Exhibit 99.1



 
Essex Announces Fourth Quarter and Full-Year 2019 Results and 2020  Guidance

San Mateo, California—January 29, 2020—Essex Property Trust, Inc. (NYSE:ESS) announced today its fourth quarter and full-year 2019 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, 2019 are detailed below.

   
Three Months Ended
December 31,
   
%
   
Year Ended
December 31,
   
%
 
Per Diluted Share
 
2019
   
2018
   
Change
   
2019
   
2018
   
Change
 
Net Income
 
$1.95
   
$1.78
   
9.6%

 
$6.66
   
$5.90
   
12.9%

Total FFO
 
$3.54
   
$3.02
   
17.2%

 
$13.73
   
$12.76
   
7.6%

Core FFO
 
$3.45
   
$3.19
   
8.2%

 
$13.38
   
$12.57
   
6.4%


Fourth Quarter and Full-Year Highlights:


Reported Net Income per diluted share for the fourth quarter of 2019 of $1.95, compared to $1.78 in the fourth quarter of 2018.
 

Grew Core FFO per diluted share by 8.2% compared to the fourth quarter of 2018 and 6.4% for the full-year 2019.
 

Achieved same-property revenue and net operating income (“NOI”) growth of 4.0% and 5.5%, respectively, compared to the fourth quarter of 2018. For the full-year, realized same-property revenue and NOI growth of 3.4% and 3.9%, respectively, achieving the high-end of the full-year NOI guidance range.
 

Acquired two apartment communities during the fourth quarter of 2019 for a total contract price of $172.1 million. For the full-year, the Company acquired or increased its interests in eight apartment communities for a total pro rata contract price of $856.4 million, exceeding the high-end of the full-year guidance range.
 

Committed $32.0 million in a preferred equity investment in the fourth quarter of 2019. For the full-year, the Company committed $141.7 million in five preferred equity investments, exceeding the high-end of the full-year guidance range.
 

Disposed of one joint venture community during the fourth quarter for a total contract price of $311.0 million.
 
Subsequent Events:
 

In January 2020, the Company acquired its joint venture partner’s 45% interest in a land parcel and six communities representing 2,020 apartment homes, together valued at approximately $1.0 billion on a gross basis.
 
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 solid 2019 results, for both the fourth quarter and full-year, with same-property NOI growth at the high-end of our guidance range. Demand for rental housing remains consistently strong along the West Coast, driven by steady job growth, particularly around the tech hubs of Northern California and Seattle. A significant improvement in our cost of capital in 2019 drove transaction activity, contributing to results above the high-end of our initial 2019 guidance range for Core FFO per share, acquisitions and preferred equity investments. We expect another productive year in 2020 with stable operating fundamentals and rent growth mostly consistent with our long-term averages,” 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 December 31, 2019 compared to the quarter ended December 31, 2018, and the sequential percentage change for the quarter ended December 31, 2019 compared to the quarter ended September 30, 2019, by submarket for the Company:

