Essex Announces Fourth Quarter and Full-Year 2023 Results and 2024 Guidance
Net Income, Funds from Operations (“FFO”), and Core FFO per diluted share for the three and twelve months ended
|
Three Months Ended
|
|
Twelve Months Ended
|
|
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|
% |
% |
||||
|
2023 |
2022 |
Change |
2023 |
2022 |
Change |
Per Diluted Share |
|
|
|
|
|
|
Net Income |
|
|
-64.3% |
|
|
0.8% |
Total FFO |
|
|
2.7% |
|
|
11.2% |
Core FFO |
|
|
1.6% |
|
|
3.6% |
|
|
|
|
|
|
|
Fourth Quarter and Full-Year 2023 Highlights:
-
Reported Net Income per diluted share for the fourth quarter of 2023 of
$1.02 , compared to$2.86 in the fourth quarter of 2022. For the full-year 2023, the Company reported Net Income per diluted share of$6.32 compared to$6.27 in 2022. - Grew Core FFO per diluted share by 1.6% compared to the fourth quarter of 2022 and 3.6% compared to the full-year 2022, exceeding the high-end of the Company’s original guidance range.
- Achieved same-property revenues and net operating income (“NOI”) growth of 2.9% and 2.3%, respectively, compared to the fourth quarter of 2022. For the full-year 2023, same-property revenues and NOI grew 4.4% and 4.3%, respectively, both exceeding the midpoint of the Company’s original guidance range.
-
For the full-year 2023, the Company disposed of one apartment community in a non-core market for a total contract price of
$91.7 million . -
For the full-year 2023, the Company committed
$18.8 million to two preferred equity investments at a weighted average return rate of 12.6%. The Company received$72.3 million in redemption proceeds from four preferred equity investments at a weighted average return rate of 9.1%. -
For the full-year 2023, the Company repurchased 437,026 shares of its common stock, totaling
$95.7 million at an average price per share of$218.88 . -
As of
February 2, 2024 , the Company’s immediately available liquidity was approximately$1.6 billion .
Same-Property Operations
Same-property operating results exclude any properties that are not comparable for the periods presented. The table below illustrates the percentage change in same-property gross revenues for the quarter ended
|
Q4 2023 vs. Q4 2022 |
Q4 2023 vs. Q3 2023 |
% of Total |
Revenue
|
Revenue
|
Q4 2023
|
|
|
|
||
|
-0.4% |
-0.6% |
18.4% |
|
4.0% |
1.8% |
10.7% |
|
8.2% |
1.3% |
9.1% |
|
7.2% |
1.5% |
4.1% |
Total |
3.2% |
0.6% |
42.3% |
|
|
||
|
3.7% |
-0.7% |
19.6% |
|
1.6% |
-0.5% |
7.7% |
|
6.1% |
1.7% |
4.7% |
|
3.4% |
1.6% |
5.4% |
|
0.0% |
2.3% |
2.5% |
Total |
3.3% |
0.1% |
39.9% |
|
1.3% |
0.8% |
17.8% |
Same-Property Portfolio |
2.9% |
0.5% |
100.0% |
The table below illustrates the components that drove the change in same-property revenues on a year-over-year basis for the three and twelve-month periods ended
Same-Property Revenue Components |
Q4 2023
|
YTD 2023
|
Q4 2023
|
||
Scheduled Rents |
|
2.4% |
|
4.4% |
0.1% |
Delinquencies (1) |
|
-0.4% |
|
-0.7% |
0.5% |
Cash Concessions |
|
0.7% |
|
0.1% |
0.0% |
Vacancy |
|
0.0% |
|
0.2% |
-0.3% |
Other Income |
|
0.2% |
|
0.4% |
0.2% |
2023 Same-Property Revenue Growth |
|
2.9% |
|
4.4% |
0.5% |
-
The year-over-year negative impact from delinquencies is largely due to lower net delinquency in the prior period, which benefitted from Emergency Rental Assistance payments of
$2.6 million and$34.5 million in the fourth quarter and full-year 2022, respectively. This compares to Emergency Rental Assistance payments of$0.5 million and$2.6 million in the fourth quarter and full-year 2023, respectively. For additional details, please see page S-16 of the accompanying supplemental financial information.
