Exhibit 99.1




Essex Announces First Quarter 2020 Results and Withdraws Full-Year Guidance
 
San Mateo, California—May 6, 2020—Essex Property Trust, Inc. (NYSE: ESS) (the “Company”) announced today its first quarter 2020 earnings results and related business activities.

Net Income, Funds from Operations (“FFO”), and Core FFO per diluted share for the quarter ended March 31, 2020 are detailed below.

                 
     
Three Months Ended
March 31,
   
%
   
     
2020
   
2019
   
Change
   
 
Per Diluted Share
                   
 
Net Income
 

$4.76
   

$1.81
     
163.0%

 
 
Total FFO
 

$3.44
   

$3.34
     
3.0%

 
 
Core FFO
 

$3.48
   

$3.23
     
7.7%

 
 
 
                         

First Quarter 2020 Highlights:

Reported Net Income per diluted share for the first quarter of 2020 of $4.76, compared to $1.81 in the first quarter of 2019.  The increase is largely attributable to a gain on remeasurement of co-investments in the first quarter of 2020.


Grew Core FFO per diluted share by 7.7% compared to the first quarter of 2019, exceeding the midpoint of the first quarter guidance range by $0.07 per share.


Achieved same-property gross revenue and net operating income (“NOI”) growth of 3.2% and 3.9%, respectively, compared to the first quarter of 2019.


Increased the dividend by 6.5% to an annual distribution of $8.31 per common share, our 26th consecutive annual increase.


Committed $106.4 million in two preferred equity investments and an investment in subordinated loans at a weighted average return of 11.2%.


Issued $500.0 million of 12-year senior unsecured notes due in 2032 at an interest rate per annum of 2.65% and an effective yield of 2.69%.


Repurchased $176.3 million in common stock at an average price per share of $227.13 under the stock buyback program.


As of May 4, 2020, the Company’s immediately available liquidity exceeded $1.0 billion.

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



Acquired its joint venture partner’s 45.0% interest in a land parcel and six communities representing 2,020 apartment homes, together valued at approximately $1.0 billion on a gross basis. The Company recognized $6.5 million of promote income related to this transaction in the first quarter.

“We are pleased with the thoughtful and caring response by the Essex team with respect to the unprecedented challenges from the COVID-19 pandemic.  Early in the crisis, we acted decisively to implement protocols to protect Essex team-members, financially assist impacted residents, and maintain essential housing services.  The solid start to 2020, as reflected in our first quarter financial results, is not expected to continue given the extraordinary effects of the pandemic and ongoing economic fallout.  Given that it’s impossible to reasonably predict the future course of the COVID-19 virus, and thus its economic consequences such as job loss and reduced rental demand across the country, we have withdrawn our previously-provided guidance ranges for 2020.  While we cannot predict the depth or the duration of the pandemic, we remain committed to our mission and believe that the defensive characteristics of apartments, the durability of the technology industries, and the Company’s strong financial condition will allow us to seek opportunity while managing through broad market disruption,” commented Michael Schall, President and CEO of the Company.

Same-Property Operations

Same-property operating results exclude any properties that are not comparable for the periods presented. The table below illustrates the percentage change in same-property gross revenues for the quarter ended March 31, 2020 compared to the quarter ended March 31, 2019, and the sequential percentage change for the quarter ended March 31, 2020 compared to the quarter ended December 31, 2019, by submarket for the Company:

