BPG Holdings Investment Case Study #002: The Same Construction Dollar Doesn't Create the Same Value
Why BPG Holdings Is Allocating More Capital to Retail Than Workforce Multifamily
"The most important investment decision isn't how much capital you invest. It's how long that capital continues creating value."
About the BPG Holdings Investment Case Study Series
Every acquisition teaches us something.
Some investments validate our assumptions.
Others challenge them.
Our goal with this series is to give investors an inside look at how BPG Holdings evaluates
opportunities, deploys capital, and makes long-term investment decisions.
These aren't hypothetical examples.
They're real properties.
Real renovations.
Real numbers.
Because we believe transparency builds better investment partnerships.
The Question Every Investor Should Be Asking
In our first Investment Case Study, we walked through the evolution of our 15-unit apartment community in Waynesboro, Virginia.
From the day we acquired the property through today, gross monthly rental income increased from $10,233 to approximately $17,360, representing nearly 70% revenue growth through disciplined asset management and strategic capital improvements.
Naturally, investors ask us the same question:
"If the investment performed so well, why isn't BPG Holdings buying more apartment communities?"
It's a great question.
The answer has very little to do with multifamily.
It has everything to do with how construction dollars create value.
Today, every investment committee discussion inside BPG Holdings begins with one question:
Where does the next construction dollar work the hardest?
To answer that question, let's compare two actual projects completed by our team.
Investment #1
Renovating One Workforce Housing Apartment
Recently, one apartment at Hamlet Apartments became vacant.
Like every multifamily owner, we evaluated the improvements necessary to prepare the unit for its next resident.
The scope of work was intentionally modest.
It included:
Luxury vinyl plank flooring
New dishwasher
Interior door replacement
Blind replacement
Paint touch-ups
Minor punch-list repairs
Mechanical testing
General turnover work
Total renovation cost:
$9,411.88
The apartment is now positioned to lease at approximately $1,265 per month, compared to average rents of approximately $682 per month when we acquired the property in late 2021.
The renovation was successful.
It increased rental income.
It improved the resident experience.
It protected the long-term value of the property.
But then we asked another question.
Investment #2
Renovating a Retail Space
Now compare that same investment philosophy to another project.
At our shopping center located at 625 Mount Clinton Pike in Harrisonburg, Virginia, we recently completed tenant improvements on approximately 4,100 square feet of retail space.
When we acquired the shopping center, the previous tenant occupied the space on a month-to-month lease paying approximately $2,138.75 per month, or roughly $6.26 per square foot annually.
We invested approximately $27,954.20 into the space, including demolition, flooring, wall separation, project management, and materials.
Following the renovation, we secured a new lease with the following terms:
4,100 square feet
$15.00/SF NNN
$2.50/SF CAM reimbursement
Three-year lease
3% annual rent increases
One renovation transformed an underperforming suite into a stabilized, income-producing asset with contractual rent growth.
Same Contractor.
Same Market.
Same Construction Environment.
Both projects were completed by AVEC Construction.
Both were completed during the same construction cost environment.
Both required meaningful capital investment.
Yet they produced very different investment characteristics.
Comparing the Return on Construction Capital
Metric | Hamlet Apartments | Mount Clinton Retail |
Construction Investment | $9,411.88 | $27,954.20 |
Space Improved | 790 SF Apartment | 4,100 SF Retail Suite |
Cost Per SF | $11.91/SF | $6.82/SF |
Previous Rent | $1,150/month | ~$2,138.75/month base rent |
New Rent | ~$1,265/month | $15.00/SF NNN + $2.50 CAM |
Lease Length | Typically 12 months | 3 Years |
Annual Rent Growth | 3% Standard | 3% Contractual |
Operating Expense Recovery | None | CAM reimbursement |
Expected Capital Reinvestment | Every tenant turnover | Limited during lease term |
Looking Beyond Construction Costs
Many investors focus exclusively on the cost of renovations.
We think that's only half the story.
The more important question is:
How long will those construction dollars continue generating returns before additional capital is required?
This is where the economics begin to diverge.
Workforce Multifamily
The investment cycle typically looks like this:
Invest capital.
Lease the apartment.
Collect rent.
Tenant moves out.
Replace flooring.
Paint.
Repair damage.
Replace appliances.
Lease the apartment again.
Repeat.
There is nothing inherently wrong with this model.
In fact, it's exactly how many successful apartment owners have built tremendous wealth.
But it is a business model built on recurring capital deployment.
Neighborhood Retail
Retail follows a different cycle.
Invest capital.
Lease the space.
Collect rent.
Receive contractual annual rent increases.
Continue collecting income.
Because the lease extends over multiple years, those same construction dollars continue
producing value without the recurring turnover cycle commonly found in apartments.
The construction dollars simply stay productive longer.
That distinction matters.
Construction Dollars Have a Lifespan
One of the most valuable lessons we've learned over the past several years is this:
Not every construction dollar has the same productive life.
A renovation isn't simply an expense.
It's an investment.
Like every investment, it should continue generating returns for as long as possible.
The longer those improvements continue producing income before additional capital must be
invested, the stronger the long-term economics become.
That philosophy increasingly shapes where BPG Holdings chooses to deploy capital.
Why Retail Makes Sense Today
This isn't an argument against multifamily.
Hamlet Apartments remains one of our favorite investments.
We would gladly purchase the property again at our original acquisition basis.
But today's investment environment is different.
Construction costs have increased dramatically.
Labor is more expensive.
Materials cost more.
Insurance costs more.
Financing costs remain elevated.
In this environment, we believe capital should be allocated where construction dollars continue creating value for longer periods of time.
For us, neighborhood retail currently offers that opportunity.
Especially when we can:
Acquire below replacement cost.
Invest strategic tenant improvement dollars.
Secure multi-year leases.
Lock in contractual rent growth.
Recover operating expenses through NNN lease structures.
Reduce the frequency of future capital expenditures.
That doesn't make retail universally better than multifamily.
It simply makes it more attractive based on today's economics.
Investment Lesson
Institutional investors don't become emotionally attached to asset classes.
They become disciplined about capital allocation.
At BPG Holdings, we don't ask:
"Which property type is the most popular?"
We ask:
"Where will the next construction dollar continue creating value for the longest period of time?"
That question influences every acquisition we pursue.
Every renovation we approve.
Every tenant improvement allowance we negotiate.
And every investment opportunity we present to our investors.
BPG Takeaways
Rising construction costs have changed the economics of value-add real estate across every asset class.
The true measure of a renovation isn't its cost—it's how long those dollars continue producing income.
Long-term leases with contractual rent increases can extend the productive life of construction capital.
Every renovation should be evaluated as an investment, not simply as a maintenance expense.
BPG Holdings allocates capital based on long-term risk-adjusted returns—not asset class popularity.
Looking Ahead
The real estate market will continue to evolve.
Interest rates will change.
Construction costs will fluctuate.
Certain asset classes will fall in and out of favor.
Our investment philosophy will remain the same.
Every dollar of capital should have a purpose.
Every improvement should create measurable value.
And every investment should earn the opportunity to stay in our portfolio.
See you soon at BPG Holdings Case Study #003, how I purchased a $8,000 house used it to buy a quadplex.
Happy Investing ✌️
— Cassidy Burns
Founder,
BPG Holdings
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