EX-99.2 3 s001674x1_ex99-2.htm EXHIBIT 99.2
Exhibit 99.2
Q1 2017 Supplemental
Table of Contents

 
Page
Consolidated Operating Results
S-1 – S-2
Consolidated Funds From Operations
S-3
Consolidated Balance Sheets
S-4
Debt Summary – March 31, 2017
S-5
Capitalization Data, Public Bond Covenants, Credit Ratings, and Selected Credit Ratios – March 31, 2017
S-6
Portfolio Summary by County – March 31, 2017
S-7
Operating Income by Quarter – March 31, 2017
S-8
Same-Property Results by County – Quarters ended March 31, 2017 and 2016, and December 31, 2016
S-9
Same-Property Operating Expenses
S-10
Development Pipeline – March 31, 2017
S-11
Redevelopment Pipeline – March 31, 2017
S-12
Capital Expenditures – March 31, 2017
S-12.1
Co-Investments – March 31, 2017
S-13
Assumptions for 2017 FFO Guidance Range
S-14
Reconciliation of Projected EPS, FFO and Core FFO per diluted share
S-14.1
Summary of Apartment Community Acquisitions and Dispositions Activity
S-15
2017 MSA Level Forecasts: Supply, Jobs and Apartment Market Conditions
S-16
Reconciliations of Non-GAAP Financial Measures and Other Terms
S-17.1 – S-17.4

E S S E X  P R O P E R T Y  T R U S T,  I N C.
 
Consolidated Operating Results
  
Three Months Ended
  
(Dollars in thousands, except share and per share amounts)
  
March 31,
  
 
   2017     2016  
             
Revenues:
            
Rental and other property
  
$
333,168
    
$
312,178
  
Management and other fees
    
2,236
      
2,024
  
     
335,404
      
314,202
  
                 
Expenses:
                
Property operating
    
99,513
      
94,490
  
Depreciation and amortization
    
115,503
      
109,707
  
General and administrative
    
10,601
      
9,182
  
Acquisition and investment related costs
    
556
      
828
  
     
226,173
      
214,207
  
Earnings from operations
    
109,231
      
99,995
  
                 
Interest expense, net (1)
    
(51,999
)
    
(49,343
)
Interest and other income
    
6,764
      
5,208
  
Equity income from co-investments
    
10,899
      
15,068
  
Gain on sale of real estate and land
    
26,174
      
20,258
  
Deferred tax expense on gain on sale of real estate and land
    
-
      
(4,279
)
Gain on remeasurement of co-investment
    
86,482
      
-
  
Net income
    
187,551
      
86,907
  
Net income attributable to noncontrolling interest
    
(8,587
)
    
(5,071
)
Net income attributable to controlling interest
    
178,964
      
81,836
  
Dividends to preferred stockholders
    
-
      
(1,314
)
Excess of redemption value of preferred stock over the carrying value
    
-
      
(2,541
)
Net income available to common stockholders
  
$
178,964
    
$
77,981
  
                 
Net income per share - basic
  
$
2.73
    
$
1.19
  
                 
Shares used in income per share - basic
    
65,549,484
      
65,405,654
  
                 
Net income per share - diluted
  
$
2.72
    
$
1.19
  
                 
Shares used in income per share - diluted
    
65,859,490
      
65,557,639
  
 
(1)
Refer to page S-17.2, the section titled "Interest Expense, Net" for additional information.
 
 
See Company's 10-K and 10-Q for additional disclosures
S-1
 E S S E X  P R O P E R T Y  T R U S T,  I N C.
 
Consolidated Operating Results
  
Three Months Ended
  
Selected Line Item Detail
  
March 31,
  
(Dollars in thousands)
  
2017
    
2016
  
             
Rental and other property
            
Rental
  
$
310,122
    
$
292,519
  
Other property
    
23,046
      
19,659
  
Rental and other property
  
$
333,168
    
$
312,178
  
                 
Property operating expenses
                
Real estate taxes
  
$
35,868
    
$
34,419
  
Administrative and insurance
    
20,555
      
19,034
  
Maintenance and repairs
    
18,901
      
18,018
  
Utilities
    
16,655
      
15,466
  
Property management
    
7,534
      
7,553
  
Property operating expenses
  
$
99,513
    
$
94,490
  
                 
                 
Interest and other income
                
Marketable securities and other interest income
  
$
4,880
    
$
4,468
  
Gain on sale of marketable securities and other investments
    
1,605
      
740
  
Insurance reimbursements and other
    
279
      
-
  
Interest and other income
  
$
6,764
    
$
5,208
  
                 
Equity income from co-investments
                
Equity income from co-investments
  
$
5,253
    
$
4,952
  
Income from preferred equity investments
    
5,646
      
2,681
  
Gain on sale of co-investment communities
    
-
      
7,435
  
Equity income from co-investments
  
$
10,899
    
$
15,068
  
                 
Noncontrolling interest
                
Limited partners of Essex Portfolio, L.P.
  
$
6,146
    
$
2,784
  
DownREIT limited partners' distributions
    
1,550
      
1,434
  
Third-party ownership interest
    
891
      
853
  
Noncontrolling interest
  
$
8,587
    
$
5,071
  
 
See Company's 10-K and 10-Q for additional disclosures
 
S-2
E S S E X  P R O P E R T Y  T R U S T,  I N C.
 
Consolidated Funds From Operations (1)
  
Three Months Ended
     
(Dollars in thousands, except share and per share amounts and in footnotes)
  
March 31,
     
   
2017
    
2016
  
% Change
  
                 
Funds from operations attributable to common stockholders and unitholders (FFO)
                
Net income available to common stockholders
  
$
178,964
    
$
77,981
      
Adjustments:
                    
Depreciation and amortization
    
115,503
      
109,707
      
Gains not included in FFO
    
(112,656
)
    
(27,693
)
    
Deferred tax expense on gain on sale of real estate and land - Taxable REIT Subsidiary activity
    
-
      
4,279
      
Depreciation add back from unconsolidated co-investments
    
12,854
      
12,023
      
Noncontrolling interest related to Operating Partnership units
    
6,146
      
2,784
      
Depreciation attributable to third party ownership and other (2)
    
(25
)
    
6
      
Funds from operations attributable to common stockholders and unitholders
  
$
200,786
    
$
179,087
      
FFO per share-diluted
  
$
2.95
    
$
2.64
      
11.7
%
                         
Components of the change in FFO
                        
Non-core items:
                        
Acquisition and investment related costs
  
$
556
    
$
828
          
Gain on sale of marketable securities and other investments
    
(1,605
)
    
(740
)
        
Interest rate hedge ineffectiveness (3)
    
(6
)
    
-
          
Excess of redemption value of preferred stock over the carrying value
    
-
      
2,541
          
Insurance reimbursements
    
(25
)
    
-
          
Core funds from operations attributable to common stockholders and unitholders
    
199,706
      
181,716
          
Core FFO per share-diluted
  
$
2.94
    
$
2.68
      
9.7
%
                         
Changes in core items:
                        
Same-property NOI
  
$
11,217
                  
Non-same property NOI
    
4,750
                  
Management and other fees, net
    
212
                  
FFO from co-investments
    
4,097
                  
Interest and other income
    
666
                  
Interest expense
    
(2,650
)
                
General and administrative
    
(1,419
)
                
Other items, net
    
1,117
                  
   
$
17,990
                  
                         
Weighted average number of shares outstanding diluted (4)
    
67,974,466
      
67,866,703
          
 
(1)
Refer to page S-17.1, the section titled "Funds from Operations ("FFO")" for additional information on the Company's definition and use of FFO and Core FFO.
(2) The Company consolidates certain co-investments. Noncontrolling interest's share of net operating income in these investments for the three months ended March 31, 2017 was $1.2 million.
(3)
 
Interest rate swaps are generally adjusted to fair value through other comprehensive income (loss). However, because certain of our interest rate swaps do not have a 0% LIBOR floor, while related hedged debt in these cases is subject to a 0% LIBOR floor, the portion of the change in fair value of these interest rate swaps attributable to this mismatch is recorded as noncash interest rate hedge ineffectiveness through interest expense.
(4)
Assumes conversion of all outstanding operating partnership interests in the Operating Partnership and excludes all DownREIT units for which the Operating Partnership has the ability and intention to redeem the DownREIT limited partnership units for cash and does not consider them to be common stock equivalents.
 
