(To read more on the multifamily market, click here.)

CHICAGO-Locally based Equity Residential continues to reduce its exposure in the multifamily rental market, but is hardly exiting the area. While selling 1,221 suburban units for $186.7 million in the first quarter, the multifamily REIT says it hopes to begin a 278-unit, $70-million project in the South Loop, with an opening expected in late 2007.

Equity Residential president and chief executive officer David J. Neithercut says the company paid $6 million for a site, and will build the South Loop project with a joint venture partner. The development is expected to yield a return in the “high 6%” range, Neithercut adds during the company’s earnings conference call Wednesday.

Meanwhile, Equity Residential has sold the 403-unit City View at the Highlands in Lombard for $78.6 million, the 612-unit Bourbon Square complex in Palatine for $78 million and the 206-unit Landings of Lake Zurich for $30.1 million, according to Cushman & Wakefield. The properties were among 25 sold by Equity Residential during the first quarter, totaling $799.9 million for the 8,110 units. The average capitalization rate for the sales was 5.6%, Neithercut says, but indicates the price for the three-year-old City View at the Highlands was 4.23%.

The REIT’s top 20 markets now generate 84.2% of its net operating income, according to Equity Residential’s first-quarter earnings report. Not on that list is the Chicago market, where Equity Residential’s holdings now total five with 1,716 units, good for 28th place on the company’s list.

For 2006, Equity Residential expects property sales to total at least $1.5 billion, a figure that could jump to more than $2 billion if its Lexford portfolio is sold.

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