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Essex Property Trust's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Third, technology and social media companies and the proximity to the Pacific Rim provided different and well-positioned engine for job growth. This differentiation was apparent in 2011 and will likely continue into 2012 and beyond.

Fourth, rent growth is not just about jobs, but rather the combination of job growth and limited supply of all new housing both rental and for sale. Historically, we have seen very strong rent growth for several years when these conditions are present as they are today.

Fifth, personal and median household income levels typically declined in recessionary times and accelerate during recovery periods. In 2009, personal incomes fell 5.4% in our target markets and have since grown by 10.8%. Looking at national averages for income growth can be misleading as areas with concentrations of employment in the federal government, energy and tech are the leaders in income growth. Economy.com estimates that personal income growth will average 5.5% over the next four years. This income growth is greater than the 3.5% use in our basic assumption.

Finally population and other demographic considerations continue to support strong rental growth demand. Obviously the world economy is in a vulnerable state and we expect external shock and additional volatility, which could affect our expectation. Still I suggest that a prolonged slow pace recovery amid low interest rate is the very favorable environment for the industry and the company.

Second topic cap rates, cap rates range from 4.25% to 4.75% for A property in A locations and in the high 4% to low 5% range for B property in A locations. Cap rates increased from there for lesser locations in property quality. Acquisitions still work in this environment due to low interest rate and strong market rent growth expectations. Our preference is finding value-added opportunities, with rents recovering aggressively in many places, market selection and timing is critical to accretive investment.

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