Essex Property Trust Essay

Essex Property Trust Investment Analysis

AS OF FALL 2017，

PREPARED FOR

INVESTMENT COMMITTEE

PREPARED BY

YUAN, CECILIA

September 2017

Investment Committee

Dear Investment Committee,

Enclosed is my research findings regard the Essex Property Trust REIT. In this report, my focus is the calculation of current NAV and projection. I utilized all available resources and consulted with experts to provide analysis with supporting statistics for you to make thorough a real estate investment decision.

I wish you enjoy this report as a useful tool to your real estate needs. I would like to assist you in the best way we can. Please do not hesitate to contact me should you have any question regarding

Essex Property Trust, Inc. was founded in 1971. The headquartered is in Palo Alto, California. Essex Property Trust engages in the ownership, operation, management, development, acquisition, and redevelopment of apartment communities, as well as commercial properties. On March 31, 2012, the company owned or had interests in 158 apartment communities; 5 commercial buildings, and 5 development projects. Its communities are located in Los Angeles, Orange, Riverside, Santa Barbara, San Diego, and Ventura counties in southern California; and the San Francisco Bay area in northern California, as well as in the Seattle metropolitan area. The company has elected to be taxed as a real estate investment trust.

Based on the NAV calculation, the NAV is $240 while the market price (9.28.17) is $250. Therefore, it is priced at a premium.

The paper will analyze internal reasons by vacancy rate, external acquisitions, and the leverage. For external reasons, the paper would discuss the impact of rising interest rates. Besides, rising home prices are exceeding the growth in multifamily

There are two outcomes. First, it makes it tougher for current renters to buy a home. What’s more, it may eventually present a condo opportunity for ESS since about 9k of its units are condo-mapped.

PART IV

INVESTMENT RECOMMENDATION

Based on all the previous analysis, I would not recommend investing in ESS REIT currently or in the near-term.

First, the NAV is $259.82 while the market price is $250. It is clear that the stock is being traded at a premium. Second, for the internal reasons, there’s 27% vacancy, and it brings uncertainty in the future revenue. In addition, there’s much of this growth has come from external acquisitions, and the leverage is as high as 45%. Those are the factors increasing risk. Besides, the management team average age is too old, and that may lack creativity and energy. In the end, that will influence company’s performance.

For external reasons, the rising interest rates can hurt REITs in many ways. What’s more, rising home prices are exceeding the growth in multifamily NOIs.

Please feel free to contact us should you have any question regarding this