NY firm sells Miami Beach mixed-use building at 40% loss

Distressed real estate investor ArcPe scooped up a mixed-use building on the previously popular retail strip of Collins Avenue in Miami Beach, paying 41 percent less than the property’s purchase price a decade ago.

Shire Realty sold the three-story building at 826 Collins Avenue for $5 million, according to a news release from the buyer’s broker.

Drew Kristol and Kirk Olson of Marcus & Millichap represented ArcPe. Allison Turk of Berkshire Hathaway/EWM Realty represented Shire.

Although the deal comes as distressed sales are expected amid rising interest rates, the Collins Avenue building didn’t trade at a discount because of debt issues. Records show Shire Realty had not taken out a mortgage on the property.

Rather, the building’s high vacancy prompted the price drop, according to Kristol. Vacancies have increased on that part of Collins Avenue where retailers were once abundant.

The 10,000-square-foot building a short walk from the beach consists of a ground-floor retail space, offices on the second level and a third-floor apartment with three bedrooms and a rooftop deck with a pool. Only the apartment is leased. Retailer Levi’s vacated the space before Covid, and the office tenants also have left, Kristol said.

New York-based Shire Realty, led by Sami David and Rena Shulsky, had paid $8.5 million for the property in 2012, records show. The building was fully leased at the time, said Kristol, who also worked on that deal.

ArcPe’s all-cash purchase also allowed for a discount, as lending has become unreliable and has led to foiled deals in South Florida, Kristol said.

Miami Beach-based ArcPe, founded in 2004, is a private equity firm that invests nationwide with a focus on value-add opportunities, according to its website. It plans to lease up the Collins Avenue building and keep the apartment, which also could be a “great Airbnb-type rental,” said David Gordon of ArcPe. He leads the firm with John Olsen, and both are managing partners.

The deal comes on the heels of another ArcPe purchase of a Miami Beach building at a deep discount. The firm bought the property at 624 Collins Avenue out of foreclosure late last summer for $5 million, or 47 percent less than the seller’s purchase price in April, before tenant French Connection vacated the building, according to records and Gordon.

Although portions of Collins Avenue in Miami Beach have experienced retail vacancies, ArcPe sees the stretch specifically between Ninth and Fifth streets in South Beach as poised for revitalization and growth, Gordon said.

South Florida’s commercial real estate market is largely considered a haven compared with the rest of the U.S. thanks to an influx of population and companies. Yet, brokers and investors have told The Real Deal that they expect some distressed sales in the coming months, especially from owners who can’t refinance loans that are coming due or who have floating-rate financing.

“We think there is going to be more opportunity in the South Florida market” for smaller properties such as apartment buildings priced at less than $10 million, Gordon said.

Inquiries are coming in to ArcPe from banks that have already initiated foreclosures or have foreclosed on properties and now are looking to sell, he said.

“A bank can only have a certain amount of distressed assets on their books.”