In Archstone Sale, Equity Residential and AvalonBay Divide Spoils For a year, Sam Zell, the Chicago real estate tycoon, engaged in a very public quest to buy Archstone Enterprise, a giant private residential landlord with upscale rental apartment buildings in the most coveted metropolitan markets. The lobby of one of Archstone Enterprise's high-end properties, this one at 515 West 52nd Street in Manhattan. So it was not surprising when Equity Residential, the apartment building behemoth where Mr. Zell is chairman, announced last week that it would be the majority partner in a $16 billion deal, including the assumption of $9.5 billion in debt, to acquire Archstone, based in Englewood, Colo. The deal, expected to close in the first quarter of next year, is the biggest real estate transaction since the Blackstone Group completed its $26 billion purchase of Hilton Hotels in November 2007, according to Real Capital Analytics, a New York research firm. More surprising was the disclosure that Equity Residential had approached its biggest publicly traded rival, AvalonBay Communities, of Arlington, Va., last January to become its minority partner in the deal. The two companies, both real estate investment trusts, or REITs, worked together to split Archstone's portfolio of more than 45,000 rental units as well as its development and land sites. Under the terms of the deal, AvalonBay will acquire 40 percent of Archstone. The acquisition comes at a time when shares of once-red-hot multifamily REITs have softened even though rents and occupancy remain strong. Analysts say, however, that the market is overreacting to a slight slowdown in rent growth. In Archstone, the buyers are getting a company that commands the highest rent among large-scale apartment companies, according to Green Street Advisors, of Newport Beach, Calif. Sixty-nine percent of Archstone's properties are considered top quality, Green Street Advisors said, compared with 49 percent for Equity Residential and 45 percent for AvalonBay. Archstone pioneered the use of sophisticated software - much like the kind used by airlines and hotels - to keep buildings full at the highest possible rents. In a conference call with investors last week, executives of Equity Residential and AvalonBay said the Archstone properties would complement their existing portfolios, enabling both companies to grow in a way that would not be possible with incremental deals. For Equity Residential, the deal will accelerate its long-term efforts to get out of real estate markets where it is easy for developers to keep putting up new buildings. The company plans to sell its properties in Atlanta, Orlando, Phoenix and Jacksonville. Like the acquiring companies, Archstone is concentrated in places where zoning laws, high land costs and antidevelopment sentiment make it more challenging to build. The acquisition "allows each of us to get more of what we wanted than either of us could have gotten on our own," Timothy J. Naughton, chief executive at AvalonBay, said on the call. AvalonBay, itself the product of a merger, has been known mainly as a developer, while Equity Residential has grown mainly through acquisitions. But Equity Residential will acquire four of Archstone's current development projects, to AvalonBay's three, and 15 sites to be developed in the future. AvalonBay will take on just three land parcels. The executives said each company got exactly what it wanted. Mr. Naughton said that his company would pick up 23 additional buildings in Southern California, a market that AvalonBay views as very promising. David J. Neithercut, chief executive of Equity Residential, said the deal would increase the company's holdings in San Francisco by 48 percent and Boston by 41 percent. "These have been extremely challenging markets in which to increase our exposure," he said. Executives from Equity Residential and AvalonBay declined requests for interviews. Robert M. White Jr., president of Real Capital Analytics, predicted that in the near future, other REITs are likely to grow in the same way. "The existing REITs have tremendous access to capital - capital a private owner can't get," he said. That really favors some of the bigger REITs getting even bigger. While Equity Residential and AvalonBay were devising plans to carve up Archstone over the last year, Lehman Holdings, the owner of Archstone, was also pursuing an alternative strategy to take the company public. Archstone had a long history as a public company when Lehman Brothers and Tishman Speyer bought it in 2007, in a $22 billion deal that ultimately helped bring about Lehman's downfall. An earlier version of this article misstated how Alexander Goldfarb, a managing director at Sandler O'Neill & Partners, calculated the rate of growth in the net operating income of the publicly traded apartment sector. He said it is on pace to be 7 to 9 percent for 2012, not 6 percent; it is expected to slow to 6 percent in 2013.