Toggle SGML Header (+)


Section 1: 8-K (FORM 8-K)


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): May 2, 2018

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.)

1100 Park Place, Suite 200
San Mateo, CA 94403
(Address of principal executive offices) (Zip Code)

(650) 655-7800
(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))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter):

Essex Property Trust, Inc.
Emerging growth company
Essex Portfolio, L.P.
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 
 

 




Item 2.02. Results of Operations and Financial Condition.

On May 2, 2018, Essex Property Trust, Inc. (the “Company”) issued a press release and supplemental information announcing the Company’s financial results for the three months ended March 31, 2018. The Company has posted a copy of the press release and supplemental information on the Company’s website at www.essex.com. A copy of the press release and supplemental information is attached hereto as Exhibit 99.1 and incorporated by reference herein.

The information in this report (including Exhibit 99.1) 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.

(d) Exhibits.

The exhibit listed below is being furnished with this Form 8-K.

Press Release and Supplemental Information for the quarter ended March 31, 2018.



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned hereunto duly authorized.

Date:  May 2, 2018

 
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


(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit 99.1
 
 

 


Essex Announces First Quarter 2018 Results

San Mateo, California—May 2, 2018—Essex Property Trust, Inc. (NYSE: ESS) (the “Company”) announced today its first quarter 2018 earnings results and related business activities.

Net Income and Funds from Operations (“FFO”) per diluted share for the quarter ended March 31, 2018 are detailed below. Core FFO excludes acquisition and investment related costs and certain non-routine items.
 
   
Three Months Ended
March 31,
   
%
 
   
2018
   
2017
   
Change
 
Per Diluted Share
                 
  Net Income
 
$
1.38
   
$
2.72
     
-49.3
%
  Total FFO
 
$
3.35
   
$
2.95
     
13.6
%
  Core FFO
 
$
3.09
   
$
2.94
     
5.1
%
                         
 
First Quarter 2018 Highlights:

·
Reported Net Income per diluted share for the first quarter of 2018 of $1.38, compared to $2.72 in the first quarter of 2017.  In the first quarter of 2017, a gain on remeasurement of co-investment of $86.5 million was recognized. No such gain was recognized in the first quarter of 2018.

·
Grew Core FFO per diluted share by 5.1% compared to the first quarter of 2017, achieving the high-end of the guidance range.

·
Achieved same-property gross revenue and net operating income (“NOI”) growth of 3.3% and 3.6%, respectively, compared to the first quarter of 2017.

·
Realized a sequential quarterly increase in same-property revenue growth of 0.7%.

·
Increased the dividend by 6.3% to an annual distribution of $7.44 per common share.

·
Raised the midpoint of guidance for same-property revenue growth for the full-year by 15 basis points to 2.7% and NOI growth by 20 basis points to 2.7%.

·
Revised full-year Net Income per diluted share guidance range to $4.66 to $5.00. Provided Net Income guidance range for the second quarter of $1.02 to $1.12 per diluted share.

·
Revised full-year Total FFO per diluted share guidance range to $12.54 to $12.88, raising the midpoint by $0.28 per share, primarily attributable to promote income from co-investments. Provided Total FFO guidance range for the second quarter of $3.00 to $3.10 per diluted share.

·
Increased full-year Core FFO per diluted share guidance by $0.02 per share at the midpoint to a range of $12.28 to $12.64. Provided Core FFO guidance range for the second quarter of $3.00 to $3.10 per diluted share.
 
 
1100 Park Place Suite 200 San Mateo California 94403 telephone 650 655 7800 facsimile 650 655 7810
www.essex.com



“We have experienced healthy momentum in the early part of 2018, leading to improving revenues driven by occupancy rates across our portfolio. As a result, we performed ahead of the midpoint of initial guidance for Core FFO and same-property revenue growth. Positive job growth in the coastal markets of California and Washington is generating strong demand for housing, demonstrated by extraordinary increases in for-sale housing values and steady rent growth for apartments. Consistent with our first quarter results, we anticipate periodic disruption in apartment pricing power during 2018 from deliveries of new apartment communities offering large lease concessions in certain urban submarkets. We are well-positioned as we enter peak leasing season and remain on track to achieve our 2018 operating plan,” commented Michael Schall, President and CEO of the Company.

Same-Property Operations

Same-property operating results exclude 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 March 31, 2018 compared to the quarter ended March 31, 2017, and the sequential percentage change for the quarter ended March 31, 2018 versus the quarter ended December 31, 2017, by submarket for the Company:


   
Q1 2018 vs. Q1 2017
   
Q1 2018 vs. Q4 2017
   
% of Total
 
   
Gross Revenues
   
Gross Revenues
   
Q1 2018 Revenues
 
Southern California
     
   Los Angeles County
   
2.8
%
   
0.7
%
   
20.3
%
   Orange County
   
3.2
%
   
0.4
%
   
11.2
%
   San Diego County
   
3.8
%
   
0.8
%
   
9.4
%
   Ventura County
   
5.1
%
   
1.6
%
   
4.4
%
   Other Southern California
   
5.0
%
   
3.1
%
   
0.5
%
       Total Southern California
   
3.3
%
   
0.8
%
   
45.8
%
Northern California
     
   Santa Clara County
   
2.0
%
   
0.8
%
   
15.5
%
   Alameda County
   
4.5
%
   
0.6
%
   
7.0
%
   San Mateo County
   
1.9
%
   
1.4
%
   
5.0
%
   Contra Costa County
   
2.8
%
   
0.7
%
   
5.0
%
   San Francisco
   
3.3
%
   
-0.3
%
   
3.3
%
   Other Northern California
   
6.9
%
   
-0.5
%
   
0.3
%
       Total Northern California
   
2.7
%
   
0.7
%
   
36.1
%
Seattle Metro
   
4.5
%
   
0.7
%
   
18.1
%
Same-Property Portfolio
   
3.3
%
   
0.7
%
   
100.0
%
                         

   
Year-Over-Year Growth
 
   
Q1 2018 compared to Q1 2017
 
   
Gross
Revenues
   
Operating
Expenses
   
NOI
 
Southern California
   
3.3
%
   
3.7
%
   
3.2
%
Northern California
   
2.7
%
   
-0.7
%
   
4.0
%
Seattle Metro
   
4.5
%
   
5.7
%
   
4.0
%
Same-Property Portfolio
   
3.3
%
   
2.5
%
   
3.6
%

- 2 -

 
   
Sequential Growth
 
   
Q1 2018 compared to Q4 2017
 
   
Gross
Revenues
   
Operating
Expenses
   
NOI
 
Southern California
   
0.8
%
   
-0.9
%
   
1.4
%
Northern California
   
0.7
%
   
0.8
%
   
0.7
%
Seattle Metro
   
0.7
%
   
-2.8
%
   
2.1
%
Same-Property Portfolio
   
0.7
%
   
-0.7
%
   
1.3
%

   
Financial Occupancies
 
   
Quarter Ended
 
   
3/31/2018
   
12/31/2017
   
3/31/2017
 
Southern California
   
96.9
%
   
96.8
%
   
96.4
%
Northern California
   
97.4
%
   
96.9
%
   
96.6
%
Seattle Metro
   
96.9
%
   
96.4
%
   
96.6
%
Same-Property Portfolio
   
97.1
%
   
96.8
%
   
96.5
%

Investment Activity

In March 2018, the BEXAEW, LLC joint venture operating agreement was amended, and the joint venture was extended. As part of the amendment, the Company received a cash payment for promote income of approximately $20.5 million, which has been included in Net Income and Total FFO but has been excluded from Core FFO.

