Essex Earnings: Solid Growth From Lower Delinquencies; Acquires Partners' Share of Assets

Essex Property Trust's third-quarter results were slightly better than we anticipated, giving us confidence in our $306 fair value estimate for the no-moat company. Same-store occupancy remained flat sequentially at 96.2%, matching our estimate. Average rental rates were up 1.8% year over year. Same-store revenue was up 3.5%, slightly better than our estimate of 2.8%, as fewer delinquencies on rent payments increased revenue growth by 1.3% and higher other income increased revenue growth by 0.8%. However, same-store operating expenses rose 5.5% in the quarter, higher than our estimate of 4.3%, as utilities costs were up 10.5% and personnel costs were up 5.0%. As a result, same-store net operating income growth was just 2.6% in the third quarter, though that was slightly higher than our estimate of 2.1%. Essex reported core funds from operations of $3.91 per share, 3.4% higher than the $3.78 reported in the third quarter of 2023.