10-QPeriod: Q2 FY2006

ESSEX PROPERTY TRUST, INC. Quarterly Report for Q2 Ended May 10, 2006

Filed May 10, 2006For Securities:ESS

Summary

Essex Property Trust, Inc. (ESS) reported its first quarter 2006 results, showcasing continued revenue growth driven by its multifamily property operations across key West Coast markets. Total property revenues increased by 8.9% year-over-year, primarily due to strong performance in 'Same-Properties' and contributions from recent acquisitions. While overall net income saw a significant decrease compared to the prior year period, this was largely influenced by a substantial gain on the sale of real estate in Q1 2005 and a decrease in equity income from co-investments. The company also highlighted strategic debt management, including the renegotiation of its revolving credit facility to increase its capacity and extend its maturity. Management remains confident in its liquidity and capital resources to fund operations, acquisitions, and dividend payments, supported by existing cash, credit lines, and potential equity/debt issuances.

Key Highlights

  • 1Total property revenues increased by 8.9% to $85.3 million in Q1 2006 compared to $78.3 million in Q1 2005, driven by Same-Property revenue growth of 5.4% and increased revenue from newly acquired properties.
  • 2Net income available to common stockholders decreased to $9.8 million in Q1 2006 from $26.4 million in Q1 2005, primarily due to the absence of a significant gain on sale of real estate in the prior year and lower equity income from co-investments.
  • 3The company acquired two apartment communities in Isla Vista, California, aggregating 239 units, for approximately $57.1 million in January 2006.
  • 4Essex renegotiated its revolving line of credit, increasing the maximum principal amount to $200 million from $185 million and extending the maturity date to March 2009.
  • 5Total assets grew to $2.30 billion as of March 31, 2006, from $2.24 billion as of December 31, 2005, with real estate assets forming the bulk of the company's holdings.
  • 6Funds From Operations (FFO) for Q1 2006 were $28.9 million, or $1.13 per diluted share, a decrease from $32.8 million, or $1.28 per diluted share, in Q1 2005, reflecting the impact of non-operational gains and losses.
  • 7The company continued its development and redevelopment activities, with six communities in various stages of redevelopment and multiple development projects in the pipeline.

Frequently Asked Questions

The main driver of Essex Property Trust's revenue growth is its multifamily property operations. In the first quarter of 2006, total property revenues increased by 8.9%, largely due to a 5.4% increase in 'Same-Property' revenues and contributions from newly acquired properties.

The significant decrease in net income for the first quarter of 2006 compared to the first quarter of 2005 is primarily due to a large gain on the sale of real estate that was recognized in the prior year's quarter, which did not recur in 2006. Additionally, equity income from co-investments was substantially lower in the current quarter.

Essex is actively managing its debt and liquidity. The company renegotiated its revolving credit facility, increasing its capacity to $200 million and extending its maturity. As of March 31, 2006, it had approximately $18.5 million outstanding on this line. Management believes its existing cash flow, credit lines, and access to capital markets are sufficient to meet its operational and financial needs.

Essex focuses on owning quality real estate in supply-constrained markets, primarily multifamily properties in Southern California, Northern California, and the Pacific Northwest. The company is also engaged in strategic acquisitions, dispositions of non-core assets, and ongoing development and redevelopment projects to enhance its portfolio and returns.