Restaurant reformation takes place in South Beach

May 12, 2012

Paola Iuspa-Abbott

2012-04-03 12:00:00 AM

When real estate investor Nelson Fox walked into a dilapidated warehouse in South Beach a few years ago, he

saw abandoned vans stored atop each other.

“It was like a scene from the movie Escape From New York,” he said, referring to the 1981 science fiction action

film featuring Manhattan as a giant maximum-security prison. “It was surreal.”

Now, the space is a fine-dining restaurant called Fogo de Chao. The neighborhood, in the southernmost tip of

Miami Beach and home to some of South Florida’s most luxurious condos, is known as SoFi, for south of Fifth

Street.

After spotting the rundown warehouse, Fox and his partner Lyle Stern assembled a group of investors, bought the

space, gutted the place and built in the restaurant. Piece by piece, over six years, the partners have assembled a

half-block and turned old warehouses into high-end restaurants like Fogo de Chao.

“We saw the development that was taking place and realized there was going to be a void of quality retail and

restaurants south of Fifth,” Stern said.

One of the newest additions to the collection on First Street between Washington and Jefferson avenues is

upscale Greek fishery Estiatorio Milos.

Milos’ entrance to SoFi underlines a trend that is transforming one of Miami Beach’s oldest neighborhoods into a

fine-dining destination. The small area, south of Fifth Street and between Biscayne Bay to the west and the

Atlantic Ocean to the east, has more than 14 restaurants, most of them for fine dining.

Some of the recent additions to SoFi include, along with Fogo de Chao, Lolita Cocina & Tequila Bar and Symcha’s. They join older high-end restaurants like the legendary Joe’s Stone Crab and Smith & Wollensky.

The growing number of high-end eateries on the tip of the island makes it stand out.

“South of Fifth has one of the greatest concentrations of fine-dining restaurants south of New York and east of

Las Vegas,” Fox’s partner Stern said.

Lynne Hernandez said she began noticing the influx of upscale restaurants in the last couple of years.

“More obviously, in the last year,” added Hernandez, who is South Florida regional director of the Florida

Restaurant & Lodging Association.

Hernandez said other pockets in the region, including Delray Beach, South Miami and Miami’s Wynwood and

Design District, are becoming fine-dining destinations that don’t compete with SoFi, but complement it and each

other.

“But the beach is its own animal,” she said, referring to SoFi.

At least two new restaurant spaces there are already permitted, and the owners are looking for high-end tenants.

“The city didn’t do anything to promote that area as a dining” destination, Miami Beach City Planner Thomas

Mooney said. “It sort of evolved on its own.”

HOUSING BOOM

Milos’ interior build-out is almost finished, now that the snow-white marble for the flooring has arrived from Greece — along with a Greek marble installer.

Milos, with locations in Montreal and New York, is set to open its SoFi doors this month.

Restaurateurs began pouring into the area after the recent housing boom, when SoFi’s shoreline was walled with

luxury high-rises. It became a magnet for affluent condo buyers from around the world.

Yet, most of the customers seen waiting in line for tables at the pricey restaurants are tourists and business

people who drive over from the Brickell corridor, Aventura and Coral Gables.

The trailblazing restaurateurs have transformed dilapidated and historic properties into some of the nation’s most

successful eateries. That was the case of Prime One Twelve, a steakhouse that serves 500 to 1,000 customers

on any given day — the average check is $110 per person — and grosses more than $20 million in annual sales,

owner Myles Chefetz said.

“The only restaurant in Miami that does that kind of [sales volume] number is Joe’s, which has been around for

100 years,” he said. “Typically, a successful restaurant would do $6 million to $8 million a year,” he said.

Chefetz opened the Prime One Twelve steakhouse in a restored historic hotel in 2004. Two years ago he opened

Prime Italian across the street on Ocean Drive.

When he opened his first SoFi restaurant in 1995, the area was still a ghost town of abandoned properties. Back

then, he rented a space for the now-defunct Nemo, a restaurant at 100 Collins Ave., for about $10 per square

foot.

Today, the high demand for restaurant space has pushed rental rates up to $60 a square foot, not too far from the

$100-per-square-foot rate that landlords charge restaurateurs on trendy Lincoln Road in Miami Beach, Chefetz

said.

POSITIVE IMPACT

Fox and Stern recently bought an old two-story, wood-frame apartment building at 850 Commerce St. and got city

permits to turn it into a restaurant with a courtyard dining area. Stern is talking to several interested high-end

restaurateurs to lease the space, he said.

“The fact that they are restoring and preserving it speaks very highly of their intentions and the positive impact

that an adaptive reuse like that can have on a property,” said Mooney, the Miami Beach planner.

