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11/4/02: South Florida Business Journal
Real estate fund scoops up inner-city shopping center
By: Darcie Lunsford
A decades-old shopping center on the outskirts of Miami-Dade County's working class
cities of Hialeah and Liberty City is not exactly prime real estate. Nor is it the
sure-hit buy that would typically attract institutional investors.
But New York-based UrbanAmerica has built a $200 million portfolio in eight states
using institutional cash to scoop up inner-city shopping centers and offices such
as this one.
In September, the group paid $11.5 million for the 500,000-square-foot Northside
Shopping Center on Northwest 79th Street.
In the 1960s, the center was once the bustling retail heart of the working-class
neighborhoods surrounding it, brokers said. These days, it is a hodge-podge of government
agencies, local merchants, medical offices and a flea market. With its worn paint
and pothole-filled parking lot, it is hardly the kind of class A asset you predict
financial titans Deutsche Bank, JPMorgan Chase, Citibank, FleetBoston Financial
and Prudential Financial to bankroll.
But these institutional investors, along with 11 others, did as part of a $101 million
capital infusion into UrbanAmerica, which owns and operates 3 million square feet
of inner-city-style assets across Florida, Georgia, Michigan, Missouri, Nevada,
New York and Washington, D.C.
UrbanAmerica CEO Richmond McCoy, a Lauderdale-by-the-Sea resident, owned a property
management firm and handled Teachers Insurance and Annuity Association and other
institutional investors before launching UrbanAmerica in 1998 with $10 million in
seed money from individual investors. "Our strategy for Northside [Shopping
Center] is to work with national retailers we have around the country that are interested
in serving the needs of inner-city shoppers," McCoy said. "That property
has been deprived of a long-term institutional strategy."
The center's roster already includes national retailers Walgreens, Payless ShoeSource
and Foot Locker. It is about 70 percent leased.
McCoy said his strategy is to spend as much as $5 million to refurbish a center
then leverage its relationship with other national and local chains to fill the
balance. The national chains that will be targeted are The Sports Authority, RadioShack,
Winn-Dixie and Home Depot. These retailers, McCoy said, want to tap the underserved
buying power of these low-to-moderate-income consumers.
But doing so is not always easy.
"One of the reasons national retailers don't go into these centers is because
there are a lot of local owners that are not necessarily long-term owners,"
McCoy said. "They want to be in a property that is safe and is going to maintain
its value. Our entire mission is to invest institutional equity in these ethnic
markets." UrbanAmerica also owns the Lakes Mall in Lauderdale Lakes, Dolphin
Plaza in Miami and a Dixie Highway office building in West Palm Beach leased to
governmental agencies. And UrbanAmerica has a $12.8 million contract to buy the
160,000-square-foot Prospect Place, also on Dixie Highway in West Palm Beach.
The building is leased to various Florida agencies, including the Labor Department.
Occupancy stands at 94 percent, McCoy said. UrbanAmerica's strategy for Northside
strays from the current trend to redevelop infill sites for denser, more modern
uses. Operating and leasing Northside as it is will likely be more challenging,
some experts say. "It's going to be challenging to change the perception,"
said Paco Diaz, VP of retail services at CB Richard Ellis in Miami.
Diaz has been a broker in the area for 20 years and said Northside has always teetered
on the edge, lacking the pull and appeal of newer properties.
Cushman ~Wakefield director Terry Salzman said Northside's age and design make it
"functionally obsolete." Salzman represented an out-of-state buyer that
unsuccessfully sought to snap up the center for its prime 49.5 acres of dirt. "There
are not a lot of major shopping opportunities in central Miami-Dade County,"
he said. "That was the one." Salzman said his group planned to raze the
existing center and rebuild a new one using the latest designs. That would help
spur new tenant and consumer interest, he said. "If they are not going to knock
it down and significantly consolidate the good tenants that are there, it is going
to be problematic," Salzman said.
UrbanAmerica is considering ways to develop a 4.5-acre slice of Northside's land,
but McCoy said the existing center just lacks good management, and a facelift will
kick start deals and a wave of new shoppers.
E-mail Real Estate Editor Darcie Lunsford at firstname.lastname@example.org.