Citing Covid-19 shutdown, Williams Sonoma and Pottery Barn want out of Lincoln Road

September 28th, 8:45am September 25th, 11:54pm

Gregory Prosser

Commercial Real Estate

The Lincoln at 1691 Michigan Avenue

As retailers struggle amid the pandemic, Williams Sonoma and Pottery Barn are taking a new tack, attempting to terminate their lease by alleging a government “taking.”

Claiming government shutdowns and restrictions are hampering their connected stores off Lincoln Road in Miami Beach, they are suing their landlord to break the lease agreement that amounts to nearly $800,000 per year, according to a recently filed lawsuit.

Williams Sonoma, which also owns Pottery Barn, sued New York-based Clarion Partners affiliate CLPF – Lincoln this month in Miami-Dade Circuit Court. The home furnishings company wants to break a lease agreement for 43,000 square feet of ground-floor retail space of an office building with a garage at 1691 Michigan Avenue, known as The Lincoln.

A Clarion Partners spokesperson declined comment. A Williams Sonoma spokesperson and the local attorney representing the company did not respond to requests for comment.

Clarion’s affiliate paid $109.25 million in cash for the ground lease of The Lincoln in 2016, records show. The six-story building was completed in 2003 and is connected to a 709-space parking garage.

According to the complaint, Williams Sonoma notified Clarion’s affiliate on June 11 that it was terminating the lease under a clause that the agreement is voidable in the event of government actions that impair the stores’ business operations, also known as a “taking.”

Williams Sonoma claims the forced closures of non-essential businesses during the initial months of the pandemic, and then precautionary measures enacted after the shutdowns were lifted have created a significant impact on retail sales.

Williams Sonoma has been unable to operate its stores at The Lincoln in a manner consistent with the material purpose of its lease, the lawsuit states. “The market for in-person retail sales in Miami Beach has not recovered to the pre-pandemic levels upon which the lease was based and is unlikely to do so,” the complaint claims. “The described effects of COVID-19 have utterly and irreversibly frustrated the purpose of the parties’ lease agreement.”

On June 17, the Clarion affiliate rejected Williams Sonoma’s intention to exercise the “taking” clause, the lawsuit alleges. Meanwhile, the home furnishings retailer states it has not missed any rent payments since March when the shutdowns began.

Williams Sonoma signed the lease in 2015 and agreed to pay a monthly rate of $64,446 based upon “Lincoln Road’s status as a premier shopping destination with heavy pedestrian traffic. Lincoln Road is walking distance,” the lawsuit states. “The number of visitors and the unparalleled popularity of the area.. were the dispositive factors in plaintiff’s decision to agree to pay nearly $780,000 annually in rents.”

Lincoln Road’s commercial real estate has taken a big hit during the pandemic. Embattled co-working space firm WeWork moved out of its 40,000-square-foot Lincoln Road location in August just as its landlord sued the company for nearly $20 million in unpaid rent. Independent bookstore Books & Books permanently shuttered its 950 Lincoln Road space after being there more than 30 years. And Miami Beach real estate investor Sam Herzberg filed eviction lawsuits against Diesel USA and Perry Ellis’ Original Penguin.

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Sterling Building on Lincoln Road scores hotel approval

Rendering of hotel addition at Sterling Building (Credit: Kobi Karp Architecture & Interior Design)

Rendering of hotel addition at Sterling Building (Credit: Kobi Karp Architecture & Interior Design)

Sam Herzberg’s proposal to add a hotel to the 91-year-old Sterling Building on Lincoln Road cleared another hurdle.

The Miami Beach Planning Board last week approved the 144-room project by a 6-1 vote. The hotel is one of two currently in the planning stages for the popular pedestrian mall. City leaders and Lincoln Road business owners say the hotels will attract more visitors and supplement the new convention center hotel that will be built couple of blocks north of the Sterling Building.

Herzberg — along with Mel Schlesser, president of Jameck Development, which is proposing the other hotel — have been working with the city’s planning and zoning department for about a year on new regulations that would allow hotel uses on Lincoln Road. On Oct. 16, the city commission adopted an ordinance that eliminated parking requirements, increased the maximum height from 50 to 75 feet and reduced room sizes to 200 square feet for hotels proposed on Lincoln Road. In exchange, developers are being required to provide certain amenities such as ground-floor public spaces.

