<PAGE> 1
FORM 10Q
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, 1996
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. 1-13106
ESSEX PROPERTY TRUST, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 77-0369576
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
777 CALIFORNIA AVENUE, PALO ALTO, CALIFORNIA 94304
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(ZIP CODE)
(415) 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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
6,275,000 SHARES OF COMMON STOCK,
$.0001 PAR VALUE AS OF MARCH 31, 1996
Exhibit Index on Page 15
Page 1 of 28
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Page Number
- ------- ----------- -----------
<S> <C>
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements (Unaudited) 3
Condensed Consolidated Balance Sheet of Essex Property Trust, Inc. as of
March 31, 1996 and December 31, 1995 4
Condensed Consolidated Statement of Operations of Essex Property Trust, Inc.
for the three months ended March 31, 1996 and 1995 5
Condensed Consolidated Statement of Cash Flows of Essex Property Trust, Inc.
for the three months ended March 31, 1996 and 1995 6
Notes to Condensed Consolidated Financial Statements 7
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
PART II: OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
Page 2 of 28
<PAGE> 3
PART I
ITEM 1 FINANCIAL INFORMATION
"Essex" means Essex Property Trust, Inc., a real estate investment trust
incorporated in the State of Maryland, or where the context otherwise requires,
Essex Portfolio, L.P., a partnership in which Essex Property Trust, Inc.
is the sole general partner.
The information furnished in the accompanying condensed consolidated balance
sheet, condensed consolidated statement of operations and condensed consolidated
statement of cash flows of Essex reflect 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.
Page 3 of 28
<PAGE> 4
ESSEX PROPERTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
Assets 1996 1995
------ --------- ------------
<S> <C> <C>
Real estate:
Rental properties:
Land and land improvements $ 65,374 $ 61,738
Buildings and improvements 231,732 222,620
-------- --------
297,106 284,358
Less accumulated depreciation (42,456) (40,281)
-------- --------
254,650 244,077
Investments 8,581 8,656
-------- --------
263,231 252,733
Cash and cash equivalents 2,651 3,983
Notes and other related party receivables 6,289 4,780
Notes and other receivables 5,092 5,130
Prepaid expenses and other assets 1,567 1,944
Deferred charges, net 3,790 5,090
-------- --------
$282,620 $273,660
======== ========
Liabilities and Stockholders' Equity
Mortgage notes payable 152,358 136,061
Lines of credit 12,869 18,463
Accounts payable and accrued liabilities 4,727 2,964
Dividends payable 3,455 3,455
Other liabilities 1,662 1,565
-------- --------
Total liabilities 175,071 162,508
Minority interest 25,544 26,423
Stockholders' equity:
Common stock, $.0001 par value, 670,000,000 shares authorized,
6,275,000 shares issued and outstanding 1 1
Additional paid-in capital 112,070 112,070
Accumulated deficit (30,066) (27,342)
-------- --------
Total stockholders' equity 82,005 84,729
-------- --------
$282,620 $273,660
======== ========
</TABLE>
See accompanying notes to the unaudited financial statements.
Page 4 of 28
<PAGE> 5
ESSEX PROPERTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except shares per share amounts)
<TABLE>
<CAPTION>
Three months ended
March 31, March 31,
1996 1995
----------- ----------
<S> <C> <C>
Revenues:
Rental $ 10,951 $ 10,307
Interest and other income 603 616
--------- ---------
11,554 10,923
--------- ---------
Expenses:
Property operating expenses:
Maintenance and repairs 1,007 985
Real estate taxes 886 849
Utilities 756 768
Administrative 656 675
Advertising 151 70
Insurance 146 136
Depreciation and amortization 2,190 1,980
--------- ---------
5,792 5,463
--------- ---------
Interest 2,901 2,720
Amortization of deferred financing costs 245 363
General and administrative 397 365
Loss from hedge termination 21 --
--------- ---------
Total expenses 9,356 8,911
--------- ---------
Income before minority interests and extraordinary
item 2,198 2,012
Minority interest (75) (525)
--------- ---------
Income before extraordinary item 2,123 1,487
Extraordinary item:
Loss on early extinguishment of debt (2,180) --
--------- ---------
Net income (loss) $ (57) $ 1,487
========= =========
Per share data:
Net income per share from operations before
extraordinary item $ .34 .24
Extraordinary item - debt extinguishment (.35) --
--------- ---------
Net income (loss) per share $ (.01) $ .24
========= =========
Weighted average number of shares outstanding
during the period 6,275,000 6,275,000
========= =========
</TABLE>
See accompanying notes to the unaudited financial statements.
Page 5 of 28
<PAGE> 6
ESSEX PROPERTY TRUST, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unadited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three months ended Three months ended
March 31, 1996 March 31, 1995
------------------ ------------------
<S> <C> <C>
Net cash flows from operating activities $ 5,695 $ 4,429
Cash flows from investing activities:
Additions to real estate investments (12,748) (541)
Investments in corporations and joint ventures 154 0
-------- -------
Net cash used in investing activities (12,594) (541)
Cash flows from financing activities:
Proceeds from mortgages, other notes payable
and lines of credit 45,271 880
Repayment of mortgages, other notes
payables and lines of credit (34,568) (1,559)
Additions to deferred charges (225) 0
Additions to notes and other related party
receivables/payables 2,166 574
Repayment of notes, other related party
receivables/payables (3,622) (785)
Distribution to partners/dividends to shareholders (3,455) (3,394)
-------- -------
Net cash provided by (used in) financing activities 5,567 (4,284)
-------- -------
Net decrease in cash and cash equivalents (1,332) (396)
Cash and cash equivalents at beginning of period 3,983 2,411
-------- -------
Cash and cash equivalents at end of period $ 2,651 $ 2,015
======== =======
Supplemental disclosure of cash flow
information
Cash paid for interest $ 2,910 $ 2,705
======== =======
Supplemental disclosure of non-cash investing
and financing activity
Mortgage note payable assumed in
connection with purchase of real estate
investment $ 0 $ 0
======== =======
Dividends declared and payable $ 3,455 $ 3,394
======== =======
</TABLE>
See accompanying notes to the unaudited financial statements.
Page 6 of 28
<PAGE> 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
(1) ORGANIZATION AND BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements of Essex
Property Trust, Inc. (the "Company") are prepared in accordance with
generally accepted accounting principles for interim financial information
and 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 condensed
consolidated financial statements should be read in conjunction with the
audited consolidated financial statements included in the Company's annual
report on Form 10-K for the year ended December 31, 1995.
The accompanying consolidated financial statements present the accounts of
Essex Property Trust, Inc., following certain reorganization transactions
in connection with the sale of 6,275,000 shares of common stock in an
initial public offering which closed on June 13, 1994 (the "Offering").
The consolidated financial statements for the three months ended March 31,
1996 and 1995 include the accounts of the Company and Essex Portfolio,
L.P. (the "Operating Partnership", which holds the operating assets of the
Company). The Company is the sole general partner in and owns 77.2% of the
Operating Partnership. The limited partners own an aggregate 22.8%
interest in the Operating Partnership.
All significant intercompany balances and transactions have been
eliminated in the consolidated financial statements.
(2) SIGNIFICANT TRANSACTIONS
The following significant transactions occurred during the quarter ended
March 31, 1996:
(A) Acquisitions
(I) On January 31, 1996, Essex acquired Treetops Apartments, a 172 unit
apartment community in Fremont, California for a contract price of
$10,725. Essex assumed the existing mortgage owed on the property
of approximately $7,266, which carries an 8.5% fixed interest rate
and is due in September, 1999. Built in 1978, Treetops has a heated
pool and spa, fitness center, and patios or balconies in individual
units.
