We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Is it Wise to Retain Essex Property Stock in Your Portfolio for Now?
Read MoreHide Full Article
Key Takeaways
ESS benefits from West Coast demand drivers supporting rental and property revenue growth.
Technology and scale initiatives are boosting margins and improving operational efficiency.
High liquidity supports growth, though elevated supply and debt continue to pressure ESS.
Essex Property Trust, Inc. (ESS - Free Report) is well-positioned to gain from a robust property base in the West Coast market with several demand drivers. The high cost of home ownership is likely to continue driving healthy demand for residential rental units, aiding revenue growth.
Efforts to leverage technology, scale and organizational capabilities are expected to drive margin expansion and improve operational efficiency across its portfolio. A healthy balance sheet also augurs well for growth.
However, the elevated supply of rental units in certain markets is likely to increase competitive pressure, restricting rent growth momentum to some extent. A concentrated portfolio and high debt burden add to its woes.
While shares of this residential REIT, carrying a Zacks Rank #3 (Hold), have fallen 1.4%, narrower than the industry’s decline of 4.8% in the past three months, analysts seem bullish on this stock, with the Zacks Consensus Estimate for its 2025 FFO per share being revised marginally upward to $15.97 over the past two months.
Image Source: Zacks Investment Research
What’s Aiding ESS?
Essex Property’s substantial exposure to the West Coast market has offered ample scope to enhance its top line. The West Coast is home to several innovation and technology companies that drive job creation and income growth. Moreover, California has key life science clusters and is a major employment driver in San Francisco and San Diego.
Moreover, the West Coast region has higher median household incomes, a higher percentage of renters than owners and favorable demographics. Also, due to the high cost of homeownership, the transition from renter to homeowner is difficult in these markets, making renting apartment units a more flexible and viable option. Against this backdrop, we expect its rental and other property revenues to increase 6.2% and 3.2% year over year in 2025 and 2026, respectively.
The company is also banking on its technology, scale and organizational capabilities to drive margin expansion across its portfolio and improve operational efficiency by lowering costs. It is making good progress on the technology front, and leasing agents are becoming more productive by leveraging these tools. These efforts are likely to have an incremental effect on the top-line and bottom-line growth, positioning Essex Property to ride on the growth curve.
Essex Property maintains a healthy balance sheet and enjoys financial flexibility. As of Sept. 30, 2025, the company had $1.5 billion in liquidity through undrawn capacity on its unsecured credit facilities, cash, cash equivalents and marketable securities. In the third quarter of 2025, its net debt-to-adjusted EBITDAre was 5.5X. Over the years, it has made efforts to increase its unencumbered net operating income (NOI) to an adjusted total NOI, which was 93% at the end of the third quarter of 2025. With a high percentage of such assets, the company can access secured and unsecured debt markets and maintain availability on the line.
Solid dividend payouts are arguably the biggest attraction for REIT investors, and Essex Property has been steadily raising its payout. It has increased its dividend five times in the last five years, and its five-year annualized dividend growth rate is 5.11%. With a low dividend payout ratio and decent balance sheet strength, the dividend payment is expected to be sustainable over the long run.
What’s Hurting ESS?
The struggle to lure renters will persist, as supply volumes remain elevated in some of the markets where the company operates. In addition, Essex Property faces competition from other housing alternatives, such as rental apartments, condominiums and single-family homes. Such a competitive landscape limits the company’s ability to increase rents, restricting its growth momentum to some extent.
Essex Property has a substantial debt burden, and its total debt, net as of Sept. 30, 2025, was $6.66 billion. During the third quarter of 2025, interest expenses increased 8.4% year over year to $63.3 million. For 2025, we expect interest expenses to rise 8.7% on a year-over-year basis.
The Zacks Consensus Estimate for Independence Realty Trust’s 2025 FFO per share is currently pegged at $1.18, suggesting 1.7% growth year over year.
The consensus mark for Veris Residential’s current-year FFO per share has moved three cents northward in the past two months to 67 cents and calls for an 11.7% increase year over year.
