DENVER–UDR, Inc. (the “Company”) (NYSE:UDR), a leading multifamily real estate investment trust, today announced the closing of the previously disclosed west coast development joint venture with an initial investment of $136 million consisting of five under construction communities totaling 1,533 homes. The Company is in negotiation to add a sixth asset to the joint venture. The transaction is immediately accretive to 2015 FFO.
West Coast Development Joint Venture
The Company closed the previously announced joint venture agreement with real estate private equity firm, The Wolff Company, Scottsdale, AZ (the “Partner”). The Company invested $136 million for a 48 percent interest in a portfolio of five communities that are currently under construction. The communities are located in three of the Company’s core, coastal markets: Metro Seattle, Los Angeles and Orange County, CA. The Company’s investment is based on an initial all-in price of $559 million and the transaction is immediately accretive to FFO. The Company’s average stabilized yield on initial price is estimated at 5.4 percent. In addition, the Company will earn a 6.5 percent preferred return on its $136 million investment through each individual community’s date of stabilization, defined as when a community reaches 80 percent occupancy for ninety consecutive days, while the Partner is allocated all economics (income and expense) during the pre-stabilization period. Upon stabilization, economics will be shared based on each partner’s ownership percentage. The Company will serve as property manager and be paid a management fee during the lease-up phase and subsequent operation of each of the communities.
The Company has a fixed price option to acquire the Partner’s remaining interest in each community beginning one year after completion. If the options are exercised for all five communities, the Company’s total price will be $597 million and the Company’s all-in stabilized yield is estimated to be 5.0 percent. In the event the Company does not exercise its options to purchase at least two communities, the Partner will be entitled to a 6.5 percent return on its implied equity in the communities not acquired. The Partner is providing certain guaranties and there will be construction loans on all five communities.
Once completed the five communities will contain 1,533 homes with a weighted average size of 844 square feet and 29,136 square feet of retail.
Additional transaction details can be found on the Investor Relations page of the Company’s website, www.udr.com.
About UDR, Inc.
UDR, Inc., an S&P 400 company, is a leading multifamily real estate investment trust with a demonstrated performance history of delivering superior and dependable returns by successfully managing, buying, selling, developing and redeveloping attractive real estate properties in targeted U.S. markets. As of March 31, 2015, UDR owned or had an ownership position in 48,086 apartment homes including 1,434 homes under development. For 43 years, UDR has delivered long-term value to shareholders, the best standard of service to residents and the highest quality experience for associates. Additional information can be found on the Company’s website at www.udr.com.