Item 6. Selected Financial Data

19K characters. Original on sec.gov · Markdown

Item 6. Selected Financial Data

The following tables set forth summary financial and operating information for the ESS and the Operating Partnership from January 1, 2011 through December 31, 2015.

Essex Property Trust, Inc. and Subsidiaries



	Years Ended December 31,
	2015		2014		2013		2012		2011
	($ in thousands, except per share amounts)
OPERATING DATA:(1)
Rental and other property	$	1,185,498	$	961,591	$	603,327	$	527,945	$	461,866
Management and other fees from affiliates	8,909		9,347		7,263		8,457		5,428

Income before discontinued operations	$	248,239	$	134,438	$	140,882	$	127,653	$	46,958
Income from discontinued operations	—		—		31,173		11,937		10,558
Net income	248,239		134,438		172,055		139,590		57,516
Net income available to common stockholders	$	226,865	$	116,859	$	150,811	$	119,812	$	40,368
Per share data:
Basic:
Income before discontinued operations available to common stockholders	$	3.50	$	2.07	$	3.26	$	3.10	$	0.94
Net income available to common stockholders	$	3.50	$	2.07	$	4.05	$	3.42	$	1.24
Weighted average common stock outstanding	64,872		56,547		37,249		35,032		32,542
Diluted:
Income before discontinued operations available to common stockholders	$	3.49	$	2.06	$	3.25	$	3.09	$	0.94
Net income available to common stockholders	$	3.49	$	2.06	$	4.04	$	3.41	$	1.24
Weighted average common stock outstanding	65,062		56,697		37,335		35,125		32,629
Cash dividend per common share	$	5.76	$	5.11	$	4.84	$	4.40	$	4.16


(1)	Reclassifications have been made in prior periods to conform to the current year’s presentation.



	As of December 31,
	2015		2014		2013		2012		2011
	($ in thousands)
BALANCE SHEET DATA:(1)
Investment in rental properties (before accumulated depreciation)	$	12,331,469	$	11,244,681	$	5,443,757	$	5,033,672	$	4,313,064
Net investment in rental properties	10,381,577		9,679,875		4,188,871		3,952,155		3,393,038
Real estate under development	242,326		429,096		50,430		66,851		44,280
Co-investments	1,036,047		1,042,423		677,133		571,345		383,412
Total assets	12,005,091		11,526,732		5,162,320		4,826,356		4,019,519
Total indebtedness	5,315,464		5,080,689		3,009,005		2,797,816		2,343,413
Redeemable noncontrolling interest	45,452		23,256		—		—		—
Cumulative convertible preferred stock	—		—		4,349		4,349		4,349
Cumulative redeemable preferred stock	73,750		73,750		73,750		73,750		73,750
Stockholders' equity	6,237,733		6,022,672		1,884,619		1,764,804		1,437,527


(1)	Reclassifications have been made in prior periods to conform to the current year’s presentation. Additionally, due to measurement adjustments related to the BRE merger in 2014, certain amounts do not agree to previously reported balances.



