ESS - Earnings call transcript Q4 2018 | Essex Property Trust, Inc.

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Operator

Good day and welcome to the Essex Property Trust Fourth Quarter 2018 Earnings Call.

As a reminder, today’s conference call is being recorded. Statements made in this conference call regarding expected operating results and other future events are forward-looking statements that involve risks and uncertainties.

Forward-looking statements are made based on current expectations, assumptions and beliefs as well as information available to the company at this time. A number of factors could cause actual results to differ materially from those anticipated. risks SEC. found these filings the about the with information can in be company’s Further get the limit we respectful question When to one of you asks and everyone’s be that time and follow-up. yourself one question-and-answer to portion, management your my introduce Mr. It is to host, now pleasure and Officer Schall, Property for Trust. President Michael Essex Chief Executive Thank you.

begin. You may

Michael Schall

review and John and follow will me will investment welcome fourth XXXX Eudy Thank Today Kleiman here our the you Q&A. quarter earnings West markets. our XXXX comments and summarize Angela ESS to call. is for update Coast John expectations Burkart provide and results, with on I for the an

beginning, for past years. Before whose month his Eudy many John contributions XX plus company’s to would the I to recognize over last retirement was announced the like success

since achieved IPO solid annual rate anticipated to first Essex put since year. shareholders start and generated X.X% dividend a the for in To consecutive the IPO. per grown industry topic, for XX us period, shareholder perspective, return ESS its in years. compounded annual core per both another return a growth at into XX for XXXX than NOI has XX% results was REIT XXXX slightly ranking years share the compounded that share and Over year FFO number to an total X.X% X we ago better total the same FFO growth a growth X.X% broader with that the Turning of has property

company relates as opportunistic, was discipline Dividend Achieving allocation. being increasing especially it for group us our a the capital as dividend XXth about as Next Aristocrats. of placing month, among was as our it much will year, select to these results about consider board known

is markets We have goal mistakes To baseball hits unforced use real major a avoiding understanding led analogy, estate and our get while found minimizing to many errors. winning local to has formula. base the that

average, per add it phases is cycle below and challenges that our FFO an X.X% core economic the growth FFO historical and to of later share, consistent investments XXXX’s Although is NAV. with finding in

are footprint. the out-performance record The company, of the to XXXX relates residents, ago. we demand years continue the job the for focused our of platform next proud levels compared X-month Setting While of drivers colleagues We continue nearly metros firms a and high-quality our strong a the XX-year of it the We to on housing XX continue tech for increase as where in to of continuous as markets believe team our ended Essex X to stage to as of average XXXX, Jose national shareholders. we public our San improvement primary West our relative X.X%, trailing were strong across growth Coast remains see saw track jobs our quarter initial in during markets. trend with in tech the Seattle, expectations. which expand this will exceeded year we and

Essex markets ago. years top all public in this XX% over positions, started we which Over and grew job past the openings tracking highest at California data the XX are have in open tech seen level Washington to several XX,XXX firms of we the since located year,

supplemental. of companies were Coast West note that in recent pursuing to very large considerable focused growth Page the announced their attention in like markets the would companies same the period during as much of the country, demonstrated as S-XX.X has nearly While expansion areas twice on tech we on other these time of same

into in was personal this We the continue compared at U.S. Turning to upward. estimated to labor for expect tight believe the X% our wages XXXX, outperformance continue XXXX, income to low markets and unemployment continue to push we will markets will growth X.X% In XXXX.

we rents, ago continue affordability. a decline As than to compared leading result a nearly rent as of improved to growing to markets to income in year our ratios see wages rental all of faster

This delivery have supply quarter, XXXX in and expect San pushing as Our to significant delivery estimate X,XXX of such by downtown changed what similar in XXXX XXXX estimating the factoring in although delays deliveries supply and our apartment supply our third by for resulted supplemental. units a apartment to in reduced quarter XXXX roughly as XX,XXX estimates increases Oakland from level there the discussed compared Orange units by methodology of apartment of in into deliveries not XXXX. deliveries multifamily we for we are a County Diego. from XXXX large supply for in LA differences Last Overall, forecast. market we offset construction published in change in resulting CBD

our implemented back improvements overestimated supply to estimates while reflect at as research XXXX development. team visit we several supply primarily construction beginning the accuracy under track of who estimates supply original by multifamily supply X% XX%. of by The due Looking third-party our communities improved process and as overestimated by multifamily XXXX, delays our frequently providers much apartment to

risks steady several that support monitoring supply growth in XXXX. be will long-term rent macro and averages healthy economy, expectation are related to our consistent mostly for we markets the Essex growth levels the Although with job

Coast market of The a last few in in conditions, to change heightened West the market being call a volatility on Turning no resulted since December quarterly to review markets transactions suggests deals rates. cap investment our dropped.

we stabilized. in the is capital interest since still of cap tempered little often do cap the and volumes. move have to change plenty of first looking near With rates Generally, changing future. expectations buy and quickly conditions However, for conditions indication rates, rates expect to transaction apartments lower Fed not

be XXXX I over adjusted expect best the we our concludes found more risk in That market equity returns deals and to view investment the preferred the close few to continue given John turn dollars pipeline. on a my current will We to comments. call our Burkart. will in