On the other hand, Milos will open in one of the properties assembled by Fox and Stern. The partners brought in

developer Russell Galbut to build a robotic parking garage next to Milos and serve their warehouses-turnedrestaurants.

The mechanical garage will have 104 spaces and a penthouse home for Galbut, Stern said.

Even during the economic downturn, Fox and Stern push forward with their redevelopment plans. They built

Clarke’s, Fogo de Chao and Jeronimo’s Bar in a row.

Stern said they put together the abutting properties to be able to determine the look and feel of First Street. (To reade the entire article visit http://www.dailybusinessreview.com)

 

 


Margaritaville project up against clock for funding

May 12, 2012

Paola Iuspa-Abbott

2012-03-09 12:00:00 AM

The title of Jimmy Buffett’s 1981 song “Somewhere Over China” seems especially appropriate as the developer of the Margaritaville Hollywood Beach Resort turns to that nation for funding to build the long-discussed oceanfront project.

Buffett, a minority owner, and Hollywood developer Lon Tabatchnick are seeking to raise $75 million from 150

investors at $500,000 apiece, said Tabatchnick, a principal with Hollywood Resort Partners. He is also president of the Lojeta development firm in Hollywood.

“We have 25 percent already committed” from Chinese investors, said Tabatchnick, sitting in his conference room with a six-inch binder spelling out U.S. government rules on how to handle foreign investment. “Raising the first $25 million is the toughest. Raising the last $25 million is easy.”

The question is whether Tabatchnick will be able to raise the funds quickly enough to meet a May 15 deadline.

The city, which owns the land that Margaritaville will be built on, set that date for the developer to line up all the financing for the project. Tabatchnick said that won’t be a problem because he is in the process of securing gap financing, such as a letter of credit or a bridge loan. He declined to provide additional details. The gap financing would give him time to recruit all the needed investors from China.

Tabatchnick is courting Chinese investors through the EB-5 Visa program. The program requires foreign

investors to invest $500,000 in a U.S. government-approved project and for the developer to create or preserve 10 jobs per applicant.

In exchange, the investors receive an EB-5 visa, which could lead to permanent U.S. residency for the them andtheir families.

Construction of Margaritaville is estimated to cost $131 million. If he raises the required money, Tabatchnick plans to start construction of the 360-room resort in June. The project, at A1A and Johnson Street along Hollywood Beach’s Broadwalk, would also include multiple restaurants and bars, including one named after Buffett’s duet with Alan Jackson, “It’s Five O’Clock Somewhere.”

99-Year Lease

The city of Hollywood signed a 99-year lease with Tabatchnick’s company a year ago to redevelop the site, now home to parking lots and a garage.

The developer is to receive building permits on March 15. But before the city turns control of the land over to him, Tabatchnick needs to meet several financial conditions.

He has to invest at least $10 million in the project, of which he has already spent about $7 million. He also needs to have the $75 million from EB-5 investors or gap financing in place, said Cathy Swanson-Rivenbark, Hollywood’s assistant city manager.

“EB-5 financing is more affordable than traditional financing, so there is an incentive on his part to get the EB-5, but he doesn’t want to delay to take possession [of the site] and commence construction,” Swanson-Rivenbark said.

In addition to Tabatchnick’s obligations, a community development district, which will issue $38 million in bonds, was approved in Broward Circuit Court on Feb. 29.

Tabatchnick said he will meet the May 15 deadline.

“Once we have all the permits, the necessary funds will come available,” he said. “We are very confident we are going to start construction in June.”

Tabatchnick is running a bit behind the schedule established in the 2011 lease.

Swanson-Rivenbark said Tabatchnick is to ask the City Commission at a March 21 meeting to push back Margaritaville’s opening from January 2014 to August 2014.

“We don’t look at it as a sign that the project is in jeopardy, instead, it is a sign that the project is almost ready to commence construction,” she said.

Life Science Project

If successful, Margaritaville would be one of the few real estate projects in South Florida to be funded through the EB-5 program.

The University of Miami Life Science & Technology Park west of downtown Miami was partially built with funds from EB-5 investors, said Fred Burgess, who helps match EB-5 investors in government approved projects across the country, specially South Florida.

He helped raise a “substantial” amount of the $20 million raised through the EB-5 program to fund the nearly $140 million UM building during the recession.

Since construction financing is difficult to obtain, “there are a lot of projects looking for money,” he said.

But landing capital from China, isn’t easy. (To read the entire article visit http://www.dailybusinessreview.com)

Copyright 2012. ALM Media Properties, LLC. All rights reserved.


