winter 2015 investor presentation - snl · 2015-02-26 · certain statements in this presentation,...

The Leading West Coast Multifamily REIT

WINTER 2015 INVESTOR PRESENTATION

1

Certain statements in this presentation, which are not historical facts, may be considered forward-looking statements within the meaning of the federal securities laws. The forward looking statements, some of which can be identified by terms and phrases such as “forecast”, “estimate”, “expect”, “anticipate”, “should”, “could”, “may”, and similar expressions, reflect the current views of Essex Property Trust, Inc. (“Essex” or the “Company”) and its affiliates with respect to future events and are subject to risks and uncertainties. Such forward-looking statements involve the risk that actual results could be materially different from those described in such forward-looking statements. Factors that could cause actual results to be materially different are discussed under the caption “Risk Factors” in Item 1A of the Company’s Report on Form 10-K for the year ended December 31, 2014. All forward-looking statements and reasons why results may differ included in this presentation are made of the date hereof, and we assume no obligation to update any such forward-looking statements or reasons why actual results may differ.

UPDATE ON BRE MERGER

WEST COAST INVESTMENT STRATEGY FINANCIAL INFORMATION UPDATE APPENDIX

I.

II.

III.

IV.

3 – 8

9 – 14

15 – 23

24 – 29

PAGES

2

TABLE OF CONTENTS

Safe Harbor Disclosure

Solstice, Sunnyvale, CA

3

UPDATE ON THE MERGER BETWEEN ESS AND BRE

Belcarra, Bellevue, WA

MERGER AND INTEGRATION UPDATE

POST MERGER PRIORITIES

4

Time Frame to Complete Priorities

Merger Completed April 1, 2014

Reconcile Pricing Philosophy

12-18 months from merger close

Best Practice Execution

Phased Process Over 3 - 4 Years: Standardization & Systems - 12 months Automation and centralization - 12 months post

merger and continuing for 2 years

Lower Operating Costs Through Scale

Realize savings over next several years

Financial Structure Benefits

Achieved targeted accretion over blended cost of funds

Ongoing

G&A Synergies Ongoing

INTEGRATION PHASES

5

Phase I Phase II Phase III

The Dylan, West Hollywood, CA

PHASE I

6

STATUS - Nearing Completion

INTEGRATION PRIORITIES

- Onboard over 500 BRE employees - Consolidate corporate and regional offices - Migrate all properties to one property management and

accounting platform - Consolidate pricing under one system - Move all employees to one HRIS System - Adopt BRE RUBS program for ESS - Implement Craigslist approach with BRE - Evaluate and set priorities for redevelopment of BRE

properties

NEXT STEPS - Focus on few remaining details around Phase I items - Focus on Phase II

PHASE II

7

STATUS - Kicked off in January, 2015


- Extend resource management efforts to BRE (seek to lower energy and water consumption)

- Implement redevelopment programs at BRE properties - Continue to implement refinements to pricing including

the amenity pricing, extending lease terms, and reducing turnover rates

- New Essex website to be rolled out early in the second quarter

NEXT STEPS - Kick-off Phase III - Track/monitor success of Phase I & II

PHASE III

8

STATUS - Planning efforts in full swing


- Integrate and simplify systems - Improve reporting and accountability - Establish greater flexibility and responsiveness to

customers - Enhance customer relationship management - Expand centralization of procurement - Create a regional management structure as appropriate - Human resource projects focused on management

training and fast tracking high-achieving associates - Reorganize leasing staff around property clusters

NEXT STEPS - Phase III is expected to be financially positive with respect

to both revenues and expenses - Continue to monitor the success of the integration phases

WEST COAST INVESTMENT STRATEGY

STRONG WEST COAST FUNDAMENTALS

Mosso, San Francisco, CA

8

0.0%

1.0%

2.0%

3.0%

4.0%

San

Fra

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sco

San

Jo

se

Seat

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San

Die

go

Oak

lan

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Ora

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Co

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Bo

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ntu

ra

New

Yo

rk

Los

An

gele

s

Was

hin

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n D

C

10

STRONG WEST COAST JOB GROWTH

Trailing 3 Month Job Growth YOY as of December 2014

Job growth in West Coast markets outpaces the U.S. and other major MSAs.

