AvalonBay Communities and Equity Residential on May 20 announced they would join forces in an all-stock merger to create a multifamily real estate titan with an enterprise value approaching $69 billion.
The merger would create a much stronger organization that would generate about $2 billion annually in cash flow to be deployed across multiple growth channels, the companies said in an investor presentation.
The new entity would leverage artificial intelligence, technology, and automation across its diverse multifamily portfolio of more than 180,000 units to centralize services and generate increased net operating income at the asset and neighborhood levels.
AvalonBay operates 98,271 apartments in 11 states, while Equity Residential owns and manages the keys to 85,211 apartment doors primarily in major coastal markets and large metropolitan cities, including Atlanta, Denver, and Austin, Texas. Approximately 7,200 doors are affordable housing units.
AvalonBay and Equity Residential also have about 10,800 apartments under construction among 32 new apartment communities, along with $4.2 billion in their combined development rights pipeline. The new entity is expected to deliver annualized dividends of $2.81 per share, equal to Equity Residential’s existing dividend payment and higher than AvalonBay’s.
“This combination creates a new and fundamentally stronger company with differentiated capabilities,” said Benjamin Schall, CEO and president of AvalonBay Communities. “We will directly increase the supply of both market rate and affordable housing. Our ambition is to redefine leadership in rental housing.”
Schall will lead the newly formed company, which will take a new name and have dual headquarters in Chicago and Arlington, Virginia. Under the terms of the agreement, which is expected to close in the second half of 2026 and was unanimously approved by the boards of both companies, AvalonBay shareholders of record will receive 2.793 shares of Equity Residential common stock for each share owned. When the deal closes, the new company will be 51.2 percent owned by AvalonBay shareholders and 48.8 percent owned by Equity Residential shareholders.
Just over half of the current construction pipeline is affordable or mixed-income housing, and AvalonBay and Equity Residential said they would earmark $25 million for an affordable housing bridge loan to be used by non-profit developers to bring new affordable housing projects to market.
“The combined company’s investors will benefit from accelerated growth from increased investment in operational innovation; a larger, self-funded development platform; and the variety of other value creation opportunities that world class scale affords,” said Mark J. Parrell, president and CEO of Equity Residential. Parrell is scheduled to retire once the deal closes, following a 27-year run at the helm of the company.
Equity Residential was founded in the 1960s by Sam Zell and Bob Lurie. AvalonBay was formed in 1998 when Avalon Properties and Bay Communities merged to form a bicoastal real estate investment trust. It made its debut on the S&P 500 in 2007.
Following the announcement, AvalonBay’s shares dipped by about 1.38 percent by the market close, while Equity Residential’s stock ticked down by about 0.78 percent.
Goldman Sachs, J.P. Morgan, and Wells Fargo are serving as financial advisers to AvalonBay, with Goodwin Procter LLP serving as legal adviser. Morgan Stanley, Centerview Partners, and BofA Securities are advising Equity Residential, with Wachtell, Lipton, Rosen & Katz serving as legal adviser.
