UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant
To Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 11, 2015
Independence Realty Trust, Inc.
(Exact name of registrant as specified in its charter)
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Maryland |
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001-36041 |
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26-4567130 |
(State or other jurisdiction
of incorporation) |
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(Commission
File Number) |
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(I.R.S. Employer
Identification No.) |
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Cira Centre, 2929 Arch Street, 17th Floor, Philadelphia, Pennsylvania |
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19104 |
(Address of principal executive offices) |
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(Zip Code) |
(Registrants telephone number, including area code): (215) 243-9000
Not Applicable
Former
name or former address, if changed since last report
Check the appropriate box below
if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
On May 11, 2015, Independence Realty Trust, Inc. (IRT) issued a press
release announcing that it has entered into a definitive merger agreement (the Merger Agreement) with Trade Street Residential, Inc. (TSRE), a Maryland corporation, pursuant to which, among other things, TSRE
will merge with and into IRT (the Merger) creating a leading, regional market focused, multifamily real estate investment trust (REIT). A copy of the press release is attached as Exhibit 99.1 hereto.
IRT also prepared a slide presentation for investors regarding the Merger. A copy of the slide presentation is attached as Exhibit 99.2 hereto.
Cautionary Statement Regarding Forward-Looking Statements
This Current Report on Form 8-K may include forward-looking statements within the meaning of Section 27A of the Securities Act and
Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements, which are based on current expectations, estimates and projections about the industry and markets in which IRT and TSRE operate and beliefs of and
assumptions made by IRT management and TSRE management, involve uncertainties that could significantly affect the financial results of IRT or TSRE or the combined company. Words such as expects, anticipates,
intends, plans, believes, seeks, estimates, variations of such words and similar expressions are intended to identify such forward-looking statements, which generally are not historical in
nature. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements. These statements are not guarantees of future performance and involve certain
risks, uncertainties and assumptions that are difficult to predict. Although IRT believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, IRT can give no assurance that its expectations will be
attained and, therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Some of the factors that may affect outcomes and results include, but are not limited to:
(i) the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement, (ii) the inability to complete the Merger or failure to satisfy other conditions to completion of the Merger,
(iii) the inability to complete the Merger within the expected time period or at all, including due to the failure to obtain the approval of TSREs stockholders or IRTs stockholders, or the failure to satisfy other conditions to
completion of the Merger, (iv) risks related to disruption of managements attention from the ongoing business operations due to the proposed Merger, (v) the effect of the announcement of the proposed merger on IRTs or
TSREs relationships with their respective customers, tenants, lenders, operating results and businesses generally, (vi) changes in financial markets and interest rates, or to the business or financial condition of either company or
business, (vii) availability of financing and capital, (viii) risks associated with acquisitions, including the integration of the combined companies businesses, (ix) maintenance of REIT Status, (x) the performance of
TSREs portfolio and IRTs portfolio, and (xi) those additional risks and factors discussed in reports filed with the Securities and Exchange Commission (SEC) by IRT and TSRE from time to time, including those
discussed under the heading Risk Factors in their respective most recently filed reports on Forms 10-K and 10-Q. Neither IRT nor TSRE undertakes any duty to update any forward-looking statements contained herein, except as may be
required by law.
Important Information For Investors And Stockholders
This communication does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any securities or a solicitation of any vote or
approval. This communication relates to a proposed business combination between IRT and TSRE. In connection with this proposed business combination, IRT and/or TSRE may file one or more proxy statements, registration statements, proxy
statement/prospectus or other documents with the SEC. This communication is not a substitute for any proxy statement, registration statement, proxy statement/prospectus or other document IRT and/or TSRE may file with the SEC in connection with the
proposed transaction. INVESTORS AND SECURITY HOLDERS OF IRT AND TRADE STREET ARE URGED TO READ THE PROXY STATEMENT(S), REGISTRATION STATEMENT(S), PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS THAT MAY BE FILED WITH THE SEC CAREFULLY AND IN THEIR
ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Any definitive proxy statement(s) (if and when available) will be mailed to stockholders of TSRE and/or IRT, as applicable. Investors and security holders
will be able to obtain free copies of these documents (if and when available) and other documents filed with the SEC by IRT and/or TSRE through the website maintained by the SEC at http://www.sec.gov. Copies of the documents filed with the SEC by
IRT will be available free of charge on IRTs internet website at http://www.irtreit.com or by contacting IRTs Investor Relations Department by email at aviroslav@irtreit.com or by phone at +1-215-243-9000. Copies of the documents filed
with the SEC by TSRE will be available free of charge on TSREs internet website at http://www.tradestreetresidential.com or by contacting TSREs Investor Relations Department by email at ir@trade-street.com or by phone at
+1-786-248-6099.
