Gables Loses $5M on Sale of Four Apartment Assets

The suburban properties making up the deal are Gables Wood Arbor, Gables Wood Crossing, Gables Wood Glen and Gables Wood Knoll. Madison Apartment Group is the multifamily affiliate of BPG Properties Ltd., formerly Berwind Property Group.

"In connection with this transaction, the company expects to record a gain, net of associated costs, of approximately $20 million or 59 cents per diluted share in the first quarter," Gables chairman and CEO Chris Wheeler says in a statement. However, he adds, "this transaction is expected to result in an economic loss of $5.3 million or (a loss of) 16 cents per diluted share."

Wheeler says the economic loss is "equal to the gain before the impact of accumulated depreciation and thus represents the net cash proceeds from the sale, less the cash (Gables) invested in the sold assets."

Still, he says, "We continue to execute our strategic plan by recycling capital from the sale of suburban assets into our targeted EPN (Established Premium Neighborhood) locations, reducing our exposure to variable-rate debt and selling assets with the highest cost of ownership.

Wheeler says he expects "approximately 90% of our apartment revenues will be generated from EPN locations with premium growth potential, as we move through the first quarter of 2005." Gables Residential REIT manages 43,755 apartment homes in 167 communities, including the 76 communities it owns with 19,822 stabilized units.

Gables has an additional 12 communities with 2,984 apartment units under development or leaseup. NAREIT compilations show Gables' stock on the New York Stock Exchange returned a total 2004 return of $10.67 per share and a dividend yield of 6.73%.

Steve Pogarsky, acquisitions officer for Madison Apartment Group, calls the transaction "an excellent addition" to the seven properties his firm operates in the Atlanta region. "One of the many features that attracted us to this portfolio was the opportunity to acquire the properties, subject to long-term tax-exempt variable-rate bonds," Pogarsky says.

"Like many areas in the country, the Atlanta multifamily market has been hurt by vacancy and concessions, and as a result, operating income levels have fallen dramatically since 2000," the Madison executive says. "We believe we are buying off of the current diminished revenue levels in anticipation of the gradual improvement in the Atlanta apartment market."