10-QPeriod: Q2 FY2009

ESSEX PROPERTY TRUST, INC. Quarterly Report for Q2 Ended Jun 30, 2009

Filed August 7, 2009For Securities:ESS

Summary

Essex Property Trust, Inc. (ESS) reported its second quarter 2009 financial results, a period marked by ongoing economic challenges. Despite a slight decrease in same-property revenues due to declining scheduled rents, the company demonstrated resilience with a modest increase in overall property revenues, driven by new acquisitions and lease-up of development projects. Occupancy rates remained strong, indicating stable demand for their apartment communities. The company's financial position appears sound, with sufficient liquidity from cash, marketable securities, and available credit lines to meet its obligations. Management's focus remains on strategic market monitoring, efficient operations, and prudent capital management amidst a tight credit environment. Financially, the company managed its debt effectively, including repurchasing a portion of its exchangeable bonds and Series G preferred stock at a discount, which generated gains. The development pipeline, though significant in scale, is being funded through a combination of existing resources and credit facilities, with careful attention to cost management. Investors should note the company's proactive approach to hedging interest rate risk and its continued focus on enhancing shareholder value through operational efficiency and strategic investments in its core West Coast markets.

Financial Highlights

21 data points
Beta

Revenue

$103.63M

Net Income

$13.00M

12.5% Net Margin

EPS (Diluted)

$0.43

Cash & Equivalents

$65.44M

Free Cash Flow

$89.23M

Financial Statements
Beta
Revenue$103.63M
Operating Expenses$68.59M
Operating Income$35.04M
Interest Expense$21.51M
Net Income$13.00M
EPS (Basic)$0.43
EPS (Diluted)$0.43
Shares Outstanding (Basic)26.83M
Shares Outstanding (Diluted)26.85M

Key Highlights

  • 1Total assets increased to $3.24 billion as of June 30, 2009, from $3.16 billion as of December 31, 2008.
  • 2Rental and other property revenues for the three months ended June 30, 2009, increased slightly to $102.7 million from $100.1 million in the prior year period.
  • 3Net income attributable to common stockholders increased to $11.4 million ($0.43 per diluted share) for the three months ended June 30, 2009, from $8.7 million ($0.35 per diluted share) in the prior year period.
  • 4The company repurchased $71.3 million of its exchangeable bonds during the first quarter of 2009, recognizing a $6.1 million gain on early retirement of debt.
  • 5Funds from Operations (FFO) for the quarter increased to $40.0 million ($1.43 per diluted share) compared to $39.2 million ($1.42 per diluted share) in the prior year quarter.
  • 6The company maintained strong financial occupancy rates, with stabilized apartment communities at 96.8% as of June 30, 2009.
  • 7Liquidity appears strong, with $65.4 million in unrestricted cash and cash equivalents and $115.4 million in marketable securities available at June 30, 2009.

Frequently Asked Questions

Essex Property Trust is actively managing its debt by repurchasing exchangeable bonds and preferred stock at a discount when opportunistic, which has generated gains. The company utilizes a mix of fixed and variable rate debt, and employs interest rate hedges (swaps and caps) to manage interest rate risk. They also have access to significant credit lines, including an unsecured line of credit and a facility with Freddie Mac, and are exploring traditional debt financing. The company aims to maintain a strong balance sheet and access capital markets to fund its operations, acquisitions, and development activities, while remaining compliant with debt covenants.

While the overall economic environment presents challenges, Essex Property Trust has demonstrated resilience. For the three months ended June 30, 2009, total property revenues saw a slight increase due to new acquisitions and development lease-ups. However, same-property revenues experienced a slight decrease due to lower scheduled rents, particularly in Southern California. Despite this, financial occupancy rates for stabilized apartment communities remained strong, averaging 96.8% for the quarter, indicating continued demand for their apartment units.

As of June 30, 2009, Essex Property Trust's portfolio consisted of 133 apartment communities (27,143 units) located in Southern California, Northern California, and the Seattle metropolitan area, along with five office and commercial buildings. The company also has a development pipeline including three development projects, three predevelopment projects, and four land parcels held for future development, aggregating approximately 1,959 units. Additionally, nine communities were undergoing redevelopment.

Essex Property Trust believes its current cash reserves, marketable securities, operating cash flows, and available credit lines are sufficient to meet its anticipated cash needs for 2009, including dividend payments. The company expects same-property revenues to continue to face pressure in the near term due to expected decreases in scheduled rents. However, they are actively managing their portfolio and capital structure to navigate the current economic climate and maintain financial flexibility.