   
Q1 2020 vs.
Q1 2019
   
Q1 2020 vs.
Q4 2019
   
% of Total
 
   
Gross
Revenues
   
Gross
Revenues
   
Q1 2020
Revenues
 
Southern California
                       
Los Angeles County
   
2.2%

   
-0.3%
 
   
19.0%
 
Orange County
   
3.1%

   
-0.2%
 
   
11.0%
 
San Diego County
   
3.7%

   
0.7%
 
   
8.2%
 
Ventura County
   
2.5%
 
   
0.6%
 
   
4.4%
 
Total Southern California
   
2.7%
 
   
0.0%
 
   
42.6%
 
Northern California
                       
Santa Clara County
   
3.4%
 
   
0.2%
 
   
19.0%
 
Alameda County
   
2.3%
 
   
-0.9%
 
   
6.9%
 
San Mateo County
   
3.3%
 
   
0.1%
 
   
5.1%
 
Contra Costa County
   
2.1%
 
   
-0.5%
 
   
4.8%
 
San Francisco
   
4.1%
 
   
-0.3%
 
   
3.3%
 
Total Northern California
   
3.1%
 
   
-0.1%
 
   
39.1%
 
Seattle Metro
   
4.7%
 
   
0.6%
 
   
18.3%
 
Same-Property Portfolio
   
3.2%
 
   
0.1%
 
   
100.0%
 

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Year-Over-Year Growth
 
   
Q1 2020 compared to Q1 2019
 
   
Gross
Revenues
   
Operating
Expenses
   
NOI
 
Southern California
   
2.7%
 
   
2.4%
 
   
2.9%
 
Northern California
   
3.1%
 
   
1.8%
 
   
3.5%
 
Seattle Metro
   
4.7%
 
   
-1.8%
 
   
7.6%
 
Same-Property Portfolio
   
3.2%
 
   
1.3%
 
   
3.9%
 

   
Sequential Growth
 
   
Q1 2020 compared to Q4 2019
 
   
Gross
Revenues
   
Operating
Expenses
   
NOI
 
Southern California
   
0.0%
 
   
2.4%
 
   
-0.9%

Northern California
   
-0.1%
 
   
-0.8%
 
   
0.1%
 
Seattle Metro
   
0.6%
 
   
3.3%
 
   
-0.4%
 
Same-Property Portfolio
   
0.1%
 
   
1.4%
 
   
-0.4%
 

   
Financial Occupancies
 
   
Quarter Ended
 
   
3/31/2020
   
12/31/2019
   
3/31/2019
 
Southern California
   
96.6%
 
   
97.0%
 
   
96.8%

Northern California
   
96.9%
 
   
97.2%
 
   
97.1%
 
Seattle Metro
   
96.9%

   
97.1%
 
   
96.9%
 
Same-Property Portfolio
   
96.8%
 
   
97.1%
 
   
96.9%
 

Investment Activity

Real Estate

In January 2020, 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. As a result of the acquisition, the Company reported a remeasurement gain of $234.7 million in the first quarter of 2020, which is excluded from Total and Core FFO. The Company recognized approximately $6.5 million of promote income in the first quarter of 2020 associated with this transaction, which is excluded from Core FFO.

Other Investments

In the first quarter of 2020, the Company originated two preferred equity investments totaling $91.4 million and comprised of two multifamily communities located in California. The investments have a weighted average return of 11.3% with most of the proceeds expected to fund in late 2020 and early 2021.

In March 2020, the Company committed to fund an investment in subordinated loans totaling $15.0 million as part of the development of a multifamily community located in Los Angeles, CA. The investment has an

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initial preferred return of 10.5% and matures in 2023. The initial funding for this investment is expected to occur by the third quarter of 2020.

In the first quarter of 2020, the Company received cash proceeds of $28.2 million from the full or partial redemption of a preferred equity investment and a subordinated loan investment. The Company recorded $0.2 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 May 4, 2020. The Company has minimal development funding requirements and currently has no new development starts planned in 2020.

Project Name
 
Location
 
Total
Apartment
Homes
   
ESS
Ownership
   
% Leased
as of
05/04/20
 
Status
500 Folsom
 
San Francisco, CA
   
537
     
50%
 
   
53.3%
 
In Lease-Up
Mylo
 
Santa Clara, CA
   
476
     
100%
 
   
34.7%
 
In Lease-Up
Station Park Green – Phase III
 
San Mateo, CA
   
172
     
100%
 
   
36.6%
 
In Lease-Up
Patina at Midtown
 
San Jose, CA
   
269
     
50%
 
   
0.4%
 
Pre-leasing
Total/Average % Leased
       
1,454
             
35.4%
 
 

Liquidity and Balance Sheet

Common Stock

In the first quarter of 2020, the Company repurchased 776,261 shares of its common stock totaling $176.3 million, including commissions, at an average price of $227.13 per share. As of May 6, 2020, the Company had $73.7 million of purchase authority remaining under the stock repurchase plan.

The Company did not issue any shares of common stock through its equity distribution program in the first quarter of 2020.

Balance Sheet

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%.

In February 2020, the Company issued $500.0 million of 12-year senior unsecured notes due in 2032 at an interest rate per annum of 2.65% and an effective yield of 2.69%. The proceeds paid down the Company’s line of credit, which had been used to fund the buyout of CPP’s 45.0% interest in a land parcel and six communities, as well as to repay $100.3 million of secured debt during the quarter with a cash rate of 5.3% and an effective rate of 4.1%.

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Subsequent to quarter end, the Company obtained a $200.0 million unsecured term loan, priced at LIBOR + 1.20% with a one-year maturity and two 12-month extension options, exercisable at the Company’s option. The proceeds will be used to repay all remaining consolidated debt maturing in 2020, of which $169.6 million was prepaid on April 30, 2020, with an effective rate of 7.1% and a cash rate of 4.3%.
 
As of May 4, 2020, the Company had $885 million in undrawn capacity on its unsecured credit facilities and over $1.0 billion in available liquidity.

Guidance

For the first quarter of 2020, the Company exceeded the midpoint of the guidance range provided in its fourth quarter 2019 earnings release for Core FFO by $0.07 per share.

The following table provides a reconciliation of first quarter 2020 Core FFO per share to the midpoint of the guidance provided in the fourth quarter 2019 earnings release, which was dated January 29, 2020.

