After announcing a deal in July, a fund recently launched by Greystar, the nation’s largest apartment operator, officially completed the acquisition of Monogram Residential Trust earlier this month.
The newly formed perpetual-life fund, Greystar Growth and Income Fund, LP, is led by Greystar Real Estate Partners and its initial founding capital partners, APG Asset Management NV, GIC, and Ivanhoé Cambridge.
The announcement follows Monogram stockholders’ vote to approve the merger and the other transactions contemplated by the merger agreement, including the restructuring of Monogram’s joint venture with PGGM. The total portfolio transaction value is approximately $4.4 billion, including the PGGM JV and debt assumed or refinanced.
Pursuant to the transaction, Monogram’s stockholders will be entitled to receive $12 per share in cash. Last year, The Wall Street Journal reported that Monogram was actively exploring a deal with potential buyers.
“The Monogram Residential board of directors and management team are pleased to have completed this transaction which maximizes value for stockholders and partners that entrusted our team over the past several years,” said Mark Alfieri, Monogram's CEO, president, and COO, in a statement. “The valuation achieved is a testament to the quality of the portfolio and operating platform.”
A source with knowledge of the deal says Alfieri will not be staying on with Greystar. In 2011, Alfieri was named MFE’s Executive of the Year while he led Behringer Harvard.
As of June 30, Plano, Texas–based Monogram's portfolio included investments in 48 multifamily communities in 10 states comprising 13,438 apartments.
Charleston, S.C.–based Greystar manages more than 415,000 units in over 140 markets globally, with an aggregate estimated value of approximately $80 billion. Its founder and CEO, Bob Faith, says the Monogram deal is consistent with the company’s vision of “the continued institutionalization of the rental housing sector globally. Greystar Growth and Income Fund, LP, is simply our most recent vehicle which will access the U.S. core-plus multifamily space.”
Faith shared more of his thoughts with MFE about the deal earlier this week:
Was the Greystar Growth and Income Fund started with this acquisition in mind, or was it in the works beforehand?
There was actually an interesting series of events that led up to the inception of Greystar Growth and Income Fund, LP, and the Monogram transaction. We had been in discussions with our partners to create a core-plus perpetual-life vehicle as a blind pool, and during the course of those discussions, our team was reviewing the Monogram take-private in order to access what we believed was one of the truly outstanding multifamily portfolios in the U.S.
We were attracted to the opportunity because Monogram’s high-quality portfolio directly fit within the vehicle’s strategy, and also provided a unique opportunity to gain scale in the markets we're targeting, leveraging Greystar’s national operating platform across the U.S. Our investors were willing to increase their initial capital commitments to the fund in order to acquire the portfolio.
Things progressed quite quickly from there, and, in the end, we were able to dual-track both the acquisition and the vehicle capitalization with our partners APG, GIC, Ivanhoé Cambridge, and PGGM. In order to consummate the Monogram transaction, we were able to purchase the outstanding shares of Monogram and negotiate a recapitalization of certain JV interests held by PGGM while also having them join as initial founder partners in Greystar Growth and Income Fund.
Why is this acquisition a good move for Greystar? What stands out about Monogram?
The acquisition allowed us to accelerate the growth of Greystar Growth and Income Fund’s portfolio. The majority of the assets are well located in the gateway or coastal markets consistent with the fund's strategy. The Monogram assets were the newest portfolio of any of the publicly traded REITs with an average age of just over 5 years old. Monogram’s portfolio represented a unique opportunity to access a difficult to replicate portfolio of properties at a discount to replacement cost and NAV.
Now that the deal has closed, what happens to the Monogram-controlled properties (operationally)?
One of the challenges that Monogram faced was that they didn't have scale in any of their markets. Now that the transaction has closed, Greystar will be absorbing the portfolio into our national operating platform, where we operate over 415,000 units and $80 billion in assets nationwide. As the largest operator of rental housing in the country, we have a deep pool of talent, technology platforms, and economies of scale. In addition, on some assets we've identified some minor capital improvements that will further enhance [the assets'] value.
