Current media coverage and upcoming developments hand-picked from the industry.

Lincoln Road

Lease roundup: Terranova, Millennium, R&B, Duke nab tenants

THE REAL DEAL – August 22, 2022 BY LIDIA DINKOVA

Callista Couture, Unfashional I Lincoln Road I Miami Beach

In another example of New York businesses’ migration to South Florida, two retailers are making their debut with new stores on Miami Beach’s Lincoln Road.

Stephen Bittel’s Terranova, among the biggest landlords on the shopping and dining pedestrian street, signed Callista Couture for 1,200 square feet at 612 Lincoln Road, as well as Unfashional for over 1,500 square feet at 817 Lincoln Road, with an additional 1,700-square-foot pop-up space at 815 Lincoln Road, according to the landlord’s news release.

The buildings are part of Terranova’s seven-property portfolio spanning roughly 140,000 square feet along Lincoln Road. The company is based in Miami Beach.

Lincoln spans eight blocks and has 281 businesses, 65 restaurants, more than 800,000 square feet of retail space, according to the release. It includes over 1 million square feet of offices.

Silicon Valley Bank, MFS Investment Management I Four Seasons Hotel and Tower I Miami

Millennium Partners has fully leased the office portion at the Four Seasons Hotel and Tower in Miami’s Brickell.

Silicon Valley Bank, a subsidiary of SVB Financial Group, will move into 8,600 square feet on the 15th floor at the office building at 1441 Brickell Avenue in the second quarter of next year, according to a news release from the owner’s broker. Investment manager MFS Investment Management will move into 2,300 square feet, also on the 15th floor, by year-end.

In total, 19,000 square feet of new leases were signed, although the other tenants were not identified.

Gordon Messinger of CBRE represented Millennium Partners. Jenny Turner and Bob Orban of Cresa Partners represented Silicon Valley Bank. Carlyle Coffin of Newmark represented MFS Investment.

Millennium Partners completed the 70-story Four Seasons in 2003, with a 221-key hotel and 84 condo-hotel units on the lower floors and 186 condos on floors 40 to 70, according to the developer’s website and property records.

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Lincoln Road

Lincoln Road Adds New York Retail Tenants

COMMERCIAL OBSERVER – August 18, 2022 BY JEFF OSTROWSKI

New York fashion merchants Unfashional and Callista Couture will open stores on Lincoln Road in Miami Beach, commercial real estate firm Terranova Corp. said Thursday.

Unfashional, which operates in New York’s Soho and Meatpacking District, will take 1,558 square feet at 817 Lincoln Road and an additional 1,675 square feet at 815 Lincoln Road as a pop-up space, Terranova said.

Callista Couture, a purveyor of European clothes and accessories, will occupy 1,215 square feet at 612 Lincoln Road.

Miami Beach-based Terranova owns 137,411 square feet on Lincoln Road. The company is the largest owner of retail space along the popular pedestrian mall.

Other tenants on the eight-block pedestrian stretch of Lincoln Road include Apple, Zara, Sephora, Anthropologie, Armani Exchange and TUMI.

“With New York retailers now making their mark in Miami, we are witnessing an evolution in the ongoing migration, and those individuals and corporations who have relocated are now surrounded by the retail and restaurants they love,” Stephen Bittel, founder and chairman of Terranova, said in a statement.

Lincoln Road has experienced ups and downs in recent years. Asking rent once reached $350 a square foot along the promenade, but prices have since fallen. Earlier this year, Vornado Realty Trust sold a retail complex at the edge of the road after defaulting on a loan. Meanwhile, a Cheesecake Factory restaurant is scheduled to open.

Lyle Stern, president of the Lincoln Road Business Improvement District, welcomed Unfashional and Callista Couture as unique additions to the road’s tenant mix.

“Our occupancy is quite good, and our vacancy is quite low,” Stern told Commercial Observer.

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CRE_StephenBittel

What To Expect For The Second Half Of 2022 In Commercial Real Estate With Stephen Bittel

KHTS – August 17, 2022

With the recent announcement by the Federal Reserve of a 75 basis point raise in its benchmark interest rates, yet another variable has been thrown into the mix when it comes to trying to decipher what the future holds for commercial real estate. Although the hope for everyone is that this increase will work to cool the economy and bring down inflation, supply chain issues, the war in Ukraine, continued disruptions as a result of the Covid-19 pandemic, and oligopolies taking advantage of the situation continue to make the fight against inflation an uphill battle. As rumblings of a potential recession grow louder, financial uncertainty will continue to change the actions of consumers and lenders alike, leaving markets in flux and forcing us to brace for the unknown.

In the face of this disquietude, the best thing business owners and investors can do is play close attention to the shifting trends in their respective markets. For Stephen Bittel, founder and chairman of the real estate and private equity investment firm Terranova Corporation, changes to the commercial real estate landscape can still present significant opportunities for those able to take advantage of them. Bittel has over 40 years of experience in commercial real estate, starting his company with a single commercial property investment and growing it to an institution in Southern Florida that has served as the exclusive agent for more than $5 billion worth of commercial projects.

