10-QPeriod: Q1 FY2003

ESSEX PROPERTY TRUST, INC. Quarterly Report for Q1 Ended Mar 31, 2003

Filed May 15, 2003For Securities:ESS

Summary

Essex Property Trust, Inc. (ESS) reported its first quarter results for 2003, showing a year-over-year increase in total revenues driven primarily by newly acquired properties and development activities. However, net income experienced a decrease, largely due to a significant drop in "interest and other income" and an increase in property operating expenses and interest expenses. The company continues to expand its portfolio, with a focus on multifamily properties across Southern California, Northern California, and the Pacific Northwest. The launch of the Essex Apartment Value Fund (the "Fund") signals a strategic approach to new investments, leveraging significant capital commitments. Despite a challenging economic environment with some regional revenue declines, ESS highlights improved occupancy rates in key markets. The company maintains a strong liquidity position with substantial available credit lines and is actively managing its debt structure, with a focus on fixed-rate debt.

Key Highlights

  • 1Total revenues increased by 19.4% to $58.995 million, primarily driven by properties acquired after December 31, 2001, and the addition of office buildings, RV parks, and manufactured housing communities.
  • 2Net income decreased by 9.4% to $10.231 million, impacted by a significant 48.2% reduction in "interest and other income" and a 33.1% rise in total expenses, largely due to increased property operating expenses and interest expenses.
  • 3Property revenues from "Quarterly Same Store Properties" saw a slight decrease of 1.5%, with declines in Northern California and the Pacific Northwest, though offset by a 7.2% increase in Southern California.
  • 4Average financial occupancy across multifamily properties improved to 95.2% compared to 92.8% in the prior year, with notable gains in Southern California and the Pacific Northwest.
  • 5The company reported $10.367 million in unrestricted cash and cash equivalents, with a total of $195 million available under two unsecured lines of credit, providing strong liquidity.
  • 6Development activities are progressing, with ownership interests in five development communities totaling 1,248 units, and a remaining commitment of $102.3 million for these projects.
  • 7The company is navigating an economic downturn in its operating regions, acknowledging potential impacts on rental rates, occupancy, and property valuations, while highlighting risk moderation through property type and geographic diversity.

Frequently Asked Questions

Essex Property Trust saw a significant increase in total revenues, up 19.4% to $58.995 million, largely due to new property acquisitions. However, net income decreased by 9.4% to $10.231 million. This decline was primarily driven by a substantial drop in "interest and other income" and an increase in operating and interest expenses.

Essex Property Trust maintains a strong liquidity position with $10.367 million in unrestricted cash and $195 million available under unsecured lines of credit. The company utilizes a mix of fixed and variable rate debt, with a strategic focus on fixed-rate obligations to mitigate interest rate risk. It also has a significant amount of secured indebtedness, primarily fixed-rate.

The company acknowledges a general economic downturn in its operating regions, which could impact rental rates and occupancy. However, Essex Property Trust highlights an overall improvement in average financial occupancy to 95.2% and notes positive revenue growth in Southern California. The company is actively managing its portfolio and development pipeline, including through the Essex Apartment Value Fund, aiming to mitigate risks through diversification.

The primary driver for the revenue increase is the addition of properties acquired after December 31, 2001. This includes 21 multifamily properties, as well as office buildings, recreational vehicle parks, and manufactured housing communities. These new assets contributed significantly to the overall property revenue growth.