Financial Data and Key Metrics Changes - The company reported a solid second quarter with core FFO per share exceeding the midpoint of guidance by $0.07, driven by better same property operations and lower operating expenses [12][4] - Full year core FFO per share guidance was increased by $0.10 to $15.91, reflecting improved same property revenue growth and reduced expenses [13][4] - Same property NOI is expected to grow 3.1% at the midpoint, a 40 basis points improvement from original guidance [14] Business Line Data and Key Metrics Changes - The second quarter saw a 3% blended rate growth for the same store portfolio, with Northern California and Seattle leading at 3.8% and 3.7% respectively, while Southern California lagged at 2% [5][4] - Los Angeles experienced a challenging environment with only 1.3% blended rent growth due to elevated supply deliveries and soft demand [6][4] - The suburban markets of San Mateo and San Jose outperformed with blended rate growth of 5.6% and 4.4% respectively [5] Market Data and Key Metrics Changes - The company expects modest U.S. GDP and job growth, with a stable job environment on the West Coast [8][4] - The transaction market for West Coast multifamily properties remains healthy, with deal volumes slightly higher in the second quarter compared to the previous year [10][4] - Average cap rates for institutional quality assets have remained in the mid-4% range, with some transactions in Northern California occurring in the low 4% range [10][4] Company Strategy and Development Direction - The company plans to maintain disciplined capital allocation by funding acquisitions with select dispositions, aiming to optimize risk-adjusted returns [11][4] - The focus is on fee simple acquisitions relative to cost of capital, with a strategic shift towards stabilized multifamily assets [82][4] - The company is also targeting a reduced size of the structured finance book, aiming for it to be less than 4% of core FFO by year-end [15][4] Management's Comments on Operating Environment and Future Outlook - Management noted that the softness in the macro economy is impacting demand, particularly in Southern California, which mirrors the broader U.S. economy [21][4] - The company anticipates a decline in supply deliveries in the second half of the year, which could improve the leasing environment [22][4] - Infrastructure investments related to the World Cup and Olympics are expected to enhance economic activity in Los Angeles over the next few years [6][4] Other Important Information - The company executed a $300 million delayed draw term loan and expanded its line of credit to $1.5 billion, enhancing balance sheet flexibility [16][4] - Preferred equity redemptions are expected to be backend loaded, impacting sequential core FFO growth [15][4] Q&A Session Summary Question: What drove the weaker blended pricing in Los Angeles? - Management indicated that the underperformance was due to heavier supply in the first half and slow delinquency recovery, not related to fire ordinances [19][4] Question: Can you elaborate on Northern California's performance? - Management noted strength in Northern California with job postings gradually increasing, and the seasonal curve performing slightly better than expected [24][4] Question: What are the expectations for concessions in LA? - Concessions in LA remain elevated compared to the rest of the portfolio, slightly higher than the previous year [44][4] Question: How does the commercial paper program compare to the revolver? - The commercial paper program offers about 70 basis points savings compared to the line of credit, used similarly as a temporary bridge to permanent financing [45][4] Question: What is the expected cadence of earnings from the structured investment book? - The structured finance investments book is expected to decrease significantly over the next few quarters, with repayments anticipated to reduce the book to $200-$250 million by the end of 2026 [97][4] Question: What are the implications of the recent CEQA reform? - Management views the CEQA reform as net positive, potentially encouraging development, although limited near-term impact is expected due to existing economic challenges [101][4]

Financial Data and Key Metrics Changes - The company reported a solid second quarter with core FFO per share exceeding the midpoint of guidance by $0.07, driven by better same property operations and lower operating expenses [11][12] - The full year core FFO per share guidance was increased by $0.10 to $15.91, reflecting a 3.15% same property revenue growth and a 3.25% same property expense growth [12][14] - Year-to-date, the company has received approximately $30 million in preferred equity redemptions, with an additional $175 million expected before year-end [14][16] Business Line Data and Key Metrics Changes - The second quarter saw a 3% blended rate growth for the same store portfolio, with Northern California and Seattle leading at 3.8% and 3.7% respectively, while Southern California lagged at 2% [4][5] - Los Angeles experienced a challenging environment with only 1.3% blended rent growth due to elevated supply deliveries and legacy delinquency issues [5][20] - The suburban markets of San Mateo and San Jose outperformed with blended rate growth of 5.6% and 4.4% respectively, attributed to limited housing supply and better job growth [4][5] Market Data and Key Metrics Changes - The investor appetite for West Coast multifamily properties remains healthy, with deal volumes slightly higher in the second quarter compared to the previous year [8] - Average cap rates for institutional quality assets have remained in the mid-4% range, with some transactions in Northern California occurring in the low 4% range [8][72] - The company has been able to generate average yields in the mid to high 4% from approximately $1 billion of acquisitions in Northern California over the last twelve months [9] Company Strategy and Development Direction - The company plans to maintain disciplined capital allocation by funding acquisitions with select dispositions, aiming to optimize risk-adjusted