Three Months Ended
                                                   March 31,September 30,
                                   Number of   --------------------   Dollar   Percentage
                                  Properties     2003       2002      Change     Change
                                  -----------  ---------  ---------  --------- -----------
Revenues:                                      (Dollars in thousands)
  Property revenues - quarterly
    Quarterly Same Store Properties
      Southern California                 22  $  17,47017,914  $  16,29417,263  $     1,176         7.2651         3.8 %
      Northern California                 16     13,151     14,638     (1,487)      (10.2)12,189     13,589     (1,400)      (10.3)
      Pacific Northwest                   23     10,321     10,645       (324)       (3.0)10,032     10,534       (502)       (4.8)
                                  -----------  ---------  ---------  --------- -----------
          Properties                      61     40,942     41,577       (635)       (1.5)40,135     41,386     (1,251)       (3.0)
  Property revenues - properties
    acquired subsequent to
    December 31, 2001June 30, 2002 (1)                            14,954      1,858     13,096       704.815,120      2,243     12,877       574.1
                                               ---------  ---------  --------- -----------
      Total property revenues                    55,896     43,435     12,461        28.755,255     43,629     11,626        26.6
Interest and other income                         3,099      5,977     (2,878)      (48.2)2,982      5,166     (2,184)      (42.3)
                                               ---------  ---------  --------- -----------
      Total revenues                          $  58,99558,237  $  49,41248,795  $   9,5839,442        19.4 %
                                               =========  =========  ========= ===========

As set forth in the above table, the $9,583,000$9,442,000 net increase in total revenues was mainly attributable to an increase of $13,096,000$12,877,000 attributable to multifamily properties acquired subsequent to December 31, 2001,June 30, 2002, four office buildings, five recreational vehicle parks, two manufactured housing communities, redevelopment communities and development communities, which was offset in part by a decrease in interest and other income of $2,878,000$2,184,000 and a decrease in quarterly same store propertiesrevenues from the Quarterly Same Store Properties of $635,000.$1,251,000. Subsequent to December 31, 2001,June 30, 2002, the Company acquired interests in 21 multifamily properties, two office buildings, five recreational vehicle parks, two manufactured housing communities and achieved stabilized operations in three redevelopment communities and one development community (the "Quarterly Acquisitions Properties").

Interest and other income decreased by $2,878,000$2,184,000 or 48.2%42.3% to $3,099,000$2,982,000 in the firstthird quarter of 2003 from $5,977,000$5,166,000 in the firstthird quarter of 2002. The decrease primarily relates to the payoffrepayment of notes receivable resultingwhich resulted in thea decrease in interest income on notes receivables and the sale of co-investmentco- investment assets resulting in the decrease in income earned on the Company's co- investments.co-investments.

Property revenues from the Quarterly Same Store Properties decreased by $635,000$1,251,000 or 1.5%3.0% to $40,942,000$40,135,000 in the firstthird quarter of 2003 from $41,577,000$41,386,000 in the firstthird quarter of 2002. The majority of this decrease was attributable to the 16 Quarterly Same Store Properties located in Northern California and the 23 Quarterly Same Store Properties located in the Pacific Northwest. The property revenues of the Quarterly Same Store Properties in Northern California decreased by $1,487,000$1,400,000 or 10.2%10.3% to $13,151,000$12,189,000 in the firstthird quarter of 2003 from $14,638,000$13,589,000 in the firstthird quarter of 2002. The decrease in Northern California is primarily attributable to rental rate decreases offset by an increaseand a decrease in financial occupancy to 95.8%95.6% in the firstthird quarter of 2003 from 95.2%96.8% in the firstthird quarter of 2002. The property revenues of the Quarterly Same Store Properties in the Pacific Northwest decreased by $324,000$502,000 or 3.0%4.8% to $10,321,000$10,032,000 in the firstthird quarter of 2003 from $10,645,000$10,534,000 in the firstthird quarter of 2002. The $324,000$502,000 decrease in the Pacific Northwest is primarily attributable to rental rate decreases offset by an increase in financialdecreases. Financial occupancy to 94.5%remained constant at 94.8% in the firstthird quarter of 2003 from 90.8% inas compared to the firstthird quarter of 2002. The 22 multifamily residential propertiesQuarterly Same Store Properties located in Southern California offset the net decrease in total property revenues from the other Quarterly Same Store Properties. The property revenues for these properties increased by $1,176,000$651,000 or 7.2%3.8% to $17,470,000$17,914,000 in the firstthird quarter of 2003 from $16,294,000$17,263,000 in the firstthird quarter of 2002. The $1,176,000$651,000 increase is primarily attributable to rental rate increases and an increase in financial occupancy to 95.2%97.0% in the firstthird quarter of 2003 from 92.0%96.3% in the firstthird quarter of 2002.

