Essex Property Trust Earnings: Expense Growth Lower Than Anticipated Despite Flood Clean-Up Costs

First-quarter results for no-moat Essex Property Trust were relatively in line with our expectations, leading us to reaffirm our $317 fair value estimate. Same-store occupancy improved 70 basis points sequentially to 96.7%, better than our estimate of flat growth. Average rental rates improved 6.8% year over year with the Northern California markets being a slight drag on performance, only up 5.3% in the quarter. While same-store revenue growth of 7.6% underperformed our estimate of 9.3% growth, same-store operating expenses were only up 4.0% compared with our estimate of 5.5% expense growth. As a result, same-store net operating income improved by 9.2%, relatively in line with our estimate of 9.8% growth. Essex reported core funds from operations of $3.65 per share in the first quarter, which was 4 cents better than our $3.61 estimate and 8.3% higher than the $3.37 figure reported in the first quarter of 2022.