Inside Milestone Apartments REIT’s $1.9B Acquisition

A merger will acquire Landmark Apartment Trust.

Dallas—Milestone Apartments REIT has entered into an agreement with Starwood Capital Group to acquire, by way of merger, Landmark Apartment Trust for $8.17 per Landmark share in cash, representing a total enterprise value of approximately $1.9 billion. The acquisition is expected to close in early 2016.

Kirkland & Ellis LLP advised Starwood Capital Group and Milestone Apartments REIT in connection with the agreement’s execution.

Milestone announced the acquisition of 100 percent interest in 15 high-quality, garden-style properties totaling 4,172 units from Landmark Apartment Trust for a gross purchase price of $502 million. The properties average 10 years in age. This acquisition is in line with the REIT’s growth strategy to enhance its portfolio and improve its operating margins and cash-flow position.

Starwood will acquire Landmark’s interest in 63 properties, to be managed by the REIT. Milestone also announced its Board of Trustees has approved an approximate 11 percent increase to its monthly cash distribution, effective January 2016. Via the acquisition, Milestone and Starwood are provided a portfolio of properties aligning with the investment goals of each.

As a result of the acquisition, Milestone Apartments REIT will increase its scale in seven of its existing Sunbelt properties. Its property management will expand into existing and new U.S. markets, establishing greater critical mass to drive operating efficiencies and growth. The year one average cap rate of the properties is approximately 6.1 percent. Unit prices average $120,000.

Starwood will retain Milestone as property manager of the portfolio of 63 properties, totaling 19,615 units, acquired from Landmark. That increases the total units under management by the REIT to more than 50,000 units.

In the third quarter of this year, Milestone’s total and samestore average monthly in-place rents were $871 and $821, up respectively 12.2 percent and 6.3 percent from $776 and $772 in the third quarter of 2014.

Strong total and samestore occupancy levels of 95.3 percent were recorded in the third quarter of this year, versus 95.5 percent in the third quarter of 2014.

Milestone’s Houston portfolio also remained strong. Total and same store monthly in-place rents averaged $920 and $859, up 13.4 percent and 5.9 percent respectively from $811 in the third quarter of 2014.

In Houston, total and same store occupancy ended up in third quarter of this year, at 95 and 95.2 percent respectively.

“With strong total and samestore rent growth and continued high occupancy in Q3 2015, a robust outlook for the U.S. apartment market and continued favorable demographic trends in the U.S., particularly in the Sunbelt markets, this is an excellent opportunity to increase our presence in our target markets,” said Robert Landin, CEO of Milestone.

“The acquisition of these properties will high grade the REIT’s portfolio, establish greater scale, and improve our operating margins and cash flow position,” he continued. “We are pleased to form a strategic relationship with Starwood through this transaction, which provides each of us with the opportunity to expand upon our respective investment strategies.”