Kenwood Park Apartments Going Condo

The sale "highlights the trend that has been taking over Florida--apartment communities selling to investors who immediately convert them into condominiums," says Darron Kattan, a partner in the Meyer Kattan Group of Marcus & Millichap's Tampa office.

The sale marked the third condo conversion transaction in city of Fort Myers in the last five months. "We expect this trend to continue until interest rates move up significantly, as home buying continues to be an attractive, enticing alternative to renting," Kattan adds.

"The property was on the market for two weeks before we had a signed contract," the broker tells GlobeSt.com. The deal took 90 days to complete, from contract signing to closing. There were no environmental or governmental challenges buyer or seller had to overcome before closing the deal, Kattan says.

At $76,923 per unit for a 31-year-old property, Kattan tells GlobeSt.com, "The pricing on Kenwood Park is a premium price (only) when viewing the price from the eyes of an apartment operator, where the 1973 vintage at that price per unit would not pencil out for a buyer." He adds, "A condo converter works on an entirely different economic system, factoring in margins, rehab dollars, selloff timing, carrying costs and other factors that impact the profitability of the conversion."

Average asking monthly rents at Kenwood Park Apartments are $650 to $695 for one-bedroom, one-bath units; $760 to $790 for two-bedroom, two-bath units; and $800 per month for a three-bedroom, two-bath unit. Kenwood has 86 two-bedroom, two-bath units; 16 one-bedroom, one-bath units; one two-bedroom, two-bath unit; and one three-bedroom, two-bath unit.

The units currently bring in gross annual rent of $938,520 plus other income of $35,077 for gross potential income of $969,457. The effective gross income, less deductions for concessions and discounts, is about $897,761, according to the pro forma data prepared by Marcus & Millichap. The total current annual return is 6.4%. The pro forma shows a return of 12%.

Andrew Wright and Jeff Meyer of the Meyer Kattan Group worked with Kattan on the deal, representing the seller. Still Hunter and Evan Kristol of Marcus & Millichap's Fort Lauderdale office negotiated for the buyer.

The Meyer Kattan Group's total transactional volume to date this year is $66 million versus $8.56 million in a slow first quarter 2004. The partners posted $59.53 million in sales volume in all of 2004 compared to $55.24 million in 2003.

"We have $133.8 million under contract at the moment and about $135 million on the market or signed up and being brought to market," Darron Kattan tells GlobeSt.com. "We are doing some of the stuff above as co-listings with other Marcus & Millichap agents around the firm and many of our deals are sold by other agents in other offices as well, but the transaction volume is happening here locally, speaking to the strength of the Central Florida market place and the influx of out-of-area capital." The Meyer Kattan Group formally partnered three years ago.