	As of and for the years ended December 31,
	2015			2014			2013			2012			2011
	($ in thousands, except per share amounts)
OTHER DATA:
Funds from operations (FFO)(1) attributable to common stockholders and unitholders:
Net income available to common stockholders	$	226,865		$	116,859		$	150,811		$	119,812		$	40,368
Adjustments:
Depreciation and amortization	453,423			360,592			193,518			170,686			152,543
Gains not included in FFO attributable to common stockholders and unitholders	(81,347		)	(50,064		)	(67,975		)	(60,842		)	(7,543		)
Depreciation add back from unconsolidated co-investments	49,826			33,975			15,748			14,467			12,642
Noncontrolling interest related to Operating Partnership units	7,824			4,911			8,938			7,950			3,228
Insurance reimbursements	(1,751		)	—			—			—			—
Depreciation attributable to third party ownership and other	(781		)	(1,331		)	(1,309		)	(1,223		)	(1,066		)
Funds from operations attributable to common stockholders and unitholders	$	654,059		$	464,942		$	299,731		$	250,850		$	200,172
Non-core items:
Merger and integration expenses	3,798			53,530			4,284			—			—
Acquisition and investment related costs	2,414			1,878			1,161			2,255			1,231
Gain on sale of marketable securities, note prepayment, and other investments	(598		)	(886		)	(2,519		)	(819		)	(4,956		)
Gain on sale of co-investments	—			—			—			—			(919		)
Gain on sale of land	—			(2,533		)	(1,503		)	—			(180		)
Loss on early retirement of debt	6,114			268			300			5,009			1,163
Co-investment promote income	(192		)	(10,640		)	—			(2,299		)	—
Income from early redemption of preferred equity investments	(1,954		)	(5,250		)	(1,358		)	—			—
Insurance reimbursements	(2,319		)	—			—			—			—
Other non-core items, net (2)	(651		)	1,852			—			—			268
Core funds from operations (Core FFO) attributable to common stockholders and unitholders	$	660,671		$	503,161		$	300,096		$	254,996		$	196,779
Weighted average number of shares outstanding, diluted (FFO)(3)	67,310			58,921			39,501			37,378			34,861
Funds from operations attributable to common stockholders and unitholders per share - diluted	$	9.72		$	7.89		$	7.59		$	6.71		$	5.74
Core funds from operations attributable to common stockholders and unitholders per share - diluted	$	9.82		$	8.54		$	7.60		$	6.82		$	5.64


(1)	FFO is a financial measure that is commonly used in the REIT industry. The Company presents funds from operations as a supplemental operating performance measure. FFO is not used by the Company, nor should it be considered to be, as an alternative to net earnings computed under GAAP as an indicator of the Company’s operating performance or as an alternative to cash from operating activities computed under GAAP as an indicator of the Company's ability to fund its cash needs.

(1)

FFO is a financial measure that is commonly used in the REIT industry. The Company presents funds from operations as a supplemental operating performance measure. FFO is not used by the Company, nor should it be considered to be, as an alternative to net earnings computed under GAAP as an indicator of the Company’s operating performance or as an alternative to cash from operating activities computed under GAAP as an indicator of the Company's ability to fund its cash needs.

FFO is not meant to represent a comprehensive system of financial reporting and does not present, nor does it intend to present, a complete picture of the Company's financial condition and operating performance. The Company believes that net earnings computed under GAAP remain the primary measure of performance and that FFO is only meaningful when it is used in conjunction with net earnings. The Company considers FFO and FFO excluding non-routine items (referred to as

“Core FFO”) to be useful financial performance measurements of an equity REIT because, together with net income and cash flows, FFO provides investors with an additional basis to evaluate operating performance and ability of a REIT to incur and service debt and to fund acquisitions and other capital expenditures and its ability to pay dividends. Further, the Company believes that its consolidated financial statements, prepared in accordance with GAAP, provide the most meaningful picture of its financial condition and its operating performance.

In calculating FFO, the Company follows the definition for this measure published by the National Association of Real Estate Investment Trusts (“NAREIT”), which is a REIT trade association. The Company believes that, under the NAREIT FFO definition, the three most significant adjustments made to net income are (i) the exclusion of historical cost depreciation, (ii) the exclusion of gains and losses from the sale of previously depreciated properties and (iii) the exclusion of impairment losses on depreciated properties. Essex agrees that these three NAREIT adjustments are useful to investors for the following reasons:


(a)	historical cost accounting for real estate assets in accordance with GAAP assumes, through depreciation charges, that the value of real estate assets diminishes predictably over time. NAREIT stated in its White Paper on Funds from Operations “since real estate asset values have historically risen or fallen with market conditions, many industry investors have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves.” Consequently, NAREIT’s definition of FFO reflects the fact that real estate, as an asset class, generally appreciates over time and depreciation charges required by GAAP do not reflect the underlying economic realities.

(a)

historical cost accounting for real estate assets in accordance with GAAP assumes, through depreciation charges, that the value of real estate assets diminishes predictably over time. NAREIT stated in its White Paper on Funds from Operations “since real estate asset values have historically risen or fallen with market conditions, many industry investors have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves.” Consequently, NAREIT’s definition of FFO reflects the fact that real estate, as an asset class, generally appreciates over time and depreciation charges required by GAAP do not reflect the underlying economic realities.