Hefty cost overruns hidden, Jeffrey Soffer memos show

May 12, 2012

Paola Iuspa-Abbott

2012-02-13 12:00:00 AM

Jeffrey Soffer is facing new claims that he allegedly sought to hide from lenders hefty cost overruns tied to the

construction of his failed Fontainebleau Las Vegas project.

The information comes from internal memos plaintiff attorneys obtained from Turnberry West Construction, a

general contractor Soffer formed to build the Las Vegas project.

Soffer and Turnberry West are being sued in Clark County (Nevada) District Court by 44 lenders seeking to

recover more than $1.5 billion. The suit also names Fontainebleau Resorts and executives Albert Kotite, Bruce

Weiner, Glenn Schaeffer, James Freeman Devendra Kumar and Howard Karawan.

According to the Feb. 1 proposed amendments to a March 2011 lawsuit, the memos show that Fontainebleau

Resorts used two sets of books to hide the true cost of the project from the lenders. The lenders claim the

developer kept a “bank budget,” in which the construction costs “appeared to be in balance” and kept a “Jeff

Soffer budget,” which reflected the cost overruns.

Through a representative, Soffer declined to comment.

“FBR insisted that TWC Inc. must manipulate the cost and schedule estimates and projections to meet the

guidelines dictated by” FBR executives, according to the amended complaint, citing the memos obtained from

Turnberry West. “The charade began in August 2007 and continued until January 2009. TWC Inc. repeatedly

warned FBR that the farce was ill advised.”

Fontainebleau Resorts could obtain payouts from the $1.85 billion construction loan only by submitting advance

certificates to indicate that the project was on budget.

The lawsuit claims the developer began construction already $100 million over budget. That grew to about $430

million by February 2009. If the lenders had known of the cost overrun, they would have stopped the loan

withdraws, according to the lawsuit.

By late 2008, a few months before work on the project was halted, Turnberry West executive Robert Ambridge

told Soffer and other Fontainebleau Resorts executives he would not sign the contractor’s advance certificate

“because he believed it to be false,” according to the recent filing.

Soffer then personally signed the certificates for November and December 2008 draws, according to the new

documents.

WORSENING FINANCES

The company’s financial situation worsened in December 2008 when another lender, Lehman Brothers Holdings,

stopped funding a $315 million loan to pay for construction of the Fontainebleau Las Vegas’ retail component.

Lehman had filed for Chapter 11 bankruptcy protection in September 2008, helping trigger the global financial

crisis.

In June 2009, Soffer’s Fontainebleau Las Vegas Holdings, controlled by Fontainebleau Resorts, filed for Chapter

11 bankruptcy, which later was converted to Chapter 7 liquidation. The unfinished project was acquired in

February 2010 by Icahn Nevada Gaming Acquisition for $150 million, a fraction of the total debt incurred by Soffer

companies to develop the resort.

The lenders hope the new filing will convince Clark County District Court Judge Mark Denton to amend the yearold

lawsuit to again include Kotite, Schaeffer, Weiner, Kumar and Karawan as defendants, plaintiff attorney Kirk

D. Dillman said in an interview.

Last December, Denton dismissed Kotite, Schaeffer, Weiner, Kumar and Karawan from the initial lawsuit. Denton

denied Soffer and Freeman’s motions to be dismissed from the suit. (To read the whole article visit http://www.dailybusinessreview.com)

Copyright 2012. ALM Media Properties, LLC. All rights reserved.


Opposition to casino gambling bill getting stronger

May 12, 2012

Paola Iuspa-Abbott

2011-11-30 12:00:00 AM

Walking down the streets of downtown Kuala Lumpur, Grace Solares says she saw very few tourists eating at

local restaurants or shopping at the Petronas Twin Towers. Early this month, Solares was part of a group

attending a convention at Malaysia’s Kuala Lumpur Convention Centre — nearly 45 minutes away from the city’s

main recreational destination, the Genting Highland. The sprawling resort boasts more than 10,000 hotel rooms,

a casino, convention and exhibition space, a theme park, a skyway, performance halls, restaurants, clubs and

shops. Buses drive tourists from the airport to the resort destination on a mountain peak and then back to the

airport, she said.

“The impact that that project has on Kuala Lumpur is visible … the downtown is empty… it is a ghost town,”

Solares asserted. She is a founder of Miami Neighborhood United, a coalition of neighborhood associations in

Miami.

Solares said her six-day trip to Kuala Lumpur cemented her opposition to a casino resort destination bill that

would allow three massive casino resorts in Miami-Dade and Broward counties. She fears the casino destinations

would suck the life out of existing businesses and hurt entire neighborhoods that now benefit from tourism.

