Exhibit 99.1





Essex Announces Third Quarter 2020 Results
 
San Mateo, California—October 28, 2020—Essex Property Trust, Inc. (NYSE: ESS) (the “Company”) announced today its third quarter 2020 earnings results and related business activities.

Net Income, Funds from Operations (“FFO”), and Core FFO per diluted share for the quarter ended September 30, 2020 are detailed below.

                         

 
Three Months Ended
September 30,
   
%
   
Nine Months Ended
September 30,
   
%
 
   
2020
   
2019
   
Change
   
2020
   
2019
   
Change
 
Per Diluted Share
                                   
Net Income
 

$1.13
   
$1.51
     
-25.2%

 

$7.21
   
$4.71
     
53.1%

Total FFO
 
$2.88
   
$3.50
     
-17.7%

 
$9.53
   
$10.19
     
-6.5%

Core FFO
 
$3.15
   
$3.35
     
-6.0%

 
$9.80
   
$9.92
     
-1.2%

                                                 

Third Quarter 2020 Highlights:


Reported Net Income per diluted share for the third quarter of 2020 of $1.13, compared to $1.51 in the third quarter of 2019.


Core FFO declined by 6.0% per diluted share compared to the third quarter of 2019.


Same-property gross revenue and net operating income (“NOI”) declined by 6.7% and 10.8%, respectively, compared to the third quarter of 2019. The decline in same-property revenue and NOI is primarily attributed to an additional $16.8 million of cash concessions compared to the prior year period. If accounting for concessions using the straight-line GAAP method, same-property revenue and NOI would have declined 2.9% and 5.5%, respectively.


Disposed of one apartment community during the third quarter for a total contract price of $51.5 million.


Repurchased 121,260 shares of common stock totaling $26.6 million at an average price per share of $219.24 under the stock buyback program.


In August 2020, the Company issued $600.0 million of senior unsecured notes consisting of two $300.0 million tranches due in 2031 and 2050, respectively. The notes bear an interest rate per annum of 1.65% and 2.65%, respectively.


As of October 22, 2020, the Company’s immediately available liquidity is approximately $1.7 billion.

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


“The challenges related to the COVID-19 pandemic and subsequent economic recession continued throughout the third quarter of 2020.  Local and state governments on the West Coast adopted strict guidelines for reopening businesses, muting the recovery in job growth and economic activity in the third quarter.  However, these restrictions have begun to subside, leading to cautious optimism that the pace of improvement in job growth and economic activity will accelerate. In the meantime, our strong balance sheet and conservative dividend payout ratio allow us to remain focused on our mission of providing essential housing services while creating value for our shareholders,” 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 September 30, 2020 compared to the quarter ended September 30, 2019, and the sequential percentage change for the quarter ended September 30, 2020 compared to the quarter ended June 30, 2020, by submarket for the Company:

   
Q3 2020 vs.
Q3 2019

 
Q3 2020 vs.
Q2 2020

 
% of Total

   
Gross
Revenues

 
Gross
Revenues

 
Q3 2020
Revenues

Southern California
     
     
     
Los Angeles County
   
-13.5%

   
-5.1%

   
17.6%

Orange County
   
-2.6%

   
1.9%

   
11.5%

San Diego County
   
-2.1%

   
0.1%

   
8.6%

Ventura County
   
-2.0%

   
2.2%

   
4.7%

Total Southern California
   
-7.3%

   
-1.4%

   
42.4%

Northern California
   
     
     
Santa Clara County
   
-7.2%

   
-5.1%

   
18.9%

Alameda County
   
-10.9%

   
-4.9%

   
6.7%

San Mateo County
   
-9.2%

   
-5.0%

   
4.9%

Contra Costa County
   
-4.6%

   
1.6%

   
5.0%

San Francisco
   
-15.5%

   
-9.4%

   
3.0%

Total Northern California
   
-8.5%

   
-4.6%

   
38.5%

Seattle Metro
   
-1.6%

   
-0.1%

   
19.1%

Same-Property Portfolio
   
-6.7%

   
-2.4%

   
100.0%


The table below illustrates the components that drove the change in Same-Property Revenues on a year-over-year basis.

