Multifamily Archives | Page 28 of 28

Nov 06 No Comments

New York-Based Multifamily Investors Flock To South Florida

Author: Admin

Categories: Allapattah,Aventura,Commercial News,Miami Beach,Multifamily,Neighborhoods,Trends,Wynwood

There is a wave of investors who are currently selling their New York-based properties to invest in the South Florida area. Why?

Mainly because of the recent rent control law and its negative impact on returns on investments. It has been estimated, for example, apartment property values dropped 20%-30% as soon as the laws went into effect. Some investors are now mainly focused on getting their money out of New York and are looking to invest in properties that will produce better yields—specifically in non-regulated rent control markets, such as South Florida.

Why South Florida?

“There is zero incentive for New York multifamily investors to purchase a building and spend money on renovations if they can’t raise rents in these rent-controlled environments. Florida has always been a market with attractive yields. This is why most NY investors are choosing South Florida,” says Rafael Fermoselle, managing partner of Eleventrust Real Estate. “They either have their New York properties under contract to be sold, have already sold them, are in 1031 exchanges, or in some cases looking for diversification.”

Investors are selling their assets in New York and reinvesting in deals that yield more and ideally, are located under one roof. However, since Miami’s inventory is compressed with a lot of smaller multifamily properties and it’s difficult to find buildings with high unit counts under one roof, investors are turning to multifamily portfolios that are comprised of 4 – 8 buildings totaling 50-120 units. Although not all under one roof, investors are finding the 100+ units they are seeking with room to add value.

“Investors are working closely with Eleventrust because we have the inventory other brokerages don’t, plus, many of the deals they are transacting are happening off market, which many investors prefer,” explains Fermoselle.

Opportunity Zones

Opportunity Zones are another big reason why this new wave of investors are looking to South Florida. Miami, Fort Lauderdale and West Palm Beach are among the best places to invest in Opportunity Zones. There are about 123 Opportunity Zones in South Florida, including 67 in Miami-Dade, 30 in Broward and 26 in Palm Beach counties.

“Almost 16% of South Florida’s commercial assets are located in Opportunity Zones, one of the highest rates in the nation,” Fermoselle tells GlobeSt.com.

Tax Savings

New York investors looking to move to Florida also benefits from the state not having an income tax for Florida residents. New York state tax rates range from 4% to 8.82%. Additionally, the effective real estate property tax rate for Florida residents is approximately 0.98%, compared to 1.68% in New York.

New York investors will also save on capital gains tax in Florida where the top marginal tax rate on capital gains in Florida is 25% and top marginal tax rates on capital gains in New York is 33.82%.

“We currently have 4 successful deals with New York investors including multifamily properties with 9-18 units,” says Fermoselle. “We also have properties located in emerging neighborhoods that are garnering interest from east coast investors.”

Source: GlobeSt.

Oct 30 No Comments

More Than 7 Acres Up For Sale In Allapattah

Author: Admin

Categories: Allapattah,Commercial News,Development,Multifamily,Neighborhoods,Retail,Shopping Centers

More signs that Allapattah is the hot place to be: the heir to the Bill Seidle auto dealerships has put a portfolio of three tracts equaling 7.6 acres on the market. Asking price: $18.35 million.

The parcels belong to Bob Seidle — son of the late Bill Seidle — and Bob’s wife Tracy. Some are currently home to small shopping centers and parking lots. They are zoned T6-8, which means they can be redeveloped with buildings up to 8 stories tall, said listing agent Cesar Carasa of One Stop Realty. They are located in the city of Miami.

The three parcels lie south of the 112 Expressway between Wynwood and the Miami International Airport. Each of the three parcels edges NW 36th Street. The parcels are not contiguous; two of them sit on opposite sides of NW 36th Street.

One parcel includes five folios along the north side of NW 36th Street, beginning just west of NW 27th Avenue to 29th NW Avenue on the west and extends north several blocks.

The second parcel includes eight folios along the north side of NW 36th Street, beginning just west of NW 31st Avenue to NW 32nd Avenue; it extends two blocks to the north.

The third parcel includes 11 folios on the south side of NW 36th Street between NW 27th and NW 28th Avenues.

The properties were placed on the market two weeks ago and have attracted six inquiries thus far.

The central location of the parcels — a 12-minute drive to Miami International Airport and a 20-minute drive to South Beach — make them ideal for residential redevelopment, said Carasa. He said, “That section is very well located for the middle class.”

“People can’t afford to pay a lot of the rentals. Apartments in that part of town would be cheaper than other areas like Brickell,” said Carasa.

The neighborhood has attracted long-term residents.

Carasa said, “Because it’s a central location, I’ve seen people move from Homestead to here because of traffic.”

