UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2021~~March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________to _________

001-13106 (Essex Property Trust, Inc.)

333-44467-01 (Essex Portfolio, L.P.)

(Commission File Number)

ESSEX PROPERTY TRUST, INC.

ESSEX PORTFOLIO, L.P.

(Exact name of Registrant as Specified in its Charter)


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

1100 Park Place, Suite 200

San Mateo, California 94403

(Address of Principal Executive Offices, Including Zip Code)

(650) 655-7800

(Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange on which registered

Common Stock, $.0001 par value (Essex Property Trust, Inc.)

ESS

New York Stock Exchange

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.

Essex Property Trust, Inc.

Yes

☒

☐

Essex Portfolio, L.P.

Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

Essex Property Trust, Inc.

Yes

☒

☐

Essex Portfolio, L.P.

Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Essex Property Trust, Inc.:

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

Essex Portfolio, L.P.:

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.


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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Essex Property Trust, Inc.

Yes

☐

☒

Essex Portfolio, L.P.

Yes

☐

☒

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: ~~65,034,811~~65,333,024 shares of Common Stock ($.0001 par value) of Essex Property Trust, Inc. were outstanding as of ~~July 28, 2021.~~April 25, 2022.

EXPLANATORY NOTE

This report combines the reports on Form 10-Q for the three ~~and six~~ month ~~periods~~period ended ~~June 30, 2021~~March 31, 2022 of Essex Property Trust, Inc., a Maryland corporation, and Essex Portfolio, L.P., a Delaware limited partnership of which Essex Property Trust, Inc. is the sole general partner.

Unless stated otherwise or the context otherwise requires, references to the "Company," "we," "us" or "our" mean collectively Essex Property Trust, Inc. and those entities/subsidiaries owned or controlled by Essex Property Trust, Inc., including Essex Portfolio, L.P., and references to the "Operating Partnership" mean Essex Portfolio, L.P. and those entities/subsidiaries owned or controlled by Essex Portfolio, L.P. Unless stated otherwise or the context otherwise requires, references to "Essex" mean Essex Property Trust, Inc., not including any of its subsidiaries.

Essex operates as a self-administered and self-managed real estate investment trust ("REIT"), and is the sole general partner of the Operating Partnership. As the sole general partner of the Operating Partnership, Essex has exclusive control of the Operating Partnership's day-to-day management.

The Company is structured as an umbrella partnership REIT ("UPREIT") and Essex contributes all net proceeds from its various equity offerings to the Operating Partnership. In return for those contributions, Essex receives a number of Operating Partnership limited partnership units ("OP Units," and the holders of such OP Units, "Unitholders") equal to the number of shares of common stock it has issued in the equity offerings. Contributions of properties to the Company can be structured as tax-deferred transactions through the issuance of OP Units, which is one of the reasons why the Company is structured in the manner outlined above. Based on the terms of the Operating Partnership's partnership agreement, OP Units can be exchanged into Essex common stock on a one-for-one basis. The Company maintains a one-for-one relationship between the OP Units issued to Essex and shares of common stock.

The Company believes that combining the reports on Form 10-Q of Essex and the Operating Partnership into this single report provides the following benefits:

•enhances investors' understanding of Essex 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 Essex and the Operating Partnership; and

•creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.

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

All of the Company's property ownership, development, and related business operations are conducted through the Operating Partnership and Essex has no material assets, other than its investment in the Operating Partnership. Essex's primary function is acting as the general partner of the Operating Partnership. As general partner with control of the Operating Partnership, Essex consolidates the Operating Partnership for financial reporting purposes. Therefore, the assets and liabilities of Essex and the Operating Partnership are the same on their respective financial statements. Essex also issues equity from time to time and guarantees certain debt of the Operating Partnership, 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 co-investments. 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 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 of capital include the Operating Partnership's working capital, net cash provided by operating activities, borrowings under its revolving credit facilities, the issuance of secured and unsecured debt and equity securities and proceeds received from disposition of certain properties and co-investments.

The Company believes it is important to understand the few differences between Essex and the Operating Partnership in the context of how Essex and the Operating Partnership operate as a consolidated company. Stockholders' equity, partners' capital and noncontrolling interest are the main areas of difference between the condensed consolidated financial statements of Essex and those of the Operating Partnership. The limited partners of the Operating Partnership are accounted for as partners' capital in the Operating Partnership's condensed consolidated financial statements and as noncontrolling interest in Essex’s condensed consolidated financial statements. The noncontrolling interest in the Operating Partnership's condensed consolidated financial statements include the interest of unaffiliated partners in various consolidated partnerships and co-investment partners. The noncontrolling interest in Essex's condensed consolidated financial statements include (i) the same noncontrolling interest as

iii

presented in the Operating Partnership’s condensed consolidated financial statements and (ii) OP Unitholders. The differences between stockholders' equity and partners' capital result from differences in the equity issued at Essex and Operating Partnership levels.

To help investors understand the significant differences between Essex and the Operating Partnership, this report on Form 10-Q provides separate condensed consolidated financial statements for Essex and the Operating Partnership; a single set of consolidated notes to such financial statements that includes separate discussions of stockholders' equity or partners' capital, and earnings per share/unit, as applicable; and a combined Management's Discussion and Analysis of Financial Condition and Results of Operations.

This report on Form 10-Q also includes separate Part I, Item 4. Controls and Procedures sections and separate Exhibits 31 and 32 certifications for each of Essex and the Operating Partnership in order to establish that the requisite certifications have been made and that Essex and the Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934 (the "Exchange Act") and 18 U.S.C. §1350.

In order to highlight the differences between Essex and the Operating Partnership, the separate sections in this report on Form 10-Q for Essex and the Operating Partnership specifically refer to Essex and the Operating Partnership. In the sections that combine disclosure of Essex 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 co-investments 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 Essex 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.

The information furnished in the accompanying unaudited condensed consolidated balance sheets, statements of income and comprehensive income, equity, capital, and cash flows of the Company and the Operating Partnership reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the aforementioned condensed consolidated financial statements for the interim periods and are normal and recurring in nature, except as otherwise noted.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the notes to such unaudited condensed consolidated financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations herein. Additionally, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's annual report on Form 10-K for the year ended December 31, ~~2020.~~2021.

ESSEX PROPERTY TRUST, INC.

ESSEX PORTFOLIO, L.P.

FORM 10-Q

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION		Page No.

Item 1.	Condensed Consolidated Financial Statements of Essex Property Trust, Inc. (Unaudited)

	Condensed Consolidated Balance Sheets as of ~~June 30, 2021~~Mar ch 31 , 202 2 and December 31, ~~2020~~202 1	2

	Condensed Consolidated Statements of Income and Comprehensive Income for the three ~~and six~~ months ended ~~June 30, 2021~~M arch 31, 2022 and ~~2020~~202 1	3

	Condensed Consolidated Statements of Equity for the three ~~and six~~ months ended ~~June 30, 2021~~M arch 31, 2022 and ~~2020~~202 1	4

	Condensed Consolidated Statements of Cash Flows for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 and ~~2020~~202 1	86

	Condensed Consolidated Financial Statements of Essex Portfolio, L.P. (Unaudited)

	Condensed Consolidated Balance Sheets as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~202 1	108

	Condensed Consolidated Statements of Income and Comprehensive Income for the three ~~and six~~ months ended ~~June 30, 2021~~March 31 , 2022 and ~~2020~~202 1	119

	Condensed Consolidated Statements of Capital for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~	1210

	Condensed Consolidated Statements of Cash Flows for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2 022 and ~~2020~~202 1	1612

	Notes to Condensed Consolidated Financial Statements	1814

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3630

Item 3.	Quantitative and Qualitative Disclosures About Market Risks	4738

Item 4.	Controls and Procedures	4839

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	4840

Item 1A.	Risk Factors	4940

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4940

Item 3.	Defaults Upon Senior Securities	4940

Item 4.	Mine Safety Disclosures	4940

Item 5.	Other Information	4940

Item 6.	Exhibits	5041

Signatures		5142

Table of Contents

Part I – Financial Information

Item 1. Condensed Consolidated Financial Statements

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except parenthetical and share amounts)


ASSETS	ASSETS	June 30, 2021		December 31, 2020		ASSETS	March 31, 2022		December 31, 2021
Real estate:	Real estate:					Real estate:
Rental properties:	Rental properties:					Rental properties:
Land and land improvements	Land and land improvements	$	2,923,508	$	2,929,009	Land and land improvements	$	3,032,678	$	3,032,678
Buildings and improvements	Buildings and improvements	12,373,299		12,132,736		Buildings and improvements	12,651,423		12,597,249
		15,296,807		15,061,745			15,684,101		15,629,927
Less: accumulated depreciation	Less: accumulated depreciation	(4,392,056)		(4,133,959)		Less: accumulated depreciation	(4,779,581)		(4,646,854)
		10,904,751		10,927,786			10,904,520		10,983,073
Real estate under development	Real estate under development	208,330		386,047		Real estate under development	112,815		111,562
Co-investments	Co-investments	1,037,270		1,018,010		Co-investments	1,144,542		1,177,802
Real estate held for sale		0		57,938

		12,150,351		12,389,781			12,161,877		12,272,437
Cash and cash equivalents-unrestricted	Cash and cash equivalents-unrestricted	48,155		73,629		Cash and cash equivalents-unrestricted	98,107		48,420
Cash and cash equivalents-restricted	Cash and cash equivalents-restricted	10,021		10,412		Cash and cash equivalents-restricted	10,446		10,218
Marketable securities, net of allowance for credit losses of 0 as of both June 30, 2021 and December 31, 2020		175,782		147,768
Notes and other receivables, net of allowance for credit losses of $0.7 million and $0.8 million as of June 30, 2021 and December 31, 2020, respectively (includes related party receivables of $57.9 million and $4.7 million as of June 30, 2021 and December 31, 2020, respectively)		238,855		195,104
Marketable securities, net of allowance for credit losses of zero as of both March 31, 2022 and December 31, 2021						Marketable securities, net of allowance for credit losses of zero as of both March 31, 2022 and December 31, 2021	169,702		191,829
Notes and other receivables, net of allowance for credit losses of $0.7 million and $0.8 million as of March 31, 2022 and December 31, 2021, respectively (includes related party receivables of $39.9 million and $176.9 million as of March 31, 2022 and December 31, 2021, respectively)						Notes and other receivables, net of allowance for credit losses of $0.7 million and $0.8 million as of March 31, 2022 and December 31, 2021, respectively (includes related party receivables of $39.9 million and $176.9 million as of March 31, 2022 and December 31, 2021, respectively)	205,420		341,033
Operating lease right-of-use assets	Operating lease right-of-use assets	70,551		72,143		Operating lease right-of-use assets	68,158		68,972
Prepaid expenses and other assets	Prepaid expenses and other assets	53,484		47,340		Prepaid expenses and other assets	56,591		64,964
Total assets	Total assets	$	12,747,199	$	12,936,177	Total assets	$	12,770,301	$	12,997,873
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Unsecured debt, net	Unsecured debt, net	$	5,403,874	$	5,607,985	Unsecured debt, net	$	5,308,841	$	5,307,196
Mortgage notes payable, net	Mortgage notes payable, net	641,274		643,550		Mortgage notes payable, net	637,778		638,957
Lines of credit	Lines of credit	85,000		0		Lines of credit	98,000		341,257
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	160,121		152,855		Accounts payable and accrued liabilities	221,925		180,751
Construction payable	Construction payable	31,960		31,417		Construction payable	35,484		29,136
Dividends payable	Dividends payable	142,810		141,917		Dividends payable	150,976		143,213
Distributions in excess of investments in co-investments						Distributions in excess of investments in co-investments	28,846		35,545

Operating lease liabilities	Operating lease liabilities	72,363		74,037		Operating lease liabilities	69,801		70,675
Liabilities associated with real estate held for sale		0		29,845
Other liabilities	Other liabilities	38,068		39,140		Other liabilities	40,705		39,969
Total liabilities	Total liabilities	6,575,470		6,720,746		Total liabilities	6,592,356		6,786,699
Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies	0		0
Redeemable noncontrolling interest	Redeemable noncontrolling interest	35,026		32,239		Redeemable noncontrolling interest	39,738		34,666

Equity:	Equity:					Equity:
Common stock; $0.0001 par value, 670,000,000 shares authorized; 65,003,996 and 64,999,015 shares issued and outstanding, respectively		7		6
Common stock; 0.0001 par value, 670,000,000 shares authorized; 65,332,274 and 65,248,393 shares issued and outstanding, respectively						Common stock; 0.0001 par value, 670,000,000 shares authorized; 65,332,274 and 65,248,393 shares issued and outstanding, respectively	7		7

Additional paid-in capital	Additional paid-in capital	6,862,879		6,876,326		Additional paid-in capital	6,930,072		6,915,981
Distributions in excess of accumulated earnings	Distributions in excess of accumulated earnings	(899,663)		(861,193)		Distributions in excess of accumulated earnings	(987,333)		(916,833)
Accumulated other comprehensive loss, net		(9,768)		(14,729)
Accumulated other comprehensive income (loss), net						Accumulated other comprehensive income (loss), net	14,237		(5,552)
Total stockholders' equity	Total stockholders' equity	5,953,455		6,000,410		Total stockholders' equity	5,956,983		5,993,603
Noncontrolling interest	Noncontrolling interest	183,248		182,782		Noncontrolling interest	181,224		182,905
Total equity	Total equity	6,136,703		6,183,192		Total equity	6,138,207		6,176,508
Total liabilities and equity	Total liabilities and equity	$	12,747,199	$	12,936,177	Total liabilities and equity	$	12,770,301	$	12,997,873

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income and Comprehensive Income

(Unaudited)

(In thousands, except share and per share amounts)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Revenues:	Revenues:									Revenues:
Rental and other property	Rental and other property	$	348,757	$	368,149	$	701,633	$	757,899	Rental and other property	$	379,216	$	352,876
Management and other fees from affiliates	Management and other fees from affiliates	2,221		2,348		4,470		4,965		Management and other fees from affiliates	2,689		2,249
		350,978		370,497		706,103		762,864			381,905		355,125
Expenses:	Expenses:									Expenses:
Property operating, excluding real estate taxes	Property operating, excluding real estate taxes	63,215		65,142		128,366		129,273		Property operating, excluding real estate taxes	68,858		65,085
Real estate taxes	Real estate taxes	44,278		44,994		89,606		88,006		Real estate taxes	47,242		45,328
Corporate-level property management expenses	Corporate-level property management expenses	9,105		8,646		18,052		17,405		Corporate-level property management expenses	10,172		9,013
Depreciation and amortization	Depreciation and amortization	128,736		133,609		257,323		265,168		Depreciation and amortization	133,533		128,587
General and administrative	General and administrative	12,222		14,952		22,034		28,934		General and administrative	12,242		9,812

Expensed acquisition and investment related costs	Expensed acquisition and investment related costs	41		15		56		102		Expensed acquisition and investment related costs	8		15
		257,597		267,358		515,437		528,888			272,055		257,840
Gain on sale of real estate and land	Gain on sale of real estate and land	0		16,597		100,096		16,597		Gain on sale of real estate and land	—		100,096
Earnings from operations	Earnings from operations	93,381		119,736		290,762		250,573		Earnings from operations	109,850		197,381
Interest expense	Interest expense	(50,971)		(54,447)		(102,620)		(109,594)		Interest expense	(50,377)		(51,649)
Total return swap income	Total return swap income	2,633		2,788		5,477		4,772		Total return swap income	2,544		2,844
Interest and other income		22,371		11,405		36,758		6,184
Interest and other (loss) income										Interest and other (loss) income	(7,567)		14,387
Equity income from co-investments	Equity income from co-investments	18,248		17,257		35,259		38,554		Equity income from co-investments	21,171		17,011
Deferred tax expense on unrealized gain on unconsolidated co-investment		(1,842)		(1,636)		(2,350)		(1,636)
Deferred tax benefit (expense) on unconsolidated co-investments										Deferred tax benefit (expense) on unconsolidated co-investments	2,754		(508)
Loss on early retirement of debt, net	Loss on early retirement of debt, net	(16,465)		(5,027)		(18,982)		(4,706)		Loss on early retirement of debt, net	—		(2,517)
Gain on remeasurement of co-investment		2,260		0		2,260		234,694

Net income	Net income	69,615		90,076		246,564		418,841		Net income	78,375		176,949
Net income attributable to noncontrolling interest	Net income attributable to noncontrolling interest	(4,769)		(5,618)		(13,274)		(19,377)		Net income attributable to noncontrolling interest	(5,121)		(8,505)

Net income available to common stockholders	Net income available to common stockholders	$	64,846	$	84,458	$	233,290	$	399,464	Net income available to common stockholders	$	73,254	$	168,444
Comprehensive income	Comprehensive income	$	70,259	$	94,172	$	251,700	$	413,850	Comprehensive income	$	98,856	$	181,441
Comprehensive income attributable to noncontrolling interest	Comprehensive income attributable to noncontrolling interest	(4,791)		(5,756)		(13,449)		(19,208)		Comprehensive income attributable to noncontrolling interest	(5,813)		(8,658)
Comprehensive income attributable to controlling interest	Comprehensive income attributable to controlling interest	$	65,468	$	88,416	$	238,251	$	394,642	Comprehensive income attributable to controlling interest	$	93,043	$	172,783
Per share data:	Per share data:									Per share data:
Basic:	Basic:									Basic:
Net income available to common stockholders	Net income available to common stockholders	$	1.00	$	1.29	$	3.59	$	6.08	Net income available to common stockholders	$	1.12	$	2.59
Weighted average number of shares outstanding during the period	Weighted average number of shares outstanding during the period	65,001,677		65,412,407		64,995,682		65,728,119		Weighted average number of shares outstanding during the period	65,275,775		64,989,620
Diluted:	Diluted:									Diluted:
Net income available to common stockholders	Net income available to common stockholders	$	1.00	$	1.29	$	3.59	$	6.07	Net income available to common stockholders	$	1.12	$	2.59
Weighted average number of shares outstanding during the period	Weighted average number of shares outstanding during the period	65,080,746		65,427,935		65,048,016		65,855,347		Weighted average number of shares outstanding during the period	65,339,378		65,114,933

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Equity for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~

(Unaudited)

(In thousands)


		Common stock		Additional paid-in capital			Distributions in excess of accumulated earnings		Accumulated other comprehensive loss, net				Noncontrolling interest		Total					Common stock			Additional paid-in capital		Distributions in excess of accumulated earnings		Accumulated other comprehensive income (loss), net			Noncontrolling interest			Total
Three months ended June 30, 2021			Shares			Amount
Balances at March 31, 2021			64,999	$	6		$	6,864,185			$	(828,625)			$	(10,390)	$	185,755			$	6,210,931
Three months ended March 31, 2022																			Three months ended March 31, 2022					Shares					Additional paid-in capital	Amount		Distributions in excess of accumulated earnings			Accumulated other comprehensive income (loss), net			Noncontrolling interest			Total
Balances at December 31, 2021																			Balances at December 31, 2021				65,248										$	6,176,508
Net income	Net income		—	—			—		64,846				—		4,769		69,615		Net income				—		—		—					73,254			—			5,121			78,375

Change in fair value of derivatives and amortization of swap settlements	Change in fair value of derivatives and amortization of swap settlements		—	—			—		—				456		16		472		Change in fair value of derivatives and amortization of swap settlements				—		—		—			—			19,404			679			20,083
Change in fair value of marketable debt securities, net	Change in fair value of marketable debt securities, net		—	—			—		—				166		6		172		Change in fair value of marketable debt securities, net				—		—		—			—			385			13			398
Issuance of common stock under:	Issuance of common stock under:																		Issuance of common stock under:
Stock option and restricted stock plans, net	Stock option and restricted stock plans, net		5	1			573		—				—		—		574		Stock option and restricted stock plans, net				84		—		16,867			—			—			—			16,867
Sale of common stock, net	Sale of common stock, net		—	—			(84)		—				—		—		(84)		Sale of common stock, net				—		—		(141)			—			—			—			(141)
Equity based compensation costs	Equity based compensation costs		—	—			2,571		—				—		214		2,785		Equity based compensation costs				—		—		2,380			—			—			83			2,463

Changes in the redemption value of redeemable noncontrolling interest	Changes in the redemption value of redeemable noncontrolling interest		—	—			(2,574)		—				—		62		(2,512)		Changes in the redemption value of redeemable noncontrolling interest				—		—		(5,014)			—			—			(58)			(5,072)

Contributions from noncontrolling interest																			Contributions from noncontrolling interest				—		—		—			—			—			125			125
Distributions to noncontrolling interest	Distributions to noncontrolling interest		—	—			—		—				—		(7,303)		(7,303)		Distributions to noncontrolling interest				—		—		—			—			—			(7,619)			(7,619)
Redemptions of noncontrolling interest	Redemptions of noncontrolling interest		0	—			(1,792)		—				—		(271)		(2,063)		Redemptions of noncontrolling interest				—		—		(1)			—			—			(25)			(26)
Common stock dividends ($2.09 per share)			—	—			—		(135,884)				—		—		(135,884)
Balances at June 30, 2021			65,004	$	7		$	6,862,879	$	(899,663)			$	(9,768)	$	183,248	$	6,136,703
Common stock dividends ($2.20 per share)																			Common stock dividends ($2.20 per share)				—		—		—			(143,754)			—			—			(143,754)
Balances at March 31, 2022																			Balances at March 31, 2022				65,332		$	7	$	6,930,072		$	(987,333)		$	14,237		$	181,224		$	6,138,207

Table of Contents

Common stock Additional paid-in capital Distributions
in excess of accumulated
earnings Accumulated
other
comprehensive loss, net Noncontrolling interest Total
Six months ended June 30, 2021 Shares Amount
Balances at December 31, 2020 64,999 $ 6 $ 6,876,326 $ (861,193) $ (14,729) $ 182,782 $ 6,183,192
Net income — — — 233,290 — 13,274 246,564
Change in fair value of derivatives and amortization of swap settlements — — — — 4,713 166 4,879
Change in fair value of marketable debt securities, net — — — — 248 9 257
Issuance of common stock under:
Stock option and restricted stock plans, net 44 1 (3,171) — — — (3,170)
Sale of common stock, net — — (84) — — — (84)
Equity based compensation costs — — 7,599 — — 268 7,867
Retirement of common stock, net (40) — (9,172) — — — (9,172)
Changes in the redemption value of redeemable noncontrolling interest — — (6,752) — — 157 (6,595)
Contributions from noncontrolling interest — — — — — 1,900 1,900
Distributions to noncontrolling interest — — — — — (14,857) (14,857)
Redemptions of noncontrolling interest 1 — (1,867) — — (451) (2,318)
Common stock dividends ($4.18 per share) — — — (271,760) — — (271,760)
Balances at June 30, 2021 65,004 $ 7 $ 6,862,879 $ (899,663) $ (9,768) $ 183,248 $ 6,136,703

