Behind the Deal: Negotiating Miami’s First Walmart

MIAMI—Walmart announced its first Miami store in August. But fewer know the story behind the story, which was a financial labyrinth of sorts.

To be located at 6991 SW 8 St. the Walmart Neighborhood Market site will also be home to a gas station and a TD Bank. Construction is set to begin next year with an anticipated opening in 2014. But the deal could have fallen through several times along the road to the big announcement.

The story begins when TRR Everglades Holdings acquired the $13.5 million note for the land on which the first Miami Walmart will call home for $7.1 million in July. Sergio Rok and Jimmy Tate, a duo of real estate experts and developers behind TRR Everglades Holdings, did plenty of heavy lifting to design a site plan that will house the Walmart.

Indeed, Rok and Tate not only closed the deal with the lender but also worked to help execute the lease with Walmart and begin negotiations with TD Bank. The old Everglades Lumber site, which has a 20-year lease to Pep Boys in effect, served as collateral.

“The original loan that was an asset-based facility and not a real estate loan,” Rok tells GlobeSt.com. “As part of the collateral, the borrower pledged two separate pieces of real estate—Everglades Lumber property which consisted of about 6.6 acres and Pep Boys property which was located at another location—both which we had an interest in owning.”

As Rok explains it, the Everglades Lumber parcel was perfect for Walmart but not large enough for Walmart and two out parcels which TRR needed in order to make the numbers on the deal work. TRR needed to have a portion of the borrower’s adjacent warehouse property, about 1.25 acres, transferred to Everglades Lumber parcel in order to serve up a lot size both Walmart and the City of Miami would approve.

“The Pep Boys parcel had a senior loan with another lender and was not part of the note purchase we acquired,” Rok says. “Subsequent to executing the purchase and sale agreement with the business loan lender to buy its loan documents—which included a note and mortgage for the Everglades Lumber parcel and a second and third note and mortgage on the Pep Boys parcel—we learned that the second and third mortgage on the Pep Boys parcel actually triggered a default for the borrower we had to resolve before we closed.”

Once the default occurred, the primary lender on the Pep Boys parcel sent the loan to a special servicer even though the primary lender knew TRR was prepared to close. After a long challenge, TRR decided to pay off the primary lender on the Pep Boys parcel to satisfy that loan concurrent with the closing on the Everglades loan so it could have the Pep Boys parcel title free and clear at closing.

But the challenges didn’t end there. TRR found out right before closing that the adjacent land it had negotiated to be transferred to the company at closing also had carried debt a third party lender. The owner of the adjacent parcel was also behind on property taxes.

“We needed this land free and clear as well in order to consummate our ground lease with Walmart,” Tate tells GlobeSt.com. “The borrower had lead us to believe that the adjacent property was being refinanced to clean up the liens whereby the collateral for the new mortgage would only be on the portion of the property where with income-producing warehouses. We also thought the vacant land being transferred to us at closing would be carved out of the new mortgage and therefore would be transferred to us at closing free and clear, as negotiated and agreed.”

That wasn’t the case. The debt on the adjacent property was also in default. There was no money to pay the back taxes and new financing was not available in time for the closing. TRR had to give the adjacent property owner a short-term loan to pay off the debt and back taxes and put a new note and mortgage on the asset. Then TRR discovered a new IRS lien on some of the assets that had to be cleared up.

“While all this was going on, we needed to create a site plan Walmart would approve,” Tate says. “We needed to confirm that the proposed site plan met all of the governmental agency requirements and that the property was properly zoned for the proposed use. Then we needed to renegotiate a fair and reasonable ground lease transaction with Walmart. But the deal no longer made economic sense for an all-cash transaction and we needed the seller to finance a portion of the transaction.”

TRR finally got the deal done after more than 16 months. 

Flagami hasn’t seen any significant development in about 10 years. It’s an ideal location for a Walmart because grocery options are limited in what is one of the most highly populated areas of Miami.