The Leading West Coast Multifamily REIT JUNE 2015 NAREIT PRESENTATION

Transcription

1 The Leading West Coast Multifamily REIT JUNE 2015 NAREIT PRESENTATION 0

2 TABLE OF CONTENTS I. II. ABOUT ESSEX UPDATE ON BRE MERGER PAGES III. WEST COAST INVESTMENT STRATEGY 7 12 IV. FINANCIAL INFORMATION UPDATE V. APPENDIX Solstice, Sunnyvale, CA Safe Harbor Disclosure 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, 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. 1

3 ABOUT ESSEX Multifamily REIT Supply-constrained coastal markets of California and Washington 240+ properties totaling 57,000+ apartment homes $20.9 billion in total market capitalization (1) Highest shareholder returns of multifamily REITs (2) over 5, 10, and 20 years 21 year history of increasing cash dividend Strategy Drive rent growth on high occupancy Add value through redevelopment Acquire and develop West Coast properties near transportation nodes in submarkets with highest expected rent growth Maintain strong balance sheet and financial flexibility Management Team Top executives share an average tenure of roughly 20 years (1) As of 3/31/15. (2) Multifamily REITs represents the total returns of 9 peers through 3/31/15. Northern CA 38% of NOI (1) Seattle 18% of NOI (1) Southern CA 44% of NOI (1) 2

4 MERGER INTEGRATION PHASES Phase I Phase II Phase III Completed Kicked off in January 2015 Kicked off Planning in Q The Dylan, West Hollywood, CA 3

5 PHASE I STATUS - Completed, December 2014 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 Phase II & Phase III 4

6 PHASE II STATUS - Kicked off in January, 2015 INTEGRATION PRIORITIES - Extend resource management efforts to BRE (seek to lower energy and water consumption) January Implement redevelopment programs at BRE properties January Continue to refine pricing including the amenity pricing, extending lease terms, and reducing turnover rates Throughout New Essex website has been launched May 2015 NEXT STEPS - Focus on Phase III - Track/monitor integration savings and improved customer experience 5

7 PHASE III STATUS - Kicked off Phase III planning in Q INTEGRATION PRIORITIES NEXT STEPS - Integrate and simplify systems - Reorganize leasing and maintenance staff around property clusters - Establish greater flexibility and responsiveness to customers - Enhance customer relationship management - Expand centralization of procurement - Human resource projects focused on management training and fast tracking high-achieving associates - Improve reporting and accountability - Phase III is expected to be financially positive with respect to both revenues and expenses - Continue to monitor the success of the integration phases 6

8 WEST COAST INVESTMENT STRATEGY Mosso, San Francisco, CA STRONG WEST COAST FUNDAMENTALS 9

9 San Jose San Francisco Seattle Orange County San Diego Los Angeles Oakland New York Washington DC Ventura Boston STRONG WEST COAST JOB GROWTH 6% West Coast job growth outpaces the U.S. and other major MSAs. Trailing 3 Month Job Growth As of April % 4% 3% 2% Essex Portfolio Wtd. Avg. = 3.6%* U.S. Avg. = 2.3% 1% 0% ESS Markets Source: BLS (not seasonally adjusted) *For those markets included in this graph which represents 91% of Essex s revenues as of 4/31/15. Non ESS Markets 8

10 San Jose San Francisco Los Angeles Seattle Orange County Oakland San Diego Ventura STRONG PERSONAL INCOME GROWTH Strong personal income growth supports rent growth Personal Income Growth Estimates 7% 6% 5% 4% Essex Portfolio Wtd. Avg. = 5.5%* U.S. Avg. = 4.4% 3% 2% 1% 0% Source: BEA, Rosen Consulting Group, Economy.com *For those markets included in this graph which represents 91% of Essex s revenues as of 3/31/15. 9

11 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 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 LIMITED SUPPLY IN ESS MARKETS 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. 2.0% Total Permits as a % of Total Stock ESS CA vs. U.S. 2.0% SF Permits as a % of SF Stock ESS CA vs. U.S. 1.5% 1.5% 1.0% 1.0% 0.5% 0.5% 0.0% 0.0% Source: Census, ESS, Rosen Consulting Group ESS CA Permits as % of Stock US Permits as % of Stock 10