John Burkart

you, Mike. Thank

compared I original year, focus would full like markets work are achieving our to year the our year-over-year the stronger today on In Overall, ago. of operating X.X% XXXX. occupancy the for these my to higher higher and XXXX same-store fourth results. and last associates to guidance. our rents we rent exceeding the market For thank than market our emphasizing X of at revenue with strategy, related related to quarter, we expect all market XXXX. in strengthening the quarter over were their Consistent hard end continue achieved X.X% growth comments

contemplates the a XXXX for occupancy basis guidance XX points XX.X% Our reduction year. of about of full to

to XXXX continues Regarding leading other The midpoint. XXXX to expenses, year-over-year taxes great X% in in wages at and guidance largely do expense the a in with see for controllables to categories of we utilities, offsets continue about identifying pressure to operating X.X% team in controllable insight operating are operating efficiencies provides year-over-year same. the leasing activity In platform. in rental they to do had of increase and opportunities held into future expected Office the they job growth XXXX XXXX, expenses to demand.

in by office the of illustrated construction continued Page and regional tech S-XX.X companies provide second major announcements the the robust leasing which encouraged environment XXXX, this supplemental. detail we I have will of my market on office commentary. in more leasing are We half for the public activity on

a XXXX, downtown the continues of impacted new that basis supply. supply, downtown deliveries percentage will In portfolio and the the is as expect therefore of areas Overall new less in to in downtown in be deliveries X.X% we of not focus the Essex’s stock XX be the markets locations terms locations. supply in versus apartment cities. suburban CBDs concentrated be should by the surrounding coastal in the points largest of

provide will our I Now, an update markets. on

growth. XXXX For X.X% year strongest of XXXX, since Seattle the year-over-year with full year job had its

including X.X Union. expand ground XXXX. second million and the Other hit major announced milestones offices, the their from were over square Redmond; in QX Amazon’s and approval continued foot square positions Facebook’s million third increased almost Amazon lease in Although for have expansion Issaquah; for there on receiving feet Microsoft Pacific major open their in Lake South to headquarter employers the foot plans X.X Pacific new at their X,XXX X and QX openings million Northwest In XXXX, Washington over of in Costco city Amazon square XXX% location, in Northwest Washington. expansion breaking

outside continue square office Seattle to and pre-leasing Downtown Additionally, Amazon Bellevue, in of Facebook expand Washington. feet XXX,XXX

San Sunnyvale with professional downtown Moving Jose Area expanded Francisco active and to in property expanding which by footprint DoorDash, Google, industries by vast and million feet. of paying In majority the and led year-over-year the billion growth San QX Tech while services their and in land in X high feet. Google their and the job presence Francisco Bay, View by XXX,XXX square business Mountain Facebook as worth such $X growth San Northern of in Bay X.X% square companies, X.X% occurred purchasing California, over was South over averaged over information.

with our same Fremont Supply the Oakland X.X% X.X% and with and Jose compared same period followed same-store year-over-year slightly MDs San and for Our respectively, the growth San X.X% period. in submarkets was San Francisco at by Mateo revenue the for San to San Jose growth XXXX is X.X% by led lower at X.X%, XXXX. Francisco in growth and

downtown of we However, units, units supply delivered X,XXX Oakland will MD which increasing X,XXX the to Oakland. be see in in

Area and X.X% LA remains of Beach XXX,XXX pre-leasing additional by relatively job Oakland. solidify was LA. fourth QX, led submarkets, impactful while the combined consistent Southern growth points, supply West X.X% flat. in be with growth quarter Angeles feet CBD it Continuing their LA in square with an Although total the period. Woodland impacted posting X.X% Los X.X% and the to County. by which the growth completed downtown for feet for X.X% will in in expand deals trailed South, negatively with Tri-Cities to at in a XXX,XXX X.X% and is continues Year-over-year by Facebook in with growth revenue the Google square and averaged our our California market markets growth Hills region both West still respectively for Orange the remained was Bay XXXX growth, Netflix low Long presence basis XX Hollywood.

Oakland. I Regarding for comment in similar as downtown have supply, had LA

in supply is the XX concentration at in is significant. points, County overall Although basis the relatively LA LA downtown low

will December period. was revised XXXX. in last looking increase jobs XX with situation from fourth negative annual quarter it units in we closely in in numbers year units which March, about this over We XXXX year’s grew in XXXX the year. X,XXX Orange at when expect and downtown actually the the A points occurred prior County, to turned benchmarking review deliveries the X,XXX year-over-year basis about LA to and in In similar

for of XXXX. Finally, high growth to job attributed job growth in quarter paying year-over-year fourth the of in is jobs added was San Diego X.X% Most the industries.

to at of the also potential tech Culver the in later members. and two each Vista. our group Apple’s inbound announced impact over is departed estimated employees in company X,XXX margins goals X.X% City out beginning of one for occupancy growth days to well XX plan as for on market moderate Military in carrier San call a And XX% giant to activity X.X% for in strike the X,XXX turn as in was addition crew Year-over-year Angela has and quarter XXXX Diego a fourth add Seattle. the the Thank with X%. Austin, the CFO, Currently, campus will having and at In portfolio year, our have the the Kleiman. our now arriving of Oceanside, availability is the over carriers North will in an you. I year carrier and City submarket, Chula our revenue at X.X%

Angela Kleiman

XXXX The Today, key on the S-XX of sheet. supplemental. release an by the followed update starts our and assumptions capital markets and John. X our on you, will I XXXX focus on the Page supporting of press balance guidance forecast Thank

