Essex Property Trust, Inc. · NYSE:ESS
Essex Property Trust — Investor Presentation (March 2016)
37 slides from Essex Property Trust's investor presentation, Mar 11, 2016
Slide 1: Investor Presentation March 2016
INVESTOR PRESENTATION MARCH 2016 ESSEX” PROPERTY TRUST, INC.
Slide 2: Table of Contents
ESSEX TABLE OF CONTENTS PROPERTY TRUST, INC. ABOUT ESSEX 3-4 WEST COAST INVESTMENT STRATEGY 5-11 TECH INDUSTRY: THEN & NOW 12-17 INVESTMENT OVERVIEW 18-22 FINANCIAL PERFORMANCE & CAPITAL MANAGEMENT 23 — 30 APPENDIX 31-37 SAFE HARBOR DISCLOSURE Certain statements in this presentation, which are not h
Slide 3: Only Public Multifamily REIT Dedicated Exclusively to the West Coast
ONLY PUBLIC MULTIFAMILY REIT DEDICATED ESSEX EXCLUSIVELY TO THE WEST COAST PROPERTY TRUST, INC. Dedicated to coastal markets of California and , 3 Washington with high barriers to entry cent = 246 properties totaling 58,000+ apartment homes = $21.6 billion in total San Francisco MD 9% market capital
Slide 4: Key Strategic Objectives
ESSEX KEY STRATEGIC OBJECTIVES PROPERTY TRUST, INC. = Add value through strategic redevelopment = Acquire and develop West Coast properties near transportation a2 8H 8H we & nodes in submarkets J ———EEee | : | , with highest expected rent growth = Drive rent growth on high occupancy = Internal value
Slide 5: Strong West Coast Fundamentals
STRONG WEST COAST FUNDAMENTALS PROPERTY TRUST, INC.
Slide 6: Robust West Coast Job Growth
ESSEX ROBUST WEST COAST JOB GROWTH PROPERTY TRUST, INC. 5% 4% 3% 2% 1% WEST COAST JOB GROWTH OUTPACES THE U.S. AND OTHER MAJOR MSA’S Trailing 3 Month Job Growth As of December 2015 Essex Portfolio Wtd. Avg. = 3.0%!) U.S. Avg. = 1.9% 0% o o > yn x 8 8 = % 2 S 6 a 2 ral 5 s > & a 3 2 a7 e% g > Q s a €
Slide 7: Favorable Demographics
ESSEX FAVORABLE DEMOGRAPHICS PROPERTY TRUST, INC. FAVORABLE DEMOGRAPHIC TRENDS INDICATE CONTINUED RENTAL DEMAND U.S. Population by Age Group (in Millions) ¢ ¢ 24 5 22 + 20 + . 18 4 16 + 14 4 4 12 + T T T T T T T T 1 20to24years 25to29years 30to34years 35to39years 40to44years 45to49 years S5O0to54yea
Slide 8: Strong Personal Income Growth
ESSEX STRONG PERSONAL INCOME GROWTH PROPERTY TRUST, INC. STRONG PERSONAL INCOME GROWTH SUPPORTS RENT GROWTH IN ESS MARKETS 2016 Personal Income Growth Estimates 7% 4 Essex Portfolio Wtd. Avg. = 6.4%!) * -- _ — — — oo U.S. Avg. = 5.5% 5% + 4% 3% 4 2% 1% + 0% 4 : : : : : . : Source: BEA, Rosen Consult
Slide 9: Limited Supply in ESS Markets
ESSEX LIMITED SUPPLY IN ESS MARKETS a ESS CA SUPPLY AS A PERCENT OF STOCK HAS HISTORICALLY BEEN BELOW 1% AND REMAINS MUTED BOTTOM LINE: RELATIVE TO THE NATION, ESS’ CA MARKETS HAVE LESS HOUSING SUPPLY WITH BETTER JOB GROWTH Single Family Permits as a % of Single Family Stock Total Permits as a % of
Slide 10: Demand to Exceed Supply in ESS Markets
ESSEX DEMAND TO EXCEED SUPPLY IN ESS MARKETS PROPERTY TRUST, INC. IN ESS’ SUPPLY-CONSTRAINED MARKETS, DEMAND IS EXPECTED TO EXCEED SUPPLY RELATIVE TO OTHER MAJOR METROS New Household Formation to Total New Supply $1,200 5 J e ®@ core Essex Markets @ Other Marked g @ Essex Portfolio @ us. > | @ 8 $1,
Slide 11: West Coast Expected to Continue to Outperform
WEST COAST EXPECTED TO CONTINUE TO ESSEX OUTPERFORM PROPERTY TRUST, INC. RENT GROWTH IN ESS MARKETS IS EXPECTED TO EXCEED THE U.S. AND TOP 20 MSA’S") THROUGH 2020 Cumulative Rent Growth: ESS vs. Major Metros and U.S. I 60% 4 I 55% 1 50% ~ ! I 15% I 9 40% + ' 40% 1 39% i} 30% + 1 20% ~ 17% 10% + I 1
Slide 12: Tech Industry: Then & Now
TECH INDUSTRY: THEN & NOW PROPERTY TRUST, INC.