returns and drive NAV and core FFO per share accretion [10] - The focus is shifting towards fee simple acquisitions and stabilized multifamily assets, with a reduced emphasis on the mezzanine finance book due to its volatility [40][82] - The company is tracking several large infrastructure investments related to the World Cup and Olympics in Los Angeles, which are expected to improve economic activities in the market [5][36] Management's Comments on Operating Environment and Future Outlook - Management expects modest U.S. GDP and job growth, with a stable job environment on the West Coast [6] - The outlook for the second half of the year assumes market rents will moderate consistent with normal seasonality, with a potential for higher outcomes driven by increased hiring and a favorable operating environment [7][8] - Management noted that the softness in the macro economy is impacting demand, particularly in Southern California, which mirrors the broader U.S. economy [20][21] Other Important Information - The company has executed several transactions to enhance balance sheet flexibility, including a $300 million delayed draw term loan and an expanded line of credit [15][16] - The structured finance book is expected to decline significantly, with projections of being less than 4% of core FFO by year-end [14][98] Q&A Session Summary Question: What drove the weaker blended pricing in Los Angeles? - Management indicated that the underperformance in Los Angeles was due to heavier supply in the first half, slow delinquency recovery, and a soft demand environment [18][19] Question: Is there strength in Northern California that is not being fully appreciated? - Management confirmed strength in Northern California, with job postings gradually increasing and performance slightly better than expected [24][25] Question: What are the expectations for concessions in LA? - Concessions in LA remain elevated compared to the rest of the portfolio, slightly higher than the previous year but not dramatically worse [46][47] Question: How does the company view the impact of CEQA reform? - Management views CEQA reform as net positive, although it expects limited near-term impact due to existing economic challenges [102][104] Question: What is the expected cadence of earnings from the structured investment book? - The structured finance investments are expected to decline significantly over the next few quarters, with repayments anticipated to reduce the book size substantially [98][99]

Financial Performance - Net income per diluted share for Q2 2025 was $3.44, compared to $1.45 in Q2 2024, primarily driven by a gain on sale of real estate[11] - Core FFO per diluted share grew by 2.3% compared to Q2 2024, exceeding guidance by $0.07[11] - Same-property revenue and NOI grew by 3.2% and 3.3%, respectively, compared to Q2 2024[11] Portfolio Activity - Acquired two apartment communities with 420 units in Northern California for $240.5 million[11] - Sold a 350-unit apartment community in Southern California for $239.6 million, recording a gain of $126.2 million[11] - Sold a 243-unit apartment community in Oakland, CA for $97.5 million subsequent to quarter end[11] Capital Structure and Liquidity - Total market capitalization is $25.7 billion[12] - Available unsecured commitments stand at $1.356 billion, with total liquidity of $1.477 billion[14] - The company obtained a $300 million unsecured term loan and increased its unsecured credit facility from $1.2 billion to $1.5 billion[11] Debt and Credit Metrics - Debt to Total Assets ratio is 35%[3] - Secured Debt to Total Assets ratio is 4%[3] - Interest Coverage is 524%[3]

Core Insights - Essex Property Trust Inc. (ESS) reported Q2 2025 core funds from operations (FFO) per share of $4.03, exceeding the Zacks Consensus Estimate of $3.99 and reflecting a 2.3% year-over-year improvement [1][8] - Despite positive earnings, the stock faced pressure, declining approximately 1.5% in pre-market trading due to the Federal Reserve's interest rate meeting outcome [1] Financial Performance - Total revenues reached $469.8 million, surpassing the Zacks Consensus Estimate of $469.2 million, and increased by 6.2% year over year [2] - Same-property revenues grew by 3.2% year over year, exceeding the internal estimate of 2.3%, while same-property operating expenses rose by 2.9%, lower than the estimated 3.8% [3] - Same-property net operating income (NOI) increased by 3.3% year over year, significantly above the estimate of 1.7% [3] - Financial occupancy remained stable at 96.2%, unchanged year over year but down 10 basis points sequentially [3] Interest Expenses - Interest expenses rose by 9.7% year over year, totaling $64.2 million [4] Portfolio Activity - In Q2, ESS acquired two apartment communities with 420 units in Northern California for $240.5 million [5] - The company sold a 350-unit community in Santa Ana, CA, for $239.6 million in April 2025, and a 243-unit community in Oakland, CA, for $97.5 million after the quarter ended [5] Balance Sheet Position - As of July 25, 2025, ESS had $1.5 billion in liquidity, including undrawn credit facilities, cash, and marketable securities [6] - Cash and cash equivalents, including restricted cash, decreased to $67.9 million from $107.9 million at the end of the previous quarter [6] Guidance - ESS raised its full-year 2025 core FFO guidance midpoint to $15.91 per share, citing steady portfolio performance [8] - For Q3 2025, the company projects core FFO per share between $3.89 and $3.99, with the full-year projection ranging from $15.80 to $16.02, an increase from the previous range [9][10]

Essex Property Trust (ESS) reported $469.83 million in revenue for the quarter ended June 2025, representing a year-over-year increase of 6.2%. EPS of $4.03 for the same period compares to $1.45 a year ago. The reported revenue compares to the Zacks Consensus Estimate of $469.19 million, representing a surprise of +0.14%. The company delivered an EPS surprise of +1%, with the consensus EPS estimate being $3.99. While investors closely watch year-over-year changes in headline numbers -- revenue and earnings ...

