CHICAGO, IL - Equity Residential announced that the company and AvalonBay Communities, Inc. have completed their previously announced acquisition of the assets and liabilities of Archstone Enterprise LP from Lehman Brothers Holdings Inc., which consists principally of a portfolio of high-quality apartment properties in major markets in the United States. Under the terms of the agreement, Equity Residential has acquired approximately 60% of Archstone’s assets and liabilities and AvalonBay has acquired approximately 40% of Archstone’s assets and liabilities.
“This is an exciting day for Equity Residential and its shareholders as we add more than 21,000 high quality apartment units in our core markets to our platform and welcome more than 700 of the industry’s best people to our company,” said David J. Neithercut, Equity Residential’s President and CEO. “By funding a significant portion of this acquisition with proceeds from the sale of our non-core assets, we have nearly completed the total transformation of our portfolio. Going forward, our future earnings and shareholder return will be derived from the highest quality assets in the nation's high-barrier coastal markets.”
Equity Residential has acquired 71 wholly-owned stabilized operating properties, consisting of 20,160 apartment units and two partially-owned and unconsolidated stabilized operating properties consisting of 768 apartment units with a budgeted average monthly rent of $2,681 per unit; three master-leased properties containing 853 apartment units; and four projects in various stages of construction for 964 apartment units.
Since the announcement of the transaction on November 26, 2012, Archstone has sold six properties that were allocated to Equity Residential as part of its purchase. These properties, consisting of 2,316 apartment units, were sold at an aggregate price of approximately $509.4 million and Equity Residential’s purchase price was adjusted accordingly.
Equity Residential has paid its portion of the transaction consideration with $2.016 billion in cash and the issuance of 34,468,085 common shares to the seller of the Archstone assets, which is an affiliate of Lehman. In addition, a total of $2.0 billion of Archstone secured mortgage principal was paid off in conjunction with the closing. The company’s cash purchase price was financed through a combination of approximately $575.0 million of cash on hand, approximately $1.6 billion of available borrowings under the company’s revolving credit facility, approximately $1.1 billion of proceeds from the disposition of non-core assets and approximately $750.0 million of bank term debt.
In addition, the company has assumed approximately $2.8 billion of consolidated secured debt, including $2.2 billion of Fannie Mae secured debt. A detailed schedule of the debt being assumed will be available in the company’s Form 8-K to be filed with the SEC.
Equity Residential has previously announced its intention to fund a significant portion of the Archstone acquisition with the proceeds from the sale of assets that are not part of the company’s long-term strategic plans and expects to sell approximately $4.0 billion of its non-core assets in 2013.
Since the Archstone transaction announcement on November 26, 2012, the company has sold 43 properties, consisting of 11,588 apartment units for an aggregate sale price of approximately $1.68 billion at a weighted average capitalization rate of 6.1%. Equity Residential currently has 39 properties, consisting of 11,621 apartment units, under contract for sale and expected to close in the next 75 days, for an aggregate sale price of approximately $1.9 billion.