Slide 13: Tech Today vs. Dot-Com
TECH TODAY VS. DOT-COM _ESSEX_ PROPERTY TRUST, INC. THEN (2000) NOW (2015) % OF THE WORLD WITH ACCESS TO INTERNET 7% 46% GLOBAL INTERNET POPULATION 3.4B NUMBER OF DEVICES PER PERSON 4.3 (by 2020) PRICE-TO-SALES RATIO 6.5 NUMBER OF INTERNET/SOCIAL MEDIA IPOS 24 MEDIAN AGE OF COMPANIES GOING PUBLIC 11
Slide 14: Wealth Creation Is Accelerating on the West Coast
WEALTH CREATION IS ACCELERATING ON THE WEST ESSEX COAST PROPERTY TRUST, INC. «= TECH HUBS ON THE WEST COAST HAVE HELPED FUEL A SHIFT IN ECONOMIC POWER FROM THE EAST COAST TO THE WEST COAST = SAN JOSE HAS THE HIGHEST GDP PER CAPITA OF ALL MAJOR U.S. CITIES Real GDP/Capita: $75,874 | —— Growth: 18% BO
Slide 15: "Unicorns" vs. Public Tech Companies
“UNICORNS” VS. PUBLIC TECH COMPANIES _ESSEX_ PROPERTY TRUST, INC. » TOP 10 PUBLIC TECH COMPANIES EMPLOY ALMOST 15X MORE PEOPLE THAN THE TOP 20 UNICORNS IN THE BAY AREA AND SEATTLE » BOTTOM LINE: MOVEMENTS MADE BY LARGE PUBLIC TECH COMPANIES SUCH AS APPLE AND ALPHABET HAVE A MORE RELEVANT IMPACT ON T
Slide 16: Comparison of Largest Public Tech vs. Non-Tech Firms
COMPARISON OF 10 LARGEST PUBLIC TECH VS. ESSEX NON-TECH FIRMS PROPERTY TRUST, ING. » TECH FIRMS HAVE CREATED $1.8 TRILLION IN EQUITY MARKET VALUE OVER THE PAST 10 YEARS, GROWING 3.2X FASTER THAN NON-TECH FIRMS » TECH FIRMS HAVE 2.2X MORE CASH ON HAND THAN NON-TECH FIRMS » ALLTOP 10 TECH FIRMS AND 3
Slide 17: Large Tech Firms Continue to Hire
ESSEX LARGE TECH FIRMS CONTINUE TO HIRE a = TOP 10 LARGE TECH FIRMS GLOBAL EMPLOYMENT GROWTH OVER THE PAST DECADE HAS CONTINUED TO RISE = OVER THE TEN YEAR PERIOD, THE COMPOUND ANNUAL GROWTH RATE OF EMPLOYMENT HIRING HAS BEEN 10.2% Total 10 Large Tech Firm Employment!) 2005-2015 1,400,000 + 1,200,00
Slide 18: Investment Overview
INVESTMENT OVERVIEW PROPERTY TRUST, INC.