Company Performance - Essex Property Trust (ESS) reported quarterly funds from operations (FFO) of $4.03 per share, exceeding the Zacks Consensus Estimate of $3.99 per share, and up from $3.94 per share a year ago, representing an FFO surprise of +1.00% [1] - The company posted revenues of $469.83 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 0.14%, compared to year-ago revenues of $442.36 million [2] - Over the last four quarters, Essex Property Trust has consistently surpassed consensus FFO estimates [2] Future Outlook - The sustainability of the stock's price movement will depend on management's commentary during the earnings call and future FFO expectations [3] - The current consensus FFO estimate for the coming quarter is $3.98 on revenues of $474.24 million, and for the current fiscal year, it is $15.94 on revenues of $1.88 billion [7] - The estimate revisions trend for Essex Property Trust was favorable ahead of the earnings release, resulting in a Zacks Rank 2 (Buy) for the stock, indicating expected outperformance in the near future [6] Industry Context - The REIT and Equity Trust - Residential industry is currently in the top 33% of over 250 Zacks industries, suggesting a positive outlook for stocks within this sector [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in estimate revisions, which can be tracked by investors [5]

[Earnings Press Release](index=3&type=section&id=Earnings%20Press%20Release) [Second Quarter 2025 Results and Full-Year Guidance Update](index=3&type=section&id=Second%20Quarter%202025%20Results%20and%20Full-Year%20Guidance%20Update) Essex Property Trust announced strong second quarter 2025 results, with a significant increase in Net Income per share to $3.44, driven by a gain on the sale of real estate, leading to a raised full-year 2025 guidance for Core FFO, same-property revenues, and Net Operating Income (NOI) Q2 & H1 2025 Financial Performance (Per Diluted Share) | | Three Months Ended | % Change | Six Months Ended | % Change | | :--- | :--- | :--- | :--- | :--- | | | **June 30, 2025** | **YoY** | **June 30, 2025** | **YoY** | | **Net Income** | $3.44 | 137.2% | $6.59 | 15.8% | | **Total FFO** | $4.03 | 3.6% | $8.00 | -5.8% | | **Core FFO** | $4.03 | 2.3% | $8.00 | 3.0% | Revised Full-Year 2025 Guidance | Guidance Metric | Revised Range | Revised Midpoint | Change at Midpoint | | :--- | :--- | :--- | :--- | | **Net Income per diluted share** | $10.05 - $10.29 | $10.17 | +$0.73 | | **Core FFO per diluted share** | $15.80 - $16.02 | $15.91 | +$0.10 | | **Same-Property Revenues** | 2.90% to 3.40% | 3.15% | +0.15% | | **Same-Property Operating Expenses** | 3.00% to 3.50% | 3.25% | (0.50%) | | **Same-Property NOI** | 2.70% to 3.50% | 3.10% | +0.40% | - Core FFO per diluted share exceeded the midpoint of the Company's guidance by **$0.07**, primarily due to higher same-property revenue growth and favorable property taxes in Washington[11](index=11&type=chunk) - The company acquired two apartment communities in Northern California for **$240.5 million** and disposed of one in Southern California for **$239.6 million**[11](index=11&type=chunk) [Same-Property Operations](index=4&type=section&id=Same-Property%20Operations) For Q2 2025, the same-property portfolio demonstrated solid growth, with revenues increasing by 3.2% and Net Operating Income (NOI) by 3.3% year-over-year, led by Northern California's 3.4% revenue growth and a significant sequential NOI increase in Seattle Metro Same-Property Revenue Growth by Region (Q2 2025) | Region | YoY (vs. Q2 2024) | YTD (vs. YTD 2024) | QoQ (vs. Q1 2025) | | :--- | :--- | :--- | :--- | | **Southern California** | 3.1% | 3.5% | 0.5% | | **Northern California** | 3.4% | 3.5% | 1.2% | | **Seattle Metro** | 2.8% | 2.5% | 1.5% | | **Same-Property Portfolio** | **3.2%** | **3.3%** | **1.0%** | Same-Property NOI Growth by Region (Q2 2025) | Region | YoY (vs. Q2 2024) | YTD (vs. YTD 2024) | QoQ (vs. Q1 2025) | | :--- | :--- | :--- | :--- | | **Southern California** | 2.1% | 2.9% | 0.5% | | **Northern California** | 2.5% | 3.4% | 2.0% | | **Seattle Metro** | 7.8% | 3.9% | 8.5% | | **Same-Property Portfolio** | **3.3%** | **3.3%** | **2.5%** | - The **3.2%** YoY revenue growth was primarily driven by a **2.3%** increase in scheduled rents and a **0.5%** positive impact from lower delinquency[13](index=13&type=chunk) - Overall portfolio financial occupancy was **96.2%** at the end of Q2 2025, unchanged from Q2 2024[16](index=16&type=chunk) [Investment