   
Q4 2019 vs.
Q4 2018
   
Q4 2019 vs.
Q3 2019
   
% of Total
 
   
Gross
Revenues
   
Gross
Revenues
   
Q4 2019
Revenues
 
Southern California
     
Los Angeles County
   
3.5%

   
1.8%



19.0%

Orange County
   
3.5%

   
2.5%



10.9%

San Diego County
   
2.8%

   
0.8%



8.4%

Ventura County and Other
   
3.7%

   
0.8%



4.8%

Total Southern California
   
3.4%

   
1.7%



43.1%

Northern California
   
Santa Clara County
   
4.5%

   
1.7%



18.9%

Alameda County
   
4.0%

   
1.2%



6.9%

San Mateo County
   
5.2%

   
3.0%



5.0%

Contra Costa County
   
3.4%

   
1.2%



4.8%

San Francisco
   
5.4%

   
1.4%



3.3%

Total Northern California
   
4.4%

   
1.7%



38.9%

Seattle Metro
   
4.8%

   
1.6%



18.0%

Same-Property Portfolio
   
4.0%

   
1.7%



100%


   
Year-Over-Year Growth
   
Year-Over-Year Growth
 
   
Q4 2019 compared to Q4 2018
   
YTD 2019 compared to YTD 2018
 
   
Gross
Revenues
   
Operating
Expenses
   
NOI
   
Gross
Revenues
   
Operating
Expenses
   
NOI
 
Southern California
   
3.4%

   
0.0%

   
4.7%

   
3.0%

   
2.7%

   
3.1%

Northern California
   
4.4%

   
0.9%

   
5.7%

   
3.8%

   
2.8%

   
4.1%

Seattle Metro
   
4.8%

   
-0.6%

   
7.1%

   
3.8%

   
0.4%

   
5.2%

Same-Property Portfolio
   
4.0%

   
0.2%

   
5.5%

   
3.4%

   
2.3%

   
3.9%


- 2 -

   
Sequential Growth
 
   
Q4 2019 compared to Q3 2019
 
   
Gross
Revenues
   
Operating
Expenses
   
NOI
 
Southern California
   
1.7%

   
-3.5%

   
3.8%

Northern California
   
1.7%

   
-0.9%

   
2.6%

Seattle Metro
   
1.6%

   
-0.5%

   
2.5%

Same-Property Portfolio
   
1.7%

   
-2.0%

   
3.1%


   
Financial Occupancies
 
   
Quarter Ended
 
   
12/31/2019

 
9/30/2019

 
12/31/2018

Southern California
   
97.0%

   
96.1%

   
96.7%

Northern California
   
97.2%

   
95.8%

   
96.9%

Seattle Metro
   
97.1%

   
95.9%

   
96.7%

Same-Property Portfolio
   
97.1%

   
96.0%

   
96.8%


Investment Activity

Real Estate

In November 2019, Wesco V, LLC (“Wesco V”), a joint venture in which the Company owns a 50.0% interest, acquired Velo and Ray, a 308-unit apartment home community located in the Fremont neighborhood of Seattle, WA for a total contract price of $133.0 million.

In December 2019, the Company acquired Pure Redmond, a 105-unit apartment home community located in Redmond, WA, for a total contract price of $39.1 million.

Subsequent to quarter end, the Company purchased Canada Pension Plan Investment Board’s (“CPP Investments”) 45.0% interest in a land parcel and six communities valued at approximately $1.0 billion on a gross basis. The six communities totaling 2,020 apartment homes were consolidated on the Company’s financials in mid-January and this transaction is reflected in the 2020 guidance provided herein. As a result of the acquisition, the Company expects to report a remeasurement gain in the first quarter of 2020 in excess of $225 million. The remeasurement gain incorporates impairments recognized in the fourth quarter of 2019, related to acquiring interests in one property and land held for development at below book value. Both the remeasurement gain and the impairments are excluded from Total and Core FFO. The Company expects to recognize approximately $6.4 million of promote income in the first quarter of 2020 associated with this transaction, which will be excluded from Core FFO.

Dispositions

In October 2019, a CPP joint venture, in which Essex had a 55.0% ownership interest, sold a 463-unit apartment community located in San Francisco, CA, for a total contract price of $311.0 million. The Company recognized a $50.2 million gain on sale, which has been excluded from Core FFO.

- 3 -

Other Investments

In October 2019, the Company originated a $32.0 million preferred equity investment on a multifamily development located in Irvine, CA. The investment has an initial preferred return of 11.3% and matures in 2024. This investment is expected to be fully funded by the third quarter of 2020.

In November 2019, the Company received cash proceeds of $83.1 million from the maturity of an investment in a mortgage backed security, which was 4.9x our initial investment made in 2010. The Company recognized approximately $7.0 million of accelerated interest income in the fourth quarter related to this maturity, which has been excluded from Core FFO.

In the fourth quarter of 2019, the Company received cash proceeds of $83.9 million from the full or partial redemption of three preferred equity and two subordinated loan investments. The Company recorded $1.0 million of income from prepayment penalties as a result of the early redemptions, which has been excluded from Core FFO.

Development Activity

The table below represents the development communities in lease-up and the current leasing status as of January 27, 2020.