   
Per Diluted
Share
 
Projected midpoint of Core FFO per share for Q1 2020
 
$
3.41
 
NOI from consolidated communities
   
0.04
 
FFO from Co-Investments
   
0.01
 
G&A and other
   
0.02
 
Core FFO per share for Q1 2020 reported
  $
3.48
 

Due to the economic disruption and inherent uncertainty of the COVID-19 pandemic, the Company is withdrawing its full-year guidance. As a result of COVID-19, the Company has provided additional disclosures on its operations for April 2020 on page S-15 along with updated 2020 supply, job, and rent growth projections in its core markets and other economic data starting on page S-16 of the supplemental financial information.

COVID-19 Response

Essex’s top priorities remain the health and safety of the Company’s residents and employees as well as providing the necessary resources and flexibility to assist those who need it most during this unprecedented time. Early in the crisis, the Company announced that it was halting evictions and creating payment plans for those who have been financially impacted by the pandemic, including our commercial tenants. The Company also began offering lease renewals with no rent increases to all residents. For employees, the Company has provided additional paid leave and instituted numerous policies to maintain a safe work environment. Despite the ongoing challenges of the pandemic, the Essex team is working hard to ensure that all of our stakeholders are safe and supported.

Conference Call with Management

The Company will host an earnings conference call with management to discuss its quarterly results on Thursday, May 7, 2020 at 10 a.m. PT (1 p.m. ET), which will be broadcast live via the Internet at 

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www.essex.com, and accessible via phone by dialing toll-free, (877) 407-0784, or toll/international, (201) 689-8560. No passcode is necessary.

A rebroadcast of the live call will be available online for 30 days and digitally for 7 days. To access the replay online, go to www.essex.com and select the first quarter 2020 earnings link. To access the replay, dial (844) 512-2921 using the replay pin number 13700927. 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 6 properties in various stages of active development. Additional information about the Company can be found on the Company’s website at www.essex.com.

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

FFO RECONCILIATION

FFO, as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), is generally considered by industry analysts as an appropriate measure of performance of an equity REIT. Generally, FFO adjusts the net income of equity REITs for non-cash charges such as depreciation and amortization of rental properties, impairment charges, gains on sales of real estate and extraordinary items. Management considers FFO and FFO which excludes non-core items, which is referred to as “Core FFO,” to be useful supplemental operating performance measures of an equity REIT because, together with net income and cash flows, FFO and Core FFO provide investors with additional bases to evaluate the operating performance and ability of a REIT to incur and service debt and to fund acquisitions and other capital expenditures and to pay dividends. By excluding gains or losses related to sales of depreciated operating properties and excluding real estate depreciation (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO can help investors compare the operating performance of a real estate company between periods or as compared to different companies. By further adjusting for items that are not considered part of the Company’s core business operations, Core FFO allows investors to compare the core operating performance of the Company to its performance in prior reporting periods and to the operating performance of other real estate companies without the effect of items that by their nature are not comparable from period to period and tend to obscure the Company’s actual operating results. FFO and Core FFO do not represent net income or cash flows from operations as defined by U.S. generally accepted accounting principles (“GAAP”) and are not intended to indicate whether cash flows will be sufficient to fund cash needs. These measures should not be considered as alternatives to net income as an indicator of the REIT's operating performance or to cash flows as a measure of liquidity. FFO and Core FFO do not measure whether cash flow is sufficient to fund all cash needs including principal amortization, capital improvements and 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.

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The following table sets forth the Company’s calculation of diluted FFO and Core FFO for the three months ended March 31, 2020 and 2019 (in thousands, except for share and per share amounts):

   
Three Months Ended
March 31,
 
Funds from Operations attributable to common stockholders and unitholders
 
2020
   
2019
 
Net income available to common stockholders
 
$
315,006
   
$
118,858
 
Adjustments:
               
Depreciation and amortization
   
131,559
     
120,568
 
Gains not included in FFO
   
(234,694
)
   
(31,535
)
Depreciation and amortization from unconsolidated co-investments
   
12,544
     
15,190
 
Noncontrolling interest related to Operating Partnership units
   
10,986
     
4,171
 
Depreciation attributable to third party ownership and other
   
(134
)
   
(230
)
Funds from Operations attributable to common stockholders and unitholders
 
$
235,267
   
$
227,022
 
FFO per share – diluted
 
$
3.44
   
$
3.34
 
Expensed acquisition and investment related costs
 
$
87
   
$
32
 
Loss on sale of marketable securities
   
13
     
58
 
Unrealized (gains) losses on marketable securities
   
8,696
     
(4,510
)
Provision for credit losses
   
(50
)
   
-
 
Equity (income) loss from non-core co-investment(1)
   
110
     
(314
)
Interest rate hedge ineffectiveness (2)
   
-
     
181
 
Gain on early retirement of debt, net
   
(321
)
   
(1,336
)
Co-investment promote income
   
(6,455
)
   
(809
)
Income from early redemption of preferred equity investments
   
(210
)
   
(100
)
General and administrative and other, net
   
820
     
-
 
Insurance reimbursements, legal settlements, and other, net
   
43
     
(210
)
Core Funds from Operations attributable to common stockholders and unitholders
 
$
238,000
   
$
220,014
 
Core FFO per share – diluted
 
$
3.48
   
$
3.23
 
Weighted average number of shares outstanding diluted (3)
   
68,359,698
     
68,048,908
 


(1)
Represents the Company’s share of co-investment income from Real Estate Technology Ventures, L.P.

