Essex Property Trust, Inc. · NYSE:ESS
Essex Property Trust — Investor Presentation (May 2018)
50 slides from Essex Property Trust's investor presentation, May 31, 2018
Slide 1: Investor Presentation May/June 2018
INVESTOR PRESENTATIONMAY/JUNE 2018
Slide 2: Table of Contents
ABOUT ESSEX EXECUTIVE SUMMARYWEST COAST FUNDAMENTALSINVESTMENT OVERVIEW AND CAPITAL STRUCTUREFINANCIAL PERFORMANCE AND 2018 GUIDANCEAPPENDIXPROVEN TRACK RECORD ESSEX PORTFOLIODEFINITIONS & RECONCILIATIONS PAGE(S)23 4 – 17 18 – 2526 – 3031 32 – 3435 – 3839 – 48 TABLE OF CONTENTS *
Slide 3: Essex at a Glance
(1) Represents percent of pro rata NOI as of 3/31/18.(2) Oakland includes Alameda and Contra Costa Counties.(3) As of 3/31/18. * San Francisco MD 8%Oakland(2) 13%Santa Clara 19% Ventura 4%Los Angeles 19%Orange County 11%San Diego 8% SOUTHERN CA43% of NOI(1) NORTHERN CA40% of NOI(1) Washington & Cali
Slide 4: Executive Summary
EXECUTIVE SUMMARY * ESSEX’S WEST COAST MARKETS ARE EXPECTED TO LEAD THE NATION IN RENT GROWTH OVER THE NEXT SEVERAL YEARS DUE TO FAVORABLE SUPPLY AND DEMAND DYNAMICS KEY HIGHLIGHTS The embedded housing shortage of 7.3 million units remains a key issue – California represents roughly half of the nati
Slide 5: West Coast Fundamentals
Gas Company LoftsLos Angeles, CA(Renovation included the addition of rooftop amenity with pool) Agora at South MainWalnut Creek, CA(2016 Development) WEST COAST FUNDAMENTALS EmmeEmeryville, CA
Slide 6: Why West Coast Markets? Long-Term Favorable Supply/Demand Dynamics
WHY WEST COAST MARKETS? * LONG-TERM FAVORABLE SUPPLY/DEMAND DYNAMICS
Slide 7: California's Chronic Housing Shortage
* CALIFORNIA’S CHRONIC HOUSING SHORTAGE Source: Up for Growth National Coalition - Housing Underproduction in the U.S., April 2018 IN THE U.S., 23 STATES HAVE PRODUCED ~7.3 MILLION TOO FEW HOUSING UNITS FROM 2000-2015CALIFORNIA REPRESENTS NEARLY 50% OF THE HOUSING SHORTFALL AT ~3.4 MILLION UNITS
Slide 8: Limited Supply in Essex Markets
Sources: Census, Essex, and Rosen LIMITED SUPPLY IN ESSEX MARKETS ESSEX CA SUPPLY AS A PERCENT OF STOCK HAS HISTORICALLY REMAINED BELOW 1% RELATIVE TO THE NATION, ESSEX’S CA MARKETS HAVE LESS HOUSING SUPPLY WITH BETTER JOB GROWTH *
Slide 9: Essex Near-Term Supply Outlook
MULTIFAMILY SUPPLY AND TOTAL SUPPLY AS A % OF STOCK ARE EXPECTED TO REMAIN RELATIVELY FLAT ACROSS THE ESSEX MARKETS IN 2018 AND 2019 Source: Essex(1) Weighted by ESS December 2017 year-to-date same-property scheduled rent. ESSEX NEAR-TERM SUPPLY OUTLOOK *
Slide 10: Wealth Creation Strongest on the West Coast
* WEALTH CREATION STRONGEST ON THE WEST COAST CALIFORNIA AND WASHINGTON’S KNOWLEDGE-BASED ECONOMIES HAVE LED THE NATION IN PER CAPITA GDP GROWTH OVER THE PAST 5 YEARS, DRIVING WEALTH CREATION ACROSS THE ESSEX MARKETS Source: Bureau of Economic Analysis
