10-QPeriod: Q1 FY2007

ESSEX PROPERTY TRUST, INC. Quarterly Report for Q1 Ended Mar 31, 2007

Filed May 8, 2007For Securities:ESS

Summary

Essex Property Trust, Inc. (ESS) reported its first quarter 2007 financial results, demonstrating solid operational performance driven by increases in rental and other property revenues. Total revenues rose to $93.2 million from $83.1 million in the prior year's quarter, an increase of approximately 12.2%. This growth was primarily fueled by a 7.5% increase in same-property revenues, attributed to higher scheduled rents and increased average rental rates across its portfolio, particularly in Northern California and Seattle Metro regions. The company also reported a significant increase in net income to $37.5 million from $10.3 million in the first quarter of 2006, largely due to a substantial gain from discontinued operations, primarily from the sale of the City Heights Apartments joint venture. Adjusted for these one-time items, the underlying operational performance remains strong, with earnings from operations growing to $15.6 million from $9.9 million. ESS continues to actively manage its portfolio through strategic acquisitions and dispositions, with recent acquisitions bolstering its presence in key West Coast markets.

Key Highlights

  • 1Total property revenues increased by 12.1% to $92.2 million for the three months ended March 31, 2007, compared to $82.2 million for the same period in 2006.
  • 2Net income available to common stockholders more than tripled to $35.3 million ($1.51 per basic share) from $9.8 million ($0.43 per basic share) year-over-year, significantly boosted by gains from discontinued operations.
  • 3The company completed several strategic acquisitions in the first quarter of 2007, including Harvest Park apartments (104 units) in Santa Rosa, CA, and two adjacent apartment communities (108 units) in Santa Barbara, CA.
  • 4Essex Property Trust successfully executed a significant disposition, selling the City Heights Apartments joint venture property for $120 million, resulting in a substantial gain.
  • 5Debt management appears active, with new mortgage origination and refinancing, alongside the utilization of interest rate swaps to hedge against future interest rate fluctuations.
  • 6The company continues to invest in its future, with a consolidated development pipeline of 2,726 units and a significant redevelopment pipeline of 3,903 units.
  • 7Funds from Operations (FFO) increased by over 56% to $45.4 million ($1.70 per diluted share) compared to $28.9 million ($1.13 per diluted share) in the prior year's quarter, indicating strong operational cash flow.

Frequently Asked Questions

The significant increase in net income to $37.5 million was largely driven by a substantial gain from discontinued operations, primarily from the sale of the City Heights Apartments joint venture for $120 million, which resulted in a $13.7 million gain for Essex. Additional contributions came from fees related to the City Heights joint venture and the sale of Peregrine Point condominiums.

Total property revenues increased by 12.1% to $92.2 million. Same-property revenues grew by 7.5%, driven by a 8.5% increase in scheduled rents. Northern California showed the strongest revenue growth at 8.9%, followed by Seattle Metro at 11.4%, indicating robust rental market performance in these key West Coast regions.

Essex Property Trust is actively managing its portfolio through strategic acquisitions and dispositions. The company completed several property acquisitions in the first quarter of 2007 and continues to invest in its future through a consolidated development pipeline of 2,726 units and a redevelopment pipeline of 3,903 units. These activities are focused on key West Coast markets.

The company is actively managing its debt through new mortgage originations and refinancing. Furthermore, Essex is utilizing forward-starting interest rate swaps to hedge against potential increases in interest rates on its future debt issuances, demonstrating a proactive approach to interest rate risk management.