Under Herzberg’s proposal, a hotel would be built on top of the Sterling Building near the back of the property facing Lincoln Lane. The Sterling’s ground floor retail is home to Books & Books and a Penguin clothing store, and features a courtyard the bookstore uses as an outdoor seating area.

“We are taking the floor area ratio to its most logical location, which is closer to the existing garage located immediately north of the alley,” said project architect Kobi Karp. “We felt it was important to take the FAR and put it further away from Lincoln Road.”

Schlesser’s company owns the circa-1935 Lincoln Center complex at 690 Lincoln Road that entails a two-story retail building, a courtyard and a three-story office building. He’s proposing to add two stories to the office building and convert the entire structure into a hotel that will also have rooms as small as 200 square feet.

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Compiled by Keith Larsen

Co-working firm Spaces moving into 1111 Lincoln

Spaces also signed a lease at 801 Brickell earlier this month

Mark Dixon, CEO of IWG and 1111 Lincoln

Mark Dixon, CEO of IWG and 1111 Lincoln

The co-working firm Spaces just leased a lot of space in one of Miami Beach’s marquee properties.

Spaces leased 51,064 square feet at 1111 Lincoln, at the corner of Alton Road and Lincoln Road. The lease covers 55 percent of the total office space at the building.

The property is known for its large parking garage designed by Swiss architectural firm Herzog & de Meuron that some say resembles a “House of Cards.” The property has 94,488 square feet of office space and 51,839 square feet of retail and restaurant space.

Current tenants include Juvia, Ted Baker, Osklen, Shake Shack and Douglas Elliman, according to a press release. 1111 Lincoln is now 95 percent occupied, said Kevin Gonzalez, vice president at CBRE, in the release.

CBRE’s Diana Parker and Gonzalez represented the landlord. JLL’s Gavin Macphail represented Spaces in the lease negotiations.

Spaces is owned by IWG Plc, the parent company of Regus.

This is the second big lease Spaces has secured this month. It also signed a lease to occupy 49,000 square feet at 801 Brickell Avenue, a 28-story office building. In January, it announced a lease for nearly 43,000 square feet at One CocoWalk, an office building under construction in Coconut Grove.

Spaces currently has two other sites open in South Florida, in Wynwood and Fort Lauderdale, according to its website.

The flexible office space market is growing in South Florida, but experts have warned that the region doesn’t attract the blue-chip clients that are increasingly bolstering co-working firms across the country. Since 2015, WeWork has taken up more than a quarter million square feet of office space in Miami-Dade, close to five times the square footage Büro occupies at its five locations, which range from 10,000 to 20,000 square feet, according to a recent analysis by The Real Deal.

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Miami Beach may encourage taller hotel development on Lincoln Road

Miami Beach may encourage taller hotel development on Lincoln Road

Sam Herzberg wants to transform the Sterling Building into a 130-room Sterling Hotel

Lincoln Road (Credit: Facebook)

Real estate investor Sam Herzberg’s desire to turn the 91-year-old Sterling Building into a 130-room hotel has sparked interest in Miami Beach to encourage more hotels and smaller rooms on Lincoln Road.

Miami Beach commissioners Ricky Arriola, Joy Malakoff, and John Elizabeth Aleman on Wednesday largely backed a proposed law that would waive parking requirements for hotel additions attached to historic buildings on Lincoln Road between Alton Road and Washington Avenue. The proposed rule would also increase the height limit to 75 feet for hotel additions on Lincoln Road and allow new hotel units that are 200 square feet in size.

Under the current zoning that covers Lincoln Road, height is limited to 50 feet. Also, new hotel rooms built in Miami Beach must be at least 300 square feet under the current code.

At a Miami Beach Land Use and Development Committee meeting, Herzberg’s attorney, Michael “Micky” Marrero, said his client has wanted to transform the two-story, office-retail Sterling Building at 925 Lincoln Road into a 75-foot hotel and retail complex for years.

Unfortunately, Marrero claimed, the city’s parking impact fees and current minimum size requirements for hotel rooms haven’t made such a hotel financially possible on Lincoln Road.

Boutique hotel additions could help bring back mom-and-pop restaurants and shops to Lincoln Road, he said. Many of those smaller businesses have been replaced by big corporate stores, as Lincoln Road has become one of the most expensive retail centers in the United States, with rents averaging $300 per square foot.

“This is a way to spur development and keep the contributing elements [of Lincoln Road] without bringing more big-box stores,” Marrero said, adding that the developer intends to keep Books & Books in the Sterling Building, as well.

Architect Kobi Karp said he could build a hotel addition directly behind the existing Sterling Building, allowing Lincoln Lane to be used for vehicular traffic while Lincoln Road, which has been closed off from cars since the 1960s, will be used as the hotel’s “public amenity area.”

“We just add a tower in the back toward the end,” Karp told the three commissioners. “That’s the concept we are playing with right now.” It would be a tower as well as a courtyard in the back, Karp said.

Should the city approve the Lincoln Road hotel ordinance, Herzberg hopes to start construction by the end of 2020, Marrero said.

Arriola praised the proposed hotel as well as the proposed ordinance. “I think long-term, this puts us in a good position as we compete with other cities,” Arriola said. “I don’t want to miss this opportunity.”

Commissioner Malakoff said building a hotel addition behind The Sterling Hotel “makes a lot of sense.” She was also pleased that the proposed ordinance restricts hotels to the north side of Lincoln Road, which tend to abut commercial properties. The south side of Lincoln Road, on the other hand, tends to abut residential properties.

But Malakoff opposes hotels using rooftop additions for parties, especially if they’re near SoundScape Park where movies and classical music concerts are often projected onto the wall of the New World Symphony Building. “I don’t want to hear rap music coming from the rooftop,” Malakoff said.

Former Miami Beach commissioner Nancy Liebman, now an activist affiliated with the Miami Design Preservation League, urged the Land Use Committee not to rush the ordinance forward. She was especially worried that raising the height limit to 75 feet will encourage future developers to push for even taller buildings. “All of a sudden they will grow a little higher, and a little higher, and that will be the end of Lincoln Road,” Liebman said.

The proposed ordinance will come back to the Land Use Committee on May 22nd. During that time, the city’s planning department will compile a list of potential sites where hotel additions could be built on the north side of Lincoln Road.

Carlos Zapata-designed “wing” on Lincoln Road may soon disappear

The “wing” on Lincoln Road
A landmark may soon disappear from Lincoln Road, albeit one that has often been ridiculed.
The wing and fountain
On Wednesday, Miami Beach’s Land Use and Development Committee unanimously voted in favor of removing a triangular glass-and-metal-structure from the 400 block of Lincoln Road. Designed by architect and artist Carlos Zapata, the structure, which also includes two rectangular water fountains and a planter bed, is the first thing that greets tourists walking west from the beach.
Completed in 1999, the structure was soon called “the roach” or “the wing” by Miami Beach officials. It cost $259,000 to build and was, according to a Miami Herald article from that time, “intended to be the final touch on the mall’s $17 million make-over.” The structure was also supposed to house an information touch screen for tourists, but the device never worked properly and, thus, was never installed.
The touchscreen wasn’t the only problem. “The structure was never completed as designed, missing a glass wall in front of the fountain,” according to a March 30 report from City Manager Jimmy Morales.
Miami Beach is about to embark on yet another renovation project for Lincoln Road, a pedestrian mall where retail rents surpass $300 a square foot. The Lincoln Road master plan, created by James Corner Field Operations and approved by the Miami Beach City Commission in October, suggested the Zapata structure’s removal, Morales’ memo stated, “in order to enhance visibility from Washington Avenue.”
The structure is a hazard, too, Morales’ memo stated. “The Zapata ‘wing’ and fountain conditions have deteriorated over time due to the environment and impact on pedestrian traffic,” the city manager wrote. “The fountains are used by children, dogs, and skateboarders, creating a potentially hazardous situation. Risk management has received complaints of slip and falls adjacent to that area.”
Commissioner Joy Malakoff asked if it was possible for the city to sell the structure. Max Sklar, director of Tourism, Culture and Economic Development, doubted it. The wing was never installed correctly, Sklar said. “It was not what he [Zapata] designed,” Sklar said. “I don’t think he really would take credit for it.”
The structure’s removal is not a done deal yet. It still has to be authorized by the city commission. The elected body’s next meeting is April 13.

Source: The Real Deal Miami