By Dees Stribling, Contributing Editor
Ellicott City, Md.—Home Properties Inc. has bought Howard Crossing in Ellicott City, a highly affluent suburb in Baltimore, for $186 million. The company paid cash for the 1,350-unit apartment property, or about $138,000 per unit, and it estimates that the first-year cap rate will be 5.9 percent. Constructed in phases from 1968 through 1975, Howard Crossing consists of 42 three-story brick garden-style apartment buildings with 680 one-bedroom units and 670 two-bedroom units. The average unit size is 854 square feet. Over the next three years, Home Properties says it expects to spend about $12 million, in addition to normal capital expenditures, to upgrade individual units and exteriors to improve marketing and retention. The company plans to correct deferred maintenance; improve landscaping, HVAC and electric service; replace roofs, asphalt and concrete; and upgrade kitchens.
Part of the acquisition was funded using the proceeds from the issuance of $50 million of unsecured Senior Guaranteed Notes whose interest rate is 4.16 percent, according to the buyer. The balance of the purchase price was funded through the line of credit and a $100 million unsecured bank demand loan, with the same terms and rate as the line of credit.
Howard Crossing is a little less than a mile from another property that the company bought in 2010, the 858-unit Charleston Manor. “Charleston Manor has exceeded our underwriting expectations,” notes Home Properties president and CEO Edward J. Pettinella. “Based on our familiarity with this submarket, we expect Howard Crossing will achieve similar success.”