6/12/2013 | By Mitch Irzinski
Michael Schall, president and CEO of Essex Property Trust (NYSE: ESS), joined REIT.com for a CEO Spotlight video interview in Chicago at REITWeek 2013: NAREIT’s Investor Forum.
Essex focuses on multifamily properties, primarily on the West Coast. Schall discussed the fundamentals in his core markets.
“Apartment fundamentals on the West Coast continue to be strong,” he said. “We just received our April-May 2013 results, which indicate that same property revenue is up 6.3 percent, which accelerated from [the first quarter] and is above the midpoint of the guidance rating for 2013. As we expected, Northern California and Seattle are leading the way, and Southern California continues its recovery that is longer-term in nature, but is certainly going the right direction. So, we’re very pleased with the results so far this year.”
Schall described the acquisitions market in light of the strong fundamentals.
“It is more difficult,” he said. “Owners of property are pretty pleased with the current conditions. They see the economy getting better. Rent growth is good amid very low interest rates, which provides a good cash flow, so they’re reluctant to sell. Buyers on the other hand, have seen a lot of rent growth already occur and are concerned about overpaying.”
Schall also described the company’s development pipeline and any potential concerns about a shift in supply and demand.
“The good news is that we don’t produce a lot of apartments on the West Coast,” he said. “Generally, the supply of new housing in total both for sale and for rent is less than 1 percent of stock over longer periods of time. Still, our strategy on the development side is to be an early-cycle developer. We have nine communities under construction right now, for an aggregate estimated cost of about a billion dollars. We expect to slow down our development activity as we get further along in the economic cycle, but we’re very well positioned right now.”