Project Name
Location
 
Total
Apartment Homes
   
ESS
Ownership
   
% Leased
as of
01/27/20
 
Status
Station Park Green - Phase II
San Mateo, CA
 
199
   
100%

 
92.5%

In Lease-Up
Mylo
Santa Clara, CA
 
476
   
100%

 
34.7%

In Lease-Up
500 Folsom
San Francisco, CA
 
537
   
50%

 
31.7%

In Lease-Up
Total/Average % Leased
 
1,212
         
42.8%

 

Liquidity and Balance Sheet

Common Stock

During the fourth quarter of 2019, the Company did not issue any shares of common stock through its equity distribution program.

Balance Sheet

In October 2019, the Company issued $150.0 million of 10-year senior unsecured notes due in January 2030 bearing an interest rate per annum of 3.0% and an effective interest rate of 2.8%. The notes were issued as additional notes pursuant to the notes previously issued in August 2019. The proceeds were used to prepay certain secured mortgages due in 2020.

In January 2020, the Company extended the maturity date of its $1.2 billion unsecured line of credit facility to mature in December 2023 with one 18-month extension, exercisable at the Company’s option. Pricing on the line of credit remained unchanged at LIBOR + 0.825%.

As of January 27, 2020, the Company had approximately $725.0 million in undrawn capacity on its unsecured credit facilities.

- 4 -

2020 Full-Year Guidance and Assumptions

Per Diluted Share
Range
   
Midpoint
 
Net Income
$9.20 - $9.60
   
$9.40
 
Total FFO
$13.83 - $14.23
   
$14.03
 
Core FFO
$13.74 - $14.14
   
$13.94
 
             
U.S. Economic Assumptions
           
GDP Growth
2.0%

       
Job Growth
1.2%

       
   
       
ESS Markets Economic Assumptions
 
       
Job Growth
1.7%

       
Market Rent Growth
3.0%

       
             
Estimated Same-Property Portfolio Growth based on 47,347 Apartment Homes
           
Southern California
2.2% to 3.2%
     
2.7%

Northern California
2.6% to 3.6%
     
3.1%

Seattle
3.5% to 4.5%
     
4.0%

Gross Revenue
2.6% to 3.6%
     
3.1%

Operating Expense
2.5% to 3.5%
     
3.0%

Net Operating Income
2.2% to 4.0%
     
3.1%


Other Key Assumptions


Acquisitions of $375 - $575 million, excluding the CPP transaction which closed in January 2020.

Dispositions of $100 - $300 million.

Preferred equity investments of $50 - $100 million.

Redemptions of structured finance investments and a mortgage backed security expected to be $225 million in 2020.

Total development spending in 2020 for existing projects under construction is expected to be approximately $100 million at the Company’s pro rata share. The Company does not currently plan to start any new developments during 2020.

Revenue generating capital expenditures are expected to be approximately $100 million at the Company’s pro rata share.

For additional details regarding the 2020 assumptions, please see page S-14 of the accompanying supplemental financial information. For the first quarter of 2020, the Company has established a guidance range of Core FFO per diluted share of $3.36 to $3.46.

Conference Call with Management

The Company will host an earnings conference call with management to discuss its quarterly results on Thursday, January 30, 2020 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.

- 5 -

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 2019 earnings link. To access the replay digitally, dial (844) 512-2921 using the replay pin number 13697637. 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 250 apartment communities comprising approximately 60,000 apartment homes with an additional 7 properties in various stages of active development. Additional information about the Company can be found on the Company’s website at www.essex.com.

