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Here’s What Some Tenants Are Paying In The Miami Design District

Over the past decade, Craig Robins’ Dacra and his well-heeled partners have spearheaded the transformation of the once-gritty Miami Design District into a luxury shopping destination and cultural hub.

Last February, the ownership group achieved a major milestone when it secured a 10-year, $500 million refinancing from Bank of America for a 15-building, 497,000-square-foot portion of the Miami Design District known as Oak Plaza. But just weeks later, the coronavirus pandemic changed everything.

The properties were closed from mid-March to mid-May due to coronavirus restrictions, and again for 10 days in June “due to civil unrest,” although no damage occurred, according to loan documents. The landlord provided millions of dollars in rent abatements to tenants, and also secured loan modifications to defer three months of debt service.

While the pandemic has put other projects in the Miami Design District under severe financial pressure, observers expect the Oak Plaza properties to come back strong.

“Oak Plaza is well positioned to return to its strong pre-pandemic performance given the high-quality, luxury nature of the retail tenancy and targeted clientele coupled with experienced long-term institutional sponsorship,” a recent DBRS Morningstar report observed. “However, the property is likely to continue to experience stress in the short and medium term until the pandemic fully abates, the economy recovers and international travel resumes.”

As of September, the Oak Plaza properties were 88.5 percent occupied by 86 tenants. Overall, tenants have an average underwritten annual rent of $78 per square foot, with retailers typically paying triple digits while showroom tenants pay somewhat less.

By total rent paid, Hermès is the top tenant in the portfolio, paying $113 per square foot for a 13,500-square-foot building on Northeast 39th Street, in the heart of the district. The second-priciest lease goes to jeweler Harry Winston, which pays $209 per square foot for 7,200 square feet in the Palm Court building across the street from Hermès.

By square footage, the largest leases are for luxury furniture retailers Holly Hunt and Fendi Casa/Luxury Living, each paying about $50 per square foot for more than 20,000 square feet in showroom space.

Thirteen of the tenants, including Christian Dior (11,000 square feet), Fendi, Louis Vuitton (10,000 square feet), and Tiffany & Co. (5,000 square feet), are considered affiliates of the landlord because their parent company, French conglomerate LVMH Moët Hennessy Louis Vuitton, owns a stake in the partnership via the investment firm L Catterton.

In 2019, the properties generated more than $231 million in sales, or more than $1,000 per square foot, among tenants reporting sales. Since the start of the pandemic, the landlord has provided $4.7 million worth of rent deferrals to 35 tenants and $4.9 million in rent abatements to 27 tenants, according to DBRS Morningstar. Eight tenants totaling nearly 30,000 square feet have moved out since March.


Source:  The Real DealClick here to read more about this story.

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Retail Landlords Are Creating A Blacklist Of Tenants That Aren’t Paying Rent

While mom-and-pop retailers may be feeling the economic pain of coronavirus the hardest, some bigger companies have decided to forgo rent payments as well. But landlords aren’t buying it.

Owners of malls and shopping centers have been putting together a “blacklist” of financially stable tenants that haven’t met their April rent obligations, the Wall Street Journal reported.

“We think that it’s their duty to pay April rent,” chief executive officer of Kimco Realty CEO Conor Flynn told the Journal. “The customer base is going to recognize who the bad actors are.”

According to Marcus & Millichap, April rent collection has ranged from just 10 to 25 percent for mall owners with higher concentrations of nonessential tenants, to 50 to 60 percent for landlords with “essential” tenants such as grocery stores and pharmacies.

Large retail tenants that have failed to pay rent in full include Burlington Stores, Petco Animal Supplies, LVMH Moët Hennessy Louis Vuitton, Victoria’s Secret and Staples.

Staples, which has been able to keep many stores open in areas where it is considered essential, has told landlords that it will not pay rent because of a drop in sales. Dick’s will not pay rent at stores that were closed due to government orders, but will continue to pay rent for stores that it closed voluntarily.

While some mall owners have indicated that they plan to declare non-paying tenants in default, smaller landlords may be more hesitant to confront big tenants over rent payments. Retailers appear to recognize that they have the upper hand, but things could get messy.

“The retailers think they have leverage here and they’re trying to use it,” Green Street Advisors analyst Vince Tibone said. “I see it potentially becoming a fight and going into litigation.”


Source:  The Real Deal

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