The residential real estate investment trust -
Essex Property Trust Inc.
) - reported first-quarter 2014 funds from operations (FFO) of
$2.02 per share, exceeding the Zacks Consensus Estimate of $2.00 by
1.0% as well as the year-ago quarter figure of $1.87 by 8.0%.
Results were driven by improving market fundamentals along its
Including merger expenses, acquisition costs and non-recurring
items, the company reported FFO per share of $1.68, depicting a
fall of 14.6% year over year from $1.97. Notably, in the quarter
under review, the company had incurred $16.1 million in merger
Total revenue came in at $161.6 million in first-quarter 2014, up
9.2% from the prior-year quarter and also ahead of the Zacks
Consensus Estimate of $160 million.
This REIT, which accomplished the merger with BRE Properties on Apr
1, thereby creating the premium West Coast multifamily REIT, was
also added to the S&P 500 Index on the same day.
During the quarter, the company's same-property gross revenues
increased 7.2% from the prior-year quarter, while net operating
income (NOI) advanced 8.3% year over year. The legacy BRE portfolio
generated a 5.6% increase in same-property revenues in the first
The company completed the lease-up of Connolly Station (a 309 unit
community) in Dublin, CA. The community was 99% occupied as of the
end of April. It also commenced the lease-up of two additional
Essex Property exited the quarter with cash and cash equivalents of
$48.7 million, down from $53.8 million. Notably, on Mar 31, 2014,
contribution of $888 million was made in BRE properties to 3 new
co-investment entities as part of financing a substantial part of
the cash consideration of the BRE merger.
For second-quarter 2014, Essex Property expects core FFO per share
in the range of $1.96 - $2.04. This includes the impact of the BRE
portfolio and recent financing deals. The Zacks Consensus Estimate
of $2.03 per share also falls within this range.
For full-year 2014, the company guided for core FFO per share in
the range of $8.15 - $8.45, reflecting a rise of the mid-point by 5
cents. The Zacks Consensus Estimate of $8.26 per share lies within
We believe that with a solid property base, significant geographic
overlap and strong management team at Essex, this combined entity
can efficiently leverage on the attractive market fundamentals,
synergies and reward shareholders accordingly.
As a matter of fact, in the West Coast, strong growth in jobs amid
a lower supply of properties in the market (both new rental as well
as for-sale housing) keeps the demand momentum robust. And Essex,
which presently enjoys ownership interests in 234 apartment
communities with an additional 14 properties in different phases of
active development, is expected to benefit from this going forward.
Essex Property currently has a Zacks Rank #3 (Hold).
Investors interested in the REIT industry may also consider stocks
Equity LifeStyle Properties, Inc.
Cousins Properties Incorporated
Duke Realty Corporation
). All these stocks carry a Zacks Rank #2 (Buy).
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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