Essex Reports High Revenue Growth in Fourth Quarter but Anticipates a Slowdown in 2023

Essex Property Trust reported fourth-quarter results that were in line with our expectations, leading us to reaffirm our $322 fair value estimate. Same-store occupancy sequentially remained flat at 96.0% in the fourth quarter, matching our estimate. Average rental rates in the same-store portfolio increased 8.1% year over year due to continued high inflation, leading to same-store revenue growing 10.5%. While high inflation also led to utility costs growing 13.5% and insurance costs growing 9.5%, other major operating expenses like real estate taxes, maintenance expenditures, and administrative costs all grew 3.3% or less in the quarter. As a result, same-store operating expenses only grew 4.0% in the fourth quarter, which led to same-store net operating income, or NOI, growth of 13.3% that was relatively in line with our 14.1% estimate. Essex reported core funds from operations, or FFO, of $3.77 per share, which was a penny better than our $3.76 estimate and 16.0% higher than the $3.25 figure that the firm reported in the fourth quarter of 2021.