While the deal is not a pure student housing play, it does illustrate the rapid maturation of this specialty niche in the real estate industry. Robin Kennedy, real estate and land use partner at Manatt, Phelps & Phillips, tells GlobeSt.com that student housing has changed almost beyond recognition over the last five to 10 years. Consolidation and its inevitable result--ever more competitive private sector companies--will usher in a new era of management and asset development, she says.
Yaacov Gross, head of Morrison & Foerster's real estate securities group, also agrees the consolidation this deal represents will aid the larger sector. "It will deliver greater operating efficiencies in what is a management-intensive niche," he tells GlobeSt.com.
From ACC's perspective, the deal is a chance to expand into new markets and--as Gross indicates--leverage economies of scale for better managerial efficiencies. In a statement CEO Bill Bayless says the acquisition will also provide it with a significant opportunity for accretion in asset value, the ability to self fund a portion of its owned development pipeline via strategic dispositions, and entry into 41 new collegiate markets, "creating opportunities for growth in each of our business segments."
By the time the deal is successfully completed, American Campus will own 83 student housing communities consisting of approximately 51,600 beds, have a JV interest in 23 properties totaling approximately 13,200 beds--including eight properties held by GMH in existing joint ventures--and provide third-party management of 26,600 beds. Together with its existing holdings, the company will be managing 144 properties consisting of 91,400 beds.
It is a deal with more than a few moving parts; Balfour Beatty's acquisition of GMH's military housing portfolio is just one part of the multi-structured transaction. To help fund the deal, American Campus Communities has also entered into an agreement with Fidelity Real Estate Group--which is acting on behalf of an institutional fund--to form a joint venture and transfer 15 GMH student housing properties to the venture with an estimated value of $326 million. American Campus will provide property management services for the properties and retain a minority interest in the venture, which is subject to closing conditions. The rest of the cash consideration will be provided by KeyBank National Association, which has committed to a $200-million term loan.
Under the terms of the merger agreement, each common share of GMH and each unit of GMH's operating partnership will receive approximately $5.53 in value based on the closing price of ACC's shares of common stock on Feb. 11. The merger agreement also calls for Joseph Macchione, GMH Communities' EVP and General Counsel, to join ACC's board. Merrill Lynch & Co. acted as exclusive financial advisor to American Campus. Locke Lord Bissell & Liddell LLP served as legal counsel to the company.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
