Independence Realty Trust (IRT), RAIT Financial Trust (RAS) Enter Agreement on Management Internalization

September 27, 2016 6:41 AM EDT

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Independence Realty Trust, Inc. (“NYSE: IRT) announced that it has entered into a definitive agreement with RAIT Financial Trust (NYSE: RAS) with respect to the internalization of IRT’s external management arrangements (the “Internalization”) and separation from RAIT and certain of RAIT’s affiliates.

The Internalization will consist of two parts: (i) the acquisition of IRT’s external advisor, which is a subsidiary of RAIT, and (ii) the acquisition of certain assets and the assumption of certain liabilities relating to the multifamily property management business of RAIT, including property management contracts relating to apartment properties owned by IRT, RAIT and third parties. The purchase price for the Internalization is $43 million, subject to certain prorations at closing.

Upon closing of the Internalization, each of Scott F. Schaeffer, IRT’s Chief Executive Officer, Farrell Ender, IRT’s President, and James J. Sebra, IRT’s Chief Financial Officer, are expected to enter into employment agreements with IRT. Messrs. Schaeffer and Ender are expected to become employees of IRT upon closing. Mr. Sebra is expected to remain the CFO of RAIT until the later to occur of March 31, 2017 or the filing of RAIT’s Form 10-K for the fiscal year ending December 31, 2016 with the U.S. Securities and Exchange Commission. In addition, more than 400 current employees of RAIT and the property manager are expected to become employees of IRT.

"It is the right time in IRT’s evolution to internalize management. This transaction represents an important milestone for the company. It maintains continuity of our management team, while providing strategic, operational and financial benefits that will enhance shareholder value,” stated Robert McCadden, Chairman of the IRT special committee.

The Internalization is expected to close on or before December 31, 2016, subject to certain conditions including, but not limited to, completion of an equity offering, receipt of certain third-party consents and entry into employment agreements with the executives named above.

In addition, IRT has agreed to repurchase up to all of the approximately 7.3 million shares of IRT common stock owned by certain of RAIT’s subsidiaries, subject to market conditions.

Citigroup Global Markets Inc. is acting as exclusive financial advisor and Hogan Lovells US LLP is acting as legal advisor to the special committee of the board of directors of IRT in connection with the Internalization.

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