Twin Acquisitions by Home Properties - Analyst Blog

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Home Properties Inc. ( HME ), a multifamily real estate investment trust (REIT), has recently acquired two apartment communities in Virginia for an aggregate purchase price of $112.2 million. The twin acquisitions are expected to be accretive to earnings with immediate effect.

At the same time, the company announced that it has initiated marketing efforts for 10 held-for-sale properties (worth $300 million) in diverse locations such as Baltimore, Washington, D.C., Philadelphia and Long Island, NY as part of its portfolio restructuring program.

Home Properties acquired the erstwhile 'Hunter's Crossing' presently renamed as 'The Manor East,' in Leesburg, Virginia, for $16.2 million. The acquired property consists of 15 three-story garden-style buildings (164 units) with pitched roofs.

The apartment community has 75 one-bedroom units and 89 two-bedroom units, with the average unit size being 822 square feet. The property offers luxury amenities such as a swimming pool and fitness center.

Besides its lucrative features, the property is strategically located in close proximity to major employment centers and corporate campuses in the region. At the close of the transaction, the property was 98.0% occupied at monthly rents averaging $1,050 per unit. Home Properties further intends to spend approximately $2.8 million during the first three years of its ownership, in addition to normal capital expenditures, to upgrade the property.

Home Properties also purchased 'Woodway at Trinity Center' in Centreville, Virginia, for $96.0 million in cash. The acquired property consists of 18 three-story wood-frame buildings (504 units) with concrete slab and pitched roofs.

The apartment community has 252 one-bedroom units and an identical number of two-bedroom units, with the average unit size being 908 square feet. The property offers luxury amenities such as a swimming pool, business center, and fitness center.

The property is located in close proximity to major employment centers and corporate campuses in the region with easy access to transportation facilities. At the close of the transaction, the property was 97.2% occupied at monthly rents averaging $1,377 per unit. Home Properties intends to spend an additional $3.9 million during the first three years of its ownership along with normal capital expenditures, to upgrade the property.

Home Properties primarily operates along the East Coast of the U.S. The key target markets of the company include New York-Long Island/New Jersey, Boston, Washington D.C./Northern Virginia, Baltimore, Philadelphia, and Chicago. The company typically invests $200 million - $300 million annually to acquire multifamily communities and fuel its growth engine.

Home Properties largely focuses on the relatively stable markets in the suburban region of major metropolitan areas that have significant barriers to new construction, a favorable supply/demand relationship, high single-family home prices, stable job growth, and reduced vulnerability to economic downturns.

We presently have a Neutral recommendation on Home Properties, which currently has a Zacks #3 Rank that translates into a short-term Hold rating. We also have a Neutral recommendation and a Zacks #3 Rank for BRE Properties Inc. ( BRE ), one of the peers of Home Properties.


 
BRE PROPERTIES (BRE): Free Stock Analysis Report
 
HOME PPTYS INC (HME): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: BRE , HME

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