When the team at Tryko Partners took a look at how to renovate Pemberton Manor in Salisbury, Md., they decided the minimum wasn’t going to be enough.
The 209-unit property was acquired through a foreclosure auction in late 2011. And since 143 of the units are Section 8, the U.S. Department of Housing and Urban Development (HUD) required the purchaser to complete about $972,000 worth of renovation and deferred maintenance. The Brick, N.J.-based company went above the government mandated expectation and invested $1.3 million.
Since the property included basketball and tennis courts and a pool that had been poorly maintained, the renovation team decided to upgrade those amenities too, even though they weren’t part of the purchasing agreement, Chad Buchanan says.
Buchanan, chief investment officer, says the company decided to invest an additional $500,000 into the property because it wanted the community to be a point of pride as a portfolio asset.
“We could have closed down the pool and paved it over and saved on insurance and not put the money into the improvement and could have got a better return on investment, but that’s not how we do business and that’s not how we like to operate our affordable housing properties,” he says.
Another renovation that went above and beyond the HUD requirements was to enclose breezeway staircases that connect the buildings throughout the 16 acre-property.
“It was not cheap and it was not required,” Buchanan says. “But the Mid-Atlantic winters can be rough and this is a family, Section 8 property and has multiple levels in each building. So enclosing the stairs was one of those things we felt we needed to do.”
The renovated property exceeded the 11 percent return it was expected to bring, instead delivering a 13 percent return, increasing rents by $95 per unit.
Since many of the individual units had been renovated by the previous owners in 2004, the company didn’t need to focus on all the interior kitchens and baths, but rather on the units that had fallen by the wayside over the years and needed to be updated to be put back online.
“We had a pretty grim idea of what the problems would probably be [prior to purchasing the property],” he says. “And we were right. There were approximately 20 units down, but we went in and fixed them and now everything is back online.”
Occupancy jumped from 85 percent before the renovation to 93 percent after.
Lindsay Machak is an Associate Editor for Multifamily Executive. Connect with her on Twitter @LMachak.