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JBK Capital Buys Key West Retail Property; Aims for More

Commercial Real Estate Direct Staff Report

A venture led by JBK Capital has paid $18 million for 400-408 Duval St., a 32,000-square-foot retail property in Key West, Fla. The venture includes Fidelity Real Estate Group, a division of Pyramis Global Advisors, which is a unit of investment manager Fidelity Investments. Fidelity, which manages more than $14 billion of assets, pursues value-add opportunities.

The property becomes the second investment for JBK, a New York investment firm that was launched last year by Bray Kelly, a former executive director of the global commercial real estate group of UBS, which, incidentally, provided debt financing for the Key West acquisition. JBK earlier bought an industrial-flex property in Largo, Fla.

The two investments exemplify JBK's strategy of pursuing value-add opportunities. The property at 400-408 Duval is in a market with extremely high barriers to entry. And its tenants, which include Chico's Fresh Produce and Earthbound Trading Co., pay rents that are substantially below market rates.

"This is a great building in a strategic location," Kelly said.

The same is true of its flex-property investment.

JBK's principals, Kelly and James P. Josephson, a UBS alumnus who previously was vice president of finance for Montecito Investment Co., capitalize their firms along with a group of high net-worth investors as well as institutions.

The company's aim is to pursue underperforming assets, be they properties or debt instruments such as B-notes, mezzanine loans and other performing or nonperforming notes. It hopes to accumulate a portfolio of $250 million by the end of next year. But it will remain very selective, pursuing office, retail and industrial properties in Florida and the New York tri-state area that can be improved in value through leasing, intensive management or repositioning. It would also consider apartment properties in certain markets. It is generally targeting investments of $20 million to $25 million apiece, and doesn't rely on heavy doses of leverage.

"We want to buy the right assets," Kelly said, adding that the company will generally team up with partners, as in the case with the Key West acquisition.