X.X% expectation U.S. We long-term assumptions expecting growth. guidance, market growth the for rent FFO revenue midpoint. a and primarily a revenue Coast outperform X% to of expense of markets at growth driven is core midpoint our to for we steady rate and property same are West to guiding our of The a growth average. the by On near average the continue are both

You there quarter the this mentioned key two that third growth are on call rate. headwinds impacting

due rate current is as coming rates in First effective below the the is the on debt refinancing marketplace. debt

our in building it associated a interest opens, to between start will is this which XX per effect tailwind. up development months operating drag we is and expect takes cash pipeline our typically creates When expense. phase, to over Since vacant, first Once anticipate lease we flow. on of a more FFO the the XX even development This Second of stabilized XXXX. recognize to a temporary XX% of a drag though year, buildings lease the $X.XX drag meaningful we the per are share $X.XX up become pipeline.

yields assets of net Turning private Essex activities, to and arbitrage the capital market markets between seller our cost year, as was capital. for we a of

sale property the repurchased assume at the have of X%. $XXX have premium $XXX and million beginning debt a stock $XXX from & stock, price this years for rate We large we fourth Xth been a represents Since property, trading proceeds close because average an we to completed repurchased quarter, at million stock has of common have mid a January. repurchase sold cap than were funded does we what X been million, Downtown value. $XXX.XX. purchased which our Currently, this During the asset repaid we which trading the to value. net guidance XXXX, stock asset discount other of of in Angeles with not additional XXXX through any we for to we Hope Recently, net Los ago at over using when

conditions ready and maximize our plan market to we on remain adjust are returns. shareholder always, allocators depending disciplined to As capital

to Lastly, XXXX. XXXX any course. sheet, includes long unsecured that refinancing loan million $XXX without of This relative in incurring We subject debt on pricing balance about of the fees. pre-paying we million debt maturities term with matures repay generally to a $XXX favor on prepayment secured plan in

the million $XXX is loan pay average calculate GAAP discussed while the had previous on our effective to the for expense interest debt is on rates we that call used this rate As X.X%. prepayment, X.X%,

and of be to the balance generate we billion with negative, impact XX% even will remains liquidity. $X.X approximately savings In debt So, $X summary, annual X.Xx FFO strong, million. cash though only of sheet our EBITDA, leverage, over will

advantage take may comments. concludes turn that now the to I my call in opportunities operator are the back arise any will well-positioned to That of XXXX. We questions. And for

Operator

with comes Thank Nick question. Instructions] proceed Our you. [Operator first from Please question your with Joseph Citi.

Nick Joseph

talk half probably you first can XXXX and quarter year? the comps of Thanks. the the least throughout in same-store seen Wondering occupancy revenue given if at about growth first for the difficult

John Burkart

is This sure. John. Yes,

from little is benefit noise that income the some last be quarter of other to we and other of part going first The tougher had a of because bit it year. income,

So little tougher. the year-over-year are comps a

preliminary but in example, on revenue X.X%. the numbers For January, revenue is overall revenue, rental our is X%, actual

was market less it desirable, looking than So, out the will is reality it last actually this year but is stronger than come year. the

position, better pickup quarter would overall, So first will and the the it we lighter are a in but be throughout then numbers year.

Nick Joseph

that were delayed looks a I shift just like two a the of weeks. Thanks. that a on only quarter And it then and development, of by projects recognize could be few

seeing delays normal actually is or more projects these shift? quarterly are So it

John Eudy

actually This but into of month, it. is behind the so a John Eudy. out was only reason The X.X quarter, labor issue the delayed pushed a couple pushed it our deals. it next They are that about

Nick Joseph

Thanks.

Operator

question Scotiabank. question. next Trent from your comes proceed with Please Our Trujillo with

Trent Trujillo

like the thanks lot on Hi, but the in deliver commentary supply for good and taking Bay morning to different looks a that’s it Area. I of questions. markets, in is scheduled supply there the appreciate

discounts of that that your the new your about one believe could growth, you rents XX% do rent be I ability enough and drawing think you may cited to you of are to be a to an peers not have see thinking point perhaps existing products? So assets impact? how XX% residents, drive or So, are ultimate that much maintain do because that occupancy demand at retain recently will it

Michael Schall

Area. growth job of Hi, apartment area Bay continue the supply, is think stock and we for X% the in the stock your of somewhere has economy. And that question. you of the total look supply at X.X% as strongest levels to overall and on be Mike. see Thanks on Area will side XXXX around strongest the if Trent, Bay we Yes, this the

point toward being the jobs numbers to appear at and is for-sale be the growing there mortgage higher is rates few are higher not And units do and built by a would make apartments for-sale other impacted X%. of component more being concerning. sort fewer we is obviously trend I prices. Those So and a built

past around California had of X% somewhere over year. think the increase I median price home a

So, to rental. it and benefits basically think that supply we more I the outstrips demand, is expensive housing the But getting relates all look when at for-sale as and well. significantly as demand apartments that, supply and think side we

Trent Trujillo

might for last times campaign. a great. in XX Eudy, with then this your took And this of ask lead the maybe role one about be Okay, one John can transition, but the we Prop you

So and potential housing the latest resolution can on in maybe affordability measures you issues affordability maybe in your thoughts a the you and provide seen shortage us know be and about think let been you could what have involved California? to efforts and

