Terranova Corporation, one of South Florida’s premier commercial real estate firms, has completed a deal with the Cheesecake Factory for a 20-year lease on Miami Beach’s Lincoln Road. According to Terranova chairman Stephen Bittel, the California-based company plans to open in the 7,000-square-foot corner space this fall and is currently in the process of securing a building permit for an extensive interior buildout.
The space was previously occupied by Sushi Samba, which closed in December of 2019 just prior to the beginning of the coronavirus pandemic.
Although the Cheesecake Factory will be making internal renovations to match its stylized brand it has managed to snag a second-generation restaurant space with built out kitchens and grease traps which have become a highly-sought feature in the past year.
An affiliate of Bittel’s Terranova owns the building with Morgan Stanley’s Prime Property Fund. An affiliate of the commercial real estate firm purchased the property with two addresses at 600 Lincoln Road and 1630 Pennsylvania Avenue in 2014 for $108.6 million. It was originally built in 1931.
The Cheesecake Factory, known for its namesake cheesecakes and expansive food menu, also intends to lease outdoor space from the city of Miami Beach in the front of the space for outdoor dining––an increasingly popular feature for restaurants in light of the coronavirus pandemic. The restaurant intends to hire as many as 200 employees, providing an additional boost to the local economy.
Lincoln Road has been one of the most popular destinations for visitors to the South Beach area and residents alike since the road was first closed to traffic in the 1960’s. Terranova has been involved in the urban retail center since 2011 when it closed on a landmark three-building deal for the acquisition of 741 Lincoln Road, 600 Lincoln Road, and 723 North Lincoln Lane.
By 2014 the firm had amassed six properties at the cost of $191 million and completed one of the largest deals in South Florida history when it sold them for $342 million.
Although lockdowns and other societal shifts caused by the coronavirus pandemic caused many to question the long-term outlook for urban areas, the recent surge in investment sales of properties for the area indicate a positive position for the most part. An office property at 1688 Meridian Avenue, which is across the street from the Macy’s off Lincoln Road, recently sold for $49.5 million, and a renovated office at 1674 Meridian Avenue sold for $26.5 million, both previously owned by another Terranova affiliate.
In recent years, a slowdown in sales caused by the closing of the Miami Beach Convention Center for renovations contributed to significant vacancies for Lincoln Road, but Bittel has said that retail leasing is currently up on the stretch. Although 2020 hit the restaurant industry particularly hard, according to Bittel Terranova’s restaurant space leasing is at 100 percent and rates are higher than they were in the years before the pandemic, and Lincoln Road isn’t the only area to see its restaurants thrive.
In Coral Gables over 70 restaurants acquired permits from the city for outdoor dining in 2021, with the historic Miracle Mile becoming a hotspot of its own for dining at all times of the day thanks to its extensive outdoor seating offerings.
Restaurant sales in 2021 for most of Terranova’s tenants actually exceeded what they earned prior to the pandemic in 2019, as they came out the other side with stronger business models thanks to adaptations such as to-go menus, delivery services and additional seating space thanks to expanding operations outdoors.
However, while much of the restaurant industry has managed to take the necessary changes in stride, retailers that have failed to make the necessary adjustments are struggling.
Older big box retailers in particular appear to have had difficulty keeping up with the acceleration of trends caused by the coronavirus pandemic, with Bittel citing Kmart as a prime example.
Once operating around 2,400 stores at its peak, the brand just announced plans to shutter two more stores in the United States, leaving only four locations nationally today. The chain failed to keep up with retailers such as Walmart and Target who have worked to increase their online presence and were therefore able to withstand the brunt of the pandemic.
Despite the continued uncertainties retailers will face in the coming year, Bittel said that already real estate transactions in 2021/2022 have exceeded typical activity, with Terranova completing over a dozen capital market transactions in the last four months alone to the tune of over $230 million.
This is likely thanks in part to the growth of the South Florida area as a whole. Bittel identified recently that during the pandemic a number of top-level executives made the decision to move to the Sunshine State, and now the second level of senior leadership will likely follow suit to get in closer proximity to those who preceded them.
Additionally, an increasing number of tech companies have been looking to Miami and its municipalities as locations for headquarters, with Blockchain.com announcing the relocation of its United States headquarters from New York City to Wynwood last year and Picsart opening one in Miami Beach.
All of these changes have certainly kept those in the South Florida commercial real estate market busy. For Bittel’s Terranova, this has included the closing of a $40 million refinancing deal for the Palm Plaza shopping center near Miami Lakes. The 90,000-square-foot property is at a leasing capacity of 95 percent, with tenants such as Sketchers, Starbucks, MDNow, First Watch and an anchor tenant of CVS-owned pharmacy chain Navarro Discount Pharmacy.
The property is also currently in the midst of a $1.3 million renovation, as a new parking lot and landscaping mark a few of the many new changes for what is the property’s first renovation in nearly twenty years. The deal was made with the Puerto Rican financial services company Banco Popular.
The Miami-based company also recently secured a $55 million refinance of its Miracle Mile portfolio, consolidating and replacing loans from three lenders on 14 properties including 220 Miracle Mile, 300 Miracle Mile, and 253 Miracle Mile. Additionally, just one month earlier Terranova refinanced its Marshalls/Lincoln Eatery building in Miami Beach with a $23 million loan, with the financing for all properties provided by City National Bank.
Terranova also recently completed one of the largest investment sales to occur on 41st Street in Miami Beach with the sale of its own headquarters location at 810 Arthur Godfrey Road. Originally purchased in 2002 for $4.3 million, the property and 52,000-square-foot building that sits on it was sold to the Fifteen Group for $22 million, with the Miami-based company planning to renovate and lease it to wealth management and financial firms as well as family offices. Bittel says that Terranova will remain on the top floor of the property in 2022 before settling in either Miami Beach or Coral Gables.