Over the course of his four decade career Bittel and his company have navigated their way through a number of economic downturns. Below, we explore with him the direction the commercial real estate market appears to be heading for the rest of the year, as well as the potential larger implications these trends could have on the sector at large.

Federal interest rates will put more pressure on the industry

According to the Federal Open Market Committee, high inflation in combination with job gains, broad price pressures and the Russian invasion of Ukraine were behind its decision to again raise interest rates. While this most recent hike should not have come as much of a shock to those within the commercial real estate sector, it has created additional pressure on a market that has already seen a pronounced decline in transaction volume in the first and second quarter of 2022. Additionally, the inability of those who invest in commercial real estate to accurately determine market value of assets due to uncertainty around debt capital markets will induce caution amongst many investors, choosing to hold back on potential investment opportunities. Until there is more perceived stability, this trend will likely continue.

Bittel told the commercial real estate news website GlobeSt.com that a bid/ask gap is another factor behind the slowdown in sales activities. According to him, there is an impasse due to sellers wanting the price for the asset they were able to get last year while buyers are expecting a discount due to the higher cost of debt capital. When it comes to development, the higher cost of debt will further hurt development deals that were already facing higher construction costs due to supply shortages.

Banks are pulling back on loan issuing

Coupled with the problems to the market caused by interest rate increases is banks seeking to conserve capital and limit risk by refraining from issuing loans. Stricter credit requirements are seeing a smaller percentage of business owners eligible for loans, preventing progress and putting many commercial real estate investors without available  capital in a tough spot. According to the data firm Trepp Inc., in the first quarter of 2022 banks issued $29 billion of securities backed by real estate loans, compared with only $20.6 billion in the second quarter.

Trepp also noted that after the large increase reported in the consumer price index by the Labor Department in June sentiments about the market have only gotten worse, with banks issuing less than half of the volume of collateralized-loan obligations that month when compared with February, down from $8.9 billion to $3.6 billion.

The “mass exodus” from urban centers has slowed

Commercial real estate trends tend to follow residential by 12 to 18 months, so it is important to take note of the state of the multi- and single-family markets when trying to anticipate what lies ahead. Multi-family sectors have recovered for the most part from the Covid-19 pandemic, reaching 4.6 percent vacancy rates in the third quarter of 2021 according to a market report assembled by Lee & Associates. Large cities such as Los Angeles and New York have similarly seen vacancies for multi-family properties return to pre-pandemic levels, and as the price of single-family homes continue to grow higher there has been an increased demand for larger rental units in urban centers that have the ability to accommodate remote work.

Conversely, sales of newly built homes have started to taper off due to rising mortgage rates. Freddie Mac has reported the average fixed rate mortgage has risen over two percent since the beginning of the year, from 3.1 percent to 5.23 percent. As rates and prices continue to climb, the rental market has seen a boost by those now priced out of home ownership at the moment.

Industrial assets are stars

In a presentation to Florida International University’s business real estate students, Bittel told them that the Covid-19 pandemic has flipped the commercial real estate market on its head. What was once an advantageous investment category today has minimal value, and categories that nobody saw coming have become hot commodities. Just as multi-family developments in key markets across the country are proving to be advantageous for institutional investors, so too are industrial assets according to Bittel. With the boom of online retail that is showing no signs of slowing, e-commerce distribution centers are doing very well, and self-storage facilities are in high demand as the pandemic caused many to rethink their current living situations.

The retail market is facing many challenges

However, while distribution centers for e-commerce may be seeing a boom, retail is suffering from the decrease in demand due to newly created online shopping habits as a result of the Covid-19 pandemic. Supply disruptions have not helped the matter, nor have rising labor costs or increased expenses as a result of inflation. Combined, these factors have led to a decrease in foot traffic that has made the retail market higher risk.

According to Bittel, it is retailers that were able to evolve that have been able to succeed in the face of these difficult conditions. Although as an investor he believes retail properties are messy, he told the students at Florida International University that suburban malls with supermarket anchors did well throughout the pandemic, and restaurants that adapted quickly to implement takeout and delivery options are often now making more money than prior to Covid-19 as a result.

Plan accordingly

Understanding the ebbs and flows of the market has rarely been as difficult as it is right now, but for those who were able to prepare for inflation and a potential recession don’t have to spell doom and gloom. In the fourth quarter of 2021 Bittel’s Terranova Corporation refinanced roughly $150 million of its properties, and according to Bittel the company has since been putting its balance sheet to work. The company has actively focused on making opportunistic acquisitions of distressed debt and equity, and business owners and investors should take a leaf out of Bittel’s book by keeping a close watch on capital markets.

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