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Bayside Funding Partners Erik Anderson and Dominic Leoni Breakdown The Complicated Process of Multi-Family Investing
READ MORE HERE!: https://www.hauteresidence.com/bayside-funding-partners-erik-anderson-and-dominic-leoni-breakdown-the-complicated-process-of-multi-family-investing/
Investment management powerhouse Blackrock is on its way down south to Palm Beach County, showing the continued finance migration from New York. Larry Fink’s company subleased 5,000 square feet at the 360 Rosemary building, which was developed by Stephen Ross’ Related Companies, The Wall Street Journal reported. The new location has been nicknamed the “snowbird office” among company employees. The 20-story building was completed last year and is fully leased. Tenants reportedly include Paul Singer’s hedge fund Elliott Management, Goldman Sachs Group and Steven Cohen’s Point72 Asset Management. About 35 BlackRock employees are expected to move in early next year, although more from the New York headquarters could join them. Rick Rieder, who is the company’s head of fixed income and owns property in Palm Beach County, also is expected to work in this office when in Florida.
BlackRock, which has roughly $10 Trillion of assets under management and more than 18,000 employees, will keep its Midtown Manhattan headquarters. It has no plans to relocate additional heads to Florida and its “executive leadership teams” will remain based in New York, the company said in a statement to WST. Ross and his New York-based Related have made a hefty bet on downtown West Palm where they are the biggest Class A office building owners. Their assets include the two Phillips Point towers and CityPlace tower. Related also purchased half of the ownership interest in Esperante Corporate Center for an undisclosed amount last year. Downtown West Palm is a growing hot spot in South Florida for financial firm relocations and expansions, earning it the moniker of the “Wall Street of the South.”
Miami’s Brickell has also become a magnet for the financial sector. Ken Griffin’s hedge fund Citadel and financial services firm Citadel Securities is moving their headquarters there.
Palm Beach, across the bay from West Palm, has also attracted financial industry behemoths, with Griffin’s Citadel taking over the former Neiman Marcus building at 151 Worth Avenue.
Commercial Real Estate firm, Cushman & Wakefield, was held in contempt of court for refusing to turn over records of its appraisals of several Trump properties. However, it has just handed over 36,000 documents, court filings show.
New York Supreme Court Justice Arthur Engoron had found Cushman & Wakefield in contempt last month for not producing documents in state Attorney General Letitia James' civil probe into the Trump Organization's business practices and ordered the firm to pay a $10,000-a-day fine until it complied. In a letter to the judge late Friday, James' office said it has now "received Cushman’s production, which amounts to about 35,867 documents since entry of this Court’s contempt order." The letter said the attorney general's office was joining with Cushman in asking the judge to "dissolve the Contempt Order and hold any contempt purged, without any fines due or owing."
James’ office is considering whether to file a civil suit against former President Donald Trump and his company over their business practices and has said in court filings that it has “uncovered substantial evidence establishing numerous misrepresentations in Mr. Trump’s financial statements provided to banks, insurers, and the Internal Revenue Service.” In court filings, the attorney general's office said it also discovered "serious problems" with some of Cushman's appraisals for the Trump Organization over the years, including 40 Wall Street, his Seven Springs property in New York, and his Los Angeles golf club. James subpoenaed the company last September and again in February, court documents show. The judge said the real estate firm had “partially responded” to the subpoenas in March before it refused to provide the remaining records.
A spokesperson for the real estate company said in a statement last month that the company had gone to "extreme lengths" to comply with the judge's order. "We have gone to great expense and effort to quickly identify, collect, review and produce the massive set of documents requested by the OAG, and we have now produced over hundreds of thousands of pages of documents and over 650 appraisals since the last subpoena was issued in February 2022,” the spokesperson said then. The same judge also found Donald Trump in civil contempt of court earlier this year for failing to comply with a subpoena from the attorney general's office. Engoron lifted the contempt finding in June after Trump complied with the terms of the subpoena and paid $110,000 in fines.
Consumer confidence in this housing market has dropped to a new low since 2011. Prospective buyers and sellers are becoming pessimistic about the market. Fannies Mae conducts a monthly survey and the numbers are on a downward trend. Just 17% of those surveyed in July said now is a good time to buy a home, down from 20% in June. Even more telling, however, is that the share of sellers who think it’s a good time to list their homes dropped to 67% in July from 76% two months prior.
