Excerpted from CoStar story.
Developers in Florida and throughout the United States can’t seem to build shimmering apartment towers fast enough, but the beauty of older, existing properties is in the eye of the investor.
The latest example is a decades-old apartment complex in Tampa, Florida, that fielded about 20 offers before ultimately selling this week for $23.5 million to a buyer planning major upgrades to the property.
Miami-based Ambrus Management intends to improve the exterior of University Gardens and renovate the units, said Kevin Kelleher, senior director at Franklin Street in Tampa. The brokerage represented both Ambrus and seller ResProp Management of Tampa in the transaction.
The average rent in the 292-unit complex at 2002 Colonial Parc Dr. is $858 per month. The expected renovations could boost average rents closer to $1,000, Kelleher said. Rents rose after the renovation of a similar property across the street following a 2017 sale, he noted.
Apartments for lower- and middle-income workers are in short supply nationally, but investors view the existing assets as secure and full of opportunity, according to Kelleher.
“Across the country, we are not in any way keeping pace with workforce housing,” he said in an interview. “Nobody is delivering that to the marketplace.”
With rising land prices and construction costs, developers have turned almost exclusively to luxury rentals because they offer wider profit margins than mid-market units, analysts say.
University Gardens is in the North Tampa area, which also is home to the Busch Gardens amusement park and the 50,000-student University of South Florida.
North Tampa is one of the youngest regions in Tampa Bay and has the largest renter demand pool, according to Brian Alford, an economist for CoStar Market Analytics. Most of the rental properties are workforce housing projects built in the 1980s and ‘90s, with investment activity traditionally among the highest in the region.
Due to strong demand and limited supply, North Tampa established a record low 5.2% vacancy rate last year and remains more than 94% occupied now, Alford explained, adding that the tight vacancies have led to record-setting annual rent growth.
“North Tampa has the second-fastest growing rents in the metro and is projected to remain well above the historical average and continue to outperform the metro average over the next two years,” he wrote in an email. “However, nominal asking rents are among the lowest in Tampa at $1,036 per unit, largely due to the preponderance of workforce housing.”
University Gardens, located southwest of the University of South Florida campus, was built between 1969 and 1974. The three buildings were separate projects until ResProp purchased each one and made them a single property in 2012, Kelleher said. The development sold for $80,479 per door.
Only about 10% of the units are rented to students, but that could change because Ambrus’ renovations likely will create a “better unified brand” among the three buildings, Kelleher noted.
“They’re changing the look and feel of the property to give it a different presence to appeal to more students,” he said.
For the record: Darron Kattan, Zachary Ames and Avery Jordan of Franklin Street assisted Kelleher in representing the buyer and seller in the deal. Franklin Street’s Casey Siggins and Ben Miller secured $12 million in financing on behalf of the buyer. See CoStar COMPS #4718272 for additional information on this transaction.