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Essex Property (ESS) Misses on Q4 FFO Amid Concessions

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Essex Property Trust Inc. (ESS - Free Report) reported fourth-quarter 2020 core funds from operations (FFO) per share of $3.02, missing the Zacks Consensus Estimate of $3.12. The figure also fell 12.5% from the year-ago quarter’s $3.45.

Also, total revenues of $362.1 million lagged the Zacks Consensus Estimate of $366 million as well as slipped 3.5% year over year.

Results reflect the adverse impact of the pandemic on the company’s business. Concessions and delinquencies affected same-property revenues during the quarter.

Michael J. Schall, president and CEO, Essex Property pointed that “fourth quarter results provided signs of stabilization, with a partial recovery of lost jobs and modestly improved same-property revenues on a sequential basis.”

Management forecasts “year-over-year results to remain challenged through the second quarter of 2021, followed by a steady economic recovery and resurgence inrental demand assuming a widespread distribution of vaccines.”

For 2020, the company recorded core FFO per share of $12.82, down 4.2 % from the prior year’s $13.38 and also missed the Zacks Consensus Estimate of $12.92. Total revenues of $1.5 billion went up 2.4% year on year.

Quarter in Detail

During the October-December period, Essex Property’s same-property gross revenues slid 8.0% from the prior-year period. Moreover, same-property operating expenses flared up 4.6% year on year. Consequently, same-property NOI dropped 12.7% year over year. However, on a sequential basis, same-property gross revenue and NOI improved by 0.3% and 1.0%, respectively.

Financial occupancies of 96.5% in the fourth quarter expanded 50 basis points (bps) sequentially but shrunk 60 bps year on year.

During the reported quarter, the company sold a community, containing 115 apartment homes, in Glendale, CA for a total contract price of $60 million, recognizing a $25.7-million gain on sale.

Balance Sheet

Essex Property exited 2020 with cash and cash equivalents, including restricted cash, of $84.0 million, up from the $81.1 million recorded at the end of 2019. As of Feb 1, 2021, the company had $1.2 billion in liquidity through undrawn capacity on its unsecured credit facilities and cash and marketable securities.

In the fourth quarter, the company repaid $328.2 million of secured and unsecured debt due to mature in 2021, with a weighted average effective rate of 4.2%.

During the reported quarter, Essex Property repurchased 211,681 shares of its common stock amounting to $46.3 million at an average price of $218.84 per share. Notably, the board of directors approved the replenishment of the stock-repurchase plan in December such that the company had $250 million of purchase authority remaining under the stock-repurchase plan. As of Feb 1, 2021, the company had $214.4 million of purchase authority remaining under the stock-repurchase plan.


For full-year 2021, the company expects core FFO per share of $11.86-$12.46, with $12.16 at the mid-point. This is below the Zacks Consensus Estimate of $12.78.

The company’s full-year outlook incorporates same-property gross revenue decline of 1.50-3.50%, operating expense rise of 2-3% and NOI contraction of 3-6.25%. In addition, the company projects acquisitions and dispositions of $300-$500 million, which are subject to market conditions and cost of capital, as well as preferred equity commitments of $100-$150 million, to be funded by redemptions.

Moreover, the company projects total development spending in 2021 for the existing projects under construction to be about $60 million at the company’s pro rata share. Presently, the REIT does not intend to commence any new developments during 2021.

For first-quarter 2021, the company projects core FFO per share at $2.96-$3.10. The Zacks Consensus Estimate for the same is currently pinned at $3.12.

Essex Property currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Essex Property Trust, Inc. Price, Consensus and EPS Surprise

Essex Property Trust, Inc. Price, Consensus and EPS Surprise

Essex Property Trust, Inc. price-consensus-eps-surprise-chart | Essex Property Trust, Inc. Quote

Performance of Other Residential REITs

AvalonBay Communities, Inc.’s (AVB - Free Report) core FFO per share of $2.02 missed the Zacks Consensus Estimate of $2.09 for the October-December quarter. The reported figure also declined 16.9% year over year from the prior-year quarter’s $2.43. Results underlined decline in residential rental revenues on lease rates and concessions as well as uncollectible lease revenues.

Mid-America Apartment Communities, Inc. (MAA - Free Report) , commonly referred to as MAA, reported fourth-quarter 2020 core FFO per share of $1.65, surpassing the Zacks Consensus Estimate of $1.64. However, the reported figure marginally declined from the year-ago figure of $1.66. The residential REIT’s quarterly results were driven by an increase in average effective rent per unit for the same-store portfolio. Positive rent growth also aided same-store portfolio revenue growth during the quarter.

We now look forward to the earnings releases of another residential REITs — Equity Residential (EQR - Free Report) — scheduled for the next week.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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