This press release and accompanying supplemental financial information has been furnished to the 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 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, 2019 and 2018 (dollars 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
 
2019
   
2018
   
2019
   
2018
 
Net income available to common stockholders
 
$
128,818
   
$
117,820
   
$
439,286
   
$
390,153
 
Adjustments:
                               
Depreciation and amortization
   
122,908
     
120,597
     
483,750
     
479,884
 
Gains not included in FFO
   
(47,063
)
   
(51,439
)
   
(79,468
)
   
(73,683
)
Impairment loss
   
7,105
     
-
     
7,105
     
-
 
Impairment loss from unconsolidated co-investments
   
11,484
     
-
     
11,484
     
-
 
Depreciation and amortization from unconsolidated co-investments
   
15,351
     
15,609
     
60,655
     
62,954
 
Noncontrolling interest related to Operating Partnership units
   
4,480
     
4,071
     
15,343
     
13,452
 
Depreciation attributable to third party ownership and other
   
(1,097
)
   
(241
)
   
(1,805
)
   
(940
)
Funds from Operations attributable to common stockholders and unitholders
 
$
241,986
   
$
206,417
   
$
936,350
   
$
871,820
 
FFO per share – diluted
 
$
3.54
   
$
3.02
   
$
13.73
   
$
12.76
 
Expensed acquisition and investment related costs
 
$
99
   
$
38
   
$
168
   
$
194
 
Deferred tax expense on unrealized gain on unconsolidated co-investment (1)
   
-
     
-
     
1,457
     
-
 
Gain on sale of marketable securities
   
(534
)
   
(68
)
   
(1,271
)
   
(737
)
Unrealized (gains) losses on marketable securities
   
(1,430
)
   
5,585
     
(5,710
)
   
5,159
 
Equity (income) loss from non-core co-investment (2)
   
418
     
-
     
(4,143
)
   
-
 
Interest rate hedge ineffectiveness (3)
   
-
     
87
     
181
     
148
 
(Gain) loss on early retirement of debt, net
   
3,426
     
-
     
(3,717
)
   
-
 
Gain on early retirement of debt from unconsolidated co-investment
   
-
     
-
     
-
     
(3,662
)
Co-investment promote income
   
-
     
-
     
(809
)
   
(20,541
)
Income from early redemption of preferred equity investments
   
(1,031
)
   
(50
)
   
(3,562
)
   
(1,652
)
Accelerated interest income from maturity of investment in mortgage backed security
   
(7,032
)
   
-
     
(7,032
)
   
-
 
General and administrative and other, net
   
1,181
     
6,171
     
1,181
     
8,745
 
Insurance reimbursements and legal settlements, net
   
(595
)
   
-
     
(858
)
   
(561
)
Core Funds from Operations attributable to common stockholders and unitholders
 
$
236,488
   
$
218,180
   
$
912,235
   
$
858,913
 
Core FFO per share – diluted
 
$
3.45
   
$
3.19
   
$
13.38
   
$
12.57
 
Weighted average number of shares outstanding diluted (4)
   
68,449,008
     
68,322,115
     
68,198,785
     
68,322,207
 


(1)
A deferred tax expense was recorded during the year ended December 31, 2019 related to the $4.4 million net unrealized gain on the Real Estate Technology Ventures, L.P. co-investment discussed below.

- 7 -


(2)
Represents the Company’s share of co-investment income from Real Estate Technology Ventures, L.P. Income for the year ended December 31, 2019 includes a net unrealized gain of $4.4 million.

(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 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 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 revenues 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,
 
   
2019
   
2018
   
2019
   
2018
 
Earnings from operations
 
$
116,818
   
$
149,029
   
$
481,112
   
$
511,989
 
Adjustments:
                               
Corporate-level property management expenses
   
8,279
     
7,749
     
32,899
     
31,062
 
Depreciation and amortization
   
122,908
     
120,597
     
483,750
     
479,884
 
Management and other fees from affiliates
   
(2,504
)
   
(2,371
)
   
(9,527
)
   
(9,183
)
General and administrative
   
15,531
     
16,912
     
54,262
     
53,451
 
Expensed acquisition and investment related costs
   
99
     
38
     
168
     
194
 
Impairment loss
   
7,105
     
-
     
7,105
     
-
 
(Gain) Loss on sale of real estate and land
   
3,164
     
(39,617
)
   
3,164
     
(61,861
)
NOI
   
271,400
     
252,337
     
1,052,933
     
1,005,536
 
Less: Non-same property NOI
   
(18,274
)
   
(12,518
)
   
(63,492
)
   
