Essex Property Trust, Inc. · NYSE:ESS
Essex Property Trust — Investor Presentation (February 2020)
47 slides from Essex Property Trust's investor presentation, Feb 28, 2020
Slide 1: Investor Presentation February-March 2020
INVESTOR PRESENTATION FEBRUARY-MARCH 2020
Slide 2: Table of Contents
TABLE OF CONTENTS 2 ABOUT ESSEX 3 EXECUTIVE SUMMARY 4 WEST COAST FUNDAMENTALS 8 LEGISLATIVE UPDATES & KEY MARKET STATS 21 INVESTMENTS AND CAPITAL ALLOCATION 24 2020 GUIDANCE AND BALANCE SHEET 31 DEFINITIONS & RECONCILIATIONS 38
Slide 3: Essex at a Glance
ESSEX AT A GLANCE Represents percent of pro rata NOI as of 12/31/19, rounded to the nearest percent.Oakland includes Alameda and Contra Costa Counties. (3) As of 12/31/19. Ventura 5%Los Angeles 18%Orange County 10%San Diego 8% SOUTHERN, CA41% of NOI(1) NORTHERN, CA42% of NOI(1)San Francisco MD 9% Oa
Slide 4: Executive Summary – Key Highlights
EXECUTIVE SUMMARY – KEY HIGHLIGHTS California’s chronic housing shortage remains a key issue and shows no signs of abating (pg. 10)New supply as a percent of stock remains well below 1% and the recent decline in permits in ESS markets compares favorably to the U.S. (pg. 11-12)The after-tax cost prem
Slide 5: Investment Strategy Leads to Superior Total Returns
0% 1000% 2000% 3000% 4000% 5000% 6000% Jun-94Dec-94 Jun-95 Dec-95 Jun-96 Dec-96 Jun-97 Dec-97Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-
Slide 6: Significant Dividend Per Share and Total FFO Per Share Growth
$10.00$8.00$6.00$4.00$2.00$0.00 $12.00 $14.00 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E Dividend Per Share Total FFO Per Share Since the IPO, we have generated compound Annual Dividend/SH and Total FFO/SH g
Slide 7: Superior Same-Property NOI, Core FFO, and Dividend Growth
Superior Core FFO Growth cannot be explained by strong rent growth alone, Essex drives superior bottom line results through disciplined capital allocation decisions and an unwavering focus oncreating value for shareholders SUPERIOR SAME-PROPERTY NOI, CORE FFO, AND DIVIDEND GROWTH Source: Company Dis
Slide 8: West Coast Fundamentals
WEST COAST FUNDAMENTALS Township | Redwood City, CA
Slide 9: Why West Coast Markets?
WHY WEST COAST MARKETS? 9 LONG-TERM FAVORABLE SUPPLY/DEMAND DYNAMICS DIVERSE DEMAND DRIVERS Highest GDP in the U.S.Centers of innovation drive job creation and income growthHigher median household incomesHigher percentage of renters vs. ownersFavorable demographics New supply (multifamily & for-sale
Slide 10: California's Chronic Housing Shortage
CALIFORNIA’S CHRONIC HOUSING SHORTAGE Source: Up for Growth National Coalition - Housing Underproduction in the U.S., April 2018 10 In the U.S., 23 states underproduced by ±7.3 million housing units from 2000-2015California represents nearly 50% of the housing shortfall at ±3.4 million units
Slide 11: Limited Supply in Essex Markets
In Essex’s California markets, new supply as a percent of stock has historically remained below 1%Total permitting activity is down 17% from the recent peak in Essex CA markets LIMITED SUPPLY IN ESSEX MARKETS Source: Census Bureau, Essex, and Rosen Consulting Group 11 Essex U.S. 0.0% 0.2% 0.4% 0.6%
Slide 12: Permits and Near-Term Supply
PERMITS AND NEAR-TERM SUPPLY Source: Census Bureau, Essex, and Rosen Consulting Group(1) Trailing twelve months (TTM) includes all residential permits for single-family and multifamily 12 0.5% 0.6% 0.7% 0.8% Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-18 May-18 Sep-18 Jan-19 M
Slide 13: The Rising Premium to Own vs. Rent in Essex Markets
0 50,000 100,000 150,000 200,000 250,000 300,000 New Jobs/Housing Units Per Year (2010-2019) Chronic housing shortage and tax law changes have pushed the cost to own a median priced home to 74% above the average cost to rent in Essex metros Essex Metros Have Created 5x More Jobs Than Housing Units T
Slide 14: Essex Markets Benefit from Superior Long-Term Employment Growth
17.3% 26.3% -5% 15%10%5%0% 20% 25% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Essex markets have benefitted from superior job growth this decade, well above the national averagesCumulative Job Growth30% ESSEX MARKETS CONTINUE TO BENEFIT FROM SUPERIOR LONG-TERM EMPLOYMENT GROWTH Sources:
Slide 15: West Coast Job Growth Continues to Outpace the U.S.
