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WashREIT Sells 3 Power Centers, Focuses on Multifamily Assets

Zacks Equity Research

WashREIT WRE has been executing its strategy to reduce exposure of high-risk commercial assets and recycle proceeds in value-focused multi-family properties. In line with this, it completed the sale of three power centers — the Centre at Hagerstown, Frederick Crossing and Frederick County Square — for aggregate gross proceeds of around $77 million, in a recent development.

The sale, along with the previously-announced disposition of five shopping center retail assets, spanning 800,000 square feet of space, for $485 million, was closed at a blended capitalization rate in the low 6% range.

The transaction also marks WashREIT’s $1.1-billion of deals executed, year to date.

In fact, the company also completed the sale of Quantico Corporate Center, for roughly $33 million this year. These dispositions have enabled WashREIT to focus on targeted multi-family properties. Notable acquisitions include 2,113-unit Assembly multi-family portfolio, spanning across seven assets, for around $461 million, and purchase of the 227-unit Cascade at Landmark for approximately $70 million. By end of this year, the company anticipates sale of another $125-$175 million of commercial assets.

These efforts will likely transform and de-risk the company’s portfolio. Such strategic capital allocation will likely realign the company’s portfolio. Furthermore, management believes such activities will stabilize and strengthen future cash flows, thus boosting the company’s ability to create long-term value for shareholders.

However, large-scale dispositions might result in loss of net operating income, in turn, impeding bottom-line growth.

Amid these, this Zacks #3 (Hold) Ranked stock has declined 1.8%, underperforming the industry’s rally of 6.8% over the past three  months.

Nonetheless, given the underlying strength in the U.S apartment market, WashREIT’s focus on residential properties is a strategic fit and supports its long-term growth. In fact, the current year’s prime leasing period was encouraging for the U.S. apartment market, with decent rent growth and increasing occupancy level. Per the latest report from real estate technology and analytics firm RealPage, with an impressive leasing activity in 2019’s peak season, occupancy rate in July reached 96.2%. The figure is not only up 0.4 points year on year, but also marks the highest rate since 2000.

With occupancy pushing up, rent growth also seems to be steady at 3.1%. Annual rent growth in July 2019 was approximately 40 basis points (bps) higher year over year and apartment rents averaged $1,414 across the United States. This comes after a solid performance in the April-June quarter.

Stocks to Consider

OUTFRONT Media Inc. OUT currently sports a Zacks Rank of 1 (Strong Buy). The Zacks Consensus Estimate for 2019 funds from operations (FFO) per share has been revised around 2% upward to $2.33 over the past month. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alexandria Real Estate Equities, Inc. ARE holds a Zacks Rank of 2 (Buy), at present. The Zacks Consensus Estimate for the current-year FFO per share remained unchanged at $6.98 in the past month.

Mid-America Apartment Communities, Inc.  MAA is another Zacks #2 Ranked company, presently. The Zacks Consensus Estimate for the ongoing year’s FFO per share has been revised marginally upward to $6.28 in a week’s time.

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.

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