1921

Total Expenses increased by $10,663,000$11,156,000 or approximately 33.1%34.6% to $42,867,000$43,373,000 in the firstthird quarter of 2003 from $32,204,000$32,217,000 in the firstthird quarter of 2002. This increase was mainly due to an increase in interest expense $2,010,000property operating expenses of $8,867,000 or 22.9%40.4% to $10,799,000$30,834,000 in the firstthird quarter of 2003 from $8,789,000$21,967,000 in the firstthird quarter of 2002. Of such operating expense increase $9,443,000 was attributable to the Quarterly Acquisition Properties, which was offset by a small decrease in operating expense attributable to the Quarterly Same Store Properties. Interest expense increased by $1,907,000 or 22.1% to $10,528,000 in the third quarter of 2003 from $8,621,000 in the third quarter of 2002. The increase in interest expense is due to increases in the mortgage notes payable and line of credit balances. Property operating expenses increasedbalances

Minority interests decreased by $8,489,000$360,000 or 39.4%6.0% to $30,056,000$5,604,000 in the firstthird quarter of 2003 from $21,567,000$5,964,000 in the firstthird quarter of 2002. This is primarily due to the decrease in net income of the Operating Partnership.

Net incomedecreased by $1,354,000 or 12.8% to $9,260,000 in the third quarter of 2003 from $10,614,000 in the third quarter of 2002. The decrease in net income is mainly attributable to the factors noted above.

Comparison of the Nine Months Ended September 30, 2003 to the Nine Months Ended September 30, 2002

Average financial occupancy rates of the Company's multifamily Same Store Properties (stabilized properties consolidated by the Company for each of the nine months ended September 30, 2003 and 2002) was 95.6% and 94.4%, for the nine months ended September 30, 2003 and 2002, respectively.

The regional breakdown of average financial occupancy for the multifamily Same Store Properties for the nine months ended September 30, 2003 and 2002 are as follows:

                                             Nine Months Ended
                                               September 30,
                                          ----------------------
                                            2003        2002
                                          ---------  -----------
Southern California                           96.0%        94.3%
Northern California                           95.6%        95.7%
Pacific Northwest                             94.8%        92.8%

Total Revenues increased by $26,491,000 or 17.8% to $175,679,000 in the nine months ended September 30, 2003 from $149,188,000 in the nine months ended September 30, 2002.

22

The following table sets forth a breakdown of these revenue amounts, including the revenues attributable to the Same Store Properties.

                                                 Nine Months Ended
                                                    September 30,
                                   Number of   --------------------   Dollar   Percentage
                                  Properties     2003       2002      Change     Change
                                  -----------  ---------  ---------  --------- -----------
Revenues:                                      (Dollars in thousands)
  Property revenues
  Same Store Properties
    Southern California                   22  $  52,922  $  50,413  $   2,509         5.0 %
    Northern California                   16     38,182     42,165     (3,983)       (9.4)
    Pacific Northwest                     23     30,567     31,747     (1,180)       (3.7)
                                  -----------  ---------  ---------  --------- -----------
          Properties                      61    121,671    124,325     (2,654)       (2.1)
  Property revenues - properties
    acquired subsequent to
    December 31, 2001 (1)                        44,761      5,902     38,859       658.4
                                               ---------  ---------  --------- -----------
      Total property revenues                   166,432    130,227     36,205        27.8
Interest and other income                         9,247     18,961     (9,714)      (51.2)
                                               ---------  ---------  --------- -----------
      Total revenues                          $ 175,679  $ 149,188  $  26,491        17.8 %
                                               =========  =========  ========= ===========

As set forth in the above table, the $26,491,000 net increase in total revenues was mainly attributable to an increase of $38,859,000 attributable to multifamily properties acquired subsequent to December 31, 2001, four office buildings, five recreational vehicle parks, two manufactured housing communities, redevelopment communities and development communities, which was offset in part by a decrease in interest and other income of $9,714,000 and a decrease in revenue from the Same Store Properties of $2,654,000. Subsequent to December 31, 2001, the Company acquired interests in 21 multifamily properties, two office buildings, five recreational vehicle parks, two manufactured housing communities and achieved stabilized operations in three redevelopment communities and one development community (the "Acquisitions Properties").

Interest and other income decreased by $9,714,000 or 51.2% to $9,247,000 in the nine months ended September 30, 2003 from $18,961,000 in the nine months ended September 30, 2002. The decrease primarily relates to the repayment or conversion to non-accrual of notes receivable which resulted in a decrease in interest income on notes receivables and the sale of co-investment assets resulting in the decrease in income earned on the Company's co- investments.

