Home News Three Steadfast REITs to Merge in $3.3 Billion Transaction

Three Steadfast REITs to Merge in $3.3 Billion Transaction

Steadfast Apartment REIT Inc., Steadfast Income REIT Inc, and Steadfast Apartment REIT III Inc., three affiliated publicly registered non-traded REITs, agreed to merge to create a combined company with approximately $3.3 billion in gross real estate assets.

Steadfast Apartment REIT Inc., Steadfast Income REIT Inc, and Steadfast Apartment REIT III Inc., three affiliated publicly registered non-traded REITs, agreed to merge to create a combined company with approximately $3.3 billion in total real estate assets.

Steadfast Apartment REIT plans to acquire the two REITs in separate stock-for-stock, tax-free transactions, and the combined company expects to maintain its focus of multifamily properties with an emphasis on moderate income apartments.

The transactions are expected to close in the first quarter of 2020, if approved by shareholders and other closing conditions. The merger transactions are expected to close concurrently but are not conditioned on the consummation of each other.

“We believe the strategic merger of these three highly complementary portfolios with similar investment strategies will create an enhanced and diversified portfolio, concentrated in high growth markets,” said Rodney Emery, chairman of the three REITs. “We believe the enhanced size, scale and prominence of the combined portfolio will greatly improve our access to attractive capital sources, which can be used to drive future growth opportunities and potentially deliver enhanced liquidity options to stockholders.”

If the mergers occurred today, the combined portfolio would consist of 71 properties in 14 states with an average rent of $1,158. Based on occupancy as of June 30, 2019, the combined portfolio is expected to have an occupancy rate of 94 percent, an average age of 20 years and total real estate assets of $3.3 billion.

Steadfast Income REIT and Steadfast Apartment REIT III stockholders will receive 0.5934 and 1.43 shares, respectively, of Steadfast Apartment REIT common stock. This is equivalent to $9.40 per Steadfast Income REIT share and $22.65 per Steadfast Apartment REIT III share, based on Steadfast Apartment REIT’s most recent estimated value per share of $15.84.

Following the closing of the transactions, Steadfast Apartment REIT stockholders will own approximately 48.1 percent of the of the combined company, while Steadfast Income REIT and Steadfast Apartment REIT III stockholders will own 40.6 percent and 11.3 percent, respectively.

The Steadfast Apartment REIT board will add one independent director from the Steadfast Income REIT and Steadfast Apartment REIT III boards, increasing the number of directors from five to seven.

Steadfast Apartment REIT expects to continue distributions, which are currently equivalent to 6 percent annualized based on a purchase price of $15.00 per share, or $0.90 per share annually, and its distribution reinvestment plan will remain in effect.

The three REITs will limit quarterly share repurchases to requests made in connection with the death or qualifying disability of a stockholder.

Steadfast Income REIT and Steadfast Apartment REIT III have go-shop periods of 30 days and 45 days, respectively.

Steadfast Apartment REIT, Steadfast Income REIT and Steadfast Apartment REIT III invest in mid-tier apartment communities across the United States and are sponsored by Steadfast REIT Investments LLC, an affiliate of Steadfast Companies.

Steadfast Apartment REIT closed its $1 billion offering in March 2016 after launching in December 2013. The company raised $793.7 million as of the first quarter 2019 and continues to raise funds through its distribution reinvestment plan.

Steadfast Income REIT, which launched in July 2010, closed its $1 billion initial offering in December 2013 and raised $769.6 million investor equity. The company suspended its DRIP in the fourth quarter of 2014.

Steadfast Apartment REIT III Inc. closed its $1 billion primary offering at the end of August 2018 after raising $205.2 million in investor equity. The offering was declared effective in February 2016 and terminated its distribution reinvestment plan in February 2019.

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