Exhibit 99.1




Essex Announces Fourth Quarter and Full-Year 2018 Results and 2019 Guidance

San Mateo, California—January 30, 2019—Essex Property Trust, Inc. (NYSE:ESS) announced today its fourth quarter and full-year 2018 earnings results and related business activities.

Net Income and Funds from Operations (“FFO”) per diluted share for the quarter ended and year ended December 31, 2018 are detailed below.

     
Three Months Ended
December 31,
   
%
   
Year Ended
December 31,
   
%
 
     
2018
   
2017
   
Change
   
2018
   
2017
   
Change
 
 
Per Diluted Share
                                   
 
Net Income
 
$1.78
   
$1.57
   
13.4%

 
$5.90
   
$6.57
     
-10.2%

 
Total FFO
 
$3.02
   
$3.01
   
0.3%

 
$12.76
   
$11.91
     
7.1%

 
Core FFO
 
$3.19
   
$3.01
   
6.0%

 
$12.57
   
$11.91
     
5.5%

                                         

Fourth Quarter and Full-Year Highlights:


·
Reported Net Income per diluted share for the fourth quarter of 2018 of $1.78, compared to $1.57 in the fourth quarter of 2017.  The increase was primarily due to gain on sale of real estate during the current quarter.


·
Grew Core FFO per diluted share by 6.0% compared to the fourth quarter of 2017 and 5.5% for the full-year 2018.


·
Achieved same-property gross revenue and net operating income (“NOI”) growth of 2.9% and 2.5%, respectively, compared to the fourth quarter of 2017. For the full-year, achieved same-property gross revenue and NOI growth of 2.8% and 2.9%, respectively.


·
Sold three communities during the fourth quarter of 2018 for a total contract price of $285.3 million. For the full-year, the Company sold four communities for a total contract price of $417.3 million.


·
Committed $57.6 million in three preferred equity and subordinated debt investments for the full-year 2018.


·
Repurchased $47.5 million in common stock under the stock buyback program during the fourth quarter of 2018 and $51.2 million for the full-year 2018.

“We continued to produce favorable results in the fourth quarter and full-year 2018, reflecting an improving economy and a stable operating environment in our West Coast markets. We expect these conditions to continue into 2019, leading once again to market rent growth near long-term averages. Solid job growth and higher income growth rates underlie our belief that housing affordability pressures are slowly abating, improving our outlook longer term” commented Michael Schall, President and CEO of the Company.

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


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 December 31, 2018 compared to the quarter ended December 31, 2017, and the sequential percentage change for the quarter ended December 31, 2018 compared to the quarter ended September 30, 2018, by submarket for the Company:

