10-QPeriod: Q2 FY2005

ESSEX PROPERTY TRUST, INC. Quarterly Report for Q2 Ended Jun 30, 2005

Filed August 5, 2005For Securities:ESS

Summary

Essex Property Trust, Inc. (ESS) reported solid performance for the quarter and six months ended June 30, 2005. The company demonstrated revenue growth driven by increased occupancy and rental rates across its key West Coast markets, particularly in Southern California. Significant property acquisitions and dispositions occurred, including the purchase of Mission Hills Apartments and the sale of Eastridge Apartments, the latter resulting in a deferred gain due to a related party loan. Financially, ESS maintained a strong liquidity position with substantial cash and available credit lines, supporting ongoing development and redevelopment projects. The company also strategically managed its debt through new mortgage loans and interest rate hedging, aiming to stabilize interest expenses. The results highlight ESS's ongoing strategy of portfolio enhancement and proactive capital management in a dynamic real estate market.

Key Highlights

  • 1Total property revenues increased by 12% year-over-year for the three months ended June 30, 2005, reaching $78.0 million, driven by a 3.7% increase in Same Store Property Revenues and significant growth in non-same store properties.
  • 2Net income available to common stockholders grew substantially to $38.4 million ($1.66 per share) for the three months ended June 30, 2005, compared to $5.2 million ($0.23 per share) in the prior year period, largely due to gains from discontinued operations and improved core property performance.
  • 3The company acquired Mission Hills Apartments (282 units) in Oceanside, California, for approximately $50.5 million and sold Eastridge Apartments (188 units) in San Ramon, California, for approximately $47.5 million.
  • 4Debt management included obtaining two non-recourse mortgage loans totaling $32.9 million and three additional loans totaling $12.9 million, contributing to a total mortgage debt of $1,127.7 million as of June 30, 2005.
  • 5Liquidity remains strong, with $33.1 million in unrestricted cash and cash equivalents and significant availability under credit lines, supporting ongoing development and redevelopment activities.
  • 6The company recorded $1.5 million for legal settlement costs related to a class-action lawsuit concerning on-call maintenance employees, representing management's best estimate of the total cost.
  • 7Essex Apartment Value Fund II (Fund II) acquired Tower @ 801, a 173-unit apartment community in Seattle, Washington, for approximately $31.9 million, indicating continued investment in strategic markets.

Frequently Asked Questions

For the three months ended June 30, 2005, Essex Property Trust, Inc. reported total property revenues of $78.0 million, a 12% increase from $69.6 million in the same period of 2004. This growth was driven by a 3.7% increase in same-store property revenues and a significant 41.8% increase in non-same store property revenues, reflecting successful acquisitions and development projects.

The company maintained a strong liquidity position with $33.1 million in unrestricted cash and cash equivalents as of June 30, 2005, and substantial availability under its credit facilities. Debt management included obtaining new mortgage loans totaling $45.8 million and strategically hedging interest rate risk through a forward-starting swap. These actions are intended to fund operational needs, debt service, development projects, and maintain REIT qualification.

Key transactions included the acquisition of Mission Hills Apartments, a 282-unit community in Oceanside, California, for approximately $50.5 million, funded by the sale of Eastridge Apartments, a 188-unit community in San Ramon, California, for approximately $47.5 million. The sale of Eastridge Apartments resulted in a deferred gain of $2.2 million due to a related party participating loan.

Essex is actively engaged in development and redevelopment. As of June 30, 2005, the company had ownership interests in two development communities (475 units) with an estimated $95.0 million remaining to be expended, and six redevelopment communities (1,905 units) with approximately $23.1 million remaining to be expended. These projects are integral to the company's growth strategy.