It was an exciting ride while it lasted. The two-month bidding war over Town & Country Trust, a multifamily real estate investment trust based in Baltimore, appears to have finally come to an end. Town & Country will likely walk away with a $1.4 billion (€1.2 billion) buyout offer from the original suitor in the battle, Magazine Acquisition, a joint venture between Morgan Stanley Real Estate, Onex Real Estate and Sawyer Realty Holdings.
The events were set into motion in late 2004, when Town & Country's management began looking at the possibility of a buyout. In December of 2005 it accepted a bid of $33.90 a share from Magazine.
Oriole Partnership, a joint venture between Essex Property Trust, UBS Wealth Management and AEW Oriole, countered with an offer of $36 per share. Then a third potential buyer, Berkshire Property Advisors of Boston, entered the fray, lobbing in a bid of $37 a share in early February. Bidding continued at a rapid pace, sending the public shares of Town & Country soaring. In the end, Magazine won out with its final bid of $40.20 a share on February 17 as Oriole announced it was dropping out.
The deal will mark the first major investment for Onex Real Estate, which was formed by the Toronto-based private equity firm Onex in January of 2005. The group is led by Michael Dana, former cohead of US real estate investment banking at CSFB.
According to industry analysts, the bidding race is evidence of the nationwide interest in multi-family real estate.
“There is a stability factor for multi-family real estate,” says Richard Anderson, a senior real estate analyst at Harris Nesbitt in New York. “People need to have a roof over their heads to live—there is always a need for entry-level housing.”
He said Town & Country attracted special attention because it has properties in the mid-Atlantic, an attractive region. In addition, many of the properties are located at convenient interchanges near the Baltimore Beltway.
However Anderson said he was surprised by the rapid escalation in the bidding war. “I thought the original bid was an appropriate bid,” he said. “You look at some of the assets and they're pretty old. You wonder, is this a worthwhile investment?”
“Certainly there's something behind the scenes that we are not all seeing,” he continued. “We don't have the advantage of the confidential information that they do, so we're not in a place where we can criticize. But it took us by surprise.”