Transaction Adds Vertically Integrated
Multifamily Platform with Approximately $7 Billion in AUM and Over
28,000 Units Across Sunbelt Markets
Broadens RMR’s Position as a Leading
Alternative Asset Manager and Advances Strategic Focus on Growing
Private Capital Business, Doubling Private Capital AUM to $15
Billion and Growing Total AUM to $44 Billion
All Cash Transaction Expected to be Immediately
Accretive
The RMR Group (Nasdaq: RMR) today announced that it has entered
into a definitive agreement to acquire 100% of the equity interests
in MPC Partnership Holdings, LLC, doing business as CARROLL
(“CARROLL”), a vertically integrated multifamily platform, in an
all cash transaction for $80 million, subject to customary purchase
price adjustments, with the potential for incremental earnout
consideration up to $20 million based on the deployment of future
capital.
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The acquisition is an attractive opportunity for RMR to enter
the only major commercial real estate sector in which RMR does not
have a significant presence. CARROLL also brings an advanced
technology infrastructure and digital marketing capabilities that
may be leveraged across the RMR platform. The transaction further
advances RMR’s strategic focus on growing its private capital
business, adding approximately $7 billion in assets under
management (“AUM”) and over 20 institutional partner
relationships.
Founded in 2004 and headquartered in Atlanta, Georgia, as of
March 31, 2023 CARROLL provides asset and property management
services to 81 multifamily properties with more than 28,000 units,
primarily located across the Sunbelt markets of the United States.
With approximately 700 employees, CARROLL’s platform combines
leading operations with deep market knowledge and expertise in
capital raising, property acquisitions, asset management and
property management through its in house brand, ARIUM Living, to
unlock value at managed assets. The company’s highly scalable,
profitable and asset light business generates recurring fee income,
with a track record of delivering average gross realized returns of
nearly 30% for institutional investors. Since inception, CARROLL
has executed more than $12 billion in real estate acquisitions and
currently has the potential to make multifamily investments in
excess of $3 billion in its current general partner fund
series.
Adam Portnoy, President & Chief Executive Officer of The RMR
Group, made the following statement:
“We are excited to announce the strategic acquisition of
CARROLL, a leading vertically integrated multifamily housing
platform. This transaction will further diversify and expand the
reach of RMR, augmenting RMR’s already considerable scale with
differentiated operational expertise in a favored commercial real
estate sector. Importantly, the CARROLL platform is uniquely
positioned to continue benefitting from favorable demographic
tailwinds in high-growth Sunbelt markets. Additionally, this
acquisition will advance RMR’s private capital growth strategy with
high-quality global institutional investors and drive continued
growth across the combined platform with the potential to make in
excess of $3 billion of additional multifamily investments. We look
forward to welcoming the CARROLL team to RMR at closing and
supporting CARROLL’s continued growth and expanding its operations
as part of RMR.”
Patrick Carroll, Founder & Chief Executive Officer of
CARROLL, made the following statement:
“I’m incredibly proud of the business my team and I have built
over the past nearly 20 years with the support of our investors and
partners and I’m thrilled to see CARROLL take the next step under
RMR’s ownership. CARROLL’s long track record of success and
expertise in the multifamily sector will perfectly complement RMR’s
diverse real estate investment management platform. I believe RMR
is the right company to lead the CARROLL team and business through
the next phase of growth, while continuing to focus on the core
tenets of our business – consistently delivering best-in-class
management and generating meaningful value for our partners.”
Strategic and Financial Rationale
The acquisition of CARROLL represents the successful advancement
of RMR’s strategic plan to expand its private capital business and
utilize its balance sheet to diversify into additional real estate
sectors. The transaction advances the following objectives:
Diversification
- Expands the RMR platform by providing multifamily expertise
across the Sunbelt markets via a leading vertically integrated
operator.
- Provides additional high quality institutional investors
through CARROLL’s existing joint venture and limited partner
relationships.
- Adds a profitable, scalable and asset light business with a
recurring revenue stream.
- Leverages CARROLL’s experience and expertise in value add
multifamily investing, diversifying RMR’s capabilities beyond core
plus real estate and supporting future multifamily vehicles.
Growth & Scale
- Enhances RMR’s position as a leading alternative asset
management platform, growing total AUM to approximately $44 billion
and private capital AUM to approximately $15 billion.
- Positions RMR for continued growth, including through the
ability of CARROLL’s general partner fund series to make in excess
of $3 billion of additional multifamily investments.
Value Creation
- Expected to be immediately accretive to Adjusted EBITDA,
Adjusted EPS and Distributable Earnings per share.
- Provides RMR with a proven fund platform to generate
performance-based promote fees on new co-investments.
Key Transaction Details
RMR is acquiring 100% of the equity interest in CARROLL for $80
million, subject to customary purchase price adjustments, with the
potential for incremental earnout consideration up to $20 million
tied to the deployment of future capital. The sellers are to retain
existing general partner co-investments and promote fees derived
from those investments. The transaction is expected to be funded
entirely with cash on hand, and the transaction price, excluding
contingent earnout consideration, reflects an implied valuation of
11.4x to 13.3x of CARROLL’s recurring 2024 EBITDA and 6.2x to 7.3x
of CARROLL’s recurring 2024 EBITDA adjusted for potential
synergies.
