Latest Public-To-Private Acquisition Spotlights Broadening Investor Interest In Student Real estate Property Sector
Private-equity company Harrison Street Real Estate Capital LLC has actually struck an offer to get student housing owner and operator School Crest Communities Inc. in a deal that values the Charlotte, NC-based REIT at about $1.9 billion, including assumed financial obligation.
Under the regards to the offer, Harrison Street would obtain Campus Crest (NYSE: CCG) at $7.03 per share, consisting of $6.90 in money, plus $0.13 in net proceeds from the REIT’s sale of a joint-venture interest in Evo, a student real estate asset in downtown Montreal.
CCG shares jumped almost 15 % in heavy trading on Monday. The merger with Harrison Street is anticipated to close in the very first quarter of 2016 and the sale of the Montreal joint venture stake is anticipated to close by Oct. 30. However, if the Montreal sale does not close prior to the merger closing, Campus Crest investors will receive a considerably lower return of about $6.23 per share in cash and one non-transferable contingent value right per share.
The deal is one of the biggest including the student housing sector, which has actually drawn enhancing interest from financiers varying from private-equity funds and REITs to pension funds and other institutional investors. Campus Crest Communities is one of the largest owners and managers of student real estate buildings near college campuses, with ownership interests in 79 student real estate homes with over 42,000 beds throughout North America.
In 2014, the REIT revealed it was exploring strategic options earlier this year after receiving financier inquiries following a corporate restructuring. The transaction is the latest private takeout of in the REIT area, where shares have actually been damageded by stock exchange volatility and issues about the potential for the first rise in rate of interest considering that 2006.
Earlier this month, Blackstone Group LP accepted buy life science and biotech property owner BioMed Realty Trust Inc. for $4.8 billion. Blackstone also accepted acquire Strategic Hotels & & Resorts in in September for a magnificent $6 billion.
Shares of REITs have typically under-performed this year as financiers gird for the very first interest-rate hike because 2006, developing opportunities for buyers like New York-based Blackstone
Meanwhile, student-housing developers have become incnreasingly active. Athens, GA-based Landmark Characteristic began construction on eight new communities last summer season, with 14 tasks totaling approximately 10,000 beds and more than $1 billion in investment under advancement across the country as of Aug. 31, and plans for another 20-plus jobs.
Other leading student real estate REITs, including American School Communities (NYSE: ACC) and Education Properties Trust (NYSE: EDR) also remain to construct out their advancement pipelines, moneying brand-new projects from the disposition of non-core assets. Although ACC has said it intends to pull back on acquisitions for the balance of 2015 and may even offer some core possessions.
On the other hand, private equity and pension funds are seeking to make the most of their lower level of capital to get top quality student real estate assets,
“From the time management very first discussed strategic options in July, we presumed this would be a personal equity deal,” noted Rod Petrik, REIT expert with Stifel Nicolaus. “Both ACC and EDR openly mentioned they had no interest in the company as an entire, keeping in mind that the portfolio doesn’t fit their particular techniques.”
Trading at a cap rate estimated in the low 6 % range, the offer is richer than indicated cap rates for both ACC and EDR, highlighting exactly what Petrik said is “the disconnect between the public REIT evaluation and private offer evaluation.”
Moelis & & Co. LLC served as School Crest’s financial adviser and Kilpatrick Townsend & & Stockton LLP is working as its legal consultant. Raymond James and Associates Inc. is working as Harrison Street’s monetary advisor, with DLA Piper LLP (working as its legal advisor.