CASE STUDIES

Creekside Apartments

Lancaster, PA  | OFF-MARKET TRANSACTION

Creekside Apartments in Lancaster, PA, is a shining example of how smart investment and upgrades can turn properties into highly profitable ventures. Acquired in 2018, the project involved 261 units across two properties, bought for $31.5 million. The acquisition was supported by an in-place Freddie Mac loan and a preferred equity partnership with a private equity firm, highlighting a collaborative approach to investment.

INVESTMENT STRATEGY

The strategy focused on significant improvements, with over $5 million spent on the complete renovation of all units and enhancing exteriors. These upgrades led to a rent increase of over 20%, yielding a 15% return on investment (ROI). Efforts to save on utility costs and better management practices also helped in increasing the property's value and occupancy rates.

SUCCESSFUL EXIT

In 2021, the properties were sold for $50.9 million to a buyer from New Jersey, marking a successful end to the investment journey. The sale generated a 27.12% internal rate of return (IRR) and a 2.56 times return on the initial investment, showcasing the effectiveness of the investment and management strategies.

CONCLUSION

The Creekside Apartments project highlights Berger Investments' key role in transforming strategies into profitable outcomes. By significantly enhancing property values, the project achieved notable financial success, demonstrating the company's skill in navigating complex investment landscapes. This effort delivered impressive returns for stakeholders and showcased the company's dedication to robust results.

Village Square Apartments

Bensalem, PA  | PARTNER BUYOUT

In 2016, Berger Investments acquired Village Square Apartments, a substantial 694-unit property located in Bensalem, PA, through an off-market deal, with a total capitalization of $90 million. This acquisition represented a strategic expansion within the Berger Communities portfolio, highlighting an exceptional opportunity for value-add investments through both interior and exterior refurbishments. The initial condition of Village Square underscored a significant opportunity: the prior ownership lacked the capacity to undertake necessary renovations, thus leaving substantial value unrealized.

Strategic Acquisition and Value Enhancement

Berger Investments navigated a complex transaction landscape with innovative structuring to secure favorable terms and mitigate transactional expenses. This approach included a nuanced deal that allowed for a mortgage assumption while enabling the seller to retain a 42% equity interest, thus circumventing substantial transfer tax and prepayment penalties.

The revitalization strategy commenced with a $6 million investment in capital improvements, focusing on the full renovation of 230 units and extensive exterior upgrades, as well as the installation of new HVAC systems to address inefficiencies and high operational costs. These strategic enhancements facilitated a rental increase of over 20%, substantiating the initial investment thesis.

Advancing Operational Excellence

Building upon the success of the initial renovation phase, Berger Investments initiated a second phase in 2020, with a further $7.5 million dedicated to the full renovation of an additional 325 units and continued exterior improvements. This phase significantly bolstered the property's net operating income by 76.5% from acquisition through 2023, culminating in the completion of the seller buy-out and delivering a substantial return of investment to the PE partner—$15.4 million, signifying a full recovery of the initial equity.

As part of the supplemental financing in 2022, Berger Investments received $6.6 million return of all original equity.

Conclusion

The Village Square Apartments case study exemplifies Berger Investments' strategic foresight in real estate investment and its capacity to extract and enhance value from underperforming assets. Through meticulous planning, astute deal structuring, and targeted value-add initiatives, Berger Investments not only transformed a sizable property but also realized significant financial returns, thereby reinforcing its standing as a vanguard in the realm of value-add real estate investment.

Willowdale Apartments

Frederick, MD  | Partner Buyout

In 2016, Berger Investments identified an opportunity in Willowdale Apartments, a 432-unit complex located in Frederick, Maryland. Situated between Baltimore and Washington DC, Frederick offers an attractive location for those seeking accessible employment options with the benefit of a lower cost of living. Despite its potential, Willowdale suffered from historical mismanagement and the challenge of integrating into a market oversaturated with new developments.

Focused Strategy for Improvement

Berger Investments initiated a targeted renovation plan to elevate Willowdale Apartments above its past challenges. With an investment of $4.2 million for capital improvements, the project aimed at fully renovating 225 units, partially updating 25 units, and enhancing the property's exterior. This approach led to a more than 10% increase in rents, positioning Willowdale as a competitive yet affordable choice for residents.

Sustained Investment and Growth

The commitment to Willowdale's transformation continued with a further investment of $3.5 million, extending full renovations to 80 additional units and making more exterior improvements. This consistent focus on enhancement significantly boosted the net operating income by 69.9% from acquisition through 2023.

Financial Returns and Strategic Success

The project's financial strategy and execution led to substantial returns: a $6.4 million equity return to the PE partner in June 2019, followed by a $6.2 million equity return and additional cash proceeds in June 2023. Berger Investments itself secured a $7.7 million return of original equity and cash proceeds, marking a successful financial outcome.

CONCLUSION

Willowdale Apartments exemplifies Berger Investments' expertise in revitalizing and managing real estate investments. Through strategic renovations and adept financial management, Willowdale has been transformed into a thriving community that offers value to residents and investors alike, showcasing Berger’s professional approach to real estate development and investment.