<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. 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.)
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 ___
---
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:
18,095,786 shares of Common Stock
as of May 10, 2000
<PAGE>
TABLE OF CONTENTS
FORM 10-Q
<TABLE>
<CAPTION>
Part I Page No.
--------
<S> <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 Stockholders' Equity
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 12
Item 3 Quantitative and Qualitative Disclosure About Market Risk 17
Part II
Item 6 Exhibits and Reports on Form 8-K 19
Signatures 20
</TABLE>
2
<PAGE>
Part I Financial Information
- ------ ---------------------
Item 1: Financial Statements (Unaudited)
--------------------------------
"Essex" or the "Company" 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 limited
partnership in which Essex Property Trust, Inc. is the sole general
partner.
The information furnished in the accompanying consolidated unaudited
balance sheets, statements of operations, stockholders' equity and
cash flows of the Company 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 PROPERTY TRUST, INC.
Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------- ------------
<S> <C> <C>
Assets
------
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
Cash and cash equivalents-restricted 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 Stockholders' Equity
------------------------------------
Mortgage notes payable $ 372,917 $ 373,608
Line of credit - 10,500
Accounts payable and accrued liabilities 29,583 28,379
Dividends 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 238,551 238,289
Stockholders' equity:
8.75% Convertible Preferred Stock, Series 1996A:
$.0001 par value, 184,687 and 1,600,000
authorized, 184,687 and 1,600,000 issued and
outstanding 1 1
Common stock, $.0001 par value, 656,497,491
and 659,282,178 authorized, 18,095,537 and
18,049,952 issued and outstanding 2 2
Cumulative redeemable preferred stock;
$.0001 par value, no shares issued and
outstanding:
7.875% Series B 2,000,000 shares authorized - -
9.125% Series C 500,000 shares authorized - -
9.30% Series D 2,000,000 shares authorized - -
9.25% Series E 2,200,000 shares authorized - -
Excess stock, $.0001 par value, 330,000,000
shares authorized and no shares - -
issued and outstanding
Additional paid-in capital 426,169 425,089
Distributions in excess of accumulated earnings (34,716) (37,399)
---------- ----------
Total stockholders' equity 391,456 387,693
---------- ----------
$1,056,362 $1,062,313
========== ==========
</TABLE>
See accompanying notes to the consolidated unaudited financial statements.
4
<PAGE>
ESSEX PROPERTY TRUST, INC.
Consolidated Statements of Operations
(Unaudited)
(Dollars in thousands, except per share 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 (6,194) (3,236)
----------- -----------
Net income 12,750 8,454
Preferred stock dividends (117) (831)
----------- -----------
Net income available to common stockholders $ 12,633 $ 7,623
=========== ===========
Per share data:
Basic:
Net income $ 0.70 $ 0.46
=========== ===========
Weighted average number of shares
outstanding during the period 18,067,694 16,735,640
=========== ===========
Diluted:
Net income $ 0.69 $ 0.45
=========== ===========
Weighted average number of shares
outstanding during the period 18,499,759 16,888,989
=========== ===========
Dividend per share $ 0.55 $ 0.50
=========== ===========
</TABLE>
See accompanying notes to the consolidated unaudited financial statements.
5
<PAGE>
ESSEX PROPERTY TRUST, INC.
Consolidated Statements of Stockholders' Equity
for the three months ended March 31, 2000 and the
year ended December 31, 1999
(Unaudited)
(Dollars and shares in thousands)
<TABLE>
<CAPTION>
Distributions
Additional in excess of
Preferred stock Common stock paid - in accumulated
---------------------- ----------------------
Shares Amount Shares Amount capital earnings Total
--------- ---------- ---------- -------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1998 1,600 $ 1 16,641 $ 2 $ 431,278 $ (41,481) $ 389,800
Shares issued from conversion
of Convertible Preferred Stock (1,415) - 1,618 - - - -
Shares purchased by Operating
Partnership - - (262) - (7,119) - (7,119)
Net proceeds from options exercised - - 53 - 930 - 930
Net income - - - - - 43,564 43,564
Dividends declared - - - - - (39,482) (39,482)
--------- ---------- ---------- -------- ---------- ------------ ----------
Balances at December 31, 1999 185 1 18,050 2 425,089 (37,399) 387,693
Net proceeds from options exercised - - 46 - 1,080 - 1,080
Net income - - - - - 12,750 12,750
Dividends declared - - - - - (10,067) (10,067)
--------- ---------- ---------- -------- ---------- ------------ ----------
Balances at March 31, 2000 185 $ 1 18,096 $ 2 $ 426,169 $ (34,716) $ 391,456
========= ========== ========== ======== ========== ============ ==========
</TABLE>
See accompanying notes to the consolidated unaudited financial statements
6
<PAGE>
ESSEX PROPERTY TRUST, INC.
