UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended September 30, 20172023


OR


o☐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 001-13106File Number)


ESSEX PROPERTY TRUST, INC.
ESSEX PORTFOLIO, L.P.
(Exact name of Registrant as Specified in its Charter)
Maryland (Essex
77-0369576
(Essex Property Trust, Inc.)
(Essex Property Trust, Inc.)
California77-0369575
 (Essex Portfolio, L.P.)
77-0369576 (Essex Property Trust, Inc.)
77-0369575 (Essex(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, includingIncluding 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 classTrading
Symbol(s)		Name of each exchange on which registered
Common Stock, $.0001 par value (Essex Property Trust, Inc.)ESSNew 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)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 x   No o
Yes
☒No☐Essex Portfolio, L.P.Yesx☒Noo☐


i

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

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"large accelerated filer,” “accelerated" "accelerated filer,” “smaller" "smaller reporting company”company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

i



Essex Property Trust, Inc.:
Large accelerated filer☒
Accelerated filer☐Non-accelerated filer☐Smaller reporting company☐
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o   (Do not check if a smaller reporting company)
Smaller reporting company o
Emerging growth companyo


☐


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

☐
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.o
☐
Essex Portfolio, L.P.o☐


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 o   No x
Yes
☐No☒Essex Portfolio, L.P.Yeso☐Nox☒
 
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: 66,037,02964,184,604 shares of Common Stock ($0.0001.0001 par value) of Essex Property Trust, Inc. were outstanding as of October 30, 2017.
25, 2023.

ii


EXPLANATORY NOTE


This report combines the reports on Form 10-Q for the three and nine month periods ended September 30, 20172023 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”"Essex" mean Essex Property Trust, Inc., a Maryland corporation thatnot including any of its subsidiaries.

Essex operates as a self-administered and self-managed real estate investment trust (“REIT”("REIT"), and references to “EPLP” mean Essex Portfolio, L.P. References to the “Company,” “we,” “us” or “our” mean collectively Essex, EPLP and those entities/subsidiaries owned or controlled by Essex and/or EPLP.  References to the “Operating Partnership” mean collectively EPLP and those entities/subsidiaries owned or controlled by EPLP.

Essex is the general partner of EPLP and as the sole general partner of EPLP,the Operating Partnership. As the sole general partner of the Operating Partnership, Essex has exclusive control of EPLP'sthe Operating Partnership's day-to-day management.


The Company is structured as an umbrella partnership REIT (“UPREIT”("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"Units," and the holders of such OP Units, "Unitholders") equal to the number of shares of common stock it has issued in the equity offering.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 EPLP'sthe 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 EPLPthe Operating Partnership into this single report provides the following benefits:


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


Management operates the CompanyEssex and the Operating Partnership as one business. The management of Essex consists of the same members as the management of EPLP.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 EPLP.the Operating Partnership. Essex's primary function is acting as the general partner of EPLP.the Operating Partnership. As general partner with control of the Operating Partnership, the CompanyEssex consolidates the Operating Partnership for financial reporting purposes. Therefore, the assets and liabilities of the CompanyEssex 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 EPLP,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 joint ventures.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 additional 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 joint ventures.co-investments.


iii

The Company believes it is important to understand the few differences between Essex and EPLPthe Operating Partnership in the context of how Essex and EPLPthe 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 the CompanyEssex 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 condensed consolidated partnerships and joint ventureco-investment partners. The noncontrolling interest in the Company'sEssex's condensed consolidated financial statements include (i) the same noncontrolling interest as presented in the Operating Partnership’s condensed consolidated financial statements and (ii) OP Unit holders.Unitholders. The differences between stockholders' equity and partners' capital result from differences in the equity issued at the CompanyEssex and Operating Partnership levels.
 
To help investors understand the significant differences between the CompanyEssex and the Operating Partnership, this report on Form 10-Q provides separate condensed consolidated financial statements for the CompanyEssex and the Operating Partnership; a single set of consolidated

iii

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 the CompanyEssex and the Operating Partnership in order to establish that the requisite certifications have been made and that the CompanyEssex 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 the CompanyEssex and the Operating Partnership, the separate sections in this report on Form 10-Q for the CompanyEssex and the Operating Partnership specifically refer to the CompanyEssex and the Operating Partnership. In the sections that combine disclosure of the CompanyEssex and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of the Company. Although the Operating Partnership is generally the entity that directly or indirectly enters into contracts and joint venturesco-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 the CompanyEssex 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, 2016.2022.

iv


ESSEX PROPERTY TRUST, INC.
ESSEX PORTFOLIO, L.P.
FORM 10-Q
INDEXTABLE OF CONTENTS


PART I. FINANCIAL INFORMATIONPage No.
PART I. FINANCIAL INFORMATIONPage No.
Item 1.Condensed Consolidated Financial Statements of Essex Property Trust, Inc. (Unaudited)
2
3
4
58
Condensed Consolidated Financial Statements of Essex Portfolio, L.P. (Unaudited)
710
811
912
1016
1218
Item 2.
2736
Item 3.
3646
Item 4.
3747
PART II. OTHER INFORMATION
Item 1.
3848
Item 1A.
3848
Item 2.
3848
Item 3.
48
Item 4.
48
Item 5.
3849
Item 6.
3950
4051
1
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)
ASSETSSeptember 30, 2017 December 31, 2016ASSETSSeptember 30, 2023December 31, 2022
Real estate:   Real estate:
Rental properties:   Rental properties:
Land and land improvements$2,719,064
 $2,559,743
Land and land improvements$3,036,912 $3,043,321 
Buildings and improvements10,585,742
 10,116,563
Buildings and improvements13,036,033 12,922,906 
13,304,806
 12,676,306
 16,072,945 15,966,227 
Less: accumulated depreciation(2,651,542) (2,311,546)Less: accumulated depreciation(5,527,559)(5,152,133)
10,653,264
 10,364,760
 10,545,386 10,814,094 
Real estate under development313,825
 190,505
Real estate under development23,067 24,857 
Co-investments1,124,577
 1,161,275
Co-investments1,133,515 1,127,491 
Real estate held for sale, net—
 101,957
12,091,666
 11,818,497
11,701,968 11,966,442 
Cash and cash equivalents-unrestricted46,507
 64,921
Cash and cash equivalents-unrestricted391,994 33,295 
Cash and cash equivalents-restricted16,766
 105,381
Cash and cash equivalents-restricted8,503 9,386 
Marketable securities184,574
 139,189
Notes and other receivables (includes related party receivables of $65.6 million and $11.3 million as of September 30, 2017 and December 31, 2016, respectively)121,557
 40,970
Marketable securities, net of allowance for credit losses of zero as of both September 30, 2023 and December 31, 2022Marketable securities, net of allowance for credit losses of zero as of both September 30, 2023 and December 31, 202290,186 112,743 
Notes and other receivables, net of allowance for credit losses of $0.6 million and $0.3 million as of September 30, 2023 and December 31, 2022, respectively (includes related party receivables of $7.2 million and $7.0 million as of September 30, 2023 and December 31, 2022, respectively)Notes and other receivables, net of allowance for credit losses of $0.6 million and $0.3 million as of September 30, 2023 and December 31, 2022, respectively (includes related party receivables of $7.2 million and $7.0 million as of September 30, 2023 and December 31, 2022, respectively)164,603 103,045 
Operating lease right-of-use assetsOperating lease right-of-use assets64,636 67,239 
Prepaid expenses and other assets51,453
 48,450
Prepaid expenses and other assets75,757 80,755 
Total assets$12,512,523
 $12,217,408
Total assets$12,497,647 $12,372,905 
   
LIABILITIES AND EQUITY 
  
LIABILITIES AND EQUITY  
Unsecured debt, net$3,501,146
 $3,246,779
Unsecured debt, net$5,316,929 $5,312,168 
Mortgage notes payable, net2,111,467
 2,191,481
Mortgage notes payable, net888,010 593,943 
Lines of credit2,609
 125,000
Lines of credit— 52,073 
Accounts payable and accrued liabilities222,122
 138,226
Accounts payable and accrued liabilities215,201 165,461 
Construction payable59,767
 35,909
Construction payable22,709 23,159 
Dividends payable121,496
 110,170
Dividends payable155,806 149,166 
Distributions in excess of investments in co-investments36,245
 —
Distributions in excess of investments in co-investments50,686 42,532 
Operating lease liabilitiesOperating lease liabilities65,927 68,696 
Other liabilities33,733
 32,922
Other liabilities45,972 43,441 
Total liabilities6,088,585
 5,880,487
Total liabilities6,761,240 6,450,639 
Commitments and contingencies

 

Commitments and contingencies
Redeemable noncontrolling interest40,044
 44,684
Redeemable noncontrolling interest29,960 27,150 
Equity: 
  
Equity:  
Common stock; $0.0001 par value, 670,000,000 shares authorized; 66,002,487 and 65,527,993 shares issued and outstanding, respectively6
 6
Common stock; $0.0001 par value, 670,000,000 shares authorized; 64,184,604 and 64,604,603 shares issued and outstanding, respectivelyCommon stock; $0.0001 par value, 670,000,000 shares authorized; 64,184,604 and 64,604,603 shares issued and outstanding, respectively6 6 
Additional paid-in capital7,111,866
 7,029,679
Additional paid-in capital6,660,916 6,750,076 
Distributions in excess of accumulated earnings(821,732) (805,409)Distributions in excess of accumulated earnings(1,184,597)(1,080,176)
Accumulated other comprehensive loss, net(24,632) (32,098)
Accumulated other comprehensive income, netAccumulated other comprehensive income, net55,358 46,466 
Total stockholders' equity6,265,508
 6,192,178
Total stockholders' equity5,531,683 5,716,372 
Noncontrolling interest118,386
 100,059
Noncontrolling interest174,764 178,744 
Total equity6,383,894
 6,292,237
Total equity5,706,447 5,895,116 
Total liabilities and equity$12,512,523
 $12,217,408
Total liabilities and equity$12,497,647 $12,372,905 
See accompanying notes to the unaudited condensed consolidated financial statements.
2
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 September 30,Nine Months Ended September 30,
 2023202220232022
Revenues:
Rental and other property$416,398 $406,862 $1,239,319 $1,183,318 
Management and other fees from affiliates2,785 2,886 8,328 8,313 
 419,183 409,748 1,247,647 1,191,631 
Expenses:  
Property operating, excluding real estate taxes77,020 73,450 224,745 212,069 
Real estate taxes46,876 46,593 138,787 137,594 
Corporate-level property management expenses11,504 10,184 34,387 30,532 
Depreciation and amortization137,357 135,511 410,422 403,561 
General and administrative14,611 15,172 43,735 40,541 
Expensed acquisition and investment related costs31 230 375 248 
Casualty loss— — 433 — 
 287,399 281,140 852,884 824,545 
Gain on sale of real estate and land— — 59,238 — 
Earnings from operations131,784 128,608 454,001 367,086 
Interest expense(54,161)(51,645)(157,806)(152,499)
Total return swap income690 1,882 2,544 6,709 
Interest and other income (loss)4,406 (6,796)29,055 (31,571)
Equity income from co-investments10,694 10,985 33,802 23,756 
Tax (expense) benefit on unconsolidated co-investments(404)(1,755)(1,237)7,863 
Loss on early retirement of debt, net— (2)— (2)
Gain on remeasurement of co-investment— 17,423 — 17,423 
Net income93,009 98,700 360,359 238,765 
Net income attributable to noncontrolling interest(5,727)(5,858)(19,925)(15,615)
Net income available to common stockholders$87,282 $92,842 $340,434 $223,150 
Comprehensive income$97,122 $124,797 $369,564 $297,053 
Comprehensive income attributable to noncontrolling interest(5,867)(6,740)(20,238)(17,582)
Comprehensive income attributable to controlling interest$91,255 $118,057 $349,326 $279,471 
Per share data:  
Basic:  
Net income available to common stockholders$1.36 $1.43 $5.30 $3.42 
Weighted average number of shares outstanding during the period64,184,180 65,059,678 64,274,085 65,198,532 
Diluted:  
Net income available to common stockholders$1.36 $1.43 $5.30 $3.42 
Weighted average number of shares outstanding during the period64,186,020 65,067,790 64,275,279 65,225,767 
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Revenues:       
Rental and other property$341,974
 $327,078
 $1,011,908
 $958,818
Management and other fees from affiliates2,395
 2,093
 6,927
 6,145
 344,369
 329,171
 1,018,835
 964,963
Expenses: 
  
    
Property operating, excluding real estate taxes66,606
 63,781
 193,632
 185,390
Real estate taxes37,531
 35,580
 108,283
 104,540
Depreciation and amortization117,451
 110,467
 350,893
 329,847
General and administrative9,788
 9,647
 30,726
 28,527
Acquisition and investment related costs324
 284
 1,154
 1,379
 231,700
 219,759
 684,688
 649,683
Earnings from operations112,669
 109,412
 334,147
 315,280
Interest expense(55,938) (56,693) (167,333) (164,727)
Total return swap income2,538
 3,143
 7,653
 9,080
Interest and other income5,790
 4,943
 17,916
 19,560
Equity income from co-investments19,727
 9,568
 40,934
 38,932
Loss on early retirement of debt—
 (211) —
 (211)
Gain on sale of real estate and land249
 —
 26,423
 20,258
Deferred tax expense on gain on sale of real estate and land—
 —
 —
 (4,279)
Gain on remeasurement of co-investment—
 —
 88,641
 —
Net income85,035
 70,162
 348,381
 233,893
Net income attributable to noncontrolling interest(5,312) (4,601) (18,935) (14,483)
Net income attributable to controlling interest79,723
 65,561
 329,446
 219,410
Dividends to preferred stockholders—
 —
 —
 (1,314)
Excess of redemption value of preferred stock over the carrying value—
 —
 —
 (2,541)
Net income available to common stockholders$79,723
 $65,561
 $329,446
 $215,555
Comprehensive income$88,870
 $73,173
 $356,102
 $235,874
Comprehensive income attributable to noncontrolling interest(5,438) (4,700) (19,190) (14,548)
Comprehensive income attributable to controlling interest$83,432
 $68,473
 $336,912
 $221,326
Per share data: 
  
    
Basic: 
  
    
Net income available to common stockholders$1.21
 $1.00
 $5.01
 $3.29
Weighted average number of shares outstanding during the period65,994,896
 65,507,669
 65,759,450
 65,455,004
Diluted: 
  
    
Net income available to common stockholders$1.21
 $1.00
 $5.00
 $3.29
Weighted average number of shares outstanding during the period66,078,283
 65,617,551
 65,836,965
 65,578,661
Dividend per common share$1.75
 $1.60
 $5.25
 $4.80


See accompanying notes to the unaudited condensed consolidated financial statements.
3
Table of Contents



ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
Condensed Consolidated StatementStatements of Equity for the three and nine months ended September 30, 20172023 and 2022
(Unaudited)
(In thousands)
 Common stockAdditional paid-in capitalDistributions
in excess of accumulated
earnings		Accumulated
other
comprehensive income, net		Noncontrolling interestTotal
Three Months Ended September 30, 2023SharesAmount
Balances at June 30, 202364,183 $6 $6,657,481 $(1,123,594)$51,385 $176,727 $5,762,005 
Net income— — — 87,282 — 5,727 93,009 
Change in fair value of derivatives and amortization of swap settlements— — — — 3,973 140 4,113 
Issuance of common stock under:      
Sale of common stock, net— — (106)— — — (106)
Equity based compensation costs— — 2,211 — — 78 2,289 
Changes in the redemption value of redeemable noncontrolling interest— — 1,317 — — 78 1,395 
Distributions to noncontrolling interest— — — — — (7,973)(7,973)
Redemptions of noncontrolling interest2 — 13 — — (13)— 
Common stock dividends ($2.31 per share)— — — (148,285)— — (148,285)
Balances at September 30, 202364,185 $6 $6,660,916 $(1,184,597)$55,358 $174,764 $5,706,447 


4
Table of Contents


Common stockAdditional paid-in capitalDistributions
in excess of accumulated
earnings		Accumulated
other
comprehensive income, net		Noncontrolling interestTotal
Nine Months Ended September 30, 2023Nine Months Ended September 30, 2023SharesAmount
Balances at December 31, 2022Balances at December 31, 202264,605 $6 $6,750,076 $(1,080,176)$46,466 $178,744 $5,895,116 
Net incomeNet income— — — 340,434 — 19,925 360,359 
 Common stock Additional paid-in capital 
Distributions
in excess of accumulated earnings
 
Accumulated
other
comprehensive loss, net
 Noncontrolling Interest  
 Shares Amount Total
Balances at December 31, 2016 65,528
 $6
 $7,029,679
 $(805,409) $(32,098) $100,059
 $6,292,237
Net income —
 —
 —
 329,446
 —
 18,935
 348,381
Reversal of unrealized gains upon the sale of marketable securities —
 —
 —
 —
 (1,596) (54) (1,650)
Change in fair value of derivatives and amortization of swap settlements —
 —
 —
 —
 7,160
 245
 7,405
Change in fair value of derivatives and amortization of swap settlements— — — — 8,892 313 9,205 
Change in fair value of marketable securities, net —
 —
 —
 —
 1,902
 64
 1,966
Issuance of common stock under:  
  
  
  
  
  
  
Issuance of common stock under:
Stock option and restricted stock plans, net 160
 —
 24,079
 —
 —
 —
 24,079
Stock option and restricted stock plans, net3 — — — — — — 
Sale of common stock, net 312
 —
 80,377
 —
 —
 —
 80,377
Sale of common stock, net— — (231)— — — (231)
Equity based compensation costs —
 —
 3,814
 —
 —
 1,080
 4,894
Equity based compensation costs— — 9,598 — — 337 9,935 
Retirement of common stock, netRetirement of common stock, net(437)— (95,657)— — — (95,657)
Changes in the redemption value of redeemable noncontrolling interest —
 —
 (916) —
 —
 13
 (903)Changes in the redemption value of redeemable noncontrolling interest— — (2,770)— — (40)(2,810)
Contributions from noncontrolling interest —
 —
 —
 —
 —
 22,506
 22,506
Distributions to noncontrolling interest —
 —
 —
 —
 —
 (21,072) (21,072)Distributions to noncontrolling interest— — — — — (24,006)(24,006)
Redemptions of noncontrolling interest 2
 —
 (25,167) —
 —
 (3,390) (28,557)Redemptions of noncontrolling interest14 — (100)— — (509)(609)
Common stock dividends —
 —
 —
 (345,769) —
 —
 (345,769)
Balances at September 30, 2017 66,002
 $6
 $7,111,866
 $(821,732) $(24,632) $118,386
 $6,383,894
Common stock dividends ($6.93 per share)Common stock dividends ($6.93 per share)— — — (444,855)— — (444,855)
Balances at September 30, 2023Balances at September 30, 202364,185 $6 $6,660,916 $(1,184,597)$55,358 $174,764 $5,706,447 



5
Table of Contents


Common stockAdditional paid-in capitalDistributions
in excess of accumulated
earnings		Accumulated
other
comprehensive income, net		Noncontrolling InterestTotal
Three Months Ended September 30, 2022SharesAmount
Balances at June 30, 202265,124 $7 $6,875,863 $(1,073,577)$25,554 $178,738 $6,006,585 
Net income— — — 92,842 — 5,858 98,700 
Change in fair value of derivatives and amortization of swap settlements— — — — 25,304 885 26,189 
Change in fair value of marketable debt securities, net— — — — (89)(3)(92)
Issuance of common stock under:
Stock option and restricted stock plans, net1 — 155 — — — 155 
Sale of common stock, net— — (107)— — — (107)
Equity based compensation costs— — 1,891 — — 66 1,957 
Retirement of common stock, net(372)(1)(97,120)— — — (97,121)
Changes in the redemption value of redeemable noncontrolling interest— — 3,195 — — 532 3,727 
Distributions to noncontrolling interest— — — — — (7,748)(7,748)
Redemptions of noncontrolling interest— — (8,005)— — (563)(8,568)
Common stock dividends ($2.20 per share)— — — (142,480)— — (142,480)
Balances at September 30, 202264,753 $6 $6,775,872 $(1,123,215)$50,769 $177,765 $5,881,197 

