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Is Retail The New Darling Of The CRE Industry?

A recent panel discussion at ICSC Las Vegas covered the state of the capital markets and during a morning session, where industry experts provided insights into the current situation, shedding light on the challenges and opportunities facing the market. Hessam Nadji, the president and CEO of Marcus & Millichap, kicked off the discussion by acknowledging the significant disruption caused by the movement of interest rates.

Nadji compared the situation to the financial crisis of 2008 and 2009, emphasizing that while the financial system was not on the brink of collapse this time, the impact on valuation and transaction velocity was similar. Sellers, Nadji noted, were hesitant to enter the market unless compelled by urgent circumstances. However, any products that did hit the market were attracting multiple offers, despite the tight financing conditions, with the intention of refinancing later, he said. Nadji also pointed out that retail, surprisingly, emerged as the new darling of the industry, outperforming other property types.

Glenn Rufrano, ICSC Chair and former CEO of VEREIT, moderator of the panel, expressed relief that the industry had moved away from the bottom of the economic downturn. This sentiment was echoed by other participants who acknowledged the progress made but also emphasized the need for more activity. Alex Nyhan, CEO of First Washington Realty and ICSC Trustee, for example, noted the changing composition of buyers for grocery-anchored shopping centers.

Nyhan explained that “caution had become prevalent in the market,” prompting a “wait for the debt market to stabilize approach” before putting more properties up for sale. However, he mentioned that demand from life companies remains strong.

Rufrano asked about the dynamics of buyers and sellers in the market where panelist Devin Murphy, president of Phillips, Edison & Co., responded that there was still considerable activity in the market. According to Murphy, while overall activity had declined, there were still opportunities to acquire assets. For example, Murphy’s company had successfully acquired four grocery-anchored centers in the first quarter, despite the challenging environment. The sellers encountered currently are primarily institutional investors motivated to sell due to the denominator effect, which aimed to rebalance their portfolios. Additionally, individual holders who were not willing to inject more equity into their assets are also ones who are seeking to sell. Despite the decline in overall activity, Murphy revealed that his company had managed to purchase nearly $100 million worth of assets in Q1.

Rufrano acknowledged the importance of understanding the motivations behind buyer and seller decisions. He expressed optimism, expecting to see more activity before the end of the year, indicating potential progress in the capital markets.

 

Source:  GlobeSt.

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Former Low-Income South Beach Apartments Hit Market As Possible Hotel Conversion

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Jamestown is looking to cut off a slice of its Collins Avenue portfolio by listing a historic South Beach apartment building for sale.

The Atlanta-based real estate investment firm, led by CEO and principal Matt Bronfman, retained Marcus & Millichap to market 727 Collins Apartments at 727 Collins Avenue in Miami Beach, according to an online listing. Jamestown and Marcus & Millichap’s Joseph Thomas, who is leading the marketing efforts, declined comment.

After publication, Thomas said the price guidance is $15 million. In 2015, a Jamestown affiliate paid $12.3 million for the four-story Art Deco building completed in 1930, records show.

The 25-unit property operated as a low-income, housing tax-credit apartment building until April when the restrictions expired, the listing states. As a result, potential buyers will be able to convert 727 Collins Apartments into a limited-service hotel or a short-term rental building, according to Marcus & Millichap. The 23,238-square-foot building, a mix of one- and two-bedroom apartments, also has a ground-floor retail store.

 

Source:  The Real Deal

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Miami Is A Hotspot For Retail Development

Miami is one of the top markets in the country for retail development, according to a report from Marcus & Millichap. The firm’s second quarter 2021 outlook report forecasts nearly 1.5 million square feet of retail space will deliver into the market this year, the highest level since 2017.

Mall redevelopment and mixed-use projects are driving the development activity, and much of it wrapped up in three projects. One of the largest projects in the market is the Miami Worldcenter, a mixed-use development with residential hospitality and 300,000 square feet of retail space. In Miami Beach, Bal Harbour Shops is adding 350,000 square feet, which is scheduled for completion in 2023. Finally, the Aventura Mall is in the middle of a 215,000-square-foot expansion, which is expected to hit the market later this year.

Last year, the pandemic hampered retail development. According to the report, retail deliveries were half of what they were for the previous five-year average and the lowest level in a calendar year in more than a decade. Still, retail projects continued to come to market. Miami Beach added nearly 100,000 square feet of space, and South Dade added more than 71,000 square feet of space. This year, developers will make up for the lost time, delivering 1 million square feet more year-over-year.

Developers are clearly bullish on the Miami retail sector, but the market has certainly seen an impact from the pandemic. This year, the report expects vacancy rate to climb 80 basis points to 5.2%, the highest rate since 2010. The slowed leasing activity along with increased retail development will also drag asking rents down 1.3% this year to $31.83 per square foot. In 2020, the vacancy rate was unchanged, and asking rents fell 3.1%.

Miami’s downtown area is experiencing a renaissance that his helping to fuel development activity and growth. The market is attracting out-of-state investment. Earlier this year, New York-based developer Time Century Holdings entered the Miami market to transform the Metro Mall into a luxury jewelry center. The developer secured a $23.6 million construction loan for the $50 million project through City National Bank of Florida.

 

Source:  GlobeSt.

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