Security Capital Group Inc. said Thursday it plans to merge two of its apartment real estate investment trusts in a transaction valued at roughly $1.6 billion, creating one of the largest owners and developers in the U.S.
Security Capital Pacific Trust and Security Capital Atlantic Inc. will be combined to form Archstone Communities, a company with 304 properties and 90,166 apartments in 19 states throughout the South and the West Coast.
The transaction furthers the consolidation in the fragmented apartment business, where companies are teaming up to cut costs as development accelerates and rent growth slows. That’s especially true in the Southeast, where Security Capital Atlantic operates.
“Atlantic’s stock was going nowhere,” said Sam Lieber, portfolio manager of the Alpine U.S. Real Estate Equity Fund. “This looks like a good deal for Pacific because they are buying Atlantic cheaply and will get the upside when the Southeast markets rebound.”
Terms call for Denver-based Pacific to swap one share for each Atlanta-based Atlantic share, the companies said. Pacific will assume about $527 million of debt.
