BY Fraser Tennant
In a transaction valued in the region of $7.6bn, global private equity firm Lone Star Funds has announced its intention to enter into a definitive agreement to acquire Home Properties, Inc., the publicly traded multifamily real estate investment trust.
Under the terms of the agreement, Lone Star Funds will acquire all of the outstanding common stock of Home Properties for $75.23 per share in an all-cash transaction. The agreement, which includes the assumption of existing debt, will, upon completion, see Home Properties become a privately held company.
“We are pleased to enter into an agreement to acquire Home Properties and look forward to working with their talented team to complete this transaction and integrate the Company's portfolio into Lone Star Funds' existing multifamily portfolio," said a delighted Hugh J. Ward III, co-head of real estate investments at Lone Star Funds.
“This is Lone Star Funds' second large, recent apartment purchase following the 2014 acquisition of a 64 property, 20,439 unit portfolio, and is consistent with our strategy of buying primarily Class B apartments, including workforce housing, located in in-fill markets with strong underlying fundamentals."
The Lone Star Funds/Home Properties definitive agreement does, however, contain a ‘go shop’ provision which allows the latter firm to solicit alternative proposals from third parties for 30 days from 22 June, the date of the announcement.
"The Home Properties team has built a great company, as reflected by our strong platform, unique assets, and differentiated business strategy," said Edward J. Pettinella, President and Chief Executive Officer of Home Properties. "We believe this transaction with Lone Star Funds provides our stockholders with compelling value for their investment, consistent with our long-term strategy."
Concurrent with the Lone Star Funds, Home Properties has also entered into an agreement to contribute a portfolio of up to six portfolios, totalling 3246 units, to UDR, Inc, a $13bn multifamily real estate investment trust, in exchange for cash and newly issued units.
But a potential threat to the dealmaking extravaganza has arisen in the past few days with the revelation that national securities firm Faruqi & Faruqi, LLP is investigating the board of directors of Home Properties over potential breaches of fiduciary duties in connection with the sale to Lone Star Funds.
However, for the present, the Lone Star Funds/Home Properties transaction is still expected to close in the fourth quarter of 2015.