U.S. Avg. = 2.1%

Source: BLS (not seasonally adjusted) *For those markets included in this graph which represents 90% of Essex’s revenues

Essex Portfolio Wtd. Avg. = 2.8%*

ESS Markets Non ESS Markets

11

STRONG PERSONAL INCOME GROWTH

2014 and 2015 Personal Income Growth Estimates

Strong personal income growth supports rent growth.

Source: BEA , Rosen Consulting Group, Economy.com *For those markets included in this graph which represents 90% of Essex’s revenues as of 12/31/14. Wtd Average of 2014 and 2015 Personal Income Growth.

U.S. Avg. = 4.7%

Essex Portfolio Wtd. Avg. = 5.4%*

0%

1%

2%

3%

4%

5%

6%

7%

8%

San

Jo

se

San

Fra

nci

sco

Los

An

gele

s

Ora

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Co

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Seat

tle

Oak

lan

d

San

Die

go

Ve

ntu

ra

2015 Personal Income Growth 2014 Personal Income Growth

12

LIMITED SUPPLY IN ESS MARKETS

Source: Census, ESS, Rosen Consulting Group

• ESS CA supply as a % of stock has historically been below 1% and remains muted today. • Bottom Line: Relative to the nation, ESS CA has less housing supply with better job growth.

0.0%

0.5%

1.0%

1.5%

2.0%

Dec

-90

Dec

-92

Dec

-94

Dec

-96

Dec

-98

Dec

-00

Dec

-02

Dec

-04

Dec

-06

Dec

-08

Dec

-10

Dec

-12

Dec

-14

SF Permits as a % of SF Stock ESS CA vs. U.S.

ESS CA Permits as % of Stock US Permits as % of Stock

0.0%

0.5%

1.0%

1.5%

2.0%

Dec

-90

Dec

-92

Dec

-94

Dec

-96

Dec

-98

Dec

-00

Dec

-02

Dec

-04

Dec

-06

Dec

-08

Dec

-10

Dec

-12

Dec

-14

Total Permits as a % of Total Stock ESS CA vs. U.S.

In ESS’ supply-constrained markets, demand is expected to exceed supply relative to other major metros.

13

DEMAND TO EXCEED SUPPLY IN ESSEX MARKETS

*Essex Portfolio weighted by % of SS Revenue New Home demand based upon a ratio of 2 forecast jobs to create one household (forecasts are ESS and Moody's). Total new supply based on ESS forecasts and total permits, assuming a 12 month completion lag; except U.S., which is based on forecast starts (permits and starts from Moody's)

San Jose

Orange County

San Francisco

Oakland

San Diego

Seattle

Essex Portfolio*

Nassau-Suffolk

Baltimore

Boston

New York

DC

Denver

Dallas

Atlanta

Houston

Miami Phoenix

U.S.

ESS Los Angeles Submarket

$0

$200

$400

$600

$800

$1,000

$1,200

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0Med

ian

Sin

gle

Fam

ily H

om

e P

rice

(in

00

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NA

R, D

ataq

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k, &

Mo

od

y's)

Ratio of New Home Demand to Total New Supply (2015F-2017F)

New Household Formation to Total New Supply (2 new jobs = 1 new household*)

Core Essex Markets

Essex Portfolio

Other Markets

U.S.

WEST COAST EXPECTED TO CONTINUE TO OUTPERFORM

14

Over 60% of Essex revenues are in the top projected MSAs by rent growth for the next 5 years.

Source: Axiometrics as of November 17, 2014. *National Average represents the average of all same-store properties that report to Axiometrics.

