Local Assets Part of Brookfield's $2.5B Purchase of Associated Estates

WASHINGTON, DC—The relentless pressure from activist shareholder Jonathan Litt has paid off: Associated Estates Realty Corp. announced yesterday 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 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.

The deal is a milestone for Litt and the general push among activist investors to prod companies into making changes that they say are to the benefit of investors.

While such companies have been in the headlines for a number of years in other sectors, especially technology, only recently have they begun to make inroads in commercial real estate.

"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."

Besides the larger implications for the industry, the deal also has significance on a local level as at least eight assets are trading hands.

They include the 504-unit Ashborough in Ashburn, VA; Westwind Farms, a 464-unit apartment complex, also in Ashburn; the 304-unit Riverside Station in Woodbridge, VA; the Belvedere, a 296-unit property in Richmond; Bristol at Ghent, a 268-unit property in Norfolk, VA; the 250-unit Carmel Vienna Metro in Fairfax; River Forest, which is 240 units in Chester, VA; 140 units in Bethesda, MD, at the 7001 Arlington at Bethesda.