Equity Residential and AvalonBay Communities Inc. (AVB), the largest publicly traded U.S. apartment owners, are preparing the sale of a German unit that’s valued at about 1.3 billion euros ($1.7 billion), four people with knowledge of the matter said.
Morgan Stanley (MS) has been hired to manage the sale of DeWAG Management GmbH, according to the people, who asked not to be identified because the plan is private. DeWAG is most likely to be sold to an individual buyer, though an initial public offering is also being considered, one of the people said.
Equity Residential, founded by billionaire investor Sam Zell, and AvalonBay acquired the Stuttgart, Germany-based landlord as part of their purchase earlier this year of Archstone Inc. from Lehman Brothers Holdings Inc. DeWAG owns 14,500 residential properties in west German cities including Cologne, Munich and Frankfurt, according to its website.
Marty McKenna, a spokesman in Chicago for Equity Residential (EQR), didn’t return a call or e-mail seeking comment on the company’s plans. DeWAG, Morgan Stanley and Jason Reilley, a spokesman for Arlington, Virginia-based AvalonBay, declined to comment.
Equity Residential and AvalonBay said in November that they would sell some assets after buying Archstone in a deal valued at $6.5 billion. In January, Equity Residential agreed to sell 27 U.S. properties to Goldman Sachs Group Inc. (GS) and Greystar Real Estate Partners LLC for as much as $1.5 billion.
In the U.S., Equity Residential this year accelerated sales of buildings outside its core coastal markets, before an expected increase in interest rates, Chief Executive Officer David Neithercut said on a July 31 conference call. The company said it will complete $4.1 billion of dispositions planned for this year by September.
“An important driver of the Archstone transaction was the ability it provided us to accelerate the sale of so many of these non-core assets, and we’re very pleased that the market has been extremely receptive to our offerings,” Neithercut said on the call.
U.S. firms including Blackstone Group LP (BX) and Goldman Sachs are selling German residential properties to take advantage of high demand as investors seek a safe place to put their money amid the European debt crisis. Archstone bought DeWAG for about $649 million in 2006. At that time, the German company owned 6,100 apartments, according to a statement.
While DeWAG mostly manages properties, it also develops them. The company is held in a fund of which Archstone owns 16 percent and investors such as insurers and pension funds own the rest, according to DeWAG’s website.
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