(B) Debt related transactions
(I) On February 16, 1996, Essex refinanced a mortgage loan in the
approximate amount of $12,160 loan with a 7.1% 10 year fixed rate
loan in the amount of $14,475. In connection with the refinance
transaction, Essex has paid the lender a prepayment fee of $500
and, subject to final negotiations, could pay up to $400
additionally. Essex wrote off approximately $1,105 in deferred
financing costs.
(II)On February 21, 1996, Essex refinanced three variable rate loans
in the approximate balance of $18,960, with a $20,200, 7.5%, 7 year
fixed rate mortgage. Essex wrote off approximately $175 in deferred
financing costs in connection with this transaction.
(3) RELATED PARTY TRANSACTIONS
Effective June 13, 1994, all general and administrative expenses of the
Company and Essex Management Corporation ("EMC") are initially borne by the
Company, with a portion subsequently allocated to EMC. Expenses allocated
to EMC for the three months ended March 31, 1996 and 1995, totaled $425 and
$488,
Page 7 of 28
<PAGE> 8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
respectively, and are reflected as a reduction in general and
administrative expenses in the accompanying consolidated statements of
operations.
Included in rental income in the accompanying consolidated statements of
operations is related party rents earned from space leased to The Marcus &
Millichap Company ("M&M"), including operating expense reimbursements, of
$170 and $165 for the three months ended March 31, 1996 and 1995,
respectively.
Included in other income for the three months ended March 31, 1996 and 1995
is interest income of $91 and $86, earned principally under notes
receivable from Essex Fidelity I Corporation and Essex Sacramento
Corporation, respectively, and management fees and equity income of $137
and 0, earned from Essex Bristol Partners and Essex San Ramon Partners,
respectively.
Effective June 13, 1994, EMC provides property management services to the
Company's neighborhood shopping centers. The fee paid by the Company for
the three months ended March 31, 1996 and 1995 was $28, and $25,
respectively, and is included in administrative expense in the accompanying
consolidated statements of operations.
Notes and other related party receivables as of March 31, 1996 and December
31, 1995 consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
Notes receivable from Essex Fidelity I Corporation
and Essex Sacramento Corporation, bearing
interest at 9% due on demand $3,380 $3,540
Notes receivable from Essex Marina Cove, L.P.
bearing interest at 12% due on demand 1,466 --
Notes receivable from Essex Fidelity I Corporation
and Jackson School Village, L.P. bearing
interest at 9.5% - 10%, due 2015 500 500
Other related party receivables 943 740
------ ------
$6,289 $4,780
====== ======
</TABLE>
Other related party receivables consist primarily of unreimbursed expenses
due from EMC, accrued interest income on related party notes receivable and
acquisition cost-related reimbursements due from Essex San Ramon Partners.
As of March 31, 1996 and December 31, 1995, the Company has payables to
related parties totaling $166 and $217, representing temporary borrowings
and unreimbursed expenses, respectively.
During the three months ended March 31, 1996, the Company paid brokerage
commissions totalling $250 to M&M in connection with the purchase of real
estate. The commissions are reflected as an increased cost on the purchase
of real estate in the accompanying condensed consolidated balance sheet.
Page 8 of 28
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion is based primarily on the consolidated financial
statements of Essex Property Trust, Inc. ("Essex" or the "Company") as of March
31, 1996 and 1995 and for the three months ended March 31, 1996 and 1995.
This information should be read in conjunction with the accompanying
consolidated financial statements and notes thereto. These 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.
Substantially all the assets of Essex are held by, and substantially all
operations conducted through, Essex Portfolio, L.P. (the "Operating
Partnership"). Essex is the sole general partner of the Operating Partnership
and, as of March 31, 1996 and 1995, owned a 77.2% general partnership interest
in the Operating Partnership. The Company qualifies as a Real Estate Investment
Trust (a "REIT") for Federal income tax purposes.
Certain statements in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations," section constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of Essex to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements.
GENERAL BACKGROUND
Essex's revenues are generated primarily from multifamily residential, retail
and commercial property operations, which accounted for 95% and 94% of its
revenues for the three months ended March 31, 1996 and 1995, respectively.
Essex's properties (the "Properties") are located in California, Oregon and
Washington. Occupancy levels of Essex's multifamily residential Properties in
these markets have generally remained high (averaging approximately 95% over the
last five years).
Essex has qualified as a real estate investment trust ("REIT") for federal
income tax purposes, commencing with the year ending December 31, 1994. In order
to maintain compliance with REIT tax rules, Essex provides fee-based asset
management and disposition services as well as third-party property management
and leasing services through Essex Management Corporation ("EMC"). Essex owns
100% of EMC's 19,000 shares of nonvoting preferred stock. Executives of Essex
own 100% of EMC's 1,000 shares of common stock. Essex has been actively engaged
in the business of acquiring and managing portfolios of non-performing assets
along with institutional investors. Asset management services resulting from
these portfolios are provided by EMC, typically for the term that is required to
acquire, reposition and dispose of the portfolio. Asset management agreements
usually provide for a base management fee calculated as a percentage of the
gross asset value of the portfolio under management, and an incentive fee based
upon the overall financial performance of the portfolio. Accordingly, the fees
earned as a result of these contracts fluctuate as assets are acquired and
disposed. In general, Essex believes, however, that there will be fewer
opportunities to acquire portfolios of non-performing assets in the future.
Average financial occupancy rates of the Company's multifamily properties for
the three months ended March 31, 1996 on multifamily properties were as follows:
<TABLE>
<CAPTION>
All On a Same
Properties Property Basis
---------- --------------
<S> <C> <C>
Northern California 99% 99%
Seattle 94% 95%
Southern California 97% 97%
</TABLE>
Page 9 of 28
<PAGE> 10
The Company's retail and commercial properties were 93% occupied (based on
square footage) as of March 31, 1996.
RESULTS OF OPERATIONS
Comparison of the Three Months Ended March 31, 1996 to the Three Months Ended
March 31, 1995
Total Revenues increased by $631,000 or 5.8% to $11,554,000 in the first quarter
of 1996 from $10,923,000 in the first quarter of 1995. Rental revenues increased
by $644,000 or 6.3% to $10,951,000 in the first quarter of 1996 from $10,307,000
in the first quarter of 1995. Approximately $45,000 of the increase in rental
revenues was attributable to the Properties acquired and disposed of in 1995 and
1996 with the balance of the increase relating to rental rate and occupancy
level increases. Rental revenues from the San Francisco South Bay and Seattle
multifamily residential Properties increased by $471,000 to $8,564,000 in the
first quarter of 1996 from $8,093,000 in the first quarter of 1995. Rental
revenue increased by $38,000 during the first quarter of 1996 from the amount in
the first quarter of 1995 for the two Properties located in Southern California.
Commercial property rental revenue increased $135,000 for the first quarter of
1996 as a result of increased occupancy.
Total Expenses increased by $445,000 or approximately 5.0% to $9,356,000 in the
first quarter of 1996 from $8,911,000 in the first quarter of 1995. Interest
expense increased by $181,000 or 6.6% to $2,901,000 in the first quarter of 1996
from $2,720,000 in the first quarter of 1995. Such interest expense increase was
primarily due to the net addition of outstanding mortgage debt in connection
with property and investment acquisitions.
Property operating expenses, which include maintenance and repairs, real estate
taxes, advertising, utilities, and on-site administrative expenses, increased by
$119,000 or 3.4% to $3,602,000 in the first quarter of 1996 from $3,483,000 in
the first quarter of 1995. Of such increase, $41,000 was attributable to
Properties acquired and disposed of in 1995 and 1996.
