Essex to Buy BRE for $4.3 Billion in Apartment REIT Deal

Essex Property Trust Inc. (ESS) agreed to buy BRE Properties Inc. (BRE) for about $4.3 billion, creating the largest publicly traded apartment owner on the U.S. West Coast.

Shareholders of San Francisco-based BRE will receive 0.2971 Essex shares and $12.33 in cash, the companies said in a statement today. The terms, the same as announced Dec. 9 when talks were disclosed, value BRE at $56.21 a share based on yesterday’s closing stock price.

The combined company will own about 56,000 units in California and Seattle, areas that are among the top U.S. markets for rental growth. The transaction forms the only publicly traded real estate investment trust solely focused on West Coast apartments, and will provide a greater competitive advantage, said Michael Schall, president and chief executive officer of Palo Alto, California-based Essex.

“The combination of Essex and BRE is a good one,” Richard Anderson, a REIT analyst with BMO Capital Markets in New York, said in an interview before the deal was announced. “From a property perspective, they kind of sit on top of one another. Essex may have the opportunity to improve operations with some of BRE’s older assets.”

Essex was rebuffed in an attempt to buy BRE earlier this year, two people with knowledge of the bid said this month. Investment firm Land & Buildings, a BRE shareholder, in July urged the REIT to consider a sale and said it was part of a group that would pay $60 a share for the company.

Photographer: Mike Kane/Bloomberg

Seattle was the top U.S. metropolitan area for 12-month apartment-rent growth in the third quarter. Close

Seattle was the top U.S. metropolitan area for 12-month apartment-rent growth in the third quarter.

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Photographer: Mike Kane/Bloomberg

Seattle was the top U.S. metropolitan area for 12-month apartment-rent growth in the third quarter.

Share Fall

BRE shares fell 3.2 percent to $54.11. They have gained 1.4 percent since Dec. 3, the day before Bloomberg News reported that the companies were in talks. Essex shares dropped 3.3 percent today to $142.78.

BRE has been exploring options for more than a year, CEO Constance Moore said in the statement.

“After careful consideration, we determined that combining with Essex is the best way to accelerate our strategic plans,” she said. “This transaction will create a must-own sharpshooter REIT focused on West Coast apartments.”

Seattle was the top U.S. metropolitan area for 12-month apartment-rent growth in the third quarter, followed by San Jose, California, according to research firm Reis Inc. San Francisco was No. 4.

UBS AG was Essex’s lead financial adviser, while Wells Fargo & Co. worked with BRE.

Schall will be president and CEO of the combined company. Three BRE directors will be added to Essex’s board, bringing the total to 13 members.

Essex expects the transaction to close at the end of the first quarter, Schall said on a conference call. The deal has a $170 million breakup fee, he said.

To contact the reporter on this story: David M. Levitt in New York at dlevitt@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net

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