(2)
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 approximately $181,000 from interest expense to accumulated other comprehensive income. As a result of the adoption of this standard, the Company recognizes qualifying hedge ineffectiveness through accumulated other comprehensive income as opposed to current earnings.

(3)
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.

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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
March 31,
 
   
2020
   
2019
 
Earnings from operations
 
$
130,837
    $
115,695
 
Adjustments:
               
Corporate-level property management expenses
   
8,759
     
8,429
 
Depreciation and amortization
   
131,559
     
120,568
 
Management and other fees from affiliates
   
(2,617
)
   
(2,335
)
General and administrative
   
13,982
     
13,459
 
Expensed acquisition and investment related costs
   
87
     
32
 
NOI
   
282,607
     
255,848
 
Less: Non-same property NOI
   
(30,842
)
   
(13,638
)
Same-Property NOI
 
$
251,765
    $
242,210
 

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 expectations related to the impact of the COVID-19 pandemic on the Company’s business, financial condition and results of operations and the impact of any measures taken to mitigate the impact of the pandemic, 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 such economic conditions, including as a result of the COVID-19 pandemic, 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

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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 impact of the COVID-19 pandemic, which remains inherently uncertain as the situation is unprecedented and continuously evolving, and other potential future outbreaks of infectious diseases or other health concerns, and measures taken to limit their impact, could adversely affect the Company’s business and its tenants, and cause a significant downturn in general economic conditions, the real estate industry, and the markets in which the Company's communities are located; 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; 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 market; 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. Additionally, the risks, uncertainties and other factors set forth above or otherwise referred to in the reports that the Company has filed with the SEC may be further amplified by the global impact of the COVID-19 pandemic. 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.

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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

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Q1 2020 Supplemental
Table of Contents
 
 
Page(s)
Consolidated Operating Results
S-1 – S-2
Consolidated Funds From Operations
S-3
Consolidated Balance Sheets
S-4
Debt Summary – March 31, 2020
S-5
Capitalization Data, Public Bond Covenants, Credit Ratings, and Selected Credit Ratios – March 31, 2020
S-6
Portfolio Summary by County – March 31, 2020
S-7
Operating Income by Quarter – March 31, 2020
S-8
Same-Property Revenue Results by County – Quarters ended March 31, 2020 and 2019, and December 31, 2019
S-9
Same-Property Operating Expenses – Quarter ended as of March 31, 2020 and 2019
S-10
Development Pipeline – March 31, 2020
S-11
Redevelopment Pipeline – March 31, 2020
S-12
Capital Expenditures – March 31, 2020
S-12.1
Co-investments and Preferred Equity Investments – March 31, 2020
S-13
Summary of Apartment Community Acquisitions and Dispositions Activity
S-14
April 2020 Collections, Operating Statistics, Liquidity, and Near-Term Funding Obligations
S-15
2020 MSA Level Forecast: Supply, Jobs, and Apartment Market Conditions
S-16
Federal Stimulus is Mitigating the Income Impact of Unemployment 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
March 31,
 
   
2020
   
2019
 
             
Revenues:
           
Rental and other property
 
$
389,750
   
$
353,888
 
Management and other fees from affiliates
   
2,617
     
2,335
 
     
392,367
     
356,223
 
                 
Expenses:
               
Property operating
   
107,143
     
98,040
 
Corporate-level property management expenses
   
8,759
     
8,429
 
Depreciation and amortization
   
131,559
     
120,568
 
General and administrative
   
13,982
     
13,459
 
Expensed acquisition and investment related costs
   
87
     
32
 
     
261,530
     
240,528
 
Earnings from operations
   
130,837
     
115,695
 
Interest expense, net (1)
   
(53,163
)
   
(51,598
)
Interest and other income (loss)
   
(5,221
)
   
12,261
 
Equity income from co-investments
   
21,297
     
16,276
 
Gain on early retirement of debt, net
   
321
     
1,336
 
Gain on remeasurement of co-investment
   
234,694
     
31,535
 
Net income
   
328,765
     
125,505
 
Net income attributable to noncontrolling interest
   
(13,759
)
   
