This cycle has been a busy one for The Radco Cos., an Atlanta-based firm that's completed 74 acquisitions since 2011 and now controls roughly 20,000 units in nine states.
CEO Norman Radow founded Radco 23 years ago, but it wasn’t until August 2011 that he shifted the company’s focus to value-add. The firm has raised more than $600 million in private capital to fund its acquisitions since that time.
“We figured out that the renting-nation phenomenon was starting, and we thought about how we wanted to play it,” he recalls. “We decided to go into B and C+ space because we had infrastructure, we had a balance sheet, there was liquidity in the market for multifamily, and we thought workforce housing was the future.”
About half of Radco’s units are in the Atlanta area, including a 260-unit Class B property, Tuscana Apartment Homes in Norcross, Ga., which Radco acquired in August for $22 million. Radow calls it a “cookie-cutter deal” for Radco, since the company has a big footprint along the I-85 corridor in Georgia and the property is in need of some upgrades.
Radco plans to spend more than $4 million, or approximately $16,600 a unit, on capital improvements to modernize the community. Interior renovations will include updated cabinetry, upgraded appliance packages, new flooring, modern lighting, hard-surface countertops, and designer paint. Amenity improvements will feature a complete clubhouse remodel, expansion of the fitness center, the addition of a fire pit/grilling area, upgrades to the community pools, and installation of a package concierge system. Radco also plans to replace all the roofs and enhance the landscaping and hardscaping, as well as supply exterior lighting upgrades, updated signage, and a new, modern, communitywide paint scheme.
A Preference for Value-Add
Radow says his company prefers acquiring properties that are in need of upgrades rather than developments that have already been updated because doing so enhances profits in the long run. “The more we can do to restore and add value, the more we like it,” he says.
Radco is in the midst of a rehab of a property in Chattanooga, Tenn., that had an outdated roof and exterior. “You’re taking a property from looking like a C property to a B+, A- property,” he says. “That’s a tremendous improvement in the physicality of the community, and we generally see the largest increase in value because of that.”
—Norman Radow, CEO, The Radco Cos.
The formula works for Radco, Radow says, because it targets properties in states with low taxes and good weather that more people are moving to each year who are in need of an affordable place to live. “These people can’t afford a home or luxury units,” he says of the company’s renters. “[There’s] almost an unlimited supply of possible tenants and a finite supply of product.”
Earlier this month, Radco announced the $36 million acquisition of Reflections Apartments in Casselberry, Fla., a 336-unit property that has been renamed Radius Winter Park. It’s Radco’s seventh acquisition in Florida and second in the Seminole County submarket of northeast Orlando.
Built in 1984, Radius Winter Park is situated on 18.5 acres and consists of 336 units within 16 two- and three-story buildings. Radco plans to spend nearly $5 million, or approximately $14,000 a unit, on capital improvements to modernize the community. As at Tuscana Apartment Homes, interior renovations will include updated cabinetry, upgraded appliances, new flooring and lighting, hard-surface countertops, and designer paint, while common-area amenity improvements will feature a complete clubhouse remodel, an expanded fitness center (including outdoor, CrossFit-style equipment), a fire pit/grilling area, and a package concierge system.
