ACQUISITION—Purchase of an existing property that is available for rent.
AMORTIZATION—An accounting procedure that gradually allocates the value of a limited-life or intangible asset through periodic charges to income; also, the reduction of debt through regular payments of principal sufficient to repay the loan over an established period.
AVERAGE MARKET RENT—The weighted average (by unit type) of quoted rents drawn from surveys of buildings with more than 100 units.
CAPITALIZATION RATE—The unleveraged return generated through the operation of a property, expressed as the percentage determined by dividing the Net Operating Income from the property (see "NOI") by its cost or value.
CO-INVESTMENT (JOINT VENTURE)—Shared ownership or economic participation in the operations and value of a property.
DEBT-TO-TOTAL-MARKET-CAPITALIZATION RATIO—The ratio of (a) total indebtedness to (b) total market capitalization, which equals total indebtedness, plus the value of preferred stock, plus the value of common stock and securities convertible into common stock.
DEVELOPMENT—The process of acquiring land and constructing rental housing.
DISPOSITION—The sale of property.
DIVIDEND PAYOUT RATIO—see “FFO Payout Ratio.”
EBITDA—The acronym for "Earnings Before Interest, Taxes, Depreciation, and Amortization." This is a financial measure that provides a basis for comparing the unleveraged and pre-tax cash flow of companies.
FINANCIAL OCCUPANCY—The percentage resulting from dividing actual rental revenue by total possible rental revenue. Actual rental revenue represents contractual revenue pursuant to leases without considering delinquency and concessions. Total possible rental revenue represents the value of all apartment units, with occupied units valued at contractual rental rates pursuant to leases and vacant units
valued at estimated market rents. We believe that financial occupancy is a meaningful measure of occupancy because it considers the value of each vacant unit at its estimated market rate. Financial occupancy may not completely reflect short-term trends in physical occupancy and financial occupancy rates as disclosed by other REITs may not be comparable to our calculation of financial occupancy.
FUNDS FROM OPERATION (FFO)—Represents net income or loss computed in accordance with GAAP, minus gains or losses from debt restructuring and property sales, plus certain depreciation and amortization, and after adjustment for unconsolidated partnerships and co-investments, if any. As defined by NAREIT, FFO is generally considered by industry analysts as an appropriate measure of performance of an equity REIT. Results from unconsolidated partnerships and co-investments, if any, will be adjusted to apply a comparable calculation to its results. FFO does not represent cash generated from operating activities in accordance with GAAP, nor should it be considered an alternative to net income as an indication of performance, or an alternative to cash flows as a measure of liquidity.
FFO-PAYOUT-RATIO—The portion of FFO being distributed as dividends, calculated by dividing paid dividends by FFO for a given period. GAAP-The acronym for "Generally Accepted Accounting Principles."
LOSS DUE TO LEASE—The excess of the market rent for an apartment over the
contractual rent being paid by the resident.
NAREIT—The acronym for "National Association of Real Estate Investment Trusts"- the REIT trade association. NOI-The acronym for "Net Operating Income," which means the revenue and expense directly attributable to the operations of the property, excluding financing and noncash expenses such as depreciation.
NYSE—The acronym for “The New York Stock Exchange.”
OCCUPANCY—see “Financial Occupancy.”
REDEVELOPMENT—The process of upgrading existing properties to make them more upscale and generate higher rents. Essex's redevelopment program focuses on the features that create the most value, such as "like-new" interiors, garages, exercise facilities and modern leasing facilities.
REIT—The acronym for "Real Estate Investment Trust," which is a corporation or business trust that has elected special treatment under the tax law. In general, REITs pay no corporate income tax on earnings. They are required, among other things, to distribute at least 90% of their taxable income as dividends and to invest in rent-producing real property.
SAME-STORE/SAME-PROPERTY— The results from a property or group of properties that have had stabilized operations and have been owned during two comparable periods.
SUPPLY-CONSTRAINED (MARKETS)—Real estate markets with limited development opportunities due to one or more of the following: (1) relatively few developable land sites that are suitable for housing; (2) political barriers to growth, resulting from restrictive zoning laws or local political opposition to development; (3) physical barriers to growth, resulting from natural features such as mountains or waterways; and (4) economic limitations which make development prohibitively expensive in relation to expected returns.
SUPPLY/DEMAND—As it relates to housing, supply is the result of either new development or conversion from another property type. Demand constitutes the need for housing usually generated by job and/or population growth.
YIELD—The annualized return on invested capital, expressed as a percentage derived by dividing the annualized return by the amount of capital invested.
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