Activity](index=5&type=section&id=Investment%20Activity) The company engaged in strategic capital recycling during the quarter, acquiring two communities in Santa Clara County for $240.5 million and selling a property in Santa Ana for $239.6 million, which generated a gain of $126.2 million, followed by a post-quarter sale in Oakland and a new joint venture formation - **Acquisitions:** Acquired two apartment communities (420 homes) in Santa Clara County for a total of **$240.5 million** in May[18](index=18&type=chunk) - **Dispositions:** Sold a 350-unit community in Santa Ana, CA for **$239.6 million** in April, recording a **$126.2 million** gain. Subsequent to quarter end, sold a 243-unit community in Oakland, CA for **$97.5 million**[19](index=19&type=chunk)[20](index=20&type=chunk) - **Other Investments:** Formed a new joint venture, Wesco VII, with a **$50.0 million** commitment from each partner. The venture originated a **$42.6 million** preferred equity investment with an initial preferred return of **13.5%**[21](index=21&type=chunk) [Balance Sheet and Liquidity](index=6&type=section&id=Balance%20Sheet%20and%20Liquidity) Essex significantly enhanced its financial flexibility and liquidity by securing a new $300.0 million term loan, establishing a $750.0 million commercial paper program, and upsizing its unsecured credit facility to $1.5 billion, resulting in approximately $1.5 billion in total liquidity as of late July 2025 - Obtained a new **$300.0 million** unsecured term loan maturing in May 2028, with **$150.0 million** drawn as of June 30, 2025[23](index=23&type=chunk) - Established a **$750.0 million** commercial paper program, with **$365.0 million** outstanding as of June 30, 2025[24](index=24&type=chunk) - Subsequent to quarter end, increased its unsecured credit facility from **$1.2 billion** to **$1.5 billion** and extended the maturity to January 2030[25](index=25&type=chunk) - As of July 25, 2025, the Company had approximately **$1.5 billion** in liquidity from its credit facilities, cash, and marketable securities[27](index=27&type=chunk) [Guidance](index=7&type=section&id=Guidance) The company has raised its full-year 2025 guidance following a strong second quarter performance that exceeded expectations, with the revised midpoint for Core FFO per diluted share now at $15.91, an increase of $0.10, and third quarter Core FFO projected between $3.89 to $3.99 per diluted share Full-Year 2025 Guidance Revision | Per Diluted Share | Previous Midpoint | Revised Midpoint | Change | | :--- | :--- | :--- | :--- | | **Net Income** | $9.44 | $10.17 | +$0.73 | | **Total FFO** | $15.81 | $15.89 | +$0.08 | | **Core FFO** | $15.81 | $15.91 | +$0.10 | | **Same-Property Revenues** | 3.00% | 3.15% | +0.15% | | **Same-Property NOI** | 2.70% | 3.10% | +0.40% | - The company provided third quarter 2025 Core FFO guidance with a range of **$3.89 - $3.99** per diluted share and a midpoint of **$3.94**[33](index=33&type=chunk) Q3 2025 Core FFO Guidance Midpoint Reconciliation | | Per Diluted Share | | :--- | :--- | | **Core FFO per diluted share for Q2 2025 reported** | **$4.03** | | Consolidated Revenues | $0.05 | | Consolidated Operating Expenses | ($0.11) | | Structured Finance Investments | ($0.02) | | G&A and Other | ($0.01) | | **Guidance midpoint of Core FFO per diluted share for Q3 2025** | **$3.94** | [FFO Reconciliation](index=8&type=section&id=FFO%20Reconciliation) This section provides a detailed reconciliation from Net Income to Funds from Operations (FFO) and Core FFO, showing that for Q2 2025, Net Income of $221.4 million was adjusted for items like depreciation ($151.5 million) and gains on sale (-$126.2 million) to arrive at FFO of $268.8 million, with further minor adjustments resulting in a Core FFO of $268.6 million FFO and Core FFO Reconciliation (Q2 2025 vs Q2 2024) | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | **Net income available to common stockholders** | $221,362 | $92,914 | | Depreciation and amortization | $151,501 | $145,613 | | Gains not included in FFO | ($126,174) | - | | Other adjustments | $22,175 | $20,260 | | **FFO attributable to common stockholders** | **$268,838** | **$258,787** | | Non-core adjustments | ($284) | $3,178 | | **Core FFO attributable to common stockholders** | **$268,554** | **$261,965** | FFO and Core FFO Per Share (Diluted) | | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | **FFO per share** | $4.03 | $3.89 | | **Core FFO per share** | $4.03 | $3.94 | [NOI