Apr. 1, 2014, 5:38 PM
Apr. 1, 2014, 4:15 PM
- The combined company has an equity market cap of about $11.1B and a total market cap of $16.2B. BRE Properties shareholders have received 0.2971 newly issued shares of Essex (ESS) common stock and $7.18 in cash - $58.87 at today's closing price. The cash consideration was adjusted to reflect the authorization of a $5.15 per share special distribution to BRE shareholders.
- BRE is up 3.7% AH to $63.25. Essex is off 1.5% to $171.40.
- Essex anticipates the deal with be accretive to core FFO per share of about $0.05-$0.08 annually.
- Source: Press Release
Mar. 26, 2014, 5:35 PM
- Essex Property Trust (ESS) +2.2% AH on news it will replace Cliffs Natural Resources (CLF) in the S&P 500 after the close of trading April 1.
- CLF will move down to the S&P MidCap 400, replacing ESS.
- FEI Co. (FEIC) will replace BRE Properties (BRE), which is being acquired by Essex, in the MidCap 400, and Fabrinet (FN) will replace FEI in the S&P SmallCap 600.
- Also, Albany Molecular Research (AMRI) will replace Supertex (SUPX), which is being acquired, in the SmallCap 600.
- AMRI +4.2%, FEIC +2%, FN +1.5%, CLF -1.3% AH.
Feb. 19, 2014, 7:48 AM
- It's a valuation call from analyst David Toti, who notes a 12.1% return for Essex (ESS) since October 4 has more than doubled that of the MSCI U.S. REIT Index.
- "We still expect ESS' portfolio to remain a best-in-class performer, and for there to be increasing synergies after the BRE merger. We continue to assign the stock the 11th highest applied NAV premiums amongst the 80 REITs we scale."
- Toti downgrades to Hold from Buy with price target cut $5 to $171.
Feb. 3, 2014, 4:49 PM
Feb. 3, 2014, 12:10 AM
Feb. 2, 2014, 5:35 PM
Jan. 8, 2014, 10:53 AM
- Morgan Stanley is neutral on the group despite some obvious headwinds as it's likely the bad news has already been priced into the stocks.
- First, there's supply pressure - Axios estimates 323K new units in 2014 vs. the 275K historical average and 184K last year. Supply increases may not be as detrimental as thought, however, thanks to average growth of just 125K units per year from 2010-2012.
- Second, there's rising rates: Morgan Stanley notes multifamily has historically been the least impacted in the REIT sector from higher rates thanks to shorter lease terms.
- Valuation? Multifamily REITs trade at a 14% discount to NAV vs. a 1% premium historically. The FFO multiple is 16.1x vs. the 10-year average of 18x, and the relative FFO multiple sigma of negative 1.6x also suggests the group's undervaluation compared to the broader REIT sector.
- Among the players: EQR, AVB, ESS, BRE, PPS, UDR, AIV, CPT, HME, MAA.
Dec. 19, 2013, 5:05 PM
- "Overall this transaction appears to be positive," says KeyBanc, reiterating its Hold on Essex Property (ESS) following the agreement to buy BRE Properties. The roughly 5.0% cap rate seems fair and the deal being accretive to FFO is encouraging, but operating upside and expense synergies will be offset by a Prop 13 tax adjustment - a disappointment. Essex's exposure to SoCal markets will increase from 45% to 50% of NOI and that of Northern California will fall to 33% from 37%.
- Maybe a more interesting take is BMO Capital, which muses about the possibility of topping bids. A $60 per share offer implies a 4.5% cap rate (after Prop 13) - "expensive, but still reasonable for a West Coast multifamily portfolio ... the math for an all-in cash offer in that range could pencil for a leveraged private buyer."
- If it weren't for Avalon Bay (AVB) and Equity Residential (EQR) "having a lot of wood to chop" with the Archstone integration, they would be natural suitors for BRE, says BMO. Standing in the way of a better offer is the $170M break-up fee - just 3.9% of the deal's equity value, but a big number nevertheless.
Dec. 19, 2013, 8:23 AM
- Essex Property Trust (ESS) agrees to buy BRE Properties in a deal currently valuing BRE at $56.21 per share. Owners of each BRE share will receive $12.33 in cash and 0.2971 shares of newly created Essex common stock.
- Combined, the two companies will have a total market cap of about $15.4B. Essex equity holders will hold about 63% of the combined company's equity.
- "This transaction will create a must-own sharpshooter REIT focused on West Coast apartments, and we believe this is a great outcome for our company," says BRE CEO Constance Moore. BRE turned down an offer for $60 per share from Land & Building earlier this year.
