Essex Property Trust Earnings: Acquisition of JV Partners' Share of Portfolio Should Create Value

First-quarter results for Essex Property Trust were slightly better than we anticipated, giving us confidence in our $290 fair value estimate for the no-moat company. Same-store occupancy declined 10 basis points sequentially to 96.3%, and average rental rates were only up 2.1% year-over-year, both of which are relatively in line with our expectations. However, the company benefited from fewer delinquencies and higher other income in the quarter, leading to same-store revenue growth of 3.6% that beat our 2.2% estimate. Operating expense growth of 5.0% was slightly higher than our 4.5% estimate, but the revenue beat led to Essex reporting same-store net operating income growth of 3.0% in the first quarter that was higher than our 1.1% growth estimate. The company reported core funds from operations of $3.83 per share, which was slightly better than our $3.70 estimate for the quarter.