AIMCO Closes $1.5B Casden Properties Deal

Apartment Investment and Management Co., better known as AIMCO, closed on its mega acquisition of Casden Properties L.L.C., a private REIT with more than 11,000 affordable housing units spanning 25 states and some 5,000 market-rate apartments in and around Southern California.

The Denver-based REIT shelled out $206 million in AIMCO stock or common OP units as well as $198 million in cash and about $673 million in debt. It is also forking over $418 million and providing a standby facility of $70 million in debt to develop 1,381 units in Park La Brea, Calif., which will increase its free cash flow in the six-county area from 3.5 percent to 15.9 percent.

AIMCO will invest $50 million for a 20 percent interest in Casden Development Corp., which will accelerate redevelopment of AIMCO's affordable portfolio as well as new development opportunities in Southern California. AIMCO will have the option to purchase all of Casden's rental projects, such as its proposed 350-unit project in Westwood Village.

As part of the agreement, AIMCO also gains ownership of National Partnership Investments Corp., a tax credit syndicator and Casden subsidiary that controls more than 400 multi-family properties with some 41,000 units. AIMCO hired a new head of affordable properties, David Robertson, in February.

The deal is risky, but appears to be a good move, according to Ross Smotrich, managing director of Bear, Stearns & Co. and colleague Jeff Langbaum. A Bear Stearns report noted, among other things, that the transaction should play into AIMCO's strengths.

Bear Stearns analysts thus raised AIMCO's FFO ratings by $0.08 per share and maintained its buy rating. Despite concern about the cost of the LaBrea development, they project NOI growth of 11.6 percent for the affordable portfolio, 9.2 percent for market-rate units and a five-year growth rate of 7 to 8 percent.

In total, AIMCO adds 17,383 units. The purchase bumps its total apartment stock to 60,000 units, mostly in Southern California. AIMCO anticipates an uptick in annualized FFO as high as $0.12 per share. AIMCO was not available for comments.