Year-Over-Year Change |
|
Year-Over-Year Change |
||||||
|
Q4 2023 compared to Q4 2022 |
|
YTD 2023 compared to YTD 2022 |
|||||
|
Revenues |
Operating
|
NOI |
|
Revenues |
Operating
|
NOI |
|
|
3.2% |
6.1% |
2.1% |
|
4.9% |
6.3% |
4.3% |
|
|
3.3% |
5.5% |
2.4% |
|
4.0% |
4.1% |
4.0% |
|
|
1.3% |
-1.6% |
2.5% |
|
4.0% |
1.4% |
5.1% |
|
Same-Property Portfolio |
2.9% |
4.5% |
2.3% |
|
4.4% |
4.5% |
4.3% |
|
|
Sequential Change |
||
|
Q4 2023 compared to Q3 2023 |
||
|
Revenues |
Operating
|
NOI |
|
0.6% |
-1.4% |
1.5% |
|
0.1% |
-0.1% |
0.3% |
|
0.8% |
-5.5% |
3.5% |
Same-Property Portfolio |
0.5% |
-1.6% |
1.3% |
|
Financial Occupancies |
||
|
Quarter Ended |
||
|
|
|
|
|
95.9% |
96.3% |
96.4% |
|
96.2% |
96.5% |
95.8% |
|
96.5% |
96.3% |
95.8% |
Same-Property Portfolio |
96.1% |
96.4% |
96.0% |
Investment Activity
Other Investments
In
Liquidity and Balance Sheet
Common Stock
In the fourth quarter of 2023, the Company did not issue any shares of common stock through its equity distribution program or repurchase any shares through its stock repurchase plan. For the full-year 2023, the Company repurchased 437,026 shares of its common stock totaling
Balance Sheet
In the fourth quarter of 2023, the Company recognized a
As of
2024 Full-Year Guidance and Key Assumptions
Per Diluted Share |
Range |
Midpoint |
|
|
Net Income |
|
|
|
|
Total FFO |
|
|
|
|
Core FFO |
|
|
|
|
Q1 2024 Core FFO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GDP Growth |
1.30% |
|
|
|
Job Growth |
1.20% |
|
|
|
|
|
|
|
|
ESS Markets Economic Assumptions |
|
|
|
|
Job Growth |
1.30% |
|
|
|
Market Rent Growth |
1.25% |
|
|
|
|
|
|||
Estimated Same-Property Portfolio Growth
Based on 50,884 |
|
Range |
Midpoint
|
Midpoint
|
Revenues |
0.70% to 2.70% |
1.70% |
1.80% |
|
Operating Expenses |
3.50% to 5.00% |
4.25% |
4.25% |
|
Net Operating Income |
-1.10% to 2.30% |
0.60% |
0.70% |
|
Key Assumptions
- Acquisition and disposition activities will be influenced by market conditions and cost of capital, consistent with the Company’s historical practice of creating NAV and FFO per share.
-
Structured finance redemptions are expected to be
$50 -$150 million . The proceeds will be prioritized to fund future acquisitions, subject to market conditions. - The Company has minimal development funding needs and does not currently plan to start any new developments in 2024.
-
Revenue generating capital expenditures are expected to be approximately
$50 million at the Company’s pro rata share.
2024 Core FFO Per Diluted Share Guidance Midpoint versus Full-Year 2023
The table below provides a summary of changes between the Company’s 2023 Core FFO per diluted share and its 2024 Core FFO per diluted share guidance midpoint.