Participants in Solicitation
IRT,
TSRE, their respective directors and certain of their respective executive officers may be considered participants in the solicitation of proxies in connection with the proposed transaction. Information about the directors and executive officers of
IRT is set forth in its Annual Report on Form 10-K for the year ended December 31, 2014, which was filed with the SEC on March 16, 2015, and its proxy statement for its 2015 annual meeting of stockholders, which was filed with the SEC on
April 7, 2015. Information about the directors and executive officers of TSRE is set forth in its Annual Report on Form 10-K/A for the year ended December 31, 2014, which was filed with the SEC on March 25, 2015. These documents can
be obtained free of charge from the sources indicated above. Additional information regarding the participants in the proxy solicitations and a description of their direct and indirect interests, by security holdings or otherwise, will be contained
in the proxy statement/prospectus and other relevant materials to be filed with the SEC when they become available.
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Item 9.01. |
Financial Statements and Exhibits |
(d) Exhibits.
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99.1 |
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Press Release of Independence Realty Trust, Inc., dated May 11, 2015. |
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99.2 |
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Presentation of Independence Realty Trust, Inc., dated May 11, 2015. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
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Independence Realty Trust, Inc. |
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May 11, 2015 |
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By: |
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/s/ James J. Sebra |
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Name: |
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James J. Sebra |
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Title: |
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Chief Financial Officer and Treasurer |
-5-
Exhibit Index
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Exhibit No. |
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Description |
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99.1 |
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Press Release of Independence Realty Trust, Inc., dated May 11, 2015. |
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99.2 |
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Presentation of Independence Realty Trust, Inc., dated May 11, 2015. |
Exhibit 99.1
INDEPENDENCE REALTY TRUST ANNOUNCES DEFINITIVE MERGER AGREEMENT TO ACQUIRE TRADE STREET RESIDENTIAL
PHILADELPHIA, PA and AVENTURA, FL, May 11, 2015 Independence Realty Trust, Inc. (IRT) (NYSE MKT: IRT) and Trade Street
Residential, Inc. (Trade Street) (NASDAQ: TSRE) jointly announced that IRT and TSRE have signed a definitive merger agreement pursuant to which IRT has agreed to acquire all of the outstanding common stock of Trade Street for a mix of
cash and stock, creating a leading, regional market focused, multifamily REIT.
Under the terms of the definitive merger agreement, IRT will pay each
Trade Street stockholder $3.80 in cash and 0.4108 of newly issued IRT common stock, subject to adjustment as described below. Based on the agreed upon Reference Price of $9.25 for IRT shares, this offer represents the equivalent of $7.60
in value to Trade Street stockholders. The transaction is expected to close in the third quarter of 2015, subject to customary closing conditions including the approval of both IRT and Trade Street stockholders.
Upon consummation of the merger, IRT will significantly increase its scale and improve the quality of its portfolio while accelerating its market penetration
in key regional markets and realizing immediate financial benefits.
