Equity Residential and AvalonBay Communities on May 21 announced a definitive agreement to combine in an all-stock merger of equals creating one of the country’s leading real estate companies with a pro forma equity market capitalization of approximately $52 billion and a total enterprise value of approximately $69 billion and more than 180,000 rental apartments.
Both companies have operated and managed apartment communities across Westchester and Fairfield counties.
Benjamin Schall, president and CEO of AvalonBay, will serve as president and CEO and trustee of the combined company. Mark J. Parrell, who has served as CEO of Equity Residential for eight years and at the company for 27 years, will retire at the transaction close.
The full management team will be announced prior to closing and is expected to include substantial representation from both companies. The combined company will have dual headquarters in Arlington, Virginia, and Chicago. The company will operate under a new name to be announced at closing.
The Board of Trustees will initially consist of 7 existing trustees of Equity Residential and 7 existing directors of AvalonBay. Steve Sterrett, current lead independent trustee of Equity Residential, will serve as chair. David Neithercut, current non-executive chair, and Tim Naughton, current non-executive chair of AvalonBay, will each serve as trustees of the combined company.
“This combination creates a new and fundamentally stronger company with differentiated capabilities that will drive structurally superior cash flow generation, earnings and dividend growth, and value for shareholders,” Schall said. “As one of the country’s leading developers of new apartments across our regions, we will directly increase the supply of both market rate and affordable housing. Drawing on the foundational strengths and industry-leading teams across both of our organizations, our ambition is to redefine leadership in rental housing for the benefit of residents, associates, and shareholders.”
Mark J. Parrell, Equity Residential’s president and CEO, is equally excited to partner with AvalonBay.
“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. This, together with our similar cultures that prioritize exceeding the expectations of our employees and residents, positions the combined company to create exceptional value for its shareholders, customers and employees.”
Sterrett, who was former CFO of Simon Property Group, calls the merger a “transformative event in the apartment industry that will create long-term value for shareholders.”
“By combining the two premier companies in the sector, we create a company with the size and scale to be a leading operator in the space as well as a major creator of new rental housing,” Sterrett said. “Having spent decades helping build and lead one of the country’s great real estate companies, I have a deep appreciation for what it takes to create enduring value in this industry, and I think the future prospects of this enterprise are tremendous.”
Merger rationale
The company states some of the reasons for the merger.
- Tech‑enabled efficiency: Combined investments in AI, automation, and centralized services, coupled with increased portfolio scale, to drive margin expansion and enhance the resident experience
- Embedded growth: Currently $4.4 billion under construction (10,800 apartments) across 32 communities, including over 50% with an affordable or mixed-income component
- Accelerated growth engine: $4.2 billion development rights pipeline with expectation to meaningfully increase annual new development start activity
Transaction details
Under the terms of the agreement, which has been unanimously approved by the Board of Directors of AvalonBay and the Board of Trustees of Equity Residential, AvalonBay shareholders will receive 2.793 shares of Equity Residential common stock for each share of AvalonBay common stock owned. Upon closing, AvalonBay shareholders will own approximately 51.2% and Equity Residential shareholders will own approximately 48.8% of the combined company on a fully diluted basis.
The transaction is expected to be completed in the second half of 2026, subject to shareholder approval by both AvalonBay and Equity Residential and satisfaction of other customary closing conditions. The merger is expected to qualify as a tax-free reorganization for U.S. federal income tax purposes.
Goldman Sachs & Co LLC is serving as lead financial advisor to AvalonBay and Goodwin Procter LLP is serving as legal advisor to AvalonBay. J.P. Morgan and Wells Fargo are also serving as financial advisors to AvalonBay.
Morgan Stanley & Co. LLC and Centerview Partners LLC are serving as lead financial advisors to Equity Residential and Wachtell, Lipton, Rosen & Katz is serving as legal advisor to Equity Residential. BofA Securities is also serving as a financial advisor to Equity Residential.
