-- In 2009, the Company repurchased $81.9 million of its Series G
Cumulative Convertible Preferred Stock at a $23.9 million discount to its
carrying value.
-- In 2009, the Company wrote-off development costs totaling $6.7 million
related to two land parcels that will no longer be developed by the
Company.
-- In 2009, the Company elected to cancel the Outperformance Plan and
wrote-off $3.8 million in unamortized costs related to the Plan.
-- In 2009, the Company recorded $0.6 million in additional loan loss
reserves related to a note receivable secured by an apartment community in
the Portland Metro area.
-- In 2008, the Company wrote-off $0.2 million in loan costs related to
the sale of an apartment community.
Net income available to common stockholders for the quarter ended September
30, 2009 totaled $21.7 million, or $0.74 per diluted share, compared to net
income available to common stockholders of $11.4 million, or $0.45 per
diluted share, for the quarter ended September 30, 2008.
Same-Property Operations
Same-property operating results exclude properties that do not have
comparable results. The table below illustrates the percentage change in
same-property revenues, operating expenses, and net operating income
("NOI") for the three and nine months ended September 30, 2009 compared to
September 30, 2008:
Q3 2009 compared to Q3 YTD 2009 compared to YTD
2008 2008
------------------------- -------------------------
Revenues Expenses NOI Revenues Expenses NOI
-------- -------- ----- -------- -------- -----
Southern California -3.9% 3.6% -7.5% -2.4% 1.9% -4.4%
Northern California -4.6% -1.8% -6.1% 0.0% -3.3% 1.8%
Seattle Metro -7.3% 2.8% -13.0% -1.5% 4.0% -4.4%
-------- -------- ----- -------- -------- -----
Same-property average -4.7% 1.8% -8.0% -1.5% 0.6% -2.6%
======== ======== ===== ======== ======== =====
The table below illustrates the sequential percentage change in
same-property revenues, expenses, and NOI for the quarter ended September
30, 2009 versus the quarter ended June 30, 2009:
Q3 2009 compared to Q2 2009
----------------------------
Revenues Expenses NOI
-------- -------- --------
Southern California -1.3% 4.8% -4.2%
Northern California -2.8% 4.5% -6.4%
Seattle Metro -3.9% 6.9% -9.9%
-------- -------- --------
Same-property average -2.2% 5.1% -5.8%
======== ======== ========
Same-property financial occupancies for the quarters ended are as follows:
-------- -------- --------
9/30/09 6/30/09 9/30/08
-------- -------- --------
Southern California 96.6% 96.3% 95.4%
Northern California 97.6% 97.6% 97.7%
Seattle Metro 97.1% 96.8% 96.6%
-------- -------- --------
Same-property average 97.0% 96.8% 96.3%
======== ======== ========
Dispositions
During the third quarter, the Company sold Spring Lake, a 69-unit community
located in Seattle, Washington for $5.7 million. The community was
acquired in 1997.
Development
In July, development was completed on the 119-unit community Cielo, located
in Chatsworth, California, owned by Essex Apartment Value Fund II, L.P.
("Fund II"). The community is currently 62% leased, and stabilized
operations are anticipated by the first quarter of 2010.
Studio 40-41, a 149-unit property owned by Fund II, located in Studio City,
California is currently 88% leased.
During the quarter, framing, exterior masonry and roof construction were
underway at Joule Broadway, a 295-unit development located in the Capital
Hill neighborhood of Seattle. The community will feature views of downtown
Seattle and Mount Rainier and will include 29,100 square feet of ground
floor retail. Construction is expected to be completed in September 2010
and stabilized operations in May 2011.
The Company ceased further development efforts and recorded impairment
charges totaling $6.7 million related to two land parcels consisting of
Citiplace in San Diego, California and View Pointe in Newcastle,
Washington.
Additional information pertaining to the location of all development
projects, related costs and construction timelines can be found on page S-9
in the Company's Supplemental Financial Information package.
Redevelopment
In the third quarter, the Company completed the exterior renovation of its
388-unit Foothill Commons community, located just minutes from downtown
Bellevue, Washington. Improvements to existing structures include new
siding, roofing, windows and balcony railings. In addition, the Company
completed and leased 28 newly constructed apartment homes, which featured
vaulted ceilings and washers and dryers. The next phase of the Foothill
Commons redevelopment project will include interior unit renovations with
the installation of washers and dryers. The total cost of the Foothill
Commons project, including the addition of 28 new apartment homes and
apartment interior renovation, is expected to be $36.3 million, of which
$19.7 million has been expended.
Also in the third quarter, the Company completed the first phase of its
redevelopment of Highridge Apartments, a 255-unit apartment community
located in Ranchos Palos Verdes, California. The first phase scope
included window, balcony railing, landscaping and other replacements to the
buildings with the greatest customer exposure. The Highridge redevelopment
was approved as a multi-phased project, the objective of which is to reduce
near-term capital outlays while proceeding with the most visible and
important improvements to the community.
Liquidity and Balance Sheet
Common Stock
During the third quarter, the Company issued 1,130,800 shares of common
stock at an average price of $75.56 for $84.2 million, net of fees and
commissions through the Company's Controlled Equity Offering Program.
During 2009, the Company has issued 2,276,250 shares of common stock for
$160.0 million, net of fees and commissions at an average price of $71.36,
and repurchased 350,000 shares for $20.3 million at an average price of
$57.89.
Series G Cumulative Convertible Preferred Stock
During the third quarter, the Company repurchased $81.9 million of its
Series G Cumulative Convertible Preferred Stock, at a $23.9 million
discount to its carrying value. During 2009, the Company has repurchased
substantially all the Series G stock at a $49.6 million discount to its
carrying value.
