Lehman Brothers is prepping a $2.125 billion facility to fund the $2.8 billion acquisition of Gables Residential Trust by a private equity venture formed by ING Clarion Partners. ING Real Estate is a syndication agent.
The deal consists of a three-year, $300 million revolver and a $1.825 billion term loan that will have a 12-month maturity with some extension features. Frank Sullivan, managing director at ING Clarion, said these terms gave the company the most flexibility and allowed for some changes in the future rather than being locked into a fixed rate. "We wanted something that we can clearly repay, change and modify over the next few years. It's a great value to have that type of financing," he said. The revolver will be used to fund construction projects Gables is currently involved in and for future projects, he explained.
ING will provide an additional $400 million in equity to finance the transaction. The purchase price includes the assumption and refinancing of about $1.2 billion of the company's outstanding debt and preference shares.
Gables develops, builds, owns and manages multi-family properties. It is based in Boca Raton, Fla. and owns more than 20,000 units located primarily in the south--Houston, Atlanta and Dallas. At the beginning of the year it said publicly it was interested in selling for the right price. Sullivan said the company was very receptive to the offer and, with a strong market, anticipates Gables' operating results will get better. "To us, it was an operating platform combined with a good operating base. We weren't just buying apartments, more so it was the people, the systems, the knowledge of how to develop apartments that was very important to us," Sullivan said.
ING and Lehman have worked together in the past and Sullivan said the two decided to team up after a couple of conversations. "It's a good marriage," said Sullivan. Lehman is an equity contributor. A Lehman banker declined to comment.
