Americans are increasingly turning to rentals as they’re priced out of the housing market. Those who build and develop apartments are doing the same.
Sam Zell’s Equity Residential and homebuilder Toll Brothers are teaming up to develop rental apartments and capitalize on the national trend, according to Bloomberg. The two companies have formed a partnership aimed at plowing $1.9 billion on the venture — and possibly more.
The initial partnership will stretch over the next three years, with the companies investing a combined $750 million in equity and leveraging additional debt to build apartment developments across the country. The investments will be centered in several major markets — Boston, Seattle, Atlanta, Denver, Dallas-Fort Worth, Austin and San Diego.
The companies describe the $1.9 billion figure as an “initial minimum co-investment,” leaving room for more money to be poured into the venture later. The projects will be financed with around 60 percent leverage, with Equity contributing 75 percent of the equity for each development.
In over 90 percent of markets examined recently by the National Association of Realtors, the median price of an existing home soared at least 10 percent year-over-year from the second quarter 2020 to this year’s second quarter.
As a result, rental markets are surging as people are priced out of homes and head to apartments. New York City recently overtook San Francisco as the most expensive city for renters.
Equity recently sold a 450-unit rental portfolio in Hermosa Beach for $275 million. The company is still investing in apartments, though, acquiring seven rental buildings in the second quarter for $645.7 million.
[Bloomberg] — Holden Walter-Warner