Essex Property Trust Prices $350 Million of Senior Notes

Rhea-AI Summary

Essex Property Trust, Inc. (NYSE:ESS) announced a $350 million public offering of 5.500% senior notes due 2034. The Notes were priced at 99.752% of par value with a yield to maturity of 5.532%. Proceeds will repay upcoming debt maturities and fund general corporate purposes.

Insights

Financial Analyst

The announcement by Essex Property Trust regarding the pricing of their $350 million senior notes due 2034 at a 5.500% interest rate is a significant financial maneuver. From an investment perspective, the yield to maturity of 5.532% is slightly above the coupon rate, indicating a marginally lower price than par value at issuance. This suggests a cautious market reception, potentially due to current interest rate trends or the creditworthiness of the issuer.

The decision to use the proceeds to repay upcoming debt, particularly the 3.875% senior unsecured notes due May 2024, is a strategic move to manage the company's debt profile. This refinancing could lead to interest cost savings, given the current low-interest-rate environment relative to historical rates. However, it is crucial to monitor the long-term impact on the company's financial flexibility, especially as the new notes carry a higher interest rate than the maturing debt.

Market Research Analyst

Essex Property Trust's involvement of multiple reputable financial institutions as joint book-running managers and co-managers reflects the offering's complexity and the need for robust market placement strategies. The offering's timing and conditions could be indicative of the company's market outlook and its strategic response to anticipated economic conditions. As the real estate market is sensitive to interest rate fluctuations, the fixed interest payments until 2034 provide investors with clarity on future cash outflows, which is crucial for valuation purposes.

Furthermore, the allocation of funds for potential acquisition opportunities signals Essex's growth-oriented strategy. The real estate sector's performance, driven by factors such as housing demand and rent price trends, will be pivotal in determining the success of such investments. Stakeholders should assess the company's acquisition track record and the potential for value creation through these investments.

Legal Expert

The issuance of senior notes by Essex is subject to regulatory compliance, as indicated by the joint filing of a registration statement with the SEC. Investors must be aware that the offering's closing is contingent upon certain conditions, which, while not specified, typically include legal and regulatory approvals. The detailed prospectus supplement will provide critical legal disclosures, including the notes' covenant structure, guarantees and Essex's obligations.

It is also important to consider the legal implications of the 'no offer to sell' statement in jurisdictions where the securities laws are more restrictive. This ensures that Essex and its underwriters mitigate potential legal risks associated with the offering. Investors should review these legal documents to understand fully the terms and risks associated with the notes.

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 $350 million aggregate principal amount of 5.500% senior notes due 2034 (the “Notes”). The Notes were priced at 99.752% of par value with a yield to maturity of 5.532%. 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 March 14, 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 3.875% senior unsecured notes due May 2024 upon maturity thereof, and for other general corporate and working capital purposes, which may include the funding of potential acquisition opportunities. Pending application of the net proceeds from the offering for the foregoing purposes, such net proceeds initially may be invested in short-term securities.

Wells Fargo Securities, LLC, J.P. Morgan Securities LLC, PNC Capital Markets LLC, U.S. Bancorp Investments, Inc. and Citigroup Global Markets Inc. served as joint book-running managers for the offering. BMO Capital Markets Corp., Mizuho Securities USA LLC, Scotia Capital (USA) Inc., TD Securities (USA) LLC and Truist Securities, Inc. served as senior co-managers and BNP Paribas Securities Corp., Capital One Securities, Inc., Morgan Stanley & Co. 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 252 apartment communities comprising approximately 62,000 apartment homes with an additional property in active development.

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 most recent annual report on Form 10-K and any subsequent current reports on Form 8-K filed (and not furnished) by us with the SEC, and the prospectus supplement and related prospectus for this offering, 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/20240307873988/en/

Loren Rainey

Director, Investor Relations

(650) 655-7800

lrainey@essex.com

Source: Essex Property Trust, Inc.

FAQ

What is the ticker symbol for Essex Property Trust, Inc.?

The ticker symbol for Essex Property Trust, Inc. is ESS.

What was the total principal amount of the senior notes offered by Essex?

Essex offered $350 million aggregate principal amount of senior notes.

When do the Notes mature?

The Notes mature on April 1, 2034.

Which companies served as joint book-running managers for the offering?

Wells Fargo Securities, LLC, J.P. Morgan Securities LLC, PNC Capital Markets LLC, U.S. Bancorp Investments, Inc., and Citigroup Global Markets Inc. served as joint book-running managers.

What will the net proceeds from the offering be used for?

The net proceeds will be used to repay upcoming debt maturities, including the repayment of the Issuer's 3.875% senior unsecured notes due May 2024, and for general corporate and working capital purposes.