Lessons for Value-Add Project Pursuits

Views of 2555 North Clark Street’s concierge desk and lobby seating, before and after a suite of value-add renovations.


We frequently cover the incredible design work we get to provide on new construction projects.   No less popular but less well-covered here is a new wave in re-development of existing buildings or “value-add” opportunities.

These opportunities differ from both new construction deals and stabilized building acquisitions in that the established cash flow has the potential for significant increases after improvements are completed and the property repositioned.  These are multifamily “fixer-uppers,” some might say.

Not without its own unique risk profile, the renovation of an existing property offers our clients a few advantages over new development including: faster delivery of units and accelerated recognition of improved cash flows and less entitlement and construction risks.

This business strategy is not a new one.  For decades FitzGerald has been engaged in the thoughtful renovation of aged buildings, including the Stony Island Arts Bank, the transformation of North Pier into the Lofts at River East, and the conversion of the barracks building at Fort Sheridan.

A number of our clients, recognizing the maturation of the current multi-family development cycle, are shifting focus to pure investment and value-add opportunities.

Several such projects, including the 171-unit 2555 North Clark Street building pictured above, a 358-unit apartment community in Atlanta, Georgia, and a 526-unit affordable apartment community in DeKalb, Illinois offer a glimpse into the current state of the value-add business model.

For each of these projects, we helped devise a design and construction strategy to maximize the goals that our client sets for each endeavor.  We provided options and solutions that will yield the best possible leasing and investment impact.

What follows are a few of the most critical considerations for almost any Value-Add undertaking.


Contingencies and Latent Conditions

All progress must have a starting point, and some of these communities have been under-maintained or under-managed prior to acquisition. Just like a land survey that helps steer and inform a new construction project, an in-depth property condition assessment will provide a comprehensive view of the state of the existing site, buildings, and dwelling units. This report is indispensable for setting a project budget that anticipates, rather than reacts to, unexpected conditions. A critical part of that budget will be a realistic—if not conservative—contingency that can be tapped, returned, or invested elsewhere near the end of the project.

From water infiltration to code-compliance issues, we never quite know what we’re going to find in our assessment—but we always advise our clients to brace for the unexpected. At the 358-unit apartment community in Atlanta, the new owners understood that even once construction began, the possibility that a portion of the buildings, or units in a building, could suffer from an issue that was previously unobservable—and held an appropriate contingency to remediate as necessary.


Schedule & Accelerated Delivery: Time is Money

Another decision the development team must make is the pace at which the improvements will be made. Can the building be vacated for a turnkey overhaul? Should the plan schedule common area improvements and allow units to be renovated upon their natural turnover?

At the 30-building, 526-unit affordable apartment community in DeKalb, Illinois, the buildings were conducive to improving groupings of four units at a time, each group taking one week to deliver.

During demolition and construction, arrangements were made to temporarily relocate residents to hospitality units elsewhere on the site or provide a stipend for alternative lodging. Any unforeseen circumstances would mean an extension of that expense and inconvenience. A critical eye on schedule and design details is required to avoid delays in returning residents to their homes will cost money and goodwill.

Our teams succeed on these projects by leveraging the same leadership, staff, and consultant teams across many projects, allowing that knowledge and experience to inform the scope of work for each building that follows. We can’t claim “to have seen it all,” but we know what to look for and our veteran team can point to a wide range of successful renovations completed with aggressive schedules.


Market Level, Marketability

FitzGerald is a leader in supporting multifamily developers across market segments and product types. We know what it takes to create a best-in-class luxury destination that is packed full of amenities and high-end finishes.  Just as important, and we have the skill in designing more affordable housing that maximizes livability and comfort. Whatever the target market, we maximize investment potential while holding to exceptionally tight budgets and requirements from our public and private development partners.

In all three of these lessons, a common thread can be drawn: We know that the developers and investors for value-add projects will be working with slim margins of profit and schedule, and we work diligently to think creatively and attain maximum value for every dollar spent. Through this work, we take pride in supporting our clients’ missions and constantly pursue ways to put new purpose and life into a space, a building, or a community.