Essex Property Trust Earnings: Higher-Than-Anticipated Revenue Growth Leads to Guidance Raise

Essex Property Trust reported second-quarter results that were relatively in line with our expectations, leading us to reaffirm our $317 fair value estimate for the no-moat company. Same-store occupancy fell 10 basis points sequentially to 96.6%, but is up 50 basis points year-over-year and is better than our estimate of 96.0% occupancy for the second quarter. However, average rental rates improved 5.3% year over year, which is below our estimate of 8.1% rate growth. Same-store revenue was up only 4.0% in the second quarter as growth saw a negative 150-basis-point impact due to increased delinquencies, though that is because 2022 saw a $13 million benefit from the Emergency Rental Assistance program that has since rolled off. Same-store operating expenses increased 5.3% in the second quarter, slightly above our estimate of 5.0% growth, and led to same-store net operating income growth of 3.6%. Essex reported core funds from operations growth of 2.4% in the second quarter to $3.77 per share, a penny better than our $3.76 estimate.