10-QPeriod: Q2 FY2022

ESSEX PROPERTY TRUST, INC. Quarterly Report for Q2 Ended Jun 30, 2022

Filed July 27, 2022For Securities:ESS

Summary

Essex Property Trust, Inc. (ESS) reported solid financial performance for the second quarter and first half of 2022, demonstrating resilience in its West Coast apartment portfolio. Total revenues increased by 13.9% year-over-year for the quarter, driven by a 12.7% increase in same-property revenues, attributed to a 7.2% rise in average rental rates and a decrease in cash concessions. Net income available to common stockholders for the quarter was $57.1 million, or $0.87 per diluted share, compared to $64.8 million, or $1.00 per diluted share, in the prior year period, reflecting higher operating expenses and a notable increase in unrealized losses on marketable securities. The company maintained a strong balance sheet with total assets of $12.56 billion and total liabilities of $6.52 billion as of June 30, 2022. Cash and cash equivalents stood at $37.8 million, with an additional $154.5 million in marketable securities. Despite the decrease in net income compared to the prior year, the company's operational performance, particularly in its key markets of Southern California, Northern California, and Seattle Metro, remains robust, with same-property NOI increasing by 16.7% for the quarter. The company continues to manage its capital effectively, including share repurchases and managing its debt facilities, indicating confidence in its future outlook.

Financial Highlights

33 data points
Beta

Revenue

$399.98M

Net Income

$57.05M

14.3% Net Margin

EPS (Diluted)

$0.87

Total Assets

$12.56B

Cash & Equivalents

$37.76M

Free Cash Flow

$194.40M

Financial Statements
Beta
Revenue$399.98M
Operating Expenses$271.35M
Operating Income$128.63M
Interest Expense$50.48M
Net Income$57.05M
EPS (Basic)$0.87
EPS (Diluted)$0.87
Shares Outstanding (Basic)65.26M
Shares Outstanding (Diluted)65.29M

Key Highlights

  • 1Total revenues increased by 13.9% to $399.98 million for Q2 2022 compared to Q2 2021.
  • 2Same-property revenues grew by 12.7% year-over-year in Q2 2022, driven by a 7.2% increase in average rental rates.
  • 3Net income available to common stockholders decreased to $57.1 million in Q2 2022 from $64.8 million in Q2 2021.
  • 4Diluted EPS was $0.87 for Q2 2022, down from $1.00 in Q2 2021.
  • 5Same-property Net Operating Income (NOI) increased by 16.7% to $267.7 million in Q2 2022.
  • 6The company repurchased 218,960 shares of common stock for $60.8 million during the six months ended June 30, 2022.
  • 7Unrestricted cash and cash equivalents stood at $37.8 million, with $154.5 million in marketable securities as of June 30, 2022.

Frequently Asked Questions

Revenue growth was primarily driven by an increase in same-property revenues, which rose by 12.7%. This was largely due to a 7.2% increase in average rental rates and a reduction in cash concessions offered to tenants compared to the prior year.

The decrease in net income was influenced by several factors, including increased operating expenses such as property operating expenses (excluding real estate taxes), corporate-level property management expenses, and depreciation and amortization. Additionally, a significant increase in unrealized losses on marketable securities and a decrease in equity income from co-investments also contributed to the lower net income.

Essex Property Trust maintains a solid liquidity position with $37.8 million in unrestricted cash and $154.5 million in marketable securities as of June 30, 2022. The company has two unsecured lines of credit totaling $1.24 billion, with $45.0 million outstanding on its main credit facility. Management believes its current cash flows, cash reserves, marketable securities, and available credit lines are sufficient to meet its anticipated cash needs for the next twelve months.

Essex continues to monitor markets for rental growth opportunities. As of June 30, 2022, the company had a development pipeline consisting of one unconsolidated joint venture project and various predevelopment projects totaling 264 apartment homes. The company plans to fund these projects using a combination of working capital, credit lines, construction loans, equity and debt issuances, and asset dispositions.