Equity residential partnering with Toll Brothers on $1.9B apartment rental venture

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Equity Residential is partnering with Toll Brothers to
develop new rental apartment communities in key U.S. markets.

The companies announced this morning that they initially
intend to focus on acquiring and developing sites in six metro markets where
both parties have a significant or growing presence: Atlanta; Austin; Boston;
Denver; Orange County/San Diego; and Seattle, as well as in Dallas-Fort Worth,
a market that Equity Residential has recently re-entered.

Over the next three years, Equity Residential will invest 75
percent of the equity for each selected project and Toll Brothers will invest
25 percent. It is expected that each project will also be financed with
approximately 60 percent leverage.

Equity Residential will have the option to acquire each
property upon stabilization. The parties have targeted an initial minimum
co-investment of approximately $750 million in combined equity, or nearly $1.9
billion capacity, assuming 60 percent leverage.

These targets, which are subject to identifying mutually
acceptable properties, could increase if additional opportunities are
identified.

Three properties currently controlled by Toll Brothers, with
a total anticipated project cost of approximately $242 million, are expected to
jump-start the venture.

Toll Brothers will act as managing member of each project,
overseeing approvals, design and construction for which it will receive
development, construction management, and financing fees, as well as a promoted
interest to be realized upon the sale of each property and has, with limited
exceptions, agreed to develop apartment projects exclusively with Equity
Residential in the designated metro markets. Equity Residential will receive
fees for property management, leasing and marketing services, as well as
construction oversight.

“We are delighted to be working again with Toll Brothers and
their experienced apartment development team, with whom we’ve had a long and
successful business relationship,” said Mark J. Parrell, President and CEO of
Equity Residential. “This venture will marry Equity Residential’s market knowledge
and balance sheet strength with Toll Brothers’ existing deep development
capability to produce high quality apartment properties in our expansion
markets and predominantly suburban locations in our existing markets that
appeal to our affluent renter demographic. We expect this venture to create
significant value for our shareholders, to accelerate our diversification
efforts and to allow us to efficiently scale up our development efforts.”

“We are thrilled to join with Equity Residential in this
exciting partnership which offers tremendous benefit to both of our
organizations,” said Douglas C. Yearley, Jr., Chairman and CEO of Toll
Brothers. “This venture will increase the capital efficiency of our Toll
Brothers Apartment Living platform, allowing us to develop more apartments with
less capital. Having Equity Residential co-investing with us at initial site
acquisition and being the likely purchaser of developed properties at
stabilization will enable our Apartment Living business to improve return on equity
and to generate a higher and more predictable income stream through consistent
and recurring fees and property sales.”

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