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Essex Property (ESS) Beats on Q1 FFO, Suspends 2020 View

Zacks Equity Research

Essex Property Trust Inc. ESS reported first-quarter 2020 core funds from operations (FFO) per share of $3.48, surpassing the Zacks Consensus Estimate of $3.40. The figure also improved 7.7% from the year-ago quarter’s $3.23.

Results reflect improved net operating income and same-property gross revenues from the company’s communities.

Total revenues of $392.4 million were up 10.15% year over year in the reported quarter. The figure, in addition, outpaced the Zacks Consensus Estimate of $383.2 million.

In light of the coronavirus pandemic and related uncertainties, Essex Property has withdrawn its current-year guidance. The company also recently announced halting evictions and creating payment plans for its tenants affected by the pandemic. Also, the company began offering lease renewals with no rent increases to all residents.

Quarter in Detail

During the first quarter, Essex Property’s same-property gross revenues grew 3.2% from the prior-year period. Also, same-property NOI improved 3.9% year over year. However, financial occupancies of 96.8% contracted 30 basis points (bps) sequentially and 10 bps year over year.

During the reported quarter, the company acquired a 45% stake in a land parcel and six communities having 2,020 apartment homes valued at about $1 billion on a gross basis from Canada Pension Plan Investment Board. As a result of this, the company had a remeasurement gain of $234.7 million, and a promote income of $6.5 million in the first quarter. Both of these transactions are excluded from the core FFO.

Balance Sheet

Essex Property exited the first quarter with cash and cash equivalents, including restricted cash, of $282.3 million, up from the $81.1 million recorded at the end of 2019.

During the reported quarter, the company repurchased 776,261 shares of its common stock amounting to $176.3 million at an average price of $227.13 per share. As of May 6, the company had $73.7 million of purchase authority remaining under the stock-repurchase plan.

As of May 4, Essex Property had $885 million in undrawn capacity on its unsecured credit facilities and the available liquidity surpassed $1 billion for the company. In January 2020, the company extended the maturity date of its $1.2-billion unsecured line of credit facility to mature in December 2023. Also, in February, it issued $500 million of 12-year senior unsecured notes due in 2032 at an interest rate of 2.65%. Post the quarter’s end, the company obtained a $200-million unsecured term loan. This was priced at LIBOR + 1.20%.

Outlook

Essex Property withdrew the 2020 FFO per share outlook in light of the uncertainties related to the coronavirus pandemic. The company had earlier projected core FFO per share of $13.74-$14.14 for the year.

The full-year outlook was backed by same-property gross revenue growth guidance of 2.6-3.6%, operating expense rise of 2.5-3.5% and NOI expansion of 2.2-4%.

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 REITs like Outfront Media Inc. OUT, Kimco Realty Corp. KIM and Ventas, Inc. VTR, which are slated to report quarterly numbers on May 8.

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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