Development Activity

The following table represents the development community in lease-up during the first quarter of 2018 and the current leasing status as of April 27, 2018.


Project Name
Location
Total Apartment Homes
 
ESS Ownership
 
% Leased as of 4/27/18
 
Status
Station Park Green – Phase I
San Mateo, CA
   
121
     
100
%
   
40
%
In Lease-Up

Liquidity and Balance Sheet

Common Stock

During the first quarter of 2018, the Company repurchased 16,834 shares of its common stock totaling $3.8 million, including commissions, at an average price of $224.13 per share. As of March 31, 2018, the Company had $245.2 million of purchase authority remaining under the stock repurchase plan.

The Company did not issue any shares of common stock through its equity distribution program in the first quarter of 2018.

- 3 -


Balance Sheet

In January 2018, the Company amended one of its unsecured credit facilities, increasing the maximum amount available for borrowing from $1.0 billion to $1.2 billion and extending the maturity to December 2021.

In March 2018, the Company issued $300.0 million of 30-year senior unsecured notes due 2048 at an interest rate per annum of 4.500%.

As of April 27, 2018, the Company had $1.2 billion in undrawn capacity on its unsecured credit facilities.

Guidance

For the first quarter of 2018, the Company exceeded the midpoint of the guidance range provided in its fourth quarter 2017 earnings release for Core FFO by $0.05 per share.

The following table provides a reconciliation of first quarter 2018 Core FFO per share to the midpoint of the guidance provided in the fourth quarter 2017 earnings release, which was dated February 7, 2018.

   
Per Diluted Share
 
Projected midpoint of Core FFO per share for Q1 2018
 
$
3.04
 
    NOI from consolidated communities
   
0.05
 
    FFO from Co-Investments
   
0.01
 
    G&A and other income
   
(0.01
)
Core FFO per share for Q1 2018 reported
 
$
3.09
 

The table below provides key changes to the 2018 full-year assumptions for Net Income, Total FFO, Core FFO per diluted share, and same-property growth. For additional details regarding the Company’s 2018 assumptions, please see page S-14 of the accompanying supplemental financial information. For the second quarter of 2018, the Company has established a range for Core FFO per diluted share of $3.00 to $3.10.

2018 Full-Year Guidance
   
Previous
Range
   
Previous Midpoint
   
Revised
Range
   
Revised Midpoint
 
Per Diluted Share
                       
  Net Income
 
$
4.42 - $4.81
   
$
4.62
   
$
4.66 - $5.00
   
$
4.83
 
  Total FFO
 
$
12.23 - $12.62
   
$
12.43
   
$
12.54 - $12.88
   
$
12.71
 
  Core FFO
 
$
12.24 - $12.64
   
$
12.44
   
$
12.28 - $12.64
   
$
12.46
 
Same-Property Growth
                               
  Gross Revenues
 
2.0% to 3.0%
     
2.5
%
 
2.3% to 3.0%
     
2.7
%
  Operating Expenses
 
2.1% to 3.1%
     
2.6
%
 
2.1% to 3.1%
     
2.6
%
  NOI
 
1.6% to 3.4%
     
2.5
%
 
2.0% to 3.4%
     
2.7
%

- 4 -


Upcoming Events

The Company is scheduled to participate in the National Association of Real Estate Investment Trusts (“NAREIT”) Institutional Investor Forum in New York from June 5 through June 7, 2018, and the Company’s President and Chief Executive Officer, Michael J. Schall, will present at the conference on June 5 at 4:30 p.m. ET. The presentation will be webcast and can be accessed on the Investors section of the Company’s website at www.essex.com. A copy of any materials provided by the Company at the conference will also be made available on the Investors section of the Company’s website.

Conference Call with Management

The Company will host an earnings conference call with management to discuss its quarterly results on Thursday, May 3, 2018 at 9 a.m. PT (12 p.m. ET), which will be broadcast live via the Internet at www.essex.com, and accessible via phone by dialing toll-free, (877) 407-0784, or toll/international, (201) 689-8560. No passcode is necessary.

A rebroadcast of the live call will be available online for 30 days and digitally for 7 days. To access the replay online, go to www.essex.com and select the first quarter 2018 earnings link. To access the replay digitally, dial (844) 512-2921 using the replay pin number 13678159. 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) 655-7800.

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. The Company currently has ownership interests in 247 apartment communities comprising more than 60,000 apartment homes with an additional 7 properties in various stages of active development. Additional information about the Company can be found on the Company’s website at www.essex.com.

This press release and accompanying supplemental financial information has been furnished to the SEC electronically on Form 8-K and can be accessed from the Company’s website at www.essex.com. If you are unable to obtain the information via the Internet, please contact the Investor Relations Department at (650) 655-7800.

Funds from Operations (“FFO”) Reconciliation

FFO, as defined by 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 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 measures of an equity REIT because, together with net income and cash flows, FFO and Core FFO provide investors with additional bases 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.

- 5 -


FFO and Core FFO do 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. These measures 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 and Core FFO do not measure whether cash flow is sufficient to fund all cash needs including principal amortization, capital improvements and distributions to stockholders. FFO and Core FFO also do 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 months ended March 31, 2018 and 2017 (in thousands, except for share and per share amounts):

   
Three Months Ended
March 31,
 
Funds from Operations attributable to common stockholders and unitholders
 
2018
   
2017
 
Net income available to common stockholders
 
$
90,918
   
$
178,964
 
Adjustments:
               
Depreciation and amortization
   
119,105
     
115,503
 
Gains not included in FFO
   
-
     
(112,656
)
Depreciation and amortization add back from unconsolidated co-investments
   
15,859
     
12,854
 
Noncontrolling interest related to Operating Partnership units
   
3,132
     
6,146
 
Depreciation attributable to third party ownership and other
   
(232
)
   
(25
)
Funds from Operations attributable to common stockholders and unitholders
 
$
228,782
   
$
200,786
 
FFO per share – diluted
 
$
3.35
   
$
2.95
 
Expensed acquisition and investment related costs
 
$
57
   
$
556
 
Gain on sale of marketable securities
   
(680
)
   
(1,605
)
Unrealized losses on marketable securities
   
876
     
-
 
Interest rate hedge ineffectiveness (1)
   
56
     
(6
)
Co-investment promote income
   
(20,541
)
   
-
 
Income from early redemption of preferred equity investments
   
(24
)
   
-
 
Insurance reimbursements, legal settlements, and other, net
   
2,433
     
(25
)
Core Funds from Operations attributable to common stockholders and unitholders
 
$
210,959
   
$
199,706
 
Core FFO per share – diluted
 
$
3.09
   
$
2.94
 
Weighted average number of shares outstanding diluted (2)
   
68,318,012
     
67,974,466
 
 
(1)
Interest rate swaps are generally adjusted to fair value through other comprehensive income (loss). However, because certain of our interest rate swaps do not have a 0% LIBOR floor, while related hedged debt in these cases is subject to a 0% LIBOR floor, the portion of the change in fair value of these interest rate swaps attributable to this mismatch is recorded as noncash interest rate hedge ineffectiveness through interest expense.

