<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File No. 333-44467-01
ESSEX PORTFOLIO, L.P.
(Exact name of Registrant as specified in its Charter)
Maryland 77-0369575
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
925 East Meadow Drive, Palo Alto, California 94303
(Address of principal executive offices)
(Zip code)
(650) 494-3700
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months for such shorter period that the Registrant was required
to file such report, and (2) has been subject to such filing requirements for
the past 90 days. Yes X No __
-----
<PAGE>
TABLE OF CONTENTS
FORM 10-Q
<TABLE>
<CAPTION>
Part I Page No.
--------
<S> <C> <C>
Item 1 Financial Statements (Unaudited) 3
Consolidated Balance Sheets as of March 31, 2000 and
December 31, 1999 4
Consolidated Statements of Operations
for the three months ended March 31, 2000 and 1999 5
Consolidated Statements of Partners' Capital
for the three months ended March 31, 2000
and the year ended December 31, 1999 6
Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 2000 and 1999 7
Notes to Consolidated Financial Statements 8
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 3 Quantitative and Qualitative Disclosure About Market Risk 18
Part II
Item 6 Exhibits and Reports on Form 8-K 20
Signatures 21
</TABLE>
2
<PAGE>
Part I Financial Information
- ------ ---------------------
Item 1: Financial Statements (Unaudited)
--------------------------------
Essex Portfolio, L.P., a California limited partnership, (the
"Operating Partnership") effectively holds the assets and liabilities
and conducts the operating activities of Essex Property Trust, Inc.
("Essex" or the "Company"). Essex Property Trust, Inc., a real estate
investment trust incorporated in the State of Maryland, is the sole
general partner of the Operating Partnership.
The information furnished in the accompanying consolidated unaudited
balance sheets, statements of operations, partners' capital and cash
flows of the Operating Partnership reflects all adjustments which are,
in the opinion of management, necessary for a fair presentation of the
aforementioned financial statements for the interim periods.
The accompanying unaudited financial statements should be read in
conjunction with the notes to such financial statements and
Management's Discussion and Analysis of Financial Condition and Results
of Operations.
3
<PAGE>
ESSEX PORTFOLIO, L.P.
Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
Assets 2000 1999
------ ---------------- -----------------
<S> <C> <C>
Real estate:
Rental properties:
Land and land improvements $ 241,643 $ 234,497
Buildings and improvements 728,508 694,579
---------------- -----------------
970,151 929,076
Less accumulated depreciation (95,404) (96,605)
---------------- -----------------
874,747 832,471
Investments 49,037 47,992
Real estate under development 59,410 120,414
---------------- -----------------
983,194 1,000,877
Cash and cash equivalents-unrestricted 23,086 12,348
Restricted cash 18,082 17,216
Notes and other related party receivables 14,781 13,654
Notes and other receivables 7,796 9,001
Prepaid expenses and other assets 3,966 3,495
Deferred charges, net 5,457 5,722
---------------- -----------------
$ 1,056,362 $ 1,062,313
================ =================
Liabilities and Partners' Capital
---------------------------------
Mortgage notes payable $ 372,917 $ 373,608
Lines of credit 0 10,500
Accounts payable and accrued liabilities 29,583 28,379
Distributions payable 13,228 13,248
Other liabilities 5,625 5,594
Deferred gain 5,002 5,002
---------------- -----------------
Total liabilities 426,355 436,331
Minority interests 2,486 2,379
Partners' capital:
General Partner:
Common equity 387,140 383,379
Preferred equity 4,314 4,314
---------------- -----------------
391,454 387,693
Limited Partners:
Common equity 31,577 31,420
Preferred equity 204,490 204,490
---------------- -----------------
236,067 235,910
---------------- -----------------
Total partners' capital 627,521 623,603
---------------- -----------------
Total liabilities and partners' capital $ 1,056,362 $ 1,062,313
================ =================
</TABLE>
See accompanying notes to the consolidated unaudited financial statements.
4
<PAGE>
ESSEX PORTFOLIO, L.P.
Consolidated Statements of Operations
(Unaudited)
(Dollars in thousands, except per unit amounts)
<TABLE>
<CAPTION>
Three months ended
------------------------------------
March 31, March 31,
2000 1999
----------------- ---------------
<S> <C> <C>
Revenues:
Rental $ 36,846 $ 31,902
Other property 954 696
----------------- ---------------
Total property 37,800 32,598
Interest and other 1,736 1,292
----------------- ---------------
Total revenues 39,536 33,890
----------------- ---------------
Expenses:
Property operating expenses
Maintenance and repairs 2,151 2,095
Real estate taxes 2,598 2,517
Utilities 2,056 1,995
Administrative 3,332 2,743
Advertising 497 509
Insurance 221 221
Depreciation and amortization 6,667 6,045
----------------- ---------------
17,522 16,125
----------------- ---------------
Interest 5,808 4,934
Amortization of deferred financing costs 159 130
General and administrative 1,125 1,011
----------------- ---------------
Total expenses 24,614 22,200
----------------- ---------------
Income before gain on the sales of real estate
and minority interests 14,922 11,690
Gain on the sales of real estate 4,022 0
----------------- ---------------
Income before minority interests 18,944 11,690
Minority interests (146) (146)
----------------- ---------------
Net income 18,798 11,544
Dividends on preferred units-general partner (117) (831)
Dividends on preferred units-limited partner (4,580) (2,145)
----------------- ---------------
Net income available to common units $ 14,101 $ 8,568
================= ===============
Per operating partnership unit data.
Basic:
Net income $ 0.70 $ 0.46
================= ===============
Weighted average number of partnership
units outstanding during the period 20,146,833 18,608,130
================= ===============
Diluted:
Net income $ 0.69 $ 0.46
================= ===============
Weighted average number of partnership
units outstanding during the period 20,578,898 18,761,479
================= ===============
Distributions per Operating Partnership common unit $ 0.55 $ 0.50
================= ===============
</TABLE>
See accompanying notes to the consolidated unaudited financial statements.
5
<PAGE>
ESSEX PORTFOLIO, L.P.
