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Moody's upgrades Essex operating unit, revises outlook

Moody's upgraded the senior unsecured rating of Essex Property Trust Inc.'s main operating unit, Essex Portfolio LP, to Baa1 from Baa2 and also revised the outlook to stable from positive.

At the same time, the rating agency upgraded Essex Property's preferred stock shelf rating to (P)Baa2 from (P)Baa3 and Essex Portfolio's senior unsecured debt rating to Baa1 from Baa2, issuer rating to Baa1 from Baa2 and senior unsecured shelf rating to (P)Baa1 from (P)Baa2.

According to Moody's, the company's Baa1 rating reflects its "meaningful scale and position as the largest publicly traded apartment REIT focused on the West Coast." Additionally, the company benefits from EBITDA margins that are the highest among its peers.

The rating agency noted that the company's main credit challenge continues to be its geographic concentration in California and Seattle, and its "meaningful exposure" to technology-driven markets.

Offsetting these concerns is the company's track record in these regions, as well as the low single-family housing affordability and supply-constrained nature of many of its chosen submarkets.

The stable outlook, meanwhile, reflects the rating agency's expectation that the company will keep showing robust operating performance, while maintaining modest overall leverage and secured debt levels.