(2)
Assumes conversion of all outstanding limited partnership units in Essex Portfolio, L.P. (the “Operating Partnership”) into shares of the Company’s common stock and excludes all DownREIT limited partnership units for which the Operating Partnership has the ability and intention to redeem the units for cash and does not consider them to be common stock equivalents.

- 6 -


Net Operating Income (“NOI”) and Same-Property NOI Reconciliations

NOI and Same-Property NOI are considered by management to be important supplemental performance measures to earnings from operations included in the Company’s condensed consolidated statements of income. The presentation of same-property NOI assists with the presentation of the Company’s operations prior to the allocation of depreciation and any corporate-level or financing-related costs. NOI reflects the operating performance of a community and allows for an easy comparison of the operating performance of individual communities or groups of communities. In addition, because prospective buyers of real estate have different financing and overhead structures, with varying marginal impacts to overhead by acquiring real estate, NOI is considered by many in the real estate industry to be a useful measure for determining the value of a real estate asset or group of assets. The Company defines same-property NOI as same-property revenue less same-property operating expenses, including property taxes. Please see the reconciliation of earnings from operations to NOI and same-property NOI, which in the table below is the NOI for stabilized properties consolidated by the Company for the periods presented (dollars in thousands):


   
Three Months Ended
March 31,
 
   
2018
   
2017
 
Earnings from operations
 
$
110,547
   
$
109,231
 
Adjustments:
               
     Corporate-level property management expenses
   
7,770
     
7,509
 
     Depreciation and amortization
   
119,105
     
115,503
 
     Management and other fees from affiliates
   
(2,308
)
   
(2,236
)
     General and administrative
   
14,813
     
10,601
 
     Expensed acquisition and investment related costs
   
57
     
556
 
        NOI
   
249,984
     
241,164
 
     Less: Non-same property NOI
   
(17,255
)
   
(16,596
)
Same-Property NOI
 
$
232,729
   
$
224,568
 


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. Forward-looking statements are statements which are not historical facts, including statements regarding the Company’s expectations, estimates, assumptions, hopes, intentions, beliefs and strategies regarding the future. Words such as “expects,” “assumes,” “anticipates,” “may,” “will,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Such forward-looking statements include, among other things, statements regarding the Company’s intent, beliefs or expectations with respect to the timing of completion of current development and redevelopment projects and the stabilization of such projects, the timing of lease-up and occupancy of its apartment communities, the anticipated operating performance of its apartment communities, the total projected costs of development and redevelopment projects, co-investment activities, qualification as a REIT under the Internal Revenue Code, the real estate markets in the geographies in which the Company’s properties are located and in the United States in general, the adequacy of future cash flows to meet anticipated cash needs, its financing activities and the use of proceeds from such activities, the availability of debt and equity financing, general economic conditions including the potential impacts from the economic conditions, trends affecting the Company’s financial condition or results of operations, changes to U.S. tax laws and regulations in general or specifically related to REITs or real estate, changes to laws and regulations in jurisdictions in which communities the  Company owns are located, and other information that is not historical information.

- 7 -


While the Company’s management believes the assumptions underlying its forward-looking statements are reasonable, such forward-looking statements involve known and unknown risks, uncertainties and other factors, many of which are beyond the Company’s control, which could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The Company cannot assure the future results or outcome of the matters described in these statements; rather, these statements merely reflect the Company’s current expectations of the approximate outcomes of the matters discussed. Factors that might cause the Company’s actual results, performance or achievements to differ materially from those expressed or implied by these forward-looking statements include, but are not limited to, the following: the Company may fail to achieve its business objectives; the actual completion of development and redevelopment projects may be subject to delays; the stabilization dates of such projects may be delayed; the Company may abandon or defer development projects for a number of reasons, including changes in local market conditions which make development less desirable, increases in costs of development, increases in the cost of capital or lack of capital availability, resulting in losses; the total projected costs of current development and redevelopment projects may exceed expectations; such development and redevelopment projects may not be completed; development and redevelopment projects and acquisitions may fail to meet expectations; estimates of future income from an acquired property may prove to be inaccurate; occupancy rates and rental demand may be adversely affected by competition and local economic and market conditions; there may be increased interest rates and operating costs; the Company may be unsuccessful in the management of its relationships with its co-investment partners; future cash flows may be inadequate to meet operating requirements and/or may be insufficient to provide for dividend payments in accordance with REIT requirements; there may be a downturn in general economic conditions, the real estate industry, and the markets in which the Company’s communities are located; changes in laws or regulations; the terms of any refinancing may not be as favorable as the terms of existing indebtedness; and those risks, special considerations, and other factors referred to in the Company’s quarterly reports on Form 10-Q, in the Company’s annual report on Form 10-K for the year ended December 31, 2017, and in the Company’s other filings with the Securities and Exchange Commission (the “SEC”). All forward-looking statements are made as of the date hereof, the Company assumes no obligation to update or supplement this information for any reason, and therefore, they may not represent the Company’s estimates and assumptions after the date of this press release.

Definitions and Reconciliations

Non-GAAP financial measures and certain other capitalized terms, as used in this earnings release, are defined and further explained on pages S-17.1 through S-17.4, “Reconciliations of Non-GAAP Financial Measures and Other Terms,” of the accompanying supplemental financial information.  The supplemental financial information is available on the Company’s website at www.essex.com.

