Premier Suburb
The most prolific, popular or expensive suburb within a city or town.
Putting ‘Premier Suburb’ in Context
Scenario
GrovePoint Capital, a real estate investment manager specializing in Class A multifamily properties in core markets, is evaluating the acquisition of The Grove Residences. This is a newly developed, 125-unit luxury apartment community located in Coconut Grove, Miami, FL. Coconut Grove is widely regarded as one of Miami’s premier suburbs due to its high-end retail, waterfront parks, historic charm, and proximity to downtown Miami.
About the Property
The Grove Residences offers one-, two-, and three-bedroom units averaging 1,200 square feet. The property features top-tier amenities, including a rooftop pool with panoramic views of Biscayne Bay, a state-of-the-art fitness center, co-working spaces, and private parking. The property sits on a 2-acre site surrounded by lush tropical landscaping, consistent with the character of Coconut Grove.
Why Location Matters
As a premier suburb, Coconut Grove attracts affluent renters who value its proximity to Miami’s business districts while enjoying a suburban lifestyle. Its reputation for safety, vibrant cultural scene, and excellent schools also contribute to strong rental demand. This translates to premium rents for well-located properties like The Grove Residences. Current market data indicates that similar Class A properties in Coconut Grove achieve an average rent of $4.50 per square foot, which is 20% higher than comparable properties in non-premier suburbs of Miami.
Investment Metrics
GrovePoint Capital’s underwriting for The Grove Residences assumes a purchase price of $85 million, equating to $680,000 per unit. The property generates an annual Net Operating Income (NOI) of $4.25 million, resulting in a Year 1 cap rate of 5%. The projected cash-on-cash return in Year 1 is 6.5% based on a 60% loan-to-value acquisition financing with a 5% interest rate.
Key Takeaway
Investing in a premier suburb like Coconut Grove comes with higher upfront costs, but the location’s strong fundamentals—high demand, premium rents, and long-term appreciation—can justify the expense. The Grove Residences demonstrates how a property in a prestigious location can deliver steady cash flow and potential for appreciation, making it an attractive investment for a core acquisition strategy.
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