HITTING A HOME RUN WITH VALUE-ADD CONSTRUCTION

Call it the longest seventh inning in the apartment cycle that has been seen over the last two decades. Five years ago was perhaps the pinnacle of value-add construction, and the market still holds opportunities for multifamily developers and owners to capitalize on apartment upgrades. They’re just a little more difficult to find, which means the prospects require solid execution.

“When you do find them they are at stretched cap rates, which makes the financial dynamics of an asset owner picking up that asset a little more challenging,” said Jeffrey Rosenfeld, executive vice-president and chief business development officer of Florida-based Adivo Construction.

New supply, which has been on a steady incline since 2012 and is expected to reach peak levels this year much like it did last year, has put a dent in some rehab projects. But the capital expenditure strategy to take older apartments and upgrade them to better compete with newer communities is still viable today.

Rehab projects getting legs in tertiary markets

Last fall, Rosenfeld joined a handful of panelists as the National Multifamily Housing Council’s OpTech conference to share insights on top amenities and how to most effectively approach rehab and repositioning projects.

Many factors, Rosenfeld says, contribute to still fertile ground for taking distressed or slightly distressed properties and updating them to compete at the top of the market. A big one is the high cost of capital and restrictive covenants for new home buyers that continue to make it difficult for younger generations to have a place to call their own. In addition, long-time home owners are downsizing and seeking a maintenance-free lifestyle with certain amenities.

Adivo Construction is a national general contractor with over 20-years of construction expertise specializing in the value-add improvements of apartment communities. The company has completed more than 100 repositioning and renovation projects for publicly traded and privately held companies in Florida, Texas, Kentucky, Oklahoma, Georgia, South Carolina, North Carolina, Tennessee, Indiana, Michigan, Missouri, Arkansas, Kansas and throughout the United States.

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