UDR to Pocket $1.7B on Apartment Portfolio Sale
- Jan 30, 2008
Plans have been made for UDR Inc. to sell a portfolio of 86 multi-family properties to a joint venture involving DRA Advisors L.L.C. and Steven D. Bell & Co. As per the terms of the contract, UDR will walk away with an aggregate $1.7 billion. DRA and Steven D. Bell & Co. will fork over $1.5 billion in cash as well as a $200 million principal note in exchange for the group of assets, which encompasses 25,684 apartment residences. Presently, the apartment properties haven an average occupancy level of 94.4 percent and an average age of 24 years. For UDR, funds from the transaction leave it with the freedom to engage in a variety of activities. The multi-family REIT plans to apply about $500 to $600 million toward future acquisitions, while using approximately $500 to $600 million for paying down debt. The remaining $300 to $500 million will be coupled with the $200 million note for additional property purchases, as well as the repurchasing of stock. DRA relied on MJC Associates L.L.C. for brokering and financial guidance, while the company turned to Merrill Lynch and Co. for portfolio strategy assistance, as well as financial advice. If all goes as planned the transaction will close on or around March 3. UDR’s disposition of the portfolio will leave it with a presence in its core markets; markets characterized by job growth, high rent growth and a lack of affordable single-family homes. To that end, about 90 percent of its resulting portfolio will be located on the Pacific Coast, in Suburban Washington, D.C., and in Florida, with the bulk of the assets–about 47 percent–sited on the Pacific Coast. With the close of the sale, UDR will exit Arkansas, Delaware, North Carolina, Ohio and South Carolina. “The markets we’ve chosen to stay in are ones that have very bright, long-term prospects,” Larry Thede, UDR vice president of investor relations, told CPN today. “We’re in the right locations where demand will stay strong for apartments.” UDR’s repositioning of its portfolio to a predominantly West Coast portfolio–the majority of its assets will be in California–dovetails with the company’s recent relocation of its corporate headquarters from Richmond, Va., to Denver, which has been the home of UDR’s executive offices for the last seven years. MJC Associates marketed the UDR portfolio to a limited group, but the joint venture still found itself competing with an eager cluster of hopeful buyers. For Steven D. Bell & Co., the collection of assets was tailor-made. “The secondary markets UDR is getting out of are the markets we’ve been getting into,” company principal John Bell told CPN today. He cited Charlotte, N.C., and Birmingham, Ala. as two such locales. “Our strategy is to purchase and upgrade properties in these markets with the intention of upgrading them to B+ or A- status.”The third largest apartment REIT in the country, Denver-based UDR Inc. acquires, develops, redevelops and manages real estate across the United States. As of the close of 2007, the company owned 65,587 residential units and had an additional 6,385 under development. New York-headquartered DRA Advisors L.L.C. is an investment advisor focusing on real estate investment management services for institutional and private investors, and other clients. The company manages in excess of $9 billion in assets accounting for more than 20 million square feet of office and industrial space, 32 million square feet of retail space and 19,000 residential units. Steven D. Bell, based in Greensboro, N.C., is a real estate investment and management concern that currently oversees a portfolio valued at $3.6 billion and encompassing approximately 34,000 residential units, 2,000 senior living units and 5.4 million square feet of commercial space.