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

For the quarterly period ended June 30, 2020March 31, 2021

OR

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

For the transition period from ________to _________

001-13106 (Essex Property Trust, Inc.)
333-44467-01 (Essex Portfolio, L.P.)
(Commission File Number)

ESSEX PROPERTY TRUST, INC.
ESSEX PORTFOLIO, L.P.
(Exact name of Registrant as Specified in its Charter)
Maryland77-0369576
(Essex Property Trust, Inc.)(Essex Property Trust, Inc.)
California77-0369575
 (Essex Portfolio, L.P.)(Essex Portfolio, L.P.)
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification Number)
1100 Park Place, Suite 200
San Mateo,, California94403
(Address of Principal Executive Offices, Including Zip Code)

(650) (650) 655-7800
(Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: 
Title of each class
Trading

Symbol(s)
Name of each exchange on which registered
Common Stock, $.0001 par value (Essex Property Trust, Inc.)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) 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☒No☐Essex Portfolio, L.P.Yes☒No☐


i

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

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

Essex Property Trust, Inc.:
Large accelerated filer
☒

Accelerated filer☐Non-accelerated filer☐Smaller reporting company☐
Emerging growth company

☐

Essex Portfolio, L.P.:
Large accelerated filer☐Accelerated filer☐Non-accelerated filer
☒

Smaller reporting company☐
Emerging growth company

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Essex Property Trust, Inc.Yes☐No☒Essex Portfolio, L.P.Yes☐No☒
 
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 65,209,94664,998,910 shares of Common Stock ($.0001.0001 par value) of Essex Property Trust, Inc. were outstanding as of August 3, 2020.
April 26, 2021.

ii


EXPLANATORY NOTE

This report combines the reports on Form 10-Q for the three and six month periodsperiod ended June 30, 2020March 31, 2021 of Essex Property Trust, Inc., a Maryland corporation, and Essex Portfolio, L.P., a Delaware limited partnership of which Essex Property Trust, Inc. is the sole general partner.

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

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

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

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

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

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

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

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

iii

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

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

In order to highlight the differences between Essex and the Operating Partnership, the separate sections in this report on Form 10-Q for Essex and the Operating Partnership specifically refer to Essex and the Operating Partnership. In the sections that combine disclosure of Essex and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of the Company. Although the Operating Partnership is generally the entity that directly or indirectly enters into contracts and co-investments and holds assets and debt, reference to the Company is appropriate because the Company is one business and the Company operates that business through the Operating Partnership. The separate discussions of Essex and the Operating Partnership in this report should be read in conjunction with each other to understand the results of the Company on a consolidated basis and how management operates the Company.

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

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the notes to such unaudited condensed consolidated financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations herein. Additionally, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 2019.2020.

iv


ESSEX PROPERTY TRUST, INC.
ESSEX PORTFOLIO, L.P.
FORM 10-Q
TABLE 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
86
Condensed Consolidated Financial Statements of Essex Portfolio, L.P. (Unaudited)
108
119
1210
1612
1814
Item 2.
3731
Item 3.
4840
Item 4.
4941
PART II. OTHER INFORMATION
Item 1.
5041
Item 1A.
5041
Item 2.
5142
Item 3.
5242
Item 4.
5242
Item 5.
5242
Item 6.
5343
5444

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)
ASSETSMarch 31, 2021December 31, 2020
Real estate:
Rental properties:
Land and land improvements$2,902,401 $2,929,009 
Buildings and improvements12,075,518 12,132,736 
 14,977,919 15,061,745 
Less: accumulated depreciation(4,259,148)(4,133,959)
 10,718,771 10,927,786 
Real estate under development404,496 386,047 
Co-investments962,625 1,018,010 
Real estate held for sale0 57,938 
12,085,892 12,389,781 
Cash and cash equivalents-unrestricted103,442 73,629 
Cash and cash equivalents-restricted9,918 10,412 
Marketable securities, net of allowance for credit losses of 0 as of both March 31, 2021 and December 31, 2020165,265 147,768 
Notes and other receivables, net of allowance for credit losses of $0.9 million and $0.8 million as of March 31, 2021 and December 31, 2020, respectively (includes related party receivables of $57.6 million and $4.7 million as of March 31, 2021 and December 31, 2020, respectively)266,896 195,104 
Operating lease right-of-use assets71,347 72,143 
Prepaid expenses and other assets87,444 47,340 
Total assets$12,790,204 $12,936,177 
LIABILITIES AND EQUITY  
Unsecured debt, net$5,454,290 $5,607,985 
Mortgage notes payable, net642,419 643,550 
Accounts payable and accrued liabilities158,673 152,855 
Construction payable34,852 31,417 
Dividends payable142,822 141,917 
Operating lease liabilities73,201 74,037 
Liabilities associated with real estate held for sale0 29,845 
Other liabilities36,694 39,140 
Total liabilities6,542,951 6,720,746 
Commitments and contingencies00
Redeemable noncontrolling interest36,322 32,239 
Equity:�� 
Common stock; $0.0001 par value, 670,000,000 shares authorized; 64,998,910 and 64,999,015 shares issued and outstanding, respectively6 6 
Additional paid-in capital6,864,185 6,876,326 
Distributions in excess of accumulated earnings(828,625)(861,193)
Accumulated other comprehensive loss, net(10,390)(14,729)
Total stockholders' equity6,025,176 6,000,410 
Noncontrolling interest185,755 182,782 
Total equity6,210,931 6,183,192 
Total liabilities and equity$12,790,204 $12,936,177 
ASSETSJune 30, 2020 December 31, 2019
Real estate:   
Rental properties:   
Land and land improvements$2,933,690
 $2,773,805
Buildings and improvements12,088,080
 11,264,337
 15,021,770
 14,038,142
Less: accumulated depreciation(3,927,746) (3,689,482)
 11,094,024
 10,348,660
Real estate under development467,915
 546,075
Co-investments1,008,758
 1,335,339
Real estate held for sale, net24,495
 —
 12,595,192
 12,230,074
Cash and cash equivalents-unrestricted246,204
 70,087
Cash and cash equivalents-restricted10,271
 11,007
Marketable securities, net of allowance for credit losses of $13.6 million and zero as of June 30, 2020 and December 31, 2019, respectively154,433
 144,193
Notes and other receivables, net of allowance for credit losses of $0.1 million and zero as of June 30, 2020 and December 31, 2019, respectively (includes related party receivables of $5.2 million and $90.2 million as of June 30, 2020 and December 31, 2019, respectively)44,748
 134,365
Operating lease right-of-use assets73,669
 74,744
Prepaid expenses and other assets52,894
 40,935
Total assets$13,177,411
 $12,705,405
    
LIABILITIES AND EQUITY 
  
Unsecured debt, net$5,615,795
 $4,763,206
Mortgage notes payable, net703,617
 990,667
Lines of credit—
 55,000
Accounts payable and accrued liabilities164,340
 158,017
Construction payable48,809
 48,912
Dividends payable142,629
 135,384
Operating lease liabilities75,626
 76,740
Other liabilities40,473
 36,565
Total liabilities6,791,289
 6,264,491
Commitments and contingencies


 


Redeemable noncontrolling interest33,241
 37,410
Equity: 
  
Common stock; $.0001 par value, 670,000,000 shares authorized; 65,331,206 and 66,091,954 shares issued and outstanding, respectively7
 7
Additional paid-in capital6,944,805
 7,121,927
Distributions in excess of accumulated earnings(760,028) (887,619)
Accumulated other comprehensive loss, net(18,710) (13,888)
Total stockholders' equity6,166,074
 6,220,427
Noncontrolling interest186,807
 183,077
Total equity6,352,881
 6,403,504
Total liabilities and equity$13,177,411
 $12,705,405


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 March 31,
 20212020
Revenues:
Rental and other property$352,876 $389,750 
Management and other fees from affiliates2,249 2,617 
 355,125 392,367 
Expenses:  
Property operating, excluding real estate taxes65,151 64,131 
Real estate taxes45,328 43,012 
Corporate-level property management expenses8,947 8,759 
Depreciation and amortization128,587 131,559 
General and administrative9,812 13,982 
Expensed acquisition and investment related costs15 87 
 257,840 261,530 
Gain on sale of real estate and land100,096 0 
Earnings from operations197,381 130,837 
Interest expense(51,649)(55,147)
Total return swap income2,844 1,984 
Interest and other income (loss)14,387 (5,221)
Equity income from co-investments17,011 21,297 
Deferred tax expense on unrealized gain on unconsolidated co-investment(508)0 
(Loss) gain on early retirement of debt, net(2,517)321 
Gain on remeasurement of co-investment0 234,694 
Net income176,949 328,765 
Net income attributable to noncontrolling interest(8,505)(13,759)
Net income available to common stockholders$168,444 $315,006 
Comprehensive income$181,441 $319,678 
Comprehensive income attributable to noncontrolling interest(8,658)(13,452)
Comprehensive income attributable to controlling interest$172,783 $306,226 
Per share data:  
Basic:  
Net income available to common stockholders$2.59 $4.77 
Weighted average number of shares outstanding during the period64,989,620 66,043,831 
Diluted:  
Net income available to common stockholders$2.59 $4.76 
Weighted average number of shares outstanding during the period65,114,933 66,195,415 
 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
Revenues:       
Rental and other property$368,149
 $359,375
 $757,899
 $713,263
Management and other fees from affiliates2,348
 2,260
 4,965
 4,595
 370,497
 361,635
 762,864
 717,858
Expenses: 
  
    
Property operating, excluding real estate taxes65,142
 58,905
 129,273
 117,527
Real estate taxes44,994
 36,285
 88,006
 75,703
Corporate-level property management expenses8,646
 8,469
 17,405
 16,898
Depreciation and amortization133,609
 119,465
 265,168
 240,033
General and administrative14,952
 13,927
 28,934
 27,386
Expensed acquisition and investment related costs15
 24
 102
 56
 267,358
 237,075
 528,888
 477,603
Gain on sale of real estate and land16,597
 —
 16,597
 —
Earnings from operations119,736
 124,560
 250,573
 240,255
Interest expense(54,447) (54,112) (109,594) (107,755)
Total return swap income2,788
 1,975
 4,772
 4,020
Interest and other income11,405
 8,347
 6,184
 20,608
Equity income from co-investments17,257
 16,959
 38,554
 33,235
Deferred tax expense on unrealized gain on unconsolidated co-investment(1,636) —
 (1,636) —
(Loss) gain on early retirement of debt, net(5,027) 332
 (4,706) 1,668
Gain on remeasurement of co-investment—
 —
 234,694
 31,535
Net income90,076
 98,061
 418,841
 223,566
Net income attributable to noncontrolling interest(5,618) (5,786) (19,377) (12,433)
Net income available to common stockholders$84,458
 $92,275
 $399,464
 $211,133
Comprehensive income$94,172
 $93,740
 $413,850
 $217,408
Comprehensive income attributable to noncontrolling interest(5,756) (5,640) (19,208) (12,225)
Comprehensive income attributable to controlling interest$88,416
 $88,100
 $394,642
 $205,183
Per share data: 
  
    
Basic: 
  
    
Net income available to common stockholders$1.29
 $1.40
 $6.08
 $3.21
Weighted average number of shares outstanding during the period65,412,407
 65,718,806
 65,728,119
 65,710,842
Diluted: 
  
    
Net income available to common stockholders$1.29
 $1.40
 $6.07
 $3.21
Weighted average number of shares outstanding during the period65,427,935
 65,821,815
 65,855,347
 65,802,417

See accompanying notes to the unaudited condensed consolidated financial statements.

3
Table of Contents


ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Equity for the three and six months ended June 30,March 31, 2021 and 2020 and 2019
(Unaudited)
(In thousands)
 Common stockAdditional paid-in capitalDistributions
in excess of accumulated
earnings		Accumulated
other
comprehensive loss, net		Noncontrolling interestTotal
Three months ended March 31, 2021SharesAmount
Balances at December 31, 202064,999 $6 $6,876,326 $(861,193)$(14,729)$182,782 $6,183,192 
Net income— — — 168,444 — 8,505 176,949 
Change in fair value of derivatives and amortization of swap settlements— — — — 4,257 150 4,407 
Change in fair value of marketable debt securities, net— — — — 82 3 85 
Issuance of common stock under:      
Stock option and restricted stock plans, net39 — (3,744)— — — (3,744)
Equity based compensation costs— — 5,028 — — 54 5,082 
Retirement of common stock, net(40)— (9,172)— — — (9,172)
Changes in the redemption value of redeemable noncontrolling interest— — (4,178)— — 95 (4,083)
Contributions from noncontrolling interest— — — — — 1,900 1,900 
Distributions to noncontrolling interest— — — — — (7,554)(7,554)
Redemptions of noncontrolling interest1 — (75)— — (180)(255)
Common stock dividends ($2.09 per share)— — — (135,876)— — (135,876)
Balances at March 31, 202164,999 $6 $6,864,185 $(828,625)$(10,390)$185,755 $6,210,931 


4
Table of Contents


Common stockAdditional paid-in capitalDistributions
in excess of accumulated
earnings		Accumulated
other
comprehensive loss, net		Noncontrolling InterestTotal
Three months ended March 31, 2020Three months ended March 31, 2020SharesAmount
Balances at December 31, 2019Balances at December 31, 201966,092 $7 $7,121,927 $(887,619)$(13,888)$183,077 $6,403,504 
Net incomeNet income— — — 315,006 — 13,759 328,765 
 Common stock Additional paid-in capital 
Distributions
in excess of accumulated earnings
 
Accumulated
other
comprehensive loss
 Noncontrolling interest Total
Three Months Ended June 30, 2020 Shares Amount 
Balances at March 31, 2020 65,412
 $7
 $6,959,523
 $(708,697) $(22,668) $189,784
 $6,417,949
Net income —
 —
 —
 84,458
 —
 5,618
 90,076
Cash flow hedge losses reclassified to earnings —
 —
 —
 —
 3,171
 111
 3,282
Change in fair value of derivatives and amortization of swap settlements —
 —
 —
 —
 754
 25
 779
Change in fair value of derivatives and amortization of swap settlements— — — — (8,486)(296)(8,782)
Change in fair value of marketable debt securities, net —
 —
 —
 —
 33
 2
 35
Change in fair value of marketable debt securities, net— — — — (294)(11)(305)
Issuance of common stock under:  
  
  
  
  
  
 

Issuance of common stock under:      
Stock option and restricted stock plans, net 6
 —
 536
 —
 —
 —
 536
Stock option and restricted stock plans, net89 — 8,665 — — — 8,665 
Sale of common stock, net —
 —
 (63) —
 —
 —
 (63)Sale of common stock, net— — (70)— — — (70)
Equity based compensation costs —
 —
 5,058
 —
 —
 177
 5,235
Equity based compensation costs— — 1,619 — — 79 1,698 
Retirement of common stock, net (88) —
 (20,093) —
 —
 —
 (20,093)Retirement of common stock, net(776)— (176,311)— — — (176,311)
Cumulative effect upon adoption of ASU No. 2016-13
Cumulative effect upon adoption of ASU No. 2016-13
— — — (190)— — (190)
Changes in the redemption value of redeemable noncontrolling interest —
 —
 (199) —
 —
 (399) (598)Changes in the redemption value of redeemable noncontrolling interest— — 4,741 — — 26 4,767 
Changes in noncontrolling interest from acquisitionChanges in noncontrolling interest from acquisition— — — — — 1,349 1,349 
Distributions to noncontrolling interest —
 —
 —
 —
 —
 (8,133) (8,133)Distributions to noncontrolling interest— — — — — (7,879)(7,879)
Redemptions of noncontrolling interest 1
 —
 43
 —
 —
 (378) (335)Redemptions of noncontrolling interest7 — (1,048)— — (320)(1,368)
Common stock dividends ($2.0775 per share) —
 —
 —
 (135,789) —
 —
 (135,789)Common stock dividends ($2.0775 per share)— — — (135,894)— — (135,894)
Balances at June 30, 2020 65,331
 $7
 $6,944,805
 $(760,028) $(18,710) $186,807
 $6,352,881
Balances at March 31, 2020Balances at March 31, 202065,412 $7 $6,959,523 $(708,697)$(22,668)$189,784 $6,417,949 



  Common stock Additional paid-in capital 
Distributions
in excess of accumulated earnings
 
Accumulated
other
comprehensive loss
 Noncontrolling interest Total
Six Months Ended June 30, 2020 Shares Amount     
Balances at December 31, 2019 66,092
 $7
 $7,121,927
 $(887,619) $(13,888) $183,077
 $6,403,504
Net income —
 —
 —
 399,464
 —
 19,377
 418,841
Cash flow hedge losses reclassified to earnings         3,171
 111
 3,282
Change in fair value of derivatives and amortization of swap settlements —
 —
 —
 —
 (7,732) (271) (8,003)
Change in fair value of marketable debt securities, net —
 —
 —
 —
 (261) (9) (270)
Issuance of common stock under:             

