UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

FORM 10-K

 
(MARK ONE)
 (MARK ONE)
[X]
xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 20072015
OR
[   ]
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________ TO _____________
Commission file number    number:   1-13106 (Essex Property Trust, Inc.)
Commission file number:   333-44467-01 (Essex Portfolio, L.P.)

ESSEX PROPERTY TRUST, INC.
Essex Portfolio,ESSEX PORTFOLIO, L.P.
(Exact name of Registrant as Specified in its Charter)

  California77-0369575
  (State
Maryland (Essex Property Trust, Inc.)
California (Essex Portfolio, L.P.)
77-0369576 (Essex Property Trust, Inc.)
77-0369575 (Essex Portfolio, L.P.)
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification Number)

925 East Meadow Drive1100 Park Place, Suite 200
Palo Alto,San Mateo, California    9430394403
(Address of Principal Executive Offices including Zip Code)
(650) 494-3700655-7800
(Registrant's Telephone Number, Including Area Code)


Securities registered pursuant to Section 12(b) of the Act: None


Title of each className of each exchange on which registered
Common Stock, $.0001 par value (Essex Property Trust, Inc.)New York Stock Exchange
7.125% Series H Cumulative Redeemable Preferred Stock (Essex Property Trust, Inc.)New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes [X]   No [   ]Act.
Essex Property Trust, Inc.    Yes x   No o
Essex Portfolio, L.P.     Yes o   No x



Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [   ]   No [X]  
Essex Property Trust, Inc.    Yes o  No x
Essex Portfolio, L.P.     Yes o   No x

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]   No [   ]
Essex Property Trust, Inc.    Yes x   No o
Essex Portfolio, L.P.     Yes x   No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Essex Property Trust, Inc.    Yes x   No o
Essex Portfolio, L.P.     Yes x   No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K, or any amendment to this Form 10-K.  [   ]

Essex Property Trust, Inc.    o
Essex Portfolio, L.P.    o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):


Essex Property Trust, Inc.:
Large accelerated filer [X]x
Accelerated filer [   ]o
Non-accelerated filer [   ]
(Doo   (Do not check if a smaller reporting company)
Smaller reporting company [  ]o

Essex Portfolio, L.P.:
Large accelerated filer o
Accelerated filer o
Non-accelerated filer x   (Do not check if a smaller reporting company)
Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes [   ]   No [X]
Essex Property Trust, Inc.    Yes o   No x
Essex Portfolio, L.P.     Yes o   No x

As of June 30, 2015, the aggregate market value of the voting stock held by non-affiliates of Essex Property Trust, Inc. was $13,717,739,025.  The aggregate market value was computed with reference to the closing price on the New York Stock Exchange on such date. Shares of common stock held by executive officers, directors and holders of more than ten percent of the outstanding common stock have been excluded from this calculation because such persons may be deemed to be affiliates. This exclusion does not reflect a determination that such persons are affiliates for any other purposes. There is no public trading market for the common units of Essex Portfolio, L.P. As a result, the aggregate market value of the common units held by non-affiliates of Essex Portfolio, L.P., cannot be determined.

As of February 22, 2016, 65,411,581 shares of common stock ($.0001 par value) of Essex Property Trust, Inc. were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:
The following document is incorporated by reference in Part III of the Annual Report on Form 10-K: Proxy statement for the annual meeting of stockholders of Essex Property Trust, Inc. to be held May 6, 2008
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filed within 120 days of December 31, 2015.



EXPLANATORY NOTE

This report combines the annual reports on Form 10-K for the year ended December 31, 2015 of Essex Property Trust, Inc. and Essex Portfolio, L.P. Unless stated otherwise or the context otherwise requires, references to “ESS” mean Essex Property Trust, Inc., a Maryland corporation that operates as a self-administered and self-managed real estate investment trust (“REIT”), and references to “EPLP” mean Essex Portfolio, L.P. (the “Operating Partnership”). Unless stated otherwise or the context otherwise requires, references to the “Company,” “Essex,” “we,” “us” or “our” mean collectively ESS, EPLP and those entities/subsidiaries owned or controlled by ESS and/or EPLP.  References to the “Operating Partnership” mean collectively EPLP and those entities/subsidiaries owned or controlled by EPLP.

ESS is the general partner of, and as of December 31, 2015 owned an approximate 96.7% ownership interest in EPLP.  The remaining 3.3% interest is owned by limited partners. As the sole general partner of EPLP, ESS has exclusive control of EPLP's day-to-day management.
2007
The Company is structured as an umbrella partnership REIT (“UPREIT”) and ESS contributes all net proceeds from its various equity offerings to the Operating Partnership. In return for those contributions, ESS receives a number of OP Units (see definition below) in the Operating Partnership equal to the number of shares of common stock it has issued in the equity offering.  Contributions of properties to the Company can be structured as tax-deferred transactions through the issuance of OP Units in the Operating Partnership, which is one of the reasons why the Company is structured in the manner shown above. Based on the terms of EPLP's partnership agreement, OP Units can be exchanged for ESS common stock on a one-for-one basis. The Company maintains a one-for-one relationship between the OP Units of the Operating Partnership issued to ESS and shares of common stock.

The Company believes that combining the reports on Form 10-K of ESS and EPLP into this single report provides the following benefits:

enhances investors' understanding of the Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;
eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure applies to both the Company and the Operating Partnership; and
creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.

Management operates the Company and the Operating Partnership as one business. The management of ESS consists of the same members as the management of EPLP.

All of the Company's property ownership, development and related business operations are conducted through the Operating Partnership and ESS has no material assets, other than its investment in EPLP. ESS's primary function is acting as the general partner of EPLP. As general partner with control of the Operating Partnership, the Company consolidates the Operating Partnership for financial reporting purposes. Therefore, the assets and liabilities of the Company and the Operating Partnership are the same on their respective financial statements. ESS also issues equity from time to time and guarantees certain debt of EPLP, as disclosed in this report. The Operating Partnership holds substantially all of the assets of the Company, including the Company's ownership interests in its joint ventures. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for the net proceeds from equity offerings by the Company, which are contributed to the capital of the Operating Partnership in exchange for additional limited partnership interests in the Operating Partnership (“OP Units”) (on a one-for-one share of common stock per OP Unit basis), the Operating Partnership generates all remaining capital required by the Company's business. These sources include the Operating Partnership's working capital, net cash provided by operating activities, borrowings under its revolving credit facility, the issuance of secured and unsecured debt and equity securities and proceeds received from disposition of certain properties and joint ventures.

The Company believes it is important to understand the few differences between ESS and EPLP in the context of how ESS and EPLP operate as a consolidated company. Shareholders' equity, partners' capital and noncontrolling interests are the main areas of difference between the consolidated financial statements of the Company and those of the Operating Partnership. The limited partners of the Operating Partnership are accounted for as partners' capital in the Operating Partnership's consolidated financial statements and as noncontrolling interests in the Company's consolidated financial statements. The noncontrolling interests in the Operating Partnership's consolidated financial statements include the interests of unaffiliated partners in various consolidated partnerships and development joint venture partners. The noncontrolling interests in the Company's consolidated financial statements include (i) the same noncontrolling interests as presented in the Operating Partnership’s consolidated financial statements and (ii) limited partner OP Unit holders of the Operating Partnership. The differences between

iii

stockholders' equity and partners' capital result from differences in the equity issued at the Company and Operating Partnership levels.

To help investors understand the significant differences between the Company and the Operating Partnership, this report provides separate consolidated financial statements for the Company and the Operating Partnership; a single set of consolidated notes to such financial statements that includes separate discussions of shareholders' equity or partners' capital, earnings per share/unit; as applicable; and a combined Management's Discussion and Analysis of Financial Condition and Results of Operations.

This report also includes separate Part II, Item 9A. Controls and Procedures sections and separate Exhibits 31 and 32 certifications for each of the Company and the Operating Partnership in order to establish that the requisite certifications have been made and that the Company and the Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934 and 18 U.S.C. §1350.

In order to highlight the differences between the Company and the Operating Partnership, the separate sections in this report for the Company and the Operating Partnership specifically refer to the Company and the Operating Partnership. In the sections that combine disclosure of the Company and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of the Company. Although the Operating Partnership is generally the entity that directly or indirectly enters into contracts and joint ventures and holds assets and debt, reference to the Company is appropriate because the Company is one business and the Company operates that business through the Operating Partnership. The separate discussions of the Company and the Operating Partnership in this report should be read in conjunction with each other to understand the results of the Company on a consolidated basis and how management operates the Company.

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ESSEX PROPERTY TRUST, INC.
ESSEX PORTFOLIO, L.P.
2015 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

Part I. Page
Item 1.
Business
1
Item 1A.
Risk Factors
8
7
Item 1B.
Unresolved Staff Comments
18
22
Item 2.
Properties
18
22
Item 3.
Legal Proceedings
24
30
Item 4.Submission of Matters to a Vote of Security Holders
Mine Safety Disclosures
24
30
Part II.  
Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
25
30
Item 6.
Selected Financial Data
26
34
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
29
38
Item 7A.
Quantitative and Qualitative Disclosures About Market Risks
39
49
Item 8.
Financial Statements and Supplementary Data
40
50
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
40
50
Item 9A.
Controls and Procedures
40
50
Item 9B.
Other Information
40
51
Part III.  
Item 10.
Directors, Executive Officers and Corporate Governance
41
51
Item 11.
Executive Compensation
41
51
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
41
51
Item 13.
Certain Relationships and Related Transactions, , and Director Independence
41
51
Item 14.
Principal Accounting Fees and Services
41
51
Part IV.  
Item 15.
Exhibits and Financial Statement Schedules
42
52
Signatures
 
S-1


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Table of Contents

PART I
Forward Looking Statements
 
This Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Such forward-looking statements are described in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in the section, “Forward Looking Statements.”  Our actualActual results could differ materially from those set forth in each forward-looking statement.  Certain factors that might cause such a difference are discussed in this report, including in Item 1A, Risk Factors of this Form 10-K.

Item 1. Business

OVERVIEW
Essex Portfolio, L.P. (the “Operating Partnership”) acquires, develops, redevelops and manages apartment communities in selected residential areas located primarily in the West Coast of the United States and effectively holds the assets and liabilities and conducts the operating activities of
Essex Property Trust, Inc. (“Essex”, "ESS", or the “Company”). The Company is a Maryland corporation, is an S&P 500 company that operates as a self-administered and self-managed real estate investment trust (“REIT”). The Company owns all of its interest in its real estate and other investments directly or indirectly through Essex Portfolio, L.P. (the “Operating Partnership” or “EPLP”). The Company is the sole general partner of the Operating Partnership and as of December 31, 20072015 owns a 90.9%96.7% general partnership interest. In this report, the terms “we,” “us” and “our”“Essex” or the “Company” also refer to Essex Property Trust, Inc., its Operating Partnership and those entities owned or controlled by the Operating Partnership’s subsidiaries.Partnership.

The Company has elected to be treated as a REIT for federal income tax purposes, commencing with the year ended December 31, 1994 as the Company completed an initial public offering on June 13, 1994. In order to maintain compliance with REIT tax rules, the Operating PartnershipCompany utilizes taxable REIT subsidiaries for various revenue generating or investment activities. Each of theAll taxable REIT subsidiary entitiessubsidiaries are consolidated by the Operating Partnership.Company.

We areThe Company is engaged primarily in the ownership, operation, management, acquisition, development and redevelopment of real estate.  The majority of our real estate consists ofpredominantly apartment communities. As of December 31, 2007, we2015, the Company owned or held an interest in 134 apartment246 communities, aggregating 27,489 units,59,160 apartment homes, located predominantly along the West Coast, (collectively, the “Properties”, and individually, a “Property”). Our other properties included six officeas well as four commercial buildings (totaling approximately 478,040319,079 square feet) two recreational vehicle parks (totaling 338 spaces), and one manufactured housing community (containing 157 sites). We currently have sixeight active development projects with 1,079 units2,447 apartment homes in various stages of active development (together with the Properties,(collectively, the “Portfolio”).

The Operating Partnership’s and the Company’s website address is http://www.essexpropertytrust.com.www.essex.com. The Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports, and the Proxy Statement for its Annual Meeting of Stockholders are available, free of charge, on ourits website as soon as practicable after we filethe Company files the reports with the U.S. Securities and Exchange Commission (“SEC”).

BUSINESS OBJECTIVES AND STRATEGIES

The following is a discussion of ourthe Company’s business objectives and strategies in regards to real estate investment and management.  One or more of these criteria may be amended or rescinded from time to time without stockholder vote.

Business Objectives
Our primary business objectives are to increase unitholders’ value by investing in properties located in supply constrained markets, and by improving operating results and the value of our Properties, while maintaining a strong balance sheet.  We intend to achieve these objectives by:
·  Maximizing property income by maintaining a high level of occupancy while increasing rental income;
·  Expanding our Portfolio through acquisitions, development and, when appropriate, redevelopment of  apartment communities in selected major metropolitan areas;
·  Optimizing financial performance through a portfolio asset allocation program, and to increase or decrease investments in a market based on projected changes in regional economic and local market conditions; and
·  Maintaining a strong balance sheet by identifying and utilizing capital resources that provide positive leverage (i.e. investment yield that exceeds capital cost).
We cannot assure our unitholders that we will achieve our business objectives.
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Business Strategies

Research Driven Approach to Investments– We believe The Company believes that successful real estate investment decisions and portfolio growth begin with extensive regional economic research and local market knowledge.  Utilizing a proprietary research model that we have developed over the last two decades, weThe Company continually assessassesses markets where we currently operate,the Company operates, as well as markets where we considerthe Company considers future investment opportunities by evaluating:evaluating the following:

·  Markets in major metropolitan areas that have regional population primarily in excess of one million,  thereby creating liquidity, which is an important element when modifying the geographic concentration of the Operating Partnership’s portfolio in response to changing market conditions;
Focus on markets in major metropolitan areas that have regional population in excess of one million;
·  Constraints on new supply driven by: (i) low availability of developable land sites where competing housing could be economically built; (ii) political growth barriers, such as protected land, urban growth boundaries, and potential lengthy and expensive development permit processes; and (iii) natural limitations to development, such as mountains or waterways;
·  Rental demand is enhanced by affordability of rents relative to costs of rents compared to expensive for-sale housing; and
·  Housing demand that is based on proximity to jobs, high quality of life and related commuting factors, as well as potential job growth.
Housing demand that is based on job growth, proximity to jobs, high median incomes and the quality of life including related commuting factors.

Recognizing that all real estate markets are cyclical, wethe Company regularly evaluateevaluates the results of ourits regional economic, as well as, ourand local market research, and adjustadjusts the geographic focus of ourits portfolio accordingly.  We seekThe Company seeks to increase ourits portfolio allocation in markets projected to have the strongest local economies and to decrease such allocations in markets

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Table of Contents

projected to have declining economic conditions.  Likewise, the Operating PartnershipCompany also seeks to increase its portfolio allocation in markets that have attractive property valuations and to decrease such allocations in markets that have inflated valuations and low relative yields.

Property Operations – We manage our PropertiesThe Company manages its communities by focusing on strategiesactivities that willmay generate above-average rental growth, tenant retention/satisfaction and long-term asset appreciation.  We intendThe Company intends to achieve this by utilizing the strategies set forth below:
·  
Property Management – The Chief Operating Officer, Divisional Managers, Regional Portfolio Managers and Area Managers are accountable for the performance and maintenance of the Properties. They supervise, provide training for the on-site managers, manage budgeted expectations against performance, monitor market trends and prepare operating and capital budgets.
·  
Capital Preservation – The Capital and Maintenance department is responsible for the planning, budgeting and completion of major deferred maintenance and capital improvement projects at our Properties.
·  
Business Planning and Control – Comprehensive business plans are implemented in conjunction with every investment decision.  These plans include benchmarks for future financial performance, based on collaborative discussions between on-site managers and senior management.

·  
Development and Redevelopment  - We focus on acquiring and developing apartment communities in supply constrained markets, and redeveloping our existing communities to improve the financial and physical aspects of our communities.Property Management– Oversee delivery of and quality of the housing provided to our residents and manage the properties financial performance.
Capital Preservation –Asset Management is responsible for the planning, budgeting and completion of major capital improvement projects at the Company’s communities.
Business Planning and Control – Comprehensive business plans are implemented in conjunction with significant investment decisions.  These plans include benchmarks for future financial performance, based on collaborative discussions between on-site managers and senior management.
Development and Redevelopment – The Company focuses on acquiring and developing apartment communities in supply constrained markets, and redeveloping its existing communities to improve the financial and physical aspects of the Company’s communities.

CURRENT BUSINESS ACTIVITIES
Acquisitions
Merger with BRE Properties, Inc. in 2014
On April 1, 2014, Essex completed the merger with BRE Properties, Inc. (“BRE”). In connection with the closing of the merger, (1) BRE merged into a wholly owned subsidiary of Essex, and (2) each outstanding share of BRE common stock was converted into (i) 0.2971 shares (the “Stock Consideration”) of Essex common stock, and (ii) $7.18 in cash, (the “Cash Consideration”), plus cash in lieu of fractional shares for total consideration of approximately $4.3 billion. The Cash Consideration was adjusted as a result of the authorization and declaration of a special distribution to the stockholders of BRE of $5.15 per share of BRE common stock payable to BRE stockholders of record as of the close of business on March 31, 2014 (the “Special Dividend”). The Special Dividend was payable as a result of the closing of the sale of certain interests in assets of BRE to certain parties, which closed on March 31, 2014. Pursuant to the terms of the merger agreement, the amounts payable as a Special Dividend reduced the Cash Consideration of $12.33 payable by Essex in the merger to $7.18 per share of BRE common stock.

Essex issued approximately 23.1 million shares of Essex common stock as Stock Consideration in the merger. For purchase accounting, the value of the common stock issued by Essex upon the consummation of the merger was determined based on the closing price of BRE’s common stock on the closing date of the merger. As a result of Essex being admitted to the S&P 500 on the same date as the closing of the merger, Essex’s common stock price experienced significantly higher than usual trading volume and the closing price of $174 per share was significantly higher than its volume-weighted average trading price for the days before and after April 1, 2014. BRE’s common stock did not experience the same proportionate increase in common stock price leading up to April 1, 2014.  As a result, given that a substantial component of the purchase price is an exchange of equity instruments, Essex used the closing price of BRE’s common stock on April 1, 2014 of $61 per share, less the Cash Consideration, as the fair value of the equity consideration. After deducting the Special Dividend and the Cash Consideration per share, this resulted in a value of $48.67 per share of BRE common stock which is the equivalent of approximately $164 per share of Essex common stock issued.
 
Acquisitions have been a significant growthof Real Estate

Acquisitions are an important component of our business. During 2007, we completedthe Company’s business plan, and during 2015, the Company acquired ownership interests in seven communities comprised of 1,722 apartment homes for $638.1 million. 


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Table of Contents

The following is a seriessummary of 2015 acquisitions that added to our overall Portfolio.($ in millions):
 
Southern California
Property Name Location Apartment Homes Essex Ownership Percentage Ownership Quarter in 2015 Purchase Price
8th & Hope Los Angeles, CA 290
 100% EPLP Q1 $200.0
The Huxley (1)
 Los Angeles, CA 187
 100% EPLP Q1 48.8
The Dylan (1)
 Los Angeles, CA 184
 100% EPLP Q1 51.3
Reveal (2)
 Woodland Hills, CA 438
 99.75% EPLP Q2 73.0
Avant Los Angeles, CA 247
 100% EPLP Q2 99.0
Avant II Los Angeles, CA 193
 100% EPLP Q4 73.0
Enso San Jose, CA 183
 100% EPLP Q4 93.0
Total 2015 1,722
  
     $638.1

·  
(1)
In March 2007,2015, the Operating Partnership acquired two adjacent apartment communities aggregating 108 units locatedCompany purchased the joint venture partner's remaining membership interest in Santa Barbara, California for approximately $21.2 million. Lucero Village, built in 1973, consists of 70-unitsThe Huxley and The Continental, built in 1965, consistsDylan co-investments for a purchase price of 38-units.$100.1 million. The properties are now consolidated.
·  
(2)
In April 2007,2015, the Operating Partnership acquired Cardiff byCompany purchased the Sea Apartments locatedjoint venture partner's 49.5% membership interest in Cardiff, Californiathe Reveal co-investment for $72.0 million. The community, which is in Northern San Diego County, consistsa purchase price of 300-units and was built in 1986.
·  In May 2007, the Operating Partnership acquired Coldwater Canyon apartments for $8.3 million.  Built in 1979, the property consists of 39-units located in Studio City, California.
2
Northern California
·  In March 2007, the Operating Partnership acquired Harvest Park apartments, built in 2004 with a condominium map for $22.5 million. This apartment community has 104-units and is located in Santa Rosa, California.
·  In May 2007, the Operating Partnership acquired Canyon Oaks apartments, located in San Ramon, California, for $64.3 million.  Built in 2005 and consisting of 250-units, the property is within Windermere, a master planned community, and is the sister property to Mill Creek at Windermere, acquired in September 2007.
·  In June 2007, the Operating Partnership acquired Magnolia Lane, built in 2001, for $5.4$73.0 million. The property is a 32-unit community subject to a ground lease that expires in 64 years and is adjacent to Thomas Jefferson, another Essex community, purchased in September 2007.now consolidated.
·  In September 2007, the Operating Partnership acquired Mill Creek at Windermere, a 400-unit community located in San Ramon, California, for $100.5 million. Built in 2005, the property is located within Windermere, a master planned community, and is the sister property to Canyon Oaks, acquired during the second quarter of 2007.
·  The Operating Partnership also acquired Thomas Jefferson Apartments in September 2007 for $28.0 million in a DownREIT transaction that included issuing 7,006 DownREIT units to a related party. The community, which was managed by Essex before the acquisition, is a 156-unit apartment complex located in Sunnyvale, California. Built in 1963, the property is located adjacent to Magnolia Lane, another Essex community, purchased in June 2007.
Seattle Metro
·  In June 2007, the Operating Partnership acquired The Cairns, a 100-unit property built in 2005 and located in the Lake Union area of Seattle, for $28.1 million.

Dispositions of Real Estate

As part of ourits strategic plan to own quality real estate in supply-constrained markets, wethe Company continually evaluate our Propertiesevaluates all the communities and sellsells those which no longer meet ourits strategic criteria. WeThe Company may use the capital generated from the dispositions to invest in higher-return Properties, repurchase our common stock,communities or other real estate investments, or repay debts. We believeThe Company believes that the sale of these Propertiescommunities will not have a material impact on ourits future results of operations or cash flows nor will their sale materially affect ourits ongoing operations. Generally, the Company seeks to have any impact of earnings dilution resulting from these dispositions will be offset by the positive impact of ourits acquisitions, development and redevelopment activities.

·  In February 2007, the Operating Partnership sold the joint venture property City Heights Apartments, a 687-unit community located in Los Angeles, California for $120.0During 2015, the Company sold two apartment communities, Pinnacle South Mountain and Sharon Green, for a total of $308.8 million, resulting in total gains of $44.9 million. Additionally, in March 2015, the Company sold two commercial buildings, aggregating 120,000 square feet, located in Emeryville, CA, for $13.0 million, resulting in gains of $2.4 million. The Operating Partnership’s share of the proceeds from the sale totaled $33.9 million, resulting in a $13.7 million gain on sale to the Operating Partnership, and an additional $10.3 million for fees from the joint venture partner, both of which are included in income from discontinued operations.
·  The Operating Partnership sold the 21 remaining condominium units at Peregrine Point during the first three quarters of 2007, resulting in a gain of $1.0 million net of taxes and expenses.
·  In December 2007, the Operating Partnership sold four communities (875-units) in the Portland metropolitan area for $97.5 million, resulting in a gain of $47.6 million net of minority interest.  The proceeds from the sale were used in a tax-free reverse exchange for the purchase of Mill Creek at Windermere in September 2007.
·  In January 2008, the Operating Partnership collected $7.5 million and recognized income of $6.3 million from the sale of its preferred interest in Waterstone at Fremont Apartments, located in Fremont, California.

Development Pipeline

The Operating PartnershipCompany defines development activitiesprojects as new propertiescommunities that are being constructed or are newly constructed and in the case of development communities, are in a phase of lease-up and have not yet reached
3
stabilized operations.  As of December 31, 2007, excluding2015, the Company had two consolidated development projects owned by Essex Apartment Value Fund II, L.P. (“Fund II”), the Operating Partnership had threeand six joint venture development projects comprised of 684 units2,447 apartment homes for an estimated cost of $236.7 million,$1.4 billion, of which $125.8$787 million remains to be expended.expended, of which $542 million is the Company's share.

The Operating PartnershipCompany defines the predevelopment pipelineprojects as new propertiesproposed communities in negotiation or in the entitlement process with aan expected high likelihood of becoming entitled development activities.projects. As of December 31, 2007,2015, the Operating PartnershipCompany had five development communities aggregating 1,658 units that were classified asvarious consolidated predevelopment projects. The estimated total cost of the predevelopment pipeline at December 31, 2007 was $508.4 million, of which $411.3 million remains to be expended.   The Operating PartnershipCompany may also acquire land for future development purposes.   The Operating Partnership owned five land parcels held for future development aggregating 434 units aspurposes or sale.


3
Table of December 31, 2007. The Operating Partnership had incurred $25.5 million in costs related to these five land parcels as of December 31, 2007.Contents

The following table sets forth information regarding the Operating Partnership’s consolidatedCompany’s development pipeline:pipeline ($ in millions):

       As of 12/31/07 ($ in millions)  
       Estimated  Incurred Projected
Development Pipeline Location Units  
Project Cost(1)
  Project Cost Stabilization
Development Projects            
    Belmont Station Los Angeles, CA 275 $71.1 $55.5 Dec-08
    The Grand Oakland, CA 238  96.2  42.0 May-09
    Fourth Street Berkeley, CA 171  69.4  13.4 Aug-10
    684  236.7  110.9  
Predevelopment projects various 1,658  508.4  97.1 Nov-10 to Jul-14
Land held for future development various 434  25.5  25.5       -
        Consolidated Development Pipeline   2,776 $770.6 $233.5  
         As of
        12/31/2015
     Essex   Incurred Estimated
Development Pipeline Location Ownership% Apartment Homes 
Project Cost (1)
 
Project Cost(1)
Development Projects - Consolidated          
MB 360 - Phase II San Francisco, CA 100% 172
 $119
 $135
Station Park Green San Mateo, CA 100% 599
 83
 354
Total - Consolidated Development Projects    
 771
 202
 489
Development Projects - Joint Venture    
  
  
  
Epic - Phase III San Jose, CA 55% 200
 84
 92
Agora(2)
 Walnut Creek, CA 51% 49
 84
 95
Owens Pleasanton, CA 55% 255
 55
 89
Hacienda Pleasanton, CA 55% 251
 37
 86
Century Towers San Jose, CA 50% 376
 93
 172
500 Folsom (3)
 San Francisco, CA 50% 545
 62
 381
Total - Joint Venture Development Projects    
 1,676
 415
 915
Predevelopment Projects - Consolidated    
  
  
  
Other Projects various 100% —
 40
 40
Total - Predevelopment Projects    
 —
 40
 40
Grand Total - Development and Predevelopment Pipeline    
 2,447
 $657
 $1,444

(1)
Includes costs related to the entire project, including both the Company's and joint venture partners' costs. Includes incurred costs and estimated costs to complete these development projects. For predevelopment projects, only incurred costs are included in estimated costs.
(2)
Estimated project costs for this development include costs to develop both residential and commercial space.
(3)
Estimated project cost for this development is net of a projected value for low-income housing tax credit proceeds and savings from tax exempt bonds.
(1) Includes incurred costs and estimated costs to complete these development projects.

Redevelopment Pipeline

The Operating PartnershipCompany defines the redevelopment communitiespipeline as existing properties owned or recently acquired, which have been targeted for additional investment by the Operating PartnershipCompany with the expectation of increased financial returns through property improvement.  During redevelopment, apartment unitshomes may not be available for rent and, as a result, may have less than stabilized operations.  As of December 31, 2007,2015, the Operating PartnershipCompany had ownership interests in thirteenfive major redevelopment communities aggregating 3,8911,313 apartment unitshomes with estimated redevelopment costs of $135.6$159.8 million, of which approximately $74.6$82.5 million remains to be expended.  These amounts exclude redevelopment projects owned by Fund II.   The following table illustrates these consolidated redevelopment projects:

       As of 12/31/07 ($ in thousands)
       Estimated  Incurred
Redevelopment Pipeline Location Units  
Renovation Cost(1)
 Project Cost
Southern California          
    Avondale at Warner Center Woodland Hills, CA 446 $14,070 $11,188
    Highridge Rancho Palos Verde, CA 255  16,063  1,976
    Mira Monte Mira Mesa, CA 355  6,060  5,900
    Pathways Long Beach, CA 296  10,721  5,788
Northern California          
    Boulevard (Treetops) Fremont, CA 172  8,387  5,757
    Bridgeport (Summerhill Commons) Newark, CA 184  4,586  3,869
    Marina Cove Santa Clara, CA 292  9,858  805
    Montclaire (Oak Pointe) - Phase I-III Sunnyvale, CA 390  15,106  5,688
    Wimbledon Woods Hayward, CA 560  9,350  7,195
Seattle Metro          
    Palisades - Phase I and II Bellevue, WA 192  6,951  6,461
    Sammamish View(2)
 Bellevue, WA 153  3,875  3,875
    Woodland Commons Bellevue, WA 236  11,779  1,240
    Foothill Commons Bellevue, WA 360  18,804  1,298
            Total Redevelopment Pipeline   3,891 $135,610 $61,040
Long Term Debt

(1) Includes incurred costsDuring 2015, the Company made regularly scheduled principal payments and estimated costs to complete these redevelopment projects.
(2) The redevelopmentloan payoffs of $118.3 million of its secured mortgage notes payable at this community was completed in the fourth quarter of 2007, and will be added back to Same-Property operations (as defined in Item 7) during the fourth quarter of 2008.
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Debt Transactions
In March 2007, the Operating Partnership obtained a mortgage loan secured by the Camino Ruiz Square community purchased in December 2006 in the amount of $21.1 million, with a fixedan average interest rate of 5.36%, which matures5.3%.

In March 2015, the Company issued $500 million of 3.5% senior unsecured notes that mature in April 2025. The interest is payable semi-annually in arrears on April 1 2017.
In April 2007,st and October 1st of each year, commencing October 1, 2015, until the Operating Partnership refinanced a mortgage loan for $35.7 million secured by the Tierra Vista community in the amount of $62.5 million, with a fixed interest rate of 5.47%, which maturesmaturity date in April 2017.2025. The Company used the net proceeds of this offering to repay indebtedness under the Company's $1.0 billion unsecured line of credit facility, its $25.0 million unsecured working capital line and for other general corporate purposes.

In June 2007, the Operating Partnership obtained a mortgage loan secured by the Cardiff by the Sea community purchased in April 2007 in the amount

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Table of $42.2 million. The loan has a fixed interest rate of 5.71% and matures in June 2017. The Operating Partnership assumed a mortgage loan in conjunction with the acquisition of The Cairns community in the amount of $12.0 million, with a fixed interest rate of 5.5%, which matures in May 2014.  Finally, the Operating Partnership refinanced $18.6 million of debt secured by the Highridge community with a $44.8 million fixed interest rate loan of 6.05%, which matures in June 2017.Contents

Bank Debt
In July 2007, the Operating Partnership paid-off a mortgage loan secured by Monterra del Sol for $2.6 million with a fixed interest rate of 7.56%.
In August 2007, the Operating Partnership obtained a mortgage loan secured by the Coldwater Canyon community purchased in May 2007 in the amount of $5.9 million, with a fixed interest rate of 6.1%, which matures in August 2017.  The Operating Partnership also refinanced an $11.6 million mortgage loan secured by the Capri at Sunny Hills community with a new loan in the amount of $19.2 million, with a fixed interest rate of 5.8%, which matures in August 2012.
In September 2007, the Operating Partnership assumed two loans in conjunction with the acquisition of the Thomas Jefferson community.  The first loan is for $14 million with a fixed interest rate of 5.7% due in March 2017, and the second loan is for $6.0 million with a fixed interest rate of 5.9% due in March 2017.
In December 2007, the Operating Partnership and a joint venture partner obtained a construction loan in the amount of $17.5 million secured by the Main Street predevelopment project in Walnut Creek, California.  The loan is variable based on LIBOR plus 125 basis points and matures in December 2009.  The initial funding on this loan was approximately $12.1 million, and the remainder of the loan will be used for predevelopment costs.
In January 2008, the Operating Partnership obtained a mortgage loan in the amount of $49.9 million secured by Mirabella, a community located in Marina Del Rey, California.  The loan has a fixed interest rate of 5.21%, which matures in January 2018.
Structured Finance
In March 2007, the Operating Partnership originated a $6.9 million mezzanine loan receivable for the acquisition and capital improvement of California Hill, a 153-unit, age-restricted apartment community located in Concord, California.   The floating rate note receivable is based on LIBOR with a 5% floor for the LIBOR rate plus 4.75%.  The note receivable is due in March 2011.
In September 2007, the Operating Partnership originated a $14.0 million bridge loan for the completion and lease-up of Valley View, a 146-unit apartment community located in Vancouver, Washington.  The loan refinanced a construction loan, incorporating additional proceeds for interior upgrades to the remaining phases; exterior and common area upgrades and interest reserves to take the project through lease-up and stabilization.  The floating rate note receivable is based on LIBOR with a 5% floor for the LIBOR rate plus 3.38%.  The note receivable is due in February 2009.
In October 2007, the Operating Partnership originated a $14.0 million bridge loan secured by 301 Ocean Avenue a 47-unit apartment community located in Santa Monica, California and the interest payments are guaranteed by the owner of the asset.  The floating rate note receivable is based on LIBOR with a 5% floor for the LIBOR rate plus 2.95%.  The note receivable is due in April 2009.
Derivative Transactions
In March 2007, the Operating Partnership entered into a ten-year forward-starting interest rate swap for a notional amount of $50 million and a settlement date on or before October 1, 2011, to manage interest rate exposure on
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identified future debt obligations.  In April 2007, in conjunction with the refinance of the Tierra Vista mortgage loan, the Operating Partnership settled a $50 million forward-starting swap and received $1.3 million from the counterparty. The accounting for the swap settlement reduces the effective interest rate on the new Tierra Vista mortgage loan to 5.19%.

As of December 31, 20072015, Fitch Ratings ("Fitch"), Moody’s Investor Service, and Standard and Poor's (“S&P”) credit agencies rated Essex Property Trust, Inc. and Essex Portfolio, L.P. BBB+/Stable, Baa2/Positive, and BBB/Positive, respectively.

At December 31, 2015, the Operating PartnershipCompany's $1.0 billion credit facility had entered into nine forward-startingan interest rate swaps totalingof LIBOR plus 0.95%, which is based on a notional amounttiered rate structure tied to the Company's credit ratings. In January 2016, the Company extended the maturity date on its $1.0 billion unsecured line of $450 millioncredit facility from December 2017 to December 2019, with one 18-month extension, exercisable by the Company and lowered the interest rates ranging from 4.9%rate to 5.9% and settlements dates ranging from April 2008 to October 2011.  These derivatives qualify for hedge accounting as they are expected to economically hedge the cash flows associated with the refinancing of debt that matures between April 2008 and October 2011.  The fair value of the derivatives decreased $8.0 million during the year ended December 31, 2007 to a liability value of $10.2 million as of December 31, 2007, and the derivative liability was recorded in other liabilities in the Operating Partnership’s consolidated financial statements.  The changes in the fair values of the derivatives are reflected in accumulated other comprehensive (loss) income in the Operating Partnership’s consolidated financial statements.  No hedge ineffectiveness on cash flow hedges was recognized during the year ended December 31, 2007 and 2006.LIBOR plus 0.90%.

Equity Transactions

During the second quarter of 2007, the Company2015, ESS issued and sold 1,670,5001,481,737 shares of its common stock for $213.7 million at an average stockshare price of $127.91 per share, net$226.46 for proceeds of underwriter fees and expenses.
In August 2007, the Company’s Board of Directors authorized a stock repurchase plan to allow the Company to acquire shares in an aggregate of up to $200 million.  The program supersedes the common stock repurchase plan that Essex announced on May 16, 2001.  During 2007, the Company repurchased and retired 323,259 shares of its common stock for approximately $32.6$332.3 million, net of fees and commissions. ESS contributed the net proceeds to the Operating Partnership and used the proceeds to pay down debt, fund the development and redevelopment pipeline, fund acquisitions, and for general corporate purposes. During January 2008, the Company repurchased an additional 137,500first quarter of 2016 through February 22, 2016, ESS has not issued any shares for $13.2 million, net of fees and commissions.  under its equity distribution program.

Co-investments

The Company has repurchased 460,759 shares for $45.8 million atentered into, and may continue in the future to enter into, joint ventures or partnerships (including limited liability companies) through which we own an average stock priceindirect economic interest in less than 100% of $99.30 per share since the stock repurchase plan was approved in August.
ESSEX APARTMENT VALUE FUNDS
Essex Apartment Value Fund, L.P. ("Fund I" and “Fund II”), are investment funds formedcommunity or land owned directly by the Operating Partnershipjoint venture or partnership. For each joint venture the Company holds a 50% to add value through rental growth and asset appreciation, utilizing the Operating Partnership's development, redevelopment and asset management capabilities.  The assets in Fund I were sold during 2004 and 2005, and Fund I was liquidated in 2007.
Fund II has eight institutional investors, and the Operating Partnership, with combined partner equity commitments of $265.9 million. Essex has committed $75.0 million to Fund II, which represents a 28.2%55% non-controlling interest as general partner and limited partner. Fund II utilitized debt as leverage of approximately 65% of the estimated value of the underlying real estate.  Fund II invested in apartment communities in the Operating Partnership’s targeted West Coast marketsventure and as of December 31, 2007, owned eleven apartment communitieswill earn customary management fees and threemay earn development, asset property management fees and may also earn a promote interest.

The Company has also made, and may continue in the future to make, preferred equity investments in various multi-family development projects. There was no acquisition or disposition activity in Fund II in the year ended December 31, 2007.  Essex records revenue for its asset management, property management, development and redevelopment services when earned, and promote income when realized if Fund II exceeds certain financialThe Company earns a preferred rate of return benchmarks.  on these investments.
Fund II - Development and Redevelopment Pipeline
As of December 31, 2007, the following table sets forth information regarding Fund II’s development and redevelopment pipelines:
       As of 12/31/07 ($ in millions)  
       Estimated  Incurred Projected
Development Pipeline - Fund II Location Units  
Project Cost(1)
  Project Cost Stabilization
Development Projects            
    Eastlake 2851 on Lake Union Seattle, WA 127 $35.4 $24.7 Jul-08
    Studio 40-41 Studio City, CA 149  60.6  30.7 Aug-09
    Cielo Chatsworth, CA 119  39.4  12.3 Sep-09
          Fund II - Development Pipeline   395 $135.4 $67.7  
Redevelopment Pipeline - Fund II            
Redevelopment Projects            
    Regency Tower - Phase I - II Oakland, CA 178 $4.5 $3.7  
    The Renaissance Los Angeles, CA 168  5.0  3.6  
          Fund II - Redevelopment Pipeline   346 $9.5 $7.3  
             
(1)  Includes incurred costs and estimated costs to complete these development and redevelopment projects.
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OFFICES AND EMPLOYEES

The Operating PartnershipCompany is headquartered in Palo Alto,San Mateo, California, and has regional offices in Woodland Hills, California; San Jose, California; Irvine, California; San Diego, California and Bellevue, Washington. As of December 31, 2007,2015, the Operating PartnershipCompany had approximately 9171,806 employees.

INSURANCE

The Operating Partnership carries comprehensiveCompany purchases general liability fire, extendedand all risk property, including loss of rent, insurance coverage and rental loss insurance for each of the Properties with a $5.0 million deductible per incident.its communities. The Company also purchases limited earthquake, terrorism, environmental and flood insurance.  There are however, certain types of extraordinary losses such as, for example, losses from terrorismwhich may not be covered or could exceed coverage limits. The insurance programs are subject to deductibles and self-insured retentions in varying amounts. The Company utilizes a wholly owned insurance subsidiary, Pacific Western Insurance LLC ("PWI") to self-insure certain earthquake for whichand all risk losses. As of December 31, 2015, PWI has cash and marketable securities of approximately $60.3 million, and is consolidated in the Operating Partnership does not have insurance coverage.Company's financial statements.

Substantially allAll of the PropertiesCompany's communities are located in areas that are subject to earthquake activity. The Operating Partnership believes it has a proactive approachCompany evaluates its financial loss exposure to its potential earthquake losses.  The Operating Partnership utilizes third-party seismic consultants for its acquisitions and performs seismic upgrades to those acquisitions that are determined to have a higher level of potential loss from an earthquake.  The Operating Partnership utilizes internal and third-partyevents by using actuarial loss models developed by the insurance industry and property vulnerability based on structural evaluations of seismic consultants. The Company manages this exposure, where considered appropriate, desirable, and cost-effective, by upgrading properties to helpincrease their resistance to determine its exposure.forces caused by seismic events, by considering available funds and coverages provided by PWI and/or by purchasing seismic insurance. The majority of the Operating Partnership’s Properties are lower density garden-style apartments which may be less susceptible to earthquake damage.  The Operating Partnership will continue to monitor third-partyCompany also purchases limited earthquake insurance pricingfor certain properties owned by the Company's co-investments.  
In addition, the Company carries other types of insurance coverage related to a variety of risks and exposures.  
Based on market conditions, andthe Company may consider obtaining third-party coverage if it deems it cost effective.
Althoughchange or potentially eliminate insurance coverages, or increase levels of self-insurance. Further, the Operating PartnershipCompany may carry insurance for potential losses associated with its Properties, employees, residents, and compliance with applicable laws, it may still incur losses, which could be material, due to uninsured risks, deductibles co-payments and self-insured retentions, and/or losses in excess of applicable insurance coverage and those losses may be material.limits.


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Table of Contents

COMPETITION
COMPETITION
There are numerous housing alternatives that compete with our apartmentthe Company’s communities in attracting residents.  These include other apartment communities, condominiums and single-family homes that are available for rent in the markets in which the properties are located. The Properties also compete for residents with new and existing homes and condominiums that are for sale.homes.  If the demand for our Propertiesthe Company’s communities is reduced or if competitors develop and/or acquire competing properties on a more cost-effective basis,housing, rental rates and occupancy may drop which may have a material adverse affecteffect on ourthe Company’s financial condition and results of operations.

We faceThe Company faces competition from other real estate investment trusts, businesses and other entities in the acquisition, development and operation of properties.apartment communities.  Some of the competitors are larger and have greater financial resources than we do.the Company.  This competition may result in increased costs of properties we acquire and/apartment communities the Company acquires and or develop.develops.

WORKING CAPITAL

We believeThe Company believes that cash flows generated by ourits operations, existing cash and marketable securities balances, availability under existing lines of credit, access to capital markets and the ability to generate cash gains from the disposition of real estate are sufficient to meet all of ourits reasonably anticipated cash needs during 2008.  2016.

The timing, source and amounts of cash flows provided by financing activities and used in investing activities are sensitive to changes in interest rates, stock price, and other fluctuations in the capital markets environment, which can affect ourthe Company’s plans for acquisitions, dispositions, development and redevelopment activities.

ENVIRONMENTAL CONSIDERATIONS

See the discussion under the caption, “Possible“Risks Related to Real Estate Investments and Our Operations - The Company’s Portfolio may have environmental liabilities”liabilities” in Item 1A, Risk Factors, for information concerning the potential effect of environmental regulations on our operations.its operations, which discussion under the caption “The Company’s Portfolio may have environmental liabilities” is incorporated by reference into this Item 1.

OTHER MATTERS

Certain Policies of the Operating PartnershipCompany

We intendThe Company intends to continue to operate in a manner that will not subject usit to regulation under the Investment Company Act of 1940. The Operating PartnershipCompany has in the past five years and may in the future (i) issue securities senior to its common stock, (ii) fund acquisition activities with borrowings under its line of credit and (iii) offer shares of common stock and/or units of limited partnership interest in the Operating Partnership or affiliated partnerships as partial consideration for property acquisitions. The Operating PartnershipCompany from time to time acquires partnership
7
interests in partnerships and joint ventures, either directly or indirectly through subsidiaries of the Operating Partnership,Company, when such entities’ underlying assets are real estate. In general, the Operating Partnership does not (i) underwrite securities of other issuers or (ii) actively trade in loans or other investments.

We investThe Company invests primarily in apartment communities that are located in predominantly coastal markets within Southern California, the San Francisco Bay Area, and the Seattle metropolitan area. The Operating PartnershipCompany currently intends to continue to invest in apartment communities in such regions.  However, these practices may be reviewed and modified periodically by management.


6
Table of Contents

ITEM 1A: RISK FACTORS
Item 1A. Risk Factors
For purposes of this section, the term “stockholders” means the holders of shares of Essex Property Trust, Inc.’s common stock and preferred stock. Set forth below are the risks that we believe are material to Essex Property Trust, Inc.’s stockholders and Essex Portfolio, L.P.’s unit holders. You should carefully consider the following factors in evaluating our company, our properties and our business.
Our business, operating results, cash flows and financial conditionscondition are subject to various risks and uncertainties, including, without limitation, those set forth below, any one of which could cause our actual operating results to vary materially from recent results or from our anticipated future results.
Risks Related to Our Real Estate Investments and Operations
We depend on our key personnel - Our success depends on our ability to attract and retain executive officers, senior officers and company managers. There is substantial competition for qualified personnel in the real estate industry and the loss of several of our key personnel could have an adverse effect on us.
Debt financing – At December 31, 2007, we had approximately $1.66 billion of indebtedness (including $233.1 million of variable rate indebtedness, of which $152.7 million is subject to interest rate protection agreements). We are subject to the risks normally associated with debt financing, including the following:
·  cash flow may not be sufficient to meet required payments of principal and interest;
·  inability to refinance maturing indebtedness on encumbered properties;
·  the terms of any refinancing may not be as favorable as the terms of existing indebtedness;
·  inability to comply with debt covenants could cause an acceleration of the maturity date; and
·  repaying debt before the scheduled maturity date could result in prepayment penalties.
Uncertainty of our ability to refinance balloon payments - As of December 31, 2007, we had approximately $1.66 billion of mortgage debt, exchangeable bonds and line of credit borrowings, most of which are subject to balloon payments (see Notes 8 and 9 to the Operating Partnership’s consolidated financial statements for more details) . We do not expect to have sufficient cash flows from operations to make all of these balloon payments. These mortgages, bonds and lines of credit borrowings have the following scheduled principal and balloon payments:
2008--$125.2 million;
2009--$185.7 million;
2010--$154.8 million;
2011--$166.5 million;
2012--$32.2 million;
Thereafter--$993.3 million.
We may not be able to refinance such mortgage indebtedness, bonds, or lines of credit.  The Properties subject to these mortgages could be foreclosed upon or otherwise transferred to the lender.  This could cause us to lose income and asset value.  We may be required to refinance the debt at higher interest rates or on terms that may not be as favorable as the terms of existing indebtedness.
The Operating Partnership’s current financing activities have not been severely impacted by the tightening in the credit markets.  Our strong balance sheet, the established relationships with our unsecured line of credit bank group and access to Fannie Mae and Freddie Mac secured debt financing have insulated us from the turmoil being experienced by many other real estate companies.  Recently, we have experienced some expansion in credit spreads as Fannie Mae and Freddie Mac’s tier 4 financing are currently at approximately 200 basis points over the relevant U.S. treasury securities.
Debt financing on Properties may result in insufficient cash flow - Where possible, we intend to continue to use leverage to increase the rate of return on our investments and to provide for additional investments that we could not otherwise make. There is a risk that the cash flow from the Properties will be insufficient to meet both debt payment obligations and the distribution requirements of the real estate investment trust provisions of the Internal Revenue Code. We may obtain additional debt financing in the future through mortgages on some or all of the Properties. These mortgages may be recourse, non-recourse, or cross-collateralized.
As of December 31, 2007, the Operating Partnership had 74 of its 123 consolidated apartment communities
8
encumbered by debt. Of the 74 communities, 51 are secured by deeds of trust relating solely to those properties.  With respect to the remaining 23 communities, there are 5 cross-collateralized mortgages secured by 8 communities, 7 communities, 3 communities, 3 communities, and 2 communities, respectively. The holders of this indebtedness will have claims against these communities and, to the extent indebtedness is cross-collateralized, lenders may seek to foreclose upon communities which are not the primary collateral for their loan. This may accelerate other indebtedness secured by communities. Foreclosure of communities would reduce our income and net asset value.
Risk of rising interest rates - Current interest rates could potentially increase rapidly, which could result in higher interest expense on our variable rate indebtedness. Prolonged interest rate increases could negatively impact our ability to make acquisitions and develop properties at economic returns on investment and our ability to refinance existing borrowings at acceptable rates.
As of December 31, 2007, we had approximately $220.9 million of long-term variable rate indebtedness bearing interest at floating rates tied to the rate of short-term tax-exempt revenue bonds (which mature at various dates from 2020 through 2034), $12.2 million of short-term variable rate indebtedness bearing interest at LIBOR plus 1.25% related to a predevelopment project due in 2009, and $169.8 million of variable rate indebtedness under our lines of credit. Of the $169.8 million of variable rate indebtedness under our lines of credit, $100.0 million is bearing interest at the Freddie Mac Reference Rate plus from 0.55% to 0.59%, $61.0 million is bearing interest at the underlying interest rate based on a tiered rate structure tied to the Company’s corporate ratings and is currently at LIBOR plus 0.80%, and $8.8 million is bearing interest at the underlying interest rate based on the bank’s Prime Rate less 2.0%. Approximately $152.7 million of the long-term indebtedness is subject to interest rate cap protection agreements, which may reduce the risks associated with fluctuations in interest rates. The remaining $68.2 million of long-term variable rate indebtedness was not subject to any interest rate cap protection agreements as of December 31, 2007. An increase in interest rates may have an adverse effect on our net income and results of operations.
Risk of losses on interest rate hedging arrangements – Periodically, we have entered into agreements to reduce the risks associated with increases in interest rates, and may continue to do so. Although these agreements may partially protect against rising interest rates, they also may reduce the benefits to us if interest rates decline. If a hedging arrangement is not indexed to the same rate as the indebtedness that is hedged, we may be exposed to losses to the extent that the rate governing the indebtedness and the rate governing the hedging arrangement change independently of each other. Finally, nonperformance by the other party to the hedging arrangement may subject us to increased credit risks. In order to minimize counterparty credit risk, our policy is to enter into hedging arrangements only with A-rated financial institutions.
Bond compliance requirements may limit income from certain properties - At December 31, 2007, we had approximately $220.9 million of variable rate tax-exempt financing relating to the following apartment communities: Inglenook Court, Wandering Creek, Boulevard (Treetops), Huntington Breakers, Camarillo Oaks, Fountain Park, Anchor Village and Hidden Valley (Parker Ranch). This tax-exempt financing subjects these properties to certain deed restrictions and restrictive covenants. We expect to engage in tax-exempt financings in the future. In addition, the Internal Revenue Code and rules and regulations thereunder impose various restrictions, conditions and requirements excluding interest on qualified bond obligations from gross income for federal income tax purposes. The Internal Revenue Code also requires that at least 20% of apartment units be made available to residents with gross incomes that do not exceed a specified percentage, generally 50%, of the median income for the applicable family size as determined by the Housing and Urban Development Department of the federal government. In addition to federal requirements, certain state and local authorities may impose additional rental restrictions. These restrictions may limit income from the tax-exempt financed properties if we are required to lower rental rates to attract residents who satisfy the median income test. If the Operating Partnership does not reserve the required number of apartment homes for residents satisfying these income requirements, the tax-exempt status of the bonds may be terminated, the obligations under the bond documents may be accelerated and we may be subject to additional contractual liability.
Adverse effect to property income and value due to generalGeneral real estate investment risks -may adversely affect property income and values. Real propertyestate investments are subject to a variety of risks. The yields available from equity investments inIf the communities and other real estate depend on the amount of income generated and expenses incurred. If the propertiesinvestments do not generate sufficient income to meet operating expenses, including debt service and capital expenditures, cash flow and the ability to make distributions to stockholders will be adversely affected. Income from the Propertiescommunities may be further adversely affected by, among other things, the following factors:
the general economic climate;
·  the general economic climate;
local economic conditions in which the communities are located, such as oversupply of housing or a reduction in demand for rental housing;
·  local economic conditions in which the Properties are located, such as oversupply of housing or a reduction in demand for rental housing;
the attractiveness of the communities to tenants;
·  the attractiveness of the properties to tenants;
competition from other available housing alternatives;
·  competition from other available space; and
changes in rent control or stabilization laws or other laws regulating housing;
·  the Operating Partnership’sthe Company’s ability to provide for adequate maintenance and insurance; and insurance.
changes in interest rates and availability of financing.
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As leases onat the Propertiescommunities expire, tenants may enter into new leases on terms that are less favorable to us.the Company. Income and real estate values also may be adversely affected by such factors as applicable laws (e.g.,(ex: the Americans with Disabilities Act of 1990 and tax laws), interest rate levels and the availability and terms of financing.. Real estate investments are relatively illiquid and, therefore, ourthe Company’s ability to vary ourits portfolio promptly in response to changes in economic or other conditions may be quite limited.
Short-term leases expose us to the effects of declining market rents, and the Company may be unable to renew leases or relet units as leases expire. Substantially all of our apartment leases are for a term of one year or less. If the Company is unable to promptly renew the leases or relet the units, or if the rental rates upon renewal or reletting are significantly lower than expected rates, then the Company’s results of operations and financial condition will be adversely affected. With these short term leases, our rental revenues are impacted by declines in market rents more quickly than if our leases were for longer terms.
Economic environmentWe may pursue acquisitions, dispositions, investments and impactjoint ventures, which could adversely affect our results of operations. We may make acquisitions of and investments in businesses that offer complementary properties and communities to augment our market coverage, or enhance our property offerings. We may also enter into strategic alliances or joint ventures to achieve these goals. We cannot assure you that we will be able to identify suitable acquisition, investment, alliance, or joint venture opportunities, that we will be able to consummate any such transactions or relationships on terms and conditions acceptable to us, or that such transactions or relationships will be successful. In addition, our original estimates and assumptions used in assessing any acquisition may be inaccurate, and we may not realize the expected financial or strategic benefits of any such acquisition. From time to time, we may also divest portions of our business that are no longer strategically important or exit minority investments, which could materially affect our FFO, cash flows and results of operations.
These transactions or any other acquisitions or dispositions involve risks and uncertainties. For example, as a consequence of such transactions, we may assume unknown liabilities, which could ultimately lead to material costs for us. In addition, the integration of acquired businesses or other acquisitions may not be successful and could result in disruption to other parts of our business. To integrate acquired businesses or other acquisitions, we must implement our management information systems, operating systems and internal controls, and assimilate and manage the personnel of the acquired operations. There can be no assurance that all pre-acquisition property due diligence will have identified all material issues that might arise with respect to such acquired business and its properties or as to any such other acquisitions.
Any acquisition may also cause us to assume liabilities and ongoing lawsuits, acquire goodwill and other non-amortizable intangible assets that will be subject to impairment testing and potential impairment charges, incur amortization expense related

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to certain intangible assets, increase our expenses and working capital requirements, and subject us to litigation, which would reduce our return on invested capital. In addition, if the businesses or properties that we acquire have a different pricing or cost structure than we do, such acquisitions may adversely affect our profitability and reduce our overall margin. Failure to manage and successfully integrate the acquisitions we make or to improve margins of the acquired businesses and products could materially harm our business, operating results and margins. Any dispositions we may make may also result in ongoing obligations to us following any such divestiture, for example as a result of any transition services or indemnities we agree to provide to the purchaser in any such transaction, which may result in additional expenses and may adversely affect our financial condition and results of operation.
Any future acquisitions we make may also require significant additional debt or equity financing, which, in the case of debt financing, would increase our leverage and potentially affect our credit ratings and, in the case of equity or equity-linked financing, could be dilutive to our existing stockholders. Any downgrades in our credit ratings associated with an acquisition could adversely affect our ability to borrow by resulting in more restrictive borrowing terms. As a result of the foregoing, we also may not be able to complete acquisitions or other strategic transactions in the future to the same extent as in the past, or at all. These and other factors could harm our ability to achieve anticipated levels of profitability at acquired operations or realize other anticipated benefits of an acquisition, and could adversely affect our business, financial condition and results of operations.
National and regional economic environments can negatively impact the Company’s operating results. - The Company's forecast for the national economy assumes growth of the gross domestic product of the national economy and the economies of the western states in markets where we operate can impact our operating results. Somewest coast states. In the event of these markets are concentrated in high-tech sectors, which have experienced economic downturns, anda recession, the Company could again in the future. Our property type and diverse geographic locations provide some degree of risk mitigation. However, we are not immune to prolonged economic downturns. Although we believe we are well positioned to meet these challenges, it is possible a reductionincur reductions in rental rates, occupancy levels, property valuations and increases in operating costs such as advertising and turnover and repair and maintenance expense could occur in the event of economic uncertainty.expenses.
Due to the Operating Partnership's concentration in supply restricted markets, the Operating Partnership has not experienced any material adverse impact from increases in supply of unsold single family residences.
Risk of Inflation/Deflation may affect rental rates and operating expenses. - Substantial inflationary or deflationary pressures could have a negative effect on rental rates and property operating expenses.
Risks that acquisitions willAcquisitions of communities involve various risks and uncertainties and may fail to meet expectationsexpectations. - We intend The Company intends to continue to acquire apartment communities. However, there are risks that acquisitions will fail to meet ourthe Company’s expectations. OurThe Company’s estimates of future income, expenses and the costs of improvements or redevelopment that are necessary to allow usthe Company to market an acquired propertyapartment community as originally intended may prove to be inaccurate. We expectAlso, in connection with such acquisitions, we may assume unknown liabilities, which could ultimately lead to material costs for us. The Company expects to finance future acquisitions, in whole or in part, under various forms of secured or unsecured financing or through the issuance of partnership units by the Operating Partnership or related partnerships or additional equity by the Company. The use of equity financing, rather than debt, for future developments or acquisitions could dilute the interest of the Company’s existing stockholders. If we financethe Company finances new acquisitions under existing lines of credit, there is a risk that, unless we obtainthe Company obtains substitute financing, the Operating PartnershipCompany may not be able to secureundertake additional borrowing for further lines of credit for new developmentacquisitions or developments or such lines of creditborrowing may be not available on advantageous terms.
Our apartment communities may be subject to unknown or contingent liabilities which could cause us to incur substantial costs. The properties that the Company owns or may acquire are or may be subject to unknown or contingent liabilities for which the Company may have no recourse, or only limited recourse, against the sellers. In general, the representations and warranties provided under the transaction agreements related to the sales of the properties may not survive the closing of the transactions. While the Company will seek to require the sellers to indemnify us with respect to breaches of representations and warranties that survive, such indemnification may be limited and subject to various materiality thresholds, a significant deductible or an aggregate cap on losses. As a result, there is no guarantee that we will recover any amounts with respect to losses due to breaches by the sellers of their representations and warranties. In addition, the total amount of costs and expenses that may be incurred with respect to liabilities associated with apartment communities may exceed our expectations, and we may experience other unanticipated adverse effects, all of which may adversely affect our business, financial condition and results of operations.
Risks that developmentDevelopment and redevelopment activities willmay be delayed, not completed, and/or not achieve expected resultsresults. - We pursue apartment community The Company pursues development and redevelopment projects and these projects generally require various governmental and other approvals, which have no assurance of being received. OurThe Company’s development and redevelopment activities generally entail certain risks, including the following:
funds may be expended and management's time devoted to projects that may not be completed;
·  funds may be expended and management's time devoted to projects that may not be completed;
construction costs of a project may exceed original estimates possibly making the project economically unfeasible;
·  construction costs of a project may exceed original estimates possibly making the project economically unfeasible;
projects may be delayed due to, without limitation, adverse weather conditions, labor or material shortage;
·  projects may be delayed due to, without limitation, adverse weather conditions, entitlementoccupancy rates and rents at a completed project may be less than anticipated;
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expenses at completed development projects may be higher than anticipated; and government regulations, labor shortages, or unforeseen complications;
·  occupancy rates and rents at a completed project may be less than anticipated; and
we may be unable to obtain, or experience a delay in obtaining, necessary zoning, occupancy, or other required governmental or third party permits and authorizations, which could result in increased costs or delay or abandonment of opportunities.
·  expenses at projects may be higher than anticipated.

These risks may reduce the funds available for distribution to the Company’s stockholders. Further, the development and redevelopment of propertiescommunities is also subject to the general risks associated with real estate investments. For further information regarding these risks, please see “Adverse Effectthe risk factor above titled “General real estate investment risks may adversely affect property income and values.”
Difficulty of selling apartment communities could limit liquidity and financial flexibility. If we are found to Property Incomehave held, acquired or developed a community primarily with the intent to resell the community, federal tax laws may limit our ability to sell the community without incurring a 100% tax on the gain on the sale of the community and Value Duepotentially adversely impacting our status as a real estate investment trust (“REIT”) unless we own the community through one of our taxable REIT subsidiaries (“TRSs”). In addition, real estate in our markets can at times be difficult to General Real Estate Investment Risks.”sell quickly at prices we find acceptable. These potential difficulties in selling real estate in our markets may limit our ability to change or reduce the apartment communities in our portfolio promptly in response to changes in economic or other conditions, which could have a material adverse effect on our financial condition and results of operations.

The geographic concentration of the Operating Partnership’s PropertiesCompany’s communities and fluctuations in local markets may adversely impact ourthe Company’s financial condition and operating resultsresults. – The Operating PartnershipCompany generated significant amounts of rental revenues for the year ended December 31, 2007,2015, from propertiesthe Company’s communities concentrated in Southern California (Los Angeles, Orange, Santa Barbara, San Diego, and Ventura counties), Northern California (the San Francisco Bay Area), and the Seattle metropolitan area. As ofFor the year ended December 31, 2007, 81%2015, 83% of the Operating Partnership’s  propertyCompany’s rental revenues were generated from Propertiescommunities located in California. This geographic concentration could present risks if local property market performance falls below expectations. TheIn general, factors that may adversely affect local market and economic conditionconditions include the following:

the economic climate, which may be adversely impacted by a reduction in jobs or income levels, industry slowdowns and other factors;
local conditions, such as oversupply of, these marketsor reduced demand for, apartment homes;
declines in household formation;
favorable residential mortgage rates;
rent control or stabilization laws, or other laws regulating rental housing, which could affect occupancy,prevent the Company from raising rents to offset increases in operating costs; and
competition from other available apartments and other housing alternatives and changes in market rental rates.

The Company may experience various increased costs, including increased property taxes, to own and maintain its properties. Real property taxes on our properties may increase as our properties are reassessed by taxing authorities or as property tax rates change. Thus, our real estate taxes in the State of Washington could increase as a result of property value reassessments or increased property tax rates in that state. A current California law commonly referred to as Proposition 13 generally limits annual real estate tax increases on California properties to 2% of assessed value. However, under Proposition 13, property tax reassessment generally occurs as a result of a “change in ownership” of a property, as specially defined for purposes of those rules. Because the property taxing authorities may not determine whether there has been a “change in ownership” or the actual reassessed value of a property for a period of time after a transaction has occurred, we may not know the impact of a potential reassessment for a considerable amount of time following a particular transaction. Therefore, the amount of property taxes we are required to pay could increase substantially from the property taxes we currently pay or have paid in the past, including on a retroactive basis. In addition, from time to time voters and lawmakers have announced initiatives to repeal or amend Proposition 13 to eliminate its application to commercial and industrial property and/or introduce split tax roll legislation. Such initiatives, if successful, could increase the assessed value and/or tax rates applicable to commercial property in California, including our apartment communities.

The Company may experience increased costs associated with capital improvements and routine property maintenance, such as repairs to the foundation, exterior walls, and rooftops of its properties, as its properties advance through their life-cycles. Increases in the Company’s expenses as well asto own and maintain its properties could adversely impact the income generated from the Properties and their underlying asset values. The financial results of major local employers also may impact the cash
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flow and value of certain of the Properties. This could have a negative impact on ourCompany’s financial condition and operating results which could affect our ability to pay expected dividends to our stockholders.of operations.

Competition in the apartment community market may adversely affect operations and the rental demand for our Propertiesthe Company’s communities. - There are numerous housing alternatives that compete with our apartmentthe Company’s communities in attracting residents. These include other apartment communities, condominiums and single-family homes that are available for rent or for sale in the markets in which the Propertiescommunities are located. The Properties also compete forCompetitive housing in a particular area and the increasing affordability of

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owner occupied single and multi-family homes caused by lower housing prices, mortgage interest rates and government programs to promote home ownership could adversely affect the Company’s ability to retain its residents, with new and existinglease apartment homes and condominiums that are for sale.increase or maintain rents. If the demand for our Propertiesthe Company’s communities is reduced or if competitors develop and/or acquire competing properties on a more cost-effective basis,apartment communities, rental rates may drop, which may have a material adverse affecteffect on ourthe Company’s financial condition and results of operations.
We The Company also facefaces competition from other real estate investment trusts, businesses and other entities in the acquisition, development and operation of apartment communities. Some of the competitors are larger and have greater financial resources than we do. This competition may result in an increase in costs and prices of apartment communities that we acquirethe Company acquires and/or develop.
develops.
Dividend requirements as a result of preferred stock may lead to a possible inability to sustain dividends - We have Series F Cumulative Redeemable Preferred Stock (“Series F Preferred Stock”) with an aggregate liquidation preference of approximately $25 million outstandingInvestments in mortgages and Series G Cumulative Convertible Preferred Stock (“Series G Preferred Stock”) with an aggregate liquidation preference of approximately $149.5 million outstanding. In addition, we are required under limited conditions to issue Series B Cumulative Redeemable Preferred Stock (“Series B Preferred Stock”) with an aggregate liquidation preference of $80 million and Series D Cumulative Redeemable Preferred Stock (“Series D Preferred Stock”) with an aggregate liquidation preference of $50 million in each case in exchange for outstanding preferred interests inother real estate securities could affect the Operating Partnership. The terms of the Series B, D, F and G Preferred Stock provide for certain cumulative preferential cash distributions per each share of preferred stock.
These terms also provide that while such preferred stock is outstanding, we cannot authorize, declare, or pay any distributions on our common stock, unless all distributions accumulated on all shares of such preferred stock have been paid in full. Our failure to pay distributions on such preferred stock would impair our ability to pay dividends on our common stock. Our credit agreement limits our ability to pay dividends on our preferred stock if we fail to satisfy a fixed charge coverage ratio.
If the Company wishes to issue any common stock in the future (including upon the exercise of stock options), the funds required to continue to pay cash dividends at current levels will be increased.  The Company’s ability to pay dividends will depend largely upon the performance of our current properties and other properties thatmake distributions to stockholders. The Company may be acquiredinvest in equity, preferred equity or developed in the future.
If the Company cannot pay dividends on its common stock, the Company’s status as adebt securities related to real estate, investment trust may be jeopardized. Our ability to pay dividends on our common stock is further limited by the Maryland General Corporation Law. Under the Maryland General Corporation Law, the Company may not make a distribution on stock if, after giving effect to such distribution, either:
·  we would not be able to pay our indebtedness as it becomes due in the usual course of business; or
·  our total assets would be less than our total liabilities, including the liquidation preference on our Series B, Series D, Series F, and Series G preferred stock.
Resale of shares pursuant to our effective registration statement or that are issued upon conversion of our convertible preferred stock may have an adverse effect on the market price of the shares – The Operating Partnership has the following effective registration statements, which allows for the resale into the public stock of common stock held by stockholders, as specified in the registration statements:
·  A registration statement, declared effective in 2003, which covers the resale of certain shares, including (i) up to 2,270,490 shares of common stock that are issuable upon exchange of limited partnership interests in the Operating Partnership and (ii) up to 1,473,125 shares that are issuable upon exchange of limited partnership interests in certain other real estate partnerships;
·  Registration statements, declared effective in 2006, that cover (i) the resale of up to 142,076 shares issuable in connection with our Waterford and Vista Belvedere acquisitions and (ii) the resale of shares issuable in connection with the exchange rights of our 3.625% Exchangeable Senior Notes, as to which there is a principal amount of $225 million outstanding.
During the third quarter of 2006, we issued, pursuant to a registration statement, 5,980,000 shares of 4.875% Series G Cumulative Preferred Stock for estimated gross proceeds of $149.5 million; such shares are convertible, subject to
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certain conditions, into common stock, which could be resold into the public market.
The resale of the shares of common stock pursuant to these various registration statements or that are issued upon conversion of our outstanding convertible preferred stock may have an adverse effect on the market price of our shares.
The exchange and repurchase  rights of Exchangeable Senior Notes and Series G Preferred Stock  may be detrimental to holders of common stock - The Operating Partnership has $225 million principal amount of 3.625% Exchangeable Senior Notes (the “Notes”) outstanding which mature on November 1, 2025. The Notes are exchangeable into the Company's common stock on or after November 1, 2020 or prior to November 1, 2020 under certain circumstances. The Notes are redeemable at the Operating Partnership's option for cash at any time on or after November 4, 2010 and are subject to repurchase for cash at the option of the holder on November 1st in the years 2010, 2015 and 2020, or upon the occurrence of certain events. The Notes are senior unsecured and unsubordinated obligations of the Operating Partnership.
In 2006, the Company sold 5,980,000 shares of 4.875% Series G Cumulative Convertible Preferred Stock (the “Series G Preferred Stock”) for gross proceeds of $149.5 million.  Holders may convert Series G Preferred Stock into shares of the Company’s common stock subject to certain conditions.  The conversion rate will initially be .1830 shares of common stock per $25 share liquidation preference, which is equivalent to an initial conversion price of $136.62 per share of common stock (the conversion rate will be subject to adjustment upon the occurrence of specified events).  On or after July 31, 2011, the Company may, under certain circumstances cause some or all of the Series G Preferred Stock to be converted into shares of common stock at the then prevailing conversion rate.  Further, if a fundamental change occurs, as defined in the articles supplementary for the Series G Preferred Stock, then the holders may require the Company to repurchase all or part of their Series G Preferred Stock subject to certain conditions.
The exchange of the Notes and/or Series G Preferred Stock for common stock would dilute stockholder ownership in the Company, and such exchange could adversely affect the market price of our common stock and ourCompany’s ability to raise capital throughmake distributions to stockholders. The Company may purchase or otherwise invest in securities issued by entities which own real estate and/or invest in mortgages or unsecured debt obligations. These mortgages may be first, second or third mortgages that may or may not be insured or otherwise guaranteed. The Company may acquire mezzanine loans, which take the saleform of additional equity securities.  Ifsubordinated loans secured by second mortgages on the Notes and Series G Preferred Stock are not exchanged, the repurchase priceunderlying property or loans secured by a pledge of the Notes and Series G Preferred Stock may discourageownership interests of either the entity owning the property or impede transactionsa pledge of the ownership interests of the entity or entities that might otherwise beowns the interest in the entity owning the property. In general, investments in mortgages include the following risks:
that the value of mortgaged property may be less than the amounts owed, causing realized or unrealized losses;
the borrower may not pay indebtedness under the mortgage when due, requiring the Company to foreclose, and the amount recovered in connection with the foreclosure may be less than the amount owed;
that interest rates payable on the mortgages may be lower than the Company’s cost of funds;
in the case of junior mortgages, that foreclosure of a senior mortgage could eliminate the junior mortgage; and
delays in the collection of principal and interest if a borrower claims bankruptcy.

