Essex Property Trust Earnings: Expense Growth Remains High but FFO In Line With Our Expectations

Essex Property Trust reported fourth-quarter earnings that were relatively in line with our expectations, leading us to reaffirm our $306 fair value estimate for the no-moat company. Same-store occupancy sequentially fell 30 basis points to 95.9% in the fourth quarter while average rental rates were up 1.9% year over year. However, the company benefited from higher other-property revenues, leading to same-store revenue growth of 2.6% and 3.2% growth after removing a noncash charge taken during the quarter, which matched our 3.2% growth estimate for the fourth quarter. However, same-store operating expenses remain high, with the company reporting 4.7% expense growth, leading to same-store net operating income growth of 1.7%, which was below our 2.7% estimate. Still, Essex reported slightly higher joint venture income compared with our expectations, so core funds from operations came in at $3.92 per share for the fourth quarter, in line with our $3.91 estimate.