John Eudy

for create housing we’re hole I Well, that as the XX is done, points to work if that’s unabated think built, to years with the that speak to there and have you last was be up are to governor best to out you we it back don’t the have XX/XX and California what as we’ve is a do are housing XX minor around it lot long know, in a that’s been and that out the meaning going will, handsomely our there to up, but housing see of defeated for that construction solutions of if keep I anything call occur more that and affordable supply get expectation. so discussed some it to struggle new it the can’t gets I demands for it’s and so how the take time going to measures to the far well are of off, amendments be be tough very you good long-winded it understand and long legislature shortage, good think make there to a bantered answer to if Prop been work beginning legislature to is a they post focus do discussion economics if even housing, going question the blowing California and of Prop is all and of the leadership by Costa-Hawkins to couple as as is deep not had my know, first you of very reform my amount it’s or Costa-Hawkins, economic it can but any there anything on drivers XX, actually get a it will, being would at to how going was to I I’ll California repealing

Trent Trujillo

Okay, thank you very much.

Operator

Our Wu question. Please your of Bank next with with comes question America/Merrill Lynch. proceed Shirley from

Shirley Wu

Thanks the taking for guys. Hey, question.

going your how range in are you versus rents to of terms back X.X%, and think take will what with occupancy? the end X.X% lower of So you do revenue guidance get to the range? comfortable upper that to it And to

John Burkart

Sure. is John speaking. This

a be are range they stronger in our a markets are We at we at the our us Area downside hurt year right of answer stronger or better spot some is loss out as where what were there if will that jobs jobs really opposed those our a lead now but market we with would huge some against midpoint headwind watching jobs the mentioned that last would to occupancy Bay the are hurt to the we that a things a and will and favoring Orange the though that obviously XX and shifted had very puts that that I of your that upside about job stronger does we the turns the the not County which are position, points time that comfortable be us and good would we’re Seattle in County we’re unfavorable call, than headwinds, say seeing Orange market with lease to occupancy jobs basis this point if worse things certainly ago I would all time because same will question? make I rent occupancy strategy It’s in at work so so mentioned growth that market. mentioned market headwinds better

Shirley Wu

Yes.

‘XX a a that is if into slippage ’XX slippage from have now mentioned on into good projection? theme, slippage you have you So accounted actually seems ‘XX your so but also into right it consistent for you supply, as

John Burkart

last years an is they’re all assessment and John. so the is year at, our labor where and where you’re more we that go adjustment continued have up timing but every adjusted this macro to we year last the because the driving in I past based this modify asset, Yes, with confident than what the tough we and as years our make come we a of a is consistent errors our look over of on process is of even that the fairly couple acknowledge shortage been to judgment to there as shift to of the more of right, expectations, it because it but then just several we a What we’re last made that slippage have drive supply but, of the theme we out it’s best made then, relates so yeah, and delays. because experience we as the assets

Shirley Wu

Thank you. it. Got

Operator

Our Markets. Wurschmidt question. with from Austin KeyBanc next with is Capital Please question proceed your

Austin Wurschmidt

versus third-party Question, when your for they’ve differences? supply think you on there. timing XXXX of are point? there at the a material do still at got you Hi this handle completions for forecasts forecasts And look

Michael Schall

Austin, Mike Hi Schall. it’s

in I ‘XX around appears you that point ‘XX, alluded construction you there that also of amount to in it degree supply a in in beyond supply don’t taking up you how making the areas noted our possibly as we of opinion similar made, of then that ‘XX, X,XXX terms market, so XX,XXX the from labor, in overstated XX% delivered reality be year you sense? there the to and that the that that’s the from the when say fundamental so don’t per numbers one out an tremendous issues are and significant there’ll this supply that such to are increase areas just to high I last last fire unless just them going units comments maybe think are and the on change in the moves that anecdote, something a a the year do next John in without more the market as because variation then see, markets a expect the these made units out are changed there are areas of actually time lot markets labor the well trade there changes number huge my that the fundamentally that would had we don’t was these in demographic labor could West be I same within how was are of more some quarter’s had spent the our are these into fact, labor out and of year and Coast with and construction largely XXXX of have, which call, we next like to, delivered of we move end a a and in ‘XX construction people, on construction see than people As homes labor candidly year some because in so hasn’t thing know into to I destroyed systematic vendors produce adjustment, year metro workers some diverted to without fires could retiring that and market, of time there and into we makes estimates estimates the people moving typically more next

Austin Wurschmidt

that that it greater begins don’t construction peak interesting I slow or risk in peak deliveries an quarter completed we or on Thanks likelihood greater that’s a there is and specific to if once a Do projects know Yes, are you supply you anecdote. pipeline that. call pass time? that for think

Michael Schall

underlies we’ve all I net this developed those start to about to I’d you’re this of the increase buying future and somewhere growing and from Eudy really a couple unlikely construction when of perspective preferred for we’re around development therefore costs equity past and to that else’s and when growing someone from the the is digit two is a X% concern development so low construction where I we’re X%, X%, focus Yes, economics land units going terms financing at have double-digit numbers our development on we years cost yields number high had increase just in and significant and compress and to rather rate single the portfolio at our switch coming for between we point a than that been think the where contract land have loan, that direct at appropriate start the just the the a point the because John in it’s signing contractor deal why go know to development so and rents said, that and we of think effect economics way low think they time. are to to we economics so, in a from what of that’s cost approach are general back of it’s about more risk, development they we construction etcetera. with this in have commit at

