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Distressed sales expected in South Florida amid rising interest rates, but this Collins Avenue building traded at a discount due to large vacancies, broker says
Distressed real estate investor ARC PE has snapped up a mixed-use building on Miami Beach’s once-popular Collins Avenue retail strip, paying 41 percent less than the property’s purchase price a decade ago.
Shire Realty sold the three-story building at 826 Collins Avenue for $5 million, according to a news release from the buyer’s broker.
Drew Kristol and Kirk Olson of Marcus & Millichap represented ARC PE. Allison Turk of Berkshire Hathaway/EWM Realty represented Shire.
Although the deal comes as unfavorable sales are expected amid rising interest rates, the Collins Avenue building did not trade at a discount due to debt issues. Records show Shire Realty did not take out a mortgage on the property.
Rather, the building’s high vacancy caused the price to drop, according to Kristol. Vacancies have increased on that stretch of Collins Avenue where retailers once abounded.
The 10,000-square-foot building a short walk from the beach consists of a ground-floor retail space, second-level offices and a third-floor apartment with three bedrooms and a rooftop deck with a pool. Only the apartment is rented. Retailer Levi’s vacated the space before Covid, and the office tenants have also left, Kristol said.
New York-based Shire Realty, led by Sami David and Rena Shulsky, had paid $8.5 million for the property in 2012, according to records. The building was fully leased at the time, said Kristol, who also worked on that deal.
ARC PE’s cash purchase also allowed for a discount as lending has become unreliable and led to failed deals in South Florida, Kristol said.
Miami Beach-based ARC PE, founded in 2004, is a private equity firm that invests nationally with a focus on value-add opportunities, according to its website. He plans to lease the Collins Avenue building and keep the apartment, which could also be a “great Airbnb-type rental,” said ARC PE’s David Gordon. He runs the company with John Olsen, both of whom are managing partners.
The deal comes on the heels of another ARC PE purchase of a Miami Beach building at a steep discount. The company bought the property at 624 Collins Avenue from foreclosure late last summer for $5 million, or 47 percent less than the seller’s purchase price in April, before tenant French Connection vacated the building, according to records and Gordon .
Although parts of Collins Avenue in Miami Beach have experienced retail vacancy, ARC PE sees the stretch between Ninth and Fifth streets in South Beach as ripe for revitalization and growth, Gordon said.
South Florida’s commercial real estate market is largely considered a haven compared to the rest of the US, thanks to an influx of population and companies. However, brokers and investors told The Real Deal that they expect some adverse sales in the coming months, especially from owners who can’t refinance maturing loans or have variable rate financing.
“We think there’s going to be more opportunity in the South Florida market” for smaller properties, such as apartment buildings priced under $10 million, Gordon said.
Inquiries are coming to ARC PE from banks that have already started foreclosures or have foreclosed properties and are now looking to sell, he said.
“A bank can only have a certain amount of problem assets on its books.”
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