Hard hats and hammers have become a familiar sight at apartment complexes in Tampa Bay. • Cash-rich investors are buying older buildings and pumping millions of dollars into the rental communities since few premier complexes are for sale. Prices for the older complexes are so low that even after paying for new roofs, kitchens and bathrooms, investors can still raise monthly rents to reap profits. • Another upside: Renovations provide work for contractors and improve neighborhoods by attracting better renters, experts say.
"This is providing a better, safer and cleaner place for people to live," said Bruce Keene, president of management services at Franklin Street, a Tampa-based full-service commercial real estate firm. "It also keeps people working."
Last year, 156 apartment communities sold for $1.9 billion in Pinellas and Hillsborough counties, according to CoStar Group, which does commercial real estate analysis. That was a marked improvement from 2010, when 98 communities sold for nearly $819 million.
Local experts also attribute the buying surge to the lack of new construction during the housing bust and low prices on buildings exiting foreclosure. Lenders, they say, are still holding onto many multifamily complexes in which prior owners defaulted on loans.
"We're going to be doing this for another five to six years," Keene added.
In the last year, Franklin Street has managed the renovations of about 1,600 apartment units in eight complexes across Tampa Bay. The cost of the upgrades totals about $7 million.
An ongoing renovation is at the 28-year-old Central Park community, a 216-unit complex near USF Tampa. An investor paid $7.2 million for the property and is putting about $1.8 million into new roofs, windows, landscaping and exterior paint. Interior renovations will follow.
The complex will be renamed the Avenue. Keene said renovated apartments typically are renamed to attract better tenants.
The housing bust is driving the boom in multifamily properties.
People who lost homes in foreclosure typically have to wait three years to buy another home. As the foreclosure crisis shoved many people into apartments, the negative stigma attached to renting disappeared.
The Times reported in August that rising multifamily demand has lowered bay area vacancy rates, pushed up rents and driven investors to snap up apartment buildings the moment they hit the market.
The multifamily area is the hottest sector in commercial real estate because investors view it as a safe investment amid the turmoil roiling the economy and financial markets.
Oldsmar-based Windsor Redevelopment Corp. repairs and renovates apartment complexes.
When the real estate market tanked, owner Clint Fehr became licensed in Texas, Georgia, North Carolina, South Carolina, Virginia and Louisiana in order to keep crews working.
Last year, local renovation work took off for his project managers and the more than 150 plumbers, painters and electricians that Fehr hires as subcontractors. He expects 2012 to be busy with renovations.
"My added work will lead to hiring," Fehr said. "I expect this to be a good year."
John Burpee, the head of NAI Tampa Bay, a commercial real estate firm, said buyers are after any buildings with multiple units that produce income.
Small investors, like doctors and lawyers, call daily to ask about investing $500,000 into multifamily housing, Burpee said.
"They're looking to buy a deal," he said. "These people have been sitting on the sidelines the last few years saving pennies. They want to spend it now."
Burpee expects the surge to continue for years. Homeowners with foreclosures on their credit reports don't want to lower their living standards and want apartments with upgrades.
"The old fiberglass showers are a thing of the past," he said. " A lot of money is being spent on bathrooms."
Burpee knows firsthand.
In September, he and a business partner paid $640,000 for a St. Petersburg apartment complex with 18 units. The 40-year-old complex exited foreclosure after selling for $1.3 million in 2007. Burpee and his partner spent $5,000 to $7,000 to improve each unit. The rents range from $595 to $795 a month.
"We were able to capitalize on the weakness of the market," Burpee said. "We're able to buy at a reduced rate, make some small upgrades and still remain competitive."
Mark Puente can be reached at [email protected] or (727) 893-8459. Follow him on Twitter at twitter.com/markpuente.