ARLINGTON, VA. — AvalonBay Communities Inc. (NYSE: AVB) and Equity Residential (NYSE: EQR) have completed their $16 billion acquisition of Archstone Enterprise from Lehman Brothers Holdings Inc. The total deal includes cash and stock and the assumption of approximately $9.5 billion in debt.
Equity, the largest publicly traded U.S. apartment landlord, which is controlled by real estate billionaire Sam Zell, now owns 60 percent of Archstone, or 78 apartment properties. AvalonBay, the second-biggest, owns the remaining 68 complexes.
The companies have stated that the deal will help them grow quickly in coastal cities, such as New York and San Francisco, where expansion is difficult due to the scarcity and high cost of land.
The properties are mostly located in Phoenix, Washington, D.C., Orlando, Southern California, Denver and Jacksonville.
Equity's cash and equity portion of the transaction, which included approximately $2 billion in cash and the issuance of 34,468,085 shares, was funded by the sale of non-core assets.
“By funding a portion of this acquisition with proceeds from the sale of our non-core assets, we have nearly completed the total transformation of our portfolio,” says David Neithercut, CEO and president of Chicago-based Equity Residential. “Going forward, our future earnings and shareholder return will be derived from the highest quality assets in the nation's high-barrier coastal markets.”
According to Equity, the deal has increased its 127,814-unit portfolio by 20,160 units. The acquisition has also significantly boosted Arlington, Va.-based AvalonBay's holdings. As of the end of 2012, it owned or held a stake in 203 apartment communities.
Equity Residential's stock price closed Wednesday at $55.99 per share on the New York Stock Exchange, down from $57.71 per share.
AvalonBay Communities stock price closed at $125.94 per share Wednesday, down from $132.63 per share a year ago.
— Liz Burlingame