Slide 11: Top Tech vs. Non-Tech Companies
* TOP 10 TECH VS. NON-TECH COMPANIES SINCE 2005, THE TOP 10 PUBLIC TECH FIRMS HAVE CREATED $3.8 TRILLION IN EQUITY MARKET VALUE, GROWING 5.6X FASTER THAN NON-TECH FIRMSALL TOP 10 TECH FIRMS AND 3 OF THE TOP 10 NON-TECH FIRMS ARE HEADQUARTERED IN ESSEX MARKETSSINCE 2005, GLOBAL EMPLOYMENT FOR THE TOP
Slide 12: West Coast Job Growth
WEST COAST JOB GROWTH WEST COAST JOB GROWTH REMAINS STRONG COMPARED TO THE U.S. AND MAJOR EAST COAST METROS, WITH MOST OF THE OUTPERFORMANCE EMANATING FROM THE TECHNOLOGY MARKETSTIGHT LABOR MARKET CONDITIONS CONTINUE, DEMONSTRATED BY ULTRA-LOW UNEMPLOYMENT RATES Source: Bureau of Labor Statistics (n
Slide 13: West Coast Job Growth Rebounded
WEST COAST JOB GROWTH WEST COAST JOB GROWTH HAS RECENTLY REBOUNDED AFTER DIPPING IN THE FALL OF 2017, WHILE SELECT EAST COAST MARKETS CONTINUE TO LAG Source: Bureau of Labor Statistics *
Slide 14: LinkedIn Worker Migration Trends
* RECENT MIGRATION TRENDS REFLECT THE INFLUX OF WORKERS TO ESSEX’S WEST COAST MARKETS, PRIMARILY FROM MAJOR EAST COAST METROS LINKEDIN WORKER MIGRATION TRENDS Note: LinkedIn defines migration as a member changing their location on their LinkedIn profile. The maps reflect the cities the most LinkedIn
Slide 15: Personal Income Growth Expected to Accelerate
* PERSONAL INCOME GROWTH IS EXPECTED TO ACCELERATE ACROSS ALL ESSEX MARKETS IN 2018, HELPING ALLEVIATE AFFORDABILITY PRESSURES WAGE GROWTH SHOULD IMPROVE AFFORDABILITY Sources: Rosen and Economy.comRepresents forecasted data using average of Rosen and Economy.com estimates.ESS markets weighted by De
Slide 16: Personal Income Growth vs. Rent Growth
* Sources: Axiometrics, Rosen and Bureau of Economic Analysis WE EXPECT PERSONAL INCOMES TO GROW FASTER THAN RENTS FOR THE 3RD CONSECUTIVE YEAR IN 2018, WHICH IS HELPING ALLEVIATE AFFORDABILITY PRESSURES IN ESSEX MARKETS PERSONAL INCOME GROWTH VS. RENT GROWTH
Slide 17: Demand to Exceed Supply in Essex's Markets
* DEMAND TO EXCEED SUPPLY IN ESSEX’S MARKETS IN ESSEX’S SUPPLY CONSTRAINED MARKETS, DEMAND IS EXPECTED TO EXCEED SUPPLY RELATIVE TO OTHER MAJOR METROS FOR THE NEXT SEVERAL YEARS Sources: National Association of Realtors, CoreLogic, and Essex*Essex Portfolio weighted by % of same-property revenueNew
Slide 18: Rent Growth Outlook - Axio Forecast
RENT GROWTH OUTLOOK - AXIO FORECAST WEST COAST MARKETS ARE PROJECTED TO BE THE TOP PERFORMING MARKETS THROUGH 2019ROUGHLY 88% OF ESSEX’S TOTAL NOI IS IN THE TOP PROJECTED MSA’S Axiometrics Top Projected Rent Growth Markets * Source: Axiometrics. Ranking of the top 40 largest major metros in the U.S.