Consolidated Statements of Partners' Capital
For the three months ended March 31, 2000 and the
year ended December 31, 1999
(Unaudited)
(Dollars and units in thousands)
<TABLE>
<CAPTION>
General Partner Limited Partners
---------------------------------------- ---------------------------------------
Preferred Preferred
Common Equity Equity Common Equity Equity
------------------------ ----------- ------------------------- ---------
Units Amount Amount Units Amount Amount Total
--------- ----------- ----------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31,
1998 16,641 $ 352,295 $ 37,505 1,873 $ 25,331 $ 102,150 $ 517,281
Contribution-net proceeds from
perpetual preferred units - - - - - 102,340 102,340
Contribution net proceeds
from options exercised 53 930 - - - - 930
Common units issued from
conversion of Convertible 1,618 33,191 (33,191) - - -
Preferred Stock
Redemption of limited partner - - - (65) (2,101) - (2,101)
common units
Issuance of limited
partner common units - - - 274 7,469 - 7,469
Common units purchased
by Operating Partnership (262) (7,119) - - - - (7,119)
Net income 42,231 1,333 - 5,051 12,238 60,853
Partners' distributions - (38,149) (1,333) - (4,330) (12,238) (56,050)
--------- ----------- ----------- --------- ----------- --------- ---------
Balances at December 31,
1999 18,050 383,379 4,314 2,082 31,420 204,490 623,603
Redemption of limited
partner common units - - - (5) (165) - (165)
Contribution-net proceeds
from options exercised 46 1,080 - - - - 1,080
Net income - 12,633 117 - 1,468 4,580 18,798
Partners' distributions - (9,952) (117) - (1,146) (4,580) (15,795)
--------- ----------- ----------- --------- ----------- --------- ---------
Balances at March 31,
2000 18,096 $ 387,140 $ 4,314 2,077 $ 31,577 $ 204,490 $ 627,521
========= =========== =========== ========= =========== ========= =========
</TABLE>
See accompanying notes to the consolidated unaudited financial statements.
6
<PAGE>
ESSEX PORTFOLIO, L.P.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three months ended
-----------------------------------
March 31, March 31,
2000 1999
------------------------------------
<S> <C> <C>
Net cash provided by operating activities: $ 22,032 $ 18,862
-------------- --------------
Cash flows from investing activities:
Additions to real estate (5,548) (4,874)
Proceeds received from the disposition of real estate 31,302 -
(Decrease) Increase in restricted cash (866) 283
Additions to related party notes and other receivables (2,000) (967)
Repayment of related party notes and other receivables 2,036 477
Additions to real estate under development (9,526) (24,834)
Net (contribution to) / distributions from investments
in corporations and limited partnerships (605) 327
-------------- --------------
Net cash provided by (used in) investing activities 14,793 (29,588)
-------------- --------------
Cash flows from financing activities:
Proceeds from mortgage and other notes payable
and lines of credit 17,000 53,000
Repayment of mortgage and other notes payable
and lines of credit (28,191) (29,737)
Additions to deferred charges - (337)
Contributions from stock options exercised and shares
issued through dividend reinvestment plan
-general partner 1,080 39
Distributions to minority interest and limited partners (5,768) (3,026)
Redemption of operating partnership units limited partner (164) (200)
Distributions to general partner (10,044) (9,316)
-------------- --------------
Net cash (used in) provided by financing activities (26,087) 10,423
-------------- --------------
Net increase (decrease) in cash and cash equivalents 10,738 (303)
Cash and cash equivalents at beginning of period 12,348 2,548
-------------- --------------
Cash and cash equivalents at end of period $ 23,086 $ 2,245
============== ==============
Supplemental disclosure of cash flow information:
Cash paid for interest, net of $656 and
$1,179 capitalized $ 5,208 $ 3,446
============== ==============
Supplemental disclosure of non-cash investing and
financing activities:
Real estate under development transferred to
rental properties $ 70,530 $ -
============== ==============
</TABLE>
See accompanying notes to consolidated unaudited financial statements.
7
<PAGE>
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
(Unaudited)
(Dollars in thousands, except for per share and per unit amounts)
(1) Organization and Basis of Presentation
--------------------------------------
Essex Portfolio, L.P. (the "Operating Partnership") was formed in March
1994 and commenced operations on June 13, 1994, when Essex Property Trust,
Inc. (the "Company"), the general partner of the Operating Partnership,
completed its initial public offering (the "Offering") in which it issued
6,275,000 shares of common stock at $19.50 per share. The net proceeds from
the Offering of $112,071 were used by the Company to acquire a 77.2%
interest in the Operating Partnership. The Company has elected to be
treated as a real estate investment trust ("REIT") under the Internal
Revenue Code of 1986 (the "Code"), as amended.
The unaudited consolidated financial statements of the Operating
Partnership are prepared in accordance with generally accepted accounting
principles for interim financial information and in accordance with the
instructions to Form 10-Q. In the opinion of management, all adjustments
necessary for a fair presentation of the financial position, results of
operations and cash flows for the periods presented have been included and
are normal and recurring in nature. These unaudited consolidated financial
statements should be read in conjunction with the audited consolidated
financial statements included in the Operating Partnership's annual report
on Form 10-K for the year ended December 31, 1999.
The Company is the sole general partner in the Operating Partnership,
owning an 89.7%, 89.7% and 90.0% general partnership interest as March 31,
2000, December 31, 1999 and March 31, 1999, respectively.
As of March 31, 2000, the Operating Partnership operates and has ownership
interests in 69 multifamily properties (containing 15,442 units) and four
commercial properties (with approximately 250,000 square feet)
(collectively, the "Properties"). The Properties are located in Northern
California (the San Francisco Bay Area), Southern California (Los Angeles,
Ventura, Orange and San Diego counties), and the Pacific Northwest (the
Seattle, Washington and Portland, Oregon metropolitan areas).
All significant intercompany balances and transactions have been eliminated
in the consolidated financial statements.
(2) Significant Transactions
------------------------
(A) Disposition Activities
---------------------------
On March 6, 2000, the Operating Partnership sold the buildings and a
leasehold interest in Vista Pointe, a 286 unit apartment community, located
in Anaheim, California for $15,300. The land lease entitles the Operating
Partnership to receive a fixed land lease payment over the 34-year term,
and an interest in future appreciation of the Vista Pointe property. In
connection with the sale, the Operating Partnership is obligated to loan at
9% up to approximately $1,000 related to property specific improvements.
The Operating Partnership's interest in the land is subordinated to a loan
obtained by the buyer in connection with the purchase of the property. The
Operating Partnership may be required to sell the land after six years as
specified in the buyout provisions of the agreement. There was a $4,013
gain recognized on the sale.
On March 29, 2000, the Operating Partnership sold Station Park Apartments,
a 106 unit apartment community located in Walnut Creek, California for
$15,800. This apartment was
8
<PAGE>
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
(Unaudited)
(Dollars in thousands, except for per share and per unit amounts)
previously reported as a development community and reached stabilized
operations in February 2000. There was a $9 gain recognized on the sale.
(B) Development Activities
---------------------------
Development communities are defined by the Operating Partnership as new
apartment properties that are being constructed or are newly constructed
and in a phase of lease-up and have not yet reached stabilized operations.
At March 31, 2000, the Operating Partnership had five development
communities, with an aggregate of 1,176 multifamily units. During the first
quarter of 2000, the Operating Partnership reached stabilized operations at
three multifamily communities containing 540 units that were previously
reported as development communities. The three projects which were
previously reported as development projects and have achieved stabilized
operations are Bel Air, Fountain Court and Station Park Apartments. In
connection with the properties currently under development, the Operating
Partnership has directly, or in some cases through its joint ventures,
entered into contractual construction related commitments with unrelated
third parties. As of March 31, 2000, the Operating Partnership is committed
to fund approximately $63,400 under these commitments.
