(Crystal Proenza is associate editor of Real EstateFlorida.)

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MIAMI-Seven years ago Mehmet Bayraktar, chairman and CEO ofFlagstone Property Group, was invited to Watson Island by the Cityof Miami, which was looking to plan a marina on the site that sitsjust off the MacArthur Causeway between Downtown and Miami Beach.Last week, Bayraktar celebrated an event he has been waiting forsince 2001: the groundbreaking of Island Gardens, a $640 millionmixed-use yachting resort on the island.

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Island Gardens, to be developed and owned by Flagstone, will bebuilt on a 24-acre site owned by the city adjacent to the MiamiChildren's Museum. The development is set to feature two towers and221,000 sf of retail space. The first tower will house a 150-roomShangri-La Hotel and 98 luxury fractional residences to be managedby Shangri-La Hotels.

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"We are selling a one-eighth fractional ownership that allowsbuyers to have 45 days per year of usage," says Philip C. Freedman,Flagstone's vice president of residential sales. Pricing starts at$215,000 for a 1,200-sf, one-bedroom unit and goes up to $850,000for a 3,770-sf, four-bedroom unit. Freedman believes the units willsell, even during tough economic times. "There are 267 fractionalclubs worldwide," he explains. "Last year they accounted for $2.6billion in sales, and the year before was $2.1 billion. Sales haveconsistently gone up 20 to 30%, and we have 141 fractions sold todate," he adds.

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The second tower at Island Gardens will include a 350-room hotelrun by a four-star brand to be announced later this month,Bayraktar tells GlobeSt.com. The two-level retail space is set tofeature 60 luxury shops, 18 waterfront restaurants and outdoor andindoor seating for more than 1,500 guests. In addition, the projectis planning a "super-yacht harbor" designed for mega-yachts andgiga-yachts longer than 400 feet. According to Flagstone, IslandGardens is the only location under development in North America toaccommodate these vessels. Public gardens featuring waterfalls andartwork are also being planned for the site.

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Approximately 18% of the fractional ownership units arecommitted, says Bayraktar, and letters of intent have been receivedfor about 15% of the retail portion. According to Flagstone,institutional equity in form of 35% of project costs has beenclosed with ING Clarion. Flagstone will seek to borrow the rest by2010, a deadline set by the City of Miami. The developer iscurrently at various stages of debt placement based on componentsof the project. Flagstone says some components have received theirloan commitment and agreements are being drafted and others havebeen committed and approved by a lead bank and are in the processof being syndicated.

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"I hope and believe we've been very lucky that now things areslowing down," Bayraktar tells GlobeSt.com of the current downturn."This is the perfect time for construction—for labor andmaterials—and once we open in fall of 2011, things should be goingin the other direction."

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