-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RNi2Y+6GWPMaeAi0zYAO1wDwkrirLIKOfp2LBBbfg6oUIhfZ0YX84UGYrLU6K2ee zHGq0f/3ybzXC5xMeEyUfg== 0001012870-00-002766.txt : 20000515 0001012870-00-002766.hdr.sgml : 20000515 ACCESSION NUMBER: 0001012870-00-002766 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ESSEX PORTFOLIO LP CENTRAL INDEX KEY: 0001053059 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-44467-01 FILM NUMBER: 629084 BUSINESS ADDRESS: STREET 1: 777 CALIFORNIA AVE CITY: PALO ALTO STATE: CA ZIP: 94304 BUSINESS PHONE: 4154943700 MAIL ADDRESS: STREET 1: 777 CALIFORNIA AVENUE CITY: PALO ALTO STATE: CA ZIP: 94304 10-Q 1 FORM 10-Q FOR QUARTER ENDED 3/31/2000 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission File No. 333-44467-01 ESSEX PORTFOLIO, L.P. (Exact name of Registrant as specified in its Charter) Maryland 77-0369575 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 925 East Meadow Drive, Palo Alto, California 94303 (Address of principal executive offices) (Zip code) (650) 494-3700 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months for such shorter period that the Registrant was required to file such report, and (2) has been subject to such filing requirements for the past 90 days. Yes X No __ ----- TABLE OF CONTENTS FORM 10-Q
Part I Page No. -------- Item 1 Financial Statements (Unaudited) 3 Consolidated Balance Sheets as of March 31, 2000 and December 31, 1999 4 Consolidated Statements of Operations for the three months ended March 31, 2000 and 1999 5 Consolidated Statements of Partners' Capital for the three months ended March 31, 2000 and the year ended December 31, 1999 6 Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2000 and 1999 7 Notes to Consolidated Financial Statements 8 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 13 Item 3 Quantitative and Qualitative Disclosure About Market Risk 18 Part II Item 6 Exhibits and Reports on Form 8-K 20 Signatures 21
2 Part I Financial Information - ------ --------------------- Item 1: Financial Statements (Unaudited) -------------------------------- Essex Portfolio, L.P., a California limited partnership, (the "Operating Partnership") effectively holds the assets and liabilities and conducts the operating activities of Essex Property Trust, Inc. ("Essex" or the "Company"). Essex Property Trust, Inc., a real estate investment trust incorporated in the State of Maryland, is the sole general partner of the Operating Partnership. The information furnished in the accompanying consolidated unaudited balance sheets, statements of operations, partners' capital and cash flows of the Operating Partnership reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the aforementioned financial statements for the interim periods. The accompanying unaudited financial statements should be read in conjunction with the notes to such financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations. 3 ESSEX PORTFOLIO, L.P. Consolidated Balance Sheets (Unaudited) (Dollars in thousands)
March 31, December 31, Assets 2000 1999 ------ ---------------- ----------------- Real estate: Rental properties: Land and land improvements $ 241,643 $ 234,497 Buildings and improvements 728,508 694,579 ---------------- ----------------- 970,151 929,076 Less accumulated depreciation (95,404) (96,605) ---------------- ----------------- 874,747 832,471 Investments 49,037 47,992 Real estate under development 59,410 120,414 ---------------- ----------------- 983,194 1,000,877 Cash and cash equivalents-unrestricted 23,086 12,348 Restricted cash 18,082 17,216 Notes and other related party receivables 14,781 13,654 Notes and other receivables 7,796 9,001 Prepaid expenses and other assets 3,966 3,495 Deferred charges, net 5,457 5,722 ---------------- ----------------- $ 1,056,362 $ 1,062,313 ================ ================= Liabilities and Partners' Capital --------------------------------- Mortgage notes payable $ 372,917 $ 373,608 Lines of credit 0 10,500 Accounts payable and accrued liabilities 29,583 28,379 Distributions payable 13,228 13,248 Other liabilities 5,625 5,594 Deferred gain 5,002 5,002 ---------------- ----------------- Total liabilities 426,355 436,331 Minority interests 2,486 2,379 Partners' capital: General Partner: Common equity 387,140 383,379 Preferred equity 4,314 4,314 ---------------- ----------------- 391,454 387,693 Limited Partners: Common equity 31,577 31,420 Preferred equity 204,490 204,490 ---------------- ----------------- 236,067 235,910 ---------------- ----------------- Total partners' capital 627,521 623,603 ---------------- ----------------- Total liabilities and partners' capital $ 1,056,362 $ 1,062,313 ================ =================
See accompanying notes to the consolidated unaudited financial statements. 4 ESSEX PORTFOLIO, L.P. Consolidated Statements of Operations (Unaudited) (Dollars in thousands, except per unit amounts)
Three months ended ------------------------------------ March 31, March 31, 2000 1999 ----------------- --------------- Revenues: Rental $ 36,846 $ 31,902 Other property 954 696 ----------------- --------------- Total property 37,800 32,598 Interest and other 1,736 1,292 ----------------- --------------- Total revenues 39,536 33,890 ----------------- --------------- Expenses: Property operating expenses Maintenance and repairs 2,151 2,095 Real estate taxes 2,598 2,517 Utilities 2,056 1,995 Administrative 3,332 2,743 Advertising 497 509 Insurance 221 221 Depreciation and amortization 6,667 6,045 ----------------- --------------- 17,522 16,125 ----------------- --------------- Interest 5,808 4,934 Amortization of deferred financing costs 159 130 General and administrative 1,125 1,011 ----------------- --------------- Total expenses 24,614 22,200 ----------------- --------------- Income before gain on the sales of real estate and minority interests 14,922 11,690 Gain on the sales of real estate 4,022 0 ----------------- --------------- Income before minority interests 18,944 11,690 Minority interests (146) (146) ----------------- --------------- Net income 18,798 11,544 Dividends on preferred units-general partner (117) (831) Dividends on preferred units-limited partner (4,580) (2,145) ----------------- --------------- Net income available to common units $ 14,101 $ 8,568 ================= =============== Per operating partnership unit data. Basic: Net income $ 0.70 $ 0.46 ================= =============== Weighted average number of partnership units outstanding during the period 20,146,833 18,608,130 ================= =============== Diluted: Net income $ 0.69 $ 0.46 ================= =============== Weighted average number of partnership units outstanding during the period 20,578,898 18,761,479 ================= =============== Distributions per Operating Partnership common unit $ 0.55 $ 0.50 ================= ===============
See accompanying notes to the consolidated unaudited financial statements. 5 ESSEX PORTFOLIO, L.P. Consolidated Statements of Partners' Capital For the three months ended March 31, 2000 and the year ended December 31, 1999 (Unaudited) (Dollars and units in thousands)
