BRE Properties Inc. (BRE), an apartment real estate investment trust (REIT), has recently acquired an apartment community titled ‘The Landing at Jack London Square’ in Oakland, California, for $64.9 million. The acquisition is part of the long-term strategy of the company to own high-quality apartment homes in the Bay Area, and provides it a competitive advantage by owning properties in one of the strongest rental markets in California.
The acquired property comprises of four buildings, each consisting of three levels of apartment homes over a single-level parking structure. The class-A apartment community has a total of 282 apartment homes, having an average unit size of 914 square feet. The buildings are designed in such a manner that over 30% of each of the apartment homes enjoys panoramic views of the waterfront.
The apartment community is strategically located in the heart of Jack London Square – a premier business, dining, entertainment and shopping destination in Oakland. The property also facilitates easy access to several transportation network facilities such as the railways, Bay Area Rapid Transit (BART), Alameda/Oakland Ferry, and the Oakland airport. The region is home to over 11.5 million square feet of office space, and is one of the busiest in the country with The Port of Oakland handling nearly $33 billion worth of cargo each year.
Besides its location advantage, the apartment community offers an attractive investment proposition for BRE Properties with a low density of 31 apartment homes per acre. The property was also acquired at a discount to replacement cost on an unencumbered basis, with proceeds from its recently completed equity offering. The apartment community is presently 95% occupied and is expected to generate a first year net operating income to acquisition cost yield of approximately 5.0%.
BRE Properties develops, acquires, and manages multifamily apartment communities primarily in the Western U.S., where it currently operates in three states: California, Washington and Arizona. Since its inception in 1970, BRE Properties has provided long-term value to shareholders by focusing on developing and acquiring apartment homes with customer-defined amenities, and providing professional management services delivered by well-trained associates.
The properties of the company are usually located near business, transportation, employment and recreation centers of a city, which are essential for customers who value the convenience, service and flexibility of rental living. As of March 31, 2011, its multifamily portfolio had real estate assets with a net book value of approximately $3.1 billion.
We maintain our ‘Neutral’ rating on BRE Properties, which currently has a Zacks #3 Rank that translates into a short-term ‘Hold’ rating, indicating that the stock is expected to perform in line with the overall U.S. equity market for the next 1–3 months. We also have a ‘Neutral’ recommendation and a Zacks #3 Rank for Equity Residential (EQR), a competitor of BRE Properties.
BRE PROPERTIES (BRE): Free Stock Analysis Report
EQUITY RESIDENT (EQR): Free Stock Analysis Report
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