TOP PROJECTED RENT GROWTH MARKETS % of ESS

‘15-’19 Revenue

Cumulative as of

Rank MSA Growth Q4 2014

1 San Jose, CA 22.8% 14.9%

2 San Francisco, CA 21.9% 7.9%

3 Oakland, CA 21.7% 7.3%

4 Denver, CA 21.0%

5 Los Angeles, CA 20.9% 17.2%

6 Seattle, WA 20.9% 17.4%

7 Houston, TX 20.9%

8 Odessa, TX 20.6%

9 Boston, MA 20.4%

10 Austin, TX 20.3%

ESS Top 10 Wtd. Average 21.5% 64.7%

Top 10 Average 21.1%

National Average* 17.8%

15

FINANCIAL INFORMATION UPDATE

Radius, Redwood City, CA

FINANCIAL INFORMATION UPDATE

8.5%

0%

2%

4%

6%

8%

10%

ESS AIV EQR UDR AVB CPT HME MAA PPS

2015 Estimated Same-Property NOI Growth

ESS led in same-property NOI growth for 2014 and is expected to lead in 2015.

Source: Company Disclosures. 2015 is the midpoint of the Company guidance range as of Q4 ‘14

16

ESSEX CONTINUES TO OUTPERFORM

Peer Average 4.0%

9.2%

0%

2%

4%

6%

8%

10%

ESS EQR AIV UDR CPT MAA AVB PPS HME

2014 Same-Property NOI Growth

Peer Average 4.0%

2015 INVESTMENT ACTIVITY TO DATE

17

Block 9 – San Francisco, CA

Acquisition of Land Parcel in San Francisco for Development of 42 Story Apartment Community • Land Price: $43.6M • Units: 545 • Ownership: 50% • Construction Start: Q4 ‘15 • Location: Transbay Central District Plan

Transbay District Center Plan Area

Block 9 site

DEVELOPMENT DELIVERY TIMELINE (2)

# of Properties Units Total

Cost (1)

2015 6 1,120 $601

2016 2 506 $175

2017 1 376 $172

Total 9 2,002 $948

18

DEVELOPMENT PIPELINE UPDATE

(1) Total cost in millions and not ESS share. Includes only those projects under construction as of 12/31/14. (2) Based on initial occupancy.

Stabilized or completed construction on 11 projects in 2014 for a total cost of $1.4B.

Expect to start 3 to 4 new projects in 2015 which are not shown below.

$0

$200

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$1,000

$1,200

$1,400

$1,600

2014 2015 2016 2017

Delivery of Development Pipeline (1) (2)

Co

st in

mill

ion

s

$18.8 Billion Total Capitalization

CAPITAL STRUCTURE PROFILE

19 Source: Company Disclosures

As of 12/31/2014

Debt Summary ($ million) 12/31/14

Secured Mortgage Debt

Fixed Rate $2,057

Variable Rate 189

Total Secured Mortgage Debt 2,246

Unsecured Debt

Bonds 2,392

Term Loan 225

Line of Credit 246

Total Unsecured Debt 2,863

Total Consolidated Debt $5,109

Liquidity Profile ($ million) 12/31/14

Unsecured Credit Facility - Committed $1,025

Balance Outstanding (246)

Undrawn Portion of Credit Facility 779

Cash, Cash Equivalents & Marketable Securities 213

Total Liquidity $992

Equity 73% Preferred

Stock <1%

Credit Facility

1%

Unsecured Debt 14%

Secured Debt 12%

Equity Preferred Stock Credit Facility

Unsecured Debt Secured Debt

STRONG CREDIT PROFILE

20

Select Balance Sheet Ratios 12/31/14 9/30/14 Covenant Targets

Secured Debt / Undepreciated Book 17% 17% < 40% < 16%

Total Debt / Undepreciated Book 39% 40% < 65% < 42%

Interest Coverage 329% 331% > 150% > 300%

Unsecured Debt Ratio (1) 288% 278% >150% >250%

Net Indebtedness to Recurring EBITDA (2)(3) 6.5X 6.9X 6.0X – 7.0X

Unencumbered NOI to Total NOI 64% 64% >65%

Credit Ratings

Fitch: BBB+ (Stable) S&P: BBB (Stable)

