Monogram Residential Trust Inc., an owner, operator and developer of luxury apartment communities with a significant presence in select coastal markets, has entered into a definitive merger agreement to be acquired by a newly formed perpetual life fund, Greystar Growth and Income Fund LP, led by Greystar Real Estate Partners and its initial founding capital partners, affiliates of APG Asset Management N.V., GIC, and Ivanhoé Cambridge. The transaction valued at approximately $3 billion, including debt to be assumed or refinanced.
Under the terms of the merger agreement, which was unanimously approved by Monogram’s Board of Directors, Monogram’s stockholders will receive $12.00 per share in cash. This represents a premium of approximately 22% to Monogram’s unaffected closing stock price on July 3, 2017, the last trading day prior to the public announcement of the transaction.
The $3-billion aggregate transaction value includes Monogram’s share of its two institutional co-investment joint ventures with PGGM and NPS. The PGGM joint venture will be restructured, and the joint venture interests held by NPS will be purchased by Greystar pursuant to a separate assignable purchase and sale agreement for approximately $0.5 billion, subject to certain adjustments at closing, including payment of the NPS joint venture’s share of debt to be assumed or refinanced in connection with the transaction.
The transaction, which is expected to close in the second half of 2017, is subject to approval by Monogram’s stockholders and other customary closing conditions. The transaction is not contingent on receipt of financing by Greystar. JPMorgan Chase Bank, N.A. has provided a commitment letter to Greystar Growth and Income Fund for $2 billion in debt financing for the transaction upon the terms and conditions set forth in such letter. Following payment of the previously announced second quarter dividend on July 7, Monogram will not pay any dividends through the close of the transaction except as required to maintain its REIT status and any such dividend will be deducted from the purchase price.
Financial services firm, Canaccord Genuity, says in a report to shareholders that the deal represents approximately 22% upside to the July 3 close price. With a consensus NAV of $11.92 and a portfolio composed of high-quality, class-A and well-located assets, the firm believes that the transaction price represents a “solid deal for shareholders, especially given the sizeable portfolio exposure to properties under construction and in lease up (we estimate about 11% of stabilized run-rate NOI), as well as continued pressure across the portfolio from new deliveries limiting near-term fundamental growth acceleration.” The firm also notes that “while we would not rule out an outside competing bid, we believe this deal is likely the best offer MORE sees with the aforementioned portfolio risks.”
“We are pleased to have reached this agreement, which maximizes value at a substantial premium to our existing share price,” says Alan Patton, Monogram’s Chairman of the Board of Directors. “We are confident that today’s announcement represents the best path forward for all of Monogram’s stockholders.”
“This landmark is the result of Monogram’s success at executing and delivering on strong operations, innovative development programs and investment strategies in conjunction with skillful market timing,” say Mark Alfieri, Monogram’s Chief Executive Officer, President and Chief Operating Officer. “The interest we received from this sophisticated group of investors demonstrates that our targeted focus on building our portfolio with high quality Class A assets in select core markets has been recognized and our stockholders and joint venture partners are rewarded with this successful outcome.”
“We are excited to add Monogram’s high-quality assets in some of the best markets in the country as the seed portfolio for Greystar Growth and Income Fund, LP, our flagship core-plus perpetual life vehicle,” says Bob Faith, the Founder, Chairman and Chief Executive Officer of Greystar. “The collective strength and experience of our high-quality investment partners are second to none, and we look forward to completing this transaction and further expanding Greystar’s U.S. multifamily platform.”
Morgan Stanley & Co. LLC is serving as exclusive financial advisor and Goodwin Procter LLP is serving as legal advisor to Monogram. J.P. Morgan Securities LLC is serving as exclusive financial advisor and Jones Day is serving as legal advisor to Greystar.