   
Q4 2018 vs.
Q4 2017
   
Q4 2018 vs.
Q3 2018
   
% of Total
 
   
Gross
Revenues
   
Gross
Revenues
   
Q4 2018
Revenues
 
Southern California
     
Los Angeles County
   
3.2%

   
1.0%

   
19.7%

Orange County
   
2.1%

   
0.8%

   
11.3%

San Diego County
   
3.2%

   
0.3%

   
8.8%

Ventura County
   
3.5%

   
0.8%

   
4.5%

Other Southern California
   
4.5%

   
-0.1%

   
0.5%

Total Southern California
   
3.0%

   
0.8%

   
44.8%

Northern California
   
Santa Clara County
   
3.2%

   
0.9%

   
15.8%

Alameda County
   
2.6%

   
0.7%

   
7.1%

San Mateo County
   
4.2%

   
0.4%

   
5.1%

Contra Costa County
   
1.7%

   
0.6%

   
5.0%

San Francisco
   
1.9%

   
1.2%

   
3.4%

Other Northern California
   
3.0%

   
10.3%

   
0.3%

Total Northern California
   
2.9%

   
0.8%

   
36.7%

Seattle Metro
   
2.5%

   
0.9%

   
18.5%

Same-Property Portfolio
   
2.9%

   
0.8%

   
100%


   
Year-Over-Year Growth
   
Year-Over-Year Growth
 
   
Q4 2018 compared to Q4 2017
   
YTD 2018 compared to YTD 2017
 
   
Gross
Revenues
   
Operating
Expenses
   
NOI
   
Gross
Revenues
   
Operating
Expenses
   
NOI
 
Southern California
   
3.0%

   
2.6%

   
3.1%

   
3.1%

   
2.4%

   
3.3%

Northern California
   
2.9%

   
5.1%

   
2.1%

   
2.4%

   
1.4%

   
2.8%

Seattle Metro
   
2.5%

   
4.4%

   
1.7%

   
2.9%

   
5.2%

   
1.9%

Same-Property Portfolio
   
2.9%

   
3.8%

   
2.5%

   
2.8%

   
2.6%

   
2.9%


   
Sequential Growth
 
   
Q4 2018 compared to Q3 2018
 
   
Gross
Revenues
   
Operating
Expenses
   
NOI
 
Southern California
   
0.8%

   
-0.1%

   
1.1%

Northern California
   
0.8%

   
4.3%

   
-0.4%

Seattle Metro
   
0.9%

   
-1.4%

   
2.0%

Same-Property Portfolio
   
0.8%

   
1.1%

   
0.7%


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Financial Occupancies
 
   
Quarter Ended
 
   
12/31/2018

 
9/30/2018

 
12/31/2017
 
Southern California
   
96.7%

   
96.5%

   
96.9%

Northern California
   
96.9%

   
96.3%

   
96.9%

Seattle Metro
   
96.7%

   
96.1%

   
96.4%

Same-Property Portfolio
   
96.8%

   
96.4%

   
96.8%


Investment Activity

In October 2018, Wesco V, LLC (“Wesco V”), one of the Company’s joint ventures, acquired Meridian at Midtown in San Jose, CA for a total contract price of $104.0 million. As part of the transaction, Wesco V assumed a $69.9 million loan with an effective interest rate of 4.5% and a maturity date in 2026. Meridian was built in 2015 and comprises 218 apartment homes near downtown San Jose. The Company had a preferred equity investment in Meridian which was repaid in 2015.

In December, the Company purchased its joint venture partner’s 49.9% interest in Marquis, a 166 unit apartment community located in San Jose, CA for a pro rata contract price of $35.4 million. The property is encumbered by a mortgage totaling $45.8 million. Upon consolidation of this property, the Company recorded a $1.3 million gain to remeasure the Company’s investment in the joint venture to fair value. The gain is not included in the calculation of FFO.

Dispositions

In November, the Company sold two communities located in Chino Hills, CA that were owned as part of the co-investment platform, in which Essex has a 50% ownership interest. Enclave at Town Square, a 31-year old community containing 124 apartment homes, which was owned by BEXAEW, LLC, was sold for a total contract price of $30.5 million. The Summit, a 29-year old community containing 125 apartment homes, which was owned by Wesco III, LLC, was sold for a total contract price of $34.8 million. Total gain on sale was $10.6 million, which has been excluded from the calculation of FFO.

In December, the Company sold its 8th and Hope apartment community for a total contract price of $220.0 million, representing $739,000 per apartment home. The property contains 290 luxury apartment homes and approximately 5,900 sq. ft. of retail space located in downtown Los Angeles, CA. Essex acquired 8th and Hope in 2015 for a total contract price of $200.0 million. Total gain on sale was $39.6 million, which has been excluded from the calculation of FFO. Michael Schall, President and CEO of the Company commented, “We were able to opportunistically sell our 8th and Hope community in downtown Los Angeles at an attractive cap rate. Given the market volatility in the fourth quarter, we used the proceeds to repurchase stock at a discount to net asset value and paydown debt.” Michael Schall, President and CEO of the Company commented, “We were able to opportunistically sell our 8th and Hope community in downtown Los Angeles at an attractive cap rate. Given the market volatility in the fourth quarter, we used the proceeds to repurchase stock at a discount to net asset value and paydown debt.”

