$342 million sale of six properties on Miami Beach’s Lincoln Road closes

Terranova Corp. and its investment partner Acadia sold their six-building portfolio at a record price for South Florida retail properties. Terranova becomes managing member of the new partnership with Morgan Stanley Real Estate Investing.

08/19/2014 5:43 PM

08/19/2014 5:57 PM

In one of the largest deals in South Florida’s history, the $342 million sale of six buildings on Miami Beach’s Lincoln Road closed on Tuesday. It marks the biggest transfer of property on the pedestrian promenade, with one of the sellers remaining part owner in the new entity.

Miami Beach-based Terranova Corp., and investment partner Acadia Realty Trust, the largest property owners on Lincoln Road, sold their six-building Lincoln Road portfolio to a new partnership of Morgan Stanley Real Estate Investing along with affiliates of Terranova.

The properties, sprinkled along the Lincoln Road 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. In all, the transaction translated to a profit of $151 million — or 79 percent for Terranova and Acadia, in a combined total of a little over three years.

“It was a very rewarding investment for everyone involved,” said Terranova Corp. Chairman Stephen Bittel, calling it “one of the most exciting deals” in the company’s 35-year history.

Terranova will be the managing member of the new entity, and will continue to manage, lease and develop the properties, Bittel said. Two of the properties on Lincoln Road already have received Historic Preservation Board approval for expansions, allowing for a new large flagship retailer. And an additional development is proposed on Lincoln Lane, creating a three-level building, he said.

“We are fully engaged in the two redevelopments and the one ground-up development that are part of this portfolio,” he said. “And we remain laser focused on working with the city to make sure the redevelopment of the common areas is completed.”

The partnership also plans to continue to acquire more properties, Bittel said.

“This partnership is very eager to grow its holdings on Lincoln Road, and the pricing is expensive, but from time to time we hope there are opportunities to increase our ownership,” he said.

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, has called the Lincoln Road deal a “needle mover.”

Tuesday’s sale also underscores the widespread popularity of Lincoln Road among investors. Asking prices for properties can approach $5,000 a square foot. Rents have risen to $300 a square foot, which puts Lincoln Road on par with New York’s Madison Avenue, said retail consultant Cynthia Cohen, president of Strategic Mindshare.

Such prices also reflect tourists and residents’ growing interest in shopping and dining along urban streets.

“When there’s a buzz of hot retailers, restaurants and a real energy to the street, then it’s magic,” Cohen said.

Indeed, 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.

“This is just a wonderful story about something great happening on Lincoln Road. We believed in it at another time and level, when people thought we were crazy,” Bittel said. “And maybe now they think we are a little less crazy.”

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