Essex Announces First Quarter 2018 Results
San Mateo, California—May 2, 2018—Essex Property Trust, Inc. (NYSE: ESS) (the “Company”) announced today its first quarter 2018 earnings results and related business activities.
Net Income and Funds from Operations (“FFO”) per diluted share for the quarter ended March 31, 2018 are detailed below. Core FFO excludes acquisition and investment related costs and certain non-routine items.
| | | Three Months Ended March 31, | | | % | |
| | | 2018 | | | 2017 | | | Change | |
| Per Diluted Share | | | | | | | | | |
| Net Income | | $ | 1.38 | | | $ | 2.72 | | | | -49.3 | % |
| Total FFO | | $ | 3.35 | | | $ | 2.95 | | | | 13.6 | % |
| Core FFO | | $ | 3.09 | | | $ | 2.94 | | | | 5.1 | % |
| | | | | | | | | | | | | |
First Quarter 2018 Highlights:
| · | Reported Net Income per diluted share for the first quarter of 2018 of $1.38, compared to $2.72 in the first quarter of 2017. In the first quarter of 2017, a gain on remeasurement of co-investment of $86.5 million was recognized. No such gain was recognized in the first quarter of 2018. |
| · | Grew Core FFO per diluted share by 5.1% compared to the first quarter of 2017, achieving the high-end of the guidance range. |
| · | Achieved same-property gross revenue and net operating income (“NOI”) growth of 3.3% and 3.6%, respectively, compared to the first quarter of 2017. |
| · | Realized a sequential quarterly increase in same-property revenue growth of 0.7%. |
| · | Increased the dividend by 6.3% to an annual distribution of $7.44 per common share. |
| · | Raised the midpoint of guidance for same-property revenue growth for the full-year by 15 basis points to 2.7% and NOI growth by 20 basis points to 2.7%. |
| · | Revised full-year Net Income per diluted share guidance range to $4.66 to $5.00. Provided Net Income guidance range for the second quarter of $1.02 to $1.12 per diluted share. |
| · | Revised full-year Total FFO per diluted share guidance range to $12.54 to $12.88, raising the midpoint by $0.28 per share, primarily attributable to promote income from co-investments. Provided Total FFO guidance range for the second quarter of $3.00 to $3.10 per diluted share. |
| · | Increased full-year Core FFO per diluted share guidance by $0.02 per share at the midpoint to a range of $12.28 to $12.64. Provided Core FFO guidance range for the second quarter of $3.00 to $3.10 per diluted share. |
1100 Park Place Suite 200 San Mateo California 94403 telephone 650 655 7800 facsimile 650 655 7810
www.essex.com
“We have experienced healthy momentum in the early part of 2018, leading to improving revenues driven by occupancy rates across our portfolio. As a result, we performed ahead of the midpoint of initial guidance for Core FFO and same-property revenue growth. Positive job growth in the coastal markets of California and Washington is generating strong demand for housing, demonstrated by extraordinary increases in for-sale housing values and steady rent growth for apartments. Consistent with our first quarter results, we anticipate periodic disruption in apartment pricing power during 2018 from deliveries of new apartment communities offering large lease concessions in certain urban submarkets. We are well-positioned as we enter peak leasing season and remain on track to achieve our 2018 operating plan,” 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, 2018 compared to the quarter ended March 31, 2017, and the sequential percentage change for the quarter ended March 31, 2018 versus the quarter ended December 31, 2017, by submarket for the Company:
| | | Q1 2018 vs. Q1 2017 | | | Q1 2018 vs. Q4 2017 | | | % of Total | |
| | | Gross Revenues | | | Gross Revenues | | | Q1 2018 Revenues | |
| Southern California | | | |
| Los Angeles County | | | 2.8 | % | | | 0.7 | % | | | 20.3 | % |
| Orange County | | | 3.2 | % | | | 0.4 | % | | | 11.2 | % |
| San Diego County | | | 3.8 | % | | | 0.8 | % | | | 9.4 | % |
| Ventura County | | | 5.1 | % | | | 1.6 | % | | | 4.4 | % |
| Other Southern California | | | 5.0 | % | | | 3.1 | % | | | 0.5 | % |
| Total Southern California | | | 3.3 | % | | | 0.8 | % | | | 45.8 | % |
| Northern California | | | |
| Santa Clara County | | | 2.0 | % | | | 0.8 | % | | | 15.5 | % |
| Alameda County | | | 4.5 | % | | | 0.6 | % | | | 7.0 | % |
| San Mateo County | | | 1.9 | % | | | 1.4 | % | | | 5.0 | % |
| Contra Costa County | | | 2.8 | % | | | 0.7 | % | | | 5.0 | % |
| San Francisco | | | 3.3 | % | | | -0.3 | % | | | 3.3 | % |
| Other Northern California | | | 6.9 | % | | | -0.5 | % | | | 0.3 | % |
| Total Northern California | | | 2.7 | % | | | 0.7 | % | | | 36.1 | % |
| Seattle Metro | | | 4.5 | % | | | 0.7 | % | | | 18.1 | % |
| Same-Property Portfolio | | | 3.3 | % | | | 0.7 | % | | | 100.0 | % |
| | | | | | | | | | | | | |
| | | Year-Over-Year Growth | |
| | | Q1 2018 compared to Q1 2017 | |
| | | Gross Revenues | | | Operating Expenses | | | NOI | |
| Southern California | | | 3.3 | % | | | 3.7 | % | | | 3.2 | % |
| Northern California | | | 2.7 | % | | | -0.7 | % | | | 4.0 | % |
| Seattle Metro | | | 4.5 | % | | | 5.7 | % | | | 4.0 | % |
| Same-Property Portfolio | | | 3.3 | % | | | 2.5 | % | | | 3.6 | % |
| | | Sequential Growth | |
| | | Q1 2018 compared to Q4 2017 | |
| | | Gross Revenues | | | Operating Expenses | | | NOI | |
| Southern California | | | 0.8 | % | | | -0.9 | % | | | 1.4 | % |
| Northern California | | | 0.7 | % | | | 0.8 | % | | | 0.7 | % |
| Seattle Metro | | | 0.7 | % | | | -2.8 | % | | | 2.1 | % |
| Same-Property Portfolio | | | 0.7 | % | | | -0.7 | % | | | 1.3 | % |
| | | Financial Occupancies | |
| | | Quarter Ended | |
| | | 3/31/2018 | | | 12/31/2017 | | | 3/31/2017 | |
| Southern California | | | 96.9 | % | | | 96.8 | % | | | 96.4 | % |
| Northern California | | | 97.4 | % | | | 96.9 | % | | | 96.6 | % |
| Seattle Metro | | | 96.9 | % | | | 96.4 | % | | | 96.6 | % |
| Same-Property Portfolio | | | 97.1 | % | | | 96.8 | % | | | 96.5 | % |
Investment Activity
In March 2018, the BEXAEW, LLC joint venture operating agreement was amended, and the joint venture was extended. As part of the amendment, the Company received a cash payment for promote income of approximately $20.5 million, which has been included in Net Income and Total FFO but has been excluded from Core FFO.
Development Activity
The following table represents the development community in lease-up during the first quarter of 2018 and the current leasing status as of April 27, 2018.
| Project Name | Location | Total Apartment Homes | | ESS Ownership | | % Leased as of 4/27/18 | | Status |
| Station Park Green – Phase I | San Mateo, CA | | | 121 | | | | 100 | % | | | 40 | % | In Lease-Up |
Liquidity and Balance Sheet
Common Stock
During the first quarter of 2018, the Company repurchased 16,834 shares of its common stock totaling $3.8 million, including commissions, at an average price of $224.13 per share. As of March 31, 2018, the Company had $245.2 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 2018.
Balance Sheet
In January 2018, the Company amended one of its unsecured credit facilities, increasing the maximum amount available for borrowing from $1.0 billion to $1.2 billion and extending the maturity to December 2021.
In March 2018, the Company issued $300.0 million of 30-year senior unsecured notes due 2048 at an interest rate per annum of 4.500%.
As of April 27, 2018, the Company had $1.2 billion in undrawn capacity on its unsecured credit facilities.
Guidance
For the first quarter of 2018, the Company exceeded the midpoint of the guidance range provided in its fourth quarter 2017 earnings release for Core FFO by $0.05 per share.
The following table provides a reconciliation of first quarter 2018 Core FFO per share to the midpoint of the guidance provided in the fourth quarter 2017 earnings release, which was dated February 7, 2018.
| | | Per Diluted Share | |
| Projected midpoint of Core FFO per share for Q1 2018 | | $ | 3.04 | |
| NOI from consolidated communities | | | 0.05 | |
| FFO from Co-Investments | | | 0.01 | |
| G&A and other income | | | (0.01 | ) |
| Core FFO per share for Q1 2018 reported | | $ | 3.09 | |
The table below provides key changes to the 2018 full-year assumptions for Net Income, Total FFO, Core FFO per diluted share, and same-property growth. For additional details regarding the Company’s 2018 assumptions, please see page S-14 of the accompanying supplemental financial information. For the second quarter of 2018, the Company has established a range for Core FFO per diluted share of $3.00 to $3.10.
2018 Full-Year Guidance
| | | Previous Range | | | Previous Midpoint | | | Revised Range | | | Revised Midpoint | |
| Per Diluted Share | | | | | | | | | | | | |
| Net Income | | $ | 4.42 - $4.81 | | | $ | 4.62 | | | $ | 4.66 - $5.00 | | | $ | 4.83 | |
| Total FFO | | $ | 12.23 - $12.62 | | | $ | 12.43 | | | $ | 12.54 - $12.88 | | | $ | 12.71 | |
| Core FFO | | $ | 12.24 - $12.64 | | | $ | 12.44 | | | $ | 12.28 - $12.64 | | | $ | 12.46 | |
| Same-Property Growth | | | | | | | | | | | | | | | | |
| Gross Revenues | | 2.0% to 3.0% | | | | 2.5 | % | | 2.3% to 3.0% | | | | 2.7 | % |
| Operating Expenses | | 2.1% to 3.1% | | | | 2.6 | % | | 2.1% to 3.1% | | | | 2.6 | % |
| NOI | | 1.6% to 3.4% | | | | 2.5 | % | | 2.0% to 3.4% | | | | 2.7 | % |
Upcoming Events
The Company is scheduled to participate in the National Association of Real Estate Investment Trusts (“NAREIT”) Institutional Investor Forum in New York from June 5 through June 7, 2018, and the Company’s President and Chief Executive Officer, Michael J. Schall, will present at the conference on June 5 at 4:30 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.
Conference Call with Management
The Company will host an earnings conference call with management to discuss its quarterly results on Thursday, May 3, 2018 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 first quarter 2018 earnings link. To access the replay digitally, dial (844) 512-2921 using the replay pin number 13678159. 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. The Company currently has ownership interests in 247 apartment communities comprising more than 60,000 apartment homes with an additional 7 properties in various stages of active development. Additional information about the Company can be found on the Company’s website at www.essex.com.
