Dive Brief:

• Today, Independence Realty Trust and Centerspace announced a combination that will create a middle-market apartment REIT with 44,354 units across 17 states and an enterprise value of approximately $8.1 billion, according to a press release from IRT.
• Centerspace and IRT will create a geographically diverse portfolio with 58% of pro forma net operating income derived from Sun Belt markets, 27% from Midwest markets and 15% from Mountain West markets.
• The IRT-Centerspace combination shows that multifamily REITs of all stripes are chasing scale in an environment where the costs of doing business continue to rise. The combined firm is projected to create synergies of approximately $24 million upon full integration, which should occur within 12 months after the merger closes.

Dive Insight:

This alliance comes less than a month after AvalonBay Communities and Equity Residential officially merged on Aug. 17 to create Vivmark, a REIT with a market capitalization of about $53 billion, an enterprise value of roughly $71 billion and a more-than-180,000-unit portfolio. 

The IRT-Centerspace alliance will create a REIT focused on high-growth, non-gateway markets with a pro forma equity market capitalization of approximately $5 billion, per the release. When the deal closes, IRT stockholders will own approximately 78% of the combined company’s equity on a fully diluted basis, excluding preferred units. Centerspace shareholders will possess approximately 22%.

The transaction is expected to close as early as the end of the fourth quarter of 2026, subject to certain conditions. Once it closes, the REIT has identified several ways to drive earnings growth.

IRT will roll out its Wi-Fi initiative across the Centerspace portfolio. The company should also have an expanded pipeline of units available for future redevelopment through IRT’s value-add program, which has generated historical return on investment of approximately 16%, per the release. 

In the release, IRT Chairman and CEO Scott Schaeffer pointed to greater efficiency across a larger operating base, the expanded value-add renovation program and other income initiatives as drivers for the merger.

“By pairing our high-growth Sunbelt portfolio — which remains our largest exposure and primary growth engine — with Centerspace’s stable Midwest and recovering Mountain West communities, we are building a platform in markets that have historically delivered above-average NOI growth with lower volatility,” Schaeffer said.

Centerspace wrapped up a strategic review of its activities in June and indicated that it would sell 12 communities, totaling approximately $240 million to $245 million, to improve portfolio quality, strengthen the balance sheet, preserve shareholder value and maximize flexibility.

Later, strong demand led the Minot, South Dakota-based REIT to sell two additional Minneapolis properties. Even after the property sales, the REIT’s executives ultimately found the IRT union to “deliver compelling value for Centerspace shareholders,” who would benefit by participating in a larger company with “enhanced access to capital markets” and lower leverage, Anne Olson, president and CEO of Centerspace, said in the release. 

“Our complementary portfolio of high-quality Midwest and Mountain West apartment communities is located in markets experiencing accelerating migration and strong employment growth — this is a natural fit with IRT’s scaled operating platform and proven value creation strategies,” Olson said.

Click here to sign up to receive multifamily and apartment news like this article in your inbox every weekday.