-----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, TApLBKrDv5u3FovsqXMRUX0zymjmUdpK4C6NEcGuZsGEGrkgIb2EN1pCD+20gv62 RliGN76ll7Q97j50fbIP+g== 0000950149-96-000556.txt : 19960515 0000950149-96-000556.hdr.sgml : 19960515 ACCESSION NUMBER: 0000950149-96-000556 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ESSEX PROPERTY TRUST INC CENTRAL INDEX KEY: 0000920522 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 770369576 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13106 FILM NUMBER: 96562344 BUSINESS ADDRESS: STREET 1: 7777 CALIFORNIA AVE CITY: PALO ALTO STATE: CA ZIP: 94304 BUSINESS PHONE: 4154943700 MAIL ADDRESS: STREET 1: 755 PAGE MILL RD CITY: PALO ALTO STATE: CA ZIP: 94304 10-Q 1 FORM 10-Q 1 FORM 10Q 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, 1996 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. 1-13106 ESSEX PROPERTY TRUST, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) MARYLAND 77-0369576 (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 777 CALIFORNIA AVENUE, PALO ALTO, CALIFORNIA 94304 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (415) 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 --- --- APPLICABLE ONLY TO CORPORATE ISSUERS: INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE. 6,275,000 SHARES OF COMMON STOCK, $.0001 PAR VALUE AS OF MARCH 31, 1996 Exhibit Index on Page 15 Page 1 of 28 2 INDEX
Exhibit Number Description Page Number - ------- ----------- ----------- PART I: FINANCIAL INFORMATION Item 1: Financial Statements (Unaudited) 3 Condensed Consolidated Balance Sheet of Essex Property Trust, Inc. as of March 31, 1996 and December 31, 1995 4 Condensed Consolidated Statement of Operations of Essex Property Trust, Inc. for the three months ended March 31, 1996 and 1995 5 Condensed Consolidated Statement of Cash Flows of Essex Property Trust, Inc. for the three months ended March 31, 1996 and 1995 6 Notes to Condensed Consolidated Financial Statements 7 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II: OTHER INFORMATION Item 6: Exhibits and Reports on Form 8-K 13 Signatures 14
Page 2 of 28 3 PART I ITEM 1 FINANCIAL INFORMATION "Essex" means Essex Property Trust, Inc., a real estate investment trust incorporated in the State of Maryland, or where the context otherwise requires, Essex Portfolio, L.P., a partnership in which Essex Property Trust, Inc. is the sole general partner. The information furnished in the accompanying condensed consolidated balance sheet, condensed consolidated statement of operations and condensed consolidated statement of cash flows of Essex reflect 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. Page 3 of 28 4 ESSEX PROPERTY TRUST, INC. CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands)
March 31, December 31, Assets 1996 1995 ------ --------- ------------ Real estate: Rental properties: Land and land improvements $ 65,374 $ 61,738 Buildings and improvements 231,732 222,620 -------- -------- 297,106 284,358 Less accumulated depreciation (42,456) (40,281) -------- -------- 254,650 244,077 Investments 8,581 8,656 -------- -------- 263,231 252,733 Cash and cash equivalents 2,651 3,983 Notes and other related party receivables 6,289 4,780 Notes and other receivables 5,092 5,130 Prepaid expenses and other assets 1,567 1,944 Deferred charges, net 3,790 5,090 -------- -------- $282,620 $273,660 ======== ======== Liabilities and Stockholders' Equity Mortgage notes payable 152,358 136,061 Lines of credit 12,869 18,463 Accounts payable and accrued liabilities 4,727 2,964 Dividends payable 3,455 3,455 Other liabilities 1,662 1,565 -------- -------- Total liabilities 175,071 162,508 Minority interest 25,544 26,423 Stockholders' equity: Common stock, $.0001 par value, 670,000,000 shares authorized, 6,275,000 shares issued and outstanding 1 1 Additional paid-in capital 112,070 112,070 Accumulated deficit (30,066) (27,342) -------- -------- Total stockholders' equity 82,005 84,729 -------- -------- $282,620 $273,660 ======== ========
See accompanying notes to the unaudited financial statements. Page 4 of 28 5 ESSEX PROPERTY TRUST, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in thousands, except shares per share amounts)
Three months ended March 31, March 31, 1996 1995 ----------- ---------- Revenues: Rental $ 10,951 $ 10,307 Interest and other income 603 616 --------- --------- 11,554 10,923 --------- --------- Expenses: Property operating expenses: Maintenance and repairs 1,007 985 Real estate taxes 886 849 Utilities 756 768 Administrative 656 675 Advertising 151 70 Insurance 146 136 Depreciation and amortization 2,190 1,980 --------- --------- 5,792 5,463 --------- --------- Interest 2,901 2,720 Amortization of deferred financing costs 245 363 General and administrative 397 365 Loss from hedge termination 21 -- --------- --------- Total expenses 9,356 8,911 --------- --------- Income before minority interests and extraordinary item 2,198 2,012 Minority interest (75) (525) --------- --------- Income before extraordinary item 2,123 1,487 Extraordinary item: Loss on early extinguishment of debt (2,180) -- --------- --------- Net income (loss) $ (57) $ 1,487 ========= ========= Per share data: Net income per share from operations before extraordinary item $ .34 .24 Extraordinary item - debt extinguishment (.35) -- --------- --------- Net income (loss) per share $ (.01) $ .24 ========= ========= Weighted average number of shares outstanding during the period 6,275,000 6,275,000 ========= =========
See accompanying notes to the unaudited financial statements. Page 5 of 28 6 ESSEX PROPERTY TRUST, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unadited) (Dollars in Thousands)
Three months ended Three months ended March 31, 1996 March 31, 1995 ------------------ ------------------ Net cash flows from operating activities $ 5,695 $ 4,429 Cash flows from investing activities: Additions to real estate investments (12,748) (541) Investments in corporations and joint ventures 154 0 -------- ------- Net cash used in investing activities (12,594) (541) Cash flows from financing activities: Proceeds from mortgages, other notes payable and lines of credit 45,271 880 Repayment of mortgages, other notes payables and lines of credit (34,568) (1,559) Additions to deferred charges (225) 0 Additions to notes and other related party receivables/payables 2,166 574 Repayment of notes, other related party receivables/payables (3,622) (785) Distribution to partners/dividends to shareholders (3,455) (3,394) -------- ------- Net cash provided by (used in) financing activities 5,567 (4,284) -------- ------- Net decrease in cash and cash equivalents (1,332) (396) Cash and cash equivalents at beginning of period 3,983 2,411 -------- ------- Cash and cash equivalents at end of period $ 2,651 $ 2,015 ======== ======= Supplemental disclosure of cash flow information Cash paid for interest $ 2,910 $ 2,705 ======== ======= Supplemental disclosure of non-cash investing and financing activity Mortgage note payable assumed in connection with purchase of real estate investment $ 0 $ 0 ======== ======= Dividends declared and payable $ 3,455 $ 3,394 ======== =======
See accompanying notes to the unaudited financial statements. Page 6 of 28 7 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1996 AND 1995 (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) (1) ORGANIZATION AND BASIS OF PRESENTATION The unaudited condensed consolidated financial statements of Essex Property Trust, Inc. (the "Company") are prepared in accordance with generally accepted accounting principles for interim financial information and 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 condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 1995. The accompanying consolidated financial statements present the accounts of Essex Property Trust, Inc., following certain reorganization transactions in connection with the sale of 6,275,000 shares of common stock in an initial public offering which closed on June 13, 1994 (the "Offering"). The consolidated financial statements for the three months ended March 31, 1996 and 1995 include the accounts of the Company and Essex Portfolio, L.P. (the "Operating Partnership", which holds the operating assets of the Company). The Company is the sole general partner in and owns 77.2% of the Operating Partnership. The limited partners own an aggregate 22.8% interest in the Operating Partnership. All significant intercompany balances and transactions have been eliminated in the consolidated financial statements. (2) SIGNIFICANT TRANSACTIONS The following significant transactions occurred during the quarter ended March 31, 1996: (A) Acquisitions (I) On January 31, 1996, Essex acquired Treetops Apartments, a 172 unit apartment community in