Real estate investment trust Elme Communities is selling the bulk of its multifamily portfolio to Cortland for $1.6 billion in cash. The transaction is expected to close in the fourth quarter.
The sale of the 19-asset portfolio is the first step in Elme Communities’ liquidation and dissolution. It also intends to market its remaining nine multifamily assets comprising over 3,500 units as well as Watergate 600, an iconic office building in Washington, D.C., with the goal of completing these sales within the next 12 months.
After a deliberate evaluation process by the board’s transaction committee, it was determined the combination of the sale of assets to Cortland and the subsequent sale of the remaining assets is most likely to result in the greatest value for shareholders as compared with the company’s other strategic alternatives, including continuing to operate the business as an independent going concern, according to lead independent trustee Benjamin Butcher.
“… Despite our successful transformation into a focused multifamily platform with strong operating capabilities, market conditions have not allowed us to lower our cost of capital in a way that supports accretive growth,” said Elme president and CEO Paul McDermott. “We are pleased to have reached an agreement with Cortland that recognizes the greater value of these 19 Elme communities and their long-term potential when coupled with Cortland’s economies of scale. We believe Cortland will be an excellent steward of the properties and that this sale will facilitate a seamless transition of ownership, enabling continuity of operations for our residents and community teams, and continuing our legacy of customer service excellence.”
Elme noted shareholders would receive between $14.50 and $14.82 per share following the close of the sale.
This acquisition marks Cortland’s second large-scale transaction with a publicly traded REIT. In 2019, it became the largest apartment owner in the Dallas-Fort Worth metroplex with the purchase of Pure Multi-Family REIT for $1.2 billion in cash.
The 19-property portfolio comprises 5,800 units and is primarily in the Washington, D.C., metro, with three communities in the Atlanta metro.
“This transaction is a major milestone in Cortland’s history, as we significantly grow our presence in the greater Washington, D.C., area and our home state of Georgia,” said CEO Steven DeFrancis. “We are excited to welcome these communities into the Cortland family and deliver the exceptional experience residents have come to expect from our brand.”
For Elme, Goldman Sachs & Co. and Jones Lang LaSalle Securities are serving as financial advisors, Hogan Lovells US as legal counsel, and Joele Frank as strategic communications advisor. Evercore is acting as lead financial advisor and exclusive debt placement agent to Cortland, while Citigroup Global Markets and Morgan Stanley & Co. also are serving as financial advisors and King & Spalding as legal counsel.
