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Section 1: 8-K (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): July 24, 2019

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))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
 
Trading
Symbol(s)
 
Name of each exchange on which registered
Common Stock, $0.0001 par value (Essex Property Trust, Inc.)
 
ESS
 
New York Stock Exchange


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 July 24, 2019 Essex Property Trust, Inc. (the “Company”) issued a press release and supplemental information announcing the Company’s financial results for the quarter and six months ended June 30, 2019. 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 and six months ended June 30, 2019.



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:  July 24, 2019

 
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 PROPERTY TRUST, INC .1100 Park Place, Suite 200 San Mateo, CA 94403(650) 655-7800  INVESTOR RELATIONS Rylan BurnsDirector of Investor Relations (650) 655-7800      Brio300 Apartment Homes Walnut Creek, CA  SECOND QUARTER 2019Earnings Release & Supplemental Financial Information                         
 





Essex Announces Second Quarter 2019 Results

San Mateo, California—July 24, 2019—Essex Property Trust, Inc. (NYSE: ESS) (the “Company”) announced today its second quarter 2019 earnings results and related business activities.

Net Income, Funds from Operations (“FFO”), and Core FFO per diluted share for the quarter ended June 30, 2019 are detailed below.

 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
%
%
 
2019
2018
Change
2019
2018
Change
Per Diluted Share
           
  Net Income
$1.40
$1.52
-7.9%
$3.21
$2.90
10.7%
  Total FFO
$3.36
$3.17
6.0%
$6.69
$6.52
2.6%
  Core FFO
$3.33
$3.14
6.1%
$6.57
$6.23
5.5%
             

Second Quarter 2019 Highlights:


Reported Net Income per diluted share for the second quarter of 2019 of $1.40, compared to $1.52 in the second quarter of 2018. The decrease is attributable to gains on sale of real estate in the second quarter of 2018.


Grew Core FFO per diluted share by 6.1% compared to the second quarter of 2018, exceeding the midpoint of the guidance range by $0.11.


Achieved same-property gross revenue and net operating income (“NOI”) growth of 3.5% and 4.1%, respectively, compared to the second quarter of 2018.


Raised the midpoint of full-year guidance for same-property gross revenues and NOI by 0.25% and 0.65%, respectively. Full-year same-property expense guidance was lowered by 0.80% at the midpoint, primarily attributable to favorable tax assessments in Washington.


Increased full-year Net Income per diluted share guidance range to $5.84 to $6.02. Provided Net Income guidance range for the third quarter of $1.27 to $1.37 per diluted share.


Increased full-year Total FFO per diluted share guidance range to $13.31 to $13.49. Provided Total FFO guidance range for the third quarter of $3.26 to $3.36 per diluted share.


Raised full-year Core FFO per diluted share guidance by $0.20 per share at the midpoint to a range of $13.19 to $13.37. Provided Core FFO guidance range for the third quarter of $3.26 to $3.36 per diluted share.

1100 Park Place Suite 200 San Mateo California 94403 telephone 650 655 7800 facsimile 650 655 7810
www.essex.com

We are pleased to report strong second quarter results with Core FFO per share growth exceeding the high-end of our guidance range. Market conditions remain favorable, particularly in technology - driven Northern California and Seattle, where job growth continues to exceed the national average. Personal income growth continues to outpace rents, improving rental affordability in all of our markets. Better market conditions, favorable tax assessments, and an improving cost of capital have resulted in a meaningful increase to the midpoint of our full-year Core FFO per share guidance range,” 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 June 30, 2019 compared to the quarter ended June 30, 2018, and the sequential percentage change for the quarter ended June 30, 2019 compared to the quarter ended March 31, 2019, by submarket for the Company:

 
Q2 2019 vs. Q2 2018
Q2 2019 vs. Q1 2019
% of Total
 
Gross Revenues
Gross Revenues
Q2 2019 Revenues
Southern California
 
   Los Angeles County
3.4%
0.3%
19.0%
   Orange County
2.8%
0.7%
10.9%
   San Diego County
3.2%
1.2%
8.5%
   Ventura County and Other
3.2%
0.6%
4.9%
       Total Southern California
3.2%
0.6%
43.3%
Northern California
 
   Santa Clara County
3.9%
0.8%
18.8%
   Alameda County
3.0%
0.6%
6.9%
   San Mateo County
4.4%
0.5%
5.0%
   Contra Costa County
2.7%
0.6%
4.8%
   San Francisco
5.9%
2.6%
3.3%
       Total Northern California
3.8%
0.9%
38.8%
Seattle Metro
3.5%
1.0%
17.9%
Same-Property Portfolio
3.5%
0.8%
100.0%

 
Year-Over-Year Growth
 
Year-Over-Year Growth
 
Q2 2019 compared to Q2 2018
 
YTD 2019 compared to YTD 2018
 
Gross
Revenues
Operating
Expenses
NOI
 
Gross
Revenues
Operating
Expenses
NOI
Southern California
3.2%
4.5%
2.7%
 
3.1%
3.8%
2.9%
Northern California
3.8%
3.6%
3.9%
 
3.6%
2.3%
4.1%
Seattle Metro
3.5%
-7.3%
8.4%
 
3.0%
2.0%
3.5%
Same-Property Portfolio
3.5%
1.8%
4.1%
 
3.3%
2.9%
3.4%

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Sequential Growth
 
Q2 2019 compared to Q1 2019
 
Gross
Revenues
Operating
Expenses
NOI
Southern California
0.6%
-0.7%
1.2%
Northern California
0.9%
-1.1%
1.6%
Seattle Metro
1.0%
-9.5%
5.7%
Same-Property Portfolio
0.8%
-2.6%
2.1%
   
