Essex Property Trust, Inc. · NYSE:ESS
Essex Property Trust — Investor Day (November 2008)
37 slides from Essex Property Trust's investor day presentation, Nov 19, 2008
Slide 1: Investor Day - Los Angeles Property Tour
Essex Property Trust, Inc. Investor Day - Los Angeles Property Tour November 18, 2008
Slide 2: Forward-Looking Statement
Forward-Looking Statement SAFE HARBOR STATEMENT UNDER THE PRIVATE LITIGATION REFORM ACT OF 1995: This presentation by Essex Property Trust, Inc. (the “Company”) includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the S
Slide 3: Why Essex?
Why Essex? • Essex provides superior growth relative to the multifamily REIT sector • One of the strongest multifamily balance sheets • Self-funded through • Essex market locations offer long-term stability in an uncertain economic environment – Supply-constrained locations result in higher occupanc
Slide 4: Stable Markets: Overall Vacancy
* Source: Realfacts, all buildings completed before 2007 • Overall Vacancy rates in Essex markets remain low through varying economic cycles* Stable Markets
Slide 5: 10-Year Single Family Supply as a % of Stock
*For the years 1998 - 2007: Source - Permits: US Census (Axiometrics), Median Price: Realtor.org/Axiometrics, Median HH Income: Easi Demographics Essex Markets Major U.S. Metros Essex Regions/Portfolio Essex Markets vs. U.S. Average 10 -Year Single Family Supply as a % of Stock*
Slide 6: Single Family Affordability
*Affordability: the ratio of the estimated median household income to the “required income” (three times the mortgage payment) to purchase the media-priced home. Assumes 20% down payment, 6.25% interest rate, 1% tax rate, 0.25% insurance rate. Source Median Price: Realtor.org/Axiometrics, Median HH
Slide 7: Venture Capital Spending
Venture Capital Spending by Industry 17% 13% 5% 6% 6% 6% Venture Capital Spending by Location ($ in thousands) Venture Capital Spending*
Slide 8: Operations Update & Market Overview
OPERATIONS UPDATE & MARKET OVERVIEW Presented by Michael Schall - EVP & COO
Slide 9: Same Property Results
Qtr. ended September 30, 2008* 9 months ended September 30, 2008** 2008 Guidance Revenues Southern California 1.1% 1.9% 1.5% to 3.0% Northern California 8.4% 10.0% 5.5% to 7.0% Seattle 7.5% 8.2% 5.5% to 7.0% Average 4.0% 4.9% 3.0% to 4.5% Expenses 3.9% 3.9% 2.5% to 4.0% NOI 4.0% 5.4% 4.5% to 5.8% Mu
Slide 10: Key Accomplishments in 2008
Key Accomplishments in 2008 • Increased growth and yield expectation via acquisitions, dispositions, and development – Northern California now 29% of property revenues - up 11% – Seattle now 17% of property revenues - up 3% – 82% of Fund II revenues from Northern California and Seattle – Disposed of
Slide 11: City View - Hayward, CA
City View - Hayward, CA 560 Units Total Cost: $ 9.4 million
Slide 12: Montclaire - Sunnyvale, CA
Montclaire - Sunnyvale, CA 390 Units Total Cost: $ 15.1 million
Slide 13: Key Objectives for 2009
Key Objectives for 2009 • Operating Strategy assumes economic headwinds – Maintain high occupancy levels – Utilize longer duration leases – Diligent collections effort • Refine and Leverage Investments in Yardi, Price Optimizer, and Call Center • Lease-up 100 Grand in Oakland, California
Slide 14: Southern California Market Update
Southern California Market Update • Continued slowing of revenue growth rates • Submarkets - Ranked strongest to weakest: – San Diego – Los Angeles – Orange – Ventura – Inland Empire (limited exposure - 0.7% of NOI) • Each submarket has various degrees of job loss and new supply – Overall job growth
Slide 15: Southern California Rent to Median Income
Southern California Rent to Median Income
Slide 16: Northern California Market Update
Northern California Market Update • Strong rental growth • Employment in tech sectors has been resilient • Overall supply of apartments less than Southern California, and limited condo conversion activity • Limited construction of for-sale housing • Continued decline in move-out to home ownership (l
Slide 17: Northern California Rent to Median Income
Northern California Rent to Median Income
Slide 18: Seattle Metro Market Update
Seattle Metro Market Update • Rental Growth continues to be strong, although moderating • Seattle continues significant job growth • 2.0% growth (year-over-year, as of September 30, 2008) • Boeing is a positive factor, given strike settlement and 787 demand • Wa Mu layoffs are expected to contribute
