The Resurrection of Value-Add
With stiff competition for class A product, many YieldStar clients have turned their attention to improving B product in A locations. Berkshire Property Advisors tested upgrades in select markets during 2010 with positive results, and accelerated redevelopment efforts notably in 2011. Berkshire markets with strong demand for upgrades include the DC/Baltimore corridor, Boston, and Denver.
“Executing our strategy requires a sophisticated approach to pricing, to ensure we’re consistently getting an acceptable return on our redevelopment capital,” explained Berkshire COO Tom Shuler.
There are two ways to manage renovations with YieldStar: You can set up a separate, upgraded floor plan group or distinguish individual units with an amenity premium. The goal either way is to preserve the rehab premium and be able to report easily on investment return.
YieldStar has become a valuable component of Berkshire’s redevelopment strategy. “With YieldStar, the frequency of base rent changes allows us to capture market rent growth while balancing our rehab strategy with amenity premiums,” continued Tom. “And we have reports that reveal amenity upgrade gaps, allowing us to analyze real-time absorption and investment returns against expectation.”
The gap is where Berkshire looks to make decisions on moving forward or not with a renovation program.
Are you using revenue management to manage your renovations? Share your experiences in the comments below.