Essex Announces Third Quarter 2023 Results
Essex Property Trust, Inc. (NYSE: ESS) announced its Q3 2023 earnings results and business activities. Net Income, FFO, and Core FFO per diluted share showed positive growth compared to the same period last year. The company achieved same-property revenue and NOI growth, closed secured loans, and committed to preferred equity investment. The full-year 2023 guidance ranges were reaffirmed.
Positive
Net Income per diluted share for Q3 2023 increased by 2.4% compared to Q3 2022.
Same-property revenues and NOI grew by 3.2% and 2.7%, respectively, compared to Q3 2022.
The company closed $298.0 million in secured loans at a 5.08% fixed interest rate.
Committed $12.3 million to one preferred equity investment at a preferred return of 13.5%.
The company's full-year 2023 guidance ranges for Core FFO per diluted share, same-property revenues, expenses, and NOI were reaffirmed.
Negative
Net Income per diluted share for Q3 2023 decreased by 4.9% compared to Q3 2022.
The sequential change in same-property revenues was only 1.1%.
The year-over-year negative impact from delinquencies affected revenues.
No information on stock issuance or repurchase was provided.
No specific information on future investment activity was mentioned.
10/26/2023 - 04:15 PM
SAN MATEO, Calif. --(BUSINESS WIRE)--
Essex Property Trust, Inc. (NYSE: ESS) (the “Company”) announced today its third quarter 2023 earnings results and related business activities.
Net Income, Funds from Operations (“FFO”), and Core FFO per diluted share for the three and nine months ended September 30, 2023 are detailed below.
Three Months Ended
September 30,
Nine Months Ended
%
%
2023
2022
Change
2023
2022
Change
Per Diluted Share
Net Income
$1.36
$1.43
-4.9%
$5.30
$3.42
55.0%
Total FFO
$3.69
$3.45
7.0%
$11.37
$9.93
14.5%
Core FFO
$3.78
$3.69
2.4%
$11.21
$10.75
4.3%
Third Quarter 2023 Highlights:
Reported Net Income per diluted share for the third quarter of 2023 of $1.36 $1.43
Achieved Core FFO per diluted share of $3.78 2.4% growth compared to the third quarter of 2022 and exceeding the midpoint of the guidance range by $0.03
Achieved same-property revenues and net operating income (“NOI”) growth of 3.2% and 2.7% , respectively, compared to the third quarter of 2022. On a sequential basis, same-property revenues improved 1.1% .
Closed $298.0 million 5.08% fixed interest rate. The proceeds are intended to repay a majority of the Company’s $400.0 million
Committed $12.3 million 13.5% .
Reaffirmed the midpoint of the full-year 2023 guidance ranges for Core FFO per diluted share as well as same-property revenues, expenses, and NOI.
As of October 24, 2023, the Company’s immediately available liquidity was approximately $1.6 billion
Same-Property Operations
Same-property operating results exclude any properties that are not comparable for the periods presented. The table below illustrates the percentage change in same-property gross revenues for the quarter ended September 30, 2023 compared to the quarter ended September 30, 2022, and the sequential percentage change for the quarter ended September 30, 2023 compared to the quarter ended June 30, 2023, by submarket for the Company:
Q3 2023 vs. Q3 2022
Q3 2023 vs. Q2 2023
% of Total
Revenue
Change
Revenue Change
Q3 2023 Revenues
Southern California
Los Angeles County
1.2%
0.7%
18.6%
Orange County
4.2%
1.3%
10.5%
San Diego County
8.7%
2.5%
9.0%
Ventura County
4.7%
0.7%
4.1%
Total Southern California
3.8%
1.2%
42.2%
Northern California
Santa Clara County
4.9%
1.4%
19.8%
Alameda County
1.4%
0.8%
7.8%
San Mateo County
2.0%
2.2%
4.6%
Contra Costa County
1.2%
0.8%
5.4%
San Francisco
-1.9%
-1.4%
2.5%
Total Northern California
2.9%
1.1%
40.1%
Seattle Metro
2.3%
0.6%
17.7%
Same-Property Portfolio
3.2%
1.1%
100.0%
The table below illustrates the components that drove the change in same-property revenues on a year-over-year basis for the three and nine-month periods ending September 30, 2023 and on a sequential basis for the third quarter of 2023.