6
Table of Contents


Common stockAdditional paid-in capitalDistributions
in excess of accumulated
earnings		Accumulated
other
comprehensive income (loss), net		Noncontrolling InterestTotal
Nine Months Ended September 30, 2022SharesAmount
Balances at December 31, 202165,248 $7 $6,915,981 $(916,833)$(5,552)$182,905 $6,176,508 
Net income— — — 223,150 — 15,615 238,765 
Change in fair value of derivatives and amortization of swap settlements— — — — 56,124 1,960 58,084 
Change in fair value of marketable debt securities, net— — — — 197 7 204 
Issuance of common stock under:
Stock option and restricted stock plans, net88 — 17,194 — — — 17,194 
Sale of common stock, net— — (314)— — — (314)
Equity based compensation costs— — 6,843 — — 239 7,082 
Retirement of common stock, net(591)(1)(157,950)— — — (157,951)
Changes in the redemption value of redeemable noncontrolling interest— — 4,246 — — 704 4,950 
Contributions from noncontrolling interest— — — — — 125 125 
Distributions to noncontrolling interest— — — — — (22,989)(22,989)
Redemptions of noncontrolling interest8 — (10,128)— — (801)(10,929)
Common stock dividends ($6.60 per share)— — — (429,532)— — (429,532)
Balances at September 30, 202264,753 $6 $6,775,872 $(1,123,215)$50,769 $177,765 $5,881,197 

See accompanying notes to the unaudited condensed consolidated financial statements.
7
Table of Contents



ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)thousands, except parenthetical amounts) 
 Nine Months Ended September 30,
 20232022
Cash flows from operating activities:
Net income$360,359 $238,765 
Adjustments to reconcile net income to net cash provided by operating activities:  
Straight-lined rents1,650 5,529 
Depreciation and amortization410,422 403,561 
Amortization of discount and debt financing costs, net5,028 4,916 
Realized and unrealized (gains) losses on marketable securities, net(4,294)51,126 
Provision for credit losses51 64 
Earnings from co-investments(33,802)(23,756)
Operating distributions from co-investments48,229 86,854 
Accrued interest from notes and other receivables(8,919)(10,748)
Casualty loss433 — 
Gain on the sale of real estate and land(59,238)— 
Equity-based compensation5,943 6,589 
Loss on early retirement of debt, net— 2 
Gain on remeasurement of co-investment— (17,423)
Changes in operating assets and liabilities: 
Prepaid expenses, receivables, operating lease right-of-use assets, and other assets3,024 15,406 
Accounts payable, accrued liabilities, and operating lease liabilities44,971 38,948 
Other liabilities2,533 8,902 
Net cash provided by operating activities776,390 808,735 
Cash flows from investing activities:  
Additions to real estate:  
Acquisitions of real estate and acquisition related capital expenditures, net of cash acquired(23,845)(21,759)
Redevelopment(56,168)(67,974)
Development acquisitions of and additions to real estate under development(6,317)(22,754)
Capital expenditures on rental properties(94,304)(107,105)
Investments in notes receivable(52,888)(160,013)
Collections of notes and other receivables— 303,088 
Proceeds from insurance for property losses2,991 4,325 
Proceeds from dispositions of real estate99,388 — 
Contributions to co-investments(32,169)(159,461)
Changes in refundable deposits10,200 (16,318)
Purchases of marketable securities(11,552)(12,760)
Sales and maturities of marketable securities46,989 30,025 
Non-operating distributions from co-investments15,251 161,324 
Net cash used in investing activities(102,424)(69,382)
Cash flows from financing activities:  
Proceeds from unsecured debt and mortgage notes598,000 — 
Payments on unsecured debt and mortgage notes(301,678)(24,103)
Proceeds from lines of credit844,021 1,053,663 
Repayments of lines of credit(896,094)(1,175,440)
8
Table of Contents


 Nine Months Ended September 30,
 2017 2016
Cash flows from operating activities:   
Net income$348,381
 $233,893
Adjustments to reconcile net income to net cash provided by operating activities: 
  
Depreciation and amortization350,893
 329,847
Amortization of discount on marketable securities and other investments(11,128) (10,771)
Amortization of (premium) discount and debt financing costs, net(5,132) (11,432)
Gain on sale of marketable securities and other investments(1,650) (2,876)
Company's share of gain on the sales of co-investments(10,058) (13,046)
Earnings from co-investments(30,876) (25,886)
Operating distributions from co-investments47,702
 45,342
Gain on the sale of real estate and land(26,423) (20,258)
Equity-based compensation4,894
 4,436
Loss on early retirement of debt, net—
 211
Gain on remeasurement of co-investment(88,641) —
Changes in operating assets and liabilities:   
   Prepaid expenses, receivables and other assets(7,862) 656
Accounts payable and accrued liabilities50,788
 49,961
Other liabilities399
 420
Net cash provided by operating activities621,287
 580,497
Cash flows from investing activities: 
  
Additions to real estate: 
  
Acquisitions of real estate and acquisition related capital expenditures(200,028) (124,054)
Redevelopment(50,642) (62,983)
Development acquisitions of and additions to real estate under development(92,936) (58,575)
Capital expenditures on rental properties(46,455) (40,503)
Investments in notes receivable(76,961) (4,375)
Proceeds from insurance for property losses648
 3,288
Proceeds from dispositions of real estate132,039
 48,008
Contributions to co-investments(231,552) (121,972)
Changes in restricted cash and refundable deposits91,209
 65,858
Purchases of marketable securities(65,668) (18,779)
Sales and maturities of marketable securities and other investments33,377
 14,708
Non-operating distributions from co-investments112,572
 34,564
Net cash used in investing activities(394,397) (264,815)
Cash flows from financing activities: 
  
Proceeds from unsecured debt and mortgage notes597,981
 499,724
Payments on unsecured debt and mortgage notes(460,040) (244,583)
Proceeds from lines of credit564,833
 321,373
Repayments of lines of credit(687,224) (336,373)
Repayment of cumulative redeemable preferred stock—
 (73,750)
Additions to deferred charges(4,108) (5,300)
Net proceeds from issuance of common stock80,377
 (382)
Net proceeds from stock options exercised24,079
 17,878
Payments related to tax withholding for share-based compensation(118) (222)
Distributions to noncontrolling interest(20,405) (19,844)
Redemption of noncontrolling interest(4,849) (2,435)
Redemption of redeemable noncontrolling interest(720) —
 Nine Months Ended September 30,
 20232022
Retirement of common stock(95,657)(157,951)
Additions to deferred charges(1,681)(140)
Net costs from issuance of common stock(231)(314)
Net proceeds from stock options exercised— 19,410 
Payments related to tax withholding for share-based compensation— (2,216)
Contributions from noncontrolling interest— 125 
Distributions to noncontrolling interest(23,532)(22,606)
Redemption of noncontrolling interest(609)(10,929)
Redemption of redeemable noncontrolling interest— (478)
Common stock dividends paid(438,689)(423,443)
Net cash used in financing activities(316,150)(744,422)
Net increase (decrease) in unrestricted and restricted cash and cash equivalents357,816 (5,069)
Unrestricted and restricted cash and cash equivalents at beginning of period42,681 58,638 
Unrestricted and restricted cash and cash equivalents at end of period$400,497 $53,569 
Supplemental disclosure of cash flow information:
Cash paid for interest (net of $0.7 million and $1.9 million capitalized in 2023 and 2022, respectively)$159,758 $149,970 
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$5,298 $5,225 
Supplemental disclosure of noncash investing and financing activities:  
Transfers between real estate under development and rental properties, net$827 $98,024 
Transfers from real estate under development to co-investments$1,322 $2,090 
Reclassifications to (from) redeemable noncontrolling interest from additional paid in capital and noncontrolling interest$2,810 $(4,950)
Debt assumed in connection with acquisition$— $21,303 

 Nine Months Ended September 30,
 2017 2016
Common and preferred stock dividends paid(335,110) (306,284)
Net cash used in financing activities(245,304) (150,198)
Net (decrease) increase in cash and cash equivalents(18,414) 165,484
Cash and cash equivalents at beginning of period64,921
 29,683
Cash and cash equivalents at end of period$46,507
 $195,167
    
Supplemental disclosure of cash flow information:   
Cash paid for interest, net of $10.0 million and $9.4 million capitalized in 2017 and 2016, respectively$148,742
 $140,183
Supplemental disclosure of noncash investing and financing activities: 
  
Issuance of DownREIT units in connection with acquisition of real estate$22,506
 $—
Transfers between real estate under development to rental properties, net$2,195
 $106,255
Transfer from real estate under development to co-investments$4,122
 $8,332
Reclassifications to (from) redeemable noncontrolling interest to or from additional paid in capital and noncontrolling interest$903
 $(1,343)
Debt assumed in connection with acquisition$51,882
 $48,832


See accompanying notes to the unaudited condensed consolidated financial statements.


9
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ESSEX PORTFOLIO, L.P.  AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except parenthetical and unit amounts)
ASSETSSeptember 30, 2023December 31, 2022
Real estate:
Rental properties:
Land and land improvements$3,036,912 $3,043,321 
Buildings and improvements13,036,033 12,922,906 
 16,072,945 15,966,227 
Less: accumulated depreciation(5,527,559)(5,152,133)
 10,545,386 10,814,094 
Real estate under development23,067 24,857 
Co-investments1,133,515 1,127,491 
11,701,968 11,966,442 
Cash and cash equivalents-unrestricted391,994 33,295 
Cash and cash equivalents-restricted8,503 9,386 
Marketable securities, net of allowance for credit losses of zero as of both September 30, 2023 and December 31, 202290,186 112,743 
Notes and other receivables, net of allowance for credit losses of $0.6 million and $0.3 million as of September 30, 2023 and December 31, 2022, respectively (includes related party receivables of $7.2 million and $7.0 million as of September 30, 2023 and December 31, 2022, respectively)164,603 103,045 
Operating lease right-of-use assets64,636 67,239 
Prepaid expenses and other assets75,757 80,755 
Total assets$12,497,647 $12,372,905 
LIABILITIES AND CAPITAL  
Unsecured debt, net$5,316,929 $5,312,168 
Mortgage notes payable, net888,010 593,943 
Lines of credit— 52,073 
Accounts payable and accrued liabilities215,201 165,461 
Construction payable22,709 23,159 
Distributions payable155,806 149,166 
Distributions in excess of investments in co-investments50,686 42,532 
Operating lease liabilities65,927 68,696 
Other liabilities45,972 43,441 
Total liabilities6,761,240 6,450,639 
Commitments and contingencies
Redeemable noncontrolling interest29,960 27,150 
Capital:  
General Partner:
Common equity (64,184,604 and 64,604,603 units issued and outstanding, respectively)5,476,325 5,669,906 
5,476,325 5,669,906 
Limited Partners:
Common equity (2,258,812 and 2,272,496 units issued and outstanding, respectively)47,714 51,454 
    Accumulated other comprehensive income, net61,215 52,010 
Total partners' capital5,585,254 5,773,370 
Noncontrolling interest121,193 121,746 
Total capital5,706,447 5,895,116 
Total liabilities and capital$12,497,647 $12,372,905 
 September 30, 2017 December 31, 2016
ASSETS   
Real estate:   
Rental properties:   
Land and land improvements$2,719,064
 $2,559,743
Buildings and improvements10,585,742
 10,116,563
 13,304,806
 12,676,306
Less: accumulated depreciation(2,651,542) (2,311,546)
 10,653,264
 10,364,760
Real estate under development313,825
 190,505
Co-investments1,124,577
 1,161,275
Real estate held for sale, net—
 101,957
 12,091,666
 11,818,497
Cash and cash equivalents-unrestricted46,507
 64,921
Cash and cash equivalents-restricted16,766
 105,381
Marketable securities184,574
 139,189
Notes and other receivables (includes related party receivables of $65.6 million and $11.3 million as of September 30, 2017 and December 31, 2016, respectively)121,557
 40,970
Prepaid expenses and other assets51,453
 48,450
Total assets$12,512,523

$12,217,408
    
LIABILITIES AND CAPITAL 
  
Unsecured debt, net$3,501,146
 $3,246,779
Mortgage notes payable, net2,111,467
 2,191,481
Lines of credit2,609
 125,000
Accounts payable and accrued liabilities222,122
 138,226
Construction payable59,767
 35,909
Distributions payable121,496
 110,170
Distributions in excess of investments in co-investments36,245
 —
Other liabilities33,733
 32,922
Total liabilities6,088,585

5,880,487
Commitments and contingencies

 

Redeemable noncontrolling interest40,044
 44,684
Capital: 
  
General Partner:   
Common equity (66,002,487 and 65,527,993 units issued and outstanding, respectively)6,290,140
 6,224,276
 6,290,140

6,224,276
Limited Partners:   
Common equity (2,251,112 and 2,237,290 units issued and outstanding, respectively)49,498
 49,436
    Accumulated other comprehensive loss(21,627) (29,348)
Total partners' capital6,318,011

6,244,364
Noncontrolling interest65,883
 47,873
Total capital6,383,894

6,292,237
Total liabilities and capital$12,512,523

$12,217,408


See accompanying notes to the unaudited condensed consolidated financial statements.
10
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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Condensed Consolidated Statements of Income and Comprehensive Income
(Unaudited)
(In thousands, except unit and per unit amounts)
 Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
Revenues:
Rental and other property$416,398 $406,862 $1,239,319 $1,183,318 
Management and other fees from affiliates2,785 2,886 8,328 8,313 
 419,183 409,748 1,247,647 1,191,631 
Expenses:  
Property operating, excluding real estate taxes77,020 73,450 224,745 212,069 
Real estate taxes46,876 46,593 138,787 137,594 
Corporate-level property management expenses11,504 10,184 34,387 30,532 
Depreciation and amortization137,357 135,511 410,422 403,561 
General and administrative14,611 15,172 43,735 40,541 
Expensed acquisition and investment related costs31 230 375 248 
Casualty loss— — 433 — 
 287,399 281,140 852,884 824,545 
Gain on sale of real estate and land— — 59,238 — 
Earnings from operations131,784 128,608 454,001 367,086 
Interest expense(54,161)(51,645)(157,806)(152,499)
Total return swap income690 1,882 2,544 6,709 
Interest and other income (loss)4,406 (6,796)29,055 (31,571)
Equity income from co-investments10,694 10,985 33,802 23,756 
Tax (expense) benefit on unconsolidated co-investments(404)(1,755)(1,237)7,863 
Loss on early retirement of debt, net— (2)— (2)
Gain on remeasurement of co-investment— 17,423 — 17,423 
Net income93,009 98,700 360,359 238,765 
Net income attributable to noncontrolling interest(2,655)(2,611)(7,943)(7,815)
Net income available to common unitholders$90,354 $96,089 $352,416 $230,950 
Comprehensive income$97,122 $124,797 $369,564 $297,053 
Comprehensive income attributable to noncontrolling interest(2,655)(2,611)(7,943)(7,815)
Comprehensive income attributable to controlling interest$94,467 $122,186 $361,621 $289,238 
Per unit data:  
Basic:  
Net income available to common unitholders$1.36 $1.43 $5.30 $3.42 
Weighted average number of common units outstanding during the period66,443,416 67,333,077 66,535,917 67,476,168 
Diluted:
Net income available to common unitholders$1.36 $1.43 $5.30 $3.42 
Weighted average number of common units outstanding during the period66,445,256 67,341,189 66,537,111 67,503,403 
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Revenues:       
Rental and other property$341,974
 $327,078
 $1,011,908
 $958,818
Management and other fees from affiliates2,395
 2,093
 6,927
 6,145
 344,369
 329,171
 1,018,835
 964,963
Expenses: 
  
    
Property operating, excluding real estate taxes66,606
 63,781
 193,632
 185,390
Real estate taxes37,531
 35,580
 108,283
 104,540
Depreciation and amortization117,451
 110,467
 350,893
 329,847
General and administrative9,788
 9,647
 30,726
 28,527
Acquisition and investment related costs324
 284
 1,154
 1,379
 231,700
 219,759
 684,688
 649,683
Earnings from operations112,669
 109,412
 334,147
 315,280
Interest expense(55,938) (56,693) (167,333) (164,727)
Total return swap income2,538
 3,143
 7,653
 9,080
Interest and other income5,790
 4,943
 17,916
 19,560
Equity income from co-investments19,727
 9,568
 40,934
 38,932
Loss on early retirement of debt, net—
 (211) —
 (211)
Gain on sale of real estate and land249
 —
 26,423
 20,258
Deferred tax expense on gain on sale of real estate and land—
 —
 —
 (4,279)
Gain on remeasurement of co-investment—
 —
 88,641
 —
Net income85,035
 70,162
 348,381
 233,893
Net income attributable to noncontrolling interest(2,591) (2,378) (7,646) (7,026)
Net income attributable to controlling interest82,444
 67,784
 340,735
 226,867
Preferred interest distributions—
 —
 —
 (1,314)
Excess of redemption value of preferred units over the carrying value—
 —
 —
 (2,541)
Net income available to common unitholders$82,444
 $67,784
 $340,735
 $223,012
Comprehensive income$88,870
 $73,173
 $356,102
 $235,874
Comprehensive income attributable to noncontrolling interest(2,591) (2,378) (7,646) (7,026)
Comprehensive income attributable to controlling interest$86,279
 $70,795
 $348,456
 $228,848
Per unit data: 
  
    
Basic: 
  
    
Net income available to common unitholders$1.21
 $1.00
 $5.01
 $3.30
Weighted average number of common units outstanding during the period68,246,008
 67,728,621
 68,011,123
 67,679,240
Diluted:       
Net income available to common unitholders$1.21
 $1.00
 $5.00
 $3.29
Weighted average number of common units outstanding during the period68,329,395
 67,838,503
 68,088,638
 67,802,897
Distribution per common unit$1.75
 $1.60
 $5.25
 $4.80


See accompanying notes to the unaudited condensed consolidated financial statements.
11
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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Condensed Consolidated StatementStatements of Capital for the three and nine months ended September 30, 20172023 and 2022
(Unaudited)
(In thousands)
(Unaudited)
 General PartnerLimited PartnersAccumulated other
comprehensive income, net		Noncontrolling interestTotal
 Common EquityCommon Equity
Three Months Ended September 30, 2023UnitsAmountUnitsAmount
Balances at June 30, 202364,183 $5,533,893 2,260 $49,704 $57,102 $121,306 $5,762,005 
Net income— 87,282 — 3,072 — 2,655 93,009 
Change in fair value of derivatives and amortization of swap settlements— — — — 4,113 — 4,113 
Issuance of common units under:      
Sale of common stock by general partner, net— (106)— — — — (106)
Equity based compensation costs— 2,211 — 78 — — 2,289 
Changes in the redemption value of redeemable noncontrolling interest— 1,317 — 90 — (12)1,395 
Distributions to noncontrolling interest— — — — — (2,754)(2,754)
Redemptions2 13 (1)(11)— (2)— 
Distributions declared ($2.31 per unit)— (148,285)— (5,219)— — (153,504)
Balances at September 30, 202364,185 $5,476,325 2,259 $47,714 $61,215 $121,193 $5,706,447 


12
Table of Contents


General PartnerLimited PartnersAccumulated other
comprehensive income, net		Noncontrolling interestTotal
General Partner Limited Partners Accumulated other comprehensive loss    Common EquityCommon Equity
Nine Months Ended September 30, 2023Nine Months Ended September 30, 2023UnitsAmountUnitsAmountTotal
Balances at December 31, 2022Balances at December 31, 202264,605 $5,669,906 2,272 $51,454 $52,010 $121,746 $5,895,116 
Net incomeNet income— 340,434 — 11,982 — 7,943 360,359 
Common Equity Common Equity Accumulated other comprehensive loss Noncontrolling Interest  
Units Amount Units Amount Total
Balances at December 31, 201665,528
 $6,224,276
 2,237
 $49,436
 $47,873
 $6,292,237
Net income—
 329,446
 —
 11,289
 —
 7,646
 348,381
Reversal of unrealized gains upon the sale of marketable securities—
 —
 —
 —
 (1,650) —
 (1,650)
Change in fair value of derivatives and amortization of swap settlements—
 —
 —
 —
 7,405
 —
 7,405
Change in fair value of derivatives and amortization of swap settlements— — — — 9,205 — 9,205 
Change in fair value of marketable securities, net—
 —
 —
 —
 1,966
 —
 1,966
Issuance of common units under: 
  
  
  
  
  