Property revenues from the Same Store Properties decreased by $2,654,000 or 2.1% to $121,671,000 in the nine months ended September 30, 2003 from $124,325,000 in the nine months ended September 30, 2002. The majority of this decrease was attributable to the 16 Same Store Properties located in Northern California and the 23 Same Store Properties located in the Pacific Northwest. The property revenues of the Same Store Properties in Northern California decreased by $3,983,000 or 9.4% to $38,182,000 in the nine months ended September 30, 2003 from $42,165,000 in the nine months ended September 30, 2002. The decrease in Northern California is primarily attributable to rental rate decreases and a slight decrease in financial occupancy to 95.6% in the nine months ended September 30, 2003 from 95.7% in the nine months ended September 30, 2002. The property revenues of the Same Store Properties in the Pacific Northwest decreased by $1,180,000 or 3.7% to $30,567,000 in the nine months ended September 30, 2003 from $31,747,000 in the nine months ended September 30, 2002. The $1,180,000 decrease in the Pacific Northwest is primarily attributable to rental rate decreases offset by an increase in financial occupancy to 94.8% in the nine months ended September 30, 2003 from 92.8% in the nine months ended September 30, 2002. The 22 multifamily residential properties located in Southern California offset the net decrease in total property revenues from the other Same Store Properties. The property revenues for these properties increased by $2,509,000 or 5.0% to $52,922,000 in the nine months ended September 30, 2003 from $50,413,000 in the nine months ended September 30, 2002. The $2,509,000 increase is primarily attributable to rental rate increases and an increase in financial occupancy to 96.0% in the nine months ended September 30, 2003 from 94.3% in the nine months ended September 30, 2002.

23

Total Expenses increased by $32,399,000 or approximately 33.8% to $128,291,000 in the nine months ended September 30, 2003 from $95,892,000 in the nine months ended September 30, 2002. This increase was mainly due to an increase in property operating expenses of $25,759,000 or 39.8% to $90,400,000 in the nine months ended September 30, 2003 from $64,641,000 in the nine months ended September 30, 2002. Of such operating expense increase $7,795,000$25,256,000 was attributable to the Quarterly Acquisition Properties. Interest expense increased by $5,796,000 or 22.2% to $31,858,000 in the nine months ended September 30, 2003 from $26,062,000 in the nine months ended September 30, 2002. The increase in interest expense is due to increases in the line of credit balance.

Minority interests decreased by $1,066,000 or 5.8% to $17,247,000 in the nine months ended September 30, 2003 from $18,313,000 in the nine months ended September 30, 2002. This is primarily due to the decrease in net income of the Operating Partnership.  

Discontinued operationsdecreased by $152,000$8,286,000 to $0 in the first quarter ofnine months ended September 30, 2003 from $152,000$8,286,000 in the first quarter innine months ended September 30, 2002. This decrease is due to the reduction of gain on sale of real estate and operating income from Tara Village, a 168-unit apartment community located in Tarzana, California, which was sold on June 18, 2002.

Minority interests decreased by $167,000 or 2.8% to $5,897,000 in the first quarter of 2003 from $6,064,000 in the first quarter of 2002. This is primarily due to the decrease in net income of the Operating Partnership.

Net incomedecreased by $1,065,000$13,128,000 or 9.4%30.3% to $10,231,000$30,141,000 in the first quarter ofnine months ended September 30, 2003 from $11,296,000$43,269,000 in the first quarter ofnine months ended September 30, 2002. The decrease in net income is mainly attributable to the factors noted above.

Liquidity and Capital Resources

At March 31,September 30, 2003, the Company had $10,367,000$10,400,000 of unrestricted cash and cash equivalents. The Company expects to meet its short-term liquidity requirements by using its working capital, cash generated from operations, and amounts available under lines of credit or other financings. The Company believes that its current net cash flows will be adequate to meet operating requirements and to provide for payment of dividends by the Company in accordance with REIT qualification requirements. The Company expects to meet its long-term liquidity requirements relating to property acquisitions and development (beyond the next 12 months) and balloon debt maturities by using a combination of some or all of the following sources: working capital, amounts available on lines of credit, net proceeds from public and private debt and equity issuances, and proceeds from the disposition of properties that may be sold from time to time. There can, however, be no assurance that the Company will have access to the debt and equity markets in a timely fashion to meet such future funding requirements or that future working capital and borrowings under the lines of credit will be available, or if available, will be sufficient to meet the Company's requirements or that the Company will be able to dispose of properties in a timely manner and under terms and conditions that the Company deems acceptable.

The Company has two outstanding unsecured lines of credit for an aggregate amount of $195,000,000.$215,000,000. The first line, in the amount of $165,000,000,$185,000,000, matures in May 2004, with an option to extend it for one year thereafter. Outstanding balances under this line of credit bear interest at a rate, which uses a tiered rate structure tied to the Company's corporate ratings, if any, and leverage rating, which has been priced at LIBOR plus 1.10%. At March 31,September 30, 2003 the Company had $123,000,000$132,700,000 outstanding on this line of credit. In July 2003, the Company expanded this line from $165,000,000 to $185,000,000. No other material terms of this facility were revised. A second line of credit in the amount of $30,000,000 matures in December 2003. Outstanding balances, if any, on this second line bear interest based on a tiered rate structure currently at LIBOR plus 1.10%. At March 31,September 30, 2003 the Company had $30,000,000 outstanding on this line of credit. The outstanding balance on this line of credit was repaid subsequent to the end of the quarter. At March 31,September 30, 2003, these lines of credit bore interest rates of approximately 2.6%2.3%. The credit agreements contain debt covenants related to limitations on indebtedness and liabilities, maintenance of minimum levels of consolidated earnings before depreciation, interest and amortization and maintenance of minimum tangible net worth.