Same-Property Revenue Components
 
$ Amount
(in millions)
   
% Contribution to
Growth/(Decline)
 
Q3 2019 Same-Property Revenue
 
$
337.7
     
Scheduled Rents
   
(1.5
)
   
(0.4%)

Delinquencies
   
(5.5
)
   
(1.6%)

Cash Concessions
   
(16.8
)
   
(5.0%)

Vacancy
   
0.2
     
0.1%

Other Income
   
0.9
     
0.3%

Q3 2020 Same-Property Revenues/Growth
 
$
315.0
     
(6.7%)


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Year-Over-Year Growth
   
Year-Over-Year Growth
 
   
Q3 2020 compared to Q3 2019
   
YTD 2020 compared to YTD 2019
 
   
Gross
Revenues
   
Operating
Expenses

 
NOI

 
Gross
Revenues

 
Operating
Expenses

 
NOI

Southern California
   
-7.3%

   
2.1%

   
-11.1%

   
-3.4%

   
2.5%

   
-5.8%

Northern California
   
-8.5%

   
3.1%

   
-12.6%

   
-3.0%

   
2.9%

   
-5.0%

Seattle Metro
   
-1.6%

   
8.8%

   
-5.9%

   
0.9%

   
7.8%

   
-1.9%

Same-Property Portfolio
   
-6.7%

   
3.7%

   
-10.8%

   
-2.5%

   
3.7%

   
-4.8%


   
Sequential Growth
 
   
Q3 2020 compared to Q2 2020
 
   
Gross
Revenues
   
Operating
Expenses
   
NOI
 
Southern California
   
-1.4%

   
3.4%

   
-3.6%

Northern California
   
-4.6%

   
4.1%

   
-7.8%

Seattle Metro
   
-0.1%

   
-2.1%

   
0.9%

Same-Property Portfolio
   
-2.4%

   
2.5%

   
-4.5%


   
Financial Occupancies

   
Quarter Ended

   
9/30/2020

 
6/30/2020

 
9/30/2019

Southern California
   
95.9%

   
94.5%

   
96.1%

Northern California
   
96.2%

   
95.0%

   
95.9%

Seattle Metro
   
95.9%

   
95.4%

   
95.9%

Same-Property Portfolio
   
96.0%

   
94.9%

   
96.0%


Investment Activity

Dispositions

In July 2020, the Company sold a community in Redmond, WA containing 126 apartment homes, for a total contract price of $51.5 million. The Company recognized a $22.7 million gain on sale, which has been excluded from Core FFO.

Subsequent to quarter end, the Company sold a community located in Glendale, CA containing 115 apartment homes, for a total contract price of $60.0 million.

Other Investments

In the third quarter of 2020, the Company received cash proceeds of $60.3 million from the full redemption of a preferred equity investment and the partial redemption of an investment in a mortgage backed security. The remaining portion of the mortgage backed security is expected to be redeemed in the fourth quarter of 2020.

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In the third quarter of 2020, the Company funded a preferred equity investment totaling $10.5 million for the development of a multifamily community located in Southern California. The investment has an initial preferred return of 11.0% and is scheduled to mature in August 2025.

Subsequent to quarter end, the Company originated two preferred equity investments totaling $46.8 million. One of the investments is for the development of a multifamily community and the other is an investment in a stabilized multifamily community, both located in Southern California. The investments have a weighted average return of 10.2% with most of the proceeds funding in late 2020 and early 2021.

Development Activity

During the third quarter of 2020, the Company’s development, Station Park Green – Phase III, reached stabilization.

The table below represents the development communities in lease-up and the current leasing status as of October 22, 2020.

Project Name
Location
 
Total
Apartment
Homes
   
ESS
Ownership
   
% Leased as of
10/22/20
 
Status
500 Folsom
San Francisco, CA
   
537
     
50%

   
84.5%

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

   
58.6%

In Lease-Up
Patina at Midtown
San Jose, CA
   
269
     
50%

   
33.1%

In Lease-Up
Total/Average % Leased
     
1,282
             
64.1%

 

liquidity and balance sheet

Common Stock

In the third quarter of 2020, the Company repurchased 121,260 shares of its common stock totaling $26.6 million, including commissions, at an average price of $219.24 per share. Year-to-date through October 22, 2020, the Company has repurchased 985,509 shares of its common stock totaling $223.0 million, including commissions, at an average price of $226.27 per share. As of October 22, 2020, the Company had $203.3 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 third quarter of 2020.

