Apartment-only real estate investment trust Mid-America Apartment Communities (NYSE: MAA) once again is snapping up properties, this time announcing Monday that it is adding multifamily housing operator Colonial Properties Trust (NYSE: CLP) to its portfolio in an $8.6 billion transaction.
MAA is a self-administered, self-managed apartment-only REIT currently owning, or having ownership interest in, 49,873 apartment units across states in the Sunbelt region of the United States. Colonial is a Sunbelt-focused REIT owning or having partial ownership interest in 35,181 apartment units.
Mid-America CFO Albert M Campbell said, "Our goal is to create one of the strongest balance sheets in the sector, providing us the financial flexibility in the capital markets to manage our cost of capital, allowing us to capitalize on business opportunities, ultimately supporting the growth of the combined company, and the security of our dividend to our shareholders."
Under the terms of the agreement, each share of Colonial Properties Trust will be converted into 0.36 shares of newly issued MAA stock, and the combined company will be an UPREIT, an umbrella partnership real estate investment trust, which allows partners the opportunity to convert their ownership of one or more of their properties into an interest that can be converted into a security.
Following the merger, former MAA equity holders will hold approximately 56% of the combined company's equity, and former Colonial equity holders will hold approximately 44%. The all-stock merger is intended to be a tax-free transaction. With both boards of directors having unanimously approved the transaction, the deal is expected to close during the third quarter of 2013.
The new company will have a combined asset base consisting of approximately 85,000 multifamily units in 285 properties. It expects to realize savings of $25 million over an 18-month period during which the companies will become fully integrated. The combined company is expected to have a pro forma equity market capitalization of approximately $5.1 billion and a total market capitalization of $8.6 billion.