Solares is part of a grassroots movement that is beginning to organize with one goal in mind: kill the bill being

pushed by the Genting Group, Las Vegas Sands, Wynn Resorts Limited and other casino operators that are

eager to make South Florida the next Las Vegas. The Florida Legislature will vote on the bill during the 2012

session beginning in January.

Malaysian-based Genting has already acquired nearly 30 acres in downtown Miami, where it plans to build a 10-

million-square-foot casino and entertainment resort. The project, called Resorts World Miami, is planned for the

site now occupied by the Miami Herald, east of Biscayne Boulevard and north of Interstate 395.

“It is not hard to figure out that whoever goes there is not going to come out and subsidize the businesses around

the area,” Solares said. “You are not going to have people go to Little Havana to eat arroz con pollo. You are

going to have the arroz con pollo right there. Tourists won’t go to have ceviche on 7th Street and 38th because

you are going to have the Peruvian restaurant there.”

Her group, Neighborhood United, is hosting a free casino forum in Miami City Hall on Dec. 14. She hopes to

recruit neighborhood associations at that event to help with the fight to defeat casinos.

Genting representative Chris Goode said his company has a developed a plan to protect local businesses. He

said casino goers collect points when they gamble and those points can be redeemed at local restaurants.

“Two to three dozen restaurants already signed up to participate,” Goode said Tuesday in an interview at a

gambling forum conducted by the Fort Lauderdale Chamber of Commerce. He said the list of Miami area

participants is growing.

The Forge of Miami Beach, City Hall in Miami and Garcia’s Seafood Grille and Fish Market on the Miami River

are among the signees reported by Genting.

“The Forge and Garcia’s are also considering opening a second location at the Resorts World Miami,” said Tadd

Schwartz, a Genting spokesman.

Lobbyist Nick Iarossi said his client, Las Vegas Sands, would cater to out-of-state travelers attending large

conventions.

That business model would bring new patrons to the area, rather than taking commerce away from existing

restaurants and hotels, he said Tuesday.

‘Cannibalistic industry’

Former state Sen. Dan Gelber counters that resort destinations are designed to keep visitors inside their walls,

providing little benefits to existing businesses and most likely stealing their business away. Gelber recently

became chairman of the grassroots South Florida No Casinos to help organize the opposition, which until now

has remained largely silent.

“Gambling is basically a cannibalistic industry,” Gelber said. “It preys on people, hotels, restaurants and other

businesses,”

Last week, his group hired a South Florida coordinator and a statewide executive director to reach out to

community groups and business leaders for support.

Gelber said opposing the massive expansion of gambling is “almost a business decision.”

Disney-backed No Casinos is lobbying elected officials to kill the bill and plans to become a forum for residents to

speak up and let Tallahassee know how they feel.

“The Florida Legislature needs to know that South Florida is not for this,” said Gelber, a lawyer and former federal

prosecutor who is volunteering his services to No Casinos. “Gambling proponents are trying to create the

perception that South Florida wants casinos and that is not true.”

Opponents fear gambling would create a spike in crime, divorces, personal bankruptcies and other social

problems.

Many of their concerns are based on a 2009 report published by the Congressional Quarterly, a publication

owned by The Economist Group. The report, based on data from the FBI and the Census Bureau, showed

Nevada had the highest rate of divorces, robberies, violent crimes, car thefts and personal bankruptcies in the

country. Nevada, lagging behind New York, had the nation’s second highest cost per capita in police protection.

Goode said the opposition blames gambling for everything, “except terrorism,” because they need to be educated

on the benefits of resort destinations.

“Let’s sit down and talk about the facts,” he said.

Grassroots organizing

Gregory Bush, director of the Institute for Public History at the University of Miami and an associate professor of

history, recently revamped his website, http://www.commonsensemiami.com, to feed the casino opponents.

“It is kind of a coalition building,” said Bush, also vice president of the nonprofit Urban Environment League in

Miami. “At this stage, we don’t need a lot of money. We just need to bring people out of the woodwork to email

elected officials and do things like that.”

In the blog, he posts news articles, essays and opinion by him and community leaders, including car dealership

mogul Norman Braman and developer Armando Codina.

Bush said the UEL, which is against expanding gambling, plans to host a free casino forum on Dec. 10 in

Wynwood to help fuel the grassroots movement.

“I am nervous about it,” he said. “We don’t want to have Genting busing in all sort of people paying them $50 to

demonstrate, which happens sometimes.” (To read the entire article visit http://www.dailybusinessreview.com)

 

Copyright 2012. ALM Media Properties, LLC. All rights reserved.