Bel Air apartments is a 348 unit existing apartment community previously
referred to as the Shores in San Ramon, California which was acquired by
the Operating Partnership in December 1995. Including the expansion of 114
units, the total number of units for this community is 462 units. The
property is wholly owned by the Operating Partnership. The total investment
related to the 114 unit expansion of approximately $18,200 is included in
rental properties in the accompanying consolidated balance sheets at March
31, 2000.
Fountain Court Apartments is a 320 unit apartment community located in
downtown Seattle, Washington. The Operating Partnership has a 51%
ownership interest in the property. The total investment of approximately
$36,800 is included in rental properties in the accompanying consolidated
balance sheets at March 31, 2000.
Station Park Apartments is a 106 unit apartment community located in Walnut
Creek, California. This property was sold during the first quarter of 2000
as noted under disposition activities.
(C) Redevelopment Activities
-----------------------------
Redevelopment communities are defined by the Operating Partnership as
existing properties owned or recently acquired which have been targeted for
investment by the Operating Partnership with the expectation of increasing
financial returns through property improvement. Redevelopment communities
typically have apartment units that are not available for rent and as a
result, may have less than stabilized operations. At March 31, 2000, the
Operating Partnership had eight redevelopment communities in Southern
California which contain an aggregate of 2,054 units with a total projected
investment of $33,860.
(3) Related Party Transactions
--------------------------
All general and administrative expenses of the Company, the Operating
Partnership and Essex Management Corporation, an unconsolidated preferred
stock subsidiary of the Company ("EMC") are initially borne by the
Operating Partnership, with a portion subsequently allocated to EMC.
Expenses allocated to EMC for the three months ended March 31, 2000 and
1999 totaled $233 and $102, respectively. The expenses are reflected as a
reduction in general and administrative expenses in the accompanying
consolidated statements of operations.
9
<PAGE>
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
(Unaudited)
(Dollars in thousands, except for per share and per unit amounts)
Other income includes interest income of $122 and $86 for the three months
ended March 31, 2000 and 1999. This interest income was earned principally
on the notes receivable from related party partnerships in which the
Operating Partnership owns an ownership interest. Other income also
includes management fee income and investment income from its related
party partnerships in which the Operating Partnership owns an ownership
interest of $474 and $344 for the three months ended March 31, 2000 and
1999.
During the quarter ended March 31, 2000, the Operating Partnership paid
brokerage commissions totaling $289 to M&M on the sales of real estate. The
commission is reflected as a reduction of the gain on sales of real estate
in the accompanying consolidated statements of operations. The Chairman of
M&M is the Chairman of the Company.
Notes and other related party receivables as of March 31, 2000 and December
31, 1999 consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
--------- ------------
Notes receivable from Joint Ventures: 2000 1999
--------- -------------
<S> <C> <C>
Note receivable from Highridge Apartments
secured, bearing interest at 9.4%, due March 2008 $1,047 $ 1,047
Note receivable from Highridge Apartments, secured,
Bearing interest at 10%, due on demand 2,950 2,950
Note receivable from Fidelity I and JSV, secured,
bearing interest at 9.5-10%, due 2015 800 800
Note receivable from Highridge,
non-interest bearing, due on demand 3,988 3,624
Note receivable from Las Hadas,
non-interest bearing, due on demand 2,558 1,209
Note receivable from Anchor Village,
non-interest bearing, due on demand 1,334 1,282
Other related party receivables:
Loans to officers, bearing interest at 8%, due April 2006 633 633
Other related party receivables, substantially due on demand 1,481 2,109
-------- -------
$14,791 $13,654
======== =======
</TABLE>
Other related party receivables consist primarily of accrued interest
income on related party notes receivables and loans to officers, advances
and accrued management fees from joint venture investees and unreimbursed
expenses due from EMC.
(4) Forward Treasury Contracts
--------------------------
The Operating Partnership has one forward treasury contract for an
aggregate notional amount of $20,000, locking the 10 year treasury rate at
6.16%. This contract is to limit the interest rate exposure on identified
future debt financing requirements relating to multifamily development
10
<PAGE>
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
(Unaudited)
(Dollars in thousands, except for per share and per unit amounts)
projects. This contract will be settled no later than June 2000. If the
contract were settled as of March 31, 2000, the Operating Partnership would
be entitled to receive approximately $105.
During the first quarter of 2000, three of the four contracts that were
held as of December 31, 1999, were sold. The Operating Partnership received
proceeds of approximately $920. It is anticipated that these proceeds will
be reflected as a reduction in future project financing cost.
(5) New Accounting Pronouncements
-----------------------------
In June 1998, the FASB issued Financial Accounting Statement No. 133 (SFAS
133), Accounting for Derivative Instruments and Hedging Activities. The
Operating Partnership will adopt SFAS 133 for interim periods beginning in
2001, the effective date of SFAS 133, as amended. Management believes that
the adoption of these statements will not have a material impact on the
Operating Partnership's financial position or results of operations.
(6) Segment Information
-------------------
The Operating Partnership defines its reportable operating segments as the
three geographical regions in which its multifamily residential properties
are located: Northern California, Southern California, and the Pacific
Northwest. Non-segment property revenues and net operating income included
in the following schedule consists of revenue generated from the Operating
Partnership's commercial property. Excluded from segment revenues are
interest and other corporate income. Other non-segment assets include
investments, real estate under development, cash, receivables and other
assets. The revenues, net operating income, and assets for each of the
reportable operating segments are summarized as follows for the periods
presented.
<TABLE>
<CAPTION>
Three months ended
March 31, March 31,
2000 1999
--------- ---------
<S> <C> <C>
Revenues
Northern California $12,636 $11,288
Southern California 15,773 12,509
Pacific Northwest 9,391 8,116
------- -------
Total segment revenues 37,800 31,913
Non-segment property revenues - 685
Interest and other income 1,736 1,292
------- -------
Total revenues $39,536 $33,890
======= =======
Net operating income:
Northern California $ 9,880 $ 8,562
Southern California 10,716 8,332
Pacific Northwest 6,393 5,376
------- -------
Total segment net operating income 26,989 22,270
Non-segment net operating income (44) 248
Interest and other income 1,736 1,292
Depreciation and amortization (6,667) (6,045)
Interest (5,808) (4,934)
Amortization of deferred financing costs (159) (130)
General and administrative (1,125) (1,011)
------- -------
Income before gain on the sales of real
estate and minority interests $14,922 $11,690
======= =======
</TABLE>
11
<PAGE>
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
(Unaudited)
(Dollars in thousands, except for per share and per unit amounts)
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
-------------- -----------------
<S> <C> <C>
Assets:
Northern California $ 233,528 $ 216,946
Southern California 405,550 415,374
Pacific Northwest 230,539 195,011
---------- ----------
Total segment net real estate assets 869,617 827,331
Non-segment net real estate assets 5,130 5,140
---------- ----------
Net real estate assets 874,747 832,471
Non-segment assets 181,615 229,842
---------- ----------
Total assets $1,056,362 $1,062,313
========== ==========
</TABLE>
12
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and
----------------------------------------------------------------
Results of Operations
---------------------
The following discussion is based primarily on the consolidated unaudited
financial statements of Essex Portfolio, L.P. (the "Operating Partnership") for
the three months ended March 31, 2000 and 1999. This information should be read
in conjunction with the accompanying consolidated unaudited financial statements
and notes thereto. These consolidated financial statements include all
adjustments which are, in the opinion of management, necessary to reflect a fair
statement of the results and all such adjustments are of a normal recurring
nature.
