Article originally published at miamiherald.com by Nicholas Nehamas – @NickNehamas
Miami Herald staff writer Chabeli Herrera contributed to this report
The parrots of Jungle Island could soon squawk the name of a new owner.
Investors are working on a deal to take over the lease for Miami’s historically under-performing aviary and tourist attraction — and they may ask voters for the right to build a hotel and other improvements on city-owned land.
Aventura-based ESJ Capital Partners is negotiating with a group led by Bern Levine, a veterinarian who bought the wildlife park in 1988 when it was called Parrot Jungle and located in what is now Pinecrest. Levine later won voter approval to move the attraction to Watson Island along the MacArthur Causeway, where it reopened in 2003.
But the 18-acre facility, which includes a banquet hall, has struggled to attract visitors and has had money problems since the move. And its relationship with its landlord — the city of Miami — has been marred by spats and broken promises. After a new management company took over in 2013, Jungle Island said it wanted to compete with world-class tourism destinations in Orlando, a goal it has so far failed to reach.
ESJ represents investors from Europe and has put money into properties in Brickell and the Design District. The firm also invests in charter schools and medical offices but has kept out of the spotlight since it launched in 2008. It has operations in Luxembourg, in addition to South Florida.
Levine, his partner Ron Krongold and ESJ principal Arnaud Sitbon confirmed a sale was in the works but refused to comment further.
Under the deal, ESJ would buy the Jungle Island lease and take over its debt. It’s not clear if the firm would operate as sole owner or in majority partnership with the current group.
“There are different options on the table,” Sitbon said in a brief phone call.
In the past, Levine’s group has sought new investors to finance upgrades but denied it was seeking to sell.
Any sale would need approval from commissioners in Miami and Miami-Dade County. Both governments back a $25 million loan the park received from the federal government in 2001.
Miami Commissioner Ken Russell said he met with ESJ and heard its plans to improve Jungle Island’s business model, including adding a zip line, swimming lagoon, water slides, helicopter tours and more restaurants.
But he said it was clear the firm has bigger plans for the site, including the possibility of developing a hotel, shops and spa.
“A financial transaction of this size has to have a better upside or it wouldn’t be attractive,” Russell said. (The city values the proposed deal at roughly $60 million.)
Although a 2008 modification to Jungle Island’s lease allows for the construction of a “theme hotel,” zoning changes would likely require a public referendum. In 1995, voters approved Jungle Island’s lease on Watson Island for the “development and operation of a botanical garden attraction and ancillary entertainment and retail facilities,” according to ballot language. Publicity-shy ESJ could back away from a big political fight, insiders say.
“My advice to [ESJ] is to be as open and transparent as possible about their intentions and plans,” Russell said. “We’ve been very patient with Jungle Island because we’re a stakeholder and we want them to succeed. … [New development] could be a great amenity to the public, but it has to be balanced with the will of the people and the capacity of the causeway.”
Jungle Island has long failed to deliver as an attraction, said Stuart Blumberg, former president of the Greater Miami & The Beaches Hotel Association.
“It’s an attraction that was marketed and sold to the tourists incorrectly and the end result is that it didn’t work,” Blumberg said.
Miami Mayor Tomás Regalado, a frequent critic of the park in the past, said he expected the city to approve the transfer of the lease.
“The plans that they have are refreshing and I think people will go back to Jungle Island,” Regalado said. “Maybe they can bring this back to life. Miami needs family attractions.”
He said ESJ expressed interest in eventually bringing a hotel to the site during a meeting.
“I told them, look: one thing is the transfer, which we can do because the charter allows it,” Regalado said. “But if you really want to build a hotel then you’re talking years. You’re going to have a huge process with public hearings and after all is said and done you have to go to a referendum. They understood.”
Developers have targeted derelict land on Watson Island for new projects, including a sea-plane base, heliport and mega-yacht marina and resort. The marina opened in January and the same group is working on a $600 million hotel-and-retail complex called Island Gardens.
In a statement, a spokeswoman for Jungle Island wrote: “Our highest priority continues to be providing the South Florida community with a world-class and constantly evolving attraction that enriches guests’ experiences, draws global visitors to the urban core, and enhances Miami’s reputation as a premier destination. It is our policy not to discuss private business negotiations. However, Jungle Island is currently working with the City on permitting for new permanent interactive attractions.”
Hanging over the deal is the possibility of foreclosure.
In 2001, Jungle Island took out a $10.75 million mortgage from Union Planters Bank, according to county records. HSBC later took over the loan but transferred it to an ESJ affiliate earlier this year. ESJ considered foreclosure when the tourist attraction couldn’t come up with loan payments, a source said, but instead of fighting in court, the parties decided to pursue a sale and transfer of the lease.
The tenant arrangement with the city has also been troubled.
Jungle Island didn’t pay rent for three years during the recession. It still owes deferred rent under an agreement with the city. The park also promised to attract 750,000 annual visitors when it moved to Watson Island. The actual number has hovered between 400,000 and 500,000.
In 2012, the park said it wouldn’t be able to make a $2 million payment on a $25 million loan from the federal government. The loan — issued by the Department of Housing and Urban Development and backed by the city and county — helped Jungle Island move and build its new home. A default would have fallen on taxpayers.
At the time, Levine asked city commissioners for a lease extension and 13 more acres of waterfront land to build a hotel, restaurants and shops. The request was refused and Levine later made the loan payment after the city threatened foreclosure.
The park also fell short of job creation goals.
In 2013, Levine hired John Dunlap, former director of the San Diego Zoo, and his firm, Iconic Attractions, to revitalize the ailing facility. Dunlap promised major renovations and upgrades with a new master plan. It’s unclear if ESJ plans to retain him. Dunlap could not be reached for comment.
The financial relationship between Jungle Island and the city has improved. Daniel Alfonso, the Miami city manager, said the park is up to date on its loan and rent payments.
While ESJ originally planned to buy a smaller stake, recent talks have centered around a complete sale, Alfonso said. The city is performing due diligence.
“The contract [between Jungle Island and the city] does permit sale and transfer,” he said. “But we have to make sure the new owner is capable of making the payments.”
ESJ and affiliated companies quietly manage 2 million square feet of real estate, mainly in the southeastern U.S., with a value of more than $500 million, according to its website. Its deals rarely appear in the press.
The firm’s portfolio includes charter schools in Miami-Dade and Broward counties, as well as Tampa and Vero Beach. It sold a property in the Design District for $5.7 million in 2014 and paid $12 million for a medical office building in Tampa in 2010.
ESJ also got caught up in a dispute over the sale of a small office building at 1428 Brickell Ave., one of the last remaining prime development spots in the trendy neighborhood. The firm holds a mortgage on the property, which is at the center of a lawsuit between the owner and a prospective buyer who says he was unfairly cut out of the deal. ESJ had sought to foreclose but court records suggest the case is being settled.
The Jungle Island sale has implications beyond the city of Miami: Watson Island — built gradually from Biscayne Bay dredgings in the 1920s — sits on the MacArthur Causeway en route to Miami Beach.
Miami Beach Mayor Philip Levine said he wasn’t aware of the deal but was concerned new development could lead to more traffic for the already congested causeway.
“Until we get a public transportation system across the bay,” the mayor said in reference to a proposed Bay Link rail line, “we need to be careful about new development and more density.”