{"url_path":"/sec/avb/8-k/2026-05-21/item-1-01","section_key":"item-1-01","section_title":"Item 1.01 Entry into a Material Definitive Agreement.","topic":"sec","document":{"doc_type":"8-K","doc_date":"2026-05-21","source_url":"https://www.sec.gov/Archives/edgar/data/915912/0001104659-26-064781-index.html","accession_number":"0001104659-26-064781","cik":"0000915912","ticker":"AVB","issuer_name":"AVALONBAY COMMUNITIES INC","edgar_url":"https://www.sec.gov/Archives/edgar/data/915912/0001104659-26-064781-index.html","primary_entity_key":"0000915912","primary_entity_name":"AVALONBAY COMMUNITIES INC"},"word_count":2925,"has_tables":true,"body_markdown":"Item 1.01Entry into a Material Definitive Agreement.\n\n \n\nOn May 20, 2026, AvalonBay Communities, Inc., a Maryland corporation\n(“AvalonBay”), Equity Residential, a Maryland real estate investment trust (“Equity Residential”), ERP Operating\nLimited Partnership, an Illinois limited partnership (the “ERP Operating Partnership”), and Canopy Merger Sub LLC, a Maryland\nlimited liability company and a direct wholly owned subsidiary of Equity Residential (“Merger Sub”), entered into an Agreement\nand Plan of Merger (the “Merger Agreement”). Capitalized terms used but not defined herein have the meanings ascribed to them\nin the Merger Agreement.\n\n \n\nThe Merger Agreement provides for the combination of Equity Residential\nand AvalonBay in an all-stock merger-of-equals transaction upon the terms and subject to the conditions set forth in the Merger Agreement.\nThe combined company will operate under a new name to be announced prior to the closing of the Transactions (as defined below) (the “closing”).\nThe Board of Trustees of Equity Residential (the “Equity Residential Board”) and the Board of Directors of AvalonBay (the\n“AvalonBay Board”) have each unanimously approved the Merger Agreement and the Transactions.\n\n \n\nUpon the terms and subject to the conditions of the Merger Agreement,\n(i) on the closing date but prior to the Effective Time (as defined below), AvalonBay will contribute certain assets set forth in an exhibit\nto the Merger Agreement (the “Asset Contribution”) in exchange for units of partnership interest in the ERP Operating Partnership\n(“OP Units”) that have, in the aggregate, a value equal to the fair market value of such contributed assets and (ii) following\nthe Asset Contribution and at the Effective Time, AvalonBay will merge with and into Merger Sub, with Merger Sub being the surviving entity\n(the “Merger” and, together with the Asset Contribution and the other transactions contemplated by the Merger Agreement, the\n“Transactions”). The AvalonBay Board has unanimously (a) determined and declared the Merger Agreement and the Transactions\nfair to, advisable and in the best interests of AvalonBay and its stockholders, (b) approved and deemed advisable the execution and\ndelivery of the Merger Agreement, the performance by AvalonBay of its covenants and agreements contained therein and the consummation\nof the Transactions, (c) directed that the approval of the Merger be submitted for consideration at a meeting of AvalonBay’s\nstockholders and (d) resolved to recommend that AvalonBay’s stockholders vote in favor of the approval of the Merger and to\ninclude such recommendation in the Joint Proxy Statement/Prospectus contemplated by the Merger Agreement.\n\n \n\n*Merger Consideration*\n\n* *\n\nPursuant to the terms and subject to the conditions in the Merger Agreement,\nat the effective time of the Merger (the “Effective Time”), by virtue of the Merger, each outstanding share of common stock\nof AvalonBay, par value $0.01 per share (“AvalonBay Common Stock”), issued and outstanding immediately prior to the Effective\nTime will automatically be cancelled, retired and will cease to exist, and will be converted into the right to receive 2.793 (the “Exchange\nRatio”) common shares of beneficial interest, $0.01 par value per share, of Equity Residential (“Equity Residential Common\nShares”), plus the right, if any, to receive cash in lieu of fractional Equity Residential Common Shares, if any, into which such\nAvalonBay Common Stock would have been converted.\n\n \n\n*Post-Closing Governance*\n\n* *\n\nAvalonBay and Equity Residential have also agreed to certain governance-related\nmatters. At the Effective Time, the Board of Trustees of the combined company will have fourteen members, consisting of (a) seven members\nof the Equity Residential Board as of immediately prior to the Effective Time, including David J. Neithercut and Stephen E. Sterrett,\nand (b) seven members of the AvalonBay Board as of immediately prior to the Effective Time, including Timothy J. Naughton and Benjamin\nW. Schall. In addition, effective as of the Effective Time, Stephen E. Sterrett will be appointed to serve as Chairman of the Board\nof Trustees of the combined company, and Benjamin W. Schall will be appointed to serve as Chief Executive Officer of the combined company.