Miami's Trendy Wynwood District Thrives On Small Business. How Can It Survive Coronavirus?

Daniel Levine stepped outside of his Wynwood ice cream shop, Dasher & Crank, this week to look at the neighborhood.

“It’s an absolute ghost town,” he said. “I don’t see a single person around.”

Sweet Spot, a candy shop that had opened just a few months ago, was gone. There was brown paper covering the windows at Laid Fresh. A gelato place was dark, as was every other business in its building.

Like a smattering of other restaurants, Levine was committed to staying open and offering treats to go.

“I take the responsibility of being Wynwood’s ice cream shop very seriously,” Levine said. “I spread happiness to the community.”

Wynwood, Miami’s trendy arts district, has built a worldwide reputation over the past 20 years as a mecca for street art, nightlife and unique boutiques. But facing the threat of the coronavirus, the small businesses that give it life are facing an existential threat. Several stakeholders spoke to Bisnow about how the neighborhood can get through the pandemic — and the effects it may have on real estate.

The Tenant

Levine’s retail rent is $9,300 each month, which he pays by selling ice cream at $5 per scoop. So it takes 1,860 scoops — 62 per day — to cover just the rent, not counting payroll, ingredients or a profit for himself, he said.

Because of the coronavirus pandemic, Levine lost all of his wholesale business to local restaurants and all of his special events, which together usually make up 45% of sales. He pared staff down to the few who really need the income, made sure he was on every delivery app known to mankind, and ramped up his community outreach, like bringing free treats to healthcare workers.

Pulling in as much revenue in a day as he normally would in an hour, he has been able cover just payroll and the equipment that’s financed. He survives by living with family members.

Though residential projects are in the works, few people live in Wynwood full time. In the beginning of the year, he lost business to an ice cream truck that had been operating illegally nearby. He had hoped to make up sales in the usually busy weeks around Spring Break and Easter.

“It couldn’t have come at a worse time,” Levine said. “We rely on those profits to get us through the summer."

As the crisis dawned in March, Levine said, he asked his landlord, Goldman Properties, what it would do to support its tenants.

“They said they were going to discuss it internally, and ‘Here's your invoice for the month of April,’" he said. "Two weeks later, shutdowns happened.”

He managed to pay 33% of April's rent, but warned he wouldn’t be able to pay May's. He said he was invoiced anyway. He said rent deferments wouldn't be enough to ensure his business's survival.

“We need abatement. Those sales are gone," he said. "It’s not like all of a sudden in the summer, we are going to make enough profits to pay our obligations, plus rent obligations from the spring.”

He said collectively, the virus would give tenants bargaining power. But just this week, before any massive rent strikes could materialize, a federal Paycheck Protection Program loan had just come through, which he said he would probably use toward rent. 

The Landlord

“It’s been my life’s mission, for 18 or 19 years, to make [Wynwood] a neighborhood where the little guy or girl can hang a shingle,” Lombardi Properties principal David Lombardi said. "Early on, I was the only schmuck doing anything there. It was lonely."

In the early 2000s, Lombardi owned apartments on Miami Beach, but got priced out. A friend showed him the low-slung, gritty warehouses in Wynwood, and he liked the wide streets and proximity to Interstate 95, downtown and the beach. He befriended a gallery owner, Brook Dorsch, who opened his eyes to the artists and modeling agencies then operating inside many of the area's warehouses. He envisioned retailers doing well there, and bought a warehouse, then more.

When Tony Goldman, who is credited for reviving New York’s Soho neighborhood and then South Beach, came behind him, it felt validating. The Goldmans bought about 15 buildings discreetly. The Wynwood landlords gave street artists license to paint their buildings, announced their vision and started throwing parties. The world’s attention followed.

Lombardi recently sold a parcel to Lennar Homes, but still owns about 4 acres in the neighborhood, including a development site on 29th Street and retail buildings that house tenants like La Sandwicherie and Sana, a skincare company.

Lombardi said he is giving rent relief to its tenants, essentially 50% off.

“I feel we have obligations to do this,” he said.

Despite his offer, the Sweet Shop, his tenant, closed, as did another, Antigua Collection, a bathing suit shop. Others have been holding on, and a new one, Night Owl Cookies, still hopes to open in 45 days, he said.

Because he’s been there so long, Lombardi said he was able to buy his properties cheaply and has low debts, so he can offer tenants a break. But even though he acknowledged that other landlords might not be able to, depending on their debt obligations, they can't escape economic reality.

