ESS Essex Property Trust Inc

UNITED STATES  

SECURITIES AND EXCHANGE COMMISSION  

Washington, DC 20549 

 

FORM 8-K 

 

Current Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

 

Date of Report (Date of Earliest Event Reported): October 29, 2015

 

ESSEX PROPERTY TRUST, INC.  

ESSEX PORTFOLIO, L.P.  

(Exact Name of Registrant as Specified in its Charter)

 

001-13106 (Essex Property Trust, Inc.) 

333-44467-01 (Essex Portfolio, L.P.) 

(Commission File Number)

 

Maryland (Essex Property Trust, Inc.)  California (Essex Portfolio, L.P.)	77-0369576 (Essex Property Trust, Inc.)  77-0369575 (Essex Portfolio, L.P.)
(State or Other Jurisdiction of Incorporation)	(I.R.S. Employer Identification No.)

 

925 East Meadow Drive, Palo Alto, California 94303 

(Address of principal executive offices) (Zip Code)

 

(650) 494-3700 

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name or former address, if changed since last report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

[   ]   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

[   ]   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

[   ]   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

[   ]   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

Item 2.02. Results of Operations and Financial Condition

 

On October 29, 2015, Essex Property Trust, Inc. (the “Company”) issued a press release announcing the Company’s earnings for the quarter and nine months ended September 30, 2015. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated by reference herein in its entirety.

 

The information in this report (including Exhibits 99.1 and 99.2) is being furnished pursuant to Item 2.02 and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act.

 

Item 9.01. Financial Statements and Exhibits.

 

(a) - (b) Not applicable.

 

(c) Exhibits.

 

The exhibits listed below are being furnished with this Form 8-K.

 

99.1           Press Release issued by Essex Property Trust, Inc. October 29, 2015

 

99.2           Supplemental Information

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: October 29, 2015

 

	Essex Property Trust, Inc.
	/s/ Angela L. Kleiman
	Name: Angela L. Kleiman
	Title: Executive Vice President and Chief Financial Officer
	Essex Portfolio, L.P.
	By: Essex Property Trust, Inc.,
	its General Partner
	/s/ Angela L. Kleiman
	Name: Angela L. Kleiman
	Title: Executive Vice President and Chief Financial Officer

 

 

 

EXHIBIT INDEX 

 

Exhibit Number		Description
99.1		Press Release issued by Essex Property Trust, Inc. dated October 29, 2015
99.2		Supplemental Information

 

 

 

 

 

Exhibit 99.1

 

 

 

Essex Announces Third Quarter 2015 Results

Core FFO per Diluted Share Grows 15.3% in the Third Quarter

 

Palo Alto, California—October 29, 2015—Essex Property Trust, Inc. (NYSE:ESS) announced today its third quarter 2015 earnings results and related business activities.

 

Funds from Operations (“FFO”) and Net Income per diluted share for the quarter ended September 30, 2015 are detailed below. FFO and Net Income for the third quarter include no merger and integration related expenses compared to $3.9 million of expenses in the prior year period. Core FFO excludes merger and integration expenses, acquisition costs and non-routine items.

 

	Three Months Ended			Nine Months Ended
	September 30,		%	September 30,		%
	2015	2014	Change	2015	2014	Change
Per Diluted Share
Total FFO	$2.53	$2.08	21.6%	$7.19	$5.55	29.5%
Core FFO	$2.49	$2.16	15.3%	$7.19	$6.28	14.5%
Net Income	$0.65	$0.85	-23.5%	$2.27	$1.41	61.0%

 

Third Quarter Highlights:

 

·

Grew Core FFO per diluted share by 15.3% compared to Q3 2014, which exceeded the Company’s guidance range, primarily due to strong operating results and income from co-investments.

 

·

Achieved same-property gross revenues and net operating income (“NOI”) growth of 7.6% and 10.1%, respectively, compared to Q3 2014.

 

·

Realized a sequential quarterly increase in same-property revenue growth of 2.4%.

 

·

Increased the midpoint of the full-year same-property NOI growth range by 10 basis points to 10.6%.

 

·

Provided a Core FFO guidance range for the fourth quarter of 2015 of $2.51 to $2.59 per diluted share.

 

·

Increased the full-year Core FFO guidance range per diluted share to $9.70 to $9.78, raising the midpoint by $0.10 per share. This represents a 1% increase at the midpoint.

 

“We are pleased to report another strong quarter, demonstrated by a 10.1% increase in same-property NOI growth and a 15.3% increase in Core FFO per share.  Exceptional job growth resulted in demand that substantially exceeded deliveries of new housing, pushing rental rates higher in Seattle and all coastal California regions.  With a loss to lease of 7% at the end of September and our expectation for continued favorable housing fundamentals, we carry significant operational momentum into 2016,” commented Michael Schall, President and Chief Executive Officer of the Company. 

 

925 East Meadow Drive Palo Alto California 94303 telephone 650 494 3700 facsimile 650 494 8743 

www.essex.com

 

 

Same-Property Operations

 

Essex same-property operating results includes all properties acquired in the merger with BRE that were stabilized as of April 1, 2014 and excludes any properties that are not comparable for the periods presented. The table below illustrates the percentage change in same-property gross revenues for the quarter ended September 30, 2015 compared to the quarter ended September 30, 2014, and the sequential percentage change for the quarter ended September 30, 2015 versus the quarter ended June 30, 2015 by submarket for the Company:

 

		Q3 2015 vs. Q3 2014				Q3 2015 vs. Q2 2015				% of Total
		Gross Revenues				Gross Revenues				Q3 2015 Revenues
Southern California
Los Angeles County			5.8	%			1.8	%			16.8	%
Orange County			5.9	%			1.7	%			13.1	%
San Diego County			4.7	%			2.2	%			9.0	%
Ventura County			6.1	%			2.2	%			5.5	%
Other Southern California			5.7	%			-2.9	%			1.0	%
Total Southern California			5.7	%			1.8	%			45.4	%
Northern California
Santa Clara County			10.2	%			2.9	%			15.1	%
Alameda County			12.7	%			3.1	%			6.9	%
San Mateo County			9.4	%			3.1	%			6.0	%
Contra Costa County			9.5	%			3.3	%			5.7	%
San Francisco MSA			7.2	%			2.5	%			2.2	%
Other Northern California			9.3	%			4.2	%			0.6	%
Total Northern California			10.2	%			3.0	%			36.5	%
Seattle Metro			7.3	%			2.7	%			18.1	%
Same-Property Portfolio			7.6	%			2.4	%			100.0	%

 

 

		Year Over Year Growth
		Q3 2015 compared to Q3 2014
			Gross Revenues				Operating Expenses				NOI
Southern California			5.7	%			0.3	%			8.5	%
Northern California			10.2	%			2.2	%			13.6	%
Seattle Metro			7.3	%			8.0	%			7.0	%
Same-Property Portfolio			7.6	%			2.3	%			10.1	%

 

 

 

		Sequential Growth
		Q3 2015 compared to Q2 2015
		Gross  Revenues				Operating Expenses				NOI
Southern California			1.8	%			4.6	%			0.5	%
Northern California			3.0	%			1.8	%			3.5	%
Seattle Metro			2.7	%			3.4	%			2.3	%
Same-Property Portfolio			2.4	%			3.4	%			1.9	%

 

 

		Financial Occupancies
		Quarter Ended
		9/30/2015				6/30/2015				9/30/2014
Southern California			95.8	%			95.9	%			95.9	%
Northern California			96.3	%			96.3	%			96.1	%
Seattle Metro			96.1	%			96.1	%			95.6	%
Same-Property Portfolio			96.0	%			96.1	%			95.9	%

 

Development Activity

 

The table below represents the development communities in lease-up during the third quarter and the current leasing status as of October 25, 2015.

