Price Tag For Toll Brothers' Apartment Business Rises To $380M As Sale Is Delayed
Fortune 500 homebuilder Toll Brothers will get an extra $33M for the planned sale of its multifamily development business, but the company won’t be able to use that extra cash on holiday gifts, as the deal’s closing has been delayed to the first quarter.
Real estate investment firm Kennedy Wilson’s purchase price for Toll Brothers Apartment Living is now expected to be $380M, according to Toll Brothers’ latest filing with the Securities and Exchange Commission. The transaction was initially expected to close in October, with Kennedy Wilson to pay $347M.
The increase is due to continued investment by Toll Brothers since the deal was announced in September.
The delayed closing caused Toll Brothers' fourth-quarter earnings to fall far short of Wall Street's expectations, according to Seeking Alpha.
The Toll Brothers Apartment Living platform has already moved over to Kennedy Wilson, including its people, pipeline and a portion of the existing portfolio, as detailed by Managing Director Michael Skena in a LinkedIn post on Monday.
As part of the company's Q4 earnings call on Tuesday, Toll Brothers CEO Douglas Yearley said Kennedy Wilson will acquire around 50% of the Apartment Living portfolio.
“We expect to sell our remaining interest in the retained properties over the next few years,” Yearley said. “As we exit the multifamily business, we anticipate using the significant cash proceeds from these transactions to both grow our core homebuilding business and return capital to stockholders.”
Kennedy Wilson will acquire Toll Brothers' general interests in 18 apartment and student housing properties valued at $2.2B, as well as a pipeline of 29 projects in various stages of development, according to the original release announcing the deal. If completed, those projects would total around $3.6B in invested capital.
The 20 properties Kennedy Wilson will manage while Toll Brothers looks for a buyer have an estimated value of about $3B.
The deal also establishes a business relationship aimed at boosting each company’s pipeline of prospects. As part of the transaction, Kennedy Wilson will refer for-sale opportunities to Toll Brothers, and the homebuilder will send multifamily deals to Kennedy Wilson.
The real estate investment firm expects to put in around $90M on the acquired assets, with the remaining balance “funded from existing Kennedy Wilson partners.”
The deal will represent a substantial boost to Kennedy Wilson’s assets under management, which the company said totaled $30B. The company will have a combined portfolio of more than 80,000 rental units that it owns, finances or manages.
Kennedy Wilson said it plans to expand its apartment development platform.
The deal comes as smaller multifamily operators are being acquired by larger investors looking to capitalize on credit dislocation.
Brookfield Asset Management is reported to be circling a $10B deal for a portfolio of 300 manufactured home developments from Singapore’s sovereign wealth fund.
Pennsylvania-based Morgan Properties, an investment firm that owns or manages more than 100,000 units in 22 states, reached a $354M deal in August to take Dream Residential REIT and its 15-property portfolio private.
