10-QPeriod: Q3 FY2006

ESSEX PROPERTY TRUST, INC. Quarterly Report for Q3 Ended Aug 4, 2006

Filed August 7, 2006For Securities:ESS

Summary

Essex Property Trust, Inc. (ESS) reported solid operational performance for the quarter ended June 30, 2006, with total property revenues increasing by 8.8% year-over-year, driven by a 6.3% rise in same-property revenues, primarily due to increased rental rates. The company continues to expand its portfolio, with significant capital expenditures in development and redevelopment projects, funded partly through strategic equity offerings including a notable Series G Cumulative Convertible Preferred Stock issuance in July 2006. Financially, the company demonstrated a healthy balance sheet with total assets growing and manageable debt levels. While interest expenses have risen due to increased debt and borrowing rates, the company has proactively managed this through forward-starting interest rate swaps, hedging future refinancing needs. The disposal of non-core assets and strategic acquisitions are ongoing, reflecting a commitment to optimizing the portfolio for long-term value creation. Investors can find reassurance in the consistent occupancy rates and the company's strategic positioning in high-demand West Coast markets.

Key Highlights

  • 1Total property revenues increased by 8.8% to $86.7 million for the quarter ended June 30, 2006, compared to the prior year, driven by a 6.3% increase in same-property revenues.
  • 2Same-property revenues were primarily boosted by a 5.9% increase in rental rates, indicating strong pricing power and market demand.
  • 3The company actively manages its real estate portfolio, with $2.2 million in development and $34.0 million in redevelopment projects underway, aiming for enhanced financial returns.
  • 4Essex Property Trust successfully raised approximately $149.5 million in gross proceeds through the issuance of Series G Cumulative Convertible Preferred Stock in July 2006, intending to use these funds for debt reduction and pipeline funding.
  • 5Despite an increase in total debt, the company has implemented a robust hedging strategy with seven forward-starting interest rate swaps totaling $350 million to mitigate interest rate risk on future debt refinancing.
  • 6Occupancy rates remained high and stable, with average financial occupancies at 96.6% for stabilized multifamily properties during the quarter.
  • 7The company continued to dispose of non-core assets, generating proceeds and gains, while focusing on investments in high-growth West Coast markets.

Frequently Asked Questions

Essex Property Trust is a fully integrated Real Estate Investment Trust (REIT) that primarily generates revenue from multifamily property operations. Its strategic focus is on three major West Coast regions: Southern California, Northern California, and the Pacific Northwest (Seattle and Portland metropolitan areas).

Total property revenues increased by 8.8% to $86.7 million for the quarter ended June 30, 2006, compared to $79.7 million in the same period of 2005. This growth was largely driven by a 6.3% increase in same-property revenues, which was primarily attributable to a 5.9% increase in rental rates and a decrease in rent concessions.

Essex Property Trust maintains a mix of fixed and variable rate debt. To manage interest rate risk associated with future debt maturities, the company has entered into seven forward-starting interest rate swaps totaling $350 million. These swaps hedge against potential increases in interest rates on forecasted debt issuances between 2007 and early 2011.

The company utilizes a combination of strategies to fund its growth. This includes cash flows from operations, available credit lines, and capital markets access. Notably, in July 2006, ESS raised approximately $149.5 million through the issuance of Series G Cumulative Convertible Preferred Stock and continues to use its Controlled Equity Offering program to sell common stock for proceeds intended for development and redevelopment pipelines.