The Real Deal New York

New York investors swarm Miami’s Design District

Real estate players go after a limited pool of properties

April 03, 2014 11:35AM
By Eric Kalis

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From left: Michael Comras and Luis Castillo

From left: Michael Comras and Luis Castillo

From the South Florida site: New York-based real estate investors are pouring money into Miami’s Design District as the area evolves into a luxury retail hub.

The district’s conversion is being led by Craig Robins-led Dacra and private equity partner L Real Estate Advisors, which lured A-list tenants like Cartier, Hermes and Louis Vuitton to the district. Their $1 billion mixed-use project could bring a total of 120 high-end retailers to the 19-acre site by fall 2015. The district’s traditional tenant base of furniture and home furnishing retailers is looking to relocate to neighboring blocks in anticipation of being forced out by the luxury brands.

With that project well underway, investors are gobbling district properties, and existing property owners are taking advantage of the chance to cash out.

Acquisition opportunities are limited. Robins and his partners own about 80 percent of the district’s real estate.

“There are not an infinite number of properties available,” HFF managing director Luis Castillo told The Real Deal. The Miami office of HFF is currently marketing a property near the Dacra/L Real Estate project.

“That’s what makes it interesting,” Castillo said. “There are extreme barriers to entry specific to the area between Northeast 38th and 41st streets.”

One major New York-based real estate player, Thor Equities, plunked down about $5.7 million on March 3 for a small building at 53 Northeast 39th Street, a block away from Dacra and L Real Estate’s development. The seller, Aventura-based ESJ Capital Partners, booked a profit of nearly $2.2 million from its May 2012 purchase of the property.

Thor’s website includes the NEST building at 120 Northeast 39th Street as part of its Miami portfolio. NEST is a European furnishings retailer run by Sara Colombo, wife of developer Ugo Colombo.

But Miami-Dade County records identify Colombo’s CMC Group as the owner of the property. If Thor has a deal in place to buy the building, it has not closed.

Questions for Thor were referred to executive Scott Sherman, who oversees the company’s Florida portfolio. Sherman did not respond to calls.

Just before Thor’s purchase of 53 Northeast 39th Street, a joint venture between New York-based Mack Real Estate Group and Wharton Equity Partners picked up 1.4 acres in the district for $9 million. The site at 3635 Northeast First Avenue and 3604-3620 Northeast First Court has significant development potential.

“What we’re seeing is a lot of speculation in the market because there are not a lot of proven sales coming from retailers yet,” retail specialist Michael Comras, president and CEO of the Comras Company, told TRD. Comras owns property in the district, brokers transactions for others and handles retail leasing at certain sites. He is looking for further opportunities to both buy and sell area properties.

“No one is selling these properties for cheap,” Comras said. “If you are buying, you see some upside. [Investors] look at it and understand the district is starting to build a critical mass of these luxury large tenants. Over time, the critical mass will attract enough people that the rents will be in line with store volumes.”

The next district property to change hands could be a retail building occupied by high-end furniture company Baltus at 3925 North Miami Avenue. HFF is marketing the 10,780-square-foot property, which has zoning that allows up to 12 stories and a maximum of 32 residential units or 63 hotel rooms. Sources familiar with the site expect it to trade for $15 to $18 million.

Whoever ends up with the property would soon have an opportunity to test the anticipated rent growth in the district. The lease with Baltus ends in April 2015, according to HFF. A new owner could try to renew with the retailer at a substantially increased rent or broadly market the space.

Baltus has incentive to stick around, as it is partnering with the Related Group on the luxury Baltus House condo building under construction near the district.

“Obviously they need to maintain a presence in the district,” said Castillo, who is part of the HFF team marketing the property. Numerous New York investors are showing interest in the property, along with groups from the West Coast and outside of the U.S.

HFF expects to start receiving formal offers on Thursday.

Numerous retailers are interested in the building if Baltus does not renew its lease there, according to Castillo.

“This is one of the most anticipated high street markets to come around in a long time.”

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