Analyst Note| Kevin Brown |
Essex Property Trust missed our fourth-quarter estimates, but there was nothing reported this quarter that would significantly impact our $273 fair value estimate for the no-moat company. For the second quarter in a row Essex reported a sequential occupancy increase with same-store occupancy rising 50 basis points to 96.5%, better than our estimate of a 50-basis-point decline. The fourth quarter's year-over-year average rental rate decline of 1.9% was also better than our estimate of a 3.3% decline. However, same-store revenue declined 8.0% as delinquencies and rent concessions dragged down the result by 5.8% combined, far worse than we had anticipated. Combined with operating expenses increasing 4.6%, Essex reported a fourth-quarter net operating income decline of 12.7% that was worse than the 9.9% drop we thought it might see, and core funds from operations fell 12.5% to $3.02 per share.