Foreign Investors, All Cash Buyers Slowing

Is the influx of foreign capital into Florida multifamily drying up or overflowing?

That’s one of the questions GlobeSt asked Deme Mekras, regional managing partner at Franklin Street, for his take as Real Share Apartments East gets under way at the Eden Roc Hotel in Miami Beach. You can still glean from part one of this exclusive interview, Beyond Miami: Multifamily Investors Hunting.

GlobeSt.com: How has the influx of foreign capital into Florida multifamily changed?

Mekras: The influx of foreign capital has played a substantial role in bringing Florida’s real estate market back to health. We have not seen a slowdown in foreign dollars and don’t expect the flow to stop any time soon. In fact, six of our last 10 trades have involved investors from outside the United States. While most come from Latin America, we are seeing more and more from Eastern Europe including the Ukraine, which is in the middle of political unrest. Foreign investors want a safe place to put their money and in a stable asset class which leads them to multifamily, and many times South Florida.

GlobeSt.com: What does it take to get deals done today?

Mekras: You need full cooperation from all parties: the buyers, sellers, lenders, attorneys and brokers. With multifamily fundamentals strong again, lenders have a renewed appetite for multifamily and they are loosening up on loan-to-value and debt service requirements. Because more deals involve debt these days, they are taking longer to close compared to three years ago when cash deals were more prevalent. Three years ago, 100% of our transactions involved cash buyers. Today that number has dropped to 50%.

GlobeSt.com: Have mindsets of buyers and sellers changed?  

Mekras: Yes. On the buy side, investors are getting used to the fact that there are no more “pennies on the dollar” deals out there. They are accepting that returns are now more in line with traditional yields produced by real estate. There are no more big scores. Sellers are no longer desperate to sell just to limit their losses. Now that they have weathered the storm, they can afford to hold on or sell when the time is right. Conclusion: The market is back and if you don’t get with it as a buyer or seller, you\’ll find yourself on the sidelines.

GlobeSt.com: Have mindsets of buyers and sellers changed?  

Mekras: Yes. On the buy side, investors are getting used to the fact that there are no more “pennies on the dollar” deals out there. They are accepting that returns are now more in line with traditional yields produced by real estate. There are no more big scores. Sellers are no longer desperate to sell just to limit their losses. Now that they have weathered the storm, they can afford to hold on or sell when the time is right. Conclusion: The market is back and if you don’t get with it as a buyer or seller, you\’ll find yourself on the sidelines.

 

Source: GlobeSt