10-QPeriod: Q3 FY2004

ESSEX PROPERTY TRUST, INC. Quarterly Report for Q3 Ended Sep 30, 2004

Filed November 9, 2004For Securities:ESS

Summary

Essex Property Trust, Inc. (ESS) reported solid financial results for the nine months ended September 30, 2004, demonstrating significant growth driven by strategic acquisitions and strong performance in its core multifamily property segment. The company experienced a substantial increase in total revenues and net income compared to the prior year, reflecting successful execution of its investment strategy focused on high-growth West Coast markets. Significant real estate dispositions, particularly within its Essex Apartment Value Fund I, contributed to realized gains and provided capital for future investments. The establishment of Essex Apartment Value Fund II signifies continued strategic capital formation and a commitment to future growth opportunities. The company's financial position remains robust, with increasing assets and a well-managed debt structure. Management highlights a strategic focus on job growth, limited housing supply, and favorable demographic trends in its target markets, particularly Southern California, which continues to be the strongest performing region. Looking ahead, Essex Property Trust appears well-positioned to capitalize on market opportunities while navigating potential economic headwinds.

Key Highlights

  • 1Total revenues increased by 10.7% to $209.1 million for the nine months ended September 30, 2004, compared to $188.9 million in the same period of 2003.
  • 2Net income grew by 67.5% to $47.2 million for the nine months ended September 30, 2004, from $28.2 million in the same period of 2003.
  • 3Significant gains from real estate sales, particularly from Fund I dispositions, contributed substantially to the period's financial performance.
  • 4The company successfully closed on Essex Apartment Value Fund II, with combined equity commitments of $265.9 million, signaling strong investor confidence and future growth potential.
  • 5Same-store property revenues in Southern California, the company's largest segment, increased by 4.0% for the nine months ended September 30, 2004.
  • 6Total assets grew to $2.15 billion as of September 30, 2004, up from $1.92 billion at the end of 2003, reflecting continued investment and expansion.
  • 7The company maintained a strong liquidity position with $16.2 million in unrestricted cash and cash equivalents and significant availability under its lines of credit.

Frequently Asked Questions

Revenue growth was primarily driven by a 10.7% increase in total property revenues, fueled by acquisitions of new multifamily properties and the stabilization of development communities. Net income saw a significant increase of 67.5%, largely due to substantial gains recognized from the disposition of properties within Essex Apartment Value Fund I, as well as strong operational performance from the core multifamily portfolio.

Essex Apartment Value Fund I (Fund I) saw significant activity with substantial property dispositions that generated considerable gains for Essex. The company also announced the final closing of Essex Apartment Value Fund II (Fund II) with significant equity commitments, positioning it as the exclusive investment vehicle for new multifamily property investments in targeted West Coast markets.

Essex's strategy focuses on markets with strong job growth and limited housing supply. Southern California continues to be the strongest performing region with solid revenue growth. While Northern California experienced some revenue decline, the company plans to increase its investment focus there anticipating positive future fundamentals. The Pacific Northwest also shows positive trends. The formation of Fund II and ongoing acquisitions and development initiatives indicate a proactive approach to future growth.

Essex Property Trust primarily uses fixed-rate debt to mitigate interest rate risk. The company also monitors its exposure using various techniques and has interest rate cap agreements in place for a portion of its variable-rate debt. The report indicates that the company's current interest rate exposure is manageable, with most variable rate debt carrying low interest rates.