HIGHLAND RANCH, Colo. ( TheStreet) -- Shares of UDR ( UDR - Get Report) tumbled several points Wednesday morning after the residential real estate investment trust announced a secondary offering of 13.5 million shares.

UDR, which manages apartment communities around the U.S., said late Tuesday it plans to sell the new shares of its common stock in an underwritten public offering, and grant the underwriters a 30-day option to purchase up to an additional 2 million shares to cover overallotments.

UDR investors, concerned about the dilutive effect a secondary offering will have on their holdings, bid the stock lower by 3.7% less than an hour into trading Wednesday.

The REIT said it plans to use the net proceeds from the offering to fund potential and recent acquisitions, to pay down debt and for general corporate purposes.

Also late Tuesday, UDR announced an acquisition of five operating communities in California, Massachusetts and Maryland, and one presale venture, also in Massachusetts, totaling $455.1 Million.

UDR said the communities "will be financed via cash, available capacity under the company's credit facility and the assumption of $92 million of first mortgages on Marina Pointe and Ridge at Blue Hills with a current weighted average interest rate of 2.3%."

CEO Tom Toomey said the firm's "entry into Boston exemplifies our strategy of owning homes in markets characterized by low home affordability with superior growth prospects."

He added that UDR also secured the acquisitions of three additional multifamily communities developed by Hanover in Anaheim, Boston and Baltimore.

UDR also plans to enter into a presale venture with an affiliate of Hanover to develop a 240-home community in the Boston area.

Industry peers Essex Property Trust ( ESS - Get Report), BRE Properties ( BRE), Equity Residential ( EQR - Get Report) and Mid-America Apartment Communities ( MAA - Get Report) have also added new apartment acquisitions to their portfolios this year as the REITs look to pick up low-priced properties before the real estate market recovers fully.

>>Mid-America Rises on Acquisition

Cap rates, or the rate at which an investment will pay for itself, have suffered across the sector in the recent recession as joblessness led to high vacancy rates and declining rents.

Mid-America said last month it paid $33.6 million for Hue, a recently built, high-end, mid-rise multifamily and retail development in Raleigh's downtown area. The apartment community was originally developed as condominiums, said Mid-America CFO Al Campbell.

It was Mid-America's second acquisition in the month of August after announcing it had acquired Verandas at Sam Ridley, an upscale 336-unit gated apartment community near Nashville, Tenn. for $32 million.

Shares of Essex Property fell 0.6% Wednesday morning and BRE lost 0.1%. Equity Residential gained 0.7% and Mid-America was higher by 0.5%.

-- Written by Miriam Marcus Reimer in New York.

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