 

Project Name		Location		Total Apartment Homes				ESS Ownership				% Leased as of 10/25/15				Status
One South Market		San Jose, CA			312				55	%			84	%			In Lease-Up
Epic Phase III		San Jose, CA			200				55	%			67	%			In Lease-Up
MB360 Phase II		San Francisco, CA			172				100	%			26	%			Pre-Leasing
Total/Average % Leased					684								64	%

 

Other Investments

 

In August 2015, the Company received cash of $21.9 million from the redemption of a preferred equity investment related to one property located in San Jose, CA. The Company recorded $1.5 million of income from prepayment penalties due to the early termination of the agreement. The prepayment income has been excluded from the calculation of Core FFO.

 

Liquidity and Balance Sheet

 

Common Stock

 

During the third quarter, the Company issued 155,728 shares of common stock through its equity distribution program at an average price of $228.61 for net proceeds of $35.4 million. Year-to-date through September 30, 2015, the Company issued 1,374,639 shares of common stock through its equity distribution program at an average price of $226.30 for net proceeds of $308.0 million. Subsequent to quarter-end, the Company has issued 107,098 shares of common stock at an average price of $228.61 for net proceeds of $24.3 million.

 

 

Balance Sheet

 

As of September 30, 2015, the Company had over $1.02 billion in undrawn capacity on its unsecured credit facilities.

 

Guidance

 

The following table provides a reconciliation of third quarter Core FFO per share to the midpoint of the guidance as provided in the second quarter 2015 earnings release distributed in July 2015.

 

		Per Share
Projected midpoint Core FFO per share for Q3 2015		$	2.43
NOI from consolidated communities			0.03
Co-Investments			0.02
Interest and other			0.01
Core FFO per share Q3 2015, reported		$	2.49

 

The Company has increased its full-year Core FFO guidance range from $9.56 to $9.72 to a range of $9.70 to $9.78, raising the midpoint by $0.10 per share. The revised guidance includes a 25 basis points reduction to same-property operating expense growth at the midpoint for the full-year and higher expected income on our development communities due to strong lease-up activity. Our same-property guidance assumptions are detailed in the table below. Year-to-date the midpoint of the full-year same-property revenue and NOI growth has increased by 115 basis points and 210 basis points, respectively. For additional details regarding our 2015 assumptions, please see page S-14 of the Supplemental Financial Information.

 

		Same-Property Growth for Full Year 2015 based on 28,617 apartment homes				Same-Property Growth for Q2 ’15 - Q4 ’15 based on 43,134 apartment homes
		Revised   Range		Prior   (July 2015)		Range   Unchanged
Gross Revenue		7.7% - 8.1%		7.7% - 8.1%		7.3% - 7.7%
Operating Expense		1.8% - 2.2%		2.0% - 2.5%		2.5% - 3.0%
Net Operating Income		10.1% - 11.1%		10.0% - 11.0%		9.3% - 10.3%

 

 

Conference Call with Management

 

The Company will host an earnings conference call with management to discuss its quarterly results on Friday, October 30, 2015 at 11 a.m. PT (2 p.m. ET), which will be broadcast live via the Internet at www.essex.com, and accessible via phone by dialing toll-free, (888) 312-9849, or toll/international, (719) 457-2602. No passcode is necessary.

 

 

A rebroadcast of the live call will be available online for 90 days and digitally for 7 days. To access the replay online, go to www.essex.com and select the third quarter earnings link. To access the replay digitally, dial (877) 870-5176 using the replay pin number 186759. If you are unable to access the information via the Company’s website, please contact the Investor Relations Department at investors@essex.com or by calling (650) 494-3700.

 

Corporate Profile

 

Essex Property Trust, Inc., an S&P 500 company, is a fully integrated real estate investment trust (REIT) that acquires, develops, redevelops, and manages multifamily residential properties in selected West Coast markets. Essex currently has ownership interests in 245 apartment communities with an additional 9 properties in various stages of active development. Additional information about Essex can be found on the Company’s web site at www.essex.com.

 

This press release and accompanying supplemental financial information will be filed electronically on Form 8-K with the Securities and Exchange Commission and can be accessed from the Company’s web site at www.essex.com. If you are unable to obtain the information via the Web, please contact the Investor Relations Department at (650) 494-3700.

 

Funds from Operations (“FFO”) Reconciliation

 

FFO, as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), is generally considered by industry analysts as an appropriate measure of performance of an equity REIT. Generally, FFO adjusts the net income of equity REITs for non-cash charges such as depreciation and amortization of rental properties, impairment charges, gains/losses on sales of real estate and extraordinary items. Management considers FFO and FFO which excludes merger, integration and acquisition costs and items that are not routine or not related to the Company’s core business activities, which is referred to as “Core FFO”, to be useful financial performance measurements of an equity REIT because, together with net income and cash flows, FFO and Core FFO provide investors with an additional basis to evaluate the operating performance and ability of a REIT to incur and service debt and to fund acquisitions and other capital expenditures and the ability to pay dividends.

 

FFO does not represent net income or cash flows from operations as defined by U.S. generally accepted accounting principles (“GAAP”) and are not intended to indicate whether cash flows will be sufficient to fund cash needs. It should not be considered as an alternative to net income as an indicator of the REIT’s operating performance or to cash flows as a measure of liquidity. FFO does not measure whether cash flow is sufficient to fund all cash needs including principal amortization, capital improvements and distributions to shareholders. FFO also does not represent cash flows generated from operating, investing or financing activities as defined under GAAP. Management has consistently applied the NAREIT definition of FFO to all periods presented. However, there is judgment involved and other REITs’ calculation of FFO may vary from the NAREIT definition for this measure, and thus their disclosures of FFO may not be comparable to the Company’s calculation.

 

 

The following table sets forth the Company’s calculation of diluted FFO and Core FFO for the three and nine months ended September 30, 2015 and 2014:

 

		Three Months Ended   September 30,								Nine Months Ended September 30,
Funds from Operations attributable to common stockholders and unitholders (In thousands)		2015				2014				2015				2014
Net income available to common stockholders		$	42,323			$	53,566			$	147,241			$	76,685
Adjustments:
Depreciation and amortization			116,308				102,286				336,946				253,890
Gains not included in FFO			—				(31,372	)			(41,126	)			(41,664	)
Depreciation add back from unconsolidated co-investments			12,800				9,986				36,822				23,060
Noncontrolling interest related to Operating Partnership units			1,471				1,816				5,115				3,442
Insurance reimbursements			(1,751	)			—				(1,751	)			—
Depreciation attributable to third party ownership and other			(253	)			(335	)			(753	)			(996	)
Funds from Operations attributable to common stockholders and unitholders		$	170,898			$	135,947			$	482,494			$	314,417
Merger and integration expenses			—				3,857				3,798				46,413
Acquisition and investment related costs			381				51				1,357				768
Gain on sale of marketable securities, note prepayment, and other investments			(598	)			—				(598	)			(886	)
Gain on sale of land			—				—				—				(400	)
Co-investment promote income			(192	)			—				(192	)			(4,904	)
Income from early redemption of preferred equity investments			(1,485	)			—				(1,954	)			—
Insurance reimbursements			(569	)			—				(2,319	)			—
Other non-core adjustments			—				1,249				(207	)			710
Core Funds from Operations attributable to common stockholders and unitholders		$	168,435			$	141,104			$	482,379			$	356,118

 

 

 

SAFE HARBOR STATEMENT UNDER THE PRIVATE LITIGATION REFORM ACT OF 1995:

 

