Two apartment rental giants merge, aim to leverage data, AI flywheel

The $52 billion merger of two apartment rental companies is also a bet that the combined company can leverage a data flywheel and an AI joint venture.

Equity Residential said last week that it will merge with AvalonBay Communities in an all-stock merger worth about $52 billion. The merger of equals, which is expected to close in the second half of 2026, creates a company that will own 180,000 apartments with an enterprise value approaching $70 billion.

Ben Schall, President and CEO of AvalonBay, said on a conference call that the deal will give the combined company scale, but "is not about getting bigger just to be bigger." Schall will become CEO of the combined yet-to-be-named company.

The new company will be "powered by a leading operating platform that leverages technology, AI, centralized services and leading regional teams enhancing the resident experience while driving operating efficiencies and margin expansion," said Schall.

Merger announcements typically carry a boilerplate about scale and synergies, but Schall said a larger company will simply have more data required for better decisions. "Operational scale matters because it allows us to spread operating and technology investments across a much larger base of homes at a meaningfully lower cost per unit. It also provides greater data richness, stronger market knowledge and deeper within market density, all of which improve decision-making across leasing, maintenance, resident services, marketing, purchasing and capital allocation," said Schall.

According to Equity Residential and AvalonBay, the companies can save $175 million from corporate overhead efficiencies with $125 million of that in place 18 months after the close.

It doesn't hurt that Equity Residential and AvalonBay decided to partner on Elise AI to automate processes in 2019. The two companies were the only institutional investors in Elise AI.

Mark Parrell, Equity Residential's President and CEO, said the combined company's scale will enable it to invest better through cycles due to cutting edge technology.

The plan is to use data that concentrated where the company's portfolio is strongest, notably Northern California, to have better visibility and improve efficiency.

Parrell noted that Equity Residential and AvalonBay could choose to sell Elise AI to the broader industry. "Newco will have the ability to create those kinds of products on its own, and either resell them to the industry more broadly or keep it for its own benefit. So, there are things that Newco will be uniquely able to do and accelerate even beyond the numbers on the page," said Parrell.

Future tech investments

Schall said the combined company will have the "ability to further accelerate the piloting and adoption of new technologies and to spread those costs across a wider portfolio."

Part of that ability to invest will be due to a stronger balance sheet via better credit ratings and the ability to self-fund growth. The combined company will have more than $2 billion in cash flow and pay more than $2 billion in dividends.

The combined company will also broaden Elise AI's reach to residents, and communicate across the full customer journey, said Schall.

Equity Residential and AvalonBay collectively has more than 60 million pieces of customer feedback.

"We can identify emerging technologies and spread the cost across a much larger base of homes. That investment benefits residents directly, faster response times, better digital tools, more consistent service, while also driving the operating efficiencies that benefit shareholders. We also expect a broader and richer set of data to optimize our operating and investment decisions and outcomes," said Schall.

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