10-KPeriod: FY2013

ESSEX PROPERTY TRUST, INC. Annual Report, Year Ended Dec 31, 2013

Filed February 26, 2014For Securities:ESS

Summary

This 10-K filing for Essex Property Trust, Inc. (ESS) for the year ended December 31, 2013, highlights a significant pending merger with BRE Properties, Inc. This strategic combination aims to create a larger, combined entity operating under the Essex Property Trust name, with continuing Essex stockholders expected to own approximately 62% of the combined company. The company's core business focuses on owning, operating, acquiring, developing, and redeveloping apartment communities primarily along the West Coast, with a strong presence in Southern California, the San Francisco Bay Area, and the Seattle metropolitan area. Financially, ESS demonstrates solid performance with increasing revenues and a strategic approach to capital management, including a substantial issuance of unsecured notes and expansion of its credit facilities. The company also actively manages its property portfolio through acquisitions and dispositions to focus on supply-constrained markets. Investors should note the forward-looking statements and associated risks, particularly those related to the proposed merger, integration challenges, financing, and potential market and economic fluctuations.

Financial Highlights

34 data points
Beta

Revenue

$610.59M

Net Income

$156.28M

25.6% Net Margin

EPS (Diluted)

$4.04

Total Assets

$5.19B

Cash & Equivalents

$18.49M

Free Cash Flow

$304.98M

Financial Statements
Beta
Revenue$610.59M
Operating Expenses$421.88M
Operating Income$188.71M
Interest Expense$116.52M
Net Income$156.28M
EPS (Basic)$4.05
EPS (Diluted)$4.04
Shares Outstanding (Basic)37.25M
Shares Outstanding (Diluted)37.34M

Key Highlights

  • 1Major pending merger with BRE Properties, Inc. to create a larger West Coast-focused apartment REIT.
  • 2Portfolio consists of 164 apartment communities (34,079 units) and four commercial buildings, primarily located in California and Washington.
  • 3Strong revenue growth of 14.3% year-over-year driven by acquisitions and same-property rent increases.
  • 4Secured significant long-term financing, including $300 million in senior unsecured notes issued in April 2013.
  • 5Increased credit facility capacity to $1.0 billion, demonstrating strong liquidity management.
  • 6Active development pipeline with 2,501 units in various stages of development.
  • 7Experienced a 6.3% increase in same-property revenues for 2013, with projections for continued growth in 2014.

Frequently Asked Questions

The most significant event is the announced Agreement and Plan of Merger with BRE Properties, Inc. on December 19, 2013. This merger, expected to close in 2014, will combine the two companies to create a larger REIT focused on West Coast apartment communities. Continuing Essex stockholders are expected to hold approximately 62% of the combined entity.

Essex Property Trust's portfolio is concentrated along the West Coast of the United States, with its primary markets being Southern California (46% of units), the San Francisco Bay Area (32% of units), and the Seattle metropolitan area (22% of units). As of December 31, 2013, the company owned 164 apartment communities comprising 34,079 units, along with four commercial buildings totaling approximately 315,900 square feet.

Essex Property Trust has a multi-faceted approach to capital management. In 2013, it issued $300 million in senior unsecured notes and has increased its unsecured line of credit capacity to $1.0 billion. The company also holds ratings of BBB+/Stable from Fitch, Baa2/Stable from Moody's, and BBB/Stable from S&P. It continues to use a mix of debt and equity financing, with a strategy to prioritize unsecured debt and reduce reliance on mortgage debt.

Key risks highlighted include those related to the pending BRE merger, such as integration challenges, financing risks for the cash portion of the deal, and potential negative impacts if the merger fails. Other significant risks include market and economic conditions affecting rental demand and rates, rising interest rates impacting borrowing costs, geographic concentration in California and Washington, and competition within the apartment market.