General and administrative expenses represent the costs of Essex's various
acquisition and administrative departments as well as partnership administration
and non-operating expenses. Such expenses increased by $32,000 in the first
quarter of 1996 from the first quarter of 1995.
Net income after minority interest decreased by $1,544,000 to $(57,000) in the
first quarter of 1996 from $1,487,000 in the first quarter of 1995. The decrease
in net income was largely the result of an extraordinary charge of $2,180,000
related to the early extinguishment of debt.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, Essex had $2,651,000 in cash and cash equivalents, which
management believes should be sufficient to meet its immediate operating cash
requirements. Essex has credit facilities in the committed amount of
approximately $17,000,000. At March 31, 1996 Essex had $12,869,000 outstanding
on its lines of credit, with interest rates generally ranging from 7.2% to 7.4%.
Essex's cash balance decreased $1,332,000 from $3,983,000 as of December 31,
1995 to $2,651,000 as of March 31, 1996. This decrease in cash was the result of
$5,695,000 net cash provided by operating activities, reduced by $12,594,000 net
cash used by investing activities and $5,567,000 in net cash provided by
financing activities. The significant components which contributed to the
$12,594,000 net cash used by investing activities was $12,748,000 used to
purchase and upgrade rental properties. The significant components which
contributed to the $5,567,000 net cash provided by financing activities were
$45,271,000 of proceeds from mortgages, other notes payable and lines of credit
as offset by $34,568,000 of repayments of mortgages, other notes payable and
lines of credit and $3,455,000 of dividends/distribution paid.
As of March 31, 1996, the combined outstanding indebtedness under mortgages and
lines of credit consisted of $124,141,000 in fixed rate debt, (such component
includes variable rate indebtedness subject to interest rate swap agreements),
$14,617,000 in debt based on the Federal Home Loan Bank's 11th District Cost of
Funds index ("the 11th District Debt"), $10,580,000 of variable rate debt based
on The London Interbank Offered Rates ("LIBOR"), $2,289,000 of variable rate
debt based on The Internal Banking Offshore Rate ("IBOR"), and
Page 10 of 28
<PAGE> 11
$13,600,000 of debt represented by tax exempt variable rate demand bonds.
Essex's 11th District Debt is subject to maximum annual payment adjustments of
7.5% and a maximum interest rate during the term of the loans of 13%.
In June 1994, Essex entered into a five-year interest rate protection agreement
covering mortgage notes payable with aggregate balances of $24,133,000 as of
December 31, 1994. The agreements protected the Company from increase in the
thirty-day LIBOR rate in excess of a 6.3125% cap rate. In May 1995, Essex sold
this agreement and used the net proceeds to enter into an interest rate swap
agreement extending through June 1999. The interest rate swap agreement fixes
the thirty-day LIBOR rate at 5.79% for mortgage notes payable with aggregate
balances of $18,246,000 as of March 31, 1996.
Essex expects to incur in the range of approximately $1,450,000 or $300 per
weighted average occupancy unit in non-revenue generating capital expenditures
for the year ended December 31, 1996. These expenditures do not include the
improvements required in connection with Northwestern Mutual mortgage loans and
renovation expenditures required pursuant to the requirements related to the
tax-exempt variable rate demand bonds. Essex expects that cash from operations
and/or the lines of credit will fund such expenditures.
Essex pays quarterly dividends from cash available for distribution. Until it is
distributed, cash available for distribution is invested by the Company
primarily in short-term investment grade securities or is used by the Company to
reduce balances outstanding under its lines of credit.
Essex expects to meet its short-term liquidity requirements by using its initial
working capital and any portion of net cash flow from operations not currently
distributed. Essex believes that its future net cash flows will be adequate to
meet operating requirements and to provide for payment of dividends by the
Company in accordance with REIT requirements.
Essex expects to meet certain long-term liquidity requirements such as scheduled
debt maturities and repayment of short-term financing of acquisition and
development activities through the issuance of long-term secured and unsecured
debt and offerings by Essex of additional equity securities (or limited
partnership interests in the Operating Partnership).
On March 7, 1996, Essex filed a shelf registration statement for up to $100
million of common stock, preferred stock, depository shares and warrants to
purchase common and preferred stock. As of May 9, 1996, the shelf registration
statement had not been declared effective by the Securities and Exchange
Commission.
FUNDS FROM OPERATIONS
Industry analysts generally consider Funds from Operations an appropriate
measure of performance of an equity REIT. Generally, Funds from Operations
adjusts the net income of equity REITs for non-cash charges such as depreciation
and amortization and non-recurring gains or losses. Management generally
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 GAAP and does not that 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 Operating Partnership'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 calculation of Funds from Operations. The following table sets forth
Essex's calculation of actual Funds from Operations for the quarter ended March
31, 1996 and 1995.
Page 11 of 28
<PAGE> 12
<TABLE>
<CAPTION>
For the Quarter
ended March 31,
------------------------------------------
1996 1995
----------- -----------
<S> <C> <C>
Income before, extraordinary
item and minority interest $2,198,000 $2,012,000
Adjustments:
Depreciation & Amortization 2,190,000 1,973,000 .
Adjustment for Unconsolidated
Joint Venture 119,000 0
Non-recurring Items 21,000 0
Minority Interest - Pathways (140,000) (120,000)
--------- ----------
Funds from Operations $4,388,000 $3,865,000
========== ==========
Number of Shares (1) 8,130,000 8,130,000
</TABLE>
(1) Assumes conversion of all outstanding operating partnership interests in
the Operating Partnership into shares of Essex's common stock.
The National Association of Real Estate Investment Trusts ("NAREIT"), a leading
industry trade group, has approved a revised definition of Funds from
Operations, which provides that the amortization of deferred financing costs in
no longer to be added back to net income to calculate Funds from Operations.
Essex has adopted the revised NAREIT definition of Funds from Operations
beginning on January 1, 1996 and 1995 results have been restated based on this
revised definition.
Page 12 of 28
<PAGE> 13
PART II OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
EXHIBITS
--------
10.43 $20.2 million Promissory Note to Northwestern Mutual
Life Insurance Company
10.44 $14.475 million Promissory Note to Union Bank
12.1 Schedule of Computation of Ratio of Earnings to Fixed
Changes
27.1 Article 5 Financial Data Schedule (EDGAR filing only)
REPORTS ON FORM 8-K
None
Page 13 of 28
<PAGE> 14
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 PROPERTY TRUST, INC.
/s/ Michael J. Schall
-------------------------------------------
Michael J. Schall, Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
-------------------------------------------
Date
Page 14 of 28
<PAGE> 15
<TABLE>
<CAPTION>
EXHIBITS INDEX PAGE
- -------------- ----
<S> <C> <C>
10.43 $20.2 million Promissory Note to Northwestern
Life Insurance Company 16
10.44 $14.475 million Promissory Note to Union Bank 22
12.1 Schedule of Computation of Ratio of Earnings to
Fixed Changes 28
27.1 Article 5 Financial Data Schedule (EDGAR filing only)
</TABLE>
Page 15 of 28
<PAGE> 1
LOAN NO. A-331882 WASHINGTON
EXHIBIT 10.43
PROMISSORY NOTE
---------------
$20,200,000.00 As of February 13, 1996
--------------------
(Place of Execution)
For value received, the undersigned, herein called "Borrower," promises
to pay to the order of THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, a
Wisconsin corporation, who, together with any subsequent holder of this note,
is hereinafter referred to as "Lender", at 720 E. Wisconsin Avenue, Milwaukee,
WI 53202 or at such other place as Lender shall designate in writing, in coin
or currency which, at the time or times of payment, in legal tender for public
and private debts in the United States, the principal sum of TWENTY MILLION TWO
HUNDRED THOUSAND DOLLARS or so much thereof as shall have been advanced from
time to time plus interest on the outstanding principal balance at the rate and
payable as follows:
Interest shall accrue from the date of advance until maturity at
the rate of seven and fifty hundredths percent (7.50%) per annum (the
"Interest Rate").