Balance Sheet

In August 2020, the Company issued $600.0 million of senior unsecured notes, consisting of $300.0 million due in January 2031 and $300.0 million due in September 2050. The senior unsecured notes due in 2031 and 2050 bear an interest rate per annum of 1.65% and 2.65%, respectively, and were issued at effective yields of 1.75% and 2.67%, respectively. A portion of the proceeds were used to prepay $300.0 million of the Company’s outstanding 3.625% senior notes due in August 2022. The Company incurred $19.1 million in prepayment penalties and write-offs of unamortized costs in the third quarter related to this debt repayment.  The remaining proceeds will be used to repay all remaining 2021 debt maturities.

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As of October 22, 2020, the Company had $1.2 billion in undrawn capacity on its unsecured credit facilities and $0.5 billion in cash and marketable securities.

COVID-19 Update

Due to the uncertain nature of the COVID-19 pandemic and evolving economic re-opening plans, the Company is not reinstating full-year 2020 guidance. Instead, the Company continues to provide additional disclosures related to its operations on page S-15 of the supplemental financial information.

Conference Call with Management

The Company will host an earnings conference call with management to discuss its quarterly results on Thursday, October 29, 2020 at 9 a.m. PT (12 p.m. ET), which will be broadcast live via the Internet at www.essex.com, and accessible via phone by dialing toll-free, (877) 407-0784, or toll/international, (201) 689-8560. No passcode is necessary.

A rebroadcast of the live call will be available online for 30 days and digitally for 7 days. To access the replay online, go to www.essex.com and select the third quarter 2020 earnings link. To access the replay, dial (844) 512-2921 using the replay pin number 13710810. 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.

Upcoming Events

The Company is scheduled to participate in the National Association of Real Estate Investment Trusts (“NAREIT”) virtual REITWorld conference from November 17 through November 18, 2020, and the Company’s President and Chief Executive Officer, Michael J. Schall, will present at the conference on Tuesday, November 17 at 3:45 p.m. ET. The presentation will be webcast and can be accessed on the Investors section of the Company’s website at www.essex.com. A copy of any materials provided by the Company at the conference will also be made available on the Investors section of the Company’s website.

Corporate Profile

Essex Property Trust, Inc., an S&P 500 company, is a fully integrated real estate investment trust (REIT) that acquires, develops, redevelops, and manages multifamily residential properties in selected West Coast markets. Essex currently has ownership interests in 246 apartment communities comprising approximately 60,000 apartment homes with an additional 6 properties in various stages of active development. Additional information about the Company can be found on the Company’s website at www.essex.com.

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

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FFO RECONCILIATION

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

The following table sets forth the Company’s calculation of diluted FFO and Core FFO for the three and nine months ended September 30, 2020 and 2019 (in thousands, except for share and per share amounts):

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Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
Funds from Operations attributable to common stockholders and unitholders
 
2020
   
2019
   
2020
   
2019
 
Net income available to common stockholders
 
$
73,661
   
$
99,335
   
$
473,125
   
$
310,468
 
Adjustments:
                               
Depreciation and amortization
   
130,202
     
120,809
     
395,370
     
360,842
 
Gains not included in FFO
   
(24,879
)
   
-
     
(276,170
)
   
(32,405
)
Depreciation and amortization from unconsolidated co-investments
   
12,883
     
15,483
     
38,191
     
45,304
 
Noncontrolling interest related to Operating Partnership units
   
2,593
     
3,464
     
16,543
     
10,863
 
Depreciation attributable to third party ownership and other
   
(134
)
   
(242
)
   
(407
)
   
(708
)
                                 
Funds from Operations attributable to common stockholders and unitholders
 
$
194,326
   
$
238,849
   
$
646,652
   
$
694,364
 
FFO per share – diluted
 
$
2.88
   
$
3.50
   
$
9.53
   
$
10.19
 
Expensed acquisition and investment related costs
 
$
2
   
$
13
   
$
104
   
$
69
 
Deferred tax expense on unrealized gain on unconsolidated co-investment (1)
   
-
     
1,457
     
1,636
     
1,457
 
Gain on sale of marketable securities
   
(91
)
   
(239
)
   
(124
)
   
(737
)
Unrealized (gains) losses on marketable securities
   
(3,288
)
   
