chain restaurants on ocean drive?

City Commissioners continue to struggle with what types of restaurants and retailers should be allowed on Ocean Drive. Without enough votes last week to pass an ordinance that would prohibit chain restaurants and retail stores on the street, Commissioners deferred a vote until their July 26th meeting.
 
Chain or formula restaurants are defined in the ordinance as those that have 100 or more locations nationwide or five or more on Miami Beach. Formula retail stores are described as those with 10 or more locations nationwide or five or more on Miami Beach.
 
While Commissioners approved the ordinance at first reading last month, several said they wanted to review a not-yet-completed economic analysis before the second and final vote. Planning Director Tom Mooney said that analysis, now complete, indicated such prohibitions would not have an adverse impact on the City.
 
The ordinance’s sponsor, Commissioner Ricky Arriola said the recommendation was part of the 10-point plan “to help revitalize and reposition Ocean Drive so that it remains an attractive tourist market.” He called it Miami Beach’s “front door” and said if it becomes “like any suburban strip mall” it will lose its appeal. The definitions, he said, are “to try to still attract good quality businesses but put some kind of threshold in place that will allow Ocean Drive to maintain its unique character.”
 
Arriola said other cities that wanted to maintain their unique character “particularly where they’re trying to appeal to a tourist market” have put even greater restrictions in place. The City’s economic consultant’s report noted that 15 municipalities limit the number of formula restaurants in certain areas to 15 or fewer. Arriola asked his colleagues what they thought the threshold was, 100? Less?
 
Mayor Philip Levine said, “If the objective of this body… is to not allow franchises and multi-location operators that change the character of Ocean Drive, if that’s the objective of this body, you really need a low number. A hundred is a massive number. You’re not achieving anything.” He said he thinks the limit should be 15. “Otherwise what are you doing? What’s the point?”
 
Arguing for a higher threshold, Commissioner Kristen Rosen Gonzalez said, “I would love to see a Ruth’s Chris steakhouse or a Hillstones… I would love to be able to have those types of locations … so I think that we should make it a higher threshold than 100. I really do think there’s a lot of quality places.”
 
Jeffrey Bass, a representative of the new owners of 1200 Ocean Drive was clear in his message. “Risk for the real estate market is like kryptonite. Owners and investors in real estate don’t like to see cities precipitously change the rules of the game in a way that materially affects investment." He called the proposed ordinance a “game changer” and when added to the “game changing vote” this November to roll back the hours for alcohol sales on Ocean Drive from 5 am to 2 am, “they’re a potential knockout," he said. "And we believe that this city should not adopt any regulation affecting Ocean Drive until we see what the voters do at the ballot box in November.”
 
Turning to the economic report, he said, “It absolutely contradicts your staff’s findings. Your staff talks about this proliferation of chain affiliated or a homogenization of retailers. That’s just not the case.” The report notes 40 eating and drinking establishments on Ocean Drive of which three would be considered formula restaurants under the proposed ordinance (TGI Fridays, Ben & Jerry’s, and Pinkberry). Six are part of chains that have less than 100 locations nationwide (Wet Willies, Sushi Siam, Fat Tuesday, Sugar Factory, Havana 1957, and Madero). The report also cited the hurdles for the chain restaurants to renovate a historic structure on Ocean Drive to accommodate their needs and said it was “doubtful that there will be [a] stampede by formula restaurant chains to locate along Ocean Drive…”
 
Bass said his group had supplied its own economic report that takes into account tax revenues lost by “destroying significant investment backed property values on Ocean Drive … Our economic report quantified a loss of approximately $2,000 a square foot which translates to a reduction to the City on Ocean Drive within the scope of the ordinance of  $3,000,000 of lost revenues per year.”  He noted, “I’ve supplied the City attorney with a legal memorandum outlining the frailties within the ordinance and we’ve reserved all of our rights.”
 
Levine’s response was swift. “The bigger risk to Miami Beach real estate is not limiting the amount of franchises on Ocean Drive, it’s the chaos on Ocean Drive. It’s sea level rise … and when I think of the concerns of the real estate investment community because I’m kind of a part of that, I don’t see on the top of my list the limitation of franchises on Ocean Drive as being anywhere near the top 5000 risks to Miami Beach.” He told Bass if “there’s no evidence they’re coming … then I don’t understand why your client would even be concerned then. If there’s no evidence and there’s no tenants out there knocking down your door to open up franchises, I’m not sure why you even care.” As one of the developers of Sunset Harbor “where we don’t have franchises,” he said, “… we achieved some pretty great rents, but it’s a different type of environment. Cleaner. Calmer. Nicer. Tourist friendly. Resident friendly. So I’m not so sure I’d be looking at the franchise model on Ocean Drive as the savior for my friends that own properties on Ocean Drive.”
 
Arriola jumped in. “Just so the folks out there know what we’re dealing with, your client is the client that brought CVS to Ocean Drive to the great consternation of many.” He noted the Palace, which had been at 1200 Ocean Drive for almost 30 years, lost its lease with the change of ownership (and closed on July 4^th). He said it was his understanding that the owners had been negotiating with the Five Guys Burger Chain and when that didn’t work out, began discussions with Ruth’s Chris. “So you’re here because you are representing a client that wants to attract a franchise restaurant and I think that would be harmful to Ocean Drive,” he told Bass. He said “the better restaurants” in the South of Fifth and Sunset Harbour neighborhoods are succeeding. “Restaurants do very well in this community. The real estate market is not suffering. But the problem is Ocean Drive right now is being proliferated by low-end retail and franchise type restaurants.”

