RESI: Sam Zell’s Equity Residential Partners With Toll on $1.9 Billion Apartment Deal

August 24, 2021 by Kevin Kelly

The evolving and residential housing boom continues and Bloomberg put it best:

Sam Zell’s Equity Residential and the luxury homebuilder Toll Brothers Inc. have formed a partnership to develop apartments, looking to deploy $1.9 billion to take advantage of the surging demand for rentals.

Two industry stalwarts, Equity Residential (Constituent of RESI Index), and premier home builder Toll Brothers are indeed seeking to take advantage of surging demand for rentals with the parties having targeted an initial minimum co-investment of approximately $750M in combined equity. According to Toll Brothers press release, they will, “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.”

Rents in the U.S. are surging as would-be home buyers are finding it harder to enter the housing market. Home prices have been driven higher in the pandemic by low mortgage rates and a shortage of housing inventory. That’s pushed more Americans into rentals.

The RESI index is a premier barometer for the residential housing market. According to Nareit, 43 million households rent. Kelly Intelligence anticipates significant pent-up demand from millennial generation could favor apartments and single family rentals over the next decade as surging home prices will lead tenants renting longer, pushing vacancy down, and rents up.

Through the partnership, the parties initially intend to focus on selectively acquiring and developing sites for apartment rental communities 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 in Dallas-Fort Worth, a market that Equity Residential has recently re-entered.

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