  
Issuance of common units under:
General partner's stock based compensation, net160
 24,079
 —
 —
 —
 —
 24,079
General partner's stock based compensation, net3 — — — — — — 
Sale of common stock by general partner, net312
 80,377
 —
 —
 —
 —
 80,377
Sale of common stock by general partner, net— (231)— — — — (231)
Equity based compensation costs—
 3,814
 16
 1,080
 —
 —
 4,894
Equity based compensation costs— 9,598 — 337 — — 9,935 
Changes in redemption value of redeemable noncontrolling interest—
 (916) —
 78
 —
 (65) (903)
Contributions from noncontrolling interest—
 —
 —
 —
 —
 22,506
 22,506
Retirement of common units, netRetirement of common units, net(437)(95,657)— — — — (95,657)
Changes in the redemption value of redeemable noncontrolling interestChanges in the redemption value of redeemable noncontrolling interest— (2,770)— (42)— 2 (2,810)
Distributions to noncontrolling interest—
 —
 —
 —
 —
 (9,092) (9,092)Distributions to noncontrolling interest— — — — — (8,344)(8,344)
Redemptions2
 (25,167) (2) (405) —
 (2,985) (28,557)Redemptions14 (100)(13)(355)— (154)(609)
Distributions declared—
 (345,769) —
 (11,980) —
 —
 (357,749)
Balances at September 30, 201766,002
 $6,290,140
 2,251
 $49,498
 $(21,627) $65,883
 $6,383,894
Distributions declared ($6.93 per unit)Distributions declared ($6.93 per unit)— (444,855)— (15,662)— — (460,517)
Balances at September 30, 2023Balances at September 30, 202364,185 $5,476,325 2,259 $47,714 $61,215 $121,193 $5,706,447 

13
Table of Contents


 General PartnerLimited PartnersAccumulated other
comprehensive income, net		Noncontrolling interestTotal
 Common EquityCommon Equity
Three Months Ended September 30, 2022UnitsAmountUnitsAmount
Balances at June 30, 202265,124 $5,802,293 2,273 $51,233 $30,387 $122,672 $6,006,585 
Net income— 92,842 — 3,247 — 2,611 98,700 
Change in fair value of derivatives and amortization of swap settlements— — — — 26,189 — 26,189 
Change in fair value of marketable debt securities, net— — — — (92)— (92)
Issuance of common units under:      
General partner's stock based compensation, net1 155 — — — — 155 
Sale of common stock by general partner, net— (107)— — — — (107)
Equity based compensation costs— 1,891 — 66 — — 1,957 
Retirement of common units, net(372)(97,121)— — — — (97,121)
Changes in the redemption value of redeemable noncontrolling interest— 3,195 — 172 — 360 3,727 
Distributions to noncontrolling interest— — — — — (2,747)(2,747)
Redemptions— (8,005)(1)— — (563)(8,568)
Distributions declared ($2.20 per unit)— (142,480)— (5,001)— — (147,481)
Balances at September 30, 202264,753 $5,652,663 2,272 $49,717 $56,484 $122,333 $5,881,197 



14
Table of Contents


General PartnerLimited PartnersAccumulated other
comprehensive income (loss), net		Noncontrolling interestTotal
Common EquityCommon Equity
Nine Months Ended September 30, 2022UnitsAmountUnitsAmount
Balances at December 31, 202165,248 $5,999,155 2,282 $56,502 $(1,804)$122,655 $6,176,508 
Net income— 223,150 — 7,800 — 7,815 238,765 
Change in fair value of derivatives and amortization of swap settlements— — — — 58,084 — 58,084 
Change in fair value of marketable debt securities, net— — — — 204 — 204 
Issuance of common units under:
General partner's stock based compensation, net88 17,194 — — — — 17,194 
Sale of common stock by general partner, net— (314)— — — — (314)
Equity based compensation costs— 6,843 — 239 — — 7,082 
Retirement of common units, net(591)(157,951)— — — — (157,951)
Changes in the redemption value of redeemable noncontrolling interest— 4,246 — 294 — 410 4,950 
Contributions from noncontrolling interest— — — — — 125 125 
Distributions to noncontrolling interest— — — — — (7,965)(7,965)
Redemptions8 (10,128)(10)(94)— (707)(10,929)
Distributions declared ($6.60 per unit)— (429,532)— (15,024)— — (444,556)
Balances at September 30, 202264,753 $5,652,663 2,272 $49,717 $56,484 $122,333 $5,881,197 


See accompanying notes to the unaudited condensed consolidated financial statements.
15
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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)thousands, except parenthetical amounts)
 Nine Months Ended September 30,
 20232022
Cash flows from operating activities:
Net income$360,359 $238,765 
Adjustments to reconcile net income to net cash provided by operating activities:  
Straight-lined rents1,650 5,529 
Depreciation and amortization410,422 403,561 
Amortization of discount and debt financing costs, net5,028 4,916 
Realized and unrealized (gains) losses on marketable securities, net(4,294)51,126 
Provision for credit losses51 64 
Earnings from co-investments(33,802)(23,756)
Operating distributions from co-investments48,229 86,854 
Accrued interest from notes and other receivables(8,919)(10,748)
Casualty loss433 — 
Gain on the sale of real estate and land(59,238)— 
Equity-based compensation5,943 6,589 
Loss on early retirement of debt, net— 2 
Gain on remeasurement of co-investment— (17,423)
Changes in operating assets and liabilities:  
Prepaid expenses, receivables, operating lease right-of-use assets, and other assets3,024 15,406 
Accounts payable, accrued liabilities, and operating lease liabilities44,971 38,948 
Other liabilities2,533 8,902 
Net cash provided by operating activities776,390 808,735 
Cash flows from investing activities:  
Additions to real estate:  
Acquisitions of real estate and acquisition related capital expenditures, net of cash acquired(23,845)(21,759)
Redevelopment(56,168)(67,974)
Development acquisitions of and additions to real estate under development(6,317)(22,754)
Capital expenditures on rental properties(94,304)(107,105)
Investments in notes receivable(52,888)(160,013)
Collections of notes and other receivables— 303,088 
Proceeds from insurance for property losses2,991 4,325 
Proceeds from dispositions of real estate99,388 — 
Contributions to co-investments(32,169)(159,461)
Changes in refundable deposits10,200 (16,318)
Purchases of marketable securities(11,552)(12,760)
Sales and maturities of marketable securities46,989 30,025 
Non-operating distributions from co-investments15,251 161,324 
Net cash used in investing activities(102,424)(69,382)
Cash flows from financing activities:  
Proceeds from unsecured debt and mortgage notes598,000 — 
Payments on unsecured debt and mortgage notes(301,678)(24,103)
Proceeds from lines of credit844,021 1,053,663 
Repayments of lines of credit(896,094)(1,175,440)
16
Table of Contents


 Nine Months Ended September 30,
 2017 2016
Cash flows from operating activities:   
Net income$348,381
 $233,893
Adjustments to reconcile net income to net cash provided by operating activities: 
  
Depreciation and amortization350,893
 329,847
Amortization of discount on marketable securities and other investments(11,128) (10,771)
Amortization of (premium) discount and debt financing costs, net(5,132) (11,432)
Gain on sale of marketable securities and other investments(1,650) (2,876)
Company's share of gain on the sales of co-investment(10,058) (13,046)
Earnings from co-investments(30,876) (25,886)
Operating distributions from co-investments47,702
 45,342
Gain on the sale of real estate and land(26,423) (20,258)
Equity-based compensation4,894
 4,436
Loss on early retirement of debt—
 211
Gain on remeasurement of co-investment(88,641) —
Changes in operating assets and liabilities: 
  
Prepaid expense, receivables and other assets(7,862) 656
Accounts payable and accrued liabilities50,788
 49,961
Other liabilities399
 420
Net cash provided by operating activities621,287
 580,497
Cash flows from investing activities: 
  
Additions to real estate: 
  
Acquisitions of real estate and acquisition related capital expenditures(200,028) (124,054)
Redevelopment(50,642) (62,983)
Development acquisitions of and additions to real estate under development(92,936) (58,575)
Capital expenditures on rental properties(46,455) (40,503)
Investments in notes receivable(76,961) (4,375)
Proceeds from insurance for property losses648
 3,288
Proceeds from dispositions of real estate132,039
 48,008
Contributions to co-investments(231,552) (121,972)
Changes in restricted cash and refundable deposits91,209
 65,858
Purchases of marketable securities(65,668) (18,779)
Sales and maturities of marketable securities and other investments33,377
 14,708
Non-operating distributions from co-investments112,572
 34,564
Net cash used in investing activities(394,397) (264,815)
Cash flows from financing activities: 
  
Proceeds from unsecured debt and mortgage notes597,981
 499,724
Payments on unsecured debt and mortgage notes(460,040) (244,583)
Proceeds from lines of credit564,833
 321,373
Repayments of lines of credit(687,224) (336,373)
Repayment of cumulative redeemable preferred stock—
 (73,750)
Additions to deferred charges(4,108) (5,300)
Net proceeds from issuance of common units80,377
 (382)
Net proceeds from stock options exercised24,079
 17,878
Payments related to tax withholding for share-based compensation(118) (222)
Distributions to noncontrolling interest(5,568) (5,171)
Redemption of noncontrolling interest(4,849) (2,435)
Redemption of redeemable noncontrolling interest(720) —
 Nine Months Ended September 30,
 20232022
Retirement of common units(95,657)(157,951)
Additions to deferred charges(1,681)(140)
Net costs from issuance of common units(231)(314)
Net proceeds from stock options exercised— 19,410 
Payments related to tax withholding for share-based compensation— (2,216)
Contributions from noncontrolling interest— 125 
Distributions to noncontrolling interest(6,395)(6,380)
Redemption of noncontrolling interests(609)(10,929)
Redemption of redeemable noncontrolling interests— (478)
Common units distributions paid(455,826)(439,669)
Net cash used in financing activities(316,150)(744,422)
Net increase (decrease) in unrestricted and restricted cash and cash equivalents357,816 (5,069)
Unrestricted and restricted cash and cash equivalents at beginning of period42,681 58,638 
Unrestricted and restricted cash and cash equivalents at end of period$400,497 $53,569 
  
Supplemental disclosure of cash flow information:
Cash paid for interest (net of $0.7 million and $1.9 million capitalized in 2023 and 2022, respectively)$159,758 $149,970 
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$5,298 $5,225 
Supplemental disclosure of noncash investing and financing activities:  
Transfers between real estate under development and rental properties, net$827 $98,024 
Transfers from real estate under development to co-investments$1,322 $2,090 
Reclassifications to (from) redeemable noncontrolling interest from general and limited partner capital and noncontrolling interest$2,810 $(4,950)
  Debt assumed in connection with acquisition$— $21,303 


 Nine Months Ended September 30,
 2017 2016
Common and preferred units and preferred interest distributions paid(349,947) (320,957)
Net cash used in financing activities(245,304) (150,198)
Net (decrease) increase in cash and cash equivalents(18,414) 165,484
Cash and cash equivalents at beginning of period64,921
 29,683
Cash and cash equivalents at end of period$46,507
 $195,167
     
Supplemental disclosure of cash flow information:   
Cash paid for interest, net of $10.0 million and $9.4 million capitalized in 2017 and 2016, respectively$148,742
 $140,183
Supplemental disclosure of noncash investing and financing activities: 
  
Issuance of DownREIT units in connection with acquisition of real estate$22,506
 $—
Transfers between real estate under development to rental properties, net$2,195
 $106,255
Transfer from real estate under development to co-investments$4,122
 $8,332
Reclassifications to (from) redeemable noncontrolling interest to or from general partner capital and noncontrolling interest$903
 $(1,343)
  Debt assumed in connection with acquisition$51,882
 $48,832


See accompanying notes to the unaudited condensed consolidated financial statements.
17
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ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 20172023 and 20162022
(Unaudited)


(1) Organization and Basis of Presentation


The accompanying unaudited condensed consolidated financial statements present the accounts of Essex Property Trust, Inc. (“Essex”("Essex" or the “Company”"Company"), which include the accounts of the Company and Essex Portfolio, L.P. and its subsidiaries (the “Operating"Operating Partnership,”" which holds the operating assets of the Company), prepared in accordance with U.S. generally accepted accounting principles (“("U.S. GAAP”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, 2016.2022.


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


The unaudited condensed consolidated financial statements for the three and nine months ended September 30, 20172023 and 20162022 include the accounts of the Company and the Operating Partnership. Essex is the sole general partner of the Operating Partnership, with a 96.7%96.6% general partnership interest as of both September 30, 20172023 and December 31, 2016.2022. Total Operating Partnership limited partnership units ("OP Units"Units," and the holders of such OP Units, "Unitholders") outstanding were 2,251,1122,258,812 and 2,237,2902,272,496 as of September 30, 20172023 and December 31, 2016,2022, respectively, and the redemption value of the units, based on the closing price of the Company’s common stock totaled $571.8approximately $479.1 million and $520.2$481.6 million as of September 30, 20172023 and December 31, 2016,2022, respectively.


As of September 30, 2017,2023, the Company owned or had ownership interests in 247 stabilized252 operating apartment communities, aggregating 60,305comprising 61,997 apartment homes, excluding the Company’s ownership interest in preferred interestequity co-investments, (collectively, the “Communities”, and individually, a “Community”), oneloan investments, three operating commercial buildingbuildings, and seven active developments (collectively, the “Portfolio”).a development pipeline comprised of one unconsolidated joint venture project. The Communitiesoperating apartment communities are located in Southern California (Los(primarily Los Angeles, Orange, San Diego, and Ventura counties), Northern California (the San Francisco Bay Area) and the Seattle metropolitan areas.


Recent Accounting Pronouncements


In May 2014,August 2023, the Financial Accounting Standards Board ("FASB"(the "FASB") issued Accounting Standards Update ("ASU") No. 2014-09 "Revenue from Contracts with Customers.2023-05 "Business Combinations—Joint Venture Formations (Subtopic 805-60)" The new standard provides a single comprehensive revenue recognition model for contracts with customers (excluding certain contracts, such as lease contracts) to improve comparability within industries. The new standard requiresunder which an entity that qualifies as a joint venture is required to recognize revenue to reflectapply a new basis of accounting upon the transfer of goods or services to customers at an amount the entity expects to be paid in exchange for those goods and services and provide enhanced disclosures, all to provide more comprehensive guidance for transactions such as service revenue and contract modifications. In August 2015, the FASB deferred the effective dateformation of the new standard by one year,joint venture. The amendments in ASU 2023-05 require that a joint venture must initially measure its assets and itliabilities at fair value on the formation date. ASU 2023-05 is now effective for interim and annual periods beginningall joint ventures that are formed on or after December 15, 2017. Early adoption is permitted. The new standard may be applied using either a full retrospective or a modified approach upon adoption. The Company does not expect to early adopt and expects to adopt using the modified approach. The Company is currently evaluating the impact the adoption of this new standard will have on its recording of revenue related to its revenue streams and related disclosures. The Company does not expect that the adoption of this new standard will have a material effect on its consolidated results of operations or financial position.

In January 2016, the FASB issued ASU No. 2016-01 "Recognition and Measurement of Financial Assets and Financial Liabilities", which requires changes to the classification and measurement of investments in certain equity securities and to the presentation of certain fair value changes for financial liabilities measured at fair value. The new standard will be effective for the Company beginning on January 1, 20182025 and early adoption is permitted. The Company does not expect that this amendment willthe adoption to have a material effectimpact on its consolidated results of operations orand financial position.


In February 2016,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 FASB issued ASU No. 2016-02 "Leases", which requires an entity that is a lesseelife 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 classify leasesrental income, such revenues are recorded when due from tenants and recognized monthly as either finance or operating and to recognize a lease liability and a right-of-use asset for all leases that have a duration of greater than 12 months. Leases of 12 months or less will be accounted for similar to existing guidance for operating leases today. For lessors, accounting for leases under the new standard will be substantially the same as existing guidance for sales-type leases, direct financing leases, and operating leases, but eliminates current real estate specific provisions and changes the treatment ofthey are earned.


18

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 20172023 and 20162022
(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 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.
initial direct costs.
The new standard will be effective forCompany recognizes any gains on sales of real estate when it transfers control of a property and when it is probable that the Company beginning on January 1, 2019 and early adoption is permitted, including adoption in an interim period. The new standard must be applied using a modified retrospective approach. The Company is currently evaluating the impact of this amendment on its consolidated results of operations and financial position.

In June 2016, the FASB issued ASU No. 2016-13 "Measurement of Credit Losses on Financial Instruments", which amends the current approach to estimate credit losses on certain financial assets, including trade and other receivables, available-for-sale securities, and other financial instruments. Generally, this amendment requires entities to establish a valuation allowance for the expected lifetime losses of these certain financial assets. Subsequent changes in the valuation allowance are recorded in current earnings and reversal of previous losses are permitted. Currently, U.S. GAAP requires entities to write down credit losses only when losses are probable and loss reversals are not permitted. The new standard will be effective for the Company beginning on January 1, 2020 and early adoption is permitted. The Company is currently evaluating the impact of this amendment on its consolidated results of operations and financial position.

In August 2016, the FASB issued ASU No. 2016-15 "Classification of Certain Cash Receipts and Cash Payments", which requires entities to adhere to a uniform classification and presentation of certain cash receipts and cash payments in the statement of cash flows. The amendments in this update provide guidance on eight specific cash flow issues. The new standard will be effective for the Company beginning on January 1, 2018 and early adoption is permitted. The Company does not expect the impact of this amendment to be material on its consolidated results of operations or financial position.

In November 2016, the FASB issued ASU No. 2016-18 "Statement of Cash Flows", which requires entities to include restricted cash and restricted cash equivalents in the reconciliation of beginning-of-period to the end-of-period of cash and cash equivalents in the statement of cash flows. This new standard seeks to eliminate the current diversity in practice in how changes in restricted cash and restricted cash equivalents is presented in the statement of cash flows. This new standard will be effective for the Company beginning January 1, 2018 and early adoption is permitted. The Company does not expect the impact of this amendment to be material on its consolidated results of operations or financial position.

In January 2017, the FASB issued ASU No. 2017-01 "Business Combinations: Clarifying the Definition of a Business", which provides a new framework for determining whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Currently, U.S. GAAP does not specify the minimum inputs and processes required for an integrated set of assets and activities to meet the definition of a business, causing a broad interpretation of the definition of a business. This new standard will be effective for the Company beginning January 1, 2018 and early adoption is permitted. The Company expects thatcollect substantially all of the related consideration.

Marketable Securities

The Company reports its acquisitions of communities will qualifyequity 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, and as asset acquisitions and transaction costs related to these acquisitions will be capitalized upon adoption.

In February 2017,defined by the FASB issued ASU No. 2017-05 "Other Income - Gainsstandard for fair value measurements). As of September 30, 2023 and Losses from the DerecognitionDecember 31, 2022, $0.1 million and $0.2 million of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidanceequity securities presented within common stock, preferred stock, and Accounting for Partial Sales of Nonfinancial Assets", which adds guidance for partial sales of nonfinanical assets, including partial sales of real estate. Historically, U.S. GAAP contained several different accounting models to evaluate whether the transfer of certain assets qualified for sale treatment. This new standard reduces the number of potential accounting models that might apply and clarifies which model does apply in various circumstances. Partial sales of nonfinancial assets are commonstock funds in the real estate industrytables below represent investments measured at fair value, using net asset value as a practical expedient, and include transactions in which the seller retains an equity interestare not categorized in the entity that ownsfair value hierarchy.

Realized and unrealized gains and losses in equity securities and interest income are included in interest and other income on the assets or has ancondensed consolidated statements of income and comprehensive income.

As of September 30, 2023 and December 31, 2022, equity interestsecurities consisted primarily of investment funds-debt securities, common stock, preferred stock and stock funds. 