Austin Wurschmidt

the And is in you for and as now your exposure the LA Mike. of can well talked versus market guys’ ’XX seeing one significant to thoughts, of concentration just following doubling supply the you’re you as ‘XX me what in concession trends appreciate Xth last downtown is, I sale then the about Hope? speak

Michael Schall

that? you [indiscernible] do to want John, do

John Burkart

as we’ll expect supply coming aggressive, on the again this it downtown same-store get that. It’s in Yes, more the normal with to watch we one as lease-ups our not we couple grab a new we it’s exposure in LA, now, market lease-ups, really as what it I’ll couple and the so our far after year might as to that downtown exposure because relates Sure, seeing answer that pretty reminding it’s fourth quarter in with what are that typically consistent see right that’s concessions of everybody now it of the might fairly that the very does market so X in that is specifically point that not market, lower X it’s relates pretty sale the are for concessions roughly X, point are big question? your in of weeks, whole they weeks the a now this but to portfolio, LA up at small. percent is carefully season

Austin Wurschmidt

absolutely. you. was helpful. Yes, Thank very That

Operator

from Our next O’Neill. Goldfarb proceed with Please comes question. Alexander question Sandler your with

Alexander Goldfarb

Yes, there. morning good out

questions. two So

talk on your First, like headway to expense, the a taxes, expenses unable be rise guys that make point Mike do your that’s said about sustainable to think it but manage operating payroll certainly continuing pressure utility talked further ongoing controllables? seems are you you it the shortage, comments could control to wages is year payroll the really labor to that controllables going do this seems you and you going just or ability the you on if are offset so can you think guys future the you on in to to

John Burkart

making still with finding are more technology winning while opportunities again to in the doing we Yes, take change I forget equation leverage to I paying beneficial in run a see as collections significant opportunities reduce of that as long-term vendor labor it but in not a run is what but so the we potentially out work we sure, experience, it. and people would in wages, of and does was therefore picture the it my to of as that our and this you’re bucket wages pressure for are at employee opportunity, personnel that is got I’ve said, controllables things John. there so to of total right, Mike, relates is very Alex, actually stab we also ways lot your or there as to one and is so our sharing issues affordability end we much the will back a is processes so but rents leverage that go we well to try it up, up you here things know specific day improving affordability getting so automate more tremendous of various asset our goes have help experience so the future costs the to to be the out amount at. if find everybody implement labor for of this we’re to will a much, foreseeable continue significantly out much forever, overall but question, the that trend of customer reducing faster management with let’s looking different

Michael Schall

question that there? your Does answer

Alexander Goldfarb

construction increasing the Mike’s to page looks you yes, to you am pipeline? just does Angela I’m if is going on just are looks ‘XX guidance was capitalized turn and reading guidance but it than guys be could higher the you higher, page capitalized but mean, interest I like referencing labor ‘XX? and it expected it way, could in anticipating wage Yes, through comments actually if to why on if now be I interest to I correctly, with talk, so it didn’t that the sound walk development

Angela Kleiman

naturally this of because sure am to going spend out. to development that’s those that a is than our interest of I and million how have $XXX over a little $XXX still Oh, Alex and year current just really nothing just it’s increase million we function so numbers capitalized happy pipeline about of work more

Alexander Goldfarb

Okay, thanks Angela.

Michael Schall

Alex. Thanks,

Operator

comes John Capital with question proceed Markets. Kim next BMO your question. Our from Please with

John Kim

Good morning.

risk-adjusted this attractive most yet only you million preferred be seller you’ve mentioned for this than to your what year. spend in as remarks, anticipates your Mike on last equity less is year think invested prepared of top which $XX a and your $XXX that returns net to million dollar for year guidance expect your I you

if should getting wondering that investment into just So most opportunities we are pricy? that read

Michael Schall

Thanks it’s John, a Yes, that. good observation. for

we need a want a are now little be right but optimistic we we so sure close. so we basically reworked going us again, it thought in require they a to sponsors of that close rents deals increasing sure that been our make some it’s period otherwise and typically so of for level deals in cost a closing it the good we assumption the of construction would than given do pipeline has represents the deals the we to a just equity in I get we essentially made XXXX perhaps XXXX minute so back inherent and originally remain to is they back uncertainty, a bit thought and most more to actually very were and are pushed just taken preferred being and longer pushed guidance point had think in ago these upside the to could with to of to other faster of which I XXXX lot table fact, time equity has pipeline have than the the

John Kim

like and your about to occurred And be reduce doesn’t trend maintaining Okay. then but Orange sensitive sound to jobs in just jobs of job too you’re it forecast mentioned December, point, this market XX,XXX John County concerned how that forecast, I’m had would the that you’re forecast? loss your still much it that slight at year the for if wondering you

Michael Schall

think we’re we Mike in growth job I on aggressive me. and X.X% is and bit been historically, growth have X.X% on if is if don’t this will California of realistic some Job assumptions you think been and so can think close follow to thoughtful John, John and there virtually anything maybe all conservative. these that back degree is about jobs we have little and but I everything Southern being pretty vary I look a so Yes,

John Burkart

jobs And then Orange you add, with of would County, revisions pretty last just a and bunch back came were the the revised jobs. they Yes. and I remember through whole year flat

We’re or if not watching happen I’m that’ll situation. watching but we’re that again that closely. not, sure

seeing print not what aware bring the up so signs want call people a jobs that there I the see it seeing December. great just and having to was that is are in struggles. in negative on we We’re market

John Kim

it. Got

you. thank Okay,

Operator

question. Our next with Drew Robert Baird. W. question comes proceed from with Babin Please your

Drew Babin

Hey, good morning.

