Analyst Note| Kevin Brown |
Essex Property Trust reported second-quarter results that were slightly ahead of our expectations, though we don't see anything that would materially affect our $270 fair value estimate for the no-moat company. Same-store occupancy fell 10 basis points sequentially to 96.6% in the second quarter, though that is up 170 basis points from the second quarter of 2020. However, rental rates continue to decline, with a 3.6% year-over-year drop in the quarter, leading to a same-store revenue decline of 3.0%. However, Essex did a good job controlling operating expenses with the same-store figure falling 0.2% year over year as maintenance and repair expenses falling 10.1% to a more normal level for the company. As a result, same-store net operating income declined only 4.2% in the second quarter, which is better than our estimate of a 6.4% decline. Essex reported a similar 3.8% year-over-year decline to core funds from operations, which came in at $3.04 in the second quarter.