See Company's 10-K and 10-Q for additional disclosures
 
S-3
E S S E X  P R O P E R T Y  T R U S T,  I N C.
 
Consolidated Balance Sheets
(Dollars in thousands)
 
   
March 31, 2017
    
December 31, 2016
  
             
Real Estate:
            
Land and land improvements
  
$
2,719,064
    
$
2,559,743
  
Buildings and improvements
    
10,492,413
      
10,116,563
  
     
13,211,477
      
12,676,306
  
Less:  accumulated depreciation
    
(2,418,793
)
    
(2,311,546
)
     
10,792,684
      
10,364,760
  
Real estate under development
    
239,685
      
190,505
  
Co-investments
    
1,071,258
      
1,161,275
  
Real estate held for sale, net
    
-
      
101,957
  
     
12,103,627
      
11,818,497
  
Cash and cash equivalents, including restricted
    
100,252
      
170,302
  
Marketable securities
    
138,977
      
139,189
  
Notes and other receivables
    
50,855
      
40,970
  
Prepaid expenses and other assets
    
53,716
      
48,450
  
Total assets
  
$
12,447,427
    
$
12,217,408
  
                 
Unsecured debt, net
  
$
3,195,129
    
$
3,246,779
  
Mortgage notes payable, net
    
2,231,145
      
2,191,481
  
Lines of credit
    
176,233
      
125,000
  
Distributions in excess of investments in co-investments
    
35,534
      
-
  
Other liabilities
    
374,968
      
317,227
  
Total liabilities
    
6,013,009
      
5,880,487
  
Redeemable noncontrolling interest
    
45,415
      
44,684
  
Equity:
                
Common stock
    
6
      
6
  
Additional paid-in capital
    
7,035,178
      
7,029,679
  
Distributions in excess of accumulated earnings
    
(741,204
)
    
(805,409
)
Accumulated other comprehensive loss, net
    
(29,959
)
    
(32,098
)
Total stockholders' equity
    
6,264,021
      
6,192,178
  
Noncontrolling interest
    
124,982
      
100,059
  
Total equity
    
6,389,003
      
6,292,237
  
Total liabilities and equity
  
$
12,447,427
    
$
12,217,408
  
 
See Company's 10-K and 10-Q for additional disclosures
 
S-4
E S S E X  P R O P E R T Y  T R U S T,  I N C.
 
Debt Summary - March 31, 2017
(Dollars in thousands, except in footnotes)
 
               
Scheduled principal payments, unamortized premiums (discounts) and (debt issuance costs) are as follows - excludes lines of credit:
  
                                       
     
Weighted Average
                            
 
Balance
Outstanding
  
Interest
Rate
  
Maturity
in Years
          
Unsecured
  
Secured
  
Total
   Weighted
Average
Interest Rate		  
Percentage
of Total Debt
  
Unsecured Debt, net
                                      
Bonds private - fixed rate
  
$
315,000
      
4.5
%
    
3.4
   2017     
$
40,000
    
$
74,776
    
$
114,776
      
4.8
%
    
2.1
%
Bonds public - fixed rate
    
2,550,000
      
3.7
%
    
6.8
   2018       
-
      
301,858
      
301,858
      
5.3
%
    
5.6
%
Term loan (1)
    
350,000
      
2.2
%
    
4.9
   2019       
75,000
      
578,114
      
653,114
      
4.3
%
    
12.1
%
Unamortized net discounts and debt issuance costs
    
(19,871
)
    
-
      
-
   2020      
-
      
695,070
      
695,070
      
4.8
%
    
12.9
%
     
3,195,129
      
3.6
%
    
6.3
   2021       
500,000
      
52,831
      
552,831
      
4.3
%
    
10.2
%
Mortgage Notes Payable, net
                         2022       
650,000
      
42,649
      
692,649
      
3.0
%
    
12.8
%
Fixed rate - secured
    
1,910,519
      
4.7
%
    
3.8
   2023       
600,000
      
2,188
      
602,188
      
3.6
%
    
11.1
%
Variable rate - secured (2)
    
281,552
      
1.5
%
    
19.2
   2024       
400,000
      
2,317
      
402,317
      
4.0
%
    
7.4
%
Unamortized premiums and debt issuance costs, net
    
39,074
      
-
      
-
  
2025 
      
500,000
      
16,056
      
516,056
      
3.5
%
    
9.6
%
Total mortgage notes payable
    
2,231,145
      
4.3
%
    
5.7
   2026      
450,000
      
55,091
      
505,091
      
3.4
%
    
9.3
%
                         
 
2027 
      
-
      
166,250
      
166,250
      
2.5
%
    
3.1
%
Unsecured Lines of Credit
                        
 
Thereafter
      
-
      
204,871
      
204,871
      
2.1
%
    
3.8
%
Line of credit (3)
    
175,000
      
1.9
%
        
 
Subtotal
      
3,215,000
      
2,192,071
      
5,407,071
      
3.8
%
    
100.0
%
Line of credit (4)
    
1,233
      
1.9
%
        
Debt Issuance Costs
      
(17,278
)
    
(6,938
)
    
(24,216
)
NA
  
NA
  
Total lines of credit
    
176,233
      
1.9
%
        
Premiums/(Discounts)
      
(2,593
)
    
46,012
      
43,419
  
 
  
NA
  
 
  
NA
  
                         
Total
    
$
3,195,129
    
$
2,231,145
    
$
5,426,274
      
3.8
%
    
100.0
%
Total debt, net
  
$
5,602,507
      
3.8
%
                                                        
 
Capitalized interest for the three months ended March 31, 2017 was approximately $3.3 million.
 
(1)
The unsecured term loan has a variable interest rate of LIBOR plus 0.95%. The Company has interest rate swap contracts with an aggregate notional amount of $200 million, which effectively converts the interest rate on $200 million of the term loan to a fixed rate of 2.3%.
(2)
$281.6 million of variable rate debt is tax exempt to the note holders. $20.7 million is subject to interest rate cap protection agreements.
(3)
The unsecured line of credit facility aggregates to $1 billion. The line matures in December 2020 with one 18-month extension, exercisable at the Company's option.  The underlying interest rate on this line is based on a tiered rate structure tied to the Company's corporate ratings and is currently at LIBOR plus 0.90%.
(4)
The unsecured line of credit facility is $25 million and is scheduled to mature in January 2018. The underlying interest rate on this line is based on a tiered rate structure tied to the Company's corporate ratings and is currently at LIBOR plus 0.90%.
 
See Company's 10-K and 10-Q for additional disclosures
 
S-5
E S S E X  P R O P E R T Y  T R U S T,  I N C.
 
Capitalization Data, Public Bond Covenants, Credit Ratings and Selected Credit Ratios - March 31, 2017
(Dollars and shares in thousands, except per share amounts)
 
Capitalization Data
                    
Public Bond Covenants (1)
    
Actual
  
Requirement
Total debt, net   
  
$
5,602,507
                      
                       
Adjusted Debt to Adjusted Total Assets:
   38 %  
< 65%
Common stock and potentially dilutive securities
                                     
Common stock outstanding
        
65,570
                           
Limited partnership units (1)
        
2,328
                           
Options-treasury method
        
85
        
Secured Debt to Adjusted Total Assets:
     15 %  
< 40%
Total shares of common stock and potentially dilutive securities
    
67,983
                        
                                                    
Common stock price per share as of March 31, 2017
  
$
231.53
                         
                       
Interest Coverage:
     394 %  
> 150%
Total equity capitalization
      
$
15,740,104
                         
                                                    
Total market capitalization
      
$
21,342,611
        
Unsecured Debt Ratio (2):
     292 %  
> 150%
                                                   
Ratio of debt to total market capitalization 
    
26.3
%
                       
                        
Selected Credit Ratios (3)
  
Actual
    
Credit Ratings
                                               
Rating Agency
  
Rating
  
Outlook
              
Net Indebtedness Divided by Adjusted EBITDA, normalized and annualized:
     5.7    
Fitch
  
BBB+
  
Stable
                                   
Moody's
  
Baa1
  
Stable
              
Unencumbered NOI to Adjusted Total NOI:
     68%    
Standard & Poor's
  
BBB+
  
Stable
                                   
                       
(1)
Refer to page S-17.3 for additional information on the Company's Public Bond Covenants.
(1)
Assumes conversion of all outstanding operating partnership interests in the Operating Partnership into shares of the Company's common stock. 
    
