Apartment Properties Attract Investment Capital

Multifamily property in major metro markets remains the asset of choice for many commercial real estate investors, with momentum fueled by a number of large late-summer sales transactions following a solid first half of 2010.

Public and private REITs have landed the largest deals of late, but private equity, pension funds, insurance companies, owner-developers and even private individuals are all getting into the action for both core and distressed multifamily projects in large metros around the country, according to CoStar Group sales data.

“Investors are continuing to hunt down deals in the apartment space,” said CoStar real estate economist Dan Egan, citing plans announced this week by apartment real estate investment trust UDR Inc. (NYSE: UDR) to acquire six apartment communities in Massachusetts, Southern California and Baltimore for $455.1 million in one of the largest portfolio deals of the year.

UDR’s purchase includes the $157.5 million purchase of the 583-unit Marina Pointe in Los Angeles’s posh Marina del Rey, and the $98 million purchase of 160-unit Garrison Square at the intersection of Boston’s Back Bay and South Hill neighborhoods at a stellar $612,000 per unit.

“Those are all really nice assets, and it speaks volumes about the sentiment of investors with regard to apartments,” Egan said. “We haven’t seen that kind of trading and confidence in the office market.”

The UDR sale includes three communities recently developed by The Hanover Co. and acquired at a substantial discount to their cost, including the 266-home1818 Platinum Triangle in Anaheim, acquired for $70.5 million, or $266,000 per unit; Ridge at Blue Hills in Braintree, MA, 186 units, $40 million, or $215,000 per unit; and the 180-unit Domain Brewers Hill in Baltimore, $46 million, or $255,600 per unit.

Monthly rental income for all six communities acquired by the REIT averages just under $2,000 per occupied unit. UDR said it will finance the 1,614-unit portfolio with cash, funds from its credit facility and the assumption of $92 million of first mortgages on the Marina del Rey and Braintree properties. (credit costar-r.drummer)

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