Dive Brief:
- UDR and Apollo are forming a long-term joint venture that will own a portfolio of 19 apartment properties totaling 7,059 apartment homes and valued at approximately $2 billion, according to an Oct. 21 press release.
- Apollo-managed funds and affiliates will invest $1.34 billion of capital into a newly established joint venture, acquiring an approximate two-thirds interest in the properties. UDR, which will retain a one-third interest, will continue to operate and manage the portfolio and earn an asset management fee, per the release.
- UDR Chairman, President and CEO Tom Toomey said that access to equity is a strategic priority for UDR. “With this transaction, we believe we will be positioned to take advantage of compelling opportunities in the marketplace, while improving the quality of our wholly-owned portfolio and strengthening our balance sheet, all in an accretive manner,” he said in the release.
Dive Insight:
With the transaction, UDR will get “access to a new, low-cost permanent source of equity capital,” CFO Dave Bragg said in the release. The REIT expects to deploy the proceeds into high-growth assets and other general corporate purposes.
“Proceeds will also be utilized for debt reduction, strengthening the balance sheet at an opportune moment,” Bragg said.
The transaction implies a roughly 6% cap rate for the portfolio, with average revenue per unit of $2,058 and an age of 39 years, per the release. At the fifth anniversary of closing, UDR will have the option to repurchase Apollo’s interest in the JV at an expected 7% to 7.5% fixed return for a finite period.
“Our shareholders will benefit not only from the flexibility to move assets in and out of our newly established joint venture, but also from the ability to realize outsized value creation over time,” Toomey said in the release.
The UDR-Apollo JV is expected to close on Oct. 29, subject to execution of the documentation and customary closing conditions, per the release.
Citigroup Global Markets and Wells Fargo Securities were the structuring agents and financial advisors to UDR. Scotiabank was the financial advisor to Apollo, per the release.
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