Michael Schall

Hi, Drew.

Drew Babin

where pricing of derivative there in improvement few derivative power you in guidance, has you markets hey, the for are in A question next a second markets purposes? your In had into obviously, going another pickup guidance leasing of XXXX quite a kind year, second that assuming were any – XXXX.

John Burkart

and goes to the it strong. in – a shifted. it the they say of markets the a when all way. continued then the way see clearly market, taking really I first something a in the necessarily in the like ‘XX and to strength off, continue back factors and to not were Northern SoCal but Seattle look at in look ‘XX market we with supplies generally markets. we continue year, consistency Orange do things the the job will strength the see job and slow growth, California We but region say, next check shifted growth the I it things again, again half continued the the wouldn’t in we pretty and that good larger County at expect exception shift market overall and with had – would We that of over stay in really in expect

Drew Babin

guess forecast loss some seem for on language, the be to end well as growth ‘XX ‘XX, your of Okay, would market And that the created midpoint about I implied of talked than that’s the would of I converting lease, that loss on that basis decline. being the quantify higher you over comments guess, of guidance. it points to or lease of of rent I of growth property as deceleration maybe in based bit helpful. caused overall kind kind by can of to occupancy know towards revenue the a XX piece that? by the you fee what’s by drag kind income

John Burkart

we Essex to how you kind Let metrics course it’s referencing that’s along loss at it. I for big at and the look one market of adjustment, Typically, key of me occupancy to it. picture thank with lease, rent the look way of walk and again, through

in loss leasing to seasonal the peak look so, after and looking And typically slowdown. lease, before we slow in like to it at at normal It’s down September. when things

figure, of had So, look if you’re say the on X.XX% we’re to all at going if and into on that that XX you’re with gets about out, about at point going the and S-XX, the going the that average you range and you you for rent take loss of that at the again, another hits to darn And how it’s revenue about a month Then, XXX that in that subtract that close X.X% over leases, to that our to for get X.X% pretty you convention we’re points. if then next portfolio you to points take we look occupancy mid-year lease, at market, year. gets X%. basis and and XX basis

with of the So kind we pretty that it it our midpoint see year, on are X% I big so think guidance. we how look spot and picture at

Drew Babin

point side. helpful. data Okay. of submarkets can The you of of explanation side visibility on downtown the some of some kind And some any about I time there kind East behind Seattle, possibly just lower out tech creation supply that East middle you news to and the firms kind the and very in and based of the anything additional guess what kind shift the income towards are getting beginning in of Seattle? directionally side on East and housing those this around some out seeing is it commentary also from more at about seem of would disruption lastly provide out in market is

Michael Schall

then Well, Seattle very is have you’re yes, but see was of Seattle Downtown trend West. I the Bellevue in into Seattle. And reduced suburban and then and supply now an – think we It first in the than more there Drew. development was more broadly. side overall There right, Downtown area – on the areas been focused it’s more East on moving development of

XXXX. Seattle X,XXX X,XXX and over in X,XXX in ‘XX, then we in little units being delivered about had So

So, And be we obviously to actually the side, robust. which in then going continues right the side that actually direction. is think other is, side the demand supply the very

piece, bit the other which affordability, more the about and markets, is were concerned which California maybe affordable. much Seattle So – we in is more

view an still to XXXX just market as small invest. area growth Cal appropriate as for bit Cal. our Southern we you it’s And compared being our to tell and expectation Seattle below expectation, a from Northern So, rent can

Drew Babin

the Great. you. Appreciate Thank explanation.

Operator

Please comes Capital Markets. your Wes question. Our next from with question proceed with Golladay RBC

Wes Golladay

period buy an wondering and contemplating the and maybe look the the quarter. and Xth like Is to of in it you you just were good entire – as you one-week at in guys or week I’m the could all bought transaction, Hope quarter? last looks asset the stock actually was conceivable sell and everyone. it a was Go it Yes, that – arbitrage, it that that morning stock the described throughout

Michael Schall

positive arbitrage debt Mike. still a point it’s guess Yes, of buy to was that thought kind Wes, just example. we didn’t If if smaller could the stock, could. hey Yes, stock to I refinance we we for that there we hope rates increase buy the

obviously going opportunity pretty the stock was it back the arbitrage our what to happened no positive about we’re buy in the was outcome So, and to matter excited But it. better be view.

Wes Golladay

think growth? bottom. though rent the Big which buying rate you and for maybe you’re developers I like environment cap when at selling more to whole if long-term do this interest on there’s cited, will assets then believe negative that congrats you low Well, be picture overall a could maybe their just transactions lower hurdle eventually X.X% Yes. rate, start

Michael Schall

of questions, the Well, challenging pretty matter it’s on landscape, it’s view variety because is, our a respond to points of this but of different of at a to view. side looking type all hypothetical

of guess what are The hey, So, increase next case, apartments you’re price going is to that value we implied going our that would cost is, higher does in valuations is The too so I understand capital to is mean in decline, real we about portfolio I because going what’s increase. allocation talking the to the better. and and constantly of or the capital that to make trying ask good you at decisions. question that again, are looking estate stock stock

just the that without challenging variable Does one make that focuses variable other on is answer. sense? to to So, ask question a

Wes Golladay

me. that’s Thanks. you for it I agree relative And the it your way with definitely of look at fair point. That’s from No, the value stock.

