A New York firm bought part of the Macy’s building in downtown Miami and is expected to acquire the rest. The next priority is negotiating a new lease to keep Macy’s as a tenant.
In a deal that could have implications for the future of downtown Miami’s anchor retail tenant, a New York real estate investment firm paid $15.55 million to acquire more than half the property that now houses Macy’s Flagler Street store.
The acquisition by Aetna Realty Group includes the 48,000 square feet of land that was leased to R.W. Burdine in 1917. Until the recent sale, the property was owned by 23 heirs of Richard and Harriet Ashby, who signed the initial 99-year lease with Burdine. The lease expires in 2016.
The Ashby family began taking steps to prepare the property at the intersection of Miami Avenue and Flagler Street for sale nearly four years ago, said Lewis R. Cohen, a GrayRobinson lawyer who represented the Ashby family in the transaction that closed on New Year’s Eve.
Over the years, Macy’s and its predecessor, Burdines, grew the site’s downtown presence well beyond the Ashby land, and the current building now extends another 30,000 square feet of land. Aetna has also made a commitment to purchase the remaining portion of the building, that is currently owned by Macy’s, Cohen said. But that deal hasn’t closed yet.
“That deal is a sure thing,” Cohen said. “They could not have closed with us without having an agreement with Macy’s completely nailed down.”
When Macy’s decided not to purchase the Ashby land itself, the owners soughta third-party that could control both pieces. The reason: Improvements made to the store over the years straddled both properties, such as elevators and escalators starting on one parcel and ending on another.
“Between the engineering difficulties of severing the properties and the legal issues involved, it would have been somewhere between extremely expensive and impossible” for different entities to share control, Cohen said.
Aetna was one of three bidders interested in the site, Cohen said. One of the other players was the Barlington Group, a Miami developer that in 2011 signed a deal with Macy’s to sub-lease 20,000 square feet of empty ground-floor space for a mix of restaurants and cafes.
Macy’s spokesman Jim Sluzewski said this transaction doesn’t impact Macy’s current lease. He declined to comment on any other pending transaction regarding the property the retailer owns in downtown Miami.
“It’s business as usual,” said Sluzewski, who also would not discuss Macy’s long-term plans for downtown Miami beyond the expiration of its lease. The company’s roots in downtown Miami date to 1898, when the first Burdines opened in a nearby downtown location.
Aetna and its local attorneys did not respond to calls Wednesday for comments.
But Cohen said Macy’s is in the process of finalizing a short-term deal with the new owners.
“They intend to stay for at least the foreseeable future,” Cohen said. “For a minimum of five years they’ll be there and possibly longer.”
Macy’s long-term future on Flagler Street has been in doubt since 2007, when Macy’s Florida then-Chairwoman Julie Greiner took city leaders to task for the deplorable conditions in downtown and threatened that the retailer might leave.
Today, downtown is a much different place with a residential population that has nearly doubled over a decade and grown to about 80,000 residents. A 2012 occupancy study by the Downtown Development Authority found that more than 95 percent of the residential units built in downtown since 2003 are currently occupied. By 2014, the downtown population is expected to exceed 90,000.
City leaders grew hopeful about Macy’s long-term commitment to the city’s urban core in 2011 when the retailer announced the deal with Barlington.
Since then, Barlington has spent several million dollars on improving the space and bringing in tenants, including Avenue D, Kork Wine & Spirits, Rojo Cuban Coffee, and Quarterman’s Ice Cream to generate more traffic in the evening. Two more tenants will be opening before the end of the first quarter, said Bill Fuller, co-managing partner of Barlington, whose sub-lease remains in effect until 2016.
“We continue to want to improve the intersection and be part of the revitalization of the area,” Fuller said. “Our original intent was to increase traffic downtown and have a positive impact on Macy’s sales. That has all manifested itself the way we envisioned. The question is whether Macy’s can stay long enough to realize the benefits of Flagler Street’s revitalization.”
Aetna Realty and its affiliated company, United States Realty & Investment Company, have a 75-plus-year history as a real-estate owner, investor. and developer. The company is based out of New York, but over the years it has owned more than 10 million square feet of property in 10 states, most in the Northeast. In South Florida, the company owns retail properties on Clematis Street in downtown West Palm Beach; office buildings in West Palm Beach, Kendall, and Riviera Beach; and a storage facility in Homestead.