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Increased scale IRTs number of properties will increase from 31 to 50* resulting in a 55% increase in units to 14,044*. The combined scale will provide an enhanced platform to continue to pursue
accretive acquisitions and transformational opportunities. |
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Improved portfolio quality the addition of Trades Streets high-quality Class A apartment communities will reduce IRTs average property age from 25 years to 20 years while improving
average base rents, occupancy levels and operating margins on the expanded platform. |
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Accelerates market penetration the addition of Trade Streets highly-complementary portfolio will expand IRTs geographic diversity into targeted regions in eight new markets, and also enhance
IRTs presence in three existing markets, to create a leading non-gateway multifamily platform in select regional markets in the United States. |
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Immediate financial benefits the transaction is expected to be accretive to 2016 Core FFO and AFFO per share, with meaningful identified run-rate cost savings and NOI upside from value-add capex.
Additionally, with a stronger balance sheet and lower cost of capital, IRT will be better positioned to drive future growth and increase its current quarterly dividend. |
Upon completion of the transaction, Scott Schaeffer will continue to serve as Chairman and CEO of IRT. Mack Pridgen, Chairman of Trade Street, and Richard
Ross, CEO of Trade Street, will join IRTs board of directors, which will be expanded from five members to seven members.
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Pro forma for IRTs acquisition of 236-unit multifamily property in Indianapolis, Indiana on May 1, 2015. |
Scott Schaeffer, Chairman and CEO of IRT, stated, We are pleased to announce the acquisition of Trade
Street, which will accelerate our expansion strategy and significantly strengthen our position as a leading regional multifamily operator across select target markets in the United States. This high quality portfolio of luxury, class A apartment
communities will immediately increase our average occupancy levels and average base rents, and we have additional value-creating opportunities in progress to drive further improvement in our operating results. We also expect to generate increased
operating efficiencies and achieve synergies on our larger platform which should result in stronger margins and cash flows. Upon completion of the deal, our expanded business will be even better situated to continue to pursue accretive acquisitions
and transformational opportunities to create additional shareholder value.
Richard Ross, CEO of Trade Street, commented, Building on our
successful accomplishments since our IPO in May 2013, we are also pleased to have reached this agreement with IRT. We believe our combined business will be better positioned to further expand our modern portfolio of well-located apartment
communities and capitalize on the improving fundamentals in our attractive markets across the Southeast and Texas.
The transaction has been
approved by the board of directors of both IRT and Trade Street. In addition, in connection with the merger agreement, RAIT Financial Trust (NYSE: RAS), which, with is affiliates and subsidiaries, collectively own approximately 23% of IRTs
commons stock, has entered into a voting agreement pursuant to which it has committed to support the transaction. Also in connection with the merger agreement, certain affiliates of Senator Investment Group LP and Monarch Alternative Capital LP,
which own approximately 25.4% and 23.0%, respectively, of Trade Streets common stock, have entered into voting agreements pursuant to which they have committed to support the transaction. Under the definitive merger agreement, IRTs
shares of common stock have been valued at the Reference Price of $9.25 per share, representing a fixed exchange ratio of 0.4108 shares of IRTs common stock for each share of Trade Street common stock. The Reference Price represents a 1%
premium to the 45-day VWAP of IRTs stock price. Based on the Reference Price, IRT expects to issue approximately 16.1 million shares of IRT common stock and OP units to Trade Street common stockholders and unit holders.
IRT has secured $500 million of committed financing for this transaction.
IRT has the option to increase the cash portion of the consideration from $3.80 per share of Trade Street common stock up to $4.56 per share of Trade Street
common stock with a corresponding decrease in the stock portion of the merger consideration as provided for under the terms of the merger agreement, in which case the exchange ratio will be adjusted to reflect the new consideration mix.
Upon completion of the merger, the company will retain the Independence Realty Trust name and will trade under the ticker symbol IRT (NYSE MKT). Following the
close of the transaction, the combined companys corporate headquarters will be located in Philadelphia, PA.
Deutsche Bank acted as exclusive financial advisor, and Pepper Hamilton acted as legal advisor to Independence
Realty Trust. JP Morgan acted as exclusive financial advisor and Morrison & Foerster LLP and Venable LLP acted as legal advisors to Trade Street Residential.
About Independence Realty Trust, Inc.
