Retail buildings on Miami Beach’s Lincoln Road sell for record $342 million

Terranova Corp. and its investment partner are selling a six-building portfolio at a record price for South Florida retail properties.

08/06/2014 6:34 PM

08/06/2014 8:47 PM

The biggest property sale on Miami Beach’s Lincoln Road — and one of the highest-priced deals in South Florida history — is in the works, as the South Florida real estate market continues to soar.

Miami Beach-based Terranova Corp., and investment partner Acadia Realty Trust, the largest property owners on Lincoln Road, have agreed to sell their six-building portfolio on Lincoln Road for $342 million. The information was disclosed in Acadia’s recent earnings release and conference call with Wall Street analysts. The buyer has not yet been named.

The properties, sprinkled along the pedestrian promenade and on nearby Lincoln Lane, include the sites of such popular Lincoln Road hang-outs as Sushi Samba and Dylan’s Candy Store. They were originally purchased in two parcels in February 2011 and December 2012, for a total of $191 million. Therefore, the transaction translates to a profit of $151 million — or 79 percent, in a combined total of a little over three years.

The deal, to an-as-yet undisclosed institutional investor, has not yet been completed.

Terranova Corp. Chairman Stephen Bittel declined to discuss the pending sale, saying “our policy is never to discuss unclosed transactions.”

Acadia, a publicly traded, White Plains, N.Y.-based, real estate investment trust specializes in the acquisition, re-development and operation of retail and urban mixed-use properties. In its recent analysts’ conference call, Acadia Chief Executive Kenneth F. Bernstein called the buyer a “very high quality institutional investor from whom we received a compelling and preemptive proposal.”

At $342 million, the Lincoln Road sale ranks among one of the highest priced deals in South Florida. The only commercial property to bring a higher price was the April 2008 purchase of a 50 percent share in the Fontainebleau Miami Beach, according to research dating to 2001 by Jones Lang LaSalle, a commercial real estate firm. A unit of the Dubai government bought the stake for $375 million from Turnberry Associates.

Steve Medwin, managing director of Jones Lang LaSalle, called the Lincoln Road deal a “needle mover.”

“It is a megadeal,” he said. “We don’t see very many of those in the Miami market.”

When the Lincoln Road sale closes, Terranova and Acadia will set a new record in retail real estate sales in South Florida, underscoring how hot a commodity the shopping and dining haven has become.

For the past few years, Lincoln Road has become a magnet for global brands, amid an influx of new capital from New York institutional investors. Prices have hit new heights as the pedestrian mall attracts more international and national retail tenants. In June, the Gap opened a new two-story store, with Athleta next door and Intermix alongside it. Lululemon, Zara, Apple, and Zadig & Voltaire are under construction on the street, which boasts other new tenants — including Urban Outfitters, American Eagle Apparel, H&M and Forever 21.

In the realm of commercial real estate, experts say Lincoln Road has taken its place among the most regaled high streets of the world.

Prospective national tenants like Nike, Abercrombie & Fitch and Old Navy have been circling the promenade, report insiders. The British brand Topshop might not be far behind as retailers and restaurants pour out to side streets, expanding the corridor that runs from Alton Road to the ocean, into a broader district.

Acadia and Terranova’s properties are in the heart of the action, at 600, 719-737, 740, 801-821, 826-838 Lincoln Rd., and 723 N Lincoln Lane. Tenants include Starbucks, Fossil, A/X Armani Jeans and the Khong River House restaurant, owned by Miami-based 50 Eggs.

During Acadia’s analysts’ conference call, Bernstein said that Lincoln Road rents have shown “very significant movement,” doubling from $150 a square foot to $300 a square foot since Terranova and Acadia bought the properties.

Bernstein credited Terranova for its contribution in raising the value of the properties through its leasing efforts. He said Terranova will remain active in the properties after the sale.

“This was an opportunity to make some pretty significant profit, and it is in our financial interests,” Acadia Chief Financial Officer Jon Grisham told analysts, adding that talks heated up in May. “So it makes sense to do this.”

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