Craigdell Gardens: A “Value-Add-Venture” with Birgo Capital

Post by 
Dan Croce

When Birgo Capital first considered the acquisition of Craigdell Gardens in the fall of 2019, it jumped out to our principals as the type of asset that is right down the fairway for us. Birgo’s real estate private equity investment strategy is focused on acquiring stabilized but underutilized workforce housing assets that are often overlooked in the heartland of America. At first glance, the Craigdell opportunity checked the right boxes:

  • Affordable workforce housing property 
  • Within 30 minutes of downtown Pittsburgh
  • Historical cash flows sufficient to finance 75% of the purchase price
  • Clear opportunities for P&L improvement through marketing and modest unit upgrades
  • Asking price well below replacement cost
  • Superior location relative to competitive product within the submarket 

Birgo was awarded the deal and commenced due diligence in the fourth quarter of 2019. We anticipated a close in late Q1 of 2020, but the onset of COVID-19 caused Birgo to pause all acquisition activity in March. We continued to monitor the asset through the pandemic, and ultimately were pleased to close the transaction in August of 2020. 

In this article, we’ll discuss some of the key considerations that Birgo Capital analyzed in deciding to add this asset to the Fund II portfolio.


Craigdell Gardens is a garden style 97-unit apartment complex made up of 7 buildings. Built in 1968, the property sits on 7.6 acres of land. It contains four garages and 22 covered carports, in addition to ample surface parking. The complex has an attractive courtyard for resident use, on-site storage for all residents, and it boasts a noticeable community feel with many long-term tenants. Craigdell Gardens contains the following unit mix: 

  • 7 - 3 bed, 2 bath apartments; historical asking rents of $800/unit
  • 56 - 2 bed, 1 bath apartments; historical asking rents of $640/unit
  • 32 - 1 bed, 1 bath apartments; historical asking rents of $530/unit
  • 2 - studio apartments; historical asking rents of $475/unit
Spacious, well-lit units provide a strong base for leasing efforts


The property is located in the borough of New Kensington, which is approximately 20 miles from downtown Pittsburgh. At first glance, New Kensington itself is not a uniquely compelling submarket, but it is a remarkably stable town and its proximity to Pittsburgh is attractive. Within the submarket, this asset is at a competitive advantage based on its proximity to primary shopping centers and restaurants. It is also conveniently located next to commonly frequented neighborhood attractions such as the Pittsburgh Ice Arena and Memorial Park, as well as the local public schools. Primary employers in the area are Siemens, Leeds, Philips, Amazon, and Penn State University (branch campus). Noteworthy recent investments in the community include a number of new microbreweries and a commitment from Penn State University to add a $5 million entrepreneurial technology center to the branch campus.

Physical Condition

Upon acquisition, this property was generally in good physical condition. There was very little deferred maintenance; the predecessor ownership and management teams kept the property in reasonably good condition, with decent occupancy rates. However, there were a number of units that had been “down” for quite some time, as they would require some capital expenditure (roofing, waterproofing, and storm water line replacement) in order to be brought online. The previous owner opted against the completion of these projects, and Birgo’s intention was to add value by bringing these units back into habitable condition by first addressing these property-level issues. 

Storm water line replacement in process

Business Plan

As mentioned above, one core element of the investment thesis was to increase the available unit count at the property by completing necessary capital improvements to bring several down units back online. In addition to this, Birgo plans to do modest upgrades to the interior finishes in the apartments. Our market analysis indicated that more significant rent growth will be achieved if a portion of the units are modernized. Additionally, by investing in common area improvements, we believe that we can generally upgrade the market positioning of the property and appeal to a broader tenant base. In addition to realizing upside through unit renovation, we plan to drive rent growth through more sophisticated marketing efforts. Birgo routinely finds that professionalizing the leasing process leads to better topline results within 6 months of acquisition, and this asset has been  no exception.

Kitchens are functional, but cosmetic upgrades provide upside opportunity

With respect to operations and staffing, a highly experienced Birgo team member has been identified to lead the effort in overseeing the new property. This asset was acquired in conjunction with an additional 52 units at two nearby properties, which aggregate to form a 149-unit region to be led by this property manager and the maintenance and leasing teams that they will build. 


As noted above, this asset was acquired in conjunction with another 52 units. The combined 149-unit portfolio was purchased for $6,075,000, or $40,772 per unit. The appraiser applied a 7.25% cap rate to the assets. Based on in-place income and the raw value of the down units, we believe this is an attractive valuation. Generally speaking, we would expect the cap rate to be modestly lower than this for a transaction of this nature, based on the trends we have observed in comparable deals. In addition to improving NOI through driving rent growth and reducing expenses, we believe that upgrading the profile of the property from a Class C to a Class B will compress the cap rate upon exit, leading to a very strong IRR. 


Birgo is thrilled to have acquired Craigdell Gardens. We believe that we will be able to generate an attractive risk-adjusted return by adding value and improving the bottom line, and with two months of ownership under our belt, we are well on our way. It’s our conviction that we can simultaneously make  a positive impact on the community of New Kensington, and provide an all around win for our investors and tenants.  

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