In addition, the Fund, the investment fund managed by the Company, has an unsecured line of credit for an aggregate amount of $125,000,000.$50,000,000. In August 2003, the Fund reduced this line from $125,000,000 to $50,000,000. This facility is directly tied to the remaining capital commitments of certain investors. As of September 30, 2003, the maximum amount available on this line matures in December 2003.was approximately $47,568,000. The line bears interest at LIBOR plus 0.875%. As of March 31September 30, 2003, the line had an outstanding balance of $71,260,000.$36,572,000. This line matures in December 2003. The Fund plans on using one or more of the following sources to repay the outstanding balance at maturity: working capital, secured mortgage financing, construction financing, calling undrawn equity commitments, and proceeds from the disposition of properties which may be sold from time to time. The line provides for debt covenants relating to limitations on mortgage indebtedness.

24

In addition to the Company's unsecured lines of credit, the Company had $658,896,000$664,596,000 of secured indebtedness at March 31,September 30, 2003. Such indebtedness consisted of $598,527,000$595,024,000 in fixed rate debt with interest rates varying from 5.5% to 8.2% and maturity dates ranging from 2005 to 2026. The indebtedness also includes $60,369,000$69,572,000 of tax-exempt variable rate demand bonds with interest rates paid during the threenine months ended March 31,September 30, 2003 ranging from approximately 4.5% to 5.5%which averaged 3.7% and maturity dates ranging from 2020 to 2032. The tax-exempt variable rate demand bonds are capped at interest rates ranging from 7.1% to 7.3%.

20

The Company's unrestricted cash balance increased by $1,805,000$1,838,000 from $8,562,000 as of December 31,2002 to $10,367,000$10,400,000 as of March 31,September 30, 2003. The Company generated $29,678,000$73,748,000 in cash from operating activities, used $15,059,000$58,553,000 cash in investing activities and used $12,814,000$13,357,000 cash in financing activities. The $15,059,000$58,553,000 net cash used in investing activities was primarily a result of $6,742,000$24,293,000 contributed to investments in corporations and limited partnerships, $20,119,000 used to fund real estate under development, $3,636,000$13,090,000 used into upgrade rental properties and $8,337,000 used to fund additions to notes receivables from investees, other related parties and other receivables and $3,158,000 used to upgrade rental properties.receivables. The $12,814,000$13,357,000 net cash used in financing activities was primarily a result of $19,614,000$66,618,000 of repayments of mortgages and other notes payable and lines of credit, $15,336,000$50,184,000 of dividends paid, $5,063,000$15,389,000 of distributions to minority interest partners offset by $27,447,000$89,851,000 of proceeds from mortgages and other notes and line of credit.credit and $24,664,000 of net proceeds from the issuance of preferred stock.

Non-revenue generating capital expenditures are improvements and upgrades that extend the useful life of the property and are not related to preparing a multifamily property unit to be rented to a tenant. The Company expects to incur approximately $375 per weighted average occupancy unit in non-revenue generating capital expenditures for the year ended December 31, 2003. These expenditures do not include the improvements required in connection with the origination of mortgage loans, expenditures for acquisition properties' renovations and improvements, which are expected to generate additional revenue, and renovation expenditures required pursuant to tax-exempt bond financings. The Company expects that cash from operations and/or its lines of credit will fund such expenditures. However, there can be no assurance that the actual expenditures incurred during 2003 and/or the funding thereof will not be significantly different than the Company's current expectations.

The Company is currently developing fivesix multifamily residential projects, with an aggregate of 1,2481,368 multifamily units. Such projects involve certain risks inherent in real estate development. See "Other Matters/ Risk Factors-- Risks that Development Activities Will be Delayed or Not Completed and/or Fail to Achieve Expected Results" in Item 1 of the Company's Annual Report on Form 10-K for the year ended December 31, 2002. In connection with these development projects, the Company has directly, or in some cases through its joint venture partners entered into contractual construction related commitments with unrelated third parties and the total projected estimated cost for these projects is approximately $226,300,000.$229,700,000. As of March 31,September 30, 2003, the remaining commitment to fund these development projects is approximately $102,300,000,$74,800,000, of which approximately $40,300,000$36,400,000 is the Company's commitment. The 132-unit Kelvin Avenue development project in Irvine, California is still in the process of obtaining entitlements and its estimated total costs have not yet been finalized and is not included in the numbers above. The Company expects to fund such commitments by using a combination of some or all of the following sources: its working capital, amounts available on its lines of credit, net proceeds from public and private equity and debt issuances, and proceeds from the disposition of properties, if any.

