Milestone Apartments REIT Announces Major Portfolio Acquisition
- Oct 24, 2016
Dallas—Milestone Apartments Real Estate Investment Trust has agreed to acquire a portfolio consisting of six high-quality apartment communities with an average age of 11 years, all located in U.S. Sunbelt markets. The portfolio, featuring a total of 1,460 units, was purchased for $242 million. Subject to customary closing conditions, the acquisition is expected to close on or before Dec. 1 of this year.
To partially fund the acquisition, Milestone announced it has entered into an agreement with a syndicate of underwriters co-led by BMO Capital Markets and CIBC Capital Markets to issue approximately 9.5 million trust units of the REIT. As well, Milestone announced its board of trustees has approved a 10 percent increase to its unitholder monthly cash distributions, expected to be effective for the January 2017 distribution.
The acquisition enables the REIT to further geographically diversify its U.S. Sunbelt property portfolio. That portfolio benefits from strong economic fundamentals, favorable underlying demographic trends and higher-than-national-average employment and population growth, Milestone said in a statement. The portfolio includes properties in Charlotte, N.C., Denver, Orlando and San Antonio, where the REIT already owns properties. It also includes properties in Colorado Springs and Oklahoma City, which represent heretofore untapped markets for the REIT.
The Colorado Springs and Oklahoma City assets will be managed from Milestone’s nearest regional offices. That will enable the company to efficiently manage the apartment communities and at the same time capture a foothold likely to propel additional growth opportunities in attractive markets new to Milestone.
Milestone saw this as an outstanding acquisition opportunity for several reasons. “It allowed us to increase our economies of scale in four markets where we already have a presence, and enter two new markets in the process,” Dallas-based Milestone Apartments’ Director of Investor Relations Robert Debs told Multi-Housing News.
“Also, this acquisition involved purchasing new properties that allow Milestone to continue to improve our operating margins and cash flows.”
Following the completion of the acquisition, the REIT’s investment properties’ value is expected to surge by more than 10 percent to approximately $2.7 billion, up from $2.4 billion at the end of the second quarter of 2016. As of Sept. 30, the properties reported average monthly rents of approximately $1,175 and average occupancies of 95.5 percent.
There invariably are challenges in any acquisition of this type, and as a publicly traded company, Milestone would have limited control over them, Debs said.
“Over the last several weeks, there has been volatility in the markets, and our REIT decreased in value,” he said. “But in the last week it has bounced back. And the bounceback in our stock price made the deal that much more appealing.”
Images courtesy of Milestone Apartments REIT