General Partner Limited Partners ---------------------------------------- --------------------------------------- Preferred Preferred Common Equity Equity Common Equity Equity ------------------------ ----------- ------------------------- --------- Units Amount Amount Units Amount Amount Total --------- ----------- ----------- --------- ----------- --------- --------- Balances at December 31, 1998 16,641 $ 352,295 $ 37,505 1,873 $ 25,331 $ 102,150 $ 517,281 Contribution-net proceeds from perpetual preferred units - - - - - 102,340 102,340 Contribution net proceeds from options exercised 53 930 - - - - 930 Common units issued from conversion of Convertible 1,618 33,191 (33,191) - - - Preferred Stock Redemption of limited partner - - - (65) (2,101) - (2,101) common units Issuance of limited partner common units - - - 274 7,469 - 7,469 Common units purchased by Operating Partnership (262) (7,119) - - - - (7,119) Net income 42,231 1,333 - 5,051 12,238 60,853 Partners' distributions - (38,149) (1,333) - (4,330) (12,238) (56,050) --------- ----------- ----------- --------- ----------- --------- --------- Balances at December 31, 1999 18,050 383,379 4,314 2,082 31,420 204,490 623,603 Redemption of limited partner common units - - - (5) (165) - (165) Contribution-net proceeds from options exercised 46 1,080 - - - - 1,080 Net income - 12,633 117 - 1,468 4,580 18,798 Partners' distributions - (9,952) (117) - (1,146) (4,580) (15,795) --------- ----------- ----------- --------- ----------- --------- --------- Balances at March 31, 2000 18,096 $ 387,140 $ 4,314 2,077 $ 31,577 $ 204,490 $ 627,521 ========= =========== =========== ========= =========== ========= =========
See accompanying notes to the consolidated unaudited financial statements. 6 ESSEX PORTFOLIO, L.P. Condensed Consolidated Statements of Cash Flows (Unaudited) (Dollars in thousands)
Three months ended ----------------------------------- March 31, March 31, 2000 1999 ------------------------------------ Net cash provided by operating activities: $ 22,032 $ 18,862 -------------- -------------- Cash flows from investing activities: Additions to real estate (5,548) (4,874) Proceeds received from the disposition of real estate 31,302 - (Decrease) Increase in restricted cash (866) 283 Additions to related party notes and other receivables (2,000) (967) Repayment of related party notes and other receivables 2,036 477 Additions to real estate under development (9,526) (24,834) Net (contribution to) / distributions from investments in corporations and limited partnerships (605) 327 -------------- -------------- Net cash provided by (used in) investing activities 14,793 (29,588) -------------- -------------- Cash flows from financing activities: Proceeds from mortgage and other notes payable and lines of credit 17,000 53,000 Repayment of mortgage and other notes payable and lines of credit (28,191) (29,737) Additions to deferred charges - (337) Contributions from stock options exercised and shares issued through dividend reinvestment plan -general partner 1,080 39 Distributions to minority interest and limited partners (5,768) (3,026) Redemption of operating partnership units limited partner (164) (200) Distributions to general partner (10,044) (9,316) -------------- -------------- Net cash (used in) provided by financing activities (26,087) 10,423 -------------- -------------- Net increase (decrease) in cash and cash equivalents 10,738 (303) Cash and cash equivalents at beginning of period 12,348 2,548 -------------- -------------- Cash and cash equivalents at end of period $ 23,086 $ 2,245 ============== ============== Supplemental disclosure of cash flow information: Cash paid for interest, net of $656 and $1,179 capitalized $ 5,208 $ 3,446 ============== ============== Supplemental disclosure of non-cash investing and financing activities: Real estate under development transferred to rental properties $ 70,530 $ - ============== ==============
See accompanying notes to consolidated unaudited financial statements. 7 Notes to Consolidated Financial Statements March 31, 2000 and 1999 (Unaudited) (Dollars in thousands, except for per share and per unit amounts) (1) Organization and Basis of Presentation -------------------------------------- Essex Portfolio, L.P. (the "Operating Partnership") was formed in March 1994 and commenced operations on June 13, 1994, when Essex Property Trust, Inc. (the "Company"), the general partner of the Operating Partnership, completed its initial public offering (the "Offering") in which it issued 6,275,000 shares of common stock at $19.50 per share. The net proceeds from the Offering of $112,071 were used by the Company to acquire a 77.2% interest in the Operating Partnership. The Company has elected to be treated as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986 (the "Code"), as amended. The unaudited consolidated financial statements of the Operating Partnership are prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-Q. In the opinion of management, all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented have been included and are normal and recurring in nature. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Operating Partnership's annual report on Form 10-K for the year ended December 31, 1999. The Company is the sole general partner in the Operating Partnership, owning an 89.7%, 89.7% and 90.0% general partnership interest as March 31, 2000, December 31, 1999 and March 31, 1999, respectively. As of March 31, 2000, the Operating Partnership operates and has ownership interests in 69 multifamily properties (containing 15,442 units) and four commercial properties (with approximately 250,000 square feet) (collectively, the "Properties"). The Properties are located in Northern California (the San Francisco Bay Area), Southern California (Los Angeles, Ventura, Orange and San Diego counties), and the Pacific Northwest (the Seattle, Washington and Portland, Oregon metropolitan areas). All significant intercompany balances and transactions have been eliminated in the consolidated financial statements. (2) Significant Transactions ------------------------ (A) Disposition Activities --------------------------- On March 6, 2000, the Operating Partnership sold the buildings and a leasehold interest in Vista Pointe, a 286 unit apartment community, located in Anaheim, California for $15,300. The land lease entitles the Operating Partnership to receive a fixed land lease payment over the 34-year term, and an interest in future appreciation of the Vista Pointe property. In connection with the sale, the Operating Partnership is obligated to loan at 9% up to approximately $1,000 related to property specific improvements. The Operating Partnership's interest in the land is subordinated to a loan obtained by the buyer in connection with the purchase of the property. The Operating Partnership may be required to sell the land after six years as specified in the buyout provisions of the agreement. There was a $4,013 gain recognized on the sale. On March 29, 2000, the Operating Partnership sold Station Park Apartments, a 106 unit apartment community located in Walnut Creek, California for $15,800. This apartment was 8 Notes to Consolidated Financial Statements March 31, 2000 and 1999 (Unaudited) (Dollars in thousands, except for per share and per unit amounts) previously reported as a development community and reached stabilized operations in February 2000. There was a $9 gain recognized on the sale. (B) Development Activities --------------------------- Development communities are defined by the Operating Partnership as new apartment properties that are being constructed or are newly constructed and in a phase of lease-up and have not yet reached stabilized operations. At March 31, 2000, the Operating Partnership had five development communities, with an aggregate of 1,176 