Multifamily REIT Home Properties, Inc. (NYSE: HME) said June 22 that it has agreed to be purchased by an affiliate of Lone Star Funds, a global private equity firm, in a deal valued at approximately $7.6 billion including debt.
Home Properties also said it agreed to contribute a portfolio of up to six properties containing up to 3,246 units to multifamily REIT UDR, Inc. (NYSE: UDR) in exchange for a combination of cash and newly issued units in a newly-formed subsidiary of UDR.
Home Properties, which owns apartment communities in the suburbs of major metropolitan areas mainly on the East Coast, will become a privately held company following the transaction with Lone Star.
Lone Star will pay $75.23 per share in cash for Home Properties shares. That represents a 3.4 percent premium to the closing stock price of $72.73 on June 19.
“We believe this transaction with Lone Star Funds provides our stockholders with compelling value for their investment, consistent with our long-term strategy,” said Edward Pettinella, president and CEO of Home Properties.
The agreement contains a provision under which Home Properties may solicit alternative proposals from third parties during the next 30 calendar days. In the absence of a new offer, the transaction is expected to close in the fourth quarter.
Home Properties Selling Properties to UDR
According to UDR, the six properties it is receiving from Home Properties are valued at $908 million and are located in the Washington, D.C., market.
“We appreciate Home Properties and Lone Star Funds reaching out to create an opportunity for UDR to offer the Home Properties operating partnership (OP) unitholders an alternative that will allow them to continue to participate in the strong multifamily space and continued growth in UDR,” said Tom Toomey, president and CEO of UDR.
Richard Anderson, analyst at Mizuho Securities, said the transaction with Lone Star “became the best shareholder outcome after many fits and starts regarding mergers-and-acquisitions chatter surrounding” Home Properties.
The main stumbling block to getting the deal done, he added, was to maintain a tax protection alternative for its approximately 10 million OP units, which UDR helped satisfy.