Other Investments

During the fourth quarter of 2018, the Company originated a $12.5 million subordinated loan on a multifamily development located in Vista, CA. The funding for this investment is expected to occur over nine months in 2019. The subordinated loan has a 9.9% interest rate and matures in 2021.

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Liquidity and Balance Sheet

Common Stock

During the fourth quarter of 2018, the Company repurchased 193,649 shares of its common stock totaling $47.5 million, including commissions, at an average price of $245.08 per share. For the full-year, the Company repurchased 210,483 shares of common stock totaling $51.2 million, including commissions, at an average price of $243.40 per share.

Subsequent to quarter end through January 28, 2019, the Company repurchased 234,061 shares of common stock totaling $57.0 million, including commissions, at an average price of $243.48 per share.  As of January 28, 2019, the Company had $140.7 million of purchase authority remaining under the stock repurchase program.

In 2018, the Company did not issue any shares of common stock through its equity distribution program.

Balance Sheet

In January 2019, the Company extended the maturity date of its $1.2 billion unsecured line of credit facility to mature in December 2022 with one 18-month extension, exercisable at the Company’s option.  The pricing on the line of credit is LIBOR + 0.825%, a reduction of 0.05% from prior pricing.

As of January 28, 2019, the Company had approximately $1.2 billion in undrawn capacity on its unsecured credit facilities.

2019 Full-Year Guidance and Assumptions

Per Diluted Share
 
Range
 
Net Income
 
$4.81 - $5.21
 
Total FFO
 
$12.82 - $13.22
 
Core FFO
 
$12.83 - $13.23
 
       
U.S. Economic Assumptions
     
GDP Growth
 
2.5%

Job Growth
 
1.3%

       
ESS Markets Economic Assumptions
     
Job Growth
 
1.8%

Market Rent Growth
 
3.1%

       
Estimated Same-Property Portfolio Growth based on 47,902 Apartment Homes
     
Southern California
 
2.5% to 3.5%
 
Northern California
 
2.6% to 3.6%
 
Seattle
 
2.3% to 3.3%
 
Gross Revenue
 
2.5% to 3.5%
 
Operating Expense
 
2.5% to 3.5%
 
Net Operating Income
 
2.1% to 3.9%
 

- 4 -

Other Key Assumptions


·
Acquisitions of $200 - $400 million.

·
Dispositions of $300 - $500 million.

·
Preferred equity investments of $50 - $100 million.

·
Total development spending in 2019 for existing projects under construction is expected to be approximately $250 million at the Company’s pro rata share. The Company does not currently plan to start any new developments during 2019.

·
Revenue generating capital expenditures are expected to be approximately $80 million at the Company’s pro rata share.

·
The repayment of $887 million of secured and unsecured debt that originally matures in 2019 and 2020 with a weighted average effective rate of 4.1%.

For additional details regarding the 2019 assumptions, please see page S-14 of the accompanying supplemental financial information. For the first quarter of 2019, the Company has established a guidance range of Core FFO per diluted share of $3.14 to $3.24.

Conference Call with Management

The Company will host an earnings conference call with management to discuss its quarterly results on Thursday, January 31, 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 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 fourth quarter 2018 earnings link. To access the replay digitally, dial (844) 512-2921 using the replay pin number 13685822. 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 245 apartment communities with an additional 6 properties in various stages of active development. Additional information about Essex can be found on the Company’s website at www.essex.com.

This press release and accompanying supplemental financial information will be 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.

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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 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.

