The Bascom Company Looks to Operational Value-Add in Rent Lagging B and C apartment sectors.

Bascom also thinks the volume of deals with deferred maintenance and financial distress likely to come out of the Class B and C markets over the next five years will be more than healthy enough to satisfy investor demand. Success, the company’s executives contend, will depend on familiarity with the renovation process and hardiness when it comes to the hairier side of reposition-ready ­assets.

“It’s tough to bring us a deal that we have not seen ­before, whether it is an operational deficiency or a physical deficiency,” says Bascom vice president of acquisitions Jeff Fuller. “We’re looking at an acquisition right now that has major sewer problems that are going to scare away a lot of buyers,” he continues. “But we have the ability, the capital sources, and the expertise to do it. We can also do Class A value-add. It is the same business plan for As, Bs, and Cs. We don’t do condo conversions, and we don’t do ground-up construction: We just buy and reposition existing apartments.”

This year, Bascom will focus on the continued renovation of the firm’s 2010 acquisitions while looking for new deal opportunities. Only 451 units are scheduled for full-on renovation (mostly at The Maples) this year, meaning the company will continue to tighten occupancies, expenses, and collections to position the portfolio for revenue growth in 2011 and, eventually, traditional cap-ex renovations beyond.

Meanwhile, Bascom will look to land more assets out of an already identified $300 million pipeline of possible deals while reaching out feelers for additional opportunities to shine where capital-constrained owners have failed.

“There are a lot of people hanging on, thinking they’ve gotten through the worst of it, and yes, rents are going up, but the reality is that rents are not going to go up fast enough for them to get out of that hole,” Fink says. “The repositioning of B, B-minus, and even C assets is a phenomenon that has to happen before the cost-to-replacement equation makes ground-up development pencil out.

“We think we are entering the most amazing period in our generation for our business plan, which is acquiring and repositioning value-add distressed apartment communities in the United States.”