Contact Information
Barb Pak
Group Vice President of Finance & Investor Relations
(650) 655-7800
bpak@essex.com

- 8 -

 
Q1 2018 Supplemental
Table of Contents

 
Page(s)
Consolidated Operating Results
S-1 – S-2
Consolidated Funds From Operations
S-3
Consolidated Balance Sheets
S-4
Debt Summary – March 31, 2018
S-5
Capitalization Data, Public Bond Covenants, Credit Ratings, and Selected Credit Ratios – March 31, 2018
S-6
Portfolio Summary by County – March 31, 2018
S-7
Operating Income by Quarter – March 31, 2018
S-8
Same-Property Revenue Results by County – Quarters ended March 31, 2018 and 2017, and December 31, 2017
S-9
Same-Property Operating Expenses – Quarter – to Date as of March 31, 2018 and 2017
S-10
Development Pipeline – March 31, 2018
S-11
Redevelopment Pipeline – March 31, 2018
S-12
Capital Expenditures – March 31, 2018
S-12.1
Co-investments and Preferred Equity Investments – March 31, 2018
S-13
Assumptions for 2018 FFO Guidance Range
S-14
Reconciliation of Projected EPS, FFO and Core FFO per diluted share
S-14.1
Summary of Apartment Community Acquisitions and Dispositions Activity
S-15
2018 MSA Level Forecast: Supply, Jobs and Apartment Market Conditions
S-16
LinkedIn Worker Migration Trends for the San Francisco Bay Area – April 2017-March 2018
 S-16.1
Reconciliations of Non-GAAP Financial Measures and Other Terms
S-17.1 – S-17.4
 
 
 

 
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
 
(Dollars in thousands, except share and per share amounts)
March 31,
 
     
 
 2018  
 
 2017  
                 
Revenues:
           
 
Rental and other property
$
          344,947
 
$
                     333,168
 
 
Management and other fees from affiliates
 
               2,308
   
                          2,236
 
       
          347,255
   
                    335,404
 
                 
Expenses:
           
 
Property operating
 
            94,963
   
                       92,004
 
 
Corporate-level property management expenses
 
               7,770
   
                          7,509
 
 
Depreciation and amortization
 
            119,105
   
                      115,503
 
 
General and administrative
 
              14,813
   
                         10,601
 
 
Expensed acquisition and investment related costs
 
                     57
   
                              556
 
       
          236,708
   
                     226,173
 
Earnings from operations
 
           110,547
   
                      109,231
 
                 
Interest expense, net (1)
 
           (52,591)
   
                      (51,999)
 
Interest and other income
 
               5,909
   
                          6,764
 
Equity income from co-investments
 
            32,774
   
                        10,899
 
Gain on sale of real estate and land
 
                       -
   
                        26,174
 
Gain on remeasurement of co-investment
 
                       -
   
                       86,482
 
 
Net income
 
            96,639
   
                      187,551
 
Net income attributable to noncontrolling interest
 
              (5,721)
   
                        (8,587)
 
 
Net income available to common stockholders
$
             90,918
 
$
                     178,964
 
                 
Net income per share - basic
$
1.38
 
$
2.73
 
                 
Shares used in income per share - basic
 
66,044,022
   
65,549,484
 
                 
Net income per share - diluted
$
1.38
 
$
2.72
 
                 
Shares used in income per share - diluted
 
66,082,517
   
65,859,490
 
                 
 
(1)       Refer to page S-17.2, the section titled “Interest Expense, Net” for additional information.
       
 
See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information
S-1

 
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
 
Selected Line Item Detail
March 31,
 
(Dollars in thousands)
 
2018  
 
2017  
                 
Rental and other property
           
 
Rental
 
$
         321,661
 
$
         310,122
 
 
Other property
 
           23,286
   
           23,046
 
   
Rental and other property
$
         344,947
 
$
         333,168
 
                 
Property operating expenses
           
 
Real estate taxes
$
           37,713
 
$
           35,868
 
 
Administrative and insurance
 
           20,701
   
           20,261
 
 
Maintenance and repairs
 
           19,624
   
           19,220
 
 
Utilities
 
           16,925
   
           16,655
 
   
Property operating expenses
$
           94,963
 
$
           92,004
 
                 
                 
Interest and other income
           
 
Marketable securities and other interest income
$
            5,851
 
$
            4,880
 
 
Gain on sale of marketable securities
 
               680
   
            1,605
 
 
Unrealized losses on marketable securities (1)
 
              (876)
   
                   -
 
 
Insurance reimbursements, legal settlements, and other, net
 
               254
   
               279
 
   
Interest and other income
$
            5,909
 
$
            6,764
 
                 
Equity income from co-investments
           
 
Equity income from co-investments
$
            4,289
 
$
            5,253
 
 
Income from preferred equity investments
 
            7,920
   
            5,646
 
 
Co-investment promote income
 
           20,541
   
                   -
 
 
Income from early redemption of preferred equity investments
 
                 24
   
                   -
 
   
Equity income from co-investments
$
           32,774
 
$
           10,899
 
                 
Noncontrolling interest
           
 
Limited partners of Essex Portfolio, L.P.
$
            3,132
 
$
            6,146
 
 
DownREIT limited partners’ distributions
 
            1,590
   
            1,550
 
 
Third-party ownership interest
 
               999
   
               891
 
   
Noncontrolling interest
$
            5,721
 
$
            8,587
 
                 
 
(1)       The Company adopted ASU No. 2016-01 “Recognition and Measurement of Financial Assets and Financial Liabiliies”, as of January 1, 2018 using the modified-retrospective method. As a result of this adoption, the Company recognizes mark to market adjustments on equity securities through its income statement on a prospective basis. Prior period results have not been adjusted.
       
 
See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information
S-2

 
 
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 (1)
Three Months Ended
   
(Dollars in thousands, except share and per share amounts and in footnotes)
March 31,
   
     
 
2018  
 
2017
 
% Change
                   
Funds from operations attributable to common stockholders and unitholders (FFO)
             
Net income available to common stockholders
$
               90,918
 
$
              178,964
   
Adjustments:
             
 
Depreciation and amortization
 
             119,105
   
              115,503
   
 
Gains not included in FFO
 
                        -
   
             (112,656)
   
 
Depreciation and amortization add back from unconsolidated co-investments
 
               15,859
   
                12,854
   
 
Noncontrolling interest related to Operating Partnership units
 
                 3,132
   
                 6,146
   
 
Depreciation attributable to third party ownership and other (2)
 
                   (232)
   
                     (25)
   
   
Funds from operations attributable to common stockholders and unitholders
$
             228,782
 
$
              200,786
   
   
FFO per share-diluted
$
3.35
 
$
2.95
 
13.6%
                   
Components of the change in FFO
             
Non-core items:
             
Expensed acquisition and investment related costs
$
                     57
 
$
                    556
   
Gain on sale of marketable securities
 
                   (680)
   
                (1,605)
   
Unrealized losses on marketable securities
 
                    876
   
                        -
   
Interest rate hedge ineffectiveness (3)
 
                     56
   
                       (6)
   
Co-investment promote income
 
              (20,541)
   
                        -
   
Income from early redemption of preferred equity investments
 
                    (24)
   
                        -
   
Insurance reimbursements, legal settlements, and other, net
 
                 2,433
   
                     (25)
   
   
Core funds from operations attributable to common stockholders and unitholders
$
             210,959
 
$
              199,706
   
   
Core FFO per share-diluted
$
3.09
 
$
2.94
 
5.1%
                   
Changes in core items:
             
Same-property NOI
$
                 8,161
         
Non-same property NOI
 
                    659
         
Management and other fees, net
 
                     72
         
FFO from co-investments
 
                 4,315
         
Interest and other income
 
                    971
         
Interest expense
 
                   (654)
         
General and administrative
 
                (1,779)
         
