Earlier this week,
) announced that it has inked a deal to sell a portfolio of
assets worth $1.5 billion to a joint venture of
The Goldman Sachs Group Inc.
) and Greystar Real Estate Partners LLC.
AVALONBAY CMMTY (AVB): Free Stock Analysis
EQUITY RESIDENT (EQR): Free Stock Analysis
GOLDMAN SACHS (GS): Free Stock Analysis
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The deal comes as Equity Residential strategically moves to
generate funds for the Archstone acquisition by vending assets in
markets it intends to exit as well as non-core assets in primary
The Deal Terms
The assets for sale include 27 properties that are located in
Washington, D.C. and Northern N.J., Florida, Phoenix, Denver,
Southern California and San Francisco Bay Area. As per the deal
terms, the properties are valued at around $187,000 per apartment
unit and a capitalization rate in the mid-to-high 5% range.
Equity Residential furnished the buyer with a right to eliminate
up to 8% of the value of these assets from their purchase.
Therefore, Goldman Sachs and Greystar have contractual
obligations to buy at least $1.38 billion of assets.
Last November, Equity Residential along with
AvalonBay Communities Inc.
), entered into an agreement with Lehman Brothers Holdings Inc.
to acquire the entire ownership stake of Archstone Enterprise LP
- one of the largest investors, developers and operators of
apartment communities in the U.S.
The deal, valued at about $16 billion, will entitle Equity
Residential to 60% of Archstone's assets and liabilities, while
the remainder will be acquired by AvalonBay. The transaction is
expected to be completed by the first quarter of 2013.
For Equity Residential, the deal to sell off non-core assets is a
strategic fit as it would help finance the Archstone acquisition
and accelerate its portfolio restructuring initiatives. The
Archstone acquisition is likely to result in operational
synergies for the company, improving the overall quality of the
portfolio with assets in high-barrier, high-growth coastal
Equity Residential currently has a Zacks Rank #3 (Hold).
Considering its fundamentals, we also have a long-term Neutral
recommendation on the stock.