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Steadfast Apartment REIT to combine with 2 Steadfast-backed REITs

Steadfast Apartment REIT Inc. agreed to acquire fellow multifamily real estate investment trusts Steadfast Income REIT Inc., or SIR, and Steadfast Apartment REIT III, or STAR III, in separate stock-for-stock, tax-free transactions.

The merger would create a moderate-income apartment REIT with approximately $3.3 billion in gross real estate assets. The three REITs are sponsored by Steadfast REIT Investments LLC, an affiliate of Steadfast Cos.

Under the terms of the deal, SIR and STAR III shareholders will receive 0.5934 and 1.43 Steadfast Apartment common shares, respectively, representing $9.40 per SIR share and $22.65 per STAR III share, based on the latest estimated value per share of Steadfast Apartment REIT of $15.84.

SIR and STAR III are granted 30-day and 45-day go-shop periods, respectively, during which they can actively seek alternative proposals from third parties. They both have the right to terminate their respective merger deals with Steadfast Apartment to accept a superior offer, subject to the terms and conditions of their respective agreements.

Stakeholders of Steadfast Apartment, SIR and STAR III will own about 48.1%, 40.6% and 11.3% of the combined entity, respectively, after deal closing.

Steadfast Apartment anticipates continuing distributions equating to 6% annualized, based on a purchase price of $15.00 per share, or 90 cents per share annually, subject to market factors and company performance.

The transactions, which are set to be finalized in the first quarter of 2020, remain subject to approval of the respective shareholders of SIR and STAR III. The mergers are expected to close simultaneously but are not contingent on the completion of each other.

The synergies and fee structure realignment created by the mergers are expected to deliver a projected average annual increase of about $21 million in cash flow to the combined company.

Robert A. Stanger & Co. Inc. was financial adviser to Steadfast Apartment's special committee, while Venable LLP was its legal adviser. Morrison & Foerster LLP provided legal advice to Steadfast Apartment.

BMO Capital Markets was financial adviser to SIR's special committee and Proskauer Rose LLP was its legal adviser. Houlihan Lokey Inc. was financial adviser to STAR III's special committee and DLA Piper LLP (US) was its legal adviser.