UDR Wraps Up Reinvestment of Funds from $1.7B 1031 Exchange
- Sep 08, 2008
Almost exactly six months after closing on the sale of 86 apartment properties to DRA Fund VI L.L.C. and joint venture partner Steven D. Bell & Co., UDR Inc. has concluded the reinvestment of 1031 exchange funds from the from the $1.7 billion sale. The Denver-based REIT used $951 million of the proceeds to purchase, in various transactions, 12 apartment communities encompassing nearly 4,100 residential units. The acquisitions allowed the company to reposition its portfolio with newer properties within close proximity to lifestyle centers and transportation hubs in its core markets, which are characterized by high rent-growth potential, expanding employment opportunities and limited availability of affordable single-family homes. UDR’s new purchases span six states; four are located in California. The 193-unit Edgewater and the 250-unit Almaden Lake Village are located in the San Francisco area; the 296-unit Pine Brook Village II is in Orange County; and Tierra Del Rey, offering 170 residences, is in Metropolitan Los Angeles. The other West Coast assets are the 235-unit Island Square and the 220-unit Hearthstone at Merrill Creek, both of which are in the Seattle area. The portfolio also enhances UDR’s Washington, D.C., presence with the 606-unit Circle Towers and the 241-unit Delancey at Shirlington. UDR also walked away with two Texas apartment complexes, the 1,043-unit Legacy Village compound in Plano and the 390-unit Residences at the Domain in Austin. The remaining two assets, Tampa , Fla.’s 249-unit Vintage Lofts and the 200-unit Waterford at Peoria in Phoenix, Ariz., are presently under development. The acquisition of the rental complexes, which have an average age of 15 years, presented UDR with a bit of immediate gratification, as the average monthly income per home at the properties represents a 20 percent increase from the income level of UDR’s portfolio before the comprehensive transformation. Of course, UDR’s presence extends beyond the aforementioned markets, but not too far beyond. “The markets we’re in now are likely the ones we’ll continue to focus on,” a UDR spokesperson told CPN. “When you’re already in a place like Seattle, for example, and add properties, it helps in terms of economies of scale. You can do labor sharing and you can offer tenants different locations. There’s an advantage to being big in a few markets, as opposed to being scattered around a lot of markets, and that’s what we accomplished–we’re more concentrated.” UDR, however, did more than just go on a shopping spree after pocketing nearly $2 billion from the 1031 exchange transaction. The company used $115.8 million of the proceeds to repurchase 4.9 million shares of its common stock to pay down debt totaling $387.4 million. Outside of the 1031 exchange activity, 2008 has brought two other multifamily purchases for UDR. The company shelled out $50.1 million for The Place at Millenia, an apartment community in Orlando featuring 371 residences, and paid $56.9 million for the 264-residence Dulaney Crescent in Suburban Baltimore. As for the remainder of the year, more buying binges are not really in the cards. “We feel we accomplished a lot with the sale In March and the conclusion of the acquisitions in August,” the spokesperson said. “Any acquisitions over the next three or four months will be in an opportunistic way.” An apartment REIT, UDR buys, sells, develops and redevelops multifamily real estate in targeted markets across the country. As of August 31, the company owned 44,089 apartment units, and had an additional 5,116 under development, as well as 684 more units under contract for development in its pre-sale program.