Pursuant to existing shelf registration statements, the Company has the capacity to issue up to $342,000,000 of equity securities and the Operating Partnership has the capacity to issue up to $250,000,000 of debt securities.

The Company pays quarterly dividends from cash available for distribution. Until it is distributed, cash available for distribution is invested by the Company primarily in short-term investment grade securities or is used by the Company to reduce balances outstanding under its line of credit.

Essex Apartment Value Fund, L.P. (the "Fund"), is an investment fund organized by the Company in 2001.2001 to add value through rental growth and asset appreciation, utilizing the Company's development, redevelopment and asset management capabilities. Currently the Fund is considered fully invested based on its acquisitions to date and anticipated development and redevelopment expenditures. The Fund will be, subject to specific exceptions, the Company's exclusive investment vehicle for new investments until the Fund's committed capital has been invested or committed for investments, or if earlier, December 31, 2003. The Fund has total capital commitments of $250 million and is expectednow expects to utilize leverage of approximately 65%61% of the value of the underlying real estate portfolio. The Company is committed to invest 21.4% of the aggregate capital committed to the Fund. In addition, Essexthe Company will be compensated by the Fund for its asset management, property management, development and redevelopment services and may receive incentive distributionspayments if the Fund exceeds certain financial return benchmarks. The

25

Financing and equity issuances.  During the third quarter of 2003 and the early part of the fourth quarter of 2003, the Company undertook the following financing activities and equity issuances.

On July 30, 2003, in connection with the Company's remaining unfunded capital commitmentacquisition, by merger, of John M. Sachs, Inc. ("Sachs") that was completed on December 17, 2002, and under the terms of the merger agreement, a final analysis was prepared, which indicated that the actual net liabilities of Sachs were less than the net liabilities of Sachs estimated to be outstanding as of March 31,the merger date.  Based on the final analysis and as a post-closing adjustment payment pursuant to the merger agreement, the Company made a final payment of approximately $1,766,000 in cash and issued an additional 35,860 shares of common stock to certain of the pre-merger shareholders of Sachs.

On September 23, 2003, the Company issued 1,000,000 shares of its Series F Cumulative Redeemable Preferred Stock ("Series F Preferred Stock") at a fixed price of $24.664 per share, a discount from the $25.00 per share liquidation value of the shares.  The shares do not begin to accrue a dividend until November 25, 2003, and, following that date, will pay quarterly distributions at an annualized rate of 7.8125% per year of the liquidation value and will be redeemable by the Company on or after September 23, 2008.  The Company will amortize the original discount in connection with the issuance of these shares in the fourth quarter of 2003, resulting in a charge of approximately $336,000.  The shares were issued pursuant to the Company's existing shelf registration statement.  The Company intends to use the net proceeds from this sale of Series F Preferred Stock to redeem all of the 9.125% Series C Cumulative Redeemable Preferred Units (the "Series C Preferred Units") of Essex Portfolio, L.P., of which the Company is the general partner.    On October 15, 2003, the Company issued a notice of redemption to the holders of Series C Preferred Stock.  The Company expects to redeem all outstanding Series C Preferred Units on November 24, 2003, for a price of $50.00 per unit plus accrued and unpaid dividends. 

On October 6, 2003, the Company sold 1.6 million newly issued shares of common stock and received offering proceeds (before expenses) of $60.67 per share, representing a 3.25% discount to the common stock's closing price on September 30, 2003, the date of the underwriting agreement between the Company and the underwriter, pursuant to which the shares were sold.  The shares were issued pursuant to the Company's existing shelf registration statement.  The net proceeds of the offering of approximately $40.3 million.

21

After the Company's equity issuances, the Company has the capacity pursuant to existing shelf registration statements to issue up to $219,455,250 in equity securities and the Operating Partnership has the capacity pursuant to such registration statements to issue up to $250,000,000 of debt securities.

Contractual Obligations and Commercial Commitments

The following table summarizes our contractual obligations and other commitments at March 31,September 30, 2003, and the effect such obligations could have on our liquidity and cash flow in future periods:

                                Less Than     2-3        4-5      Over 5
                                 1 Year      Years      Years      Years      Total
(In thousands)                  ---------  ---------  ---------  ---------  ---------
Mortgage notes payable         $   5,1921,689  $  48,09448,904  $  83,527  $ 522,083530,476  $ 658,896664,596
Lines of credit                   30,000    123,000132,700         --         --    153,000162,700
Development commitments(1)        40,30036,400         --         --         --     40,30036,400
Redevelopment commitments(2)       3,000         --         --         --      3,000
Essex Apartment Value Fund, L.P.
   capital commitment             40,29515,285         --         --         --     40,29515,285
                                ---------  ---------  ---------  ---------  ---------
                               $  115,78786,374  $ 171,094181,604  $  83,527  $ 522,083530,476  $ 892,491881,981
                                =========  =========  =========  =========  =========

