For its value-add multifamily strategy, Chapel Hill, N.C.-based Eller Capital has chosen to focus on purchasing, renovating, and repositioning multifamily properties originally built in the 1970s or 1980s. Its standard blueprint incorporates extensive renovations to the exteriors and residential units, as well as new, state-of-the art amenities.
Multifamily Executive asked CEO Daniel Eller about the details of his strategy, the returns he has seen, and how he expects the value-add segment to remain and evolve in the foreseeable future.
MFE: How have value-add and repositioning trends evolved over the past few years? What makes Eller Capital’s approach new, different, and profitable?
Eller: There is no asset class that is currently in as much demand as value-add multifamily. Over the last several years, a tremendous amount of capital has been invested in the space, and a significant amount of capital remains allocated to value-add opportunities. Over the course of the current cycle, property values have continued to increase to the point that the cost basis for some value-add multifamily assets may approach or exceed replacement cost. We have also seen a lot of value-add deals that were acquired by a buyer who never actually executed on a value-add strategy, relying solely on cap rate compression to deliver investment returns. There is a big difference between buying a “value-add deal” and actually executing a “value-add project.”
Suraj Shrestha is an associate at Harborside Partners. He has been taking the lead role on research projects; to develop and implement online marketing strategies for search engine optimization and social media marketing. He is one of the core parts for helping to grow business revenue and the company’s online presence.