AvalonBay Communities and Equity Residential have proposed a merger that would create the largest publicly traded apartment landlord and rank among the nation’s biggest real estate deals.
The combined portfolio would span more than 180,000 apartments across 631 communities, with another 10,800 units under construction in high-cost coastal markets.
The deal intends to "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,” Steve Sterrett, the current lead independent trustee of Equity Residential who will serve as chairman of the combined company, said in a statement.
The two companies were worth a combined $51 billion before the announcement, with Arlington, Virginia-based AvalonBay valued at nearly $26 billion and Chicago, Illinois-based Equity Residential at roughly $25 billion. Including debt, the combined company would have an enterprise value of about $69 billion, making it one of the largest real estate deals in the U.S.
The announcement follows pushback from executives at competing real estate investment trusts who have argued that a larger size does not necessarily translate into stronger returns.
“For us, the way we think about this is that bigger is not better," Camden Property Trust Chief Executive Officer Alex Jessett said during the apartment landlord's first-quarter earnings call in late April. "Better is better. And if you look at long-term trends, there’s absolutely no correlation between size of the company and total shareholder return."
Tom Toomey, CEO of fellow apartment REIT UDR, struck a similar tone, saying operational performance matters more than scale.
“We look at it and say excellence is the important thing to all successful companies, and size is sometimes an advantage, sometimes not,” Toomey said on an earnings call in late April.
The deal is expected to close in the second half of 2026, pending approval from shareholders of both companies.
Properties at play
The move is larger than one of the previously biggest REIT mergers in the United States: the $26 billion acquisition by Prologis of Duke Realty back in 2022. It’s also among the largest mergers of REITs focused on the multifamily sector, topping Essex Property Trust’s $4.3 billion buy of BRE Properties just over a decade ago.
Under the deal announced Thursday, AvalonBay shareholders will receive 2.793 shares of Equity Residential stock for every AvalonBay share they own, giving them a slightly larger stake in the combined company at about 51.2%, compared with 48.8% for Equity Residential shareholders.
AvalonBay CEO Benjamin Schall will lead the combined company, while Equity Residential CEO Mark Parrell is expected to retire at closing. The company will maintain dual headquarters in Arlington, Virginia, and Chicago and operate under a new name to be announced at closing.
Equity Residential, founded by the late billionaire Sam Zell, has a portfolio concentrated in major coastal markets, along with a presence in metropolitan areas such as Atlanta, Denver and Austin, Texas.
AvalonBay’s portfolio is similarly focused on coastal markets, with properties in Boston, New York, Seattle and California, while expanding into Dallas, Southeast Florida and Charlotte, North Carolina.
Industry reacts
Property professionals said the deal does little to shift the overall market concentration.
“Even combined, AvalonBay and EQR would control less than 1% of total rental inventory,” said Andy Kaiser, a senior multifamily associate at Newmark. “Apartment real estate is one of the least concentrated industries.”
At the same time, dealmaking across the sector has picked up.
Data from S&P Global shows that M&A activity involving publicly traded equity real estate investment trusts in the United States has continued to ramp up in the early months of this year, with four new deals totaling $16.77 billion announced in the year through April 15.
Morgan Stanley’s analyst Adam Kramer said the merger underscores a push toward efficiency through scale but argued it is unlikely enough to offset softer apartment fundamentals, including slower rent growth and lingering concerns about demand.
“We think the skepticism stems from demand concerns, namely job growth, but our conversations with investors suggest broader worries, including AI, immigration, population growth and migration,” Kramer wrote in a note following the news of the merger.
Analysts broadly echoed that view, saying the transaction is not expected to spark a new wave of mergers among the largest REITs, citing the lack of deals between industry leaders such as Public Storage and Extra Space Storage or healthcare REITs Welltower and Ventas.
“I don’t think it leads to more mega mergers,” said David Auerbach, chief investment officer at Hoya Capital Real Estate. “I think we would have already heard those rumblings.”
Instead, Auerbach said consolidation is more likely among smaller and mid-sized REITs, particularly in sectors such as apartments that remain fragmented.
"Other REITs will be watching how the market reacts and responds to this deal and could lead to more M&A if the market responds/reacts positively to this,” Auerbach added.
Fewer acquisitions
The merger comes as apartment REITs have slowed acquisitions and shifted toward stock buybacks, as their shares trade below the value of the underlying real estate holdings.
That dynamic has pushed companies to favor repurchasing their own stock over buying new properties because apartment deals that look attractive in the private market can lose value once they are part of a publicly traded company.
AvalonBay said it is balancing both strategies. During April’s earnings call, chief financial officer Kevin O’Shea said stock repurchases and development remain “highly attractive” at current valuations, noting the company’s shares imply higher return than some potential acquisitions.
The trend has contributed to a slowdown in dealmaking across the sector, making large-scale mergers one avenue for growth as companies look to expand without relying on external acquisitions.
For the record
Goldman Sachs & Co. LLC is serving as lead financial adviser to AvalonBay, alongside J.P. Morgan and Wells Fargo, while Goodwin Procter LLP is acting as legal adviser.
Morgan Stanley and Centerview Partners are serving as lead financial advisers to Equity Residential, with BofA Securities also advising. Wachtell, Lipton, Rosen & Katz is acting as legal adviser.
CoStar News reporters Jonathan Lehrfeld and Mark Heschmeyer contributed to this report.