Miami Beach and Developers Agree to Final Terms Allowing 500-700 Alton Road Project to Proceed

Susan Askew
Susan Askew

Miami Beach and Developers Agree to Final Terms Allowing 500-700 Alton Road Project to Proceed:

Permitting process now underway for public park, retail pavilion and tower to follow

The City of Miami Beach and the developers of the 500-700 Alton Road project have reached an agreement that will finally allow the construction process to begin. Russell Galbut and David Martin have approved plans for a 519-ft residential tower on the 500 block and a three-acre public park and retail pavilion on the 600-700 blocks. They will also build a pedestrian bridge designed by noted artist Daniel Buren across 5th Street.

A legal battle over the number of residential floors within the approved building envelope put the project on hold while lawyers from both sides attempted to reach a settlement that would allow the project to proceed. On Wednesday, following a closed-door session with attorneys and then more – sometimes tense – public negotiating, both sides came to terms. Russell Galbut and David Martin are now moving ahead with the permitting process for the park construction to be followed shortly after by the retail pavilion and tower. 

In November, the developers successfully fought the City’s historic definition of measuring FAR before the City’s Board of Adjustment (BOA). The BOA ruling said that elevator shafts, stairwells, and mechanical chutes and chases should not be counted as Floor Area which allowed for 40 residential floors within the tower envelope versus 38 according to the Planning Director’s calculation of FAR. The developers did not ask for additional height or width of the building, but wanted to include 40 residential floors within the approved design footprint. The City appealed that decision.

Last month, the City and the developers reached an agreement on most of the outstanding issues including allowing the FAR (and 40 residential floors) as ruled by the Board of Adjustment. The agreement, approved on first reading by Commissioners in January, included earlier conveyance of the park site to the City and faster completion; a reduction in the maximum number of residential units on the site from 410 to 330; and approval of the final pedestrian bridge design and a budget setting a maximum $9.6 million in G.O. Bond money to be used as the City’s portion of the bridge costs.

Since then, both sides engaged in extensive negotiations to hammer out additional issues. By the time they got to Wednesday’s meeting, the developers confirmed their commitment of a minimum of $8 million be spent on park construction and included the resiliency elements of the park within the scope of work in the agreement. They also agreed to a letter of credit to ensure the park construction and the developers' additional bridge costs which secures the money to complete those projects in the event of a default.

The developers also agreed not to seek any increase in height or floorplate. Previously they had requested that the agreement not to seek the additional height or floorplate expire if a building permit was not issued by the City within a certain timeframe. The agreement also includes full settlement of the legal claim and reimbursement by the developers of the City’s full costs of litigation in the amount of $270,000.

The development agreement also provided for completion of a section of the Baywalk between 10th and 12th Streets pending the City’s getting the consent of the adjacent property owners and obtaining the necessary permits (which include a lengthy environmental permitting process) within a certain time period. The final terms agreed to include an extension of two years for the City to get those approvals and permits. The City’s outside legal counsel, Jeffrey Bass, Shubin & Bass, said it was “a tremendous show of good faith by the developer” who also came forward with a consent for construction of the Baywalk from the Mondrian which is 50% owned by Galbut. “That is a really important piece to bringing that Baywalk whole,” Bass told Commissioners.

The final pieces of the puzzle were brought to the public meeting for negotiation including the developers' request to eliminate a $750,000 credit to the City in the event the adjacent properties do not agree to the Baywalk construction. The developers argued they were agreeing to pay the additional $2.8 million in the pedestrian bridge construction costs over and above the City’s allocated portion but wanted the Baywalk credit to be struck from the agreement. The additional properties that still need to provide consent are the Mirador 1000 and Mirador 1200 which flank the Mondrian. Commissioners disposed of that issue early on, agreeing to eliminate the credit in exchange for the additional bridge costs.

Daniel Buren-designed pedestrian bridge to be built over 5th Street

The final sticking point was indemnification against future lawsuits by projects that might want to take advantage of the Board of Adjustment ruling on how FAR is calculated in which the developers, specifically Galbut, hold an interest. The City Commission passed legislation on first reading last month to codify the historic interpretation of FAR to include elevator shafts, stairwells, mechanical chutes and chases in the calculation resulting in “zoning in progress” which precludes any new projects from using the expanded definition. However, there was a window of time between the Board of Adjustment ruling in November and zoning in progress in January. Bass noted five projects in which Galbut has an interest that were identified that might make a claim for the additional FAR though he didn’t rule out the possibility that other claims could come forward from other developers.

Bass said one claim is already in process by the developers of Ocean Terrace, “a mirror image claim,” to the one the City lost at the Board of Adjustment. In December, Sandor Scher and Alex Blavatnik’s Ocean Terrace Holdings submitted new plans to the Historic Preservation Board which include approximately 20,000 sq ft in additional FAR allowed under the Board of Adjustment’s interpretation.

That leaves four additional properties in which Galbut has an interest. Galbut agreed to a covenant not to sue for two properties in which he has a controlling interest – 1212 Lincoln Road and the Decoplage at 100 Lincoln Road. He has a minority interest in the remaining two, the Bancroft Hotel at 1501 Collins and 7145 Carlyle (on which 72 Park is proposed). Developer Matis Cohen also filed plans for the 72 Park development within the window between the ruling and the zoning in progress that takes advantage of the additional FAR allowed by the BOA ruling.

Bass sought $750,000 to indemnify the City against future claims. Galbut offered $200,000 – $100,000 per claim by entities in which he has a participatory but not controlling interest.

