MEMPHIS, TN - The commercial real estate market received a much needed boost last week when Louisville, Ky.-based NTS Realty Holdings LP followed through on its plans to buy the Colonial Grand at Shelby Farms apartment complex for $41 million. The transaction occurred in two separate warranty deeds, one for $25.2 million and one for $15.8 million, with an NTS Realty Holdings entity called Shelby Farms Apartments LLC acting as buyer.
NTS Realty Holdings bought the 473,278-square-foot, 450-unit complex from Colonial Realty LP and Colonial Properties Services Inc., entities affiliated with Birmingham, Ala.-based Colonial Properties Trust. The transaction closed June 27, marking the second highest commercial deal of the year following the sale of Countrywood Crossing shopping center in Cordova, which garnered $55.2 million in March.
It also ranked as the second-highest multifamily sale in recent history for Shelby County, behind only the sale of Watergrove Apartments to Philadelphia-based BPG Properties Ltd. in October for $46 million. Colonial Grand, at 536 Shelby Grove Drive in Cordova, narrowly edged the sales of Legacy Farms for $36.5 million in 2007, and the Trails of Mount Moriah for $35.3 million in 2006 for the most lucrative apartment sales in the past 10 years, according to Chandler Reports.
What, exactly, caught the eyes of executives at NTS Realty Holdings? For one thing, the transaction provided positioning help with a 1031 exchange, which allows real estate investors to defer capital gains taxes on their investment properties.
Also, they knew the seller and the type of product it puts on the market. "Colonial is a long-standing operator and somebody that does a good job," said Greg Wells, executive vice president and chief financial officer for NTS Realty Holdings. "They had certain opportunities they were looking to accomplish with their sale, and it righted with our opportunity to buy a property. Everything worked out with these fellows in terms of their need to effectuate a disposition and our need to effectuate an acquisition."
Shelby Farms Apartments also took out two loans totaling $27.8 million from Colonial Properties Services for the deal, which included the standard assignment of rents and leases. The new owner soon will rename and rebrand the property, but Wells said that hasn't been decided. Colonial Grand at Shelby Farms was built in 1996 and renovated in 2006. Its second phase brought the unit total to 450, and the property is now 93 percent occupied. The apartments average 1,052 square feet and $915 per month.
Those figures are slightly above normal for both Shelby County and the Cordova submarket. New construction apartments countywide are 92.8 percent occupied with an average size of 1,019 square feet and rental rate of $870. And new construction apartments in Cordova are 91.9 percent occupied with an average size of 1,044 square feet and rental rate of $867, according to the latest data from CB Richard Ellis (CBRE) Memphis' multifamily division.
Source: Memphis Daily