- Essex anticipates the deal will improve core FFO by about $0.05-$0.08 annually, and the current annual dividend of $4.84 is expected to be maintained.
- A conference call is set for 10 ET.
- Press release
Dec. 12, 2013, 8:06 AM
- KeyBanc makes some moves in the apartment REIT sector, boosting AvalonBay (AVB) and UDR to Buy with price targets of $139 and $29, respectively. Essex Property Trust (ESS) loses its Buy rating.
- The sector as a whole is boosted to a Buy, "based upon attractive valuation levels that overlook the potential for accelerating fundamentals, as the impact of new supply wanes and continued employment gains support greater rental demand into '15," says analyst Karin Ford.
- "We are incrementally constructive on East Coast exposure; our upgrade of AVB is consistent with this notion ... Declining supply in UDR's markets should support fundamental outperformance for the Co.'s portfolio going forward."
- "While we continue to see West Coast fundamentals as favorable, we believe ESS largely prices that in, particularly following its bullish Investor Day, which highlighted a strong 3-yr. growth plan. Additionally, the potential acquisition of BRE could be an overhang for the stock."
Dec. 9, 2013, 8:53 AM
- Essex Property Trust (ESS) confirms its proposal to buy BRE Properties, saying it offered $12.33 in cash and $0.2971 of ESS for each share of BRE - $58.08 based on Friday's close. Chatter last week said the offer was higher than a rejected $60 per share bid made by Land & Buildings earlier this year.
- The two companies have entered exclusive negotiations.
- BRE -2% premarket to $58.15
- Essex press release
- BRE press release
Dec. 6, 2013, 11:17 AM
- "It’s very hard to grow in size by doing one-off property acquisitions and one-off property developments,” says REIT analyst Jeffrey Langbaum of the M&A shopping spree for apartment REITs. “If you want to grow in earnest, a big portfolio is one way to do that. You’ve had companies taking advantage of those opportunities.”
- Essex Property Trust (ESS +0.3%) is the latest with its reported $5B bid ($64-$65 per share, though it would probably not be all-cash) for BRE Properties (BRE -0.1%). The deal - should it happen - would add to $22B in apartment REIT purchases in 2013. Before the report of the bid, BRE traded at a 13% discount to its NAV, and next up on the block could be Home Properties (HME +0.6%) and Post Properties (PPS +0.9%), both of which also trade as discounts. A November 22 Citi report pegs Post's NAV at $58.16 vs. a current price $46, and Home's at $73.17 vs. a current $56.
- Associated Estates Realty (AEC -0.3%) is another takeout possibility, says Sandler's Alexander Goldfarb, who estimates NAV at $21.90 vs. the current stock price of $16.33.
- While investors have complained about BRE management's performance, apartment REITs in general have been under pressure amid rising rates this year even as business remains strong. "You have a lot of mismatch in the valuation of apartment buildings or apartment REITs,” says “Long-term factors here are still very stacked on the side of solid growth.” says another analyst.
- Others in the sector: Equity Residential (EQR +0.2%), AvalonBay (AVB +0.4%), UDR (UDR -0.7%), Apartment Investment and Management (AIV +0.4%), Camden (CPT -1.3%), Mid-America (MAA +0.4%).
Dec. 5, 2013, 11:09 AM
- "BRE Properties (BRE +0.4%) has chronically underperformed its closest comparables by a number of measures, including total returns, net operating income growth, FFO growth and dividend growth," says Land and Buildings CEO Jonathan Litt, urging the company to explore a sale in light of yesterday's report of Essex Property Trust's (ESS +1.3%) offer to buy for about $5B.
- "Selling the company to a best-in-class operator such as Essex would present an opportunity for BRE Properties’ shareholders to realize the potential of the company’s intrinsic value ... On behalf of all shareholders, we demand that the Board exercise its fiduciary duties and maximize shareholder value by exploring a sale of the company.”
- L&B also announces its nomination of six candidates to the board. If elected, they would constitute a majority.
- "We believe that our high level of frustration with the company’s poor track record is reflective of the views of many of BRE’s shareholders. We have been engaged with BRE’s management for over a year and BRE’s Board since August about ways to drive shareholder value, including full operational and strategic reviews." BRE this summer rejected a $60 per share bid from L&B.
Dec. 4, 2013, 5:37 PM
Dec. 4, 2013, 12:46 PM
BRE Properties, Inc., is a real estate investment trust. The Company develops, acquires, and manages multifamily apartment communities located in the metropolitan markets within the State of California, Seattle, and Washington region.
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