Essex Property Trust, Inc. (ESS) Earnings

Management highlights

- **Overall Portfolio Performance * Solid first half 2026 results outperformed original guidance, driven by strong operational execution * West Coast multifamily fundamentals remain durable, supported by limited new housing supply and rental housing affordability relative to ownership * Core FFO per share for Q2 exceeded the midpoint of prior guidance by $0.10: $0.05 from same property NOI outperformance, $0.03 from non-same property NOI, and a one-time $0.03 benefit from successful property tax appeals under Prop 8 * Revenue growth for same property was 20 basis points ahead of plan, and operating expenses came in lower than forecast - **Regional Operational Trends * Seattle: Rent growth peaked in early July 2026 in line with typical seasonality, and is expected to moderate for the remainder of the year. Recent major corporate office expansion announcements signal positive future demand, with new supply deliveries continuing to moderate. Rent growth flipped positive in March 2026 and increased to 2.8% by June 2026 before starting to taper * Northern California: Strong performance driven by a favorable supply-demand backdrop, continued tech sector investment, and positive in-migration of talent and entrepreneurs drawn to the region's innovation ecosystem. Rent growth still has not peaked for the 2026 season, with momentum extending beyond typical seasonal patterns * Southern California: Remains stable, aligned with moderate national job growth. Orange County leads submarket performance, San Diego is improving after working through supply, and Los Angeles County continues to lag but has improved from its 2023 trough. New aerospace/defense industry activity is a positive early green shoot, but is too new to impact results yet - **Transaction and Capital Markets * Investor interest in West Coast multifamily assets remains healthy despite higher interest rates, with transaction volume increasing through 2026 * Cap rates for institutional quality assets hold in the mid 4% range overall, with Northern California institutional assets pricing in the low 4% range * The balance sheet remains strong: net debt to EBITDA of 5.4x, minimal near-term debt maturities, over $1 billion in available liquidity, and access to multiple capital sources, providing ample flexibility for investments

Guidance

- Full year 2026 core FFO per share guidance midpoint was raised by $0.20 (a 1.3% increase at the midpoint), driven by better-than-expected portfolio operating performance - Same property NOI growth guidance midpoint was increased by 70 basis points to 2.8%: 40 basis points of the increase comes from higher revenue growth (split as 15 basis points from higher scheduled rent, 15 basis points from higher other income, 10 basis points from higher occupancy), and 25 basis points from lower expected operating expense growth driven by the one-time property tax savings - Full year blended rent growth is expected to hit 2.5% at the midpoint, with first half 2026 coming in at 2.6% and second half 2026 expected at 2.4%, with no large sequential drop-off seen to date unlike 2025 - Q3 2026 core FFO guidance midpoint is $3.99 per share, a $0.09 sequential decline from Q2, driven by normal seasonal increases in utilities, California property taxes, and timing-driven higher controllable spending in the second half - 2027 new housing supply is expected to trend lower than 2026, creating a more favorable supply backdrop that will require less incremental job growth to absorb new units - The preferred equity investment book is expected to stabilize at a $100 million run rate for guidance purposes after recent redemptions, with a small third quarter redemption already factored into guidance that is offset by a new investment

Segment performance

Essex Property Trust operates three regional multifamily segments across the West Coast, with the following Q2 2026 performance: 1. **Seattle**: 2.6% blended rent growth, a 340 basis points sequential increase from Q1 2026. The Eastside submarket outperformed with 3.2% blended rent growth, while the urban core delivered 1% rent growth. Seattle represents approximately 30% of the firm's total portfolio. 2. **Northern California**: The firm's strongest performing segment, delivering 6.5% blended rent growth with sustained high occupancy. Northern California makes up roughly 40% of the portfolio. It saw continued strong momentum, with peak leasing extending beyond typical seasonal patterns, and has not yet peaked for the 2026 season. 3. **Southern California**: Delivered 1.4% blended rent growth, led by Orange County, with Los Angeles lagging. Southern California accounts for approximately 30% of the portfolio. Occupancy remains above 95%, supported by limited new supply despite tempered regional job growth aligned with national averages.

Risks & headwinds

- Forward-looking results are subject to material risks and uncertainties that could cause actual performance to differ from expectations, with additional detail available in the company's SEC filings - Continued macroeconomic and geopolitical uncertainty remains, with slower broad U.S. job growth in 2026 acting as a headwind, particularly for Southern California which is more closely tied to national economic trends - Seattle's CBD has higher existing supply concentration than suburban areas, and job growth translation to rent growth has a lag after corporate expansion announcements - California's AB 1482 rent regulation prolongs the translation of strong market rent growth to full same-store revenue growth due to high retention - Ground lease negotiations for three properties with expiring leases in 2027/2028 are ongoing, with uncertainty around future ground rent levels or potential disposition outcomes - Litigation over an unrelated multi-year dispute was recently settled, though the settlement is still subject to court approval and no additional details can be shared at this time

Analyst Q&A

• Q: Analyst Steve Sacqua asked if management's decision to not build stronger second half momentum into guidance despite steady July trends is driven by conservatism or material headwinds. /

  A: Management stated that the guidance is conservative: it assumes no major second half drop-off, but slower broad U.S. job growth (especially impacting Southern California, which makes up a large share of the portfolio) creates enough uncertainty to warrant factoring that risk in. Management confirmed that Northern California rent momentum remains strong and has not yet peaked, and that Southern California is still solidly performing relative to most other U.S. metros with 1.4% rent growth and 95%+ occupancy.

• Q: Analyst Brad Hefner asked what drives the dynamic of lower year-over-year new lease spreads but elevated renewal spreads, despite strong Northern California performance. /

  A: Management explained that strong new lease spreads in Northern California are offset by weaker performance in Southern California and Seattle, which combined make up 60% of the total portfolio. Renewal spreads are holding steady at ~5% companywide, and management expects this trend of lower new lease spreads and higher renewals to continue.

• Q: Analyst Alexander Goldfarb asked whether Seattle's Eastside can reach Northern California-level performance, and if CBD Seattle could see a positive surprise over the next 12 months. /

  A: Management noted that strong future job growth and declining supply make similar performance possible for the Eastside, but Seattle historically produces more new supply so it needs more job growth to generate the same pricing power. A CBD recovery is possible, but it has higher existing supply concentration and employers are not concentrated in the CBD, so the magnitude of a recovery is uncertain and unlikely to reach Northern California levels.

• Q: Analyst John Kim asked whether the company changed its strategy to push higher renewal rents, which could suppress new lease rates going forward. /

  A: Management confirmed that operating strategy has not changed: the core goal is always to maximize total revenue, with no preference for new vs renewal rents. In current market conditions, focusing on renewals is more profitable because turnover is costly, so it makes sense to prioritize retention unless new leases can deliver more than 6% rent growth to offset turnover costs.