UDR Completes Acquisition of NYC’s 21 Chelsea
- Nov 02, 2011
November 2, 2011
By Barbra Murray, Contributing Editor
UDR Inc. spent the summer making deals and one of them, the purchase of 21 Chelsea in New York City, recently closed. The multi-family REIT acquired the 210-unit luxury apartment property for $138.9 million, including the assumption of $31 million of existing debt.
UDR is in the midst of transforming its apartment portfolio into one that predominantly encompasses properties located in markets with above average job growth, low home affordability and limited new supply. 21 Chelsea, sited in Manhattan’s trendy Chelsea neighborhood, fits the bill completely.
In an effort to capitalize on increasing demand in the rental market, UDR will shell out as much as $8 million to upgrade the 13-story apartment building and reposition it for higher rents. Presently, the average monthly rate per unit at 21 Chelsea is $3,226, but UDR anticipates being able to secure a 20 percent increase following the repositioning program. Rents across Manhattan are on the upswing and Chelsea is no exception. In October, average year-over-year rents in the neighborhood increased roughly 10 percent from $3,739 to $4,120, as per numbers from real estate brokerage firm MNS.
With the 21 Chelsea buy and the $443 million purchase of the 706-unit Rivergate in Murray Hill, UDR has made $1.2 billion of acquisitions in Manhattan year to date. The REIT’s portfolio repositioning strategy is already working.
“We are very encouraged by the improvement in operations and the rent increases we have achieved thus far in Manhattan,” Thomas W. Toomey, president and CEO of UDR, said during the company’s third-quarter earnings call at the end of October. “While we are just beginning our redevelopment efforts, I’m excited about the initial outperformance versus our pro forma expectations.” Jerry A. Davis, senior vice president of operations, added that the recently acquired Manhattan assets, which have an average occupancy level of 98 percent, are providing rent increases in the 11 to 14 percent range, and that UDR has been able to eliminate broker commissions and reduce maintenance costs at the properties.