Three times in seven months, the Overlook at Lakemont apartment complex in Bellevue, Washington, was set to change hands. Each time after the sale went to contract, would-be buyers backed out over the potential cost of correcting fundamental construction defects in the balconies and stairwells of the 400-unit property. But in July 2002 real estate investor Concierge Asset Management stepped up and purchased the complex in the Seattle suburb. For Concierge, the buildings' many structural flaws only increased their charm.

Tiburon, California­based Concierge and its chairman, Maxwell Drever, specialize in fixer-uppers. And they prefer to buy them in markets like Bellevue that are struggling with relatively high apartment vacancy rates. "We go in and we dress the property up so people want to live there and are willing to pay a little more rent," explains Drever, 63.

In the case of Overlook, Concierge fashioned a neat turnaround, buying the property for $38 million and then investing $4.7 million in improvements. Aside from refurbishing the stairwells and balconies, the company replaced old countertops with new granite ones and added other amenities. It was able to increase the spruced-up property's occupancy rate from the low 70 percent range to the high 90s, thus realizing a 21 percent increase (from $298,000 to $360,275) in monthly rent collections. The gains were especially notable considering that the Seattle area has a 7.8 percent apartment vacancy rate.

Two months ago Concierge sold Overlook to a subsidiary of Englewood, Colorado, real estate investment trust Archstone-Smith for $50 million. The annual internal rate of return to fund investors: more than 20 percent.

Concierge is what's known in real estate parlance as a value-added investor. This group falls in the middle of the risk-return spectrum, between core (safest) and opportunistic (riskiest). The longtime real estate investor is currently attempting to raise $150 million in equity. If successful, it will be Concierge's fourth fundraising in as many years. The new vehicle aims to focus on markets still smarting from the technology bust, among them Atlanta, Austin, Denver and Seattle.

Concierge is just one of several value-added apartment investors that are attracting institutional capital. Others include Boston-based AEW Capital Management, a real estate investment adviser with $18.2 billion of capital under management, and Horsham, Pennsylvania­ based GMAC Institutional Advisors, which manages $13 billion of real estate investments.

AEW found its value-added investment strategy so popular that its new fund, AEW Value Investors, which closed in late September, exceeded its target capitalization. The $342.6 million of equity it raised from about 30 institutional investors and high-net-worth individuals will allow it to buy close to $700 million of assets.

In September, GMAC formed Select Apartment Properties, a joint venture with the Dallas Police and Fire Pension System that owns five apartment properties valued at a total of more than $150 million, in Boston; Chicago; Dallas; Sacramento, California; and Washington, D.C. The properties will undergo extensive renovations.

GMAC is applying the same value-added strategy to a commingled fund that expected to close a roughly $190 million equity fundraising at the end of November. About half of its assets will be multifamily properties.