When EQR paid $535M for a suburban Atlanta portfolio at a 4.7% cap rate , private investors scoffed.

“They must be high.”

They’re not high. They’re playing a different game.

🧪 What Looks Like Overpaying… Isn’t

Let’s use simple math.

You and EQR are both looking at the same $1,000,000 of stabilized NOI.

Same NOI. Much higher price. Lower leverage. Yet they still get roughly the same cash return.

Why?

🧠 Their Capital is Just… Cheaper

✅ Your True WACC:

  • 75% Debt @ 5.8%

    • 75% Debt @ 5.8%

  • 25% Equity @ 10%

    • 25% Equity @ 10%

  • WACC: 6.85%

    • WACC: 6.85%

    ✅ EQR’s Realistic WACC:

  • 50% Debt @ 4.0%

    • 50% Debt @ 4.0%

  • 50% Equity @ ~7.0% (not just dividend yield—add growth)

    • 50% Equity @ ~7.0% (not just dividend yield—add growth)

  • WACC: 5.5%

    • WACC: 5.5%

    They don’t need 8–10% returns to satisfy LPs. They need to beat 5.5% . That’s it.

    Even if 4.7% is a little dilutive today, their rent growth assumptions (3–4%/yr) pull them above water fast.

    🧠 Why They Still Do "Dilutive" Deals

    Buying at a 4.7% cap with a 5.5% WACC? That’s short-term negative leverage. So why do it?

    Because they’re underwriting tomorrow's NOI , not today’s.

    If rents grow 3–4% annually, that 4.7% becomes a 6%+ yield in a few years— turning a short-term “loss” into long-term shareholder alpha .

    You don’t have that luxury. Often, you need yield on day one. You need leverage to make the numbers work. And you answer to LPs who want cash flow now.

    So, stop comparing your underwriting to theirs.

    You’re optimizing for cash flow and value creation through execution. They’re optimizing for stock accretion through scale and capital efficiency.

    Let them chase 4.7% caps. You chase 8%–10%+ Cash on Cash returns on messy deals they can’t touch. That’s where your edge lives.

    Here is Link to the article https://www.bisnow.com/atlanta/news/multifamily/chicago-based-apartment-giant-buying-eight-atlanta-apartments-129609