multifamily units. During the first quarter of 2000, the Operating Partnership reached stabilized operations at three multifamily communities containing 540 units that were previously reported as development communities. The three projects which were previously reported as development projects and have achieved stabilized operations are Bel Air, Fountain Court and Station Park Apartments. In connection with the properties currently under development, the Operating Partnership has directly, or in some cases through its joint ventures, entered into contractual construction related commitments with unrelated third parties. As of March 31, 2000, the Operating Partnership is committed to fund approximately $63,400 under these commitments. Bel Air apartments is a 348 unit existing apartment community previously referred to as the Shores in San Ramon, California which was acquired by the Operating Partnership in December 1995. Including the expansion of 114 units, the total number of units for this community is 462 units. The property is wholly owned by the Operating Partnership. The total investment related to the 114 unit expansion of approximately $18,200 is included in rental properties in the accompanying consolidated balance sheets at March 31, 2000. Fountain Court Apartments is a 320 unit apartment community located in downtown Seattle, Washington. The Operating Partnership has a 51% ownership interest in the property. The total investment of approximately $36,800 is included in rental properties in the accompanying consolidated balance sheets at March 31, 2000. Station Park Apartments is a 106 unit apartment community located in Walnut Creek, California. This property was sold during the first quarter of 2000 as noted under disposition activities. (C) Redevelopment Activities ----------------------------- Redevelopment communities are defined by the Operating Partnership as existing properties owned or recently acquired which have been targeted for investment by the Operating Partnership with the expectation of increasing financial returns through property improvement. Redevelopment communities typically have apartment units that are not available for rent and as a result, may have less than stabilized operations. At March 31, 2000, the Operating Partnership had eight redevelopment communities in Southern California which contain an aggregate of 2,054 units with a total projected investment of $33,860. (3) Related Party Transactions -------------------------- All general and administrative expenses of the Company, the Operating Partnership and Essex Management Corporation, an unconsolidated preferred stock subsidiary of the Company ("EMC") are initially borne by the Operating Partnership, with a portion subsequently allocated to EMC. Expenses allocated to EMC for the three months ended March 31, 2000 and 1999 totaled $233 and $102, respectively. The expenses are reflected as a reduction in general and administrative expenses in the accompanying consolidated statements of operations. 9 Notes to Consolidated Financial Statements March 31, 2000 and 1999 (Unaudited) (Dollars in thousands, except for per share and per unit amounts) Other income includes interest income of $122 and $86 for the three months ended March 31, 2000 and 1999. This interest income was earned principally on the notes receivable from related party partnerships in which the Operating Partnership owns an ownership interest. Other income also includes management fee income and investment income from its related party partnerships in which the Operating Partnership owns an ownership interest of $474 and $344 for the three months ended March 31, 2000 and 1999. During the quarter ended March 31, 2000, the Operating Partnership paid brokerage commissions totaling $289 to M&M on the sales of real estate. The commission is reflected as a reduction of the gain on sales of real estate in the accompanying consolidated statements of operations. The Chairman of M&M is the Chairman of the Company. Notes and other related party receivables as of March 31, 2000 and December 31, 1999 consist of the following:
March 31, December 31, --------- ------------ Notes receivable from Joint Ventures: 2000 1999 --------- ------------- Note receivable from Highridge Apartments secured, bearing interest at 9.4%, due March 2008 $1,047 $ 1,047 Note receivable from Highridge Apartments, secured, Bearing interest at 10%, due on demand 2,950 2,950 Note receivable from Fidelity I and JSV, secured, bearing interest at 9.5-10%, due 2015 800 800 Note receivable from Highridge, non-interest bearing, due on demand 3,988 3,624 Note receivable from Las Hadas, non-interest bearing, due on demand 2,558 1,209 Note receivable from Anchor Village, non-interest bearing, due on demand 1,334 1,282 Other related party receivables: Loans to officers, bearing interest at 8%, due April 2006 633 633 Other related party receivables, substantially due on demand 1,481 2,109 -------- ------- $14,791 $13,654 ======== =======
Other related party receivables consist primarily of accrued interest income on related party notes receivables and loans to officers, advances and accrued management fees from joint venture investees and unreimbursed expenses due from EMC. (4) Forward Treasury Contracts -------------------------- The Operating Partnership has one forward treasury contract for an aggregate notional amount of $20,000, locking the 10 year treasury rate at 6.16%. This contract is to limit the interest rate exposure on identified future debt financing requirements relating to multifamily development 10 Notes to Consolidated Financial Statements March 31, 2000 and 1999 (Unaudited) (Dollars in thousands, except for per share and per unit amounts) projects. This contract will be settled no later than June 2000. If the contract were settled as of March 31, 2000, the Operating Partnership would be entitled to receive approximately $105. During the first quarter of 2000, three of the four contracts that were held as of December 31, 1999, were sold. The Operating Partnership received proceeds of approximately $920. It is anticipated that these proceeds will be reflected as a reduction in future project financing cost. (5) New Accounting Pronouncements ----------------------------- In June 1998, the FASB issued Financial Accounting Statement No. 133 (SFAS 133), Accounting for Derivative Instruments and Hedging Activities. The Operating Partnership will adopt SFAS 133 for interim periods beginning in 2001, the effective date of SFAS 133, as amended. Management believes that the adoption of these statements will not have a material impact on the Operating Partnership's financial position or results of operations. (6) Segment Information ------------------- The Operating Partnership defines its reportable operating segments as the three geographical regions in which its multifamily residential properties are located: Northern California, Southern California, and the Pacific Northwest. Non-segment property revenues and net operating income included in the following schedule consists of revenue generated from the Operating Partnership's commercial property. Excluded from segment revenues are interest and other corporate income. Other non-segment assets include investments, real estate under development, cash, receivables and other assets. The revenues, net operating income, and assets for each of the reportable operating segments are summarized as follows for the periods presented.
