Merger of Colonial, Cornerstone to Create $5 Billion Firm

Colonial Properties Trust, a diversified REIT, has purchased multifamily REIT Cornerstone Realty Income Trust in a $1.5 billion merger. The total transaction value of the deal is $10.80 per share based on Colonial’s Oct. 22 closing price. Shareholders from both REITs must still approve the transaction.

Cornerstone Realty Income Trust (NYSE:TCR) is based in Richmond, Va. Colonial Properties Trust (NYSE:CLP) is based in Birmingham, Ala., and owns a portfolio of multifamily, office and retail properties in the Southeastern U.S.

"This is truly a company-changing event. The combined company will have a total enterprise value in excess of $5 billion and possess one of the largest Sunbelt focused multifamily platforms," says Thomas Lowder, Colonial’s chairman and CEO.

As a result of the merger, Lowder expects Colonial’s multifamily portfolio to generate more than 50% of its 2005 pro forma net operating income (NOI). This year, by comparison, Colonial’s multifamily portfolio generated 29% of pro forma NOI. The deal also diversifies Colonial’s holdings: Lowder says that no single state will account for more than 27% of the firm’s 2005 NOI (pro forma) versus 42% exposure this year.

The deal will be structured as a common and preferred stock election merger, according to Colonial. Lowder reconfirms Colonial’s funds from operations (FFO) guidance for 2005; he also maintains the firm’s current common dividend policy.

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