174
     
(2,215
)
   
(4,280
)
Provision for credit losses
   
3
     
-
     
100
     
-
 
Equity income from non-core co-investment (2)
   
213
     
(4,247
)
   
(4,373
)
   
(4,561
)
Interest rate hedge ineffectiveness (3)
   
-
     
-
     
-
     
181
 
Loss (gain) on early retirement of debt, net
   
19,114
     
(5,475
)
   
23,820
     
(7,143
)
Gain on early retirement of debt from unconsolidated co-investment
   
-
     
-
     
(38
)
   
-
 
Co-investment promote income
   
-
     
-
     
(6,455
)
   
(809
)
Income from early redemption of preferred equity investments
   
-
     
(1,699
)
   
(210
)
   
(2,531
)
General and administrative and other, net
   
2,510
     
-
     
5,642
     
-
 
Insurance reimbursements legal settlements, and other, net
   
132
     
(15
)
   
69
     
(263
)
Core Funds from Operations attributable to common stockholders and unitholders
 
$
212,921
   
$
228,818
   
$
664,608
   
$
675,747
 
Core FFO per share – diluted
 
$
3.15
   
$
3.35
   
$
9.80
   
$
9.92
 
Weighted average number of shares outstanding diluted (4)
   
67,495,286
     
68,229,823
     
67,837,336
     
68,117,569
 


(1)
A deferred tax expense was recorded during the second quarter of 2020 related to the $4.7 million net unrealized gain on the Real Estate Technology Ventures, L.P. co-investment discussed below.

(2)
Represents the Company’s share of co-investment income from Real Estate Technology Ventures, L.P. Income for the second quarter of 2020 includes a net unrealized gain of $4.7 million.

(3)
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.

(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.

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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
September 30,
   
Nine Months Ended
September 30,
 
   
2020
   
2019
   
2020
   
2019
 
Earnings from operations
 
$
128,937
   
$
124,039
   
$
379,510
   
$
364,294
 
Adjustments:
                               
Corporate-level property management expenses
   
8,619
     
8,553
     
26,024
     
25,451
 
Depreciation and amortization
   
130,202
     
120,809
     
395,370
     
360,842
 
Management and other fees from affiliates
   
(2,347
)
   
(2,428
)
   
(7,312
)
   
(7,023
)
General and administrative
   
13,310
     
11,345
     
42,244
     
38,731
 
Expensed acquisition and investment related costs
   
2
     
13
     
104
     
69
 
Gain on sale of real estate and land
   
(22,654
)
   
-
     
(39,251
)
   
-
 
NOI
   
256,069
     
262,331
     
796,689
     
782,364
 
Less: Non-same property NOI
   
(39,196
)
   
(19,196
)
   
(102,881
)
   
(53,575
)
Same-Property NOI
 
$
216,873
   
$
243,135
   
$
693,808
   
$
728,789
 

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 continued impact of the COVID-19 pandemic on the Company’s business, financial condition and results of operations and the impact of any additional 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

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the COVID-19 pandemic and governmental measures intended to prevent its spread, 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 continued impact of the COVID-19 pandemic, which remains inherently uncertain as to duration and severity, and any additional governmental measures taken to limit its spread and other potential future outbreaks of infectious diseases or other health concerns, could continue to 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; 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. 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.

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.

- 9 -

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

- 10 -

 Q3 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 – September 30, 2020
S-5
   
Capitalization Data, Public Bond Covenants, Credit Ratings, and Selected Credit Ratios – September 30, 2020
S-6
   
Portfolio Summary by County – September 30, 2020
S-7
   
Operating Income by Quarter – September 30, 2020
S-8
   
Same-Property Revenue Results by County – Quarters ended September 30, 2020 and 2019, and June 30, 2020
S-9
   
Same-Property Revenue Results by County – Nine months ended September 30, 2020 and 2019
S-9.1
   
Same-Property Operating Expenses – Quarter and Year to Date as of September 30, 2020 and 2019
S-10
   
Development Pipeline – September 30, 2020
S-11
   
Redevelopment Pipeline – September 30, 2020
S-12
   
Capital Expenditures – September 30, 2020
S-12.1
   
Co-investments and Preferred Equity Investments – September 30, 2020
S-13
   
Summary of Apartment Community Acquisitions and Dispositions Activity
S-14
   
Delinquencies, Operating Statistics, and Same-Property Revenue Growth with Concessions on a GAAP basis
S-15
   