12 Median Single Family Home Price (in 000s, NAR, Dataquick, & Moody's) DEMAND TO EXCEED SUPPLY IN ESSEX MARKETS $1,200 $1,000 In ESS supply-constrained markets, demand is expected to exceed supply relative to other major metros. New Household Formation to Total New Supply (2 new jobs = 1 new household*) Core Essex Markets Essex Portfolio Other Markets U.S. San Francisco San Jose $800 Oakland Orange County $600 New York San Diego Essex Portfolio* ESS Los Angeles Submarket $400 $200 DC Denver U.S. Phoenix Houston Seattle Miami Atlanta Dallas Boston Baltimore Nassau-Suffolk $ Ratio of New Home Demand to Total New Supply (2015F-2017F) *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 11 permits, assuming a 12 month completion lag; except U.S., which is based on forecast starts (permits and starts from Moody's).

13 WEST COAST EXPECTED TO CONTINUE TO OUTPERFORM Over 65% of Essex revenues are in the top projected MSAs by rent growth for the next 5 years. TOP PROJECTED RENT GROWTH MARKETS % of ESS Revenue Cumulative as of Rank MSA Growth Q Oakland, CA 26.4% 7.3% 2 San Jose, CA 24.9% 15.1% 3 San Francisco, CA 23.5% 8.4% 4 Naples, FL 22.9% 5 Cape Coral, FL 22.6% 6 North Port, FL 22.3% 7 Denver, CO 22.3% 8 Seattle, WA 22.0% 17.4% 9 Palm Bay, FL 21.6% 10 Los Angeles, CA 21.0% 17.7% ESS Top 10 Wtd. Average 23.1% 65.9% Top 10 Average 22.9% National Average* 19.5% Source: Axiometrics as of 3/31/15. *National Average represents the average of all same-store properties that report to Axiometrics. 12

14 FINANCIAL INFORMATION UPDATE FINANCIAL INFORMATION UPDATE Radius, Redwood City, CA 13

15 ESSEX CONTINUES TO OUTPERFORM ESS led in same-property NOI growth for Q and is expected to lead in % 10.7% Q Same-Property NOI Growth 12% 2015E Same-Property NOI Growth 10% 10% 9.4% 8% 8% 6% Peer Average 5.0% 6% 4% 4% Peer Average 4.2% 2% 2% 0% ESS EQR UDR MAA AVB AIV HME CPT PPS Source: Company Disclosures Estimated Same-Property NOI growth is the midpoint of company disclosures as of 3/31/15. 0% ESS EQR UDR AIV CPT AVB HME MAA PPS 14

16 2015 INVESTMENT ACTIVITY TO DATE Acquisition of 8 th & Hope in Los Angeles, a 22 Story Apartment Tower Price: $200.0M Units: 290 Ownership: 100% Location: Downtown Los Angeles 50% occupied at acquisition Buyout of Joint Venture Partner s 50% Interest in Two Los Angeles Communities, The Huxley and The Dylan Total Price: $100.1M* Units: 371 Ownership: 100% Location: West Hollywood Buyout of Joint Venture Partner s 49.5% Interest in Reveal Price: $73.0M* Units: 438 Ownership: 99.75% Location: Woodland Hills The Dylan West Hollywood Los Angeles, CA 8 th & Hope Downtown Los Angeles, CA The Huxley West Hollywood Los Angeles, CA *Represents the purchase price to buy out the joint venture partners interest noted above. Reveal Woodland Hills, CA 15

17 Cost in millions DEVELOPMENT PIPELINE UPDATE Stabilized or completed construction on 11 projects in 2014 for a total cost of ~$1.4B Expect to complete construction and begin leasing six projects in 2015 for a total cost of $0.6B Projected to start 3 to 4 new projects in 2015, 2 of which have been announced and are shown on the following pages $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $- Delivery of Development Pipeline (1) Total cost in billions and not ESS share. Includes only those projects under construction as of 3/31/15. (2) Based on initial occupancy. Development Delivery Timeline (2) # of Properties Units Total Cost (1) ,120 $ $ $ $0.4 Total 11 3,146 $1.7 ESS Share Total cost $1.1 Unfunded cost $0.7 Total cost as % of total market cap. 5.3% Unfunded cost as % of total market cap. 3.1% 16