This press release and accompanying supplemental financial information has been furnished to the SEC 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 Internet, please contact the Investor Relations Department at (650) 655-7800.
Funds from Operations (“FFO”) Reconciliation
FFO, as defined by 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 merger, integration and acquisition costs and items that are not routine or not related to the Company’s core business activities, which is referred to as “Core FFO”, to be useful financial 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 the ability to pay dividends.
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 an alternative 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 months ended March 31, 2018 and 2017 (in thousands, except for share and per share amounts):
| | | Three Months Ended March 31, | |
| Funds from Operations attributable to common stockholders and unitholders | | 2018 | | | 2017 | |
| Net income available to common stockholders | | $ | 90,918 | | | $ | 178,964 | |
| Adjustments: | | | | | | | | |
| Depreciation and amortization | | | 119,105 | | | | 115,503 | |
| Gains not included in FFO | | | - | | | | (112,656 | ) |
| Depreciation and amortization add back from unconsolidated co-investments | | | 15,859 | | | | 12,854 | |
| Noncontrolling interest related to Operating Partnership units | | | 3,132 | | | | 6,146 | |
| Depreciation attributable to third party ownership and other | | | (232 | ) | | | (25 | ) |
| Funds from Operations attributable to common stockholders and unitholders | | $ | 228,782 | | | $ | 200,786 | |
| FFO per share – diluted | | $ | 3.35 | | | $ | 2.95 | |
| Expensed acquisition and investment related costs | | $ | 57 | | | $ | 556 | |
| Gain on sale of marketable securities | | | (680 | ) | | | (1,605 | ) |
| Unrealized losses on marketable securities | | | 876 | | | | - | |
Interest rate hedge ineffectiveness (1) | | | 56 | | | | (6 | ) |
| Co-investment promote income | | | (20,541 | ) | | | - | |
| Income from early redemption of preferred equity investments | | | (24 | ) | | | - | |
| Insurance reimbursements, legal settlements, and other, net | | | 2,433 | | | | (25 | ) |
| Core Funds from Operations attributable to common stockholders and unitholders | | $ | 210,959 | | | $ | 199,706 | |
| Core FFO per share – diluted | | $ | 3.09 | | | $ | 2.94 | |
Weighted average number of shares outstanding diluted (2) | | | 68,318,012 | | | | 67,974,466 | |
| (1) | Interest rate swaps are generally adjusted to fair value through other comprehensive income (loss). However, because certain of our interest rate swaps do not have a 0% LIBOR floor, while related hedged debt in these cases is subject to a 0% LIBOR floor, the portion of the change in fair value of these interest rate swaps attributable to this mismatch is recorded as noncash interest rate hedge ineffectiveness through interest expense. |
| (2) | Assumes conversion of all outstanding limited partnership units in Essex Portfolio, L.P. (the “Operating Partnership”) into shares of the Company’s common stock and excludes all DownREIT limited partnership units for which the Operating Partnership has the ability and intention to redeem the units for cash and does not consider them to be common stock equivalents. |
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 condensed consolidated statements of income. The presentation of same-property NOI assists with the presentation of the Company’s operations prior to the allocation of depreciation and any corporate-level or financing-related costs. NOI reflects the operating performance of a community and allows for an easy comparison of the operating performance of individual communities or groups of communities. In addition, because prospective buyers of real estate have different financing and overhead structures, with varying marginal impacts to overhead by acquiring real estate, NOI is considered by many in the real estate industry to be a useful measure for determining the value of a real estate asset or group of assets. The Company defines same-property NOI as same-property revenue less same-property operating expenses, including property taxes. Please see the reconciliation of earnings from operations to NOI and same-property NOI, which in the table below is the NOI for stabilized properties consolidated by the Company for the periods presented (dollars in thousands):
| | | Three Months Ended March 31, | |
| | | 2018 | | | 2017 | |
| Earnings from operations | | $ | 110,547 | | | $ | 109,231 | |
| Adjustments: | | | | | | | | |
| Corporate-level property management expenses | | | 7,770 | | | | 7,509 | |
| Depreciation and amortization | | | 119,105 | | | | 115,503 | |
| Management and other fees from affiliates | | | (2,308 | ) | | | (2,236 | ) |
| General and administrative | | | 14,813 | | | | 10,601 | |
| Expensed acquisition and investment related costs | | | 57 | | | | 556 | |
| NOI | | | 249,984 | | | | 241,164 | |
| Less: Non-same property NOI | | | (17,255 | ) | | | (16,596 | ) |
| Same-Property NOI | | $ | 232,729 | | | $ | 224,568 | |
Safe Harbor Statement Under The Private Litigation Reform Act of 1995:
This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements which are not historical facts, including statements regarding the Company’s expectations, estimates, assumptions, hopes, intentions, beliefs and strategies regarding the future. Words such as “expects,” “assumes,” “anticipates,” “may,” “will,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Such forward-looking statements include, among other things, statements regarding the Company’s intent, beliefs or expectations with respect to the timing of completion of current development and redevelopment projects and the stabilization of such projects, the timing of lease-up and occupancy of its apartment communities, the anticipated operating performance of its apartment communities, the total projected costs of development and redevelopment projects, co-investment activities, qualification as a REIT under the Internal Revenue Code, the real estate markets in the geographies in which the Company’s properties are located and in the United States in general, the adequacy of future cash flows to meet anticipated cash needs, its financing activities and the use of proceeds from such activities, the availability of debt and equity financing, general economic conditions including the potential impacts from the economic conditions, trends affecting the Company’s financial condition or results of operations, changes to U.S. tax laws and regulations in general or specifically related to REITs or real estate, changes to laws and regulations in jurisdictions in which communities the Company owns are located, and other information that is not historical information.
While the Company’s management believes the assumptions underlying its forward-looking statements are reasonable, such forward-looking statements involve known and unknown risks, uncertainties and other factors, many of which are beyond the Company’s control, which could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The Company cannot assure the future results or outcome of the matters described in these statements; rather, these statements merely reflect the Company’s current expectations of the approximate outcomes of the matters discussed. Factors that might cause the Company’s actual results, performance or achievements to differ materially from those expressed or implied by these forward-looking statements include, but are not limited to, the following: the Company may fail to achieve its business objectives; the actual completion of development and redevelopment projects may be subject to delays; the stabilization dates of such projects may be delayed; the Company may abandon or defer development projects for a number of reasons, including changes in local market conditions which make development less desirable, increases in costs of development, increases in the cost of capital or lack of capital availability, resulting in losses; the total projected costs of current development and redevelopment projects may exceed expectations; such development and redevelopment projects may not be completed; development and redevelopment projects and acquisitions may fail to meet expectations; estimates of future income from an acquired property may prove to be inaccurate; occupancy rates and rental demand may be adversely affected by competition and local economic and market conditions; there may be increased interest rates and operating costs; the Company may be unsuccessful in the management of its relationships with its co-investment partners; future cash flows may be inadequate to meet operating requirements and/or may be insufficient to provide for dividend payments in accordance with REIT requirements; there may be a downturn in general economic conditions, the real estate industry, and the markets in which the Company’s communities are located; changes in laws or regulations; the terms of any refinancing may not be as favorable as the terms of existing indebtedness; and those risks, special considerations, and other factors referred to in the Company’s quarterly reports on Form 10-Q, in the Company’s annual report on Form 10-K for the year ended December 31, 2017, and in the Company’s other filings with the Securities and Exchange Commission (the “SEC”). All forward-looking statements are made as of the date hereof, the Company assumes no obligation to update or supplement this information for any reason, and therefore, they may not represent the Company’s estimates and assumptions after the date of this press release.
Definitions and Reconciliations
Non-GAAP financial measures and certain other capitalized terms, as used in this earnings release, are defined and further explained on pages S-17.1 through S-17.4, “Reconciliations of Non-GAAP Financial Measures and Other Terms,” of the accompanying supplemental financial information. The supplemental financial information is available on the Company’s website at www.essex.com.
