TORONTO AND GREENWICH, CONN. — Milestone Apartments Real Estate Investment Trust (TSX: MST.UN), a Toronto-based multifamily REIT, has entered into an agreement with an affiliate of Starwood Capital Group whereby Starwood will acquire all of Milestone’s subsidiaries and assets. The transaction, which is expected to close in the second quarter of this year, is valued at $2.85 billion (USD).
Milestone’s board of trustees has unanimously approved the acquisition and recommends that its shareholders vote in favor of the transaction. Milestone’s shareholders will receive $16.15 per share in cash upon closing, and the REIT expects to continue paying its monthly distributions in the normal course through closing.
Milestone REIT’s portfolio consists of 78 garden-style apartment properties comprising 24,061 apartment units that are located in 16 major metropolitan markets throughout the Southeast and Southwest. Nearly half of the REIT’s holdings are in Texas.
The transaction’s average price per apartment unit of approximately $120,000 compares favorably to Milestone’s current book value of approximately $109,500 per apartment unit.
Starwood’s acquisition of Milestone’s portfolio of multifamily properties and operating platform of more than 1,200 employees will allow the firm to grow its multifamily footprint, especially in the Sunbelt region, where Starwood owns more than 67,000 apartment units.
The acquisition agreement provides for representations and warranties, board support and non-solicitation covenants from Milestone, including provisions that allow Milestone to accept a superior proposal in certain circumstances and a four business day “right to match period” in favor of Starwood.
The agreement also provides for the payment of a termination fee of $53 million to Starwood and a reverse termination fee of $100 million to Milestone if the transaction is terminated in certain specified circumstances.
Goodmans LLP and Vinson & Elkins LLP are acting as legal counsel to Milestone, and Stikeman Elliott LLP and Kirkland & Ellis LLP are acting as legal counsel to Starwood.
BMO Capital Markets is acting as financial advisor to Milestone and has provided a fairness opinion to the special committee of Milestone’s board of trustees. National Bank Financial has provided the special committee of Milestone’s board of trustees with an independent fairness opinion in respect of the transaction.
In addition to its holdings, Milestone also manages more than 50,000 apartment units across the United States. The REIT’s U.S. headquarters is in Dallas.
Milestone’s stock price closed on Wednesday, Jan. 18 at $19.66 (CAD) per share, up from $14.49 (CAD) per share last year.
“I am extremely proud of what this organization has achieved since the REIT’s 2013 initial public offering, including more than doubling the REIT’s enterprise value, more than tripling our equity market capitalization and generating total annual compound returns for our investors in excess of 28 percent,” says Robert Landin, CEO of Milestone.
Starwood Capital Group is a private alternative investment firm and has raised more than $37 billion of equity capital since its inception in 1991, and currently manages approximately $52 billion in assets. The Greenwich, Conn-based firm is one of the largest owners of multifamily housing in the United States. Following the transaction, the firm will have more than 109,600 units under management.
— John Nelson