Landmark Apartment Trust of America’s CEO on Recapitalization and Baby Boomers
- Sep 12, 2012
Richmond, Va.—Landmark Apartment Trust of America Inc., a real estate investment trust, recently completed a $536 million recapitalization transaction. MHN speaks to Jay Olander, CEO, Landmark Apartment Trust, about this recapitalization, as well as why his company strategically targets baby boomers at their class-A properties.
MHN: Your company recently had a very large recapitalization transaction. Describe this recapitalization and what it meant for Landmark.
Olander: The total recapitalization was about $536 million. We purchased 21 apartment communities for a value of $485 million. In addition to that, we sold $50 million worth of preferred equity to bring cash to the company, to allow us to execute on the purchase and to acquire additional property, and then we sold some common stock for about a million and a half too. Those are the components of the transaction. The 21 properties that we purchased were throughout the country—Alabama, Florida, South Carolina and Texas—and they fall right in line with a strategy that our company had formally executed of purchasing properties in that Southern region of the country where people are moving to with the changing demographics in our country. We look at this as a very significant transaction for our existing shareholders. We had a retail shareholder base made up of retail investors to hit purchase shares in our company through registered reps. This is a sizable transaction—it more than doubles the size of our company. It also brings to the table some rather large institutional investors to blend in with our retail shareholder base. We have a goal of listing our shares, and we feel that this transaction is a major step in the direction of being able to list the company.
MHN: What are your plans going forward?
Olander: We are still looking to expand the company, to build it bigger than it is right now. In fact, we purchased a property in Houston (an additional property not included in the 21 mentioned) using the proceeds of that preferred, and we’re looking to expand the company a little bit further. We would like to—depending on market conditions—list the company on a public exchange within the next couple of years, possibly as soon as a year.
MHN: Are you going to continue to go after these big transactions?
Olander: We are looking at a number of different strategies. We are talking to some people about another couple of larger transactions, and we’re talking to some investor groups about some smaller transactions. I think this was an enormous transaction for the size of our company. We were about a $400 million company previously, so this is an enormous transaction for us in terms of growing the company, and now we are looking to capitalize on our combined size and push forward in smaller and bigger chunks.
MHN: You mentioned the Southern region earlier. Are you going to continue to go for that area, and why do you think that’s such a booming area right now?
Olander: There’s a huge trend in our country of people moving north to south, and we see it appealing to every demographic in the country. Detroit is not picking up jobs right now; Houston is. Houston is one of the fastest growing cities; Dallas is one of the fastest growing cities. We are buying properties where people are moving to. We’re appealing to two clear demographics right now. There are about 112 million people in the country under the age of 30. These are people either in or coming into their prime renting years, and they’re moving to places where jobs are being created—into the Southern region.
The other interesting dynamic that’s hitting the apartment market right now are the baby boomers. We’ve got 78 million baby boomers that we’ve all heard about our entire careers. These are people who are coming into a time in their lives when they’re looking at making changes in how and where they live. What we’re seeing right now is, as the jobs are moving south, the people who get out of college are moving to where the jobs are, and we’re also seeing a secondary backlash of these baby boomers moving to where their kids are moving to. For example, Detroit is a city that’s lost a lot of jobs over the last 20 years. You’ve got mom and dad who’ve worked in the auto industry their entire lives, kids went to school, and got jobs in Dallas. Now mom and dad are retiring from that auto industry and they’re moving to where their children are moving to. And when you move from Detroit, which has lost population for 20 years, to Dallas, which is one of the five largest cities in the country, it’s a big step. Rather than just coming in and buying a home, many of them are renting. We have our class-A portfolio that was built for us in the last five to seven years, and we have some B properties that are 20 years old. And in our class-A properties, which are the highest rents in town, about 25 percent of our residents are baby boomers. That really shocks people because historically the baby boomers have been people who owned homes. We’re seeing that changing lifestyle, so we’re buying in those markets where people are moving for their jobs and their children.
MHN: It’s surprising that baby boomers are a quarter of your renters.
Olander: And in the highest rents! They’re the ones who can afford it. They retire, and they can afford a little higher rent, and they want a nice place. What we find is they move, they follow their kids, they find that someone else is doing their maintenance, and they never leave!
MHN: Is there anything you’d like to add?
Olander: As a company, we looked a few years ago to find the best strategy for our shareholders. After looking at some investment bankers, we decided the best thing to do was to grow and expand the company to give each individual investor the ability to have liquidity. This strategy gives the investors that. We feel like we’re in a good position to do that, and we have a good management team in place.