~~Table of Contents~~

Common stock Additional paid-in capital Distributions
in excess of accumulated
earnings Accumulated
other
comprehensive loss, net Noncontrolling Interest Total
Three months ended June 30, 2020 Shares Amount
Balances at March 31, 2020 65,412 $ 7 $ 6,959,523 $ (708,697) $ (22,668) $ 189,784 $ 6,417,949
Net income — — — 84,458 — 5,618 90,076
Cash flow hedge losses reclassified to earnings — — — — 3,171 111 3,282
Change in fair value of derivatives and amortization of swap settlements — — — — 754 25 779
Change in fair value of marketable debt securities, net — — — — 33 2 35
Issuance of common stock under:
Stock option and restricted stock plans, net 6 — 536 — — — 536
Sale of common stock, net — — (63) — — — (63)
Equity based compensation costs — — 5,058 — — 177 5,235
Retirement of common stock, net (88) — (20,093) — — — (20,093)
Changes in the redemption value of redeemable noncontrolling interest — — (199) — — (399) (598)
Distributions to noncontrolling interest — — — — — (8,133) (8,133)
Redemptions of noncontrolling interest 1 — 43 — — (378) (335)
Common stock dividends ($2.0775 per share) — — — (135,789) — — (135,789)
Balances at June 30, 2020 65,331 $ 7 $ 6,944,805 $ (760,028) $ (18,710) $ 186,807 $ 6,352,881

~~Table of Contents~~


		Common stock		Additional paid-in capital			Distributions in excess of accumulated earnings		Accumulated other comprehensive loss, net				Noncontrolling Interest		Total					Common stock			Additional paid-in capital		Distributions in excess of accumulated earnings		Accumulated other comprehensive income (loss), net			Noncontrolling Interest			Total
Six months ended June 30, 2020			Shares			Amount
Balances at December 31, 2019			66,092	$	7		$	7,121,927			$	(887,619)			$	(13,888)	$	183,077			$	6,403,504
Three months ended March 31, 2021																			Three months ended March 31, 2021					Shares					Additional paid-in capital	Amount		Distributions in excess of accumulated earnings			Accumulated other comprehensive income (loss), net			Noncontrolling Interest			Total
Balances at December 31, 2020																			Balances at December 31, 2020				64,999										$	6,183,192
Net income	Net income		—	—			—		399,464				—		19,377		418,841		Net income				—		—		—					168,444			—			8,505			176,949

Cash flow hedge losses reclassified to earnings			—	—			—		—				3,171		111		3,282
Change in fair value of derivatives and amortization of swap settlements	Change in fair value of derivatives and amortization of swap settlements		—	—			—		—				(7,732)		(271)		(8,003)		Change in fair value of derivatives and amortization of swap settlements				—		—		—			—			4,257			150			4,407
Change in fair value of marketable debt securities, net	Change in fair value of marketable debt securities, net		—	—			—		—				(261)		(9)		(270)		Change in fair value of marketable debt securities, net				—		—		—			—			82			3			85
Issuance of common stock under:	Issuance of common stock under:																		Issuance of common stock under:
Stock option and restricted stock plans, net	Stock option and restricted stock plans, net		95	—			9,201		—				—		—		9,201		Stock option and restricted stock plans, net				39		—		(3,744)			—			—			—			(3,744)
Sale of common stock, net			—	—			(133)		—				—		—		(133)

Equity based compensation costs	Equity based compensation costs		—	—			6,677		—				—		256		6,933		Equity based compensation costs				—		—		5,028			—			—			54			5,082

Retirement of common stock, net	Retirement of common stock, net		(864)	—			(196,404)		—				—		—		(196,404)		Retirement of common stock, net				(40)		—		(9,172)			—			—			—			(9,172)
Cumulative effect upon adoption of ASU No. 2016-13			—	—			—		(190)				—		—		(190)

Changes in the redemption value of redeemable noncontrolling interest	Changes in the redemption value of redeemable noncontrolling interest		—	—			4,542		—				—		(373)		4,169		Changes in the redemption value of redeemable noncontrolling interest				—		—		(4,178)			—			—			95			(4,083)
Changes in noncontrolling interest from acquisition			—	—			—		—				—		1,349		1,349
Contributions from noncontrolling interest																			Contributions from noncontrolling interest				—		—		—			—			—			1,900			1,900
Distributions to noncontrolling interest	Distributions to noncontrolling interest		—	—			—		—				—		(16,012)		(16,012)		Distributions to noncontrolling interest				—		—		—			—			—			(7,554)			(7,554)
Redemptions of noncontrolling interest	Redemptions of noncontrolling interest		8	—			(1,005)		—				—		(698)		(1,703)		Redemptions of noncontrolling interest				1		—		(75)			—			—			(180)			(255)
Common stock dividends ($4.155 per share)			—	—			—		(271,683)				—		—		(271,683)
Balances at June 30, 2020			65,331	$	7		$	6,944,805	$	(760,028)			$	(18,710)	$	186,807	$	6,352,881
Common stock dividends ($2.09 per share)																			Common stock dividends ($2.09 per share)				—		—		—			(135,876)			—			—			(135,876)
Balances at March 31, 2021																			Balances at March 31, 2021				64,999		$	6	$	6,864,185		$	(828,625)		$	(10,390)		$	185,755		$	6,210,931

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands, except parenthetical amounts)


		Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020			2022	2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	246,564	$	418,841	Net income	78,375	$	176,949
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Straight-lined rents	Straight-lined rents	5,825		(2,803)		Straight-lined rents	2,074	3,087
Depreciation and amortization	Depreciation and amortization	257,323		265,168		Depreciation and amortization	133,533	128,587
Amortization of discount on marketable securities		0		(4,862)

Amortization of discount and debt financing costs, net	Amortization of discount and debt financing costs, net	6,311		3,973		Amortization of discount and debt financing costs, net	1,665	2,132
Loss on sale of marketable securities		(2,499)		(33)
Income form early redemption of notes receivable		(4,747)		0
Gain on sale of marketable securities						Gain on sale of marketable securities	(12,171)	(2,611)

Provision for credit losses	Provision for credit losses	(107)		97		Provision for credit losses	62	38
Unrealized (gains) losses on equity securities recognized through income		(16,681)		1,073
Unrealized losses (gains) on equity securities recognized through income						Unrealized losses (gains) on equity securities recognized through income	24,585	(6,276)

Earnings from co-investments	Earnings from co-investments	(35,259)		(38,554)		Earnings from co-investments	(21,171)	(17,011)
Operating distributions from co-investments	Operating distributions from co-investments	57,364		29,613		Operating distributions from co-investments	52,281	46,355
Accrued interest from notes and other receivables	Accrued interest from notes and other receivables	(8,530)		(835)		Accrued interest from notes and other receivables	(3,447)	(4,201)
Gain on the sale of real estate and land	Gain on the sale of real estate and land	(100,096)		(16,597)		Gain on the sale of real estate and land	—	(100,096)

Equity-based compensation	Equity-based compensation	3,776		4,043		Equity-based compensation	2,296	1,386
Loss on early retirement of debt, net	Loss on early retirement of debt, net	18,982		4,706		Loss on early retirement of debt, net	—	2,517
Gain on remeasurement of co-investment		(2,260)		(234,694)

Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Prepaid expenses, receivables, operating lease right-of-use assets, and other assets	Prepaid expenses, receivables, operating lease right-of-use assets, and other assets	(5,348)		(6,421)		Prepaid expenses, receivables, operating lease right-of-use assets, and other assets	16,026	(41,060)
Accounts payable, accrued liabilities, and operating lease liabilities	Accounts payable, accrued liabilities, and operating lease liabilities	3,209		2,565		Accounts payable, accrued liabilities, and operating lease liabilities	40,300	4,976
Other liabilities	Other liabilities	4,244		830		Other liabilities	735	494
Net cash provided by operating activities	Net cash provided by operating activities	428,071		426,110		Net cash provided by operating activities	315,143	195,266
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Additions to real estate:	Additions to real estate:					Additions to real estate:
Acquisitions of real estate and acquisition related capital expenditures, net of cash acquired	Acquisitions of real estate and acquisition related capital expenditures, net of cash acquired	(18,418)		(458,857)		Acquisitions of real estate and acquisition related capital expenditures, net of cash acquired	(61)	(1,203)
Redevelopment	Redevelopment	(19,981)		(32,211)		Redevelopment	(18,004)	(9,274)
Development acquisitions of and additions to real estate under development	Development acquisitions of and additions to real estate under development	(34,640)		(54,994)		Development acquisitions of and additions to real estate under development	(6,882)	(19,629)
Capital expenditures on rental properties	Capital expenditures on rental properties	(49,044)		(40,013)		Capital expenditures on rental properties	(24,917)	(16,720)

Investments in notes receivable	Investments in notes receivable	(71,613)		(6,669)		Investments in notes receivable	(134,697)	(69,885)
Collections of notes and other receivables	Collections of notes and other receivables	36,244		98,711		Collections of notes and other receivables	270,338	—
Proceeds from insurance for property losses	Proceeds from insurance for property losses	117		568		Proceeds from insurance for property losses	88	102
Proceeds from dispositions of real estate	Proceeds from dispositions of real estate	243,365		230,935		Proceeds from dispositions of real estate	—	243,365
Contributions to co-investments	Contributions to co-investments	(160,719)		(43,817)		Contributions to co-investments	(79,284)	(49,974)

Changes in refundable deposits	Changes in refundable deposits	(968)		96		Changes in refundable deposits	(6,318)	11
Purchases of marketable securities	Purchases of marketable securities	(23,509)		(10,989)		Purchases of marketable securities	(10,826)	(23,296)
Sales and maturities of marketable securities	Sales and maturities of marketable securities	14,931		4,301		Sales and maturities of marketable securities	27,911	14,772
Non-operating distributions from co-investments	Non-operating distributions from co-investments	78,600		25,136		Non-operating distributions from co-investments	88,370	78,600
Net cash used in investing activities		(5,635)		(287,803)
Net cash provided by investing activities						Net cash provided by investing activities	105,718	146,869
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from unsecured debt and mortgage notes	Proceeds from unsecured debt and mortgage notes	745,505		856,630		Proceeds from unsecured debt and mortgage notes	—	447,404
Payments on unsecured debt and mortgage notes	Payments on unsecured debt and mortgage notes	(951,727)		(286,074)		Payments on unsecured debt and mortgage notes	(904)	(600,858)
Proceeds from lines of credit	Proceeds from lines of credit	453,359		1,038,426		Proceeds from lines of credit	391,472	204,794
Repayments of lines of credit	Repayments of lines of credit	(368,359)		(1,093,426)		Repayments of lines of credit	(634,729)	(204,794)

Retirement of common stock	Retirement of common stock	(9,172)		(196,404)		Retirement of common stock	—	(9,172)

Table of Contents


		Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020			2022		2021
Additions to deferred charges	Additions to deferred charges	(6,361)		(7,297)		Additions to deferred charges	—		(3,434)
Payments related to debt prepayment penalties	Payments related to debt prepayment penalties	(18,342)		(1,696)		Payments related to debt prepayment penalties	—		(2,132)
Net proceeds from issuance of common stock	Net proceeds from issuance of common stock	(84)		(133)		Net proceeds from issuance of common stock	(141)		—

Net proceeds from stock options exercised	Net proceeds from stock options exercised	2,275		14,865		Net proceeds from stock options exercised	19,083		1,701
Payments related to tax withholding for share-based compensation	Payments related to tax withholding for share-based compensation	(5,445)		(5,664)		Payments related to tax withholding for share-based compensation	(2,216)		(5,445)
Contributions from noncontrolling interest	Contributions from noncontrolling interest	1,900		0		Contributions from noncontrolling interest	125		1,900
Distributions to noncontrolling interest	Distributions to noncontrolling interest	(14,787)		(15,613)		Distributions to noncontrolling interest	(7,218)		(7,461)
Redemption of noncontrolling interest	Redemption of noncontrolling interest	(2,318)		(1,703)		Redemption of noncontrolling interest	(26)		(255)
Redemption of redeemable noncontrolling interest		(3,808)		0

Common stock dividends paid	Common stock dividends paid	(270,937)		(264,837)		Common stock dividends paid	(136,392)		(135,064)
Net cash (used in) provided by financing activities		(448,301)		37,074
Net cash used in financing activities						Net cash used in financing activities	(370,946)		(312,816)

Net (decrease) increase in unrestricted and restricted cash and cash equivalents		(25,865)		175,381
Net increase in unrestricted and restricted cash and cash equivalents						Net increase in unrestricted and restricted cash and cash equivalents	49,915		29,319
Unrestricted and restricted cash and cash equivalents at beginning of period	Unrestricted and restricted cash and cash equivalents at beginning of period	84,041		81,094		Unrestricted and restricted cash and cash equivalents at beginning of period	58,638		84,041
Unrestricted and restricted cash and cash equivalents at end of period	Unrestricted and restricted cash and cash equivalents at end of period	$	58,176	$	256,475	Unrestricted and restricted cash and cash equivalents at end of period	$	108,553	$	113,360

Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Cash paid for interest (net of $3.8 million and $9.0 million capitalized in 2021 and 2020, respectively)		$	96,541	$	98,358
Cash paid for interest (net of $0.9 million and $2.1 million capitalized in 2022 and 2021, respectively)						Cash paid for interest (net of $0.9 million and $2.1 million capitalized in 2022 and 2021, respectively)	$	51,168	$	55,213
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:					Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	Operating cash flows from operating leases	$	5,316	$	3,430	Operating cash flows from operating leases	$	1,738	$	1,738
Supplemental disclosure of noncash investing and financing activities:	Supplemental disclosure of noncash investing and financing activities:					Supplemental disclosure of noncash investing and financing activities:

Transfers between real estate under development and rental properties, net	Transfers between real estate under development and rental properties, net	$	218,835	$	131,960	Transfers between real estate under development and rental properties, net	$	4,346	$	267
Transfer from real estate under development to co-investments	Transfer from real estate under development to co-investments	$	1,337	$	1,473	Transfer from real estate under development to co-investments	$	858	$	747

Reclassifications to (from) redeemable noncontrolling interest to/from additional paid in capital and noncontrolling interest		$	6,593	$	(4,169)
Reclassifications to redeemable noncontrolling interest from additional paid in capital and noncontrolling interest						Reclassifications to redeemable noncontrolling interest from additional paid in capital and noncontrolling interest	$	5,073	$	4,083

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except parenthetical and unit amounts)


ASSETS	ASSETS	June 30, 2021		December 31, 2020		ASSETS	March 31, 2022		December 31, 2021
Real estate:	Real estate:					Real estate:
Rental properties:	Rental properties:					Rental properties:
Land and land improvements	Land and land improvements	$	2,923,508	$	2,929,009	Land and land improvements	$	3,032,678	$	3,032,678
Buildings and improvements	Buildings and improvements	12,373,299		12,132,736		Buildings and improvements	12,651,423		12,597,249
		15,296,807		15,061,745			15,684,101		15,629,927
Less: accumulated depreciation	Less: accumulated depreciation	(4,392,056)		(4,133,959)		Less: accumulated depreciation	(4,779,581)		(4,646,854)
		10,904,751		10,927,786			10,904,520		10,983,073
Real estate under development	Real estate under development	208,330		386,047		Real estate under development	112,815		111,562
Co-investments	Co-investments	1,037,270		1,018,010		Co-investments	1,144,542		1,177,802
Real estate held for sale, net	Real estate held for sale, net	0		57,938		Real estate held for sale, net	—		—
		12,150,351		12,389,781			12,161,877		12,272,437
Cash and cash equivalents-unrestricted	Cash and cash equivalents-unrestricted	48,155		73,629		Cash and cash equivalents-unrestricted	98,107		48,420
Cash and cash equivalents-restricted	Cash and cash equivalents-restricted	10,021		10,412		Cash and cash equivalents-restricted	10,446		10,218
Marketable securities, net of allowance for credit losses of 0 as of both June 30, 2021 and December 31, 2020		175,782		147,768
Notes and other receivables, net of allowance for credit losses of $0.7 million and $0.8 million as of June 30, 2021 and December 31, 2020, respectively (includes related party receivables of $57.9 million and $4.7 million as of June 30, 2021 and December 31, 2020, respectively)		238,855		195,104
Marketable securities, net of allowance for credit losses of zero as of both March 31, 2022 and December 31, 2021						Marketable securities, net of allowance for credit losses of zero as of both March 31, 2022 and December 31, 2021	169,702		191,829
Notes and other receivables, net of allowance for credit losses of $0.7 million and $0.8 million as of March 31, 2022 and December 31, 2021, respectively (includes related party receivables of $39.9 million and $176.9 million as of March 31, 2022 and December 31, 2021, respectively)						Notes and other receivables, net of allowance for credit losses of $0.7 million and $0.8 million as of March 31, 2022 and December 31, 2021, respectively (includes related party receivables of $39.9 million and $176.9 million as of March 31, 2022 and December 31, 2021, respectively)	205,420		341,033
Operating lease right-of-use assets	Operating lease right-of-use assets	70,551		72,143		Operating lease right-of-use assets	68,158		68,972
Prepaid expenses and other assets	Prepaid expenses and other assets	53,484		47,340		Prepaid expenses and other assets	56,591		64,964
Total assets	Total assets	$	12,747,199	$	12,936,177	Total assets	$	12,770,301	$	12,997,873
LIABILITIES AND CAPITAL	LIABILITIES AND CAPITAL					LIABILITIES AND CAPITAL
Unsecured debt, net	Unsecured debt, net	$	5,403,874	$	5,607,985	Unsecured debt, net	$	5,308,841	$	5,307,196
Mortgage notes payable, net	Mortgage notes payable, net	641,274		643,550		Mortgage notes payable, net	637,778		638,957
Lines of credit	Lines of credit	85,000		0		Lines of credit	98,000		341,257
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	160,121		152,855		Accounts payable and accrued liabilities	221,925		180,751
Construction payable	Construction payable	31,960		31,417		Construction payable	35,484		29,136
Distributions payable	Distributions payable	142,810		141,917		Distributions payable	150,976		143,213
Operating lease liabilities						Operating lease liabilities	69,801		70,675
Distributions in excess of investments in co-investments						Distributions in excess of investments in co-investments	28,846		35,545

Operating lease liabilities		72,363		74,037
Liabilities associated with real estate held for sale		0		29,845
Other liabilities	Other liabilities	38,068		39,140		Other liabilities	40,705		39,969
Total liabilities	Total liabilities	6,575,470		6,720,746		Total liabilities	6,592,356		6,786,699
Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies	0		0
Redeemable noncontrolling interest	Redeemable noncontrolling interest	35,026		32,239		Redeemable noncontrolling interest	39,738		34,666

Capital:	Capital:					Capital:
General Partner:	General Partner:					General Partner:
Common equity (65,003,996 and 64,999,015 units issued and outstanding, respectively)		5,963,223		6,015,139
Common equity (65,332,274 and 65,248,393 units issued and outstanding, respectively)						Common equity (65,332,274 and 65,248,393 units issued and outstanding, respectively)	5,942,746		5,999,155

		5,963,223		6,015,139			5,942,746		5,999,155
Limited Partners:	Limited Partners:					Limited Partners:
Common equity (2,293,760 and 2,294,760 units issued and outstanding, respectively)		56,950		58,184
Common equity (2,282,464 and 2,282,464 units issued and outstanding, respectively)						Common equity (2,282,464 and 2,282,464 units issued and outstanding, respectively)	54,112		56,502
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(6,167)		(11,303)		Accumulated other comprehensive loss	18,677		(1,804)
Total partners' capital	Total partners' capital	6,014,006		6,062,020		Total partners' capital	6,015,535		6,053,853
Noncontrolling interest	Noncontrolling interest	122,697		121,172		Noncontrolling interest	122,672		122,655
Total capital	Total capital	6,136,703		6,183,192		Total capital	6,138,207		6,176,508
Total liabilities and capital	Total liabilities and capital	$	12,747,199	$	12,936,177	Total liabilities and capital	$	12,770,301	$	12,997,873

See accompanying notes to the unaudited condensed consolidated financial statements.

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Condensed Consolidated Statements of Income and Comprehensive Income

(Unaudited)

(In thousands, except unit and per unit amounts)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Revenues:	Revenues:									Revenues:
Rental and other property	Rental and other property	$	348,757	$	368,149	$	701,633	$	757,899	Rental and other property	$	379,216	$	352,876
Management and other fees from affiliates	Management and other fees from affiliates	2,221		2,348		4,470		4,965		Management and other fees from affiliates	2,689		2,249
		350,978		370,497		706,103		762,864			381,905		355,125
Expenses:	Expenses:									Expenses:
Property operating, excluding real estate taxes	Property operating, excluding real estate taxes	63,215		65,142		128,366		129,273		Property operating, excluding real estate taxes	68,858		65,085
Real estate taxes	Real estate taxes	44,278		44,994		89,606		88,006		Real estate taxes	47,242		45,328
Corporate-level property management expenses	Corporate-level property management expenses	9,105		8,646		18,052		17,405		Corporate-level property management expenses	10,172		9,013
Depreciation and amortization	Depreciation and amortization	128,736		133,609		257,323		265,168		Depreciation and amortization	133,533		128,587
General and administrative	General and administrative	12,222		14,952		22,034		28,934		General and administrative	12,242		9,812

Expensed acquisition and investment related costs	Expensed acquisition and investment related costs	41		15		56		102		Expensed acquisition and investment related costs	8		15
		257,597		267,358		515,437		528,888			272,055		257,840
Gain on sale of real estate and land	Gain on sale of real estate and land	0		16,597		100,096		16,597		Gain on sale of real estate and land	—		100,096
Earnings from operations	Earnings from operations	93,381		119,736		290,762		250,573		Earnings from operations	109,850		197,381
Interest expense	Interest expense	(50,971)		(54,447)		(102,620)		(109,594)		Interest expense	(50,377)		(51,649)
Total return swap income	Total return swap income	2,633		2,788		5,477		4,772		Total return swap income	2,544		2,844
Interest and other income		22,371		11,405		36,758		6,184
Interest and other (loss) income										Interest and other (loss) income	(7,567)		14,387
Equity income from co-investments	Equity income from co-investments	18,248		17,257		35,259		38,554		Equity income from co-investments	21,171		17,011
Deferred tax expense on unrealized gain on unconsolidated co-investment		(1,842)		(1,636)		(2,350)		(1,636)
Deferred tax (benefit) expense on unconsolidated co-investments										Deferred tax (benefit) expense on unconsolidated co-investments	2,754		(508)
Loss on early retirement of debt, net	Loss on early retirement of debt, net	(16,465)		(5,027)		(18,982)		(4,706)		Loss on early retirement of debt, net	—		(2,517)
Gain on remeasurement of co-investment		2,260		0		2,260		234,694

Net income	Net income	69,615		90,076		246,564		418,841		Net income	78,375		176,949
Net income attributable to noncontrolling interest	Net income attributable to noncontrolling interest	(2,481)		(2,654)		(5,039)		(5,427)		Net income attributable to noncontrolling interest	(2,558)		(2,558)

Net income available to common unitholders	Net income available to common unitholders	$	67,134	$	87,422	$	241,525	$	413,414	Net income available to common unitholders	$	75,817	$	174,391
Comprehensive income	Comprehensive income	$	70,259	$	94,172	$	251,700	$	413,850	Comprehensive income	$	98,856	$	181,441
Comprehensive income attributable to noncontrolling interest	Comprehensive income attributable to noncontrolling interest	(2,481)		(2,654)		(5,039)		(5,427)		Comprehensive income attributable to noncontrolling interest	(2,558)		(2,558)
Comprehensive income attributable to controlling interest	Comprehensive income attributable to controlling interest	$	67,778	$	91,518	$	246,661	$	408,423	Comprehensive income attributable to controlling interest	$	96,298	$	178,883
Per unit data:	Per unit data:									Per unit data:
Basic:	Basic:									Basic:
Net income available to common unitholders	Net income available to common unitholders	$	1.00	$	1.29	$	3.59	$	6.08	Net income available to common unitholders	$	1.12	$	2.59
Weighted average number of common units outstanding during the period	Weighted average number of common units outstanding during the period	67,295,437		67,708,157		67,289,464		68,026,084		Weighted average number of common units outstanding during the period	67,558,239		67,283,424
Diluted:	Diluted:									Diluted:
Net income available to common unitholders	Net income available to common unitholders	$	1.00	$	1.29	$	3.59	$	6.07	Net income available to common unitholders	$	1.12	$	2.59
Weighted average number of common units outstanding during the period	Weighted average number of common units outstanding during the period	67,374,506		67,723,685		67,341,798		68,153,312		Weighted average number of common units outstanding during the period	67,621,842		67,408,737

See accompanying notes to the unaudited condensed consolidated financial statements.

