Blackstone fund affiliate to acquire Apple REIT Six for $1.2B

Abstract

Apple REIT Six has suspended its dividend reinvestment and share redemption programs, as well as its dividend payments, in connection with the execution of the merger agreement.

Apple REIT Six Inc. entered into a definitive merger agreement to be acquired by BRE Select Hotels Corp., an affiliate of Blackstone Real Estate Partners VII, for about $1.2 billion.

Under the terms of the deal, which was approved by Apple REIT Six's board, each issued and outstanding unit of the company will be converted into the right to receive consideration of $11.10 per unit, the company said Nov. 30.

The consideration will consist of $9.20 in cash and one share of 7% series A cumulative redeemable preferred stock of BRE Select Hotels with a liquidation preference of $1.90 per share.

The new preferred shares will have an option for the holder to redeem after 7.5 years and a dividend rate of 7%. The liquidation preference will be subject to a downward adjustment should net costs and payments relating to certain legacy litigation and regulatory matters exceed $3.5 million.

The new preferred shares will also be redeemable by BRE Select Hotels at any time at the liquidation preference and will have limited voting rights. The dividend rate on the new preferred shares will increase to 11% if not redeemed within five years.

The transaction value includes transaction costs and the assumption or repayment of Apple REIT Six's debt.

Apple REIT Six has suspended its dividend reinvestment and share redemption programs, as well as its dividend payments, in connection with the execution of the merger agreement. The deal is expected close in the first half of 2013, subject to shareholder approval and customary closing conditions.

McGuireWoods LLP is acting as legal adviser to Apple REIT Six, while Wells Fargo Securities provided financial advisory services. Simpson Thacher & Bartlett LLP is acting as legal adviser to BRE Select Hotels, and Bank of America Merrill Lynch and Citi are acting as its financial advisers.