If any of the holders of common stock. Further, these repurchase rights may be triggered in situations where the Company needsabove were to conserve its cash reserves, in which event such repurchase might adversely affect the Company and its common stockholders.
Our future issuances of common stock, preferred stock or convertible debt securitiesoccur, it could adversely affect the market price of our common stock - In order to finance our property acquisition and development activities, we have issued and sold common stock, preferred stock and convertible debt securities.  For example, during 2007, the Company sold 1,500,000 shares of its common stock in a public offering for proceeds of $191.8 million, net of underwriter fees and expenses.  During 2007 and 2006, pursuant to a Controlled Equity Offering program that the Company entered into with Cantor Fitzgerald & Co., the Company issued and sold approximately 170,500 and 427,700 shares of common stock for $21.9 million and $48.3 million, net of fees and commissions, respectively.  The Company may in the future sell further shares of common stock pursuant to a Controlled Equity Offering program with Cantor Fitzgerald &Co.
In 2006, the Company issued 5,980,000 shares of 4.875% Series G Cumulative Convertible Preferred Stock for gross proceeds of approximately $149.5 million.  In 2005, the Operating Partnership sold $225 million principal amount of 3.625% Exchangeable Senior Notes, which are exchangeable into the Company’s common stock under certain conditions.
During the first quarter of 2007, the Company filed a new shelf registration statement with the SEC, allowing the Company to sell an undetermined number of equity and debt securities as defined in the prospectus.  Future sales of common stock, preferred stock or convertible debt securities may dilute stockholder ownership in the Company and could adversely affect the market price of the common stock.
cash flows from operations.
Our Chairman is involved in other real estate activities and investments, which may lead to conflicts of interest - Our Chairman, George M. Marcus is not an employee of the Operating Partnership, and is involved in other real estate activities and investments, which may lead to conflicts of interest. Mr. Marcus owns interests in various other real estate-related businesses and investments. He is the Chairman of The Marcus & Millichap Company, or (“TMMC”), which is a holding company for certain real estate brokerage and services companies. TMMC has an interest in Pacific Property Company, a company that invests in apartment communities.
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Mr. Marcus has agreed not to divulge any information that may be received by him in his capacity as Chairman of the Company to any of his affiliated companies and that he will abstain his vote on any and all resolutions by the Company’s Board of Directors regarding any proposed acquisition and/or development of an apartment community where it appears that there may be a conflict of interest with any of his affiliated companies.  Notwithstanding this agreement, Mr. Marcus and his affiliated entities may potentially compete with us in acquiring and/or developing apartment communities, which competition may be detrimental to us.  In addition, due to such potential competition for real estate investments, Mr. Marcus and his affiliated entities may have a conflict of interest with us, which may be detrimental to the interests of the Company’s stockholders.
The influence of executive officers, directors and significant stockholders may be detrimental to holders of common stock - As of December 31, 2007, George M. Marcus, the Chairman of our Board of Directors, wholly or partially owned 1,768,773 shares of common stock (including shares issuable upon exchange of limited partnership interests in the Operating Partnership and certain other partnerships and assuming exercise of all vested options). This represents approximately 7.1% of the outstanding shares of our common stock. Mr. Marcus currently does not have majority control over us. However, he currently has, and likely will continue to have, significant influence with respect to the election of directors and approval or disapproval of significant corporate actions. Consequently, his influence could result in decisions that do not reflect the interests of all our stockholders.
Under the partnership agreement of the Operating Partnership, the consent of the holders of limited partnership interests is generally required for any amendment of the agreement and for certain extraordinary actions. Through their ownership of limited partnership interests and their positions with us, our directors and executive officers, including Mr. Marcus, have substantial influence on us. Consequently, their influence could result in decisions that do not reflect the interests of all stockholders.
The voting rights of preferred stock may allow holders of preferred stock to impede actions that otherwise benefit holders of common stock - In general, the holders of our outstanding shares of preferred stock do not have any voting rights. However, if full distributions are not made on any outstanding preferred stock for six quarterly distributions periods, the holders of preferred stock who have not received distributions, voting together as a single class, will have the right to elect two additional directors to serve on our Board of Directors.
These voting rights continue until all distributions in arrears and distributions for the current quarterly period on the preferred stock have been paid in full. At that time, the holders of the preferred stock are divested of these voting rights, and the term and office of the directors so elected immediately terminates. While any shares of our preferred stock are outstanding, the Company may not, without the consent of the holders of two-thirds of the outstanding shares of each series of preferred stock, each voting separately as a single class:
·  authorize or create any class or series of stock that ranks senior to such preferred stock with respect to the payment of dividends, rights upon liquidation, dissolution or winding-up of our business;
·  amend, alter or repeal the provisions of the Company’s Charter or Bylaws, including by merger or consolidation, that would materially and adversely affect the rights of such series of preferred stock; or
·  in the case of the preferred stock into which our preferred units are exchangeable, merge or consolidate with another entity or transfer substantially all of its assets to another entity, except if such preferred stock remains outstanding with the surviving entity and has the same terms and in certain other circumstances.
These voting rights of the preferred stock may allow holders of preferred stock to impede or veto actions that would otherwise benefit the holders of our common stock.
The redemption rights of the Series B preferred units, Series D preferred units, Series F preferred stock and Series G preferred stock may be detrimental to holders of the Company’s  common stock - Upon the occurrence of one of the following events, the terms of the Operating Partnership’s Series B and D Preferred Units require it to redeem all of such units and the terms of the Company’s Series F Preferred Stock and the Series G Preferred Stock provide the holders of the majority of the outstanding Series F Preferred Stock and Series G Preferred Stock the right to require the Company to redeem all of such stock:
·  the Company completes a “going private” transaction and its common stock is no longer registered under the Securities Exchange Act of 1934, as amended;
·  the Company completes a consolidation or merger or sale of substantially all of its assets and the surviving entity’s debt securities do not possess an investment grade rating;
·  the Company fails to qualify as a REIT; or
·  in the case of Series G preferred stock, The Company common stock is not traded on a major exchange.
The aggregate redemption price of the Series B Preferred Units would be $80 million, the aggregate redemption price of the Series D Preferred Units would be $50 million, the aggregate redemption price of the Series F Preferred Stock
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would be $25 million and the aggregate redemption price of the Series G Preferred Stock would be $149.5 million, plus, in each case, any accumulated distributions.
These redemption rights may discourage or impede transactions that might otherwise be in the interest of holders of common stock. Further, these redemption rights might trigger situations where the Company needs to conserve its cash reserves, in which event such redemption might adversely affect the Company and its common holders.
Maryland business combination law may not allow certain transactions between the Company and its affiliates to proceed without compliance with such law - Under Maryland law, “business combinations” between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, share exchange, or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. An interested stockholder is defined as any person (and certain affiliates of such person) who beneficially owns ten percent or more of the voting power of the then-outstanding voting stock. The law also requires a supermajority stockholder vote for such transactions. This means that the transaction must be approved by at least:
·  80% of the votes entitled to be cast by holders of outstanding voting shares; and
·  Two-thirds of the votes entitled to be cast by holders of outstanding voting shares other than shares held by the interested stockholder with whom the business combination is to be effected.
The statute permits various exemptions from its provisions, including business combinations that are exempted by the board of directors prior to the time that the interested stockholder becomes an interested stockholder.  These voting provisions do not apply if the stockholders receive a minimum price, as defined under Maryland law.  As permitted by the statute, the Board of Directors of the Company irrevocably has elected to exempt any business combination by us, George M. Marcus, William A. Millichap, who are the chairman and a director of the Company, respectively, and TMMC or any entity owned or controlled by Messrs. Marcus and Millichap and TMMC. Consequently, the five-year prohibition and supermajority vote requirement described above will not apply to any business combination between us and Mr. Marcus, Mr. Millichap, or TMMC. As a result, we may in the future enter into business combinations with Messrs. Marcus and Millichap and TMMC, without compliance with the supermajority vote requirements and other provisions of the Maryland General Corporation Law.
Anti-takeover provisions contained in the Operating Partnership agreement, charter, bylaws, and certain provisions of Maryland law could delay, defer or prevent a change in control - While the Company is the sole general partner of the Operating Partnership, and generally has full and exclusive responsibility and discretion in the management and control of the Operating Partnership, certain provisions of the Operating Partnership agreement place limitations on the Company’s ability to act with respect to the Operating Partnership. Such limitations could delay, defer or prevent a transaction or a change in control that might involve a premium price for our stock or otherwise be in the best interest of the stockholders or that could otherwise adversely affect the interest of the Company’s stockholders. The partnership agreement provides that if the limited partners own at least 5% of the outstanding units of partnership interest in the Operating Partnership, the Company cannot, without first obtaining the consent of a majority-in-interest of the limited partners in the Operating Partnership, transfer all or any portion of our general partner interest in the Operating Partnership to another entity. Such limitations on the Company’s ability to act may result in our being precluded from taking action that the Board of Directors believes is in the best interests of the Company’s stockholders. As of December 31, 2007, the limited partners held or controlled approximately 9.1% of the outstanding units of partnership interest in the Operating Partnership, allowing such actions to be blocked by the limited partners.
The Company’s Charter authorizes the issuance of additional shares of common stock or preferred stock and the setting of the preferences, rights and other terms of such preferred stock without the approval of the holders of the common stock. We may establish one or more series of preferred stock that could delay defer or prevent a transaction or a change in control. Such a transaction might involve a premium price for our stock or otherwise be in the best interests of the holders of common stock. Also, such a class of preferred stock could have dividend, voting or other rights that could adversely affect the interest of holders of common stock.

The Company’s Charter, as well as the Company’s stockholder rights plan, contains other provisions that may delay, defer or prevent a transaction or a change in control that might be in the best interest of the Company’s stockholders. The Company’s stockholder rights plan is designed, among other things, to prevent a person or group from gaining control of the Company without offering a fair price to all of the Company’s stockholders. The Bylaws may be amended by the Board of Directors to include provisions that would have a similar effect, although the Company presently has no such intention. The Charter contains ownership provisions limiting the transferability and ownership of shares of capital stock, which may have the effect of delaying, deferring or preventing a transaction or a change in
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control. For example, subject to receiving an exemption from the Board of Directors, potential acquirers may not purchase more than 6% in value of the stock (other than qualified pension trusts which can acquire 9.9%). This may discourage tender offers that may be attractive to the holders of common stock and limit the opportunity for stockholders to receive a premium for their shares of common stock.

The Maryland General Corporations Law restricts the voting rights of shares deemed to be “control shares.”   Under the Maryland General Corporations Law, “control shares” are those which, when aggregated with any other shares held by the acquirer, entitle the acquirer to exercise voting power within specified ranges. Although the Bylaws exempt the Company from the control share provisions of the Maryland General Corporations Law, the Board of Directors may amend or eliminate the provisions of the Bylaws at any time in the future. Moreover, any such amendment or elimination of such provision of the Bylaws may result in the application of the control share provisions of the Maryland General Corporations Law not only to control shares which may be acquired in the future, but also to control shares previously acquired. If the provisions of the Bylaws are amended or eliminated, the control share provisions of the Maryland General Corporations Law could delay, defer or prevent a transaction or change in control that might involve a premium price for the stock or otherwise be in the best interests of the Company’s stockholders.

The Operating Partnership’s joint ventures and joint ownership of Propertiescommunities and partial interests in corporations and limited partnerships could limit the Operating Partnership’sCompany’s ability to control such Propertiescommunities and partial interestsinterests. - Instead of purchasing and developing apartment communities directly, we havethe Company has invested and may continue to invest in joint ventures. Joint venture partners often have shared control over the development and operation of the joint venture assets. Therefore, it is possible that a joint venture partner in an investment might become bankrupt, or have economic or business interests or goals that are inconsistent with ourthe Company’s business interests or goals, or be in a position to take action contrary to ourthe Company’s instructions or requests, or ourits policies or objectives. Consequently, a joint venture partners’ actions might subject property owned by the joint venture to additional risk. Although we seekthe Company seeks to maintain sufficient influence over any joint venture to achieve its objectives, wethe Company may be unable to take action without ourits joint venture partners’ approval, or joint venture partners could take actions binding on the joint venture without ourits consent. A joint venture partner might fail to approve decisions that are in the Company’s best interest. Should a joint venture partner become bankrupt, wethe Company could become liable for such partner’s share of joint venture liabilities. In some instances, the Company and the joint venture partner may each have the right to trigger a buy-sell arrangement, which could cause the Company to sell its interest, or acquire a partner’s interest, at a time when the Company otherwise would have not have initiated such a transaction.
From time to time, we,the Company, through the Operating Partnership, investinvests in corporations, limited partnerships, limited liability companies or other entities that have been formed for the purpose of acquiring, developing, financing, or managing real property. InFor example, the Company has made preferred equity investments in third party entities that own real estate. With preferred equity investments and certain circumstances,other investments, the Operating Partnership’s interest in a particular entity may beis typically less than a majority of the outstanding voting interests of that entity. Therefore, the Operating Partnership’s ability to control the daily operations of such an entity may be limited. Furthermore, the Operating Partnership may not have the power to remove a majority of the board of directors (in the case of a corporation) or the general partner or partners (in the case of a limited partnership) of such an entity in the event that its operations conflict with the Operating Partnership’s objectives. The Operating Partnership may not be able to dispose of its interests in such an entity. In the event that such an entity becomes insolvent, the Operating Partnership may lose up to its entire investment in and any advances to the entity. We have,The Company may also incur losses if any guarantees or indemnifications were made by the Company. The Company also owns properties indirectly under "downREIT" structures. The Company has, and in the future may, enter into transactions that could require usthe Company to pay the tax liabilities of partners, which contribute assets into downREITs, joint ventures or the Operating Partnership, in the event that certain taxable events, which are within ourthe Company’s control, occur. Although we planthe Company plans to hold the contributed assets or defer recognition of gain on their sale pursuant to the like-kind exchange rules under Section 1031 of the Internal Revenue Code, wethe Company can provide no assurance that wethe Company will be able to do so and if such tax liabilities were incurred they can expect tocould have a material impact on ourits financial position.

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DedicatedCompliance with laws benefiting disabled persons may require the Company to make significant unanticipated expenditures or impact the Company’s investment activitiesstrategy. A number of federal, state and local laws (including the Americans with Disabilities Act) and regulations exist that may require modifications to existing buildings or restrict certain renovations by requiring improved access to such buildings by disabled persons and may require other factors specifically relatedstructural features which add to Fund II - Fund II involves risksthe cost of buildings under construction. Legislation or regulations adopted in the future may impose further burdens or restrictions on the Company with respect to us such asimproved access by disabled persons. The costs of compliance with these laws and regulations may be substantial. Noncompliance with these laws could result in the following:
·  our partners in Fund II might remove the Operating Partnership as the general partner of Fund II;
·  our partners in Fund II might become bankrupt (in which event we might become generally liable for the liabilities of Fund II);
·  our partners in Fund II might have economic or business interests or goals that are inconsistent with our business interests or goals;
·  our partners in Fund II might fail to fund capital commitments as contractually required; or
·  our partners in Fund II might fail to approve decisions regarding Fund II that are in the Operating Partnership’s  best interest.
We will, however, generally seekimposition of fines or an award of damages to maintain sufficient influence over Fund IIprivate litigants and also could result in an order to permit it to achieve its business objectives.
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Investments in mortgages and other real estate securities – The Operating Partnership may invest in securities related to real estate,correct any noncomplying feature, which could adversely affect our ability to make distributions to stockholders.  The Operating Partnership may purchase securities issued by entities which own real estate and investresult in mortgages or unsecured debt obligations. These mortgages may be first, second or third mortgages that may or may not be insured or otherwise guaranteed. In general, investments in mortgages include the following risks:substantial capital expenditures.
·  that the value of mortgaged property may be less than the amounts owed, causing realized or unrealized losses;
·  the borrower may not pay indebtedness under the mortgage when due, requiring us to foreclose, and the amount recovered in connection with the foreclosure may be less than the amount owed;
·  that interest rates payable on the mortgages may be lower than our cost of funds; and
·  in the case of junior mortgages, that foreclosure of a senior mortgage would eliminate the junior mortgage.
If any of the above were to occur, cash flows from operations and our ability to make expected dividends to stockholders could be adversely affected.
PossibleThe Company’s portfolio may have environmental liabilitiesliabilities. - Under various federal, state and local environmental and public health laws, regulations and ordinances we have been from time to time, and regulations, an ownermay be required in the future, regardless of knowledge or operatorresponsibility, to investigate and remediate the effects of real estate is liable for the costs of removal or remediation of certain hazardous or toxic substances on,or petroleum product releases at our properties (including in some cases naturally occurring substances such as methane and radon gas) and may be held liable under these laws or common law to a governmental entity or migratingto third parties for response costs, property damage, personal injury or natural resources damages and for investigation and remediation costs incurred as a result of the impacts resulting from such property. Such laws often impose liability without regard as to whetherreleases.  While the ownerCompany is unaware of any such response action required or operator knewdamage claims associated with its existing properties which individually or in aggregate would have a materially adverse effect on our business, assets, financial condition or results of operations, potential future costs and damage claims may be substantial and could exceed any insurance coverage we may have for such events or was responsible for,such coverage may not exist.  Further, the presence of such hazardous or toxic substances. The presence of such substances, or the failure to properly remediate any such substances,impacts, may adversely affect the owner’s or operator’sour ability to borrow against, develop, sell or rent such propertythe affected property.  In addition, some environmental laws create or allow a government agency to borrow using such property as collateral. Persons exposed to such substances, either through soil vapor or ingestionimpose a lien on the impacted site in favor of the substances may claim personal injury damages. Persons who arrangegovernment for the disposal or treatmentdamages and costs it incurs as a result of responding to hazardous or toxic substancessubstance or wastes also may be liable for the costs of removal or remediation of such substances at the disposal or treatment facility to which such substances or wastes were sent, whether or not such facility is owned or operated by such person. petroleum product releases .
Certain environmental laws impose liability for release of asbestos-containing materials (“ACMs”("ACMs") into the air, and third parties may seek recovery from owners or operators of real propertiesapartment communities for personal injury associated with ACMs.  In connection with the ownership (direct or indirect), operation, management and development of real properties,our communities, the Operating PartnershipCompany could be considered an owner or operator of such properties or as having arranged for the disposal or treatment of hazardous or toxic substances and, therefore, may be potentially liable for removal or remediation costs, as well as certain other costs, including governmental fines and costs related to injuries of persons and property.
Investments in real property create a potential for environmental liabilities on the part of the owner of such real property.  We carryThe Company carries certain limited insurance coverage for this type of environmental risk. We have conducted environmental studiesrisk as to its properties; however, such coverage is not fully available for all properties and, as to those properties for which revealed the presence of groundwater contamination atlimited coverage is fully available it may not apply to certain Properties. Such contamination at certain of these properties was reported to have migrated on-siteclaims arising from adjacent industrial manufacturing operations. The former industrial users of the Properties were identified as the source of contamination. The environmental studies noted that certain Properties are located adjacent to any possible down gradient from sites with known groundwater contamination, the lateral limits of which may extend onto suchconditions present on those properties. The environmental studies also noted that at certain of these properties, contamination existed because of the presence of underground fuel storage tanks, which have been removed.  In general, in connection with the ownership, operation, financing, management and development of real properties, weits communities, the Company may be potentially liable for removal or clean-up costs, as well as certain other costs and environmental liabilities.  WeThe Company may also be subject to governmental fines and costs related to injuries to third persons and damage to their property.
Properties which we intend to acquire undergo a pre-acquisition Phase I environmental site assessment, which is intended to afford the Company protection against so-called “owner liability” under the primary federal environmental law, as well as further environmental assessment, which generally does not involve invasive techniques such as soil or ground water sampling except where conditions warranting such further assessment are identified and seller’s consent is obtained.  While such assessments are conducted in accordance with applicable “all appropriate inquiry" standards, no assurance can be given that all environmental conditions present on or beneath or emanating from a given property will be discovered or that the full nature and extent of those conditions which are discovered will be adequately ascertained and quantified.
RecentlyIn connection with our ownership, operation and development of communities, from time to time we undertake remedial action in response to the presence of subsurface or other contaminants, including contaminants in soil, groundwater and soil vapor beneath or affecting our buildings.  The Company does so pursuant to appropriate environmental regulatory requirements with the objective of obtaining regulatory closure or a no further action determination that will allow for future use, development and sale of any impacted community.
Mold growth may occur when excessive moisture accumulates in buildings or on building materials, particularly if the moisture problem remains undiscovered or is not addressed in a timely manner.  Although the occurrence of mold at multi-family and other structures, and the need to remediate such mold, is not a new phenomenon, there has been an increasing number of lawsuits against owners and managers of apartment communities alleging personal injury and property damage caused by the presence of moldincreased awareness in residential real estate. Some of these lawsuits have resultedrecent years that certain molds may in substantial monetary judgmentssome instances lead to adverse health effects, including allergic or settlements.other reactions.  The Operating Partnership has been sued for mold related matters and has settled some, but not all, such matters, which matters remain unresolved and pending.   Insurance carriers have reacted to mold related liability awards by excluding mold related claims from standard policies and pricing mold endorsements at prohibitively high rates.  The Operating Partnership has, however, purchased pollution liability insurance, which includes limited coverage for mold, although the insurance may not cover all pending or future mold claims.  The Operating PartnershipCompany has adopted programs designed to manage the existence of mold in its properties as well as guidelinespolicies for promptly addressing and resolving reports of mold when it is detected, and to minimize any

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impact mold might have on residents orof the property.  The Operating Partnership cannot assure you that it will notCompany believes its mold policies and proactive response to address any known existence reduce its risk of loss from these cases; however, no assurance can be sued in the future for mold related matters and cannot assure youprovided that the liabilities resulting from such current or futureCompany has identified and responded to all mold related matters will not be substantial.  The costs of carrying insurance to address potential mold related claims may also be substantial.
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occurrences.
California has enacted legislation, commonly referred to as “Proposition 65”"Proposition 65," requiring that “clear"clear and reasonable”reasonable" warnings be given to consumerspersons who are exposed to chemicals known to the State of California to cause cancer or reproductive toxicity, including tobacco smoke.  Although we havethe Company has sought to comply with Proposition 65 requirements, wethe Company cannot assure you that wethe Company will not be adversely affected by litigation relating to Proposition 65.
Methane gas is a naturally-occurring gas that is commonly found below the surface in several areas, particularly in the Southern California coastal areas.  Methane is a non-toxic gas, but is flammable and can be ignitableexplosive at sufficient concentrations when in confined spaces.  Although naturally-occurring,spaces and exposed to an ignition source.  Naturally-occurring, methane gas is not regulated at the state orand federal level as a greenhouse gas but is not otherwise regulated as a hazardous substance; however some local governments, such as the County of Los Angeles have imposed requirementsCounty, require that new buildings constructed in areas designated methane gas zones install detection systems in areas where methane gas is known to be located. 
and/or venting systems.  Methane gas is also associated with certain industrial activities, such as former municipal waste landfills.  Radon is also a naturally-occurring gas that is found below the surface.surface and can pose a threat to human health requiring abatement action if present in sufficient concentration within occupied areas.  The Operating PartnershipCompany cannot assure you that it will not be adversely affected by costs related to its compliance with methane or radon gas related requirements or litigation costs related to methane or radon gas.
The Operating Partnership has almost no indemnification agreements from third parties for potentialWe cannot assure you that costs or liabilities incurred as a result of environmental clean-upmatters will not affect our ability to make distributions to stockholders, or that such costs at its Properties. The Operating Partnership has no wayor liabilities will not have a material adverse effect on our financial condition and results of determining at this timeoperations; provided, however, the magnitudeCompany is unaware of any potential liability topending or threatened alleged claim resulting from such matters which it may be subject arising out of unknown environmental conditions or violations with respect to the properties formerly owned by the Operating Partnership. No assurance can be given that existing environmental studies with respect to any of the Properties reveal all environmental liabilities, that any prior owner or operator of a Property did not create any material environmental condition not known to the Operating Partnership, or thatwould have a material environmentaladverse effect on the Company’s financial condition, does not exist as to any oneresults of operations or morecash flows.
The Company may incur general uninsured losses. The Company purchases general liability and all risk property, including loss of the Properties. The Operating Partnership has limitedrent, insurance coverage for the types of environmental liabilities described above.
General uninsured losses - The Operating Partnership carries comprehensive liability, fire, extended coverage and rental loss insurance for each of the Properties.its communities. The Company also purchases limited earthquake, terrorism, environmental and flood insurance. There are however, certain types of extraordinary losses such as, for example, losses for terrorismwhich may not be covered or could exceed coverage limits. The insurance programs are subject to deductibles and self-insured retentions in varying amounts. The Company utilizes a wholly owned insurance subsidiary, Pacific Western Insurance LLC ("PWI") to self-insure certain earthquake for whichand all risk losses. As of December 31, 2015, PWI has cash and marketable securities of approximately $60.3 million, and is consolidated in the Operating Partnership does not have insurance coverage. Substantially all ofCompany's financial statements.
All the Propertiescommunities are located in areas that are subject to earthquake activity. In January 2007,The Company evaluates its financial loss exposure to seismic events by using actuarial loss models developed by the Operating Partnership canceled its then existing earthquake policyinsurance industry and established a wholly owned insurance subsidiary, Pacific Western Insurance LLC (“PWI”).  Throughproperty vulnerability based on structural evaluations of seismic consultants. The Company manages this exposure, where considered appropriate, desirable, and cost-effective, by upgrading properties to increase their resistance to forces caused by seismic events, by considering available funds and coverages provided by PWI the Operating Partnership is self-insured as it relates to earthquake related losses.  Additionally, as of January 2008, PWI provides property and casualtyand/or by purchasing seismic insurance. Purchasing seismic insurance coverage forcan be costly and such seismic insurance is in limited supply. As a result, the first $5.0 millionCompany may experience a shortage in desired coverage levels if market conditions are such that insurance is not available, or the cost of the Operating Partnership’s property level insurance claims per incident.makes it, in managements view, not economically practical. The Company purchases limited earthquake insurance for certain high-density properties and assets owned by the Company's co-investments.

The Company carries other types of insurance coverage related to a variety of risks and exposures. Based on market conditions, the Company may change or potentially eliminate insurance coverages, or increase levels of self-insurance. Further, we cannot assure you that the company will not incur losses, which could be material, due to uninsured risks, deductibles and self-insured retentions, and/or losses in excess of coverage limits.

We have significant investments in large metropolitan markets, such as the metropolitan markets in Southern California, the San Francisco Bay Area and Seattle. These markets may in the future be the target of actual or threatened terrorist attacks. Future terrorist attacks in these markets could directly or indirectly damage our communities, both physically and financially, or cause losses that exceed our insurance coverage.

Although the Operating PartnershipCompany may carry insurance for potential losses associated with its Properties,communities, employees, residents, and compliance with applicable laws, it may still incur losses due to uninsured risks, deductibles, co-paymentscopayments or losses in excess of applicable insurance coverage and those losses may be material. In the event of a substantial loss, insurance coverage may not be able to cover the full current market value of replacement cost of the Operating Partnership’sCompany’s lost investment.  Inflation, changesinvestment, or the insurance carrier may become insolvent and not be able to cover the full amount of the insured losses. Changes in building codes and ordinances, environmental

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considerations and other factors might also affect the Operating Partnership’sCompany’s ability to replace or renovate an apartment community after it has been damaged or destroyed.
Accidental death or horrendous injuries due to fire, natural disasters or other hazards could adversely affect our business and results of operations. The accidental death or horrendous injuries of persons living in our communities due to fire, natural disasters or other hazards could have a material adverse effect on our business and results of operations. Our insurance coverage may not cover all losses associated with such events, and we may experience difficulty marketing communities where any such events have occurred, which could have a material adverse effect on our business and results of operations.
Adverse changes in laws may affect the Company's liability relating to its properties and its operations.Changes Increases in real estate taxtaxes and other laws - Generally we do not directly pass through costs resulting from changes in real estate tax laws to residential property tenants. We also do not generally pass through increases in income, service and transfer taxes cannot always be passed through to residents or other taxes, to tenants under leases. These costsusers in the form of higher rents, and may adversely affect funds from operationsthe Company's cash available for distribution and theits ability to make distributions to stockholders.its stockholders and pay amounts due on its debt. Similarly, compliance with changes in (i) laws increasing the potential liability of the Company on a range of issues, including those regarding potential liability for other environmental conditions existing on properties or increasing the restrictions on discharges or other conditions, or (ii)as well as changes in laws including those affecting development, construction and safety requirements, may result in significant unanticipated expenditures, which could have a material adverse effect on the Company and its ability to make distributions to its stockholders and pay amounts due on our debt. For example, the California statute known as "SB375" provides that, in order to reduce greenhouse emissions, there should be regional planning to coordinate housing needs with regional transportation. Such planning could lead to restrictions on property development that adversely affect the Company. In addition, future enactment of rent control or rent stabilization laws or other laws regulating multi-family housing, as well as any lawsuits against the Company arising from such rent control or other laws, may reduce rental revenues or increase operating costs.
The soundness of financial institutions could adversely affect us. We maintain cash and cash equivalent balances, including significant cash amounts of our wholly owned insurance subsidiary, Pacific Western Insurance LLC, as well as 401(k) plan assets in a limited number of financial institutions.  Our cash balances are generally in excess of federally insured limits.  The failure or collapse of one or more of these financial institutions may materially adversely affect our ability to recover our cash balances or the 401(k) assets.  Certain financial institutions are lenders under our credit facilities, and, from time to time, we execute transactions with counterparties in the financial services industry.  In the event that the volatility of the financial markets adversely affects these financial institutions or counterparties, we or other parties to the transactions with us may be unable to complete transactions as intended, which could adversely affect our business and results of operations.
Failure to succeed in new markets may limit the Company’s growth. The Company may from time to time make acquisitions or commence development activity outside of its existing market areas if appropriate opportunities arise. The Company’s historical experience in its existing markets does not ensure that it will be able to operate successfully in new markets. The Company may be exposed to a variety of risks if it chooses to enter new markets. These risks include, among others:
an inability to evaluate accurately local apartment market conditions and local economies;
an inability to identify appropriate acquisition opportunities or to obtain land for development;
an inability to hire and retain key personnel; and
lack of familiarity with local governmental and permitting procedures.

The Company’s real estate assets may be subject to impairment charges. The Company continually evaluates the recoverability of the carrying value of its real estate assets under U.S. generally accepted accounting principles ("U.S. GAAP"). Factors considered in evaluating impairment of the Company’s existing multi-family real estate assets held for investment include significant declines in property operating profits, recurring property operating losses and other significant adverse changes in general market conditions that are considered permanent in nature. Generally, a multi-family real estate asset held for investment is not considered impaired if the undiscounted, estimated future cash flows of the asset over its estimated holding period are in excess of the asset’s net book value at the balance sheet date. Assumptions used to estimate annual and residual cash flow and the estimated holding period of such assets require the judgment of management. There can be no assurance that the Company will not take charges in the future related to the impairment of the Company’s assets. Any future impairment charges could have a material adverse effect on the Company’s results of operations.
We face risks associated with land holdings and related activities. We hold land for future development and may in the future acquire additional land holdings. The risks inherent in purchasing, owning and developing land increase as demand for apartments, or rental rates, decrease. Real estate markets are highly uncertain and, as a result, the value of undeveloped land may fluctuate significantly. In addition, carrying costs can be significant and can result in losses or reduced profitability. As a result, we hold certain land, and may, in the future acquire additional land, in our development pipeline at a cost we may not be able to fully recover or at a cost which may preclude our developing a profitable multi-family community. If there are

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subsequent changes in the fair value of our land holdings which we determine is less that the carrying basis of our land holdings reflected in our financial statements plus estimated costs to sell, we may be required to take future impairment changes which could have a material adverse effect on our results of operations.
Risks Related to Our Indebtedness and Financings
Capital and credit market conditions may affect the Company’s access to sources of capital and/or the cost of capital, which could negatively affect the Company’s business, results of operations, cash flows and financial condition. In periods when the capital and credit markets experience significant unanticipated decreasevolatility, the amounts, sources and cost of capital available to the Company may be adversely affected. Our current balance sheet, the debt capacity available on the unsecured line of credit with a diversified bank group, access to the public and private placement debt markets and secured debt financing providers such as Fannie Mae and Freddie Mac provides some insulation from volatile capital markets. We primarily use external financing, including sales of equity securities, to fund acquisitions, developments, and redevelopments and to refinance indebtedness as it matures. If sufficient sources of external financing are not available to us on cost effective terms, we could be forced to limit our acquisition, development and redevelopment activity and/or take other actions to fund our business activities and repayment of debt, such as selling assets, reducing our cash dividend or paying out less than 100% of our taxable income. In general, to the extent that the Company’s access to capital and credit is at a higher cost than the Company has experienced in revenuerecent years (reflected in higher interest rates for debt financing or increase in expenditures,a lower stock price for equity financing without a corresponding change to investment cap rates) the Company’s ability to make acquisitions, develop communities, obtain new financing, and refinance existing borrowing at competitive rates could be adversely affected, which would impact the Company's financial standing and related credit rating. In addition, if our ability to obtain financing is adversely affected, we may be unable to satisfy scheduled maturities on existing financing through other sources of our liquidity, which could result in lender foreclosure on the apartment communities securing such debt.
The Company could be negatively impacted by the condition of Fannie Mae or Freddie Mac and by changes in government support for multi-family housing.Historically, the Company has utilized borrowing from Fannie Mae and Freddie Mac. There are no assurances that these entities will lend to the Company in the future.  Beginning in 2011, the Company has primarily utilized unsecured debt and has repaid secured debt at or near their respective maturity and has placed less reliance on agency mortgage debt financing. The Administration and lawmakers have proposed potential options for the future of agency mortgage finance in the U.S. that could involve the phase out of Fannie Mae and Freddie Mac. While we believe Fannie Mae and Freddie Mac will continue to provide liquidity to our sector, should they discontinue doing so, have their mandates changed or reduced or be disbanded or reorganized by the government or if there is reduced government support for support for multi-family housing more generally, it may adversely affect funds from operationsinterest rates, capital availability, development of multi-family communities and the value of multi-family residential real estate and, as a result, may adversely affect the Company and its growth and operations.
Debt financing has inherent risks. At December 31, 2015, the Company had approximately $5.3 billion of indebtedness (including $525.3 million of variable rate indebtedness, of which $225.0 million is subject to interest rate swaps effectively fixing the interest rate, and $20.7 million is subject to interest rate cap protection).The Company is subject to the risks normally associated with debt financing, including the following:
cash flow may not be sufficient to meet required payments of principal and interest;
inability to refinance maturing indebtedness on encumbered apartment communities;
inability to comply with debt covenants could cause defaults and an acceleration of maturity dates; and
paying debt before the scheduled maturity date could result in prepayment penalties.

The Company may not be able to renew, repay or refinance its indebtedness when due or may be required to refinance its indebtedness at higher interest rates or on terms that may not be as favorable as the terms of existing indebtedness. If the Company is unable to refinance its indebtedness on acceptable terms, or not at all, the Company might be forced to dispose of one or more of its properties on disadvantageous terms, which might result in losses. Such losses could have an adverse effect on the Company and its ability to make distributions to stockholders.
its stockholders and pay amounts due on its debt. Furthermore, if a property is mortgaged to secure payment of indebtedness and the Company is unable to meet mortgage payments, the mortgagee could foreclose on the property, appoint a receiver and exercise rights under an assignment of rents and leases, or pursue other remedies, all with a consequential loss of revenues and asset value. Foreclosures could also create taxable income without accompanying cash proceeds, thereby hindering our ability to meet REIT distribution requirements.
ChangesDebt financing of communities may result in insufficient cash flow to service debt and fund distributions. Where appropriate, the Company intends to continue to use leverage to increase the rate of return on the Company’s investments and to provide for additional investments that the Company could not otherwise make. There is a risk that the cash flow from the

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communities will be insufficient to meet both debt payment obligations and the distribution requirements of the real estate investment trust provisions of the Internal Revenue Code of 1986, as amended (the “Code”). Our ability to make payments on and to refinance our indebtedness and to fund our operations, working capital and capital expenditures, depends on our ability to generate cash in the future. To a certain extent, our cash flow is subject to general economic, industry, regional, financial, competitive, operating, legislative, regulatory, taxation and other factors, many of which are beyond our control.
As of December 31, 2015, the Company had 69 consolidated communities encumbered by debt. With respect to the 69 communities encumbered by debt, all of them are secured by deeds of trust relating solely to those communities. The holders of this indebtedness will have rights with respect to these communities and, if debt payment obligations are not met, lenders may seek foreclosure of communities which would reduce the Company’s income and net asset value, and its ability to service other debt.
Compliance requirements of tax-exempt financing policy; no limitationand below market rent requirements may limit income from certain communities. At December 31, 2015, the Company had approximately $281.7 million of variable rate tax-exempt financing. This tax-exempt financing provides for certain deed restrictions and restrictive covenants. The Company expects to engage in tax-exempt financings in the future. The Code and rules and regulations thereunder impose various restrictions, conditions and requirements in order to allow the note holder to exclude interest on debt – We have adoptedqualified bond obligations from gross income for federal income tax purposes. The Code also requires that at least 20% of apartment units be made available to residents with gross incomes that do not exceed a policyspecified percentage, generally 50%, of maintaining a debt-to-total-market-capitalization ratio of less than 50%. The calculation of debt-to-total-market-capitalization isthe median income for the applicable family size as follows: total indebtedness divideddetermined by the sumHousing and Urban Development Department of the federal government. Certain state and local authorities may impose additional rental restrictions. These restrictions may limit income from the tax-exempt financed communities if the Company is required to lower rental rates to attract residents who satisfy the median income test. If the Company does not reserve the required number of apartment homes for residents satisfying these income requirements, the tax-exempt status of the bonds may be terminated, the obligations under the bond documents may be accelerated and the Company may be subject to additional contractual liability. Besides the limitations due to tax-exempt financing requirements, the income from certain communities may be limited due to below market rent ("BMR") requirements imposed by local authorities in connection with the original development of the community.
The indentures governing our notes and other financing arrangements contain restrictive covenants that limit our operating flexibility. The indentures that govern our publicly registered notes contain financial and operating covenants that, among other things, restrict our ability to take specific actions, even if we believe them to be in our best interest, including restrictions on our ability to:
consummate a merger, consolidation or sale of all or substantially all of our assets; and
incur additional secured and unsecured indebtedness.

The instruments governing our other unsecured indebtedness require us to meet specified financial covenants, including covenants relating to net worth, fixed charge coverage, debt service coverage, the amounts of total indebtedness plus total equity market capitalization.  As usedand secured indebtedness, leverage and certain investment limitations. These covenants may restrict our ability to expand or fully pursue our business strategies. Our ability to comply with these provisions and those contained in this calculation, total equity market capitalizationthe indentures governing the notes, may be affected by changes in our operating and financial performance, changes in general business and economic conditions, adverse regulatory developments or other events adversely impacting us. The breach of any of these covenants, including those contained in our indentures, could result in a default under our indebtedness, which could cause those and other obligations to become due and payable. If any of our indebtedness is equalaccelerated, we may not be able to repay it.
Rising interest rates may affect the Company’s costs of capital and financing activities and results of operation. Interest rates could increase, which could result in higher interest expense on the Company’s variable rate indebtedness or increase interest rates when refinancing maturing fixed rate debt. Prolonged interest rate increases could negatively impact the Company’s ability to make acquisitions and develop apartment communities with positive economic returns on investment and the Company’s ability to refinance existing borrowings.
Interest rate hedging arrangements may result in losses. The Company from time to time uses interest rate swaps and interest rate caps contracts to manage certain interest rate risks. Although these agreements may partially protect against rising interest rates, they also may reduce the benefits to the aggregate market valueCompany if interest rates decline. If a hedging arrangement is not indexed to the same rate as the indebtedness that is hedged, the Company may be exposed to losses to the extent that the rate governing the indebtedness and the rate governing the hedging arrangement change independently of each other. Finally, nonperformance by the other party to the hedging arrangement may subject the Company to increased credit risks. In order to minimize counterparty credit risk, the Company enters into hedging arrangements only with investment grade financial institutions.

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A downgrade in the Company's investment grade credit rating could materially and adversely affect its business and financial condition. The Company plans to manage its operations to maintain its investment grade credit rating with a capital structure consistent with its current profile, but there can be no assurance that it will be able to maintain its current credit ratings. Any downgrades in terms of ratings or outlook by any of the outstanding shares of common stock (basedrating agencies could have a material adverse impact on the greaterCompany’s cost and availability of current market price or the gross proceeds per share from public offeringscapital, which could in turn have a material adverse impact on its financial condition, results of the outstanding shares plus any undistributed net cash flow), assuming the conversion of all limited partnership interestsoperations and liquidity.
Changes in the Operating Partnership into sharesCompany’s financing policy may lead to higher levels of common stock and the gross proceeds of the preferred units and preferred stock. Based on this calculation (including the current market price and excluding undistributed net cash flow), our debt-to-total-market-capitalization ratio was approximately 35.7% as of December 31, 2007.indebtedness.
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Our The Company’s organizational documents do not limit the amount or percentage of indebtedness that may be incurred. The Company has adopted a policy of maintaining a limit on debt financing consistent with the existing covenants required to maintain the Company’s unsecured line of credit bank facility, unsecured debt and senior unsecured bonds. Although pursuant to this policy the Company manages its debt to be in compliance with the debt covenants, the Company may increase the amount of outstanding debt at any time without a concurrent improvement in the Company’s ability to service the additional debt. Accordingly, the Board of Directors of The Company could change current policies and the policies of the Operating Partnership regarding indebtedness. If we changed these policies, we could incurbecome more debt,leveraged, resulting in an increased risk of default of its debt covenants or on its debt obligations and in an increase in debt service requirements. Any covenant breach or significant increase in the Company’s leverage could materially adversely affect the Company’s financial condition and ability to access debt and equity capital markets in the future.
If the Company or its subsidiaries defaults on an obligation to repay outstanding indebtedness when due, the default could trigger a cross-default or cross-acceleration under other indebtedness. If the Company or one of its subsidiaries defaults on its obligations to repay outstanding indebtedness, the default could cause a cross-default or cross-acceleration under other indebtedness. A default under the agreements governing the Company’s or its subsidiaries’ indebtedness, including a default under mortgage indebtedness, lines of credit, bank term loan, or the indenture for the Company’s outstanding senior notes, that is not waived by the required lenders or holders of outstanding notes, could trigger cross-default or cross-acceleration provisions under one or more agreements governing the Company’s indebtedness, which could cause an immediate default or allow the lenders to declare all funds borrowed thereunder to be due and payable.
Risks Related to the Company in General and the Ownership of Essex’s Stock
The Company depends on its key personnel, whose continued service is not guaranteed.The Company’s success depends on its ability to attract and retain executive officers, senior officers and company managers. There is substantial competition for qualified personnel in the real estate industry and the loss of any of the Company’s key personnel could have an adverse effect on the Company.
The price per share of the Company’s stock may fluctuate significantly. The market price per share of the Company’s common stock may fluctuate significantly in response to many factors, including without limitation:
regional, national and global economic conditions;
actual or anticipated variations in the Company’s quarterly operating results or dividends;
changes in the Company’s funds from operations or earnings estimates;
issuances of common stock, preferred stock or convertible debt securities;
publication of research reports about the Company or the real estate industry;
the general reputation of real estate investment trusts and the attractiveness of their equity securities in comparison to other equity securities (including securities issued by other real estate based companies);
general stock and bond market conditions, including changes in interest rates on fixed income securities, that may lead prospective purchasers of the Company’s stock to demand a higher annual yield from dividends;
availability to capital markets and cost of capital;
a change in analyst ratings or the Company’s credit ratings;
terrorist activity may adversely affect the markets in which the Company’s securities trade, possibly increasing market volatility and causing erosion of business and consumer confidence and spending; and
natural disasters such as earthquakes.

Many of the factors listed above are beyond the Company’s control. These factors may cause the market price of shares of the Company’s common stock to decline, regardless of the Company’s financial condition, results of operations, or business prospects.

The Company’s future issuances of common stock, preferred stock or convertible debt securities could be dilutive to current stockholders and adversely affect the market price of the Company’s common stock. In order to finance the Company’s acquisition and development activities, the Company has issued and sold common stock, preferred stock and convertible debt securities. For example, during the years ended December 31, 2015 and 2014, the Company issued 1.5 million and 3.0 million

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(excluding shares issued in connection with the BRE merger) shares of common stock for $332.3 million and $534.0 million, net of fees and commissions, respectively. The Company may in the future sell further shares of common stock, including pursuant to its equity distribution programs with Cantor Fitzgerald & Co., Barclays Capital Inc., BMO Capital Markets Corp., BNP Paribas Securities Corp., Citigroup Global Markets Inc., Jefferies LLC ("Jefferies"), J.P. Morgan Securities LLC ("JP Morgan"), Liquidnet, Inc., Mitsubishi UFJ Securities (USA), Inc., and UBS Securities LLC ("UBS").

In 2014, the Company filed a new shelf registration statement with the SEC, allowing the Company to sell an undetermined number of equity and debt securities as defined in the prospectus. Future sales of common stock, preferred stock or convertible debt securities may dilute stockholder ownership in the Company and could adversely affect the market price of the common stock.
The Company’s Chairman is involved in other real estate activities and investments, which may lead to conflicts of interest. The Company’s Chairman, George M. Marcus is not an employee of the Company, and is involved in other real estate activities and investments, which may lead to conflicts of interest. Mr. Marcus owns interests in various other real estate-related businesses and investments. He is the Chairman of the Marcus & Millichap Company (“MMC”), which is a parent company of a diversified group of real estate service, investment and development firms.  Mr. Marcus is also the Co-Chairman of Marcus & Millichap, Inc. (“MMI”), and Mr. Marcus owns a controlling interest in MMI.  MMI is a national brokerage firm listed on the NYSE that underwent its initial public offering in 2013.
Mr. Marcus has agreed not to divulge any confidential or proprietary information that may be received by him in his capacity as Chairman of the Company to any of his affiliated companies and that he will absent himself from any and all discussions by the Company's Board of Directors regarding any proposed acquisition and/or development of an apartment community where it appears that there may be a conflict of interest with any of his affiliated companies. Notwithstanding this agreement, Mr. Marcus and his affiliated entities may potentially compete with the Company in acquiring and/or developing apartment communities, which competition may be detrimental to the Company. In addition, due to such potential competition for real estate investments, Mr. Marcus and his affiliated entities may have a conflict of interest with the Company, which may be detrimental to the interests of the Company’s stockholders.
The influence of executive officers, directors and significant stockholders may be detrimental to holders of common stock. As of December 31, 2015, George M. Marcus, the Chairman of the Company’s Board of Directors, wholly or partially owned approximately 1.6 million shares of common stock (including shares issuable upon exchange of limited partnership interests in the Operating Partnership and certain other partnerships, indirectly held shares of common stock and assuming exercise of all vested options).  Mr. Marcus currently does not have majority control over the Company. However, he currently has, and likely will continue to have, significant influence with respect to the election of directors and approval or disapproval of significant corporate actions. Consequently, his influence could result in decisions that do not reflect the interests of all the Company’s stockholders.
Under the partnership agreement of the Operating Partnership, the consent of the holders of limited partnership interests is generally required for certain amendments of the agreement and for certain extraordinary actions. Through their ownership of limited partnership interests and their positions with the Company, the Company’s directors and executive officers, including Mr. Marcus, have substantial influence on the Company. Consequently, their influence could result in decisions that do not reflect the interests of all stockholders.
Our related party guidelines may not adequately address all of the issues that may arise with respect to related party transactions. The Company adopted "Related Party Transaction Approval Process Guidelines" that provide generally that any transaction in which a director or executive officer has an interest must have the prior approval of the Audit Committee of the Company's Board of Directors. The review and approval procedures in these guidelines are intended to determine whether a particular related party transaction is fair, reasonable and serves the interests of the Company's stockholders. Pursuant to these guidelines, related party transactions have been approved from time to time. There is no assurance that this policy will be adequate for determining whether a particular related party transaction is suitable and fair for the Company. Also, the policy's procedures may not identify and address all the potential issues and conflicts of interests with a related party transaction.
Failure to generate sufficient revenue or other liquidity needs could limit cash flow available for distributions to stockholders. A decrease in rental revenue, or liquidity needs such as the repayment of indebtedness or funding of our acquisition and development activities, could have an adverse effect on our obligationsability to pay distributions to our stockholders. Significant expenditures associated with each community such as debt service payments, if any, real estate taxes, insurance and maintenance costs are generally not reduced when circumstances cause a reduction in income from a community.


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The form, timing and/or amount of dividend distributions in future periods may vary and be impacted by economic and other considerations. The form, timing and/or amount of dividend distributions will be declared at the discretion of the Board of Directors and will depend on actual cash from operations, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code and other factors as the Board of Directors may consider relevant. The Board of Directors may modify our dividend policy from time to time.

We may choose to pay dividends in our own stock, in which case stockholders may be required to pay tax in excess of the cash they receive. We may distribute taxable dividends that are payable in part in our stock. Taxable stockholders receiving such dividends will be required to include the full amount of the dividend as income to the extent of our current and accumulated earnings and profits for federal income tax purposes. As a result, a U.S. stockholder may be required to pay tax with respect to such dividends in excess of the cash received. If a U.S. stockholder sells the stock it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our stock at the time of the sale. Furthermore, with respect to non-U.S. stockholders, we may be required to withhold U.S. tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in stock. In addition, the trading price of our stock would experience downward pressure if a significant number of our stockholders sell shares of our stock in order to pay taxes owed on dividends.

The voting rights of preferred stock may allow holders of preferred stock to impede actions that might otherwise benefit holders of common stock. Essex currently has outstanding shares of 7.125% Series H Cumulative Redeemable Preferred Stock (“Series H Preferred Stock”). In general, the holders of the Company’s outstanding shares of Series H Preferred Stock do not have any voting rights. However, if full distributions are not made on outstanding Series H Preferred Stock for six quarterly distributions periods, the holders of Series H Preferred Stock, together with holders of other series of preferred stock upon which like voting rights have been conferred, will have the right to elect two additional directors to serve on the Company’s Board of Directors.
These voting rights continue until all distributions in arrears and distributions for the current quarterly period on the Series H Preferred Stock have been paid in full. At that time, the holders of the Series H Preferred Stock are divested of these voting rights, and the obligationsterm of office of the directors so elected immediately terminates. These voting rights of the holders of the Series H Preferred Stock, or that of holders of other preferred stock that the Company may issue in the future, may allow such holders to impede or prevent actions that would otherwise benefit the holders of the Company’s common stock.
The Maryland Business Combination Act may delay, defer or prevent a transaction or change in control of the Company that might involve a premium price for the Company's stock or otherwise be in the best interest of our stockholders. Under the Maryland General Corporation Law, certain “business combinations” between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, share exchange, or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. An interested stockholder is defined as any person (and certain affiliates of such person) who beneficially owns ten percent or more of the voting power of the then-outstanding voting stock of the corporation. The law also requires a two supermajority stockholder votes for such transactions. This means that the transaction must be approved by at least:
80% of the votes entitled to be cast by holders of outstanding voting shares; and
Two-thirds of the votes entitled to be cast by holders of outstanding voting shares other than shares held by the interested stockholder with whom the business combination is to be effected.

The statute permits various exemptions from its provisions, including business combinations that are exempted by the board of directors prior to the time that the interested stockholder becomes an interested stockholder. These voting provisions do not apply if the stockholders receive a minimum price, as defined under the Maryland General Corporation Law. As permitted by the statute, the Board of Directors of the Company irrevocably has elected to exempt any business combination among the Company, George M. Marcus, who is the chairman of the Company, and MMC or any entity owned or controlled by Mr. Marcus and MMC. Consequently, the five-year prohibition and supermajority vote requirements described above will not apply to any business combination between the Company, Mr. Marcus, or MMC. As a result, the Company may in the future enter into business combinations with Mr. Marcus and MMC, without compliance with the supermajority vote requirements and other provisions of the Maryland Business Combination Act.
Certain provisions contained in the Operating Partnership agreement, Charter and Bylaws, and certain provisions of the Maryland General Corporation Law could delay, defer or prevent a change in control. While the Company is the sole general partner of the Operating Partnership, and an increasegenerally has full and exclusive responsibility and discretion in debt service requirementsthe management and control of the Operating Partnership, certain provisions of the Operating Partnership agreement place limitations on the Company’s power to act with respect to the Operating Partnership. Such limitations could delay, defer or prevent a transaction or a change in control that might involve a premium price for the Company’s stock or otherwise be in the

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best interests of its stockholders or that could otherwise adversely affect their interests. The partnership agreement provides that if the limited partners own at least 5% of the outstanding units of partnership interest in the Operating Partnership, the Company may not, without first obtaining the consent of a majority in interest of the limited partners in the Operating Partnership, transfer all or any portion of the Company’s general partner interest in the Operating Partnership to another entity. Such limitations on the Company’s power to act may result in the Company’s being precluded from taking action that the Board of Directors otherwise believes is in the best interests of the Company or its stockholders.
The Company’s Charter authorizes the issuance of additional shares of common stock or preferred stock and the setting of the preferences, rights and other terms of such stock without the approval of the holders of the common stock. The Company may establish one or more classes or series of stock that could delay, defer or prevent a transaction or a change in control. Such a transaction might involve a premium price for the Company’s stock or otherwise be in the best interests of the holders of common stock. Also, such a class or series of stock could have dividend, voting or other rights that could adversely affect our financial conditionthe interests of holders of common stock.
The Company’s Charter contains provisions limiting the transferability and resultsownership of operations. Such increased debt could exceedshares of capital stock, which may delay, defer or prevent a transaction or a change in control. For example, subject to receiving an exemption from the underlyingBoard of Directors, potential acquirers may not purchase more than 6% in value of the Properties.stock (other than qualified pension trusts which can acquire 9.9%). This may discourage tender offers that may be attractive to the holders of common stock and limit the opportunity for stockholders to receive a premium for their shares of common stock.
The Maryland General Corporation Law restricts the voting rights of holders of shares deemed to be “control shares.” Under the Maryland General Corporation Law, “control shares” are those which, when aggregated with any other shares held by the acquirer, entitle the acquirer to exercise voting power within specified ranges. Although the Bylaws exempt the Company from the control share provisions of the Maryland General Corporation Law, the Board of Directors may amend or eliminate the provisions of the Bylaws at any time in the future. Moreover, any such amendment or elimination of such provision of the Bylaws may result in the application of the control share provisions of the Maryland General Corporation Law not only to control shares which may be acquired in the future, but also to control shares previously acquired. If the provisions of the Bylaws are amended or eliminated, the control share provisions of the Maryland General Corporation Law could delay, defer or prevent a transaction or change in control that might involve a premium price for the stock or otherwise be in the best interests of the Company’s stockholders.
The Company’s Charter and Bylaws also contain other provisions that may impede various actions by stockholders without approval of the Company’s Board of Directors, and that in turn may delay, defer or prevent a transaction, including a change in control that might involve a premium price for the stock or otherwise be in the best interests of the Company's stockholders. Those provisions include:
directors may be removed by stockholders, without cause, only upon the affirmative vote of at least two-thirds of the votes entitled to be cast generally in the election of the directors, and with cause, only upon the affirmative vote of a majority of the votes entitled to be cast generally in the election of the directors;
the Company’s board can fix the number of directors and fill vacant directorships upon the vote of a majority of the directors;
stockholders must give advance notice to nominate directors or propose business for consideration at a stockholders’ meeting; and
for stockholders to call a special meeting, the meeting must be requested by not less than a majority of all the votes entitled to be cast at the meeting.

A breach of the Company’s privacy or information security systems could materially adversely affect the Company’s business and financial condition. The protection of tenant, employee, and company data is critically important to the Company. Our business requires us, including some of our vendors, to use and store personally identifiable and other sensitive information of its tenants and employees. The collection and use of personally identifiable information is governed by federal and state laws and regulations. Privacy and information security laws continue to evolve and may be inconsistent from one jurisdiction to another. Compliance with all such laws and regulations may increase the Company’s operating costs and adversely impact the Company’s ability to market the Company’s properties and services.
The security measures put in place by the Company, and such vendors, cannot provide absolute security, and the Company and our vendors' information technology infrastructure may be vulnerable to criminal cyber-attacks or data security incidents due to employee error, malfeasance, or other vulnerabilities.  Any such incident could compromise the Company’s or such vendors' networks, and the information stored by the Company or such vendors could be accessed, misused, publicly disclosed,

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corrupted, lost, or stolen, resulting in fraud, including wire fraud related to Company assets, or other harm.  Moreover, if a data security incident or breach affects the Company’s systems or such vendors' systems or results in the unauthorized release of personally identifiable information, the Company’s reputation and brand could be materially damaged and the Company may be exposed to a risk of loss or litigation and possible liability, which could result in a material adverse effect on the Company’s business, results of operations, and financial condition.
In the third quarter of 2014, the Company discovered and reported that certain of its computer networks containing personal and proprietary information were compromised by a cyber-intrusion. Based on information from our forensic investigation, the Company has confirmed that evidence exists of exfiltration of data on Company systems. The precise nature of the data has not been identified, and the Company does not presently have any evidence that data belonging to the Company has been misused.
After detecting unusual activity, the Company took immediate steps to assess and contain the intrusion and secure its systems. The Company retained independent forensic computer experts to analyze the impacted data systems and consulted with law enforcement.
As described in Note 16, "Commitments and Contingencies", of our notes to consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K, on December 19, 2014, a putative class action was filed against the Company in the U.S. District Court for the Northern District of California, entitled Foster v. Essex Property Trust, Inc. alleging that the Company failed to properly secure the personally-identifying information of its residents. At this point, the Company is unable to predict the developments in, outcome of, and/or economic and/or other consequences of such pending litigation or future litigation or predict the developments in, outcome of, and/or other consequences arising as a result of any potential government inquiries related to this matter.
Privacy and information security risks have generally increased in recent years because of the proliferation of new technologies and the increased sophistication and activities of perpetrators of cyber-attacks. In light of this network intrusion we discovered in the third quarter of 2014, we have dedicated additional Company resources to strengthening the security of the Company’s computer systems. In the future, the Company may be required to expend additional resources to continue to enhance the Company’s information security measures and/or to investigate and remediate any information security vulnerabilities. Despite these steps, there can be no assurance that the Company will not suffer a similar data security incident in the future, that unauthorized parties will not gain access to sensitive data stored on the Company’s systems, or that any such incident will be discovered in a timely manner.  Further, the techniques used by criminals to obtain unauthorized access to sensitive data are often novel or change frequently; accordingly, the Company may be unable to anticipate these techniques or implement adequate preventative measures.
Expanding social media vehicles present new risks. The use of social media could cause us to suffer brand damage or information leakage. Negative posts or comments about us on any social networking website could damage our reputation. In addition, employees or others might disclose non-public sensitive information relating to our business through external media channels. The continuing evolution of social media will present us with new challenges and risks.
Employee theft or fraud could result in loss. Certain of our employees have access to, or signature authority with respect to, bank accounts or other company assets, which exposes us to the risk of fraud or theft. In addition, certain employees have access to key information technology (IT) infrastructure and to tenant and other information that is commercially valuable. Should any employee compromise our IT systems, or misappropriate tenant or other information, we could incur losses, including significant financial or reputational harm, from which full recovery cannot be assured. We also may not have insurance that covers any losses in full or that covers losses from particular criminal acts. As of December 31, 2015, potential liabilities for theft or fraud are subjectnot quantifiable and an estimate of possible loss cannot be made.
Any material weaknesses identified in the Company's internal control over financial reporting could have an adverse effect on the Company’s stock price. Section 404 of the Sarbanes-Oxley Act of 2002 requires the Company to certainevaluate and report on its internal control over financial reporting. If the Company identifies one or more material weaknesses in its internal control over financial reporting, the Company could lose investor confidence in the accuracy and completeness of its financial reports, which in turn could have an adverse effect on the Company’s stock price.
Tax Risks
There are various U.S. tax risks in connection with an investment in the Company and in Essex Portfolio, L.P. - The Company has elected to be taxed as a REIT under the Internal Revenue Code. The Company’s qualification as a REIT requires it to satisfy numerous requirements (some on an annual and quarterly basis)requirements, including income, asset and distribution tests, established under highly technical and complex Internal Revenue Code provisions for which there are only limited judicial or administrative interpretations,interpretations.

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To qualify under the income test, (i) at least 75% of the Company’s annual gross income generally must be derived from rents from real property, mortgage interest, gain from the sale or other disposition of real property held for investment, dividends or other distributions on, and gain from the sale or other disposition of shares of other REITs and certain other limited categories of income and (ii) at least 95% of the Company’s annual gross income generally must be derived from the preceding sources plus other dividends, interest other than mortgage interest, and gain from the sale or other disposition of stock and securities held for investment. To qualify under the asset test, at the end of each quarter, at least 75% of the value of the Company’s assets must consist of cash, cash items, government securities and qualified real estate assets and there are significant additional limitations regarding the Company’s investment in securities other than government securities and qualified real estate assets, including limitations on the percentage of our assets that can be represented by the Company’s taxable REIT subsidiaries (“TRS’s”). To qualify under the distribution test, the Company generally must distribute to its shareholders each calendar year at least 90% of its REIT taxable income, determined before a deduction for dividends paid and excluding any net capital gain. In addition, to the extent the Company satisfies the 90% test, but distributes less than 100% of its REIT taxable income, it will be subject to corporate income tax on such undistributed income and could be subject to an additional 4% excise tax. Because the Company needs to meet these tests to maintain its qualification as a REIT, it could cause the Company to have to forego certain business opportunities and potentially require the Company to liquidate otherwise attractive investments.
In addition to the income, asset and distribution tests described above, the Company’s qualification as a REIT involves the determination of various factual matters and circumstances not entirely within the Company’s control. Although the Company intends that its current organization and method of operation enable it to qualify as a REIT, the Companyit cannot assure you that it so qualifies or that it will be able to remain so qualified in the future. Future legislation, new regulations, administrative interpretations or court decisions (any of which could have retroactive effect) could adversely affect the Company’s ability to qualify as a REIT or adversely affect itsthe Company’s stockholders. If itthe Company fails to qualify as a REIT in any taxable year, the Company would be subject to U.S. federal income tax (including any applicable alternative minimum tax) on itsthe Company’s taxable income at corporate rates, and the Company would not be allowed to deduct dividends paid to its shareholdersstockholders in computing its taxable income. The Company maywould also be disqualified from treatment as a REIT for the four taxable years following the year in which itthe Company failed to qualify. The additional tax liability would reduce its net earnings available for investment or distribution to stockholders, and itthe Company would no longer be required to make distributions to its stockholders. Even ifstockholders for the Company continues to qualify as apurpose of maintaining REIT it will continue to be subject to certain federal, state and local taxes on its income and property.

status.
The Company has established several taxable REIT subsidiaries. Despite the Company’s qualification as a REIT, its taxable REIT subsidiariesTRSs. The TRSs must pay U.S. federal income tax on their taxable income. While the Company will attempt to ensure that its dealingdealings with its taxable REIT subsidiaries doesTRSs do not adversely affect its REIT qualification, the Companyit cannot provide assuranceassurances that it will successfully achieve that result. Furthermore, the Company may be subject to a 100% penalty tax, or its taxable REIT subsidiariesTRSs may be denied deductions, to the extent dealings between the Company and its dealings with its taxable REIT subsidiaries’TRSs are not deemed to be arm’s length in nature. The Company intends that its dealings with its TRSs will be on an arm’s length basis. No assurances can be given, however, that the Internal Revenue Service will not assert a contrary position.
The Company owns interests in multiple subsidiary REITs that have elected to be taxed as REITs under the Code. These subsidiary REITs are subject to the various REIT qualification requirements and other limitations that are applicable to the Company. If any of the Company’s dealings with its taxablesubsidiary REITs were to fail to qualify as a REIT, subsidiaries’ willthen (i) the subsidiary REIT would become subject to federal income tax and (ii) the Company’s ownership of shares in such subsidiary REIT would cease to be arm’s length in nature.
a qualifying asset for purposes of the asset tests applicable to REITs. If any of the Company’s subsidiary REITs were to fail to qualify as REITs, it is possible that the Company could also fail to qualify as a REIT.
From time to time, wethe Company may transfer or otherwise dispose of some of our Properties.its properties.  Under the Internal Revenue Code, unless certain exceptions apply, any gain resulting from transfers of Propertiesproperties that we holdthe Company holds as inventory or primarily for sale to customers in the ordinary course of business wouldcould be treated as income from a prohibited transaction subject to a 100% penalty tax. Since we acquirethe Company acquires properties for investment purposes, we doit does not believe that ourits occasional transfers or disposals of property areshould be treated as prohibited transactions. However, whether property is held for investment purposes is a question of fact that depends on all the facts and circumstances surrounding the particular transaction. The Internal Revenue Service may contend that certain transfers or disposals of properties by usthe Company are prohibited transactions. If the Internal Revenue Service were to argue successfully that a transfer or disposition of property constituted a prohibited transaction, then the Company would be required to pay a 100% penalty tax on any gain allocable to the Companyit from the prohibited transaction, and the Company’s ability to retain future gains onproceeds from real property sales may be jeopardized. Income from a prohibited transaction might adversely affect the Company’s ability to satisfy the income tests for qualification as a REIT for U.S. federal income tax purposes. Therefore, no assurances can be given that the Company will be able to satisfy the income tests for qualification as a REIT.REIT if the Company transferred or disposed of property in a transaction treated as a prohibited transaction.
Dividends paid by REITs to U.S. stockholders that are individuals, trusts or estates are generally not eligible for the reduced tax rate applicable to qualified dividends received from non-REIT corporations (the maximum rate on qualified dividends is

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currently 23.8%). Rather, U.S. individual, trust or estate stockholders who receive dividends from a REIT that are not designated as capital gain dividends will be taxed on such dividends at ordinary income rates (at a current maximum rate of 43.4%). This may cause investors to view REIT investments to be less attractive than investments in non-REIT corporations, which in turn may adversely affect the value of stock in REITs, including the Company’s stock.
Non-U.S. investors that invest in the Company should be aware of the following U.S. federal income tax considerations in connection with such investment. First, distributions by the Company from its current and accumulated earnings and profits are subject to a 30% U.S. withholding tax in the hands of non-U.S. investors, unless the 30% is reduced by an applicable income tax treaty. Such distributions may also be subject to a 30% withholding tax under the “Foreign Account Tax Compliance Act” (“FATCA”) unless a non-U.S. investor complies with certain requirements prescribed by FATCA. Second, distributions by the Company that are attributable to gains from dispositions of U.S. real property (“capital gain dividends”) will be treated as income that is effectively connected with a U.S. trade or business in the hands of a non-U.S. investor, such that a non-U.S. investor will have U.S. federal income tax payment and filing obligations with respect to capital gain dividends. Furthermore, capital gain dividends may be subject to an additional 30% “branch profits tax” (which may be reduced by an applicable income tax treaty) in the hands of a non-U.S. investor that is a corporation. Third, any gain derived by a non-U.S. investor on a disposition of such investor’s stock in the Company will subject such investor to U.S. federal income tax payment and filing requirements unless the Company is treated as a domestically-controlled REIT. A REIT is “domestically controlled” if less than 50% of the REIT’s capital stock, by value, has been owned directly or indirectly by persons who are not qualifying U.S. persons during a continuous five-year period ending on the date of disposition or, if shorter, during the entire period of the REIT’s existence. The Company believes that it is a domestically-controlled REIT, but no assurances can be given in this regard. Notwithstanding the foregoing, even if the Company were not a domestically-controlled REIT, under a special exception non-U.S. investors should not have U.S. federal income tax payment and filing obligations on capital gain dividends or a disposition of their stock in the Company if (i) they did not own more than 10% of such stock at any time during the one-year period ending on the date of the disposition, and (ii) the Company’s stock continues to be regularly traded on an established securities market located in the United States and certain other non-U.S. investors may also not be subject to these payment and filing obligations. Non-U.S. investors should consult with their independent advisors as to the above U.S. tax considerations and other U.S. tax consequences of an investment in the Company’s stock, in light of their particular circumstances.
The Company believes that its operating partnership, Essex Portfolio, L.P., will continue to be treated as a partnership for U.S. federal income tax purposes. As a partnership, Essex Portfolio, L.P. is not subject to U.S. federal income tax on its income. Instead, each of its partners is required to pay tax on the partner’s allocable share of the income of Essex Portfolio, L.P. No assurances can be given, however, that the Internal Revenue Service will not challenge Essex Portfolio, L.P.’s status as a partnership for U.S. federal income tax purposes, or that a court would not sustain such a challenge. If the Internal Revenue Service were successful in treating Essex Portfolio, L.P. as a corporation for U.S. federal income tax purposes, the Company could fail to meet the income tests and/or the asset tests applicable to REITs and, accordingly, cease to qualify as a REIT. Also, the failure of Essex Portfolio, L.P. to qualify as a partnership would cause it to become subject to federal and state corporate income tax, which would reduce significantly the amount of cash available for distribution to its partners.
Item 1B. Unresolved Staff Comments.Comments

None.

Item 2. Properties

Our core apartment PortfolioThe Company’s portfolio as of December 31, 20072015 (including partial ownership interests)communities owned by unconsolidated joint ventures, but excluding communities underlying preferred equity investments) was comprised of 134246 apartment communities (comprising 27,48959,160 apartment units)homes), of which 13,205 units28,039 apartment homes are located in Southern California, 8,462 units18,924 apartment homes are located in the San Francisco Bay Area, 5,520 unitsand 12,197 apartment homes are located in the Seattle metropolitan area, and 302 units are located in the other areas which consists of one community in Houston, Texas.area.  The Operating Partnership’sCompany’s apartment communities accounted for 97.5%99.3% of the Operating Partnership’s revenueCompany’s revenues for the year ended December 31, 2007.2015.


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Occupancy Rates

The 134 apartment communities had an average Same-PropertiesFinancial occupancy (asis defined in Item 7), based on “financial occupancy,” duringas the year ended December 31, 2007, of approximately 95.9%. With respect to stabilized apartment communities with sufficient operating history, occupancy figures are based on financial occupancy (the percentage resulting from dividing actual rental revenue by total possible rental revenue). Actualpotential rental revenue represents contractual(actual rental revenue pursuant to leases without considering delinquencyfor occupied apartment homes plus market rent for vacant apartment homes). When calculating actual rents for occupied apartment homes and concessions.market rents for vacant apartment homes, delinquencies and concessions are not taken into account. Total possible rental revenue represents the value of all apartment units,homes, with occupied unitsapartment homes valued at contractual rental rates pursuant to leases and vacant unitsapartment homes valued at estimated market rents. We believeThe Company believes 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 REITsand the Company's calculation of financial occupancy may not be comparable to our calculationfinancial occupancy as disclosed by other REITs. Market rates are determined using a variety of financial occupancy.
As of December 31, 2007,factors such as effective rental rates at the headquarters building was 100% occupied by the Operating Partnership and the Southern California office building was 100% occupied,property based on physical occupancy. With respect to office buildings,recently signed leases and asking rates for comparable properties in the market. The recently signed effective rates at the property are used as the starting point in the determination of the market rates of vacant apartment homes. The Company then increases or decreases these rates based on the supply and demand in the apartment community’s market. The Company will check the reasonableness of these rents based on its position within the market and compare the rents against the asking rents by comparable properties in the market.

