Like most seasoned apartment renovators, The Bascom Group has seen little opportunity across its portfolio of 32,051 units to invest in serious physical renovation projects over the past three years. Sure, labor has been cheap, and most nonpetroleum building products can be had at a discount to prerecession prices. Economically stressed renters even still show an interest in newly renovated apartments—but here’s the rub: Virtually none of those prospects is willing to pay a premium to rent an upgraded unit.

In the B and C markets, which make up 80 percent of the Bascom portfolio, pushing rent increases for any reason remains challenging, resulting in a renovation docket that precludes action on all but the most critical deferred maintenance issues. While bringing so-called “down units” back on line as a value-add play remains doable, large-scale asset upgrades still have to wait out a larger market recovery. Until then, if you’re funneling cap-ex into a value-added physical renovation play, you might as well be throwing your dollars into a black hole.

“I don’t see how spending money on traditional value-add renovation is going to get you any bang for your buck right now,” says Jerome Fink, one of three managing partners (including David Kim and Derek Chen) who founded Bascom in 1996 with a vision of buying physically distressed apartment assets, investing in functional and operational renovations, and reselling the assets after a three- to five-year hold. “In a lot of our markets, renters are still too price-sensitive. Yeah, the resident demographic likes a renovated unit, but they are not yet willing—and, in many cases, not yet able—to pay for it.”