Starwood ups bid for multifamily REIT

The higher offer comes after a proxy advisory firm urged shareholders to vote against the $2.6bn deal last month.

Starwood Capital Group has increased its bid to purchase multifamily real estate investment trust Milestone Apartments REIT by 10 cents a share, the firm said last week. On Tuesday, shareholders voted to accept the offer.

Dallas-based Milestone had agreed to be acquired for $16.15 per share in mid-January in a deal valued at $2.6 billion, including debt. After shareholder pushback, Greenwich, Connecticut-based Starwood raised its purchase price to $16.25 per share, the firm said Wednesday. Excluding debt, the stock portion of the transaction increased from a value of $1.3 billion to $1.31 billion. The deal is expected to close on April 28.

Milestone owns 78 garden-style apartment properties located in 16 major metropolitan markets throughout the south-east and south-west US. After the deal closes, Starwood will own more than 109,600 units.

Last month, advisory firm Institutional Shareholder Services recommended shareholders vote against the deal in a report, writing “the transaction indicates speed and certainty were prioritized over price.”

However, another proxy advisor, Glass Lewis, recommended the deal, saying that “Starwood is able to offer greater value than other parties due to its geographic overlap with Milestone's assets, focus on the mid-market apartment segment, access to capital, and capacity to make a purchase of this size.”

Despite ISS’s report, Milestone urged its shareholders to vote for the acquisition. The REIT also moved its shareholder vote from March 7 to March 28.

In tandem with Starwood’s increased offer, Milestone executives agreed to “financial concessions and commitments” totaling more than $7 million.

Starwood and Milestone have worked together previously: in October 2015, the companies teamed up to buy Landmark Apartment Trust, a southern US-focused multifamily REIT, in a deal valued at $1.9 billion. Under the deal, Starwood acquired 63 Landmark properties, while Milestone took 15 assets and also served as the property manager for Starwood’s part of the portfolio.

Starwood manages $52 billion, according to its website. The firm is currently raising capital for both a new core-plus platform and its latest opportunistic fund, Starwood Opportunity Fund XI Global. It was unclear at press time through which vehicle Starwood would acquire Milestone.