10-QPeriod: Q3 FY2021

ESSEX PROPERTY TRUST, INC. Quarterly Report for Q3 Ended Sep 30, 2021

Filed October 27, 2021For Securities:ESS

Summary

Essex Property Trust, Inc. (ESS) reported its third-quarter results for the period ending September 30, 2021. The company experienced a decrease in total revenues for the nine months ended September 30, 2021, compared to the same period in 2020, primarily due to property dispositions. However, same-property revenues showed a slight increase in the third quarter. The company also reported a significant gain on the sale of real estate and land, particularly in the nine-month period, driven by strategic property sales. Net income available to common stockholders decreased year-over-year for both the three and nine-month periods. This decline is influenced by factors such as lower rental revenue from dispositions, higher property operating expenses, and a significant loss on early debt retirement. Despite these challenges, the company maintained strong financial liquidity, with substantial cash and marketable securities, and sufficient availability under its credit lines to meet its obligations. Management remains focused on navigating the ongoing impacts of the COVID-19 pandemic while executing its investment strategy.

Financial Highlights

33 data points
Beta

Revenue

$362.86M

Net Income

$118.39M

32.6% Net Margin

EPS (Diluted)

$1.82

Total Assets

$12.79B

Cash & Equivalents

$49.91M

Free Cash Flow

$271.81M

Financial Statements
Beta
Revenue$362.86M
Operating Expenses$267.78M
Operating Income$137.97M
Interest Expense$50.02M
Net Income$118.39M
EPS (Basic)$1.82
EPS (Diluted)$1.82
Shares Outstanding (Basic)65.05M
Shares Outstanding (Diluted)65.15M

Key Highlights

  • 1Total property revenues decreased by 5.7% to $1,062.3 million for the nine months ended September 30, 2021, compared to the prior year, largely due to property sales.
  • 2Same-property revenues saw a 2.7% increase to $325.2 million for the three months ended September 30, 2021, driven by improved occupancy and reduced concessions.
  • 3The company recognized $143.0 million in gains on the sale of real estate and land for the nine months ended September 30, 2021, primarily from property dispositions.
  • 4Net income available to common stockholders decreased to $118.4 million for the third quarter of 2021 from $73.7 million in the prior year. Year-to-date, net income decreased to $351.7 million from $497.7 million.
  • 5Interest expense decreased by 7.5% to $152.6 million for the nine months ended September 30, 2021, attributed to lower average outstanding debt and interest rates, though partially offset by new debt issuances.
  • 6As of September 30, 2021, the company had $49.9 million in unrestricted cash and cash equivalents and $183.1 million in marketable securities, indicating a strong liquidity position.
  • 7The company is actively managing the impacts of the COVID-19 pandemic, with delinquency rates improving from the prior year but still impacting operations, and has implemented measures to support residents and maintain operations.

Frequently Asked Questions

For the nine months ended September 30, 2021, total property revenues decreased by 5.7% to $1,062.3 million compared to the same period in 2020. This decrease was primarily driven by strategic property dispositions. However, for the three months ended September 30, 2021, same-property revenues increased by 2.7% to $325.2 million, reflecting improved financial occupancy and reduced concessions.

Essex Property Trust maintained a strong liquidity position as of September 30, 2021. The company reported $49.9 million in unrestricted cash and cash equivalents and $183.1 million in marketable securities. Additionally, the company had $1.24 billion in available lines of credit, with only a small portion drawn down, indicating sufficient resources to meet its obligations and fund ongoing operations and investments.

The COVID-19 pandemic has continued to impact the company, particularly concerning resident ability to pay rent, leading to increased delinquencies. While delinquency rates improved from 2.7% in Q3 2020 to 1.4% in Q3 2021 for same-property communities, it remains a factor. The company has implemented measures to support residents, such as payment plans and waiving late fees where applicable. Despite these challenges, the company has managed to maintain access to capital markets and service its debt obligations.

During the nine months ended September 30, 2021, Essex Property Trust engaged in several significant transactions. These included the acquisition of commercial properties for future apartment development (e.g., 7 South Linden, Third & Broad), the acquisition of joint venture partner interests (e.g., The Village at Toluca Lake), and the disposition of several apartment communities (e.g., Devonshire, Hidden Valley, Park 20, Axis 2300), which contributed to substantial gains on sale. The company also issued new senior unsecured notes totaling $750 million and repaid existing debt.