Greystar kicks off core-plus fund with $3bn US REIT deal

The multifamily investment firm has agreed to acquire New York-listed Monogram Residential Trust for its maiden open-ended core-plus fund with backing from four marquee institutional investors.

Greystar Real Estate Partners is to seed its debut core-plus vehicle with the assets of New York-listed Monogram Residential Trust, which it has agreed to acquire in a $3 billion deal on Tuesday.

Under the terms of the merger agreement, which was unanimously approved by Monogram’s board, stockholders will receive $12 per share in cash, representing a premium of approximately 22 percent to Monogram’s closing stock price on July 3, 2017.

The deal for Monogram will see Greystar take on 13,674 units in 49 luxury apartment communities as well as more than 350 Monogram employees.

The deal also includes Monogram’s share of its two institutional co-investment joint ventures with PGGM and the Korean pension plan, NPS. The PGGM joint venture will be restructured, and the joint venture interests held by NPS will be purchased by Greystar separately for approximately $500 million.

According to sources familiar with the transaction, the transaction will be made using $1.8 billion of capital from the Greystar Growth and Income Fund as well as an additional $500 million equity co-investment alongside the fund.

So far, the Charleston, South Carolina-based multifamily investment firm has received commitments from leading institutional investors including APG, GIC, Ivanhoé Cambridge and PGGM.

Greystar is targeting returns of 10-12 percent gross, with yearly income returns of 5-6 percent, for the fund, the source said. The firm will limit its use of leverage in the fund to 50 percent loan-to-value of the portfolio.

JP Morgan Securities acted as exclusive financial advisor, and Jones Day as legal advisor to Greystar on this transaction. Goodwin advised Monogram Residential Trust.

Greystar is the largest operator of apartments in the US, managing more than 415,000 units in over 140 markets globally, with an aggregate estimated value of approximately $80 billion. The firm’s institutional investment management platform has nearly $17 billion in gross assets under management including more than $8 billion of developments.