Contact Information
Barb Pak
Group Vice President of Finance & Investor Relations
(650) 655-7800
bpak@essex.com
Q1 2018 Supplemental
Table of Contents
| | Page(s) |
| Consolidated Operating Results | S-1 – S-2 |
| Consolidated Funds From Operations | S-3 |
| Consolidated Balance Sheets | S-4 |
| Debt Summary – March 31, 2018 | S-5 |
| Capitalization Data, Public Bond Covenants, Credit Ratings, and Selected Credit Ratios – March 31, 2018 | S-6 |
| Portfolio Summary by County – March 31, 2018 | S-7 |
| Operating Income by Quarter – March 31, 2018 | S-8 |
| Same-Property Revenue Results by County – Quarters ended March 31, 2018 and 2017, and December 31, 2017 | S-9 |
| Same-Property Operating Expenses – Quarter – to Date as of March 31, 2018 and 2017 | S-10 |
| Development Pipeline – March 31, 2018 | S-11 |
| Redevelopment Pipeline – March 31, 2018 | S-12 |
| Capital Expenditures – March 31, 2018 | S-12.1 |
| Co-investments and Preferred Equity Investments – March 31, 2018 | S-13 |
| Assumptions for 2018 FFO Guidance Range | S-14 |
| Reconciliation of Projected EPS, FFO and Core FFO per diluted share | S-14.1 |
| Summary of Apartment Community Acquisitions and Dispositions Activity | S-15 |
| 2018 MSA Level Forecast: Supply, Jobs and Apartment Market Conditions | S-16 |
| LinkedIn Worker Migration Trends for the San Francisco Bay Area – April 2017-March 2018 | 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 | Three Months Ended | |
| (Dollars in thousands, except share and per share amounts) | March 31, | |
| | | | | 2018 | | | 2017 | |
| | | | | | | | | |
| Revenues: | | | | | | |
| | Rental and other property | $ | 344,947 | | $ | 333,168 | |
| | Management and other fees from affiliates | | 2,308 | | | 2,236 | |
| | | | | 347,255 | | | 335,404 | |
| | | | | | | | | |
| Expenses: | | | | | | |
| | Property operating | | 94,963 | | | 92,004 | |
| | Corporate-level property management expenses | | 7,770 | | | 7,509 | |
| | Depreciation and amortization | | 119,105 | | | 115,503 | |
| | General and administrative | | 14,813 | | | 10,601 | |
| | Expensed acquisition and investment related costs | | 57 | | | 556 | |
| | | | | 236,708 | | | 226,173 | |
| Earnings from operations | | 110,547 | | | 109,231 | |
| | | | | | | | | |
Interest expense, net (1) | | (52,591) | | | (51,999) | |
| Interest and other income | | 5,909 | | | 6,764 | |
| Equity income from co-investments | | 32,774 | | | 10,899 | |
| Gain on sale of real estate and land | | - | | | 26,174 | |
| Gain on remeasurement of co-investment | | - | | | 86,482 | |
| | Net income | | 96,639 | | | 187,551 | |
| Net income attributable to noncontrolling interest | | (5,721) | | | (8,587) | |
| | Net income available to common stockholders | $ | 90,918 | | $ | 178,964 | |
| | | | | | | | | |
| Net income per share - basic | $ | 1.38 | | $ | 2.73 | |
| | | | | | | | | |
| Shares used in income per share - basic | | 66,044,022 | | | 65,549,484 | |
| | | | | | | | | |
| Net income per share - diluted | $ | 1.38 | | $ | 2.72 | |
| | | | | | | | | |
| Shares used in income per share - diluted | | 66,082,517 | | | 65,859,490 | |
| | | | | | | | | |
(1) Refer to page S-17.2, the section titled “Interest Expense, Net” for additional information. | | | | |
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 | |
| Selected Line Item Detail | March 31, | |
| (Dollars in thousands) | | 2018 | | | 2017 | |
| | | | | | | | | |
| Rental and other property | | | | | | |
| | Rental | | $ | 321,661 | | $ | 310,122 | |
| | Other property | | 23,286 | | | 23,046 | |
| | | Rental and other property | $ | 344,947 | | $ | 333,168 | |
| | | | | | | | | |
| Property operating expenses | | | | | | |
| | Real estate taxes | $ | 37,713 | | $ | 35,868 | |
| | Administrative and insurance | | 20,701 | | | 20,261 | |
| | Maintenance and repairs | | 19,624 | | | 19,220 | |
| | Utilities | | 16,925 | | | 16,655 | |
| | | Property operating expenses | $ | 94,963 | | $ | 92,004 | |
| | | | | | | | | |
| | | | | | | | | |
| Interest and other income | | | | | | |
| | Marketable securities and other interest income | $ | 5,851 | | $ | 4,880 | |
| | Gain on sale of marketable securities | | 680 | | | 1,605 | |
| | Unrealized losses on marketable securities (1) | | (876) | | | - | |
| | Insurance reimbursements, legal settlements, and other, net | | 254 | | | 279 | |
| | | Interest and other income | $ | 5,909 | | $ | 6,764 | |
| | | | | | | | | |
| Equity income from co-investments | | | | | | |
| | Equity income from co-investments | $ | 4,289 | | $ | 5,253 | |
| | Income from preferred equity investments | | 7,920 | | | 5,646 | |
| | Co-investment promote income | | 20,541 | | | - | |
| | Income from early redemption of preferred equity investments | | 24 | | | - | |
| | | Equity income from co-investments | $ | 32,774 | | $ | 10,899 | |
| | | | | | | | | |
| Noncontrolling interest | | | | | | |
| | Limited partners of Essex Portfolio, L.P. | $ | 3,132 | | $ | 6,146 | |
| | DownREIT limited partners’ distributions | | 1,590 | | | 1,550 | |
| | Third-party ownership interest | | 999 | | | 891 | |
| | | Noncontrolling interest | $ | 5,721 | | $ | 8,587 | |
| | | | | | | | | |
(1) The Company adopted ASU No. 2016-01 “Recognition and Measurement of Financial Assets and Financial Liabiliies”, as of January 1, 2018 using the modified-retrospective method. As a result of this adoption, the Company recognizes mark to market adjustments on equity securities through its income statement on a prospective basis. Prior period results have not been adjusted. | | | | |
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 | | |
| (Dollars in thousands, except share and per share amounts and in footnotes) | March 31, | | |
| | | | | 2018 | | | 2017 | | % Change |
| | | | | | | | | | |
| Funds from operations attributable to common stockholders and unitholders (FFO) | | | | | | | |
| Net income available to common stockholders | $ | 90,918 | | $ | 178,964 | | |
| Adjustments: | | | | | | | |
| | Depreciation and amortization | | 119,105 | | | 115,503 | | |
| | Gains not included in FFO | | - | | | (112,656) | | |
| | Depreciation and amortization add back from unconsolidated co-investments | | 15,859 | | | 12,854 | | |
| | Noncontrolling interest related to Operating Partnership units | | 3,132 | | | 6,146 | | |
| | Depreciation attributable to third party ownership and other (2) | | (232) | | | (25) | | |
| | | Funds from operations attributable to common stockholders and unitholders | $ | 228,782 | | $ | 200,786 | | |
| | | FFO per share-diluted | $ | 3.35 | | $ | 2.95 | | 13.6% |
| | | | | | | | | | |
| Components of the change in FFO | | | | | | | |
| Non-core items: | | | | | | | |
| Expensed acquisition and investment related costs | $ | 57 | | $ | 556 | | |
| Gain on sale of marketable securities | | (680) | | | (1,605) | | |
| Unrealized losses on marketable securities | | 876 | | | - | | |
Interest rate hedge ineffectiveness (3) | | 56 | | | (6) | | |
| Co-investment promote income | | (20,541) | | | - | | |
| Income from early redemption of preferred equity investments | | (24) | | | - | | |
| Insurance reimbursements, legal settlements, and other, net | | 2,433 | | | (25) | | |
| | | Core funds from operations attributable to common stockholders and unitholders | $ | 210,959 | | $ | 199,706 | | |
| | | Core FFO per share-diluted | $ | 3.09 | | $ | 2.94 | | 5.1% |
| | | | | | | | | | |
| Changes in core items: | | | | | | | |
| Same-property NOI | $ | 8,161 | | | | | |
| Non-same property NOI | | 659 | | | | | |
| Management and other fees, net | | 72 | | | | | |
| FFO from co-investments | | 4,315 | | | | | |
| Interest and other income | | 971 | | | | | |
| Interest expense | | (654) | | | | | |
| General and administrative | | (1,779) | | | | | |
| Corporate-level property management expenses | | 261 | | | | | |
| Other items, net | | (753) | | | | | |
| | | | $ | 11,253 | | | | | |
| | | | | | | | | | |
Weighted average number of shares outstanding diluted (4) | | 68,318,012 | | | 67,974,466 | | |
(1) | Refer to page S-17.1, the section titled “Funds from Operations (“FFO”) for additional information on the Company’s definition and use of FFO and Core FFO. |
(2) | The Company consolidates certain co-investments. The noncontrolling interest’s share of net operating income in these investments for the three months ended March 31, 2018 was $1.2 million. |
(3) | Interest rate swaps are generally adjusted to fair value through other comprehensive income (loss). However, because certain of our interest rate swaps do not have a 0% LIBOR floor, while related hedged debt in these cases is subject to a 0% LIBOR floor, the portion of the change in fair value of these interest rate swaps attributable to this mismatch, if any, is recorded as noncash interest rate hedge ineffectiveness through interest expense. |
(4) | Assumes conversion of all outstanding limited partnership units in the Operating Partnership into shares of the Company’s common stock and excludes all DownREIT limited partnership units for which the Operating Partnership has the ability and intention to redeem the units for cash and does not consider them to be common stock equivalents. |
| 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, 2018 | | | December 31, 2017 |
| | | | | | | | | |
| | Real Estate: | | | | | |
| | | Land and land improvements | $ | 2,719,064 | | $ | 2,719,064 |
| | | Buildings and improvements | | 10,657,671 | | | 10,629,767 |
| | | | | | 13,376,735 | | | 13,348,831 |
| | | Less: accumulated depreciation | | (2,888,130) | | | (2,769,297) |
| | | | | | 10,488,605 | | | 10,579,534 |
| | Real estate under development | | 395,710 | | | 355,735 |
| | Co-investments | | 1,290,957 | | | 1,155,984 |
| | | | | | 12,175,272 | | | 12,091,253 |
| | Cash and cash equivalents, including restricted cash | | 139,078 | | | 61,126 |
| | Marketable securities | | 197,745 | | | 190,004 |
| | Notes and other receivables | | 70,525 | | | 100,926 |
| | Prepaid expenses and other assets | | 60,047 | | | 52,397 |
| | | | Total assets | $ | 12,642,667 | | $ | 12,495,706 |
| | | | | | | | | |
| | Unsecured debt, net | $ | 3,797,923 | | $ | 3,501,709 |
| | Mortgage notes payable, net | | 1,921,047 | | | 2,008,417 |
| | Lines of credit | | - | | | 179,000 |
| | Distributions in excess of investments in co-investments | | - | | | 36,726 |
| | Other liabilities | | 390,379 | | | 333,823 |
| | | | Total liabilities | | 6,109,349 | | | 6,059,675 |
| | Redeemable noncontrolling interest | | 41,159 | | | 39,206 |
| | Equity: | | | | | | |
| | | Common stock | | 7 | | | 7 |
| | | Additional paid-in capital | | 7,127,248 | | | 7,129,571 |
| | | Distributions in excess of accumulated earnings | | (743,773) | | | (833,726) |