"How is a guy going to sell twice as many T-shirts and pants, or popsicles” in the fall, he wondered. He implored his fellow landlords to cut to deals for tenants rather than let space sit empty.

“Empty storefronts in Wynwood doesn't do anybody any good," he said. "Make a deal for two years and re-evaluate.”

He expects rents would drop 30% to 35% across the board as the market shakes out.

“We all have to look at the next two years as, ‘Let’s just try to get by without bloodshed,'” Lombardi said. “People don’t seem to want to pay attention to what's really happening in the world. It’s going to be significant. Let’s keep the magic that we've got [in Wynwood].”

The Diplomat

Albert Garcia, chairman of the Wynwood BID, a quasi-public agency made of neighborhood property owners, said Wynwood was uniquely prepared for the crisis because several years ago, it was the epicenter of the Zika outbreak.

“The CDC issued its first-ever travel advisory with the continental United States,” he said.

The business improvement district drafted emergency protocols, which it ended up implementing during the coronavirus pandemic. It enforced stringent occupancy levels about a week before the county did, Garcia said.

The BID began contacting government officials to emphasize the need for small business relief, and it compiled info about government programs for its members and tenants, Garcia said. It kicked in $250K to beef up a security system to protect closed storefronts.

Now, everyone is doing Zoom meetings, promoting takeout and using social media to keep emphasizing connections.

“Not to brag, but we were ahead of that” with a campaign called WYN at Home, Garcia said. “Once we reopened, we didn’t want to start from zero.”

He pointed out that major landholder Moishe Mana allowed food distribution on his property, and apartment-hotel Domio, despite having just opened and taking a financial hit, donated 1,800 hotel rooms for medical workers.

Going forward, he said, Wynwood would follow, and maybe exceed, CDC guidelines, requiring masks and gloves and 6-foot distancing.

“All of our projects that are under construction are continuing unabated,” he said.

Those include mixed-use Wynwood Square by CIM Group, Class-A office project Gateway at Wynwood, and 545 Wyn, an office project from Sterling Bay.

“I'm fairly confident Wynwood will re-emerge probably faster than other neighborhoods,” he said, citing the same small businesses that are struggling as the reason for a quick rebound.

The Broker

The big question on many minds in commercial real estate: Where will the virus leave rents?

Tony Arellano, of DWNTWN Realty Advisors, said that he’s been active in Wynwood for 14 years, and “it’s never been an easy market.” But he, too, envisions a quick bounce back.

“We've all been stuck in our homes for 70 days," he said. "When Wynwood opens, it’s an open-air, walkable, gridded neighborhood. Where else are you going to walk around? Aventura Mall? Dadeland?”

He acknowledged that vacancies would rise and rents would drop in the short-term. But long-term, he is still optimistic.

“There’s 28 developments in Wynwood last time I counted," a mix of multifamily, retail, office and 300 hotel keys. "Wynwood is not too tall, not too short, just the right height for developers: eight to 12 stories. 150 units to the acre is perfect."

Rents might be $120 per SF, but sales could be $11 to $12 per foot, he said. That's a bargain compared to Lincoln Road, where rents go up to $300 per SF with comparable foot traffic, he said.

A successful operation like Coyo Taco, which has a bar in the back, might be paying $60 to $90 per SF, but can do $2K per SF in food sales, Arellano said. In 2016, he helped negotiate the lease for Coyo's owner to open a food hall concept, 1-800-Lucky, which was reported to pay $62.50 triple-net, or $26K per month for 10K SF of indoor and outdoor space. 

Arellano said he thinks "reasonable rents" in Wynwood's five-block-by-five-block core are $70 to $150  per SF.

There's a reason for retailers to stay, Arellano said. “The neighborhood has the ability to create brands.”

A vintage guitar store, he pointed out, was named among the top 10 in the country shortly after opening. Salty Donut, a concept from two pastry chefs, “has taken over world,” he said.

“A year after opening, [Panther Coffee] was featured in an American Express commercial,” Arellano said, also highlighting Wynwood's Zak the Baker. “As soon as people can go out, they’re going to be picking up fresh baked bread. His lines get longer, they don’t get shorter.”

When Zika came, Arellano said Wynwood was back "like it never happened" two months later. He pointed to major developers — Kenner, Related, Kushner, Sterling Bay — and family offices, which all own in Wynwood, saying they could withstand the ordeal.

“They’re not even flinching,” he said. “Don’t bet against Wynwood.”