Eastern Pasco County Getting First Condo Conversion

ZEPHYRHILLS, FL-This eastern Pasco County city of 11,550 permanent residents, best known for its bottled water product, is getting its first condominium conversion at the four-year-old, 224-unit, 90%-leased Ryals Chase Apartments at 5919 Ryals Rd., about 40 miles northeast of Downtown Tampa.

Zephyr 26 Holdings LLC, a private Miami Beach-based investment group, paid Zephyr Apartment Properties LLC, a Clearwater-based private partnership of individual Southeast investors, $22 million or $98,214 per unit for the property. The condos are expected to be priced from about $109,000 to $169,000.

The Tampa-based Meyer Kattan Group within the Marcus & Millichap Real Estate Investment Brokerage Co. represented buyer and seller. Jeffrey Meyer, Darron Kattan and Andrew Wright of the Meyer Kattan Group, and Dan Mulkey of M&M's Tampa office handled the transaction. Meyer calls the deal "the first major condominium conversion in this [east Pasco county] emerging sub market."

A half dozen buyers were bidding for the property. "Multiple offers at or within 1% of the list price" were submitted, Meyer says. "Some of the other bidders were also converters but they could not match the price paid by the successful bidder because they were not contemplating an immediate conversion." The other bidders included 1031 exchange buyers and traditional apartment investors.

The property was on the market for 45 days and took another 81 days to complete, from contract signing to closing. The average asking gross rent range is $710 to $1,020 per month. There were no environmental or governmental challenges buyer or seller had to overcome before closing the deal, Meyer tells GlobeSt.com.

The broker anticipates other condo conversion projects to follow the Ryals Chase transaction "as new product is built in the area and as single-family residential and condo pricing continue to skyrocket." He says "much of the class A inventory in New Tampa is converting as well."

Meyer says the effect of continuing condo conversions on the total apartment market will vary from submarket to submarket. "On an overall basis, the shrinkage in apartment inventory will result in higher physical and economic occupancy, although on certain deals in certain submarkets, the prevalence of investor-buyers, as opposed to resident-buyers could mitigate that impact," he tells GlobeSt.com.

The Meyer Kattan Group won the listing and selling contracts because of its close relationship with several of the partners in the ownership group, Meyer says. The seller, Zephyr Apartment Properties LLC, developed Ryals Chase Apartments in 2001.