Fremont, California for a contract price of $10,725. Essex assumed the existing mortgage owed on the property of approximately $7,266, which carries an 8.5% fixed interest rate and is due in September, 1999. Built in 1978, Treetops has a heated pool and spa, fitness center, and patios or balconies in individual units. (B) Debt related transactions (I) On February 16, 1996, Essex refinanced a mortgage loan in the approximate amount of $12,160 loan with a 7.1% 10 year fixed rate loan in the amount of $14,475. In connection with the refinance transaction, Essex has paid the lender a prepayment fee of $500 and, subject to final negotiations, could pay up to $400 additionally. Essex wrote off approximately $1,105 in deferred financing costs. (II)On February 21, 1996, Essex refinanced three variable rate loans in the approximate balance of $18,960, with a $20,200, 7.5%, 7 year fixed rate mortgage. Essex wrote off approximately $175 in deferred financing costs in connection with this transaction. (3) RELATED PARTY TRANSACTIONS Effective June 13, 1994, all general and administrative expenses of the Company and Essex Management Corporation ("EMC") are initially borne by the Company, with a portion subsequently allocated to EMC. Expenses allocated to EMC for the three months ended March 31, 1996 and 1995, totaled $425 and $488, Page 7 of 28 8 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1996 AND 1995 (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) respectively, and are reflected as a reduction in general and administrative expenses in the accompanying consolidated statements of operations. Included in rental income in the accompanying consolidated statements of operations is related party rents earned from space leased to The Marcus & Millichap Company ("M&M"), including operating expense reimbursements, of $170 and $165 for the three months ended March 31, 1996 and 1995, respectively. Included in other income for the three months ended March 31, 1996 and 1995 is interest income of $91 and $86, earned principally under notes receivable from Essex Fidelity I Corporation and Essex Sacramento Corporation, respectively, and management fees and equity income of $137 and 0, earned from Essex Bristol Partners and Essex San Ramon Partners, respectively. Effective June 13, 1994, EMC provides property management services to the Company's neighborhood shopping centers. The fee paid by the Company for the three months ended March 31, 1996 and 1995 was $28, and $25, respectively, and is included in administrative expense in the accompanying consolidated statements of operations. Notes and other related party receivables as of March 31, 1996 and December 31, 1995 consist of the following:
March 31, December 31, 1996 1995 --------- ------------ Notes receivable from Essex Fidelity I Corporation and Essex Sacramento Corporation, bearing interest at 9% due on demand $3,380 $3,540 Notes receivable from Essex Marina Cove, L.P. bearing interest at 12% due on demand 1,466 -- Notes receivable from Essex Fidelity I Corporation and Jackson School Village, L.P. bearing interest at 9.5% - 10%, due 2015 500 500 Other related party receivables 943 740 ------ ------ $6,289 $4,780 ====== ======
Other related party receivables consist primarily of unreimbursed expenses due from EMC, accrued interest income on related party notes receivable and acquisition cost-related reimbursements due from Essex San Ramon Partners. As of March 31, 1996 and December 31, 1995, the Company has payables to related parties totaling $166 and $217, representing temporary borrowings and unreimbursed expenses, respectively. During the three months ended March 31, 1996, the Company paid brokerage commissions totalling $250 to M&M in connection with the purchase of real estate. The commissions are reflected as an increased cost on the purchase of real estate in the accompanying condensed consolidated balance sheet. Page 8 of 28 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion is based primarily on the consolidated financial statements of Essex Property Trust, Inc. ("Essex" or the "Company") as of March 31, 1996 and 1995 and for the three months ended March 31, 1996 and 1995. This information should be read in conjunction with the accompanying consolidated financial statements and notes thereto. These 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. Substantially all the assets of Essex are held by, and substantially all operations conducted through, Essex Portfolio, L.P. (the "Operating Partnership"). Essex is the sole general partner of the Operating Partnership and, as of March 31, 1996 and 1995, owned a 77.2% general partnership interest in the Operating Partnership. The Company qualifies as a Real Estate Investment Trust (a "REIT") for Federal income tax purposes. Certain statements in this "Management's Discussion and Analysis of Financial Condition and Results of Operations," section constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Essex to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. GENERAL BACKGROUND Essex's revenues are generated primarily from multifamily residential, retail and commercial property operations, which accounted for 95% and 94% of its revenues for the three months ended March 31, 1996 and 1995, respectively. Essex's properties (the "Properties") are located in California, Oregon and Washington. Occupancy levels of Essex's multifamily residential Properties in these markets have generally remained high (averaging approximately 95% over the last five years). Essex has qualified as a real estate investment trust ("REIT") for federal income tax purposes, commencing with the year ending December 31, 1994. In order to maintain compliance with REIT tax rules, Essex provides fee-based asset management and disposition services as well as third-party property management and leasing services through Essex Management Corporation ("EMC"). Essex owns 100% of EMC's 19,000 shares of nonvoting preferred stock. Executives of Essex own 100% of EMC's 1,000 shares of common stock. Essex has been actively engaged in the business of acquiring and managing portfolios of non-performing assets along with institutional investors. Asset management services resulting from these portfolios are provided by EMC, typically for the term that is required to acquire, reposition and dispose of the portfolio. Asset management agreements usually provide for a base management fee calculated as a percentage of the gross asset value of the portfolio under management, and an incentive fee based upon the overall financial performance of the portfolio. Accordingly, the fees earned as a result of these contracts fluctuate as assets are acquired and disposed. In general, Essex believes, however, that there will be fewer opportunities to acquire portfolios of non-performing assets in the future. Average financial occupancy rates of the Company's multifamily properties for the three months ended March 31, 1996 on multifamily properties were as follows:
All On a Same Properties Property Basis ---------- -------------- Northern California 99% 99% Seattle 94% 95% Southern California 97% 97%
Page 9 of 28 10 The Company's retail and commercial properties were 93% occupied (based on square footage) as of March 31, 1996. RESULTS OF OPERATIONS Comparison of the Three Months Ended March 31, 1996 to the Three Months Ended March 31, 1995 Total Revenues increased by $631,000 or 5.8% to $11,554,000 in the first quarter of 1996 from $10,923,000 in the first quarter of 1995. Rental revenues increased by $644,000 or 6.3% to $10,951,000 in the first quarter of 1996 from $10,307,000 in the first quarter of 1995. Approximately $45,000 of the increase in rental revenues was attributable to the Properties acquired and disposed of in 1995 and 1996 with the balance of the increase relating to rental rate and occupancy level increases. Rental revenues from the San Francisco South Bay and Seattle multifamily residential Properties increased by $471,000 to $8,564,000 in the first quarter of 1996 from $8,093,000 in the first quarter of 1995. Rental revenue increased by $38,000 during the first quarter of 1996 from the amount in the first quarter of 1995 for the two Properties located in Southern California. Commercial property rental revenue increased $135,000 for the first quarter of 1996 as a result of increased occupancy. Total Expenses increased by $445,000 or approximately 5.0% to $9,356,000 in the first quarter of 1996 from $8,911,000 in the first quarter of 1995. Interest expense increased by $181,000 or 6.6% to $2,901,000 in the first quarter of 1996 from $2,720,000 in the first quarter of 1995. Such interest expense increase was primarily due to the net addition of outstanding mortgage debt in connection