The next phase of a local real estate investment firm’s business model has arrived, as the company has sold its first property after years of steady acquisitions.
Capital Square 1031, which purchases commercial real estate and then sells shares of ownership in each property to pools of investors looking to cash in on so-called 1031 exchanges, last month unloaded its Bridgeview Apartments complex in Tampa, Florida.
It sold the 348-unit community for $43 million, after paying $31 million for it in 2013.
“(Investors received) distributions every month for five years and now they are getting 141 cents on the dollar,” CEO Louis Rogers said. “Apartments are hot and Tampa is hot – literally and economically.”
The property sale is a new, next step for Capital Square, which was founded in 2012. Rogers said the company hadn’t had a chance yet to sell any of its assets, as the typical holding time for its individual properties is designed to be seven to 10 years.
“Now that the firm is 6 years old, the dispositions are expected to increase,” Rogers said.
“2019 is when loads of properties will begin to sell,” he said. “We’re disposing of properties a little early at prices that are better than anticipated.”
The company owns nearly 70 properties across the United States, the bulk of which are outside of the Richmond region. That includes a mix of apartments, medical office and retail buildings.
Offers for apartments are attractive, Rogers said, and it also will look to offload some of its retail holdings.
“We’ve cooled on retail and gotten more bullish on apartments and medical, so if there’s an opportunity to sell retail, we will,” he said.
Among its Richmond-area holdings are the Mayton Transfer Lofts in downtown Petersburg, which it acquired in June, and the Golf Galaxy building in West Broad Village, a mixed-use development in Short Pump that soon may see the bulk of its commercial spaces come under new ownership.
While it is now an active seller, Capital Square’s buying streak also is showing no signs of ending.
Rogers said most of the investors from the Tampa deal will reinvest their money in another Capital Square property for another 1031 exchange.
He said the company has another Richmond-area apartment property under contract, but he would not divulge specifics. And it recently secured a round of private-equity funding to help it close a pipeline of deals that Rogers said totaled $100 million.