This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include statements in the “Third Quarter Highlights” and “Guidance” sections of the release regarding significant momentum in 2016, 2015 same-property growth with respect to gross revenues, operating expenses and net operating income, core FFO per share for the fourth quarter of 2015 and for the full-year 2015 and estimates, with respect to the balance of 2015, regarding lower expense growth and higher development communities’ income and statements and estimates set forth under the captions “Development Pipeline—September 30, 2015” and “Redevelopment Pipeline—September 30, 2015” on pages S-11 and S-12 of the Company’s Supplemental Financial Information Package, which accompanies this press release, regarding estimated costs of property development and redevelopment and regarding the anticipated timing of redevelopments and of the construction start, initial occupancy and stabilization of property development and the various financial projections and assumptions, including those regarding 2015 NOI, FFO and Core FFO, set forth in the columns “2015 Guidance Range” on page S-14 of the Company’s Supplemental Financial Information Package and the forecasts, set forth on page S-16 of the Company’s Supplemental Financial Information Package, of residential supply, jobs, and rent growth in various areas. The Company’s actual results may differ materially from those projected in such forward-looking statements. Factors that might cause such a difference include, but are not limited to, changes in market demand for rental units and the impact of competition and competitive pricing, unforeseen consequences from cyber-intrusion, unanticipated difficulties in integrating the businesses of Essex and BRE and realizing anticipated synergies, changes in economic conditions, unexpected delays in the development and stabilization of development projects, unexpected difficulties in leasing of development projects, total costs of development investments exceeding the Company’s projections and other risks detailed in the Company’s filings with the Securities and Exchange Commission (SEC). All forward-looking statements are made as of today, and the Company assumes no obligation to update this information. For more details relating to risk and uncertainties that could cause actual results to differ materially from those anticipated in our forward-looking statements, and risks to our business in general, please refer to our SEC filings, including the Company’s Report on Form 10-K for the year ended December 31, 2014.

 

Contact Information

Barb Pak 

Vice President of Finance & Investor Relations 

(650) 494-3700 

bpak@essex.com

 

Exhibit 99.2

 

 

 

  

Q3 2015 Supplemental

Table of Contents

 

	Page
Consolidated Operating Results	S-1 – S-2
Consolidated Funds From Operations	S-3
Consolidated Balance Sheets	S-4
Debt Summary – September 30, 2015	S-5
Capitalization Data, Public Bond Covenants, Credit Ratings, and Selected Credit Ratios – September 30, 2015	S-6
Portfolio Summary by County – September 30, 2015	S-7
Operating Income by Quarter – September 30, 2015	S-8
Same-Property Revenue Results by County – Quarters ended September 30, 2015, September 30, 2014, and June 30, 2015	S-9
Same-Property Revenue Results by County – Nine months ended September 30, 2015 and 2014	S-9.1
Same-Property Operating Expenses	S-10
Development Pipeline – September 30, 2015	S-11
Redevelopment Pipeline – September 30, 2015	S-12
Co-Investments – September 30, 2015	S-13
Assumptions for 2015 FFO Guidance Range	S-14
Summary of Apartment Community Acquisitions and Dispositions Activity	S-15
Preliminary 2016 MSA Level Forecasts: Supply, Jobs and Apartment Market Conditions	S-16

 

 

 

E S S E X  P R O P E R T Y  T R U S T, I N C.
Consolidated Operating Results			Three Months Ended						Nine Months Ended
(Dollars in thousands, except share and per share amounts)			September 30,						September 30,
			2015			2014 (1)			2015			2014 (1)
Revenues:
	Rental and other property		$	302,522		$	268,512		$	876,852		$	684,813
	Management and other fees			2,104			2,361			6,809			6,856
				304,626			270,873			883,661			691,669
Expenses:
	Property operating			94,119			88,062			271,367			223,926
	Depreciation and amortization			116,308			102,286			336,946			253,890
	General and administrative			11,129			11,479			31,223			28,621
	Merger and integration expenses			-			3,857			3,798			46,413
	Acquisition and investment related costs			381			51			1,357			768
				221,937			205,735			644,691			553,618
Earnings from operations				82,689			65,138			238,970			138,051
Interest expense				(50,053)			(45,830)			(148,401)			(117,021)
Interest and other income				7,367			2,992			14,820			8,685
Equity income from co-investments				7,179			4,910			15,962			21,065
Gain on sale of real estate and land				-			31,372			7,112			38,853
Gain on remeasurement of co-investment				-			-			34,014			-
	Net income			47,182			58,582			162,477			89,633
Net income attributable to noncontrolling interest				(3,545)			(3,720)			(11,295)			(8,971)
Net income attributable to controlling interest				43,637			54,862			151,182			80,662
Dividends to preferred stockholders				(1,314)			(1,296)			(3,941)			(3,977)
	Net income available to common stockholders		$	42,323		$	53,566		$	147,241		$	76,685
Net income per share - basic			$	0.65		$	0.85		$	2.28		$	1.41
Shares used in income per share - basic				65,138,868			62,892,601			64,714,994			54,250,104
Net income per share - diluted			$	0.65		$	0.85		$	2.27		$	1.41
Shares used in income per share - diluted				65,297,550			63,069,772			64,892,770			54,443,227
(1)	Due to subsequent purchase price allocation adjustments made to the opening balance sheet for the BRE Merger on April 1, 2014, certain amounts do not match prior reported.

 

 

 

 

E S S E X  P R O P E R T Y  T R U S T, I N C.
Consolidated Operating Results			Three Months Ended						Nine Months Ended
Selected Line Item Detail			September 30,						September 30,
(Dollars in thousands)			2015			2014			2015			2014
Rental and other property
	Rental		$	284,026		$	250,697		$	820,639		$	637,283
	Other property			18,496			17,815			56,213			47,530
		Rental and other property	$	302,522		$	268,512		$	876,852		$	684,813
Property operating expenses
	Real estate taxes		$	33,591		$	31,768		$	97,820		$	77,452
	Administrative and insurance			19,307			19,072			56,103			50,380
	Maintenance and repairs			18,487			16,054			52,650			42,443
	Utilities			16,460			16,052			46,209			40,059
	Property management			6,274			5,116			18,585			13,592
		Property operating expenses	$	94,119		$	88,062		$	271,367		$	223,926
Interest and other income
	Marketable securities and other interest income		$	3,699		$	2,951		$	10,152		$	7,676
	Notes receivable			-			41			-			123
	Gain from sale of marketable securities, note prepayment, and other investments			598			-			598			886
	Insurance reimbursements			3,070			-			4,070			-
		Interest and other income	$	7,367		$	2,992		$	14,820		$	8,685
Equity income from co-investments
	Equity income from co-investments		$	2,969		$	535		$	6,176		$	1,578
	Income from preferred equity investments			2,533			4,375			7,640			11,372
	Gain on sale of co-investment communities			-			-			-			3,211
	Co-investment promote income			192			-			192			4,904
	Income from early redemption of preferred equity investments			1,485			-			1,954			-
		Equity income from co-investments	$	7,179		$	4,910		$	15,962		$	21,065
Noncontrolling interest
	Limited partners of Essex Portfolio, L.P.		$	1,471		$	1,816		$	5,115		$	3,442
	DownREIT limited partners’ distributions			1,297			1,208			3,894			3,563
	Third-party ownership interest			777			696			2,286			1,966
		Noncontrolling interest	$	3,545		$	3,720		$	11,295		$	8,971

 

 

 

 

