Apollo is paying $1.34 billion for two-thirds of 19 UDR apartment communities

UDR CEO Tom Toomey sold Apollo about two-thirds of a $2.0 billion portfolio of 19 apartment communities with 7,059 homes, and Apollo committed $1.34 billion of equity ^[1]. The deal priced at about a 6.0% cap rate, and UDR keeps a one-third stake, keeps managing the buildings and can buy Apollo out starting in year five at an expected 7.00% to 7.50% fixed return ^[1].

“Access to equity capital is one of UDR’s strategic priorities,” Toomey said ^[1]. By our math, the price works out to about $283,000 per home, for communities that average 39 years old and $2,058 of revenue per home ^[1].

MAA and Essex also sold apartments and put cash back to work

MAA, led by CEO Brad Hill, sold a 269-unit Washington, D.C., community in which it held a 35% stake for about $147 million in September, and bought back $50.0 million of its stock at an average $126.72 a share ^[2]. It also has eight communities with 2,236 units under construction at an expected cost of $760.0 million ^[2].

Essex sold three communities in Seattle, San Jose and Marina del Rey for $111.9 million of its share in August, then bought a 378-unit Oakland community built in 2024 after the quarter ended ^[3]. Its Wesco VII venture made two preferred equity investments in July at an 11.5% initial return ^[3].

Renewing tenants paid more while new tenants often paid less

Tenants who renewed at MAA and Essex last quarter paid 5.3% more, while new residents at both signed for less than the previous tenant paid for the same unit ^[2][3]. Hill said “October blended pricing accelerated more than 100 basis points year-over-year” ^[2].

MAA lowered its full-year same-store revenue forecast, Essex narrowed its range, and UDR raised its FFO as adjusted guidance to $2.54 to $2.56 a share ^[2][3][4][5]. At MAA, residents leaving to buy a home made up 10.1% of move-outs, a record low ^[2].

How to use this

For renters

1. Ask the leasing office what it charges new residents for the same floor plan before you sign a renewal. At MAA’s average effective rent of $1,691 ^[2], we calculate a 5.3% renewal at about $1,781 and a new lease 6.0% lower at about $1,590, a gap of about $191 a month.
2. Ask for a longer lease at today’s renewal rate and get it in writing. UDR said its renewal offers for the fourth quarter are higher than the ones it sent in the third quarter ^[4].

For apartment owners and sellers

1. Use the UDR and Apollo price as a reference for older suburban portfolios. Apollo paid about a 6.0% cap rate for communities averaging 39 years old ^[1], and a buyer quoting a much higher cap rate on a similar asset should explain the difference in writing.
2. Price each renewal against the cost of an empty unit as well as the market rate. On a $1,691 rent ^[2], we calculate that one vacant month costs about as much as 19 months of a 5.3% increase, so a smaller raise that keeps a good tenant can come out ahead.

For investors in private apartment deals

1. Ask the sponsor for separate rent growth assumptions on new leases and renewals. New leases ran at −6.0% at MAA and −0.2% at Essex ^[2][3], so a plan that assumes 3% on every lease needs a written reason.
2. Compare any preferred equity offer with Essex’s 11.5% initial return on its July investments ^[3] and with UDR’s 7.00% to 7.50% buyback return to Apollo ^[1].
3. Read the Form D before the pitch deck. Peachtree Blvd 123 LLC, based in Columbia, Maryland, filed to raise $35 million under Rule 506(c) with a $100,000 minimum and had sold nothing at filing ^[6]. A 506(c) offering can be advertised publicly, so treat the ad as marketing and the filing as the record.