Independence
Realty Trust, Inc. (NYSE MKT: IRT) is a real estate investment trust that seeks to own well-located apartment properties in non-gateway markets that support strong occupancy and the potential for growth in rental rates. IRT seeks to provide
stockholders with attractive risk-adjusted returns, with an emphasis on distributions and capital appreciation. Subsidiaries of RAIT Financial Trust (NYSE: RAS) serve as IRTs external advisor and property manager and RAIT affiliates
collectively own approximately 23% of IRTs outstanding common stock.
About Trade Street Residential, Inc.
Trade Street Residential, Inc. is a vertically integrated and self-managed real estate investment trust focused on acquiring, owning, operating and managing
conveniently located, garden-style and mid-rise apartment communities in mid-sized cities and suburban submarkets of larger cities primarily in the southeastern United States, including Texas.
Important Information Will be Filed with the SEC
IRT plans to file with the SEC a Registration Statement on Form S-4 in connection with the transaction. IRT and Trade Street plan to file with the SEC
and mail to their respective stockholders a Joint Proxy Statement/Prospectus in connection with the transaction. The Registration Statement and the Joint Proxy Statement/Prospectus will contain important information about IRT, Trade Street, the
transaction and related matters. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT AND THE JOINT PROXY STATEMENT/PROSPECTUS CAREFULLY WHEN THEY ARE AVAILABLE.
Investors and security holders will be able to obtain free copies of the Registration Statement and the Joint Proxy Statement/Prospectus and other documents
filed with the SEC by IRT and Trade Street through the web site maintained by the SEC at www.sec.gov or by phone, email or written request by contacting the investor relations department of IRT or Trade Street at the following:
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IRT |
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Trade Street |
Cira Centre |
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19950 W. Country Club Drive |
2929 Arch Street, 17th Floor |
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Suite 800 |
Philadelphia, PA 19104 |
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Aventura, Florida 33180 |
Attention: Investor Relations |
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Attention: Investor Relations |
215-243-9000 |
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786-248-6099 |
aviroslav@irtreit.com |
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ir@trade-street.com |
IRT and Trade Street, and their respective directors and executive officers, may be deemed to be participants in
the solicitation of proxies in respect of the transactions contemplated by the merger agreement. Information regarding the directors and executive officers of IRT is contained in IRTs Form 10-K for the year ended December 31, 2014 and its
proxy statement filed on April 7, 2015, which are filed with the SEC. Information regarding Trade Streets directors and executive officers is contained in Trade Streets Form 10-K/A for the year ended December 31, 2014, which is
filed with the SEC. A more complete description will be available in the Registration Statement and the Joint Proxy Statement/Prospectus.
This
communication shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or
sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act
of 1933, as amended.
Forward-Looking Statements
This press release may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as may, trend, will,
expect, intend, anticipate, estimate, believe, continue, seek or other similar words. Because such statements include risks, uncertainties and contingencies, actual
results may differ materially from the expectations, intentions, beliefs, plans or predictions of the future expressed or implied by such forward-looking statements. These risks, uncertainties and contingencies include, but are not limited to, those
disclosed in IRTs filings with the Securities and Exchange Commission. IRT undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events, except as may be required by law.
Independence Realty Trust, Inc.
Investor Relations
Andres Viroslav
215-243-9000
aviroslav@irtreit.com
Trade Street Residential, Inc.
