Rehab's Reach

This year, for the first time among our ARI feature projects, we give each renovation an actual ARI rank: a subjective letter grade based on our assessment of how well each renovation accomplishes its ROI objectives, meets its rent and target-market goals, and executes its redesign plans. Turn the page and let us know if you agree—and perhaps pick up some inspiration for your own properties.

CITYSIDE AT HUNTINGTON METRO

Alexandria, VA

MFE ARI: B+

THE SITUATION: Located in Alexandria, Va., a historic city eight miles across the 14th Street Bridge from downtown Washington, D.C., and close to a subway stop, Cityside at Huntington Metro consists of four buildings with 569 units on 15 acres. But when the property was purchased, the buildings were extremely dated—three from the early 1960s and one from 1974; moreover, rents were at the bottom of the market, says Benjamin Underwood, regional manager of The Bainbridge Cos., which was brought in to manage the renovation and property.

THE CHALLENGE: Because surrounding buildings targeted mostly upper-end tenants and had achieved top occupancy rates, the new owners knew they needed to undertake remodeling that would introduce an upscale hotel-style ambience that could compete. They were willing to pump in $10 million, beginning last May, to tackle both the exterior and interior.

THE RESULT: The new design features universally appealing luxe amenities, from a rooftop fitness center to a cyber café, resurfaced tennis court, new pool decking, and completely remodeled units. To date, 220 apartments have been finished. “The building now competes well against those in the median category, including new construction with slightly higher prices,” says Underwood. Best of all: Rents have been increased $200 a month.

ROSEMEADE APARTMENT HOMES

Sacramento, Calif.

MFE ARI: B

THE SITUATION: Built in 1992, the exteriors of the 38 buildings at Rosemeade Apartment Homes were remodeled in 2005 by the prior owner, and the new siding, decks, balconies, and windows were one reason The ConAm Group purchased the 465-unit property on 31 acres four years ago. “New siding and decks don’t usually translate into a rent lift,” says Will Stephenson, investment manager. The company also liked the site’s Roseville location, an upscale area of Sacramento, and the potential to increase rent and maintain a strong occupancy rate.

THE CHALLENGE: To gain the additional monthly fees and up occupancy, the developer knew it had to redo unit interiors with condo-quality finishes, as well as improve and add the right shared amenities.

THE RESULT: Goals were met on both fronts. Tops on the list of common-area facilities now are two pool areas with new decks, new spas, low seat walls, a covered barbecue area, and larger lawn to simulate a resort ambience. Even though the overall real estate market declined after the company’s purchase, ConAm still found its bet proved correct. “People will pay for nicely renovated units with granite countertops, stainless steel appliances, new paint, flooring, hardware, and window treatments, especially because we still weren’t as expensive as new units in the market. We offered a good alternative to newer, more expensive product,” Stephenson says.

VASEO APARTMENT LIVING

Phoenix

MFE ARI: B+

THE SITUATION: Built in 1986–1987, Vaseo Apartment Living, with 1,222 apartments in 88 buildings (85 of which house rental units) on 65 acres, is the largest multifamily rental property in Arizona. But because of deferred maintenance due to economic downturns, the buildings desperately needed a face-lift. Klein Financial Corp. undertook a substantial remodeling and rebranding, inside and out, starting last year.

THE CHALLENGE: Rather than reduce costs as many competitors have done, Klein focused on a wider demographic set than the original low-to-medium target by upgrading the buildings’ exteriors and interiors to attract professionals and families as well as the existing affordable pool of applicants, says Forest White, director of asset engineering.

THE RESULT: Whereas the prime prior amenity was a basement-level fitness center, there’s now a smorgasbord of communal spaces that inspire camaraderie among the 2,500 residents—including an above-ground workout room, demonstration kitchen, gathering center, kids’ room, dog park, and separate leasing and resident service centers. “Residents with service requests used to mingle with new prospects, who might hear complaints,” says White. In addition, apartments throughout are being remodeled, and the former tropical-style exterior décor has been replaced with a Tuscan-inspired face-lift. “It’s made a huge difference in attracting drive-by traffic,” White says.

PARK KIELY

San Jose, Calif.

MFE ARI: A-

THE SITUATION: After The Laramar Group, based in Denver, purchased a 949-unit complex on 32 acres in 2009, it knew it needed to remodel everything—all the exteriors, all the shared amenities, and all individual apartments.

THE CHALLENGE: After the deal closed and Laramar honed its renovation plan, the economy collapsed. The company decided to suspend work redoing apartments and focus on improvements to common amenities—a clubhouse, fitness center, pool, tennis court-to-sport-court transformation, outdoor eating area, and landscaping. “We realized we wouldn’t be getting the needed rents, but the common areas had to be addressed,” says Justin Sato, senior vice president of financial management. By late 2010, improvement in the job and apartment markets convinced Laramar executives to proceed with unit rehabs yet be sure not to overimprove them and only do so on a case-by-case basis as tenants moved out.

THE RESULT: The kitchens became a prime focus because of most residents’ interest in that space, says Sato. To date, more than 160 units have been completed, and the results are a high building occupancy with monthly rent increases of $210. The company sold the property last year.

LAKEWOOD PARK

Lexington, KY.

MFE ARI: B+

THE SITUATION: The 330 mid-1970s apartments at Lakewood Park needed remodeling, especially 135 of them located by a reservoir, which were in the worst condition and on the most prime property. But the upside was that the developer—also the site manager, Andover Management Group—obtained the property at a good price; the shell was in good condition; and the development stood in a prime Lexington location, says Brett Wilson, Andover’s chief financial officer. The goal was to move all the units from the low end of the market, at under $400 in rent, to Class A, for $1,000-plus a month, with an anticipated upswing in occupancy from 30 percent to 90 percent.

THE CHALLENGE: After deciding to tear down the 135 units in the worst shape, Andover still needed to determine whether to build apartments, condominiums, or assisted-care senior ­living in their place.

THE RESULT: The company is still trying to decide what type of housing stock to build by the reservoir. But in the meantime, it moved forward and redid the remaining 195 apartments—improving their interior features and overall aesthetics, which allowed Andover to increase monthly rents by $600. Wilson estimates that his company will spend a total of $10 million. Shared amenities are also being overhauled and include a clubhouse, walking/jogging trails, and pool. Using the company’s own construction team has helped keep down costs, Wilson says.

CITYSOUTH

San Mateo, Calif.

MFE ARI: A

THE SITUATION: A complex of five, 40-year-old buildings on nine areas in the hot Silicon Valley job market, in an area without many prime rehabbed properties, and close to U.S. Highway 101. Add proximity to San Francisco and San Jose, and the property seemed to just be waiting for an upgrade to stand out, increase rents, and up its class status.

THE CHALLENGE: The issues were twofold: 1) How much to increase monthly rents yet still come in $200 below what competitors charge; and 2) how to fix up the buildings to move them from B- or C status to A or A-, says Jerry Davis, senior vice president of operations at CitySouth’s developer/manager, UDR. Sustainability was also a goal.

THE RESULT: UDR decided to introduce a brand-new, contemporary look that would wow prospects. The firm achieved the look with a reskinned exterior, new shared amenities—including a swank indoor resident lounge to encourage mingling—and revamped individual apartments. “We knew this market, and that renters don’t stay in their apartments that much, but want to enjoy common areas and the outdoors,” Davis says. To meet the demand for green, UDR included energy-efficient windows, water-conserving fixtures, and an efficient irrigation system. The remodeling enabled UDR to raise monthly rents $700 and be awarded a 2011 MFE ­Design Award for apartment renovation.