Northern California 5.5% to 7.0%
Seattle Metro 5.5% to 7.0%
Southern California 1.5% to 3.0%
--------------------------------------
Combined Total 3.0% to 4.5%
For the consolidated same-property portfolio, operating expenses are
expected to increase between 2.5% and 4.0% with an increase in
same-property net operating income (NOI) ranging between 4.5% and 5.8%. The
projected 2008 non-revenue generating capital expenditures that are needed
to extend the useful life of the Company's apartment communities and
achieve the forecasted revenue growth are estimated at $950 per unit.
Acquisitions and Dispositions
The 2008 acquisition plan is for an increase in new investments of
approximately $100 million, to be financed with proceeds from dispositions
(in 1031 exchanges) or joint venture capital. The Company will continue to
concentrate its acquisitions efforts on the Seattle metropolitan area and
the San Francisco Bay Area. The Company has targeted between $100 million
and $200 million in dispositions, primarily in Southern California, and
plans to use the net proceeds to fund its 2008 acquisitions and the stock
repurchase program announced in 2007. The midpoint for 2008 guidance
assumes that acquisition and disposition transactions have no significant
impact on FFO.
Development
In 2008, Essex expects to incur approximately $150 million in development
costs on its balance sheet and $50 million of development costs in Fund II.
Two development projects will be completed and lease-up activities will
start in the second quarter. The Company expects that property operating
expenses needed to achieve stabilization for the two development projects
being leased up (Belmont Station in Los Angeles and 2851 Eastlake in
Seattle -- owned by Fund II), will reduce non-same store net operating
income and the equity income from Fund II by approximately $1 million in
2008. During the stabilization period (not to exceed one year) the Company
capitalizes interest and property taxes on the units in the development
project that are not available for lease due to ongoing development
activities. In 2008 the company expects to capitalize $14 million of
interest cost on the entire development pipeline owned by the REIT
(excluding Fund II).
Redevelopment
Approximately $30 million will be invested in redevelopment activities
during 2008 which include apartment communities in the Company's existing
portfolio, as well as assets owned by Fund II. The communities in the
redevelopment program are not included in same-property results and these
properties are forecasted to increase the consolidated non-same property
NOI by approximately $2 million in 2008. The NOI from redevelopment
activities includes the estimated vacancy loss on the units while they are
being rehabilitated and is forecasted to be $1.8 million in 2008, an
increase of approximately $0.6 million over the redevelopment vacancy
incurred in 2007. The average yield from the redevelopment program is
estimated at 10% (redevelopment related net operating income increases
divided by incremental redevelopment costs).
Other Income
In January 2008 the Company collected $7.5 million and recognized other
income of $6.3 million from its preferred interest in Waterstone
Apartments, located in Fremont, California. FFO of $.23 per share will be
reported in the first quarter of 2008 from this transaction. The Company's
midpoint of its 2008 guidance range assumes no additional non-recurring
income items will be recognized in 2008.
Other estimates used in providing 2008 guidance include:
-- Interest cost (including amortization of loan fees) of approximately
$87 million, net of capitalized interest assuming an average borrowing cost
of 5.8%. The net interest cost assumes net incremental proceeds of $50
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 2008
development activity.
-- Corporate general and administrative ("G&A") expenses of $26 million,
including the overhead cost related to asset management, property
management, development and redevelopment activities on assets owned by
Fund II.
-- Management fees earned will be approximately $5.5 million and do not
include any promote fees or the formation of a new fund.
-- Weighted average shares of common stock outstanding estimated at 27.5
million shares. Minority interest expense is expected to increase by $1
million for the increase in the dividend payments to the DownREIT limited
partners and a full year of payments to the Hillsdale Garden property joint
venture partner.
-- Write-off of costs related to abandoned projects, impairments of
investments and prepayment obligations from refinancing or repurchasing
debt or preferred shares are assumed to be insignificant.
Conference Call with Management
The Company will host a conference call with management to discuss its 2008
guidance and fourth quarter results on Thursday, February 7, 2008, at 9:00
a.m. PST (12:00 p.m. EST), which will be broadcast live via the Internet at
www.essexpropertytrust.com, and accessible via phone by dialing (866)
700-6067 and entering the passcode 29282673.
A rebroadcast of the live call will be available online for 90 days and
digitally for 7 days. To access the replay online, go to
www.essexpropertytrust.com and select the fourth quarter earnings link. To
access the replay digitally, dial (888) 286-8010 using the passcode,
69949969. If you are unable to access the information via the Company's Web
site, please contact the Investor Relations department at
investors@essexpropertytrust.com or by calling (650) 494-3700.
About Essex Property Trust, Inc.
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 and redevelops apartment
communities in selected West Coast communities. Essex currently has
ownership interests in 133 apartment communities, 26,963 units, and has
1,108 units in various stages of 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.
Funds From Operations
Funds from Operations, 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, FFO adjusts the net income of equity REITs for non-cash charges
such as depreciation and amortization of rental properties, gains/losses on
sales of real estate and extraordinary items. Management considers FFO to
be a useful financial performance measurement of an equity REIT because,
together with net income and cash flows, FFO provides investors with an
additional basis to evaluate the performance and ability of a REIT to incur
and service debt and to fund acquisitions and other capital expenditures.
FFO does not represent net income or cash flows from operations as defined
by generally accepted accounting principles (GAAP) and is not intended to
indicate whether cash flows will be sufficient to fund cash needs. It
should not be considered as an alternative to net income as an indicator of
the REIT's operating performance or to cash flows as a measure of
liquidity. FFO does not measure whether cash flow is sufficient to fund all
cash needs including principal amortization, capital improvements and
distributions to shareholders. FFO also does not represent cash flows
generated from operating, investing or financing activities as defined
under GAAP.
The following table sets forth the Company's forecast of the midpoint of
the 2008 FFO guidance reconciled to its forecast of net income ($ in
thousands):
Guidance
--------
Funds from operations 2008
--------
Net income available to common stockholders $ 50,000
Adjustments:
Depreciation and amortization 110,000
Minority interests and co-investments 5,000
--------
Funds from operations $165,000
========
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
2008 annual per diluted share GAAP earnings and FFO; 2008 rental growth,
2008 same-property operations growth, 2008 operating expenses, 2008
non-revenue generating capital expenditures, 2008 disposition activities,
2008 other income, 2008 general and administrative expenses, future average
borrowing costs, 2008 management fee revenue, the weighted average shares
outstanding; growth in GDP and non-farm employment; 2008 interest rates,
costs and refinancing; projected acquisition, development and redevelopment
activities; and costs and the financial impact of such activities. 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 the
Company assumes 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 cause 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, 2006.
Contact Information: Contact: Nicole R. Christian Michael T. Dance (650) 849-1649