Three months ended March 31, March 31, 2000 1999 --------- --------- Revenues Northern California $12,636 $11,288 Southern California 15,773 12,509 Pacific Northwest 9,391 8,116 ------- ------- Total segment revenues 37,800 31,913 Non-segment property revenues - 685 Interest and other income 1,736 1,292 ------- ------- Total revenues $39,536 $33,890 ======= ======= Net operating income: Northern California $ 9,880 $ 8,562 Southern California 10,716 8,332 Pacific Northwest 6,393 5,376 ------- ------- Total segment net operating income 26,989 22,270 Non-segment net operating income (44) 248 Interest and other income 1,736 1,292 Depreciation and amortization (6,667) (6,045) Interest (5,808) (4,934) Amortization of deferred financing costs (159) (130) General and administrative (1,125) (1,011) ------- ------- Income before gain on the sales of real estate and minority interests $14,922 $11,690 ======= =======
11 Notes to Consolidated Financial Statements March 31, 2000 and 1999 (Unaudited) (Dollars in thousands, except for per share and per unit amounts)
March 31, 2000 December 31, 1999 -------------- ----------------- Assets: Northern California $ 233,528 $ 216,946 Southern California 405,550 415,374 Pacific Northwest 230,539 195,011 ---------- ---------- Total segment net real estate assets 869,617 827,331 Non-segment net real estate assets 5,130 5,140 ---------- ---------- Net real estate assets 874,747 832,471 Non-segment assets 181,615 229,842 ---------- ---------- Total assets $1,056,362 $1,062,313 ========== ==========
12 Item 2: Management's Discussion and Analysis of Financial Condition and ---------------------------------------------------------------- Results of Operations --------------------- The following discussion is based primarily on the consolidated unaudited financial statements of Essex Portfolio, L.P. (the "Operating Partnership") for the three months ended March 31, 2000 and 1999. This information should be read in conjunction with the accompanying consolidated unaudited financial statements and notes thereto. These consolidated financial statements include all adjustments which are, in the opinion of management, necessary to reflect a fair statement of the results and all such adjustments are of a normal recurring nature. The Operating Partnership holds, directly or indirectly, all of the Company's interests in the Operating Partnership's properties and all of the Company's operations relating to the Company's properties are conducted through the Operating Partnership. The Company is the sole general partner of the Operating Partnership and, as of March 31, 2000, December 31, 1999 and March 31, 1999, owed an 89.7%, 89.7% and 90.0% general partnership interest in the Operating Partnership, respectively. Certain statements in this "Management's Discussion and Analysis of Financial Condition and Results of Operations," and elsewhere in the quarterly report on Form 10-Q which are not historical facts may be considered forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended, including statements regarding the Operating Partnership's expectations, hopes, intentions, beliefs and strategies regarding the future. Forward looking statements include statements regarding the Operating Partnership's expectation as to the timing of completion of current development projects, beliefs as to the adequacy of future cash flows to meet operating requirements, and to provide for dividend payments in accordance with REIT requirements and expectations as to the amount of non-revenue generating capital expenditures for the year ended December 31, 2000, potential acquisitions and developments, the anticipated performance of existing properties, future acquisitions and developments and statements regarding the Operating Partnership's financing activities. Such forward-looking statements involve known and unknown risks, uncertainties and other factors including, but not limited to, that the actual completion of development projects will be subject to delays, that such development projects will not be completed, that future cash flows will be inadequate to meet operating requirements and/or will be insufficient to provide for dividend payments in accordance with REIT requirements, that the actual non-revenue generating capital expenditures will exceed the Operating Partnership's current expectations, as well as those risks, special considerations, and other factors discussed under the caption "Other Matters/Risk Factors" in Item 1 of the Operating Partnership's Annual Report on Form 10-K for the year ended December 31, 1999, and those other risk factors and special considerations set forth in the Operating Partnership's other filings with the Securities and Exchange Commission (the "SEC") which may cause the actual results, performance or achievements of the Operating Partnership to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. General Background The Operating Partnership's property revenues are generated primarily from multifamily property operations, which accounted for greater than 98% of its property revenues for the three months ended March 31, 2000 and 1999. The Operating Partnership's multifamily properties (the "Properties") are located in Northern California (the San Francisco Bay Area), Southern California (Los Angeles, Ventura, Orange and San Diego counties) and the Pacific Northwest (the Seattle, Washington and Portland, Oregon metropolitan areas). The average occupancy levels of the Operating Partnership's portfolio has exceeded 95% for the last five years. Since the Operating Partnership began operations in June 1994, the Operating Partnership has acquired ownership interests in 58 multifamily residential properties and its headquarters building. Of the multifamily properties acquired since the Operating Partnership began operations, 11 are located in 13 Northern California, 29 are located in Southern California, 18 are located in the Seattle, Washington metropolitan area and one is located in the Portland, Oregon metropolitan area. In total, these acquisitions consist of 11,954 multifamily units with total capitalized acquisition costs of approximately $950.7 million. Additionally since it began operations, the Operating Partnership has developed and has ownership interests in six multifamily development properties that have reached stabilized operations. These development properties consist of 1,220 units with total capitalized development costs of $131.7 million. As part of its active portfolio management strategy, the Operating Partnership has disposed of, since its it began operations, 12 multifamily residential properties (seven in Northern California, four in Southern California and one in the Pacific Northwest) consisting of a total of 1,748 units, six retail shopping centers in the Portland, Oregon metropolitan area and one commercial property in Northern California at an aggregate gross sales price of approximately $190.7 million resulting in total net realized gains of approximately $32.2 million and a deferred gain of $5.0 million. The Operating Partnership is developing five multifamily residential communities, with an aggregate of 1,176 multifamily units. In connection with these development projects, the Operating Partnership has directly, or in some cases through its joint venture partners, entered into contractual construction related commitments with unrelated third parties for approximately $91,300,000. As of March 31, 2000, the Operating Partnership's remaining development commitment is approximately $63,400,000. Results of Operations Comparison of the Three Months Ended March 31, 2000 to the Three Months Ended - ----------------------------------------------------------------------------- March 31,1999. - -------------- Average financial occupancy rates of the Operating Partnership's multifamily Same Store Properties (properties owned by the Operating Partnership for each of the three months ended March 31, 2000 and 1999) increased to 96.4% for the three months ended March 31, 2000 from 95.7%, for the three months ended March 31, 1999. "Financial Occupancy" is defined as the percentage resulting from dividing actual rental income by total possible rental income. Total possible rental income is determined by valuing occupied units at contractual rents and vacant units at market rents. The regional breakdown of financial occupancy for the multifamily Same Store Properties for the three months ended March 31, 2000 and 1999 are as follows: March 31, March 31, 2000 1999 ---- ---- Northern California 97.8% 96.2% Southern California 96.3% 96.7% Pacific Northwest 94.6% 94.1% 14 Total Revenues increased by $5,646,000 or 16.7% to $39,536,000 in the first quarter of 2000 from $33,890,000 in the first quarter of 1999. The following table sets forth a breakdown of these revenue amounts, including the revenues attributable to the Same Store Properties.