Investor Relations
Stephen Swett
786-248-6099
ir@trade-street.com
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Creating a leading regional market
multifamily platform
May 2015
Exhibit 99.2 |
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2
Disclaimer
This presentation may include forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. These forward-looking statements which are based on current expectations, estimates and
projections about the industry and markets in which Independence Realty Trust, Inc. (IRT) and Trade
Street Residential, Inc. (TSRE) operate and beliefs of and assumptions made by IRT
management and TSRE management, involve uncertainties that could significantly affect the financial results of IRT or
TSRE or the combined company. Words such as expects, anticipates,
intends, plans, believes, seeks, estimates, variations of such words and similar expressions are intended to identify such
forward-looking statements, which generally are not historical in nature. Such forward-looking
statements include, but are not limited to, statements about the anticipated benefits of the business combination
transaction involving IRT and TSRE, including future financial and operating results (such as FFO), and
the combined companys plans, objectives, expectations and intentions. All statements that address
operating performance, events or developments that we expect or anticipate will occur in the future
including statements relating to expected synergies, improved liquidity and balance sheet strength are
forward-looking statements. These statements are not guarantees of future performance and involve
certain risks, uncertainties and assumptions that are difficult to predict. Although we believe the
expectations reflected in any forward-looking statements are based on reasonable assumptions, we
can give no assurance that our expectations will be attained and therefore, actual outcomes and results
may differ materially from what is expressed or forecasted in such forward-looking statements. Some
of the factors that may affect outcomes and results include, but are not limited to: (i) national, regional and
local economic climates, (ii) changes in financial markets and interest rates, or to the business or
financial condition of either company or business (iii) changes in market demand for rental apartment homes
and competitive pricing, (iv) risks associated with acquisitions, including the integration of the
combined companies businesses, (v) maintenance of real estate investment trust (REIT) status, (vi) availability
of financing and capital, (vii) risks associated with achieving expected revenue synergies or cost
savings, (viii) risks associated with the companies ability to consummate the merger on the terms described or
at all and the timing of the closing of the merger; (ix) dividends are subject to the discretion of our
Board of Directors, and will depend on our financial condition, results of operations, capital requirements,
compliance with applicable laws and agreements and any other factors deemed relevant by our Board, (x)
risks associated with pursuing additional strategic acquisitions, including risks associated with the
need to raise large amounts of additional capital to fund the acquisitions, and (xi) those additional
risks and factors discussed in reports filed with the Securities and Exchange Commission (SEC) by IRT and
TSRE from time to time, including those discussed under the heading Risk Factors in their
respective most recently filed reports on Forms 10-K and 10-Q. Neither IRT nor TSRE undertakes any duty to
update any forward-looking statements appearing in this presentation.
This communication does not constitute an offer to buy or sell or the solicitation of an offer to buy
or sell any securities or a solicitation of any vote or approval. This communication relates to a proposed
business combination between Independence Realty Trust, Inc. (IRT) and Trade Street
Residential, Inc. (Trade Street). In connection with this proposed business combination, IRT and/or Trade Street may
file one or more proxy statements, registration statements, proxy statement/prospectus or other
documents with the SEC. This communication is not a substitute for any proxy statement, registration statement,
proxy statement/prospectus or other document IRT and/or Trade Street may file with the SEC in
connection with the proposed transaction. INVESTORS AND SECURITY HOLDERS OF IRT AND TRADE STREET
ARE URGED TO READ THE PROXY STATEMENT(S), REGISTRATION STATEMENT(S), PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS THAT MAY BE FILED WITH THE
SEC CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION. Any definitive proxy statement(s) (if and when available) will be mailed
to stockholders of Trade Street and/or IRT, as applicable. Investors and security holders will be able to obtain free copies of these documents (if and when available) and other
documents filed with the SEC by IRT and/or Trade Street through the website maintained by the SEC at
http://www.sec.gov. Copies of the documents filed with the SEC by IRT will be available free of charge
on IRTs internet website at http://www.irtreit.com or by contacting IRTs Investor Relations
Department by email at aviroslav@irtreit.com or by phone at +1-215-243-9000. Copies of the documents filed with
the SEC by Trade Street will be available free of charge on Trade Streets internet website at
http://www.tradestreetresidential.com or by contacting Trade Streets Investor Relations Department by email at
ir@trade-street.com or by phone at +1-786-248-6099.
IRT, Trade Street, their respective directors and certain of their respective executive officers may be
considered participants in the solicitation of proxies in connection with the proposed transaction.
