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ESSEX PROPERTY TRUST, INC. Annual Report, Year Ended Dec 31, 1997

Filing Date
Filed March 31, 1998
Period End
December 31, 1997
Security
ESS
In the record · 2016–202610-K1110-Q328-K137

ESS filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 137 current reports (8-K) between 2016 and 2026.

  1. Leadership change8-K · Feb ’16Feb ’16
  2. FY2018 annual report10-K · Feb ’19Feb ’19
  3. Material agreement8-K · Jun ’21Jun ’21
  4. Material agreement8-K · Dec ’25Dec ’25

01—Abstract

Summary

Summary of the 10-K filed March 31, 1998. Cited figures are marked; the original filing is the authoritative source.

Essex Property Trust (NYSE: ESS) closed 1997 as a substantially larger West Coast multifamily REIT.

The portfolio grew from 29 multifamily properties (6,624 units) at year-end 1996 to 54 properties (10,700 units) at year-end 1997, following 27 acquisitions for roughly $317 milliona. Total revenues rose 66.8% to $84.6 million, and net income climbed to $29.3 million ($1.92 diluted EPS) from $8.9 million. Funds from operations (NAREIT revised definition) reached $43.5 million, and same-store rental income grew 8.6%.

Growth was funded largely by equity: roughly $174 millionb of net stock proceeds in 1997 and continuing common and preferred offerings, with the stock trading around $35.56 in late March 1998. The balance sheet expanded to $738.8 million in total assets, and debt-to-total-market-capitalization was 28% at year-end, well under the company's 50% policy ceiling. Investors should note the concentration in four metro areas (roughly 43% of rental revenue from the San Francisco Bay Area), the 1998 maturity wall of $31.7 million, and the approximately $77 million in construction commitments on six development projects.

Essex also disclosed groundwater contamination at certain properties and earthquake coverage subject to a $25 millionc aggregate limit with a 15% deductible. Overall, the filing presents a fast-growing, equity-funded REIT with strong coverage (debt service coverage of 4.4x) and rising occupancy-linked rents. Its growth trajectory depends on continued access to capital markets and disciplined acquisition pricing, while its geographic concentration and earthquake exposure remain the principal risks.

02—Key points

Key Highlights

  1. Total revenues rose 66.8% to $84.6 million in 1997, and net income increased to $29.3 million from $8.9 million in 1996.
  2. Diluted EPS was $1.92 in 1997, up from $1.12 in 1996; FFO (NAREIT revised definition) totaled $43.5 million.
  3. The multifamily portfolio grew to 54 properties with 10,700 units after 27 acquisitions (4,213 units) for about $317.1 million.
  4. Same-store rental income increased 8.6%, with average same-property monthly rent rising to $852 from $798.
  5. Debt-to-total-market-capitalization was 28% at year-end 1997, below the company's 50% policy limit; debt service coverage was 4.4x.
  6. Roughly $174 million of net stock offering proceeds in 1997 funded growth, and a 1.2 million unit Series B preferred placement of $60 million closed in February 1998.
  7. Risk factors include 43% rental revenue concentration in the San Francisco Bay Area, $31.7 million of debt maturing in 1998, and about $77 million in committed development construction costs.

03—Questions

Frequently Asked Questions

  1. How did Essex's earnings and cash flow perform in 1997?

    Net income rose to $29.3 million ($1.92 diluted EPS) from $8.9 million ($1.12) in 1996, driven mainly by acquisitions, same-store rent growth, and higher gains on sales. Net cash from operating activities increased to $46.9 million from $20.1 million, and dividends rose to $0.45 per quarter by late 1997.

  2. How leveraged is the company and what debt risks should investors watch?

    Total property indebtedness was $276.6 million at year-end 1997, or 28% of total market capitalization. About $58.8 million is variable-rate tax-exempt debt, with $29.2 million capped at 7.2%. Scheduled maturities include $31.7 million in 1998 and $174.7 million in 2002 and thereafter, creating refinancing risk.

  3. Where is the portfolio concentrated and what are the main geographic risks?

    About 43% of 1997 rental revenue came from the San Francisco Bay Area, 25% from Seattle, 26% from Southern California, and 6% from Portland. This concentration exposes results to local economic downturns, and all properties face earthquake risk, with coverage capped at $25 million above a $5 million retention and a 15% deductible.

  4. What growth plans and capital needs does Essex have for 1998?

    Essex is developing six projects totaling about 1,330 units at an estimated cost of $150 million, with about $77 million of construction commitments outstanding. It has a $100 million equity and $250 million debt shelf registration on file, and expects non-revenue capital expenditures of about $300 per unit in 1998.

04—Continue

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