Essex Property Trust, Inc. · NYSE:ESS
Essex Property Trust — Investor Presentation (March 2018)
52 slides from Essex Property Trust's investor presentation, Mar 5, 2018
Slide 1: Investor Presentation March 2018
INVESTOR PRESENTATIONMARCH 2018
Slide 2: Table of Contents
ABOUT ESSEXPROVEN TRACK RECORDWEST COAST INVESTMENT STRATEGYINVESTMENT OVERVIEWFINANCIAL PERFORMANCE, 2018 GUIDANCE, & CAPITAL STRUCTUREAPPENDIX ESSEX PORTFOLIO SUSTAINABILITYDEFINITIONS & RECONCILIATIONS PAGE(S)2 – 3 4 – 7 8 – 2021 – 2526 – 3334 35 – 3839 – 4243 – 51 TABLE OF CONTENTS *
Slide 3: Essex at a Glance
Represents percent of pro rata NOI as of 12/31/17.Oakland includes Alameda and Contra Costa Counties.Multifamily REITs represent the total return of 6 peers through 12/31/17. * San Francisco MD 9%Oakland(2) 13%Santa Clara 19% Ventura 4%Los Angeles 19%Orange County 11%San Diego 8% SOUTHERN CA43% of N
Slide 4: Key Strategic Objectives
KEY STRATEGIC OBJECTIVES 360 ResidencesSan Jose, CA(2017 Acquisition) *
Slide 5: Proven Track Record
PROVEN TRACK RECORD Century TowersSan Jose, CA(2017 Development)
Slide 6: Proven History of Strategic Capital Allocation
Acquires BRE in a deal valued at $6B, creating the only public apartment REIT dedicated exclusively to West Coast markets. Increases investment in preferred equity and subordinated debt program due to attractive risk-adjusted returns relative to ground-up development. Acquires and begins developing
Slide 7: Investment Strategy Leads to Superior Total Returns
INVESTMENT STRATEGY LEADS TO SUPERIOR TOTAL RETURNS HIGHEST TOTAL RETURN OF ALL PUBLIC U.S. REITS SINCE IPO IN 1994 Source: SNL Financial, NAREITJune 1994 – December 2017 * ESS CAGR: 17% 3,744% 1,205% 931% 826%
Slide 8: Significant Dividend per Share and FFO per Share Growth
* SINCE THE IPO, WE HAVE GENERATED COMPOUND ANNUAL FFO/SH AND DIVIDEND/SH GROWTH OF 8.3% AND 6.4%, RESPECTIVELY(1)RAISED THE DIVIDEND EVERY YEAR SINCE THE IPO AND PAID ENTIRELY IN CASH SIGNIFICANT DIVIDEND PER SHARE AND TOTAL FFO PER SHARE GROWTH (1) Includes 2018 estimated growth.(2) 2018E FFO/shar
Slide 9: Solid West Coast Fundamentals
SOLID WEST COAST FUNDAMENTALS Gas Company LoftsLos Angeles, CA(Renovation included the addition of rooftop amenity with pool)
Slide 10: Why West Coast Markets?
WHY WEST COAST MARKETS? * LONG-TERM FAVORABLE SUPPLY/DEMAND DYNAMICS
Slide 11: West Coast Job Growth
WEST COAST JOB GROWTH JOB OPENINGS REMAIN STRONG, BUT LOW UNEMPLOYMENT RATES AND A SHORTAGE OF SKILLED WORKERS ARE HAVING AN IMPACT ON EMPLOYERS ABILITY TO HIREESS MARKETS CONTINUE TO OUTPACE U.S. GROWTH Source: BLS (not seasonally adjusted)(1) For those markets included in this graph which represen
Slide 12: Relative Job Growth Rankings Q4 2017
* ESS MARKETS SAW A STRONG REBOUND IN RELATIVE JOB GROWTH IN Q4 '17 AFTER UNDERPERFORMING THE U.S. MEDIAN IN Q3 '17 RELATIVE JOB GROWTH RANKINGS Source: BLS (1) Essex weighted by % of pro rata NOI.(2) Includes 433 U.S. markets.
