When JLL’s Maurice Habif brought a 336-unit Hollywood apartment complex to market, just before Labor Day, he noticed more than the usual attention of institutional investors in South Florida.
Habif saw unknown private investors, family offices outside Florida, even a group funded by 1,031 deferred capital gains.
Parc Station, a garden-style community community at 2301 North 29th Avenue, was eventually sold to Atlanta-based Cortland Partners for $ 91.7 million, which is the third trade of a private investor in the last 18 months. However, increased interest in the region from the new harvest of investors has helped increase supply.
This appetite for multi-family assets in Florida expects brokers to expect a flood of trades in 2021. Investors with more families, who felt they were good, threw themselves into the market, while landlords held assets in hopes that rent collections would stabilize, brokers from South Florida said.
Gridlock led to a slowdown by some measures. Multi-family sales of more than $ 25 million in Palm Beach, Broward and Miami-Dade districts fell from 39 sales in 2019 to 31 sales in 2020, said Hampton Beebe, vice president of Newmark Boca Raton.
The flurry of business at the end of the year was a promising sign of what was to come. The $ 20 million plus dollar in South Florida was $ 2.8 billion in 2020, up 17 percent from $ 2.4 billion year-on-year, according to JLL.
And despite the sharp rise in unemployment – the unemployment rate in the Miami Beach-Kendall metropolitan area rose to 7 percent in December 2020 from 1.5 percent in January 2020, according to the U.S. Bureau of Labor Statistics – landlords have not seen a drop in rents. Rents for an apartment in the Miami metropolitan area stagnated year-on-year – according to Yardi, there was an increase of 0.2 percent from December 2019 to December 2020.
Meanwhile, buyers in the multi-family market in South Florida could change. Real estate investment funds accounted for only 3.2 percent more families trades in 2020 compared to 12.8 percent a year earlier, says Brandon Isner, a Miami-based CBRE researcher.
The share of private buyers in the sale of investment in apartments last year fell to 45.2 percent from 47.5 percent in 2019, said Isner. And institutional investors received a much larger share of trades, representing 46.3 percent of transactions in 2020 compared to 32 percent in 2019.
These changes were at odds with national trends. In the US, private capital accounted for 66.6 percent of business in 2020, compared to 64.9 percent in 2019, while the share of institutional capital rose to 24.6 percent in 2020, compared to 22 percent in 2019.
Cap rates for more families in South Florida remained unchanged last year, despite Covid-19, with rates in the summer 2020 to be about 4.5 percent, similar to cap rates in the second half of 2019, according to CBRE data.
These rates compare South Florida to places like Los Angeles, Atlanta and Chicago. According to the CBRE, the rate of family restraint in South Florida was less than 5.8 percent in New York and 5.3 percent in Orlando and Philadelphia.
Greater interest in South Florida means that ceiling rates will be further compressed. Beebe said his team sees it in the first quarter of this year.
Private and institutional investors who are betting on larger assets have been trying to hold them for up to 10 years, and South Florida sales after the Great Recession were a selling point.
“Miami is always underestimated for recovery,” Beebe said.
Collections for multi-generational South Florida Class A assets are over 95 percent, with Miami-Dade lagging behind Broward and Broward lagging behind Palm Beach County. Class B and C assets are still above 90 percent, according to Cushman & Wakefield.
The perceived stability of the region is the reason why the real estate company based in Yamal Yidios, Miami, Ytech, did not accept a smaller offer at Ocean House, a 186 garden-style apartment building at 7780-7810 Tatum Waterway Drive in Miami Beach’s North Beach area. Ytech listed the property for $ 50 million in the summer, and Yidios is happy with this price. “If the timing is right, we’ll sell Ocean House,” he said.
In December, Ytech sold the 491 Miami Gardens apartment complex to private investor Greenstone Property Group $ 78 million. Ytech bought the property for $ 14.4 million in 2012.
Sellers and their brokers claim that out-of-court buyers are clearly showing more interest. Yidios said that of the 460 confidentiality agreements he received for Ocean House in Miami Beach, 35 percent came from the New York or Los Angeles area.
Joseph Thomas and his team at Marcus & Millichap usually work with real estate between 10 and 200 units, which usually do not capture institutional interest. More stabilized properties indicate a reduction rate of 5 percent or higher, he said.
Although market conditions such as the Covid-19 may push landlords to sell, the catalyst is usually a personal situation, Thomas said. Maybe the landlord is ready to retire. Maybe his family doesn’t want to take over the business. Maybe the loan is due.
210 properties with 8 to 100 units were sold in South Florida in 2020, down 19 percent from 258 deals in 2019, Thomas said.
He also said state inquiries had doubled since 2019, with 25 percent of inquiries from 2019 coming from the state compared to mid-2020. with low taxes.
“March and April were relatively slow and scary,” Thomas said. “Then investors started to reappear.” The collections came in better than originally expected. The business started to flourish in May and we never looked back. “