The Operating Partnership holds, directly or indirectly, all of the Company's
interests in the Operating Partnership's properties and all of the Company's
operations relating to the Company's properties are conducted through the
Operating Partnership. The Company is the sole general partner of the Operating
Partnership and, as of March 31, 2000, December 31, 1999 and March 31, 1999,
owed an 89.7%, 89.7% and 90.0% general partnership interest in the Operating
Partnership, respectively.
Certain statements in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and elsewhere in the quarterly report on
Form 10-Q which are not historical facts may be considered forward looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities and Exchange Act of 1934, as amended,
including statements regarding the Operating Partnership's expectations, hopes,
intentions, beliefs and strategies regarding the future. Forward looking
statements include statements regarding the Operating Partnership's expectation
as to the timing of completion of current development projects, beliefs as to
the adequacy of future cash flows to meet operating requirements, and to provide
for dividend payments in accordance with REIT requirements and expectations as
to the amount of non-revenue generating capital expenditures for the year ended
December 31, 2000, potential acquisitions and developments, the anticipated
performance of existing properties, future acquisitions and developments and
statements regarding the Operating Partnership's financing activities. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors including, but not limited to, that the actual completion of
development projects will be subject to delays, that such development projects
will not be completed, that future cash flows will be inadequate to meet
operating requirements and/or will be insufficient to provide for dividend
payments in accordance with REIT requirements, that the actual non-revenue
generating capital expenditures will exceed the Operating Partnership's current
expectations, as well as those risks, special considerations, and other factors
discussed under the caption "Other Matters/Risk Factors" in Item 1 of the
Operating Partnership's Annual Report on Form 10-K for the year ended December
31, 1999, and those other risk factors and special considerations set forth in
the Operating Partnership's other filings with the Securities and Exchange
Commission (the "SEC") which may cause the actual results, performance or
achievements of the Operating Partnership to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements.
General Background
The Operating Partnership's property revenues are generated primarily from
multifamily property operations, which accounted for greater than 98% of its
property revenues for the three months ended March 31, 2000 and 1999. The
Operating Partnership's multifamily properties (the "Properties") are located in
Northern California (the San Francisco Bay Area), Southern California (Los
Angeles, Ventura, Orange and San Diego counties) and the Pacific Northwest (the
Seattle, Washington and Portland, Oregon metropolitan areas). The average
occupancy levels of the Operating Partnership's portfolio has exceeded 95% for
the last five years.
Since the Operating Partnership began operations in June 1994, the Operating
Partnership has acquired ownership interests in 58 multifamily residential
properties and its headquarters building. Of the multifamily properties
acquired since the Operating Partnership began operations, 11 are located in
13
<PAGE>
Northern California, 29 are located in Southern California, 18 are located in
the Seattle, Washington metropolitan area and one is located in the Portland,
Oregon metropolitan area. In total, these acquisitions consist of 11,954
multifamily units with total capitalized acquisition costs of approximately
$950.7 million. Additionally since it began operations, the Operating
Partnership has developed and has ownership interests in six multifamily
development properties that have reached stabilized operations. These
development properties consist of 1,220 units with total capitalized
development costs of $131.7 million. As part of its active portfolio
management strategy, the Operating Partnership has disposed of, since its it
began operations, 12 multifamily residential properties (seven in Northern
California, four in Southern California and one in the Pacific Northwest)
consisting of a total of 1,748 units, six retail shopping centers in the
Portland, Oregon metropolitan area and one commercial property in Northern
California at an aggregate gross sales price of approximately $190.7 million
resulting in total net realized gains of approximately $32.2 million and a
deferred gain of $5.0 million.
The Operating Partnership is developing five multifamily residential
communities, with an aggregate of 1,176 multifamily units. In connection with
these development projects, the Operating Partnership has directly, or in some
cases through its joint venture partners, entered into contractual construction
related commitments with unrelated third parties for approximately $91,300,000.
As of March 31, 2000, the Operating Partnership's remaining development
commitment is approximately $63,400,000.
Results of Operations
Comparison of the Three Months Ended March 31, 2000 to the Three Months Ended
- -----------------------------------------------------------------------------
March 31,1999.
- --------------
Average financial occupancy rates of the Operating Partnership's multifamily
Same Store Properties (properties owned by the Operating Partnership for each of
the three months ended March 31, 2000 and 1999) increased to 96.4% for the three
months ended March 31, 2000 from 95.7%, for the three months ended March 31,
1999. "Financial Occupancy" is defined as the percentage resulting from dividing
actual rental income by total possible rental income. Total possible rental
income is determined by valuing occupied units at contractual rents and vacant
units at market rents. The regional breakdown of financial occupancy for the
multifamily Same Store Properties for the three months ended March 31, 2000 and
1999 are as follows:
March 31, March 31,
2000 1999
---- ----
Northern California 97.8% 96.2%
Southern California 96.3% 96.7%
Pacific Northwest 94.6% 94.1%
14
<PAGE>
Total Revenues increased by $5,646,000 or 16.7% to $39,536,000 in the first
quarter of 2000 from $33,890,000 in the first quarter of 1999. The following
table sets forth a breakdown of these revenue amounts, including the revenues
attributable to the Same Store Properties.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
Number of Dollar Percentage
Properties 2000 1999 Change Change
---------- ------- ------- -------- ----------
<S> <C> <C> <C> <C> <C>
Revenues
Property revenues Same
Store Properties
Northern California 12 $10,529 $ 9,665 $ 864 8.9%
Southern California 13 9,360 8,702 658 7.7
Pacific Northwest 19 8,409 8,116 293 3.6
-- ------- ------- ------ ----------
Quarterly Same Store
Properties 44 28,298 26,483 1,815 6.9
==
Property revenues properties
acquired/disposed of
subsequent to December 31, 1998 9,502 6,115 3,387 55.4
------- ------- ------ ----------
Total property revenues 37,800 32,598 5,202 16.0
------- ------- ------ ----------
Interest and other income 1,736 1,292 444 34.4
------- ------- ------ ----------
Total revenues $39,536 $33,890 $5,646 16.7%
======= ======= ====== ==========
</TABLE>
As set forth in the above table, $3,387,000 of the $5,646,000 net increase in
total revenues is attributable to properties acquired or disposed of subsequent
to December 31, 1998, redevelopment communities and development communities.
