Essex Property Trust, Inc. (NYSE:ESS)

Essex Property Trust is a fully integrated real estate investment trust (REIT) that acquires, develops, redevelops, and manages multifamily residential properties located in highly desirable, supply-constrained markets. Essex portfolio comprises of 130 apartment communities and has 908 units in various stages of development. The company’s portfolio is concentrated along the West Coast – Southern California, San Francisco Bay Area and the Seattle metropolitan area.

The increasing demand in U.S. housing market led to rise in average home prices by 55% over the last decade, while income average income per worker has increased by a mere 14%. As a result owning home has become a far off dream for many buyers, and thereby has boosted demand for rental home, which is clearly seen from the fact that the average rent for an apartment increased 4% to 4.4% in the first three quarters of 2006.

ESS three-fourth of properties are concentrated in California, where housing prices is out of reach for potential homebuyers and find renting home as the only viable option available. Moreover, decline in production level has further aggravated the problems for first time homebuyers. Factors like job growth gaining momentum should push the demand for housing market. Further, it is expected that in 2007, California should outpace nation’s overall economic growth.

A supply-constrained market helped the company to achieve 12% rise in its funds from operation (FFO) for fiscal 2006. The company in order to further strengthen its position in California market has acquired Hillsdale Garden Apartments. The management on the basis of moderately strong economy anticipates FFO to be around $5.40-$5.60 per share. The company with a healthy occupancy rate of 96% and a favorable supply/demand dynamics makes the stock a good buy.