BIRMINGHAM, AL-Colonial Properties Trust has agreed to sell 18 apartment communities to Elco Holdings for $338 million. The price represents a 6% cap rate for the portfolio, which consists of 5,659 units in Georgia, North Carolina, Texas and Virginia.
The REIT says the deal is part of its ongoing strategy to recycle older multifamily assets to improve the average age, margin and capital expenditure requirements of its portfolio. The properties under contract have an average age of 25 years.
According to a research note from Sandler O'Neill + Partners LP, the deal allows Colonial Properties Trust to recycle its capital into higher quality assets. Moreover, the firm says the disposition is “essentially neutral” to the REIT’s NAV. Currently, Colonial Properties Trust is trading at an implied 5.7% cap rate.
The disposition announcement was followed by the REIT’s second quarter 2011 earnings release during which it increased guidance for the year.
“Multifamily fundamentals continued to improve during the second quarter, leading to an increase in our 2011 full-year same-property NOI and FFO per share guidance range,” Colonial Properties Trust Chairman and CEO Thomas Lowder said in a statement. “Our new and renewal lease rates are accelerating, while resident turnover has declined and occupancy levels have remained high. The second quarter results demonstrate our ability to capitalize on these fundamentals, execute on our balance sheet targets and focus on growing the company.”
The REIT’s same-property NOI for its apartment portfolio increased 7.5% compared with the 3.9% for the second quarter 2010. The portfolio was 96.2% occupied at the end of the second quarter 2011.
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