Essex Property Trust, Inc. (NYSE: ESS) (the “Company”) announced
today its third quarter 2024 earnings results and related business
activities.
Net Income, Funds from Operations (“FFO”), and Core FFO per
diluted share for the quarter ended September 30, 2024 are detailed
below.
Three Months Ended
September 30,
Nine Months Ended September
30,
%
%
2024
2023
Change
2024
2023
Change
Per Diluted
Share
Net Income
$1.84
$1.36
35.3%
$7.54
$5.30
42.3%
Total FFO
$3.81
$3.69
3.3%
$12.30
$11.37
8.2%
Core FFO
$3.91
$3.78
3.4%
$11.68
$11.21
4.2%
Third Quarter 2024
Highlights:
- Reported Net Income per diluted share for the third quarter of
2024 of $1.84, compared to $1.36 in the third quarter of 2023. The
increase is largely attributable to gains on remeasurements of
co-investments recognized in the third quarter of 2024.
- Grew Core FFO per diluted share by 3.4% compared to the third
quarter of 2023, exceeding the midpoint of the Company’s guidance
range by $0.04. The outperformance was primarily driven by
favorable same-property revenue growth.
- Achieved same-property revenue and net operating income (“NOI”)
growth of 3.5% and 2.6%, respectively, compared to the third
quarter of 2023. On a sequential basis, same-property revenues
improved 1.2%.
- Issued $200.0 million of 10-year senior unsecured notes due in
April 2034 at an effective yield of 5.1%.
- Acquired and consolidated two joint venture apartment home
communities located in San Jose, CA at a combined valuation of
$290.5 million on a gross basis.
- Raised full-year 2024 guidance range as detailed in the table
below:
Full-Year 2024 Revised Guidance
Revised
Range
Revised
Midpoint
Change at Midpoint
Net Income per diluted share
$8.66 - $8.78
$8.72
+$0.37
Core FFO per diluted share
$15.50 - $15.62
$15.56
+$0.06
Same-Property Revenues
3.10% to 3.40%
3.25%
+0.25%
Same-Property Operating Expenses
4.50% to 5.00%
4.75%
Unchanged
Same-Property NOI
2.30% to 2.90%
2.60%
+0.30%
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 September 30, 2024 compared to the quarter
ended September 30, 2023, and the sequential percentage change for
the quarter ended September 30, 2024 compared to the quarter ended
June 30, 2024, by submarket for the Company:
Q3 2024 vs. Q3 2023
Q3 2024 vs. Q2 2024
% of Total
Revenue Change
Revenue Change
Q3 2024 Revenues
Southern California
Los Angeles County
2.5%
1.0%
18.6%
Orange County
5.2%
1.5%
10.7%
San Diego County
5.3%
1.5%
9.1%
Ventura County
6.3%
1.6%
4.2%
Total Southern California
4.1%
1.3%
42.6%
Northern California
Santa Clara County
2.4%
1.0%
19.6%
Alameda County
1.8%
1.1%
7.7%
San Mateo County
3.2%
1.1%
4.5%
Contra Costa County
3.3%
0.9%
5.4%
San Francisco
5.0%
1.4%
2.5%
Total Northern California
2.7%
1.0%
39.7%
Seattle Metro
3.8%
1.1%
17.7%
Same-Property Portfolio
3.5%
1.2%
100.0%
The table below illustrates the components that drove the change
in same-property revenue on a year-over-year basis for the three-
and nine-month periods ended September 30, 2024 and on a sequential
basis for the quarter ended September 30, 2024.