Accrued interest shall be paid on the fifteenth day of the month
following the first advance and on the fifteenth day of each of the next
six months. On the fifteenth day of the seventh month (the "Initial
Amortization Date") and on the fifteenth day of each and every month
thereafter, installments of principal and interest shall be paid in
the amount of $149,277.00 until maturity. The amortization period shall
be twenty-five years. All installments shall be applied first in payment
of interest, and the remainder of each installment shall be applied on
principal. The entire unpaid principal balance plus accrued interest
thereon shall be due and payable on March 15, 2003 (the "Maturity
Date").
In the event the Sunpointe Note (as hereinafter defined) and the
Facilitator Note (as hereinafter defined) are paid or otherwise
satisfied in full prior to the Maturity Date, the Interest Rate on this
note shall be increased by ten hundredths percent (0.10%) per annum,
effective as of the date of any such payment or satisfaction. Said
increased Interest Rate shall be effective through the remaining term of
this note.
Borrower shall have the one time privilege, upon thirty (30) days
advance written notice, beginning June 15, 1999 of paying this note in full
with a prepayment privilege fee. This fee represents consideration to Lender
for loss of yield and reinvestment costs. The fee shall be the greater of Yield
Maintenance of 1% of the outstanding principal balance of this note.
As used herein, "Yield Maintenance" means the amount, if any, by which
(i) the present value of the Then Remaining Payments (as hereinafter defined)
calculated using a
Page 16 of 28
<PAGE> 2
periodic discount rate (corresponding to the payment frequency under this note)
which, when compounded for such number of payment periods in a year, equals the
per annum effective yield of the Most Recently Auctioned United States Treasury
Obligation having a maturity date equal to the Maturity Date (or, if there is
no such equal maturity date, then the linearly interpolated per annum effective
yield of the two Most Recently Auctioned United States Treasury Obligations
having maturity dates most nearly equivalent to the Maturity Date) as reported
by the Wall Street Journal five business days prior to the date of prepayment
exceeds (ii) the outstanding principal balance of this note (exclusive of all
accrued interest).
If such United States Treasury obligation yields shall not be reported as of
such time or the yields reported as of such time shall not be ascertainable,
then the periodic discount rate shall be equal to the Treasury Constant
Maturity Series yields reported, for the latest day for which such yields shall
have been so reported, as of five business days preceding the prepayment date,
in Federal Reserve Statistical Release H.15 (519) (or any comparable successor
publication) for actively traded United States Treasury obligations having a
constant maturity most nearly equivalent to the Maturity Date.
As used herein, "Then Remaining Payments" means payments in such amounts and at
such times as would have been payable subsequent to the date of such prepayment
in accordance with the terms of this note.
As used herein, "Most Recently Auctioned United States Treasury Obligations"
shall mean the bonds and notes with maturities of 30 years, 10 years, 5 years,
3 years and 1 year which, as of the date the prepayment privilege fee is
calculated, were most recently auctioned by the United States Treasury.
Upon the occurrence of an Event of Default (as defined in the Lien Instrument)
followed by acceleration of the whole indebtedness, or a condemnation or sale
under threat of condemnation of all or substantially all of the Property,
payment of the amount necessary to satisfy the entire indebtedness evidenced by
this note will constitute an evasion of the prepayment terms hereunder and be
deemed to be a voluntary prepayment hereof and such payment will, therefore (to
the extent not prohibited by law) include the prepayment privilege fee required
under the prepayment in full privilege recited above. If such prepayment occurs
prior to June 15, 1999 and results from an Event of Default followed by an
acceleration of the whole indebtedness, then such payment will, to the extent
not prohibited by law, include a prepayment fee equal to the greater of Yield
Maintenance or 6% of the outstanding principal balance of this note. If such
prepayment occurs prior to June 15, 1999 and results in a condemnation or sale
under threat of condemnation of all or substantially all of the Property, the
prepayment fee shall be Yield Maintenance.
Notwithstanding the above and provided there is no default under this note,
this note may be prepaid in full without a prepayment fee at any time during
the last sixty (60) days of the term of this note.
Borrower acknowledges and agrees that the Interest Rate hereunder shall
be increased if certain financial statements and other reports are not
furnished to Lender,
Page 17 of 28
<PAGE> 3
all as described in more detail in the provision of the Lien Instrument
entitled "FINANCIAL STATEMENTS".
This note is secured by:
(a) that certain Deed of Trust, Security Agreement and Fixture Filing
dated June 13, 1994 executed by Essex Sunpointe Ltd. ("Sunpointe"), a
California limited partnership, for the benefit of The Northwestern Mutual Life
Insurance Company and recorded on June 13, 1994, as Document No. 94061300678,
in the records of King County, Washington, as amended by that certain First
Amendment of Lien Instrument of even date herewith executed by Sunpointe and
The Northwestern Mutual Life Insurance Company (as so amended, the "Sunpointe
Lien Instrument") covering certain property in Bellevue, King County Washington
(the "Sunpointe Property");
(b) that certain Deed of Trust, Security Agreement and Fixture Filing
dated June 13, 1994 executed by Essex-Palisades Facilitator ("Facilitator"), a
California limited partnership, for the benefit of The Northwestern Mutual Life
Insurance Company and recorded on June 13, 1994 as Document No. 9406130080 in
the records of King County, Washington, as amended by that certain First
Amendment of Lien Instrument of even date herewith executed by Facilitator and
The Northwestern Mutual Life Insurance Company (as so amended, the "Facilitator
Lien Instrument") covering certain property in Bellevue, King County Washington
(the "Facilitator Property");
(c) Deed of Trust and Security Agreement (the "Portfolio Lien
Instrument") of even date herewith executed by ESSEX PORTFOLIO L.P., a
California limited partnership to FIRST AMERICAN TITLE INSURANCE COMPANY, as
Trustee, for THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, covering certain
property in Bellevue, King County, Washington consisting of approximately 13.98
acres (the "Sammamish View Property"), in Bellevue, King County, Washington
consisting of approximately 9.09 acres (the "Emerald Ridge Property") and in
Seattle, King County, Washington consisting of approximately 1.74 acres (the
"Wharfside Pointe Property") (The Sammamish View Property, the Emerald Ridge
Property and the Wharfside Pointe Property are collectively herein referred to
as the "Portfolio Property"; the Portfolio Property, the Sunpointe Property and
the Facilitator Property are collectively herein referred to as the
"Property"), and the Sunpointe Lien Instrument, the Facilitator Lien Instrument
and the Portfolio Lien Instrument are collectively herein referred to as the
"Lien Instrument").
Upon the occurrence of an Event of Default (as defined in the Lien
Instrument), the whole unpaid principal and accrued interest shall, at the
option of Lender, to be exercised at any time thereafter, become due and
payable at once without notice, notice of the exercise of, and the intent to
exercise, such option being hereby expressly waived.
All persons or corporations now or at any time liable, whether
primarily or secondarily, for payment of indebtedness hereby evidenced, for
themselves, their heirs, legal representatives, successors and assigns,
respectively, expressly waive presentment for payment, notice of dishonor,
protest, notice of protest, and diligence in collection, and
Page 18 of 28
<PAGE> 4
consent that the time of said payments or any part thereof may be extended by
Lender and further consent that the real or collateral security or any part
thereof may be released by Lender, without in any wise modifying, altering,
releasing, affecting, or limiting their respective liability or the lien of said
Lien Instrument, and agree to pay reasonable attorney's fees and expenses of
collection including any bankruptcy or insolvency proceeding, in case this note
is placed in the hands of an attorney for collection or suit is brought thereon.
