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Equity Residential (EQR) Boosts Presence in Dallas Through JV

Equity Residential EQR and Toll Brothers, Inc. TOL, through its Toll Brothers Apartment Living (“TBAL”) rental division, revealed plans to develop three new luxury rental communities in the Dallas/Ft. Worth metropolitan area. This move is part of the strategic relationship established in 2021 between both parties and will mark their first three joint ventures. The rental communities, namely The Settler, Remy and Lyle, will have 1,053 units.

Amid rising demand for rental apartment units, Equity Residential is focusing on strategic diversification efforts and development initiatives.

Per Mark J. Parrell, president and CEO of Equity Residential, “Dallas/Ft. Worth is a dynamic market with a growing population of the affluent renter demographic that we are interested in capturing. We are expanding our presence in the market and believe that these properties will make excellent additions to our existing portfolio there.”

Both EQR and TOL plan to focus on selective acquisition and development of sites for apartment rental communities in specific metro markets, including Dallas/Ft. Worth, where both entities enjoy substantial or growing presence.

Equity Residential and Toll Brothers will be investing 75% and 25%, respectively, of equity for each of the selected projects, per the terms of the partnership. It is anticipated that each project will also be financed with roughly 60% of leverage.

Assuming this leverage, the targeted initial minimum co-investment is nearly $750 million in combined equity or around $1.9 billion capacity. It may be noted that all three sites have been financed through a construction loan. In addition, upon stabilization, EQR will have the option of acquiring each property.

Talking about the rental communities, The Settler, located at 204 Athenia Drive in the heart of Ft. Worth’s River District, will be a four-story multifamily rental community with 362 apartment units. It will offer a 543-space parking garage with bicycle storage and a sky lounge overlooking downtown Ft. Worth.

Remy, located in Frisco Town Center in the Dallas suburb of Frisco at the intersection of Gordon and Church Streets, will comprise 357 apartment units and a 545-space parking garage. This five-story community, in one of the most affluent and desirable suburbs of Dallas, is adjacent to Frisco’s City Hall and Medical City Frisco hospital.

Lyle will also be a five-story multifamily rental community and offer 334 apartment units and a 475-space parking garage. It is well-positioned at the intersection of Trinity Mills and Addison Rd. at 17727 Addison Road and is adjacent to the Dallas North Tollway.

Equity Residential, to capitalize on the recent migration trends of affluent renters, has been focusing on expanding its presence in the suburban locations of its established markets. In sync with this strategy, it recently entered the select new markets of Atlanta, GA and Austin, TX. In the recent past, EQR acquired three communities totaling 909 units in the Dallas and Atlanta markets that TBAL and other partners had developed.

Moreover, its portfolio diversification efforts paid off well during the pandemic, given the suburban markets' stability compared to the urban markets. Therefore, this recent move to develop three new luxury rental communities in Dallas seems prudent.

Shares of this Zacks Rank #2 (Buy) firm have gained 5.6% compared with its industry’s growth of 1.4% in the quarter-to-date period.

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Other Stocks to Consider

Some other top-ranked stocks from the residential REIT sector are Independence Realty Trust IRT and BRT Apartments BRT, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Independence Realty Trust’s current-year FFO per share has moved 1.8% northward in the past month to $1.08.

The Zacks Consensus Estimate for BRT Apartments’ ongoing year’s FFO per share has been raised 5.8% over the past month to $1.63.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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Equity Residential (EQR) : Free Stock Analysis Report
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