For communities that are development properties in lease-up without stabilized occupancy figures, arethe Company believes the physical occupancy rate is the appropriate performance metric. While a community is in the lease-up phase, the Company’s primary motivation is to stabilize the property which may entail the use of rent concessions and other incentives, and thus financial occupancy which is based on “physical occupancy” which referscontractual revenue is not considered the best metric to the percentage resulting from dividing leased and occupied square footage by rentable square footage. With respect to recreational vehicle parks, manufactured housing communities, or apartment communities which have not yet stabilized or have insufficient operating history, occupancy figures are based on “physical occupancy” which refers to the percentage resulting from dividing leased and occupied units by rentable units.
For the year ended December 31, 2007, none of the Operating Partnership’s Properties had book values equal to 10% or more of total assets of the Operating Partnership or gross revenues equal to 10% or more of aggregate gross revenues of the Operating Partnership.quantify occupancy.

Apartment Communities

Our apartmentThe Company’s communities are generallyprimarily suburban garden apartmentsgarden-style communities and town homes comprising multiple clusters of two and three storythree-story buildings situated on three to fifteen acres of land. As of December 31, 2015, the Company’s communities include 162 garden-style, 78 mid-rise, and 6 high-rise communities. The apartment communities have onan average of 205 units,approximately 240 apartment homes, with a mix of studio, one, two and some three-bedroom units.apartment homes. A wide variety of amenities are available at each apartment community,the Company’s communities, including covered parking, fireplaces, swimming pools, clubhouses with complete fitness facilities, volleyball and playground areas and tennis courts.
 
We select, trainThe Company hires, trains and supervise a full team ofsupervises on-site service and maintenance personnel.  We believeThe Company believes that the following primary factors enhance ourthe Company’s ability to retain tenants:
·  
located near employment centers
located near employment centers;
·  well built communities that have been well maintained since acquisition;attractive communities that are well maintained; and
·  proactive customer service approach.
proactive customer service.

Office and Other Commercial Buildings

The Operating Partnership’sCompany’s former corporate headquarters iswas located in two office buildings with approximately 39,600 square feet located at 925/935 East Meadow Drive, Palo Alto, California and was classified as held for sale at December 31, 2015. The Company owns an office building with approximately 17,400 square feet located at 925 East Meadow Drive, Palo Alto, California. The Operating Partnership acquired the property in 1997. In December 2007, the Operating Partnership acquired the adjacent property at 935 East Meadow Drive, and the Operating Partnership will be making improvements to the building though the third quarter of 2008.  This building is approximately 14,500 square feet and will be solely occupied by the Operating Partnership. The Operating Partnership also owns an office building in Southern California (Woodland Hills), comprised of approximately 38,900 square feet building, of which the Operating Partnership occupies approximately 11,500 square feet at December 31, 2007. The building has nine third-party tenants occupying approximately 27,400 square feet. The largest single tenant occupies approximately 10,900 square feet. The Operating Partnership acquired the Woodland Hills property in 2001. The Operating Partnership has a mortgage loan receivable on an office building with approximately 110,000106,564 square feet located in Irvine, California, of which is consolidated in accordance with GAAP.  The Operating Partnership also has two predevelopment projects, Cadence Campus which is an office building comprised of 262,500the Company occupies approximately 8,000 square feet andat December 31, 2015.  The Company owns Essex-Hollywood, a 34,000 square foot commercial building and a 138,915 square foot retail site in Santa Clara, California as future development sites that are currently utilitized as a production studio of 35,000 square feet, and both properties are 100% leased to single tenants.leased.
Recreational Vehicle Parks and Manufactured Housing Community
The Operating Partnership owns two recreational vehicle parks (comprising of 338 spaces), acquired in the Operating Partnership’s December 2002 acquisition of John M. Sachs, Inc., located in El Cajon, California.  
19
The Operating Partnership also owns one manufactured housing community (containing 157 sites), acquired in the Operating Partnership’s December 2002 acquisition of John M. Sachs, Inc., and located in Vista, California.

The following tables describe the Operating Partnership’s PropertiesCompany’s operating portfolio as of December 31, 2007.2015. The first table describes the Operating Partnership’s apartmentCompany’s communities and the second table describes the Operating Partnership’sCompany’s other real estate assets. (See Note 8 of the Company’s consolidated financial statements for more information about the Company’s secured mortgage debt and Schedule III for a list of secured mortgage loans related to the Company’s portfolio.)
      Rentable      
      Square Year Year  
Apartment Communities (1)
 Location Units Footage Built Acquired 
Occupancy(2)
Southern California            
Alpine Country Alpine, CA 108 81,900 1986 2002 94%
Alpine Village Alpine, CA 306 254,400 1971 2002 96%
Barkley, The(3)(4) Anaheim, CA 161 139,800 1984 2000 97%
Bonita Cedars Bonita, CA 120 120,800 1983 2002 98%
Camarillo Oaks Camarillo, CA 564 459,000 1985 1996 96%
Camino Ruiz Square Camarillo, CA 160 105,448 1990 2006 97%
Mountain View Camarillo, CA 106 83,900 1980 2004 98%
Cardiff by the Sea Cardiff, CA 300 284,460 1986 2007 97%
Cambridge Chula Vista, CA 40 22,100 1965 2002 96%
Woodlawn Colonial Chula Vista, CA 159 104,500 1974 2002 93%
Mesa Village Clairemont, CA 133 43,600 1963 2002 99%
Parcwood(5) Corona, CA 312 270,000 1989 2004 95%
Coral Gardens El Cajon, CA 200 182,000 1976 2002 94%
Tierra del Sol/Norte El Cajon, CA 156 117,000 1969 2002 97%
Grand Regency Escondido, CA 60 42,400 1967 2002 98%
Valley Park(6) Fountain Valley, CA 160 169,700 1969 2001 96%
Capri at Sunny Hills(6) Fullerton, CA 100 128,100 1961 2001 97%
Wilshire Promenade Fullerton, CA 149 128,000 1992(7) 1997 94%
Montejo(6) Garden Grove, CA 124 103,200 1974 2001 97%
CBC Apartments Goleta, CA 148 91,538 1962 2006 98%
Chimney Sweep Apartments Goleta, CA 91 88,370 1967 2006 95%
Hampton Court (Columbus) Glendale, CA 83 71,500 1974(8) 1999 94%
Hampton Place (Lorraine) Glendale, CA 132 141,500 1970(9) 1999 95%
Devonshire Hemet, CA 276 207,200 1988 2002 92%
Huntington Breakers Huntington Beach, CA342 241,700 1984 1997 97%
Hillsborough Park La Habra, CA 235 215,500 1999 1999 96%
Trabuco Villas Lake Forest, CA 132 131,000 1985 1997 98%
Marbrisa Long Beach, CA 202 122,800 1987 2002 97%
Pathways Long Beach, CA 296 197,700 1975(10) 1991 85%
Bunker Hill Los Angeles, CA 456 346,600 1968 1998 96%
Cochran Apartments Los Angeles, CA 58 51,400 1989 1998 93%
Kings Road Los Angeles, CA 196 132,100 1979(11) 1997 96%
Marbella, The Los Angeles, CA 60 50,108 1991 2005 90%
Marina City Club(12) Los Angeles, CA 101 127,200 1971 2004 95%
Park Place Los Angeles, CA 60 48,000 1988 1997 93%
Renaissance, The(5) Los Angeles, CA 168 154,268 1990(13) 2006 84%
Windsor Court Los Angeles, CA 58 46,600 1988 1997 93%
Mirabella(14) Marina Del Rey, CA 188 176,800 2000 2000 98%
Mira Monte Mira Mesa, CA 355 262,600 1982(15) 2002 96%
Hillcrest Park Newbury Park, CA 608 521,900 1973(16)(17)1998 96%
Fairways(18) Newport Beach, CA 74 107,100 1972 1999 90%
Country Villas Oceanside, CA 180 179,700 1976 2002 97%
Mission Hills Oceanside, CA 282 244,000 1984 2005 97%
Mariner's Place Oxnard, CA 105 77,200 1987 2000 98%
Monterey Villas Oxnard, CA 122 122,100 1974(19) 1997 98%
Tierra Vista Oxnard, CA 404 387,100 2001 2001 96%
Monterra del Mar Pasadena, CA 123 74,400 1972(20) 1997 94%
Monterra del Rey Pasadena, CA 84 73,100 1972(21) 1999 92%
Monterra del Sol Pasadena, CA 85 69,200 1972(22) 1999 96%
Villa Angelina(6) Placentia, CA 256 217,600 1970 2001 97%
            (continued)
20
      Rentable      
      Square Year Year  
Apartment Communities (1)
 Location Units Footage Built Acquired 
Occupancy(2)
Southern California (continued)            
Fountain Park Playa Vista, CA 705 608,900 2002 2004 96%
Highridge(6) Rancho Palos Verdes, CA255 290,200 1972(23) 1997 92%
Bluffs II, The(24) San Diego, CA 224 126,700 1974 1997 98%
Summit Park San Diego, CA 300 229,400 1972 2002 97%
Vista Capri - North San Diego, CA 106 51,800 1975 2002 98%
Brentwood (Hearthstone)(6) Santa Ana, CA 140 154,800 1970 2001 96%
Treehouse(6) Santa Ana, CA 164 135,700 1970 2001 95%
Hope Ranch Collection Santa Barbara, CA 108 126,700 1965&73 2007 95%
Carlton Heights Santee, CA 70 48,400 1979 2002 94%
Hidden Valley (Parker Ranch)(25) Simi Valley, CA 324 310,900 2004 2004 94%
Meadowood Simi Valley, CA 320 264,500 1986 1996 91%
Shadow Point Spring Valley, CA 172 131,200 1983 2002 97%
Coldwater Canyon Studio City, CA 39 34,125 1979 2007 70%
Lofts at Pinehurst, The Ventura, CA 118 71,100 1971(26) 1997 97%
Pinehurst(27) Ventura, CA 28 21,200 1973 2004 98%
Woodside Village Ventura, CA 145 136,500 1987 2004 96%
Walnut Heights Walnut, CA 163 146,700 1964 2003 94%
Avondale at Warner Center Woodland Hills, CA 446 331,000 1970(28) 1997 92%
    13,205 11,038,017     95%
Northern California            
Belmont Terrace Belmont, CA 71 72,951 1974 2006 96%
Carlmont Woods(5) Belmont, CA 195 107,200 1971 2004 98%
Davey Glen(5) Belmont, CA 69 65,974 1962 2006 92%
Pointe at Cupertino, The Cupertino, CA 116 135,200 1963(29) 1998 98%
Harbor Cove(5) Foster City, CA 400 306,600 1971 2004 97%
Stevenson Place Fremont, CA 200 146,200    1971(30) 1983 95%
Boulevard (Treetops) Fremont, CA 172 131,200 1978(31) 1996 87%
Waterstone at Fremont (Mountain Vista)(32) Fremont, CA 526 433,100 1975 2000 94%
City View (Wimbledon Woods) Hayward, CA 560 462,400 1975(33) 1998 95%
Alderwood Park(5) Newark, CA 96 74,624 1987 2006 97%
Bridgeport (Summerhill Commons) Newark, CA 184 139,000 1987(34) 1987 96%
Regency Towers(5) Oakland, CA 178 140,900 1975(35) 2005 92%
San Marcos (Vista del Mar) Richmond, CA 432 407,600 2003 2003 96%
Mt. Sutro San Francisco, CA 99 64,000 1973 2001 98%
Carlyle, The San Jose, CA 132 129,200 2000 2000 97%
Enclave, The(5) San Jose, CA 637 525,463 1998 2005 96%
Esplanade San Jose, CA 278 279,000 2002 2004 97%
Waterford, The San Jose, CA 238 219,600 2000 2000 98%
Hillsdale Garden Apartments(36) San Mateo, CA 697 611,505 1948 2006 96%
Bel Air San Ramon, CA 462 391,000 1988(37) 1997 96%
Canyon Oaks San Ramon, CA 250 237,894 2005 2007 94%
Foothill Gardens San Ramon, CA 132 155,100 1985 1997 94%
Mill Creek at Windermere San Ramon, CA 400 381,060 2005 2007 93%
Twin Creeks San Ramon, CA 44 51,700 1985 1997 94%
Le Parc Luxury Apartments Santa Clara, CA 140 113,200 1975(38) 1994 98%
Marina Cove(39) Santa Clara, CA 292 250,200 1974(40) 1994 98%
Harvest Park Santa Rosa, CA 104 116,628 2004 2007 95%
Bristol Commons Sunnyvale, CA 188 142,600 1989 1997 97%
Brookside Oaks(6) Sunnyvale, CA 170 119,900 1973 2000 99%
Magnolia Lane(41) Sunnyvale, CA 32 31,541 2001 2007 97%
Montclaire, The (Oak Pointe) Sunnyvale, CA 390 294,100 1973(42) 1988 90%
Summerhill Park Sunnyvale, CA 100 78,500 1988 1988 98%
Thomas Jefferson(6) Sunnyvale, CA 156 110,824 1969 2007 100%
Windsor Ridge Sunnyvale, CA 216 161,800 1989 1989 96%
Vista Belvedere Tiburon, CA 76 78,300 1963 2004 94%
Tuscana Tracy, CA 30 29,088 2007 2007 84%
    8,462 7,195,152     96%
            (continued)

21
       
Rentable
      
      Square Year Year  
Apartment Communities (1)
 Location Units Footage Built Acquired 
Occupancy(2)
Seattle, Washington Metropolitan Area            
Cedar Terrace Bellevue, WA 180 174,200 1984 2005 95%
Emerald Ridge-North Bellevue, WA 180 144,000 1987 1994 95%
Foothill Commons Bellevue, WA 360 288,300 1978(43) 1990 99%
Palisades, The Bellevue, WA 192 159,700 1977(44) 1990 94%
Sammamish View Bellevue, WA 153 133,500 1986(45) 1994 87%
Woodland Commons Bellevue, WA 236 172,300 1978(43) 1990 99%
Canyon Pointe Bothell, WA 250 210,400 1990 2003 97%
Inglenook Court Bothell, WA 224 183,600 1985 1994 94%
Salmon Run at Perry Creek Bothell, WA 132 117,100 2000 2000 97%
Stonehedge Village Bothell, WA 196 214,800 1986 1997 95%
Park Hill at Issaquah Issaquah, WA 245 277,700 1999 1999 96%
Wandering Creek Kent, WA 156 124,300 1986 1995 98%
Bridle Trails Kirkland, WA 108 73,400 1986(46) 1997 97%
Evergreen Heights Kirkland, WA 200 188,300 1990 1997 96%
Laurels at Mill Creek, The Mill Creek, WA 164 134,300 1981 1996 97%
Morning Run(5) Monroe, WA 222 221,786 1991 2005 97%
Anchor Village(6) Mukilteo, WA 301 245,900 1981 1997 96%
Castle Creek Newcastle, WA 216 191,900 1997 1997 95%
Brighton Ridge Renton, WA 264 201,300 1986 1996 96%
Fairwood Pond Renton, WA 194 189,200 1997 2004 95%
Forest View Renton, WA 192 182,500 1998 2003 96%
Cairns, The Seattle, WA 100 70,806 2006 2007 95%
Fountain Court Seattle, WA 320 207,000 2000 2000 96%
Linden Square Seattle, WA 183 142,200 1994 2000 97%
Maple Leaf Seattle, WA 48 35,500 1986 1997 99%
Spring Lake Seattle, WA 69 42,300 1986 1997 99%
Tower @ 801(5) Seattle, WA 173 118,500 1970 2005 97%
Wharfside Pointe Seattle, WA 142 119,200 1990 1994 97%
Echo Ridge(5) Snoqualmie, WA 120 124,539 2000 2005 97%
    5,520 4,688,531     96%
Other Region            
St. Cloud Houston, TX 302 306,800 1968 2002 93%
             
    302 306,800     93%
        Total/Weighted Average   27,489 23,228,500     96%
      Rentable      
      Square Year Year  
Other real estate assets(1)
 Location Tenants Footage Built Acquired 
Occupancy(2)
Office Buildings            
535 - 575 River Oaks(47)  San Jose, CA 1 262,500 1990 2007 100%
925 East Meadow Drive(48) Palo Alto, CA 1 17,400 1988 1997 100%
935 East Meadow Drive(49) Palo Alto, CA - 14,500 1962 2007 0%
6230 Sunset Blvd(47) Los Angeles, CA 1 35,000 1938 2006 100%
17461 Derian Ave(50) Irvine, CA 3 110,000 1983 2000 100%
22110-22120 Clarendon Street(51) Woodland Hills, CA 9 38,940 1982 2001 100%
    Total Office Buildings   15 478,340     100%
             
Recreational Vehicle Parks            
Circle RV El Cajon, CA 179 spaces   1977   2002  (52)
Vacationer El Cajon, CA 159 spaces   1973   2002  (52)
    Total Recreational Vehicle Parks   338 spaces        
             
Manufactured Housing Community            
Green Valley Vista, CA 157 sites   1973   2002  (52)
    Total Manufactured Housing Community   157 sites        
    Apartment Rentable Year Year  
Communities (1)
 Location Homes Square Footage Built Acquired 
Occupancy(2)
Southern California            
Alpine Village Alpine, CA 301
 254,400
 1971 2002 97%
Anavia Anaheim, CA 250
 312,343
 2009 2010 96%

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Table of Contents

    Apartment Rentable Year Year  
Communities (1)
 Location Homes Square Footage Built Acquired 
Occupancy(2)
Barkley, The (3)(4)
 Anaheim, CA 161
 139,800
 1984 2000 98%
Park Viridian Anaheim, CA 320
 254,600
 2008 2014 96%
Bonita Cedars Bonita, CA 120
 120,800
 1983 2002 97%
Camarillo Oaks Camarillo, CA 564
 459,000
 1985 1996 96%
Camino Ruiz Square Camarillo, CA 160
 105,448
 1990 2006 97%
Enclave at Town Square (21)
 Chino Hills, CA 124
 89,948
 1987 2014 97%
The Heights I & II (21)
 Chino Hills, CA 332
 324,370
 2004 2014 96%
The Summit (5)
 Chino Hills, CA 125
 98,420
 1989 2014 98%
Pinnacle at Otay Ranch Chula Vista, CA 364
 384,192
 2001 2014 95%
Mesa Village Clairemont, CA 133
 43,600
 1963 2002 98%
Villa Siena Costa Mesa, CA 272
 262,842
 1974 2014 96%
Emerald Pointe Diamond Bar, CA 160
 134,816
 1989 2014 96%
Regency at Encino Encino, CA 75
 78,487
 1989 2009 97%
The Havens (21)
 Fountain Valley, CA 440
 414,040
 1969 2014 96%
Valley Park (4)
 Fountain Valley, CA 160
 169,700
 1969 2001 97%
Capri at Sunny Hills (4)
 Fullerton, CA 100
 128,100
 1961 2001 97%
Haver Hill (5)
 Fullerton, CA 264
 224,130
 1973 2012 96%
Pinnacle at Fullerton Fullerton, CA 192
 174,336
 2004 2014 96%
Wilshire Promenade Fullerton, CA 149
 128,000
 1992 1997 96%
Montejo (4)
 Garden Grove, CA 124
 103,200
 1974 2001 97%
CBC Apartments Goleta, CA 148
 91,538
 1962 2006 97%
The Sweeps Goleta, CA 91
 88,370
 1967 2006 97%
416 on Broadway Glendale, CA 115
 126,782
 2009 2010 96%
Hampton Court Glendale, CA 83
 71,500
 1974 1999 93%
Hampton Place Glendale, CA 132
 141,500
 1970 1999 93%
Devonshire Hemet, CA 276
 207,200
 1988 2002 96%
Huntington Breakers Huntington Beach, CA 342
 241,700
 1984 1997 95%
The Huntington Huntington Beach, CA 276
 202,256
 1975 2012 97%
Axis 2300 Irvine, CA 115
 170,714
 2010 2010 97%
Hillsborough Park La Habra, CA 235
 215,500
 1999 1999 97%
Village Green La Habra, CA 272
 175,762
 1971 2014 97%
The Palms at Laguna Niguel Laguna Niguel, CA 460
 362,136
 1988 2014 96%
Trabuco Villas Lake Forest, CA 132
 131,000
 1985 1997 97%
Marbrisa Long Beach, CA 202
 122,800
 1987 2002 96%
Pathways Long Beach, CA 296
 197,700
 1975 1991 96%
8th & Hope Los Angeles, CA 290
 298,437
 2014 2015 79%
5600 Wilshire Los Angeles, CA 284
 243,910
 2008 2014 96%
Alessio Los Angeles, CA 624
 552,716
 2001 2014 95%
Avant Los Angeles, CA 440
 305,989
 2014 2015 95%
The Avery (4)
 Los Angeles, CA 121
 129,393
 2014 2014 97%
Bellerive Los Angeles, CA 63
 79,296
 2011 2011 97%
Belmont Station Los Angeles, CA 275
 225,000
 2009 2009 97%
Bunker Hill Los Angeles, CA 456
 346,600
 1968 1998 88%
Catalina Gardens Los Angeles, CA 128
 117,585
 1987 2014 97%
Cochran Apartments Los Angeles, CA 58
 51,400
 1989 1998 97%
Gas Company Lofts (5)
 Los Angeles, CA 251
 226,666
 2004 2013 97%
Jefferson at Hollywood Los Angeles, CA 270
 238,119
 2010 2014 94%
Kings Road Los Angeles, CA 196
 132,100
 1979 1997 96%

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Table of Contents

    Apartment Rentable Year Year  
Communities (1)
 Location Homes Square Footage Built Acquired 
Occupancy(2)
Marbella Los Angeles, CA 60
 50,108
 1991 2005 97%
Muse Los Angeles, CA 152
 135,292
 2011 2011 97%
Pacific Electric Lofts (6)
 Los Angeles, CA 314
 277,980
 2006 2012 94%
Park Catalina Los Angeles, CA 90
 72,864
 2002 2012 96%
Park Place Los Angeles, CA 60
 48,000
 1988 1997 97%
Regency Palm Court (5)
 Los Angeles, CA 116
 54,844
 1987 2014 96%
Santee Court Los Angeles, CA 165
 132,040
 2004 2010 97%
Santee Village Los Angeles, CA 73
 69,817
 2011 2011 97%
Tiffany Court Los Angeles, CA 101
 74,538
 1987 2014 98%
Wilshire La Brea Los Angeles, CA 478
 354,972
 2014 2014 95%
Windsor Court (5)
 Los Angeles, CA 95
 51,266
 1987 2014 95%
Windsor Court Los Angeles, CA 58
 46,600
 1988 1997 97%
Aqua at Marina Del Rey Marina Del Rey, CA 500
 479,312
 2001 2014 95%
Marina City Club (7)
 Marina Del Rey, CA 101
 127,200
 1971 2004 96%
Mirabella Marina Del Rey, CA 188
 176,800
 2000 2000 97%
Mira Monte Mira Mesa, CA 355
 262,600
 1982 2002 96%
Madrid Apartments (6)
 Mission Viejo, CA 230
 228,099
 2000 2012 97%
Hillcrest Park Newbury Park, CA 608
 521,900
 1973 1998 96%
Fairways (8)
 Newport Beach, CA 74
 107,100
 1972 1999 96%
Candlewood North Northridge, CA 189
 166,910
 1964 2014 96%
Canyon Creek (21)
 Northridge, CA 200
 148,150
 1986 2014 96%
Country Villas Oceanside, CA 180
 179,700
 1976 2002 96%
Mission Hills Oceanside, CA 282
 244,000
 1984 2005 96%
Renaissance at Uptown Orange Orange, CA 460
 432,836
 2007 2014 96%
Mariner's Place Oxnard, CA 105
 77,200
 1987 2000 97%
Monterey Villas Oxnard, CA 122
 122,100
 1974 1997 97%
Tierra Vista Oxnard, CA 404
 387,100
 2001 2001 96%
Arbors Parc Rose (6)
 Oxnard, CA 373
 503,196
 2001 2011 95%
The Hallie del Mar Pasadena, CA 123
 74,400
 1972 1997 92%
The Hallie del Rey Pasadena, CA 84
 73,100
 1972 1999 92%
The Hallie del Sol Pasadena, CA 85
 69,200
 1972 1999 92%
Stuart at Sierra Madre Villa Pasadena, CA 188
 168,630
 2007 2014 96%
Villa Angelina (4)
 Placentia, CA 256
 217,600
 1970 2001 97%
Fountain Park Playa Vista, CA 705
 608,900
 2002 2004 97%
Highridge (4)
 Rancho Palos Verdes, CA 255
 290,200
 1972 1997 98%
Cortesia at Rancho Santa Margarita Rancho Santa Margarita, CA 308
 277,580
 1999 2014 96%
Pinnacle at Talega San Clemente, CA 362
 355,764
 2002 2014 96%
Allure at Scripps Ranch San Diego, CA 194
 207,052
 2002 2014 96%
Bernardo Crest San Diego, CA 216
 205,548
 1988 2014 96%
Cambridge Park San Diego, CA 320
 317,958
 1998 2014 95%
Carmel Creek San Diego, CA 348
 384,216
 2000 2014 96%
Carmel Landing San Diego, CA 356
 283,426
 1989 2014 94%
Carmel Summit San Diego, CA 246
 225,880
 1989 2014 97%
CentrePointe San Diego, CA 224
 126,700
 1974 1997 94%
Domain San Diego, CA 379
 345,044
 2013 2013 94%
Esplanade (21)
 San Diego, CA 616
 479,600
 1986 2014 96%

25
Table of Contents

    Apartment Rentable Year Year  
Communities (1)
 Location Homes Square Footage Built Acquired 
Occupancy(2)
Montanosa San Diego, CA 472
 414,968
 1990 2014 96%
Summit Park San Diego, CA 300
 229,400
 1972 2002 96%
Essex Skyline at MacArthur Place (9)
 Santa Ana, CA 349
 512,791
 2008 2010 96%
Fairhaven (4)
 Santa Ana, CA 164
 135,700
 1970 2001 98%
Parkside Court (21)
 Santa Ana, CA 210
 152,400
 1986 2014 97%
Pinnacle at MacArthur Place Santa Ana, CA 253
 262,867
 2002 2014 96%
Hope Ranch Santa Barbara, CA 108
 126,700
 1965 / 1973 2007 98%
Bridgeport Coast (22)
 Santa Clarita, CA 188
 168,198
 2006 2014 97%
Hidden Valley (10)
 Simi Valley, CA 324
 310,900
 2004 2004 97%
Meadowood Simi Valley, CA 320
 264,500
 1986 1996 96%
Shadow Point Spring Valley, CA 172
 131,200
 1983 2002 96%
The Fairways at Westridge (22)
 Valencia, CA 234
 223,330
 2004 2014 96%
Vistas of West Hills (22)
 Valencia, CA 220
 221,119
 2009 2014 96%
Allegro Valley Village, CA 97
 127,812
 2010 2010 97%
Lofts at Pinehurst, The Ventura, CA 118
 71,100
 1971 1997 97%
Pinehurst (11)
 Ventura, CA 28
 21,200
 1973 2004 98%
Woodside Village Ventura, CA 145
 136,500
 1987 2004 97%
Walnut Heights Walnut, CA 163
 146,700
 1964 2003 95%
The Dylan West Hollywood, CA 184
 150,678
 2014 2014 92%
The Huxley West Hollywood, CA 187
 154,776
 2014 2014 93%
Reveal Woodland Hills, CA 438
 414,892
 2010 2011 95%
Avondale at Warner Center Woodland Hills, CA 446
 331,000
 1970 1999 96%
    28,039

24,850,294
     96%
Northern California            
Belmont Terrace Belmont, CA 71
 72,951
 1974 2006 94%
Fourth & U Berkeley, CA 171
 146,255
 2010 2010 96%
The Commons Campbell, CA 264
 153,168
 1973 2010 97%
The Pointe at Cupertino Cupertino, CA 116
 135,200
 1963 1998 98%
Connolly Station (23)
 Dublin, CA 309
 286,348
 2014 2014 96%
Avenue 64 Emeryville, CA 224
 196,896
 2007 2014 94%
Emme (23)
 Emeryville, CA 190
 148,935
 2015 2015 81%
Foster's Landing Foster City, CA 490
 415,130
 1987 2014 96%
Stevenson Place Fremont, CA 200
 146,200
 1975 2000 95%
Mission Peaks Fremont, CA 453
 404,034
 1995 2014 96%
Mission Peaks II Fremont, CA 336
 294,720
 1989 2014 96%
Paragon Apartments Fremont, CA 301
 267,047
 2013 2014 94%
Boulevard Fremont, CA 172
 131,200
 1978 1996 97%
Briarwood (6)
 Fremont, CA 160
 111,160
 1978 2011 96%
The Woods (6)
 Fremont, CA 160
 105,280
 1978 2011 96%
City Centre (22)
 Hayward, CA 192
 175,420
 2000 2014 97%
City View Hayward, CA 572
 462,400
 1975 1998 97%
Lafayette Highlands Lafayette, CA 150
 151,790
 1973 2014 97%
Apex Milpitas, CA 366
 350,961
 2014 2014 96%
Regency at Mountain View (5)
 Mountain View, CA 142
 127,600
 1970 2013 96%
Bridgeport Newark, CA 184
 139,000
 1987 1987 98%
The Landing at Jack London Square Oakland, CA 282
 257,796
 2001 2014 95%

26
Table of Contents

    Apartment Rentable Year Year  
Communities (1)
 Location Homes Square Footage Built Acquired 
Occupancy(2)
The Grand Oakland, CA 243
 205,026
 2009 2009 96%
Radius Redwood City, CA 264
 245,862
 2015 2015 94%
San Marcos Richmond, CA 432
 407,600
 2003 2003 96%
Bennett Lofts San Francisco, CA 165
 184,713
 2004 2012 95%
Fox Plaza San Francisco, CA 443
 230,017
 1968 2013 95%
MB 360 Phase I San Francisco, CA 188
 222,810
 2014 2014 96%
Mosso (23)
 San Francisco, CA 463
 607,549
 2014 2014 87%
Park West San Francisco, CA 126
 90,060
 1958 2012 95%
101 San Fernando San Jose, CA 323
 296,078
 2001 2010 96%
Bella Villagio San Jose, CA 231
 227,511
 2004 2010 97%
Enso San Jose, CA 183
 179,562
 2014 2015 100%
Epic - Phase I & II (13) (23)
 San Jose, CA 569
 472,236
 2013 2013 95%
Esplanade San Jose, CA 278
 279,000
 2002 2004 96%
Fountains at River Oaks San Jose, CA 226
 209,954
 1990 2014 97%
Museum Park San Jose, CA 117
 121,329
 2002 2014 97%
One South Market (23)
 San Jose, CA 312
 283,268
 2015 2015 46%
Palm Valley (16)
 San Jose, CA 1,098
 1,132,284
 2008 2014 96%
The Carlyle San Jose, CA 132
 129,200
 2000 2000 97%
The Waterford San Jose, CA 238
 219,600
 2000 2000 97%
Willow Lake San Jose, CA 508
 471,744
 1989 2012 96%
Lakeshore Landing San Mateo, CA 308
 223,972
 1988 2014 95%
Hillsdale Garden San Mateo, CA 697
 611,505
 1948 2006 97%
Park 20 (23)
 San Mateo, CA 197
 140,547
 2015 2015 79%
Deer Valley San Rafael, CA 171
 167,238
 1996 2014 97%
Bel Air San Ramon, CA 462
 391,000
 1988 1995 96%
Canyon Oaks San Ramon, CA 250
 237,894
 2005 2007 98%
Crow Canyon San Ramon, CA 400
 337,064
 1992 2014 96%
Foothill Gardens San Ramon, CA 132
 155,100
 1985 1997 97%
Mill Creek at Windermere San Ramon, CA 400
 381,060
 2005 2007 97%
Twin Creeks San Ramon, CA 44
 51,700
 1985 1997 97%
1000 Kiely Santa Clara, CA 121
 128,486
 1971 2011 95%
Le Parc Santa Clara, CA 140
 113,200
 1975 1994 97%
Marina Cove (14)
 Santa Clara, CA 292
 250,200
 1974 1994 96%
Riley Square (6)
 Santa Clara, CA 156
 126,900
 1972 2012 95%
Villa Granada Santa Clara, CA 270
 238,841
 2010 2014 96%
Chestnut Street Apartments Santa Cruz, CA 96
 87,640
 2002 2008 97%
Harvest Park Santa Rosa, CA 104
 116,628
 2004 2007 97%
Bristol Commons Sunnyvale, CA 188
 142,600
 1989 1995 95%
Brookside Oaks (4)
 Sunnyvale, CA 170
 119,900
 1973 2000 95%
Lawrence Station Sunnyvale, CA 336
 297,188
 2012 2014 96%
Magnolia Lane (15)
 Sunnyvale, CA 32
 31,541
 2001 2007 97%
Magnolia Square (4)
 Sunnyvale, CA 156
 110,824
 1963 2007 97%
Montclaire Sunnyvale, CA 390
 294,100
 1973 1988 97%
Reed Square Sunnyvale, CA 100
 95,440
 1970 2011 97%
Solstice Sunnyvale, CA 280
 571,466
 2014 2014 96%
Summerhill Park Sunnyvale, CA 100
 78,500
 1988 1988 95%
Via Sunnyvale, CA 284
 309,421
 2011 2011 96%
Windsor Ridge Sunnyvale, CA 216
 161,800
 1989 1989 96%

27
Table of Contents

    Apartment Rentable Year Year  
Communities (1)
 Location Homes Square Footage Built Acquired 
Occupancy(2)
Vista Belvedere Tiburon, CA 76
 78,300
 1963 2004 95%
Tuscana Tracy, CA 30
 29,088
 2007 2007 99%
Verandas (22)
 Union City, CA 282
 199,092
 1989 2014 96%
    18,924
 17,173,129
     95%
Seattle, Washington Metropolitan Area          
Belcarra Bellevue, WA 296
 241,567
 2009 2014 96%
BellCentre Bellevue, WA 248
 181,288
 2001 2014 96%
Cedar Terrace Bellevue, WA 180
 174,200
 1984 2005 96%
Courtyard off Main Bellevue, WA 110
 108,388
 2000 2010 96%
Ellington at Bellevue Bellevue, WA 220
 165,794
 1994 2014 96%
Emerald Ridge Bellevue, WA 180
 144,000
 1987 1994 96%
Foothill Commons Bellevue, WA 394
 288,300
 1978 1990 96%
Palisades, The Bellevue, WA 192
 159,700
 1977 1990 97%
Park Highland Bellevue, WA 250
 224,750
 1993 2014 95%
Piedmont Bellevue, WA 396
 348,969
 1969 2014 96%
Sammamish View Bellevue, WA 153
 133,500
 1986 1994 97%
Woodland Commons Bellevue, WA 302
 217,878
 1978 1990 95%
Bothell Ridge (21)
 Bothell, WA 214
 167,370
 1988 2014 96%
Canyon Pointe Bothell, WA 250
 210,400
 1990 2003 95%
Inglenook Court Bothell, WA 224
 183,600
 1985 1994 97%
Pinnacle Sonata Bothell, WA 268
 343,095
 2000 2014 95%
Salmon Run at Perry Creek Bothell, WA 132
 117,100
 2000 2000 98%
Stonehedge Village Bothell, WA 196
 214,800
 1986 1997 97%
Highlands at Wynhaven Issaquah, WA 333
 424,674
 2000 2008 96%
Park Hill at Issaquah Issaquah, WA 245
 277,700
 1999 1999 97%
Wandering Creek Kent, WA 156
 124,300
 1986 1995 97%
Ascent Kirkland, WA 90
 75,840
 1988 2012 97%
Bridle Trails Kirkland, WA 108
 99,700
 1986 1997 97%
Corbella at Juanita Bay Kirkland, WA 169
 103,339
 1978 2010 96%
Evergreen Heights Kirkland, WA 200
 188,300
 1990 1997 97%
Slater 116 Kirkland, WA 108
 81,415
 2013 2013 96%
Montebello Kirkland, WA 248
 272,734
 1996 2012 96%
Aviara (12)
 Mercer Island, WA 166
 147,033
 2013 2014 96%
Laurels at Mill Creek Mill Creek, WA 164
 134,300
 1981 1996 97%
Parkwood at Mill Creek Mill Creek, WA 240
 257,160
 1989 2014 95%
The Elliot at Mukilteo (4)
 Mukilteo, WA 301
 245,900
 1981 1997 95%
Castle Creek Newcastle, WA 216
 191,900
 1998 1998 97%
Delano Redmond, WA 126
 116,340
 2005 2011 97%
Elevation Redmond, WA 158
 138,916
 1986 2010 97%
Redmond Hill (6)
 Redmond, WA 442
 350,275
 1985 2011 96%
Shadowbrook Redmond, WA 418
 338,880
 1986 2014 97%
The Trails of Redmond Redmond, WA 423
 376,000
 1985 2014 97%
Vesta (6)
 Redmond, WA 440
 381,675
 1998 2011 96%
Brighton Ridge Renton, WA 264
 201,300
 1986 1996 97%
Fairwood Pond Renton, WA 194
 189,200
 1997 2004 97%
Forest View Renton, WA 192
 182,500
 1998 2003 97%
Pinnacle on Lake Washington Renton, WA 180
 190,908
 2001 2014 96%
Annaliese Seattle, WA 56
 48,216
 2009 2013 96%

28
Table of Contents

    Apartment Rentable Year Year  
Communities (1)
 Location Homes Square Footage Built Acquired 
Occupancy(2)
The Audrey at Belltown Seattle, WA 137
 94,119
 1992 2014 97%
Ballinger Commons (21)
 Seattle, WA 485
 407,253
 1989 2014 96%
The Bernard Seattle, WA 63
 43,151
 2008 2011 96%
Cairns, The Seattle, WA 100
 70,806
 2006 2007 97%
Citywalk (21)
 Seattle, WA 102
 92,010
 1988 2014 97%
Collins on Pine Seattle, WA 76
 48,733
 2013 2014 97%
Domaine Seattle, WA 92
 79,421
 2009 2012 95%
Expo (16)
 Seattle, WA 275
 190,176
 2012 2012 97%
Fountain Court Seattle, WA 320
 207,000
 2000 2000 95%
Joule (17)
 Seattle, WA 295
 191,109
 2010 2010 96%
Taylor 28 Seattle, WA 197
 155,630
 2008 2014 95%
Vox Seattle, WA 58
 42,173
 2013 2013 97%
Wharfside Pointe Seattle, WA 155
 119,200
 1990 1994 94%
    12,197
 10,503,985
     96%
             
Total/Weighted Average   59,160
 52,527,408
     95%

      Square Year Year  
Other real estate assets (1)
 Location Tenants Footage Built Acquired 
Occupancy (2)
925 / 935 East Meadow Drive (18)
 Palo Alto, CA — 39,600
 1988 / 1962 1997 / 2007 —%
Essex - Hollywood (19)
 Los Angeles, CA 1 34,000
 1938 2006 100%
Derian Office Building (20)
 Irvine, CA 8 106,564
 1983 2000 100%
Santa Clara Retail Santa Clara, CA 3 138,915
 1970 2011 100%
    12 319,079
     88%

Footnotes to the Operating Partnership’s PropertiesCompany’s Portfolio Listing as of December 31, 2007
2015

(1)
Unless otherwise specified, the Operating PartnershipCompany has a 100% ownership interest in each Property.community.
(2)
For apartment communities, occupancy rates are based on financial occupancy for the year ended December 31, 2007;2015; for the officecommercial buildings recreational vehicle parks, manufactured housing communities or properties which have not yet stabilized or have insufficient operating history, occupancy rates are based on physical occupancy as of December 31, 2007.2015. For an explanation of how financial occupancy and physical occupancy are calculated, see “Properties-Occupancy Rates” in this Item 2.
(3)The Operating Partnership has a 30% special limited partnership interest in the entity that owns this apartment community. This investment was made under arrangements whereby the Essex Management Corporation (“EMC”) became the general partner and the existing partners were granted the right to require the applicable partnership to redeem their interest for cash. Subject to certain conditions, the Operating Partnership may, however, elect to deliver an equivalent number of shares of the Company’s common stock in satisfaction of the applicable partnership's cash redemption obligation.
(4)
(3)
The community is subject to a ground lease, which, unless extended, will expire in 2082.
(5)  This community is owned by Fund II. The Operating Partnership has a 28.2% interest in Fund II which is accounted for using the equity method of accounting.
(6)  
(4)
The Operating PartnershipCompany holds a 1% special limited partner interest in the partnerships which own these apartment communities. These investments were made under arrangements whereby EMCEssex Management Company became the 1% sole general partner and the other limited partners were granted the right to require the applicable partnership to redeem their interest for cash. Subject to certain conditions, the Operating PartnershipCompany may, however, elect to deliver an equivalent number of shares of the Company’s common stock in satisfaction of the applicable partnership’s cash redemption obligation.
(7)  In 2002
(5)
This community is owned by Wesco III. The Company has a 50% interest in Wesco III which is accounted for using the Operating Partnership purchased an additional 21 units adjacent to this apartment community for $3 million. This property was built in 1992.equity method of accounting.
(8)  
(6)
This community is owned by Wesco I. The Operating Partnership completedCompany has a $1.6 million redevelopment50% interest in 2000.Wesco I which is accounted for using the equity method of accounting.
(9)  The Operating Partnership completed a $2.3 million redevelopment in 2000.
(10)  The Operating Partnership is in the process of performing a $10.7 million redevelopment.
(7)
(11)  The Operating Partnership completed a $6.2 million redevelopment in 2007.  .
(12)  This community is subject to a ground lease, which, unless extended, will expire in 2067.
(13)  Fund II is in the process of performing a $5.0 million redevelopment.
(14)  During the third quarter of 2007, the Operating Partnership acquired full ownership by purchasing the general contractor's interest for $9 million.
(8)
(15)  The Operating Partnership is in the process of performing a $6.1 million redevelopment.
(16)  The Operating Partnership completed an $11.0 million redevelopment in 2001.
(17)  The Operating Partnership completed an additional $3.6 million redevelopment in 2005.
(18)  This community is subject to a ground lease, which, unless extended, will expire in 2027.
(19)  
(9)
The Operating Partnership completedCompany has a $3.2 million redevelopment97% interest and an Executive Vice President of the Company has a 3% interest in 2002.this community.
(20)  
(10)
The Operating Partnership completedCompany has a $1.9 million redevelopment in 2000.75% member interest.
(21)  The Operating Partnership completed a $1.9 million redevelopment in 2001.
(22)  The Operating Partnership completed a $1.7 million redevelopment in 2001.
(23)  The Operating Partnership is in the process of performing a $16.1 million redevelopment.
(24)  
The Operating Partnership had an 85% controlling limited partnership interest as of December 31, 2006, and during January 2007 the Operating Partnership acquired the remaining 15% partnership interest.(11)
(25)  The Operating Partnership and EMC have a 74.0% and 1% member interests, respectively.
(26)  The Operating Partnership completed a $3.5 million redevelopment in 2002.
(27)  The community is subject to a ground lease, which, unless extended, will expire in 2028.
(28)  The Operating Partnership
(12)
This community is in the process of performing a $14.1 million redevelopment.
(29)  The Operating Partnership completed a $2.7 million redevelopment in 2001.
(30)  The Operating Partnership completed a $4.5 million redevelopment in 1998.
(31)  The Operating Partnership is in the process of performing an $8.4 million redevelopment.
(32)  The Operating Partnership had a preferred limited partnership interest. In March 2007, the Operating Partnership sold part of its limited partnership interest, and in January 2008, the Operating Partnership sold its remaining interest.
(33)  The Operating Partnership is in the process of performing a $9.4 million redevelopment.
(34)  The Operating Partnership is in the process of performing a $4.6 million redevelopment
(35)  Fund II is in the process of performing a $4.5 million redevelopment.
(36)  The community was subject to a ground lease, which, unless extended, wouldwill expire in 2047.  In the second quarter of 2007, the Operating Partnership entered into a joint venture partnership with a third-party, and the Operating Partnership contributed the improvements for an 81.5% interest and the joint venture partner contributed the title to the land for an 18.5% interest in the partnership.2030.
23
(37)  
(13)
The Operating Partnership completed construction of 114 units of the 462 total unitscommunity is being developed in 2000.three phases with one remaining phase currently under development.
(38)  The Operating Partnership completed a $3.4 million redevelopment in 2002.
(39)  
(14)
A portion of this community on which 84 unitsapartment homes are presently located is subject to a ground lease, which, unless extended, will expire in 2028.

29

(40)  The Operating Partnership is in the process of performing a $9.9 million redevelopment.
(41)  
(15)
The community is subject to a ground lease, which, unless extended, will expire in 2070.
(42)  
(16)
The Operating PartnershipCompany has 50% ownership in each of these communities which is inaccounted for using the processequity method of performing a $15.1 million redevelopment.accounting.
(43)  
(17)
The Operating Partnership isCompany has 99% ownership in the process of performing a joint $30.6 million redevelopment at these communities.this community.
(44)  The Operating Partnership is in
(18)
This property was the process of performing a $7.0 million redevelopmentCompany's previous headquarters until December 2015 and was unoccupied at December 31, 2015.
(45)  The Operating Partnership is in the process of performing a $3.9 million redevelopment.
(46)  The Operating Partnership is in the process of performing a $5.1 million redevelopment and completed construction of 16 units of the community’s 108 units in 2006.  Operations were restabilized in the second quarter of 2006.
(19)
(47)  The property is leased through January 2016 to a single tenant on a short-term basis, and is included in the Operating Partnership’s predevelopment pipeline.tenant.
(48)  
(20)
The Operating PartnershipCompany occupies 100%8% of space in this property.
(49)  
(21)
This community is owned by BEXAEW.  The Company has a 50% interest in BEXAEW which is accounted for using the equity method of accounting.
(22)
This community is owned by Wesco IV. The Company has a 50% interest in Wesco IV which is accounted for using the equity method of accounting.
(23)
The property is currently vacant and under a $2.0 million redevelopment. The Operating Partnership expects to occupy 100% of this property upon completion of the redevelopment in approximately the third quarter of 2008.
(50)  The Operating PartnershipCompany has a mortgage receivable, and consolidates55% ownership in this property in accordance with GAAP. The Operating Partnership occupies 4.6%community which is accounted for using the equity method of this property.accounting. 
(51)  The Operating Partnership occupies 30% of this property.
(52)  The Operating Partnership leased these three properties in 2003 to an unrelated third party for approximately 5 years with an option to purchase the property in approximately 2008.

Item 3. Legal Proceedings

Recently there has been an increasing numberThe information, which regards lawsuits, other proceedings and claims, set forth in Note 16, “Commitments and Contingencies”, of lawsuits against owners and managersour notes to consolidated financial statements included in Part IV, Item 15 of apartment communities alleging personal injury and property damage causedthis Annual Report on Form 10-K is incorporated by reference into this Item 3. In addition to such matters referred to in Note 16, the presenceCompany is subject to various other legal and/or regulatory proceedings arising in the course of moldits business operations. We believe that, with respect to such matters that we are currently a party to, the ultimate disposition of any such matter will not result in residential real estate.  Some of these lawsuits have resulted in substantial monetary judgments or settlements.  The Operating Partnership has been sued for mold related matters and has settled some, but not all, of such matters.  Insurance carriers have reacted to mold related liability awards by excluding mold related claims from standard policies and pricing mold endorsements at prohibitively high rates.  The Operating Partnership has, however, purchased pollution liability insurance, which includes some coverage for mold.  The Operating Partnership has adopted programs designed to manage the existence of mold in its properties as well as guidelines for promptly addressing and resolving reports of mold to minimize any impact mold might have on residents or property.  Liabilities resulting from such mold related matters are not expected to have a material adverse effect on the Operating Partnership’s financial condition, results of operations or cash flows.
The Operating Partnership carries comprehensive liability, fire, extended coverage and rental loss insurance for each of the Properties. There are, however, certain types of extraordinary losses, such as, for example, losses for terrorism or earthquake, for which the Operating Partnership does not have insurance coverage. Substantially all of the Properties are located in areas that are subject to earthquake activity.
The Operating Partnership is subject to various other lawsuits in the normal course of its business operations.  Such lawsuits are not expected to have a material adverse effect on the Operating Partnership’sCompany’s financial condition, results of operations or cash flows.

Item 4. Submission of Matters to a Vote of Security HoldersMine Safety Disclosures

During the fourth quarter of 2007, no matters were submitted to a vote of security holders.Not Applicable.

24
Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 
Market Information
The shares of the Company’s common stock are traded on the New York Stock Exchange (“NYSE”) under the symbol ESS.  ESS common stock has been traded on the NYSE since June 13, 1994. The high, low and closing price per share of common stock reported on the NYSE for the quarters indicated are as follows:
Quarter Ended High Low Close
December 31, 2015 $244.71
 $214.29
 $239.41
September 30, 2015 $232.20
 $205.72
 $223.42
June 30, 2015 $231.90
 $208.85
 $212.50
March 31, 2015 $243.17
 $207.26
 $229.90
December 31, 2014 $214.43
 $176.70
 $206.60
September 30, 2014 $196.08
 $177.68
 $178.75
June 30, 2014 $185.99
 $164.76
 $184.91
March 31, 2014 $173.01
 $141.79
 $170.05

The closing price of ESS stock as of February 22, 2016 was $209.53.
There is no established public trading market for Essex Portfolio, L.P.’s OP Units.
Holders
The approximate number of holders of record of the shares of ESS common stock was 1,395 as of February 22, 2016. This number does not include stockholders whose shares are held in investment accounts by other entities. ESS believes the actual number of stockholders is greater than the number of holders of record.

30

As of February 22, 2016, there were 172 holders of record of Essex Portfolio, L.P.’s OP Units, including ESS.
Return of Capital
Under provisions of the Internal Revenue Code of 1986, as amended, the portion of the cash dividend, if any, that exceeds earnings and profits is considered a return of capital. The return of capital is generated due to a variety of factors, including the deduction of non-cash expenses, primarily depreciation, in the determination of earnings and profits.

The status of the cash dividends distributed for the years ended December 31, 2015, 2014, and 2013 related to common stock, and Series G and H preferred stock for tax purposes are as follows:
  2015 2014 2013
Common Stock      
Ordinary income 99.28% 70.03% 77.34%
Capital gain 0.72% 21.95% 17.64%
Unrecaptured section 1250 capital gain —% 8.02% 5.02%
  100.00% 100.00% 100.00%
       
  2015 2014 2013
Series G, and H Preferred stock  
  
  
Ordinary income 99.28% 70.03% 77.34%
Capital gains 0.72% 21.95% 17.64%
Unrecaptured section 1250 capital gain —% 8.02% 5.02%
  100.00% 100.00% 100.00%

Dividends and Distributions
Since ESS’s initial public offering on June 13, 1994, ESS and the Operating Partnership have paid regular quarterly dividends/distributions to its stockholders and unitholders. ESS paid the following dividends per share of common stock and the Operating Partnership paid the following distributions per limited partner OP unit:
Year Ended Annual Dividend/Distribution Quarter Ended 2015 2014 2013
1995 $1.69
 March 31, $1.44 $1.21 $1.21
1996 $1.72
 June 30, $1.44 $1.30 $1.21
1997 $1.77
 September 30, $1.44 $1.30 $1.21
1998 $1.95
 December 31, $1.44 $1.30 $1.21
1999 $2.15
        
2000 $2.38
 Annual Dividend/Distribution $5.76 $5.11 $4.84
2001 $2.80
        
2002 $3.08
        
2003 $3.12
        
2004 $3.16
        
2005 $3.24
        
2006 $3.36
        
2007 $3.72
        
2008 $4.08
        
2009 $4.12
        
2010 $4.13
        
2011 $4.16
        
2012 $4.40
        

31


Future dividends/distributions by ESS and the Operating Partnership will be at the discretion of the Board of Directors of ESS and will depend on the actual cash flows from operations of the Company, its financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code, applicable legal restrictions and such other factors as the Board of Directors deem relevant. There are currently no contractual restrictions on ESS and the Operating Partnership present or future ability to pay dividends and distributions.
The Board of Directors has declared a dividend/distribution for the first quarter of 2016 of $1.60 per share.  The dividend/distribution will be payable on April 15, 2016 to shareholders/unitholders of record as of March 31, 2016.
Dividend Reinvestment and Share Purchase Plan

ESS has adopted a dividend reinvestment and share purchase plan designed to provide holders of common stock with a convenient and economical means to reinvest all or a portion of their cash dividends in shares of common stock and to acquire additional shares of common stock through voluntary purchases. Computershare, LLC, which serves as ESS transfer agent, administers the dividend reinvestment and share purchase plan. For a copy of the plan, contact Computershare, LLC at (312) 360-5354.

Securities Authorized for Issuance under Equity Compensation Plans

See ourthe Company’s disclosure in the 20072016 Proxy Statement under the heading “Equity Compensation Plan Information”, which disclosure is incorporated herein by reference.

Issuance of Registered Equity Securities

During the second quarter of 2007 the Company2015, ESS sold 1,670,5001,481,737 shares of common stock for proceeds of $213.7$332.3 million, net of underwriter feescommissions, at an average price of $226.46. Common stock sales were made pursuant to a registration statement and expenses.  The Operating PartnershipESS used the net proceeds from the stock offerings to pay down outstanding borrowings under the Operating Partnership’s lines of credit and todebt, fund acquisitionredevelopment and development projects.pipelines, fund acquisitions, and for general corporate purposes. During the first quarter of 2016 through February 22, 2016, ESS has not issued any shares of common stock.

Issuer Purchases of Equity Securities

In August 2007, the Company’sDecember 2015, ESS Board of Directors authorized a stock repurchase plan to allow the CompanyESS to acquire shares in an aggregate of up to $200$250 million. The program supersedes the common stock repurchase plan that Essex announced on May 16, 2001.  During 2007August 30, 2007. Under the Companyprevious stock repurchase plan, ESS repurchased and retired 323,259816,659 shares of its common stock for approximately $32.6 million.  During January 2008, the Company repurchased and retired 137,500 shares of its common stock for approximately $13.2 million.  Since the Company announced the inception of the stock repurchase plan, the Company has repurchased and retired 460,759 shares for $45.8totaling $66.6 million at an average stock price of $99.40$81.56 per share, including commissions.

Performance Graph

The line graph below compares the cumulative total stockholder return on ESS common stock for the last five years with the cumulative total return on the S&P 500 and the NAREIT All Equity REIT index over the same period.  This comparison assumes that the value of the investment in the common stock and each index was $100 on December 31, 2010 and that all dividends were reinvested (1).


32


  Period Ending
Index 12/31/2010
 12/31/2011
 12/31/2012
 12/31/2013
 12/31/2014
 12/31/2015
Essex Property Trust, Inc. 100.00
 127.06
 136.59
 138.04
 204.30
 242.85
NAREIT All Equity REIT Index 100.00
 108.28
 129.62
 133.32
 170.68
 175.51
S&P 500 100.00
 102.11
 118.45
 156.82
 178.28
 180.75
(1)
Common stock performance data is provided by SNL Financial.

The graph and other information furnished under the above caption “Performance Graph” in this Part II Item 5 of this Form 10-K shall not deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of the Exchange Act, as amended.
 
Unregistered SaleSales of Equity Securities and Use of Proceeds

During September 2007,the years ended December 31, 2015 and 2014, the Operating Partnership acquired the Thomas Jefferson apartments in Sunnyvale, California, by acquiring ownership interests in the two limited partnerships that collectively owned the property.  In connection with this acquisition, the limited partnerships were restructured to provide for limitedissued partnership units or DownREIT units, that are redeemable for cash, or at the Operating Partnership's sole discretion, cash or shares of the common stock of the Company.  A total of 62,873 such units were issued.   The issuance of such units was pursuant toin private placements in reliance on the exemption from registration set forth inprovided by Section 4(2) of the Securities Act, in the amounts and for the consideration set forth below:
During the year ended December 31, 2015 and 2014, ESS issued an aggregate of 1933,203,556 and 185,387 shares of its common stock upon the exercise of stock options, respectively. ESS contributed the proceeds from the option exercises of $26.5 million and $11.0 million to our Operating Partnership in exchange for an aggregate of 203,556 and 185,387 common OP Units, as amended.required by the Operating Partnership’s partnership agreement, respectively.
During the year ended December 31, 2015 and 2014, ESS issued an aggregate of 22,939 and 126,931 shares of its common stock in connection with restricted stock awards for no cash consideration, respectively. For each share of common stock issued

33

by ESS in connection with such awards, our Operating Partnership issued common OP units to ESS as required by the partnership agreement, for an aggregate of 22,939 and 126,931 units during the year ended December 31, 2015 and 2014, respectively.

During the years ended December 31, 2015 and 2014, ESS issued and sold an aggregate of 1,481,737 and 2,964,315 shares of its common stock, respectively, pursuant to a registration statement and its equity distribution program. ESS contributed the net proceeds from these share issuances of $332.3 million and $534.0 million in exchange for an aggregate of 1,481,737 and 2,964,315 common OP Units, respectively, as required by the Operating Partnership's partnership agreement.
Item 6. Selected Financial Data
 
The following tables set forth summary financial and operating information for the ESS and the Operating Partnership from January 1, 20032011 through December 31, 2007.2015.

         Years Ended December 31,
   2007  
2006(1)
2005(1)
2004(1)
2003(1)
       (In thousands, except  per unit amounts)
OPERATING DATA:               
REVENUES               
   Rental and other property $383,433 $334,770 $303,235 $266,722 $233,800
   Management and other fees from affiliates  5,090  5,030  10,951  23,146  6,027
   388,523  339,800  314,186  289,868  239,827
EXPENSES               
   Property operating expenses, excluding depreciation               
     and amortization  128,424  114,398  104,479  93,666  77,307
   Depreciation and amortization  100,389  78,094  74,849  66,414  51,814
   Amortization of deferred financing costs  3,071  2,745  1,947  1,560  1,187
   General and administrative  26,273  22,234  19,148  18,042  9,549
   Interest  80,995  72,898  70,784  60,709  49,985
   Other expenses  800  1,770  5,827               -                -
   339,952  292,139  277,034  240,391  189,842
   Earnings from operations  48,571  47,661  37,152  49,477  49,985
                
   Gain on the sales of real estate              -              -         6,391        7,909              -
   Interest and other income       10,310         6,176         8,524        3,077           668
   Equity income (loss) in co-investments         3,120       (1,503)       18,553      40,683        2,349
   Minority interests       (4,847)       (4,977)       (5,340)      (4,550)       (4,696)
   Income from continuing operations before income tax provision  57,154  47,357  65,280  96,596  48,306
   Income tax provision          (400)          (525)       (2,538)         (257)              -
   Income from continuing operations  56,754  46,832  62,742  96,339  48,306
                
   Income from discontinued operations (net of minority interests  80,546  33,015  35,558  7,469  8,660
Net income  137,300  79,847  98,300  103,808  56,966
Write off of Series C preferred units offering costs              -              -              -             -          (625)
Write off of Series E preferred units offering costs              -              -              -      (1,575)              -
Amortization of discount on Series F preferred equity              -              -              -             -          (336)
Distributions on preferred units - Series F & G       (9,174)       (5,145)       (1,953)      (1,952)          (195)
Distributions on preferred units - limited partners     (10,238)     (10,238)     (10,238)    (14,175)     (17,996)
Net income available to common units $   117,888  $     64,464  $     86,109  $    86,106  $    37,814
Per unit data:               
  Basic:               
    Net income from continuing operations available to      
      common units $1.38 $1.23 $2.00 $3.11 $1.23
    Net income available to common units $4.36 $2.52 $3.40 $3.41 $1.59
    Weighted average common units outstanding  27,044  25,560  25,344  25,255  23,737
  Diluted:               
    Net income from continuing operations available to      
      common units $1.35 $1.21 $1.97 $3.09 $1.22
    Net income available to common units $4.27 $2.48 $3.35 $3.38 $1.58
    Weighted average common units outstanding  27,597  26,030  25,694  25,490  23,948
Cash dividend per common unit $3.72 $3.36 $3.24 $3.16 $3.12
26
Essex Property Trust, Inc. and Subsidiaries
   As of December 31,
   2007  
2006(1)
2005(1)
2004(1)
2003(1)
BALANCE SHEET DATA:                
   Investment in rental properties (before accumulated                
     depreciation) $3,117,759 $2,669,187 $2,431,629 $2,371,194 $1,984,122 
   Net investment in rental proerties  2,575,772  2,204,172  2,042,589  2,041,542  1,718,359 
   Real estate under development  233,445  107,620  54,416  38,320  55,183 
   Total assets  2,980,323  2,485,840  2,239,290  2,217,217  1,916,811 
   Total secured indebtedness  1,362,873  1,186,554  1,129,918  1,161,184  976,545 
   Total unsecured indebtedness  294,818  225,000  225,000  155,800  12,500 
   Cumulative convertible preferred equity  145,912  145,912                -  -             -                - 
   Cumulative redeemable preferred equity  24,412  24,412  24,412  24,412  24,412 
   Partners' capital (less redeemable preferred equity)  972,769  774,217  737,497  752,991  787,396 
                 
                 
   As of and for the years ended December 31,
   2007  
2006(1)
2005(1)
2004(1)
2003(1)
OTHER DATA:                
Interest coverage ratio(2)
  3.0X2.8X2.7X3.0X3.1X
Same-property gross operating margin(3)(4)
  67%  67%  66%  65%  66% 
Average same-property monthly rental rate per                
  apartment unit(4)(5)
 $1,314 $1,225 $1,149 $1,055 $1,088 
Average same-property monthly operating expenses                
  per apartment unit(4)(6)
 $437 $421 $395 $331 $325 
Total apartment units (at end of period)  27,489  27,553  26,587  25,518  26,012 
Same-property occupancy rate(7)
  96%  96%  97%  96%  96% 
Total Properties (at end of period)  134  130  126  131  132 
  Years Ended December 31,
  2015 2014 2013 2012 2011
  ($ in thousands, except per share amounts)
OPERATING DATA:(1)
          
Rental and other property $1,185,498
 $961,591
 $603,327
 $527,945
 $461,866
Management and other fees from affiliates 8,909
 9,347
 7,263
 8,457
 5,428
           
Income before discontinued operations $248,239
 $134,438
 $140,882
 $127,653
 $46,958
Income from discontinued operations —
 —
 31,173
 11,937
 10,558
Net income 248,239
 134,438
 172,055
 139,590
 57,516
Net income available to common stockholders $226,865
 $116,859
 $150,811
 $119,812
 $40,368
Per share data:  
  
  
  
  
Basic:  
  
  
  
  
Income before discontinued operations available to common stockholders $3.50
 $2.07
 $3.26
 $3.10
 $0.94
Net income available to common stockholders $3.50
 $2.07
 $4.05
 $3.42
 $1.24
Weighted average common stock outstanding 64,872
 56,547
 37,249
 35,032
 32,542
Diluted:  
  
  
  
  
Income before discontinued operations available to common stockholders $3.49
 $2.06
 $3.25
 $3.09
 $0.94
Net income available to common stockholders $3.49
 $2.06
 $4.04
 $3.41
 $1.24
Weighted average common stock outstanding 65,062
 56,697
 37,335
 35,125
 32,629
Cash dividend per common share $5.76
 $5.11
 $4.84
 $4.40
 $4.16

(1)
Reclassifications have been made in prior periods to conform to the current year’s presentation.

34

  As of December 31,
  2015 2014 2013 2012 2011
  ($ in thousands)
BALANCE SHEET DATA:(1)
          
Investment in rental properties (before accumulated depreciation) $12,331,469
 $11,244,681
 $5,443,757
 $5,033,672
 $4,313,064
Net investment in rental properties 10,381,577
 9,679,875
 4,188,871
 3,952,155
 3,393,038
Real estate under development 242,326
 429,096
 50,430
 66,851
 44,280
Co-investments 1,036,047
 1,042,423
 677,133
 571,345
 383,412
Total assets 12,005,091
 11,526,732
 5,162,320
 4,826,356
 4,019,519
Total indebtedness 5,315,464
 5,080,689
 3,009,005
 2,797,816
 2,343,413
Redeemable noncontrolling interest 45,452
 23,256
 —
 —
 —
Cumulative convertible preferred stock —
 —
 4,349
 4,349
 4,349
Cumulative redeemable preferred stock 73,750
 73,750
 73,750
 73,750
 73,750
Stockholders' equity 6,237,733
 6,022,672
 1,884,619
 1,764,804
 1,437,527

(1)
Reclassifications have been made in prior periods to conform to the current year’s presentation. Additionally, due to measurement adjustments related to the BRE merger in 2014, certain amounts do not agree to previously reported balances.


35

  As of and for the years ended December 31,
  2015 2014 2013 2012 2011
  ($ in thousands, except per share amounts)
OTHER DATA:  
Funds from operations (FFO)(1) attributable to common stockholders and unitholders:
          
Net income available to common stockholders $226,865
 $116,859
 $150,811
 $119,812
 $40,368
Adjustments:  
  
  
  
  
Depreciation and amortization 453,423
 360,592
 193,518
 170,686
 152,543
Gains not included in FFO attributable to common stockholders and unitholders (81,347) (50,064) (67,975) (60,842) (7,543)
Depreciation add back from unconsolidated co-investments 49,826
 33,975
 15,748
 14,467
 12,642
Noncontrolling interest related to Operating Partnership units 7,824
 4,911
 8,938
 7,950
 3,228
Insurance reimbursements (1,751) —
 —
 —
 —
Depreciation attributable to third party ownership and other (781) (1,331) (1,309) (1,223) (1,066)
Funds from operations attributable to common stockholders and unitholders $654,059
 $464,942
 $299,731
 $250,850
 $200,172
Non-core items:  
  
  
  
  
Merger and integration expenses 3,798
 53,530
 4,284
 —
 —
Acquisition and investment related costs 2,414
 1,878
 1,161
 2,255
 1,231
Gain on sale of marketable securities, note prepayment, and other investments (598) (886) (2,519) (819) (4,956)
Gain on sale of co-investments —
 —
 —
 —
 (919)
Gain on sale of land —
 (2,533) (1,503) —
 (180)
Loss on early retirement of debt 6,114
 268
 300
 5,009
 1,163
Co-investment promote income (192) (10,640) —
 (2,299) —
Income from early redemption of preferred equity investments (1,954) (5,250) (1,358) —
 —
Insurance reimbursements (2,319) —
 —
 —
 —
Other non-core items, net (2)
 (651) 1,852
 —
 —
 268
Core funds from operations (Core FFO) attributable to common stockholders and unitholders $660,671
 $503,161
 $300,096
 $254,996
 $196,779
Weighted average number of shares outstanding, diluted (FFO)(3)
 67,310
 58,921
 39,501
 37,378
 34,861
Funds from operations attributable to common stockholders and unitholders
 per share - diluted
 $9.72
 $7.89
 $7.59
 $6.71
 $5.74
Core funds from operations attributable to common stockholders and unitholders
 per share - diluted
 $9.82
 $8.54
 $7.60
 $6.82
 $5.64

(1)
FFO is a financial measure that is commonly used in the REIT industry. The Company presents funds from operations as a supplemental operating performance measure. FFO is not used by the Company, nor should it be considered to be, as an alternative to net earnings computed under GAAP as an indicator of the Company’s operating performance or as an alternative to cash from operating activities computed under GAAP as an indicator of the Company's ability to fund its cash needs.

FFO is not meant to represent a comprehensive system of financial reporting and does not present, nor does it intend to present, a complete picture of the Company's financial condition and operating performance. The Company believes that net earnings computed under GAAP remain the primary measure of performance and that FFO is only meaningful when it is used in conjunction with net earnings. The Company considers FFO and FFO excluding non-routine items (referred to as

36

“Core FFO”) to be useful financial performance measurements of an equity REIT because, together with net income and cash flows, FFO provides investors with an additional basis to evaluate operating performance and ability of a REIT to incur and service debt and to fund acquisitions and other capital expenditures and its ability to pay dividends.  Further, the Company believes that its consolidated financial statements, prepared in accordance with GAAP, provide the most meaningful picture of its financial condition and its operating performance.
 
   Years Ended December 31,
   2007  
2006(1)
2005(1)
2004(1)
2003(1)
   
  (Dollars in thousands)
RECONCILIATION OF NET INCOME TO          
   ADJUSTED EBITDA (2):
                
Net income $137,300 $79,847 $98,300 $103,808 $56,966 
Interest expense  80,995  72,898  70,784  60,709  49,985 
Tax expense  400  525  2,538  257                - 
Depreciation and amortization  100,389  78,094  74,849  66,414  51,814 
Amortization of deferred financing costs  3,071  2,745  1,947  1,560  1,187 
Gain on the sales of real estate                -                -  (6,391)      (7,909)                - 
Gain on the sales of co-investment activities, net       (2,046)                -     (18,116)    (39,242)                - 
Minority interests  4,847  4,977  5,340  4,550  4,696 
Income from discontinued operations (net of minority interest)  (80,546)  (33,015)  (35,558)  (7,469)  (8,660) 
Adjusted EBITDA(2)
  244,410  206,071  193,693  182,678  155,988 
Interest expense  80,995  72,898  70,784  60,709  49,985 
Interest coverage ratio(2)
  3.0X2.8X2.7X3.0X3.1X
In calculating FFO, the Company follows the definition for this measure published by the National Association of Real Estate Investment Trusts (“NAREIT”), which is a REIT trade association. The Company believes that, under the NAREIT FFO definition, the three most significant adjustments made to net income are (i) the exclusion of historical cost depreciation, (ii) the exclusion of gains and losses from the sale of previously depreciated properties and (iii) the exclusion of impairment losses on depreciated properties. Essex agrees that these three NAREIT adjustments are useful to investors for the following reasons:
 
(1)  The above financial and operating information from January 1
(a)historical cost accounting for real estate assets in accordance with GAAP assumes, through December 31, 2003 reflectdepreciation charges, that the retroactive adoption of FIN 46R and SFAS No. 123.  The results of operations for 2006, 2005, 2004 and 2003 have been reclassified to reflect discontinued operations for properties sold subsequent to December 31, 2006.
(2)  Interest coverage ratio represents earnings before minority interests, gain on salesvalue of real estate interest expense, taxes,assets diminishes predictably over time. NAREIT stated in its White Paper on Funds from Operations “since real estate asset values have historically risen or fallen with market conditions, many industry investors have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves.” Consequently, NAREIT’s definition of FFO reflects the fact that real estate, as an asset class, generally appreciates over time and depreciation and amortization (“adjusted EBITDA”) dividedcharges required by interest expense.  The Operating Partnership believesGAAP do not reflect the underlying economic realities.
(b)REITs were created as a legal form of organization in order to encourage public ownership of real estate as an asset class through investment in firms that the interest coverage ratio is useful to readers because it is frequently used by investors, lenders, security analysts and other interested partieswere in the evaluationbusiness of companieslong-term ownership and management of real estate.  The exclusion, in our industry.  In addition,NAREIT’s definition of FFO, of gains from the Operating Partnership believes that this ratio is useful in evaluating our performance comparedsales and impairment losses of previously depreciated operating real estate assets allows investors and analysts to that of other companies in our industry becausereadily identify the calculationoperating results of the adjusted EBITDA componentlong-term assets that form the core of the interest coverage ratio generally eliminates the effects of financing costs, income taxes,a REIT’s activity and depreciation and amortization, which items may vary for different companies for reasons unrelated toassists in comparing those operating performance.results between periods.

