Sputtering homeownership has driven U.S. apartment vacancies to five-year lows. So multi-family property operators like Essex Property Trust (ESS) are posting gains on rising rents. As a result, growth and income investors in Essex have prospered, notching a 22.5 percent share price increase so far this year while earning 3 percent dividend. Dividends have risen 5 percent annually for several years.

This real estate investment trust (REIT) relies on its ownership interests in 155 apartment complexes, amounting to 32,076 units, for revenues. Essex is one of the largest apartment unit owners on the West Coast, mainly in California and the Pacific Northwest.

Essex’s strong management is taking full advantage of these stellar assets. An occupancy rate of 96.4 percent at year-end 2010 was among the highest of publicly held REITs, note S&P analysts. They credit Essex’s strategy of redeveloping older properties in markets with limited supply.

So, strong results are rolling in. Third-quarter funds from operations rose 14.3 percent vs. a year ago. Same-property revenues climbed 4.1 percent, driven by a 5.3 percent rise in rental rates. This is the greatest rental rate growth since first quarter 2008, notes Essex CEO Michael Schall.

More value ahead

Of the 25 analysts followed by Thomson/First Call, seven have strong buy recommendations for Essex and six have buys, with 12 holds.

S&P analysts rate Essex a buy, citing its conservative financial structure, stable stream of recurring management fees and rebounding rental rates.

The company reports next on Feb. 1, 2012.