An Atlanta-based company that turns around old apartments has swooped into West Palm Beach and purchased two apartment complexes, with plans to spend a whopping $20 million renovating them.
Cortland Partners, an investment and management firm, purchased 396-unit Arium Palm Cove and 416-unit Arium at Laguna Lakes.
Cortland plans to combine the apartment complexes into one community to be called Portofino Place in a bid to make the properties operate more efficiently. The apartment communities are north of Palm Beach Lakes Boulevard, to the west of Interstate 95.
The purchase closed on Oct. 14. Terms were not disclosed. The seller was Carroll Communities, which bought the apartment complexes just last year for $112 million.
A top Cortland executive said the purchase price was a premium over the previous $112 million sale, but still was less money than new construction would have cost.
As a result, Cortland will be able to rehab the apartments and make them as luxurious — or better — than new apartment complexes coming onto the market, said John Builder, Cortland director of investments for Florida.
Cortland’s move could signal a shift away from developers seeking to build new apartments, and instead indicate that some real estate players think it might be cheaper to buy old ones and fix them up.
After all, construction costs are going up and bankers are demanding stricter lending terms, according to a recent real estate forum featuring the region’s top apartment builders.
During the next two years, Cortland will take units as they are vacated by tenants and completely redo them. Kitchens will receive 42-inch cabinets, granite countertops, tile backsplashes and stainless steel appliances. Bathrooms will receive new plumbing and lighting.
A Laguna Lakes pool will be rebuilt because it is too small.
When the upgrades are completed, Builder expects rental rates will rise to between $230 to $250 a unit. Online rents now range from about $1,200 to $2,000 for one to three-bedroom apartments at Arium Palm Cove, according to apartments.com.
Although some apartment developers are starting to be wonder if rental rates can go much higher, Builder said Cortland is thinking of long-term housing trends. And those trends shows increasing apartment dwelling, Builder said.
A major reason: Young people in their 20s are putting off buying homes until they are well into their 30s.
“They’re more tied to a career than what they perceive as a financial anchor,” Builder said.
Cortland thinks Palm Beach County shows positive signs for continued job growth, a positive trend for apartment owners.
Cortland has been impressed by deals such as UTC’s decision to build the Center for Intelligent Buildings in Palm Beach Gardens. The center, which will showcase UTC products and brands, is expected to create hundreds of new jobs.
Builder said Cortland has been eager to enter the Palm Beach County market, and this was a strong first deal.
“We needed a tent pole in Southeast Florida, and 812 units is a great way to have a tent pole,” Builder said. “It’s not going to be our last (deal) either. We’re bullish on the area over the long-term.”
Cortland owns 35,000 apartment units throughout seven states, mostly in the Southeast U.S. and also Texas.