Stock option and restricted stock plans, net 95
 —
 9,201
 —
 —
 —
 9,201
Sale of common stock, net —
 —
 (133) —
 —
 —
 (133)
Equity based compensation costs —
 —
 6,677
 —
 —
 256
 6,933
Retirement of common stock, net (864) —
 (196,404) —
 —
 —
 (196,404)
Cumulative effect upon adoption of ASU No. 2016-13 —
 —
 —
 (190) —
 —
 (190)
Changes in the redemption value of redeemable noncontrolling interest —
 —
 4,542
 —
 —
 (373) 4,169
Changes in noncontrolling interest from acquisition —
 —
 —
 —
 —
 1,349
 1,349
Distributions to noncontrolling interest —
 —
 —
 —
 —
 (16,012) (16,012)
Redemptions of noncontrolling interest 8
 —
 (1,005) —
 —
 (698) (1,703)
Common stock dividends ($4.155 per share) —
 —
 —
 (271,683) —
 —
 (271,683)
Balances at June 30, 2020 65,331
 $7
 $6,944,805
 $(760,028) $(18,710) $186,807
 $6,352,881


  Common stock Additional paid-in capital 
Distributions
in excess of accumulated earnings
 
Accumulated
other
comprehensive loss, net
 Noncontrolling Interest Total
Three Months Ended June 30, 2019 Shares Amount     
Balances at March 31, 2019 65,716
 $7
 $7,028,154
 $(822,087) $(14,817) $125,938
 $6,317,195
Net income —
 —
 —
 92,275
 —
 5,786
 98,061
Reversal of unrealized gains upon the sale of marketable debt securities —
 —
 —
 —
 (63) (2) (65)
Change in fair value of derivatives and amortization of swap settlements —
 —
 —
 —
 (4,214) (147) (4,361)
Change in fair value of marketable debt securities, net —
 —
 —
 —
 102
 3
 105
Issuance of common stock under:  
  
  
  
  
  
 

Stock option and restricted stock plans, net 11
 —
 2,024
 —
 —
 —
 2,024
Sale of common stock, net —
 —
 (62) —
 —
 —
 (62)
Equity based compensation costs —
 —
 3,171
 —
 —
 329
 3,500
Changes in the redemption value of redeemable noncontrolling interest —
 —
 288
 —
 —
 51
 339
Changes in noncontrolling interest from acquisition —
 —
 —
 —
 —
 65,472
 65,472
Distributions to noncontrolling interest —
 —
 —
 —
 —
 (6,944) (6,944)
Redemptions of noncontrolling interest —
 —
 (1,689) —
 —
 (277) (1,966)
Common stock dividends ($1.95 per share) —
 —
 —
 (128,182) —
 —
 (128,182)
Balances at June 30, 2019 65,727
 $7
 $7,031,886
 $(857,994) $(18,992) $190,209
 $6,345,116


  Common stock Additional paid-in capital 
Distributions
in excess of accumulated earnings
 
Accumulated
other
comprehensive loss, net
 Noncontrolling Interest Total
Six Months Ended June 30, 2019 Shares Amount     
Balances at December 31, 2018 65,890
 $7
 $7,093,079
 $(812,796) $(13,217) $126,771
 $6,393,844
Net income —
 —
 —
 211,133
 —
 12,433
 223,566
Reversal of unrealized gains upon the sale of marketable debt securities —
 —
 —
 —
 (31) (1) (32)
Change in fair value of derivatives and amortization of swap settlements —
 —
 —
 —
 (6,140) (214) (6,354)
Change in fair value of marketable debt securities, net —
 —
 —
 —
 221
 7
 228
Issuance of common stock under:  
  
  
  
  
  
 

Stock option and restricted stock plans, net 62
 —
 5,228
 —
 —
 —
 5,228
Sale of common stock, net —
 —
 (82) —
 —
 —
 (82)
Equity based compensation costs —
 —
 5,472
 —
 —
 628
 6,100
Retirement of common stock, net (234) —
 (56,989) —
 —
 —
 (56,989)
Cumulative effect upon adoption of ASU No. 2017-12 —
 —
 —
 —
 175
 6
 181
Changes in the redemption value of redeemable noncontrolling interest —
 —
 (2,739) —
 —
 1,311
 (1,428)
Changes in noncontrolling interest from acquisition —
 —
 —
 —
 —
 65,472
 65,472
Distributions to noncontrolling interest —
 —
 —
 —
 —
 (14,108) (14,108)
Redemptions of noncontrolling interest 9
 —
 (12,083) —
 —
 (2,096) (14,179)
Common stock dividends ($3.90 per share) —
 —
 —
 (256,331) —
 —
 (256,331)
Balances at June 30, 2019 65,727
 $7
 $7,031,886
 $(857,994) $(18,992) $190,209
 $6,345,116


See accompanying notes to the unaudited condensed consolidated financial statements.

5
Table of Contents


ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands, except parenthetical amounts) 
 Three Months Ended March 31,
 20212020
Cash flows from operating activities:
Net income$176,949 $328,765 
Adjustments to reconcile net income to net cash provided by operating activities:  
Straight-lined rents3,087 (208)
Depreciation and amortization128,587 131,559 
Amortization of discount on marketable securities0 (2,394)
Amortization of discount and debt financing costs, net2,132 2,297 
(Gain) loss on sale of marketable securities(2,611)13 
Provision for credit losses38 (50)
Unrealized (gains) losses on equity securities recognized through income(6,276)8,696 
Earnings from co-investments(17,011)(21,297)
Operating distributions from co-investments46,355 19,388 
Accrued interest from notes and other receivables(4,201)(355)
Gain on the sale of real estate and land(100,096)0 
Equity-based compensation1,386 1,405 
Loss (gain) on early retirement of debt, net2,517 (321)
Gain on remeasurement of co-investment0 (234,694)
Changes in operating assets and liabilities: 
Prepaid expenses, receivables, operating lease right-of-use assets, and other assets(41,060)36 
Accounts payable, accrued liabilities, and operating lease liabilities4,976 32,808 
Other liabilities494 1,278 
Net cash provided by operating activities195,266 266,926 
Cash flows from investing activities:  
Additions to real estate:  
Acquisitions of real estate and acquisition related capital expenditures, net of cash acquired(1,203)(458,302)
Redevelopment(9,274)(18,296)
Development acquisitions of and additions to real estate under development(19,629)(25,681)
Capital expenditures on rental properties(16,720)(17,151)
Investments in notes receivable(69,885)0 
Collections of notes and other receivables0 98,711 
Proceeds from insurance for property losses102 457 
Proceeds from dispositions of real estate243,365 0 
Contributions to co-investments(49,974)(21,905)
Changes in refundable deposits11 96 
Purchases of marketable securities(23,296)(10,731)
Sales and maturities of marketable securities14,772 165 
Non-operating distributions from co-investments78,600 7,000 
Net cash provided by (used in) investing activities146,869 (445,637)
Cash flows from financing activities:  
Proceeds from unsecured debt and mortgage notes447,404 498,140 
Payments on unsecured debt and mortgage notes(600,858)(102,563)
Proceeds from lines of credit204,794 1,038,426 
Repayments of lines of credit(204,794)(743,426)
Retirement of common stock(9,172)(176,311)
Additions to deferred charges(3,434)(5,172)
6
Table of Contents


 Six Months Ended June 30,
 2020 2019
Cash flows from operating activities:   
Net income$418,841
 $223,566
Adjustments to reconcile net income to net cash provided by operating activities: 
  
Depreciation and amortization265,168
 240,033
Amortization of discount on marketable securities(4,862) (10,869)
Amortization of discount and debt financing costs, net3,973
 1,726
Gain on sale of marketable securities(33) (498)
Provision for credit losses97
 —
Unrealized loss (gain) on equity securities recognized through income1,073
 (4,454)
Company's share of gain on the sales of co-investments—
 (870)
Earnings from co-investments(38,554) (32,365)
Operating distributions from co-investments29,613
 38,699
Accrued interest from notes and other receivables(835) (2,896)
Gain on the sale of real estate and land(16,597) —
Equity-based compensation4,043
 5,321
Loss (gain) on early retirement of debt, net4,706
 (1,668)
Gain on remeasurement of co-investment(234,694) (31,535)
Changes in operating assets and liabilities:   
Prepaid expenses, receivables, operating lease right-of-use assets, and other assets(9,224) (7,925)
Accounts payable, accrued liabilities, and operating lease liabilities2,565
 12,486
Other liabilities830
 1,082
Net cash provided by operating activities426,110
 429,833
Cash flows from investing activities: 
  
Additions to real estate: 
  
Acquisitions of real estate and acquisition related capital expenditures, net of cash acquired(458,857) (47,585)
Redevelopment(32,211) (30,804)
Development acquisitions of and additions to real estate under development(54,994) (86,108)
Capital expenditures on rental properties(40,013) (41,927)
Investments in notes receivable(6,669) —
Collections of notes and other receivables98,711
 2,500
Proceeds from insurance for property losses568
 2,698
Proceeds from dispositions of real estate230,935
 —
Contributions to co-investments(43,817) (167,278)
Changes in refundable deposits96
 252
Purchases of marketable securities(10,989) (40,098)
Sales and maturities of marketable securities4,301
 50,226
Non-operating distributions from co-investments25,136
 26,657
Net cash used in investing activities(287,803) (331,467)
Cash flows from financing activities: 
  
Proceeds from unsecured debt and mortgage notes856,630
 498,234
Payments on unsecured debt and mortgage notes(286,074) (473,528)
Proceeds from lines of credit1,038,426
 975,832
Repayments of lines of credit(1,093,426) (858,832)
Retirement of common stock(196,404) (56,989)
Additions to deferred charges(7,297) (5,873)
Payments related to debt prepayment penalties(1,696) —
 Three Months Ended March 31,
 20212020
Payments related to debt prepayment penalties(2,132)0 
Net proceeds from issuance of common stock0 (70)
Net proceeds from stock options exercised1,701 14,329 
Payments related to tax withholding for share-based compensation(5,445)(5,664)
Contributions from noncontrolling interest1,900 0 
Distributions to noncontrolling interest(7,461)(7,478)
Redemption of noncontrolling interest(255)(1,368)
Common stock dividends paid(135,064)(128,879)
Net cash (used in) provided by financing activities(312,816)379,964 
Net increase in unrestricted and restricted cash and cash equivalents29,319 201,253 
Unrestricted and restricted cash and cash equivalents at beginning of period84,041 81,094 
Unrestricted and restricted cash and cash equivalents at end of period$113,360 $282,347 
Supplemental disclosure of cash flow information:
Cash paid for interest (net of $2.1 million and $4.8 million capitalized in 2021 and 2020, respectively)$55,213 $52,487 
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$1,738 $1,715 
Supplemental disclosure of noncash investing and financing activities:  
Transfers between real estate under development and rental properties, net$267 $131,841 
Transfer from real estate under development to co-investments$747 $824 
Reclassifications to (from) redeemable noncontrolling interest to/from additional paid in capital and noncontrolling interest$4,083 $(4,767)

 Six Months Ended June 30,
 2020 2019
Net proceeds from issuance of common stock(133) (82)
Net proceeds from stock options exercised14,865
 8,743
Payments related to tax withholding for share-based compensation(5,664) (3,515)
Distributions to noncontrolling interest(15,613) (13,842)
Redemption of noncontrolling interest(1,703) (14,179)
Redemption of redeemable noncontrolling interest—
 (73)
Common stock dividends paid(264,837) (250,686)
Net cash provided by (used in) financing activities37,074
 (194,790)
Net increase (decrease) in unrestricted and restricted cash and cash equivalents175,381
 (96,424)
Unrestricted and restricted cash and cash equivalents at beginning of period81,094
 151,395
Unrestricted and restricted cash and cash equivalents at end of period$256,475
 $54,971
    
Supplemental disclosure of cash flow information:   
Cash paid for interest (net of $9.0 million and $12.3 million capitalized in 2020 and 2019, respectively)$98,358
 $94,925
Cash paid for amounts included in the measurement of lease liabilities:   
Operating cash flows from operating leases$3,430
 $3,392
Supplemental disclosure of noncash investing and financing activities: 
  
Issuance of DownREIT units in connection with acquisition of real estate$—
 $65,472
Transfers between real estate under development and rental properties, net$131,960
 $138
Transfer from real estate under development to co-investments$1,473
 $240
Reclassifications (from) to redeemable noncontrolling interest to/from additional paid in capital and noncontrolling interest$(4,169) $1,428
Initial recognition of operating lease right-of-use assets$—
 $77,645
Initial recognition of operating lease liabilities$—
 $79,693
Debt assumed in connection with acquisition$—
 $98,681

See accompanying notes to the unaudited condensed consolidated financial statements.


7
Table of Contents


ESSEX PORTFOLIO, L.P.  AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except parenthetical and unit amounts)
ASSETSMarch 31, 2021December 31, 2020
Real estate:
Rental properties:
Land and land improvements$2,902,401 $2,929,009 
Buildings and improvements12,075,518 12,132,736 
 14,977,919 15,061,745 
Less: accumulated depreciation(4,259,148)(4,133,959)
 10,718,771 10,927,786 
Real estate under development404,496 386,047 
Co-investments962,625 1,018,010 
Real estate held for sale, net0 57,938 
12,085,892 12,389,781 
Cash and cash equivalents-unrestricted103,442 73,629 
Cash and cash equivalents-restricted9,918 10,412 
Marketable securities, net of allowance for credit losses of 0 as of both March 31, 2021 and December 31, 2020165,265 147,768 
Notes and other receivables, net of allowance for credit losses of $0.9 million and $0.8 million as of March 31, 2021 and December 31, 2020, respectively (includes related party receivables of $57.6 million and $4.7 million as of March 31, 2021 and December 31, 2020, respectively)266,896 195,104 
Operating lease right-of-use assets71,347 72,143 
Prepaid expenses and other assets87,444 47,340 
Total assets$12,790,204 $12,936,177 
LIABILITIES AND CAPITAL  
Unsecured debt, net$5,454,290 $5,607,985 
Mortgage notes payable, net642,419 643,550 
Accounts payable and accrued liabilities158,673 152,855 
Construction payable34,852 31,417 
Distributions payable142,822 141,917 
Operating lease liabilities73,201 74,037 
Liabilities associated with real estate held for sale0 29,845 
Other liabilities36,694 39,140 
Total liabilities6,542,951 6,720,746 
Commitments and contingencies00
Redeemable noncontrolling interest36,322 32,239 
Capital:  
General Partner:
Common equity (64,998,910 and 64,999,015 units issued and outstanding, respectively)6,035,566 6,015,139 
6,035,566 6,015,139 
Limited Partners:
Common equity (2,293,760 and 2,294,760 units issued and outstanding, respectively)59,328 58,184 
    Accumulated other comprehensive loss(6,811)(11,303)
Total partners' capital6,088,083 6,062,020 
                  Noncontrolling interest122,848 121,172 
Total capital6,210,931 6,183,192 
Total liabilities and capital$12,790,204 $12,936,177 
ASSETSJune 30, 2020 December 31, 2019
Real estate:   
Rental properties:   
Land and land improvements$2,933,690
 $2,773,805
Buildings and improvements12,088,080
 11,264,337
 15,021,770
 14,038,142
Less: accumulated depreciation(3,927,746) (3,689,482)
 11,094,024
 10,348,660
Real estate under development467,915
 546,075
Co-investments1,008,758
 1,335,339
Real estate held for sale, net24,495
 —
 12,595,192
 12,230,074
Cash and cash equivalents-unrestricted246,204
 70,087
Cash and cash equivalents-restricted10,271
 11,007
Marketable securities, net of allowance for credit losses of $13.6 million and zero as of June 30, 2020 and December 31, 2019, respectively154,433
 144,193
Notes and other receivables, net of allowance for credit losses of $0.1 million and zero as of June 30, 2020 and December 31, 2019, respectively (includes related party receivables of $5.2 million and $90.2 million as of June 30, 2020 and December 31, 2019, respectively)44,748
 134,365
Operating lease right-of-use assets73,669
 74,744
Prepaid expenses and other assets52,894
 40,935
Total assets$13,177,411

$12,705,405
    
LIABILITIES AND CAPITAL 
  
Unsecured debt, net$5,615,795
 $4,763,206
Mortgage notes payable, net703,617
 990,667
Lines of credit—
 55,000
Accounts payable and accrued liabilities164,340
 158,017
Construction payable48,809
 48,912
Distributions payable142,629
 135,384
Operating lease liabilities75,626
 76,740
Other liabilities40,473
 36,565
Total liabilities6,791,289

6,264,491
Commitments and contingencies


 


Redeemable noncontrolling interest33,241
 37,410
Capital: 
  
General Partner:   
Common equity (65,331,206 and 66,091,954 units issued and outstanding, respectively)6,184,784
 6,234,315
 6,184,784

6,234,315
Limited Partners:   
Common equity (2,295,510 and 2,301,653 units issued and outstanding, respectively)61,437
 57,359
    Accumulated other comprehensive loss(15,423) (10,432)
Total partners' capital6,230,798

6,281,242
                  Noncontrolling interest122,083
 122,262
Total capital6,352,881

6,403,504
Total liabilities and capital$13,177,411

$12,705,405

See accompanying notes to the unaudited condensed consolidated financial statements.