California’s Counties are Advancing Through the State’s Re-opening Tiers
S-16
   
Reconciliations of Non-GAAP Financial Measures and Other Terms
S-17.1 – S-17.4
 


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

Consolidated Operating Results
 
Three Months Ended
   
Nine Months Ended
 
(Dollars in thousands, except share and per share amounts)
 
September 30,
   
September 30,
 
   
2020
   
2019
   
2020
   
2019
 
                         
Revenues:
                       
Rental and other property
 
$
368,464
   
$
364,504
   
$
1,126,363
   
$
1,077,767
 
Management and other fees from affiliates
   
2,347
     
2,428
     
7,312
     
7,023
 
     
370,811
     
366,932
     
1,133,675
     
1,084,790
 
                                 
Expenses:
                               
Property operating
   
112,395
     
102,173
     
329,674
     
295,403
 
Corporate-level property management expenses
   
8,619
     
8,553
     
26,024
     
25,451
 
Depreciation and amortization
   
130,202
     
120,809
     
395,370
     
360,842
 
General and administrative
   
13,310
     
11,345
     
42,244
     
38,731
 
Expensed acquisition and investment related costs
   
2
     
13
     
104
     
69
 
     
264,528
     
242,893
     
793,416
     
720,496
 
Gain on sale of real estate and land
   
22,654
     
-
     
39,251
     
-
 
Earnings from operations
   
128,937
     
124,039
     
379,510
     
364,294
 
Interest expense, net (1)
   
(52,453
)
   
(52,742
)
   
(157,275
)
   
(156,477
)
Interest and other income
   
6,512
     
8,685
     
12,696
     
29,293
 
Equity income from co-investments
   
14,960
     
21,700
     
53,514
     
54,935
 
Deferred tax expense on unrealized gain on unconsolidated co-investment
   
-
     
(1,457
)
   
(1,636
)
   
(1,457
)
(Loss) gain on early retirement of debt, net
   
(19,114
)
   
5,475
     
(23,820
)
   
7,143
 
Gain on remeasurement of co-investment
   
-
     
-
     
234,694
     
31,535
 
Net income
   
78,842
     
105,700
     
497,683
     
329,266
 
Net income attributable to noncontrolling interest
   
(5,181
)
   
(6,365
)
   
(24,558
)
   
(18,798
)
Net income available to common stockholders
 
$
73,661
   
$
99,335
   
$
473,125
   
$
310,468
 
                                 
Net income per share - basic
 
$
1.13
   
$
1.51
   
$
7.22
   
$
4.72
 
                                 
Shares used in income per share - basic
   
65,232,837
     
65,850,524
     
65,561,820
     
65,757,914
 
                                 
Net income per share - diluted
 
$
1.13
   
$
1.51
   
$
7.21
   
$
4.71
 
                                 
Shares used in income per share - diluted
   
65,241,428
     
65,973,085
     
65,676,093
     
65,857,660
 
 
(1)
Refer to page S-17.2, the section titled “Interest Expense, Net” for additional information.

See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information
 
S-1

E S S E X  P R O P E R T Y  T R U S T, I N C.
 
Consolidated Operating Results
 
Three Months Ended
   
Nine Months Ended
 
Selected Line Item Detail
 
September 30,
   
September 30,
 
(Dollars in thousands)
 
2020
   
2019
   
2020
   
2019
 
 
                       
Rental and other property
                       
Rental income
 
$
362,073
   
$
358,001
   
$
1,108,658
   
$
1,058,973
 
Other property
   
6,391
     
6,503
     
17,705
     
18,794
 
Rental and other property
 
$
368,464
   
$
364,504
   
$
1,126,363
   
$
1,077,767
 
                                 
Property operating expenses
                               
Real estate taxes
 
$
44,358
   
$
39,290
   
$
132,364
   
$
114,993
 
Administrative
   
23,155
     
21,381
     
67,491
     
62,887
 
Maintenance and repairs
   
23,214
     
21,323
     
68,991
     
61,929
 
Utilities
   
21,668
     
20,179
     
60,828
     
55,594
 
Property operating expenses
 
$
112,395
   
$
102,173
   
$
329,674
   
$
295,403
 
                                 
Interest and other income
                               
Marketable securities and other income
 
$
3,268
   
$
8,605
   
$
10,526
   
$
24,013
 
Gain on sale of marketable securities
   
91
     
239
     
124
     
737
 
Provision for credit losses
   
(3
)
   
