Multifamily giant Equity Residential agreed to buy an 11-property apartment portfolio in three Sun Belt cities from investment firm Blackstone for nearly $1 billion, expanding in the region after Blackstone signaled property values may have bottomed.
The deal, expected to close in the third quarter, calls for Equity to acquire 3,572 apartments in Atlanta, Dallas and Denver for a total cost of about $964 million. Alec Breckenridge, Equity’s chief investment officer, characterized the price as “attractive” relative to what it would cost to build new.
“This transaction is a significant step in our goal of generating a higher percentage of our annual net operating income from these strong growth expansion markets,” Breckenridge said in a statement.
While Equity’s portfolio has traditionally been focused on major coastal areas, it has made a push to enter higher-performing markets in quickly growing regions largely in the South and Mountain West. Before the Blackstone deal, Mark Parrell, Equity’s CEO, said on a second-quarter earnings call that the company owned 10 properties in Denver but “is still building up” a portfolio in the Sun Belt.
The Blackstone deal adds three properties consisting of 978 units to Equity’s portfolio in Denver. The purchase also includes 1,357 units across four properties in Atlanta and four others in Dallas totaling 1,237 units. On average, properties are 8 years old across the portfolio.
The sale “demonstrates the strong institutional demand for high-quality assets,” Asim Hamid, senior managing director at Blackstone Real Estate, said in a statement. “We continue to see strong fundamentals in attractive markets" for rental housing.
Far from stepping away from bets on rentals, commercial real estate and other assets, Blackstone invested $34 billion in the second quarter, including deals for both Apartment Income REIT and Tricon Residential. The company has committed to spending another $19 billion, according to Jonathan Gray, the company’s president and chief operating officer.
“Investment activity is picking up meaningfully,” Gray said on Blackstone’s call to discuss second-quarter earnings. “Commercial real estate value was bottoming. … More bidders were showing up. The cost of capital has declined significantly. The availability of debt capital has increased significantly. The overall trend line on investing is positive.”
As part of its second-quarter earnings report, Equity said it made recent acquisitions for two properties in Atlanta and Dallas totaling 644 units at a combined cost of $216.8 million. The company is also under contract for an additional deal in Denver expected to add another 202 units to its portfolio for $77 million, Equity said.
The company did not immediately respond to a CoStar News request to comment.
Sun Belt Expansion
Parrell has said the company would continue to look for acquisitions in its Sun Belt expansion markets that compare well to replacement costs, with the estimated annual yield indicated by underwriting for a 5% capitalization rate.
“While we acknowledge that current rent levels are weak in these expansion markets and likely to remain so in the near term, in the longer term, we see relief on the way that starts in these oversupplied markets have collapsed,” Parrell said on Equity’s latest earnings call. “Deliveries in 2026 and 2027 are likely to be much lower than both current levels and historical levels. These expected lower supply levels underpin our property acquisition underwriting in outer years where we expect a significant rental rate recovery.”
But Breckenridge urged patience with rate recovery. He expects new acquisitions in its expansion regions to post slightly negative rent growth over the next year, with some offset from operational improvements followed by a period of flat performance before seeing rent increases in 2027 and into 2028.
“That’s a deal that works for us and fits within our cost of capital,” he said.
Analysts from Morgan Stanley estimated the deal would fall in line with capitalization rate expectations from Equity with assumptions for concession, vacancy and operating income that are slightly worse than the company’s current portfolio.
The investment bank said the deal was an encouraging sign for real estate transaction activity that has been suppressed by higher interest rates, and believes it supports Blackstone’s assessment that commercial real estate values are bottoming, which should drive more alignment between buyers and sellers and increase sales volume moving forward.
Equity is ranked sixth on the National Multifamily Housing Council’s 2024 list of largest multifamily owners with nearly 81,000 apartment units in its portfolio at the end of this past year.