AvalonBay and Equity Residential are merging in a $69 billion all-stock deal that creates the largest US apartment owner, signaling a new wave of consolidation across the struggling multifamily sector.
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AvalonBay and Equity Residential merge in $69 billion apartment megadeal
AvalonBay Communities and Equity Residential agreed to an all-stock merger of equals valued at $69 billion, creating the largest US apartment owner with more than 180,000 units as landlords race to cut costs and restore investor confidence after years of sluggish profits.
"The combined company's investors will benefit from accelerated growth from increased investment in operational innovation and a larger, self-funded development platform," Mark Parrell, chief executive of Equity Residential, who plans to retire after the deal closes, said in a statement.
Under the terms announced Thursday, AvalonBay shareholders will receive 2.793 shares of Equity Residential common stock for each share they hold, giving them about 51.2 percent of the combined entity on a fully diluted basis. The pro forma equity market capitalization stands at roughly $52 billion, with an enterprise value of approximately $69 billion. The transaction, unanimously approved by both boards, is expected to close in the second half of 2026 and is structured as a tax-free reorganization for US federal income tax purposes.
The merger is the most extreme sign yet of consolidation pressures gripping the apartment sector, where the number of publicly traded multifamily REITs has shrunk to about a dozen from more than 20 in the 1990s. Landlords are struggling with flat or declining rents driven by a historic oversupply of new apartments — roughly 480,000 units coming online this year and about 450,000 annually in the years ahead, according to Yardi Matrix — while rising costs for materials, labor and insurance squeeze developer margins. Higher interest rates have further increased the cost of financing, pushing market capitalizations below the actual value of properties.
Scale and Synergy Targets
Management is targeting $175 million in gross cost synergies within 18 months of closing, with $125 million remaining on a net basis after property tax reassessments. The combined company expects to generate roughly $2 billion in annual cash flow, giving it self-funding capacity that executives say will reduce reliance on expensive debt. "We're going to have a lower cost of capital than anyone else," Parrell said.
The merged REIT will inherit dual A3/A- credit ratings and plans to pay an initial annualized dividend of $2.81 per share, matching Equity Residential's current payout and exceeding AvalonBay's yield. The companies have $4.4 billion and 10,800 apartments under construction across 32 communities, with more than half carrying affordable or mixed-income components, plus a $4.2 billion development-rights pipeline.
Benjamin Schall, AvalonBay's president and chief executive, will serve as president, CEO and trustee of the combined company, which will operate under a new name to be announced at closing. The 14-member board will be split evenly between seven trustees from each company, with Steve Sterrett, Equity Residential's lead independent trustee, serving as chairman. The entity will maintain dual headquarters in Chicago and Arlington, Virginia.
Industry Consolidation Accelerates
The deal follows a pattern of consolidation across the multifamily sector. In 2021, Independence Realty Trust and Steadfast Apartment REIT combined in a $7 billion merger. Blackstone took AIR Communities private in 2024. Several other apartment firms have begun liquidating and selling off properties.
"Everyone is in that grow-or-die mode," said Jonathan Morgan, co-chief executive of Morgan Properties, the second-largest apartment owner in the US. John Burns, CEO of John Burns Research and Consulting, said: "Real estate is getting very little respect on Wall Street. So you're going to see more combinations so they can get more respect from investors."
The combined company's portfolio is concentrated in supply-constrained coastal markets including New York, Boston, Washington, D.C., Seattle, Southern California and the Bay Area, with a 95 percent market overlap that executives say will support localized management structures and drive down operating costs. The companies plan to deploy artificial intelligence and automation across leasing, maintenance and customer service functions to lift net operating income margins.
Green Street Advisors analysts said the merger "should help the companies' valuation and cost of capital versus peers" but added that they are "not holding our breath for a sea change." The combined entity will surpass Greystar Real Estate Partners, which has about 119,000 units, as the largest US apartment owner, though it will still control a relatively small share of the overall market.
This article is for informational purposes only and does not constitute investment advice.
[1] The Apartment Megamerger That Shows Landlords Are in Trouble - WSJ[2] Equity Residential, AvalonBay to merge in $69 billion multifamily deal[3] AvalonBay and Equity Residential agree to $69 billion merger[4] Equity Residential and AvalonBay to merge in mega U.S. real estate deal[5] AvalonBay, Equity Residential Merge to Form $69B Multifamily Giant
