After buying a trophy property in Arlington, Va., late last year, Chicago-based Equity Residential (EQR) continues to add apartments to one of the largest apartment portfolios in the country.

Equity announced this week that it has acquired two high-rise apartment towers in New York City from Macklowe Properties and has entered into a contract to acquire a third tower. The acquisitions, which were made free and clear of debt, include River Tower, a 38-story apartment tower with 323 apartment units; and 777 Sixth Avenue, a 32-story tower with 294 apartment units. Equity expects to close on Longacre House, a 26-story apartment tower with 293 apartment units, by May 1. Longacre “has existing debt that is prepayable at par on May 1.”

The deals will help Macklowe fund its 510 Madison Avenue development, according to a report by New York-based Sandler O’Neill + Partners.

“We are very pleased to add these premier properties, at prices well below replacement cost, to our New York portfolio,” said David J. Neithercut, Equity Residential's President and CEO in a press release. “This transaction is yet another example of our ongoing strategy to add high-quality assets to our portfolio in core markets that position the company to benefit from improving apartment fundamentals.”

Together, these three towers constitute 910 apartment units, 23,339 square feet of retail space, and 50,000 square feet of parking space. All told, they cost Equity $475 million, which comes out to $470,000 per apartment unit and $545 per square foot of rentable apartment space. The initial cap rate on the combined transaction is 5.52 percent. The REIT bought the properties with disposition proceeds.

Green Street Advisors, a Newport Beach, Calif.-based consulting and research firm, looks for a 5.6 percent market cap rate for similar product in New York, meaning that Equity's purchase fell well within those parameters. “It looks like fair pricing to me,” says Andrew J. McCulloch, an analyst for Green Street Advisors.

Equity's New York portfolio now numbers 26 properties, totaling 7,320 apartment units. In Manhattan itself, there are 14 properties, totaling 3,825 apartment units. The firm also has the dry powder to add even more units. “They have a lot of cash sitting on the balance sheet and available line capacity,” McCulloch says. “Even after this deal, they’re still definitely capable of going out and adding more properties.”