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Essex Property Reveals $245M Disposition: Time to Buy?

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Essex Property Trust, Inc.ESS revealed the sale of Sharon Green Apartments in Menlo Park, CA for $245 million or $828,000 per apartment home. Completed in 1970, Sharon Green Apartments consist of 296 apartment homes.

The company intends to deploy significant part of the proceeds for the purchase of two properties that are less than two years old. The two properties are located in downtown Los Angeles and San Jose, CA and the company has struck deals to buy them for $166 million or $441,000 per apartment home. These acquisitions are expected to be complete before the year end.

We believe that the move is a strategic fit as it would help Essex Property enhance its portfolio quality by replacing older properties with the newly built ones.

Why Should You Buy the Stock?

Essex Property enjoys a solid property base and has a strong management team. Its merger with BRE Properties in 2014 led to the creation of a premium West Coast pure-play multifamily REIT. Substantial exposure in the West Coast market offers the company ample scope to boost its top line as the region has been experiencing solid growth in jobs and personal income, and a comparatively lower housing supply, which should drive rent and occupancies.

Notably, the company reported an earnings surprise of 1.63% in the last quarter. In each of the trailing four quarters, it has delivered a positive surprise with an average beat of 2.06%.

The company's historical EPS growth (3-5 years) of 14.46% is well above the industry average of 9.98%. Moreover, its earnings momentum is expected to continue in the near term, as reflected by the company's projected EPS growth (F1/F0) of 14.2%, compared to the industry average rate of 9.62%. This reflects strong prospects for the company.

Therefore, we believe that investing in Essex Property right now should not disappoint you. The company currently has a Zacks Rank #2 (Buy). Moreover, reflecting its solid growth potential, the stock has a Zacks Growth Style Score of 'B'. According to our style score system , a stock with a favorable Zacks Rank and a Zacks Growth Style Score of 'A' (or 'B') are highly desirable.

Other Stocks to Consider

Other well-ranked stocks in the residential REIT space include Avalonbay Communities Inc. AVB , Post Properties Inc. PPS and UDR, Inc. UDR . All three stocks carry the same Zacks Rank as Essex Property.

Note: All EPS numbers presented in this write up represent funds from operations ("FFO") per share. 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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AVALONBAY CMMTY (AVB): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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