Information about the directors and executive officers of IRT is set forth in its Annual Report on Form
10-K for the year ended December 31, 2014, which was filed with the SEC on March 16, 2015, and its
proxy statement for its 2015 annual meeting of stockholders, which was filed with the SEC on April 7,
2015. Information about the directors and executive officers of Trade Street is set forth in its Annual
Report on Form 10-K/A for the year ended December 31, 2014, which was filed with the SEC on March
25, 2015. These documents can be obtained free of charge from the sources indicated above.
Additional information regarding the participants in the proxy solicitations and a description of their
direct and indirect interests, by security holdings or otherwise, will be contained in the proxy
statement/prospectus and other relevant materials to be filed with the SEC when they become available.
SAFE HARBOR STATEMENT UNDER THE PRIVATE LITIGATION REFORM ACT OF 1995
IMPORTANT INFORMATION FOR INVESTORS AND STOCKHOLDERS
PARTICIPANTS IN SOLICITATIONS
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Transformative combination
IRT has entered into a definitive merger agreement to acquire TSRE
Accelerates IRTs regional market expansion strategy, creating one of the
leading regional market multifamily platforms
TSRE
assets
provide
enhanced
geographic
diversity
within
targeted
regions;
exposure
to
8
new
high
quality regional markets and increased presence in 3 existing markets
(a) Pro forma for acquisition of 236-unit property in Indianapolis,
Indiana on May 1, 2015. (b) Based on LTM 3/31/2015 financials.
(c) Based on 2015E NOI.
(d) Based on monthly dividend of $0.06 per month.
Source: Company filings
Combined
scale
will
provide
an
enhanced
platform
to
pursue
accretive
acquisitions
and
transformational
opportunities
Number
of
properties
increase
from
31
to
50
(a)
Number
of
units
increase
55%
from
9,055
to
14,044
(a)
Increased market capitalization will improve liquidity to shareholders
TSRE assets amongst the newest in the multifamily REIT space with average property
age of 11 years
Increases
operating
efficiency
with
pro
forma
NOI
margin
of
55%
(b)
Improves
portfolio
diversification
with
class
A
assets
now
constituting
45%
of
combined
company
(c)
Improves average base rents from $827 to $902 with additional upside from strong
leasing momentum and positive releasing spreads
TSRE same store NOI growth of 9% quarter-over-quarter for Q1 2015
Expected to be accretive to 2016 Core FFO and AFFO per share, based on management
estimates
Significant identified run-rate cost savings and NOI upside from value-add
capex
Strong balance sheet and lower cost of capital to drive future accretive
growth
Well
positioned
to
continue
to
grow
current
quarterly
dividend
of
$0.18
per
share
(d)
1
2
3
4
Enhanced
scale
Improved
portfolio
quality
Accelerates
market
penetration
Immediate
financial
benefit
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Transaction overview
Transaction
Independence Realty Trust, Inc. (IRT) has entered into a definitive
agreement to acquire all outstanding shares of Trade Street Residential,
Inc. (TSRE)
Senator Investment Group LP and Monarch Alternative Capital LP, who own ~25% and
~23% of TSRE, respectively, and RAIT Financial Trust, who owns ~23% of IRT,
have entered into a voting agreement supporting the transaction
IRT will expand its Board of Directors from 5 to 7 with the inclusion of Mack
Pridgen, Chairman of the TSRE Board, and Richard Ross, President and CEO of
TSRE Consideration
Cash consideration between $3.80 per share (50% cash) and $4.56 per share (60%
cash) (Cash Consideration) at IRTs election
Exchange ratio of 0.411x and 0.329x for 50% and 60% Cash Consideration,
respectively, based on the quotient of (i) $7.60 minus the Cash
Consideration over (ii) the $9.25 fixed exchange price Financing
commitments
IRT has secured $500 million of committed financing for this transaction
Dividend and
financial benefits
IRT expects to maintain its current quarterly dividend of $0.18 per share
(a)
Transaction is expected to be accretive to 2016E Core FFO and AFFO per share,
based on management estimates
Pro forma leverage of the combined company expected to be in-line with target
leverage levels
Potential to delever post transaction from organic growth and asset sales
Improved asset
management fee
structure
In conjunction with the transaction, the IRT and RAIT Boards have approved a new
asset management fee construct
Base asset management fee changed from 0.75% of total assets to 1.5% of cumulative
equity issued; expects to result in meaningful savings for the combined
company Synergy potential
Significant identified run-rate cost savings and NOI upside from value-add
capex Timing
Transaction expected to close during Q3 2015, subject to customary closing
conditions including shareholder approval of both IRT and TSRE
shareholders (a) Based on monthly dividend of $0.06 per month.
