Essex Property Trust has formed a venture that has agreed to pay $128 million for a 349-unit residential condominium complex in Santa Ana, Calif.

The Palo Alto, Calif., REIT and its venture partner will hold equal stakes in the Essex Skyline at MacArthur Place at 2 Hutton Centre Drive, about a mile from John Wayne International Airport. They will pay about 45 percent less than the Orange County project's original construction cost, according to Essex.

The property is being purchased from a construction lender.

The venture is converting the complex to rentals and will pay the REIT asset and property management fees. Essex also has the potential to earn a promoted return on the investment.

The REIT expects multifamily rents throughout Southern California to increase faster than in its other West Coast markets.

In a conference call with analysts last month, Mike Schall, chief operating officer, said that job losses in Southern California began slowing in the second half of last year. He also noted that the REIT's rents in the area increased in both the third and fourth quarters, but for the full year fell 5.9 percent from 2008.

Essex holds stakes in 133 apartment communities with 27,221 units in California and Washington State.

Comments? E-mail John Covaleski or call him at (215) 504-2860, Ext. 208.