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AIMCO to Acquire Oxford Properties in $301 Million Deal

Denver-based apartment REIT will add 36,662 units to national portfolio.
June 27, 2000
Denver-based AIMCO (Apartment Investment and Management Co.), already the biggest manager of apartments in the U.S., increased its ownership level by signing a definitive agreement to acquire 166 apartment communities from Bethesda, MD-based Oxford Realty Financial Group for $301 million in cash and stock.

The Oxford properties include 36,662 units in 18 states and are owned by 166 separate partnerships that are subject to mortgage loans totaling $1.4 billion (Oxford's pro-rata share of the indebtedness is $555 million). AIMCO said the transaction is expected to close in the third quarter and to add an estimated $0.23 per share to its 2001 FFO and $0.21 per share to 2001 AFFO.

AIMCO has agreed to pay $241 million in cash and $60 million in AIMCO Common O.P. Units and Class A Common Stock at a price per unit and per share based on the 20-day average share price calculated 5 business days prior to the closing. The share price range is expected to be between $40 and $45 per unit/share. In addition, approximately $13 million of transaction costs will be incurred.

AIMCO will borrow the cash portion of the purchase price from Bank of America and Lehman Brothers under a two-year bridge loan, which AIMCO expects to repay from presently scheduled property refinancings, expected property sales, and internal cash flow.

AIMCO Already Manages Properties
Through an affiliate, AIMCO already manages 165 of the 166 Oxford apartment properties under long-term contracts and is a stockholder in certain of the Oxford entities. In addition to the Oxford apartment properties, AIMCO is acquiring the entity which owns the managing general partner position in Oxford Tax-Exempt Fund II, L.P. OTEF is a publicly-traded fund that owns tax-exempt bonds secured by properties owned by some of the 166 partnerships. And in a separate transaction, AIMCO agreed to purchase approximately 700,000 OTEF securities which represent approximately a 9% limited partnership interest.

In a prepared statement, AIMCO's President and Vice Chairman Peter Kompaniez said, "Having managed the Oxford Properties for many years, we know the properties well and are confident of their value. We are particularly gratified that Leo Zickler and his senior management team, having observed closely AIMCO's management of their properties, elected to make a substantial investment in AIMCO equity securities. We look forward to continuation of this important and satisfying relationship."

Merrill Lynch & Co. acted as financial advisor to ORFG and its affiliates in connection with this transaction. Lehman Brothers and Banc of America Securities L.L.C. acted as financial advisors to AIMCO in connection with the transaction.
Analysts, Investors Applaud Deal
On news of the acquisition, Salomon Smith Barney upgraded AIMCO to "Buy" from "Outperform" and also increased its 2001 FFO estimate by $0.23 per share to $5.63, based on a 17.3% growth rate. The fact that AIMCO’s 7.7x multiple is trading at a 16% discount to the apartment REIT peer also pleased the analysts at Salomon Smith Barney.

The analysts also cheered AIMCO’s acquisition of Oxford’s general partnership interest in OTEF, the fund that holds the tax-exempt debt secured by several Oxford properties, seeing an opportunity to pursue the acquisition of OTEF and acquiring the debt on the Oxford portfolio at a discount to the face value.

Through subsidaries, AIMCO operates 1,834 properties, including approximately 352,000 apartment units, and serves approximately one million residents. AIMCO's properties are located in 48 states, the District of Columbia and Puerto Rico.
SOURCES: Apartment Investment and Management Co., SalomonSmithBarney
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