Tired of handling leases, the Seidle family decided to sell at market price of $54 to $55 a square foot. They hope to sell the three parcels for $18.35 million but are willing to consider individual sales.

The per-square-foot listing price is comparable to other area transactions, said Carlos Fausto Miranda of Fausto Commercial. But the total amount is rare, he said.

The listing price a square foot between $54 and $55 is comparable to other transactions in the area, said Carlos Fausto Miranda of Fausto Commercial, but what is unique is the amount of land offered in the portfolio.

Over the past year, the area just west of Wynwood has become Miami-Dade’s new real estate darling. The Rubell Family Art Collection has abandoned its former Wynwood space in favor of Allapattah, and art collector and developer Jorge Perez also will open a private museum this fall. Developer Robert Wennett has announced a massive residential-mixed use project in the area designed by star architect Bjarke Ingels, and developer Moishe Mana has also expanded his Allapattah holdings.

“It’s a great but underutilized neighborhood,” said Miranda. It’s one of the few east-west corridors that takes you straight from the beaches to the swamps.”

Due to increasing interest in the area, Carasa said, “For commercial properties it usually takes a year, but, for these it would take no more than two to three months to sell.”

Source: Miami Herald

Oct 25 No Comments

ULI Recommends Changes To City Of Miami Zoning Code

Author: Admin

Categories: Commercial News,Development,Healthcare,Multifamily,Offices,Retail,Shopping Centers

A new Urban Land Institute report suggests city officials relax certain provisions of the Miami 21 zoning code to encourage denser developments on narrower lots and further incentivize developers who reduce or eliminate parking, among other recommendations.

Report co-author Andrew Frey presented his ULI focus group’s findings on Friday to Miami Mayor Francis Suarez, who declined to comment about how he will incorporate the report’s recommendations into a revamp of Miami 21 that is currently underway.

“We are focused that [growth] happens responsibly,” Suarez said. “That it supports things like transit; that it supports our resiliency efforts.”\

Frey, director of development for Fortis Design + Build, said the focus group was formed last year to look at aspects of Miami 21 that inhibit progress in areas of housing choice, affordability and mobility.

“We wanted to give specific textual recommendations that hopefully can shorten up the cycle between finding glitches or gaps in Miami 21 and filling them,” Frey said. “We tried to make the recommendations as concrete as possible.”

According to the report, city officials should consider deleting lot size minimums and density maximums in certain areas, such as those zoned T4, T5 and T6. The neighborhoods with T4 zoning allow a transition from single-family homes to multifamily buildings with room for small businesses and mom-and-pop retail such as Southwest Eighth Street in Little Havana. In T5 neighborhoods, developers can put up mixed-use buildings that accomodate retail, office and apartments such as Wynwood. And T6 neighborhoods allow developers to build multi-story condo, apartment and office towers such as downtown Miami, Brickell and Edgewater.

Getting rid of density maximums would allow developers to build more apartments sized smaller for mid-market renters because they would be able to build 100 or more units an acre . And by eliminating lot size minimums, Miami can encourage the development of more housing types such as townhouses, row houses and brownstones found in other major U.S. metropolitan cities, the report states.

The ULI focus group also suggested dramatic revisions to the parking standards in Miami 21, including having the Miami Parking Authority provide all on-street parking in single-family residential neighborhoods as residents-only at no cost. Other recommendations included significantly reducing parking requirements for new buildings and allowing developers to obtain parking reductions without having to pay impact fees.

Greg West, CEO of apartment builder ZOM Living and ULI Southeast Florida Caribbean District’s chairman, attended the mayor’s presentation. He noted that the report was produced with input from several heavy hitters from the real estate industry, including urban planner Elizabeth Plater-Zyberk, the original author of Miami 21. In addition to Frey, the focus group included land use attorneys Iris Escarra and Steven Wernick, developers David Martin and Kenneth Naylor and architects Reinaldo Borges and Raymond Fort.

“We had a pretty big tent on whom we sought input from, which also included the people who originally wrote and drafted Miami 21,” West said. “I think from the private side and development community, we got a good base.”

Source: The Real Deal

Oct 23 No Comments

South Florida Developers Riff On The Shift From Condos To Rentals

Author: Admin

Categories: Commercial News,Development,Multifamily,Offices,Retail

The cyclical nature of Miami’s condo market has many developers shifting toward rentals – but not Michael Shvo.

The New York developer, who is making a big push in Miami Beach, said that as long as you have the right site and project, the overall market’s performance is irrelevant.

“It doesn’t really matter what the market is. You build something special in the right location, you’re not competing with something in Brickell or in Wynwood,” Shvo said at The Real Deal’s Sixth Annual South Florida Showcase & Forum on Thursday. “I don’t lose sleep at night over oversupply or undersupply.”