Corporate-level property management expenses
 
                    261
         
Other items, net
 
                   (753)
         
     
$
               11,253
         
                   
Weighted average number of shares outstanding diluted (4)
 
68,318,012
   
67,974,466
   
(1)
Refer to page S-17.1, the section titled “Funds from Operations (“FFO”) for additional information on the Company’s definition and use of FFO and Core FFO.
(2)
The Company consolidates certain co-investments. The noncontrolling interest’s share of net operating income in these investments for the three months ended March 31, 2018 was $1.2 million.
(3)
Interest rate swaps are generally adjusted to fair value through other comprehensive income (loss). However, because certain of our interest rate swaps do not have a 0% LIBOR floor, while related hedged debt in these cases is subject to a 0% LIBOR floor, the portion of the change in fair value of these interest rate swaps attributable to this mismatch, if any, is recorded as noncash interest rate hedge ineffectiveness through interest expense.
(4)
Assumes conversion of all outstanding limited partnership units in the Operating Partnership into shares of the Company’s common stock and excludes all DownREIT limited partnership units for which the Operating Partnership has the ability and intention to redeem the units for cash and does not consider them to be common stock equivalents.
 
 
See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information
S-3

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)
         
         
March 31, 2018
   
December 31, 2017
                 
 
Real Estate:
         
   
Land and land improvements
$
                 2,719,064
 
$
                    2,719,064
   
Buildings and improvements
 
                10,657,671
   
                  10,629,767
         
                13,376,735
   
                  13,348,831
   
Less:  accumulated depreciation
 
                (2,888,130)
   
                   (2,769,297)
         
                10,488,605
   
                  10,579,534
 
Real estate under development
 
                    395,710
   
                      355,735
 
Co-investments
 
                 1,290,957
   
                    1,155,984
         
                12,175,272
   
                  12,091,253
 
Cash and cash equivalents, including restricted cash
 
                    139,078
   
                        61,126
 
Marketable securities
 
                    197,745
   
                      190,004
 
Notes and other receivables
 
                      70,525
   
                      100,926
 
Prepaid expenses and other assets
 
                      60,047
   
                        52,397
     
Total assets
$
                12,642,667
 
$
                  12,495,706
                 
 
Unsecured debt, net
$
                 3,797,923
 
$
                    3,501,709
 
Mortgage notes payable, net
 
                 1,921,047
   
                    2,008,417
 
Lines of credit
 
                               -
   
                      179,000
 
Distributions in excess of investments in co-investments
 
                               -
   
                        36,726
 
Other liabilities
 
                    390,379
   
                      333,823
     
Total liabilities
 
                 6,109,349
   
                    6,059,675
 
Redeemable noncontrolling interest
 
                      41,159
   
                        39,206
 
Equity:
           
   
Common stock
 
                              7
   
                                7
   
Additional paid-in capital
 
                 7,127,248
   
                    7,129,571
   
Distributions in excess of accumulated earnings
 
                   (743,773)
   
                     (833,726)
   
Accumulated other comprehensive loss, net
 
                     (14,709)
   
                       (18,446)
     
Total stockholders’ equity
 
                 6,368,773
   
                    6,277,406
   
Noncontrolling interest
 
                    123,386
   
                      119,419
     
Total equity
 
                 6,492,159
   
                    6,396,825
     
Total liabilities and equity
$
                12,642,667
 
$
                  12,495,706
 
 
See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information
S-4

 
E S S E X  P R O P E R T Y  T R U S T,  I N C.    
                                                   
Debt Summary - March 31, 2018              
(Dollars in thousands, except in footnotes)             
   
                                                   
                                                   
                       
Scheduled principal payments, unamortized premiums (discounts) and (debt issuance costs) are as follows - excludes lines of credit:
             
Weighted Average
                               
       
Balance
 Outstanding
 
Interest
Rate
 Maturity
 in Years
       
Unsecured
 
Secured
   
Total
   
Weighted
Average
Interest Rate
   
Percentage of Total Debt
Unsecured Debt, net
                                             
 
Bonds private - fixed rate
 
$
275,000
 
4.5%
 
2.8
   
2018
 
 $
                -
 
 $
        126,740
 
 $
        126,740
 
5.5%
 
2.2%
 
Bonds public - fixed rate
   
3,200,000
 
3.8%
 
8.4
   
2019
   
          75,000
   
        552,016
   
        627,016
 
4.1%
 
11.0%
 
Term loan (1)
   
350,000
 
2.5%
 
3.9
   
2020
   
                -
   
        694,921
   
        694,921
 
4.8%
 
12.2%
 
Unamortized net discounts and debt issuance costs
   
       (27,077)
 
          -
 
          -
   
2021
   
        500,000
   
          44,846
   
        544,846
 
4.3%
 
9.5%
         
3,797,923
 
3.7%
 
7.6
   
2022
   
        650,000
   
          42,466
   
        692,466
 
3.1%
 
12.1%
Mortgage Notes Payable, net
                 
2023
   
        600,000
   
           2,188
   
        602,188
 
3.6%
 
10.5%
 
Fixed rate - secured
   
1,626,714
 
4.5%
 
3.2
   
2024
   
        400,000
   
           2,317
   
        402,317
 
4.0%
 
7.0%
 
Variable rate - secured (2)
   
270,083
 
2.1%
 
18.5
   
2025
   
        500,000
   
          16,056
   
        516,056
 
3.6%
 
9.0%
 
Unamortized premiums and debt issuance costs, net
   
24,250
 
          -
 
          -
   
2026
   
        450,000
   
          55,091
   
        505,091
 
3.4%
 
8.8%
   
Total mortgage notes payable
   
1,921,047
 
4.2%
 
5.3
   
2027
   
        350,000
   
        155,500
   
        505,500
 
3.4%
 
8.8%
                       
2028
   
                -
   
           2,934
   
           2,934
 
3.0%
 
0.1%
Unsecured Lines of Credit
                 
Thereafter
   
        300,000
   
        201,722
   
        501,722
 
3.7%
 
8.8%
 
Line of credit (3)
   
                -
 
2.5%
       
Subtotal
   
3,825,000
   
1,896,797
   
5,721,797
 
3.9%
 
100.0%
 
Line of credit (4)
   
                -
 
2.5%
       
Debt Issuance Costs
   
         (20,472)
   
          (4,958)
   
         (25,430)
 
NA
 
NA
   
Total lines of credit
   
                -
 
2.5%
       
(Discounts)/Premiums
   
          (6,605)
   
          29,208
   
          22,603
 
NA
 
NA
                       
Total
 
$
3,797,923
 
$
1,921,047
 
$
5,718,970
 
3.9%
 
100.0%
   
Total debt, net
 
$
5,718,970
 
3.9%
                                   
                                                   
                                                   
Capitalized interest for the three months ended March 31, 2018 was approximately $4.2 million.
                       