\n\n \n\n*Treatment of AvalonBay Equity Awards*\n\n* *\n\nPursuant to the terms and conditions of the Merger Agreement, as of\nthe Effective Time, each award of restricted shares of AvalonBay Common Stock that vest on the basis of time (each, an “AvalonBay\nRestricted Share Award”) granted under an AvalonBay equity plan outstanding immediately prior to the Effective Time (subject to\ncertain exceptions), by virtue of the Merger, will be converted into an award of restricted Equity Residential Common Shares that is subject\nsolely to time-based vesting conditions (each, an “Equity Residential Time-Vesting Restricted Share Award”) with respect to\na number of Equity Residential Common Shares, rounded to the nearest whole number of shares, equal to the product of (i) the number\nof shares of AvalonBay Common Stock subject to such AvalonBay Restricted Share Award immediately prior to the Effective Time and (ii) the\nExchange Ratio, subject to and in accordance with the terms of the applicable AvalonBay equity plan and AvalonBay Restricted Share Award\nagreement in effect immediately prior to the Effective Time (including vesting schedule, retirement provisions, double-trigger vesting\nacceleration entitlements and payment of dividend entitlements).\n\n \n\n \n\n \n\n \n\nEach award with respect to shares of AvalonBay Common Stock that vest\non the basis of the achievement of applicable performance goals (each, an “AvalonBay Performance Award”) granted under an\nAvalonBay equity plan outstanding immediately prior to the Effective Time, by virtue of the Merger, will be converted into an Equity Residential\nTime-Vesting Restricted Share Award or an award of OP Units in the ERP Operating Partnership designated as a “Restricted Unit”\nin the ERP Operating Partnership’s partnership agreement (each, an “Equity Residential Time Vesting Restricted Unit Award”)\nwith respect to a number of Equity Residential Common Shares, rounded to the nearest whole number of shares, equal to the product of (i)\nthe number of shares of AvalonBay Common Stock subject to such AvalonBay Performance Award immediately prior to the Effective Time, determined\nby deeming any performance-based vesting criteria applicable to such AvalonBay Performance Award to be achieved based on the greater of\ntarget performance and the actual level of performance (as calculated as of the latest practicable date prior to the Effective Time and\ncertified by the Compensation Committee of the AvalonBay Board prior to the Effective Time) and (ii) the Exchange Ratio, subject to and\nin accordance with the terms of the applicable AvalonBay equity plan and form of AvalonBay Restricted Share Award agreement in effect\nimmediately prior to the Effective Time, including the time-based vesting schedule that was associated with that AvalonBay Performance\nAward but with such other terms as are associated with the form of AvalonBay Restricted Share Award, including retirement provisions and\ndouble-trigger vesting acceleration entitlements. Each holder of an AvalonBay Performance Award will also receive a payment in cash equal\nto cumulative dividends paid by AvalonBay with respect to the shares of AvalonBay Common Stock deemed earned from the date of grant of\nthe AvalonBay Performance Award through the Effective Time.\n\n* *\n\nEach award with respect to shares of AvalonBay Common Stock deferred\npursuant to the AvalonBay Directors’ Deferred Compensation Plan (each, an “AvalonBay Deferred Unit Award”) outstanding\nimmediately prior to the Effective Time, by virtue of the Merger, will be converted into a number of Equity Residential Common Shares,\nrounded to the nearest whole number of shares, equal to the product of (i) the number of shares of AvalonBay Common Stock subject to such\nAvalonBay Deferred Unit Award immediately prior to the Effective Time (inclusive of any dividends paid on shares of AvalonBay Common Stock\nthat have been reinvested and credited in the form of additional AvalonBay Deferred Unit Awards) and (ii) the Exchange Ratio, subject\nto and in accordance with the terms of the AvalonBay Directors’ Deferred Compensation Plan, in a manner that complies with the requirements\nof Section 409A (“Section 409A”) of the Internal Revenue Code (the “Code”).\n\n \n\nEach option to purchase a number of shares of AvalonBay Common Stock\nat a specific price per share (each, an “AvalonBay Option”) outstanding immediately prior to the Effective Time, by virtue\nof the Merger, will be converted into an option to purchase a number of Equity Residential Common Shares at a specific price per share\n(each, an “Equity Residential Option”) with respect to a number of Equity Residential Common Shares equal to the product,\nrounded down to the nearest whole number of shares, of (i) the number of shares of AvalonBay Common Stock subject to such AvalonBay Option\nimmediately prior to the Effective Time and (ii) the Exchange Ratio, and with an exercise price per share, rounded up to the nearest whole\ncent, equal to (A) the exercise price per share of AvalonBay Common Stock of such AvalonBay Option immediately prior to the Effective\nTime divided by (B) the Exchange Ratio (each, an “Adjusted Equity Residential Option”). Each Adjusted Equity Residential Option\nwill continue to be subject to the terms of the applicable AvalonBay equity plan and AvalonBay Option award agreement in effect immediately\nprior to the Effective Time, including the applicable vesting schedule, retirement provisions and double-trigger vesting acceleration\nentitlements. The exercise price and the number of Equity Residential Common Shares subject to such Adjusted Equity Residential Options\nwill be determined in a manner consistent with the requirements of Section 409A.