Slide 19: Investment Overview and Capital Structure
Palm ValleySan Jose, CA MB360San Francisco, CA(2014 Development) INVESTMENT OVERVIEW AND CAPITAL STRUCTURE Station Park GreenSan Mateo, CA(2018 Development)
Slide 20: Core Competencies to Create Value
CORE COMPETENCIES TO CREATE VALUE * The GallowayPleasanton, CA CONDO OPTIONALITY:Potential value creation through 8,600 condo convertible apartment homes in the Essex Portfolio DEVELOPMENT:Develop high-quality tenant-desired apartment homes near transportation nodes ACQUISITIONS:Improve the NAV/shar
Slide 21: Strategic Capital Allocation
STRATEGIC CAPITAL ALLOCATION * 360 ResidencesSan Jose, CA(2017 Acquisition) KEY INVESTMENT TARGETSImprove portfolio growth through dispositions of select assetsUtilize co-investment platform to optimize cost of capital Large discounts to NAV (>10%) would likely result in increased disposition activi
Slide 22: Development Pipeline Update
Based on initial occupancy.Total cost in millions and not ESS share. Includes only those projects under construction as of 3/31/18. Excludes land held for future development.Data as of 3/31/18. FORECASTED SPEND OF $250M AT PRO RATA SHARE ON DEVELOPMENT PROJECTS UNDER CONSTRUCTION IN 2018 DEVELOPMENT
Slide 23: Disciplined Capital Allocation Process
DISCIPLINED CAPITAL ALLOCATION PROCESS * DEALS MUST BE ACCRETIVE TO 3 METRICS:
Slide 24: Capital Structure & Liquidity Profile
$22.2 Billion Total Capitalization Data as of 3/31/18(1) Consolidated portfolio only. CAPITAL STRUCTURE & LIQUIDITY PROFILE Debt Composition(1) * STRONG BALANCE SHEET WITH AMPLE LIQUIDITY AND FINANCIAL FLEXIBILITY
Slide 25: 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 26: Well Laddered Debt Maturity Schedule
WELL LADDERED DEBT MATURITY SCHEDULE % of Total Debt Maturing/Year 2.2% 11.0% 12.2% 9.5% 12.1% 10.5% 7.0% 9.0% 8.8% 8.8% 0.1% 8.8% Debt Maturity Schedule(1) (1) Data as of 3/31/2018. Excludes lines of credit. Weighted Average Interest Rate 5.5% 4.1% 4.8% 4.3% 3.1% 3.6% 4.0% 3.6% 3.4% 3.4% 3.0% 3.7%
Slide 27: Financial Performance and 2018 Guidance
Gas Company LoftsLos Angeles, CA(Renovation included the addition of rooftop amenity with pool) Agora at South MainWalnut Creek, CA(2016 Development) FINANCIAL PERFORMANCE AND 2018 GUIDANCE EmmeEmeryville, CA 8th & RepublicanSeattle, WA(2017 Acquisition)
Slide 28: Continued Outperformance vs. Peers
Source: Company Disclosures 2018E represents the midpoint of guidance as set forth in the earnings release for the first quarter of 2018. Peer average represents 6 multifamily REITs. CPT and MAA provide Total FFO guidance, not Core FFO. CONTINUED OUTPERFORMANCE VS. PEERS ESSEX SAME-PROPERTY NOI AND
Slide 29: 2018 Year-to-Date Same-Property Revenue Growth
PRELIMINARY APRIL/MAY SAME-PROPERTY REVENUE GREW 2.8%, INCLUDING 30 BASIS POINTS OF HIGHER OCCUPANCY FROM THE COMPARABLE PERIOD ONE YEAR AGO.OCCUPANCY IN APRIL/MAY IS 30 BASIS POINTS BELOW THE FIRST QUARTER. THIS IS CONSISTENT WITH OUR STRATEGY TO DRIVE RENT GROWTH DURING PEAK LEASING SEASON. * 2018
Slide 30: 2018 Full-Year Guidance
Source: Company DisclosuresCore FFO excludes acquisition costs and non-routine items. * 2018 FULL-YEAR GUIDANCE (UNCHANGED FROM Q1 2018)
Slide 31: 2018 MSA Level Forecast: Supply, Jobs, and Apartment Market Conditions
E S S E X P R O P E R T Y T R U S T, I N C. 2018 MSA Level Forecast: Supply, Jobs, and Apartment Market Conditions Residential Supply (1) Job Forecast (2) Market Forecast (3) Market New MF Supply New SF Supply Total Supply % of MF Supply to MF Stock % of Total Supply to Total Stock Est. New Jobs Dec
Slide 32: Appendix
Gas Company LoftsLos Angeles, CA(Renovation included the addition of rooftop amenity with pool) Agora at South MainWalnut Creek, CA(2016 Development) WEST COAST FUNDAMENTALS EmmeEmeryville, CA Pinnacle at MacArthur PlaceSanta Ana, CA APPENDIX
Slide 33: 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 34: Investment Strategy Leads to Superior Total Returns