Shvo will be redeveloping the Raleigh hotel in Miami Beach. A partnership led by Shvo, Bilgili Group and Deutsche Finance Group bought the 83-room Raleigh for $103 million from a Tommy Hillfiger and Dogus Group, and also purchased the Richmond Hotel and the South Seas Hotel.

Shvo was joined by Laurent Morali of the Kushner Companies, Florida East Coast Realty’s Jerome Hollo, and developer Lissette Calderon on the panel, “The next wave of South Florida development,” moderated by TRD’s Editor-in-Chief Stuart Elliott.

Hollo acknowledged the slow luxury condo market.

“People are looking to place their investment in a little bit of a safer asset, which right now is multifamily. If that cycle turns again, you’ll see a lot of those buildings convert to condos,” he said.

His firm built the luxury mixed-use building Panorama Tower in Brickell, with rentals, retail, office and hotel components. The 2.6 million-square-foot, 85-story tower was completed in 2018 and secured a $425 million refinance earlier this year. It’s about 70 to 75 percent leased, he said.

“Renting is good for everyone now,” Hollo said. “Wherever they are in their life cycle, they love renting.”

Kushner Companies has purchased or is under contract to buy three sites in South Florida, and all of them will have rentals as opposed to condos, Morali said. In Edgewater, where it’s planning an 1,100-unit apartment development, the property is in a designated Opportunity Zone, giving Kushner substantial tax benefits.

But Morali said recent changes in the federal tax code and the wave of rent reform legislation in markets like New York and California didn’t impact Kushner’s decision to target South Florida.

“We’ve been looking [in Miami] for five years,” he said.

Calderon, president and CEO of Neology Life Development, said it was a personal choice to go from building condos to building rentals.

“It was a natural progression to go into the rental side, [with me] wanting to make an impact on the community we’re in,” she said.

Targeting the right renter and buyer via social media is vital to a project’s success, the panelists emphasized.

“You really have to be hyper-focused in terms of authenticity, local context,” Calderon said, referring to when she became a young, successful profession. “I had two options: living in the suburbs or living in the urban core with my mom. There was no product for someone like me.”

Hollo, whose firm coined the term “Brickellista” to market Panorama to renters, said that now with social media and technology, developers can hyperfocus on a certain demographic.

“There’s traffic, and then there’s traffic that might not be great for your product,” he said.

Shvo took offense to the term “demographic.”

“I think you have to stop using the word demographic,” he said. “Because demographic doesn’t matter anymore. … It’s all about the psychographic. What’s their lifestyle?”

Source: The Real Deal

Oct 17 No Comments

Finding Opportunities In Miami’s Multifamily Market

Author: Admin

Categories: Allapattah,Commercial News,Development,Multifamily,Trends

Employment and population growth continue to fuel Miami’s multifamily market across all segments.

With more than $3 billion in originations in South Florida and 146 loans granted in 2018, Berkadia is one of the region’s largest commercial mortgage lenders.

As part of its expansion in Florida, Berkadia hired Charles Foschini as senior managing director back in 2016. In an interview with Multi-Housing News, Foschini talks about Miami’s current multifamily investment trends and how new supply will impact the market. He also shares his predictions for the metro’s multifamily landscape for the next 12 months.

Foschini: Miami’s market is incredibly vibrant, but it’s also unlike most other major metro markets in that we have so much wealth imported here from other parts of the country and flight capital from around the world. That said, there are three distinct changes we’ve seen in the past two years.

First, there’s extraordinary demand for multifamily product not only as a result of strong job and population growth but also due to the limited inventory of affordably priced single-family homes. A shortfall of homes priced at $250,000 or below has prolonged renting for many would-be first-time homebuyers and those who lost their homes during the housing market collapse of 2008. At the same time, more people across the age and income spectrum—from Millennials to retirees—are renting by choice. They like the choice amenities many new developments offer and the worry-free lifestyle of renting.

Lastly, there has been an extraordinary amount of urban infill development in this cycle, not just in Miami’s downtown, although that’s practically unrecognizable from just five years ago but also in other urban submarkets. We’ve seen an incredible amount of new multifamily development directly on or adjacent to mass transit rail lines. In a city with incredible traffic congestion, walkability is a huge draw.

Construction is expected to mark a new cycle high with more than 16,000 units delivered by year’s end, according to Yardi Matrix. How will the new supply impact the Miami market?

Foschini: The new supply will be absorbed. Demand is still incredibly strong. More than 900 people are moving to Florida every day and our population is expected to soar to 22 million over the next three years. Absorption continues to outpace deliveries by about two to one in South Florida at large. The reality is that Miami is really a confined space, a peninsula. There are only 13 miles between the Everglades to Biscayne Bay and that’s all the land there is.