 
Financial Occupancies
 
Quarter Ended
 
6/30/2019
3/31/2019
6/30/2018
Southern California
96.7%
96.8%
96.8%
Northern California
96.6%
97.1%
96.7%
Seattle Metro
96.4%
96.9%
96.3%
Same-Property Portfolio
96.6%
96.9%
96.7%

Investment Activity

Real Estate

In June 2019, the Company purchased a 300 unit apartment home community located in Walnut Creek, CA for $164.9 million in a DownREIT structure. Concurrent with the closing of the acquisition, the Company assumed a $98.7 million mortgage loan with an effective interest rate of 3.2% and a maturity date in 2025.

Preferred Equity

In April 2019, the Company originated two preferred equity investments in multifamily developments located in Oakland, CA. The first is a $36.8 million investment with an initial preferred return of 10.3%, and the second is a $11.8 million investment with an initial preferred return of 11.0%. Both investments will be funded through the third and fourth quarter of 2019.

Development Activity

The table below represents the development communities in lease-up and the current leasing status as of July 22, 2019.

Project Name
Location
Total Apartment Homes
ESS Ownership
% Leased as of 7/22/19
Status
Station Park Green - Phase II
San Mateo, CA
199
100%
24.1%
In Lease-Up
Mylo
Santa Clara, CA
476
100%
21.9%
Pre-Leasing
Total/Average % Leased
675
 
22.5%
 

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liquidity and balance sheet

Common Stock

The Company did not issue any shares of common stock through its equity distribution program in the second quarter of 2019.

Balance Sheet

As of July 22, 2019, the Company had $1.0 billion in undrawn capacity on its unsecured credit facilities.

Guidance

For the second quarter of 2019, the Company exceeded the midpoint of the guidance range provided in its first quarter 2019 earnings release for Core FFO by $0.11 per share.

The following table provides a reconciliation of second quarter 2019 Core FFO per share to the midpoint of the guidance provided in the first quarter 2019 earnings release, which was dated April 24, 2019.

   
Per Diluted Share
Projected midpoint of Core FFO per share for Q2 2019
$
3.22
    NOI from consolidated communities
 
0.10
    FFO from Co-Investments
 
0.01
Core FFO per share for Q2 2019 reported
$
3.33

The table below provides key changes to the 2019 full-year assumptions for Net Income, Total FFO, Core FFO per diluted share, and same-property growth. For additional details regarding the Company’s 2019 assumptions, please see page S-14 of the accompanying supplemental financial information. For the third quarter of 2019, the Company has established a range for Core FFO per diluted share of $3.26 to $3.36.

2019 Full-Year Guidance

 
Previous
Range
Previous Midpoint
 
Revised
Range
Revised Midpoint
Per Diluted Share
         
  Net Income
$5.49 - $5.83
$5.66
 
$5.84 - $6.02
$5.93
  Total FFO
$13.01 - $13.35
$13.18
 
$13.31 - $13.49
$13.40
  Core FFO
$12.90 - $13.25
$13.08
 
$13.19 - $13.37
$13.28
Same-Property Growth
         
  Gross Revenues
2.5% to 3.5%
3.0%
 
3.0% to 3.5%
3.3%
  Operating Expenses
2.5% to 3.5%
3.0%
 
2.0% to 2.4%
2.2%
  NOI
2.1% to 3.9%
3.0%
 
3.2% to 4.1%
3.7%

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Conference Call with Management

The Company will host an earnings conference call with management to discuss its quarterly results on Thursday, July 25, 2019 at 10 a.m. PT (1 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 second quarter 2019 earnings link. To access the replay, dial (844) 512-2921 using the replay pin number 13692128. 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. Essex currently has ownership interests in 246 apartment communities comprising approximately 60,000 apartment homes with an additional 6 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 Securities and Exchange Commission 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 Web, please contact the Investor Relations Department at (650) 655-7800.

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 on sales of real estate and extraordinary items. Management considers FFO and FFO which excludes non-core items, which is referred to as “Core FFO,” to be useful supplemental operating 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 to pay dividends. By excluding gains or losses related to sales of depreciated operating properties and excluding real estate depreciation (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO can help investors compare the operating performance of a real estate company between periods or as compared to different companies. By further adjusting for items that are not considered part of the Company’s core business operations, Core FFO allows investors to compare the core operating performance of the Company to its performance in prior reporting periods and to the operating performance of other real estate companies without the effect of items that by their nature are not comparable from period to period and tend to obscure the Company’s actual operating results. 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 alternatives 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

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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 REIT’s 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 six months ended June 30, 2019 and 2018 (in thousands, except for share and per share amounts):

   
Three Months Ended
June 30,
 
Six Months Ended
June 30,
Funds from Operations attributable to common stockholders and unitholders
 
