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Apartment REP Blog
Oct 8

Written by: Apartment REP
10/8/2013 9:04 AM 

Written by Bryce Meyers | COSTAR

Associated Estates Realty Corp. (NYSE, NASDAQ: AEC), a Richmond Heights, OH-based REIT, entered into a definitive purchase agreement to secure a multifamily portfolio consisting of seven Class A apartment communities located throughout the Southeast and Mid-Atlantic.

In total, the portfolio is comprised of 1,606 units, with 462 units currently stabilized, 349 units in lease-up, and 795 units under construction by the current owner, which will transfer to the new owner upon completion.

The sale price of $324 million results in a nominal cap rate of 5.5 percent on year one stabilized net operating income. Six of the properties will be obtained free and clear of debt, while The Apartments at Blakeney in Charlotte, NC will include the assumption of a $28 million loan. The average completed construction year of the portfolio is 2012.

Associated Estates will fund the acquisition with proceeds from property dispositions in the Southeast and Mid-Atlantic over the next 12 months. Proceeds from five select properties with secured debt are expected to bring in somewhere in the neighborhood of $240 million alone. These sales would result in a blended, unlevered IRR in excess of 13%.

Property Overview

  • St. Mary's Square--Raleigh, NC: a 134-unit, four-story, midrise building constructed in 2013 in the Glenwood South submarket of West Raleigh. The property is currently in lease-up, and is scheduled to reach 95% occupancy in November 2013. Anticipated closing is Q4 2013.
  • Lofts at Weston -- Cary, NC: a 215-unit, four-story, midrise building constructed in 2013 in the Weston submarket. The property is currently in lease-up, and is scheduled to reach 95% occupancy in December 2013. Anticipated closing is Q4 2013.
  • The Apartments at Blakeney--Charlotte, NC: a 295-unit, garden-style building constructed in 2008 in the Highway 51 submarket, three miles south of the 535-acre Ballantyne Office Park. Anticipated closing is Q4 2013.
  • Alpha Mill Phases I and II--Charlotte, NC: Phase I is a 167-unit, midrise, adaptive re-use project constructed in 2007 in East Charlotte. The property is the site of a historic former cotton mill.
    Phase II will be a 100-unit, four-story, midrise building upon completion, set for Q1 2014.
    Anticipated closing for Alpha Mill Phases I and II is Q1 2014.
  • Perimeter Town Center -- Atlanta, GA: will be a 345-unit, five-story, midrise building upon completion, set for Q4 2014.
    The acquisition will be the third Atlanta-owned property for Associated Estates, totaling 699 units in the market.
  • Varela -- Tampa, FL: will be a 350-unit, four-story, midrise building upon completion, set for Q4 2014.

Associated Estates will take ownership of Perimeter Town Center and Varela once construction on the properties has been completed. They will handle all leasing and management services during the lease-up phase.

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