Essex Property Trust(US:ESS)2024-10-30 20:23Financial Data and Key Metrics Changes - The company reported a core FFO per share of $3.91 for Q3 2024, exceeding the midpoint of guidance by $0.04, driven by higher same property revenues [6] - The full-year core FFO guidance was raised to $15.56 per share, reflecting a 3.5% year-over-year growth, with same property revenue growth expectations increased to 3.25% [6][8] - Same property NOI growth is expected to be 2.6%, a 30 basis points increase at the midpoint [6] Business Line Data and Key Metrics Changes - The blended rate growth for Q3 was 2.5%, tempered by seasonal moderation and difficult year-over-year comparisons [2] - Seattle achieved a strong 3.8% blended rate growth, while Northern California saw 2.3% growth, led by Santa Clara County at 3.6% [3] - Southern California's blended lease rate growth was 2.1%, with LA's recovery expected to improve next year as delinquency rates decrease [3] Market Data and Key Metrics Changes - The overall supply growth is expected to be only 50 basis points in 2025, consistent with low levels in 2024 [4] - Job postings at the top 20 technology companies have been recovering, indicating a shift towards future growth and increased demand in regions like San Jose and Seattle [4] - The company noted a stable market environment with financial occupancy at 96.1% for October [3] Company Strategy and Development Direction - The company is focusing on occupancy in anticipation of slower demand typical of seasonal trends [2] - There is strong investor interest in multifamily properties on the West Coast, with cap rates trading in the mid 4% range [5] - The company plans to continue acquiring properties to drive NAV and FFO per share accretion for shareholders [5] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the economic viability of LA due to upcoming events like the World Cup and Olympics, alongside improvements in delinquency rates [11] - The company anticipates a potential reacceleration in new lease rates due to easier year-over-year comparisons and stable market conditions [39] - Management highlighted that the concessionary environment is expected to remain stable, with no significant headwinds anticipated for the upcoming months [53] Other Important Information - The company spent $10 million on advocacy expenses in Q3, with a year-to-date total of $16 million, expecting to exceed $30 million for the full year [28] - The company has maintained a strong balance sheet with low leverage and over $1 billion in liquidity [8] Q&A Session Summary Question: What gives confidence that LA Alameda County will normalize? - Management noted significant improvement in delinquency rates, from nearly 5% to 1.6%, and positive economic indicators such as the World Cup and increased tax credits for the film industry [11] Question: Can you expand on the improving tech job backdrop? - Job openings at the top 20 tech companies have reached pre-COVID levels, indicating a positive trend for future hiring [12] Question: How is the pricing strategy evolving? - The company is focusing on occupancy strategies and anticipates a deceleration in demand, with renewals being sent out in the mid-4s [15] Question: What is the impact of potential rent control repeal? - Management indicated that only 8% of California cities have active rent control, and there is confidence that Proposition 33 will be defeated based on past trends [16] Question: What are the expectations for new lease rates? - Management expects new lease rates to inflect positively due to easier year-over-year comparisons and stable market conditions [39] Question: How are advocacy costs treated in core FFO? - Management clarified that advocacy costs are not seen as recurring and are excluded from core FFO calculations [44]