10-QPeriod: Q1 FY2008

ESSEX PROPERTY TRUST, INC. Quarterly Report for Q1 Ended Mar 31, 2008

Filed May 8, 2008For Securities:ESS

Summary

Essex Property Trust, Inc. (ESS) reported its first quarter 2008 results, demonstrating continued operational strength despite a challenging economic environment. The company's core business of apartment rentals showed robust performance, with increased revenues and stable occupancy rates across its key West Coast markets. While overall net income was impacted by a lack of discontinued operations gains compared to the prior year's quarter, the underlying operational performance remains a key takeaway for investors. The company's strategic focus on high-growth West Coast markets continues to drive value, with solid revenue growth in Southern California, Northern California, and the Seattle Metro area. Management highlighted effective debt management and a solid liquidity position, indicating resilience. The company is actively managing its development pipeline and capital structure, positioning itself for future growth while navigating market uncertainties.

Key Highlights

  • 1Total property revenues increased by 13.2% year-over-year to $101.5 million in Q1 2008, driven by same-property revenue growth of 5.7% and significant contributions from newly acquired properties.
  • 2Net income available to common stockholders decreased to $15.7 million ($0.63 per diluted share) in Q1 2008 from $35.3 million ($1.46 per diluted share) in Q1 2007, primarily due to the absence of significant gains from discontinued operations recorded in the prior year.
  • 3The company's development pipeline remains substantial, with 5 development projects and 3 predevelopment projects underway, representing significant future investment and growth potential.
  • 4Total assets grew slightly to $3.00 billion as of March 31, 2008, from $2.98 billion as of December 31, 2007, reflecting ongoing real estate investments.
  • 5Mortgage notes payable increased to $1.31 billion from $1.26 billion, indicating continued financing activity for property acquisitions and development.
  • 6The company maintained strong financial occupancy rates, averaging 95.9% across its stabilized apartment communities, with Northern California and Seattle Metro showing notable improvements.
  • 7Essex completed a stock repurchase of 143,400 shares for approximately $13.7 million in January 2008, demonstrating a commitment to returning capital to shareholders and managing its share count.

Frequently Asked Questions

Essex Property Trust's primary revenue driver is its rental property operations. In the first quarter of 2008, total property revenues increased due to growth in same-property revenues across its key West Coast markets, particularly Northern California and Seattle Metro, as well as contributions from recently acquired properties.

The decrease in net income available to common stockholders was primarily due to the absence of substantial gains from discontinued operations, which significantly boosted net income in the first quarter of 2007. The core operating performance, excluding these one-time items, remains a key indicator.

Essex Property Trust maintains a strong liquidity position with $10.4 million in unrestricted cash and cash equivalents, and has access to various lines of credit. The company has a significant portion of its debt at fixed rates and utilizes hedging strategies to manage interest rate risk. Management believes its cash flows, existing cash, credit availability, and access to capital markets are sufficient to meet its needs for 2008.

Essex Property Trust is actively pursuing new developments and redevelopments. As of March 31, 2008, the company had a substantial development and predevelopment pipeline totaling over 2,700 units, with significant estimated remaining project costs. This indicates a strategic focus on expanding its portfolio in target West Coast markets.