Same-Property Revenue
Components
Q3 2024 vs. Q3
2023
YTD 2024 vs. YTD
2023
Q3 2024 vs. Q2
2024
Scheduled Rents
1.7%
1.9%
0.9%
Delinquencies
1.3%
1.1%
0.2%
Cash Concessions
0.0%
0.1%
0.0%
Vacancy
-0.3%
-0.4%
0.0%
Other Income
0.8%
0.8%
0.1%
2024 Same-Property Revenue
Growth
3.5%
3.5%
1.2%
Year-Over-Year Change
Year-Over-Year Change
Q3 2024 compared to Q3
2023
YTD 2024 compared to YTD
2023
Revenues
Operating
Expenses
NOI
Revenues
Operating
Expenses
NOI
Southern California
4.1%
4.3%
4.0%
4.3%
4.1%
4.3%
Northern California
2.7%
6.8%
0.9%
2.8%
5.6%
1.6%
Seattle Metro
3.8%
5.4%
3.1%
3.2%
5.7%
2.1%
Same-Property Portfolio
3.5%
5.5%
2.6%
3.5%
5.0%
2.9%
Sequential Change
Q3 2024 compared to Q2
2024
Revenues
Operating
Expenses
NOI
Southern California
1.3%
4.7%
0.0%
Northern California
1.0%
7.5%
-1.7%
Seattle Metro
1.1%
3.6%
0.0%
Same-Property Portfolio
1.2%
5.6%
-0.7%
Financial Occupancies
Quarter Ended
9/30/2024
6/30/2024
9/30/2023
Southern California
95.9%
95.7%
96.3%
Northern California
96.4%
96.3%
96.6%
Seattle Metro
96.6%
97.1%
96.3%
Same-Property Portfolio
96.2%
96.2%
96.4%
Investment Activity
Acquisitions
In July, the Company acquired its joint venture partner’s 49.9%
common equity interest in Patina at Midtown, a 269-unit apartment
home community built in 2021 and located in San Jose, CA, for a
total contract price of $117.0 million on a gross basis. This
reflects an attractive valuation of $435,000 per unit. Concurrent
with the closing, the Company repaid a $95.0 million secured
mortgage encumbering the property and was fully redeemed on a
preferred equity investment affiliated with the partnership. The
Company recorded a gain on remeasurement of co-investments of $2.2
million, which has been excluded from Total and Core FFO.
In September, the Company acquired its joint venture partner’s
50% common equity interest in Century Towers, a 376-unit apartment
home community built in 2017 and located in San Jose, CA, for a
total contract price of $173.5 million on a gross basis. This
reflects an attractive valuation of $458,000 per unit. Concurrent
with the closing, the Company repaid a $110.5 million secured
mortgage encumbering the property and was fully redeemed on a
preferred equity investment affiliated with the partnership. The
Company issued approximately $25.0 million of Operating Partnership
Units (“OP Units”) to the seller at $305 per unit. The Company
recorded a gain on remeasurement of co-investments of $29.4
million, which has been excluded from Total and Core FFO.
Subsequent to quarter end, the Company acquired its joint
venture partner’s 49.9% interest in the BEX II portfolio,
comprising of four communities totaling 871 apartment homes, for a
total contract price of $337.5 million on a gross basis. Concurrent
with the closing, the Company assumed $95.0 million of secured
mortgages.
Dispositions
Subsequent to quarter end, the Company sold its 81.5% interest
in a 76-year-old apartment home community located in San Mateo, CA
for a total contract price of $252.4 million on a gross basis. The
697-unit apartment home community was unencumbered and was
classified as held for sale on the balance sheet as of September
30, 2024.
Other Investments
In July, the Company received cash proceeds of $40.1 million
from the full redemption of a subordinated loan investment yielding
an 11.5% rate of return.
Subsequent to quarter end, the Company received cash proceeds of
$55.8 million from the full and partial redemptions of two
structured finance investments yielding a 9.6% weighted average
rate of return. Year-to-date through October, the Company has
received cash proceeds of $106.2 million from redemptions of
structured finance investments yielding a 10.4% weighted average
rate of return.
Liquidity and Balance Sheet
Common Stock
Year-to-date through October 28, 2024, the Company has not
issued any shares of common stock through its equity distribution
program or repurchased any shares through its stock repurchase
plan.
Balance Sheet
In August, the Company issued $200.0 million of 10-year senior
unsecured notes due in April 2034 bearing an interest rate of 5.50%
per annum and an effective yield of 5.11%. The notes were issued as
additional notes to the previous offering conducted in March
2024.