27
The adjusted EBITDA componentManagement has consistently applied the NAREIT definition of FFO to all periods presented. However, other REITs in calculating FFO may vary from the interest coverage ratio, however, is not a recognized measurement under U.S. generally accepted accounting principles, or GAAP.  When analyzing our operating performance, readers should use the interest coverage ratioNAREIT definition for this measure, and its adjusted EBITDA component in addition to, and not as an alternative for, net income, as determined in accordance with GAAP.  Because not all companies use identical calculations, our presentationthus their disclosure of the interest coverage ratio and its adjusted EBITDA componentFFO may not be comparable to similarly titled measures of other companies.  Furthermore, the interest coverage ratio is not intended to be a measure of free cash flow for our management’s discretionary use, as it does not consider certain cash requirements such as income tax payments, debt service requirements, capital expenditures and other fixed charges.  The amounts shown for the interest coverage ratio and adjusted EBITDA may also differ from the amounts calculated under similarly titled definitions in our debt instruments, which can be further adjusted to reflect certain other cash and non-cash charges and are used to determine compliance with financial covenants and our ability to engage in certain activities such as incurring additional debt and making certain restricted payments.Company’s calculation.

         (3)Gross operating margin represents rental revenues
(2)
Other items, net are non-recurring in nature and other property income less property operating expenses, exclusive of depreciationinclude items such as gains on non-operating assets and amortization, divided by rental revenues and other property income.tax related items.
         (4)A stabilized apartment community, or “Same-Property” apartment
(3)
Assumes conversion of all dilutive outstanding operating partnership interests in the Operating Partnership and excludes 744,346 DownREIT units (as defined in Item 7), are those units in properties thatfor which the Operating Partnership has consolidatedthe ability and intention to redeem the DownREIT limited partnership units for cash and does not consider them to be common stock equivalents.


37

Essex Portfolio, L.P. and Subsidiaries
  Years Ended December 31,
  2015 2014 2013 2012 2011
  ($ in thousands, except per unit amounts)
OPERATING DATA:(1)
          
Rental and other property $1,185,498
 $961,591
 $603,327
 $527,945
 $461,866
Management and other fees from affiliates 8,909
 9,347
 7,263
 8,457
 5,428
           
Income before discontinued operations $248,239
 $134,438
 $140,882
 $127,653
 $46,958
Income from discontinued operations —
 —
 31,173
 11,937
 10,558
Net income 248,239
 134,438
 172,055
 139,590
 57,516
Net income available to common unitholders $234,689
 $121,726
 $159,749
 $127,771
 $43,593
Per unit data:  
  
  
  
  
Basic:  
  
  
  
  
Income before discontinued operations available to common unitholders $3.50
 $2.07
 $3.27
 $3.11
 $0.95
Net income available to common unitholders $3.50
 $2.07
 $4.06
 $3.43
 $1.25
Weighted average common units outstanding 67,054
 58,772
 39,380
 37,252
 34,774
Diluted:  
  
  
  
  
Income before discontinued operations available to common unitholders $3.49
 $2.07
 $3.26
 $3.10
 $0.95
Net income available to common unitholders $3.49
 $2.07
 $4.05
 $3.42
 $1.25
Weighted average common units outstanding 67,244
 58,921
 39,467
 37,344
 34,861
Cash distributions per common unit $5.76
 $5.11
 $4.84
 $4.40
 $4.16
(1)
Reclassifications have been made in prior periods to conform to the entire two years as ofcurrent year’s presentation.

  As of December 31,
  2015 2014 2013 2012 2011
  ($ in thousands)
BALANCE SHEET DATA:(1)
          
Investment in rental properties (before accumulated depreciation) $12,331,469
 $11,244,681
 $5,443,757
 $5,033,672
 $4,313,064
Net investment in rental properties 10,381,577
 9,679,875
 4,188,871
 3,952,155
 3,393,038
Real estate under development 242,326
 429,096
 50,430
 66,851
 44,280
Co-investments 1,036,047
 1,042,423
 677,133
 571,345
 383,412
Total assets 12,005,091
 11,526,732
 5,162,320
 4,826,356
 4,019,519
Total indebtedness 5,315,464
 5,080,689
 3,009,005
 2,797,816
 2,343,413
Redeemable noncontrolling interest 45,452
 23,256
 —
 —
 —
Cumulative convertible preferred interest —
 —
 4,349
 4,349
 4,349
Cumulative redeemable preferred interest 71,209
 71,209
 71,209
 71,209
 71,209
Partners' capital 6,287,381
 6,073,433
 1,932,108
 1,811,427
 1,486,914

(1)
Reclassifications have been made in prior periods to conform to the end ofcurrent year’s presentation. Additionally, due to measurement adjustments related to the period set forth. The number of apartment unitsBRE merger in such properties may vary at each year-end. Percentage changes in averages per unit2014, certain amounts do not correspondagree to total Same-Property revenues and expense percentage changes which are discussed in Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations.previously reported balances.

(5) Average Same-Property monthly rental rate per apartment unit represents total scheduled rent for the same property apartment units for the period (actual rental rates on occupied apartment units plus market rental rates on vacant apartment units) divided by the number of such apartment units and further divided by the number of months in the period.
(6) Average Same-Property monthly expenses per apartment unit represents total monthly operating expenses, exclusive of depreciation and amortization, for the same property apartment units for the period divided by the total number of such apartment units and further divided by the number of months in the period.
(7) Occupancy rates are based on financial occupancy. For an explanation of how financial occupancy is calculated, see Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.
28
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the accompanying consolidated 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.
OVERVIEW

The Operating PartnershipESS is a self-administered and self-managed REIT that acquires, develops, redevelops and manages apartment communities in selected residential areas located primarily in the West Coast of the United States.  The Company is a self-administered and self-managed REIT thatESS owns all of its interests in its real properties,estate investments, directly or indirectly, through the Operating Partnership.  The CompanyESS is the sole general partner of the Operating Partnership and, as of December 31, 2007,2015, had an approximately 90.9%96.7% general partner interest in the Operating Partnership.

OurThe Company’s investment strategy has two components: constant monitoring of existing markets, and evaluation of new markets to identify areas with the characteristics that underlie rental growth. OurThe Company’s strong financial condition supports ourits investment strategy by enhancing ourits ability to quickly shift our acquisition, development, redevelopment, and disposition activities to markets that will optimize the performance of the portfolio.

As of December 31, 2007, we2015, the Company had ownership interests in 134246 communities, comprising 59,160 apartment homes.

The Company’s apartment communities comprising 27,489 apartment units.  Our apartment communities are predominately located in the following major West Coast regions:


Southern California (Los Angeles, Orange, Riverside, Santa Barbara, San Diego, and Ventura counties)
Northern California (the San Francisco Bay Area)
SeattleMetro (Seattle metropolitan area)
Other Region (Houston, Texas)

As of December 31, 2007, we also had ownership interests in six office buildings (with approximately 478,340 square feet), two recreational vehicle parks (comprising 338 spaces) and one manufactured housing community (containing 157 sites).

As of December 31, 2007, our consolidated2015, the Company’s development pipeline was comprised of threetwo consolidated projects under development, six unconsolidated joint venture projects fiveunder development and various consolidated predevelopment projects and five land parcels held for future development aggregating 2,776 units,2,447 apartment homes, with total incurred costs of $233.5 million,$0.7 billion, and estimated remaining project costs of approximately $537.1 million$0.8 billion for total estimated project costs of $770.6 million.$1.4 billion. 

As of December 31, 2015, the Company also had ownership interests in four commercial buildings (with approximately 319,079 square feet).

By region, the Operating Partnership'sCompany's operating results for 20072015 and rent2014 and projections for 2016 new housing supply (defined as new multi-family apartment homes and single family homes, excluding developments with fewer than 100 apartment homes as well as senior and student housing), job growth, analysis for 2008and rental income are as follows:

Southern California Region:  As of December 31, 2007,2015, this region represented 48%49% of ourthe Company’s consolidated apartment units. During the year ended December 31, 2007, Same-Propertyhomes.  Revenues for “2015/2014 Same-Properties” (as defined below), or “Same-Property revenues,” increased 4.4%6.0% in 2015 as compared to 2006.  The Operating Partnership expects in 20082014. In 2016, the Company projects new residential supply of 12,20030,300 apartment homes and single family homes, and 15,600 apartment units which represents a total new supply of 0.5% of existingthe total housing stock. The Operating Partnership expects this regionCompany assumes an increase of 168,050 jobs or 2.2%, and an increase in Same-Property revenues of between 5.25% to add 40,000 new jobs and generate market rent growth ranging from 1% to 3%6.25% in 2008.2016.
 
Northern California Region:  As of December 31, 2007,2015, this region represented 31%30% of ourthe Company’s consolidated apartment units.homes.  Same-Property revenues increased 9.4%10.5% in 20072015 as compared to 2006.  The Operating Partnership expects in 20082014.  In 2016, the Company projects new residential supply of 5,80018,300 apartment homes and single family homes, and 7,200 apartment units which represents a0.8% of the total new supply of 0.4% of existinghousing stock. The Operating Partnership expects this regionCompany assumes an increase of 95,300 jobs or 2.9%, and an increase in Same-Property revenues of between 8.50% to add 38,000 new jobs and generate market rent growth ranging from 5% to 7%9.50% in 2008.2016.
 
Seattle Metro Region: As of December 31, 2007,2015, this region represented 20%21% of ourthe Company’s consolidated apartment units.homes.  Same-Property revenues increase 11.0%increased 7.7% in 20072015 as compared to 2006.  The Operating Partnership expects in 20082014.  In 2016, the Company projects new residential supply of 8,00016,050 apartment homes and single family homes, and 4,500 apartment units which represents a1.3% of the total new supply of 1.2% of existinghousing stock. The Operating Partnership expects this regionCompany assumes an increase of 43,100 jobs or 2.7%, and an increase in Same-Property revenues of between 6.00% to add 28,000 new jobs and generate market rent growth ranging from 5% to 7%7.00% in 2008.2016.
Other Region: As of December 31, 2007, the remaining 1% of our units related to a community located in Houston, Texas.  During December 2007, the Operating Partnership sold four communities that were located in the Portland metropolitan region.
29

The Operating Partnership’sCompany projects 2016 Same-Property revenues to increase compared to 2015 results, as renewal and new leases are signed at higher rents in 2016 than 2015.  Same-Property operating expenses are expected to increase in 2016 by 3.25% to 4.25%.



38

The Company’s consolidated apartment communities are as follows:
 As of December 31, 2007 As of December 31, 2006
 Apartment Units% Apartment Units%
Southern California12,72552% 12,96555%
Northern California6,36126% 5,38923%
Seattle Metro5,00521% 4,90521%
Other Regions3021% 3021%
Total24,393100% 23,561100%
Joint venture properties
 As of As of
 December 31, 2015 December 31, 2014
 Apartment Homes % Apartment Homes %
Southern California23,707
 49% 22,168
 47%
Northern California14,694
 30% 14,789
 31%
Seattle Metro10,239
 21% 10,216
 21%
Arizona—
 —% 552
 1%
Total48,640
 100% 47,725
 100%

Co-investments, including Fund IIWesco I, LLC ("Wesco I"), Wesco III, LLC ("Wesco III"), Wesco IV, LLC (“Wesco IV”), Canadian Pension Plan Investment Board ("CPPIB" or "CPP"), Palm Valley and BEXAEW, LLC (“BEXAEW”) communities, developments under construction and communities sold in 2007 including City Heights and the four Portland metropolitanpreferred equity interest co-investment communities are not included in the consolidated apartment communities’ resultstable presented above for both periods presented in the table above.periods.

RESULTS OF OPERATIONS

Comparison of Year Ended December 31, 20072015 to the Year Ended December 31, 20062014

OurThe Company’s average financial occupancies for the Operating Partnership’sCompany’s stabilized apartment communities or “2007/2006“2015/2014 Same-Properties” (stabilized properties consolidated by the Operating PartnershipCompany for the years ended December 31, 20072015 and 2006) decreased 60 basis points to 95.9% for the year ended December 31, 2007 from 96.5% for the year ended December 31, 2006.2014) was unchanged at 96.2% in both 2015 and 2014.  Financial occupancy is defined as the percentage resulting from dividing actual rental revenue by total possiblepotential rental revenue.revenue (actual rental revenue for occupied apartment homes plus market rent for vacant apartment homes). Actual rental revenue represents contractual rental revenue pursuant to leases without considering delinquency and concessions. Total possiblepotential rental revenue represents the value of all apartment units,homes, with occupied unitsapartment homes valued at contractual rental rates pursuant to leases and vacant unitsapartment homes 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.

Market rates are determined using the recently signed effective rates on new leases at the property and are used as the starting point in the determination of the market rates of vacant apartment homes. The Company may increase or decrease these rates based on the supply and demand in the apartment community’s market. The Company will check the reasonableness of these rents based on its position within the market and compare the rents against the asking rents by comparable properties in the market. Financial occupancy may not completely reflect short-term trends in physical occupancy and financial occupancy rates as disclosed by other REITsand the Company's calculation of financial occupancy may not be comparable to ourfinancial occupancy as disclosed by other REITs.

The Company does not take into account delinquency and concessions to calculate actual rent for occupied apartment homes and market rents for vacant apartment homes. The calculation of financial occupancy compares contractual rates for occupied apartment homes to estimated market rents for unoccupied apartment homes, and thus the calculation compares the gross value of all apartment homes excluding delinquency and concessions. For apartment communities that are development properties in lease-up without stabilized occupancy figures, the Company believes the physical occupancy rate is the appropriate performance metric. While an apartment community is in the lease-up phase, the Company’s primary motivation is to stabilize the property which may entail the use of rent concessions and other incentives, and thus financial occupancy, which is based on contractual revenue is not considered the best metric to quantify occupancy.


39

The regional breakdown of the Operating Partnership’s 2007/2006Company’s 2015/2014 Same-Property portfolio for financial occupancy for the years ended December 31, 20072015 and 20062014 is as follows:

 Years ended
 December 31,
 2007 2006
Southern California95.6% 96.3%
Northern California96.8% 96.7%
Seattle Metro96.3% 96.8%
Other Regions92.5% 90.6%
 
Years ended
December 31,
 2015 2014
Southern California96.2% 96.3%
Northern California96.3% 96.2%
Seattle Metro96.2% 96.0%

The following table provides a breakdown of revenue amounts, including the revenues attributable to 2007/20062015/2014 Same-Properties.

     Years Ended      
                                                                                     Number of  December 31,  Dollar Percentage 
  Properties  2007  2006  Change Change 
Property Revenues (dollars in thousands)
              
   2007/2006 Same-Properties:              
       Southern California 56 $185,060 $177,336 $7,724 4.4%
       Northern California 16  60,024  54,887  5,137 9.4 
       Seattle Metro 22  56,427  50,852  5,575 11.0 
       Other Regions 1  2,015  1,980  35 1.8 
            Total 2007/2006 Same-Property revenues 95  303,526  285,055  18,471 6.5 
   2007/2006 Non-Same Property Revenues (1)    79,907  49,715  30,192 60.7 
          Total property revenues   $383,433 $334,770 $48,663 14.5%
  Number of 
Years Ended
December 31,
 Dollar Percentage
Property Revenues ($ in thousands)
 Properties 2015 2014 Change Change
2015/2014 Same-Properties: (1)
          
Southern California 58
 $283,435
 $267,413
 $16,022
 6.0%
Northern California 37
 250,478
 226,679
 $23,799
 10.5%
Seattle Metro 34
 124,143
 115,219
 8,924
 7.7%
Total 2015/2014 Same-Property revenues 129
 658,056
 609,311
 48,745
 8.0%
2015/2014 Non-Same Property Revenues  
 527,442
 352,280
 175,162
 49.7%
Total property revenues  
 $1,185,498
 $961,591
 $223,907
 23.3%
(1)  Includes twelve communities acquired after January 1, 2006, eleven redevelopment communities, three office buildings and one development community.
(1)
Same-property excludes BRE properties acquired April 1, 2014 and properties held for sale.
30
2007/20062015/2014 Same-Property Revenues increased by $18.5$48.7 million or 6.5%8.0% to $303.5$658.1 million for 20072015 compared to $285.1$609.3 million for 2006.in 2014. The increase was primarily attributable to an increase of 8.1% in scheduled rents of $20.4 million or 7.3% as compared to 2006.  Average monthlyaverage rental rates from $1,741 per apartment home for 2007/2006 Same-Property communities were $1,3142014 to $1,882 per unitapartment home for 2007 compared to $1,225 per unit for 2006.  The decline in occupancy of 60 basis points in 2007 compared to 2006 decreased revenues by $2.3 million of which $0.8 million was caused by vacancy created by units that were under renovation.  Bad debt expense and rent concessions increased $0.8 million, ratio utility billing system (“RUBS”) income increased $0.8 million, and ancillary property income increased $0.4 million  for 2007 compared to 2006.2015. 

2007/20062015/2014 Non-Same Property Revenues increased by $30.2$175.2 million or 60.7%49.7% to $79.9$527.4 million for 2007in 2015 compared to $49.7$352.3 million for 2006.in 2014.  The increase was primarily due to twelvethe BRE merger and the acquisition or consolidation of ten communities, acquirednet of dispositions and properties held for sale, since January 1, 2006.2014.

Management and other fees from affiliates increased only slightly by $0.1 million to $5.1 million in 2007.  These fees consist of $4.8 million in fee income primarily from Fund II and $0.3 million in promote income from Fund I in 2007, compared to $3.8 million in fee income primarily from Fund II and $1.2 million in promote income from Fund I in 2006.
Total Expenses increased $47.8 million or 16.4% to $340.0 million for 2007 from $292.1 million for 2006.  Property operating expenses, excluding real estate taxesincreased by $14.0$30.3 million or 12.3% for 2007, which is14.8% in 2015 compared to 2014, primarily due to the BRE merger and the acquisition or consolidation of twelveten communities, annual increases in property salaries.  The increase includes an increasenet of dispositions and properties held for sale, since January 1, 2014. 2015/2014 Same-Property operating expenses excluding real estate taxes, of $4.0increased by $2.3 million or 1.7% in 2015 compared to 2014, due primarilymainly to thea $1.7 million increase in the number of communities, increase in assessments for the Operating Partnership’s California communities that are limited to 2% per yearrepairs and large increases in assessments of the communities located in the Seattle metropolitan area.   Depreciation expensemaintenance.

Real estate taxes increased by $22.3$20.7 million or 28.5% for 2007,19.2% in 2015 compared to 2014, due primarily due to the BRE merger and the acquisition or consolidation of twelveten communities, afternet of dispositions and held for sale, since January 1, 20062014. 2015/2014 Same-Property real estate taxes increased by $1.7 million or 3.2% for 2015 compared to 2014.

Depreciation and recording depreciationamortization expense increased by $92.8 million or 25.7% in 2015 compared to 2014, primarily due to the BRE merger and the acquisition or consolidation of ten communities, net of dispositions and properties held for sale, since January 1, 2014.

Merger and integration expenses include, but are not limited to, advisor fees, legal fees, and accounting fees related to the Cadence Campusmerger with BRE and Hollywood commercial buildings, which are predevelopment propertiesrelated integration activity. The Company completed the merger with short-term tenant leases.  BRE on April 1, 2014. Merger and integration expenses were $3.8 million for 2015 and $53.5 million for 2014.

Interest expense increased $8.1$40.3 million or 11.1% due primarily to24.5% in 2015, due to an increase in fundingaverage outstanding debt primarily due to assumed debt in connection with the BRE merger in addition to a $6.8 million decrease in capitalized interest in 2015 compared to 2014, which was due to a decrease in development costs as compared to the same period in 2014.

40


Total return swap income of $5.7 million in 2015 consists of monthly settlements related to the Operating Partnership’s linesCompany's total return swap contracts that were entered into during the year, in connection with $257.3 million of credit and an increase of outstandingtax-exempt mortgage notes payable. GeneralThe Company had no total return swap income in 2014.

Interest and administrative costsother income increased $4.0$7.3 million or 18.2%62.1% in 2015, due to an increase in costs related to employees working on Fund II development and redevelopment projects that can not be capitalized by the Operating Partnershipinvestment of approximately $1.5 million,mortgage backed securities, an increase of $3.1 million in the number of employees, annual increasesinsurance proceeds and $0.6 million in compensation and increased bonuses.
Other expenses of $0.8 million for 2007 consists of a $0.5 million reserve for loan loss resultingincome from the write-down of an impaired mezzanine note receivable related to a condominium project located in Sherman Oaks, California, and a $0.3 million accrual for unpaid business taxes related to the sale of the Essex on Lake Merritt in 2004.  Other expenses of $1.8an investment.

Equity income from co-investments decreased by $18.0 million for the year ended 2006, relate to $1.0$21.9 million in pursuit costs related2015 compared to $39.9 million in 2014, primarily due to events in 2014 which did not recur in 2015, including the Operating Partnership’s attempt to acquireCompany’s share of the Town & Country REIT, and a $0.8gain on the sale of two co-investment communities of $6.6 million, impairment charge resulting from a write-down of a community in Houston, Texas.
Interest and other income increased by $4.1 million or 66.9% to $10.3 million for 2007 from $6.2 million for 2006 due primarily to an increase in leasepromote income of $4.7$10.6 million, resultingand income from the early redemption of preferred equity investments of $5.3 million in 2014, partially offset by $2.0 million in income generated from the Cadence Campus and Hollywood commercial buildings,early redemption of two preferred equity investments during 2015 and an increase of $1.5 million in interest income earned from the mezzanine/bridge loans, compared to the Operating Partnership recorded a non-recurring gain of $1.7 million related to the sale of Town & Country REIT stock in 2006.
Equity income (loss) in co-investments increased by $4.6 million to $3.1 million for 2007 compared to a loss of $1.5 million for 2006, due primarily to the recording of $2.0 million from the partial sale of the Operating Partnership’s interest in the Mountain Vista, LLC joint venture in the first quarter of 2007 plus $0.3 million of equity income recorded from Fund I, and $0.4 million of equity income earned from its investment in Fund II during 2007.  Fund II operations for 2006 included $2.7 million in depreciation resulting in the Operating Partnership recording a loss of $1.5$7.4 million in equity income (loss)from co-investment operations. Additionally, income from preferred equity investments decreased by approximately $5.1 million from 2014 to 2015.

Gains on sale of real estate and land increased by $1.3 million or 2.8% in co-investments related2015 compared to Fund II during 2006.
Income from discontinued operations for 2007 includes2014, due primarily to $7.1 million in gains on the sales of Pinnacle South Mountain and two commercial buildings as well as a $40.2 million gain fromon the sale of four communities in the Portland metropolitan region of $51.9 million, sale of the City Heights joint venture property net of minority interest for a gain of  $13.7 million, $10.3Sharon Green during 2015 as compared to approximately $16.8 million in fees from the joint venture partner, and the net gain on sale of 21 condominiums at Peregrine Point for $1.0 million.  During the year ended 2006, income from discontinued operations included a gain of $8.8 million from the sale of the Vista Pointe joint venture property and $8.2 million in fees, a gain of $3.1 milliongains on the sales of Vista Capri East, Casa Tierra,North, Coldwater Canyon, Pinnacle Town Center, and Diamond Valleya land parcel adjacent to the Company's Park Viridian property, as well as a $29.2 million gain on the sale of Mt. Sutro during 2014.

Gains on remeasurement of co-investment increased by $34.0 million in 2015 compared to 2014, due to the remeasurement of the Company's investments, as a result of the Company's acquisition of a controlling interest in The Huxley and The Dylan properties, andresulting in a gain of $2.0$21.3 million, from the saleand Reveal, resulting in a gain of the first 45 condominiums at Peregrine Point.$12.7 million.

31
Comparison of Year Ended December 31, 20062014 to the Year Ended December 31, 20052013

OurThe Company’s average financial occupancies for the Operating Partnership’sCompany’s stabilized apartment communities or “2006/2005for “2014/2013 Same-Properties” (stabilized properties consolidated by the Operating PartnershipCompany for the years ended December 31, 20062014 and 2005) for the year ended December 31, 2006 decreased2013) increased 10 basis points to 96.5%96.2% in 2014 from 96.6% for the year ended December 31, 2005.
96.1% in 2013. The regional breakdown of the Operating Partnership’sCompany’s stabilized 2006/20052014/2013 Same-Property portfolio for financial occupancy for the years ended December 31, 20062014 and 20052013 is as follows:

Years ended
December 31,
Years ended
December 31,
2006 20052014 2013
Southern California96.3% 96.5%96.3% 96.1%
Northern California96.7% 97.1%96.3% 96.1%
Seattle Metro96.9% 96.7%96.0% 96.1%
Other Regions90.6% 88.1%

The following table provides a breakdown of revenue amounts, including the revenues attributable to 2006/20052014/2013 Same-Properties.

     Years Ended      
  Number of  December 31,  Dollar Percentage 
                                                                                           Properties      2006        2005      Change    Change 
Property Revenues (dollars in thousands)
                   
   2006/2005 Same-Properties:                 
       Southern California 53 $174,156 $164,550 $9,606 5.8%
       Northern California 16  54,887  50,625  4,262 8.4 
       Seattle Metro 21  48,663  44,551  4,112 9.2 
       Other Regions 1  1,980  1,843  137 7.4 
            Total 2006/2005 Same-Property revenues 91  279,686  261,569  18,117 6.9 
     2006/2005 Non-Same Property Revenues (1)    55,084  41,666  13,418 32.2 
          Total property revenues   $334,770 $303,235 $31,535 10.4%
  Number of 
Years Ended
December 31,
 Dollar Percentage
Property Revenues ($ in thousands)
 Properties 2014 2013 Change Change
2014/2013 Same-Properties:          
Southern California 58
 $267,413
 $253,503
 $13,910
 5.5%
Northern California 35
 218,577
 199,395
 19,182
 9.6%
Seattle Metro 29
 115,219
 107,225
 7,994
 7.5%
Total 2014/2013 Same-Property revenues 122
 601,209
 560,123
 41,086
 7.3%
2014/2013 Non-Same Property Revenues (1)
  
 80,059
 43,204
 36,855
 85.3%
2014 BRE Legacy Property Revenues (2)
   280,323
 —
 280,323
 

Total property revenues  
 $961,591
 $603,327
 $358,264
 59.4%
(1)   Includes eight communities acquired subsequent to January 1, 2005, ten redevelopment communities, and three office buildings.

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(1)
Includes eleven communities acquired after January 1, 2013, three sold communities and one redevelopment community.
(2)
Includes 55 stabilized properties acquired in connection with the BRE merger on April 1, 2014, and two development communities in lease-up.

2006/20052014/2013 Same-Property Revenues increased by $18.1$41.1 million or 6.9%7.3% to $279.7$601.2 million for 20062014 compared to $261.6$560.1 million for 2005.in 2013. The increase was primarily attributable to an increase in rental ratesscheduled rents of $17.4$39.1 million or 6.5%,as reflected in an increase of $0.77.1% in average rental rates from $1,619 per unit for 2013 to $1,734 per unit for 2014. Scheduled rents increased in all regions by 5.2%, 9.5%, and 7.4% in Southern California, Northern California, and Seattle Metro, respectively. Income from utility billings and other income increased by $2.2 million and $1.1 million, respectively in RUBS revenue, an increase of $0.7 million in ancillary property income, and a decrease in rent concessions of $0.9 million2014 compared to the 2005.   Bad debt expense was consistent for the two years, and2013. Financial occupancy decreasedincreased 10 basis points in 2006 by $0.9 million as2014 to 96.2% compared to 2005.96.1% in 2013.

2006/20052014/2013 Non-Same Property Revenues increased by $13.4$36.9 million or 32.2%85.3% to $55.1$80.1 million for 2006in 2014 compared to $41.7$43.2 million for 2005.to 2013.  The increase in non-same property revenues was primarily due to eight propertiesrevenue generated from eleven communities acquired or consolidated since January 1, 2005.2013.

Management and other fees from affiliatesdecreased by approximately $5.9 increased $2.0 million or 54.1% for 200628.7% to $9.3 million in 2013 compared to $7.3 million in 2012.  The increase is primarily due to the asset and property management fees earned from the Wesco III, Wesco IV, and BEXAEW co-investments formed during 2014. The increase in management fees was offset by a reduction of $1.2 million in asset and property management fees from the sale of two Essex Apartment Value Fund II, L.P. ("Fund II") communities in 2014.

Property operating expenses, excluding real estate taxes increased $64.6 million or 46.1% in 2014 compared to 2013, primarily due to properties acquired in connection with the BRE merger and six other communities in 2014. 2014/2013 Same-Property operating expenses excluding real estate taxes, increased by $3.8 million or 3.0% in 2014 compared to 2013, due mainly to a $1.6 million increase in repairs and maintenance and a $1.3 million increase in utilities expense.

Real estate taxes increased $50.6 million or 88.3% in 2014 compared to 2013, due primarily to $7.1 millionproperties acquired in promote income recorded duringconnection with the year ended 2005 related to the sale of Fund I assets, as compared to $1.2 millionBRE merger and six other communities in promote income from Fund I during 2006.
Total Expenses increased $15.1 million or 5.5% to $292.1 million for 2006 from $277.0 million for 2005.  The increase was primarily due to increases in utility expense,2014. 2014/2013 Same-Property real estate taxes insurance expense, and salaries.  Utility expense increased by $3.1$2.3 million over the prior yearor 4.5% for 2014 compared to 2013 due mainlyto a $1.6 million or 15.6% increase in property taxes for Seattle Metro due to higher natural gasassessed values for 2014.

Depreciation and electrical prices.  Real estate taxesamortization expense increased $2.8by $168.2 million over the prior year due mainlyor 87.4% in 2014 compared to increases in assessment of properties in the Seattle metropolitan area and new acquisitions.  Insurance expense increased $0.9 million over prior year due to increases in earthquake and property liability premiums.  Salaries increased mainly due to an increase in payroll salaries over the prior year, an increase in equity based compensation expense, and higher operating expenses2013, due to the acquisition of eight communitiesBRE and six other communities. The increase is also due to the capitalization of approximately $313.1 million in 2006.additions to rental properties through 2013, including $152.8 million spent on acquisition of and additions to real estate under development, $81.4 million spent on redevelopment, and $78.9 million spent on capital expenditures on rental properties.  Approximately $122.0 million in additions to rental properties were capitalized for 2012, including $17.8 million spent on acquisitions of and additions to real estate under development, $47.3 million spent on redevelopment, and $56.9 million spent on capital expenditures on rental properties.

General and administrative expense increased $14.2 million or 53.2% in 2014 compared to 2013 primarily due to additional corporate employees from the BRE merger and $2.8 million in expenses related to the cyber-intrusion.

Merger and integration expenses include, but are not limited to, advisor fees, legal fees, and accounting fees related to the BRE merger. The Company completed the merger with BRE on April 1, 2014. Merger and integration expenses were $53.5 million for 2014 and $4.3 million for 2013.

Interest expenseincreased by $2.1$48.0 million or 3% for 200641.2% in 2014, primarily due to $72.9 million, netadditional debt assumed as part of $3.9 millionthe BRE merger, offset by an increase in capitalized interest from development and redevelopment projects.

Equity income from co-investments decreased by $16.0 million to $39.9 million in 2014 compared to $70.8 million, net of $1.1 in capitalized interest for 2005.  The increase was mainly due to an increase in total outstanding debt of $57 million between 2006 and 2005, and higher short-term borrowing rates.
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Other expenses decreased $4.1 million or 69.6% to $1.8 million for the year ended 2006 compared to $5.8 million for the year ended 2005.  During 2006, the Operating Partnership incurred $1.0$55.9 million in net pursuit costs related to the Operating Partnership’s attempt to acquire the Town & Country REIT in the first quarter of 2006 and the Operating Partnership recorded a $0.8 million impairment charge on a property in Houston, Texas during the third quarter of 2006.  During 2005, the Operating Partnership recorded the following other expenses: (i) a $1.5 million charge related to a legal settlement, (ii) $1.4 million in incentive compensation costs related to $6.1 million in interest income realized on2013.  The Essex on Lake Merritt participating loan in the third quarter of 2005, (iii) an impairment loss of $1.3 million related to a property in Houston, Texas in the fourth quarter of 2005, and (iv) pre-payment penalties and write-off of deferred charges in the amount of $1.6 million related to the early termination of various mortgage notes payable during the fourth quarter of 2005.
Gain on sale of real estate decrease was $0 for 2006 compared to a gain of $6.4 million recorded for 2005 resulting from the recognition of a $5.0 million deferred gainprimarily due to the saleCompany’s share of The Essex on Lake Merritt and $1.4 million from taxable REIT subsidiary activity.
Interest and other income was comprised of $1.7 million for athe gain on the sale of the Town & Country REIT stock recorded during the first quarter for 2006, $0.7two Fund II communities of $6.6 million, promote income of interest$10.6 million, and income earned on notes receivables, $0.2from early redemption of preferred equity investments of $5.3 million in forfeited deposits from a potential disposition and approximately $1.9 million in interest income on cash balances, as2014, compared to $6.1 million in interest income from the Essex on Lake Merritt participating loan recorded in the third quarterCompany's share of 2005.  Lease income from the RV parks was consistent for both periods.
Equity (loss) income in co-investments decreased $20.1 million for 2006 primarily due to gains from the sale of Fund I properties during the year ended 2005 totaling $18.1 million.  For 2006 the Operating Partnership recorded a net loss on its investment in Fund II of $1.5 million, and there were no property sales in Fund I or II during 2006.
Income tax provision decreased by $2.0 million during 2006 due to less taxable income related to taxable REIT subsidiary activity.
Income from discontinued operations for 2006 relates primarily to the gain on sale of 45 Peregrine Point condominiums for $2.0 million, a gain on sale of the Vista Pointe joint venture property for $8.8 million plus fees and promote income from that sale of $8.2 million, a gain of $3.1 million on the sales of the Vista Capri East, Casa Tierra, and Diamond Valley properties, and a gain of $6.7 million on the sale of Emerald Palms community.  Discontinued operations for  2005 relates primarily to the salefive Fund II communities of the Eastridge Apartments$38.8 million, net of internal dispositions costs in the second quarter2013.


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Table of 2005, for a gain on sale of $28.5 million, a gain of $0.7 million attributed to the sale of four small assets, and $1.2 million in rental revenues related to the Eastridge community.Contents

Liquidity and Capital Resources

StandardThe following table sets forth the Company’s cash flows for 2015, 2014 and Poor's (“S&P”)2013 ($ in thousands):
  For the year ended December 31,
  2015 2014 2013
Cash flow provided by (used in):      
Operating activities $617,410
 $493,312
 $304,982
Investing activities $(725,556) $(1,147,156) $(453,696)
Financing activities $108,214
 $520,610
 $148,599

ESS’s business is operated primarily through the Operating Partnership. ESS issues public equity from time to time, but does not otherwise generate any capital itself or conduct any business itself, other than incurring certain expenses in operating as a public company which are fully reimbursed by the Operating Partnership. ESS itself does not hold any indebtedness, and its only material asset is its ownership of partnership interests of the Operating Partnership. ESS’s principal funding requirement is the payment of dividends on its common stock and preferred stock. ESS’s sole source of funding for its dividend payments is distributions it receives from the Operating Partnership.

As of December 31, 2015, ESS owned a 96.7% general partner interest and the limited partners owned the remaining 3.3% interest in the Operating Partnership.

The liquidity of ESS is dependent on the Operating Partnership’s ability to make sufficient distributions to ESS. The primary cash requirement of ESS is its payment of dividends to its stockholders. ESS also guarantees some of the Operating Partnership’s debt, as discussed further in Notes 7 and 8 of the notes to consolidated financial statements included elsewhere herein. If the Operating Partnership fails to fulfill certain of its debt requirements, which trigger the ESS’s guarantee obligations, then ESS will be required to fulfill its cash payment commitments under such guarantees. However, ESS’s only significant asset is its investment in the Operating Partnership.

For ESS to maintain its qualification as a REIT, it must pay dividends to its stockholders aggregating annually at least 90% of its REIT taxable income, excluding net capital gains. While historically ESS has issuedsatisfied this distribution requirement by making cash distributions to its stockholders, it may choose to satisfy this requirement by making distributions of cash or other property, including, in limited circumstances, ESS’s own stock. As a corporate credit ratingresult of BBB/Stable for Essex Property Trust, Inc.this distribution requirement, the Operating Partnership cannot rely on retained earnings to fund its ongoing operations to the same extent that other companies whose parent companies are not REITs can. ESS may need to continue to raise capital in the equity markets to fund the Operating Partnership’s working capital needs, acquisitions and Essex Portfolio, L.P.developments.

At December 31, 2007,2015, the Operating PartnershipCompany had $10.0$29.7 million of unrestricted cash and cash equivalents. We believeequivalents and $137.5 million in marketable securities, of which $57.1 million were held available for sale. The Company believes that cash flows generated by ourits operations, existing cash and cash equivalents, marketable securities balances, availability under existing lines of credit, access to capital markets and the ability to generate cash gains from the disposition of real estate are sufficient to meet all of ourthe Company’s reasonably anticipated cash needs during 2008.2016. The timing, source and amounts of cash flows provided by financing activities and used in investing activities are sensitive to changes in interest rates and other fluctuations in the capital markets environment, which can affect ourthe Company’s plans for acquisitions, dispositions, development and redevelopment activities.

Essex has a $200.0 million unsecured line of credit and, asAs of December 31, 2007, there was $61.02015, the Company had $465.0 million balance on the lineof private placement unsecured bonds outstanding at an average interest rate of 6.2%. This facility matures in4.5% with maturity dates ranging from March 2009, with2016 through August 2021. In January 2016, $150.0 million of these bonds bearing an option for a one-year extension. The underlying interest rate on this line is based on a tiered rate structure tied to an S&P rating on the credit facility (currently BBB-) at LIBOR plus 0.8%.  We also have a $100.0 million credit facility from Freddie Mac, which is secured by eight apartment communities and which matures in January 2009.  of 4.36% were repaid.

As of December 31, 2007,2015, the Operating PartnershipCompany had $100.0$2.4 billion of fixed rate public bonds, net of unamortized premiums, discounts and debt issuance costs, with interest rates varying from 3.25% to 5.50% and maturity dates ranging from 2017 to 2025.

As of December 31, 2015, the Company had a $225.0 million unsecured term loan outstanding underthat has a variable interest rate of LIBOR plus 1.05%. The Company has entered into interest rate swap contracts for a term of five years with a notional amount totaling $225.0 million, which effectively converted the interest rate on $225.0 million of the term loan to a fixed rate of 2.4%. The $200 million tranche of this lineunsecured term loan has a maturity date of credit at anNovember 2016 and the $25 million tranche has a maturity date of August 2017.

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As of December 31, 2015, the Company’s mortgage notes payable totaled $2.2 billion, net of unamortized premiums and debt issuance costs, which consisted of $1.9 billion in fixed rate debt with interest rates varying from 4.3% to 6.4% and maturity dates ranging from 2016 to 2021 and $281.7 million of tax-exempt variable rate demand notes with a weighted average interest rate of 5.4%1.2%. The underlyingtax-exempt variable rate demand notes have maturity dates ranging from 2025 to 2040, and $20.7 million is subject to interest rate on this linecaps and $257.3 million is between 55 and 59 basis points over the Freddie Mac Reference Rate.  In 2007, the Operating Partnership entered into ansubject to total return swaps.

The Company has two lines of credit aggregating $1.03 billion as of December 31, 2015 including a $1.0 billion unsecured revolving line of credit for $10.0 million with a commercial bank with an initial maturity date of March 2008.  Borrowing under this revolving line of credit bears an interest rate at the bank’s Prime Rate less 2.0%.credit. As of December 31, 20072015, there was an $8.8a $15.0 million balance on the revolvingthis unsecured line of credit atwith an averageunderlying interest rate of 5.6%LIBOR plus 0.95%. In January 2016, the facility maturity date was extended to December 31, 2019 with one 18-month extension, exercisable by the Company, with an underlying interest rate of LIBOR plus 0.90%. The line is used to fund short-termCompany also has a $25.0 million working capital needs.  The Operating Partnership’sunsecured line of credit agreement. As of December 31, 2015, there were no amounts outstanding on this unsecured line with an underlying interest rate of LIBOR plus 0.95%. In January 2016 the maturity date was extended to January 2018 and the interest rate was lowered to LIBOR plus 0.90%.

The Company’s unsecured line of credit and unsecured debt agreements contain debt covenants related to limitations on indebtedness
33
and liabilities and maintenance of minimum levels of consolidated earnings before depreciation, interest and amortization and maintenance of minimum tangible net worth.  Certain terms and covenants of the $200.0 million unsecured line of credit were amended during the third quarter of 2007.amortization. The Operating PartnershipCompany was in compliance with the line of creditdebt covenants as of December 31, 20072015 and 2014.

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 investment grade securities held available for sale or is used by the Company to reduce balances outstanding under its line of credit.

The Company has benefited from borrowing from Fannie Mae and Freddie Mac, and there are no assurances that these entities will lend to the Company in the future. To the extent that the Company’s access to capital and credit is at a higher cost than the Company has experienced in recent years (reflected in higher interest rates for debt financing or a lower stock price for equity financing) the Company’s ability to make acquisitions, develop communities, obtain new financing, and refinance existing borrowing at competitive rates could be adversely impacted. For the past three years the Company has primarily issued unsecured debt and repaid secured debt when it has matured to place less reliance on mortgage debt financing, and to unencumber more of the Company's communities.

Derivative Activity

The Company uses interest rate swaps, interest rate cap, and total return swap contracts to manage certain interest rate risks. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves. The fair values of interest rate swaps and total return swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparties nonperformance risk in the fair value measurements.

The Company has entered into interest rate swap contracts with an aggregate notional amount of $225.0 million that effectively fixed the interest rate on the $225.0 million unsecured term loan at 2.4%. These derivatives qualify for hedge accounting.
The Company has entered into four total return swap contracts, with an aggregate notional amount of $257.3 million, that effectively converts $257.3 million of mortgage notes payable to a floating interest rate based on SIFMA plus a spread. Additionally, the total return swaps provide fair market value protection on the mortgage notes payable to our counterparties during the initial period of the total return swap until the Company's option to call the mortgage notes at par can be exercised. The Company can currently call one of the total return swaps with $114.4 million of the outstanding debt at par, while the call option on the other three total return swaps relating to $142.9 million of the outstanding debt can be exercised starting on January 1, 2017. These derivatives do not qualify for hedge accounting.

As of December 31, 2006.  Fund II has2015 the Company also had nine interest rate caps totaling a credit facility aggregating $21.0 million.  This line bearsnotional amount of $20.7 million that effectively limit the Company’s exposure to interest at LIBOR plus 0.875%rate risk by providing a ceiling on the underlying variable interest rate for $20.7 million of the Company’s tax exempt variable rate debt.


44

As of December 31, 2015 and matures2014, the aggregate carrying value of the interest rate swap contracts was a liability of $1.0 million and $1.8 million, respectively. The aggregate carrying value of the interest rate caps was zero on May 30, 2008.
the balance sheets as of both December 31, 2015 and 2014. The aggregate carrying value of the total return swaps was $4 thousand and zero as of December 31, 2015 and 2014, respectively.

DuringHedge ineffectiveness related to cash flow hedges, which is reported in current year income as interest expense, was not significant for the first quarteryears ended December 31, 2015, 2014 and 2013.

Issuance of 2007,Common Stock

In 2014, the Company filed a new shelf registration statement with the SEC, allowing the Company to sell an undetermined number or amount of certain equity (only ESS) and debt securities as defined in the prospectus.

In August 2007, the Company’s Board of Directors authorized a stock repurchase planESS has entered into equity distribution agreements with Cantor Fitzgerald & Co., Barclays Capital Inc., BMO Capital Markets Corp., BNP Paribas Securities Corp., Citigroup Global Markets Inc, Jefferies LLC, J.P. Morgan Securities LLC, Liquidnet, Inc., Mitsubishi UFJ Securities (USA), Inc, and UBS Securities LLC.  Pursuant to allow the Company to acquire sharesits equity distribution program, in an aggregate of up to $200 million.  The program supersedes the common stock repurchase plan that Essex announced on May 16, 2001.  During 2007 the Company repurchased and retired 323,2592015, ESS issued 1,481,737 shares of its common stock for approximately $32.6$332.3 million, net of fees and commissions, and in 2014, ESS issued 2,964,315 shares of common stock for proceeds of $534.0 million, net of fees and commissions. During January 2008, the Company repurchased an additional 137,500 shares for $13.2 million, net of fees and commissions.  As of February 2008, the Company may repurchase approximately an additional $154 million of common stock under the current plan.
The Company sold 5,980,000 shares of 4.875% Series G Cumulative Convertible Preferred Stock for gross proceeds of $149.5 million during the thirdfirst quarter of 2006.  Holders may convert Series G Preferred Stock into shares of the Company’s common stock subject to certain conditions.  The conversion rate was initially .18302016 through February 22, 2016, ESS has not issued any shares of common stock per the $25 share liquidation preference, which is equivalentpursuant to an initial conversion price of approximately $136.62 per share of common stock (the conversion rate will be subject to adjustment upon the occurrence of specified events).  The conversion rate was .1836 shares of common stock per $25 per share liquidation preference as of December 31, 2007.  On or after July 31, 2011, the Company may, under certain circumstances, cause some or all of the Series G Preferred Stock to be converted into shares of common stock at the then prevailing conversion rate.
The Operating Partnership, has $225.0 million of outstanding exchangeable senior notes (the “Notes”) with a coupon of 3.625% due 2025. The Notes are senior unsecured obligations of the Operating Partnership, and are fully and unconditionally guaranteed by the Company.  On or after November 1, 2020, the Notes will be exchangeable at the option of the holder into cash and, in certain circumstances at Essex’s option, shares of the Company’s common stock at an initial exchange price of $103.25 per share subject to certain adjustments.  The Notes will also be exchangeable prior to November 1, 2020, but only upon the occurrence of certain specified events.  On or after November 4, 2010, the Operating Partnership may redeem all or a portion of the Notes at a redemption price equal to the principal amount plus accrued and unpaid interest (including additional interest, if any).  Note holders may require the Operating Partnership to repurchase all or a portion of the Notes at a purchase price equal to the principal amount plus accrued and unpaid interest (including additional interest, if any) on the Notes on November 1, 2010, November 1, 2015 and November 1, 2020.
As of December 31, 2007, our mortgage notes payable totaled $1.26 billion which consisted of $1.0 billion in fixed rate debt with interest rates varying from 4.86% to 8.18% and maturity dates ranging from 2008 to 2018 and $233.1 million of tax-exempt variable rate demand bonds with a weighted average interest rate of 4.5%. The tax-exempt variable rate demand bonds have maturity dates ranging from 2009 to 2039, and are subject to interest rate caps.
In January 2008, the Operating Partnership obtained a mortgage loan in the amount of $49.9 million secured by Mirabella, a community located in Marina Del Rey, California.  The loan has a fixed interest rate of 5.21%, which matures in January 2018, and the net proceeds were used  to reduce outstanding borrowings under the Operating Partnership’s lines of credit.
The Company pays quarterly dividends from cash available for distribution. Until it is distributed, cash available for distribution is invested by the Operating Partnership primarily in short-term investment grade securities or is used by the Operating Partnership to reduce balances outstanding under its line of credit.
The Operating Partnership’s current financing activities have not been severely impacted by the tightening in the credit markets.  Our strong balance sheet, the established relationships with our unsecured line of credit bank group and access to Fannie Mae and Freddie Mac secured debt financing have insulated us from the turmoil being experienced by many other real estate companies.  Recently, we have experienced some expansion in credit spreads as Fannie Mae and Freddie Mac’s tier 4 financing are currently at approximately 200 basis points over the relevant U.S. treasury securities.
Derivative Activity
In April 2007, the Operating Partnership settled a $50.0 million forward-starting swap and received $1.3 million from
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the counterparty.  The accounting for the swap settlement reduces the effective interest rate on the new Tierra Vista mortgage loan to 5.19%.  As of December 31, 2007 the Operating Partnership had entered into nine forward-starting interest rate swaps totaling a notional amount of $450 million with interest rates ranging from 4.9% to 5.9% and settlements dates ranging from April 2008 to October 2011.  These derivatives qualify for hedge accounting as they are expected to economically hedge the cash flows associated with the refinancing of debt that matures between April 2008 and October 2011.  The fair value of the derivatives decreased $7.9 million during the year ended December 31, 2007 to a liability value of $10.2 million as of December 31, 2007, and the derivative liability was recorded in other liabilities in the Operating Partnership’s consolidated financial statements.  The changes in the fair values of the derivatives are reflected in accumulated other comprehensive (loss) income in the Operating Partnership’s consolidated financial statements.  No hedge ineffectiveness on cash flow hedges was recognized during the year ended December 31, 2007 and 2006.
Issuance of Common Stock
During April 2007, the Company issued and sold approximately 170,500 shares of common stock for $21.8 million, net of fees and commissions, under its Controlled Equity Offeringthis program. Under this program, the CompanyESS may from time to time sell shares of common stock into the existing trading market at current market prices, and the Operating PartnershipCompany anticipates using the net proceeds, from such saleswhich are contributed to fund development, redevelopment pipelines, andthe Operating Partnership, to pay down outstanding borrowingsdebt, fund redevelopment and development pipelines, fund acquisitions, and for general corporate purposes.  As of February 22, 2016, ESS may sell an additional 1,719,109 shares under the Operating Partnership’s lines of credit.current equity distribution program.

During May 2007, the Company sold 1,500,000 shares of its common stock for proceeds of $191.9 million, net of underwriter fees and expenses.  The Operating Partnership used net proceeds from the common stock sales to reduce outstanding borrowings under the Operating Partnership’s lines of credit.
Capital Expenditures

Non-revenue generating capital expenditures are improvements and upgrades that extend the useful life of the property.  For the year ended December 31, 2007,2015, non-revenue generating capital expenditures totaled approximately $919$1,173 per unit.apartment home. The Operating Partnership expectsCompany projects to incur approximately $950$1,200 per unitapartment home in non-revenue generating capital expenditures for the year endedending December 31, 2008.2016. These expenditures do not include the improvements required in connection with the origination of mortgage loans, expenditures for deferred maintenance on acquisition properties, and expenditures for property renovations and improvements which are expected to generate additional revenue, and renovation expenditures required pursuant to tax-exempt bond financings.  Revenue-generating expenditures totaled $11.0 million during 2007, and the Operating Partnership expects to incur approximately $6.0 million in revenue generating capital expenditures for the year ended December 31, 2008.revenue. The Operating PartnershipCompany 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 20082016 and/or the funding thereof will not be significantly different than the Operating Partnership’sCompany’s current expectations.

Development and Predevelopment Pipeline

The Operating PartnershipCompany defines development activitiesprojects as new propertiescommunities that are being constructed or are newly constructed and in the case of development communities, are in a phase of lease-up and have not yet reached stabilized operations. As of December 31, 2007, excluding development projects owned by Fund II,2015, the Operating PartnershipCompany had threetwo consolidated development projects comprised of 684 units for771 apartment homes with an estimated cost of $236.7$489.0 million of which $125.8$287.0 million remains to be expended, and six unconsolidated joint venture active development projects comprised of 1,676 apartment homes with an estimated cost of $0.9 billion, of which approximately $500.0 million remains to be expended. See discussion in the section, “Risks that development activities will be delayed or not completed and/or fail to achieve expected results” in Item 1A, Risk Factors,The Company's share of this Form 10-K.these estimated remaining project costs is approximately $255.0 million.
 
The Operating PartnershipCompany defines the predevelopment pipelineprojects as new propertiesproposed communities in negotiation or in the entitlement process with aan expected high likelihood of becoming entitled development activities.  As of December 31, 2007, the Operating Partnership had five development communities aggregating 1,658 units that were classified as predevelopment projects. The estimated total cost of the predevelopment pipeline at December 31, 2007 was $508.4 million, of which $411.3 million remains to be expended.   The Operating PartnershipCompany may also acquire land for future development purposes.   The Operating Partnership owned five land parcels held for future development aggregating 434 units as of December 31, 2007. The Operating Partnership had incurred $25.5 million in costs related to these five land parcels as of December 31, 2007.purposes or sale.
 
The Operating PartnershipCompany expects to fund the development and predevelopment pipeline by using a combination of some or all of the following sources: its working capital, amounts available on its lines of credit, construction loans, net proceeds from public and private equity and debt issuances, and proceeds from the disposition of properties, if any.
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Redevelopment Pipeline

The Operating PartnershipCompany defines redevelopment activitiescommunities as existing properties owned or recently acquired, which have been targeted for additional investment by the Operating PartnershipCompany with the expectation of increased financial returns through property improvement.  The Operating Partnership’s redevelopment strategy strives to improve the financial and physical aspects of the Operating Partnership’s redevelopment apartment communities and to target a 10 percent return on the incremental renovation investment.  Many of the Operating Partnership’s properties are older and in excellent neighborhoods, providing lower density with large floor plans that represent attractive redevelopment opportunities.  During redevelopment, apartment unitshomes may not be available for rent and, as a result, may have less than stabilized operations.  As of December 31, 2007,2015, the Operating PartnershipCompany had thirteenownership interests in five major redevelopment communities aggregating 3,891 1,313

45

apartment unitshomes with estimated redevelopment costs of $135.6$159.8 million, of which approximately $74.6$82.5 million remains to be expended.  These amounts exclude redevelopment projects owned by Fund II.

Alternative Capital Sources

Fund II has eight institutional investors,The Company utilizes co-investments as an alternative source of capital for acquisitions of both operating and the Operating Partnership, with combined partner equity commitments of $265.9 million. Essex has committed $75.0 million to Fund II, which represents a 28.2% interest as general partner and limited partner. Fund II utilized debt as leverage equal to approximately 65% of the estimated value of the underlying real estate.  Fund II invested in apartment communities in the Operating Partnership’s targeted West Coast markets and, asdevelopment communities. As of December 31, 2007, owned eleven2015, the Company had an interest in 1,676 apartment homes of communities and threeactively under development projects.  Essex records revenuewith joint ventures for a total estimated cost of $0.9 billion. Total estimated remaining costs total approximately $500.0 million, of which the Company estimates that its asset management, property management,remaining investment in these development and redevelopment services when earned, and promote income when realized if Fund II exceeds certain financial return benchmarks.joint ventures will be approximately $255.0 million. In addition, the Company had an interest in 10,520 apartment homes of operating communities with joint ventures for a total book value of $738.9 million.

Contractual Obligations and Commercial Commitments

The following table summarizes the maturationmaturity or due dates of ourthe Company’s contractual obligations and other commitments at December 31, 2007,2015, and the effect such obligations could have on ourthe Company’s liquidity and cash flow in future periods:periods ($ in thousands):

      2009 and  2011 and      
(In thousands)  2008  2010  2012  Thereafter  Total
Mortgage notes payable $116,357 $179,502 $198,728 $768,286 $1,262,873
Exchangeable bonds               -                -               -  225,000  225,000
Lines of credit  8,818  161,000               -                   -  169,818
Interest on indebtedness  87,000  93,100  57,900  204,800  442,800
Development commitments  153,000  260,600  89,800  33,700  537,100
Redevelopment commitments  42,700  31,900               -                   -  74,600
Essex Apartment Value Fund II, L.P.               
   capital commitment  13,383                -               -                   -  13,383
  $421,258 $726,102 $346,428 $1,231,786 $2,725,574
  2016 
2017 and
2018
 
2019 and
2020
 Thereafter Total
Mortgage notes payable $29,714
 $519,802
 $1,279,300
 $329,451
 $2,158,267
Unsecured debt 350,000
 365,000
 75,000
 2,300,000
 3,090,000
Lines of credit —
 —
 15,000
 —
 15,000
Interest on indebtedness (1)
 221,917
 373,819
 266,313
 223,734
 1,085,783
Ground leases 2,742
 5,484
 5,484
 131,851
 145,561
Operating leases 1,695
 3,557
 3,792
 12,350
 21,394
Development commitments (including co-investments) (2)
 195,218
 329,207
 17,235
 —
 541,660
  $801,286
 $1,596,869
 $1,662,124
 $2,997,386
 $7,057,665

(1)
Interest on indebtedness for variable debt was calculated using interest rates as of December 31, 2015.
(2)
Estimated project cost for development the Company's 500 Folsom project is net of a projected value for low-income housing tax credit proceeds and savings from tax exempt bonds.

Variable Interest Entities

In accordance with Financial Accounting Standards Board (FASB) Interpretation No. 46 Revised (FIN 46R)accounting standards for consolidation of variable interest entities (VIEs), “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51”,the Company consolidates the Operating Partnership consolidatesand 19 DownREIT limited partnerships (comprising twelve properties), and an office building that is subject to loans made by the Operating Partnership.eleven communities). The Operating PartnershipCompany consolidates these entities because it is deemed the primary beneficiary under FIN 46R.beneficiary. The REIT has no assets or liabilities other than its investment in the Operating Partnership. The consolidated total assets and liabilities related to these variable interest entities (VIEs),DownREIT VIEs, net of intercompany eliminations, were approximately $222.7$241.0 million and $163.9$206.7 million, respectively, as of December 31, 20072015, and $178.3$235.1 million and $110.9$209.1 million respectively, as of December 31, 2006, respectively.2014. Interest holders in VIEs consolidated by the Operating PartnershipCompany are allocated net income equal to the cash payments made to those interest holders for services rendered or distributions from cash flow. The remaining results of operations are generally allocated to the Operating Partnership.Company. As of December 31, 2007 and 2006,2015, the Operating Partnership was involved with two VIEs,Company did not have any VIE’s of which it iswas not deemed to be the primary beneficiary.  Total assets and liabilities of these entities were approximately $71.7 million and $78.5 million and $58.3 million and $58.4 million, as of December 31, 2007 and 2006, respectively.  The Operating Partnership does not have a significant exposure to loss from its involvement with these unconsolidated VIEs.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements, in accordance with U.S. generally accepted accounting
36
principles, requires the Operating PartnershipCompany to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. We defineThe Company defines critical accounting policies as those accounting policies that require ourthe Company's management to exercise their most difficult, subjective and complex judgments.  OurThe Company’s critical accounting policies relate principally to the following key areas: (i) accounting for business combinations; (ii) consolidation under applicable accounting standards of various entities; (ii)(iii) assessing the carrying values of ourthe Company's real estate properties and investments in and advances to joint ventures and affiliates; and (iii)(iv) internal cost capitalization.  The Operating PartnershipCompany bases its estimates on historical experience, current market conditions, and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from those estimates made by management.

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The Operating PartnershipCompany accounts for its business combinations, including the merger and other acquisitions of investments in real estate, in accordance with ASC 805-10, Business Combinations, which requires the acquired tangible and intangible assets and liabilities to be recorded at fair value, with excess purchase price, if any, recorded to goodwill. The Company must make significant assumptions in determining the fair value of the tangible and intangible assets and liabilities acquired and consideration transferred. The use of different assumptions in estimating the fair value could affect the measurement and timing of recognition of acquired assets and liabilities and related expenses.

The consideration transferred in a business combination is generally measured at fair value. For debt assumed by the Company, the fair value is determined using estimated market interest rates for debt with comparable terms in place at the time of the acquisition. For equity issued by the Company, the fair value is generally based on the fair value of the Company’s equity interests at the date of issuance.

The fair value of the tangible assets, which principally includes land and building, is determined first by valuing the property as a whole as if it were vacant, using stabilized net operating income and market specific capitalization rates. The fair value of the land and building is then recorded based on its estimated fair value.

In calculating the fair value of identified intangible assets of an acquired property, the in-place leases are valued based on in-place rent rates and estimated time and cost to lease a unit.

The initial purchase accounting is based on the Company’s preliminary assessment, which may differ when additional information becomes available. Subsequent adjustments made to the initial purchase accounting, if any, are made within the measurement period, which will be finalized within one year of the acquisition date.

The Company assesses each entity in which it has an investment or contractual relationship to determine if it may be deemed to be a VIE. If such an entity is a VIE, then the Operating Partnership analyzes the expected losses and expected residual returnsCompany performs an analysis to determine who is the primary beneficiary. If the Operating PartnershipCompany is the primary beneficiary, then the entity is consolidated. The analysis required to identify VIEs and primary beneficiaries is complex and judgmental, and the analysis must be applied to various types of entities and legal structures.

The Operating PartnershipCompany assesses the carrying value of its real estate investments by monitoring investment market conditions and performance compared to budget for operating properties and joint ventures, and by monitoring estimated costs for properties under development. Local market knowledge and data is used to assess carrying values of properties and the market value of acquisition opportunities. Whenever events or changes in circumstances indicate that the carrying amount of a property held for investment may not be fully recoverable, the carrying amount is evaluated. If the sum of the property’s expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the property, then the Operating PartnershipCompany will recognize an impairment loss equal to the excess of the carrying amount over the fair value of the property. Adverse changes in market conditions or poor operating results of real estate investments could result in impairment charges. When the Operating PartnershipCompany determines that a property is held for sale, it discontinues the periodic depreciation of that property. The criteria for determining when a property is held for sale requires judgment and has potential financial statement impact as depreciation would cease and an impairment loss could occur upon determination of held for sale status. Assets held for sale are reported at the lower of the carrying amount or estimated fair value less costs to sell. With respect to investments in

Further, the Company evaluates whether its co-investments are other than temporarily impaired and, advances to joint ventures and affiliates, the Operating Partnership looksif so, records an impairment loss equal to the underlying properties to assess performance andexcess of the recoverability of carrying amounts for those investments in a manner similar to direct investments in real estate properties. An impairment charge or investment valuation charge is recorded if theco-investments' carrying value of the investment exceedsover its estimated fair value.

The Operating PartnershipCompany capitalizes all direct and certain indirect costs, including interest and real estate taxes, incurred during development and redevelopment activities. Interest is capitalized on real estate assets that require a period of time to get them ready for their intended use. The amount of interest capitalized is based upon the average amount of accumulated development expenditures during the reporting period. Included in capitalized costs are management’s accounting estimates of the direct and incremental personnel costs and indirect project costs associated with ourthe Company's development and redevelopment activities. Indirect project costs consist primarily of personnel costs associated with construction administration and development, including accounting, legal fees, and various officecorporate and community onsite costs that clearly relate to projects under development.

The Operating PartnershipCompany bases its accounting estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may vary from those estimates and those estimates could be different under different assumptions or conditions.


47

Net Operating Income (“NOI”)

Same-Property net operating income (“NOI”) is considered by management to be an important supplemental performance measure to earnings from operations included in the Company’s consolidated statements of income. The presentation of Same-Property NOI assists with the presentation of the Company’s operations prior to the allocation of depreciation and any corporate-level or financing-related costs. NOI reflects the operating performance of a community and allows for an easy comparison of the operating performance of individual communities or groups of communities. Prospective buyers of real estate have different financing and overhead structures, with varying marginal impacts to overhead by acquiring real estate, and NOI is considered by many in the real estate industry to be a useful measure for determining the value of a real estate asset or group of assets.  The Company defines Same-Property NOI as Same-Property revenue less Same-Property operating expenses.

The reconciliation of earnings from operations to Same-Property NOI for the periods presented:

 2015 2014 2013
Earnings from operations$331,174
 $201,514
 $188,705
Adjustments: 
  
  
General and administrative40,090
 40,878
 26,684
Management and other fees from affiliates(8,909) (9,347) (7,263)
Depreciation and amortization453,423
 360,592
 192,420
Merger and integration expenses3,798
 53,530
 4,284
Acquisition and investment related costs2,414
 1,878
 1,161
Net operating income821,990
 649,045
 405,991
Less: Non Same-Property NOI(357,457) (229,244) (22,599)
Same-Property NOI$464,533
 $419,801
 $383,392

Forward Looking Statements

Certain statements in this "Management's Discussion and Analysis of Financial Condition and Results of Operations," and elsewhere in this Annual Report on Form 10-K 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 Operating Partnership'sCompany's expectations, hopes, intentions, beliefs and strategies regarding the future.  Forward looking statements include statements regarding the Operating Partnership'sCompany's expectations as to the timing of completion of current development and redevelopment projects and the stabilization dates of such projects, expectation as to the total projected costs and rental rates of development and redevelopment 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, expectations as to the amount of capital expenditures,anticipated cash needs, expectations as to the amount of non-revenue generating capital expenditures, future acquisitions, the Operating Partnership's and Fund II’sCompany's development and redevelopment pipeline and the
37
sources of funding for it, the anticipated performance of existing properties, anticipated results fromproperty and growth trends in various geographic regions, statements regarding the Operating Partnership'sCompany’s expected 2016 Same-Property revenue generally and in various areas, and 2016 Same-Property operating expenses, statements regarding the Company's financing activities, and the use of proceeds from such activities.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors including, but not limited to, that the Operating PartnershipCompany will fail to achieve its business objectives, that the actual completion of development and redevelopment projects will be subject to delays, that the stabilization dates of such projects will be delayed, that the total projected costs of current development and redevelopment projects will exceed expectations, , that such development and redevelopment projects will not be completed, that development and redevelopment projects and acquisitions will fail to meet expectations, that estimates of future income from an acquired property may prove to be inaccurate, 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 Operating Partnership'sCompany's current expectations, that there may be a downturn in the markets in which the Operating Partnership's propertiesCompany's communities are located, that the terms of any refinancing may not be as favorable as the terms of existing indebtedness, as well as those risks, special considerations, and other factors discussed under the caption “Potential Factors Affecting Future Operating Results” below and those discussed in Item 1A, Risk Factors, of this Form 10-K, and those risk factors and special considerations set forth in the Operating Partnership'sCompany’s other filings with the Securities and Exchange Commission (the "SEC")SEC which may cause the actual results, performance or achievements of the Operating PartnershipCompany 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 today, and the Operating PartnershipCompany assumes no obligation to update this information.


Potential Factors Affecting Future Operating Results
48
Many factors affect the Operating Partnership’s actual financial performance and may cause the Operating Partnership’s future results to be different from past performance or trends.  These factors include those set forth under the caption “Risk Factors” in Item 1A.Table of this Annual Report on Form 10-K and the following:
Development and Redevelopment Activities
The Operating Partnership pursues apartment communities and development and redevelopment projects from time to time. These projects generally require various government and other approvals, the receipt of which cannot be assured. The Operating Partnership's development and redevelopment activities generally entail certain risks, including the following:
·funds may be expended and management's time devoted to projects that may not be completed;
·construction costs of a project may exceed original estimates possibly making the project economically unfeasible;
·projects may be delayed due to, among other things, adverse weather conditions;
·occupancy rates and rents at a completed project may be less than anticipated; and
·expenses at a completed development project may be higher than anticipated.
These risks may reduce the funds available for distribution to the Company's stockholders. Further, the development and redevelopment of properties is also subject to the general risks associated with real estate investments.
Interest Rate Fluctuations
The Operating Partnership monitors changes in interest rates and believes that it is well positioned from both a liquidity and interest rate risk perspective. However, current interest rates are at historic lows and potentially could increase rapidly to levels more in line with higher historical levels. The immediate effect of significant and rapid interest rate increases would result in higher interest expense on the Operating Partnership's variable interest rate debt. The effect of prolonged interest rate increases could negatively impact the Operating Partnership's ability to make acquisitions and develop properties at economic returns on investment and the Operating Partnership's ability to refinance existing borrowings at acceptable rates.

Interest Rate Hedging Activities

The Operating Partnership’sCompany’s objective in using derivatives is to add stability to interest expense and to manage its exposure to interest rate movements or other identified risks.  To accomplish this objective, the Operating Partnership primarily usesCompany entered into interest rate swaps as part of its cash flow hedging strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts in exchange for fixed-rate payments over the life of the agreements without exchange of the underlying principal amount.  As of December 31, 2007, we have entered into nine forward-starting2015, the Company has seven interest rate swap contracts to mitigate the risk of changes in the interest-related cash outflows on forecasted issuance of long-term debt.  The forward-starting swaps are cash flow hedges$225.0 million of the variability of forecasted interest payments associated with the refinancing of the Operating Partnership’s long-term debt between 2007 and 2011.five-year unsecured term debt.  As of December 31, 2007,2015, the Operating PartnershipCompany also had $233.1$291.7 million of variable rate indebtedness, of which $152.7$20.7 million is subject to interest rate cap protection. All of our derivative instrumentsthe Company’s interest rate swaps are designated as cash flow hedges and the Operating Partnership does not have any fair value hedges as of December 31, 2007.2015. The following table summarizes the notional amount, carrying value, and estimated fair value of ourthe Company’s derivative instruments used to hedge interest rates as of December 31, 2007.2015.  The notional amount represents the aggregate amount of a particular security that is currently hedged at one time, but does not represent exposure to credit, interest rates or market risks. The table also includes a sensitivity analysis to demonstrate the impact on ourthe Company’s derivative instruments from an increase or decrease in 10-year Treasury bill interest rates by 50 basis points, as of December 31, 2007.2015.

       
Carrying and
    
  Notional Maturity Estimate Fair + 50 - 50
(Dollars in thousands) Amount Date Range Value Basis Points Basis Points
   Carrying and Estimated Carrying Value
   Maturity Estimated + 50 - 50
($ in thousands)
 Notional Amount Date Range Fair Value Basis Points Basis Points
Cash flow hedges:Cash flow hedges:                
  
Interest rate forward-starting swaps$450,000 2008-2011 $     (10,240)$         5,828$         (27,504)
Interest rate swaps $225,000
 2016-2017 $(1,032) $(56) $(2,003)
Interest rate caps Interest rate caps 152,749 2008-2011              13               42                     3 20,674
 2018-2019 —
 —
 —
Total cash flow hedges Total cash flow hedges$602,749 2008-2011 $     (10,227)$         5,870$         (27,501) $245,674
 2016-2019 $(1,032) $(56) $(2,003)

Additionally, the Company has entered into total return swap contracts, with an aggregate notional amount of $257.3 million, that effectively converts $257.3 million of mortgage notes payable to a floating interest rate based on SIFMA plus a spread and had a carrying value of $4 thousand at December 31, 2015. These derivatives do not qualify for hedge accounting.

Interest Rate Sensitive Liabilities

The Operating PartnershipCompany 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 Operating Partnership’sCompany’s real estate investment portfolio and operations. The Operating Partnership’sCompany’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 Operating PartnershipCompany 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 Operating PartnershipCompany does not enter into derivative or interest rate transactions for speculative purposes.

The Operating Partnership’sCompany’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. Management believes that the carrying amounts of its LIBOR debt approximates fair value as of December 31, 2007 because interest rates, yields and other terms for these instruments are consistent with yields and other terms currently available to the Operating Partnership for similar instruments. Management has estimated that the fair value of the Operating Partnership’s $1.25Company’s $4.8 billion of fixed rate mortgage notes payable and exchangeable bondsdebt at December 31, 20072015, to be $4.8 billion.  Management has estimated the fair value of the Company’s $525.3 million of variable rate debt at December 31, 2015, is approximately $1.30 billion$527.6 million based on the terms of existing mortgage notes payable and variable rate demand notes compared to those available in the marketplace.marketplace ($ in thousands).
 
