Grove Property Becomes Latest Equity Residential Target

HARTFORD, CT—Greater stability and improved access to capital are two major reasons Grove Property Trust (AMEX: GVE) has agreed to be acquired by Equity Residential Properties Trust, the chairman and president of the real estate investment trust said this week. “Being in business with a company that is national in scope is helpful in leveling some of the bumps in the road and keeping us competitive,” Grove’s Damon D. Navarro says in explaining the decision to join forces with Equity. With its holdings condensed in New England, Navarro says management was concerned Grove might be susceptible to regional fluctuations over the long haul and felt Equity’s position as the country’s leading multifamily REIT would bolster his firm’s ability to grow. Equity’s lower cost of capital, for example, should be a particular benefit, Navarro notes.

Founded in 1980, Grove currently has more than 6,000 apartment units in Connecticut, Maine, Massachusetts and Rhode Island. Under the $461-million agreement, Grove shareholders would receive about $17 per share in cash. The acquisition price includes $251 million in debt, of which Equity will assume some $244 million. Equity also has 19 multifamily properties in New England, but Navarro says he believes his company will continue to concentrate on the six-state region once the deal is completed. Structured as an UPREIT, Grove has traditionally targeted infill suburban locations, with a focus on acquiring and upgrading older properties.

New England “is our specialty,” Navarro says. “It’s part of the reason they bought our company, and I think they believe we can create value over the long term.” To date, Grove Property Trust has been among the better-performing operations of its kind, with SNL Real Estate Securities Monthly estimating its total return during the past three years at 110%. It was also the 10th best performing REIT on a total return basis in 1999 and has a current market capitalization of $320 million.