“If you’re sitting with an asset that has good, solid bones and is in a good market, you could renovate at a fraction of the cost of building it,” Koziolkowsky says.
Filling the Void
Koziolkowsky is onto something. Renovations aren’t the only aspect of the multifamily renovation sector that fell off of a cliff during the Great Recession. New multifamily starts also dropped to dramatically low levels—only 97,300 units were started in 2009, the lowest amount since the early 1960s. And interestingly enough, that’s creating an opportunity for renovators.
Barton Creek Landing
UDR’s full-scale remodel template was in full force at Barton Creek Landing. The Denver-based REIT changed the exterior look of the property and added new amenities, including a clubhouse, fitness center, and pools. Inside the units, the work continued. The company opened up the kitchens, and added new cabinets, countertops, appliances, and windows. The REIT just completed the exterior and is wrapping up the interior work.
Eventually, UDR expects big rent bumps. “We expect the improvement to earn $600 to $700 in additional rent per unit,” says Jerry Davis, SVP of property operations for UDR. “We’re expecting completion [of the full job] in the second quarter of 2012.”
Location: Austin, Texas
Company: UDR
Number of units: 250
Amount invested per unit: $67,000
Rent increase per unit: $389
Pre-rehab occupancy: 94%
Post-rehab occupancy: 96%
Scope of rehab: Leasing office, fitness center, clubhouse, new washers and dryers?, and updated cabinets, countertops, appliances, and windows
“We can take advantage of what we redevelop and capture those prospects on the street who can’t get a new product because it’s not out there or available,” says David Nischwitz, MAA’s SVP and director of property redevelopment. “But what they can get is a renovated apartment. You are seeing a lot of other companies trying to expedite the renovation process over the next 24 months to try to keep up with growing demand.”
