AvalonBay Communities Inc. ( AVB ), an Arlington,
Va. - based real estate investment trust (REIT) recently disclosed
the divestiture of 2 communities - Avalon Decoverly and Crystal
House. This comes as part of the company's portfolio restructuring
activity in the Washington D.C. area and the deals helped fetch a
total of $332 million.AVALONBAY CMMTY (AVB): Free Stock Analysis
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Specifically, AvalonBay sold off Avalon Decoverly - a 564
apartment home community situated in Rockville, Md. for $135
million. The other property - Crystal House - an 828 apartment home
community property in Arlington, Va. was disposed for $197 million.
Crystal House was acquired by Mack-Cali Realty
Corp. ( CLI
), an Edison-based REIT through a joint venture (JV) with a fund
advised by UBS Global Asset Management of UBS AG (
AvalonBay disposed the 2 communities at a weighted average initial
year market capitalization rate of 5.2%. The amount gathered would
be used for meeting general corporate needs.
AvalonBay purchased Crystal House as part of its Archstone
acquisition deal. As a matter of fact, in Nov 2012, AvalonBay
alongwith Equity Residential ( EQR ), entered into an
agreement with Lehman Brothers Holdings Inc. to acquire the entire
ownership stake of Archstone Enterprise LP.
The deal envisaged AvalonBay acquiring 40% of Archstone's assets
and liabilities, while the rest would be taken by Equity
Residential. The transaction closed on Feb 27, 2013 and
Archstone Enterprise LP is now known as Jupiter Enterprise LP.
We believe that the asset dispositions are a strategic fit for
AvalonBay. The move would help enhance its portfolio as well as
boost its balance sheet with adequate liquidity. Also, management
expects to continue its expansion spree with estimated acquisitions
worth $300 million of in-service communities in the current year
apart from the purchase of the Archstone portfolio. We believe that
this portfolio repositioning activity will improve the internal
growth metrics and enable the company to emerge stronger once the
real estate markets fully recover.
However, short-term revenue headwinds arising from acquisitions
and a huge development pipeline, which will heighten operational
risks, remain the matters of concern.
AvalonBay currently has a Zacks Rank # 3 (Hold).