Orlando Area Apartment Market Overview
Condominium Conversions and
Population/Job Growth Fuel Demand

May 2007

General

Finding a vacant apartment in Metro Orlando is harder than ever as thousands of condo conversions and scarce construction have squeezed the vacancy rate to another record low. Approximately 19,000 units were purchased by condo converters in 2005. From January to August 2006, another 6,500 units were purchased for conversion. Currently condo conversion activity has slowed substantially but has not stopped. Through mid-December 2006, apartment sales totaled $1.85 billion with the average price per unit at $90,199. (CB Richard Ellis)

CB Richard Ellis reported a gross occupancy rate through December 2006 at 96.8%. Average rental rates were $849 in 2006, up 6.8% over the last 12 months, compared to $795 in 2005. The rental rate is projected to be $927 for 2007. (Orlando Economic Development Commission and CB Richard Ellis, Inc. - Central Florida Business - February 5, 2007)

Orlando ranked among the nation's top rent growth performers through the 3rd quarter 2006 with a 6.4% increase locally, compared to 4.5% nationally. Orlando experienced job growth at more than twice the national rate in 2006, adding more than 41,000 jobs from June 2005 to June 2006. An expected creation of 26,000 new jobs in 2007 will continue to sustain apartment demand. New construction will add 1,500 units in 2007, 25% of those are proposed for downtown.

As a result of Orlando's record occupancy rates and fast-rising rents, due to the area's population and job growth, Metro Orlando is considered to be the fourth best market in the nation for apartment investors. In the second quarter, Orlando's vacancy rate was less than 3 percent. Metro Orlando is projected to add another 35,000 jobs and 62,000 residents over the next year. Reportedly, the best indicators for a property's financial performance are factors such as area employment growth, population growth and vacancy [rate]. (Orlando Sentinel - September 14, 2006)

In addition, according to the National Association of Realtors, Orlando was placed among the top markets for apartment investment over the last year. 2006 was the second most active year in Orlando apartment sales history.

New Apartment Development

Skull Kingdom will be replaced by a $60 million apartment block on International Drive. The four-story, wood-frame apartment building will target more than 40,000 people who work within two miles of the site, which is opposite Universal Orlando on Interstate 4, near the corner of I-Drive and Universal Boulevard. The 333-unit complex, wrapped around a parking garage at 5933 American Way, will be within walking distance of many I-Drive employers, according to Damien Madsen, a partner in Broad Street Partners, the project's developer based in Charleston, South Carolina. Construction should start by August, he said. Madsen said the first tenants might be able to move in about a year after construction starts. Rents are expected to range from $850 to $1,250 a month. (Orlando Sentinel - March 23, 2007)

Although there is a tremendous demand for new apartment development, new construction will be limited due to the lack of available land and rising insurance costs. Bill Donges, chief executive of Lane Co., an Atlanta-based developer, said insurance costs for its Florida properties increased from $200 to $300 per apartment prior to Hurricane Katrina in 2005 to $1,800 to $2,400 per unit in 2006. Only 1,400 new units are scheduled to be completed in 2007. Some units bought for conversion are returning as rentals, but the effect on the rental market has been minimal due to very strong housing demand. (Orlando Sentinel - February 10, 2007)

LeCesse Development Corp. bought 36 acres on Avalon Park Boulevard in east Orange County for $20 million. The company plans to develop 487 apartments and town homes on the property. The seller was LCA Associates. Gerald Smith, Mark Smith and Paul Guyet, all of Smith Equities Corp., were the brokers. (Central Florida Business - November 27, 2006)

Reserve at Beachline Apartments is being built by Contravest, Inc. for $29 million. The project, consisting of 348 units, is located at Narcoossee Road and SR 528 in Orlando. (Central Florida Business - August 14, 2006)

Construction on a project at Millenia Boulevard in Orlando is nearing completion. It consists of 303 units.

The Traditions at Alafaya in Oviedo, a 253-unit project, was recently completed by ComVest, Inc. of Lake Mary at a cost of $17.3 million. (Central Florida Business - August 28, 2006)

Site work is underway for the 261-unit, Camden Orange Court Apartments, which will be located on Orange Avenue at the former site of the Orange Court Motor Lodge. (Central Florida Business - August 14, 2006)

A 22.52-acre parcel in the Osceola Corporate Center in Osceola County sold for $6 million. The buyer was Fore Properties Inc. The seller was Deerfield Land Corp. The property is approved for 350 apartments. The parcel is on the south side of Osceola Parkway, east of John Young Parkway, and adjacent to Tupperware World Headquarters. Susan Lawrence of Real Estate Strategies, Orlando, was the broker handling the transaction. (Orlando Sentinel - July 14, 2006)

Apartment Sales

The Praedium Group LLC and Affirmative Equities Co. LP, both of New York City, announced Tuesday that they have sold the 552-unit, Fountains at Lake Orlando Apartments at 5175 Cinderlane Parkway in northwest Orlando for $34.35 million, or $62,228 per unit. The property was built in 1986. The sellers acquired the property in 2004 and completed a multimillion-dollar renovation. (Orlando Sentinel - January 17, 2007)

Arbour Apartments LLC, an entity of Watson Real Estate Management, acquired Arbour Apartments at 11600 MacKay Boulevard, in Orlando, from Crawford Arbour Apartments LP of Naples for $25.44 million, or approximately $63,605 per unit. The 400-unit, 292,000 square foot, multi-family property was built in 1974 in the University submarket. The team of Stephen St. Clair and Enon Winkler of The Sterling Group of Marcus & Millichap represented both buyer and seller. (Co-Star Advisor Newsletter - December 14, 2006)

Aztec Group Inc., Miami, arranged $17.25 million in financing for the acquisition and rehab of the 319-unit, The Willows of Winter Park Apartments. Mayan ZMKG Willows LLP was the buyer. (Central Florida Business - July 3, 2006)

The 236-unit, Cypress Pointe at Lake Orlando Apartments at 4030 Dijon Road in Orlando sold for $19.12 million, or $81,017 per unit. The buyer was Ashkenazy & Agus Ventures Inc. of Boca Raton. The complex will be converted to condominiums. The Miami office of Holliday Fenoglio Fowler LP arranged $22.33 million in acquisition and conversion financing for the property. (Orlando Sentinel - May 25, 2006)

The Atlanta office of Holliday Fenoglio Fowler handled the recent sales of the 156-unit Fox Hollow Apartments near Orlando International and the 168-unit Hunting Reserve Apartments near Lake Mary. The two sold for $16.4 million, or $50,617 per unit, to Enhanced Affordable Development Co. LLC of Los Angeles. (Central Florida Business - May 29, 2006)

Cornerstone Group Condo Conversion Division acquired St. Andrews Apartments, a 259-unit rental community, at 11500 Westwood Blvd. in Orlando, for the purpose of conversion. The developers paid $33 million, or $127,413 per unit, for the 14.6-acre property. America First was the seller. Ocean Bank provided the $38.25 million loan. The community will be renamed Lexington Place. Sales of the one- and two-bedroom units will begin in December 2006 with prices ranging from $179,500 to $254,000. (Southwest Orlando Bulletin - February 17, 2006)