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EQUITY RESIDENTIAL 8-K Report, Material Agreement (Dec 5, 2011)

Filed December 5, 2011For Securities:EQR

Summary

Equity Residential (EQR), through its operating partnership ERP Operating Limited Partnership (ERP), announced on December 2, 2011, its intention to acquire a 50% interest in various entities affiliated with Archstone, a privately-held owner and operator of multifamily apartment properties. The total purchase price for this acquisition is $1,325,000,000 in cash. This strategic move will result in ERP holding approximately a 26.5% ownership stake in the Archstone Entities, which boast a substantial portfolio of nearly 50,000 stabilized apartment units across top U.S. growth markets, plus an additional significant presence in Germany. The transaction is subject to certain conditions, including a right of first offer (ROFO) held by a third party, which must either be waived or not exercised for the acquisition to proceed. ERP plans to finance the acquisition through a combination of cash on hand, existing credit facilities (with potential for increase), asset dispositions, and debt and equity offerings. While ERP will have approval rights over certain major decisions, it will hold a minority interest and not control the Archstone Entities' operations. The closing is anticipated for late first quarter 2012.

Key Highlights

  • 1ERP Operating Limited Partnership (ERP) to acquire a 50% interest in Archstone Entities for $1.325 billion in cash.
  • 2This acquisition will result in ERP holding an approximate 26.5% ownership interest in the Archstone Entities.
  • 3The Archstone portfolio includes approximately 48,922 wholly-owned stabilized apartment units in top U.S. growth markets, along with units under construction, land for development, and significant international holdings in Germany.
  • 4The transaction is contingent on a third party's right of first offer (ROFO) not being exercised.
  • 5ERP plans to fund the acquisition using a mix of cash, credit facilities, asset sales, and capital markets activities.
  • 6ERP and Equity Residential will hold a minority interest in the Archstone Entities and will account for the investment using the equity method.
  • 7The acquisition is expected to close in late Q1 2012, subject to customary closing conditions and regulatory approvals.

Frequently Asked Questions

Equity Residential, through its subsidiary ERP Operating Limited Partnership, is acquiring a 50% interest in various entities affiliated with Archstone for $1,325,000,000 in cash. This acquisition will give ERP approximately a 26.5% ownership stake in the Archstone Entities.

The Archstone portfolio consists of a significant number of apartment properties, including 48,922 wholly-owned and stabilized apartment units in prime U.S. growth markets as of September 30, 2011. It also includes units under construction, land for development, and approximately 14,000 units in Germany.

Yes, a key condition is that a third party holds a right of first offer (ROFO) on the purchased interests, which must be waived or not exercised for the deal to proceed. There's also a 'Tag-Along Right' for this third party. The company notes that there's no assurance the transaction will close due to the ROFO, other closing conditions, or potential adverse impacts on financial condition if the expected benefits are not realized. Accounting treatment will be via the equity method, and Equity Residential/ERP will hold a minority interest without control over Archstone's operations.

ERP expects to fund the acquisition using a combination of its existing cash on hand, available borrowings under its revolving credit facility (which can be increased), proceeds from the sale of non-core assets, bank term debt, and potentially debt and equity offerings. A $1.0 billion bridge loan facility commitment has also been secured.