Real estate slump … what real estate slump?
The deal closed last week on the property, said Reed Weinberg, president and principal partner in the commercial and investment real estate firm.
The raw land, taken back by Louisville-based Republic Bank & Trust Co. as collateral from a failed office development, sold for about $175,000 per acre, a total deal worth about $3 million, Weinberg said.
The purchaser, Indianapolis-based Watermark Residential, plans to build a Class-A apartment complex at the site, he said.
Josh Pervis, development director at Watermark, did not return calls for comment.
With virtually no nearby residents in the heavily developed office park/retail/restaurant corridor, the property will be relatively easy to develop.
“That property has everything going for it in that it’s in an area without a lot of homes. Not a lot of residential,” Weinberg said.
“It’s just a reality with an apartment complex. No matter how nice, neighbors are going to fight it.” Except, there are no neighbors, one of several undeveloped parcels along that stretch of Hurstbourne Parkway at Dorsey Lane just south of Westport Road.
Weinberg described Watermark as “an up and coming” apartment developer focused more on middle-market cities such as Louisville and Lexington, Ky.
Watermark has two projects planned in the region – Watermark at Hamburg Farms, a 150-unit apartment development in Lexington, and Watermark at Indian Lake Village outside Nashville.
The sale is just one of numerous recent apartment-related transactions including the sales of several Class A apartment buildings in Louisville during the past few months.
With slow residential real estate sales, existing Class-A apartment complexes have historically low vacancy rates.
“The fundamentals in Louisville are fantastic,” Weinberg said. “There is little supply coming on line if any at all. There is a lot of money chasing not a lot of deals.”
One way to measure the attractiveness of existing apartment complexs as investments is capitalization rate, or the ratio of operating income generated divided by the original investment.
So, if a $1 million apartment complex has a cap rate of 10, it generates $100,000 in annual operating income, or 10 percent of the purchase price returned in one year.
That spread narrows as complex values rise faster than rents, with cap rates for Class A sub 7-percent range, Weinberg said.
PRG has carved out its niche in moving bank-owned property, termed “Real Eastate Owned,” which is listed as a liability on bank balance sheets.
PRG also sold 12 acres in Frankfort, Ky. recently.
“We really have had great success since 2008, becoming the premiere (real estate) company in city working with community banks,” Weinberg said, including Republic and First Federal Savings Bank, based in Elizabethtown, Ky.
The Hurstbourne property, though, has gotten the firm a lot of attention, he added.
“We have a big SOLD sign out, and I am shocked at the number of people who tell me they go by that sign and that site – everyone, it seems, knows the location.”