New York REIT Purchases Two Apartment Communities

The 344-unit Virginia Village community was purchased for $27 million--including closing costs--or $78,600 a unit. According to Home Properties, consideration for Virginia Village included$9.6 million of assumed debt, $16.2 million of operating partnership units inHome Properties of New York LP (exchangeable for Home Properties stock) and $1.2 million of cash on hand. The mortgage carries an interest rate of 6.91% and matures in January 2008.

Virginia Village, which is 99% occupied with monthly rents averaging $980, is located across the street from Orleans Village, an 851-unit community purchased by Home Properties last November. Built in 1967, Home Properties plans on spending $1.9 million on renovations.

Sandalwood Apartments, with 384 units, was purchased for $17.6 million (or $45,700 per unit) in an all-cash deal. According to Home Properties, Sandalwood is 99% occupied with an average monthly rent of $551. An estimated 20 miles from Baltimore, the community is located one mile from Morningside Heights, a 1,050-unit complex purchased by Home Properties in 1998.

Built in 1973, Home Properties plans to spend some $4.2 million to improve the property over the next three years. The company expects an 8.2% initial unleveraged return on the purchase and capital improvement costs, with a return of 10% by the second year.

Home Properties chairman and CEO Norman Leenhouts says the purchases help expand the REIT's market penetration in the areas. "These communities are well suited to our unique strategy of acquiring and repositioning older properties in markets with substantial barriers to new development. With existing rents well below market levels, these acquisitions have a great deal of untapped potential in very tight markets," he says.