E S S E X  P R O P E R T Y  T R U S T, I N C.
Consolidated Funds From Operations			Three Months Ended									Nine Months Ended
(Dollars in thousands, except share and per share amounts and in footnotes)			September 30,									September 30,
			2015			2014			% Change			2015			2014			% Change
Funds from operations attributable to common stockholders and unitholders (FFO)
Net income available to common stockholders			$	42,323		$	53,566					$	147,241		$	76,685
Adjustments:
	Depreciation and amortization			116,308			102,286						336,946			253,890
	Gains not included in FFO			-			(31,372)						(41,126)			(41,664)
	Depreciation addback from unconsolidated co-investments			12,800			9,986						36,822			23,060
	Noncontrolling interest related to Operating Partnership units			1,471			1,816						5,115			3,442
	Insurance reimbursements (1)			(1,751)			-						(1,751)			-
	Depreciation attributable to third party ownership and other (2)			(253)			(335)						(753)			(996)
		Funds from operations attributable to common stockholders and unitholders	$	170,898		$	135,947					$	482,494		$	314,417
		FFO per share-diluted	$	2.53		$	2.08		21.6%			$	7.19		$	5.55		29.5%
Components of the change in FFO
Non-core items:
Merger and integration expenses			$	-			3,857					$	3,798			46,413
Acquisition and investment related costs				381			51						1,357			768
Gain on sale of marketable securities, note prepayment, and other investments				(598)			-						(598)			(886)
Gain on sale of land				-			-						-			(400)
Co-investment promote income				(192)			-						(192)			(4,904)
Income from early redemption of preferred equity investments				(1,485)			-						(1,954)			-
Insurance reimbursments				(569)			-						(2,319)			-
Other non-core adjustments				-			1,249						(207)			710
		Core funds from operations attributable to common stockholders and unitholders		168,435			141,104						482,379			356,118
		Core FFO per share-diluted	$	2.49		$	2.16		15.3%			$	7.19		$	6.28		14.5%
Changes in core items:
Same-property NOI			$	16,399								$	34,984
Non-same property NOI (3)				12,304									109,850
Management and other fees, net				(257)									78
FFO from co-investments				3,406									14,599
Interest and other income				707									2,353
Interest expense				(4,223)									(31,380)
General and administrative				(899)									(3,851)
Other items, net				(106)									(372)
			$	27,331								$	126,261
Weighted average number of shares outstanding diluted (4)				67,535,685			65,234,328						67,135,143			56,677,712
	(1)	Insurance reimbursements for replacement costs related to a flood at one of our properties.
	(2)	The Company consolidates Hidden Valley and Hillsdale Garden Apartments.  Noncontrolling interest’s share of net operating income in these investments for the three and nine months ended September 30, 2015 was $1.0 million and $2.9 million, respectively.
	(3)	Nine month results include properties acquired in the merger with BRE as non-same property.
	(4)	Assumes conversion of all outstanding operating partnership interests in the Operating Partnership and excludes 902,668 DownREIT units for which the Operating Partnership has the ability and intention to redeem the DownREIT limited partnership units for cash and does not consider them to be common stock equivalents.

 

 

 

 

	E S S E X  P R O P E R T Y  T R U S T, I N C.
	Consolidated Balance Sheets
	(Dollars in thousands)
					September 30, 2015			December 31, 2014
	Real Estate:
		Land and land improvements		$	2,566,586		$	2,424,930
		Buildings and improvements			9,753,982			8,819,751
					12,320,568			11,244,681
		Less:  accumulated depreciation			(1,858,134)			(1,564,806)
					10,462,434			9,679,875
	Real estate under development				226,690			429,096
	Co-investments				1,036,043			1,042,423
	Real estate held for sale, net				8,742			56,300
					11,733,909			11,207,694
	Cash and cash equivalents				72,306			95,749
	Marketable securities and other investments				133,058			117,240
	Notes and other receivables				22,668			24,923
	Acquired in-place lease value				12,675			47,748
	Prepaid expenses and other assets				38,101			33,378
			Total assets	$	12,012,717		$	11,526,732
	Unsecured debt, net			$	3,090,896		$	2,603,548
	Mortgage notes payable, net				2,224,513			2,234,317
	Lines of credit, net (1)				2,011			242,824
	Other liabilities				338,885			286,719
			Total liabilities		5,656,305			5,367,408
	Redeemable noncontrolling interest				24,589			23,256
	Equity:
		Common stock			6			6
		Cumulative redeemable preferred stock, liquidation value			73,750			73,750
		Additional paid-in capital			6,980,443			6,651,165
		Distributions in excess of accumulated earnings			(782,801)			(650,797)
		Accumulated other comprehensive loss, net			(50,357)			(51,452)
			Total stockholders’ equity		6,221,041			6,022,672
		Noncontrolling interest			110,782			113,396
			Total equity		6,331,823			6,136,068
			Total liabilities and equity	$	12,012,717		$	11,526,732
(1)	Lines of credit, net excludes unamortized debt issuance costs as of September 30, 2015 as the net effect resulted in a negative debt balance as of September 30, 2015 and was reclassified to prepaid expenses and other assets on the Consolidated Balance Sheet. The net balance at December 31, 2014 resulted in a positive debt balance and is presented on a net basis.

 

 

 

E S S E X  P R O P E R T Y  T R U S T, I N C.
Debt Summary - September 30, 2015
(Dollars in thousands, except in footnotes)
												Scheduled principal payments, unamortized premiums (discounts) and (debt issuance costs) are as follows - excludes lines of credit:
																					Unamortized premiums (discounts) and (debt issuance costs)
							Weighted Average																			Weighted Average Interest Rate		Percentage of Total Debt
				Balance			Interest		Maturity
				Outstanding			Rate		In Years					Unsecured			Secured							Total
Unsecured Debt, net
	Bonds private - fixed rate				465,000		4.5%		3.5			2015		$	-		$	7,296			6,218		$	13,514		3.8%		0.3%
	Bonds public - fixed rate				2,400,000		3.5%		7.0			2016			350,000			29,707			24,765			404,472		3.2%		7.6%
	Term loan (1)				225,000		2.4%		1.2			2017			365,000			199,178			16,296			580,474		3.2%		10.9%
	Unamortized premiums and debt issuance costs				896		-		-			2018			-			320,621			13,220			333,841		5.4%		6.2%
					3,090,896		3.5%		6.0			2019			75,000			566,393			8,571			649,964		4.2%		12.2%
Mortgage Notes Payable, net												2020			-			693,447			3,236			696,683		5.0%		13.1%
	Fixed rate - secured			$	1,873,854		4.9%		3.8			2021			500,000			51,152			(3,545)			547,607		4.3%		10.3%
	Variable rate - secured (2)				292,083		1.7%		22.7			2022			300,000			1,186			(3,974)			297,212		3.7%		5.6%
	Unamortized premiums and debt issuance costs				58,576		-		-			2023			600,000			1,282			(1,703)			599,579		3.6%		11.3%
		Total mortgage notes payable			2,224,513		4.5%		6.3			2024			400,000			19,158			(1,000)			418,158		4.0%		7.9%
												2025			500,000			14,611			(319)			514,292		3.5%		9.7%
Unsecured Lines of Credit, net												Thereafter			-			261,906			(2,293)			259,613		1.3%		4.9%
	Line of credit (3)				-		-
	Line of credit (4)				2,011		1.7%					Total		$	3,090,000		$	2,165,937		$	59,472		$	5,315,409		3.9%		100.0%
	Unamortized debt issuance costs (5)				(3,576)		-
		Total lines of credit (5)			(1,565)		1.7%
		Total debt, net		$	5,313,844		4.0%

Capitalized interest for the three and nine months ended September 30, 2015 was approximately $3.9 million and $12.2 million, respectively.                  

                                                         

⁽¹⁾ The unsecured term loan has a variable interest rate of LIBOR plus 1.05%.  The Company has entered into interest rate swap contracts with a notional amount totaling $225 million, which effectively converts the interest rate on of the term loan to a fixed rate of 2.4%.

⁽²⁾ Of $292.1 million of variable rate debt, $282.1 million is tax exempt to the note holders and $262.5 million is subject to interest rate protection agreements or total return swap contracts.  