Moody’s: Baa2 (Stable)

Source: Company Disclosures (1) Unsecured debt ratio is unsecured assets (excluding investments in joint ventures) divided by unsecured indebtedness (2) Net Indebtedness is total debt less unamortized premiums, unrestricted cash, and marketable securities (3) Adjusted EBITDA annualizes the pro forma NOI for current quarter acquisitions and excludes non-routine items in earnings

Debt Maturity Schedule(1)

As of December 31, 2014

% of Debt Maturing

2.6% 8.7% 12.0% 6.9% 13.4% 14.4% 11.3% 6.1% 12.3% 8.6% 0.3% 3.4%

WELL LADDERED DEBT MATURITY PROFILE

21

$ M

illio

ns

Source: Company Disclosures

(1) Excludes lines of credit

$125

$422

$584

$337

$653

$699

$549

$298

$600

$418

$14

$166

$0

$200

$400

$600

$800

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Unsecured Debt + Unamortized Premiums Secured Debt

2015 GUIDANCE

22

2015 Guidance Midpoint

National GDP Forecast 2.8% 2.8%

National Job Growth 2.0% 2.0%

ESS Job Growth 2.5% 2.5%

ESS Market Rent Growth 5.6% 5.6%

ESS Same-Property Revenue Growth 6.25% - 7.25% 6.75%

ESS Same-Property Expense Growth 2.50% - 3.50% 3.00%

ESS Same-Property NOI Growth 7.50% - 9.50% 8.50%

Total FFO Per Share $9.11 - $9.44 $9.28

Core FFO Per Share (1) $9.25 - $9.55 $9.40

Total FFO Per (Diluted) Share Growth 15.4% - 19.6% 17.5%

Core FFO Per (Diluted) Share Growth (1) 8.3% - 11.8% 10.1%

Source: Company Disclosures (1) Core FFO excludes merger related costs, acquisition costs and non-routine items

3-Year Outlook November 2013

Estimated Annual Growth

('14E-'16E)

Cumulative Growth at Midpoint

2014A + 2015E Cumulative Growth at Midpoint

Growth Needed in 2016 to

Achieve Investor Day Plan

Same-Property Revenue Growth 4.0-6.0% 15.8% 14.6% 1.2%

Same-Property Expense Growth 2.5-3.5% 9.3% 6.5% 2.8%

Same-Property NOI Growth 5.0-6.8% 18.8% 18.5% 0.3%

Annual Core FFO Growth 7.0-10.0% 27.7% 23.8% 3.9%

Dividend 3.0%

Annual Total Return to Shareholders 10.0-13.0% 38.6% 48.0%(2)

Core FFO per diluted share $9.70(1) $9.40 $0.30

COMPARISON TO INITIAL 3 YEAR OUTLOOK

23 (1) Estimate for 2016 Core FFO/Share provided at our November 2013 Investor Day (2) Total return for the year ended 12/31/14.

Current estimates show we are tracking almost 1 year ahead of initial projections.

APPENDIX

24

The Stuart, Pasadena, CA

25

SIGNIFICANT GEOGRAPHIC OVERLAP 5 Mile Radius

NORTHERN CALIFORNIA

Source: Axiometrics, Moody's, RCG, SNL, BLS, DQ News, Census and ESS Disclosures as of December 31, 2014. Trailing 3 months beginning December 2014.