Same-Property Revenue Components
Q3 2023
vs. Q3 2022
YTD 2023
vs. YTD 2022
Q3 2023
vs. Q2 2023
Scheduled Rents
3.3%
5.1%
1.0%
Delinquencies (1)
-0.6%
-0.7%
0.0%
Cash Concessions
-0.2%
0.0%
0.2%
Vacancy
0.3%
0.2%
-0.3%
Other Income
0.4%
0.3%
0.2%
2023 Same-Property Revenue Growth
3.2%
4.9%
1.1%
The year-over-year negative impact from delinquencies is largely due to lower net delinquency in the prior period, which benefitted from Emergency Rental Assistance payments of $7.4 million $31.9 million $0.4 million $2.1 million
Year-Over-Year Change
Year-Over-Year Change
Q3 2023 compared to Q3 2022
YTD 2023 compared to YTD 2022
Revenues
Operating
Expenses
NOI
Revenues
Operating
Expenses
NOI
Southern California
3.8%
5.9%
2.9%
5.5%
6.4%
5.1%
Northern California
2.9%
3.1%
2.9%
4.3%
3.7%
4.5%
Seattle Metro
2.3%
3.9%
1.6%
4.9%
2.4%
6.0%
Same-Property Portfolio
3.2%
4.4%
2.7%
4.9%
4.6%
5.0%
Sequential Change
Q3 2023 compared to Q2 2023
Revenues
Operating
Expenses
NOI
Southern California
1.2%
6.2%
-0.7%
Northern California
1.1%
2.1%
0.7%
Seattle Metro
0.6%
6.0%
-1.5%
Same-Property Portfolio
1.1%
4.5%
-0.3%
Financial Occupancies
Quarter Ended
9/30/2023
6/30/2023
9/30/2022
Southern California
96.3%
96.4%
96.2%
Northern California
96.5%
96.7%
96.0%
Seattle Metro
96.3%
96.9%
95.3%
Same-Property Portfolio
96.4%
96.6%
96.0%
Investment Activity
Other Investments
In September 2023, the Company committed $12.3 million 13.5% . The investment was fully funded at closing and is scheduled to mature in 2028.
Liquidity and Balance Sheet
Common Stock
In the third quarter of 2023, the Company did not issue any shares of common stock through its equity distribution program or repurchase any shares through its stock repurchase plan.
Year-to-date through October 24, 2023, the Company has repurchased 437,026 shares of its common stock totaling $95.7 million $218.88 $302.7 million
Balance Sheet
In July 2023, the Company closed $298.0 million 5.08% fixed interest rate. The proceeds are intended to repay a majority of the Company’s $400.0 million
As of October 24, 2023, the Company had approximately $1.6 billion
Guidance
The table below provides the Company’s 2023 full-year assumptions for Net Income, Total FFO, Core FFO per diluted share, and same-property growth, as well as the Company’s fourth quarter 2023 assumptions for Core FFO per diluted share. For additional details regarding the Company’s 2023 assumptions, please see page S-14 of the accompanying supplemental financial information.
2023 Full-Year and Fourth Quarter Guidance
Previous
Range
Previous Midpoint
Revised
Range
Revised Midpoint
Change at the Midpoint
Per Diluted Share
Net Income
$6.74 $6.98
$6.86
$6.69 $6.81
$6.75
($0.11
Total FFO
$15.13 $15.37
$15.25
$15.10 $15.22
$15.16
($0.09
Core FFO
$14.88 $15.12
$15.00
$14.94 $15.06
$15.00
-
Q4 2023 Core FFO
-
-
$3.73 $3.85
$3.79
N/A
Same-Property Growth on a Cash-Basis(1)
Revenues
4.0% to 4.8%
4.4%
4.2% to 4.6%
4.4%
-
Operating Expenses
3.75% to 4.25%
4.0%
3.75% to 4.25%
4.0%
-
NOI
3.9% to 5.1%
4.5%
4.1% to 4.9%
4.5%
-
The Company’s guidance midpoint for same-property revenues and NOI growth on a GAAP basis is 4.6% and 4.9% , respectively.
Conference Call with Management
The Company will host an earnings conference call with management to discuss its quarterly results on Friday, October 27, 2023 at 10:00 a.m. PT (1:00 p.m. ET), which will be broadcast live via the Internet at www.essex.com , and accessible via phone by dialing toll-free, (877) 407-0784, or toll/international, (201) 689-8560. No passcode is necessary.