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The combination will provide enhanced scale
($ in millions)
Properties
(a)
31
19
50
Units
(a)
9,055
4,989
14,044
Markets
16
11
24
LTM Revenues
$63
$61
$124
LTM NOI
(b)
$33
$35
$68
Note: Market data as of 5/8/2015; financial and operating metrics as of
3/31/2015. (a) Portfolio data pro forma for the acquisition of
236-unit property in Indianapolis, Indiana announced on May 1, 2015.
(b) NOI defined as as-reported property operating revenues less property
level expenses. Source: Company filings
Combined company expected to have over $1.4 billion of total capitalization and over
$500 million of equity market capitalization
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and is a continuation of IRTs regional market expansion strategy
Oklahoma Portfolio
Purchase Date
February 28, 2014
MSA
Oklahoma City, OK
Average age
(b)
31 years
Number of Units
1,658
Acquisition Price
$65 million
Average Base Rent
(c)
$642
Occupancy
(c)
92%
Louisville Portfolio
Purchase Date
December 8, 2014
MSA
Louisville, KY
Average age
(b)
29 years
Number of Units
1,549
Acquisition Price
$162 million
Average Base Rent
(c)
$879
Occupancy
(c)
95%
Trade Street Residential
Announce Date
May 11, 2015
MSA
Various
Average age
(b)
11 years
Number of Units
4,989
Acquisition Price
~$650 million
Average Base Rent
(c)
$1,034
Occupancy
(c)
96%
1
(a) Pro forma for TSRE acquisition announced on May 11, 2015 and acquisition
of 236-unit property in Indianapolis, Indiana on May 1, 2015. (b)
Weighted average based on units. (c) As of 3/31/2015.
Source: Company filings, Real Capital Analytics
Since January 2014, IRT has acquired 40 properties totaling 11,254 units,
representing ~4x unit growth (a) |
|
7
Average portfolio age of public multifamily universe
(b)
The combination will result in improved operating margins, portfolio
quality and average age
Note: Financial and operating metrics as of 3/31/2015, unless otherwise
noted. (a) Based on 2015E NOI.
(b) Weighted average years based on units.
Source: Company filings, CoStar, Real Capital Analytics
2
A
73%
B
27%
B
47%
A
45%
C
8%
B
62%
A
25%
C
13%
39
31
25
20
17
14
13
12
11
Property class
breakdown
(a)
Average base rent
$827
$1,034
$902
Occupancy
94.0%
95.5%
94.5%
LTM NOI margin
52.9%
57.7%
55.3% |
|
TSREs assets have high occupancy and ABR
Fountains Southend
Millenia 700
Location
Orlando, FL
Year Built / Renovated
2012
Number of units
297
Year completed
2012
Average base rent
$1,226
Occupancy
97.0%
Average unit size (square feet)
952
Class A apartment building developed in
2012 and located in the South Central
submarket of Orlando
Strategically located just off Interstate 4, on
the ring road of The Mall at Millenia, which
consistently ranks as one of the top 10 malls
by sales per square foot in North America
Orlando is ranked by Forbes as the fourth
fastest growing city in America, with record
population gains of nearly 34.2% since 2000
(national average less than 10%)
2
Location
Charlotte, NC
Year Built / Renovated
2013
Number of units
208
Year completed
2013
Average base rent
$1,247
Occupancy
97.9 %
Average unit size (square feet)
844
Class A multifamily community located just
outside of downtown Charlotte, which boasts
65,000 employees and many entertainment
destinations
Located in one of the most favorable
submarkets in the Charlotte MSA
Key highlights
Key highlights
Note: Operating metrics as of 3/31/2015.
