Starwood Buys Equity Residential Apartments for $5.4 Billion

  • Equity Residential to pay $9 to $11 special dividend
  • Company plans to sell more of its apartments next year

Starwood Capital Group LLC is buying apartments from Equity Residential for $5.4 billion as Barry Sternlicht’s investment fund extends its reach in the U.S. home-rental industry.

The deal includes 23,262 homes spread across 72 communities and the price is equal to $230,634 per unit, Equity Residential said in a statement Monday. Most of the proceeds will be used to pay a special dividend of $9 to $11 a share.

Sternlicht is becoming a growing force in a U.S. residential rental market that’s expanding as young Americans face hurdles buying homes. The Starwood Waypoint Residential Trust unit agreed to merge with Colony American Homes in September, part of billionaire Tom Barrack’s Colony Capital Inc., to create a company with more than 30,000 units.

“The size of this transaction underscores our conviction in multifamily housing’s continuing ability to offer superior risk-adjusted returns,” Sternlicht said in the statement. “We are excited to increase our exposure to these growth markets."

The purchase, Starwood Capital Group’s biggest non-hotel property acquisition, was made through a unit controlled by Starwood Global Opportunity Fund X , the company said. Starwood Capital said it has purchased or agreed to buy 67,800 units in the last 12 months, including the deal announced on Monday.

Equity Residential, founded by Sam Zell, said it intends to sell another 4,728 apartments next year, including all of its assets in Connecticut. The homes sold Monday are in South Florida, Seattle, Denver, Washington D.C. and California. The sale isn’t expected to affect the fourth-quarter dividend, the company said.

Residential landlords are adding assets and consolidating amid the lowest U.S. homeownership level in decades. Even so, stocks of all the publicly traded rental-home landlords have been sagging this year, with firms struggling to convince investors they can operate the business efficiently.

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