WASHINGTON, DC—Denver-based UDR's play for six multifamily communities in the DC area may or may not work out. There are, after all, many moving parts to the transaction before it can be called done.

Putting that aside though, the fact that it is eager to expand here is telling, according to analysts that have picked part the deal since it was announced and widely reported early Monday morning.

Baird Equity Research developed that theme in a research note published shortly after the deal was announced on Monday titled " Making Bet on DC Recovery with Home Properties Portfolio Acquisition."

As UDR said in its announcement on Monday morning, the year-one NOI cap rate of 5.2% will likely generate immediate earnings accretion.

Also as Baird noted, the assets UDR is seeking to acquire, while "not CBD nature" do command revenue per occupied home ($1,873) greater than UDR's portfolio average.

Washington DC, Baird also wrote, "is beginning to show early indications of a bottom."

Would that Baird had ended the sentence there, but it went on to note that "significant new supply of apartments and a relatively affordable housing market could make matters worse should government-related employment experience additional weakness.

This theme of hitting bottom was also highlighted by Marc Magazine, executive managing director of Savills Studley's Hotel Group, talking about another transaction that recently occurred here on which Savills advised.

Earlier this month, Hersha Hospitality Trust entered into a purchase agreement for the 155-room St. Gregory Hotel & Suites for $57 million.

The nine-story hotel is located at 21st and M Street NW and has an average daily rate of $169.36 and occupancy of 89.5% in the trailing twelve months ending April 30, 2015.

The deal demonstrates Hersha's conviction in the city as it recovers from a period of muted growth, Jay H. Shah, Hersha's CEO, said in a prepared statement.

Ditto, according to Magazine.

“This sale is a major bellwether of what the D.C. market will look like over the next 18 months," he said in a prepared statement.

"With sequestration and the threat of government shutdown behind us combined with the imminent change of leadership in the White House (regardless of party), the investment community has noticed and is once again focused on acquisitions."

Instant Insights /

Why Do the Talking Points About the UDR and Hersha Hospitality Transactions Sound Similar?

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