The large chains, he said, are welcome anywhere else in the City. “We’re just asking that on 10 blocks we can preserve the unique historic nature.” He noted the support of the Miami Design Preservation League. “They asked that we adopt this ordinance to make sure we maintain the same character so that we don’t turn Ocean Drive into Bayside or any suburban mall. I understand you’re a very effective advocate for your client and that’s what you’re doing but we have a different responsibility here which is to protect the overall economic value of not just Ocean Drive but the Miami Beach brand. If tourists cease to come to Ocean Drive because it’s like anyplace they can go back home, our economy suffers. What we’re trying to do is do something reasonable that allows your client to continue to make money, but allows us to maintain the unique character and historic nature of Ocean Drive.” Arriola said he was in favor of a lower threshold but that he’d settle for a compromise of 100. Levine said he’d “go to 50” before Rosen Gonzalez said, “I’m a no.”
 
Citing Bass’ argument about the vote to roll back the operational hours and the restrictions in the proposed ordinance, she said, “I feel like it’s an attack and an assault on Ocean Drive … I look at it as you’re going to shut this street down completely and stop redevelopment … It really is an economic engine, kind of like the Colosseum in Rome and the Eiffel Tower in Paris, it draws tremendous amounts of people … I don’t think you’re going to see a bunch of McDonalds and Burger Kings and CVS’ go to Ocean Drive. It’s just too expensive. Why should we stop the redevelopment? I’m a solid no on this.”
 
Levine asked, “If you feel that they’re not coming, then why are you concerned to limit them?”
 
“I think right now we’re experiencing a renaissance of its own,” she responded. “I think that we’re seeing properties are being bought up. They’re being renovated. We’re going to see a better quality of hotel stock. I think it’s happening on its own. I don’t think we have to punish people further.”
 
Levine pressed, “You’re okay if you have franchises all up and down Ocean Drive?
 
“I don’t think you’re going to see franchises up and down Ocean Drive,” she said. “I looked at the report… it outlines all the factors why it’s difficult to open up on Ocean Drive. They’re not there now but they could be there now” and they’re not she said.
 
Levine was incredulous. “You’re okay with the risk of them coming?”
 
“You have some establishments right now that are not chains that are not great operators either and I think that there are some chains that might be better operators ... I just don’t see why we have to do this right now,” she said.
 
Arriola responded, “I just find it fascinating and curious. I’ve heard Commissioner Rosen Gonzalez complain publicly about the proliferation of chain restaurants and retailers on Lincoln Road and a particular comment she made about Marshalls opening there and now she’s like welcoming formula retail and formula restaurants on Ocean Drive so I find the argument inconsistent.” As to the potential of an earlier closing time, “that it’s going to be a death blow to Ocean Drive and to the restaurants there,” he said, “In effect, Sunset Harbour and South of Fifth are essentially 2 am closures with a few exceptions and the restaurants there do fabulous. In fact two of the top ten restaurants, Joe’s [Stone Crab] and Prime 112, are South of Fifth. So the 2 am is not going to affect the better restaurants, that’s for sure.”
 
Knowing the number of votes needed was five, Arriola suggested postponing a vote until Commissioner John Alemán returned from vacation.
 
Commissioner Michael Grieco then made his first comments. “I can tell you that from what I’ve heard on the dais previously from Commissioner Alemán, I wouldn’t expect her support on the 100 either.” Paraphrasing her previous comments that she would “hold her nose” and vote for the Planning Board version of the ordinance, which defined formula restaurants as having 400 or more locations nationwide, he said, “I personally would hold my nose and vote for the 400.”  But, he said, “I think this is borderline communism and I think that we are overreaching as a local government and trying to curate private property too much. I think that we really need to step back and think about this. There’s a big difference between zoning out certain uses like we’ve done both on Lincoln Road and what we’re trying to do on Ocean Drive in certain areas and then starting to get in the weeds curating private property and going this far with it. So I would hold my nose on the 400 which is the Planning Board version but I would not support it” at 100.
 
Arriola noted the findings of the City’s economic study that the ordinance would have no impact. Regarding Commissioner Alemán, he said, “She didn’t have the benefit of reading the study prior to her comments.” He suggested deferring to give her the ability to review the report and be in attendance for the vote.
 
Grieco shot back. “It’s not an economic study. It was a market study and that’s very different ‘cause an economic study – which is what I was looking for – is having an independent consultant tell us how this impacts property values.” He pointed out that at a previous meeting “at least two people up here” talked about higher rents being the result of higher sale prices and property taxes. “If we pass this and it ends up that we devalue property, we are going to get sued to the tune of millions of dollars … so we need to be very careful in what we do.” He said he wanted to see an independent study that looked at the impact on property values and property tax revenues. He said the market report commissioned by the City “doesn’t predict that formula retail is trying to make it on Ocean Drive but just because it’s not, does that mean if we prevent it from happening does that affect property values? Is it being able to market to national credit tenants whether they’re coming or not?” He referenced conversations he’s had with people in the real estate market outside of Ocean Drive who say it will negatively impact values. “I think that’s something we need to take into consideration,” he said. “As of now when we go too far down into curating private property, I’m a no.”
 
Levine also noted the Miami Design Preservation League endorsement of the ordinance and asked if it could be sent to the Historic Preservation Board for discussion and feedback at their July meeting prior to the Commission meeting later in the month.
 
Arriola’s frustration was evident. “So we lose the Palace in a few days and we might get it replaced with a Five Guys Burgers. If that’s the vision we have for Ocean Drive then do not support this ordinance.” 

The ordinance and economic report can be found here.