Another Massive Apartment Deal

According to this article in the Wall Street Journal, Sam Zell’s Equity Residential has sold a 23,000-unit portfolio to Starwood Capital Group for $5.4 billion. From the article:

This deal is Mr. Zell’s biggest since 2012. Back then, Equity Residential was a buyer. The firm teamed with AvalonBay Communities to purchase apartment giant Archstone for $6.5 billion, not including about $9.5 billion in debt.

But Equity Residential has become “less aggressive as buyers of assets” in recent years, Mr. Zell said in an interview late Friday. Instead, it is getting out of suburban markets and into downtown urban centers, where young people are moving and where it is more difficult to build, he said.

Most of the 23,300 apartment units in the deal, roughly a quarter of Equity Residential’s total, are low-rise and mid-rise units in suburban markets in and around southern Florida, Denver, Seattle, Washington, D.C., and Southern California. Analysts expect a significant amount of new supply to be concentrated in those markets in coming years.

“There’s an awful lot of apartments under construction,” Mr. Zell said, “and the majority of them are garden apartments in suburban areas.”

Meanwhile, on the other side of the deal sits Starwood, which is betting big on the apartment market. In the last year it has purchased or put under contract 67,800 units. Why? Here’s the money quote from the firm’s CEO:

“This is the healthiest U.S. apartment market in my lifetime,” Mr. Sternlicht said in an interview Friday. “We don’t see that trend reversing.”

 

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