Grubb Properties is back in full force. Since paring its 35-property portfolio of nearly 5,000 units down to five properties in June 2007— before the downturn caused cap rates to compress—the Charlotte, N.C. #226;€“ based company has scooped up about 2,000 units in the past two years, focusing on the Carolinas, Georgia, and Tennessee. The firm also has a $100 million construction pipeline through a joint-venture partnership with Raleigh, N.C.–based Dominion Realty Partners that's going to be delivering a $22 million deal in Richmond, Va., and a $35 million deal in Raleigh, N.C.

Heading up Grubb's investment effort is Andrea Howard , SVP of multifamily investments. A veteran of the REIT world via Houston-based Camden Property Trust and Charlotte-based Summit Property (before it was bought by Camden in 2005), she took some time to talk with Apartment Finance Today about Grubb's tactics of late.

What's your acquisition strategy?

We're trying to get back what we lost. We feel we can play the most in the value-add space. We're still small enough that we can't—and don't want to—compete in Class A, especially with some of the crazy values you're seeing in that space. Instead, we're looking for great locations at below-replacement costs. Those are the two main things that are driving our strategy in the Southeastern markets.

What's the typical value-add deal you look for?

It's well located, in a primary Southeast market like Charlotte, Raleigh, or Atlanta. It's a deal that needs maybe $3,000 to $5,000 a unit in capital up-front costs between the exterior and interior to go from a B-minus to a B-plus or A-minus. We love mismanaged deals, because we have in-house property management as well as in-house construction. We really feel like we can go in and add that value.

What's your hold time?

Everything we've done has been with Fannie Mae , Freddie Mac , or HUD debt, with the exception of two deals. So we've stuck with the agencies in either seven- or 10-year fixed, because we feel like the value is in the debt. If you can lock in long-term debt, then the debt could be worth more than the apartments down the road. We just locked in one of our development deals in Raleigh with HUD at a rate of 4.18. That's good for 42 years—two years interest only while it's being constructed and 40 years straight. It's going to have tremendous value as rates go back up over the next five to 10 years.

Are you selling anything now?

We're mainly adding assets. We did go round-trip on one of the deals we bought this summer. It's an asset we bought in 2010. After a 16-month hold, we were able to sell it and get an 83 percent internal rate of return. We weren't looking to sell it; in fact, we regretfully sold it. It was just a price we couldn't turn down. We saw the ability to [use a 1031 tax exchange to develop a new property] and purchase a note we were simultaneously working on. We're not planning to sell anything next year.