There is a need for new rental product in just about every submarket to lower the impact of the car and lessen commutes. In some areas like the Central Business District, Brickell and Miami Beach, you have all the elements of a true live-work-play environment already in place, but in emerging areas of the city that don’t have a direct tie to our rail lines, the easiest way to do that is to add high-quality residential communities near centers of employment—in submarkets like Doral or North Miami for example.

Which Miami submarkets are most attractive for investors and developers? Why?

Foschini: Miami is so dense that any area can be successful. The key is finding land at a value where you can hit your return on cost and make a profit. With that in mind, developers are finding some interesting deals in neighborhoods that are still technically in the city, but west of Interstate 95—neighborhoods like Allapatah, Opa-Locka and even Hialeah.

How is investment in the metro responding to the current economic environment?

Foschini: It’s extremely healthy—our commercial sectors are really thriving. In fact, ownership in the CBD has become increasingly institutional and the level of long-term investment in Miami from institutional and global capital is impressive. There are several high-profile, long-term infrastructure projects that are going to create new jobs and demand for housing. Absorption may slow as a result of all the new deliveries, but projects are filling up over time and most are hitting their rent and investment objectives.

What can you tell us about financing multifamily projects in Miami? How has the process changed in the past few years?

Foschini; In this cycle, lenders have maintained their discipline and seasoned developers have come to the table with more equity and more patient capital than we’ve seen in the past. That has allowed for more projects to get off the ground and have the breathing room to lease up. The market has no shortage of capital in both a recourse and non-recourse format. Banks, life companies and—on larger deals—debt funds have all stepped in to bring projects out of the ground.

As developable land in South Florida becomes scarcer, how do you see construction activity going forward? What about the cost of construction financing?

Foschin: Land is scarcer, that’s true, but there is no shortage of opportunity. As the highest and best use of land evolves, we will see more existing projects such as shopping centers and small offices come down to make way for redevelopment as multifamily. It is my belief that lenders’ spreads have been higher than in previous cycles and they were able to get away with it because the baseline indexes were so low. I believe that if the indexes trend up, competition will push spreads down and the environment, at least on the debt side, will remain favorable.

What are your overall market predictions for the next 12 months?

Foschini: Existing projects will continue to lease up and new projects that are well thought out and have well-capitalized and experienced operators, will get funded. Investment sales activity will be slower—that’s a given since a lot of product has been picked over and traded in this cycle—but there will still be activity from developers and investors who are creative and capitalize on things like access to mass transit, Opportunity Zone incentives etc. Overall, the demand from the investment community for product in Miami and South Florida as a whole will remain strong.

Source: Multihousing News

Oct 16 No Comments

Miami Among Top US Cities In 2019 For Growth

Author: Admin

Categories: Commercial News,Development,Multifamily,Retail,Trends

When it comes to economic growth, Miami ranks among the best in the nation, according to a new list.

New York-based WalletHub ranked over 515 cities on economic growth over several years, considering over 17 separate areas to score each city as part of an index out of 100. Those metrics included population growth, job growth, building-permit activity, growth in businesses and other economic factors. The study broke the cities into three categories: large, more than 300,000, midsize, 100,000 to 300,000 and small, fewer than 100,000.

Other cities in the area included:

Davie, No. 68
Boca Raton, No. 69
Boynton Beach, No. 92
West Palm Beach, No. 111

Source: SFBJ

Oct 04 No Comments

FIP Commercial To Host State of the Market Open Forum

Author: Admin

Categories: Commercial News,Development,FIP News,Healthcare,Leasing,Multifamily,Offices,Retail,Trends

Come join us next Tuesday, October 8th, at 10:30 AM for a State of the Market Open Forum being held at Soho Studios (2136 NW 1^st Ave) in Wynwood.

This event is hosted by FIP Commercial and is free to all real estate agents in the Miami area. Topics covered will include the following:

National Commercial Real Estate Trends
State of the Market – Miami Multi-Family
State of the Market – Miami Retail
State of the Market – Miami Office

We will also discuss asset class transactions, rental rates, occupancy, demand, and much more. This is an open forum setting so questions and comments throughout are appreciated.

Seats are limited so please RSVP at rsvp@fipcommercial.com.

Oct 03 No Comments

Miami’s Population Is Changing And That’s Making Real Estate Change, Too

Author: Admin

Categories: Multifamily,Trends

A population increase of foreign-born and northerners is influencing real estate in South Florida.

About 94 new people a day moved to Miami-Dade, Broward and Palm Beach counties from July 2017 to July 2018, most of them from out of the country. Meanwhile, about 58,000 Floridians over the course of the year moved to another state, according to data compiled by Bloomberg and the U.S. Census Bureau.