(2)
Unsecured Debt Ratio is unsecured assets (excluding investments in co-investments) divided by unsecured indebtedness.
               
(3)
Refer to pages S-17.1 to S-17.4, the section titled "Reconciliations of Non-GAAP Financial Measures and Other Terms" for additional information on the Company's Selected Credit Ratios.
 
See Company's 10-K and 10-Q for additional disclosures
 
S-6
 E S S E X  P R O P E R T Y  T R U S T,  I N C.
 
Portfolio Summary as of March 31, 2017
 
   
Apartment Homes
    
Average Monthly Rental Rate (1)
    
Percent of NOI (2)
  
Region - County
  
Consolidated (3)
    
Unconsolidated
Co-investments (4)
    
Apartment
Homes in
Development (5)
    
Total
    
Consolidated
    
Unconsolidated
Co-investments (6)
    
Total (7)
    
Consolidated
    
Unconsolidated
Co-investments (6)
    
Total (7)
  
                                                             
Southern California
                                                            
Los Angeles County
    
9,387
      
1,418
      
-
      
10,805
    
$
2,342
    
$
2,015
    
$
2,319
      
19.9
%
    
12.9
%
    
19.4
%
Orange County
    
5,553
      
1,379
      
-
      
6,932
      
2,072
      
1,811
      
2,043
      
10.6
%
    
11.3
%
    
10.7
%
San Diego County
    
5,203
      
616
      
-
      
5,819
      
1,823
      
1,667
      
1,815
      
8.7
%
    
4.6
%
    
8.3
%
Ventura County
    
2,577
      
693
      
-
      
3,270
      
1,692
      
1,988
      
1,727
      
4.3
%
    
6.3
%
    
4.5
%
Other Southern CA
    
623
      
249
      
-
      
872
      
1,566
      
1,536
      
1,561
      
0.9
%
    
1.6
%
    
0.9
%
Total Southern California
    
23,343
      
4,355
      
-
      
27,698
      
2,070
      
1,870
      
2,052
      
44.4
%
    
36.7
%
    
43.8
%
                                                                                 
Northern California
                                                                                
Santa Clara County
    
7,356
      
2,053
      
476
      
9,885
      
2,637
      
2,704
      
2,645
      
18.2
%
    
20.5
%
    
18.4
%
Alameda County
    
2,954
      
1,983
      
-
      
4,937
      
2,453
      
2,344
      
2,424
      
6.5
%
    
17.7
%
    
7.5
%
San Mateo County
    
1,830
      
197
      
320
      
2,347
      
2,797
      
2,812
      
2,798
      
5.0
%
    
2.6
%
    
4.8
%
Contra Costa County
    
2,270
      
49
      
-
      
2,319
      
2,242
      
4,429
      
2,266
      
4.9
%
    
0.6
%
    
4.5
%
San Francisco
    
1,342
      
463
      
545
      
2,350
      
3,035
      
3,311
      
3,079
      
3.6
%
    
7.5
%
    
3.9
%
Other Northern CA
    
96
      
-
      
-
      
96
      
2,738
      
-
      
2,738
      
0.3
%
    
-
      
0.3
%
Total Northern California
    
15,848
      
4,745
      
1,341
      
21,934
      
2,598
      
2,638
      
2,604
      
38.5
%
    
48.9
%
    
39.4
%
                                                                                 
Seattle Metro
    
10,238
      
1,958
      
-
      
12,196
      
1,734
      
1,605
      
1,723
      
17.1
%
    
14.4
%
    
16.8
%
                                                                                 
Total
    
49,429
      
11,058
      
1,341
      
61,828
    
$
2,167
    
$
2,165
    
$
2,167
      
100.0
%
    
100.0
%
    
100.0
%
 
(1)
Average monthly rental rate is defined as the total potential monthly rental revenue (actual rent for occupied apartment homes plus market rent for vacant apartment homes) divided by the number of apartment homes.
(2)
Actual NOI for the quarter ended March 31, 2017. See the section titled "Net Operating Income ("NOI") and Same-Property NOI Reconciliations" on page S-17.3.  
(3)
Includes all apartment communities with rents.               
(4)
Includes two rental income producing development communities in lease-up which consist of 627 apartment homes.       
(5)
Includes development communities with no rental income.               
(6)
Co-investment amounts weighted for Company's pro rata share.             
(7)
At Company's pro rata share.               
 
See Company's 10-K and 10-Q for additional disclosures
 
S-7
 E S S E X  P R O P E R T Y  T R U S T,  I N C.
 
Operating Income by Quarter (1)
(Dollars in thousands)
 
   
Apartment Homes
    
Q1 '17
    
Q4 '16
    
Q3 '16
    
Q2 '16
    
Q1 '16
  
                                     
Rental and other property revenues:
                                    
Same-property
    
46,128
    
$
302,125
    
$
300,808
    
$
300,069
    
$
293,093
    
$
287,850
  
Acquisitions (2)
    
2,081
      
13,751
      
3,018
      
2,475
      
2,354
      
866
  
Development (3)
    
360
      
4,334
      
4,270
      
4,303
      
4,062
      
3,610
  
Redevelopment
    
621
      
4,814
      
4,757
      
4,775
      
4,703
      
4,502
  
Non-residential/other, net (4)
    
239
      
8,144
      
14,052
      
15,456
      
15,350
      
15,350
  
Total rental and other property revenues
    
49,429
      
333,168
      
326,905
      
327,078
      
319,562
      
312,178
  
                                                 
Property operating expenses:
                                                
Same-property
            
90,455
      
91,522
      
91,261
      
88,393
      
87,397
  
Acquisitions (2)
            
4,552
      
906
      
831
      
850
      
313
  
Development (3)
            
1,576
      
1,528
      
1,569
      
1,497
      
1,339
  
Redevelopment
            
1,526
      
1,558
      
1,565
      
1,477
      
1,497
  
Non-residential/other, net (4) (5)
            
1,404
      
3,483
      
4,135
      
3,862
      
3,944
  
Total property operating expenses
            
99,513
      
98,997
      
99,361
      
96,079
      
94,490
  
                                                 
Net operating income (NOI):
                                                
Same-property
            
211,670
      
209,286
      
208,808
      
204,700
      
200,453
  
Acquisitions (2)
            
9,199
      
2,112
      
1,644
      
1,504
      
553
  
Development (3)
            
2,758
      
2,742
      
2,734
      
2,565
      
2,271
  
Redevelopment
            
3,288
      
3,199
      
3,210
      
3,226
      
3,005
  
Non-residential/other, net (4)
            
6,740
      
10,569
      
11,321
      
11,488
      
11,406
  
Total NOI
          
$
233,655
    
$
227,908
    
$
227,717
    
$
223,483
    
$
217,688
  
                                                 
Same-property metrics
                                                
Operating margin
            
70
%
    
70
%
    
70
%
    
70
%
    
70
%
Annualized turnover (6)
            
46
%
    
47
%
    
63
%
    
56
%
    
45
%
Financial occupancy (7)
            
96.5
%
    
96.6
%
    
96.5
%
    
96.0
%
    
96.0
%
 
(1)
Includes consolidated communities only.        
(2)
Acquisitions include properties acquired which did not have comparable stabilized results as of January 1, 2016.
(3)
Development includes properties developed which did not have comparable stabilized results as of January 1, 2016.
(4)
Other real estate assets consists mainly of retail space, commercial properties, boat slips, held for sale properties, and disposition properties.
(5)
Includes other expenses and intercompany eliminations pertaining to self-insurance.   
(6)
Annualized turnover is defined as the number of apartment homes turned over during the quarter, annualized, divided by the total number of apartment homes.
(7)
Financial occupancy is defined as the percentage resulting from dividing actual rental revenue by total potential rental revenue (actual rent for occupied apartment homes plus market rent for vacant apartment homes).
 
