Independence Realty Trust and Steadfast Apartment Merge

Independence Realty Trust (IRT) and Steadfast Apartment REIT (STAR) have announced a merger that will have a pro forma enterprise value of $7 billion and create a combined company that will own approximately 38,000 apartment units across 131 communities in 16 states. It will also become a top three publicly traded multifamily REIT focused on the Sunbelt region.

Under the terms of the agreement, STAR will merge with and into IRT, with IRT continuing as the surviving public company after the transaction closes in the fourth quarter. The new company is slated to have a pro forma equity market capitalization of approximately $4 billion. Morrison & Foerster LLP advised Steadfast Apartments in the deal.

The combined companies’ approximately 38,000 units will be based in urban and suburban locations in Georgia, North Carolina, Tennessee, Kentucky, Ohio, Oklahoma, Indiana, Texas, Florida, South Carolina, Missouri, Alabama, Colorado, Kansas, Illinois, and Virginia. Its ten largest markets by unit count would be Atlanta, Dallas/Ft. Worth, Denver, Oklahoma City, Louisville, Columbus, Indianapolis, Raleigh-Durham, Houston, and Memphis.

“The combination of IRT and STAR’s highly complementary portfolios will create a leading multifamily REIT in the attractive Sunbelt region, that we believe will be well-positioned to unlock significant value and improve our market diversification,” said Scott F. Schaeffer, IRT’s Chairman and CEO in a prepared statement. “We expect to realize notable economies of scale and synergies, develop a more competitive operating platform and further capitalize on our redevelopment initiative.”

The companies say that the benefits of the merger will include enhanced portfolio reach and diversification across high-growth Sunbelt markets, an expanded value add pipeline, operational savings, an immediate benefit to IRT’s core FFO per share, increased scale and increased financial strength and flexibility.

Following the merger, Schaeffer will continue to serve as Chairman of the Board of Directors and CEO. James J. Sebra will continue to serve as CFO of the combined company, while Farrell Ender will continue to serve as president. Ella S. Neyland, currently STAR’s president, CFO and treasurer, will be the chief operating officer. 

The deal illustrates the ever-growing competitiveness of the apartment industry as well as larger forces that are propelling CRE mergers and acquisitions. 

In June, David Bonser, co-head of Hogan Lovells’ corporate and finance practice in the Americas, said that he thought there would be more merger-and-acquisition activity and market consolidation in the REIT space coming out of the pandemic.

“I’ve been in this space for almost 30 years now,” Bonser said in an earlier interview. “You always think there’s going to be increased activity, and then it often never pans out. But I do think you’re going to see increased activity over the next 12 months.”

While Bonser said most of the action will likely happen in the hard-hit retail sector, he did see migration changing things in apartments.

“In most cases, people are moving out to the suburbs, either for single-family residential or more of the garden-style apartments,” Bonser said in an earlier interview.. “The suburban multifamily product has really seen a resurgence because of this. Between the single-family residential stuff, as well as the multifamily in the suburbs, there’s going to be some real interest in the suburbs.”