Security Capital to Merge 2 Apartment REITS

Security Capital Group Inc. said it plans to merge two of its apartment real estate investment trusts in a transaction valued at about $1.6 billion, creating one of the largest owners and developers in the U.S. Security Capital Pacific Trust and Security Capital Atlantic Inc. will be combined to form Archstone Communities, a company with 304 properties and 90,166 apartments in 19 states throughout the South and West. The transaction is an example of the consolidation underway in the fragmented apartment business, where companies are teaming up to cut costs at a time when development is accelerating and rent growth is slowing. Terms of the agreement call for Denver-based Pacific Trust to swap one share for each Atlanta-based Atlantic share, the companies said. Pacific will issue about $1.1 billion in stock and assume about $527 million of debt. On the New York Stock Exchange, Security Capital Atlantic rose $1.56 to close at $22.56, and Security Capital Pacific fell 94 cents to close at $23.19, amid concern that the company is diluting its future growth by acquiring its sister company.