8
Table of Contents


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 March 31,
 20212020
Revenues:
Rental and other property$352,876 $389,750 
Management and other fees from affiliates2,249 2,617 
 355,125 392,367 
Expenses:  
Property operating, excluding real estate taxes65,151 64,131 
Real estate taxes45,328 43,012 
Corporate-level property management expenses8,947 8,759 
Depreciation and amortization128,587 131,559 
General and administrative9,812 13,982 
Expensed acquisition and investment related costs15 87 
 257,840 261,530 
Gain on sale of real estate and land100,096 0 
Earnings from operations197,381 130,837 
Interest expense(51,649)(55,147)
Total return swap income2,844 1,984 
Interest and other income (loss)14,387 (5,221)
Equity income from co-investments17,011 21,297 
Deferred tax expense on unrealized gain on unconsolidated co-investment(508)0 
(Loss) gain on early retirement of debt, net(2,517)321 
Gain on remeasurement of co-investment0 234,694 
Net income176,949 328,765 
Net income attributable to noncontrolling interest(2,558)(2,773)
Net income available to common unitholders$174,391 $325,992 
Comprehensive income$181,441 $319,678 
Comprehensive income attributable to noncontrolling interest(2,558)(2,773)
Comprehensive income attributable to controlling interest$178,883 $316,905 
Per unit data:  
Basic:  
Net income available to common unitholders$2.59 $4.77 
Weighted average number of common units outstanding during the period67,283,424 68,344,012 
Diluted:
Net income available to common unitholders$2.59 $4.76 
Weighted average number of common units outstanding during the period67,408,737 68,495,596 
 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
Revenues:       
Rental and other property$368,149
 $359,375
 $757,899
 $713,263
Management and other fees from affiliates2,348
 2,260
 4,965
 4,595
 370,497
 361,635
 762,864
 717,858
Expenses: 
  
    
Property operating, excluding real estate taxes65,142
 58,905
 129,273
 117,527
Real estate taxes44,994
 36,285
 88,006
 75,703
Corporate-level property management expenses8,646
 8,469
 17,405
 16,898
Depreciation and amortization133,609
 119,465
 265,168
 240,033
General and administrative14,952
 13,927
 28,934
 27,386
Expensed acquisition and investment related costs15
 24
 102
 56
 267,358
 237,075
 528,888
 477,603
Gain on sale of real estate and land16,597
 —
 16,597
 —
Earnings from operations119,736
 124,560
 250,573
 240,255
Interest expense(54,447) (54,112) (109,594) (107,755)
Total return swap income2,788
 1,975
 4,772
 4,020
Interest and other income11,405
 8,347
 6,184
 20,608
Equity income from co-investments17,257
 16,959
 38,554
 33,235
Deferred tax expense on unrealized gain on unconsolidated co-investment(1,636) —
 (1,636) —
(Loss) gain on early retirement of debt, net(5,027) 332
 (4,706) 1,668
Gain on remeasurement of co-investment—
 —
 234,694
 31,535
Net income90,076
 98,061
 418,841
 223,566
Net income attributable to noncontrolling interest(2,654) (2,558) (5,427) (5,034)
Net income available to common unitholders$87,422
 $95,503
 $413,414
 $218,532
Comprehensive income$94,172
 $93,740
 $413,850
 $217,408
Comprehensive income attributable to noncontrolling interest(2,654) (2,558) (5,427) (5,034)
Comprehensive income attributable to controlling interest$91,518
 $91,182
 $408,423
 $212,374
Per unit data: 
  
    
Basic: 
  
    
Net income available to common unitholders$1.29
 $1.40
 $6.08
 $3.21
Weighted average number of common units outstanding during the period67,708,157
 68,018,090
 68,026,084
 68,012,999
Diluted:       
Net income available to common unitholders$1.29
 $1.40
 $6.07
 $3.21
Weighted average number of common units outstanding during the period67,723,685
 68,121,099
 68,153,312
 68,104,574

See accompanying notes to the unaudited condensed consolidated financial statements.

9
Table of Contents


ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Condensed Consolidated Statements of Capital for the three and six months ended June 30,March 31, 2021 and 2020 and 2019
(Unaudited)
(In thousands)
 General PartnerLimited PartnersAccumulated other
comprehensive loss, net		Noncontrolling interestTotal
 Common EquityCommon Equity
Three months ended March 31, 2021UnitsAmountUnitsAmount
Balances at December 31, 202064,999 $6,015,139 2,295 $58,184 $(11,303)$121,172 $6,183,192 
Net income— 168,444 — 5,947 — 2,558 176,949 
Change in fair value of derivatives and amortization of swap settlements— — — — 4,407 — 4,407 
Change in fair value of marketable debt securities, net— — — — 85 — 85 
Issuance of common units under:       
General partner's stock based compensation, net39 (3,744)— — — — (3,744)
Equity based compensation costs— 5,028 — 54 — — 5,082 
Retirement of common units, net(40)(9,172)— — — — (9,172)
Changes in the redemption value of redeemable noncontrolling interest— (4,178)— 73 — 22 (4,083)
Contributions from noncontrolling interest— — — — — 1,900 1,900 
Distributions to noncontrolling interest— — — — — (2,760)(2,760)
Redemptions1 (75)(1)(136)(44)(255)
Distributions declared ($2.09 per unit)— (135,876)— (4,794)— — (140,670)
Balances at March 31, 202164,999 $6,035,566 2,294 $59,328 $(6,811)$122,848 $6,210,931 
10
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General PartnerLimited PartnersAccumulated other
comprehensive loss, net		Noncontrolling interestTotal
General Partner Limited Partners Accumulated other comprehensive loss Noncontrolling interest Total Common EquityCommon Equity
Three months ended March 31, 2020Three months ended March 31, 2020UnitsAmountUnitsAmountTotal
Balances at December 31, 2019Balances at December 31, 201966,092 $6,234,315 2,302 $57,359 $(10,432)$122,262 $6,403,504 
Net incomeNet income— 315,006 — 10,986 — 2,773 328,765 
Common Equity Common Equity Accumulated other comprehensive loss Noncontrolling interest Total
Three months ended June 30, 2020Units Amount Units Amount 
Balances at March 31, 202065,412
 $6,250,833
 2,296
 $63,550
 
Net income—
 84,458
 —
 2,964
 —
 2,654
 90,076
Cash flow hedge losses reclassified to earnings—
 —
 —
 —
 3,282
 —
 3,282
Change in fair value of derivatives and amortization of swap settlements—
 —
 —
 —
 779
 —
 779
Change in fair value of derivatives and amortization of swap settlements— — — — (8,782)— (8,782)
Change in fair value of marketable debt securities, net—
 —
 —
 —
 35
 —
 35
Change in fair value of marketable debt securities, net— — — — (305)— (305)
Issuance of common units under: 
  
  
  
  
  
  
Issuance of common units under:      
General partner's stock based compensation, net6
 536
 —
 —
 —
 —
 536
General partner's stock based compensation, net89 8,665 — — — — 8,665 
Sale of common stock by general partner, net—
 (63) —
 —
 —
 —
 (63)Sale of common stock by general partner, net— (70)— — — — (70)
Equity based compensation costs—
 5,058
 —
 177
 —
 —
 5,235
Equity based compensation costs— 1,619 2 79 — — 1,698 
Retirement of common units, net(88) (20,093) —
 —
 —
 —
 (20,093)Retirement of common units, net(776)(176,311)— — — — (176,311)
Changes in the redemption value of redeemable noncontrolling interest—
 (199) —
 (398) —
 (1) (598)
Cumulative effect upon adoption of ASU No. 2016-13
Cumulative effect upon adoption of ASU No. 2016-13
— (190)— — — — (190)
Changes in redemption value of redeemable noncontrolling interestChanges in redemption value of redeemable noncontrolling interest— 4,741 — (18)— 44 4,767 
Changes in noncontrolling interest from acquisitionChanges in noncontrolling interest from acquisition— — — — — 1,349 1,349 
Distributions to noncontrolling interest—
 —
 —
 —
 —
 (3,366) (3,366)Distributions to noncontrolling interest— — — — — (3,107)(3,107)
Redemptions1
 43
 —
 (89) 

 (289) (335)Redemptions7 (1,048)(8)(84)— (236)(1,368)
Distributions declared ($2.0775 per unit)—
 (135,789) —
 (4,767) —
 —
 (140,556)Distributions declared ($2.0775 per unit)— (135,894)— (4,772)— — (140,666)
Balances at June 30, 202065,331
 $6,184,784
 2,296
 $61,437
 $(15,423) $122,083
 $6,352,881
Balances at March 31, 2020Balances at March 31, 202065,412 $6,250,833 2,296 $63,550 $(19,519)$123,085 $6,417,949 


 General Partner Limited Partners Accumulated other comprehensive loss Noncontrolling interest Total
 Common Equity Common Equity   
Six months ended June 30, 2020Units Amount Units Amount   
Balances at December 31, 201966,092
 $6,234,315
 2,302
 $57,359
 $(10,432) $122,262
 $6,403,504
Net income—
 399,464
 —
 13,950
 —
 5,427
 418,841
Cash flow hedge losses reclassified to earnings—
 —
 —
 —
 3,282
 —
 3,282
Change in fair value of derivatives and amortization of swap settlements—
 —
 —
 —
 (8,003) —
 (8,003)
Change in fair value of marketable debt securities, net—
 —
 —
 —
 (270) —
 (270)
Issuance of common units under: 
  
  
  
  
  
 

General partner's stock based compensation, net95
 9,201
 —
 —
 —
 —
 9,201
Sale of common stock by general partner, net—
 (133) —
 —
 —
 —
 (133)
Equity based compensation costs—
 6,677
 2
 256
 —
 —
 6,933
Retirement of common units, net(864) (196,404) —
 —
 —
 —
 (196,404)
Cumulative effect upon adoption of ASU No. 2016-13—
 (190) —
 —
 —
 —
 (190)
Changes in the redemption value of redeemable noncontrolling interest—
 4,542
 —
 (416) —
 43
 4,169
Changes in noncontrolling interest from acquisition—
 —
 —
 —
 —
 1,349
 1,349
Distributions to noncontrolling interest—
 —
 —
 —
 —
 (6,473) (6,473)
Redemptions8
 (1,005) (8) (173) —
 (525) (1,703)
Distributions declared ($4.155 per unit)—
 (271,683) —
 (9,539) —
 —
 (281,222)
Balances at June 30, 202065,331
 $6,184,784
 2,296
 $61,437
 $(15,423) $122,083
 $6,352,881


 General Partner Limited Partners Accumulated other comprehensive loss Noncontrolling interest Total
 Common Equity Common Equity   
Three months ended June 30, 2019Units Amount Units Amount   
Balances at March 31, 201965,716
 $6,206,074
 2,299
 $58,667
 $(11,394) $63,848
 $6,317,195
Net income—
 92,275
 —
 3,228
 —
 2,558
 98,061
Reversal of unrealized gains upon the sale of marketable debt securities—
 —
 —
 —
 (65) —
 (65)
Change in fair value of derivatives and amortization of swap settlements—
 —
 —
 —
 (4,361) —
 (4,361)
Change in fair value of marketable debt securities, net—
 —
 —
 —
 105
 —
 105
Issuance of common units under: 
  
  
  
  
  
 

General partner's stock based compensation, net11
 2,024
 —
 —
 —
 —
 2,024
Sale of common stock by general partner, net—
 (62) —
 —
 —
 —
 (62)
Equity based compensation costs—
 3,171
 —
 329
 —
 —
 3,500
Changes in redemption value of redeemable noncontrolling interest—
 288
 —
 4
 —
 47
 339
Changes in noncontrolling interest from acquisition—
 —
 —
 —
 —
 65,472
 65,472
Distributions to noncontrolling interest—
 —
 —
 —
 —
 (2,443) (2,443)
Redemptions—
 (1,689) —
 (1) —
 (276) (1,966)
Distributions declared ($1.95 per unit)—
 (128,182) —
 (4,501) —
 —
 (132,683)
Balances at June 30, 201965,727
 $6,173,899
 2,299
 $57,726
 $(15,715) $129,206
 $6,345,116


 General Partner Limited Partners Accumulated other comprehensive loss Noncontrolling interest Total
 Common Equity Common Equity   
Six months ended June 30, 2019Units Amount Units Amount   
Balances at December 31, 201865,890
 $6,280,290
 2,305
 $59,061
 $(9,738) $64,231
 $6,393,844
Net income—
 211,133
 —
 7,399
 —
 5,034
 223,566
Reversal of unrealized gains upon the sale of marketable debt securities—
 —
 —
 —
 (32) —
 (32)
Change in fair value of derivatives and amortization of swap settlements—
 —
 —
 —
 (6,354) —
 (6,354)
Change in fair value of marketable debt securities, net—
 —
 —
 —
 228
 —
 228
Issuance of common units under: 
  
  
  
  
  
 

General partner's stock based compensation, net62
 5,228
 —
 —
 —
 —
 5,228
Sale of common stock by general partner, net—
 (82) —
 —
 —
 —
 (82)
Equity based compensation costs—
 5,472
 3
 628
 —
 —
 6,100
Retirement of common units, net(234) (56,989) —
 —
 —
 —
 (56,989)
Cumulative effect upon adoption of ASU No. 2017-12—
 —
 —
 —
 181
 —
 181
Changes in redemption value of redeemable noncontrolling interest—
 (2,739) —
 2
 —
 1,309
 (1,428)
Changes in noncontrolling interest from acquisition—
 —
 —
 —
 —
 65,472
 65,472
Distributions to noncontrolling interest—
 —
 —
 —
 —
 (5,110) (5,110)
Redemptions9
 (12,083) (9) (366) —
 (1,730) (14,179)
Distributions declared ($3.90 per unit)—
 (256,331) —
 (8,998) —
 —
 (265,329)
Balances at June 30, 201965,727
 $6,173,899
 2,299
 $57,726
 $(15,715) $129,206
 $6,345,116


See accompanying notes to the unaudited condensed consolidated financial statements.

11
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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands, except parenthetical amounts)
 Three Months Ended March 31,
 20212020
Cash flows from operating activities:
Net income$176,949 $328,765 
Adjustments to reconcile net income to net cash provided by operating activities:  
Straight-lined rents3,087 (208)
Depreciation and amortization128,587 131,559 
Amortization of discount on marketable securities0 (2,394)
Amortization of discount and debt financing costs, net2,132 2,297 
(Gain) loss on sale of marketable securities(2,611)13 
Provision for credit losses38 (50)
Unrealized (gains) losses on equity securities recognized through income(6,276)8,696 
Earnings from co-investments(17,011)(21,297)
Operating distributions from co-investments46,355 19,388 
Accrued interest from notes and other receivables(4,201)(355)
Gain on the sale of real estate and land(100,096)0 
Equity-based compensation1,386 1,405 
Loss (gain) on early retirement of debt, net2,517 (321)
Gain on remeasurement of co-investment0 (234,694)
Changes in operating assets and liabilities:  
Prepaid expenses, receivables, operating lease right-of-use assets, and other assets(41,060)36 
Accounts payable, accrued liabilities, and operating lease liabilities4,976 32,808 
Other liabilities494 1,278 
Net cash provided by operating activities195,266 266,926 
Cash flows from investing activities:  
Additions to real estate:  
Acquisitions of real estate and acquisition related capital expenditures, net of cash acquired(1,203)(458,302)
Redevelopment(9,274)(18,296)
Development acquisitions of and additions to real estate under development(19,629)(25,681)
Capital expenditures on rental properties(16,720)(17,151)
Investments in notes receivable(69,885)0 
Collections of notes and other receivables0 98,711 
Proceeds from insurance for property losses102 457 
Proceeds from dispositions of real estate243,365 0 
Contributions to co-investments(49,974)(21,905)
Changes in refundable deposits11 96 
Purchases of marketable securities(23,296)(10,731)
Sales and maturities of marketable securities14,772 165 
Non-operating distributions from co-investments78,600 7,000 
Net cash provided by (used) in investing activities146,869 (445,637)
Cash flows from financing activities:  
Proceeds from unsecured debt and mortgage notes447,404 498,140 
Payments on unsecured debt and mortgage notes(600,858)(102,563)
Proceeds from lines of credit204,794 1,038,426 
Repayments of lines of credit(204,794)(743,426)
Retirement of common units(9,172)(176,311)
Additions to deferred charges(3,434)(5,172)
12
Table of Contents


 Six Months Ended June 30,
 2020 2019
Cash flows from operating activities:   
Net income$418,841
 $223,566
Adjustments to reconcile net income to net cash provided by operating activities: 
  
Depreciation and amortization265,168
 240,033
Amortization of discount on marketable securities(4,862) (10,869)
Amortization of discount and debt financing costs, net3,973
 1,726
Gain on sale of marketable securities(33) (498)
Provision for credit losses97
 —
Unrealized loss (gain) on equity securities recognized through income1,073
 (4,454)
Company's share of gain on the sales of co-investment—
 (870)
Earnings from co-investments(38,554) (32,365)
Operating distributions from co-investments29,613
 38,699
Accrued interest from notes and other receivables(835) (2,896)
Gain on the sale of real estate and land(16,597) —
Equity-based compensation4,043
 5,321
Loss (gain) on early retirement of debt, net4,706
 (1,668)
Gain on remeasurement of co-investment(234,694) (31,535)
Changes in operating assets and liabilities: 
  
Prepaid expenses, receivables, operating lease right-of-use assets, and other assets(9,224) (7,925)
Accounts payable, accrued liabilities, and operating lease liabilities2,565
 12,486
Other liabilities830
 1,082
Net cash provided by operating activities426,110
 429,833
Cash flows from investing activities: 
  
Additions to real estate: 
  
Acquisitions of real estate and acquisition related capital expenditures, net of cash acquired(458,857) (47,585)
Redevelopment(32,211) (30,804)
Development acquisitions of and additions to real estate under development(54,994) (86,108)
Capital expenditures on rental properties(40,013) (41,927)
Investments in notes receivable(6,669) —
Collections of notes and other receivables98,711
 2,500
Proceeds from insurance for property losses568
 2,698
Proceeds from dispositions of real estate230,935
 —
Contributions to co-investments(43,817) (167,278)
Changes in refundable deposits96
 252
Purchases of marketable securities(10,989) (40,098)
Sales and maturities of marketable securities4,301
 50,226
Non-operating distributions from co-investments25,136
 26,657
Net cash used in investing activities(287,803) (331,467)
Cash flows from financing activities: 
  
Proceeds from unsecured debt and mortgage notes856,630
 498,234
Payments on unsecured debt and mortgage notes(286,074) (473,528)
Proceeds from lines of credit1,038,426
 975,832
Repayments of lines of credit(1,093,426) (858,832)
Retirement of common units(196,404) (56,989)
Additions to deferred charges(7,297) (5,873)
Payments related to debt prepayments penalties(1,696) —
 Three Months Ended March 31,
 20212020
Payments related to debt prepayment penalties(2,132)0 
Net proceeds from issuance of common units0 (70)
Net proceeds from stock options exercised1,701 14,329 
Payments related to tax withholding for share-based compensation(5,445)(5,664)
Contributions from noncontrolling interest1,900 0 
Distributions to noncontrolling interest(2,114)(2,016)
Redemption of noncontrolling interests(255)(1,368)
Common units distributions paid(140,411)(134,341)
Net cash (used in) provided by financing activities(312,816)379,964 
Net increase in unrestricted and restricted cash and cash equivalents29,319 201,253 
Unrestricted and restricted cash and cash equivalents at beginning of period84,041 81,094 
Unrestricted and restricted cash and cash equivalents at end of period$113,360 $282,347 
  
Supplemental disclosure of cash flow information:
Cash paid for interest (net of $2.1 million and $4.8 million capitalized in 2021 and 2020, respectively)$55,213 $52,487 
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$1,738 $1,715 
Supplemental disclosure of noncash investing and financing activities:  
Transfers between real estate under development and rental properties, net$267 $131,841 
Transfer from real estate under development to co-investments$747 $824 
Reclassifications to (from) redeemable noncontrolling interest to/from general and limited partner capital and noncontrolling interest$4,083 $(4,767)

 Six Months Ended June 30,
 2020 2019
Net proceeds from issuance of common units(133) (82)
Net proceeds from stock options exercised14,865
 8,743
Payments related to tax withholding for share-based compensation(5,664) (3,515)
Distributions to noncontrolling interest(4,152) (3,925)
Redemption of noncontrolling interests(1,703) (14,179)
Redemption of redeemable noncontrolling interests—
 (73)
Common units distributions paid(276,298) (260,603)
Net cash provided by (used in) financing activities37,074
 (194,790)
Net increase (decrease) in unrestricted and restricted cash and cash equivalents175,381
 (96,424)
Unrestricted and restricted cash and cash equivalents at beginning of period81,094
 151,395
Unrestricted and restricted cash and cash equivalents at end of period$256,475
 $54,971
     
Supplemental disclosure of cash flow information:   
Cash paid for interest (net of $9.0 million and $12.3 million capitalized in 2020 and 2019, respectively)$98,358
 $94,925
Cash paid for amounts included in the measurement of lease liabilities:   
Operating cash flows from operating leases$3,430
 $3,392
Supplemental disclosure of noncash investing and financing activities: 
  
Issuance of DownREIT units in connection with acquisition of real estate$—
 $65,472
Transfers between real estate under development and rental properties, net$131,960
 $138
Transfer from real estate under development to co-investments$1,473
 $240
Reclassifications (from) to redeemable noncontrolling interest to/from general and limited partner capital and noncontrolling interest$(4,169) $1,428
Initial recognition of operating lease right-of-use assets$—
 $77,645
Initial recognition of operating lease liabilities$—
 $79,693
  Debt assumed in connection with acquisition$—
 $98,681

See accompanying notes to the unaudited condensed consolidated financial statements.

13
Table of Contents
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30,March 31, 2021 and 2020 and 2019
(Unaudited)


(1) Organization and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements present the accounts of Essex Property Trust, Inc. ("Essex" or the "Company"), which include the accounts of the Company and Essex Portfolio, L.P. and its subsidiaries (the "Operating Partnership," which holds the operating assets of the Company), prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and in accordance with the instructions to Form 10-Q. In the opinion of management, all adjustments necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented have been included and are normal and recurring in nature. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 2019.2020.

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 six months ended June 30,March 31, 2021 and 2020 and 2019 include the accounts of the Company and the Operating Partnership. Essex is the sole general partner of the Operating Partnership, with a 96.6% general partnership interest as of both June 30, 2020March 31, 2021 and December 31, 2019.2020. Total Operating Partnership limited partnership units ("OP Units," and the holders of such OP Units, "Unitholders") outstanding were 2,295,5102,293,760 and 2,301,6532,294,760 as of June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively, and the redemption value of the units, based on the closing price of the Company’s common stock totaled approximately $526.1$623.5 million and $692.5$544.8 million as of June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively.

As of June 30, 2020,March 31, 2021, the Company owned or had ownership interests in 248244 operating apartment communities, aggregating 60,34160,175 apartment homes, excluding the Company’s ownership interest in preferred interest co-investments, loan investments, 1 operating commercial building, and a development pipeline comprised of 43 consolidated projects and 32 unconsolidated joint venture projects. The operating apartment communities are located in Southern California (primarily Los Angeles, Orange, San Diego, and Ventura counties), Northern California (the San Francisco Bay Area) and the Seattle metropolitan areas.

Accounting Pronouncements Adopted in the Current Year

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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. Previously, U.S. GAAP required entities to write down credit losses only when losses were probable and loss reversals were not permitted. The FASB additionally issued various updates to clarify and amend the guidance provided in ASU No. 2016-13. In May 2019,January 2021, the FASB issued ASU No. 2019-04, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,2021-01 "Reference Rate Reform (Topic 848): Scope." which, with respect to credit losses, among other things, clarifies and addresses issues related to accrued interest, transfers between classifications of loans or debt securities, recoveries, and variable interest rates. Additionally,The amendments in May 2019, the FASB issued ASU No. 2019-05, "Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief," which allows entities2021-01 provide optional expedients to irrevocably elect the fair value optioncurrent guidance on certain financial instruments.contract modifications and hedge accounting from the expected market transition from LIBOR and other interbank offered rates to alternative reference rates. The guidance generally can be applied to applicable contract modifications through December 31, 2022. The Company adopted ASU No. 2016-13, ASU No. 2019-04, and ASU No. 2019-05 as ofthis new guidance in January 1, 2020, using the modified retrospective approach by applying2021 on a cumulative effect adjustment of $0.2 million representing estimated accumulated credit losses to the opening balance of retained earnings.

In August 2018, the FASB issued ASU No. 2018-13 "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement," which eliminates certain disclosure requirements affecting all levels of measurements, and modifies and adds new disclosure requirements for Level 3 measurements. The Company adopted ASU No. 2018-13 as of January 1, 2020. Thisprospective basis.This adoption did not have a material impact on the Company's consolidated results of operations or financial position.


ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2020 and 2019
(Unaudited)

In March 2020, the FASB issued ASU No. 2020-04 "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting," which contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU No. 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter of 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

In April 2020, the FASB issued a Staff Question-and-Answer (Q&A) to clarify whether lease concessions related to the effects of COVID-19 require the application of the lease modification guidance under Accounting Standards Codification ("ASC") Topic 842, Leases. The Q&A allows companies to not apply the lease modification guidance to rent concessions that result in deferred rent where the total cash flows required by the modified lease agreement are materially the same as the cash flows required under the original lease and the changes to the lease do not result in a substantial increase to the rights of the lessor or the obligations of the lessee. The Company adopted the guidance during the three months ended June 30, 2020 for eligible residential lease concessions. The lease concessions that met the criteria of the Q&A are treated as if they were part of the enforceable rights and obligations of the parties under the existing lease contract. The amount of rent concessions subject to the Q&A were not material and this adoption did not have a material impact on the Company's consolidated results of operations or financial position.

Revenues and Gains on Sale of Real Estate

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

14

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2021 and 2020
(Unaudited)
The Company also generates other property-related revenue associated with the leasing of apartment homes, including storage income, pet rent, and other miscellaneous revenue. Similar to rental income, such revenues are recorded when due from tenants and recognized monthly as they are earned.

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.

Subsequent to the adoption of ASC 610-20 "Gains and Losses from the Derecognition of Nonfinancial Assets" on January 1, 2018, theThe Company recognizes any gains on sales of real estate when it transfers control of a property and when it is probable that the Company will collect substantially all of the related consideration.

Marketable Securities

The Company reports its equity securities and available for sale debt securities at fair value, based on quoted market prices (Level 1 for the common stock and investment funds and Level 2 for the unsecured bonds and Level 3 for investments in mortgage backed securities,debt, as defined by the FASB standard for fair value measurements). As of June 30, 2020March 31, 2021 and December 31, 2019, $2.72020, $2.4 million and $3.6$2.5 million, respectively, of equity securities presented within common stock and stock funds in the tables below, represent investments measured at fair value, using net asset value as a practical expedient, and are not categorized in the fair value hierarchy.

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

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

As of March 31, 2021 and December 31, 2020, marketable securities consist of the following ($ in thousands):
 March 31, 2021
 CostGross
Unrealized
Gain (Loss)		Carrying Value
Equity securities:
Investment funds - debt securities$61,430 $(647)$60,783 
Common stock and stock funds80,425 22,909 103,334 
Debt securities:
Available for sale
Investment-grade unsecured debt1,051 97 1,148 
Total - Marketable securities$142,906 $22,359 $165,265 

15

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30,March 31, 2021 and 2020 and 2019
(Unaudited)

 December 31, 2020
 CostGross
Unrealized
Gain (Loss)		Carrying Value
Equity securities:
Investment funds - debt securities$49,646 $985 $50,631 
Common stock and stock funds81,074 15,001 96,075 
Debt securities:
Available for sale
Investment-grade unsecured debt1,050 12 1,062 
Total - Marketable securities$131,770 $15,998 $147,768 
purchase discounts are included in interest and other income on the condensed consolidated statements of income and comprehensive income.

As of June 30, 2020 and December 31, 2019, equity securities and available for sale debt securities consisted primarily of investment-grade unsecured bonds, U.S. treasury securities, common stock and stock funds. As of June 30, 2020 and December 31, 2019, the Company classified its mortgage backed security investment, which matures in September 2020, as held to maturity, and accordingly, this security is stated at its amortized cost. The discount on the mortgage backed security is being amortized to interest income based on an estimated yield and the maturity date of the security.

As of June 30, 2020 and December 31, 2019, marketable securities consist of the following ($ in thousands):
 June 30, 2020
 
Amortized
Cost/Cost
 
Gross
Unrealized
Gain (Loss)
 Carrying Value Allowance for Credit Losses
Equity securities:       
Investment funds - debt securities$28,153
 $721
 $28,874
  
Common stock and stock funds45,518
 1,677
 47,195
  
        
Debt securities:       
Available for sale       
Investment-grade unsecured debt1,050
 (197) 853
 —
Held to maturity   
  
  
Mortgage backed securities77,511
 —
 77,511
 13,644
Total - Marketable securities$152,232
 $2,201
 $154,433
 $13,644

 December 31, 2019
 
Amortized
Cost/Cost
 
Gross
Unrealized
Gain (Loss)
 Carrying Value
Equity securities:     
Investment funds - debt securities$29,588
 $544
 $30,132
Common stock and stock funds34,941
 2,927
 37,868
     

Debt securities:     
Available for sale     
U.S. treasury securities2,421
 13
 2,434
Investment-grade unsecured bonds1,048
 60
 1,108
Held to maturity 
  
  
Mortgage backed securities72,651
 —
 72,651
Total - Marketable securities$140,649
 $3,544
 $144,193

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

For the three months ended June 30,March 31, 2021 and 2020, and 2019, the proceeds from sales and maturities of marketable securities totaled $4.1$14.8 million and $33.4$0.2 million, respectively, which resulted in $46 thousand and $0.6$2.6 million in realized gains respectively, for such periods. For the six months ended June 30, 2020 and 2019, the proceeds from sales and maturities of marketable

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2020 and 2019
(Unaudited)

securities totaled $4.3 million and $50.2 million, respectively, which resulted in $33$13 thousand and $0.5 million in realized gains,losses, respectively, for such periods.

For the three and six months ended June 30,March 31, 2021 and 2020, the portion of equity security unrealized lossesgains or gainslosses that were recognized in income totaled $7.6$6.3 million in gains and $1.1$8.7 million in losses, respectively, and were included in interest and other income on the Company's condensed consolidated statements of income and comprehensive income. For the three and six months ended June 30, 2019, the portion of equity security unrealized losses or gains that were recognized in income totaled $56 thousand in losses and $4.5 million in gains, respectively, and were included in interest and other income(loss) on the Company's condensed consolidated statements of income and comprehensive income.

Unrealized losses on Investment-grade unsecured bonds as of June 30, 2020 have not been recognized into income because the debts of the issuers are of high credit quality, management does not intend to sell the securities, it is likely that the Company will not be required to sell the securities prior to their anticipated recovery, and the decline in fair value is largely due to other market conditions.

The Company monitors the credit quality of its held to maturity mortgage backed security through the review of remittance reports and individual loan watchlists, which are prepared quarterly and provide most recent debt service coverage ratios for each loan within the security, when available. The Company monitors such reports to determine the likelihood that a particular loan within the mortgage backed security may be foreclosed upon.

The Company measures the expected credit loss on its held to maturity mortgage backed security based on the present value of expected future cash flows, which takes into account current market conditions and available credit information obtained from the individual loans held within the mortgage backed security. The following table presents the allowance for credit losses rollforward for the mortgage backed security ($ in thousands):

Balance at December 31, 2019$—
Impact of adoption ASC 326 (1)
13,644
Provision for credit losses—
Balance at June 30, 2020$13,644

(1) As part of the adoption of ASC 326, effective January 1, 2020, the Company recorded a gross up of the mortgage backed security and related allowance for credit losses of $13.6 million. This gross up had no effect on the Company's consolidated results of operations or financial position.

Variable Interest Entities

In accordance with accounting standards for consolidation of variable interest entities ("VIEs"), the Company consolidated the Operating Partnership, 1718 DownREIT entities (comprising 9 communities), and 56 co-investments as of June 30, 2020.March 31, 2021. As of December 31, 2019,2020, the Company consolidated the Operating Partnership, 17 DownREIT entities (comprising 9 communities) and 65 co-investments. The Company consolidates these entities because it is deemed the primary beneficiary. EssexThe Company has no assets or liabilities other than its investment in the Operating Partnership. The consolidated total assets and liabilities related to the above consolidated co-investments and DownREIT entities, net of intercompany eliminations, were approximately $0.9 billion$900.6 million and $327.7$323.7 million, respectively, as of June 30, 2020March 31, 2021 and $1.0 billion$898.5 million and $364.3$326.8 million, respectively, as of December 31, 2019.2020. Noncontrolling interests in these entities were $121.5$122.5 million and $122.5$120.8 million as of June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively. The Company's financial risk in each VIE is limited to its equity investment in the VIE. As of June 30, 2020March 31, 2021 and December 31, 2019,2020, the Company did not have any VIEs of which it was not deemed to be the primary beneficiary.

