Michael Schall, president and CEO of Essex Property Trust (NYSE: ESS), joined REIT.com for a CEO Spotlight video interview at REITWorld 2014: NAREIT’s Annual Convention for All Things REIT at the Atlanta Marriott Marquis.
Earlier this year, Essex completed its purchase of another apartment REIT, BRE Properties. Schall talked about the status of the efforts to integrate the two companies.
“I would certainly say that acquiring a large company is a challenging process, but it’s going very well,” Schall noted.
Schall said the merger of the two companies has provided an opportunity to evaluate the strength of the assets in both portfolios and build a stronger company. He added that Essex’s exclusive focus on the West Coast apartment market helped the company differentiate itself.
“We found great opportunity within the BRE portfolio to add some key positions to our company, to reassess the best of Essex and the best of BRE and to try to put together the pieces in a way that creates a better and stronger company,” he said.
Are there more major transactions on the immediate horizon for Essex? Schall said he doesn’t expect so. He noted that Essex’s underlying business strategy relies on identifying the best supply-and-demand dynamics in the housing market on the West Coast.
“The BRE transaction was very unique, in that it was completely complementary to the Essex portfolio,” Schall explained. “I think, going forward, we go back to the same basic strategy that we’ve pursued for the last 20 years, which is single asset acquisitions and developments and a lot of rehab of existing property.”
Essex’s stock price was up 42 percent through Dec. 2, compared with a total return of 25.8 percent on the FTSE NAREIT All REIT Index and a 37.4 percent gain for apartment REITs during the same period. Looking ahead to 2015, Schall speculated that Essex would maintain its momentum from this year. He pointed out that the company’s primary geographical markets on the West Coast serves as hubs for some of the more vibrant areas of the U.S. economy, including the technology and life sciences sectors. As a result, Essex’s target markets currently enjoy better-than-average employment growth.
“This is a momentum business,” he said. “We’re going to take some of that strength and move it into 2015. We expect another very good year in 2015.”