- 6 -

The following table sets forth the Company’s calculation of diluted FFO and Core FFO for the three months and years ended December 31, 2018 and 2017 (in thousands, except for share and per share amounts):

   
Three Months Ended
December 31,
   
Year Ended
December 31,
 
Funds from Operations attributable to common stockholders and unitholders
 
2018
   
2017
   
2018
   
2017
 
Net income available to common stockholders
 
$
117,820
   
$
103,613
   
$
390,153
   
$
433,059
 
Adjustments:
                               
Depreciation and amortization
   
120,597
     
117,988
     
479,884
     
468,881
 
Gains not included in FFO
   
(51,439
)
   
(34,779
)
   
(73,683
)
   
(159,901
)
Depreciation and amortization from unconsolidated co-investments
   
15,609
     
15,196
     
62,954
     
55,531
 
Noncontrolling interest related to Operating Partnership units
   
4,071
     
3,536
     
13,452
     
14,825
 
Depreciation attributable to third party ownership and other
   
(241
)
   
(212
)
   
(940
)
   
(286
)
Funds from Operations attributable to common stockholders and unitholders
 
$
206,417
   
$
205,342
   
$
871,820
   
$
812,109
 
FFO per share – diluted
 
$
3.02
   
$
3.01
   
$
12.76
   
$
11.91
 
Expensed acquisition and investment related costs
 
$
38
   
$
415
   
$
194
   
$
1,569
 
Gain on sale of marketable securities
   
(68
)
   
(259
)
   
(737
)
   
(1,909
)
Unrealized losses on marketable securities
   
5,585
     
-
     
5,159
     
-
 
Interest rate hedge ineffectiveness (1)
   
87
     
(59
)
   
148
     
(78
)
Loss on early retirement of debt
   
-
     
1,796
     
-
     
1,796
 
Gain on early retirement of debt from unconsolidated co-investment
   
-
     
-
     
(3,662
)
   
-
 
Co-investment promote income
   
-
     
-
     
(20,541
)
   
-
 
Income from early redemption of preferred equity investments
   
(50
)
   
(100
)
   
(1,652
)
   
(356
)
General and administrative and other, net
   
6,171
     
(1,418
)
   
8,745
     
(1,083
)
Insurance reimbursements and legal settlements, net
   
-
     
-
     
(561
)
   
(25
)
Core Funds from Operations attributable to common stockholders and unitholders
 
$
218,180
   
$
205,717
   
$
858,913
   
$
812,023
 
Core FFO per share – diluted
 
$
3.19
   
$
3.01
   
$
12.57
   
$
11.91
 
Weighted average number of shares outstanding diluted (2)
   
68,322,115
     
68,321,214
     
68,322,207
     
68,194,472
 


(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, if any, 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.

- 7 -

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
December 31,
   
Year Ended
December 31,
 
   
2018
   
2017
   
2018
   
2017
 
Earnings from operations
 
$
109,412
   
$
112,375
   
$
450,128
   
$
446,522
 
Adjustments:
                               
Corporate-level property management expenses
   
7,749
     
7,552
     
31,062
     
30,156
 
Depreciation and amortization
   
120,597
     
117,988
     
479,884
     
468,881
 
Management and other fees from affiliates
   
(2,371
)
   
(2,647
)
   
(9,183
)
   
(9,574
)
General and administrative
   
16,912
     
10,659
     
53,451
     
41,385
 
Expensed acquisition and investment related costs
   
38
     
415
     
194
     
1,569
 
NOI
   
252,337
     
246,342
     
1,005,536
     
978,939
 
Less: Non-same property NOI
   
(20,140
)
   
(19,796
)
   
(82,998
)
   
(82,177
)
Same-Property NOI
 
$
232,197
   
$
226,546
   
$
922,538
   
$
896,762
 

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.

- 8 -

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 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.

Contact Information
Barb Pak
Group Vice President of Finance & Investor Relations
(650) 655-7800

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Q4 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 – December 31, 2018
S-5
Capitalization Data, Public Bond Covenants, Credit Ratings, and Selected Credit Ratios – December 31, 2018
S-6
Portfolio Summary by County – December 31, 2018
S-7
Operating Income by Quarter – December 31, 2018
S-8
Same-Property Revenue Results by County – Quarters ended December 31, 2018 and 2017, and September 30, 2018
S-9
Same-Property Revenue Results by County – Years ended December 31, 2018 and 2017
S-9.1
Same-Property Operating Expenses – Quarter and Years ended as of December 31, 2018 and 2017
S-10
Development Pipeline – December 31, 2018
S-11
Redevelopment Pipeline – December 31, 2018
S-12
Capital Expenditures – December 31, 2018
S-12.1
Co-investments and Preferred Equity Investments – December 31, 2018
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
Expansion by Leading West Coast Tech Companies Set to Continue Fueling Job Creation in Essex Markets
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
(Dollars in thousands, except share and per share amounts)
 
