A press release from Holliday Fenoglio Fowler, LP (HFF), a real estate finance company, announced a $92.75 MM debt and equity placement for a new Avondale, Arizona 715-unit multi-family development. About $74 MM of that was debt from a life insurance company and an institutional equity partner put up about $17 MM. It appears the developer only had to put up about $1 to 2 MM. The development is huge, located on 33.7 acres at the corner of Indian School & El Mirage Road. There are a number of amenities like 2 clubhouses, 4 swimming pools, a theater, sauna, and fitness center.
We have been asked by many real estate investors what development opportunities are out there in various markets. As in any business, you need to study the trends and see where the competition is the most fierce and where there might be opportunities. In the multi-family space, we have seen that many of the major developers (e.g. Trammell Crow Residential, Gables, etc.) will not touch a project unless the size is extremely large. They are not going to build a 100 unit garden apartment complex because their cost structure and their lender’s invested capital requirements are so large. As this continues, there may be opportunities for smaller infill projects. In Scottsdale, for instance, some feel that there is pent-up demand for urban style living, lofts and so forth. However, the new, large projects coming on line such as X (Ten) Wine Lofts and Toll Brothers The Mark are incredibly expensive; their cost of land for the large, trophy parcels they are building on is enormous. With the right land cost on a smaller parcel (no small feat) and the right skill set, there may be an opportunity for a smaller developer to build a handful of units.