   For the Years Ended December 31
   
2008(1)
  2009  
2010(2)
  
2011(3)
  2012  Thereafter  Total  Fair value
(In thousands)                               
Fixed rate debt $116,357 $24,689 $154,813 $166,545 $32,183 $760,148 $1,254,735 $1,301,938
Average interest rate  6.8%  7.2%  8.0%  6.3%  5.2%  5.2%      
Variable rate LIBOR debt $8,818 $173,150 $              - $            - $           - $220,988(4)$402,956 $402,956
Average interest rate  5.6%  5.7%                -              -             -  4.5%      
 For the Years Ended December 31,
 2016 2017 2018 2019 2020 Thereafter Total Fair value
Fixed rate debt (1)
$179,677 $538,685 $320,080 $650,620 $692,440 $2,350,056
 $4,731,558
 $4,835,891
Average interest rate4.5% 3.3% 5.5% 4.3% 5.0% 3.8%  
  
Variable rate debt (1)
$200,038 $25,495
 $542
 $25,592
 $647
 $279,395
(2)$531,709
 $527,592
Average interest rate2.3% 2.3% 1.1% 1.8% 1.1% 1.2% 
 
  

49

 
(1)
Represents scheduled principal payments.
(2)
$245.7 million is subject to interest rate protection agreements.
(1) $50 million covered by a forward-starting swap at a fixed rate of 4.869%, with a settlement date on or before October 1, 2008.   Also, $25 million covered by a forward-starting swap at a fixed rate of 5.082%, with a settlement date on or before January 1, 2009.
(2) $150 million covered by three forward-starting swaps with fixed rates ranging from 5.099% to 5.824%, with a settlement date on or before
January 1, 2011.
39
(3) $125 million covered by forward-starting swaps with fixed rates ranging from 5.655% to 5.8795%, with a settlement date on or before February 1, 2011.  $50 million covered by a forward-starting swap with a fixed rate of 5.535%, with a settlement date on or before July, 1 2011.  $50 million covered by a forward-starting swap with a fixed rate of 5.343%, with a settlement date on or before October 1, 2011.  The Operating Partnership intends to encumber certain unencumbered assets during 2011 in conjunction with the settlement of these forward-starting swaps.
(4) $152,749 subject to interest rate caps.
The table incorporates only those exposures that exist as of December 31, 2007;2015; it does not consider those exposures or positions that could arise after that date. As a result, ourthe Company’s ultimate realized gain or loss, with respect to interest rate fluctuations and hedging strategies would depend on the exposures that arise during the period, our hedging strategies at the time, and interest rates.period.

Item 8. Financial Statements and Supplementary Data

The response to this item is submitted as a separate section of this Form 10-K. See Item 15.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.Not applicable.

Item 9A. Controls and Procedures

Essex Property Trust, Inc.

As of December 31, 2007, we2015, ESS carried out an evaluation, under the supervision and with the participation of management, including ourits Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of ourits disclosure controls and procedures pursuant to(as defined in Rules 13a-15 of13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended.amended (the “Exchange Act”)). Based upon that evaluation, theESS’s Chief Executive Officer and Chief Financial Officer concluded that ouras of December 31, 2015, ESS’s disclosure controls and procedures arewere effective in timely alerting management to materialensure that the information relating to the Operating Partnership that is required to be includeddisclosed by ESS in our periodic filings with the Securitiesreports that ESS files or submits under the Exchange Act were recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that such disclosure controls and procedures were also effective to ensure that information required to be disclosed in the reports that ESS  files or submits under the Exchange Commission.Act is accumulated and communicated to the ESS’s management, including ESS’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

There were no changes in the Operating Partnership’sESS’s internal control over financial reporting, that occurred during the quarter ended December 31, 2007,2015, that have materially affected, or are reasonably likely to materially affect, the Operating Partnership’sESS’s internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

OurESS’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). OurESS’s management assessed the effectiveness of ourESS’s internal control over financial reporting as of December 31, 2007.2015. In making this assessment, ourESS’s management used the criteria set forth in the report entitled “Internal Control-Integrated Framework (2013)” published by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Our. ESS’s management has concluded that, as of December 31, 2007, our2015, its internal control over financial reporting was effective based on these criteria. OurESS’s independent registered public accounting firm, KPMG LLP, has issued an auditattestation report on the effectiveness of ourover ESS’s internal control over financial reporting, which is included herein.

Essex Portfolio, L.P.

As of December 31, 2015, the Operating Partnership carried out an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer of the general partner, of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer of the general partner concluded that as of December 31, 2015, the Operating Partnership’s disclosure controls and procedures were effective to ensure that the information required to be disclosed by the Operating Partnership in the reports that it files or submits under the Exchange Act were recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that such disclosure controls and procedures were also effective to ensure that information required to be disclosed in the reports that the Operating Partnership files or submits under the Exchange Act is accumulated and communicated to the Operating Partnership’s management, including the Chief Executive Officer and Chief Financial Officer of the general partner, to allow timely decisions regarding required disclosure.


50

There were no changes in the Operating Partnership’s internal control over financial reporting, that occurred during the quarter ended December 31, 2015, that have materially affected, or are reasonably likely to materially affect, the Operating Partnership’s internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

The Operating Partnership’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). The Operating Partnership’s management assessed the effectiveness of the Operating Partnership’s internal control over financial reporting as of December 31, 2015. In making this assessment, the Operating Partnership’s management used the criteria set forth in the report entitled “Internal Control-Integrated Framework (2013)” published by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). The Operating Partnership’s management has concluded that, as of December 31, 2015, its internal control over financial reporting was effective based on these criteria.
Item 9B. Other Information

None.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information required by this Item 10 is incorporated herein by reference from our Proxy Statement, relating to our 2016 Annual Meeting of Shareholders, under the Company’s definitive proxy statement for its annual stockholders’ meetingheading “Board and Corporate Governance Matters,” to be held on May 6, 2008.filed with the SEC within 120 days of December 31, 2015.

Item 11. Executive Compensation
 
The information required by this Item 11 is incorporated herein by reference from our Proxy Statement, relating to our 2016 Annual Meeting of Shareholders, under the Company’s definitive proxy statement for its annual stockholders’ meetingheadings “Executive Compensation” and “Director Compensation,” to be held on May 6, 2008.filed with the SEC within 120 days of December 31, 2015.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this Item 12 is incorporated herein by reference from our Proxy Statement, relating to our 2016 Annual Meeting of Shareholders, under the Company’s definitive proxy statement for its annual stockholders’ meetingheading “Security Ownership of Certain Beneficial Owners and Management,” to be held on May 6, 2008.filed with the SEC within 120 days of December 31, 2015.
 
Item 13. Certain Relationships and Related Transactions and Director Independence

The information required by this Item 13 is incorporated herein by reference from our Proxy Statement, relating to our 2016 Annual Meeting of Shareholders, under the Company’s definitive proxy statement for its annual stockholders’ meetingheading “Certain Relationships and Related Persons Transactions,” to be held on May 6, 2008.filed with the SEC within 120 days of December 31, 2015.

Item 14. Principal Accounting Fees and Services

The information required by this Item 14 is incorporated herein by reference from our Proxy Statement, relating to our 2016 Annual Meeting of Shareholders, under the Company’s definitive proxy statement for its annual stockholders’ meetingheadings “Report of the Audit Committee” and “Fees Paid to KPMG LLP,” to be held on May 6, 2008.filed with the SEC within 120 days of December 31, 2015.


51

PART IV

Item 15. Exhibits and Financial Statement Schedules
 
(A) Financial Statements
 
(1)   Consolidated Financial Statements of Essex Property Trust, Inc.Page
Reports of Independent Registered Public Accounting FirmF-1
F- 1
Consolidated Balance Sheets:
As of December 31, 20072015 and 2006
2014
F-4F- 4
Consolidated Statements of Operations:
Income: Years ended December 31, 2007, 20062015, 2014, and 2005
2013
F-5F- 5
Consolidated Statements of Partners’ Capital:
Comprehensive Income: Years ended December 31, 2007, 20062015, 2014, and 2005
2013
F-6F- 6
Consolidated Statements of Equity: Years ended December 31, 2015, 2014, and 2013
F- 7
Consolidated Statements of Cash Flows:
Years ended December 31, 2007, 20062015, 2014, and 2005
2013
F- 10
F-7
Notes to the Consolidated Financial StatementsF-9
F- 20
(2)   Consolidated Financial Statements of Essex Portfolio, L.P.
Report of Independent Registered Public Accounting Firm
F- 3
Consolidated Balance Sheets: As of December 31, 2015 and 2014
F- 12
Consolidated Statements of Income: Years ended December 31, 2015, 2014, and 2013
F- 13
Consolidated Statements of Comprehensive Income: Years ended December 31, 2015, 2014, and 2013
F- 14
Consolidated Statements of Capital: Years ended December 31, 2015, 2014, and 2013
F- 15
Consolidated Statements of Cash Flows: Years ended December 31, 2015, 2014, and 2013
F- 18
Notes to Consolidated Financial Statements
F- 20
(3)  Financial Statement Schedule -– Schedule III -– Real Estate and Accumulated Depreciation as of December 31, 20072015
F-31F- 52
(3)
(4)   See the Exhibit Index immediately following the signature page and certifications for a list of exhibits filed or incorporated by reference as part of this report. 
 
(B) Exhibits
 
The Operating PartnershipCompany hereby files, as exhibits to this Form 10-K, those exhibits listed on the Exhibit Index referenced in Item 15(A)(3)(4) above.

52

Report of Independent Registered Public Accounting Firm

The General PartnerBoard of Directors and Stockholders
Essex Portfolio, L.P.Property Trust, Inc.:
 
We have audited the accompanying consolidated balance sheets of Essex Portfolio, L.P.Property Trust, Inc. and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, equity, and cash
flows for each of the years in the three-year period ended December 31, 2015. In connection with our audits of the consolidated financial statements, we have also audited the accompanying financial statement schedule III. These consolidated financial statements and the accompanying financial statement schedule III are the responsibility of Essex Property Trust, Inc.’s management. Our responsibility is to express an opinion on these consolidated financial statements and the accompanying financial statement schedule III based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Essex Property Trust, Inc. and subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule III, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Essex Property Trust, Inc.’s internal control over financial reporting as of December 31, 2007,2015, based on criteria established in Internal Control–Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 26, 2016 expressed an unqualified opinion on the effectiveness of Essex Property Trust, Inc.’s internal control over financial reporting.

/S/ KPMG LLP
KPMG LLP
San Francisco, California
February 26, 2016

F- 1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Essex Property Trust, Inc.:

We have audited Essex Property Trust, Inc.’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Essex Portfolio, L.P.Property Trust, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting, appearing under Item 9A. Our responsibility is to express an opinion on the Partnership’sEssex Property Trust, Inc.'s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Essex Portfolio, L.P.Property Trust, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007,2015, based on criteria established in Internal Control–Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
F-1

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Essex Portfolio, L.P.Property Trust, Inc. and subsidiaries as of December 31, 20072015 and 2006,2014, and the related consolidated statements of operations, partners’income, comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2015, and our report dated February 26, 2016, expressed an unqualified opinion on those consolidated financial statements.

/S/ KPMG LLP
KPMG LLP
San Francisco, California
February 26, 2016

F- 2

Report of Independent Registered Public Accounting Firm

The General Partner
Essex Portfolio, L.P.:

We have audited the accompanying consolidated balance sheets of Essex Portfolio, L.P. (the Operating Partnership) and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, capital, and cash flows for each of the years in the three-year period ended December 31, 2007, and our report dated February 27, 2008, expressed an unqualified opinion on those consolidated financial statements.
/S/ KPMG LLP
   KPMG LLP
San Francisco, California
February 27, 2008
F-2
Report of Independent Registered Public Accounting Firm
The General Partner
Essex Portfolio, L.P.:
We have audited the accompanying consolidated balance sheets of Essex Portfolio, L.P. and subsidiaries as of December 31, 2007 and 2006, and the related consolidated statements of operations, partners’ capital, and cash flows for each of the years in the three-year period ended December 31, 2007.2015. In connection with our audits of the consolidated financial statements, we have also audited the accompanying financial statement schedule III. These consolidated financial statements and the accompanying financial statement schedule III are the responsibility of the Essex Portfolio L.P.’sOperating Partnership’s management. Our responsibility is to express an opinion on these consolidated financial statements and the accompanying financial statement schedule III based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Essex Portfolio, L.P. and subsidiaries as of December 31, 20072015 and 2006,2014, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2007,2015, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule III, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Essex Portfolio, L.P.’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 27, 2008 expressed an unqualified opinion on the effectiveness of Essex Portfolio, L.P.’s internal control over financial reporting.
/S/ KPMG LLP
KPMG LLP
/S/ KPMG LLP
   KPMG LLP

San Francisco, California
February 27, 200826, 2016

F- 3

ESSEX PORTFOLIO, L.P.PROPERTY TRUST, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 20072015 and 20062014
(Dollars in thousands, except unitshare amounts)
   2007  2006
ASSETS      
Real estate:      
   Rental properties:      
       Land and land improvements $       670,494  $       560,880
       Buildings and improvements      2,447,265      2,108,307
       3,117,759      2,669,187
   Less accumulated depreciation        (541,987)       (465,015)
       2,575,772      2,204,172
       
   Real estate - held for sale, net                   -          41,221
   Real estate under development         233,445         107,620
   Co-investments           64,191          56,318
       2,873,408      2,409,331
Cash and cash equivalents-unrestricted             9,956            9,662
Cash and cash equivalents-restricted           12,527          13,948
Marketable securities             2,017                   -
Notes receivable and other receivables from related parties               904            1,209
Notes and other receivables           49,632          18,195
Prepaid expenses and other assets           20,286          20,632
Deferred charges, net           11,593          12,863
          Total assets $    2,980,323  $    2,485,840
       
       
LIABILITIES AND PARTNERS' CAPITAL      
Mortgage notes payable $    1,262,873  $    1,060,704
Mortgage notes payable - held for sale                   -          32,850
Exchangeable bonds         225,000         225,000
Lines of credit         169,818          93,000
Accounts payable and accrued liabilities           58,148          38,614
Dividends payable           28,521          24,910
Other liabilities           15,580          14,328
Deferred gain             2,193            2,193
          Total liabilities      1,762,133      1,491,599
Commitments and contingencies      
Minority interests           70,347          44,950
Redeemable convertible limited partnership units             4,750            4,750
Cumulative convertible preferred equity (liquidation value of $149,500)         145,912         145,912
Partners' Capital:      
   General Partner:      
        Common equity         774,894         590,070
        Preferred equity (liquidation value of $25,000)           24,412          24,412
          799,306         614,482
   Limited Partners:      
        Common equity           80,173          59,730
        Preferred equity (liquidation value of $130,000)         126,690         126,690
          206,863         186,420
   Accumulated other comprehensive (loss) income           (8,988)           (2,273)
          Total partners' capital         997,181         798,629
       
          Total liabilities and partners' capital $    2,980,323  $    2,485,840
 2015 2014
ASSETS
Real estate:   
Rental properties:   
Land and land improvements$2,522,842
 $2,424,930
Buildings and improvements9,808,627
 8,819,751
 12,331,469
 11,244,681
Less accumulated depreciation(1,949,892) (1,564,806)
 10,381,577
 9,679,875
Real estate under development242,326
 429,096
Co-investments1,036,047
 1,042,423
Real estate held for sale, net26,879
 56,300
 11,686,829
 11,207,694
Cash and cash equivalents-unrestricted29,683
 25,610
Cash and cash equivalents-restricted93,372
 70,139
Marketable securities and other investments137,485
 117,240
Notes and other receivables19,285
 24,923
Acquired in-place lease value, net2,857
 47,748
Prepaid expenses and other assets35,580
 33,378
Total assets$12,005,091
 $11,526,732
LIABILITIES AND EQUITY
Unsecured debt, net$3,088,680
 $2,603,548
Mortgage notes payable, net2,215,077
 2,234,317
Lines of credit, net11,707
 242,824
Accounts payable and accrued liabilities131,415
 135,162
Construction payable40,953
 30,892
Dividends payable100,266
 88,221
Other liabilities34,518
 32,444
Total liabilities5,622,616
 5,367,408
Commitments and contingencies

 

Redeemable noncontrolling interest45,452
 23,256
Equity: 
  
Common stock; $.0001 par value, 656,020,000 shares authorized; 65,379,359 and 63,682,646 shares issued and outstanding, respectively6
 6
Cumulative redeemable 7.125% Series H preferred stock at liquidation value73,750
 73,750
Additional paid-in capital7,003,317
 6,651,165
Distributions in excess of accumulated earnings(797,329) (650,797)
Accumulated other comprehensive loss, net(42,011) (51,452)
Total stockholders' equity6,237,733
 6,022,672
Noncontrolling interest99,290
 113,396
Total equity6,337,023
 6,136,068
Total liabilities and equity$12,005,091
 $11,526,732

See accompanying notes to consolidated financial statements.

F- 4

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 2015, 2014 and 2013
(Dollars in thousands, except per share and share amounts)
F-4
 2015 2014 2013
Revenues:     
Rental and other property$1,185,498
 $961,591
 $603,327
Management and other fees from affiliates8,909
 9,347
 7,263
 1,194,407
 970,938
 610,590
Expenses: 
  
  
Property operating, excluding real estate taxes234,953
 204,673
 140,060
Real estate taxes128,555
 107,873
 57,276
Depreciation and amortization453,423
 360,592
 192,420
General and administrative40,090
 40,878
 26,684
Merger and integration expenses3,798
 53,530
 4,284
Acquisition and investment related costs2,414
 1,878
 1,161
 863,233
 769,424
 421,885
Earnings from operations331,174
 201,514
 188,705
Interest expense(204,827) (164,551) (116,524)
Total return swap income5,655
 —
 —
Interest and other income19,143
 11,811
 11,633
Equity income from co-investments21,861
 39,893
 55,865
Loss on early retirement of debt, net(6,114) (268) (300)
Gains on sale of real estate and land47,333
 46,039
 1,503
Gains on remeasurement of co-investment34,014
 —
 —
Income before discontinued operations248,239
 134,438
 140,882
Income from discontinued operations—
 —
 31,173
Net income248,239
 134,438
 172,055
Net income attributable to noncontrolling interest(16,119) (12,288) (15,772)
Net income attributable to controlling interest232,120
 122,150
 156,283
Dividends to preferred stockholders(5,255) (5,291) (5,472)
Net income available to common stockholders$226,865
 $116,859
 $150,811
Per share data: 
  
  
Basic: 
  
  
Income before discontinued operations available to common stockholders$3.50
 $2.07
 $3.26
Income from discontinued operations available to common stockholders—
 —
 0.79
Net income available to common stockholders$3.50
 $2.07
 $4.05
Weighted average number of shares outstanding during the year64,871,717
 56,546,959
 37,248,960
Diluted: 
  
  
Income before discontinued operations available to common stockholders$3.49
 $2.06
 $3.25
Income from discontinued operations available to common stockholders—
 —
 0.79
Net income available to common stockholders$3.49
 $2.06
 $4.04
Weighted average number of shares outstanding during the year65,061,685
 56,696,525
 37,335,295

See accompanying notes to consolidated financial statements.

F- 5

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
Years ended December 31, 2015, 2014 and 2013
(Dollars in thousands)
 2015 2014 2013
Net income$248,239
 $134,438
 $172,055
Other comprehensive income (loss): 
  
  
Changes in fair value of cash flow hedges and reclassification to interest expense7,893
 4,168
 12,614
Changes in fair value of marketable securities1,865
 6,302
 (1,556)
Reversal of unrealized gains upon the sale of marketable securities—
 (886) (1,767)
Total other comprehensive income9,758
 9,584
 9,291
Comprehensive income257,997
 144,022
 181,346
Comprehensive income attributable to noncontrolling interest(16,436) (12,852) (16,274)
Comprehensive income attributable to controlling interest$241,561
 $131,170
 $165,072

See accompanying notes to consolidated financial statements.

F- 6

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
Consolidated Statements of Equity
Years ended December 31, 2015, 2014 and 2013
(Dollars and shares in thousands)
 
Series H
Preferred stock
 Common stock 
Additional
paid-in
 
Distributions
in excess of
accumulated
 
Accumulated
other
comprehensive
 Noncontrolling  
 Shares Amount Shares Amount capital earnings loss, net Interest Total
Balances at December 31, 20122,950
 $73,750
 36,443
 $3
 $2,204,778
 $(444,466) $(69,261) $115,312
 $1,880,116
Net income—
 —
 —
 —
 —
 156,283
 —
 15,772
 172,055
Reversal of unrealized gains upon the sale of marketable securities—
 —
 —
 —
 —
 —
 (1,673) (94) (1,767)
Change in fair value of cash flow hedges and amortization of swap settlements—
 —
 —
 —
 —
 —
 11,934
 680
 12,614
Change in fair value of marketable securities—
 —
 —
 —
 —
 —
 (1,472) (84) (1,556)
Issuance of common stock under: 
  
  
  
  
  
  
  
  
Stock option plans—
 —
 65
 —
 7,244
 —
 —
 —
 7,244
Sale of common stock—
 —
 913
 1
 138,365
 —
 —
 —
 138,366
Equity-based compensation costs—
 —
 —
 —
 (907) —
 —
 2,515
 1,608
Redemptions of noncontrolling interest—
 —
 —
 —
 (3,717) —
 —
 (1,994) (5,711)
Distributions to noncontrolling interest—
 —
 —
 —
 —
 —
 —
 (18,488) (18,488)
Common and preferred stock dividends—
 —
 —
 —
 —
 (186,243) —
 —
 (186,243)
Balances at December 31, 20132,950
 73,750
 37,421
 4
 2,345,763
 (474,426) (60,472) 113,619
 1,998,238
Net income—
 —
 —
 —
 —
 122,150
 —
 12,288
 134,438
Reversal of unrealized gains upon the sale of marketable securities—
 —
 —
 —
 —
 —
 (841) (45) (886)
Changes in fair value derivatives and amortization of swap settlements—
 —
 —
 —
 —
 —
 3,721
 447
 4,168
Changes in fair value of marketable securities—
 —
 —
 —
 —
 —
 6,140
 162
 6,302
Issuance of common stock under:                 
Stock consideration in the Merger, net—
 —
 23,067
 2
 3,774,085
 —
 —
 —
 3,774,087

F- 7

Stock option and restricted stock plans—
 —
 218
 —
 11,024
 —
 —
 —
 11,024
Equity distribution agreements, net—
 —
 2,943
 —
 532,670
 —
 —
 —
 532,670
Equity-based compensation costs—
 —
 —
 —
 5,719
 —
 —
 6,153
 11,872
Reclassification of noncontrolling interest to redeemable noncontrolling interest—
 —
 —
 —
 (19,823) —
 —
 (1,067) (20,890)
Changes in the redemption value of redeemable noncontrolling interest—
 —
 —
 —
 312
 —
 —
 —
 312
Conversion of Series G preferred stock—
 —
 34
 —
 4,349
 —
 —
 —
 4,349
Contributions from noncontrolling interest—
 —
 —
 —
 —
 —
 —
 1,419,816
 1,419,816
Retirement of noncontrolling interest—
 —
 —
 —
 —
 —
 —
 (1,419,816) (1,419,816)
Distributions to noncontrolling interest—
 —
 —
 —
 —
 —
 —
 (17,069) (17,069)
Redemptions of noncontrolling interest—
 —
 —
 —
 (2,934) —
 —
 (1,092) (4,026)
Common and preferred stock dividends—
 —
 —
 —
 —
 (298,521) —
 —
 (298,521)
Balances at December 31, 20142,950
 73,750
 63,683
 6
 6,651,165
 (650,797) (51,452) 113,396
 6,136,068
Net income—
 —
 —
 —
 —
 232,120
 —
 16,119
 248,239
Change in fair value of derivatives and amortization of swap settlements—
 —
 —
 —
 —
 —
 7,637
 256
 7,893
Change in fair value of marketable securities—
 —
 —
 —
 —
 —
 1,804
 61
 1,865
Issuance of common stock under:                 
Stock option and restricted stock plans—
 —
 207
 —
 26,540
 —
 —
 —
 26,540
Sale of common stock—
 —
 1,489
 —
 332,137
 —
 —
 —
 332,137
Equity based compensation costs—
 —
 —
 —
 5,946
 —
 —
 3,700
 9,646
Reclassification of noncontrolling interest to redeemable noncontrolling interest—
 —
 —
 —
 (7,657) —
 —
 (12,115) (19,772)
Changes in the redemption value of redeemable noncontrolling interest—
 —
 —
 —
 (2,615) —
 —
 —
 (2,615)
Distributions to noncontrolling interest—
 —
 —
 —
 —
 —
 —
 (21,705) (21,705)

F- 8

Redemptions of noncontrolling interest—
 —
 —
 —
 (2,199) —
 —
 (422) (2,621)
Common and preferred stock dividends—
 —
 —
 —
 —
 (378,652) —
 —
 (378,652)
Balances at December 31, 20152,950
 $73,750
 65,379
 $6
 $7,003,317
 $(797,329) $(42,011) $99,290
 $6,337,023

See accompanying notes to consolidated financial statements.

F- 9

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 2015, 2014 and 2013
(Dollars in thousands) 
 2015 2014 2013
Cash flows from operating activities:     
Net income$248,239
 $134,438
 $172,055
Adjustments to reconcile net income to net cash provided by operating activities: 
  
  
Depreciation and amortization453,423
 360,592
 193,518
Earnings from co-investments(21,392) (33,335) (14,613)
Company's share of gain on the sales of co-investments(469) (6,558) (41,252)
Operating distributions from co-investments46,608
 49,486
 19,636
Gain on the sales of real estate and land(47,333) (46,039) (30,725)
Loss on early retirement of debt, net6,114
 268
 300
Gains on sale of marketable securities and other investments(598) (886) (1,767)
Amortization of (premium) discount and financing costs, net(19,361) (14,672) 12,216
Amortization of discount on notes receivables—
 —
 (844)
Amortization of discount on marketable securities and other investments(12,389) (9,325) (6,556)
Non cash merger and integration expenses—
 9,025
 —
Equity-based compensation6,061
 8,740
 4,508
Gains on remeasurement of co-investment(34,014) —
 —
Changes in operating assets and liabilities: 
  
  
Prepaid expenses, in-place lease value, receivables and other assets267
 15,828
 (1,588)
Accounts payable and accrued liabilities(9,633) 24,233
 72
Other liabilities1,887
 1,517
 22
Net cash provided by operating activities617,410
 493,312
 304,982
Cash flows from investing activities: 
  
  
Additions to real estate: 
  
  
Acquisitions of real estate and acquisition related capital expenditures(515,726) (387,547) (348,774)
Redevelopment(99,346) (81,429) (47,289)
Development acquisitions of and additions to real estate under development(157,900) (152,766) (17,757)
Capital expenditures on rental properties(57,277) (78,864) (56,919)
Proceeds from insurance for property losses16,811
 35,547
 —
BRE merger consideration paid—
 (555,826) —
Acquisition of membership interest in co-investment(115,724) —
 —
Dispositions of real estate319,008
 141,189
 65,496
Dispositions of co-investments31,556
 13,900
 —
Changes in restricted cash and refundable deposits(14,068) (36,582) (9,149)
Purchases of marketable securities(14,300) (20,516) (16,442)
Sales and maturities of marketable securities and other investments8,907
 8,753
 24,172
Purchases of and advances under notes and other receivables—
 —
 (56,750)
Collections of notes and other receivables—
 76,585
 53,438
Contributions to co-investments(127,879) (246,006) (162,578)
Non-operating distributions from co-investments382
 136,406
 118,856

F- 10

Net cash used in investing activities(725,556) (1,147,156) (453,696)
Cash flows from financing activities: 
  
  
Borrowings under debt agreements1,345,855
 2,093,406
 969,061
Repayment of debt(1,197,351) (1,814,020) (750,900)
Additions to deferred charges(8,034) (17,402) (7,402)
Net proceeds from stock options exercised26,540
 11,039
 4,958
Net proceeds from issuance of common stock332,137
 531,379
 137,749
Distributions to noncontrolling interest(21,055) (17,465) (18,488)
Redemption of noncontrolling interest(2,621) (5,753) (5,711)
Common and preferred stock dividends paid(367,257) (260,574) (180,668)
Net cash provided by financing activities108,214
 520,610
 148,599
Cash acquired from the BRE merger—
 140,353
 —
Cash acquired from consolidation of co-investment4,005
 —
 —
Net increase (decrease) in cash and cash equivalents4,073
 7,119
 (115)
Cash and cash equivalents at beginning of year25,610
 18,491
 18,606
Cash and cash equivalents at end of year$29,683
 $25,610
 $18,491
      
Supplemental disclosure of cash flow information:     
Cash paid for interest, net of capitalized interest$181,106
 $130,691
 $103,516
Interest capitalized$15,571
 $22,510
 $16,486
      
Supplemental disclosure of noncash investing and financing activities: 
  
  
Issuance of Operating Partnership units for contributed properties$—
 $1,419,816
 $—
Retirement of Operating Partnership units$—
 $(1,419,816) $—
Transfer from real estate under development to rental properties$308,704
 $10,203
 $68
Transfer from real estate under development to co-investments$6,234
 $83,574
 $27,906
Reclassification to redeemable noncontrolling interest from additional paid in capital and noncontrolling interest$22,387
 $18,766
 $—
Debt assumed in connection with acquisition of co-investment$114,435
 $—
 $—
Mortgage notes (excluding BRE merger) assumed in connection with purchases of real estate including the loan premiums recorded$—
 $72,568
 $—

See accompanying notes to consolidated financial statements


F- 11

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 2015 and 2014
(Dollars in thousands, except per unit amounts)
 2015 2014
ASSETS
Real estate:   
Rental properties:   
Land and land improvements$2,522,842
 $2,424,930
Buildings and improvements9,808,627
 8,819,751
 12,331,469
 11,244,681
Less: accumulated depreciation(1,949,892) (1,564,806)
 10,381,577
 9,679,875
Real estate under development242,326
 429,096
Co-investments1,036,047
 1,042,423
Real estate held for sale, net26,879
 56,300
 11,686,829
 11,207,694
Cash and cash equivalents-unrestricted29,683
 25,610
Cash and cash equivalents-restricted93,372
 70,139
Marketable securities and other investments137,485
 117,240
Notes and other receivables19,285
 24,923
Acquired in-place lease value, net2,857
 47,748
Prepaid expenses and other assets35,580
 33,378
Total assets$12,005,091
 $11,526,732
LIABILITIES AND CAPITAL
Unsecured debt, net$3,088,680
 $2,603,548
Mortgage notes payable, net2,215,077
 2,234,317
Lines of credit, net11,707
 242,824
Accounts payable and accrued liabilities131,415
 135,162
Construction payable40,953
 30,892
Distributions payable100,266
 88,221
Other liabilities34,518
 32,444
Total liabilities5,622,616
 5,367,408
Commitments and contingencies

 

Redeemable noncontrolling interest45,452
 23,256
Capital: 
  
General Partner: 
  
Common equity (65,379,359 and 63,682,646 units issued and outstanding, respectively)6,208,535
 6,002,915
Series H 7.125% Preferred interest (liquidation value of $73,750)71,209
 71,209
 6,279,744
 6,074,124
Limited Partners: 
  
Common equity (2,214,545 and 2,168,158 units issued and outstanding, respectively)47,235
 48,665
Accumulated other comprehensive loss(39,598) (49,356)
Total partners' capital6,287,381
 6,073,433
Noncontrolling interest49,642
 62,635
Total capital6,337,023
 6,136,068
Total liabilities and capital$12,005,091
 $11,526,732

See accompanying notes to consolidated financial statements

F- 12

ESSEX PORTFOLIO, L.P. AND SUBSIDIARES
Consolidated Statements of OperationsIncome
Years ended December 31, 2007, 20062015, 2014, and 20052013
(Dollars in thousands, except per unit and unit amounts)
    2007  2006  2005
 Revenues:         
    Rental and other property  $        383,433  $        334,770  $        303,235
    Management and other fees from affiliates            5,090             5,030            10,951
          388,523          339,800          314,186
 Expenses:        
    Property operating, excluding real estate taxes           95,849            85,811            78,715
    Real estate taxes           32,575            28,587            25,764
    Depreciation and amortization         100,389            78,094            74,849
    Interest           80,995            72,898            70,784
    Amortization of deferred financing costs            3,071             2,745             1,947
    General and administrative           26,273            22,234            19,148
    Other expenses               800             1,770             5,827
          339,952          292,139          277,034
 Earnings from operations            48,571            47,661            37,152
          
 Gain on sale of real estate                   -                    -             6,391
 Interest and other income           10,310             6,176             8,524
 Equity income (loss) in co-investments            3,120            (1,503)            18,553
 Minority interests           (4,847)            (4,977)            (5,340)
       Income before discontinued operations and tax provision           57,154            47,357            65,280
 Income tax provision              (400)               (525)            (2,538)
 Income before discontinued operations           56,754            46,832            62,742
          
 Income from discontinued operations (net of minority interests)           80,546            33,015            35,558
       Net income         137,300            79,847            98,300
 Distribution on preferred units - Series F & G           (9,174)            (5,145)            (1,953)
 Distribution on preferred units - limited partners         (10,238)          (10,238)          (10,238)
       Net income available to common units  $        117,888  $          64,464  $          86,109
 Per unit data:        
    Basic:        
      Income before discontinued operations available to common units  $             1.38  $             1.23  $             2.00
      Income from discontinued operations              2.98               1.29               1.40
        Net income available to common units  $             4.36  $             2.52  $             3.40
         
    Weighted average number of units outstanding during the year    27,043,697     25,560,415     25,343,695
    Diluted:        
      Income before discontinued operations available to common units  $             1.35  $             1.21  $             1.97
      Income from discontinued operations              2.92               1.27               1.38
        Net income available to common units  $             4.27  $             2.48  $             3.35
          
    Weighted average number of units outstanding during the year    27,596,668     26,029,775     25,693,637
 2015 2014 2013
Revenues:     
Rental and other property$1,185,498
 $961,591
 $603,327
Management and other fees from affiliates8,909
 9,347
 7,263
 1,194,407
 970,938
 610,590
Expenses: 
  
  
Property operating, excluding real estate taxes234,953
 204,673
 140,060
Real estate taxes128,555
 107,873
 57,276
Depreciation and amortization453,423
 360,592
 192,420
General and administrative40,090
 40,878
 26,684
Merger and integration expenses3,798
 53,530
 4,284
Acquisition and investment related costs2,414
 1,878
 1,161
 863,233
 769,424
 421,885
Earnings from operations331,174
 201,514
 188,705
Interest expense(204,827) (164,551) (116,524)
Total return swap income5,655
 —
 —
Interest and other income19,143
 11,811
 11,633
Equity income from co-investments21,861
 39,893
 55,865
Loss on early retirement of debt, net(6,114) (268) (300)
Gains on sale of real estate and land47,333
 46,039
 1,503
Gains on remeasurement of co-investment34,014
 —
 —
Income before discontinued operations248,239
 134,438
 140,882
Income from discontinued operations—
 —
 31,173
Net income248,239
 134,438
 172,055
Net income attributable to noncontrolling interest(8,295) (7,421) (6,834)
Net income attributable to controlling interest239,944
 127,017
 165,221
Preferred interest distributions(5,255) (5,291) (5,472)
Net income available to common unitholders$234,689
 $121,726
 $159,749
Per unit data: 
  
  
Basic: 
  
  
Income before discontinued operations available to common unitholders$3.50
 $2.07
 $3.27
Income from discontinued operations—
 —
 0.79
Net income available to common unitholders$3.50
 $2.07
 $4.06
Weighted average number of common units outstanding during the year67,054,184
 58,771,666
 39,380,385
Diluted: 
  
  
Income before discontinued operations available to common unitholders$3.49
 $2.07
 $3.26
Income from discontinued operations—
 —
 0.79
Net income available to common unitholders$3.49
 $2.07
 $4.05
Weighted average number of common units outstanding during the year67,244,152
 58,921,232
 39,466,720

See accompanying notes to consolidated financial statements

F- 13

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
Years Ended December 31, 2015, 2014, and 2013
(Dollars in thousands)
 2015 2014 2013
Net income$248,239
 $134,438
 $172,055
Other comprehensive income (loss): 
  
  
Changes in fair value of cash flow hedges and reclassification to interest expense7,893
 4,168
 12,614
Changes in fair value of marketable securities1,865
 6,302
 (1,556)
Reversal of unrealized gains upon the sale of marketable securities—
 (886) (1,767)
Total other comprehensive income9,758
 9,584
 9,291
Comprehensive income257,997
 144,022
 181,346
Comprehensive income attributable to noncontrolling interest(8,295) (7,421) (6,834)
Comprehensive income attributable to controlling interest$249,702
 $136,601
 $174,512

See accompanying notes to consolidated financial statements.

F- 14

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Consolidated Statements of Partners’ Capital
Years ended December 31, 2007, 20062015, 2014, and 20052013
(Dollars and units in thousands)
  General Partner   Limited Partners Accumulated   
        Preferred       Preferred  other   
                                                                                           Common Equity  Equity Common Equity  Equity  comprehensive   
  Units  Amount  Amount Units  Amount  Amount  (loss) income  Total
Balances at December 31, 2004       23,041  $         566,865  $            24,412         2,478  $           59,436  $          126,690  $                                 -  $                   777,403
Comprehensive income:                      
   Net income                 -             77,763                 1,953                  -                8,346              10,238                                   -                       98,300
   Change in fair value of cash flow hedges                 -                         -                         -                  -                         -                         -                             660                             660
Comprehensive income                                          98,960
Issuance of common units under                      
   stock-based compensation plans            103                5,767                         -                  -                         -                         -                                   -                          5,767
Retirement of Essex Property Trust, Inc.                      
   common stock         (286)           (25,000)                         -                  -                         -                         -                                   -                     (25,000)
Redemption of limited partner common units                 -                         -                         -             (89)               (2,861)                         -                                   -                         (2,861)
Vested series Z and Z-1 incentive units                 -                         -                         -               48                 2,351                         -                                   -                           2,351
Reallocation of partners' capital                 -                 5,135                         -                  -               (5,135)                         -                                   -                                   -
Partners' distributions                 -           (74,635)               (1,953)                  -              (7,885)            (10,238)                                   -                       (94,711)
Balances at December 31, 2005     22,858  $         555,895  $            24,412         2,437  $           54,252  $          126,690  $                           660  $                    761,909
Comprehensive income:                      
   Net income                 -             57,603                 5,145                  -                 6,861              10,238                                   -                       79,847
   Change in fair value of cash flow hedges                 -                         -                         -                  -                         -                         -                        (2,933)                        (2,933)
Comprehensive income                                           76,914
Issuance of common units under                      
   Stock-based compensation plans              92                5,575                         -                  -                         -                         -                                   -                          5,575
   Sale of common stock427             48,273                         -                  -                         -                         -                                   -                       48,273
Issuance of general partner common units39                   443                         -                  -                         -                         -                                   -                             443
Issuance of limited partners' common units                 -                         -                         -               73                7,704                         -                                   -                          7,704
Redemption of limited partner common units                 -                         -                         -             (57)              (2,863)                         -                                   -                        (2,863)
Vested series Z and Z-1 incentive units                 -                         -                         -               42                 1,759                         -                                   -                           1,759
Reallocation of partners' capital                 -                         -                         -                  -                   307                         -                                   -                             307
Partners' distributions                 -            (77,719)               (5,145)                  -              (8,290)            (10,238)                                   -                     (101,392)
Balances at December 31, 2006      23,416  $         590,070  $            24,412         2,495  $           59,730  $          126,690  $                      (2,273)  $                   798,629
Comprehensive income:                      
   Net income                 -            106,464                 9,174                  -               11,424              10,238                                   -                      137,300
   Settlement of forward-starting swap                 -                         -                         -                  -                         -                         -                             1,311                             1,311
   Change in fair value of cash flow hedges and                     
   amortization of gain on settlement of swap                 -                         -                         -                  -                         -                         -                        (8,026)                        (8,026)
Comprehensive income                                         130,585
Issuance of common units under                      
   Stock-based compensation plans              87                5,648                         -                  -                         -                         -                                   -                          5,648
   Sale of common stock          1,671            213,672                         -                  -                         -                         -                                   -                      213,672
Retirement of common units from retirement of   
   common stock
         
(323)
  
         
(32,644)
                         -                  -                         -                         -                                   -                     (32,644)
Issuance of general partner common units and 
   reallocation between general partner and limited
   partners
              
 
26
  
         
 
 (16,504)
  
                    
 
   -
 
               
 
  -
  
                       
 
18,767
  
                    
 
   -
  
                               
 
  -
  
                    
 
2,263
Issuance of limited partners' common units                 -                         -                         -                  -                         -                         -                                   -                                   -
Redemption of limited partner common units                 -                         -                         -             (37)              (2,088)                         -                                   -                        (2,088)
Vested series Z and Z-1 incentive units                 -                         -                         -               29                 1,595                         -                                   -                           1,595
Partners' distributions                 -             (91,812)               (9,174)                  -              (9,255)            (10,238)                                   -                    (120,479)
Balances at December 31, 2007     24,877  $         774,894  $            24,412         2,487  $            80,173  $          126,690  $                      (8,988)  $                     997,181
 General Partner Limited Partners Accumulated    
     Preferred     Preferred other    
 Common Equity Equity Common Equity Equity comprehensive Noncontrolling  
 Units Amount Amount Units Amount Amount loss, net Interest Total
Balances at December 31, 201236,443
 $1,762,856
 $71,209
 2,122
 $45,593
 $—
 $(68,231) $68,689
 $1,880,116
Net income—
 150,811
 5,472
 —
 8,938
 —
 —
 6,834
 172,055
Reversal of unrealized gains upon the sale of marketable securities—
 —
 —
 —
 —
 —
 (1,767) —
 (1,767)
Change in fair value of cash flow hedges and amortization of swap settlements—
 —
 —
 —
 —
 —
 12,614
 —
 12,614
Changes in fair value of marketable securities—
 —
 —
 —
 —
 —
 (1,556) —
 (1,556)
Issuance of common units under: 
  
  
  
  
  
  
  
  
Stock and unit based compensation plans65
 7,244
 —
 —
 —
 —
 —
 —
 7,244
Sale of common stock by the general partner913
 138,366
 —
 —
 —
 —
 —
 —
 138,366
Stock and unit based compensation costs—
 (907) —
 28
 2,515
 —
 —
 —
 1,608
Redemptions—
 (3,717) —
 —
 (617) —
 —
 (1,377) (5,711)
Distributions to noncontrolling interest—
 —
 —
 —
 —
 —
 —
 (8,016) (8,016)
Distributions declared—
 (180,771) (5,472) —
 (10,472) —
 —
 —
 (196,715)
Balances at December 31, 201337,421
 1,873,882
 71,209
 2,150
 45,957
 —
 (58,940) 66,130
 1,998,238
Net income—
 116,859
 5,291
 —
 4,867
 —
 —
 7,421
 134,438
Reversal of unrealized gains upon the sale of marketable securities—
 —
 —
 —
 —
 —
 (886) —
 (886)
Changes in fair value of derivatives and amortization of swap settlements—
 —
 —
 —
 —
 —
 4,168
 —
 4,168
Changes in fair value of marketable securities—
 —
 —
 —
 —
 —
 6,302
 —
 6,302
Issuance of common units under: 
  
  
  
  
  
  
  
  

F- 15

Common stock issued as consideration by general partner in merger23,067
 3,774,087
 —
 —
 —
 —
 —
 —
 3,774,087
General partner's stock based compensation218
 11,024
 —
 —
 —
 —
 —
 —
 11,024
Sale of common stock by the general partner2,943
 532,670
 —
 —
 —
 —
 —
 —
 532,670
Equity-based compensation costs—
 5,719
 —
 28
 6,153
 —
 —
 —
 11,872
Reclassification of noncontrolling interest to redeemable noncontrolling interest—
 (19,823) —
 (10) 4,017
 —
 —
 (5,084) (20,890)
Changes in the redemption value of redeemable noncontrolling interest—
 312
 —
 —
 —
 —
 —
 —
 312
Conversion of Series G preferred stock34
 4,349
 —
 —
 —
 —
 —
 —
 4,349
Contributions from noncontrolling interest—
 —
 —
 8,561
 1,419,816
 —
 —
 —
 1,419,816
Retirement of noncontrolling interest—
 —
 —
 (8,561) (1,419,816) —
 —
 —
 (1,419,816)
Distributions to noncontrolling interests—
 —
 —
 —
 —
 —
 —
 (4,890) (4,890)
Redemptions—
 (3,374) —
 —
 (1,181) —
 —
 (942) (5,497)
Distributions declared—
 (292,790) (5,291) —
 (11,148) —
 —
 —
 (309,229)
Balances at December 31, 201463,683
 6,002,915
 71,209
 2,168
 48,665
 —
 (49,356) 62,635
 6,136,068
Net income—
 226,865
 5,255
 —
 7,824
 —
 —
 8,295
 248,239
Change in fair value of derivatives and amortization of swap settlements—
 —
 —
 —
 —
 —
 7,893
 —
 7,893
Changes in fair value of marketable securities—
 —
 —
 —
 —
 —
 1,865
 —
 1,865
Issuance of common units under: 
  
  
  
  
  
  
  
  
General partner's stock based compensation207
 26,540
 —
 —
 —
 —
 —
 —
 26,540
Sale of common stock by the general partner1,482
 332,137
 —
 —
 —
 —
 —
 —
 332,137
Equity based compensation costs—
 5,946
 —
 54
 3,700
 —
 —
 —
 9,646
Changes in redemption value of redeemable noncontrolling interest—
 (2,615) —
 —
 —
 —
 —
 —
 (2,615)
Reclassification of noncontrolling interest to redeemable noncontrolling interest—
 (7,657) —
 —
 —
 —
 —
 (12,115) (19,772)

F- 16

Distributions to noncontrolling interests—
 —
 —
 —
 —
 —
 —
 (8,751) (8,751)
Redemptions7
 (2,199) —
 (7) —
 —
 —
 (422) (2,621)
Distributions declared—
 (373,397) (5,255) —
 (12,954) —
 —
 —
 (391,606)
Balances at December 31, 201565,379
 $6,208,535
 $71,209
 2,215
 $47,235
 $—
 $(39,598) $49,642
 $6,337,023

See accompanying notes to consolidated financial statements.statements

F- 17
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 2007, 2006 and 2005
(Dollars in thousands)
   2007  2006  2005
Cash flows from operating activities:         
   Net income $   137,300  $     79,847  $     98,300
   Minority interests         4,847         5,639         5,687
   Adjustments to reconcile net income to net         
    cash provided by operating activities:         
     Gain on the sales of real estate         (66,559)     (22,096)     (37,802)
     The Operating Partnership's share of gain on the sales of         
       co-investments assets        (2,046)                -     (18,115)
     Impairment loss and reserve for loan loss            500            800         1,300
     Equity (income) loss of co-investments           (320)         1,503       (7,420)
     Depreciation and amortization     100,389       83,036       80,075
     Amortization of deferred financing costs         3,071         2,743         1,970
     Changes in operating assets and liabilities:         
        Prepaid expenses and other assets         2,458            493       (4,762)
        Accounts payable and accrued liabilities         9,984         6,162         4,709
        Other liabilities         1,254         1,808            667
           Net cash provided by operating activities     190,878     159,935     124,609
Cash flows used in investing activities:         
   Additions to real estate:         
        Acquisitions of real estate    (336,312)   (199,107)     (91,496)
        Improvements to recent acquisitions        (5,145)       (5,238)       (5,009)
        Redevelopment      (38,618)     (25,609)     (14,229)
        Revenue generating capital expenditures      (11,044)       (4,788)       (2,933)
        Non-revenue generating capital expenditures      (22,620)     (19,120)     (14,568)
   Additions to real estate under development    (142,968)     (68,362)     (24,861)
   Dispositions of real estate     218,069       38,092       68,585
   Changes in restricted cash and refundable deposits            467         4,371         7,318
   Purchases of marketable securities        (7,776)                -                 -
   Sales of marketable securities         5,759                -                 -
   Advances under notes and other receivables      (36,145)     (26,125)       (3,220)
   Collections of notes and other receivables         3,724       21,234         4,880
   Contributions to co-investments      (21,647)     (38,395)       (4,799)
   Distributions from co-investments       16,385       10,171       49,489
           Net cash used in investing activities    (377,871)   (312,876)     (30,843)
Cash flows from financing activities:         
   Borrowings under mortgage and other notes payable and lines of credit     866,397     324,228     205,096
   Repayment of mortgage and other notes payable and lines of credit    (678,383)   (266,965)   (389,363)
   Additions to deferred charges        (1,800)          (587)       (6,339)
   Proceeds from settlement of derivative instruments         1,311                -                 -
   Proceeds from exchangeable bonds                 -                -     225,000
   Retirement of Essex Property Trust, Inc. common stock      (32,644)                -     (25,000)
   Net proceeds from stock options exercised         4,321         4,287         4,489
   Net proceeds from issuance of common units to general partners     213,672       48,273                 -
   Net proceeds from issuance of preferred equity, Series G                 -     145,912                 -
   Contributions from minority interest partner         4,000                -                 -
   Distributions to limited partners and minority interest partners      (82,715)     (21,657)     (23,165)
   Redemption of limited partner units and minority interests        (9,233)       (4,779)       (4,528)
   Distributions to general partner      (97,639)     (80,446)     (76,263)
           Net cash provided by (used in) financing activities     187,287     148,266     (90,073)
Net increase (decrease) in cash and cash equivalents            294       (4,675)         3,693
Cash and cash equivalents at beginning of year         9,662       14,337       10,644
Cash and cash equivalents at end of year $       9,956  $       9,662  $     14,337
                                                                                             (Continued)
F-7
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 2007, 20062015, 2014, and 20052013
(Dollars in thousands)
   2007  2006  2005
Supplemental disclosure of cash flow information:         
   Cash paid for interest, net of $5,100, $3,900 and $1,100         
    capitalized in 2007, 2006 and 2005, respectively $     74,397  $     68,686  $     71,619
Supplemental disclosure of noncash investing and         
 financing activities:         
   Mortgage notes assumed in connection with purchases         
     of real estate $     43,839                -                 -
   Land contributed by a partner in a consolidated joint venture $     22,200                -                 -
   Issuance of DownREIT units in connection with         
     purchase of real estate $       7,067                -                 -
   Issuance of Operating Partnership units in         
     connection with the purchase of real estate                 -  $       7,704                 -
   Land contributed by a partner in a consolidated joint venture         
   Accrual of distributions $     28,521  $     24,910  $     22,496
   Change in value of cash flow hedges and amortization of swap settlement         
       included in other liabilities or other assets as applicable $      (8,026)  $     (2,933)  $          660
   Accruals for capital expenditures included in the year-end balance of         
       accounts payable and accrued liabilities $       8,703  $       4,804  $       4,636
 2015 2014 2013
Cash flows from operating activities:     
Net income$248,239
 $134,438
 $172,055
Adjustments to reconcile net income to net cash provided by operating activities: 
  
  
Depreciation and amortization453,423
 360,592
 193,518
Earnings from co-investments(21,392) (33,335) (14,613)
Operating Partnership's share of gain on the sales of co-investments(469) (6,558) (41,252)
Operating distributions from co-investments46,608
 49,486
 19,636
Gain on the sales of real estate and land(47,333) (46,039) (30,725)
Loss on early retirement of debt, net6,114
 268
 300
Gains on sale of marketable securities and other investments(598) (886) (1,767)
Amortization of (premium) discount and financing costs, net(19,361) (14,672) 12,216
Amortization of discount on notes receivables—
 —
 (844)
Amortization of discount on marketable securities and other investments(12,389) (9,325) (6,556)
Non cash merger and integration expenses—
 9,025
 —
Equity-based compensation6,061
 8,740
 4,508
Gains on remeasurement of co-investment(34,014) —
 —
Changes in operating assets and liabilities: 
  
  
Prepaid expenses, in-place lease value, receivables and other assets267
 15,828
 (1,588)
Accounts payable and accrued liabilities(9,633) 24,233
 72
Other liabilities1,887
 1,517
 22
Net cash provided by operating activities617,410
 493,312
 304,982
Cash flows from investing activities: 
  
  
Additions to real estate: 
  
  
Acquisitions of real estate and acquisition related capital expenditures(515,726) (387,547) (348,774)
Redevelopment(99,346) (81,429) (47,289)
Development acquisitions of and additions to real estate under development(157,900) (152,766) (17,757)
Capital expenditures on rental properties(57,277) (78,864) (56,919)
Proceeds from insurance for property losses16,811
 35,547
 —
BRE merger consideration paid—
 (555,826) —
Acquisition of membership interest in co-investment(115,724) —
 —
Dispositions of real estate319,008
 141,189
 65,496
Dispositions of co-investments31,556
 13,900
 —
Changes in restricted cash and refundable deposits(14,068) (36,582) (9,149)
Purchases of marketable securities(14,300) (20,516) (16,442)
Sales and maturities of marketable securities and other investments8,907
 8,753
 24,172
Purchases of and advances under notes and other receivables—
 —
 (56,750)
Collections of notes and other receivables—
 76,585
 53,438
Contributions to co-investments(127,879) (246,006) (162,578)
Non-operating distributions from co-investments382
 136,406
 118,856

F- 18

Net cash used in investing activities(725,556) (1,147,156) (453,696)
Cash flows from financing activities: 
  
  
Borrowings under debt agreements1,345,855
 2,093,406
 969,061
Repayment of debt(1,197,351) (1,814,020) (750,900)
Additions to deferred charges(8,034) (17,402) (7,402)
Net proceeds from stock options exercised26,540
 11,039
 4,958
Net proceeds from issuance of common units332,137
 531,379
 137,749
Distributions to noncontrolling interest(7,615) (4,841) (8,016)
Redemption of limited partners units and noncontrolling interests(2,621) (802) (5,711)
Common units and preferred units and preferred interests distributions paid(380,697) (278,149) (191,140)
Net cash provided by financing activities108,214
 520,610
 148,599
Cash acquired from the BRE merger—
 140,353
 —
Cash acquired from consolidation of co-investment4,005
 —
 —
Net increase (decrease) in cash and cash equivalents4,073
 7,119
 (115)
Cash and cash equivalents at beginning of year25,610
 18,491
 18,606
Cash and cash equivalents at end of year$29,683
 $25,610
 $18,491
      
Supplemental disclosure of cash flow information:     
Cash paid for interest, net of capitalized interest$181,106
 $130,691
 $103,516
Interest capitalized$15,571
 $22,510
 $16,486
      
Supplemental disclosure of noncash investing and financing activities: 
  
  
Issuance of Operating Partnership units for contributed properties$—
 $1,419,816
 $—
Retirement of Operating Partnership units$—
 $(1,419,816) $—
Transfer from real estate under development to rental properties$308,704
 $10,203
 $68
Transfer from real estate under development to co-investments$6,234
 $83,574
 $27,906
Reclassification to redeemable noncontrolling interest from additional paid in capital and noncontrolling interest$22,387
 $18,766
 $—
Debt assumed in connection with acquisition of co-investment$114,435
 $—
 $—
Mortgage notes (excluding BRE merger) assumed in connection with purchases of real estate including the loan premiums recorded$—
 $72,568
 $—

See accompanying notes to consolidated financial statements.statements


F- 19

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007, 20062015, 2014, and 20052013
(Dollars in thousands, except for per share and per unit amounts)
(1) Organization
 
The accompanying consolidated financial statements present the accounts of Essex Portfolio, L.P. (the “Operating Partnership”), and its subsidiaries.  Essex Property Trust, Inc. (the(“Essex”, “ESS”, or the “Company”) was incorporated in, which include the stateaccounts of Maryland in March 1994. On June 13, 1994, the Company commenced operations withand Essex Portfolio, L.P. and subsidiaries (the “Operating Partnership,” which holds the completion of an initial public offering (the “Offering”) in which it issued 6,275,000 shares of common stock at $19.50 per share. The net proceedsoperating assets of the Offering of $112.1 million were usedCompany). Unless otherwise indicated, the notes to acquire a 77.2% general partnership interest inconsolidated financial statements apply to both the Company and the Operating Partnership.

The Company hasESS is the sole general partner in the Operating Partnership with a 90.9%96.7% general partner interest and the limited partners ownowned a 9.1%3.3% interest in the Operating Partnership as of December 31, 2007.2015. The limited partners may convert their 2,273,472 Operating Partnership units into an equivalent number of shares of common stock. Total Operating Partnership limited partnership units outstanding were 2,214,545 and 2,168,158 as of December 31, 2015 and 2014, respectively, and the redemption value of the units, based on the closing price of the Company’s common stock totaled approximately $530.2 million and $447.9 million, as of December 31, 2015 and 2014, respectively. The Company has reserved shares of common stock for such conversions. These conversion rights may be exercised by the limited partners at any time through 2024.

As of December 31, 2007,2015, the Operating PartnershipCompany owned or had ownership interests in 134246 apartment communities, (aggregating 27,489 units)59,160 apartment homes), six officefour commercial buildings, two recreational vehicle parks (totaling 338 spaces), and one manufactured housing community (containing 157 sites)eight active development projects (collectively, the “Properties”“Portfolio”). The Propertiescommunities are located in Southern California (Los Angeles, Orange, Riverside, Santa Barbara, San Diego, and Ventura counties), Northern California (the San Francisco Bay Area), and the Seattle metropolitan area,areas.

On April 1, 2014, Essex completed the merger with BRE Properties, Inc. (“BRE”).  In connection with the closing of the merger, (1) BRE merged into a wholly owned subsidiary of Essex, and other region (Houston, Texas)(2) each outstanding share of BRE common stock was converted into (i) 0.2971 shares (the “Stock Consideration”) of Essex common stock, and (ii) $7.18 in cash, (the “Cash Consideration”), plus cash in lieu of fractional shares for total consideration of approximately $4.3 billion.  The Cash Consideration was adjusted as a result of the authorization and declaration of a special distribution to the stockholders of BRE of $5.15 per share of BRE common stock payable to BRE stockholders of record as of the close of business on March 31, 2014 (the “Special Dividend”).  The Special Dividend was payable as a result of the closing of the sale of certain interests in assets of BRE to certain parties, which closed on March 31, 2014.  Pursuant to the terms of the merger agreement, the amounts payable as a Special Dividend reduced the Cash Consideration of $12.33 payable by Essex in the merger to $7.18 per share of BRE common stock.

Essex issued approximately 23.1 million shares of Essex common stock as Stock Consideration in the merger.  For purchase accounting, the value of the common stock issued by Essex upon the consummation of the merger was determined based on the closing price of BRE’s common stock on the closing date of the merger. As a result of Essex being admitted to the S&P 500 on the same date as the closing of the merger, Essex’s common stock price experienced significantly higher than usual trading volume and the closing price of $174 per share was significantly higher than its volume-weighted average trading price for the days before and after April 1, 2014.  BRE’s common stock did not experience the same proportionate increase in common stock price leading up to April 1, 2014.  As a result, given that a substantial component of the purchase price is an exchange of equity instruments, Essex used the closing price of BRE’s common stock on April 1, 2014 of $61 per share, less the Cash Consideration, as the fair value of the equity consideration.  After deducting the Special Dividend and the Cash Consideration per share, this resulted in a value of $48.67 per share of BRE common stock which is the equivalent of approximately $164 per share of Essex common stock issued.

(2) Summary of Critical and Significant Accounting Policies

(a) Principles of Consolidation and Basis of Presentation

The accounts of the Operating Partnership,Company, its controlled subsidiaries and the variable interest entities (“VIEs”) in which it is the primary beneficiary are consolidated in the accompanying financial statements.statements and prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). 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. All significant inter-company accounts and transactions have been eliminated. Certain reclassifications have been made to prior year amounts to conform to the current year’s presentation. Such reclassifications had no net effect on previously reported financial results.


F- 20
Table of Contents
In accordance with Financial Accounting Standards Board (FASB) Interpretation No. 46 Revised (“FIN 46R”), “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51”,
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015, 2014, and 2013


Noncontrolling interest includes the 3.3% limited partner interests in the Operating Partnership not held by the Company at both December 31, 2015 and 2014. These percentages include the Operating Partnership’s vested long term incentive plan units (see Note 13).

The Company consolidates the Operating Partnership and 19 DownREIT limited partnerships (comprising twelve properties)eleven communities), an office building thatsince the Company is subject to loans made by the Operating Partnership, and prior to the sale of the property during 2007, the buildings and improvements that were owned by a third-party subject to a ground lease on land that was owned by the Operating Partnership.  The Operating Partnership consolidates these entities because it is deemed the primary beneficiary under FIN 46R.of these variable interest entities (“VIEs”). The Company has no assets or liabilities other than its investment in the Operating Partnership. The consolidated total assets and liabilities related to these DownREIT VIEs, net of intercompany eliminations, were approximately $222.7$241.0 million and $163.9$206.7 million, respectively, as of December 31, 20072015, and $269.5$235.1 million and $145.5$209.1 million, respectively, as of December 31, 2006.2014.

The DownREIT entities thatVIEs collectively own twelveeleven apartment communities were investments made under arrangements wherebyin which Essex Management Company (“EMC”) becameis the general partner, the Operating Partnership becameis a special limited partner, and the other limited partners were granted rights of redemption for their interests. Such limited partners can request to be redeemed and the Operating PartnershipCompany, subject to certain restrictions, can elect to redeem their rights for cash or by issuing shares of the Company'sits common stock on a one share per unit basis.  Conversion values will be based on the market value of the Company's common stock at the time of redemption multiplied by the number of units stipulated under the above arrangements. The other limited partners receive distributions based on the Company's current dividend rate times the number of units held. AsTotal DownREIT units outstanding were 963,172 and 974,790 as of December 31, 2007,2015 and 2014 respectively, and the maximum numberredemption value of shares that could be issued to meet redemptionthe units, based on the closing price of these DownREIT entities is 1,201,012.  Asthe Company’s common stock totaled approximately $230.6 million and $201.4 million, as of December 31, 20072015 and 2006, the2014, respectively. The carrying value of redeemable noncontrolling interest in the otheraccompanying balance sheets was $45.5 million and $23.3 million as of December 31, 2015 and 2014, respectively. The amounts represent units of limited partners' interests in DownREIT VIEs as to which it is outside of the Company’s control to redeem the DownREIT units with Company common stock and may potentially be redeemed for cash, and are presented at either their redemption value or historical cost, depending on the limited partner's right to redeem their units as of the balance sheet date. The carrying value of DownREIT units as to which it is within the control of the Company to redeem the units with its common stock is $18.4 million and $30.8 million as of December 31, 2015 and 2014, respectively and is classified within minoritynoncontrolling interests in the accompanying consolidated balance sheets.
 
Minority interests include the 9.1% and 9.6% limited partner interests in the Operating Partnership not held by the Company at December 31, 2007 and 2006, respectively. The Company periodically adjusts the carrying value of minority interest in the Operating Partnership to reflect its share of the book value of the Operating Partnership. Such adjustments are recorded to stockholders’ equity as a reallocation of minority interest in the Operating Partnership in the accompanying consolidated statements of stockholders’ equity.  The minority interest balance also includes the Operating Partnership’s cumulative redeemable preferred units (see Note 12).
F-9
Interest holders in VIEs consolidated by the Operating PartnershipCompany are allocated a priority of net income equal to the cash payments made to those interest holders for services rendered or distributions from cash flow.  The remaining results of operations are generally allocated to the Operating Partnership.Company.

As of December 31, 20072015 and 20062014, the Operating Partnership was involved with twoCompany did not have any VIEs of which it iswas not deemed to be the primary beneficiary.  Total assets

(b) Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers." The new standard provides a single comprehensive revenue recognition model for contracts with customers (excluding certain contracts, such as lease contracts) to improve comparability within industries. The new standard requires an entity to recognize revenue to reflect the transfer of these entities were approximately $71.7goods or services to customers at an amount the entity expects to be paid in exchange for those goods and services and provide enhanced disclosures, all to provide more comprehensive guidance for transactions such as service revenue and contract modifications. In August 2015, the FASB deferred the effective date of the new standard by one year, and it is now effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted but not before the original effective date. The new standard may be applied using either a full retrospective or a modified approach upon adoption. The Company has not yet selected a transition method and is currently evaluating the impact of adopting the new standard on its consolidated results of operations and financial position.

In February 2015, the FASB issued ASU No. 2015-02 "Consolidation (Topic 810): Amendments to the Consolidation Analysis", which provides new consolidation guidance and makes changes to both the variable interest model and the voting model. Among other changes, the new standard specifically eliminates the presumption in the current voting model that a general partner controls a limited partnership or similar entity unless that presumption can be overcome. Generally, only a single limited partner that is able to exercise substantive kick-out rights will consolidate. The new standard will be effective for the Company beginning on January 1, 2016 and early adoption is permitted, including adoption in an interim period. The new standard must be applied using a modified retrospective approach by recording a cumulative-effect adjustment to equity/capital

F- 21
Table of Contents

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015, 2014, and 2013


as of the beginning of the period of adoption or retrospectively to each period presented. The Company is currently evaluating the impact of adopting the new standard on its consolidated results of operations and financial position.

In April 2015, the FASB issued ASU No. 2015-03 "Simplifying the Presentation of Debt Issuance Costs", which requires companies to present debt financing costs as a direct deduction from the carrying amount of the associated debt liability rather than as an asset, consistent with the presentation of debt discounts on the consolidated balance sheets. The new standard will be effective for the Company beginning on January 1, 2016 and early adoption is permitted. The Company adopted this standard during the second quarter of 2015. This adoption resulted in a reclassification of $29.4 million and $78.5 million and totalin debt issuance costs, net of accumulated amortization, from an asset to a reduction to associated debt liabilities were approximately  $58.3 million and $58.4 million, as of December 31, 20072014.

In January 2016, the FASB issued ASU No. 2016-01 "Recognition and 2006, respectively.Measurement of Financial Assets and Financial Liabilities", which requires changes to the classification and measurement of investments in certain equity securities and to the presentation of certain fair value changes for financial liabilities measured at fair value. The Operating Partnership does not have a significant exposure to loss fromnew standard will be effective for the Company beginning on January 1, 2018 and early adoption is permitted. The Company is currently evaluating the impact of this amendment on its involvement with these unconsolidated VIEs.consolidated results of operations and financial position.
 
(b)(c) Real Estate Rental Properties

Significant expenditures, which improve or extend the life of an asset and have a useful life of greater than one year, are capitalized. Operating real estate assets are stated at cost and consist of land, buildings and improvements, furniture, fixtures and equipment, and other costs incurred during their development, redevelopment and acquisition.  Expenditures for maintenance and repairs are charged to expense as incurred.

The depreciable life of various categories of fixed assets is as follows:
Computer software and equipment
3 - 5 years
Interior unitapartment home improvements5 years
Furniture, fixtures and equipment5 years
Land improvements and certain exterior components of real property10 years
Real estate structures30 years
 
In accordance with SFAS No. 67, “Accounting for Costs and Initial Rental Operations of Real Estate Projects,” the Operating PartnershipThe Company capitalizes predevelopment costs incurred in the pursuit of new development opportunities, in the negotiation process, as well as the entitlement process with a high likelihood of the projects becoming development activities.  Predevelopment costs for which a future development is no longer considered probable are charged to expense.  Allall costs incurred with the predevelopment, development or redevelopment of real estate assets are capitalized if they are clearly associated with the predevelopment, development or redevelopment of rental property, or are associated with the construction or expansion of real property. Such capitalized costs include land, land improvements, allocated costs of the Operating Partnership’sCompany’s project management staff, construction costs, as well as interest and related loan fees, property taxes and insurance. Capitalization begins for predevelopment, development, and redevelopment projects when activity commences. Capitalization ends when the apartment home is completed and the property is available for a new resident.resident or if the development activities cease.

In accordance with FASB’s Statement of Financial Accounting Standard No. 141 (“SFAS No. 141”) “Business Combinations,” the Operating PartnershipThe Company allocates the purchase price of real estate to land and building including personal property, and identifiable intangible assets, such as the value of above, below and at-market in-place leases. The values of the above and below market leases are amortized and recorded as either a decrease (in the case of above market leases) or an increase (in the case of below market leases) to rental revenue over the remaining term of the associated leases acquired.acquired, which in the case of below market leases the Company assumes lessees will elect to renew their leases. The value of acquired at-marketin-place leases are amortized to expense over the term the Operating PartnershipCompany expects to retain the acquired tenant, which is generally 2015 months.
In accordance with SFAS No. 141 and its applicability to The net carrying value of acquired in-place leases we performas of December 31, 2015 of $2.9 million is expected to be recognized in amortization expense primarily in 2016.

The Company performs the following evaluation for properties we acquire:communities acquired:
 
(1)adjust the purchase price for any fair value adjustments resulting from such things as assumed debt or contingencies;
(2)estimate the value of the real estate “as if vacant” as of the acquisition date;
(2)  
(3)allocate that value among land and building and determine the associated asset life for each;      buildings including personal property;
(3)  
(4)compute the value of the difference between the “as if vacant” value and the adjusted purchase price, which will represent the total intangible assets;

F- 22
Table of Contents

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015, 2014, and 2013


(4)  allocate
(5)compute the value of the above and below market leases to the intangible assets and determine the associated life of the above market/ below market leases;
(5)  allocate
(6)compute the remaining intangible value toof the at-market in-place leases orand customer relationships, if any, and the associated lives of these assets.

Whenever events or changes in circumstances indicate that the carrying amount of a property held for investment or held for sale may not be fully recoverable, the carrying amount will be evaluated for impairment. If the sum of the property’s expected future cash flows (undiscounted and without interest charges) is less than the carrying amount
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(including (including intangible assets) of thea property held for investment, then the Operating PartnershipCompany will recognize an impairment loss equal to the excess of the carrying amount over the fair value of the property. Such fairFair value of a property is determined using conventional real estate valuation methods, such as discounted cash flow, the property’s unleveraged yield in comparison to the unleveraged yields and sales prices of similar propertiescommunities that have been recently sold, and other third party information, if available. PropertiesCommunities held for sale are carried at the lower of cost and fair value less estimated costs to sell.
During the second quarter As of 2006, the Operating Partnership recorded an impairment loss of $0.8 millionDecember 31, 2015 and in fourth quarter of 2005 the Operating Partnership recorded an impairment loss of $1.3 million resulting from write-downs of a property’s value in Houston, Texas, to reduce the property’s carrying value to its estimated fair value.  The2014, two and one properties were classified as held for sale, respectively. No impairment charges arewere recorded in other expenses in the accompanying consolidated statements of operations.2015, 2014 or 2013.

In the normal course of business, the Operating PartnershipCompany will receive purchase offers for sale of its Properties,communities, either solicited or unsolicited. For those offers that are accepted, the prospective buyer will usually require a due diligence period before consummation of the transaction. It is not unusual for matters to arise that result in the withdrawal or rejection of the offer during this process. The Operating PartnershipCompany classifies real estate as "held for sale" when all criteria under Statement of Financial Accounting Standard No. 144 (“SFAS No. 144”), "Accountingthe accounting standard for the Impairment or Disposaldisposals of Long-Lived Assets"long-lived assets have been met.  In accordance with SFAS No. 144, the Operating Partnership presents income and gains/losses on properties sold as discontinued operations net of minority interests. Real estate investments accounted for under the equity method of accounting remain classified in continuing operations upon disposition.  (See Note 7 for a description of the Operating Partnership’s discontinued operations for 2007, 2006, and 2005).

(c)(d) Co-investments

The Operating PartnershipCompany owns investments in joint ventures (“co-investments”) in which it has significant influence, but its ownership interest does not meet the criteria for consolidation in accordance with FIN 46R or Emerging Issues Task Force Consensus No. 04-05 (“EITF 04-05”), “Determining Whether a General Partner or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights.”accounting standards. Therefore, the Operating PartnershipCompany accounts for these investments using the equity method of accounting. Under the equity method of accounting, the investment is carried at the cost of assets contributed, plus the Operating Partnership’sCompany’s equity in earnings less distributions received and the Operating Partnership’sCompany’s share of losses.

A majority of thesethe co-investments, excluding the preferred equity investments, compensate the Operating PartnershipCompany for its asset management services and some of these investments may provide promote distributions if certain financial return benchmarks are achieved. Asset management fees are recognized when earned, and promote fees are recognized when the earnings events have occurred and the amount is determinable and collectible.  Asset management fees andAny promote fees are reflected in interest and other and equity income in co-investments, respectively, in the accompanying consolidated statements of operations.(loss) from co-investments.

