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Essex Property Buys Los Angeles Asset to Boost Portfolio - Analyst Blog

Zacks Equity Research

Essex Property Trust Inc. ESS has enhanced its portfolio with the purchase of an apartment community – 8th & Hope – in downtown Los Angeles for $200 million as a contract price. Completed in 2014, this 22-story, 290 apartment homes property also has around 4,000 square feet of ground floor retail space.

For Essex Property, which boasts a solid portfolio in the attractive West Coast markets, this purchase is a strategic fit. This is because the acquired property offers the company solid scope to enjoy higher demand, backed by its proximity to high-paying job sectors in the financial district, along with shopping plazas, entertainment points and restaurants. Currently around 50% leased, the property is expected to attain stabilized occupancy by the third quarter of this year.

We believe that with an enhanced property base and strong management team, Essex Property is well poised to leverage the attractive market fundamentals of the West Coast. With improving economy and growth in jobs, consumers are becoming all the more confident, which is encouraging.  

Last month, riding on strong growth, the residential real estate investment trust (“REIT”) reported encouraging fourth-quarter 2014 results. Core funds from operations (“FFO”) of $2.24 per share beat both the Zacks Consensus Estimate of $2.22 and the year-ago quarter figure of $1.94.

Also, last week, adding to the delight of its shareholders, Essex Property declared a 10.8% hike in its quarterly dividend rate to $1.44 from $1.30 paid earlier. The new dividend will be paid on Apr 15, 2015 to shareholders of record as on Mar 31.

Essex Property currently carries a Zacks Rank #3 (Hold). Investors interested in the residential REIT industry may consider stocks like Equity Residential EQR, Post Properties Inc. PPS and Sun Communities Inc. SUI. All these stocks hold a Zacks Rank #2 (Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.  
 


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