with property and investment acquisitions. Property operating expenses, which include maintenance and repairs, real estate taxes, advertising, utilities, and on-site administrative expenses, increased by $119,000 or 3.4% to $3,602,000 in the first quarter of 1996 from $3,483,000 in the first quarter of 1995. Of such increase, $41,000 was attributable to Properties acquired and disposed of in 1995 and 1996. General and administrative expenses represent the costs of Essex's various acquisition and administrative departments as well as partnership administration and non-operating expenses. Such expenses increased by $32,000 in the first quarter of 1996 from the first quarter of 1995. Net income after minority interest decreased by $1,544,000 to $(57,000) in the first quarter of 1996 from $1,487,000 in the first quarter of 1995. The decrease in net income was largely the result of an extraordinary charge of $2,180,000 related to the early extinguishment of debt. LIQUIDITY AND CAPITAL RESOURCES At March 31, 1996, Essex had $2,651,000 in cash and cash equivalents, which management believes should be sufficient to meet its immediate operating cash requirements. Essex has credit facilities in the committed amount of approximately $17,000,000. At March 31, 1996 Essex had $12,869,000 outstanding on its lines of credit, with interest rates generally ranging from 7.2% to 7.4%. Essex's cash balance decreased $1,332,000 from $3,983,000 as of December 31, 1995 to $2,651,000 as of March 31, 1996. This decrease in cash was the result of $5,695,000 net cash provided by operating activities, reduced by $12,594,000 net cash used by investing activities and $5,567,000 in net cash provided by financing activities. The significant components which contributed to the $12,594,000 net cash used by investing activities was $12,748,000 used to purchase and upgrade rental properties. The significant components which contributed to the $5,567,000 net cash provided by financing activities were $45,271,000 of proceeds from mortgages, other notes payable and lines of credit as offset by $34,568,000 of repayments of mortgages, other notes payable and lines of credit and $3,455,000 of dividends/distribution paid. As of March 31, 1996, the combined outstanding indebtedness under mortgages and lines of credit consisted of $124,141,000 in fixed rate debt, (such component includes variable rate indebtedness subject to interest rate swap agreements), $14,617,000 in debt based on the Federal Home Loan Bank's 11th District Cost of Funds index ("the 11th District Debt"), $10,580,000 of variable rate debt based on The London Interbank Offered Rates ("LIBOR"), $2,289,000 of variable rate debt based on The Internal Banking Offshore Rate ("IBOR"), and Page 10 of 28 11 $13,600,000 of debt represented by tax exempt variable rate demand bonds. Essex's 11th District Debt is subject to maximum annual payment adjustments of 7.5% and a maximum interest rate during the term of the loans of 13%. In June 1994, Essex entered into a five-year interest rate protection agreement covering mortgage notes payable with aggregate balances of $24,133,000 as of December 31, 1994. The agreements protected the Company from increase in the thirty-day LIBOR rate in excess of a 6.3125% cap rate. In May 1995, Essex sold this agreement and used the net proceeds to enter into an interest rate swap agreement extending through June 1999. The interest rate swap agreement fixes the thirty-day LIBOR rate at 5.79% for mortgage notes payable with aggregate balances of $18,246,000 as of March 31, 1996. Essex expects to incur in the range of approximately $1,450,000 or $300 per weighted average occupancy unit in non-revenue generating capital expenditures for the year ended December 31, 1996. These expenditures do not include the improvements required in connection with Northwestern Mutual mortgage loans and renovation expenditures required pursuant to the requirements related to the tax-exempt variable rate demand bonds. Essex expects that cash from operations and/or the lines of credit will fund such expenditures. Essex pays quarterly dividends from cash available for distribution. Until it is distributed, cash available for distribution is invested by the Company primarily in short-term investment grade securities or is used by the Company to reduce balances outstanding under its lines of credit. Essex expects to meet its short-term liquidity requirements by using its initial working capital and any portion of net cash flow from operations not currently distributed. Essex believes that its future net cash flows will be adequate to meet operating requirements and to provide for payment of dividends by the Company in accordance with REIT requirements. Essex expects to meet certain long-term liquidity requirements such as scheduled debt maturities and repayment of short-term financing of acquisition and development activities through the issuance of long-term secured and unsecured debt and offerings by Essex of additional equity securities (or limited partnership interests in the Operating Partnership). On March 7, 1996, Essex filed a shelf registration statement for up to $100 million of common stock, preferred stock, depository shares and warrants to purchase common and preferred stock. As of May 9, 1996, the shelf registration statement had not been declared effective by the Securities and Exchange Commission. FUNDS FROM OPERATIONS Industry analysts generally consider Funds from Operations an appropriate measure of performance of an equity REIT. Generally, Funds from Operations adjusts the net income of equity REITs for non-cash charges such as depreciation and amortization and non-recurring gains or losses. Management generally 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 GAAP and does not that 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 Operating Partnership'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 calculation of Funds from Operations. The following table sets forth Essex's calculation of actual Funds from Operations for the quarter ended March 31, 1996 and 1995. Page 11 of 28 12
For the Quarter ended March 31, ------------------------------------------ 1996 1995 ----------- ----------- Income before, extraordinary item and minority interest $2,198,000 $2,012,000 Adjustments: Depreciation & Amortization 2,190,000 1,973,000 . Adjustment for Unconsolidated Joint Venture 119,000 0 Non-recurring Items 21,000 0 Minority Interest - Pathways (140,000) (120,000) --------- ---------- Funds from Operations $4,388,000 $3,865,000 ========== ========== Number of Shares (1) 8,130,000 8,130,000
(1) Assumes conversion of all outstanding operating partnership interests in the Operating Partnership into shares of Essex's common stock. The National Association of Real Estate Investment Trusts ("NAREIT"), a leading industry trade group, has approved a revised definition of Funds from Operations, which provides that the amortization of deferred financing costs in no longer to be added back to net income to calculate Funds from Operations. Essex has adopted the revised NAREIT definition of Funds from Operations beginning on January 1, 1996 and 1995 results have been restated based on this revised definition. Page 12 of 28 13 PART II OTHER INFORMATION Item 6: Exhibits and Reports on Form 8-K EXHIBITS -------- 10.43 $20.2 million Promissory Note to Northwestern Mutual Life Insurance Company 10.44 $14.475 million Promissory Note to Union Bank 12.1 Schedule of Computation of Ratio of Earnings to Fixed Changes 27.1 Article 5 Financial Data Schedule (EDGAR filing only) REPORTS ON FORM 8-K None Page 13 of 28 14 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 PROPERTY TRUST, INC. /s/ Michael J. Schall ------------------------------------------- Michael J. Schall, Executive Vice President and Chief Financial Officer (Principal Financial Officer) ------------------------------------------- Date Page 14 of 28 15
EXHIBITS INDEX PAGE - -------------- ---- 10.43 $20.2 million Promissory Note to Northwestern Life Insurance Company 16 10.44 $14.475 million Promissory Note to Union Bank 22 12.1 Schedule of Computation of Ratio of Earnings to Fixed Changes 28 27.1 Article 5 Financial Data Schedule (EDGAR filing only)