(6,647
)
Net income available to common stockholders
 
$
315,006
   
$
118,858
 
                 
Net income per share - basic
 
$
4.77
   
$
1.81
 
                 
Shares used in income per share - basic
   
66,043,831
     
65,702,788
 
                 
Net income per share - diluted
 
$
4.76
   
$
1.81
 
                 
Shares used in income per share - diluted
   
66,195,415
     
65,783,869
 

(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
March 31,
 
(Dollars in thousands)
 
2020
   
2019
 
             
Rental and other property
           
Rental income
 
$
383,498
   
$
347,805
 
Other property
   
6,252
     
6,083
 
Rental and other property
 
$
389,750
   
$
353,888
 
                 
Property operating expenses
               
Real estate taxes
 
$
43,012
   
$
39,418
 
Administrative
   
22,757
     
21,110
 
Maintenance and repairs
   
21,871
     
19,666
 
Utilities
   
19,503
     
17,846
 
Property operating expenses
 
$
107,143
   
$
98,040
 
                 
Interest and other income
               
Marketable securities and other income
 
$
3,481
   
$
7,599
 
Loss on sale of marketable securities
   
(13
)
   
(58
)
Provision for credit losses
   
50
     
-
 
Unrealized gains (losses) on marketable securities
   
(8,696
)
   
4,510
 
Insurance reimbursements, legal settlements, and other, net
   
(43
)
   
210
 
Interest and other income (loss)
 
$
(5,221
)
 
$
12,261
 
                 
Equity income from co-investments
               
Equity income from co-investments
 
$
3,063
   
$
4,985
 
Income from preferred equity investments
   
11,679
     
10,068
 
Equity income (loss) from non-core co-investment
   
(110
)
   
314
 
Co-investment promote income
   
6,455
     
809
 
Income from early redemption of preferred equity investments
   
210
     
100
 
Equity income from co-investments
 
$
21,297
   
$
16,276
 
                 
Noncontrolling interest
               
Limited partners of Essex Portfolio, L.P.
 
$
10,986
   
$
4,171
 
DownREIT limited partners’ distributions
   
2,136
     
1,564
 
Third-party ownership interest
   
637
     
912
 
Noncontrolling interest
 
$
13,759
   
$
6,647
 

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
March 31,
       
   
2020
   
2019
   
% Change
 
                   
Funds from operations attributable to common stockholders and unitholders (FFO)
                 
Net income available to common stockholders
 
$
315,006
   
$
118,858
       
Adjustments:
                     
Depreciation and amortization
   
131,559
     
120,568
       
Gains not included in FFO
   
(234,694
)
   
(31,535
)
     
Depreciation and amortization from unconsolidated co-investments
   
12,544
     
15,190
       
Noncontrolling interest related to Operating Partnership units
   
10,986
     
4,171
       
Depreciation attributable to third party ownership and other  (2)
   
(134
)
   
(230
)
     
Funds from operations attributable to common stockholders and unitholders
 
$
235,267
   
$
227,022
       
FFO per share-diluted
 
$
3.44
   
$
3.34
     
3.0
%
                         
Components of the change in FFO
                       
Non-core items:
                       
Expensed acquisition and investment related costs
 
$
87
   
$
32
         
Loss on sale of marketable securities
   
13
     
58
         
Unrealized (gains) losses on marketable securities
   
8,696
     
(4,510
)
       
Provision for credit losses
   
(50
)
   
-
         
Equity (income) loss from non-core co-investment  (3)
   
110
     
(314
)
       
Interest rate hedge ineffectiveness  (4)
   
-
     
181
         
Gain on early retirement of debt, net
   
(321
)
   
(1,336
)
       
Co-investment promote income
   
(6,455
)
   
(809
)
       
Income from early redemption of preferred equity investments
   
(210
)
   
(100
)
       
General and administrative and other, net
   
820
     
-
         
Insurance reimbursements, legal settlements, and other, net
   
43
     
(210
)
       
Core funds from operations attributable to common stockholders and unitholders
 
$
238,000
   
$
220,014
         
Core FFO per share-diluted
 
$
3.48
   
$
3.23
     
7.7
%
                         
Changes in core items:
                       
Same-property NOI
 
$
9,555
                 
Non-same property NOI
   
17,204
                 
Management and other fees, net
   
282
                 
FFO from co-investments
   
(2,957
)
               
Interest and other income
   
(4,118
)
               
Interest expense
   
(1,746
)
               
General and administrative
   
297
                 
Corporate-level property management expenses
   
(330
)
               
Other items, net
   
(201
)
               
   
$
17,986
                 
                         
Weighted average number of shares outstanding diluted  (5)
   
68,359,698
     
68,048,908
         

(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 months ended March 31, 2020 was $1.4 million.
(3)
Represents the Company’s share of co-investment income from Real Estate Technology Ventures, L.P.
(4)
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 approximately $181,000 from interest expense to accumulated other comprehensive income. As a result of the adoption of this standard, the Company recognizes qualifying hedge ineffectiveness through accumulated other comprehensive income as opposed to current earnings.
(5)
Assumes conversion of all outstanding limited partnership units in the Operating Partnership into shares of the Company’s common stock and excludes all DownREIT limited partnership units for which the Operating Partnership has the ability and intention to redeem the units for cash and does not consider them to be common stock equivalents.
 
