By Jon Peterson
Bethesda, Md.-based Toll Brothers Apartment Living, the apartment development division of Toll Brothers, is eying its first apartment development project in the San Francisco Bay Area.
“We are now in negotiations on a development site in the East Bay near a major BART station. We would be hopeful of putting this site under contract in the near future,” says Charles Elliott, a managing director with Toll Brothers and head of Toll Brothers Apartment Living. He works out of the company’s office in Horsham, Pa.
This project would be the first development that the Toll Brothers Apartment Living has done in the Bay Area. “We made the decision about six months ago to expand our footprint beyond the East Coast corridor from Boston to Washington, D.C. The San Francisco area is one market that we have been looking at since then. We think now that the East Bay from say Oakland to Milpitas is a little bit more attractive now than is San Francisco proper. This area has good job growth, upside in rental rate growth and strong transportation access,” said Elliott.
The other new markets that Toll Brothers wants to grow its apartment development business into include Los Angeles, San Diego, Atlanta, Dallas and Denver. The developer has just begun to look into some other markets as well. These would include Seattle and Chicago.
“Seattle is a market that we like from a demographics standpoint and one with think is a good one. We have only just begun to look at it for future development potential,” said Elliott.
The Apartment Living division of Toll Brothers wants to find either ground up development sites or to buy properties that can be totally re-developed. In some cases this might be converting an existing office building into apartments. It’s not really interested in renovating an existing apartment project.
Most of its projects will have total development costs of somewhere between $60 million and $200 million. This would likely mean a minimum of 250 units in the East Bay and at least 100 units in San Francisco.
The Apartment Living projects are typically developed in joint ventures with institutional partners. In the past its capital sources have been the likes of Pennsylvania State Employees Retirement System, Prudential Real Estate Investors and Brandywine Realty Trust.
The equity invested in these projects would be 25 percent to 50 percent coming from Toll Brothers and the balance from an institutional partner. The ownership of these projects will follow along the same lines as the equity contributions. The developer does typically arrange a construction loan for its projects.