DF Ventures' $75.5M Sale in Newport News Highlights Value-Add Success

NEWPORT NEWS, VA – December 29, 2025 – In a transaction that underscores the robust health of the regional multifamily market, DF Ventures, the investment arm of Drucker + Falk, has completed the sale of the Compass at City Center apartment community for $75.5 million. The buyer, Washington, D.C.-based real estate firm Penzance, acquired the 396-unit property, concluding a highly successful seven-year value-add initiative by the seller.

The deal represents a significant return on investment for DF Ventures and its partners. After acquiring the property in 2018 for $46.65 million, the firm executed a long-term strategy that has now yielded a 24% internal rate of return (IRR) and a 2.85 equity multiple for its investors. This successful exit not only highlights the firm's strategic acumen but also casts a bright spotlight on the growing investor appetite for well-positioned assets in secondary markets like Newport News.

A Blueprint for Value-Add Creation

The impressive financial returns were not the result of passive ownership but a deliberate, multi-year enhancement plan. Central to DF Ventures' strategy was a $6.0 million capital improvement program designed to modernize the 1986-built property and elevate its standing in a competitive rental market. The renovations were comprehensive, including the construction of a new, state-of-the-art clubhouse that serves as the community's social and recreational hub.

Beyond the clubhouse, the capital was deployed to systematically upgrade unit interiors, bringing them up to modern standards with new finishes, fixtures, and appliances. Targeted enhancements to community amenities further improved the resident experience, making the property more attractive to prospective tenants and justifying higher rental rates. This strategic injection of capital, coupled with Drucker + Falk's hands-on property management, proved to be a powerful combination.

The performance metrics of this investment place it firmly in the upper echelon of value-add multifamily projects. While target IRRs for such projects typically range from the mid-teens to low-twenties, achieving a 24% IRR over a seven-year hold period demonstrates exceptional execution. Similarly, a 2.85x equity multiple signifies that investors received nearly three times their initial equity investment back. This level of return is comparable to other highly successful value-add case studies across the country, where strategic renovations have unlocked significant asset appreciation and rental income growth, validating the thesis that older, well-located properties hold immense untapped potential.

Penzance Deepens Its Mid-Atlantic Focus

The acquisition marks another significant move for Penzance, a vertically integrated real estate firm known for its strategic investments across the Mid-Atlantic. With a portfolio valued at over $4.5 billion, Penzance specializes in identifying and acquiring assets where it can leverage its in-house expertise in management, leasing, and construction to create value. The purchase of Compass at City Center aligns perfectly with this strategy.

Penzance's recent activity shows a clear and continued confidence in the Virginia and broader Southeast markets. In March 2025, the firm acquired a six-building industrial portfolio in Manassas, VA, for $55 million. This followed its August 2023 purchase of the Jasper Columbia Pike, a 269-unit multifamily property in Arlington, VA. By adding a substantial asset in Newport News, Penzance is diversifying its geographic footprint within the state, betting on the strong economic fundamentals of the Hampton Roads region. This pattern of investment suggests a belief that markets outside of the primary D.C. metropolitan core offer compelling risk-adjusted returns.

Newport News: A Market Gaining Momentum

The $75.5 million price tag for Compass at City Center is a powerful testament to the growing strength and appeal of the Newport News real estate market. Once considered primarily a military town, the city is now recognized by savvy investors as a hub of stable economic activity with significant growth potential. The market is supported by a diverse economic base that includes shipbuilding, advanced manufacturing, defense, and technology.

This economic stability translates into a healthy demand for rental housing. The Newport News multifamily market is currently described as balanced, with a rental vacancy rate of just 6.3% as of October 2025. This tight supply is reflected in rising rents, which have increased approximately 3.4% year-over-year, with the average apartment now leasing for around $1,424. The consistent demand is further bolstered by a large military population that seeks quality rental options and a high renter-occupied household rate of 52%.

Investor interest is also fueled by the city's pro-business environment and strategic location within the Hampton Roads metropolitan area. New developments, such as the recently opened Shipyard Flats downtown, indicate ongoing revitalization and a market capable of absorbing new inventory. For investors like Penzance, Newport News offers a compelling combination of affordability relative to larger East Coast cities, steady rental demand, and a clear path for future economic growth.

Strong Returns Signal Multifamily Sector Resilience

Beyond its local significance, the successful sale of Compass at City Center sends a broader message about the enduring appeal of the multifamily asset class. In an economic environment marked by shifting interest rates and uncertainty in other commercial real estate sectors, this transaction demonstrates that well-located, well-managed apartment communities remain a source of stable cash flow and significant capital appreciation.

The transaction, marketed by Drew White and Carter Wood of Berkadia's Investment Sales team, showcases the deep liquidity that exists for high-quality multifamily assets. The ability to generate a 24% IRR and a 2.85x equity multiple reinforces investor confidence and is likely to attract further institutional capital into the sector. It highlights that the value-add model—buying, improving, and stabilizing a property—remains a viable and highly profitable strategy.

Furthermore, the deal emphasizes the attractiveness of secondary markets like Newport News. As competition and pricing in primary gateway cities become prohibitive, investors are increasingly turning to markets with strong demographic and economic fundamentals to find yield. This sale serves as a benchmark for asset valuation in the region and a powerful case study for how to successfully execute an investment strategy outside of the traditional top-tier markets.