ALEXANDRIA, VA-Last month we reported that the Virginia Department of Transportation sold Hunting Point, a 530-unit apartment complex on the Potomac River, for $78 million. The buyer was Lubert-Adler of Philadelphia, PA. This particular sale pushed the company's multifamily portfolio for its domestic institutional investors pass the $2 billion mark.

More to the point, the sale illustrates just how far value-add has come back, not just here, not just in multifamily, but in general. Indeed some observers say that it won't be long before opportunistic funds become a frequent player in this market, as they are starting to in New York City, as the Wall Street Journal reported.

Lubert-Adler launched its Fund VI, VI-A and VI-B co-investment pool in January of 2010 with over $1 billion in equity. Since then it has acquired some 70 multifamily properties totaling over 20,000 units. Most of the assets were acquired in the last 18 months. The goal for the investments was to generate overall returns of 17-20%, with 10-12% of that coming from current yield, according to Dean Adler, CEO.

To meet those numbers the company sought out one-off middle-market acquisitions through local entrepreneurs, focusing on properties that are too large for local operators but smaller than those that would interest the very large funds, according to Adler. "Our goal was to buy assets opportunistically [emphasis mine], preferably from sellers who are not in the everyday business of improving real estate, and then work with our local partners to increase current yield by renovating and repositioning the assets."

Some quick math about Hunting Point: little upgrades have been made to the units and rents are 30-40% below market rate. Over the next three years, the company plans to invest about $14 million in capital improvements.