Fannie Mae’s Home Purchase Sentiment Index consists of six components: buying conditions, selling conditions, home price outlook, mortgage rate outlook, job loss concern and change in household income. Overall, the index fell two points in July to 62.8. It’s down 13 points from a year earlier. It hit an all-time high of 93.7 in summer 2019, before the pandemic. “Unfavorable mortgage rates have been increasingly cited by consumers as a top reason behind the growing perception that it’s a bad time to buy, as well as sell, a home,” Doug Duncan, Fannie Mae’s senior vice president and chief economist, wrote in a release. Just 6% of those surveyed think mortgage rates will fall, while 67% said they expect rates to rise further. Sales of both new and existing homes have been falling sharply over the last few months, as affordability weakens and consumers worry about inflation and the broader economy.
Stock market conditions have also been affecting consumer sentiment. Big losses in the market have caused the demand for homes to drop, as consumers worry about the broader economy and inflation. Big losses in the stock market have also caused demand for higher-end homes to drop. More supply is coming on the market, which is helping a little bit, but inventory is still well below historical norms, especially at the entry level. “With home price growth slowing, and projected to slow further, we believe consumer reaction to current housing conditions is likely to be increasingly mixed: Some homeowners may opt to list their homes sooner to take advantage of perceived high prices, while some potential homebuyers may choose to postpone their purchase decision believing that home prices may drop,” added Duncan.
The number of foreclosure starts is up 219% since January. A “start” is considered to be when the first public foreclosure notice happens. The number of properties that had foreclosure filings is up 153% from the same time period last year. 96% of major metro areas saw an annual increase in foreclosure filings, with foreclosure rates highest in Illinois, New Jersey, and Ohio. California and Florida topped the list for the number of foreclosure starts. EVP of market intelligence at ATTOM, a real estate data company, had some thoughts. “Foreclosure activity across the United States continued its slow, steady climb back to pre-pandemic levels in the first half of 2022. While overall foreclosure activity is still running significantly below historic averages, the dramatic increase in foreclosure starts suggests that we may be back to normal levels by sometime in early 2023.”
What does this quick uptick in foreclosures mean for the housing market? Foreclosures are shooting up as the various foreclosure moratoriums that kept people in their homes during the pandemic have now ended. That being said, they are shooting up from extremely low levels - noting that even after the sharp increase in foreclosure activity observed in the first half of 2022, we are still not back to 2019’s low pre-pandemic mid-year total. Much of the foreclosure activity that we are seeing today is on loans that were either already in foreclosure or were more than 120 days delinquent prior to the pandemic. Many of these loans were protected by the foreclosure moratorium put in place by the government - therefore just halting the inevitable by a couple of years. Greg McBride, chief financial analyst at Bankrate says, “Foreclosure activity is returning to normal levels after being artificially depressed by pandemic-induced payment relief programs and extended foreclosure moratoriums. In a historical context, foreclosures are still very low.” While foreclosures remain unfortunate for the owners of those homes, for shoppers who have been frustrated by the lack of homes for sale in their budget, the increase in foreclosures could bring additional options, says Hale. “But much like the increases we see in for-sale housing inventory, it’s just the first step. We would need to see many more months of these increases before home shoppers will feel like they have an abundance of homes to choose from,” says Hale.
The large retailer, Kohl’s, just announced that they might be selling their business after all, but might opt to sell some of its real estate. Kohl’s has been in talks with The Vitamin Shoppe owner, Franchise Group, but announced that it terminated this deal. Kohl’s was pressured by activist firms including Macellum advisors to consider a sale of the company, mostly in part to unlock the value of Kohl’s real estate. Macellum proposed that Kohl’s should sell some of its real estate and lease it back as a way to unlock tied up money. Kohl’s has been resistant to this sale, at least at such a large scale.
The company completed a small scale sale-leaseback earlier on during the pandemic gaining the company $127 million by selling and leasing back its San Bernardino e-commerce fulfillment and distribution centers. However, senior management said that it was analyzing other ways to monetize its real estate.
