MAA, Colonial Properties Trust to Become One in $8.6B Merger

MAA and Colonial Properties Trust have made a multibillion-dollar pact that will change the rankings in the apartment REIT arena.

Station Square at Cosner’s Corner

MAA and Colonial Properties Trust have made a multibillion-dollar pact that will change the rankings in the apartment REIT arena. In an all-stock transaction valued at $8.6 billion, the companies will merge and, with a combined 84,772 units residential units, become the second largest publicly traded apartment REIT in the country.

Terms of the agreement call for each Colonial common share to be converted into 0.36 newly issued MAA common share, leaving the equity split in the new company at 56 and 44 percent in MAA’s equity holders’ favor. The resulting entity will be known as MAA and operate as an UPREIT. 

“You have two portfolios that have similar operating strategies in similar markets, they know each other very well and they have similar operating systems, so it makes a lot of sense logistically,” Michael Salinsky, a director with investment bank RBC Capital Markets, told Commercial Property Executive.

When all is said and done, the new MAA will have a gargantuan presence in the Sunbelt region, with large concentrations of assets in Dallas/Ft. Worth, which will account for 11.7 percent of the portfolio, as well as Atlanta, Austin, Raleigh, Charlotte, Nashville, Jacksonville, Tampa, Orlando and Houston. The REIT’s collection of 285 apartment communities –which includes MAA’s recently acquired 260-unit Station Square at Cosner’s Corner in Fredericksburg, Va.–will have an occupancy level of 96 percent and an average age of 15 years. Its portfolio will be second only to that of Equity Residential in size. 

“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,” H. Eric Bolton Jr., CEO of MAA, said in a press release. “In addition, through capitalizing on the strengths gained from the combination of the two platforms, we will enhance our ability to serve residents across the region, drive higher margins as a result of synergies and advantages generated by the merger, and enhance career opportunities for our associates.”

The benefits of uniting as a single entity are numerous. “These are also two firms that are competing against each other for big assets so they’ll have a little bit lower competition for acquisitions in their target markets,” Salinsky added.

MAA relied on legal guidance from Goodwin Procter L.L.P and Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C .in the agreement, while Colonial turned to Hogan Lovells and Burr & Forman L.L.P.  On board as financial advisor to MAA is J.P. Morgan, which is being advised by J.P. Morgan. BofA Merrill Lynch is providing financial guidance for Colonial.

The announcement of the planned merger comes roughly two decades after MAA and Colonial launched as public REITs. MAA kicked off in 1994, one year after Colonial Properties. If all goes as planned, the  two will come together as one major player in the multi-family sector during the third quarter of this year.