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To Ease Rent Crisis, Miami City Commission May Change Zoning Code To Allow For Communal Living Developments In Wynwood

After gaining notoriety as the center of the housing crisis in the US, Miami is looking to co-living developments to calm soaring rent prices.

Today (3/23), the Miami City Commission is considering changes to the zoning code to establish regulations regarding co-living. If adopted, the amendment will allow for communal living developments to rise in Miami’s bustling central business district, health district and Wynwood.

Last year, Miami surpassed New York City and Los Angeles as the most expensive housing market in the nation. In June 2022, the Biden administration called Miami the ‘epicenter of the housing crisis.’

Government agencies like the Department of Housing and Urban Development (HUD) see co-living as a solution to provide working-class individuals with affordable shelter.

Communal living has roots dating back to the 19th century, when tenements and boarding houses became popular. Modern co-living spaces feature private bedrooms designed around a shared living room and kitchen.

21st-century co-living communities have emerged as an amenity-laden, roommate-sharing concept to facilitate an environment where working professionals can thrive at a fair price.

The proposed legislation limits co-living developments to the civic center and health district, central business district downtown and neighborhood revitalization districts in Wynwood. These are Miami’s busiest urban areas and have rapidly grown in the post-pandemic era as people from across the nation flocked to South Florida.

Background information states the city “recognizes the growing demand for accessible housing options, including co-living concepts, incorporated in urban center and urban core areas where there is significantly less reliance on automobiles and enhanced utilization of bicycle and transit facilities that connect to places of employment and other services.”

The ordinance defines a co-living unit as communal living quarters consisting of private bedrooms and bathrooms with a shared space that includes a full kitchen with direct access to the outside or a common hall.

Each unit would be allowed a maximum of six co-living rooms. A co-living room is defined as a single bedroom within the unit. Under the proposed requirements, a co-living room must be at least 180 square feet and could not exceed 400 square feet.

The operational plan required under the new ordinance stipulates all co-living units within a building must be managed by one centralized operator and at least one dedicated employee must be available 24 hours a day to respond to residents’ needs.

On Feb. 15, the Planning, Zoning and Appeals Board recommended approval of the zoning text change in a vote of 8-1.

What attracts most residents to co-living communities is a home in a well-run building in a good area at a reasonable price. The developments offer fully-furnished units, including everything from sheets to silverware and weekly cleaning services. All utilities and various tech services like WiFi and Netflix are included in the monthly rent.

Another positive of co-living is that it eliminates the financial liability of roommates by offering individual room leases rather than group leases.

Co-living is popular in major urban areas like New York City. Zoning ordinances, however, restrict communal housing in many areas. Changes on the regulatory front, like the amendment before the Miami City Commission, are needed to address barriers to opening co-living communities.

In 2022, Florida topped the Census Bureau’s list of fastest-growing states as the population grew by nearly 2%. Attractive lifestyle and job opportunities put Miami on the map of most popular US migration destinations.

During that time, the cost of rent in Miami increased over 30% from 2021 to 2022 and the county was ranked the most competitive rental market in a year-end survey by RentCafe.

In April 2022, Miami-Dade Mayor Daniella Levine Cava declared an affordable housing crisis and allocated an additional $13 million in rental assistance through the Emergency Rental Assistance Program.

Two months later, HUD Secretary Marcia Fudge met with local leaders to tour affordable housing projects in Miami.

“I decided today to come down to the epicenter of the housing crisis in this country,” said Ms. Fudge. “It is a shame that people who work hard every day cannot afford to live in the communities in which they work.”

After her visit, Ms. Fudge said more affordable housing projects must be created to lower housing costs and called for support from federal, state and local governments to make it happen.

A study from Florida International University regarding affordable housing revealed Miami has the highest proportion of cost-burdened renters in the nation, with 53% of renters spending 35% or more of their household income on rent.

HUD defines cost-burdened people as those who pay more than 30% of their income for housing and may have difficulty affording necessities such as food, clothing, transportation and medical care.

Creating co-living developments will provide renters with more affordable housing options and relief from record-breaking rent prices.

Market reports forecast co-living developments to increase in coming years as the communities could be a solution to the affordable housing crisis.

In January, the largest co-living operators in US and Europe and Asia, Common and Habyt, merged to form Habyt Group. The move created the largest co-living brand in the world with locations in more than 40 cities and 14 countries and over 30,000 communal units.

While the co-living sector represents a small corner of the housing market, the desire for communal living, like rental prices, is rising.


Source:  Miami Today

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Are Multifamily Prices Coming Down Soon?