The Bloomberg study credited the loss of locals in major metro areas to pricey real estate and tax law changes.

“Northerners and foreigners coming down here, that’s going to drive prices,” said Kevin Morris, a senior director for Colliers International Affordable Housing division.

Developers continue to see an international clientele, especially those from Latin America, moving to the Magic City.

“Latin American economies are not in a good place but you can expect the elite to find the right liquidity that would be required to move abroad,” said Marcelo Kingston, developer and managing director for Multiplan Real Estate Asset Management.

High-earning professionals able to work from anywhere also are moving to South Florida from Connecticut, Massachusetts and New York.

The influx of northerners is reshaping development strategies in two ways, he said.

First, it forces Kingston’s team to build for someone putting down roots.

“We see Miami as a final destination,” he said. “When we position ourselves, we try to find well-established communities in Miami Beach.”

Second, northerners are looking for interior upgrades such as fancy flooring and cabinetry.

In the case of the condo 57 Ocean at 5775 Collins Ave., Kingston said: “As the developer, you need to be flexible in customizing the right upgrades” that a permanent resident would want.

“Design has to be in the right mindset towards meeting those needs,” he said.

The affordable housing market will also benefit from the population changes. The number of renters will grow as it becomes harder for the middle class and blue-collar workers to buy. Vacancy rates will drop and rents will increase, Morris said.

“From an affordable developer’s perspective if there’s an increase in rent levels it helps them because they are going to be able to charge more rent for their properties,” he said. “The developer will reap a benefit in the market increasing in rental value.”

Increased rents in affordable housing options will still be cheaper than what else is on the market since rent is based on an area’s median prices.

So, how could offering affordable housing benefit a developer?

Take an average $1,000 monthly rent in a market as affordable property, it’s marketed at 60% of that rent, or $600. If the median rent increases to $1,200 in the area, then affordable-property owners can charge $700. So, “from an affordable housing owner’s standpoint, higher rent is actually a good thing,” Morris said. And that could mean more affordable housing being made available.

The predictions for affordable housing may mean a brighter tomorrow but, for now, Floridians are looking elsewhere as rent and the cost of living inch higher. Over half of Miami’s population, 70%, are renters, according to research by Florida International University’s Jorge M. Perez Metropolitan Center. And a good chunk of the population spends over 30% of their paychecks each month on housing, which is more than what’s recommended for housing costs.

It costs a family of four about $85,000 a year to live in Miami-Dade County, according to the Economic Policy Institute’s Family Budget Calculator. And wages aren’t keeping up.

“What I’ve seen now is that some Floridians might be leaving because the cost of living has been growing a lot,” Kingston said.

The lack of available affordable housing is such a concern that Metropolitan Center’s AICP Associate Director Ned Murray’s team is trying to solve it with an affordable housing master plan.

“The two big factors: How much are you going to get paid and where are you going to live? They are getting more difficult even for people looking to move here when you look at wages versus housing costs,” Murray said.

The mid-market is the one area in South Florida not expected to see much growth.

“That’s going away for the most part,” Murray said. “From the developer’s standpoint, they are having a hard time building at that mid-market because of the price of land and the scarcity of land that would be ideal for new housing construction for that mid-market.”

The median purchase price of a home, about $350,000 in Miami, is not affordable to 85% of all city households, Murray said.

“Miami is becoming expensive to raise a family,” said resident Mary Snow, executive director of the Coral Gables Community Foundation. “Could we move to Vero Beach or the Carolinas and live more cheaply? Yeah. And we’ve had a lot of friends do that.”

“But,” she said, “this is home.”

Besides family close by, jobs, and being second- and third-generation Miamians, the Magic City’s amenities and culture also keep Snow and her husband here.

“We always have people that move away and come back. I hope we continue to see that,” Snow said.

Real estate broker and EWM Realty International President Ron Shuffield is not concerned that the population changes will hurt the real estate market: “The community will continue to grow. Will it continue to grow with people born here? Not necessarily, but it can.”

Real estate, regardless of who is buying, is being sold and transactions are expected to continue.

“We’ll always have people moving in and out,” he said. But “we’re selling property” whether it’s through exchanging currency or welcoming someone from South Carolina.

Source: Chicago Tribune

Sep 30 No Comments

The ‘Incredible’ Flow Of Capital Into Multifamily Is Expected To Increase In 2020

Author: Admin

Categories: Commercial News,Multifamily,Trends

The U.S. multifamily sector has emerged as a top investor target during this cycle, and despite concerns of a looming recession, industry leaders expect the flow of investment to only increase next year.

