Greystar fund agrees to buy student housing giant EdR for $4.6 billion

A newly formed fund affiliated with Charleston’s Greystar Real Estate Partners has agreed to buy EdR, one of the country’s largest developers, owners and managers of college student housing, in an all-cash deal valued at about $4.6 billion including debt, EdR announced today.

EdR stockholders would receive $41.50 a share. That is 26.3% above the stock’s volume-weighted average price over the 90 days ending May 31 and 13.6% above its May 31 closing price, the last trading day before news stories speculated about a possible sale, according to EdR. EdR’s board approved the deal unanimously.

The buyer is Greystar Student Housing Growth and Income Fund LP, a perpetual-life fund. EdR’s properties will be its first holdings.

“EdR has one of the highest quality and best located student housing portfolios in the U.S., and it will seed Greystar’s newly formed flagship student housing-focused perpetual-life fund,” said Bob Faith, Greystar’s founder, chairman and CEO.

What EdR brings

EdR, based in Memphis, Tennessee, owns or manages 79 communities with more than 42,300 beds serving 50 universities in 25 states, according to the company. It had about 1,265 employees at the end of 2017, according to its annual report.

The company was incorporated in 2004 to carry on the student housing business of Allen & O’Hara Inc. It also runs the ONE Plan, a program in which EdR puts up its own money to build and renovate housing on campuses so universities can save their borrowing capacity for other projects, according to its annual report.

Faith said the program was a main attraction.

“EdR’s ONE Plan on-campus platform is an integral component that drove our interest and we are excited about the continued on-campus growth opportunities it provides,” he said.

Randy Churchey, EdR’s chairman and CEO, said the sale serves stockholders.

“For more than 50 years, EdR has been a pioneer in the student housing industry, partnering with some of America’s most prestigious universities to enhance and transform their campus housing and achieve their student success goals,” Churchey said. “As a public company, one of our priorities is to maximize stockholder value and we believe this transaction with Greystar accomplishes that goal.”

A Blackstone side deal

At the same time, a joint venture between an affiliate of Blackstone Real Estate Income Trust and a Greystar affiliate will buy a portfolio of EdR’s off-campus student housing near top universities, EdR said. The combined Greystar and EdR team will keep managing those properties.

JPMorgan Chase Bank has committed debt financing to Greystar’s new fund, and the deal does not depend on Greystar getting financing, EdR said.

EdR stockholders must approve the merger at a special meeting. The companies expect it to close in the second half of the year.

EdR will stop paying its regular quarterly dividends. If the deal closes after Oct. 15, stockholders would also get about $0.00435 a share for each day after that date until closing.

Room for a rival bid

In a video script for employees that EdR filed with the Securities and Exchange Commission, Churchey said other companies have a month to try to top Greystar’s offer.

“After this initial announcement, there is a 30-day process whereby other companies can attempt to make an offer,” he said.

If EdR ends the agreement for a better offer on or before July 25, it would owe a $50.6 million termination fee. After that, the fee rises to $118.1 million. The Greystar side would owe EdR $200 million in certain circumstances if it fails to close, according to the filing. Either side can walk away if the deal has not closed by Dec. 31.

BofA Merrill Lynch is advising EdR. J.P. Morgan Securities is advising Greystar.

Greystar’s growing reach

Greystar is the largest operator of apartments in the United States, managing more than 435,000 conventional units and student beds in over 150 markets worldwide, the company said. It has about $6 billion of student housing assets under management, making it the 10th-largest student housing operator in the U.S., the largest in Spain and the third-largest owner of student housing in the United Kingdom, according to the company.

In April, the National Multifamily Housing Council ranked Greystar the largest U.S. apartment manager for the eighth year in a row and the top apartment developer for the second straight year, Greystar said.

The EdR deal follows a similar one last year. A different Greystar-led perpetual fund, Greystar Growth and Income Fund, completed its purchase of Monogram Residential Trust, a Texas apartment company, in September in a deal valued at about $3 billion.

The merger agreement lists the Greystar fund’s address as 18 Broad St. in Charleston.