18 2015 ANNOUNCED DEVELOPMENT STARTS 500 Folsom Price of land: $43.6M Est. Construction Cost (1) : $381M Units: 545 with 5,900 sf of ground floor retail Ownership: ~50% Construction Start: Q Location: Downtown San Francisco, adjacent to Transbay Terminal Key 500 Folsom Transbay District Center Plan Area (1) Total cost, not ESS pro rata share. 500 Folsom Downtown San Francisco, CA 17

19 2015 ANNOUNCED DEVELOPMENT STARTS Station Park Green Price of land: $67.0M Est. Construction Cost: $354M Units: 599 with 25,000 sf of retail and 10,000 sf of office Ownership: 100%* Construction Start: Q Location: San Mateo, adjacent to Caltrain station Key Station Park Green Hayward Park Caltrain Station Station Park Green San Mateo, CA *Final decision regarding co-investment structure is pending. 18

20 CAPITAL STRUCTURE PROFILE $20.9 Billion Total Capitalization Debt Summary ($ million) 3/31/15 Secured Mortgage Debt Fixed Rate $2,031 Variable Rate 292 Secured Debt 11% Total Secured Mortgage Debt 2,323 Unsecured Debt Preferred Stock < 1% Unsecured Debt 15% Equity 74% Bonds 2,888 Term Loan 225 Line of Credit - Total Unsecured Debt 3,113 Total Consolidated Debt $5,436 Liquidity Profile ($ million) 3/31/15 Equity Preferred Stock Unsecured Debt Secured Debt Unsecured Credit Facility - Committed $1,025 Balance Outstanding - Undrawn Portion of Credit Facility 1,025 Cash, Cash Equivalents & Marketable Securities 384 Total Liquidity $1,409 Source: Company Disclosures As of 3/31/

21 STRONG CREDIT PROFILE Select Balance Sheet Ratios 3/31/15 12/31/14 Covenant Targets Secured Debt / Undepreciated Book 17% 17% < 40% < 16% Total Debt / Undepreciated Book 40% 39% < 65% < 42% Interest Coverage 326% 329% > 150% > 300% Unsecured Debt Ratio (1) 279% 288% >150% >250% Net Indebtedness to Recurring EBITDA (2)(3) 6.4x 6.5X 6.0X 7.0X Unencumbered NOI to Total NOI 64% 64% >65% Credit Ratings Fitch: BBB+ (Stable) Moody s: Baa2 (Positive) S&P: BBB (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. 20

22 Thereafter $ Millions WELL LADDERED DEBT MATURITY PROFILE Pro Forma Debt Maturity Schedule (1) As of March 31, 2015 $800 $600 $584 $653 $699 $549 $601 $515 $400 $422 $337 $299 $419 $261 $200 $97 $0 Secured Debt Unsecured Debt + Unamortized Premiums % of Debt Maturing 1.8% 7.7% 10.8% 6.2% 12.0% 12.8% 10.1% 5.5% 11.1% 7.7% 9.5% 4.8% Source: Company Disclosures (1) Excludes lines of credit. 21

23 2015 GUIDANCE 2015 Revised Midpoint Change to Midpoint of Initial Guidance National GDP Forecast 2.8% 0.00% National Job Growth 2.0% 0.00% ESS Job Growth 2.5% 0.00% ESS Market Rent Growth 5.6% 0.00% ESS Same-Property Revenue Growth 7.25% 0.50% ESS Same-Property Expense Growth 2.75% -0.25% ESS Same-Property NOI Growth 9.38% 0.88% Total FFO Per Share $9.38 $0.10 Core FFO Per Share (1) $9.48 $0.08 Total FFO Per (Diluted) Share Growth 18.8% 1.30% Core FFO Per (Diluted) Share Growth (1) 11.0% 0.95% Source: Company Disclosures (1) Core FFO excludes merger related costs, acquisition costs and non-routine items. 22

