Stephen Bittell, Founder & Chairman, Terranova Corporation

In an interview with Invest:, Stephen Bittell, founder and chairman of Terranova Corp, discussed Terranova’s long-term investment approach, the evolution of Miami’s urban retail corridors, and the infrastructure needs shaping South Florida’s future. “We try to be ahead of the shift, so as the market performs, we can be rewarded,” Bittell said.

How would you define Terranova’s core mission today?

Terranova continues to be an opportunistic investor, not only in real estate but also across many other sectors. We try to take advantage of imperfections in the market and use those opportunities to grow revenues in the businesses we invest in.

How has Terranova’s approach evolved as Miami has shifted toward denser, more walkable city centers?

Around 20 years ago, we had one of the largest portfolios of supermarket-anchored suburban centers in the state. We intentionally shifted our focus to high-street retail, and for more than 20 years, we have been the largest retail property owner on Miracle Mile in Coral Gables, where we have 15 separate buildings.

For most of the last 15 years, we were also the largest individual owner on Lincoln Road in Miami Beach. We have sold some of our Miami Beach holdings, but we continue to be focused on Miracle Mile, where we have brought in exceptional tenants. Moxies is coming in, Fuku opened recently as part of David Chang’s Momofuku Group, Chewy is opening its first clinic in Miami on Miracle Mile, and Wells Fargo is combining two branches into one.

There is a great story to be told about how Miracle Mile has transformed into a real retail and entertainment hub. We have also added two office buildings at 255 and 299 Alhambra in Coral Gables. Industrious is opening its first Coral Gables location with 23,000 square feet, and Driftwood Hotels is expanding into one of our buildings.

What factors guide your decisions when identifying and investing in key Miami properties?

We look for places that have the opportunity to grow tenancies and rents. We are not core investors. We want to be opportunistic investors where we can take advantage of a market imperfection, not necessarily to disrupt the market, but to benefit from a trend we believe is emerging.

When we looked at where our employees were living over the years, we saw people shifting away from the historic pattern of moving farther into the suburbs for more space. Traffic became a challenge, and people increasingly wanted to live closer in and take advantage of more walkable locations. We have seen that happen across South Florida.

How does Terranova balance financial performance with creating long-term community value?

We have always believed that we win together. We are often willing to accept a lower yield in the initial years to take advantage of what we believe is a long-term opportunity.

We evaluate almost every potential investment with a long horizon. We have held some investments for decades, including one since 1981. We are a much longer-term holder than the average real estate investor.

How has Miami’s shift toward a more technology- and finance-driven economy influenced Terranova’s strategy?

Our office buildings in Coral Gables were premised on the fact that rents on Brickell Avenue, which were once in the $60 to $70 per square foot range, have gone up to close to $200 per square foot. We thought we could provide a high-value, high-amenity neighborhood for office tenants that could lease at a lower rent than Brickell, but higher than what had historically been achieved in Coral Gables.

We look for opportunities where there are shifts in the market. We try to be ahead of the shift, so as the market performs, we can be rewarded.

How do you see public-private collaboration shaping Miami’s urban development?

Developers love public-private partnerships because they do not have to carry the land and entitlement process in the same way, so it becomes a real opportunity from a capital structure standpoint.

In terms of infrastructure, all of South Florida is way behind its needs. U.S. 1 south of downtown is essentially the same street it was when I was growing up here almost 70 years ago.

We need more transportation opportunities. We need to remove septic tanks across the county, bury power lines, and address infrastructure needs that should have been handled a long time ago. The challenge is that we elect officials for two- and four-year terms, while these projects take much longer.

How important are tenant experience and community engagement in your leasing philosophy?

Every property owner wants experienced tenants, but there is always a balance between cool and credit. Cool tenants are newer, more exciting, and more interesting, but they tend to have less experience and a smaller balance sheet. High-credit tenants are essential to finance a building and make sure that, over the long run, their bills and our bills are paid.

Because our portfolio is significantly under-levered from a financing point of view, we have more opportunities to take risks with cooler tenants that we believe have an exciting future ahead of them.

What challenges do you see in maintaining affordability in high-demand urban markets?

Affordability is a crisis affecting the entire country. It may be particularly acute in South Florida when it comes to housing and the cost of restaurants, but it is a national issue.

With multiple live shooting wars going on around the world, pricing is affected across everything from gasoline to food to the raw materials needed for construction projects. That is one reason there has been limited new supply of retail and office space over the last several years.

When limited new supply occurs at the same time as growing demand for space, rents increase. That is the nature of our economy.

What will define a successful real estate strategy for Miami over the next decade?

Terranova was formed in 1980, so we are not far from our 50th anniversary. We have tried to maintain a rock-solid balance sheet that enables us to survive bad markets and prosper in good markets. We keep our debt low, keep expenses fair and reasonable, and try to give tenants a better experience through increased amenities and more hotel-type services in some of our office buildings.

Retail is a different business. In retail, we need to create more exciting, experiential opportunities. We do that through pop-ups and by working hard to attract new concepts from around the world.

What are examples of the market imperfections Terranova has identified and acted on?

When we first bought in Coral Gables, rents were around $18 to $20 per square foot. Today, they are around $90 per square foot. We look smart now, but it took 21 years to get that smart.

Our thinking on Lincoln Road was similar. When we initially bought there, rents were around $75 per square foot. They ran as high as $367 per square foot and have now settled back to around $200 per square foot. We look for places in the market where we perceive things happening that not everyone else sees.

That was also the driver of our office investments in Coral Gables. We believed office rents there were too low compared with downtown and Brickell. We bought at a moment when no one wanted to buy office buildings and no one could finance office buildings, but because of our banking relationships and balance sheet, we were able to get those buildings done.

Are there other sectors or markets where Terranova sees growth opportunities?

We are most of the capital structure of a biotech company in Israel that we believe has exciting technology. We also have real estate outside South Florida, including in Texas, Washington state, and the greater Atlanta market.

We continue to look for places where we believe there are growth opportunities that can give us a return, not only from the real estate but also from the growth of the overall market.