An 'unlocked gem'

Cortland Partners spent $85.13 million early last year to acquire the Bowery Bayside Apartments in Tampa's tony Westshore district — at the time one of the largest multifamily deals in Gulf Coast history.

But that was merely step one.

The Atlanta-based company has filed plans with Hillsborough County to raze hundreds of units within the 6301 S. Westshore Blvd. complex and develop in their place a pair of six-story structures.

In all, Cortland could add as many as 589 new rental apartments and invest roughly $140 million into the 832-unit Bowery Bayside, company officials say.

“Our core business plan when we purchased the property was to rehabilitate all existing units to current standards, and at the same time examine the entitlements available to see if it would make sense to add units,” says John Builder, the company's director of investments.

Under current plans, Cortland intends early next year to begin razing nine of Bowery Bayside's 52 buildings with 224 units and replace them with a six-story building — five residential units and deck parking — containing as many as 385 new units.

A second six-story building with as many as 204 additional units would be built on the 60-acre site after the first is completed. Builder says the total number of units to be constructed will be determined with community input in mind. Cortland may build fewer than 589 apartments in all.

Cortland's plans come as the Gulf Coast's multifamily market continues to defy economic gravity, with rental rate increases that outpace wage growth and inflation, compressed capitalization rates on sales, heightened new construction and accelerated deal volume.

And while new apartment construction is nothing new along the Gulf Coast, it is unusual for an owner to demolish existing units and replace them with new ones. Still, area statistics seem to justify the push.

Regional employers are expected to add 38,000 workers to area payrolls this year, a 3% increase that is twice the national rate, according to a new multifamily study of the area by Sarasota commercial real estate brokerage Harshman & Co. Inc.

That influx will push rents up another 6.4% in 2016, the firm projects.

Apartment vacancy, meanwhile, is projected to dip down to 3.6% at year's end, despite the delivery of 5,600 new units in the metro area in 2016 -- on top of the 3,400 that were completed last year.

Analysts attribute the development and the valuations in pricing to continued area job growth and population influxes, as well as macro-trends that show homeownership at a more than 40-year low in the U.S.

“We really like the fundamentals of the Tampa area right now,” Builder says. “And our decision to move forward with new units stemmed from potential for rent and job growth, as well as long-term demographics. We have enough security in those factors to go ahead, and as a company, we're very bullish on both the Tampa and Orlando submarkets.”

Cortland is familiar with both.

In the Tampa area, the company owns seven apartment complexes with about 3,000 units, including Audubon Village, Carlyle at Crosstown and Island Walk.

But its plan will face increased competition from dozens of new upscale rental developments being planned or built along the Gulf Coast, and from operators that, like Cortland, are buying properties with plans to renovate them.

Most notably, New York-based TGM Associates spent a combined $164.3 million to buy the Ibis Walk apartments in St. Petersburg last month and the Tuscany Apartments in Sarasota County. At TGM University Park, as Tuscany is now known, TGM is preparing a major renovation, company officials say.

ESG Kullen, meanwhile, also of New York, invested $80.85 million last month to acquire the Trellis on the Lakes apartments in St. Petersburg.

Farther south, Starwood Capital Group bought the Gulfstream Isles apartments early last month in Fort Myers for $95.2 million -- a price that is believed to be a Gulf Coast record.

For its part, Cortland hopes to have its new development at Bowery Bayside completed by summer 2019.

Builder says architects are working to design as many of the new units as possible with views of Tampa Bay. Only a fraction of Bowery Bayside units now have water views.

Though studio apartments to three-bedroom dwellings will be available, he expects the new units will average about 950 square feet and rent for about $1.99 per square foot, or an average of $1,890 per month.

Until then, Cortland continues to try to attract residents with a host of apartment amenities and newly rehabilitated units that will modernize the original 1980s construction. New features include feature wood-style flooring, track lighting, upgraded windows and stainless steel Kenmore appliances, according to the community's website.

Bowery Bayside's amenities include two swimming pools, kayak and paddle board launch, clubhouse, nature walks to the waterfront, lighted tennis court and outdoor grilling areas.

A 4,000-square-foot fitness center is being installed now, as well.

The new buildings also will offer a raft of amenities, including a rooftop lounge and a boardwalk.

“We feel good about the number of units we're looking at, considering the location and its proximity to MacDill (Air Force Base), I-275, downtown Tampa, Westshore and St. Petersburg,” Builder says. “It's exciting, too, to be turning a B-minus property into a Class A project. We think Bowery Bayside is an unlocked gem.”