What's the Deal? | Oak Row's Erik Rutter Reveals Luxury Mixed-Use Plans for $181M Construction Plan

What drew you to the deal?

At Oak Row Equities, we first identify a submarket of interest, then we locate sites within that submarket primed for best-in-class development. Every site that we’ve acquired to date has been off-market and 2600 Biscayne Boulevard is no exception. We first identified Edgewater as a target submarket given its central location within Miami surrounded by some of the fastest- growing neighborhoods. Edgewater has fantastic transit connectivity, which will continue to increase with a new train station planned for 27th and Northeast 2nd Avenue between Wynwood, Midtown, and Edgewater. This location has ideal adjacency to Biscayne Bay and has already undergone tremendous infrastructure improvements with Baywalk. There are roughly five new restaurants slated to come to Baywalk over the next several years. Edgewater has historically been a for-sale condominium market with a limited supply of existing, purpose-built, professionally-managed luxury rental apartments. We think that Edgewater is one of the most sophisticated rental markets that continues to pick up momentum and popularity within the City of Miami. We believe that larger units, ultra-modern finishes, and health and wellness amenities that are condo- quality, will do very well in this location. In addition, there's very limited office supply in Edgewater. There is a plethora of new construction offices across Miami, though no Class AAA office space currently exists in Edgewater. We're building 300,000 sq ft of Class AAA office space in Wynwood alone. We feel that the increasingly strong job market immediately south and west of Edgewater makes it an even more viable live-work-play community. 2600 Biscayne is a site that takes up a full block and runs from Biscayne Boulevard on 26th Street to Northeast 2nd Avenue and 26th Terrace. It is an impressive site with great geometry; it’s a perfect rectangle. This allowed us to create a perfectly massed building without compromising any of our uses, which could have been a challenge given the size of our site.

What initially attracted Oak Row to the South Florida market?

Miami is a unique market. It has tremendous demand fundamentals, including corporate relocations, positive migration patterns, quality of life, preferable tax treatment, and great weather. When we first entered the market in 2018, none of the major tech companies had a presence in Miami. Most of these firms had been investing in quality of life for their workers, with the goal of offering environments that would improve talent retention by keeping employees incentivized and happy. Something that struck me as strange back then was that none of these companies – large tech firms, financial services firms, hedge funds, and private equity firms – had offices in Miami. In 2018, as a recent college graduate seeking a top-tier job, you could only live in New York, San Francisco, LA, Boston, or Chicago, but not Miami. I saw this as a fundamental flaw with the City of Miami and a massive opportunity. I thought that as employees continued to gain power and leverage over their employers and could continue to push for their happiness, there would be a fulcrum moment at which point talent would push corporations to Miami, or corporations would move to Miami and talent would follow. As we look at the landscape today, most large tech companies either have an office, have moved their headquarters, or are in the process of opening an office in Miami. So many of the large financial institutions are building a presence here, and that's fundamentally shifting and changing the market for the better. I think if you speak to people who have invested in Miami over the last three decades, Miami has flirted with this fundamental shift several times, never quite reaching that tipping point. Today, that change has happened. With these important companies moving or expanding, I believe Miami has been fundamentally altered. This is just the start of the corporate relocation movement in South Florida.

How did you secure financing for the deal?

We hired Newmark as our debt broker, and we ran a full marketing process. We have a great relationship with Bank OZK, who is also our construction lender on The Wynwood Plaza. They came in and met our ask at 50% loan to cost. In this market, nothing comes easy, but we were fortunate to have a unique and differentiated product that spoke to the market. We received several bids, and are very happy to work with a repeat lender on a project of this magnitude.

What is going to set 2600 Biscayne apart?

2600 Biscayne is a million-square-foot mixed-use development that will be the neighborhood- defining project in Edgewater. It will be the most luxurious rental product delivered to the market to date. The tower has 187,000 sq ft of trophy class AAA commercial space of which we've already pre-leased 50%. Our units are spacious and the entire building is meticulously designed. The residences will have beautiful protected views of Biscayne Bay, and elegant balconies in each unit. Our amenity package is second to none. The building has a keen focus on health and wellness with a large resident-only gym, cold plunge, and sauna. Amenities also include a rooftop co-working space, dedicated and valet parking, a wraparound exterior amenity deck with a lap pool, hot tub, BBQ grills, and luxe cabanas outside. Inside the building, we have a fitness center, yoga studio, dog grooming spa, dry spa, co-working space, card room, and resident lounge. 2600 Biscayne will also be one of the tallest buildings in the neighborhood. It's a truly differentiated product in terms of location, quality, and offering.

Who are the key partners or collaborators involved in this deal?

Arquitectonica is our architect of record. They are fantastic and we love collaborating with them. We’re currently working on three projects together. 2600 Biscayne is a fantastic example of Arquitectonica’s amazing exterior design aesthetic and functional interior layouts. We commissioned Derrick Adams, who is a world-renowned artist, for a stunning 200-foot mural that will be visible from Biscayne Boulevard to Northeast 2nd, and all over the City of Miami. Derrick just had an amazing show in Los Angeles to showcase his new work. Our interior designer is Vida, who is based out of Portland. We are proud to have introduced Vida to the Miami market. We were drawn to their elegant, sophisticated, and minimalist style. This project will be a showcase not only for our architect and artist but also for our interior designer. Our spaces will offer a level of sophistication above what's typically delivered in the Miami market.

What were the unexpected challenges that you encountered with the deal?

At 2600 Biscayne, we transferred density from a neighboring site which always adds another layer of complexity. The challenge here was both from a City of Miami perspective as well as a timing perspective, creating an additional acquisition process running parallel to the larger acquisition process for the land. We're fortunate that things went smoothly and we successfully transferred the density over. Since then, we've been able to transfer density to three other projects in our pipeline.

How did you begin your real estate career?

I've been working in real estate for a long time. Every internship I had throughout my college years was in real estate. I worked at M&T Bank and Starwood Property Trust. After I graduated from Georgetown, I went straight to Tishman Speyer. At Tishman Speyer, I was working in acquisitions and development, and it is also where I met my partner, David Weitz. At the end of 2017, David and I left to launch Oak Row Equities. Our business has been officially launched since 2018 and since our inception, we've been 100% focused on South Florida, specifically Miami-Dade County. Over the last six years, we've taken Oak Row Equities from a two-person team to a team of north of fourteen people. We’re also one of the top three largest developers of multifamily in Miami-Dade County. Today, we have about four and a half million gross square feet between fully stabilized, topped-out construction, middle of construction, and pre-development. That represents about 2,500 multifamily units and about 600,000 square feet of Class A office.

What advice would you give a CRE pro starting in the industry?

I would say that the capitalization is the most critical component of any project. It is imperative to study the ways in which you can add value in creating a resilient and intelligent cap stack. You could have an amazing piece of dirt in an amazing city poised for outsized growth but if your cap stack isn’t thoroughly mapped out, it doesn't matter. Make sure you're aligned with your equity partners, and your lender.

 

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This interview was conducted through Traded’s Ambassador Program in collaboration with Thomas DeRuvo and Keith Furtado's of Rutgers University.

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