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Staff file Photo by Dave Flessner / One Riverside Apartments at 950 Riverside Drive has been sold to a North Carolina investment group that previously bought four other major apartment complexes in Chattanooga over the past 14 months.

CORRECTION: This story was updated at 11:32 p.m. on Thursday, Dec. 23, 2021, to correct the section of the IRS to 1031 in the next to last paragraph. It had previously stated 103.

In its fifth apartment acquisition in Chattanooga in the past 14 months, a national real estate investment company announced Wednesday it has bought one of the biggest multi-family developments near Erlanger Health Center to capitalize on what it sees as a growing local market.

A real estate business created by Capital Square Acquisitions LLC in Glen Allen, Virginia, bought the 280-unit One Riverside Apartments, which were completed last year. The purchase follows similar acquisitions by the same company of Marina Pointe Apartments and the Integra Vista apartments in Hixson, and 17 Broad in Southside. Collectively, Capital Square has invested more than $200 million to buy and upgrade apartments in Chattanooga since October 2020.

"Chattanooga is a gem of a city with the feel of Austin or Nashville before they took off," said Louis Rogers, founder and chief executive officer of Capital Square, in a news release. "The combination of natural beauty and economic opportunity is unrivaled in the region."

Seth Harris, executive vice president of investments for Capital Square, said the firm identified Chattanooga as a growing market in the Sun Belt with relatively attractive prices compared with more expensive cities like Atlanta and Nashville.

"We've seen occupancy rates remain stable, and that's driven by the migration of people into Chattanooga over the past several years," Harris said Wednesday. "That only seems to have accelerated during the pandemic, and a lot of those new residents are looking for apartments to rent."

At 950 Riverside Drive, One Riverside Apartments features one- and two-bedroom units situated on 17.7 acres of land just a few blocks from Erlanger's main campus and only a couple of miles from downtown Chattanooga. The apartments connect to the Tennessee Riverwalk along the nearby Tennessee River and feature such amenities as a clubhouse with resident lounges, a gaming area, clubhouse kitchen, business center, coffee bar and meeting rooms.

The apartments in One Riverside rent for $1,227 to $2,122 a month, and Capital Square officials said there are no immediate plans to change the rental rates.

"One Riverside is ideally located in the Chattanooga East submarket, providing residents with convenient access to numerous employers and community points of interest," said Whitson Huffman, chief strategy and investment officer for Capital Square, in the news release. "The property's submarket has high barriers to entry with only one other property under construction within a three-mile radius. This premier location coupled with high-end amenities makes this property an exceptional addition to our portfolio."

Southeastern Development, a 34-year-old real estate development and brokerage service headquartered in Augusta, Georgia, developed and built One Riverside Apartments.

CS1031 One Riverside Apartments, the entity that bought the 280-unit complex this week, is seeking to raise $45.34 million in equity from accredited investors and has a minimum investment requirement of $50,000. Harris declined to disclose the purchase price for the property.

Capital Square markets its properties to many investors who are seeking to avoid immediate payment of capital gains on other real estate sales. Under provisions of Section 1031 of the Internal Revenue Code, a business or the owners of investment property may defer federal taxes on some exchanges of real estate. The provision is used by investors who are selling one property and reinvesting the proceeds in one or more other properties.

Capital Square owns and operates more than 10,000 multi-family units at 143 properties across the nation. Harris said the company has no immediate plans to buy other apartment complexes in Chattanooga but it is open to considering other acquisitions in the market.

Contact Dave Flessner at dflessner@timesfreepress.com or at 423-757-6340.

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