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 0
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)
Net proceeds from stock options exercised and shares
issued through dividend reinvestment plan 1,080 39
Distributions to minority interest/partners (5,768) (3,026)
Redemption of operating partnership units (164) (200)
Dividends paid (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
--------------------------------------
The unaudited consolidated financial statements of the Company 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 Company's annual report on Form 10-K for the
year ended December 31, 1999.
The unaudited consolidated financial statements for the three months ended
March 31, 2000 and 1999 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 the
Operating Partnership, owning an 89.7%, 89.7% and 90.0% general partnership
interest as of March 31, 2000, December 31, 1999 and March 31, 1999,
respectively.
As of March 31, 2000, the Company 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 Company 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 Company 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
Company is obligated to loan at 9% up to $1,000 for property specific
improvements. The Company's interest in the land is subordinated to a loan
obtained by the buyer in connection with the purchase of the property. The
Company 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 Company sold Station Park Apartments, a 106 unit
apartment community located in Walnut Creek, California for $15,800. This
apartment was 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 Company 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 Company had five development communities, with an aggregate
of 1,176 multifamily units. During the first quarter of 2000, the Company
reached
4
<PAGE>
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
(Unaudited)
(Dollars in thousands, except for per share and per unit amounts)
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 Company 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 Company 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 Company in December 1995. Including 114 newly constructed units, the
total number of units for this community is 462 units. The property is
wholly owned by the Company. 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 Company 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 Company as existing properties
owned or recently acquired which have been targeted for investment by the
Company 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 Company 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 and Essex Management
Corporation, an unconsolidated preferred stock subsidiary of the Company
("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, 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.
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
Company owns an ownership interest. Other income also includes management
fee income and investment income earned from its related party
partnerships in which the Company 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 Company 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
5
<PAGE>
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
(Unaudited)
(Dollars in thousands, except for per share and per unit amounts)
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 Company 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 projects. This
contract will be settled no later than June 2000. If the contract were
settled as of March 31, 2000, the Company 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 Company 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
Company will adopt SFAS 133 for interim
10
<PAGE>
Notes to Consolidated Financial Statements
March 31, 2000 and 1999
(Unaudited)
(Dollars in thousands, except for per share and per unit amounts)
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 Company's financial position or results of
operations.
(6) Segment Information
-------------------
The Company 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
Company'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, 2000 March 31, 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>
<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>
11
<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 Property Trust, Inc. ("Essex" or the "Company")
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.
Substantially all of the assets of the Company are held by, and substantially
all operations are conducted through, Essex Portfolio, L.P. (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,
owned an 89.7%, 89.7% and 90.0% general partnership interest in the Operating
Partnership, respectively. The Company has elected to be treated 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," 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 Company's expectations, hopes, intentions,
beliefs and strategies regarding the future. Forward looking statements include
statements regarding the Company'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
Company'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 Company'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 Company'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 Company's other filings with the Securities and
Exchange Commission (the "SEC") which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements.
General Background
The Company'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 Company'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
Company's portfolio has exceeded 95% for the last five years.
The Company has elected to be treated as a real estate investment trust ("REIT")
for federal income tax purposes, commencing with the year ended December 31,
1994. The Company provides some of its fee-based asset management and
disposition services as well as third-party property management and leasing
services through Essex Management Corporation ("EMC"), in order to maintain
compliance with REIT tax
12
<PAGE>
rules. The Company owns 100% of EMC's 19,000 shares of non-voting Preferred
Stock. Executives of the Company own 100% of EMC's 1,000 shares of Common Stock.
