Equity Residential, Toll Brothers Ink Strategic Partnership - Quick Facts

(RTTNews) - Equity Residential (EQR), an S&P 500 company, and home builder Toll Brothers, Inc. (TOL) announced Tuesday the establishment of a strategic partnership to develop new rental apartment communities in key U.S. markets.

Under 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.

Over the next three years, Equity Residential will invest 75% of the equity for each selected project and Toll Brothers will invest 25%. It is expected that each project will also be financed with approximately 60% leverage.

Equity Residential will have the option to acquire each property upon stabilization. The parties have targeted an initial minimum co-investment of approximately $750 million in combined equity, or nearly $1.9 billion capacity, assuming 60% leverage.

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.

Toll Brothers will also receive 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.

Meanwhile, Equity Residential will receive fees for property management, leasing and marketing services, as well as construction oversight.