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Tampa Bay Area
Business Observer Monday, Aug. 1, 2005 17 years ago

The Conversion Craze

Real estate analyst Marvin Rose thinks the conversion of apartments to condos is approaching saturation.
by: Adam Hughes Staff Writer

The Conversion Craze

By David R. Corder

Associate Editor

The recent sale of 1,000 rental units at Tampa's Grand Palm Village to a Miami Beach investor just boosted the community's inventory of condominiums. It's just one of numerous local rental properties repositioned over the past few years for condo sales in a fast-moving trend throughout the Tampa Bay market.

Some market watchers now wonder just how long the local market can sustain this trend. "I see a new (project) almost every day in the newspaper," says Marvin Rose, a Tampa Bay area residential real estate analyst.

The trend causes Rose, president of Tarpon Springs' Rose Residential Reports, to question whether the condo-conversion market is near the saturation point.

"I would think it's pretty close to it," he says. "It's an investor-driven market. There has to be a limit. They have to be approaching it."

One of Rose's main concerns is downtown Tampa, where around 2,000 new condo units are proposed or under construction.

"Some of the downtown submarkets give me a little concern," he says. "That's just because they have no history. Downtown St. Petersburg does have a little history, where downtown Tampa doesn't."

Despite that concern, Rose remains bullish about condo development in some of the other local submarkets. For one, he cites strong continued demand for beach-area condos. He also likes the outlook for some condo growth in Tampa's downtown Channel District.

"The beaches have a long history of absorption," he says. "Certain projects in the Channel District that will do fine are well-conceived and well-designed."

Meanwhile, Rose remains bullish about the suburban new home market. "The suburban family market is as strong as I've ever seen, and there is no sign of weakness," he says.

Earlier this month, an affiliate of Miami Beach investor Abbey Berkowitz acquired the 1,000 rental units at Grand Palm Village, 8649 N. Himes Ave., for $87.5 million. Berkowitz's Carrollwood 26 Holdings LLC paid $87,500 each for the property built from 1989-1991.

The purchase price is nearly 49% more than the prior sale. Boston's Realty Associates Fund V LP paid nearly $52 million in April 2002 for the rental community.

Berkowitz, who did not respond to a request for comment, secured the property with $98 million in financing through Column Financial Inc. That's $10.5 million more than the purchase price. Berkowitz financed the transaction in the name of Carrollwood 26 Holdings and Miami Beach-based Vehodaos Management Corp.

The 1,000-unit property - now dubbed the Grand Oasis - no longer accepts rental contracts in excess of seven months because of the new owner's condo-conversion plans, a leasing agent told Gulf Coast Business Review. The agent referred all inquiries about condo sales opportunities there to a Web site (

Besides the rental units, the deal includes a 4,627-square-foot clubhouse, about 3,400 square feet of office space in two separate buildings and 2,000 square feet of garage space.

This Tampa deal occurred just months after Berkowitz sold Miami Beach's Saxony Hotel to Houston's Patrinely Group LLC. His father, Holocaust survivor and hotelier Murray Berkowitz, purchased that property in the mid-1970s.

It's also one of the largest sales of rental properties in the Tampa Bay area in recent months.

Earlier this year, a joint venture between Chicago's Walton Street Capital LLC and Fort Lauderdale's Motta Co. LLC paid $125 million for Tampa's Georgetown rental apartments. The venture plans to tear down the Westshore property and erect a 1,200-unit condominium community.

Also, two affiliates of Bay Communities, a Palm Coast-based condo conversion development group, paid about $106 million last month in two separate deals for 767 rental units in North Tampa and Brandon. The affiliates also plan to convert those units into condos.

Besides those projects, real estate entrepreneurs throughout the Tampa Bay area have acquired numerous other rental properties of all sizes over the past few years with plans to convert them into condos.

Rose says investor pools still account for about half of all condo unit sales, another factor that concerns him.

"At the end of the day, somebody still has to live in these units," he says. "They have to be able to pay (the mortgage) or rent, or it won't make sense for anybody."

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