Slide 19: Seattle Metro Rent to Median Income
Seattle Metro Rent to Median Income
Slide 20: Development Update
DEVELOPMENT UPDATE Presented by John Eudy - EVP, Development
Slide 21: Development: Current Pipeline
Development Current Pipeline (including Fund II) • Eight developments under development with a total cost of $623 million ($294 million has already been funded) • 3 projects in predevelopment for a total cost of $317 million – Leased rates are substantially below market rents and may be re-leased or
Slide 22: Current Developments
The Grand - - Oakland, CA Units Fourth Street - Berkeley, CA Units Tasman Place - Sunnyvale, CA Units Cielo - Chatsworth, CA Units Studio 40-41 - Studio City, CA Units Belmont Station - Los Angeles, CA Units Current Developments
Slide 23: Current Developments
Joule Broadway - Seattle, WA Units Eastlake 2851 - Seattle, WA Units Current Developments
Slide 24: Economic Downturn Provides Opportunities
Economic Downturn Provides Opportunities • Capitalize on land acquisition opportunities – Difficult to obtain financing for smaller companies • Benefit from lower hard costs for the next 24 months • Create efficient productivity through competitive labor costs and premium subs
Slide 25: Acquisitions Update
ACQUISITIONS UPDATE Presented by Craig Zimmerman - EVP, Acquisitions
Slide 26: Current Acquisitions Strategy
Current Acquisitions Strategy • Focus on all markets – High Growth: Northern California & Seattle – Stressed Markets: Southern California • Joint Venture Opportunities • Distressed properties offer attractive pricing
Slide 27: Current Market Conditions
Current Market Conditions • Cap Rate Update – Sellers looking for 5.5 to 6 percent range – Buyers yield expectations have increased given capital constraints – Limited transaction volume • Current Opportunities in market – Private companies defaulting on high-leverage renovation loans – Distressed c
Slide 28: Recent Acquisitions
Highlands at Wynhaven - Issaquah, WA 333 Units Total Cost - $66.3 million Chestnut Street Apartments - Santa Cruz, CA 96 Units Total Cost - $22.1 million Recent Acquisitions
Slide 29: Financial Overview
FINANCIAL OVERVIEW Presented by Michael Dance, EVP & CFO
Slide 30: Financial Strategy
Financial Strategy • Match cost of capital to appropriate investment opportunity – Create positive arbitrage – Generate accretion to cash flow per share • Increase liquidity • Finance our active developments and provide flexibility to fund future opportunities
Slide 31: Enhanced Balance Sheet and Liquidity
Enhanced Balance Sheet and Liquidity Steps initiated to enhance balance sheet and liquidity: – Raised $143 million in equity in 2008 through common stock sales – Signed new loan agreement for a secured 5-year credit facility of $150 million (expandable to $250 million) – Obtained $100 million in con
Slide 32: Current Debt Structure
Secured Debt 64% Variable Rate 14% Exchangeable Bonds 13% Secured Lines of Credit 6% Unsecured Lines of Credit 3% As of September 30, 2008 Current Debt Structure*
Slide 33: Debt Ratio vs. Peers
* Source - BMO Capital Markets' REIT Equity Weekly (November 10, 2008) Total Market Capitalization includes equity market capitalization, debt and preferred issuance Debt Ratio vs. Peers* • Lowest Debt to Total Market Capitalization ratio among multifamily peers
Slide 34: Sources & Uses of Capital
Sources & Uses of Capital ($ In Millions)
Slide 35: Dry Powder
2008 NOI from Unencumbered Assets $93 Estimated Proceeds from 10-year financing with no line facility $900 Amount of 10-year financing that can be funded to maintain a fixed charge coverage ratio of 1.5 to 1 $300 Amount on Bank Line $200 Total Borrowing Capacity $500 Dry Powder ($ In Millions)
Slide 36: Dividends Per Share
$4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 e169 $172 S177 $4.08 95 '96 '97 '98 $3.72 $336 g303 $3.12 $3.16 $3.24 $280 $2.38 $2.15 Il it T T '99 ‘00 '01 ‘02 '03 '04 '05 ‘06 ‘07 '08 @ Dividends Per Share
Slide 37: Proven Cycle-Tested Strategy: Investment Considerations
Proven Cycle-Tested Strategy 10-Year Total Return of 325.9%* Seasoned Management Team Conservative Operating Philosophy Strong Balance Sheet Consistent Dividend Growth Source - Keybanc Capital Markets - The Leaderboard, November 7, 2008 Supply Constrained Markets Investment Considerations