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Greystar Agrees to Acquire EdR in $4.6B Merger

Southside-Commons-Lehigh-University

EdR recently broke ground on Southside Commons, a 428-bed community serving Lehigh University in Bethlehem, Pa. The company's portfolio at the time of acquisition spanned about 70 properties totaling more than 36,000 beds.

CHARLESTON, S.C. — An affiliate of multifamily development firm Greystar has agreed to acquire student housing developer Education Realty Trust Inc. (NYSE: EDR) in an all-cash transaction that will take the company private. The sales price of $4.6 billion includes existing debt.

Under the terms of the agreement, which is expected to close during the second half of the year, EdR’s stockholders will receive $41.50 per share in cash. The price represents a premium of 13.6 percent over the May 31 closing share price, the last day before rumors of the sale were published.

According to the company’s annual report, in 2017, Memphis-based EdR owned 70 student housing properties totaling 36,420 beds across 24 states. The company also managed 16 communities totaling 9,832 beds across 10 states.

“As a public company, one of our priorities is to maximize stockholder value and we believe this transaction with Greystar accomplishes that goal,” says Randy Churchey, CEO and chairman of EdR.  “Since the current EdR management team took over on January 1, 2010 — and including this transaction — EdR stockholders will have received a total stockholder return of 293 percent.”

According to Alex Goldfarb, managing director and senior REIT analyst at New York-based Sandler O’Neill + Partners LP, the transaction says as much about current strategies for REIT stocks as it does the market for student housing.

“Public REIT investors are under pressure due to concerns over outgoing cash flows, rising interest rates and growth opportunities elsewhere,” says Goldfarb. “Given where REIT stocks are trading overall, the potential to have privatization of REITs is real and is helpful for REITs as they pitch investors.”

Goldfarb adds that from a student housing perspective, the deal reflects Greystar’s confidence in the performance of on-campus assets. He says EdR’s portfolio is approximately 40 percent on-campus housing, with the rest positioned off campus. In addition, the offered price illustrates the disconnect that exists between how public and private capital markets value the student housing sector, adds Goldfarb.

In a related transaction, a joint venture between affiliates of Blackstone Real Estate Income Trust Inc. and Greystar will acquire a portfolio of student housing assets. According to streetinsider.com, this transaction involves 20 properties totaling 10,500 beds and is valued at roughly $1.2 billion. Blackstone is a 95 percent partner in the acquiring entity.

EdR’s stock price closed at $40.41 per share on Friday, June 22, essentially unchanged from one year ago. However, the stock price has risen by more than 10 percent since May 31. The peak price in recent years occurred in July 2016 at a price of approximately $48 per share.

— Taylor Williams

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