A rebroadcast of the live call will be available online for 30 days and digitally for 7 days. To access the replay online, go to www.essex.com and select the third quarter 2023 earnings link. To access the replay, dial (844) 512-2921 using the replay pin number 13741662. If you are unable to access the information via the Company’s website, please contact the Investor Relations Department at investors@essex.com or by calling (650) 655-7800.
Upcoming Events
The Company is scheduled to participate in the National Association of Real Estate Investment Trusts (“NAREIT”) REITWorld Conference held at the JW Marriott Los Angeles L.A. LIVE in Los Angeles, CA from November 14 - 15, 2023. A copy of any materials provided by the Company at the conference will be made available on the Investors section of the Company’s website at www.essex.com .
Corporate Profile
Essex Property Trust, Inc., an S&P 500 company, is a fully integrated real estate investment trust (REIT) that acquires, develops, redevelops, and manages multifamily residential properties in selected West Coast markets. Essex currently has ownership interests in 252 apartment communities comprising approximately 62,000 apartment homes with an additional property in active development. Additional information about the Company can be found on the Company’s website at www.essex.com .
This press release and accompanying supplemental financial information has been furnished to the Securities and Exchange Commission electronically on Form 8-K and can be accessed from the Company’s website at www.essex.com . If you are unable to obtain the information via the Web, please contact the Investor Relations Department at (650) 655-7800.
FFO RECONCILIATION
FFO, as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), is generally considered by industry analysts as an appropriate measure of performance of an equity REIT. Generally, FFO adjusts the net income of equity REITs for non-cash charges such as depreciation and amortization of rental properties, impairment charges, gains on sales of real estate and extraordinary items. Management considers FFO and FFO which excludes non-core items, which is referred to as “Core FFO,” to be useful supplemental operating performance measures of an equity REIT because, together with net income and cash flows, FFO and Core FFO provide investors with additional bases to evaluate the operating performance and ability of a REIT to incur and service debt and to fund acquisitions and other capital expenditures and to pay dividends. By excluding gains or losses related to sales of depreciated operating properties and land and excluding real estate depreciation (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO can help investors compare the operating performance of a real estate company between periods or as compared to different companies. By further adjusting for items that are not considered part of the Company’s core business operations, Core FFO allows investors to compare the core operating performance of the Company to its performance in prior reporting periods and to the operating performance of other real estate companies without the effect of items that by their nature are not comparable from period to period and tend to obscure the Company’s actual operating results. FFO and Core FFO do not represent net income or cash flows from operations as defined by U.S. generally accepted accounting principles (“GAAP”) and are not intended to indicate whether cash flows will be sufficient to fund cash needs. These measures should not be considered as alternatives to net income as an indicator of the REIT's operating performance or to cash flows as a measure of liquidity. FFO and Core FFO do not measure whether cash flow is sufficient to fund all cash needs including principal amortization, capital improvements and distributions to stockholders. FFO and Core FFO also do not represent cash flows generated from operating, investing or financing activities as defined under GAAP. Management has consistently applied the NAREIT definition of FFO to all periods presented. However, there is judgment involved and other REITs’ calculation of FFO may vary from the NAREIT definition for this measure, and thus their disclosures of FFO may not be comparable to the Company’s calculation.
The following table sets forth the Company’s calculation of diluted FFO and Core FFO for the three and nine months ended September 30, 2023 and 2022 (in thousands, except for share and per share amounts):
Three Months Ended
September 30,
Nine Months Ended
September 30,
Funds from Operations attributable to common stockholders and unitholders
2023
2022
2023
2022
Net income available to common stockholders
$
87,282
$
92,842
$
340,434
$
223,150
Adjustments:
Depreciation and amortization
137,357
135,511
410,422
403,561
Gains not included in FFO
-
(17,423
)
(59,238
)
(17,423
)
Casualty loss
-
-
433
-
Depreciation and amortization from unconsolidated co-investments
18,029
18,288
53,486
54,532
Noncontrolling interest related to Operating Partnership units
3,072
3,247
11,982
7,800
Depreciation attributable to third party ownership and other
(371
)
(357
)
(1,095
)
(1,064
)
Funds from Operations attributable to common stockholders and unitholders
$
245,369
$
232,108
$
756,424
$
670,556
FFO per share – diluted
$
3.69
$
3.45
$
11.37
$
9.93
Expensed acquisition and investment related costs
$
31
$
230
$
375
$
248
Tax expense (benefit) on unconsolidated co-investments (1)
404
1,755
1,237
(7,863
)
Realized and unrealized losses (gains) on marketable securities, net
4,577
17,115
(4,294
)
51,126
Provision for credit losses
17
(1
)
51
(64
)
Equity (income) loss from non-core co-investments (2)
(538
)
1,563
(1,422
)
31,117
Loss on early retirement of debt, net
-
2
-
2
Loss on early retirement of debt from unconsolidated co-investment
-
1
-
988
Co-investment promote income
-
-
-
(17,076
)
Income from early redemption of preferred equity investments and notes receivable
-
-
(285
)
(858
)
General and administrative and other, net
1,743
882
2,570
2,327
Insurance reimbursements, legal settlements, and other, net
(283
)
(5,069
)
(9,082
)
(5,077
)
Core Funds from Operations attributable to common stockholders and unitholders
$
251,320
$
248,586
$
745,574
$
725,426
Core FFO per share – diluted
$
3.78
$
3.69
$
11.21
$
10.75
Weighted average number of shares outstanding diluted (3)
66,445,256
67,341,189
66,537,111
67,503,403
Represents tax related to net unrealized gains or losses on technology co-investments.
