Equity Residential had its eye on the Archstone portfolio for a while. But after several unsuccessful bids to obtain a controlling stake in the Lehman Brothers–owned Archstone, the Chicago-based REIT finally got the big prize it’d been after.
In an agreement announced on Nov. 26 with Lehman, Equity will become the new owner of a 60 percent stake in Archstone’s assets and liabilities. The remaining 40 percent was snatched up by Arlington, Va.–based AvalonBay in a partnership that hands over approximately $16 billion in aggregate to Lehman from the two multifamily powerhouses. The transaction total includes $9.5 million in debt from Lehman and is set to close during the first quarter of 2013.
The deal is the largestsingle move in commercial real estate since Blackstone bought Hilton Hotels for $26 billion in 2007. And it will surely set the acquisitions bar astronomically high this year.
As a result of the transaction, AvalonBay upped its unit count by 37 percent, to 82,323, and Equity increased its portfolio by 20 percent, to 136,433 units.
In early December, Equity began disposing of older assets in its portfolio to fund the purchase. Tampa, Fla.–based Elco Landmark Residential bought four of Equity’s Florida assets, with renovations in mind, for nearly $100 million. Three of the properties are located in Jacksonville, totaling 882 units, and the other is a 252-unit property in Orlando.
More recently, Equity said it would sell $1.5 billion worth of assets to a joint venture between Goldman Sachs and Greystar Real Estate Partners. The deal includes 27 properties with more than 8,000 units spread across Washington, D.C., northern New Jersey, Florida, Phoenix, Denver, Southern California, and the San Francisco Bay Area.
The properties are valued at about $187,000 per unit, and the deal had a cap rate in the mid– to high–5 percent range.
Equity granted both parties the right to exclude up to 8 percent of the value of the assets from the purchase. The companies have also waived their due diligence contingency after placing $150 million in escrow. The deal is expected to close in the first quarter.