Toll Brothers, Equity Residential team up for $1.9B multifamily JV

by John Yellig

Fortune 500 apartment landlord Equity Residential and luxury homebuilder Toll Brothers Inc. have teamed up to develop almost $1.9 billion of new multifamily properties in certain U.S. markets.

The strategic partnership will initially target developments in six metro areas where they both have a “significant or growing presence”: Atlanta; Austin, Texas; Boston; Denver; Orange County/San Diego, Calif.; and Seattle. The partnership will also seek opportunities in Dallas/Fort Worth, which Equity Residential recently re-entered, according to a press release.

Under the partnership agreement, over the next three years, Equity Residential will contribute 75% of the equity for each project, while Toll Brothers will invest 25%. The companies also expect to finance projects with 60% leverage. The agreement’s inital minimum co-investment target of $750 million brings the total capacity to approximately $1.9 billion, including debt.

Three Toll Brothers-controlled properties valued at $242 million are expected to jump-start the venture. Under the agreement, Toll Brothers’ Apartment Living division will serve as managing member of each project, overseeing approvals, design and construction. In return, it will receive development, construction management and financing fees, as well as a promoted interest to be realized upon the sale of each property. It has also agreed, with limited exceptions, to work exclusively with Equity Residential in the target markets.

Equity Residential will have the option to acquire each property upon stabilization and will receive fees for property management, leasing and marketing services, and construction oversight.

The venture will bring together Equity Residential’s market knowledge and balance-sheet strength and Toll Brothers’ development capabilities to produce high-quality apartment properties that appeal to Equity Residential’s “affluent renter demographic,” Equity Residential President and CEO Mark Parrell said.

“This venture will increase the capital efficiency of our Toll Brothers Apartment Living platform, allowing us to develop more apartments with less capital,” Toll Brothers Chairman and CEO Douglas Yearley said. “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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