What are some key reasons to renovate an apartment community?
Gold: For Tryko, renovations are a built-in part of the acquisition process. We believe that every property can be enhanced to improve quality of life for existing residents or be better positioned to compete on a higher level. Over the past four years we have added 3,500 units to our portfolio, which means that our construction team has been very busy. For our firm, renovations are a key part of stamping a property with the Tryko name and ensuring that it is an up-to-date, safe, attractive place to live.
Chinn: Owners that hold a property for an extended period of time come to a point where they either need to invest money to keep it current, or sell. As a result, when we acquire a community it often is at the end of this cycle. Even before we close on the purchase, we look at what it will take to increase its value. This can range from a basic update with current paint colors and other finishes, to breaking through walls to create a more open floor plan. We might invest $1,000 or $10,000 per unit depending on our goal.
Describe your favorite recent “turnaround”
Gold: We are really proud of our Pemberton Manor property in Salisbury, Md. We purchased the 209-unit, garden-style community (which includes a mix of market-rate and affordable residences) out of foreclosure in 2011. Many years of deferred maintenance had really taken its toll. We invested $1 million in physical upgrades. We beautified the buildings and grounds with fresh paint, updated landscaping and repaving. The community pool, which had been closed, was relined and opened, and we improved the property’s playgrounds, tennis and basketball courts. Tryko also enclosed entries, staircases and hallways with storefront glass. The previous ownership renovated kitchens and baths, and modernized the property’s HVAC and electrical systems, which helped to keep our costs down somewhat. The overall progress at Pemberton Manor brought occupancy to 96 percent in just 12 months. Everyone who has seen the changes first-hand agrees that the property has come a long way.
Describe a project that took a market-rate property to the next level.
Chinn: The Flats at Fox Hill in Monroeville, Pa., was constructed in the 1980s and for several years had struggled financially. Quite simply, the 436 apartments and amenities there had become dated and worn. We purchased the property in summer 2012 at 78 percent occupancy. Several factors – including the success of several neighboring Class A properties and the stability of the Monroeville multifamily market in general – contributed to our confidence in what we could achieve there. We immediately launched a multi-million dollar renovation. To date, we have remodeled more than 250 units, incorporating high-end, modern finishes like granite countertops and stainless appliances, new flooring and ceramic tile in the bathrooms. We remodeled building lobbies and common areas, added a community pavilion for picnics and barbeques, and built a sand volleyball court on the grounds. We opened a fitness center as well, and plan to incorporate a business center. Today, Fox Hill is 95 percent occupied, and the progress there continues to gain momentum. The changes, in both the property’s appearance and tenant base, are significant.
What upgrades are most valued by tenants today?
Chinn: We are seeing a big focus on the kitchen. This is a place where families get together and guests are entertained. Renters are looking for a little bit of glamour. Features like bright, modern lighting, stainless appliances, and granite countertops with under-mount sinks provide the high-end feel of a single-family home. Bathrooms are important, too. The most competitive properties are providing vanities, mirrors and finishes that are a step or two above the standard.
Gold: Utility conversion is also big right now at older properties. Tenants who pay higher rents want to control their own heat and cooling. We recently provided individual central air conditioning and dedicated gas furnaces for 500 apartments at our Loch Raven community in Baltimore, Md. We completed the electrical upgrades needed to accommodate central air, as well as the installation of new gas lines and individual metering in less than 10 months after we purchased the property. It was a major undertaking but well worth it. Occupancy there has climbed to 96 percent.
Tryko maintains in-house construction expertise. What’s the advantage?
Gold: Outside vendors not only come with an added profit margin, but they may not have the same purchase power as an owner that is renovating 2,000 units per year. There are a lot of additional advantages to self-managing a project. Among them, you see priorities at the ground level and can apply your resources accordingly.
Chinn: Maintaining a core group of construction workers not only reduces cost but makes it easier to keep things on schedule. Having a group of steady employees that can do a whole job rather than specializing in one particular area of construction allows us to turn over units faster and more smoothly between tenants. Of course, we do ramp up our staff for larger construction projects. But as soon as we get back to a work level that we can handle with a handful of people in house, it pays to keep it in house. We provide long-term jobs and receive loyalty in return.