Within two weeks of bringing a 65-unit apartment complex in Fort Lauderdale’s Dorsey-Riverbend neighborhood to market, Franklin Street had toured the real estate 30 times with interested buyers.

Both regional and out-of-state investors were drawn to the 1972-built North Fork Gardens property when it hit the market in March, said Hernando Perez, director of multifamily investment sales with Franklin Street.

The apartment complex northeast of Interstate 95 and Broward Boulevard traded for $6.9 million in July, setting a price record for the neighborhood at about $107,500 per unit.

“We were able to achieve a triple-digit per door number, which in that market has never really been done before,” Perez said.

Purchased by a Coral Springs company, the Section 8 apartment complex morphed into a highly competitive deal indicating the strong desire by multifamily investors to own a piece of South Florida real estate.

Similar record-setting deals have made their mark in the region this year following a big year for multifamily investment in South Florida. While sales activity lagged in the first quarter of 2017, investors enthusiastically returned to the market in the second quarter.

Six of the 10 priciest multifamily deals in Miami-Dade County since July 2016 closed during the first half of this year, according to CoStar Group. The five largest deals in Broward County also closed during the first half of the year, and a flurry of big-dollar trades valued over $49 million closed in Palm Beach County in July.

Hometown bankers see a continuous need for rental product in South Florida over the next decade and consequently are more than willing to fund the transactions, said Eddy Arriola, CEO of Apollo Bank in Miami.

Climbing homeownership costs have kept rental demand high. Coupled with South Florida’s robust job and population growth, the rental market is sitting on solid fundamentals, making it a sound move for banks like Apollo as well as investors.

Over 15,900 apartments are slated for completion this year, with the greatest supply coming to Miami — a cycle high in all three counties, according to Marcus & Millichap’s latest multifamily report.

“If I talk to a banker that is not lending on multifamily, it’s only because they have concentration issues and have been so active lending in the last five years that maybe they might be pulling back … but not because they feel it’s overheated,” Arriola said.

Apollo is interested in financing both new construction and acquisitions, he said, and deals keep popping up with financing readily available.

Miami-Dade County

Real estate attorney Michael Denberg represents buyers looking for value-add plays in South Florida.

“Over the last year there’s been a very significant amount of multifamily transactions, mainly in the Class B type of environment,” said Denberg, a partner with Arnstein & Lehr in Fort Lauderdale.

Investors eyeing property in Miami-Dade have swayed toward older, stabilized products with significant upside opportunity. Class B and C properties outside Miami’s urban core, where rents are significantly more affordable, remain in high demand by tenants — and investors have taken note.

Going-in cap rates for these properties fall in the high 6 percent to the low 9 percent range, according to Marcus & Millichap’s latest multifamily report.

In May, Denberg worked a $61 million deal in suburban West Kendall, where he helped negotiate the sale of the 424-unit Broadwater Apartments, a community that last traded in 1988, a year after it was built.

The property sold in an off-market transaction to North Palm Beach-based Electra America Inc. in a deal that broke down to about $144,000 per unit.

The transaction pointed to the growing interest in Class B and C apartment properties across the county.

Developers have built mostly luxury rentals this cycle due to escalating building costs. While there is a growing supply of Class A product under construction in Miami-Dade, new units are renting at a premium.

Average rental rates for Class A apartment buildings increased 12.7 percent in the year ended in June, according to Marcus & Millichap.

Affordability issues have fueled tenant demand for older apartment communities, further supporting occupancy rates in all tiers.

As of June, most Class B and C properties were 97 percent to 100 percent occupied. Class A apartment buildings, on the other hand, were about 85 percent occupied, down from 97 percent last year, according to Colliers International.

The revitalization of up-and-coming Miami neighborhoods like Little Haiti and Little Havana will further spur buyer interest for older properties in those areas, Marcus & Millichap said in its third quarter report.

Multifamily sale volumes picked up across Miami-Dade in the second quarter, said Peter Mekras, a managing director at Aztec Group. The region is on track to meet or exceed last year’s transaction volume with more deals expected to close later this year.

