“They have a team that’s been with the company pretty much since they’ve gone public,” says Rod Petrik, managing director at St. Louis-based Stifel, Nicolaus, and Co., a regional investment banking firm that covers Equity. “They’ve developed their own and promoted from within.”
Still, as 2010 came to a close, Equity had to adjust its approach to acquisitions, driven in part by the increase in competition from other buyers. And now, heading into 2011, that evolution will continue. The bottom line? Neithercut and his team have no plans to stop and will continue to look for imaginative ways to add units.
A Foundation for Acquisitions
Zell—the famed grave dancer known for buying and turning around struggling properties—formed Equity from a combination of apartment assets that he controlled (some with White Plains, N.Y.-based Starwood). When Zell rolled these assets up and took Equity public in 1993, it hardly resembled the giant it is today. The company had a respectable 20,000 units. But from 1993 to 2000, Equity gobbled up seven different public real estate companies, pushing its portfolio size upwards of 225,000 units by 2000. In late 2000, it initiated a coastal strategy of buying in high-barrier cities and began selling in secondary and tertiary markets where new supply was easy to add.
Equity Residential
Credit: Equity Residential
Headquarters: Chicago
Founded: 1993
No. of Employees: 4,100
Market Cap: $14.18 billion
Units Owned: 132,699
Market Coverage: National, with an emphasis on high-barrier, coastal markets
Once the company became a long-term holder of apartments, Zell said that the focus on high-barrier markets was vital. “If we were going to get appropriate valuation for our company and be an owner of apartments, as opposed to a serial buyer and seller, it became obvious to us that we had to shift what we were to what we are today,” Zell says.
Neithercut served as executive vice president and CFO from 1995 to 2004, became president in 2005, and was named CEO in 2006. “David is measured, thoughtful, and intelligent,” Zell says. “He started in finance, and step by step, over 20 years, has taken on more. Moving from CFO to CEO is a big step But that’s a reflection of the kind of talent he has.”
Neithercut continued the company’s portfolio transformation, selling in low-growth markets such as the Midwest and buying in Southern California, Washington, D.C., and New York. The biggest splash came in 2006 when Equity sold its Lexford Housing Division—27,115 units across 289 properties—to Montvale, N.J.’s Empire Group Holdings for about $1.1 billion in cash (many of those units recently went into special servicing).
“The value of the Lexford transaction was really impacted by the CMBS market,” Neithercut says. “When that market was the frothiest, we thought it was an opportune time to sell that portfolio and reallocate into new markets.”