See Company's 10-K and 10-Q for additional disclosures
 
S-8
E S S E X  P R O P E R T Y  T R U S T,  I N C. 
 
Same-Property Results by County - First Quarter 2017 vs. First Quarter 2016 and Fourth Quarter 2016
(Dollars in thousands, except average monthly rental rates)
 
               
Average Monthly Rental Rate
    
Financial Occupancy   
    
Gross Revenues   
    
Sequential Gross Revenues
  
Region - County
  
Apartment
Homes
    
Q1 '17 %
of Actual
NOI
    
Q1 '17
    
Q1 '16
    
% Change
    
Q1 '17
    
Q1 '16
    
% Change
    
Q1 '17
    
Q1 '16
    
% Change
    
Q4 '16
    
% Change
  
                                                                               
Southern California
                                                                              
Los Angeles County
    
8,523
      
19.6
%
  
$
2,342
    
$
2,270
      
3.2
%
    
96.2
%
    
96.0
%
    
0.2
%
  
$
60,392
      
58,305
      
3.6
%
  
$
60,420
      
0.0
%
Orange County
    
5,553
      
11.4
%
    
2,072
      
1,972
      
5.1
%
    
96.5
%
    
96.1
%
    
0.4
%
    
34,962
      
33,105
      
5.6
%
    
34,630
      
1.0
%
San Diego County
    
4,961
      
8.9
%
    
1,809
      
1,727
      
4.7
%
    
96.4
%
    
95.7
%
    
0.7
%
    
27,549
      
25,982
      
6.0
%
    
27,418
      
0.5
%
Ventura County
    
2,577
      
4.7
%
    
1,692
      
1,615
      
4.8
%
    
97.2
%
    
96.2
%
    
1.0
%
    
13,593
      
12,814
      
6.1
%
    
13,482
      
0.8
%
Other Southern CA
    
384
      
0.4
%
    
1,226
      
1,177
      
4.2
%
    
95.9
%
    
96.8
%
    
-0.9
%
    
1,475
      
1,405
      
5.0
%
    
1,467
      
0.5
%
Total Southern California
    
21,998
      
45.0
%
    
2,058
      
1,977
      
4.1
%
    
96.4
%
    
96.0
%
    
0.4
%
    
137,971
      
131,611
      
4.8
%
    
137,417
      
0.4
%
                                                                                                         
Northern California
                                                                                                        
Santa Clara County
    
5,925
      
16.7
%
    
2,649
      
2,598
      
2.0
%
    
97.1
%
    
96.4
%
    
0.7
%
    
48,004
      
46,392
      
3.5
%
    
47,614
      
0.8
%
Alameda County
    
2,954
      
7.0
%
    
2,453
      
2,381
      
3.0
%
    
94.8
%
    
95.6
%
    
-0.8
%
    
21,667
      
21,221
      
2.1
%
    
21,464
      
0.9
%
San Mateo County
    
1,830
      
5.4
%
    
2,797
      
2,714
      
3.1
%
    
97.7
%
    
96.0
%
    
1.8
%
    
15,861
      
15,121
      
4.9
%
    
15,826
      
0.2
%
Contra Costa County
    
2,270
      
5.3
%
    
2,242
      
2,163
      
3.7
%
    
97.2
%
    
96.6
%
    
0.6
%
    
15,635
      
14,970
      
4.4
%
    
15,577
      
0.4
%
San Francisco
    
817
      
1.9
%
    
2,472
      
2,405
      
2.8
%
    
95.1
%
    
93.4
%
    
1.8
%
    
5,994
      
5,753
      
4.2
%
    
6,038
      
-0.7
%
Other Northern CA
    
96
      
0.3
%
    
2,738
      
2,459
      
11.3
%
    
97.5
%
    
98.4
%
    
-0.9
%
    
801
      
709
      
12.9
%
    
806
      
-0.7
%
Total Northern California
    
13,892
      
36.6
%
    
2,550
      
2,484
      
2.7
%
    
96.6
%
    
96.0
%
    
0.6
%
    
107,962
      
104,166
      
3.6
%
    
107,325
      
0.6
%
                                                                                                         
Seattle Metro
    
10,238
      
18.4
%
    
1,734
      
1,619
      
7.1
%
    
96.6
%
    
95.8
%
    
0.8
%
    
56,192
      
52,073
      
7.9
%
    
56,066
      
0.2
%
                                                                                                         
Total Same-Property
    
46,128
      
100.0
%
  
$
2,134
    
$
2,050
      
4.1
%
    
96.5
%
    
96.0
%
    
0.5
%
  
$
302,125
    
$
287,850
      
5.0
%
  
$
300,808
      
0.4
%
 
See Company's 10-K and 10-Q for additional disclosures
 
S-9
E S S E X  P R O P E R T Y  T R U S T,  I N C.
 
Same-Property Operating Expenses - Quarter to Date as of March 31, 2017 and 2016
(Dollars in thousands)
 
 
Based on 46,128 apartment homes  
  
                 
 
Q1 '17
  
Q1 '16
  
% Change
  
% of Op. Ex.
  
Same-property operating expenses:
                
Real estate taxes
  
$
31,596
    
$
31,375
      
0.7
%
    
34.9
%
Maintenance and repairs
    
17,398
      
16,614
      
4.7
%
    
19.2
%
Administrative
    
15,969
      
15,542
      
2.7
%
    
17.7
%
Utilities
    
15,007
      
13,988
      
7.3
%
    
16.6
%
Management fees
    
6,929
      
6,937
      
-0.1
%
    
7.7
%
Insurance
    
3,556
      
2,941
      
20.9
%
    
3.9
%
Total same-property operating expenses
  
$
90,455
    
$
87,397
      
3.5
%
    
100.0
%
 
See Company's 10-K and 10-Q for additional disclosures
 
S-10
E S S E X  P R O P E R T Y  T R U S T,  I N C.
 
Development Pipeline - March 31, 2017
(Dollars in millions, except per apartment home amounts in thousands and except in footnotes)
 
Project Name
  
Location
  
Ownership %
    
Estimated
Apartment
Homes
    
Estimated
Commercial
sq. feet
    
Incurred to
Date
    
Remaining
Costs
    
Estimated
Total Cost
    
Essex Est.
Total Cost (1)
    
Cost per
Apartment
Home (2)
    
Average %
Occupied (3)
    
% Leased (3)
    
Construction
Start
    
Initial
Occupancy
    
Stabilized
Operations
  
                                                                                   
Development Projects - Consolidated (4)
                                                                              
Station Park Green (5)
  
San Mateo, CA
    
100
%
    
320
      
35,000
    
$
93
    
$
146
    
$
239
    
$
239
    
$
693
      
0.0
%
    
0.0
%
    
Q3 2015
      
Q1 2018
      
Q4 2018
  
Gateway Village (6)
  
Santa Clara, CA
    
100
%
    
476
      
-
      
48
      
178
      
226
      
226
      
475
      
0.0
%
    
0.0
%
    
Q3 2016
      
Q2 2018
      
Q3 2019
  
Total Development Projects - Consolidated
            
796
      
35,000
      
141
      
324
      
465
      
465
      
584
                                       
                                                                                                          
Land Held for Future Development - Consolidated
                                                                                                     
Other Projects (5)(7)
  
Various
    
100
%
                    
110
      
-
      
110
      
110
                                               
Total Development Pipeline - Consolidated
            
796
      
35,000
      
251
      
324
      
575
      
575
                                               
                                                                                                          
Development Projects - Joint Venture (4)
                                                                                                     
The Galloway (at Hacienda)
  
Pleasanton, CA
    
55
%
    
251
      
-
      
79
      
7
      
86
      
47
      
343
      
4.8
%
    
20.0
%
    
Q1 2015
      
Q1 2017
      
Q1 2018
  
Century Towers
  
San Jose, CA
    
50
%
    
376
      
2,006
      
152
      
20
      
172
      
86
      
456
      
15.4
%
    
21.0
%
    
Q3 2014
      
Q1 2017
      
Q1 2018
  
500 Folsom (8)
  
San Francisco, CA
    
50
%
    
545
      
6,000
      
121
      
294
      
415
      
208
      
751
      
0.0
%
    
0.0
%
    
Q4 2015
      
Q4 2018
      
Q2 2020
  
Total Development Projects - Joint Venture
            
1,172
      
8,006
      
352
      
321
      
673
      
341
    
$
569
                                       
                                                                                                          
Land Held for Future Development - Joint Venture
    
50
%
                    
13
      
1
      
14
      
7
                                               
Total Development Pipeline - Joint Venture
            
1,172
      
8,006
      
365
      
322
      
687
      
348
                                               
                                                                                                          
Grand Total - Development Pipeline
            
1,968
      
43,006
    
$
616
    
$
646
    
$
1,262
      
923
                                               
Essex Cost Incurred to Date - Pro Rata
                                                    
(437
)
                                             
Essex Remaining Commitment
                                                      
$
486
                                               
 
(1)
The Company's share of the estimated total costs of the project.                        
(2)
Net of the estimated allocation to the retail component of the project.                      
(3)
Calculations are based on multifamily operations only and are as of March 31, 2017. As of April 24, 2017, The Galloway (at Hacienda) was 35% leased and Century Towers was 35% leased.    
(4)
For the first quarter of 2017, the Company's cost includes $3.2 million of capitalized interest, $2.4 million of capitalized overhead and $0.6 million of development fees (such development fees reduced G&A expenses).  
(5)
Reflects development of phases one and two. Costs incurred for phases three and four, which consist of 279 apartment homes, are included in Land Held for Future Development.      
(6)
Cost incurred to date does not include a deduction of $4.7 million for accumulated depreciation recorded during the period when the property was held as a retail operating asset.      
(7)
Cost incurred to date does not include a deduction of $6.3 million for accumulated depreciation recorded during the period when one property was held as a retail operating asset.      
(8)
Estimated total cost is net of a projected value for low income housing tax credit proceeds and tax exempt bonds.                
 
See Company's 10-K and 10-Q for additional disclosures
 
S-11
E S S E X  P R O P E R T Y  T R U S T,  I N C.
 
Redevelopment Pipeline - March 31, 2017
(Dollars in thousands)
 
 
Apartment
Homes
  
Total
Incurred
To Date
  
Estimated
Remaining
Cost
  
Estimated
Total
Cost
    
Project
Start Date
  
NOI
For the three months ended
  
 
Region/Project Name  
2017
  
2016
  
                               
Same-Property - Redevelopment Projects (1)
                              
Southern California
                              
Hamptons
    
215
    
$
14,000
    
$
9,600
    
$
23,600
    
Q1 2014
          
The Hallie (formerly Monterras)
    
292
      
23,000
      
3,400
      
26,400
      Q1 2014          
Kings Road
    
196
      
1,300
      
10,900
      
12,200
      Q4 2016          
The Palms at Laguna Niguel
    
460
      
1,000
      
7,200
      
8,200
      Q4 2016          
Northern California
                                               
Crow Canyon
    
400
      
900
      
5,900
      
6,800
      Q1 2017          
Seattle Metro
                                               
Park Highland
    
250
      
10,300
      
2,200
      
12,500
      Q4 2014          
Total Same-Property - Redevelopment Projects
    
1,813
    
$
50,500
    
$
39,200
    
$
89,700
           
$
7,989
    
$
7,329
  
                                                        
Non-Same Property - Redevelopment Projects
                                                       
Southern California
                                                       
Bunker Hill Towers
    
456
    
$
59,800
    
$
27,600
    
$
87,400
      Q3 2013                  
Total Non-Same Property - Redevelopment Projects
    
456
    
$
59,800
    
$
27,600
    
$
87,400
           
$
1,923
    
$
1,656
  
 
(1)
Redevelopment activities are ongoing at these communities, but the communities have stabilized operations, therefore results are classified in same-property results. 
 
See Company's 10-K and 10-Q for additional disclosures
 
S-12
E S S E X  P R O P E R T Y  T R U S T,  I N C.
 
Capital Expenditures - March 31, 2017
(Dollars in thousands, except in footnotes and per apartment home amounts)
 
Revenue Generating Capital Expenditures (1) (2)
    
Q1 2017
      
Q4 2016
      
Q3 2016
      
Q2 2016
    
Trailing 4 Quarters
  
Same-property portfolio
  
$
9,345
    
$
14,910
    
$
13,534
    
$
12,861
    
$
50,650
  
Non-same property portfolio
    
2,310
      
5,114
      
6,691
      
6,476
      
20,591
  
Total revenue generating capital expenditures
  
$
11,655
    
$
20,024
    
$
20,225
    
$
19,337
    
$
71,241
  
                                         
Number of same-property interior renovations completed
    
589
      
511
      
731
      
841
      
2,672
  
Number of total consolidated interior renovations completed
    
594
      
581
      
855
      
939
      
2,969
  
                                         
Non-Revenue Generating Capital Expenditures (3)
    
Q1 2017
      
Q4 2016
      
Q3 2016
      
Q2 2016
    
Trailing 4 Quarters
  
                                         
Non-revenue generating capital expenditures
  
$
9,381
    
$
19,224
    
$
18,520
    
$
16,595
    
$
63,720
  
Average apartment homes in quarter
    
48,900
      
48,712
      
49,053
      
49,053
      
48,930
  
Capital expenditures per apartment homes in the quarter
  
$
192
    
$
395
    
$
378
    
$
338
    
$
1,302
  
 
(1)
The Company incurred $0.1 million of capitalized interest, $2.0 million of capitalized overhead and $0.2 million of co-investment fees related to redevelopment in Q1 2017. 
(2)
Represents revenue generating or expense saving expenditures such as full-scale redevelopments shown on page S-12, interior unit turn renovations, enhanced amenities and certain resource management initiatives.
(3)
Represents roof replacements, paving, building and mechanical systems, exterior painting, siding, etc.
 
See Company's 10-K and 10-Q for additional disclosures
 
S-12.1
E S S E X  P R O P E R T Y  T R U S T,  I N C.
 
Co-investments - March 31, 2017
(Dollars in thousands)
 
    
Essex
Ownership
Percentage
    
Apartment
Homes
    
Total
Undepreciated
Book Value
   
Debt
Amount
    
Essex
Book
Value
    
Weighted
Average
Borrowing Rate
    
Remaining
Term of
Debt (in Years)
    
For the Three
Months Ended
March 31, 2017
 
                                                 
Operating Non-Consolidated Joint Ventures
                                            
NOI
  
                                                 
Wesco I, LLC
    
50.0
%
    
2,275
    
$
569,965
    
$
304,101
    
$
93,227
      
3.8
%
    
8.2
    
$
9,568
  
Wesco III, LLC
    
50.0
%
    
993
      
249,074
      
133,139
      
47,345
      
3.4
%
    
3.5
      
3,898
  
Wesco IV, LLC
    
50.0
%
    
1,116
      
303,688
      
198,000
      
40,615
      
3.7
%
    
3.9
      
4,883
  
BEXAEW, LLC
    
50.0
%
    
2,191
      
405,731
      
280,000
      
47,321
      
3.5
%
    
3.9
      
6,972
  
BEX II, LLC (3)
    
50.1
%
    
871
      
306,743
      
130,635
      
(35,534
)
    