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Condensed Consolidated Statements of Capital for the three and ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~

(Unaudited)

(In thousands)


		General Partner				Limited Partners				Accumulated other comprehensive loss, net			Noncontrolling interest			Total				General Partner								Limited Partners				Accumulated other comprehensive income (loss), net				Noncontrolling interest			Total
		Common Equity				Common Equity									Common Equity											Common Equity
Three months ended June 30, 2021		Units	Amount		Units		Amount					Total
Balances at March 31, 2021		64,999	$	6,035,566		2,294		$	59,328				$	(6,811)				$	122,848		$	6,210,931
Three months ended March 31, 2022																		Three months ended March 31, 2022		Units				Amount			Units		Amount			Accumulated other comprehensive income (loss), net				Noncontrolling interest		Total
Balances at December 31, 2021																		Balances at December 31, 2021		65,248				$	5,999,155			2,282		$	56,502			$	6,176,508
Net income	Net income	—	64,846			—		2,288					—			2,481					69,615		Net income	—		73,254				—				2,563							78,375

Change in fair value of derivatives and amortization of swap settlements	Change in fair value of derivatives and amortization of swap settlements	—	—			—		—		472			—			472		Change in fair value of derivatives and amortization of swap settlements		—				—				—		—		20,083				—			20,083
Change in fair value of marketable debt securities, net	Change in fair value of marketable debt securities, net	—	—			—		—		172			—			172		Change in fair value of marketable debt securities, net		—				—				—		—		398				—			398
Issuance of common units under:	Issuance of common units under:																	Issuance of common units under:
General partner's stock based compensation, net	General partner's stock based compensation, net	5	574			—		—		—			—			574		General partner's stock based compensation, net		84				16,867				—		—		—				—			16,867
Sale of common stock by general partner, net	Sale of common stock by general partner, net	—	(84)			—		—		—			—			(84)		Sale of common stock by general partner, net		—				(141)				—		—		—				—			(141)
Equity based compensation costs	Equity based compensation costs	—	2,571			—		214		—			—			2,785		Equity based compensation costs		—				2,380				—		83		—				—			2,463

Changes in the redemption value of redeemable noncontrolling interest	Changes in the redemption value of redeemable noncontrolling interest	—	(2,574)			—		(85)		—			147			(2,512)		Changes in the redemption value of redeemable noncontrolling interest		—				(5,014)				—		(14)		—				(44)			(5,072)
Contributions from noncontrolling interest	Contributions from noncontrolling interest	—	—			—		—		—			0			0		Contributions from noncontrolling interest		—				—				—		—		—				125			125
Distributions to noncontrolling interest	Distributions to noncontrolling interest	—	—			—		—		—			(2,508)			(2,508)		Distributions to noncontrolling interest		—				—				—		—		—				(2,597)			(2,597)
Redemptions	Redemptions	0	(1,792)			0		0		—			(271)			(2,063)		Redemptions		—				(1)				—		—		—				(25)			(26)
Distributions declared ($2.09 per unit)		—	(135,884)			—		(4,795)		—			—			(140,679)
Balances at June 30, 2021		65,004	$	5,963,223		2,294		$	56,950	$	(6,167)		$	122,697		$	6,136,703
Distributions declared ($2.20 per unit)																		Distributions declared ($2.20 per unit)		—				(143,754)				—		(5,022)		—				—			(148,776)
Balances at March 31, 2022																		Balances at March 31, 2022		65,332				$	5,942,746			2,282		$	54,112	$	18,677			$	122,672		$	6,138,207

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Table of Contents

General Partner Limited Partners Accumulated other
comprehensive loss, net Noncontrolling interest Total
Common Equity Common Equity
Six months ended June 30, 2021 Units Amount Units Amount
Balances at December 31, 2020 64,999 $ 6,015,139 2,295 $ 58,184 $ (11,303) $ 121,172 $ 6,183,192
Net income — 233,290 — 8,235 — 5,039 246,564
Change in fair value of derivatives and amortization of swap settlements — — — — 4,879 — 4,879
Change in fair value of marketable debt securities, net — — — — 257 — 257
Issuance of common units under:
General partner's stock based compensation, net 44 (3,170) — — — — (3,170)
Sale of common stock by general partner, net — (84) — — — — (84)
Equity based compensation costs — 7,599 — 268 — — 7,867
Retirement of common units, net (40) (9,172) — — — — (9,172)
Changes in the redemption value of redeemable noncontrolling interest — (6,752) — (12) — 169 (6,595)
Contributions from noncontrolling interest — — — — — 1,900 1,900
Distributions to noncontrolling interest — — — — — (5,268) (5,268)
Redemptions 1 (1,867) (1) (136) — (315) (2,318)
Distributions declared ($4.18 per unit) — (271,760) — (9,589) — — (281,349)
Balances at June 30, 2021 65,004 $ 5,963,223 2,294 $ 56,950 $ (6,167) $ 122,697 $ 6,136,703

~~Table of Contents~~


	General Partner				Limited Partners				Accumulated other comprehensive income (loss), net		Noncontrolling interest		Total
	Common Equity				Common Equity
Three months ended March 31, 2021	Units	Amount		Units		Amount
Balances at December 31, 2020	64,999	$	6,015,139		2,295		$	58,184	$	(11,303)	$	121,172	$	6,183,192
Net income	—	168,444			—		5,947		—		2,558		176,949
Change in fair value of derivatives and amortization of swap settlements	—	—			—		—		4,407		—		4,407
Change in fair value of marketable debt securities, net	—	—			—		—		85		—		85
Issuance of common units under:
General partner's stock based compensation, net	39	(3,744)			—		—		—		—		(3,744)

Equity based compensation costs	—	5,028			—		54		—		—		5,082
Retirement of common units, net	(40)	(9,172)			—		—		—		—		(9,172)
Changes in redemption value of redeemable noncontrolling interest	—	(4,178)			—		73		—		22		(4,083)
Contributions from noncontrolling interest	—	—			—		—		—		1,900		1,900
Distributions to noncontrolling interest	—	—			—		—		—		(2,760)		(2,760)
Redemptions	1	(75)			(1)		(136)		—		(44)		(255)
Distributions declared ($2.09 per unit)	—	(135,876)			—		(4,794)		—		—		(140,670)
Balances at March 31, 2021	64,999	$	6,035,566		2,294		$	59,328	$	(6,811)	$	122,848	$	6,210,931

General Partner Limited Partners Accumulated other
comprehensive loss, net Noncontrolling interest Total
Common Equity Common Equity
Three months ended June 30, 2020 Units Amount Units Amount
Balances at March 31, 2020 65,412 $ 6,250,833 2,296 $ 63,550 $ (19,519) $ 123,085 $ 6,417,949
Net income — 84,458 — 2,964 — 2,654 90,076
Cash flow hedge losses reclassified to earnings — — — — 3,282 — 3,282
Change in fair value of derivatives and amortization of swap settlements — — — — 779 — 779
Change in fair value of marketable debt securities, net — — — — 35 — 35
Issuance of common units under:
General partner's stock based compensation, net 6 536 — — — — 536
Sale of common stock by general partner, net — (63) — — — — (63)
Equity based compensation costs — 5,058 0 177 — — 5,235
Retirement of common units, net (88) (20,093) — — — — (20,093)
Changes in redemption value of redeemable noncontrolling interest — (199) — (398) — (1) (598)
Distributions to noncontrolling interest — — — — — (3,366) (3,366)
Redemptions 1 43 — (89) — (289) (335)
Distributions declared ($2.0775 per unit) — (135,789) — (4,767) — — (140,556)
Balances at June 30, 2020 65,331 $ 6,184,784 2,296 $ 61,437 $ (15,423) $ 122,083 $ 6,352,881

~~Table of Contents~~

General Partner Limited Partners Accumulated other
comprehensive loss, net Noncontrolling interest Total
Common Equity Common Equity
Six months ended June 30, 2020 Units Amount Units Amount
Balances at December 31, 2019 66,092 $ 6,234,315 2,302 $ 57,359 $ (10,432) $ 122,262 $ 6,403,504
Net income — 399,464 — 13,950 — 5,427 418,841
Cash flow hedge losses reclassified to earnings — — — — 3,282 — 3,282
Change in fair value of derivatives and amortization of swap settlements — — — — (8,003) — (8,003)
Change in fair value of marketable debt securities, net — — — — (270) — (270)
Issuance of common units under:
General partner's stock based compensation, net 95 9,201 — — — — 9,201
Sale of common stock by general partner, net — (133) — — — — (133)
Equity based compensation costs — 6,677 2 256 — — 6,933
Retirement of common units, net (864) (196,404) — — — — (196,404)
Cumulative effect upon adoption of ASU No. 2016-13
— (190) — — — — (190)
Changes in redemption value of redeemable noncontrolling interest — 4,542 — (416) — 43 4,169
Changes in noncontrolling interest from acquisition — — — — — 1,349 1,349
Distributions to noncontrolling interest — — — — — (6,473) (6,473)
Redemptions 8 (1,005) (8) (173) — (525) (1,703)
Distributions declared ($4.155 per unit) — (271,683) — (9,539) — — (281,222)
Balances at June 30, 2020 65,331 $ 6,184,784 2,296 $ 61,437 $ (15,423) $ 122,083 $ 6,352,881

See accompanying notes to the unaudited condensed consolidated financial statements.

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Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands, except parenthetical amounts)


		Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020			2022		2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	246,564	$	418,841	Net income	$	78,375	$	176,949
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Straight-lined rents	Straight-lined rents	5,825		(2,803)		Straight-lined rents	2,074		3,087
Depreciation and amortization	Depreciation and amortization	257,323		265,168		Depreciation and amortization	133,533		128,587
Amortization of discount on marketable securities		0		(4,862)

Amortization of discount and debt financing costs, net	Amortization of discount and debt financing costs, net	6,311		3,973		Amortization of discount and debt financing costs, net	1,665		2,132
Loss on sale of marketable securities		(2,499)		(33)
Income from early redemption of notes receivable		(4,747)		0
Gain on sale of marketable securities						Gain on sale of marketable securities	(12,171)		(2,611)

Provision for credit losses	Provision for credit losses	(107)		97		Provision for credit losses	62		38
Unrealized (gains) losses on equity securities recognized through income		(16,681)		1,073
Unrealized losses (gains) on equity securities recognized through income						Unrealized losses (gains) on equity securities recognized through income	24,585		(6,276)

Earnings from co-investments	Earnings from co-investments	(35,259)		(38,554)		Earnings from co-investments	(21,171)		(17,011)
Operating distributions from co-investments	Operating distributions from co-investments	57,364		29,613		Operating distributions from co-investments	52,281		46,355
Accrued interest from notes and other receivables	Accrued interest from notes and other receivables	(8,530)		(835)		Accrued interest from notes and other receivables	(3,447)		(4,201)
Gain on the sale of real estate and land	Gain on the sale of real estate and land	(100,096)		(16,597)		Gain on the sale of real estate and land	—		(100,096)

Equity-based compensation	Equity-based compensation	3,776		4,043		Equity-based compensation	2,296		1,386
Loss on early retirement of debt, net	Loss on early retirement of debt, net	18,982		4,706		Loss on early retirement of debt, net	—		2,517
Gain on remeasurement of co-investment		(2,260)		(234,694)

Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Prepaid expenses, receivables, operating lease right-of-use assets, and other assets	Prepaid expenses, receivables, operating lease right-of-use assets, and other assets	(5,348)		(6,421)		Prepaid expenses, receivables, operating lease right-of-use assets, and other assets	16,026		(41,060)
Accounts payable, accrued liabilities, and operating lease liabilities	Accounts payable, accrued liabilities, and operating lease liabilities	3,209		2,565		Accounts payable, accrued liabilities, and operating lease liabilities	40,300		4,976
Other liabilities	Other liabilities	4,244		830		Other liabilities	735		494
Net cash provided by operating activities	Net cash provided by operating activities	428,071		426,110		Net cash provided by operating activities	315,143		195,266
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Additions to real estate:	Additions to real estate:					Additions to real estate:
Acquisitions of real estate and acquisition related capital expenditures, net of cash acquired	Acquisitions of real estate and acquisition related capital expenditures, net of cash acquired	(18,418)		(458,857)		Acquisitions of real estate and acquisition related capital expenditures, net of cash acquired	(61)		(1,203)
Redevelopment	Redevelopment	(19,981)		(32,211)		Redevelopment	(18,004)		(9,274)
Development acquisitions of and additions to real estate under development	Development acquisitions of and additions to real estate under development	(34,640)		(54,994)		Development acquisitions of and additions to real estate under development	(6,882)		(19,629)
Capital expenditures on rental properties	Capital expenditures on rental properties	(49,044)		(40,013)		Capital expenditures on rental properties	(24,917)		(16,720)

Investments in notes receivable	Investments in notes receivable	(71,613)		(6,669)		Investments in notes receivable	(134,697)		(69,885)
Collections of notes and other receivables	Collections of notes and other receivables	36,244		98,711		Collections of notes and other receivables	270,338		—
Proceeds from insurance for property losses	Proceeds from insurance for property losses	117		568		Proceeds from insurance for property losses	88		102

Proceeds from dispositions of real estate	Proceeds from dispositions of real estate	243,365		230,935		Proceeds from dispositions of real estate	—		243,365
Contributions to co-investments	Contributions to co-investments	(160,719)		(43,817)		Contributions to co-investments	(79,284)		(49,974)
Changes in refundable deposits	Changes in refundable deposits	(968)		96		Changes in refundable deposits	(6,318)		11
Purchases of marketable securities	Purchases of marketable securities	(23,509)		(10,989)		Purchases of marketable securities	(10,826)		(23,296)
Sales and maturities of marketable securities	Sales and maturities of marketable securities	14,931		4,301		Sales and maturities of marketable securities	27,911		14,772
Non-operating distributions from co-investments	Non-operating distributions from co-investments	78,600		25,136		Non-operating distributions from co-investments	88,370		78,600
Net cash used in investing activities		(5,635)		(287,803)
Net cash provided by investing activities						Net cash provided by investing activities	105,718		146,869
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from unsecured debt and mortgage notes	Proceeds from unsecured debt and mortgage notes	745,505		856,630		Proceeds from unsecured debt and mortgage notes	—		447,404
Payments on unsecured debt and mortgage notes	Payments on unsecured debt and mortgage notes	(951,727)		(286,074)		Payments on unsecured debt and mortgage notes	(904)		(600,858)
Proceeds from lines of credit	Proceeds from lines of credit	453,359		1,038,426		Proceeds from lines of credit	391,472		204,794
Repayments of lines of credit	Repayments of lines of credit	(368,359)		(1,093,426)		Repayments of lines of credit	(634,729)		(204,794)

Retirement of common units	Retirement of common units	(9,172)		(196,404)		Retirement of common units	—		(9,172)

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		Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020			2022		2021
Additions to deferred charges	Additions to deferred charges	(6,361)		(7,297)		Additions to deferred charges	—		(3,434)
Payments related to debt prepayment penalties	Payments related to debt prepayment penalties	(18,342)		(1,696)		Payments related to debt prepayment penalties	—		(2,132)
Net proceeds from issuance of common units	Net proceeds from issuance of common units	(84)		(133)		Net proceeds from issuance of common units	(141)		—

Net proceeds from stock options exercised	Net proceeds from stock options exercised	2,275		14,865		Net proceeds from stock options exercised	19,083		1,701
Payments related to tax withholding for share-based compensation	Payments related to tax withholding for share-based compensation	(5,445)		(5,664)		Payments related to tax withholding for share-based compensation	(2,216)		(5,445)
Contributions from noncontrolling interest	Contributions from noncontrolling interest	1,900		0		Contributions from noncontrolling interest	125		1,900
Distributions to noncontrolling interest	Distributions to noncontrolling interest	(4,238)		(4,152)		Distributions to noncontrolling interest	(2,046)		(2,114)
Redemption of noncontrolling interests	Redemption of noncontrolling interests	(2,318)		(1,703)		Redemption of noncontrolling interests	(26)		(255)

Common units distributions paid	Common units distributions paid	(281,486)		(276,298)		Common units distributions paid	(141,564)		(140,411)
Net cash (used in) provided by financing activities		(448,301)		37,074
Net cash used in financing activities						Net cash used in financing activities	(370,946)		(312,816)

Net (decrease) increase in unrestricted and restricted cash and cash equivalents		(25,865)		175,381
Net increase in unrestricted and restricted cash and cash equivalents						Net increase in unrestricted and restricted cash and cash equivalents	49,915		29,319
Unrestricted and restricted cash and cash equivalents at beginning of period	Unrestricted and restricted cash and cash equivalents at beginning of period	84,041		81,094		Unrestricted and restricted cash and cash equivalents at beginning of period	58,638		84,041
Unrestricted and restricted cash and cash equivalents at end of period	Unrestricted and restricted cash and cash equivalents at end of period	$	58,176	$	256,475	Unrestricted and restricted cash and cash equivalents at end of period	$	108,553	$	113,360

Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Cash paid for interest (net of $3.8 million and $9.0 million capitalized in 2021 and 2020, respectively)		$	96,541	$	98,358
Cash paid for interest (net of $0.9 million and $2.1 million capitalized in 2022 and 2021, respectively)						Cash paid for interest (net of $0.9 million and $2.1 million capitalized in 2022 and 2021, respectively)	$	51,168	$	55,213
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:					Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	Operating cash flows from operating leases	$	5,316	$	3,430	Operating cash flows from operating leases	$	1,738	$	1,738
Supplemental disclosure of noncash investing and financing activities:	Supplemental disclosure of noncash investing and financing activities:					Supplemental disclosure of noncash investing and financing activities:

Transfers between real estate under development and rental properties, net	Transfers between real estate under development and rental properties, net	$	218,835	$	131,960	Transfers between real estate under development and rental properties, net	$	4,346	$	267
Transfer from real estate under development to co-investments	Transfer from real estate under development to co-investments	$	1,337	$	1,473	Transfer from real estate under development to co-investments	$	858	$	747

Reclassifications to (from) redeemable noncontrolling interest to/from general and limited partner capital and noncontrolling interest		$	6,593	$	(4,169)
Reclassifications to redeemable noncontrolling interest from general and limited partner capital and noncontrolling interest						Reclassifications to redeemable noncontrolling interest from general and limited partner capital and noncontrolling interest	$	5,073	$	4,083

See accompanying notes to the unaudited condensed consolidated financial statements.

1713

Table of Contents

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~

(Unaudited)

(1) Organization and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements present the accounts of Essex Property Trust, Inc. ("Essex" or the "Company"), which include the accounts of the Company and Essex Portfolio, L.P. and its subsidiaries (the "Operating Partnership," which holds the operating assets of the Company), prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and in accordance with the instructions to Form 10-Q. 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. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's annual report on Form 10-K for the year ended December 31, ~~2020.~~2021.

All significant intercompany accounts and transactions have been eliminated in the unaudited condensed consolidated financial statements. Certain reclassifications have been made to conform to current year's presentation.

The unaudited condensed consolidated financial statements for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ include the accounts of the Company and the Operating Partnership. Essex is the sole general partner of the Operating Partnership, with a 96.6% general partnership interest as of both ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021. Total Operating Partnership limited partnership units ("OP Units," and the holders of such OP Units, "Unitholders") outstanding were ~~2,293,760 and 2,294,760~~2,282,464 as of ~~June 30, 2021~~both March 31, 2022 and December 31, ~~2020, respectively,~~2021, and the redemption value of the units, based on the closing price of the Company’s common stock totaled approximately ~~$688.2~~$788.5 million and ~~$544.8~~$804.0 million as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

As of ~~June 30, 2021,~~March 31, 2022, the Company owned or had ownership interests in ~~246~~253 operating apartment communities, ~~aggregating 60,920~~comprising 62,290 apartment homes, excluding the Company’s ownership interest in preferred ~~interest~~equity co-investments, loan investments, 13 operating commercial ~~building,~~buildings, and a development pipeline comprised of 21 consolidated ~~projects~~project and 1 unconsolidated joint venture project. The operating apartment communities are located in Southern California (primarily Los Angeles, Orange, San Diego, and Ventura counties), Northern California (the San Francisco Bay Area) and the Seattle metropolitan areas.

Accounting Pronouncements Adopted in the Current Year

In January 2021, the Financial Accounting Standards Board (the "FASB") issued ~~ASU~~Accounting Standards Update ("ASU") No. ~~2021-01 "Reference Rate Reform (Topic 848)~~2020-06 "Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): ~~Scope.~~Accounting for Convertible Instruments and Contracts in an Entity's Own Equity." The amendments in ASU ~~No. 2021-01 provide optional expedients~~2020-06 modifies the if-converted method of calculating diluted earnings per share ("EPS"). For instruments that may be settled in cash or shares, and are not classified as a liability, the guidance requires entities to include the ~~current guidance on contract modifications and hedge accounting from~~effect of potential share settlement in the expected market transition from LIBOR and other interbank offered rates to alternative reference rates. The guidance generally can be applied to applicable contract modifications through December 31, 2022.diluted EPS calculation, if the effect is more dilutive. The Company adopted this ~~new~~ guidance inon January ~~2021~~1, 2022 on a prospective basis. This adoption did not have a material impact on the Company's consolidated results of operations or financial position.

Revenues and Gains on Sale of Real Estate

Revenues from tenants renting or leasing apartment homes are recorded when due from tenants and are recognized monthly as they are earned which generally approximates a straight-line basis, else, adjustments are made to conform to a straight-line basis. Apartment homes are rented under short-term leases (generally, lease terms of 9 to 12 months). Revenues from tenants leasing commercial space are recorded on a straight-line basis over the life of the respective lease. See Note 3, Revenues, for additional information regarding such revenues.

The Company also generates other property-related revenue associated with the leasing of apartment homes, including storage income, pet rent, and other miscellaneous revenue. Similar to rental income, such revenues are recorded when due from tenants and recognized monthly as they are earned.

~~ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES~~

~~ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~June 30, 2021 and 2020~~

~~(Unaudited)~~

Apart from rental and other property-related revenue, revenues from contracts with customers are recognized as control of the promised services is passed to the customer. For customer contracts related to management and other fees from affiliates (which

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2022 and 2021

(Unaudited)

includes asset management and property management), the transaction price and amount of revenue to be recognized is determined each quarter based on the management fee calculated and earned for that month or quarter. The contract will contain a description of the service and the fee percentage for management services. Payments from such services are one month or one quarter in arrears of the service performed.

The Company recognizes any gains on sales of real estate when it transfers control of a property and when it is probable that the Company will collect substantially all of the related consideration.

Marketable Securities

The Company reports its equity securities and available for sale debt securities at fair value, based on quoted market prices (Level 1 for the common stock and investment funds and Level 2 for the unsecured debt, as defined by the FASB standard for fair value measurements). As of both ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020, $2.5~~2021, $0.8 million of equity securities ~~were~~ presented within common stock and stock funds in the tables below ~~which~~ represent investments measured at fair value, using net asset value as a practical expedient, and are not categorized in the fair value hierarchy.