Three Months Ended
December 31,
   
Twelve Months Ended
December 31,
 
   
2018
   
2017
   
2018
   
2017
 
                         
Revenues:
                       
Rental and other property
 
$
350,787
   
$
342,417
   
$
1,390,870
   
$
1,354,325
 
Management and other fees from affiliates
   
2,371
     
2,647
     
9,183
     
9,574
 
     
353,158
     
345,064
     
1,400,053
     
1,363,899
 
                                 
Expenses:
                               
Property operating
   
98,450
     
96,075
     
385,334
     
375,386
 
Corporate-level property management expenses
   
7,749
     
7,552
     
31,062
     
30,156
 
Depreciation and amortization
   
120,597
     
117,988
     
479,884
     
468,881
 
General and administrative
   
16,912
     
10,659
     
53,451
     
41,385
 
Expensed acquisition and investment related costs
   
38
     
415
     
194
     
1,569
 
     
243,746
     
232,689
     
949,925
     
917,377
 
Earnings from operations
   
109,412
     
112,375
     
450,128
     
446,522
 
                                 
Interest expense, net (1)
   
(52,132
)
   
(53,116
)
   
(211,785
)
   
(212,796
)
Interest and other income
   
1,769
     
6,688
     
23,010
     
24,604
 
Equity income from co-investments
   
24,521
     
45,511
     
89,132
     
86,445
 
Loss on early retirement of debt
   
-
     
(1,796
)
   
-
     
(1,796
)
Gain on sale of real estate and land
   
39,617
     
-
     
61,861
     
26,423
 
Gain on remeasurement of co-investment
   
1,253
     
-
     
1,253
     
88,641
 
Net income
   
124,440
     
109,662
     
413,599
     
458,043
 
Net income attributable to noncontrolling interest
   
(6,620
)
   
(6,049
)
   
(23,446
)
   
(24,984
)
Net income available to common stockholders
 
$
117,820
   
$
103,613
   
$
390,153
   
$
433,059
 
                                 
Net income per share - basic
 
$
1.78
   
$
1.57
   
$
5.91
   
$
6.58
 
                                 
Shares used in income per share - basic
   
66,020,487
     
66,035,998
     
66,041,058
     
65,829,155
 
                                 
Net income per share - diluted
 
$
1.78
   
$
1.57
   
$
5.90
   
$
6.57
 
                                 
Shares used in income per share - diluted
   
66,079,796
     
66,103,882
     
66,085,089
     
65,898,255
 

(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
Selected Line Item Detail
 
Three Months Ended
December 31,
   
Twelve Months Ended
December 31,
 
(Dollars in thousands)
 
2018
   
2017
   
2018
   
2017
 
                         
Rental and other property
                       
Rental
 
$
326,974
   
$
319,500
   
$
1,296,435
   
$
1,263,476
 
Other property
   
23,813
     
22,917
     
94,435
     
90,849
 
Rental and other property
 
$
350,787
   
$
342,417
   
$
1,390,870
   
$
1,354,325
 
                                 
Property operating expenses
                               
Real estate taxes
 
$
39,147
   
$
38,027
   
$
151,525
   
$
146,310
 
Administrative
   
20,600
     
20,597
     
81,811
     
81,716
 
Maintenance and repairs
   
20,721
     
19,685
     
80,463
     
78,094
 
Utilities
   
17,982
     
17,766
     
71,535
     
69,266
 
Property operating expenses
 
$
98,450
   
$
96,075
   
$
385,334
   
$
375,386
 
                                 
Interest and other income
                               
Marketable securities and other income
 
$
7,286
   
$
6,429
   
$
26,871
   
$
22,670
 
Gain on sale of marketable securities
   
68
     
259
     
737
     
1,909
 
Unrealized losses on marketable securities (1)
   
