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ESSEX PROPERTY TRUST, INC. 8-K Report, Material Agreement (Aug 24, 2020)

Filed August 24, 2020For Securities:ESS

Summary

Essex Property Trust, Inc. (ESS) announced through its operating partnership, Essex Portfolio, L.P., the issuance of $600 million in senior notes. This offering comprises $300 million of 1.650% senior notes due 2031 and $300 million of 2.650% senior notes due 2050. The net proceeds, approximately $591.3 million after expenses, are earmarked for repaying existing debt maturities and redeeming a significant portion of the company's 3.625% senior unsecured notes due August 2022. This strategic refinancing aims to lower interest expenses and extend the company's debt maturity profile. The issuance is secured by a guarantee from Essex Property Trust, Inc., and is governed by an indenture that includes customary restrictive covenants. These covenants limit the operating partnership's ability to engage in mergers, asset sales, and incur additional secured or unsecured indebtedness. The notes are senior unsecured obligations, ranking equally with other unsecured debt but are effectively subordinated to secured debt and subsidiary liabilities. Investors should note the redemption terms, which allow for early redemption at a premium prior to specified 'Par Call Dates'.

Key Highlights

  • 1Essex Portfolio, L.P. issued $600 million in aggregate principal amount of senior notes.
  • 2The notes consist of $300 million of 1.650% senior notes due 2031 and $300 million of 2.650% senior notes due 2050.
  • 3Net proceeds of approximately $591.3 million will be used for debt repayment and redemption of existing 3.625% senior unsecured notes due 2022.
  • 4The company's operating partnership secured the issuance with a full and unconditional guarantee from Essex Property Trust, Inc.
  • 5The indenture includes restrictive covenants limiting future debt incurrence and major corporate actions.
  • 6The notes are general unsecured senior obligations, effectively subordinated to secured debt.
  • 7Early redemption options exist, with a premium payable if redeemed before the 'Par Call Date'.

Frequently Asked Questions

The primary purpose is to refinance existing debt. The net proceeds will be used to repay upcoming debt maturities, including specific private placement notes and mortgage notes, and to redeem $300 million of the company's 3.625% senior unsecured notes due August 2022. This is expected to manage the company's debt maturity profile and potentially lower interest expenses.

The new issuance includes $300 million of 1.650% senior notes due January 15, 2031, and $300 million of 2.650% senior notes due September 1, 2050.

The new notes are general unsecured senior obligations of the Operating Partnership. They rank equally with other senior unsecured obligations of the Operating Partnership. However, they are effectively subordinated to any secured indebtedness of the Operating Partnership and to all existing and future secured and unsecured liabilities and preferred equity of the Operating Partnership's subsidiaries.

Yes, the indenture governing the notes contains restrictive covenants. These include limitations on the Operating Partnership's ability to complete a merger or sell substantially all of its assets, as well as restrictions on incurring additional secured and unsecured indebtedness.