Equity Residential (EQR:US), the largest publicly traded U.S. apartment landlord, agreed to sell 27 properties to Goldman Sachs Group Inc. (GS:US) and Greystar Real Estate Partners LLC for as much as $1.5 billion.
The transaction values the apartments at about $187,000 per unit, Chicago-based Equity Residential said in a statement today. The joint venture is obligated to purchase at least $1.38 billion of assets. The 8,010 units are located in northern New Jersey, Florida, Phoenix, Denver, Southern California and the Washington, D.C., and San Francisco Bay areas.
Equity Residential, founded by billionaire Sam Zell, said in November that it would sell some assets after agreeing to buy part of rival landlord Archstone Inc. from Lehman Brothers Holdings Inc., a deal that will boost holdings in cities where it already has properties. The real estate investment trust is accelerating its disposal of properties outside its core growth areas, with plans for as much as $4 billion in sales.
Today’s deal is “evidence that they had their ducks in order from the very beginning in terms of how they were going to finance the Archstone transaction,” Richard Anderson, a REIT analyst with BMO Capital Markets in New York, said in a telephone interview. “They’re no dummies. They’re not going to sign up for a several-billion-dollar transaction and not have a pretty good plan in place before they announce it.”
Equity Residential agreed to purchase 60 percent of Archstone in a cash-and-stock deal valued at about $6.5 billion. AvalonBay Communities Inc. (AVB:US), the second-biggest publicly traded apartment landlord, is buying the other 40 percent.
The sale to Goldman and Greystar is expected to be completed by the end of March.
“With this transaction we will have made significant progress selling assets in our exit markets and non-core assets in primary markets to fund our share of the acquisition of Archstone,” David J. Neithercut, Equity Residential’s president and chief executive officer, said in the statement. “Demand for multifamily assets remains very strong.”
The $187,000 price per unit is more than the $149,000 average last year for the seven regions in which Equity Residential sold assets, according to Ben Carlos Thypin, director of market analysis at Real Capital Analytics Inc. in New York.
“It is reasonable to assume these are assets of relatively high quality,” Thypin said in an e-mail.
The properties include the Ellipse at Government Center, a newly renovated community in Fairfax, Virginia, with a pool and tennis court where a two-bedroom apartment can be leased for $1,450 a month, according to Equity Residential’s website.
Also included in the deal is Iron Horse Park, north of San Francisco in Pleasant Hill, where apartments have views of Mount Diablo and a two-bedroom unit rents for $1,825.
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