In the first full year of operations post closing, RMR expects
the CARROLL platform to generate more than $35 million in recurring
fees and approximately $11 million to $13 million of Adjusted
EBITDA, including $5 million to $6 million of synergies. Post
transaction, RMR expects to have no debt and approximately $200
million of cash on hand for further opportunistic growth
strategies.
Approvals and Closing
The transaction, which was unanimously approved by RMR’s Board
of Directors, is expected to close in the fall of 2023, subject to
customary conditions, primarily obtaining limited partner, joint
venture partner and lender consents.
Advisors
The CenterCap Group, LLC is serving as exclusive financial
advisor and Skadden, Arps, Slate, Meagher & Flom LLP is acting
as legal advisor to RMR on this transaction. UBS Investment Bank is
acting as exclusive financial advisor and King & Spalding LLP
is acting as legal advisor to CARROLL.
Investor Presentation
A supplemental investor presentation on the transaction is
available on the Investor Relations section of RMR’s website at
rmrgroup.com.
RMR plans to discuss this pending transaction during its fiscal
third quarter 2023 conference call scheduled for Thursday, August
10, 2023 at 10:00 a.m. Eastern Time. The conference call telephone
number is (877) 270-2148. Participants calling from outside the
United States and Canada should dial (412) 902-6510. No pass code
is necessary to access the call from either number.
Non-GAAP Financial Measures
This press release contains references to non-GAAP financial
measures including Adjusted EBITDA, Adjusted EPS and Distributable
Earnings per share. These measures are “non-GAAP financial
measures” within the meaning of the applicable rules of the SEC.
For a calculation and definition of these measures, please refer to
RMR’s earnings presentations, Form 8-K filings and financial
reports. Copies of all RMR filings are available from the Investor
Relations section of the company’s website, rmrgroup.com, and from
the SEC.
About The RMR Group
The RMR Group is a leading U.S. alternative asset management
company, unique for its focus on commercial real estate (“CRE”) and
related businesses. RMR’s vertical integration is supported by
approximately 600 real estate professionals in more than 30 offices
nationwide who manage over $37 billion in assets under management
and leverage more than 35 years of institutional experience in
buying, selling, financing and operating CRE. RMR benefits from a
scalable platform, a deep and experienced management team and a
diversity of direct real estate strategies across its clients. RMR
is headquartered in Newton, MA and was founded in 1986. For more
information, please visit www.rmrgroup.com.
WARNING REGARDING FORWARD-LOOKING
STATEMENTS
This press release includes forward-looking statements that are
within the meaning of the Private Securities Litigation Reform Act
of 1995 and other securities laws that are subject to subject to
risks and uncertainties. These statements may include words such as
“believe,” “could,” “driving,” “estimate,” “expect,” “goal,”
“intend,” “may,” “plan,” “project,” “seek,” “should,” “will,”
“would,” “considering,” and similar expressions. Forward-looking
statements include, without limitation, statements regarding the
transaction, prospective performance, future plans, events,
expectations, performance, objectives and opportunities and the
outlook for CARROLL’s business, the expected timing of the
completion of the transaction; the ability to complete the
transaction considering the various closing conditions; and the
accuracy of any assumptions underlying any of the foregoing.
Investors are cautioned that any such forward-looking statements
are not guarantees of future performance and involve risks and
uncertainties and are cautioned not to place undue reliance on
these forward-looking statements. Actual results may differ
materially from those currently anticipated due to a number of
risks and uncertainties. For example, the closing of the
transaction is subject to the satisfaction or waiver of closing
conditions, consents with respect to managed funds, joint-venture
partners and applicable lenders, some of which are beyond our
control, and RMR cannot be sure that any or all of these conditions
will be satisfied or waived. Accordingly, the transaction may not
close on the contemplated terms or at all or it may be delayed. The
transaction is subject to various additional risks, including: the
risk that the business will not be integrated successfully or that
the integration will be more costly or more time-consuming and
complex than anticipated; the risk that cost savings and synergies
anticipated to be realized by the transaction may not be fully
realized or may take longer to realize than expected; the
occurrence of any event, change or other circumstance that could
give rise to the termination of the purchase agreement underlying
the transaction; risks related to future opportunities, plans and
strategy for CARROLL, including the uncertainty of expected future
financial performance, expected access to capital, timing of
accretion and operating results of RMR following completion of the
transaction and the challenges facing the industries in which RMR
and CARROLL operate; the risk that the transaction will divert
management’s attention from RMR’s ongoing business operations;
changes in CARROLL’s business during the period between now and the
closing of the transaction; risks associated with the impact of
general economic, political and market factors on us, CARROLL or
the transaction; and other matters. These factors should not be
construed as exhaustive and should be read in conjunction with
other cautionary statements that are included in RMR’s periodic
filings. The information contained in RMR’s filings with the
Securities and Exchange Commission (“SEC”), including under the
caption “Risk Factors” in its periodic reports, or incorporated
therein, identifies important factors that could cause differences
from the forward-looking statements in this press release. RMR’s
filings with the SEC are available on its website and at
www.sec.gov. You should not place undue reliance on forward-looking
statements. Except as required by law, RMR undertakes no obligation
to update any forward-looking statement, whether as a result of new
information, future events or otherwise.
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Kevin Barry, Director, Investor Relations (617) 658-0776
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