Essex Property Trust, Inc . (NYSE:ESS) President and CEO Mike Schall says the multifamily REIT is facing favorable tailwinds—including continued tech investment in its core markets, muted supply, and strong balance sheet fundamentals—as he prepares to step down from his current role at the end of the month.
Schall has served as president and CEO since 2011. His successor is Angela Kleiman, Essex’s current SVP and COO.
Speaking with the REIT Report, Schall said, “Coming out of periods of disruption, we've always been an opportunistic company. We've always found the right investments in the right place. And I think this is the case today.”
Schall highlighted the rapid pace of investments underway today by tech companies in artificial intelligence, which is likely to drive the economies of northern California and Seattle. “That will help Essex continue to grow as it has over much of the last 30 years or so.”
In addition, Schall said tech companies are likely to want employees to spend more time in the office as they tackle complex projects, which is coming at a time when housing supply remains muted. Under-investment in the West Coast has always led to a period where demand may exceed supply for some period of time, “and I think that's potentially ahead of us over the next several years,” he said.
Elsewhere in the interview, Schall commented on:
- The “massive” amounts of capital needed to fund construction and why increased mandates for low-income housing have made adequate returns on capital in California more challenging.
- Essex’s 2014 merger with BRE Properties, and the importance of preparation and timing.
- Why Essex ultimately chose to focus on the West Coast, which was primarily because it saw the tech community as “such amazing innovators and wealth creators” with high-paid jobs ideal for apartment ownership. “The West Coast markets have worked as we expected they would…they have produced the best long-term rent growth in the nation. We figured it out early on and chose well.”
- Affordable housing issues and the need for local leaders to offer tax and financing incentives for developers to help offset costs.
- Essex’s data-driven culture: “We think better data is a huge competitive advantage.”
