Chicago financier Sam Zell’s Equity Residential Properties Trust cemented its position as America’s apartment giant Wednesday with the announcement it is acquiring Augusta, Ga.-based Merry Land & Investment Co. in a $2.2 billion transaction.
The deal brings to Equity Residential, the country’s largest multifamily real estate investment trust, a portfolio of 118 properties with 34,990 apartment units in nine states, with the greatest concentrations in Georgia, Florida and Texas.
Zell said the deal will give his company about one-fourth of all the publicly held apartment-building equity in the nation. When it goes through, Equity will own and operate 656 properties with 187,543 apartment units throughout the country and have a total market capitalization of $12 billion.
“This is a perfect fit for us. This balances us out overall in the country,” said Zell, noting that Equity’s last big transaction was the $1 billion-plus acquisition of Evans-Withycombe, a big apartment owner in the Southwest.
Zell said the price was “pretty cheap,” despite the fact that Merry Land’s market capitalization prior to the deal was only about $1.73 billion–about 27 percent less than the $2.2 billion being laid out by Equity in stock and assumed debt.
“I don’t think you could replace these assets for what we’re paying for it,” Zell said. “In our judgment it was undervalued, plus it becomes more valuable by being a part of us.”
He said that Equity has been able to significantly improve the operations of its previous acquisitions. “I suspect we will here as well,” he added.
Craig Leupold, an analyst at Green Street Advisors in Newport Beach, Calif., said Merry Land, which has a high-quality portfolio of suburban garden-style apartments, has been rumored as an acquisition target ever since its longtime chairman, Peter Knox, died in 1996.