As of September 30, 2023 and December 31, 2022, marketable securities consisted of the following ($ in the buyer. This new standard will be effective for the Company beginning January 1, 2018 and early adoption is permitted. thousands):
 September 30, 2023
 CostGross
Unrealized (Loss) Gain		Carrying Value
Equity securities:
Investment funds - debt securities$38,886 $(6,814)$32,072 
Common stock, preferred stock, and stock funds51,026 7,088 58,114 
Total - Marketable securities$89,912 $274 $90,186 

 December 31, 2022
 CostGross
Unrealized Loss		Carrying Value
Equity securities:
Investment funds - debt securities$43,155 $(6,771)$36,384 
Common stock, preferred stock, and stock funds78,481 (2,122)76,359 
Total - Marketable securities$121,636 $(8,893)$112,743 

The Company will adopt this new standard concurrently withuses the adoptionspecific identification method to determine the cost basis of ASU 2014-09 "Revenuea debt security sold and to reclassify amounts from Contracts with Customers" and is currently evaluating the impact of this amendment on its consolidated results of operations and financial position.accumulated other comprehensive income for such securities.

In August 2017, the FASB issued ASU No. 2017-12 "Derivatives and Hedging - Targeted Improvements to Accounting for Hedging Activities", which, among other things, requires entities to present the earnings effect of hedging instruments in the same income statement line item in which the earnings effect of the hedged item is reported. The new standard also adds new disclosure requirements. This new standard will be effective for the Company beginning January 1, 2019 and early adoption is permitted. The Company is currently evaluating the impact of this amendment on its consolidated results of operations and financial position.




19

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 20172023 and 20162022
(Unaudited)


Marketable Securities

The Company reports its available for saleFor the three and nine months ended September 30, 2023, the portion of unrealized losses recognized on equity securities at fair value, based on quoted market prices (Level 1 for the common stockstill held as of September 30, 2023 totaled $4.6 million and investment funds, Level 2 for the unsecured bonds$0.7 million, respectively, and Level 3 for investments in mortgage backed securities, as defined by the FASB standard for fair value measurements), and any unrealized gain or loss is recorded as other comprehensive income. Realized gains and losses, interest income, and amortization of purchase discounts arewere included in interest and other income (loss) on the Company's condensed consolidated statements of income and comprehensive income. For the three and nine months ended September 30, 2022, the portion of unrealized losses recognized on equity securities still held as of September 30, 2022 totaled $7.8 million and $30.6 million respectively, and were included in interest and other (loss) income on the Company's condensed consolidated statements of income and comprehensive income.

As of September 30, 2017 and December 31, 2016, marketable securities consisted primarily of investment-grade unsecured bonds, common stock, investments in mortgage backed securities, and investment funds that invest in U.S. treasury or agency securities. As of September 30, 2017 and December 31, 2016, the Company classified its investments in mortgage backed securities, which mature in November 2019 and September 2020, as held to maturity, and accordingly, these securities are stated at their amortized cost. The discount on the mortgage backed securities is being amortized to interest income based on an estimated yield and the maturity date of the securities.

As of September 30, 2017 and December 31, 2016, marketable securities consist of the following ($ in thousands):

 September 30, 2017
 
Amortized
Cost
 
Gross
Unrealized
Gain (Loss)
 Carrying Value
Available for sale:     
Investment-grade unsecured bonds$4,450
 $(14) $4,436
Investment funds - debt securities28,067
 146
 28,213
Investment funds - U.S. treasuries10,910
 (29) 10,881
Common stock and stock funds33,816
 1,687
 35,503
Held to maturity: 
  
  
Mortgage backed securities105,541
 —
 105,541
Total - Marketable securities$182,784
 $1,790
 $184,574
      
 December 31, 2016
 
Amortized
Cost
 
Gross
Unrealized
Gain (Loss)
 Carrying Value
Available for sale: 
  
  
Investment funds - debt securities$19,604
 $(73) $19,531
Investment funds - U.S. treasuries10,022
 (22) 10,000
Common stock and stock funds13,696
 1,569
 15,265
Held to maturity: 
  
  
Mortgage backed securities94,393
 —
 94,393
Total - Marketable securities$137,715
 $1,474
 $139,189

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

For the three months ended September 30, 2017 and 2016, the proceeds from sales and maturities of available for sale securities totaled $4.6 million and $3.5 million, respectively, which resulted in $32,000 realized gains and $1.0 million realized gains, respectively, for such periods. For the nine months ended September 30, 2017 and 2016, the proceeds from sales and maturities of available for sale securities totaled $33.4 million and $14.7 million, respectively, which resulted in $1.7 million realized gains and $2.9 million realized gains, respectively, for such periods.

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2017 and 2016
(Unaudited)


Variable Interest Entities


In accordance with accounting standards for consolidation of variable interest entities ("VIEs"), the Company consolidatesconsolidated the Operating Partnership, 1618 DownREIT limited partnershipsentities (comprising eight Communities)nine communities), and eightsix co-investments as of September 30, 2017.2023 and December 31, 2022. 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 eightabove consolidated co-investments and 16 DownREIT limited partnerships,entities, net of intercompany eliminations, were approximately $842.7$954.4 million and $278.7$327.6 million, respectively, as of September 30, 20172023 and $746.1$939.4 million and $221.3$324.3 million, respectively, as of December 31, 2016.2022. Noncontrolling interests in these entities were $66.1was $121.1 million and $45.4$121.5 million as of September 30, 20172023 and December 31, 2016,2022, respectively. The Company's financial risk in each VIE is limited to its equity investment in the VIE. As of September 30, 20172023 and December 31, 2016,2022, the Company did not have any other VIEs of which it was deemed to be the primary beneficiary and did not have any VIEs of which it was not deemed to be the primary beneficiary.


Equity-based Compensation


The cost of shareshare- and unit basedunit-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 12, “Equity14, "Equity Based Compensation Plans,”" in the Company’s annual report on Form 10-K for the year ended December 31, 2016)2022) are being amortized over the expected service periods.


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 September 30, 20172023 and December 31, 2016,2022, 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 $5.0 billion of fixed rate debt including unsecured debt, atwith a carrying value of $5.7 billion as of both September 30, 20172023 and December 31, 2016,2022, was approximately $5.1 billion. Thebillion and $5.2 billion, respectively. Management has estimated that the fair value of the Company’s $520.1 million and $274.2 million of variable rate debt at September 30, 20172023 and December 31, 2016 approximates its fair value2022, respectively, was approximately $519.2 million and $273.2 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 September 30, 20172023 and December 31, 20162022 due to the short-term maturity of these instruments. Marketable securities except mortgage backed securities, and derivatives are carried at fair value as of September 30, 20172023 and December 31, 2016.2022.

At September 30, 2017, the Company’s investments in mortgage backed securities had a carrying value of $105.5 million and the Company estimated the fair value to be approximately $117.6 million. At December 31, 2016, the Company’s investments in mortgage backed securities had a carrying value of $94.4 million and the Company estimated the fair value to be approximately $108.8 million. The Company determines the fair value of the mortgage backed securities based on unobservable inputs (level 3 of the fair value hierarchy) considering the assumptions that market participants would make in valuing these securities. Assumptions such as estimated default rates and discount rates are used to determine expected, discounted cash flows to estimate the fair value.

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 $4.9$5.0 million and $4.8$4.5 million during the three months ended September 30, 20172023 and 2016,2022, respectively, and $15.0$14.4 million and $14.0$15.7 million, duringfor the nine months ended September 30, 20172023 and 2016,2022, 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.






20

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 20172023 and 20162022
(Unaudited)


Co-investments


The Company owns investments in joint ventures (“co-investments”) in which it has significant influence, but its ownership interest does not meet the criteria for consolidation in accordance with 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 condensed consolidated statement of income and comprehensive income equal to the amount by which the fair value of the Company's previously owned co-investment interest the Company previously owned exceeds its carrying value. A majority of the co-investments, excluding themost 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.

The Company reports investments in co-investments where accumulated distributions have exceeded the Company’s investment as distributions in excess of investments in co-investments in the accompanying condensed consolidated balance sheets. The net investment of one of the Company’s co-investments is less than zero as a result of financing distributions in excess of the Company's investment in that co-investment.


Changes in Accumulated Other Comprehensive Loss,Income, Net by Component


Essex Property Trust, Inc.
($ in thousands)
:
 
Change in fair
value and amortization
of swap settlements
 
Unrealized
gains/(losses) on
available for sale
securities
 Total
Balance at December 31, 2016$(32,963) $865
 $(32,098)
Other comprehensive income before reclassification13,512
 1,902
 15,414
Amounts reclassified from accumulated other comprehensive loss(6,352) (1,596) (7,948)
Other comprehensive income7,160
 306
 7,466
Balance at September 30, 2017$(25,803) $1,171
 $(24,632)
Change in fair
value and amortization
of swap settlements
Balance at December 31, 2022$46,466 
Other comprehensive income before reclassification8,877 
Amounts reclassified from accumulated other comprehensive income15 
Other comprehensive income8,892 
Balance at September 30, 2023$55,358 


Changes in Accumulated Other Comprehensive Loss, by Component


Essex Portfolio, L.P.
($ in thousands):
Change in fair
value and amortization
of swap settlements
Balance at December 31, 2022$52,010 
Other comprehensive income before reclassification9,190 
Amounts reclassified from accumulated other comprehensive income15 
Other comprehensive income9,205 
Balance at September 30, 2023$61,215 
 
Change in fair
value and amortization
of swap settlements
 
Unrealized
gains/(losses) on
available for sale
securities
 Total
Balance at December 31, 2016$(30,161) $813
 $(29,348)
Other comprehensive income before reclassification13,974
 1,966
 15,940
Amounts reclassified from accumulated other comprehensive loss(6,569) (1,650) (8,219)
Other comprehensive income7,405
 316
 7,721
Balance at September 30, 2017$(22,756) $1,129
 $(21,627)


Amounts reclassified from accumulated other comprehensive income in connection with derivatives are recorded in interest expense on the condensed consolidated statements of income and comprehensive income. 


21

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 20172023 and 20162022
(Unaudited)


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

Redeemable Noncontrolling Interest


The carrying value of redeemable noncontrolling interestinterests in the accompanying condensed consolidated balance sheets was $40.0$30.0 million and $44.7$27.2 million as of September 30, 20172023 and December 31, 2016,2022, respectively. The limited partners may redeem their noncontrolling interests for cash in certain circumstances.


The changes toin the redemption value of redeemable noncontrolling interests for the nine months ended September 30, 20172023 is as follows ($ in thousands):
Balance at December 31, 2022$27,150 
Reclassification due to change in redemption value and other2,810 
Balance at September 30, 2023$29,960 
Balance at December 31, 2016$44,684
Reclassification due to change in redemption value and other903
Redemptions(5,543)
Balance at September 30, 2017$40,044


Cash, Cash Equivalents and Restricted Cash

Highly liquid investments generally 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):
 September 30, 2023December 31, 2022September 30, 2022December 31, 2021
Cash and cash equivalents - unrestricted$391,994 $33,295 $42,711 $48,420 
Cash and cash equivalents - restricted8,503 9,386 10,858 10,218 
Total unrestricted and restricted cash and cash equivalents shown in the condensed consolidated statement of cash flows$400,497 $42,681 $53,569 $58,638 

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”("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 Thethe Nine Months Ended 2017September 30, 2023 and Subsequent Events


Significant Transactions


Acquisitions


In January 2017,April 2023, the Company purchased its joint venture partner's 50.0% interest in Palm Valley, foracquired Hacienda at Camarillo Oaks, a contract price of $183.0 million. Prior to the purchase, an approximately $220.0 million mortgage encumbered the property. Concurrent with the closing of the acquisition, the entire mortgage balance was repaid and the property is now unencumbered. Palm Valley has 1,098 apartment homes, within four communities, and is located in San Jose, CA. As a result of this acquisition, the Company realized a gain on remeasurement of co-investment of $88.6 million upon consolidation.

In March 2017, the Company converted its existing $15.3 million preferred equity investment in Sage at Cupertino, a 23073-unit apartment home community located in San Jose,Camarillo, CA, intofor a 40.5% common equity ownership interest in the property. The Company issued DownREIT units to the other members, including an affiliatetotal contract price of the Marcus & Millichap Company, based on an estimated property valuation of $90.0$23.1 million. See Note 5, Related Party Transactions, for additional details. At the time of acquisition, the property was encumbered by a $52.0 million bridge loan from the Company. The Company consolidates the property based on a VIE analysis performed by the Company.


The consolidated fair value of acquired communities listed in the preceding paragraphs above were included on the Company's condensed consolidated balance sheet as follows: $169.5 million was included in land and land improvements, $365.7 million was included in buildings and improvements, and $3.2 million was included in prepaid expenses and other assets.




22

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 20172023 and 20162022
(Unaudited)


Dispositions

In August 2017,March 2023, the Company sold CBC and The Sweeps, a Company co-investment, Wesco V, LLC ("Wesco V") acquired 8th & Republican, a 211non-core apartment home community with 239 apartment homes, located in Seattle, WA, for a total contract price of $101.3 million. The property is encumbered by a $55.0 million related party bridge loan from the Company, which accrues interest at 3.5% and is scheduled to mature on December 16, 2017. See the "Co-Investments" section below for further details related to the creation of Wesco V. See Note 5, Related Party Transactions, for additional details related to the related party bridge loan.

Also in August 2017, Wesco V acquired 360 Residences, a 213 apartment home community, located in San Jose,Goleta, CA, for a total contract price of $133.5$91.7 million. In connection with this acquisition, Wesco V assumed $57.9The Company recognized a $54.5 million of mortgage debt, with an effective interest rate of 3.4% and a maturity date of May 2022.gain on sale.

Dispositions

In January 2017, the Company sold Jefferson at Hollywood, a 270 apartment home community located in Los Angeles, CA, for $132.5 million, resulting in a gain of $26.2 million.

In August 2017, a Company co-investment, Wesco I, LLC ("Wesco I") sold Madrid, a 230 apartment home community located in Mission Viejo, CA, for $83.0 million, which resulted in a gain of $10.1 million for the Company, recorded in the statement of income as equity income in co-investments. Wesco I used $30.1 million of proceeds to repay the loan on the property.
Preferred Equity Investments


During the nine months endedIn September 30, 2017,2023, the Company made commitments to fund $89.3originated a preferred equity investment totaling $12.3 million in five preferred equity investments,a joint venture that owns one multifamily community located in Irvine, CA, Seattle, WA, Marina del Rey, CA, Woodland Hills, CA,Southern California. The investment has an initial preferred return of 13.5% and San Jose, CA. These investments have initial accrued preferred returns ranging from 9.5%-11.0%, with maturities ranging from March 2020is scheduled to August 2024. As ofmature in September 30, 2017, the Company has funded $38.0 million of the $89.3 million commitment.2028.


In April 2017,June 2023, the Company received cash of $12.6$14.7 million, fromincluding an early redemption fee of $0.3 million, for the partialfull redemption of a preferred equity investment in a joint venture that holds a property located in Seattle, WA. The Company recorded a reduction of $12.4 million in its preferred equity investment. The Company recognized a gain of $0.3 million as a result of this early redemption, which is included in equity income from co-investments in the condensed consolidated statement of income and comprehensive income.Southern California.


In August 2017,April 2023, the Company received cash of $11.7$11.2 million for a fullthe partial redemption of a preferred equity investment, class and $6.9 million forwhose sponsors include a partial redemption of another preferred equity investment classrelated party, in a joint venture that holds property located in Northern California. See Note 6, Related Party Transactions, for additional details.

Common Stock

During the nine months ended September 30, 2023, the Company repurchased and retired 437,026 shares of the Company's common stock through the Company's stock repurchase plan, totaling $95.7 million, including commissions, at an average price per share of $218.88. As a property in San Jose, CA. The Company's remaining preferred equity investment in this joint venture was $13.4 millionresult, as of September 30, 2017.

Notes Receivable

In May 2017, the Company made a commitment to fund a mezzanine loan of $13.2 million to a limited liability company that owns a development project located in Anaheim, CA. The investment will initially accrue interest based on a 10.0% compounded return. This investment is scheduled to mature in May 2021. As of September 30, 2017,2023, the Company had fully funded$302.7 million of purchase authority remaining under the $13.2Company's $500.0 million commitment.stock repurchase plan.


Co-investmentsSecured Debt


In August 2017,July 2023, the Company formed a new joint venture entity, Wesco V, with an institutional partner. Each partner has a 50.0% ownershipclosed $298.0 million in 10-year secured loans priced at 5.08% fixed interest and an initial equity commitment of $150.0 million. The joint venture is unconsolidated for financial reporting purposes.rates encumbering four properties located in Northern California.


Senior Unsecured Debt

In March 2017, the Company paid off $300.0 million of 5.500% senior unsecured notes.

In April 2017, the Company issued $350.0 million of 10-year 3.625% senior unsecured notes. The interest is paid semi-annually in arrears on May 1 and November 1 of each year commencing on November 1, 2017 until the maturity date of May 1, 2027.

23

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 20172023 and 20162022
(Unaudited)


(3) Revenues

Disaggregated Revenue

The Company usedfollowing table presents the net proceedsCompany’s revenues disaggregated by revenue source ($ in thousands):
 Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
Rental income$410,438 $401,467 $1,222,859 $1,166,670 
Other property5,960 5,395 16,460 16,648 
Management and other fees from affiliates2,785 2,886 8,328 8,313 
Total revenues$419,183 $409,748 $1,247,647 $1,191,631 

The following table presents the Company’s rental and other property revenues disaggregated by geographic operating segment ($ in thousands):
 Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
Southern California$172,139 $164,954 $508,873 $479,102 
Northern California168,224 163,157 498,263 476,415 
Seattle Metro70,631 69,054 210,885 200,964 
Other real estate assets (1)
5,404 9,697 21,298 26,837 
Total rental and other property revenues$416,398 $406,862 $1,239,319 $1,183,318 

(1) Other real estate assets consist of this offering to repay indebtedness under its unsecured linesrevenues 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 September 30,Nine Months Ended September 30,
 2023202220232022
Same-property (1)
$398,460 $386,200 $1,181,559 $1,126,489 
Acquisitions (2)
1,528 675 3,881 675 
Development (3)
5,808 5,410 17,018 15,008 
Redevelopment1,564 1,422 4,696 4,348 
Non-residential/other, net (4)
10,432 14,783 33,658 44,403 
Straight line rent concession (5)
(1,394)(1,628)(1,493)(7,605)
Total rental and other property revenues$416,398 $406,862 $1,239,319 $1,183,318 

(1) Same-property includes properties that have comparable stabilized results as of creditJanuary 1, 2022 and for other general corporate and working capital purposes.

Private Placement Bond Redemption

In July 2017,are consolidated by the Company repaid $40.0 million in private placement bonds with a coupon rate of 4.5%for the three and a stated maturity date of September 2017. This represented the total outstanding balance of these unsecured bonds.

Common Stock

During the nine months ended September 30, 2017, the Company issued 311,873 shares2023 and 2022. A community is considered to have reached stabilized operations once it achieves an initial occupancy of common stock, through our equity distribution program at an average price of $260.30 per share for proceeds of $80.4 million, net of fees and commissions. There were no such sales during the three months ended September 30, 2017.90%.

Subsequent to quarter end through October 30, 2017, the Company issued 33,571 additional shares of common stock through its equity distribution program at an average price of $261.19 per share for proceeds of $8.7 million, net of fees and commissions.

Subsequent Events

In October 2017, the Company entered into an amendment to the Wesco I operating agreement to extend the joint venture. Under the amendment, the Company received an additional ownership interest in exchange for promote interest earned(2) Acquisitions include properties acquired which is expected to be approximately $38.0 million. As a result of the amendment, the Company's ownership interest in Wesco I increased to approximately 58.0%.

In October 2017, the Company made a commitment to fund a $40.0 million preferred equity investment in a multifamily development project located in Los Angeles, CA with an accrued initial preferred return of 11.3% and an October 2021 maturity date.

