HOUSTON – Houston’s multifamily market is set for supply and demand parity in 2019, according to Berkadia’s 2019 Houston Multifamily Market preview. Following a slowdown in absorption deriving partially from a return of homeowners to residences after Hurricane Harvey, multifamily developers will taper deliveries to bring supply and demand closer to equilibrium.

“2019 should actually be very favorable towards the landlord,” said Ryan Epstein, Senior Managing Director of Berkadia’s Houston office. “We’re not going to have a lot of supply, so it’s a good year for landlords to solidify occupancies and work on increasing rents. The trend of capital chasing assets will continue into 2019, and Houston has displayed exceptional fundamentals that will keep the multifamily market attractive for a variety of large institutional investors.”

Rising interest rates will present some headwinds in 2019, according to Senior Managing Director Tucker Knight of Berkadia’s Houston office.

“Multifamily developers and investors are certainly more conscientious about where we are in the cycle,” said Knight. “The status quo is expected to remain in 2019, with recession-proof tactics taking place in 2020. Overall, firms will remain creative in making deals work because of rising rates and the absence of price fluctuations. When it comes to development, construction financing is now more readily available than it was 20 months ago.”

Highlights from Berkadia’s 2019 Outlook report:

·         Developers are expecting to deliver 5,560 units in 2019, approximately a third fewer than in 2018 which saw 8,300 units come online.

·         Effective rents are expected to rise 4.2 percent year over year from $1,129 to $1,177 per month.

·         Consistent apartment demand will be driven by employment growth which is forecast to expand by 2.6 percent.

Berkadia has arranged the $48.5 million sale and $35.8 million financing of Viera of the Palm Beaches, a 300-unit multifamily asset located in West Palm Beach. Senior Director Tal Frydman, Director Yoav Yuhjtman, and Associate Director Nicholas Perrone of Berkadia’s South Florida office represented the seller, a joint venture between investment firms Angelo Gordon and McDowell Properties, and the buyer, an affiliate of Axonic Properties, LLC. The same Berkadia investment sales team also brokered the sale of Viera of Palm Beaches previously, in 2016.

With this transaction, the Berkadia South Florida investment sales team has completed transactions of over 1,000 apartment units totaling $190 million over the last few months, and on track for another $100 million closing in the beginning of 2019. 

Senior Director Brad Williamson of Berkadia’s South Florida office arranged the financing on behalf of the buyer, a real estate owner, operator, and management firm based in New York City. Berkadia sourced very competitive terms from a top U.S. commercial bank which provided a 4-year, 70 percent LTC floating rate loan with a 160 bps spread and 3 years interest only.

“Palm Beach County distinguishes itself from the rest of South Florida with an exceptional quality of life and rapid growth opportunities throughout various sectors of the greater West Palm Beach area,” said Frydman. “With a recent influx of new construction built in the last few years, the pace of demand signals a strong multifamily market ahead thanks to a rise in job growth and median household income. Recognizing this pace, the seller began a second round of unit upgrades commanding over $120 in rent premium that will be completed by the buyer.”

“We are excited to add to our existing residential portfolio in Palm Beach County,” added Jonathan Shechtman, Managing Principle for Axonic Properties, LLC.

Built in 1986, Viera of the Palm Beaches is located at 4860 Sand Stone Lane. One- and two-bedroom units include washer/dryer, dishwasher, stainless steel appliances, granite countertops, and vinyl plank floors. Community amenities feature a newly renovated clubhouse, state of the art fitness center, swimming pool, tennis courts, barbecue area, lounge area, dog park, and trails for jogging, biking, and hiking.

Situated in Palm Beach County, the community is found near major employers and transit corridors. The county is a national leader in the aviation, aerospace, and engineering industry, supporting approximately 17,000 jobs in the area. Florida’s Turnpike is 10 minutes away and Interstate 95 is less than 15 minutes away.

 Lake Worth, Fla. – Berkadia has arranged the $25.64 million sale and finance of Oakwood Apartments, a rare 160-unit apartment community featuring all four-bedroom townhome-style units located in Lake Worth. Senior Director Tal Frydman, Director Yoav Yuhjtman, and Associate Director Nicholas Perrone of Berkadia’s South Florida office represented the sellers, Coast Capital Partners and Naya USA. Senior Director Brad Williamson and Director of Operations Jared Hill of Berkadia arranged the $19.231 million acquisition loan on behalf of the borrower, One Real Estate Investment.

Freddie Mac originated a seven-year, fixed-rate Green Up loan with a 75 percent LTV ratio.

“The property was last traded in 2014 for $12.9 million and was sold for a considerable gain, thanks to property improvements and renovations carried out by the previous owner and South Florida’s competitive multifamily market,” said Yuhjtman.

 “Palm Beach County is increasingly becoming one of South Florida’s most attractive investment locations,” said Williamson. “The area has diversified its economic base, strengthening its financial, technology, manufacturing, agricultural and tourism sectors to complete a transformational process throughout the county. Ranked among the top 100 ‘Best Places to Live,’ Palm Beach County is poised for further growth while highlighting accelerated employment, local amenities, and universities.”

“Oakwood presents a unique unit mix and compelling value-add opportunity which our firm specializes in,” added Jeronimo Hirschfeld, CEO of One Real Estate Investment. “Our planned enhancements will further improve the entire community’s amenities and interiors.”

Built in 1993, Oakwood Apartments is located at 2425 Second Avenue North, and comprises160 two-story attached townhome units each with four bedrooms and 2.5 bathrooms and 1,252 square feet of space. Community amenities include swimming pool, clubhouse, business center, gym, internet café, and onsite management. Rents range from $1,500 to 1,700 for renovated units.

The community is conveniently located close to Interstate 95 and is less than 25 minutes away from Downtown West Palm Beach and Boca Raton. 

Gainesville, Fla. – Berkadia announces it has arranged $15.5 million in acquisition financing for Aviara, a 242-unit multifamily asset in Gainesville, Florida. Berkadia South Florida’s Senior Managing Director Charles Foschini and Managing Director Christopher Apone arranged the loan on behalf of Beachwold Residential, a real estate investment firm based in New York City, along with John Reed of Berkadia’s Richmond, Virginia office. Berkadia’s Jacksonville-based Investment Sales team led by Greg Rainey arranged the sale of the property.

Bank United originated the five-year term loan with a 75 percent loan-to-cost.

“Gainesville’s consistent apartment demand continually attracts investors that seek areas with proven fundamentals, including robust employment figures and a steady stream of residents,” said Foschini. “Demand drivers such as the University of Florida, Malcolm Randall VA Medical Center and UF Health – Shands Hospital create compelling investment opportunities in the area.”

Built in 1972, Aviara is located at 205 SE 16 Avenue. One-, two-, and three-bedroom units offer new high-end cherry finish cabinets, granite countertops, stainless-steel appliances, walk-in closets, and private entries. Community amenities include two outdoor swimming pools with expansive pool decks, clubhouse, business center, fitness center, cyber café with Wi-Fi, tennis court, sand volleyball court, and a playground.

Aviara is situated near important transit routes and employment hubs, including Downtown Gainesville and University of Florida. Interstate 75 and Downtown Gainesville are less than 10 minutes away, and University of Florida is only five minutes away.