-
     
(100
)
   
-
 
Unrealized gains (losses) on marketable securities
   
3,288
     
(174
)
   
2,215
     
4,280
 
Insurance reimbursements, legal settlements, and other, net
   
(132
)
   
15
     
(69
)
   
263
 
Interest and other income
 
$
6,512
   
$
8,685
   
$
12,696
   
$
29,293
 
                                 
Equity income from co-investments
                               
Equity income from co-investments
 
$
991
   
$
4,430
   
$
4,300
   
$
14,531
 
Income from preferred equity investments
   
11,957
     
11,324
     
35,913
     
31,633
 
Equity (loss) income from non-core co-investment
   
(213
)
   
4,247
     
4,373
     
4,561
 
Gain on sale of co-investment communities
   
2,225
     
-
     
2,225
     
870
 
Gain on early retirement of debt from unconsolidated co-investment
   
-
     
-
     
38
     
-
 
Co-investment promote income
   
-
     
-
     
6,455
     
809
 
Income from early redemption of preferred equity investments
   
-
     
1,699
     
210
     
2,531
 
Equity income from co-investments
 
$
14,960
   
$
21,700
   
$
53,514
   
$
54,935
 
                                 
Noncontrolling interest
                               
Limited partners of Essex Portfolio, L.P.
 
$
2,593
   
$
3,464
   
$
16,543
   
$
10,863
 
DownREIT limited partners’ distributions
   
2,123
     
2,016
     
6,393
     
5,225
 
Third-party ownership interest
   
465
     
885
     
1,622
     
2,710
 
Noncontrolling interest
 
$
5,181
   
$
6,365
   
$
24,558
   
$
18,798
 

See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information
 
S-2

E S S E X  P R O P E R T Y  T R U S T, I N C.
 
Consolidated Funds From Operations  (1)
 
Three Months Ended
         
Nine Months Ended
       
(Dollars in thousands, except share and per share amounts and in footnotes)
 
September 30,
         
September 30,
       
 
 
2020
   
2019
   
% Change
   
2020
   
2019
   
% Change
 
                                     
Funds from operations attributable to common stockholders and unitholders (FFO)
                                   
Net income available to common stockholders
 
$
73,661
   
$
99,335
         
$
473,125
   
$
310,468
       
Adjustments:
                                           
Depreciation and amortization
   
130,202
     
120,809
           
395,370
     
360,842
       
Gains not included in FFO
   
(24,879
)
   
-
           
(276,170
)
   
(32,405
)
     
Depreciation and amortization from unconsolidated co-investments
   
12,883
     
15,483
           
38,191
     
45,304
       
Noncontrolling interest related to Operating Partnership units
   
2,593
     
3,464
           
16,543
     
10,863
       
Depreciation attributable to third party ownership and other  (2)
   
(134
)
   
(242
)
         
(407
)
   
(708
)
     
Funds from operations attributable to common stockholders and unitholders
 
$
194,326
   
$
238,849
         
$
646,652
   
$
694,364
       
FFO per share-diluted
 
$
2.88
   
$
3.50
     
-17.7
%
 
$
9.53
   
$
10.19
   
-6.5
%
                                               
Components of the change in FFO
                                             
Non-core items:
                                             
Expensed acquisition and investment related costs
 
$
2
   
$
13
           
$
104
   
$
69
       
Deferred tax expense on unrealized gain on unconsolidated co-investment (3)
   
-
     
1,457
             
1,636
     
1,457
       
Gain on sale of marketable securities
   
(91
)
   
(239
)
           
(124
)
   
(737
)
     
Unrealized (gains) losses on marketable securities
   
(3,288
)
   
174
             
(2,215
)
   
(4,280
)
     
Provision for credit losses
   
3
     
-
             
100
     
-
       
Equity income from non-core co-investment  (4)
   
213
     
(4,247
)
           
(4,373
)
   
(4,561
)
     
Interest rate hedge ineffectiveness  (5)
   
-
     
-
             
-
     
181
       
Loss (gain) on early retirement of debt, net
   
19,114
     
(5,475
)
           
