JUST AS LEBRON JAMES recently made the decision to come to South Florida, so too have multifamily buyers from around the country.
The Miami Heat won their last NBA championship in 2006, around the same time that the local market stood out as the hottest place for multifamily investment.
Now, attention is focused on South Florida once again, deservedly so.
The single-family housing crisis has led more residents to the flexibility, ease, and affordability of renting.
Even as the economy improves, more residents will move away from home and stop “doubling up” to save money, two trends that will further enhance apartment fundamentals.
Broward County's unemployment rate, at 10.7 percent, is a full percentage point below that of Florida. And better days are on the horizon. Fort Lauderdale's job market is expected to grow 2.6 percent from the third quarter of 2010 to the third quarter of 2011, well outpacing the national job growth forecast of 1.1 percent during that time, according to Moody's Economy.
Across Florida, the employment market is expected to grow about 3 percent during that period, with the construction, health services, natural resources, and business services sectors leading the charge. Royal Caribbean's Allure of the Seas, the world's largest cruise ship, recently arrived at Fort Lauderdale's Port Everglades, showing that the leisure and hospitality industry is also making waves here again.
Bolstered by these signs of economic strength and stability, investors are once again eyeing Fort Lauderdale as one of the best bets in the country—and their interest is quickly turning into action.
The Fort Lauderdale apartment market has seen three recent trades worthy of front-page headlines.
These deals all attracted significant interest as the supply and demand outlook continues to improve.
Buyers are confident that rents and NOIs will continue to grow here, and the slow pace of new construction means it will be a few years before new deliveries have an effect on the rental pool.
Dallas-based Invesco Real Estate's acquisition of the brand-new, 481-unit Alexan Solero in Plantation from Dallas-based Trammell Crow Residential marked the first garden-style apartment sale above $200,000 per unit in years. At more than $104 million (or $217,000 per unit), the transaction further signaled the return of South Florida as a high-profile, desirable market.
The fact that the asset was still in lease-up (80 percent leased) was overshadowed by the lack of similar quality assets and the acceptance that rental rates will only get stronger.
Another head-turning deal was the sale of the Resort at Pembroke Pines to Los Angeles–based CBRE Investors. The 1,520-unit garden-style apartment community was sold by a partnership between Chicago- based Heitman and CalSTRS.
At $193.5 million, the purchase price was the largest South Florida sale in several years.
A third recent deal was the 366-unit, 1990-vintage Hillsboro Bay Club in Coconut Creek. Seattle-based Kennedy Associates paid more than $53 million (or $145,000 per unit), matching the same price The Laramar Group paid for the asset in early 2007. Is this a sign that the market is rebounding toward its peak, condo-conversion days? Time will tell, but nobody can argue the fact that optimism is in the air.
Fundamentals Fight On
The vacancy rate for apartments in Broward County was just 5.5 percent as of August 2010, according to Reinhold P. Wolff Economic Research.
While this was 20 basis points higher than in May 2010, it was a sharp decline from the 6.8 percent recorded in August 2009. Average monthly rents also climbed year-over-year, increasing 2.1 percent.
These improved fundamentals, along with lower cap rates and very attractive financing for stabilized assets, have reinvigorated the investment sales market to the point where equity investors are focusing again on new construction.