Disruptive Real Estate
After a pandemic-related work stoppage, lawsuits and contractor claims briefly crippled progress at Esplanade at Aventura, construction and leasing at the office-and-retail center is back on track. But whether the mixed-use project will stay in the hands of developer Seritage Growth Properties remains to be seen.
The New York-based real estate firm, led by President and CEO Andrea Olshan, unveiled a plan that could involve selling all of its assets and returning the proceeds to shareholders, according to a proxy filing released this month.
The company has already obtained approval from its biggest shareholder, former Seritage Chairman Eddie Lampert. Lampert, who owns 29 percent of Seritage’s outstanding Class A shares, agreed to vote for the plan, which requires approval from two-thirds of the company’s shareholders.
While Seritage executives are mum about which properties could hit the market, local real estate experts said a potential sale of Esplanade at Aventura would attract a horde of institutional office and retail buyers. They could end up spending about $1,000 a square foot for the 215,000-square-foot new development. That would equate to $215 million.
The open-air, three-level mixed-use project is being built on the former Sears site within Aventura Mall.
“If this site were to hit the market, the response would be huge,” said Stefano Santoro with Disruptive Real Estate. “There would be strong demand for a mixed-use vertical development with a diverse tenant mix like this.”
To be sure, nothing has been determined about any Seritage properties, especially Esplanade at Aventura, a company representative said. In a statement, Seritage said that about 90 percent of the project’s shell work has been completed and that about 63 percent of Esplanade is pre-leased. Seritage declined to disclose an anticipated completion date.
Formed in 2015 as a real estate spinoff of the troubled Sears retail chain, Seritage has focused on redeveloping properties that previously housed Sears and Kmart stores. The company owns properties totaling more than 26.5 million square feet across 41 states, Seritage’s website states.
Yet, Seritage has experienced financial difficulties since the onset of the pandemic. It announced in March that the company would transition from a real estate investment trust to a C corporation, and that Lampert would step down as Seritage’s top executive.
Esplanade at Aventura has gone through its own pandemic-fueled setbacks.
In May 2020, two months after Seritage halted construction, Mexican restaurant operator Carolo Holdings sued the company in an attempt to break its lease for a 13,114-square-foot space, seeking a refund of its $1.7 million cash deposit. The lawsuit alleged Seritage hit the brakes, fearing for its own financial strength and the economic viability of the project in the wake of the pandemic.
An onslaught of contractor claims for alleged nonpayment in 2020 also besieged Seritage. Last year, between January and March, Seritage paid $12.3 million to 11 contractors that had filed liens against the property, records show. Carolo also dismissed its lawsuit last year after reaching an undisclosed settlement with Seritage, court documents show. In addition, three contractors that sued Seritage in 2020 also dismissed their complaints upon receiving payment.
In March of last year, work on the project resumed, according to construction commencement notices. Leasing also picked up again. In March, CCRM Fertility signed a long-term lease for an 18,179-square-foot office space, according to a press release.
The fertility clinic joins co-working firm Industrious, which signed a 30,000-square-foot lease at Esplanade in 2019. Other tenants that signed before construction stopped include Pinstripes, JOEY, Su Japanese and Mixtura Market.
If Seritage decides it would sell Esplanade at Aventura, the property will be a “very well received asset,” said Douglas Mandel with Marcus & Millichap. “Aventura is one of the most affluent markets in the country, representing the high watermark for every asset class,” Mandel said. “Esplanade would be a highly, highly competitive deal, and the buyer for something like it would be global.”
Esplanade at Aventura would probably sell for a price close to the $216 million New York-based RPT Realty paid for the Shops at Mary Brickell Village, an open-air office-and-retail center in Miami’s Brickell neighborhood. The deal for Mary Brickell Village closed this month.
“If it is properly listed, Esplanade would fetch around $200 million,” Santoro said.