What a ride! For the past five years, apartment building owners hit the jackpot with their property values going up nationally by 37%, according to Marcus and Millichap. This was fueled by record rental increases of 13.5% in 2021 and 6.2% in 2022 and mortgage rates hitting their lowest ever in January 2021. But this trend is seemingly slowing. According to CBRE, the average multifamily cap rate went up by 38 basis points to 4.49% in the last quarter of 2022, which means prices are starting to come down. And thank goodness!

As a commercial mortgage banker specializing in multifamily financing nationally, 2022 was an extremely difficult year. It was a head-on collision between property values going up and mortgage rates going up. This produced smaller loan sizes, killing many of our deals. It wasn’t pleasant telling my client, “Sorry, 40% down is no longer going to cut it. Can you come up with 50%?” He replied, “Really? I was only getting a 4% cash-on-cash return, and now you want me to be happy with 2%.” I told him to negotiate the price down with the seller, who opted to take the property off the market instead.

Why Both Buyers And Sellers Have Their Brakes On

Although multifamily is the most sought-after asset class in the commercial real estate market today, prices remain high. This is a result of low supply and demand. In fact, the 4th quarter of 2022 hit the lowest level for both since 2009, according to Moody Analytics.

So, it’s no wonder that both buyers and sellers have their brakes on. Why? Because many buyers can’t figure out what a property is really worth today. Worse yet, they are afraid they are buying at the top of the market with a recession around the corner. And many sellers are in love with those high prices. They know that this is not a good time to sell with rates being so high. I’ve found that most are financially strong and don’t have to sell. They can just wait for rates to come down—snug in the comfort of the very low long-term rates they have on the property.

Why Multifamily Sales Prices Could Come Down Slowly In 2023

The good news for sellers is that the economy seems to be getting stronger, with wages climbing 6.3% for jobs posted on Indeed and 4.8 million jobs created in 2022. Even better, in January 2023, 517,000 new jobs were created, and unemployment hit a 53-year low at 3.4%. Many sellers, real estate brokers and property managers I talk with are arguing that this should justify today’s high multifamily prices and support more rental increases in 2023 as wages have gone up too.

But I think the data from the last quarter of 2022 supports a different argument—that multifamily prices must come down. According to CBRE, new investment in multifamily property fell by 70% (download required). Why? Because investors couldn’t make the numbers work, and the future did not look bright. According to Fannie Mae, there was a negative demand for multifamily units of -103,485 at the end of 2022. Now if we add to this the 783,000 new apartment units they report coming online in 2023, this is a recipe for rents remaining flat and rental concessions on the rise.

Savvy property investors know that if they are going to buy high, they have to raise rents to achieve the return they need in the future. This goes right to their bottom line, raising the net operating income in the income approach of a commercial appraisal and raising property value. But as noted in the report above, Fannie Mae is expecting rents to only achieve a 1.5% increase in 2023.

Today’s high prices just don’t seem sustainable, or I should say, they are not based in reality. The reality is that too many units are available for rent, too many units are coming online and too many renters are already paying more than they can afford with inflation. The reality is what an investor is willing to put down on a loan with today’s high mortgage rates. The reality is that those rates are likely to go higher as the Fed struggles to lower inflation to their benchmark of 2%. It’s at 6.3% now. And the reality is what an investor needs to earn.

A client of mine recently summed it up perfectly: “If I buy at today’s prices, I will be paying what the property will be worth in two years. And that’s if I can raise rents enough. Why would I do that?”

What does all this mean? If you are a multifamily investor, you might be better off waiting until prices come down. I think they will by the last quarter of 2023, as appraisal valuations come down and more sellers must sell due to divorce, partnership breakup, loan maturity or death. Of course, those who have the time may want to make lowball offers on properties with under-market rents in good neighborhoods where renters can afford future rent increases and wait for one to stick.

If you are a seller or listing real estate broker, unless you want to wait for a cash buyer, it’s important to not only sell the property’s upsides and value adds but also think about the buyers’ expectations for earnings. Based on actual net operating income, current interest rates and down payment requirement, what sale price will bring the deal to the closing table?

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.


Source:  Forbes

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Wynwood Development Gets Boost With $67 Million Construction Loan

A developer obtained a $66.9 million mortgage to build an apartment complex in Miami’s Wynwood Arts District.

A group of Illinois-based lenders consisting of CIBC Bank USA, First Bank Chicago and Republic Bank provided the financing to Wynwood Land LLC, a partnership between Chicago-based Fifield Cos. and Newark, New Jersey-based PGIM Real Estate. The lenders boosted a mortgage originally issued in 2022 by $53.16 million to $66.9 million now. The document lists the maturity date as March 20, 2027.

It secures the 1.41-acre site at 45 and 37 N.E. 27th St. The developers purchased the property for $19.5 million in 2022 and subsequently demolished the commercial buildings there.