3.1
%
    
4.6
      
3,995
  
CPPIB
    
50.0% - 55.0
%
    
2,232
      
862,449
      
-
      
463,899
      
-
      
-
      
11,904
  
Other 
    
50.0% - 55.0
%
    
753
      
273,057
      
186,086
      
42,384
      
3.1
%
    
3.5
      
3,822
  
Total Operating Non-Consolidated Joint Ventures
            
10,431
    
$
2,970,707
    
$
1,231,961
    
$
699,257
      
3.3
%
    
4.9
    
$
45,042
  
Development Non-Consolidated Joint Ventures (1)
    
50.0% - 55.0
%
    
1,172
      
365,231
      
83,344
      
123,408
      
3.3
%
    
4.8
      
56
  
Total Non-Consolidated Joint Ventures
            
11,603
    
$
3,335,938
    
$
1,315,305
    
$
822,665
                    
$
45,098
  
                                                                 
                                                           
Essex Portion of
NOI and Expenses
  
 NOI  
                                                          
$
23,175
  
Depreciation
                                                            
(12,854
)
Interest expense and other
                                                            
(5,068
)
Net income from operating co-investments
                                                          
$
5,253
  
                                                                 
                                                                 
                                           
Weighted
Average
Preferred Return
    
Weighted
Average
Expected Term
       Income from
Preferred Equity
Investments		  
Income from preferred equity investments
                                                          
$
5,646
  
Preferred Equity Investments (2)
                                  
$
213,059
      
10.6
%
    
2.9
    
$
5,646
  
                                                                 
Total Co-investments
                                  
$
1,035,724
                    
$
10,899
  
 
(1)
The Company has interests in four development co-investments, which are detailed on S-11.          
(2)
As of March 31, 2017 the Company has invested in thirteen preferred equity investments.           
(3)
This co-investment was classified as a liability as of March 31, 2017.              
 
See Company's 10-K and 10-Q for additional disclosures
 
S-13
E S S E X  P R O P E R T Y  T R U S T,  I N C.
 
Assumptions for 2017 FFO Guidance Range
Q1 2017 Earnings Results Supplement
 
The guidance projections below are based on current expectations and are forward-looking. See page S-14.1 for the reconciliations of earnings per share ("EPS") to FFO per share and Core FFO per share. The guidance on this page is given for Net Operating Income and Total and Core FFO. See pages S-17.1 to S-17.4 for the definitions of non-GAAP financial measures and other terms.
 
($'s in thousands, except share and per share data) (1)
  
2017 YTD
    
2017 Guidance Range
    
   
Actuals
    
Low End
    
High End
  
Comments About Guidance
Net Operating Income ("NOI")
                          
                         
Total NOI from consolidated communities
  
$
233,655
    
$
931,500
    
$
948,800
  
Includes same-property NOI growth of 2.8% to 4.6% and investment transactions completed through the end of April.
                                      
Accretion from acquisitions, net of dispositions
    
-
      
500
      
1,000
    
                                      
Management Fees
    
2,236
      
8,600
      
9,600
    
                                      
Interest Expense
                                   
   Interest expense, before capitalized interest
    
(55,342
)
    
(230,800
)
    
(227,200
)
Updated to reflect April unsecured bond offering and loan assumed in conversion of Sage to consolidated entity.
   Interest capitalized
    
3,337
      
13,700
      
15,700
    
           Net interest expense
    
(52,005
)
    
(217,100
)
    
(211,500
)
  
                                      
Recurring Income and Expenses
                                   
Interest and other income
    
5,134
      
20,800
      
21,800
    
FFO from co-investments
    
23,753
      
94,600
      
97,600
  
Reflects first quarter results and investment activity completed through the end of April.
General and administrative expense
    
(10,601
)
    
(41,000
)
    
(43,000
)
  
Non-controlling interest
    
(2,466
)
    
(11,000
)
    
(10,000
)
  
  Total recurring income and expenses
    
15,820
      
63,400
      
66,400
    
Non-Core Income and Expenses
                                   
Gain on sales of marketable securities and land
    
1,605
      
1,605
      
1,605
    
Acquisition and investment related costs
    
(556
)
    
(1,100
)
    
(1,700
)
  
Other non-core adjustments
    
31
      
31
      
31
    
  Total non-core income and expenses
    
1,080
      
536
      
(64
)
  
                                      
Funds from Operations
  
$
200,786
    
$
787,436
    
$
814,236
    
                                      
Funds from Operations per diluted share
  
$
2.95
    
$
11.56
    
$
11.96
    
                                      
% Change - Funds from Operations
    
11.7
%
    
4.0
%
    
7.6
%
  
                                      
Core Funds from Operations (excludes non-core items)
  
$
199,706
    
$
786,900
    
$
814,300
    
                                      
Core Funds from Operations per diluted share
  
$
2.94
    
$
11.56
    
$
11.96
    
                                      
% Change - Core Funds from Operations
    
9.7
%
    
4.7
%
    
8.3
%
  
                                      
EPS - Diluted
  
$
2.72
    
$
5.60
    
$
6.00
    
                                      
Weighted average shares outstanding - FFO calculation
    
67,974
      
68,100
      
68,100
    
 
(1)
 All non-core items are excluded from the YTD actuals and included in the non-core income and expense section of the FFO reconciliation.
 
See Company's 10-K and 10-Q for additional disclosures
 
S-14
E S S E X  P R O P E R T Y  T R U S T,  I N C.
 
Reconciliation of Projected EPS, FFO and Core FFO per diluted share 
 
Projected EPS, FFO and Core FFO per diluted share
 
With respect to the Company's guidance regarding its projected FFO and Core FFO for the second quarter of 2017 and full-year 2017, which guidance is set forth in the earnings release for the first quarter of 2017 and on page S-14 of this supplement, a reconciliation of projected net income per share to projected FFO per share and projected Core FFO per share, as set forth in such guidance, is presented in the table below.
 
         
2017 Guidance Range (1)
  
       
2nd Quarter 2017   
    
Full-Year 2017
  
    YTD Actual    
Low
    
High
    
Low
    
High
  
EPS - diluted
  
$
2.72
    
$
0.90
    
$
1.00
    
$
5.60
    
$
6.00
  
Conversion from GAAP share count
    
(0.09
)
    
(0.03
)
    
(0.03
)
    
(0.19
)
    
(0.19
)
Depreciation & amortization expense
    
1.89
      
1.91
      
1.91
      
7.62
      
7.62
  
Noncontrolling interests related to Operating Partnership units
    
0.09
      
0.03
      
0.03
      
0.19
      
0.19
  
Gain on sale of real estate and remeasurement of co-investment
    
(1.66
)
    
-
      
-
      
(1.66
)
    
(1.66
)
FFO per share - diluted
    
2.95
      
2.81
      
2.91
      
11.56
      
11.96
  
Gain on sale of marketable securities
    
(0.02
)
    
-
      
-
      
(0.02
)
    
(0.02
)
Acquisition and investment related costs
    
0.01
      
0.01
      
0.01
      
0.02
      
0.02
  
Core FFO per share - diluted
  
$
2.94
    
$
2.82
    
$
2.92
    
$
11.56
    
$
11.96
  
 
(1)
2017 Guidance Range excludes projected gain on sale of real estate and land and projected gain on sale of marketable securities until they are realized within the reporting period presented in this report.
 
See Company's 10-K and 10-Q for additional disclosures
 
S-14.1
E S S E X  P R O P E R T Y  T R U S T,  I N C.
 
