DENVER, CO - UDR, a leading multifamily real estate investment trust, announced that it has entered into a definitive agreement with Lone Star, Inc., Lone Star L.P., Home Properties, Inc. and Home Operating Partnership to acquire up to six communities valued at $908 million in exchange for a combination of common OP units of a newly formed operating partnership of the Company, cash and the assumption of debt. The estimated year-one cap rate on the transaction is approximately 5.2 percent. The identified apartment communities are located in the Company’s core Washington, DC market.
“We are pleased with the opportunity to acquire a select group of apartment communities, in the recovering Washington, DC market,” said Tom Toomey, president and chief executive officer of UDR. “This accretive transaction is consistent with our Strategic Plan, as we are able to acquire the communities at favorable market pricing, fund the transaction with equity capital issued in line with NAV and improve our balance sheet metrics.”
The Company had the opportunity to select specific communities from Home’s entire portfolio that matched its investment criteria of:
Increases our exposure to the recovering Washington, DC market with assets that are in direct proximity to transportation hubs, restaurants and retail, and
Provides a mix of recently developed and redeveloped assets in addition to assets with redevelopment potential.
The average occupancy for the identified communities is 90 percent, with an average monthly revenue per occupied home of $1,873.
The transaction is expected to be funded through the issuance of up to $753 million of UDR OP Units issued at $35 per unit, the assumption of $90 million of debt and $65 million in cash, inclusive of transfer taxes and loan assumption fees. The agreement provides that each Home unitholder will have the option to elect to receive cash from Lone Star or UDR OP Units. The number of UDR OP Units and the amount of cash will be determined at the closing of the consent solicitation of the Home OP unitholders which we anticipate to be completed by mid-August, 2015. Based upon the level of Home OP unitholders electing to receive UDR OP Units, UDR will have the option to either acquire less than six properties or to acquire some of the properties through a Section 1031 exchange pursuant to the Internal Revenue Code. The closing of the transaction is subject to the closing of the merger between Lone Star and Home.