Associated Estates to Buy 1,600-Unit Apartment Portfolio for $324M

Associated Estates Realty Corp. will add 1,606 residential units to its holdings overnight. The REIT has entered into a definitive agreement with Northwood Ravin to acquire a portfolio of seven existing and under-development apartment assets across three states in the Southeast and Mid-Atlantic for $324 million.

Associated Estates Realty Corp. will add 1,606 residential units to its holdings overnight. The REIT has entered into a definitive agreement with Northwood Ravin L.L.C. to acquire a portfolio of seven existing and under-development apartment assets across three states in the Southeast and Mid-Atlantic for $324 million.

Presently, Associated Estates’ portfolio consists of 51 multi-family assets containing 13,171 units across 10 states. With five of the seven to-be-purchased properties located in North Carolina, the REIT will nearly triple its presence in the Tar Heel State in one fell swoop. The 295-unit Apartments at Blakeney and the 167-unit Alpha Mill Phase I are located in Charlotte, as is Alpha Mill Phase II, which will feature 100 residences upon its completion next year. Rounding out the North Carolina collection are the 134-unit St. Mary’s Square in Raleigh, and the 215-unit Lofts at Weston in Cary.

Associated Estates’ third-of-a billion-dollar purchase will also include Perimeter Town Center, a 345-unit apartment community in Atlanta and the 350-unit Varela in Tampa, both of which are presently under construction.

It’s all about location. “My initial take on [the acquisition] is that they’re trading out of some of their lower-growth areas into higher-growth areas, and they’re trying to increase their exposure to some better markets longer term, which strengthens their portfolio,” David Wigginton, managing director with Discern Investment Analytics Inc., told Commercial Property Executive.

Additionally, Associate Estates’ acquisition of the assets, as well as the dispositions the company will engage in to partially finance the purchase, will play a role in lowering the average age of the REIT’s existing portfolio. Four of the properties that will be acquired were developed between 2008 and 2013 and the remaining three are scheduled for completion in 2014. Among the assets slated for disposition is a group of five apartment communities with an average age of 23 years. Associated Estates anticipates pocketing as much as $240 million on that handful of outgoing properties, which the REIT snapped up in 1998 for $99 million.

“The expected pricing for the properties we plan to sell, once again, demonstrates our ability to create significant value from buying, developing and managing apartment communities,” Jeffrey Friedman, president & CEO of Associated Estates said in a prepared statement. “These new acquisitions should position Associated Estates to continue to deliver sector leading same community NOI growth over a long period of time.”

The acquisition of three of the existing apartment communities is on schedule to close in the fourth quarter of this year, and Associated Estates will come into possession of an additional two in the first quarter of 2014, and the final two in the fourth quarter of 2014.