Summary of Apartment Community Acquisitions and Dispositions Activity
Year to date as of March 31, 2017
(Dollars in thousands, except average rent amounts and in footnotes)
Acquisitions
        
Apartment
Homes
  
Essex
Ownership
Percentage
     
Entity
     
Date
  
Contract
Price
    
Price per
Apartment Home
      
Average
Rent
  
                   
Property Name
  
Location
              
                                 
Palm Valley(1)
  
San Jose, CA
      
1,098
      
100.0
%
EPLP
Jan-17
  
$
183,000
    
$
333
    
$
2,566
  
 Sage(2)
  
San Jose, CA
      
230
      
40.5
%
EPLP
Mar-17
    
90,000
    
 
391
      
2,485
  
   
Q1 2017
      
1,328
                     
$
273,000
    
$
343
          
 
 
 
 
 
 
Dispositions
                                                
Property Name
  
Location
  
Apartment
Homes
  
Essex
Ownership
Percentage
  
Entity
Date
Sales
Price
  
Price per
Apartment Home
          
                                                       
Jefferson at Hollywood
  
Hollywood, CA
      
270
      
100.0
%
EPLP
Jan-17
  
$
132,500
    
$
491
          
    Q1 2017      
270
                     
$
132,500
    
$
491
          
 
(1)
In January 2017, the Company purchased the joint venture partner's 50.0% membership interest in the Palm Valley co-investment for a purchase price of $183.0 million.
(2)
In March 2017, the Company converted its existing $15.3 million preferred equity investment in Sage at Cupertino into a 40.5% equity ownership interest in the property. The Company issued DownREIT units to the seller for the remaining equity based on an estimated property valuation of $90.0 million and an encumbrance of $52.0 million of mortgage debt. As of March 31, 2017, the Company consolidates the property, based on a VIE analysis performed by the Company.
 
See Company's 10-K and 10-Q for additional disclosures
 
S-15
E S S E X  P R O P E R T Y  T R U S T,  I N C.
 
2017 MSA Level Forecast: Supply, Jobs, and Apartment Market Conditions
 
                                     
    Residential Supply (1)    
Job Forecast (2)
    
Market Forecast (3)
  
Market
  
New MF Supply
    
New SF Supply
    
Total Supply
    
% of MF Supply to MF Stock
    
% of Total Supply to Total Stock
    
Est. New Jobs
    
% Growth
    
Economic Rent Growth
  
                                                 
Los Angeles
    
10,750
      
6,550
      
17,300
      
0.7
%
    
0.5
%
    
69,800
      
1.6
%
    
3.7
%
Orange
    
6,550
      
4,650
      
11,200
      
1.6
%
    
1.0
%
    
36,400
      
2.3
%
    
4.2
%
San Diego
    
3,200
      
3,900
      
7,100
      
0.7
%
    
0.6
%
    
34,150
      
2.4
%
    
5.2
%
Ventura
    
450
      
375
      
825
      
0.7
%
    
0.3
%
    
5,100
      
1.7
%
    
3.9
%
So. Cal.
    
20,950
      
15,475
      
36,425
      
1.0
%
    
0.6
%
    
145,450
      
2.0
%
    
4.2
%
                                                                 
San Francisco
    
4,750
      
700
      
5,450
      
1.3
%
    
0.8
%
    
22,500
      
2.1
%
    
2.2
%
Oakland
    
2,850
      
5,250
      
8,100
      
0.9
%
    
0.8
%
    
19,000
      
1.7
%
    
2.4
%
San Jose
    
3,250
      
2,350
      
5,600
      
1.4
%
    
0.8
%
    
26,850
      
2.5
%
    
2.6
%
No. Cal.
    
10,850
      
8,300
      
19,150
      
1.2
%
    
0.8
%
    
68,350
      
2.2
%
    
2.5
%
                                                                 
Seattle
    
10,950
      
8,650
      
19,600
      
2.3
%
    
1.6
%
    
44,600
      
2.7
%
    
4.6
%
                                                                 
Weighted Average (4)
    
42,750
      
32,425
      
75,175
      
1.3
%
    
0.9
%
    
258,400
      
2.2
%
    
3.6
%
 
All data are based on Essex Property Trust, Inc. forecasts.
                                                  
U.S. Economic Assumptions: 2017 G.D.P. Growth: 2.2%, 2017 Job Growth: 1.6%
                                          
(1) Residential Supply: total supply includes the Company's estimate of actual multifamily deliveries including properties with 50+ units and excludes student, senior and 100% affordable housing communities. Single
     family estimates based on an average trailing 12 month single family permit. Previous presentations had included multifamily deliveries of 100+ units and excluded student, senior and 100% affordable housing.
  
(2) Job Forecast: refers to the difference between total non-farm industry employment (not seasonally adjusted) projected 4Q over 4Q, expressed as total new jobs and growth rates.
  
(3) Market Forecast: the estimated rent growth represents the forecasted change in effective market rents for full year 2017 vs 2016 (excludes submarkets not targeted by Essex).
  
(4) Weighted Average: markets weighted by scheduled rent in the Company's Portfolio.
                                  
 
See Company's 10-K and 10-Q for additional disclosures
S-16
E S S E X  P R O P E R T Y  T R U S T,  I N C.     
          
Reconciliations of Non-GAAP Financial Measures and Other Terms    
          
                   
Adjusted EBITDA Reconciliation
            
                   
Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) is a component of the credit ratio, "Net Indebtedness Divided by Adjusted EBITDA", presented on page S-6, in the section titled "Selected Credit Ratios", and it is not intended to be a measure of free cash flow for our management’s discretionary use, as it does not consider certain cash requirements such as income tax payments, debt service requirements, capital expenditures and other fixed charges. Adjusted EBITDA is not a recognized measurement under U.S. GAAP. Because not all companies use identical calculations, our presentation of Adjusted EBITDA may not be comparable to similarly titled measures of other companies.
                   
The reconciliation of Adjusted EBITDA to Net Income available to common stockholders is presented in the table below (Dollars in thousands):
 
   
Three Months Ended
  
   
March 31,
  
   
2017
  
Net income available to common stockholders
  
$
178,964
  
Add: Net income attributable to noncontrolling interest
    
8,587
  
Net Income
    
187,551
  
Adjustments:
        
Acquisition and investment related costs
    
556
  
Depreciation and amortization
    
115,503
  
Equity income from co-investments
    
(5,253
)
Gain on sale of marketable securities
    
(1,605
)
Gain on remeasurement of co-investment
    
(86,482
)
Gain on sale of real estate and land
    
(26,174
)
Insurance reimbursements
    
(25
)
Interest expense, net (1)
    
51,999
  
Adjusted EBITDA
  
$
236,070
  
 
 (1)  Interest expense, net includes items such as gains on derivatives and the amortization of deferred charges. 
                   
Encumbered
            
                   
Encumbrance means any mortgage, deed of trust, lien, charge, pledge, security interest, security agreement or other encumbrance of any kind.
                   
Funds From Operations ("FFO")
            
                   
FFO, as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), is generally considered by industry analysts as an appropriate measure of performance of an equity REIT. Generally, FFO adjusts the net income of equity REITs for non-cash charges such as depreciation and amortization of rental properties, impairment charges, gains on sales of real estate and extraordinary items. Management considers FFO and FFO which excludes merger, integration and acquisition costs and items that are not routine or not related to the Company’s core business activities, which is referred to as “Core FFO”, to be useful financial performance measurements of an equity REIT because, together with net income and cash flows, FFO and Core FFO provide investors with additional bases to evaluate the operating performance and ability of a REIT to incur and service debt and to fund acquisitions and other capital expenditures and the ability to pay dividends.
 
See Company's 10-K and 10-Q for additional disclosures
S-17.1
E S S E X  P R O P E R T Y  T R U S T,  I N C.        
               
Reconciliations of Non-GAAP Financial Measures and Other Terms       
 
 
Funds From Operations ("FFO") - continued
              
           
FFO and Core FFO do not represent net income or cash flows from operations as defined by U.S. generally accepted accounting principles (“GAAP”) and are not intended to indicate whether cash flows will be sufficient to fund cash needs. These measures should not be considered as an alternative to net income as an indicator of the REIT's operating performance or to cash flows as a measure of liquidity. FFO and Core FFO do not measure whether cash flow is sufficient to fund all cash needs including principal amortization, capital improvements and distributions to shareholders. FFO and Core FFO do not represent cash flows generated from operating, investing or financing activities as defined under U.S. GAAP. Management has consistently applied the NAREIT definition of FFO to all periods presented. However, there is judgment involved and other REITs’ calculation of FFO may vary from the NAREIT definition for this measure, and thus their disclosures of FFO may not be comparable to the Company’s calculation.
           
