10-QPeriod: Q1 FY2021

ESSEX PROPERTY TRUST, INC. Quarterly Report for Q1 Ended Mar 31, 2021

Filed April 28, 2021For Securities:ESS

Summary

Essex Property Trust, Inc. (ESS) reported its first-quarter 2021 financial results, showing a decrease in total revenues to $355.1 million from $392.4 million in the prior year period. This decline was primarily driven by a $36.9 million decrease in property revenues, largely due to an increase in rent concessions and a decrease in average rental rates, exacerbated by the ongoing impact of the COVID-19 pandemic. The company recognized significant gains on the sale of real estate totaling $100.1 million from the disposal of three apartment communities. Despite the revenue dip, the company demonstrated resilience with its operating segment performance, with Southern California, Northern California, and Seattle Metro regions showing steady financial occupancy rates above 96%. The company also successfully managed its liquidity, ending the quarter with $103.4 million in unrestricted cash and cash equivalents and access to a $1.24 billion line of credit. Strategic debt management was evident with the issuance of $450 million in senior unsecured notes and the repayment of existing debt maturities. Investors should note the continued impact of COVID-19 on rental income and concessions, alongside the company's strategic asset sales and focus on core West Coast markets.

Financial Highlights

33 data points
Beta

Revenue

$355.13M

Net Income

$168.44M

47.4% Net Margin

EPS (Diluted)

$2.59

Total Assets

$12.79B

Cash & Equivalents

$103.44M

Free Cash Flow

$195.27M

Financial Statements
Beta
Revenue$355.13M
Operating Expenses$257.84M
Operating Income$197.38M
Interest Expense$51.65M
Net Income$168.44M
EPS (Basic)$2.59
EPS (Diluted)$2.59
Shares Outstanding (Basic)64.99M
Shares Outstanding (Diluted)65.11M

Key Highlights

  • 1Total revenues decreased by 9.5% to $355.1 million for Q1 2021 compared to $392.4 million for Q1 2020, primarily due to lower rental income.
  • 2Recognized $100.1 million in gains from the sale of three apartment communities (Hidden Valley, Axis 2300, and Park 20) in February 2021.
  • 3Same-Property Revenues decreased by 8.1% to $317.8 million, driven by increased rent concessions and a 3.3% decrease in average rental rates, along with a rise in delinquencies from 0.4% to 2.1%.
  • 4Maintained strong financial occupancy rates above 96% across its key geographic segments (Southern California, Northern California, and Seattle Metro).
  • 5Strengthened liquidity with $103.4 million in unrestricted cash and cash equivalents and $165.3 million in marketable securities as of March 31, 2021.
  • 6Issued $450 million of senior unsecured notes due March 1, 2028, with a coupon rate of 1.700%, to repay upcoming debt maturities and for general corporate purposes.
  • 7Repurchased 40,000 shares of common stock for $9.2 million during the quarter, with $214.5 million of purchase authority remaining under its stock repurchase plan.

Frequently Asked Questions

The primary driver for the decrease in total revenues to $355.1 million from $392.4 million in the prior year period was a $36.9 million decrease in property revenues. This was largely attributed to an increase in rent concessions and a 3.3% decrease in average rental rates, influenced by the ongoing impact of the COVID-19 pandemic.

Essex Property Trust managed its debt by issuing $450 million of senior unsecured notes due in 2028 with a 1.700% coupon rate. The proceeds were used to repay upcoming debt maturities and for general corporate purposes. Additionally, the company has access to a $1.24 billion line of credit, with no amounts outstanding as of March 31, 2021.

The company acknowledged the continued impact of COVID-19, particularly on rental income and delinquencies, which increased to 2.1% of scheduled rental income in Q1 2021 from 0.4% in Q1 2020. However, the company stated that the increase in delinquencies has not materially impacted its liquidity position. They continue to offer payment plans and support to residents affected by the pandemic.

Yes, in February 2021, the company sold three apartment communities: Hidden Valley for $105.0 million (recognizing a $69.2 million gain), Park 20 for $113.0 million (immaterial gain), and Axis 2300 for $57.5 million (recognizing a $30.8 million gain). These sales contributed significantly to the $100.1 million gain on sale of real estate recognized in the quarter.