(53,044
)
Same-Property NOI
 
$
253,126
   
$
239,819
   
$
989,441
   
$
952,492
 

- 8 -

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 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-

- 9 -

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
Rylan Burns
Vice President of Finance & Investor Relations
(650) 655-7800
rburns@essex.com

- 10 -

Q4 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 – December 31, 2019
S-5
Capitalization Data, Public Bond Covenants, Credit Ratings, and Selected Credit Ratios – December 31, 2019
S-6
Portfolio Summary by County – December 31, 2019
S-7
Operating Income by Quarter – December 31, 2019
S-8
Same-Property Revenue Results by County – Quarters ended December 31, 2019 and 2018, and September 30, 2019
S-9
Same-Property Revenue Results by County – Years ended December 31, 2019 and 2018
S-9.1
Same-Property Operating Expenses – Quarter and Years ended as of December 31, 2019 and 2018
S-10
Development Pipeline – December 31, 2019
S-11
Redevelopment Pipeline – December 31, 2019
S-12
Capital Expenditures – December 31, 2019
S-12.1
Co-investments and Preferred Equity Investments – December 31, 2019
S-13
Assumptions for 2020 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
2020 MSA Level Forecast: Supply, Jobs, and Apartment Market Conditions
S-16
Recent Permitting and Employment Growth Trends - Essex Market Apartment Fundamentals vs. National Averages
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,
 
 
 
2019
   
2018
   
2019
   
2018
 
 
                       
Revenues:
                       
Rental and other property
 
$
372,861
   
$
350,787
   
$
1,450,628
   
$
1,390,870
 
Management and other fees from affiliates
   
2,504
     
2,371
     
9,527
     
9,183
 
     
375,365
     
353,158
     
1,460,155
     
1,400,053
 
                                 
Expenses:
                               
Property operating
   
101,461
     
98,450
     
397,695
     
385,334
 
Corporate-level property management expenses
   
8,279
     
7,749
     
32,899
     
31,062
 
Depreciation and amortization
   
122,908
     
120,597
     
483,750
     
479,884
 
General and administrative
   
15,531
     
16,912
     
54,262
     
53,451
 
Expensed acquisition and investment related costs
   
99
     
38
     
168
     
194
 
Impairment loss
   
7,105
     
-
     
7,105
     
-
 
     
255,383
     
243,746
     
975,879
     
949,925
 
Gain (loss) on sale of real estate and land
   
(3,164
)
   
39,617
     
(3,164
)
   
61,861
 
Earnings from operations
   
116,818
     
149,029
     
481,112
     
511,989
 
Interest expense, net (1)
   
(52,416
)
   
(52,132
)
   
(208,893
)
   
(211,785
)
Interest and other income
   
17,005
     
1,769
     
46,298
     
23,010
 
Equity income from co-investments
   
57,201
     
24,521
     
112,136
     
89,132
 
Deferred tax expense on unrealized gain on unconsolidated co-investment
   
-
     
-
     
(1,457
)
   
-
 
Gain (loss) on early retirement of debt, net
   
(3,426
)
   
-
     
3,717
     
-
 
Gain on remeasurement of co-investment
   
-
     
1,253
     
31,535
     
1,253
 
Net income
   
135,182
     
124,440
     
464,448
     
413,599
 
Net income attributable to noncontrolling interest
   
(6,364
)
   
(6,620
)
   
(25,162
)
   
(23,446
)
Net income available to common stockholders
 
$
128,818
   
$
117,820
   
$
439,286
   
$
390,153
 
                                 
Net income per share - basic
 
$
1.95
   
$
1.78
   
$
6.67
   
$
5.91
 
                                 
Shares used in income per share - basic
   
66,085,254
     
66,020,487
     
65,840,422
     
66,041,058
 
                                 
Net income per share - diluted
 
$
1.95
   
$
1.78
   
$
6.66
   
$
5.90
 
                                 
Shares used in income per share - diluted
   
66,191,395
     
66,079,796
     
65,939,455
     
66,085,089
 

(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)
 
2019
   
2018
   
2019
   
2018
 
 
                       