Represents the Company's share of co-investment income or loss from technology co-investments.
Assumes conversion of all outstanding limited partnership units in Essex Portfolio, L.P. (the “Operating Partnership”) into shares of the Company’s common stock and excludes DownREIT limited partnership units.
Net Operating Income (“NOI”) and Same-Property NOI Reconciliations
NOI and same-property NOI are considered by management to be important supplemental performance measures to earnings from operations included in the Company’s consolidated statements of income. The presentation of same-property NOI assists with the presentation of the Company’s operations prior to the allocation of depreciation and any corporate-level or financing-related costs. NOI reflects the operating performance of a community and allows for an easy comparison of the operating performance of individual communities or groups of communities. In addition, because prospective buyers of real estate have different financing and overhead structures, with varying marginal impacts to overhead by acquiring real estate, NOI is considered by many in the real estate industry to be a useful measure for determining the value of a real estate asset or group of assets. The Company defines same-property NOI as same-property revenues less same-property operating expenses, including property taxes. Please see the reconciliation of earnings from operations to NOI and same-property NOI, which in the table below is the NOI for stabilized properties consolidated by the Company for the periods presented (dollars in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023
2022
2023
2022
Earnings from operations
$
131,784
$
128,608
$
454,001
$
367,086
Adjustments:
Corporate-level property management
expenses
11,504
10,184
34,387
30,532
Depreciation and amortization
137,357
135,511
410,422
403,561
Management and other fees from
affiliates
(2,785
)
(2,886
)
(8,328
)
(8,313
)
General and administrative
14,611
15,172
43,735
40,541
Expensed acquisition and investment related costs
31
230
375
248
Casualty loss
-
-
433
-
Gain on sale of real estate and land
-
-
(59,238
)
-
NOI
292,502
286,819
875,787
833,655
Less: Non-same property NOI
(12,523
)
(14,108
)
(40,918
)
(38,755
)
Same-Property NOI
$
279,979
$
272,711
$
834,869
$
794,900
Safe Harbor Statement Under The Private Litigation Reform Act of 1995:
This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements which are not historical facts, including statements regarding the Company's expectations, estimates, assumptions, hopes, intentions, beliefs and strategies regarding the future. Words such as “expects,” “assumes,” “anticipates,” “may,” “will,” “intends,” “plans,” “projects,” “believes,” “seeks,” “future,” “estimates,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Such forward-looking statements include, among other things, statements regarding the Company’s expectations related to the continued evolution of the work-from-home trend, the Company’s intent, beliefs or expectations with respect to the timing of completion of current development and redevelopment projects and the stabilization of such projects, the timing of lease-up and occupancy of its apartment communities, the anticipated operating performance of its apartment communities, the total projected costs of development and redevelopment projects, co-investment activities, qualification as a REIT under the Internal Revenue Code of 1986, as amended, 2023 same-property revenue and operating expenses generally and in specific regions, the real estate markets in the geographies in which the Company’s properties are located and in the United States in general, the adequacy of future cash flows to meet anticipated cash needs, its financing activities and the use of proceeds from such activities, the availability of debt and equity financing, general economic conditions including the potential impacts from such economic conditions, inflation, the labor market, supply chain impacts, geopolitical tensions and regional conflicts, trends affecting the Company’s financial condition or results of operations, changes to U.S. tax laws and regulations in general or specifically related to REITs or real estate, changes to laws and regulations in jurisdictions in which communities the Company owns are located, and other information that is not historical information. While the Company's management believes the assumptions underlying its forward-looking statements are reasonable, such forward-looking statements involve known and unknown risks, uncertainties and other factors, many of which are beyond the Company’s control, which could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The Company cannot assure the future results or outcome of the matters described in these statements; rather, these statements merely reflect the Company’s current expectations of the approximate outcomes of the matters discussed. Factors that might cause