⁽³⁾ The unsecured line of credit facility aggregates to $1 billion and the line matures in December 2018 with one 18-month extension, exercisable at the Company’s option.  The underlying interest rate on this line is based on a tiered rate structure tied to the Company’s corporate ratings and is currently at LIBOR plus 0.95%.

⁽⁴⁾ The unsecured line of credit facility is $25 million and matures in January 2016.  The underlying interest rate on this line is based on a tiered rate structure tied to the Company’s corporate ratings and is currently at LIBOR plus 0.95%.  

⁽⁵⁾ For financial statement purposes, unamortized debt issuance costs related to unsecured lines of credit have been reclassified to prepaid expenses and other assets on the Consolidated Balance Sheet because the net effect resulted in a negative debt balance as of September 30, 2015.

 

 

 

E S S E X  P R O P E R T Y  T R U S T, I N C.

Capitalization Data, Public Bond Covenants, Credit Ratings and Selected Credit Ratios - September 30, 2015

(Dollars and shares in thousands, except per share amounts)

Capitalization Data

Public Bond Covenants

Actual

Requirement

Total debt, net

$

5,313,844

Debt to Total Assets:

38%

< 65%

Common stock and potentially dilutive securities

Common stock outstanding

65,235

Limited partnership units (1)

2,237

Options-treasury method

186

Secured Debt to Total Assets:

16%

< 40%

Total shares of common stock and potentially dilutive securities

67,658

Common stock price per share as of September 30, 2015

$

223.42

Interest Coverage:

345%

> 150%

Market value of common stock and potentially dilutive securities

$

15,116,150

Preferred stock

$

73,750

Unsecured Debt Ratio (1) :

290%

> 150%

Total equity capitalization

$

15,189,900

Selected Credit Ratios

Actual

Total market capitalization

$

20,503,744

Ratio of debt to total market capitalization

25.9%

Net Indebtedness Divided by Adjusted EBITDA (2) (3):

6.1

Unencumbered NOI to Total NOI:

66%

(1)

Assumes conversion of all outstanding operating partnership interests in the Operating Partnership into shares of the Company’s common stock.

(1)

Unsecured Debt Ratio is unsecured assets (excluding investments in co-investments) divided by unsecured indebtedness.

(2)

Net Indebtedness is total debt less unamortized premiums, debt issuance costs, unrestricted cash and cash equivalents, and marketable securities.

Credit Ratings

(3)

Adjusted EBITDA annualizes the proforma NOI for current quarter acquisitions and excludes non-routine items in earnings.

Rating Agency

Rating     Outlook

Fitch

BBB+      Stable

Moody’s

Baa2      Positive

Standard & Poor’s

BBB       Positive

 

 

 

 

E S S E X  P R O P E R T Y  T R U S T, I N C.

Portfolio Summary as of September 30, 2015

 

		Apartment Homes																Average Monthly Rental Rate (1)												Percent of NOI (2)
Region - County		Consolidated (3)				Unconsolidated Co-investments (4)				Apartment Homes in Development (5)				Total				Consolidated				Unconsolidated Co-investments (6)				Total (7)				Consolidated				Unconsolidated Co-investments (6)				Total (7)
Southern California
Los Angeles County			9,245				1,618				—				10,863			$	2,189			$	1,852			$	2,162				19.3	%			14.0	%			18.8	%
Orange County			5,786				1,144				—				6,930				1,932				1,633				1,905				11.1	%			9.9	%			11.0	%
San Diego County			4,962				616				—				5,578				1,689				1,541				1,681				8.1	%			4.4	%			7.8	%
Ventura County			2,898				373				—				3,271				1,587				1,991				1,611				4.9	%			3.5	%			4.8	%
Other Southern CA			623				581				—				1,204				1,483				1,622				1,527				0.8	%			4.4	%			1.1	%
Total Southern California			23,514				4,332				—				27,846				1,928				1,731				1,911				44.2	%			36.2	%			43.5	%
Northern California
Santa Clara County			5,874				2,477				376				8,727				2,523				2,607				2,538				16.2	%			24.7	%			17.0	%
Alameda County			3,138				1,293				—				4,431				2,296				2,176				2,275				7.4	%			14.5	%			8.1	%
San Mateo County			2,126				197				599				2,922				2,809				2,705				2,804				6.4	%			2.8	%			6.1	%
Contra Costa County			2,270				—				555				2,825				2,110				—				2,110				5.1	%			—				4.6	%
San Francisco MSA			1,169				463				717				2,349				2,817				3,492				2,938				3.3	%			8.1	%			3.7	%
Other Northern CA			230				—				—				230				1,979				—				1,979				0.5	%			—				0.4	%
Total Northern California			14,807				4,430				2,247				21,484				2,467				2,586				2,483				38.9	%			50.1	%			39.9	%
Seattle Metro			10,239				1,958				—				12,197				1,582				1,460				1,571				16.9	%			13.7	%			16.6	%
Total			48,560				10,720				2,247				61,527			$	2,019			$	2,045			$	2,022				100.0	%			100.0	%			100.0	%

 

⁽¹⁾ Average monthly rental rate is defined as the total potential monthly rental revenue (actual rent for occupied apartment homes plus market rent for vacant apartment homes) divided by the number of apartment homes. 

⁽²⁾ Actual NOI for the quarter ended September 30, 2015.  

⁽³⁾ Includes all apartment communities with rents including developments in lease up, excluding commercial space. 

⁽⁴⁾ Includes two rental income producing development communities in lease-up which consist of 512 apartment homes.

⁽⁵⁾ Includes development communities with no rental income.

⁽⁶⁾ Co-investment amounts weighted for Company’s pro rata share. 

⁽⁷⁾ At Company’s pro rata share.

 

 

 

 

E S S E X  P R O P E R T Y  T R U S T, I N C.
Operating Income by Quarter (1)
(Dollars in thousands)
			Apartment Homes		Q3 ’15		Q2 ’15		Q1 ’15		Q4 ’14		Q3 ’14
Rental and other property revenues:
Same-property (2)			43,134		$     258,212		$     252,169		$     246,536		$     243,633		$     240,031
Acquisitions (3)			3,415		23,099		20,255		14,269		12,579		10,110
Development (4)			1,331		12,392		11,273		9,753		8,146		6,101
Redevelopment			680		4,214		4,078		3,979		4,134		4,105
Non-Residential/Other, net (5)			-		4,605		6,326		5,692		8,286		8,165
Total rental and other property revenues			48,560		302,522		294,101		280,229		276,778		268,512
Property operating expenses:
Same-property (2)					79,841		77,181		76,042		76,984		78,059
Acquisitions (3)					8,003		7,256		4,867		4,166		3,352
Development (4)					4,024		3,868		3,355		3,167		2,493
Redevelopment					1,611		1,534		1,539		1,515		1,567
Non-Residential/Other, net (5) (6)					640		238		1,368		2,789		2,591
Total property operating expenses					94,119		90,077		87,171		88,621		88,062
Net operating income (NOI):
Same-property (2)					178,371		174,988		170,494		166,649		161,972
Acquisitions (3)					15,096		12,999		9,402		8,413		6,758
Development (4)					8,368		7,405		6,398		4,979		3,608
Redevelopment					2,603		2,544		2,440		2,619		2,538
Non-Residential/Other, net (5)					3,965		6,088		4,324		5,497		5,574
Total NOI					$     208,403		$     204,024		$     193,058		$     188,157		$     180,450
Same-property metrics
	Operating margin				69%		69%		69%		68%		67%
	Annualized turnover (7)				60%		55%		44%		44%		63%
	Financial occupancy (8)				96.0%		96.1%		96.1%		96.2%		95.9%
(1)	Includes consolidated communities only.
(2)	Same-property includes BRE properties acquired April 1, 2014.
(3)	Acquisitions include properties acquired which did not have comparable stabilized results as of April 1, 2014.
(4)	Development includes properties developed which did not have comparable stabilized results as of April 1, 2014.
(5)	Other real estate assets consists mainly of retail space, commercial properties, boat slips, and disposition properties.
(6)	Includes other expenses and intercompany eliminations pertaining to self-insurance.
(7)	Annualized turnover is defined as the number of apartment homes turned over during the quarter, annualized, divided by the total number of apartment homes.
(8)	Financial occupancy is defined as the percentage resulting from dividing actual rental revenue by total potential rental revenue (actual rent for occupied apartment homes plus market rent for vacant apartment homes).