Reconciliation](index=10&type=section&id=NOI%20Reconciliation) This section reconciles Earnings from Operations to Net Operating Income (NOI) and Same-Property NOI, showing that for Q2 2025, Earnings from Operations of $279.7 million was adjusted for corporate expenses, depreciation, and gains on sale to arrive at a total NOI of $332.2 million, with Same-Property NOI for the quarter at $290.9 million NOI Reconciliation (Q2 2025 vs Q2 2024) | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | **Earnings from operations** | $279,700 | $137,450 | | Adjustments (Depreciation, G&A, etc.) | $52,481 | $175,798 | | **NOI** | **$332,181** | **$313,248** | | Less: Non-same property NOI | ($41,325) | ($31,667) | | **Same-Property NOI** | **$290,856** | **$281,581** | [Supplemental Data](index=12&type=section&id=Supplemental%20Data) [Consolidated Operating Results](index=12&type=section&id=Consolidated%20Operating%20Results) The consolidated operating results show a year-over-year increase in total revenues to $469.8 million for Q2 2025 from $442.4 million in Q2 2024, with net income available to common stockholders rising substantially to $221.4 million, largely due to a $126.2 million gain on the sale of real estate Consolidated Operating Results Highlights (in thousands) | | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | **Total Revenues** | $469,833 | $442,355 | | **Earnings from operations** | $279,700 | $137,450 | | **Net income available to common stockholders** | $221,362 | $92,914 | - Property operating expenses increased to **$135.4 million** in Q2 2025 from **$126.5 million** in Q2 2024, with notable increases in real estate taxes, personnel costs, and utilities[59](index=59&type=chunk) [Consolidated Funds from Operations](index=14&type=section&id=Consolidated%20Funds%20from%20Operations) This schedule details the calculation of FFO and Core FFO, showing that for Q2 2025, FFO per diluted share increased by 3.6% to $4.03, while Core FFO per diluted share grew by 2.3% to $4.03, and for the six months ended June 30, 2025, Core FFO per share increased by 3.0% to $8.00 FFO and Core FFO Per Share Performance | Per Share - Diluted | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | **FFO** | $4.03 | $3.89 | 3.6% | | **Core FFO** | $4.03 | $3.94 | 2.3% | | | **YTD 2025** | **YTD 2024** | **% Change** | | **FFO** | $8.00 | $8.49 | -5.8% | | **Core FFO** | $8.00 | $7.77 | 3.0% | [Consolidated Balance Sheets](index=15&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheet as of June 30, 2025, shows total assets of $13.18 billion, a slight increase from $12.93 billion at year-end 2024, with total liabilities increasing to $7.34 billion from $7.18 billion, primarily due to an increase in lines of credit and commercial paper outstanding Balance Sheet Summary (in thousands) | | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | $13,181,490 | $12,927,359 | | **Total Liabilities** | $7,342,654 | $7,176,120 | | **Total Equity** | $5,805,914 | $5,720,390 | [Debt Summary](index=16&type=section&id=Debt%20Summary) As of June 30, 2025, the company's total debt stood at $6.76 billion with a weighted average interest rate of 3.7% and a weighted average maturity of 6.6 years, primarily composed of unsecured bonds and term loans with a maturity profile extending beyond 2035 Total Debt Profile as of June 30, 2025 | Metric | Value | | :--- | :--- | | **Total Debt, net** | $6,759,454 thousand | | **Weighted Average Interest Rate** | 3.7% | | **Weighted Average Maturity** | 6.6 years | - The company's debt is primarily unsecured (**$5.52 billion**) compared to secured mortgage notes (**$0.87 billion**)[67](index=67&type=chunk) [Capitalization and Credit Ratios](index=17&type=section&id=Capitalization%20and%20Credit%20Ratios) As of June 30, 2025, Essex's total market capitalization was $25.66 billion, with a debt-to-total market capitalization ratio of 26.3%, maintaining investment-grade credit ratings of Baa1 from Moody's and BBB+ from Standard & Poor's, and remaining in compliance with all public bond covenants - Total market capitalization was **$25.66 billion**, with a debt-to-market cap ratio of **26.3%**[69](index=69&type=chunk) - Credit ratings are stable at **Baa1** (Moody's) and **BBB+** (Standard & Poor's)[69](index=69&type=chunk) Key Credit Metrics | Metric | Actual | Requirement | | :--- | :--- | :--- | | **Debt to Total Assets** | 35% | < 65% | | **Secured Debt to Total Assets** | 4% | < 40% | | **Interest Coverage** | 524% | > 150% | | **Net