ess essex property trust aug 2010 presentation slides deck

8/8/2019 ESS Essex Property Trust Aug 2010 Presentation Slides Deck

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Investor/Analyst

DayInvestor/Analyst

DayOrangeCounty,CaliforniaAugust12,2010


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2

KeithGuericke

President&CEO

EssexSkyline

at

MacArthur Place

Pool

Deck


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3

Forward

Looking

Statement

SAFEHARBORSTATEMENTUNDERTHEPRIVATELITIGATIONREFORMACTOF 1995:

This presentation by Essex Property Trust, Inc. (the Company) includes forward-looking statements within the meaning of

Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as

amended. Such forward-looking statements include statements regarding 2010 and 2011 financial guidance, future trends in

our market locations, our future operations and financial strategy, anticipated yields on development, anticipated yields on

redevelopment and resource management initiatives, housing supply forecasts in our markets, job growth in our markets,

average vacancy in our markets, rent growth in our markets, median household income forecasts and growth in our markets,

acquisitions and redevelopment forecasts for 2010 and future capital needs, refinancing activity and capital availability. TheCompany's actual results may differ materially from those projected in such forward-looking statements.

Factors that might cause such a difference include, but are not limited to, changes in market demand for rental units and the

impact of competition and competitive pricing, changes in economic conditions, unexpected delays in the development and

stabilization of development and redevelopment projects, unexpected difficulties in leasing of development and redevelopmentprojects, total costs of renovation and development investments exceeding our projections and other risks detailed in the

Company's filings with the Securities and Exchange Commission (SEC). All forward-looking statements are made as of

today, and the Company assumes no obligation to update this information. For more details relating to risk and uncertainties

that could cause actual results to differ materially from those anticipated in our forward-looking statements, and risks to our

business in general, please refer to our SEC filings, including our most recent report on Form 10-K for the year ended

December 31, 2009.


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4

Agenda

ErikAlexanderOrangeCountyMarketUpdate

MichaelDance

Financial

Overview

JohnBurkartRedevelopment&ResourceManagement

JohnEudyDevelopment

CraigZimmermanAcquisitions

MichaelSchallCurrentOperatingEnvironment&Forecast

KeithGuerickeEssexMarketStrategy


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5

Why

Western

Coastal

Markets?

Requirementsforlongtermsuccess

Stableoccupancy

Lowaffordability

Growinganddiverseeconomy

LimitedHousingsupply

CoastalRegionCharacteristics

Permanentconstraintsonnewsupply

Jobgrowthexpectationsdriveincomegrowth

Highcostofhomeownership

Higherqualityoflife


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6

Economic

Research

Model

IncomeGrowth

HouseholdGrowth

PopulationGrowth

JobGrowth

HousingSupply

Single

Family

Affordability

Rankingof27

submarketsto

determineallocation

ofinvestmentcapital


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7

Northern

California

EssexProperties

DevelopmentCommunities

Units:8,857

PercentageofPortfolio:32%

AverageRent:$1,430

Occupancy:97.5%


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8

Southern

California

EssexProperties

Units:13,082


AverageRent:$1,337

Occupancy:97.1%


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9

Seattle

Metro

Area

EssexProperties

DevelopmentCommunities

Units:6,053


AverageRent:$998

Occupancy:97.3%


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10

LimitedSupplyinOurMarkets(Multifamily

and

Single

Family

supply

as

a

%

of

total

housing

stock)

0.00%

0.25%

0.50%

0.75%

1.00%

1.25%

1.50%

1.75%

2.00%

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010e

2011f

2012f

2013f


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11

High

Home

Prices

In

Our

Markets

$

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

SanFr

ancisco

SanJo

se

Oakla

nd

Orang

e

Vent

ura

New

York

Nassau

Su

ffolk

SanDi

ego

LosA

ngeles

Seattle

Boston

Wash.

D.C.