 

 

 

 

E S S E X  P R O P E R T Y  T R U S T, I N C.
Same-Property Revenue Results by County - Third Quarter 2015 vs. Third Quarter 2014 and Second Quarter 2015 (1)
(Dollars in thousands, except average monthly rental rates)
								Average Monthly Rental Rate						Financial Occupancy						Gross Revenues						Sequential Gross Revenues
Region - County				Apartment Homes		Q3 ’15 % of Actual NOI		Q3 ’15		Q3 ’14		% Change		Q3 ’15		Q3 ’14		% Change		Q3 ’15		Q3 ’14		% Change		Q2 ’15		% Change
Southern California
	Los Angeles County			6,844		16.3%		$   2,108		$   1,997		5.6%		95.7%		95.6%		0.1%		$    43,303		$   40,922		5.8%		$    42,521		1.8%
	Orange County			5,786		12.7%		1,932		1,826		5.8%		96.2%		96.1%		0.1%		33,835		31,941		5.9%		33,273		1.7%
	San Diego County			4,583		8.6%		1,673		1,581		5.8%		95.4%		96.2%		-0.8%		23,202		22,164		4.7%		22,707		2.2%
	Ventura County			2,898		5.6%		1,587		1,496		6.1%		96.4%		96.3%		0.1%		14,170		13,356		6.1%		13,859		2.2%
	Other Southern CA			623		0.9%		1,483		1,381		7.4%		92.2%		92.4%		-0.2%		2,676		2,532		5.7%		2,757		-2.9%
Total Southern California				20,734		44.1%		1,871		1,769		5.8%		95.8%		95.9%		-0.1%		117,186		110,915		5.7%		115,117		1.8%
Northern California
	Santa Clara County			5,228		16.5%		2,468		2,244		10.0%		96.3%		96.2%		0.1%		39,078		35,472		10.2%		37,980		2.9%
	Alameda County			2,613		7.1%		2,258		1,995		13.2%		96.0%		96.3%		-0.3%		17,935		15,912		12.7%		17,392		3.1%
	San Mateo County			1,862		6.3%		2,737		2,506		9.2%		96.1%		96.0%		0.1%		15,578		14,243		9.4%		15,107		3.1%
	Contra Costa County			2,270		5.8%		2,110		1,923		9.7%		96.8%		96.4%		0.4%		14,625		13,358		9.5%		14,163		3.3%
	San Francisco MSA			816		2.1%		2,355		2,204		6.9%		96.1%		95.1%		1.1%		5,745		5,360		7.2%		5,607		2.5%
	Other Northern CA			230		0.5%		1,979		1,767		12.0%		95.8%		97.1%		-1.3%		1,365		1,249		9.3%		1,310		4.2%
Total Northern California				13,019		38.3%		2,386		2,165		10.2%		96.3%		96.1%		0.2%		94,326		85,594		10.2%		91,559		3.0%
Seattle Metro				9,381		17.6%		1,576		1,471		7.1%		96.1%		95.6%		0.5%		46,700		43,522		7.3%		45,493		2.7%
Total Same-Property				43,134		100.0%		$   1,963		$   1,824		7.6%		96.0%		95.9%		0.1%		$  258,212		$ 240,031		7.6%		$  252,169		2.4%
(1) Same-property includes BRE properties acquired April 1, 2014.

 

 

 

 

E S S E X  P R O P E R T Y  T R U S T, I N C.
Same-Property Revenue Results by County - Nine months ended September 30, 2015 vs. Nine months ended September 30, 2014 (1)
(Dollars in thousands, except average monthly rental rates)
						YTD		Average Monthly Rental Rate						Financial Occupancy						Gross Revenues
Region - County				Apartment Homes		2015 % of Actual NOI		YTD 2015		YTD 2014		% Change		YTD 2015		YTD 2014		% Change		YTD 2015		YTD 2014		% Change
Southern California
	Los Angeles County			4,400		16.4%		$    2,018		$    1,904		6.0%		96.1%		96.2%		-0.1%		$  80,637		$  76,276		5.7%
	Orange County			2,887		10.8%		2,046		1,925		6.3%		96.4%		95.9%		0.5%		53,805		50,219		7.1%
	San Diego County			2,067		5.1%		1,383		1,297		6.6%		96.1%		96.3%		-0.2%		26,546		25,095		5.8%
	Ventura County			2,898		8.5%		1,556		1,470		5.9%		96.3%		96.6%		-0.3%		41,723		39,577		5.4%
	Other Southern CA			623		1.5%		1,447		1,351		7.1%		96.0%		96.2%		-0.2%		8,190		7,672		6.8%
Total Southern California				12,875		42.3%		1,790		1,687		6.1%		96.2%		96.2%		0.0%		210,901		198,839		6.1%
Northern California
	Santa Clara County			4,279		20.3%		2,373		2,145		10.6%		96.3%		96.1%		0.2%		92,313		83,217		10.9%
	Alameda County			1,542		6.0%		2,054		1,817		13.0%		96.4%		97.0%		-0.6%		29,225		26,214		11.5%
	San Mateo County			768		3.6%		2,441		2,205		10.7%		96.9%		96.6%		0.3%		17,397		15,711		10.7%
	Contra Costa County			1,720		6.5%		2,005		1,820		10.2%		96.6%		96.3%		0.3%		31,620		28,663		10.3%
	San Francisco MSA			645		2.4%		2,252		2,098		7.3%		94.8%		94.6%		0.2%		12,815		11,897		7.7%
	Other Northern CA			230		0.8%		1,881		1,725		9.0%		96.8%		96.9%		-0.1%		3,949		3,644		8.4%
Total Northern California				9,184		39.6%		2,236		2,020		10.7%		96.3%		96.2%		0.1%		187,319		169,346		10.6%
Seattle Metro				6,558		18.1%		1,478		1,375		7.5%		96.3%		96.0%		0.3%		92,204		85,606		7.7%
Total Same-Property				28,617		100.0%		$    1,862		$    1,722		8.1%		96.3%		96.2%		0.1%		$ 490,424		$ 453,791		8.1%
(1) Same-property excludes BRE properties acquired April 1, 2014.

 

 

 

 

E S S E X  P R O P E R T Y  T R U S T, I N C.
Same-Property Operating Expenses - Quarter and Year to Date as of September 30, 2015 and 2014
(Dollars in thousands)
		Based on 43,134 apartment homes (1)									Based on 28,617 apartment homes (2)
		Q3 ’15		Q3 ’14		% Change		% of Op. Ex.			YTD 2015		YTD 2014		% Change		% of Op. Ex.
Same-property operating expenses:
Real estate taxes		$27,083		$27,533		-1.6%		33.9%			$    42,726		$    41,902		2.0%		29.7%
Maintenance and repairs		16,060		14,361		11.8%		20.1%			30,273		29,891		1.3%		21.1%
Administrative		14,707		14,993		-1.9%		18.4%			28,958		28,451		1.8%		20.1%
Utilities		13,995		14,117		-0.9%		17.5%			26,860		27,060		-0.7%		18.7%
Management fees (3)		5,401		4,557		18.5%		6.8%			9,862		9,609		2.6%		6.8%
Insurance		2,595		2,498		3.9%		3.3%			5,116		5,232		-2.2%		3.6%
Total same-property operating expenses		$79,841		$78,059		2.3%		100.0%			$  143,795		$  142,145		1.2%		100.0%
(1) Same-property includes BRE properties acquired starting April 1, 2014.
(2) Same-property excludes BRE properties.
(3) During 2015, the Company changed its allocation to property management fees.

