$46-Mil Apartment Buy Serves as REIT's Fountain of Youth

"For us, it is a great way to access new properties and we will probably do something like this going forward," Ella Neyland, United Dominion's executive vice president and treasurer, tells GlobeSt.com. She says the sweet part of the deal is that it only cost $77,250 per unit. "It's hard to buy new property at that quality for that price," she asserts. Prior to the buy, the REIT's complexes averaged 12 years old.

Neyland says it was simply time to exercise its "buy-sell" provision in the joint venture agreement with Credit Suisse First Boston. That timing was based on property stabilization and "the fact that we were able to buy at wholesale prices," she explains.

Credit Suisse's share of the JV was 75%. The deal carried a cap rate of 8.7% based upon projected NOI for the next year, less recurring capital expenditures of $170 per apartment.

The acquisition consisted of the 308-unit Mandolin at 2525 Highway 360 in the Ft. Worth suburb of Euless; 250-unit Meridian at 3620 Huffines Blvd. in the Dallas suburb of Carrollton; and 236-unit Sierra Canyon at 13601 S. 44th St. in Phoenix. They are ranked in the A minus and B plus categories. The trio is 97% occupied and rent for an average of $900 per month.

The joint venture has two other communities under development that most likely will end up in the United Dominion portfolio once they are stabilized. The locations were not available by press time, but most likely are in the Sun Belt where United Dominion has been particularly active on the development front. United Dominion owns all or part of nearly 76,000 apartments and has more than 800 units under construction.