Rental and other property (1)
                       
Rental income
 
$
366,612
   
$
344,849
   
$
1,425,585
   
$
1,366,590
 
Other property
   
6,249
     
5,938
     
25,043
     
24,280
 
Rental and other property
 
$
372,861
   
$
350,787
   
$
1,450,628
   
$
1,390,870
 
                                 
Property operating expenses
                               
Real estate taxes
 
$
40,177
   
$
39,147
   
$
155,170
   
$
151,570
 
Administrative
   
22,089
     
20,823
     
85,807
     
82,655
 
Maintenance and repairs
   
19,412
     
20,498
     
81,341
     
79,574
 
Utilities
   
19,783
     
17,982
     
75,377
     
71,535
 
Property operating expenses
 
$
101,461
   
$
98,450
   
$
397,695
   
$
385,334
 
                                 
Interest and other income
                               
Marketable securities and other income
 
$
7,957
   
$
7,286
   
$
31,970
   
$
26,871
 
Gain on sale of marketable securities
   
534
     
68
     
1,271
     
737
 
Unrealized gains (losses) on marketable securities
   
1,430
     
(5,585
)
   
5,710
     
(5,159
)
Accelerated interest income from maturity of investment in mortgage backed security
   
7,032
     
-
     
7,032
     
-
 
Insurance reimbursements and legal settlements, net
   
52
     
-
     
315
     
561
 
Interest and other income
 
$
17,005
   
$
1,769
   
$
46,298
   
$
23,010
 
                                 
Equity income from co-investments
                               
Equity income from co-investments
 
$
5,911
   
$
4,143
   
$
20,442
   
$
17,021
 
Income from preferred equity investments
   
11,391
     
9,759
     
43,024
     
35,687
 
Equity income (loss) from non-core co-investment
   
(418
)
   
-
     
4,143
     
-
 
Impairment loss from unconsolidated co-investment (2)
   
(11,484
)
   
-
     
(11,484
)
   
-
 
Legal settlement from unconsolidated co-investment
   
543
     
-
     
543
     
-
 
Gain on sale of co-investment communities
   
50,227
     
10,569
     
51,097
     
10,569
 
Gain on early retirement of debt from unconsolidated co-investment
   
-
     
-
     
-
     
3,662
 
Co-investment promote income
   
-
     
-
     
809
     
20,541
 
Income from early redemption of preferred equity investments
   
1,031
     
50
     
3,562
     
1,652
 
Equity income from co-investments
 
$
57,201
   
$
24,521
   
$
112,136
   
$
89,132
 
                                 
Noncontrolling interest
                               
Limited partners of Essex Portfolio, L.P.
 
$
4,480
   
$
4,071
   
$
15,343
   
$
13,452
 
DownREIT limited partners’ distributions
   
2,016
     
1,580
     
7,241
     
6,350
 
Third-party ownership interest
   
(132
)
   
969
     
2,578
     
3,644
 
Noncontrolling interest
 
$
6,364
   
$
6,620
   
$
25,162
   
$
23,446
 

(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.
(2)
$0.9 million of impairment loss from unconsolidated co-investment in the fourth quarter of 2019 is attributable to third party ownership.



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,
       
 
 
2019
   
2018
   
% Change
   
2019
   
2018
   
% Change
 
                                     
Funds from operations attributable to common stockholders and unitholders (FFO)
                                   
Net income available to common stockholders
 
$
128,818
   
$
117,820
         
$
439,286
   
$
390,153
       
Adjustments:
                                           
Depreciation and amortization
   
122,908
     
120,597
           
483,750
     
479,884
       
Gains not included in FFO
   
(47,063
)
   
(51,439
)
         
(79,468
)
   
(73,683
)
     
Impairment loss
   
7,105
     
-
           
7,105
     
-
       
Impairment loss from unconsolidated co-investments
   
11,484
     
-
           
11,484
     
-
       
Depreciation and amortization from unconsolidated co-investments
   
15,351
     
15,609
           
60,655
     
62,954
       
Noncontrolling interest related to Operating Partnership units
   
4,480
     
4,071
           
15,343
     
13,452
       
Depreciation attributable to third party ownership and other (2)
   