| | | Accumulated other comprehensive loss, net | | (14,709) | | | (18,446) |
| | | | Total stockholders’ equity | | 6,368,773 | | | 6,277,406 |
| | | Noncontrolling interest | | 123,386 | | | 119,419 |
| | | | Total equity | | 6,492,159 | | | 6,396,825 |
| | | | Total liabilities and equity | $ | 12,642,667 | | $ | 12,495,706 |
| 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, 2018 |
| (Dollars in thousands, except in footnotes) | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | Scheduled principal payments, unamortized premiums (discounts) and (debt issuance costs) are as follows - excludes lines of credit: |
| | | | | | | | Weighted Average | | | | | | | | | | | | | | | | |
| | | | | Balance Outstanding | | Interest Rate | Maturity in Years | | | | | Unsecured | | Secured | | | Total | | Weighted Average Interest Rate | | Percentage of Total Debt |
| Unsecured Debt, net | | | | | | | | | | | | | | | | | | | | | | | |
| | Bonds private - fixed rate | | $ | 275,000 | | 4.5% | | 2.8 | | | 2018 | | $ | - | | $ | 126,740 | | $ | 126,740 | | 5.5% | | 2.2% |
| | Bonds public - fixed rate | | | 3,200,000 | | 3.8% | | 8.4 | | | 2019 | | | 75,000 | | | 552,016 | | | 627,016 | | 4.1% | | 11.0% |
| | Term loan (1) | | | 350,000 | | 2.5% | | 3.9 | | | 2020 | | | - | | | 694,921 | | | 694,921 | | 4.8% | | 12.2% |
| | Unamortized net discounts and debt issuance costs | | | (27,077) | | - | | - | | | 2021 | | | 500,000 | | | 44,846 | | | 544,846 | | 4.3% | | 9.5% |
| | | | | | 3,797,923 | | 3.7% | | 7.6 | | | 2022 | | | 650,000 | | | 42,466 | | | 692,466 | | 3.1% | | 12.1% |
| Mortgage Notes Payable, net | | | | | | | | | | 2023 | | | 600,000 | | | 2,188 | | | 602,188 | | 3.6% | | 10.5% |
| | Fixed rate - secured | | | 1,626,714 | | 4.5% | | 3.2 | | | 2024 | | | 400,000 | | | 2,317 | | | 402,317 | | 4.0% | | 7.0% |
| | Variable rate - secured (2) | | | 270,083 | | 2.1% | | 18.5 | | | 2025 | | | 500,000 | | | 16,056 | | | 516,056 | | 3.6% | | 9.0% |
| | Unamortized premiums and debt issuance costs, net | | | 24,250 | | - | | - | | | 2026 | | | 450,000 | | | 55,091 | | | 505,091 | | 3.4% | | 8.8% |
| | | Total mortgage notes payable | | | 1,921,047 | | 4.2% | | 5.3 | | | 2027 | | | 350,000 | | | 155,500 | | | 505,500 | | 3.4% | | 8.8% |
| | | | | | | | | | | | | 2028 | | | - | | | 2,934 | | | 2,934 | | 3.0% | | 0.1% |
| Unsecured Lines of Credit | | | | | | | | | | Thereafter | | | 300,000 | | | 201,722 | | | 501,722 | | 3.7% | | 8.8% |
| | Line of credit (3) | | | - | | 2.5% | | | | | Subtotal | | | 3,825,000 | | | 1,896,797 | | | 5,721,797 | | 3.9% | | 100.0% |
| | Line of credit (4) | | | - | | 2.5% | | | | | Debt Issuance Costs | | | (20,472) | | | (4,958) | | | (25,430) | | NA | | NA |
| | | Total lines of credit | | | - | | 2.5% | | | | | (Discounts)/Premiums | | | (6,605) | | | 29,208 | | | 22,603 | | NA | | NA |
| | | | | | | | | | | | | Total | | $ | 3,797,923 | | $ | 1,921,047 | | $ | 5,718,970 | | 3.9% | | 100.0% |
| | | Total debt, net | | $ | 5,718,970 | | 3.9% | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Capitalized interest for the three months ended March 31, 2018 was approximately $4.2 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) | $270.1 million of variable rate debt is tax exempt to the note holders. $9.9 million is subject to interest rate cap protection agreements. | | | | | | | | | |
(3) | This unsecured line of credit facility has a capacity of $1.2 billion. The line matures in December 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 0.875%. |
(4) | This unsecured line of credit facility has a capacity $35.0 million and is scheduled to mature in January 2020. The underlying interest rate on this line is based on a tiered rate structure tied to the Company’s corporate ratings and is currently at LIBOR plus 0.875%. |
| 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, 2018 | |
| (Dollars and shares in thousands, except per share amounts) | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Capitalization Data | | | | | | | Public Bond Covenants (1) | | Actual | | Requirement | | |
| Total debt, net | | | | $ | 5,718,970 | | | | | | | | | | |
| | | | | | | | | | Adjusted Debt to Adjusted Total Assets: | | 37% | | < 65% | | |
| Common stock and potentially dilutive securities | | | | | | | | | | | | |
| | Common stock outstanding | | | 66,044 | | | | | | | | | | |
| | Limited partnership units (1) | | | 2,235 | | | | | | | | | | |
| | Options-treasury method | | | 53 | | | Secured Debt to Adjusted Total Assets: | | 12% | | < 40% | | |
| Total shares of common stock and potentially dilutive securities | | 68,332 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Common stock price per share as of March 31, 2018 | $ | 240.68 | | | | | | | | | | |
| | | | | | | | | | Interest Coverage: | | 427% | | > 150% | | |
| Total equity capitalization | | $ | 16,446,146 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Total market capitalization | | $ | 22,165,116 | | | Unsecured Debt Ratio (2): | | 280% | | > 150% | | |
| | | | | | | | | | | | | | | | | |
| Ratio of debt to total market capitalization | | | 25.8% | | | | | | | | | | |
| | | | | | | | | | Selected Credit Ratios (3) | | Actual | | | | |
Credit Ratings | | | | | | | | | | | | | | | |
Rating Agency | | Rating | Outlook | | | | | Net Indebtedness Divided by Adjusted EBITDAre, normalized and annualized: | | 5.6 | | | | |
| Fitch | | BBB+ | Stable | | | | | | | | | | | | |
| Moody’s | | Baa1 | Stable | | | | | Unencumbered NOI to Adjusted Total NOI: | | 72% | | | | |
| Standard & Poor’s | BBB+ | Stable | | | | | | | | | | | | |
| | | | | | | | | | (1) | Refer to page S-17.3 for additional information on the Company’s Public Bond Covenants. | | | | |
(1) | Assumes conversion of all outstanding limited partnership units in the Operating Partnership 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. |
| | | | | | | | | | | | | | | | | |
| 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, 2018 |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | 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 | | 9,387 | | 1,563 | | 200 | | 11,150 | | $ 2,385 | | $ 2,053 | | $ 2,358 | | 19.4% | | 12.5% | | 18.8% |
| | Orange County | | 5,553 | | 1,149 | | - | | 6,702 | | 2,131 | | 1,844 | | 2,104 | | 10.6% | | 8.5% | | 10.4% |
| | San Diego County | | 5,203 | | 616 | | - | | 5,819 | | 1,882 | | 1,736 | | 1,873 | | 8.9% | | 4.4% | | 8.4% |
| | Ventura County | | 2,577 | | 693 | | - | | 3,270 | | 1,759 | | 2,082 | | 1,800 | | 4.4% | | 6.3% | | 4.6% |
| | Other Southern CA | | 623 | | 249 | | - | | 872 | | 1,597 | | 1,594 | | 1,596 | | 0.8% | | 1.6% | | 0.9% |
| Total Southern California | | 23,343 | | 4,270 | | 200 | | 27,813 | | 2,122 | | 1,932 | | 2,106 | | 44.1% | | 33.3% | | 43.1% |
| | | | | | | | | | | | | | | | | | | | | | | |
| Northern California | | | | | | | | | | | | | | | | | | | | |
| | Santa Clara County | | 7,356 | | 2,266 | | 745 | | 10,367 | | 2,667 | | 2,796 | | 2,685 | | 18.3% | | 24.9% | | 19.1% |
| | Alameda County | | 2,954 | | 1,983 | | - | | 4,937 | | 2,489 | | 2,321 | | 2,445 | | 6.7% | | 19.5% | | 7.9% |
| | San Mateo County | | 1,951 | | 197 | | 371 | | 2,519 | | 2,880 | | 2,871 | | 2,871 | | 4.9% | | 2.3% | | 4.6% |
| | Contra Costa County | | 2,270 | | 49 | | - | | 2,319 | | 2,279 | | 4,557 | | 2,303 | | 4.9% | | 0.6% | | 4.5% |
| | San Francisco | | 1,343 | | 463 | | 545 | | 2,351 | | 3,062 | | 3,250 | | 3,092 | | 3.6% | | 6.2% | | 3.8% |
| | Other Northern CA | | 96 | | - | | - | | 96 | | 2,885 | | - | | 2,885 | | 0.3% | | - | | 0.3% |
| Total Northern California | | 15,970 | | 4,958 | | 1,661 | | 22,589 | | 2,639 | | 2,669 | | 2,644 | | 38.7% | | 53.5% | | 40.2% |
| | | | | | | | | | | | | | | | | | | | | | | |
| Seattle Metro | | 10,238 | | 1,582 | | - | | 11,820 | | 1,800 | | 1,797 | | 1,800 | | 17.2% | | 13.2% | | 16.7% |
| | | | | | | | | | | | | | | | | | | | | | | |
| Total | | | 49,551 | | 10,810 | | 1,861 | | 62,222 | | $ 2,222 | | $ 2,255 | | $ 2,226 | | 100.0% | | 100.0% | | 100.0% |
(1) | Average monthly rental rate is defined as the total potential monthly rental revenue (actual rent for occupied apartment homes plus market rent for vacant apartment homes) divided by the number of apartment homes. |
(2) | Actual NOI for the quarter ended March 31, 2018. See the section titled “Net Operating Income (“NOI”) and Same-Property NOI Reconciliations” on page S-17.3. |
(3) | Includes one rental income producing development community in lease-up which consists of 121 apartment homes. |
(4) | Includes all apartment communities with rents. |
(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. |
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) |
| | | | | | | | | | | | | | |
| | | | Apartment Homes | Q1 ‘18 | | Q4 ‘17 | | Q3 ‘17 | | Q2 ‘17 | | Q1 ‘17 |
| | | | | | | | | | | | | | |
| Rental and other property revenues: | | | | | | | | | | | | |
| Same-property | | 47,242 | | $ 322,385 | | $ 320,004 | | $ 319,565 | | $ 314,813 | | $ 312,024 |
Acquisitions (2) | | 1,328 | | 10,383 | | 10,435 | | 10,498 | | 10,170 | | 8,186 |
Development (3) | | 121 | | 19 | | - | | - | | - | | - |
| Redevelopment | | 621 | | 5,024 | | 5,005 | | 4,913 | | 4,909 | | 4,814 |
Non-residential/other, net (4) | | 239 | | 7,136 | | 6,973 | | 6,998 | | 6,874 | | 8,144 |
| Total rental and other property revenues | | 49,551 | | 344,947 | | 342,417 | | 341,974 | | 336,766 | | 333,168 |
| | | | | | | | | | | | | | |
Property operating expenses: (5) | | | | | | | | | | | | |
| Same-property | | | | 89,656 | | 90,273 | | 90,935 | | 87,480 | | 87,456 |
Acquisitions (2) | | | | 3,074 | | 3,116 | | 3,220 | | 2,926 | | 2,600 |
Development (3) | | | | 64 | | - | | - | | - | | - |
| Redevelopment | | | | 1,469 | | 1,528 | | 1,529 | | 1,392 | | 1,452 |
Non-residential/other, net (4) (6) | | | | 700 | | 1,157 | | 880 | | (1,054) | | 496 |
| Total property operating expenses | | | | 94,963 | | 96,074 | | 96,564 | | 90,744 | | 92,004 |
| | | | | | | | | | | | | | |
| Net operating income (NOI): | | | | | | | | | | | | |
| Same-property | | | | 232,729 | | 229,731 | | 228,630 | | 227,333 | | 224,568 |
Acquisitions (2) | | | | 7,309 | | 7,319 | | 7,278 | | 7,244 | | 5,586 |
Development (3) | | | | (45) | | - | | - | | - | | - |
| Redevelopment | | | | 3,555 | | 3,477 | | 3,384 | | 3,517 | | 3,362 |
Non-residential/other, net (4) | | | | 6,436 | | 5,816 | | 6,118 | | 7,928 | | 7,648 |
| Total NOI | | | | $ 249,984 | | $ 246,343 | | $ 245,410 | | $ 246,022 | | $ 241,164 |
| | | | | | | | | | | | | | |
| Same-property metrics | | | | | | | | | | | | |
| Operating margin | | | | 72% | | 72% | | 72% | | 72% | | 72% |
Annualized turnover (7) | | | | 40% | | 46% | | 61% | | 54% | | 46% |
Financial occupancy (8) | | | | 97.1% | | 96.8% | | 96.7% | | 96.4% | | 96.5% |