Indebtedness / Adjusted EBITDAre** | 5.5x | N/A | [Portfolio Summary](index=18&type=section&id=Portfolio%20Summary) As of June 30, 2025, the company's portfolio consisted of interests in 63,385 apartment homes across Southern California, Northern California, and the Seattle Metro area, with Southern and Northern California contributing 40.8% and 41.1% of total NOI, respectively, and an average monthly rental rate of $2,707 Portfolio Breakdown by Region (at Company's pro rata share) | Region | Total Apartment Homes | Average Monthly Rent | % of Total NOI | | :--- | :--- | :--- | :--- | | **Southern California** | 25,889 | $2,670 | 40.8% | | **Northern California** | 24,627 | $2,987 | 41.1% | | **Seattle Metro** | 12,869 | $2,251 | 18.1% | | **Total** | **63,385** | **$2,707** | **100.0%** | [Operating Income by Quarter](index=19&type=section&id=Operating%20Income%20by%20Quarter) This schedule shows a consistent trend of rising same-property revenues and NOI over the past five quarters, with same-property NOI increasing from $281.6 million in Q2 2024 to $290.9 million in Q2 2025, and blended net effective rate growth for leases at 3.0% in Q2 2025 Quarterly Same-Property NOI (in thousands) | Quarter | Same-Property NOI | | :--- | :--- | | Q2 2024 | $281,581 | | Q3 2024 | $279,921 | | Q4 2024 | $281,075 | | Q1 2025 | $283,663 | | Q2 2025 | $290,856 | Same-Property Net Effective Rate Growth (Q2 2025) | Lease Type | Rate Growth | | :--- | :--- | | **New Lease** | 0.7% | | **Renewal** | 4.2% | | **Blended** | 3.0% | [Same-Property Results by County](index=20&type=section&id=Same-Property%20Results%20by%20County) This section provides a granular breakdown of same-property revenue growth by county, with San Francisco showing the highest year-over-year revenue growth at 6.5% in Q2 2025, and San Mateo (4.7%) and San Francisco (6.6%) being the top performers year-to-date Top 3 Same-Property Revenue Growth by County (Q2 2025 vs Q2 2024) | County | Revenue Growth | | :--- | :--- | | San Francisco | 6.5% | | San Mateo County | 4.2% | | Orange County | 3.5% | Top 3 Same-Property Revenue Growth by County (YTD 2025 vs YTD 2024) | County | Revenue Growth | | :--- | :--- | | San Francisco | 6.6% | | San Mateo County | 4.7% | | Ventura County | 4.2% | [Same-Property Operating Expenses](index=22&type=section&id=Same-Property%20Operating%20Expenses) Total same-property operating expenses increased by 2.9% year-over-year in Q2 2025, driven primarily by a 13.7% rise in maintenance and repairs and a 9.9% increase in utilities, while real estate taxes decreased by 3.7% for the quarter, with year-to-date total expenses up 3.3% Same-Property Operating Expense Growth (Q2 2025 vs Q2 2024) | Expense Category | % Change YoY | | :--- | :--- | | Maintenance and repairs | 13.7% | | Utilities | 9.9% | | Personnel costs | 6.1% | | Real estate taxes | -3.7% | | **Total** | **2.9%** | [Development Pipeline](index=23&type=section&id=Development%20Pipeline) As of June 30, 2025, the company's development pipeline includes one consolidated project, 7 South Linden in South San Francisco, a 543-unit project with an estimated total cost of $311 million, expected to start construction in Q1 2025 and stabilize in Q1 2030, alongside land held for future development Consolidated Development Project: 7 South Linden | Metric | Value | | :--- | :--- | | **Location** | South San Francisco, CA | | **Apartment Homes** | 543 | | **Estimated Total Cost** | $311 million | | **Construction Start** | Q1 2025 | | **Stabilized Operations** | Q1 2030 | [Capital Expenditures](index=24&type=section&id=Capital%20Expenditures) In Q2 2025, the company incurred $20.0 million in revenue-generating capital expenditures and $35.8 million in non-revenue-generating capital expenditures, with total capital expenditures amounting to $199.6 million over the trailing four quarters Capital Expenditures (in thousands) | Category | Q2 2025 | Trailing 4 Quarters | | :--- | :--- | :--- | | **Revenue Generating** | $20,017 | $80,959 | | **Non-Revenue Generating** | $35,822 | $118,674 | [Co-investments and Preferred Equity Investments](index=25&type=section&id=Co-investments%20and%20Preferred%20Equity%20Investments) As of June 30, 2025, the company held investments in operating joint ventures totaling 7,694 apartment homes, which generated $22.8 million in NOI at Essex's share for Q2, and $445.5 million in preferred equity investments with a weighted average return of 9.2%, generating $9.3 million in income for