In September, the Company extended the maturity date of its $1.2
billion unsecured line of credit facility to mature in January 2029
with two additional six-month extension options, exercisable at the
Company’s option. The underlying interest rate on the line of
credit is unchanged at Adjusted SOFR plus 0.765%, which is based on
a tiered rate structure tied to the Company’s corporate ratings and
further adjusted by the facility’s Sustainability Metric Adjustment
feature.
As of October 28, 2024, the Company had approximately $1.2
billion in liquidity via undrawn capacity on its unsecured credit
facilities, cash and cash equivalents, and marketable
securities.
Guidance
For the third quarter of 2024, the Company exceeded the midpoint
of the guidance range provided in its second quarter 2024 earnings
release for Core FFO by $0.04 per diluted share. The outperformance
primarily relates to favorable same-property revenue growth.
The following table provides a reconciliation of third quarter
2024 Core FFO per diluted share to the midpoint of the guidance
provided in the Company’s second quarter 2024 earnings release.
Per Diluted
Share
Guidance midpoint of Core FFO per diluted
share for Q3 2024
$
3.87
NOI from Consolidated Communities
0.04
FFO from Co-Investments
0.01
G&A and Other
(0.01)
Core FFO per diluted share for Q3 2024
reported
$
3.91
The table below provides key updates to the Company’s 2024
full-year assumptions for Net Income, Total FFO, Core FFO per
diluted share, and same-property growth. For additional details
regarding the Company’s 2024 Core FFO guidance range, please see
page S-13 of the accompanying supplemental financial
information.
2024 Full-Year and Fourth
Quarter Guidance
Previous Range
Previous Midpoint
Revised Range
Revised Midpoint
Change at the Midpoint
Per Diluted Share
Net Income
$8.23 - $8.47
$8.35
$8.66 - $8.78
$8.72
+$0.37
Total FFO
$15.93 - $16.17
$16.05
$15.86 - $15.98
$15.92
($0.13)
Core FFO
$15.38 - $15.62
$15.50
$15.50 - $15.62
$15.56
+$0.06
Q4 2024 Core FFO
-
-
$3.82 - $3.94
$3.88
N/A
Same-Property Growth on a Cash-Basis (1)
Revenues
2.70% to 3.30%
3.00%
3.10% to 3.40%
3.25%
+0.25%
Operating Expenses
4.50% to 5.00%
4.75%
4.50% to 5.00%
4.75%
Unchanged
NOI
1.80% to 2.80%
2.30%
2.30% to 2.90%
2.60%
+0.30%
(1)
The midpoint of the Company’s
same-property revenues and NOI on a GAAP basis are 3.40% and 2.90%,
respectively, representing a 0.20% and 0.40% increase to the
Company’s previous guidance midpoints.
Conference Call with Management
The Company will host an earnings conference call with
management to discuss its quarterly results on Wednesday, October
30, 2024 at 10:00 a.m. PT (1:00 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 30
days and digitally for 7 days. To access the replay online, go to
www.essex.com and select the third quarter 2024 earnings link. To
access the replay, dial (844) 512-2921 using the replay pin number
13749248. If you are unable to access the information via the
Company’s website, please contact the Investor Relations Department
at investors@essex.com or calling (650) 655-7800.
Upcoming Events
The Company is scheduled to participate in the National
Association of Real Estate Investment Trusts (“NAREIT”) REITWorld
Conference held at the Wynn Las Vegas in Las Vegas, NV on November
19, 2024. A copy of any materials provided by the Company at the
conference will be made available on the Investors section of the
Company’s website at www.essex.com.
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 254 apartment communities comprising
approximately 62,000 apartment homes. Additional information about
the Company can be found on the Company’s website at
www.essex.com.
This press release and accompanying supplemental financial
information has been furnished to the Securities and Exchange
Commission electronically on Form 8-K 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.