Three Months Ended March 31, ------------------- Number of Dollar Percentage Properties 2000 1999 Change Change ---------- ------- ------- -------- ---------- Revenues Property revenues Same Store Properties Northern California 12 $10,529 $ 9,665 $ 864 8.9% Southern California 13 9,360 8,702 658 7.7 Pacific Northwest 19 8,409 8,116 293 3.6 -- ------- ------- ------ ---------- Quarterly Same Store Properties 44 28,298 26,483 1,815 6.9 == Property revenues properties acquired/disposed of subsequent to December 31, 1998 9,502 6,115 3,387 55.4 ------- ------- ------ ---------- Total property revenues 37,800 32,598 5,202 16.0 ------- ------- ------ ---------- Interest and other income 1,736 1,292 444 34.4 ------- ------- ------ ---------- Total revenues $39,536 $33,890 $5,646 16.7% ======= ======= ====== ==========
As set forth in the above table, $3,387,000 of the $5,646,000 net increase in total revenues is attributable to properties acquired or disposed of subsequent to December 31, 1998, redevelopment communities and development communities. During this period, the Operating Partnership acquired six multifamily properties and reached stabilized operations at five development communities (the "Acquisition Properties"), and disposed of six multifamily properties, and one commercial property (the "Disposition Properties"). Of the increase in total revenues, $1,815,000 is attributable to increases in property revenues from the Same Store Properties. Property revenues from the Same Store Properties increased by approximately 6.9% to $28,298,000 in the first quarter of 2000 from $26,483,000 in the first quarter of 1999. The majority of this increase was attributable to the 12 multifamily Same Store Properties located in Northern California. The property revenues of the Same Store Properties in Northern California increased by $864,000 or 8.9% to $10,529,000 in the first quarter of 2000 from $9,665,000 in the first quarter of 1999. This $864,000 increase is primarily attributable to rental rate increases and an increase in financial occupancy to 97.8% in the first quarter of 2000 from 96.2% in the first quarter of 1999. The 13 Same Store Properties located in Southern California accounted for the next largest regional component of the Same Store Properties property revenues increase. The property revenues of these properties increased by $658,000 or 7.7% to $9,360,000 in first quarter of 2000 from $8,702,000 in the first quarter of 1999. The $658,000 increase is attributable to rental rate increases which were offset by a decrease in financial occupancy to 96.3% in the first quarter of 2000 from 96.7% in the third quarter of 1999. The 19 multifamily residential properties located in the Pacific Northwest also contributed to the Same Store Properties property revenues increase. The property revenues of these properties increased by $293,000 or 3.6% to $8,409,000 in the first quarter of 2000 from $8,116,000 in the first quarter of 1999. The $293,000 increase is primarily attributable to rental rate increase and an increase in financial occupancy to 94.6% in the first quarter of 2000 from 94.1% in the first quarter of 1999. The increase in total revenue also reflected an increase of $444,000 attributable to interest and other income, which primarily relates to interest income on outstanding notes receivables and income earned on the Operating Partnership's joint venture investments. Total Expenses increased by $2,414,000 or approximately 10.9% to $24,614,000 in the first quarter of 2000 from $22,200,000 in the first quarter of 1999. Interest expense increased by $874,000 or 17.7% to $5,808,000 in the first quarter from $4,934,000 in the first quarter of 1999. Such increase was primarily due to the net addition of outstanding mortgage debt in connection with property and investment acquisitions which was offset in part by capitalization of interest charges relating to the Operating Partnership's development and redevelopment communities. Property operating expenses, exclusive of 15 depreciation and amortization, increased by $775,000 or 7.7% to $10,855,000 in the first quarter of 2000 from $10,080,000 in the first quarter of 1999. Of such increase, $971,000 was attributable to the Acquisition Properties and the Disposition Properties. The aggregate property operating expense increase is less than the amount of such increase for the Acquisition and Disposition Properties due to a decrease in property operating expenses of the Same Store Properties. General and administrative expenses represent the costs of the Operating Partnership's various acquisition and administrative departments as well as partnership administration and non-operating expenses. Such expenses increased by $114,000 in the first quarter of 2000 from the amount for the first quarter of 1999. This increase is largely due to additional staffing requirements resulting from the growth of the Operating Partnership. Net income increased by $7,254,000 to $18,798,000 in the first quarter of 2000 from $11,544,000 in the first quarter of 1999. Net income for the first quarter of 2000 included a gain on the sales of real estate of $4,022,000. No gains on sale were recognized in the first quarter of 1999. The remainder of the increase is a result of the net contribution of the Acquisition Properties and the increase in net operating income from the Same Store Properties. Liquidity and Capital Resources At March 31, 2000 the Operating Partnership had $23,086,000 of unrestricted cash and cash equivalents. The Operating Partnership expects to meet its short-term liquidity requirements by using its working capital, cash generated from operations and amounts available under lines of credit. The Operating Partnership believes that its current net cash flows will be adequate to meet operating requirements and to provide for payment of dividends by the Company in accordance with REIT qualification requirements. The Operating Partnership expects to meet its long-term funding requirements relating to property acquisition and development (beyond the next 12 months) by using working capital, amounts available from lines of credit, net proceeds from public and private debt and equity issuances, and proceeds from the disposition of properties that may be sold from time to time. There can, however, be no assurance that the Operating Partnership will have access to the debt and equity markets in a timely fashion to meet such future funding requirements or that future working capital, and borrowings under the lines of credit will be available, or if available, will be sufficient to meet the Operating Partnership's requirements or that the Operating Partnership will be able to dispose of properties in a timely manner and under terms and conditions that the Operating Partnership deems acceptable. The Operating Partnership has a $100,000,000 unsecured line of credit. Outstanding balances under the line of credit bear interest at the bank's reference rate, or at the Operating Partnership's option, 1.15% over the LIBOR rate. The line of credit matures in May 2000. At March 31, 2000 the Operating Partnership had no balance outstanding on its line of credit. During the quarter ended March 31, 2000, the Operating Partnership had outstanding balances which bore interest rates ranging from 7.0% to 8.0%. The Operating Partnership intends to replace or renew this facility prior to its expiration with similar terms. In addition to the unsecured line of credit, the Operating Partnership had $372,917,000 of secured indebtedness at March 31, 2000. Such indebtedness consisted of $291,597,000 in fixed rate debt with interest rates varying from 6.4% to 8.8% and maturity dates ranging from 2000 to 2026. The indebtedness also included $58,820,000 of debt represented by tax exempt variable rate demand bonds with interest rates paid during the first three months of 2000 ranging from 5.0% to 6.0% and maturity dates ranging from 2020 to 2026. The tax exempt variable rate demand bonds are capped at a maximum interest rates ranging from 7.1% to 7.3%. At March 31, 2000, the Operating Partnership also had a variable rate construction loan outstanding which is secured by one of its development communities. This development community reached stabilized operations in March 2000. The construction loan, in the aggregate amount of $22,500,000 bears interest at LIBOR plus 2.0% and matures in June 2000. The Operating