Zenith finds niche in underutilized property
Jacksonville Business Journal - by Lisette Hilton
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.