During this period, the Operating Partnership acquired six multifamily
properties and reached stabilized operations at five development communities
(the "Acquisition Properties"), and disposed of six multifamily properties, and
one commercial property (the "Disposition Properties").
Of the increase in total revenues, $1,815,000 is attributable to increases in
property revenues from the Same Store Properties. Property revenues from the
Same Store Properties increased by approximately 6.9% to $28,298,000 in the
first quarter of 2000 from $26,483,000 in the first quarter of 1999. The
majority of this increase was attributable to the 12 multifamily Same Store
Properties located in Northern California. The property revenues of the Same
Store Properties in Northern California increased by $864,000 or 8.9% to
$10,529,000 in the first quarter of 2000 from $9,665,000 in the first quarter of
1999. This $864,000 increase is primarily attributable to rental rate increases
and an increase in financial occupancy to 97.8% in the first quarter of 2000
from 96.2% in the first quarter of 1999. The 13 Same Store Properties located
in Southern California accounted for the next largest regional component of the
Same Store Properties property revenues increase. The property revenues of
these properties increased by $658,000 or 7.7% to $9,360,000 in first quarter of
2000 from $8,702,000 in the first quarter of 1999. The $658,000 increase is
attributable to rental rate increases which were offset by a decrease in
financial occupancy to 96.3% in the first quarter of 2000 from 96.7% in the
third quarter of 1999. The 19 multifamily residential properties located in the
Pacific Northwest also contributed to the Same Store Properties property
revenues increase. The property revenues of these properties increased by
$293,000 or 3.6% to $8,409,000 in the first quarter of 2000 from $8,116,000 in
the first quarter of 1999. The $293,000 increase is primarily attributable to
rental rate increase and an increase in financial occupancy to 94.6% in the
first quarter of 2000 from 94.1% in the first quarter of 1999. The increase in
total revenue also reflected an increase of $444,000 attributable to interest
and other income, which primarily relates to interest income on outstanding
notes receivables and income earned on the Operating Partnership's joint venture
investments.
Total Expenses increased by $2,414,000 or approximately 10.9% to $24,614,000 in
the first quarter of 2000 from $22,200,000 in the first quarter of 1999.
Interest expense increased by $874,000 or 17.7% to $5,808,000 in the first
quarter from $4,934,000 in the first quarter of 1999. Such increase was
primarily due to the net addition of outstanding mortgage debt in connection
with property and investment acquisitions which was offset in part by
capitalization of interest charges relating to the Operating Partnership's
development and redevelopment communities. Property operating expenses,
exclusive of
15
<PAGE>
depreciation and amortization, increased by $775,000 or 7.7% to $10,855,000 in
the first quarter of 2000 from $10,080,000 in the first quarter of 1999. Of such
increase, $971,000 was attributable to the Acquisition Properties and the
Disposition Properties. The aggregate property operating expense increase is
less than the amount of such increase for the Acquisition and Disposition
Properties due to a decrease in property operating expenses of the Same Store
Properties.
General and administrative expenses represent the costs of the Operating
Partnership's various acquisition and administrative departments as well as
partnership administration and non-operating expenses. Such expenses increased
by $114,000 in the first quarter of 2000 from the amount for the first quarter
of 1999. This increase is largely due to additional staffing requirements
resulting from the growth of the Operating Partnership.
Net income increased by $7,254,000 to $18,798,000 in the first quarter of 2000
from $11,544,000 in the first quarter of 1999. Net income for the first quarter
of 2000 included a gain on the sales of real estate of $4,022,000. No gains on
sale were recognized in the first quarter of 1999. The remainder of the
increase is a result of the net contribution of the Acquisition Properties and
the increase in net operating income from the Same Store Properties.
Liquidity and Capital Resources
At March 31, 2000 the Operating Partnership had $23,086,000 of unrestricted cash
and cash equivalents. The Operating Partnership expects to meet its short-term
liquidity requirements by using its working capital, cash generated from
operations and amounts available under lines of credit. The Operating
Partnership believes that its current net cash flows will be adequate to meet
operating requirements and to provide for payment of dividends by the Company in
accordance with REIT qualification requirements. The Operating Partnership
expects to meet its long-term funding requirements relating to property
acquisition and development (beyond the next 12 months) by using working
capital, amounts available from lines of credit, net proceeds from public and
private debt and equity issuances, and proceeds from the disposition of
properties that may be sold from time to time. There can, however, be no
assurance that the Operating Partnership will have access to the debt and equity
markets in a timely fashion to meet such future funding requirements or that
future working capital, and borrowings under the lines of credit will be
available, or if available, will be sufficient to meet the Operating
Partnership's requirements or that the Operating Partnership will be able to
dispose of properties in a timely manner and under terms and conditions that the
Operating Partnership deems acceptable.
The Operating Partnership has a $100,000,000 unsecured line of credit.
Outstanding balances under the line of credit bear interest at the bank's
reference rate, or at the Operating Partnership's option, 1.15% over the LIBOR
rate. The line of credit matures in May 2000. At March 31, 2000 the Operating
Partnership had no balance outstanding on its line of credit. During the quarter
ended March 31, 2000, the Operating Partnership had outstanding balances which
bore interest rates ranging from 7.0% to 8.0%. The Operating Partnership
intends to replace or renew this facility prior to its expiration with similar
terms.
In addition to the unsecured line of credit, the Operating Partnership had
$372,917,000 of secured indebtedness at March 31, 2000. Such indebtedness
consisted of $291,597,000 in fixed rate debt with interest rates varying from
6.4% to 8.8% and maturity dates ranging from 2000 to 2026. The indebtedness
also included $58,820,000 of debt represented by tax exempt variable rate demand
bonds with interest rates paid during the first three months of 2000 ranging
from 5.0% to 6.0% and maturity dates ranging from 2020 to 2026. The tax exempt
variable rate demand bonds are capped at a maximum interest rates ranging from
7.1% to 7.3%. At March 31, 2000, the Operating Partnership also had a variable
rate construction loan outstanding which is secured by one of its development
communities. This development community reached stabilized operations in March
2000. The construction loan, in the aggregate amount of $22,500,000 bears
interest at LIBOR plus 2.0% and matures in June 2000.
The Operating Partnership's unrestricted cash balance increased by $10,738,000
from $12,348,000 as of December 31, 1999 to $23,086,000 as of March 31, 2000.
