If a penny saved is a penny earned, then Berkshire Property Advisors has earned many pennies indeed. At every stage of a property investment and every level of the company, Berkshire searches for the “alpha,” the seemingly small factors in acquisitions, renovations, and management that add up to superior returns for the Boston-based firm, which currently owns nearly $1.5 billion worth of multifamily assets.

“We're looking for pennies at all levels,” says Frank Apeseche, Berkshire's CEO and senior partner. “You have to link all the pieces together to get the total return.” At Berkshire, that adds up to between 13.5 percent and 19 percent, a figure the company projects to beat the rest of the market by three to six percentage points during the next five to seven years, thanks to a mix of smart deals, sensible renovations, and operational practices on value-add properties.

“They're always looking for an angle to enhance retur ns,” says Peter Donovan, senior managing director of CB Richard Ellis's multi-housing group. “They see opportunities, they pull them off, and they move more quickly than others.”

VIEW FROM THE TOP: From Berkshire's Boston offices, CEO Frank Apeseche can see the Massachusetts State House and beyond.
VIEW FROM THE TOP: From Berkshire's Boston offices, CEO Frank Apeseche can see the Massachusetts State House and beyond.

No wonder institutions entrust their investment dollars to Berkshire, which grew its portfolio to 20,432 units in 2006. “Berkshire's long track record of successful real estate returns is a product of their thorough knowledge of the markets and their on-the-ground property management and renovation team that has extraordinary high professional standards,” says Dee Dee Sklar, managing director, capital markets, for the New York branch of West LBAG, a large commercial European bank and investor in Berkshire's Multifamily Value Fund.

EARLY ADOPTER For the past two years, the question of “public versus private” has been an oft-discussed one among multifamily REITs, but Berkshire found its answer long ago. Founded in 1969 by brothers George and Douglas Krupp, the company went public as Berkshire Realty Co. in 1991, becoming one of the first public REITs.

Then, in 1998, Berkshire leadership took the company private in partnership with the Blackstone Group and Goldman Sachs, which freed the firm to sell what had become a $1.4 billion multifamily portfolio in 2004 and deliver those gains to its investors. ( The company also sold Berkshire Mortgage Finance, one of the biggest mortgage lenders in the country, to Deutsche Bank that same year.)

Big deals, to be sure, except in the mind of Berkshire executives, who say such choices were simply the reasonable response to market conditions. “We're just playing the cycle,” says David Quade, Berkshire's CFO.

Berkshire, which made an unsuccessful play for Town and Country Trust last year, watches cycles closely and responds accordingly. “I think the model for REITs and capital in real estate has changed,” Apeseche says, pointing to cap rate compression, cheap and available debt, and a now close relationship between cap rates and interest rates. “A public company can't harvest appreciation” in real estate properties the same way a private firm can, he believes.

Such observations led the firm to the relatively complicated mix of public and private corporate structures it uses today. Berkshire Property Advisors is the real estate operating company that manages and rehabilitates the apartment properties held both by Berkshire Income Realty, a public REIT traded on the American Stock Exchange, and the Berkshire Multifamily Value Fund, a $335 million equity fund that focuses on properties with value-add potential. (By year's end, that fund is expected to be fully invested in $1.2 billion worth of real estate.) And a third multifamily fund, which will open to investors in mid-2007, is expected to raise between $500 million and $600 million of equity by early 2008.

“Their ability to raise capital has been extraordinary,” Donovan says.