Any unrealized gain or loss in debt securities classified as available for sale is recorded as other comprehensive income. Unrealized gains and losses in equity securities, realized gains and losses in debt securities, interest income, and amortization of purchase discounts are included in interest and other income ~~(loss)~~ on the condensed consolidated statements of income and comprehensive income.

As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, equity securities and available for sale debt securities consisted primarily of ~~investment-grade unsecured debt, and~~investment funds-debt securities, common stock and stock ~~funds.~~funds, and investment-grade unsecured debt.

As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, marketable securities consisted of the following ($ in thousands):


		June 30, 2021						March 31, 2022
		Cost		Gross Unrealized Gain (Loss)		Carrying Value				Cost		Gross Unrealized Gain (Loss)		Carrying Value
Equity securities:	Equity securities:								Equity securities:
Investment funds - debt securities	Investment funds - debt securities	$	61,673	$	259	$	61,932		Investment funds - debt securities	$	62,382	$	(4,638)	$	57,744
Common stock and stock funds	Common stock and stock funds	80,123		32,408		112,531			Common stock and stock funds	81,026		29,143		110,169

Debt securities:	Debt securities:								Debt securities:
Available for sale	Available for sale								Available for sale

Investment-grade unsecured debt	Investment-grade unsecured debt	1,050		269		1,319			Investment-grade unsecured debt	1,050		739		1,789

Total - Marketable securities	Total - Marketable securities	$	142,846	$	32,936	$	175,782		Total - Marketable securities	$	144,458	$	25,244	$	169,702

1915

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~

(Unaudited)


		December 31, 2020						December 31, 2021
		Cost		Gross Unrealized Gain (Loss)		Carrying Value				Cost		Gross Unrealized (Loss) Gain		Carrying Value
Equity securities:	Equity securities:								Equity securities:
Investment funds - debt securities	Investment funds - debt securities	$	49,646	$	985	$	50,631		Investment funds - debt securities	$	62,192	$	(502)	$	61,690
Common stock and stock funds	Common stock and stock funds	81,074		15,001		96,075			Common stock and stock funds	79,155		49,592		128,747

Debt securities:	Debt securities:								Debt securities:
Available for sale	Available for sale								Available for sale

Investment-grade unsecured debt	Investment-grade unsecured debt	1,050		12		1,062			Investment-grade unsecured debt	1,051		341		1,392

Total - Marketable securities	Total - Marketable securities	$	131,770	$	15,998	$	147,768		Total - Marketable securities	$	142,398	$	49,431	$	191,829

The Company uses the specific identification method to determine the cost basis of a debt security sold and to reclassify amounts from accumulated other comprehensive income for such securities.

For the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the proceeds from sales and maturities of marketable securities totaled ~~$0.1~~$27.9 million and ~~$4.1~~$14.8 million, respectively, which resulted in $0.1 million in realized losses and $46 thousand in realized gains, respectively, for such periods. For the six months ended June 30, 2021 and 2020, the proceeds from sales and maturities of marketable securities totaled $14.9$12.2 million and ~~$4.3~~$2.6 million ~~respectively, which resulted in $2.5 million and $33 thousand~~ in realized gains, respectively, for such periods.

For the three ~~and six~~ months ended ~~June 30,~~March 31, 2022, and 2021 the portion of equity security unrealized gains and losses that were recognized in income totaled ~~$10.4~~$24.6 million in losses and ~~$16.7~~$6.3 million in gains, respectively, and were included in interest and other ~~income~~ (loss) ~~on the Company's condensed consolidated statements of~~ income and comprehensive income. For the three and six months ended June 30, 2020, the portion of equity security unrealized gains or losses that were recognized in income totaled $7.6 million in gains and $1.1 million in losses, respectively, and were included in interest and other income (loss) on the Company's condensed consolidated statements of income and comprehensive income.

Variable Interest Entities

In accordance with accounting standards for consolidation of variable interest entities ("VIEs"), the Company consolidated the Operating Partnership, 18 DownREIT entities (comprising 9 communities), and 6 co-investments as of ~~June 30, 2021. As of~~March 31, 2022 and December 31, ~~2020, the Company consolidated the Operating Partnership, 17 DownREIT entities (comprising 9 communities) and 5 co-investments.~~2021. The Company consolidates these entities because it is deemed the primary beneficiary. The Company has no assets or liabilities other than its investment in the Operating Partnership. The consolidated total assets and liabilities related to the above consolidated co-investments and DownREIT entities, net of intercompany eliminations, were approximately ~~$904.6~~$900.6 million and ~~$320.8~~$323.7 million, respectively, as of ~~June 30, 2021~~March 31, 2022 and ~~$898.5~~$909.3 million and ~~$326.8~~$320.1 million, respectively, as of December 31, ~~2020.~~2021. Noncontrolling interests in these entities were $122.5 million and ~~$120.8~~$122.4 million as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. The Company's financial risk in each VIE is limited to its equity investment in the VIE. As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the Company did not have any VIEs of which it was not deemed to be the primary beneficiary.

Equity-based Compensation

The cost of share- and unit-based compensation awards is measured at the grant date based on the estimated fair value of the awards. The estimated fair value of stock options and restricted stock granted by the Company are being amortized over the vesting period. The estimated grant date fair values of the long term incentive plan units (discussed in Note 14, "Equity Based Compensation Plans," in the Company’s annual report on Form 10-K for the year ended December 31, ~~2020)~~2021) are being amortized over the expected service periods.

2016

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~

(Unaudited)

Fair Value of Financial Instruments

Management believes that the carrying amounts of the outstanding balances under its lines of credit, and notes and other receivables approximate fair value as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, because interest rates, yields, and other terms for these instruments are consistent with interest rates, yields, and other terms currently available for similar instruments. Management has estimated that the fair value of the Company’s fixed rate debt with a carrying value of $5.7 billion ~~and $5.5 billion at June 30, 2021~~as of both March 31, 2022 and December 31, ~~2020, respectively,~~2021, was approximately ~~$6.1~~$5.6 billion and $6.0 billion, respectively. Management has estimated that the fair value of the Company’s ~~$408.9~~$321.4 million and ~~$775.1~~$564.9 million of variable rate debt at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively, was approximately ~~$406.6~~$319.4 million and ~~$770.1~~$561.7 million, respectively, based on the terms of existing mortgage notes payable, unsecured debt, and variable rate demand notes 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 payables, other liabilities, and dividends payable approximate fair value as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 due to the short-term maturity of these instruments. Marketable securities are carried at fair value as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021.

Capitalization of Costs

The Company’s capitalized internal costs related to development and redevelopment projects were comprised primarily of interest and employee compensation and totaled ~~$5.5~~$5.4 million and ~~$8.9~~$6.4 million during the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, respectively, and $11.9 million and $18.8 million for the six months ended June 30, 2021 and 2020,~~ respectively. The Company capitalizes leasing commissions associated with the lease-up of development communities and amortizes the costs over the life of the leases. The amounts capitalized for leasing commissions are immaterial for all periods presented.

Co-investments

The Company owns investments in joint ventures in which it has significant influence, but its ownership interest does not meet the criteria for consolidation in accordance with U.S. GAAP. Therefore, the Company accounts for co-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 Company's equity in earnings less distributions received and the Company's share of losses. The significant accounting policies of the Company’s co-investment entities are consistent with those of the Company in all material respects.

Upon the acquisition of a controlling interest of a co-investment, the co-investment entity is consolidated and a gain or loss is recognized upon the remeasurement of co-investments in the consolidated statement of income equal to the amount by which the fair value of the Company's previously owned co-investment interest exceeds its carrying value. A majority of the co-investments, excluding most preferred equity investments, compensate the Company for its asset management services and some of these investments may provide promote income 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. Any promote fees are reflected in equity income from co-investments.

Changes in Accumulated Other Comprehensive ~~Loss,~~Income (Loss), Net by Component

Essex Property Trust, Inc.

($ in thousands):


		Change in fair value and amortization of swap settlements		Unrealized gain on available for sale securities		Total			Change in fair value and amortization of swap settlements		Unrealized gain on available for sale securities		Total
Balance at December 31, 2020		$	(14,771)	$	42	$	(14,729)
Balance at December 31, 2021								Balance at December 31, 2021	$	(5,912)	$	360	$	(5,552)

Other comprehensive income before reclassification	Other comprehensive income before reclassification	4,706		248		4,954		Other comprehensive income before reclassification	19,399		385		19,784
Amounts reclassified from accumulated other comprehensive loss	Amounts reclassified from accumulated other comprehensive loss	7		0		7		Amounts reclassified from accumulated other comprehensive loss	5		—		5
Other comprehensive income	Other comprehensive income	4,713		248		4,961		Other comprehensive income	19,404		385		19,789
Balance at June 30, 2021		$	(10,058)	$	290	$	(9,768)
Balance at March 31, 2022								Balance at March 31, 2022	$	13,492	$	745	$	14,237

2117

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~

(Unaudited)

Essex Portfolio, L.P.

($ in thousands):


		Change in fair value and amortization of swap settlements		Unrealized gain on available for sale securities		Total			Change in fair value and amortization of swap settlements		Unrealized gain on available for sale securities		Total
Balance at December 31, 2020		$	(11,346)	$	43	$	(11,303)
Balance at December 31, 2021								Balance at December 31, 2021	$	(2,176)	$	372	$	(1,804)

Other comprehensive income before reclassification	Other comprehensive income before reclassification	4,872		257		5,129		Other comprehensive income before reclassification	20,078		398		20,476
Amounts reclassified from accumulated other comprehensive loss	Amounts reclassified from accumulated other comprehensive loss	7		0		7		Amounts reclassified from accumulated other comprehensive loss	5		—		5
Other comprehensive income	Other comprehensive income	4,879		257		5,136		Other comprehensive income	20,083		398		20,481
Balance at June 30, 2021		$	(6,467)	$	300	$	(6,167)
Balance at March 31, 2022								Balance at March 31, 2022	$	17,907	$	770	$	18,677

Amounts reclassified from accumulated other comprehensive ~~loss~~income in connection with derivatives are recorded in interest expense on the condensed consolidated statements of income and comprehensive income. Realized gains and losses on available for sale debt securities are included in interest and other income on the condensed consolidated statements of income and comprehensive income.

Redeemable Noncontrolling Interest

The carrying value of redeemable noncontrolling interests in the accompanying condensed consolidated balance sheets was ~~$35.0~~$39.7 million and ~~$32.2~~$34.7 million as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. The limited partners may redeem their noncontrolling interests for cash in certain circumstances.

The changes to the redemption value of redeemable noncontrolling interests for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 is as follows ($ in thousands):


Balance at December 31, ~~2020~~2021	$	~~32,239~~34,666
Reclassification due to change in redemption value and other	~~6,595~~5,072
~~Redemptions~~	~~(3,808)~~

Balance at ~~June 30, 2021~~March 31, 2022	$	~~35,026~~39,738

Cash, 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 communities in connection with the Company’s mortgage debt.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows ($ in thousands):


		June 30, 2021		December 31, 2020		June 30, 2020		December 31, 2019			March 31, 2022		December 31, 2021		March 31, 2021		December 31, 2020
Cash and cash equivalents - unrestricted	Cash and cash equivalents - unrestricted	$	48,155	$	73,629	$	246,204	$	70,087	Cash and cash equivalents - unrestricted	$	98,107	$	48,420	$	103,442	$	73,629
Cash and cash equivalents - restricted	Cash and cash equivalents - restricted	10,021		10,412		10,271		11,007		Cash and cash equivalents - restricted	10,446		10,218		9,918		10,412
Total unrestricted and restricted cash and cash equivalents shown in the condensed consolidated statement of cash flows	Total unrestricted and restricted cash and cash equivalents shown in the condensed consolidated statement of cash flows	$	58,176	$	84,041	$	256,475	$	81,094	Total unrestricted and restricted cash and cash equivalents shown in the condensed consolidated statement of cash flows	$	108,553	$	58,638	$	113,360	$	84,041

2218

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~

(Unaudited)

Accounting Estimates

The preparation of condensed consolidated financial statements, in accordance with U.S. GAAP, requires the Company 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 Company evaluates its estimates, including those related to acquiring, developing and assessing the carrying values of its real estate portfolio, its investments in and advances to joint ventures and affiliates, its notes receivables, and its qualification as a real estate investment trust ("REIT"). The Company 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.

(2) Significant Transactions During the ~~Six~~Three Months Ended ~~June 30, 2021~~March 31, 2022 and Subsequent Events

Significant Transactions

Acquisitions

In ~~June 2021, the Company acquired its joint venture partner, BEX III, LLC's~~January 2022, Wesco VI, LLC ("~~BEX III"~~Wesco VI") ~~50.0% interest in The Village at Toluca Lake, a community totaling 145 homes located in Burbank, CA, for a total consideration of $31.8 million. Concurrent with the closing~~, one of the ~~acquisition, $29.5 million in mortgage debt that encumbered the property was paid off. As~~Company's joint ventures with an institutional partner, acquired Vela, a ~~result of this acquisition, the Company realized a gain on remeasurement of co-investment of $2.3 million upon consolidation.~~

~~Dispositions~~

~~In February 2021, the Company sold Hidden Valley, a 324~~379-unit apartment home community located in ~~Simi Valley,~~Woodland Hills, CA, for a total contract price of ~~$105.0~~$183.0 million. The ~~Company recognized a $69.2 million gain on sale. In conjunction with the sale, $29.7 million of mortgage debt that encumbered the~~ property was ~~repaid.~~

~~In February 2021,~~encumbered by a $100.7 million bridge loan from the Company, ~~sold Park 20, a 197 apartment home community located~~with an interest rate of 2.64% that was paid off in ~~San Mateo, CA, for a total contract price of $113.0 million. The Company recognized~~January 2022 and replaced by permanent secured debt with an ~~immaterial gain on sale.~~

~~In February 2021, the Company sold Axis 2300, a 115 apartment home community located in Irvine, CA, for a total contract price of $57.5 million. The Company recognized a $30.8 million gain on sale.~~institutional lender.

Co-Investments

Preferred Equity Investments

In ~~January 2021,~~the first quarter of 2022, the Company originated a3 preferred equity ~~investment~~investments totaling ~~$20.0~~$29.5 million in ~~one~~ multifamily ~~community~~communities located in Southern California and Washington. The ~~investment has an initial~~ preferred equity investments have a weighted average return of 10.0% and isare scheduled to mature in ~~January 2026.~~March 2027.

In ~~March 2021,~~the first quarter of 2022, the Company received cash proceeds of ~~$10.0 million for the full redemption of a preferred equity investment in a joint venture that holds property located in Southern California.~~

~~In March 2021, the Company received cash of $110.2~~$106.9 million, including an early redemption fee of ~~$3.5~~$0.9 million, for the full redemption of a2 preferred equity ~~investment~~investments and partial redemption of 2 preferred equity investments in joint ventures that held properties in California.

Notes Receivable

In January 2022, the Company provided a ~~joint venture that holds property~~$100.7 million related party bridge loan to Wesco VI in connection with the acquisition of Vela. The note receivable accrued interest at 2.64% and was paid off in January 2022. Additionally, the Company received cash of $121.3 million in January 2022, for the payoff of the remaining related party bridge loans to Wesco VI. See Note 6, Related Party Transactions, for additional details.

In January 2022, the Company received cash of $48.5 million, for the payoff of the related party bridge loan to a single asset entity owning apartment home community in Vista, CA. See Note 6, Related Party Transactions, for additional details.

In February 2022, the Company provided a $32.8 million related party bridge loan to BEX II in connection with the payoff of a debt related to one of its properties located in Southern California. The note receivable accrues interest at 1.35% and was scheduled to mature in March 2022, but was subsequently paid off in April 2022. The bridge loan is classified within notes and other receivables in the accompanying condensed consolidated balance sheets. See Note 6, Related Party Transactions, for additional details.

2319

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~

(Unaudited)

~~Notes Receivable~~

In March 2021, the Company provided a $52.5 million related party bridge loan to Wesco I, LLC ("Wesco I") in connection with the payoff of a debt related to one of its properties located in Southern California. The note receivable accrued interest at 2.55% and is scheduled to mature in July 2021. The bridge loan is classified within notes and other receivables in the accompanying condensed consolidated balance sheets.

~~In June 2021, the Company received cash of $36.5 million, including an early redemption fee of $4.7 million, for the full redemption of a mezzanine loan on a property located in Northern California.~~

~~Common Stock~~

During the three months ended March 31, 2021, the Company repurchased and retired 40,000 shares totaling $9.2 million, including commissions. The Company did 0t repurchase any shares during the three months ended June 30, 2021. As a result, as of June 30, 2021, the Company had $214.5 million of purchase authority remaining under its $250.0 million stock repurchase plan.

~~Senior Unsecured Debt~~

In March 2021, the Operating Partnership issued $450.0 million of senior unsecured notes due on March 1, 2028 with a coupon rate of 1.700% per annum (the "2028 Notes"), which are payable on March 1 and September 1 of each year, beginning on September 1, 2021. The 2028 Notes were offered to investors at a price of 99.423% of par value. The 2028 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 unconditionally guaranteed by Essex. The Company used the net proceeds of this offering to repay upcoming debt maturities, including all or a portion of certain unsecured term loans, and for general corporate and working capital purposes.

In June 2021, the Operating Partnership issued $300.0 million of senior unsecured notes due on June 15, 2031 with a coupon rate of 2.550% per annum (the "2031 Notes"), which are payable on June 15 and December 15 of each year, beginning on December 15, 2021. The 2031 Notes were offered to investors at a price of 99.367% of par value. The 2031 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 unconditionally guaranteed by Essex. The Company used the net proceeds of this offering to repay upcoming debt maturities, including to fund the redemption of $300.0 million aggregate principal amount (plus the make-whole amount and accrued and unpaid interest) of its outstanding 3.375% senior unsecured notes due January 2023, and for other general corporate and working capital purposes.

~~Subsequent Events~~

~~None.~~

(3) Revenues

Disaggregated Revenue

The following table presents the Company’s revenues disaggregated by revenue source ($ in thousands):

Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Rental income $ 343,322 $ 363,087 $ 690,627 $ 746,585
Other property 5,435 5,062 11,006 11,314
Management and other fees from affiliates 2,221 2,348 4,470 4,965
Total revenues $ 350,978 $ 370,497 $ 706,103 $ 762,864

~~ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES~~

~~ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~June 30, 2021 and 2020~~

~~(Unaudited)~~


	Three Months Ended March 31,
	2022		2021
Rental income	$	373,425	$	347,305
Other property	5,791		5,571
Management and other fees from affiliates	2,689		2,249
Total revenues	$	381,905	$	355,125

The following table presents the Company’s rental and other property revenues disaggregated by geographic operating segment ($ in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Southern California	Southern California	$	143,230	$	140,510	$	286,242	$	292,405	Southern California	$	156,969	$	141,969
Northern California	Northern California	143,386		152,118		290,076		310,574		Northern California	152,590		146,690
Seattle Metro	Seattle Metro	59,267		60,649		117,900		123,693		Seattle Metro	64,203		58,633
Other real estate assets (1)	Other real estate assets (1)	2,874		14,872		7,415		31,227		Other real estate assets (1)	5,454		5,584
Total rental and other property revenues	Total rental and other property revenues	$	348,757	$	368,149	$	701,633	$	757,899	Total rental and other property revenues	$	379,216	$	352,876

(1) Other real estate assets consist of revenues generated from retail space, commercial properties, held for sale properties, disposition properties and straight-line rent adjustments for concessions. Executive management does not evaluate such operating performance geographically.

The following table presents the Company’s rental and other property revenues disaggregated by current property category status ($ in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Same-property (1)	Same-property (1)	$	314,949	$	324,654	$	632,755	$	670,306	Same-property (1)	$	356,273	$	334,437
Acquisitions (2)	Acquisitions (2)	13,948		13,696		27,621		26,254		Acquisitions (2)	1,747		—
Development (3)	Development (3)	7,500		4,420		14,430		8,495		Development (3)	9,427		6,930
Redevelopment	Redevelopment	4,149		5,096		8,739		10,497		Redevelopment	1,435		1,632
Non-residential/other, net (4)	Non-residential/other, net (4)	11,156		17,308		24,402		39,372		Non-residential/other, net (4)	12,918		13,246
Straight line rent concession (5)	Straight line rent concession (5)	(2,945)		2,975		(6,314)		2,975		Straight line rent concession (5)	(2,584)		(3,369)
Total rental and other property revenues	Total rental and other property revenues	$	348,757	$	368,149	$	701,633	$	757,899	Total rental and other property revenues	$	379,216	$	352,876

(1) Properties that have comparable stabilized results as of January 1, ~~2020~~2021 and are consolidated by the Company for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020.~~2021. A community is generally considered to have reached stabilized operations once it achieves an initial occupancy of 90%.

(2) Acquisitions include properties acquired which did not have comparable stabilized results as of January 1, ~~2020.~~2021.

(3) Development includes properties developed which did not have stabilized results as of January 1, ~~2020.~~2021.

(4) Non-residential/other, net consists of revenues generated from retail space, commercial properties, held for sale properties, disposition properties, student housing, properties undergoing significant construction activities that do not meet our

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2022 and 2021

(Unaudited)

redevelopment criteria, and 32 communities located in the California counties of ~~Riverside,~~ Santa Barbara and Santa Cruz, which the Company does not consider its core markets.

(5) Same-property revenues reflect concessions on a cash basis. Total rental and other property revenues reflect concessions on a straight-line basis in accordance with U.S. GAAP.

Deferred Revenues and Remaining Performance Obligations

When cash payments are received or due in advance of the Company’s performance of contracts with customers, deferred revenue is recorded. The total deferred revenue balance related to such contracts was ~~$2.8~~$2.2 million and ~~$3.1~~$2.4 million as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively, and was included in accounts payable and accrued liabilities within the accompanying condensed consolidated balance sheets. The amount of revenue recognized for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 that was included in the December 31, ~~2020~~2021 deferred revenue balance was ~~$0.3~~$0.2 million, which was included in interest and other (loss) income within the condensed consolidated statements of income and comprehensive income.

~~ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES~~

~~ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~June 30, 2021 and 2020~~

~~(Unaudited)~~

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in the revenue recognition accounting standard. As of ~~June 30, 2021,~~March 31, 2022, the Company had ~~$2.8~~$2.2 million of remaining performance obligations. The Company expects to recognize approximately ~~13%~~25% of these remaining performance obligations in ~~2021,~~2022, an additional ~~51%~~60% through ~~2023,~~2024, and the remaining balance thereafter.

