Now that Vivmark Residential is a reality, the REIT could become a blue-chip stock, according to one analyst. However, the merger's real benefits may not materialize until 2028.

The firm, created after AvalonBay Communities and Equity Residential officially merged on Aug. 17, has a pro forma equity market capitalization of about $53 billion and an enterprise value of roughly $71 billion. It will own more than 180,000 rental apartments, making it the country's largest owner this year, with another 10,000-plus units under construction.

Vivmark’s scale and liquidity, combined with the simplicity of its business model — owning, operating and developing rental housing — should make it attractive for investors, according to Anthony Paolone, executive director at JP Morgan.

“In terms of our big-picture view of VMRK, we are constructive on the company’s scale and liquidity, and we think it should be viewed as the go-to ‘blue chip’ stock for investors seeking exposure to residential rental housing,” Paolone wrote in a research note shared with Multifamily Dive. 

JP Morgan initiated coverage of Vivmark with a neutral rating and a December 2027 price target of $73 per share. It pegs the REIT’s net asset value per share at $76.50, assuming a 5.3% cap rate on the portfolio. 

Slow near-term growth

JP Morgan didn’t go overweight because it continues to expect mediocre multifamily earnings growth, forecasting funds from operations at 0.6% for multifamily REITs versus 6.3% for the overall REIT group in 2026. 

In 2027, it expects apartment REIT FFO growth to be 3.4% versus 6.1% for the overall REIT group. In 2028, the gap is expected to narrow with 5.3% for multifamily versus 6% for the overall REIT group. 

JP Morgan notes that outside of New York and San Francisco, landlords have “had limited pricing power when replacing tenants.” 

“Underlying the fundamentals is the fact that the expected rebound in landlord pricing power following the supply wave of the last few years has been slow to materialize,” Paolone wrote.

But Vivmark does have a foothold in markets producing some of the strongest results across the country. Michael Lewis, an analyst at Truist, said the two firms posted “strong growth in San Francisco and solid results in New York,” in a research report published on July 23 after EQR’s earnings release.

The advantage of scale

In the initial merger announcement, AVB and EQR discussed the efficiencies they create, including $175 million in gross earnings benefits.

Property management efficiencies should generate $65 million, followed by $50 million from corporate overhead initiatives, $48 million in property operating expense savings and $12 million in revenue opportunities. 

“Some benefits, such as corporate overhead, could show up relatively quickly given there is now a single management team, but other savings initiatives will likely take several quarters to translate into reported results,” Paolone wrote.

Countering those efficiencies will be what JP Morgan estimates as $35 million of interest expense from the $740 million of deal costs and $50 million of higher property taxes from reassessment due to Proposition 13 in California.

JP Morgan doesn’t think there is much to “dial in” for 2027 synergies relative to larger drivers such as underlying core trends and interest expense. “This is instead a 2028 story, in our view, where successful integration alongside improved fundamentals could make growth appear very compelling,” Paolone wrote.

Alexander Goldfarb, managing director and senior research analyst for investment bank and financial services company Piper Sandler, agrees that Vivmark won’t reach its full earnings potential until 2028, though he sees upside in its development initiatives and placed a neutral rating on the company.

“We believe the combined AVB/EQR difference is the ability to cash-flow fund the development program which enhances the yields and mitigates the inherent dilution that comes from advance financing, whether asset sales or equity,” Goldfarb wrote in a separate research note.

Click here to sign up to receive multifamily and apartment news like this article in your inbox every weekday.