Note: Anything related to earnings presented in this write-up represents FFO, a widely used metric to gauge the performance of REITs.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Shutterstock
Is it Wise to Retain Essex Property Stock in Your Portfolio for Now?
Key Takeaways
Essex Property Trust, Inc. (ESS - Free Report) is well-positioned to gain from a robust property base in the West Coast market with several demand drivers. The high cost of home ownership is likely to continue driving healthy demand for residential rental units, aiding revenue growth.
Efforts to leverage technology, scale and organizational capabilities are expected to drive margin expansion and improve operational efficiency across its portfolio. A healthy balance sheet also augurs well for growth.
However, the elevated supply of rental units in certain markets is likely to increase competitive pressure, restricting rent growth momentum to some extent. A concentrated portfolio and high debt burden add to its woes.
While shares of this residential REIT, carrying a Zacks Rank #3 (Hold), have fallen 1.4%, narrower than the industry’s decline of 4.8% in the past three months, analysts seem bullish on this stock, with the Zacks Consensus Estimate for its 2025 FFO per share being revised marginally upward to $15.97 over the past two months.
Image Source: Zacks Investment Research
What’s Aiding ESS?
Essex Property’s substantial exposure to the West Coast market has offered ample scope to enhance its top line. The West Coast is home to several innovation and technology companies that drive job creation and income growth. Moreover, California has key life science clusters and is a major employment driver in San Francisco and San Diego.
Moreover, the West Coast region has higher median household incomes, a higher percentage of renters than owners and favorable demographics. Also, due to the high cost of homeownership, the transition from renter to homeowner is difficult in these markets, making renting apartment units a more flexible and viable option. Against this backdrop, we expect its rental and other property revenues to increase 6.2% and 3.2% year over year in 2025 and 2026, respectively.
The company is also banking on its technology, scale and organizational capabilities to drive margin expansion across its portfolio and improve operational efficiency by lowering costs. It is making good progress on the technology front, and leasing agents are becoming more productive by leveraging these tools. These efforts are likely to have an incremental effect on the top-line and bottom-line growth, positioning Essex Property to ride on the growth curve.
Essex Property maintains a healthy balance sheet and enjoys financial flexibility. As of Sept. 30, 2025, the company had $1.5 billion in liquidity through undrawn capacity on its unsecured credit facilities, cash, cash equivalents and marketable securities. In the third quarter of 2025, its net debt-to-adjusted EBITDAre was 5.5X. Over the years, it has made efforts to increase its unencumbered net operating income (NOI) to an adjusted total NOI, which was 93% at the end of the third quarter of 2025. With a high percentage of such assets, the company can access secured and unsecured debt markets and maintain availability on the line.
Solid dividend payouts are arguably the biggest attraction for REIT investors, and Essex Property has been steadily raising its payout. It has increased its dividend five times in the last five years, and its five-year annualized dividend growth rate is 5.11%. With a low dividend payout ratio and decent balance sheet strength, the dividend payment is expected to be sustainable over the long run.
What’s Hurting ESS?
The struggle to lure renters will persist, as supply volumes remain elevated in some of the markets where the company operates. In addition, Essex Property faces competition from other housing alternatives, such as rental apartments, condominiums and single-family homes. Such a competitive landscape limits the company’s ability to increase rents, restricting its growth momentum to some extent.
Essex Property has a substantial debt burden, and its total debt, net as of Sept. 30, 2025, was $6.66 billion. During the third quarter of 2025, interest expenses increased 8.4% year over year to $63.3 million. For 2025, we expect interest expenses to rise 8.7% on a year-over-year basis.
Stocks to Consider
Some better-ranked stocks from the broader REIT sector are Independence Realty Trust, Inc. (IRT - Free Report) and Veris Residential, Inc. (VRE - Free Report) . Independence Realty Trust and Veris Residential each carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Independence Realty Trust’s 2025 FFO per share is currently pegged at $1.18, suggesting 1.7% growth year over year.
The consensus mark for Veris Residential’s current-year FFO per share has moved three cents northward in the past two months to 67 cents and calls for an 11.7% increase year over year.
Note: Anything related to earnings presented in this write-up represents FFO, a widely used metric to gauge the performance of REITs.