Commercial Real Estate Appraisal - 1114 S Dixie Hwy

PROPERTY DETAIL
1114 S Dixie Hwy is a two-tenant NNN strip center with an advantageous location. The
property is over the S Dixie Hwy, a highly trafficked highway in Coral Gables, and it is only a few
steps away from “University Metrorail Station. The property is located well across from the
University of Miami, home to more than 20,000 students, faculty, and staff. It is also surrounded
by residential single and multifamily, and many other retail properties. The two tenants on-site,
Starbucks and Moon Thai, have become very popular among students and local neighbors. As
land is a scarce commodity in this particular area, this is one of the remaining sites that offer
fifteen free parking lots to customers.
Axel Adriel Peluso Nieto

USA | (786) 407 3639 | apelusonieto@miami.com
www.linkedin.com/in/apelusonieto
Property Information The property is comprised of a
1114 S Dixie Hwy one-story building that sits over
Address
Coral Gables, FL 33146. 15,000 sq ft. of land or 0.34 acres.
Zoning MX1
Property Type Retail. Multi-Tenant, Net Leased The building total of 5,482 sq ft. of
Stores 2 developed retail space with 15
Stories 1 parking spaces (1 parking space per
Lot Size 15,000 sq ft. 365.46 sq ft. of leasable space).
Developed Space 5,482 sq ft.
Year built 1955 According to information gathered
Tenants Starbucks | Moon Thai Restaurant from Rockval, GEM PYRAMID LLC
Year 1 NOI* $307,473
acquired this property from GAZEBO
Cap Rate* 4.46%
Asked Price* $6,900,000
CORP. on October 1, 2017. It was
Selling Price** $6,400,000 transacted for $6,4 million
Selling Price/sq ft.** $1,167 ($1,167/sq ft.).

According to the Coral Gables
zoning code, the property is located in an
MX-1 Mixed Use Zone which allows
redevelopment of the property into a
mixed-use: commercial and residential1.
The purpose of the (MX) Mixed Use
Districts is to accommodate commercial
and residential to serve the needs of a
diverse community. The MX1 District
allows a low intensity of development
and is located along some of the City’s
primary corridors, and often has an
adjacency with single-family residential
areas.

Located on the S Dixie Hwy,
connecting South Miami with
Coral Gables, Coral Way,
Coconut Grove, and Brickell.
The total daily traffic over the
S Dixie Hwy counts on average
77,500 Vehicles Per Day (VPD).
Nearby major shopping centers: Nearby commercial properties around include:

- Citi Bank
1. Brickell City Centre
- CVS
2. Mary Brickell Village
- WildFork Food
3. Miracle Mile
- UPS
4. The Shops at Merrick Park
among many popular fast-food chains such as:
5. CocoWalk
- McDonald’s
6. The Shops at Sunset Place
- Denny’s
- TGI Fridays
- Five Guys
- Shake Shack

The Underline is a public-private partnership that will transform Miami-Dade County land
below the existing Metrorail from the Miami River (Brickell area) to Dadeland South Metrorail
Station.
The Underline is expected to be completed by 2026. Once completed, it will serve

thousands of Miami residents. The 10-mile corridor will provide lighting, pedestrian and bicycle
paths, and access to public transportation. Additionally, it will include recreation features,
playgrounds, exercise equipment, basketball and volleyball courts, soccer fields, picnic areas, dog
parks, and more.

MARKET ANALYSIS
Nearby Sale Comparables
Address Year Built Size (sq ft.) Dist (mi) Selling Date Selling Price Price/sq ft. Submarket Weights
* 1114 S Dixie Hwy 1955 5,482 n/a 1/10/2017 $6,400,000 $1,167 Coral Gables -
1 4700 S Le Jeune Road 1961 5,069 1.3 1/18/2005 $1,850,000 $365 Coral Gables 12.5%
2 475 S Dixie Hwy 1953 1,664 1.2 on-sale $4,175,000 $2,509 Coral Gables 30%
3 440 S Dixie Hwy 1964 1,879 1.2 6/6/2013 $1,300,000 $692 Coral Gables 12.5%
4 425 S Dixie Hwy 1954 12,428 1.2 6/4/2012 $4,320,000 $348 Coral Gables 20%
5 5877 Ponce De Leon Blvd 1969 4,196 0.9 3/31/2015 $3,900,000 $929 Coral Gables 25%
Weighted Average 1960 4902 1.1 - $3,485,250 $1,187 Coral Gables 100%

CoStar, RockVal, Loopnet, and Miami-Dade Gov. Property Appraiser websites were used
to collect property data on 1114 S Dixie Hwy and each one of the comparable properties. In the
absence of cap rates available data, comparable properties sales data was used instead to
appraise the subject property.
All the properties selected are other comparable retail properties located in the same
Coral Gables submarket. To be more precise, retail properties located between SW 57th Ave and
Le Jeune Road. Each one of the comparable properties is not further than 1.3 miles from the
subject property.
In this analysis, all the properties (including the subject) are of the same age, with an
average construction year of 1960. Additionally, all of them are 100% occupied as such as the
subject property. Properties size range widely varies from 1,664 sq ft. to 12,428 sq ft., with a
weighted average of 4,902 sq ft., being very close to the subject property.
In order to obtain an accurate appraisal, only properties with relatively recent available
sale data were used, with the oldest sale transaction being in 2005.

