Essex Property Trust, Inc. Q1 FY2026 earnings call

• Macro environment: U.S. economic conditions unfolded in line with outlook, but geopolitical tensions and inflation caused uncertainty. Essex delivered solid first quarter with core FFO per share exceeding guidance and same property revenues ahead of plan. • Property operating highlights: Achieved 1.4% same-store blended rent growth. Northern California was best market with 3.2% blended rent growth. Seattle had slow start with negative 80 basis points blended rent growth but showed sequential improvements. Southern California had ~1% blended rent growth. Shifted operating strategy to drive rent growth ahead of peak leasing season with 96.4% April financial occupancy and north of 3% blended lease rate growth. • Transaction activities: Interest in multifamily assets on West Coast remains healthy, especially Bay Area with cap rate compression. Essex repurchased ~$62 million of stock. • First quarter results: Core FFO per share exceeded midpoint of guidance range with key drivers being same property revenues, same property operating expense growth, and non-same property and co-investment NOI. • Full year outlook: Reaffirming same property growth and core FFO per share guidance ranges. Expecting ~$90 million in early structure finance redemption proceeds in second quarter and repurchased ~$62 million of stock. Balance sheet remains strong with net debt to EBITDA five and a half times, over $1 billion in available liquidity.

Core FFO per share exceeded the high end of guidance range. Same property revenues trended ahead of plan. Northern California was best market with 3.2% blended rent growth, Seattle had negative 80 basis points blended rent growth, Southern California had ~1% blended rent growth. Occupancy in April was 96.4% and blended lease rate growth north of 3%. Same-store blended rent growth was 1.4% for the quarter.

• Reaffirming same property growth and core FFO per share guidance ranges. • Expecting ~$90 million in early structure finance redemption proceeds in second quarter, which causes a seven-set headwind to second-half forecast but near-term earnings headwinds from redemptions are offset by benefits from buybacks. • Full year forecast unchanged at this time.

Q: In terms of the blended rate growth, asked about how it will trend to get to 2.5% guidance for the year.

A: Unplanned as relates to guidance, first quarter at 1.4% and April north of 3%, don't anticipate challenges to hitting 2.5% for the year, and first half and second half are pretty similar.

Q: On the 90 million of additional or early redemptions, asked if it's a pull forward or additional capital and potential for FFO headwind to get worse.

A: 90 million is maturities set to mature in 27 and 28 pulled forward into 2026, headwind is behind us.

Q: On change in methodology for net effective rate growth, asked what drove the decision and cadence.

A: Change to be in line with peers, all leases reporting causes more variability with highs in second and third quarter and lows in first and fourth.

Q: Asked about where renewals are being sent out for the summer.

A: Renewals sending out around 5%, renewals have been pretty sticky.

Q: California had layoff announcements from large tech companies, asked if seen changes in market.

A: Layoff announcements majority not in Essex markets, top 20 tech job openings remain steady, venture capital investments in Bay Area funding new startups, Northern California performance strong.

Q: Asked about backfilling repayment with new investments.

A: Remain actively involved in conversations related to new investments on structured finance side, tracking a few deals with attractive risk-adjusted returns.

Q: On expense, asked for more color on first quarter surprises and what reverses in back half.

A: Lower controllable expense spend in first quarter due to delaying projects from first to second and third quarters, full year controllable expense spend expected to be around 2%.

Q: On change in methodology for net effective rate growth, asked for 1Q number under old methodology.

A: On like-for-like, Q1 blended would have been 2%, new lease negative 1.2%, renewal 3.9%.

Q: Talked about new versus renewal in April and 1Q across regions.

A: April new about negative 90 basis points, renewal about 5%, taking April to 3.1%. Northern California blend north of 5%, Seattle north of 2%, Southern California around 1.5%.

Q: Asked about political tax headlines and implications to demand.

A: Hard to predict, counter-ballot measure, no impact seen to business yet.

Q: Spoke to affordability in Northern California and runway for blended lease rate growth.

A: Rent-to-median income ratios in Northern California at around 21.5%, significant rent upside, wages continue to increase.

Q: Talked about Southern California, latest thoughts and outlook.

A: LA progressing at glacial pace, excluded LA portfolio April new lease rates 180 basis points higher, market stable, trending better but slow.

Q: Asked about AI benefit, direct or indirect.

A: Getting direct benefit, especially near San Francisco, startups from AI throughout market, large AI companies expanding to peninsula.

Q: Talked about lease growth under old definition and seasonal trends.

A: More variability with all leases reporting, drop-off could be more significant as entering peak leasing season.

Q: Spoke to Seattle market breakout and investment appetite.

A: Eastside has performed better than CBD in Seattle, combination of demand and supply, significant uptick in capital interest on West Coast assets.

Q: Asked about renewal growth trends and capital allocation.

A: Reporting change through all leases is for comparative purposes, focus on maximizing revenues, capital allocation thoughtful and opportunistic.

Q: Spoke to Seattle performance and concessions.

A: Seattle fundamentals sound, concession for portfolio first quarter about six days, LA concessions higher, San Diego higher due to supply.

Q: Asked about April blend month and trajectory.

A: Typically blends continue to improve into peak leasing season, anticipate blends peak around June through July, but soft demand and geopolitical uncertainty impact.

Q: Talked about Alameda and financial modeling.

A: Combination of concession burn-off and spillover effect, preferred investments expected to be redeemed in second quarter.

Q: Asked about residents moving in from outside MSAs and insurance market.

A: Domestic immigration within Bay Area improved, international immigration legal side no material change, property insurance renewal saw healthy reduction.

Q: Asked about capital allocation and insurance market.

A: Several assets on market, proceeds allocated to highest risk-adjusted return, property insurance market reinsurers back in, premiums down.

Q: Asked about eviction processing timeline in LA and supply reduction impact.

A: Delinquency processing time improved but still around four months, pricing power expected once economic occupancy at 95% or better.

Q: Asked about LA expectations and Camden process.

A: Hoping for better numbers in LA, Camden's process different due to different portfolio allocation dynamics.