10-QPeriod: Q3 FY2020

ESSEX PROPERTY TRUST, INC. Quarterly Report for Q3 Ended Sep 30, 2020

Filed October 30, 2020For Securities:ESS

Summary

Essex Property Trust, Inc. (ESS) reported its third-quarter 2020 financial results, showcasing resilience amidst the ongoing COVID-19 pandemic. While revenues saw a slight increase year-over-year, net income available to common stockholders experienced a decline, largely influenced by a significant loss on early debt retirement and other factors. The company demonstrated strong operational execution with consistent occupancy rates in its same-property portfolio, underscoring the stable demand for its West Coast apartment communities. The company actively managed its capital structure throughout the period, issuing new senior unsecured notes and repaying existing debt, while also continuing its share repurchase program. Despite the challenging economic environment, Essex maintained a solid liquidity position, supported by substantial cash and cash equivalents and available credit lines. Management's proactive measures to support residents and ensure operational continuity highlight the company's commitment to navigating the pandemic's complexities.

Financial Highlights

33 data points
Beta

Revenue

$370.81M

Net Income

$73.66M

19.9% Net Margin

EPS (Diluted)

$1.13

Total Assets

$13.40B

Cash & Equivalents

$558.45M

Free Cash Flow

$227.33M

Financial Statements
Beta
Revenue$370.81M
Operating Expenses$264.53M
Operating Income$128.94M
Interest Expense$55.43M
Net Income$73.66M
EPS (Basic)$1.13
EPS (Diluted)$1.13
Shares Outstanding (Basic)65.23M
Shares Outstanding (Diluted)65.24M

Key Highlights

  • 1Total revenues for the nine months ended September 30, 2020, increased to $1.13 billion from $1.08 billion in the same period of 2019.
  • 2Net income available to common stockholders for the nine months ended September 30, 2020, decreased to $473.1 million from $310.5 million in the prior year period, impacted by significant debt retirement losses.
  • 3Same-property revenues decreased by 2.5% year-over-year for the nine months ended September 30, 2020, primarily due to increased delinquencies and a slight decrease in financial occupancy.
  • 4The company reported a significant loss on early debt retirement of $23.8 million for the nine months ended September 30, 2020, related to the repayment of senior unsecured notes.
  • 5Essex completed a significant acquisition in January 2020, purchasing CPPIB's interest in six communities for $1.0 billion, resulting in a $234.7 million gain on remeasurement of co-investment.
  • 6Unrestricted cash and cash equivalents stood at $558.4 million as of September 30, 2020, providing a strong liquidity position.
  • 7The company's occupancy remained strong, with average financial occupancy for the same-property portfolio at 95.9% for the nine months ended September 30, 2020.

Frequently Asked Questions

The COVID-19 pandemic led to increased delinquencies as a percentage of scheduled rent, rising from 0.4% in Q3 2019 to 2.7% in Q3 2020 for the same-property portfolio. The company implemented measures to support residents, including payment plans and waiving late fees, which partially mitigated the impact. While overall revenues saw a slight increase, net income was affected by factors including a substantial loss on early debt retirement.

Key transactions included the acquisition of CPPIB's 45.0% interest in six apartment communities for $1.0 billion in January 2020, which resulted in a $234.7 million gain on remeasurement of a co-investment. The company also completed portfolio sales, issued new senior unsecured notes totaling $600 million in August 2020, and retired $300 million of existing notes, incurring a prepayment penalty.

Essex maintained a strong liquidity position, with $558.4 million in unrestricted cash and cash equivalents and $135.0 million in marketable securities. Additionally, the company had $1.24 billion available under its two unsecured lines of credit, with no amounts outstanding on its primary credit facility at the end of the quarter. Management believes these resources are sufficient to meet anticipated cash needs for the next twelve months.

Essex actively managed its debt by issuing new senior unsecured notes totaling $1.15 billion (including additional notes) throughout the nine months ended September 30, 2020, and by repaying $300 million of existing senior unsecured notes, albeit incurring a $19.1 million loss on early retirement. The company also obtained a $200 million unsecured term loan to repay maturing debt. This proactive approach aims to optimize the company's debt maturity profile and interest rate exposure.