South Beach Without The Partying? The Future Of Ocean Drive Is In Question

Joshua Wallack was in the midst of his years-long plan to develop a $500M Skyplex with the world’s tallest roller coaster on 14 acres in Orlando. He was courting Lionsgate Entertainment to develop it into a major theme park.

But then, “COVID got me, got my term sheet pulled from Wall Street,” he said in a call with Bisnow.

He turned his attention back to the establishments his family has long operated: Mango’s Tropical Cafe, one of the highest-grossing nightclubs in the country, with locations in Miami Beach and Orlando.

The original outpost on Miami's South Beach, famous for flowing drinks, dinner shows and dancers in leopard print, had been in Wallack's family for decades. But its environment, Miami Beach's entertainment district encompassing Ocean Drive, is in flux.

In recent months, visitors to Ocean Drive have twerked on police cars and dealt drugs in broad daylight. They flashed guns and sometimes shot them.

Stakeholders in the area agree that crime, violence and tackiness have become a problem in the district, but they disagree on what to do about it. The mayor has proposed a rebranding that would move away from the anything-goes reputation, but some fear that would tank real estate values.

It is amid that uncertain atmosphere that Wallack put the Miami site and three neighboring buildings up for sale in December. 

Last spring, as the coronavirus pandemic kept bars and restaurants shuttered, Wallack said he imagined how the Miami Beach Mango’s might be redeveloped. He looked at Google Earth, identified three other properties — empty retail and a touristy beach shop — that back up to Mango’s beachfront site and managed to get them under contract. They are being offered together with his family's property as a nearly half-acre assemblage.

CBRE is marketing the property as a redevelopment site and accepting proposals that are due in mid-February. Wallack said the proposal materials have already been downloaded 70 times in 38 countries, and there is the possibility of teaming up with the city to take advantage of millions raised through a general obligation bond.

"I think that it will be a difficult sale to conclude in the current environment," said Anthony O’Brien, senior managing director of Jesta Group, a Montreal-based family office that owns The Clevelander South Beach hotel and bar, also on Ocean Drive. “That's the reality.”

Miami Beach evolved over the decades, from a quiet retirement haven to a party-centric tourist destination. Throughout the 2000s, tourism boomed around major celebrations like Ultra Music Festival, the South Beach Wine and Food Festival, Urban Beach Week, Art Basel and a few Super Bowls.

For the last few years, though, Ocean Drive has struggled with its brand and reputation. Partiers migrated off the beach to new restaurants and bars in Wynwood. Some Ocean Drive restaurants scammed customers with bait-and-switch tactics or misleading pricing.

Wallack compared the vibe on Ocean Drive to how desolate it can feel on Duval Street in Key West.

"When the people are coming off the cruise ships, it's busy, and when the cruise ships are gone, it's dead,” he said. 

The pandemic hasn’t helped business, as establishments shut and then opened with reduced capacity and a curfew. There is no cruise ship traffic at all.

Miami Beach Mayor Dan Gelber has called for transforming the Ocean Drive entertainment district into an art deco cultural district with an emphasis on arts, architecture and wellness. Hospitality owners, on the other hand, say it would be unwise to kill a party-centric brand that took decades to cultivate and is famous all over the world.

O’Brien said Jesta Group, founded by Elliott Aintabi, who began building his fortune in Texas real estate in the 1980s, could invest anywhere but saw potential in Miami Beach and went on a $100M buying spree a few years ago, picking up a Best Western and Shuckers Waterfront Grill, The Stiles South Beach hotel, then The Clevelander and the adjoining Essex House South Beach hotel.

Jesta had planned to renovate the last two, but the company recently halted investment in the properties. 

Eventually, the Clevelander reopened at 50% capacity and increased its security. O’Brien said that on a normal busy night, the room rate at the Clevelander pushed $400, but the pandemic dropped rates as low as $140 to $150.

Consultants have been hired to issue recommendations, and stakeholders continue to debate potential solutions in committees and at city commission meetings. Some of the ideas that the mayor floated, like establishing an alcohol control board and dialing back closing times from 5 a.m. to 2 a.m., have been voted down. But noise ordinances passed, as did stricter rules for sidewalk cafés.

“The fear is that if music is too loud, people have to yell at each other, and then they're spreading the virus, which I'm not going to comment on whether that's a rational decision or not,” O’Brien said. “On two occasions in the past month, we have essentially had a code compliance officer show up and say, ‘Your music is not playing an ambient level. You are now shut down for the next 24 hours.’”

O’Brien said the definition of “ambient” is subjective, and one of the shutdowns came on a busy Saturday.

“We lost $100K,” he said. 

He said he thinks the problems could be solved with more enforcement of existing laws, but the mayor has argued that the issue can't be solved with arrests.

As all parties look for answers, O'Brien said it is unclear where property values on Ocean Drive will go.

“As someone who looks at acquisitions and buying new properties, it’s too unclear what the future value will be until it becomes clear what is the agreed-upon vision and direction of Ocean Drive and Collins Avenue as well," O'Brien said. "... The potential is absolutely enormous. But we need clarity on what the future regulations are going to be.”

“The price that we pay for this property is based on the type of operation that it runs and the type of revenue it generates," he said. "If we're forced to turn the Clevelander into a yoga studio, the financial justification is no longer there.”

Until rights are solidified, he said, he can't justify further investment.

Whatever happens, Wallack said he thinks that he is in a win-win situation. He said he is optimistic that, with Miami enjoying a buzz from an influx of celebrities, tech companies and rich people, a new vision for Ocean Drive will take hold. He said he has the three buildings under contract indefinitely, and his family could work with an incoming buyer, could continue to operate Mango's as is, or sell and walk away. 

“It could range from ‘All cash and you're out’ to ‘We want you guys in’ … and I'm sure it'll be everything in between,” he said. “How can South Beach become hip again is the big question.”

CORRECTION, FEB. 2, 2:55 P.M. ET: This story has been updated to properly contextualize a quote from Joshua Wallack comparing Ocean Drive to Duval Street in Key West.