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Spring Break Chaos On Miami Beach: Just A Blip For CRE

After big crowds converged on Miami Beach this weekend, the city imposed an 8 p.m. curfew and shut down bridges connecting the beach and the mainland — giving people just hours' notice and backing up traffic late into the night. The restrictions are in place Thursdays, Fridays, Saturdays and Sundays through April 11.

Officials, residents and business owners have for years debated what to do about a sometimes-wild atmosphere that has included fights, shootings, open drug dealing, restaurant scams and twerking on cop cars — particularly on a stretch of the beachfront strip Ocean Drive, where bars stay open until 5 a.m. 

The Clevelander, on Miami Beach.

Joshua Wallack's family has owned Mango's Tropical Cafe on Ocean Drive for 30 years. "We're the ones Will Smith was singing about [in the song 'Welcome to Miami']," Wallack told Bisnow. "'Hottest club in the city/and it's right on the beach.'"

Wallack didn't see much of a problem with the tourists' behavior, saying that every generation has its wild times. Today's are just captured on cellphone videos. People who are now college-age grew up playing Grand Theft Auto and seeing marijuana decriminalized, he said.

"They're good kids, they just need structure," Wallack said. He thought the curfew had the potential to backfire.

"A sea of people with a bunch of closed venues?" he said. "What are you going to do with that?"

Wallack and other hotel and bar owners seemed unfazed, characterizing the chaos as a blip that will pass — and likely not hurt Miami Beach commercial property values.

Max Commus, managing director in the hospitality investment advisory practice at Hodges Ward Elliott, said he was reminded of the famous quote from P.T. Barnum: "'No such thing as bad publicity.''

"People see two things: chaos and big crowds of partiers," Commus said. "There's not a lot of other places in America that you can see big crowds of partiers right now. I think the good far outweighs the bad. It tells the world Miami Beach is open for business. It's wild, it's crazy and yes, there were some bad apples that may have ruined the bunch. But it reminds everyone we're open for business."

Hospitality assets have been trading for equal to or more than what they did pre-pandemic, he said. South Beach is seen as having recovered, and that's driving disproportionate investor interest compared to other markets.

"The data point we're pointing all investors to is the recovery of the Miami market after the Great Financial Crisis in 2009," Commus said. "Miami Beach hotels recovered revenue and growth almost two times the rate of the broader United States."

Nevertheless, some Miami Beach stakeholders, including year-round residents, have been alarmed by the behaviors on the beach. Over the past year or two, Miami Beach Mayor Dan Gelber has proposed numerous measures like closing bars earlier — an idea that was voted down — or rebranding the area into a yoga/architecture/wellness destination, which some people argue is crazy, given Miami's tourism economy and global reputation as a vacation destination.

Robert Finvarb, whose company owns several Marriott hotels, said the issue was getting blown out of proportion.

"People are excited to get out. As far as commercial real estate prices, there's nowhere I'd rather be than Miami Beach," he said. "If anybody is overreacting, tell them [to] give me a call. I'll be happy to buy their properties."

Finvarb says demand for his 500 rooms on the beach has been "on fire" and there was no wave of cancellations following the imposition of the curfew. He doesn't blame the city for cracking down, though, lest someone get hurt.

The Clevelander, a famous hotel and bar, shut down its food and beverage voluntarily on Friday — a day before Miami Beach announced the curfew. It will be closed until at least March 24, for safety reasons, proprietors said.

That seemed ironic, since Jesta Group, a Montreal-based family office that owns the property, has been arguing in city meetings to retain the party vibe. In February, the bar had a sign on its property saying, "Misbehavior Encouraged."

Alex Tachmes, an attorney for the Clevelander, told Bisnow the sign had been a tongue-in-cheek marketing tactic and that this past Friday, police had shot pepper balls to disperse a large crowd, which triggered people to stampede into the Clevelander and also gave some customers breathing trouble. Employees were calling in sick the next day, so management decided it best to close, but still pay its employees.

