10-QPeriod: Q3 FY2001

ESSEX PROPERTY TRUST, INC. Quarterly Report for Q3 Ended Sep 30, 2001

Filed November 9, 2001For Securities:ESS

Summary

Essex Property Trust, Inc. (ESS) reported its financial results for the third quarter and the first nine months of 2001. The company demonstrated growth in total revenues, driven by both its core rental properties and increased interest income. Investment in real estate development and acquisitions continued, indicated by a significant increase in "Real estate under development" and "Investments" on the balance sheet. The company also established a new private equity fund, Essex Apartment Value Fund, L.P., to further its acquisition and development strategies. Financially, the company saw an increase in net income compared to the prior year's period, partly due to a gain on the sale of real estate in the third quarter of 2001. Despite increased interest expenses, primarily related to new debt for acquisitions, Essex maintained positive operating cash flows and continued to pay dividends. The company is actively managing its market risk, particularly interest rate fluctuations, through a mix of fixed and variable rate debt, and aims to meet its funding requirements through various capital sources.

Key Highlights

  • 1Total revenues for the nine months ended September 30, 2001, increased by 18.3% to $152.9 million compared to the same period in 2000.
  • 2Net income for the nine months ended September 30, 2001, rose to $37.5 million from $33.3 million in the prior year.
  • 3The company established the Essex Apartment Value Fund, L.P., with an initial closing of $105 million, aimed at acquiring, developing, and managing multifamily properties.
  • 4Total assets grew to $1.37 billion as of September 30, 2001, from $1.28 billion at the end of 2000, reflecting investments in real estate and development.
  • 5Mortgage notes payable and lines of credit increased, indicating ongoing financing activities for property acquisitions and development, with total liabilities rising to $729.9 million.
  • 6Despite a decrease in financial occupancy rates in some regions compared to the prior year, rental rate increases contributed to higher property revenues.
  • 7The company reported a gain of $3.79 million related to the sale of real estate in the third quarter of 2001.

Frequently Asked Questions

Revenue growth is primarily driven by increases in rental income from its multifamily properties, supported by rental rate increases. Additionally, interest and other income from notes receivable and joint venture investments have also contributed significantly to overall revenue growth.

Essex Property Trust is financing its growth through a combination of increased mortgage debt, utilization of its lines of credit, and potentially through public and private debt and equity issuances. The establishment of the Essex Apartment Value Fund, L.P., also represents a strategic move to leverage external capital for acquisitions and development.

The company employs an active portfolio management strategy that includes developing new properties, redeveloping existing ones to enhance returns, and disposing of assets when deemed appropriate. They are also focusing on specific geographical regions: Northern California, Southern California, and the Pacific Northwest.

The Fund serves as the company's exclusive investment vehicle for new investments (subject to exceptions) until its capital is substantially deployed or by December 31, 2003. This structure allows Essex to leverage a larger pool of capital for acquisitions and development, while also providing management fees and potential incentive distributions to the company.