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BRE Buys Jefferson at Hollywood

Zacks Equity Research

The apartment real estate investment trust (:REIT), BRE Properties, Inc. (BRE) disclosed the buyout of a Calif.-based Class A community – Jefferson at Hollywood – for $120.5 million. The move reflects the company’s strategy of enhancing its portfolio mix, through premium assets acquisitions.

BRE Properties acquired the Jefferson at Hollywood on an unencumbered basis and at a discount to the replacement cost. The acquired property was funded through proceeds from BRE Properties’ revolving credit facility.

The strategic location of Jefferson at Hollywood makes it an accretive buyout for BRE Properties. Jefferson at Hollywood, constructed in 2010, is a 270 apartment homes community positioned in the popular Hollywood sub-market of Los Angeles. The property, situated in the heart of entertainment district, is conveniently connected to neighborhood restaurants and other attractive destinations.

Moreover, it is in proximity to Hollywood Boulevard’s iconic landmarks such as Madame Tussauds Hollywood, Dolby Theatre and Ripley's Believe It Or Not! Odditorium. Notably, BRE Properties expect the Jefferson at Hollywood to generate net operating income-to-purchase price yield of 4.0% in the first year.

The Hollywood sub-market has been experiencing a substantial rise in demand generated by entertainment and media industries for office and studio space, due to revitalization through around $4 billion of public and private investments in recent years. This, in turn, has driven demand for apartment communities in the area.

With this buyout, BRE Properties now owns 75 multifamily communities (21,396 homes) and a joint venture interest in an additional apartment community (totaling 252 homes). Moreover, the company plans to offload several slower growth, non-core assets through reverse like-kind exchange deals. The exchange is slated to be complete by the first quarter of 2014.

BRE Properties currently carries a Zacks Rank #3 (Hold). Other well performing REITs include Education Realty Trust, Inc. (EDR), Campus Crest Communities, Inc. (CCG) and Cousins Properties Incorporated (CUZ). All the stocks carry the same rank as BRE Properties.

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