Michael Schall

thank Okay, you.

Operator

question. Our comes your next Please Hardik Associates. & with Goel proceed with Zelman question from

Hardik Goel

labor Thanks around, there, the what’s on causing guys the just and the I’m wondering, Hey, have obviously, you view drive was supply issues. just for taking the I assets, market, adjustment guys. my best you guys beyond the these into delay just question. wondering view you

to of are likely be kinds the look add mid-rise, delayed that delays, mid-rise, versus color more more specifically? if the delayed? What are can the more than that of you something are that’s there So, projects you high-rise kind certain to at high-rise be on likely is maybe assets

John Eudy

they that the more as XX try that to last Eudy. the of The general I’ll stacks of that longer there complicated structure been obviously, itself. issues the like older part over construction the years the answer John has faced be driver the has folks delays labor that. answer. specifically This the out-migration higher industry were the on likelihood are more as year and no ago The everything there could is up

XX So, of next the would Hardik, it’s complex say. construction, there likelihood yes, the the for a be bit delays months, more higher the this environment little but in everything,

Hardik Goel

a side just basis And you notice? that structure on also is on complexity that capital construction or the

John Eudy

pipeline. to Well, it, deal, I work start was so obviously, you numbers construction, to referring the already but to just it’s do the have a capital, in want to once on you’ve the committed but

only was I referring So, responded. to pipeline the when I

Hardik Goel

Well, of thanks you so and much, John, as retire. best luck

John Eudy

be but Well, working I’m going to retire, not XX/X. I’ll never

Michael Schall

We’re not let going to go John that easy.

John Eudy

Yes.

Operator

with question. Guinee Our next Please John from question Stifel. proceed your with comes

John Guinee

you. thank Great,

First, John, XX miss we’re great years, going to been it’s a boy. you,

John Eudy

not XX, just I’m counting. to that exact, be

John Guinee

XX, wow.

You apologize, then then and handle have costs XXXX did our you in XXXX? already if promote Costa-Hawkins the other started missed how I you any two identified there it, Xth you And questions, requirements and that incurred Hope? memory on and in Exchange this income when and you refresh I wow. were XX, Any XXXX

Angela Kleiman

Thanks, John. Sure.

then. and impact was Hope, such is had piece not last back gain. Xth small a of gains, the meaningful a It because but piece the – sold On we had of there we exchange, the XXXX on share it’s

small So a piece. just

pulled information it X G&A on impact full-year. Page expect, have for in think as or impact XXXX, so Costa-Hawkins gain way and $X.X disclosed a press release. impacting total one-time And such the and the doesn’t that numbers really significant for a course, don’t forecasted But have don’t the million we about of item the public in we in also is Costa-Hawkins cost, is any which number. the to reoccur X event material core separately, actually So to without it’s and far off the we we I absorb a certainly ultimate dividend. that the in ability and a and And as we

John Guinee

promote income any Angela, expected in XXXX?

Angela Kleiman

the with reevaluating this getting platform conversations venture not point, market and more a and we’re goes factoring yet, there’s just lot still conversations a conditions that because promote. At that the into joint involves

John Guinee

you. Great. Thank

Angela Kleiman

good a the on have pipeline certainly embedded we So, promote.

John Guinee

much. very you thank Thank you. Great,

Michael Schall

John. Thanks,

Operator

proceed your comes question with Jefferies. next Please with from Okusanya Tayo Our question.

Tayo Okusanya

Hi, West yes, good morning over there Coast. on the

the promotion. from A congratulations end. our semi-retirement add on my of things John Adam congrats on also your also and me Let couple

about the talked Hope. during and the cap just disposition? some on did well rate of Could we’ve some quarter, as you other a give think sense cap of acquisitions I kind of as us other of the Xth of the you rates

Michael Schall

this is Sure, Mike.

the rate. I for rates it’s changed As locations, a in cap a mentioned X% around have a property think I remarks, don’t A prepared of cap quality and heck lot whole

then to let’s very A basis located B will probably minus have from And you you would high points basis minus, the A to go add for quality, rate. plus cap sub-X say, B Sometimes have you plus A – very or rates. a plus, quality type that A say, XX points property let’s from to well XX cap

the past. very again, So said with in consistent what we’ve

Tayo Okusanya

in That’s second is to given viewpoint that helpful. the forecast being on still the of one XXXX? cap assets you the why main And Okay. the XXXX question, reasons of net similar rates, seller

Michael Schall

a if the buy go balance the for we example, sheet tomorrow, our lower Yes, gives versus go our which cost debt just that into each price and again the it’s transact of in stock on asset and what the I and marketplace. said components of it incur earlier, value reason really those. is to it net relationships different and Notably, Company balance the debt sheet is between

from and add on for side. transactional the So, the looking arbitrage appropriate value we’re –

to need our fund pipeline. also We development

Tayo Okusanya

Got it.

from it my That’s you. Thank Okay. Congrats. end.

Michael Schall

you. Thank

Operator

your Pawlowski with John comes with question Green proceed Street Our Please from next question. Advisors.

