After a COVID-related pause last year, apartment sales have ticked up amid improving fundamentals throughout the Gulf Coast.
| 12:00 p.m. May 20, 2021
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Commercial Real Estate
After a pause in transactions last summer because of pandemic-fueled uncertainty, investors are once again flocking to multifamily rental deals throughout the Gulf Coast.
Since the beginning of April, a handful of major sales totaling more than $400 million have been completed, and analysts believe the deal flow will remain robust throughout 2021 as more people are vaccinated against COVID-19 and the economy continues its post-pandemic rebound.
Those recent sales came on the heels of a $1.75 billion portfolio purchase by Morgan Properties and Olayan America in late February that involved four complexes with nearly 2,000 units in the Tampa Bay area.
The deal also marked Morgan Properties’ entrance into Florida.
“There’s quite a bit of pent-up demand we’re finding on both the sell side and the capital side, as investors are once again looking with renewed interest at apartment deals in Florida,” says Nick Meoli, an executive managing director with commercial real estate brokerage Cushman & Wakefield, who together with the firm’s Mike Donaldson earlier this month negotiated a $77 million sale of the Lakeshore Club apartments in Tampa.
“Now that there’s a light at the end of the proverbial tunnel in regards to COVID, operations are going well throughout the state in terms of occupancy, property growth and rent growth,” Meoli adds. “It’s a good story to tell.”
Virginia-based Snell Properties is part of the story, too. The company last month bought the 228-unit Arcos Apartments in downtown Sarasota for $80 million, its first Florida acquisition.
“We identified Central Florida a while back as a market we wanted to be in, and we found Arcos to be a truly beautiful property,” says Peter Colarulli, a Snell Properties vice president.
“It’s a great location in a truly walkable part of downtown, near restaurants, Main Street and the water.”
Colarulli adds that Arcos’ occupancy is 97%, with average rents of $2,100 monthly. Just as significantly, despite the pandemic rent collections have remained strong and delinquencies have been almost completely absent.
The flurry of Gulf Coast deals comes, too, as multifamily rental project fundamentals have improved in recent months.
In March, for instance, missed rent payments dropped to 7.7%, according to Mortgage Bankers Association data — the lowest level since the pandemic took hold more than a year ago.
At the same time, in April overall apartment rents grew by 1.3%, the fastest pace for a single month in the past decade, according to real estate research firm RealPage.
In the Tampa Bay area, by comparison, rents have grown 9% year-over-year, one of the highest increases in the U.S.
“The outlook is a positive one,” the National Multifamily Housing Council, a leading industry trade group, wrote in a report last month.
Arcos wasn’t the only major Sarasota to sell of late, either.
Last month, Wellington-based Bainbridge Cos. sold its 2019 completed Palmore complex, with 336 units, to a group led by Westbrook Partners of Palm Beach Gardens for $88 million.
In the Tampa Bay area, in addition to the 638-unit Lakeshore Club deal, investors in April bought the Cortona South Tampa Apartments and the newly renamed Lotus at Starkey Ranch Apartments, in the Odessa section of Pasco County.
At Cortona South, New York-based Blackstone Group spent $76.5 million to acquire the four-story, 300-unit complex, which was built at 5145 S. Dale Mabry Highway in 2018, according to property and other records.
RSE Capital Partners of Washington, D.C., bought the Lotus at Starkey Ranch property — formerly Volaris at Starkey Ranch — for $87 million. That 384-unit community, at 1610 Long Spur, was completed in 2018.
Unlike Morgan Properties and Snell Properties’ purchases, many of the latest Gulf Coast multifamily rental deals are being made by buyers who are well familiar with the market.
Covenant Capital Group, the Nashville firm that bought Lakeshore Club, also owns the 640-unit Swan Lake apartments in Tampa and a half-dozen other complexes throughout the state, according to its website.
RSE Capital, too, has experience here.
In late 2019, it partnered with Olympus Properties of Texas to buy the 21-story, 340-unit Icon Harbour Island luxury tower in downtown Tampa for $131.5 million.
That same year, the company paired with American Landmark to buy the Amira at Westly complex and TruAmerica on the Twin Lakes and Runaway Bay communities. Combined, the company spent nearly $128 million on the trio’s 814 units.
In all, RSE Capital has completed more than 220 investments — 13 of which are on the Gulf Coast — involving more than $4 billion in capital, its website notes.
Neither Blackstone, Covenant Capital nor RSE Capital officials returned telephone calls for comment on their purchases.
In a statement in February, Morgan Properties’ principal Jason Morgan noted that the Tampa area was the “top relocation destination for Americans who moved during COVID-19."
Collectively, the company and Olayan spent $241.62 million to buy the four Tampa-area complexes — Park at Lake Magdalene Apartments & Townhomes, Tuscany Pointe at Tampa, Reserve at Lake Pointe in St. Petersburg and Melrose on the Bay, in Clearwater.
Similarly, Snell Properties’ Colarulli says the company was drawn to the Gulf Coast and to Arcos, specifically, because of in-migrations from the Northeast and Mid-Atlantic, a trend that was “accelerated” by the pandemic.
“As such, the market today is as desirable as it was more than a year ago,” Colarulli says.
Arcos, an amenity-rich project that was completed in 2019 by Forge Capital Partners and Framework Group, both of Tampa, is occupied by a large number of Millennial transplants from the Mid-Atlantic and Northeast, he says.
But on the other end of the spectrum, Covenant Capital expects to generate tremendous upside from Lakeshore Club, a complex on nearly 66 acres.
Following a roughly $9.5 million capital improvement program at Lakeshore Club, the landlord anticipates “rent increases by over $325 per unit on average,” Cushman & Wakefield’s Donaldson says, in a statement.
Moreover, despite the heightened level of activity, Meoli doesn’t expect any slowdown to occur anytime in the near future.
“I absolutely believe this level of activity will continue through the summer,” he says. “We’re projecting a very active summer this year, because investors are very bullish on the growth of the region and the sector.”