UDR JVs with Kuwait Finance House on $154M D.C. Apartment Buy

December 23, 2011
By Barbra Murray, Contributing Editor

UDR Inc. and joint venture partner Kuwait Finance House continue to augment their Washington, D.C.-area apartment portfolio with the acquisition of 1301 Thomas Circle, a 292-residence property in the city’s Logan Circle neighborhood. The partners paid $154 million for the luxury multi-family asset.

In addition to respective equity contributions of $19.2 million and $44.8 million, UDR and KHF relied on a $90 million five-year interest-only Fannie Mae loan to finance the purchase of the 10-story building. The five-year-old apartment community is presently 94 percent occupied, which dovetails with the current state of the market in Washington, D.C., where demand for rentals continues to soar. The metro area will kick off 2012 with a vacancy rate of 4.5 percent, a 60 basis point drop from 2010, according to a report by Marcus & Millichap Real Estate Investment Services.

Timing is everything, and the greater D.C. area is the right place at the right time. “Recent job growth continues to spur the creation of new rental households, resulting in net absorption of more than 8,600 units in the past year,” the report noted. “Much of the surge can be attributed to a release of pent-up demand in the second half of 2010, but additional improvements will be driven by job creation.”

Buyers from all over are keen on the market, and the numbers tell the story. “Sales velocity remains strong, surging 39 percent in the past 12 months as the metro’s relatively strong economy continues to encourage investors,” the report said.

The property at 1301 Thomas marks UDR and KFH’s second Washington, D.C.-area purchase this year. In September, the partners acquired Twenty400, a new 217-unit luxury apartment property in Arlington, Va., for $84 million. They aren’t finished just yet. UDR and KFH established the 30/70 joint venture in 2009 with the purpose of investing as much as $450 million in multifamily assets located in high-barrier markets. With the completion of the 1301 Thomas transaction, the team will have $169 million of remaining funds to play with. As per terms of the joint venture agreement, UDR and KFH will hold the assets for up to seven years.