MIAMI—As Miami's multifamily market heats up,the level of investment and activity is rising across key marketsin South Florida. GlobeSt.com caught up with PeterMekras, senior vice president at Continental RealEstate Cos. (CREC), to discuss factors fueling activity inthe market.

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This year, Mekras has sold and capitalizedmultifamily communities, land for development andfor-sale projects in the region. CREC's multi-family practice forinvestment sales, debt and equity placements stretches throughoutthe state.

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GlobeSt.com: International investors have beenactively acquiring condos in South Florida, but are multifamilyinvestments a better investment in the long term?

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Mekras: International investors have beenactive acquiring both multifamily communities andindividual condominiums. Given the lack of alternatives availablefor yield and inflation concerns, both are appropriate. While bothare very different, it's my opinion thatmultifamily provides a superior option.

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Rental apartments are a better hedge on inflation due to asuperior operating margin. Also, apartment owners have bettercontrol over the property as no association of other owners isimpacting decisions. And more importantly, rental apartments have agreater ability to be leveraged through a variety of debtsources.

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GlobeSt.com: Tell us about the levels of lendingactivity for multifamily, both new development and acquisitions.Has traditional lending returned?

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Mekras: For ground up construction of rentalapartments, banks, life companies, and balance sheet lenders areproviding between 60% and 75% of project costs. The mostsignificant change from the last development cycle is thatconstruction financing is only available if you are a seasoneddeveloper, well capitalized, and have a compelling product andlocation.

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In addition, how you behaved with your lenders in recent past isalso taken into consideration. For existing properties, mostlenders are financing up to 75% of the purchase price, butprimarily driven by debt service coverage and debt yieldlimitations. The overall lending climate has improved dramaticallysince 2011. Capital is available, cheap, and aggressively seekingopportunities in the multifamily arena.

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GlobeSt.com: What is the current appetite in theSouth Florida marketplace for class B and C apartmentbuildings?

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Mekras: There is a very strong appetite. Thereis exceptional debt available for class B and C apartments, notmuch different than the debt available for class A apartments. Thelenders are different, but the leverage is about the same, up to75% of the purchase price. The difference is that buyers of class Aproperties are mostly institutional investors that rarely useleverage greater than 65% and obtain their financing from lifecompanies and the large banks.

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Buyers of class B and C communities do borrow up to 75% atinterest rates under 5%. Earlier this year some investors were ableto borrower under 4% before treasuries moved aggressively over thesummer. Irrespective of this change in rates, capital is stillextremely cheap.

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Be sure to come back for part two of our exclusive interviewihis afternoon. Merkas will discuss which Florida submarketsare most active for multifamily investment, what factors arecontributing to the high level of activity, and more.

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GlobeSt.com: What is the current appetite in theSouth Florida marketplace for class B and C apartmentbuildings?

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Mekras: There is a very strong appetite. Thereis exceptional debt available for class B and C apartments, notmuch different than the debt available for class A apartments. Thelenders are different, but the leverage is about the same, up to75% of the purchase price. The difference is that buyers of class Aproperties are mostly institutional investors that rarely useleverage greater than 65% and obtain their financing from lifecompanies and the large banks.

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Buyers of class B and C communities do borrow up to 75% atinterest rates under 5%. Earlier this year some investors were ableto borrower under 4% before treasuries moved aggressively over thesummer. Irrespective of this change in rates, capital is stillextremely cheap.

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Be sure to come back for part two of our exclusive interviewihis afternoon. Merkas will discuss which Florida submarketsare most active for multifamily investment, what factors arecontributing to the high level of activity, and more.

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