(1) | Includes consolidated communities only. | | | | | | | | | | | | |
(2) | Acquisitions include properties acquired which did not have comparable stabilized results as of January 1, 2017. | | | | |
(3) | Development includes properties developed which did not have comparable stabilized results as of January 1, 2017. | | | | |
(4) | Other real estate assets consists mainly of retail space, commercial properties, boat slips, held for sale properties, disposition properties, and student housing. |
(5) | Starting with the first quarter of 2018, the Company no longer includes corporate-level property management expenses in total property operating expenses. Prior period amounts have been reclassified to conform to the current year’s presentation. |
(6) | Includes other expenses and intercompany eliminations pertaining to self-insurance. In Q2 ‘17, there were $2.0 million in reductions to operating expenses related to changes in prior period property tax estimates. |
(7) | Annualized turnover is defined as the number of apartment homes turned over during the quarter, annualized, divided by the total number of apartment homes. |
(8) | Financial occupancy is defined as the percentage resulting from dividing actual rental revenue by total potential rental revenue (actual rent for occupied apartment homes plus market rent for vacant apartment homes). |
E S S E X P R O P E R T Y T R U S T, I N C. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Same-Property Results by County - First Quarter 2018 vs. First Quarter 2017 and Fourth Quarter 2017 |
| (Dollars in thousands, except average monthly rental rates) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Average Monthly Rental Rate | | Financial Occupancy | | | | Gross Revenues | | | | Sequential Gross Revenues |
| Region - County | | Apartment Homes | | Q1 ‘18 % of Actual NOI | | Q1 ‘18 | | Q1 ‘17 | | % Change | | Q1 ‘18 | | Q1 ‘17 | | % Change | | Q1 ‘18 | | Q1 ‘17 | | % Change | | Q4 ‘17 | | % Change |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Southern California | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Los Angeles County | | 8,931 | | 19.6% | | $ 2,396 | | $ 2,356 | | 1.7% | | 96.7% | | 96.1% | | 0.6% | | $ 65,291 | | $ 63,530 | | 2.8% | | $ 64,811 | | 0.7% |
| | Orange County | | 5,553 | | 11.1% | | 2,131 | | 2,072 | | 2.8% | | 96.8% | | 96.5% | | 0.3% | | 36,074 | | 34,962 | | 3.2% | | 35,945 | | 0.4% |
| | San Diego County | | 5,203 | | 9.3% | | 1,882 | | 1,823 | | 3.2% | | 97.0% | | 96.4% | | 0.6% | | 30,211 | | 29,100 | | 3.8% | | 29,973 | | 0.8% |
| | Ventura County | | 2,577 | | 4.6% | | 1,759 | | 1,692 | | 4.0% | | 97.7% | | 97.2% | | 0.5% | | 14,293 | | 13,593 | | 5.1% | | 14,069 | | 1.6% |
| | Other Southern CA | | 384 | | 0.4% | | 1,274 | | 1,226 | | 3.9% | | 97.1% | | 95.9% | | 1.3% | | 1,549 | | 1,475 | | 5.0% | | 1,502 | | 3.1% |
| Total Southern California | | 22,648 | | 45.0% | | 2,121 | | 2,069 | | 2.5% | | 96.9% | | 96.4% | | 0.5% | | 147,418 | | 142,660 | | 3.3% | | 146,300 | | 0.8% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Northern California | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Santa Clara County | | 6,028 | | 16.3% | | 2,688 | | 2,652 | | 1.4% | | 97.6% | | 97.1% | | 0.5% | | 49,853 | | 48,881 | | 2.0% | | 49,455 | | 0.8% |
| | Alameda County | | 2,954 | | 7.0% | | 2,489 | | 2,453 | | 1.5% | | 97.1% | | 94.8% | | 2.4% | | 22,649 | | 21,667 | | 4.5% | | 22,504 | | 0.6% |
| | San Mateo County | | 1,830 | | 5.1% | | 2,838 | | 2,797 | | 1.5% | | 97.7% | | 97.7% | | 0.0% | | 16,158 | | 15,861 | | 1.9% | | 15,931 | | 1.4% |
| | Contra Costa County | | 2,270 | | 5.1% | | 2,279 | | 2,242 | | 1.7% | | 97.8% | | 97.2% | | 0.6% | | 16,072 | | 15,635 | | 2.8% | | 15,953 | | 0.7% |
| | San Francisco | | 1,178 | | 3.1% | | 2,953 | | 2,921 | | 1.1% | | 96.2% | | 95.7% | | 0.5% | | 10,666 | | 10,327 | | 3.3% | | 10,694 | | -0.3% |
| | Other Northern CA | | 96 | | 0.3% | | 2,885 | | 2,738 | | 5.4% | | 99.6% | | 97.5% | | 2.2% | | 856 | | 801 | | 6.9% | | 860 | | -0.5% |
| Total Northern California | | 14,356 | | 36.9% | | 2,625 | | 2,587 | | 1.5% | | 97.4% | | 96.6% | | 0.8% | | 116,254 | | 113,172 | | 2.7% | | 115,397 | | 0.7% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Seattle Metro | | 10,238 | | 18.1% | | 1,800 | | 1,734 | | 3.8% | | 96.9% | | 96.6% | | 0.3% | | 58,713 | | 56,192 | | 4.5% | | 58,307 | | 0.7% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Same-Property | | 47,242 | | 100.0% | | $ 2,205 | | $ 2,154 | | 2.4% | | 97.1% | | 96.5% | | 0.6% | | $ 322,385 | | $ 312,024 | | 3.3% | | $ 320,004 | | 0.7% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
E S S E X P R O P E R T Y T R U S T, I N C. |
| | | | | | | | | |
| Same-Property Operating Expenses - Quarter-to-Date as of March 31, 2018 and 2017 |
| (Dollars in thousands) |
| | | | | | | | | |
| | | | | | | | | |
| | | Based on 47,242 apartment homes |
| | | | | | | | | |
| | | Q1 ‘18 | | Q1 ‘17 | | % Change | | % of Op. Ex. |
| | | | | | | | | |
| Same-property operating expenses: | | | | | | | | |
| Real estate taxes | | $ 34,764 | | $ 33,394 | | 4.1% | | 38.8% |
| Maintenance and repairs | | 18,410 | | 18,145 | | 1.5% | | 20.5% |
| Administrative | | 17,588 | | 16,820 | | 4.6% | | 19.6% |
| Utilities | | 15,799 | | 15,413 | | 2.5% | | 17.6% |
| Insurance | | 3,095 | | 3,684 | | -16.0% | | 3.5% |
| Total same-property operating expenses | | $ 89,656 | | $ 87,456 | | 2.5% | | 100.0% |
| | | | | | | | | |
| | | | | | | | | |
E S S E X P R O P E R T Y T R U S T, I N C. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Development Pipeline - March 31, 2018 |
| (Dollars in millions, except per apartment home amounts in thousands and except in footnotes) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Project Name | | Location | | Ownership % | Estimated Apartment Homes | Estimated Commercial sq. feet | Incurred to Date | Remaining Costs | Estimated Total Cost | Essex Est. Total Cost (1) | Cost per Apartment Home (2) | Average % Occupied | %
Leased (3) | Construction Start | Initial Occupancy | Stabilized Operations |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Development Projects - Consolidated (4) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Station Park Green - Phase I (5) | | San Mateo, CA | | 100% | | 121 | | 28,000 | | $ 96 | | $ 2 | | $ 98 | | $ 98 | | $ 661 | | 3% | | 29% | | Q3 2015 | | Q1 2018 | | Q3 2018 |
| | Station Park Green - Phase II (5) | | San Mateo, CA | | 100% | | 199 | | - | | 69 | | 72 | | 141 | | 141 | | 709 | | 0% | | 0% | | Q2 2017 | | Q2 2019 | | Q4 2019 |
| | Station Park Green - Phase III (5) | | San Mateo, CA | | 100% | | 172 | | - | | 51 | | 73 | | 124 | | 124 | | 721 | | 0% | | 0% | | Q3 2017 | | Q3 2019 | | Q1 2020 |
| | Gateway Village (6) | | Santa Clara, CA | | 100% | | 476 | | - | | 96 | | 130 | | 226 | | 226 | | 475 | | 0% | | 0% | | Q3 2016 | | Q1 2019 | | Q1 2020 |
| | Hollywood (7) | | Hollywood, CA | | 100% | | 200 | | 4,700 | | 29 | | 76 | | 105 | | 105 | | 500 | | 0% | | 0% | | Q4 2017 | | Q1 2020 | | Q3 2020 |
| Total Development Projects - Consolidated | | | | | | 1,168 | | 32,700 | | 341 | | 353 | | 694 | | 694 | | 574 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Land Held for Future Development - Consolidated | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Other Projects (5)(7) | | Various | | 100% | | | | | | 66 | | - | | 66 | | 66 | | | | | | | | | | | | |
| Total Development Pipeline - Consolidated | | | | | | 1,168 | | 32,700 | | 407 | | 353 | | 760 | | 760 | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Development Projects - Joint Venture (4) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Ohlone | | San Jose, CA | | 50% | | 269 | | - | | 41 | | 95 | | 136 | | 68 | | 506 | | 0% | | 0% | | Q3 2017 | | Q3 2019 | | Q2 2020 |
| | 500 Folsom (8) | | San Francisco, CA | | 50% | | 545 | | 6,000 | | 174 | | 241 | | 415 | | 208 | | 751 | | 0% | | 0% | | Q4 2015 | | Q2 2019 | | Q4 2020 |
| Total Development Projects - Joint Venture | | | | | | 814 | | 6,000 | | 215 | | 336 | | 551 | | 276 | | $ 670 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Grand Total - Development Pipeline | | | | | | 1,982 | | 38,700 | | $ 622 | | $ 689 | | $ 1,311 | | 1,036 | | | | | | | | | | | | |
| Essex Cost Incurred to Date - Pro Rata | | | | | | | | | | | | | | | | (515) | | | | | | | | | | | | |
| Essex Remaining Commitment | | | | | | | | | | | | | | | | $ 521 | | | | | | | | | | | | |
(1) | The Company’s share of the estimated total costs of the project. |
(2) | Net of the estimated allocation to the retail component of the project. |
(3) | Calculations are based on multifamily operations only and are as of March 31, 2018. As of April 27, 2018, Station Park Green - Phase I was 40% leased and 23% occupied. |
(4) | For the first quarter of 2018, the Company’s cost includes $4.1 million of capitalized interest, $1.9 million of capitalized overhead and $0.7 million of development fees (such development fees reduced G&A expenses). |
(5) | Development of Station Park Green - Phases I, II, and III are reflected under Development Projects - Consolidated. Costs incurred for Station Park Green - Phase IV, which consists of 107 apartment homes, are included in Land Held for Future Development - Consolidated. |
(6) | Cost incurred to date does not include a deduction of $4.7 million for accumulated depreciation recorded during the period when the property was held as a retail operating asset. |
(7) | Cost incurred to date does not include a deduction of $6.3 million for accumulated depreciation recorded during the period when one property was held as a retail operating asset. |
(8) | Estimated costs incurred to date and total cost is net of a projected value for low income housing tax credit proceeds and the value of the tax exempt bond structure. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
E S S E X P R O P E R T Y T R U S T, I N C. |
| | | | | | | | | | | | | | | | |
| Redevelopment Pipeline - March 31, 2018 |
| (Dollars in thousands) |
| | | | | | | | | | | | | | | | |
| | | | | | Total | | Estimated | | Estimated | | | | NOI |
| | | | Apartment | | Incurred | | Remaining | | Total | | Project | | Three Months Ended |
| Region/Project Name | | Homes | | To Date | | Cost | | Cost | | Start Date | | 2018 | | 2017 |
| | | | | | | | | | | | | | | | |
Same-Property - Redevelopment Projects (1) | | | | | | | | | | | | | | |
| Southern California | | | | | | | | | | | | | | |
| Hamptons | | 215 | | $ 19,300 | | $ 4,300 | | $ 23,600 | | Q1 2014 | | | | |
| Kings Road | | 196 | | 3,500 | | 8,700 | | 12,200 | | Q4 2016 | | | | |
| The Palms at Laguna Niguel | | 460 | | 3,400 | | 4,800 | | 8,200 | | Q4 2016 | | | | |
| Northern California | | | | | | | | | | | | | | |