The project, dubbed Wynwood Station, has been approved for 210 apartments, 11,500 square feet of retail space, and 296 parking spaces. Amenities would include a pool deck, an interior courtyard, coworking space, a lounge with a kitchen, a large fitness center, and a creative arts room.

Miami-based MSA Architects designed Wynwood Station.

In 2021, the mixed-use residential project was denied by the City of Miami’s Urban Development Review Board. The board voted unanimously on Nov. 17 to deny the project after voicing numerous concerns including the massing of the building, location of a trash chute, location of elevators, design of the parking levels and ramps, the width of a covered walkway, the size of a courtyard and more.


Source:  SFBJ

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Terra Offers $500M For Oceanfront Miami Beach Condo Building

Terra has offered half a billion dollars to buy out an oceanfront condo building in Miami Beach, six months after a Related Group-led venture backed out, according to a letter obtained by Commercial Observer.

Located at 5445 Collins Avenue, the property, Castle Beach Club, sits on 4 acres along the famed Miami Beach strip, offering 576 linear feet along the ocean.

The deal — if finalized — would effectively become the most expensive land purchase in the Miami area. Terra, led by David Martin, will most likely tear down the 18-story building and construct an ultra-luxury condo complex. The site can accommodate a structure up to 200 feet tall.

The proposed buyout is part of a growing trend following the deadly collapse of Champlain Towers South, a condominium built in 1981 that was poorly maintained. Some condo associations of similar, decades-old buildings are choosing to sell to developers to avoid footing the bill for costly repairs, now mandated by Florida law.

In late 2021, the homeowners association of Castle Beach Club put the property, which dates back to the 1960s, on the market, hiring a team led by Colliers’ Ken Krasnow and Gerard Yetming to shore up the highest price.

Jorge Perez’s Related Group and 13th Floor Investments first swooped in a year ago, together bidding $500 million. But the joint venture backed out of the deal in October after their financing fell apart as interest-rate hikes rattled capital markets and a handful of unit owners held out.

Last Friday, Terra officially entered the picture, matching Related’s original offer.

A letter penned by Yetming was sent to unit owners announcing Terra’s $500 million bid, which averages out to $877,192 per unit. The property’s 570 unit owners are set to receive individual offers in the next two weeks, after which they will have about two months to decide whether to accept the offer. To complete the sale, Terra will likely need 95 percent buy-in from condo owners.

“We can confirm that Terra has the capability to complete this purchase, and has the funding in place to do so,” according to a letter.

The source of Terra’s financing remains unclear, though the developer is said to have a partner on the deal with whom it previously worked with.

Back in 2022, Terra and seven other firms had bid on Castle Beach Club, according to The Real Deal, which first reported the most recent proposal.


Source:  Commercial Observer

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Centner Academy Owners Assemble Land In Wynwood

The controversial owners of Centner Academy in Miami are assembling land in Wynwood Norte.

Entities tied to David and Leila Centner acquired the adjacent parcels at 3442 and 3490 Northwest Second Avenue for $4.7 million in January, records show. The lots total 0.2 acres and include a 7,660-square-foot building the Centners have been using as storage for the school.

They also own the 0.8-acre property at 3465 Northwest Second Avenue. State records show attorney Jamie Mandel, who represents the Centners on their real estate deals, now manages the company that owns the 12,000-square-foot school building. A deed transfer has not been recorded.

Real estate investor Babba Joshua Yesharim’s BHBH LLC sold the properties at 3442 and 3490 Northwest Second Avenue. Yesharim’s company paid just $275,000 for the lots in 2011, marking a 16-fold price increase in 12 years.

Yesharim said his parcels were on the market for $5.5 million, and that the Centners canceled their contract to buy the lots. After receiving offers from other buyers, he approached the Centners to see if they were still interested, and they negotiated the latest deal.

The Centners will likely use their properties to expand their Centner Academy school, which has locations at 4136 North Miami Avenue, near the Miami Design District, and at 1911 Northeast Miami Court.

Yesharim said the Centners are also building an apartment project down the street from the Wynwood Norte assemblage, just south of Roberto Clemente Park. Property records show a company managed by Coral Gables-based ABH Developer Group paid about $7.5 million for the land at 3311 and 3327 Northwest Second Avenue and 182 Northwest 34th Street. ABH Developer Group did not respond to a request for comment.


Source:  The Real Deal

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Mast Capital, Rockpoint Underway On Nine-Story Multifamily Project In Miami Beach

Mast Capital, in partnership with Rockpoint, is underway on a nine-story, 178-unit multifamily development located at 3900 Alton Road in Miami Beach.

Designed by Arquitectonica, the unnamed apartment community will consist of units ranging from studios to three-bedroom apartments sized from 560 square feet to 1,410 square feet.

