Essex Property Trust Earnings: Rent Growth Slowing While Expense Growth Remains Elevated

Essex Property Trust reported results for the fourth quarter that were generally in line with our expectations for the quarter, leading us to reaffirm our $305 fair value estimate. Same-store occupancy declined 30 basis points sequentially to 96.1%, below our estimate of occupancies remaining flat. Average rental rates were up just 2.4% year over year, though that is slightly better than our estimate of 1.9% growth. As a result, same-store revenues grew 2.9% in the quarter, in line with our estimate. However, same-store operating expenses were up 4.5% in the fourth quarter, leading to same-store net operating income growth of just 2.3%. Essex reported core funds from operations of $3.83 per share for the fourth quarter, slightly below our $3.96 estimate mainly due to a one-time impairment charge in the unconsolidated portfolio. Excluding that charge, core FFO results were in line with our expectations.