Apartment owner and developer UDR Inc. is finding plenty of local assets to unload to pay for its $350 million project under way at the Pacific City mixed-use development in Huntington Beach.
The Highlands Ranch, Colo.-based real estate investment trust closed on two sales in Orange County last quarter totaling $183 million, and disclosed this month that it has a $90.5 million local sale in the works.
The impending sale involves UDR’s Pacific Shores complex, a 264-home community about a mile west of the San Diego (405) Freeway on Warner Avenue in Huntington Beach. UDR has owned the complex since it paid nearly $30 million for it in 2003.
The buyer paying the $90.5 million, or $342,800 per unit, hasn’t been disclosed. The deal should close by the end of March, the company said in its recent quarterly earnings report.
UDR’s biggest sale last quarter involved Katella Grand I, a recently built, 399-unit complex in the Platinum Triangle area of Anaheim.
Chapman University bought it for $148 million, or nearly $371,000 per unit, in the biggest single-property apartment sale of the past year in OC, according to CoStar Group Inc. records. It’s about two miles from the main campus at Chapman, which plans to turn it into student housing.
Also closed in December was the sale of Vista Del Rey, a 116-unit complex in Tustin that property records show was acquired by a unit of Palo Alto-based Pacific Urban Residential. Now known as Terra at Tustin, it sold for nearly $35 million, or close to $302,000 per unit. UDR had owned it since 2004, according to regulatory filings.
The sell-offs come as UDR continues on work at its Residences at Pacific City, a 516-unit complex just off Coast Highway near Huntington Beach’s pier. It’s the last phase of development at the 31-acre project, which also includes a new shopping center and the Paséa Hotel & Spa.
UDR budgeted $663,000 per unit to build the apartments, and as of a year ago estimated it would be complete this quarter. Part of the complex is now open, but work still remains.
The roughly three-month completion delay has increased construction costs by about 2%, officials said late last year.
“What we have delivered and leased is achieving strong rental rates, but past construction delays continue to negatively impact our velocity, given the project’s high-end clientele,” Chief Operating Officer Jerry Davis said this month during the company’s latest quarterly earnings call.
One-bedroom rents there start at a little more than $3,000 per month, and three-bedroom units rent for more than $5,000 a month.
Pacific City “will be a game changing asset in Orange County once complete, but will be a drag on our 2018 results versus previous expectations,” Davis said.
Another local drag, he said was the disappointing rate of employment growth in OC last year, which is affecting the overall rental market.
“We only have 13,000 (new) jobs in 2017, down in OC compared to about 25,000 in 2016.” The good news is that job growth this year should be back up to about 28,000, he said.
UDR’s market value is $8.8 billion. It owned 12 OC properties totaling about 4,800 units as of a year ago, before the recent sell-offs.
BKM Buys
Newport Beach-based BKM Capital Partners, an investor in multitenant industrial properties, has made what’s reported to be its largest-ever acquisition, a $92 million buy of an industrial park near McCarran International Airport in Las Vegas.
The property includes 13 buildings totaling about 671,000 square feet; it traded hands for $132.75 per square foot, according to the Las Vegas Review-Journal, which was first to report the transaction.
The seller also has OC ties. It was a venture between Irvine-based CIP Real Estate and Los Angeles-based Oaktree Capital Management.
The Las Vegas deal follows by several months BKM’s $72 million acquisition of a 12-building business park in Freemont. It made the deal in a venture with an affiliate of L.A.-based Canyon Partners Real Estate LLC.
