Colonial Properties Trust is in negotiations to be sold to Mid-America Apartment Communities (MAA) to form one of the largest publicly traded REITs in the country.
Birmingham, Ala.–based Colonial will bring more than 35,000 apartment units into Memphis, Tenn.–based MAA’s portfolio to create a combined company of more than 85,000 apartments across 285 properties nationwide, according to an MAA news release announcing the proposed transaction Monday.
“The scale of the combined company will support accelerated growth and deployment of capital across our high-growth Sunbelt markets driving superior value-creation opportunity for our shareholders,” said H. Eric Bolton Jr., CEO of MAA.
The 10 largest markets for the new company will include Dallas–Forth Worth, Austin, and Houston, Texas; Atlanta; Raleigh and Charlotte, N.C.; Nashville, Tenn.; and Jacksonville, Tampa, and Orlando, Fla.
Under the acquisition, Colonial stock will be exchanged as 0.36 percent of an MAA share, creating an UPREIT. Former MAA investors will hold about 56 percent of the company while former Colonial equity holders will account for about 44 percent.
The proposed transaction was approved unanimously by both companies’ boards and is pending closing and approval from shareholders on both sides.
CEO of Colonial Thomas H. Lowder will join a newly formed board of directors that will include 12 members, five of which will be elected by the Colonial board.
Bolton, who is also chairman of the MAA board, will remain at the helm of the newly formed company.
The company will be headquartered in Memphis and operate as MAA.
MAA estimates a savings of about $25 million each year in general and administrative costs after the companies completely merge, which is expected to take about 18 months following the closing of the deal, the release states.
Adding more properties to MAA’s efficient operations platform is a good plan, says Paula Poskon, a senior research analyst with Robert W. Baird & Co.
MAA will be able to support the absorption of Colonial without many obstacles while also eliminating a key competitor in its acquisition space, she said.
“They have fairly strong operations—very efficient, a conservative management team, very strong balance sheet, excellent corporate governance, and a very strong board,” Poskon said.
Alexander Goldfarb, managing director of equity research of REITs for New York–based Sandler O’Neill + Partners, said he expected Colonial to be sold but the announcement came sooner than he had predicted.
“It definitely happened a few years sooner than we expected,” he said. “But, we thought at some point Colonial would get together with MAA. The two companies are complementary to one another both in portfolios and balance sheets.”