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Essex Property (ESS) Beats on Q2 FFO, Raises '21 Guidance
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Essex Property Trust Inc. (ESS - Free Report) reported second-quarter 2021 core funds from operations (FFO) per share of $3.04, beating the Zacks Consensus Estimate of $2.99. The figure also surpassed the higher end of the company’s guided range.
Results reflect better-than-anticipated revenues in the quarter. Total revenues of $351 million exceeded the Zacks Consensus Estimate of $348.7 million.
With relaxation in the Covid-19 restrictions, the company’s markets witnessed decent recovery in fundamentals. The residential REIT also raised the full-year 2021 guidance.
Michael J. Schall, president and CEO, Essex Property noted, “We experienced strong economic growth in the second quarter, as Covid-19 restrictions were gradually lifted. The momentum in rent growth continued in July, and we have now achieved net effective market rents for the Essex portfolio that are slightly ahead of pre-pandemic levels. While pandemic-related uncertainty will continue, we remain confident in the West Coast economies and strength of our housing markets.”
However, the core FFO per share shows a decline of 3.8% from the year-ago quarter’s $3.16. Also, total revenues slipped 5.3% year over year, reflecting the adverse impact of the pandemic on the company’s business.
Quarter in Detail
During the April-June period, Essex Property’s same-property revenues dipped 3% from the prior-year period and operating expenses edged down 0.2% year on year. Consequently, same-property NOI dropped 4.2% year over year.
Nonetheless, same-property revenues slid 0.9%, while expenses declined 1.6%, resulting in the NOI edging down 0.6%, on a sequential basis.
Financial occupancies of 96.6% in the second quarter contracted 10 basis points (bps) sequentially but expanded 170 bps year on year.
During the reported quarter, the company acquired its joint-venture partner’s 50% stake in The Village at Toluca Lake, a 145-apartment home community in Burbank, CA, for a contract price of $31.8 million. A $29.5 million in mortgage debt encumbering the property was repaid simultaneously with the closing of the acquisition.
Balance Sheet
Essex Property exited second-quarter 2021 with cash and cash equivalents, including restricted cash, of $58.2 million, down from the $84 million recorded at the end of 2020. As of Jul 27, the company had $1.3 billion in liquidity through undrawn capacity on its unsecured credit facilities, and cash and marketable securities.
Outlook
For third-quarter 2021, the company projects core FFO per share at $2.98-$3.1. The Zacks Consensus Estimate for the same is $3.06.
For full-year 2021, the company raised the core FFO per share guidance to $12.21-$12.45 from the $12.02-$12.46 guided earlier, reflecting a 9-cent per share increase at the mid-point to $12.33. The Zacks Consensus Estimate for the same is currently pinned at $12.26.
Management increased the mid-point of full-year same-property revenues to the higher end of the previous guidance range, representing a 0.5% increase at the mid-point to -1.4% (range being -1.6% to -1.2%). The NOI estimates have been raised 0.8% at the mid-point to -3.0% (range being -3.3% to -2.6%).
Equity Residential’s (EQR - Free Report) FFO per share of 78 cents outpaced the Zacks Consensus Estimate of 70 cents for the April-June period. Results highlighted robust physical occupancy and improvement in other same-store operating metrics, driving quarterly sequential same-store revenues and NOI positive for the first time since the onset of the global health crisis. Based on these improvements, the residential REIT also raised its full-year guidance for same-store revenues, NOI and FFO per share.
AvalonBay Communities, Inc.’s (AVB - Free Report) second-quarter 2021 core FFO per share of $1.98 beat the Zacks Consensus Estimate of $1.93. Results were backed by the better-than-projected top-line figure. Improvement in same-store residential NOI and development and other stabilized residential NOI were the tailwinds.
We now look forward to the earnings release of another REIT — Vornado Realty Trust (VNO - Free Report) — scheduled to be out on Aug 2.