John Pawlowski

Thanks.

was go in year scary were that I restated. you it say, Orange a bit saw BLS to similar to back job ago growth the think Let’s and a trajectories County contrast Area where it Bay and

at and kind are BLS understand guessing a answer telling it County trends, year-ago I’m growth corroborated trends least Orange numbers, the I that this which a Those lot your time I BLS. trends of the that a So, you as predictors numbers? on-the-ground better different job of they’re Is concern with on-the-ground than actually and be stated restatements. type and on-the-ground stronger BLS could

John Burkart

is this John. No,

that’s rent it in going the County the pretty which context really on good. of of And up delivered everything was it year, was the revised last sense being saw supply else, we everything Orange year So market was wasn’t and Area, last in substantially. Bay growth that pretty

it so, BLS and not situation. would this I a and And was consistent go similar with back say, it’s year

BLS fourth County, basically that in say, flat has Orange rents quarter. over were yet job prior Orange seeing year the the growth for County X.X% are year, We quarter

We also forward. deliveries expect going lower supply

the make there seeing and we is significant we now, number not of trying that’s but sense So, we’re look and numbers out a it. BLS one we’re many Right deterioration. at on-the-ground, it to watch

watch we’ll to the but so, on And on the really revisions, stay we’ll rental continue more focused what’s going in market.

John Pawlowski

look will that the share trend? that What trend XQ? and of you What’s like the X.X% Could this into in year? in Okay. what growth trajectory was it January

John Burkart

markets Sure. in and but those little that’s January The where as bit it down Diego. – in is bit, there down year up from San is earlier it’s of can that was go Both that our the little the from are on why movement a demand as a and at whole low unusual not period. one-month number within I time. certainly this in quarter portfolio there point it’s quoted a That’s is fourth a because the

bit really That’s whole so from quarter, only little have why a reference there. a So not point. January the January, we use good is down I but

John Pawlowski

yes, steps in increase support, starting the does Governor address is experience From need could that John how to cities in he successful Okay. starts regional cities. recent are steps Eudy big forced or up we if to their Newsom’s quickly see of he planned pick allocation? and allocations bipartisan the to have these housing some on your certain

John Burkart

not that you identification the years of stabilized till from X you have is consideration that Well, California, asset. a taking as know into John actually in X cycle years to site

he even sequel sound reality you the and going anyway. economics And the some there of said the is but that really drive the by much if that the sequel through time accelerate and go decision the things you’re process some reform, the to good, execution ambitious has in timing not

So, I what expecting the from X X see. see to years a near-term increase we’re don’t over years to next massive

Michael Schall

And of Mike. strike I of state to But have backyard. think more these the if that suing some it’s City I I saw one in it’s a just the SB-XX. Beach over notable you that. don’t thing new the know is John, Huntington add requirements John, to Hey

relates I going be on eye it think So, keeping something to to our these matters. as that’s that we’re

John Pawlowski

Right.

Thanks, Okay. guys.

John Burkart

Nimby California are I is not what to think attitudes going easily in change says. Mike

Michael Schall

yes, point, exactly. the That’s

Operator

question last our your with Securities. Please question. proceed will We MUFG Karin take Ford from with

Karin Ford

could we like what out going morning good the your do if but this you’re how be market one sound hey, your will think nationwide job there. rent growth downside think in do up outlook, growth and underwriting It a West you end Oh, doesn’t recession forecasts? fare risk do and to XXXX Coast you the year, into

Michael Schall

Mike. Hi, obviously because Karin, not respond recession, how how it type is what to it’s I what exactly to etcetera. that, happens am depends it sure on employment, of to deep

think turn how quantifying this that a mismatch, I change, have with but once point. a to and the will looks expect is would at at stated because conditions end delivered, it the I a to you development time demand it I to cycle, that to be exactly and So, end pipelines the will continue will up work, what of hard you’ll finished means off, they be trail responding exactly. continue virtually jobs impossible do supply

Karin Ford

then to in at investments Burlingame, the you the originated, or million I had investment an of that my million Okay, just book, on press quarter fair $XX the said but think preferred enough. in you million $XX September December. number And pipeline release and equity stayed second is $XX from question third

that something wondering happen? off paid just did did deal was I Just or not get

Michael Schall

Yes.

X So, the X years. preferred equity deals duration to of typical these are

having yes, we are or redemptions repayments. So constantly

Karin Ford

us give on the what Okay. rate what just a it? and was you sense Can for was repaid

Angela Kleiman

total was it still memory preferred $X to from we pay XX%. you I darn small commitment, at close was million am the equity time disclosed had at to point, last million. rate, But it’s it’s Yes, a deal, around and close $XXX our look this what if just pretty

around inflows, maximum we million. we our some and are outflows, is net-net, still $XXX that capacity some So there there under $XXX but of million is are well

Karin Ford

investment new first is think – anything that there first closing is you And phase the any the quarter? imminent in in

Angela Kleiman

do pipeline good that That’s we just timing really as the a is but we close the working said, hard and to to say, because difficult through, are have predict. of Mike

Karin Ford

you. thank Okay,

Michael Schall

Thank you, Karen.

Operator

to this Michael like call would Schall time, I closing comments. back At turn the for to

Michael Schall

Thank thanks participation operator and of in you forward the seeing your look Thank Have call day. to Citigroup everyone at on you. today. you, We for conference a the great many March.

Operator

conference. This concludes today’s

your participation. disconnect may you and at we this thank time for your lines You

Essex Property Trust (ESS) 31 Jan 192018 Q4 Earnings call transcript