Equity-based Compensation

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

16

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30,March 31, 2021 and 2020 and 2019
(Unaudited)

Compensation Plans," in the Company’s annual report on Form 10-K for the year ended December 31, 2019) 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 June 30, 2020March 31, 2021 and December 31, 2019,2020, because interest rates, yields, and other terms for these instruments are consistent with interest rates, yields, and other terms currently available for similar instruments. Management has estimated that the fair value of the Company’s fixed rate debt with a carrying value of $5.8 billion and $5.5 billion and $5.2 billion at June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively, was approximately $6.0$6.1 billion and $5.4$6.0 billion, respectively. Management has estimated that the fair value of the Company’s $805.1$324.0 million and $660.4$775.1 million of variable rate debt at June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively, was approximately $799.8$322.2 million and $655.8$770.1 million, respectively, based on the terms of existing mortgage notes payable, unsecured debt, and variable rate demand notes compared to those available in the marketplace. Management believes that the carrying amounts of cash and cash equivalents, restricted cash, accounts payable and accrued liabilities, construction payables, other liabilities, and dividends payable approximate fair value as of June 30, 2020March 31, 2021 and December 31, 20192020 due to the short-term maturity of these instruments. Marketable securities except mortgage backed securities, are carried at fair value as of June 30, 2020March 31, 2021 and December 31, 2019.2020.

At June 30, 2020, the Company’s investment in its mortgage backed security had a carrying value of $77.5 million and the Company estimated the fair value to be approximately $77.6 million. At December 31, 2019, the Company’s investment in its mortgage backed security had a carrying value of $72.7 million and the Company estimated the fair value to be approximately $72.7 million. The Company determines the fair value of the mortgage backed security based on unobservable inputs (level 3 of the fair value hierarchy) considering the assumptions that market participants would make in valuing this security. Assumptions such as estimated default rates and discount rates are used to determine the expected, discounted cash flows to estimate 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 $8.9$6.4 million and $10.4$9.9 million during the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively, and $18.8 million and $21.1 million for the six months ended June 30, 2020 and 2019, respectively. The Company capitalizes leasing commissions associated with the lease-up of development communities and amortizes the costs over the life of the leases. The amounts capitalized for leasing commissions are immaterial for all periods presented.

Co-investments

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

Upon the acquisition of a controlling interest of a co-investment, the co-investment entity is consolidated and a gain or loss is recognized upon the remeasurement of co-investments in the consolidated statement of income equal to the amount by which the fair value of the Company's previously owned co-investment interest 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.

Changes in Accumulated Other Comprehensive Loss, Net by Component

Essex Property Trust, Inc.
($ in thousands):
 Change in fair
value and amortization
of swap settlements		Unrealized
gain on
available for sale securities		Total
Balance at December 31, 2020$(14,771)$42 $(14,729)
Other comprehensive income before reclassification4,255 82 4,337 
Amounts reclassified from accumulated other comprehensive loss2 0 2 
Other comprehensive income4,257 82 4,339 
Balance at March 31, 2021$(10,514)$124 $(10,390)

17

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30,March 31, 2021 and 2020 and 2019
(Unaudited)

Changes in Accumulated Other Comprehensive Loss, Net by Component

Essex Property Trust, Inc.
($ in thousands):
 
Change in fair
value and amortization
of swap settlements
 
Unrealized
gain/(loss) on
available for sale securities
 Total
Balance at December 31, 2019$(13,989) $101
 $(13,888)
Other comprehensive loss before reclassification(920) (261) (1,181)
Amounts reclassified from accumulated other comprehensive loss(3,641) —
 (3,641)
Other comprehensive loss(4,561) (261) (4,822)
Balance at June 30, 2020$(18,550) $(160) $(18,710)

Changes in Accumulated Other Comprehensive Loss, by Component

Essex Portfolio, L.P.
($ in thousands):
 Change in fair
value and amortization
of swap settlements		Unrealized
gain/(loss) on
available for sale securities		Total
Balance at December 31, 2020$(11,346)$43 $(11,303)
Other comprehensive income before reclassification4,405 85 4,490 
Amounts reclassified from accumulated other comprehensive loss2 0 2 
Other comprehensive income4,407 85 4,492 
Balance at March 31, 2021$(6,939)$128 $(6,811)
 
Change in fair
value and amortization
of swap settlements
 
Unrealized
gain/(loss) on
available for sale securities
 Total
Balance at December 31, 2019$(10,536) $104
 $(10,432)
Other comprehensive loss before reclassification(952) (270) (1,222)
Amounts reclassified from accumulated other comprehensive loss(3,769) —
 (3,769)
Other comprehensive loss(4,721) (270) (4,991)
Balance at June 30, 2020$(15,257) $(166) $(15,423)


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

Redeemable Noncontrolling Interest

The carrying value of redeemable noncontrolling interest in the accompanying condensed consolidated balance sheets was $33.2$36.3 million and $37.4$32.2 million as of June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively. The limited partners may redeem their noncontrolling interests for cash in certain circumstances.

The changes to the redemption value of redeemable noncontrolling interests for the sixthree months ended June 30, 2020March 31, 2021 is as follows ($ in thousands):
Balance at December 31, 2020$32,239 
Reclassification due to change in redemption value and other4,083 
Redemptions0 
Balance at March 31, 2021$36,322 
Balance at December 31, 2019$37,410
Reclassification due to change in redemption value and other(4,169)
Redemptions—
Balance at June 30, 2020$33,241



ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2020 and 2019
(Unaudited)

Cash, Cash Equivalents and Restricted Cash

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

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows ($ in thousands):
 March 31, 2021December 31, 2020March 31, 2020December 31, 2019
Cash and cash equivalents - unrestricted$103,442 $73,629 $271,877 $70,087 
Cash and cash equivalents - restricted9,918 10,412 10,470 11,007 
Total unrestricted and restricted cash and cash equivalents shown in the condensed consolidated statement of cash flows$113,360 $84,041 $282,347 $81,094 
 June 30, 2020 December 31, 2019 June 30, 2019 December 31, 2018
Cash and cash equivalents - unrestricted$246,204
 $70,087
 $38,168
 $134,465
Cash and cash equivalents - restricted10,271
 11,007
 16,803
 16,930
Total unrestricted and restricted cash and cash equivalents shown in the condensed consolidated statement of cash flows$256,475
 $81,094
 $54,971
 $151,395
18

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2021 and 2020
(Unaudited)

Accounting Estimates

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

(2)  Significant Transactions During The Sixthe Three Months Ended June 30, 2020March 31, 2021 and Subsequent Events

Significant Transactions

Acquisitions

In January 2020, the Company purchased Canada Pension Plan Investment Board's ("CPPIB") 45.0% interest in each of a land parcel and 6 communities totaling 2,020 apartment homes, valued at $1.0 billion on a gross basis. As a result of this acquisition, the Company realized a gain on remeasurement of co-investment of $234.7 million. Furthermore, the Company recognized $6.5 million in promote income as a result of the transaction, which is included in equity income from co-investments on the condensed consolidated statements of income and comprehensive income.

Dispositions

In June 2020,February 2021, the Company completedsold Hidden Valley, a portfolio sale which consisted of 2324 apartment communities, One South Market and Museum Park, bothhome community located in San Jose,Simi Valley, CA, for a total contract price of $232.0$105.0 million. The Company recognized a $16.6$69.2 million gain on sale. In conjunction with the sale, $29.7 million of mortgage debt that encumbered the property was repaid.

In February 2021, the Company sold Park 20, a 197 apartment home community located in San Mateo, CA, for a total contract price of $113.0 million. The Company recognized an immaterial gain on sale.

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

As of June 30, 2020, the Company had 1 community totaling 126 apartment homes that qualified as held for sale.

Co-Investments

Preferred Equity Investments

In January 2021, the Company originated a preferred equity investment totaling $20.0 million in one multifamily community located in Washington. The investment has an initial preferred return of 10.0% and is scheduled to mature in January 2026.

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

In March 2021, the Company received cash of $110.2 million, including an early redemption fee of $3.5 million for the full redemption of a preferred equity investment in a joint venture that holds property located in Southern California.

Notes Receivable

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

Common Stock

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


19

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30,March 31, 2021 and 2020 and 2019
(Unaudited)

In the first quarter of 2020, the Company originated 2 preferred equity investments totaling $91.4 million in two multifamily communities located in California. The investments have a weighted average initial return of 11.3% with most of the proceeds expected to fund in late 2020 and early 2021.

In March 2020, the Company received cash of $11.3 million, including an early redemption fee of $0.2 million, for the partial redemption of a preferred equity investment in a joint venture that holds property located in Southern California.

Notes Receivable

In January 2020, the Company received cash of $16.9 million for the full redemption of a mezzanine loan in a property located in Southern California.

In January 2020, the Company received $85.8 million for the payoff of a related party bridge loan to Wesco V, LLC ("Wesco V"). See Note 6, Related Party Transactions, for additional details.

In March 2020, the Company committed to fund an investment in mezzanine loans totaling $15.0 million as part of the development of a multifamily community located in Southern California. The investment has an initial 10.5% interest rate and maturity date of February 2023, with options to extend for up to two years. As of June 30, 2020, the Company had not funded this commitment.

In April 2020, the Company committed to fund a $29.2 million mezzanine loan in a multifamily community located in Northern California, with an 11.0% interest rate and an initial maturity date of October 2023, with options to extend for up to two years. As of June 30, 2020, the Company had funded $6.7 million of this commitment.

Common Stock

During the three months ended March 31, 2020, the Company repurchased and retired 776,261 shares totaling $176.3 million, including commissions. In May 2020, the board of directors approved the replenishment of the stock repurchase plan such that, as of such date, the Company had $250.0 million of purchase authority remaining under the replenished plan. During the three months ended June 30, 2020, the Company repurchased and retired 87,988 shares totaling $20.1 million, including commissions, all of which were repurchased after the replenishment in May 2020. As a result, as of June 30, 2020, the Company had $229.9 million of purchase authority remaining under its $250.0 million stock repurchase plan.

Senior Unsecured Debt

In February 2020,March 2021, the Operating Partnership issued $500.0$450.0 million of senior unsecured notes due on March 15, 20321, 2028 with a coupon rate of 2.650%1.700% per annum (the "2032"2028 Notes"), which are payable on March 151 and September 151 of each year, beginning on September 15, 2020.1, 2021. The 20322028 Notes were offered to investors at a price of 99.628%99.423% of par value. The 20322028 Notes are general unsecured senior obligations of the Operating Partnership, rank equally in right of payment with all other senior unsecured indebtedness of the Operating Partnership and are unconditionally guaranteed by Essex. The Company used the net proceeds of this offering to repay indebtedness under its unsecured linesupcoming debt maturities, including all or a portion of credit, which had been used to fund the buyout of CPPIB's 45.0% joint venture interests discussed above, as well as repay $100.3 million of secured debt during the quarter.

In April 2020, the Company originated a $200.0 millioncertain unsecured term loan with a one-year maturityloans, and 2 12-month extension options, exercisable at the Company’s option. The unsecured term loan bears a variable interest rate of LIBOR plus 1.20% and the proceeds were used to repay all remaining consolidated debt maturing in 2020.

In June 2020, the Company issued an additional $150.0 million of the 2032 Notes at a price of 105.660% of par value, plus accrued interest from February 2020 up to, but not including, the date of delivery of the Notes, with an effective yield of 2.093%. These additional notes have substantially identical terms as the 2032 Notes issued in February 2020. The proceeds were used to repay indebtedness under the Company's unsecured credit facilities and for other general corporate and working capital purposes.



ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2020 and 2019
(Unaudited)

Subsequent Events

In July 2020, the Company sold Delano, a 126 apartment home community located in Redmond, WA, for a total contract price of $51.5 million.None.

(3)  Revenues

Disaggregated Revenue

The following table presents the Company’s revenues disaggregated by revenue source ($ in thousands):
Three Months Ended June 30, Six Months Ended June 30, Three Months Ended March 31,
2020 2019 2020 2019 20212020
Rental income$363,087
 $353,167
 $746,585
 $700,972
Rental income$347,305 $383,498 
Other property5,062
 6,208
 11,314
 12,291
Other property5,571 6,252 
Management and other fees from affiliates2,348
 2,260
 4,965
 4,595
Management and other fees from affiliates2,249 2,617 
Total revenues$370,497
 $361,635
 $762,864
 $717,858
Total revenues$355,125 $392,367 

The following table presents the Company’s rental and other property revenues disaggregated by geographic operating segment ($ in thousands):
 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
Southern California$143,983
 $152,415
 $299,625
 $303,878
Northern California153,831
 136,427
 313,846
 271,185
Seattle Metro60,649
 60,240
 123,693
 119,890
Other real estate assets (1)
9,686
 10,293
 20,735
 18,310
Total rental and other property revenues$368,149
 $359,375
 $757,899
 $713,263

 Three Months Ended March 31,
 20212020
Southern California$143,012 $151,895 
Northern California146,690 158,456 
Seattle Metro58,633 63,044 
Other real estate assets (1)
4,541 16,355 
Total rental and other property revenues$352,876 $389,750 

(1) Other real estate assets consistsconsist of revenues generated from retail space, commercial properties, held for sale properties, disposition properties and straight-line rent adjustments for concessions. Executive management does not evaluate such operating performance geographically.
20

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2021 and 2020
(Unaudited)

The following table presents the Company’s rental and other property revenues disaggregated by current property category status ($ in thousands):
 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
Same-property (1)
$323,651
 $336,492
 $668,287
 $670,387
Acquisitions (2)
19,885
 475
 38,764
 475
Development (3)
4,420
 1,217
 8,495
 2,375
Redevelopment5,096
 5,240
 10,497
 10,469
Non-residential/other, net (4)
15,097
 15,951
 31,856
 29,557
Total rental and other property revenues$368,149
 $359,375
 $757,899
 $713,263

 Three Months Ended March 31,
 20212020
Same-property (1)
$317,806 $345,652 
Acquisitions (2)
13,673 12,558 
Development (3)
6,930 4,075 
Redevelopment4,590 5,401 
Non-residential/other, net (4)
13,246 22,064 
Straight line rent concession (5)
(3,369)0 
Total rental and other property revenues$352,876 $389,750 

(1) Properties that have comparable stabilized results as of January 1, 20192020 and are consolidated by the Company for the three and six months ended June 30, 2020March 31, 2021 and 2019.2020. A community is generally considered to have reached stabilized operations once it achieves an initial occupancy of 90%.
(2) Acquisitions includes properties acquired which did not have comparable stabilized results as of January 1, 2019.2020.
(3) Development includes properties developed which did not have stabilized results as of January 1, 2019.2020.

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2020 and 2019
(Unaudited)

(4) Non-residential/other, net consists of revenues generated from retail space, commercial properties, held for sale properties, disposition properties, student housing, properties undergoing significant construction activities that do not meet our redevelopment criteria, and 3 communities located in the California counties of Riverside, Santa Barbara, and Santa Cruz, which the Company does not consider its core marketsmarkets.
(5) Same-property revenues reflect concessions on a cash basis. Total rental and other property revenues reflect concessions on a straight-line rent adjustments for concessions.basis in accordance with U.S. GAAP.

Deferred Revenues and Remaining Performance Obligations

When cash payments are received or due in advance of the Company’s performance of contracts with customers, deferred revenue is recorded. The total deferred revenue balance related to such contracts was $3.5$3.0 million and $3.9$3.1 million as of June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively, and was included in accounts payable and accrued liabilities within the accompanying condensed consolidated balance sheets. The amount of revenue recognized for the sixthree months ended June 30, 2020March 31, 2021 that was included in the December 31, 20192020 deferred revenue balance was $0.4$0.1 million, which was included in interest and other income within the condensed consolidated statements of income and comprehensive income.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in the revenue recognition accounting standard. As of June 30, 2020,March 31, 2021, the Company had $3.5$3.0 million of remaining performance obligations. The Company expects to recognize approximately 10%19% of these remaining performance obligations in 2020,2021, an additional 42%48% through 2022,2023, and the remaining balance thereafter.