the Company’s actual results, performance or achievements to differ materially from those expressed or implied by these forward-looking statements include, but are not limited to, the following: potential future outbreaks of infectious diseases or other health concerns, which could adversely affect the Company’s business and its tenants, and cause a significant downturn in general economic conditions, the real estate industry, and the markets in which the Company's communities are located; the Company may fail to achieve its business objectives; the actual completion of development and redevelopment projects may be subject to delays; the stabilization dates of such projects may be delayed; the Company may abandon or defer development or redevelopment projects for a number of reasons, including changes in local market conditions which make development less desirable, increases in costs of development, increases in the cost of capital or lack of capital availability, resulting in losses; the total projected costs of current development and redevelopment projects may exceed expectations; such development and redevelopment projects may not be completed; development and redevelopment projects and acquisitions may fail to meet expectations; estimates of future income from an acquired property may prove to be inaccurate; occupancy rates and rental demand may be adversely affected by competition and local economic and market conditions; there may be increased interest rates, inflation, escalated operating costs and possible recessionary impacts; geopolitical tensions, regional conflicts and the related impacts on macroeconomic conditions, including, among other things, interest rates and inflation; the Company may be unsuccessful in the management of its relationships with its co-investment partners; future cash flows may be inadequate to meet operating requirements and/or may be insufficient to provide for dividend payments in accordance with REIT requirements; changes in laws or regulations; the terms of any refinancing may not be as favorable as the terms of existing indebtedness; unexpected difficulties in leasing of development projects; volatility in financial and securities markets; the Company’s failure to successfully operate acquired properties; unforeseen consequences from cyber-intrusion; the Company’s inability to maintain our investment grade credit rating with the rating agencies; government approvals, actions and initiatives, including the need for compliance with environmental requirements; and those further risks, special considerations, and other factors referred to in the Company’s annual report on Form 10-K for the year ended December 31, 2022, quarterly reports on Form 10-Q, and those risk factors and special considerations set forth in the Company's other filings with the SEC which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. All forward-looking statements are made as of the date hereof, the Company assumes no obligation to update or supplement this information for any reason, and therefore, they may not represent the Company’s estimates and assumptions after the date of this press release.
Definitions and Reconciliations
Non-GAAP financial measures and certain other capitalized terms, as used in this earnings release, are defined and further explained on pages S-18.1 through S-18.4, "Reconciliations of Non-GAAP Financial Measures and Other Terms," of the accompanying supplemental financial information. The supplemental financial information is available on the Company's website at www.essex.com .
View source version on businesswire.com: https://www.businesswire.com/news/home/20231026692634/en/
Loren Rainey
lrainey@essex.com
Source: Essex Property Trust, Inc.
What were the Q3 2023 earnings results for Essex Property Trust, Inc.?
Essex Property Trust, Inc. reported positive growth in Net Income, FFO, and Core FFO per diluted share for Q3 2023 compared to the same period last year.
How did same-property revenues and NOI perform in Q3 2023?
Same-property revenues and NOI grew by 3.2% and 2.7%, respectively, compared to Q3 2022.
What were the highlights of the company's Q3 2023 activities?
The company closed secured loans, committed to a preferred equity investment, and reaffirmed its full-year 2023 guidance ranges.
What was the impact of delinquencies on revenues?
The year-over-year negative impact from delinquencies affected revenues, largely due to lower net delinquency compared to the prior period.
Was there any stock issuance or repurchase in Q3 2023?
No information on stock issuance or repurchase was provided in the PR.
What is the liquidity of the company as of October 24, 2023?
The company had approximately $1.6 billion in liquidity as of October 24, 2023.
What were the full-year 2023 guidance ranges for the company?
The company reaffirmed its full-year 2023 guidance ranges for Core FFO per diluted share, same-property revenues, expenses, and NOI.