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 on sales of real estate and
extraordinary items. Management considers FFO and FFO which
excludes non-core items, which is referred to as “Core FFO,” to be
useful supplemental operating performance measures of an equity
REIT because, together with net income and cash flows, FFO and Core
FFO provide investors with additional bases to evaluate the
operating performance and ability of a REIT to incur and service
debt and to fund acquisitions and other capital expenditures and to
pay dividends. By excluding gains or losses related to sales of
depreciated operating properties and land and excluding real estate
depreciation (which can vary among owners of identical assets in
similar condition based on historical cost accounting and useful
life estimates), FFO can help investors compare the operating
performance of a real estate company between periods or as compared
to different companies. By further adjusting for items that are not
considered part of the Company’s core business operations, Core FFO
allows investors to compare the core operating performance of the
Company to its performance in prior reporting periods and to the
operating performance of other real estate companies without the
effect of items that by their nature are not comparable from period
to period and tend to obscure the Company’s actual operating
results. 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 alternatives 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 stockholders. 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 nine months ended
September 30, 2024 and 2023 (in thousands, except for share and per
share amounts):
Three Months Ended September
30,
Nine Months Ended September
30,
Funds from Operations attributable to
common stockholders and unitholders
2024
2023
2024
2023
Net income available to common
stockholders
$
118,424
$
87,282
$
484,069
$
340,434
Adjustments:
Depreciation and amortization
146,439
137,357
431,785
410,422
Gains not included in FFO
(31,583)
-
(169,909)
(59,238)
Casualty loss
-
-
-
433
Impairment loss from unconsolidated
co-investments
-
-
3,726
-
Depreciation and amortization from
unconsolidated co-investments
16,417
18,029
52,267
53,486
Noncontrolling interest related to
Operating Partnership units
4,206
3,072
17,075
11,982
Depreciation attributable to third party
ownership and other
(370)
(371)
(1,149)
(1,095)
Funds from Operations attributable to
common stockholders and unitholders
$
253,533
$
245,369
$
817,864
$
756,424
FFO per share – diluted
$
3.81
$
3.69
$
12.30
$
11.37
Expensed acquisition and investment
related costs
$
-
$
31
$
68
$
375
Tax (benefit) expense on unconsolidated
co-investments (1)
(441)
404
(1,199)
1,237
Realized and unrealized (gains) losses on
marketable securities, net
(5,697)
4,577
(10,645)
(4,294)
Provision for credit losses
(182)
17
(116)
51
Equity income from non-core co-investments
(2)
(555)
(538)
(6,282)
(1,422)
Co-investment promote income
-
-
(1,531)
-
Income from early redemption of preferred
equity investments and notes receivable
-
-
-
(285)
General and administrative and other,
net
13,956
1,743
22,403
2,570
Insurance reimbursements, legal
settlements, and other, net (3)
(612)
(283)
(43,912)
(9,082)
Core Funds from Operations attributable
to common stockholders and unitholders
$
260,002
$
251,320
$
776,650
$
745,574
Core FFO per share – diluted
$
3.91
$
3.78
$
11.68
$
11.21
Weighted average number of shares
outstanding diluted (4)
66,551,838
66,445,256
66,500,412
66,537,111
(1)
Represents tax related to net unrealized
gains or losses on technology co-investments.
(2)
Represents the Company's share of
co-investment income or loss from technology co-investments.
(3)
Includes legal settlement gains of $42.5
million and $7.7 million for the nine months ended September 30,
2024 and 2023, respectively.
(4)
Assumes conversion of all outstanding
limited partnership units in Essex Portfolio, L.P. (the “Operating
Partnership”) into shares of the Company’s common stock and
excludes DownREIT limited partnership units.
Net Operating Income (“NOI”) and
Same-Property NOI Reconciliations
NOI and Same-Property NOI are considered by management to be
important supplemental performance measures to earnings from
operations included in the Company’s consolidated statements of
income. The presentation of same-property NOI assists with the
presentation of the Company’s operations prior to the allocation of
depreciation and any corporate-level or financing-related costs.
