Apollo Global Management is poised to acquire a two-thirds stake in a portfolio of more than 7,000 apartment units from multifamily REIT UDR.
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Funds managed by the investment giant are expected to invest $1.34B of equity capital in a newly formed joint venture with UDR, which will retain a one-third interest. The joint venture, valued at about $2B, will own a portfolio of 19 UDR apartment communities totaling 7,059 units, according to a release.
"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," UDR CEO Tom Toomey said in a statement.
The portfolio will have an average revenue per apartment unit of $2,058 and an age of 39 years, according to the release. The implied capitalization rate is about 6% for the portfolio.
The communities have been stabilized for two consecutive calendar years and were not in the process of substantial redevelopments, according to investor documents.
The transaction is expected to close on Oct. 29, subject to closing conditions.
"We expect the transaction to be accretive to earnings and intend to deploy the proceeds into higher-growth assets and other general corporate purposes," UDR Chief Financial Officer Dave Bragg said in a statement. "Proceeds will also be utilized for debt reduction, strengthening the balance sheet at an opportune moment."
Apollo made a similar move in August, giving $1B to Starwood Real Estate Income Trust to acquire a 41.5% stake in the equity interest of an affordable housing portfolio made up of 120 properties.
As of the end of September, UDR owned or had an ownership position in about 61,000 apartment units. It sold two apartment communities in Seattle and Nashville in the third quarter, with a combined 412 units.
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