Lone Star Goes on Mega Shopping Spree

Lone Star Funds has gone and gotten itself a major multi-family REIT based in Rochester, N.Y.
Edward Pettinella

Edward Pettinella, Home Propertis

Home Properties Inc., a major multi-family REIT based in Rochester, N.Y., has agreed to be acquired by an affiliate of global private equity firm Lone Star Funds, of Dallas, in a transaction worth about $7.6 billion, Home Properties announced Monday. On completion of the all-cash transaction, Home Properties, currently publicly traded, will become a privately held company.

The acquisition, Hugh Ward, co-head of real estate investments at Lone Star Funds, said in a release, “is consistent with our strategy of buying primarily Class B apartments, including workforce housing, located in in-fill markets with strong underlying fundamentals.”

(In late September, Lone Star Funds acquired a 64-property, 20,439-unit apartment portfolio from Bell Partners Inc. and DRA Advisors L.L.C. for more than $1.8 billion.)
Lone Star Funds reportedly has received $6.1 billion of fully committed financing from Goldman, Sachs & Co.

In a second transaction, Home Properties has agreed to contribute a portfolio of up to six properties containing up to 3,246 units to UDR Inc., a $13 billion multi-family REIT based in metro Denver, in exchange for a combination of cash and newly issued units of a newly formed subsidiary of UDR.
Neither Home Properties nor Lone Star Funds would provide additional information about the two planned transactions.
Lone Star Funds will acquire all of Home Properties’ outstanding common stock for $75.23 per share, a price that represents a premium of about 9 percent over the REIT’s unaffected closing stock price on April 24.

“We believe this transaction with Lone Star Funds provides our stockholders with compelling value for their investment, consistent with our long-term strategy,” Home Properties president & CEO Edward Pettinella said in the release.

The Home Properties board has unanimously approved the merger agreement and recommended its approval by stockholders. The transaction is expected to close in the fourth quarter.

BofA Merrill Lynch acted as financial advisor and Hogan Lovells U.S. L.L.P. acted as legal advisor to Home Properties.
Goldman, Sachs & Co. acted as exclusive financial advisor to Lone Star. Gibson, Dunn & Crutcher L.L.P. acted as corporate legal advisor, Hunton & Williams L.L.P. acted as real estate legal advisor, and Skadden, Arps, Slate, Meagher & Flom L.L.P. acted as tax legal advisors to Lone Star Funds.