NOI reflects the operating performance of a community and allows
for an easy comparison of the operating performance of individual
communities or groups of communities. In addition, because
prospective buyers of real estate have different financing and
overhead structures, with varying marginal impacts to overhead by
acquiring real estate, NOI is considered by many in the real estate
industry to be a useful measure for determining the value of a real
estate asset or group of assets. The Company defines same-property
NOI as same-property revenues less same-property operating
expenses, including property taxes. Please see the reconciliation
of earnings from operations to NOI and same-property NOI, which in
the table below is the NOI for stabilized properties consolidated
by the Company for the periods presented (dollars in
thousands):
Three Months Ended September
30,
Nine Months Ended September
30,
2024
2023
2024
2023
Earnings from operations
$
128,790
$
131,784
$
398,599
$
454,001
Adjustments:
Corporate-level property management
expenses
12,150
11,504
36,004
34,387
Depreciation and amortization
146,439
137,357
431,785
410,422
Management and other fees from
affiliates
(2,563)
(2,785)
(7,849)
(8,328)
General and administrative
29,067
14,611
67,374
43,735
Expensed acquisition and investment
related costs
-
31
68
375
Casualty loss
-
-
-
433
Gain on sale of real estate and land
-
-
-
(59,238)
NOI
313,883
292,502
925,981
875,787
Less: Non-same property NOI
(26,431)
(12,390)
(66,748)
(40,504)
Same-Property NOI
$
287,452
$
280,112
$
859,233
$
835,283
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. Forward-looking statements are statements which are not
historical facts, including statements regarding the Company's
expectations, estimates, assumptions, hopes, intentions, beliefs
and strategies regarding the future. Words such as “expects,”
“assumes,” “anticipates,” “may,” “will,” “intends,” “plans,”
“projects,” “believes,” “seeks,” “future,” “estimates,” and
variations of such words and similar expressions are intended to
identify such forward-looking statements. Such forward-looking
statements include, among other things, statements regarding the
Company’s fourth quarter and full-year 2024 guidance (including net
income, Total FFO and Core FFO, same-property growth and related
assumptions) and anticipated yield on certain investments. While
the Company's management believes the assumptions underlying its
forward-looking statements are reasonable, such forward-looking
statements involve known and unknown risks, uncertainties and other
factors, many of which are beyond the Company’s control, which
could cause the actual results, performance or achievements of the
Company to be materially different from any future results,
performance or achievements expressed or implied by such
forward-looking statements. The Company cannot assure the future
results or outcome of the matters described in these statements;
rather, these statements merely reflect the Company’s current
expectations of the approximate outcomes of the matters
discussed.
Factors that might cause the Company’s actual results,
performance or achievements to differ materially from those
expressed or implied by these forward-looking statements include,
but are not limited to, the following: assumptions related to our
fourth quarter and full-year 2024 guidance; occupancy rates and
rental demand may be adversely affected by competition and local
economic and market conditions; there may be increased interest
rates, inflation, escalated operating costs and possible
recessionary impacts; geopolitical tensions and regional conflicts,
and the related impacts on macroeconomic conditions, including,
among other things, interest rates and inflation; the terms of any
refinancing may not be as favorable as the terms of existing
indebtedness; the Company’s inability to maintain our investment
grade credit rating with the rating agencies; the Company may be
unsuccessful in the management of its relationships with its
co-investment partners; the Company may fail to achieve its
business objectives; time of actual completion and/or stabilization
of development and redevelopment projects; estimates of future
income from an acquired property may prove to be inaccurate; future
cash flows may be inadequate to meet operating requirements and/or
may be insufficient to provide for dividend payments in accordance
with REIT requirements; changes in laws or regulations and the
anticipated or actual impact of future changes in laws or
regulations; unexpected difficulties in leasing of future
development projects; volatility in financial and securities
markets; the Company’s failure to successfully operate acquired
properties; unforeseen consequences from cyber-intrusion;
government approvals, actions and initiatives, including the need
for compliance with environmental requirements; and those further
risks, special considerations, and other factors referred to in the
Company’s annual report on Form 10-K for the year ended December
31, 2023, quarterly reports on Form 10-Q, and those risk factors
and special considerations set forth in the Company's other filings
with the SEC which may cause the actual results, performance or
achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied by
such forward-looking statements. All forward-looking statements are
made as of the date hereof, the Company assumes no obligation to
update or supplement this information for any reason, and
therefore, they may not represent the Company’s estimates and
assumptions after the date of this press release.
Definitions and Reconciliations
Non-GAAP financial measures and certain 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241029198114/en/
Loren Rainey Director, Investor Relations (650) 655-7800
lrainey@essex.com
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