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Maryland Multifamily Investor Enters South Florida Market

Pays Nearly $81,000 a Unit at Summit Palms in Lauderhill
March 7, 2018
Federal Capital Partners (FCP), a private real estate investment firm in Maryland, entered the South Florida market with its acquisition of the Summit Palms apartments in Lauderhill, FL, paying $28.5 million, or nearly $81,000 per unit, for the asset.

The seller, Summit Property Group of Miami, bought the once-troubled complex from Atlantic Housing Foundation for just $7.8 million ($22,000 /unit) in 2012, according to CoStar data.
See CoStar COMPS #2241159.

At the time, the 352-unit community had less than 5 percent occupancy, and the firm invested more than $5 million in renovations, according to Berkadia, the seller’s broker. The occupancy rate now is 97.2 percent.

“They have been able to stabilize and completely reposition this asset,” Berkadia’s Yoav Yuhjtman said of Summit Property Group in a statement. “Looking to take advantage of the strong market in South Florida, they felt that it was the right time sell the property, and will now look for their next project.”

Summit Palms, at 4491 NW 19th St. in Broward County, was built in 1974 and features one-, two- and three-bedroom apartments with average asking rents of $1,151 per month.

“Summit Palms represents a compelling investment opportunity for FCP, as it is located in a high-density suburban area with strong demand for workforce housing,” said Bruce Gago, vice president of FCP.

The company says it will retain Avesta to continue management of the affordable housing community.

"There is tremendous demand in the marketplace for this type of product, and very little availability," Jack McCabe, a real estate consultant in Deerfield Beach, FL, told CoStar News. "That may be one of the reasons why it sold for what would be considered an excellent price."

The new owner likely will boost revenue by raising rents, which would still be less than luxury apartments in the market, though potentially unaffordable for some existing tenants, McCabe added.

Nearly all multifamily communities being built across South Florida cater to affluent professionals and empty nesters, with rents well above $2,000 a month.

"We're seeing rents in South Florida rise faster than the cost of ownership," said Ken Johnson, a real estate professor at Florida Atlantic University in Boca Raton and associate dean of graduate programs in the college of business.

Still, renting remains a slightly better deal than buying in South Florida for people who can reinvest the money they would have spent on homeownership, according to the latest Beracha, Hardin & Johnson Buy Vs. Rent Index. The quarterly report was created by Johnson and two Florida International University professors.

While Summit Palms marks FCP’s first deal in South Florida, it has seven investments across the Sunshine State and now operates 1,167 multifamily units, with 603 more under construction. The Chevy Chase, MD-based firm has completed more than $6 billion in investments since it was founded in 1999.

Berkadia represented both sides of the transaction. Tal Frydman, Yoav Yuhjtman and Nicholas Perrone brokered the deal.

See CoStar COMPS #4157464 for additional information on this transaction.

Paul Owers, South Florida Market Reporter  CoStar Group   
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