PALO ALTO, CA--(Marketwire - February 4, 2009) - Essex Property Trust, Inc., (
NYSE:
ESS) a
real estate investment trust (REIT) with apartment communities located in
targeted West Coast markets, announced today 2009 estimates for Earnings
per Share (EPS) and Funds from Operations (FFO) per diluted share. For the
year ended December 31, 2009, the Company estimates that EPS will range
from $1.90 - $2.30 per diluted share and FFO will range from $5.50 to $5.90
per diluted share.
The Company's 2009 forecast assumes continued slowing of the national
economy, with an estimated GDP decline of 1.3% and non-farm employment
decrease of 2 million jobs.
The Company's FFO and EPS estimates for 2009 include additional interest
expense (non-cash) related to the adoption of FASB Staff Position No. APB
14-1. This new accounting pronouncement is effective for the Company on
January 1, 2009 and it must be applied retrospectively. The pronouncement
requires companies to bifurcate the convertible debt as of the date of
issuance between the value of the equity component and the value of the
debt component of convertible debt instruments that may be settled in cash.
Interest expense is then recorded on the amount allocated to debt based on
a market rate as of the date of issuance for similar debt without the
conversion feature.
Retroactively applying APB 14-1 is expected to decrease the 2008 FFO
results by approximately $0.10 per share and to decrease the 2007 FFO
results by approximately $0.15 per share. The midpoint of the 2009
guidance for FFO of $5.70 per share represents a 6% reduction from the
revised 2008 FFO of $6.04 per share.
Property Operations
The Company anticipates an overall portfolio rental rate decline of 1.8%
largely due to job losses of approximately 1% in most regions. Occupancy in
each of the Company's regions is expected to range between 94% - 95%.
Additionally, increased supply in parts of Southern California, Seattle and
Bellevue will present added pressure on fundamentals throughout 2009.
The midpoint of the Company's 2009 guidance is based on the following
projected changes in revenue, expenses and net operating income (NOI) from
same-property operations, expressed as a percentage increase compared to
its projected 2008 results:
Revenue Expenses NOI
-------- -------- --------
Northern California (0.5%) (1.2%) (0.1%)
Seattle Metro (1.5%) 5.7% (5.2%)
Southern California (2.5%) 3.2% (5.2%)
-------- -------- --------
Total Same-Property Portfolio (1.8%) 2.3% (3.8%)
======== ======== ========
The projected 2009 non-revenue generating capital expenditures that are
needed to extend the useful life of the Company's apartment communities are
estimated to range between $1,100 and $1,400 per unit.
Acquisitions & Dispositions
In 2009, the Company expects to dispose of approximately $100 million in
assets. The midpoint for the 2009 guidance assumes that disposition
transactions will be slightly accretive as proceeds will be used to reduce
commitments.
The 2008 acquisitions that are not included in same-property results are
expected to increase NOI in 2009 by $3.8 million.
Development & Redevelopment
In 2009, Essex expects to incur approximately $110 million of development
costs on its balance sheet and $30 million of development costs in Fund II.
Four development projects will be in lease-up during 2009. Two of these
communities (Studio 40-41 in Studio City, CA and Cielo in Chatsworth, CA --
both owned by Fund II) will commence lease-up activities in the second half
of 2009. Belmont Station, located in Los Angeles, CA, which began initial
lease-up in 2008 and The Grand, located in Oakland, CA, which will commence
lease-up activities in February, are expected to reach stabilization in
2009. The Company expects that property operating expenses needed to
achieve stabilization for the four development projects being leased up and
the cessation of capitalizing interest, will reduce FFO by approximately $4
million in 2009.
Approximately $30 million will be invested in redevelopment activities
during 2009 which include apartment communities in the Company's existing
portfolio, as well as assets owned by Fund II. Communities in the
redevelopment program that fall below 95% occupancy are not included in
same-property results and these properties are forecasted to increase the
consolidated non-same property NOI from $26.1 million to $26.8 million,
representing a 2.7% increase. The average yield from the redevelopment
program is estimated at 7% - 9% (redevelopment related net operating income
increases divided by incremental redevelopment costs).
In 2009, development and redevelopment activities will be funded by the
Company's secured line facility, construction loans and proceeds from
dispositions. The Company expects to capitalize $15 million of interest
cost on the entire development and redevelopment pipeline owned by the REIT
(excluding Fund II).
Other estimates used in providing 2009 guidance include:
-- Interest cost (including amortization of loan fees) of approximately
$85 million, net of capitalized interest assuming an average borrowing cost
of 5.6%. The net interest cost assumes net incremental proceeds of $110
million from new secured financing and the refinance of maturing
obligations. The increased mortgage borrowing will be used to pay down the
bank line of credit and create the borrowing capacity needed to fund 2009
and 2010 development activity and pay down line facilities. Short term
variable rate borrowing costs are expected to increase 100bps during 2009.
-- Corporate general and administrative ("G&A") expenses of approximately
$25 million.
-- Management fee revenue is estimated to be approximately $5 million and
it is assumed that there are no promote distributions from Fund II.
-- Weighted average shares of common stock outstanding estimated at 28.8
million shares.
-- Other income from non-core activities is expected to generate
approximately $2 million in FFO during the first quarter of 2009.
Essex Property Trust, Inc., located in Palo Alto, California and traded on
the New York Stock Exchange (ESS), is a fully integrated real estate
investment trust (REIT) that acquires, develops, redevelops, and apartment
communities in selected West Coast communities. Essex currently has
ownership interests in 134 apartment communities 26,992 units, and has
1,256 units in various stages of active development. Additional
information about Essex can be found on the Company's web site at
www.essexpropertytrust.com. If you would like to receive future press
releases via e-mail-please send a request to
investors@essexpropertytrust.com.
Forward-Looking Statements: The statements, which are not historical facts,
contained in this release are forward-looking statements including
statements regarding the Company's beliefs and expectations relating to
2009 annual per diluted share GAAP earnings and FFO; 2009 same property net
operating income; 2009 interest expense; apartment market conditions; 2009
same-property operations; 2009 operating expenses; 2009 non-revenue
generating capital expenditures; 2009 disposition activities; 2009 equity
capital transactions; 2009 development and redevelopment activities, costs
and yields; 2009 G&A expenses; first quarter other income; 2009 management
fee revenue; the weighted average shares outstanding; growth in GDP and
non-farm employment; and 2009 interest rates and costs and refinancing.
These forward-looking statements involve risks and uncertainties which
could cause actual results to differ materially from such forward-looking
statements including, but not limited to, change in the Company's strategy,
downturns in the real estate markets in which the Company owns properties,
the effect of changes in economic conditions, the effect of changes in
interest rates, the impact of competition and competitive pricing, the
results of financing efforts, and other risks detailed in the Company's SEC
filings. All forward-looking statements and reasons why results may differ
included in this press release are made as of the date hereof, and we
assume no obligation to update any such forward-looking statement or reason
why actual results may differ. For more details relating to risks and
uncertainties that could actual results to differ materially from those
anticipated in our forward-looking statements, please refer to our SEC
filings, including our Report on Form 10-K for the year ended December 31,
2007.