Slide 19: Core Competencies to Create Value
CORE COMPETENCIES TO CREATE VALUE ESSEX PROPERTY TRUST, INC. ACQUISITIONS = Improve the NAV/sh, cash flow/sh and growth prospects of the Company DEVELOPMENT = Develop high-quality tenant desired apartment homes near transportation nodes REDEVELOPMENT = Focused on rent justified improvements to maxim
Slide 20: Recent Dispositions
ESSEX RECENT DISPOSITIONS PROPERTY TRUST, INC. = Sold December 2015 = Sold January 2016 * Total contract price of $245.0M = Owned by BEXAEW, LLC, in which the ($828,000/apartment home) Company has 50% ownership = Property was built in 1970 and is «= Total contract price of $93.8M, of located in Menl
Slide 21: Recent Acquisitions & Preferred Equity Investments
RECENT ACQUISITIONS & PREFERRED EQUITY INVESTMENTS ESSEX PROPERTY TRUST, INC. IN MARCH 2016, THE COMPANY ORIGINATED A $47.1 M PREFERRED EQUITY INVESTMENT IN A MULTIFAMILY DEVELOPMENT PROJECT LOCATED IN GLENDALE, CA. THE INVESTMENT HAS A PREFERRED RETURN OF 12%. RECENT ACQUISITIONS OUTLINED BELOW Loc
Slide 22: Development Pipeline Update
ESSEX DEVELOPMENT PIPELINE UPDATE PROPERTY TRUST, INC. «= COMPLETED CONSTRUCTION ON 5 PROJECTS IN 2015 FOR A TOTAL COST OF ~$0.5B » EXPECT TO COMPLETE CONSTRUCTION AND BEGIN LEASING 3 PROJECTS IN 2016 FOR A TOTAL COST OF $270.0M = 3 ANTICIPATED DEVELOPMENT STARTS FOR 2016 (NOT SHOWN IN THE TABLES BE
Slide 23: Financial Performance & Capital Management
FINANCIAL PERFORMANCE & CAPITAL MANAGEMENT PROPERTY TRUST, INC.
Slide 24: Continued Outperformance vs. Peers
ESSEX CONTINUED OUTPERFORMANCE VS. PEERS PROPERTY TRUST, INC. » ESS SAME-PROPERTY NOI GROWTH HAS EXCEEDED THE PEER AVERAGE BY 3.5% ANNUALLY FOR THE LAST 4 YEARS = NOI GROWTH IN 2016 IS PROJECTED TO OUTPERFORM THE PEER GROUP YET AGAIN AND BE THE HIGHEST AMONG THE PEERS Same-Property NOI Growth 10% 5
Slide 25: 2016 YTD Same-Property Revenue Growth
ESSEX 2016 YTD SAME-PROPERTY REVENUE GROWTH PROPERTY TRUST, INC. = YEAR-TO-DATE SAME-PROPERTY REVENUE GROWTH IS TRACKING SLIGHTLY FAVORABLE TO OUR FULL-YEAR GUIDANCE RANGE IN ALL THREE REGIONS Midpoint of Full-Year Same-Property Revenue Growth January/February 2016 agile Giudemee REE Southern Califo
Slide 26: Hypothetical Capital Allocation Strategy: Running the Machine in Reverse
HYPOTHETICAL CAPITAL ALLOCATION STRATEGY: ESSEX RUNNING THE MACHINE IN REVERSE PROPERTY TRUST, INC. » COMPANY HAS A $250M STOCK BUYBACK PROGRAM APPROVED BY THE BOARD OF DIRECTORS » ESTIMATED $ ACCRETION TO CORE FFO FROM EXECUTION OF THE BUYBACK PROGRAM » VALUE CREATION (SHOWN IN TABLE BELOW) IS DEPE
Slide 27: $21.6 Billion Total Capitalization
ESSEX PROPERTY TRUST, INC. $21.6 BILLION TOTAL CAPITALIZATION DEBT SUMMARY ($ MILLION) 12/31/15 CAPITAL STRUCTURE PROFILE Unsecured Debt Bonds $2,863 Term Loan 225 Credit Line of Credit 12 Facility 1% Total Unsecured Debt 3,100 Mortgage Debt Unsecured . Debt Fixed Rate 1,923 Preferred 14% Variable R
Slide 28: Strong Credit Profile
