(UDR) UDR Adds Asset at Record Price

UDR Inc. (UDR), a leading multifamily real estate investment trust (REIT), has recently acquired a luxury condo-turned-rental project in Washington DC, for $104 million or $670 per square foot – the highest price per square foot ever paid for a Class A rental property in the region. The 185-unit apartment complex called ‘View 14’ was purchased from Level 2 Development, LLC – a local real estate firm specializing in the construction of luxury residential and mixed-use projects.

‘View 14’ is the second such property that UDR has acquired from the DC-based real estate firm. Earlier in September 2007, the company had purchased Nehemiah Shopping Center for $30.9 million. With the recent purchase, UDR currently has 16 properties in and around Washington DC.

Spanning 155,000 square feet, the acquired property is strategically located in a premium market in close proximity to a Metro rail transit station. The fully leased apartment units demand some of the highest aggregate rents in the region at $2,868, with its affluent tenants flaunting an average household income of $130,000 per year. The property also includes a 31,000-square-foot retail space, which is currently vacant.

UDR is among the best-positioned apartment REITs in the U.S., with the majority of its portfolio located in California, Florida and on the Atlantic Coast. These are areas where housing costs have soared in the past few years, and despite the drop in home values, the rent-versus-own spread still remains high. The housing meltdown will continue to help apartment REITs like UDR and we expect this sector to remain comparatively stable in the coming quarters as well.

Furthermore, UDR has a geographic diversification that increases investment opportunity and decreases the risk associated with cyclical local real estate markets and economies, thereby increasing the stability and predictability of the earnings. UDR has also continuously upgraded the overall quality of its portfolio by selling assets in smaller market, older properties and replacing them with newer assets in better long-term markets. This provides an upside potential for the company.

We maintain our ‘Neutral’ recommendation on UDR for the long term. The company presently has a Zacks #2 Rank, which translates into a short-term ‘Buy’ rating. We also have a ‘Neutral’ recommendation and a Zacks #3 Rank (short-term ‘Hold’) for Equity Residential (EQR), one of the competitors of UDR.

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UDR INC (UDR): Free Stock Analysis Report

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