(5,585
)
   
-
     
(5,159
)
   
-
 
Insurance reimbursements and legal settlements, net
   
-
     
-
     
561
     
25
 
Interest and other income
 
$
1,769
   
$
6,688
   
$
23,010
   
$
24,604
 
                                 
Equity income from co-investments
                               
Equity income from co-investments
 
$
4,143
   
$
3,998
   
$
17,021
   
$
17,334
 
Income from preferred equity investments
   
9,759
     
6,634
     
35,687
     
23,918
 
Gain on sale of co-investment communities
   
10,569
     
34,779
     
10,569
     
44,837
 
Gain on early retirement of debt from unconsolidated co-investment
   
-
     
-
     
3,662
     
-
 
Co-investment promote income
   
-
     
-
     
20,541
     
-
 
Income from early redemption of preferred equity investments
   
50
     
100
     
1,652
     
356
 
Equity income from co-investments
 
$
24,521
   
$
45,511
   
$
89,132
   
$
86,445
 
                                 
Noncontrolling interest
                               
Limited partners of Essex Portfolio, L.P.
 
$
4,071
   
$
3,536
   
$
13,452
   
$
14,825
 
DownREIT limited partners’ distributions
   
1,580
     
1,496
     
6,350
     
6,433
 
Third-party ownership interest
   
969
     
1,017
     
3,644
     
3,726
 
Noncontrolling interest
 
$
6,620
   
$
6,049
   
$
23,446
   
$
24,984
 

(1)
The Company adopted ASU No. 2016-01 “Recognition and Measurement of Financial Assets and Financial Liabilities”, 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)
(Dollars in thousands, except share and per share amounts and in footnotes)
 
Three Months Ended
December 31,
       
Twelve Months Ended
December 31,
     
   
2018
   
2017
 
% Change
   
2018
   
2017
 
% Change
 
                                 
Funds from operations attributable to common stockholders and unitholders (FFO)
                               
Net income available to common stockholders
 
$
117,820
   
$
103,613
       
$
390,153
   
$
433,059
     
Adjustments:
                                       
Depreciation and amortization
   
120,597
     
117,988
         
479,884
     
468,881
     
Gains not included in FFO
   
(51,439
)
   
(34,779
)
       
(73,683
)
   
(159,901
)
   
Depreciation and amortization from unconsolidated co-investments
   
15,609
     
15,196
         
62,954
     
55,531
     
Noncontrolling interest related to Operating Partnership units
   
4,071
     
3,536
         
13,452
     
14,825
     
Depreciation attributable to third party ownership and other (2)
   
(241
)
   
(212
)
       
(940
)
   
(286
)
   
Funds from operations attributable to common stockholders and unitholders
 
$
206,417
   
$
205,342
       
$
871,820
   
$
812,109
     
FFO per share-diluted
 
$
3.02
   
$
3.01
 
0.3
%
 
$
12.76
   
$
11.91
 
7.1
%
                                         
Components of the change in FFO
                                       
Non-core items:
                                       
Expensed acquisition and investment related costs
 
$
38
   
$
415
       
$
194
   
$
1,569
     
Gain on sale of marketable securities
   
(68
)
   
(259
)
       
(737
)
   
(1,909
)
   
Unrealized losses on marketable securities
   
5,585
     
-
         
5,159
     
-
     
Interest rate hedge ineffectiveness (3)
   
87
     
(59
)
       
148
     
(78
)
   
Loss on early retirement of debt
   
-
     
1,796
         
-
     
1,796
     
Gain on early retirement of debt from unconsolidated co-investment
   
-
     
-
         
(3,662
)
   
-
     
Co-investment promote income
   
-
     
-
         
(20,541
)
   
-
     
Income from early redemption of preferred equity investments
   
(50
)
   
(100
)
       
(1,652
)
   
(356
)
   
General and administrative and other, net
   
6,171
     
(1,418
)
       
