NAV model for Essex Property Trust

Goal: The purpose of this case study is for each student to independently build a net asset
value (NAV) model for Essex Property Trust (ESS). Using the financial information provided in
ESS’s Earnings Release & Supplemental Financial Information, the student should prepare a
model that arrives at an estimate of value per common share of equity for ESS. Each student
will be assigned a specific financial period (e.g., 2Q20, 3Q20, etc.). Students will be marked
down if they use the wrong reporting period. (Please use 4Q20 be specific financial period)
Grading: In addition to the specifics of creating an NAV analysis, the assignment will also be
graded for its organization and whether the instructions have been properly followed.
Structure: Students are required to submit a detailed NAV calculation for ESS. The NAV should
be in the form of an Excel (or similar) spreadsheet. Students are required to provide enough
details and/or supporting schedules to show all calculations. Calculations are not enough. The
student is required to provide a thoughtful explanation of any assumptions used in the analysis.
In particular, please note the assumptions that were pointed out in the class presentation on
NAV. These can be included in the spreadsheet or as a separate word document. (Note: do not
submit a write up on how to do an NAV. Rather show me through your NAV model how to
calculate an NAV. The only write up necessary is to provide support for your assumptions or
any key data that you may have gathered from your research (e.g., capitalization rates). In
addition to the NAV analysis, the student should also provide copies of the relevant pages (and
only the relevant pages) from the ESS Financial Supplement (or other document) that support
the numbers or assumptions provided in the NAV. Provide a clear reference from the NAV
spreadsheet to the ESS Financial Supplement (or other document) pages that are included so I
can clearly follow and see the origin of your inputs.
Resources: Assigned reading material for Class 4 should be your guide.
You can use the following assumptions as given, with no further explanation required, but show
all calculations:
1. Debt Spreads over Treasuries: 200 bps.
2. Development Yield Spread over Cap Rates: 200 bps.
3. Property Management Expense: take the proportion of managed properties to total
properties and multiply that ratio times the General & Administrative expense.
For this assignment, you can ignore the following in your NAV:
 Structured Finance Investments.
 Redeemable Non-Controlling Interest.
 JV Acquisitions, Dispositions, if any.
 Redevelopment pipeline – no adjustment necessary.