the quarter Investment Summary (Q2 2025) | Investment Type | Essex Book Value | Income Generated | | :--- | :--- | :--- | | **Operating JVs** | $360,921 thousand | $22,831 thousand (NOI) | | **Preferred Equity** | $445,511 thousand | $9,317 thousand | [Acquisitions and Dispositions](index=26&type=section&id=Acquisitions%20and%20Dispositions) Year-to-date as of June 30, 2025, Essex acquired 1,039 apartment homes for a total of $585.9 million, primarily in Northern California, and disposed of 605 homes for $366.6 million, mainly in Southern California YTD 2025 Transaction Summary | Activity | Apartment Homes | Total Contract Price | | :--- | :--- | :--- | | **Acquisitions** | 1,039 | $585,875 thousand | | **Dispositions** | 605 | $366,580 thousand | [2025 FFO Guidance Assumptions](index=27&type=section&id=2025%20FFO%20Guidance%20Assumptions) This schedule provides the detailed build-up for the full-year 2025 FFO guidance, assuming total NOI between $1.31 billion and $1.32 billion and net interest expense around $253 million, leading to a projected Core FFO per diluted share range of $15.80 to $16.02 Key Full-Year 2025 Guidance Assumptions (Midpoint) | Item | 2025 Guidance Midpoint (in thousands) | | :--- | :--- | | **Total NOI from Consolidated Communities** | $1,316,900 | | **Net interest expense** | ($253,000) | | **FFO from co-investments** | $91,700 | | **Core Funds from Operations** | $1,061,100 | [Reconciliation of Projected EPS, FFO and Core FFO](index=28&type=section&id=Reconciliation%20of%20Projected%20EPS%2C%20FFO%20and%20Core%20FFO) This table reconciles the company's projected Net Income (EPS) to its FFO and Core FFO guidance for Q3 and the full year 2025, showing that for the full year, a projected EPS midpoint of $10.17 is reconciled to a Core FFO per share midpoint of $15.91, with the primary adjustment being for depreciation Full-Year 2025 Guidance Reconciliation (Per Share Midpoints) | | Full-Year 2025 Midpoint | | :--- | :--- | | **EPS - diluted** | $10.17 | | Depreciation and amortization & other adjustments | $5.74 | | **Core FFO per share - diluted** | $15.91 | [MSA Level Supply Forecast](index=29&type=section&id=MSA%20Level%20Supply%20Forecast) The company forecasts total new residential supply (multifamily and single-family) to be 0.5% of existing stock in 2025, decreasing to 0.4% in 2026, with the Seattle market expected to see the highest relative supply at 1.0% in 2025, while Northern California markets are projected to have very low supply levels Total Residential Supply as a % of Stock | Market | 2025E | 2026E | | :--- | :--- | :--- | | Southern California | 0.4% | 0.4% | | Northern California | 0.4% | 0.3% | | Seattle | 1.0% | 0.6% | | **Total** | **0.5%** | **0.4%** | [Reconciliations of Non-GAAP Financial Measures and Other Terms](index=30&type=section&id=Reconciliations%20of%20Non-GAAP%20Financial%20Measures%20and%20Other%20Terms) This section provides detailed definitions and reconciliations for non-GAAP financial measures used throughout the report, including Adjusted EBITDAre, FFO, Core FFO, and NOI, clarifying calculation methodologies to ensure comparability and transparency for investors - Provides definitions for key terms such as FFO, Core FFO, NOI, Adjusted EBITDAre, Financial Occupancy, and others to clarify the metrics used in the report[104](index=104&type=chunk)[112](index=112&type=chunk)[117](index=117&type=chunk)[123](index=123&type=chunk) - Includes detailed table reconciliations for key non-GAAP measures, such as Net Income to Adjusted EBITDAre and Earnings from Operations to Same-Property NOI, aligning with SEC best practices[109](index=109&type=chunk)[124](index=124&type=chunk)

Core Viewpoint - Growth stocks are appealing due to their potential for above-average financial growth, but identifying strong candidates involves significant risk and volatility [1] Group 1: Company Overview - Essex Property Trust (ESS) is highlighted as a recommended growth stock, possessing a favorable Growth Score and a top Zacks Rank [2] - The company has a historical EPS growth rate of 5.6%, with a projected EPS growth of 2.2% this year, surpassing the industry average of 1.9% [5] Group 2: Financial Metrics - Cash flow growth for Essex Property Trust stands at 38.3% year-over-year, significantly higher than the industry average of 4% [6] - The historical annualized cash flow growth rate for the company is 8.1% over the past 3-5 years, compared to the industry average of 5.9% [7] Group 3: Earnings Estimates - There has been a positive trend in earnings estimate revisions for Essex Property Trust, with the Zacks Consensus Estimate for the current year increasing by 0.1% over the past month [9] - The combination of earnings estimate revisions and a Growth Score of B positions Essex Property Trust favorably for potential outperformance [11]