                                                   
(1)
The unsecured term loan has a variable interest rate of LIBOR plus 0.95%. The Company has interest rate swap contracts with an aggregate notional amount of $175 million, which effectively converts the interest rate on $175 million of the term loan to a fixed rate of 2.3%.
(2)
$270.1 million of variable rate debt is tax exempt to the note holders. $9.9 million is subject to interest rate cap protection agreements.
                 
(3)
This unsecured line of credit facility has a capacity of $1.2 billion. The line matures in December 2021 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 0.875%.
(4)
This unsecured line of credit facility has a capacity $35.0 million and is scheduled to mature in January 2020. 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 0.875%.
 
See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information
S-5

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 - March 31, 2018
 
(Dollars and shares in thousands, except per share amounts)
   
                                 
                                 
Capitalization Data
           
 Public Bond Covenants (1)
 
Actual
 
Requirement
   
Total debt, net
     
$
5,718,970
                   
                 
Adjusted Debt to Adjusted Total Assets:
 
37%
 
< 65%
   
Common stock and potentially dilutive securities
                       
 
Common stock outstanding
   
66,044
                   
 
Limited partnership units (1)
   
2,235
                   
 
Options-treasury method
   
53
   
Secured Debt to Adjusted Total Assets:
 
12%
 
< 40%
   
Total shares of common stock and potentially dilutive securities
 
68,332
                   
                                 
Common stock price per share as of March 31, 2018
$
240.68
                   
                 
Interest Coverage:
 
427%
 
> 150%
   
Total equity capitalization
 
$
16,446,146
                   
                                 
Total market capitalization
 
$
22,165,116
   
Unsecured Debt Ratio (2):
 
280%
 
> 150%
   
                                 
Ratio of debt to total market capitalization
   
25.8%
                   
                 
Selected Credit Ratios (3)
 
Actual
       
Credit Ratings
                             
Rating Agency
 
Rating
Outlook
       
Net Indebtedness Divided by Adjusted EBITDAre, normalized and annualized:
 
5.6
       
Fitch
 
BBB+
Stable
                       
Moody’s
 
Baa1
Stable
       
Unencumbered NOI to Adjusted Total NOI:
 
72%
       
Standard & Poor’s
BBB+
Stable
                       
                 
(1)
Refer to page S-17.3 for additional information on the Company’s Public Bond Covenants.
       
(1)
Assumes conversion of all outstanding limited partnership units in the Operating Partnership into shares of the Company’s common stock.
   
(2)
Unsecured Debt Ratio is unsecured assets (excluding investments in co-investments) divided by unsecured indebtedness.
                 
(3)
Refer to pages S-17.1 to S-17.4, the section titled “Reconciliations of Non-GAAP Financial Measures and Other Terms” for additional information on the Company’s Selected Credit Ratios.
                                 
 
See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information
S-6

E S S E X  P R O P E R T Y  T R U S T,  I N C.    
                                             
Portfolio Summary by County as of March 31, 2018         
                                             
                                             
       
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
 
9,387
 
1,563
 
                  200
 
11,150
 
 $         2,385
 
 $                  2,053
 
 $  2,358
 
19.4%
 
12.5%
 
18.8%
 
Orange County
 
5,553
 
1,149
 
                       -
 
6,702
 
            2,131
 
                    1,844
 
     2,104
 
10.6%
 
8.5%
 
10.4%
 
San Diego County
 
5,203
 
616
 
                       -
 
5,819
 
            1,882
 
                    1,736
 
     1,873
 
8.9%
 
4.4%
 
8.4%
 
Ventura County
 
2,577
 
693
 
                       -
 
3,270
 
            1,759
 
                    2,082
 
     1,800
 
4.4%
 
6.3%
 
4.6%
 
Other Southern CA
 
623
 
249
 
                       -
 
872
 
            1,597
 
                    1,594
 
     1,596
 
0.8%
 
1.6%
 
0.9%
Total Southern California
 
23,343
 
4,270
 
                  200
 
27,813
 
            2,122
 
                    1,932
 
     2,106
 
44.1%
 
33.3%
 
43.1%
                                             
Northern California
                                       
 
Santa Clara County
 
7,356
 
2,266
 
745
 
10,367
 
            2,667
 
                    2,796
 
     2,685
 
18.3%
 
24.9%
 
19.1%
 
Alameda County
 
2,954
 
1,983
 
                       -
 
4,937
 
            2,489
 
                    2,321
 
     2,445
 
6.7%
 
19.5%
 
7.9%
 
San Mateo County
 
1,951
 
197
 
371
 
2,519
 
            2,880
 
                    2,871
 
     2,871
 
4.9%
 
2.3%
 
4.6%
 
Contra Costa County
 
2,270
 
49
 
                       -
 
2,319
 
            2,279
 
                    4,557
 
     2,303
 
4.9%
 
0.6%
 
4.5%
 
San Francisco
 
1,343
 
463
 
545
 
2,351
 
            3,062
 
                    3,250
 
     3,092
 
3.6%
 
6.2%
 
3.8%
 
Other Northern CA
 
96
 
                           -
 
                       -
 
96
 
            2,885
 
                           -
 
     2,885
 
0.3%
 
                           -
 
0.3%
Total Northern California
 
15,970
 
4,958
 
1,661
 
22,589
 
            2,639
 
                    2,669
 
     2,644
 
38.7%
 
53.5%
 
40.2%
                                             
Seattle Metro
 
10,238
 
1,582
 
                       -
 
11,820
 
            1,800
 
                    1,797
 
     1,800
 
17.2%
 
13.2%
 
16.7%
                                             
Total
   
49,551
 
10,810
 
1,861
 
62,222
 
 $         2,222
 
 $                  2,255
 
 $  2,226
 
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 March 31, 2018. See the section titled “Net Operating Income (“NOI”) and Same-Property NOI Reconciliations” on page S-17.3.
(3)
Includes one rental income producing development community in lease-up which consists of 121 apartment homes.   
(4)
Includes all apartment communities with rents.       
(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.    
See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information
S-7

 
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
Q1 ‘18
 
Q4 ‘17
 
Q3 ‘17
 
Q2 ‘17
 
Q1 ‘17
                           
Rental and other property revenues:
                       
Same-property
 
          47,242
 
 $            322,385
 
 $            320,004
 
 $            319,565
 
 $            314,813
 
 $            312,024
Acquisitions (2)
 
           1,328
 
                10,383
 
                10,435
 
                10,498
 
                10,170
 
                  8,186
Development (3)
 
              121
 
                       19
 
                       -
 
                         -
 
                       -
 
                       -
Redevelopment
 
              621
 
                  5,024
 
                  5,005
 
                  4,913
 
                  4,909
 
                  4,814
Non-residential/other, net (4)
 
              239
 
                  7,136
 
                  6,973
 
                  6,998
 
                  6,874
 
                  8,144
Total rental and other property revenues
 
          49,551
 
               344,947
 
               342,417
 
               341,974
 
               336,766
 
               333,168
                           
Property operating expenses: (5)
                       
Same-property
     
                89,656
 
                90,273
 
                90,935
 
                87,480
 
                87,456
Acquisitions (2)
     
