(Read more on the multifamily market.)

SAN MATEO, CA-Essex Property Trust, the Palo Alto-based apartment REIT, has formed a joint venture with the owner of the land beneath one of its assets here, the Hillsdale Garden Apartments. The 697-unit complex was built in 1948 on 30 acres; Essex acquired the improvements and a 40-year leasehold in September 2006 for $97.3 million, according to SEC filings.

In this latest transaction, Essex contributed its leasehold interest, for which it paid $46,000 per year, and the land owner contributed its fee interest in the land to a joint venture. As a result, Essex now holds an 81.5% interest in the value and operations of the joint venture and also will receive a 3% management fee and a 5% redevelopment/construction management fee from the joint venture.

"It just made sense," a source at Essex tells GlobeSt.com in explaining the reasoning behind the transaction. "We were paying them to lease the land and the [landowner's] participation in the partnership eliminates that, and we are paying them a portion of the operating income. It works out for both of us."