Essex Property Trust (ESS) follows a research-driven strategy for real estate investment decisions to increase shareholder returns. The company continually assesses markets where it operates, as well as markets where it considers future investment opportunities.
The strategy’s key points
Essex Property Trust implements its strategy by following several key points:
- focus on major metropolitan markets with a population in excess of 1 million
- evaluate constraints on new supply and act accordingly
- enhance rental demand through affordable rents relative to costs of for-sale housing
- adjust the geographic focus of the portfolio according to the real estate market’s cyclicality
- increase portfolio allocation in markets that have attractive property valuations
The company manages its communities by focusing on activities that may generate above-average rental growth, tenant retention, and long-term asset appreciation. The company intends to achieve this by focusing on acquiring and developing apartment properties in supply-constrained markets, as well as redeveloping its existing communities to improve their financial and physical aspects. Also, the company considers the quality of apartments delivered to residents an essential part of its long-term growth strategy.
Strategy enhances market position
Essex Property Trust believes that its operating strategy has produced positive results in recent years. The company expects that its strategy will help it to increase profitability further while maintaining a strong balance sheet and liquidity position in the years to come. It also expects the strategy to help thwart competition from other major players such as AvalonBay Communities (AVB), Equity Residential (EQR), and UDR (UDR). The iShares U.S. Real Estate ETF (IYR) invests 2% of its portfolio in Essex Property Trust.
In the next article, we’ll analyze Essex Property Trust’s revenue.