Essex Property Trust Delivers Strong Q1 2025 Results, Leveraging Market Position for Long-Term Growth
Essex Property Trust (EPT) kicked off its 2025 year with a robust first quarter, showcasing the company's strategic prowess and ability to navigate complex market conditions. In a recent earnings call, President and Chief Executive Officer Angela Kleiman highlighted the key highlights from the quarter, providing insights into the company's operating performance and near-term outlook.
The quarter saw EPT report core FFO per share exceeding the midpoint of its guidance range, with a strong start to the year courtesy of $305 million in acquisitions in Northern California. These purchases were funded by dispositions in Southern California, marking a strategic reallocation into higher rent growth markets and further optimization of the company's operating platform.
Operating highlights included 2.8% blended net effective rent growth, with new lease rates improving sequentially from the fourth quarter for the same property portfolio. Delinquency improvement was a key factor in this performance, driven largely by Los Angeles where delinquency improved to 1.3% of scheduled rent compared to 3.9% for the same period last year.
The company's operating strategy also contributed to a notably low turnover rate of 35%, while achieving positive new lease rate growth and stable occupancy levels. EPT's regional performance was strong, with new lease rates turning positive in all three major regions – led by Northern California at 1.5%, Seattle at 1.3%, and Southern California last at 20 basis points.
On a more granular level, San Mateo led the same property portfolio with 4.8% new rate growth, while Oklahoma trailed behind with negative 1.2% in new rate growth primarily due to elevated supply. Oakland has begun to demonstrate incremental improvement in supplier base and concessions moderate.
EPT's solid performance would normally warrant revising guidance upward; however, the company remains cautious due to macroeconomic uncertainty, including the impact on business investment and job growth. Despite this, the West Coast multifamily fundamentals are well-positioned for a wide range of economic outcomes, with total new housing supply delivery as a percentage of stock in 2025 exceptionally low at only 50 basis points in EPT's markets.
This downside protection is a key reason why EPT's supply-constrained markets have outperformed over multiple economic cycles. Furthermore, the cost to own versus rent remains prohibitive at over 2.5x more expensive. Overall, EPT remains excited about its portfolio's growth potential as its markets continue to lead in innovation, providing a solid foundation for economic growth.
In addition to strong operating performance, EPT also noted that deal volume in its markets was higher in the first quarter compared to the same period last year, totaling $2.5 billion with cap rates consistently in the mid- to high 4% range. While there is limited data on the impact of ongoing policy changes, recent transactions have maintained consistent valuations.