Any principal, interest or other amounts payable under this note, the Lien
Instrument or other instruments securing payment hereof, not paid when due
(without regard to any notice and/or cure provisions contained herein or in any
of the other loan documents executed in connection with this note), including
principal becoming due by reason of acceleration by Lender of the entire unpaid
balance of this note, shall bear interest from the due date thereof until paid
at the Default Rate, as hereinafter defined. The term "Default Rate" is defined
as the lower of a rate equal to the interest rate in effect at the time of the
default as herein provided plus 5% per annum or the maximum rate permitted by
law.
No provision of this note shall require the payment or permit the
collection of interest, including any fees paid which are construed under
applicable law to be interest, in excess of the maximum permitted by law. If any
such excess interest is collected or herein provided for, or shall be
adjudicated to have been collected or be so provided for herein, the provisions
of this paragraph shall govern, and Borrower shall not be obligated to pay the
amount of such interest to the extent that it is in excess of the amount
permitted by law and any such excess collected shall, at the option of Lender,
unless otherwise required by applicable law, be immediately refunded to Borrower
or credited on the principal of this note immediately upon Lender's awareness of
the collection of such excess.
Notwithstanding any provision contained herein or in the Lien Instrument to
the contrary, if Lender shall take action to enforce the collection of the
indebtedness evidenced hereby or secured by the Lien Instrument (collectively,
the "Indebtedness"), its recourse shall, except as provided below, be limited to
the Property or the proceeds from the sale of the Property and the proceeds
realized by Lender in exercising its rights and remedies (i) under the Absolute
Assignment (as defined in the Lien Instrument), (ii) under the Additional
Guarantee of even date herewith executed by Essex Property Trust, Inc., a
Maryland corporation ("EPTI"), and under the Guarantee of Recourse Obligations
of even date herewith executed by EPTI, both for the benefit of Lender, and
under other separate guarantees, if any, (iii) under any of the other Loan
Documents (as defined in the Lien Instrument) and (iv) in any other collateral
securing the Indebtedness. If such proceeds are insufficient to pay the
Indebtedness, Lender will never institute any action, suit, claim or demand in
law or in equity against Borrower for or on account of such deficiency;
provided, however, that the provisions contained in this paragraph
(i) shall not in any way affect or impair the validity or enforceability of
the Indebtedness or the Lien Instrument; and
Page 19 of 28
<PAGE> 5
(ii) shall not prevent Lender from seeking and obtaining a judgment
against Borrower, and Borrower shall be personally liable, for
the Recourse Obligations; and
(iii) shall not be applicable in the event of a violation of any of
the provisions of the Lien Instrument following the caption
entitled "Due on Sale" (i.e. Borrower shall be personally
liable for all of the Indebtedness in the event of such
violation).
As used herein, the term "Recourse Obligations" means
(a) rents and other income from the Property from and after the date
of any default under the Loan Documents remaining uncured on the date
of the foreclosure sale of the Property pursuant to the Lien Instrument
or the conveyance of the Property to Lender in lieu of foreclosure,
which rents and other income have not been applied to the payment of
principal and interest on the Note or to reasonable operating expenses
of the Property,
(b) amounts necessary to repair any damage to the Property caused by
the intentional acts or intentional omissions of Borrower or its agents,
(c) insurance loss and condemnation award proceeds released to Borrower
but not applied in accordance with any agreement between Borrower and
Lender as to their application,
(d) amounts necessary to pay costs of investigation and clean-up of
hazardous materials and toxic substances on or affecting the Property,
(e) damages suffered by Lender as a result of fraud or
misrepresentation in connection with the Indebtedness by Borrower or
any other person or entity acting on behalf of Borrower, and
(f) amounts necessary to pay real estate taxes, special assessments and
insurance premiums with respect to the Property (to the extent not
previously deposited with Lender by Borrower pursuant to the provisions
of the Lien Instrument following the caption entitled "DEPOSITS BY
GRANTOR") either paid by Lender and not reimbursed prior to, or
remaining due or delinquent on, either (i) the later of (A) the date on
which title vests in the purchaser at the foreclosure sale of the
Property pursuant to the Lien Instrument or (B) the date on which
Borrower's statutory right of redemption shall expire or be waived, or
(ii) the date of the conveyance of the Property to lender in lieu of
foreclosure.
This Note shall be governed by and construed in accordance with the
laws of the State of Washington.
Page 20 of 28
<PAGE> 6
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT,
MODIFY LOAN TERMS, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT
ENFORCEABLE UNDER WASHINGTON LAW.
ESSEX PORTFOLIO L.P., a California
limited partnership
By: Essex Property Trust, Inc., a
Maryland corporation, general
partner
By: /s/ Jordan E. Ritter
---------------------------------
Its: Vice President
(corporate seal)
PAGE 21 of 28
<PAGE> 1
EXHIBIT 10.44
[UNION BANK LOGO] COMMERCIAL PROMISSORY NOTE
SECURED BY DEED OF TRUST
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Borrower Name ESSEX PORTFOLIO, L.P., a California limited partnership
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Borrower Address Office Number 795 Loan Number 2696022339-
777 California Street ---------------------------------------------------------------------
Palo Alto, California 94304 Maturity Date Amount
March 1, 2006 $14,475,000.00
- -----------------------------------------------------------------------------------------------------
Walnut Creek California Date January 29, 1996 $14,475,000.00
</TABLE>
FOR VALUE RECEIVED, the undersigned ("Debtor") promises to pay to the order of
Union Bank ("Bank"), as indicated below, the principal sum of FOURTEEN MILLION
FOUR HUNDRED SEVENTY-FIVE THOUSANDS AND NO/100* Dollars ($14,475,000.00), or so
much thereof as is disbursed, together with interest on the balance of such
principal sum from time to time outstanding, at a per annum rate equal to
/X/ Seven and Nine One Hundredths percent (7.09%) (Fixed Rate);
/ / the Reference Rate plus ____--__________ percent (___-0-________%),
such per annum rate to change as and when the Reference Rate shall
change; or
/ / ________________________________________________________________________
________________________________________________________________________
provided, however, Debtor shall pay total interest over the term of
this note of not less than $500.
As used herein, the term "Reference Rate" shall mean the rate announced by Bank
from time to time at its corporate headquarters as its "Reference Rate." The
Reference Rate is an index rate determined by Bank from time to time as a means
of pricing certain extensions of credit and is neither directly tied to any
external rate of interest or index nor necessarily the lowest rate of interest
charged by Bank at any given time. All computations of interest under this note
shall be made on the basis of a year of 360 days, for actual days elapsed.
1. PAYMENTS.
PRINCIPAL PAYMENTS. Debtor shall pay principal
/ / in full on _____--________, 19__; however, at any time prior to the
maturity of this note, the Debtor may borrow, repay and reborrow hereon
so long as the total outstanding at any one time does not exceed the
principal amount of this note.
/ / in full on _____--________, 19__.
/X/ in 119 installments in amounts as set forth below each on the 1st day
of each month (commencing April 1, 1996) and a final installment on
March 1, 2006, on which date all principal and interest then unpaid
shall be due and payable.
EACH YEAR AMOUNT
--------- ----------
Year 1 $17,079.00
Year 2 $18,405.00
Year 3 $19,834.00
Year 4 $21,374.00
Year 5 $23,033.00
Year 6 $24,821.00
Year 7 $26,748.00
Year 8 $28,825.00
Year 9 $31,063.00
Year 10 $33,474.00
INTEREST PAYMENTS. Debtor shall pay interest
/X/ on the 1st day of each month (commencing March 1, 1996).
