Built in 2002, the 216-unit Verona at Boynton Beach development in Florida includes 72 one-bedroom, 108 two-bedroom, and 36 three-bedroom apartments with 9-foot ceilings, spacious (1,097 square feet on average) floor plans, and a full-size washer and dryer in every unit. Amenity spaces on the sprawling 14.2-acre resort community grounds include a clubhouse, a business center, a fitness center, a dog park and pet wash station, a playground, a pool, and a package center, plus barbecue and picnic areas. Verona, close to West Palm Beach and Boca Raton, is in Florida’s top submarket for both population and income growth. It’s also ready for a value-add repositioning.
“Value-add used to be updating aging properties from the ’80s and ’90s, but now you’re looking at communities all the way up to 2015 that are ready for both an asset and a management upgrade,” says Stephanie Brock, executive vice president of operations for Chicago-based Waterton, which purchased the Verona in April and has commenced value-add enhancements to both the amenity package and in-unit residence finishes.
One of the target resident demographics for the refreshed Verona will be renters by choice: residents who have the financial wherewithal to purchase a home or condominium but instead elect to live the renter lifestyle. Among them are even more focused cohorts of upwardly mobile young professionals, empty nesters seeking the vibrancy of neighborhood and community, work-from-anywhere digital nomads, and renters of all ilk who simply prefer the convenience of maintenance-free living without the commitment of a mortgage. And that’s just for starters.
“The mortgage is the minimum cost to be a homeowner. Let’s not forget the need to assemble a down payment and pay property taxes, insurance, and maintenance costs,” says Dwight Dunton, founder and CEO of Alexandria, Virginia–based Bonaventure Holdings. “So you can actually afford to pay more in rent versus a mortgage and still have that be economically beneficial because your roof gets repaired, your lawn gets watered, there are teams on call to fix your toilet, your packages are taken care of. There’s tremendous value from being a renter that doesn’t come along with homeownership, and that’s the broader context behind those who choose to rent.”
Multifamily investors targeting value-add opportunities that factor in renters by choice need to begin early in the due-diligence process, determining whether site location per se offers the back-end fundamentals on which to build a value-add play. Specifically, renters by choice tend to look more broadly beyond the property as they consider neighborhood restaurants, entertainment, shopping, walkability, and access to the outdoors, which collectively form a highly amenitized lifestyle.
“The neighborhood amenity feel is a real driver of this renter cohort,” Brock says. “Are there great places to eat? Is there access to hiking and biking? Can I get on the trail and ride over to the brewery? It’s real estate, real estate, real estate, and the ability to choose your own epicenter is a gravitating desire of the renter.”
Value-add players, of course, need to at least approach the bar set by ground-up construction, which has the ability to place-make from the get-go. Eugene Colberg is a principal at Colberg Architecture and managed the design of The Lane at Boerum Place in Brooklyn, New York. Perched on a two-story gymnasium podium that itself sits above a New York City subway station, the 108-unit luxury building features studio to three-bedroom apartments outfitted with soundproof windows and custom solar window shades, but Colberg says it's the amenity spaces that continue to score big with renters by choice.
“Even with a smaller and more targeted amenity package, you can create activity in and around the building,” Colberg says. “The draw of The Lane is that it sits on subway lines that provide access to the entire city. The farther out the asset, the more you need to make your buildings self-contained: The fitness room is bigger; the parking is ample; and depending on size, you’ve maximized the use of roof space, outdoor space, and terraces.”
Dunton agrees that amenities are critical to the marketing and absorption success of renter-by-choice repositioning but argues that high-touch property management, and not just the physical plant overhaul, is what provides the return on value-add plays. “You can never stop spending on the arms race of amenities and trying to out-amenitize the last building in your market,” Dunton says. “But people will move out of the most beautiful whiz-bang communities if they’re not supported by the best service available and a concierge experience where staff provide a lifestyle via activities and personalized programming.”
Regardless of value-add approach, designers and developers agree the one absolute to any asset repositioning that targets renters by choice is a total upgrade of the building’s central nervous system to provide the fastest, most reliable, and most easily activated Wi-Fi available.
“It’s surprising in today’s environment that there’s still a strict management play by just delivering good service to a clean, well-located community that just never had the TLC,” Brock says. “But either way, technology is far and away one of the most critical aspects to success and is only becoming more so. It all comes back to the renter-by-choice desire for conveniences and maintenance-free [features], and that begins at move-in with internet access that is immediate, fluid, convenient, and easy.”