This increase was primarily a result of
16
<PAGE>
$22,032,000 of net cash provided by operating activities and $14,793,000 of net
cash provided by investing activities, which was offset by $26,087,000 of net
cash used in financing activities. Of the $14,793,000 net cash provided by
investing activities, $31,302,000 of proceeds were received from the disposition
of real estate, as offset by $5,548,000 of cash used to purchase and upgrade
rental properties and $9,526,000 used to fund real estate under development. The
$26,087,000 net cash used in financing activities was primarily a result of
$28,191,000 of repayments of mortgage and other notes payable and lines of
credit and $10,044,000 of dividends/distributions paid which was offset by
$17,000,000 of proceeds from mortgage and other notes payable and lines of
credit.
Non-revenue generating capital expenditures are improvements and upgrades that
extend the useful life of the property and are not related to preparing a
multifamily property unit to be rented to a tenant. The Operating Partnership
expects to incur approximately $320 per weighted average occupancy unit in non-
revenue generating capital expenditures for the year ended December 31, 2000.
These expenditures do not include the improvements required in connection with
the origination of mortgage loans, expenditures for acquisition properties'
renovations and improvements which are expected to generate additional revenue,
and renovation expenditures required pursuant to tax-exempt bond financings.
The Operating Partnership expects that cash from operations and/or its lines of
credit will fund such expenditures. However, there can be no assurance that the
actual expenditures incurred during 2000 and/or the funding thereof will not be
significantly different than the Operating Partnership's current expectations.
The Operating Partnership is developing five multifamily residential
communities, with an aggregate of 1,176 multifamily units. Such projects
involve certain risks inherent in real estate development. See "Other
Matters/Risk Factors - Risks That Development Activities Will Be Delayed or Not
Completed" in Item 1 of the Operating Partnership's Annual Report on Form 10-K
for the year ended December 31, 1999. In connection with these development
projects, the Operating Partnership has directly, or in some cases through its
joint venture partners, entered into contractual construction related
commitments with unrelated third parties for a total amount of approximately
$91,300,000. As of March 31, 2000, the Operating Partnership's remaining
commitment to fund the estimated cost to complete is approximately $63,400,000.
The Operating Partnership expects to fund such commitments with a combination of
its working capital, operating cash flows, amounts available on its lines of
credit, net proceeds from public and private equity and debt issuances, and
proceeds from the disposition of properties, which may be sold from time to
time. During the first quarter of 2000, the Operating Partnership reached
stabilized occupancy at three communities that were previously reported as
development communities.
Pursuant to existing shelf registration statements, the Company has the capacity
to issue up to $342,000,000 of equity securities and the Operating Partnership
has the capacity to issue up to $250,000,000 of debt securities.
The Operating Partnership pays quarterly dividends from cash available for
distribution. Until it is distributed, cash available for distribution is
invested by the Operating Partnership primarily in short-term investment grade
securities or is used by the Operating Partnership to reduce balances
outstanding under its line of credit.
Year 2000 Compliance
The date is now past January 1, 2000 and the Operating Partnership has not
experienced any immediate adverse impact from the transition to the year 2000.
However, the Operating Partnership cannot provide assurance that its vendors
have not or will nor be affected in a manner that is not yet apparent. The
Operating Partnership uses software, computer technology and other services
provided by third party vendors that may fail due to year 2000 issues. This
failure may involve significant time and expense, and uncorrected problems could
potentially harm the Operating Partnership's operations. Therefore, the
Operating Partnership will continue to monitor its year 2000 compliance and the
year 2000 compliance of its vendors.
17
<PAGE>
Funds from Operations
Industry analysts generally consider funds from operations, ("Funds From
Operations"), an appropriate measure of performance of an equity REIT. The
Company, the sole general partner in the Operating Partnership, has elected to
be treated as a REIT under the code. Generally, Funds From Operations adjusts
the net income of equity REITs for non-cash charges such as depreciation and
amortization of rental properties and non-recurring gains or losses. Management
considers Funds from Operations to be a useful financial performance measurement
of an equity REIT because, together with net income and cash flows, Funds from
Operations provides investors with an additional basis to evaluate the ability
of a REIT to incur and service debt and to fund acquisitions and other capital
expenditures. Funds From Operations does not represent net income or cash flows
from operations as defined by generally accepted accounting principles ("GAAP")
and is not intended to indicate whether cash flows will be sufficient to fund
cash needs. It should not be considered as an alternative to net income as an
indicator of the REIT's operating performance or to cash flows as a measure of
liquidity. Funds From Operations does not measure whether cash flow is
sufficient to fund all cash needs including principal amortization, capital
improvements and distributions to shareholders. Funds From Operations also does
not represent cash flows generated from operating, investing or financing
activities as defined under GAAP. Further, Funds from Operations as disclosed
by other REITs may not be comparable to the Company's presentation of Funds From
Operations. The following table sets forth The Company's calculation of Funds
from Operations for the three months ended March 31, 2000 and 1999.
March 31, 2000 March 31, 1999
--------------- ---------------
Income before gain on the sales of
real estate and minority interests $14,922,000 $11,690,000
Adjustments:
Depreciation and amortization 6,667,000 6,045,000
Unconsolidated joint ventures 1,009,000 367,000
Minority interests (1) (4,726,000) (2,363,000)
----------- -----------
Funds from Operations $17,872,000 $15,739,000
=========== ===========
Weighted average number
shares outstanding diluted (1) 20,578,898 20,496,718
=========== ===========
/(1)/ Includes all outstanding units of the general partner common equity and
preferred equity and assumes conversion of all limited partner common
equity into shares of the Company's Common Stock.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Operating Partnership is exposed to interest rate changes primarily as a
result of its line of credit and long-term debt used to maintain liquidity and
fund capital expenditures and expansion of the Operating Partnership's real
estate investment portfolio and operations. The Operating Partnership's
interest rate risk management objective is to limit the impact of interest rate
changes on earnings and cash flows and to lower its overall borrowing costs. To
achieve its objectives the Operating Partnership borrows primarily at fixed
rates and may enter into derivative financial instruments such as interest rate
swaps, caps and treasury locks in order to mitigate its interest rate risk on a
related financial instrument. The Operating Partnership does not enter into
derivative or interest rate transactions for speculative purposes.
The Operating Partnership's interest rate risk is monitored using a variety of
techniques. The table below presents the principal amounts and weighted average
interest rates by year of expected maturity to evaluate the expected cash flows
and sensitivity to interest rate changes. The Operating Partnership believes
that the principal amounts of the Operating Partnership's mortgage notes payable
and line of credit approximate
18
<PAGE>
fair value as of March 31, 2000 as interest rates are consistent with yields
currently available to the Operating Partnership for similar instruments.
