TPG nears deal for student housing: sources

New York

PRIVATE equity firm TPG is in advanced talks to acquire a student housing portfolio from Preferred Apartment Communities, according to people with knowledge of the matter.

The transaction values the eight properties - which serve schools including Florida State University, Baylor University and Arizona State University - at about US$480 million, said the people, who requested anonymity because the deal isn't public. The transaction isn't final and the talks could still fall apart.

Preferred Apartment's shares spiked as much as 7.2 per cent to US$6.84 before paring the gains. The stock was up 1 per cent at 2.25pm in New York.

Representative for TPG and Atlanta-based Preferred Apartment Communities declined to comment on the talks.

"We do believe our student housing portfolio is an incredibly valuable and well-positioned asset," John Isakson, Preferred Apartment's chief financial officer, said in a statement.

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TPG's potential bet on student housing comes amid turbulence caused by the pandemic, which forced many universities and colleges to shutter before the end of the 2019-2020 academic year. Schools that brought students back to campus in recent weeks have faced virus outbreaks that have shut down in-person classes.

Chief executive officer Joel Murphy said on a Preferred Apartment Communities earnings call in August that the universities where the company operates were planning to open in "some fashion" for the fall semester. Still, the real estate investment trust cautioned that a resurgence of Covid-19 could hurt its business.

The company in March terminated a deal with a prospective purchaser for six of the properties being targeted by TPG, filings show. Preferred Apartment Communities shares had dropped more than 50 per cent this year through Monday's close, underperforming the 12 per cent decline for the US Bloomberg Reits index.

TPG's real estate arm has made wagers on student housing before. Last year, it formed a strategic venture with Round Hill Capital to buy 13 properties in Germany. BLOOMBERG