Independence Realty and Centerspace to Form $8.1B Multifamily REIT
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Centerspace and Independence Realty Trust (IRT) are merging together to form a multifamily REIT that holds an enterprise value of roughly $8.1 billion and expands access to major markets.
The definitive agreement has been approved by both apartment firms' Boards of Directors and gives IRT 78 percent equity control in the new company, with Centerspace owning 22 percent upon closing. Independence Realty Trust will continue trading on the New York Stock Exchange and the new entity will include its brand name. It's unclear if Centerspace will appear in the new name.
The new company will operate a combined portfolio that includes 44,454 apartment units across 163 multifamily communities in 17 states.
Importantly, Centerspace and IRT said that the deal will increase margins by scaling technology and operational initiatives on top of regional expansion. The two firms estimate that synergies each year will be about $24 million.
The pro forma equity capitalization is anticipated to come out to about $5 billion, with roughly 58 percent of the NOI estimated to be generated from Sun Belt markets. The rest of the pro forma NOI is projected to come 15 percent from the Mountain West and 27 percent from the Midwest, according to the companies. In addition, roughly 80 percent of the total NOI is expected to be generated from population centers that are forecasted to rank in the top quartiles for growth.
Moreover, IRT's value-added program is expected to unlock opportunities for future redevelopment of existing multifamily units. The program for the REIT has historically snagged a 16 percent return on investment.
"This transaction delivers compelling value for Centerspace shareholders, who will benefit from participation in a larger, more efficient enterprise with enhanced access to capital markets, and a meaningful reduction in leverage," Anne Olson, president and CEO of Centerspace, said in a statement.
"Our complementary portfolio of high-quality Midwest and Mountain West apartment communities is located in markets experiencing accelerating migration and strong employment growth — this is a natural fit with IRT's scaled operating platform and proven value creation strategies."
The deal is set to close as early as the fourth quarter, subject to stockholder approval, customary conditions and lender consents.
Source: GlobeSt/ALM