CHICAGO--(BUSINESS WIRE)--
Equity Residential (NYSE: EQR) today announced it has entered into a
contract to acquire an approximate 26.5% ownership interest in
Archstone, a privately-held owner, operator and developer of multifamily
apartment properties, for $1.325 billion in cash. The ownership
interests under contract represent one half of the collective interests
currently owned by affiliates of Bank of America and Barclays Bank PLC
(together, the “Sellers”). Closing is contingent on the remaining
significant Archstone owner not exercising its right of first offer
(“ROFO”) to acquire this interest from the Sellers at the same price as
agreed to by Equity Residential, as well as certain other closing
conditions. If this owner declines to exercise its right and all other
closing conditions are met, it is expected that the acquisition by
Equity Residential would occur late in the first quarter of 2012.
There can be no assurance that the transactions contemplated by the
contract between Equity Residential and the Sellers will be consummated,
whether as a result of the exercise of the ROFO or of the failure of
other closing conditions.
Upon acquisition of the subject interests, Equity Residential will hold
a minority interest and will not have the ability to cause any decisions
or actions with respect to Archstone. Equity Residential will, however,
have approval rights over certain major decisions including annual
budgets and certain financings, refinancings, acquisitions and
dispositions. At this time, Equity Residential has no rights or
contractual obligations to acquire more than a 26.5% interest in
Archstone.
The Archstone Portfolio
The Archstone portfolio is comprised of apartment properties primarily
located in top U.S. growth markets. As of September 30, 2011, the
Archstone portfolio included 48,922 wholly-owned and stabilized
apartment units as well as 1,332 apartment units under construction,
land sites for the potential development of 5,279 apartment units and
9,423 apartment units owned in unconsolidated joint ventures with third
parties. The portfolio also includes approximately 14,000 wholly-owned
or unconsolidated joint venture-owned apartment units in Germany. The
purchase price equates to approximately $296,000 per unit and a
capitalization rate of 5.3% for Archstone’s wholly-owned and stabilized
portfolio.
“The Archstone and Equity Residential portfolios are highly
complementary with concentrations in the same markets and assets of
similar quality,” said David J. Neithercut, Equity Residential’s
President and CEO. “In addition, since we believe that none of the
current owners of Archstone is likely to be a long term owner, acquiring
this position allows us a role in determining, and perhaps even
expediting, the ultimate outcome regarding Archstone.”
Funding
The consummation of the acquisition is not subject to a financing
condition. Equity Residential expects to fund the acquisition through a
combination of cash on hand, available borrowings under its $1.25
billion revolving credit facility (which the company has the contractual
right under certain conditions to increase to a total of $1.75 billion),
proceeds from the disposition of non-core apartment assets, bank term
debt and secured and unsecured debt and equity offerings.
Contemporaneously with entering into the contract with the Sellers,
Equity Residential also obtained a commitment from Morgan Stanley Senior
Funding, Inc. to provide a $1.0 billion bridge loan facility.
Contract Terms
Equity Residential is in the process of filing a Form 8-K with the
Securities and Exchange Commission that contains more details of the
contract. The company expects that this filing will be available on
Monday, December 5, 2011.
2011 Archstone Transaction Costs
For the fourth quarter of 2011, Equity Residential will record
approximately $5.8 million of transaction and financing expenses from
this acquisition, which will impact the company’s earnings per share and
Funds from Operations (FFO) as defined by the National Association of
Real Estate Investment Trusts, but not Normalized FFO.
Advisors
Morgan Stanley & Co. LLC served as Equity Residential’s financial
advisor and Hogan Lovells as its legal advisor on this transaction. BofA
Merrill Lynch and Barclays Capital served as sell-side financial
advisors on this transaction. Kaye Scholer served as legal advisor to
Bank of America and Simpson Thacher & Bartlett served as legal advisor
to Barclays Bank PLC.
About Equity Residential
Equity Residential is an S&P 500 company focused on the acquisition,
development and management of high quality apartment properties in top
U.S. growth markets. Equity Residential owns or has investments in 417
properties located in 15 states and the District of Columbia, consisting
of 119,011 apartment units. For more information on Equity Residential,
please visit our website at www.equityapartments.com.
This announcement shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be any
sale of any securities in any state or other jurisdiction in which such
offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such state or
jurisdiction.
Forward Looking Statements
Statements in this news release, and other statements that Equity
Residential may make, including statements about the benefits of the
acquisition, may contain forward-looking statements that involve
numerous risks and uncertainties. The statements contained in this news
release that are not purely historical are forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Exchange Act of 1934, as amended,
including, without limitation, statements regarding the expected
benefits and closing of the acquisition, the management of Equity
Residential’s expectations, beliefs and intentions.All
forward-looking statements included in this communication are based on
information available to Equity Residential on the date hereof.In
some cases, you can identify forward-looking statements by terminology
such as “may,” “can,” “will,” “should,” “could,” “expects,” “plans,”
“anticipates,” “intends,” “believes,” “estimates,” “predicts,”
“potential,” “targets,” “goals,” “projects,” “outlook,” “continue,”
“preliminary,” “guidance,” or variations of such words, similar
expressions, or the negative of these terms or other comparable
terminology. No assurance can be given that any of the events
anticipated by the forward-looking statements will transpire or occur,
or if any of them do so, what impact they will have on Equity
Residential’s results of operations or financial condition.Accordingly,
actual results may differ materially and adversely from those expressed
in any forward-looking statements. Neither Equity Residential nor any
other person can assume responsibility for the accuracy and completeness
of forward-looking statements. There are various important factors that
could cause actual results to differ materially from those in any such
forward-looking statements, many of which are beyond Equity
Residential’s control. These factors include, at a minimum: any exercise
of the ROFO; failure to obtain, delays in obtaining or adverse
conditions contained in any required regulatory or other approvals;
failure to consummate or delay in consummating this acquisition for
other reasons; changes in laws or regulations; failure of the investment
in the purchased interests to perform as expected, even in the event the
proposed acquisition is consummated; inability to influence the
operations and control of the Archstone entities following consummation
of the transaction; and changes in general economic conditions. Equity
Residential undertakes no obligation (and expressly disclaims any such
obligation) to publicly update or revise any forward-looking statement,
whether as a result of new information, future events or otherwise. For
additional information, please refer to Equity Residential’s most recent
Form 10-K, 10-Q and 8-K reports filed with the SEC.
Equity Residential
Marty McKenna, (312) 928-1901
Source: Equity Residential