A new era for the evolving Lincoln Road
Lincoln Road is in transition as it sees an influx of new capital from New York institutional investors. Prices for properties and rents are reaching new heights as the pedestrian mall attracts more international and national retail tenants.
06/15/2014 7:00 PM
06/16/2014 10:24 AM
Stroll down Lincoln Road and, as you shop, dine and people-watch, you’ll find an urban metamorphosis taking shape.
New York-based institutional investors are buying up properties at record prices, and tenant rents are skyrocketing. Major national and international retailers are setting up shop, with a huge, two-story Gap store about to open on Friday, and Athleta and Intermix alongside it. New sites are under construction for Apple and Zara. Soon, Lululemon will open, as will Zadig & Voltaire and Kiko Milano, an Italian cosmetics brand. Bebe, Kiehl’s and Melissa Shoes will move to new spots. And more eateries will emerge, like the Las Vegas-based Sugar Factory and the Argentine gelateria Freddo, while Ladurée, the fancy French macaron shop, will add an ice cream and champagne bar with outdoor seating.
Insiders say other prospective national tenants like Nike, Abercrombie & Fitch and Old Navy have been circling the promenade, hoping to land a spot. The British brand Topshop may 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.
Lincoln Road is in transition after decades of ups and downs dating from its 1920s origins. Through the early 1950s, elite department stores like Saks Fifth Avenue and Bonwit Teller lined the street and women paraded by, dressed in fur coats. After falling into decline, the street has been on an upswing since the 1990s. Now, with a resurgence of investor and tenant interest, Lincoln Road is evolving into a new phase — and booming.
“It is squarely in the sights of every major, exciting retail operator around the world, and the demand for locations on Lincoln Road has never been higher,” said Stephen Bittel, founder and chairman of Miami Beach-based Terranova Corp. Since December 2010, Terranova has bought several properties on Lincoln Road in a joint venture with New York-based Acadia Realty Trust, making it the street’s largest owner of retail property.
In the realm of commercial real estate, Lincoln Road has taken its place among the most regaled “high streets” of the world, experts say.
“It’s our Champs-Élysées,” said Steven Gombinski, president of the Lincoln Road Property Owners Association and owner of 900 Lincoln Road, a corner building he has restored to its original historical design. Formerly the site of Pasha’s, it will become Bebe’s new flagship store in November.
And if you wonder what other retailers are coming in the future: “Look at Aventura Mall’s tenant list and see who is not here,” said Miami Beach-based commercial real estate broker and developer Michael Comras.
As South Florida’s economy benefits from a flurry of tourists, with a record 14.2 million overnight visitors to Miami-Dade County in 2013, Lincoln Road’s rise in value is taking place amid a retail explosion. Across the causeway, the Design District is transforming into a luxury shopping destination and Aventura Mall is expanding. Farther south, Dadeland Mall has recently added a new wing, and plans are unfolding for major complexes near downtown Miami — Brickell City Centre and Miami WorldCenter.
On Lincoln Road, prices are now entering another stratosphere, reaching $5,000-per-square foot for building purchases, and $300 or more per square foot for rent, as New York-based buyers like Acadia, with Terranova, Imperium Capital, Crown Acquisitions and Vornado Realty Trust scoop up sites and sign leases with well-known national and international tenants. Amid demand for space, new stores are rising to two stories.
The influx signifies the next stage in a transition that began about 15 years ago, when major national tenants first started flocking to the road. Today, fewer than half the tenants are local brands.
Over the past few decades, building prices have jumped from $27 a square foot in 1985, to $250 in 1999, to nearly $5,000 now — a 20-fold increase in less than 20 years. Rents have risen from $6 a square foot in 1985 to $18 in 1990 to $35 in 1999, and now, $300. That puts Lincoln Road rents on par with parts of Madison Avenue, though still far below parts of Soho and Fifth Avenue in New York, where rents can approach $2,000 a square foot, said retail consultant Cynthia Cohen, president of Strategic Mindshare.