8,745
     
(1,083
)
   
Insurance reimbursements and legal settlements, net
   
-
     
-
         
(561
)
   
(25
)
   
Core funds from operations attributable to common stockholders and unitholders
 
$
218,180
   
$
205,717
       
$
858,913
   
$
812,023
     
Core FFO per share-diluted
 
$
3.19
   
$
3.01
 
6.0
%
 
$
12.57
   
$
11.91
 
5.5
%
                                         
Changes in core items:
                                       
Same-property NOI
 
$
5,651
               
$
25,776
             
Non-same property NOI
   
344
                 
821
             
Management and other fees, net
   
(276
)
               
(391
)
           
FFO from co-investments
   
3,229
                 
18,425
             
Interest and other income
   
1,192
                 
4,201
             
Interest expense
   
838
                 
785
             
General and administrative
   
1,456
                 
(1,783
)
           
Corporate-level property management expenses
   
(197
)
               
(906
)
           
Other items, net
   
226
                 
(38
)
           
   
$
12,463
               
$
46,890
             
                                         
Weighted average number of shares outstanding diluted (4)
   
68,322,115
     
68,321,214
         
68,322,207
     
68,194,472
     

(1)
Refer to page S-17.2, 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 and twelve months ended December 31, 2018 was $1.3 million and $5.1 million, respectively.
(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)
                
 
 
 
December 31, 2018
   
December 31, 2017
 
             
Real Estate:
           
Land and land improvements
 
$
2,701,356
   
$
2,719,064
 
Buildings and improvements
   
10,664,745
     
10,643,009
 
     
13,366,101
     
13,362,073
 
Less:  accumulated depreciation
   
(3,209,548
)
   
(2,769,297
)
     
10,156,553
     
10,592,776
 
Real estate under development
   
454,629
     
355,735
 
Co-investments
   
1,300,140
     
1,155,984
 
     
11,911,322
     
12,104,495
 
Cash and cash equivalents, including restricted cash
   
151,395
     
61,126
 
Marketable securities
   
209,545
     
190,004
 
Notes and other receivables
   
71,895
     
100,926
 
Prepaid expenses and other assets
   
39,439
     
39,155
 
Total assets
 
$
12,383,596
   
$
12,495,706
 
                 
Unsecured debt, net
 
$
3,799,316
   
$
3,501,709
 
Mortgage notes payable, net
   
1,806,626
     
2,008,417
 
Lines of credit
   
-
     
179,000
 
Distributions in excess of investments in co-investments
   
-
     
36,726
 
Other liabilities
   
348,335
     
333,823
 
Total liabilities
   
5,954,277
     
6,059,675
 
Redeemable noncontrolling interest
   
35,475
     
39,206
 
Equity:
               
Common stock
   
7
     
7
 
Additional paid-in capital
   
7,093,079
     
7,129,571
 
Distributions in excess of accumulated earnings
   
(812,796
)
   
(833,726
)
Accumulated other comprehensive loss, net
   
(13,217
)
   
(18,446
)
Total stockholders’ equity
   
6,267,073
     
6,277,406
 
Noncontrolling interest
   
126,771
     
119,419
 
Total equity
   
6,393,844
     
6,396,825
 
Total liabilities and equity
 
$
12,383,596
   
$
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 - December 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
Interest Rate
 
Percentage
of Total Debt
 
     
Weighted Average
                 
 
Balance
Outstanding
 
Interest
Rate
 
Maturity
in Years
     
Unsecured
 
Secured
 
Total
 
Unsecured Debt, net
                                   
Bonds private - fixed rate
$
275,000
   
4.5
%
 
2.1
   
2019
$
75,000
 
$
515,658
 
$
590,658
   
4.4
%
 
10.5
%
Bonds public - fixed rate
 
3,200,000
   
3.9
%
 
7.7
   
2020
 
-
   
693,723
   
693,723
   
5.0
%
 
12.3
%
Term loan (1)
 
