Tampa Bay Business Journal
When real estate investor Omar Garcia first toured West River Flats in Tampa, there was raw sewage in some of the apartments, the roofs were bad, and it was a known hangout for drug dealers.
Garcia saw right through the mess.
"It was solid concrete block," he said. "You’ve gotta look at the bones. If it has good bones, you can do a lot with it."
Garcia and his partners in Urban Core Holdings LLC closed on that property in December 2014. Today, it's 100 percent occupied with a significant waiting list, and a popular housing choice for University of Tampa students. With that project complete, Urban Core Holdings is turning its attention to another real estate transformation: The redevelopment of an old office building at 220 E. Madison St. in downtown Tampa into 120 micro apartments, between 300 and 400 square feet each. If the group's vision is fully realized, the building won't have any parking, and the majority of residents won't own a car. (A waiver from the city, which is subject to city council approval, is required to convert the building to apartments without parking spaces.) Urban Core Holdings is under contract to acquire the office building. A purchase price hasn't been disclosed, but construction costs are estimated at $7 million.
Despite Tampa's progress with urban revitalization over the last few years — thousands of residential units have been built in the city center, and retailers and restaurants are beginning to follow — Urban Core Holdings' project is a pioneering one. Micro apartments are typically built in extremely dense urban areas with well-connected transit systems and dozens of shops and eateries within walking distance. Tampa is still a car-dependent city with limited shopping and dining options in the urban core. But Garcia — a Harbour Island resident who adamantly "hates" driving and car ownership — and other urban advocates argue that the city won't ever shed its car dependency without projects like his. The micro apartments, Garcia and his partners believe, will fill a niche in downtown Tampa. The thousands of units built in the urban core and Channel district in recent years are luxury apartments, out of reach for many young professionals who want to live downtown. The apartments in 220 Madison will rent for around $800 per month. The smallest studios in the Channel district's newest buildings start around $1,500 per month.
"I probably get four multifamily deals thrown at me on a daily basis," Garcia said, "and you look at them and it’s all, 'We think you can increase the rent by 15 percent.' It’s this marginal thing, and I’ve seen the prices and everything is ridiculous. We really want to do major value-add."
The conversion of 220 E. Madison into apartments has the potential to be a "major value-add" project. The office space in it is currently 90 percent vacant, and turning the building into residential units would generate more rent and add to downtown's growing residential base. Urban Core Holdings has received deposits on more than 80 of the units since it began taking reservations on April 17. The reservations require only a $50 deposit, but they demonstrate to potential lenders that there's real interest in renting an apartment the size of a hotel room, Garcia said. The CVS on the ground floor of the 12-story building will remain. There will be office space on the second floor and a third-floor common area. The remaining floors will be apartments. With the building's proximity to the Tampa Riverwalk and Curtis Hixon Waterfront Park, Garcia already felt that he was sitting on a potential goldmine. In late April, though, during a due diligence tour of the building, his confidence in the redevelopment increased substantially. He was touring the building with a windows specialist who wanted to see a corner of the building Garcia himself hadn't seen yet on the 11th floor.
"We go into this office and lo and behold, they open the doors and you see these amazing views of Curtis Hixon," he said.
That sort of surprise is one reason Garcia said he prefers repositioning old properties to building ground-up developments.
"The view? It’s built," he said. "What do I gotta do — put a window on it? I'm not going from scratch."
Garcia has understood the profitability and personal satisfaction of fixing up derelict properties for most of his adult life. As a teenager, he watched his mother, a residential real estate agent, flipping houses in West Tampa and Town 'n' Country in the 1980s.
"I was literally going to houses that my mom would go in, and I’d be gagging," Garcia said, "and my mom would just be walking around, looking at the them."
Those dilapidated houses sparked Garcia's interest in real estate, and he majored in civil engineering at the University of South Florida. He served in the U.S. Navy and holds a master's of business administration degree from the University of North Carolina. His resume is dotted with ventures in technology and real estate. After the housing crash, he spent a few years flipping single-family homes and building out a software company that ultimately fizzled. As the single-family market became less profitable, he turned his attention to multifamily.
When he saw the West River Flats, he knew he was looking at a gem: A solidly built apartment building a mile from the University of Tampa. He and his partners paid $3.5 million for it and closed days before the Tampa Housing Authority announced it would be relocating residents out of the nearby North Boulevard Homes to make way for a major redevelopment in West Tampa.
"We paid $26,000 a unit for concrete block," Garcia said. "They were selling stuff in Suitcase City by USF for more than that."
The group put $2 million into the property, modernizing units and working to improve the security. The property manager lives on site, as does a Tampa police officer. UT students can rent fully furnished, three-bedrooms for $1,800 a month all-in — $600 a month for three roommates. That's the kind of transformation he thinks is possible in the heart of downtown with the pioneering micro apartments.
"What’s most satisfying is to take something already built — to take something that’s existing and unlock the value, I find that super interesting," Garcia said. "From a risk perspective, I find it a lot less risky than going ground up."