10-QPeriod: Q2 FY2010

ESSEX PROPERTY TRUST, INC. Quarterly Report for Q2 Ended Jun 30, 2010

Filed August 6, 2010For Securities:ESS

Summary

Essex Property Trust, Inc. (ESS) reported its second-quarter 2010 financial results, indicating a continued impact from the economic slowdown, particularly on rental rates. While revenue from rental properties saw a slight decrease year-over-year for both the quarter and the first six months, the company is strategically managing its portfolio with new acquisitions and development activities. The balance sheet shows growth in real estate assets, offset by an increase in liabilities, primarily mortgage notes payable and lines of credit. Despite pressure on rental income, Essex is focused on operational efficiency and strategic growth. The company completed several property acquisitions in key West Coast markets and advanced its development pipeline. Management expressed confidence in the company's liquidity and ability to meet financial obligations and dividend payments, supported by existing cash, marketable securities, and credit facilities. The report highlights the ongoing challenges in the rental market, specifically declining scheduled rents, but also points to an increase in financial occupancy, suggesting a resilient demand for its properties.

Financial Highlights

31 data points
Beta

Revenue

$100.19M

Net Income

$10.03M

10.0% Net Margin

EPS (Diluted)

$0.32

Total Assets

$3.32B

Cash & Equivalents

$8.37M

Free Cash Flow

$36.44M

Financial Statements
Beta
Revenue$100.19M
Operating Expenses$72.19M
Operating Income$27.99M
Interest Expense$20.16M
Net Income$10.03M
EPS (Basic)$0.32
EPS (Diluted)$0.32
Shares Outstanding (Basic)29.33M
Shares Outstanding (Diluted)29.40M

Key Highlights

  • 1Total assets increased to $3.32 billion as of June 30, 2010, up from $3.25 billion at the end of 2009, driven by real estate investments.
  • 2Total liabilities also rose to $2.09 billion from $1.98 billion, largely due to increases in mortgage notes payable and lines of credit.
  • 3Rental and other property revenue for the six months ended June 30, 2010, decreased to $199.3 million from $206.4 million in the prior year period, reflecting a decline in scheduled rents.
  • 4Net income available to common stockholders for the six months ended June 30, 2010, was $22.6 million, a significant decrease from $53.7 million in the same period of 2009, impacted by lower revenues and gains from debt retirement in the prior year.
  • 5The company completed several strategic acquisitions in late June and July 2010, including Eagle Rim (WA), 101 San Fernando (CA), and The Commons (CA), totaling over 700 units.
  • 6Development pipeline remains active with four consolidated and one unconsolidated joint venture development projects, aggregating 1,214 units.
  • 7Financial occupancy for stabilized apartment communities increased to 97.2% for the quarter ended June 30, 2010, up from 96.8% in the prior year, indicating stable demand despite rent pressures.

Frequently Asked Questions

Essex Property Trust's financial position remains solid, though it faces headwinds in rental income due to economic conditions. Total assets have grown, indicating continued investment in real estate. While liabilities have also increased, largely due to debt financing for acquisitions and development, the company maintains sufficient liquidity through cash, marketable securities, and credit facilities to meet its obligations and fund ongoing operations and development.

The economic slowdown has led to a decrease in scheduled rents across Essex's markets, impacting overall rental revenue. For the first six months of 2010, rental revenue decreased compared to the same period in 2009. However, the company has seen an increase in financial occupancy rates, suggesting that while tenants are paying lower rents, demand for apartments remains strong. The company anticipates a slight decrease in same-property revenues in the third quarter of 2010 compared to the prior year, but expects revenues to be slightly higher than the second quarter of 2010 due to an anticipated increase in scheduled rents.

Essex is pursuing growth through strategic acquisitions in its core West Coast markets and by advancing its development pipeline. The company recently acquired several apartment communities and continues to invest in new development and redevelopment projects. These activities are funded through a combination of working capital, credit facilities, and potential equity/debt issuances, demonstrating a commitment to expanding its portfolio and enhancing future returns.

Essex actively manages its debt through a combination of fixed and variable rate loans, utilizing credit facilities and engaging in hedging activities. As of June 30, 2010, the company had significant mortgage notes payable and lines of credit. It employs interest rate swaps and caps to mitigate interest rate risk on its debt. Despite increased borrowing, the company remained in compliance with its debt covenants and has access to both unsecured and secured credit lines.