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PALO ALTO, CA-Magazine Acquisition, the Morgan Stanley Real Estate-Onex Real Estate joint venture with a tentative agreement to acquire Town and Country Trust for $33.90 per share, has three days to match the $36-per-share offer by Oriole Partnership, an Essex Property Trust-led joint venture that includes UBS Wealth Management–North American Property Fund Ltd. and AEW Oriole Co-Investment LLC. The clock started this morning, when Town and Country made the official determination that the Oriole Partnership offer was indeed superior.

Town and Country owns and operates 38 apartment communities with 13,183 apartment homes in the Mid-Atlantic States and Florida. Essex Property Trust is a multifamily REIT with ownership interests in 26,800 units in 127 properties. Onex Real Estate, an affiliate of Toronto-based Onex Corp., was formed in January to invest in real estate assets in North America and New York-based Morgan Stanley Real Estate manages $38 billion of real estate on behalf of institutional clients.

Friday's pronouncement by Town and Country made no mention of Thursday's move by Berkshire Property Investors to top both bidders with a $37-per-share proposal, which as of noontime Friday had not become a definitive offer. Berkshire Property Advisors is a Boston-based private company with about 18,000 apartment units under management.

All offers are to acquire all of the outstanding common shares and limited partnership units of Baltimore-based Town and Country Trust. Town and Country Trust has about 17.5 million shares outstanding plus an additional 19.9 million partnership units, according to SEC filings. Including debt assumption, all three deals are valued between $1.3 billion and $1.4 billion.

In response to the Essex-led offer, Town and Country's board of trustees earlier this week provided non-public information to Oriole Partnership and said it would enter into discussions with the JV regarding the proposal. However, Town and Country's board of trustees also said it would continue to recommend the existing transaction with Magazine Acquisition.

Town and Country shareholders are scheduled to vote on the Magazine Acquisition merger agreement March 9. As a defense against such competing offers, the existing merger agreement with Magazine Acquisition allows it to match any higher proposal before Town and Country's board of trustees could change its recommendation or terminate the merger agreement in favor of a better one.

Oriole's higher offer--and likely Berkshire Property's offer as well--include an extra $20-million payment to cover the cost of Town and Country terminating its agreement with Magazine Acquisition. The Morgan Stanley-Onex JV issued a statement Tuesday, saying "We are currently reviewing our options, and we expect to make further announcements as appropriate."

The Morgan-Onex JV's $1.3-billion offer is comprised of $750 million in equity and $440 million for the assumption of mortgage debt, plus about another $100 million for convertible notes. Neither Berkshire nor Oriole Partnership is detailing their competing offers yet, but both are believed to be nearly identical to the Magazine Acquisition agreement--save for the higher per-share price.

Oriole Partnership's offer will remain open for acceptance by Town and Country until 1 p.m. on Feb. 8, the day after the Morgan-Onex JV must decide whether to match Oriole's offer. If the offer is accepted by TCT, it is anticipated that the proposed transaction will close in the first quarter of 2006, assuming it isn't trumped by that of Berkshire Property Investors.

Instant Insights /

GlobeSt.com UPDATE: TCT Puts Magazine Acquisition on the Clock

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