350,000
   
3.0
%
 
3.1
   
2021
 
500,000
   
43,604
   
543,604
   
4.5
%
 
9.7
%
Unamortized net discounts and debt issuance costs
 
(25,684
)
 
-
   
-
   
2022
 
650,000
   
41,178
   
691,178
   
3.4
%
 
12.3
%
   
3,799,316
   
3.8
%
 
6.9
   
2023
 
600,000
   
852
   
600,852
   
3.7
%
 
10.7
%
Mortgage Notes Payable, net
                   
2024
 
400,000
   
932
   
400,932
   
4.0
%
 
7.1
%
Fixed rate - secured
 
1,526,270
   
4.6
%
 
2.3
   
2025
 
500,000
   
14,619
   
514,619
   
3.6
%
 
9.2
%
Variable rate - secured (2)
 
269,625
   
2.5
%
 
17.7
   
2026
 
450,000
   
99,405
   
549,405
   
3.5
%
 
9.8
%
Unamortized premiums and debt issuance costs, net
 
10,731
   
-
   
-
   
2027
 
350,000
   
153,955
   
503,955
   
3.6
%
 
9.0
%
Total mortgage notes payable
 
1,806,626
   
4.3
%
 
4.6
   
2028
 
-
   
68,332
   
68,332
   
4.1
%
 
1.2
%
                     
2029
 
-
   
31,156
   
31,156
   
2.4
%
 
0.5
%
Unsecured Lines of Credit
                   
Thereafter
 
300,000
   
132,481
   
432,481
   
3.9
%
 
7.7
%
Line of credit (3)
 
-
   
3.2
%
       
Subtotal
 
3,825,000
   
1,795,895
   
5,620,895
   
4.0
%
 
100.0
%
Line of credit (4)
 
-
   
3.2
%
       
Debt Issuance Costs
 
(18,543
)
 
(4,181
)
 
(22,724
)
NA
 
NA
 
Total lines of credit
 
-
   
3.2
%
       
(Discounts)/Premiums
 
(7,141
)
 
14,912
   
7,771
 
NA
 
NA
 
                     
Total
$
3,799,316
 
$
1,806,626
 
$
5,605,942
   
4.0
%
 
100.0
%
Total debt, net
$
5,605,942
   
4.0
%
                                       
                                                     

Capitalized interest for the three and twelve months ended December 31, 2018 was approximately $5.4 million and $18.7 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)
$269.6 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 December 31, 2018, this unsecured line of credit facility had a capacity of $1.2 billion, with a scheduled maturity date in December 2021 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 0.875% as of December 31, 2018. In January 2019, the line of credit facility was amended such that the scheduled maturity date was extended to December 2022 with one 18-month extension, exercisable at the Company’s option. The underlying interest rate on the amended line is based on a tiered rate structure tied to the Company’s corporate ratings and is currently at LIBOR plus 0.825%.
(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 - December 31, 2018
(Dollars and shares in thousands, except per share amounts)

 
         
 
     
        
 
Capitalization Data
         
Public Bond Covenants (1)
 
Actual
 
Requirement
 
Total debt, net
 
$
5,605,942
     
 
     
   
 
             
Adjusted Debt to Adjusted Total Assets:
   
36%

< 65%
 
Common stock and potentially dilutive securities
           
 
               
Common stock outstanding
   
65,890
     
 
             
Limited partnership units (1)
   
2,265
     
 
             
Options-treasury method
   
51
     
Secured Debt to Adjusted Total Assets:
   
12%

< 40%
 
Total shares of common stock and potentially dilutive securities
   
68,206
     
 
             
 
           
 
                  
Common stock price per share as of December 31, 2018
 
$
245.21
     
 
             
 
           
Interest Coverage:
   
437%

> 150%
 
Total equity capitalization
 
$
16,724,793
     
 
             
 
           
 
                  
Total market capitalization
 
$
22,330,735
     
Unsecured Debt Ratio (2):
   
285%

> 150%
 
 
           
 
       
        
 
Ratio of debt to total market capitalization
   
25.1
%