/ / ___________--___________________________________________________________
INTEREST-INCLUDED OPTION. If a fixed rate of interest is applicable to this
note and other principal and interest payment terms are not stated in the
preceding paragraphs, Debtor shall pay principal and interest together in
_____--______ installments of $__-0-_____ each on the ___--______ day of each
_____--______ (commencing)____--___________, 19__) and in a final installment of
$__-0-____ on ______________, 19__, on which date all principal and interest
then unpaid shall be due and payable.
- --------------------------------------------------------------------------------
PAGE 22 of 28
<PAGE> 2
Debtor shall pay all amounts due under this note in lawful money of the United
States of Bank's Monterey Park Office, or such other office as may be
designated by Bank, from time to time.
2. LATE PAYMENTS. If any installment payment required by the terms of
this note is unpaid ten days after due, Debtor shall, at the option of Bank,
pay a fee of $100 to Bank; provided that if this note is secured by a deed of
trust on real property containing only a single-family owner-occupied dwelling,
such fee shall not exceed six-percent of the installment due that is applicable
to the payment of principal and interest, or five dollars, whichever is greater.
3. INTEREST RATE FOLLOWING DEFAULT. In the event of default (as described
in paragraph 4 below), at the option of the Bank, and, to the extent permitted
by law, interest shall be payable on the outstanding principal under this note
at a per annum rate equal to five percent (5%) in excess of the interest rate
specified in the initial paragraph of this note, calculated from the date of
default until such default is cured, or if such default is not cured or is
incapable of being cured, until all amounts payable under this note are paid in
full.
4. DEFAULT AND ACCELERATION OF TIME FOR PAYMENT. Default shall include,
but not be limited to, any of the following: (a) the failure of Debtor to make
any payment required under this note within three (3) Business Days after the
date due; (b) any breach, misrepresentation or other default (not otherwise
specified herein or in the deed of trust securing this note), by Debtor or its
General Partner (hereinafter individually and collectively referred to as the
"Obligor") under any deed of trust, security agreement, guaranty or other
agreement between Bank and any Obligor, which is not cured within thirty (30)
days after written notice thereof from Bank, provided, however, that if such
failure by its nature cannot be cured within such thirty (30) day period (but
is reasonably capable of being cured within ninety (90) days after such
notice), then the cure period shall remain in effect so long as Obligor
commences the cure within such thirty (30) day period and diligently prosecutes
such cure to completion within such ninety (90) day period; (c) the insolvency
of any Obligor or the failure of any Obligor generally to pay such Obligor's
debts as such debts become due; (d) the commencement as to any Obligor of any
voluntary or involuntary proceeding under any laws relating to bankruptcy,
insolvency, reorganization, arrangement, debt adjustment or debtor relief,
provided, however, with respect to any such involuntary proceeding no event of
default shall arise unless said involuntary proceeding is not dismissed within
forty-five (45) days following the date of commencement thereof; (e) the
assignment by any Obligor for the benefit of such Obligor's creditors; (f) the
appointment, or commencement of any proceedings for the appointment, of a
receiver, trustee, custodian or similar official for all or substantially all
of any Obligor's property, which is not dismissed or otherwise discharged
within forty-five (45) days after commencement; (g) the commencement of any
proceeding for the dissolution or liquidation of any Obligor, which is not
dismissed or otherwise discharged within forty-five (45) days after
commencement; (h) the termination of existence of any Obligor; (i) the failure
of any Obligor to comply with any order, judgment, injunction, decree, writ or
demand of any court or other public authority, which materially or adversely
affects the property securing this note, as determined in Bank's reasonable
discretion, or such Obligor's ability to conduct or operate its business; (j)
the filing or recording against any Obligor, or the property of any Obligor, of
any notice of levy, notice to withhold, or other legal process for taxes other
than property taxes which is not dismissed or rescinded within thirty (30) days
after such occurrence; (k) the default by any Obligor personally liable for
amounts owed hereunder on any obligation in the aggregate of Three Million
Dollars ($3,000,000.00) concerning the borrowing of money; (l) a default occurs
under any instrument encumbering or affecting all or any portion of the
property subject to the deed of trust securing this note not cured within the
applicable cure periods; (m) the issuance against any Obligor, or the property
of any Obligor, of any writ of attachment, execution, or other judicial lien,
which is not dismissed within thirty (30) days following such issuance; or (n)
the material deterioration of the financial condition of any Obligor which
results in Bank deeming itself, in good faith, insecure. Upon the occurrence of
any such default, Bank, in its discretion, may cease to advance funds hereunder
and, following the expiration of any cure period, may declare all obligations
under this note immediately due and payable; however, upon the occurrence of an
event of default under (d) (with respect to a voluntary proceeding only) or (e)
all principal and interest shall automatically become immediately due and
payable.
5. ADDITIONAL AGREEMENTS OF DEBTOR. If any amounts owing under this note
are not paid when due, Debtor promises to pay all costs and expenses, including
reasonable attorneys' fees, incurred by Bank in the collection or enforcement
of this note. Debtor and any endorser of this note, for the maximum period of
time and the full extend permitted by law, (a) waive diligence, presentment,
demand, notice of nonpayment, protest, notice of protest, and notice of every
kind; (b) waive the right to assert the defense of any statute of limitations to
any debt or obligation hereunder; and (c) consent to renewals and extensions of
time for the payment of any amounts due under this note. If this note is signed
by more than one party, the term "Debtor" includes each of the undersigned and
any successors in interest thereof, all of whose liability shall be joint and
several. Any married person who signs this note agrees that recourse may be had
against the separate property of that person for any obligations hereunder. The
receipt of any check or other item of payment by Bank, at its option, shall not
be considered a payment on account until such check or other item of payment if
honored when presented for payment at the drawee bank. Bank may delay the
credit of such payment based upon Bank's schedule of funds availability, and
interest under
PAGE 23 of 28
<PAGE> 3
this note shall accrue until the funds are deemed collected. In any action
brought under or arising out of this note, Debtor and any endorser of this note,
including their successors and assigns, hereby consent to the jurisdiction of
any competent court within the State of California, except as provided in any
addendum attached hereto, and consent to service of process by any means
authorized by California Law. The term "Bank" includes, without limitation, any
holder of this note. This note shall be construed in accordance with and
governed by the laws of the State of California.
The deed of trust securing this note permits the Bank to declare all obligations
hereunder immediately due and payable upon breach of the following provision:
"Trustor shall not, directly or indirectly, sell, convey, assign, further
encumber, transfer, alienate or otherwise dispose of the real property
encumbered by said deed of trust or any part thereof or any interest therein,
whether voluntarily, involuntarily, by operation of law or otherwise, without
the prior written consent or Beneficiary."
6. NON-RECOURSE. By accepting this Note, and providing that Debtor in no way
hinders, delays, interferes with, or prejudices Bank's exercise of any rights
and remedies available to it hereunder under the Deed of Trust, Assignment of
Rents, Security Agreement and Fixture Filing ("Deed of Trust"), or under any
applicable laws, the holder hereof agrees that except as otherwise expressly set
forth in the last sentence of this Section 6, the sole recourse of such holder
for the collection of this Note shall be against the property encumbered by the
Deed of Trust securing this Note and that neither Debtor nor the general or
limited partners of Debtor shall be personally liable for the payment of this
Note nor for the payment of any deficiency established upon foreclosure and sale
of the property encumbered by said Deed of Trust. This provision relating to
limitation on liability shall not extend to (i) any waste, material
misrepresentation or fraud of the Debtor if Debtor has acted maliciously,
recklessly or intentionally, or (ii) any liability of Debtor relating to
environmental matters as more fully set forth in the Environmental Compliance
Agreement executed by Debtor, or (iii) any misapplication of casualty or
condemnation proceeds received by Debtor, or (iv) any rent or other payments
collected after recordation of a notice of default under this Note, or under the
Deed of Trust, (except to the extent applied to the reasonable and necessary
expenses of operating and maintaining the property), and any security deposits,
advances or prepaid rent, or any similar sums paid to Debtor or held for the
account of Debtor by any other person or entity in connection with the property
after a default under this Note or the Deed of Trust, securing this Note.