0% 1% 2% 3% Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 WEST COAST JOB GROWTH CONTINUES TO OUTPACE THE U.S. Source: BLS, Census Bureau, EssexESS non-farm employment growth averages are weighted by same-property rental income across Essex metros.Major East Coast Markets include New York City, Bo
Slide 16: Job Growth in ESS Markets – High vs. Low Wage Industries
JOB GROWTH IN ESS MARKETS – HIGH VS. LOW WAGE INDUSTRIES Source: BLSEssex markets weighted by 4Q19 Same-Property Revenue. 16 2.5% 2.3%2.0% 1.5%1.0%0.5%0.0% 2.0% 2.5% Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 High-paying industries continue to add more
Slide 17: Job Openings – Top 10 Tech Firms
Job openings at the Top 10 Tech firms in CA and WA is nearly 27,000 positions, +12% compared to one year ago JOB OPENINGS – TOP 10 TECH FIRMS Source: Company Websites and LinkedIn 17 0 5,000 10,000 15,000 20,000 25,000 30,000 1Q162Q163Q164Q161Q172Q173Q174Q171Q182Q183Q184Q181Q192Q193Q194Q19 Total Job
Slide 18: Rising Incomes Are Leading to Improved Affordability
RISING INCOMES ARE LEADING TO IMPROVED AFFORDABILITY Sources: Census Bureau, Essex, Moody’s Analytics, Axio and Rosen Consulting Group 18 West Coast Income vs. Rent Growth 60% 47% 46% 33% -10% 0% 10% 20% 30% 40% 50% 60% 70% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020(e) Percent Growth In
Slide 19: Demand to Exceed Supply in Essex's Markets
DEMAND TO EXCEED SUPPLY IN ESSEX’S MARKETS 19 s San FranciscoSan JoseLos Angeles ESS SubmarketsEssex Portfolio*Oakland Orange County Los Angeles Core Essex MarketSan Diego Essex PortfolioDenver Boston Nassau-Suffolk Seattle Other MarketsNorthern NJ D.C. U.S.New York Portland MiamiBaltimore U.S. Phoe
Slide 20: What $1 Million Buys You in the 'Burbs, East vs. West
WHAT $1 MILLION BUYS YOU IN THE ‘BURBS, EAST VS. WEST 20 Bay Area Seattle D.C. New York
Slide 21: Legislative Update & Key Market Stats
LEGISLATIVE UPDATE & KEY MARKET STATS The Courtyards at 65th Street | Emeryville, CA
Slide 22: Legislation Update
LEGISLATION UPDATE 22 Sources: The Sacramento Bee and California Department of Finance, Finance Bulletin Housing costs remain a key political and business issue across the country with many states implementing various forms of rent control legislation including Oregon, Colorado, Florida, Illinois, M
Slide 23: Property Maps & Key Market Stats
LOS ANGELES ORANGE COUNTY NORTHERN CALIFORNIA SEATTLE Units: 10,660Properties: 49 Units: 6,702Properties: 27 Units: 21,642Properties: 83 Units: 12,233Properties 57 PROPERTY MAPS & KEY MARKET STATS Sources: Axiometrics, CoreLogic, LinkedIn, CoStar, JLL Office Report, CBRE, Moody's, RCG, S&P Global Ma
Slide 24: Investments and Capital Allocation
INVESTMENTS AND CAPITAL ALLOCATION Velo & Ray | Seattle, WA
Slide 25: Core Competencies to Create Value
ACQUISITIONS:Improve the NAV/share, cash flow/share and growth prospects of the company DEVELOPMENT:Develop high-quality tenant-desired apartment homes near transportation nodes REDEVELOPMENT:Focused on rent justified improvements to maximize NOI and value CONDO OPTIONALITY:Potential value creation