Portla

nd

Balti

mor

e

Denv

er

Phila

delphi

a

Mia

mi/F

t.La

uder

dale

Austin

Sacram

ento

Chica

go

Inla

ndEmpire

Min

neap

olis

Housto

n

Dalla

sFt

.Worth

Phoe

nix

LasV

egas

Orla

ndo

Atla

nta

EssexMarkets

MajorU.S.Metros


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12

Essex

Markets:

Job

Growth

vs.

Vacancy

8%

6%

4%

2%

0%

2%

4%

6%

8%

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010e

AverageVacancyRatesinEssexMarkets JobGrowthInEssexMarkets


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13

Essex

Markets:

Rent

Growth

vs.

Job

Growth

12.5%

10.0%

7.5%

5.0%

2.5%0.0%

2.5%

5.0%

7.5%

10.0%

12.5%

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010e

EffectiveRentGrowthinEssexMarkets JobGrowthInEssexMarkets


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14

MichaelSchallChief

Operating

Officer

Essex

Skyline

at

MacArthur Place

Fire

Pit


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15

The

Big

Picture

Demand

Considerations

EchoBoomers(60millionstrong)arecoming(butneedjobs)

Declininghomeownershiprates(backto65%)

Increasedlongevitycontributestohousingdemand

Lowerrents

stimulate

demand

(roommates

often

uncouple)

QualityoflifefactorsfavortheWestCoast

Jobssupported

by

tech

industries

Venture

Capital

investment


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16

VentureCapitalSpending

Second

Quarter

2010

6%

9%

5%

5%

61%

$4.02billion

1%1%2%2%

3%

3%

2%

EssexMarkets

NewEngland

NYMetro

SouthwestMidwest

DCMetro

Texas

NorthCentral

Southwest

PhiladelphiaMetro

Colorado

Other

Source:PriceWaterhouseCoopers


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17

TheBigPicture HousingSupplyConsiderations

Supplyofhousing(singlefamily&multifamily)at30yearlows

Expensivesinglefamilyhomes

Fewerdevelopersandreluctantbanksrestrictdevelopment

Homemortgagesnowrequireprovenincomeanddownpayments


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18

SecondQuarterPerformance

6.5%0.2%4.4%

Sameproperty

average

12.6%2.7%9.1%SeattleMetro

8.0%0.3%

5.3%

NorthernCalifornia

3.7%0.3%2.4%SouthernCalifornia

NOIExpensesRevenues

Q22010comparedtoQ22009

Market Rents Increased 4.3% from December 2009

Positive ancillary indicators

Delinquency down 30%

Turnover declined

Concessions down 50+ percent


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19

WhyDidntOperatingResults

ImproveQuicker?


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20

SouthernCalifornia

Cumulative

Reported

Quarterly

Rent

Growth

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

1Q'06 2Q'06 3Q'06 4Q'06 1Q'07 2Q'07 3Q'07 4Q'07 1Q'08 2Q'08 3Q'08 4Q'08 1Q'09 2Q'09 3Q'09 4Q'09 1Q'10 2Q'10

Cumulative%

Change

ESS AVB BRE EQR UDR Avg.


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21

NorthernCalifornia

Cumulative

Reported

Quarterly

Rent

Growth

0%

20%

40%

60%

80%

100%

120%

140%


Cumulative%

Change



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22

SeattleMetroArea

Cumulative

Reported

Quarterly

Rent

Growth

0%

20%

40%

60%

80%

100%

120%

140%


Cumulative%

Change



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23

0%

5%

10%

15%

20%

25%

30%

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

e

8%

4%

0%

4%

8%

12%

16%

ActualRent/Income AverageRent('89 '10) MedianHouseholdIncomeGrowth U.S.AnnualAverageRentGrowth

SanJose

Average

Rents

as

a

%

of

Median

Household

Income

GAP=20.2%

ofRents

MedianIncome AverageRent Rentas%Income

CurrentIncome

GAPfrom

Average

Monthy$

ValueofGAP

%ofCurrent

Rents

1989 48,115$ 890$ 22.2% 3.3% 242$ 20.2%

2010 87,654$ 1,201$ 16.4%

AverageIncome

Growth

(1989

2010)

