BRE Properties Inc. (BRE), a real estate investment trust (REIT) that develops and manages multi-family apartment communities, has recently acquired assets worth $185 million in California. With the acquisition, the company has gained a valuable presence in two of the most desirable, high barrier-to-entry submarkets in California characterized by a dearth in developable land and limited new supply.
 
BRE acquired Aqua Marina del Rey, a 500-unit property in Marina del Rey, a seaside census-designated place (CDP) in Los Angeles County, California, for about $166 million at a cap rate of 4.6%. The company expects to achieve a stabilized cap rate of approximately 5.3% after renovating the property.
 
The Marina del Rey submarket is located in close proximity to Alessio Apartments, a Mediterranean-style multi-family apartment community centered around a resort-style pool. Furthermore, the acquired property is close to major employment centers around the region and offers an ideal locale for an exciting urban lifestyle on the Southern California coast.
 
BRE also acquired 2.4 acres of land in downtown Sunnyvale for approximately $19 million. The site would support future developments of a 280-unit property, consolidating BRE’s presence in the Silicon Valley. The company currently operates three apartment communities and owns an additional land parcel in the region.
 
At the same time, BRE sold a 264-unit property in Riverside, California, for $24.6 million, realizing a profit of approximately $7.8 million. The proceeds from the asset sale were utilized to partly finance the acquisitions in Marina del Rey and Sunnyvale. BRE funded the balance payments with proceeds from its revolving credit facility.
 
Both the acquisitions and asset sale transaction were in line with the long-term strategy of the company to strengthen its position in the coastal California region that epitomizes the supply-constrained premium markets of the country. Year to date, BRE acquired four operating communities (two in Southern California and two in the San Francisco Bay area) totaling 1,037 units, and one land parcel for about $312 million.
 
Since its inception in 1970, BRE has provided long-term value to shareholders by focusing on developing and acquiring apartments 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, essential to customers who value the convenience, service, and flexibility of rental living. We maintain our Neutral rating on BRE, which currently has a Zacks #3 Rank that translates into a short-term ‘Hold’ recommendation.
 
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