2019
 
2018
 
2019
 
2018
Net income available to common stockholders
$
92,275
$
100,440
$
211,133
$
191,358
Adjustments:
               
Depreciation and amortization
 
119,465
 
119,330
 
240,033
 
238,435
Gains not included in FFO
 
(870)
 
(22,244)
 
(32,405)
 
(22,244)
Depreciation and amortization from unconsolidated co-investments
 
14,631
 
15,720
 
29,821
 
31,579
Noncontrolling interest related to Operating Partnership units
 
3,228
 
3,460
 
7,399
 
6,592
Depreciation attributable to third party ownership and other
 
(236)
 
(233)
 
(466)
 
(465)
Funds from Operations attributable to common stockholders and unitholders
$
228,493
$
216,473
$
455,515
$
445,255
FFO per share – diluted
$
3.36
$
3.17
$
6.69
$
6.52
Expensed acquisition and investment related costs
$
24
$
68
$
56
$
125
(Gain) loss on sale of marketable securities
 
(556)
 
131
 
(498)
 
(549)
Unrealized losses (gains) on marketable securities
 
56
 
(122)
 
(4,454)
 
754
Unrealized gain on unconsolidated co-investments
 
 
 
(314)
 
Interest rate hedge ineffectiveness (1)
 
 
40
 
181
 
96
Gain on early retirement of debt, net
 
(332)
 
 
(1,668)
 
Co-investment promote income
 
 
 
(809)
 
(20,541)
Income from early redemption of preferred equity investments
 
(732)
 
(1,578)
 
(832)
 
(1,602)
General and administrative and other, net
 
 
 
 
2,433
Insurance reimbursements and legal settlements, net
 
(38)
 
(450)
 
(248)
 
(450)
Core Funds from Operations attributable to common stockholders and unitholders
$
226,915
$
214,562
$
446,929
$
425,521
Core FFO per share – diluted
$
3.33
$
3.14
$
6.57
$
6.23
Weighted average number of shares outstanding diluted (2)   68,079,855   68,331,709   68,063,937   68,324,230


(1)
Interest rate swaps are generally adjusted to fair value through other comprehensive income (loss). However, because certain of the Company’s 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. On January 1, 2019, the Company adopted ASU No. 2017-12 “Derivatives and Hedging - Targeted Improvements to Accounting for Hedging Activities,” which resulted in a cumulative effect adjustment of $181,000 from interest expense to accumulated other comprehensive income.
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(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.

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
June 30,
 
Six Months Ended
June 30,
   
2019
 
2018
 
2019
 
2018
Earnings from operations
$
124,560
$
138,516
$
240,255
$
249,063
Adjustments:
               
     Corporate-level property management
     expenses
 
8,212
 
7,782
 
16,365
 
15,552
     Depreciation and amortization
 
119,465
 
119,330
 
240,033
 
238,435
     Management and other fees from
     affiliates
 
(2,260)
 
(2,197)
 
(4,595)
 
(4,505)
     General and administrative
 
13,927
 
11,125
 
27,386
 
25,938
     Expensed acquisition and investment related costs
 
24
 
68
 
56
 
125
     Gain on sale of real estate and land
 
 
(22,244)
 
 
(22,244)
        NOI
 
263,928
 
252,380
 
519,500
 
502,364
     Less: Non-same property NOI
 
(15,959)
 
(14,224)
 
(28,697)
 
(27,886)
Same-Property NOI
$
247,969
$
238,156
$
490,803
$
474,478

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,” “projects,” “believes,” “seeks,” “future,” “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

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a REIT under the Internal Revenue Code of 1986, as amended, 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.

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 or redevelopment 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; unexpected difficulties in leasing of development projects; volatility in financial and securities markets; the Company’s failure to successfully operate acquired properties; unforeseen consequences from cyber-intrusion; the Company’s inability to maintain our investment grade credit rating with the rating agencies; government approvals, actions and initiatives, including the need for compliance with environmental requirements; and those further risks, special considerations, and other factors referred to in the Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, and other reports that the Company files with the SEC from time to time. 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.

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Contact Information
Rylan Burns
Director of Investor Relations
(650) 655-7800
rburns@essex.com

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Q2 2019 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 – June 30, 2019
S-5
Capitalization Data, Public Bond Covenants, Credit Ratings, and Selected Credit Ratios – June 30, 2019
S-6
Portfolio Summary by County – June 30, 2019
S-7
Operating Income by Quarter – June 30, 2019
S-8
Same-Property Revenue Results by County – Quarters ended June 30, 2019 and 2018, and March 31, 2019
S-9
Same-Property Revenue Results by County – Six months ended June 30, 2019 and 2018
S-9.1
Same-Property Operating Expenses – Quarter and Year to Date as of June 30, 2019 and 2018
S-10
Development Pipeline – June 30, 2019
S-11
Redevelopment Pipeline – June 30, 2019
S-12
Capital Expenditures – June 30, 2019
S-12.1
Co-investments and Preferred Equity Investments – June 30, 2019
S-13
Assumptions for 2019 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
2019 MSA Level Forecast: Supply, Jobs and Apartment Market Conditions
S-16
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
 