As Class A properties continue to sell at a premium, the value of Class B and C properties has risen. A vintage apartment complex can sell for over $200,000 per unit, whereas five years ago those numbers didn’t make sense, Mekras said.

“There’s tremendous liquidity in the market,” he said. “If you’re an owner and you’re looking to sell your property, there’s a very deep pool of buyers.”

Broward County

Perez, who handles multifamily sales at Franklin Street, listed an apartment complex in Plantation during the second quarter and found the submarket just as competitive as Fort Lauderdale.

Within two weeks, 25 potential buyers toured the property with offers starting at $100,000 per door.

Perez is in the midst of negotiating with a New Jersey group and noted investors squeezed out of Miami-Dade’s expensive market are moving north to Broward. They’re zeroing in on potential gains in specific submarkets where rents are still rising.

In Broward, investors are not only eyeing value-add properties but also actively searching for Class A product. “As we continue to move through the year, we’re starting to see that the competition for Class A institutional assets is getting fierce,” Perez said. “There are a lot of investors chasing that space.”

This year’s largest trade was in Pembroke Pines. The 700-unit Montage at City Center was acquired for $159 million by Virginia-based Harbor Group International. The 2014-built community sold for $226,429 per unit with 95 percent occupancy.

Then came another blockbuster deal: The $134 million sale of the Amaray Las Olas, the first urban high-rise to hit the market during this real estate cycle in South Florida. GID Real Estate Investments in Boston paid $526,000 for each of the tower’s 254 ultra-luxury apartment units. The 30-story rental skyscraper was developed by Stiles Corp. and the Rockefeller Group, which quickly turned the property over after its 2016 completion.

Stiles president of residential development Jeff McDonough said the Amaray sale set a price-per-unit record for any multifamily asset in the Southeastern U.S. south of Washington.

“That makes a strong statement about Broward County and Fort Lauderdale — Broward County and South Florida are on par with other major metro markets in the Southeastern U.S. for projects of this caliber,” he said. The Amaray was received remarkably well by Fort Lauderdale’s rental community, reaching stabilization in less than a year at some of the highest rental rates in South Florida.

McDonough said the group’s decision to sell didn’t indicate any concerns about the market. He said the high-rise attracted interest from large institutions as well as well-capitalized, private groups, both domestic and international. Several condo converters also stepped forward due to the apartment tower’s location adjacent to Las Olas Boulevard in the heart of Fort Lauderdale’s central business district.

Marcus & Millichap noted transit expansion like All Aboard Florida’s Brightline express train will bring more buyer attention to downtown Fort Lauderdale and the Flagler Village neighborhood. Value-add opportunities are also prevalent in Hollywood, Dania Beach, Pompano Beach and Deerfield Beach, where cap rates can reach 8 percent.

Palm Beach County

Eleven properties with at least 100 units traded hands in Palm Beach County this year by September for a total dollar volume of about $709 million on large communities, said Avery Klann, executive managing director with ARA.

Both new and vintage products changed hands in recent months. Notables sales include the 259-unit Loftin Place in West Palm Beach, which changed hands for $63.5 million in July. The 2015-built complex was purchased by New York-based Castle Lanterra Properties for about $245,000 per unit.

The Delray Verana in Delray Beach, a 1988-built complex with 488 apartments, was purchased by San Diego’s Bainbridge Capital for $102.5 million, or $210,000 per unit.

“The market has definitely picked up starting in the second quarter. The first quarter was a little slow,” said Klann, who was involved in both deals. “We’re seeing interest in core assets like Loftin Place as well as value-add opportunities like Delray Verano.”

The blockbuster deal was the Quaye at Palm Beach Gardens, a 340-unit apartment complex acquired by New Jersey-based PGIM Real Estate for $118 million, or $347,000 per unit. The complex was built in 2015.

Even pension fund advisers, which have traditionally focused on core, Class A product, are now also looking at value-add plays, Klann said.

He credits South Florida’s strong job and population growth as the main drivers for rental demand throughout the region. The heightened demand has filled more buildings, supported rental rates and turned older apartment communities into hidden real estate treasures waiting to be polished by a new owner.

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