UDR To Buy Six Washington, DC Apartment Communities In Exchange For OP Units

(RTTNews) - UDR Inc. (UDR) announced that it has entered into a definitive agreement with Lone Star, Inc., Lone Star L.P., Home Properties, Inc. and Home Operating Partnership to acquire up to six communities valued at $908 million in exchange for a combination of common OP units of a newly formed operating partnership of the Company or "UDR OP Units", cash and the assumption of debt.

The estimated year-one cap rate on the transaction is approximately 5.2 percent. The identified apartment communities are located in the Company's core Washington, DC market.

The transaction is expected to be funded through the issuance of up to $753 million of UDR OP Units issued at $35 per unit, the assumption of $90 million of debt and $65 million in cash, inclusive of transfer taxes and loan assumption fees.

The agreement provides that each Home unitholder will have the option to elect to receive cash from Lone Star or UDR OP Units. The number of UDR OP Units and the amount of cash will be determined at the closing of the consent solicitation of the Home OP unitholders which we anticipate to be completed by mid-August, 2015.

Based upon the level of Home OP unitholders electing to receive UDR OP Units, UDR will have the option to either acquire less than six properties or to acquire some of the properties through a Section 1031 exchange pursuant to the Internal Revenue Code.

The closing of the transaction is subject to the closing of the merger between Lone Star and Home.

If all communities are acquired, the transaction will be accretive to 2016 FFO, FFO as Adjusted and AFFO by approximately $0.015 per share. Additionally, the Company's 2016 balance sheet metrics will be positively impacted, with debt to assets and net debt to EBITDA incrementally improving by up to 175 basis points and 0.2x, respectively.

The Company anticipates that the transaction will close in the fourth quarter of 2015.