26

New Accounting Pronouncements Not Yet Adopted

In January 2003, the FASB approved for issuance FASB Interpretation No. 46 (FIN 46), "Consolidation of Variable Interest Entities." FIN 46 clarifies the application of Accounting Research Bulletin No. 51, "Consolidated Financial Statements" to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 applies immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. It applies in the first fiscal year or interim period beginningending after JuneDecember 15, 2003, to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. FIN 46 may be applied prospectively with a cumulative-effect adjustment as of the date on which it is first applied or by restating previously issued financial statements for one or more years with a cumulative-effect adjustment as of the beginning of the first year restated. The disclosure requirements of FIN 46 are effective for all financial statements initially issued after January 31, 2003. It is reasonably possible that certain of the entities through which and with which the Company conducts business, including those described in Notes 3(b) and 5 of the Company's December 31, 2002 consolidated financial statements will be deemed to be Variable Interest Entities (VIEs) under the provisions of FIN 46. TheBased on its preliminary evaluation of the entities considered reasonably possible to be VIEs, the total assets and liabilities net of intercompany balances of such entities were estimated at $78,782$77,775,000 and $51,853$55,603,000 at March 31,September 30, 2003. The Company's estimated maximum exposure to loss would be equal to its investments in these arrangements, plus the related debt guarantees, which totaled $29,235,$22,850,000, as of March 31,September 30, 2003. The disclosures provided reflect management's understanding and analysis of FIN 46 based upon information currently available. The evaluation of the impact of FIN 46 on the Company's various arrangementsconsolidated financial statements is ongoing and is subject to change in the event additional interpretive guidance is provided by the Financial Accounting Standards Board or others.

Forward Looking Statements

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, and Section 21E of the Securities and Exchange Act of 1934, as amended, including statements regarding the Company's expectations, hopes, intentions, beliefs and strategies regarding the future. Forward looking statements include statements regarding the Company's expectations as to the timing of completion of current development projects and the stabilization dates of such projects, expectation as to the total projected costs and rental rates of current development projects, beliefs as to the adequacy of future cash flows to meet operating requirements and to provide for dividend payments in accordance with REIT requirements, expectations as to the amount of capital expenditures, expectations as to the amount of non-revenue generating capital expenditures, future acquisitions and developments, the anticipated performance of the Essex Apartment Value Fund, L.P., the anticipated performance of existing properties, and statements regarding the Company's financing activities and the use of proceeds from such activities.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors including, but not limited to, that the Company will fail to achieve its business objectives, that the actual completion of development projects will be subject to delays, that the stabilization dates of such projects will be delayed, that the total projected costs of current development projects will exceed expectations, that such development projects will not be completed, that development projects and acquisitions will fail to meet expectations, that estimates of future income from an acquired property may prove to be inaccurate, that future cash flows will be inadequate to meet operating requirements and/or will be insufficient to provide for dividend payments in accordance with REIT requirements, that the actual non-revenue generating capital expenditures will exceed the Company's current expectations, that the Essex Apartment Value Fund will fail to perform as anticipated, that the Company's partners in this Fund fail to fund capital commitments as contractually required, that there may be a downturn in the markets in which the Company's properties are located, and that the terms of any refinancing may not be as favorable as the terms of existing indebtedness, and that the Company will not be able to complete property acquisitions, as anticipated, for which the proceeds from recent equity issuances were intended to be used, as well as those risks, special considerations, and other factors discussed under the caption "Potential Factors Affecting Future Operating Results" below and those discussed under the caption "Other Matters/Risk Factors" in Item 1 of the Company's Annual Report on Form 10-K for the year ended December 31, 2002, and those other 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.

2227

Potential Factors Affecting Future Operating Results

Many factors affect the Company's actual financial performance and may cause the Company's future results to be different from past performance or trends. These factors include those factors discussed under the caption "Other Matters/Risk Factors" in Item 1 of the Company's Annual Report on Form 10-K for the year ended December 31, 2002 and the following:  

Economic Environment and Impact on Operating Results

Both the national economy and the economies of the western states in which the Company owns, manages and develops properties, some of which are concentrated in high-tech sectors, have been and may continue to be in an economic downturn .downturn. The impacts of such recessiondownturn on operating results can include, and are not limited to, reduction in rental rates, occupancy levels, property valuations and increases in operating costs such as advertising, turnover and repair and maintenance expense.

The Company's property type and diverse geographic locations provide some degree of risk moderation but are not immune to a prolonged down cycle in the real estate markets in which the Company operates. Although the Company believes it is well positioned to meet the challenges ahead, it is possible that further reductions in occupancy and market rental rates will result in reduction of rental revenues, operating income, cash flows, and market value of the Company's shares. Prolonged recession could also affect the Company's ability to obtain financing at acceptable rates of interest and to access funds from the disposition of properties at acceptable prices.

