UDR spends about $60,000 to $110,000 per door on these 20- to 40-year-old project rehabs, which often fundamentally change the architectural structure of a building. In its complete, 360-degree rehabs, UDR provides granite countertops, upgraded fixtures, and its biggest hit recently, the California Closet, a highly partitioned closet. In its higher-end apartments, it will provide stainless steel appliances. In other cases, it goes with Satina Steel, which looks like stainless steel but costs less. In addition, UDR will change the pitch of the roofs, change windows and doors, and apply new siding and paint. Parking is also ripe for a renovation at many of these properties. UDR may update parking stalls to add more spaces or even convert an old tennis court into parking. “We’ll open up the floor plans and modernize the building,” says Jerry Davis, SVP of property operations for UDR. “We can’t typically raise the ceiling height. Other than that, you can make the thing look brand new.”
Woods at Barton Skyway
Memphis-based REIT MAA’s Woods at Barton Skyway was ripe for a rehab, thanks to its proximity to good schools, shopping, and downtown Austin.
The renovation had the usual interior touches such as upgraded baths and kitchens, but the real head turners were in the common areas—an updated fitness center, revised clubhouse, and outdoor kitchen were added to the amenity list.
“The Woods provided us with significant opportunities to redevelop the unit interiors, enhance amenities, and improve curb appeal,” says David Nischwitz, SVP and director of property redevelopment at MAA. “We completed the unit interior renovations in 2010 and recently completed the amenity redevelopment phase of the project this year. With this project, we had an internal rate of return in excess of 30 percent.”
Location: Austin, Texas
Company: MAA
Number of units: 278
Amount invested per unit: $5,000
Rent increase per unit: $100
Pre-rehab occupancy: 93%
Post-rehab occupancy: 95%
Scope of rehab: Outdoor kitchen and grill area, fitness center, clubroom, pet park, pet grooming station, wood plank floors, appliances, and ?lighting
For most of its rehabs, UDR targets a rent increase between 20 percent and 35 percent, depending on the scope of the work. Apartments that have never been updated can see rent increases upward of 30 percent, while properties that have seen more recent upgrades will bring in less. For instance, the company’s only rehab to be completed thus far in 2011 saw a third of the units updated in the prior two or three years, so rents went up only 24 percent on average.
