EJF Capital & Toll Brothers Buy Santa Ana Apartment Development

EJF Capital and Toll Brothers Apartment Living have formed a joint venture to acquire and apartment development site in Santa Ana, California. The property will include 12,350 square feet of retail space and a variety of amenities, including parking and amenities including pool, fitness center, co-working areas, and outdoor community.

The project has already been certified as a Qualified Opportunity Zone, and the firms plan to leverage the benefit to both produce a cost savings as well as spur economic growth. In addition, a portion of the units will be dedicated to affordable hosing. The development is scheduled to break ground in November 2021, and it will deliver in 2024.

Chinmay Bhatt, Noam Franklin and Cody Kirkpatrick of Berkadia JV Equity & Structured Capital identified the joint venture partner for Toll Brothers and helped structure the deal.

According to EJF co-founder and Co-CEO Neal Wilson, the resurgence in Santa Ana had mostly focused on office and retail development, but there is significant demand to bring a class-A apartment property to the market. Plus, tenants will benefits from the retail sector evolution in the area.

Santa Ana has been a growth market in Orange County, a market already facing undersupply of apartment product. From 2014 through 2021, an average of 3,361 units per year, but net absorption has averaged 3,600 unit per year, highlighting the tremendous demand for new product. Santa Ana is also an employment hub near the Orange County Civic Center, which employs 15,000, as well as state and federal offices including the Ronald Reagan Federal Building and United States Courthouse.

The demand helped to stabilize apartment rents and occupancy through the pandemic. In early 2021, Orange County average rents were projected to rise 1.8% this year in the wake of supply failing to meet demand and the overall economic context, according to a report from Yardi Matrix. Orange County rent growth took a dive with the start of the pandemic, but continues to outpace the nation, according to the study.

Orange County rents rose 0.3% on a trailing three-month basis through February, outperforming the 0.1% overall US rate, the study said. The county’s $2,164 average rent as of February was well above the $1,399 national norm. Developers had 6,547 units under construction as of February and another 27,407 apartments in the planning and permitting stages.