Old Miami Funding Proposal
For funding selected property acquisitions in the proposed Old Miami TM retail & entertainment district of downtown Miami, Fl
Prepared by: Mike Alaoui, Davidson Barlett and Carsten Werner, Old Miami Group LLC
The Old Miami Group is seeking a funding partner or partners to acquire and selectively renovate, reposition and lease up a portfolio of commercial and mixed use properties in the central business district of Miami, Florida. Our location analysis with attachments, funding request, return on investment objectives, and a sample property profile are included. We are seeking the guidance and experience you and your firm have to offer in achieving these objectives.
Executive Summary
The objective
To purchase, renovate, reposition and lease-up selected commercial properties in and near the Downtown Miami Historic District.
- Need # 1 – A financing partner for current and future acquisitions in the district.
- Need # 2 – Remodeling / construction funding for selected individual properties in which our interest might be acquired by joint venture, seller financing or leasehold.
- Need # 3 – Funding for property management & marketing (M&M) during lease-up.
The Opportunity
To build a unique and diverse portfolio of commercial and mixed use properties in the historic center of Downtown Miami, Florida, while utilizing in full the advantages of the downtown location and the many incentives offered to maximize financial returns and add long term value to the properties and the area.
- Objective #1 – To acquire at current market prices stabilized, cash flowing properties in the district needing little or nothing in the way of physical improvement, but which will realize increased occupancy and value from improved market conditions in the target area.
- Objective # 2 – To acquire, renovate, reposition and lease up vacant and under-utilized properties selected for their income potential, as well as the impact that their renovations will have on the renaissance of the district as a whole.
Funding requirements
A minimum credit line of US $50 million for phase I acquisitions, with an additional US $50 million available for phase II acquisition, renovations and marketing & management during lease-up.
Location Analysis
The Opportunity of Old Miami
- A recent large influx of new residents and office workers into the immediate vicinity of the downtown Miami trade area, with significant growth projected in the near and long term.
- Significant neglect, poor marketing and operational execution by current ownership of targeted properties.
- Superior location as Miami’s original shopping district in a vibrant urban setting with parking, rapid transit and other support infrastructure in place.
- Outstanding potential to increase targeted properties’ share of the local and tourist markets through a series of incentivized major and cosmetic improvements, combined with leasing efforts targeting more attractive local and national retail and restaurant tenants.
- The target area is a unique and distinctly urban district of early 20st century buildings within the central business district of Miami, Florida, literally the center of town for one of the world’s most dynamic cities, and the center of government and commerce for a population of 2.5 million people in Miami-Dade County. The district is surprisingly well preserved given the area’s immediate proximity to several dozen major residential and commercial buildings constructed during the past decade, which collectively represent several billion dollars of private investment, to say nothing of public works improvements underway in the area, which include a $1 billion dollar tunnel from downtown to the port of Miami now under construction. Downtown Miami will enjoy direct metrorail service from Miami international Airport (MIA) starting in the Spring of 2012, and this will coincide with the opening of the new Marlin’s major-league baseball stadium, a spectacular 37,000 seat retractable roof facility, located 2 miles west of the district.
Downtown Miami includes many attractions and well known entertainment venues, including the American Airlines Arena, home of the NBA’s Miami Heat, the Adrienne Arsch Center for the performing Arts, Bayside Marketplace and Marina, and Mary Brickell Village. The entirety of downtown Miami also includes the Brickell financial district to the south, as well as the performing arts district to the north, all of which are served by a 3.6 mile, 21 station automated metro mover (video on the side bar) system which allows convenient, easy and free access between the districts for downtown’s 200,000 workers, 70,000 residents and 25,000 students.
Funding Request
EQUITY SPLIT: PERCENTAGES TO BE NEGOTIATED BETWEEN OMG AND FUNDING PARTNER(S) ON PROPERTIES ACQUIRED THRU JOINT EFFORTS. ALL FUNDING SECURED BY FIRST MORTGAGES ON SUBJECT PROPERTIES, WITH PREFERRED RETURNS FOR FUNDING PARTNER(S), AND MARKETING AND MAINTENANCE FEES (M&M) TO OMG. AS AN ALTERNATIVE, LIMITED PARTNERSHIP ENTITIES TO FUND INDIVIDUAL PROPERTIES CAN BE UTILIZED.
PHASE I: US $50 MILLION FOR THE ACQUISITION OF TARGETED STABILIZED PROPERTIES.
PHASE II: US $50 MILLION FOR STRATEGIC, VALUE -ADD PROPERTY ACQUISITIONS, RENOVATION, REPOSITIONING AND M&M OF SAME DURING LEASE-UP.
In great abundance in Old Miami are smaller mixed use commercial properties with significant retail components. These, along with medium and larger office buildings, again with ground floor retail space, will comprise primarily the properties targeted for acquisition. We are attracted to both value add and stabilized opportunities; joint venture and sale/ leaseback opportunities will be considered;
- Acquisition Criteria for Retail: Purchased primarily on current income & immediate income potential if vacant; E. Flagler Street, N. Miami Avenue & Corner locations preferred.
- Acquisition Criteria for Office: Class B and C assets in areas in or near the Old Miami trade area, with vacancies in the 20-30 % range, purchased on current income.
- Acquisition Criteria for Residential: Preferred are newly constructed condominium units, studio, 1 & 2 Bedrooms, purchased individually or in bulk which offer at least a 10% return.
- Acquisition Criteria for Hospitality: Greater than 75 units, low or mid/high-rise, purchased on current income. Minimum C+ or better quality.
Return on investment
Investment Objectives
- A portfolio size of at least 25 properties within the Old Miami trade area, including at least one Flagler Street retail arcade.
- Average retail rental rates of $40 NNN for our properties within 5 years
- Average office rental rates of $30 per sq ft for our properties within 5 years
- Leveraged yield targets at 80% leverage, in high teens
- Equity multiple target with 2.0x’s.
SAMPLE PROPERTY PROFILE
The 1925 Ritz Hotel: For Sale
- Address: 134 East Flagler Street, Miami, FL 33131
- Size: 24,200 square feet on 5 stories
- Ground floor retail- 2 bays of approximately 2,200 square feet each
- Second floor office space finished but vacant
- Upper floors vacant and gutted, ready for build-out
- 2 Elevator shafts empty, estimated cost to replace $170,000
- City of Miami 40 year certification completed
- Asking Price: $1,950,000, $80.58 per square foot
- Current income from retail space: $110,000 per year
- Permitted uses: Retail, office space, live/work loft space, youth hostel, boutique hotel
