Essex Property Trust(US:ESS)2025-10-30 19:00Financial Data and Key Metrics Changes - The company reported a solid quarter with core FFO per share exceeding the midpoint of guidance by $0.03, leading to an increase in the full-year guidance midpoint for core FFO per share to $15.94 [9] - Year-to-date blended lease rate growth was 3% across all leases and 2.7% on like-term leases, demonstrating the competitive advantage in low-supply markets [3][4] Business Line Data and Key Metrics Changes - Southern California's blended lease rate growth was around 1.2%, while Northern California achieved close to 4%, and Seattle was at about 2% [14] - The structured finance portfolio saw $118 million in redemptions year-to-date, with an expectation of $200 million in total proceeds for the full year [9] Market Data and Key Metrics Changes - Northern California remains the best-performing region, with significant rent growth driven by AI-related startups and favorable rent-to-income ratios [4] - Seattle's market is stable but trending at the low end of expectations due to soft demand and supply constraints [4][36] Company Strategy and Development Direction - The company is optimistic about the market outlook for 2026, anticipating a decline in total housing supply deliveries by almost 40% [6] - The focus remains on acquiring assets in high-growth submarkets, with nearly $1 billion invested in Northern California since 2024 [6][30] Management's Comments on Operating Environment and Future Outlook - Management noted that hiring and investment decisions have been delayed due to a soft economic environment and policy uncertainty, but the West Coast is expected to outperform the U.S. average [5] - The company anticipates stable growth in 2026, with earnings projected to be between 80 to 100 basis points [6][19] Other Important Information - The transaction market on the West Coast is slightly above 2024 levels but remains below historical averages, with cap rates generally in the mid-4% range [7] - The company has executed several financings throughout 2025 to strengthen its balance sheet and increase liquidity [11] Q&A Session Summary Question: Can you break out the blended rate growth for the third quarter? - Management confirmed that Los Angeles was a drag on performance, with Southern California at 1.2%, Northern California close to 4%, and Seattle at about 2% [14] Question: Is there a pickup in demand in Northern California? - Management noted steady strength in Northern California, with a slight uptick in tech job postings benefiting the region [16] Question: Can you break down the 2026 earnings estimate? - Management indicated that Northern California is expected to lead, with Southern California ranking third and Seattle in the middle [19] Question: How do you view the impact of AI on job growth? - Management believes AI will be net additive to the economy, with Seattle's job market remaining stable due to strong anchor industries [65] Question: What is the outlook for concessions across the portfolio? - Concessions are comparable to the same period last year, with negligible impact on renewals and primarily affecting new leases [59] Question: What is the strategy regarding the preferred equity book? - Management stated they are not exiting the business but are being more selective due to heavy redemptions and compressed yields [49] Question: How does the company view the impact of potential changes in Seattle's local government? - Management does not foresee significant changes affecting apartment communities, as recent legislation has balanced tenant protection with housing production needs [51]