Essex Announces Second Quarter 2018 Results
SAN MATEO, Calif.--(BUSINESS WIRE)--Aug 1, 2018--Essex Property Trust, Inc. (NYSE: ESS) (the “Company”) announced today its second quarter 2018 earnings results and related business activities.
Net Income and Funds from Operations (“FFO”) per diluted share for the quarter ended June 30, 2018 are detailed below. Core FFO excludes acquisition and investment related costs and certain non-routine items.
Second Quarter 2018 Highlights:Reported Net Income per diluted share for the second quarter of 2018 of $1.52, compared to $1.08 in the second quarter of 2017, primarily due to gains realized on a property sale in the second quarter of 2018. Grew Core FFO per diluted share by 5.7% compared to the second quarter of 2017, exceeding the high-end of the guidance range. Achieved same-property gross revenue and net operating income (“NOI”) growth of 2.8% and 3.0%, respectively, compared to the second quarter of 2017. Realized a sequential quarterly increase in same-property revenue growth of 0.4%. Raised the midpoint of guidance for same-property revenue and NOI growth for the full-year by 15 bps each to 2.8% and 2.9%, respectively. Revised full-year Net Income per diluted share guidance range to $5.15 to $5.31. Provided Net Income guidance range for the third quarter of $1.09 to $1.18 per diluted share. Revised full-year Total FFO per diluted share guidance range to $12.72 to $12.88, raising the midpoint by $0.09 per share. Provided Total FFO guidance range for the third quarter of $3.06 to $3.15 per diluted share. Increased full-year Core FFO per diluted share guidance by $0.07 per share at the midpoint to a range of $12.44 to $12.62. Provided Core FFO guidance range for the third quarter of $3.07 to $3.17 per diluted share.
“We are pleased to report another great quarter, with results exceeding expectations across our West Coast footprint. Improving economic conditions continued to drive housing demand throughout the 2018 prime leasing season, driven by job growth and personal income growth that were well ahead of national averages. Based on the strength of our second quarter results, we are increasing our 2018 guidance with respect to same-property revenue, NOI and Core FFO growth,” commented Michael Schall, President and CEO of the Company.
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 June 30, 2018 compared to the quarter ended June 30, 2017, and the sequential percentage change for the quarter ended June 30, 2018 versus the quarter ended March 31, 2018, by submarket for the Company:
In June 2018, the Company sold Domain for a total contract price of $132.0 million. The community, which is located in San Diego, CA, contains 379 apartment homes. Total gain on the sale was $22.2 million, which has been excluded from the calculation of FFO.
In May 2018, the Company originated a $26.5 million preferred equity investment in a multifamily community located in Ventura, CA. As of June 30, 2018, the Company had funded $20.4 million. The total investment has an initial preferred return of 10.25% and matures in 2023.
In June 2018, the Company received cash of $26.5 million from the redemption of a preferred equity investment related to one property in Seattle, WA. The Company recorded $1.6 million of income from prepayment penalties as a result of the early redemption, which has been excluded from Core FFO.
Station Park Green – Phase I reached stabilized operations in June 2018. The community is located in San Mateo, CA and comprises 121 apartment homes. As of July 30, 2018, Station Park Green – Phase I was 99.2% leased.
LIQUIDITY AND BALANCE SHEET
The Company did not issue any shares of common stock through its equity distribution program in the second quarter of 2018.
The Company did not repurchase any shares of common stock in the second quarter of 2018.
In June 2018, Fitch Ratings affirmed the Company’s senior unsecured debt at BBB+ and revised the rating outlook from stable to positive.
As of July 30, 2018, the Company had $1.2 billion in undrawn capacity on its unsecured credit facilities.
For the second quarter of 2018, the Company exceeded the midpoint of the guidance range provided in its first quarter 2018 earnings release for Core FFO by $0.09 per share. However, $0.03 per share of the favorable variance relates to timing differences on same-property operating expenses, which are now expected to occur in the second half of the year.
The following table provides a reconciliation of second quarter 2018 Core FFO per share to the midpoint of the guidance provided in the first quarter 2018 earnings release, which was dated May 2, 2018.
The following table provides key changes to the 2018 full-year assumptions for Net Income, Total FFO, Core FFO per diluted share, and same-property growth. For additional details regarding the Company’s 2018 assumptions, please see page S-14 of the accompanying supplemental financial information. For the third quarter of 2018, the Company has established a range for Core FFO per diluted share of $3.07 to $3.17.
CONFERENCE CALL WITH MANAGEMENT
The Company will host an earnings conference call with management to discuss its quarterly results on Thursday, August 2, 2018 at 9 a.m. PT (12 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 seven days. To access the replay online, go to www.essex.com and select the second quarter 2018 earnings link. To access the replay digitally, dial (844) 512-2921 using the replay pin number 13681122. If you are unable to access the information via the Company’s website, please contact the Investor Relations Department at firstname.lastname@example.org or by calling (650) 655-7800.
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. The Company currently has ownership interests in 247 apartment communities comprising approximately 60,000 apartment homes, excluding six properties in various stages of active development, one commercial building, preferred equity co-investments, and loan investments. 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 (“SEC”) 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 Internet, please contact the Investor Relations Department at (650) 655-7800.
FFO, as defined by 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 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 the ability to pay dividends.
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 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 six months ended June 30, 2018 and 2017 (in thousands, except for share and per share amounts):
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