2024 Core FFO Per Diluted Share Guidance Midpoint versus 2023 |
|
Midpoint |
2023 Core FFO Per Diluted Share |
$ |
15.03 |
NOI from Consolidated Communities |
|
0.14 |
Consolidated Net Interest Expense |
|
0.04 |
Interest and Other Income |
|
0.02 |
FFO from Co-Investments, including preferred equity |
(0.16) |
|
G&A and Other |
|
(0.04) |
2024 Core FFO Per Diluted Share Guidance Midpoint |
$ |
15.03 |
For additional details regarding the Company’s 2024 FFO guidance range, please see page S-14 of the supplemental financial information.
Conference Call with Management
The Company will host an earnings conference call with management to discuss its quarterly results on
A rebroadcast of the live call will be available online for 30 days and digitally for 7 days. To access the replay online, go to www.essex.com and select the fourth quarter 2023 earnings link. To access the replay, dial (844) 512-2921 using the replay pin number 13743418. If you are unable to access the information via the Company’s website, please contact the Investor Relations Department at investors@essex.com or by calling (650) 655-7800.
Corporate Profile
This press release and accompanying supplemental financial information has been furnished to the
FFO RECONCILIATION
FFO, as defined by the
The following table sets forth the Company’s calculation of diluted FFO and Core FFO for the three and twelve months ended
|
|
Three Months Ended
|
|
Twelve Months Ended
|
|||||||||||
Funds from Operations attributable to common stockholders and unitholders |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|||
Net income available to common stockholders |
$ |
65,391 |
|
$ |
185,165 |
|
$ |
405,825 |
|
$ |
408,315 |
|
|||
Adjustments: |
|
|
|
|
|
|
|
|
|||||||
Depreciation and amortization |
|
138,016 |
|
|
135,758 |
|
|
548,438 |
|
|
539,319 |
|
|||
Gains not included in FFO |
|
- |
|
|
(94,416 |
) |
|
(59,238 |
) |
|
(111,839 |
) |
|||
Casualty loss |
|
- |
|
|
- |
|
|
433 |
|
|
- |
|
|||
Impairment loss from unconsolidated co-investments |
|
33,700 |
|
|
2,105 |
|
|
33,700 |
|
|
2,105 |
|
|||
Depreciation and amortization from unconsolidated co-investments |
|
18,259 |
|
|
18,053 |
|
|
71,745 |
|
|
72,585 |
|
|||
Noncontrolling interest related to |
|
2,302 |
|
|
6,497 |
|
|
14,284 |
|
|
14,297 |
|
|||
Depreciation attributable to third party ownership and other |
|
(379 |
) |
|
(357 |
) |
|
(1,474 |
) |
|
(1,421 |
) |
|||
Funds from Operations attributable to common stockholders and unitholders |
$ |
257,289 |
|
$ |
252,805 |
|
$ |
1,013,713 |
|
$ |
923,361 |
|
|||
FFO per share – diluted |
$ |
3.87 |
|
$ |
3.77 |
|
$ |
15.24 |
|
$ |
13.70 |
|
|||
Expensed acquisition and investment related costs |
$ |
220 |
|
$ |
1,884 |
|
$ |
595 |
|
$ |
2,132 |
|
|||
Tax (benefit) expense on unconsolidated co-investments (1) |
|
(540 |
) |
|
(2,373 |
) |
|
697 |
|
|
(10,236 |
) |
|||
Realized and unrealized (gains) losses on marketable securities, net |
|
(5,712 |
) |
|
(5,579 |
) |
|
(10,006 |
) |
|
45,547 |
|
|||
Provision for credit losses |
|
19 |
|
|
(317 |
) |
|
70 |
|
|
(381 |
) |
|||
Equity (income) loss from non-core co-investments (2) |
|
(263 |
) |
|
6,928 |
|
|
(1,685 |
) |
|
38,045 |
|
|||
Loss on early retirement of debt, net |
|
- |
|
|
- |
|
|
- |
|
|
2 |
|
|||
Loss on early retirement of debt from unconsolidated co-investment |
|
- |
|
|
- |
|
|
- |
|
|
988 |
|
|||
Co-investment promote income |
|
- |
|
|
- |
|
|
- |
|
|
(17,076 |
) |
|||
Income from early redemption of preferred equity investments and notes receivable |
|
- |
|
|
(811 |
) |
|
(285 |
) |
|
(1,669 |
) |
|||
General and administrative and other, net |
|
4,059 |
|
|
209 |
|
|
6,629 |
|
|
2,536 |
|
|||
Insurance reimbursements, legal settlements, and other, net |
|
(739 |
) |
|
(315 |
) |
|
(9,821 |
) |
|
(5,392 |
) |
|||
Core Funds from Operations attributable to common stockholders and unitholders |
$ |
254,333 |
|
$ |
252,431 |
|
$ |
999,907 |
|
$ |
977,857 |
|
|||
Core FFO per share – diluted |
$ |
3.83 |
|
$ |
3.77 |
|
$ |
15.03 |
|
$ |
14.51 |
|
|||
Weighted average number of shares outstanding diluted (3) |
|
66,447,394 |
|
|
67,003,718 |
|
|
66,514,456 |
|
|
67,374,526 |
|
|||
|
|
|
|
|
|
|
|
|
- Represents tax related to net unrealized gains or losses on technology co-investments.
- Represents the Company's share of co-investment income or loss from technology co-investments.
-
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 DownREIT limited partnership units.
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):
Three Months Ended |
Twelve Months Ended |
||||||||||||||
|
|
||||||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|||
Earnings from operations |
$ |
130,341 |
|
$ |
228,143 |
|
$ |
584,342 |
|
$ |
595,229 |
|
|||
Adjustments: |
|
|
|
|
|
|
|
|
|||||||
Corporate-level property management expenses |
|
11,485 |
|
|
10,172 |
|
|
45,872 |
|
|
40,704 |
|
|||
Depreciation and amortization |
|
138,016 |
|
|
135,758 |
|
|
548,438 |
|
|
539,319 |
|
|||
Management and other fees from affiliates |
|
(2,803 |
) |
|
(2,826 |
) |
|
(11,131 |
) |
|
(11,139 |
) |
|||
General and administrative |
|
19,739 |
|
|
16,036 |
|
|
63,474 |
|
|
56,577 |
|
|||
Expensed acquisition and investment related costs |
|
220 |
|
|
1,884 |
|
|
595 |
|
|
2,132 |
|
|||
Casualty loss |
|
- |
|
|
- |
|
|
433 |
|
|
- |
|
|||
Gain on sale of real estate and land |
|
- |
|
|
(94,416 |
) |
|
(59,238 |
) |
|
(94,416 |
) |
|||
NOI |
|
296,998 |
|
|
294,751 |
|
|
1,172,785 |
|
|
1,128,406 |
|
|||
Less: Non-same property NOI |
|
(13,261 |
) |
|
(17,303 |
) |
|
(54,179 |
) |
|
(56,058 |
) |
|||
Same-Property NOI |
$ |
283,737 |
|
$ |
277,448 |
|
$ |
1,118,606 |
|
$ |
1,072,348 |
|
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 evolution of the work-from-home trend, 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 lease-up and occupancy of its apartment communities, the anticipated operating performance of its apartment communities, the total projected costs of development and redevelopment projects, co-investment activities, qualification as a REIT under the Internal Revenue Code of 1986, as amended, the Company’s first quarter and full-year 2024 guidance (including net income, Total FFO and Core FFO and related assumptions, including with respect to GDP growth, job growth and market rent growth), 2024 same-property revenue, operating expenses and net operating income generally and in specific regions, the real estate markets in the geographies in which the Company’s properties are located and in
Definitions and Reconciliations
Non-GAAP financial measures and certain other capitalized terms, as used in this earnings release, are defined and further explained on pages S-18.1 through S-18.4, "Reconciliations of Non-GAAP Financial Measures and Other Terms," of the accompanying supplemental financial information. The supplemental financial information is available on the Company's website at www.essex.com.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240206039162/en/
Director, Investor Relations
(650) 655-7800
lrainey@essex.com
Source: