A unit of Brookfield Asset Management Inc. agreed to buy Associated Estates Realty Corp., a U.S. apartment landlord that had been under pressure from an activist investor, for about $1.7 billion.
Brookfield will pay $28.75 a share in cash for the Richmond Heights, Ohio-based company, according to a statement Wednesday. The price is about 17 percent more than Associated Estates’ closing price on Tuesday. Including debt, the deal is valued at about $2.5 billion, the companies said.
“After analyzing the company’s strategy, assets and other opportunities, including running a process involving a number of qualified potential buyers, the board unanimously determined that this transaction is the best course of action to maximize shareholder value,” Chief Executive Officer Jeffrey I. Friedman said in the statement.
Associated Estates, which owns apartments in 10 states, jumped 16 percent Wednesday to $28.49. The stock has rallied 68 percent in the past year.
The deal follows months of activism by Jonathan Litt’s Land & Buildings Investment Management, which has criticized the landlord’s share performance and urged it to find a buyer. His firm, which owns about 2.2 percent of Associates Estates’ stock, nominated three candidates to the real estate investment trust’s board before a shareholder meeting next month.
“We are encouraged that the board of Associated Estates has chosen to enter into this transaction, which we believe is an outstanding outcome for all shareholders,” Litt said in a statement. His firm’s goal “was always to unlock the substantial discount the company has traded at relative to net asset value, and we are confident that this has now been achieved.”
Land & Buildings estimated the asset value of Associated Estates at $31 a share, according to an April 8 statement. Litt, who is also fighting a proxy battle at casino operator MGM Resorts International and pushing for changes at mall owner Macerich Co., started urging Associated Estates in June to consider a sale to his fund or a private-equity buyer.
Brookfield, based in Toronto, has been expanding its multifamily investing arm as U.S. apartment rents climb, with deals including the purchase of about 4,000 units in Manhattan last year. It joins other Canadian asset managers, including one of the largest pension fund managers, in seeking to benefit from rising demand for rentals in the country.