(3) 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 own, operate, and develop apartment communities. The carrying values of the Company's co-investmentsdid not have comparable stabilized results as of September 30, 2017 and December 31, 2016 areJanuary 1, 2022.
(3) Development includes properties developed which did not have stabilized results as follows (in thousands, except in parenthetical):of January 1, 2022.
(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
24
 Weighted Average Essex Ownership Percentage September 30, 2017 December 31, 2016
Membership interest/Partnership interest in:     
CPPIB54% $502,419
 $422,068
Wesco I, III, IV, and V50% 225,041
 180,687
Palm Valley (1)
50% —
 68,396
BEXAEW50% 45,523
 47,963
BEX II (2)
50% (36,245) 19,078
Other53% 40,471
 43,713
Total operating and other co-investments, net  777,209
 781,905
Total development co-investments, net50% 85,670
 157,317
Total preferred interest co-investments (includes related party investments of $20.7 million and $35.9 million as of September 30, 2017 and December 31, 2016, respectively)  225,453
 222,053
Total co-investments, net  $1,088,332
 $1,161,275


ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 20172023 and 20162022
(Unaudited)


(1) In January 2017,meet our redevelopment criteria, and two communities located in the California counties of Santa Barbara and Santa Cruz, which the Company purchaseddoes not consider its joint venture partner's 50.0% interestcore markets.
(5) Represents straight-line concessions for residential operating communities. Same-property revenues reflect concessions on a cash basis. Total rental and other property revenues reflect concessions on a straight-line basis in Palm Valleyaccordance 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 $1.2 million and $1.7 million as of September 30, 2023 and December 31, 2022, respectively, and was included in accounts payable and accrued liabilities within the accompanying condensed consolidated balance sheets. The amount of revenue recognized for the nine months ended September 30, 2023 that was included in the December 31, 2022 deferred revenue balance was $0.5 million, which was included in rental and other property revenue within the condensed consolidated statements of income and comprehensive income.

A performance obligation is a resultpromise in a contract to transfer a distinct good or service to the customer, and is the unit of this acquisition,account in the revenue recognition accounting standard. As of September 30, 2023, the Company consolidates Palm Valley.had $1.2 million of remaining performance obligations. The Company expects to recognize approximately 15% of these remaining performance obligations in 2023, an additional 68% through 2025, and the remaining balance thereafter.
(2) This
(4) Co-investments

The Company has joint ventures and preferred equity investments in co-investments which own, operate, and develop apartment communities and are accounted for under the equity method. As of September 30, 2023, the Company had invested in six technology co-investments and the co-investment balance of these investments was $39.8 million, and the aggregate commitment was $86.0 million. As of December 31, 2022, the Company had six technology co-investments and the co-investment balance of these investments was $39.4 million and the aggregate commitment was $87.0 million.

The carrying values of the Company's co-investments as of September 30, 2023 and December 31, 2022 are as follows ($ in thousands, except parenthetical amounts):
 
Weighted Average Company Ownership Percentage (1)
September 30, 2023December 31, 2022
Ownership interest in:
Wesco I, Wesco III, Wesco IV, Wesco V, and Wesco VI (2)
54 %$164,756 $178,552 
BEXAEW, BEX II, BEX IV, and 500 Folsom50 %228,926 238,537 
Other (3)
52 %67,653 74,742 
Total operating and other co-investments, net461,335 491,831 
Total development co-investments51 %14,612 12,994 
Total preferred interest co-investments (includes related party investments of $81.5 million and $87.1 million as of September 30, 2023 and December 31, 2022, respectively. See Note 6 - Related Party Transactions for further discussion)606,882 580,134 
Total co-investments, net$1,082,829 $1,084,959 

(1) Weighted average Company ownership percentages are as of September 30, 2023.
(2) As of September 30, 2023 and December 31, 2022, the Company's investments in Wesco I, Wesco III, and Wesco IV were classified as a liability asof $47.9 million and $41.7 million, respectively, due to distributions in excess of the Company's investment.
(3) As of September 30, 2017.2023 and December 31, 2022, the Company's investments in Expo and Century Towers were classified as a liability of $2.8 million and $0.8 million, respectively, due to distributions received in excess of the Company's investment.

25

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2023 and 2022
(Unaudited)

The weighted average Company ownership percentage excludes the Company's investments in non-core technology co-investments which are carried at fair value.

The combined summarized entity financial information of co-investments and preferred equity investments is as follows ($ in thousands).:
 September 30, 2023December 31, 2022
Combined balance sheets: (1)
  Rental properties and real estate under development$5,099,914 $4,955,051 
  Other assets286,663 294,663 
   Total assets$5,386,577 $5,249,714 
  Debt$3,561,368 $3,397,113 
  Other liabilities330,099 264,872 
  Equity1,495,110 1,587,729 
  Total liabilities and equity$5,386,577 $5,249,714 
Company's share of equity$1,082,829 $1,084,959 

 Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
Combined statements of income: (1)
Property revenues$103,379 $94,791 $303,926 $272,967 
Property operating expenses(37,603)(36,950)(116,549)(102,252)
Net operating income65,776 57,841 187,377 170,715 
Interest expense(41,802)(27,507)(111,800)(67,588)
General and administrative(1,635)(5,028)(13,171)(15,387)
Depreciation and amortization(44,704)(42,200)(129,009)(120,388)
Net loss$(22,365)$(16,894)$(66,603)$(32,648)
Company's share of net income (2)
$10,694 $10,985 $33,802 $23,756 

 September 30, 2017 December 31, 2016
Combined balance sheets:   
Rental properties and real estate under development$3,671,101
 $3,807,245
Other assets111,372
 121,505
Total assets$3,782,473
 $3,928,750
Debt$1,597,597
 $1,617,639
Other liabilities65,865
 74,607
Equity (1)
2,119,011
 2,236,504
Total liabilities and equity$3,782,473
 $3,928,750
Company's share of equity$1,088,332
 $1,161,275
(1) Includes preferred equity investments held by the Company and excludes investments in technology co-investments.

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Combined statements of income:       
Property revenues$76,303
 $72,124
 $224,319
 $216,434
Property operating expenses(27,753) (24,976) (79,028) (75,377)
Net operating income48,550
 47,148
 145,291
 141,057
Gain on sale of real estate10,058
 —
 10,058
 28,291
Interest expense(13,718) (10,978) (39,663) (35,260)
General and administrative(2,452) (1,496) (6,147) (4,276)
Depreciation and amortization(27,884) (25,569) (84,211) (79,676)
Net income$14,554
 $9,105
 $25,328
 $50,136
Company's share of net income (1)
$19,727
 $9,568
 $40,934
 $38,932
(1)(2) Includes the Company's share of equity income from co-investmentsjoint 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 $0.5$2.0 million and $0.8$1.8 million for the three months ended September 30, 20172023 and 2016,2022, respectively, and $1.5$5.9 million and $2.5$5.4 million for the nine months ended September 30, 20172023 and 2016,2022, respectively.



26

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 20172023 and 20162022
(Unaudited)


(4)(5) Notes and Other Receivables
 
Notes receivable, secured by real estate, and other receivables consist of the following as of September 30, 20172023 and December 31, 20162022 ($ in thousands):
 September 30, 2023December 31, 2022
Note receivable, secured, bearing interest at 11.50%, due November 2024 (Originated November 2020)$36,573 $33,477 
Note receivable, secured, bearing interest at 11.00%, due October 2025 (Originated October 2021)43,569 21,452 
Note receivable, secured, bearing interest at 12.00%, due August 2024 (Originated August 2022)11,377 10,350 
Note receivable, secured, bearing interest at 11.25%, due October 2027 (Originated October 2022)33,933 — 
Notes and other receivables from affiliates (1)
7,218 6,975 
Straight line rent receivables (2)
10,486 12,164 
Other receivables22,089 18,961 
Allowance for credit losses(642)(334)
Total notes and other receivables$164,603 $103,045 
 September 30, 2017 December 31, 2016
Notes receivable, secured, bearing interest at 10.00%, due May 2021$13,416
 $—
Notes receivable, secured, bearing interest at 10.75%, due September 202028,532
 17,685
Related party note receivable, secured, bearing interest at 9.50%, due October 2019(1)
6,599
 6,593
Related party note receivable, secured, bearing interest at 3.50%, due December 2017(1)
55,000
 —
Notes and other receivables from affiliates (2)
3,981
 4,695
Other receivables14,029
 11,997
Total notes and other receivables$121,557
 $40,970


(1) See Note 5, Related Party Transactions, for additional details.
(2) These amounts consist of short-term loans outstanding and due from various joint ventures as of September 30, 20172023 and December 31, 2016,2022, respectively. See Note 5,6, Related Party Transactions, for additional details.

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

(5)The following table presents the activity in the allowance for credit losses for notes receivable, secured ($ in thousands):

Notes Receivable, Secured
Balance at December 31, 2022$334 
Provision for credit losses308 
Balance at September 30, 2023$642 

No loans were placed on nonaccrual status or charged off during the nine months ended September 30, 2023 or 2022.

(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 $3.1$3.2 million and $3.7 million during both the three months ended September 30, 20172023 and 2016,2022, respectively, and $9.0$9.6 million and $9.6$10.3 million during the nine months ended September 30, 20172023 and 2016,2022, respectively. All of these fees are net of intercompany amounts eliminated by the Company. The Company netted development and redevelopment fees of $0.7approximately $0.5 million and $1.0$0.9 million against general and administrative expenses for the three months ended September 30, 20172023 and 2016,2022, respectively, and $2.1$1.5 million and $3.4$2.0 million for the nine months ended September 30, 20172023 and 2016,2022, respectively.


The Company’s Chairman and founder, Mr. George M. Marcus, is the Chairman of the Marcus & Millichap Company (“MMC”("MMC"), which is a parent company of a diversified group of real estate service, investment, and development firms. Mr. Marcus is also the Co-ChairmanChairman of Marcus & Millichap, Inc. (“MMI”("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 nine months ended September 30, 2023 and 2022, the Company did not pay brokerage commissions related to real estate transactions to MMC and its affiliates.


In August 2022, the Company funded an $11.2 million preferred equity investment in an entity whose sponsor includes an affiliate of MMC. The entity owns three multifamily communities located in Azusa, CA. The investment initially accrues interest based on a 9.5% preferred return and is scheduled to mature in August 2027.

27

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2023 and 2022
(Unaudited)

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 was scheduled to mature in March 2022, but was subsequently paid off in April 2022.

In January 2022, the Company provided a $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 scheduled to mature in February 2022, but 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 as detailed below.

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.

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.

In October 2021, the Company provided a $30.3 million related party bridge loan 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.

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, and in January 2022, the note receivable was paid off.

In June 2019, the Company acquired Brio, a 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 initially accrued interest based on an 11.0% preferred return which was reduced to 9.0% upon completion and lease-up of the project. The investment is scheduled to mature in February 2024.

In October 2018, the Company funded an $18.6 million preferred equity investment in an entity whose sponsor is an affiliate of MMC. The entity wholly owns a 268-unit apartment home community development located in Burlingame, CA. The investment initially accrued interest based on a 12.0% preferred return which was reduced to 9.0% upon completion and lease-up of the project. In April 2023, the investment's maturity date was extended from April 2024 to May 2026 with the investment accruing interest based on a 11.0% preferred return. In April 2023, the Company received cash of $11.2 million for the partial redemption of this preferred equity investment.

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-unit apartment home community located in Ventura, CA. The investment accrued interest based on a 10.25% initial preferred return. The investment was scheduled to mature in May 2023. In November 2021, the Company received cash of $18.3 million for the partial redemption of this preferred equity investment, and the maturity of the remaining commitment was extended to December 2028. As of September 30, 2023, the Company had a remaining commitment of $13.0 million and continues to accrue interest on a 9.0% preferred return. The remaining committed amount is expected to be funded if and when requested by the sponsors.

28

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2023 and 2022
(Unaudited)

In March 2017, the Company converted its existing $15.3 million preferred equity investment in Sage at Cupertino, a 230230-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 VIEconsolidation analysis performed by the Company.

In 2015, the Company made preferred equity investments totaling $20.0 million in three entities affiliated with MMC that own apartment communities in California. The Company earns a 9.5% preferred return on each such investment, all of which are scheduled to mature in 2022.


As described in Note 4,5, Notes and Other Receivables, the Company has provided short-term loans to affiliates. As of September 30, 20172023 and December 31, 2016, $4.02022, $7.2 million and $4.7$7.0 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):
 September 30, 2023December 31, 2022Weighted Average
Maturity
In Years as of September 30, 2023
Term loan - variable rate, net (1)
$298,456 $(1,611)4.1
Bonds public offering - fixed rate, net5,018,473 5,313,779 7.4
Unsecured debt, net (2)
5,316,929 5,312,168 
Lines of credit (3)
— 52,073 
Mortgage notes payable, net (4)
888,010 593,943 8.1
Total debt, net$6,204,939 $5,958,184  
Weighted average interest rate on fixed rate unsecured bonds private placement and bonds public offering3.3 %3.3 % 
Weighted average interest rate on variable rate term loan (1)
4.2 %— %
Weighted average interest rate on lines of credit6.2 %4.4 %
Weighted average interest rate on mortgage notes payable4.3 %3.5 % 


(1) In November 2016,October 2022, the Operating Partnership obtained a $300.0 million unsecured term loan priced at Adjusted SOFR plus 0.85% and matures in October 2024 with three 12-month extension options, exercisable at the Company's option. This loan has been swapped to an all-in fixed rate of 4.2% and the swap has a termination date of October 2026. In April 2023, the Company provided adrew down the $300.0 million unsecured term loan and in May 2023 used the proceeds to repay the Company's $300.0 million unsecured notes due in May 2023. The unsecured term loan includes unamortized debt issuance costs of $1.5 million and $1.6 million as of September 30, 2023 and December 31, 2022, respectively.
(2) Unsecured debt, net, consists of fixed rate public bond offerings and variable rate term loan which includes unamortized discount, net of premiums, of $6.6 million mezzanine loanand $7.9 million and unamortized debt issuance costs of $26.5 million and $29.9 million, as of September 30, 2023 and December 31, 2022, respectively.
(3) Lines of credit, related to a limited liability companythe Company's two lines of unsecured credit aggregating $1.24 billion as of September 30, 2023, excludes unamortized debt issuance costs of $4.1 million and $5.1 million as of September 30, 2023 and December 31, 2022, respectively. These debt issuance costs are included in which MMC holds a significant ownership interest through subsidiaries. The mezzanine loan is classified within notesprepaid expenses and other receivables inassets on the accompanying condensed consolidated balance sheets andsheets. As of September 30, 2023, the Company’s $1.2 billion credit facility had an outstanding balanceinterest rate at the Adjusted Secured Overnight Financing Rate ("Adjusted SOFR") plus 0.75%, which is based on a tiered rate structure tied to the Company’s credit ratings, adjusted for the Company's sustainability metric grid, and a scheduled maturity date of $6.6 million asJanuary 2027 with two six-month extensions, exercisable at the Company’s option. As of both September 30, 2017 and December 31, 2016.

2023, the Company’s $35.0 million working capital unsecured line of credit had an interest rate of Adjusted SOFR plus 0.75%, which is based on a tiered rate structure tied

29

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 20172023 and 20162022
(Unaudited)

In August 2017, the Company provided a $55.0 million related party bridge loan to a property acquired by Wesco V. The note receivable accrues interest at 3.5% and is scheduled to mature on December 16, 2017. The bridge loan is classified within notes and other receivables in the accompanying condensed consolidated balance sheets and had an outstanding balance of $55.0 million as of September 30, 2017, and no balance as of December 31, 2016.

(6) Debt
The Company does not have indebtedness as debt is incurred by the Operating Partnership. The Company guarantees the Operating Partnership’s unsecured debt including the revolving credit facilities for the full term of such debt.

Debt consists of the following ($ in thousands):

 September 30, 2017 December 31, 2016 
Weighted Average
Maturity
In Years
Unsecured bonds private placement - fixed rate$274,378
 $314,190
 3.3
Term loan - variable rate348,457
 98,189
 4.4
Bonds public offering - fixed rate2,878,311
 2,834,400
 6.7
Unsecured debt, net (1)
3,501,146
 3,246,779
  
Lines of credit (2)
2,609
 125,000
 
Mortgage notes payable, net (3)
2,111,467
 2,191,481
 5.4
Total debt, net$5,615,222
 $5,563,260
  
Weighted average interest rate on fixed rate unsecured bonds private placement and bonds public offering3.7% 3.6%  
Weighted average interest rate on variable rate term loan2.4% 2.3%  
Weighted average interest rate on lines of credit1.9% 1.8%  
Weighted average interest rate on mortgage notes payable4.2% 4.3%  

(1) Includes unamortized discount of $5.0 million and $0.1 million and unamortized debt issuance costs of $18.9 million and $18.1 million, as of September 30, 2017 and December 31, 2016, respectively.
(2) Lines of credit, related to the Company's two lines of unsecured credit aggregating $1.03 billion as of September 30, 2017, excludes unamortized debt issuance costs of $3.4 million and $3.3 million as of September 30, 2017 and December 31, 2016, respectively. These debt issuance costs are included in prepaid expenses and other assets on the condensed consolidated balance sheets. The Company’s $1.0 billion credit facility had an interest rate of LIBOR plus 0.90%, which is based on a tiered rate structure tied to the Company’s credit ratings. In January 2017,ratings, adjusted for the Company’s $1.0 billion credit facility’sCompany's sustainability metric grid, and a scheduled maturity date was extended to December 2020 with one 18-month extension, exercisableof July 2024.
(4) In July 2023, the Company closed $298.0 million in 10-year secured loans priced at the Company’s option. The Company’s $25.0 million working capital unsecured line of credit had ana 5.08% fixed interest rate of LIBOR plus 0.90%, which is based on a tiered rate structure tied to the Company’s credit ratings. The $25.0 million credit facility matures in January 2018.
(3)rate. Includes total unamortized premium, net of $37.4discounts of $0.7 million and $50.8$1.2 million, reduced by unamortized debt issuance costs of $6.0$3.2 million and $7.4$2.0 million, as of September 30, 20172023 and December 31, 2016,2022, respectively.


The aggregate scheduled principal payments of the Company’s outstanding debt, excluding lines of credit, as of September 30, 20172023 are as follows (excluding lines of credit) ($ in thousands):
2023$751 
2024 (1)
403,109 
2025633,054 
2026549,405 
2027803,955 
Thereafter3,850,269 
Total$6,240,543 
(1) In July 2023, the Company closed $298.0 million in 10-year secured loans priced at a 5.08% fixed interest rate.


