UDR, Inc. (the “Company”) (NYSE:UDR), a leading multifamily real estate investment trust and GRESB 5 Star rated company for its sustainability leadership, announced today that it has closed a $510 million joint venture with LaSalle Investment Management (the “Partner”). The Company and the Partner intend to grow the joint venture over time through the acquisition of high-quality, well-located communities with operational upside that can be recognized through the implementation of UDR’s industry-leading operating platform.
Under the terms of the agreement, UDR will:
- initially contribute four communities totaling 1,328 apartment homes (the “seed portfolio”) into the joint venture;
- retain a 51 percent ownership in the communities included in the joint venture; and,
- receive approximately $250 million in cash proceeds.
The joint venture will initially have no debt. The value of the seed portfolio is based on a low-5% effective forward yield, and the Company expects the transaction to be accretive to FFOA and cash flow per share in the first year of the venture.
Details on the communities included in the seed portfolio, which are diversified across geography, age, price point, and offer various value-add opportunities, are presented in the table below.(1)
|
Community |
Market |
Homes |
Age (Years) |
Monthly Revenue per Occupied Home |
Occupancy |
|
The Hawthorne Apartments |
Seattle |
284 |
20 |
$2,787 |
97.3% |
|
Los Alisos at Mission Viejo |
Orange County |
320 |
9 |
2,791 |
97.1% |
|
Lodge at Ames Pond |
Boston |
364 |
13 |
2,516 |
97.7% |
|
Signal Hill Apartments |
Washington, DC |
360 |
13 |
2,046 |
98.0% |
|
Total / Weighted Avg. |
– |
1,328 |
14 |
$2,513 |
97.6% |
|
(1) Data as of June 2023. |
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The Company serves as the manager of the joint venture and will earn asset management, property management, financing, and construction management fees. For new acquisitions made through the venture, the Company will earn acquisition fees and the potential to earn a promoted return should certain return hurdles be achieved.
“We are pleased to establish a new joint venture with such a high-quality partner,” said Tom Toomey, UDR’s Chairman and CEO. “The venture validates the success of UDR’s operating platform, innovation, and unique value creation mechanisms, which have led to the highest controllable operating margin among our peer group and earnings per share growth that is consistently above the peer average. Additionally, the venture expands UDR’s strategy of diversifying among capital sources that provide the Company the ability to execute accretive investment opportunities across economic and market cycles. We look forward to growing this venture with our Partner over time to the benefit of our stakeholders through increased operating scale, densification, and earnings accretion.”
