Denver-based Apartment Investment and Management Co. (AIMCO), the largest apartment owner and management company, has agreed to purchase Los Angeles-based Casden Properties, a private REIT that owns 17,383 apartments, for $1.5 billion. The sale, which is expected to close in first-quarter 2002, has been approved by Casden shareholders. The approval of AIMCO shareholders is not required.
With the purchase of Casden, AIMCO will acquire 6,356 market-rate apartments in southern California, 1,381 of which still are under development, and 11,027 affordable-housing apartments in 25 states. Under the terms of the deal, AIMCO also will acquire National Partnership Investments Corp., a subsidiary of Casden that has an ownership interest in approximately 41,000 apartments. Additionally, AIMCO will issue $213 million in stock and securities to Casden’s ownership group, which consists of the company’s founder, chairman and CEO, Alan Casden, and an affiliate of New York-based Blackacre Capital Management.
In all, the deal will increase the number of apartments that AIMCO owns or manages from approximately 304,000 units to 363,000 units, according to AIMCO. The value of that portfolio will increase from $12.5 billion to $15 billion upon completion of the deal, according to the company.
In another component of the transaction, Alan Casden has formed Casden Development LLC. The current shareholders of the company, which features an initial capitalization of $320 million, are Alan Casden, AIMCO and Blackacre Capital Management. Casden Development will assume development responsibility for all of AIMCO’s project in metropolitan Los Angeles, and AIMCO will have an option to purchase apartment projects developed by the company.
UBS Warburg, a New York-based finance advisory firm, maintained its "buy" rating on AIMCO stock after the deal. "We think the Casden deal further validates the AIMCO business model of finding, working, and structuring difficult but attractive deals in a commodity-oriented sector," said a UBS Warburg report on the deal.
Robert Stevenson, a REIT analyst for New York-based Morgan Stanley Dean Witter & Co. who covers AIMCO, said the purchase is a good one in that it meets AIMCO’s goal of increasing its presence in southern California. However, "time will tell if they are able to execute on the financing," he said. "It’s mostly a debt deal." AIMCO only put a total of $217 million in cash into the deal.