Darron Kattan believes luck and timing are on his side. In the past month, his multifamily division at Franklin Street closed more than $100 million in apartment transactions across central and western Florida. The old adage was “location, location, location,” Kattan says. “The real way to look at it is timing, timing, timing.”
The biggest sale of the month for the Tampa-based commercial real estate firm was an $81 million portfolio of 13 properties scattered from Sarasota to Tampa to Jacksonville. The portfolio was mostly blue-collar or lower income C-class properties, which are now seeing an increase in activity, according to Kattan. “We're seeing a lot of demand, continued interest from institutions paying record pricing,” he says. “It's moving down the ladder, increasing demand on the lower income properties out there.”
Franklin Street has seen an influx of deals involving distressed properties snatched up after the last bubble. These properties are ready to be sold now that demand has returned, Kattan says. Foreign investors are also showing increased interest in central Florida, he adds.
The 180-employee firm has five offices in Florida and Georgia — Tampa, Jacksonville, Miami, Fort Lauderdale and Atlanta. The company considers itself unique because it is “full service,” offering all third party commercial real estate services, from brokerage to management, insurance and financing. Kattan says they attract clients through a collaborative approach to all aspects of the deal.
With the recovery, Franklin Street has seen revenues continue to grow. The company experienced between 30% and 40% revenue growth last year with $13 million in revenue, and expects to double revenues from last year to this year. Kattan doesn't expect his team to slow down too much. A couple other deals in Orlando for lower-income properties will probably close by the end of the year, he says.
Recently, Kattan's team in Tampa is seeing an influx of foreign capital from South America to the multifamily arena in Florida. “Southeast Florida has gotten to a point where people can't make sense of it,” he says. “The next step is Tampa, Orlando and Jacksonville, which are somewhat close, and they'll get a higher yield on their money when they invest in these markets.”
Foreign investors are attracted to the currency rate and a stable region, Kattan says. He estimates around half of the sales in central Florida have South American investors in some component of the buying entity.
It isn't anything new for foreign investors to invest in Florida. It's also not new for them to move out of Miami. “It happens anytime there is a run-up,” like in 2004 and 2006, Kattan says. But the way things are going, Kattan says he wouldn't be surprised if seven or eight out of 10 deals include foreign investors as private clients.
Working with foreign investors usually means dealing with a larger transaction and more complicated structure of buyers, Kattan says. “You have to develop relations with syndicators that are truly capable of getting to the finish line,” he adds. Now that people can access property information at the click of a mouse, the value of a real estate broker has changed from just getting information out there to helping the seller as a consultant, including vetting the buyer, he says.
The timing hasn't always been right for Kattan's team of four agents. Right now, the team is averaging between 30 and 50 transactions a year. In 2008 and 2009, it was slim to none. “That's when you develop relationships and dig your heels in,” Kattan says.
Kattan's biggest challenge is new construction entering the pipeline, he says. “At some point we will build too much.” When that happens, the newer properties have to lower rent, and the 5- or 10-year-old products experience negative pressure on rents. Kattan says he keeps hearing about rental units starting at $1,500 a month entering the market. “With 300 units like this entering the market every month or two, it's a little scary,” he says.
The other threat to continued success is the eventual rise of interest rates. Asked how Franklin Street will keep up the high numbers, Kattan says: “Do as many deals as we can when the sun is shining. And don't spend every dollar you make. You have to be prepared to weather the storm.”