| Crow Canyon | | 400 | | 5,500 | | 1,900 | | 7,400 | | Q1 2017 | | | | |
| Total Same-Property - Redevelopment Projects | | 1,271 | | $ 31,700 | | $ 19,700 | | $ 51,400 | | | | $ 6,002 | | $ 5,719 |
| | | | | | | | | | | | | | | | |
| Non-Same Property - Redevelopment Projects | | | | | | | | | | | | | | |
| Southern California | | | | | | | | | | | | | | |
| Bunker Hill Towers | | 456 | | $ 69,100 | | $ 18,300 | | $ 87,400 | | Q3 2013 | | | | |
| Total Non-Same Property - Redevelopment Projects | | 456 | | $ 69,100 | | $ 18,300 | | $ 87,400 | | | | $ 2,156 | | $ 1,972 |
| | | | | | | | | | | | | | | | |
(1) | Redevelopment activities are ongoing at these communities, but the communities have stabilized operations, therefore results are classified in same-property results. |
| | | | | | | | | | | | | | | | |
E S S E X P R O P E R T Y T R U S T, I N C. | | |
| | | | | | | | | | | | | | | | |
| Capital Expenditures - March 31, 2018 | | |
| (Dollars in thousands, except in footnotes and per apartment home amounts) | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Revenue Generating Capital Expenditures (1) (2) | | Q1 ‘18 | | Q4 ‘17 | | Q3 ‘17 | | Q2 ‘17 | | | | Trailing 4 Quarters | | |
| Same-property portfolio | | $ 9,916 | | $ 14,048 | | $ 18,091 | | $ 17,926 | | | | $ 59,981 | | |
| Non-same property portfolio | | 2,863 | | 3,146 | | 1,884 | | 2,580 | | | | 10,473 | | |
| Total revenue generating capital expenditures | | $ 12,779 | | $ 17,194 | | $ 19,975 | | $ 20,506 | | | | $ 70,454 | | |
| | | | | | | | | | | | | | | | |
| Number of same-property interior renovations completed | | 499 | | 426 | | 650 | | 760 | | | | 2,335 | | |
| Number of total consolidated interior renovations completed | | 522 | | 435 | | 660 | | 768 | | | | 2,385 | | |
| | | | | | | | | | | | | | | | |
Non-Revenue Generating Capital Expenditures (3) | | Q1 ‘18 | | Q4 ‘17 | | Q3 ‘17 | | Q2 ‘17 | | | | Trailing 4 Quarters | | |
| | | | | | | | | | | | | | | | |
Non-revenue generating capital expenditures (4) | | $ 11,567 | | $ 19,895 | | $ 20,875 | | $ 16,473 | | | | $ 68,810 | | |
| Average apartment homes in quarter | | 49,490 | | 49,429 | | 49,429 | | 49,429 | | | | 49,444 | | |
| Capital expenditures per apartment homes in the quarter | | $ 234 | | $ 402 | | $ 422 | | $ 333 | | | | $ 1,392 | | |
| | | | | | | | | | | | | | | | |
(1) | The Company incurred $0.1 million of capitalized interest, $2.7 million of capitalized overhead and $0.2 million of co-investment fees related to redevelopment in Q1 2018. |
(2) | Represents revenue generating or expense saving expenditures, such as full-scale redevelopments shown on page S-12, interior unit turn renovations, enhanced amenities and certain resource management initiatives. |
(3) | Represents roof replacements, paving, building and mechanical systems, exterior painting, siding, etc. |
(4) | Non-revenue generating capital expenditures does not include expenditures incurred due to changes in governmental regulations that the Company would not have incurred otherwise, and expenditures in which the Company expects to be reimbursed. |
E S S E X P R O P E R T Y T R U S T, I N C. |
| | | | | | | | | | | | | | | | | | | | |
| Co-investments and Preferred Equity Investments - March 31, 2018 |
| (Dollars in thousands) |
| | | | | | Weighted Average Essex | | | | Total | | | | Essex | | Weighted | | Remaining | | Three Months Ended March 31, 2018 |
| | | | | | Ownership | | Apartment | | Undepreciated | | Debt | | Book | | Average | | Term of | |
| | | | | | Percentage | | Homes | | Book Value | | Amount | | Value | | Borrowing Rate | | Debt (in Years) | |
| | | | | | | | | | | | | | | | | | | | |
| Operating and Other Non-Consolidated Joint Ventures | | | | | | | | | | | | | | | | NOI |
| | | | | | | | | | | | | | | | | | | | |
| | Wesco I, III, IV, and V | | 53% | | 4,578 | $ | 1,306,668 | $ | 730,517 | $ | 214,650 | | 3.7% | | 5.6 | $ | 21,039 |
| | BEXAEW, BEX II, and BEX III | | 50% | | 2,620 | | 679,690 | | 372,869 | | 135,174 | | 3.5% | | 3.7 | | 10,354 |
| | CPPIB | | 54% | | 2,483 | | 949,891 | | - | | 496,512 | | - | | - | | 13,715 |
| | Other | | | 52% | | 1,129 | | 419,356 | | 313,949 | | 50,209 | | 3.6% | | 6.3 | | 5,749 |
| | Total Operating and Other Non-Consolidated Joint Ventures | | | | 10,810 | $ | 3,355,605 | $ | 1,417,335 | $ | 896,545 | | 3.6% | | 5.3 | $ | 50,857 |
Development Non-Consolidated Joint Ventures (1) | | 50% | | 814 | | 215,136 | | 87,605 | | 75,092 | | 3.6% | | 28.3 | (2) | - |
| | Total Non-Consolidated Joint Ventures | | | | 11,624 | $ | 3,570,741 | $ | 1,504,940 | $ | 971,637 | | | | | $ | 50,857 |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | Essex Portion of NOI and Expenses |
| | NOI | | | | | | | | | | | | | | | | | $ | 26,743 |
| | Depreciation | | | | | | | | | | | | | | | | (15,859) |
| | Interest expense and other | | | | | | | | | | | | | | | | (6,595) |
| | Promote income | | | | | | | | | | | | | | | | 20,541 |
| | Net income from operating and other co-investments | | | | | | | | | | | | | | | $ | 24,830 |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | Weighted Average Preferred Return | | Weighted Average Expected Term | | Income from Preferred Equity Investments |
| | Income from preferred equity investments | | | | | | | | | | | | | | | $ | 7,920 |
| | Income from early redemption of preferred equity investments | | | | | | | | | | | | | | | | 24 |
Preferred Equity Investments (3) | | | | | | | | | $ | 319,320 | | 10.7% | | 3.2 | $ | 7,944 |
| | | | | | | | | | | | | | | | | | | | |
| | Total Co-investments | | | | | | | | | $ | 1,290,957 | | | | | $ | 32,774 |
| | (1) | | The Company has interests in two development co-investments, which are detailed on page S-11. | | | | | | | | | | | |
| | (2) | | $72.2 million of the debt related to 500 Folsom is financed by tax exempt bonds with a maturity date of January 2052. | | | | | | | | | | |
| | (3) | | As of March 31, 2018, the Company has invested in 17 preferred equity investments. | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
E S S E X P R O P E R T Y T R U S T, I N C. |
| Assumptions for 2018 FFO Guidance Range |
| Q1 2018 Earnings Results Supplement |
| | | | | | | | | |
| The guidance projections below are based on current expectations and are forward-looking. See page S-14.1 for the reconciliations of earnings per share (“EPS”) to FFO per share and Core FFO per share. The guidance on this page is given for Net Operating Income (“NOI”) and Total and Core FFO. See pages S-17.1 to S-17.4 for the definitions of non-GAAP financial measures and other terms. |
| |
| ($’s in thousands, except per share data) | | Three Months | | | | | | |
| | | Ended March 31, | | 2018 Full-Year Guidance Range | | |
| | | 2018 (1) | | Low End | | High End | | Comments About Guidance Revisions |
| | | | | | | | | |
| Total NOI from Consolidated Communities | $ | 249,984 | $ | 996,900 | $ | 1,011,400 | | Includes a range of same-property NOI growth of 2.0% to 3.4%, an increase from the prior range of 1.6% to 3.4% |
| | | | | | | | | |
| Accretion from Acquisitions Net of Dispositions | | - | | 1,100 | | 2,100 | | |
| | | | | | | | | |
| Management Fees | | 2,308 | | 8,700 | | 9,700 | | |
| | | | | | | | | |
| Interest Expense | | | | | | | | |
| Interest expense, before capitalized interest | | (56,705) | | (233,800) | | (230,400) | | Updated to reflect the March 2018 unsecured bond offering |
| Interest capitalized | | 4,170 | | 16,200 | | 18,200 | | Updated for timing of development spend |
| Net interest expense | | (52,535) | | (217,600) | | (212,200) | | |
| | | | | | | | | |
| Recurring Income and Expenses | | | | | | | | |
| Interest and other income | | 6,105 | | 25,200 | | 26,200 | | |
| FFO from co-investments | | 28,068 | | 113,000 | | 116,200 | | |
| General and administrative | | (12,380) | | (43,600) | | (45,600) | | |
| Corporate-level property management expenses | | (7,770) | | (30,500) | | (31,600) | | |
| Non-controlling interest | | (2,821) | | (11,700) | | (10,700) | | |
| Total recurring income and expenses | | 11,202 | | 52,400 | | 54,500 | | |
| | | | | | | | | |
| Non-Core Income and Expenses | | | | | | | | |
| Gain on sale of marketable securities | | 680 | | 680 | | 680 | | |
| Unrealized losses on marketable securities | | (876) | | (876) | | (876) | | |
| Co-investment promote income | | 20,541 | | 20,541 | | 20,541 | | |
| Expensed acquisition and investment related costs | | (57) | | (500) | | (1,200) | | |
| Insurance reimbursements, legal settlements, and other, net | | (2,465) | | (2,465) | | (2,465) | | |
| Total non-core income and expenses | | 17,823 | | 17,380 | | 16,680 | | |
| | | | | | | | | |
Funds from Operations (2) | $ | 228,782 | $ | 858,880 | $ | 882,180 | | |
| | | | | | | | | |
| Funds from Operations per diluted share | $ | 3.35 | $ | 12.54 | $ | 12.88 | | |
| | | | | | | | | |
| % Change - Funds from Operations | | 13.6% | | 5.3% | | 8.1% | | |
| | | | | | | | | |
| Core Funds from Operations (excludes non-core items) | $ | 210,959 | $ | 841,500 | $ | 865,500 | | |
| | | | | | | | | |
| Core Funds from Operations per diluted share | $ | 3.09 | $ | 12.28 | $ | 12.64 | | |
| | | | | | | | | |
| % Change - Core Funds from Operations | | 5.1% | | 3.1% | | 6.1% | | |
| | | | | | | | | |
| EPS - Diluted | $ | 1.38 | $ | 4.66 | $ | 5.00 | | |
| | | | | | | | | |
| Weighted average shares outstanding - FFO calculation | | 68,318 | | 68,500 | | 68,500 | | |
| | | | | | | | | |
(1) All non-core items are excluded from the YTD actuals and included in the non-core income and expense section of the FFO reconciliation. |
(2) 2018 Guidance excludes projected gain on sale of marketable securities, loss on early retirement of debt, political/legislative costs, and promote income until they are realized within the reporting period presented in the report. |
E S S E X P R O P E R T Y T R U S T, I N C. | |
| | | | | | | | | | | | | | | | | | | |
| Reconciliation of Projected EPS, FFO and Core FFO per diluted share | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Projected EPS, FFO and Core FFO per diluted share | |
| | | | | | | | | | | | | | | | | | | |
| | With respect to the Company’s guidance regarding its projected FFO and Core FFO, which guidance is set forth in the earnings release and on page S-14 of this supplement, a reconciliation of projected net income per share to projected FFO per share and projected Core FFO per share, as set forth in such guidance, is presented in the table below. |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | 2018 Guidance Range (1) | |
| | | | | | Three Months Ended March 31, 2018 | | | 2nd Quarter 2018 | | | Full-Year 2018 | |
| | | | | | Low | | | High | | | Low | | | High | |
| | EPS - diluted | $ | 1.38 | | $ | 1.02 | | $ | 1.12 | | $ | 4.66 | | $ | 5.00 | |
