EdR Privatization Deal Headlines Acquisition Spree
Greystar and Blackstone continue adding to their residential empires and gear up to buy more student housing as another REIT leaves the public markets.
Greystar, currently the largest manager of apartments in the country, continued adding assets to its empire with Monday’s announcement that its newly-formed, perpetual-life fund, Greystar Student Housing Growth and Income Fund, is buying student housing REIT EdR in an all-cash transaction valued at approximately $4.6 billion.
In conjunction with the EdR transaction, a joint venture between an affiliate of Blackstone Real Estate Income Trust (BREIT) and an affiliate of Greystar will acquire a portfolio of off-campus student housing assets, which are located adjacent to top-tier university campuses. The newly combined Greystar/EdR team will continue to manage the assets. BREIT is targeting owning an approximately $10 billion portfolio of stabilized, income generating real estate concentrated in U.S. markets.
“EdR has one of the highest quality and best located student housing portfolios in the U.S., and it will seed Greystar’s newly formed flagship student housing-focused perpetual-life fund. We are excited to capitalize on our significant scale and experience to enhance the platform's performance and value over the long term,” said Bob Faith, the Founder, Chairman and Chief Executive Officer of Greystar in a press release.
The sale price represents a premium of 26.3 percent over the 90-day volume-weighted average share price ending May 31 and a premium of 13.6 percent over the May 31 closing share price, the last trading day prior to news stories being published that speculated about a possible EdR sale.
In early June, The Wall Street Journal reported that EdR was in talks with potential private buyers. That was no surprise since the private market bid for student housing has been strong in recent years.
Green Street’s Student Housing Commercial Property Price Index increased approximately 4 percent in the past 12 months compared to less than 1 percent growth registered in other major property types.
“Cap rates in 2018 have shown no sign of weakness in the face of rising interest rates, even for lower-quality assets,” according to a Green Street report. “Thus, student housing REITs have a real opportunity to proactively close prevailing NAV discounts.”
For EdR, which has missed its earnings guidance in the past, the sale gives it capital to fund its development pipeline.
“The development program was taking longer to stabilize,” says Alexander Goldfarb, Managing Director and the senior REIT analyst in the Research Department of Sandler O'Neill + Partners. “That weighed on the stock. They’ll go private and they will not have those quarterly public pressures.”
Overall, EdR’s run as a public company under EdR's Chief Executive Officer and Chairman of the Board of Directors Randy Churchey can be considered a success. Since the current EdR management team took over Jan. 1, 2010, EdR’s stockholders received a total stockholder return of 293 percent, according to the company’s calculations.
“I think Churchey did a great job of reinvigorating the company,” Goldfarb says. “He came in when the company was in a tough spot.”
This is the second major REIT privatization in less than a year for Greystar. Last year, the company, under the perpetual life fund, Greystar Growth and Income Fund, LP, bought Monogram Residential for approximately $3 billion.
Blackstone also has been adding to its Las Vegas portfolio. Since spring 2017, the New York-based investment firm has purchased at least nine apartment communities for $616 million, according to the Las Vegas Review-Journal.