Six Months Ended
(Dollars in thousands, except share and per share amounts)
June 30,
 
June 30,
     
2019
 
2018
 
2019
 
2018
                           
Revenues:
                     
 
Rental and other property
$
              359,375
 
$
              346,526
 
$
              713,263
 
$
              691,473
 
Management and other fees from affiliates
 
                  2,260
   
                  2,197
   
                  4,595
   
                  4,505
       
              361,635
   
              348,723
   
              717,858
   
              695,978
                           
Expenses:
                     
 
Property operating
 
                95,447
   
                94,146
   
              193,763
   
              189,109
 
Corporate-level property management expenses
 
                  8,212
   
                  7,782
   
                16,365
   
                15,552
 
Depreciation and amortization
 
              119,465
   
              119,330
   
              240,033
   
              238,435
 
General and administrative
 
                13,927
   
                11,125
   
                27,386
   
                25,938
 
Expensed acquisition and investment related costs
 
                      24
   
                      68
   
                      56
   
                     125
       
              237,075
   
              232,451
   
              477,603
   
              469,159
Gain on sale of real estate and land
 
                        —
   
                22,244
   
                        —
   
                22,244
Earnings from operations
 
              124,560
   
              138,516
   
              240,255
   
              249,063
Interest expense, net(1)
 
               (52,137)
   
               (54,050)
   
             (103,735)
   
             (106,641)
Interest and other income
 
                  8,347
   
                  6,895
   
                20,608
   
                12,804
Equity income from co-investments
 
                16,959
   
                15,049
   
                33,235
   
                47,823
Gain on early retirement of debt, net
 
                     332
   
                      —
   
                  1,668
   
                         —
Gain on remeasurement of co-investment
 
                         —
   
                         —
   
                31,535
   
                         —
 
Net income
 
                98,061
   
              106,410
   
              223,566
   
              203,049
Net income attributable to noncontrolling interest
 
                 (5,786)
   
                 (5,970)
   
               (12,433)
   
               (11,691)
 
Net income available to common stockholders
$
                92,275
 
$
              100,440
 
$
              211,133
 
$
              191,358
                           
Net income per share - basic
$
1.40
 
$
1.52
 
$
3.21
 
$
2.90
                           
Shares used in income per share - basic
 
65,718,806
   
66,047,751
   
65,710,842
   
66,045,897
                           
Net income per share - diluted
$
1.40
 
$
1.52
 
$
3.21
 
$
2.90
                           
Shares used in income per share - diluted
 
65,821,815
   
66,096,349
   
65,802,417
   
66,088,803
                           
(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
 
Six Months Ended
Selected Line Item Detail
June 30,
 
June 30,
(Dollars in thousands)
2019
 
2018
 
2019
 
2018
                           
Rental and other property(1)
                     
 
Rental income
$
          353,167
 
$
          340,481
 
$
          700,972
 
$
          679,496
 
Other property
 
              6,208
   
              6,045
   
            12,291
   
            11,977
   
Rental and other property
$
          359,375
 
$
          346,526
 
$
          713,263
 
$
          691,473
                           
Property operating expenses
                     
 
Real estate taxes
$
            36,285
 
$
            36,035
 
$
            75,703
 
$
            73,748
 
Administrative
 
            20,654
   
            21,222
   
            42,040
   
            42,099
 
Maintenance and repairs
 
            20,939
   
            19,729
   
            40,605
   
            39,177
 
Utilities
   
            17,569
   
            17,160
   
            35,415
   
            34,085
   
Property operating expenses
$
            95,447
 
$
            94,146
 
$
          193,763
 
$
          189,109
                           
Interest and other income
                     
 
Marketable securities and other income
$
              7,809
 
$
              6,454
 
$
            15,408
 
$
            12,559
 
Gain (loss) on sale of marketable securities
 
                 556
   
               (131)
   
                 498
   
                 549
 
Unrealized (losses) gains on marketable securities
 
                 (56)
   
                 122
   
              4,454
   
               (754)
 
Insurance reimbursements and legal settlements, net
 
                   38
   
                 450
   
                 248
   
                 450
   
Interest and other income
$
              8,347
 
$
              6,895
 
$
            20,608
 
$
            12,804
                           
Equity income from co-investments
                     
 
Equity income from co-investments
$
              5,116
 
$
              4,492
 
$
            10,101
 
$
              8,781
 
Income from preferred equity investments
 
            10,241
   
              8,979
   
            20,309
   
            16,899
 
Unrealized gain on unconsolidated co-investments
 
                      —
   
                     —
   
                 314
   
 
Gain on sale of co-investment communities
 
                 870
   
                      —
   
                 870
   
                      —
 
Co-investment promote income
 
                      —
   
                      —
   
                 809
   
            20,541
 
Income from early redemption of preferred equity investments
 
                 732
   
              1,578
   
                 832
   
              1,602
   
Equity income from co-investments
$
            16,959
 
$
            15,049
 
$
            33,235
 
$
            47,823
                           
Noncontrolling interest
                     
 
Limited partners of Essex Portfolio, L.P.
$
              3,228
 
$
              3,460
 
$
              7,399
 
$
              6,592
 
DownREIT limited partners’ distributions
 
              1,645
   
              1,590
   
              3,209
   
              3,180
 
Third-party ownership interest
 
                 913
   
                 920
   
              1,825
   
              1,919
   
Noncontrolling interest
$
              5,786
 
$
              5,970
 
$
            12,433
 
$
            11,691
                           
(1)
On January 1, 2019, the Company adopted ASU No. 2016-02 “Leases.” As a result of this adoption certain amounts previously classified as other property revenue have been reclassified to rental income. Prior period amounts have been adjusted to conform to the current period’s presentation.
   

