CLEVELAND—Associated Estates Realty Corp. appeared to end a struggle with investor Jonathan Litt yesterday when it announced that its board of directors had approved a $2.5 billion merger with an affiliate of Brookfield Asset Management. Since last year, officials from the apartment REIT had been under pressure from Litt to make a sale and in December they agreed to look for a buyer.
The Richmond Heights, OH-based company's portfolio consists of 56 apartment communities containing 15,004 units located in 10 states. According to Forbes, Litt was critical of “a large and persistent discount to its net asset value on public stock markets.” In response, in December 2014 the REIT's board said they were undertaking a thorough business review.
“After analyzing the company's strategy, assets and other opportunities, including running a process involving a number of qualified potential buyers, the board unanimously determined that this transaction is the best course of action to maximize shareholder value,” Jeffrey I. Friedman, chairman and chief executive officer said yesterday in a prepared statement. Company officials were not available for further comment.
The Brookfield affiliate will acquire all outstanding shares of common stock for $28.75 per share in cash, a 17% boost over Tuesday's closing price of $24.48.
“We are encouraged that the board of Associated Estates has chosen to enter into this transaction, which we believe is an outstanding outcome for all shareholders,” said Litt yesterday in a prepared statement. “Our goal at AEC was always to unlock the substantial discount the company has traded at relative to net asset value, and we are confident that this has now been achieved.”
The Toronto-based Brookfield is a global firm with more than $200 billion in assets under management with a focus on property, renewable energy, infrastructure and private equity. Brookfield Property Group, its largest investment platform, owns and operates portfolios in the multifamily, office, retail, industrial, and hotel sectors.
“We are pleased that Brookfield recognizes the value inherent in our income producing properties, development projects and the platform we have built,” Friedman added. “We are also excited that this transaction will deliver compelling, immediate and certain value to all Associated Estates shareholders."
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