(4) Co-investments

The Company has joint ventures and preferred equity investments in co-investments which are accounted for under the equity method. The co-investments, including BEXAEW, LLC ("BEXAEW"), BEX II, LLC ("BEX II"), BEX IV, LLC (""BEX IV"), 500 Folsom, Wesco I, LLC ("Wesco I"), Wesco III, LLC ("Wesco III"), Wesco IV, LLC ("Wesco IV"), ~~and~~ Wesco V, LLC ("Wesco V"), and Wesco VI, own, operate, and develop apartment communities. The carrying values of the Company's co-investments as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 are as follows ($ in thousands, except parenthetical amounts):


		Weighted Average Company Ownership Percentage (1)		June 30, 2021		December 31, 2020			Weighted Average Company Ownership Percentage (1)		March 31, 2022		December 31, 2021
Ownership interest in:	Ownership interest in:							Ownership interest in:

Wesco I, Wesco III, Wesco IV, and Wesco V		51	%	172,709		178,322
BEXAEW, BEX II, BEX III (2), BEX IV, and 500 Folsom (3)		50	%	276,409		152,309
Other		47	%	48,193		27,635
Wesco I (2), Wesco III, Wesco IV, Wesco V, and Wesco VI								Wesco I (2), Wesco III, Wesco IV, Wesco V, and Wesco VI	52	%	$	221,781	$	168,198
BEXAEW, BEX II, BEX IV, and 500 Folsom								BEXAEW, BEX II, BEX IV, and 500 Folsom	50	%	267,338		270,550
Other (3)								Other (3)	52	%	112,548		126,503
Total operating and other co-investments, net	Total operating and other co-investments, net			497,311		358,266		Total operating and other co-investments, net			601,667		565,251
Total development co-investments	Total development co-investments	50	%	9,532		157,433		Total development co-investments	50	%	11,836		11,076
Total preferred interest co-investments (includes related party investments of $85.3 million and $81.4 million as of June 30, 2021 and December 31, 2020, respectively)				530,427		502,311
Total preferred interest co-investments (includes related party investments of $72.6 million and $71.1 million as of March 31, 2022 and December 31, 2021, respectively)								Total preferred interest co-investments (includes related party investments of $72.6 million and $71.1 million as of March 31, 2022 and December 31, 2021, respectively)			502,193		565,930
Total co-investments, net	Total co-investments, net			$	1,037,270	$	1,018,010	Total co-investments, net			$	1,115,696	$	1,142,257

(1) Weighted average Company ownership percentages are as of ~~June 30, 2021.~~March 31, 2022.

(2)~~In June 2021,~~ As of March 31, 2022, the ~~Company purchased~~Company's investment in Wesco I was classified as a liability of $28.7 million due to distributions in excess of the ~~additional 50% interest in BEX III.~~Company's investment.

(3) ~~500 Folsom had not stabilized~~As of March 31, 2022, the Company's investment in Expo was classified as a liability of ~~December 31, 2020. Its carrying value was included~~$0.2 million due to distributions received in excess of the ~~development~~Company's investment. The weighted average Essex ownership percentage excludes our investments in non-core technology co-investments ~~balance as of December 31, 2020.~~which are carried at fair value.

~~The combined summarized financial information of co-investments is as follows ($ in thousands):~~

June 30, 2021 December 31, 2020
Combined balance sheets: (1)
  Rental properties and real estate under development $ 4,082,553 $ 4,242,611
  Other assets 225,482 200,777
   Total assets $ 4,308,035 $ 4,443,388
  Debt $ 2,529,501 $ 2,611,365
  Other liabilities 195,048 189,515
  Equity 1,583,486 1,642,508
  Total liabilities and equity $ 4,308,035 $ 4,443,388
Company's share of equity $ 1,037,270 $ 1,018,010

2621

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~

(Unaudited)

Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Combined statements of income: (1)
Property revenues $ 68,405 $ 72,175 $ 140,164 $ 149,544
Property operating expenses (27,013) (25,859) (54,344) (51,574)
Net operating income 41,392 46,316 85,820 97,970
Interest expense (15,965) (19,478) (32,665) (40,331)
General and administrative (4,029) (3,392) (8,310) (7,475)
Depreciation and amortization (31,813) (28,778) (64,522) (57,215)
Net loss $ (10,415) $ (5,332) $ (19,677) $ (7,051)
Company's share of net income (2)
$ 18,248 $ 17,257 $ 35,259 $ 38,554

The combined summarized financial information of co-investments is as follows ($ in thousands):


	March 31, 2022		December 31, 2021
Combined balance sheets: (1)
Rental properties and real estate under development	$	4,666,950	$	4,603,465
Other assets	342,271		278,411
Total assets	$	5,009,221	$	4,881,876
Debt	$	3,199,607	$	3,046,765
Other liabilities	167,238		200,129
Equity	1,642,376		1,634,982
Total liabilities and equity	$	5,009,221	$	4,881,876
Company's share of equity	$	1,115,696	$	1,142,257


	Three Months Ended March 31,
	2022		2021
Combined statements of income: (1)
Property revenues	$	84,600	$	71,759
Property operating expenses	(35,793)		(27,331)
Net operating income	48,807		44,428

Interest expense	(18,302)		(16,700)
General and administrative	(3,967)		(4,281)
Depreciation and amortization	(38,807)		(32,709)
Net loss	$	(12,269)	$	(9,262)
Company's share of net income (2)	$	21,171	$	17,011

(1) Includes preferred equity investments held by the Company.

(2) Includes the Company's share of equity income from joint ventures and preferred equity investments, gain on sales of co-investments, co-investment promote income and income from early redemption of preferred equity investments. Includes related party income of ~~$2.3~~$1.8 million and ~~$2.1~~$2.3 million for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, respectively, and $4.6 million and $4.2 million for the six months ended June 30, 2021 and 2020,~~ respectively.

~~(5) Notes and Other Receivables~~

~~Notes and other receivables consist of the following as of June 30, 2021 and December 31, 2020 ($ in thousands):~~

June 30, 2021 December 31, 2020
Note receivable, secured, bearing interest at 9.90%, due November 2021 (Originated November 2018) 14,950 14,216
Notes receivable, secured, bearing interest at 10.50%, due February 2023 (Originated March 2020) 16,143 15,299
Note receivable, secured, bearing interest at 11.00%, due October 2023 (Originated April 2020) (1)
0 25,461
Notes receivable, secured, bearing interest at 9.00%, due December 2023 (Originated November 2020) 83,562 79,827
Notes receivable, secured, bearing interest at 11.50%, due November 2024 (Originated November 2020) 27,996 15,423
Related party note receivable, secured, bearing interest at 2.55%, due July 2021
(Originated March 2021) (2)
52,838 0
Notes and other receivables from affiliates (3)
5,086 4,744
Straight line rent receivables (4)
19,414 25,214
Other receivables 19,606 15,671
Allowance for credit losses (740) (751)
Total notes and other receivables $ 238,855 $ 195,104

~~(1)~~ ~~In June 2021, the Company received cash of $36.5 million, including an early redemption fee of $4.7 million, from the payoff of this note receivable.~~

~~(2)~~ ~~See Note 6, Related Party Transactions, for additional details.~~

~~(3)~~ ~~These amounts consist of short-term loans outstanding and due from various joint ventures as of June 30, 2021 and~~

~~December 31, 2020. See Note 6, Related Party Transactions, for additional details.~~

~~(4)~~ ~~These amounts are receivables from lease concessions recorded on a straight-line basis for the Company's operating~~

~~properties.~~

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~

(Unaudited)

(5) Notes and Other Receivables

Notes and other receivables consist of the following as of March 31, 2022 and December 31, 2021 ($ in thousands):


	March 31, 2022		December 31, 2021
Notes receivable, secured, bearing interest at 10.50%, due February 2023 (Originated March 2020)	$	17,513	$	17,051
Note receivable, secured, bearing interest at 9.00%, due December 2023 (Originated November 2020)	88,746		87,365
Note receivable, secured, bearing interest at 11.50%, due November 2024 (Originated November 2020)	30,614		29,729
Related party note receivable, secured, bearing interest at 2.15%, due March 2022 (Originated September 2021) (1)	—		29,314
Related party note receivable, secured, bearing interest at 2.30%, due April 2022 (Originated October 2021) (2)	—		30,399
Related party note receivable, secured, bearing interest at 2.36%, due February 2022 (Originated November 2021) (3)	—		62,058
Related party note receivable, secured, bearing interest at 2.36%, due February 2022 (Originated November 2021) (4)	—		48,562
Related party note receivable, secured, bearing interest at 1.35%, due March 2022 (Originated February 2022) (5)	32,788		—
Notes and other receivables from affiliates (6)	7,074		6,556
Straight line rent receivables (7)	13,482		15,523
Other receivables	15,904		15,232
Allowance for credit losses	(701)		(756)
Total notes and other receivables	$	205,420	$	341,033

(1) In January 2022, the Company received cash of $29.2 million to payoff the principal of this note receivable.

(2) In January 2022, the Company received cash of $30.3 million to payoff the principal of this note receivable.

(3) In January 2022, the Company received cash of $61.9 million to payoff the principal of this note receivable.

(4) In January 2022, the Company received cash of $48.4 million to payoff the principal of this note receivable.

(5) See Note 6, Related Party Transactions, for additional details.

(6) These amounts consist of short-term loans outstanding and due from various joint ventures as of March 31, 2022 and December 31, 2021, respectively. See Note 6, Related Party Transactions, for additional details.

(7) These amounts are receivables from lease concessions recorded on a straight-line basis for the Company's operating properties.

The following table presents the activity in the allowance for credit losses for notes and other receivables by loan type ($ in thousands):

Mezzanine Loans Bridge Loans Total
Balance at December 31, 2020 $ 751 $ 0 $ 751
Provision for credit losses (37) 26 (11)
Balance at June 30, 2021 $ 714 $ 26 $ 740


	Mezzanine Loans		Bridge Loans		Total
Balance at December 31, 2021	$	671	$	85	$	756

Provision for credit losses	14		(69)		(55)
Balance at March 31, 2022	$	685	$	16	$	701

No loans were placed on nonaccrual status or charged off during the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 or ~~2020.~~2021.

(6) Related Party Transactions

The Company charges certain fees relating to its co-investments for asset management, property management, development and redevelopment services. These fees from affiliates totaled ~~$2.6~~$3.1 million and $2.2 million during ~~both~~ the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, and $4.8 million and $5.7 million during the six months ended June 30, 2021 and 2020,~~ respectively. All of these fees are net of intercompany amounts eliminated by the Company. The Company

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2022 and 2021

(Unaudited)

netted development and redevelopment fees of approximately ~~$0.3~~$0.4 million and zero against general and administrative expenses for ~~both~~ the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, and $0.3 million and $0.8 million for the six months ended June 30, 2021 and 2020,~~ respectively.

The Company’s Chairman and founder, Mr. George M. 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~~Chairman of Marcus & Millichap, Inc. ("MMI"), and Mr. Marcus owns a controlling interest in MMI, a national brokerage firm listed on the New York Stock Exchange. For the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, the Company did 0tnot pay ~~any~~ brokerage commissions related to real estate transactions to MMC and its affiliates. ~~For the three and six months ended June 30, 2020,~~

In February 2022, the Company ~~paid brokerage commissions totaling 0 and $0.2~~provided a $32.8 million ~~respectively,~~related party bridge loan to ~~MMC and its affiliates~~BEX II in connection with the payoff of a debt related to ~~real estate transactions.~~one of its properties located in Southern California. The note receivable accrues interest at 1.35% and was scheduled to mature in March 2022, but was subsequently paid off in April 2022. The bridge loan is classified within notes and other receivables in the accompanying condensed consolidated balance sheets.

In January 2022, the Company provided a $100.7 million related party bridge loan to Wesco VI in connection with the purchase of Vela. The note receivable accrued interest at 2.64% and was scheduled to mature in February 2022, but was paid off in January 2022.

In November 2021, the Company provided a $48.4 million related party bridge loan in connection with the purchase of an interest in a single asset entity owning an apartment home community in Vista, CA. The note receivable accrued interest at 2.36% and was scheduled to mature in February 2022, but was paid off in January 2022. The bridge loan is classified within notes and other receivables in the accompanying condensed consolidated balance sheets.

In November 2021, the Company provided a $61.9 million related party bridge loan to Wesco VI in connection with the acquisition of The Rexford. The note receivable accrued interest at 2.36% and was scheduled to mature in February 2022, but was paid off in January 2022. The bridge loan is classified within notes and other receivables in the accompanying condensed consolidated balance sheets.

In October 2021, the Company provided a $30.3 million related party bridge to Wesco VI in connection with the acquisition of Monterra in Mill Creek. The note receivable accrued interest at 2.30% and was scheduled to mature in April 2022, but was paid off in January 2022. The bridge loan is classified within notes and other receivables in the accompanying condensed consolidated balance sheets.

In September 2021, the Company provided a $29.2 million related party bridge loan to Wesco VI in connection with the acquisition of Martha Lake Apartments. The note receivable accrued interest at 2.15% and was scheduled to mature in December 2021. In December 2021, the maturity date of the note receivable was extended to March 2022, but was paid off in January 2022. The bridge loan is classified within notes and other receivables in the accompanying condensed consolidated balance sheets.

In March 2021, the Company provided a $52.5 million related party bridge loan to Wesco I in connection with the payoff of a debt related to one of its properties located in Southern California. The note receivable accrued interest at 2.55% and is scheduled to mature in July 2021. The bridge loan is classified within notes and other receivables in the accompanying condensed consolidated balance sheets and had an outstanding balance of $52.8 million as of June 30, 2021. The bridge loan was paid off in July 2021.

In November 2019, the Company provided an $85.5 million related party bridge loan to Wesco V in connection with the acquisition of Velo and Ray. The note receivable accrued interest at LIBOR plus 1.30% and was scheduled to mature in February 2020, but was paid off in January 2020. The bridge loan was classified within notes and other receivables in the accompanying condensed consolidated balance sheets.

In June 2019, the Company acquired Brio, a ~~300 unit~~300-unit apartment home community located in Walnut Creek, CA. The Company issued DownREIT units to an affiliate of MMC, based on a contract price of $164.9 million. The property was encumbered by $98.7 million of mortgage debt which was assumed by the Company at the time of acquisition. As a result of this transaction, the Company consolidated the property, based on a VIE analysis performed by the Company.

In February 2019, the Company funded a $24.5 million preferred equity investment in an entity whose sponsor is an affiliate of MMC, which owns a multifamily development community located in Mountain View, CA. The investment has an initial preferred return of 11.0% and is scheduled to mature in February 2024.

In October 2018, the Company funded a $18.6 million preferred equity investment in an entity whose sponsor is an affiliate of MMC. The entity wholly owns a ~~268~~268-unit apartment home community development located in Burlingame, CA. ~~This~~ The

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2022 and 2021

(Unaudited)

investment ~~accrues~~initially accrued interest based on ~~an initial~~a 12.0% preferred ~~return.~~return which was reduced to 9.0% upon completion and lease-up of the project. The investment is scheduled to mature in April 2024.

In May 2018, the Company made a commitment to fund a $26.5 million preferred equity investment in an entity whose sponsors include an affiliate of MMC. The entity wholly owns a ~~400~~400-unit apartment home community located in Ventura, CA. ~~This~~

~~ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES~~

~~ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~June 30, 2021 and 2020~~

~~(Unaudited)~~

The investment ~~accrues~~accrued interest based on a 10.25% preferred return. The investment iswas scheduled to mature in May 2023. ~~As of June 30,~~In November 2021, the Company ~~had funded $23.4~~received cash of $18.3 million, for the partial redemption of this preferred equity investment, and the maturity of the ~~commitment.~~remaining commitment was extended to December 2028. As of March 31, 2022, the Company had a remaining commitment of $13.0 million and accrues interest on a 9.0% preferred return. The remaining committed amount ~~will~~is expected to be funded if and when requested by the sponsors.

In March 2017, the Company converted its existing $15.3 million preferred equity investment in Sage at Cupertino, a ~~230~~230-unit apartment home community located in San Jose, CA, into a 40.5% common equity ownership interest in the property. The Company issued DownREIT units to the other members, including an MMC affiliate, based on an estimated property valuation of $90.0 million. At the time of the conversion, the property was encumbered by $52.0 million of mortgage debt. As a result of this transaction, the Company consolidates the property, based on a consolidation analysis performed by the Company.

As described in Note 5, Notes and Other Receivables, the Company has provided short-term loans to affiliates. As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020, $57.9~~2021, $7.1 million and ~~$4.7~~$6.6 million, respectively, of short-term loans remained outstanding due from joint venture affiliates and is classified within notes and other receivables in the accompanying condensed consolidated balance sheets.

(7) Debt

Essex does not have indebtedness as debt is incurred by the Operating Partnership. Essex guarantees the Operating Partnership’s unsecured debt including the revolving credit facilities for the full term of the facilities.

Debt consists of the following ($ in thousands):


		June 30, 2021			December 31, 2020			Weighted Average Maturity In Years as of June 30, 2021		March 31, 2022			December 31, 2021			Weighted Average Maturity In Years as of March 31, 2022
Unsecured bonds private placement - fixed rate		$	0		$	199,950		0.0
Term loan - variable rate		99,941			549,380			0.6
Bonds public offering - fixed rate		5,303,933			4,858,655			9.2

Unsecured debt, net (1)	Unsecured debt, net (1)	5,403,874			5,607,985				Unsecured debt, net (1)	5,308,841			5,307,196			8.4
Lines of credit (2)	Lines of credit (2)	85,000			0				Lines of credit (2)	98,000			341,257
Mortgage notes payable, net (3)	Mortgage notes payable, net (3)	641,274			643,550			9.0	Mortgage notes payable, net (3)	637,778			638,957			8.2
Total debt, net	Total debt, net	$	6,130,148		$	6,251,535			Total debt, net	$	6,044,619		$	6,287,410
Weighted average interest rate on fixed rate unsecured bonds private placement and bonds public offering	Weighted average interest rate on fixed rate unsecured bonds private placement and bonds public offering	3.3		%	3.4		%		Weighted average interest rate on fixed rate unsecured bonds private placement and bonds public offering	3.3		%	3.3		%
Weighted average interest rate on variable rate term loan		1.1		%	1.7		%
Weighted average interest rate on lines of credit	Weighted average interest rate on lines of credit	1.0		%	1.0		%		Weighted average interest rate on lines of credit	1.1		%	1.0		%
Weighted average interest rate on mortgage notes payable	Weighted average interest rate on mortgage notes payable	2.6		%	2.7		%		Weighted average interest rate on mortgage notes payable	2.7		%	2.7		%

(1) ~~Includes~~Unsecured debt, net, consists of fixed rate public bond offerings which includes unamortized discount, net of ~~$10.9~~premiums, of $9.4 million and ~~$10.1~~$9.9 million and unamortized debt issuance costs of ~~$35.2~~$31.8 million and ~~$31.9~~$32.9 million, as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

(2) Lines of credit, related to the Company's 2 lines of unsecured credit aggregating $1.24 billion as of ~~June 30, 2021,~~March 31, 2022, excludes unamortized debt issuance costs of ~~$3.0~~$4.1 million and ~~$3.7~~$4.4 million as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. These debt issuance costs are included in prepaid expenses and other assets on the condensed consolidated balance sheets. As of ~~June 30, 2021,~~March 31, 2022, the Company’s $1.2 billion credit facility had an interest rate of LIBOR plus ~~0.825%~~0.775%, which is based on a tiered rate structure tied to the Company’s credit ratings and a scheduled maturity date of ~~December 2023~~September 2025 with ~~1 18-month extension,~~3 six-month extensions, exercisable at the Company’s option. Subsequent to quarter end, the borrowing spread on this facility will be reduced by 2.5 basis points to LIBOR plus 0.75% as a result of achieving the Enhanced Sustainability Metric Target for 2021 as defined by the facility's sustainability-linked pricing component. As of ~~June 30, 2021,~~March 31, 2022, the Company’s $35.0 million working capital unsecured line of credit had an interest rate of LIBOR plus 0.825%, which is based on a tiered rate structure tied to the Company’s credit ratings, and a scheduled maturity date of February 2023.

~~(3)~~ Includes total unamortized premium of $3.2 million and $3.9 million, reduced by unamortized debt issuance costs of $1.6 million and $1.8 million, as of June 30, 2021 and December 31, 2020, respectively.

2925

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~

(Unaudited)

working capital unsecured line of credit had an interest rate of LIBOR plus 0.775%, which is based on a tiered rate structure tied to the Company’s credit ratings, and a scheduled maturity date of February 2023.

(3) Includes total unamortized premium, net of discounts of $2.2 million and $2.5 million, reduced by unamortized debt issuance costs of $1.4 million and $1.5 million, as of March 31, 2022 and December 31, 2021, respectively.

The aggregate scheduled principal payments of the Company’s outstanding debt, excluding lines of credit, as of ~~June 30, 2021~~March 31, 2022 are as follows ($ in thousands):


Remaining in 2021		$	1,774
2022		143,188
Remaining in 2022				Remaining in 2022	$	42,284
2023	2023	302,945		2023	302,945
2024	2024	403,109		2024	403,109
2025	2025	633,054		2025	633,054
2026				2026	549,405
Thereafter	Thereafter	4,605,629		Thereafter	4,056,224
Total	Total	$	6,089,699	Total	$	5,987,021

(8) Segment Information

The Company's segment disclosures present the measure used by the chief operating decision makers for purposes of assessing each segment's performance. The Company's chief operating decision makers are comprised of several members of its executive management team who use net operating income ("NOI") to assess the performance of the business for the Company's reportable operating segments. NOI represents total property revenues less direct property operating expenses.

The executive management team generally evaluates the Company's operating performance geographically. The Company defines its reportable operating segments as the 3 geographical regions in which its communities are located: Southern California, Northern California, and Seattle Metro.

Excluded from segment revenues and NOI are management and other fees from affiliates and interest and other income. Non-segment revenues and NOI included in the following schedule also consist of revenues generated from commercial properties and properties that have been sold. Other non-segment assets include items such as real estate under development, co-investments, real estate held for sale, cash and cash equivalents, marketable securities, notes and other receivables, and prepaid expenses and other assets.

The revenues and NOI for each of the reportable operating segments are summarized as follows for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ ($ in thousands):

3026

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~

(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Revenues:	Revenues:									Revenues:
Southern California	Southern California	$	143,230	$	140,510	$	286,242	$	292,405	Southern California	$	156,969	$	141,969
Northern California	Northern California	143,386		152,118		290,076		310,574		Northern California	152,590		146,690
Seattle Metro	Seattle Metro	59,267		60,649		117,900		123,693		Seattle Metro	64,203		58,633
Other real estate assets	Other real estate assets	2,874		14,872		7,415		31,227		Other real estate assets	5,454		5,584
Total property revenues	Total property revenues	$	348,757	$	368,149	$	701,633	$	757,899	Total property revenues	$	379,216	$	352,876
Net operating income:	Net operating income:									Net operating income:
Southern California	Southern California	$	99,263	$	96,829	$	198,514	$	205,118	Southern California	$	110,213	$	98,577
Northern California	Northern California	98,916		109,592		200,541		226,779		Northern California	104,985		101,649
Seattle Metro	Seattle Metro	40,386		40,780		79,165		85,206		Seattle Metro	43,296		38,792
Other real estate assets	Other real estate assets	2,699		10,812		5,441		23,517		Other real estate assets	4,622		3,445
Total net operating income	Total net operating income	241,264		258,013		483,661		540,620		Total net operating income	263,116		242,463
Management and other fees from affiliates	Management and other fees from affiliates	2,221		2,348		4,470		4,965		Management and other fees from affiliates	2,689		2,249
Corporate-level property management expenses	Corporate-level property management expenses	(9,105)		(8,646)		(18,052)		(17,405)		Corporate-level property management expenses	(10,172)		(9,013)
Depreciation and amortization	Depreciation and amortization	(128,736)		(133,609)		(257,323)		(265,168)		Depreciation and amortization	(133,533)		(128,587)
General and administrative	General and administrative	(12,222)		(14,952)		(22,034)		(28,934)		General and administrative	(12,242)		(9,812)

Expensed acquisition and investment related costs	Expensed acquisition and investment related costs	(41)		(15)		(56)		(102)		Expensed acquisition and investment related costs	(8)		(15)
Gain on sale of real estate and land	Gain on sale of real estate and land	0		16,597		100,096		16,597		Gain on sale of real estate and land	—		100,096
Interest expense	Interest expense	(50,971)		(54,447)		(102,620)		(109,594)		Interest expense	(50,377)		(51,649)
Total return swap income	Total return swap income	2,633		2,788		5,477		4,772		Total return swap income	2,544		2,844
Interest and other income		22,371		11,405		36,758		6,184
Interest and other (loss) income										Interest and other (loss) income	(7,567)		14,387
Equity income from co-investments	Equity income from co-investments	18,248		17,257		35,259		38,554		Equity income from co-investments	21,171		17,011
Deferred tax expense on unrealized gain on unconsolidated co-investment		(1,842)		(1,636)		(2,350)		(1,636)
Deferred tax benefit (expense) on unconsolidated co-investments										Deferred tax benefit (expense) on unconsolidated co-investments	2,754		(508)
Loss on early retirement of debt, net	Loss on early retirement of debt, net	(16,465)		(5,027)		(18,982)		(4,706)		Loss on early retirement of debt, net	—		(2,517)
Gain on remeasurement of co-investment		2,260		0		2,260		234,694

Net income	Net income	$	69,615	$	90,076	$	246,564	$	418,841	Net income	$	78,375	$	176,949

3127

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~

(Unaudited)

Total assets for each of the reportable operating segments are summarized as follows as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 ($ in thousands):


		June 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Assets:	Assets:					Assets:
Southern California	Southern California	$	3,985,599	$	3,993,275	Southern California	$	3,981,059	$	4,018,839
Northern California	Northern California	5,527,443		5,408,019		Northern California	5,425,077		5,460,701
Seattle Metro	Seattle Metro	1,377,702		1,403,678		Seattle Metro	1,397,195		1,407,033
Other real estate assets	Other real estate assets	14,007		122,814		Other real estate assets	101,189		96,500
Net reportable operating segment - real estate assets	Net reportable operating segment - real estate assets	10,904,751		10,927,786		Net reportable operating segment - real estate assets	10,904,520		10,983,073
Real estate under development	Real estate under development	208,330		386,047		Real estate under development	112,815		111,562
Co-investments	Co-investments	1,037,270		1,018,010		Co-investments	1,144,542		1,177,802
Real estate held for sale		0		57,938

Cash and cash equivalents, including restricted cash	Cash and cash equivalents, including restricted cash	58,176		84,041		Cash and cash equivalents, including restricted cash	108,553		58,638
Marketable securities	Marketable securities	175,782		147,768		Marketable securities	169,702		191,829
Notes and other receivables	Notes and other receivables	238,855		195,104		Notes and other receivables	205,420		341,033
Operating lease right-of-use assets	Operating lease right-of-use assets	70,551		72,143		Operating lease right-of-use assets	68,158		68,972
Prepaid expenses and other assets	Prepaid expenses and other assets	53,484		47,340		Prepaid expenses and other assets	56,591		64,964
Total assets	Total assets	$	12,747,199	$	12,936,177	Total assets	$	12,770,301	$	12,997,873

(9) Net Income Per Common Share and Net Income Per Common Unit

($ in thousands, except share and unit data):

Essex Property Trust, Inc.


		Three Months Ended June 30, 2021					Three Months Ended June 30, 2020						Three Months Ended March 31, 2022					Three Months Ended March 31, 2021
		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		Income		Weighted- average Common Shares	Per Common Share Amount
Basic:	Basic:											Basic:
Net income available to common stockholders	Net income available to common stockholders	$	64,846	65,001,677	$	1.00	$	84,458	65,412,407	$	1.29	Net income available to common stockholders	$	73,254	65,275,775	$	1.12	$	168,444	64,989,620	$	2.59
Effect of Dilutive Securities:	Effect of Dilutive Securities:											Effect of Dilutive Securities:
Stock options	Stock options	—		79,069			—		15,528			Stock options	—		63,603			—		31,066

DownREIT units												DownREIT units	—		—			197		94,247
Diluted:	Diluted:											Diluted:
Net income available to common stockholders	Net income available to common stockholders	$	64,846	65,080,746	$	1.00	$	84,458	65,427,935	$	1.29	Net income available to common stockholders	$	73,254	65,339,378	$	1.12	$	168,641	65,114,933	$	2.59

~~ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES~~

~~ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~June 30, 2021 and 2020~~

~~(Unaudited)~~

Six Months Ended June 30, 2021 Six Months Ended June 30, 2020
Income Weighted-
average
Common
Shares Per
Common
Share
Amount Income Weighted-
average
Common
Shares Per
Common
Share
Amount
Basic:
Net income available to common stockholders $ 233,290 64,995,682 $ 3.59 $ 399,464 65,728,119 $ 6.08
Effect of Dilutive Securities:
Stock options — 52,334 — 32,981
DownREIT units 0 0 392 94,247
Diluted:
Net income available to common stockholders $ 233,290 65,048,016 $ 3.59 $ 399,856 65,855,347 $ 6.07

The table above excludes from the calculations of diluted earnings per share weighted average convertible OP Units of ~~2,293,760~~2,282,464 and ~~2,295,750,~~2,293,804, which include vested 2014 Long-Term Incentive Plan Units, and 2015 Long-Term Incentive Plan Units for the three months ended ~~June 30, 2021~~March 31, 2022 and ~~2020, respectively, and 2,293,782 and 2,297,966 for the six months ended June 30, 2021 and 2020, respectively, because they were anti-dilutive.~~2021. The related income allocated to these convertible OP Units aggregated ~~$2.3~~$2.6 million and ~~$3.0~~$5.9 million for the three months ended ~~June 30, 2021~~March 31, 2022 and 2020, respectively, and $8.2 million and $14.0 million for the six months ended June 30, 2021 and 2020, respectively. Additionally, the table excludes all DownREIT units for which the Operating Partnership has the ability and intention to redeem the units for cash and does not consider them to be common stock equivalents.2021.

Stock options of ~~136,172~~79,687 and ~~431,253~~349,252 for the three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020, respectively, and 0 and 290,570 for the six months ended June 30, 2021 and 2020, respectively,~~ were excluded from the calculation of diluted earnings per share because the assumed proceeds per share of such options plus the average unearned compensation were greater than the average market price of the common stock for the periods ended and, therefore, were anti-dilutive.

~~Essex Portfolio, L.P.~~

Three Months Ended June 30, 2021 Three Months Ended June 30, 2020
Income Weighted-
average
Common Units Per
Common
Unit
Amount Income Weighted-
average
Common Units Per
Common
Unit
Amount
Basic:
Net income available to common unitholders $ 67,134 67,295,437 $ 1.00 $ 87,422 67,708,157 $ 1.29
Effect of Dilutive Securities:
Stock options — 79,069 — 15,528
Diluted:
Net income available to common unitholders $ 67,134 67,374,506 $ 1.00 $ 87,422 67,723,685 $ 1.29

3328

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~

(Unaudited)

Essex Portfolio, L.P.


		Six Months Ended June 30, 2021					Six Months Ended June 30, 2020						Three Months Ended March 31, 2022					Three Months Ended March 31, 2021
		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		Income		Weighted- average Common Units	Per Common Unit Amount
Basic:	Basic:											Basic:
Net income available to common unitholders	Net income available to common unitholders	$	241,525	67,289,464	$	3.59	$	413,414	68,026,084	$	6.08	Net income available to common unitholders	$	75,817	67,558,239	$	1.12	$	174,391	67,283,424	$	2.59
Effect of Dilutive Securities:	Effect of Dilutive Securities:											Effect of Dilutive Securities:
Stock options	Stock options	—		52,334			—		32,981			Stock options	—		63,603			—		31,066
DownREIT units	DownREIT units	0		0			392		94,247			DownREIT units	—		—			197		94,247
Diluted:	Diluted:											Diluted:
Net income available to common unitholders	Net income available to common unitholders	$	241,525	67,341,798	$	3.59	$	413,806	68,153,312	$	6.07	Net income available to common unitholders	$	75,817	67,621,842	$	1.12	$	174,588	67,408,737	$	2.59

Stock options of ~~136,172~~79,687 and ~~431,253~~349,252 for the three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020, respectively, 0 and 290,570 for the six months ended June 30, 2021 and 2020, respectively,~~ were excluded from the calculation of diluted earnings per unit because the assumed proceeds per unit of these options plus the average unearned compensation were greater than the average market price of the common unit for the periods ended and, therefore, were anti-dilutive. Additionally, the table excludes all DownREIT units for which the Operating Partnership has the ability and intention to redeem the units for cash and does not consider them to be common stock equivalents.

(10) Derivative Instruments and Hedging Activities

As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the ~~aggregate carrying value of the~~Company had no interest rate swap contracts were a liability of 0 and $2.4 million, respectively. As of June 30, 2021 and December 31, 2020, the swap contracts were presented in the condensed consolidated balance sheets as an asset of 0 for both periods and a liability of 0 and $2.4 million, respectively, and were included in other liabilities on the condensed consolidated balance sheets.contracts.

The Company has 4 total return swap contracts, with an aggregate notional amount of ~~$224.7~~$224.2 million, that effectively convert ~~$224.7~~$224.2 million of mortgage notes payable to a floating interest rate based on the Securities Industry and Financial Markets Association Municipal Swap Index ("SIFMA") plus a spread. The total return swaps provide fair market value protection on the mortgage notes payable to the 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 all four of its total return swaps, with ~~$224.7~~$224.2 million of the outstanding debt at par. These derivatives do not qualify for hedge accounting and had a carrying and fair value of 0zero at both ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021. These total return swaps are scheduled to mature between November 2022 and December 2024. The realized gains of ~~$2.7~~$2.5 million and $2.8 million for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, respectively, and $5.5 million and $4.8 million for the six months ended June 30, 2021 and 2020,~~ respectively were reported in the condensed consolidated statements of income and comprehensive income as total return swap income.

(11) Commitments and Contingencies

The Company is subject to various lawsuits in the normal course of its business operations. Such lawsuits have not had a material adverse effect on the Company's financial condition, results of operations or cash flows. While no assurances can be given, the Company does not believe there is any pending or threatened litigation against the Company that, individually or in the aggregate, would reasonably be expected to have a material adverse effect on the Company.

The Company is subject to various federal, state, and local environmental and other laws. Compliance by the Company with existing laws has not had a material adverse effect on the Company. However, the Company cannot predict the impact of new, changed or ~~changed~~expired laws or regulations on its current portfolio or on other assets that the Company may acquire in the future, including,

~~ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES~~

~~ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES~~

~~Notes to Condensed Consolidated Financial Statements~~

~~June 30, 2021 and 2020~~

~~(Unaudited)~~

without limitation, certain eviction moratoriums and other mandates that have been, or may be, enacted or extended in connection with the COVID-19 pandemic. To the extent that an environmental or other matter arises or is identified in the future that has other than a remote risk of having a material impact on the condensed consolidated financial statements, the Company will disclose the estimated range of possible outcomes associated with it, and, if an outcome is probable, accrue an appropriate liability for that matter. The Company will consider whether any such matter results in an impairment of value on the affected property and, if so, impairment will be recognized.

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Table of Contents

Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the Company’s Condensed Consolidated Financial Statements and accompanying Notes thereto included elsewhere herein and with the Company’s ~~2020~~2021 annual report on Form 10-K for the year ended December 31, ~~2020.~~2021. Capitalized terms not defined in this section have the meaning ascribed to them elsewhere in this Quarterly Report on Form 10-Q. The Company makes statements in this section that are forward-looking statements within the meaning of the federal securities laws. For a complete discussion of forward-looking statements, see the section in this Form 10-Q entitled "Forward-Looking Statements."

Essex is a self-administered and self-managed REIT that acquires, develops, redevelops, and manages apartment communities in selected residential areas located on the West Coast of the United States. Essex owns all of its interests in its real estate investments, directly or indirectly through the Operating Partnership. Essex is the sole general partner of the Operating Partnership and, as of ~~June 30, 2021,~~March 31, 2022, had an approximately 96.6% general partnership interest in the Operating Partnership.

The 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. The Company’s strong financial condition supports its investment strategy by enhancing its ability to quickly shift acquisition, development, redevelopment, and disposition activities to markets that will optimize the performance of the Company's portfolio.

As of ~~June 30, 2021,~~March 31, 2022, the Company owned or had ownership interests in ~~246~~253 operating apartment communities, comprising ~~60,920~~62,290 apartment homes, excluding the Company’s ownership interest in preferred equity co-investments, loan investments, ~~one~~three operating commercial ~~building,~~buildings, and a development pipeline comprised of ~~two~~one consolidated ~~projects~~project and one unconsolidated joint venture project.

The Company’s apartment communities are located in the following major regions:

Southern California (primarily Los Angeles, Orange, San Diego, and Ventura counties)

Northern California (the San Francisco Bay Area)

Seattle Metro (Seattle metropolitan area)

As of ~~June 30, 2021,~~March 31, 2022, the Company’s development pipeline was comprised of ~~two~~one consolidated ~~projects~~project under development, one unconsolidated joint venture project under development, and various predevelopment projects aggregating ~~571~~371 apartment homes, with total incurred costs of ~~$0.2 billion,~~$162.0 million, and estimated remaining project costs of approximately ~~$96.0~~$55.0 million, ~~$58.0~~$29.0 million of which represents the Company's share of estimated remaining costs, for total estimated project costs of ~~$0.3 billion.~~$217.0 million.

The Company’s consolidated apartment communities are as follows:


		As of June 30, 2021			As of June 30, 2020				As of March 31, 2022			As of March 31, 2021
		Apartment Homes	%		Apartment Homes	%			Apartment Homes	%		Apartment Homes	%
Southern California	Southern California	22,466	43	%	22,675	43	%	Southern California	22,190	43	%	22,121	43	%
Northern California	Northern California	19,123	37	%	19,319	37	%	Northern California	19,230	37	%	19,123	37	%
Seattle Metro	Seattle Metro	10,218	20	%	10,343	20	%	Seattle Metro	10,341	20	%	10,218	20	%
Total	Total	51,807	100	%	52,337	100	%	Total	51,761	100	%	51,462	100	%

Co-investments, including Wesco I, Wesco III, Wesco IV, Wesco V, Wesco VI, BEXAEW, BEX II, BEX IV, and 500 Folsom communities, developments under construction, and preferred equity interest co-investment communities are not included in the table presented above for both periods. The community previously held in the BEX III co-investment, which was consolidated in the second quarter of 2021, is excluded from the ~~June 30, 2020~~March 31, 2021 table, but included in the ~~June 30, 2021~~March 31, 2022 table.

~~Current Material Development – the~~The COVID-19 Pandemic

The ~~United States~~COVID-19 pandemic and ~~other countries around the world are continuing to experience an unprecedented health pandemic related to COVID-19 and~~its related variants ~~which has created~~continues to create considerable instability, disruption, and uncertainty. ~~Governmental authorities in impacted regions are taking dramatic and unpredictable actions in~~In an effort to slow ~~COVID-19’s spread. Federal,~~down the spread of the viruses and mitigate its impact on affected populations, federal, state and local jurisdictions have ~~issued and revised~~implemented varying forms of ~~restrictions on public gatherings and requiring businesses~~requirements which may continue to ~~make changes to their operations in a manner that may~~ negatively affect ~~profitability, result in job losses~~profitability. While the California eviction moratorium sunsetted during the third quarter of 2021, other state and ~~related financial impacts that may affect future operations to an unknown extent. Moreover,~~local eviction moratoriums and laws that limit rent increases during times of emergency and impair the ability to collect unpaid rent during certain timeframes

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~~increases during times of emergency and prohibit the ability~~continue to ~~collect unpaid rent during certain timeframes, have been enacted~~be in effect in various formats at various ~~levels of government, including~~ regions in which Essex's communities are located, impacting Essex and its properties. The Company ~~is working~~continues to work to comply with the stated intent of local, county, state and federal laws. ~~In that regard, the Company has implemented a wide range of practices to protect and support its employees and residents. Such measures include:~~

•~~instituting a hybrid work model for corporate associates to work at the Company's corporate offices and remotely;~~

•~~transitioning most public interactions with leasing staff to on-line and telephonic communications;~~

•increasing cleaning practices for common areas and community amenities and opening common areas and community amenities with limited hours, limited capacity or by reservation only, depending in part on jurisdictional requirements; and

•~~delaying the response to maintenance orders in certain circumstances in order to promote the protection of our employees and residents.~~

Due to the COVID-19 pandemic, some of the Company's residents, their health, their employment, and, thus, their ability to pay rent, have been and may continue to be impacted. To support residents, the Company has implemented the following steps, including, but not limited to:

•~~assembling a Resident Response Team to effectively and efficiently respond to resident needs and concerns with respect to the pandemic;~~

•~~structuring payment plans for residents who are unable to pay their rent as a result of the outbreak and waiving late fees for those residents; and~~

•~~establishing the Essex Cares fund for the purpose of supporting the Company’s residents and communities that are experiencing financial hardships caused by the COVID-19 pandemic.~~

The long-term impact of the COVID-19 pandemic on the U.S. and world economies generally, and on the Company's results in particular ~~has been, and may continue to be significant. The long-term impact~~ will largely depend on uncertain future developments, ~~which are highly uncertain and cannot be predicted,~~ including ~~but not limited to, whether employees and employers will continue to promote remote work if and when the pandemic concludes. This includes~~ new information which may emerge concerning the severity of COVID-19 and related variants, ~~the success of actions taken to contain or treat COVID-19 including but not limited to vaccination rates,~~ future laws that may be enacted, the impact on job growth and the broader economy, and reactions by consumers, companies, governmental entities and capital markets.

Primarily as a result of the impact of the COVID-19 pandemic, the Company's cash delinquencies as a percentage of scheduled rental income for the Company’s stabilized apartment communities or "Same-Property" (stabilized properties consolidated by the Company for the quarters ended ~~June 30, 2021~~March 31, 2022 and ~~2020)~~2021) remained higher than the pre-pandemic period ~~but improved from 4.3%~~typical range of 0.3% to 0.4% and remained elevated at 2.1% for the three months ended ~~June 30, 2020 to 2.6%~~March 31, 2021 and 2.2% for the three months ended ~~June 30, 2021.~~March 31, 2022. The Company has executed some payment plans and will continue to work with residents to collect such cash delinquencies. As of ~~June 30, 2021,~~March 31, 2022, the increase in delinquencies has not had a material adverse impact on the Company's liquidity position. The Company's average financial occupancy for the Company’s Same-Property portfolio ~~increased~~slightly decreased from ~~94.9%~~96.7% for the three months ended ~~June 30, 2020~~March 31, 2021 to ~~96.6%~~96.3% for the three months ended ~~June 30, 2021.~~March 31, 2022.

The COVID-19 pandemic has not negatively impacted the Company's ability to access traditional funding sources on the same or reasonably similar terms as were available in recent periods prior to the pandemic, as demonstrated by the Company's financing activity during the three months ended ~~June 30, 2021~~March 31, 2022 discussed in the "Liquidity and Capital Resources" section below. The Company is not at material risk of not meeting the covenants in its credit agreements and is able to timely service its debt and other obligations.

Comparison of the Three Months Ended ~~June 30, 2021~~March 31, 2022 to the Three Months Ended ~~June 30, 2020~~March 31, 2021

The Company’s average financial occupancy for the Company’s Same-Property portfolio was ~~96.6%~~96.3% and ~~94.9%~~96.7% for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. Financial occupancy is defined as the percentage resulting from dividing actual rental income by total scheduled rental income. Actual rental income represents contractual rental income pursuant to leases without considering delinquency and concessions. Total scheduled rental income represents the value of all apartment homes, with occupied apartment homes valued at contractual rental rates pursuant to leases and vacant apartment homes valued at estimated market rents. The Company believes that financial occupancy is a meaningful measure of occupancy because it considers the value of each vacant apartment home 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 a variety of factors, including overall supply and demand for housing, concentration of new apartment deliveries

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within the same submarket which can cause periodic disruption due to greater rental concessions to increase leasing velocity, and rental affordability. Financial occupancy may not completely reflect short-term trends in physical occupancy and financial occupancy rates, and the Company's calculation of financial occupancy may not be comparable to financial occupancy 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 income, is not considered the best metric to quantify occupancy.

The regional breakdown of the Company’s Same-Property portfolio for financial occupancy for the three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ is as follows:

Three Months Ended June 30,
2021 2020
Southern California 97.0 % 94.6 %
Northern California 96.2 % 95.0 %
Seattle Metro 96.7 % 95.3 %

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	Three Months Ended March 31,
	2022		2021
Southern California	96.3	%	96.7	%
Northern California	96.5	%	96.7	%
Seattle Metro	95.9	%	96.6	%

The following table provides a breakdown of revenues amounts, including revenues attributable to the Same-Properties:


		Number of Apartment	Three Months Ended June 30,				Dollar		Percentage			Number of Apartment	Three Months Ended March 31,				Dollar		Percentage
Property Revenues ($ in thousands)	Property Revenues ($ in thousands)	Homes	2021		2020		Change		Change		Property Revenues ($ in thousands)	Homes	2022		2021		Change		Change
Same-Property Revenues:	Same-Property Revenues:										Same-Property Revenues:
Southern California	Southern California	20,800	$	135,476	$	132,759	$	2,717	2.0	%	Southern California	21,256	$	150,653	$	138,418	$	12,235	8.8	%
Northern California	Northern California	16,072	120,206		131,246		(11,040)		(8.4)	%	Northern California	17,895	142,002		137,386		4,616		3.4	%
Seattle Metro	Seattle Metro	10,218	59,267		60,649		(1,382)		(2.3)	%	Seattle Metro	10,218	63,618		58,633		4,985		8.5	%
Total Same-Property Revenues	Total Same-Property Revenues	47,090	314,949		324,654		(9,705)		(3.0)	%	Total Same-Property Revenues	49,369	356,273		334,437		21,836		6.5	%
Non-Same Property Revenues	Non-Same Property Revenues		33,808		43,495		(9,687)		(22.3)	%	Non-Same Property Revenues		22,943		18,439		4,504		24.4	%
Total Property Revenues	Total Property Revenues		$	348,757	$	368,149	$	(19,392)	(5.3)	%	Total Property Revenues		$	379,216	$	352,876	$	26,340	7.5	%

Same-Property Revenues ~~decreased~~increased by ~~$9.7~~$21.8 million or ~~3.0%~~6.5% to ~~$314.9~~$356.3 million in the ~~second~~first quarter of ~~2021~~2022 from ~~$324.7~~$334.4 million in the ~~second~~first quarter of ~~2020.~~2021. The ~~decrease~~increase was primarily attributable to an ~~additional $8.5 million~~increase of ~~cash concessions compared to the prior year period and a decrease of 3.6%~~4.5% in average rental rates from ~~$2,372 per apartment home~~$2,299 in the ~~second~~first quarter of ~~2020~~2021 to ~~$2,287 per apartment home~~$2,402 in the ~~second~~first quarter of 2022 and decreased cash concessions in the first quarter of 2022 compared to the first quarter of 2021.

Non-Same Property Revenues ~~decreased~~increased by ~~$9.7~~$4.5 million or ~~22.3%~~24.4% to ~~$33.8~~$22.9 million ~~in the second quarter of 2021 from $43.5 million in the second quarter of 2020. The decrease was primarily due to sales in 2020 and the sales of Hidden Valley, Axis 2300, and Park 20~~ in the first quarter of 2022 from $18.4 million in the first quarter of 2021. The increase was primarily due to the acquisitions of The Village at Toluca Lake and Canvas in 2021 and an increase in average rental rates.

Management and other fees from affiliates ~~decreased~~increased by ~~$0.1~~$0.5 million or ~~4.3%~~22.7% to $2.7 million in the first quarter of 2022 from $2.2 million in the ~~second~~first quarter of ~~2021 from $2.3 million in the second quarter of 2020.~~2021. The ~~decrease~~increase was primarily due to ~~a decrease~~the addition of Martha Lake Apartments, Monterra in ~~revenues used~~Mill Creek, The Rexford, and Silver communities to ~~calculate management fees.~~the Company's joint venture portfolio in 2021 and Vela in 2022, partially offset by the Company's purchase of BEX III's 50.0% interest in The Village at Toluca Lake.