Slide 26: Disciplined Capital Allocation Process
Integrating the investing decision and the financing decision leads to value creation for shareholders Cash Flow Growth Improve GrowthRate of thePortfolio NAV/Share DEALS MUST BE ACCRETIVE TO 3 METRICS: DISCIPLINED CAPITAL ALLOCATION PROCESS 26
Slide 27: Disciplined Underwriting and Total Return Driven Investing Timeline
Our innovative management team is responsive to changing market dynamics with the ability to source and structure unique opportunities within the multifamily spaceDisciplined underwriting, rigorous analysis, and total return driven 2001 2009 Acquires $106M of multifamily REIT unsecured bonds yieldin
Slide 28: CPP Investment Portfolio Buy-Out
CPP INVESTMENT PORTFOLIO BUY-OUT 28 In January 2020, the Company purchased CPP Investments 45% interest in a land parcel and six communities valued at approximately $1.0 billion. The Company expects to recognize $6.5M in promote income in Q1 ‘20.The deal is year-one accretive to FFO and is reflected
Slide 29: Development Pipeline Update
Development Property Location Apartment Homes Total Cost(1)$M Remaining Costs(1) $M InitialOccupancy Stabilized Operations % Leased as 02/07/20 of Mylo Santa Clara, CA 476 $226 $29 Q3 2019 Q1 2021 33.8% 500 Folsom San Francisco, CA 537 $415 $38 Q3 2019 Q4 2020 35.8% Station Park Green Phase II San M
Slide 30: Optimizing Portfolio Performance
Essex aims to provide its residents with unparalleled convenience and customer service through paperless leasing, mobile maintenance accessibility, and smart home technologies.Currently implementing several platform investments that are intended to maximize efficiency and growthand improve sustainab
Slide 31: Guidance & Balance Sheet
GUIDANCE & BALANCE SHEET Mylo | Santa Clara, CA
Slide 32: 2020 Year-to-Date Same-Property Revenue Growth
2020 YEAR-TO-DATE SAME-PROPERTY REVENUE GROWTH 32 ActualsJan/Feb 2019 Preliminary Jan/Feb 2020 Region Revenue Growth Financial Occupancy Revenue Growth Financial Occupancy Full-Year Guidance Range Southern California 2.6% 96.8% 2.9% 96.7% 2.2% to 3.2% Northern California 3.0% 97.2% 3.5% 97.0% 2.6% t
Slide 33: 2020 Guidance
Full-Year Guidance Guidance Midpoint National GDP Forecast 2.0% National Job Growth 1.2% ESS Job Growth 1.7% ESS Market Rent Growth 3.0% ESS Same-Property Revenue Growth 2.6% - 3.6% 3.1% ESS Same-Property Expense Growth 2.5% - 3.5% 3.0% ESS Same-Property NOI Growth 2.2% - 4.0% 3.1% Total FFO Per Sha
Slide 34: 2020 MSA Level Forecast
All data are based on Essex Property Trust, Inc. forecasts.U.S. Economic Assumptions: 2020 G.D.P. Growth: 2.0%, 2020 Job Growth: 1.2% 2020 MSA LEVEL FORECAST 34 Residential Supply: Total supply includes the Company's estimate of multifamily deliveries of properties with 50+ units and excludes studen
Slide 35: Capital Structure & Liquidity Profile
CAPITAL STRUCTURE & LIQUIDITY PROFILE As of 12/31/19(1) Consolidated portfolio only. 35 12/31/19 Unsecured Credit Facility - CommittedBalance OutstandingUndrawn Portion of Credit FacilityCash, Cash Equivalents & Marketable Securities $1,235$55 $1,180$225 Total Liquidity $1,405 Liquidity Profile ($ m