“Those rents wouldn’t be able to go up if there weren’t the number of customers on the road,” Cohen said. “So it’s very symbiotic. You can’t just raise the rent because nobody will pay it if they don’t have the opportunity to generate high sales. Lincoln Road is very much a destination for residents as well as tourists.”
In fact, Lincoln Road’s average asking rent, at $271.56 per-square-foot last year, was up 34 percent from 2012, and it far surpassed that of Miami Beach’s Ocean Drive ($125) and Collins Avenue ($107.52) as well as Palm Beach’s Worth Avenue ($85.22), according to research by Terranova.
Momentum has escalated in the past four years, after the pedestrian-only stretch was extended a block west, and the Herzog & de Meuron-designed 1111 building and garage were completed, which now houses Juvia, Nespresso and various shops.
“The value of buildings is up tenfold in 15 years, and rents have followed suit,” said Comras, who has brokered deals for tenants and property owners on Lincoln Road for 16 years.
Yet not everyone believes Lincoln Road’s evolution is for the better. While new national stores like Urban Outfitters and American Eagle Outfitters have recently arrived, other local brands like Pink Palm, Van Dyke Café, Tasti D-Lite, TiramesU, Pasha’s and Score have left the street amid rising rents — sometimes landing on nearby roads or neighborhoods. Next, Sushi Siam is set to close, as its new property owner, New York-based Imperium Capital brings in Sugar Factory, sources say.
Some local mainstays remain, among them, Books & Books, Yuca, Rosinella, Base, Alchemist, Britto Central and ArtCenter South Florida.
Pink Palm, the card and gift shop, left its site at 723 Lincoln Road last July, when its lease expired and its new landlord tripled the rent from $15,000 a month to $45,000 a month, said co-owner Perry Martino.
He and co-owner Russ Root moved the shop, now called Perfect Gifts South Beach, to 1516 Washington Ave. But sales have dropped off.
“In a perfect world, I would rather be there [on Lincoln Road],” Martino said. “But in a real world, there’s no way unless you are corporate America to afford it.”
Many Miami Beach residents who have watched the evolution say they mourn the loss of the local mom-and-pop shops.
“It’s turned into a Middle American mall,” said Sara Leviten, a 66-year-old retiree whose memories of Lincoln Road date to the ’50s. “I like some of the shops, but most are chain stores. It’s lost its funkiness and character.”
Daniel Ciraldo, historical preservation officer for the Miami Design Preservation League, is also wary of the changes. “Lincoln Road is becoming a victim of its own success,” he said. “We’re seeing a lot of mom-and-pop, unique stores being replaced by mass market chain stores, and it’s affecting the quality of the experience on that thoroughfare.”
Still, international tourists flock to the street by the planeful.
Lyle Stern, president of Miami Beach-based Koniver Stern Group, who has leased and owned buildings on Lincoln Road for more than 20 years, points to the assortment of hotels on track for South Beach, calling the tourist industry “one of the great underpinnings of Lincoln Road.”
In fact, a quick, random survey of pedestrians one day recently revealed tourists from France, Brazil, Germany and Canada.
“We love Lincoln Road,” said Anta Tsountas, who was shopping with her husband at John Varvatos, the high-end men’s store that opened its first store in the Southeast on Lincoln Road in April 2013. Originally from Greece, the two live in Montreal and own an apartment in Fort Lauderdale. During every visit to South Florida, they drive down to Lincoln. “It reminds us a lot of Europe,” Tsountas, 50, said.
Day and night, visitors amble along, kids in tow. Packed cafés serve up sushi and spaghetti to wide-eyed voyeurs taking in the French bulldogs, leggy models and shirtless bodybuilders on skateboards. On Sundays, a farmer’s market or antique and collectibles market often sets up stalls. And at night, mimes in white paint, saxophone players and singers draw large crowds.