Proponents of a sale-leaseback agreement argue that it is a convenient way for companies to come up with funds to put toward future growth, but there must be a buyer. However, this also leaves the seller with having to meet lease obligations since they would be renting the property they just sold. In 2020, Big Lots reached a deal with a private-equity firm to raise $725 million from selling four company-owned distribution centers and leasing them back, giving them increased liquidity during the pandemic. Private-equity firm Oak Street had been planning to offer financing to Franchise Group in a Kohl’s deal. Kohl’s on Friday reaffirmed its plan to conduct a $500 million accelerated stock buyback later this year.
Kohl’s shares ended last Friday trading down almost 20% and touched a 52-week low of $27.65.
The housing slowdown that has been anticipated for months is just about here. Home sales are down, and some of the nation’s hottest towns that thrived during Covid are beginning to see price drops. This real estate downturn might sound awful, however with home prices as high as they are, this market was long overdue for a cooling off. Fed chairman Jerome Powell during the Fed meeting last Wednesday that “activity in the housing sector has weakened.” He announced another .75% (75 bps) spike in interest rates.
Contract signings fell 8.6% in June from one month ago, reported from the National Association of Realtors. Economists last year were predicting a 20% drop, so this is much less than what was predicted. Mortgage applications are at their lowest level since February.
Prices are continuing to drop and real estate analysts expect that to continue, especially as rates increase. We are seeing new construction prices drop as well, with 20% of builders lowering their prices this month. “Some of the metro areas that attracted out-of-state buyers early in the housing boom are cooling off the fastest,” writes Nicole Friedman from the WSJ. Ian Shepherdson, chief economist at Pantheon, added some notes as well. “Activity is now in free-fall, inventory is rocketing, and prices have started to fall.”
This is how the real world is reacting to the Fed’s updates. Once rates jumped, all of a sudden homes were less affordable. Although there are many people who want to buy, they just cannot! “The challenge with the housing market is that many Americans so desperately still want to own a home,” says Ali Wolf, chief economist at Zonda. “But rising home prices and higher rates have pushed them to the limit.”
The much anticipated Federal Reserve announcement is coming tomorrow, July 27th. The Fed is widely expected to raise interest rates by another 75 basis points and could even surprise markets by sounding even more unrelenting about their tightening policy. They are trying their best to combat inflation without sending the economy into a recession. A 75 basis point hike would put the Fed funds rate in a range of 2.25% to 2.5%.
Investors will be looking for guidance from Powell on what the Fed could do at its next meeting in September. At one point, markets were expecting a full 100 bps (1%) hike, but Fed officials dismissed that view.“I do think they’re going to lean a little bit more hawkish on September,” said Jim Caron, head of macro strategies for global fixed income at Morgan Stanley Investment Management. “They’re just not seeing the progress on inflation.”
The Fed is expected to provide fresh commentary on the economy as well, which is may acknowledge is slowing. “There’s going to be a lot of two-handed economist talk from Jay Powell,” said Vincent Reinhart, chief economist at Dreyfus and Mellon. “He’s going to say we’re definitely going through a soft inventory and trade cycle.” While our slower economic growth will most likely be acknowledged, chairman Powell might say that there is support for the economy as the labor market is still strong. However, it will most likely be another quarter of GDP decline, so Powell’s thoughts will be a mixed bag.
The Fed’s meeting ends on Thursday, the eve of the release of second-quarter GDP, which is expected to be declining. This would suggest that the economy is heading for a recession, with some believing that would prove that we are already in one with two straight quarters of declining GDP. Traders are betting that the Fed will ultimately cause a recession with its aggressive policy tightening.
China will launch a real estate fund to help developers resolve the debt crisis with funds of up to 300 billion yuan, or $44 billion USD. China wants to restore confidence in the property/developer industry after the absolute turmoil of the last year or so.
The size of the fund will be set initially at 80 billion Yuan through support from the central bank, the People’s Bank of China, and one unidentified individual. The state-owned China Construction Bank will contribute 50 billion Yuan into the fund, but the money will come from the People’s Bank of China relending facility. If the model works, other banks will follow suit with a target to raise up to 200 to 300 billion Yuan.
China’s property sector is a key pillar of their economy, but also a sector that has been going from one crisis to another. Even with the new fund, analysts fear that the fund will provide only part of the solution. “We don’t know details of the fund yet. If just 80 billion, it’s not enough to solve the problem,” said Larry Hu, chief China economist at Macquarie. “I believe the fund would be part of the bigger package to solve the current debt and mortgage crisis, because it alone would not solve all the problems… we need a real estate recovery,” he added.