The five properties featured in the table above are comparable with 1114 S Dixie Hwy.
They were chosen based on the following criteria: location, size, vacancy rate, property style,
tenants, and last selling date.
- 475 S Dixie Hwy has the highest weight compared to other properties. Despite it has
only one tenant, it shares the same tenant as the subject property. There is another Starbucks
leasing there. Additionally, both properties have similar styles, and they both include a parking
lot for their customers. Finally, this property is currently on sale which gives a current market
price condition.
On the contrary, 4700 S Le Jeune Road and 440 S Dixie Hwy have the lowest weight.
- In the case of 4700 S Le Jeune Road, it is located on another road different from the
subject property. It includes more tenants and different kinds of tenants compared to the subject
property. Despite both properties sharing that both have parking lots, their styles are quite
different.
- In the case of 440 S Dixie Hwy, it is smaller and looks older compared to the subject
property. Although it also has an Asian restaurant, it is just one not so desired tenant. Finally, it
doesn’t own a parking lot exclusively for its clients in an area in which is really hard to park
otherwise.
In between the two extremes, 425 S Dixie Hwy and 5877 Ponce De Leon Blvd hit high weights as
well.
- 5877 Ponce De Leon Blvd has two well-known tenants: “Domino’s” and “The Munch”.
Despite it is located on the other side of the US1, it virtually shares the same traffic as S Dixie
Hwy.
- 425 S Dixie Hwy instead is just only one big tenant that occupies a much bigger space
than the two tenants leasing the subject property. It is also important to notice that property
points out to other kinds of tenants. For instance, “Basset”, a home furniture manufacturer and
retailer, instead of a restaurant retailer as the case of the subject property.
Based on the analysis conducted above, it was determined that the weighted average
price/sq ft. in the area should be around $1,187. Considering that 1114 S Dixie Hwy is 5,482 sq ft.
big, the value of this property should be approximately $6,507,134.

Valuation Scenarios
Address Year Built Size (sq ft.) Dist (mi) Selling Date Selling Price Price/sq ft. Submarket
1114 S Dixie Hwy (Worst Case) 1955 5,482 - 1/10/2017 $5,756,100 $1,050 Coral Gables
1114 S Dixie Hwy (Mid-Case) 1955 5,482 - 1/10/2017 $6,505,352 $1,187 Coral Gables
1114 S Dixie Hwy (Best Case) 1955 5,482 - 1/10/2017 $7,126,600 $1,300 Coral Gables
After having read the offering memorandum for the subject property and for different
properties in this area, I conclude that the market in this area is fastly recovering after the
pandemic. There is a very little vacancy for good retail stores despite the rise of e-commerce.
Based on this analysis, I will use $1,187 per sq ft. as the median case scenario, $1,050 per
sq ft. as the worst-case scenario, and $1,300 per sq ft. as the best-case scenario.
Nearby Rents Quotes

Address Year Built Size (sq ft.) Dist (mi) Lease Type Lease Ask Price Submarket Weight
* 1114 S Dixie Hwy 1955 5,482 n/a NNN - Coral Gables -
1 1250 S Dixie Hwy 1953 2,381 0.3 NNN $50 Coral Gables 35%
2 301 Altara Ave 2019 2,720 1.9 NNN $60 Coral Gables 10%
3 7200-7222 Red Rd 1955 1,673 1.2 NNN $37 Coral Gables 20%
4 6020-6030 S Dixie Hwy 2019 2,365 1.8 NNN $65 Coral Gables 15%
5 3850 Bird Rd 2007 5,222 1.9 NNN $30 Coral Gables 10%
6 3060 SW 37th Ave 2021 1,000 1.8 NNN $42 Coral Gables 10%
Weighted Average 1990 2417 1.2 NNN $48 Coral Gables 100%
In order to obtain an accurate current market price, only properties with relatively recent
available data were used. These six properties are other properties that are on lease now.
All the properties selected are other comparable retail properties located in the same
Coral Gables submarket, not further than 1.9 miles from the subject property. Information from
Loopnet was used to collect property data of each one of the properties in the table above.
In this analysis, not all the properties are strictly similar to the subject property.
Additionally, all of them are not occupied; some of them are empty now. Properties’ age widely
varies between properties as same as the size range that also varies from 1,000 sq ft. to 5,222
sq ft.
The six properties featured in the table above are other properties comparable with 1114
S Dixie Hwy. They were weighted based on the following criteria: location, distance, parking, and
property style.

