Essex Property Trust

Methodology

Essex Property Trust is a REIT where EPS has limited meaning—FFO (Funds From Operations) is the proper earnings metric for West Coast multifamily real estate. Depreciation distorts GAAP earnings while FFO better reflects cash generation from apartment rents. Investors should use FFO-based valuation methods rather than traditional P/E ratios for this apartment REIT.

Methodology

PEG ratios based on EPS are inappropriate for Essex—FFO growth is the relevant metric for REIT valuation. The West Coast apartment REIT delivers low-to-mid single-digit FFO growth from rent increases in expensive coastal markets. Multifamily REITs trade more on implied cap rates and dividend yields than earnings multiples given their income-focused profile.

Methodology

Essex pays a substantial dividend yielding 3-4%, making total return analysis critical, though PEGY using EPS is still flawed for REITs. The dividend represents most of FFO from stable high-barrier West Coast apartment markets. Investors should evaluate total return using FFO growth plus dividend yield rather than EPS-based metrics.