Closing is expensive. A Jesta executive told Bisnow in January that it cost them $100K when it was shut down for 24 hours for a coronavirus-related violation. Tachmes acknowledged that Jesta can take the financial hit because it is a well-positioned multinational company, but the curfew will likely hurt small businesses.

Matias Pesce, CEO of Miami Beach-based V&E Restaurant Group, told the South Florida Business Journal that he expected a 20% decline in expected sales at seven of the company's 11 restaurants over the next two weeks because of the curfew. However, he too supported the city's crackdown.

The newspaper also reported that the Betsy Hotel, on Ocean Drive, had no cancellations.

Wallack said his family has kept Mango's closed for a year and six days now due to the coronavirus. So the curfew didn't impact him directly, except that over the past few years, both his bar and the Clevelander have been blamed for revelers' bad behavior. As streets stay wild even with Mango's closed, it proves that his bar isn't the cause — and thus, earlier closing times aren't the solution.

Wallack pointed to a few decisions that made it seem like anything goes in Miami Beach. In 2014, off-duty cops were banned from working in nightclubs. The Miami Beach police chief made that decision after one cop was found drunk at Mango's. In 2015, both the county and city gave police the option to issue fines instead of making arrests for marijuana.

"For 25 years, everything was fine," Wallack said. "Then they didn't allow us to provide security. Immediately they started blaming the clubs — 'Mango's and the Clevelander are the bad guys!'"

He pointed to the new Moxy hotel on South Beach and a planned hotel from nightlife impresario Dave Grutman and singer Pharrell Williams. Those are party-oriented hotels with big food and beverage programs, Wallack said. Soho House, Faena and the Fontainebleau all attract vacationers without the problems of Ocean Drive, he said.

Airbnbs are part of the problem, Wallack believes. Travelers who stay at hotels have built-in recreation — restaurant, bar, swimming pool — but tourists staying in home shares venture to Ocean Drive for entertainment. The city should implement a concert program or festival to engage the crowds.

"If you bring 1,000 kids to summer camp and there's nothing for them to do, it descends into chaos. Like 'Lord of the Flies' Fyre Festival," Wallack said.

This winter, Wallack put a few nearby properties under contract and tried to sell them, along with the Mango's site, as an assemblage.

"CBRE said it was the most action they've had on any deal in two years. We had 90 qualified bidders from seven continents," Wallack said.

It was the entertainment district's fun vibe that attracted so much interest, he said. But because of the uncertainty about whether city commissioners will enact stricter rules, and how long it could take to get approvals and redevelop it, the site did not sell.

"We were obviously very early to the table with something like that," Wallack said.

He thinks that right now, the city of Miami — downtown and the mainland — is enjoying a popularity boom and stealing thunder from Miami Beach, which technically sits on a barrier island. He noted that late, famed developer Tony Goldman, who led the revitalization of SoHo in New York, then South Beach in the '90s, had a vision around which city leaders coalesced, but that unity fell apart after the Goldman family turned its attention to Miami's Wynwood District.

"If LeBron James were to join the Miami Heat right now, he'd say 'I'm taking my talents to the Magic City,' a nickname for Miami, not to South Beach," Wallack said.

He's sure the beach will get its cool vibe back, though, so long as stakeholders realize they need to embrace change.

"We're not going to enact legislation or roll back closing times and the '90s are going to reappear," he said.

Tachmes said the week's craziness won't drive Jesta Group away from Miami Beach, but long-term, it thinks the city needs two things: more permanent, sustained policing effort year-round with "two cops on every corner" and city-sponsored programming like R&B or jazz concerts during busy weekends.

"If tomorrow the city meets and they vote 5-2 and our 5 a.m. liquor licenses go to midnight, we're not going to sit back and let go of our investment — but I don't think that would be the time to pump $30M into the property," Tachmes said. "Months will go by, the situation will improve, things will stabilize, and the city will find a better way to control and handle these large crowds."

Finvarb said he would far rather operate on Miami Beach than in New York, Chicago, Minneapolis or California, which all have their own challenges.

"This too shall pass," he said.