Zenith finds niche in underutilized
property
By: Lisette Hilton
December 11, 2000
Source: The
Business Journal
Marc Kopelman, vice president of Pompano Beach-based
Zenith Realty Investments, is searching for just the right properties.
Since 1998, Kopelman and his partners at the
commercial real estate investment company have assembled a portfolio
of 12 properties, worth $75 million, with a combined 800,000 square
feet.
Unlike the big guys, Zenith Realty guns for
an asset class below that earmarked by typical institutional investors.
"We don't focus on large class A properties
because pension funds, REITs and large institutions compete for those,"
Kopelman said. "They're able to pay higher prices because they
don't need the returns that small investors are looking for."
Instead, Zenith looks for class B assets, which
generally are smaller in size and tenants. They require heavier management
and more hands-on attention, which according to Kopelman, is Zenith's
strength.
"We like to look for the assets that have
deferred maintenance, leasing problems, are in up-and-coming locations
that people haven't quite figured out yet," he said. We look
for things that we can hang on three to five years -- even longer
-- so that we can create the value that we think is in the assets."
Finding a niche
Kopelman worked for Kenneth Leventhal &
Co. before forming Zenith Realty with real estate broker Scott Brenner.
Brenner, founder of Pompano-Beach- based Brenner Real Estate Group,
was one of Kopelman's clients. Kopelman consulted with Brenner about
his firm, a commercial real estate services firm that provided property
management, leasing and construction consulting.
Brenner, an attorney, and Kopelman, a CPA,
decided to leverage the expertise of Brenner Realty by forming Zenith
Realty in 1997 -- a time when real estate investment trusts, or REITs,
dominated the landscape.
Hy Horowitz, a partner at Brenner Real Estate
Group, joined Zenith Realty as partner, as did his son Brian.
Today, Zenith Realty Investment is a stand-alone
company that uses the services of Brenner Real Estate Group. Kopelman
is an executive vice president at Brenner. The commercial investment
business is their passion.
Kopelman was a vice chair of Urban Land Institute,
a national real estate organization that focuses on dealing with the
issues that developers and real estate owners face.
The partners decided to focus on office and
industrial buildings in the tri-county area's eastern core around
U.S. 1, I-95 and major east-west roads.
"We look at urban infill areas,"
Kopelman said. "I like to look where the demographics are on
the upswing. We look for significant barriers to entry, where there
isn't a lot of land. You have to go through the redevelopment process,
which tends to drive many people away because it's a more intensive
process. It's a lot riskier. That's where we can get creative."
A few examples
Hillsboro Commons, a building in Deerfield
Beach, is a typical Zenith acquisition. Purchased in May, the vacant
building on the corner of Hillsboro Boulevard and U.S. 1 was deteriorating.
"The building was built in the 1980s and
designed to be an atrium shopping center, but that's when real estate
collapsed, so the developer never finished the project," said
Kopelman. "We bought it with the intention of turning it to a
B+ office building.
"We wanted to capitalize on the proximity
of the area, on a major highway, he said. "Again, you're capitalizing
on the growth of an area, but you're focusing on the outskirts, where
you can deliver quality product at prices that might be 25 or 30 percent
less than competing markets."
Another plus is that the property is at the
entrance to a newly formed community redevelopment area.
Hillsboro Commons is under construction and
will be complete by the beginning of next year. The leasing price
is $14.75 a square foot, triple net. The building, which will house
Zenith's and Brenner's new headquarters, will have a 3,500-sqaure-foot
tenants-only gym as well as break and recreation rooms. The building
also will be fully fiber capable, offering tenants broadband for high-speed
computer access, as well as have video conferencing services.
Another example is Zenith's recent acquisition
on Commercial Boulevard, just west of I-95. Zenith is converting the
former Decora Warehouse to single story Class A office space. The
building, which is near a residential area and other office buildings,
is expected to open early next year.
15 properties by year end
Kopelman predicts that by the end of the year,
Zenith will have acquired about 15 properties, or 1 million square
feet. The plan during the next two to three years is to accumulate
2.5 to 3 million square feet of property worth $250 million to $300
million.
"We're very bullish on South Florida and
its growth prospects," he said. "We think there's opportunity
for what we do here for a lifetime. The most important thing about
it is that we have fun doing it.
"We're adding value to the communities,"
he said. "There has been a tremendous move out of many of our
older areas, leaving them to deteriorate and become decrepit. I get
a certain sense of satisfaction with bringing back those areas and
redeveloping and repositioning them for the new users of tomorrow."
Lisette Hilton is a correspondent with The
South Florida Business Journal.