Remaining in 2017$7,719
2018257,108
2019661,318
2020694,887
2021544,810
Thereafter3,439,209
Total$5,605,051


ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2017 and 2016
(Unaudited)

(7)(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. Essex'sThe 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 revenuerevenues 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 three 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 revenuerevenues 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, net, 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 nine months ended September 30, 20172023 and 20162022 ($ in thousands):
30
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Revenues:       
Southern California$150,413
 $142,112
 $445,296
 $417,114
Northern California127,673
 115,318
 377,531
 338,761
Seattle Metro58,285
 55,543
 171,564
 161,192
Other real estate assets5,603
 14,105
 17,517
 41,751
Total property revenues$341,974
 $327,078
 $1,011,908
 $958,818
Net operating income:       
Southern California$102,699
 $96,486
 $305,894
 $284,345
Northern California91,018
 83,042
 271,224
 243,876
Seattle Metro39,674
 37,688
 116,733
 109,352
Other real estate assets4,446
 10,501
 16,142
 31,315
Total net operating income237,837
 227,717
 709,993
 668,888
Management and other fees from affiliates2,395
 2,093
 6,927
 6,145
Depreciation and amortization(117,451) (110,467) (350,893) (329,847)
General and administrative(9,788) (9,647) (30,726) (28,527)
Acquisition and investment related costs(324) (284) (1,154) (1,379)
Interest expense(55,938) (56,693) (167,333) (164,727)
Total return swap income2,538
 3,143
 7,653
 9,080
Interest and other income5,790
 4,943
 17,916
 19,560
Equity income from co-investments19,727
 9,568
 40,934
 38,932
Loss on early retirement of debt—
 (211) —
 (211)
Gain on sale of real estate and land249
 —
 26,423
 20,258
Deferred tax expense on gain on sale of real estate and land—
 —
 —
 (4,279)
Gain on remeasurement of co-investment—
 —
 88,641
 —
Net income$85,035
 $70,162
 $348,381
 $233,893





ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 20172023 and 20162022
(Unaudited)


 Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
Revenues:
Southern California$172,139 $164,954 $508,873 $479,102 
Northern California168,224 163,157 498,263 476,415 
Seattle Metro70,631 69,054 210,885 200,964 
Other real estate assets5,404 9,697 21,298 26,837 
Total property revenues$416,398 $406,862 $1,239,319 $1,183,318 
Net operating income:
Southern California$121,110 $117,014 $359,975 $339,992 
Northern California116,958 113,401 347,594 331,636 
Seattle Metro49,611 48,816 149,894 141,380 
Other real estate assets4,823 7,588 18,324 20,647 
Total net operating income292,502 286,819 875,787 833,655 
Management and other fees from affiliates2,785 2,886 8,328 8,313 
Corporate-level property management expenses(11,504)(10,184)(34,387)(30,532)
Depreciation and amortization(137,357)(135,511)(410,422)(403,561)
General and administrative(14,611)(15,172)(43,735)(40,541)
Expensed acquisition and investment related costs(31)(230)(375)(248)
Casualty loss— — (433)— 
Gain on sale of real estate and land— — 59,238 — 
Interest expense(54,161)(51,645)(157,806)(152,499)
Total return swap income690 1,882 2,544 6,709 
Interest and other income (loss)4,406 (6,796)29,055 (31,571)
Equity income from co-investments10,694 10,985 33,802 23,756 
Tax (expense) benefit on unconsolidated co-investments(404)(1,755)(1,237)7,863 
Loss on early retirement of debt, net— (2)— (2)
Gain on remeasurement of co-investment— 17,423 — 17,423 
Net income$93,009 $98,700 $360,359 $238,765 
Total assets for each of the reportable operating segments are summarized as follows as of September 30, 2017 and December 31, 2016 ($ in thousands):
31
 September 30, 2017 December 31, 2016
Assets:   
Southern California$4,822,941
 $4,924,792
Northern California4,241,460
 3,791,549
Seattle Metro1,532,784
 1,570,340
Other real estate assets56,079
 78,079
Net reportable operating segment - real estate assets10,653,264
 10,364,760
Real estate under development313,825
 190,505
Co-investments1,124,577
 1,161,275
Real estate held for sale, net—
 101,957
Cash and cash equivalents, including restricted cash63,273
 170,302
Marketable securities184,574
 139,189
Notes and other receivables121,557
 40,970
Prepaid expenses and other assets51,453
 48,450
Total assets$12,512,523
 $12,217,408
(8) Net Income Per Common Share and Net Income Per Common Unit
($ in thousands, except share and unit data)

Essex Property Trust, Inc.
 Three Months Ended September 30, 2017 Three Months Ended September 30, 2016
 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$79,723
 65,994,896
 $1.21
 $65,561
 65,507,669
 $1.00
Effect of Dilutive Securities:           
Stock options—
 83,387
   —
 109,882
  
Diluted: 
  
  
  
  
  
Net income available to common stockholders$79,723
 66,078,283
 $1.21
 $65,561
 65,617,551
 $1.00




ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 20172023 and 20162022
(Unaudited)


Total assets for each of the reportable operating segments are summarized as follows as of September 30, 2023 and December 31, 2022 ($ in thousands):
 September 30, 2023December 31, 2022
Assets:
Southern California$3,824,670 $3,892,003 
Northern California5,282,972 5,414,467 
Seattle Metro1,345,028 1,374,379 
Other real estate assets92,716 133,245 
Net reportable operating segment - real estate assets10,545,386 10,814,094 
Real estate under development23,067 24,857 
Co-investments1,133,515 1,127,491 
Cash and cash equivalents, including restricted cash400,497 42,681 
Marketable securities90,186 112,743 
Notes and other receivables164,603 103,045 
Operating lease right-of-use assets64,636 67,239 
Prepaid expenses and other assets75,757 80,755 
Total assets$12,497,647 $12,372,905 

(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 September 30, 2023Three Months Ended September 30, 2022
 IncomeWeighted-
average
Common
Shares		Per
Common
Share
Amount		IncomeWeighted-
average
Common
Shares		Per
Common
Share
Amount
Basic:
Net income available to common stockholders$87,282 64,184,180 $1.36 $92,842 65,059,678 $1.43 
Effect of Dilutive Securities: 
Stock options— 1,840 — 8,112 
Diluted:      
Net income available to common stockholders$87,282 64,186,020 $1.36 $92,842 65,067,790 $1.43 
32

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2023 and 2022
(Unaudited)

Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016Nine Months Ended September 30, 2023Nine Months Ended September 30, 2022
Income 
Weighted-
average
Common
Shares
 
Per
Common
Share
Amount
 Income 
Weighted-
average
Common
Shares
 
Per
Common
Share
Amount
 IncomeWeighted-
average
Common Units		Per
Common
Unit
Amount		IncomeWeighted-
average
Common Units		Per
Common
Unit
Amount
Basic:           Basic:
Net income available to common stockholders$329,446
 65,759,450
 $5.01
 $215,555
 65,455,004
 $3.29
Net income available to common unitholdersNet income available to common unitholders$340,434 64,274,085 $5.30 $223,150 65,198,532 $3.42 
Effect of Dilutive Securities:           
Effect of Dilutive Securities: 
Stock options—
 77,515
   —
 123,657
  Stock options— 1,194 — 27,235 
Diluted: 
  
  
  
  
  
Diluted:      
Net income available to common stockholders$329,446
 65,836,965
 $5.00
 $215,555
 65,578,661
 $3.29
Net income available to common unitholdersNet income available to common unitholders$340,434 64,275,279 $5.30 $223,150 65,225,767 $3.42 
The table above excludes from the calculations of diluted earnings per share weighted average convertible OP Units of 2,251,1122,259,236 and 2,220,952,2,273,399, which include vested Series Z Incentive Units, Series Z-1 Incentive Units, 2014 Long-Term Incentive Plan Units and 2015 Long-Term Incentive Plan Units, for the three months ended September 30, 20172023 and 2016,2022, respectively, and 2,251,6732,261,832 and 2,224,2362,277,636 for the nine months ended September 30, 20172023 and 2016,2022, respectively, because they were anti-dilutive. The related income allocated to these convertible OP Units aggregated $2.7$3.1 million and $2.2$3.2 million for the three months ended September 30, 20172023 and 2016,2022, respectively, and $11.3$12.0 million and $7.5$7.8 million for the nine months ended September 30, 20172023 and 2016,2022, respectively. Additionally, the table excludes all DownREIT units for which the Operating Partnership has the ability and intention to redeem the DownREIT units for cash and does not consider them to be common stock equivalents.

Stock options of zero461,873 and 40,900271,018 for the three months ended September 30, 20172023 and 2016,2022, respectively, and 2,352501,187 and 76,054230,326 for the nine months ended September 30, 20172023 and 2016,2022, 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 September 30, 2017 Three Months Ended September 30, 2016 Three Months Ended September 30, 2023Three Months Ended September 30, 2022
Income 
Weighted-
average
Common Units
 
Per
Common
Unit
Amount
 Income 
Weighted-
average
Common Units
 
Per
Common
Unit
Amount
 IncomeWeighted-
average
Common
 Units		Per
Common
Unit
Amount		IncomeWeighted-
average
Common
 Units		Per
Common
Unit
Amount
Basic:           Basic:
Net income available to common unitholders$82,444
 68,246,008
 $1.21
 $67,784
 67,728,621
 $1.00
Net income available to common unitholders$90,354 66,443,416 $1.36 $96,089 67,333,077 $1.43 
Effect of Dilutive Securities:           
Effect of Dilutive Securities: 
Stock options—
 83,387
   —
 109,882
  Stock options— 1,840 — 8,112 
Diluted: 
  
  
  
  
  
Diluted:      
Net income available to common unitholders$82,444
 68,329,395
 $1.21
 $67,784
 67,838,503
 $1.00
Net income available to common unitholders$90,354 66,445,256 $1.36 $96,089 67,341,189 $1.43 

33

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 20172023 and 20162022
(Unaudited)


Nine Months Ended September 30, 2017 Nine Months Ended September 30, 2016Nine Months Ended September 30, 2023Nine Months Ended September 30, 2022
Income 
Weighted-
average
Common Units
 
Per
Common
Unit
Amount
 Income 
Weighted-
average
Common Units
 
Per
Common
Unit
Amount
 IncomeWeighted-
average
Common Units		Per
Common
Unit
Amount		IncomeWeighted-
average
Common Units		Per
Common
Unit
Amount
Basic:           Basic:
Net income available to common unitholders$340,735
 68,011,123
 $5.01
 $223,012
 67,679,240
 $3.30
Net income available to common unitholders$352,416 66,535,917 $5.30 $230,950 67,476,168 $3.42 
Effect of Dilutive Securities:           
Effect of Dilutive Securities: 
Stock options—
 77,515
   —
 123,657
  Stock options— 1,115 — 27,235 
Diluted: 
  
  
  
  
  
Diluted:      
Net income available to common unitholders$340,735
 68,088,638
 $5.00
 $223,012
 67,802,897
 $3.29
Net income available to common unitholders$352,416 66,537,111 $5.30 $230,950 67,503,403 $3.42 


Stock options of zero461,873 and 40,900271,018 for the three months ended September 30, 20172023 and 2016,2022, respectively, and 2,352501,187 and 76,054230,326 for the nine months ended September 30, 20172023 and 2016,2022, 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 DownREIT units for cash and does not consider them to be common stock equivalents.

(9)(10) Derivative Instruments and Hedging Activities


As of September 30, 2017,2023, the Company had entered intoan interest rate swap contractscontract with an aggregate notional amount of $175.0$300.0 million that effectively fixed the interest rate on the $175.0$300.0 million unsecured term loan at 2.3%4.2%. These derivatives qualifyThis derivative qualifies for hedge accounting.


As of September 30, 2017, the Company had interest rate caps, which are not accounted for as hedges, totaling a notional amount of $20.7 million that effectively limit the Company’s exposure to interest rate risk by providing a ceiling on the underlying variable interest rate for $20.7 million of the Company’s tax exempt variable rate debt.

As of September 30, 20172023 and December 31, 2016,2022, the aggregate carrying value of the interest rate swap contracts waswere presented in the consolidated balance sheets as an asset of $3.8$11.2 million and $4.4$5.6 million, respectively, and iswere included in prepaid expenses and other assets on the condensed consolidated balance sheets. The aggregate carrying value

As of the interest rate caps was zero on the condensed consolidated balance sheets as of both September 30, 20172023 and December 31, 2016.

Hedge ineffectiveness related to cash flow hedges, which is included in interest expense on the condensed consolidated income statements, net was not significant for both the three and nine months ended September 30, 2017 and 2016.

Additionally,2022, the Company had no interest rate caps.

The Company has entered intofour total return swapsswap contracts, with an aggregate notional amount of $223.0 million, that effectively convert $256.8$223.0 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 $256.8$223.0 million of the outstanding debt at par. These derivatives do not qualify for hedge accounting and had a carrying and fair value of zero at both September 30, 20172023 and December 31, 2016.2022. These total return swaps are scheduled to mature between September 2021December 2024 and November 2022. Realized2033. The realized gains of $2.5$0.7 million and $3.1$1.9 million for the three months ended September 30, 20172023 and 2016,2022, respectively, and $7.7$2.5 million and $9.1$6.7 million for the nine months ended September 30, 20172023 and 2016,2022, respectively, arewere 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.


34

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 20172023 and 20162022
(Unaudited)


(10) CommitmentsIn late 2022 and Contingencies

early 2023, a number of purported class actions were filed against RealPage, Inc., a seller of revenue management software, and various lessors of multifamily housing which utilize this software, including the Company. The complaints allege collusion among defendants to artificially increase rents of multifamily residential real estate above competitive levels. The Company intends to vigorously defend against these lawsuits. Given their early stage, the Company is unable to predict the outcome or estimate the amount of loss, if any, that may result from such matters. The Company is also subject to various lawsuitsother legal and/or regulatory proceedings arising in the normal course of its business operations. Such lawsuits could, but areThe Company believes that, with respect to such matters that it is currently a party to, the ultimate disposition of any such matter will not expected to, haveresult in a material adverse effect on the Company'sCompany’s financial condition, results of operations or cash flows.

The Company is subject to various federal, state, and local environmental laws. To the extent that an environmentalsuch a 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.


35
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 20162022 annual report on Form 10-K for the year ended December 31, 2016. We make2022. 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"Forward-Looking Statements."
 
The CompanyEssex is a self-administered and self-managed REIT that acquires, develops, redevelops, and manages apartment communities in selected residential areas located primarily inon 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 September 30, 2017,2023, had an approximately 96.7%96.6% general partnerpartnership 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 September 30, 2017,2023, the Company owned or had ownership interests in 247 stabilized252 operating apartment communities, comprising 60,30561,997 apartment homes, excluding the Company’s ownership interest in preferred equity interest co-investments, and the Company also had ownership interests in oneloan investments, three operating commercial building with approximately 106,564 square feetbuildings, and seven active developments. a development pipeline comprised of one unconsolidated joint venture project. 

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


Southern California (Los (primarily Los Angeles, Orange, San Diego, and Ventura counties)
Northern California (the San Francisco Bay Area)
SeattleMetro (Seattle (the Seattle metropolitan area)


As of September 30, 2017,2023, the Company’s development pipeline was comprised of four consolidated projects under development, threeone unconsolidated joint venture projectsproject under development aggregating 264 apartment homes and various consolidated predevelopment projects, aggregating 2,158 apartment homes, with total incurred costs of $0.6 billion,$112.0 million, and estimated remaining project costs of $0.8 billion, $0.5 billionapproximately $13.0 million, $6.7 million of which represents the Company's share of estimated remaining costs, for total estimated project costs of $1.4 billion.$125.0 million.


The Company’s consolidated apartment communities are as follows:
 As of September 30, 2023As of September 30, 2022
 Apartment Homes%Apartment Homes%
Southern California21,986 43 %22,401 43 %
Northern California19,245 37 %19,230 37 %
Seattle Metro10,341 20 %10,341 20 %
Total51,572 100 %51,972 100 %
 As of September 30, 2017 As of September 30, 2016
 Apartment Homes % Apartment Homes %
Southern California23,343
 47% 23,949
 49%
Northern California15,848
 32% 14,865
 30%
Seattle Metro10,238
 21% 10,239
 21%
Total49,429
 100% 49,053
 100%


Co-investments, including Wesco I, LLC ("Wesco I"), Wesco III, LLC ("Wesco III"), Wesco IV, LLC (“Wesco IV”), Wesco V, LLC ("Wesco V"), Canadian Pension Plan Investment Board ("CPPIB" or "CPP"),VI, BEXAEW, LLC (“BEXAEW”), and BEX II, LLC ("BEX II")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.


ComparisonMarket Considerations

While COVID-19’s impact begins to dissipate, the Company continues to comply with the stated intent of local, county, state and federal laws, some of which limit rent increases during times of emergency and impair the ability to collect unpaid rent during certain timeframes and at various regions in which our communities are located, impacting the Company and its properties. Concurrently, geopolitical tensions and regional conflicts have increased uncertainty during 2022 and 2023. Inflation has caused an increase in consumer prices, thereby reducing purchasing power and elevating the risks of a recession. Due to increased inflation, the U.S. Federal Reserve raised the federal funds rate a total of seven times during 2022 and four
36
times in 2023. In response, market interest rates have increased significantly during this time. At the same time, the labor market remains historically tight and companies continue to look to add employees, pushing unemployment lower.

The long-term impact of these developments will largely depend on 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 Three Months Ended September 30, 2017 toimpact of the Three Months Ended September 30, 2016

The Company’s average financial occupanciesCOVID-19 pandemic, the Company's cash delinquencies as a percentage of scheduled rental income for the Company’s stabilized apartment communities or “Same-Property”"Same-Property" (stabilized properties consolidated by the Company for the quarters ended September 30, 20172023 and 2016) was 96.7% and 96.5%2022) have generally remained higher than the pre-pandemic historical average of 0.35% since the second quarter of 2020. Cash delinquencies were elevated at 1.4% for the three months ended September 30, 20172022 and 2016,further increased to 2.0% for the three months ended September 30, 2023. The lower cash delinquencies for the three months ended September 30, 2022 was due to $7.4 million of Emergency Rental Assistance payments as compared to the $0.4 million received for three months ended September 30, 2023; however, current tenant delinquencies remained well above pre-pandemic levels. The Company continues to work with residents to collect such cash delinquencies. As of September 30, 2023, the delinquencies have not had a material adverse impact on the Company's liquidity position.

The foregoing macroeconomic conditions have 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. 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 September 30, 2023 to the Three Months Ended September 30, 2022

The Company’s average financial occupancy for the Company’s Same-Property portfolio was 96.4% and 96.0% for the three months ended September 30, 2023 and 2022, respectively. Financial occupancy is defined as the percentage resulting from dividing actual rental revenueincome by total potentialscheduled rental revenue.income. Actual rental revenueincome represents contractual rental revenueincome pursuant to leases without considering delinquency and concessions. Total potentialscheduled rental revenueincome 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. We believeThe 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 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 revenue,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 September 30, 20172023 and 20162022 is as follows:
 Three Months Ended September 30,
 20232022
Southern California96.3 %96.2 %
Northern California96.5 %96.0 %
Seattle Metro96.3 %95.3 %

37
 Three Months Ended September 30,
 2017 2016
Southern California96.8% 96.7%
Northern California96.9% 96.5%
Seattle Metro96.2% 96.1%

The following table provides a breakdown of revenuerevenues amounts, including revenues attributable to the Same-Properties:
 Number of ApartmentThree Months Ended September 30,DollarPercentage
Property Revenues ($ in thousands)Homes20232022ChangeChange
Same-Property Revenues:
Southern California21,352 $167,926 $161,793 $6,133 3.8 %
Northern California18,371 159,903 155,353 4,550 2.9 %
Seattle Metro10,341 70,631 69,054 1,577 2.3 %
Total Same-Property Revenues50,064 398,460 386,200 12,260 3.2 %
Non-Same Property Revenues 17,938 20,662 (2,724)(13.2)%
Total Property Revenues $416,398 $406,862 $9,536 2.3 %
  Number of Apartment Three Months Ended September 30, Dollar Percentage
Property Revenues ($ in thousands) Homes 2017 2016 Change Change
Same-Property Revenues:          
Southern California 21,998
 $141,203
 $136,368
 $4,835
 3.5%
Northern California 13,892
 109,820
 108,156
 1,664
 1.5%
Seattle Metro 10,238
 58,285
 55,545
 2,740
 4.9%
Total Same-Property Revenues 46,128
 309,308
 300,069
 9,239
 3.1%
Non-Same Property Revenues  
 32,666
 27,009
 5,657
 20.9%
Total Property Revenues  
 $341,974
 $327,078
 $14,896
 4.6%



Same-Property Revenues increased by $9.2$12.3 million or 3.1%3.2% to $309.3$398.5 million in the third quarter of 20172023 from $300.1$386.2 million in the third quarter of 2016.2022. The increase was primarily attributable to an increase of 3.0%3.3% in average rental rates from $2,118 per apartment home$2,539 in the third quarter of 20162022 to $2,182 per apartment home$2,623 in the third quarter of 2017. 2023.


Non-Same Property Revenues increased decreased by $5.7$2.7 million or 20.9%13.2% to $32.7$17.9 million in the third quarter of 20172023 from $27.0$20.7 million in the third quarter of 2016.2022. The increasedecrease was primarily due to revenue generated by the consolidationsale of Palm ValleyAnavia in January 2017.2022 and CBC and The Sweeps in 2023.


Management and other fees from affiliates increased by $0.3 million or 14.3% to $2.4 million in the third quarter of 2017 from $2.1 million in the third quarter of 2016, primarily due to property management fee revenue from joint venture development communities that went into lease-up from the third quarter of 2016 through the third quarter of 2017.

Property operating expenses, excluding real estate taxes increased $2.8by $3.5 million or 4.4%4.8% to $66.6$77.0 million for the third quarter of 20172023 compared $63.8to $73.5 million for to the third quarter of 20162022, primarily due to an increaseincreases of $1.5 million in utilities expense.expenses, $1.2 million in administrative expenses, and $0.8 million in personnel costs. Same-Property operating expenses, excluding real estate taxes, increased by $2.1$4.4 million or 3.6% for6.2% to $75.2 million in the third quarter of 20172023 compared to $70.8 million in the third quarter of 2016,2022, primarily due to a $1.3increases of $1.6 million increase in utilities.utilities expenses, $1.4 million in insurance and other expenses, $1.1 million in personnel costs, and $0.3 million in maintenance and repairs expenses.


Real estate taxes increased $1.9by $0.3 million or 5.3%0.6% to $37.5$46.9 million for the third quarter of 20172023 compared to $35.6$46.6 million for the third quarter of 20162022, primarily due primarily to the consolidation of Palm Valley in January 2017 and increases in tax rates and property valuations.special assessments in 2023, combined with refunds received in 2022. Same-Property real estate taxes increased by $0.6$0.5 million or 1.9%1.2% to $32.7 million in the third quarter of 2017 compared to $32.1 million in the third quarter of 2016 primarily due to increases in tax rates and property valuations.