ESSEX PROPERTY TRUST, INC. STRONG CREDIT PROFILE SELECT BALANCE SHEET RATIOS 12/31/15 9/30/15 COVENANT TARGETS Secured Debt / Undepreciated Book 16% 16% < 40% < 16% Total Debt / Undepreciated Book 38% 38% < 65% < 42% Interest Coverage 357% 345% > 150% > 300% Unsecured Debt Ratio!) 292% 290% > 150% >
Slide 29: Well Laddered Debt Maturity Schedule
WELL LADDERED DEBT MATURITY SCHEDULE ESSEX PROPERTY TRUST, INC. Debt Maturity Schedule!) 1,000 5 ras 2 800 4 2 Ss 1 < 600 | — ‘a 14 8 x0 168) . — = 586 3B 400) — & 693 1 = 497 in 598 500 a a 381 399 g@ 200 375 321 296 84 3 * 0 : —3 - - - - - : : 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025, 202
Slide 30: 2016 Guidance
2016 GUIDANCE ESSEX PROPERTY TRUST, INC. National GDP Forecast 2.8% 2.8% National Job Growth 2.0% 2.0% | ESS Job Growth 2.5% 2.5% ESS Market Rent Growth 6.0% 6.0% | ESS Same-Property Revenue Growth 6.50% — 7.50% 7.00% ESS Same-Property Expense Growth 3.25% — 4.25% 3.75% | ESS Same-Property NOI Growt
Slide 31: Appendix
APPENDIX PROPERTY TRUST, INC.
Slide 32: Northern California Portfolio
NORTHERN CALIFORNIA PORTFOLIO ESSEX PROPERTY TRUST, INC. NORTHERN CALIFORNIA HIGHLIGHTS = Both San Francisco and San Jose have seen strong trailing three month job growth as of December of 4.1% and 5.0%, respectively. » The information sector in San Jose has recorded 23 consecutive months of double
Slide 33: Los Angeles Portfolio
LOS ANGELES PORTFOLIO ESSEX PROPERTY TRUST, INC. Kagel Canyon Ks centa-Montrose a,Cafiada a, wer, X Bu ? sal Ona ‘ Hi ! z ® Beverly Hills Santa Mo! ica ba Ne Inglewood Altadena ne Los Angeles wee Units 11,056 Inte eration Appar a | 2 Lo Properties 52 £1 Segundo) jawthorne Pro rata % of NOI 19.5% Man
Slide 34: Orange County Portfolio
ORANGE COUNTY PORTFOLIO ESSEX PROPERTY TRUST, INC. Hacienda eel Heights ORANGE COUNTY HIGHLIGHTS thittier Rowland ( ) ae Heights = Orange County had job growth of 2.6% for the @ Heights ths trailing three month period beginning December ow: Scout — Reservation (142) 2015. gp Hab ew = Construction an
Slide 35: Seattle Portfolio
SEATTLE PORTFOLIO _ESSEX_ PROPERTY TRUST, INC. , SEATTLE HIGHLIGHTS Units 12,197 « Seattle continues to demonstrate strong job growth with 2.9% for the trailing three months beginning in Pro rata % of NOI 16.8% December. ‘ Properties 56 SS Occupancy 96.2% » Trade, Transportation and Utilities accoun
Slide 36: 2016 MSA Forecast
2016 MSA FORECAST ESSEX PROPERTY TRUST, INC. ESSEX PROPERTY TRUST,INC. 2016 MSA Level Forecast: Supply, Jobs, and Apartment Market Cc Residential Supply Job Forecast (?) Market Forecast (3) New MF New SF % of MF Supply % of Total Supply Est. New Jobs Economic Rent 9 Market Supply Supply Total Supply
Slide 37: ESS Economic Forecast vs. Actuals
ESSEX ESS ECONOMIC FORECAST VS. ACTUALS PROPERTY TRUST, INC. = WHILE U.S. GDP GREW AT A SLOWER RATE THE PAST TWO YEARS THAN OUR INITIAL FORECAST, ESS MARKETS SIGNIFICANTLY OUTPERFORMED OUR INITIAL JOB AND RENT GROWTH FORECASTS = 2016 IS EXPECTED TO BE ANOTHER STRONG YEAR IN COASTAL CALIFORNIA AND SE
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