(1) Median Distance between an Essex Property and the nearest BRE Property

(2) US Home Price as of 12/25/14. San Francisco and San Jose

as of December 2014

Combined

Total Units 20,340

Properties 79

Median Distance Between Properties(1)

1.3 miles

Essex Legacy BRE

US San

Francisco San Jose

Trailing 3 Month Job Growth

2.1% 3.7% 3.7%

Personal Income Growth 2015F

5.5% 6.6% 6.8%

Median Home Price(2) $229,000 $949,000 $690,000

Northern California Sample Highlights

Both San Francisco and San Jose have seen strong December job growth of 3.7% and 4.0%, respectively.

The Information sector had a stronger 2014 vs. 2013 growing at 6.5% vs 2.5%.

2014 office absorption in Silicon Valley was 3.6% of stock and 2.5% of stock in San Francisco.

Illumina Inc. and Yelp announced expansion plans.

26

Then: Dot-Com Now

• Only 7% of the world had access to the internet in 2000

• Valuations were frothy with peak P/S ratios of 48.9 in 2000

• Only 14% of tech companies were profitable at IPO in 2000 and 2001 (there were 90 internet/social media IPOs in 2000)

• Average age of companies going public was 6 years in 2000

• Number of devices in 2003 was 1 per person

• VC volume was roughly 4x higher

• Tech was new and widespread

monetization did not take hold

• 41% of the world has access to the internet today

• Median P/S ratio in 2013 was 6.1 • Approx. 33% of tech companies were

profitable at IPO in 2013 (there were 26 internet/social media IPOs in 2013)

• Average age of companies going public in 2013 was 12 years, double that of “Dot-Com” era

• Now, multiple devices per person and

expected to grow to 7 per person by 2020 • Monetization has occurred and tech has

become more grounded by infiltrating all aspects of our economy

Source: Bloomberg, Birinyi Associates, Rosen, PwC MoneyTree

TECH TODAY VS. DOT-COM

Essex Legacy BRE

27

5 Mile Radius

LOS ANGELES



(2) US Home Price as of 12/25/14. Los Angeles as of December 2014

Combined

Total Units 10,166

Properties 49


1.0 miles

SIGNIFICANT GEOGRAPHIC OVERLAP

US Los Angeles

Trailing 3 Month Job Growth 2.1% 1.5%

Personal Income Growth 2014F 5.5% 6.0%

Median Home Price(2) $229,000 $460,000

Los Angeles Sample Highlights

Los Angeles job growth in December was 1.7%.

December YOY Motion Picture job growth was 5.0%.

Los Angeles had stronger job growth in the Information (2.9% vs. 0.7%) and Professional Business Services (3.2% vs. 2.7%) sectors in 2014 vs 2013.

Google acquired 12 acres in Playa Vista.

ORANGE COUNTY

28

5 Mile Radius



(2) US Home Price as of 12/25/14. Orange County as of December 2014

Combined

Total Units 7,090

Properties 29


1.5 miles


US Orange County




Orange County Sample Highlights

Orange County had YOY job growth of 2.3% in December led by growth in Education and Health Services and Professional and Business Services.

Orange County office net absorption was 2.0% in 2014.

Anaheim Regional Transportation Intermodal Center (ARTIC) debuted in December offering a centralized regional transportation hub.

Essex Legacy BRE

SEATTLE

29

5 Mile Radius

Combined

Total Units 12,174

Properties 56


1.5 miles



(2) US Home Price as of 12/25/14. Seattle as of 4Q 2014


US Seattle




Seattle Sample Highlights

Seattle continues to demonstrate strong job growth with 3.1% YOY job growth in December.

2014 office net absorption was 2.4% in Seattle.

SpaceX received $1 billion in funding from Fidelity and Google and will open a new office in Redmond that could employ up to 1,000 people.

Amazon plans to double their office footprint to 10 million square feet of space by 2019.

Essex Legacy BRE

NOTES

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winter 2015 investor presentation - snl · 2015-02-26 · certain statements in this presentation,...

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