UDR Partners With LaSalle for a $510M Joint Venture Deal
UDR, Inc. UDR recently announced the formation of a $510 million joint venture with LaSalle Investment Management, an independent subsidiary of Jones Lang LaSalle JLL. This partnership aims to acquire high-quality communities with operational upside, leveraging UDR's top-tier operating platform.
Under the terms of the agreement, UDR will initially contribute four communities totaling 1,328 apartment homes into the joint venture. While retaining 51% ownership in these communities, UDR will receive around $250 million in cash proceeds. The venture is designed to be debt-free initially, and the company anticipates that it will be accretive to funds from operations (FFO) as adjusted and cash flow per share within the first year.
The communities selected for the seed portfolio, diversified across geography, age and price point, present multiple value-add opportunities. UDR will serve as the venture's manager, earning various management fees, including asset, property, financing and construction management fees. For any new acquisitions, UDR will earn acquisition fees and there is also a potential to earn a promoted return if certain return hurdles are met.
This joint venture is a testament to the effectiveness of UDR’s operating platform, innovation and unique value-creation mechanisms, and it further amplifies its strategy of diversifying capital sources that enable the execution of accretive investment opportunities across economic and market cycles. It sets the stage for UDR to increase its operating scale, densify and achieve earnings accretion.
The joint venture is expected to further fuel the company's growth trajectory. The cash proceeds from the venture can be used to strengthen UDR's balance sheet, fund capital expenditures, or repurchase shares, thereby enhancing shareholder value. It also positions UDR to capture opportunities in high-quality communities and enhance FFO per share growth. The joint venture could potentially contribute to UDR's capacity to sustain or even increase its dividend, enhancing its appeal to income-focused investors.
Currently, UDR carries a Zacks Rank of 3 (Hold). Shares of UDR have rallied 10.7%, outperforming the industry’s increase of 5.2% over the past six months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Stocks to Consider
Some better-ranked stocks from the REIT sector are Invitation Homes Inc. INVH and BRT Apartments Corp. BRT. While Invitation Homes currently carries a Zacks Rank #2 (Buy), BRT Apartments sports a Zacks Rank #1.
The Zacks Consensus Estimate for Invitation Homes’ current-year FFO per share has been revised 1.1% north over the past month to $1.78.
The Zacks Consensus Estimate for BRT Apartments’ 2023 FFO per share has been revised 33.6% north in the past two months to $1.55.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.
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Jones Lang LaSalle Incorporated (JLL) : Free Stock Analysis Report
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