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Essex Property (ESS) Q3 FFO and Revenues Beat Estimates
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Residential real estate investment trust (“REIT”), Essex Property Trust Inc. (ESS - Free Report) reported third-quarter 2016 core funds from operations (“FFO”) of $2.81 per share, beating the Zacks Consensus Estimate of $2.76. Core FFO per share also improved 12.9% from the year-ago quarter figure of $2.49. Results were driven by growth in same-property net operating income (“NOI”).
Moreover, total revenue of $329.2 million in the quarter beat the Zacks Consensus Estimate of $326 million and was up 8.1% year over year. The outperformance reflects solid rental and other property revenues.
Per management, the Essex Property portfolio was able to realize “key targets” during the third quarter. However, nationwide and in a number of west coast submarkets, there is continued apartment deliveries and a slowdown in employment trends. This is expected to continue and moderate pricing power amid aggressive rental concessions provided at newly developed communities.
Quarter in Detail
During the quarter, Essex Property’s same-property gross revenues grew 6.9% from the prior-year quarter, while same- property NOI improved 8.3% year over year. Financial occupancies of 96.5% expanded 50 basis points (bps), both sequentially and year over year.
Essex Property exited third-quarter 2016 with cash and cash equivalents, including restricted, of $211.1 million, up from $123.1 million at the end of 2015. As of Oct 24, 2016, the company had $1.025 billion in undrawn capacity on its unsecured credit facilities.
Outlook
Essex Property has upgraded its 2016 core FFO guidance range per share to $11.00–$11.06 from $10.90–$11.06, reflecting a 5 cent rise at the midpoint. The Zacks Consensus Estimate is currently pegged at $11.01.
However, it has narrowed the same-property revenue growth range to 6.7–6.9% from the prior guided 6.6–7.0%, leaving the midpoint unchanged. Same-property NOI is guided in the range of 7.9–8.3%.
For fourth-quarter 2016, the company projects core FFO per share in the $2.77–$2.83 range. The Zacks Consensus Estimate is currently pegged at $2.82.
Conclusion
With a solid property base and healthy management team, we believe Essex Property is well capable of navigating through the current challenging cycle in the residential real estate market.
Encouragingly, in October, the company’s senior unsecured debt rating was upgraded by Moody’s to Baa1 from Baa2, with a stable outlook. Moreover, the company’s corporate credit rating was raised by Standard & Poor’s to BBB+ from BBB, with a stable outlook.
However, pricing power is likely to remain moderated in the upcoming quarters amid high supply of new rental units.
We now look forward to the earnings releases of General Growth Properties, Inc , Vornado Realty Trust (VNO - Free Report) and Taubman Centers, Inc. scheduled next week.
Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, 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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Essex Property (ESS) Q3 FFO and Revenues Beat Estimates
Residential real estate investment trust (“REIT”), Essex Property Trust Inc. (ESS - Free Report) reported third-quarter 2016 core funds from operations (“FFO”) of $2.81 per share, beating the Zacks Consensus Estimate of $2.76. Core FFO per share also improved 12.9% from the year-ago quarter figure of $2.49. Results were driven by growth in same-property net operating income (“NOI”).
Moreover, total revenue of $329.2 million in the quarter beat the Zacks Consensus Estimate of $326 million and was up 8.1% year over year. The outperformance reflects solid rental and other property revenues.
Per management, the Essex Property portfolio was able to realize “key targets” during the third quarter. However, nationwide and in a number of west coast submarkets, there is continued apartment deliveries and a slowdown in employment trends. This is expected to continue and moderate pricing power amid aggressive rental concessions provided at newly developed communities.
Quarter in Detail
During the quarter, Essex Property’s same-property gross revenues grew 6.9% from the prior-year quarter, while same- property NOI improved 8.3% year over year. Financial occupancies of 96.5% expanded 50 basis points (bps), both sequentially and year over year.
Essex Property exited third-quarter 2016 with cash and cash equivalents, including restricted, of $211.1 million, up from $123.1 million at the end of 2015. As of Oct 24, 2016, the company had $1.025 billion in undrawn capacity on its unsecured credit facilities.
Outlook
Essex Property has upgraded its 2016 core FFO guidance range per share to $11.00–$11.06 from $10.90–$11.06, reflecting a 5 cent rise at the midpoint. The Zacks Consensus Estimate is currently pegged at $11.01.
However, it has narrowed the same-property revenue growth range to 6.7–6.9% from the prior guided 6.6–7.0%, leaving the midpoint unchanged. Same-property NOI is guided in the range of 7.9–8.3%.
For fourth-quarter 2016, the company projects core FFO per share in the $2.77–$2.83 range. The Zacks Consensus Estimate is currently pegged at $2.82.
Conclusion
With a solid property base and healthy management team, we believe Essex Property is well capable of navigating through the current challenging cycle in the residential real estate market.
Encouragingly, in October, the company’s senior unsecured debt rating was upgraded by Moody’s to Baa1 from Baa2, with a stable outlook. Moreover, the company’s corporate credit rating was raised by Standard & Poor’s to BBB+ from BBB, with a stable outlook.
However, pricing power is likely to remain moderated in the upcoming quarters amid high supply of new rental units.
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.
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We now look forward to the earnings releases of General Growth Properties, Inc , Vornado Realty Trust (VNO - Free Report) and Taubman Centers, Inc. scheduled next week.
Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. FFO, 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.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>