Blackstone Invades Sun Belt With $5.8B Deal for Apartment Portfolio

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Blackstone Real Estate Income Trust plans to buy multifamily owner Preferred Apartment Communities in an all-cash transaction valued at approximately $5.8 billion.

The deal brings 40 rental apartment properties with about 12,000 units in Georgia, Florida, North Carolina and Tennessee under the ownership of the New York-based Blackstone and sends a message about investor demand for multifamily properties in Sun Belt states, The Wall Street Journal first reported

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Jacob Werner, co-head of Americas acquisitions for Blackstone, said that the portfolio not only taps into the housing market in the South, but offers significant opportunities for the company to leverage retail income.

“Preferred Apartment Communities and its portfolio of high-quality multifamily assets in key Sun Belt markets … [represent] a significant majority of the company’s value,” Werner said in a statement. “Investing using [Blackstone’s] perpetual capital will enable us to be long-term owners of these vibrant communities.”

The sale, unanimously approved by Preferred Apartment’s board of directors, is expected to close in the second quarter of this year subject to approval by Preferred Apartment stockholders, according to WSJ. The merger agreement —in  which Blackstone will pay $25 per stock per share — gives Preferred Apartment a 30-day period to market the company to other possible bidders

“This transaction is an excellent outcome for our stockholders and the culmination of the hard work our first-class team has done over the past few years to simplify and refocus our portfolio,” Joel Murphy, Preferred Apartment’s CEO, said in a statement.

Preferred Apartment anticipates that an existing team from their firm will continue to manage the properties with support from Blackstone’s vertically integrated property management and operations team.

The purchase price represents a premium of 39 percent over the closing stock price on Feb. 9, and a premium of about 60 percent on the 90-day volume-weighted average price through that date, according to Blackstone.

Shareholders of each series of Preferred Apartment’s preferred stock will also receive a $1,000 per share liquidation preference as well as accrued — but unpaid — dividends, Blackstone said.

JLL, BofA Securities, Lazard Frères & Co. and Wells Fargo Securities are serving as Blackstone’s financial advisers. Goldman Sachs is the lead financial adviser for Preferred Apartment alongside KeyBanc Capital Markets and King & Spalding while Vinson & Elkins is its legal counsel.

This would not be the first multibillion-dollar deal for Blackstone since ringing in the new year.

In late January, it announced a similar deal to buy Resource REIT in a $3.7 billion deal, giving Blackstone another 42 garden-style apartment communities across 13 states.

Blackstone took on the Philadelphia-based real estate investment trust’s debt through a common stock purchase of $14.75 per share, pulling more than 12,600 apartments into its gravity well of influence. The deal is expected to close in the second quarter of 2022.

Mark Hallum can be reached at mhallum@commercialobserver.com.