TreeTop Development’s Revitalization Success Story
- Jul 05, 2012
East Orange, N.J.—New Jersey-based TreeTop Development was recently involved in a revitalization project on South Harrison Street in East Orange, N.J. Adam Mermelstein, managing member of TreeTop Development, recently spoke to MHN about this project, and why revitalization is important to both residents and TreeTop’s bottom line.
MHN: Give us some background on TreeTop Development.
Mermelstein: TreeTop was formed in 2005. We started out as a development company, basically building ground-up construction in Hoboken, in Jersey City, in Williamsburg in Brooklyn, and in certain areas around New York City. As the market shifted, and the condo market started declining, we transitioned into multifamily value-added opportunistic deals. For example, we buy apartments that have been mismanaged, or where we perceive value where someone else might not, and then institute a pretty intensive capital improvement program. We try to enhance the value of the property; we try to bring up our rents and lower our expenses, and at the same time provide services and amenities that the prior owner didn’t provide. Coupled with that, we also buy HUD properties because they provide us with strong cash-on-cash returns. We believe a good landlord—and the landlords that make money over time—put money into their buildings, and that’s the only way that we can take money out.
MHN: Describe the South Harrison Street deal.
Mermelstein: That’s a good model of what we do. We purchased 548 units in East Orange in different buildings. When purchased, it was about 40 percent vacant. The buildings hadn’t been renovated or really touched in 40 years. We needed major capital improvements consisting of landscaping, the lobby, hallways—none of these had ever been upgraded. We went in there very aggressively, and we started re-landscaping all of the properties. We updated the brickwork, we put in new sidewalks and walkways, we put in new windows and renovated all the lobbies, and [brought it to] a level that East Orange hadn’t even seen prior. These were really built as luxury buildings, so we restored their grandeur. We also renovated the hallways, and finally we renovated each unit. Not to a luxury level, but just a nice, clean quality apartment at an affordable price. And that was our basic goal—to provide a better apartment at the same price as our neighbor.
MHN: Do you feel the revitalization helped draw more residents?
Mermelstein: I do think that. First of all, it was a collaborative effort on South Harrison Street. We had identified this quarter as an up-and-coming area, one we saw future growth in. While East Orange hadn’t seen construction in many years, there were two new construction buildings on the block, and there were other buildings that other landlords had renovated. We came in and picked the balance of the building that hadn’t been renovated and all of a sudden it turned from a “body block” with few renovated buildings to an entire quarter that was upgraded. And that’s what we look for—rather than renovating a building or a unit, we look to position ourselves and collaborate with the owners and the neighborhood to change the community. That’s definitely a model that we look to do elsewhere. We’re looking to make a push right now into Morningside Heights, the Harlem area of Manhattan, and it’s the same model.
MHN: How do you think the revitalizations have added value?
Mermelstein: I think they add value to three groups of people. They add value to the community because no one wants to live in a building [that’s] not in a good neighborhood. So we go in there and really try to change the neighborhood along with other owners and collaborate with the local government and politicians. I think it helps the neighborhood and the community. It certainly helps the existing residents who live in the building. I’ve been a landlord for 11 years, and tenants typically complain when they see you. People always like to criticize. It’s very rare that a tenant will come to you and say, “I love what you’re doing,” or “thank you so much,” or “this is unbelievable, you’re really changing the building, thank you, thank you!” But they do that when we come in. Not in all buildings, but in buildings that were completely mis-run, because they were used to living in borderline substandard conditions—certainly not upgraded and renovated conditions. So I think they really appreciate what we do. And finally, I think that it benefits us. While we’re changing the building and changing the neighborhood and renovating the asset and filling it up, I think we’re reaping the rewards from a financial perspective.
MHN: You mentioned your residents come up to you now and say how much they love what you’ve done. Do you ever use that resident feedback in your marketing efforts?
Mermelstein: We certainly do! For example, in our East Orange portfolio we have a Youtube video with testimonials from some tenants. We had that constantly playing in our management office. One of the theories that we have is that we don’t really buy in luxury areas. We buy in middle class and working class areas. But what we like to do is really step up the experience that people are used to in terms of renting and in terms of living. From the second they walk onto our property they come into a beautiful management office with glass walls and a flat-screen TV playing, where somebody is going to greet you with a cup of water, and take you around in a professional manner as opposed to sending you to see the apartment with a super. We sit you down and give you a welcome packet and help you answer questions, whether you are a first-time resident or new to the area. We try to create a whole new experience in terms of renting.