Equity Residential, Toll Brothers Partner on $1.9B Apartment Development Deal

While apartment demand continues to soar, so too do deals involving developers, wanting to satisfy those needs in key markets nationwide.

Equity Residential and Toll Brothers, through its Toll Brothers Apartment Living division, have established a partnership to acquire and develop new rental apartment communities. 

The parties have targeted an initial minimum co-investment of approximately $750 million in combined equity, or nearly $1.9B capacity, assuming 60% leverage. 

The two companies initially intend to focus in six metro markets where both 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. 

These apartments will join the more than 330,000 new rental units expected to be delivered coast to coast by year’s end, according to Yardi Matrix.

“The pandemic shifts and resurgence of the residential rental market bring new residential supply into focus,” Yardi’s Doug Ressler told RentCafe in an interview. “Lack of entry-level housing supply and rising home prices will show the multifamily rental market demand increasing as new renters enter the market and Millennials extend their rental commitments.”

During the next three years, Equity Residential will invest 75% of the equity for each selected project with Toll Brothers investing the remainder. Each project will also be financed with approximately 60% leverage. 

Equity Residential will have the option to acquire each property upon stabilization. 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.