 

 

 

 

E S S E X  P R O P E R T Y  T R U S T, I N C.

Development Pipeline - September 30, 2015

(Dollars in millions, except per apartment home amounts in thousands and except in footnotes)

 

	Project Name		Location		Ownership %		Estimated Apartment Homes		Estimated Commercial sq. feet		Incurred to   Date		Remaining Costs		Estimated Total Cost		Essex Est. Total Cost (1)		Cost per Apartment Home (2)		Average % Occupied		% Leased		Construction Start		Initial Occupancy		Stabilized Operations
Development Projects - Consolidated (3)
	MB 360 Phase II (4)		San Francisco, CA		100%		172		11,500		$112		$23		$135		$135		$744		0.0%		0.0%		Q3 2014		Q4 2015		Q2 2016
	Station Park Green		San Mateo, CA		100%		599		35,000		79		275		354		354		567		0.0%		0.0%		Q3 2015		Q3 2017		Q4 2018
Total Development Projects - Consolidated							771		46,500		191		298		489		489		634
Land Held for Future Development - Consolidated
	Other Projects		Various		100%						36		-		36		36
Total Development Pipeline - Consolidated							771		46,500		227		298		525		525
Development Projects/Land Held for Future Development - Joint Venture (3)
	Epic - Phase III		San Jose, CA		55%		200		-		82		10		92		51		460		30.0%		55.0%		Q3 2013		Q3 2015		Q1 2016
	One South Market		San Jose, CA		55%		312		6,000		139		2		141		78		445		53.5%		75.6%		Q2 2013		Q2 2015		Q1 2016
	Agora (5)		Walnut Creek, CA		51%		49		35,000		79		16		95		48		1,140		0.0%		0.0%		Q3 2013		Q1 2016		Q2 2016
	Owens		Pleasanton, CA		55%		255		5,729		44		45		89		49		341		0.0%		0.0%		Q3 2014		Q2 2016		Q2 2017
	Hacienda		Pleasanton, CA		55%		251		-		32		54		86		47		343		0.0%		0.0%		Q1 2015		Q3 2016		Q3 2017
	Century Towers		San Jose, CA		50%		376		2,006		80		92		172		86		456		0.0%		0.0%		Q3 2014		Q1 2017		Q1 2018
	500 Folsom (6)		San Francisco, CA		50%		545		6,000		58		323		381		191		691		0.0%		0.0%		Q4 2015		Q4 2018		Q2 2020
Total Development Projects - Joint Venture							1,988		54,735		514		542		1,056		550		$507
Grand Total - Development Pipeline							2,759		101,235		$741		$840		$ 1,581		1,075
Essex Cost Incurred to Date																	(499)
Essex Remaining Commitment																	$ 576

 

(1)

The Company’s share of the estimated total costs of the project.

(2)

Net of the estimated allocation to the retail component of the project.

(3)

For the third quarter of 2015, the Company’s cost includes $3.6 million of capitalized interest, $0.9 million of capitalized overhead and $1.0 million of development fees (such development fees reduced G&A expenses).

(4)

To date the Company has received $42.1 million of the expected $45.0 million of insurance proceeds for constructions costs related to the fire that occurred in March 2014.

(5)

Apartment homes are built to condominium standards and average approximately 1,600 square feet.

(6)

Estimated total cost is net of a projected value for low income housing tax credit proceeds and tax exempt bonds.

 

 

 

 

E S S E X  P R O P E R T Y  T R U S T, I N C.
Redevelopment Pipeline - September 30, 2015
(Dollars in thousands, except per apartment home amounts and in footnotes)
					Total		Estimated		Estimated				NOI
			Apartment		Incurred		Remaining		Total		Project		For the nine months ended
Region/Project Name (1)			Homes		To Date		Cost		Cost		Start Date		2015 (5)		2014 (5)
Same-property - Redevelopment Projects (2) (3)
Northern California
Summerhill Park			100		$5,200		$4,700		9,900		Q4 2014
Southern California
Hamptons			215		5,200		18,400		23,600		Q1 2014
Monterras			292		17,700		8,700		26,400		Q1 2014
Seattle Metro
Park Highland			250		3,800		8,700		12,500		Q4 2014
Total Same-property - Redevelopment Projects			857		$     31,900		$     40,500		$     72,400				$ 10,009		$ 8,391
Non-same property - Redevelopment Projects
Southern California
Bunker Hill Towers (4)			456		$     27,900		$     59,500		$     87,400		Q3 2013
Total Non-same property - Redevelopment Projects			456		$     27,900		$     59,500		$     87,400				$  4,346		$ 4,264
(1)	The Company incurred $0.3 million of capitalized interest, $2.0 million of capitalized overhead and $0.2 million of co-investment redevelopment fees related to redevelopment in Q3 2015.
(2)	Redevelopment activities are ongoing at these communities, but the communities have stabilized operations, therefore results are classified in same-property results.
(3)	During the three and nine months ended September 30, 2015, the Company completed the redevelopment of interiors totaling 859 and 1,752 apartment homes for the same-property portfolio and 1,051 and 2,292 apartment homes for the total portfolio, respectively.
(4)	The estimated cost has increased by $11.2 million which reflects the redevelopment of the remaining 228 apartment homes (50% of the property) plus additional revenue generating enhancements to the property.
(5)	Park Highland was acquired on April 1, 2014. As a result, the NOI for the nine months ended September 30, 2014 reflects two quarters of NOI, amounting to $1.3 million, as opposed to the NOI for the nine months ended September 30, 2015, which reflects three quarters of NOI, amounting to $2.1 million.

 

 

 

 

E S S E X  P R O P E R T Y  T R U S T, I N C.
Co-investments - September 30, 2015
(Dollars in thousands)					Essex Ownership Percentage		Apartment Homes		Total Undepreciated Book Value		Debt Amount		Essex Book Value		Weighted Average Borrowing Rate		Remaining Term of Debt (in Years)		For the Three Months Ended  September 30, 2015		For the Nine Months Ended September 30, 2015
Operating Non-Consolidated Joint Ventures																			NOI
	Wesco I, LLC				50.0%		2,275		$   555,482		$   298,904		$  102,811		3.9%		9.5		$  8,620		$  26,977
	Wesco III, LLC				50.0%		993		234,142		119,773		52,248		3.6%		5.0		3,403		9,975
	Wesco IV, LLC				50.0%		1,116		298,948		155,000		63,257		3.9%		5.4		4,411		12,772
	BEXAEW, LLC				50.0%		2,723		523,336		321,837		89,236		3.0%		5.4		8,170		23,367
	CPPIB				55.0%		1,728		608,373		-		335,474		-		-		9,480		23,012
	Palm Valley				50.0%		1,098		370,832		228,765		69,428		2.5%		1.3		5,391		15,036
	Other				28.2% - 50.0%		275		65,529		51,000		6,162		3.6%		4.9		1,196		4,576
	Total Operating Non-Consolidated Joint Ventures						10,208		$ 2,656,642		$ 1,175,279		$  718,616		3.3%		5.6		$ 40,671		$115,715
Development Non-Consolidated Joint Ventures (1)					50.0% - 55.0%		1,988		513,630		87,303		212,892		1.9%		1.2		304		175
	Total Non-Consolidated Joint Ventures						12,196		$ 3,170,272		$ 1,262,582		$  931,508						$ 40,975		$115,890
																			Essex Portion of NOI and Expenses
	NOI																		$ 20,966		$  59,385
	Depreciation																		(12,800)		(36,822)
	Interest expense and other																		(5,197)		(16,387)
	Promote income																		192		192
	Net income from operating co-investments																		$  3,161		$   6,368
																			Income from Preferred Equity Investments
																			For the Three Months Ended  September 30, 2015		For the NineMonths Ended September 30, 2015
															Weighted Average Preferred Return		Weighted Average Expected Term
	Income from preferred equity investments																		$  2,533		$   7,640
	Income from early redemption of preferred equity investments																		1,485		1,954
Preferred Equity Investments (2)													104,535		9.7%		3.2		$  4,018		$   9,594
	Total Co-investments											$	1,036,043						$  7,179		$ 15,962
	(1)		The Company has interests in seven development co-investments, which are detailed on S-11.
	(2)		As of September 30, 2015 the Company has invested in eight preferred equity investments.

