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Essex Property (ESS) Q4 FFO and Revenues Beat Estimates

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Essex Property Trust Inc. (ESS - Free Report) reported fourth-quarter 2021 core funds from operations (FFO) per share of $3.25, beating the Zacks Consensus Estimate of $3.23. The figure also improved 7.6% from the year-ago quarter’s $3.02.

Also, total revenues of $371.6 million beat the Zacks Consensus Estimate of $370.1 million as well as increased 2.6% year over year.

Results reflect improving rent growth amid recovering economic conditions.

For 2021, Essex Property recorded a core FFO per share of $12.49, down 2.6 % from the prior year’s $12.82. However, the figure topped the Zacks Consensus Estimate of $12.47. Total revenues of $1.4 billion went down 3.7% year over year.

Michael J. Schall, president and CEO, Essex Property noted, “Our results reflect a remarkable year of rent growth for Southern California and solid positive momentum in Northern California and Seattle. We attribute our progress to improving economic conditions, including better job growth compared to the U.S., record job openings for the largest tech employers in the Essex markets, and record venture capital investment.”

Quarter in Detail

During the October-December months, Essex Property’s same-property revenues increased 4% from the prior-year period’s level and operating expenses rose 2.5% year over year. Same-property net operating income (NOI) increased 4.7% year over year.

On a sequential basis, same-property revenues and NOI increased 1.6% and 3.5% respectively, indicating a second consecutive quarter of positive improvement.

Financial occupancies of 96.1% in the fourth quarter contracted 30 basis points (bps), sequentially, and 40 bps year over year.

Essex Property acquired or increased ownership interest in four apartment communities during the fourth quarter of 2021 for a total contract price of $347.5 million.

In the fourth quarter of 2021, ESS committed $60 million to two structured finance investments.

Balance Sheet

Essex Property exited fourth-quarter 2021 with cash and cash equivalents, including restricted cash, of $58.6 million, down from $84 million recorded at the end of 2020.As of Jan 31, ESS had $1.2 billion of liquidity through an undrawn capacity on its unsecured credit facilities, and cash and marketable securities.

Outlook

For 2022, Essex Property expects a core FFO per share of $13.46-$13.94, with $13.70 at the mid-point. This is below the Zacks Consensus Estimate of $13.98.

ESS’s full-year outlook incorporates a same-property gross revenue decline of 7-8.5%, an operating expense rise of 3.5-4.5% and NOI growth of 8-10.85%. In addition, Essex Property projects acquisitions of $500-$700 million, subject to market conditions and cost of capital.

Essex Property projects dispositions of $100-$300 million, representing the cost of capital. Moreover, ESS projects total development spending in 2021 for the existing projects under construction to be about $30 million at its pro rata share. Presently, the REIT does not intend to commence any new development during 2022.

For first-quarter 2022, Essex Property projects core FFO per share at $3.24-$3.36. The Zacks Consensus Estimate for the same is currently pinned at $3.35.

Essex Property currently carries a Zacks Rank #3 (Hold). 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

We now look forward to the earnings releases of other residential REITs, namely AvalonBay Communities, Inc. (AVB - Free Report) and Mid-America Apartment Communities, Inc. (MAA - Free Report) , scheduled for today after the closing bell and that of UDR Inc. (UDR - Free Report) , slated for a Feb 8, 2022 release.

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.