The $1.3 billion offer to buy Baltimore-based apartment owner The Town & Country Trust could be topped by a West Coast apartment developer that is proposing paying $36 a share for the company, Town & Country announced yesterday.
Town & Country, which owns apartment complexes throughout the Mid-Atlantic, had announced an agreement in December to be acquired for $33.90 a share by a joint venture of Morgan Stanley Real Estate and Onex Real Estate. But the company disclosed yesterday that it recently received a bid to be purchased by a partnership of Essex Property Trust Inc. and AEW Capital Management LP.
The Essex/AEW bid, which represents a per-share premium of $2.10 over the existing merger agreement or a total of $43.5 million for 20.7 million shares, is preliminary and does not commit the partnership to an acquisition agreement with Town & Country, yesterday's announcement said.
Shares of Town & Country closed at $34.22 Friday, down 8 cents.
Essex, based in Palo Alto, Calif., owns, develops and manages apartment communities in West Coast markets and has ownership interests in 127 multifamily properties with 26,800 units, according to the company's Web site. It has more than 500 units under development.
A spokeswoman for Essex did not return a call yesterday.
Town & Country, a successor to Town & Country Management Corp. was started by Alfred Lerner, a wealthy Cleveland businessman and power in Baltimore banking. It now owns and operates 39 apartment complexes with 13,330 units, including 18 in the Baltimore area. The company employs about 35 people at its Lombard Street headquarters.
Harvey Schulweis, chairman and chief executive of Town & Country, could not be reached yesterday.
After announcing the existing merger agreement, he had said that the company decided to sell because the offer was too attractive to pass up.
Spokesmen for Morgan Stanley and Onex, a Canadian company with operating companies in the service, manufacturing and technology industries, did not return phone calls yesterday.
Town & Country's board of trustees already has approved the sale to Morgan Stanley and Onex. In addition, entities with 9 percent of the outstanding shares and 96 percent of the outstanding limited partnership units have pledged to vote for the sale. That includes groups controlled by the family of founder Lerner, who was chairman until his death in 2002, company executive officers and directors.
Yesterday's announcement said the trustees continue to recommend the existing agreement with Morgan Stanley and Onex, which has the right to match any third-party bid before the board can change its recommendation.
The disclosure also said the board had provided nonpublic information to the latest bidders, as required by the existing merger agreement.
The Baltimore real estate investment trust said it plans to disclose additional details of the Essex/AEW proposal as part of a filing today with the Securities and Exchange Commission.
The SEC filing, a definitive proxy statement, will outline the merger agreement with Morgan Stanley and Onex. That cash agreement includes the assumption of debt.
The sale is subject to approval by two-thirds of Town & Country's common shareholders, who are scheduled to vote March 9 in New York.
The keen interest in Town & Country's apartments reflects investors' voracious appetite for owning multifamily properties and the strong demand for entry-level housing, one real estate analyst said yesterday.
"There's a perception of a need for entry-level residential housing, and that perception creates a feeling that the residential real estate market is more stable over the long term than other real estate sectors," said Richard Anderson, a senior real estate analyst at Harris Nesbitt in New York. "People need a roof over their heads. There's always a need for places for people to live."