Global investors are fixated on any changes in China’s property market, accounting for more than a quarter of the country’s GDP. The fund will be used to bankroll the purchase of unfinished home projects and complete their construction, and then rent them to individuals as part of the government's drive to boost rental housing. Such a move would underline the importance the central government attaches to providing more affordable homes for young people at a time when some local governments have been reluctant to build rental housing because land sales are a major source of income. Henan-government backed Zhenghou Real Estate, which set up one of the first local bailout funds in the country last week with state-owned Henan Asset Management amid the mortgage boycott, plans to use 20 billion Yuan to acquire 50,000 units and turn them into rental housing.
The fund would support more than a dozen property developers, including China Evergrande Group. Regulators and local governments will select developers eligible for support from the fund, adding that the fund could be used to buy financial products issued by the developers or finance state buyers’ acquisitions of their projects.
There were pullbacks in the annual numbers for permits and housing starts in June, however it was only minimal due to the strong multi-family sector. If it was not for the strong figures from multi-family, the numbers would have been far from on track.
Permits for residential construction went down .6% from their May level to an annual rate of 1.685 million units as permits for single family homes fell 8% to 967,000 units, meanwhile multi-family permits grew by 13.1 percentage points. On a year-over-year basis, total permits were up 1.4% while those for single-family residences were down 11.4%. Multifamily construction jumped 27.8% on an annual basis.
Home builder confidence dropped to a two-year low as high inflation and supply chain constraints prompted builders to halt construction on homes, reported the National Association of Home Builders. This is yet another sign that the housing market is due for a steep turnaround after the pandemic-era home buying frenzy. Builder confidence in the market for new homes posted its seventh straight monthly decline in July, falling 12 points to 55 for its second-biggest-month drop in history, according to the Wells Fargo Housing Market Index. The report also showed home builder expectations for both current and future sales have dropped sharply, pushing confidence to its lowest level since May 2020. National Association of Home Builders Chaire Jerry Conter stated that rising home building costs, high inflation, and production bottlenecks are causing builders to halt production as these costs are sometimes higher than what the property is worth! Even if the homes built are worth the margin for the builders, high interest rates have cut foot traffic and interest from potential buyers. Pantheon Macro chief economist Ian Shepherdson said confidence has further to fall. “This is a meltdown,” saus Shepherdson. “Pretty soon, anyone who has bought a home in the recent months will be sitting in a loss.”
Whether we are at the pump, the grocery store, or the car dealership, America is feeling the inflationary pressure. The same goes for mortgage rates, which nobody argues are rising. What caused the record high rates back in the 70’s/80’s? Record high inflation. What has pushed rates higher at the fastest pace since then over the last six months? The same story.
When you think about mortgage rates vs. inflation, it makes sense. Rates are based on bonds, which are a “fixed-income” investment. This means that the buyer (investor) agrees to receive payments over time on a fixed set of terms upfront. If I am a bond investor(mortgage lender), I am paying a large amount of cash upfront, and you will pay me the set price over however many years we agree upon. Now, think about the same example with record high inflation. Your monthly payment used to be able to buy me a certain amount of “stuff.” Now, due to high inflation, the same “stuff” will cost me 1.5x what it used to. So, in order for me to be able to buy the same amount of “stuff” I used to be able to, I have to charge a higher rate. That is the most basic illustration on how rising inflation affects interest rates.
In order to combat inflation, the FED raises rates, not mortgage rates exactly, but that is for another discussion! They announce how much they will raise rates eight times every year. The next meeting is on July 27th, and the question is, how much will they raise rates? The last spike was .75% and some are thinking that the next spike will be 1.00%, as inflation is still affecting the economy greatly. Higher rates have done some great work in the housing market so far. We are seeing purchase numbers drop, inventory opening up, contingencies coming back, and less competition as prospective buyers get priced out of the market. However, we are still not back to pre-pandemic numbers and some markets are still unaffected, like Miami for example.