21

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2021 and 2020
(Unaudited)
(4) Co-investments

The Company has joint ventures and preferred equity investments in co-investments which are accounted for under the equity method. The co-investments, including BEXAEW, BEX II, BEX III, and BEX IV, 500 Folsom, Wesco I, LLC ("Wesco I"), Wesco III, LLC ("Wesco III"), Wesco IV, LLC ("Wesco IV"), and Wesco V, LLC ("Wesco V"), own, operate, and develop apartment communities. The carrying values of the Company's co-investments as of June 30, 2020March 31, 2021 and December 31, 20192020 are as follows ($ in thousands, except parenthetical amounts):
 
Weighted Average Company Ownership Percentage (1)
 June 30, 2020 December 31, 2019
Ownership interest in:     
CPPIB (2)
—% $—
 $345,466
Wesco I, Wesco III, Wesco IV, and Wesco V51% 186,509
 216,756
BEXAEW, BEX II, BEX III, and BEX IV50% 155,759
 160,888
Other47% 25,991
 20,351
Total operating and other co-investments, net  368,259
 743,461
Total predevelopment and development co-investments50% 167,774
 146,944
Total preferred interest co-investments (includes related party investments of $77.3 million and $73.2 million as of June 30, 2020 and December 31, 2019, respectively)  472,725
 444,934
Total co-investments, net  $1,008,758
 $1,335,339

 
Weighted Average Company Ownership Percentage (1)
March 31, 2021December 31, 2020
Ownership interest in:
Wesco I, Wesco III, Wesco IV, and Wesco V51 %178,071 178,322 
BEXAEW, BEX II, BEX III, BEX IV, and 500 Folsom (2)
50 %294,737 152,309 
Other47 %28,680 27,635 
Total operating and other co-investments, net501,488 358,266 
Total predevelopment and development co-investments50 %22,237 157,433 
Total preferred interest co-investments (includes related party investments of $83.3 million and $81.4 million as of March 31, 2021 and December 31, 2020, respectively)438,900 502,311 
Total co-investments, net$962,625 $1,018,010 
 
(1) Weighted average Company ownership percentages are as of June 30,March 31, 2021.
(2) 500 Folsom had not stabilized as of December 31, 2020. Its carrying value was included in the predevelopment and development co-investments balance as of December 31, 2020.
(2)
 In January 2020, the Company purchased CPPIB's 45.0% interest
The combined summarized financial information of co-investments is as follows ($ in each of a land parcel and 6 communities totaling 2,020 apartment homes.thousands):
 March 31, 2021December 31, 2020
Combined balance sheets: (1)
  Rental properties and real estate under development$4,054,459 $4,242,611 
  Other assets224,288 200,777 
   Total assets$4,278,747 $4,443,388 
  Debt$2,496,205 $2,611,365 
  Other liabilities189,046 189,515 
  Equity1,593,496 1,642,508 
  Total liabilities and equity$4,278,747 $4,443,388 
Company's share of equity$962,625 $1,018,010 
22

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30,March 31, 2021 and 2020 and 2019
(Unaudited)

 Three Months Ended March 31,
 20212020
Combined statements of income: (1)
Property revenues$71,759 $77,369 
Property operating expenses(27,331)(25,715)
Net operating income44,428 51,654 
Interest expense(16,700)(20,853)
General and administrative(4,281)(4,083)
Depreciation and amortization(32,709)(28,437)
Net loss$(9,262)$(1,719)
Company's share of net income (2)
$17,011 $21,297 
The combined summarized financial information of co-investments is as follows ($ in thousands):
 June 30, 2020 December 31, 2019
Combined balance sheets: (1)
   
  Rental properties and real estate under development$4,398,987
 $4,733,762
  Other assets215,425
 139,562
   Total assets$4,614,412
 $4,873,324
  Debt$2,716,143
 $2,442,213
  Other liabilities164,951
 117,160
  Equity1,733,318
 2,313,951
  Total liabilities and equity$4,614,412
 $4,873,324
Company's share of equity$1,008,758
 $1,335,339

 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
Combined statements of income: (1)
       
Property revenues$72,175
 $81,832
 $149,544
 $165,557
Property operating expenses(25,859) (27,835) (51,574) (56,554)
Net operating income46,316
 53,997
 97,970
 109,003
Interest expense(19,478) (16,080) (40,331) (31,195)
General and administrative(3,392) (2,243) (7,475) (4,171)
Depreciation and amortization(28,778) (28,937) (57,215) (58,872)
Net income (loss)$(5,332) $6,737
 $(7,051) $14,765
Company's share of net income (2)
$17,257
 $16,959
 $38,554
 $33,235
(1) Includes preferred equity investments held by the Company.
(2) Includes the Company's share of equity income from joint ventures and preferred equity investments, gain on sales of co-investments, co-investment promote income and income from early redemption of preferred equity investments. Includes related party income of $2.1$2.3 million and $1.8$2.1 million for the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively, and $4.2 million and $3.5 million for the six months ended June 30, 2020 and 2019, respectively.

(5) Notes and Other Receivables
 
Notes and other receivables consist of the following as of June 30, 2020March 31, 2021 and December 31, 20192020 ($ in thousands):
 March 31, 2021December 31, 2020
Note receivable, secured, bearing interest at 9.90%, due November 2021 (Originated November 2018)14,577 14,216 
Notes receivable, secured, bearing interest at 10.50%, due February 2023 (Originated March 2020)15,715 15,299 
Note receivable, secured, bearing interest at 11.00%, due October 2023 (Originated April 2020)30,761 25,461 
Notes receivable, secured, bearing interest at 9.00%, due December 2023 (Originated November 2020)81,766 79,827 
Notes receivable, secured, bearing interest at 11.50%, due November 2024 (Originated November 2020)27,175 15,423 
Related party note receivable, secured, bearing interest at 2.55%, due July 2021
(Originated March 2021)(1)
52,500 0 
Notes and other receivables from affiliates (2)
5,116 4,744 
Straight line rent receivables(3)
22,115 25,214 
Other receivables18,047 15,671 
Allowance for credit losses(876)(751)
Total notes and other receivables$266,896 $195,104 
 June 30, 2020 December 31, 2019
Note receivable, secured, bearing interest at 9.00%, due May 2021 (Originated May 2017) (1)
$—
 $16,828
Note receivable, secured, bearing interest at 9.90%, due November 2021 (Originated November 2018)13,506
 12,838
Related party note receivable, secured, bearing variable rate interest, due February
2020 (Originated November 2019) (2)(3)
—
 85,713
Notes receivable, secured, bearing interest at 11.00%, due October 2023 (Originated April 2020)6,582
 —
Notes and other receivables from affiliates (4)
5,156
 4,442
Other receivables19,604
 14,544
Allowance for credit losses(100) —
Total notes and other receivables$44,748
 $134,365


ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2020 and 2019
(Unaudited)


(1) In January 2020, the Company received cash of $16.9 million from the payoff of this note receivable.
(2) See Note 6, Related Party Transactions, for additional details.
(3)(2) In January 2020, the Company received cash of $85.8 million from the payoff of this note receivable.
(4)These amounts consist of short-term loans outstanding and due from various joint ventures as of June 30, 2020March 31, 2021 and
December 31, 2019.2020. See Note 6, Related Party Transactions, for additional details.

In the normal course of business, the Company originates and holds two types of loans: mezzanine loans issued to entities that(3) These amounts are pursuing apartment development and short-term bridge loans issued to joint ventures with the Company.

The Company categorizes development project mezzanine loans into risk categories basedreceivables from lease concessions recorded on relevant information about the ability of the borrowers to service their debt, such as: current financial information, credit documentation, public information, and previous experience with the borrower. The Company initially analyzes each mezzanine loan individually to classify the credit risk of the loan. On a periodic basis the Company evaluates and performs site visits of the development projects associated with the mezzanine loans to confirm whether they are on budget and whether there are any delays in development that could impact the Company's assessment of credit loss.

All bridge loans that the Company issues are, by their nature, short-term and meant only to provide time for the Company’s joint ventures to obtain long-term funding for newly acquired communities. As the Company is a partner in the joint ventures that are borrowing such funds and has performed a detailed review of each community as part of the acquisition process, there is little to no credit risk associated with such loans. As such, the Company does not review credit quality indicators for bridge loans on an ongoing basis.

The Company estimates the allowance for credit losses for each loan type using relevant available information from internal and external sources, relating to past events, current conditions, and reasonable forecasts. Historical credit loss experience provides thestraight-line basis for the estimation of expected credit losses. Adjustments to historical loss information are made, if necessary, for differences in current loan-specific risk characteristics. For example, in the case of mezzanine loans, adjustments may be made due to differences in track record and experience of the mezzanine loan sponsor as well as the percent of equity that the sponsor has contributed to the project. Company's operating
properties.

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

 Mezzanine Loans Bridge Loans Total
Balance at December 31, 2019$—
 $—
 $—
Impact of adoption ASC 326147
 43
 190
Provision for credit losses(47) (43) (90)
Balance at June 30, 2020$100
 $—
 $100

23

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2021 and 2020
(Unaudited)
Mezzanine LoansBridge LoansTotal
Balance at December 31, 2020$751 $0 $751 
Provision for credit losses99 26 125 
Balance at March 31, 2021$850 $26 $876 

No loans were placed on nonaccrual status or charged off during the sixthree months ended June 30, 2020March 31, 2021 or 2019.2020.

(6) Related Party Transactions

The Company charges certain fees relating to its co-investments for asset management, property management, development and redevelopment services. These fees from affiliates totaled $2.6$2.2 million and $3.5$3.1 million during the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively, and $5.7 million and $6.9 million during the six months ended June 30, 2020 and 2019, respectively. All of these fees are net of intercompany amounts eliminated by the Company. The Company netted development and redevelopment feesfees of $0.3 million and $1.3approximately 0 and $0.4 million against general and administrative expenses for the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively, and $0.8 million and $2.4 million for the six months ended June 30, 2020 and 2019, respectively.


ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2020 and 2019
(Unaudited)

The Company’s Chairman and founder, Mr. George M. Marcus, is the Chairman of the Marcus & Millichap Company ("MMC"), which is a parent company of a diversified group of real estate service, investment, and development firms. Mr. Marcus is also the Co-Chairman of Marcus & Millichap, Inc. ("MMI"), and Mr. Marcus owns a controlling interest in MMI, a national brokerage firm listed on the New York Stock Exchange. For the three and six months ended June 30,March 31, 2021 and 2020, the Company paid brokerage commissions totaling 0 and $0.2 million, respectively, to MMC and its affiliates related to real estate transactions.

In March 2021, the Company provided a $52.5 million related party bridge loan to Wesco I in connection with the payoff of a debt related to one of its properties located in Southern California. The note receivable accrued interest at 2.55% and is scheduled to mature in July 2021. The bridge loan is classified within notes and other receivables in the accompanying condensed consolidated balance sheets and had an outstanding balance of $52.5 million as of March 31, 2021.

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

In August 2019, the Company provided an $89.0 million related party bridge loan to Wesco V in connection with the acquisition of The Courtyards at 65th Street. The note receivable accrued interest at LIBOR plus 1.30% and was paid off in November 2019.

In August 2019, the Company provided a $44.4 million related party bridge loan to BEX IV in connection with the acquisition of 777 Hamilton. The note receivable accrued interest at 3.25%. In November 2019, the term of the bridge loan was extended to
February 2020, but was paid off in December 2019.

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 has an initial preferred return of 11.0% and is scheduled to mature in February 2024.

In October 2018, the Company funded a $18.6 million preferred equity investment in an entity whose sponsor is an affiliate of MMC. The entity wholly owns a 268 apartment home community development located in Burlingame, CA. This investment accrues interest based on an initial 12.0% preferred return. The investment is scheduled to mature in April 2024.

In May 2018, the Company made a commitment to fund a $26.5 million preferred equity investment in an entity whose sponsors include an affiliate of MMC. The entity wholly owns a 400 apartment home community located in Ventura, CA. This investment accrues interest based on a 10.25% preferred return. The investment is scheduled to mature in May 2023. As of June 30, 2020,March 31, 2021, the Company had funded $23.1$23.4 million of the commitment. The remaining committed amount will be funded if and when requested by the sponsors.

24

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2021 and 2020
(Unaudited)
In November 2016,March 2017, the Company providedconverted its existing $15.3 million preferred equity investment in Sage at Cupertino, a $6.6 million mezzanine loan to230 apartment home community located in San Jose, CA, into a limited liability company in which MMC holds a significant40.5% common equity ownership interest through subsidiaries. The mezzanine loan was classified within notes and other receivables in the accompanying condensed consolidated balance sheets andproperty. 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 paid off in October 2019.

In 2015,encumbered by $52.0 million of mortgage debt. As a result of this transaction, the Company made preferred equity investments totaling $20.0 million in 3 entities affiliated with MMC that own apartment communities in California. The Company earnedconsolidates the property, based on a 9.5% preferred return on each such investment. One $5.0 million investment, which was scheduled to mature in 2022, was fully redeemed in 2017. Another $5.0 million investment, which was scheduled to mature in 2022, was fully redeemed in 2018. The remaining investment was fully redeemed in February 2019.consolidation analysis performed by the Company.

As described in Note 5, Notes and Other Receivables, the Company has provided short-term loans to affiliates. As of June 30, 2020March 31, 2021 and December 31, 2019, $5.22020, $57.6 million and $4.4$4.7 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.


ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2020 and 2019
(Unaudited)

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

Debt consists of the following ($ in thousands):
 June 30, 2020 December 31, 2019 
Weighted Average
Maturity
In Years as of June 30, 2020
Unsecured bonds private placement - fixed rate$199,884
 $199,820
 1.0
Term loan - variable rate548,896
 349,189
 2.1
Bonds public offering - fixed rate4,867,015
 4,214,197
 7.6
Unsecured debt, net (1)
5,615,795
 4,763,206
  
Lines of credit (2)
—
 55,000
 
Mortgage notes payable, net (3)
703,617
 990,667
 9.5
Total debt, net$6,319,412
 $5,808,873
  
Weighted average interest rate on fixed rate unsecured bonds private placement and bonds public offering3.6% 3.8%  
Weighted average interest rate on variable rate term loan1.8% 2.7%  
Weighted average interest rate on lines of credit1.0% 2.5%  
Weighted average interest rate on mortgage notes payable2.8% 4.1%  

 March 31, 2021December 31, 2020Weighted Average
Maturity
In Years as of March 31, 2021
Unsecured bonds private placement - fixed rate$49,989 $199,950 0.4
Term loan - variable rate99,916 549,380 0.9
Bonds public offering - fixed rate5,304,385 4,858,655 9.0
Unsecured debt, net (1)
5,454,290 5,607,985  
Lines of credit (2)
0 0 
Mortgage notes payable, net (3)
642,419 643,550 9.2
Total debt, net$6,096,709 $6,251,535  
Weighted average interest rate on fixed rate unsecured bonds private placement and bonds public offering3.3 %3.4 % 
Weighted average interest rate on variable rate term loan1.1 %1.7 % 
Weighted average interest rate on lines of credit1.0 %1.0 %
Weighted average interest rate on mortgage notes payable2.6 %2.7 % 

(1) Includes unamortized discount of $5.7$12.0 million and $12.2$10.1 million and unamortized debt issuance costs of $28.5$33.7 million and $24.5$31.9 million, as of June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively.
(2) Lines of credit, related to the Company's 2 lines of unsecured credit aggregating $1.24 billion as of June 30, 2020,March 31, 2021, excludes unamortized debt issuance costs of $4.2$3.3 million and $3.8$3.7 million as of June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively. These debt issuance costs are included in prepaid expenses and other assets on the condensed consolidated balance sheets. As of June 30, 2020,March 31, 2021, the Company’s $1.2 billion credit facility had an interest rate of LIBOR plus 0.825%, which is based on a tiered rate structure tied to the Company’s credit ratings and a scheduled maturity date of December 2023 with 1 18-month extension, exercisable at the Company’s option. As of June 30, 2020,March 31, 2021, the Company’s $35.0 million working capital unsecured line of credit had an interest rate of LIBOR plus 0.825%, which is based on a tiered rate structure tied to the Company’s credit ratings, and a scheduled maturity date of February 2021.2023.
(3) Includes total unamortized premium of $4.6$3.5 million and $5.9$3.9 million, reduced by unamortized debt issuance costs of $2.2$1.7 million and $2.6$1.8 million, as of June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively.

