Cottonwood Residential officials say they are aware that multifamily values and supply have spiked in recent years in the Tampa and St. Petersburg markets, and that affordability is increasingly becoming an issue, especially for urban renters.
But those dynamics were trumped by St. Petersburg's walkability and its solid economic fundamentals — like office job growth — when buying the former Modera Prime apartment tower for $77.5 million earlier this year.
“The purchase fit with our plan to recycle capital from older projects into dynamic locations like St. Petersburg, which has all the modern amenities and is a very walkable downtown,” says Paul Fredenberg, the company's senior vice president of acquisitions.
The 309-unit Cottonwood Bayview, an eight-story rental tower at 235 Third Ave. N, opened in 2014. Rents range from $1,285 per month for a studio to about $3,000 per month for a two-bedroom unit.
“There is a lot of supply out there, so you do have to be careful,” Fredenberg says. “But the Tampa and Orlando areas have proven themselves to be pretty resilient.”
He acknowledges, however, that “affordability will become an issue at some point” if occupancy and rental increases continue on the pace they've had the past two years. Average occupancy in the Tampa area today is in excess of 96%, while rent rates have climbed an average of 5% the past two years, according to statistics from researcher Reis and others.
“You could argue that every asset class is somewhat over valued today, compared to historical averages,” Fredenberg says. “But the demographics as we see them really support multifamily investment and we anticipate that will continue.”
Bayview wasn't Salt Lake City-based Cottonwood's first foray into the Tampa rental market, either.
It also owns the Marq Highland Park, in the Westchase section of Tampa, which it acquired from Altman Management Co. in late 2014.