\n\n \n\n*Treatment of Equity Residential Equity Awards*\n\n* *\n\nEach Equity Residential Time-Vesting Restricted Share Award, Equity\nResidential Time-Vesting Restricted Unit Award and Equity Residential Option granted under an Equity Residential equity plan outstanding\nimmediately prior to the Effective Time (subject to certain exceptions) will remain outstanding and continue to be subject to the terms\nand conditions of the applicable Equity Residential equity plan and individual award agreement in effect immediately prior to the Effective\nTime, including the applicable vesting schedule, retirement provisions and double-trigger vesting acceleration entitlements.\n\n \n\nEach award of restricted Equity Residential Common Shares that is subject\nto both time-based and performance-based vesting conditions (each, an “Equity Residential LTI Restricted Share Award”) and\neach award of OP Units in the ERP Operating Partnership designated as a “Restricted Unit” in the ERP Operating Partnership’s\npartnership agreement that is subject to both time-based and performance-based vesting conditions (each, an “Equity Residential\nLTI Restricted Unit Award”) granted under an Equity Residential equity plan outstanding immediately prior to the Effective Time\nwill be deemed earned, with the applicable performance-based vesting conditions deemed to be achieved based on the greater of target performance\nand the actual level of performance (as calculated as of the latest practicable date prior to the Effective Time and certified by the\nCompensation Committee of the Equity Residential Board prior to the Effective Time) and any such earned Equity Residential LTI Restricted\nShare Award and each Equity Residential LTI Restricted Unit Award will remain outstanding and continue to be subject to the terms and\nconditions of the applicable Equity Residential equity plan and individual award agreement in effect immediately prior to the Effective\nTime, including the applicable time-based vesting schedule, retirement provisions and double-trigger vesting acceleration entitlements.\nAll dividend equivalents owed with respect to such earned Equity Residential LTI Restricted Share Awards and earned Equity Residential\nLTI Restricted Unit Awards will be paid promptly in accordance with applicable award terms.\n\n* *\n\n**\n\n \n\n \n\n* *\n\n*Representations, Warranties and Covenants*\n\n \n\nThe Merger Agreement contains representations and warranties from each\nof AvalonBay and Equity Residential. Additionally, the Merger Agreement provides for pre-closing covenants of each of AvalonBay and Equity\nResidential, including (i) to use commercially reasonable efforts to carry on their respective businesses in all material respects in\nthe ordinary course, consistent with past practice (subject to certain exceptions); (ii) to hold a meeting of AvalonBay’s stockholders\nand Equity Residential’s shareholders to obtain the requisite approvals contemplated by the Merger Agreement, as applicable; (iii)\nnot to solicit proposals relating to alternative business combination transactions; and (iv) subject to certain exceptions, not to enter\ninto any discussion concerning, or provide confidential information in connection with, alternative business combination transactions.\n\n \n\n*Closing Conditions*\n\n* *\n\nThe consummation of the Transactions is subject to certain customary\nclosing conditions, including, among others: (i) approval by AvalonBay’s stockholders of the Merger and approval by Equity Residential’s\nshareholders of the issuance of Equity Residential Common Shares in the Merger; (ii) the absence of a law or order restraining, enjoining,\nrendering illegal or otherwise prohibiting the consummation of the Merger; (iii) the effectiveness of a registration statement on Form\nS-4 that will be filed by Equity Residential for the issuance of Equity Residential Common Shares in the Merger; (iv) the authorization\nof the listing of the Equity Residential Common Shares on the New York Stock Exchange to be issued in the Merger, subject only to official\nnotice of issuance; (v) the accuracy of the representations and warranties of AvalonBay and Equity Residential as of the signing date\nand as of the closing date (subject to certain qualifications); (vi) material compliance with each party’s covenants; (vii) the\nreceipt by each of AvalonBay and Equity Residential of tax opinions that the Merger will qualify as a “reorganization” within\nthe meaning of Section 368(a) of the Code, (viii) the receipt by AvalonBay of an opinion relating to the status of Equity Residential\nas a real estate investment trust (“REIT”) under the Code and receipt by Equity Residential of an opinion relating to the\nstatus of AvalonBay as a REIT under the Code and (ix) other customary conditions as specified in the Merger Agreement.