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Press Release: Essex Announces Fourth Quarter and -3-

· 02/04/2021 16:15
Three Months Ended Year Ended December 31, December 31, 2020 2019 2020 2019 -------- -------- ---------- ------------ Earnings from operations $111,931 $116,818 $ 491,441 $ 481,112 Adjustments: Corporate-level property management expenses 8,549 8,616 34,573 34,067 Depreciation and amortization 130,127 122,908 525,497 483,750 Management and other fees from affiliates (2,286) (2,504) (9,598) (9,527) General and administrative 23,144 15,531 65,388 54,262 Expensed acquisition and investment related costs 1,487 99 1,591 168 Impairment loss 1,825 7,105 1,825 7,105 (Gain) Loss on sale of real estate and land (25,716) 3,164 (64,967) 3,164 ------- ------- --------- --------- NOI 249,061 271,737 1,045,750 1,054,101 Less: Non-same property NOI (31,988) (22,995) (140,782) (82,644) ------- ------- --------- --------- Same-Property NOI $217,073 $248,742 $ 904,968 $ 971,457 ======= ======= ========= =========Three Months Ended Year Ended December 31, December 31, Funds from Operations attributable to common stockholders and unitholders 2020 2019 2020 2019 ----------- ----------- ----------- ------------- Net income available to common stockholders $ 95,745 $ 128,818 $ 568,870 $ 439,286 Adjustments: Depreciation and amortization 130,127 122,908 525,497 483,750 Gains not included in FFO (25,716) (47,063) (301,886) (79,468) Impairment loss 1,825 7,105 1,825 7,105 Impairment loss from unconsolidated co-investments - 11,484 - 11,484 Depreciation and amortization from unconsolidated co-investments 13,403 15,351 51,594 60,655 Noncontrolling interest related to Operating Partnership units 3,369 4,480 19,912 15,343 Depreciation attributable to third party ownership and other (132) (1,097) (539) (1,805) ---------- ---------- ---------- ---------- Funds from operations attributable to common stockholders and unitholders $ 218,621 $ 241,986 $ 865,273 $ 936,350 ========== ========== ========== ========== FFO per share -- diluted $ 3.24 $ 3.54 $ 12.78 $ 13.73 ========== ========== ========== ========== Expensed acquisition and investment related costs $ 1,487 $ 99 $ 1,591 $ 168 Deferred tax (income) expense on unrealized gain on unconsolidated co-investment (1) (105) - 1,531 1,457 Gain on sale of marketable securities (2,007) (534) (2,131) (1,271) Unrealized gains on marketable securities (10,300) (1,430) (12,515) (5,710) Provision for credit losses 587 - 687 - Equity (income) loss from non-core co-investment (2) (916) 418 (5,289) (4,143) Interest rate hedge ineffectiveness (3) - - - 181 (Gain) loss on early retirement of debt, net (937) 3,426 22,883 (3,717) Gain on early retirement of debt from unconsolidated co-investment - - (38) - Co-investment promote income - - (6,455) (809) Income from early redemption of preferred equity investments - (1,031) (210) (3,562) Accelerated interest income from maturity of investment in mortgage backed security (11,753) (7,032) (11,753) (7,032) General and administrative and other, net 9,316 1,181 14,958 1,181 Insurance reimbursements, legal settlements, and other, net (150) (595) (81) (858) ---------- ---------- ---------- ---------- Core Funds from operations attributable to common stockholders and unitholders $ 203,843 $ 236,488 $ 868,451 $ 912,235 ---------- ---------- ---------- ---------- Core FFO per share -- diluted $ 3.02 $ 3.45 $ 12.82 $ 13.38 ========== ========== ========== ========== Weighted average number of shares outstanding diluted (4) 67,398,487 68,449,008 67,725,692 68,198,785 ========== ========== ========== ========== (1) A deferred tax expense was recorded during the second quarter of 2020 related to the $4.7 million net unrealized gain on the Real Estate Technology Ventures, L.P. co-investment. (2) Represents the Company's share of co-investment income from Real Estate Technology Ventures, L.P. (3) On January 1, 2019, the Company adopted ASU No. 2017-12 "Derivatives and Hedging - Targeted Improvements to Accounting for Hedging Activities," which resulted in a cumulative effect adjustment of approximately $181,000 from interest expense to accumulated other comprehensive income. As a result of the adoption of this standard, the Company recognizes qualifying hedge ineffectiveness through accumulated other comprehensive income as opposed to current earnings. (4) Assumes conversion of all outstanding limited partnership units in Essex Portfolio, L.P. (the "Operating Partnership") into shares of the Company's common stock and excludes all DownREIT limited partnership units for which the Operating Partnership has the ability and intention to redeem the units for cash and does not consider them to be common stock equivalents.

cash needs including principal amortization, capital improvements and distributions to stockholders. FFO and Core FFO also do not represent cash flows generated from operating, investing or financing activities as defined under GAAP. Management has consistently applied the NAREIT definition of FFO to all periods presented. However, there is judgment involved and other REITs' calculation of FFO may vary from the NAREIT definition for this measure, and thus their disclosures of FFO may not be comparable to the Company's calculation.

The following table sets forth the Company's calculation of diluted FFO and Core FFO for the three months and years ended December 31, 2020 and 2019 (dollars in thousands, except for share and per share amounts):

NET OPERATING INCOME ("NOI") AND SAME-PROPERTY NOI RECONCILIATIONS

NOI and Same-Property NOI are considered by management to be important supplemental performance measures to earnings from operations included in the Company's consolidated statements of income. The presentation of same-property NOI assists with the presentation of the Company's operations prior to the allocation of depreciation and any corporate-level or financing-related costs. NOI reflects the operating performance of a community and allows for an easy comparison of the operating performance of individual communities or groups of communities. In addition, because prospective buyers of real estate have different financing and overhead structures, with varying marginal impacts to overhead by acquiring real estate, NOI is considered by many in the real estate industry to be a useful measure for determining the value of a real estate asset or group of assets. The Company defines same-property NOI as same-property revenues less same-property operating expenses, including property taxes. Please see the reconciliation of earnings from operations to NOI and same-property NOI, which in the table below is the NOI for stabilized properties consolidated by the Company for the periods presented (dollars in thousands):

SAFE HARBOR STATEMENT UNDER THE PRIVATE LITIGATION REFORM ACT OF 1995:

This press release 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. Forward-looking statements are statements which are not historical facts, including statements regarding the Company's expectations, estimates, assumptions, hopes, intentions, beliefs and strategies regarding the future. Words such as "expects," "assumes," "anticipates," "may," "will, " "intends," "plans," "projects," "believes," "seeks," "future," "estimates," and variations of such words and similar expressions are intended to identify such forward-looking statements. Such forward-looking statements include, among other things, statements regarding the Company's expectations related to the continued impact of the COVID-19 pandemic on the Company's business, financial condition and results of operations and the impact of any additional measures taken to mitigate the impact of the pandemic, the Company's intent, beliefs or expectations with respect to the timing of completion of current development and redevelopment projects and the stabilization of such projects, the timing of

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February 04, 2021 16:15 ET (21:15 GMT)