Page 15 of 28 EX-10.43 2 PROMISSORY NOTE 1 LOAN NO. A-331882 WASHINGTON EXHIBIT 10.43 PROMISSORY NOTE --------------- $20,200,000.00 As of February 13, 1996 -------------------- (Place of Execution) For value received, the undersigned, herein called "Borrower," promises to pay to the order of THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, a Wisconsin corporation, who, together with any subsequent holder of this note, is hereinafter referred to as "Lender", at 720 E. Wisconsin Avenue, Milwaukee, WI 53202 or at such other place as Lender shall designate in writing, in coin or currency which, at the time or times of payment, in legal tender for public and private debts in the United States, the principal sum of TWENTY MILLION TWO HUNDRED THOUSAND DOLLARS or so much thereof as shall have been advanced from time to time plus interest on the outstanding principal balance at the rate and payable as follows: Interest shall accrue from the date of advance until maturity at the rate of seven and fifty hundredths percent (7.50%) per annum (the "Interest Rate"). Accrued interest shall be paid on the fifteenth day of the month following the first advance and on the fifteenth day of each of the next six months. On the fifteenth day of the seventh month (the "Initial Amortization Date") and on the fifteenth day of each and every month thereafter, installments of principal and interest shall be paid in the amount of $149,277.00 until maturity. The amortization period shall be twenty-five years. All installments shall be applied first in payment of interest, and the remainder of each installment shall be applied on principal. The entire unpaid principal balance plus accrued interest thereon shall be due and payable on March 15, 2003 (the "Maturity Date"). In the event the Sunpointe Note (as hereinafter defined) and the Facilitator Note (as hereinafter defined) are paid or otherwise satisfied in full prior to the Maturity Date, the Interest Rate on this note shall be increased by ten hundredths percent (0.10%) per annum, effective as of the date of any such payment or satisfaction. Said increased Interest Rate shall be effective through the remaining term of this note. Borrower shall have the one time privilege, upon thirty (30) days advance written notice, beginning June 15, 1999 of paying this note in full with a prepayment privilege fee. This fee represents consideration to Lender for loss of yield and reinvestment costs. The fee shall be the greater of Yield Maintenance of 1% of the outstanding principal balance of this note. As used herein, "Yield Maintenance" means the amount, if any, by which (i) the present value of the Then Remaining Payments (as hereinafter defined) calculated using a Page 16 of 28 2 periodic discount rate (corresponding to the payment frequency under this note) which, when compounded for such number of payment periods in a year, equals the per annum effective yield of the Most Recently Auctioned United States Treasury Obligation having a maturity date equal to the Maturity Date (or, if there is no such equal maturity date, then the linearly interpolated per annum effective yield of the two Most Recently Auctioned United States Treasury Obligations having maturity dates most nearly equivalent to the Maturity Date) as reported by the Wall Street Journal five business days prior to the date of prepayment exceeds (ii) the outstanding principal balance of this note (exclusive of all accrued interest). If such United States Treasury obligation yields shall not be reported as of such time or the yields reported as of such time shall not be ascertainable, then the periodic discount rate shall be equal to the Treasury Constant Maturity Series yields reported, for the latest day for which such yields shall have been so reported, as of five business days preceding the prepayment date, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded United States Treasury obligations having a constant maturity most nearly equivalent to the Maturity Date. As used herein, "Then Remaining Payments" means payments in such amounts and at such times as would have been payable subsequent to the date of such prepayment in accordance with the terms of this note. As used herein, "Most Recently Auctioned United States Treasury Obligations" shall mean the bonds and notes with maturities of 30 years, 10 years, 5 years, 3 years and 1 year which, as of the date the prepayment privilege fee is calculated, were most recently auctioned by the United States Treasury. Upon the occurrence of an Event of Default (as defined in the Lien Instrument) followed by acceleration of the whole indebtedness, or a condemnation or sale under threat of condemnation of all or substantially all of the Property, payment of the amount necessary to satisfy the entire indebtedness evidenced by this note will constitute an evasion of the prepayment terms hereunder and be deemed to be a voluntary prepayment hereof and such payment will, therefore (to the extent not prohibited by law) include the prepayment privilege fee required under the prepayment in full privilege recited above. If such prepayment occurs prior to June 15, 1999 and results from an Event of Default followed by an acceleration of the whole indebtedness, then such payment will, to the extent not prohibited by law, include a prepayment fee equal to the greater of Yield Maintenance or 6% of the outstanding principal balance of this note. If such prepayment occurs prior to June 15, 1999 and results in a condemnation or sale under threat of condemnation of all or substantially all of the Property, the prepayment fee shall be Yield Maintenance. Notwithstanding the above and provided there is no default under this note, this note may be prepaid in full without a prepayment fee at any time during the last sixty (60) days of the term of this note. Borrower acknowledges and agrees that the Interest Rate hereunder shall be increased if certain financial statements and other reports are not furnished to Lender, Page 17 of 28 3 all as described in more detail in the provision of the Lien Instrument entitled "FINANCIAL STATEMENTS". This note is secured by: (a) that certain Deed of Trust, Security Agreement and Fixture Filing dated June 13, 1994 executed by Essex Sunpointe Ltd. ("Sunpointe"), a California limited partnership, for the benefit of The Northwestern Mutual Life Insurance Company and recorded on June 13, 1994, as Document No. 94061300678, in the records of King County, Washington, as amended by that certain First Amendment of Lien Instrument of even date herewith executed by Sunpointe and The Northwestern Mutual Life Insurance Company (as so amended, the "Sunpointe Lien Instrument") covering certain property in Bellevue, King County Washington (the "Sunpointe Property"); (b) that certain Deed of Trust, Security Agreement and Fixture Filing dated June 13, 1994 executed by Essex-Palisades Facilitator ("Facilitator"), a California limited partnership, for the benefit of The Northwestern Mutual Life Insurance Company and recorded on June 13, 1994 as Document No. 9406130080 in the records of King County, Washington, as amended by that certain First Amendment of Lien Instrument of even date herewith executed by Facilitator and The Northwestern Mutual Life Insurance Company (as so amended, the "Facilitator Lien Instrument") covering certain property in Bellevue, King County Washington (the "Facilitator Property"); (c) Deed of Trust and Security Agreement (the "Portfolio Lien Instrument") of even date herewith executed by ESSEX PORTFOLIO L.P., a California limited partnership to FIRST AMERICAN TITLE INSURANCE COMPANY, as Trustee, for THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, covering certain property in Bellevue, King County, Washington consisting of approximately 13.98 acres (the "Sammamish View Property"), in Bellevue, King County, Washington consisting of approximately 9.09 acres (the "Emerald Ridge Property") and in Seattle, King County, Washington consisting of approximately 1.74 acres (the "Wharfside Pointe Property") (The Sammamish View Property, the Emerald Ridge Property and the Wharfside Pointe Property are collectively herein referred to as the "Portfolio Property"; the Portfolio Property, the Sunpointe Property and the Facilitator Property are collectively herein referred to as the "Property"), and the Sunpointe Lien Instrument, the Facilitator Lien Instrument and the Portfolio Lien Instrument are collectively herein referred to as the "Lien Instrument"). Upon the occurrence of an Event of Default (as defined in the Lien Instrument), the whole unpaid principal and accrued interest shall, at the option of Lender, to be exercised at any time thereafter, become due and payable at once without notice, notice of the exercise of, and the intent to exercise, such option being hereby expressly waived. All persons or corporations now or at any time liable, whether primarily or secondarily, for payment of indebtedness hereby evidenced, for themselves, their heirs, legal representatives, successors and assigns, respectively, expressly waive presentment for payment, notice of dishonor, protest, notice of protest, and diligence in collection, and Page 18 of 28 4 consent that the time of said payments or any part thereof may be extended by Lender and further consent that the real or collateral security or any part thereof may be released by Lender, without in any wise modifying, altering, releasing, affecting, or limiting their respective liability or the lien of said Lien Instrument, and agree to pay reasonable attorney's fees and expenses of collection including any bankruptcy or insolvency proceeding, in case this note is placed in the hands of an attorney for collection or suit is brought thereon. Any principal, interest or other amounts payable under this note, the Lien Instrument or other instruments securing payment hereof, not paid when due (without regard to any notice and/or cure provisions contained herein or in any of the other loan documents executed in connection with this note), including principal becoming due by reason of acceleration by Lender of the entire unpaid balance of this note, shall bear interest from the due date thereof until paid at the Default Rate, as hereinafter defined. The term "Default Rate" is defined as the lower of a rate equal to the interest rate in effect at the time of the default as herein provided plus 5% per annum or the maximum rate permitted by law. No provision of this note shall require the payment or permit the collection of interest, including any fees paid which are construed under applicable law to be interest, in excess of the maximum permitted by law. If any such excess interest is collected or herein provided for, or shall be adjudicated to have been collected or be so provided for herein, the provisions of this paragraph shall govern, and Borrower shall not be obligated to pay the amount of such interest to the extent that it is in excess of the amount permitted by law and any such excess collected shall, at the option of Lender, unless otherwise required by applicable law, be immediately refunded to Borrower or credited on the principal of this note immediately upon Lender's awareness of the collection of such excess. Notwithstanding any provision contained herein or in the Lien Instrument to the contrary, if Lender shall take action to enforce the collection of the indebtedness evidenced hereby or secured by the Lien Instrument (collectively, the "Indebtedness"), its recourse shall, except as provided below, be limited to the Property or the proceeds from the sale of the Property and the proceeds realized by Lender in exercising its rights and remedies (i) under the Absolute Assignment (as defined in the Lien Instrument), (ii) under the Additional Guarantee of even date herewith executed by Essex Property Trust, Inc., a Maryland corporation ("EPTI"), and under the Guarantee of Recourse Obligations of even date herewith executed by EPTI, both for the benefit of Lender, and under other separate guarantees, if any, (iii) under any of the other Loan Documents (as defined in the Lien Instrument) and (iv) in any other collateral securing the Indebtedness. If such proceeds are insufficient to pay the Indebtedness, Lender will never institute any action, suit, claim or demand in law or in equity against Borrower for or on account of such deficiency; provided, however, that the provisions contained in this paragraph (i) shall not in any way affect or impair the validity or enforceability of the Indebtedness or the Lien Instrument; and Page 19 of 28 5 (ii) shall not prevent Lender from seeking and obtaining a judgment against Borrower, and Borrower shall be personally liable, for the Recourse Obligations; and (iii) shall not be applicable in the event of a violation of any of the provisions of the Lien Instrument following the caption entitled "Due on Sale" (i.e. Borrower shall be personally liable for all of the Indebtedness in the event of such violation). As used herein, the term "Recourse Obligations" means (a) rents and other income from the Property from and after the date of any default under the Loan Documents remaining uncured on the date of the foreclosure sale of the Property pursuant to the Lien Instrument or the conveyance of the Property to Lender in lieu of foreclosure, which rents and other income have not been applied to the payment of principal and interest on the Note or to reasonable operating expenses of the Property, (b) amounts necessary to repair any damage to the Property caused by the intentional acts or intentional omissions of Borrower or its agents, (c) insurance loss and condemnation award proceeds released to Borrower but not applied in accordance with any agreement between Borrower and Lender as to their application, (d) amounts necessary to pay costs of investigation and clean-up of hazardous materials and toxic substances on or affecting the Property, (e) damages suffered by Lender as a result of fraud or misrepresentation in connection with the Indebtedness by Borrower or any other person or entity acting on behalf of Borrower, and (f) amounts necessary to pay real estate taxes, special assessments and insurance premiums with respect to the Property (to the extent not previously deposited with Lender by Borrower pursuant to the provisions of the Lien Instrument following the caption entitled "DEPOSITS BY GRANTOR") either paid by Lender and not reimbursed prior to, or remaining due or delinquent on, either (i) the later of (A) the date on which title vests in the purchaser at the foreclosure sale of the Property pursuant to the Lien Instrument or (B) the date on which Borrower's statutory right of redemption shall expire or be waived, or (ii) the date of the conveyance of the Property to lender in lieu of foreclosure. This Note shall be governed by and construed in accordance with the laws of the State of Washington. Page 20 of 28 6 ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, MODIFY LOAN TERMS, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW. ESSEX PORTFOLIO L.P., a California limited partnership By: Essex Property Trust, Inc., a Maryland corporation, general partner By: /s/ Jordan E. Ritter --------------------------------- Its: Vice President (corporate seal) PAGE 21 of 28 EX-10.44 3 COMMERCIAL PROMISSORY NOTE 1 EXHIBIT 10.44 [UNION BANK LOGO] COMMERCIAL PROMISSORY NOTE SECURED BY DEED OF TRUST
- ----------------------------------------------------------------------------------------------------- Borrower Name ESSEX PORTFOLIO, L.P., a California limited partnership - ----------------------------------------------------------------------------------------------------- Borrower Address Office Number 795 Loan Number 2696022339- 777 California Street --------------------------------------------------------------------- Palo Alto, California 94304 Maturity Date Amount March 1, 2006 $14,475,000.00 - ----------------------------------------------------------------------------------------------------- Walnut Creek California Date January 29, 1996 $14,475,000.00
FOR VALUE RECEIVED, the undersigned ("Debtor") promises to pay to the order of Union Bank ("Bank"), as indicated below, the principal sum of FOURTEEN MILLION FOUR HUNDRED SEVENTY-FIVE THOUSANDS AND NO/100* Dollars ($14,475,000.00), or so much thereof as is disbursed, together with interest on the balance of such principal sum from time to time outstanding, at a per annum rate equal to /X/ Seven and Nine One Hundredths percent (7.09%) (Fixed Rate); / / the Reference Rate plus ____--__________ percent (___-0-________%), such per annum rate to change as and when the Reference Rate shall change; or / / ________________________________________________________________________ ________________________________________________________________________ provided, however, Debtor shall pay total interest over the term of this note of not less than $500. As used herein, the term "Reference Rate" shall mean the rate announced by Bank from time to time at its corporate headquarters as its "Reference Rate." The Reference Rate is an index rate determined by Bank from time to time as a means of pricing certain extensions of credit and is neither directly tied to any external rate of interest or index nor necessarily the lowest rate of interest charged by Bank at any given time. All computations of interest under this note shall be made on the basis of a year of 360 days, for actual days elapsed. 1. PAYMENTS. PRINCIPAL PAYMENTS. Debtor shall pay principal / / in full on _____--________, 19__; however, at any time prior to the maturity of this note, the Debtor may borrow, repay and reborrow hereon so long as the total outstanding at any one time does not exceed the principal amount of this note. / / in full on _____--________, 19__. /X/ in 119 installments in amounts as set forth below each on the 1st day of each month (commencing April 1, 1996) and a final installment on March 1, 2006, on which date all principal and interest then unpaid shall be due and payable. EACH YEAR AMOUNT --------- ---------- Year 1 $17,079.00 Year 2 $18,405.00 Year 3 $19,834.00 Year 4 $21,374.00 Year 5 $23,033.00 Year 6 $24,821.00 Year 7 $26,748.00 Year 8 $28,825.00 Year 9 $31,063.00 Year 10 $33,474.00 INTEREST PAYMENTS. Debtor shall pay interest /X/ on the 1st day of each month (commencing March 1, 1996). / / ___________--___________________________________________________________ INTEREST-INCLUDED OPTION. If a fixed rate of interest is applicable to this note and other principal and interest payment terms are not stated in the preceding paragraphs, Debtor shall pay principal and interest together in _____--______ installments of $__-0-_____ each on the ___--______ day of each _____--______ (commencing)____--___________, 19__) and in a final installment of $__-0-____ on ______________, 19__, on which date all principal and interest then unpaid shall be due and payable. - -------------------------------------------------------------------------------- PAGE 22 of 28 2 Debtor shall pay all amounts due under this note in lawful money of the United States of Bank's Monterey Park Office, or such other office as may be designated by Bank, from time to time. 2. LATE PAYMENTS. If any installment payment required by the terms of this note is unpaid ten days after due, Debtor shall, at the option of Bank, pay a fee of $100 to Bank; provided that if this note is secured by a deed of trust on real property containing only a single-family owner-occupied dwelling, such fee shall not exceed six-percent of the installment due that is applicable to the payment of principal and interest, or five dollars, whichever is greater. 3. INTEREST RATE FOLLOWING DEFAULT. In the event of default (as described in paragraph 4 below), at the option of the Bank, and, to the extent permitted by law, interest shall be payable on the outstanding principal under this note at a per annum rate equal to five percent (5%) in excess of the interest rate specified in the initial paragraph of this note, calculated from the date of default until such default is cured, or if such default is not cured or is incapable of being cured, until all amounts payable under this note are paid in full. 4. DEFAULT AND ACCELERATION OF TIME FOR PAYMENT. Default shall include, but not be limited to, any of the following: (a) the failure of Debtor to make any payment required under this note within three (3) Business Days after the date due; (b) any breach, misrepresentation or other default (not otherwise specified herein or in the deed of trust securing this note), by Debtor or its General Partner (hereinafter individually and collectively referred to as the "Obligor") under any deed of trust, security agreement, guaranty or other agreement between Bank and any Obligor, which is not cured within thirty (30) days after written notice thereof from Bank, provided, however, that if such failure by its nature cannot be cured within such thirty (30) day period (but is reasonably capable of being cured within ninety (90) days after such notice), then the cure period shall remain in effect so long as Obligor commences the cure within such thirty (30) day period and diligently prosecutes such cure to completion within such ninety (90) day period; (c) the insolvency of any Obligor or the failure of any Obligor generally to pay such Obligor's debts as such debts become due; (d) the commencement as to any Obligor of any voluntary or involuntary proceeding under any laws relating to bankruptcy, insolvency, reorganization, arrangement, debt adjustment or debtor relief, provided, however, with respect to any such involuntary proceeding no event of default shall arise unless said involuntary proceeding is not dismissed within forty-five (45) days following the date of commencement thereof; (e) the assignment by any Obligor for the benefit of such Obligor's creditors; (f) the appointment, or commencement of any proceedings for the appointment, of a receiver, trustee, custodian or similar official for all or substantially all of any Obligor's property, which is not dismissed or otherwise discharged within forty-five (45) days after commencement; (g) the commencement of any proceeding for the dissolution or liquidation of any Obligor, which is not dismissed or otherwise discharged within forty-five (45) days after commencement; (h) the termination of existence of any Obligor; (i) the failure of any Obligor to comply with any order, judgment, injunction, decree, writ or demand of any court or other public authority, which materially or adversely affects the property securing this note, as determined in Bank's reasonable discretion, or such Obligor's ability to conduct or operate its business; (j) the filing or recording against any Obligor, or the property of any Obligor, of any notice of levy, notice to withhold, or other legal process for taxes other than property taxes which is not dismissed or rescinded within thirty (30) days after such occurrence; (k) the default by any Obligor personally liable for amounts owed hereunder on any obligation in the aggregate of Three Million Dollars ($3,000,000.00) concerning the borrowing of money; (l) a default occurs under any instrument encumbering or affecting all or any portion of the property subject to the deed of trust securing this note not cured within the applicable cure periods; (m) the issuance against any Obligor, or the property of any Obligor, of any writ of attachment, execution, or other judicial lien, which is not dismissed within thirty (30) days following such issuance; or (n) the material deterioration of the financial condition of any Obligor which results in Bank deeming itself, in good faith, insecure. Upon the occurrence of any such default, Bank, in its discretion, may cease to advance funds hereunder and, following the expiration of any cure period, may declare all obligations under this note immediately due and payable; however, upon the occurrence of an event of default under (d) (with respect to a voluntary proceeding only) or (e) all principal and interest shall automatically become immediately due and payable. 5. ADDITIONAL AGREEMENTS OF DEBTOR. If any amounts owing under this note are not paid when due, Debtor promises to pay all costs and expenses, including reasonable attorneys' fees, incurred by Bank in the collection or enforcement of this note. Debtor and any endorser of this note, for the maximum period of time and the full extend permitted by law, (a) waive diligence, presentment, demand, notice of nonpayment, protest, notice of protest, and notice of every kind; (b) waive the right to assert the defense of any statute of limitations to any debt or obligation hereunder; and (c) consent to renewals and extensions of time for the payment of any amounts due under this note. If this note is signed by more than one party, the term "Debtor" includes each of the undersigned and any successors in interest thereof, all of whose liability shall be joint and several. Any married person who signs this note agrees that recourse may be had against the separate property of that person for any obligations hereunder. The receipt of any check or other item of payment by Bank, at its option, shall not be considered a payment on account until such check or other item of payment if honored when presented for payment at the drawee bank. Bank may delay the credit of such payment based upon Bank's schedule of funds availability, and interest under PAGE 23 of 28 3 this note shall accrue until the funds are deemed collected. In any action brought under or arising out of this note, Debtor and any endorser of this note, including their successors and assigns, hereby consent to the jurisdiction of any competent court within the State of California, except as provided in any addendum attached hereto, and consent to service of process by any means authorized by California Law. The term "Bank" includes, without limitation, any holder of this note. This note shall be construed in accordance with and governed by the laws of the State of California. The deed of trust securing this note permits the Bank to declare all obligations hereunder immediately due and payable upon breach of the following provision: "Trustor shall not, directly or indirectly, sell, convey, assign, further encumber, transfer, alienate or otherwise dispose of the real property encumbered by said deed of trust or any part thereof or any interest therein, whether voluntarily, involuntarily, by operation of law or otherwise, without the prior written consent or Beneficiary." 6. NON-RECOURSE. By accepting this Note, and providing that Debtor in no way hinders, delays, interferes with, or prejudices Bank's exercise of any rights and remedies available to it hereunder under the Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing ("Deed of Trust"), or under any applicable laws, the holder hereof agrees that except as otherwise expressly set forth in the last sentence of this Section 6, the sole recourse of such holder for the collection of this Note shall be against the property encumbered by the Deed of Trust securing this Note and that neither Debtor nor the general or limited partners of Debtor shall be personally liable for the payment of this Note nor for the payment of any deficiency established upon foreclosure and sale of the property encumbered by said Deed of Trust. This provision relating to limitation on liability shall not extend to (i) any waste, material misrepresentation or fraud of the Debtor if Debtor has acted maliciously, recklessly or intentionally, or (ii) any liability of Debtor relating to environmental matters as more fully set forth in the Environmental Compliance Agreement executed by Debtor, or (iii) any misapplication of casualty or condemnation proceeds received by Debtor, or (iv) any rent or other payments collected after recordation of a notice of default under this Note, or under the Deed of Trust, (except to the extent applied to the reasonable and necessary expenses of operating and maintaining the property), and any security deposits, advances or prepaid rent, or any similar sums paid to Debtor or held for the account of Debtor by any other person or entity in connection with the property after a default under this Note or the Deed of Trust, securing this Note. Notwithstanding anything to the contrary in the foregoing provisions or elsewhere in this Note, Debtor shall in all events be personally liable for the payment of principal, interest and other amounts unpaid and owing under the Note, in the maximum aggregate amount of $2,171,250.00. The attached Judicial Reference Agreement and Prepayment Addendum are hereby made a part of this note. - ------------------------------------------------------------------------------- Individual's Name (Type) Corporation or Partnership (Typed Name) ESSEX PORTFOLIO, L.P., a California limited partnership BY: ESSEX PROPERTY TRUST, INC., a Maryland corporation its general partner BY: /s/ Michael Schall --------------------------------- - ------------------------------------------------------------------------------- Individual's Signature By X - ------------------------------------------------------------------------------- Date Signed Title - ------------------------------------------------------------------------------- Individual's Name (Type) By - ------------------------------------------------------------------------------- Individual's Signature Title X - ------------------------------------------------------------------------------- Date Signed Date Signed - ------------------------------------------------------------------------------- Page 24 of 28 4 [UNION BANK LOGO] PREPAYMENT ADDENDUM I. PREPAYMENT A. Except as provided in subsection I. B., below, this Note may only be prepaid in whole or in part provided Union Bank has received not less than five (5) business days prior written notice of an intention to make such prepayment and the undersigned pays a prepayment fee, to Union Bank in an amount equal to: 1. the difference between (a) the Interest rate on this Note on the principal amount which the undersigned intends to prepay, and (b) the return which Union Bank could obtain if it used the amount of such prepayment of principal to purchase at bid price regularly quoted U.S. Securities having a maturity date most closely coinciding with the maturity date of this Note and such U.S. Securities were held by Union Bank until the maturity date of this Note ("Yield Rate"); 2. the above difference, if greater than zero, is multiplied by a fraction, the numerator of which is the days in the period between the date of prepayment and the maturity date of this Note and the denominator of which is 360 days; 3. the above product is multiplied by the amount of the principal so prepaid (except in the event that principal payments are required and have been made as scheduled under the terms of the Note, then the amount multiplied in this section shall be the lesser of the amount prepaid or 50% of the total of the amount prepaid and the amount of principal scheduled under the terms of this Note to be outstanding at the maturity date of this Note); 4. the above product is then discounted to present value using the Yield Rate as the annual discount factor. B. In no event shall Union Bank be obligated to make any payment or refund to the undersigned, nor shall the undersigned be entitled to any setoff or other claim against Union Bank, should the return which Union Bank could obtain under the prepayment formula exceed the interest that Union Bank would have received if no prepayment had occurred. All prepayments shall include payment of accrued interest on the principal amount so prepaid and shall be applied to payment of interest before application to principal. C. Such prepayment fee, if any, shall also be payable if prepayment occurs as the result of the acceleration of the principal hereof by Union Bank because of any default hereunder by the undersigned. If, following such acceleration, all or any portion of the unpaid principal is satisfied, whether through sale of the property encumbered by any security agreement or other agreement securing this Note, if any, as a foreclosure held thereunder or through the tender of payment at any time following such acceleration, but prior to such a foreclosure sale, then such satisfaction of such portion of the principal shall be deemed an evasion of the prepayment prohibition set forth above, and Union Bank shall, automatically and without notice or demand, be entitled to receive, concurrently with such satisfaction the prepayment fee set forth above, and the obligation to pay such prepayment fee shall be added to the principal hereof. THE UNDERSIGNED HEREBY ACKNOWLEDGES AND AGREES THAT UNION BANK WOULD NOT LEND TO THE UNDERSIGNED THE LOAN EVIDENCED BY THIS NOTE WITHOUT THE UNDERSIGNED'S AGREEMENT, AS SET FORTH ABOVE IN THIS PARAGRAPH TO PAY UNION BANK A PREPAYMENT FEE UPON THE SATISFACTION OF ALL OR ANY PORTION OF THE PRINCIPAL BEARING INTEREST AT A FIXED INTEREST RATE FOLLOWING THE ACCELERATION OF THE MATURITY DATE HEREOF BY REASON OF A DEFAULT HEREUNDER. THE UNDERSIGNED HAS CAUSED THOSE PERSONS SIGNING THIS NOTE ON THE UNDERSIGNED'S BEHALF TO SEPARATELY INITIAL THE AGREEMENT CONTAINED IN THIS PARAGRAPH BY PLACING THEIR INITIALS BELOW: INITIALS: MJS --------- --------- --------- --------- --------- A determination by Union Bank as to the amount, if any, payable pursuant to this section, shall be conclusive on the undersigned, absent manifest error. II. AMENDMENT Except as provided above, this Addendum and the provisions contained herein cannot be changed, modified or amended except by a written instrument executed by both the undersigned and the holder hereof. ESSEX PORTFOLIO, L.P., a California limited partnership BY: ESSEX PROPERTY TRUST, INC., a Maryland corporation its general partner BY: /s/ Michael Schall --------------------------------- Page 25 of 28 5 [UNION BANK LOGO] JUDICIAL REFERENCE AGREEMENT (Commercial Transaction Secured By Real Property) 1. CLAIMS OR CONTROVERSIES SUBJECT TO JUDICIAL REFERENCE. Any claim or controversy alleged in or subject to a lawsuit between or among the parties to this agreement (collectively, the "Parties" and individually, a "Party") which arises out of or relates to (i) that certain Commercial Promissory Note Secured ----------------------------------- by Deed of Trust dated January 29, 1996, executed by ESSEX PORTFOLIO, L.P., - ---------------- ---------- -- --------------------------- a California limited partnership - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- in favor of Union Bank ("Bank"), any extensions, renewals, amendments, substitutions or replacements thereof, and any related guaranty, subordination agreement, security agreement or any other related agreement or instrument (collectively, the "Subject Documents"), (ii) any negotiations, correspondence or communications relating to any of the Subject Documents, whether or not incorporated into the Subject Documents or any indebtedness evidenced thereby, (iii) the administration or management of the Subject Documents or any indebtedness evidenced thereby or (iv) any alleged agreements, promises, representations or transactions in connection therewith, including but not limited to any claim or controversy which arises out of or is based upon an alleged tort, shall, at the written request of any Party, be determined by a reference in accordance with California Code of Civil Procedure Sections 638 et seq. In connection with such reference, the Parties hereby expressly, intentionally and deliberately waive any right they may otherwise have to trial by jury of such claim or controversy. 