Nearly 15% of Home Sales fell through last month, the highest number since the beginning of the pandemic. During the pandemic, it was a common occurrence for prospects to waive home inspections, appraisal gaps, and other contingencies to make their offer stronger. However, with mortgage rates high and applications lower, inspections are back and financing contingencies are creeping up also! With a financing contingency, the prospect can go to the seller and say, “I was not able to qualify for a loan and can no longer afford it,” being left without penalty. This is most likely a big reason that more sales fell through last month. Ali Wolf, consultant with real estate data company Zonda, had some thoughts. “What we’re seeing in some of these markets is consumer do, in fact, have a price ceiling.” With record home prices colliding with higher mortgage rates, many prospects have hit that ceiling.
Mortgage application activity has remained at 22-year lows since March. All around application activity declined last week, partially due to the holiday shortened business week. The Mortgage Banker Association said applications declined 1.7% on a seasonally adjusted basis, but was down 13% on an unadjusted basis. The refinance index increased 2% from the previous week, but is down 80% year over year. The purchase index was down 4% with seasonal adjustment and was 14% lower before the adjustment compared to the week before. The index was down 18% from its level year over year.
Mortgage rates were mostly unchanged, but applications declined for the second straight week. Purchase applications for all types of loans, conventional and government, continue to be weaker due to higher rates and worsening economic outlook. March 2022 set a record average purchase price of $460,000. The average home value currently, according to Zillow’s Home Value Index, is currently around $355,000. This value is seasonally adjusted and only includes the middle tier price of home, so the actual number could be much higher. The average purchase loan size was $415,000 last week, pulled lower by the potential moderation of home-price growth and weaker purchase activity at the upper end of the market.
Nearly 15% of all pending home sales failed to close in June, a new post-pandemic high according to an analysis from Redfin. What does this tell us? This tells that the real estate market is reacting quickly to the rise in interest rates in March, and a hopeful return from the insanity that has been the last two years. The sharp rate increases did not just pump the brakes on the housing market, it hit a wall. If borrowers decided to float their rate to “wait for rates to fall,” or did not lock their rate in time, they could have woken up just days after signing their purchase agreement to a rate that priced them out of the market. However, by the end of the summer, we hope that cancellations will come back down as sellers adjust their prices.
Six months ago, buyers were waiving contingencies like the inspection and appraisal gaps to make their offers stronger against all cash. In most areas, unfortunately not Miami yet, this is not the case anymore, another reason for the high number of contract cancellations. Home builders are also feeling a change in the market, with less foot traffic to homes and canceled contracts. “Quite a dismal traffic and sales climate," says one Phoenix builder quoted in the report. "Cancellations are extremely high.” One builder in Austin, Texas, sums it up. “Sales have fallen off the cliff. We are selling 1/3 of what we sold in March and April. Buyers have no urgency and are nervous about interest rates and inflation. Constant negative outlooks being reported consistently on the news aren't helping."
Corporate home ownership rose in the third quarter of 2021 at the fastest pace in almost two decades. For example, institutional investors bought 42.8% of all homes for sale in the Atlanta-metro area and 38% of homes in the Phoenix, Glendale, Scottsdale area. Bulk-purchase sales of foreclosed properties and distressed properties led the trend. The large companies and banks tended to purchase homes where over forty percent of the residents were African-American, more than three times above the national average.
The largest publicly traded property groups in the US saw their combined earnings surge more than 50% last year, with top executives receiving 20% higher bonuses than the previous year. Take Mid-America Apartment Communities, the largest multifamily housing owner in the U.S., with 100,000 units under its purview. Mid-America's profits more than doubled in 2021 to $550 million. And Starwood Property Trust, a major real-estate investment company, boasted of a "record" year in 2021, during which time its net income rose by one-third, to $492 million. Speaking to investors on a call in February, Starwood's CEO noted that "tenants seem capable and willing to pay these rent increases" and called inflation "an extraordinary gift that keeps on giving" for the company's affordable housing properties in Florida. (Starwood's parent, Starwood Capital Group, says it controls 220,000 housing units and 380,000 hotel rooms, among other assets.) "When you see the nation's largest apartment companies bank nearly $5 billion and their top executives' pay soar by over 22% from last year, it's obvious the punishing rental prices on our most vulnerable populations are driven by corporate greed," Kyle Herrig, president of Accountable.US, said in a statement. "Big apartment companies have joined the long list of industries using the pandemic as cover to charge working families far beyond any new cost of doing business."
Philadelphia residents Corey Camp and Jimmy Williams run a free financial literacy summer camp for children five years and older. They created their business, Buy the Hood LLC, in 2015 to teach young adults about finances, investing, and the power of ownership. These topics are rarely taught in school and are extremely important to know at an early age.
Corey is a special-ed teacher in Germantown and Williams is a real estate agent and investor. “Imagine if the concepts were put in front of us at 5 years old, and you could grow with them,” says Williams who is disappointed that these concepts are not regularly taught at a younger age. The two teach their concepts through games and relatable examples, and have not just real estate related topics, but also cryptocurrency, taxes, and how banks work. Their goal is to make an army of financially savvy, stable, and literate young people. Camp and Williams did not let the pandemic stop them either, taking their course virtual, allowing kids from all over the US to join. They have about 60 children joining this year’s camp.
They recruit kids through their network, and a majority of the attendees are African-American. Nationwide, the typical white family has eight times the wealth as a Black family. Most families build wealth through property ownership, but the homeownership rate for black families has dropped to 43%, while white families have remained at 73%, almost double. “Right now everyone is talking about wealth-building and generational wealth,” said Nicole Purvy, an entrepreneur and founder of the nonprofit Philly Real Estate Week, Inc., which teaches adults about real estate investing and home ownership. “But what good is it if we don’t teach the next generation how to receive it?” Purvy partnered with the camp this year and even started a fall gala to raise awareness for the camp.
This is an absolutely amazing camp and program. The fact that they are teaching children as young as five, at their own level, about finance is refreshing. Homeownership, its benefits and when is the right time to buy, is an extremely important message that all should receive as young as possible. Neither Erik or myself were taught any of these tips or lessons in high school or in-depth in college. Let’s spread financial literacy this year, bravo Corey and Jimmy!
The two-year explosion in home prices appears to be cooling a bit. May was the second month straight that annual appreciation was down. Annual price growth retreated from 20.4 percent in April to 19.3 percent in May, making this the largest negative correction in a single month since 2006. This still left prices up 1.5 percent from April to May - nearly twice the average historic acceleration for that month - and a gain of 10.8 percent during the first five months of the year. Typically, home growth is 3 to 4 percent over an entire year. Only three of the 100 largest markets, Miami, Omaha, and Grand Rapids, have not braked a bit over the last six months. Gains in Austin and Boise have decelerated by 12 percentage points, while Stockton, Phoenix, and Seattle have dropped back by 5 to 6 points each. The appreciation in some areas is still mind-blowing with areas like Tampa, Nashville and Miami seeing annual gains in excess of 30 percent.
According to Black Knight Data & Analytics President Ben Graboske, “…while any talk of home values and 2006 might set off alarm bells for some, the truth is that price gains would need to see deceleration at this rate for more than 12 months just to get us back to a ‘normal’ 3-5% annual growth rate. That said, the pace of deceleration could very well increase in the coming months, as we’ve already begun to see in select markets such as Austin, Boise and Phoenix.”
Home affordability is the worst since the mid-1980s with interest rates reaching 6%. In the 80s, the FED hiked interest rates into the double-digits to combat inflation causing the mortgage payment to income ratio to rise more than 50 percent. We are not quite at that level yet, but in May the monthly payment on the average home rose above $2,100 for the first time ever, consuming almost 37% of the median household income.
Real estate firm Cushman & Wakefield is being held in contempt of court for refusing to comply with subpoenas for information related to its business relationship with the Trump organization. The subpoenas were issued by the New York AG’s office as part of its civil investigation into how President Donal Trump and his family valued their holdings. Judge Arthur Engoron imposed a $10,000 daily fine starting Thursday for every day the giant does not comply with the subpoenas.
"Cushman & Wakefield's work for Donald Trump and the Trump Organization is clearly relevant to our investigation, and we're pleased that the court has recognized that and taken action to force Cushman to comply with our subpoenas," New York Attorney General Letitia James said in a statement. "No person or company, no matter how powerful, is above the law." The company has refused to comply with subpoenas for information related to its appraisals of three Trump-owned properties – 40 Wall Street in Manhattan, Trump National Golf Club in Los Angeles, and the Seven Springs estate in New York.
A spokesperson for the real estate firm said they will be appealing the decision and had some words of their own on the matter. "The ruling to hold Cushman & Wakefield in contempt demonstrates a failure to understand the extreme lengths Cushman has gone to comply with the Court's order," the company spokesperson said. "We have gone to great expense and effort to quickly identify, collect, review and produce the massive set of documents requested by the OAG, and we have now produced over hundreds of thousands of pages of documents and over 650 appraisals since the last subpoena was issued in February 2022."
Omega Real Estate Management scored a $100 million construction loan for the multifamily portion of its mixed-use project in North Miami. The project is called “The Gardens Residence,” and will have 358 units and 1,100 SQ FT of ground-floor retail located at 1155 NE 126th st.
This is all according to a news release from Berkadia, the brokerage that secured the loan. Charles Foschini and Christopher Apone, of Berkadia’s Miami office, represented Omega. Churchill Real Estate, a company based out of New York, is the lender on the transaction. The loan is a two-year, floating rate mortgage, with two one-year extension options and interest only for the full term, including any extensions. The North Miami Community Redevelopment Agency provided $15 million in project subsidies. The apartment building will offer studios, as well as one- to three- bedroom apartments, averaging 511 SQ FT to 1,270 SQ FT. The project will have a workforce housing portion, as 10 percent of the units will be for households earning 80 percent or less of the area’s median income.
This is an awesome push to provide affordable housing at a time where Miami leads the nation in the least affordable housing in the country. Construction on the project is set to start next week and is expected to be completed in mid 2024. They are planning follow-up phases of the larger mixed-use district will have a corporate office building, a creative center office and a Hall with a gourmet grocery store and four restaurants. These will all be built at 1075, 1111 and 1125 NE 125th street. Omega Real Estate, led by Sebastien Scemla, honed in their focus on downtown North Miami. They acquired the 7-acre property for The Gardens District in several deals, paying out a total of almost $17 million for the land. The Gardens District is the latest planned project in an area that is catching investors’ eyes and is poised for a quick redevelopment. The development is planned for three blocks west from a proposed Brightline commuter train stop. Just west of that, there are projects planned that will build over 400 units for Miami residents.
We are excited for all of the growth that is expected to come from these project in North Miami. These projects will help with affordable housing, as well as build up areas in Miami that have needed a touch-up for years. Hopefully this will help drive rental prices down a bit!
There are a few things that we know for certain in this market, interest rates are rising, home competition is still high, but lowering, and we are all afraid of a potential "crash." Although the "crash," if it happens, will not be close to 2008, we are still expecting somewhat of a strong shift in the real estate market. The main reason the real estate market went so crazy was due to an overwhelming demand with limited supply. However, now one research firm is warning of a new threat looming: too many houses...
When the market crashed in 2008, homebuilders were reluctant to ramp up construction again. This decade-long slowdown in new home completions culminated during COVID-19 as demand surged far past the existing supply. As the housing market slows down, most experts do not see a housing bust coming, in part because of the low supply of housing - which stands in sharp contrast to the overzealous building that lead to the last crash. However, Zelman & Associates - a housing research and investment firm has a different perspective. CEO Ivy Zelman is concerned about longer-term trends that indicate housing demand is bound to weaken. Her firm's analysis reveals slowing household formation and population growth, as well as declining immigration levels. Sooner, rather than later, we will be left with more homes than people looking to buy. Zelman argues that the recent buying frenzy represents an anomaly spurred by government stimulus payments, record-low mortgage rates, and heightened investor activity. Once these activities fade and new housing construction comes onto the market over the next two years, demand will not keep up with the pace of supply.
Zelman earned her legendary status in real estate circles by predicting the housing bubble in the mid-2000s along with a few others. This switched around 2013/14 to an optimistic outlook with older millennials aging out of apartments and into single-family homes, meaning that the market had "room to run." from 2016-2019 the market achieved an ideal balance between growing supply and sustainable demand. The market was on an upward trajectory, nobody was overleveraged, and investors were not crowding the market. Then in 2020, this all switched. The market went into overdrive, but the factors contributing to the soaring housing market are now subsiding as mortgage rates climb and government support fades. Soon, the housing market will be forced to switch just as developers are set to deliver new housing units in volumes not seen before the great recession.
