Equity Residential isn’t the only REIT that’s been busy in the first quarter of 2010. Palo Alto, Calif.-based Essex Property Trust has bought two deals in early 2010, culminating with the March 5 acquisition of Essex Skyline at MacArthur Place, a 349-unit high-rise condo project in Santa Ana, Calif.

“It was slow for a while, but we’ve jumped back into the market,” says Craig Zimmerman, executive vice president of acquisitions for Essex.

Essex purchased Essex Skyline at MacArthur Place from iStar Financial, a mortgage REIT, for $128 million, which it says is approximately 55 percent of its initial construction cost. “They had a number of units sold when they [the bank] took it back,” Zimmerman says.

That takeover to iStar negated those contracts, though. The project consists of two adjacent 25-story towers and floor-to-ceiling windows, sizeable floor plans, Viking appliances, and condo finishes.

“Essex’s recent Orange County failed condo acquisition announcement is evidence of the patience of the Essex team in sourcing deals and the challenges of buying busted condo developments,” wrote New York-based Sandler O’Neill + Partners in a recent report. “Essex’s worked over a year directly with a major lender to acquire Nexus’ failed Skyline at MacArthur Place for 55 percent of initial construction cost and, at $367,000 per unit, reportedly just over a third of its original estimated value. At $128 million, this is one of Essex’s biggest investments and represents further penetration into high-rise properties.”

Essex bought the project in a joint venture with an unidentified partner. Each owner will hold an approximate 50 percent economic interest in the property and its operations.

Sandler O’Neil thinks this structure isn’t out of the ordinary given today’s market. “Recent conversations with market participants indicate that while institutions are once again warming up to investing in real estate, they remain cautious and perhaps prefer individual JVs versus the discretionary funds of a few years ago,” it says in the report.

Essex Skyline at MacArthur Place marks the REIT’s third foray into buying buildings originally planned as condos. It isn’t alone in this pursuit, however, as Memphis-based Mid-America Apartment Communities has bought busted condo deals, and San Francisco-based BRE said it would pursue broken condos as well.

In January, Essex acquired DuPont Lofts, a 115-unit condominium development in Irvine, Calif., for $27 million. Like Essex Skyline Dupot isn’t completed. It’s 85 percent complete and has estimated completion costs of $6 million, which are primarily unit interior finishes.

Given increased competition, Zimmerman isn’t so sure other such deals will be coming down the pike. “We would love to add more deals just like this,” he says.