Slide 13: Favorable Demographics
* FAVORABLE DEMOGRAPHICS FAVORABLE DEMOGRAPHIC TRENDS INDICATE CONTINUED STRONG RENTAL DEMAND Source: Census(1) Markets weighted by renter-occupied housing units per the Census. ESS Portfolio 2016 Wtd. Avg.(1) = 23.6%
Slide 14: Positive Income Growth & Tech Trends
POSITIVE INCOME GROWTH & TECH TRENDS * Wage growth accelerated in early 2017 with the pace of growth in Essex markets remaining well ahead of the U.S. average. Sources: U.S. Bureau of Labor Statistics, U.S. Bureau of Economic Analysis(1) Represents 6 month moving average. Tax cut will further benefi
Slide 15: Strong Household Income Growth vs. Rent Growth
* Source: Moody’s, RCG, Axiometrics and Essex STRONG HOUSEHOLD INCOME GROWTH VS. RENT GROWTH HOUSEHOLD INCOME GROWTH IS OUTPACING RENT GROWTH IN MANY ESS MARKETS, WHICH IS IMPROVING AFFORDABILITY IN NEARLY ALL ESS MARKETS
Slide 16: Demand to Exceed Supply in ESS Markets
* DEMAND TO EXCEED SUPPLY IN ESS MARKETS IN ESS’ SUPPLY CONSTRAINED MARKETS, DEMAND IS EXPECTED TO EXCEED SUPPLY RELATIVE TO OTHER MAJOR METROS FOR THE NEXT SEVERAL YEARS Source: NAR, CoreLogic, Economy.com permits, and Essex*Essex Portfolio weighted by % of SS Revenue.New Home demand based upon a r
Slide 17: Limited Supply in ESS Markets
Source: Census, Essex, and Rosen Consulting Group LIMITED SUPPLY IN ESS MARKETS ESS CA SUPPLY AS A PERCENT OF STOCK HAS HISTORICALLY REMAINED BELOW 1% RELATIVE TO THE NATION, ESS’ CA MARKETS HAVE LESS HOUSING SUPPLY WITH BETTER JOB GROWTH *
Slide 18: Essex Supply Outlook
MULTIFAMILY SUPPLY AS A % OF MULTIFAMILY STOCK IS EXPECTED TO DECREASE ACROSS THE ESSEX MARKETS IN 2018 AND 2019TOTAL SUPPLY AS A % OF TOTAL STOCK IS EXPECTED TO DECLINE IN 2018 AND REMAIN FLAT IN 2019 Source: Essex(1) Weighted by ESS Dec'17 YTD SS Scheduled Rent. ESSEX SUPPLY OUTLOOK *
Slide 19: Rent Growth Outlook - Axio Forecast
RENT GROWTH OUTLOOK - AXIO FORECAST Source: Axiometrics. Ranking of the top 40 largest major metros in the U.S.Weighted by % of Essex Total NOI as of fourth quarter 2017. Ventura ranks 17th (3.1%) and Orange County ranks 20th (2.9%). ESS’ NORTHERN CALIFORNIA MARKETS ARE PROJECTED TO BE THE TOP PERFO
Slide 20: Tax Cuts: Tilting the Rent/Buy Equation
TAX CUTS: TILTING THE RENT/BUY EQUATION * Positive for owners & renters: Lower marginal rates and higher standard deductionNegative for owners/first-time buyers: New/lower caps on property tax and mortgage interest deductions Source: Urban Institute (2018) Note: Estimated changes to breakeven rents
Slide 21: Rent Control: Not Just a California Issue
RENT CONTROL: NOT JUST A CALIFORNIA ISSUE Rent Control Initiatives (Proposed or In-Place) MOVEMENTS TO LIFT RENT CONTROL BANS OR INTRODUCE NEW MEASURES ARE EMERGING ACROSS THE COUNTRY IN MANY OTHER CITIES AND STATES Recently failed rent controlproposal *
Slide 22: Investment Overview
INVESTMENT OVERVIEW Palm ValleySan Jose, CA Lawrence StationSunnyvale, CA
Slide 23: Core Competencies to Create Value
ACQUISITIONSImprove the NAV/sh, cash flow/sh and growth prospects of the CompanyDEVELOPMENTDevelop high-quality tenant desired apartment homes near transportation nodesREDEVELOPMENTFocused on rent justified improvements to maximize NOI and valueCO-INVESTMENT PLATFORMFacilitates growth via private ca
Slide 24: Strategic Capital Allocation
STRATEGIC CAPITAL ALLOCATION KEY INVESTMENT TARGETS MadridMission Viejo, CA * FULL-YEAR 2017 INVESTMENT ACTIVITY FULL-YEAR 2018 INVESTMENT TARGETSAcquisitions of $400-$525 MillionDispositions of $550-$750 MillionPreferred equity investments of $100 Million 360 ResidencesSan Jose, CA (1) Weighted by
Slide 25: Development Pipeline Update
Based on initial occupancy.Total cost in millions and not ESS share. Includes only those projects under construction as of 12/31/17.Data as of 12/31/17. FORECASTED SPEND OF $250M AT PRO RATA SHARE ON EXISTING DEVELOPMENT PROJECTS UNDER CONSTRUCTION IN 2018 DEVELOPMENT PIPELINE UPDATE * GallowayPleas
Slide 26: Disciplined Capital Allocation Process
DISCIPLINED CAPITAL ALLOCATION PROCESS * DEALS MUST BE ACCRETIVE TO THREE METRICS:
Slide 27: Financial Performance, 2018 Guidance, & Capital Structure
FINANCIAL PERFORMANCE, 2018 GUIDANCE, & CAPITAL STRUCTURE 8th & RepublicanSeattle, WA(2017 Acquisition)
Slide 28: Continued Outperformance vs. Peers
Source: Company Disclosures 2018E represents the midpoint of guidance as of Fourth Quarter Earnings Releases. Peer average represents 5 multifamily REITs. MAA does not provide Core FFO. CONTINUED OUTPERFORMANCE VS. PEERS ESS SAME-PROPERTY NOI AND CORE FFO GROWTH HAVE EXCEEDED THE PEER AVERAGE BY 2.8
Slide 29: 2018 Year-to-Date Same-Property Revenue Growth
* 2018 YEAR-TO-DATE SAME-PROPERTY REVENUE GROWTH YEAR-TO-DATE, FINANCIAL OCCUPANCY IS 97.1%, AN INCREASE OF 60 BPS RELATIVE TO THE SAME PERIOD ONE YEAR AGOWE OPPORTUNISTICALLY BUILT OCCUPANCY WITH MINIMAL RENT LOSS TO OPTIMIZE OUR POSITION TO ACHIEVE OUR 2018 PLAN
Slide 30: 2018 Full-Year Guidance
Source: Company DisclosuresCore FFO excludes acquisition costs and non-routine items. * 2018 FULL-YEAR GUIDANCE (UNCHANGED FROM INITIAL GUIDANCE)
Slide 31: 2018 MSA Level Forecast
E S S E X P R O P E R T Y T R U S T, I N C. E S S E X P R O P E R T Y T R U S T, I N C. E S S E X P R O P E R T Y T R U S T, I N C. E S S E X P R O P E R T Y T R U S T, I N C. E S S E X P R O P E R T Y T R U S T, I N C. E S S E X P R O P E R T Y T R U S T, I N C. E S S E X P R O P E R T Y T R U S T,
Slide 32: Capital Structure & Liquidity Profile
$22.2 BILLION TOTAL CAPITALIZATION Source: Company Disclosures as of 12/31/17(1) Consolidated portfolio only. * CAPITAL STRUCTURE & LIQUIDITY PROFILE (1)
Slide 33: Strong Credit Profile
STRONG CREDIT PROFILE * Source: Company DisclosuresUnsecured Debt Ratio is unsecured assets (excluding investments in co-investments) divided by unsecured indebtedness.Net Indebtedness is total debt less unamortized premiums, debt issuance costs, unrestricted cash and cash equivalents, and marketabl
Slide 34: Well Laddered Debt Maturity Schedule
WELL LADDERED DEBT MATURITY SCHEDULE Debt Maturity Schedule(1) (1) Data as of 12/31/2017. Excludes lines of Credit. * % of Total Debt Maturing/Year 3.7% 11.5% 12.6% 9.9% 12.6% 10.9% 7.3% 9.4% 9.2% 9.2% 0.1% 3.6% Weighted Average Interest Rate 5.3% 4.1% 4.8% 4.3% 3.1% 3.6% 4.0% 3.5% 3.4% 3.4% 2.9% 2.
Slide 35: Appendix
APPENDIX Renaissance at Uptown OrangeOrange, CA
Slide 36: Northern California Highlights and Portfolio
San Francisco and San Jose both outpaced the U.S. in job growth over the trailing three month period ending in December 2017.San Francisco had the lowest unemployment rate in the ESS portfolio at 2.2% as of November 2017.Silicon Valley absorbed 1.6M SF of office space in 2017, or 2.2% of stock.Silic
Slide 37: Los Angeles Highlights and Portfolio
Source: Axiometrics, Core Logic, Moody's, RCG, SNL, BLS, NAR, Census and Essex Disclosures as of December 2017. Trailing 3 months ended December 2017.Home Prices and YOY % Increase as of December 2017. Home prices reflect only single-family and do not include condos. U.S. uses NAR 3Q17. LOS ANGELES
Slide 38: Orange County Highlights and Portfolio
Source: Axiometrics, CoreLogic, Moody's, RCG, SNL, BLS,NAR Census and Essex Disclosures as of December 2017. Trailing 3 months ended December 2017.Home Prices and YOY % Increase as of December 2017. U.S. uses NAR 3Q17. ORANGE COUNTY PORTFOLIO ORANGE COUNTY HIGHLIGHTS Job growth in Orange County lagg
Slide 39: Seattle Highlights and Portfolio
Source: Axiometrics, Moody's, RCG, SNL, BLS, NAR, NWMLS, Census and Essex Disclosures as of December 2017. Trailing 3 months ended December 2017.Home Prices and YOY % Increase as of December 2017. U.S. uses NAR 3Q17. SEATTLE HIGHLIGHTS SEATTLE PORTFOLIO Seattle continues to demonstrate strong job gr
Slide 40: Commitment to Sustainability
COMMITMENT TO SUSTAINABILITY Huntington BreakersHuntington Beach, CA(Recently Redeveloped)
Slide 41: LEED and GreenPoint Rated Certifications
* U.S. GREEN BUILDING COUNCIL: LEADERSHIP IN ENERGY AND ENVIRONMENTAL DESIGN (LEED)Since 2009, Essex has developed nine apartment communities that are LEED Certified, including four Gold and five Silver certifications, with one additional certification currently pending. A nationally recognized prog
Slide 42: Sustainability Initiatives
2016 2015 2014 2009 2008 2006 SUSTAINABLE COMMITMENTFor the past 10+ years, Essex has been incorporating green initiatives within its apartment communities In 2016, Essex participated in the GRESB Survey for the first time and achieved GREEN STAR Rated StatusEssex participated in GRESB for the secon
Slide 43: Dedication to Sustainable Living
SUSTAINABLE INITIATIVES THROUGHOUT THE ORGANIZATION *LEED is a nationally recognized program established by the U.S. Green Building Council to encourage the design of environmentally responsible buildings. GreenPoint Rated is California-specific program through Build It Green, which encourages healt
Slide 44: Definitions & Reconciliations
DEFINITIONS & RECONCILIATIONS
Slide 45: Disclaimers
* DISCLAIMERS SAFE HARBOR STATEMENT UNDER THE PRIVATE LITIGATION REFORM ACT OF 1995This 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
Slide 46: Guidance FFO Reconciliation
* With respect to the Company's guidance regarding its projected FFO and Core FFO for the first quarter of 2018 and full-year 2018, which guidance is set forth in the earnings release for the fourth quarter of 2017 and on page S-14.1 of the earnings supplement, a reconciliation of projected net inco
Slide 47: Adjusted EBITDA Reconciliation
* RECONCILIATIONS OF NON-GAAP FINANCIALMEASURES 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 of the earnings su
Slide 48: Funds From Operations (FFO)
* RECONCILIATIONS OF NON-GAAP FINANCIALMEASURES AND OTHER TERMS 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, F
Slide 49: Net Indebtedness Reconciliation
* RECONCILIATIONS OF NON-GAAP FINANCIALMEASURES AND OTHER TERMS Total debt, net Total debt, net Total debt, net $ 5,689,126 Adjustments: Adjustments: Adjustments: Unamortized premiums, discounts, and debt issuance costs Unamortized premiums, discounts, and debt issuance costs (4,565) Cash and cash e
Slide 50: NOI and Same-Property NOI Reconciliations
* NET OPERATING INCOME (“NOI”) AND SAME-PROPERTY NOI RECONCILIATIONSNet Operating Income ("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 presentat
Slide 51: Public Bond Covenants
* PUBLIC BOND COVENANTSPublic 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 servic
Slide 52: Unencumbered NOI to Adjusted Total NOI
* RECONCILIATIONS OF NON-GAAP FINANCIALMEASURES AND OTHER TERMS UNENCUMBERED NOI TO ADJUSTED TOTAL NOIThis ratio is presented on page S-6 of the earnings supplement for the fourth quarter of 2017 in the section titled "Selected Credit Ratios". Unencumbered NOI means the sum of NOI for those real est
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