2. SELECTION OF REFEREE. Within thirty (30) days after commencement by any Party of any lawsuit subject to this agreement, the Parties shall select, pursuant to the Commercial Rules of the American Arbitration Association ("AAA"), a single neutral referee and submit by stipulation such referee to the court for an order of reference of such claim or controversy. However, the referee selected must be a retired state or federal court judge with at least five years of judicial experience in civil matters. In the event that the Parties do not submit such stipulation to the court within such thirty (30) day period, any Party may move the court pursuant to this agreement for an order of reference of such claim or controversy to a single neutral referee having such qualifications. The Parties shall equally bear the fees and expenses of the referee unless the referee otherwise provides in the award. 3. POWERS OF AND LIMITATIONS ON THE REFEREE. The referee shall have the powers provided by Title 9 of the California Code of Civil Procedure Sections 1280 et seq. (the "California Arbitration Act") and the Commercial Rules of the AAA except as provided in this agreement, including without limitation the following: (a) The referee shall determine all challenges to the legality and/or enforceability of this agreement. (b) The referee shall apply the rules of evidence to the same extent as they would be applied in a court of law. (c) Subject to the provisions of this agreement, the referee may order any remedy or relief, including without limitation judicial foreclosure, a deficiency judgment or equitable relief, and give effect to all legal and equitable defenses, including without limitation statutes of limitation, the statute of frauds, waiver and estoppel. (d) A Party may not conduct discovery unless the referee grants such Party leave to do so upon a showing of good cause. All discovery shall be completed within ninety (90) days after the appointment of the referee. The referee shall limit discovery to non-privileged material that is relevant to the issues to be determined by the referee. (e) The referee shall determine the time of the hearing and shall designate its location from among the cities of San Francisco, Los Angeles and San Diego based upon the convenience of the referee, the Parties and any witnesses. However, such hearing must be commenced within (30) days after completion of discovery, unless the referee grants a continuance upon a showing of good cause by any Party. At least seven (7) days before the date set for hearing, the Parties shall exchange copies of exhibits to be offered as evidence, and lists of witnesses who will testify, at such hearing. Once commenced, the hearing shall proceed day to day until completed, unless the referee grants a continuance upon a showing of good cause by any Party. Any Party may cause to be prepared, at its expense, a written transcription or electronic recordation of such hearing. (f) Any award by the referee shall be set forth in a statement of decision supported by written findings of fact and conclusions of law which the referee shall concurrently deliver to the Parties. (g) The referee may not award punitive damages unless the referee first makes written findings of fact that would satisfy the requirements for recovery of punitive damages under California law. Any such award of punitive damages shall not exceed a sum equal to twice the amount of actual damages as determined by the referee. (h) The referee shall award reasonable attorneys' fees (including a reasonable allocation for the costs of in-house counsel) and costs the prevailing party. (i) The provisions of California Civil Code Sections 47 et seq. shall apply to the judicial reference to the same extent as they would apply to a judicial proceeding subject to such provisions. (j) The laws of the State of California shall govern the judicial reference pursuant to this agreement. PAGE 26 of 28 6 4. PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. No provision of this agreement shall limit the right of any Party (i) to exercise any self-help remedies, (ii) to foreclose upon or sell any collateral, by power of sale or otherwise, or (iii) to obtain or oppose provisional or ancillary remedies from a court of competent jurisdiction, including without limitation appointment of a receiver, before, after or during the pendency of the judicial reference. The exercise of, or opposition to, any such remedy does not waive the right of any Party to judicial reference pursuant to this agreement. 5. MISCELLANEOUS. Judgment upon the award of the referee may be entered in any court of competent jurisdiction in accordance with California Code of Civil Procedure Sections 644 and 645. In the event that multiple claims are asserted, some of which are found not subject to this agreement, the Parties agree to stay the proceedings of the claims not subject to this agreement until all other claims are resolved in accordance with this agreement. In the event that claims are asserted against multiple parties, some of whom are not subject to this agreement, the Parties agree to sever the claims subject to this agreement and resolve them in accordance with this agreement. In the event that any provision of this agreement is found to be illegal or unenforceable, the remainder of this agreement shall remain in full force and effect. The laws of the State of California shall govern the interpretation of this agreement. This agreement fully states all of the terms and conditions of the Parties' agreement regarding the matters mentioned in, or incidental to, this agreement. This agreement supersedes all oral negotiations and prior writings concerning the subject matter hereof. This agreement is duly executed by the Parties as of the day 29th of January, 1996. UNION BANK ESSEX PORTFOLIO, L.P., a California limited partnership By ____________________________ J. Michael Stedman BY: ESSEX PROPERTY TRUST, INC., Title Asst. Vice President a Maryland corporation its general partner By ____________________________ BY: Michael J. Schall, CFO James B. Wohlleb Title Vice President ________________________________ ________________________________ ________________________________ ________________________________ _________________________________ _________________________________ _________________________________ page 27 of 28 EX-12.1 4 COMPUTATION OF RATIO OF EARNINGS 1 EXHIBIT 12.1 ESSEX PROPERTY TRUST, INC. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (in thousands, except ratios)
ESSEX PROPERTY TRUST, INC. ESSEX PARTNERS PROPERTIES ---------------------------------------- ------------------------------------------------------------- 3 MONTHS PERIOD OF PERIOD OF ENDED YEAR ENDED JUNE 13, 1994 JANUARY 1, 1994 YEAR ENDED YEAR ENDED YEAR ENDED MARCH 31, DECEMBER 31, TO DECEMBER 31, TO JUNE 12, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1996 1995 1994 1994 1993 1992 1991 --------- ------------ --------------- --------------- ------------ ------------ ------------ EARNINGS: Income before extraordinary item and minority interest... $2,198 $ 8,231 $4,397 $ 332 $ 387 $(2,344) $(3,582) Interest expense.......... 2,901 10,928 4,304 5,924 11,902 13,224 14,762 Amortization of deferred financing costs......... 245 1,355 773 96 219 218 216 Capitalized interest...... 28 92 -- -- -- -- -- ------ ------- ------ ------ ------- ------- ------- TOTAL EARNINGS............ $5,372 $20,606 $9,474 $6,352 $12,508 $11,098 $11,396 FIXED CHARGES: Interest expense.......... $2,901 $10,928 $4,304 $5,924 $11,902 $13,224 $14,762 Amortization of deferred financing costs......... 245 1,355 773 96 219 218 216 Capitalized interest...... 28 92 -- -- -- -- -- ------ ------- ------ ------ ------- ------- ------- TOTAL FIXED CHARGES....... $3,174 $12,375 $5,077 $6,020 $12,121 $13,442 $14,978 ------ ------- ------ ------ ------- ------- ------- RATIO OF EARNINGS TO FIXED CHARGES......... 1.69 1.67 1.87 1.06 1.03 0.83 0.76 ====== ======= ====== ====== ======= ======= ======= FIXED CHARGES IN EXCESS ON EARNINGS.............. -- -- -- -- -- 2,344 3,582 ====== ======= ====== ====== ======= ======= =======
Page 28 of 28 EX-27 5 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from Essex Property Trust, Inc. quarterly report for the period ended March 31, 1996. 1,000 3-MOS DEC-31-1995 MAR-31-1996 2,651 0 11,381 0 0 15,599 297,106 42,456 282,620 9,844 165,227 0 0 1 82,005 282,620 0 11,554 0 5,792 493 0 3,146 2,123 0 2,123 0 (2,180) 0 0 (0.01) (0.01)
-----END PRIVACY-ENHANCED MESSAGE-----