Baltimore-based Town and Country Trust sells for $1.3B

Daily Record, The (Baltimore), Dec 21, 2005 by Kathleen Johnston Jarboe

Morgan Stanley Real Estate and Onex Real Estate have agreed to buy Baltimore-based Town and Country Trust for $1.3 billion in a deal that would take the public real estate trust private and possibly open it to new growth.Town and Country's business has grown slowly since it took its portfolio of apartment complexes public in 1993.

The company now owns 13,645 apartments, just 24 percent more than it did a dozen years ago.The ownership change marks the end to the local holding of the collection of properties. The portfolio first began as an investment by the Meyerhoff family. Later it was sold to an insurance company before Town and Country purchased it in 1979.After going public, the firm once considered a broad growth plan to spread its brand throughout the East Coast, according to a New York analyst. But concerned with the debt loads, the management team backed away from the idea.Under the deal, Harvey Schulweis, Town and Country's chief executive, will step down.A New York analyst said management under the new owners might take a more aggressive approach to growth.I always saw them as an obvious takeover target, said Richard Anderson, an analyst with Harris Nesbitt in New York.Many analysts consider multifamily complexes like those owned by Town and Country throughout the mid-Atlantic and Florida a low-risk investment.There is an attraction to any sort of residential real estate. There is a stability to it. People have to live somewhere, Anderson said.Although apartment investments suffered from the low interest rates that drove many families to home ownership, some market watchers expect a return in growth as interest rates go up and the children of baby boomers enter the rental market.Just two months ago, Morgan Stanley agreed to pay $2.1 billion for AMLI Residential Properties Trust, which owns more than 28,000 apartments throughout the Southeast, Southwest, Midwest and Mountain regions.The deal is the first real estate investment for Onex since its parent company, Toronto-based Onex Corp., decided to open a real estate division earlier this year.Anderson didn't expect the deal to turn into a play to turn apartments into condos.It's a good business platform and worthy of being an ongoing concern whether public or private, he said.Industry watchers have long considered the Baltimore-Washington region, where Town and Country owns many of its properties, an attractive residential rental market due to its stable job base. Town and Country's stock has been a steady grower since 1995. Share prices grew by about 32 percent between 2002 and Monday. Yesterday the stock surged 13.3 percent to close at $33.75 on news of the deal.For our particular markets, I think the rental market has been pretty good, Schulweis said. Schulweis called the deal a great move for shareholders. Under the agreement, holders will receive $33.90 per share - a 16.5 percent premium over the 60-day average closing price.The deal must still be approved by two-thirds of Town and Country shareholders. But the agreement is expected to close during the first quarter of 2006.Schulweis declined to comment about when he began discussing the deal. In January, the company's board updated severance agreements for the firm's top management. Also uncertain is what will happen to the approximately 400 workers Town and Country employs, according to December 2004 figures. Representatives from Morgan Stanley and Onex declined to discuss specifics about the deal.Schulweis said it was possible employees would stay where they are, especially since Morgan Stanley's real estate arm is more of a real estate investment firm than a management company.I would expect that the company would continue to operate with the people that are running it, Schulweis said.