The reconciliations of diluted FFO and Core FFO are detailed on page S-3 in the section titled "Consolidated Funds From Operations".
  
           
Interest Expense, Net
              
           
Interest expense, net is a U.S. GAAP measure and is presented on page S-1 titled "Consolidated Operating Results". Interest expense, net includes items such as gains on derivatives and the amortization of deferred charges and is presented in the table below (Dollars in thousands):
 
   
Three Months Ended
  
   
March 31,
  
   
2017
  
Interest expense
  
$
(54,589
)
Adjustments:
        
Interest rate hedge ineffectiveness
    
6
  
Total return swap income
    
2,584
  
Interest expense, net
  
$
(51,999
)
 
                     
Net Indebtedness Divided by Adjusted EBITDA
              
                     
This credit ratio is presented on page S-6 in the section titled "Selected Credit Ratios". This credit ratio is calculated by dividing net indebtedness by Adjusted EBITDA, as annualized based on the most recent quarter, and adjusted for estimated net operating income from properties acquired or disposed of during the quarter. This ratio is presented by the Company because it provides rating agencies and investors an additional means of comparing the Company's ability to service debt obligations to that of other companies. Net indebtedness is total debt, net less unamortized premiums, discounts, debt issuance costs, unrestricted cash and cash equivalents, and marketable securities. The reconciliation of Adjusted EBITDA is set forth in "Adjusted EBITDA Reconciliation" above. The calculation of this credit ratio and a reconciliation of net indebtedness to total debt, net is presented in the table below (Dollars in thousands):
 
Total debt, net
  
$
5,602,507
  
Adjustments:
        
Unamortized premiums, discounts, and debt issuance costs
    
(19,203
)
Cash and cash equivalents-unrestricted
    
(84,344
)
Marketable securities
    
(138,977
)
Net Indebtedness
  
$
5,359,983
  
         
Adjusted EBITDA, annualized (1)
  
$
944,280
  
Other EBITDA normalization adjustments, net, annualized (2)
    
3,062
  
Adjusted EBITDA, normalized and annualized
  
$
947,342
  
         
Net Indebtedness Divided by Adjusted EBITDA, normalized and annualized
    
5.7
  
 
(1)
Based on the amount for the most recent quarter, multiplied by four.
              
(2)
Adjustments made for properties acquired or disposed of during the quarter, multiplied by four.
    
 
See Company's 10-K and 10-Q for additional disclosures
S-17.2
E S S E X  P R O P E R T Y  T R U S T,  I N C.  
 
Reconciliations of Non-GAAP Fianancial Measures and Other Terms 
 
 
Net Operating Income ("NOI") and Same-Property NOI Reconciliations      
                   
Net Operating Income ("NOI") and Same-property NOI are considered by management to be an important supplemental performance measures to earnings from operations included in the Company’s consolidated statements of income. The presentation of same-property NOI assists with the presentation of the Company’s operations prior to the allocation of depreciation and any corporate-level or financing-related costs. NOI reflects the operating performance of a community and allows for an easy comparison of the operating performance of individual communities or groups of communities. In addition, because prospective buyers of real estate have different financing and overhead structures, with varying marginal impacts to overhead by acquiring real estate, NOI is considered by many in the real estate industry to be a useful measure for determining the value of a real estate asset or group of assets. The Company defines same-property NOI as same-property revenue less same-property operating expenses, including property taxes. Please see the reconciliation of earnings from operations to NOI and same-property NOI, which in the table below is the NOI for stabilized properties consolidated by the Company for the periods presented (Dollars in thousands):
 
   
Three Months Ended
    
Three Months Ended
  
   
March 31,
    
March 31,
  
   
2017
    
2016
  
Earnings from operations
  
$
109,231
    
$
99,995
  
Adjustments:
                
Depreciation and amortization
    
115,503
      
109,707
  
Management and other fees
    
(2,236
)
    
(2,024
)
General and administrative
    
10,601
      
9,182
  
Acquisition and investment related costs
    
556
      
828
  
NOI
    
233,655
      
217,688
  
Less: Non-same property NOI
    
(21,985
)
    
(17,235
)
Same-Property NOI
  
$
211,670
    
$
200,453
  
 
Public Bond Covenants
            
                   
Public Bond Covenants refers to certain covenants set forth in instruments governing the Company's unsecured indebtedness. These instruments require the Company to meet specified financial covenants, including covenants relating to net worth, fixed charge coverage, debt service coverage, the amounts of total indebtedness and secured indebtedness, leverage and certain investment limitations. These covenants may restrict the Company's ability to expand or fully pursue its business strategies. The Company's ability to comply with these covenants may be affected by changes in the Company's operating and financial performance, changes in general business and economic conditions, adverse regulatory developments or other events adversely impacting it. The breach of any of these covenants could result in a default under the Company's indebtedness, which could cause those and other obligations to become due and payable. If any of the Company's indebtedness is accelerated, it may not be able to repay it. For risks related to failure to comply with these covenants, see "Item 1A: Risk Factors - Risks related to Our Indebtedness and Financing" in the Company's Annual Report on Form 10-K and other reports filed by the Company with the Securities and Exchange Commission ("SEC").
                   
The ratios set forth on page S-6 in the section titled "Public Bond Covenants" are provided only to show the Company's compliance with certain specified covenants that are contained in indentures related to the Company's issuance of Senior Notes, which indentures are filed by the Company with the SEC. See, for example, the Indenture dated April 10, 2017, filed by the company as Exhibit 4.1 to the Company's Form 8-K, filed on April 10, 2017. These ratios should not be used for any other purpose, including without limitation to evaluate the Company's financial condition or results of operations, nor do they indicate the Company's covenant compliance as of any other date or for any other period. The capitalized terms in the disclosure are defined in the Indentures filed by the Company via Form 8-Ks and may differ materially from similar terms used by other companies that present information about their covenant compliance.
                   
Secured Debt
            
                   
Secured Debt means Debt of the Company or any of its Subsidiaries which is secured by an Encumbrance on any property or assets of the Company or any of its Subsidiaries. The calculation of Secured Debt is set forth on page S-5.
                   
 
See Company's 10-K and 10-Q for additional disclosures
S-17.3
E S S E X  P R O P E R T Y  T R U S T,  I N C.       
             
Reconciliations of Non-GAAP Financial Measures and Other Tems             
             
             
Unencumbered NOI to Adjusted Total NOI
            
                   
This ratio is presented on page S-6 in the section titled "Selected Credit Ratios". Unencumbered NOI means the sum of NOI for those real estate assets which are not subject to an Encumbrance securing Debt. The ratio of Unencumbered NOI to Adjusted Total NOI for the three months ended March 31, 2017, annualized, is calculated by dividing Unencumbered NOI, annualized for the three months ended March 31, 2017 and as further adjusted for pro forma NOI for properties acquired or sold during the recent quarter, by Adjusted Total NOI as annualized. The calculation and reconciliation of NOI is set forth in "Net Operating Income ("NOI") and Same-Property NOI Reconciliation" above. This ratio is presented by the Company because it provides rating agencies and investors an additional means of comparing the Company's ability to service debt obligations to that of other companies. The calculation of this ratio is presented in the table below (Dollars in thousands):
 
   
Annualized
  
   
Q1'17 (1)
  
NOI
  
$
934,620
  
Adjustments:
        
Other, Net
    
122
  
Adjusted Total NOI
    
934,742
  
Less: Encumbered NOI
    
(302,534
)
Unencumbered NOI
  
$
632,208
  
         
Encumbered NOI
  
$
302,534
  
Unencumbered NOI
    
632,208
  
Adjusted Total NOI
  
$
934,742
  
         
Unencumbered NOI to Adjusted Total NOI
    
68
%
 
 (1)
This table is based on the amounts for the most recent quarter, multiplied by four.
        
 
See Company's 10-K and 10-Q for additional disclosures
 
S-17.4