Canal Crossing, an upscale apartment complex that has played a significant role in the revitalization of Upper Canal Street in recent years, has been sold for $120 million to a California-based real estate investment firm.
Passco Companies, of Irvine, Calif., said it bought the 330-unit complex and its 500-space parking lot – which is now known as Canal 1535 – primarily because of its proximity to the booming biomedical district. from this part of town.
“We’ve found this to be a great market for job growth and migration with all the education and healthcare employers moving in,” said Stacy Stemens, senior vice president at Passco. “It’s who rents there and the rents are aggressive.”
Rents are soaring
Units in the nine-story building average just over 900 square feet and rents have soared amid a nationwide shortage of rental properties.
Stemens said that as leases are renewed, rents that used to be around $1,500 to $3,500 per month now average between $2,500 and $5,500 for units one and two. bedrooms. In the New Orleans area, rents rose 8% in the six months to April, contributing to what fair housing advocates say is an escalating affordable housing crisis.
The Canal Street property features a clubhouse, lounge, and “resort-style” heated pool. Among its many high-end features, it has a well-equipped fitness center, communal business center, kitchen with espresso bar, courtyard entertainment area, a covered outdoor dog park and a putting green on its roof.
With a total living area of around 298,000 square feet, Passco paid just over $400 per square foot, which is among the highest prices paid for a residential property in New Orleans, according to Mike Siegel, President of Corporate Realty, a real estate brokerage and management company. who did not participate in the transaction.
Cheaper than building from scratch
Siegel said the price was justified by the prospects for downtown residential property and the relatively low cost of acquisition compared to what it would cost to build it from scratch.
“It’s a spectacular price and must be close to a record if it’s not, in fact, a record,” he said. “It’s largely a reflection of demand for multi-family housing and a vote of confidence in downtown New Orleans and the medical district, despite what happened with the Hard Rock.”
Siegel was referring to the collapse of the Hard Rock Hotel in October 2019, when that project was nearing completion. The disaster and the coronavirus pandemic stalled progress in the area, which included the $130 million renovation of the Jung Hotel across from 1535 Canal Street, as well as the 1201 Canal condominium development above the Saenger Theater. .
Regain old glory
Canal Street, which was a regional shopping center in the middle of the last century, fell into a period of decline as department stores like Maison Blanche and Labiche moved to the suburbs and gave way to souvenir and convenience stores.
Hotel developments like the Ritz-Carlton New Orleans have converted some of the old department store buildings. But several studies, including the most recent in 2018 by the city, have identified several issues that have hindered the region’s progress toward emulating other trade corridors such as Fayetteville Street in Raleigh, North Carolina.
These include traffic and loading issues that prevent the street from becoming more pedestrian-friendly, as well as “quality of life” issues, such as vagrancy, persistent burning, and crime.
Still, Colin Gillis, head of acquisitions at Passco, said the Canal 1535 complex was a bargain.
“We were able to take advantage of a truly unique opportunity to acquire a property of this caliber for a much lower basis than today’s replacement cost,” he said.
The building was sold by Dallas-based Provident Realty Investors and partners, who completed the $85 million development two years ago.
Passco also said last week that it had acquired the 272 Sawgrass Point apartments in Gonzales. With the two new purchases, Passco has acquired a total of six properties in Louisiana over the past five years for a total of 1,690 units.
Other Passco Louisiana properties include Tapestry Long Farm, a 276-unit complex in Baton Rouge; Sweetwater Apartments in East Baton Rouge, with 276 units; The Collins at Covington, 272 units; and Watervue, 264 units in Lake Charles.
Passco typically syndicates its properties after purchasing them as a Delaware Statutory Trust. This is intended to attract investors looking to defer their capital gains in similar real estate investments to avoid paying taxes.