Development and Redevelopment Activities

The Company pursues multifamily residential properties and development and redevelopment projects from time to time. Development projects generally require various government and other approvals, the receipt of which cannot be assured. The Company's development and redevelopment activities generally entail certain risks, including the following:

• funds may be expended and management's time devoted to projects that may not be completed;
• construction costs of a project may exceed original estimates possibly making the project economically unfeasible;
• projects may be delayed due to, among other things, adverse weather conditions;
• occupancy rates and rents at a completed project may be less than anticipated; and
• expenses at a completed development project may be higher than anticipated.

These risks may reduce the funds available for distribution to the Company's stockholders. Further, the development and redevelopment of properties is also subject to the general risks associated with real estate investments.

23

Interest Rate Fluctuations

The Company monitors changes in interest rates and believes that it is well positioned from both a liquidity and interest rate risk perspective. However, current interest rates are at historic lows and potentially could increase rapidly to levels more in line with recent levels. The immediate effect of significant and rapid interest rate increases would result in higher interest expense on the Company's variable interest rate debt. The effect of prolonged interest rate increases could negatively impact the Company's ability to make acquisitions and develop properties at economic returns on investment and the Company's ability to refinance existing borrowings at acceptable rates.

Inflation /Deflation

Inflationary increasesSubstantial inflationary or deflationary pressures would likely have a negative effect on rental rates and property operating results and such increases may be at greater rates of increases than property rental rates in a period of recession.expenses. The Company believes it effectively manages its property and other expenses but understands that a return to highersubstantial annual rates of inflation would result in increases toor deflation could adversely impact operating expense.results.

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Funds from Operations

Funds from Operations, as defined by the National Association of Real Estate Investment Trusts ("NAREIT") is generally considered by industry analysts as an appropriate measure of performance of an equity REIT. Generally, Funds from Operations adjusts the net income of equity REITSREITs for charges such as depreciation and amortization of rental properties, gains/ losses on sales of real estate and extraordinary items. Management considers Funds from Operations to be a useful financial operating performance measurement of an equity REIT because, together with net income and cash flows, Funds from Operations provides investors with an additional basis to evaluate the performance of a REIT. Funds from Operations does not represent net income or cash flows from operations as defined by generally accepted accounting principles (GAAP) and is not intended to indicate whether cash flows will be sufficient to fund cash needs. It should not be considered as an alternative to net income as an indicator of the REIT's operating performance or to cash flows as a measure of liquidity. Funds from Operations does not measure whether cash flow is sufficient to fund all cash needs including principal amortization, capital improvements and distributions to shareholders. Funds from Operations also does not represent cash flows generated from operating, investing or financing activities as defined under GAAP. Further, Funds from Operations as disclosed by other REITs may not be comparable to the Company's calculation of Funds from Operations.

The following table sets forth the Company's calculation of Funds from Operations for the three and nine months ended March 31,September 30, 2003 and 2002.

                                                     Three Months Ended              March 31,Nine Months Ended
                                                        September 30,                 September 30,
                                                 ----------------------------  --------------------------
                                                     2003           2002           2003          2002
                                                 -------------  -------------  ------------  ------------
Income from continuing operations before
  minority intrusts and discontinued
  operations                                    $  16,128,00014,864,000  $  17,208,00016,578,000  $ 47,388,000  $ 53,296,000
Adjustments:
    Gain on sale of co-investment activities               --        (19,000)                 (1,408,000)
    Depreciation and amortization                  11,609,000      8,986,00012,308,000      9,129,000    35,473,000    27,229,000
    Depreciation and amortization --
       unconsolidated co-investments                2,172,000      1,830,0002,663,000      2,170,000     7,071,000     5,892,000
    Minority interests, excluding depreciation     (4,611,000)    (4,587,000)(4,612,000)    (4,607,000)  (13,829,000)  (13,816,000)
    Income from discontinued operations                    --             152,000--            --       225,000
    Depreciation - discontinued operations                 --             94,000--            --       191,000
                                                 -------------  -------------  ------------  ------------
    Funds From Operations                       $  25,298,00025,223,000  $  23,683,00023,251,000  $ 76,103,000  $ 71,609,000
                                                 =============  =============  ============  ============
Weighted average number
  shares outstanding diluted (1)                   23,494,051     21,006,67823,647,225     20,829,211    23,535,160    20,962,971
                                                 =============  =============  Three============  ============


                                                                                    Nine Months Ended
                                                                                      March 31,
                                                ----------------------------September 30,
                                                                               --------------------------
                                                                                   2003          2002
                                                                               -------------  -------------------------  ------------
Cash flow provided by (used in):
     Operating activities                                                     $ 29,678,00073,748,000  $ 27,390,00067,892,000
     Investing activities                                                      (15,059,000)   (16,887,000)(58,553,000)  (37,215,000)
     Financing activities                                                      (12,814,000)   (10,075,000)(13,357,000)  (34,970,000)

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Item 3.3: Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to interest rate changes primarily as a result of its line of credit and long-term debt used to maintain liquidity and fund capital expenditures and expansion of the 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 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.

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 and sensitivity to interest rate changes.

