10-QPeriod: Q2 FY2008

ESSEX PROPERTY TRUST, INC. Quarterly Report for Q2 Ended Jun 30, 2008

Filed August 6, 2008For Securities:ESS

Summary

Essex Property Trust, Inc. (ESS) reported its second-quarter 2008 financial results, showing continued growth in rental revenues and net operating income across its primary West Coast markets. The company's strategic focus on Southern California, Northern California, and the Seattle Metro area is reflected in the performance of its same-property portfolio, which saw a 5.1% increase in revenue for the quarter compared to the prior year, driven by a 4.6% rise in scheduled rents and a slight improvement in occupancy. Despite an increase in total expenses, largely due to acquisitions and higher depreciation, the company maintained a solid financial footing, reporting an increase in net income available to common stockholders for the quarter and six months ended June 30, 2008. Financially, Essex demonstrated prudent management of its capital resources, with a robust cash position and access to credit facilities. The company actively managed its debt, securing new loans and settling interest rate swaps to hedge against rising interest costs. While acknowledging the tightening credit markets, Essex expressed confidence in its ability to meet its financial obligations and fund its ongoing development and redevelopment projects. The company also highlighted its ongoing stock repurchase program and its commitment to shareholder returns through dividends.

Key Highlights

  • 1Rental property revenues increased by 9.7% year-over-year for the quarter ended June 30, 2008, to $103.4 million.
  • 2Same-property revenues grew by 5.1% for the quarter, driven by a 4.6% increase in scheduled rents.
  • 3Total assets grew to $3.06 billion as of June 30, 2008, up from $2.98 billion at the end of 2007.
  • 4The company had $21.0 million in unrestricted cash and cash equivalents as of June 30, 2008.
  • 5Debt financing activities included securing new loans totaling over $70 million during the quarter.
  • 6Essex reported $11.99 million in net income for the quarter, a slight decrease from $12.19 million in the prior year's quarter, while net income available to common stockholders was $9.69 million, down from $9.88 million.
  • 7The company is actively managing its development pipeline, with five development projects and three predevelopment projects underway.

Frequently Asked Questions

Essex Property Trust reported a 9.7% increase in total property revenues for the quarter ended June 30, 2008, reaching $103.4 million. This growth was primarily driven by a 5.1% increase in revenue from its 'Same-Properties' portfolio, which saw average rental rates rise and occupancy improve.

As of June 30, 2008, Essex Property Trust had $21.0 million in unrestricted cash and cash equivalents. The company stated that it believes its operational cash flows, existing cash balances, available credit lines, and access to capital markets are sufficient to meet its reasonably anticipated cash needs for 2008.

Essex Property Trust is actively managing its debt and interest rate exposure. During the quarter, the company secured new loans and settled forward-starting interest rate swaps to hedge against potential increases in interest rates. As of June 30, 2008, the company had approximately $1.4 billion in mortgage notes payable, with a mix of fixed and variable rates, and had entered into interest rate swaps and caps to manage its interest rate risk.

Total expenses increased by 9.1% for the quarter ended June 30, 2008, compared to the prior year. This rise was primarily attributed to an 11.9% increase in property operating expenses, including real estate taxes, due to the acquisition of new properties and annual increases in salaries and taxes. Depreciation expense also increased significantly by 16.5% due to new property acquisitions and capitalized additions.