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UDR Closes $1.7B Portfolio Sale to DRA Fund VI

DENVER-The sale of 39% of its holdings leaves the apartment REIT with a portfolio concentrated in the Pacific Coast, DC corridor and Florida markets.

By Brian K. Miller | Updated on March 04, 2008

DENVER-UDR Inc. has completed a $1.7-billion, 25,684-unit portfolio sale, leaving the locally based multifamily REIT with a younger, 40,000-unit portfolio concentrated in the Pacific Coast, DC corridor and Florida markets. The sale to DRA Fund VI LLC in a joint venture with Steven D. Bell & Co. was announced at the end of January. No brokers were involved.

The sold portfolio consists of 86 apartment communities in Arkansas, Delaware, Florida, North Carolina, Ohio, Oregon, South Carolina, Tennessee, Texas, Virginia and Washington. At Dec. 31, the portfolio had total income per home of $744 per month, average occupancy of 94.4%, and operating margin of 62.3%, and an average age of 24 years. The sale price equates to $66,578 per unit and a 6.56% capitalization rate based on trailing 12-month NOI that incorporates a $650-per-home capital expenditure reserve and a 2.75% management fee.

UDR’s retained portfolio–40,183 units in 146 communities–has monthly rents approaching $1,200 per month, operating margins exceeding 68%, and an average age of 15 years, according to UDR president/chief executive Thomas Toomey. The company says approximately 47% of its net operating income now will be generated from homes on the Pacific coast, while 24% will come from the Virginia-Washington, DC corridor and 19% will come from Florida.

Toomey

“This transaction captures the disparity in value between private and public markets, and focuses the company in locations demonstrating high rent growth, strong job growth and low single family home affordability,” Toomey says. “We will reinvest $500 to $800 million of the proceeds into communities that further strengthen our portfolio, primarily in West Coast and DC corridor markets. We expect to use the balance of the proceeds to reduce debt, repurchase shares and for a potential special dividend.”

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