Analyst Note| Kevin Brown, CFA |
First-quarter results for no-moat Essex Property Trust were slightly better than we anticipated, giving us confidence in our $322 fair value estimate. Same-store occupancy sequentially improved 20 basis points to 96.3%, slightly better than our estimate of flat occupancy. Same-store rental rates improved 4.5% year over year, though that is slightly below our estimate of 4.9% growth. However, the rolloff of cash concessions made in 2021 contributed another 2.1% to revenue growth, leading to Essex reporting same-store revenue growth of 6.5%. While same-store expense growth of 4.8% was ahead of our 3.5% estimate, same-store net operating income grew 7.3% year over year in the first quarter, better than our estimate of 4.6% growth. Essex reported core funds from operations of $3.37 per share in in the first quarter, which was 7 cents ahead of the midpoint of its prior guidance for the quarter and 2 cents better than our $3.35 estimate.