<TABLE>
<CAPTION>
For Year Ended: 2000 2001 2002 2003 2004 Thereafter Total
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed rate debt (In thousands)
$ 2,247 20,586 24,832 30,481 2,697 210,754 $291,597
Average interest rate 7.1% 6.6% 6.6% 7.0% 7.0% 7.0%
Variable rate LIBOR debt (In thousands)
$22,500 - - - - 58,820(1) $ 81,320
Average interest 8.1% - - - - 5.50%
</TABLE>
/(1)/ Capped at interest rates ranging from 7.1% to 7.3%
The Operating Partnership has one forward treasury contract for an aggregate
notional amount of $20,000,000, locking the 10 year treasury rate at 6.16% which
limits interest rate exposure on certain future debt financing and which will be
settled in 2000. The fair value of this contract as of March 31, 2000 is
approximately $105,000. Fair value represents the estimated payments that the
Operating Partnership would be entitled to receive if the contract were
terminated at March 31, 2000.
The forward treasury contract represents the exposures that exist as of March
31, 2000. As firm commitments do not exist as of March 31, 2000, the
information presented herein has limited predictive value. As a result, the
Operating Partnership's ultimate realized gain or loss with respect to interest
rate fluctuations will depend on the exposures that may arise during the period,
the Operating Partnership's hedging strategies at that time and interest rates.
19
<PAGE>
Part II Other Information
- ------- -----------------
Item 6: Exhibits and Reports on Form 8-K
A. Exhibits
--------
3.1 Certificate of Correction to Articles Supplementary reclassifying
2,000,000 shares of Common Stock as 2,000,000 shares of 9.30%
Series D Cumulative Redeemable Preferred Stock
3.2 Certificate of Amendment of the Bylaws of Essex Property Trust,
Inc. dated February 14, 2000
27.1 Article 5 Financial Data Schedule (EDGAR Filing Only)
B. Reports on Form 8-K
-------------------
None
20
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ESSEX PORTFOLIO, L.P.
A California Limited Partnership
By: Essex Property Trust, inc.
Its: General Partner
/s/ MARK J. MIKL
---------------
Mark J. Mikl, Vice President and Controller
(Authorized Officer and Principal Accounting
Officer)
May 10, 2000
------------------
Date
21
<PAGE>
EXHIBIT 3.1
ESSEX PROPERTY TRUST, INC.
--------------------------
CERTIFICATE OF CORRECTION
THIS IS TO CERTIFY THAT:
Essex Property Trust, Inc., a Maryland corporation (the "Corporation"),
hereby certifies to the State Department of Assessment and Taxation of Maryland
that:
FIRST: The title of the document being corrected is Articles Supplementary
Reclassifying 2,000,000 shares of Common Stock as 2,000,000 shares of 9.30%
Series D Cumulative Redeemable Preferred Stock.
SECOND: The document being corrected was filed on July 30, 1999.
THIRD: The provisions of the Articles Supplementary which are to be
corrected are as follows:
1. Section 2 currently reads as follows:
"Section 2. Rank. The Series D Preferred Stock will, with
----
respect to distributions and rights upon voluntary or involuntary
liquidation, winding-up or dissolution of the Corporation, rank
senior to all classes or series of Common Stock (as defined in
the Charter) and to all classes or series of equity securities of
the Corporation now or hereafter authorized, issued or
outstanding, other than the 8.75% Convertible Preferred Stock,
Series 1996A (the "Series A Preferred Stock"), the 7.875% Series
B Cumulative Redeemable Preferred Stock (the "Series B Preferred
Stock") and the 9_% Series C Cumulative Redeemable Preferred
Stock (the "Series C Preferred Stock") with which it shall be on
a parity and any other class or series of equity securities of
the Corporation expressly designated as ranking on a parity with
or senior to the Series D Preferred Stock as to distributions and
rights upon voluntary or involuntary liquidation, winding-up or
dissolution of the Corporation. For purposes of these terms of
the Series D Preferred Stock, the term "Parity Preferred Stock"
shall be used to refer to the Series A Preferred Stock, the
Series B Preferred Stock, the Series C Preferred Stock and any
other class or series of equity securities of the Corporation now
or hereafter authorized, issued or outstanding expressly
designated by the Corporation to rank on a parity with Series D
Preferred Stock with respect to distributions and rights upon
voluntary or involuntary liquidation, winding up or dissolution
of the Corporation."
1
<PAGE>
2. The section directly following paragraph SIXTH currently reads as
follows:
"IN WITNESS WHEREOF, these Articles Supplementary are executed on
behalf of the Corporation by its President and attested by its
Assistant Secretary this ___ day of July, 1999."
FOURTH: The corrected provisions of the Articles Supplementary are as
follows:
1. Section 2 shall read as follows:
"Section 2. Rank. The Series D Preferred Stock will, with
----
respect to distributions and rights upon voluntary or involuntary
liquidation, winding-up or dissolution of the Corporation, rank
senior to all classes or series of Common Stock (as defined in
the Charter) and to all classes or series of equity securities of
the Corporation now or hereafter authorized, issued or
outstanding, other than the 8.75% Convertible Preferred Stock,
Series 1996A (the "Series A Preferred Stock"), the 7.875% Series
B Cumulative Redeemable Preferred Stock (the "Series B Preferred
Stock") and the 9 1/8% Series C Cumulative Redeemable Preferred
Stock (the "Series C Preferred Stock") with which it shall be on
a parity and any other class or series of equity securities of
the Corporation expressly designated as ranking on a parity with
or senior to the Series D Preferred Stock as to distributions and
rights upon voluntary or involuntary liquidation, winding-up or
dissolution of the Corporation. For purposes of these terms of
the Series D Preferred Stock, the term "Parity Preferred Stock"
shall be used to refer to the Series A Preferred Stock, the
Series B Preferred Stock, the Series C Preferred Stock and any
other class or series of equity securities of the Corporation now
or hereafter authorized, issued or outstanding expressly
designated by the Corporation to rank on a parity with Series D
Preferred Stock with respect to distributions and rights upon
voluntary or involuntary liquidation, winding up or dissolution
of the Corporation."
2. The section directly following paragraph SIXTH shall read as
follows:
"IN WITNESS WHEREOF, these Articles Supplementary are executed on
behalf of the Corporation by its President and attested by its
Assistant Secretary this 28th day of July, 1999."
The undersigned President acknowledges this Certificate of Correction to be
the corporate act of the Corporation and as to all matters or facts required to
be verified under oath, the undersigned President acknowledges that to the best
of his knowledge, information and belief, these matters and facts are true in
all material aspects and that this statement is made under the penalties for
perjury.
2
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Correction to be assigned in its name and on its behalf by its President and
attested to by its Assistant Secretary on this 9th day of September, 1999.
ATTEST: ESSEX PROPERTY TRUST, INC.
/s/ Michael J. Schall By: /s/ Keith R. Guericke (SEAL)
- --------------------- ---------------------
Michael J. Schall Keith R.Guericke
Assistant Secretary President
3
<PAGE>
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
OF
THE BYLAWS OF
ESSEX PROPERTY TRUST, INC.
a Maryland corporation
The undersigned, Michael J. Schall, hereby certifies that:
1. He is the duly elected Assistant Secretary of Essex Property
Trust, Inc., a Maryland corporation (the "Company").
