"It's been very challenging to execute that strategy because there were not a lot of assets made available for sale [in high-barrier markets]," says CEO David Neithercut, who served as EQR's executive vice president and CFO from 1995 to 2004, became president in 2005, and was named CEO in 2006.
"We had a couple of drinks last night," said CEO David Neithercut on Feb. 28, the day after closing EQR's acquisition of 21,781 units in 76 properties.
"It was really one of those things where, if you remember college and final exams, sometimes you just want to go home and go to bed."
woke up on the 28th, he
was suddenly managing a very different company from the one he
took the helm of in 2006.
"We had been bird-dogging this thing since 2007," Neithercut
"We certainly knew that when Lehman had problems, there would need to be some kind of endgame.
The banks didn't want to own it and Lehman didn't want to own it."
Though industry buzz connected EQR with Archstone, Neithercut says he didn't have formal talks with Archstone's owners until 2010.
had another card to play.
As the bidding process played out, EQR
devised other options, assuming Lehman ended up with ultimate control.
Originally, Lehman wanted only cash (and no stock) for Archstone
said that would have meant too much execution risk for EQR
needed a partner.
After talking to some large financiers, such as sovereign wealth funds, EQR
decided that to minimize risk it needed someone more familiar with American apartments.
Who better than one of its biggest rivals?
In January 2012, Neithercut approached Tim Naughton, CEO at Arlington, Va.-based REIT AvalonBay Communities (AVB) about joining forces to get Archstone.
As the rest of the world expected an IPO (even though the public markets would have probably valued Archstone
at less than its net asset value), Neithercut
remained optimistic he
could close the deal.
"They continued working on an IPO while they were working with us," Neithercut
"It sort of kept the heat on us."
In November 2012, nearly a year after Equity made its first bid, EQR
announced they paid Lehman $16 billion for Archstone
"I always felt this was the best outcome for the estate, and never once did I feel that it wouldn't happen," Neithercut
Neithercut's confidence may have been a product of his
own determination to cross the finish line.
"The deal was something David Neithercut was relentless in pursuing," says Alan George, executive vice president and chief investment officer at EQR."We dug a number of dry holes, as they say in the oil business, before we got to the point where there was a deal we could put together."
"The work that our team had done in preparation for this, by switching off Archstone's
system and switching on EQR's
system, was nothing less than awesome," Neithercut
doesn't shy away from that strategy.
"Where they might have been short was with that capital that could have renovated units, and we look forward to taking advantage of that ourselves," he