(b)	REITs were created as a legal form of organization in order to encourage public ownership of real estate as an asset class through investment in firms that were in the business of long-term ownership and management of real estate. The exclusion, in NAREIT’s definition of FFO, of gains from the sales and impairment losses of previously depreciated operating real estate assets allows investors and analysts to readily identify the operating results of the long-term assets that form the core of a REIT’s activity and assists in comparing those operating results between periods.

(b)

REITs were created as a legal form of organization in order to encourage public ownership of real estate as an asset class through investment in firms that were in the business of long-term ownership and management of real estate. The exclusion, in NAREIT’s definition of FFO, of gains from the sales and impairment losses of previously depreciated operating real estate assets allows investors and analysts to readily identify the operating results of the long-term assets that form the core of a REIT’s activity and assists in comparing those operating results between periods.

Management has consistently applied the NAREIT definition of FFO to all periods presented. However, other REITs in calculating FFO may vary from the NAREIT definition for this measure, and thus their disclosure of FFO may not be comparable to the Company’s calculation.


(2)	Other items, net are non-recurring in nature and include items such as gains on non-operating assets and tax related items.


(3)	Assumes conversion of all dilutive outstanding operating partnership interests in the Operating Partnership and excludes 744,346 DownREIT units for which the Operating Partnership has the ability and intention to redeem the DownREIT limited partnership units for cash and does not consider them to be common stock equivalents.

Essex Portfolio, L.P. and Subsidiaries



	Years Ended December 31,
	2015		2014		2013		2012		2011
	($ in thousands, except per unit amounts)
OPERATING DATA:(1)
Rental and other property	$	1,185,498	$	961,591	$	603,327	$	527,945	$	461,866
Management and other fees from affiliates	8,909		9,347		7,263		8,457		5,428

Income before discontinued operations	$	248,239	$	134,438	$	140,882	$	127,653	$	46,958
Income from discontinued operations	—		—		31,173		11,937		10,558
Net income	248,239		134,438		172,055		139,590		57,516
Net income available to common unitholders	$	234,689	$	121,726	$	159,749	$	127,771	$	43,593
Per unit data:
Basic:
Income before discontinued operations available to common unitholders	$	3.50	$	2.07	$	3.27	$	3.11	$	0.95
Net income available to common unitholders	$	3.50	$	2.07	$	4.06	$	3.43	$	1.25
Weighted average common units outstanding	67,054		58,772		39,380		37,252		34,774
Diluted:
Income before discontinued operations available to common unitholders	$	3.49	$	2.07	$	3.26	$	3.10	$	0.95
Net income available to common unitholders	$	3.49	$	2.07	$	4.05	$	3.42	$	1.25
Weighted average common units outstanding	67,244		58,921		39,467		37,344		34,861
Cash distributions per common unit	$	5.76	$	5.11	$	4.84	$	4.40	$	4.16


(1)	Reclassifications have been made in prior periods to conform to the current year’s presentation.



	As of December 31,
	2015		2014		2013		2012		2011
	($ in thousands)
BALANCE SHEET DATA:(1)
Investment in rental properties (before accumulated depreciation)	$	12,331,469	$	11,244,681	$	5,443,757	$	5,033,672	$	4,313,064
Net investment in rental properties	10,381,577		9,679,875		4,188,871		3,952,155		3,393,038
Real estate under development	242,326		429,096		50,430		66,851		44,280
Co-investments	1,036,047		1,042,423		677,133		571,345		383,412
Total assets	12,005,091		11,526,732		5,162,320		4,826,356		4,019,519
Total indebtedness	5,315,464		5,080,689		3,009,005		2,797,816		2,343,413
Redeemable noncontrolling interest	45,452		23,256		—		—		—
Cumulative convertible preferred interest	—		—		4,349		4,349		4,349
Cumulative redeemable preferred interest	71,209		71,209		71,209		71,209		71,209
Partners' capital	6,287,381		6,073,433		1,932,108		1,811,427		1,486,914


(1)	Reclassifications have been made in prior periods to conform to the current year’s presentation. Additionally, due to measurement adjustments related to the BRE merger in 2014, certain amounts do not agree to previously reported balances.

Previous: Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities · Next: Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations