SAN MATEO, CA --(Marketwired - July 28, 2016) - Essex Property Trust, Inc. (
Net Income and Funds from Operations ("FFO") per diluted share for the quarter ended June 30, 2016 are detailed below. Core FFO excludes acquisition and investment related costs and certain non-routine items.
| Three Months Ended June 30, | % | Six Months Ended June 30, | % | ||||||||||
| 2016 | 2015 | Change | 2016 | 2015 | Change | ||||||||
| Per Diluted Share | |||||||||||||
| Net Income | $1.10 | $0.70 | 57.1% | $2.29 | $1.62 | 41.4% | |||||||
| Total FFO | $2.81 | $2.38 | 18.1% | $5.45 | $4.66 | 17.0% | |||||||
| Core FFO | $2.74 | $2.40 | 14.2% | $5.42 | $4.69 | 15.6% | |||||||
Second Quarter Highlights:
- Net Income per diluted share for the second quarter of 2016 was $1.10 compared to $0.70 in the second quarter of 2015. The increase is primarily due to gains on property sales and lower depreciation and amortization expense in the second quarter of 2016.
- Grew Core FFO per diluted share by 14.2% compared to Q2 2015, which exceeded the high-end of the Company's guidance range.
- Achieved same-property gross revenues and net operating income ("NOI") growth of 6.9% and 8.2%, respectively, compared to Q2 2015.
- Realized a sequential quarterly increase in same-property revenue growth of 1.8%.
- Provided Core FFO guidance range for the third quarter of 2016 of $2.73 to $2.79 per diluted share.
- Increased the full-year Core FFO guidance range to $10.90 to $11.06 per diluted share, increasing the midpoint by $0.06 per share.
- Tightened the range of same-property revenue growth to 6.8% at the midpoint, a 20 basis point reduction from prior guidance. Reaffirmed prior expense growth guidance at the midpoint.
"We are pleased to report Core FFO per diluted share growth of 14.2% in the quarter, which exceeded the high-end of our guidance range, and we are increasing our 2016 Core FFO guidance by $0.06 per share at the midpoint. We succeeded in driving bottom line results through strong performance in our Seattle, Los Angeles and San Diego portfolios, offsetting lower-than-expected revenue growth concentrated mostly in the San Jose and San Francisco metro areas, mostly due to heightened levels of apartment deliveries in 2016. Looking forward, we expect superior job growth, particularly in regions driven by innovation and technology, and lower apartment deliveries in most of our markets will allow Essex to continue producing sector-leading bottom line results," commented Michael Schall, President and CEO of the Company.
Same-Property Operations
Same-property operating results exclude any properties that are not comparable for the periods presented. The table below illustrates the percentage change in same-property gross revenues for the quarter ended June 30, 2016 compared to the quarter ended June 30, 2015, and the sequential percentage change for the quarter ended June 30, 2016 versus the quarter ended March 31, 2016 by submarket for the Company:
| Q2 2016 vs. Q2 2015 | Q2 2016 vs. Q1 2016 | % of Total | ||||||
| Gross Revenues | Gross Revenues | Q2 2016 Revenues | ||||||
| Southern California | ||||||||
| Los Angeles County | 6.3% | 0.9% | 17.5% | |||||
| Orange County | 5.1% | 1.5% | 12.3% | |||||
| San Diego County | 7.4% | 2.1% | 9.3% | |||||
| Ventura County | 5.8% | 1.3% | 5.1% | |||||
| Other Southern California | 6.9% | -0.2% | 1.0% | |||||
| Total Southern California | 6.1% | 1.3% | 45.2% | |||||
| Northern California | ||||||||
| Santa Clara County | 7.5% | 1.9% | 16.5% | |||||
| Alameda County | 8.6% | 2.3% | 7.4% | |||||
| San Mateo County | 7.1% | 1.4% | 4.4% | |||||
| Contra Costa County | 7.8% | 2.0% | 5.4% | |||||
| San Francisco MSA | 4.0% | 1.4% | 2.0% | |||||
| Other Northern California | 12.7% | 1.4% | 0.3% | |||||
| Total Northern California | 7.6% | 1.9% | 36.0% | |||||
| Seattle Metro | 7.5% | 2.9% | 18.8% | |||||
| Same-Property Portfolio | 6.9% | 1.8% | 100% | |||||
| Year-Over-Year Growth | ||||||
| Q2 2016 compared to Q2 2015 | ||||||
| Gross Revenues | Operating Expenses | NOI | ||||
| Southern California | 6.1% | 2.7% | 7.8% | |||
| Northern California | 7.6% | 2.9% | 9.4% | |||
| Seattle Metro | 7.5% | 9.0% | 6.8% | |||
| Same-Property Portfolio | 6.9% | 4.0% | 8.2% | |||
| Sequential Growth | ||||||
| Q2 2016 compared to Q1 2016 | ||||||
| Gross Revenues | Operating Expenses | NOI | ||||
| Southern California | 1.3% | 0.9% | 1.6% | |||
| Northern California | 1.9% | -1.1% | 3.0% | |||
| Seattle Metro | 2.9% | 7.4% | 0.8% | |||
| Same-Property Portfolio | 1.8% | 1.5% | 2.0% | |||
| Financial Occupancies | ||||||
| Quarter Ended | ||||||
| 6/30/2016 | 3/31/2016 | 6/30/2015 | ||||
| Southern California | 96.0% | 96.0% | 95.8% | |||
| Northern California | 96.2% | 96.1% | 96.3% | |||
| Seattle Metro | 95.9% | 95.8% | 96.1% | |||
| Same-Property Portfolio | 96.0% | 96.0% | 96.0% | |||
Dispositions
In April, the Company sold Canyon Creek, owned by BEXAEW, LLC. The Company has a 50% ownership interest in the BEXAEW, LLC joint venture. The apartment community is located in Northridge, CA and has 200 apartment homes. Total proceeds from the sale were $53.5 million, of which $26.3 million were used to repay the loan on the community. The Company's share of the gain on sale was $5.6 million, which was excluded from the calculation of FFO.
Other Investments
In May, the Company originated a $23.7 million preferred equity investment in a multifamily development project located in Seattle, WA. The investment has a preferred return of 10% and matures in 2020.
Development Activity
The table below represents the development communities in lease-up during the second quarter and the current leasing status as of July 25, 2016.
| Project Name | Location | Total Apartment Homes | ESS Ownership | % Leased as of 7/25/16 | Status | |||||
| Agora | Walnut Creek, CA | 49 | 51% | 67% | In Lease-Up | |||||
| The Galloway (at Owens) | Pleasanton, CA | 255 | 55% | 38% | In Lease-Up | |||||
| Total/Average % Leased | 304 | 43% | ||||||||
Liquidity and Balance Sheet
Common Stock
The Company did not issue any shares of common stock through its equity distribution program in the second quarter of 2016 or subsequent to quarter-end. Year-to-date the Company has not issued any common stock through its equity distribution program.
Balance Sheet
In April, the Company redeemed all of the issued and outstanding 2,950,000 shares of the Company's 7.125% Series H Cumulative Redeemable Preferred Stock. The redemption resulted in a $2.5 million non-cash charge to Total FFO during the first quarter, which is excluded from Core FFO. For additional details on the redemption, please see the press release dated March 10, 2016.
In April, the Company issued $450 million of 10-year senior unsecured notes at an interest rate per annum of 3.375%. Please see the press release dated April 4, 2016 for additional details about the transaction.
As of July 25, 2016, the Company had $1.025 billion in undrawn capacity on its unsecured credit facilities.
Quarterly Guidance
For the second quarter, the Company exceeded the midpoint of the guidance range provided in its first quarter 2016 earnings release by $0.08 per share. The following table provides a reconciliation of second quarter Core FFO per share to the midpoint of the guidance provided in the first quarter 2016 earnings release distributed in April 2016.
| Per Diluted Share | ||||
| Projected midpoint of Core FFO per share for Q2 2016 | $ | 2.66 | ||
| NOI from consolidated communities | 0.04 | |||
| FFO from Co-Investments | 0.01 | |||
| G&A and other income | 0.03 | |||
| Core FFO per share for Q2 2016 reported | $ | 2.74 | ||
The table below provides key changes to the 2016 full-year same-property growth assumptions and Core FFO per diluted share. For additional details regarding our 2016 assumptions, please see page S-14 of the Supplemental Financial Information. For the third quarter of 2016, the Company has established a range for Core FFO per diluted share of $2.73 to $2.79.
