10-QPeriod: Q2 FY2017

ESSEX PROPERTY TRUST, INC. Quarterly Report for Q2 Ended Jun 30, 2017

Filed July 31, 2017For Securities:ESS

Summary

Essex Property Trust, Inc. (ESS) reported its financial results for the second quarter and first half of 2017. The company demonstrated continued revenue growth, driven by same-property revenue increases and contributions from new acquisitions. Operating income showed a healthy increase, reflecting effective cost management and strong rental rate growth in its core West Coast markets (Southern California, Northern California, and Seattle Metro). The company also made strategic moves, including the issuance of new senior unsecured notes to refinance existing debt, strengthening its balance sheet. While development costs and interest expenses are present, the overall financial health appears robust, supported by a solid occupancy rate and consistent rental income. Investors can look forward to continued operational performance and strategic financial management from Essex.

Financial Highlights

34 data points
Beta

Revenue

$339.06M

Net Income

$70.76M

20.9% Net Margin

EPS (Diluted)

$1.08

Total Assets

$12.52B

Cash & Equivalents

$183.88M

Free Cash Flow

$149.22M

Financial Statements
Beta
Revenue$339.06M
Operating Expenses$226.81M
Operating Income$112.25M
Interest Expense$56.81M
Net Income$70.76M
EPS (Basic)$1.08
EPS (Diluted)$1.08
Shares Outstanding (Basic)65.73M
Shares Outstanding (Diluted)65.82M

Key Highlights

  • 1Total property revenues increased by 5.4% to $336.8 million for the three months ended June 30, 2017, compared to the prior year period.
  • 2Same-property revenues saw a 3.9% increase, driven by a 3.6% rise in average rental rates.
  • 3Net income available to common stockholders was $70.8 million for Q2 2017, translating to $1.08 per diluted share, a slight decrease from $72.0 million or $1.10 per diluted share in Q2 2016.
  • 4The company issued $350 million of 10-year 3.625% senior unsecured notes in April 2017, using proceeds to repay existing debt.
  • 5As of June 30, 2017, Essex owned or had interests in 246 stabilized apartment communities, aggregating 59,860 apartment homes.
  • 6Financial occupancy for stabilized apartment communities remained strong at 96.4% for Q2 2017, up from 96.0% in the prior year.
  • 7The company's development pipeline includes 1,968 apartment homes, with total incurred costs of $0.7 billion and estimated remaining project costs of $0.6 billion.

Frequently Asked Questions

Revenue growth was primarily driven by an increase in same-property revenues, which rose by 3.9% due to a 3.6% increase in average rental rates across its stabilized apartment communities. Additionally, non-same property revenues saw a significant increase of 21.3%, largely attributed to the consolidation of the Palm Valley property acquired in January 2017.

Essex Property Trust strategically issued $350 million of 10-year senior unsecured notes in April 2017, carrying a 3.625% interest rate. The proceeds were used to repay existing indebtedness, optimizing its debt profile. The company maintained strong access to credit markets with two unsecured lines of credit totaling $1.03 billion, of which none were drawn as of June 30, 2017.

Essex Property Trust actively manages its interest rate risk. As of June 30, 2017, the company had entered into interest rate swaps covering $200.0 million of debt to effectively fix interest rates. Additionally, a portion of its variable rate debt was subject to interest rate caps. Total return swaps were also in place, converting a portion of fixed mortgage notes payable to a floating rate, with the company retaining the ability to call the underlying debt at par.

The company has a robust development pipeline of 1,968 apartment homes across consolidated and joint venture projects. It expects to fund these projects through a combination of working capital, lines of credit, debt and equity issuances, and asset dispositions. The company continues to monitor its core West Coast markets for acquisition and development opportunities that align with its strategy for rental growth.