Essex Raises 2026 Core FFO Forecast to $16.10–$16.22 a Share Despite Lower Net Income
Key Facts
Essex Property Trust raised its forecast for 2026 core funds from operations (Core FFO) to a range of $16.10–$16.22 per diluted share after reporting third-quarter results on Oct. 27. The new range puts the midpoint at $16.16, up $0.02 from the previous guidance. For the quarter ended Sept. 30, diluted net income was $1.52 per share, down 40.6% from $2.56 a year earlier. The company attributed the decline mainly to gains on property and land sales recorded in the third quarter of 2025. The results also showed growth in the operating earnings measure and same-property performance.
Third-quarter Core FFO was $4.00 per diluted share, compared with $3.97 a year earlier, an increase of 0.8%. The company said the result exceeded the midpoint of its previous guidance by $0.01 per share, attributing the difference to same-property revenue growth. Same-property revenue rose 3.0% year over year, while net operating income increased 3.1%. On a quarterly basis, same-property revenue improved 1.0% from the second quarter. The company said quarterly growth came from all regions, with performance remaining strong in Northern California.
The divergence between net income and operating performance extended to the first nine months of the year. Diluted net income was $4.14 per share, down 54.8% year over year, while Core FFO rose to $12.15 from $11.96, a gain of 1.6%. The net income comparison reflects property and land sale gains in the year-earlier period. Core FFO, the measure the company highlighted in its annual guidance, increased for both the quarter and the first nine months. These figures put the operating earnings trajectory in a different context from fluctuations in accounting net income.
Essex also raised its 2026 same-property revenue growth forecast to 2.8%–3.0%, with a midpoint of 2.9%. It now expects same-property net operating income growth of 2.8% to 3.2%, with a midpoint of 3.0%. Management said on the earnings call that it expects consolidated rent growth of about 2.9% in 2026, near the high end of its guidance range. It said strength in Northern California helped lift the annual forecast. The revisions reflect improved assumptions for revenue and operations, alongside the increase in the Core FFO forecast.
On financing, the company secured a $275 million unsecured term loan in September, maturing in September 2029, with two one-year extension options. The loan is priced at the Secured Overnight Financing Rate plus a margin of 0.80%. Essex had more than $1.7 billion in available liquidity on Sept. 30, including capacity under credit facilities, cash and marketable securities. Management said debt maturities in 2027, calculated on the basis of the company's proportionate share, total about $575 million. This includes $350 million of notes due in May 2027.
After the quarter ended, Essex acquired a 378-unit residential property in Oakland, built in 2024, which it said it would include in its fourth-quarter 2026 financial statements. The company expects fourth-quarter Core FFO of $3.95 to $4.07 per diluted share, with a midpoint of $4.01. In after-hours trading following the results, the stock fell 4.14% to $263.47, compared with the previous close of $274.85 on Oct. 27. The company held its third-quarter earnings call on Oct. 28 at 9 a.m. Pacific time, or noon Eastern time. Essex said it expects the Seattle market to improve toward the end of 2027 as technology-sector job vacancies recover and supply declines, and it also expects property tax growth to return to 3%–4% in 2027.