The aggregate scheduled principal payments of the Company’s outstanding debt, excluding lines of credit, as of June 30, 2020March 31, 2021 are as follows ($ in thousands):
Remaining in 2020$1,983
2021531,653
2022693,188
2023802,945
2024403,109
Thereafter3,918,383
Total$6,351,261
25



ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30,March 31, 2021 and 2020 and 2019
(Unaudited)
Remaining in 2021$52,644 
2022143,188 
2023602,945 
2024403,109 
2025633,054 
Thereafter4,305,629 
Total$6,140,569 

(8) Segment Information

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

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

Excluded from segment revenues and NOI are management and other fees from affiliates and interest and other income. Non-segment revenues and NOI included in the following schedule also consist of revenues generated from commercial properties and properties that have been sold. Other non-segment assets include items such as real estate under development, co-investments, real estate held for sale, 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 six months ended June 30,March 31, 2021 and 2020 and 2019 ($ in thousands):
 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
Revenues:       
Southern California$143,983
 $152,415
 $299,625
 $303,878
Northern California153,831
 136,427
 313,846
 271,185
Seattle Metro60,649
 60,240
 123,693
 119,890
Other real estate assets9,686
 10,293
 20,735
 18,310
Total property revenues$368,149
 $359,375
 $757,899
 $713,263
Net operating income:       
Southern California$99,307
 $109,260
 $210,404
 $217,256
Northern California110,649
 101,887
 228,909
 201,743
Seattle Metro40,780
 43,512
 85,206
 84,680
Other real estate assets7,277
 9,526
 16,101
 16,354
Total net operating income258,013
 264,185
 540,620
 520,033
Management and other fees from affiliates2,348
 2,260
 4,965
 4,595
Corporate-level property management expenses(8,646) (8,469) (17,405) (16,898)
Depreciation and amortization(133,609) (119,465) (265,168) (240,033)
General and administrative(14,952) (13,927) (28,934) (27,386)
Expensed acquisition and investment related costs(15) (24) (102) (56)
Gain on sale of real estate and land16,597
 —
 16,597
 —
Interest expense(54,447) (54,112) (109,594) (107,755)
Total return swap income2,788
 1,975
 4,772
 4,020
Interest and other income11,405
 8,347
 6,184
 20,608
Equity income from co-investments17,257
 16,959
 38,554
 33,235
Deferred tax expense on unrealized gain on unconsolidated co-investment(1,636) —
 (1,636) —
(Loss) gain on early retirement of debt, net(5,027) 332
 (4,706) 1,668
Gain on remeasurement of co-investment—
 —
 234,694
 31,535
Net income$90,076
 $98,061
 $418,841
 $223,566
26



ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30,March 31, 2021 and 2020 and 2019
(Unaudited)

 Three Months Ended March 31,
 20212020
Revenues:
Southern California$143,012 $151,895 
Northern California146,690 158,456 
Seattle Metro58,633 63,044 
Other real estate assets4,541 16,355 
Total property revenues$352,876 $389,750 
Net operating income:
Southern California$99,251 $108,289 
Northern California101,625 117,187 
Seattle Metro38,779 44,426 
Other real estate assets2,742 12,705 
Total net operating income242,397 282,607 
Management and other fees from affiliates2,249 2,617 
Corporate-level property management expenses(8,947)(8,759)
Depreciation and amortization(128,587)(131,559)
General and administrative(9,812)(13,982)
Expensed acquisition and investment related costs(15)(87)
Gain on sale of real estate and land100,096 0 
Interest expense(51,649)(55,147)
Total return swap income2,844 1,984 
Interest and other income (loss)14,387 (5,221)
Equity income from co-investments17,011 21,297 
Deferred tax expense on unrealized gain on unconsolidated co-investment(508)0 
(Loss) gain on early retirement of debt, net(2,517)321 
Gain on remeasurement of co-investment0 234,694 
Net income$176,949 $328,765 
Total assets for each of the reportable operating segments are summarized as follows as of June 30, 2020 and December 31, 2019 ($ in thousands):
 June 30, 2020 December 31, 2019
Assets:   
Southern California$4,160,950
 $4,233,110
Northern California5,491,288
 4,408,404
Seattle Metro1,429,957
 1,456,187
Other real estate assets11,829
 250,959
Net reportable operating segment - real estate assets11,094,024
 10,348,660
Real estate under development467,915
 546,075
Co-investments1,008,758
 1,335,339
Real estate held for sale, net24,495
 —
Cash and cash equivalents, including restricted cash256,475
 81,094
Marketable securities154,433
 144,193
Notes and other receivables44,748
 134,365
Operating lease right-of-use assets73,669
 74,744
Prepaid expenses and other assets52,894
 40,935
Total assets$13,177,411
 $12,705,405


(9) Net Income Per Common Share and Net Income Per Common Unit
($ in thousands, except share and unit data):

Essex Property Trust, Inc.
 Three Months Ended June 30, 2020 Three Months Ended June 30, 2019
 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$84,458
 65,412,407
 $1.29
 $92,275
 65,718,806
 $1.40
Effect of Dilutive Securities:           
Stock options—
 15,528
   —
 103,009
  
Diluted: 
  
  
  
  
  
Net income available to common stockholders$84,458
 65,427,935
 $1.29
 $92,275
 65,821,815
 $1.40
27



ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30,March 31, 2021 and 2020 and 2019
(Unaudited)

Total assets for each of the reportable operating segments are summarized as follows as of March 31, 2021 and December 31, 2020 ($ in thousands):
 March 31, 2021December 31, 2020
Assets:
Southern California$3,956,663 $3,993,275 
Northern California5,363,795 5,408,019 
Seattle Metro1,389,142 1,403,678 
Other real estate assets9,171 122,814 
Net reportable operating segment - real estate assets10,718,771 10,927,786 
Real estate under development404,496 386,047 
Co-investments962,625 1,018,010 
Real estate held for sale0 57,938 
Cash and cash equivalents, including restricted cash113,360 84,041 
Marketable securities165,265 147,768 
Notes and other receivables266,896 195,104 
Operating lease right-of-use assets71,347 72,143 
Prepaid expenses and other assets87,444 47,340 
Total assets$12,790,204 $12,936,177 
 Six Months Ended June 30, 2020 Six Months Ended June 30, 2019
 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$399,464
 65,728,119
 $6.08
 $211,133
 65,710,842
 $3.21
Effect of Dilutive Securities:           
Stock options—
 32,981
   —
 91,575
  
DownREIT units392
 94,247
   —
 —
  
Diluted: 
  
  
  
  
  
Net income available to common stockholders$399,856
 65,855,347
 $6.07
 $211,133
 65,802,417
 $3.21


(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 March 31, 2021Three Months Ended March 31, 2020
 IncomeWeighted-
average
Common
Shares		Per
Common
Share
Amount		IncomeWeighted-
average
Common
Shares		Per
Common
Share
Amount
Basic:
Net income available to common stockholders$168,444 64,989,620 $2.59 $315,006 66,043,831 $4.77 
Effect of Dilutive Securities: 
Stock options— 31,066 — 57,337 
DownREIT units197 94,247 196 94,247 
Diluted:      
Net income available to common stockholders$168,641 65,114,933 $2.59 $315,202 66,195,415 $4.76 

The table above excludes from the calculations of diluted earnings per share weighted average convertible OP Units of 2,295,7502,293,804 and 2,299,284,2,300,181, which include vested Series Z-1 Incentive Units, 2014 Long-Term Incentive Plan Units, and 2015 Long-Term Incentive Plan Units for the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively, and 2,297,966 and 2,302,158 for the six months ended June 30, 2020 and 2019, respectively, because they were anti-dilutive. The related income allocated to these convertible OP Units aggregated $3.0$5.9 million and $3.2$11.0 million for the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively, and $14.0 million and $7.4 million for the six months ended June 30, 2020 and 2019, respectively. Additionally, the table excludes all DownREIT units for which the Operating Partnership has the ability and intention to redeem the units for cash and does not consider them to be common stock equivalents.

28

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2021 and 2020
(Unaudited)
Stock options of 431,253349,252 and 0116,380 for the three months ended June 30,March 31, 2021 and 2020, and 2019, and 290,570 and 106,029 for the six months ended June 30, 2020 and 2019, respectively, were excluded from the calculation of diluted earnings per share because the assumed proceeds per share of such options plus the average unearned compensation were greater than the average market price of the common stock for the periods ended and, therefore, were anti-dilutive.

Essex Portfolio, L.P.
Three Months Ended June 30, 2020 Three Months Ended June 30, 2019 Three Months Ended March 31, 2021Three Months Ended March 31, 2020
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$87,422
 67,708,157
 $1.29
 $95,503
 68,018,090
 $1.40
Net income available to common unitholders$174,391 67,283,424 $2.59 $325,992 68,344,012 $4.77 
Effect of Dilutive Securities:           
Effect of Dilutive Securities: 
Stock options—
 15,528
   —
 103,009
  Stock options— 31,066 — 57,337 
DownREIT unitsDownREIT units197 94,247 196 94,247 
Diluted: 
  
  
  
  
  
Diluted:      
Net income available to common unitholders$87,422
 67,723,685
 $1.29
 $95,503
 68,121,099
 $1.40
Net income available to common unitholders$174,588 67,408,737 $2.59 $326,188 68,495,596 $4.76 

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2020 and 2019
(Unaudited)


 Six Months Ended June 30, 2020 Six Months Ended June 30, 2019
 Income 
Weighted-
average
Common Units
 
Per
Common
Unit
Amount
 Income 
Weighted-
average
Common Units
 
Per
Common
Unit
Amount
Basic:           
Net income available to common unitholders$413,414
 68,026,084
 $6.08
 $218,532
 68,012,999
 $3.21
Effect of Dilutive Securities:           
Stock options—
 32,981
   —
 91,575
  
DownREIT units392
 94,247
   —
 —
  
Diluted: 
  
  
  
  
  
Net income available to common unitholders$413,806
 68,153,312
 $6.07
 $218,532
 68,104,574
 $3.21


Stock options of 431,253349,252 and 0116,380 for the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively, and 290,570 and 106,029 for the six months ended June 30, 2020 and 2019, 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 periodperiods ended and, therefore, were anti-dilutive. Additionally, the table excludes all DownREIT units for which the Operating Partnership has the ability and intention to redeem the units for cash and does not consider them to be common stock equivalents.

(10) Derivative Instruments and Hedging Activities

As of June 30, 2020, the Company had interest rate swap contracts with an aggregate notional amount of $175.0 million that effectively fixed the interest rate on the $175.0 million unsecured term loan at 2.3%. These derivatives qualify for hedge accounting.

As of June 30, 2020March 31, 2021 and December 31, 2019,2020, the aggregate carrying value of the interest rate swap contracts were a liability of $3.4 million0 and an asset of $0.8$2.4 million, respectively. As of June 30, 2020March 31, 2021 and December 31, 2019,2020, the swap contracts were presented in the condensed consolidated balance sheets as an asset of 0 and $1.0 million, respectively, and were included in prepaid expenses and other assets on the condensed consolidated balance sheets,for both periods and a liability of $3.4 million0 and $0.2$2.4 million, respectively, and were included in other liabilities on the condensed consolidated balance sheets.

Hedge ineffectiveness related to cash flow hedges, which is included in interest expense on the condensed consolidated statements of income and comprehensive income, was not significant for the three and six months ended June 30, 2020 and 2019.

Additionally, theThe Company has 4 total return swap contracts, with an aggregate notional amount of $255.1$224.9 million, that effectively convert $255.1$224.9 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 of its total return swaps, with $255.1$224.9 million of the outstanding debt at par. These derivatives do not qualify for hedge accounting and had a carrying and fair value of 0 at both June 30, 2020March 31, 2021 and December 31, 2019.2020. These total return swaps are scheduled to mature between November 2022 and December 2024. The realized gains of $2.8 million and $2.0 million for the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively, and $4.8 million and $4.0 million for the six months ended June 30, 2020 and 2019, respectively, were reported in the condensed consolidated statements of income and comprehensive income as total return swap income.


ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 2020 and 2019
(Unaudited)

(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.

29

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2021 and 2020
(Unaudited)
The Company is subject to various federal, state, and local environmental and other laws. Compliance by the Company with existing laws has not had a material adverse effect on the Company. However, the Company cannot predict the impact of new or changed laws or regulations on its current portfolio or on other assets that the Company may acquire in the future, including, without limitation, certain eviction moratoriums and other mandates that have been, or may be, takenenacted in connection with the COVID-19 pandemic. To the extent that an environmental or other matter arises or is identified in the future that has other than a remote risk of having a material impact on the condensed consolidated financial statements, the Company will disclose the estimated range of possible outcomes associated with it, and, if an outcome is probable, accrue an appropriate liability for that matter. The Company will consider whether any such matter results in an impairment of value on the affected property and, if so, impairment will be recognized.


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

The following discussion and analysis should be read in conjunction with the Company’s Condensed Consolidated Financial Statements and accompanying Notes thereto included elsewhere herein and with the Company’s 20192020 annual report on Form 10-K for the year ended December 31, 2019.2020. Capitalized terms not defined in this section have the meaning ascribed to them elsewhere in this Quarterly Report on Form 10-Q. The Company makes statements in this section that are forward-looking statements within the meaning of the federal securities laws. For a complete discussion of forward-looking statements, see the section in this Form 10-Q entitled "Forward-Looking Statements."
 
Essex is a self-administered and self-managed REIT that acquires, develops, redevelops, and manages apartment communities in selected residential areas located on the West Coast of the United States. Essex owns all of its interests in its real estate investments, directly or indirectly through the Operating Partnership. Essex is the sole general partner of the Operating Partnership and, as of June 30, 2020,March 31, 2021, had an approximately 96.6% general partnership interest in the Operating Partnership.

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

As of June 30, 2020,March 31, 2021, the Company owned or had ownership interests in 248244 operating apartment communities, comprising 60,34160,175 apartment homes, excluding the Company’s ownership interest in preferred equity co-investments, loan investments, one operating commercial building, and a development pipeline comprised of fourthree consolidated projects and threetwo unconsolidated joint venture projects. 

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

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

As of June 30, 2020,March 31, 2021, the Company’s development pipeline was comprised of fourthree consolidated projects under development, threetwo unconsolidated joint venture projects under development, and various predevelopment projects aggregating 2,0251,316 apartment homes, with total incurred costs of $1.0$0.6 billion, and estimated remaining project costs of approximately $221.0$136.0 million, $162.0$90.0 million of which represents the Company's share of estimated remaining costs, for total estimated project costs of $1.2$0.7 billion.

The Company’s consolidated apartment communities are as follows:
 As of March 31, 2021As of March 31, 2020
 Apartment Homes%Apartment Homes%
Southern California22,121 43 %22,675 43 %
Northern California19,123 37 %19,748 37 %
Seattle Metro10,218 20 %10,343 20 %
Total51,462 100 %52,766 100 %
 As of June 30, 2020 As of June 30, 2019
 Apartment Homes % Apartment Homes %
Southern California22,675
 43% 22,674
 46%
Northern California19,319
 37% 16,749
 34%
Seattle Metro10,343
 20% 10,238
 20%
Total52,337
 100% 49,661
 100%

Co-investments, including Wesco I, Wesco III, Wesco IV, Wesco V, BEXAEW, BEX II, BEX III, and BEX IV, and 500 Folsom communities, developments under construction, and preferred equity interest co-investment communities are not included in the table presented above for both periods.

Current Material Development – the COVID-19 Pandemic

The United States and other countries around the world are experiencingcontinuing to experience an unprecedented health pandemic related to COVID-19, which has created considerable instability, disruption, and uncertainty. Governmental authorities in impacted regions are taking increasingly dramatic actionand unpredictable actions in an effort to slow COVID-19’s spread. Federal, state and local jurisdictions have issued and revised varying forms of "Shelter-in-Place" orders, halted or restricted public gatherings and restricted business to only those that are considered "essential" or requiring businesses to make changes to their operations in a manner that negatively affects profitability, resulting in extraordinary job losses and related financial impacts that will affect future

31
Table of Contents
future operations to an unknown extent. Moreover, eviction moratoriums and, laws that limit rent increases during times of emergency and prohibit the ability to collect unpaid rent during certain timeframes, have been enacted in various formats at various levels of government, including regions in which Essex's communities are located, impacting Essex properties. The Company is working to comply with the stated intent of local, county, state and federal laws. In that regard, the Company has implemented a wide range of practices to protect and support its employees and residents. Such measures include:
•closing the Company's corporate offices and instituting “work from home” measures for corporate associates,associates;
•closing leasing offices to non-Essex personnel, reducing on-site staff so that hygiene and “social distancing” standards can be effectively managed and applied, and requiring face coverings to be worn,worn;
•transitioning most public interactions with leasing staff to on-line and telephonic communications, communications; 
•increasing cleaning practices for common areas and community amenities and temporarily closing common areas and community amenities or opening with limited hours, limited capacity or by reservation only, depending in part on jurisdictional requirements; and
•delaying the response to maintenance orders in certain circumstances in order to promote the protection of our employees and residents.

Due to the COVID-19 pandemic, some of the Company's residents, their health, their employment, and, thus, their ability to pay rent, have been and may continue to be impacted. To support residents, the Company has implemented the following steps, including, but not limited to:
•assembling a Resident Response Team to effectively and efficiently respond to resident needs and concerns with respect to the pandemic,pandemic;
•structuring payment plans for residents who are unable to pay their rent as a result of the outbreak and waiving late fees for those residents; and
•establishing the Essex Cares fund for the purpose of supporting the Company’s residents and communities that are experiencing financial hardships caused by the COVID-19 pandemic.