Stanley Whitman, the 95-year-old founder of Bal Harbour Shops, recalls a different Lincoln Road, with ultra high-end shops like Saks, Bonwits, De Pinna and Jay Thorpe. His father had owned buildings on Lincoln until about 1950 and built the first theater on the north side of the street, Whitman said.
“In 1945 when I took over managing the buildings, we got $1 a square foot for rent,” Whitman said. “On the east side, they were getting $10 a square foot. I thought, ‘Someday, I hope I can get $10.’ ”
Commercial real estate broker Lyle Chariff, president of Chariff Realty Group, who has managed and leased as much as 600,000 square feet on the road, recalls raising rents to $35 a square foot in the mid 1990s. That’s up from $6 a square foot when his mother, Marcy Chariff, opened her shop, Diamonds and Chicken Soup, on Lincoln Road in 1985, he said. Chariff, who began his real estate career in 1993 by partnering with Doran Jason, at one point occupied office space above his mother’s shop.
Other local families also have held onto their sites for years and share a certain camaraderie. Robert Quittner, whose family first bought Lincoln Road properties in the late 1940s, is one of Chariff’s long-term clients and one of the longest-running property owners on the street. In the late 1950s, when his father, a dentist, was vice president of the Lincoln Road Association, its members included top-notch bankers and business people. “It was prestigious, it was the ‘who’s who’ of power people of Miami-Dade County,” said Quittner, whose family owns 532 through 560 Lincoln.
Ben Brody’s family began acquiring the 1000-1014 and 1020-1022 buildings on Lincoln Road in 1974. Brody, whose parents operated businesses in the building, said that when his father bought the property, American Express leased the space now occupied by the Spanish shoe store Camper. The rent: $750 a month or $5 per square foot. Today, Brody’s tenants include such high-end stores as Mayor’s and John Varvatos, as well as restaurants Balans and Quattro.
“I have been told by several national, prominent brokers that there is a lot of upside,” Brody said. “It’s great for us. It’s an incredible ride.”
Yet, despite the windfall of higher rents, some long-term property owners like Brody, along with many residents, lament that the current price inflation has priced out some restaurants, forcing them to pack up and retreat to side streets or other areas like Sunset Harbour, which has a burgeoning dining scene.
“We’re going to lose some of that vital mix and flavor, and we think its vital to keep the flavor of Lincoln Road intact,” said Brody, managing partner of Excel Investment Corp. “That’s why older landlords like us have the flexibility to do under-market rents for the right restaurant. For us, mix is more important than rent.”
Gombinski, whose family first purchased 900 Lincoln Road in 1985, agrees on the importance of restaurants. But he believes that overall, the changes are creating a better Lincoln Road.
“Gentrification is not bad,” he said. “It’s what has developed cities, enhanced the tax base and provided vibrant communities.”
At the same time, rising sale prices and the onslaught of national and international tenants have also led landlords to invest in restoring properties, Gombinski said. As evidence, he cites his own building, as well as the Van Dyke and the Lincoln Theater, now occupied by H&M.
At the western edge of Lincoln Road, Robert Wennett’s high-profile development of the 1111 Building has spurred even more activity. Across the street, Ladurée, a renowned 150-year-old Paris pastry institution known for its pastel-colored macarons, chose Lincoln Road for its first location in the Southeast United States, opened in February.
“The visibility is amazing for our brand,” said Pierre-Antoine Raberin, co-managing director of Ladurée USA.
NEW YORK MONEY
In the past few years, New York investment interest has led the charge. Among the largest purchases: In July 2012, Vornado Realty Trust paid $132 million for the 253,168-square-foot 1100 Lincoln Road building, whose tenants include Banana Republic, Serendipity's, Donaku, Anthropologie, Baire Grill and Regal Cinemas.
In January of this year, Imperium Capital, a privately owned real estate investment and development company, and Centurion Realty, a real estate investor — both are based in New York — acquired 643-657 Lincoln, for $33 million. Current tenants include French Connection, Runway Swimwear, Ricky’s Cosmetics and Sushi Siam.