See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information

S-3

E S S E X  P R O P E R T Y  T R U S T, I N C.

Consolidated Balance Sheets
(Dollars in thousands)
           
   
March 31, 2020
   
December 31, 2019
 
             
Real Estate:
           
Land and land improvements
 
$
2,983,314
   
$
2,773,805
 
Buildings and improvements
   
12,263,293
     
11,264,337
 
 
   
15,246,607
     
14,038,142
 
Less: accumulated depreciation
   
(3,818,489
)
   
(3,689,482
)
     
11,428,118
     
10,348,660
 
Real estate under development
   
435,865
     
546,075
 
Co-investments
   
997,137
     
1,335,339
 
     
12,861,120
     
12,230,074
 
Cash and cash equivalents, including restricted cash
   
282,347
     
81,094
 
Marketable securities
   
148,139
     
144,193
 
Notes and other receivables
   
34,867
     
134,365
 
Operating lease right-of-use assets
   
74,428
     
74,744
 
Prepaid expenses and other assets
   
49,940
     
40,935
 
Total assets
 
$
13,450,841
   
$
12,705,405
 
                 
Unsecured debt, net
 
$
5,258,263
   
$
4,763,206
 
Mortgage notes payable, net
   
887,389
     
990,667
 
Lines of credit
   
350,000
     
55,000
 
Operating lease liabilities
   
76,405
     
76,740
 
Other liabilities
   
428,192
     
378,878
 
Total liabilities
   
7,000,249
     
6,264,491
 
Redeemable noncontrolling interest
   
32,643
     
37,410
 
Equity:
               
Common stock
   
7
     
7
 
Additional paid-in capital
   
6,959,523
     
7,121,927
 
Distributions in excess of accumulated earnings
   
(708,697
)
   
(887,619
)
Accumulated other comprehensive loss, net
   
(22,668
)
   
(13,888
)
Total stockholders’ equity
   
6,228,165
     
6,220,427
 
Noncontrolling interest
   
189,784
     
183,077
 
Total equity
   
6,417,949
     
6,403,504
 
Total liabilities and equity
 
$
13,450,841
   
$
12,705,405
 

See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information

S-4

E S S E X  P R O P E R T Y  T R U S T, I N C.

Debt Summary - March 31, 2020
 
(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
%
   
1.2
   
2020
   
$
-
   
$
185,493
   
$
185,493
     
6.8
%
   
3.0
%
Bonds public - fixed rate
   
4,750,000
     
3.7
%
   
7.7
   
2021
     
500,000
     
31,653
     
531,653
     
4.3
%
   
8.6
%
Term loan (1)
   
350,000
     
2.7
%
   
1.9
   
2022
     
650,000
     
43,188
     
693,188
     
3.1
%
   
11.2
%
Unamortized net discounts and debt issuance costs
   
(41,737
)
   
-
     
-
   
2023
     
600,000
     
2,945
     
602,945
     
3.7
%
   
9.8
%
     
5,258,263
     
3.6
%
   
7.1
   
2024
     
400,000
     
3,109
     
403,109
     
4.0
%
   
6.5
%
Mortgage Notes Payable, net
                         
2025
     
500,000
     
133,054
     
633,054
     
3.5
%
   
10.2
%
Fixed rate - secured
   
629,501
     
4.7
%
   
4.3
   
2026
     
450,000
     
99,405
     
549,405
     
3.5
%
   
8.9
%
Variable rate - secured (2)
   
255,270
     
2.6
%
   
17.0
   
2027
     
350,000
     
153,955
     
503,955
     
3.6
%
   
8.1
%
Unamortized premiums and debt issuance costs, net
   
2,618
     
-
     
-
   
2028
     
-
     
68,332
     
68,332
     
4.1
%
   
1.1
%
Total mortgage notes payable
   
887,389
     
4.1
%
   
7.9
   
2029
     
500,000
     
31,156
     
531,156
     
4.0
%
   
8.6
%
                           
2030
     
550,000
     
1,592
     
551,592
     
3.1
%
   
8.9
%
Unsecured Lines of Credit
                         
Thereafter
     
800,000
     
130,889
     
930,889
     
3.3
%
   
15.1
%
Line of credit (3)
   
350,000
     
2.4
%
         
Subtotal
     
5,300,000
     
884,771
     
6,184,771
     
3.6
%
   
100.0
%
Line of credit (4)
   
-
     
2.4
%
         
Debt Issuance Costs
     
(27,589
)
   
(2,425
)
   
(30,014
)
 
NA
   
NA
 
Total lines of credit
   
350,000
     
2.4
%
         
(Discounts)/Premiums
     
(14,148
)
   
5,043
     
(9,105
)
 
NA
   
NA
 
                           
Total
   
$
5,258,263
   
$
887,389
   
$
6,145,652
     
3.6
%
   
100.0
%
Total debt, net
 
$
6,495,652
     
3.6
%                                                      

Capitalized interest for the three months ended March 31, 2020 was approximately $4.8 million.

