CHICAGO — Chicago-based Equity Residential (NYSE: NQR) has entered into an agreement to acquire a 26.5 percent ownership interest in Archstone for $1.32 billion. The remaining significant Archstone owner has the right of first offer to acquire the interest from the sellers at the same price. If the owner declines, then the acquisition is expected to close late in the first quarter of 2012.
“The Archstone and Equity residential portfolios are highly complementary with concentrations in the same markets and assets of similar quality,” said David Neithercut, president and CEO of Equity Residential, in a statement.
As of Sept. 30, 2011, in the United States, Archstone’s portfolio contained 48,922 wholly owned and stabilized apartment units and 9,423 units owned in unconsolidated joint ventures with third parties. Additionally, 1,322 units are under construction, and the company owns land sites that have development potential of approximately 5,279 units. The portfolio also includes 14,000 units in Germany.
“Since we believe that none of the current owners of Archstone is likely to be a long-term owner, acquiring this position allows us a role in determining and perhaps even expediting, the ultimate outcome regarding Archstone,” he added. The 26.5 percent interest represents one half of the collective interests currently owned by Bank of America and Barclays Bank PLC.
Equity Residential will use cash on hand, available capital under its $1.25 billion revolving credit facility, proceeds from disposition of non-core multifamily assets, bank term debt and secured and unsecured debt and equity offerings to fund the purchase. Additionally, Equity Residential has obtained a commitment from Morgan Stanley Senior Funding to provide a $1 billion bridge loan facility.
Morgan Stanley & Co. is the buyer’s financial advisors for the transaction and Hogan Levells is its legal advisors. BofA Merrill Lynch and Barclays Capital served as self-side financial advisors in this transaction. Kaye Scholer is the legal advisor to Bank of America and Simpson Thacher & Barlett is Barclays’ legal advisor.
Equity Residential’s share price closed at $53.71 on September 5, up from $51.70 a year ago.
— Savannah Duncan