Partnership's unrestricted cash balance increased by $10,738,000 from $12,348,000 as of December 31, 1999 to $23,086,000 as of March 31, 2000. This increase was primarily a result of 16 $22,032,000 of net cash provided by operating activities and $14,793,000 of net cash provided by investing activities, which was offset by $26,087,000 of net cash used in financing activities. Of the $14,793,000 net cash provided by investing activities, $31,302,000 of proceeds were received from the disposition of real estate, as offset by $5,548,000 of cash used to purchase and upgrade rental properties and $9,526,000 used to fund real estate under development. The $26,087,000 net cash used in financing activities was primarily a result of $28,191,000 of repayments of mortgage and other notes payable and lines of credit and $10,044,000 of dividends/distributions paid which was offset by $17,000,000 of proceeds from mortgage and other notes payable and lines of credit. Non-revenue generating capital expenditures are improvements and upgrades that extend the useful life of the property and are not related to preparing a multifamily property unit to be rented to a tenant. The Operating Partnership expects to incur approximately $320 per weighted average occupancy unit in non- revenue generating capital expenditures for the year ended December 31, 2000. These expenditures do not include the improvements required in connection with the origination of mortgage loans, expenditures for acquisition properties' renovations and improvements which are expected to generate additional revenue, and renovation expenditures required pursuant to tax-exempt bond financings. The Operating Partnership expects that cash from operations and/or its lines of credit will fund such expenditures. However, there can be no assurance that the actual expenditures incurred during 2000 and/or the funding thereof will not be significantly different than the Operating Partnership's current expectations. The Operating Partnership is developing five multifamily residential communities, with an aggregate of 1,176 multifamily units. Such projects involve certain risks inherent in real estate development. See "Other Matters/Risk Factors - Risks That Development Activities Will Be Delayed or Not Completed" in Item 1 of the Operating Partnership's Annual Report on Form 10-K for the year ended December 31, 1999. In connection with these development projects, the Operating Partnership has directly, or in some cases through its joint venture partners, entered into contractual construction related commitments with unrelated third parties for a total amount of approximately $91,300,000. As of March 31, 2000, the Operating Partnership's remaining commitment to fund the estimated cost to complete is approximately $63,400,000. The Operating Partnership expects to fund such commitments with a combination of its working capital, operating cash flows, amounts available on its lines of credit, net proceeds from public and private equity and debt issuances, and proceeds from the disposition of properties, which may be sold from time to time. During the first quarter of 2000, the Operating Partnership reached stabilized occupancy at three communities that were previously reported as development communities. Pursuant to existing shelf registration statements, the Company has the capacity to issue up to $342,000,000 of equity securities and the Operating Partnership has the capacity to issue up to $250,000,000 of debt securities. The Operating Partnership pays quarterly dividends from cash available for distribution. Until it is distributed, cash available for distribution is invested by the Operating Partnership primarily in short-term investment grade securities or is used by the Operating Partnership to reduce balances outstanding under its line of credit. Year 2000 Compliance The date is now past January 1, 2000 and the Operating Partnership has not experienced any immediate adverse impact from the transition to the year 2000. However, the Operating Partnership cannot provide assurance that its vendors have not or will nor be affected in a manner that is not yet apparent. The Operating Partnership uses software, computer technology and other services provided by third party vendors that may fail due to year 2000 issues. This failure may involve significant time and expense, and uncorrected problems could potentially harm the Operating Partnership's operations. Therefore, the Operating Partnership will continue to monitor its year 2000 compliance and the year 2000 compliance of its vendors. 17 Funds from Operations Industry analysts generally consider funds from operations, ("Funds From Operations"), an appropriate measure of performance of an equity REIT. The Company, the sole general partner in the Operating Partnership, has elected to be treated as a REIT under the code. Generally, Funds From Operations adjusts the net income of equity REITs for non-cash charges such as depreciation and amortization of rental properties and non-recurring gains or losses. Management considers Funds from Operations to be a useful financial performance measurement of an equity REIT because, together with net income and cash flows, Funds from Operations provides investors with an additional basis to evaluate the ability of a REIT to incur and service debt and to fund acquisitions and other capital expenditures. Funds From Operations does not represent net income or cash flows from operations as defined by generally accepted accounting principles ("GAAP") and is not intended to indicate whether cash flows will be sufficient to fund cash needs. It 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. Funds From Operations does not measure whether cash flow is sufficient to fund all cash needs including principal amortization, capital improvements and distributions to shareholders. Funds From Operations also does not represent cash flows generated from operating, investing or financing activities as defined under GAAP. Further, Funds from Operations as disclosed by other REITs may not be comparable to the Company's presentation of Funds From Operations. The following table sets forth The Company's calculation of Funds from Operations for the three months ended March 31, 2000 and 1999. March 31, 2000 March 31, 1999 --------------- --------------- Income before gain on the sales of real estate and minority interests $14,922,000 $11,690,000 Adjustments: Depreciation and amortization 6,667,000 6,045,000 Unconsolidated joint ventures 1,009,000 367,000 Minority interests (1) (4,726,000) (2,363,000) ----------- ----------- Funds from Operations $17,872,000 $15,739,000 =========== =========== Weighted average number shares outstanding diluted (1) 20,578,898 20,496,718 =========== =========== /(1)/ Includes all outstanding units of the general partner common equity and preferred equity and assumes conversion of all limited partner common equity into shares of the Company's Common Stock. Item 3. Quantitative and Qualitative Disclosures About Market Risk The Operating Partnership is exposed to interest rate changes primarily as a result of its line of credit and long-term debt used to maintain liquidity and fund capital expenditures and expansion of the Operating Partnership's real estate investment portfolio and operations. The Operating Partnership's interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows and to lower its overall borrowing costs. To achieve its objectives the Operating Partnership borrows primarily at fixed rates and may enter into derivative financial instruments such as interest rate swaps, caps and treasury locks in order to mitigate its interest rate risk on a related financial instrument. The Operating Partnership does not enter into derivative or interest rate transactions for speculative purposes. The Operating Partnership's interest rate risk is monitored using a variety of techniques. The table below presents the principal amounts and weighted average interest rates by year of expected maturity to evaluate the expected cash flows and sensitivity to interest rate changes. The Operating Partnership believes that the principal amounts of the Operating Partnership's mortgage notes payable and line of credit approximate 18 fair value as of March 31, 2000 as interest rates are consistent with yields currently available to the Operating Partnership for similar instruments.