Top capital markets executives, speaking Wednesday at Bisnow’s Multifamily Annual Conference New England, said they expect equity and debt flow into the sector to continue to rise. They said they see institutional investors allocating more money toward multifamily, banks aggressively competing to provide loans for apartment and condo projects, and Fannie Mae and Freddie Mac beginning a new spending cycle next week with a combined $200B budget.

All of this competition to provide equity and debt for multifamily projects has narrowed the yields on these deals, but with uncertainty in other sectors of the economy, experts believe investors will be happy to accept slightly lower returns. Gregory Bates, the chief operating officer of developer GID, said his firm manages money for some of the world’s largest pension funds and sovereign wealth funds. He said they remain bullish on the multifamily sector. GID’s portfolio comprises more than 30,000 residential units and it has a 10,000-unit construction pipeline.

“Real estate allocations are going to stay where they are or go up,” Bates said. “Apartments and industrial are at the top of everyone’s list … There are terrific tailwinds on the capital side.”

Walker & Dunlop Managing Director Andrew Gnazzo also foresees an increase in institutional investment.

“Life insurance companies this year have allocated more money to multifamily, and everything we’re hearing is they’re going to allocate more in 2020,” Gnazzo said. In addition to large amounts of incoming equity, Gnazzo said debt providers are also clamoring to loan money on multifamily projects. “There is an incredible amount of capital in the debt space,” Gnazzo said. “There is a really nice bucket of capital on both the debt and the equity side.”

The inflow of debt is not just seeking apartment projects, Cornerstone Realty Capital President Paul Natalizio said, but lenders are also bullish on condos, a sector they have had concerns about in the past.

“There is a surprisingly very strong market for condos,” Natalizio said. “It’s an entirely different market now. Lenders will tell you there are not enough condos … Banks have come a long way in that area, they’re very aggressive.”

Fannie Mae and Freddie Mac are also expected to pour more money into the multifamily space in the coming months.

The two government-sponsored enterprises pulled back on spending over the summer, experts said, but last month the Federal Housing Finance Agency announced new loan purchase caps that will allow Fannie Mae and Freddie Mac to spend a combined $200B over a 15-month period from the start of Q4 through the end of 2020.

“The clock starts Oct. 1,” National Multifamily Housing Council Vice President of Capital Markets Dave Borsos said of the Fannie and Freddie allocation. “From that point to the end of 2020, each enterprise will have $100B to purchase loans.”

Gnazzo said this is an encouraging sign for multifamily owners and developers who utilize debt from Fannie and Freddie.

“As Q4 goes on and into Q1 and Q2, I think [Fannie and Freddie] will put their foot on the gas; they have to spend $200B,” Gnazzo said. “It’s encouraging for all that have enjoyed agency debt.”

The inflow of money to real estate comes as economic indicators, such as the inverted yield curve, point to a coming recession. Investment managers and brokers said capital providers are looking to multifamily real estate as a more stable sector than other portions of the economy, and are willing to accept lower returns than they may have in previous years. Bates said his firm, GID, believes there will be a “hitch” in the economy at some point and it will slow the net operating income growth of apartment buildings. He said this may hurt investors who buy projects with three- or- five-year sale horizons, but those with time to wait should still see positive returns. He thinks investors are adjusting their expectations accordingly and would be happy with returns in the 6% to 7% range.

“Every investor we know, they won’t tell you this today, but 10 years from now they’ll be tickled pink if they get 6[% returns],” Bates said. “They think there will be a scarcity of product and believe producing 6 or 7 is going to be incredibly attractive relative to other global options.”

The expected returns on a multifamily project vary in different markets, CBRE Capital Markets Senior Vice President Todd Trehubenko said.

In Boston, where Wednesday’s event was held, he said investors’ return expectations have dropped from the 9%-to-10% range to the 5%-to-6% range.

“The amount of money out there chasing deals is astounding, and you have groups willing to accept low returns,” Trehubenko said.

Weston Associates Head of Acquisitions Elliott White agreed that return expectations are down for the Boston market, leading his firm to look elsewhere.

“A ton of institutional capital is coming in and saying, ‘We can’t buy anything with less than [10% returns], so my advice would be don’t buy deals in Boston,” White said. “The Boston market is still strong and will stay strong, but it won’t be the same source of high-yield investments.”

White instead said he is looking at the Mid-Atlantic, Gulf Coast and Midwest regions as areas providing higher returns to investors. The Davis Cos. Vice President of Investments Rachel Edwards agreed that investors need to look south for better yields.

“I do have to leave [Massachusetts], and the Southeast is the place I’m focused on now, from the Mid-Atlantic to Florida,” Edwards said.

Her firm is far from alone in moving south to find yield.

“It’s getting pretty competitive down there,” she said.