Slide 36: Strong Credit Profile
STRONG CREDIT PROFILE Source: Company Disclosures Please refer to the Company’s Public Bond Filings with the SEC for the definitions of the covenants.Unsecured Debt Ratio is unsecured assets (excluding investments in co-investments) divided by unsecured indebtedness.Net Indebtedness is total debt le
Slide 37: Well Laddered Debt Maturity Schedule
500 650 600 400 500 450 350 500 550 300 288 32 43 3 3 133 99 154 68 31 2 131 0 200 400 600 800 1,000 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Thereafter Unsecured Debt Secured Debt Debt Maturities in Millions ($) 5.0% 9.2% 12.0% 10.4% 7.0% 10.9% 9.5% 8.7% 1.2% 9.2% 9.5% 7.4% Debt Matur
Slide 38: Definitions & Reconciliations
DEFINITIONS & RECONCILIATIONS
Slide 39: Safe Harbor Statement Under the Private Litigation Reform Act of 1995
SAFE HARBOR STATEMENT UNDER THE PRIVATE LITIGATION REFORM ACT OF 1995This presentation 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 ar
Slide 40: Projected EPS, FFO, and Core FFO Per Diluted Share
PROJECTED EPS, FFO, AND CORE FFO PER DILUTED SHARE (1) 2020 guidance excludes inestimable projected gain on sale of real estate and land, gain on sale of marketable securities, loss on early retirement of debt, political/legislative costs, and promote income until they are realized within the report
Slide 41: Adjusted EBITDAre Reconciliation
Net income available to common stockholders $ 128,818 Adjustments:Net income attributable to noncontrolling interest 6,364 Interest expense, net (1) 52,416 Depreciation and amortization 122,908 Income tax provision 50 Loss on sale of real estate an land 3,164 Gain on sale of co-investment communitie
Slide 42: Definitions: Encumbered, FFO and Core FFO
ENCUMBEREDEncumbered means any mortgage, deed of trust, lien, charge, pledge, security interest, security agreement or other encumbrance of any kind.FUNDS FROM OPERATIONS (“FFO”) AND CORE FFOFFO, as defined by NAREIT, is generally considered by industry analysts as an appropriate measure of performa
Slide 43: Net Indebtedness Divided by Adjusted EBITDAre
NET INDEBTEDNESS DIVIDED BY ADJUSTED EBITDAreThis credit ratio is presented on page S-6 in the section titled "Selected Credit Ratios” of the earnings supplement for the fourth quarter of 2019. This credit ratio is calculated by dividing net indebtedness by Adjusted EBITDAre, as annualized based on
Slide 44: NOI and Same-Property NOI Reconciliations
NET OPERATING INCOME (“NOI”) AND SAME-PROPERTY NOI RECONCILIATIONSNOI and same-property NOI are considered by management to be important supplemental performance measures to earnings from operations included in the Company’s condensed consolidated statements of income. The presentation of same-prope
Slide 45: Unencumbered NOI to Adjusted Total NOI
UNENCUMBERED NOI TO ADJUSTED TOTAL NOIThis 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
Slide 46: Notes
NOTES 46
Slide 47: Essex Property Trust, Inc. Notes
ESSE PROPERTY TRUST, INC. NOTES a7
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