Merrimac and BH3 Take Ownership of Watson Island Site Off Downtown Miami
The coveted site has been tied up in legal disputes for years
By Julia Echikson April 19, 2023 12:41 pm
reprints
Watson Island, a prime publicly owned enclave between Downtown Miami and South Beach, may finally be getting a makeover.
A joint venture between BH3 Management and Merrimac Ventures purchased the 75-year ground lease for a 10.8-acre parcel on the island from Flagstone Property Group. The pair declined to disclose the financial terms of the deal, but it’s likely valued at over $50 million. Property records show that BH3 secured a loan for the leasehold agreement for that amount from Maxim Capital Group. Alex Zylberglait of Marcus & Millichap brokered the deal.
Watson Island, located along the MacArthur Causeway, is one of the area’s most coveted sites, home to the Jungle Island theme park, the Miami Children’s Museum and the Joia Beach restaurant. But a portion of the island has remained vacant under Flagstone’s control.
Back in 2001, the City of Miami sold the ground lease to Flagstone after Miami voters approved the developer’s plans to erect a mixed-use development on the island. In the ensuing two decades, Flagstone, led by Turkish entrepreneur Mehmet Bayrakter, built only a yacht marina.
The lack of development on the prime site sparked a decades-long fight between Flagstone and the city.
The acrimony started in 2009 when Flagstone missed a rent payment. It culminated in 2017 when city commissioners voted to terminate Flagstone’s lease, in part because the developer had yet to deliver on the promised resort. In retaliation, Flagstone sued the city in Miami-Dade Circuit Court for $122 million and won the initial case. The parties eventually settled in 2019, with the city agreeing to pay Flagstone $20 million and amend the lease.
“Watson Island is one of the City of Miami’s most important and well-situated properties, yet it’s also one of its most underutilized assets,” Greg Freedman, a principal at BH3 Management, said in a statement.
Merrimac and BH3 have now stepped in, promising to deliver a world-class development. While the new owners have yet to unveil their plans, they said the project would fall under the footprint and density that the city has already approved. Those parameters include over 350,000 square feet for retail and two hotel towers with a total of 450 rooms, as well as a waterfront promenade. Major changes to the development would require voter approval.
“For two decades, Miami residents have been anticipating the creation of a mixed-use development at this site, and now that vision will come together,” Freedman added.
The joint venture is now taking over the existing lease, putting it on the hook for $2 million annual rent payments to the city, according to the Miami Herald, which first reported the agreement. After vertical construction starts, the developers will retain control of the site for 75 years.
Merrimac and BH3 already have a track record of delivering major projects in the Miami area.
Merrimac, led by brothers Nitin and Dev Motwani, is based in Fort Lauderdale. Nitin Motwani is one of the master developers behind the 27-acre Miami Worldcenter, where high-profile companies such as Witkoff Group, Related Group and Naftali Group, as well as former WeWork CEO Adam Neumann and others are developing high-rises.
BH3, which has offices in Fort Lauderdale and New York, completed the luxury Privé at Island Estates condo development, also located on island, in Aventura five years ago.
A representative for Flagstone could not be reached for comment.
Julia Echikson can be reached at jechikson@commercialobserver.com.
