M&M at Home in Class B Multifamily

MIAMI-Central and South Florida multifamily properties are getting snapped up just about as fast as they come to market. Although some deals take longer to ink than others, the trend is clear: high-net worth individuals have a healthy appetite for acquisitions in the $2 million to $4 million range with a steady income stream.

Marcus & Millichap brokers across the state have carved out quite a niche in the class B and class C multifamily sector, often representing both sides of the transaction. In the last few weeks alone, a handful of deals have closed. Brokers expect to see the current pace of multifamily acquisitions continue into 2011.

Just over a week ago, Suburban Villas, a 36-unit apartment property in Valrico, sold for $2 million. Casey Babb, a senior associate and multifamily specialist in the firm’s Tampa office, facilitated the sale on behalf of the seller, a Florida-based private investor and the buyer, a private investor from Connecticut. 

“Even 12 months ago, there was still so much fear in the marketplace that very few transactions were occurring,” Babb tells GlobeSt.com. “But that’s changed. Investors are optimistic that things are headed in the right direction, at least on the multifamily rental front in Florida.”

Babb says conventional, non-distressed real estate transactions like Suburban Villas are beginning to reemerge in the marketplace. As he sees it, there’s a new perception among investors that waiting for the perfect distressed property to fall into your lap is not the right strategy in Florida.

“Our initial pricing and the non-distressed nature of the sale turned many people off,” Babb says. “However, after a full six-month marketing process, we were able to secure a sale at a 33% profit for the seller, and the buyer bought in at a 10.79% cap rate and a ‘high-teens’ cash-on-cash return.”

On the heels of the Suburban Villas closing, Marcus & Millichap closed on Royal Palm Gardens, a 16-unit multifamily property located in Coral Springs. The property sold for $1.05 million. M&M Senior Associate Joseph Thomas and Associate Frank  Fausone of the Fort Lauderdale office represented the seller of the property, a private investor from Coral Springs. The listing agents also secured the buyer, a limited liability company from Coconut Grove.

“There’s been quite a bit of pent up demand on the buy side,” Thomas tells GlobeSt.com. “There are more buyers than we have product to accommodate, and fewer sellers willing to come down to the new reality. So when product hits the market that’s well priced and provides a significant enough return, the buyer sees it as an attractive alternative to a CD or a trust.”

In other recent deals, Marcus & Millichap also closed on Raintree Oak, a 62-unit apartment property in Tampa. The asset sold for $2.275 million. M&M Senior Associate Robert Jinks and Associate James Vestal, associate in the firm’s Tampa office, represented both the seller, a Miami-based private investor, and the buyer, a limited liability company. Vestal says, “Even though this was a fractured condo deal, the property was being operated as a fully functioning apartment complex with high occupancy and was essentially a turnkey asset.”