Source: Bisnow

Sep 27 No Comments

Rent Reform In New York, California Propels New Wave Of Multifamily Investors To Miami

Author: Admin

Categories: Commercial News,Multifamily,Trends

First, it was tax reform that pushed CEOs, hedge fund managers and other high-net-worth individuals to South Florida. They were lured in by the favorable climate, luxury residential properties and most of all, substantial tax savings.

Now, it is the multifamily investors who are heading to South Florida, and for a different reason: rent control, something the Sunshine State lacks.

In June, New York state passed a sweeping rent reform law, expanding its protections for millions of rent stabilized tenants. The law dramatically limits how landlords can increase rents on stabilized apartments and opens the door for rent stabilization to expand outside of New York City. It stopped short of a rent cap, but that is expected to be on the table in some form in the next legislative session.

In Illinois, although rent control advocates lost a legislative battle earlier this year, they’re gearing up for a push to overturn the statewide ban on rent control in Springfield next year. And California is now poised to implement a statewide cap on annual rent increases.

Multifamily investors are moving quickly and making offers on properties in South Florida, brokers say. But they are also encountering a strong rental market and low supply, which have pushed up prices.

Eleventrust, a commercial brokerage in Miami, is working with investors from New York and Los Angeles who are looking to shift their focus to Florida because of the impact the new laws will have on their current investments.

Jose Ramos, a broker with Eleventrust, said at least 40 percent of the calls it’s getting have been from New York investors who want to close on properties in South Florida. “There’s a lot of confusion, a lot of focus on getting their money out of there and getting it into high-yield markets,” he said.

The brokerage is negotiating with two groups of investors to acquire apartment properties, via 1031 exchanges. One is for the River Lofts Apartments, a 43-unit complex at 500 to 522 Northeast 78th Street in Miami’s Upper East Side neighborhood, which hit the market with Ramos and Rafael Fermoselle, Eleventrust’s managing partner, earlier this year. It’s on the market for about $7.8 million.

Ramos and Fermoselle are showing investors properties in gentrifying markets like Little River, Little Havana and Allapattah. “The thing with Miami-Dade specifically is there’s not a lot of product that’s big enough,” Fermoselle said.

The investors they’re dealing with are looking for deals in the $5 million to $30 million range.

Deme Mekras, managing partner of MSP Group, has also received offers from New York buyers who plan to invest in South Florida multifamily properties because of the recent rent reform measures. New Yorkers especially, are more comfortable with properties in the urban cores, he said.

Rent reform is also becoming a national issue, as more than a third of Americans are considered rent-burdened. The problem is worse in South Florida, according to a report from Freddie Mac earlier this year, which found that Miami ranked as the most rent-burdened market in the U.S.

Vermont Sen. Bernie Sanders, a self-described Democratic socialist, is proposing a $2.5 trillion housing plan that would cap annual rent increases at 3 percent or one and a half times the consumer price index, whichever is higher.

Searching For Yield

Multifamily investors from out of state would prefer to spend their money on one large deal but are challenged by a lack of supply, brokers said. They’re non-institutional players, looking to spend in the range of $30 million and $40 million.

But because South Florida’s rental market has remained strong, some sellers aren’t willing to part with their property. And if they are, the prices are too high. Rents have increased by 15 to 20 percent over the last eight years, according to Hernando Perez, director of multifamily investment sales for residential brokerage Franklin Street. More people are also moving to Florida, in part because of the favorable tax climate.

“There are not a lot of deals that make sense and not a lot of deals to buy,” he said.

Perez said he is seeing a number of California buyers looking to use the proceeds of 1031 exchanges to buy in South Florida. They cited the pending statewide rent control legislation, known as AB 1482, as a reason. Perez said he is working with a group that wants to spend $10 million for a multifamily building. The group, which Perez declined to identify, is looking at properties in Hallandale Beach, Fort Lauderdale and Pompano Beach.

And what if Florida was to enact similar statewide rent regulations? Simple, Perez said.

“It would crush the profitability of the real estate market.”

Source: The Real Deal

Why South Florida?

“Investors are working closely with Eleventrust because we have the inventory other brokerages don’t, plus, many of the deals they are transacting are happening off market, which many investors prefer,” explains Fermoselle.

Opportunity Zones

“Almost 16% of South Florida’s commercial assets are located in Opportunity Zones, one of the highest rates in the nation,” Fermoselle tells GlobeSt.com.

Tax Savings

“We currently have 4 successful deals with New York investors including multifamily properties with 9-18 units,” says Fermoselle. “We also have properties located in emerging neighborhoods that are garnering interest from east coast investors.”

“People can’t afford to pay a lot of the rentals. Apartments in that part of town would be cheaper than other areas like Brickell,” said Carasa.

