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What is CXP’s Strategy to Enhance Its Competitive Position?

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Long-term growth

Columbia Property Trust (CXP) intends to invest in a property portfolio that provides the size, quality, and market needed to deliver long-term returns to its shareholders. The company follows a number of strategic initiatives in order to achieve long-term value creation and strategic objectives.

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Focus on CBD

The company’s market strategy is to focus on select primary markets with strong fundamentals and higher growth potential such as central business districts and urban in-fill locations. The company looks to acquire strategic office assets with quality tenants, which ensures stable cash flows.

The company believes that major office markets have the propensity to generate higher net income and property appreciation potential. It has a long-term goal of increasing its market concentration in order to benefit from higher demand.

Maintaining a strong balance sheet

Columbia Property Trust plans to maintain a strong balance sheet with higher liquidity levels to make opportunistic investments in the market. Maximizing cash flows through tactical leasing, timely renewals, and effective property management are some of the measures being initiated by the company to strengthen its balance sheet.

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Capital recycling

Columbia Property aims to selectively dispose of properties and redeploy capital for various strategic reasons. The company disposes of properties that are not strategic fits for its long-term earnings growth expectations and redeploys funds into target market properties to maximize long-term value and growth in net operating income. Columbia Property consistently upgrades its portfolio through property acquisitions and disposals.

Strategy implications

Columbia Property expects its strategy to generate higher rental income along with higher occupancy levels in the years to come. The strategy is also expected to help the company to further penetrate its core markets of San Francisco, New York, and Boston and take on the rising competition from other major players such as Kilroy Realty (KRC), SL Green Realty (SLG), and Boston Properties (BXP).

The iShares US Real Estate ETF (IYR) invests ~0.33% of its portfolio in Columbia Property Trust.

In the next article, we’ll analyze Columbia’s occupancy levels.

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