440 S Dixie Hwy has the highest weight compared to other properties. They both are close
to each other, sharing the same location characteristics. Moreover, both properties are of a
similar age. Finally, they both include a parking lot for their customers.
On the contrary, 301 Altara Ave, 3850 Bird Road, and 3060 SW 37th Ave have the lowest
weight. All of them share basically the same issues. They are far from the subject property in
other areas within Coral Gables but with different characteristics. The style of the properties is
not similar as well. Finally, all of them don’t own a parking lot to receive their customers.
Then, 7200-7222 Red Road and 6020-6030 S Dixie Hwy obtained weights in between the two
extremes.
- 7200-7222 Red Road is located over a highly trafficked street. Despite it is not over the
US1, it doesn’t share the same style and, it doesn’t have a parking lot, it still being within
the range of properties with available rent data comparable to the subject.

- Although 6020-6030 S Dixie Hwy is a little bit far from the subject property, it is located
over the S Dixie Hwy, sharing the same traffic. Moreover, the property also has a parking
lot for customers and shares some style with the subject property.
Based on the analyses conducted above, it was determined that the weighted average
rent/sq ft. in the area should be around $48. Considering that 1114 S Dixie Hwy is 5,482 sq ft. big,
the gross market rent for the target building should be $263,136.
MARKET COMMENTS:
MMG Equity Partners released “South Florida Retail Real Estate Summary” report last
March 17th. In that report, MMG shares a snapshot of Miami-Dade County market conditions for
the 4Q2021. It looks like on average the asking rent was $40,66 per sq ft. during the last quarter
of 20212.
This number is approximate to others offered by CoStar. It indicates that the average
asking price for the overall market is $41.22 per sq. ft. In particular, CoStar reports that for the
submarket in which the subject property is located, the average asking price is $48.44 per sq ft.
CoStar also provided how much is asking for the subject property. It is asking $48.04 per sq ft.,
providing the exact number that we got from comparable asking rents.

ANNUAL PRO FORMA RETAIL ASSUMPTIONS
TYPE PSF
GENERAL ASSUMPTIONS Operating Exp. $ 5.79
Vacancy 0% RE Taxes $ 8.52
Inflation 3% Insurance $ 1.01
Adjusting Rents 3% Management Fees $ 0.92
Adjusting Exp.Cost 3% TOTAL $ 16.24
PRO FORMA (Amounts in USD) 1114 S Dixie Hwy

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
For the Years Ending Apr-22 Apr-23 Apr-24 Apr-25 Apr-26 Apr-27
Total Square Footage 5,482 5,482 5,482 5,482 5,482 5,482

Vacant Square Footage 0 0 0 0 0 0
Rented Square Footage 5,482 5,482 5,482 5,482 5,482 5,482
Average Gross Lease

$48.00 $49.44 $50.92 $52.45 $54.02 $55.65
Rent Per Sqft
RENTAL REVENUE
Potential Gross Rent $263,136 $271,030 $279,161 $287,536 $296,162 $305,047
Vacancy $0 $0 $0 $0 $0 $0
Total Rental Revenue $263,136 $271,030 $279,161 $287,536 $296,162 $305,047
OTHER INCOME
Exp. Reimbursement $89,034 $91,705 $94,456 $97,289 $100,208 $103,214
Total Other Income $89,034 $91,705 $94,456 $97,289 $100,208 $103,214
Potential Gross Revenue $352,170 $362,735 $373,617 $384,825 $396,370 $408,261
OPERATING EXPENSES per sq ft.

Operating Exp. $5.79 $31,714 $32,665 $33,645 $34,655 $35,694 $36,765
RE Taxes $8.52 $46,707 $48,108 $49,552 $51,038 $52,569 $54,146
Insurance $1.01 $5,553 $5,720 $5,891 $6,068 $6,250 $6,437
Management Fees $0.92 $5,059 $5,211 $5,368 $5,529 $5,694 $5,865
Total Operating Expenses $16.24 $89,034 $91,705 $94,456 $97,289 $100,208 $103,214
Net Operating Income $263,136 $271,030 $279,161 $287,536 $296,162 $305,047