(1,097
)
   
(241
)
         
(1,805
)
   
(940
)
     
Funds from operations attributable to common stockholders and unitholders
 
$
241,986
   
$
206,417
         
$
936,350
   
$
871,820
       
FFO per share-diluted
 
$
3.54
   
$
3.02
     
17.2%

 
$
13.73
   
$
12.76
     
7.6%

                       
                       
Components of the change in FFO
                     
                       
Non-core items:
                     
                       
Expensed acquisition and investment related costs
 
$
99
   
$
38
       
 
$
168
   
$
194
         
Deferred tax expense on unrealized gain on unconsolidated co-investment (3)
   
-
     
-
       
   
1,457
     
-
         
Gain on sale of marketable securities
   
(534
)
   
(68
)
     
   
(1,271
)
   
(737
)
       
Unrealized (gains) losses on marketable securities
   
(1,430
)
   
5,585
       
   
(5,710
)
   
5,159
         
Equity (income) loss from non-core co-investment (4)
   
418
     
-
       
   
(4,143
)
   
-
         
Interest rate hedge ineffectiveness (5)
   
-
     
87
       
   
181
     
148
         
(Gain) loss on early retirement of debt, net
   
3,426
     
-
       
   
(3,717
)
   
-
         
Gain on early retirement of debt from unconsolidated co-investment
   
-
     
-
       
   
-
     
(3,662
)
       
Co-investment promote income
   
-
     
-
       
   
(809
)
   
(20,541
)
       
Income from early redemption of preferred equity investments
   
(1,031
)
   
(50
)
     
   
(3,562
)
   
(1,652
)
       
Accelerated interest income from maturity of investment in mortgage backed security
   
(7,032
)
   
-
       
   
(7,032
)
   
-
         
General and administrative and other, net
   
1,181
     
6,171
       
   
1,181
     
8,745
         
Insurance reimbursements and legal settlements, net
   
(595
)
   
-
       
   
(858
)
   
(561
)
       
Core funds from operations attributable to common stockholders and unitholders
 
$
236,488
   
$
218,180
       
 
$
912,235
   
$
858,913
         
Core FFO per share-diluted
 
$
3.45
   
$
3.19
     
8.2%

 
$
13.38
   
$
12.57
     
6.4%

                                                 
Changes in core items:
                                               
Same-property NOI
 
$
13,307
                   
$
36,949
                 
Non-same property NOI
   
5,756
                     
10,448
                 
Management and other fees, net
   
133
                     
344
                 
FFO from co-investments
   
3,685
                     
9,002
                 
Interest and other income
   
128
                     
4,556
                 
Interest expense
   
(371
)
                   
2,925
                 
General and administrative
   
(3,609
)
                   
(8,375
)
               
Corporate-level property management expenses
   
(530
)
                   
(1,837
)
               
Other items, net
   
(191
)
                   
(690
)
               
   
$
18,308
                   
$
53,322
                 
                                                 
Weighted average number of shares outstanding diluted (6)
   
68,449,008
     
68,322,115
             
68,198,785
     
68,322,207
         

(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 twelve months ended December 31, 2019 was $1.3 million and $5.2 million, respectively. For the fourth quarter of 2019, the amount includes $0.9 million of impairment loss attributable to third party ownership.
(3)
A deferred tax expense was recorded during the twelve months ended December 31, 2019 related to the $4.4 million net unrealized gain on the Real Estate Technology Ventures, L.P. co-investment discussed below.
(4)
Represents the Company’s share of co-investment income from Real Estate Technology Ventures, L.P. Income for the twelve months ended December 31, 2019 includes a net unrealized gain of $4.4 million.
(5)
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.
(6)
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, 2019
   
December 31, 2018
 
             
Real Estate:
           
Land and land improvements
 
$
2,773,805
   
$
2,701,356
 
Buildings and improvements
   
11,264,337
     
10,664,745
 
 
   
14,038,142
     
13,366,101
 
Less:  accumulated depreciation
   
(3,689,482
)
   
