Apartment REIT Monogram Residential Trust, Inc. (NYSE: MORE) said July 4 that it has agreed to be bought by a private investment consortium in a deal valued at approximately $3 billion.
Under the terms of the deal, Monogram will be bought by a newly formed perpetual life fund, Greystar Growth and Income Fund, LP. Monogram investors will receive $12 per share of company stock, a 22 percent premium on the July 3 closing price of $9.80. The $3.0 billion transaction value includes Monogram’s shares of its two joint ventures with Dutch pension fund manager PGGM and South Korea’s NPS.
Mark Alfieri, president, COO and CEO of Monogram, said the deal confirms that “our targeted focus on building our portfolio with high-quality, class-A assets in select core markets has been recognized.”
Drew Babin, a senior research analyst with R.W. Baird, said the Monogram deal is the first notable transaction for some time that involves upscale assets in supply-pressured markets.
Monogram’s well-located, relatively new portfolio should outperform in the intermediate-to-long term, he added.
BMO Capital Markets analyst John Kim agreed.
“Monogram has an attractive geographic exposure, and its portfolio is the youngest among its peers, resulting in lower-than-average capex and enabling it to command a premium-to-market rent,” Kim said. The company’s development pipeline provides near-term growth, and its balance sheet will improve incrementally as projects come online, he added.
Babin added that the 4 percent cap rate for the deal should be a positive signal for other REITs with meaningful exposure to similar assets.
Monogram owns, operates and develops luxury apartment communities, with a significant presence in major coastal markets. It was previously known as Behringer Harvard Multifamily REIT I, Inc., a public non-listed REIT. The company changed its name and listed on the New York Stock Exchange in 2014.
The transaction is expected to close in the second half of the year.
The price of Monogram shares had gone up more than 20 percent through mid-day trading on July 5.