\n\n \n\n*Termination*\n\n \n\nThe Merger Agreement contains provisions granting each of AvalonBay\nand Equity Residential the right to terminate the Merger Agreement under specified circumstances, including: (i) if the Merger is not\ncompleted by May 20, 2027; (ii) if either AvalonBay’s stockholders fail to approve the Merger or Equity Residential’s shareholders\nfail to approve of the share issuance in connection with the Merger; (iii) if a governmental entity of competent jurisdiction has issued\na final, non-appealable order, decree or ruling in each case permanently restraining, enjoining or otherwise prohibiting or making illegal\nthe consummation of the Merger; (iv) if the other party has breached its representations, warranties or covenants in the Merger Agreement,\nsubject to certain conditions; or (v) if the other party’s board has changed its recommendation in connection with the Merger. Upon\na termination of the Merger Agreement, under certain circumstances, AvalonBay will be required to pay a termination fee to Equity Residential\nof the lesser of approximately $1.070 billion or the maximum amount that could be paid to Equity Residential without causing it to\nfail to meet the REIT requirements for such year. Upon a termination of the Merger Agreement, under certain circumstances, Equity Residential\nwill be required to pay a termination fee to AvalonBay of the lesser of approximately $1.005 billion or the maximum amount that could\nbe paid to AvalonBay without causing it to fail to meet the REIT requirements for such year.\n\n \n\n*Dividends*\n\n* *\n\nDuring the term of the Merger Agreement, AvalonBay and Equity Residential\nmay not pay dividends or distributions without the prior written consent of the other party, other than in enumerated instances, including\nthe payment of (i) regular quarterly dividends (x) in respect of AvalonBay Common Stock at a rate not in excess of $1.78 per share,\nper quarter, and (y) as required to be made in respect of limited partner interests of AvalonBay’s subsidiary partnership structured\nas a DownREIT, (ii) regular quarterly dividends (x) in respect of Equity Residential Common Shares at a rate not in excess of\n$0.7025 per share, per quarter, (y) pursuant to the terms of the Equity Residential Series K Preferred Shares and (z) as required\nto be made in respect of OP Units, and (iii) distributions required for each of AvalonBay and Equity Residential to maintain their\nrespective status as a REIT under the Code or to avoid the incurrence of any entity-level income or excise tax. AvalonBay and Equity Residential\nalso agreed to take such actions as are necessary to ensure that the holders of AvalonBay Common Stock and Equity Residential Common Shares\neach receive dividends covering the same periods prior to the closing date and to cooperate such that, beginning with the quarterly dividend\nfor the third quarter of 2026, their respective quarterly dividends will have the same record date and payment date.\n\n \n\nThe foregoing description of the Merger Agreement and the Transactions\ndoes not purport to be complete and is subject to and qualified in its entirety by reference to the Merger Agreement, a copy of which\nis attached hereto as Exhibit 2.1 and which is incorporated by reference herein.\n\n \n\nThe Merger Agreement has been included to provide security holders\nand investors with information regarding its terms. It is not intended to provide any other factual information about AvalonBay, Equity\nResidential or any other person. The representations, warranties and covenants contained in the Merger Agreement were made solely for\npurposes of the Merger Agreement and as of specific dates, were solely for the benefit of the parties to the Merger Agreement, may be\nsubject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes\nof allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts, and may be\nsubject to standards of materiality applicable to the contracting parties that differ from those applicable to security holders. Security\nholders and investors are not third-party beneficiaries under the Merger Agreement and should not rely on the representations, warranties\nand covenants or any descriptions thereof as characterizations of the actual state of facts or condition of AvalonBay or Equity Residential.\nMoreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement,\nwhich subsequent information may or may not be fully reflected in AvalonBay’s or Equity Residential’s public disclosures."}