Colonial Stresses Multifamily in Q3 Call

BIRMINGHAM, AL-In an ongoing repositioning of its portfolio, Colonial Properties Trust isn't abandoning the retail and office sectors, but is holding the line on what it owns. Going forward, the focus will be on developing multifamily properties.

The locally based company's target markets for multifamily prospects continue to be Sunbelt states, specifically Florida and Texas, with some investment in South Carolina. In the third quarter, Colonial acquired 1,606 units in Atlanta, Dallas and Phoenix and picked up a percentage interest in a Fort Worth complex. Its only disposition took place in San Antonio.

Colonial has 1,800 apartments under construction in Austin, Gulf Shores, AL, Charlotte, NC and Memphis. "We're continuing to allocate resources to multifamily acquisitions and developments," Weston Andress, Colonial's president and CFO, said during the Q3 earnings call. "Seventy-five percent to 80% of our net income is produced by multifamily assets. We plan to stay in office and retail, but won't plan to add more resources to that."

In its multifamily division, Colonial Properties saw a 4.2% increase in same-property NOI for the quarter, representing the 12th consecutive quarter of year-over-year, same-property NOI growth for the division. Additionally, the portfolio's occupancy is 96.2% for its stabilized properties.

C. Reynolds Thompson III, the company's CEO, said the current strategy is to harvest the value gained in non-multifamily commercial properties. "Our pre-disposition with regard to commercial development is to build the projects, create the value, then harvest that value through a sale or joint venture," he added. That value, he continued, will be applied to acquiring and developing multifamily properties.

On the balance sheet side, Q3 funds from operations were $44.2 million in comparison to $47.3 million for Q3 2005. Year-to-date funds from operations total $139.7 million versus $125.6 million at this point last year.