Federal Capital Partners Sell Assets - Analyst Blog

Federal Capital Partners, a leading real estate investment trust (REIT), recently sold Grove Park apartment, a 684-unit garden-style residential community in Gaithersburg, Maryland. The asset was sold for an undisclosed amount to an affiliate of AvalonBay Communities Inc. (AVB), which primarily focuses on developing multi-family apartment communities in premium markets.

Grove Park apartment is located close to premier shopping and dining destinations, and provides easy access to public transportation. The apartment homes feature eat-in kitchens, washer/dryer, oversized closets and private patio/balcony, in addition to other amenities such as a swimming pool, fitness center, resident clubhouse and children’s play area.

At the same time, one of the associates of Federal Capital Partners sold Charleston Manor apartment, an 858-unit residential community in Ellicott City, Maryland, for an undisclosed amount. The property was sold to an affiliate of Home Properties Inc. (HME), which owns, operates and develops apartment communities in the U.S.

Charleston Manor apartment offers plush wall-to-wall carpeted floors, individually controlled heat and air, spacious floor plans and fully equipped eat-in kitchens. The apartment also features an Olympic size pool, playground and tennis courts, and provides convenient access to public transport.

The housing meltdown will continue to help apartment REITs like AvalonBay and Home Properties, and we expect this sector to remain comparatively stable in the coming quarters.

AvalonBay has Class-A assets located in premium markets, such as Washington DC, New York City, and San Francisco, where the spread between renting and owning is still high despite home price declines. This provides an upside potential for the company. Consequently, we maintain our long-term Outperform rating on AvalonBay, which also has a shorter-term Zacks #3 Rank (‘Hold’).

Home Properties primarily operates in selected Northeast, Mid-Atlantic and Southeast Florida markets. The properties of the company are typically 20-40 years old and are located in established suburban neighborhoods with little new construction opportunities.

We currently have a Neutral rating on Home Properties. The stock presently has a Zacks #3 Rank (‘Hold’), and indicates that Home Properties is expected to perform in line with the overall U.S. equity market for the next 1-3 months.