(Read more on the multifamily market.)

SAN MATEO, CA-Essex Property Trust, the Palo Alto-based apartment REIT, has formed a joint venture with the owner of the land beneath one of its assets here, the Hillsdale Garden Apartments. The 697-unit complex was built in 1948 on 30 acres; Essex acquired the improvements and a 40-year leasehold in September 2006 for $97.3 million, according to SEC filings.

In this latest transaction, Essex contributed its leasehold interest, for which it paid $46,000 per year, and the land owner contributed its fee interest in the land to a joint venture. As a result, Essex now holds an 81.5% interest in the value and operations of the joint venture and also will receive a 3% management fee and a 5% redevelopment/construction management fee from the joint venture.

“It just made sense,” a source at Essex tells GlobeSt.com in explaining the reasoning behind the transaction. “We were paying them to lease the land and the [landowner's] participation in the partnership eliminates that, and we are paying them a portion of the operating income. It works out for both of us.”

The property is approximately 95% leased. Essex has yet to invest substantial dollars in the complex beyond the cost of acquiring it but the company’s modus operandi is buying older properties and adding value. There are no immediate plans to reposition the property, according to the source.

Essex currently has ownership interests in 134 apartment communities (27,676 units), and has 908 units in various stages of development. The company says the transaction will reduce its recurring funds from operations by approximately $.03 per diluted share for the remainder of 2007.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?


© 2023 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.



Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2023 ALM Global, LLC. All Rights Reserved.