10-QPeriod: Q1 FY2014

ESSEX PROPERTY TRUST, INC. Quarterly Report for Q1 Ended Mar 31, 2014

Filed May 12, 2014For Securities:ESS

Summary

Essex Property Trust, Inc. (ESS) reported its first-quarter 2014 financial results, marked by solid revenue growth driven by its Same-Property portfolio and significant strategic activity, including the highly anticipated merger with BRE Properties, Inc. which closed on April 1, 2014. While net income available to common stockholders decreased year-over-year, this was largely influenced by substantial merger-related expenses incurred during the quarter. The company's core operations demonstrated strength, with Same-Property Net Operating Income (NOI) increasing by 8.3% year-over-year, primarily attributed to higher rental rates across its key West Coast markets. Operationally, the company maintained strong financial occupancy rates at 96.5% across its stabilized apartment communities. The integration of the BRE merger, which significantly expanded the company's portfolio and geographic reach, is expected to be a key driver of future growth and value creation. Investors should note the company's proactive approach to capital management, including equity issuances and debt management, to support its growth strategy and dividend payments. The financial statements reflect preliminary purchase accounting for the BRE merger, with full integration expected from the second quarter of 2014 onwards.

Financial Highlights

31 data points
Beta

Revenue

$161.01M

Net Income

$23.28M

14.5% Net Margin

EPS (Diluted)

$0.58

Total Assets

$6.63B

Cash & Equivalents

$19.92M

Free Cash Flow

$82.94M

Financial Statements
Beta
Revenue$161.01M
Operating Expenses$126.45M
Operating Income$34.56M
Interest Expense$29.04M
Net Income$23.28M
EPS (Basic)$0.58
EPS (Diluted)$0.58
Shares Outstanding (Basic)37.69M
Shares Outstanding (Diluted)37.93M

Key Highlights

  • 1Total property revenues increased by 9.6% to $159.0 million for the first quarter of 2014, driven by Same-Property revenue growth of 7.2%.
  • 2Same-Property Net Operating Income (NOI) increased by 8.3% to $101.1 million, reflecting strong rental rate growth across Southern California, Northern California, and Seattle Metro.
  • 3The company incurred $16.1 million in merger expenses related to the acquisition of BRE Properties, Inc., which significantly impacted reported net income.
  • 4Financial occupancy remained strong at 96.5% for stabilized apartment communities, indicating consistent demand for rental properties.
  • 5The company completed an equity distribution program, issuing shares for approximately $157.6 million in proceeds during the first quarter of 2014.
  • 6Subsequent to the quarter, in April 2014, Essex issued $400 million in senior unsecured notes and closed its merger with BRE Properties, Inc.
  • 7The company's development pipeline consists of 13 projects (two consolidated, eight unconsolidated joint ventures, and three other consolidated) aggregating 2,392 units.

Frequently Asked Questions

The merger with BRE Properties, Inc. closed on April 1, 2014, immediately following the first quarter. Therefore, the financial statements for the period ended March 31, 2014, do not include BRE's results. However, the company incurred $16.1 million in merger expenses during Q1 2014. The full financial impact, including the consolidated assets and liabilities of BRE, will be reflected starting in the second quarter of 2014, with preliminary purchase accounting adjustments noted in the filing.

Same-Property revenues increased by 7.2% to $146.4 million, driven by a 6.8% increase in average rental rates, leading to Same-Property NOI growth of 8.3% to $101.1 million. This performance highlights the strong demand and pricing power in Essex's core West Coast markets.

As of March 31, 2014, Essex had $19.9 million in unrestricted cash and cash equivalents and $100.3 million in marketable securities. The company also had $124.0 million outstanding on its $1.0 billion unsecured line of credit, with availability under existing credit facilities and access to capital markets expected to be sufficient to meet anticipated cash needs for the next twelve months.

Total property revenues increased by 9.6% to $159.0 million. This growth was primarily driven by the Same-Property portfolio, which saw revenues rise by 7.2% to $146.4 million due to higher average rental rates and a stable financial occupancy of 96.5%.