Carasa said, “Because it’s a central location, I’ve seen people move from Homestead to here because of traffic.”

“It’s a great but underutilized neighborhood,” said Miranda. It’s one of the few east-west corridors that takes you straight from the beaches to the swamps.”

Due to increasing interest in the area, Carasa said, “For commercial properties it usually takes a year, but, for these it would take no more than two to three months to sell.”

“We are focused that [growth] happens responsibly,” Suarez said. “That it supports things like transit; that it supports our resiliency efforts.”\

“We wanted to give specific textual recommendations that hopefully can shorten up the cycle between finding glitches or gaps in Miami 21 and filling them,” Frey said. “We tried to make the recommendations as concrete as possible.”

“We had a pretty big tent on whom we sought input from, which also included the people who originally wrote and drafted Miami 21,” West said. “I think from the private side and development community, we got a good base.”

“People are looking to place their investment in a little bit of a safer asset, which right now is multifamily. If that cycle turns again, you’ll see a lot of those buildings convert to condos,” he said.

“Renting is good for everyone now,” Hollo said. “Wherever they are in their life cycle, they love renting.”

“We’ve been looking [in Miami] for five years,” he said.

“It was a natural progression to go into the rental side, [with me] wanting to make an impact on the community we’re in,” she said.

“You really have to be hyper-focused in terms of authenticity, local context,” Calderon said, referring to when she became a young, successful profession. “I had two options: living in the suburbs or living in the urban core with my mom. There was no product for someone like me.”

“There’s traffic, and then there’s traffic that might not be great for your product,” he said.

“I think you have to stop using the word demographic,” he said. “Because demographic doesn’t matter anymore. … It’s all about the psychographic. What’s their lifestyle?”

“Northerners and foreigners coming down here, that’s going to drive prices,” said Kevin Morris, a senior director for Colliers International Affordable Housing division.

“Latin American economies are not in a good place but you can expect the elite to find the right liquidity that would be required to move abroad,” said Marcelo Kingston, developer and managing director for Multiplan Real Estate Asset Management.

“We see Miami as a final destination,” he said. “When we position ourselves, we try to find well-established communities in Miami Beach.”

In the case of the condo 57 Ocean at 5775 Collins Ave., Kingston said: “As the developer, you need to be flexible in customizing the right upgrades” that a permanent resident would want.

“Design has to be in the right mindset towards meeting those needs,” he said.

“From an affordable developer’s perspective if there’s an increase in rent levels it helps them because they are going to be able to charge more rent for their properties,” he said. “The developer will reap a benefit in the market increasing in rental value.”

“What I’ve seen now is that some Floridians might be leaving because the cost of living has been growing a lot,” Kingston said.

“The two big factors: How much are you going to get paid and where are you going to live? They are getting more difficult even for people looking to move here when you look at wages versus housing costs,” Murray said.

“That’s going away for the most part,” Murray said. “From the developer’s standpoint, they are having a hard time building at that mid-market because of the price of land and the scarcity of land that would be ideal for new housing construction for that mid-market.”

“Miami is becoming expensive to raise a family,” said resident Mary Snow, executive director of the Coral Gables Community Foundation. “Could we move to Vero Beach or the Carolinas and live more cheaply? Yeah. And we’ve had a lot of friends do that.”

“But,” she said, “this is home.”

“We always have people that move away and come back. I hope we continue to see that,” Snow said.

“We’ll always have people moving in and out,” he said. But “we’re selling property” whether it’s through exchanging currency or welcoming someone from South Carolina.

“Real estate allocations are going to stay where they are or go up,” Bates said. “Apartments and industrial are at the top of everyone’s list … There are terrific tailwinds on the capital side.”

“There is a surprisingly very strong market for condos,” Natalizio said. “It’s an entirely different market now. Lenders will tell you there are not enough condos … Banks have come a long way in that area, they’re very aggressive.”

“The clock starts Oct. 1,” National Multifamily Housing Council Vice President of Capital Markets Dave Borsos said of the Fannie and Freddie allocation. “From that point to the end of 2020, each enterprise will have $100B to purchase loans.”

“As Q4 goes on and into Q1 and Q2, I think [Fannie and Freddie] will put their foot on the gas; they have to spend $200B,” Gnazzo said. “It’s encouraging for all that have enjoyed agency debt.”

“The amount of money out there chasing deals is astounding, and you have groups willing to accept low returns,” Trehubenko said.

“I do have to leave [Massachusetts], and the Southeast is the place I’m focused on now, from the Mid-Atlantic to Florida,” Edwards said.

“It’s getting pretty competitive down there,” she said.

“There are not a lot of deals that make sense and not a lot of deals to buy,” he said.

“It would crush the profitability of the real estate market.”

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