For Year Ended: 2000 2001 2002 2003 2004 Thereafter Total Fixed rate debt (In thousands) $ 2,247 20,586 24,832 30,481 2,697 210,754 $291,597 Average interest rate 7.1% 6.6% 6.6% 7.0% 7.0% 7.0% Variable rate LIBOR debt (In thousands) $22,500 - - - - 58,820(1) $ 81,320 Average interest 8.1% - - - - 5.50%
/(1)/ Capped at interest rates ranging from 7.1% to 7.3% The Operating Partnership has one forward treasury contract for an aggregate notional amount of $20,000,000, locking the 10 year treasury rate at 6.16% which limits interest rate exposure on certain future debt financing and which will be settled in 2000. The fair value of this contract as of March 31, 2000 is approximately $105,000. Fair value represents the estimated payments that the Operating Partnership would be entitled to receive if the contract were terminated at March 31, 2000. The forward treasury contract represents the exposures that exist as of March 31, 2000. As firm commitments do not exist as of March 31, 2000, the information presented herein has limited predictive value. As a result, the Operating Partnership's ultimate realized gain or loss with respect to interest rate fluctuations will depend on the exposures that may arise during the period, the Operating Partnership's hedging strategies at that time and interest rates. 19 Part II Other Information - ------- ----------------- Item 6: Exhibits and Reports on Form 8-K A. Exhibits -------- 3.1 Certificate of Correction to Articles Supplementary reclassifying 2,000,000 shares of Common Stock as 2,000,000 shares of 9.30% Series D Cumulative Redeemable Preferred Stock 3.2 Certificate of Amendment of the Bylaws of Essex Property Trust, Inc. dated February 14, 2000 27.1 Article 5 Financial Data Schedule (EDGAR Filing Only) B. Reports on Form 8-K ------------------- None 20 Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ESSEX PORTFOLIO, L.P. A California Limited Partnership By: Essex Property Trust, inc. Its: General Partner /s/ MARK J. MIKL --------------- Mark J. Mikl, Vice President and Controller (Authorized Officer and Principal Accounting Officer) May 10, 2000 ------------------ Date 21 EX-3.1 2 CERTIFICATE OF CORRECTION EXHIBIT 3.1 ESSEX PROPERTY TRUST, INC. -------------------------- CERTIFICATE OF CORRECTION THIS IS TO CERTIFY THAT: Essex Property Trust, Inc., a Maryland corporation (the "Corporation"), hereby certifies to the State Department of Assessment and Taxation of Maryland that: FIRST: The title of the document being corrected is Articles Supplementary Reclassifying 2,000,000 shares of Common Stock as 2,000,000 shares of 9.30% Series D Cumulative Redeemable Preferred Stock. SECOND: The document being corrected was filed on July 30, 1999. THIRD: The provisions of the Articles Supplementary which are to be corrected are as follows: 1. Section 2 currently reads as follows: "Section 2. Rank. The Series D Preferred Stock will, with ---- respect to distributions and rights upon voluntary or involuntary liquidation, winding-up or dissolution of the Corporation, rank senior to all classes or series of Common Stock (as defined in the Charter) and to all classes or series of equity securities of the Corporation now or hereafter authorized, issued or outstanding, other than the 8.75% Convertible Preferred Stock, Series 1996A (the "Series A Preferred Stock"), the 7.875% Series B Cumulative Redeemable Preferred Stock (the "Series B Preferred Stock") and the 9_% Series C Cumulative Redeemable Preferred Stock (the "Series C Preferred Stock") with which it shall be on a parity and any other class or series of equity securities of the Corporation expressly designated as ranking on a parity with or senior to the Series D Preferred Stock as to distributions and rights upon voluntary or involuntary liquidation, winding-up or dissolution of the Corporation. For purposes of these terms of the Series D Preferred Stock, the term "Parity Preferred Stock" shall be used to refer to the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and any other class or series of equity securities of the Corporation now or hereafter authorized, issued or outstanding expressly designated by the Corporation to rank on a parity with Series D Preferred Stock with respect to distributions and rights upon voluntary or involuntary liquidation, winding up or dissolution of the Corporation." 1 2. The section directly following paragraph SIXTH currently reads as follows: "IN WITNESS WHEREOF, these Articles Supplementary are executed on behalf of the Corporation by its President and attested by its Assistant Secretary this ___ day of July, 1999." FOURTH: The corrected provisions of the Articles Supplementary are as follows: 1. Section 2 shall read as follows: "Section 2. Rank. The Series D Preferred Stock will, with ---- respect to distributions and rights upon voluntary or involuntary liquidation, winding-up or dissolution of the Corporation, rank senior to all classes or series of Common Stock (as defined in the Charter) and to all classes or series of equity securities of the Corporation now or hereafter authorized, issued or outstanding, other than the 8.75% Convertible Preferred Stock, Series 1996A (the "Series A Preferred Stock"), the 7.875% Series B Cumulative Redeemable Preferred Stock (the "Series B Preferred Stock") and the 9 1/8% Series C Cumulative Redeemable Preferred Stock (the "Series C Preferred Stock") with which it shall be on a parity and any other class or series of equity securities of the Corporation expressly designated as ranking on a parity with or senior to the Series D Preferred Stock as to distributions and rights upon voluntary or involuntary liquidation, winding-up or dissolution of the Corporation. For purposes of these terms of the Series D Preferred Stock, the term "Parity Preferred Stock" shall be used to refer to the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and any other class or series of equity securities of the Corporation now or hereafter authorized, issued or outstanding expressly designated by the Corporation to rank on a parity with Series D Preferred Stock with respect to distributions and rights upon voluntary or involuntary liquidation, winding up or dissolution of the Corporation." 2. The section directly following paragraph SIXTH shall read as follows: "IN WITNESS WHEREOF, these Articles Supplementary are executed on behalf of the Corporation by its President and attested by its Assistant Secretary this 28th day of July, 1999." The undersigned President acknowledges this Certificate of Correction to be the corporate act of the Corporation and as to all matters or facts required to be verified under oath, the undersigned President acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material aspects and that this statement is made under the penalties for perjury. 2 IN WITNESS WHEREOF, the Corporation has caused this Certificate of Correction to be assigned in its name and on its behalf by its President and attested to by its Assistant Secretary on this 9th day of September, 1999. ATTEST: ESSEX PROPERTY TRUST, INC. /s/ Michael J. Schall By: /s/ Keith R. Guericke (SEAL) - --------------------- --------------------- Michael J. Schall Keith R.Guericke Assistant Secretary President 3 EX-3.2 3 CERTIFICATE OF AMENDMENT EXHIBIT 3.2 CERTIFICATE OF AMENDMENT OF THE BYLAWS OF ESSEX PROPERTY TRUST, INC. a Maryland corporation The undersigned, Michael J. Schall, hereby certifies that: 1. He is the duly elected Assistant Secretary of Essex Property Trust, Inc., a Maryland corporation (the "Company"). 