2. Effective as of February 14, 2000, Section 1.11 of Article I of
the Company's Bylaws was amended in its entirety to read as follows:
SECTION 1.11 Annual Meetings and Stockholder Proposals. Nominations of
-----------------------------------------
individuals for election to the Board of Directors and the proposal of business
to be considered by the stockholders may be made at an annual meeting of
stockholders (i) pursuant to the Corporation's notice of meeting, (ii) by or at
the direction of the Board of Directors or (iii) by any stockholder of the
Corporation who was a stockholder of record at the time of giving of notice
provided for in this Section 1.11, who is entitled to vote at the meeting and
who complied with the notice procedures set forth in this Section 1.11.
For nominations or other business to be properly brought before an annual
meeting by a stockholder pursuant to clause (iii) of the preceding paragraph of
this Section 1.11, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation. To be timely, a stockholder's
notice must be delivered to or mailed and received at the principal executive
offices of the corporation, not less than 45 days nor more than 75 days prior to
the date on which the corporation first mailed its proxy materials for the
previous year's annual meeting of stockholders (or the date on which the
corporation mails its proxy materials for the current year if during the prior
year the corporation did not hold an annual meeting or if the date of the annual
meeting was changed more than 30 days from the prior year). Such stockholder's
notice shall set forth (i) as to each person whom the stockholder proposes to
nominate for election or reelection as a director all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected); (ii) as
to any other business that the stockholder proposes to being before the meeting,
a brief description of the business desired to be brought before the meeting,
the reasons for conducting such business at the meeting and any material
interest in such business of such stockholder and of the beneficial owner, if
any, on whose behalf the proposal is made; and (iii) as to the stockholder
giving the notice and the beneficial owner, if any, on
1
<PAGE>
whose behalf the nomination or proposal is made, (x) the name and address of
such stockholder, as they appear on the Corporation's books, and of such
beneficial owner and (y) the number of shares of each class of stock of the
Corporation which are owned beneficially and of record by such stockholder and
such beneficial owner.
Notwithstanding anything in the second sentence of the preceding paragraph
of this Section 1.11 to the contrary, in the event that the number of directors
to be elected to the Board of Directors is increased and there is no public
announcement naming all of the nominees for director or specifying the size of
the increased Board of Directors made by the Corporation at least 70 days prior
to the first anniversary of the preceding year's annual meeting, a stockholder's
notice required by this Section 1.11 shall also be considered timely, but only
with respect to nominees for any new positions created by such increase, if it
shall be delivered to the secretary at the principal executive offices of the
Corporation not later than the close of business on the tenth day following on
which such public announcement is first made by the Corporation.
Notwithstanding the preceding two paragraphs, for nominations of
individuals for election as a "Series 1996A Director(s)" (as defined in Section
2.2), pursuant to clause (iii) of the first paragraph in this Section 1.11, to
be properly brought before a meeting of stockholders, the holder of "Series
1996A Stock" (as defined in Section 2.2) shall deliver his or her nomination(s)
to the Secretary of the Corporation at the principal executive offices not less
than 60 days nor more than 120 days prior to the first anniversary of the
preceding year's annual meeting. The Corporation shall promptly notify the
holders of Series 1996A Stock if the date of the annual meeting is advanced by
more than 30 days from such anniversary date, and any nomination shall be
considered timely if delivered to the Secretary either within 60 days after
receipt of such notice or not less than 60 days prior to the date of the annual
meeting as contained in such notice.
3. Effective as of February 14, 2000, Section 2.2 of Article II of
the Company's Bylaws was amended in its entirety to read as follows:
"SECTION 2.2 Number of Directors. The Corporation shall have at
-------------------
least the minimum number of directors required by the Maryland General
Corporation Law. The Corporation shall have a Board of Directors consisting of
eleven directors. Ten of the eleven directors, hereinafter referred to as the
"Common Directors," shall be elected by the holders of common stock and the
holders of all classes or series of stock who vote together with the holders of
common stock and the remaining director, hereinafter referred to as the "Series
1996A Director" shall be elected by the holders of the 8.75% Convertible
Preferred Stock, Series 1996A (the "Series 1996A Stock"), voting separately as a
class. The number of directors may be increased upon certain events as provided
in (i) Article First, Section 3 of the Articles Supplementary classifying
1,600,000 shares of Common Stock as shares of 8.75% Convertible Preferred Stock,
Series 1996A (or Article FIFTH, subsection (e) of any restatement of the
Charter) (the "Articles Supplementary (Series 1996A Stock)"), (ii) Article
Third, Section 6 of the Articles Supplementary classifying 2,000,000 shares of
Common Stock as shares of 7.875% Series B Cumulative Redeemable Preferred Stock
(or Article FIFTH, subsection
2
<PAGE>
(f) of any restatement of the Charter), (iii) Articles First, Section 3.c of the
Articles Supplementary Reclassifying 6,617,822 shares of Common Stock as
6,617,822 shares of Series A Junior Participating Preferred Stock (or Article
FIFTH, subsection (g) of any restatement of the Charter), (iv) Article Third,
Section 6 of the Articles Supplementary classifying 500,000 shares of Common
Stock as 500,000 shares of 9 1/8% Series C Cumulative Redeemable Preferred Stock
(or Article FIFTH, subsection (h) of any restatement of the Charter), (v)
Article Third, Section 6 of the Articles Supplementary classifying 2,000,000
shares of Common Stock as 2,000,000 shares of 9.30% Series D Cumulative
Redeemable Preferred Stock (or Article FIFTH, subsection (h) of any restatement
of the Charter), (vi) Article Third, Section 6 of the Articles Supplementary
classifying 2,200,000 shares of Common Stock as 2,200,000 shares of 9.25% Series
E Cumulative Redeemable Preferred Stock (or Article FIFTH, subsection (h) of any
restatement of the Charter), and (vii) in any additional articles supplementary
to the Charter adopted by the Board of Directors pursuant to authority conferred
upon the Board of Directors by Article FIFTH of the Charter. All directors shall
be classified with respect to their respective terms of office as provided in
Section 2.3 and each director shall serve until the expiration of his or her
term and until his or her successor is elected and qualifies."
IN WITNESS HEREOF, the undersigned has set his hand hereto this 14th
day of February 2000.
/s/ Michael J. Schall
----------------------------
Michael J. Schall
Assistant Secretary
3
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ESSEX
PORTFOLIO, L.P. REPORT FOR THE THREE MONTHS ENDED MARCH 31, 2000.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 23,086
<SECURITIES> 0
<RECEIVABLES> 22,577
<ALLOWANCES> 0
<INVENTORY> 0
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0
1
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</TABLE>