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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Essex Property (ESS) Beats on Q2 FFO, Raises '21 Guidance
Essex Property Trust Inc. (ESS - Free Report) reported second-quarter 2021 core funds from operations (FFO) per share of $3.04, beating the Zacks Consensus Estimate of $2.99. The figure also surpassed the higher end of the company’s guided range.
Results reflect better-than-anticipated revenues in the quarter. Total revenues of $351 million exceeded the Zacks Consensus Estimate of $348.7 million.
With relaxation in the Covid-19 restrictions, the company’s markets witnessed decent recovery in fundamentals. The residential REIT also raised the full-year 2021 guidance.
Michael J. Schall, president and CEO, Essex Property noted, “We experienced strong economic growth in the second quarter, as Covid-19 restrictions were gradually lifted. The momentum in rent growth continued in July, and we have now achieved net effective market rents for the Essex portfolio that are slightly ahead of pre-pandemic levels. While pandemic-related uncertainty will continue, we remain confident in the West Coast economies and strength of our housing markets.”
However, the core FFO per share shows a decline of 3.8% from the year-ago quarter’s $3.16. Also, total revenues slipped 5.3% year over year, reflecting the adverse impact of the pandemic on the company’s business.
Quarter in Detail
During the April-June period, Essex Property’s same-property revenues dipped 3% from the prior-year period and operating expenses edged down 0.2% year on year. Consequently, same-property NOI dropped 4.2% year over year.
Nonetheless, same-property revenues slid 0.9%, while expenses declined 1.6%, resulting in the NOI edging down 0.6%, on a sequential basis.
Financial occupancies of 96.6% in the second quarter contracted 10 basis points (bps) sequentially but expanded 170 bps year on year.
During the reported quarter, the company acquired its joint-venture partner’s 50% stake in The Village at Toluca Lake, a 145-apartment home community in Burbank, CA, for a contract price of $31.8 million. A $29.5 million in mortgage debt encumbering the property was repaid simultaneously with the closing of the acquisition.
Balance Sheet
Essex Property exited second-quarter 2021 with cash and cash equivalents, including restricted cash, of $58.2 million, down from the $84 million recorded at the end of 2020. As of Jul 27, the company had $1.3 billion in liquidity through undrawn capacity on its unsecured credit facilities, and cash and marketable securities.
Outlook
For third-quarter 2021, the company projects core FFO per share at $2.98-$3.1. The Zacks Consensus Estimate for the same is $3.06.
For full-year 2021, the company raised the core FFO per share guidance to $12.21-$12.45 from the $12.02-$12.46 guided earlier, reflecting a 9-cent per share increase at the mid-point to $12.33. The Zacks Consensus Estimate for the same is currently pinned at $12.26.
Management increased the mid-point of full-year same-property revenues to the higher end of the previous guidance range, representing a 0.5% increase at the mid-point to -1.4% (range being -1.6% to -1.2%). The NOI estimates have been raised 0.8% at the mid-point to -3.0% (range being -3.3% to -2.6%).
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-eps-surprise-chart | Essex Property Trust, Inc. Quote
Performance of Other Residential REITs
Equity Residential’s (EQR - Free Report) FFO per share of 78 cents outpaced the Zacks Consensus Estimate of 70 cents for the April-June period. Results highlighted robust physical occupancy and improvement in other same-store operating metrics, driving quarterly sequential same-store revenues and NOI positive for the first time since the onset of the global health crisis. Based on these improvements, the residential REIT also raised its full-year guidance for same-store revenues, NOI and FFO per share.
AvalonBay Communities, Inc.’s (AVB - Free Report) second-quarter 2021 core FFO per share of $1.98 beat the Zacks Consensus Estimate of $1.93. Results were backed by the better-than-projected top-line figure. Improvement in same-store residential NOI and development and other stabilized residential NOI were the tailwinds.
We now look forward to the earnings release of another REIT — Vornado Realty Trust (VNO - Free Report) — scheduled to be out on Aug 2.
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.