The Pro-forma for 1114 S Dixie Hwy was designed based on a couple of logical
assumptions. No vacancy was considered since the subject property is a two-tenant property
which both are not expected to leave the property. The long-term inflation rate for the US
economy was used, increasing prices at 3% per year. Based on different offering memorandums
for different retail properties in the area (including the subject property), it can be possible to
assume that the NOI of this property increases at 3% per year. To simplify, it was assumed that
operating costs also increase at the inflation rate. Nevertheless, if we consider the most recent
US inflation rate of around 8%, it may be seen that rent growth lags behind. This observation fits
into Greg MacKinnon’s explanation that retail properties are not a good hedge against inflation.
Moreover, retail assumptions to calculate operating expenses. These were obtained from
the Glades Plaza offering memorandum. Those assumptions were adjusted for inflation to
today’s values. It’s valuable to notice that our subject property is NNN, so the tenants reimburse
operating expenses to the landlord.
AKERSON CAP RATE

Akerson Cap Rate 1114 S Dixie Hwy
VARIABLES AKERSON ASSUMPTIONS

Mortgage (LTV) 65% M (LTV) 65%
Equity € 35% E (1 - M) 35%
RM = Mortgage Cnst. $0.055 Loan Rate 3.6%
PV = PV Remaining Loan $0.8976 Term (Years) 30
P = 1 - PV $0.1024 Holding Period (Years) 5
Ye (Required ROE) 15% Ye (Required ROE) 15%
1/Sn (Sinking Fund fact) $0.1483 Appreciation 3%
Delta (App. Over Hold) 0.159274074
Cap Rate (No appr.) 8.30%

Cap Rate (Appreciation) 5.93%
Akerson: No appreciation
NOI $ 263,136
Property Value $ 3,171,432.25
Akerson: Appreciation
NOI $ 263,136
Property Value $ 4,433,788.45

The LTV assumption of 65% was made in reference to one of the recent quotes named in
JLL Capital Markets Overview. A conservative interest rate of 3.6% was taken from JLL Capital
Markets Overview considering it is a Retail/Class B property which usually those loans are issued
for. It was considered a 30-year schedule amortized loan with a 5-year holding period. It was also
considered a 3% annual appreciation rate based on the long-term growth rate of the US
economy. It was considered a 15% required rate of return based on the type of property (value-
add). This number fits into what Matt Shores looks like to include a property in his portfolio. All
other values were calculated using Akerson Cap Rate formulas.
CONCLUSION
In this assignment, it was possible to appraise 1114 S Dixie Hwy in two very different ways:
using External Cap Rates (from comparable properties) and using Akerson Cap Rate. This last one
is the most accurate method under unsteady market conditions such as the one we are
experiencing now. Akerson is really useful when markets are volatile and there is no good data
available. Akerson, instead of looking at comparable properties, takes a macroeconomic
approach. Because Akerson considers income return, appreciation return, equity build-up, and
leverage, it may be considered the most comprehensive cap rate.
In a perfect world, both methods should have given the same property appraisal.
Nonetheless, I got two different values for this property. Using the comps approach, I arrived at
the mid property value of $6,507,134. While using the Akerson Cap Rate, I obtained a property
value of $3,171,432 (w/o appreciation), and a property value of $4,433,788 (w/ appreciation).
It is well-known that Miami real estate market is booming, and it is highly probable that
comparable properties’ prices are pushing up our comps valuation. Additionally, some of the
used properties were last transacted when the market was recovering from the 2008 financial
crisis which doesn’t reflect the best CRE pre-pandemic conditions. Bearing on that idea, I would
think that the Akerson with appreciation valuation may be more representative of the property’s
true value (considerably lower although). I’m more confident using Akerson since it was possible
to check the obtained weighted average asking rent with other sources such as CoStar and MMG
4Q 2021 reports.
Nevertheless, under the current Miami CRE’s market prices, if this property were listed
now, it might be possible to obtain the $6,507,134.

REFERENCES
1. https://www.coralgables.com/departments/DevelopmentServices/zoningcode
2. https://www.mmgequitypartners.com/south-florida-retail-summary/


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PROPERTY DETAIL

Axel Adriel Peluso Nieto

Axel Adriel Peluso Nieto

Axel Adriel Peluso Nieto

Nearby major shopping centers: Nearby commercial properties around include:

Axel Adriel Peluso Nieto

The Underline is expected to be completed by 2026. Once completed, it will serve

Axel Adriel Peluso Nieto

Axel Adriel Peluso Nieto

Axel Adriel Peluso Nieto

Axel Adriel Peluso Nieto

Nearby Rents Quotes

Axel Adriel Peluso Nieto

Axel Adriel Peluso Nieto

Axel Adriel Peluso Nieto

PRO FORMA (Amounts in USD) 1114 S Dixie Hwy

Total Square Footage 5,482 5,482 5,482 5,482 5,482 5,482

Average Gross Lease

OPERATING EXPENSES per sq ft.

Axel Adriel Peluso Nieto

AKERSON CAP RATE

VARIABLES AKERSON ASSUMPTIONS

Cap Rate (No appr.) 8.30%

Axel Adriel Peluso Nieto

Axel Adriel Peluso Nieto

Axel Adriel Peluso Nieto

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