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
       
Six Months Ended
   
(Dollars in thousands, except share and per share amounts and in footnotes)

June 30,
       
June 30,
   
     
2019
 
2018
 
% Change
 
2019
 
2018
 
% Change
                                     
Funds from operations attributable to common stockholders and unitholders (FFO)
                               
Net income available to common stockholders
$
               92,275
 
$
             100,440
       
$
             211,133
 
$
             191,358
   
Adjustments:
                               
 
Depreciation and amortization
 
             119,465
   
             119,330
         
             240,033
   
             238,435
   
 
Gains not included in FFO
 
                   (870)
   
              (22,244)
         
              (32,405)
   
              (22,244)
   
 
Depreciation and amortization from unconsolidated co-investments
 
               14,631
   
               15,720
         
               29,821
   
               31,579
   
 
Noncontrolling interest related to Operating Partnership units
 
                 3,228
   
                 3,460
         
                 7,399
   
                 6,592
   
 
Depreciation attributable to third party ownership and other(2)
 
                   (236)
   
                   (233)
         
                   (466)
   
                   (465)
   
   
Funds from operations attributable to common stockholders and unitholders
$
             228,493
 
$
             216,473
       
$
             455,515
 
$
             445,255
   
   
FFO per share-diluted
$
3.36
 
$
3.17
 
6.0%
   
$
6.69
 
$
6.52
 
2.6%
                                     
Components of the change in FFO
                               
Non-core items:
                               
Expensed acquisition and investment related costs
$
                     24
 
$
                     68
       
$
                     56
 
$
                    125
   
(Gain) loss on sale of marketable securities
 
                   (556)
   
                    131
         
                   (498)
   
                   (549)
   
Unrealized losses (gains) on marketable securities
 
                     56
   
                   (122)
         
                (4,454)
   
                    754
   
Unrealized gain on unconsolidated co-investments
 
 —
   
 —
         
                   (314)
   
 —
   
Interest rate hedge ineffectiveness(3)
 
 —
   
                     40
         
                    181
   
                     96
   
Gain on early retirement of debt, net
 
                   (332)
   
 —
         
                (1,668)
   
 —
   
Co-investment promote income
 
 —
   
 —
         
                   (809)
   
              (20,541)
   
Income from early redemption of preferred equity investments
 
                   (732)
   
                (1,578)
         
                   (832)
   
                (1,602)
   
General and administrative and other, net
 
 —
   
 —
         
 —
   
                 2,433
   
Insurance reimbursements and legal settlements, net
 
                    (38)
   
                   (450)
         
                   (248)
   
                   (450)
   
   
Core funds from operations attributable to common stockholders and unitholders
$
             226,915
 
$
             214,562
       
$
             446,929
 
$
             425,521
   
   
Core FFO per share-diluted
$
3.33
 
$
3.14
 
6.1%
   
$
6.57
 
$
6.23
 
5.5%
                                     
Changes in core items:
                               
Same-property NOI
$
                 9,813
             
$
               16,325
         
Non-same property NOI
 
                 1,735
               
                    811
         
Management and other fees, net
 
                     63
               
                     90
         
FFO from co-investments
 
                    797
               
                 2,972
         
Interest and other income
 
                 1,355
               
                 2,849
         
Interest expense
 
                 1,873
               
                 2,991
         
General and administrative
 
                (2,802)
               
                (3,881)
         
Corporate-level property management expenses
 
                   (430)
               
                   (813)
         
Other items, net
 
                    (51)
               
                     64
         
     
$
               12,353
             
$
               21,408
         
                                     
Weighted average number of shares outstanding diluted(4)
 
68,079,855
   
68,331,709
         
68,063,937
   
68,324,230
   
                                     
(1)

Refer to page S-17.2, the section titled “Funds from Operations (“FFO”) and Core 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 and six months ended June 30, 2019 was $1.3 million and $2.6 million, respectively.
(3)

Interest rate swaps are generally adjusted to fair value through other comprehensive income (loss). However, because certain of the Company’s 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. On January 1, 2019, the Company adopted ASU No. 2017-12 “Derivatives and Hedging - Targeted Improvements to Accounting for Hedging Activities,” which resulted in a cumulative effect adjustment of $181,000 from interest expense to accumulated other comprehensive income.
(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)
         
         
June 30, 2019
   
December 31, 2018
                 
 
Real Estate:
         
   
Land and land improvements
$
                 2,778,386
 
$
                    2,701,356
   
Buildings and improvements
 
                11,007,760
   
                  10,664,745
         
                13,786,146
   
                  13,366,101
   
Less:  accumulated depreciation
 
                (3,447,848)
   
                   (3,209,548)
         