| 2016 Full-Year Guidance | |||||||||
| Previous Range | Previous Midpoint | Revised Range | Revised Midpoint | ||||||
| Same-Property Growth | |||||||||
| Gross Revenues | 6.50% to 7.50% | 7.0% | 6.6% to 7.0% | 6.8% | |||||
| Operating Expenses | 3.25% to 4.25% | 3.8% | 3.5% to 4.0% | 3.8% | |||||
| NOI | 7.50% to 9.50% | 8.5% | 7.7% to 8.5% | 8.1% | |||||
| Core FFO per diluted share | $10.72 to $11.12 | $10.92 | $10.90 to $11.06 | $10.98 | |||||
Conference Call with Management
The Company will host an earnings conference call with management to discuss its quarterly results on Friday, July 29, 2016 at 11 a.m. PT (2 p.m. ET), which will be broadcast live via the Internet at www.essex.com , and accessible via phone by dialing toll-free, (877) 407-0784, or toll/international, (201) 689-8560. No passcode is necessary.
A rebroadcast of the live call will be available online for 90 days and digitally for 7 days. To access the replay online, go to www.essex.com and select the second quarter earnings link. To access the replay digitally, dial (877) 870-5176 using the replay pin number 13639947. If you are unable to access the information via the Company's website, please contact the Investor Relations Department at investors@essex.com or by calling (650) 655-7800.
Corporate Profile
Essex Property Trust, Inc., an S&P 500 company, is a fully integrated real estate investment trust (REIT) that acquires, develops, redevelops, and manages multifamily residential properties in selected West Coast markets. Essex currently has ownership interests in 243 apartment communities with an additional 7 properties in various stages of active development. Additional information about Essex can be found on the Company's website at www.essex.com .
This press release and accompanying supplemental financial information will be filed electronically on Form 8-K with the Securities and Exchange Commission and can be accessed from the Company's website at www.essex.com . If you are unable to obtain the information via the Web, please contact the Investor Relations Department at (650) 655-7800.
Funds from Operations ("FFO") Reconciliation
FFO, as defined by the National Association of Real Estate Investment Trusts ("NAREIT"), is generally considered by industry analysts as an appropriate measure of performance of an equity REIT. Generally, FFO adjusts the net income of equity REITs for non-cash charges such as depreciation and amortization of rental properties, impairment charges, gains/losses on sales of real estate and extraordinary items. Management considers FFO and FFO which excludes merger, integration and acquisition costs and items that are not routine or not related to the Company's core business activities, which is referred to as "Core FFO", to be useful financial performance measurements of an equity REIT because, together with net income and cash flows, FFO and Core FFO provide investors with an additional basis to evaluate the operating performance and ability of a REIT to incur and service debt and to fund acquisitions and other capital expenditures and the ability to pay dividends.
FFO and Core FFO do not represent net income or cash flows from operations as defined by U.S. generally accepted accounting principles ("GAAP") and are not intended to indicate whether cash flows will be sufficient to fund cash needs. These measures should not be considered as an alternative to net income as an indicator of the REIT's operating performance or to cash flows as a measure of liquidity. FFO and Core FFO do not measure whether cash flow is sufficient to fund all cash needs including principal amortization, capital improvements and distributions to shareholders. FFO and Core FFO also do not represent cash flows generated from operating, investing or financing activities as defined under GAAP. Management has consistently applied the NAREIT definition of FFO to all periods presented. However, there is judgment involved and other REITs' calculation of FFO may vary from the NAREIT definition for this measure, and thus their disclosures of FFO may not be comparable to the Company's calculation.