2.9%

AverageIncomeGrowthDuringExpansions 4.7%


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24

SanJose

Residential

Supply

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010e

2011f

2012f

2013f

2014f

SingleFamily MultiFamily

UnitsinT

housands


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25

SanJose

Total

Housing

Supply

as

a

%

of

Stock

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010e

2011f

2012f

2013f

2014f


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0%

2%

4%

6%

8%

10%

12%

14%

16%18%

20%

22%

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

e

4%2%

0%

2%

4%

6%

8%

10%


SeattleMetroArea

Average

Rents

as

a

%

of

Median

Household

Income

GAP=20.8%

ofRents


CurrentIncome

GAPfrom

Average

Monthy$

ValueofGAP

%ofCurrent

Rents

1989 36,325$ 628$ 20.7% 2.9% 161$ 20.8%

2010 67,202$ 774$ 13.8%

AverageIncome

Growth

(1989

2010)

3.0%

AverageIncomeGrowthduringExpansions 5.4%


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27

SeattleMetroArea

Residential

Supply

0.0

2.5

5.0

7.5

10.0

12.5

15.0

17.5

20.0

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010e

2011f

2012f

2013f

2014f


UnitsinT

housands


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28

SeattleMetroArea

Total

Housing

Supply

as

a

%

of

Stock

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

e

2011f

2012f

2013f

2014f


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0%

3%5%

8%

10%

13%

15%

18%20%

23%

25%

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

e

4%

2%

0%

2%

4%

6%

8%

10%


OrangeCounty

Average

Rents

as

a

%

of

Median

Household

Income

GAP=8.9%

ofRents


CurrentIncome

GAPfrom

Average

Monthy$

ValueofGAP

%ofCurrent

Rents

1989 45,922$ 905$ 23.6% 1.6% 102$ 8.9%

2010 74,862$ 1,154$ 18.5%

Average Income Growth (1989 - 2010) 2.4%

Average Income Growth during Expans ion 4.8%


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30

OrangeCounty

Residential

Supply

0.0

1.0

2.0

3.0

4.0

5.06.0

7.0

8.0

9.0

10.0

11.0

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010e

2011f

2012f

2013f

2014f


Unitsin

Th

ousands


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31

OrangeCounty

Total

Housing

Supply

as

a

%

of

Stock

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010e

2011f

2012f

2013f

2014f


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32

CraigZimmermanExec.

Vice

President,

Acquisitions

EssexSkylineatMacArthur PlaceResidentLounge


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33

CurrentAcquisitionsEnvironment

EconomicCapRates:4.75%5.5%

Capratecompressioninlast18months

A&BProductinEssexmarkets

Stillagoodvaluegivendepressedrents

Abilitytoacquirebelowreplacementcost

CurrentOpportunitiesinthemarket

Distressed/Opportunisticsellers

Notepurchases

PlacingMezzanine

debt

/Preferred

equity

Expectedtoexceedourgoalof$300millioninacquisitionsin2010


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34

EssexSkylineatMacArthur Place

Location:SantaAna,CA

Acquired:March

2010

Units:349

YearBuilt:2009

Price:$128million

JointVenture


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35

Axis2300

Location:Irvine,CA

Acquired:December

2009

Units:115

YearBuilt:2010

PurchasePrice:$27million

TotalCosttocomplete:$38.8million


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TheCommons

Location:Campbell,CA

Acquired:July2010

Units:264

YearBuilt:1973

Price:$42.5million


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37

101SanFernando

Location:SanJose,CA

Acquired:June2010

Units:323

YearBuilt:2001

Price:$64.1million


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EagleRim

Location:Redmond,WA

Acquired:June2010

Units:156

YearBuilt:1986

Price:$18.6

million


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SanteeCourt

Location:LosAngeles,CA

NoteAmount:$21million

20%discounttoparvalue

Units:165


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40

JohnEudyExec.