23,820
     
(7,143
)
     
Gain on early retirement of debt from unconsolidated co-investment
   
-
     
-
             
(38
)
   
-
       
Co-investment promote income
   
-
     
-
             
(6,455
)
   
(809
)
     
Income from early redemption of preferred equity investments
   
-
     
(1,699
)
           
(210
)
   
(2,531
)
     
General and administrative and other, net
   
2,510
     
-
             
5,642
     
-
       
Insurance reimbursements, legal settlements, and other, net
   
132
     
(15
)
           
69
     
(263
)
     
Core funds from operations attributable to common stockholders and unitholders
 
$
212,921
   
$
228,818
           
$
664,608
   
$
675,747
       
Core FFO per share-diluted
 
$
3.15
   
$
3.35
     
-6.0
%
 
$
9.80
   
$
9.92
   
-1.2
%
                                               
Changes in core items:
                                             
Same-property NOI
 
$
(26,262
)
                 
$
(34,981
)
             
Non-same property NOI
   
20,000
                     
49,306
               
Management and other fees, net
   
(81
)
                   
289
               
FFO from co-investments
   
(5,406
)
                   
(13,064
)
             
Interest and other income
   
(5,337
)
                   
(13,487
)
             
Interest expense
   
289
                     
(979
)
             
General and administrative
   
545
                     
2,129
               
Corporate-level property management expenses
   
(66
)
                   
(573
)
             
Other items, net
   
421
                     
221
               
   
$
(15,897
)
                 
$
(11,139
)
             
                                               
Weighted average number of shares outstanding diluted  (6)
   
67,495,286
     
68,229,823
             
67,837,336
     
68,117,569
       

(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 nine months ended September 30, 2020 was $0.8 million and $3.1 million, respectively.
(3)
A deferred tax expense was recorded during the second quarter of 2020 related to the $4.7 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 second quarter of 2020 includes a net unrealized gain of $4.7 million.
(5)
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.
(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)
           
 
 
September 30, 2020
   
December 31, 2019
 
             
Real Estate:
           
Land and land improvements
 
$
2,944,521
   
$
2,773,805
 
Buildings and improvements
   
12,184,957
     
11,264,337
 
     
15,129,478
     
14,038,142
 
Less: accumulated depreciation
   
(4,043,496
)
   
(3,689,482
)
     
11,085,982
     
10,348,660
 
Real estate under development
   
364,875
     
546,075
 
Co-investments
   
1,018,235
     
1,335,339
 
Real estate held for sale, net
   
32,878
     
-
 
     
12,501,970
     
12,230,074
 
Cash and cash equivalents, including restricted cash
   
569,075
     
81,094
 
Marketable securities
   
134,971
     
144,193
 
Notes and other receivables
   
75,432
     
134,365
 
Operating lease right-of-use assets
   
72,910
     
74,744
 
Prepaid expenses and other assets
   
46,684
     
40,935
 
Total assets
 
$
13,401,042
   
$
12,705,405
 
                 
Unsecured debt, net
 
$
5,907,805
   
$
4,763,206
 
Mortgage notes payable, net
   
702,379
     
990,667
 
Lines of credit
   
-
     
55,000
 
Operating lease liabilities
   
74,844
     
76,740
 
Other liabilities
   
417,813
     
378,878
 
Total liabilities
   
7,102,841
     
6,264,491
 
Redeemable noncontrolling interest
   
30,719
     
37,410
 
Equity:
               
Common stock
   
7
     
7
 
Additional paid-in capital
   
6,921,631
     
7,121,927
 
Distributions in excess of accumulated earnings
   
(821,841
)
   
(887,619
)
Accumulated other comprehensive loss, net
   
(16,800
)
   
(13,888
)
Total stockholders’ equity
   
6,082,997
     
6,220,427
 
Noncontrolling interest
   
184,485
     
183,077
 
Total equity
   
6,267,482
     
6,403,504
 
Total liabilities and equity
 
$
13,401,042
   
$
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 - September 30, 2020
(Dollars in thousands, except in footnotes)

               
Scheduled principal payments, unamortized premiums (discounts) and (debt issuance costs) are as follows - excludes lines of credit:
 
                     
Unsecured
   
Secured
   
Total
   
Weighted Average Interest Rate
   
Percentage of Total Debt
 
         
Weighted Average
 
   
Balance Outstanding
   
Interest Rate
   
Maturity in Years
 
Unsecured Debt, net
                                                     
Bonds private - fixed rate
 
$
200,000
     
4.4
%
   
0.7
     
2020
   
$
-
   
$
1,000
   
$
1,000
     
3.6
%
   
0.0
%
Bonds public - fixed rate
   
5,200,000
     
3.5
%
   
9.1
     
2021
     
500,000
     
31,653
     
531,653
     
4.3
%
   
8.0
%
Term loan (1)
   
550,000
     
1.7
%
   
1.8
     
2022
     
350,000
     
43,188
     
393,188
     
2.0
%
   
5.9
%
Unamortized net discounts and debt issuance costs
   
(42,195
)
   
-
     
-
     
2023
     
800,000
     
2,945
     
802,945
     
3.1
%
   
12.1
%
     
5,907,805
     
3.3
%
   
8.2
     
2024
     
400,000
     
3,109
     
403,109
     
4.0
%
   
6.1
%
Mortgage Notes Payable, net
                           
2025
     
500,000
     
133,054
     
633,054
     
3.5
%
   
9.4
%
Fixed rate - secured
   
445,334
     
3.6
%
   
5.3
     
2026
     
450,000
     
99,405
     
549,405
     
3.5
%
   
8.3
%
Variable rate - secured (2)
   
254,944
     
1.1
%
   
16.4
     
2027
     
350,000
     
153,955
     
503,955
     
3.3
%
   
7.6
%
Unamortized premiums and debt issuance costs, net
   
2,101
     
-
     
-
     
2028
     
-
     
68,332
     
68,332
     
4.1
%
   
1.0
%
Total mortgage notes payable
   
702,379
     
2.7
%
   
9.3
     
2029
     
500,000
     
31,156
     
531,156
     
3.9
%
   
8.0
%
                             
2030
     
550,000
     
1,592
     
551,592
     
3.1
%
   
8.3
%
Unsecured Lines of Credit
                         
Thereafter
     
1,550,000
     
130,889
     
1,680,889
     
2.7
%
   
25.3
%
Line of credit (3)
   
-
     
1.0
%
         
Subtotal
     
5,950,000
     
700,278
     
6,650,278
     
3.3
%
   
100.0
%
Line of credit (4)
   
-
     
1.0
%
         
Debt Issuance Costs
     
(33,055
)
   
(2,127
)
   
(35,182
)
 
NA
   
NA
 
Total lines of credit
   
-
     
1.0
%
         
(Discounts)/Premiums
     
(9,140
)
   
4,228
     
(4,912
)
 
NA
   
NA
 
 
                         
Total
   
$
5,907,805
   
$
702,379
   
$
6,610,184
     
3.3
%
   
100.0
%
Total debt, net
 
$
6,610,184
     
3.3
%
   
8.3
                                                 
 
                                                                       

Capitalized interest for the three and nine months ended September 30, 2020 was approximately $3.3 million and $12.3 million, respectively.

(1)
$350.0 million of 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 $175.0 million, which effectively converts the interest rate on $175.0 million of the term loan to a fixed rate of 2.3%. In April 2020, the Company obtained a $200.0 million unsecured term loan, that has an interest rate of LIBOR plus 1.20% with a one-year maturity and two 12-month extension options, exercisable at the Company’s option.

(2)
$254.9 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 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%.

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 - September 30, 2020
(Dollars and shares in thousands, except per share amounts)

                   
Capitalization Data
       
Public Bond Covenants (1)
 
Actual
 
Requirement
Total debt, net
 
$
6,610,184
   
 
     
       
 
         
Debt to Total Assets:
   
38
%
< 65%
Common stock and potentially dilutive securities
         
 
       
             
Common stock outstanding
   
65,210
   
 
       
       
Limited partnership units (1)
   
2,254
   
 
       
       
Options-treasury method
   
7
   
Secured Debt to Total Assets:
   
4
%
< 40%
Total shares of common stock and potentially dilutive securities
   
67,471
   
 
       
       
 
         
 
       
                    
Common stock price per share as of September 30, 2020
 
$
200.79
   
 
       
       
 
         
Interest Coverage:
   
485
%
> 150%
Total equity capitalization
 
$