For the Years Ended           2003      2004      2005       2006      2007    Thereafter        Total     Fair value
                            --------  --------  ---------  --------  --------  -----------     ---------   ---------
Fixed rate debt
   (In thousands)
Amount                     $  5,1921,689  $  7,0917,901  $  41,003  $ 20,397  $ 63,130  $   461,714460,904     $ 598,527595,024   $ 576,894
Average interest rate           6.9%      6.9%       6.9%      6.9%      6.9%         6.8%

Variable rate LIBOR debt
   (In thousands)
Amount                     $ 30,000  $123,000$132,700  $      --  $     --  $     --  $    60,36969,572 (1) $ 213,369232,272   $ 213,369232,272
Average interest                2.6%      2.6%2.7%      2.3%        --        --        --          5.1%3.7%

The table incorporates only those exposures that exist as of March 31,September 30, 2003; it does not consider those exposures or positions that could arise after that date. As a result, our ultimate realized gain or loss, with respect to interest rate fluctuations, would depend on the exposures that arise during the period, our hedging strategies at the time, and interest rates.

Item 4.4: Controls and Procedures

Within 90 days prior to the filing dateAs of this report,September 30, 2003, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-14 and 15d-1413a-15 of the Securities Exchange Act of 1934, as amended. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting management to material information relating to the Company that is required to be included in our periodic filings with the Securities and Exchange Commission. There have beenwere no significant changes in ourthe Company's internal controlscontrol over financial reporting, that occurred during the quarter ended September 30, 2003, that have materially affected, or in other factors that could significantlyare reasonably likely to materially affect, the Company's internal controls subsequent to the date we carried out our evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.control over financial reporting.

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Part II -- Other Information

Item 2.2: Changes in Securities and Use of Proceeds

On June 14, 2000September 23, 2003, the Company purchased Waterford Place,issued 1,000,000 shares of its Series F Cumulative Redeemable Preferred Shares (the "Series F Preferred Stock") at a 238-unit apartment community located in San Jose, California for a contractfixed price of $35 million, which excluded$24.664 per share, a contingent paymentdiscount from the $25.00 per share liquidation value of the shares. The shares do not begin to accrue a dividend until November 25, 2003 and following that date, will pay quarterly distributions at an annualized rate of 7.8125% per year of the liquidation value and will be paidredeemable by the Company on or after September 23, 2008. The shares of Series F Preferred Stock were issued pursuant to the termsCompany's shelf registration statement. With respect to distribution and rights upon voluntary or involuntary liquidation, winding-up or dissolution of the agreement. The amountCompany, the Series F Preferred Stock ranks senior to the Company's registered common stock and on parity with the Company's Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock.

Sales of the contingent payment was disputed, and submitted to binding arbitration.Unregistered Securities. On March 19,July 30, 2003, in connection with the Company's acquisition, by merger, of John M. Sachs, Inc. ("Sachs") on December 17, 2002, and under terms of the merger agreement, a final analysis was prepared, which indicated that arbitration,the actual net liabilities were less than the net liabilities of Sachs estimated to be outstanding as of the merger date. Based on this final analysis, and as a post-closing adjustment payment pursuant to the merger agreement, the Company was directed to issuemade a final payment of $1,766,000 in cash and issued an additional 109,875 operating partnership units to the seller. Such operating partnership units are exchangeable into35,860 shares of the Company's common stock at the optionto certain of the holder.pre- merger shareholders of Sachs. This issuance of operating partnership unitscommon stock was completed pursuant to the exemption from registration set forth incontained on Section 4(2) of the Securities Act of 1933, as amended. The arbitration award has not been finalized as of the date of this report, and is not expected to be materially in excess of what was recorded to date.

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Item 6.6: Exhibits and Reports on Form 8-K

1. Exhibits

99.13.1 Articles Supplementary relating to the 7.8125% Series F Cumulative Reedemable Preferred Stock, attached as Exhibit 3.1 to the Company's Form 8-K, dated September 19, 2003, and incorporated herein by reference.

10.1 Series F Cumulative Redeemable Preferred Stock Purchase Agreement, dated September 18, 2003, by and between Essex Property Trust, Inc. and Lend Lease Rosen Real Estate Securities, LLC, attached as Exhibit 10.1 to the Company's Form 8-K, dated September 19, 2003 and incorporated herein by reference.

10.2 Eighth Amendment to the First Amended and Restated Agreement of Limited Partnership of Essex Portfolio, L.P., dated September 23, 2003.

10.3 Amended and Restated Revolving Note Agreements (increasing credit line to $185 million).

10.4 Second Amendment to Second Amended and Restated Revolving Credit Agreement.

31.1 Certification of Keith R. Guericke, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of Michael J. Schall, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of Keith R. Guericke, Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.232.2 Certification of Michael J. Schall, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

2. Reports on Form 8-K

2732

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

28
33

ESSEX PROPERTY TRUST, INC.

CERTIFICATION PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Keith R. Guericke, certify that: