velopment or to acquire existing product.
“The industrial market is
especially strong in South
Florida and in Central
Florida along I- 4,” he says.
“Another sector deserving
attention is rental multifamily. There is an opportunity
in certain locations to fill the
existing affordability gap by
renovating and repositioning lower-quality properties
and reintroducing them
back into the market at
slighter higher rents.”
With office deals, according to Madison Capital’s
Martorella, “you have to
look at the particular submarket involved and the supply of available space in the area. For instance, in the
Downtown Miami/Brickell office market,
which is the strongest it has ever been in
terms of rents and vacancy rate, three
major buildings are going up but getting financing for a fourth project of any size
would probably be difficult.
“Any deal, however, takes a bit longer to
get done when putting the financing package together,” he says. “Yet since lenders
and investors now tend not to be as busy as
usual, if a proposal manages to fit into
today’s much-tighter underwriting box,
they probably have time to allocate to it.”
Veterans of Florida real estate who have
been through any number of capital markets ups and downs over the years seem
less discouraged about the near-term outlook than might otherwise be the case.
“At least money is available today on a
deal-by-deal basis,” Olympian Capital’s Kaplan emphasizes. “It’s not like the ’88 to ’92
S&L crisis when there was no money anywhere. Or the fourth quarter of ’98 during
the Asian and Russian financial problems,
which was a terrible period but only took a
couple quarters to work out.”
To obtain money for even the most
promising of real estate ventures, Olympian
studies the capital structure, really getting
into the fundamentals of each deal and each
client’s specific needs.
“We can then find the lowest cost and
most reliable capital available at that
point in time,” Kaplan notes. “Yes, there
will be a lot of pain before we get through
“Florida is still a
very reasonable
purchase for
foreigners, and
the weak dollar
makes it even
more so.”
the current downturn. The
single-family home building
and condominium industry
is bleeding heavily, and it
will probably take as long as
five years before it comes
back in the state. But when
it does come back, it will be
much more niche-oriented
and much less geared toward big-tract, speculative
developments.”
EXPANSION POTENTIAL
Wrightwood’s Koletic anticipates the capital markets for
commercial real estate in
Florida will go through what
he terms “a period of discovery” during this year’s first
quarter, then “more an adjustment to that
discovery” over the next three months.
“Then, as we go through the second half
of the year, hopefully we’ll get some wind
at our backs, although it won’t be as forceful
a wind as had been blowing the last several
JAN REESE
Cypress Creek Capital
years,” he argues. “Although Florida may
not experience the hyper growth of recent
years, there is still a tremendous amount of
expansion potential across a broad spectrum of properties and investment cycles.”
Yet Whalen cautions that recovery may
not be evenly spread statewide. “These
days,” he notes, “we find more lenders
leery about becoming involved in projects on Florida’s West Coast between
Naples and Tampa where residential activity had dominated local real estate
markets. Suburban office buildings are
also experiencing more vacancies as
mortgage mills blow up and other organizations related to supplying homebuyer
credit give up space.”
Madison Capital’s Martorella believes
capital constraints will continue through
most of this year and possibly into 2009.
“Recovery will likely be more location
and project specific,” he observes. “When
markets were stronger, there was a greater
chance that most of the deals you saw could
get done, one way or the other. That’s definitely not the case today.”—REFLA
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