                10,338,298
   
                  10,156,553
 
Real estate under development
 
                    542,207
   
                      454,629
 
Co-investments
 
                 1,324,081
   
                    1,300,140
         
                12,204,586
   
                  11,911,322
 
Cash and cash equivalents, including restricted cash
 
                      54,971
   
                      151,395
 
Marketable securities
 
                    215,434
   
                      209,545
 
Notes and other receivables
 
                      74,416
   
                        71,895
 
Operating lease right-of-use assets
 
                      76,205
   
                                 —
 
Prepaid expenses and other assets
 
                      45,533
   
                        39,439
     
Total assets
$
                12,671,145
 
$
                  12,383,596
                 
 
Unsecured debt, net
$
                 4,294,312
 
$
                    3,799,316
 
Mortgage notes payable, net
 
                 1,429,939
   
                    1,806,626
 
Lines of credit
 
                    117,000
   
                                 —
 
Operating lease liabilities
 
                      78,226
   
                                 —
 
Other liabilities
 
                    369,722
   
                      348,335
     
Total liabilities
 
                 6,289,199
   
                    5,954,277
 
Redeemable noncontrolling interest
 
                      36,830
   
                        35,475
 
Equity:
           
   
Common stock
 
                              7
   
                                7
   
Additional paid-in capital
 
                 7,031,886
   
                    7,093,079
   
Distributions in excess of accumulated earnings
 
                   (857,994)
   
                     (812,796)
   
Accumulated other comprehensive loss, net
 
                     (18,992)
   
                       (13,217)
     
Total stockholders’ equity
 
                 6,154,907
   
                    6,267,073
   
Noncontrolling interest
 
                    190,209
   
                      126,771
     
Total equity
 
                 6,345,116
   
                    6,393,844
     
Total liabilities and equity
$
                12,671,145
 
$
                  12,383,596
                 

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 - June 30, 2019
(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
                         
 Weighted
Average
Interest Rate
     
       
Balance Outstanding
 
Interest
Rate
 
 Maturity in Years
       
 Unsecured  
 Secured    
Total
     Percentage of Total Debt  
Unsecured Debt, net
                                               
 
Bonds private - fixed rate
 
$
275,000
 
4.5%
 
1.6
   
2019
 
$
          75,000
 
$
          43,081
 
$
        118,081
 
5.0%
 
2.1%
 
 
Bonds public - fixed rate
   
3,700,000
 
3.9%
 
7.5
   
2020
   
                -
   
        695,580
   
        695,580
 
4.9%
 
12.1%
 
 
Term loan(1)
   
350,000
 
3.0%
 
2.6
   
2021
   
        500,000
   
          45,537
   
        545,537
 
4.5%
 
9.5%
 
 
Unamortized net discounts and debt issuance costs
   
       (30,688)
 
 —
 
         —
   
2022
   
        650,000
   
          43,188
   
        693,188
 
3.4%
 
12.0%
 
         
4,294,312
 
3.9%
 
6.8
   
2023
   
        600,000
   
           2,945
   
        602,945
 
3.7%
 
10.5%
 
Mortgage Notes Payable, net
                 
2024
   
        400,000
   
           3,109
   
        403,109
 
4.0%
 
7.0%
 
 
Fixed rate - secured
   
1,151,765
 
4.7%
 
3.0
   
2025
   
        500,000
   
        102,329
   
        602,329
 
3.6%
 
10.5%
 
 
Variable rate - secured(2)
   
269,333
 
2.6%
 
17.2
   
2026
   
        450,000
   
          99,405
   
        549,405
 
3.5%
 
9.6%
 
 
Unamortized premiums and debt issuance costs, net
   
8,841
 
       —
 
    —
   
2027
   
        350,000
   
        153,955
   
        503,955
 
3.6%
 
8.8%
 
   
Total mortgage notes payable
   
1,429,939
 
4.3%
 
5.7
   
2028
   
       —
   
          68,332
   
          68,332
 
4.1%
 
1.2%
 
                       
2029
   
        500,000
   
          31,156
   
        531,156
 
4.0%
 
9.2%
 
Unsecured Lines of Credit
                 
Thereafter
   
        300,000
   
        132,481
   
        432,481
 
3.9%
 
7.5%
 
 
Line of credit(3)
   
      117,000
 
3.2%
       
Subtotal
   
4,325,000
   
1,421,098
   
5,746,098
 
4.0%
 
100.0%
 
 
Line of credit(4)
   
        —
 
3.2%
       
Debt Issuance Costs
   
         (21,503)
   
          (3,424)
   
         (24,927)
 
NA
 
NA
 
   
Total lines of credit
   
      117,000
 
3.2%
       
(Discounts)/Premiums
   
          (9,185)
   
          12,265
   
           3,080
 
NA
 
NA
 
                       
Total
 
$
4,294,312
 
$
1,429,939
 
$
5,724,251
 
4.0%
 
100.0%
 
   
Total debt, net
 
$
5,841,251
 
4.0%
                                     
                                                     
                                                     
Capitalized interest for the three and six months ended June 30, 2019 was approximately $6.4 million and $12.3 million, respectively.
                                                     
(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)
$269.3 million of variable rate debt is tax exempt to the note holders. $9.9 million is subject to interest rate cap protection agreements.
(3)
As of June 30, 2019, this unsecured line of credit facility had a capacity of $1.2 billion, with a scheduled maturity date in December 2022 with one 18-month extension, exercisable at the Company’s option. The underlying interest rate on this line was based on a tiered rate structure tied to the Company’s corporate ratings and was LIBOR plus 0.825%.
(4)
This unsecured line of credit facility has a capacity $35.0 million and is scheduled to mature in February 2021. 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 0.825%.
   