Property operating expenses, excluding real estate taxes ~~decreased~~increased by ~~$1.9~~$3.8 million or ~~2.9%~~5.8% to ~~$63.2~~$68.9 million for the ~~second~~first quarter of ~~2021~~2022 compared to $65.1 million for the ~~second~~first quarter of ~~2020,~~2021, primarily due to ~~a decrease~~increases of ~~$2.8~~$3.0 million in utilities expense and $1.0 million in maintenance and repairs expenses, ~~partially driven by sales in 2020 and the sales of Hidden Valley, Axis 2300, and Park 20 in the first quarter of 2021,~~ offset by ~~an increase~~a decrease of ~~$0.9~~$0.2 million in ~~utilities~~administrative expenses. Same-Property operating expenses, excluding real estate taxes, ~~decreased~~increased by ~~$0.3~~$3.6 million or ~~0.5%~~5.8% to ~~$58.2~~$65.7 million in the ~~second~~first quarter of 2022 compared to $62.1 million in the first quarter of 2021, ~~compared to $58.5 million in the second quarter of 2020,~~ primarily due to ~~decreases~~increases of ~~$2.1~~$2.7 million in utilities expense, and $0.9 million in maintenance and repairs ~~expenses and $0.2~~expenses.

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~~million in administrative expenses, offset by increases of $1.2 million in utilities expenses and $0.8 million in insurance and other expenses.~~

Real estate taxes ~~decreased $0.7~~increased by $1.9 million or ~~1.6%~~4.2% to ~~$44.3~~$47.2 million for the ~~second~~first quarter of 2022 compared to $45.3 million for the first quarter of 2021, ~~compared to $45.0 million for the second quarter of 2020,~~ primarily due to ~~the sale of Hidden Valley, Axis 2300,~~real estate taxes for development properties Station Park Green (Phase II and ~~Park 20~~III) and Wallace on Sunset, that were completed in 2021 and the ~~portfolio sale~~acquisition of ~~One South Market~~The Village at Toluca Lake during 2021, as well as an increase in assessed valuation and ~~Museum Park, Delano, and 416 on Broadway in 2020.~~tax rates. Same-Property real estate taxes increased by ~~$0.1~~$1.3 million or ~~0.4%~~3.2% to ~~$38.1~~$42.8 million in the ~~second~~first quarter of ~~2021~~2022 compared to ~~$38.0~~$41.4 million in the ~~second~~first quarter of ~~2020,~~2021, primarily due to an increase in assessed valuations and tax rates.

Corporate-level property management expenses increased by ~~$0.5~~$1.2 million or ~~5.8%~~13.3% to ~~$9.1~~$10.2 million for the ~~second~~first quarter of 2022 compared to $9.0 million for the first quarter of 2021 ~~compared~~due to ~~$8.6 million for~~costs pertaining to the ~~second quarter~~centralization of ~~2020.~~certain property level functions.

Depreciation and amortization expense ~~decreased~~increased by $4.9 million or ~~3.7%~~3.8% to ~~$128.7~~$133.5 million for the second quarter of 2021 compared to $133.6 million for the second quarter of 2020, primarily due to a decrease in amortization expense resulting from certain lease intangibles becoming fully amortized during 2020 and the sale of Hidden Valley, Axis 2300, and Park 20 in the first quarter of 2022 compared to $128.6 million for the first quarter of 2021, primarily due an increase in depreciation expense from the completion of the development properties Mylo, Station Park Green (Phase II and Phase III), and Wallace on Sunset as well as the acquisitions of The Village at Toluca Lake and Canvas during 2021.

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Interest expense decreased by ~~$3.4~~$1.2 million or ~~6.3%~~2.3% to ~~$51.0~~$50.4 million for the ~~second~~first quarter of 2022 compared to $51.6 million for the first quarter of 2021, ~~compared to $54.4 million for the second quarter of 2020,~~ primarily due to ~~a decrease in average outstanding debt primarily as a result of~~various debt that was paid off, matured, or ~~matured,~~ regular principal amortization during and after the ~~second~~first quarter of ~~2020, and lower average interest rates,~~2021, which resulted in a decrease in interest expense of ~~$12.3~~$5.8 million for the ~~second~~first quarter of ~~2020.~~2022. These decreases to interest expense were partially offset by ~~the issuance of $300 million of~~ senior unsecured notes ~~due June 15, 2031 in May~~issued during and after the first quarter of 2021, $450.0 million of senior unsecured notes due March 1, 2028 in February 2021, $650 million of senior unsecured notes due March 15, 2032 in February and June 2020, and $600 million of senior unsecured notes due January 15, 2031 and September 1, 2050 in August 2020, which resulted in an increase of ~~$6.3~~$3.5 million interest expense for the ~~second~~first quarter of ~~2021.~~2022. Additionally, there was a ~~$2.6~~$1.1 million decrease in capitalized interest in the ~~second~~first quarter of ~~2021,~~2022, due to a decrease in development activity as compared to the same period in ~~2020.~~2021.

Total return swap income of ~~$2.6~~$2.5 million in the ~~second~~first quarter of ~~2021~~2022 consists of monthly settlements related to the Company's total return swap contracts with an aggregate notional amount of ~~$224.7~~$224.2 million.

Interest and other (loss) income increased by $11.0 million or 96.5% to $22.4 million for the second quarter of 2021 compared to $11.4 million for the second quarter of 2020, primarily due to increases of $4.7 million in income from early redemption of notes receivable, $3.4 million in marketable securities and other income, $2.8 million in unrealized gains on marketable securities, and $0.3 million in provision for credit losses.

~~Equity income from co-investments~~ increased by $0.9 million or 5.2% to $18.2 million for the second quarter of 2021 compared to $17.3 million for the second quarter of 2020, primarily due to increases of $2.1 million in equity income from non-core co-investments and $0.7 million in income from preferred equity investments, offset by a decrease of $1.8 million in equity loss from co-investments.

~~Deferred tax expense on unrealized gain on unconsolidated co-investment~~ ~~of $1.8 million for the second quarter of 2021 resulted from a net unrealized gain on $6.9 million from unconsolidated co-investments.~~

~~Loss on early retirement of debt, net~~ ~~of $16.5 million for the second quarter of 2021 was primarily due to the early repayment of $300.0 million of senior unsecured notes.~~

~~Gain on remeasurement of co-investment~~ ~~of $2.3 million for the second quarter of 2021 resulted from the Company's purchase of BEX III's 50.0% interest in The Village at Toluca Lake community.~~

~~Comparison of the Six Months Ended June 30, 2021 to the Six Months Ended June 30, 2020~~

The Company's average financial occupancy for its stabilized apartment communities or "Same-Property" (stabilized properties consolidated by the Company for the six months ended June 30, 2021 and 2020) was 96.7% and 95.8% for the six months ended June 30, 2021 and 2020, respectively.

~~The regional breakdown of the Company's Same-Property portfolio for financial occupancy for the six months ended June 30, 2021 and 2020 is as follows:~~

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Six Months Ended June 30,
2021 2020
Southern California 96.9 % 95.6 %
Northern California 96.4 % 96.0 %
Seattle Metro 96.6 % 96.1 %

Number of Apartment Six Months Ended
June 30, Dollar Percentage
Property Revenues ($ in thousands) Homes 2021 2020 Change Change
Same-Property Revenues:
Southern California 20,800 $ 270,937 $ 276,533 $ (5,596) (2.0) %
Northern California 16,072 243,918 270,080 (26,162) (9.7) %
Seattle Metro 10,218 117,900 123,693 (5,793) (4.7) %
Total Same-Property Revenues 47,090 632,755 670,306 (37,551) (5.6) %
Non-Same Property Revenues 68,878 87,593 (18,715) (21.4) %
Total Property Revenues $ 701,633 $ 757,899 $ (56,266) (7.4) %

~~Same-Property Revenues~~ decreased by ~~$37.6~~$22.0 million or ~~5.6%~~152.8% to ~~$632.8~~$7.6 million in the six months ended June 30, 2021 from $670.3 million in the six months ended June 30, 2020. The decrease was primarily attributable to an additional $18.9 million of cash concessions compared to the prior year period and a decrease of 3.5% in average rental rates from $2,370 per apartment home in the six months ended June 30, 2020 to $2,288 per apartment home in the six months ended June 30, 2021.

~~Non-Same Property Revenues~~ decreased by $18.7 million or 21.4% to $68.9 million in the six months ended June 30, 2021 from $87.6 million in the six months ended June 30, 2020. The decrease was primarily due to sales in 2020 and the sales of Hidden Valley, Axis 2300, and Park 20 inloss for the first quarter of ~~2021.~~

~~Management and other fees from affiliates~~ ~~decreased by $0.5~~2022 compared to $14.4 million ~~or 10.0% to $4.5 million in~~income for the ~~six months ended June 30,~~first quarter of 2021, ~~from $5.0 million in the six months ended June 30, 2020. The decrease was~~ primarily due to a decrease in ~~asset management fees resulting from~~ the consolidation of six communities as part of the Company's purchase of Canada Pension Plan Investment Board's ("CPPIB") 45.0% co-investment interests in the first quarter of 2020, and a decrease in revenues used to calculate management fees.

~~Property operating expenses, excluding real estate taxes~~ decreased by $0.9 million or 0.7% to $128.4 million for the six months ended June 30, 2021 compared to $129.3 million for the six months ended June 30, 2020, primarily due to decreases of $2.6 million in maintenance and repairs expenses and $0.6 million in administrative expenses partially driven by sales in 2020 and the sales of Hidden Valley, Axis 2300, and Park 20 in the first quarter of 2021, offset by an increase of $2.2 million in utilities expenses. Same-Property operating expenses, excluding real estate taxes, increased by $0.7 million or 0.6% to $117.0 million in the six months ended June 30, 2021 compared to $116.3 million in the six months ended June 30, 2020, primarily due to increases of $2.4 million in utilities expenses and $1.4 million in insurance and other expenses, offset by decreases of $1.8 million in maintenance and repairs expenses and $1.2 million in administrative expenses.

~~Real estate taxes~~ increased by $1.6 million or 1.8% to $89.6 million for the six months ended June 30, 2021 compared to $88.0 million for the six months ended June 30, 2020, primarily due to an increase in assessed valuations and tax rates. Same-Property real estate taxes increased by $2.1 million or 2.7% to $77.1 million in the six months ended June 30, 2021 compared to $75.0 million in the six months ended June 30, 2020, primarily due to an increase in assessed valuations and tax rates.

~~Corporate-level property management expenses~~ ~~increased by $0.7 million or 4.0% to $18.1 million for the six months ended June 30, 2021 compared to $17.4 million for the six months ended June 30, 2020.~~

~~Depreciation and amortization expense~~ decreased by $7.9 million or 3.0% to $257.3 million for the six months ended June 30, 2021 compared to $265.2 million for the six months ended June 30, 2020, primarily due to a decrease in amortization expense resulting from certain lease intangibles becoming fully amortized during 2020 and the sale of Hidden Valley, Axis 2300, and Park 20 in the first quarter of 2021.

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~~Gain on sale of real estate and land~~ ~~of $100.1 million in the six months ended June 30, 2021 was attributable to the sale of Hidden Valley, Axis 2300, and Park 20 in the first quarter of 2021.~~

~~Interest expense~~ decreased by $7.0 million or 6.4% to $102.6 million for the six months ended June 30, 2021 compared to $109.6 million for the six months ended June 30, 2020, primarily due to a decrease in average outstanding debt primarily as a result of debt that was paid off or matured, regular principal amortization during and after the second quarter of 2020, and lower average interest rates, which resulted in a decrease in interest expense of $25.1 million for the second quarter of 2020. These decreases to interest expense were partially offset by the issuance of $300 million of senior unsecured notes due June 15, 2031 in May 2021, $450.0 million of senior unsecured notes due March 1, 2028 in February 2021, $650 million of senior unsecured notes due March 15, 2032 in February and June 2020, and $600 million of senior unsecured notes due January 15, 2031 and September 1, 2050 in August 2020, which resulted in an increase of $12.8 million interest expense for the six months ended June 30, 2021. Additionally, there was a $5.3 million decrease in capitalized interest in the six months ended June 30, 2021, due to a decrease in development activity as compared to the same period in 2020.

~~Total return swap income~~ ~~of $5.5 million in the six months ended June 30, 2021 consists of monthly settlements related to the Company's total return swap contracts with an aggregate notional amount of $224.7 million.~~

~~Interest and other income~~ increased by $30.6 million or 493.5% to $36.8 million in income for the six months ended June 30, 2021 compared to $6.2 million for the six months ended June 30, 2020, primarily due to increases of $17.8 million in unrealized gains on marketable securities, $5.3 million in marketable securities and other income, $4.7 million in income from early redemption of notes receivable, and $2.5 million gain on salefair value of marketable securities.

Equity income from co-investments ~~decreased~~increased by ~~$3.3~~$4.2 million or ~~8.5%~~24.7% to ~~$35.3~~$21.2 million for the ~~six months ended June 30, 2021~~first quarter of 2022 compared to ~~$38.6~~$17.0 million for the ~~six months ended June 30, 2020,~~first quarter of 2021, primarily due to ~~decreases of $6.5~~$17.1 million in co-investment promote ~~income and $6.1~~income. The increase was offset by decreases of $10.5 million in equity income from ~~co-investments. The decreases were partially offset by increases of $5.5~~non-core co-investments and $2.3 million in income from preferred equity investments including income from early ~~redemptions and $3.8 million in equity income from non-core co-investments.~~redemptions.

Deferred tax ~~expense on unrealized gain~~benefit (expense) on unconsolidated ~~co-investment~~co-investments of ~~$2.4~~$2.8 million for ~~the six months ended June 30, 2021 resulted from a net unrealized gain on $8.2 million from unconsolidated co-investments.~~

~~Loss on early retirement of debt, net~~ of $19.0 million for the six months ended June 30, 2021 was primarily due to the early termination of the Company's five interest rate swap contracts in conjunction with the partial repayment of the Company's unsecured term debt and the early repayment of $300.0 million of senior unsecured notes.

~~Gain on remeasurement of co-investment~~ of $2.3 million resulted from the Company's purchase of BEX III's 50.0% interest in The Village at Toluca Lake community in the second quarter of 2021. The gain on remeasurement of $234.7 million for the six months ended June 30, 2020 resulted from the Company's purchase of CPPIB's 45.0% co-investment interests during the first quarter of ~~2020.~~2022 due to a net unrealized loss of $7.7 million from non-core unconsolidated co-investments.

Liquidity and Capital Resources

The United States and other countries around the world are continuing to experience an unprecedented health pandemic related to COVID-19, which has created considerable instability and disruption in the U.S. and world economies. Governmental authorities in affected regions have taken extraordinary steps in an effort to slow down the spread of the virus and mitigate its impact on affected populations.

As of ~~June 30, 2021,~~March 31, 2022, the Company had ~~$48.2~~$98.1 million of unrestricted cash and cash equivalents and ~~$175.8~~$169.7 million in marketable securities, all of which were equity securities or available for sale debt securities. The Company believes that cash flows generated by its operations, existing cash and cash equivalents, marketable securities balances and availability under existing lines of credit are sufficient to meet all of its anticipated cash needs during the next twelve months. Additionally, the capital markets continue to be available and the Company is able to generate cash from the disposition of real estate assets to finance additional cash flow needs, including continued development and select acquisitions. In the event that conditions become further exacerbated due to the COVID-19 pandemic and related economic disruptions, the Company may further utilize other resources such as its cash reserves, lines of credit, or decreased investment in redevelopment activities to supplement operating cash flows. The Company is carefully monitoring and managing its cash position in light of ongoing conditions and levels of operations. The timing, source and amounts of cash flows provided by financing activities and used in investing

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activities are sensitive to changes in interest rates and other fluctuations in the capital markets environment, which can affect the Company's plans for acquisitions, dispositions, development and redevelopment activities.

As of ~~June 30, 2021,~~March 31, 2022, Moody’s Investor Service, and Standard and Poor's credit agencies rated the Company and the Operating Partnership, Baa1/Stable, and BBB+/Stable, respectively.

As of ~~June 30, 2021,~~March 31, 2022, the Company had two unsecured lines of credit aggregating $1.24 billion. As of ~~June 30, 2021,~~March 31, 2022, there was ~~$85.0~~$98.0 million outstanding on the Company's $1.2 billion unsecured line of credit. The underlying interest rate is based on a tiered rate structure tied to the Company's credit ratings and sustainability-linked metrics and was LIBOR plus ~~0.825%~~0.775% as of ~~June 30, 2021.~~March 31, 2022. This facility is scheduled to mature in ~~December 2023,~~September 2025, with ~~one 18-month extension,~~three 6-month extensions, exercisable at the Company's option. Subsequent to quarter end, the borrowing spread on this facility will be reduced by 2.5 basis points to LIBOR plus 0.75% as a result of achieving the Enhanced Sustainability Metric Target for 2021 as defined by the facility's sustainability-linked pricing component. As of ~~June 30, 2021,~~March 31, 2022, there was no amount outstanding on the Company's $35.0 million working capital unsecured line of credit. The underlying interest rate on the $35.0 million line is based on a tiered rate structure tied to the Company's credit ratings and sustainability-linked metrics and was LIBOR plus ~~0.825%~~0.775% as of ~~June 30, 2021.~~March 31, 2022. This facility is scheduled to mature in February 2023.

~~In June 2021, the Operating Partnership issued $300.0 million~~

Table of senior unsecured notes due on June 15, 2031 with a coupon rate of 2.550% per annum (the "2031 Notes"), which are payable on June 15 and December 15 of each year, beginning on December 15, 2021. The 2031 Notes were offered to investors at a price of 99.367% of par value. The 2031 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 unconditionally guaranteed by Essex. The Company used the net proceeds of this offering to repay upcoming debt maturities, including to fund the redemption of $300.0 million aggregate principal amount (plus the make-whole amount and accrued and unpaid interest) of its outstanding 3.375% senior unsecured notes due January 2023, and for other general corporate and working capital purposes.

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In September ~~2018,~~2021, the Company entered into ana new equity distribution agreement pursuant to which the Company may offer and sell shares of its common stock having an aggregate gross sales price of up to $900.0 million (the ~~"2018~~“2021 ATM ~~Program"~~Program”). In connection with the ~~2018~~2021 ATM Program, the Company may also enter into related forward sale agreements, ~~whereby, at the Company’s discretion, it~~and may sell shares of its common stock ~~under the 2018 ATM Program under forward sales~~pursuant to these agreements. The use of a forward sale agreement would allow the Company to lock in a share price on the sale of shares of its common stock at the time the agreement is executed, but defer ~~receiving~~receipt of the proceeds from the sale of shares until a later ~~date.~~ date should the Company elect to settle such forward sale agreement, in whole or in part, in shares of common stock.

During the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, the Company did not ~~issue~~sell any shares of its common stock through the ~~2018~~2021 ATM Program. As of ~~June 30, 2021,~~March 31, 2022, there are no outstanding forward purchase agreements, and ~~$826.6~~$900.0 million of shares ~~remain~~remains available to be sold under ~~this program.~~the 2021 ATM Program.

In December 2015, the Company’s Board of Directors authorized a stock repurchase plan to allow the Company to acquire shares in an aggregate of up to $250.0 million. In February 2019, the Board of Directors approved the replenishment of the stock repurchase plan such that, as of such date, the Company had $250.0 million of purchase authority remaining under the stock repurchase plan. In each of May and December 2020, the Board of Directors approved the replenishment of the stock repurchase plan such that, as of such date, the Company had $250.0 million of purchase authority remaining under the replenished plan. During the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, the Company ~~repurchased and retired 40,000 shares of its common stock totaling $9.2 million, including commissions, at an average price of $229.30 per share.~~did not repurchase any shares. As of ~~June 30, 2021,~~March 31, 2022, the Company had $214.5 million of purchase authority remaining under the stock repurchase plan.

Essex 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.

Development and Predevelopment Pipeline

The Company defines development projects as new communities that are being constructed, or are newly constructed and are in a phase of lease-up and have not yet reached stabilized operations. As of ~~June 30, 2021,~~March 31, 2022, the Company’s development pipeline was comprised of ~~two~~one consolidated ~~projects~~project under development, one unconsolidated joint venture project under development

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and various consolidated predevelopment projects, aggregating ~~571~~371 apartment homes, with total incurred costs of ~~$0.2 billion,~~$162.0 million, and estimated remaining project costs of approximately ~~$96.0~~$55.0 million, ~~$58.0~~$29.0 million of which represents the Company's share of estimated remaining costs, for total estimated project costs of ~~$0.3 billion.~~$217.0 million.

The Company defines predevelopment projects as proposed communities in negotiation or in the entitlement process with an expected high likelihood of becoming entitled development projects. The Company may also acquire land for future development purposes or sale.

The Company expects to fund the development and predevelopment communities 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 assets, if any.

Derivative Activity

The Company uses interest rate swaps, interest rate caps, 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 counterparty’s nonperformance risk in the fair value measurements.

Alternative Capital Sources

The Company utilizes co-investments as an alternative source of capital for acquisitions of both operating and development communities. As of ~~June 30, 2021,~~March 31, 2022, the Company had an interest in 264 apartment homes in ~~communities~~a community actively under development with a joint ~~ventures~~venture for total estimated costs of ~~$0.1 billion.~~$102.0 million. Total estimated remaining costs are approximately ~~$77.0~~$53.0 million, of which the Company estimates its remaining investment in these development joint ventures will be

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approximately ~~$39.3~~$27.0 million. In addition, the Company had an interest in ~~9,313~~10,636 apartment homes of operating communities with joint ventures for a total book value of ~~$497.3~~$601.7 million as of ~~June 30, 2021.~~March 31, 2022.

Off-Balance Sheet Arrangements

The Company has various unconsolidated interests in certain joint ventures. The Company does not believe that these unconsolidated investments have a materially different impact on its liquidity, cash flows, capital resources, credit or market risk than its consolidated operations. See Note 4, Co-investments, in the Notes to Condensed Consolidated Financial Statements, for carrying values and combined summarized financial information of these unconsolidated investments.

Critical Accounting ~~Policies and~~ Estimates

The preparation of condensed consolidated financial statements, in accordance with U.S. GAAP, requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. The Company defines critical accounting ~~policies~~estimates as those accounting policies that require the Company’s management to exercise their most difficult, subjective and complex judgments. The Company’s critical accounting ~~policies and~~ estimates relate principally to the ~~following key areas: (i) accounting for the acquisition of investments in real estate (specifically, the allocation between land and buildings); and (ii)~~ evaluation of events and changes in circumstances indicating whether the Company’s rental properties may be impaired. The Company 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.

The Company’s critical accounting policies and estimates have not changed materially from the information reported in Note 2, Summary of Critical and Significant Accounting Policies, in the Company’s annual report on Form 10-K for the year ended December 31, ~~2020.~~2021.