24 COMPARISON TO INITIAL 3 YEAR OUTLOOK Current estimates show we are tracking almost 1 year ahead of initial projections. 3-Year Outlook November 2013 Estimated Annual Growth ('14E-'16E) Cumulative Growth at Midpoint 2014A E Cumulative Growth at Midpoint Growth Needed in 2016 to Achieve Investor Day Plan Same-Property Revenue Growth % 15.8% 15.1% 0.7% Same-Property Expense Growth % 9.3% 6.2% 3.0% Same-Property NOI Growth % 18.8% 19.4% (0.6%) Annual Core FFO Growth % 27.7% 24.8% 2.9% Dividend 3.0% Annual Total Return to Shareholders % 38.6% 48.0% (2) Core FFO per diluted share $9.70 (1) $9.48 $0.22 (1) Estimate for 2016 Core FFO/Share. (2) Total return for the year ended 12/31/14. 23

25 APPENDIX The Stuart, Pasadena, CA 24

26 NORTHERN CALIFORNIA SIGNIFICANT CLUSTER OF PROPERTIES Northern California Sample Highlights Both San Francisco and San Jose have seen strong YOY job growth as of April of 4.7% and 6.0%, respectively. The Information sector in San Jose has seen strong gains YOY for the 5 th consecutive month with 15.3% growth as of March YTD office absorption in Silicon Valley was 1.7% of stock. Uber added 40,000 sf in the Financial District and is in discussions to lease an additional 175,000 sf. US San Francisco San Jose 5 Mile Radius Trailing 3 Month Job Growth Personal Income Growth 2015F 2.3% 4.4% 5.4% 4.4% 5.8% 6.2% Totals Units 21,484 Properties 81 Median Home Price (1) $209,000 $1,009,000 $865,000 Source: Axiometrics, Moody's, RCG, SNL, BLS, Census and ESS Disclosures as of March 31, Trailing 3 months beginning March (1) Home Prices as of December

27 TECH TODAY VS. DOT-COM Then: Dot-Com 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 Now 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 26

28 LOS ANGELES SIGNIFICANT CLUSTER OF PROPERTIES Los Angeles Sample Highlights Los Angeles job growth in March was 2.7%, its strongest month since January Los Angeles has more than 2 million sf of office space under construction, supporting roughly 9,100 jobs. Yahoo signed a 130,000 sf lease in Playa Vista, promising to bring 400 employees to the area. US Los Angeles Trailing 3 Month Job Growth 2.3% 2.5% Personal Income Growth 2015F 4.4% 5.5% Median Home Price (1) $209,000 $438,000 Totals Units 10,456 Properties 50 5 Mile Radius Source: Axiometrics, Moody's, RCG, SNL, BLS, Census and ESS Disclosures as of March 31, Trailing 3 months beginning March (1) Home prices as of December Home prices in Los Angeles represent the entire county and not ESS submarkets, which have a median home price of $537,

29 ORANGE COUNTY SIGNIFICANT CLUSTER OF PROPERTIES 5 Mile Radius Orange County Sample Highlights Orange County had YOY job growth of 3.7% in March led by growth in Professional and Business Services and Education and Health Services. Hyundai Capital leased 178,000 sf of office space in Newport Beach as part of a relocation. US Orange County Trailing 3 Month Job Growth 2.3% 3.5% Personal Income Growth 2015F 4.4% 5.3% Median Home Price (1) $209,000 $680,000 Source: Axiometrics, Moody's, RCG, SNL, BLS, Census and ESS Disclosures as of March 31, Trailing 3 months beginning March (1) Home Prices as of December Totals Units 7,090 Properties 29 28

30 SEATTLE SIGNIFICANT CLUSTER OF PROPERTIES 5 Mile Radius Seattle Sample Highlights Seattle continues to demonstrate strong job growth with 3.6% YOY job growth in March. The FAA s new regional headquarters, consisting of 13,000 sf and holding 1,600 employees, will be built 13 miles south of Downtown with construction starting in Facebook is doubling its footprint in Seattle by leasing 274,000 sf. HBO will lease 112,000 sf with plans to add 90 tech employees and a variety of others to help support HBO departments. US Seattle Trailing 3 Month Job Growth 2.3% 3.4% Personal Income Growth 2015F 4.4% 5.4% Median Home Price (1) $209,000 $392,000 Totals Units 12,174 Properties 56 Source: Axiometrics, Moody's, RCG, SNL, BLS, Census and ESS Disclosures as of March 31, Trailing 3 months beginning March (1) Home Prices as of December