Essex Property Trust, Inc. — Q1 2021 10-Q
Period: Three months ended March 31, 2021; unaudited. Essex is a West Coast apartment REIT operating through Essex Portfolio, L.P. At quarter-end, it owned or had interests in 244 apartment communities totaling 60,175 homes, primarily in Southern California, Northern California, and Seattle.
Financial and operating performance
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Total revenue | $355.1 million | $392.4 million; down 9.5% |
| Net income | $176.9 million | $328.8 million |
| Net income available to common stockholders; diluted EPS | $168.4 million; $2.59 | $315.0 million; $4.76 diluted EPS |
| Same-property revenue | $317.8 million | $345.7 million; down 8.1% |
| Same-property NOI | $220.0 million | $250.8 million; down 12.3% |
| FFO / Core FFO, diluted per share | $217.5 million / $206.6 million; $3.23 / $3.07 | $235.3 million / $238.0 million; $3.44 / $3.48 |
| Net cash from operating activities | $195.3 million | $266.9 million |
| Total debt, net, at quarter-end | $6.10 billion | $6.25 billion at Dec. 31, 2020 |
Quarter-end unrestricted cash was $103.4 million; restricted cash was $9.9 million. Marketable securities totaled $165.3 million. The company had $1.24 billion of unsecured credit facilities with no balance drawn. It declared common dividends of $2.09 per share for the quarter.
Material changes and notable items
- Same-property revenue fell mainly due to $10.4 million in additional cash concessions, average rental rates declining 3.3% to $2,289 per home, and higher rent delinquencies. Average financial occupancy held at 96.7%.
- Same-property cash delinquencies rose to 2.1% of scheduled rent from 0.4% a year earlier. Management said the increase had not materially affected liquidity.
- Net income comparisons were affected by unusual real estate and co-investment gains: Q1 2021 included $100.1 million of gains on property sales; Q1 2020 included a $234.7 million co-investment remeasurement gain. Core FFO declined to $206.6 million from $238.0 million.
- Essex sold three communities in February for aggregate contract prices of $275.5 million, recognizing a $100.1 million total gain. It issued $450 million of 1.700% senior notes due 2028 and used proceeds partly to repay upcoming debt maturities.
- The company repurchased 40,000 shares for $9.2 million during the quarter. It also originated a $52.5 million related-party bridge loan bearing 2.55%, due July 2021.
Outlook, risks, and contingencies
No quantified earnings or operating guidance is provided in the supplied filing text. Management stated that cash from operations, cash and securities, available credit, and potential property dispositions were expected to cover anticipated cash needs for the next 12 months. The development pipeline included 1,316 homes, with approximately $136 million of estimated remaining project costs, including $90 million attributable to the company.
Management highlighted continuing uncertainty from COVID-19, including resident employment and rent-payment impacts, eviction moratoria, restrictions on rent increases, and possible changes in demand from remote work. Other stated risks include development cost overruns or delays, interest-rate and capital-market volatility, operating-cost increases, co-investment risks, and regulatory changes. The company reported no litigation expected to have a material adverse effect and no material change to the risk factors in its 2020 Form 10-K.
Most important facts for investors to verify
- Whether higher delinquencies and concessions persist, and whether collections or rental rates recover.
- Core FFO and same-property NOI trends, distinguishing recurring operations from property-sale and securities gains.
- Debt maturities, refinancing costs, credit-facility availability, and the company’s capacity to fund dividends and development.
- Remaining development costs and delivery or lease-up progress across the pipeline.
- Repayment and terms of the $52.5 million related-party loan, and performance and debt exposure of co-investments.