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Essex Property Trust’s Goal: “Get Many Base Hits While Minimizing Unforced Errors”

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2018 was another solid year for Essex Property Trust Inc. with 5.5% core FFO per share growth and 2.9% same property NOI growth both slightly better than anticipated at the start of the year. According to CEO Michael Schall on the firm’s Q4 earnings call, ESS has generated a 16% compounded annual total return to shareholders since its IPO 24 years ago ranking us number 1 in total shareholder return for the REIT industry since the IPO.

“Over that period, we achieved an 8.5% compounded annual growth rate in FFO per share and a dividend that has grown for 24 consecutive years. Next month, our board will consider increasing our dividend for the 25th year, placing us among a select group of company known as Dividend Aristocrats. Achieving these results was as much about discipline as it was about being opportunistic, especially as it relates to capital allocation. We have found that avoiding major mistakes and understanding the local real estate markets has led to winning formula. To use a baseball analogy, our goal is to get many base hits while minimizing unforced errors. Although 2018’s 5.5% FFO growth is below our historical average, it is consistent with later phases of an economic cycle and the challenges in finding investments that add to per share, core FFO and NAV.”

He explained that while the REIT is proud of its nearly 25-year track record as a public company, the team remains focused on continuous improvement of its platform for the next 25 years as it relates to residents, colleagues and shareholders. “Setting the stage for 2019, we continue to see strong levels of housing demand relative to the national average across our West Coast footprint. We ended 2018 with trailing 3-month job growth in the Essex metros of 2.1%, which exceeded our initial expectations. The primary drivers of the out-performance were the tech markets of San Jose and Seattle, where we saw a strong increase in high-quality jobs during the quarter compared to 1 year ago. We believe this trend will continue as tech firms continue to expand in our markets.”