Last week’s $278 million sale of the Palm Beach Outlets in West Palm Beach, the second biggest real estate transaction in the county’s history, shows the strength of the retail property market, experts say.
“This might be one of the most successful redevelopments in the nation,” William Reichel, president of Reichel Realty in West Palm Beach, told The Real Deal.
The 460,000-square-foot mall was sold to a group that includes Clarion Partners of New York and New England Development, from a group that also includes New England Development as well as Eastern Real Estate and Lubert-Adler. The partners had purchased the property for $35.5 million in June 2011 and redeveloped it. Law firm Mayer Brown represented Clarion for the deal.
The mall is 97-percent leased with tenants that include Saks Fifth Avenue Off 5th, Nike Factory Store and Brooks Brothers.
The Outlets opened in February on the site of the Palm Beach Mall, which had launched in 1967 as the first indoor mall in Florida. In the late 1990s it deteriorated, with upscale stores fleeing and a murder occurring there.
“The Palm Beach Mall was the mall in its day, then got run down, and not even Simon [Property Group, the mall’s owner,] could fix it,” Reichel told TRD. The mall finally closed in 2010.
But things changed quickly. “The ownership group had a fresh idea. The city worked with them, and it was built in 18 months,” Reichel explained. “They leased it up, and it seems to be doing phenomenally well. It’s an incredible accomplishment.”
The Outlets mall teems with shoppers at seemingly all hours.
The high sales price illustrates not just the strength of the Palm Beach County retail market, but the strength of outlet malls and retail in general throughout the country, Neil Merin, chairman of NAI Merin Hunter Codman, told TRD. “This could have been a lot of places and commanded a pretty high price.”
The strongest tourism season in the state’s history also helped boost the mall’s value, he said. “A lot of tourists in Palm Beach County have been going outlet shopping for a day.”
Reichel points to another factor behind the hefty price tag. “There is a lot of cash looking for a place to put it for low cap rates,” he said. “If you have good credit, you will generate strong prices. Lincoln Road in Miami [Beach] is hitting New York City numbers.”