If it were up to Miami developer Jeff Berkowitz, he would never sell the retail centers he builds and manages, including the relatively new Fifth & Alton South Beach.
“I am not typically a seller,” said Berkowitz, president and founder of Berkowitz Development Group. “It was never [my idea] to sell the properties.”
But his partners, car dealership moguls Alan and Robert Potamkin, don’t see eye-to-eye with Berkowitz. The entrepreneurial brothers, who are interested in maximizing their profits, want to sell the partnership’s two retail centers now that institutional buyers are salivating over quality retail properties in Miami-Dade County.
Both properties hit the market within the last two weeks. CBRE is marketing the retail centers, which do not have an asking price.
The partners completed Fifth & Alton, a 180,000-square-foot vertical retail center with 1,080 parking spaces on Alton Road and Fifth Street in Miami Beach, in 2009. The fully occupied center has tenants like Best Buy, Ross Dress for Less, Staples and Publix.
The partnership’s other retail center is Kendall Village Center, with 252,600 square feet of retail and restaurant space and about 159,900 square feet of office space on Kendall Drive off Florida’s Turnpike. The Kendall project, completed in 1989, has tenants like Regal Cinemas, LA Fitness, Old Navy, Chuck E. Cheese and Pier 1 Imports.
Berkowitz manages and handles the leasing for both properties.
“These are mature, successful centers, and we thought that we would exit and take our profits at this particular time,” said Alan Potamkin, co-chair of Miami Lakes-based Potamkin Automotive.
Stephen Nostrand, Chief Executive Officer at Colliers International South Florida, who is not involved with the properties, said both retail centers could fetch a pretty hefty price. “Is it the right time for them to sell?” he asked rhetorically. “Let me tell you, I’ve been doing this for close to 40 years, and I’ve never seen so much potential investment money in the marketplace looking for good product.”
Nostrand said it is likely Berkowitz and the Potamkins will end up selling the properties at a 6 percent cap rate. The lower the cap rate, the higher the purchase price and the longer it will take the buyer to recover the investment. That kind of cap rate was common during the real estate boom that ended with a crash in 2007. As the economy recovers from one of its worst recessions in decades, institutional investors are descending on South Florida — like hardly ever before — to buy trophy retail properties.
“So he [Berkowitz] is going to get a lot of offers and good quality buyers to choose from,” Norstand said. “It is absolutely the right time to buy using cheap money. If you are an institution with a line of credit from a large bank, you can borrow money at less than 2 percent.” He said the difference between a 2 percent interest rate on borrowed money and the 6 percent cap rate, or, return on the investment, would give the buyer a 4 percent spread. “That is incredible,” he said. “All day long you would do that. Jeff has the right product and the right reputation at the right time.”
“I am hoping … a new group will pay the Potamkins a phenomenal return based upon the trophy nature of both of these iconic properties, while allowing my family to retain our ownership in the shopping centers and to continue to manage and to lease both properties,” Berkowitz said.
Nostrand said it may not be easy to fulfill Berkowitz’s wish. “The bases for a partnership are chemistry and trust,” he said. “So, unless it is somebody that Jeff knows well, then there’s going to be some hesitation from the buyers.” He said Berkowitz has the reputation of a good retail center operator and innovative developer, building successful vertical retail centers when many others have failed at that task.
But reputation wouldn’t be enough to get him a new partner, according to Nostrand, who is also a professor in the University of Miami’s graduate program for real estate development and urbanism. “It isn’t just about reputation when you partner with someone,” he said. “It is about relationships. You need to spend time with the person. You need to understand his culture, what’s his methodology of running these places, how does he treat tenants. There’s a lot behind the curtains that goes on when running a business.”
Source: DBR-by Paola Iuspa-Abbott
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