Equity Residential may start Calif. project

Equity Residential, the largest publicly traded U.S. apartment landlord, may start building a new development in California within the next year, Chief Executive Officer David Neithercut said.

"We have a land parcel in Los Angeles that we'll look at; we've got a land parcel in the Bay Area that we'll look at as well," Neithercut said in an interview in Chicago. A project on either property "could start within the next year" if the company chooses to build, he said.

U.S. apartments may lead a rebound in commercial real estate as the economy adds jobs, property research firm Reis Inc. said in May. Vacancies probably will peak at 8.2 percent in 2010 and start to decline in 2011.

Equity Residential has lifted rents by the "high single digits" in all of its markets since the beginning of the year, as an increasing sense of job security spurs tenant demand, the CEO said in the June 11 interview. The company has been starting to raise rents after cutting them last year, though the pace of increases won't be sustainable without job growth, he said.

The company, based in Chicago, is seeking growth through acquisitions of existing apartment communities and development of new ones. This year, Equity Residential acquired three rental buildings in New York from developer Harry Macklowe, and paid $167 million for a two-tower, 559-unit building in Washington that was developed initially as a condominium.

With so few properties coming up for sale, the cost of buying an existing apartment community is getting close to the cost of building a new one, the CEO said. That comparison, a measure known as "replacement costs," is taken into account when the company decides whether to buy or build.

Equity Residential is building 111 apartments in Manhattan's Chelsea neighborhood and is about to start construction on developments in Denver and Arlington, Virginia, Neithercut said.