A local REIT is wasting little time and spending plenty of money in its march toward an IPO.
West End-based Landmark Apartment Trust of America, which buys and operates suburban apartment complexes throughout the South, has in recent months more than doubled its holdings and recapitalized with hundreds of millions of dollars. It’s all part of a plan to reach a target size to list its shares on the stock market.
Last summer, the five-year-old company, a non-traded REIT previously known as Apartment Trust of America, owned about 4,000 apartment units.
In August, it started making its move.
“We hired Merrill Lynch as a financial adviser and decided to come up with a way to accelerate the growth of our company,” said Jay Olander, the company’s chief executive, in a phone interview last week. “At some point, we would like to list these shares and we needed size to do so.”
The company worked a deal to bring in capital and acquire 21 apartment complexes with 6,100 units for $485 million. That deal brought with it new debt and new, deep-pocketed investors, including a Canadian pension fund and DeBartolo Development, which is tied to the family that previously owned the San Francisco 49ers.
“Not only did we more than double the size of our company, we also brought in a number of very large institutional players,” Olander said.
Its next steps came this month with an $83 million acquisition of three more apartment complexes and a $130 million line of credit from several big banks.
Last week it spent $30 million to acquire Elco Landmark Residential Holdings, a portfolio of property management systems and management contracts for properties owned by third parties.
The Elco property management assets give it the ability to buy, own and manage all its properties in-house.
“A publicly traded company needs to have everything internalized,” Olander said.
LATA now owns more than 11,000 apartment units and manages another 15,000, which gets it closer to where it wants to be to have its shares publicly traded.
“We could execute [a public listing] today, but we would like to get bigger,” Olander said.
Although it’s headed toward a Wall Street listing, the company keeps a low profile Richmond.
Its headquarters is in an office park off Dickens and Staples Mill roads. It doesn’t have any big signs announcing its presence, just a few small placards around the park.
“Our business is very decentralized,” Olander said. It has employees on site for each of its apartment complexes and regional managers that oversee territories that range from North Carolina to South Carolina, Georgia, Florida and Texas. It also has offices in Tampa and Jupiter, Fla.
“We have close to 1,000 employees, but only about 15 employees locally,” Olander said.
And it doesn’t own any apartment properties locally. Its closest holding is in Portsmouth.
Olander, who founded the company five years ago, has been involved in Richmond REITs for decades. He was president of the former Cornerstone Realty Income Trust, a publicly traded REIT that was based in Richmond and was founded by Glade Knight, now head of the Apple REIT Companies.
Cornerstone Realty was sold in 2005 to Alabama REIT Colonial Properties Trust in a deal valued at $1.5 billion.
The company also previously had ties to Grubb & Ellis, a real estate firm that was acquired last year year after filing bankruptcy. Olander said LATA severed ties with the firm two years ago, prior to the bankruptcy.
Olander’s company doesn’t have a target date for going public. And it isn’t finished with its growth plan.
LATA brought in $51.68 million in revenue through the first nine months of 2012, the most recent period for which figures are available. That was made up largely of rental income. Its revenue for the three quarters was up from $45.47 million in the same period of 2011. It lost $26 million during that nine-month period.
It is looking to acquire more apartments and to grow its asset base to close to $2 billion worth of real estate owned and property management. That’s about twice the size of where it is today, Olander said.
“As a listed company, bigger is better,” he said.
Your article on Landmark Apartment trust was well done, thank you. as a small investor in the REIT, I would like to know the significance of the $26 million loss for the 9 month period in which the revenue was 51 million. Your comment will be appreciated
With a 50% loss to revenue, it appears that this accelerated acquisition plan is nothing more than a ‘Too BIg To Fail’ scheme. If they are a large debt to the lending institutions, they can leverage the debt to restructure. Their NOI efficiency is awful ! And, who in LATA is still from the Grubb & Ellis apartment corp ? The last bankruptcy may be an indication of the direction this is headed.