2. Effective as of February 14, 2000, Section 1.11 of Article I of the Company's Bylaws was amended in its entirety to read as follows: SECTION 1.11 Annual Meetings and Stockholder Proposals. Nominations of ----------------------------------------- individuals for election to the Board of Directors and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (i) pursuant to the Corporation's notice of meeting, (ii) by or at the direction of the Board of Directors or (iii) by any stockholder of the Corporation who was a stockholder of record at the time of giving of notice provided for in this Section 1.11, who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 1.11. For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of the preceding paragraph of this Section 1.11, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the corporation, not less than 45 days nor more than 75 days prior to the date on which the corporation first mailed its proxy materials for the previous year's annual meeting of stockholders (or the date on which the corporation mails its proxy materials for the current year if during the prior year the corporation did not hold an annual meeting or if the date of the annual meeting was changed more than 30 days from the prior year). Such stockholder's notice shall set forth (i) as to each person whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (ii) as to any other business that the stockholder proposes to being before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and of the beneficial owner, if any, on whose behalf the proposal is made; and (iii) as to the stockholder giving the notice and the beneficial owner, if any, on 1 whose behalf the nomination or proposal is made, (x) the name and address of such stockholder, as they appear on the Corporation's books, and of such beneficial owner and (y) the number of shares of each class of stock of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner. Notwithstanding anything in the second sentence of the preceding paragraph of this Section 1.11 to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Corporation at least 70 days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice required by this Section 1.11 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the secretary at the principal executive offices of the Corporation not later than the close of business on the tenth day following on which such public announcement is first made by the Corporation. Notwithstanding the preceding two paragraphs, for nominations of individuals for election as a "Series 1996A Director(s)" (as defined in Section 2.2), pursuant to clause (iii) of the first paragraph in this Section 1.11, to be properly brought before a meeting of stockholders, the holder of "Series 1996A Stock" (as defined in Section 2.2) shall deliver his or her nomination(s) to the Secretary of the Corporation at the principal executive offices not less than 60 days nor more than 120 days prior to the first anniversary of the preceding year's annual meeting. The Corporation shall promptly notify the holders of Series 1996A Stock if the date of the annual meeting is advanced by more than 30 days from such anniversary date, and any nomination shall be considered timely if delivered to the Secretary either within 60 days after receipt of such notice or not less than 60 days prior to the date of the annual meeting as contained in such notice. 3. Effective as of February 14, 2000, Section 2.2 of Article II of the Company's Bylaws was amended in its entirety to read as follows: "SECTION 2.2 Number of Directors. The Corporation shall have at ------------------- least the minimum number of directors required by the Maryland General Corporation Law. The Corporation shall have a Board of Directors consisting of eleven directors. Ten of the eleven directors, hereinafter referred to as the "Common Directors," shall be elected by the holders of common stock and the holders of all classes or series of stock who vote together with the holders of common stock and the remaining director, hereinafter referred to as the "Series 1996A Director" shall be elected by the holders of the 8.75% Convertible Preferred Stock, Series 1996A (the "Series 1996A Stock"), voting separately as a class. The number of directors may be increased upon certain events as provided in (i) Article First, Section 3 of the Articles Supplementary classifying 1,600,000 shares of Common Stock as shares of 8.75% Convertible Preferred Stock, Series 1996A (or Article FIFTH, subsection (e) of any restatement of the Charter) (the "Articles Supplementary (Series 1996A Stock)"), (ii) Article Third, Section 6 of the Articles Supplementary classifying 2,000,000 shares of Common Stock as shares of 7.875% Series B Cumulative Redeemable Preferred Stock (or Article FIFTH, subsection 2 (f) of any restatement of the Charter), (iii) Articles First, Section 3.c of the Articles Supplementary Reclassifying 6,617,822 shares of Common Stock as 6,617,822 shares of Series A Junior Participating Preferred Stock (or Article FIFTH, subsection (g) of any restatement of the Charter), (iv) Article Third, Section 6 of the Articles Supplementary classifying 500,000 shares of Common Stock as 500,000 shares of 9 1/8% Series C Cumulative Redeemable Preferred Stock (or Article FIFTH, subsection (h) of any restatement of the Charter), (v) Article Third, Section 6 of the Articles Supplementary classifying 2,000,000 shares of Common Stock as 2,000,000 shares of 9.30% Series D Cumulative Redeemable Preferred Stock (or Article FIFTH, subsection (h) of any restatement of the Charter), (vi) Article Third, Section 6 of the Articles Supplementary classifying 2,200,000 shares of Common Stock as 2,200,000 shares of 9.25% Series E Cumulative Redeemable Preferred Stock (or Article FIFTH, subsection (h) of any restatement of the Charter), and (vii) in any additional articles supplementary to the Charter adopted by the Board of Directors pursuant to authority conferred upon the Board of Directors by Article FIFTH of the Charter. All directors shall be classified with respect to their respective terms of office as provided in Section 2.3 and each director shall serve until the expiration of his or her term and until his or her successor is elected and qualifies." IN WITNESS HEREOF, the undersigned has set his hand hereto this 14th day of February 2000. /s/ Michael J. Schall ---------------------------- Michael J. Schall Assistant Secretary 3 EX-27.1 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ESSEX PORTFOLIO, L.P. REPORT FOR THE THREE MONTHS ENDED MARCH 31, 2000. 1,000 3-MOS DEC-31-2000 MAR-31-2000 23,086 0 22,577 0 0 67,711 1,029,561 95,404 1,056,362 48,436 372,917 0 1 2 627,521 1,056,362 0 39,536 0 17,522 1,284 0 5,808 18,798 0 18,798 0 0 0 18,798 0.70 0.69
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