The Passenger Flats apartment complex behind the Chattanooga Choo Choo has sold for $17.2 million as real estate investors continue to buy into Chattanooga's rental market.
The 208-unit apartment complex, which was developed in two phases over the past seven years from some of the former hotel rooms added to the Choo Choo in 1982, was acquired by a limited partnership, Passenger Partners LLC, a real estate partnership formed last month in Knoxville. The new owners paid the equivalent of $82,692 per unit and have hired Brookside Properties Inc. to manage the apartments.
The apartments are next to the 283-unit Bluebird Apartments, which sold in 2020 for $63.15 million in the biggest valued apartment sale ever in Chattanooga.
The Passenger Flats building was originally built in 1992 as one of the hotel buildings at the Choo Choo and includes 90,542 square feet, according to Hamilton County property records. Passenger Flats features studio, one-bedroom and two-bedroom options, along with amenities such as two resort-style pools, clubhouse, fitness center, laundry facilities and free Wi-Fi.
Adams Kinsey, president of the Choo Choo, said Friday the sale is part of the ongoing redevelopment of the 25-acre Choo Choo, a former Southern Railway passenger station that was converted to a hotel complex in 1973 and later acquired by Kinsey and other investors in 1989.
"We had great success with the redevelopment and this sale reflects that," Kinsey said in an email statement Friday. "The desire for people to live in the Southside, the city's most dense, walkable and active neighborhood, continues to be extremely strong."
Kinsey said since the Choo Choo owners began redeveloping the hotel complex into a more diverse entertainment complex nearly a decade ago, many of the buildings have been sold to other developers.
"We started our redevelopment efforts in 2015 and the sale of the Terminal Station, Gardens, Station Street Parking Lot and Passenger Flats over the last six months is a reflection of the success of those efforts," Kinsey said. "The 25-acre Chattanooga Choo Choo site now holds over 500 multifamily units with Blue Bird Row and Passenger Flats and there are numerous restaurants, retail offerings and entertainment venues, plus a distillery and fitness studio."
Kinsey said "the timing was right" for the sale of Passenger Flats and comes two years after the Kinsey group also sold the nearby Craftworks Building on Main Street.
"We believe the Southside will only continue to explode in growth and are excited about new developments underway in the area," he said.
With rental rates rising and interest rates still near historic lows, investors spent a record amount on apartment complexes in Hamilton County last year. In 2021, all of the top 10 sales involved apartment complexes bought by investment companies or partnerships, most of which are based outside of Chattanooga.
"I think Chattanooga has proven itself as a great place to live and a great place to work, so we're seeing more people move and invest here as a result," David DeVaney, president of NAI Charter real estate in Chattanooga, said in a telephone interview in January. "Plus, our real estate values compared with other Southeast markets like Atlanta, Nashville and Charlotte are still seen as very attractive and very affordable."
Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340. Follow him on Twitter @dflessner1.