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Finding Opportunities In Miami’s Multifamily Market

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

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Ex-Wynwood owners brand Allapattah today’s bargain

Read the full article at: Miami Today

Roland DiGasbarro was actively looking to invest in Allapattah two years before purchasing his first building there in early 2014 because it’s an important and appealing urban location like Wynwood, he said, but at a fraction of the price.

The owner of Windsor Investments, a family-owned South Florida real estate investment company, Mr. DiGasbarro said he has been very involved over the past decade in the region’s urban locations, including downtown Miami, Coral Gables and Wynwood. At the beginning of the year, however, Mr. DiGasbarro sold his last property in Wynwood, where he owned a number of buildings.

Two years after venturing into Allapattah and buying that first building for $70 a square foot, he now owns almost a dozen properties in the area, which is northwest of downtown and a few miles east of Miami International Airport. Mr. DiGasbarro said he purchased for investment reasons and believes the neighborhood has distinctive qualities.

Geographically, Allapattah makes sense and costs are substantially lower than everything surrounding it, he said. Moreover, Mr. DiGasbarro firmly believes in the area’s appeal.

As Windsor Investments acquires assets, he said, the company continues to improve and renovate them. “We’ve been able to attract a varied tenant base into the area, including artists, restaurants and manufacturers.”

The beauty about this steadily increasing interest in Allapattah, Mr. DiGasbarro said, is that “like us, other local real estate families are aggressively buying for the very long term and who have the intention of improving the area.”

William Betts, an artist who owned buildings in Wynwood, began buying property in Allapattah in 2011 to add to his portfolio. Eventually, he sold his Wynwood buildings.

“The market had peaked and it was hard for it to go up,” Mr. Betts said. He said the buildings he saw in Allapattah were high quality – spacious, in good shape and inexpensive.

“When I bought, the prices were $75-$80 a square foot, which was a great investment,” Mr. Betts said. “Now, it’s hard to find anything under $150 a square foot.”

He owns an entire block near Seventh Avenue, keeping a portion for garden space and renting the rest to automotive tenants; a few warehouses on 10th Avenue that he uses for his own storage and others that he rents to artists; and a number of buildings as investments.

“There’s a working class vibe to Allapattah and I’ve always been attracted to that,” Mr. Betts said. “There’s also a large residential component, which makes it a real community.”

Wynwood is where people come to party, he said, but Allapattah is where Miami works.

“It won’t become a restaurant and club scene but will stay true to its legacy,” Mr. Betts predicts. “More and more artists will be attracted to Allapattah because its spaces are large and it’s affordable by today’s standards.”

Creative types will fit in well with the traditional atmosphere of Allapattah, Mr. Betts said. “It’s the only area in Miami where it feels like people are working and doing things.”

Francisco De La Torre IV, director and curator of Butter Gallery, has also relocated from Wynwood to Allapattah, where he said many important real estate developers have already acquired properties and it is just a matter of time before the area is completely transformed.

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Commercial development in Allapattah is emerging from Wynwood’s shadow

Source: The Real Deal SFL

In recent months, commercial real estate interest in Allapattah has taken off. In early March, a company tied to the Rubell family purchased a 50,225-square-foot building at 1101 Northwest 23rd Street for $8.35 million. The property previously traded for $3.125 million in 2012. The same month, developer Michael Simkins picked up the McKenzie Construction warehouse for $3.58 million from Alex Karakhanian. Two years ago, Karakhanian paid $1.14 million for the site.

In 2013, an unimproved warehouse in Wynwood would go for $50-per-square-foot, Kohn said. Today, the price has leapfrogged to $120-per-square-foot, he added.

Allapattah is also unique because the neighborhood has a diverse array of commercial activity, from produce warehouses that sell to local restaurants and markets to a discount retail corridor along Northwest 20th street and industrial warehouses along the Miami River, Kohn said.

 

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