| | | Conversion from GAAP share count | | (0.05) | | | (0.03) | | | (0.03) | | | (0.16) | | | (0.16) | |
| | | Depreciation and amortization | | 1.98 | | | 1.97 | | | 1.97 | | | 7.88 | | | 7.88 | |
| | | Noncontrolling interest related to Operating Partnership units | | 0.04 | | | 0.04 | | | 0.04 | | | 0.16 | | | 0.16 | |
| | FFO per share - diluted | | 3.35 | | | 3.00 | | | 3.10 | | | 12.54 | | | 12.88 | |
| | | Gain on sale of marketable securities | | (0.01) | | | - | | | - | | | (0.01) | | | (0.01) | |
| | | Unrealized losses on marketable securities | | 0.01 | | | - | | | - | | | 0.01 | | | 0.01 | |
| | | Co-investment promote income | | (0.30) | | | - | | | - | | | (0.30) | | | (0.30) | |
| | | Expensed acquisition and investment related costs | | - | | | - | | | - | | | - | | | 0.02 | |
| | | Insurance reimbursements, legal settlements, and other, net | | 0.04 | | | - | | | - | | | 0.04 | | | 0.04 | |
| | Core FFO per share - diluted | $ | 3.09 | | $ | 3.00 | | $ | 3.10 | | $ | 12.28 | | $ | 12.64 | |
| | | | | | | | | | | | | | | | | | | |
| | (1) | 2018 Guidance excludes projected gain on sale of real estate and land, gain on sale of marketable securities, loss on early retirement of debt, political/legislative costs, and promote income until they are realized within the reporting period presented in this report. |
E S S E X P R O P E R T Y T R U S T, I N C. |
| | | | | | | | | | | | | |
| Summary of Apartment Community Acquisitions and Dispositions Activity |
| Year to date as of March 31, 2018 |
| (Dollars in thousands, except average rent amounts and in footnotes) |
| | | | | | | | | | | | | |
| Acquisitions | | | | Essex | | | | | | | |
| | | | Apartment | | Ownership | | | | Contract | | Price per | Average |
| Property Name | Location | Homes | | Percentage | Entity | Date | | Price | | Apartment Home | Rent |
| | | | | | | | | | | | | |
| | Neither Essex nor its unconsolidated joint ventures acquired any apartment communities during the first quarter of 2018. | | | | | | |
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| | | | | | | | | | | | | |
| Dispositions | | | | Essex | | | | | | | |
| | | | Apartment | | Ownership | | | | Sales | | Price per | |
| Property Name | Location | Homes | | Percentage | Entity | Date | | Price | | Apartment Home | |
| | | | | | | | | | | | | |
| | Neither Essex nor its unconsolidated joint ventures sold any apartment communities during the first quarter of 2018. | | | | | |
E S S E X P R O P E R T Y T R U S T, I N C. |
| 2018 MSA Level Forecast: Supply, Jobs, and Apartment Market Conditions |
| | | Residential Supply (1) | | Job Forecast (2) | | Market Forecast (3) |
| Market | | New MF Supply | New SF Supply | Total Supply | % of MF Supply to MF Stock | % of Total Supply to Total Stock | | Est. New Jobs | % Growth | | Economic Rent Growth |
| | | | | | | | | | | | |
| Los Angeles | | 11,050 | 5,600 | 16,650 | 0.7% | 0.5% | | 57,800 | 1.3% | | 2.8% |
| Orange | | 4,650 | 4,400 | 9,050 | 1.1% | 0.8% | | 22,250 | 1.4% | | 2.7% |
| San Diego | | 4,500 | 3,500 | 8,000 | 1.0% | 0.7% | | 26,000 | 1.8% | | 3.5% |
| Ventura | | 400 | 1,050 | 1,450 | 0.6% | 0.5% | | 4,950 | 1.6% | | 3.2% |
| So. Cal. | | 20,600 | 14,550 | 35,150 | 0.9% | 0.6% | | 111,000 | 1.5% | | 3.0% |
| | | | | | | | | | | | |
| San Francisco | | 3,100 | 550 | 3,650 | 0.8% | 0.5% | | 20,100 | 1.8% | | 2.8% |
| Oakland | | 2,100 | 4,000 | 6,100 | 0.6% | 0.6% | | 18,500 | 1.6% | | 3.0% |
| San Jose | | 2,400 | 2,100 | 4,500 | 1.0% | 0.7% | | 16,300 | 1.5% | | 3.0% |
| No. Cal. | | 7,600 | 6,650 | 14,250 | 0.8% | 0.6% | | 54,900 | 1.6% | | 3.0% |
| | | | | | | | | | | | |
| Seattle | | 9,900 | 7,550 | 17,450 | 2.1% | 1.4% | | 35,450 | 2.1% | | 3.2% |
| | | | | | | | | | | | |
Weighted Average (4) | | 38,100 | 28,750 | 66,850 | 1.1% | 0.8% | | 201,350 | 1.6% | | 3.0% |
| | | | | | | | | | | | |
| All data are based on Essex Property Trust, Inc. forecasts. | | | | | | | | |
| | | | | | | | | | | | |
U.S. Economic Assumptions: 2018 G.D.P. Growth: 2.7%, 2018 Job Growth: 1.4% | | | | | | | |
| | | | | | | | | | | | |
| (1) | New Residential Supply: total supply includes the Company’s estimate of actual multifamily deliveries including properties with 50+ units and excludes student, senior and 100% affordable housing communities. Single family estimates based on an average trailing 12 month single family permit. Previous presentations had included multifamily deliveries of 100+ units and excluded student, senior and 100% affordable housing. |
| (2) | Job Forecast: refers to the difference between total non-farm industry employment (not seasonally adjusted) projected 4Q over 4Q, expressed as total new jobs and growth rates. |
| (3) | Market Forecast: the estimated rent growth represents the forecasted change in effective market rents for full year 2018 vs. 2017 (excludes submarkets not targeted by Essex). |
| (4) | Weighted Average: markets weighted by scheduled rent in the Company’s Portfolio. |
E S S E X P R O P E R T Y T R U S T, I N C. |
| LinkedIn Worker Migration Trends for the San Francisco Bay Area - April 2017-March 2018 |
| | | |
| • RECENT MIGRATION TRENDS REFLECT THE INFLUX OF WORKERS TO ESSEX’S WEST COAST MARKETS, PRIMARILY FROM MAJOR EAST COAST METROS |
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 | |  |
| | | |
| Note: LinkedIn defines migration as a member changing their location on their LinkedIn profile. The maps reflect the cities the most LinkedIn members moved to and from in the past 12 months. For every 10,000 LinkedIn members in the San Francisco Bay Area, 6 moved to the city in the last 12 months from New York City. Source: LinkedIn Workforce Report, April 2018. |
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E S S E X P R O P E R T Y T R U S T, I N C. | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Reconciliations of Non-GAAP Financial Measures and Other Terms | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Adjusted EBITDAre Reconciliation | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | The National Association of Real Estate Investment Trusts (“NAREIT”) defines earnings before interest, taxes, depreciation and amortization for real estate (“EBITDAre”) (September 2017 White Paper) as net income (computed in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”)) before interest expense, income taxes, depreciation and amortization expense, and further adjusted for gains and losses from sales of depreciated operating properties, impairment write-downs of depreciated operating properties, impairment write-downs of investments in unconsolidated entities caused by a decrease in value of depreciated operating properties within the joint venture and adjustments to reflect the Company’s share of EBITDAre of investments in unconsolidated entities. The Company believes that EBITDAre is useful to investors, creditors and rating agencies as a supplemental measure of the Company’s ability to incur and service debt because it is a recognized measure of performance by the real estate industry, and by excluding gains or losses related to sales or impairment of depreciated operating properties, EBITDAre can help compare the Company’s credit strength between periods or as compared to different companies. Adjusted EBITDAre represents EBITDAre further adjusted for non-comparable items and is a component of the credit ratio, “Net Indebtedness Divided by Adjusted EBITDAre,” presented on page S-6, in the section titled “Selected Credit Ratios,” and it is not intended to be a measure of free cash flow for our management’s discretionary use, as it does not consider certain cash requirements such as income tax payments, debt service requirements, capital expenditures and other fixed charges. Adjusted EBITDAre is an important metric in evaluating the credit strength of the Company and its ability to service its debt obligations. The Company believes that Adjusted EBITDAre is useful to investors, creditors and rating agencies because it allows investors to compare the Company’s credit strength to prior reporting periods and to other 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 credit quality. EBITDAre and Adjusted EBITDAre are not recognized measurements under U.S. GAAP. Because not all companies use identical calculations, our presentation of EBITDAre and Adjusted EBITDAre may not be comparable to similarly titled measures of other companies. |
| | | | | | | | | | | | | | | | | | | | |
| | The reconciliations of Net Income available to common stockholders to EBITDAre and Adjusted EBITDAre are presented in the table below (Dollars in thousands): | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | Three Months Ended | | | | | | | | | | | | | | |
| | | | | | March 31, | | | | | | | | | | | | | | |
| | | | | | 2018 | | | | | | | | | | | | | | |
| | Net income available to common stockholders | $ | 90,918 | | | | | | | | | | | | | | |
| | Adjustments: | | | | | | | | | | | | | | | | |
| | | Net income attributable to noncontrolling interest | | 5,721 | | | | | | | | | | | | | | |
| | | Interest expense, net (1) | | 52,591 | | | | | | | | | | | | | | |
| | | Depreciation and amortization | | 119,105 | | | | | | | | | | | | | | |
| | | Income tax provision | | 157 | | | | | | | | | | | | | | |
| | | Co-investment EBITDAre adjustments | | 22,521 | | | | | | | | | | | | | | |
| | | | EBITDAre | | 291,013 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | Gain on sale of marketable securities | | (680) | | | | | | | | | | | | | | |
| | | Unrealized losses on marketable securities | | 876 | | | | | | | | | | | | | | |
| | | Insurance reimbursements, legal settlements, and other, net | | 2,433 | | | | | | | | | | | | | | |
| | | Co-investment promote income | | (20,541) | | | | | | | | | | | | | | |
| | | Income from early redemption of preferred equity investments | | (24) | | | | | | | | | | | | | | |
| | | Expensed acquisition and investment related costs | | 57 | | | | | | | | | | | | | | |
| | Adjusted EBITDAre | $ | 273,134 | | | | | | | | | | | | | | |
