CHICAGO–Equity Residential (NYSE: EQR) today announced that the company has entered into an agreement to sell 72 properties consisting of 23,262 apartment units to Starwood Capital Group, through a controlled affiliate, for $5.365 billion, or approximately $230,634 per unit on average, and a capitalization rate of 5.5%. The sale is expected to close in the first quarter of 2016.
This is an extremely opportune time for Equity Residential to monetize our investments in this portfolio of assets
“This is an extremely opportune time for Equity Residential to monetize our investments in this portfolio of assets,” said David J. Neithercut, Equity Residential’s President and CEO. “In doing so, not only have we demonstrated the enormous value created for our shareholders through the realization of an unlevered internal rate of return of 11.1%, but we have also narrowed our focus which will now be entirely directed towards our core, high-density urban markets that will fulfill our strategic vision and drive EQR performance for many years to come.”
Sale of Additional Assets
In 2016, Equity Residential intends to sell an additional 26 assets located in various submarkets, consisting of 4,728 apartment units, 3,364 of which are all of the company’s assets in Connecticut and in non-core submarkets in Massachusetts. The company expects to sell these assets in individual and small portfolio sales for an aggregate value of approximately $700 million and a weighted average cap rate of 6.0% to 6.25%. The sale to Starwood, combined with these asset sales, will result in the company’s exit from the South Florida and Denver markets as well as these New England submarkets.
The company may also sell certain other assets in core markets in 2016 with the intention of reinvesting the proceeds from those sales in other assets.
Use of Proceeds
Equity Residential intends to use the majority of the proceeds from these sales to pay a special dividend to its shareholders of between $9.00 and $11.00 per share and anticipates that dividend being paid during the second quarter of 2016. The company also expects to use proceeds from this sale to reduce aggregate indebtedness in order to make the transaction leverage neutral. The company does not expect this transaction to impact the company’s fourth quarter 2015 dividend, payable in January 2016. All dividends are subject to the approval of the company’s Board of Trustees.
Neal, Gerber & Eisenberg LLP served as Equity Residential’s legal advisor on this transaction.