 

 

 

 

E S S E X  P R O P E R T Y  T R U S T, I N C.
Assumptions for 2015 FFO Guidance Range
Q3 2015 Earnings Results Supplement
($’s in thousands, except share and per share data) (1)		YTD		2015 Guidance Range
		Actuals		Low End		High End		Changes from Guidance Provided on Q2 ’15 Earnings Release
Net Operating Income (“NOI”)
Total NOI from consolidated communities		$   605,485		$  817,400		$  820,400		Reflects actual results through Q3 ’15, revised same-property NOI growth to a midpoint of 10.6% for the full-year and investment activity through October.
Management Fees		6,434		8,300		8,700
Interest Expense
Interest expense, before capitalized interest		(160,433)		(215,000)		(214,000)		Updated to reflect refinancings and timing of capital markets activities.
Forecasted interest capitalized		12,200		15,400		15,900
Net interest expense		(148,233)		(199,600)		(198,100)
Recurring Income and Expenses
Interest and other income		10,152		13,700		14,100
FFO from co-investments		50,638		68,800		69,900
General and administrative expense		(31,223)		(41,200)		(42,200)
Preferred dividends and non-controlling interest		(10,874)		(14,900)		(14,300)
Total recurring income and expenses		18,693		26,400		27,500
Non-Core Income and Expenses
Promote income from co-investment		192		192		192
Gains on sales of marketable securities and land		598		598		598
Income from early redemption of preferred equity investment		1,954		1,954		1,954
Loss on early retirement of debt		-		(6,200)		(5,800)
Merger and integration expenses		(3,798)		(4,200)		(3,800)
Acquisition and investment related costs		(1,357)		(1,400)		(1,800)
Other non-core adjustments		2,526		2,526		2,526
Total non-core income and expenses		115		(6,530)		(6,130)
Funds from Operations attributable to common stockholders and unitholders		$   482,494		$  645,970		$  652,370
Funds from Operations per diluted Share		$ 7.19		$9.60		$9.69
% Change - Funds from Operations		29.5%		21.7%		22.9%
Funds from Operations excluding non-core items attributable to common stockholders and unitholders		$   482,379		$  652,500		$  658,500
Core Funds from Operations per diluted Share		$ 7.19		$9.70		$9.78
% Change - Core Funds from Operations		14.5%		13.5%		14.6%
Weighted average shares outstanding		67,135		67,300		67,300
(1) All non-core items are excluded from the YTD actuals and included in the non-core income and expense section of the FFO reconciliation.

 

 

 

 

E S S E X  P R O P E R T Y  T R U S T, I N C.

Summary of Apartment Community Acquisitions and Dispositions Activity

Year to date as of September 30, 2015

(Dollars in thousands, except average rent amounts and in footnotes)

Acquisitions

Essex

Apartment

Ownership

Purchase

Price per

Average

Property Name

Location

Homes

Percentage

Entity

Date

Price

Apartment Home

Rent

8th & Hope

Los Angeles, CA

290

100.0%

EPLP

Feb-15

$200,000

$    690

$    3,708

The Huxley (1)

Los Angeles, CA

187

100.0%

EPLP

Mar-15

48,784

522

2,439

The Dylan (1)

Los Angeles, CA

184

100.0%

EPLP

Mar-15

51,266

557

2,646

Q1 2015

661

$300,050

$    605

Reveal (2)

Woodland Hills, CA

438

99.75%

EPLP

Apr-15

$  73,013

$    337

$    1,936

Avant

Los Angeles, CA

247

100.0%

EPLP

Jun-15

99,000

401

2,281

Q2 2015

685

$172,013

$    360

Dispositions (3)

Essex

Apartment

Ownership

Sales

Price per

Property Name

Location

Homes

Percentage

Entity

Date

Price

Apartment Home

Pinnacle South Mountain

Phoenix, AZ

552

100.0%

EPLP

Jan-15

$  63,750

$    115

Q1 2015

552

$  63,750

115

(1)

In March 2015, the Company purchased the joint venture partner’s remaining membership interest in The Huxley and The Dylan co-investments for a purchase price of $100.1 million. The properties are now consolidated.

(2)

In April 2015, the Company purchased the joint venture partner’s 49.5% membership interest in the Reveal co-investment for a purchase price of $73.0 million.

(3)

In March 2015, the Company sold two commercial buildings aggregating 120,000 square feet located in Emeryville, CA for $13.0 million.

 

 

 

 

E S S E X  P R O P E R T Y  T R U S T, I N C.
Preliminary 2016 MSA Level Forecast: Supply, Jobs, and Apartment Market Conditions
		Residential Supply (1)						Job Forecast (2)			Market Forecast (3)
Market		New MF Supply	New SF Supply	Total Supply	% of MF Supply to MF Stock	% of Total Supply to Total Stock		Est. New Jobs Dec-Dec	% Growth		Economic Rent Growth
Los Angeles		10,000	5,700	15,700	0.6%	0.4%		94,600	2.2%		5.4%
Orange		2,850	3,800	6,650	0.7%	0.6%		33,600	2.2%		5.2%
San Diego		3,300	3,800	7,100	0.7%	0.6%		34,500	2.5%		4.9%
Ventura		150	700	850	0.2%	0.3%		5,350	1.8%		5.4%
So. Cal.		16,300	14,000	30,300	0.6%	0.5%		168,050	2.2%		5.2%
San Francisco		4,400	650	5,050	1.1%	0.7%		34,700	3.0%		7.8%
Oakland		1,600	4,300	5,900	0.5%	0.6%		29,300	2.7%		7.0%
San Jose		5,250	2,100	7,350	2.0%	1.1%		31,300	3.0%		7.7%
No. Cal.		11,250	7,050	18,300	1.3%	0.8%		95,300	2.9%		7.5%
Seattle		8,450	7,600	16,050	1.7%	1.3%		43,100	2.7%		4.9%
Weighted Average (4)		36,000	28,650	64,650	1.1%	0.8%		306,450	2.5%		6.0%
All data are based on Essex Property Trust, Inc. forecasts.
U.S. Economic Assumptions: 2016 G.D.P. Growth:  2.8% , 2016 Job Growth: 2.0%
(1) New Residential Supply: MF reflects Company’s internal estimate of actual multifamily deliveries; SF is based on 12 month single family trailing permits reported by the US Census Bureau.
(2) Job Forecast:  refers to the difference between total non-farm industry employment (not seasonally adjusted) projected through full year 2016 vs 2015, expressed as total new jobs and growth rates.
(3) Market Forecast:  the estimated rent growth represents the forecasted change in effective market rents for full year 2016 vs 2015 (excludes submarkets not targeted by Essex).
(4) Weighted Average: markets weighted by scheduled rent in the Company’s Portfolio.