How Essex Property Trust Benefited from Portfolio Restructuring



Portfolio restructuring

Acquisitions and dispositions are an important component of Essex Property Trust’s (ESS) business plan. The company continually evaluates all its communities and acquires or sells those that no longer meet its strategic norms. This is part of its strategic plan to own quality real estate in supply-constrained markets.

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Acquisition of properties

In 2014, Essex acquired interests in seven communities comprising 2,578 units for $640.7 million. The company targeted properties in urban and suburban markets close to public transit systems. In 2013, the company acquired eight communities with a total of 1,472 units for $462.5 million, and in 2012, it acquired 15 communities for $801.9 million.

Disposition of properties

Disposition of properties helps Essex Property Trust to get rid of properties that generate low income. Disposition also helps the company to increase liquidity levels. Essex Property Trust believes that selling some of these non-core communities won’t have any material impact on its operations or cash flows. The company uses the sale proceeds to invest in higher-return communities, other real estate investments, or to repay its debts. In 2014, the company sold four apartment communities for $120.4 million, resulting in a total gain of $43.6 million. In 2013, the company sold three apartment communities for $57.5 million with a gain of $29.2 million.

Other major apartment REITs are also involved in portfolio restructuring to strengthen their presence in respective markets. The list includes AvalonBay Communities (AVB), Equity Residential (EQR), Camden Property Trust (CPT), and UDR (UDR). The SPDR Dow Jones Wilshire REIT ETF (RWR) invests 2.5% of its portfolio in Essex Property Trust.

In the next article, we’ll discuss Essex Property Trust’s development projects.


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