Essex Offers $4.5 Billion for BRE Properties

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Essex Property Trust has made an offer to purchase BRE Properties for approximately $4.5 billion in cash and stock, as the company looks to capitalize on the growing rental market in the U.S. West Coast. 

California-based Essex made a nonbinding offer of 0.2971 shares and $12.33 in cash for every BRE common stock. If BRE accepts the value of $58.08 a share, the combined company would have more than 50,000 rental units, primarily in the West Coast, where markets are experiencing rental price growth. 

The companies announced ongoing discussions regarding the proposal without offering further details, other than an agreement to an exclusivity period. 

The U.S., especially the West Coast, has been enjoying healthy multi-family markets in the wake of the financial recession. Even as the economy recovers, the national vacancy rate remains low. It was 4.2 percent during the third quarter, down from 4.7 percent a year ago, according to research firm Reis Inc. 

A merger is most likely to benefit BRE, analysts say. 

"BRE stock has lagged over a number of years, and the company has had a weak operational history despite being in some of the most attractive and fastest rent-growth markets in the country," New York-based Anthony Paolone, a REIT analyst at JPMorgan Chase & Co., told Bloomberg. Essex "has been exemplary over the years in navigating its core West Coast markets and being a steward of capital."

In July, BRE rejected a $4.6 billion offer from a consortium of bidders, including real estate securities investment firm Land & Buildings, according to Bloomberg. 

Essex currently has ownership interests in 163 multifamily properties with an additional 11 properties in various stages of development, according to the company.