(d)(e) Revenues and Gains on Sale of Real Estate

Revenues from tenants renting or leasing apartment units, recreational vehicle park spaces or manufactured housing community spaceshomes are recorded when due from tenants and are recognized monthly as they are earned, which is not materially different than on a straight-line basis. Units or spacesApartment homes are rented under short-term leases (generally, lease terms of 6 to 12 months) and may provide no rent for one or two months, depending on the market conditions and leasing practices of the Operating Partnership’s competitors in each sub-market at the time the leases are executed.. Revenues from tenants leasing commercial space are recorded on a straight-line basis over the life of the respective lease.

The Operating PartnershipCompany recognizes gains on sales of real estate when a contract is in place, a closing has taken place, the buyer’s initial and continuing investment is adequate to demonstrate a commitment to pay for the property and the Operating PartnershipCompany does not have a substantial continuing involvement inwith the property.

(e)(f) Cash Equivalents and Restricted Cash

Highly liquid investments with original maturities of three months or less when purchased are classified as cash equivalents. Restricted cash balances relate primarily to reserve requirements for capital replacement at certain Propertiescommunities in connection with the Operating Partnership’sCompany’s mortgage debt.

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(f)(g)  Marketable Securities and Other Investments

Marketable securities consist of  U.S. treasury or agency securities with original maturities of more than three months when purchased.  The Operating Partnership has classified these debt securities as held-to-maturity securities, and the Operating PartnershipCompany reports theits available for sale securities at amortized cost.fair value, based on quoted market prices (Level 1 for the common stock and investment funds, Level 2 for the unsecured bonds and Level 3 for the limited partnership interests, as defined by the

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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015, 2014, and 2013


FASB standard for fair value measurements as discussed later in Note 2), and any unrealized gain or loss is recorded as other comprehensive income (loss). There were no other than temporary impairment charges for the years ended December 31, 2015, 2014, and 2013. Realized gains and losses, and interest income, and amortization of purchase discounts are included in interest and other income on the consolidated statement of operations.income.

(g)As of December 31, 2015 and 2014, marketable securities and other investments consisted primarily of investment-grade unsecured bonds, common stock, investments in mortgage backed securities, investment funds that invest in U.S. treasury or agency securities, and other limited partnership investments.  As of December 31, 2015 and 2014, the Company classified its investments in mortgage backed securities, which mature in November 2019 and September 2020, as held to maturity, and accordingly, these securities are stated at their amortized cost.  The discount on the mortgage backed securities is being amortized to interest income based on an estimated yield and the maturity date of the securities.


As of December 31, 2015 and 2014 marketable securities and other investments consist of the following ($ in thousands):

 December 31, 2015
 
Amortized
Cost
 
Gross
Unrealized
Gain (Loss)
 
Carrying
Value
Available for sale:     
Investment-grade unsecured bonds$11,618
 $68
 $11,686
Investment funds - US treasuries3,675
 (9) 3,666
Common stock and stock funds34,655
 7,091
 41,746
Held to maturity: 
  
  
Mortgage backed securities80,387
 —
 80,387
Total - Marketable securities and other investments$130,335
 $7,150
 $137,485

 December 31, 2014
 
Amortized
Cost
 
Gross
Unrealized
Gain
 
Carrying
Value
Available for sale:     
Investment-grade unsecured bonds$9,435
 $145
 $9,580
Investment funds - US treasuries3,769
 3
 3,772
Common stock and stock funds25,755
 5,137
 30,892
Held to maturity: 
  
  
Mortgage backed securities67,996
 —
 67,996
Total - Marketable securities106,955
 5,285
 112,240
Other investments5,000
 —
 5,000
Total - Marketable securities and other investments$111,955
 $5,285
 $117,240

The Company uses the specific identification method to determine the cost basis of a security sold and to reclassify amounts from accumulated other comprehensive income for securities sold.  For the years ended December 31, 2015, 2014 and 2013, the proceeds from sales of available for sale securities totaled $3.3 million, $8.8 million and $24.2 million, respectively. For the years ended December 31, 2015, 2014 and 2013 these sales resulted in no net gains or losses, gains of $0.9 million and $1.8 million, respectively. For the year ended December 31, 2015, the proceeds from the sale of other investments totaled $5.6 million, which resulted in a realized gain of $0.6 million recorded in interest and other income on the consolidated statements of income. For the years ended December 31, 2014 and 2013, there were no such sales.


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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015, 2014, and 2013


(h) Notes Receivable and Interest Income
 
Notes receivable relate to real estate financing arrangements including mezzanine and bridge loans that exceed one year. They bear interest at a rate based on the borrower’s credit quality and are recorded at face value.secured by real estate. Interest is recognized over the life of the note. The Operating Partnership requires collateral for the notes.note as interest income.
 
Each note is analyzed to determine if it is impaired pursuant to SFAS No. 114, “Accounting by Creditors for Impairment of a Loan”.impaired. A note is impaired if it is probable that the Operating PartnershipCompany will not collect all contractually due principal and interest contractually due.interest. The Operating PartnershipCompany does not accrue interest when a note is considered impaired.impaired and an allowance is recorded for any principal and previously accrued interest that are not believed to be collectible. All cash receipts on impaired notes are applied to reduce the principal amount of such notes until the principal has been recovered and, thereafter, are recognized as interest income. As of December 31, 2015 and 2014, no notes were impaired.

(h)(i) Capitalization Policy

The Company capitalizes all direct and certain indirect costs, including interest, real estate taxes and insurance, incurred during development and redevelopment activities. Interest is capitalized on real estate assets that require a period of time to get them ready for their intended use.  The amount of interest capitalized is based upon the average amount of accumulated development expenditures during the reporting period.  Included in capitalized costs are management’s estimates of the direct and incremental personnel costs and indirect project costs associated with the Company's development and redevelopment activities. Indirect project costs consist primarily of personnel costs associated with construction administration and development, including accounting, legal fees, and various corporate and community onsite costs that clearly relate to projects under development. The Company’s capitalized internal costs related to development and redevelopment projects were comprised primarily of employee compensation and totaled $10.9 million, $10.4 million and $7.5 million for the years ended December 31, 2015, 2014 and 2013, respectively, most of which relates to development projects.  The Company capitalizes leasing costs associated with the lease-up of development communities and amortizes the costs over the life of the leases. The amounts capitalized are immaterial for all periods presented.

(j) Fair Value of Financial Instruments

The Company values its financial instruments based on the fair value hierarchy of valuation techniques described in the FASB’s accounting standard for fair value measurements. Level 1 inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. Level 2 inputs include quoted prices for similar assets and liabilities in active markets and inputs other than quoted prices observable for the asset or liability.  Level 3 inputs are unobservable inputs for the asset or liability. The Company uses Level 1 inputs for the fair values of its cash equivalents and its marketable securities except for unsecured bonds and mortgage backed securities. The Company uses Level 2 inputs for its investments in unsecured bonds, notes receivable, notes payable, and derivative liabilities. These inputs include interest rates for similar financial instruments. The Company’s valuation methodology for derivatives is described in Note 9. The Company uses Level 3 inputs to estimate the fair value of its mortgage backed securities. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

Management believes that the carrying amounts of the outstanding balances under its notes and other receivables approximate fair value as of December 31, 2015 and 2014, because interest rates, yields and other terms for these instruments are consistent with yields and other terms currently available for similar instruments. Management has estimated that the fair value of fixed rate debt with a carrying value of $4.8 billion and $4.4 billion, at December 31, 2015 and 2014, respectively, to be $4.8 billion and $4.6 billion. Management has estimated the fair value of the Company’s $525.3 million and $651.7 million of variable rate debt at December 31, 2015 and 2014, respectively, is $527.6 million and $656.3 million based on the terms of the Company’s existing variable rate debt compared to those available in the marketplace.  Management believes that the carrying amounts of cash and cash equivalents, restricted cash, accounts payable and accrued liabilities, construction payable, other liabilities and dividends payable approximate fair value as of December 31, 2015 and 2014 due to the short-term maturity of these instruments. Marketable securities and derivative liabilities are carried at fair value as of December 31, 2015 and 2014.

At December 31, 2015 and 2014, the Company’s investments in mortgage backed securities had a carrying value of $80.4 million and $68.0 million, respectively. The Company estimated the fair value of investment in mortgage backed securities at December 31, 2015 and 2014 to be approximately $110.2 million and $96.0 million, respectively. The Company determines the fair value of the mortgage backed securities based on unobservable inputs (level 3 of the fair value hierarchy) considering the

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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015, 2014, and 2013


assumptions that market participants would make in valuing these securities. Assumptions such as estimated default rates and discount rates are used to determine expected, discounted cash flows to estimate the fair value.

(k) Interest Rate Protection, Swap, and Forward Contracts

The Operating Partnership has from time to time usedCompany uses interest rate protection, swapswaps, interest rate cap contracts, and forward contractsstarting swaps to manage interest rate risks. The Company’s objective in using derivatives is to add stability to interest expense and to manage its exposure to interest rate exposure on currentmovements or other identified future debt transactions. The Operating Partnership accounts for such derivative contracts using SFAS No. 133. Under SFAS No. 133, derivative instruments are required to be included inrisks. To accomplish this objective, the balance sheet at fair value. The changes in the fair value of the derivatives are accounted for depending on the use of the derivativeCompany primarily uses interest rate swaps and whether it has been designated and qualifiesinterest rate caps as a part of aits cash flow hedging relationship.strategy. 
 
The Operating PartnershipCompany records all derivatives on theits consolidated balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.

For derivatives designated for accounting purposes as fair value hedges, changes in the fair value of the derivative and the hedged item related to the hedged risk are recognized in earnings. For derivatives designated for accounting purposes as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially reported in other comprehensive income (outside of earnings) and subsequently reclassified to earnings when the hedged transaction affects earnings, and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings. The Operating PartnershipCompany assesses the initial and ongoing effectiveness of each hedging relationship by comparing the changes in fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of the designated hedged item or transaction.

For derivatives not designated for accounting purposes as cash flow hedges, changes in fair value are recognized in earnings. All existing instrumentsof the Company’s interest rate swaps are considered cash flow hedges, and the Operating Partnership does not have anyhedges. The change in fair value hedges as of December 31, 2007.
The Operating Partnership’s objective in using derivatives is to add stability to interest expense and to manage its exposure to interest rate movements or other identified risks.  To accomplish this objective, the Operating Partnership primarily uses interest rate swaps as part of its cash flow hedging strategy.  Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts in exchange for fixed-rate payments over the life of the agreements without exchangetotal return swaps is reported as total return swap income in the consolidated statements of income.

(l) Income Taxes

Generally in any year in which ESS qualifies as a real estate investment trust (“REIT”) under the underlying principal amount.
Amounts reported in accumulated other comprehensive (loss)Internal Revenue Code (the “IRC”), it is not subject to federal income related to derivatives will be reclassified to interest expense as interest payments are madetax on the Operating Partnership’s hedged debt.  The Operating Partnership is hedging its exposure to the variability in future cash flows for athat portion of its forecasted transactions over a maximumincome that it distributes to stockholders. No provision for federal income taxes, other than the taxable REIT subsidiaries discussed below, has been made in the accompanying consolidated financial statements for each of the years in the three-year period of 46 months as ofended December 31, 2007.2015 as ESS has elected to be and believes it qualifies under the IRC as a REIT and has made distributions during the periods in amounts to preclude ESS from paying federal income tax.
(i) Deferred Charges
Deferred charges are principally comprised of loan fees and related costs which are amortized over the terms of the related borrowing in a manner which approximates the effective interest method.
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(j) Income Taxes

In order to maintain compliance with REIT tax rules, the Operating PartnershipCompany utilizes taxable REIT subsidiariesfor various revenue generating or investment activities. The taxable REIT subsidiaries’subsidiaries are consolidated by the Operating Partnership.Company. The activities and tax related provisions, assets and liabilities are not material.
(k) Preferred Equity

The Operating Partnership classifies its Series G Cumulative Convertible Preferred Equity (“Series G Preferred Equity”)  based on Emerging Issues Task Force Topic D-98, (“EITF D-98”) “Classification and Measurement of Redeemable Securities.” The Series G Preferred Equity contains fundamental change provisions that allow the holder to redeem the preferred stock for cash if certain events occur.  The redemption under these provisions is not solely within the Operating Partnership’s control, thusAs a partnership, the Operating Partnership has classified the Series G Preferred Equity as temporary equityis not subject to federal or state income taxes except that in the accompanying consolidated balance sheets.
The Operating Partnership classifies its Series F Cumulative Redeemable Preferred Equity (“Series F Preferred Equity”) based on EITF D-98.  The Series F Preferred Stock contains fundamental change provisionsorder to maintain ESS’s compliance with REIT tax rules that allow the holderare applicable to redeem the preferred stock for cash if certain events occur.  The redemption under these provisions is within the Operating Partnership’s control, and thusESS, the Operating Partnership hasutilizes taxable REIT subsidiariesfor various revenue generating or investment activities. The taxable REIT subsidiaries are consolidated by the Operating Partnership.


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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015, 2014, and 2013


The status of cash dividends distributed for the years ended December 31, 2015, 2014, and 2013 related to common stock, Series G and Series H preferred stock are classified the Series F Preferred Equityfor tax purposes as permanent equity in the accompanying consolidated balance sheets.follows:
 
(l) Stock-based
 2015 2014 2013
Common Stock     
Ordinary income99.28% 70.03% 77.34%
Capital gain0.72% 21.95% 17.64%
Unrecaptured section 1250 capital gain—% 8.02% 5.02%
 100.00% 100.00% 100.00%

 2015 2014 2013
Series G and H Preferred stock     
Ordinary income99.28% 70.03% 77.34%
Capital gains0.72% 21.95% 17.64%
Unrecaptured section 1250 capital gain—% 8.02% 5.02%
 100.00% 100.00% 100.00%

(m) Equity-based Compensation

The Operating Partnership accounts forcost of share and unit based compensation usingawards is measured at the grant date based on the estimated fair value method of accounting.the awards. The estimated fair value of stock options and restricted stock granted by the Operating Partnership isCompany are being amortized over the vesting period of the stock options.period.  The estimated grant date fair values of the long term incentive plan units (discussed in Note 14)13) are being amortized over the expected service periods.

(m) Legal costs(n) Changes in Accumulated Other Comprehensive Loss by Component

Legal costs associated with matters arising outEssex Property Trust, Inc. ($ in thousands)
 
Change in fair
value and
amortization
of swap settlements
 
Unrealized
gains on
available for sale
securities
 Total
Balance at December 31, 2014$(56,003) $4,551
 $(51,452)
Other comprehensive income before reclassification(393) 1,804
 1,411
Amounts reclassified from accumulated other comprehensive loss8,030
 —
 8,030
Other comprehensive income7,637
 1,804
 9,441
Balance at December 31, 2015$(48,366) $6,355
 $(42,011)


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Table of the normal course of our business are expensed as incurred. Legal costs incurredContents

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015, 2014, and 2013


Essex Portfolio, L.P. ($ in thousands)
 
Change in fair
value and
amortization
of swap settlements
 
Unrealized
gains on
available for sale
securities
 Total
Balance at December 31, 2014$(53,980) $4,624
 $(49,356)
Other comprehensive income before reclassification(407) 1,865
 1,458
Amounts reclassified from accumulated other comprehensive loss8,300
 —
 8,300
Other comprehensive income7,893
 1,865
 9,758
Balance at December 31, 2015$(46,087) $6,489
 $(39,598)

Amounts reclassified from accumulated other comprehensive loss in connection with non-recurring litigation that is not covered by insurancederivatives are accrued when amountsrecorded to interest expense on the consolidated statements of income. Realized gains and losses on available for sale securities are probableincluded in interest and estimable.other income on the consolidated statements of income.

(n)(o) Accounting Estimates and Reclassifications

The preparation of consolidated financial statements, in accordance with U.S. generally accepted accounting principles (“GAAP”),GAAP, requires the Operating PartnershipCompany to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. On an on-going basis, the Operating PartnershipCompany evaluates its estimates, including those related to acquiring, developing and assessing the carrying values of its real estate properties,portfolio, its investments in and advances to joint ventures and affiliates, and its notes receivable and its qualification as a REIT.receivable. The Operating PartnershipCompany bases its estimates on historical experience, current market conditions, and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may vary from those estimates and those estimates could be different under different assumptions or conditions.

Certain reclassifications have been made(p) BRE Merger

The merger with BRE was a two-step process. First, 14 of the BRE properties were acquired on March 31, 2014 in exchange for $1.4 billion of OP units.  The preliminary fair value of these properties was substantially all attributable to prior year balancesrental properties which included land, buildings and improvements, and real estate under development and approximately $19 million was attributable to acquired in-place lease value.  Second, the BRE merger closed on April 1, 2014 in orderexchange for the total consideration of approximately $4.3 billion.

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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015, 2014, and 2013



A summary of the fair value of the assets and liabilities acquired on April 1, 2014 was as follows (includes the 14 properties acquired on March 31, 2014 as the OP Units issued were retired on April 1, 2014) (in millions):

Cash assumed$140
Rental properties and real estate under development5,605
Real estate held for sale, net108
Co-investments224
Acquired in-place lease value77
Other assets16
Mortgage notes payable and unsecured debt(1,747)
Other liabilities(87)
Redeemable noncontrolling interest
(5)
 $4,331
  
Cash consideration for BRE merger$556
Equity consideration for BRE merger3,775
Total consideration for BRE merger$4,331

During the quarter ended March 31, 2015 the Company recorded adjustments to conformdecrease the preliminary fair value of real property by $13.1 million, to increase the preliminary fair value of co-investments by $6.0 million and to decrease its preliminary estimate for liabilities assumed by $7.1 million. The change in estimates were the result of subsequent additional information pertaining to the current year presentation.  Such reclassifications have no impact on reported earnings, total assets or total liabilities.
(o) New Accounting Pronouncements
In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes-an Interpretation of FASB Statement 109” (“FIN 48”).  FIN 48 establishes new evaluation and measurement processes for all income tax positions taken, and requires expanded disclosures of income tax matters.opening balance sheet identified by management. The adoption of this FIN on January 1, 2007 did not have a material impact on the Operating Partnership’s consolidated financial position, results of operations or cash flows.
In September 2006, the FASB issued Statement No. 157, “Fair Value Measurements” (“FAS 157”).  FAS 157 provides guidance for using fair value to measure assets and liabilities.  This statement clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing an asset or liability.  FAS 157 establishes a fair value hierarchy, giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data. This statement is effective in fiscal years beginning after November 15, 2007.  
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The Operating PartnershipCompany believes that the adoptioninformation gathered to date provides a reasonable basis for estimating the fair values of this standard will not have a material effect on its consolidated financial statements.
In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assetsassets acquired and Financial Liabilities” (“SFAS No. 159”).  FAS 159 expands opportunitiesliabilities assumed. Due to use fair value measurement in financial reporting and permits entities to choose to measure many financial instrumentsthese adjustments and, certain other items at fair value.  This Statement is effective for fiscal years beginning after November 15, 2007.  The Operating Partnership doesamounts do not planagree to measure any eligible financial assets and liabilities at fair value upon the adoption of this standard on January 1, 2008.previously reported balances.

In December 2007, the FASB issued revised SFAS No. 141, “Business Combinations” (“FAS 141(R)”).  FAS141(R) establishes principles and requirements for how the acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree;
 recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The objective of the guidance is to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. FAS 141(R) is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008,  Management is currently evaluating the impact FAS 141(R) will have on the Operating Partnership’s consolidated financial statements.  
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (“FAS 160”). FAS 160 establishes accounting and reporting standards that require the ownership interests in subsidiaries held by parties other than the parent be clearly identified, labeled, and presented in the consolidated statement of financial position within equity, but separate from the parent’s equity; the amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income; changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for consistently; when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary be initially measured at fair value; and entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. The objective of the guidance is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements. FAS 160 is effective for fiscal years beginning on or after December 15, 2008. Management is currently evaluating the impact FAS 160 will have on the Operating Partnership’s consolidated financial statements.
(3) Real Estate Investments

(a) Sales Acquisitions of RealReal Estate and Assets Held for Sale
Each property is considered a separately identifiable component of the Operating Partnership and is reported in discontinued operations when the operations and cash flows of the property have been (or will be) eliminated from the ongoing operations of the Operating Partnership as a result of a disposal transaction.
In December 2007, the Operating Partnership sold four communities (875-units) in the Portland metropolitan area for $97.5 million, resulting in a gain of $47.6 million net of minority interest.  The proceeds from the sale were used in a tax-free reverse exchange for the purchase of Mill Creek at Windermere in September 2007
In February 2007, the Operating Partnership sold the joint venture property City Heights Apartments, a 687-unit community located in Los Angeles, California for $120 million. The Operating Partnership’s share of the proceeds from the sale totaled $33.9 million, resulting in a $13.7 million gain on sale to the Operating Partnership, and an additional $10.3 million for fees from the joint venture partner, both of which are included in income from discontinued operations.  As of December 31, 2006, City Heights was classified as held for sale.

For the year ended December 31, 2005,2015, the gainCompany purchased seven communities consisting of 1,722 apartment homes for $638.1 million. The table below summarizes acquisition activity for the year ended December 31, 2015 ($ in millions):
Property NameLocationApartment HomesEssex Ownership PercentageQuarter in 2015Purchase Price
8th & HopeLos Angeles, CA290
100%Q1$200.0
The Huxley (1)
Los Angeles, CA187
100%Q148.8
The Dylan (1)
Los Angeles, CA184
100%Q151.3
Reveal (2)
Woodland Hills, CA438
99.75%Q273.0
AvantLos Angeles, CA247
100%Q299.0
Avant IILos Angeles, CA193
100%Q473.0
EnsoSan Jose, CA183
100%Q493.0
Total 20151,722
 
 $638.1
(1)
In March 2015, the Company purchased the joint venture partner's remaining membership interest in The Huxley and The Dylan co-investments for a purchase price of $100.1 million. The properties are now consolidated.
(2)
In April 2015, the Company purchased the joint venture partner's 49.5% membership interest in the Reveal co-investment for a purchase price of $73.0 million. The property is now consolidated.

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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015, 2014, and 2013



The $638.1 million aggregate purchase price for the acquisitions listed above were included on the sale of the Eastridge apartment community was $28.5 million.  An additional $2.2Company's consolidated balance sheet as follows: $117.9 million was deferred as of December 31, 2007 and 2006.  The $2.2 million was deferred because it is due and payable to the Operating Partnership only upon the sale of units following a condominium conversion which was still in progress as of December 31, 2007.   This transaction was included in discontinued operations as we had noland and land improvements, $513.3 million was included in buildings and improvements, $5.3 million was included in acquired in-place lease value, net, and $1.6 million was included in other ongoing involvement withfinancial statement line items within the Property.Company's consolidated balance sheets.
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For the year ended December 31, 2005, $5.02014, in additional to the BRE merger, the Company purchased six communities consisting of 1,480 apartment homes for $460.7 million.

(b) Sales of Real Estate Investments

For the year ended December 31, 2015, the Company sold two communities consisting of 848 apartment homes for $308.8 million previously deferredresulting in gains totaling $44.9 million. The table below summarized disposition activity for the year ended December 31, 2015 ($ in millions):
Property NameLocationApartment HomesEssex Ownership PercentageOwnershipQuarter in 2015Sales PriceGains
Pinnacle South MountainPhoenix, AZ552
100%EPLPQ1$63.8
$4.7
Sharon GreenMenlo Park, CA296
100%EPLPQ4245.0
40.2
Total 2015848
 
  $308.8
$44.9

In March 2015, the Company sold two commercial buildings, located in Emeryville, CA for $13.0 million, resulting in a gain of $2.4 million.

During 2014, the Company sold four communities consisting of 594 apartment homes for $120.4 million resulting in gains totaling $43.6 million, which are included in the line item gains on the sale of The Essexreal estate and land in the Company's consolidated statement of income.

During 2013, the Company sold three communities consisting of 363 apartment homes for $57.5 million resulting in gains totaling $29.2 million, which are included in the line item gains on Lake Merritt apartment community was recognized on the cost recovery method when the cash was received. The $5.0 million was deferred because it was due and payable to the Operating Partnership only upon the sale of units following a condominium conversion. The sale transaction was included in continuing operations as we continued to manage the rented apartment unitsreal estate and land in the project during the conversion process.Company's consolidated statement of income.

(b)(c) Co-investments

The Operating PartnershipCompany has joint ventureventures and preferred equity investments in a number of co-investments which are accounted for under the equity method. The joint venturesco-investments’ accounting policies are similar to the Company’s accounting policies. The co-investments own, operate, and operatedevelop apartment communities.


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Table of Contents
Essex Apartment Value Fund,
ESSEX PORTFOLIO, L.P. (“Fund I”), was an investment fund organized by the Operating Partnership in 2001 to add value through rental growthAND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015, 2014, and asset appreciation, utilizing the Operating Partnership’s acquisition, development, redevelopment and asset management capabilities. Fund I was considered fully invested in 2003. An affiliate2013


The carrying values of the Operating Partnership, Essex VFGP, L.P. (“VFGP”), was a 1% general partner and was a 20.4% limited partner. The Operating Partnership owned a 99% limited partnership interest in VFGP.   Fund I acquired or developed ownership interests in 19 apartment communities, representing 5,406 apartment units.
Fund I sold its apartment communities during 2004 and 2005.  The Fund I dispositions in 2005 resulted in the Operating Partnership recognizing equity income from the gain on the sale of investments of $18.1 million, and $7.0 million in promote income.  During 2006, the Operating Partnership recorded an additional $1.2 million in promote income related to the dispositions of assets in 2005, and during 2007 the Operating Partnership recorded $0.3 million in gain on its investment and $0.3 million in promote income related to the final liquidation of Fund I assets.
Essex Apartment Value Fund II, L.P. (“Fund II”), has eight institutional investors, and the Operating Partnership, with combined partner equity commitments of $265.9 million. Essex has committed $75.0 million to Fund II, which represents a 28.2% interest as general partner and limited partner. Fund II utilized debt as leverage equal to approximately 65% of the estimated value of the underlying real estate.  Fund II invests in apartment communities in the Operating Partnership’s targeted West Coast markets with an emphasis on investment opportunities in the Seattle metropolitan area and the San Francisco Bay Area. Subject to certain exceptions, Fund II had been Essex’s primary investment vehicle during 2005 and 2006. As of October 2006, Fund II was fully invested and closed for any future acquisitions or development.  As of December 31, 2007, Fund II owned eleven apartment communities and three development projects.  No properties have been sold by Fund II.  Consistent with Fund I, Essex records revenue for its asset management, property management, development and redevelopment services when earned, and promote income when realized if Fund II exceeds certain financial return benchmarks.
In August 2005, the Operating Partnership purchased 500,000 Series A Preferred shares in Multifamily Technology Solutions, Inc. (“MTS”).  The Operating Partnership owns less than 5% of the voting stock of MTS and therefore accounts for this investment on the cost method.
During 2006, the Operating Partnership made a contribution to a development with a joint venture partner totaling $3.4 million, and made additional contributions to this joint venture of $0.7 million during 2007.  The development is located in Southern California andCompany’s co-investments as of December 31, 2007 was still2015 and 2014 are as follows ($ in the predevelopment stage.thousands):
During March 2007, the Mountain Vista Apartments, LLC, a joint venture that owns the Waterstone at Fremont apartments in Fremont, California, was recapitalized with the inclusion of a new joint venture partner, and as part of this transaction the Operating Partnership received $7.7 million in net distributions from the joint venture.  The Operating Partnership accounted for this transaction as a partial sale of the Operating Partnership’s investment and recorded a gain of $2.0 million which is included in equity income in co-investments as a result of this transaction.  As of December 31, 2007, the Operating Partnership’s carrying value of its remaining investment in the amended and restated Mountain Vista Apartments, LLC joint venture was $1.2 million.  During January 2008, the Operating Partnership collected $7.5 million in connection with the return of its remaining interest in the joint venture and recognized income of $6.3 million from its preferred interest.
The Operating Partnership had a developer agreement to distribute to the general contractor of Mirabella apartments 20% of the property’s cash flow after the Operating Partnership receives a 9% cumulative preferred return on its investment from operating cash flow and a 12% preferred return on its investment from capital transactions cash flow.   During the third quarter of 2007, the Operating Partnership acquired the general contractor's interest in the Mirabella property for $9 million in lieu of distributing a percentage of future cash flows to the general contractor per
F-15
 OwnershipDecember 31,
 Percentage2015 2014
Membership interest/Partnership interest in:    
CPPIB50%-55%
$329,723
 $336,977
Wesco I, III and IV50%218,902
 256,790
BEXAEW50%88,850
 97,686
Palm Valley50%68,525
 70,186
Other28%-55%
32,927
 50,438
Total operating co-investments 738,927
 812,077
Total development co-investments50%-55%
190,808
 121,655
Total preferred interest co-investments (includes related party investments of $35.8 million and $40.8 million as of December 31, 2015 and December 31, 2014, respectively) 106,312
 108,691
Total co-investments $1,036,047
 $1,042,423
the agreement, accordingly, Mirabella became wholly owned by the Operating Partnership.
                                                                                                                                         2007 2006
Investments in joint ventures accounted for under the equity
     method of accounting:
     
   Limited partnership interest of 27.2% and general partner   
     interest of 1% in Essex Apartment Value Fund II, L.P (Fund II)$       58,419 $       45,598
   Preferred limited partnership interest in Mountain Vista   
     Apartments LLC (A)          1,182          6,806
   Development joint venture          4,090          3,414
         63,691        55,818
Investments accounted for under the cost method of accounting:
     
   Series A Preferred Stock interest in Multifamily Technology Solutions, Inc             500             500
     
       Total investments$       64,191$       56,318
(A)  The investment is held in an entity that includes an affiliate of The Marcus & Millichap Company (“TMMC”), and is the general partner.  TMMC’s Chairman is also the Chairman of the Company

The combined summarized financial information of co-investments which are accounted for under the equity method, is as follows:
follows ($ in thousands):
   December 31,  
  2007  2006   
 Balance sheets:
    Rental properties and real estate under development$     614,266 $     576,134   
    Other assets        16,184         20,681   
        Total assets$     630,450 $     596,815   
         
    Mortgage notes payable$     322,615 $     301,665   
    Other liabilities        24,014         74,793   
    Partners' capital      283,821       220,357   
        Total liabilities and partners' capital$     630,450 $     596,815   
         
 Operating Partnership's share of capital$       63,691 $       55,818   
        
  Years ended
  December 31,
  2007  2006  2005
  Statements of operations:
     Property revenues$       46,559  $       43,031  $    28,156
     Property operating expenses      (18,551)        (20,464)    (11,761)
       Net operating income        28,008         22,567      16,395
     Gain on the sale of real estate                 -                   -      41,985
     Interest expense      (13,888)        (17,000)    (11,042)
     Depreciation and amortization      (14,116)        (12,395)      (7,037)
         Net income (loss)$                4  $        (6,828)  $    40,301
         
     Operating Partnership's share of co-investment net income (loss)          1,074          (1,503)      18,553
     Operating Partnership's gain on partial sale of its interest          2,046                   -                -
         
     Income (loss) for co-investments$         3,120  $        (1,503)  $    18,553
(c)
 December 31,
 2015 2014
Combined balance sheets: (1)
   
Rental properties and real estate under development$3,360,360
 $3,426,574
Other assets96,785
 107,902
Total assets$3,457,145
 $3,534,476
Debt$1,499,601
 $1,568,398
Other liabilities92,241
 91,579
Equity1,865,303
 1,874,499
Total liabilities and equity$3,457,145
 $3,534,476
Company's share of equity$1,036,047
 $1,042,423

 
Years ended
December 31,
 2015 2014 2013
Combined statements of income: (1)
     
Property revenues$260,175
 $188,548
 $100,402
Property operating expenses(93,067) (71,419) (37,518)
Net operating income167,108
 117,129
 62,884
Gain on sale of real estate14
 23,333
 146,758
Interest expense(44,834) (39,990) (24,155)
General and administrative(5,879) (6,321) (5,344)
Equity income from co-investments (2)
—
 26,798
 18,703
Depreciation and amortization(103,613) (74,657) (36,831)
Net income$12,796
 $46,292
 $162,015
Company's share of net income (3)
$21,861
 $39,893
 $55,865

(1)
Includes preferred equity investments held by the Company.
(2)
Represents income from Wesco II's preferred equity investment in Park Merced.

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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015, 2014, and 2013


(3)
Includes the Company's share of equity income from co-investments, income from preferred equity investments, gain on sale of co-investments, co-investment promote income, and income from early redemption of preferred equity investments. Includes income earned from investments with a related party of $3.7 million and $3.8 million for the years ended December 31, 2015 and 2014, respectively.

Operating Co-investments

As of December 31, 2015 and 2014, the Company, through several joint ventures, owned 10,520 and 9,983 apartment homes, respectively, in operating communities. The Company generally owns 50%-55% of these joint ventures and the Company’s book value of these co-investments was $738.9 million and $812.1 million at December 31, 2015 and 2014, respectively.

Development Co-Investments

As of December 31, 2015 and 2014, the Company, through several joint ventures, owned 1,676 and 2,296 apartment homes, respectively, in development communities. The Company generally owns 50%-55% of these joint ventures and the Company’s book value of these co-investments was $190.8 million and $121.7 million at December 31, 2015 and 2014, respectively.

In February 2015, the Company entered into a joint venture to develop 500 Folsom, a multi-family community comprised of 545 apartment homes located in San Francisco, California. The Company has a 50% ownership interest in the development which has a projected total cost of $381.0 million. Construction began in the fourth quarter of 2015 and the property is expected to open in the fourth quarter of 2018. At December 31, 2015, the total remaining estimated costs to be incurred on this project were $319.2 million, of which the Company’s portion of the remaining costs was $159.6 million.

In July 2014, the Company entered into a joint venture to develop Century Towers, a multi-family community containing 376 apartment homes located in San Jose, California. The Company has a 50% ownership interest in the development which has a projected total cost of $172.1 million. The Company has also committed to a $27.0 million preferred equity investment in the project, which accrues at an annualized preferred return of 8.1%. Construction began in the third quarter of 2014 and the property is expected to open in the first quarter of 2017. At December 31, 2015, the total remaining estimated costs to be incurred on this project were $78.9 million, of which the Company’s portion of the remaining costs was $39.4 million.

Preferred Equity Investments

As of December 31, 2015 and 2014, the Company held preferred equity investment interests in several joint-ventures which own real estate. The Company’s book value of these preferred equity investments was $106.3 million and $108.7 million at December 31, 2015 and 2014, respectively.
In March 2015, a multi-family property, located in Anaheim, CA that was owned by an entity affiliated with a related party, in which the Company held a $13.7 million preferred equity investment, was sold. That investment of $13.7 million plus an additional $1.3 million in cash was invested as outlined in the next paragraph. Prior to the property sale, the $13.7 million preferred equity investment earned a 9.0% preferred return and was scheduled to mature in September 2020.

In June 2015, the Company made $10.0 million and $5.0 million preferred equity investments in limited liability companies owned by a related party, that own properties located in San Jose and Concord, California, respectively. These investments earn a 9.5% preferred return and are scheduled to mature in June 2022.
In August 2015, the Company made a $5.0 million preferred equity investment in a limited liability company owned by a related party that owns a property located in Los Angeles, California. This investment earns a 9.5% preferred return and is scheduled to mature in August 2022.
In August 2015, the Company redeemed a preferred equity investment in a joint venture that holds a property in San Jose, California with a carrying value of $20.4 million. The Company recognized a gain of $1.5 million as a result of this redemption which is included in equity income from co-investments in the consolidated statements of income.
In October 2014, the Company received cash of $101.0 million for its share of the redemption of a preferred equity investment related to a property located in San Francisco, California. The Company recorded $5.3 million of income from penalties due to

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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015, 2014, and 2013


the early redemption of this preferred equity investment which is included in equity income from co-investments in the consolidated statements of income.

(d) Real Estate Underunder Development

The Operating PartnershipCompany defines real estate under development activitiesprojects as new propertiescommunities that are being constructed, or are newly constructed and in the case of development communities, are in a phase of lease-up and
F-16
have not yet reached stabilized operations. As of December 31, 2007, excluding2015, the Company had two consolidated development projects, owned by Fund II, the Operating Partnership had threesix unconsolidated joint venture development projects, comprised of 684 unitsand various consolidated predevelopment projects, aggregating 2,447 apartment homes for an estimated cost of $236.7 million, of which $125.8 million remains to be expended.
The Operating Partnership defines the predevelopment pipeline as new properties in negotiation or in the entitlement process with a high likelihood of becoming development activities.  As of December 31, 2007, the Operating Partnership had five development communities aggregating 1,658 units that were classified as predevelopment projects.  The estimated total cost of the predevelopment pipeline at December 31, 2007 is $508.4 million,$1.4 billion, of which $411.3$787.0 million remains to be expended. The Operating Partnership owns land parcels held for future development aggregating 434 units asCompany’s portion of December 31, 2007.  The Operating Partnership had incurred $25.5 million inthe remaining costs related to these five land parcels as of December 31, 2007.was $542.0 million.

(4) Notes Receivable and Other Receivables from Related Parties
Notes receivable and other receivables from related parties consist of the following as of December 31, 2007 and 2006:
  2007  2006
      
Related party receivables, unsecured:    
     Loans to officers made prior to July 31, 2002, secured,    
          bearing interest of 8%, due beginning April 2007$                - $            375
     Other related party receivables, substantially due on demand             904              834
     Total notes and other receivable from related parties$            904 $         1,209
      
Other related party receivables include accrued management and development fees from Fund II totaling $0.5 million and $0.4 million as of December 31, 2007 and 2006, respectively.

(5) Notes and Other Receivables
 
Notes receivables, secured by real estate, and other receivables consist of the following as December 31, 20072015 and 2006:
2014 ($ in thousands):
  2007  2006
      
Note receivable, secured, bearing interest at 12%, due June 2008$         2,193 $         2,193
Note receivable, secured, bearing interest at LIBOR + 3.69%, due June 2009          7,346           7,309
Note receivable, secured, bearing interest at LIBOR + 4.65%, due January 2008          5,448           7,807
Note receivable, secured, bearing interest at LIBOR + 3.38%, due February 2009          7,128                   -
Note receivable, secured, bearing interest at LIBOR + 4.75%, due March 2011        10,999                   -
Note receivable, secured, bearing interest at LIBOR + 2.95%, due April 2009        14,010                   -
Other receivables          2,508              886
 $       49,632 $       18,195
As of December 31, 2007, the Operating Partnership originated five notes receivables totaling $47.4 million which are mezzanine or bridge loans.  The borrowers under each note receivable have the right to extend the maturity date if certain criteria are met specific to each agreement.  During August 2006, the Operating Partnership originated a loan with the owners of a 26-unit apartment community in Sherman Oaks, California. The proceeds from the loan financed the conversion of the units to condominiums for sale.  Effective July 1, 2007, the Operating Partnership had ceased accruing interest on the note, due to the current velocity of sales, pricing, and status of the interest reserve.  During the fourth quarter of 2007, the Operating Partnership recorded an allowance for loan loss in the amount of $0.5 million on this impaired note receivable, which is approximately equal to accrued and unpaid interest recorded from inception of the note through June 30, 2007.  The Operating Partnership believes that the current loan balance of $5.4 million is collectible through the future sales of 17 unsold condominium units.
 2015 2014
Note receivable, secured, bearing interest at 6.0%, due December 2016$3,219
 $3,212
Notes and other receivables from affiliates (1)
3,092
 8,105
Other receivables12,974
 13,606
 $19,285
 $24,923

(1)
The Company had $3.1 million and $8.1 million of short-term loans outstanding and due from various joint ventures for the years ended December 31, 2015 and 2014, respectively. See Note 5, Related Party Transactions, for additional details.
(6)
(5) Related Party Transactions

ManagementThe Company has adopted written related party transaction guidelines that are intended to cover transactions in which the Company (including entities it controls) is a party and in which any “related person” has a direct or indirect interest.  A “related person” means any Company director, director nominee, or executive officer, any beneficial owner of more than 5% of the Company’s outstanding common stock, and any immediate family member of any of the foregoing persons.  A related person may be considered to have an indirect interest in a transaction if he or she (i) is an owner, director, officer or employee of or otherwise associated with another company that is engaging in a transaction with the Company, or (ii) otherwise, through one or more entities or arrangements, has an indirect financial interest in or personal benefit from the transaction.

The related person transaction review and approval process is intended to determine, among any other relevant issues, the dollar amount involved in the transaction; the nature and value of any related person’s direct or indirect interest (if any) in the transaction; and whether or not (i) a related person’s interest is material, (ii) the transaction is fair, reasonable, and serves the best interest of the Company and its shareholders, and (iii) whether the transaction or relationship should be entered into, continued or ended.

The Company’s Chairman and founder, Mr. George Marcus, is the Chairman of the Marcus & Millichap Company (“MMC”), which is a parent company of a diversified group of real estate service, investment, and development firms. Mr. Marcus is also the Co-Chairman of Marcus & Millichap, Inc. (“MMI”), and Mr. Marcus owns a controlling interest in MMI. MMI is a national brokerage firm listed on the NYSE that underwent its initial public offering in 2013.  Essex Apartment Value Fund II, L.P. (“Fund II”) paid brokerage commissions totaling $0.6 million and $0.4 million, respectively, to an affiliate of MMI related to the sales of properties in 2013 and 2012, respectively.  There were no brokerage commissions paid by the Company to MMI or its affiliates during 2015, 2014, and 2013.

The Company charges certain fees relating to its co-investments for asset management, property management, development and redevelopment services. These fees from affiliates includes management, promote, development and redevelopment fees
F-17
totaling $5.1total $15.6 million, $5.0$16.5 million, and $11.0$11.5 million for the years ended December 31, 2007, 2006,2015, 2014 and 2005,2013, respectively. All of these fees are net of intercompany amounts eliminated by the

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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015, 2014, and 2013


Company. The Company’s Chairman, George Marcus, is the ChairmanCompany netted development and redevelopment fees of TMMC, which is a real estate brokerage firm. During$6.7 million, $7.2 million, and $4.4 million against general and administrative expenses for the years ended December 31, 2007, 2006,2015, 2014 and 2005,2013, respectively.

In March 2015, a multi-family property, located in Anaheim, CA that was owned by an entity affiliated with MMC, in which the Operating Partnership paid brokerage commissions totalingCompany held a $13.7 million preferred equity investment, was sold. That investment of $13.7 million plus an additional $1.3 million $0.8in cash was invested as outlined in the next two paragraphs. Prior to the property sale, the $13.7 million preferred equity investment earned a 9.0% preferred return and was scheduled to mature in September 2020.

In June 2015, the Company made a $10.0 million preferred equity investment in an entity affiliated with MMC that owns Greentree Apartments, a 220 apartment community located in San Jose, CA. This investment will earn a 9.5% preferred return and is scheduled to mature in June 2022.

In June 2015, the Company made a $5.0 million preferred equity investment in an entity affiliated with MMC that owns Sterling Cove Apartments, a 218 apartment community located in Concord, CA. This investment will earn a 9.5% preferred return and is scheduled to mature in June 2022.

In August 2015, the Company made a $5 million preferred equity investment in an entity affiliated with MMC that owns Alta Vista Apartments, a 92 apartment community located in Los Angeles, CA. This investment will earn a 9.5% preferred return and is scheduled to mature in August 2022.

In July 2014, the Company acquired Paragon Apartments, a 301 unit apartment community located in Fremont, CA for $111.0 million from an entity that was partially owned by an affiliate of MMC.

As described in Note 4, the Company has provided short-term bridge loans to affiliates. As of December 31, 2015 and 2014, $3.1 million and $0 to TMMC on the purchase$8.1 million, respectively, of short-term loans remained outstanding due from joint venture affiliates and sales of real estate.
Mr. Marcus was an investoris classified within notes and other receivables in the two partnerships that owned the Thomas Jefferson Apartments that was acquired by the Operating Partnership during September 2007 in a DownREIT transaction.  In conjunction with that transaction, Mr. Marcus received 7,006 DownREIT units in exchange for his partnership interests in those apartments.  The Company’s independent Board of Directors approved the acquisition of the apartment community.accompanying consolidated balance sheets.

Mr. Marcus is the Chairman of the Urban Housing Group (“UHG”), a subsidiary of TMMC.  During December 2007, UHG sold the rights to the Operating Partnership to acquire the Fourth Street development land parcel in Berkeley, California for $2.8 million.  The amount paid to the Urban Housing Group included reimbursement for the costs incurred by UHG to entitle the property for development. The Company’s independent Board of Directors approved the acquisition of the rights to the land parcel.

(7) Discontinued Operations
In the normal course of business, the Operating Partnership will receive offers for sale of its properties, either solicited or unsolicited. For those offers that are accepted, the prospective buyer will usually require a due diligence period before consummation of the transaction.  It is not unusual for matters to arise that result in the withdrawal or rejection of the offer during this process.  Essex classifies real estate as "held for sale" when all criteria under SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (“SFAS 144”) have been met.
In January 2005,2013, the Operating Partnership sold four non-core assetsCompany invested $8.6 million as a preferred equity interest investment in an entity affiliated with MMC that were acquired for $14.9 million.  The four non-core assets were: The Riviera Recreational Vehicle Parkowns an apartment development in Redwood City, California. In March 2015 the Company's preferred interest investment was prepaid and a Manufactured Home Park, located in Las Vegas, Nevada, for which the Operating Partnership had previously entered into master lease and option agreements with an unrelated entity; and two small office buildings, located in San Diego California.  The Operating Partnership recordedCompany recognized a gain of $0.7$0.5 million as a result of the prepayment.

In 2010, an Executive Vice President of the Company invested $4.0 million for a 3% limited partnership interest in a partnership with the Company that owns Essex Skyline at MacArthur Place. The Executive Vice President’s investment is equal to a pro-rata share of the contributions to the limited partnership. The Executive Vice President’s investment also receives pro-rata distributions resulting from distributable cash generated by the property if and when distributions are made.

(6) Discontinued Operations

The Company determined that the disposals through the years ended December 31, 2015 and 2014 were not considered discontinued operations in accordance with ASU 2014-08. The gains related to these disposals are recorded in gains on the sale of these assets.  real estate and land in the consolidated statements of income.

During 2013, the Company sold Linden Square, a 183 unit community located in Seattle, Washington for $25.3 million, resulting in a gain of $12.7 million. Also during 2013, the Company sold Cambridge, a 40 unit property located in Chula Vista, California for $4.7 million, resulting in a gain of $2.5 million, and Brentwood, a 140 unit property located in Santa Ana, California for $27.5 million, resulting in a gain of $14.0 million.

The Operating PartnershipCompany has recorded the gaingains on salesales and operations for these various assets sold described above as part of discontinued operations in the accompanying consolidated statements of operations.income. 


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Table of Contents
In June 2005, the Operating Partnership sold the Eastridge apartments, a 188-unit apartment community located in San Ramon, California for approximately $47.5 million.  In conjunction with the sale, the Operating Partnership deferred $2.2 million of the gain on the sale of Eastridge because Essex, through a TRS, originated a participating loan to the buyer in the amount of approximately $2.2 million, which allows the Operating Partnership to financially participate in the buyer’s condominium conversion plan.  The gain on the sale of the Eastridge property net of the deferral of the $2.2 participating loan was $28.5 million.  The Operating Partnership has recorded the gain on sale and operations for Eastridge apartments as part of discontinued operations in the accompanying consolidated statements of operations.
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
In January 2006, the Operating Partnership sold Vista Capri East and Casa Tierra apartment communities for approximately $7.0 million and in March 2006, the Operating Partnership sold Diamond Valley, a Recreational Vehicle Park, for approximately $1.3 million.  The total combined gain was $3.1 million.  The Operating Partnership has recorded the gain on sale and operations for the three properties as part of discontinued operations in the accompanying consolidated statements of operations.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In June 2006, the unconsolidated joint venture property, Vista Pointe, a 286-unit apartment community located in Anaheim, California, was sold for approximately $46.0 million. The Operating Partnership’s share of the proceeds from the transaction totaled $19.3 million, resulting in an $8.8 million gain on the sale, and an additional $8.2 million for fees and a promote distribution. The Operating Partnership has recorded the ground lease income and all related gains and fees from the Vista Pointe joint venture as part of discontinued operations in the accompanying consolidated statements of operations.
In December 2006, the Operating Partnership sold Emerald Palms, a 152-unit apartment community located in San Diego for approximately $20.5 million, for a gain of approximately $6.7 million.  The Operating Partnership has recorded the gain on sale and operations for Emerald Palms apartments as part of discontinued operations in the accompanying consolidated statements of operations.
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As of December 31, 2006, City Heights Apartments, a 687-unit community located in Los Angeles was classified as held for sale,2015, 2014, and during February 2007 the property was sold to a third-party for $120 million.  The Operating Partnership’s share of the proceeds from the sale totaled $33.9 million, resulting in a $13.7 million gain, net of minority interest, to the Operating Partnership, and an additional $10.3 million for fees from the City Heights joint venture partner are included in discontinued operations in the accompanying consolidated statements of operations.2013


The Operating Partnership sold the 21 remaining condominium units at the Peregrine Point property during the first three quarters of 2007, and recorded a gain of $1.0 million net of taxes and expenses.  The Operating Partnership started selling the units in the third quarter of 2006, and recorded the sale of 45 units and recorded a gain of $2.0 million net of taxes and expenses during 2006.  The Operating Partnership has recorded the gain on sale of condominiums and operations for Peregrine Point apartments as part of discontinued operations in the accompanying consolidated statements of operations.
In December 2007, the Operating Partnership sold four communities (875-units) in the Portland metropolitan area for $97.5 million, resulting in a gain of $51.9 million.  The Operating Partnership has recorded the gain on sale and operations for the four communities as part of discontinued operations in the accompanying consolidated statements of operations.
The components of discontinued operations are outlined below and include the results of operations for the respective periods that the Operating PartnershipCompany owned such assets, as described above.above ($ in thousands):
   2013
Revenues  $4,454
Property operating expenses  (1,406)
Depreciation and amortization  (1,098)
Expenses  (2,504)
Operating income from real estate sold  1,950
Gain on sale of real estate  29,223
Income from discontinued operations  $31,173

(7) Unsecured Debt

   2007  2006  2005
          
Rental revenues  $               9,466  $             19,537  $             21,267
Interest and other income                    290                      41                 1,231
Equity income co-investments                        -                    238                    477
Revenues                 9,756               19,816               22,975
          
Property operating expenses               (3,779)               (7,611)               (8,159)
Interest expense                  (416)               (2,314)               (2,830)
Depreciation and amortization               (1,861)               (4,940)               (5,300)
Minority interests                        -                  (660)                  (347)
Expenses               (6,056)             (15,525)             (16,636)
          
Income from real estate sold                 3,700                 4,291                 6,339
          
Gain on sale of real estate               52,874               20,503               29,219
Gain on sale of real estate - City Heights               78,306                        -                        -
Promote interest and fees               10,290                 8,221                        -
Minority interests - City Heights             (64,624)                        -                        -
                76,846               28,724               29,219
          
Income from discontinued operations  $             80,546  $             33,015  $             35,558
ESS does not have any indebtedness as all debt is incurred by the Operating Partnership. ESS guarantees the Operating Partnership’s unsecured debt including the revolving credit facilities up to the maximum amounts and for the full term of the facilities.
 
Unsecured debt consists of the following as of December 31, 2015 and 2014 ($ in thousands):
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 2015 2014 
Weighted Average
Maturity
In Years
Unsecured bonds private placement - fixed rate$463,891
 $463,443
 3.2
Term loan - variable rate224,467
 224,130
 0.9
Bonds public offering - fixed rate2,400,322
 1,915,975
 6.7
Unsecured debt, net (1)
3,088,680
 2,603,548
  
Lines of credit, net (2)
11,707
 242,824
  
Total unsecured debt$3,100,387
 $2,846,372
  
Weighted average interest rate on fixed rate unsecured and unsecured private placement bonds3.6% 3.6%  
Weighted average interest rate on variable rate term loan2.4% 2.4%  
Weighted average interest rate on lines of credit1.9% 1.8%  

(1)
Includes unamortized premium and discounts of $14.3 million and $27.5 million and reduced by unamortized debt issuance costs of $15.6 million and $13.9 million as of December 31, 2015 and 2014, respectively.
(2)
Includes unamortized debt issuance costs of $3.3 million and $3.6 million as of December 31, 2015 and 2014, respectively.

As of December 31, 2015 and 2014, the Company had $465.0 million of private placement unsecured bonds outstanding at an average effective interest rate of 4.5%.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015, 2014, and 2013


The following is a summary of the Company’s unsecured private placement bonds as of December 31, 2015 and 2014 ($ in thousands):
 Maturity 2015 2014 
Coupon
Rate
Senior unsecured private placement notesMarch 2016 $150,000
 $150,000
 4.36%
Senior unsecured private placement notesSeptember 2017 40,000
 40,000
 4.50%
Senior unsecured private placement notesDecember 2019 75,000
 75,000
 4.92%
Senior unsecured private placement notesApril 2021 100,000
 100,000
 4.27%
Senior unsecured private placement notesJune 2021 50,000
 50,000
 4.30%
Senior unsecured private placement notesAugust 2021 50,000
 50,000
 4.37%
    $465,000
 $465,000
  

As of December 31, 2015 and 2014, the Company had unsecured term loans outstanding of $225.0 million at an average interest rate of 2.4%. These loans are included in the line “Term loan-variable rate” in the table above, and as of December 31, 2015 and 2014, the carrying value net of debt issuance costs was $224.5 million and $224.1 million, respectively. The term loans are at a variable interest rate of LIBOR plus 1.05%. The Company entered into interest rate swap contracts for a term of five years with a notional amount totaling $225.0 million, which effectively converted the interest rate on $225.0 million of the term loans to a fixed rate of 2.4%. The $200 million tranche of this unsecured term loan has a maturity date of November 2016 and the $25 million tranche has a maturity date of August 2017.

In March 2015, the Company issued $500.0 million of senior unsecured notes due on April 1, 2025 with a coupon rate of 3.5% per annum and are payable on April 1st and October 1st of each year, beginning October 1, 2015 (the 2025 Notes). The 2025 Notes were offered to investors at a price of 99.747% of par value. The 2025 Notes are general unsecured senior obligations of the Operating Partnership, rank equally in right of payment with all other senior unsecured indebtedness of the Operating Partnership and are fully and unconditionally guaranteed by Essex Property Trust, Inc. These bonds are included in the line “Bonds public offering-fixed rate” in the table above, and as of December 31, 2015, the carrying value of the 2025 Notes, net of discount and debt issuance costs was $494.8 million.

In April 2014, the Company assumed $900.0 million aggregate principal amount of BRE’s 5.500% senior notes due 2017; 5.200% senior notes due 2021; and 3.375% senior notes due 2023 (together “BRE Notes”). These notes are included in the line "Bonds public offering-fixed rate" in the table above, and as of December 31, 2015 and 2014, the carrying value of the BRE Notes, plus unamortized premium was $919.1 million and $931.4 million, respectively.

In April 2014, the Company issued $400.0 million of senior unsecured notes due on May 1, 2024 with a coupon rate of 3.875% per annum and are payable on May 1st and November 1st of each year, beginning November 1, 2014 (the 2024 Notes). The 2024 Notes were offered to investors at a price of 99.234% of par value. The 2024 Notes are general unsecured senior obligations of the Operating Partnership, rank equally in right of payment with all other senior unsecured indebtedness of the Operating Partnership and are fully and unconditionally guaranteed by Essex Property Trust, Inc. These bonds are included in the line "Bonds public offering-fixed rate" in the table above, and as of December 31, 2015 and 2014, the carrying value of the 2024 Notes, net of discount and debt issuance costs was $394.5 million and $393.8 million, respectively.

In April 2013, the Company issued $300.0 million of senior unsecured notes due on May 1, 2023 with a coupon rate of 3.25% per annum and are payable on May 1st and November 1st of each year, beginning November 1, 2013 (the 2023 Notes). The 2023 Notes were offered to investors at a price of 99.152% of par value.  The 2023 Notes are general unsecured senior obligations of the Operating Partnership, rank equally in right of payment with all other senior unsecured indebtedness of the Operating Partnership and are fully and unconditionally guaranteed by Essex Property Trust, Inc. These bonds are included in the line “Bonds public offering-fixed rate” in the table above, and as of December 31, 2015 and 2014, the carrying value of the 2023 Notes, net of discount and debt issuance costs was $295.9 million and $295.5 million, respectively.

During the third quarter 2012, the Company issued $300.0 million of senior unsecured notes due August 2022 with a coupon rate of 3.625% per annum and are payable on February 15th and August 15th of each year, beginning February 15, 2013 (the 2022 Notes). The 2022 Notes were offered to investors at a price of 98.99% of par value.  The 2022 Notes are general unsecured senior obligations of the Operating Partnership, rank equally in right of payment with all other senior unsecured

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015, 2014, and 2013


indebtedness of the Operating Partnership and are fully and unconditionally guaranteed by Essex Property Trust, Inc. These bonds are included in the line "Bonds public offering-fixed rate" in the table above, and as of December 31, 2015 and 2014, the carrying value of the 2022 Notes, net of unamortized discount and debt issuance costs was $296.0 million and $295.3 million, respectively.

The following is a summary of the Company’s senior unsecured notes as of December 31, 2015 and 2014 ($ in thousands):
 Maturity 2015 2014 Coupon
Rate
Senior notesMarch 2017 300,000
 300,000
 5.500%
Senior notesMarch 2021 300,000
 300,000
 5.200%
Senior notesAugust 2022 300,000
 300,000
 3.625%
Senior notesJanuary 2023 300,000
 300,000
 3.375%
Senior notesMay 2023 300,000
 300,000
 3.250%
Senior notesMay 2024 400,000
 400,000
 3.875%
Senior notesApril 2025 500,000
 —
 3.500%
    2,400,000
 1,900,000
  

The aggregate scheduled principal payments of unsecured debt payable, excluding lines of credit, at December 31, 2015 are as follows ($ in thousands):
2016$350,000
2017365,000
2018—
2019(1)
75,000
2020—
Thereafter2,300,000
 $3,090,000

(1)
Amount does not include $15.0 million outstanding on the Company's lines of credit as of December 31, 2015, that becomes due in December 2019 in accordance with the January 2016 amendment.

The Company has two lines of credit aggregating $1.03 billion as of December 31, 2015. The Company has a $1 billion credit facility with an underlying interest rate based on a tiered rate structure tied to Fitch and S&P ratings on the credit facility and the rate was LIBOR plus 0.95% as of December 31, 2015. As of December 31, 2015 and 2014, the balance of the $1 billion credit facility was $15.0 million and $229.8 million, respectively.  In January 2016, the facility maturity date was extended to December 31, 2019 with one 18-month extension, exercisable by the Company and the interest rate, which is based on a tiered rate structure tied to the Company's corporate ratings, was lowered to LIBOR plus 0.90%. The Company also has a working capital unsecured line of credit agreement for $25.0 million. The underlying interest rate on the $25.0 million line is based on a tiered rate structure tied to Fitch and S&P ratings on the credit facility of LIBOR plus 0.95%. As of December 31, 2015 and 2014, there was a zero and $16.6 million balance, respectively, outstanding on this unsecured line. In January 2016, the maturity date was extended to January 2018 and the interest rate, which is based on a tiered rate structure tied to the Company's corporate ratings, was lowered to LIBOR plus 0.90%.

The Company’s unsecured line of credit and unsecured debt agreements contain debt covenants related to limitations on indebtedness and liabilities, and maintenance of minimum levels of consolidated earnings before depreciation, interest and amortization. The Company was in compliance with the debt covenants as of December 31, 2015 and 2014.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015, 2014, and 2013


(8) Mortgage Notes Payable and Exchangeable Bonds

ESS does not have any indebtedness as all debt is incurred by the Operating Partnership. Mortgage notes payable and exchangeable bonds consist of the following as of December 31, 20072015 and 2006:
2014 ($ in thousands):
   2007  2006
       
Mortgage notes payable to a pension fund, secured by deeds of trust, bearing interest
  at rates ranging from 6.62% to 8.18%, principal and interest payments due monthly,
  and maturity dates ranging from October 2008 through October 2010. Under certain
  conditions a portion of these loans can be converted to an unsecured note payable.
  Three loans are cross-collateralized by a total of 13 properties $     224,876  $     228,663
       
Mortgage notes payable, secured by deeds of trust, bearing interest at ranges    
  ranging from 4.86% to 7.90%, principal and interest payments due monthly,    
  and maturity dates ranging from March 2008 through June 2018      804,859       645,702
Mortgage notes payable - held for sale, secured by deed of trust, bearing interest
  at 6.90%, principal and interest payments due monthly, and maturity date of
  January 2008. Repaid in February 2007                 -         32,850
       
Multifamily housing mortgage revenue bonds secured by deeds of trust on    
  rental properties and guaranteed by collateral pledge agreements, payable    
  monthly at a variable rate as defined in the Loan Agreement    
  (approximately 4.50% at December 2007 and 4.60% at December 2006),    
  plus credit enhancement and underwriting fees ranging from approximately    
  1.2% to 1.9%. The bonds are primarily convertible to a fixed rate at the Operating    
  Partnership's option. Among the terms imposed on the properties, which are security for
  the bonds, is a requirement that 20% of the units are subject to tenant income    
  criteria. Principal balances are due in full at various maturity dates from December    
  2009 through December 2039.  $152.7 million of these bonds are subject to various    
  interest rate cap agreements which limit the maximum interest rate to such bonds       233,138       186,339
       
Exchangeable bonds, unsecured obligations of the Operating Partnership and guaranteed
  by the Company, bearing interest at 3.625% per year, payable November 1 and May 1
  of each year, which mature on November 1, 2025.  The bonds are exchangeable at the
  option of the holder into cash and, in certain circumstances at the Operating Partnership's
  option, shares of the Company's common stock at an initial exchange price of
  $103.25 per share subject to certain adjustments. These bonds will also be exchangeable
  prior to November 1, 2020 under certain circumstances.  The bonds are redeemable at
  the Operating Partnership's option for cash at any time on or after November 4,
  2010 and are subject to repurchase for cash at the option of the holder on November 1st
  in years 2010, 2015, and 2020 or upon the occurrence of certain events       225,000       225,000
       
  $  1,487,873  $  1,318,554
 2015 2014
Fixed rate mortgage notes payable$1,925,985
 $2,049,577
Variable rate mortgage notes payable (1)
289,092
 184,740
Total mortgage notes payable (2)
$2,215,077
 $2,234,317
Number of properties securing mortgage notes64
 67
Remaining terms1-31 years
 1-26 years
Weighted average interest rate4.4% 4.6%

The aggregate scheduled principal payments of mortgage notes payable and exchangeable bondsat December 31, 2015 are as follows:follows ($ in thousands):
   2008$     116,357
   2009        24,689
   2010      154,813
   2011      166,545
   2012        32,183
   Thereafter      993,286
 $  1,487,873
           
2016$29,714
2017199,180
2018320,622
2019586,212
2020693,088
Thereafter329,451
 $2,158,267

(1)
Variable rate mortgage notes payable, including $257.3 million in bonds that have been converted to variable rate through total return swap contracts, consists of multi-family housing mortgage revenue bonds secured by deeds of trust on rental properties and guaranteed by collateral pledge agreements, payable monthly at a variable rate as defined in the Loan Agreement (approximately 1.2% at December 2015 and 1.8% at December 2014) plus credit enhancement and underwriting fees ranging from approximately 1.2% to 1.9%.  Among the terms imposed on the properties, which are security for the bonds, is a requirement that 20% of the apartment homes are subject to tenant income criteria. Principal balances are due in full at various maturity dates from March 2019 through December 2046. Of these bonds $20.7 million are subject to various interest rate cap agreements which limit the maximum interest rate to such bonds.
(2)
Includes total unamortized premium of $64.8 million and $83.8 million and reduced by unamortized debt issuance costs of $8.0 million and $11.9 million as of December 31, 2015 and 2014, respectively.

For the Company’s mortgage notes payable as of December 31, 2015, monthly interest expense and principal amortization, excluding balloon payments, totaled approximately $7.5 million and $2.4 million, respectively.  Second deeds of trust accounted for $48.5 million of the $2.2 billion in mortgage notes payable as of December 31, 2015.  Repayment of debt before the scheduled maturity date could result in prepayment penalties.
(9) Lines  The prepayment penalty on the majority of Credit
The Operating Partnership has three outstanding linesthe Company’s mortgage notes payable are computed by the greater of credit in(a) 1% of the aggregate committed amount of $310.0 million as of December 31, 2007.  In March 2006, the Operating Partnership renegotiated its revolving line of credit to increaseprincipal being prepaid or (b) the maximum principal amount to $200.0 million from $185.0 million.  Additionally, the maturity date
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was extended from April 2007 to March 2009, with an option for a one-year extension, and the underlying rate, based on a tiered rate structure tied to the Company’s corporate ratings, was reduced to LIBOR plus 0.8% from LIBOR plus 1.0%.  Certain terms and covenantspresent value of the $200.0 million unsecured line of credit were amended duringmortgage note payable which is calculated by multiplying the third quarter of 2007.  The balance on this line of credit was $61.0 million as of December 31, 2007, which yielded an averageprincipal being prepaid by the difference between the interest rate of 6.2%.  No amounts were outstanding as of December 31, 2006.  The Operating Partnership also has a $100 million credit facility from Freddie Mac, which is secured by eight of the Operating Partnership’s apartment communities.  The underlying interestmortgage note and the stated yield rate on this line is between 55 and 59 and basis points overa specified U.S. treasury security as defined in the Freddie Mac Reference Rate.   As of December 31, 2007 and 2006,  $100.0 million and $93.0 million was outstanding under this line of credit, respectively, which yielded an average interest rate of 5.4% and 6.2% as of December 31, 2007 and 2006, respectively, and matures in January 2009. During March 2007, the Operating Partnership entered into an unsecured revolving line of credit for $10.0 million with a commercial bank with an initial maturity date of March 2008. Borrowings under this revolving line of credit bear an interest rate at the bank’s Prime Rate less 2.0%.   As of December 31, 2007, there was an $8.8 million balance on the revolving line of credit at an average interest rate of 5.6%.   The credit agreements contain debt covenants related to limitations on indebtedness and liabilities, maintenance of minimum levels of consolidated earnings before depreciation, interest and amortization and maintenance of minimum tangible net worth.   The Operating Partnership was in compliance with the line of credit covenants as of December 31, 2007 and 2006.
mortgage note agreement.

(10)(9) Derivative Instruments and Hedging Activities

During March 2007,The Company uses interest rate swaps and interest rate cap contracts to manage certain interest rate risks. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the Operating Partnershipexpected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The Company incorporates credit valuation

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015, 2014, and 2013


adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements.

The Company has entered into a ten-year forward-starting interest rate swap for acontracts with an aggregate notional amount of $50$225.0 million and a settlement date on or before October 1, 2011.

During April 2007,that effectively fixed the Operating Partnership refinanced a mortgage loan for $35.7 million secured by the Tierra Vista property in the amount of $62.5 million, with a fixed interest rate of 5.47%, which matures in April 2017.  In conjunction with this transaction the Operating Partnership settled a $50 million forward-starting swap and received $1.3 million from the counterparty.  The accounting for the swap settlement reduces the effective interest rate on the new  Tierra Vista mortgage$225.0 million unsecured term loan to 5.19%at 2.4%. These derivatives qualify for hedge accounting.

As of December 31, 20072015 the Operating PartnershipCompany had entered into nine forward-starting interest rate swapscaps, which are not accounted for as hedges, totaling a notional amount of $450$20.7 million that effectively limit the Company’s exposure to interest rate risk by providing a ceiling on the underlying variable interest rate for $20.7 million of the Company’s tax exempt variable rate debt.

As of December 31, 2015 and 2014, the aggregate carrying value of the interest rate swap contracts was a liability of $1.0 million and $1.8 million, respectively, and is included in other liabilities on the consolidated balance sheets. The aggregate carrying value of the interest rate cap was zero on the balance sheet as of December 31, 2015 and December 31, 2014.

Hedge ineffectiveness related to cash flow hedges, which is reported in current year income as interest expense, net was not significant for the years ended December 31, 2015, 2014 and 2013.

Additionally, the Company has entered into four total return swaps, that effectively convert $257.3 million of mortgage notes payable to a floating interest rate based on SIFMA plus a spread. The total return swaps provide fair market value protection on the mortgage notes payable to our counterparties during the initial period of the total return swap until the Company's option to call the mortgage notes at par can be exercised. The Company can currently call one of the total return swaps with interest rates ranging from 4.9%$114.4 million of the outstanding debt at par, while the call option on the other three total return swaps relating to 5.9% and settlements dates ranging from April 2008 to October 2011.$142.9 million of the outstanding debt can be exercised starting on January 1, 2017. These derivatives do not qualify for hedge accounting as they are expected to economically hedge the cash flows associated with the refinancing of debt that matures between April 2008 and October 2011.  Thehad a carrying and fair value of $4 thousand at December 31, 2015. These total return swaps are scheduled to mature between September 2021 and November 2022. The Company held no total return swaps at December 31, 2014. The realized gains of $5.7 million were reported in current year income as total return swap income. No such income or expense was incurred for the derivatives decreased $7.9 million during the yearyears ended December 31, 2007 to a liability value of $10.2 million as of December 31, 2007,2014 and the derivative liability was recorded in other liabilities in the Operating Partnership’s consolidated financial statements.  The changes in the fair values of the derivatives are reflected in accumulated other comprehensive (loss) income in the Operating Partnership’s consolidated financial statements.  No hedge ineffectiveness on cash flow hedges was recognized during the year ended December 31, 2007 and 2006.2013.

