- Hines, which owns $90.3 billion worth of real estate, bought an apartment building for $430 million.
- The sale, the second-largest of its kind in Florida history, came after a higher bid fell through.
- As deal flow slows, big investors see opportunity in what a Hines exec called “high-growth” markets.
Some big landlords have reaped the rewards of a tumultuous moment for the apartment-sales market.
Toward the end of the spring, cheap debt on multifamily buildings, which bankrolled a record year of investment in 2021, suddenly wasn’t so cheap as interest rates rose sharply. It got harder to secure financing, deals froze, and a pricing correction rippled through the market. Some investors lost out on acquisitions, and some sellers had to settle for less.
But those woes became an opportunity for some big investors.
That’s the case for Hines, a real-estate investor based in Houston that says it owns $90.3 billion worth of real estate around the world. The company purchased a 495-unit luxury apartment building in Coral Gables, Florida, near Miami, this month after a higher bid on the property fell through, Alfonso Munk, its chief investment officer for the Americas, told Insider.
Upon seeing the bid disintegrate, Hines stepped in with a lower price, which was accepted by the motivated seller, he said. The developer touted in August 2021 that the property represented a $500 million project.
Hines ultimately paid $430 million for the property, which represented about a 7% discount to the original buyer’s offer, according to a source familiar with the deal. The acquisition, which Munk said is the second-largest single-residential-property sale to ever close in the state, illustrates how large landlords are using the industry’s reset to jump in and amass even larger holdings set to benefit from solid or rising rents for years to come.
“Over the last several months, we’ve seen asset values go down because now financing is so expensive,” Munk said. “You started seeing some of the volatility in markets. So we priced this asset accordingly.”
That is, lower than Hines would have paid six months ago, he said.
Hines’ ideal Miami-area deal
Hines’ new complex, called Gables Station, which started leasing last year, is 93% occupied. Asking rents for its studios and one-, two- and three-bedroom units range from $2,500 to $8,500, a spokesperson told The Real Deal last year. It also houses a 80,000-square foot Life Time gym, a Trader Joe’s, a 25,000-square foot coworking space operated by Life Time, and two restaurants. It’s a five-minute walk from public transportation and near an outdoor mall called Merrick Park.
Before putting in any bids, Hines had a plan: buy a mixed-use residential complex in Coral Gables, where it’s relatively hard to build, Munk said.
“This is an area that significantly limits the new supply,” Munk said. RentCafe estimates the average rent for a one-bedroom in Coral Gables is $2,690, higher than Miami’s average rent for a one-bedroom of about $2,300. Its proximity to transit was also important, Munk said.
“We wanted to make sure that the asset is going to perform over the long term and withstand some of the volatility that you’re seeing,” he said, adding that the spot “fit the bill.”
Hines is focusing on multifamily investment
Apartment buildings made up about 40% of Hines’ purchases in the past four months, Munk said. In doubling its holdings of multifamily properties over the past five years, Hines, like many other investors, has focused on the Sun Belt, or the 19 states that make up the southern continental US.
“On the macro level, we have a strong conviction in these high-growth markets,” he said, defining them as ZIP codes where demand and rents are set to grow considerably.
With the purchase in Coral Gables and another in Fort Lauderdale, just north of Miami, and the development of a new apartment complex in West Palm Beach, Hines is “making a big bet” on South Florida, Munk said. Altogether, the company plans to invest $1.8 billion into that market and anticipates that many of the thousands of people who moved to Florida during the pandemic will stay there, he said.
In addition to its purchases in Florida, Hines in June purchased an office building in Salt Lake City that it plans to convert into a 255-unit residential building.
Munk said that while Hines has been expanding the share of apartment buildings in the mix, it hasn’t abandoned investments in office buildings. “We continue to believe in the sector, although it’s changing,” he said. “But yes, we’ve been focusing a lot on other sectors that have been growing significantly — multifamily being one of them.”