Essex Property Trust Prices $200 Million Add-On Offering of its Senior Notes Due 2034 with a Reoffer Yield of 5.110%

Rhea-AI Summary

Essex Property Trust (NYSE: ESS) announced that its operating partnership, Essex Portfolio, L.P., has priced a $200 million add-on offering of senior notes due 2034. The notes, which will be treated as a single series with previously issued $350 million 5.500% senior notes, have a reoffer yield of 5.110% and are priced at 102.871% of par value. Interest is payable semiannually at 5.500% per annum, with the first payment due October 1, 2024. The notes mature on April 1, 2034.

The offering is expected to close on August 21, 2024. Proceeds will be used to repay upcoming debt maturities, including a portion of the $500.0 million 3.500% senior notes due April 2025, and for general corporate purposes. Essex Property Trust is a fully integrated REIT with ownership interests in 255 apartment communities comprising over 62,000 apartment homes in selected West Coast markets.

Positive

• Additional $200 million in senior notes priced, strengthening the company's financial position
• Reoffer yield of 5.110% indicates strong investor demand
• Proceeds to be used for debt repayment, potentially improving the company's debt profile

Negative

• Increase in long-term debt obligations with the new $200 million note offering
• Higher interest rate of 5.500% compared to the 3.500% notes being repaid, potentially increasing interest expenses

Insights

Financial Analyst

Essex Property Trust's $200 million add-on offering of senior notes due 2034 is a strategic move to optimize their debt structure. The 5.110% reoffer yield is competitive in the current market, allowing Essex to secure long-term financing at favorable rates. This offering, combined with the initial $350 million notes, brings the total to $550 million, potentially improving economies of scale.

The company's plan to use the proceeds to repay upcoming debt maturities, particularly the $500 million 3.500% notes due April 2025, demonstrates proactive liability management. This refinancing could result in interest expense savings, given the current yield environment. However, investors should note the slight increase in leverage and its impact on the company's financial ratios.

Real Estate Market Analyst

Essex's decision to raise additional capital through this offering suggests confidence in the multifamily real estate market, particularly in West Coast markets where they operate. With ownership interests in 255 apartment communities comprising over 62,000 units, Essex is well-positioned to capitalize on the strong demand for rental housing in these areas.

The company's ability to secure this financing at a competitive rate indicates investor confidence in Essex's business model and the multifamily sector's stability. However, investors should monitor potential market shifts, such as interest rate changes or regional economic factors, which could impact Essex's property values and rental income streams in the long term.

SAN MATEO, Calif.--(BUSINESS WIRE)-- Essex Property Trust, Inc. (NYSE: ESS) (“Essex”) announced today that its operating partnership, Essex Portfolio, L.P. (the “Issuer”), priced an underwritten public offering of $200 million in additional senior notes due 2034 with a reoffer yield of 5.110% (the “notes”). The notes will be issued as additional notes under the indenture pursuant to which the Issuer previously issued $350 million of 5.500% senior notes due 2034 (the “initial notes”). The notes will be treated as a single series of securities with the initial notes under the indenture and will have the same CUSIP number as, and be fungible with, the initial notes. The notes were priced at 102.871% of par value. Interest is payable semiannually at an interest rate per annum of 5.500% on April 1 and October 1 of each year with the first interest payment due October 1, 2024. The notes mature on April 1, 2034. The notes will be the senior unsecured obligations of the Issuer and will be fully and unconditionally guaranteed by Essex. The notes offering is expected to close on August 21, 2024, subject to the satisfaction of certain closing conditions.

The Issuer intends to use the net proceeds of this offering to repay upcoming debt maturities, including to fund a portion of the repayment of the Issuer’s $500.0 million aggregate principal amount outstanding of 3.500% senior notes due April 2025 upon maturity thereof, and for other general corporate and working capital purposes. Pending application of the net proceeds from the offering for the foregoing purposes, such net proceeds initially may be used to repay borrowings outstanding under the Issuer’s unsecured credit facilities and/or invested in short-term securities.