(10) Lease Agreements

(11) Lease Agreements
During the fourth quarter of 2003, the Operating Partnership entered into lease and purchase option agreements with unrelated third parties related to its five recreational vehicle (“RV”) parks that were comprised of 1,717 spaces and two manufactured housing communities that contain 607 sites.  At the time of agreement, the unrelated third parties had an option to purchase the assets in approximately four years for approximately $41.7 million, which was a 5% premium to the gross book value of the assets. The Operating Partnership received $0.5 million as consideration for entering into the option agreement and a non-refundable upfront payment of $4.0 million, which was recorded as deferred revenue and has been amortized into income over the five year lease term.  Under the lease agreements, Essex receives fixed monthly lease payments and passes through all executory costs such as property taxes.   In January 2005, the Operating Partnership sold Riviera RV Resort and Riviera Mobile Home Park.  As of December 31, 2007,2015 the Operating Partnership still owns two RV parks totaling 338 spaces, and one manufactured housing community that contains 157 sites.
The Operating Partnership owns two predevelopment projects that it leases to tenants.  Cadence Campus is an office building, and Essex-HollywoodCompany is a lessor for three commercial building currently utilized as a production studio, and both properties are 100% leased to single tenants.  The lease at Cadence Campus will expire in January 2009buildings and the tenant has a right to two six-month extensions, and the Essex-Hollywood lease will expire in July 2008.  These two properties generated lease income totaling $4.7 million during the year ended December 31, 2007, which was recorded as net
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lease income and included in interest and other income in the accompanying consolidated statementscommercial portions of operations.  Interest expense is not being capitalized on these properties while they are leased, and depreciation expense is being recorded on these properties until the leases expire.
The Operating Partnership is also a lessor of an office building located in Southern California.33 mixed use communities. The tenants’ lease terms expire at various times through 2009 with average annual lease payments of approximately $1.3 million.2031. The future minimum non-cancelable base rent to be received under the Cadence Campus, Essex-Hollywood, the two office buildings in Southern California, the RV parks and manufactured housing communitythese operating leases for each of the years ending after December 31 2007 areis summarized as follows:
follows ($ in thousands):
  Future
  Minimum
                                    Rent
2008$                 6,184
2009                  4,149
2010                  1,439
2011                     695
2012                     183
2013 and thereafter                     474
 $               13,124
 Future
 Minimum
 Rent
2016$11,067
201710,078
20189,211
20198,467
20207,690
Thereafter24,955
 $71,468

The Operating Partnership is also a lessee of an office building located in Palo Alto next to the Operating Partnership’s headquarters.  The lease term expires on September 30, 2009, with average annual lease payments of approximately $0.2 million.
(12)(11) Equity Transactions
 
Preferred Securities Offerings
As of December 31, 2007, the Operating Partnership, has the following cumulative preferred securities outstanding:
Liquidation
 Description Issue DatePreference
 7.875% Series B February 19981,200,000 units $         60,000
 7.875% Series B April 1998  400,000 units $         20,000
 7.875% Series D July 19992,000,000 units $         50,000
 7.8125% Series F September 20031,000,000 shares $         25,000
4.875% Series G July 20065,980,000 shares $       149,500
Dividends onDuring the securities are payable quarterly. The holderssecond quarter of the securities have limited voting rights if the required dividends are in arrears. The Series B and D preferred units represent preferred interests issued by the Operating Partnership and are included in minority interests in the accompanying consolidated balance sheets.  The preferred units can be exchanged for Series B and D preferred stock of the Company under limited conditions.
In September 2003,2011, the Company issued 1,000,0002,950,000 shares of its7.125% Series FH Cumulative Redeemable Preferred Stock (“Series F Preferred Stock”H”) at a fixed price of $24.664 per share, a discount from the $25.00 per share for net proceeds of $71.2 million, net of costs and original issuance discounts. The Series H has no maturity date and generally may not be called by the Company before April 13, 2016. Net

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015, 2014, and 2013


proceeds from the Series H offering were contributed to the Operating Partnership for a 7.125% Series H Cumulative Redeemable Preferred Interest. As of December 31, 2015 and 2014, there were 8,000,000 shares authorized and 2,950,000 shares outstanding of Series H with an aggregate liquidation value of the shares.  The shares pay quarterly distributions at an annualized rate of 7.8125% per year of the liquidation value and are redeemable by the Company on or after September 23, 2008.  The shares were issued pursuant to the Company’s existing shelf registration statement.  The Company used the net proceeds from this sale of Series F Preferred Stock to redeem all of the 9.125% Series C Cumulative Redeemable Preferred Units (the “Series C Preferred Units”) of Essex Portfolio, L.P., of which the Company is the general partner.   $73.8 million.

In January 2004, the Operating Partnership restructured its previously issued $50,000, 9.30% Series D Cumulative Redeemable Preferred Units ("Series D Units"), and its previously issued $80,000, 7.875% Series B Cumulative Redeemable Preferred Units ("Series B Units").  The existing distribution rate of 9.30% of the Series D Units continued until July 27, 2004 – the end of the non-call period.  Effective July 28, 2004, the distribution rate on the Series D Units was reduced to 7.875%.  The date that the Series D Units can first be redeemed at the Company's option was extended by six years to July 28, 2010.  The date that the Series B Units can first be redeemed at the Company's option was extended from February 6, 2003 to December 31, 2009.
F-22
During the third quarter of 2006, the Company sold 5,980,000 shares of 4.875% Series G Cumulative Convertible Preferred Stock for gross proceeds of $149.5 million.  Holders may convert Series G Preferred Stock into shares of the Company’s common stock subject to certain conditions.  The conversion rate will initially be .1830 shares of common stock per the $25 share liquidation preference, which is equivalent to an initial conversion price of approximately $136.62 per share of common stock (the conversion rate will be subject to adjustment upon the occurrence of specified events).  On or after July 31, 2011, the Company may, under certain circumstances, cause some or all of the Series G Preferred Stock to be converted into that number of shares of common stock at the then prevailing conversion rate.
Common Stock Offerings

During 2006,2015, the Company issued and1,481,737 shares of common stock, through our equity distribution program, at an average price of $226.46 for net proceeds of $332.3 million.

In April 2014, Essex issued approximately 23,067,446 shares of Essex common stock as Stock Consideration in the BRE merger at an average price of $163.82.

During 2014, Essex sold approximately 427,7002,964,315 shares of common stock for $48.3proceeds of $534.0 million, net of fees and commissions, under its Controlled Equity Offering program. Under this program, the Company may from time to time sell sharesat an average price of common stock into the existing trading market at current market prices,$181.56.

Operating Partnership Units and Long Term Incentive Plan (“LTIP”) Units

As of December 31, 2015 and 2014, the Operating Partnership usedhad outstanding 2,070,360 and 2,076,810 operating partnership units and 144,185 and 91,348 vested LTIP units, respectively. The Operating Partnership’s general partner, ESS, owned 96.7% of the net proceeds from such sales to primarily fundpartnership interests in the development, redevelopment pipelines,Operating Partnership at both December 31, 2015 and pay down outstanding borrowing under2014, and ESS is responsible for the management of the Operating Partnership’s linesbusiness. As the general partner of credit.
During April 2007, the Company issued and sold approximately 170,500 shares ofOperating Partnership, ESS effectively controls the ability to issue common stock for $21.8 million, net of fees and commissions, under its Controlled Equity Offering program.
During May 2007, the Company sold 1,500,000ESS upon a limited partner’s notice of redemption. ESS has generally acquired OP units upon a limited partner’s notice of redemption in exchange for shares of its common stock. The redemption provisions of OP units owned by limited partners that permit ESS to settle in either cash or common stock for proceedsat the option of $191.9 million, net of underwriter fees and expenses.ESS were further evaluated in accordance with applicable accounting guidance to determine whether temporary or permanent equity classification on the balance sheet is appropriate. The Operating Partnership used net proceeds fromevaluated this guidance, including the common stock salesrequirement to reduce outstanding borrowings undersettle in unregistered shares, and determined that, with few exceptions, these OP units meet the Operating Partnership’s lines of credit.requirements to qualify for presentation as permanent equity.

Common Stock Repurchases
In August 2007, the Company’s Board of Directors authorized a stock repurchase plan to allow the Company to acquire sharesLTIP units represent an interest in an aggregate of up to $200 million.  The program supersedes the common stock repurchase plan that the Company announced on May 16, 2001.  During 2007 the Company repurchased and retired 323,259 shares of its common stock for approximately $32.6 million.  During January 2008, the Company repurchased and retired 137,500 shares of its common stock for approximately $13.2 million.
UpREIT and DownREIT transactions
During October 2006, the Operating Partnership acquired Belmont Terrace,for services rendered or to be rendered by the LTIP unit holder in its capacity as a 71-unit community locatedpartner, or in Belmont, California. Theanticipation of becoming a partner, in the Operating Partnership acquiredPartnership. Upon the apartment community in an UpREIT structured transaction for an agreed upon valueoccurrence of approximately $14.7 million.  The Operating Partnership issued 72,685 limited operating partnershipspecified events, LTIP units to the prior owners and during the closemay over time achieve full parity with common units of escrow the Operating Partnership paid-offfor all purposes. Upon achieving full parity, LTIP units will be exchanged for an equal number of the existing debtOP Units.

The redemption value of OP and LTIP units owned by the limited partners, not including ESS, had such units been redeemed at December 31, 2015, was approximately $530.2 million based on the property.
During September 2007, the Operating Partnership acquired the Thomas Jefferson apartments in Sunnyvale, California, for $28.0 million by acquiring ownership interests in the two limited partnerships that collectively owned the property.  In connection with this acquisition, the limited partnerships were restructured to provide for limited partnership units, or DownREIT units, that are redeemable for cash, or at the Operating Partnership's sole discretion, cash or sharesclosing price of theESS’s common stock as of the Company.  A totalDecember 31, 2015.


F- 40
Table of 62,873 such units were issued,Contents

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015, 2014, and the Operating Partnership assumed $20.0 million in mortgage loans in the transaction.2013


F-23
(13)(12) Net Income Per Common Share and Net Income Per Common Unit

Essex Property Trust, Inc.

Basic and diluted income from continuing and discontinued operations per unit areshare is calculated as follows for the years ended December 31:31
($ in thousands, except share and per share amounts):
   2007  2006  2005
      Weighted- Per    Weighted- 
Per
    Weighted- 
Per
      average Common    average 
Common
    average 
Common
     Common Unit    Common 
Unit
    Common 
Unit
                                                                                  Income   Units Amount IncomeUnits
Amount
  Income Units 
Amount
Basic:                   
  Income from continuing operations
    available to common units $    37,342    27,043,697$        1.38 $       31,449    25,560,415$        1.23 $50,551    25,343,695$        2.00
  Income from discontinued operations     80,546    27,043,697         2.98         33,015    25,560,415         1.29  35,558    25,343,695         1.40
     117,888           4.36         64,464           2.52  86,109           3.40
                      
  Effect of Dilutive Securities (1)               -         552,971                    -         469,360                    -         349,942  
 Diluted:                   
  Income from continuing operations
    available to common units     37,342    27,596,668         1.35         31,449    26,029,775         1.21  50,551    25,693,637         1.97
  Income from discontinued operations     80,546    27,596,668         2.92         33,015    26,029,775         1.27  35,558    25,693,637         1.38
  $  117,888  $        4.27 $       64,464  $        2.48 $86,109  $        3.35
 2015 2014 2013
 Income 
Weighted-
average
Common
Shares
 
Per
Common
Share
Amount
 Income 
Weighted-
average
Common
Shares
 
Per
Common
Share
Amount
 Income 
Weighted-
average
Common
Shares
 
Per
Common
Share
Amount
Basic:                 
Income from continuing operations available to common stockholders$226,865
 64,871,717
 $3.50
 $116,859
 56,546,959
 $2.07
 $121,324
 37,248,960
 $3.26
Income from discontinued operations available to common stockholders—
 64,871,717
 —
 —
 56,546,959
 —
 29,487
 37,248,960
 0.79
 $226,865
  
 $3.50
 $116,859
  
 $2.07
 $150,811
  
 $4.05
Effect of Dilutive Securities (1)
—
 189,968
  
 —
 149,566
  
 —
 86,335
  
Diluted: 
  
  
  
  
  
  
  
  
Income from continuing operations available to common stockholders (1)
$226,865
 65,061,685
 $3.49
 $116,859
 56,696,525
 $2.06
 $121,324
 37,335,295
 $3.25
Income from discontinued operations available to common stockholders—
 65,061,685
 —
 —
 56,696,525
 —
 29,487
 37,335,295
 0.79
 $226,865
  
 $3.49
 $116,859
  
 $2.06
 $150,811
  
 $4.04

The Operating Partnership has the ability and intent to redeem DownREIT Limited Partnership units for cash and does not consider them to be common unit equivalents.
(1)  On or after November 1, 2020,
(1)
Weighted average convertible limited partnership units of 2,182,467, 2,224,707, and 2,131,425, which include vested Series Z Incentive Units, Series Z-1 Incentive Units, 2014 Long-Term Incentive Plan Units, and 2015 Long-Term Incentive Plan Units, for the holders of the $225 million exchangeable notes may exchange, at the then applicable exchange rate, the notes for cashyears ended December 31, 2015, 2014 and at Essex’s option, a portion of the notes may be exchanged for Essex common stock; the current exchange rate is $103.25 per share of Essex common stock.  The exchangeable notes will also be exchangeable prior to November 1, 2020, but only upon the occurrence of certain specified events.  During 2007, the weighted average common stock price exceeded the $103.25 strike price and therefore common stock issuable upon exchange of the exchangeable notes was2013, respectively, were not included in the determination of diluted share count.  The treasury method was used to determine the shares to be added to the denominator for the calculation of earnings per diluted unit.share calculation because they were anti-dilutive. Additionally, excludes 963,172 DownREIT units as they are anti-dilutive.

Stock options of 25,326, 1,014,54,100, 10,843, and 22,229168,325, for 2007, 2006, 2005,the years ended December 31, 2015, 2014, and 2013, respectively, were not included in the diluted earnings per share calculation because the exercise priceassumed proceeds per share of these options plus the options wasaverage unearned compensation were greater than the average market price of the common sharesstock for the twelve  monthsyears ended and, therefore, were anti-dilutive.

5,980,000All shares of cumulative convertible Series H preferred stock Series Ginterest have been excluded from diluted earnings per shareunit for 2007the years ended 2015, 2014, and 20062013 respectively, as the effect was anti-dilutive. All shares of cumulative convertible Series G preferred interest have been excluded from diluted earnings per unit for the years ended 2014 and 2013 respectively, as the effect was anti-dilutive.

(14)

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Table of Contents

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015, 2014, and 2013


Essex Portfolio, L.P.

Basic and diluted income from continuing and discontinued operations per unit is calculated as follows for the years ended December 31 ($ in thousands, except unit and per unit amounts):

 2015 2014 2013
 Income 
Weighted-
average
Common
Units
 
Per
Common
Unit
Amount
 Income 
Weighted-
average
Common
Units
 
Per
Common
Unit
Amount
 Income 
Weighted-
average
Common
Units
 
Per
Common
Unit
Amount
Basic:                 
Income from continuing operations available to common unitholders$234,689
 67,054,184
 $3.50
 $121,726
 58,771,666
 $2.07
 $128,576
 39,380,385
 $3.27
Income from discontinued operations—
 67,054,184
 —
 —
 58,771,666
 —
 31,173
 39,380,385
 0.79
Income available to common unitholders$234,689
  
 $3.50
 $121,726
  
 $2.07
 $159,749
  
 $4.06
Effect of Dilutive Securities (1)
—
 189,968
  
 —
 149,566
  
 —
 86,335
  
Diluted: 
  
  
  
  
  
  
  
  
Income from continuing operations available to common unitholders (1)
$234,689
 67,244,152
 $3.49
 $121,726
 58,921,232
 $2.07
 $128,576
 39,466,720
 $3.26
Income from discontinued operations—
 67,244,152
 —
 —
 58,921,232
 —
 31,173
 39,466,720
 0.79
Income available to common unitholders$234,689
  
 $3.49
 $121,726
  
 $2.07
 $159,749
  
 $4.05
(1)
Stock options of 54,100, 10,843, and 168,325, for the years ended December 31, 2015, 2014, and 2013, respectively, were not included in the diluted earnings per unit calculation because the assumed proceeds per share of these options plus the average unearned compensation were greater than the average market price of the common shares for the years ended and, therefore, were anti-dilutive. Additionally, excludes 963,172 DownREIT units as they are anti-dilutive.

The cumulative convertible Series H preferred interest have been excluded from diluted earnings per unit for the years ended 2015, 2014, and 2013 respectively, as the effect was anti-dilutive. The cumulative convertible Series G preferred interest have been excluded from diluted earnings per unit for the years ended 2014 and 2013 respectively, as the effect was anti-dilutive.

(13) Equity Based Compensation Plans
 
Stock Options and Restricted Stock
 
Effective JanuaryIn May 2013, stockholders approved the Company’s 2013 Stock Award and Incentive Compensation Plan (“2013 Plan”). The 2013 Plan became effective on June 1, 2006,2013 and serves as the Operating Partnership adoptedsuccessor to the provisions of SFAS No. 123 Revised (“SFAS No. 123(R)”Company’s 2004 Stock Incentive Plan (the “2004 Plan”), “Share-Based Payment”, a revision of SFAS No. 123 usingand no additional equity awards can be granted under the modified prospective approach.   SFAS No. 123(R) requires companies to recognize in2004 Plan after the income statementdate the grant-date fair value of stock options and other equity based compensation issued to employees.2013 Plan became effective.
 
The Essex Property Trust, Inc. 2004 Stock IncentiveCompany’s 2013 Plan provides incentives to attract and retain officers, directors and key employees. The Stock Incentive2013 Plan provides for the grants of options to purchase a specified number of shares of common stock, or grants of restricted shares of common stock.stock and other award types. Under the Stock Incentive2013 Plan, the totalmaximum aggregate number of shares availablethat may be issued is 1,000,000, plus any shares that have not been issued under the 2004 Plan, including shares subject to outstanding awards under the 2004 Plan that are not issued or delivered to a participant for grant is approximately 1,200,000.any reason. The 2004 Stock Incentive2013 Plan is administered by the Compensation Committee of the Board of Directors.  The Compensation CommitteeDirectors, which is comprised of independent directors. The Compensation Committee is authorized to establish the exercise price;

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Table of Contents

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015, 2014, and 2013


however, the exercise price cannot be less than 100% of the fair market value of the common stock on the grant date. The Operating Partnership’sCompany’s options have a life of five to ten years. Option grants for officers and employees fully vest between one year0 and five5 years after the grant date.
 
Stock-based compensation expense for options and restricted stock under the fair value method totaled approximately $1.2$6.1 million, $1.1$6.1 million, and $0.8$2.3 million for years ended December 31, 2015, 2014 and 2013 respectively. Stock-based compensation expense for options and restricted stock for the year ended December 31, 2015 and 2014, includes $0.2 million and $3.6 million related to the BRE merger, of which $0.1 million and $1.7 million relates to merger and integration expenses, and which is recorded in merger and integration expense in the consolidated statements of income, respectively. In the fourth quarter of 2015, stock-based compensation expense included $2.7 million related to an immediate vesting of options and restricted stock for bonuses awarded based on asset dispositions, which is recorded as a cost of real estate and land sold. Stock-based compensation for options and restricted stock related to recipients who are direct and incremental to projects under development were capitalized and totaled $0.3 million, $0.4 million, and $0.4 million for the years ended December 31, 2007, 20062015, 2014 and 2005, respectively.  Stock-based compensation capitalized for options totaled approximately $0.2 million, $0.2 million and none for the year ended December 31, 2007, 2006 and 2005,2013, respectively. The intrinsic value of the options exercised totaled $6.3$19.4 million, $6.0$12.7 million, and $4.1$3.0 million, for the years ended December 31, 2007, 2006,2015, 2014, and 2005,2013 respectively.  The intrinsic value of the options outstanding and fully vestedexercisable totaled $9.9$29.8 million, $14.3 million, and $10.8 million, for the years endedas of December 31, 2007, 2006, and 2005, respectively.  2015.
Total unrecognized compensation cost related to unvested share-based compensation granted under the stock option and restricted plansoptions totaled $0.8$3.4 million as of
F-24
December 31, 2007.  The2015 and the unrecognized compensation cost is expected to be recognized over a weighted-average period of 30 to 5 years for the stock option plans.years.
 
The average fair value of stock options granted for the years ended December 31, 2007, 20062015, 2014 and 20052013 was $11.58, $17.40$22.78, $20.56 and $10.06 per share, respectively,$15.80, respectively. Certain stock options granted in 2015, 2014, and 2013 included a $75 cap, a $100 cap or a $125 cap on the appreciation of the market price over the exercise price. The fair value of stock options was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants:

 
 
 
2007
 
 
2006
 
 
2005
2015 2014 2013
Stock price  $95.34-$126.73  $101.01-$132.62 $69.11-$91.88$227.75
 $176.65
 $153.54
Risk-free interest rates 3.52%-4.58%  4.45%-5.15% 3.64%-4.50%1.83% 2.37% 2.68%
Expected lives 7-9 years  4-7 years 5-6 years6 years
 8 years
 8 years
Volatility 18.52%-20.31%  18.44%-18.54% 18.09%-18.54%20.06% 18.00% 18.03%
Dividend yield 3.99%-5.26% 3.12%-4.29% 4.22%-5.13%2.73% 2.90% 3.15%

A summary of the status of the Company’s stock option plans as of December 31, 2007, 2006,2015, 2014, and 20052013 and changes during the years ended on those dates is presented below:

  2007 2006 2005
           
 
Weighted-
   
 
 
Weighted-
    
 
Weighted-
       average     average    average
                                                                 exercise     exercise    exercise
                                                    Shares    price  Shares   price  Shares  price
Outstanding at beginning of year   570,542 $ 72.60   530,375 $57.73    463,376 $47.07
Granted     29,250   119.98   170,350  106.63    188,800  78.01
Exercised   (86,056)   50.23   (90,633)  47.57   (103,201)  43.47
Forfeited and canceled   (20,033)   94.29   (39,550)  80.85     (18,600)  76.70
Outstanding at end of year   493,703   79.83   570,542  72.60    530,375  57.73
               
Options exercisable at year end   288,889   64.69   272,074  52.42    248,015  43.77
 2015 2014 2013
 Shares 
Weighted-
average
exercise
price
 Shares 
Weighted-
average
exercise
price
 Shares 
Weighted-
average
exercise
price
Outstanding at beginning of year664,785
 $138.78
 695,488
 $133.37
 623,434
 $125.96
Granted78,600
 227.75
 42,518
 176.65
 150,325
 153.54
Granted - BRE options converted—
 —
 133,766
 121.03
 —
 —
Exercised(203,556) 131.53
 (185,387) 113.72
 (52,970) 102.43
Forfeited and canceled(14,735) 136.11
 (21,600) 144.29
 (25,301) 135.25
Outstanding at end of year525,094
 154.98
 664,785
 138.78
 695,488
 133.37
Options exercisable at year end342,048
 152.42
 395,986
 133.99
 300,632
 119.09


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Table of Contents

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015, 2014, and 2013


The following table summarizes information about stock options outstanding as of December 31, 2007:2015:
  Options outstanding Options exercisable
  
Number
outstanding
as of
 
Weighted-
average
remaining
 
Weighted-
average
 
Number
exercisable
as of
 
Weighted-
average
Range of December 31, contractual exercise December 31, exercise
exercise prices 2015 life (years) price 2015 price
$66.05 - $101.01 15,901
 3.2 $74.47
 15,901
 $74.47
$105.64 - $161.98 367,024
 5.3 139.73
 218,041
 135.00
$164.76 - $229.43 142,169
 7.5 203.37
 108,106
 199.02
  525,094
 5.8 154.98
 342,048
 152.42
The following table summarizes information about restricted stock outstanding as of December 31, 2015, 2014 and 2013 and changes during the years ended:
 2015 2014 2013
 Shares 
Weighted-
average
grant
price
 Shares 
Weighted-
average
grant
price
 Shares 
Weighted-
average
grant
price
Unvested at beginning of year25,820
 $168.22
 16,176
 $108.06
 24,922
 $104.52
Granted56,177
 155.21
 22,014
 194.03
 1,556
 158.75
Granted - BRE restricted stock converted—
 —
 119,411
 173.82
 —
 —
Vested(22,939) 148.20
 (126,931) 171.56
 (7,211) 109.86
Forfeited and canceled(4,382) 122.06
 (4,850) 135.10
 (3,091) 100.84
Unvested at end of year54,676
 147.10
 25,820
 168.22
 16,176
 108.06

                                                  
    Options outstanding          Options exercisable
   Number  Weighted-   Number  
   outstanding  average  Weighted-  exercisable Weighted-
    as of  remaining  average  as of average
Range of  December 31,  contractual  exercise  December 31, exercise
exercise prices 
2007
 
 
 life  price 2007  price
 $13.26-26.52 600  0.1 years $19.08 600 $19.08
  26.52-39.79 41,547  1.4 years 32.64 41,547  32.64
  39.78-53.05 90,027  3.8 years 49.33 87,427  49.28
  53.05-66.31 40,680  5.7 years 59.10 38,230  59.37
  66.31-79.57 90,775  7.2 years 75.69 52,795  76.37
  79.57-92.83 58,704  7.5 years 83.18 25,170  82.95
  92.83-106.10 39,620  8.3 years 101.51 7,720  102.63
  106.10-119.36 103,500  8.4 years 107.36 34,100  107.42
  119.36-132.62 28,250  9.3 years 125.27 1,300  128.02
   493,703  6.6 years 79.83 288,889  64.69

During 2007, the Company issued 17,178 shares of restricted stock. The unrecognized compensation cost related to unvested restricted stock totaled $7.7 million as of December 31, 2015 and is expected to be recognized straight-line over a period of 7 years less an estimate for forfeitures.0 to 4 years.

Long Term Incentive PlanPlans – ZLTIP Units

On December 9, 2014, the Operating Partnership issued 44,750 units under the 2015 Long-Term Incentive Plan Award agreements to executives of the Company. The 2015 Long-Term Incentive Plan Units (the “2015 LTIP Units”) are subject to forfeiture based on performance-based and service based conditions. An additional 24,000 units were granted subject only to performance-based criteria and were fully vested on the date granted. The 2015 LTIP Units, that were subject to vesting, will vest at 20% per year on each of the first five anniversaries of the initial grant date. The 2015 LTIP Units performance conditions measurement ended on December 9, 2015 and 95.75% of the units awarded were earned by the recipients. 2015 LTIP Units not earned based on the performance-based criteria were automatically forfeited by the recipients. The 2015 LTIP Units, once earned and vested, are convertible one-for-one into common units of the Operating Partnership which, in turn, are convertible into common stock of the Company has adopted an incentive program involvingsubject to a ten-year liquidity restriction.

In December 2013, the issuanceOperating Partnership issued 50,500 units under the 2014 Long-Term Incentive Plan Award agreements to executives of the Company. The 2014 Long-Term Incentive Plan Units (the “2014 LTIP Units”) were subject to forfeiture based on performance-based conditions and are currently subject to service based vesting. The 2014 LTIP Units vest 25% per year on each of the first four anniversaries of the initial grant date. In December 2014, the Company achieved the performance criteria and all of the 2014 LTIP Units awarded were earned by the recipients, subject to satisfaction of service based vesting conditions. The 2014 LTIP Units are convertible one-for-one into common units of the Operating Partnership which, in turn, are convertible into common stock of the Company subject to a ten year liquidity restriction.



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Table of Contents

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015, 2014, and 2013


The estimated fair value of the 2015 LTIP Units and 2014 LTIP Units were determined on the grant date using Monte Carlo simulations under a risk-neutral premise and considered Essex’s stock price on the date of grant, the unpaid dividends on unvested units and the discount factor for 10 years of illiquidity.

Prior to 2013, the Company issued Series Z Incentive Units and Series Z-1 Incentive Units (collectively referred to as “Z Units”) of limited partnership interest in the Operating Partnership.  Vesting in the Z Units is based on performance criteria established in the plan. The criteria can be revised at the beginning of the year by the Board's Compensation Committee if the Committee deems that the plan's criterion is unachievable for any given year.  The sale of Z unitsUnits is contractually prohibited and cannot be convertedprohibited. Z Units are convertible into Operating Partnership units until certain conditionswhich are met or 15 years after the inceptionexchangeable for shares of the plan.Company’s common stock that have marketability restrictions. The estimated fair value of a Z unit isUnits were determined on the grant date and considersconsidered the Company's current stock price on the date of grant, the dividends
F-25
that are not paid on unvested units and a marketability discount for the 8 to 15 years of illiquidity.  Compensation expense is calculated by taking annualmultiplying estimated vesting increases multipliedfor the period by the estimated fair value as of the grant datedate.
During 2011 and 2010, the Operating Partnership issued 154,500 Series Z-1 Incentive Units (the “Z-1 Units”) of limited partner interest to executives of the Company. The Z-1 Units are convertible one-for-one into common units of the Operating Partnership (which, in turn, are convertible into common stock of the Company) upon the earlier to occur of 100 percent vesting of the units or the year 2026. The conversion ratchet (accounted for as vesting) of the Z-1 Units into common units, is to increase consistent with the Company’s annual FFO growth, but is not to be less its $1.00 purchase price.than zero or greater than 14 percent. Z-1 Unit holders are entitled to receive distributions, on vested units, that are now equal to dividends distributed to common stockholders.
 
Stock-based compensation expense for LTIP and Z Units under the fair value method totaled approximately $1.5$3.5 million, $1.3$6.0 million and $1.6$2.2 million for the years ended December 31, 2007, 20062015, 2014 and 2005,2013, respectively. Stock-based compensation expense for the year ended December 31, 2014 includes $1.7 million related to merger and integration expenses and is recorded in merger and integration expense in the consolidated statements of income. No such amounts were recorded in merger and integration expense in 2015. In the fourth quarter of 2014, stock-based compensation expense included $2.4 million related to an immediate vesting of certain of the 2015 LTIP Units. No such amounts were recorded in 2015. Stock-based compensation related to LTIP Units attributable to recipients who are direct and incremental to these projects was capitalized for Z Unitsto real estate under development and totaled approximately $0.5 million, $0.4 million, $0.3 million and $0.2$0.5 million, for the years ended December 31, 2007, 20062015, 2014, and 2005,2013, respectively. The intrinsic value of the Zvested and unvested LTIP Units subject to conversion totaled $16.0$59.9 million as of December 31, 2007.2015.  Total unrecognized compensation cost related Zto the unvested LTIP Units subject to conversion in the future granted under the ZLTIP Units plans totaled $8.1$6.0 million as of December 31, 2007.  The2015.  On a weighted average basis, the unamortized cost for the 2014 and 2015 LTIP Units and the Z Units is expected to be recognized over the next 4 to 123.2 years subject to the achievementand 9.5 years, respectively.

F- 45
Table of the stated performance criteria.Contents

The issuance of Z Units is administered by the Compensation Committee which has the authority to select participants and determine the awards to be made up to a maximum of 600,000 Z Units.  The conversion ratchet (accounted for as vesting) of the Z Units into common units, will increase by up to 10% (up to 20% in certain circumstances following their initial issuance) effective January 1of each year for each participating executive who remains employed by the Operating Partnership if the Company has met a specified “funds from operations” per share target, or such other target as the Compensation Committee deems appropriate, for the prior year, up to a maximum conversion ratchet of 100%. The Operating Partnership has the option to redeem Z Units held by any executive whose employment has been terminated with either common units of the Operating Partnership or shares of the Company’s common stock based on the then-effective conversion ratchet.  ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During 2001, the Operating Partnership issued 200,000 Series Z Incentive Units of limited partner interest to eleven senior executives of the Company in exchange for a capital commitment of $1.00 per Series Z Incentive Unit, for an aggregate offering price of $200. The 2001 Z Unit grant had a conversion ratchet of 45, 55, and 65 percent as of January 1, 2005, 2006, and 2007 respectively. 
During 2004, the Operating Partnership issued 95,953 Series Z-1 Incentive Units of limited partner interest to fourteen senior executives of the Company in exchange for cash or a capital commitment of $1.00 per Series Z-1 Incentive Unit, for an aggregate offering price of $96. The 2004 Z Unit grant had a conversion ratchet of 20 percent upon issuance, and 30, 40 and 50 percent as of January 1, 2005, 2006 and 2007, respectively.  In 2005 an additional 27,000 Z-1 Units were granted to two senior executives pursuant to the 2004 grant terms with a 20 percent conversion ratio at issuance, and 30 and 40 percent conversion ratchet as of January 1, 2006 and 2007.
During 2005, the Operating Partnership issued 89,999 Series Z-1 Incentive Units of limited partner interest to fourteen senior executives of the Company in exchange for cash or a capital commitment of $1.00 per Series Z-1 Incentive Unit, for an aggregate offering price of $90.  The 2005 Z-1 Unit grant had a conversion ratchet of 20 and 30 percent as of January 1, 2006 and 2007.
Long Term Incentive Plan – Outperformance Plan
Stock-based compensation expense for the Outperformance Plan, (the “OPP”) adopted in December 2007 under the fair value method totaled approximately $0.1 million for year ended December 31, 2007.  Total unrecognized compensation cost less an estimate for forfeitures related to2015, 2014, and 2013


The following table summarizes information about the OPP totaled $5.5 millionLTIP Units outstanding as of December 31, 2007.  2015 ($ in thousands):
 Long Term Incentive Plan - LTIP Units
 
Total
Vested
Units
 
Total
Unvested
Units
 
Total
Outstanding
Units
 
Weighted-
average
Grant-date
Fair Value
 
Weighted-
average
Remaining
Contractual
Life (years)
Balance, December 31, 2012190,704
 140,043
 330,747
 $58.44
 11.3
Granted—
 50,500
 50,500
  
  
Vested35,919
 (35,919) —
  
  
Converted(108,433) —
 (108,433)  
  
Cancelled—
 (5,243) (5,243)  
  
Balance, December 31, 2013118,190
 149,381
 267,571
 63.53
 9.3
Granted24,000
 44,750
 68,750
 

 
Vested41,729
 (41,729) —
 

 
Converted(2,000) —
 (2,000) 

 
Cancelled—
 (1,335) (1,335) 

 
Balance, December 31, 2014181,919
 151,067
 332,986
 71.14
 10.5
Granted—
 —
 —
 

 
Vested36,650
 (36,650) —
 

 
Converted(74,384) —
 (74,384) 

 
Cancelled—
 (8,260) (8,260) 

 
Balance, December 31, 2015144,185
 106,157
 250,342
 $75.41
 9.5

(14) Segment Information

The unamortized cost is expectedCompany's segment disclosures present the measure used by the chief operating decision makers for purposes of assessing each segment's performance. Essex's chief operating decision makers are comprised of several members of its executive management team who use NOI to be recognized overassess the expected service periodperformance of five years for senior officers and three years for non-employee directors.
Under the 2007 OPP, award recipients will share in a “performance pool” if the Company’s total return to stockholdersbusiness for the period from December 4, 2007 (measured based onCompany's reportable operating segments. NOI represents total property revenue less direct property operating expenses.

The executive management team evaluates the closing price of the Company’s common stock on December 4, 2007) through December 3, 2010 exceeds a cumulative total return to stockholders of 30%.Company's operating performance geographically. The size of the pool will be 10% of the outperformance amount in excess of the 30% benchmark, subject to an aggregate maximum award of $25 million.  The maximum award will be reduced by the amount of any forfeited awards.  In the event the potential performance pool reaches the maximum aggregate award between June 4, 2010 and December 3, 2010 and remains at that level or higher for 30 consecutive days, the performance period will end early and the performance pool will be formed on the last day of such 30-day period, but the participants will nonetheless be subject to the time-based vesting requirements described below.
Each participant’s award under the 2007 OPP has been designated as a specified percentage of the aggregate performance pool.  Assuming the 30% benchmark is achieved, the pool will be allocated among the participants in
F-26
accordance with the percentage specified in each participant’s award agreement.  Individual awards were made in the form of newly created long term incentive plan (“LTIP”) Units, which are partnership units of the Operating Partnership, and the LTIP units are exchangeable on a one-for-one basis into common units of the Operating Partnership to the extent the LTIP Units become vested.  Such common units are exchangeable for shares of the Company’s common stock on a one-for-one basis.  Any shares of the Company’s common stock, which are ultimately issued in connection with the 2007 OPP, will be issued pursuant to the Company’s 2004 Stock Incentive Plan.  LTIP Units were granted prior to the determination of the performance pool; however, they will only vest upon satisfaction of performance and time vesting thresholds and will not be entitled to distributions until after the benchmark is achieved.  Distributions on LTIP Units will equal the distributions payable on each common unit of the Operating Partnership on a per unit basis.
In the case of awards granted to senior officers, if the benchmark is achieved, the LTIP Units will vest in three substantially equal installments on December 4, 2010 and on each of the first two anniversaries thereafter, based on the officer’s continued employment through the applicable vesting date.  In the case of awards granted to non-employee directors, such awards will vest in full on December 4, 2010 if the benchmark is achieved and only to the extent the board members have continued to serve through such date. 
In the event of a change of control of the Company prior to the establishment of the performance pool, the performance period will be shortened to end on a date immediately prior to such event and the cumulative stockholder return benchmark will be adjusted on a pro rata basis.  The performance pool will be formed as described above if the adjusted benchmark target is achieved, and the awards will become fully vested at such time.
 (15) Segment Information
In accordance with FASB No. 131, “Disclosures about Segments of an Enterprise and Related Information” the Operating Partnership defines its reportable operating segments as the three geographical regions in which its propertiescommunities are located: Southern California, Northern California and Seattle Metro. 

Excluded from segment revenues and net operating income are properties outside of these regions including propertycommunities classified in Houston, Texas,discontinued operations, management and other fees from affiliates, and interest and other income. Non-segment revenues and net operating income included in the following schedule also consist of revenue generated from commercial properties, recreational vehicle parks, and manufactured housing communities.properties.  Other non-segment assets include investments, real estate under development, co-investments, cash and cash equivalents, marketable securities, notes receivable,and other assetsreceivables and deferred charges.prepaid expenses and other assets.


F- 46
F-27Table of Contents

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015, 2014, and 2013


The revenues and net operating income and assets for each of the reportable operating segments are summarized as follows for the years ended December 31, 2015, 2014, and 2013 ($ in thousands):
 Years Ended December 31,
 2015 2014 2013
Revenues:     
Southern California$529,440
 $423,570
 $263,582
Northern California416,347
 326,996
 210,831
Seattle Metro201,418
 168,337
 107,796
Other real estate assets38,293
 42,688
 21,118
Total property revenues$1,185,498
 $961,591
 $603,327
Net operating income: 
  
  
Southern California$355,007
 $279,434
 $176,075
Northern California297,472
 228,971
 146,053
Seattle Metro136,580
 112,494
 71,650
Other real estate assets32,931
 28,146
 12,213
Total net operating income821,990
 649,045
 405,991
Depreciation and amortization(453,423) (360,592) (192,420)
Interest expense(204,827) (164,551) (116,524)
Total return swap income5,655
 —
 —
Management and other fees from affiliates8,909
 9,347
 7,263
General and administrative(40,090) (40,878) (26,684)
Merger and integration expenses(3,798) (53,530) (4,284)
Acquisition and investment related costs(2,414) (1,878) (1,161)
Interest and other income19,143
 11,811
 11,633
Loss on early retirement of debt, net(6,114) (268) (300)
Gain on sale of real estate and land47,333
 46,039
 1,503
Equity income from co-investments21,861
 39,893
 55,865
Gain on remeasurement of co-investment34,014
 —
 —
Income before discontinued operations$248,239
 $134,438
 $140,882


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Table of Contents

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015, 2014, and 2013


Total assets for each of the reportable operating segments are summarized as follows as of December 31, 2007, 2006,2015 and 2005:2014 ($ in thousands):

        Years Ended December 31,
   2007  2006  2005
Revenues:
   Southern California $     215,090  $     198,929  $     181,048
   Northern California        99,734         75,624         67,099
   Seattle Metro        64,079         55,721         50,936
   Other Regions          4,530           4,496           4,152
       Total property revenues $     383,433  $     334,770  $     303,235
        
Net operating income:       
   Southern California $     147,340  $     135,969  $     122,551
   Northern California        65,143         49,907         44,528
   Seattle Metro        42,137         35,138         31,792
   Other Regions             389            (642)            (115)
       Total net operating income      255,009       220,372       198,756
          
Depreciation and amortization:       
   Southern California      (49,551)       (43,017)       (39,219)
   Northern California      (27,892)       (17,568)       (15,984)
   Seattle Metro      (15,491)       (13,170)       (12,343)
   Other Regions        (7,455)         (4,339)         (7,303)
      (100,389)       (78,094)       (74,849)
Interest:       
   Southern California      (31,626)       (26,432)       (27,690)
   Northern California      (18,741)       (18,295)       (17,201)
   Seattle Metro        (6,892)         (6,904)         (6,508)
   Other Regions      (23,736)       (21,267)       (19,385)
        (80,995)       (72,898)       (70,784)
          
Amortization of deferred financing costs        (3,071)         (2,745)         (1,947)
General and administrative      (26,273)       (22,234)       (19,148)
Other expenses           (800)         (1,770)         (5,827)
Management and other fees from affiliates          5,090           5,030         10,951
Gain on sale or real estate                  -                   -           6,391
Interest and other income        10,310           6,176           8,524
Equity income in co-investments          3,120         (1,503)         18,553
Minority interests        (4,847)         (4,977)         (5,340)
Income tax provision           (400)            (525)         (2,538)
        
Income from continuing operations $       56,754  $       46,832  $       62,742
        
                                                                                                              
Assets:       
   Southern California $  1,354,818  $  1,244,037   
   Northern California      829,879       565,405   
   Pacific Northwest      353,737       317,848   
   Other Regions        37,338         76,882   
       Net reportable operating segments - real estate assets   2,575,772    2,204,172   
Real estate - held for sale, net                  -         41,221   
Real estate under development      233,445       107,620   
Co-investments        64,191         56,318   
Notes and other receivables        50,536         19,404   
Other non-segment assets        56,379         57,105   
       Total assets $  2,980,323  $  2,485,840   
F-28
 As of December 31,
Assets:2015 2014
Southern California$4,912,264
 $4,277,754
Northern California3,749,072
 3,418,571
Seattle Metro1,613,175
 1,647,058
Other real estate assets107,066
 336,492
Net reportable operating segments - real estate assets10,381,577
 9,679,875
Real estate under development242,326
 429,096
Co-investments1,036,047
 1,042,423
Real estate held for sale, net26,879
 56,300
Cash and cash equivalents, including restricted cash123,055
 95,749
Marketable securities and other investments137,485
 117,240
Notes and other receivables19,285
 24,923
Other non-segment assets38,437
 81,126
Total assets$12,005,091
 $11,526,732

(16)(15) 401(k) Plan
 
The Operating PartnershipCompany has a 401(k) benefit plan (the Plan)“Plan”) for all full-time employees who have completed six months of service. Employees may contribute up to 23% of their compensation,eligible employees. Employee contributions are limited by the maximum allowed under Section 401(k) of the Internal Revenue Code. The Operating PartnershipCompany matches 50% of the employee contributions for non-highly compensated personnel, up to 50% of their contribution up to a specified maximum. Operating PartnershipCompany contributions to the Plan were approximately $267, $226,$1.6 million, $0.9 million, and $98$0.7 million for the years ended December 31, 2007, 2006,2015, 2014, and 2005.2013, respectively.
 
(17) Fair Value of Financial Instruments
Management believes that the carrying amounts of its variable rate mortgage notes payable, lines of credit, notes receivable and other receivables from related parties, and notes and other receivables approximate fair value as of December 31, 2007 and 2006, because interest rates, yields and other terms for these instruments are consistent with yields and other terms currently available to the Operating Partnership for similar instruments. Management has estimated that the fair value of the Operating Partnership’s $1.25 billion of fixed rate mortgage notes payable and exchangeable bonds at December 31, 2007 are approximately $1.30 billion based on the terms of existing mortgage notes payable compared to those available in the marketplace.  At December 31, 2006, the Operating Partnership’s fixed rate mortgage notes payable of $1.13 billion had an approximate market value of $1.22 billion.  Management believes that the carrying amounts of cash and cash equivalents, restricted cash, marketable securities, accounts payable and accrued liabilities, other liabilities and dividends payable approximate fair value as of December 31, 2007 and 2006 due to the short-term maturity of these instruments.
(18)(16) Commitments and Contingencies
 
AtAs of December 31, 2007,2015, the Operating PartnershipCompany had fiveseven non-cancelable ground leases for certain apartment communities and buildings that expire between 2027 and 2080. Land2082. Ground lease payments are typically the greater of a stated minimum or a percentage of gross rents generated by these apartment communities. Total minimum lease commitments, under landground leases and operating leases, are approximately $1.8$2.7 million per year for the next five years.
The Operating Partnership has a performance guarantee with a commercial bank related to the Northwest Gateway development.years and $131.9 million thereafter.
 
To the extent that an environmental matter arises or is identified in the future that has other than a remote risk as defined in SFAS 5, of having a material impact on the financial statements, the Operating PartnershipCompany will disclose the estimated range of possible outcomes associated with it and, if an outcome is probable, accrue an appropriate liability for remediation and other potential liability.that matter. The Operating PartnershipCompany will consider whether any such occurrencematter results in an impairment of value on the affected property and, if so, accrue an appropriate reserve for impairment.impairment will be recognized.
 
Except with respect to three Properties, the Operating Partnership has no indemnification agreements from third parties for potential environmental clean-up costs at its Properties. The Operating PartnershipCompany has no way of determining at this time the magnitude of any potential liability to which it may be subject arising out of unknown environmental conditions or violations with respect to the propertiescommunities currently or formerly owned by the Operating Partnership.Company. No assurance can be given thatthat: existing environmental studiesassessments conducted with respect to any of the Properties revealthese communities have revealed all environmental conditions or potential liabilities thatassociated with such conditions; any prior owner or operator of a Propertyproperty did not create any material environmental condition not known to the Operating Partnership,Company; or that a material environmental condition does not otherwise exist as to any one or more of the Properties.communities. The Operating PartnershipCompany has limited insurance coverage for some of the types of environmental conditions and associated liabilities described above.

The Operating Partnership may enterCompany has entered into transactions that couldmay require the Operating PartnershipCompany to pay the tax liabilities of the partners in the Operating Partnership or in the DownREIT entities. These transactions which are within the Operating Partnership’sCompany’s control. Although the Operating PartnershipCompany plans to hold the contributed assets or defer recognition of gain on their sale pursuant to like-kind exchange rules under Section 1031 of the Internal Revenue Code, the Operating PartnershipCompany can provide no assurance that it will be able to do so and if such tax liabilities were incurred they may to have a material impact on the Operating Partnership’sCompany’s financial position.


F- 48
Table of Contents
Recently there has
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015, 2014, and 2013


There have been an increasing number of lawsuits against owners and managers of apartment communities alleging personal injury and property damage caused by the presence of mold in the residential real estate.units and common areas of those communities. Some of these lawsuits have resulted in substantial monetary judgments or settlements.  The Operating PartnershipCompany has been sued for mold related matters and has settled some, but not all, of such matters.suits.   Insurance carriers have reacted to the increase in mold
F-29
related liability awards by excluding mold related claims from standard general liability policies and pricing mold endorsements at prohibitively high rates.  The Operating PartnershipCompany has, however, purchased pollution liability insurance which includes some coverage for mold.mold claims.  The Operating PartnershipCompany has also adopted programs designedpolicies intended to manage the existencepromptly address and resolve reports of mold in its properties as well as guidelines for promptly addressing and resolving reports of mold to minimize any impact mold might have on residents or property.of its properties.  The Company believes its mold policies and proactive response to address reported mold exposures reduces its risk of loss from mold claims. While no assurances can be given that the Company has identified and responded to all mold occurrences, the Company promptly addresses and responds to all known mold reports. Liabilities resulting from such mold related matters are not expected to have a material adverse effect on the Operating Partnership’sCompany’s financial condition, results of operations or cash flows. As of December 31, 2015, potential liabilities for mold and other environmental liabilities are not quantifiable and an estimate of possible loss cannot be made.

The Operating PartnershipCompany carries comprehensive liability, fire, extended coverage and rental loss insurance for each of the Properties.communities.  There are, however, certain types of extraordinary losses, such as, for example, losses forfrom terrorism or earthquake,earthquakes, for which the Operating Partnership does not haveCompany has limited insurance coverage.  Substantially all of the Propertiescommunities are located in areas that are subject to earthquake activity. The Company has established a wholly-owned insurance subsidiary, Pacific Western Insurance LLC (“PWI”).  Through PWI, the Company is self-insured as it relates to earthquake related losses. Additionally, since January 2008, PWI has provided property and casualty insurance coverage for the first $5.0 million of the Company’s property level insurance claims per incident. As of December 31, 2015, PWI has cash and marketable securities of approximately $60.3 million.  These assets are consolidated in the Company’s financial statements. Beginning in 2013, the Company has obtained limited third party seismic insurance on selected assets in the Company's co-investments.

On December 19, 2014, a putative class action was filed against the Company in the U.S. District Court for the Northern
District of California, entitled Foster v. Essex Property Trust, Inc. alleging that the Company failed to properly secure the
personally-identifying information of its residents. The lawsuit seeks the recovery of unspecified damages and certain
injunctive relief. This lawsuit was filed in connection with a cyber-intrusion that the Company discovered in the third quarter of
2014. At this point, the Company is unable to predict the developments in, outcome of, and/or economic and/or other
consequences of this litigation or predict the developments in, outcome of, and/or other consequences arising out of any
potential future litigation or government inquiries related to this matter.

The Operating PartnershipCompany is subject to various other lawsuitslegal and/or regulatory proceedings arising in the normal course of its business operations.  Such lawsuits could haveWe believe that, with respect to such matters that we are currently a party to, the ultimate disposition of any such matter will not result in a material adverse effect on the Operating Partnership’sCompany’s financial condition, results of operations or cash flows.

(17) Subsequent Events
(19)
In January 2016, the Company acquired Mio, a 103 unit apartment community, located in San Jose, CA for $51.3 million,

In January 2016, a Company co-investment, BEXAEW, LLC, sold The Heights, a 332 unit apartment community, located in Chino Hills, CA for total proceeds of $93.8 million, of which $50.3 million was used to repay the loan on the property. The Company has a 50% ownership interest in the BEXAEW, LLC joint venture.

In January 2016, the Company sold its former headquarters office building located in Palo Alto, CA for total proceeds of $18.0 million.

In January 2016, the Company paid off $150.0 million in private placement unsecured bonds that had an interest rate of 4.36%.

In February 2016, the Company sold Harvest Park, a 104 unit community located in Santa Rosa, CA for $30.5 million.


F- 49
Table of Contents

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2015, 2014, and 2013


(18) Quarterly Results of Operations (Unaudited)

Essex Property Trust, Inc.

The following is a summary of quarterly results of operations for 20072015 and 2006:2014 ($ in thousands, except per share and dividend amounts):

    
Quarter ended
  
 
Quarter ended
  
 
Quarter ended
  
 
Quarter ended
                                                                         December 31(1)   September 30(1)   June 30(1)  
March 31(1)
2007:            
Total property revenues $101,138 $97,780 $94,508 $90,007
             
Income before discontinued operations $8,384 $15,454 $15,010 $17,906
             
       Net income $61,175 $16,164 $16,085 $43,876
       Net income available to common
       units $56,304 $11,294 $11,216 $39,074
Per unit data:
 Net income:
   Basic $2.04 $0.41 $0.42 $1.51
             
   Diluted $2.02 $0.40 $0.41 $1.46
             
 Distributions per common unit $0.93 $0.93 $0.93 $0.93
             
2006:         
Total property revenues $88,118 $84,740 $81,665 $80,247
             
Income before discontinued operations $13,440 $14,281 $9,215 $9,896
             
       Net income $21,926 $16,412 $27,450 $14,059
       Net income available to common
       units $16,988 $12,062 $24,402 $11,012
Per unit data:
 Net income:
   Basic $0.65 $0.47 $0.97 $0.44
             
   Diluted $0.64 $0.46 $0.95 $0.43
             
 Distributions per common unit $0.84 $0.84 $0.84 $0.84
             
 
Quarter ended
December 31
 
Quarter ended
September 30
 
Quarter ended
June 30
 
Quarter ended
March 31
2015:       
Total property revenues$308,646
 $302,522
 $294,101
 $280,229
Net income$85,762
 $47,182
 $50,542
 $64,753
Net income available to common stockholders$79,624
 $42,323
 $45,555
 $59,363
Per share data: 
  
  
  
Net income: 
  
  
  
Basic (1)
$1.22
 $0.65
 $0.70
 $0.92
Diluted (1)
$1.22
 $0.65
 $0.70
 $0.92
Market price: 
  
  
  
High$244.71
 $232.20
 $231.90
 $243.17
Low$214.29
 $205.72
 $208.85
 $207.26
Close$239.41
 $223.42
 $212.50
 $229.90
Dividends declared$1.44
 $1.44
 $1.44
 $1.44
2014 (2):
 
  
  
  
Total property revenues$276,778
 $268,512
 $256,952
 $159,349
Net income$44,805
 $58,582
 $4,645
 $26,406
Net income available to common stockholders$40,175
 $53,565
 $1,207
 $21,912
Per share data: 
  
  
  
Net income: 
  
  
  
Basic (1)
$0.63
 $0.85
 $0.02
 $0.58
Diluted (1)
$0.63
 $0.85
 $0.02
 $0.58
Market price: 
  
  
  
High$214.43
 $196.08
 $185.99
 $173.01
Low$176.70
 $177.68
 $164.76
 $141.79
Close$206.60
 $178.75
 $184.91
 $170.05
Dividends declared$1.30
 $1.30
 $1.30
 $1.21

(1)  Net
(1)
Quarterly earnings from discontinued operations have been reclassified for all periods presented.per common unit amounts may not total to the annual amounts due to rounding and the changes in the number of weighted common units outstanding and included in the calculation of basic and diluted shares.
(2)
Includes BRE results of operations after the merger date, April 1, 2014.



F- 50

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Financial Statement Schedule III
         Real Estate and Accumulated Depreciation
         December 31, 2007
         (Dollars in thousands)
                                                                                                    
                                                     
         
 
Initial cost
 
 
Costs
 
 
Gross amount carried at close of period
        
                                                                                                                      
Buildings and
 
capitalized
subsequent to
 
Land and
  
Buildings and
 
 
   
Accumulated
 
 
 
Date of
 
 
Date
 
 
Lives
Property Units Location  Encumbrance Land improvements acquisition  improvements  improvements 
Total(1)
  depreciation construction  acquired (years)
Encumbered apartment communities                        
 Foothill Commons 360 Bellevue, WA$ $2,435$9,821$6,074$2,440$15,890$18,330$9,298 1978  03/90    3-30
 Montclaire, The (Oak Pointe)390 Sunnyvale, CA   4,842 19,776 12,774 4,847 32,545 37,392 17,967 1973  12/88    3-30
 Palisades, The 192 Bellevue, WA   1,560 6,242 9,421 1,565 15,658 17,223 6,617 
   1969/1977(2)
 05/90    3-30
 Pathways 296 Long Beach, CA   4,083 16,757 15,174 6,239 29,775 36,014 13,093 1975  02/91    3-30
 Stevenson Place 200 Fremont, CA   996 5,582 7,879 1,001 13,456 14,457 8,763 1971  04/83    3-30
 Bridgeport (Summerhill Commons)184 Newark, CA   1,608 7,582 5,984 1,525 13,649 15,174 7,019 1987  07/87    3-30
 Summerhill Park 100 Sunnyvale, CA   2,654 4,918 1,149 2,656 6,065 8,721 3,978 1988  09/88    3-30
 Woodland Commons 236 Bellevue, WA   2,040 8,727 4,293 2,044 13,016 15,060 7,236 1978  03/90    3-30
       90,005 20,218 79,405 62,748 22,317 140,054 162,371 73,972      
 Fountain Court 320 Seattle, WA   6,702 27,306 1,691 6,985 28,714 35,699 7,679 2000  03/00    3-30
 Hillcrest Park 608 Newbury Park, CA 15,318 40,601 12,353 15,755 52,517 68,272 16,713 1973  03/98    3-30
 Hillsborough Park 235 La Habra, CA   6,291 15,455 827 6,272 16,302 22,573 4,728 1999  09/99    3-30
       76,732 28,311 83,362 14,871 29,012 97,532 126,544 29,120      
 Bel Air 462 San Ramon, CA   12,105 18,252 18,642 12,682 36,317 48,999 12,687 1988  01/97    3-30
 Waterford, The 238 San Jose, CA   11,808 24,500 11,688 15,165 32,831 47,996 7,659 2000  06/00    3-30
       58,139 23,913 42,752 30,329 27,847 69,147 96,994 20,346      
 Bonita Cedars 120 Bonita, CA   2,496 9,913 977 2,503 10,883 13,386 1,983 1983  12/02    3-30
 Bristol Commons 188 Sunnyvale, CA   5,278 11,853 2,447 5,293 14,285 19,578 5,889 1989  01/97    3-30
 Castle Creek 216 Newcastle, WA   4,149 16,028 2,020 4,833 17,364 22,197 6,593 1997  12/97    3-30
 Forest View 192 Renton, WA   3,731 14,530 689 3,731 15,219 18,950 2,233 1998  10/03    3-30
 Mira Monte 355 Mira Mesa, CA   7,165 28,459 6,909 7,186 35,347 42,533 6,243 1982  12/02    3-30
 Mission Hills 282 Oceanside, CA   10,099 38,778 1,920 10,167 40,630 50,797 3,611 1984  7/05    3-30
 Walnut Heights 163 Walnut, CA   4,858 19,168 1,140 4,887 20,280 25,166 2,927 1964  10/03    3-30
 Windsor Ridge 216 Sunnyvale, CA   4,017 10,315 3,855 4,021 14,167 18,187 8,183 1989  03/89    3-30
       100,000 41,793 149,044 19,959 42,621 168,174 210,796 37,662      
 Alpine Village 306 Alpine, CA 17,016 4,967 19,728 1,994 4,982 21,707 26,689 3,845 1971  12/02    3-30
 Anchor Village 301 Mukilteo, WA 10,750 2,498 10,595 5,433 2,681 15,845 18,526 7,092 1981  01/97    3-30
 Barkley, The 161 Anaheim, CA 4,883 2,272 8,520 1,705 2,353 10,144 12,497 3,253 1984 04/00    3-30
 Bluffs II, The 224 San Diego, CA 12,137 3,405 7,743 5,979 3,442 13,685 17,127 3,756 1974 
 06/97(3)
   3-30
 Brentwood (Hearthstone) 140 Santa Ana, CA 9,333 2,833 11,303 4,341 3,502 14,975 18,477 2,798 1970  11/01    3-30
 Brighton Ridge 264 Renton, WA 16,013 2,623 10,800 3,789 2,656 14,555 17,212 6,030 1986  12/96    3-30
 Brookside Oaks 170 Sunnyvale, CA 14,130 7,301 16,310 16,792 10,301 30,102 40,403 5,312 1973  06/00    3-30
 Cairns, The 100 Seattle, WA 11,552 6,937 20,679 62 6,939 20,739 27,678 396 2006 06/07    3-30
 Camarillo Oaks 564 Camarillo, CA 53,052 10,953 25,254 5,109 11,075 30,241 41,316 13,871 1985  07/96    3-30
 Camino Ruiz Square 160 Camarillo, CA             21,110 6,871 26,119 64 6,878 26,176 33,054 876 1990  12/06    3-30
 Canyon Point 250 Bothell, WA 15,736 4,692 18,288 1,082 4,693 19,370 24,062 2,785 1990  10/03    3-30
 Capri at Sunny Hills 100 Fullerton, CA 19,150 3,337 13,320 3,962 3,867 16,752 20,619 3,444 1961  09/01    3-30
 Cardiff by the Sea 300 Cardiff, CA 42,200 13,724 57,395 439 14,224 57,881 72,105 1,355 1986 04/07    3-30
                           (Continued)
F-31
 ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Real Estate and Accumulated DepreciationNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 20072015, 2014, and 2013


Essex Portfolio, L.P.

The following is a summary of quarterly results of operations for 2015 and 2014 (Dollars$ in thousands)thousands, except per unit and distribution amounts):
                                                     
         
 
Initial cost
 
 
Costs
 
 
Gross amount carried at close of period
        
                                                                                                   
Buildings and
 
capitalized
subsequent to
 
Land and
  
Buildings and
    
Accumulated
 
 
Date of
 
 
Date
 
 
Lives
Property Units Location  Encumbrance Land  improvements acquisition  improvements  improvements 
Total(1)
  depreciation  construction  acquired (years)
Encumbered apartment communities (continued)                      
 Carlyle, The 132 San Jose, CA 15,424 3,954 15,277 9,270 5,801 22,701 28,501 5,266 2000  04/00    3-30
 City View (Wimbledon Woods)560 Hayward, CA 51,600 9,883 37,670 15,069 10,350 52,272 62,622 15,861 1975  03/98    3-30
 Coldwater Canyon 39 Studio City, CA 5,919 1,674 6,640 367 1,676 7,005 8,681 143 1979 05/07    3-30
 Coral Gardens 200 El Cajon, CA 10,943 3,638 14,452 936 3,649 15,377 19,026 2,770 1976  12/02    3-30
 Devonshire 276 Hemet, CA 11,078 3,470 13,786 1,548 3,482 15,322 18,804 2,905 1988  12/02    3-30
 Emerald Ridge - North 180 Bellevue, WA 10,721 3,449 7,801 3,036 3,449 10,837 14,286 5,018 1987  11/94    3-30
 Esplanade 278 San Jose, CA 38,956 18,170 40,086 2,946 18,425 42,777 61,202 4,635 2002  11/04    3-30
 Evergreen Heights 200 Kirkland, WA 10,910 3,566 13,395 2,134 3,649 15,446 19,095 5,847 1990  06/97    3-30
 Fairwood Pond 194 Renton, WA             14,514 5,296 15,564 709 5,300 16,269 21,569 1,755 1997  10/04    3-30
 Fountain Park 705 Playa Vista, CA 98,665 25,073 94,980 17,327 25,208 112,173 137,380 13,407 2002  02/04    3-30
 Harvest Park 104 Santa Rosa, CA 11,603 6,700 15,479 192 6,690 15,681 22,371 413 2004 03/07    3-30
 Hidden Valley (Parker Ranch)324 Simi Valley, CA 33,303 14,174 34,065 287 11,724 36,802 48,526 4,334 2004  12/04    3-30
 Highridge 255 Rancho Palos Verde, CA44,807 5,419 18,347 8,220 5,841 26,145 31,986 9,376 1972  05/97    3-30
 Huntington Breakers 342 Huntington Beach, CA20,962 9,306 22,720 3,882 9,315 26,593 35,908 9,494 1984  10/97    3-30
 Inglenook Court 224 Bothell, WA 8,300 3,467 7,881 6,502 3,474 14,375 17,850 5,757 1985  10/94    3-30
 Kings Road 196 Los Angeles, CA 14,618 4,023 9,527 5,675 4,031 15,194 19,225 4,932 1979  06/97    3-30
 Le Pac Luxury Apartments140 Santa Clara, CA 13,713 3,090 7,421 4,768 3,092 12,187 15,279 4,889 1975  02/94    3-30
 Marbrisa 202 Long Beach, CA 20,923 4,700 18,605 1,323 4,760 19,869 24,628 3,806 1987  09/02    3-30
 Mariners Place 105 Oxnard, CA 3,872 1,555 6,103 1,029 1,562 7,126 8,687 2,166 1987  05/00    3-30
 Montejo 124 Garden Grove, CA5,812 1,925 7,685 1,332 2,110 8,833 10,942 1,959 1974  11/01    3-30
 Monterey Villas 122 Oxnard, CA 13,802 2,349 5,579 4,395 2,424 9,900 12,323 3,206 1974  07/97    3-30
 Monterra del Rey 84 Pasadena, CA 10,130 2,312 4,923 4,292 2,825 8,702 11,527 2,494 1972  04/99    3-30
 Mt. Sutro 99 San Francisco, CA5,725 2,334 8,507 1,850 2,810 9,881 12,691 2,942 1973  06/01    3-30
 Park Place/Windsor Court/Cochran176 Los Angeles, CA 21,964 4,965 11,806 5,090 5,015 16,846 21,861 5,682 1988  08/97    3-30
 Pointe at Cupertino, The 116 Cupertino, CA 13,033 4,505 17,605 606 4,505 18,211 22,716 2,282 1963 
 08/98(4)
   3-30
 Sammamish View 153 Bellevue, WA 10,778 3,324 7,501 5,942 3,331 13,436 16,767 4,724 1986  11/94    3-30
 San Marcos 432 Richmond, CA 49,225 15,563 36,204 24,269 22,866 53,170 76,036 7,372 2003  11/03    3-30
 Stonehedge Village 196 Bothell, WA 13,786 3,167 12,603 3,198 3,201 15,767 18,968 5,363 1986  10/97    3-30
 Summit Park 300 San Diego, CA 21,100 5,959 23,670 2,011 5,977 25,663 31,640 4,773 1972  12/02    3-30
 Thomas Jefferson 156 Sunnyvale, CA 19,529 8,190 19,306 91 8,195 19,392 27,587 340 1969 09/07    3-30
 Tierra Vista 404 Oxnard, CA 62,037 13,652 53,336 669 13,661 53,997 67,657 6,665 2001 
 01/01(4)
   3-30
 Treehouse 164 Santa Ana, CA 7,825 2,626 10,485 1,440 2,843 11,708 14,551 2,706 1970  11/01    3-30
 Boulevard (Treetops) 172 Fremont, CA 9,800 3,520 8,182 7,717 3,580 15,839 19,419 4,925 1978  01/96    3-30
 Valley Park 160 Fountain Valley, CA9,913 3,361 13,420 3,001 3,761 16,021 19,782 3,458 1969  11/01    3-30
 Villa Angelina 256 Placentia, CA 13,405 4,498 17,962 2,860 4,962 20,359 25,320 4,282 1970  11/01    3-30
 Vista Belvedere 76 Tiburon, CA 11,297 5,573 11,901 1,973 5,573 13,874 19,447 1,520 1963  08/04    3-30
 Wandering Creek 156 Kent, WA 5,300 1,285 4,980 3,762 1,296 8,731 10,027 3,615 1986  11/95    3-30
 Wharfside Pointe 142 Seattle, WA 7,827 2,245 7,020 4,180 2,256 11,189 13,445 4,645 1990  06/94    3-30
       1,325,057 408,608 1,283,091 342,554 432,055 1,602,745 2,034,800 391,640     (Continued)
                            
F-32
 
Quarter ended
December 31
 
Quarter ended
September 30
 
Quarter ended
June 30
 
Quarter ended
March 31
2015:       
Total property revenues$308,646
 $302,522
 $294,101
 $280,229
Net income$85,762
 $47,182
 $50,542
 $64,753
Net income available to common unitholders$82,333
 $43,794
 $47,088
 $61,474
Per unit data: 
  
  
  
Net income: 
  
  
  
Basic (1)
$1.22
 $0.65
 $0.70
 $0.93
Diluted (1)
$1.22
 $0.65
 $0.70
 $0.92
Distributions declared$1.44
 $1.44
 $1.44
 $1.44
2014 (2):
 
  
  
  
Total property revenues$276,778
 $268,512
 $256,952
 $159,349
Net income$44,805
 $58,582
 $4,645
 $26,406
Net income available to common unitholders$41,599
 $55,382
 $1,416
 $23,329
Per unit data: 
  
  
  
Net income: 
  
  
  
Basic (1)
$0.63
 $0.85
 $0.02
 $0.58
Diluted (1)
$0.63
 $0.85
 $0.02
 $0.58
Distributions declared$1.30
 $1.30
 $1.30
 $1.21

(1)
Quarterly earnings per common unit amounts may not total to the annual amounts due to rounding and the changes in the number of weighted common units outstanding and included in the calculation of basic and diluted shares.
(2)
Includes BRE results of operations after the merger date, April 1, 2014.