| | (1) | Interest expense, net includes items such as gains on derivatives and the amortization of deferred charges. | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Encumbered | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | Encumbered means any mortgage, deed of trust, lien, charge, pledge, security interest, security agreement or other encumbrance of any kind. | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Funds From Operations (“FFO”) | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | FFO, as defined by the 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 merger, integration and acquisition costs and items that are not routine or not related to the Company’s core business activities, which is referred to as “Core FFO”, to be useful financial 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 the ability to pay dividends. FFO and Core FFO do not represent net income or cash flows from operations as defined by U.S. GAAP and are not intended to indicate whether cash flows will be sufficient to fund cash needs. These measures should not be considered as an alternative to net income as an indicator of the REIT’s operating performance or to cash flows as a measure of liquidity. FFO and Core FFO do not measure whether cash flow is sufficient to fund all cash needs including principal amortization, capital improvements and distributions to shareholders. FFO and Core FFO do not represent cash flows generated from operating, investing or financing activities as defined under U.S. 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 reconciliations of diluted FFO and Core FFO are detailed on page S-3 in the section titled “Consolidated Funds From Operations”. | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Interest Expense, Net | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | Interest expense, net is presented on page S-1 in the section titled “Consolidated Operating Results”. Interest expense, net includes items such as gains on derivatives and the amortization of deferred charges and is presented in the table below (Dollars in thousands): |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | Three Months Ended | | | | | | | | | | | | | | |
| | | | | | March 31, | | | | | | | | | | | | | | |
| | | | | | 2018 | | | | | | | | | | | | | | |
| | Interest expense | $ | 54,861 | | | | | | | | | | | | | | |
| | Adjustments: | | | | | | | | | | | | | | | | |
| | | Total return swap income | | (2,270) | | | | | | | | | | | | | | |
| | Interest expense, net | $ | 52,591 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Net Indebtedness Divided by Adjusted EBITDAre | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | This credit ratio is presented on page S-6 in the section titled “Selected Credit Ratios.” This credit ratio is calculated by dividing net indebtedness by Adjusted EBITDAre, as annualized based on the most recent quarter, and adjusted for estimated net operating income from properties acquired or disposed of during the quarter. This ratio is presented by the Company because it provides rating agencies and investors an additional means of comparing the Company’s ability to service debt obligations to that of other companies. Net indebtedness is total debt, net less unamortized premiums, discounts, debt issuance costs, unrestricted cash and cash equivalents, and marketable securities. The reconciliation of Adjusted EBITDAre is set forth in “Adjusted EBITDAre Reconciliation” on page S-17.1 The calculation of this credit ratio and a reconciliation of net indebtedness to total debt at pro rata share for co-investments, net is presented in the table below (Dollars in thousands): |
| | | | | | | | | | | | | | | | | | | | |
| | Total consolidated debt, net | $ | 5,718,970 | | | | | | | | | | | | | | |
| | Total debt from co-investments at pro rata share | | 780,664 | | | | | | | | | | | | | | |
| | Adjustments: | | | | | | | | | | | | | | | | |
| | | Consolidated unamortized premiums, discounts, and debt issuance costs | 2,827 | | | | | | | | | | | | | | |
| | | Pro rata co-investments unamortized premiums, discounts, | | | | | | | | | | | | | | | | |
| | | | and debt issuance costs | | 6,027 | | | | | | | | | | | | | | |
| | | Consolidated cash and cash equivalents-unrestricted | | (121,954) | | | | | | | | | | | | | | |
| | | Pro rata co-investment cash and cash equivalents-unrestricted | | (41,526) | | | | | | | | | | | | | | |
| | | Marketable securities | | (197,745) | | | | | | | | | | | | | | |
| | | | Net Indebtedness | $ | 6,147,263 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | Adjusted EBITDAre, annualized (1) | $ | 1,092,536 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | Net Indebtedness Divided by Adjusted EBITDAre, normalized and annualized | 5.6 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | (1) | Based on the amount for the most recent quarter, multiplied by four. | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Net Operating Income (“NOI”) and Same-Property NOI Reconciliations | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | Net Operating Income (“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 revenue less same-property operating expenses, including property taxes. Please see the reconciliation of earnings from operations to NOI and same-property NOI, which in the table below is the NOI for stabilized properties consolidated by the Company for the periods presented (Dollars in thousands): |
| | | | | | Three Months Ended | | | Three Months Ended | | | | | | | | | | | |
| | | | | | March 31, | | | March 31, | | | | | | | | | | | |
| | | | | | 2018 | | | 2017 | | | | | | | | | | | |
| | Earnings from operations | $ | 110,547 | | $ | 109,231 | | | | | | | | | | | |
| | Adjustments: | | | | | | | | | | | | | | | | |
| | | Corporate-level property management expenses | | 7,770 | | | 7,509 | | | | | | | | | | | |
| | | Depreciation and amortization | | 119,105 | | | 115,503 | | | | | | | | | | | |
| | | Management and other fees from affiliates | | (2,308) | | | (2,236) | | | | | | | | | | | |
| | | General and administrative | | 14,813 | | | 10,601 | | | | | | | | | | | |
| | | Expensed acquisition and investment related costs | | 57 | | | 556 | | | | | | | | | | | |
| | | | NOI | | 249,984 | | | 241,164 | | | | | | | | | | | |
| | | Less: Non-same property NOI | | (17,255) | | | (16,596) | | | | | | | | | | | |
| | Same-Property NOI | $ | 232,729 | | $ | 224,568 | | | | | | | | | | | |
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| Public Bond Covenants | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | Public Bond Covenants refer to certain covenants set forth in instruments governing the Company’s unsecured indebtedness. These instruments require the Company to meet specified financial covenants, including covenants relating to net worth, fixed charge coverage, debt service coverage, the amounts of total indebtedness and secured indebtedness, leverage and certain investment limitations. These covenants may restrict the Company’s ability to expand or fully pursue its business strategies. The Company’s ability to comply with these covenants may be affected by changes in the Company’s operating and financial performance, changes in general business and economic conditions, adverse regulatory developments or other events adversely impacting it. The breach of any of these covenants could result in a default under the Company’s indebtedness, which could cause those and other obligations to become due and payable. If any of the Company’s indebtedness is accelerated, it may not be able to repay it. For risks related to failure to comply with these covenants, see “Item 1A: Risk Factors - Risks Related to Our Indebtedness and Financings” in the Company’s annual report on Form 10-K and other reports filed by the Company with the Securities and Exchange Commission (“SEC”). |
| | | | | | | | | | | | | | | | | | | | |
| | The ratios set forth on page S-6 in the section titled “Public Bond Covenants” are provided only to show the Company’s compliance with certain specified covenants that are contained in indentures related to the Company’s issuance of Senior Notes, which indentures are filed by the Company with the SEC. See, for example, the Indenture dated March 8, 2018, filed by the Company as Exhibit 4.1 to the Company’s Form 8-K, filed on March 8, 2018. These ratios should not be used for any other purpose, including without limitation to evaluate the Company’s financial condition or results of operations, nor do they indicate the Company’s covenant compliance as of any other date or for any other period. The capitalized terms in the disclosure are defined in the indentures filed by the Company with the SEC and may differ materially from similar terms used by other companies that present information about their covenant compliance. |
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| Secured Debt | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | Secured Debt means debt of the Company or any of its subsidiaries which is secured by an encumbrance on any property or assets of the Company or any of its subsidiaries. The Company’s total amount of Secured Debt is set forth on page S-5. |
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| Unencumbered NOI to Adjusted Total NOI | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | This ratio is presented on page S-6 in the section titled “Selected Credit Ratios”. Unencumbered NOI means the sum of NOI for those real estate assets which are not subject to an encumbrance securing debt. The ratio of Unencumbered NOI to Adjusted Total NOI for the three months ended March 31, 2018, annualized, is calculated by dividing Unencumbered NOI, annualized for the three months ended March 31, 2018 and as further adjusted for pro forma NOI for properties acquired or sold during the recent quarter, by Adjusted Total NOI as annualized. The calculation and reconciliation of NOI is set forth in “Net Operating Income (“NOI”) and Same-Property NOI Reconciliation” above. This ratio is presented by the Company because it provides rating agencies and investors an additional means of comparing the Company’s ability to service debt obligations to that of other companies. The calculation of this ratio is presented in the table below (Dollars in thousands): |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | Annualized | | | | | | | | | | | | | | |
| | | | | | Q1’18 (1) | | | | | | | | | | | | | | |
| | NOI | | $ | 999,936 | | | | | | | | | | | | | | |
| | Adjustments: | | | | | | | | | | | | | | | | |
| | | Other, net (2) | | (7,197) | | | | | | | | | | | | | | |
| | | | Adjusted Total NOI | | 992,739 | | | | | | | | | | | | | | |
| | | Less: Encumbered NOI | | (280,954) | | | | | | | | | | | | | | |
| | Unencumbered NOI | $ | 711,785 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | Encumbered NOI | $ | 280,954 | | | | | | | | | | | | | | |
| | | Unencumbered NOI | | 711,785 | | | | | | | | | | | | | | |
| | Adjusted Total NOI | $ | 992,739 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | Unencumbered NOI to Adjusted Total NOI | | 72% | | | | | | | | | | | | | | |
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| | (1) | This table is based on the amounts for the most recent quarter, multiplied by four. | | | | | | | | | | | | | | |
| | (2) | Includes intercompany eliminations pertaining to self-insurance and other expenses. | | | | | | | | | | | | | | |