                  3,074
 
                  3,116
 
                  3,220
 
                  2,926
 
                  2,600
Development (3)
     
                       64
 
                         -
 
                         -
 
                         -
 
                         -
Redevelopment
     
                  1,469
 
                  1,528
 
                  1,529
 
                  1,392
 
                  1,452
Non-residential/other, net (4) (6)
     
                     700
 
                  1,157
 
                     880
 
                 (1,054)
 
                     496
Total property operating expenses
     
                94,963
 
                96,074
 
                96,564
 
                90,744
 
                92,004
                           
Net operating income (NOI):
                       
Same-property
     
               232,729
 
               229,731
 
               228,630
 
               227,333
 
               224,568
Acquisitions (2)
     
                  7,309
 
                  7,319
 
                  7,278
 
                  7,244
 
                  5,586
Development (3)
     
                      (45)
 
                         -
 
                         -
 
                         -
 
                       -
Redevelopment
     
                  3,555
 
                  3,477
 
                  3,384
 
                  3,517
 
                  3,362
Non-residential/other, net (4)
     
                  6,436
 
                  5,816
 
                  6,118
 
                  7,928
 
                  7,648
Total NOI
     
 $            249,984
 
 $            246,343
 
 $            245,410
 
 $            246,022
 
 $            241,164
                           
Same-property metrics
                       
Operating margin
     
72%
 
72%
 
72%
 
72%
 
72%
Annualized turnover (7)
     
40%
 
46%
 
61%
 
54%
 
46%
Financial occupancy (8)
     
97.1%
 
96.8%
 
96.7%
 
96.4%
 
96.5%
(1)
Includes consolidated communities only.
                       
(2)
Acquisitions include properties acquired which did not have comparable stabilized results as of January 1, 2017.
       
(3)
Development includes properties developed which did not have comparable stabilized results as of January 1, 2017.
       
(4)
Other real estate assets consists mainly of retail space, commercial properties, boat slips, held for sale properties, disposition properties, and student housing.
(5)
Starting with the first quarter of 2018, the Company no longer includes corporate-level property management expenses in total property operating expenses. Prior period amounts have been reclassified to conform to the current year’s presentation.
(6)
Includes other expenses and intercompany eliminations pertaining to self-insurance. In Q2 ‘17, there were $2.0 million in reductions to operating expenses related to changes in prior period property tax estimates.
(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).
See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information
S-8

 
E S S E X  P R O P E R T Y  T R U S T,  I N C.                
                                                         
Same-Property Results by County - First Quarter 2018 vs. First Quarter 2017 and Fourth Quarter 2017         
(Dollars in thousands, except average monthly rental rates)                
                                                         
                                                         
               
Average Monthly Rental Rate
 
Financial Occupancy
     
Gross Revenues
     
Sequential Gross Revenues
Region - County
 
Apartment
Homes
 
Q1 ‘18 %
of Actual
NOI
 
Q1 ‘18
 
Q1 ‘17
 
% Change
 
Q1 ‘18
 
Q1 ‘17
 
% Change
 
Q1 ‘18
 
Q1 ‘17
 
% Change
 
Q4 ‘17
 
% Change
                                                         
Southern California
                                                   
 
Los Angeles County
 
8,931
 
19.6%
 
 $   2,396
 
 $   2,356
 
1.7%
 
96.7%
 
96.1%
 
0.6%
 
 $    65,291
 
 $   63,530
 
2.8%
 
 $      64,811
 
0.7%
 
Orange County
 
5,553
 
11.1%
 
      2,131
 
      2,072
 
2.8%
 
96.8%
 
96.5%
 
0.3%
 
       36,074
 
      34,962
 
3.2%
 
        35,945
 
0.4%
 
San Diego County
 
5,203
 
9.3%
 
      1,882
 
      1,823
 
3.2%
 
97.0%
 
96.4%
 
0.6%
 
       30,211
 
      29,100
 
3.8%
 
        29,973
 
0.8%
 
Ventura County
 
2,577
 
4.6%
 
      1,759
 
      1,692
 
4.0%
 
97.7%
 
97.2%
 
0.5%
 
       14,293
 
      13,593
 
5.1%
 
        14,069
 
1.6%
 
Other Southern CA
 
384
 
0.4%
 
      1,274
 
      1,226
 
3.9%
 
97.1%
 
95.9%
 
1.3%
 
         1,549
 
        1,475
 
5.0%
 
          1,502
 
3.1%
Total Southern California
 
22,648
 
45.0%
 
      2,121
 
      2,069
 
2.5%
 
96.9%
 
96.4%
 
0.5%
 
     147,418
 
    142,660
 
3.3%
 
       146,300
 
0.8%
                                                         
Northern California
                                                   
 
Santa Clara County
 
6,028
 
16.3%
 
      2,688
 
      2,652
 
1.4%
 
97.6%
 
97.1%
 
0.5%
 
       49,853
 
      48,881
 
2.0%
 
        49,455
 
0.8%
 
Alameda County
 
2,954
 
7.0%
 
      2,489
 
      2,453
 
1.5%
 
97.1%
 
94.8%
 
2.4%
 
       22,649
 
      21,667
 
4.5%
 
        22,504
 
0.6%
 
San Mateo County
 
1,830
 
5.1%
 
      2,838
 
      2,797
 
1.5%
 
97.7%
 
97.7%
 
0.0%
 
       16,158
 
      15,861
 
1.9%
 
        15,931
 
1.4%
 
Contra Costa County
 
2,270
 
5.1%
 
      2,279
 
      2,242
 
1.7%
 
97.8%
 
97.2%
 
0.6%
 
       16,072
 
      15,635
 
2.8%
 
        15,953
 
0.7%
 
San Francisco
 
1,178
 
3.1%
 
      2,953
 
      2,921
 
1.1%
 
96.2%
 
95.7%
 
0.5%
 
       10,666
 
      10,327
 
3.3%
 
        10,694
 
-0.3%
 
Other Northern CA
 
96
 
0.3%
 
      2,885
 
      2,738
 
5.4%
 
99.6%
 
97.5%
 
2.2%
 
           856
 
          801
 
6.9%
 
             860
 
-0.5%
Total Northern California
 
14,356
 
36.9%
 
      2,625
 
      2,587
 
1.5%
 
97.4%
 
96.6%
 
0.8%
 
     116,254
 
    113,172
 
2.7%
 
       115,397
 
0.7%
                                                         
Seattle Metro
 
10,238
 
18.1%
 
      1,800
 
      1,734
 
3.8%
 
96.9%
 
96.6%
 
0.3%
 
       58,713
 
      56,192
 
4.5%
 
        58,307
 
0.7%
                                                         
Total Same-Property
 
47,242
 
100.0%
 
 $   2,205
 
 $   2,154
 
2.4%
 
97.1%
 
96.5%
 
0.6%
 
 $  322,385
 
 $ 312,024
 
3.3%
 
 $    320,004
 
0.7%
                                                         
See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information
S-9

 
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-to-Date as of March 31, 2018 and 2017
(Dollars in thousands)   
                 
                 
   
Based on 47,242 apartment homes
                 
   
Q1 ‘18
 
Q1 ‘17
 
% Change
 
% of Op. Ex.
                 
