10-QPeriod: Q1 FY2005

ESSEX PROPERTY TRUST, INC. Quarterly Report for Q1 Ended Mar 31, 2005

Filed May 6, 2005For Securities:ESS

Summary

Essex Property Trust, Inc. (ESS) reported solid performance for the first quarter of 2005, with total property revenues increasing by 16.6% year-over-year to $77.3 million. This growth was driven by acquisitions, lease-up of development properties, and same-store property revenue increases, particularly in Southern California and the Pacific Northwest. Net income available to common stockholders rose significantly to $26.4 million, or $1.15 per diluted share, compared to $6.0 million, or $0.26 per diluted share, in the prior year's first quarter. The company continues to strategically expand its portfolio, with a recent acquisition in Bellevue, Washington, and ongoing development and redevelopment projects. Management's strategy of focusing on submarkets with strong job growth and limited housing supply appears to be paying off, as evidenced by positive rent growth projections for its core markets. Essex also maintained a strong liquidity position, with $12.5 million in unrestricted cash and cash equivalents and available credit lines.

Key Highlights

  • 1Total property revenues increased 16.6% to $77.3 million for Q1 2005, up from $66.3 million in Q1 2004.
  • 2Net income available to common stockholders more than quadrupled to $26.4 million ($1.15/diluted share) in Q1 2005, from $6.0 million ($0.26/diluted share) in Q1 2004.
  • 3Acquired Cedar Terrace Apartments, a 180-unit community in Bellevue, Washington, for $22.3 million in February 2005.
  • 4The company successfully stabilized Phase Two of its San Marcos Apartments development project in Richmond, California.
  • 5Same-store property revenues increased by 2.9% overall, driven by strong performance in Southern California (+4.9%) and the Pacific Northwest (+2.0%).
  • 6Entered into a $50 million forward-starting interest rate swap to hedge future debt issuance, demonstrating proactive risk management.
  • 7Total assets grew slightly to $2.23 billion as of March 31, 2005, from $2.22 billion at year-end 2004.

Frequently Asked Questions

Revenue growth was primarily driven by the acquisition of new properties, like the Cedar Terrace Apartments, the successful lease-up of development communities, and same-store property revenue increases. Southern California and the Pacific Northwest regions showed particularly strong performance in same-store revenues.

Essex Property Trust managed its debt by obtaining a new $21.8 million non-recourse mortgage on an unencumbered property and entering into a $50 million forward-starting interest rate swap to hedge against future debt issuance costs. The company also has substantial mortgage notes payable and lines of credit, with plans to place an additional $80 million in long-term fixed rate debt to repay existing credit lines.

Essex Property Trust anticipates positive rent growth across its regions. They project approximately 3.3% growth in Southern California, 1% in Northern California, and 1.8% in the Pacific Northwest for 2005. The company expects further recovery in Northern California and plans to increase its investment focus there.

The company is defending against a class-action lawsuit filed by former maintenance employees seeking unpaid wages and penalties. While the company intends to vigorously defend itself and has not accrued any settlement costs, litigation is subject to inherent uncertainties and could potentially have a material adverse effect on its financial condition.