Rather than negotiate from the dais, Mayor Dan Gelber suggested the attorneys and developers go outside to try to hammer out a final agreement on the indemnification clause. 

Galbut responded that the City’s attorneys had “negotiated millions of dollars, millions. All of which they really didn’t have the right to do.” He said the developers were told by the City’s Planning Director to go to the Board of Adjustment for an interpretation of his ruling on how the floor area was calculated. “We went to the Board of Adjustment. We won. That’s all that happened and then the negotiators came in and negotiated millions of dollars from us, letters of credit, the Baywalk, the bridge overrun.”

“We’re done,” he told Gelber. “There’s no reason to hold us hostage for other candidates, other lawsuits [for entities] we don’t control. It is an absurdity. Just the very concept of it is an outrage of law. We’re done.”

He challenged the City on efforts to further “extract” money. “This is not a card game… you’ll be the loser. We’re taking major risk here… the City was aggressive and overwhelming but we’re done and I mean that from my heart. We’re done.”

Commissioner Ricky Arriola said, “I don’t think we’re gonna have a lot to worry about” with regard to exposure, saying the Board of Adjustment interpretation would “increase FAR by about 10%, give or take.” Noting any projects out there that might have claims were smaller in nature, he said, “We’re not opening Pandora’s box tremendously. We’ve already closed the door [with zoning in progress].  We may have a couple of other developments we have to deal with… [but] I’m strongly disposed to getting this settled today and then try to work our way through these other doors as they come forward.”

Gelber said he believed the City had “moderated our risk with regard to this settlement, limited or moderated our risk, with regard to the two projects you control… The fact that you’re so concerned about how aggressive our guys have been has given us some solace.”

He then suggested, again, that the developers and attorneys “step outside and talk.”

Giving credit to Martin for being willing to give the City many of its “asks”, Galbut said, “We don’t need to go out the door. We either get it done today or we’re done…  where I could give you, I’ve given you” but he said he had no control over the two remaining entities that the City was asking indemnification for. 

“Stop looking for ghosts,” he told Gelber. “Let’s get it done and let’s move forward.”

Commissioner David Richardson asked the developers to put the $200,000 for indemnification “in one bucket whether one or two claims are brought,” which they agreed to do.

Commissioner Michael Góngora reiterated the desire to have more protection against future claims and suggested, again, that the developers and attorneys “Go outside and give us some more protection so we can get this deal done.”

Galbut said, “There is no reason for us to go outside… they got it all. We’re finished and there’s no more to give. It’s either yes or no… We can’t have more sidebars, outside bars or any other bars.” He reminded the Commission, “If we go back to the original development agreement, there’s no letter of credit, eight years for a park” construction timeline.

Arriola then proposed $300,000 in indemnification against future claims.

When Galbut said, “It’s not acceptable to us,” Arriola turned to Martin.

Martin responded, “Russell’s given me a lot of flexibility… I think this issue’s something that I promised I would let him resolve given the fact it’s entities that’s he’s involved in.”

Galbut added, “We’ve done so much and we worked so hard and we’ve done the important elements here. I appreciate what Commissioner Arriola’s doing but I really think it’s wrong… David was kind enough to pay the difference out of his own pocket” which Galbut called “admirable” but added, “I don’t think it’s appropriate or proper but I told him if that’s something he wants to do…” And, in the end, that was what got the agreement done.

Gelber concluded the discussion by thanking the developers and the community “because you were the two main movers of this. If you didn’t have a vision and they didn’t have a vision coinciding together, this wouldn’t have happened.”

Outside, the developers and attorneys shook hands and congratulated each other. Inside, Commissioners voted on second and final reading to codify the historic definition of FAR to include the elevator shafts, stairwells, and mechanical chutes and chases.

After the vote, Martin said, “This is a landmark vote for Miami Beach. The gateway to Miami Beach has been unimproved for quite some time and I think the Daniel Buren bridge, the three-acre public park, opening up the Baywalk, these are all things that just improve Miami Beach. They provide connectivity to our city. They provide beauty and they provide public space so that residents and neighbors can really enjoy and appreciate our city.”

He said the permit for the park construction has already been submitted, financing has been obtained, and the general contractor is on board for the project. The developers are looking to an 18-month construction schedule barring any issues that might impact the timeline. The goal for starting on the retail pavilion in the 600 block is the “2nd or 3rd quarter” of this year with the process for the residential tower expected to start in the fourth quarter, Martin said.

Asked what, ultimately, got the agreement done, he said, “I think it was an open dialogue, respect, trust.” He praised developers’ attorney Graham Penn, Bercow Radell Fernandez & Larkin, and Jeff Bass for the City in their efforts to “keep open dialogue and communication and try to understand each other’s perspectives and why they’re asking for certain things.”

“To be honest, I think Russell did an amazing job just providing the flexibility to really give on things that really were something that he felt more than necessary but we, you know, kind of understood where the City was coming from. They wanted to protect the citizens and the rights of the citizens and whatever we can do to mitigate that impact and whatever we can do to provide more public benefits to the City, I think, within reason was really the push.”

“It was just trust, respect, and really good focus from both parties of legal teams.”

The agreement requires the developers to submit full building permit plans for the entire park project within 90 days following the Commission’s approval of the agreement which Martin says has been done. Work is required to begin no later than 30 days following the City’s issuance of the building permit for the park project with the City agreeing to expedite its review of the plans. 

Complete construction of the park project is agreed to be the earlier of 36 months after the issuance of the building permit for the park project or 48 months following the execution of the agreement.

Renderings: Arquitectonica, Daniel Buren

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