What the AvalonBay, Equity Residential megamerger means for the apartment industry and rents
The AvalonBay Communities Inc. Park Loggia condominium, center, is reflected in a building in New York, U.S. The biggest ever merger of real estate investment
The AvalonBay Communities Inc. Park Loggia condominium, center, is reflected in a building in New York, U.S. The biggest ever merger of real estate investment trusts — the combination of Equity Residential and AvalonBay, announced Thursday — has investors and analysts alike left with dropped jaws. The all-stock merger will have a market capitalization of about $52 billion and a total enterprise value of approximately $69 billion, according to a release.
It will create one of the largest real estate companies in the U.S., with more than 180,000 rental apartments. "This combination creates a new and fundamentally stronger company with differentiated capabilities that will drive structurally superior cash flow generation, earnings and dividend growth, and value for shareholders," said Benjamin Schall, CEO of AvalonBay.
Schall will become CEO of the newly formed company, and Equity Residential CEO Mark Parrell will retire when the transaction closes. Allan Swaringen, president and CEO of JLL Income Property Trust, which manages about $90 billion of real estate investments globally for institutional clients and high-net-worth individuals, called the tie-up "unbelievable." "That they would merge is really incredible," he said.
Swaringen noted that the stocks of both companies are trading at below their net asset values, a situation that makes them both ripe to be bought and privatized.
The BriefWire