Essex Property Trust, Inc. ESS reported third-quarter 2026 core funds from operations (FFO) of $4.00 per share, missing the Zacks Consensus Estimate of $4.01. Core FFO grew marginally from $3.97 a year ago.
Quarterly revenues rose 4.1% year over year to $492.69 million but lagged the consensus estimate of $493.50 million. Results reflected rising cost pressures, with total expenses increasing 5.4%, outpacing revenue growth.
Essex Property's Same-Property Costs Rise
Same-property operating expenses increased 2.8% to $136.71 million. Maintenance and repair costs climbed 10.7%, utilities rose 4.7%, and real estate taxes increased 1.6%. Insurance and other expenses fell 5.7%, partially offsetting these increases.
Same-property NOI totaled $313.19 million compared with $303.69 million a year earlier. Sequentially, comparable-property expenses increased 6.7%, outpacing revenue growth and contributing to a 1.3% decline in NOI from the second quarter.
ESS' Rental Revenues Drive Top-Line Growth
Rental and other property revenues increased 4.1% to $490.35 million. Rental income rose 4.1% to $482.77 million, while other property revenues advanced 7.5% to $7.58 million.
Total expenses climbed 5.4% to $342.71 million, including a $10.71 million impairment charge. Property operating expenses increased 4.2% to $149.50 million, while corporate-level property management costs rose 9.6% to $13.39 million. General and administrative expenses declined 8.3% to $16.56 million.
Essex Property's Northern California Markets Lead
Northern California remained the strongest region, with same-property revenue growth of 5.4% and NOI growth of 7%. Santa Clara County revenues increased 5.7%, while San Mateo County posted 6.6% growth. San Francisco recorded an 8% increase.
Southern California revenues rose 1.5%, with NOI up 1%. Seattle Metro revenues increased 1.3%, but a 5.3% rise in operating expenses contributed to a 0.4% NOI decline. Sequentially, total same-property revenues improved 1%, led by Northern California's 1.7% gain.
ESS' Leasing and Occupancy Metrics Improve
Same-property revenues reached $449.90 million compared with $436.73 million a year earlier. The average monthly rental rate increased 2.5% to $2,777.
Financial occupancy improved to 96.3% from 96% a year earlier and remained unchanged sequentially. Renewal lease tradeouts registered 5.3% net effective rate growth, with blended lease tradeouts increasing 3.5%. New-lease rates, however, declined 0.2%.
ESS' Dispositions and Investments Progress
Essex sold three apartment communities during the quarter for a total pro rata contract price of $111.9 million. Transactions included a 76-unit Seattle property, a 268-unit San Jose property sold through a joint venture, and a 101-unit Marina del Rey community.
A 50%-owned joint venture originated two preferred equity investments totaling $36.2 million, or $18.1 million at Essex's share, carrying an initial preferred return of 11.5%. After quarter-end, the company acquired a 378-unit Oakland property following the liquidation of its subordinated loan interest and payoff of the senior mortgage.
Essex Property's Financial Flexibility
Essex obtained a $275 million unsecured term loan in September, priced at SOFR plus 0.80%, with a scheduled maturity in September 2029 and extension options. Quarter-end liquidity exceeded $1.7 billion. Net consolidated debt was $6.61 billion, while fixed-rate borrowings accounted for 92% of total debt.
ESS did not repurchase shares in the quarter. For the first nine months, it repurchased 254,001 shares for $61.9 million. Essex retained $500 million of buyback authority and $883.5 million of capacity under its at-the-market equity issuance program.
ESS Raises Full-Year Core FFO Guidance
Management revised its 2026 core FFO outlook to $16.10-$16.22 per share from $16.03-$16.25. The midpoint increased by 2 cents to $16.16. Fourth-quarter core FFO is projected at $3.95-$4.07 per share.
The revised outlook assumes same-property revenue growth of 2.8%-3% versus the prior forecast of 2.5%-3.1%. Expected NOI growth was revised to 2.8%-3.2% from 2.3%-3.3%, while operating expense growth guidance narrowed to 2.6%-2.9% from 2.5%-3%.
ESS’ Zacks Rank
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 REITs
Crown Castle Inc. CCI reported third-quarter 2026 adjusted FFO per share of $1.24, up 10.7% year over year. The metric surpassed the Zacks Consensus Estimate of $1.20 by 3.3%. Results benefited from lower interest expenses.
Prologis PLD reported third-quarter 2026 core FFO per share of $1.60, outpacing the Zacks Consensus Estimate of $1.58. Results gained from higher rental revenues, steady leasing demand and improved occupancy levels.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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