Apartments near downtown canal slated for rehab

September 15, 2009

A local real estate veteran who had planned to retire has instead jumped back into the game with the purchase of two vacant downtown properties he plans to convert to market-rate apartments.

John Watson, who was a partner with Carl Van Rooy in Van Rooy Properties Group from 1986 to 2006, formed Core Redevelopment Inc. at the end of August and on Sept. 1 purchased two buildings at Senate and North streets that will house 71 one-bedroom apartments and six studio apartments.

The buildings on the southeast and southwest corners of Senate and North and about a block east of the canal were built in 1900 and 1903 as the Avondale and Deauville apartments. They were rehabbed in 1976 as low-income housing and have been vacant since last November.

They had been owned since 2004 by a local partnership. Tenants in the buildings had been eligible for housing assistance payments through a program of the federal government. When the property fell out of compliance with that program a few years ago, occupancy took a nosedive and the entity that owned the building fell behind on its mortgage with Wells Fargo Bank.

Watson bought the buildings for a little more than $1 million—about half the mortgage balance—and plans to spend another $1 million rehabbing the units. Watson said moderating prices caused him to jump back into real estate. “I was going to retire and go off in the sunset,” Watson said. “When I was stepping away, people were paying crazy prices. But then the market changed.”

The Senate Avenue apartments, which average about 650 square feet each, will rent for between $600 and $650 a month, Watson said. The first units should be ready for tenants by Dec. 1.

Amy Burmeister, a multi-family housing specialist with the local office of CB Richard Ellis who represented Watson in the transaction, said rent growth is driving interest in downtown apartment ownership.

Downtown rents have grown 6.7 percent in the last two years compared with 1 to 2 percent in other parts of the city, she said.

The out-of-town owners of the Richelieu townhomes and flats, a 62-unit, two-building property at the northwest corner of North and East streets, are hoping the growth in rent will help attract a buyer for their property. Burmeister will list the Richelieu, which is fully occupied, later this week for $4.95 million. At $80,000 a unit, it isn’t quite the bargain Watson got on the Senate Avenue buildings, but the units are bigger— at between 950 and 1,000 square feet—and the rents average more than $900 a month.

Burmeister attributed the growth in downtown rents to the limited supply of downtown apartments and the fact young professionals these days are less likely to take the plunge and buy a condo. She said downtown is especially attractive to college students and recent graduates. Watson agreed, noting that the Senate Avenue buildings are only blocks away from the IU School of Informatics. Parking with the buildings is in short supply, but he thinks their price and proximity to IUPUI will be attractive to student renters.

Executives at Flaherty & Collins, the developer of the Cosmopolitan on the Canal project just south of Watson’s buildings, think Watson’s project will help the neighborhood without competing directly for tenants. “We’re very happy to see John Watson buy the buildings and redevelop them. It’s a significant improvement to the neighborhood to say the least,” said Jim Crossin, vice president of development for Flaherty & Collins.

The Cosmopolitan will be ready for tenants by the end of the year. Its 218 one- and two-bedroom units will start at about $1,000 a month. At that higher price point, Flaherty & Collins expects the primary demographic for the complex to be young professionals, Crossin said.


Recent Articles by Tom Harton

Comments powered by Disqus