Multifamily development driven by occupancy, rental rates

Published on: April 27, 2015

Michelle Corbet, Memphis Business Journal

The Memphis office of Financial Federal Bank has arranged more than $44 million in construction, acquisition and long-term financing for three multifamily developments in the past 30 days.

Rick Wood, Financial Federal Bank executive vice president, said multifamily projects in Memphis and around the country have more momentum than any other segment in the commercial real estate market. 

Occupancy rates are up dramatically and monthly rents have also continued to trend upward after being stagnant for several years, making it more economically feasible for apartment development, he said. 

Wood said these commercial real estate trends are also complimented by job growth in the Memphis market. 

“Anytime you have growth in salaries and disposable income, it makes people more comfortable in enhancing their lifestyle with a new living environment and higher rent,” he said. 

Most of the new construction is either in Collierville or Northeast Shelby County like the recently announced Charleston Place, a 284-unit Class A apartment complex at Houston Levee and Highway 64, in which Financial Federal arranged $30 million in construction financing. 

The other submarket experiencing new construction is Downtown Memphis with some infill projects in Midtown. 

Low interest rates, acquisition financing and availability of equity, Wood said, motivate developers who are buying existing projects in Downtown or the Medical Center District. 

The latest acquisition in the Medical Center District is 750 Adams Place Apartments, a two-tower Class C apartment building, at the northwest corner of Adams and Manassas across from Le Bonheur Children’s Hospital. 

Thunderbird Towers LLC bought the 148,800-square-foot apartment building for $6.45 million from 750 Adams Place LLC.

“Of the 201 available rental units, Adams Place has maintained 90 percent occupancy for the past decade,” Wood said. “The space’s enviable location near Le Bonheur, Methodist-University and the Health Science Center attracted buyers, who intend to invest additional funds in both interior and exterior enhancements.” 

Financial Federal arranged the $4.85 million loan through American Equity Life Insurance Co. Steve Woodyard of Woodyard Realty brokered the sale. 

Adams Place’s new owners plan to make the ground floor available for retail or office space. MRG LLC will manage the property. 

Financial Federal also arranged a $7.6 million long-term financing on Number 10 Main Apartments in Downtown Memphis. 

The historic twelve-story building on Main Street and Madison Avenue was built in 1904 and originally operated as the Commerce Title Office Building, before being renovated into apartments in the early 2000s. 

The apartments have retained a strong occupancy history for the past decade at more than 95 percent, Wood said. 

“The financing was complex due to the PILOT and other variables, but 10 Main’s history of high occupancy, asset and resident quality, and increasing rental structure attracted JP Morgan, its nationally acclaimed permanent lender,” said Jon Van Hoozer of Financial Federal Bank. 

The building features a rooftop deck and adjacent parking. Café Keough operates in the ground floor retail space at 12 Main St. 10 Main Apartments is owned by CTB LLC of Tennessee.