National Real Estate Investor (among others) reported on a transaction in which Equity Residential is taking a 26.5% interest in Archstone, a privately-held operator of multi-family properties. The cost of the interest is $1.325 billion.
This is a large transaction by any measure, but is significant as well. The sellers are affiliates of sophisticated investors, Bank of America and Barclays Bank, and the buyer is the fifth largest owner of apartment communities in the country. Further, Equity Residential is the residential property vehicle of Sam Zell, a legendary real estate investor. His reputation of being able to identify acquisition opportunities in the bleakest markets earned Zell the nickname Grave Dancer.
In January 2007, Zell put his office property vehicle, Equity Office, up for sale. and was able to attract an FFO multiple nearly double what the market was valuing the portfolio. Of course, this kind of a premium was one signal of the topping of the commercial real estate market. The Rational Realist summed it up: "Sam Zell's new nickname will be Snake Charmer, not Grave Dancer." It appears that Zell is tuning up his flute again.
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