“Miami Beach made a lot of sense to us. It’s in close proximity to New York, and we think it’s an exploding market with a lot of South American money coming into the market,” said Dan Glaser, managing partner of Imperium Capital, which has acquired $1 billion of property, mostly in New York, since its inception in 2010. For the past two years, the firm has been focused on buying on Lincoln Road, he said.
“We believe it is the best retail street in Miami,” Glaser said. “We’re very bullish on Lincoln Road long-term, and bullish on Miami Beach long-term, and we’re definitely interested in acquiring more.”
Acadia and Terranova‘s joint venture, which was at the forefront of the new surge in New York investment, now has a stable of five buildings on Lincoln Road and one on Lincoln Lane, Bittel said. Among the tenants are A/X Armani Jeans and the locally owned restaurant Khong River House.
One of the most visible changes on the road is the historic Van Dyke building at 846 Lincoln Road, which formerly housed the Van Dyke Café.
The building was purchased for $16 million by Crown Acquisitions in July 2012. It is now being restored, and Lululemon plans to open a flagship store there this fall. The company has commissioned local artist David “Lebo” Le Batard to paint a mural for the store, said Lululemon spokeswoman Renee Ascione.
Other recent acquisitions include 818 Lincoln Road, the site of Britto Central, which a Montreal-based investor bought for $34.5 million in May.
Amid it all, another new trend has emerged. With pent-up demand for larger space, landlords and retailers are looking upwards, creating two- and three-story stores for H&M, Forever 21 and the upcoming Apple and Gap stores, while staying within the 50-foot height limitation for the pedestrian mall.
And as the boom continues, more tenant moves are on the horizon. Sources say Anthropologie is expected to relocate, as will Pottery Barn and Williams Sonoma, when their leases expire next year. And Old Navy is said to be eyeing a site near the soon-to-open Zara. Apple too will move, once its new building, developed by Comras and partners, is completed next year. Comras said he is “working on several deals” for Apple’s current space.
Meanwhile, not far away, a controversy is brewing surrounding Miami Beach Community Church’s grassy yard, which developer David Edelstein has agreed to lease, with plans to build a retail building with a space on top for community events. The Miami Design Preservation League has just appealed the city’s Historic Preservation Board’s approval of the lease, Ciraldo said.
It’s all part of what Bittel says is Lincoln Road’s greatest challenge: “How do you grow a world-class High Street, in a manner that captures the essence of the local community and gives it the retail energy of the international stars, and do it in a way that serves the local community and visitors from around the world?”
About a year ago, the Property Owners Association was formed, which now counts nearly all property owners as members. Its first project was to hire landscape architect Raymond Jungles to design a landscaping plan, which the city implemented earlier this year, adding mature trees and low plantings to create more visibility from one side of the street to the other, Gombinski said.
Creating a business improvement district could be next, which would allow the area to market itself while maintaining and improving common areas, Bittel said. That could include painting, landscaping and code enforcement (for such nuisances as store employees hawking skin care products to passersby), and street work such as drainage.
To date, the city of Miami Beach has issued a request for qualifications for an international design firm to create a master plan for the road, which could lay the groundwork for millions of dollars of improvements.
Investors and brokers like Comras, Stern and Bittel hope the city will agree to develop its ground-level parking lots north of Lincoln Road with multilevel parking garages, adding more space for retail.
Stores and restaurants would spill out to side streets, connecting Lincoln Road to the area around it and creating a larger, vibrant district. The new Yard House on Lenox Avenue, for example, would be linked to Lincoln Road, as would the New World Symphony’s New World Center.
In 10 years, insiders say they envision the Lincoln Road district to include a new convention center, hotel, residential units and enhanced parking, with a busy promenade of people walking along the shops and restaurants from morning until night, enjoying a live-work-play lifestyle.
Lincoln Road, they say, has not yet reached its potential.
“There are still lots of old, tired stores that need to either upgrade and come into the modern era or go away,” Bittel said, “and they will be replaced with exciting brands from around the world.”
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