Starwood Capital Group, Milestone Agree to Acquire Landmark Apartment Trust for $1.9B in All-Cash Deal

GREENWICH, CONN. — Monument Partners LLC, an entity owned by affiliates of Starwood Capital Group and Milestone Apartments Real Estate Investment Trust (TSX: MST.UN), has entered into an agreement to acquire Landmark Apartment Trust Inc. in an all-cash transaction valued at $1.9 billion, including the assumption of existing debt.

Under the terms of the deal, Starwood Global Opportunity Fund X, through a controlled affiliate, will acquire Landmark Apartment Trust’s ownership interest in 19,615 units in 63 apartment communities. The portfolio is located in eight Sunbelt states, with major concentrations in Dallas, Atlanta, Orlando, Tampa, Charlotte and Nashville.

Milestone — which will acquire 4,172 units in 15 assets as part of the transaction — will serve as property manager for Starwood’s portion of the portfolio.

“This acquisition highlights our confidence in multifamily housing as an asset class that represents an attractive risk-reward proposition for our investors,” says Christopher Graham, senior managing director and head of real estate acquisitions for the Americas at Starwood Capital Group based in Greenwich.

“Across the United States, demographic, economic and financial factors are driving apartment vacancy rates lower and rental rates higher — and we believe that these trends will continue into the foreseeable future,” adds Graham.

Based in Richmond, Va., Landmark Apartment Trust owns and manages apartment communities in geographically diverse, high-growth markets throughout the southern United States. Landmark is an owner or part owner in approximately 24,000 apartment units and provides management services for an additional 1,700 units owned by affiliates. The company was founded in 2005.

The Landmark portfolio was particularly attractive to Starwood Capital. “We look forward to working with Milestone and are thrilled to capitalize on a rare opportunity to acquire a large portfolio of apartment communities at a discount to replacement cost that provides both immediate cash yield and growth potential,” says Ethan Bing, vice president at Starwood Capital Group.

“These assets are located in markets that benefit from a wide variety of demand drivers for population, job and household formation growth,” continues Bing. “The population in the markets within the portfolio has expanded by 1.5 percent annually over the last two years — double the U.S. average — and that growth rate is projected to be sustained over the next five years. Employment growth in these markets has averaged 2.8 percent annually over the last two years.”

Under the agreement, Monument Partners will acquire all of the outstanding common stock of Landmark and all of the outstanding common units of Landmark’s operating partnership, Landmark Apartment Trust Holdings LP, for $8.17 per share or common unit, pending shareholder approval.

Upon completion of the transaction, which is expected to close in the first quarter of 2016, Landmark will become a privately held company. Landmark currently operates as a public, non-traded real estate investment trust (REIT).

“I am pleased to announce today’s acquisition by Starwood and Milestone,” remarked Ed Kobel, chairman of Landmark’s board of directors, on Thursday. “Given that many stockholders have held shares for many years, our board believes that liquidity is a primary driver for our stockholder constituency. This is an all-cash transaction giving stockholders immediate liquidity at closing.”

The announcement marked the conclusion of a strategic review process that Landmark’s board of directors undertook earlier this year, which included the potential for an initial public offering (IPO), according to Jay Olander, Landmark’s CEO.

“Given recent market volatility, we believe that this merger provides our stockholders with a more certain liquidity event,” says Olander.

Landmark went so far as to file a registration statement with the Securities and Exchange Commission in May for a proposed IPO.

Starwood Capital Group is a private investment firm with a core focus on global real estate. Starwood Capital Group has raised approximately $32 billion of equity capital since its inception in 1991, and currently manages over $45 billion in assets.

Milestone Apartments Real Estate Investment Trust (TSX: MST.UN) is a Canadian-based, opened-ended REIT governed by the laws of Ontario. The company’s portfolio consists of 61 garden-style apartment properties, comprising approximately 19,900 units located in 14 major metro markets throughout the Southeast and Southwest United States.

Milestone is the largest real estate investment trust listed on the Toronto stock exchange focused solely on the U.S. multifamily sector. The company’s stock price closed Thursday at CA$15.59 per share, but as of late morning Friday was trading at $15.20 per share.

BofA Merrill Lynch and Citigroup are acting as financial advisors for Landmark in the transaction. Hogan Lovells US LLP is acting as legal advisor.

— Christina Cannon

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