June 25, 2019
South Florida’s multifamily market has continued to see a flurry of activity, with vacancies continuing at record lows despite an outpouring of new supply.
Connect Media asked Marc Suarez, Director of Hunt Real Estate Capital’s Miami office, who specializes in multifamily lending transactions throughout Florida, to share insights about what he’s seeing in the market right now. Check out his responses in our latest 3 CRE Q&A:
Q. As the population of South Florida grows, what does the market-rate multifamily pipeline look like? What are some of the best loan programs serving construction financing today? Can you share the details on a recent closing?
A. The pipeline continues to be strong, and that is a concern for most when looking at oversupply. For now, anything you can build that is three to four stories with surface parking gives you a strong position in a potential over-supply environment because you have more flexibility in your rent ask, versus mid-to-high-rise development where you have to ask and get a higher number to justify your yield on cost. Currently, our best loan programs for new construction are catered to different needs. We have our FHA/HUD Section 221(d)(4) product, which is typically for a more patient build-to-hold strategy investor, as the terms are very favorable to that specific type of borrower.
We also have our senior stretch program that is a balance sheet program where we combine a senior loan and mezzanine/preferred equity product in one loan that we originate and service. This product is attractive to borrowers for several reasons. First, they can interact with one lender, versus marrying a senior loan and preferred equity and negotiating with both on terms and legal. Second, because we can do both loans, it’s more time-efficient. We also have a straight up mezzanine program where we provide this portion of capital stack behind the senior lender.
Regarding our recent closings, the two I am most proud of are our Section 221(d)(4) closings. One of them was in Palm Bay (Space Coast) and the other in Miramar. These construction-to-permanent loans can be challenging, but the end result is a great opportunity for the developer, the end user, and the community. These transactions truly speak to the mission of providing capital for workforce market-rate housing with the best possible terms in this environment.
Q. What are some tips to help borrowers get the best spreads in pricing? What non-capped Agency products are the most competitive at the moment?
A. We typically have quarterly borrower calls and seminars where we keep clients up to date on Agency changes and where each is with their cap. We also explore alternatives with borrowers and look for their best options. We are fortunate to have our in-house engineer for Hunt here in our Miami office, and we use him as much as possible when it comes to educating borrowers on green advantages. Green-qualified and affordable-qualified executions are always great options as they have cap exclusions. In the current environment, qualifying for either one is a tremendous benefit. We are a firm believer that because we are local to the market and have resources here in our office, we need to be proactive with borrowers on front-end construction and when markets move. This ensures that they are in the position to take advantage of the various Agency products, rather than being reactive.
Q. What other Florida cities excite you for 2019-20?
A. Orlando and Tampa continue to be of interest and excitement. The I-4 corridor is experiencing significant job growth with major corporations coming in, and population growth seems to be responding favorably. We are monitoring the Space Coast, as it has been picking up at a good pace as a lot of aerospace and aeronautical companies move more of their operations from out West to this area. There was a long period of time where we did not see new housing starts in this part of the state, but that is starting to change.
For comments, questions or concerns, please contact David Cohen