(3,209,548
)
     
10,348,660
     
10,156,553
 
Real estate under development
   
546,075
     
454,629
 
Co-investments
   
1,335,339
     
1,300,140
 
     
12,230,074
     
11,911,322
 
Cash and cash equivalents, including restricted cash
   
81,094
     
151,395
 
Marketable securities
   
144,193
     
209,545
 
Notes and other receivables
   
134,365
     
71,895
 
Operating lease right-of-use assets
   
74,744
     
-
 
Prepaid expenses and other assets
   
40,935
     
39,439
 
Total assets
 
$
12,705,405
   
$
12,383,596
 
                 
Unsecured debt, net
 
$
4,763,206
   
$
3,799,316
 
Mortgage notes payable, net
   
990,667
     
1,806,626
 
Lines of credit
   
55,000
     
-
 
Operating lease liabilities
   
76,740
     
-
 
Other liabilities
   
378,878
     
348,335
 
Total liabilities
   
6,264,491
     
5,954,277
 
Redeemable noncontrolling interest
   
37,410
     
35,475
 
Equity:
               
Common stock
   
7
     
7
 
Additional paid-in capital
   
7,121,927
     
7,093,079
 
Distributions in excess of accumulated earnings
   
(887,619
)
   
(812,796
)
Accumulated other comprehensive loss, net
   
(13,888
)
   
(13,217
)
Total stockholders’ equity
   
6,220,427
     
6,267,073
 
Noncontrolling interest
   
183,077
     
126,771
 
Total equity
   
6,403,504
     
6,393,844
 
Total liabilities and equity
 
$
12,705,405
   
$
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 - December 31, 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
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
 
$
200,000
     
4.4
%
   
1.5

2020
   
$
-
   
$
288,057
   
$
288,057
     
5.8
%
   
5.0
%
Bonds public - fixed rate
   
4,250,000
     
3.8
%
   
7.4

2021
     
500,000
     
31,653
     
531,653
     
4.3
%
   
9.2
%
Term loan (1)
   
350,000
     
2.7
%
   
2.1

2022
     
650,000
     
43,188
     
693,188
     
3.2
%
   
12.0
%
Unamortized net discounts and debt issuance costs
   
(36,794
)
   
-
     
-

2023
     
600,000
     
2,945
     
602,945
     
3.7
%
   
10.4
%
     
4,763,206
     
3.7
%
   
6.8

2024
     
400,000
     
3,109
     
403,109
     
4.0
%
   
7.0
%
Mortgage Notes Payable, net
                     
2025
     
500,000
     
133,054
     
633,054
     
3.5
%
   
10.9
%
Fixed rate - secured
   
731,907
     
4.7
%
   
3.9

2026
     
450,000
     
99,405
     
549,405
     
3.5
%
   
9.5
%
Variable rate - secured (2)
   
255,428
     
2.3
%
   
17.2

2027
     
350,000
     
153,955
     
503,955
     
3.5
%
   
8.7
%
Unamortized premiums and debt issuance costs, net
   
3,332
     
-
     
-

2028
     
-
     
68,332
     
68,332
     
4.1
%
   
1.2
%
Total mortgage notes payable
   
990,667
     
4.1
%
   
7.4

2029
     
500,000
     
31,156
     
531,156
     
4.0
%
   
9.2
%
                       
2030
     
550,000
     
1,592
     
551,592
     
3.1
%
   
9.5
%
Unsecured Lines of Credit
                     
Thereafter
     
300,000
     
130,889
     
430,889
     
3.8
%
   
7.4
%
Line of credit (3)
   
55,000
     
2.5
%
     
Subtotal
     
4,800,000
     
987,335
     
5,787,335
     
3.8
%
   
100.0
%
Line of credit (4)
   
-
     
2.5
%
     
Debt Issuance Costs
     
(24,549
)
   
(2,612
)
   
(27,161
)
NA
 
NA
 
Total lines of credit
   
55,000
     
2.5
%
     
(Discounts)/Premiums
     
(12,245
)
   
5,944
     
(6,301
)
NA
 
NA