Since the Company's initial public offering (the "IPO") in June 1994, the
Company has acquired ownership interests in 58 multifamily residential
properties and its headquarters building. Of the multifamily properties acquired
since the IPO, 11 are located in 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 its IPO,
the Company 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 Company has disposed of, since its IPO, 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 Company is developing five multifamily residential communities, with an
aggregate of 1,176 multifamily units. In connection with these development
projects, the Company 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
Company'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 Company's multifamily Same Store
Properties (properties owned by the Company 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%
13
<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
Number of March 31, 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 Company 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 Company'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 Company's development and
redevelopment communities. Property operating expenses, exclusive of
depreciation and amortization, increased by $775,000 or 7.7% to $10,855,000 in
the first quarter of 2000 from $10,080,000
14
<PAGE>
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 Company'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
Company.
Net income increased by $4,296,000 to $12,750,000 in the first quarter of 2000
from $8,454,000 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 Company had $23,086,000 of unrestricted cash and cash
equivalents. The Company 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 Company 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 Company 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 Company 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 Company's requirements or that the
Company will be able to dispose of properties in a timely manner and under terms
and conditions that the Company deems acceptable.
The Company 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
Company's option, 1.15% over the LIBOR rate. The line of credit matures in May
2000. At March 31, 2000 the Company had no balance outstanding on its line of
credit. During the quarter ended March 31, 2000, the Company had outstanding
balances which bore interest rates ranging from 7.0% to 8.0%. The Company
intends to replace or renew this facility prior to its expiration with similar
terms.
In addition to the unsecured line of credit, the Company 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 Company 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 Company'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 $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
15
<PAGE>
$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 Company 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 Company
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 Company's current expectations.
The Company 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
Company's Annual Report on Form 10-K for the year ended December 31, 1999. In
connection with these development projects, the Company 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 Company's remaining
commitment to fund the estimated cost to complete is approximately $63,400,000.
The Company 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 Company 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 Company 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 line of credit.
Year 2000 Compliance
The date is now past January 1, 2000 and the Company has not experienced any
immediate adverse impact from the transition to the year 2000. However, the
Company cannot provide assurance that its vendors have not or will nor be
affected in a manner that is not yet apparent. The Company 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 Company's
operations. Therefore, the Company will continue to monitor its year 2000
compliance and the year 2000 compliance of its vendors.
Funds from Operations
Industry analysts generally consider funds from operations, ("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 of rental properties and non-
recurring gains or losses. Management considers Funds from Operations to be a
useful financial
16
<PAGE>
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.
<TABLE>
<CAPTION>
March 31, 2000 March 31, 1999
--------------- ---------------
<S> <C> <C>
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
=========== ===========
</TABLE>
(1) Assumes conversion of all outstanding operating partnership interests in
the Operating Partnership and Convertible Preferred Stock, Series 1996 A, into
shares of the Company's Common Stock. Minority interests have been adjusted to
reflect such conversion.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company 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 Company's real estate investment portfolio and
operations. The Company'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 Company 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 Company does not enter into
derivative or interest rate transactions for speculative purposes.
The Company'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 Company believes that the principal
amounts of the Company's mortgage notes payable and line of credit approximate
fair value as of March
17
<PAGE>
31, 2000 as interest rates are consistent with yields currently available to the
Company for similar instruments.
<TABLE>
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 Company 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 Company 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 Company's
ultimate realized gain or loss with respect to interest rate fluctuations will
depend on the exposures that may arise during the period, the Company's hedging
strategies at that time and interest rates.
18
<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
19
<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 PROPERTY TRUST, INC.
/S/ MARK J. MIKL
----------------
Mark J. Mikl, Vice President and Controller
(Authorized Officer and
Principal Accounting Officer)
May 10, 2000
--------------
Date
20
<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
PROPERTY TRUST, INC. 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
<CURRENT-ASSETS> 67,711
<PP&E> 1,029,561
<DEPRECIATION> 95,404
<TOTAL-ASSETS> 1,056,362
<CURRENT-LIABILITIES> 48,436
<BONDS> 372,917
2
0
<COMMON> 1
<OTHER-SE> 391,453
<TOTAL-LIABILITY-AND-EQUITY> 1,056,362
<SALES> 0
<TOTAL-REVENUES> 39,536
<CGS> 0
<TOTAL-COSTS> 17,522
<OTHER-EXPENSES> 1,284
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,808
<INCOME-PRETAX> 12,750
<INCOME-TAX> 0
<INCOME-CONTINUING> 12,750
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,750
<EPS-BASIC> 0.70
<EPS-DILUTED> 0.69
</TABLE>
