Clockwise from top left: Miami’s Overtown neighborhood (Credit: CreativeCommons user Pietro), a rendering of Miami Worldcenter, a historic Laundromat sign in Overtown (Credit: Phillip Pessar), and a rendering of All Aboard Florida’s MiamiCentral station
Neighborhood Dive is a new monthly TRD feature that looks at neighborhoods in South Florida that are hotbeds of new development.
A buying binge led by Miami Beach-based developer Michael Simkins is generating seven-figure deals along a four block stretch of Overtown, Miami’s historically African-American neighborhood.
“Prices have increased dramatically,” Simkins told The Real Deal of the area, which is one of the city’s poorest communities. “When we started purchasing land, it was in the $20 a square foot range. It is now approaching $150 a square foot.”
Overtown runs from Northwest Fifth Street to 20th Street and is bounded on the west by the Miami River and State Road 836 and on the east by the Florida East Coast Railway tracks on Northwest First Avenue. In addition to Simkins, a handful of other buyers have proven to be increasingly bullish on apartment buildings and vacant parcels between Northwest Eighth and 12th streets and Northwest First and Third avenues.
The properties that have been snapped up are in close proximity to three grand-scale, mixed-use developments: All Aboard Florida’s MiamiCentral, Miami Worldcenter, and Simkin’s proposed Miami Innovation Tower, the signature piece to a technology district he wants to develop in Park West, the neighborhood directly abutting Overtown.
“The area we are focused on was the main commercial corridor for historic Overtown,” Simkins said. “The Overtown of the 1940s was a thriving place. The neighborhood has soul and character.”
During the Jim Crow era, the neighborhood was known as “Colored Town” and was a bustling business and entertainment center for Miami’s black community. It’s where entertainers like Count Basie, Cab Calloway and Josephine Baker stayed when they performed in Miami. However, the construction of I-95 through portions of Overtown decimated the neighborhood’s prosperity. Riots in the 1980s further eroded Overtown.
Today, the annual median household income for Overtown residents is $17,450, according to recent U.S. Census data.
Nevertheless, investors like Simkins have recently paid top dollar for Overtown properties. In mid-October, he closed an all-cash $2 million deal there for two apartment buildings with a combined 28 units and three commercial units. Simkins paid $116 per square foot for the 16,300-square-foot assemblage .
“These buildings will be renovated with our own dollars and continue as rentals,” Simkins said. “The people living there will hopefully continue living there, as well as other Overtown residents.”
He said market-rate rent in Overtown for a one-bedroom unit is $700, compared to $1,963 in Miami, and a two-bedroom unit is $850, compared to $2,911 in Miami, according to RentJungle.com.
That deal marks the third seven-figure Overtown property transaction involving Simkins in the past 10 months. In February, Simkins paid $94 a square foot for three vacant lots totaling 13,750 square feet . In June, he bought two vacant parcels totalling 15,000 square feet on Northwest 11th Street and Northwest Second Avenue for $92 a square foot.
Simkins is not alone. In January, Bahia Apartments LLC, a company registered to Horacio Segal and Marcela Segal, a North Miami-based real estate broker, paid $3.5 million for three apartment buildings with a combined 26,887 square feet. That’s $130 a square foot. According to Miami-Dade records, Bahia obtained a $2.4 million loan from Ocean Bank that it used toward the purchase.
In July, an entity called Beacon 87 Member Inc. purchased a 75-unit apartment building for $3.68 million — about $107 a square foot. According to state incorporation records, Beacon’s manager is Joanne Rosen, a partner in New York City-based real estate investment and development firm, Beacon Advisors, LLC. The seller DJ Acquisitions 1136 paid $2.6 million for the property in May 2014.
The more recent prices are a far cry from what Simkins paid only a year ago. The developer purchased a 24-unit apartment complex at 1160 Northwest Second Avenue for $330,000 in November 2014. Today, the property has a market value of $1.6 million, according to the Miami-Dade County Property Appraiser’s website. He also paid $555,000 for a two-floor retail building at 937 Northwest Third Avenue in October 2014.
The same year, Simkins purchased another 22 lots between Northwest Ninth and Tenth streets and Northwest Second Avenue and Second Court for a combined $14.1 million. Aside from the city of Miami Park West/Overtown Community Redevelopment Agency, he believes he has the largest portfolio in Overtown.
“It’s an unprecedented level of investment,” he said. “We are committed to really reviving and redeveloping Overtown into what it has always been.”
But Overtown still faces challenges, according to Emile Farah, chief executive of the Farah Group of Companies. Farah assisted in brokering Simkin’s most recent deal. “Whoever wanted to buy it had to come with cash,” Farah said. “It’s difficult to get financing for Overtown properties.”
Banks will only lend money based on the rental income a building produces and not on the property’s appraisal price, he said. “In that area, rents are averaging $600 and are starting to go up to $700 a month,” Farah said. “The income approach doesn’t justify making a deal for most buyers.”
Farah said the area remains a tough sell, despite All Aboard Florida and other major projects. But we was optimistic about the impact of Simkins’ acquisitions. The developer “has a vision for the future of the neighborhood,” he said.
Source: The Real Deal