Home Properties purchased the 851-unit Orleans Village apartment and town home community in Alexandria from Charles E. Smith Residential Realty for $67.4 million. This translates to approximately $79,200 per unit.
Smith built Orleans Village between 1967 and 1972. The Fairfax County property is minutes from I-395 and I-495 commuter routes. With a 1999 average occupancy rate of 97.4% and 1,040-sf unit size, monthly rents average $954. The complex has 132 three-bedroom units, 447 two-bedroom units, 272 one-bedroom units, an Olympic-size swimming pool, on-site laundry facilities and ample parking.
Home Properties will spend about $7.3 million during the next three years refurbishing common areas, upgrading HVAC systems, improving laundry facilities, installing new windows, and remodeling kitchens and baths. Management expects the property to generate a 9% initial unleveraged return on acquisition and capital improvement costs, with a return exceeding 10% by the second year.
"The Northern Virginia area has a very tight rental market in which we already have a strong presence, making this property an excellent fit for our portfolio," Norman Leenhouts, Home's chairman and co-CEO, says. "The purchase was made at a substantial discount to its replacement cost and we will capture additional value as we upgrade the community and realize its full potential."
Smith is using its sale funds to purchase two newly developed apartment properties--2201 Wilson Boulevard in Arlington and New River Village in Fort Lauderdale. Smith purchased Wilson from Bush Construction Corp. for a capitalized cost of about $28 million. The Florida property was acquired from a subsidiary of American Land Housing Group for about $30 million.
The Wilson Boulevard property, a 219-unit, 10-story high rise, is in the heart of the Roslyn/Ballston sub market and is a 10-minute MetroRail ride to Downtown Washington DC. Wilson Street is 97% leased and should provide a stabilized first-year yield of about 10.25%. According to Smith Residential's president, Ernest Geradi Jr, monthly rents will average $1,750.
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