Since the end of the Great Recession, Atlanta-based Cortland Partners has bought up tired suburban apartments, pumped cash into renovating them and marketed them to renters with deeper pockets.

Now, two major foreign investors are betting half a billion dollars that this platform works.

The Canadian Pension Plan Investment Board and GIC, an organization that manages Singapore's foreign reserves with $100B in assets under management, have partnered with Cortland to buy up to 10,000 Class-B apartment units across the country and push them to a Class-A tier.

This is the first time both funds have invested in non-gateway cities with apartments. In the arrangement, CPPIB and GIC will each hold a 45% stake in the properties, and Cortland will own the remaining 10%, the firms said in announcing the partnership.

The joint venture already has purchased three properties, including more than 400 units in Denver, some 300 units in Austin and another 284 units in Raleigh. The joint venture, which is structured for 10 years, is seeking mainly suburban Class-B apartments in the South and Southeast.

“By focusing on Class-B asset opportunities, this joint venture enables us to add diversification to our U.S. multifamily portfolio, which is concentrated in prime urban locations,” CPPIB Managing Director Hilary Spann said in a statement.

Cortland CEO Steven DeFrancis said the value-add strategy is to take an apartment project in a market somewhat outside the urban core and push it up a class level by investing heavily into the amenities and unit interiors. On average, Cortland will spend up to $35K per unit.

But the payoff is huge in today's market, DeFrancis said. For instance, Cortland took a Class-B apartment in the suburbs north of Atlanta originally built in the 1990s, tore down the clubhouse, rebuilt the pool and completely renovated the unit interiors. The result? Cortland was able to push up rents by an average of $350/month, he said.

“And I mean everything back to the drywall,” DeFrancis said. “We just tore down all the amenities and started from scratch.”