The following table sets forth the Company's calculation of diluted FFO and Core FFO for the three and six months ended June 30, 2016 and 2015:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
| Funds from Operations attributable to common stockholders and unitholders (In thousands) | 2016 | 2015 | 2016 | 2015 | ||||||||||||||
| Net income available to common stockholders | $ | 72,013 | $ | 45,555 | $ | 149,994 | $ | 104,918 | ||||||||||
| Adjustments: | ||||||||||||||||||
| Depreciation and amortization | 109,673 | 113,731 | 219,380 | 220,638 | ||||||||||||||
| Gains not included in FFO | (5,611 | ) | (12,652 | ) | (33,304 | ) | (41,126 | ) | ||||||||||
| Deferred tax expense on gain on sale of real estate and land -- Taxable REIT Subsidiary activity | - | - | 4,279 | - | ||||||||||||||
| Depreciation add back from unconsolidated co-investments | 12,457 | 12,105 | 24,480 | 24,022 | ||||||||||||||
| Noncontrolling interest related to Operating Partnership units | 2,450 | 1,581 | 5,234 | 3,644 | ||||||||||||||
| Depreciation attributable to third party ownership and other | (4 | ) | (251 | ) | 2 | (500 | ) | |||||||||||
| Funds from Operations attributable to common stockholders and unitholders | $ | 190,978 | $ | 160,069 | $ | 370,065 | $ | 311,596 | ||||||||||
| Merger and integration expenses | - | 1,410 | - | 3,798 | ||||||||||||||
| Acquisition and investment related costs | 267 | 429 | 1,095 | 976 | ||||||||||||||
| Gain on sale of marketable securities | (1,103 | ) | - | (1,843 | ) | - | ||||||||||||
| Income from early redemption of preferred equity investments | - | - | - | (469 | ) | |||||||||||||
| Excess of redemption value of preferred stock over the carrying value | - | - | 2,541 | - | ||||||||||||||
| Insurance reimbursements, legal settlement, and other, net | (4,010 | ) | (582 | ) | (4,010 | ) | (1,957 | ) | ||||||||||
| Core Funds from Operations attributable to common stockholders and unitholders | $ | 186,132 | $ | 161,326 | $ | 367,848 | $ | 313,944 | ||||||||||
Safe Harbor Statement Under The Private Litigation Reform Act of 1995:
This press release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include statements in the "Second Quarter Highlights" and "Guidance" sections regarding Core FFO per diluted share for the third quarter 2016 and full-year 2016 and 2016 guidance for same-property revenues, operating expenses, and NOI; statements in the "Second Quarter Highlights" section regarding apartment deliveries and the Company producing sector leading results; and statements and estimates set forth under the captions "Development Pipeline -- June 30, 2016" and "Redevelopment Pipeline -- June 30, 2016" on pages S-11 and S-12 of the Company's Supplemental Financial Information Package, which accompanies this press release, regarding estimated costs of property development and redevelopment and regarding the anticipated timing of redevelopments and of the construction start, initial occupancy and stabilization of property development and the various financial projections and assumptions, including those regarding 2016 NOI, FFO and Core FFO, set forth in the columns "2016 Guidance Range" on page S-14 of the Company's Supplemental Financial Information Package and in the guidance range columns on page S-17.3 of that Package for the third quarter 2016 and full-year 2016, and the forecasts, set forth on page S-16 of the Company's Supplemental Financial Information Package, of residential supply, jobs, and rent growth in various areas. The Company's actual results may differ materially from those projected in such forward-looking statements. Factors that might cause such a difference include, but are not limited to, changes in market demand for rental units and the impact of competition and competitive pricing, unforeseen consequences from cyber-intrusion, changes in economic conditions, unexpected delays in the development and stabilization of development projects, unexpected difficulties in leasing of development projects, total costs of development investments exceeding the Company's projections and other risks detailed in the Company's filings with the Securities and Exchange Commission (SEC). All forward-looking statements are made as of today, and the Company assumes no obligation to update this information. For more details relating to risks and uncertainties that could cause actual results to differ materially from those anticipated in our forward-looking statements, and risks to our business in general, please refer to our SEC filings, including the Company's Report on Form 10-K for the year ended December 31, 2015.
Definitions and Reconciliations
Non-GAAP financial measures and other capitalized terms, as used in this earnings release, are defined and further explained on pages S-17.1 through S-17.4, "Reconciliations of Non-GAAP Financial Measures and Other Terms", of the accompanying supplemental financial information. The supplemental financial information is available on the Company's website at www.essex.com .
Contact Information Barb Pak Vice President of Finance & Investor Relations (650) 655-7800 bpak@essex.com
