace project. The developers filed their plans based on the BOA ruling with the Historic Preservation Board on December 16, 2019. The next day, the City’s Planning Board considered the new legislation to revert to the more conservative calculation and voted unanimously to recommend the City Commission adopt it. That action created what is known as “zoning in progress” which means all development plans had to abide by those rules from December 17th on, pending City Commission action.

Ocean Terrace Holdings says in court documents that the new ordinance doesn’t apply to its project because of the development agreement but the City has “refused to process Ocean Terrace’s development applications unless it complies with the new rule… despite the fact that the Development Agreement expressly forbids the City from applying the Amended Floor Area Rule (a ‘subsequently adopted law or policy’) to the Ocean Terrace project.”

“The result of the Defendants’ improper actions deprives Ocean Terrace of its rights under the law and under its Development Agreement with the City. The improper actions also serve to deprive or delay the City’s residents of the bargained-for millions of dollars of improvements designed to transform the North Beach area of the City,” the filing states.

“Ocean Terrace’s partnership with the City involved a promise to fund with Ocean Terrace’s private capital a critical component of the North Beach revitalization plan – a nearly fifteen-million-dollar transformative public park and streetscape improvement project spanning over 5 acres within and along Ocean Terrace, 73rd Street, 74th Street, and 75th Street,” according to the filing. “For its part, the City obligated itself, through a binding Development Agreement with Ocean Terrace, not to apply changes to its zoning regulations or policies to the Ocean Terrace project. The City’s contractual guarantee of regulatory security is the indispensable foundation through which Ocean Terrace can achieve the certainty and stability needed to raise and contribute private capital to the revitalization of North Beach. Were the City to renege on its end of the bargain, as it now attempts to do, it would jeopardize the Ocean Terrace project and with it the catalyst to North Beach’s renewal.”

By overturning the City’s earlier definition of Floor Area, the suit states, “The BOA Determination was a binding interpretation of the term ‘Floor Area,’ exactly as that term existed at the time Ocean Terrace and the City entered into the Development Agreement. As such, the BOA Determination on the proper interpretation of ‘Floor Area’ applies to the Development Agreement, subject only to a subsequent contrary determination by a circuit court of competent jurisdiction.”

Ocean Terrace Holdings also says that by allowing the 500 Alton Road developers to use the more liberal calculation, “The City’s actions constitute a violation of Ocean Terrace’s equal protection rights” under the Florida Constitution. “The City has no rational basis for taking such inconsistent positions with respect to similarly situated property developers,” according to Court documents.

The City’s actions are “threatening significant financial harm to Ocean Terrace due to the potentially protracted delays likely to flow from Defendants’ actions,” the developers claim.

The suit asks the Court to require the City to process its development and permit applications utilizing the more favorable FAR calculation and award damages, attorneys’ fees and costs.

In a separate emergency motion for a preliminary injunction for relief or, alternatively, for an expedited hearing, Ocean Terrace Holdings claims, “The retroactive application of the modified land use regulation is threatening a multi-million dollar development project intended to revitalize a blighted area of the City, employ thousands of South Floridians during an unprecedented time of economic difficulty, and ignite a rebound of the North Beach district which is expected to attract hundreds of millions of dollars of commercial activity to the area.”

“Because Ocean Terrace’s venture in North Beach is new and unique, there likely is no way to legally quantify the damage in terms of lost profit that the City’s position is causing. Only an injunction can provide any relief to the daily mounting cost of the City’s incorrect position,” the emergency motion states.

“The job creation potential for construction-related jobs alone has been analyzed by the City to present an opportunity for ‘1,270+ direct and indirect/induced construction (and related) jobs annually during the proposed two-year construction period, which generates a total of $122 million in direct and indirect/induced labor income during the construction period that will flow to the local and regional economy,’” the motion states. “The residents of North Beach have sought for decades to revitalize their community through the development of vibrant new projects such as the Ocean Terrace project. The public interest favors a preliminary injunction to prevent the City from derailing the benefits that would flow from the Ocean Terrace development.”

Ocean Terrace Holdings is represented by Akerman LLP.


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