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Essex Property Tops Q4 FFO Estimates, Issues 2016 Outlook

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Residential real estate investment trust (REIT) Essex Property Trust Inc. (ESS - Free Report) reported fourth-quarter 2015 core funds from operations (“FFO”) of $2.63 per share, beating the Zacks Consensus Estimate of $2.55. Core FFO per share also increased 17.4% from the year-ago quarter figure of $2.24. Results were driven by solid growth in net operating income (“NOI”). The company also unveiled guidance for 2016.

Moreover, total revenue came in at $310.7 million in the quarter, surpassing the Zacks Consensus Estimate of $307 million and surging 11.3% year over year. The uptick reflected solid rental and other property revenues.

For full-year 2015, core FFO per share rose 15% year over year to $9.82.  The Zacks Consensus Estimate for 2015 FFO was pegged at $9.74 per share. For full-year 2015, revenues came in at $1.19 billion, up 23% year over year.

Quarter in Detail

During the quarter, the company’s same property gross revenue increased 7.5%, while NOI improved 9.2%, both on a year-over-year basis. Financial occupancies came at 96.1%, reflecting a year-over-year decline of 20 basis points (bps).

Liquidity and Balance Sheet

Essex Property exited fourth-quarter 2015 with cash and cash equivalents of $123.1 million, up from $95.7 million at the end of 2014. As of Jan 31, 2016, the company had over $800 million in undrawn capacity on its unsecured credit facilities.

Moreover, during fourth quarter, the company issued 107,098 shares of its common stock at an average price of $228.61 per share, reaping net proceeds of $24.3 million.

2016 Outlook Introduced

Essex Property disclosed its guidance range for 2016. The company expects core FFO per share for 2016 in a range of $10.72–$11.12. The Zacks Consensus Estimate of $10.88 lies within the projected range.

For 2016, the company anticipates gross revenue, operating expenses and NOI to grow in the respective ranges of 6.50 –7.50%, 3.25 –4.25% and 7.50– 9.50%.

Conclusion

With a solid property base and strong management team, we believe Essex Property is capable of efficiently leveraging the attractive market fundamentals. In the West Coast, job growth continues to propel demand for new units. Amid manageable deliveries of new housing in the market, this demand is helping rental rates climb.

Essex Property currently carries a Zacks Rank #3 (Hold). REIT stocks that are scheduled to release fourth-quarter 2015 results next week include Liberty Property Trust (LPT - Free Report) , Federal Realty Investment Trust (FRT - Free Report) and Highwoods Properties Inc. (HIW - Free Report) .

Note: Funds from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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