DEAL OF THE DAY: Home Properties Prepares for More Acquisitions with 6.3% Cap Rate Transactions

 Westminster, Md.– Home Properties Inc. says it has purchased the 208-unit Middlebrooke Apartments and the 110-unit Westminster Apartments from the original developer and owner of the two properties.

“There finally are more acquisition opportunities in our key markets,” says Edward J. Pettinella, president and CEO of Home Properties. “We see great potential in these two properties, which we project will have a low double-digit internal rate of return. We hope to accelerate the pace of property purchases during the balance of the year.”

Both apartment communities are located in Westminster, Md. Westminster is now called Westbrooke Apartments. Both Middlebrooke and Westbrooke are within walking distance of Downtown Westminster, one mile from TownMall of Westminster and convenient to area employers. They are within commuting distance of Owings Mills, Md. (15 miles), Baltimore (35 miles) and Columbia (40 miles).

Middlebrooke was purchased for $17.5 million in cash, including closing costs, which equates to approximately $84,300 per apartment unit. Built between 1974 and 1977, the property is currently 88.8 percent occupied at monthly rents averaging $872.

During the first three years of ownership, the Company expects to spend a total of approximately $1.8 million, in addition to normal capital expenditures, to correct deferred maintenance; upgrade kitchens and baths; replace siding, window and entry doors and some HVAC; and improve signage and landscaping to upgrade the property’s curb appeal.  

Management anticipates a 6.3 percent first-year capitalization rate on this acquisition, increasing to 7.1 percent in the third year upon stabilization and after significant initial improvements and upgrades have occurred. The return is calculated after allocating 3.0 percent of rental revenues for management and overhead expenses and before normalized capital expenditures of approximately $800 per unit annually.

The Westbrooke was purchased for $6.4 million in cash, including closing costs, or approximately $58,200 per unit. Built between 1961 and 1970, the property is 86.5 percent occupied at monthly rents averaging $791.

During the first three years of ownership, Home Properties plans to spend about $1.2 million, in addition to normal capital expenditures, to correct deferred maintenance; upgrade kitchens and baths; replace siding, window and entry doors and some HVAC; and improve signage and landscaping to upgrade the property’s curb appeal.

Management anticipates a 6.3 percent first year capitalization rate, increasing to 7.4 percent in the third year upon stabilization and after completion of initial improvements and unit upgrades. The return is calculated after allocating 3.0 percent of rental revenues for management and overhead expenses and before normalized capital expenditures of approximately $800 per unit annually.