Electra America and BH Group plan to tear down a big box store on an outparcel of Cutler Bay’s Southland Mall later this year, after the current tenant, Ross Dress For Less, moves into a space in the indoor shopping center.
The move will jumpstart the first phase of the joint venture’s $1 billion makeover of Southland Mall into Southplace City Center, a mixed-use project that will ultimately have 4,395 apartments and condos, a 150-room hotel, 60,000 square feet of medical office space, 150,000 square feet of retail outparcels and a community amphitheater. The new buildings would surround the existing 808,776-square-foot retail facility, which is undergoing a major renovation.
Electra America subsidiary American Landmark is kicking off the development with a multifamily project consisting of 470 apartments, 14,000 square feet of retail and a parking garage on the site of the Ross-occupied building.
Joe Lubeck, who leads North Palm Beach-based Electra America and Tampa-based American Landmark, believes Southplace City Center will soon attract other developers wanting to cash in on the mall-to-mixed-use model that’s taking shape across the struggling indoor mall landscape in South Florida.
“We are in advanced discussions with several other apartment owners that also want to build at Southplace,” Lubeck told The Real Deal. “We saw this as a unique opportunity for us in a growing portion of Miami-Dade County. There’s definitely a lack of quality retail, quality food and beverage options and a significant demand for residential.”
Lubeck is not alone in believing South Florida indoor malls can be resuscitated with an infusion of built-in clientele in the form of new apartment tenants and homeowners. Other big players jumping on this trend include Denver-based Aimco, Coral Gables-based Codina Partners, Miami-based Midtown Equities and Jericho, New York-based Kimco Realty.
At least seven projects that entail tearing down big box stores at indoor malls to make way for mixed-use projects are in the works, according to an analysis by TRD. Population growth and demand for housing, fueled by migrations from other states during the pandemic, are driving the mall-to-mixed-use conversions, according to commercial real estate experts.
Strong demand for housing fuels conversions
Jason Comer, a real estate attorney at Sidley Austin representing developers undertaking these conversions across Florida, said the passage of the Florida Live Local Act will spur more developers to redevelop portions of indoor malls and their parking lots into apartment buildings with retail space. The Live Local Act allows mixed-use projects with at least 40 percent of residential units set aside for workforce housing to preempt local zoning requirements, as well as reap tax incentives.
“Smart developers are realizing the demand is there for affordable and workforce housing,” Comer said. “In order for these traditional malls to remain competitive and still be successful, it requires that type of redevelopment.”
Indoor malls, which usually have large surface parking lots, present a favorable opportunity for developers to build large mixed-use projects amid a scarcity of large developable tracts in dense neighborhoods, noted Jaime Sturgis with Native Realty, a Fort Lauderdale-based brokerage.
“You have these big boxes and big pads on a tremendous amount of land that is underutilized,” Sturgis said. “These big retail centers are in prime locations that are well suited for some type of redevelopment, usually market-rate and affordable housing.”
Developers planning mall-to-mixed-use conversions also benefit from dealing with willing sellers that want to offload underperforming big box spaces, or that want to partner with a builder to add a residential component to an indoor shopping center, Sturgis said.
“As occupancy wanes, the debt service ratio for malls falls, and loans mature. Simultaneously, owners of those properties start exploring alternative exit strategies,” Sturgis said. “They can sell a portion to someone who can come in and do a better development, or they may do a joint venture by bringing in an equity partner to redevelop the asset.”
Sears stores prime targets for redevelopment
For instance, Seritage Growth Properties, a New York-based Sears real estate spinoff led by CEO Andrea Olshan, sold three big box spaces between 2022 and 2023 to developers planning mixed-use projects. That includes selling a former Sears store at Southland Mall to Electra America and Aventura-based BH for $34 million.
In 2022, Electra America and BH also paid $100.3 million for the nearly 80 acres that’s home to Southland Mall. The seller, Wells Fargo Bank as trustee for a JP Morgan Chase commercial mortgage-backed securities trust, had seized the property in February of the same year as a result of a $68.7 million foreclosure judgment against the previous owner.
Also in 2022, Aimco paid $64 million for the former Searstown Plaza at 901-927 North Federal Highway in Fort Lauderdale and an adjacent 3.4 acres. The Denver-based multifamily firm plans to build a 3 million-square-foot mixed-use project with 1,500 apartments on the redevelopment site, which totals 9 acres.
Last year, Codina Partners paid $16.5 million for Seritage’s shuttered Sears store at Westland Mall in Hialeah. Codina is partnering with the mall;s owner, Dallas-based Centennial, James Carr and Manny Kadre to redevelop the 153-square-foot big box space, an outparcel and adjoining parking lot. The plan calls for 815 apartments in a pair of eight-story buildings and a six-story building with commercial space; two eight-story parking garages with 1,559 spaces; a three-story building with 15 townhomes; a two-story amenity center and a public plaza.
Codina Partners Chairman Armando Codina and CEO Ana-Marie Codina Barlick, declined to comment on the plans.
Electra America’s Lubeck said his competitors are doing mall-to-mixed-use conversions because of the potential to create new communities with built-in retail and restaurant options that can generate a steady source of commercial real estate revenue.
“I think this trend has attracted a lot of major players from across the country,” Lubeck said. “In our case, opportunities of this size don’t come along this frequently.”