Amenities will include an elevated pool deck, barbecue area, outdoor gaming area, fitness and yoga studio, resident lounge, coworking spaces and a pet washing station.

After securing a $64 million construction loan from PNC Bank in Nov. 2022, Mast Capital and Rockpoint broke ground on the development in February 2023 and plan to open the community by fall 2024.


Source:  RE Business

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Former Red Sox Star’s Omni New York Proposes Wynwood Apartments

Plans for an apartment building in Miami’s Wynwood district have been filed by Omni New York, a development company run by former MLB All-Star Maurice “Mo” Vaughn.

On March 15, the city’s Urban Development Review Board will review the proposals for Omni 21, which is proposed at 100 NE 21st St.

An affiliate of Omni New York, Wynwood 21 Apartments, paid 4.5 million for the 0.6-acre site in 2020.

The 9,856-square-foot automobile facility that currently sits on the land would be removed to make room for the apartments.

Omni 21 would have 97 apartments, 5,865 square feet of retail space, 130 parking spaces, including 25 spaces for electric car charging, and 166,960 square feet of space across 11 levels. On the fourth level, there would be an outdoor amenity deck with grills and a dog walk, and on the rooftop, there would be an amenity deck with a pool, a fitness center, and a clubroom.

The sizes of the flats would be between 481 and 1,164 square feet. There would be 42 two-bedroom units, 40 one-bedroom units, and 15 studio apartments.


Source:  SFBJ

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Clearline Real Estate Reveals Plans For Apartment Project In Wynwood

Clearline Real Estate, led by former Kushner Cos. executive Jenny Bernell, has revealed plans for its first apartment development in Wynwood.

The city’s Urban Development Review Board will go over the project on March 15. Miami-based attorney Iris Escarra represents the New York-based developer for the project, which was designed by Miami-based Arquitectonica.

Clearline’s strategy is buildings with mostly smaller apartments, which generally appeal to young workers without children. These buildings are light on parking, so the developer is counting on many tenants to utilize public transit or their bikes.

The project would be located at 2000 to 2012 N. Miami Ave and 2021 to 2035 N.W. Miami Court. It purchased the 1.38-acre property for $19.1 million in April 2022.

Totaling 435,286 square feet in 11 stories, the building would feature 310 apartments, 9,909 square feet of commercial space and 311 parking spaces. The developer is seeking a 50% density increase through a payment to the city’s affordable housing trust fund, plus a 30% parking reduction.

It would feature an interior courtyard on the fourth floor with a pool, a clubroom, a fitness room, a library and a coworking center.

There would be 118 studio apartments averaging 472 square feet, 131 one-bedroom units averaging 630 square feet, and 61 two-bedroom units averaging 851 square feet.


Source:  SFBJ

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South Beach Hotel Could Be Seized In $7.4M Foreclosure

A hostel in the South of Fifth neighborhood of Miami Beach has been targeted in a $7.39 million foreclosure lawsuit.

Fort Lauderdale-based Courthouse Square Holdings LLC filed a foreclosure complaint Feb. 27 against 235 Washington Holdings. It concerns the 48-bed hostel with a small restaurant at 235 Washington Ave. It’s currently called the Onu Hotel, although it’s also been known as the SoBe Hostel.

Miami-based Dade County Federal Credit Union awarded a $7.5 million mortgage to the borrower in 2019, the same year 235 Washington Holdings purchased the hostel for $10 million. It subsequently performed renovations to the 9,918-square-foot building.


Source:  SFBJ

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L&L, Oak Row Land New Tenants, Start Construction On 1M SF Wynwood Plaza

Developers broke ground on The Wynwood Plaza on Thursday, a 1M SF mixed-used project that is the largest yet in Miami’s Arts District.

The Wynwood Plaza at 95 Northwest 29th St. is being developed by L&L Holding Co. and Oak Row Equities, which acquired the site — where the former Rubell Museum once stood — in December 2021 for $53M. California developer Shorenstein Properties and Claure Group, the family office of former SoftBank and Sprint CEO Marcelo Claure, joined the project as partners.

The development team held a groundbreaking ceremony Thursday evening commemorating the start of construction after securing a $215M loan from Bank OZK, according to a press release.

“Recognizing the need to create something of lasting value to Miami, we assembled an all-star team capable of cultivating an environment that is every bit as unique, artistic and sophisticated as the colorful neighborhood that surrounds it,” L&L co-founders David Levinson and Robert Lapidus said in a joint statement.

When it opens, which is expected to be in 2025, the Gensler-designed Wynwood Plaza will feature a 509-unit apartment building, 32K SF of retail, 6,600 SF of outdoor dining and a half-acre public plaza designed by renowned landscape architecture firm James Corner Field Operations, which designed Brickell’s Underline and Manhattan’s High Line.


Source:  Bisnow

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