A 420 percent profit on an investment made less than five years ago persuaded the owner of South Beach landmark David’s Cafe to shut its doors earlier this year, a broker involved in the sale told the Daily Business Review.
The Gonzalez family, which operated the restaurant since 1977, decided to pack up the Cuban sandwich presses when New York investor Gideon Asset Management offered $9.89 million for the restaurant at 1058 Collins Ave. The Gonzalezes paid $1.9 million for the real estate in 2009, exercising a purchasing option included in a 2001 lease agreement with the previous owner, Nash Investment Co.
“David’s Cafe has been a wonderful cafe and an institution on the beach for a long time, and it’s sad to see it go, but the value of the real estate to investors was just incredible,” said Jonathan Carter, senior director at Miami Beach-based Comras Co. “It’s a hard corner in Collins with a freestanding facility for retail, and you just don’t have that come along.”
Michael Comras, president of the retail-focused brokerage, participated in the transaction on the seller’s side. Michael Silverman, a senior associate with the same company, represented the buyer.
Carter said there are no immediate plans to redevelop the property, which sold for $1,140 per square foot. The building “was mostly sold on the basis of what the future rents would be for 8,688 square feet of retail space,” he said.
Investors are focusing on buying up properties as a speculative play on a possible “astronomical” rent increase on a strip of Miami Beach’s Collins Avenue between Ninth and 15th streets, Carter said.
“A lot of developers purchased hotels or purchased land, and there’s a lot of speculation as to what might be going on in that area and what could happen to retail,” he said. “You’ve seen rents rise between Fifth and Ninth in Collins, and the question is how far down the street it carries.”
Some of the most eye-popping recent retail transactions in South Florida have taken place this year on Miami Beach’s Lincoln Road, where a triple-net lease can exceed $300 per square foot, Carter said. The South of Fifth neighborhood also has seen investors plop down record sums for both residential and commercial lots. As the effects of those transactions ripple through the real estate market, speculation based on projections of similarly high rent spikes is driving investors to splashy purchases.
“Demand exceeds supply, and it’s not just by a little bit, it’s by a mile,” Carter said.