8 |
|
9
and will significantly enhance IRTs portfolio quality
Talison Row at Daniel Island
Miller Creek at Germantown
Location
Daniel Island, SC
Year Built / Renovated
2013
Number of units
274
Year completed
2013
Average base rent
$1,383
Occupancy
95.6%
Average unit size (square feet)
989
Class A apartment building developed in
2013 and located in Daniel Island
Island town with traditional neighborhoods
integrated with green spaces, open water
access, highly acclaimed golf courses and a
vibrant downtown core filled with fine dining
and office space
Desirable neighborhood demographics
with average household income exceeding
$100,000, and an average housing value of
$575,000
2
Location
Memphis, TN
Year Built / Renovated
2012 / 2013
Number of units
330
Year completed
2013
Average base rent
$1,117
Occupancy
97.9%
Average unit size (square feet)
1,049
Class A apartment community developed
in 2013, located in Memphis
Widely considered to be one of the most
affluent and best performing submarkets of
Memphis Strong demographics are driven by
Nonchonnah Office Corridor (which includes
the FedEx world headquarters), Baptist
Medical Complex, and numerous retail
locations
Great visibility from Winchester Road, with
immediate access to Bill Morris Parkway
Key highlights
Key highlights
Note: Operating metrics as of 3/31/2015. |
|
10
TSREs complementary portfolio increases IRTs geographic diversification,
adding exposure to 8 new high quality regional markets and increasing
presence in 3 existing markets Accelerates penetration of high-growth
regional markets TSRE market statistics
2015E
2019E CAGR
Market
Units
Pop.
growth
Job
growth
Asheville
(a)
252
2.1%
2.2%
Atlanta
(b)
864
1.8%
2.0%
Charleston
518
1.5%
1.1%
Charlotte
208
2.3%
2.0%
Chattanooga
295
0.9%
1.3%
Dallas
734
2.0%
2.4%
Greenville
346
1.4%
1.2%
Huntsville
178
1.4%
2.1%
Memphis
(b)
521
0.7%
1.1%
Orlando
297
2.7%
2.3%
Raleigh-Durham
(b)
776
2.1%
2.2%
Total
4,989
1.7%
1.8%
US average
1.0%
1.4%
3
Note: Portfolio data as of 3/31/2015.
(a) Data not available through REIS market research; Raleigh-Durham,
closest TSRE existing market, statistics applied. (b) Market with
existing IRT properties. (c) IRT markets not shown: Phoenix, Tucson,
and Denver. Source: Company filings, REIS
Existing
Independence
Realty
Trust
properties
(c)
Trade Street Residential |
|
11
The combined company will have one of the lowest G&A costs in the multifamily
industry Note: New IRT G&A includes asset management fees.
(a) Based on 2014A financial data, except for New IRT, which is
pro forma 2015E.
Source: Company filings
4
G&A as % of total assets
(a)
Average: 0.6%
As a part of the transaction, IRT and RAIT have agreed to change
the base asset management
construct from 0.75% of total assets to 1.5% of cumulative equity issued
Expected to result in meaningful cost savings for the combined company
Significant identified run-rate cost savings and NOI upside from value-add
capex Potential for additional upside from strong leasing momentum, positive
re-leasing spreads, and property management efficiencies
TSRE same-store NOI growth of 9% quarter-over-quarter for Q1
2015 1.4%
0.8%
0.8%
0.7%
0.7%
0.6%
0.4%
0.3%
0.3%
0.2%
0.6%
TSRE
CPT
PPS
AIV
UDR
HME
ESS
MAA
AVB
EQR
New IRT
Embedded growth opportunities and meaningful synergy potential
|
|
12
Enhanced scale
Improved portfolio quality
Accelerates market penetration
Immediate financial benefit
Transformative combination |
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