Forward-Looking Statements

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Certain statements in this "Management's Discussion and Analysis of Financial Condition and Results of Operations," and elsewhere in this quarterly report on Form 10-Q 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 (the "Securities Act"), and Section 21E of the Exchange Act, including statements regarding the Company's expectations, estimates, assumptions, hopes, intentions, beliefs and strategies regarding the future. Words such as "expects," "assumes," "anticipates," "may," "will," "intends," "plans," "projects," "believes," "seeks," "future," "estimates," and variations of such words and similar expressions are intended to identify such forward-looking statements. Such forward-looking statements include, among other things, statements regarding the Company’s expectations related to the continued impact of the COVID-19 pandemic and related variants on the Company’s business, financial condition and results of operations and the impact of any additional measures taken to mitigate the impact of the pandemic, the Company's intent, beliefs or expectations with respect to the timing of completion of current development and redevelopment projects and the stabilization of such projects, the timing of lease-up and occupancy of its apartment communities, the anticipated operating performance of its apartment communities, the total projected costs of development and redevelopment projects, co-investment activities, qualification as a REIT under the Internal Revenue Code of 1986, as amended, the real estate markets in the geographies in which the Company’s properties are located and in the United States in general, the adequacy of future cash flows to meet anticipated cash needs, its financing activities and the use of proceeds from such activities, the availability of debt and equity financing, general economic conditions including the potential impacts from such economic conditions, including as a result of the COVID-19 pandemic and governmental measures intended to prevent its spread, trends affecting the Company’s financial condition or results of operations, changes to U.S. tax laws and regulations in general or specifically related to REITs or real estate, changes to laws and regulations in jurisdictions in which communities the Company owns are located, and other information that is not historical information.

While the Company's management believes the assumptions underlying its forward-looking statements are reasonable, such forward-looking statements involve known and unknown risks, uncertainties and other factors, many of which are beyond the Company’s control, which could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The Company cannot assure the future results or outcome of the matters described in these statements; rather, these statements merely reflect the Company’s current expectations of the approximate outcomes of the matters discussed. Factors that might cause the Company’s actual results, performance or achievements to differ materially from those expressed or implied by these forward-looking statements include, but are not limited to, the following: the continued impact of the COVID-19 pandemic and related variants, which remains inherently uncertain as to duration and severity, and any additional governmental measures taken to limit its spread and other potential future outbreaks of infectious diseases or other health concerns could continue to adversely affect the Company’s business and its tenants, and cause a significant downturn in general economic conditions, the

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real estate industry, and the markets in which the Company's communities are located; the Company may fail to achieve its business objectives; the actual completion of development and redevelopment projects may be subject to delays; the stabilization dates of such projects may be delayed; the Company may abandon or defer development or redevelopment projects for a number of reasons, including changes in local market conditions which make development less desirable, increases in costs of development, increases in the cost of capital or lack of capital availability, resulting in losses; the total projected costs of current development and redevelopment projects may exceed expectations; such development and redevelopment projects may not be completed; development and redevelopment projects and acquisitions may fail to meet expectations; estimates of future income from an acquired property may prove to be inaccurate; occupancy rates and rental demand may be adversely affected by competition and local economic and market conditions; there may be increased interest rates and operating costs; the Company may be unsuccessful in the management of its relationships with its co-investment partners; future cash flows may be inadequate to meet operating requirements and/or may be insufficient to provide for dividend payments in accordance with REIT requirements; changes in laws or regulations; the terms of any refinancing may not be as favorable as the terms of existing indebtedness; unexpected difficulties in leasing of development projects; volatility in financial and securities markets; the Company’s failure to successfully operate acquired properties; unforeseen consequences from cyber-intrusion; the Company’s inability to maintain our investment grade credit rating with the rating agencies; government approvals, actions and initiatives, including the need for compliance with environmental requirements; and those further risks, special considerations, and other factors referred to in this quarterly report on Form 10-Q, in the Company's annual report on Form 10-K for the year ended December 31, ~~2020,~~2021, and those risk factors and special considerations set forth in the Company's other filings with the Securities and Exchange Commission (the "SEC") which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Additionally, the risks, uncertainties and other factors set forth above or otherwise referred to in the reports that the Company has filed with the SEC may be further amplified by the global impact of the COVID-19 ~~pandemic.~~pandemic and related variants and uncertainties regarding ongoing hostilities between Russia and the Ukraine and the related impacts on macroeconomic conditions, including, among other things, interest rates. All forward-looking statements are made as of the date hereof, the Company assumes no obligation to update or supplement this information for any reason, and therefore, they may not represent the Company’s estimates and assumptions after the date of this report.

Funds from Operations Attributable to Common Stockholders and Unitholders

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Funds from Operations Attributable to Common Stockholders and Unitholders ("FFO") is a financial measure that is commonly used in the REIT industry. The Company presents FFO and FFO excluding non-core items (referred to as "Core FFO") as supplemental operating performance measures. FFO and Core FFO are not used by the Company as, nor should they be considered to be, alternatives to net income computed under U.S. GAAP as an indicator of the Company’s operating performance or as alternatives to cash from operating activities computed under U.S. GAAP as an indicator of the Company’s ability to fund its cash needs.

FFO and Core FFO are not meant to represent a comprehensive system of financial reporting and do not present, nor do they intend to present, a complete picture of the Company's financial condition and operating performance. The Company believes that net income computed under U.S. GAAP is the primary measure of performance and that FFO and Core FFO are only meaningful when they are used in conjunction with net income.

The Company considers FFO and Core FFO to be useful financial performance measurements of an equity REIT because, together with net income and cash flows, FFO and Core FFO provide investors with additional bases to evaluate operating performance and ability of a REIT to incur and service debt and to fund acquisitions and other capital expenditures and to pay dividends. By excluding gains or losses related to sales of depreciated operating properties and excluding real estate depreciation (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO can help investors compare the operating performance of a real estate company between periods or as compared to different companies. By further adjusting for items that are not considered part of the Company’s core business operations, Core FFO allows investors to compare the core operating performance of the Company to its performance in prior reporting periods and to the operating performance of other real estate companies without the effect of items that by their nature are not comparable from period to period and tend to obscure the Company’s actual operating results. The Company believes that its condensed consolidated financial statements, prepared in accordance with U.S. GAAP, provide the most meaningful picture of its financial condition and its operating performance.

In calculating FFO, the Company follows the definition for this measure published by the National Association of Real Estate Investment Trusts ("NAREIT"), which is the leading REIT industry association. The Company believes that, under the NAREIT FFO definition, the two most significant adjustments made to net income are (i) the exclusion of historical cost depreciation and (ii) the exclusion of gains and losses from the sale of previously depreciated properties. The Company agrees that these two NAREIT adjustments are useful to investors for the following reasons:

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(a)historical cost accounting for real estate assets in accordance with U.S. GAAP assumes, through depreciation charges, that the value of real estate 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 charges required by U.S. GAAP 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 were in the business of long-term ownership and management of real estate. The exclusion, in NAREIT’s definition of FFO, of gains and losses from the sales of previously depreciated operating real estate assets allows investors and analysts to readily identify the operating results of the long-term assets that form the core of a REIT’s activity and assists in comparing those operating results between periods.

Management believes that it has consistently applied the NAREIT definition of FFO to all periods presented. However, there is judgment involved and other REITs’ calculation of FFO may vary from the NAREIT definition for this measure, and thus their disclosure of FFO may not be comparable to the Company’s calculation.

The following table is a reconciliation of net income available to common stockholders to FFO and Core FFO for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ (in thousands, except share and per share amounts):

Essex Property Trust, Inc.


	Three Months Ended March 31,
	2022		2021
Net income available to common stockholders	$	73,254	$	168,444
Adjustments:
Depreciation and amortization	133,533		128,587
Gains not included in FFO	—		(100,096)

Depreciation and amortization from unconsolidated co-investments	18,115		14,729
Noncontrolling interest related to Operating Partnership units	2,563		5,947

Depreciation attributable to third party ownership and other (1)	(353)		(129)
Funds from operations attributable to common stockholders and unitholders	$	227,112	$	217,482
Funds from operations attributable to common stockholders and unitholders per share - diluted	$	3.36	$	3.23
Non-core items:

Expensed acquisition and investment related costs	$	8	$	15
Deferred tax (benefit) expense on unconsolidated co-investments (2)	(2,754)		508
Gain on sale of marketable securities	(12,171)		(2,611)
Change in unrealized losses (gains) on marketable securities, net	24,585		(6,276)
Provision for credit losses	(62)		38

Equity loss (income) from non-core co-investments (3)	8,844		(1,627)

Loss on early retirement of debt, net	—		2,517
Loss on early retirement of debt from unconsolidated co-investments	86		3
Co-investment promote income	(17,076)		—
Income from early redemption of preferred equity investments and notes receivable	(858)		(3,513)

General and administrative and other, net	448		257
Insurance reimbursements, legal settlements, and other, net	—		(182)
Core Funds from Operations attributable to common stockholders and unitholders	$	228,162	$	206,611
Core Funds from Operations attributable to common stockholders and unitholders per share-diluted	$	3.37	$	3.07
Weighted average number shares outstanding, diluted (4)	67,621,842		67,272,839

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~~Essex Property Trust, Inc.~~

Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Net income available to common stockholders $ 64,846 $ 84,458 $ 233,290 $ 399,464
Adjustments:
Depreciation and amortization 128,736 133,609 257,323 265,168
Gains not included in FFO attributable to common stockholders and unitholders (2,260) (16,597) (102,356) (251,291)
Depreciation and amortization from unconsolidated co-investments 14,819 12,764 29,548 25,308
Noncontrolling interest related to Operating Partnership units 2,288 2,964 8,235 13,950
Depreciation attributable to third party ownership and other (138) (139) (267) (273)
Funds from operations attributable to common stockholders and unitholders $ 208,291 $ 217,059 $ 425,773 $ 452,326
Funds from operations attributable to common stockholders and unitholders per share - diluted $ 3.09 $ 3.21 $ 6.33 $ 6.65
Non-core items:
Expensed acquisition and investment related costs 41 15 56 102
Deferred tax expense on unrealized gain on unconsolidated co-investment (1)
1,842 1,636 2,350 1,636
Loss (gain) on sale of marketable securities 112 (46) (2,499) (33)
Unrealized (gains) losses on marketable securities (10,405) (7,623) (16,681) 1,073
Provision for credit losses (145) 147 (107) 97
Equity income from non-core co-investments (2)
(6,771) (4,696) (8,398) (4,586)
Loss on early retirement of debt, net 16,465 5,027 18,982 4,706
(Gain) loss on early retirement of debt from unconsolidated co-investment — (38) 3 (38)
Co-investment promote income — — — (6,455)
Income from early redemption of preferred equity investments and notes receivable (4,747) — (8,260) (210)
General and administrative and other, net 256 2,312 513 3,132
Insurance reimbursements, legal settlements, and other, net (4) (106) (186) (63)
Core Funds from Operations attributable to common stockholders and unitholders $ 204,935 $ 213,687 $ 411,546 $ 451,687
Core Funds from Operations attributable to common stockholders and unitholders per share-diluted $ 3.04 $ 3.16 $ 6.12 $ 6.64
Weighted average number shares outstanding, diluted (3)
67,331,877 67,682,034 67,299,655 68,017,414

(1) The Company consolidates certain co-investments. The noncontrolling interest's share of net operating income in these investments for the three months ended March 31, 2022 was $0.7 million.

~~(1)~~(2) Represents deferred tax (benefit) expense related to net unrealized gains or losses on technology co-investments.

~~(2)~~(3) Represents the Company's share of co-investment ~~income~~loss (income) from technology co-investments.

~~(3)~~(4) Assumes conversion of all outstanding ~~Operating Partnership~~ limited partnership units ~~("OP Units")~~in the Operating Partnership into shares of the Company's common stock and excludes ~~all~~ DownREIT ~~units for which the Operating Partnership has the ability and intention to redeem the units for cash and does not consider them to be common stock equivalents.~~limited partnership units.

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Net Operating Income

Net operating income ("NOI") and Same-Property NOI are considered by management to be important supplemental performance measures to earnings from operations included in the Company’s condensed consolidated statements of income and comprehensive 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. In addition, because prospective buyers of real estate have different financing and overhead structures, with varying marginal impacts to overhead by acquiring real estate, 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 revenues less Same-Property operating expenses, including property taxes. Please see the reconciliation of earnings from operations to NOI and Same-Property NOI, which in the table below is the NOI for stabilized properties consolidated by the Company for the periods presented ($ in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Earnings from operations	Earnings from operations	$	93,381	$	119,736	$	290,762	$	250,573	Earnings from operations	$	109,850	$	197,381
Adjustments:	Adjustments:									Adjustments:
Corporate-level property management expenses	Corporate-level property management expenses	9,105		8,646		18,052		17,405		Corporate-level property management expenses	10,172		9,013
Depreciation and amortization	Depreciation and amortization	128,736		133,609		257,323		265,168		Depreciation and amortization	133,533		128,587
Management and other fees from affiliates	Management and other fees from affiliates	(2,221)		(2,348)		(4,470)		(4,965)		Management and other fees from affiliates	(2,689)		(2,249)
General and administrative	General and administrative	12,222		14,952		22,034		28,934		General and administrative	12,242		9,812

Expensed acquisition and investment related costs	Expensed acquisition and investment related costs	41		15		56		102		Expensed acquisition and investment related costs	8		15
Gain on sale of real estate and land	Gain on sale of real estate and land	—		(16,597)		(100,096)		(16,597)		Gain on sale of real estate and land	—		(100,096)
NOI	NOI	241,264		258,013		483,661		540,620		NOI	263,116		242,463
Less: Non-Same Property NOI	Less: Non-Same Property NOI	(22,621)		(29,815)		(45,037)		(61,649)		Less: Non-Same Property NOI	(15,355)		(11,580)
Same-Property NOI	Same-Property NOI	$	218,643	$	228,198	$	438,624	$	478,971	Same-Property NOI	$	247,761	$	230,883

Item 3: Quantitative and Qualitative Disclosures About Market Risks

Interest Rate Hedging Activities

The Company’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 Company uses interest rate swaps as part of its cash flow hedging strategy. The Company previously had five interest rate swaps that were designated as cash flow hedges of interest rate risk and were terminated as of March 31, 2021 in conjunction with the partial repayment of the Company's unsecured term debt. As of June 30, 2021, the Company also had $224.7 million of secured variable rate indebtedness.

Additionally, the Company has entered into four total return swap contracts, with an aggregate notional amount of ~~$224.7~~$224.2 million that effectively convert ~~$224.7~~$224.2 million of fixed mortgage notes payable to a floating interest rate based on the SIFMA plus a spread and have a carrying value of zero at ~~June 30, 2021.~~March 31, 2022. The Company is exposed to insignificant interest rate risk on these swaps as the related mortgages are callable, at par, by the Company, co-terminus with the termination of any related swap. These derivatives do not qualify for hedge accounting.

Interest Rate Sensitive Liabilities

The Company is exposed to interest rate changes primarily as a result of its lines of credit and long-term debt used to maintain liquidity and fund capital expenditures and expansion of the Company's real estate investment portfolio and operations. The Company’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 Company borrows primarily at fixed rates and may enter

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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 Company does not enter into derivative or interest rate transactions for speculative purposes.

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The Company’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.


For the Years Ended	For the Years Ended	2021			2022		2023		2024		2025		Thereafter		Total			Fair value		For the Years Ended	2022			2023		2024		2025		2026		Thereafter		Total			Fair value
($ in thousands, except for interest rates)	($ in thousands, except for interest rates)																			($ in thousands, except for interest rates)
Fixed rate debt	Fixed rate debt	$	1,409		42,408		302,093		402,177		632,035		4,384,849		$	5,764,971		$	6,087,382	Fixed rate debt	$	41,693		302,092		402,177		632,035		548,291		3,836,558		$	5,762,846		$	5,622,398
Average interest rate	Average interest rate	3.4		%	3.7	%	3.4	%	4.0	%	3.5	%	3.1	%	3.2		%			Average interest rate	3.6		%	3.4	%	4.0	%	3.5	%	3.5	%	3.2	%	3.2		%
Variable rate debt (1)	Variable rate debt (1)	$	365		100,780		85,852		932		1,019		220,780		$	409,728		$	406,555	Variable rate debt (1)	$	591		853		932		1,019		1,114		317,666		$	322,175		$	319,443
Average interest rate	Average interest rate	1.0		%	1.1	%	1.0	%	1.0	%	1.0	%	0.9	%	1.0		%			Average interest rate	1.2		%	1.2	%	1.2	%	1.2	%	1.2	%	1.1	%	1.1		%

(1) ~~$224.7~~$224.2 million is subject to total return swaps.

The table incorporates only those exposures that exist as of ~~June 30, 2021.~~March 31, 2022. It does not consider those exposures or positions that could arise after that date. As a result, the Company's ultimate realized gain or loss, with respect to interest rate fluctuations and hedging strategies would depend on the exposures that arise prior to settlement.

Item 4: Controls and Procedures

Essex Property Trust, Inc.

As of ~~June 30, 2021,~~March 31, 2022, Essex carried out an evaluation, under the supervision and with the participation of management, including Essex’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Essex's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based upon that evaluation, Essex’s Chief Executive Officer and Chief Financial Officer concluded that as of ~~June 30, 2021,~~March 31, 2022, Essex's disclosure controls and procedures were effective to ensure that the information required to be disclosed by Essex in the reports that Essex files or submits under the Exchange Act was 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 Essex files or submits under the Exchange Act is accumulated and communicated to Essex’s management, including Essex’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

There were no changes in Essex's internal control over financial reporting, that occurred during the quarter ended ~~June 30, 2021,~~March 31, 2022, that have materially affected, or are reasonably likely to materially affect, Essex’s internal control over financial reporting.

Essex Portfolio, L.P.

As of ~~June 30, 2021,~~March 31, 2022, the Operating Partnership carried out an evaluation, under the supervision and with the participation of management, including Essex's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Operating Partnership's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of ~~June 30, 2021,~~March 31, 2022, 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 the Operating Partnership files or submits under the Exchange Act was 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 Essex's Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

There were no changes in the Operating Partnership's internal control over financial reporting, that occurred during the quarter ended ~~June 30, 2021,~~March 31, 2022, that have materially affected, or are reasonably likely to materially affect, the Operating Partnership’s internal control over financial reporting.

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Part II -- Other Information

Item 1: Legal Proceedings

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The Company is subject to various lawsuits in the normal course of its business operations. While the resolution of any such matter cannot be predicted with certainty, the Company is not currently a party to any legal proceedings nor is any legal proceeding currently threatened against the Company that the Company believes, individually or in the aggregate, would have a material adverse effect on the Company's financial condition, results of operations or cash flows.

Item 1A: Risk Factors

In addition to the other information set forth in this quarterly report on Form 10-Q, you should carefully consider the factors discussed in "Part I. Item 1A. Risk Factors" in the Company's annual report on Form 10-K for the year ended December 31, ~~2020,~~2021, which could materially affect the Company's financial condition, results of operations or cash flows. There have been no material changes to the Risk Factors disclosed in Item 1A of the Company's annual report on Form 10-K for the year ended December 31, ~~2020,~~2021, as filed with the SEC and available at www.sec.gov. The risks described in the Company's annual report on Form 10-K and subsequent quarterly reports on Form 10-Q are not the only risks facing the Company. Additional risks and uncertainties not currently known or that the Company currently deems to be immaterial may also materially adversely affect the Company's financial condition, results of operations or cash flows.

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities; Essex Portfolio, L.P.

During the three months ended ~~June 30, 2021,~~March 31, 2022, the Operating Partnership issued OP Units in private placements in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, in the amounts and for the consideration set forth below:

During the three months ended ~~June 30, 2021,~~March 31, 2022, Essex issued an aggregate of ~~5,086~~83,881 shares of its common stock upon the exercise of stock options and the vesting of restricted stock ~~awards, and the exchange of OP Units and DownREIT units by limited partners or members into shares of common stock.~~awards. Essex contributed the net proceeds of ~~$0.6~~$19.1 million from the option exercises during the three months ended ~~June 30, 2021~~March 31, 2022 to the Operating Partnership in exchange for an aggregate of ~~3,105~~74,155 OP Units, as required by the Operating Partnership’s partnership agreement. Furthermore, for each share of common stock issued by Essex in connection with vesting of restricted stock awards, ~~and the exchange of OP Units and DownREIT units,~~ the Operating Partnership issued OP Units to Essex, as required by the partnership agreement. During the three months ended ~~June 30, 2021, 1,981~~March 31, 2022, 9,726 OP Units were issued to Essex pursuant to this mechanism.

Stock Repurchases

In December 2020, the Board of Directors approved the replenishment of the Company's stock repurchase plan such that, as of such date, the Company had $250.0 million of purchase authority remaining under the replenished plan. ~~As a result of the replenishment, as of June 30, 2021, the Company had $214.5 million of purchase authority remaining under the stock repurchase plan.~~ The Company did not repurchase any of its common stock during the three months ended ~~June 30,~~

~~2021.~~March 31, 2022. As of March 31, 2022, the Company had $214.5 million of purchase authority remaining under the stock repurchase plan.

Item 3: Defaults Upon Senior Securities

None.

Item 4: Mine Safety Disclosures

Not applicable.

Item 5: Other Information

None.

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Item 6: Exhibits


A. Exhibits
4.1			Indenture, dated June 1, 2021, among Essex Portfolio, L.P., Essex Property Trust, Inc., and U.S. Bank National Association, as trustee, including the form of 2.550% Senior Notes due 2031 and the guarantee thereof, attached as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed June 1, 2021, and incorporated herein by reference.

31.1*			Certification of Michael J. Schall, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*			Certification of Barbara Pak, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.3*			Certification of Michael J. Schall, Principal Executive Officer of General Partner, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.4*			Certification of Barbara Pak, Principal Financial Officer of General Partner, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*			Certification of Michael J. Schall, Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

32.2*			Certification of Barbara Pak, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

32.3*			Certification of Michael J. Schall, Principal Executive Officer of General Partner, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

32.4*			Certification of Barbara Pak, Principal Financial Officer of General Partner, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

101.INS			XBRL Instance Document - the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH			XBRL Taxonomy Extension Schema Document

101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF			XBRL Taxonomy Extension Definition Linkbase Document

101.LAB			XBRL Taxonomy Extension Label Linkbase Document

101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document

104			Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

* Filed or furnished herewith.

** In accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed "filed" for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.


			ESSEX PROPERTY TRUST, INC.
			(Registrant)

			Date: ~~July 30, 2021~~April 27, 2022

			By: /s/ BARBARA PAK

			Barbara Pak
			Executive Vice President and Chief Financial Officer (Authorized Officer, Principal Financial Officer)


			Date: ~~July 30, 2021~~April 27, 2022

			By: /s/ JOHN FARIAS

			John Farias
			Senior Vice President and Chief Accounting Officer


			ESSEX PORTFOLIO, L.P. By Essex Property Trust, Inc., its general partner
			(Registrant)

			Date: ~~July 30, 2021~~April 27, 2022

			By: /s/ BARBARA PAK

			Barbara Pak
			Executive Vice President and Chief Financial Officer (Authorized Officer, Principal Financial Officer)


			Date: ~~July 30, 2021~~April 27, 2022

			By: /s/ JOHN FARIAS

			John Farias
			Senior Vice President and Chief Accounting Officer

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	Number of Apartment	Six Months Ended June 30,				Dollar		Percentage
Property Revenues ($ in thousands)	Homes	2021		2020		Change		Change
Same-Property Revenues:
Southern California	20,800	$	270,937	$	276,533	$	(5,596)	(2.0)	%
Northern California	16,072	243,918		270,080		(26,162)		(9.7)	%
Seattle Metro	10,218	117,900		123,693		(5,793)		(4.7)	%
Total Same-Property Revenues	47,090	632,755		670,306		(37,551)		(5.6)	%
Non-Same Property Revenues		68,878		87,593		(18,715)		(21.4)	%
Total Property Revenues		$	701,633	$	757,899	$	(56,266)	(7.4)	%