(1)
The unsecured term loan has a variable interest rate of LIBOR plus 0.95%. The Company has interest rate swap contracts with an aggregate notional amount of $175 million, which effectively converts the interest rate on $175 million of the term loan to a fixed rate of 2.3%.
(2)
$255.3 million of variable rate debt is tax exempt to the note holders.
(3)
This unsecured line of credit facility has a capacity of $1.2 billion, with a scheduled maturity date in December 2023 with one 18-month extension, exercisable at the Company’s option. The underlying interest rate on this line is based on a tiered rate structure tied to the Company’s corporate ratings and is currently at LIBOR plus 0.825%.
(4)
This unsecured line of credit facility has a capacity $35.0 million, with a scheduled maturity date in February 2021. The underlying interest rate on this line is based on a tiered rate structure tied to the Company’s corporate ratings and is currently at LIBOR plus 0.825%.

See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information

S-5

E S S E X  P R O P E R T Y  T R U S T, I N C.

Capitalization Data, Public Bond Covenants, Credit Ratings and Selected Credit Ratios - March 31, 2020
(Dollars and shares in thousands, except per share amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
Capitalization Data
 
 
 
 
 
 
Public Bond Covenants (1)
 
Actual
 
Requirement
   
Total debt, net
 
 
 
$
6,495,652
 
 
 
 
         
 
 
 
 
 
 
 
 
 
Debt to Total Assets:
 
38%
 
< 65%
   
Common stock and potentially dilutive securities
 
 
 
 
 
 
         
Common stock outstanding
 
 
65,412
 
 
 
 
         
Limited partnership units (1)
 
 
2,254
 
 
 
 
         
Options-treasury method
 
 
12
 
 
Secured Debt to Total Assets:
 
5%
 
< 40%
   
Total shares of common stock and potentially dilutive securities
 
67,678
 
 
 
 
         
 
 
 
 
 
 
 
 
 
 
 
         
Common stock price per share as of March 31, 2020
$
220.24
 
 
 
 
         
 
 
 
 
 
 
 
 
 
Interest Coverage:
 
484%
 
> 150%
   
Total equity capitalization
 
$
14,905,403
 
 
 
 
         
 
 
 
 
 
 
 
 
 
 
 
         
Total market capitalization
 
$
21,401,055
 
 
Unsecured Debt Ratio (2):
 
264%
 
> 150%
   
 
 
 
 
 
 
 
 
 
 
 
         
Ratio of debt to total market capitalization
 
 
30.4%
 
 
 
 
         
 
 
 
 
 
 
 
 
 
Selected Credit Ratios (3)
 
Actual
       
Credit Ratings
 
 
 
 
 
 
 
 
 
         
Rating Agency
 
Rating
Outlook
 
 
 
 
Net Indebtedness Divided by Adjusted EBITDAre, normalized and annualized:
 
5.9
       
Fitch
 
BBB+
Stable
 
 
 
 
 
 
         
Moody’s
 
Baa1
Stable
 
 
 
 
Unencumbered NOI to Adjusted Total NOI:
 
90%
       
Standard & Poor’s
BBB+
Stable
 
 
 
 
 
 
 
 
 
   
 
 
     
 
 
 
 
(1)    Refer to page S-17.4 for additional information on the Company’s Public Bond Covenants.
   
(1) Assumes conversion of all outstanding limited partnership units in the OperatingPartnership into shares of the Company’s common stock.
   
(2)    Unsecured Debt Ratio is unsecured assets (excluding investments in co-investments) divided by unsecured indebtedness.
(3)     Refer to pages S-17.1 to S-17.4, the section titled “Reconciliations of Non-GAAP Financial Measures and Other Terms” for additional information on the Company’s Selected Credit Ratios.


See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information

S-6

E S S E X  P R O P E R T Y  T R U S T, I N C.

