Essex Property Trust, Inc. ESS has announced the pricing of $150 million of 4% senior notes due 2029 through the company’s operating partnership. The notes are priced at 100.717% of the par value and a yield to maturity of 3.910%.
The offering comes as additional notes under an indenture pursuant to which the issuer had previously issued $350-million aggregate principal amount of 4.000% senior notes due 2029 on Feb 11, 2019. The offering, subject to fulfillment of certain closing conditions, is expected to close on Mar 26. The notes will be the senior unsecured obligations of the issuer, and fully and unconditionally guaranteed by Essex Property Trust, Inc.
The company plans to utilize net proceeds of this offering to retire its debt under the unsecured line of credit facilities. Further, amounts will be channelized to funds its other general corporate and working capital needs.
By paying down its debt obligations and credit facility, this offering is anticipated to provide flexibility to the company. In addition, it reflects the company’s focus to address its financial obligations in an efficient way.
Essex Property is likely to leverage on favorable demographic trends, household formation, improving economy and job-market growth. The company’s substantial exposure to the West Coast market offers the company ample scope to enhance its top line over the long term. The West Coast is home to several innovation and technology companies. The region is witnessing solid job growth, higher wages, increased percentage of renters than owners, and favorable migration trends with the influx of workers to its markets, mainly from major East Coast markets.
However, apartment deliveries are anticipated to remain elevated in the near term and this will likely remain a pressing concern for the residential REITs, including Essex Property, AvalonBay Communities, Inc. AVB, Equity Residential EQR and Apartment Investment & Management Co. AIV.
This is because high supply curtails landlords’ ability to command more rent and result in lesser absorption. As such, aggressive rental concessions and moderate pricing power amid high supply remain concerns for the company.
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