A Detroit-based real estate company has sold off its second Chattanooga apartment complex in the past month as the turnover of rental units in the market continues.
Broder Sachse sold the 296-unit Mountain Creek Apartments on Mountain Creek Road for $20 million to Radco Cos. of Atlanta, said Chattanooga real estate broker Marcus Lyons.
The complex was last sold in 2007 for $13.25 million, records show.
Lyons said he also represented Broder Sachse in its sale within the past month of the 121-unit Ledford Apartments on North Concord Road in East Brainerd for $8.5 million to Aerial & Above Holdings of San Diego.
The deals are the latest in a flurry of sales of apartment complexes in the Chattanooga area as companies try to benefit from the demand for rental units.
Lyons said apartments are seen as a safe place for companies to harbor money.
"Unlike developing apartments, when you buy you've got cash flow that's there from day one," he said.
Also, Lyons said, it's easier to add value for refurbishing an existing complex than building new.
In addition, he said, a lot of companies are interested in Chattanooga because of economic drivers like the Volkswagen assembly plant and Amazon distribution center, insurers BlueCross BlueShield of Tennessee and Unum along with Erlanger.
David DeVaney, president of Chattanooga's NAI Charter Real Estate Corp., said past efforts by leadership of strategically positioning the city is paying off.
A recent report by Charter noted Chattanooga has more than $400 million in projects under construction with that amount in pre-development. The report cited Chattanooga's quality of life, rejuvenation of its urban core and its "strategic economic development."
Still, Lyons said there are barriers to entry to building in the Chattanooga market, such as increasing land and construction costs and "above market real estate taxes" on multifamily units.
"This is why you see a lot of investors purchasing stabilized apartment communities with a value added component, such as operations or light rehab, rather then build something new," he said.
A study released Tuesday by the online real estate service Zumper ranked Chattanooga's apartment rental rates 78th among the 100 largest metro areas in the United States. The average two-bedroom apartment in Chattanooga rents for $740 a month, or 45 percent below the U.S. average of $1,358 for a two-bedroom rental unit, Zumper said.
Over the past six months, Mountain Brook Apartments, a 280-unit apartment complex also on Mountain Creek Road, was sold for $18.5 million. Also, the Chalet at Northshore Apartments in Red Bank sold for $4.8 million.
In addition, Legends at White Oak in Collegedale was sold for $41.8 million, the biggest apartment sale yet in Hamilton County. A Fort Worth, Texas, investment firm, Olympus Property, bought the new 312-unit facility located on a 21-acre complex just off Ooltewah-Ringgold Road.
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