Vice

President,

Development

EssexSkylineatMacArthur PlacePresentationKitchen


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41

CurrentDevelopmentEnvironment

Landprices(Values)downsignificantlyfrom07highs,fewtransactionsoccurring Bid/Askspreadissueonprice..

Numerousrehashedandremarketedlandopportuniesat07pricesbackonthemarket.noREALtakers.

Constructioncostsdown2530%frompeaklevels.

Feesandentitlementextractionsup,notdown.

BarrierstoentrystillpoliticalinurbanWestCoastMarkets.noweconomic,lenderandfinancialconstraintsoverwhelmingtomostmerchantbuilders.

Limitednewdevelopmentstarts,therewillbesomestartsonembeddeddeals,newfreshstartsatcurrentacquisitionlandvalueswillbevery limitedduetobarrierstoentry.


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43

Joule

Location:Seattle,WA

Units:

295Cost:$92.8million

CompletionDate:June2010

Stabilization:August2010


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Fourth&U

Location:Berkeley,CA

Units:171

Cost:$63million

CompletionDate:June2010

Stabilization:September

2010


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TasmanPlace

Location:Sunnyvale,CA

Units:284

Cost:$125million

CompletionDate:January2012

Stabilization:September2012

h k


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46

JohnBurkartExec.

Vice

President,

Asset

Management

EssexSkylineatMacArthur PlacePuttingGreen


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Redevelopment

OpportunitytocapitalizeonstrategyofowningClassBquality

assetsin

A locations

Estimatedyield:8%10%

Current

material

&

labor

costs

at

attractive

lows

4projectsinvariousphasesofredevelopment

Anticipate$30millionspendin2010

F hill C


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48

FoothillCommons

Bellevue,

WA

(388

units)

BEFORE AFTER

M i C


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MarinaCove

Santa

Clara,

CA

(292

units)

BEFORE AFTER


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ResourceManagement

Focusonidentifyingopportunitiestosavemoneyviasaving

energy/resources

Separatethetheoryandthelabtestedinitiativesfromthefieldtestedopportunitieswithappropriatefinancialreturns.

Typical

areas

of

initiative:

Waterheating

Domestic

Pool

Lighting Irrigation

Targeting10%plusreturns

Mi h l D


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MichaelDanceChief

Financial

Officer

EssexSkylineatMacArthur PlaceApartmentInterior

External Growth Initiatives


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52

ExternalGrowthInitiatives

Joint

Venture/Fund

vs.

Balance

Sheet

PROS

Facilitate external growth via private capital

Allows for higher leverage

Shared risk of ownership

Disproportionate share of upside through promoted interest

Fees for asset, property and construction management Fosters relationships to leverage future opportunities

Broader acquisition target pool (IRR hurdle driven)

CONS

Positive leverage and asset appreciation is shared (approximately 10%)

Potentially higher cost of capital

Certain decisions require partner approval

Cost of platform and administration


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$165

$112

$167

$215

$132$167

$115

$63$50

$20

$

$50

$100

$150

$200

$250

$300

$350

2ndHalf2010

DebtBalloonPayments ForwardStartingSwaps*

ExpectedRefinancingProceeds** AvailableCapacityfromRefinancing***

DebtRefinancingActivity

2nd

Half2010 2011 2012

$215

$330

$132 $132

$167

$230

Sources SourcesSources UsesUsesUses

*ForwardStartingSwaps AssumesJuly31settlementliabilityof$70millionon$375millionnotionalamount

**Expected

Refinancing

Proceeds

assuming

2010

budgeted

NOI

on

5.25%

interest

rate

and

debt

service

coverage

of

125%

***Available

Capacity

from

refinancing

to

use

for

financing

external

growth

Constructing FFO Guidance*


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ConstructingFFOGuidance

(at

midpoint)

*SeeAssumptionsonfollowingslide

Actuals Forecast Forecast Forecast Forecast

Q2

'10 Q3

'10 Q4

'10 Q1

'11 Q2

'11RevenuesandIncome:

SamePropertyNOI 63,768 62,700 62,800 63,900 63,900

DevelopmentCommunities (392) 120 1,220 1,840 2,060

2010Acquisitions 1,460 1,720 1,770 1,850

Coinvestments Development (274) (470) (110) (50) 150

InterestandOtherIncome 3,078 3,200 3,700 3,800 3,800

InterestExpensenetofCapitalization 21,000 22,900 23,200 23,700 23,700

CoreFFOperdilutedshare 1.22 1.19 1.24 1.29 1.30

A i f C i FFO G id


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AssumptionsforConstructingFFOGuidance

SamepropertyNOIIncludesTheGrand,BelmontStation,Regency@Encino,

Woodland/FoothillCommonsandQ4rentsandnormalizedoperatingexpensesinQ1/Q211

2010AcquisitionsEagleRim,101SanFernando,TheCommons

CoinvestmentsEssexSkylineatMacArthur Place$80millionloan(LIBOR+285).Stabilized

NOIestimatedat$1.9millionperquarterinQ32011(lessinterestexpenseonmortgage)

$24millioninmezzanineloansoriginatedattheendofQ310

Changesin

interest

expense

as

follows:

Forecast Forecast Forecast

Q3'10 Q4'10 Q1'11

Q3'10andQ4'10Activity

Capitalizedinterest

on

developments

in

lease

up 1,400

100

Assumeddebtonacquistions 6/10,7/10 400

Netsavingsdebtrefinancings (600)

IncreaseinBankLine(externalgrowth,FSS's) 700 200 500

Changein

Net

interest

expense 1,900

300

500

S C N R i bl A i


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SanteeCourtNoteReceivableAccounting

Principalvalue:$25.8million

CouponRate:4.95%

Interestrecordedata10%yieldasitaccretesthediscountonthenoteovertheexpected

lifeoftheloan.

Therearethreeprobableoutcomesrelatedtothepayoffofthenotereceivableand

accountingareoutlinedbelow:

Scenario#3:Borrowerpaysoffthenotereceivableattheprincipalvalueof$25.8millioninOctober2010.

Nochange

to

midpoint

of

2010

guidance.

Thepropertyiscurrentlylistedforsalewithabroker. Iftheborrowerissuccesfulatsellingthepropertyformorethan

theloanbalance,thentheCompanywillrecognizeadditionalincomeofapprox.$3million(approx.9cents)comparedto

themidpointof2010FFOGuidance.

Nochangetomidpointof2010guidance.

Scenario#1:

Borrower

defaults

on

the

loan

and

declares

bankruptcy,

or

borrower

defaults

on

loan

and

Essex

forecloses

ontheproperty.

Scenario#2:Borrowerrequestanextensiononthematurityofthenotereceivable.

Erik Alexander


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57

ErikAlexander

SeniorVice

President,

Operations

EssexSkylineatMacArthur PlaceBocceBallCourt

Orange County


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58

OrangeCounty

Rent

Growth

vs.

Vacancy

Rates

10%

8%

6%

4%

2%0%

2%

4%

6%

8%

10%

q1

2006

q2

2006

q3

2006

q4

2006

q1

2007

q2

2007

q3

2007

q4

2007

q1

2008

q2

2008

q3

2008

q4

2008

q1

2009

q2

2009

q3

2009

q4

2009

q1

2010

q2

2010

VacancyRates JobGrowth (AnnualizedRate)

Axis 2300


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Axis2300

Units:115

CurrentAverageRent:$2,524

Concession:Upto6weeks

Current%Leased:30%

15%BMR

Skyline at MacArthur Park


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60

SkylineatMacArthur Park

Units:349


Concession:Upto2months

CurrentOccupancy:28.7%

Current%Leased:37.1%

Huntington Breakers


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61

HuntingtonBreakers

Units:342


1yearagoAverageRent:$1,443

CurrentOccupancy:94.6%

YearBuilt:1984

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