As we’ve grown our multifamily portfolio, we’ve honed an effective approach to opportunity identification. Our process serves to benefit our investors, our residents, and the rest of our stakeholders.
It begins with knowing the market—its potentials and its realities. From there, we look at each property to find an edge in how we can add value. Finally, through consistency in our standards, we’re able to foster relationships that open up more doors.
Let’s break down each of these a little bit more:
Knowing the market
Our Acquisition team prides itself on a rich understanding of our markets. When dealing with value-add properties in outsized locations, we need to be able to see the full picture.
It’s part-science, part-art. For example, if a property hasn’t been upgraded in several years, we may already have an Archstone-owned asset in the same market. We know what current rates are, what renters want, and what it takes to get a property to that level.
So we ask ourselves: How can we extract unrealized value out of the new property as we did on a neighboring acquisition?
As we gain familiarity with a given market—which may have taken years to develop—we’re able to offer informed, actionable answers to this question.
Finding an edge
At Archstone, we’re focused on value-driven investments with attractive risk-adjusted returns. Typically, that has meant forcing appreciation through a strategic renovation program. More broadly, though, it’s about identifying value across a range of multi-family opportunities.
Call it an “edge.” What does this property need to appeal to renters? And more importantly, what do we offer to make those changes happen?
Consider the Forum at Lincoln in Iowa City. Constructed in 1992—and owned by the original developer—rents were stagnant for several years and unit interiors were in their original condition. Immediately, we recognized this as a light-value add opportunity, where we could reset market rents with only moderate unit upgrades. And combined with a standard marketing refresh, we brought rents in line with surround competition within a year of acquisition.
Driving value may also not require any renovation at all. That’s usually the case with new construction, like our recent purchase of Stonehaven Overland Park. We had identified a local developer who specialized in construction but had little interest in day-to-day management. Our team reached out during the construction period to express interest in acquiring Stonehaven once it was completed.
By closing, the property was 25 percent occupied. Plus, unlike our typical value-add properties, these units were brand new. So rather than turning to our renovation team, we immediately launched our marketing campaign to execute the remaining lease-up.
At the end of the day, value-add is largely tied to risk. A deeper value-add means we’re taking on a greater amount of risk, in return for a higher reward. A lighter value-add will deliver a more dependable—if more modest—return.
As we’ve continued to grow the Archstone portfolio, we’ve operated across this entire spectrum. Each deal requires a new understanding of the realities and potential of a property. And we have the expertise to identify just that—and use an edge to our advantage.
Fostering relationships
We identify most of our deals through a network of top brokers in each of our markets. Since the start, we knew that our reputation was key in leveraging this network.
Our size and structure has been an asset in this regard. As a vertically-integrated organization, we can operate more nimbly. When a broker reaches out, we’re able to offer timely feedback on deals. And that kind of dependability stands out in a sea of deals and communications.
Sometimes, our reputation speaks for us. Our acquisition of the Forum at Lincoln began with a cold call. But even though we didn’t have an established relationship, the previous owner was able to see that we had acquired a number of properties in the area. Our presence and reputation gave him the confidence to work with our team.
If you want to join the other stakeholders who have already partnered with Archstone, you can start by visiting our Investing page.