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 - June 30, 2019
(Dollars and shares in thousands, except per share amounts)
                               
                               
Capitalization Data
           
Public Bond Covenants(1)
 
Actual
 
Requirement
 
Total debt, net
$
5,841,251
                 
                 
Adjusted Debt to Adjusted Total Assets:
 
36%
 
< 65%
 
Common stock and potentially dilutive securities
                     
 
Common stock outstanding
 
65,727
                 
 
Limited partnership units(1)
 
2,258
                 
 
Options-treasury method
 
110
   
Secured Debt to Adjusted Total Assets:
 
9%
 
< 40%
 
Total shares of common stock and potentially dilutive securities
 
68,095
                 
                               
Common stock price per share as of June 30, 2019
$
291.93
                 
                 
Interest Coverage:
 
450%
 
> 150%
 
Total equity capitalization
 
$
19,878,973
                 
                               
Total market capitalization
 
$
25,720,224
   
Unsecured Debt Ratio(2):
 
272%
 
> 150%
 
                               
Ratio of debt to total market capitalization
 
 
22.7%
                 
                 
Selected Credit Ratios(3)
 
Actual
     
Credit Ratings
                         
Rating Agency
Rating
Outlook
       
Net Indebtedness Divided by Adjusted EBITDAre, normalized and annualized:
 
5.5
     
Fitch
 
BBB+
Positive
                     
Moody’s
 
Baa1
Stable
       
Unencumbered NOI to Adjusted Total NOI:
 
80%
     
Standard & Poor’s
BBB+
Stable
                     
                 
(1)
Refer to page S-17.4 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 June 30, 2019
                                                   
        Apartment Homes    
Average Monthly Rental Rate(1)  

  Percent of NOI(2)
Region - County   Consolidated(3)
Unconsolidated
Co-investments(3)
  Apartment Homes in Development(4)   Total     Consolidated     Unconsolidated Co-investments(5)     Total(6)   Consolidated   Unconsolidated Co-investments(5)   Total(6)
         
                                       
Southern California    
   
                                 

Los Angeles County
9,097
1,563
200
10,860
 $ 2,447
 $ 2,135
$
2,421
18.6%
13.3%
18.1%

Orange County
5,553
1,149

6,702
  2,209
  1,927
  2,182
10.4%
9.0%
10.3%

San Diego County
4,824
616
 —
5,440
  1,958
  1,830
    1,951
8.2%
4.5%
7.8%

Ventura County and Other
3,200
693

3,893
  1,809
  2,180
  1,848
5.1%
6.5%
5.4%
Total Southern California
22,674
4,021
200
26,895
  2,194
  2,040
  2,181
42.3%
33.3%
41.6%












 

 

 






Northern California








 

 

 







Santa Clara County(7)
7,931
2,006
745
10,682
  2,823
  2,903
  2,832
20.2%
23.5%
20.5%

Alameda County
2,954
1,983
 —
4,937
  2,588
  2,388
  2,535
6.6%
20.3%
7.9%

San Mateo County
1,951
197
371
2,519
  3,055
  3,042
  3,054
5.3%
2.4%
5.0%

Contra Costa County
2,570
49
 —
2,619
  2,363
  4,743
  2,389
4.8%
0.7%
4.4%

San Francisco
1,343
463
537
2,343
  3,216
  3,337
  3,235
3.7%
6.2%
3.9%
Total Northern California
16,749
4,698
1,653
23,100
  2,777
  2,753
  2,773
40.6%
53.1%
41.7%












 

 

 






Seattle Metro
10,238
1,582
 —
11,820
  1,878
  1,868
  1,877
17.1%
13.6%
16.7%












 

 

 






Total

49,661
10,301
1,853
61,815
 $ 2,323
 $ 2,342
 $ 2,325
100.0%
100.0%
100.0%

(1)
Average monthly rental rate is defined as the total potential monthly rental income (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 June 30, 2019. See the section titled “Net Operating Income (“NOI”) and Same-Property NOI Reconciliations” on page S-17.3.
(3)
Includes all apartment communities with rental income.
(4)
Includes development communities with no rental income.
(5)
Co-investment amounts weighted for Company’s pro rata share. 
(6)
At Company’s pro rata share.
(7)
Includes all communities in Santa Clara County and one community in Santa Cruz County.
   