Outperformance Plan
During the third quarter, the Company elected to cancel the Outperformance
Plan (the "OPP") for senior officers and non-employee directors and
wrote-off $3.8 million in unamortized costs related to the OPP.
Mortgage Notes Payable
The Company, during the third quarter, obtained a fixed rate mortgage loan
secured by Huntington Breakers totaling $40.5 million, at a fixed rate of
5.4% which matures in October 2019. Also, the Company paid-off a $5.6
million mortgage loan secured by Mt. Sutro at a fixed rate of 7.7%.
Guidance
The Company increases its previous full year 2009 FFO Guidance of $6.20 to
$6.40 per diluted share, to a range of $6.72 to $6.82 per diluted share.
Conference Call with Management
The Company will host an earnings conference call with management to
discuss its quarterly results on Wednesday, November 4, at 9:00 a.m. PST
(12:00 p.m. EST), which will be broadcast live via the Internet at
www.essexpropertytrust.com, and accessible via phone by dialing (877)
407-4018, no passcode is necessary.
A rebroadcast of the live call will be available online for 90 days and
digitally for 7 days. To access the replay online, go to
www.essexpropertytrust.com and select the third quarter earnings link. To
access the replay digitally, dial (877) 660-6853 using the Account Code --
3055 and the Conference ID -- 334853. If you are unable to access the
information via the Company's website, please contact the Investor
Relations department at investors@essexpropertytrust.com or by calling
(650) 494-3700.
Corporate Profile
Essex Property Trust, Inc., located in Palo Alto, California, is a fully
integrated real estate investment trust ("REIT") that acquires, develops,
redevelops, and manages apartment communities located in highly desirable,
supply-constrained markets. Essex currently has ownership interests in 133
apartment communities (27,221 units), and has 466 units in various stages
of development.
This press release and accompanying supplemental financial information will
be filed electronically on Form 8-K with the Securities and Exchange
Commission and can be accessed from the Company's Web site at
www.essexpropertytrust.com. If you are unable to obtain the information via
the Web, please contact the Investor Relations Department at (650)
494-3700.
Funds from Operations ("FFO") Reconciliation
FFO, as defined by the National Association of Real Estate Investment
Trusts ("NAREIT") is generally considered by industry analysts as an
appropriate measure of performance of an equity REIT. Generally, FFO
adjusts the net income of equity REITs for non-cash charges such as
depreciation and amortization of rental properties, gains/losses on sales
of real estate and extraordinary items. Management considers FFO to be a
useful financial performance measurement of an equity REIT because,
together with net income and cash flows, FFO provides investors with an
additional basis to evaluate the performance and ability of a REIT to incur
and service debt and to fund acquisitions and other capital expenditures
and ability to pay dividends.
FFO does not represent net income or cash flows from operations as defined
by generally accepted accounting principles ("GAAP") and is not intended to
indicate whether cash flows will be sufficient to fund cash needs. It
should not be considered as an alternative to net income as an indicator of
the REIT's operating performance or to cash flows as a measure of
liquidity. FFO does not measure whether cash flow is sufficient to fund all
cash needs including principal amortization, capital improvements and
distributions to shareholders. FFO also does not represent cash flows
generated from operating, investing or financing activities as defined
under GAAP. Management has consistently applied the NAREIT definition of
FFO to all periods presented. However, there is judgment involved and other
REITs' calculation of FFO may vary from the NAREIT definition for this
measure, and thus their disclosures of FFO may not be comparable to Essex's
calculation.
The following table sets forth the Company's calculation of FFO for the
three and nine months ended September 30, 2009 and 2008.
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
Funds from Operations
(In thousands) 2009 2008 2009 2008
--------- --------- --------- ---------
Net income available to common
stockholders $ 21,739 $ 11,421 $ 75,418 $ 34,945
Adjustments:
Depreciation and amortization 29,895 28,581 88,173 84,998
Gains not included in FFO,
net of disposition costs (2,237) (46) (5,091) (46)
Noncontrolling interest and
co-investments 1,394 2,134 6,097 6,448
--------- --------- --------- ---------
Funds from Operations $ 50,791 $ 42,090 $ 164,597 $ 126,345
========= ========= ========= =========
SAFE HARBOR STATEMENT UNDER THE PRIVATE LITIGATION REFORM ACT OF 1995:
This press release includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended. Such forward-looking
statements include statements under the caption "Guidance" with respect to
2009 FFO per diluted share, and statements and estimates set forth under
the captions "Development" and "Redevelopment" and on pages S-9 and S-10 of
the Company's Supplemental Financial Information Package regarding
anticipated timing of the construction start, construction completion,
initial occupancy, and stabilization of property developments and
redevelopments. The Company's actual results may differ materially from
those projected in such forward-looking statements. Factors that might
cause such a difference include, but are not limited to, changes in market
demand for rental units and the impact of competition and competitive
pricing, changes in economic conditions, unexpected delays in the
development and stabilization of development and redevelopment projects,
unexpected difficulties in leasing of development and redevelopment
projects, total costs of renovation and development investments exceeding
our projections and other risks detailed in the Company's filings with the
Securities and Exchange Commission (SEC). All forward-looking statements
are made as of today, and the Company assumes no obligation to update this
information. For more details relating to risk and uncertainties that
could cause actual results to differ materially from those anticipated in
our forward-looking statements, and risks to our business in general,
please refer to our SEC filings, including our most recent Report on Form
10-K for the year ended December 31, 2008.
Contact Information: Contact: Nicole Christian (650) 849-1649