Wells Fargo Securities, LLC, J.P. Morgan Securities LLC, PNC Capital Markets LLC, U.S. Bancorp Investments, Inc., Scotia Capital (USA) Inc. and TD Securities (USA) LLC served as joint book-running managers for the offering. BofA Securities, Inc., BMO Capital Markets Corp., Mizuho Securities USA LLC and Truist Securities, Inc. served as senior co-managers and Regions Securities LLC and Samuel A. Ramirez & Company, Inc. served as co-managers for the offering.

The Issuer and Essex have jointly filed a registration statement (including a preliminary prospectus supplement and a prospectus) with the U.S. Securities and Exchange Commission (“SEC”) for the offering to which this communication relates. You may get these documents for free by searching the SEC online database on the SEC website at http://www.sec.gov. Alternatively, the Issuer, Essex, any underwriter or any dealer participating in the offering will arrange to send you the prospectus supplement and prospectus if you request it from (i) Wells Fargo Securities, LLC toll free at 1-800-645-3751, (ii) J.P. Morgan Securities LLC collect at 1-212-834-4533, (iii) PNC Capital Markets LLC toll free at 855-881-0697 or (iv) U.S. Bancorp Investments, Inc. toll free at 1-877-558-2607.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy any securities nor will there be any sale of these securities in any jurisdiction in which, or to any person to whom, such offer, solicitation or sale would be unlawful.

About Essex Property Trust, Inc.

Essex Property Trust, Inc., an S&P 500 company, is a fully integrated real estate investment trust that acquires, develops, redevelops, and manages multifamily residential properties in selected West Coast markets. Essex currently has ownership interests in 255 apartment communities comprising over 62,000 apartment homes.

Safe Harbor Statement

This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements which are not historical facts, including statements regarding our expectations, estimates, assumptions, hopes, intentions, beliefs and strategies regarding the future. Words such as “expects,” “assumes,” “anticipates,” “may,” “will,” “intends,” “plans,” “projects,” “believes,” “seeks,” “future,” “estimates,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Such forward-looking statements include, among other things, statements related to the notes offering, including the terms, timing and completion of the offering and the expected use of the net proceeds therefrom. We cannot assure the future results or outcome of the matters described in these statements; rather, these statements merely reflect our current expectations of the approximate outcomes of the matters discussed. Factors that might cause our actual results, performance or achievements to differ materially from those expressed or implied by these forward-looking statements include, but are not limited to, those associated with market risks and uncertainties and the satisfaction of customary closing conditions for an offering of the notes, as well as the risks referenced in our annual report on Form 10-K for the year ended December 31, 2023, our quarterly reports on Form 10-Q for the quarters ended March 31, 2024 and June 30, 2024, as well as those risk factors and special considerations set forth in our other filings with the SEC that are incorporated by reference in such prospectus supplement and accompanying prospectus which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. All forward-looking statements are made as of the date hereof, we assume no obligation to update or supplement this information for any reason, and therefore, they may not represent our estimates and assumptions after the date of this press release.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240819783193/en/

Loren Rainey

Director, Investor Relations

(650) 655-7800

lrainey@essex.com

Source: Essex Property Trust, Inc.

FAQ

What is the size and purpose of Essex Property Trust's new note offering?

Essex Property Trust (ESS) has priced a $200 million add-on offering of senior notes due 2034. The proceeds will be used to repay upcoming debt maturities, including a portion of the $500 million 3.500% senior notes due April 2025, and for general corporate purposes.

What are the key terms of Essex Property Trust's new senior notes?

The new senior notes due 2034 have a reoffer yield of 5.110% and are priced at 102.871% of par value. They carry an interest rate of 5.500% per annum, payable semiannually, with the first payment due October 1, 2024.

When is the expected closing date for Essex Property Trust's new note offering?

The new note offering by Essex Property Trust (ESS) is expected to close on August 21, 2024, subject to the satisfaction of certain closing conditions.

How many apartment communities does Essex Property Trust currently own?

As of the press release date, Essex Property Trust (ESS) has ownership interests in 255 apartment communities, comprising over 62,000 apartment homes in selected West Coast markets.