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, except in footnotes)
                                 
                                     
                                     
     
Apartment Homes
   
Q2 ‘19
   
Q1 ‘19
   
Q4 ‘18
   
Q3 ‘18
   
Q2 ‘18
                                     
Rental and other property revenues:
                                 
Same-property
 
          47,902
   $
  340,042
   $
         337,352
   $
          334,298
   $
          331,695
   $
            328,602
Acquisitions(2)
 
              778
   
                  4,836
   
                  2,271
   
                     259
   
                    —
   
          —
Development(3)
 
              121
   
                  1,192
   
                  1,133
   
                  1,153
   
                  1,091
   
                     450
Redevelopment
 
              621
   
                  5,223
   
                  5,212
   
                  5,160
   
                  5,125
   
                  5,036
Non-residential/other, net(4)
 
              239
   
                  8,082
   
                  7,920
   
                  9,917
   
                10,699
   
                12,438
Total rental and other property revenues
 
          49,661
   
               359,375
   
               353,888
   
               350,787
   
               348,610
   
               346,526
                                     
Property operating expenses:
                                 
Same-property
       
                92,073
   
                94,518
   
                94,479
   
                93,500
   
                90,446
Acquisitions(2)
       
                  1,384
   
                     796
   
                       77
   
          —
   
 —
Development(3)
       
                     506
   
                     525
   
                     535
   
                     638
   
                     498
Redevelopment
       
                  1,590
   
                  1,654
   
                  1,569
   
                  1,647
   
                  1,468
Non-residential/other, net(4)(5)
       
                    (106)
   
                     823
   
                  1,790
   
                  1,990
   
                  1,734
Total property operating expenses
       
                95,447
   
                98,316
   
                98,450
   
                97,775
   
                94,146
                                     
Net operating income (NOI):
                                 
Same-property
       
               247,969
   
               242,834
   
               239,819
   
               238,195
   
               238,156
Acquisitions(2)
       
                  3,452
   
                  1,475
   
                     182
   
    —
   
Development(3)
       
                     686
   
                     608
   
                     618
   
                     453
   
                      (48)
Redevelopment
       
                  3,633
   
                  3,558
   
                  3,591
   
                  3,478
   
                  3,568
Non-residential/other, net(4)
       
                  8,188
   
                  7,097
   
                  8,127
   
                  8,709
   
                10,704
Total NOI
       $
 263,928
   $
 255,572
   $
 252,337
   $
 250,835
   $
 252,380
                                     
Same-property metrics
                                 
Operating margin
       
73%
   
72%
   
72%
   
72%
   
72%
Annualized turnover(6)
       
48%
   
41%
   
41%
   
56%
   
52%
Financial occupancy(7)
       
96.6%
   
96.9%
   
96.8%
   
96.4%
   
96.7%
                                     
(1)
Includes consolidated communities only.
         
(2)
Acquisitions include properties acquired which did not have comparable stabilized results as of January 1, 2018.
         
(3)
Development includes properties developed which did not have comparable stabilized results as of January 1, 2018.
         
(4)
Other real estate assets consists mainly of retail space, commercial properties, boat slips, held for sale properties, disposition properties, and student housing.
(5)
Includes other expenses and intercompany eliminations pertaining to self-insurance.
(6)
Annualized turnover is defined as the number of apartment homes turned over during the quarter, annualized, divided by the total number of apartment homes.
(7)
Financial occupancy is defined as the percentage resulting from dividing actual rental income by total potential rental income (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 Revenue Results by County - Second Quarter 2019 vs. Second Quarter 2018 and First Quarter 2019
(Dollars in thousands, except average monthly rental rates)
                                                                     
               
Average Monthly
Rental Rate
 
Financial
Occupancy
 
Gross
Revenues
  Sequential Gross Revenues  
Region - County
 
Apartment Homes
Q2 ‘19 % of Actual NOI
 
Q2 ‘19
   
Q2 ‘18
 
% Change
 
Q2 ‘19
 
Q2 ‘18
 
% Change
   
Q2 ‘19
   
Q2 ‘18
 
% Change
   
Q1 ‘19
 
% Change
 
                                                                     
Southern California
                                                               
 
Los Angeles County
 
8,641
 
18.4%
   $
2,456
   $
2,375
 
3.4%
 
96.6%
 
96.6%
 
0.0%
   $
   64,597
   $
 62,488
 
3.4%
   $
  64,373
 
0.3%
 
 
Orange County
 
5,553
 
10.8%
   
      2,209
   
      2,148
 
2.8%
 
96.3%
 
96.5%
 
-0.2%
   
       37,058
   
      36,043
 
2.8%
   
        36,783
 
0.7%
 
 
San Diego County
 
4,824
 
8.5%
   
      1,958
   
      1,895
 
3.3%
 
97.0%
 
97.2%
 
-0.2%
   
       29,068
   
      28,168
 
3.2%
   
        28,724
 
1.2%
 
 
Ventura County and Other
 
2,961
 
4.8%
   
      1,780
   
      1,716
 
3.7%
 
97.1%
 
97.6%
 
-0.5%
   
       16,435
   
      15,918
 
3.2%
   
        16,342
 
0.6%
 
Total Southern California
 
21,979
 
42.5%
   
      2,193
   
      2,123
 
3.3%
 
96.7%
 
96.8%
 
-0.1%
   
     147,158
   
    142,617
 
3.2%
   
       146,222
 
0.6%
 
                                                                     
Northern California
                                                               
 
Santa Clara County(1)
 
7,453
 
19.7%
   
      2,817
   
      2,704
 
4.2%
 
96.7%
 
97.0%
 
-0.3%