F- 51
ESSEX PORTFOLIO, L.P.PROPERTY TRUST, INC. AND SUBSIDIARIES
Real Estate and Accumulated Depreciation
December 31, 2007
(Dollars in thousands)

                                                                                      
                            
         
 
Initial cost
 
 
Costs
 
 
Gross amount carried at close of period
        
                                                                                                                                   
Buildings and
 
capitalized
subsequent to
 
Land and
  
Buildings and
 
 
   
Accumulated
 
 
 
Date of
 
 
Date
 
 
Lives
Property Units Location  EncumbranceLand  improvements acquisition  improvements improvements  
Total(1)
  depreciation  construction  acquired (years)
Unencumbered apartment communities                       
 Alpine Country 108 Alpine, CA   1,741 6,914 456 1,746 7,364 9,111 1,335 1986  12/02    3-30
 Avondale at Warner Center446 Woodland Hills, CA 10,536 24,522 14,962 10,601 39,419 50,020 12,858 1970  01/97    3-30
 Belmont Terrace 71 Belmont, CA   4,446 10,290 647 4,474 10,909 15,383 433 1974  10/06    3-30
 Bridle Trails 108 Kirkland, WA   1,500 5,930 4,982 1,531 10,881 12,412 3,182 1986  10/97    3-30
 Bunker Hill 456 Los Angeles, CA   11,498 27,871 3,350 11,639 31,080 42,719 11,324 1968  03/98    3-30
 Cambridge 40 Chula Vista, CA   497 1,973 214 498 2,186 2,684 387 1965  12/02    3-30
 Canyon Oaks 250 San Ramon, CA   19,088 44,473 119 19,088 44,591 63,680 934 2005 05/07    3-30
 Carlton Heights 70 Santee, CA   1,099 4,368 318 1,103 4,682 5,785 855 1979  12/02    3-30
 CBC Apartments 148 Goleta, CA   6,283 24,000 96 6,288 24,091 30,379 1,587 1962  01/06    3-30
 Cedar Terrace 180 Bellevue, WA   5,543 16,442 2,077 5,652 18,410 24,062 1,857 1984  01/05    3-30
 Chimney Sweep Apartments91 Goleta, CA   5,558 21,320 1,561 5,618 22,820 28,439 1,670 1967  01/06    3-30
 Country Villas 180 Oceanside, CA   4,174 16,583 2,180 4,187 18,750 22,937 3,404 1976  12/02    3-30
 Monterra del Sol (Euclid) 85 Pasadena, CA   2,202 4,794 4,364 2,824 8,536 11,360 2,274 1972  04/99    3-30
 Fairways(5)
 74 Newport Beach, CA               - 7,850 2,876 9 10,717 10,726 3,877 1972  06/99    3-30
 Foothill Gardens/Twin Creeks176 San Ramon, CA   5,875 13,992 3,435 5,964 17,339 23,302 6,957 1985  02/97    3-30
 Grand Regency 60 Escondido, CA   881 3,498 217 883 3,713 4,596 669 1967  12/02    3-30
 Hampton Park 83 Glendale, CA   2,407 5,672 1,563 2,426 7,216 9,642 2,055 1974  06/99    3-30
 Hampton Place 132 Glendale, CA   4,288 11,081 2,323 4,307 13,385 17,692 3,817 1970  06/99    3-30
 Hillsdale Garden Apartments697 Hillsdale Garden, CA     22,000 94,681 1,976 22,325 97,184 119,509 3,971 1948 
 09/06(6)
   3-30
 Hope Ranch Collection 108 Santa Barbara, CA  16,877 4,078 122 4,208 16,869 21,077 384 1965 03/07    3-30
 Linden Square 183 Seattle, WA   4,374 11,588 931 4,202 12,691 16,893 3,464 1994  06/00    3-30
 Pinehurst 118 Ventura, CA   1,570 3,912 3,962 1,618 7,826 9,444 2,546 1971  06/97    3-30
 Magnonlia Lane(7)
 32 Sunnyvale, CA                 - 5,430 8 3 5,434 5,438 98 2001 06/07    3-30
 Maple Leaf 48 Seattle, WA   805 3,283 749 828 4,010 4,837 1,376 1986  10/97    3-30
 Marbella, The 60 Los Angeles, CA   2,826 11,269 147 2,871 11,371 14,242 865 1991  09/05    3-30
 Marina City Club(8)
 101 Marina Del Rey, CA               - 28,167 2,669                       - 30,836 30,836 4,070 1971  01/04    3-30
 Marina Cove(9)
 292 Santa Clara, CA   5,320 16,431 4,136 5,324 20,563 25,887 10,377 1974  06/94    3-30
 Meadowood 320 Simi Valley, CA   7,852 18,592 3,829 7,898 22,375 30,273 9,088 1986  11/96    3-30
 Mesa Village 133 Clairemont, CA   1,888 7,498 494 1,894 7,986 9,880 1,382 1963  12/02    3-30
 Mill Creek at Windermere400 San Ramon, CA   29,551 70,430 37 29,551 69,070 98,620 671 1974 09/07    3-30
 Mirabella 188 Marina Del Rey, CA 6,180 26,673 10,264 6,270 36,847 43,117 7,557 2000  05/00    3-30
 Monterra del Mar (Windsor Terrace)123 Pasadena, CA   2,188 5,263 3,951 2,735 8,666 11,402 3,016 1972  09/97    3-30
 Mountain View 106 Camarillo, CA   3,167 11,106 667 3,117 11,823 14,940 1,581 1980  01/04    3-30
 Park Hill at Issaquah 245 Issaquah, CA   7,284 21,937 810 7,284 22,747 30,031 2,530 1999 
 02/99(10)
   3-30
 Pinehurst 28 Ventura, CA   355 1,356 269 6 1,975 1,980 252 1973  12/04    3-30
 Salmon Run at Perry Creek132 Bothell, WA   3,717 11,483 501 3,801 11,900 15,701 2,877 2000  10/00    3-30
 Shadow Point 172 Spring Valley, CA  2,812 11,170 1,386 2,820 12,548 15,368 2,373 1983  12/02    3-30
 Spring Lake 69 Seattle, WA   838 3,399 359 859 3,737 4,596 1,441 1986  10/97    3-30
 St. Cloud 302 Houston, TX   2,140 7,782 247 2,146 8,022 10,169 1,915 1968  12/02    3-30
                           (Continued)
F-33
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Real Estate and Accumulated Depreciation
December 31, 2007
(Dollars in thousands)
                            
                                                                                      
 
Initial cost
 
Costs
capitalized
 
 
Gross amount carried at close of period
        
            Buildings and subsequent to Land and  Buildings and    Accumulated Date of Date Lives
Property Units Location  Encumbrance Land  improvements acquisition  improvements  improvements 
Total(1)
  depreciation  construction  acquired (years)
Unencumbered apartment communities (continued)                      
 The Laurels 164 Mill Creek, WA   1,559 6,430 1,916 1,595 8,309 9,905 3,435 1981  12/96    3-30
 Tierra del Sol/Norte 156 El Cajon, CA   2,455 9,753 654 2,463 10,399 12,862 1,881 1969  12/02    3-30
 Trabucco Villas 132 Lake Forest, CA   3,638 8,640 1,548 3,890 9,936 13,826 4,011 1985  10/97    3-30
 Tuscana 30 Tracy, CA   2,828 6,599 153 2,870 6,710 9,580 140 2007 02/07    3-30
 Vista Capri - North 106 San Diego, CA   1,663 6,609 489 1,668 7,093 8,761 1,192 1975  12/02    3-30
 Wilshire Promenade 149 Fullerton, CA   3,118 7,385 5,215 3,797 11,921 15,718 4,572 1992  01/97    3-30
 Woodlawn Colonial 159 Chula Vista, CA   2,344 9,311 943 2,351 10,248 12,598 1,923 1974  12/02    3-30
 Woodside Village 145 Ventura, CA   5,331 21,036 1,145 5,342 22,170 27,512 2,221 1987  12/04    3-30
  24,393    1,325,057 640,904 1,985,955 437,870 654,629 2,410,099 3,064,729 532,323      
                            
                            
                            
                                                    
 
Initial cost
 
Costs
capitalized
 
 
Gross amount carried at close of period
        
            Buildings and subsequent toLand and  Buildings and   Accumulated Date of Date Lives
Property Units Location  Encumbrance Land  improvements acquisition  improvements  improvements 
Total(1)
 depreciation construction acquired (years)
Other real estate assets                           
Office Buildings                           
   925 East Meadow   Palo Alto, CA                      -       1,401                 3,172 1,105               1,857                 3,822            5,678              2,211 1988  11/97    3-30
   935 East Meadow(11)
   Palo Alto, CA                      -       1,290                 3,078 0               1,290                 3,078            4,368                     - 1962  12/07    3-30
   17461 Derian   Irvine, CA                      -       3,079               12,315 5,220               3,105               17,509          20,614              4,527 1983 07/00    3-30
   22120 Clarendon   Woodland Hills, CA                     -          903                 3,600 1,205               1,014                 4,694            5,708              1,538 1982  03/01    3-30
                            
Recreational vehicle parks                           
   Circle RV   El Cajon, CA                      -       2,375                 2,347 140               2,505                 2,357            4,862                 400 1977  12/02    3-30
   Vacationer   El Cajon, CA                      -       1,975                 1,951 138               2,100                 1,964            4,064                 338 1973  12/02    3-30
Manufactured housing communities                      
   Green Valley   Vista, CA               6,216       3,750                 3,710 275               3,993                 3,742            7,735                 650 1973  12/02    3-30
                            
Total apartment communities and other real estate assets$       1,331,273 $  655,677 $         2,016,128 $             445,954 $          670,494 $         2,447,265 $    3,117,759 $         541,987     (Continued)
F-34
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Real Estate and Accumulated DepreciationFINANCIAL STATEMENT SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 20072015
(Dollars in thousands)
                                                       
              Costs                  
                                                                       Initial cost  capitalized      Gross amount carried at close of period        
                                                      Buildings and  subsequent to Land and  Buildings and    Accumulated Date of��Date Lives
Property Units Location  Encumbrance Land  improvements  acquisition   improvements  improvements 
Total(1)
  depreciation  construction  acquired (years)
Other real estate assets (continued)                         
 Development Projects(12)
                          
     Belmont Station 275 Los Angeles, CA$            19,450 $      8,100 $                        - $               47,378$            55,478 $                        - $         55,478 $                    -                    -  12/04             -
     The Grand 238 Oakland, CA                      -       4,838                         -                37,211             42,049                         -          42,049                     -                    - 08/05             -
     Fourth Street 171 Berkeley, CA                      - 8,772                    4,601 13,373                         -          13,373                     -                    - 12/07             -
                            
 Predevelopment Projects(13)
1,658 various             12,150     87,845                         -                  9,248             97,093                         -          97,093                     -                    -               -
 Land held for future development434 various                      -               -                         -                25,452             25,452                         -          25,452                     -                    -               -
                            
Consolidated Development Pipeline       2,776   $            31,600 $  109,555 $                        - $             123,890$          233,445 $                        - $       233,445 $                    -      
                            
(1)   The aggregate cost for federal income tax purposes is approximately $2,379,000,000 (unaudited).          
(2)   Phase I was built in 1969 and Phase II was built in 1977.                    
(3)   The Operating Partnership's initial ownership was 85%, and the remaining 15% interest was acquired in 2007.              
(4)   The Operating Partnership's initial ownership was 20%, and the remaining 80% interest was acquired in 2004.              
(5)   The land is leased pursuant to a ground lease expiring 2027.                    
(6)  The land was subject to a ground lease that would have expired in 2047.  In the second quarter of 2007, the Operating Partnership entered into a joint venture with a third-party, and the Operating Partnership contributed the improvements for an 81.5% interest and the joint venture partner contributed title to the land for an 18.5% interest in the partnership.
(7)   The land is leased pursuant to a ground lease expiring 2070.                    
(8)   The land is leased pursuant to a ground lease expiring 2067.                    
(9)   A portion of land is leased pursuant to a ground lease expiring in 2028.              
(10) The Operating Partnership's initial ownership was 45%, and the remaining 55% interest was acquired in 2004.              
(11) The office building is currently under renovation through approximately the third quarter of 2008.              
(12) All construction costs are reflected as real estate under development in the Operating Partnership's consolidated balance sheets until the project reaches stabilization.      
(13) The 535 - 575 River Oaks and 6230 Sunset Blvd. commercial buildings are accounted as part of predevelopment projects for the year ended December 31, 2007.      


A summary of activity for rental properties and accumulated depreciation is as follows:           
                                                                                                        
    2007  2006  2005         2007  2006  2005
Rental properties:             Accumulated depreciation:        
Balance at beginning of year  $2,669,187 $2,431,629 $2,371,194   Balance at beginning of year$465,015 $389,040 $329,652
Improvements         105,673          40,885  24,000   Depreciation expense - Acquisitions          4,838           2,314  1,406
Acquisition of real estate         397,605        202,459  90,065   Depreciation expense - Development          5,540                   -                   -
Development of real estate                     -                   -         20,460   Depreciation expense - Discontinued operations         1,820           4,941           5,777
Disposition of real estate          (54,706)          (5,786)        (22,473)   Depreciation and amortization expense - Rental properties        83,274         73,241  66,409
Real estate investment held for sale                    -                   -        (51,617)   Dispositions          (18,500)          (2,362)          (4,768)
Balance at the end of year  $3,117,759 $2,669,187 $2,431,629   Real estate investment held for sale            -          (2,159)          (9,436)
              Balance at the end of year $541,987 $465,015 $389,040
                           
      Costs       
    Initial costcapitalizedGross amount carried at close of period    
 Apartment   Buildings andsubsequent toLand andBuildings and AccumulatedDate ofDateLives
PropertyHomesLocationEncumbranceLandimprovementsacquisitionimprovementsimprovements
Total (1)
depreciationconstructionacquired(years)
Encumbered communities             
Avondale at Warner Center446
Woodland Hills, CA$44,470
$10,536
$24,522
$18,315
$10,601
$42,772
$53,373
$(26,174)1970Jan-97   3-30
Bel Air462
San Ramon, CA52,615
12,105
18,252
31,563
12,682
49,238
61,920
(26,928)1988Jan-97   3-30
Belcarra296
Bellevue, WA54,416
21,725
92,091
253
21,725
92,344
114,069
(5,874)2009Apr-14   5-30
Bella Villagio231
San Jose, CA34,686
17,247
40,343
2,271
17,247
42,614
59,861
(8,054)2004Sep-10   3-30
BellCentre248
Bellevue, WA40,485
16,197
67,207
1,463
16,197
68,670
84,867
(4,461)2001Apr-14   5-30
Belmont Station275
 Los Angeles, CA29,604
8,100
66,666
5,034
8,267
71,533
79,800
(20,898)2009Mar-09   3-30
Bridgeport184
Newark, CA20,559
1,608
7,582
8,801
1,525
16,466
17,991
(12,685)1987Jul-87   3-30
Brookside Oaks170
Sunnyvale, CA18,897
7,301
16,310
23,258
10,328
36,541
46,869
(16,270)1973Jun-00   3-30
Camino Ruiz Square160
Camarillo, CA21,093
6,871
26,119
1,431
6,931
27,490
34,421
(8,515)1990Dec-06   3-30
Canyon Oaks250
San Ramon, CA27,553
19,088
44,473
2,543
19,088
47,016
66,104
(14,036)2005May-07   3-30
Carmel Creek348
San Diego, CA65,204
26,842
107,368
2,474
26,842
109,842
136,684
(7,078)2000Apr-14   5-30
City View572
Hayward, CA73,204
9,883
37,670
23,281
10,350
60,484
70,834
(38,459)1975Mar-98   3-30
 Courtyard off Main110
Bellevue, WA15,402
7,465
21,405
2,927
7,465
24,332
31,797
(4,663)2000Oct-10   3-30
Domaine92
Seattle, WA15,149
9,059
27,177
710
9,059
27,887
36,946
(3,130)2009Sep-12   3-30
Elevation158
Redmond, WA10,973
4,758
14,285
5,740
4,757
20,026
24,783
(5,319)1986Jun-10   3-30
Ellington at Bellevue220
Bellevue, WA22,289
15,066
45,249
1,322
15,066
46,571
61,637
(2,109)1994Jul-14   3-30
Fairhaven164
Santa Ana, CA20,230
2,626
10,485
6,040
2,957
16,194
19,151
(7,714)1970Nov-01   3-30
Foster's Landing490
Foster City, CA100,847
61,714
144,000
5,685
61,714
149,685
211,399
(9,741)1987Apr-14   5-30
Fountain at River Oaks226
San Jose, CA33,159
26,046
60,773
590
26,046
61,363
87,409
(3,953)1990Apr-14   3-30
Fountain Park705
Playa Vista, CA82,366
25,073
94,980
29,371
25,203
124,221
149,424
(53,723)2002Feb-04   3-30
Hampton Place/Hampton Court215
Glendale, CA20,213
6,695
16,753
13,193
6,733
29,908
36,641
(13,448)1970Jun-99   3-30
Hidden Valley324
Simi Valley, CA29,262
14,174
34,065
2,620
9,674
41,185
50,859
(15,871)2004Dec-04   3-30
Highlands at Wynhaven333
Issaquah, WA31,522
16,271
48,932
8,001
16,271
56,933
73,204
(15,525)2000Aug-08   3-30
Highridge255
Rancho Palos Verdes, CA44,772
5,419
18,347
29,555
6,073
47,248
53,321
(26,591)1972May-97   3-30
Hillcrest Park608
Newbury Park, CA65,566
15,318
40,601
17,368
15,755
57,532
73,287
(32,302)1973Mar-98   3-30
Huntington Breakers342
Huntington Beach, CA36,648
9,306
22,720
17,026
9,315
39,737
49,052
(19,480)1984Oct-97   3-30
Inglenook Court224
Bothell, WA8,174
3,467
7,881
6,686
3,474
14,560
18,034
(10,524)1985Oct-94   3-30
Magnolia Square/Magnolia
Lane (2)
188
Sunnyvale, CA17,363
8,190
24,736
14,591
8,191
39,326
47,517
(13,145)1969Sep-07   3-30
Mill Creek at Windermere400
San Ramon, CA47,344
29,551
69,032
3,447
29,551
72,479
102,030
(20,639)2005Sep-07   3-30
Mirabella188
Marina Del Rey, CA43,518
6,180
26,673
14,103
6,270
40,686
46,956
(19,485)2000May-00   3-30

F-35
F- 52
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
FINANCIAL STATEMENT SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2015
(Dollars in thousands)


SIGNATURES
      Costs       
    Initial costcapitalizedGross amount carried at close of period    
 Apartment   Buildings andsubsequent toLand andBuildings and AccumulatedDate ofDateLives
PropertyHomesLocationEncumbranceLandimprovementsacquisitionimprovementsimprovements
Total (1)
depreciationconstructionacquired(years)
Montanosa472
San Diego, CA62,724
26,697
106,787
2,210
26,697
108,997
135,694
(7,005)1990Apr-14   5-30
Montebello248
Kirkland, WA27,353
13,857
41,575
3,735
13,858
45,309
59,167
(5,903)1996Jul-12   3-30
Montejo124
Garden Grove, CA15,232
1,925
7,685
2,822
2,194
10,238
12,432
(4,974)1974Nov-01   3-30
Park Highland250
Bellevue, WA26,556
9,391
38,224
8,053
9,391
46,277
55,668
(2,743)1993Apr-14   5-30
Park Hill at Issaquah245
Issaquah, WA27,802
7,284
21,937
5,979
7,284
27,916
35,200
(10,277)1999Feb-99   3-30
Pathways296
Long Beach, CA36,325
4,083
16,757
19,274
6,239
33,875
40,114
(25,965)1975Feb-91   3-30
Piedmont396
Bellevue, WA46,635
19,848
59,606
4,502
19,848
64,108
83,956
(3,638)1969May-14   3-30
Pinnacle at Fullerton192
Fullerton, CA27,578
11,019
45,932
858
11,019
46,790
57,809
(2,980)2004Apr-14   5-30
Pinnacle on Lake Washington180
Renton, WA18,724
7,760
31,041
449
7,760
31,490
39,250
(2,027)2001Apr-14   5-30
Pinnacle at MacArthur Place253
Santa Ana, CA39,859
15,810
66,401
1,343
15,810
67,744
83,554
(4,306)2002Apr-14   5-30
Pinnacle at Otay Ranch364
San Diego, CA40,970
17,023
68,093
766
17,023
68,859
85,882
(4,442)2001Apr-14   5-30
Pinnacle at Talega362
Irvine, CA46,489
19,292
77,168
993
19,292
78,161
97,453
(5,014)2002Apr-14   5-30
Stevenson Place200
Fremont, CA20,980
996
5,582
9,323
1,001
14,900
15,901
(10,244)1971Apr-83   3-30
Summerhill Park100
Sunnyvale, CA13,032
2,654
4,918
9,769
2,656
14,685
17,341
(5,764)1988Sep-88   3-30
The Audrey at Belltown137
Seattle, WA22,099
9,228
36,911
185
9,228
37,096
46,324
(2,373)1992Apr-14   5-30
The Avery121
Los Angeles, CA9,985
6,964
29,922
16
6,964
29,938
36,902
(1,786)2014Mar-14   3-30
The Barkley (3)
161
Anaheim, CA15,951
—
8,520
5,561
2,353
11,728
14,081
(6,090)1984Apr-00   3-30
The Bernard63
Seattle, WA9,141
3,699
11,345
231
3,689
11,586
15,275
(1,706)2008Sep-11   3-30
The Carlyle132
San Jose, CA21,889
3,954
15,277
10,317
5,801
23,747
29,548
(11,968)2000Apr-00   3-30
The Dylan184
West Hollywood, CA59,592
19,984
82,286
16
19,984
82,302
102,286
(2,637)2015Mar-15   3-30
The Elliot at Mukilteo301
Mukilteo, WA10,628
2,498
10,595
14,940
2,824
25,209
28,033
(14,705)1981Jan-97   3-30
The Huntington276
Huntington Beach, CA30,890
10,374
41,495
3,381
10,374
44,876
55,250
(5,765)1975Jun-12   3-30
The Huxley187
West Hollywood, CA54,272
19,362
75,641
40
19,362
75,681
95,043
(2,486)2014Mar-15   3-30
The Landing at Jack London Square282
Oakland, CA54,771
33,554
78,292
2,966
33,554
81,258
114,812
(5,336)2001Apr-14   5-30
The Montclaire390
Sunnyvale, CA44,921
4,842
19,776
20,602
4,997
40,223
45,220
(33,694)1973Dec-88   3-30
The Palms at Laguna Niguel460
Laguna Niguel, CA57,032
23,584
94,334
1,634
23,584
95,968
119,552
(6,171)1988Apr-14   5-30
The Palisades192
Bellevue, WA20,138
1,560
6,242
11,658
1,565
17,895
19,460
(13,831)1977May-90   3-30
The Waterford238
San Jose, CA30,689
11,808
24,500
13,536
15,165
34,679
49,844
(17,641)2000Jun-00   3-30
Tierra Vista404
Oxnard, CA53,948
13,652
53,336
4,226
13,661
57,553
71,214
(23,033)2001Jan-01   3-30
Valley Park160
Fountain Valley, CA25,856
3,361
13,420
5,269
3,761
18,289
22,050
(8,190)1969Nov-01   3-30
Villa Angelina256
Placentia, CA31,908
4,498
17,962
6,539
4,962
24,037
28,999
(11,020)1970Nov-01   3-30
Villa Grenada270
Santa Clara, CA61,057
38,299
89,365
326
38,299
89,691
127,990
(5,789)2010Apr-14   5-30

F- 53
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
FINANCIAL STATEMENT SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2015
(Dollars in thousands)


      Costs       
    Initial costcapitalizedGross amount carried at close of period    
 Apartment   Buildings andsubsequent toLand andBuildings and AccumulatedDate ofDateLives
PropertyHomesLocationEncumbranceLandimprovementsacquisitionimprovementsimprovements
Total (1)
depreciationconstructionacquired(years)
Wandering Creek156
Kent, WA5,209
1,285
4,980
3,790
1,296
8,759
10,055
(6,313)1986Nov-95   3-30
Wilshire Promenade149
Fullerton, CA17,259
3,118
7,385
7,693
3,797
14,399
18,196
(8,305)1992Jan-97   3-30
 17,085
 $2,215,077
$797,144
$2,589,987
$482,664
$810,649
$3,059,146
$3,869,795
$(750,915)   
              
Unencumbered Communities             
8th & Hope290
Los Angeles, CA$—
$29,279
$169,350
$441
$29,279
$169,791
$199,070
$(5,544)2014Feb-15   3-30
Alessio624
Los Angeles, CA—
32,136
128,543
3,105
32,136
131,648
163,784
(8,564)2001Apr-14   5-30
Allegro97
Valley Village, CA—
5,869
23,977
1,573
5,869
25,550
31,419
(6,656)2010Oct-10   3-30
Allure at Scripps Ranch194
San Diego, CA—
11,923
47,690
280
11,923
47,970
59,893
(3,074)2002Apr-14   5-30
Alpine Village301
Alpine, CA—
4,967
19,728
6,551
4,982
26,264
31,246
(11,485)1971Dec-02   3-30
Anavia250
Anaheim, CA—
15,925
63,712
6,340
15,925
70,052
85,977
(11,955)2009Dec-10   3-30
Annaliese56
Seattle, WA—
4,727
14,229
330
4,726
14,560
19,286
(1,452)2009Jan-13   3-30
Apex366
Milpitas, CA—
44,240
103,251
1,104
44,240
104,355
148,595
(4,635)2014Aug-14   3-30
Aqua at Marina Del Rey500
Marina Del Ray, CA—
58,442
175,326
4,965
58,442
180,291
238,733
(11,632)2001Apr-14   5-30
Ascent90
Kirkland, WA—
3,924
11,862
1,669
3,924
13,531
17,455
(1,734)1988Oct-12   3-30
Avant440
Los Angeles, CA—
32,379
137,940
261
32,379
138,201
170,580
(1,631)2014Jun-15   3-30
Avenue 64224
Emeryville, CA—
27,235
64,403
8,486
27,235
72,889
100,124
(4,257)2007Apr-14   5-30
Aviara (4)
166
Mercer Island, CA—
—
49,813
136
—
49,949
49,949
(3,596)2013Apr-14   5-30
Axis 2300115
Irvine, CA—
5,405
33,585
1,127
5,405
34,712
40,117
(8,800)2010Aug-10   3-30
Bellerive63
Los Angeles, CA—
5,401
21,803
765
5,401
22,568
27,969
(4,455)2011Aug-11   3-30
Belmont Terrace71
Belmont, CA—
4,446
10,290
4,399
4,473
14,662
19,135
(5,372)1974Oct-06   3-30
Bennett Lofts165
San Francisco, CA—
21,771
50,800
25,515
28,371
69,715
98,086
(7,560)2004Dec-12   3-30
Bernardo Crest216
San Diego, CA—
10,802
43,209
1,302
10,802
44,511
55,313
(2,837)1988Apr-14   5-30
Bonita Cedars120
Bonita, CA—
2,496
9,913
2,187
2,503
12,093
14,596
(5,574)1983Dec-02   3-30
Boulevard172
Fremont, CA—
3,520
8,182
10,888
3,580
19,010
22,590
(13,725)1978Jan-96   3-30
Bridle Trails108
Kirkland, WA—
1,500
5,930
5,577
1,531
11,476
13,007
(7,107)1986Oct-97   3-30
Brighton Ridge264
Renton, WA—
2,623
10,800
4,342
2,656
15,109
17,765
(9,599)1986Dec-96   3-30
Bristol Commons188
Sunnyvale, CA—
5,278
11,853
6,978
5,293
18,816
24,109
(9,909)1989Jan-97   3-30
416 on Broadway115
Glendale, CA—
8,557
34,235
1,905
8,557
36,140
44,697
(6,542)2009Dec-10   3-30
Bunker Hill456
Los Angeles, CA—
11,498
27,871
43,175
11,639
70,905
82,544
(24,680)1968Mar-98   3-30
Camarillo Oaks564
Camarillo, CA—
10,953
25,254
4,813
11,075
29,945
41,020
(19,180)1985Jul-96   3-30
Cambridge Park320
San Diego, CA—
18,185
72,739
945
18,185
73,684
91,869
(4,770)1998Apr-14   5-30

F- 54
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
FINANCIAL STATEMENT SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2015
(Dollars in thousands)


      Costs       
    Initial costcapitalizedGross amount carried at close of period    
 Apartment   Buildings andsubsequent toLand andBuildings and AccumulatedDate ofDateLives
PropertyHomesLocationEncumbranceLandimprovementsacquisitionimprovementsimprovements
Total (1)
depreciationconstructionacquired(years)
Candlewood North189
Northridge, CA—
7,267
29,068
1,298
7,267
30,366
37,633
(1,954)1964Apr-14   5-30
Canyon Pointe250
Bothell, WA—
4,692
18,288
6,156
4,693
24,443
29,136
(10,351)1990Oct-03   3-30
Capri at Sunny Hills100
Fullerton, CA—
3,337
13,320
8,354
4,048
20,963
25,011
(10,424)1961Sep-01   3-30
Carmel Landing356
San Diego, CA—
16,725
66,901
2,694
16,725
69,595
86,320
(4,478)1989Apr-14   5-30
Carmel Summit246
San Diego, CA—
14,968
59,871
1,076
14,968
60,947
75,915
(3,887)1989Apr-14   5-30
Castle Creek216
Newcastle, WA—
4,149
16,028
2,644
4,833
17,988
22,821
(11,526)1988Dec-98   3-30
Catalina Gardens128
Los Angeles, CA—
6,714
26,856
503
6,714
27,359
34,073
(1,748)1987Apr-14   5-30
CBC Apartments & The Sweeps239
Goleta, CA—
11,841
45,320
5,525
11,906
50,780
62,686
(19,106)1962Jan-06   3-30
Cedar Terrace180
Bellevue, WA—
5,543
16,442
5,020
5,652
21,353
27,005
(8,662)1984Jan-05   3-30
CentrePointe224
San Diego, CA—
3,405
7,743
19,503
3,442
27,209
30,651
(11,507)1974Jun-97   3-30
Chestnut Street Apartments96
Santa Cruz, CA—
6,582
15,689
1,262
6,582
16,951
23,533
(4,527)2002Jul-08   3-30
Collins on Pine76
Seattle, WA—
7,276
22,226
78
7,276
22,304
29,580
(1,215)2013May-14   3-30
Corbella at Juanita Bay169
Kirkland, WA—
5,801
17,415
2,133
5,801
19,548
25,349
(3,663)1978Nov-10   3-30
Cortesia at Rancho Santa Margarita308
Rancho Santa Margarita, CA—
13,912
55,649
719
13,912
56,368
70,280
(3,625)1999Apr-14   5-30
Country Villas180
Oceanside, CA—
4,174
16,583
3,332
4,187
19,902
24,089
(9,274)1976Dec-02   3-30
Deer Valley171
San Rafael, CA—
21,478
50,116
1,023
21,478
51,139
72,617
(3,329)1996Apr-14   5-30
Delano/Bon Terra126
Redmond, WA—
7,470
22,511
978
7,470
23,489
30,959
(3,265)2005Dec-11   3-30
Devonshire276
Hemet, CA—
3,470
13,786
3,236
3,482
17,010
20,492
(7,891)1988Dec-02   3-30
Domain379
San Diego, CA—
23,848
95,394
799
23,848
96,193
120,041
(6,868)2013Nov-13   3-30
Emerald Pointe160
Diamond Bar, CA—
8,458
33,832
813
8,458
34,645
43,103
(2,235)1989Apr-14   5-30
Emerald Ridge180
Bellevue, WA—
3,449
7,801
3,500
3,449
11,301
14,750
(8,307)1987Nov-94   3-30
Enso183
San Jose, CA—
21,397
71,135
2
21,397
71,137
92,534
(102)2014Dec-15   3-30
Esplanade278
San Jose, CA—
18,170
40,086
9,874
18,429
49,701
68,130
(19,358)2002Apr-11   3-30
Essex Skyline at MacArthur Place349
Santa Ana, CA—
21,537
146,099
2,862
21,537
148,961
170,498
(18,766)2008Apr-12   3-30
Evergreen Heights200
Kirkland, WA—
3,566
13,395
4,566
3,649
17,878
21,527
(10,945)1990Jun-97   3-30
Fairways (5)
74
Newport Beach, CA—
—
7,850
6,731
9
14,572
14,581
(7,135)1972Jun-99   3-30
Fairwood Pond194
Renton, WA—
5,296
15,564
2,490
5,297
18,053
23,350
(7,407)1997Oct-04   3-30
Foothill Commons394
Bellevue, WA—
2,435
9,821
36,446
2,440
46,262
48,702
(30,270)1978Mar-90   3-30
Foothill Gardens/Twin Creeks176
San Ramon, CA—
5,875
13,992
7,919
5,964
21,822
27,786
(12,293)1985Feb-97   3-30
Forest View192
Renton, WA—
3,731
14,530
1,798
3,731
16,328
20,059
(6,991)1998Oct-03   3-30
Fountain Court320
Seattle, WA—
6,702
27,306
10,209
6,585
37,632
44,217
(19,053)2000Mar-00   3-30

F- 55
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
FINANCIAL STATEMENT SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2015
(Dollars in thousands)


      Costs       
    Initial costcapitalizedGross amount carried at close of period    
 Apartment   Buildings andsubsequent toLand andBuildings and AccumulatedDate ofDateLives
PropertyHomesLocationEncumbranceLandimprovementsacquisitionimprovementsimprovements
Total (1)
depreciationconstructionacquired(years)
Fourth & U171
Berkeley, CA—
8,879
52,351
2,396
8,879
54,747
63,626
(11,966)2010Apr-10   3-30
Fox Plaza443
San Francisco, CA—
39,731
92,706
12,668
39,731
105,374
145,105
(10,314)1968Feb-13   3-30
Hillsborough Park235
La Habra, CA—
6,291
15,455
2,182
6,272
17,656
23,928
(9,602)1999Sep-99   3-30
Hillsdale Garden697
San Mateo, CA—
22,000
94,681
20,672
22,000
115,353
137,353
(38,841)1948Sep-06   3-30
Hope Ranch108
Santa Barbara, CA—
4,078
16,877
2,507
4,208
19,254
23,462
(5,586)1965Mar-07   3-30
Jefferson at Hollywood270
Los Angeles, CA—
19,054
89,321
1,182
19,054
90,503
109,557
(5,745)2010Apr-14   5-30
Joule295
Seattle, WA—
14,558
69,417
3,614
14,558
73,031
87,589
(16,387)2010Mar-10   3-30
1000 Kiely121
Santa Clara, CA—
9,359
21,845
6,725
9,359
28,570
37,929
(5,605)1971Mar-11   3-30
Kings Road196
Los Angeles, CA—
4,023
9,527
10,731
4,031
20,250
24,281
(11,236)1979Jun-97   3-30
Lafayette Highlands150
Lafayette, CA—
17,774
41,473
410
17,774
41,883
59,657
(2,716)1973Apr-14   5-30
Lakeshore Landing308
San Mateo, CA—
38,155
89,028
2,950
38,155
91,978
130,133
(6,171)1988Apr-14   5-30
Laurels at Mill Creek164
Mill Creek, WA—
1,559
6,430
5,390
1,595
11,784
13,379
(7,694)1981Dec-96   3-30
Lawrence Station336
Sunnyvale, CA—
45,532
106,735
(15)45,532
106,720
152,252
(8,451)2012Apr-14   5-30
Le Parc Luxury Apartments140
Santa Clara, CA—
3,090
7,421
11,118
3,092
18,537
21,629
(12,351)1975Feb-94   3-30
Marbrisa202
Long Beach, CA—
4,700
18,605
6,526
4,760
25,071
29,831
(10,771)1987Sep-02   3-30
Marina City Club (6) 
101
Marina Del Rey, CA—
—
28,167
40,352
—
68,519
68,519
(17,674)1971Jan-04   3-30
Marina Cove (7) 
292
Santa Clara, CA—
5,320
16,431
12,560
5,324
28,987
34,311
(18,435)1974Jun-94   3-30
Mariner's Place105
Oxnard, CA—
1,555
6,103
2,150
1,562
8,246
9,808
(4,584)1987May-00   3-30
MB 360 Phase I188
San Francisco, CA—
21,421
114,376
—
21,421
114,376
135,797
(3,749)2014Apr-14   3-30
Meadowood320
Simi Valley, CA—
7,852
18,592
7,060
7,898
25,606
33,504
(16,003)1986Nov-96   3-30
Mesa Village133
Clairemont, CA—
1,888
7,498
1,250
1,894
8,742
10,636
(3,967)1963Dec-02   3-30
Mira Monte355
Mira Mesa, CA—
7,165
28,459
9,237
7,186
37,675
44,861
(19,094)1982Dec-02   3-30
Miracle Mile/Marbella236
Los Angeles, CA—
7,791
23,075
13,484
7,886
36,464
44,350
(20,985)1988Aug-97   3-30
Mission Hills282
Oceanside, CA—
10,099
38,778
4,996
10,167
43,706
53,873
(16,771)1984Jul-05   3-30
Mission Peaks453
Fremont, CA—
46,499
108,498
1,181
46,499
109,679
156,178
(7,087)1995Apr-14   5-30
Mission Peaks II336
Fremont, CA—
31,429
73,334
2,011
31,429
75,345
106,774
(4,860)1989Apr-14   5-30
Monterey Villas122
Oxnard, CA—
2,349
5,579
5,880
2,424
11,384
13,808
(6,284)1974Jul-97   3-30
Muse152
Los Angeles, CA—
7,822
33,436
2,168
7,823
35,603
43,426
(8,563)2011Feb-11   3-30
Museum Park117
San Jose, CA—
13,864
32,348
476
13,864
32,824
46,688
(2,145)2002Apr-14   5-30
Paragon301
Fremont, CA—
32,230
77,320
328
32,230
77,648
109,878
(3,782)2013Jul-14   3-30
Park Catalina90
Los Angeles, CA—
4,710
18,839
2,281
4,710
21,120
25,830
(2,730)2002Jun-12   3-30
Park Viridian320
Anaheim, CA—
15,894
63,574
1,116
15,894
64,690
80,584
(4,137)2008Apr-14   5-30

F- 56
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
FINANCIAL STATEMENT SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2015
(Dollars in thousands)


      Costs       
    Initial costcapitalizedGross amount carried at close of period    
 Apartment   Buildings andsubsequent toLand andBuildings and AccumulatedDate ofDateLives
PropertyHomesLocationEncumbranceLandimprovementsacquisitionimprovementsimprovements
Total (1)
depreciationconstructionacquired(years)
Park West126
San Francisco, CA—
9,424
21,988
9,472
9,424
31,460
40,884
(3,667)1958Sep-12   3-30
Parkwood at Mill Creek240
Mill Creek, WA—
10,680
42,722
1,517
10,680
44,239
54,919
(2,875)1989Apr-14   5-30
Pinehurst (8) 
28
Ventura, CA—
—
1,711
482
6
2,187
2,193
(1,049)1973Dec-04   3-30
Pinnacle Crow Canyon400
San Ramon, CA—
37,579
87,685
1,717
37,579
89,402
126,981
(5,791)1992Apr-14   5-30
Pinnacle Sonata268
Bothell, WA—
14,647
58,586
564
14,647
59,150
73,797
(3,807)2000Apr-14   5-30
Radius264
Redwood City, CA—
11,702
152,336
28
11,702
152,364
164,066
(7,622)2015Apr-14   3-30
Reed Square100
Sunnyvale, CA—
6,873
16,037
7,750
6,873
23,787
30,660
(4,356)1970Jan-12   3-30
Regency at Encino75
Encino, CA—
3,184
12,737
2,519
3,184
15,256
18,440
(3,896)1989Dec-09   3-30
Renaissance at Uptown Orange460
Orange, CA—
27,870
111,482
1,600
27,870
113,082
140,952
(7,246)2007Apr-14   5-30
Reveal438
Woodlands Hills, CA—
25,073
121,314
232
25,073
121,546
146,619
(3,334)2010Apr-15   3-30
Salmon Run at Perry Creek132
Bothell, WA—
3,717
11,483
1,624
3,801
13,023
16,824
(6,577)2000Oct-00   3-30
Sammamish View153
Bellevue, WA—
3,324
7,501
6,192
3,331
13,686
17,017
(10,310)1986Nov-94   3-30
101 San Fernando323
San Jose, CA—
4,173
58,961
8,048
4,173
67,009
71,182
(13,787)2001Jul-10   3-30
San Marcos432
Richmond, CA—
15,563
36,204
27,780
22,866
56,681
79,547
(23,786)2003Nov-03   3-30
Santee Court/Santee Village238
Los Angeles, CA—
9,581
40,317
4,524
9,582
44,840
54,422
(8,616)2004Oct-10   3-30
Shadow Point172
Spring Valley, CA—
2,812
11,170
2,406
2,820
13,568
16,388
(6,197)1983Dec-02   3-30
Shadowbrook418
Redmond, WA—
19,292
77,168
2,326
19,292
79,494
98,786
(5,082)1986Apr-14   5-30
Slater 116108
Kirkland, WA—
7,379
22,138
513
7,379
22,651
30,030
(1,793)2013Sep-13   3-30
Solstice280
Sunnyvale, CA—
34,444
147,262
4,096
34,444
151,358
185,802
(11,281)2014Apr-14   5-30
Stonehedge Village196
Bothell, WA—
3,167
12,603
5,739
3,201
18,308
21,509
(11,102)1986Oct-97   3-30
Summit Park300
San Diego, CA—
5,959
23,670
4,773
5,977
28,425
34,402
(13,134)1972Dec-02   3-30
Taylor 28197
Seattle, WA—
13,915
57,700
218
13,915
57,918
71,833
(3,686)2008Apr-14   5-30
The Cairns100
Seattle, WA—
6,937
20,679
1,055
6,939
21,732
28,671
(6,340)2006Jun-07   3-30
The Commons264
Campbell, CA—
12,555
29,307
4,687
12,556
33,993
46,549
(7,457)1973Jul-10   3-30
The Grand243
Oakland, CA—
4,531
89,208
5,072
4,531
94,280
98,811
(24,391)2009Jan-09   3-30
The Hallie on del Mar/Rey/Sol292
Pasadena, CA—
2,202
4,794
48,986
8,385
47,597
55,982
(17,675)1972Apr-99   3-30
The Lofts at Pinehurst118
Sunnyvale, CA—
1,570
3,912
4,544
1,618
8,408
10,026
(4,565)2012Apr-14   3-30
The Pointe at Cupertino116
Cupertino, CA—
4,505
17,605
11,510
4,505
29,115
33,620
(11,984)1963Aug-98   3-30
The Stuart at Sierra Madre188
Pasadena, CA—
13,574
54,298
1,486
13,574
55,784
69,358
(3,674)2007Apr-14   5-30
 The Trails of Redmond423
Redmond, WA—
21,930
87,720
2,408
21,930
90,128
112,058
(5,779)1985Apr-14   5-30
Tiffany Court101
Los Angeles, CA—
6,949
27,796
461
6,949
28,257
35,206
(1,811)1987Apr-14   5-30
Trabuco Villas132
Lake Forest, CA—
3,638
8,640
2,605
3,890
10,993
14,883
(6,549)1985Oct-97   3-30

F- 57
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
FINANCIAL STATEMENT SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2015
(Dollars in thousands)


      Costs       
    Initial costcapitalizedGross amount carried at close of period    
 Apartment   Buildings andsubsequent toLand andBuildings and AccumulatedDate ofDateLives
PropertyHomesLocationEncumbranceLandimprovementsacquisitionimprovementsimprovements
Total (1)
depreciationconstructionacquired(years)
Tuscana30
Tracy, CA—
2,828
6,599
166
2,870
6,723
9,593
(2,668)2007Feb-07   3-30
Via284
Sunnyvale, CA—
22,000
82,270
944
22,016
83,198
105,214
(15,571)2011Jul-11   3-30
Villa Siena272
Costa Mesa, CA—
13,842
55,367
1,333
13,842
56,700
70,542
(3,632)1974Apr-14   5-30
Village Green272
La Habra, CA—
6,488
36,768
2,168
6,488
38,936
45,424
(2,491)1971Apr-14   5-30
Vista Belvedere76
Tiburon, CA—
5,573
11,901
7,360
5,573
19,261
24,834
(7,708)1963Aug-04   3-30
Vox58
Seattle, WA—
5,545
16,635
70
5,545
16,705
22,250
(1,237)2013Oct-13   3-30
Walnut Heights163
Walnut, CA—
4,858
19,168
3,920
4,887
23,059
27,946
(9,514)1964Oct-03   3-30
Wharfside Pointe155
Seattle, WA—
2,245
7,020
10,292
2,258
17,299
19,557
(10,007)1990Jun-94   3-30
Willow Lake508
San Jose, CA—
43,194
101,030
6,615
43,194
107,645
150,839
(12,559)1989Oct-12   3-30
5600 Wilshire284
Los Angeles, CA—
30,535
91,604
471
30,535
92,075
122,610
(5,937)2008Apr-14   5-30
Wilshire La Brea478
Los Angeles, CA—
56,932
211,998
6,259
56,932
218,257
275,189
(16,228)2014Apr-14   5-30
Windsor Ridge216
Sunnyvale, CA—
4,017
10,315
15,210
4,021
25,521
29,542
(15,505)1989Mar-89   3-30
Woodland Commons302
Bellevue, WA—
2,040
8,727
20,544
2,044
29,267
31,311
(14,679)1978Mar-90   3-30
Woodside Village145
Ventura, CA—
5,331
21,036
3,502
5,341
24,528
29,869
(9,667)1987Dec-04   3-30
 31,451
 $—
$1,667,597
$5,970,356
$754,076
$1,691,213
$6,700,816
$8,392,029
$(1,177,395)   
 

            

       Costs       
     Initial cost capitalized Gross amount carried at close of period    
  Square    Buildings and subsequent Land and Buildings and  AccumulatedDate ofDateLives
Property FootageLocationEncumbrance Landimprovementsto acquisitionimprovementsimprovementsTotal(1)depreciationconstructionacquired(years)
Other real estate assets             
 Hollywood34,000
Los Angeles, CA$—
$10,200
$13,800
$2,470
$10,200
$16,270
$26,470
$(5,777)1938Jul-06    3-30
 Santa Clara Retail138,915
Santa Clara, CA—
6,472
11,704
5,556
6,472
17,260
23,732
(4,643)1970Sep-11    3-30
Derian Office Building106,564
Irvine, CA—
3,079
12,315
4,049
4,308
15,135
19,443
(11,162)1983Jul-00    3-30
 279,479
 $—
$19,751
$37,819
$12,075
$20,980
$48,665
$69,645
$(21,582)   
              
Total$2,215,077
$2,484,492
$8,598,162
$1,248,815
$2,522,842
$9,808,627
$12,331,469
$(1,949,892)   
(1)The aggregate cost for federal income tax purposes is approximately $8.9 billion (unaudited).
(2) The land is leased pursuant to a ground lease expiring 2082.

F- 58
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
FINANCIAL STATEMENT SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2015
(Dollars in thousands)


(3) The land is leased pursuant to a ground lease expiring 2070.
(4)The land is leased pursuant to a ground lease expiring 2030.
(5)The land is leased pursuant to a ground lease expiring 2027.
(6) The land is leased pursuant to a ground lease expiring 2067.
(7)A portion of land is leased pursuant to a ground lease expiring in 2028.
(8) The land is leased pursuant to a ground lease expiring in 2028.

A summary of activity for rental properties and accumulated depreciation is as follows:
 2015 2014 2013 2015 2014 2013
Rental properties:     Accumulated depreciation:     
Balance at beginning of year$11,244,681
 $5,443,757
 $5,033,672
Balance at beginning of year$1,564,806
 $1,254,886
 $1,081,517
Improvements220,895
 135,812
 92,016
Depreciation expense - Acquisitions15,734
 121,426
 6,203
Acquisition of real estate (1)805,124
 5,678,054
 344,476
Depreciation expense - Discontinued operations—
 —
 12,290
Development of real estate307,083
 19,751
 14,111
Depreciation expense - Rental properties386,953
 199,495
 168,092
Disposition of real estate(246,314) (32,693) (40,518)Dispositions(17,601) (11,001) (13,216)
Balance at the end of year$12,331,469
 $11,244,681
 $5,443,757
Balance at the end of year$1,949,892
 $1,564,806
 $1,254,886

(1) Amount for 2014 includes $5.2 billion related to BRE merger.

F- 59

SIGNATURES

Pursuant to the requirements of Section 13 ofor 15(d) of the Securities Exchange Act of 1934, theeach Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.authorized, in the City of San Mateo, State of California, on February 26, 2016.
ESSEX PORTFOLIO, L.P.
 (Registrant)
Date: February 29, 2008
ESSEX PROPERTY TRUST, INC.
  
 By:  /S/ MICHAEL T. DANCEANGELA L. KLEIMAN
 
Michael T. DanceAngela L. Kleiman
 
Executive Vice President, Chief Financial Officer
(Authorized Officer, Principal Financial Officer)
  
 By:  /S/ JOHN FARIAS
 By:  /S/ BRYAN HUNTJohn Farias
Group Vice President, Chief Accounting Officer
  
 
ESSEX PORTFOLIO, L.P.
By: Essex Property Trust, Inc., its general partner
 Bryan Hunt
 By:  /S/ ANGELA L. KLEIMAN
Angela L. Kleiman
Executive Vice President, Chief Financial Officer
(Authorized Officer, Principal Financial Officer)
By:  /S/ JOHN FARIAS
John Farias
Group Vice President, Chief Accounting Officer


S-1

KNOWN ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Keith R. GuerickeMichael J. Schall and Michael T. Dance,Angela L. Kleiman, and each of them, his attorney-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theeach Registrant and in the capacitycapacities and on the datedates indicated.
 
Signature
Title
Date
SignatureTitleDate
/S/ MICHAEL J. SCHALL
Michael J. Schall
Chief Executive Officer and President, and Director (Principal Executive Officer)February 26, 2016
/S/ KEITH R. GUERICKE
Keith R. Guericke
Chief Executive OfficerDirector, and President, Director, and
Vice Chairman of the Board (Principal Executive Officer)
February 29, 200826, 2016
/S/ MICHAEL T. DANCE
Michael T. Dance
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
February 29, 2008
/S/ MICHAEL J. SCHALL
Michael J. Schall
Senior Executive Vice President, Director, and Chief
Operating Officer
February 29, 2008
/S/ GEORGE M. MARCUS
George M. Marcus
Director and Chairman of the BoardFebruary 29, 200826, 2016
/S/ WILLIAM A. MILLICHAP
William A. Millichap
DirectorFebruary 29, 2008
/S/ DAVID W. BRADY
David W. Brady
DirectorFebruary 29, 200826, 2016
S-1
SignatureTitleDate
/S/ ROBERT E. LARSONIRVING F. LYONS, III
Robert E. LarsonIrving F. Lyons, III
DirectorFebruary 29, 200826, 2016
/S/ GARY P. MARTIN
Gary P. Martin
DirectorFebruary 29, 200826, 2016
/S/ ISSIE N. RABINOVITCH
Issie N. Rabinovitch
DirectorFebruary 29, 200826, 2016
/S/ THOMAS E. RANDLETTROBINSON
Thomas E. RandlettRobinson
DirectorFebruary 29, 200826, 2016
/S/ WILLARD H. SMITH, JR.BYRON A. SCORDELIS
Willard H. Smith, Jr.Byron A. Scordelis
DirectorFebruary 29, 200826, 2016
/S/ JANICE L. SEARS
Janice L. Sears
DirectorFebruary 26, 2016
/S/ THOMAS P. SULLIVAN
Thomas P. Sullivan
DirectorFebruary 26, 2016
/S/ CLAUDE J. ZINNGRABE
Claude J. Zinngrabe
DirectorFebruary 26, 2016

S-2

EXHIBIT INDEX
S-2
EXHIBIT INDEX
Exhibit No.Document
Note
3.1Articles of Amendment and Restatement of Essex dated June 22, 1995, attached as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1995, and incorporated herein by reference.--
3.2Articles Supplementary of Essex Property Trust, Inc. for the 8.75% Convertible Preferred Stock, Series 1996A, attached as Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed August 13, 1996, and incorporated herein by reference.--
3.3First Amendment to Articles of Amendment and Restatement of Essex Property Trust, Inc., attached as Exhibit 3.1 to the Company’s 10-Q for the quarter ended September 30, 1996,Company's Current Report on Form 8-K, filed May 17, 2013, and incorporated herein by reference.
--
3.43.2Fourth Amended and Restated Bylaws of Essex Property Trust, Inc. (as of February 24, 2015), attached as Exhibit 3.2 to the Company's Current Report on Form 8-K, filed March 2, 2015, and incorporated herein by reference.
3.3Certificate of Correction to Exhibit 3.2 dated December 20, 1996;Limited Partnership of Essex Portfolio, L.P. and amendments thereto, attached as Exhibit 3.43.3 to the Company’sCompany's Annual Report on Form 10-K for the year ended December 31, 1996,2013, and incorporated herein by reference.--
3.5Amended and Restated Bylaws of Essex Property Trust, Inc., with amendments thereto, dated December 17, 1996 and December 4, 2007.--
3.6Articles Supplementary reclassifying 2,000,000 shares of Common Stock as 2,000,000 shares of 7.875% Series B Cumulative Redeemable Preferred Stock, filed with the State of Maryland on February 10, 1998, attached as Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed March 3, 1998, and incorporated herein by reference.--
3.7Articles Supplementary reclassifying 500,000 shares of Common Stock as 500,000 shares of 9 1/8% Series C Cumulative Redeemable Preferred Stock, filed with the State of Maryland on November 25, 1998, attached as Exhibit 3.8 to the Company’s Current Report on Form 10-K for the year ended December 31, 1998, and incorporated herein by reference.--
3.8Certificate of Correction to Exhibit 3.2 dated February 12, 1999, attached as Exhibit 3.9 to the Company’s Current Report on Form 10-K for the year ended December 31, 1998, and incorporated herein by reference.--
3.9Articles Supplementary reclassifying 6,617,822 shares of Common Stock as 6,617,822 shares of Series A Junior Participating Preferred Stock, filed with the State of Maryland on November 13, 1998, attached as Exhibit 4.0 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1998, and incorporated herein by reference.--
3.10Articles Supplementary reclassifying 2,000,000 shares of Common Stock as 2,000,000 shares of 9.30% Series D Cumulative Redeemable Preferred Stock, filed with the State of Maryland on July 30, 1999, attached as Exhibit 3.1 to the Company’s 10-Q for the quarter ended June 30, 1999 and incorporated herein by reference.--
3.11Articles Supplementary reclassifying 2,200,000 shares of Common Stock as 2,200,000 shares of 9.25% Series E Cumulative Redeemable Preferred Stock, filed with the State of Maryland on September 9, 1999, attached as Exhibit 3.1 to the Company’s 10-Q for the quarter ended September 30, 1999 and incorporated herein by reference.
--
3.12Certificate 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, attached as Exhibit 3.1 to the Company’s Form 10-Q for the quarter ended March 31, 2000, and incorporated herein by reference.
--
3.13Certificate of Amendment of the Bylaws of Essex Property Trust, Inc. dated February 14, 2000, attached as Exhibit 3.2 to the Company’s Form 10-Q for the quarter ended March 31, 2000, and incorporated herein by reference.--
3.14Articles Supplementary relating to the 7.8125% Series F Cumulative Redeemable Preferred Stock, attached as Exhibit 3.1 to the Company's Current Report on Form 8-K, dated September 19, 2003, and incorporated herein by reference.--
3.15Articles Supplementary reclassifying 2,000,000 shares of 7.875% Series B Cumulative Redeemable Preferred Stock as 2,000,000 shares of Series B Cumulative Redeemable Preferred Stock, filed with the State of Maryland on January 14, 2004, attached as Exhibit 3.16 to the Company’s Form 10-K for the year ended December 31, 2003, and incorporated herein by reference.--
3.16Articles Supplementary reclassifying 2,000,000 shares of 9.30% Series D Cumulative Redeemable Preferred Stock as 2,000,000 shares of Series D Cumulative Redeemable Preferred Stock, filed with the State of Maryland on January 14, 2004, attached as Exhibit 3.16 to the Company’s Form 10-K for the year ended December 31, 2003, and incorporated herein by reference.--
3.17
Articles Supplementary of Essex Property Trust, Inc. reclassifying 5,980,000 shares of Common Stock as 5,980,000 shares of 4.875% Series G Cumulative Convertible Preferred Stock, attached as Exhibit 3.1 to the Company’s Current Report on Form 8-K, Filed July 27, 2006, and incorporated herein by reference.--
4.1Rights Agreement, dated as of November 11, 1998, between Essex Property Trust, Inc., and BankBoston, N.A., as Rights Agent, including all exhibits thereto, attached as Exhibit 1 to the Company’s Registration Statement filed on Form 8-A dated November 12, 1998, and incorporated herein by reference.--
4.2Amendment to Rights Agreement, dated as of December 13, 2000, attached as Exhibit 4.1 to the Company’s Form 10-Q for the quarter ended March 31, 2001 and incorporated herein by reference.--
4.3Amendment to Rights Agreement, dated as of February 28, 2002, attached as Exhibit 4.3 to the Company’s Form 10-K for the year ended December 31, 2001 and incorporated herein by reference.--
4.4Form of 4.875%7.125% Series GH Cumulative ConvertibleRedeemable Preferred Stock Certificate, attached as Exhibit 4.1 to the Company’sCompany's Current Report on Form 8-K, filed July 27, 2006,April 13, 2011, and incorporated herein by reference.
--
10.14.2Indenture, dated August 15, 2012, among Essex Portfolio, L.P., Essex Property Trust, Inc., and U.S. Bank National Association, as trustee, including the form of 3.625% Senior Notes due 2022 and the guarantee thereof, attached as Exhibit 4.1 to the Company's Current Report on Form 8-K, filed August 15, 2012, and incorporated herein by reference.
4.3Indenture, dated April 15, 2013, among Essex Portfolio, L.P., Essex Property Trust, Inc., and U.S. Bank National Association, as trustee, including the form of 3.25% Senior Notes due 2023 and the guarantee thereof, attached as Exhibit 4.1 to the Company's Current Report on Form 8-K, filed April 15, 2013, and incorporated herein by reference.
4.4Form of Common Stock Certificate of Essex Property Trust, Inc., filed as Exhibit 4.5 to the Company's Form S-4 Registration Statement, filed January 29, 2014, and incorporated herein by reference.
4.5Indenture governing 5.500% Senior Notes due 2017, dated April 4, 2014, by and among Essex Portfolio, L.P., Essex Property Trust, Inc. 1994 Stock Incentive Plan, (amended and restated)U.S. Bank National Association, as trustee, including the form of 5.500% Senior Notes due 2017, attached as Exhibit 4.1 to Essex Property Trust, Inc.'s Current Report on Form 8-K, filed April 10, 2014, and incorporated herein by reference.
4.6Indenture governing 5.200% Senior Notes due 2021, dated April 4, 2014, by and among Essex Portfolio, L.P., Essex Property Trust, Inc. and U.S. Bank National Association, as trustee, including the form of 5.200% Senior Notes due 2021, attached as Exhibit 4.2 to Essex Property Trust, Inc.'s Current Report on Form 8-K, filed April 10, 2014, and incorporated herein by reference.
4.7Indenture governing 3.375% Senior Notes due 2023, dated April 4, 2014, by and among Essex Portfolio, L.P., Essex Property Trust, Inc. and U.S. Bank National Association, as trustee, including the form of 3.375% Senior Notes due 2023, attached as Exhibit 4.3 to Essex Property Trust, Inc.'s Current Report on Form 8-K, filed April 10, 2014, and incorporated herein by reference.
4.8Registration Rights Agreement related to the 5.500% Senior Notes due 2017, dated April 4, 2014, between Essex Portfolio, L.P. and Citigroup Global Markets Inc., J.P. Morgan Securities LLC, UBS Securities LLC and Wells Fargo Securities, LLC, attached as Exhibit 4.7 to Essex Property Trust, Inc.'s Current Report on Form 8-K, filed April 10, 2014, and incorporated herein by reference.
4.9Registration Rights Agreement related to the 5.200% Senior Notes due 2021, dated April 4, 2014, between Essex Portfolio, L.P. and Citigroup Global Markets Inc., J.P. Morgan Securities LLC, UBS Securities LLC and Wells Fargo Securities, LLC, attached as Exhibit 4.8 to Essex Property Trust, Inc.'s Current Report on Form 8-K, filed April 10, 2014, and incorporated herein by reference.
4.10Registration Rights Agreement related to the 3.375% Senior Notes due 2023, dated April 4, 2014, between Essex Portfolio, L.P. and Citigroup Global Markets Inc., J.P. Morgan Securities LLC, UBS Securities LLC and Wells Fargo Securities, LLC, attached as Exhibit 4.9 to Essex Property Trust, Inc.'s Current Report on Form 8-K, filed April 10, 2014, and incorporated herein by reference.
4.11Indenture, dated April 15, 2014, among Essex Portfolio, L.P., Essex Property Trust, Inc., and U.S. Bank National Association, as trustee, including the form of 3.875% Senior Notes due 2024 and the guarantee thereof, attached as Exhibit 4.1 to Essex Property Trust, Inc.'s Current Report on Form 8-K, filed April 16, 2014, and incorporated herein by reference.
4.12Registration Rights Agreement, dated April 15, 2014, among Essex Portfolio, L.P., Essex Property Trust, Inc., and Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Wells Fargo Securities, LLC as representatives of the several initial purchasers, attached as Exhibit 10.1 to the Company’sEssex Property Trust, Inc.'s Current Report on Form 10-Q for the quarter ended June 30, 20008-K, filed April 16, 2014, and incorporated herein by reference.*--
10.2First Amended and Restated Agreement of Limited Partnership


4.13Indenture, dated March 17, 2015, among Essex Portfolio, L.P., Essex Property Trust, Inc., and U.S. Bank National Association, as trustee, including the form of 3.500% Senior Notes due 2025 and the guarantee thereof, attached as Exhibit 10.14.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, and incorporated herein by reference.--
10.3First Amendment to the First Amended and Restated Agreement of Limited Partnership of Essex Portfolio, L.P. dated February 6, 1998, attached as Exhibit 10.1 to the Company’sCompany's Current Report on Form 8-K, filed March 3, 1998,17, 2015, and incorporated herein by reference.
--
10.4Second Amendment to the First Amended and Restated Agreement of Limited Partnership of Essex Portfolio, L.P. dated April 20, 1998, attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed April 23, 1998, and incorporated herein by reference.--
10.5Third Amendment to the First Amended and Restated Agreement of Limited Partnership of Essex Portfolio, L.P. dated November 24, 1998, attached as Exhibit 10.5 to the Company’s Form 10-K for the year ended December 31, 2003, and incorporated herein by reference.--
10.6Fourth Amendment to the First Amended and Restated Agreement of Limited Partnership of Essex Portfolio, L.P., dated July 28, 1999, attached as Exhibit 10.1 to the Company’s 10-Q for the quarter ended June 30, 1999 and incorporated herein by reference.--
10.7Fifth Amendment to the First Amended and Restated Agreement of Limited Partnership of Essex Portfolio, L.P., dated September 3, 1999, attached as Exhibit 10.1 to the Company’s 10-Q for the quarter ended September 30, 1999 and incorporated herein by reference.--
10.8Form of Essex Property Trust, Inc. 1994 Non-Employee and Director Stock Incentive Plan, attached as Exhibit 10.3 to the Company’s Registration Statement on Form S-11 (Registration No. 33-76578), which became effective on June 6, 1994, and incorporated herein by reference.*
--
10.9Form of Indemnification Agreement between Essex and its directors and officers, attached as Exhibit 10.7 to the Company’s Registration Statement on Form S-11 (Registration No. 33-76578), which became effective on June 6, 1994, and incorporated herein by reference.--
10.10First Amendment to Investor Rights Agreement dated July 1, 1996 by and between George M. Marcus and The Marcus & Millichap Company, attached as Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed July 16, 1996, and incorporated herein by reference.--
10.11Sixth Amendment to the First Amended and Restated Agreement of Limited Partnership of Essex Portfolio, L.P. dated as of June 28, 2001, attached as Exhibit 10.1 to the Company’s 10-Q for the quarter ended June 30, 2001 and incorporated herein by reference.*
--
10.12Executive Severance Plan attached as Exhibit 10.31 to the Company’s Form 10-K for the year ended December 31, 2001 and incorporated herein by reference.*--
10.13Agreement between Essex Property Trust, Inc. and George M. Marcus, dated March 27, 2003 attached as Exhibit 10.32 to the Company’sCompany's Form 10-K for the year ended December 31, 2002, and incorporated herein by reference.
--
10.14Seventh Amendment to the First Amended and Restated Agreement of Limited Partnership of Essex Portfolio, L.P. dated as of June 26, 2003, attached as Exhibit 10.1 to the Company’s 10-Q for the quarter ended June 30, 2003 and incorporated herein by reference.*
--
10.15Eighth Amendment to the First Amended and Restated Agreement of Limited Partnership of Essex Portfolio, L.P. dated as of September 23, 2003, attached as Exhibit 10.2 to the Company’s 10-Q for the quarter ended September 30, 2003 and incorporated herein by reference.--
10.16Ninth Amendment to the First Amended and Restated Agreement of Limited Partnership of Essex Portfolio, L.P. dated as of January 8, 2004, attached as Exhibit 10.36 to the Company’s 10-K for the year ended December 31, 2003, and incorporated herein by reference.--
10.17Tenth Amendment to the First Amended and Restated Agreement of Limited Partnership of Essex Portfolio, L.P. dated as of January 8, 2004, attached as Exhibit 10.37 to the Company’s 10-K for the year ended December 31, 2003, and incorporated herein by reference.--
10.18Eleventh Amendment to the First Amended and Restated Agreement of Limited Partnership of Essex Portfolio, L.P. dated as of March 29, 2004, attached as Exhibit 10.1 to the Company’s 10-Q for the quarter ended March 31, 2004, and incorporated herein by reference. *--
10.19Essex Property Trust, Inc. 2004 Stock Incentive Plan, attached as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, and incorporated herein by reference.*--
10.20Indenture,
10.32005 Deferred Compensation Plan (as amended and restated) of Essex Portfolio, L.P., dated October 28, 2005,as of December 2, 2008, attached as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed December 8, 2008, and incorporated herein by and amongreference.*
10.4Form of Indemnification Agreement between Essex Property Trust, Inc., and its directors and officers, attached as Guarantor,Exhibit 99.1 to the Company's Current Report on Form 8-K, filed February 25, 2011, and incorporated herein by reference.*
10.5Note Purchase Agreement, dated as of March 31, 2011, among Essex Portfolio, L.P., asEssex Property Trust, Inc. and the Issuer, and Wells Fargo Bank, N.A.purchasers of the notes party thereto (including the form of the 4.36% Senior Guaranteed Notes, due March 31, 2016), attached as Exhibit 10.1 to the Company’s current reportCompany's Current Report on Form 8-K, filed November 2, 2005,April 1, 2011, and incorporated herein by reference.-- †
10.21Fourth
10.6Note Purchase Agreement, dated as of June 30, 2011, among Essex Portfolio, L.P., Essex Property Trust, Inc. and the purchasers of the notes party thereto (including the forms of the 4.50% Senior Guaranteed Notes, Series A, due September 30, 2017, and the 4.92% Senior Guaranteed Notes, Series B, due December 30, 2019), attached as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed July 5, 2011, and incorporated herein by reference. †
10.7Amended and Restated 2004 Non-Employee Director Equity Award Program, dated May 1, 2011, attached as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, and incorporated herein by reference.*
10.8Amended and Restated Revolving Credit Agreement, dated as of March 24, 2006,September 16, 2011, by and among Essex Portfolio, L.P., PNC Bank, of AmericaNational Association, as Administrative Agent, Swing Line Lender and C Issuer, and other lenders as specified therein, attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed March 31, 2006, and incorporated herein by reference.--
10.22Twelfth Amendment to the First Amended and Restated Agreement of Limited Partnership of Essex Portfolio, L.P., dated as of July 26, 2006, attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed August 1, 2006, and incorporated herein by reference.
--
10.23Thirteenth Amendment to the First Amended and Restated Agreement of Limited Partnership of Essex Portfolio, L.P., dated as of October 26, 2006, attached as Exhibit 10.2 to the Company’s Current Report on Form 10-Q for the quarter ended  September 30, 2006, and incorporated herein by reference.--
10.24Supplemental Indenture, dated November 1, 2006, to the Indenture, dated October 28, 2005, by and among Essex Portfolio, L.P., Essex Property Trust, Inc. and Wells Fargo Bank, N.A.--
10.25First Amendment to Fourth Amended and Restated Revolving Credit Agreement, dated as of September 28, 2007, among Essex Portfolio L.P., Bank of America and other lenders as specified therein, attached as Exhibit 10.1 to the Company’sCompany's Quarterly Report on Form 10-Q for the quarter ended September 30, 2007,2011, and incorporated herein by reference.
--
10.2610.9Note Purchase Agreement, to Restructure Partnership Between Western-Mountain View II Investors, a California Limited Partnership anddated as of March 14, 2012, among Essex Portfolio, L.P., a California Limited Partnershipthe Company and Essex Property Trust, Inc., a Maryland Corporation and Essex Management Corporation, a California Corporation and General Partnersthe purchasers of the Partnership,notes party thereto (including the forms of the 4.27% Senior Guaranteed Notes, Series C, due April 30, 2021, the 4.30% Senior Guaranteed Notes, Series D, due June 29, 2021, and the 4.37% Senior Guaranteed Notes, Series E, due August 30, 2021), attached as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed on March 20, 2012, and incorporated herein by reference. †
10.10First Amendment to Amended and Restated Revolving Credit Agreement, dated May 31, 2012, by and among Essex Portfolio, L.P., PNC Bank, National Association, as Administrative Agent and L/C Issuer and the other lenders party thereto, attached as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, and incorporated herein by reference.
10.11Modification Agreement, dated July 30, 2012, attached as Exhibit 10.2 to the Company’sCompany's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, and incorporated herein by reference.
10.12Amendment to Agreement, dated as of September 11, 2012, between the Company and George Marcus, attached as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2007,2012, and incorporated herein by reference.  (The related agreement to restructure the Western-San Jose IV Investors Limited Partnership, a California Limited Partnership, has basically the same terms
10.13Essex Property Trust, Inc. Executive Severance Plan (as Amended and Restated effective March 12, 2013), attached as the exhibit and is not being filed, but will be furnishedExhibit 10.1 to the SEC upon request.)--Company's Current Report on Form 8-K, filed March 18, 2013, and incorporated herein by reference.*
10.27Fourteenth
10.14Second Amendment to Amended and Restated Revolving Credit Agreement, dated August 30, 2012, by and among Essex Portfolio, L.P., PNC Bank, National Association, as Administrative Agent and C Issuer and the Firstother lenders party thereto, attached as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, and incorporated herein by reference.


10.15Third Amendment to Amended and Restated Revolving Credit Agreement, dated January 22, 2013, by and among Essex Portfolio, L.P., PNC Bank, National Association, as Administrative Agent and C Issuer and the other lenders party thereto, attached as Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, and incorporated herein by reference.
10.16Essex Property Trust, Inc. 2013 Stock Award and Incentive Compensation Plan, attached as Appendix B to the Company's Definitive Proxy Statement on Schedule 14A for the Annual Meeting of Stockholders held May 14, 2013, filed April 1, 2013, and incorporated herein by reference.*
10.17Essex Property Trust, Inc. 2013 Employee Stock Purchase Plan, attached as Appendix C to the Company's Definitive Proxy Statement on Schedule 14A for the Annual Meeting of Stockholders held May 14, 2013, filed April 1, 2013, and incorporated herein by reference.*
10.18Forms of equity award agreements for officers under the 2013 Stock Award and Incentive Compensation Plan, attached as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, and incorporated herein by reference.*
10.19Company's Non-Employee Director Equity Award Program and forms of equity award agreements thereunder, attached as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, and incorporated herein by reference.*
10.20Third Amended and Restated Agreement of Limited Partnership of Essex Portfolio, L.P., dated as of December 26, 2007,10, 2013, attached as Exhibit 10.210.1 to the Company’sCompany's Current Report on Form 8-K, filed December 28, 2007,12, 2013, and incorporated herein by reference.*
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10.2810.21FormFourth Amendment to Amended and Restated Revolving Credit Agreement, dated as of Awards Agreement underJanuary 29, 2014, by and among Essex Portfolio, L.P., PNC Bank, National Association, as Administrative Agent and L/C Issuer and the Essex Property Trust, Inc. 2007 Outperformance Plan,other lenders party thereto, attached as Exhibit 10.1 to the Company’sCompany's Current Report on Form 8-K, filed December 28, 2007,January 31, 2014, and incorporated herein by reference.
10.22Third Modification Agreement, dated as of January 29, 2014 by and among Essex Portfolio, L.P., U.S. Bank National Association, as Administrative Agent and Lender and the other lenders party thereto, attached as Exhibit 10.2 to the Company's Current Report on Form 8-K, filed January 31, 2014, and incorporated herein by reference.
10.23BRE Properties, Inc. 1999 Stock Incentive Plan (assumed by Essex Property Trust, Inc.), attached as Exhibit 99.1 to Essex Property Trust, Inc.'s Registration Statement on Form S-8, filed April 1, 2014, and incorporated herein by reference.*
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10.24BRE Properties, Inc. Fifth Amended and Restated Non-Employee Stock Option and Restricted Stock Plan (assumed by Essex Property Trust, Inc.), attached as Exhibit 99.2 to Essex Property Trust, Inc.'s Registration Statement on Form S-8, filed April 1, 2014, and incorporated herein by reference.*
10.25Form of Equity Distribution Agreement between Essex Property Trust, Inc. and various entities, dated August 28, 2014, attached as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed September 2, 2014, and incorporated herein by reference.
10.26Form of Amended & Restated Equity Distribution Agreement between Essex Property Trust, Inc. and various entities, dated August 28, 2014, attached as Exhibit 10.2 to the Company's Current Report on Form 8-K, filed September 2, 2014, and incorporated herein by reference.
10.27Fifth Amendment to Amended and Restated Revolving Credit Agreement, dated as of January 22, 2015, by and among Essex Portfolio, L.P., PNC Bank, National Association, as Administrative Agent and L/C Issuer and other lenders party thereto, attached as Exhibit 10.27 to the Company's Annual Report on Form 10-K, filed March 2, 2015, and incorporated herein by reference.
10.28Forms of Essex Property Trust, Inc., Essex Portfolio L.P., Long-Term Incentive Plan Award Agreements, attached as Exhibit 10.28 to the Company's Annual Report on Form 10-K, filed March 2, 2015, and incorporated herein by reference.*
10.29Terms Agreement dated as of May 20, 2015, among Essex Property Trust, Inc. and Citigroup Global Markets Inc., attached as Exhibit 1.1 to the Company's Current Report on Form 8-K, filed on May 26, 2015, and incorporated herein by reference.
10.30Sixth Amendment to Amended and Restated Revolving Credit Agreement, dated as of January 19, 2016, by and among Essex Portfolio, L.P., PNC Bank, National Association, as Administrative Agent and L/C Issuer and other lenders party thereto.
12.1Schedule of Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends.--
14.1Code of Business Conduct and Ethics--
21.1List of Subsidiaries of Essex Property Trust, Inc. and Essex Portfolio, L.P.


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23.1Consent of KPMG LLP, Independent Registered Public Accounting Firm.
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23.2Consent of KPMG LLP, Independent Registered Public Accounting Firm.
24.1Power of Attorney (see signature page)
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31.1Certification of Keith R. Guericke,Michael J. Schall, Principal Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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31.2Certification of Michael T. Dance,Angela L. Kleiman, Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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31.3Certification of Michael J. Schall, Principal Executive Officer of General Partner, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.4Certification of Angela L. Kleiman, Principal Financial Officer of General Partner, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1Certification of Keith R. Guericke,Michael J. Schall, Principal Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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32.2Certification of Michael T. Dance,Angela L. Kleiman, Principal Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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32.3Certification of Michael J. Schall, Principal Executive Officer of General Partner, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.4Certification of Angela L. Kleiman, Principal Financial Officer of General Partner, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INSXBRL Instance Document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document

* Management contract or compensatory plan or arrangement.

† The schedules and certain exhibits to this agreement, as set forth in the agreement, have not been filed herewith. The Company agrees to furnish supplementally a copy of any omitted schedule or exhibit to the Securities and Exchange Commission upon request.