Portfolio Summary by County as of March 31, 2020


 
Apartment Homes
   
Average Monthly Rental Rate (1)
   
Percent of NOI (2)
 
Region - County
 
Consolidated (3)
   
Unconsolidated
Co-investments (4)
   
Apartment
Homes in
Development (5)
   
Total
   
Consolidated
   
Unconsolidated
Co-investments (6)
   
Total (7)
   
Consolidated
   
Unconsolidated
Co-investments (6)
   
Total (7)
 
                                                             
Southern California
                                                           
Los Angeles County
   
9,097
     
1,563
     
200
     
10,860
   
$
2,484
   
$
2,190
   
$
2,460
     
17.6
%
   
15.7
%
   
17.4
%
Orange County
   
5,554
     
1,149
     
-
     
6,703
     
2,248
     
1,972
     
2,222
     
9.8
%
   
10.8
%
   
9.9
%
San Diego County
   
4,824
     
616
     
-
     
5,440
     
1,995
     
1,879
     
1,988
     
7.8
%
   
5.6
%
   
7.6
%
Ventura County and Other
   
3,200
     
693
     
-
     
3,893
     
1,845
     
2,222
     
1,885
     
4.9
%
   
8.1
%
   
5.2
%
Total Southern California
   
22,675
     
4,021
     
200
     
26,896
     
2,232
     
2,088
     
2,220
     
40.1
%
   
40.2
%
   
40.1
%
                                                                                 
Northern California
                                                                               
Santa Clara County (8)
   
9,176
     
1,237
     
269
     
10,682
     
2,898
     
2,965
     
2,902
     
20.9
%
   
16.4
%
   
20.6
%
Alameda County
   
3,959
     
1,309
     
-
     
5,268
     
2,577
     
2,497
     
2,566
     
7.9
%
   
16.4
%
   
8.5
%
San Mateo County
   
2,651
     
195
     
107
     
2,953
     
3,195
     
3,881
     
3,220
     
6.2
%
   
3.7
%
   
6.0
%
Contra Costa County
   
2,619
     
-
     
-
     
2,619
     
2,493
     
-
     
2,493
     
5.3
%
   
0.0
%
   
4.9
%
San Francisco
   
1,343
     
537
     
-
     
1,880
     
3,274
     
4,008
     
3,397
     
3.4
%
   
4.1
%
   
3.4
%
Total Northern California
   
19,748
     
3,278
     
376
     
23,402
     
2,845
     
2,996
     
2,857
     
43.7
%
   
40.6
%
   
43.4
%
                                                                                 
Seattle Metro
   
10,343
     
1,890
     
-
     
12,233
     
1,933
     
1,931
     
1,933
     
16.2
%
   
19.2
%
   
16.5
%
                                                                                 
Total
   
52,766
     
9,189
     
576
     
62,531
   
$
2,403
   
$
2,375
   
$
2,401
     
100.0
%
   
100.0
%
   
100.0
%

(1)
Average monthly rental rate is defined as the total scheduled monthly rental income (actual rent for occupied apartment homes plus market rent for vacant apartment homes) divided by the number of apartment homes.
(2)
Represents the percentage of actual NOI for the quarter ended March 31, 2020. See the section titled “Net Operating Income (“NOI”) and Same-Property NOI Reconciliations” on page S-17.3.
(3)
Includes two communities consisting of 648 apartment homes that are producing partial income due to lease-up.
(4)
Includes one community consisting of 537 apartment homes that is producing partial income due to lease-up.
(5)
Includes development communities with no rental income.
(6)
Co-investment amounts weighted for Company’s pro rata share.
(7)
At Company’s pro rata share.
(8)
Includes all communities in Santa Clara County and one community in Santa Cruz County.

See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information

S-7

E S S E X  P R O P E R T Y  T R U S T, I N C.

Operating Income by Quarter (1)
(Dollars in thousands, except in footnotes)

   
Apartment
Homes
   
Q1 ‘20
   
Q4 ‘19
   
Q3 ‘19
   
Q2 ‘19
   
Q1 ‘19
 
                                     
Rental and other property revenues:
                                   
Same-property
   
47,347
   
$
346,456
   
$
346,224
   
$
340,383
   
$
338,275
   
$
335,658
 
Acquisitions (2)
   
2,869
     
21,924
     
7,201
     
6,019
     
3,538
     
987
 
Development (3)
   
968
     
4,075
     
3,417
     
1,883
     
1,217
     
1,158
 
Redevelopment
   
621
     
5,401
     
5,317
     
5,272
     
5,240
     
5,229
 
Non-residential/other, net (4)
   
961
     
11,894
     
10,702
     
10,947
     
11,105
     
10,856
 
Total rental and other property revenues
   
52,766
     
389,750
     
372,861
     
364,504
     
359,375
     
353,888
 
                                                 
Property operating expenses:
                                               
Same-property
           
94,691
     
93,412
     
95,421
     
91,043
     
93,448
 
Acquisitions (2)
           
6,830
     
2,181
     
2,020
     
945
     
332
 
Development (3)
           
1,447
     
1,208
     
706
     
506
     
524
 
Redevelopment
           
1,663
     
1,725
     
1,734
     
1,586
     
1,650
 
Non-residential/other, net (4) (5)
           
2,512
     
2,598
     
2,292
     
1,110
     
2,086
 
Total property operating expenses
           
107,143
     
101,124
     
102,173
     
95,190
     
98,040
 
                                                 
Net operating income (NOI):