Essex Property Trust, Inc.

Good day and welcome to the Essex Property Trust third quarter 2023 earnings conference 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. Further information about these risks can be found in the company's filings with the SEC. It is now my pleasure to introduce your host, Ms. Angela Kleiman, President and Chief Executive Officer for Essex Property Trust. Thank you, Ms. Kleiman.

You may begin.

Good morning, and thank you for joining Essex Third Quarter Earnings Call. Barb Hack and Jessica Anderson will follow with prepared remarks, and Rylan Burns is here for Q&A. My comments today will focus on how we performed to date, our initial outlook for 2024, and a brief update on the investment markets. Overall, 2023 has unfolded generally in line with our expectations. We increased our same property revenue and NOI growth in the middle of the year, despite a challenging operating environment, with almost 2% of rent delinquents for the first nine months of the year. For context, this delinquency level is approximately five times our historical average. The unprecedented eviction protections enacted during COVID exacerbated by subsequent court delays has resulted in protracted exposure to non-paying tenants and uncertainty on timing of when we could recapture these units. That said, we made considerable progress reducing delinquency as a percentage of rent, which is now at 1.3% in October. This improvement has naturally resulted in a temporary tradeoff between rate growth and occupancy, but has proven to be an optimal strategy to maximize revenues as we make progress towards normalization in our markets. Looking ahead to 2024, we plan to publish a more comprehensive outlook for the West Coast in conjunction with our four-year guidance on our fourth quarter earnings call. For now, we have provided our initial 2024 supply outlook for our markets on S-17 of the supplemental, which forecasts total supply growth of only half a percent of total housing stock. Unlike many other U.S. markets, total housing supply in our markets is expected to remain at low levels, and we do not see a near-term catalyst for increasing housing supply growth in the Essex market. This supply landscape also minimizes our risk to job growth relative to other markets, especially if we encounter a softer demand environment and will be a tailwind for Essex when the economy accelerates. While muted supply is part of our thesis, we also see conditions that could drive demand for housing. First, after a year of retrenchment, layoff in the tech industry appears to be slowing and return to office is gaining momentum. with percent of remote job hiring at the largest tech companies now in the low single digits. Implying that once tech hiring resumes in a meaningful way, job growth will be highly concentrated near major employment centers. Second, it remains to be seen how the artificial intelligence industry will grow. We know that success in this industry will require immense scale and capital resources. And these types of companies are largely concentrated in the Bay Area and Seattle. Third, affordability, particularly in Northern California. Today, the Bay Area is as affordable as we've seen since we began tracking this data, and we expect this will provide a long runway for rent growth. In summary, the combination of this potential demand backdrop and a muted supply outlook gives us confidence that the West Coast was well positioned to outperform in the long run. Lastly, an update on the apartment investment markets. Deal activity slowed further in the third quarter as interest rates increased sharply in recent months, compressing prospective returns and resulting in many buyers remaining on the sidelines. We have seen several marketed deals not transact this year as sellers await a less volatile interest rate environment. There is little evidence to suggest transaction activity will pick up in the near term as bid-ask spread remains wide. We have navigated through many economic cycles, and our finance team has done an excellent job in fortifying the balance sheet, which positions Essex well for any environment. With that, I'll turn the call over to Barb.