Depreciation and amortization expense increased by $7.0 million or 6.3% to $117.5$43.2 million for the third quarter of 20172023 compared to $110.5$42.7 million for the third quarter of 2016,2022 primarily due to the consolidation of Palm Valleyincreases in January 2017.special assessments in 2023, combined with refunds received in 2022.


Interest expense decreased $0.8Corporate-level property management expenses increased by $1.3 million or 1.4%12.7% to $55.9$11.5 million for the third quarter of 20172023 compared to $56.7$10.2 million for the third quarter of 2016,2022 due to costs pertaining to the centralization of certain property level functions.

Depreciation and amortization expense increased by $1.9 million or 1.4% to $137.4 million for the third quarter of 2023 compared to $135.5 million for the third quarter of 2022, primarily due to an increase in depreciation expense from the acquisition of Hacienda at Camarillo Oaks in 2023. The increase was partially offset by the sale of Anavia in 2022 and CBC and The Sweeps in 2023.

Interest expense increased by $2.6 million or 5.0% to $54.2 million for the third quarter of 2023 compared to $51.6 million for the third quarter of 2022, primarily due to borrowing on the $300.0 million unsecured term loan in April 2023 and the $298.0 million of 10-year secured loans closed in July 2023 which resulted in an increase in interest expense of $5.3 million for the third quarter of 2023. Additionally, there was a $0.3 million decrease in capitalized interest in the third quarter of 2023, due to a decrease in development activity as compared to the same period in 2022. These increases to interest expense were partially offset by various debt that was paid off, matured, or matureddue to regular principal amortization during and after the third quarter of 2016,2022, primarily due to the payoff of the $300.0 million of senior unsecured notes due May 1, 2023, which resulted in a decrease in interest expense of $4.1$3.0 million for the third quarter of 2017, partially offset by an increase primarily due to the $350.0 million senior unsecured notes due May 1, 2027 issued in April 2017 and the $450.0 million senior unsecured notes due on April 15, 2026 issued in April 2016, which resulted in $7.3 million interest expense for the third quarter of 2017 compared to $4.0 million for the third quarter of 2016.2023.


Total return swap income of $2.5$0.7 million in the third quarter of 20172023 consists of monthly settlements related to the Company's total return swap contracts that were entered into during 2015 in connection with issuing $257.3an aggregate notional amount of $223.0 million.

38
Interest and other income (loss) increased by $11.2 million or 164.7% to an income of fixed rate tax-exempt mortgage notes payable. The decrease of $0.6$4.4 million for the third quarter of 20172023 compared to the third quartera loss of 2016 was due to less favorable interest rates.

Interest and other income increased by $0.9 million or 18.4% to $5.8$6.8 million for the third quarter of 2017 compared2022, primarily due to $4.9realized and unrealized gains on marketable securities.

Equity income from co-investments decreased by $0.3 million or 2.7% to $10.7 million for the third quarter of 2016 primarily due2023 compared to an increase in marketable securities and other interest income of $1.6 million offset by a $1.0 million decrease in gain on sale of marketable securities and other investments.

Equity income from co-investments increased $10.1 million or 105.2% to $19.7$11.0 million for the third quarter of 2017 compared to $9.6 million for the third quarter of 20162022, primarily due to the salea decrease of $1.9 million in equity loss from co-investments, offset by a property by Wesco I during the third quarter of 2017, which resulted$2.1 million increase in a gain of $10.1 million for the Company.equity income (loss) from non-core co-investments.



Comparison of the Nine Months Ended September 30, 20172023 to the Nine Months Ended September 30, 20162022


OurThe Company's average financial occupanciesoccupancy for the Company's stabilized apartment communities or "Same-Property"its Same-Property portfolio (stabilized properties consolidated by the Company for the nine months ended September 30, 20172023 and 2016)2022) was 96.5%96.6% and 96.2%96.1% for the nine months ended September 30, 20172023 and 2016,2022, respectively.










The regional breakdown of the Company’sCompany's Same-Property portfolio for financial occupancy for the nine months ended September 30, 20172023 and 20162022 is as follows:

 Nine Months Ended September 30,
 2017 2016
Southern California96.5% 96.2%
Northern California96.8% 96.2%
Seattle Metro96.3% 95.9%


 Nine Months Ended September 30,
 20232022
Southern California96.5 %96.1 %
Northern California96.6 %96.2 %
Seattle Metro96.6 %95.8 %
The following table provides a breakdown of revenue amounts, including revenues attributable to the Same-Properties:

 Number of Apartment Nine Months Ended September 30, Dollar Percentage Number of ApartmentNine Months Ended September 30,DollarPercentage
Property Revenues ($ in thousands) Homes 2017 2016 Change ChangeProperty Revenues ($ in thousands)Homes20232022ChangeChange
Same-Property Revenues:          Same-Property Revenues:
Southern California 21,998
 $417,651
 $401,321
 $16,330
 4.1%Southern California21,352 $497,071 $471,267 $25,804 5.5 %
Northern California 13,892
 326,880
 318,498
 8,382
 2.6%Northern California18,371 473,602 454,258 19,344 4.3 %
Seattle Metro 10,238
 171,564
 161,193
 10,371
 6.4%Seattle Metro10,341 210,886 200,964 9,922 4.9 %
Total Same-Property Revenues 46,128
 916,095
 881,012
 35,083
 4.0%Total Same-Property Revenues50,064 1,181,559 1,126,489 55,070 4.9 %
Non-Same Property Revenues  
 95,813
 77,806
 18,007
 23.1%Non-Same Property Revenues 57,760 56,829 931 1.6 %
Total Property Revenues  
 $1,011,908
 $958,818
 $53,090
 5.5%Total Property Revenues $1,239,319 $1,183,318 $56,001 4.7 %


Same-Property Revenues increased by $35.1$55.1 million or 4.0%4.9% to $916.1 million in$1.2 billion for the nine months ended September 30, 20172023 from $881.0 million in$1.1 billion for the nine months ended September 30, 2016.2022. The increase was primarily attributable to an increase of 3.6%5.1% in average rental rates from $2,084$2,470 per apartment home infor the nine months ended September 30, 20162022 to $2,159$2,597 per apartment home infor the nine months ended September 30, 2017. 2023.  


Non-Same Property Revenues increased by $18.0$0.9 million or 23.1%1.6% to $95.8 million in the nine months ended September 30, 2017 from $77.8 million in the nine months ended September 30, 2016. The increase was primarily due to revenue generated by the consolidation of Palm Valley in January 2017.

Management and other fees from affiliates increased by $0.8 million or 13.1% to $6.9 million in the nine months ended September 30, 2017 from $6.1 million in the nine months ended September 30, 2016, primarily due to property management fee revenue from joint venture development communities that went into lease-up from the third quarter of 2016 through the third quarter of 2017.

Property operating expenses, excluding real estate taxes increased $8.2 million or 4.4% to $193.6$57.8 million for the nine months ended September 30, 2017 compared to $185.42023 from $56.8 million for the nine months ended September 30, 20162022. The increase was primarily due to the consolidationacquisitions of Regency Palm ValleyCourt and Windsor Court in January 2017.2022, Hacienda at Camarillo Oaks in 2023, and an increase in average rental rates, offset by the sale of Anavia in 2022 and CBC and The Sweeps in 2023.

Management and other fees from affiliates stayed consistent at $8.3 million for the nine months ended September 30, 2023 and 2022.

Property operating expenses, excluding real estate taxes increased by $12.6 million or 5.9% to $224.7 million for the nine months ended September 30, 2023 compared to $212.1 million for the nine months ended September 30, 2022, primarily due to increases of $4.6 million in maintenance and repairs expenses, $3.6 million in administrative expenses, $3.2 million in utilities expenses, and $1.2 million in personnel costs. Same-Property operating expenses, excluding real estate taxes, increased by $5.7$13.7 million or 3.3%6.7% to $178.1$218.9 million for the nine months ended September 30, 20172023 compared to $172.4$205.2 million for the nine
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months ended September 30, 2022, primarily due to increases of $4.8 million in maintenance and repairs expenses, $3.7 million in utilities expenses, $2.8 million in insurance and other expenses, $1.4 million in personnel costs, and $0.9 million in administrative expenses.

Real estate taxes increased by $1.2 million or 0.9% to $138.8 million for the nine months ended September 30, 2016, primarily due2023 compared to a $3.3 million increase in utilities and an increase of $1.3 million in maintenance and repairs.

Real estate taxes increased $3.8 million or 3.6% to $108.3$137.6 million for the nine months ended September 30, 2017 compared2022, primarily due to $104.5an increase of approximately 2% in California real estate taxes, partially offset by a slight decrease from 2022 in real estate taxes in the Seattle metro region. Same-Property real estate taxes increased by $1.4 million or 1.1% to $127.8 million for the nine months ended September 30, 2016 due primarily2023 compared to the consolidation of Palm Valley in January 2017 and increases in tax rates and property valuations. Same-Property real estate taxes increased by $2.1 million or 2.2% to $96.7$126.4 million for the nine months ended September 30, 2017 compared2022, primarily due to $94.6an increase of approximately 2% in California real estate taxes, partially offset by a slight decrease from 2022 in real estate taxes in the Seattle metro region.

Corporate-level property management expenses increased by $3.9 million or 12.8% to $34.4 million for the nine months ended September 30, 2016 primarily due2023 compared to increases in tax rates and property valuations.

Depreciation and amortization expense increased by $21.1 million or 6.4% to $350.9$30.5 million for the nine months ended September 30, 2017 compared2022 due to $329.8costs pertaining to the centralization of certain property level functions.

Depreciation and amortization expense increased by $6.8 million or 1.7% to $410.4 million for the nine months ended September 30, 2016, primarily due2023 compared to the consolidation of Palm Valley in January 2017.

Interest expense increased $2.6 million or 1.6% to $167.3$403.6 million for the nine months ended September 30, 2017 compared2022, primarily due to $164.7an increase in depreciation expense from the completion of Station Park Green (Phase IV) development property in 2022, the purchase of the Company's joint venture partner's 49.8% interest in Essex JV LLC co-investment that owned Regency Palm Court and Windsor Court, in 2022, and the acquisition of Hacienda at Camarillo Oaks in 2023. The increase was partially offset by the sale of Anavia in 2022 and CBC and The Sweeps in 2023.

Gain on sale of real estate and land of $59.2 million for the nine months ended September 30, 2016,2023 was primarily dueattributable to the $350.0sale of CBC and The Sweeps apartment home community.

Interest expense increased by $5.3 million senior unsecured notes due May 1, 2027 issued in April 2017 and the $450.0 million senior unsecured notes due on April 15, 2026 issued in April 2016

which resulted in $18.6 million interest expense for the nine months ended September 30, 2017 and $7.5or 3.5% to $157.8 million for the nine months ended September 30, 2016. The2023 compared to $152.5 million for the nine months ended September 30, 2022, primarily due to higher interest rates on the Company's unsecured lines of credit borrowing on the $300.0 million unsecured term loan in April 2023 and the $298.0 million of 10-year secured loans closed in July 2023 which resulted in an increase in interest expense of $9.5 million for the nine months ended September 30, 2023. Additionally, there was a $1.3 million decrease in capitalized interest in the nine months ended September 30, 2023, due to a decrease in development activity as compared to the same period in 2022. These increases to interest expense were partially offset by various debt that was paid off, matured, or maturedregular principal amortization during and after the nine months ended September 30, 2016,2022, primarily due to the payoff of the $300.0 million of senior unsecured notes due May 1, 2023, which resulted in a decrease in interest expense of $8.6$5.5 million for the nine months ended September 30, 2017.2023.


Total return swap income of $7.7$2.5 million for the nine months ended September 30, 20172023 consists of monthly settlements related to the Company's total return swap contracts that were entered into during 2015with an aggregate notional amount of $223.0 million.

Interest and other income (loss) increased by $60.7 million or 192.1% to $29.1 million in connection with issuing $257.3income for the nine months ended September 30, 2023 compared to $31.6 million in loss for the nine months ended September 30, 2022, primarily due to increases of fixed rate tax-exempt mortgage notes payable. The decrease of $1.4$55.4 million in realized and unrealized gains on marketable securities and $3.4 million in insurance reimbursements, legal settlements, and other, driven by a one-time legal settlement claim.

Equity income from co-investments increased by $10.0 million or 42.0% to $33.8 million for the nine months ended September 30, 20172023 compared to the nine months ended September 30, 2016 was due to less favorable interest rates.

Interest and other income decreased by $1.7 million or 8.7% to $17.9$23.8 million for the nine months ended September 30, 2017 compared to $19.6 million for the nine months ended September 30, 20162022, primarily due to an decreaseincreases of $3.2$32.5 million in equity income from non-core co-investments, $1.0 million in loss on early retirement of debt from unconsolidated co-investments in 2022 with no activity in the current year, offset by decreases of $17.1 million in co-investment promote income, $6.1 million in equity loss from co-investments, and $0.9 million in income from insurance reimbursements, legal settlements, and other, offset by an increase in marketable securities and other interest income.

Equitypreferred equity investments including income from co-investments increased $2.0 million or 5.1% to $40.9 million for the nine months ended September 30, 2017 compared to $38.9 million for the nine months ended September 30, 2016 primarily due to the saleearly redemption of a property by Wesco I during the nine months ended September 30, 2017, which resulted in a gain of $10.1 million, as well as increases in preferred equity income of approximately $6.2 million. This increase was offset by the sale of two properties by BEXAEW, LLC during the nine months ended September 30, 2016, which resulted in gains of $13.0 million for the Company during that period.investments.


Gain on sale of real estate and land increased $6.1 million or 30.0% to $26.4 million for the nine months ended September 30, 2017 compared to $20.3 million for the nine months ended September 30, 2016 due primarily to a $26.2 million gain on the sale of Jefferson at Hollywood during the nine months ended September 30, 2017 as compared to a $10.7 million gain on the sale of Harvest Park and a $9.6 million gain on the sale of the Company's former headquarters office building during the nine months ended September 30, 2016.

Deferred tax expense on gain on sale of real estate and land of $4.3 million for thenine months ended September 30, 2016 was recorded due to the sale of Harvest Park, which was owned by our wholly owned taxable REIT subsidiary. There was no current tax expense on the sale of real estate and land for the nine months ended September 30, 2016 as the Harvest Park proceeds were used in a like-kind exchange transaction. There were no such transactions during the nine months ended September 30, 2017.

Gain on remeasurement of co-investment of $88.6 million for the nine months ended September 30, 2017 resulted from the purchase of the Company's joint venture partner's 50% interest in Palm Valley. There were no such transactions during the nine months ended September 30, 2016.

Liquidity and Capital Resources


As of September 30, 2017,2023, the Company had $46.5$392.0 million of unrestricted cash and cash equivalents and $184.6$90.2 million in marketable securities, all of which $79.0 million were available for sale. We believeequity securities. The Company believes that cash flows generated by ourits operations, existing cash and cash equivalents, marketable securities balances and availability under existing lines of credit accessare sufficient to meet all of its anticipated cash needs during the next twelve months. Additionally, the capital markets continue to be available and the abilityCompany is able to generate cash from the disposition of real estate are sufficientassets to meet allfinance additional cash flow needs, including continued development and select acquisitions. In the event that economic disruptions occur, the Company may further utilize other resources such as its cash reserves, lines of our reasonably anticipatedcredit, or decreased investment in redevelopment activities to
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supplement operating cash needs during the next twelve months.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 activities are sensitive to changes in interest rates and other fluctuations in the capital markets environment, which can affect ourthe Company's plans for acquisitions, dispositions, development and redevelopment activities.


As of September 30, 2017, Fitch Ratings ("Fitch"),2023, Moody’s Investor Service, ("Moody's"), and Standard and Poor's (“S&P”) credit agencies rate Essex Property Trust, Inc.rated the Company and Essex Portfolio, L.P. BBB+/Stable,the Operating Partnership, Baa1/Stable, and BBB+/Stable, respectively.


TheAs of September 30, 2023, the Company hashad two unsecured lines of credit aggregating $1.03$1.24 billion. The Company has a $1.0 billion unsecured line of credit, and asAs of September 30, 2017,2023, there werewas no amounts outstanding balance on thisthe 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, adjusted for the Company's sustainability metric grid, and was LIBORat Adjusted SOFR plus 0.90%0.75% as of September 30, 2017.2023. This facility maturesis scheduled to mature in December 2020January 2027, with one 18-month extension,two six-month extensions, exercisable at the Company's option. The Company also has a $25.0As of September 30, 2023, there was no outstanding balance on the Company's $35.0 million working capital unsecured line of credit. This facility matures in January 2018. As of September 30, 2017, there was $2.6 million outstanding on the $25.0 million unsecured line. The underlying

interest rate on the $25.0$35.0 million line is based on a tiered rate structure tied to the Company's credit ratings, adjusted for the Company's sustainability metric grid, and was LIBORat Adjusted SOFR plus 0.90%0.75% as of September 30, 2017.2023. This facility is scheduled to mature in July 2024.

In March 2017, the Company paid off $300.0 million of 5.500% senior unsecured notes, at maturity.

In April 2017, the Company issued $350.0 million of 10-year 3.625% senior unsecured notes. The interest is paid semi-annually in arrears on May 1 and November 1 of each year commencing on November 1, 2017 until the maturity date of May 1, 2027. The Company used the net proceeds of this offering to repay indebtedness under its unsecured lines of credit and for other general corporate and working capital purposes.


In July 2017,2023, the Company repaid $40.0closed $298.0 million in private placement bonds10-year secured loans priced at 5.08% fixed interest rates encumbering four properties located in Northern California. The proceeds are intended to repay a majority of the Company’s $400.0 million unsecured notes due in May 2024 upon maturity.

In October 2022, the Operating Partnership entered into a $300.0 million unsecured term loan with an interest rate at Adjusted SOFR plus 0.85%. The Company also entered into an interest rate swap contract to fix the interest rate at 4.2%. The loan matures in October 2024 with three 12-month extension options, exercisable at the Company's option. The Company drew on its $300.0 million unsecured term loan in April 2023, and the proceeds were used to repay the Company’s $300.0 million unsecured notes due in May 2023.

In September 2021, the Company entered into a coupon ratenew equity distribution agreement pursuant to which the Company may offer and sell shares of 4.5%its common stock having an aggregate gross sales price of up to $900.0 million (the “2021 ATM Program”). In connection with the 2021 ATM Program, the Company may also enter into related forward sale agreements, and may sell shares of its common stock pursuant to these agreements. The use of a stated maturityforward 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 receipt of the proceeds from the sale of shares until a later date should the Company elect to settle such forward sale agreement, in whole or in part, in shares of common stock.

The 2021 ATM Program replaced the prior equity distribution agreement entered into in September 2018 (the "2018 ATM Program"), which was terminated upon the establishment of the 2021 ATM Program. During the three months ended September 30, 2023, the Company did not sell any shares of its common stock through the 2021 ATM Program. As of September 2017.30, 2023, there are no outstanding forward purchase agreements, and $900.0 million of shares remains available to be sold under 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. In September 2022, the Company's Board of Directors approved a new stock repurchase plan to allow the Company to acquire shares of common stock up to an aggregate value of $500.0 million. The Company has entered into equity distribution agreements with Cantor Fitzgerald & Co, Barclays Capital Inc., BMO Capital Markets Corp., BNP Paribas Securities Corp., Capital One Securities, Inc., Citigroup Global Markets Inc., Jefferies LLC, J.P. Morgan Securities LLC, Mitsubishi UFJ Securities (USA), Inc., and UBS Securities LLC. Pursuant to its equity distribution program, duringplan supersedes the Company's previous common stock repurchase plan announced in December 2015. During the nine months ended September 30, 2017,2023, the Company issued 311,873repurchased and retired 437,026 shares of its common stock totaling $95.7 million, including commissions, at an average price of $260.30$218.88 per share, for proceeds of $80.4 million, net of fees and commissions. There were no such sales during the three months ended September 30, 2017. Under this program, the Company may from time to time sell shares of common stock into the existing trading market at current market prices, and the Company anticipates using the net proceeds, which are contributed to the Operating Partnership, to pay down debt, acquire apartment communities, fund the development pipeline and other general corporate purposes.share. As of September 30, 2017,2023, the Company may sell an additional 4,688,127 shareshad $302.7 million of purchase authority remaining under the current equity distribution program. Subsequent to quarter end through October 30, 2017, the Company issued 33,571 additional shares of common stock through its equity distribution program at an average price of $261.19 per share for proceeds of $8.7 million, net of fees and commissions.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. 




