Elco Holdings Ltd. (TASE: ELCO), controlled by Gershon Salkind, has reported that US funds Starwood Capital Group and Milestone Apartments Real Estate Investment Trust have signed an agreement for the purchase of real estate fund Landmark Apartment Trust (LAT), which holds most of the Elco group's multifamily residential real estate business in the US.
The buyers will pay NIS 7.3 billion ($1.9 billion) gross for all of the shares in LAT. This sum includes taking on LAT's debt, plus the transaction costs. Completion of the deal, which reflects a net price per share for LAT of $8.17, is subject to several conditions, among them approval by LAT's shareholders meeting.
Before the deal, Elco held 38.4% of LAT. On completion, it will receive, via its Elco North America unit, free cash flow after costs and taxes of NIS 640 million ($167 million).
Elco began investing in multifamily real estate in the US in 2008, and has gradually raised its investment in this business. Up to the completion of the current deal, Elco has posted cumulative profits of NIS 480 million ($125 million) thanks to the enhanced value of the assets.
The current deal is will not have a material effect on Elco's profit and loss account or balance sheet, but, as mentioned, it will give the group free cash flow. The cumulative profits give an impressive average annual IRR of 23% on the assets that are the subject of the deal. Following the deal, Elco will remain with some a portfolio of some 5,700 residential units in multifamily housing complexes in the US.
Landmark Apartment Trust, Inc. is a multifamily real estate investment trust with assets consisting of mid-market, garden-style apartments primarily located in the South and certain Texas markets of the United States. Landmark owns or has an ownership position in approximately 24,000 apartment units and provides management services for an additional 1,700 units owned by affiliates.
Bank of America Merrill Lynch and Citigroup are acting as financial advisors to Elco
Published by Globes [online], Israel business news - www.globes-online.com - on October 25, 2015
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