California company sees a lot of positive attributes in Gulf Coast multifamily projects
Pent up-demand. New construction. Solid jobs numbers. A higher-than-average household income. Little comparable competition. Strong rent growth potential. Unique architecture. A raft of modern amenities. Close proximity to Interstate 75. Good schools nearby. High-end interior finishes.
These are just a few of the reasons California-based Passco Cos. LLC spent $77.5 million — or $215,277 per unit — last month to acquire the Springs at Bee Ridge apartment complex in Sarasota County, roughly a year after developer Continental Properties completed the 360-unit community.
“There’s such a premium to the name Sarasota,” says Colin Gillis, Passco’s vice president of acquisitions for the Southeast. “There’s a lot of value there, a lot of pent-up demand. And because the pipeline for new product is relatively low in the region, say from Lakewood Ranch to North Port, this made for a great fit.”
Although the Gulf Coast’s strong demographics and jobs creation numbers are often cited by investors as reasons for buying multifamily projects within the region, Passco’s multilayered criteria provides a rare — and detailed — peek into the way apartment buyers perceive Sarasota and beyond.
In Passco’s case, the Springs at Bee Ridge, which is being rebranded to Longitude 82, represents its ninth acquisition in Florida, in markets as diverse as Sarasota and Key West, Bradenton and St. Petersburg, Melbourne and Estero. In all, the company controls 2,700 units in the Sunshine State.
Gillis says Passco was drawn specifically to Springs at Bee Ridge because of its relatively quick lease-up — less than a year — and because tenants’ average household income topped $100,000, an unusually high figure.
Not bad for a community adjacent to a Walmart Supercenter that also has a portion backing up to Interstate 75.
“Longtitude 82 has one of the highest household income levels of any project in our portfolio nationwide,” Gillis says of the company’s 50-property portfolio in 17 states, valued at nearly $3 billion.
“It may seem an improbable location at first, but what the seller was ale to achieve in terms of lease-up and household income really says something about that whole area.”
Gillis credits Continental’s two-level design and level of finishes — granite countertops and stainless-steel appliances throughout — with boosting the lease-up time. Often, new apartment communities take two years or longer to achieve full occupancy, and only then by offering generous concessions on rent or lease terms.
“Because they’re new they’re low maintenance, and the two-level design provides the feel of a single-family home,” he says. “It’s good-looking architecture, and the amenity package is as good as it gets.”
Longitude 82 also remains relatively affordable, as well, at an average rent of $1,425 per unit, or $1.47 per square foot, despite design and amenities that include nine-foot ceilings, a salt water swimming pool, poolside kitchen, modern fitness center, clubhouse, lounge and coffee bar and a pair of dog parks.
Gillis says Passco was particularly comfortable with the purchase because it had previous experience with seller Continental. Last year, the 20-year-old company bought an Estero apartment complex, now known as Longitude 81, from Continental for $55 million.
Like Springs at Bee Ridge, that 260-unit community was relatively new at the time of the purchase.
JBM Institutional Multifamily Advisors’ Jamie May represented both Continental and Passco in the 5900 Wilkinson Road transaction.
Passco also is familiar with the area. In 2016, it acquired the 400-unit ParkCrest Landings community in Bradenton, a 70-acre, waterfront complex that backs up to nature preserve.
“We’re yield focused, and a very conservative, pragmatic holder of assets,” Gillis says. “Plus, we were able to buy at below replacement cost, which is not the case in some markets we look in, where there isn’t as much ability to generate income long-term.
“We focus on newly built product in secondary or emerging markets where we see population and job growth, so from that perspective, Springs at Bee Ridge was fairly typical.”
Because Longitude 82 is relatively new, as well, Gillis says Passco won’t have to inject capital in anytime soon beyond a few planned “ minor tweaks” to amenities to add cabanas poolside and some shade elsewhere in the community.
And while Passco’s purchase brings to 760 and $152.5 million the number of units it owns, and total investment, respectively, in Sarasota and Manatee counties, Gillis says the company remains bullish on the area.
“We’re never topped out anywhere,” he says. “If another Sarasota-area property came to our notice and it made sense, we’d definitely take a look at it. We’re certainly not going to limit ourselves geographically. We have to evaluate every potential acquisition on its own merits.”