Mike Schall stands on the grounds of Radius Apartments in Redwood City, Calif. The development is one of the properties Essex acquired in its purchase of BRE last year.
RC Rivera Photography Michael Schall, CEO of Essex Property Trust and 2015 Executive of the Year

Mike Schall is the kind of CEO who does deals in his sleep.

In fact, it was 2 a.m. on a December night in 2013 when he made the biggest business decision of his life. That was when he finally knew, with clarity, that his company, Essex Property Trust, would buy BRE, its largest and closest rival in what would ultimately ­become a $6.2 billion deal.

"Call it my subconscious working on things, but I woke up and said, ‘OK; this is what we're going to do,' " Schall says. "For whatever reason, I tend to sleep poorly when I have a big decision to make. But I finally decided in the middle of the night."

Making that decision snared Schall and Essex perhaps the most enviable apartment portfolio in the United States today. Now boasting 57,000 units up and down the West Coast, Essex's properties are almost exclusively located in high-barrier locales where rents have surged, in some cases, upward of 50% in recent years.

Its holdings include tightly clustered properties in San Francisco and Seattle, arguably the two hottest rental markets in the country, riding the strong tailwinds of a resurgent tech industry and its resultant job and wage growth. What's more, buying BRE when it did gave Essex broader exposure to Southern California at the exact moment rents started popping there, after years of lagging the rest of the West Coast.

But getting the deal done was just the beginning. The speed and efficiency with which Schall has integrated the two firms—and the results he's squeezed out of BRE's properties since—have wowed investors and multifamily pros alike. Ultimately, it's that feat that's netted him the title of MFE's 2015 Executive of the Year.

The Right Man for the Job

"One of the reasons I nominated him [for Executive of the Year] was because he closed the merger with BRE," says Rod Petrik, real estate analyst at St. Louis–based Stifel, Nicolaus & Co., who was among several analysts and executives MFE called upon to help make the selection. "It was logically the only company that would make sense for Essex to buy, and he's ultimately the only person who could have done it."

Schall's peers, as well, laud the achievement. "Their timing was absolutely impeccable on that transaction," says David Neithercut, Schall's counterpart at Equity Residential, one of the largest apartment REITs in the country. "Mike and his team are absolute, local sharpshooters. They pulled it off at the perfect time. Mike has obviously become a very seasoned and savvy CEO."

Consider this: While the footprints of the two companies overlapped extremely closely—more than half of BRE's properties were within two miles of an Essex building when the deal was announced—their operating results diverged more and more over the years. By 2013, the last year they were independent of each other, Essex grew revenue by 6.3%, while BRE lagged at 4.8%, 150 basis points (bps) lower. But between 2Q and 4Q 2014, the first two quarters after the deal closed, Essex had managed to cut that spread by more than half, to just 70 bps at the former BRE properties, according to David Bragg, an analyst at Newport Beach, Calif.–based real estate research firm Green Street Advisors.

"Mergers and acquisitions are extremely challenging," Bragg says. "Mike and Essex have done it nearly flawlessly. They are getting tremendous operating results out of these BRE ­assets, much better than BRE did in the past."

Of course, while the market expected efficiencies of scale and cost savings from eliminating redundant corporate structures, actually pulling it off can be the fly in the ointment. Analysts point to the combination of MAA and Colonial Properties Trust, which preceded the Essex-BRE deal by six months, and are unimpressed in comparison.

Small Steps, Big Steps

For Schall and Essex, getting those results has come from taking some small steps—Essex, for instance, opened BRE leasing offices that were previously closed on Sundays—and some big ones, too: In areas where properties are tightly clustered, such as downtown L.A., San ­Francisco, and North San Jose, Essex now uses its holdings to compete, collectively, for residents. For example, if a given property doesn't have one-bedrooms available, the Essex leasing staff will try to sell the prospect on another building close by that does.

"It's really given us the ability to compete as one company, as it relates to all the Essex properties, against everyone else, as opposed to thinking about leasing on a property-by-property basis," Schall says. "That's ­really given us a greater ability to cross-sell what we've got."

The clustered approach has also allowed the combined company to do less with more. Since its properties are now even more concentrated geographically than before, it has been able to offer after-hours leasing at select, central offices that serve a number of buildings.