Equity Residential, Toll Brothers Form $1.9B Partnership

The companies plan to develop rental properties in major markets from coast to coast.
Osprey, a 320-unit apartment property in Atlanta built by Toll Brothers that was acquired by Equity Residential in July, is an example of the long-standing relationship between the two companies. Image courtesy of Toll Brothers

Equity Residential and Toll Brothers, Inc. are teaming up to develop nearly $1.9 billion in new rental communities over the next three years in six key U.S. markets where both firms have a significant or growing presence. Those markets are Atlanta, Boston, Denver, Seattle, Orange County/San Diego in California and Austin, Texas, as well as Dallas-Fort Worth, a market Equity Residential has recently re-entered.

Under the strategic partnership, Equity Residential will invest 75 percent of the equity for each project and Toll Brothers, through its Toll Brothers Apartment Living division, will invest 25 percent. The companies have targeted a minimum co-investment of approximately $750 million in combined equity, or nearly $1.9 billion capacity assuming each project is financed with 60 percent leverage. The targets could increase if additional opportunities are identified.


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Three properties currently controlled by Toll Brothers are expected to be the first projects developed for a total of $242 million. The locations were not disclosed. The projects are likely to begin in late 2021 or early 2022, according to Toll Brothers.

Equity Residential will have the option to acquire each property once stabilized. 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. Equity Residential will receive fees for property management, leasing and marketing services as well as construction oversight.

The strategic partnership calls for Toll Brothers, with limited exceptions, to develop multifamily communities exclusively with Equity Residential in the designated markets.

Mark Parrell, president & CEO of Equity Residential, said in a prepared statement that the partnership combines Equity Residential’s market knowledge and balance sheet strength with Toll Brothers’ deep development capacity to produce high-quality apartment properties in markets the firm has targeted for expansion and predominantly suburban markets in its existing markets that appeal to an affluent renter demographic. The venture is expected to create significant value for shareholders, accelerate Equity Residential’s diversification efforts and allow it to efficiently scale up development efforts, Parrell added.


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During the company’s second-quarter earnings call on July 28, Parrell said Equity Residential is seeing demand well above 2019 in all its markets. He noted the company was allocating capital to markets that were attractive to its affluent renter base, including the suburbs of its established coastal markets as well as Denver and two new markets—Atlanta and Austin.

Responding to questions about development plans from analysts on the call, Parrell said the company would consider working with local, regional or national developers, particularly in suburban areas where the company has less of a presence. He also noted that Equity Residential would prefer to have the right to purchase at the end.

Douglas Yearley, Jr., chairman & CEO of Toll Brothers, said in prepared remarks that having Equity Residential as a co-investor would allow the company to build more apartments with less capital. Furthermore, having Equity Residential as the likely purchaser of developed, stabilized properties would enable the company’s Apartment Living business to improve return on equity and generate a higher and more predictable income stream through consistent and recurring fees and property sales.

Long-Standing Relationship

Parrell commented on the “long and successful business relationship” the two companies have had over the years. A Toll Brothers spokesperson told Multi-Housing News the relationship dates back to 2012, when the companies began a co-development of a 40-story high rise on Park Avenue South in New York City. Toll Brothers completed a condo development on the top half and Equity Residential retained the bottom half for rental apartments.

Equity Residential has also acquired rental properties developed by Toll Brothers-led joint ventures with other partners. One such deal occurred in July, when Equity Residential acquired Osprey, a 320-unit apartment community in Atlanta’s West Midtown section. The property was built by Toll Brothers Apartment Living in 2020, for $153 million. The high-rise, which features upscale amenities, also has 13,000 square feet of ground-floor retail with tenants including Orangetherory Fitness.

Other Deals

The Osprey acquisition was the second purchase Equity Residential made in the Atlanta market in July. The REIT also acquired SkyHouse South, a 320-unit high-rise community in Midtown Atlanta, for $115 million from a partnership between Novare Group and Batson-Cook Development Co. The off-market transaction marked Equity’s return to Atlanta.

In March, Toll Brothers completed Kilby, a new apartment community in Frisco, Texas, built with partner Daiwa House Texas Inc. The four-story, 258-unit community was the first multifamily project built in Texas by Toll Brothers Apartment Living and is part of Frisco Square, a $600 million mixed-use development in the city north of Dallas.