Apartment REITs continue to cash in on their highly-priced properties as they prune their portfolios.
"Since 2011, we have completed the sale of $2.4 billion of assets and expect total dispositions to approach nearly $3 billion by the end of 2016,” says Richard J. Campo, chairman and CEO of Camden Property Trust, a multifamily REIT that owns and operates approximately 158 communities throughout the country.
Top REITs like Camden continue to sell large portfolios of properties and trophy assets in primary markets. The largest three multifamily REITs are buying assets selectively, if they buy at all, mostly in strong secondary markets in prime metropolitan areas, and are selling significantly more than they buy.
Equity Residential: net seller
Take Equity Residential, which was the largest apartment REIT in U.S. with 109,540 apartments, according to the Top 50 Owners list released in April by the National Multifamily Housing Council (NMHC).
The REIT is likely to have significantly fewer apartments on next year’s list.
Equity Residential sold 23,262 apartments to affiliates of Starwood Capital Group for $5.365 billion in the first quarter. The price is much higher than Equity paid for the properties—the sale generated an economic gain of approximately $2.0 billion and an unlevered internal rate of return of 11.3 percent. Equity Residential also cashed in by selling two properties in East Palo Alto, Calif., and New York City, for hundreds of millions of dollars more than it spent to buy them in 2010 and 2011. The REIT used the proceeds to retire $2 billion in debt and improve the company’s “already strong” credit metrics. Equity Residential also bought a handful of properties in places like Seattle, Los Angeles and Brooklyn, N.Y. recently, totaling $204.1 million.
AvalonBay sells from funds
The second largest apartment REIT in the county is also selling properties, though AvalonBay Communities also bought several communities and has invested in new development. AvalonBay sold a 340-apartment community in Trumbell, Conn. for $70 million in the first quarter. In addition, AvalonBay Value Added Fund II, which is partly-owned by the REIT, sold 676 apartments for $158 million. Another fund partially owned by the REIT, Multifamily Partners AC, sold 461 apartments for $229 million. In total, that’s nearly a half-billion dollars in sales.
AvalonBay is building and buying selectively in secondary area near core markets. In May, the REIT announced plans to pay $120.3 million for ownership of a share of Market Common Clarendon, a $406-million, mixed-use property in Arlington, Va., including 300 apartments and 300,000 sq. ft. of retail space. AvalonBay also bought 217 apartments in Hoboken, N.J., and another 323 units in Alexandria, Va., in the first quarter. The REIT opened three new developments: in Falls Church, Va., Glendora, Calif. and Elmsford, N.Y.
Camden sells and builds
Camden Property Trust continues to work through its five-year plan to sell $3 billion in apartment properties by 2016.
In the first quarter, the REIT sold a portfolio of 15 properties in Las Vegas totaling 4,918 apartments, a retail center and approximately 19.6 acres of undeveloped land for $630 million. Camden is currently marketing several apartment communities, which it plans to sell for a total of $400 to $600 million.
Despite all of this sales activity, Camden is still the third largest REIT on the NMHC Top 50 list, with ownership of 59,792 apartments, up from last year’s number and down only a few thousand from 2011.
That’s because Camden is quickly building new properties as it sells older ones. Camden had three new finished properties leasing up in the first quarter, along with another seven new communities under construction.