Equity Residential partners with Toll Brothers to develop new rental apartment communities in key US 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 Dallas-Fort Worth, a market in which Equity Residential 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. Each project is also expected to be funded with a leverage of around 60%.
Equity Residential will have the option to acquire each property upon stabilization. The parties have targeted a minimum initial co-investment of around $ 750 million in combined equity, or a capacity of nearly $ 1.9 billion, assuming 60% leverage.
These targets, which are subject to the identification of mutually acceptable properties, could increase if additional opportunities are identified.
Three properties currently controlled by Toll Brothers, with an expected total project cost of around $ 242 million, are expected to revive the business.
Toll Brothers will act as a managing member of each project, overseeing approvals, design and construction for which it will receive development, construction management and financing costs, as well as a promoted interest to be realized upon completion. sale of each property and has, with limited exceptions, agreed to develop apartment projects exclusively with Equity Residential in the designated metropolitan markets. Equity Residential will receive fees for property management, rental and marketing services, as well as construction supervision.
“We are delighted to be working again with Toll Brothers and their experienced apartment development team, with whom we have enjoyed a long and successful business relationship,” said Mark J. Parrell, President and CEO of Equity Residential. “This business will combine the market knowledge and strength of Equity Residential’s balance sheet with Toll Brothers’ existing in-depth development capacity to produce high quality apartments in our expanding markets and primarily in the suburban areas of our existing markets.” which attract our population of affluent tenants. We expect this company to create significant value for our shareholders, accelerate our diversification efforts and enable us to effectively step up our development efforts. “
“We are delighted to join Equity Residential in this exciting partnership which offers tremendous benefits to both of our organizations,” said Douglas C. Yearley, Jr., President 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 on the initial site acquisition and being the likely buyer of developed properties during stabilization will allow our Apartment Living business to improve return on equity and to generate a higher and more predictable revenue stream through constant and recurring charges and properties. Sales.”
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