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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 September 30, 2017,2023, the Company’s development pipeline was comprised of four consolidated projects under development, threeone unconsolidated joint venture projectsproject under development aggregating 264 apartment homes, and various consolidated predevelopment projects, aggregating 2,158 apartment homes, with total incurred costs of $0.6 billion,$112.0 million, and estimated remaining project costs of approximately $0.8 billion, $0.5 billion$13.0 million, $6.7 million of which represents the Company's share of estimated remaining costs, for total estimated project costs of $1.4 billion.$125.0 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 pipelinecommunities 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.

Redevelopment Pipeline

The Company defines redevelopment communities as existing properties owned or recently acquired, which have been targeted for additional investment by the Company with the expectation of increased financial returns through property improvement. During redevelopment, apartment homes may not be available for rent and, as a result, may have less than stabilized operations. As of September 30, 2017, the Company had ownership interests in five major redevelopment communities aggregating 1,727 apartment homes with estimated redevelopment costs of $138.2 million, of which approximately $49.2 million remains to be expended. The Company has the ability to cease funding of the redevelopment pipeline as needed.


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 September 30, 2017,2023, the Company had an interest in 1,190264 apartment homes of communitiesin a community actively under development with a joint venturesventure for total estimated costs of $0.7 billion.$102.0 million. Total estimated remaining costs totalare approximately $0.4 billion,$13.0 million, of which the Company estimates that its remaining investment in these development joint ventures will be approximately $0.2 billion.$6.7 million. In addition, the Company had an interest in 10,87610,425 apartment homes of operating communities with joint ventures for a total book value of $0.8 billion$461.3 million as of September 30, 2017.2023.


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 3,4, 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 policiesestimates as those accounting policies that requireinvolve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the Company’s management to exercise their most difficult, subjective and complex judgments.financial condition or results of operations of the Company. The Company’s critical accounting policies and estimates relate principally to the following key areas: (i) accounting for business combinations; (ii) consolidation under applicable accounting standards for entities that are not wholly owned; (iii) assessing the carrying valuesacquisition of our real estate properties and investments in real estate; and advances to joint ventures(ii) evaluation of events and affiliates; and (iv) internal cost capitalization.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.


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The Company’s critical accounting policies and estimates have not changed materially from the information reported in Note 2, “SummarySummary of Critical and Significant Accounting Policies,” in the Company’s annual report on Form 10-K for the year ended December 31, 2016.2022.
  
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, (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements which are not historical facts, 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 asrelated to the continued evolution of the work-from-home trend, 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, expectations as tothe 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, beliefsco-investment activities, qualification as toa REIT under the Internal Revenue Code of 1986, as amended, 2023 same-property revenue and operating expenses generally and in specific regions, 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, statements regarding Company'sits 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, inflation, the labor market, supply chain impacts, geopolitical tensions and regional conflicts, 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. ManyThe Company cannot assure the future results or outcome of the matters described in these uncertainties and risks are difficult to predict and beyond management's control.statements; rather, these statements merely reflect the Company’s current expectations of the approximate outcomes of the matters discussed. Factors that might cause such differencesthe 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, that the Company will fail to achievefollowing: potential future outbreaks of infectious diseases or other health concerns, which could adversely affect the Company’s business and its business objectives, that the actual completion of developmenttenants, and redevelopment projects will be subject to delays, that the stabilization dates of such projects will be delayed, that the total projected costs of current development and redevelopment projects will exceed expectations, that such development and redevelopment projects will not

be completed, that development and redevelopment projects and acquisitions will fail to meet expectations, that estimates of future income from an acquired property may prove to be inaccurate, that there may be increased interest rates and operating costs, 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 there may because a significant downturn in general economic conditions, the real estate industry, and the markets in which the Company's communities are located, thatlocated; 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, inflation, escalated operating costs and possible recessionary impacts; geopolitical tensions and regional conflicts, and the related impacts on macroeconomic conditions, including, among other things, interest rates and inflation; 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, as well asindebtedness; 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, 2016,2022, and those risk factors and special considerations set forth in the Company's other filings with the Securities and Exchange Commission (the “SEC”).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. All forward-looking statements
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are made as of the date hereof, and the Company assumes no obligation to update or supplement this information for any reason.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
 
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 a"Core FFO") as supplemental operating performance measure.measures. FFO isand Core FFO are not used by the Company as, nor should itthey be considered to be, an alternativealternatives to net earningsincome computed under U.S. GAAP as an indicator of the Company’s operating performance or as an alternativealternatives to cash from operating activities computed under U.S. GAAP as an indicator of the Company’s ability to fund its cash needs.

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

The Company considers FFO and Core FFO excluding non-recurring items and acquisition costs (referred to as “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 ability to pay dividends. Further,By excluding gains or losses related to sales of depreciated operating properties and land 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 AssociationAssociate of REITs (“NAREIT”Real Estate Investment Trusts ("NAREIT"), which is athe leading REIT tradeindustry 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 reason:reasons:
 
(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.

(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.


(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 below is a reconciliation of net income available to common stockholders to FFO and Core FFO for the three and nine months ended September 30, 20172023 and 20162022 (in thousands, except share and per share amounts):



44
Essex Property Trust, Inc.
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Net income available to common stockholders$79,723
 $65,561
 $329,446
 $215,555
Adjustments: 
  
  
  
Depreciation and amortization117,451
 110,467
 350,893
 329,847
Gains not included in Funds from Operations attributable to common stockholders and unitholders(10,307) —
 (125,122) (33,304)
Deferred tax expense on sale of real estate and land - taxable REIT subsidiary activity—
 —
 —
 4,279
Depreciation and amortization add back from unconsolidated co-investments13,854
 12,857
 40,335
 37,337
Noncontrolling interest related to Operating Partnership units2,721
 2,223
 11,289
 7,457
Depreciation attributable to third party ownership and other(23) (5) (74) (3)
Funds from Operations attributable to common stockholders and unitholders$203,419
 $191,103
 $606,767
 $561,168
Funds from Operations attributable to common stockholders and unitholders per share - diluted$2.97
 $2.81
 $8.90
 $8.27
Non-core items: 
  
  
  
Acquisition and investment related costs324
 284
 1,154
 1,379
Gain on sale of marketable securities and other investments(32) (1,033) (1,650) (2,876)
Interest rate hedge ineffectiveness (1)
1
 —
 (19) —
Loss on early retirement of debt—
 211
 —
 211
Income from early redemption of preferred equity investments(8) —
 (256) —
Excess of redemption value of preferred stock over carrying value—
 —
 —
 2,541
Insurance reimbursements, legal settlements, and other, net335
 (31) 310
 (4,041)
Core Funds from Operations attributable to common stockholders and unitholders$204,039
 $190,534

$606,306

$558,382
Core Funds from Operations attributable to common stockholders and unitholders per share-diluted$2.98
 $2.81
 $8.90
 $8.23
Weighted average number shares outstanding diluted (2)
68,392,419
 67,914,123
 68,159,766
 67,881,126
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Net income available to common stockholders$87,282 $92,842 $340,434 $223,150 
Adjustments:    
Depreciation and amortization137,357 135,511 410,422 403,561 
Gains not included in FFO— (17,423)(59,238)(17,423)
Casualty loss— — 433 — 
Depreciation and amortization from unconsolidated co-investments18,029 18,288 53,486 54,532 
Noncontrolling interest related to Operating Partnership units3,072 3,247 11,982 7,800 
Depreciation attributable to third party ownership and other (1)
(371)(357)(1,095)(1,064)
Funds from Operations attributable to common stockholders and unitholders$245,369 $232,108 $756,424 $670,556 
FFO per share-diluted$3.69 $3.45 $11.37 $9.93 
Non-core items:    
Expensed acquisition and investment related costs$31 $230 $375 $248 
Tax expense (benefit) on unconsolidated co-investments (2)
404 1,755 1,237 (7,863)
Realized and unrealized losses (gains) on marketable securities, net4,577 17,115 (4,294)51,126 
Provision for credit losses17 (1)51 (64)
Equity (income) loss from non-core co-investments (3)
(538)1,563 (1,422)31,117 
Loss on early retirement of debt, net— 2 — 2 
Loss on early retirement of debt from unconsolidated co-investments— 1 — 988 
Co-investment promote income— — — (17,076)
Income from early redemption of preferred equity investments and notes receivable— — (285)(858)
General and administrative and other, net1,743 882 2,570 2,327 
Insurance reimbursements, legal settlements, and other, net(283)(5,069)(9,082)(5,077)
Core Funds from Operations attributable to common stockholders and unitholders$251,320 $248,586 $745,574 $725,426 
Core FFO per share-diluted$3.78 $3.69 $11.21 $10.75 
Weighted average number of shares outstanding, diluted (4)
66,445,256 67,341,189 66,537,111 67,503,403 


(1) Interest rate swaps generally are adjusted to fair value through other comprehensive income (loss). However, because The Company consolidates certain co-investments. The noncontrolling interest's share of our interest rate swaps do not have a 0% LIBOR floor, while related hedged debtnet operating income in these cases is subjectinvestments for the three and nine months ended September 30, 2023 was $0.9 million and $2.5 million, respectively.
(2) Represents tax related to a 0% LIBOR floor,net unrealized gains or losses on technology co-investments.
(3) Represents the portionCompany's share of the change in fair value of these interest rate swaps attributable to this mismatch, if any, is recorded as a non-cash interest rate hedge ineffectiveness through interest expense.co-investment income or loss from technology co-investments.

(2)(4) Assumes conversion of all dilutive outstanding operatinglimited partnership interestsunits 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 DownREIT limited partnership units for cash and does not consider them to be common stock equivalents.units.


Net Operating Income


NOINet operating income ("NOI") and Same-Property NOI are considered by management to be an important supplemental performance measuremeasures to earnings from operations included in the Company’s condensed consolidated statements of income. The presentation of Same-Property NOI assists with the presentation of the Company’s operations prior to the allocation of depreciation and any corporate-level or financing-related costs. NOI reflects the operating performance of a community and allows for an easy comparison of the operating performance of individual communities or groups of communities. 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 revenuerevenues 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):


45
Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended September 30,Nine Months Ended September 30,
2017 2016 2017 2016 2023202220232022
Earnings from operations$112,669
 $109,412
 $334,147
 $315,280
Earnings from operations$131,784 $128,608 $454,001 $367,086 
Adjustments: 
  
  
  
Adjustments:    
Corporate-level property management expensesCorporate-level property management expenses11,504 10,184 34,387 30,532 
Depreciation and amortization117,451
 110,467
 350,893
 329,847
Depreciation and amortization137,357 135,511 410,422 403,561 
Management and other fees from affiliates(2,395) (2,093) (6,927) (6,145)Management and other fees from affiliates(2,785)(2,886)(8,328)(8,313)
General and administrative9,788
 9,647
 30,726
 28,527
General and administrative14,611 15,172 43,735 40,541 
Acquisition and investment related costs324
 284
 1,154
 1,379
Expensed acquisition and investment related costsExpensed acquisition and investment related costs31 230 375 248 
Casualty LossCasualty Loss— — 433 — 
Gain on sale of real estate and landGain on sale of real estate and land— — (59,238)— 
NOI237,837
 227,717
 709,993
 668,888
NOI292,502 286,819 875,787 833,655 
Less: Non-Same Property NOI(22,550) (18,909) (68,682) (54,927)Less: Non-Same Property NOI(12,523)(14,108)(40,918)(38,755)
Same-Property NOI$215,287
 $208,808
 $641,311
 $613,961
Same-Property NOI$279,979 $272,711 $834,869 $794,900 


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. As of September 30, 2017,2023, the Company has entered into fivehad one interest rate swap contractscontract to mitigate the risk of changes in the interest-related cash outflows on $175.0$300.0 million of the Company's five-year unsecured debt. As of September 30, 2017, the Company also had $281.1 million of variable rate indebtedness, of which $20.7 million is subject to interest rate cap protection. All of theterm loan.

The Company's interest rate swaps areswap was designated as cash flow hedgeshedge as of September 30, 2017.2023. The following table summarizes the notional amount, carrying value, and estimated fair value of the Company’s cash flow hedge derivative instruments used to hedge interest rates as of September 30, 2017.2023. The notional amount represents the aggregate amount of a particular security that is currently hedged at one time, but does not represent exposure to credit, interest rates or market risks. The table also includes a sensitivity analysis to demonstrate the impact on the Company’s derivative instruments from an increase or decrease in 10-year Treasury bill interest rates by 50 basis points, as of September 30, 2017.2023.


 Notional
Amount		Maturity
Date Range		Carrying and
Estimated
Fair Value		Estimated Carrying Value
 +50-50
($ in thousands)Basis PointsBasis Points
Cash flow hedges:  
Interest rate swaps$300,000 2026$11,220 $15,143 $7,285 
Total cash flow hedges$300,000 2026$11,220 $15,143 $7,285 
     Carrying and Estimated Carrying Value
 Notional Maturity Estimated 50 -50
(in thousands)Amount Date Range Fair Value Basis Points Basis Points
Cash flow hedges:       
  
Interest rate swaps$175,000
 2022 $3,814
 $7,389
 $214
Interest rate caps20,674
 2018-2019 —
 —
 —
Total cash flow hedges$195,674
 2018-2022 $3,814
 $7,389
 $214


Additionally, the Company has entered into total return swap contracts, with an aggregate notional amount of $256.8$223.0 million that effectively convert $256.8$223.0 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 September 30, 2017.2023. The Company is exposed to insignificant interest rate risk on these total return 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 into derivative financial instruments such as interest rate swaps, caps, and treasury locks in order to mitigate its interest rate risk
46
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.
 
For the Years Ended2017 2018 2019 2020 2021 Thereafter Total Fair valueFor the Years Ended20232024202520262027ThereafterTotalFair value
(in thousands, except for interest rates)          
($ in thousands, except for interest rates)($ in thousands, except for interest rates)
Fixed rate debt$7,590
 256,567
 660,726
 694,241
 544,103
 2,810,732
 $4,973,959
 $5,102,418
Fixed rate debt$531 402,177 632,035 548,291 419,558 3,715,000 $5,717,592 $5,114,324 
Average interest rate4.5% 5.7% 4.2% 4.8% 4.3% 3.6% 4.0%  
Average interest rate3.2 %4.0 %3.5 %3.5 %3.8 %3.1 %3.3 % 
Variable rate debt (1)
$2,738

541

592
 646
 707
 628,477
(2) (3) 
$633,701
 $629,127
Variable rate debt (1)
$220 932 1,019 1,114 384,397 135,269 $522,951 $519,221 
Average interest rate1.9% 1.9% 1.9% 1.9% 1.9% 2.1% 2.1%  
Average interest rate4.6 %4.6 %4.6 %4.6 %4.2 %4.5 %4.3 % 
 
(1) $175.0 $223.0 million of variable rate debt is subjecttax exempt to interest rate swap agreements.the note holders.
(2) $20.7 million is subject to interest rate caps.
(3) $256.8 million is subject to total return swaps.


The table incorporates only those exposures that exist as of September 30, 2017.2023. 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 September 30, 2017,2023, 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 September 30, 2017,2023, 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’sEssex's internal control over financial reporting, that occurred during the quarter ended September 30, 2017,2023, that have materially affected, or are reasonably likely to materially affect, Essex’s internal control over financial reporting.


Essex Portfolio, L.P.


As of September 30, 2017,2023, 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 September 30, 2017,2023, 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 submitsubmits 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.
Index



There were no changes in the Operating Partnership’sPartnership's internal control over financial reporting, that occurred during the quarter ended September 30, 2017,2023, that have materially affected, or are reasonably likely to materially affect, the Operating Partnership’s internal control over financial reporting.
 
47

Part II -- Other Information


Item 1: Legal Proceedings


The information regarding lawsuits, other proceedings and claims, set forth in Note 11, Commitments and Contingencies, in the Notes to Condensed Consolidated Financial Statements, is incorporated by reference into this Item 1. In addition to such matters referred to in Note 11, 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 A.1A. Risk Factors" in ourthe Company's annual report on Form 10-K for the year ended December 31, 2016,2022, which could materially affect ourthe 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, 2016,2022, as filed with the SEC and available at www.sec.gov. The risks described in ourthe 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 to us or that wethe Company currently deemdeems to be immaterial may also materially adversely affect ourthe 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 September 30, 2017,2023, the Operating Partnership issued partnership unitsOP 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 September 30, 2017,2023, Essex issued an aggregate of 13,7261,300 shares of its common stock upon the exercisevesting of restricted stock options.awards and the exchange of OP units by limited partners or members into shares of common stock. Furthermore, for each share of common stock issued by Essex contributedin connection with vesting of restricted stock awards and the proceedsexchange of $2.0OP units, the Operating Partnership issued OP Units to Essex, as required by the partnership agreement. During the three months ended September 30, 2023, 1,300 OP Units were issued to Essex pursuant to this mechanism.

Stock Repurchases

In September 2022, the Board of Directors approved a new stock repurchase plan to allow the Company to acquire shares of common stock up to an aggregate of $500.0 million. The plan supersedes the Company's previous common stock repurchase plan announced in December 2015. As a result of the new stock repurchase plan, as of September 30, 2023, the Company had $302.7 million fromof purchase authority remaining under the option exercisesstock repurchase plan. The Company did not repurchase any of its common stock during the three months ended September 30, 2017 to the Operating Partnership in exchange for an aggregate of 13,726 OP Units, as required by the Operating Partnership’s partnership agreement.2023.


Item 3: Defaults Upon Senior Securities

None.

Item 4: Mine Safety Disclosures

Not applicable.

48

Item 5: Other Information


None.Securities Trading Plans of Directors and Executive Officers


During the three months ended September 30, 2023, none of our officers or directors adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non Rule 10b5-1 trading arrangement.”



49
Table of Contents

Item 6: Exhibits
 
A. Exhibits
A. Exhibits
10.1*
Separation Agreement And Release, dated as of September 15, 2023, by and between Adam W. Berry and Essex Property Trust, Inc.
12.131.1*
Ratio of Earnings to Fixed Charges.
31.1
Certification of Michael J. Schall,Angela L. Kleiman, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of Angela L. Kleiman,Barbara Pak, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.3*
Certification of Michael J. Schall,Angela L. Kleiman, Principal Executive Officer of General Partner, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.4*
Certification of Angela L. Kleiman,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,Angela L. Kleiman, Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
32.2*
Certification of Angela L. Kleiman,Barbara Pak, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
32.3*
32.4*
Certification of Angela L. Kleiman,Barbara Pak, Principal Financial Officer of General Partner, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
101.INSXBRL 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.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).


SIGNATURE* 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.
50
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on itstheir behalf by the undersigned thereunto duly authorized.
                    
ESSEX PROPERTY TRUST, INC.
(Registrant)
ESSEX PROPERTY TRUST, INC.Date: October 27, 2023
(Registrant)
By: /s/ BARBARA PAK
Date: November 3, 2017
Barbara Pak
By:  /S/ ANGELA L. KLEIMAN
Angela L. Kleiman
Executive Vice President and Chief Financial Officer

(Authorized Officer, Principal Financial Officer)


Date: October 27, 2023
Date: November 3, 2017
By: /s/ JOHN FARIAS
By:  /S/ JOHN FARIASJohn Farias
John Farias
Senior Vice President and Chief Accounting Officer


ESSEX PORTFOLIO, L.P.
By Essex Property Trust, Inc., its general partner
(Registrant)
Date: November 3, 2017October 27, 2023
By: /S/ ANGELA L. KLEIMAN/s/ BARBARA PAK
Angela L. KleimanBarbara Pak
Executive Vice President and Chief Financial Officer

(Authorized Officer, Principal Financial Officer)


Date: October 27, 2023
Date: November 3, 2017
By: /s/ JOHN FARIAS
By:  /S/ JOHN FARIASJohn Farias
John Farias
Senior Vice President and Chief Accounting Officer



40
51