INVESTMENT STRATEGY LEADS TO SUPERIOR TOTAL RETURNS SUPERIOR VALUE CREATION FOR SHAREHOLDERS SINCE THE IPOHIGHEST TOTAL RETURN OF ALL PUBLIC U.S. REITS SINCE IPO IN 1994 Sources: SNL Financial, NAREITJune 1994 – December 2017 * ESS CAGR: 17% 3,744% 1,205% 931% 826%
Slide 35: Significant Dividend per Share and FFO per Share Growth
* SINCE THE IPO, WE HAVE GENERATED COMPOUND ANNUAL FFO/SH AND DIVIDEND/SH GROWTH OF 8.4% 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 Total FF
Slide 36: Los Angeles Portfolio and Highlights
Sources: Axiometrics, CoreLogic, LinkedIn, JLL Office Report, CBRE, Moody's, RCG, S&P Global Market Intelligence, BLS, NAR, Census and Essex Disclosures as of March 2018. Trailing 3 months ended April 2018.Home Prices and YOY % Increase as of March 2018.2018 Estimate. LOS ANGELES PORTFOLIO LOS ANGEL
Slide 37: Orange County Portfolio and Highlights
Sources: Axiometrics, CoreLogic, LinkedIn, JLL Office Report, CBRE, Moody's, RCG, S&P Global Market Intelligence, BLS, NAR, Census and Essex Disclosures as of March 2018. Trailing 3 months ended April 2018.Home Prices and YOY % Increase as of March 2018. U.S. uses NAR 4Q17.2018 Estimate. ORANGE COUN
Slide 38: Northern California Highlights
San Jose job growth nearly doubled the U.S. over the trailing three month period ending in April 2018 with 3.1%. San Francisco continued to outperform the U.S. with 1.7% job growth over the same period.In the first quarter of 2018, San Francisco had 7.3M sf of office space under construction or 6.9%
Slide 39: Seattle Portfolio and Highlights
Source: Axiometrics, CoreLogic, LinkedIn, JLL Office Report, CBRE, Moody's, RCG, S&P Global Market Intelligence, BLS, NAR, Census and Essex Disclosures as of March 2018. Trailing 3 months ended April 2018.Home Prices and YOY % Increase as of March 2018. U.S. uses NAR 4Q17.2018 Estimate. SEATTLE HIGH
Slide 40: Definitions & Reconciliations
DEFINITIONS & RECONCILIATIONS
Slide 41: Disclaimers
* DISCLAIMERS 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
Slide 42: FFO and Core FFO Guidance Reconciliation
* With respect to the Company's guidance regarding its projected FFO and Core FFO for the second quarter of 2018, which guidance is set forth in the earnings release for the first quarter of 2018 and on page S-14.1 of the earnings supplement, a reconciliation of projected net income per share to pro
Slide 43: Reconciliations of Non-GAAP Financial Measures: Adjusted EBITDAre
* RECONCILIATIONS OF NON-GAAP FINANCIALMEASURES AND OTHER TERMS ADJUSTED EBITDAre RECONCILIATION The National Association of Real Estate Investment Trusts ("NAREIT”) defines earnings before interest, taxes, depreciation and amortization for real estate ("EBITDAre") (September 2017 White Paper) as ne
Slide 44: Adjusted EBITDAre Reconciliation (Continued)
* RECONCILIATIONS OF NON-GAAP FINANCIALMEASURES AND OTHER TERMS ADJUSTED EBITDAre RECONCILIATION (CONTINUED)The reconciliations of Net Income available to common stockholders to EBITDAre and Adjusted EBITDAre are presented in the table below (Dollars in thousands): (1) Interest expense, net includes
Slide 45: 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 46: Net Indebtedness Divided by Adjusted EBITDAre
* RECONCILIATIONS OF NON-GAAP FINANCIALMEASURES AND OTHER TERMS Total consolidated debt, net $ 5,718,970 Total debt from co-investments at pro rata share 780,664 Adjustments: Consolidated unamortized premiums, discounts, and debt issuance costs 2,827 Pro rata co-investments unamortized premiums, dis
Slide 47: 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 48: 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 49: 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 first quarter of 2018 in the section titled "Selected Credit Ratios". Unencumbered NOI means the sum of NOI for those real estate a
Slide 50: Notes
NOTES _ESSEX_ PROPERTY TAUST. ING.
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