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WEST PALM BEACH, FL-Sales of multifamily properties in Palm Beach County are being affected by rising unemployment, even though the market has defied the recession by posting modest declines prior to this year’s second quarter, according to a research report by Marcus & Millichap. The county’s apartment vacancy rate is expected to rise to nearly 10% this year after a slight decline in 2008.

A combination of rising unemployment, falling population growth and home foreclosures is creating a tough market for Palm Beach apartments. Investment activity in the county remains subdued, with economic concerns and stringent financing requirements relegating many prospective buyers to the sidelines, Marcus & Millichap states.

“Very few sales of distressed properties have yet to occur, but some properties bought at the peak of the market in 2005 and 2006 could encounter difficulties in the quarters ahead as softening fundamentals reduce property income,” says Greg Matus, regional manager with Marcus & Millichap in Fort Lauderdale. He notes that key areas of interest for prospective buyers include Boca Raton, West Palm Beach and Boynton Beach.

Asking rents are forecast to fall nearly 4% to $1,067 per month, while effective rents are expected to tip below the $1,000 mark. On the bright side, there is minimal development activity, with only 700 units at two complexes currently under way, according to Marcus & Millichap research.

However, Freddie Mac is helping to make deals happen. For example, CB Richard Ellis’ Capital Markets Group arranged $19.5 million acquisition financing for Archstone Villages, a 384-unit apartment property in West Palm Beach.

Terms of the fixed-rate financing include a 10-year term, 30-year amortization, 75% LTV and a favorable interest rate, says Charles Foschini, vice chairman of CBRE’s Debt & Equity Finance and Institutional Group based in Miami. Financing was arranged through Freddie Mac on behalf of buyer Azalea Village LLC.

CBRE Capital Markets claims to be among the top three Freddie Mac seller/servicers annually and led the US through the first half of 2009. Over the past six years, it has originated more than 800 multifamily transactions totaling at least $12.2 billion.

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