Shares of BRE Properties Inc. (BRE) surged over 11% in the past 2 days following a report by Bloomberg on Dec 4 that said Essex Property Trust (ESS) has offered to acquire BRE Properties for around $5 billion. The stock closed at $59.30 yesterday, leading to a market capitalization of $4.58 billion.
Essex Property would pay for the deal through bank financing, stock issuance and assets sale, as per that report. Notably, the offer price is said to exceed the bid of $60 per share of BRE Properties (or approximately $4.6 billion) furnished by the investment firm Land & Buildings Investment Management LLC earlier this year.
With this news doing the rounds in the market, the investment firm Land & Buildings Investment Management LLC insisted BRE Properties to consider this sale proposal. Further, Land & Buildings, which holds a stake in BRE Properties, nominated 6 people to join BRE Properties’ board. Their election would lead to Land & Buildings to have a majority in the company’s board.
As a matter of fact, San Francisco-based BRE Properties is involved in developing, acquiring and managing communities predominantly in the chief metropolitan markets of Southern and Northern California and Seattle. The company has a direct ownership in 75 multifamily communities and a joint venture stake in an additional apartment community.
On the other hand, Essex Property that is engaged in multifamily residential properties in select West Coast markets has ownership interests in 163 apartment communities and a number of other properties in its development pipeline.
Hence, the materialization of the sell-off will essentially lead to the union of two West Coast apartment real estate investment trusts (REITs) enjoying a solid property base in California. The combined entity can effectively leverage on this attractive market and reward shareholders accordingly. We believe any move that maximizes shareholder value is welcome and look forward to the market to see what the future beholds.
Both BRE Properties and Essex Property currently hold a Zacks Rank #3 (Hold). Moreover, investors interested in the apartment REIT industry may consider stocks like Independence Realty Trust, Inc. (IRT) and Spirit Realty Capital, Inc. (SRC). Both these stocks carry a Zacks Rank #2 (Buy).
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