Although AvalonBay Communities recently shifted to become a net seller of apartments, the Arlington, Virginia-based REIT is still in the market for properties, especially if it helps the company bulk up its portfolio in the Sun Belt.
In the third quarter, AVB bought the 260-unit Avalon Frisco at Main in Frisco, Texas, for $83.1 million, according to its Q3 earnings release. It followed that up in October by purchasing 203-unit Avalon Mooresville in Mooresville, North Carolina, for $52.1 million and 568-unit Avalon West Plano in Carrollton, Texas, for $142 million.
“In no cases were the sellers distressed,” said Matt Birenbaum, AVB’s chief investment officer, on the REIT’s Q3 earnings call. “In one of those cases, we did assume some debt, which probably gave a little boost to the price.”
With Avalon Mooresville, AVB assumed a $63 million fixed-rate mortgage loan with an interest rate of 4.18%. It matures in May 2029.
The three properties carry cap rates in the mid-4% range, have an average age of seven years and offer average rents of $1,700. AVB plans to do some light value-add upgrades of washers, dryers and some hard surface flooring at the apartment communities, but the bigger boost could come from added scale in the Sun Belt.
“It's part of getting to operating scale in those regions,” Birenbaum said. “So we think that, while the cap rate is in the mid-4%'s, the yield is more like a 5%.”
The acquisitions fit in with AVB’s strategy of buying properties with a much more affordable price point than its current portfolio, which Birenbaum said gives the REIT a much better growth profile. So far, in 2023, AVB has sold $445 million in properties at a blended average cap rate in the high 4% range.
“Those were sold and priced throughout the year — better pricing earlier in the year, softer pricing later in the year,” Birenbaum said.
Click here to sign up to receive multifamily and apartment news like this article in your inbox every weekday.