Notwithstanding anything to the contrary in the foregoing provisions or
elsewhere in this Note, Debtor shall in all events be personally liable for the
payment of principal, interest and other amounts unpaid and owing under the
Note, in the maximum aggregate amount of $2,171,250.00.
The attached Judicial Reference Agreement and Prepayment Addendum are hereby
made a part of this note.
- -------------------------------------------------------------------------------
Individual's Name (Type) Corporation or Partnership (Typed Name)
ESSEX PORTFOLIO, L.P.,
a California limited partnership
BY: ESSEX PROPERTY TRUST, INC.,
a Maryland corporation
its general partner
BY: /s/ Michael Schall
---------------------------------
- -------------------------------------------------------------------------------
Individual's Signature By
X
- -------------------------------------------------------------------------------
Date Signed Title
- -------------------------------------------------------------------------------
Individual's Name (Type) By
- -------------------------------------------------------------------------------
Individual's Signature Title
X
- -------------------------------------------------------------------------------
Date Signed Date Signed
- -------------------------------------------------------------------------------
Page 24 of 28
<PAGE> 4
[UNION BANK LOGO] PREPAYMENT ADDENDUM
I. PREPAYMENT
A. Except as provided in subsection I. B., below, this Note may only be
prepaid in whole or in part provided Union Bank has received not less
than five (5) business days prior written notice of an intention to make
such prepayment and the undersigned pays a prepayment fee, to Union Bank
in an amount equal to:
1. the difference between
(a) the Interest rate on this Note on the principal amount which the
undersigned intends to prepay, and
(b) the return which Union Bank could obtain if it used the amount of
such prepayment of principal to purchase at bid price regularly
quoted U.S. Securities having a maturity date most closely
coinciding with the maturity date of this Note and such U.S.
Securities were held by Union Bank until the maturity date of this
Note ("Yield Rate");
2. the above difference, if greater than zero, is multiplied by a
fraction, the numerator of which is the days in the period between the
date of prepayment and the maturity date of this Note and the
denominator of which is 360 days;
3. the above product is multiplied by the amount of the principal so
prepaid (except in the event that principal payments are required and
have been made as scheduled under the terms of the Note, then the
amount multiplied in this section shall be the lesser of the amount
prepaid or 50% of the total of the amount prepaid and the amount of
principal scheduled under the terms of this Note to be outstanding at
the maturity date of this Note);
4. the above product is then discounted to present value using the Yield
Rate as the annual discount factor.
B. In no event shall Union Bank be obligated to make any payment or refund
to the undersigned, nor shall the undersigned be entitled to any setoff
or other claim against Union Bank, should the return which Union Bank
could obtain under the prepayment formula exceed the interest that Union
Bank would have received if no prepayment had occurred. All prepayments
shall include payment of accrued interest on the principal amount so
prepaid and shall be applied to payment of interest before application to
principal.
C. Such prepayment fee, if any, shall also be payable if prepayment occurs
as the result of the acceleration of the principal hereof by Union Bank
because of any default hereunder by the undersigned. If, following such
acceleration, all or any portion of the unpaid principal is satisfied,
whether through sale of the property encumbered by any security agreement
or other agreement securing this Note, if any, as a foreclosure held
thereunder or through the tender of payment at any time following such
acceleration, but prior to such a foreclosure sale, then such
satisfaction of such portion of the principal shall be deemed an evasion
of the prepayment prohibition set forth above, and Union Bank shall,
automatically and without notice or demand, be entitled to receive,
concurrently with such satisfaction the prepayment fee set forth above,
and the obligation to pay such prepayment fee shall be added to the
principal hereof. THE UNDERSIGNED HEREBY ACKNOWLEDGES AND AGREES THAT
UNION BANK WOULD NOT LEND TO THE UNDERSIGNED THE LOAN EVIDENCED BY THIS
NOTE WITHOUT THE UNDERSIGNED'S AGREEMENT, AS SET FORTH ABOVE IN THIS
PARAGRAPH TO PAY UNION BANK A PREPAYMENT FEE UPON THE SATISFACTION OF ALL
OR ANY PORTION OF THE PRINCIPAL BEARING INTEREST AT A FIXED INTEREST RATE
FOLLOWING THE ACCELERATION OF THE MATURITY DATE HEREOF BY REASON OF A
DEFAULT HEREUNDER. THE UNDERSIGNED HAS CAUSED THOSE PERSONS SIGNING THIS
NOTE ON THE UNDERSIGNED'S BEHALF TO SEPARATELY INITIAL THE AGREEMENT
CONTAINED IN THIS PARAGRAPH BY PLACING THEIR INITIALS BELOW:
INITIALS: MJS
--------- --------- --------- --------- ---------
A determination by Union Bank as to the amount, if any, payable pursuant to
this section, shall be conclusive on the undersigned, absent manifest error.
II. AMENDMENT
Except as provided above, this Addendum and the provisions contained herein
cannot be changed, modified or amended except by a written instrument executed
by both the undersigned and the holder hereof.
ESSEX PORTFOLIO, L.P.,
a California limited partnership
BY: ESSEX PROPERTY TRUST, INC.,
a Maryland corporation
its general partner
BY: /s/ Michael Schall
---------------------------------
Page 25 of 28
<PAGE> 5
[UNION BANK LOGO]
JUDICIAL REFERENCE AGREEMENT
(Commercial Transaction Secured By Real Property)
1. CLAIMS OR CONTROVERSIES SUBJECT TO JUDICIAL REFERENCE. Any claim or
controversy alleged in or subject to a lawsuit between or among the parties to
this agreement (collectively, the "Parties" and individually, a "Party") which
arises out of or relates to (i) that certain Commercial Promissory Note Secured
-----------------------------------
by Deed of Trust dated January 29, 1996, executed by ESSEX PORTFOLIO, L.P.,
- ---------------- ---------- -- ---------------------------
a California limited partnership
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
in favor of Union Bank ("Bank"), any extensions, renewals, amendments,
substitutions or replacements thereof, and any related guaranty, subordination
agreement, security agreement or any other related agreement or instrument
(collectively, the "Subject Documents"), (ii) any negotiations, correspondence
or communications relating to any of the Subject Documents, whether or not
incorporated into the Subject Documents or any indebtedness evidenced thereby,
(iii) the administration or management of the Subject Documents or any
indebtedness evidenced thereby or (iv) any alleged agreements, promises,
representations or transactions in connection therewith, including but not
limited to any claim or controversy which arises out of or is based upon an
alleged tort, shall, at the written request of any Party, be determined by a
reference in accordance with California Code of Civil Procedure Sections 638 et
seq. In connection with such reference, the Parties hereby expressly,
intentionally and deliberately waive any right they may otherwise have to
trial by jury of such claim or controversy.
