NOI Growth Remains Strong for Essex in 3Q; Management Favoring Share Repurchases Over Acquisitions

Third quarter results for no-moat Essex Property Trust were slightly better than we anticipated, though we don't see anything in the quarter that would materially change our $322 fair value estimate. Same-store occupancy declined 10 basis points sequential and 40 basis points year-over-year to 96.0% in the third quarter. However, average rental rates increased 8.9% year over year, which combined with fewer rent concessions in 2022 led to same-store revenue growth of 11.4% in the third quarter that was slightly ahead of our 10.6% estimate. Same-store operating expenses only grew 2.7% in the quarter, resulting in net operating income growth of 15.4% that was slightly beat our 14.2% estimate. Essex reported core funds from operations of $3.69, 18.3% higher than the $3.12 figure the company reported in the third quarter of 2021.