Essex Property Trust (ESS) investor relations material

Market overview and fundamentals

• Focus remains on West Coast multifamily markets, primarily California and Washington, with a disciplined capital allocation strategy and a portfolio of 63,000 units valued at $24 billion.

• Strong demand drivers include low supply, technology sector growth (notably AI), and favorable rent-to-income ratios, supporting long-term rent growth potential.

• Dividend growth has been sustained for 32 consecutive years, reflecting operational stability and consistent returns.

• Rent growth outperformed both long-term averages and the previous year, with Northern California driving an extended peak leasing season.

• Anticipated 150 basis points of earn-in for 2027, 65 basis points above last year, indicating positive leasing momentum.

Regional performance and supply dynamics

• Northern California is in early recovery, with rent-to-income ratios at 21% versus pre-COVID 25%, suggesting room for further rent growth as wage increases offset rent hikes.

• Affordability remains favorable for renters, with home ownership costing 2.5 times more than renting in the Bay Area.

• Supply remains constrained due to lengthy entitlement and construction processes, with most new supply in affordable housing, minimally impacting market-rate assets.

• Construction cost inflation has moderated to 4-5% annually, down from pre-COVID double digits, but land costs remain high and few sites are transacted.

• Southern California shows stable but soft fundamentals, with delinquency rates in L.A. above historical averages due to court delays, though overall portfolio delinquency is near normal.

Regulatory and legislative environment

• Statewide rent control in California (CPI +5%, capped at 10%) and Seattle (CPI +7%, capped at 10%) is viewed as anti-gouging, with internal policies historically aligned to these caps.

• No significant movement toward more restrictive rent caps is anticipated, and recent legislative experience suggests a focus on encouraging new housing supply.

• The main risk to rent growth is potential state incentives for new supply, but practical barriers and high costs limit near-term impact.