2. SELECTION OF REFEREE. Within thirty (30) days after commencement by any
Party of any lawsuit subject to this agreement, the Parties shall select,
pursuant to the Commercial Rules of the American Arbitration Association
("AAA"), a single neutral referee and submit by stipulation such referee to the
court for an order of reference of such claim or controversy. However, the
referee selected must be a retired state or federal court judge with at least
five years of judicial experience in civil matters. In the event that the
Parties do not submit such stipulation to the court within such thirty (30) day
period, any Party may move the court pursuant to this agreement for an order of
reference of such claim or controversy to a single neutral referee having such
qualifications. The Parties shall equally bear the fees and expenses of the
referee unless the referee otherwise provides in the award.
3. POWERS OF AND LIMITATIONS ON THE REFEREE. The referee shall have the powers
provided by Title 9 of the California Code of Civil Procedure Sections 1280 et
seq. (the "California Arbitration Act") and the Commercial Rules of the AAA
except as provided in this agreement, including without limitation the
following:
(a) The referee shall determine all challenges to the legality
and/or enforceability of this agreement.
(b) The referee shall apply the rules of evidence to the same
extent as they would be applied in a court of law.
(c) Subject to the provisions of this agreement, the referee may
order any remedy or relief, including without limitation
judicial foreclosure, a deficiency judgment or equitable
relief, and give effect to all legal and equitable defenses,
including without limitation statutes of limitation, the
statute of frauds, waiver and estoppel.
(d) A Party may not conduct discovery unless the referee grants
such Party leave to do so upon a showing of good cause. All
discovery shall be completed within ninety (90) days after the
appointment of the referee. The referee shall limit discovery to
non-privileged material that is relevant to the issues to be
determined by the referee.
(e) The referee shall determine the time of the hearing and shall
designate its location from among the cities of San Francisco,
Los Angeles and San Diego based upon the convenience of the
referee, the Parties and any witnesses. However, such hearing
must be commenced within (30) days after completion of
discovery, unless the referee grants a continuance upon a
showing of good cause by any Party. At least seven (7) days
before the date set for hearing, the Parties shall exchange
copies of exhibits to be offered as evidence, and lists of
witnesses who will testify, at such hearing. Once commenced,
the hearing shall proceed day to day until completed, unless
the referee grants a continuance upon a showing of good cause
by any Party. Any Party may cause to be prepared, at its
expense, a written transcription or electronic recordation of
such hearing.
(f) Any award by the referee shall be set forth in a statement of
decision supported by written findings of fact and conclusions
of law which the referee shall concurrently deliver to the
Parties.
(g) The referee may not award punitive damages unless the referee
first makes written findings of fact that would satisfy the
requirements for recovery of punitive damages under California
law. Any such award of punitive damages shall not exceed a sum
equal to twice the amount of actual damages as determined by the
referee.
(h) The referee shall award reasonable attorneys' fees (including a
reasonable allocation for the costs of in-house counsel) and
costs the prevailing party.
(i) The provisions of California Civil Code Sections 47 et seq.
shall apply to the judicial reference to the same extent as they
would apply to a judicial proceeding subject to such provisions.
(j) The laws of the State of California shall govern the judicial
reference pursuant to this agreement.
PAGE 26 of 28
<PAGE> 6
4. PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. No provision of this
agreement shall limit the right of any Party (i) to exercise any self-help
remedies, (ii) to foreclose upon or sell any collateral, by power of sale or
otherwise, or (iii) to obtain or oppose provisional or ancillary remedies from
a court of competent jurisdiction, including without limitation appointment of
a receiver, before, after or during the pendency of the judicial reference. The
exercise of, or opposition to, any such remedy does not waive the right of any
Party to judicial reference pursuant to this agreement.
5. MISCELLANEOUS. Judgment upon the award of the referee may be entered in any
court of competent jurisdiction in accordance with California Code of Civil
Procedure Sections 644 and 645. In the event that multiple claims are asserted,
some of which are found not subject to this agreement, the Parties agree to stay
the proceedings of the claims not subject to this agreement until all other
claims are resolved in accordance with this agreement.
In the event that claims are asserted against multiple parties, some of whom
are not subject to this agreement, the Parties agree to sever the claims
subject to this agreement and resolve them in accordance with this agreement. In
the event that any provision of this agreement is found to be illegal or
unenforceable, the remainder of this agreement shall remain in full force and
effect. The laws of the State of California shall govern the interpretation of
this agreement. This agreement fully states all of the terms and conditions of
the Parties' agreement regarding the matters mentioned in, or incidental to,
this agreement. This agreement supersedes all oral negotiations and prior
writings concerning the subject matter hereof.
This agreement is duly executed by the Parties as of the day 29th of January,
1996.
UNION BANK ESSEX PORTFOLIO, L.P.,
a California limited partnership
By ____________________________
J. Michael Stedman BY: ESSEX PROPERTY TRUST, INC.,
Title Asst. Vice President a Maryland corporation
its general partner
By ____________________________ BY: Michael J. Schall, CFO
James B. Wohlleb
Title Vice President ________________________________
________________________________
________________________________
________________________________
_________________________________
_________________________________
_________________________________
page 27 of 28
<PAGE> 1
EXHIBIT 12.1
ESSEX PROPERTY TRUST, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(in thousands, except ratios)
<TABLE>
<CAPTION>
ESSEX PROPERTY TRUST, INC. ESSEX PARTNERS PROPERTIES
---------------------------------------- -------------------------------------------------------------
3 MONTHS PERIOD OF PERIOD OF
ENDED YEAR ENDED JUNE 13, 1994 JANUARY 1, 1994 YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 31, DECEMBER 31, TO DECEMBER 31, TO JUNE 12, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1994 1993 1992 1991
--------- ------------ --------------- --------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS:
Income before
extraordinary item
and minority interest... $2,198 $ 8,231 $4,397 $ 332 $ 387 $(2,344) $(3,582)
Interest expense.......... 2,901 10,928 4,304 5,924 11,902 13,224 14,762
Amortization of deferred
financing costs......... 245 1,355 773 96 219 218 216
Capitalized interest...... 28 92 -- -- -- -- --
------ ------- ------ ------ ------- ------- -------
TOTAL EARNINGS............ $5,372 $20,606 $9,474 $6,352 $12,508 $11,098 $11,396
FIXED CHARGES:
Interest expense.......... $2,901 $10,928 $4,304 $5,924 $11,902 $13,224 $14,762
Amortization of deferred
financing costs......... 245 1,355 773 96 219 218 216
Capitalized interest...... 28 92 -- -- -- -- --
------ ------- ------ ------ ------- ------- -------
TOTAL FIXED CHARGES....... $3,174 $12,375 $5,077 $6,020 $12,121 $13,442 $14,978
------ ------- ------ ------ ------- ------- -------
RATIO OF EARNINGS
TO FIXED CHARGES......... 1.69 1.67 1.87 1.06 1.03 0.83 0.76
====== ======= ====== ====== ======= ======= =======
FIXED CHARGES IN EXCESS
ON EARNINGS.............. -- -- -- -- -- 2,344 3,582
====== ======= ====== ====== ======= ======= =======
</TABLE>
Page 28 of 28
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Essex
Property Trust, Inc. quarterly report for the period ended March 31, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 2,651
<SECURITIES> 0
<RECEIVABLES> 11,381
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,599
<PP&E> 297,106
<DEPRECIATION> 42,456
<TOTAL-ASSETS> 282,620
<CURRENT-LIABILITIES> 9,844
<BONDS> 165,227
0
0
<COMMON> 1
<OTHER-SE> 82,005
<TOTAL-LIABILITY-AND-EQUITY> 282,620
<SALES> 0
<TOTAL-REVENUES> 11,554
<CGS> 0
<TOTAL-COSTS> 5,792
<OTHER-EXPENSES> 493
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,146
<INCOME-PRETAX> 2,123
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,123
<DISCONTINUED> 0
<EXTRAORDINARY> (2,180)
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
