- Miami’s industrial market hit a record in Q3 with over 6 MSF of new inventory, but new construction has slowed, with 3.3 MSF currently in the pipeline.
- Rising material costs, elevated interest rates, and economic uncertainty have led developers to pause further activity, awaiting clearer economic and interest rate signals.
- Neighboring markets, West Palm Beach and Fort Lauderdale, showed positive absorption and steady rent growth, while vacancy rates inched up across all three regions.
According to Bloomberg, PGIM Real Estate, Prudential Financial Inc.’s (PRU) $206B property arm, has formed a $500M joint venture with Citymark Capital to invest in multifamily debt.
The partnership will target both performing and non-performing loans, seeking opportunities in a market where many lenders have retreated.
The Bigger Picture
With around $650B in multifamily loans set to mature between now and 2026, PGIM and Citymark are looking to step in as traditional banks pull back from commercial property financing.
Rising interest rates have impacted property valuations, leaving many owners with fewer refinancing options. “Over the next 18 months, we expect to see a large volume of multifamily loans coming to the market,” said Soultana Reigle, PGIM Real Estate’s head of U.S. equity.
Filling The Financing Gap
The joint venture intends to address a financing gap created as higher borrowing costs make refinancing more challenging for property owners.
Banks, in particular, have scaled back their exposure to commercial real estate, leaving a void that PGIM and Citymark hope to fill with their new fund.
While borrowing costs have eased somewhat, they remain high compared to when many loans were initially originated, adding pressure on owners seeking new financing.
Strong Demand
The venture comes at a time of continued strong demand for rental housing, driven by high home prices and borrowing costs that make it difficult for many renters to transition to homeownership.
According to Q2 data from Redfin, the growth rate of renter households in the U.S. has been more than three times that of homeowners over the past year. “People that are renting and are trying to buy a home are having a tough time,” said Citymark Capital CEO Daniel Walsh. “Apartments are generally staying full in the near term.”
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What’s Next?
Despite the challenging environment, Walsh does not expect significant discounts in loan sales. “It’s really more of a little bit of capital that’s needed from all parties just to get through to a better interest rate environment, say the next 18 to 24 months,” he added.
The joint venture is positioning itself to support property owners through this transitional period, aiming for a long-term payoff once interest rates stabilize.
The collaboration between PGIM Real Estate and Citymark Capital underscores growing investor interest in the multifamily sector, despite a challenging economic backdrop.
With demand for rental housing showing no signs of waning, the joint venture’s strategic focus on multifamily debt could provide essential liquidity for property owners navigating refinancing hurdles in the coming years.
