Radical surgery to save Sunset Place was off, then on. Now its owners dumped the mall
The high-profile partners who acquired the failing Shops at Sunset Place mall in South Miami five years ago with ambitious but controversial redevelopment plans have given up on the project and dumped the landmark property at a $45 million loss.
The buyer is Midtown Opportunities, a real estate investment firm that owns vacant land in Midtown Miami and partnered on development of an apartment tower in the neighborhood. The firm said it closed on the purchase of the 9.7-acre Sunset Place for $65.5 million on Dec. 31.
Midtown Opportunities did not detail any plans for the property, located at the intersection of South Dixie Highway and Red Road. Alex Vadia, principal of Midtown Development, an arm of Midtown Opportunities, issued a short statement that reads in part: “We look forward to re-imagining the possibilities of Sunset Place alongside our community partners.” A spokeswoman said Vadia was not available for an interview Monday.
But the purchase likely spells the end for a complex Sunset Place redevelopment scheme that South Miami officials had called “critical” for the future of the small suburban city’s struggling downtown. The mall’s slow decline, blamed in part on an enclosed, self-contained design that could no longer compete with walkable urban districts like Wynwood and South Beach, led to plummeting foot traffic on surrounding blocks well before the COVID-19 pandemic struck.
The sale comes 20 months after the South Miami commission unanimously approved significant zoning and land-use changes to accommodate a blueprint developed by Sunset Place’s previous owners — a partnership of publicly traded Federal Realty Investment Trust, a Maryland group, and locals Grass River Property and The Comras Co., — that bought the mall in 2015 for $110 million.
Their plan was to tear down the half of the obsolete mall along South Dixie Highway and replace it with three hotel and apartment towers. The rest of the mall would have been revamped and opened up to the surrounding sidewalks to generate foot traffic and knit the mall and downtown streets closer together.
But city commissioners initially rejected the Federal application, which required a unanimous vote, after some members and residents objected to the scale of redevelopment. That caused significant delays that Federal executives say eventually played into their decision to sell.
The same partners followed a similar strategy in completely remaking CocoWalk, another faded “lifestyle center” they bought at around the same time as Sunset Place. The modernized CocoWalk just reopened with a new, more upscale mix of restaurants and shops, plus a new office wing and an expansive plaza that spills out onto Grand Avenue.
Federal executives and their partners declined to comment on the Sunset Place sale. According to the statement from Midtown Properties, Grass River will continue managing Sunset Place, where many of the shops are vacant.
But in a November earnings call with analysts, Federal President and CEO Donald Wood called the Sunset Place project “a failure” and “embarrassing” for the firm, according to a transcript posted on the Motley Fool website.
During the call, Wood blamed in part “the fits and starts with the entitlement process” — a reference to the prolonged review and initial rejection by the city, which he said cost “precious time.” Instead of leasing to new tenants in a strong market between 2015 and 2017, Wood said, the partnership then faced a sharp retail downturn, lower rents and rising construction costs.
The coronavirus pandemic made things worse, creating uncertainty about the viability of its key anchor tenants, including the AMC movieplex and the LA Fitness gym, as well as its hotel plan, Wood said. In September, Federal did not pay a $60 million note on Sunset Place due in September and the lender declared the firm in default, Wood said.
Wood said Federal decided not to sink any more capital into the mall, calling it “a bridge too far for us to take.”
Sunset Place is the third landmark structure on the site to fall into obsolescence. The first, a Holsum baked goods factory, was replaced in the 1980s by developer Martin Margulies’ Bakery Center, a fully enclosed retail and office complex that failed quickly and was demolished in 1996 to make way for Sunset Place.
In contrast to Federal, which operates nationally, Midtown Opportunities is a local investment firm with a slender record but with cash to spend. In 2019, Vadia’s firm paid about $27 million for vacant land in Midtown where Walmart had planned to build a store before community opposition derailed it. The former Walmart property remains vacant, and Vadia has not announced plans for it.
Midtown Opportunities also owns a large swath of land in the center of Midtown and a pair of nearby surface lots used for parking, Miami-Dade County property records show.
The statement from Midtown Opportunities says it is developing “a 22-acre mixed-use community in downtown Orlando” and was a partner with Magellan Development in GIO Midtown, a 32-story retail and apartment building that opened in April.
“When the opportunity came to purchase Sunset Place, a landmark property located in South Miami, we jumped on it,” the statement quotes Vadia as saying.
Because of an error in a Motley Fool transcript, a previous version of this story misattributed a quotation to Federal Realty Investment Trust Vice President Jeff Berkes. This version of the story correctly attributes the quote to Federal President and CEO Donald Wood.
An earlier version of this story included previous reporting by the Miami Herald that confirmed that retired baseball star Alex Rodriguez is an investor in Alex Vadia’s Midtown Miami acquisitions. A spokeswoman for Vadia denied that this week.
This story was originally published January 4, 2021 at 6:29 PM.