Core Insights - Essex Property Trust, Inc. (ESS) is expected to report second-quarter 2025 results on July 29, with anticipated year-over-year growth in revenues and core funds from operations (FFO) per share [1][9] Company Performance - In the last reported quarter, Essex Property achieved a core FFO per share surprise of 1.28%, driven by growth in same-property revenues and net operating income [2] - Over the past four quarters, Essex Property consistently surpassed the Zacks Consensus Estimate, with an average surprise of 1.29% [2] - The Zacks Consensus Estimate for second-quarter revenues is $469.19 million, reflecting a 6.07% year-over-year increase [8] - Projected core FFO per share for the second quarter is in the range of $3.90-$4.02, indicating a year-over-year increase of 1.27% [10][11] Market Overview - The U.S. apartment market showed resilience in Q2 2025, absorbing over 227,000 units, surpassing previous peak leasing surges [3] - National occupancy rates rose to 95.6%, up 140 basis points year-over-year, despite muted rent growth of only 0.19% in June [4] - More than 535,000 units were completed in the past year, with 108,000 delivered in Q2, indicating strong market absorption capabilities [5] Regional Insights - Tech-driven markets like San Francisco, San Jose, Boston, and New York are gaining momentum, supported by easing supply and return-to-office trends [6] - Sun Belt markets such as Dallas, Atlanta, and Jacksonville are also showing recovery, while tourism-dependent cities like Las Vegas and Orlando are experiencing slight declines [6] Factors Influencing ESS - Essex Property is expected to benefit from its strong presence on the West Coast, where tech-driven job creation supports rental demand [7] - The company's portfolio reallocation in Northern California is likely to enhance occupancy and revenue growth [7] - Financial occupancy is projected at 96.6%, up 30 basis points sequentially [8] Financial Challenges - High debt burden remains a challenge, with interest expenses expected to increase by 7.7% year-over-year in Q2 [8][9]

Core Viewpoint - The S&P 500 is experiencing a rally, leading to a decline in its dividend yield, which is currently around 1.2%, nearing a record low. Despite this, there are still attractive dividend-paying stocks available for yield-seeking investors [1]. Group 1: ExxonMobil - ExxonMobil has a strong track record of increasing its dividend for 42 consecutive years, outperforming its peers in the oil sector [4]. - The company benefits from an integrated business model with low-cost, high-margin assets, allowing for resilient cash flows and a fortress balance sheet with the lowest leverage ratio among its peers [5]. - ExxonMobil's 2030 plan aims to boost earnings by $20 billion and cash flow by $30 billion, supporting future dividend increases [6]. Group 2: Johnson & Johnson - Johnson & Johnson has a AAA credit rating and a net debt of $13.5 billion, which is manageable given its $380 billion market cap and $20 billion in free cash flow last year, easily covering its $11.8 billion dividend [7]. - The company has raised its dividend for 63 consecutive years, qualifying it as a Dividend King [8]. - Johnson & Johnson invests heavily in growth, spending $17 billion on R&D and securing over $30 billion in M&A deals last year, positioning it to continue increasing its 3.3% dividend yield [9]. Group 3: Essex Property Trust - Essex Property Trust is a major apartment owner focused on West Coast markets, benefiting from strong demand for rental housing [10]. - The REIT has increased its dividend for 31 consecutive years, with a cumulative increase of 516% since its IPO in 1994, currently yielding 3.6% [11]. - The company maintains a strong investment-grade balance sheet, allowing for continued expansion through acquisitions and development projects, enhancing its ability to increase dividends [12]. Group 4: High-Quality Dividend Stocks - ExxonMobil, Johnson & Johnson, and Essex Property Trust are highlighted as high-quality, high-yielding dividend stocks with yields above 3% and potential for further growth, making them attractive options for investors [13].