Same-property operating expenses:
               
Real estate taxes
 
 $      34,764
 
 $      33,394
 
4.1%
 
38.8%
Maintenance and repairs
 
         18,410
 
         18,145
 
1.5%
 
20.5%
Administrative
 
         17,588
 
         16,820
 
4.6%
 
19.6%
Utilities
 
         15,799
 
         15,413
 
2.5%
 
17.6%
Insurance
 
           3,095
 
           3,684
 
-16.0%
 
3.5%
Total same-property operating expenses
 
 $      89,656
 
 $      87,456
 
2.5%
 
100.0%
                 
                 
See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information
S-10

 
E S S E X  P R O P E R T Y  T R U S T,  I N C.                     
                                                           
Development Pipeline - March 31, 2018                       
(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 (3)
Construction Start
Initial Occupancy
Stabilized Operations
                                                           
Development Projects - Consolidated (4)
                                                       
 
Station Park Green - Phase I (5)
 
San Mateo, CA
 
100%
 
          121
 
        28,000
 
 $         96
 
 $           2
 
 $         98
 
 $             98
 
 $       661
 
3%
 
29%
 
Q3 2015
 
Q1 2018
 
Q3 2018
 
Station Park Green - Phase II (5)
 
San Mateo, CA
 
100%
 
          199
 
                -
 
           69
 
            72
 
          141
 
              141
 
          709
 
0%
 
0%
 
Q2 2017
 
Q2 2019
 
Q4 2019
 
Station Park Green - Phase III (5)
 
San Mateo, CA
 
100%
 
          172
 
                -
 
           51
 
            73
 
          124
 
              124
 
          721
 
0%
 
0%
 
Q3 2017
 
Q3 2019
 
Q1 2020
 
Gateway Village (6)
 
Santa Clara, CA
 
100%
 
          476
 
                -
 
           96
 
          130
 
          226
 
              226
 
          475
 
0%
 
0%
 
Q3 2016
 
Q1 2019
 
Q1 2020
 
Hollywood (7)
 
Hollywood, CA
 
100%
 
          200
 
         4,700
 
           29
 
            76
 
          105
 
              105
 
          500
 
0%
 
0%
 
Q4 2017
 
Q1 2020
 
Q3 2020
Total Development Projects - Consolidated
         
       1,168
 
        32,700
 
          341
 
          353
 
          694
 
              694
 
          574
                   
                                                           
Land Held for Future Development - Consolidated
                                                   
 
Other Projects (5)(7)
 
Various
 
100%
         
           66
 
               -
 
           66
 
                66
                       
Total Development Pipeline - Consolidated
         
       1,168
 
        32,700
 
          407
 
          353
 
          760
 
              760
                       
                                                           
Development Projects - Joint Venture (4)
                                                       
 
Ohlone
 
San Jose, CA
 
50%
 
          269
 
                -
 
           41
 
            95
 
          136
 
                68
 
          506
 
0%
 
0%
 
Q3 2017
 
Q3 2019
 
Q2 2020
 
500 Folsom (8)
 
San Francisco, CA
 
50%
 
          545
 
         6,000
 
          174
 
          241
 
          415
 
              208
 
          751
 
0%
 
0%
 
Q4 2015
 
Q2 2019
 
Q4 2020
Total Development Projects - Joint Venture
         
814
 
6,000
 
          215
 
          336
 
          551
 
              276
 
 $       670
                   
                                                           
Grand Total - Development Pipeline
         
       1,982
 
        38,700
 
 $       622
 
 $        689
 
 $    1,311
 
           1,036
                       
Essex Cost Incurred to Date - Pro Rata
                             
             (515)
                       
Essex Remaining Commitment
                             
 $           521
                       
 
(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)
Calculations are based on multifamily operations only and are as of March 31, 2018. As of April 27, 2018, Station Park Green - Phase I was 40% leased and 23% occupied.   
(4)
For the first quarter of 2018, the Company’s cost includes $4.1 million of capitalized interest, $1.9 million of capitalized overhead and $0.7 million of development fees (such development fees reduced G&A expenses).
(5)
Development of Station Park Green - Phases I, II, and III are reflected under Development Projects - Consolidated. Costs incurred for Station Park Green - Phase IV, which consists of 107 apartment homes, are included in Land Held for Future Development - Consolidated.
(6)
Cost incurred to date does not include a deduction of $4.7 million for accumulated depreciation recorded during the period when the property was held as a retail operating asset.    
(7)
Cost incurred to date does not include a deduction of $6.3 million for accumulated depreciation recorded during the period when one property was held as a retail operating asset.     
(8)
Estimated costs incurred to date and total cost is net of a projected value for low income housing tax credit proceeds and the value of the tax exempt bond structure.     
                                                           
 
See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information
S-11

 
E S S E X  P R O P E R T Y  T R U S T,  I N C.         
                               
Redevelopment Pipeline - March 31, 2018        
(Dollars in thousands)     
                               
         
Total
 
Estimated
 
Estimated
     
NOI
     
Apartment
 
Incurred
 
Remaining
 
Total
 
Project
 
Three Months Ended
Region/Project Name
 
 Homes
 
To Date
 
Cost
 
Cost
 
Start Date
 
2018
 
2017
                               
Same-Property - Redevelopment Projects (1)
                           
Southern California
                           
Hamptons
 
               215
 
 $     19,300
 
 $       4,300
 
 $     23,600
 
Q1 2014
       
Kings Road
 
               196
 
         3,500
 
8,700
 
        12,200
 
Q4 2016
       
The Palms at Laguna Niguel
 
               460
 
         3,400
 
4,800
 
         8,200
 
Q4 2016
       
Northern California
                           
Crow Canyon
 
               400
 
         5,500
 
1,900
 
         7,400
 
Q1 2017
       
Total Same-Property - Redevelopment Projects
 
            1,271
 
 $     31,700
 
 $     19,700
 
 $     51,400
     
 $         6,002
 
 $        5,719
                               
Non-Same Property - Redevelopment Projects
                           
Southern California
                           
Bunker Hill Towers
 
               456
 
 $     69,100
 
 $     18,300
 
 $     87,400
 
Q3 2013
       
Total Non-Same Property - Redevelopment Projects
 
               456
 
 $     69,100
 
 $     18,300
 
 $     87,400
     
 $         2,156
 
 $        1,972
                               
 
(1)
Redevelopment activities are ongoing at these communities, but the communities have stabilized operations, therefore results are classified in same-property results.
                               
 
See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information
S-12

 
E S S E X  P R O P E R T Y  T R U S T,  I N C.      
   
                               
Capital Expenditures - March 31, 2018        
   
(Dollars in thousands, except in footnotes and per apartment home amounts)