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

Primarily as a result of the impact of the COVID-19 pandemic, the Company's average financial occupancycash delinquencies as a percentage of scheduled rental income for the Company’s stabilized apartment communities or "Same-Property" (stabilized properties consolidated by the Company for the quarters ended June 30, 2020March 31, 2021 and 2019) portfolio decreased2020) increased from 96.6%0.4% for the three months ended June 30, 2019March 31, 2020 to 94.9%2.1% for the three months ended June 30, 2020. Furthermore, cash delinquencies as a percentage of scheduled rental income for the Company's Same-Property portfolio increased from 0.3% for the three months ended June 30, 2019 to 4.3% for the three months ended June 2020.March 31, 2021. The Company has executed some payment plans and will continue to work with residents to execute payment plans related to such cash delinquencies. As part of this process, the Company assessed the collectability reserve attributable to those deferred payments and the anticipated execution of payment plans in the future, which partially mitigated the delinquencies resulting in actual delinquencies as a percentage of scheduled rent for the Company's Same-Property portfolio of 3.3% for the three months ended June 30, 2020. As of June 30, 2020,March 31, 2021, the increase in delinquencies has not had a material adverse impact toon the Company's liquidity position. The Company's average financial occupancy for the Company’s Same-Property portfolio remained consistent at 96.7% for the three months ended March 31, 2021 and 2020.

The COVID-19 pandemic has not negatively impacted the Company's ability to access traditional funding sources on the same or reasonably similar terms as were available in recent periods prior to the pandemic, as demonstrated by the Company's financing activity during the sixthree months ended June 30, 2020March 31, 2021 discussed in the "Liquidity and Capital Resources" section below. The Company is not at material risk of not meeting the covenants in its credit agreements and is able to timely service its debt and other obligations.

Comparison of the Three Months Ended June 30, 2020March 31, 2021 to the Three Months Ended June 30, 2019March 31, 2020

The Company’s average financial occupancy for the Company’s Same-Property portfolio was 94.9% and 96.6%96.7% for the three months ended June 30, 2020March 31, 2021 and 2019, respectively.2020. Financial occupancy is defined as the percentage resulting from dividing actual rental income by total scheduled rental income. Actual rental income represents contractual rental income pursuant to leases without considering delinquency and concessions. Total scheduled rental income represents the value of all apartment homes, with occupied apartment homes valued at contractual rental rates pursuant to leases and vacant apartment homes valued at estimated market rents. The Company believes that financial occupancy is a meaningful measure of occupancy because it considers the value of each vacant apartment home at its estimated market rate.


32
Table of Contents
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 income, is not considered the best metric to quantify occupancy.

The regional breakdown of the Company’s Same-Property portfolio for financial occupancy for the three months ended June 30,March 31, 2021 and 2020 and 2019 is as follows:
 Three Months Ended March 31,
 20212020
Southern California96.7 %96.6 %
Northern California96.6 %96.9 %
Seattle Metro96.6 %96.8 %
 Three Months Ended June 30,
 2020 2019
Southern California94.5% 96.6%
Northern California95.0% 96.6%
Seattle Metro95.4% 96.4%

The following table provides a breakdown of revenues amounts, including revenues attributable to the Same-Properties:
 Number of ApartmentThree Months Ended March 31,DollarPercentage
Property Revenues ($ in thousands)Homes20212020ChangeChange
Same-Property Revenues:
Southern California20,800 $135,461 $143,774 $(8,313)(5.8)%
Northern California16,072 123,712 138,834 (15,122)(10.9)%
Seattle Metro10,218 58,633 63,044 (4,411)(7.0)%
Total Same-Property Revenues47,090 317,806 345,652 (27,846)(8.1)%
Non-Same Property Revenues 35,070 44,098 (9,028)(20.5)%
Total Property Revenues $352,876 $389,750 $(36,874)(9.5)%
  Number of Apartment Three Months Ended June 30, Dollar Percentage
Property Revenues ($ in thousands) Homes 2020 2019 Change Change
Same-Property Revenues:          
Southern California 21,354
 $136,231
 $144,440
 $(8,209) (5.7)%
Northern California 15,638
 127,326
 131,815
 (4,489) (3.4)%
Seattle Metro 10,112
 60,094
 60,237
 (143) (0.2)%
Total Same-Property Revenues 47,104
 323,651
 336,492
 (12,841) (3.8)%
Non-Same Property Revenues  
 44,498
 22,883
 21,615
 94.5 %
Total Property Revenues  
 $368,149
 $359,375
 $8,774
 2.4 %

Same-Property Revenues decreased by $12.8$27.8 million or 3.8%8.1% to $323.7$317.8 million in the secondfirst quarter of 20202021 from $336.5$345.7 million in the secondfirst quarter of 2019.2020. The decrease was primarily attributable to an increaseadditional $10.4 million of 3.0%cash concessions compared to the prior year period and a decrease of 3.3% in average rental rates from $2,368 per apartment home in the first quarter of 2020 to $2,289 per apartment home in the first quarter of 2021. Additionally, delinquencies as a percentage of scheduled rent increased from 0.3%0.4% in the second quarter of 2019 to 3.3% in the secondfirst quarter of 2020 and a decrease of 1.7% in financial occupancy from 96.6%to 2.1% in the secondfirst quarter of 2019 to 94.9% in the second quarter of 2020.2021.  

Non-Same Property Revenues increaseddecreased by $21.6$9.0 million or 94.5%20.5% to $44.5$35.1 million in the secondfirst quarter of 20202021 from $22.9$44.1 million in the secondfirst quarter of 2019.2020. The increasedecrease was primarily due to revenues generatedsales in 2020 and the sales of Hidden Valley, Axis 2300, and Park 20 in the first quarter of 2021.

Management and other fees from affiliates decreased by $0.4 million or 15.4% to $2.2 million in the first quarter of 2021 from $2.6 million in the first quarter of 2020. The decrease was primarily due to a decrease in asset management fees resulting from the consolidation of six communities that were consolidated as part of the Company's purchase of CPPIB's 45.0% co-investment interests in the first quarter of 2020, slightly offset by the sale of One South Marketand a decrease in the second quarter of 2020.revenues used to calculate management fees.

Management and other fees from affiliates remained relatively flat at $2.3 million in the second quarter of 2020 compared to the second quarter of 2019.
Property operating expenses, excluding real estate taxes increased $6.2$1.1 million or 10.5%1.7% to $65.1$65.2 million for the secondfirst quarter of 2021 compared to $64.1 million for the first quarter of 2020, compared to $58.9 million for the second quarter of 2019 primarily due to an increaseincreases of $3.0$1.3 million in utilities expenses and
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$0.2 million in maintenance and repairs expenses, an increaseoffset by a decrease of $2.1 million in utilities expenses, and an increase of $1.2$0.5 million in administrative expenses. The increases were primarily due to expenses generated from the six communities that were

consolidated as part of the Company's purchase of CPPIB's 45.0% co-investment interests in the first quarter of 2020. Same-Property operating expenses, excluding real estate taxes, increased by $2.1$1.1 million or 3.7%1.9% to $58.3$58.9 million in the secondfirst quarter of 2021 compared to $57.8 million in the first quarter of 2020, compared to $56.2 million in the second quarter of 2019, primarily due to an increaseincreases of $1.6$1.2 million in utilities expenses, $0.5 million in insurance and other expenses, and $0.3 million in maintenance and repairs expenses and an increase of $1.0 million in utilities expensesexpenses. These increases were offset by a decrease of $0.4$1.0 million in administrative expenses.

Real estate taxes increased $8.7$2.3 million or 24.0%5.3% to $45.0$45.3 million for the secondfirst quarter of 2021 compared to $43.0 million for the first quarter of 2020, compared to $36.3 million for the second quarter of 2019, primarily due to an increase in assessed valuations and tax rates. Same-Property real estate taxes increased by $1.9 million or 5.1% to $39.0 million in the additionsfirst quarter of six communities that were consolidated2021 compared to $37.1 million in the first quarter of 2020, as part of the Company's purchase of CPPIB's 45.0% co-investment interests, and due to increase in property valuations in Seattle Metro region. Same-Property real estate taxes increased by $3.3 million or 9.6% to $37.6 million in the second quarter of 2020 compared to $34.3 million in the second quarter of 2019 primarily due to an increase in propertyassessed valuations and tax rates in the Seattle Metro region.rates.

Corporate-level property management expenses increased by $0.1 million or 1.2%1.1% to $8.6$8.9 million for the first quarter of 2021 compared to $8.8 million for the first quarter of 2020.

Gain on sale of real estate and land of $100.1 million in the secondfirst quarter of 2020 compared2021 was attributable to $8.5 million in the second quartersale of 2019, primarily due to an increase in corporate-level property managementHidden Valley, Axis 2300, and staffing costs supporting thePark 20 apartment home communities.

Depreciation and amortization expense increaseddecreased by $14.1$3.0 million or 11.8%2.3% to $133.6$128.6 million for the secondfirst quarter of 20202021 compared to $119.5$131.6 million for the second quarter of 2019, primarily due to the additions of six communities that were consolidated in the first quarter of 2020, as partprimarily due to decrease in amortization expense resulting from certain lease intangibles becoming fully amortized during 2020 and the sale of the Company's purchase of CPPIB's 45.0% co-investment interests.Hidden Valley, Axis 2300, and Park 20 apartment home communities.

Interest expense increaseddecreased by $0.3$3.5 million or 0.6%6.4% to $54.4$51.6 million for the secondfirst quarter of 2021 compared to $55.1 million for the first quarter of 2020, compared to $54.1 million for the second quarter of 2019, primarily due to an increasea decrease in average outstanding debt primarily as a result of debt that was paid off or matured, regular principal amortization during and after the first quarter of 2020, and lower average interest rates, which resulted in a decrease in interest expense of $13.2 million for the first quarter of 2020. These decreases to interest expense were partially offset by the issuance of $450.0 million of senior unsecured notes due March 1, 2028 in February 2021, $650 million of senior unsecured notes due March 15, 2032 in February and June 2020, and $600 million of senior unsecured notes due January 15, 2031 and September 1, 2050 in August 2020, which resulted in an increase of $9.2$7.0 million interest expense for the secondfirst quarter of 2020.2021. Additionally, there was a $2.2$2.7 million decrease in capitalized interest in the secondfirst quarter of 2020,2021, due to a decrease in development activity as compared to the same period in 2019. These increases to interest expense were partially offset by debt that was paid off or matured, regular principal amortization during and after the second quarter of 2019, and lower average interest rates, which resulted in a decrease in interest expense of $11.1 million for the second quarter of 2020.

Total return swap income of $2.8 million in the secondfirst quarter of 20202021 consists of monthly settlements related to the Company's total return swap contracts that were entered into during 2015 in connection with issuing fixed rate tax-exempt mortgage notes.an aggregate notional amount of $224.9 million.

Interest and other income increased by $3.1$19.6 million or 37.3%376.9% to $11.4$14.4 million in income for the secondfirst quarter of 2021 compared to $5.2 million in expense for the first quarter of 2020, compared to $8.3 million for the second quarter of 2019, primarily due to an increase fromincreases of $15.0 million in unrealized gains on marketable securities, $2.6 million in gain on sale of $7.7 million offset by a decrease of $4.0marketable securities, and $1.9 million in marketable securities and other income.

Equity income from co-investments increaseddecreased by $0.3$4.3 million or 1.8% to $17.3 million for the second quarter of 2020 compared20.2% to $17.0 million for the secondfirst quarter of 2019,2021 compared to $21.3 million for the first quarter of 2020, primarily due to a net unrealized gaindecreases of $4.7$6.5 million in co-investment promote income and $4.4 million in equity income from an unconsolidated co-investment, andco-investments. The decreases were partially offset by an increase of $1.3$4.8 million in income from preferred equity investments including income from early redemptions. Theredemptions, and an increase was partially offset by a $4.9of $1.7 million decrease in equity income from co-investments and a decrease of $0.9 million in gain on sale of co-investment communities.non-core co-investments.

Deferred tax expense on unrealized gain on unconsolidated co-investmentof $1.6$0.5 million for the secondfirst quarter of 20202021 resulted from a net unrealized gain of $4.7on $1.6 million from an unconsolidated co-investment during the second quarter of 2020.co-investments.

Loss on early retirement of debt, net of $5.0$2.5 million for the secondfirst quarter of 20202021 was primarily due to the early repayment of $197.4 million of secured mortgage notes payable during the second quarter of 2020.

Comparison of the Six Months Ended June 30, 2020 to the Six Months Ended June 30, 2019

Our average financial occupancy for the Company's stabilized apartment communities or "Same-Property" (stabilized properties consolidated by the Company for the six months ended June 30, 2020 and 2019) was 95.8% and 96.8% for the six months ended June 30, 2020 and 2019, respectively.

The regional breakdown of the Company’s Same-Property portfolio for financial occupancy for the six months ended June 30, 2020 and 2019 is as follows:


 Six Months Ended June 30,
 2020 2019
Southern California95.6% 96.7%
Northern California96.0% 96.8%
Seattle Metro96.1% 96.7%

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

  Number of Apartment Six Months Ended June 30, Dollar Percentage
Property Revenues ($ in thousands) Homes 2020 2019 Change Change
Same-Property Revenues:          
Southern California 21,354
 $283,752
 $288,024
 $(4,272) (1.5)%
Northern California 15,638
 262,011
 262,473
 (462) (0.2)%
Seattle Metro 10,112
 122,524
 119,890
 2,634
 2.2 %
Total Same-Property Revenues 47,104
 668,287
 670,387
 (2,100) (0.3)%
Non-Same Property Revenues  
 89,612
 42,876
 46,736
 109.0 %
Total Property Revenues  
 $757,899
 $713,263
 $44,636
 6.3 %

Same-Property Revenues decreased by $2.1 million or 0.3% to $668.3 million in the six months ended June 30, 2020 from $670.4 million in the six months ended June 30, 2019. The decrease was primarily attributable to an increase of delinquencies for the six months ended June 30, 2019 as compared to the six months ended June 30, 2020 and a decrease of 1.0% in financial occupancy from 96.8% in the six months ended June 30, 2019 to 95.8% in the six months ended June 30, 2020

Non-Same Property Revenues increased by $46.7 million or 109.0% to $89.6 million in the six months ended June 30, 2020 from $42.9 million in the six months ended June 30, 2019. The increase was primarily due to revenues generated from the six communities that were consolidated as parttermination of the Company's purchase of CPPIB's 45.0% co-investment interestsfive interest rate swap contracts in conjunction with the first quarter of 2020, slightly offset by the sale of One South Market in the second quarter of 2020.

Management and other fees from affiliates increased by $0.4 million or 8.7% to $5.0 million in the six months ended June 30, 2020 compared to $4.6 million in the six months ended June 30, 2019. The increase was primarily due to the addition of The Courtyards at 65th Street, 777 Hamilton, and Velo and Ray communities to the Company's joint venture portfolio in 2019, offset slightly by the disposition of Mosso joint venture community in the fourth quarter of 2019, and by the consolidation of six communities as partpartial repayment of the Company's purchase of CPPIB's 45.0% co-investment interests.unsecured term debt. 
Property operating expenses, excluding real estate taxes increased $11.8 million or 10.0% to $129.3 million for the six months ended June 30, 2020 compared to $117.5 million for the six months ended June 30, 2019 primarily due to an increase of $5.2 million in maintenance and repairs expenses, an increase of $3.7 million in utilities expenses, and an increase of $2.8 million in administrative expenses. The increases were primarily due to expenses generated from the six communities that were consolidated as part of the Company's purchase of CPPIB's 45.0% co-investment interests in the first quarter of 2020. Same-Property operating expenses, excluding real estate taxes, increased by $3.5 million or 3.1% to $115.8 million in the six months ended June 30, 2020 compared to $112.3 million in the six months ended June 30, 2019, primarily due to an increase of $2.3 million in maintenance and repairs expenses and an increase of $1.2 million in utilities expenses.

Real estate taxes increased $12.3 million or 16.2% to $88.0 million for the six months ended June 30, 2020, compared to $75.7 million for the six months ended June 30, 2019, primarily due to the additions of six communities that were consolidated in the first quarter of 2020 as part of the Company's purchase of CPPIB's 45.0% co-investment interests. Same-Property real estate taxes increased by 4.5% or $3.2 million to $74.3 million in the six months ended June 30, 2020 from $71.1 million in the six months ended June 30, 2019, primarily due to an increase in property valuations and tax rates in Seattle Metro region.
Corporate-level property management expenses increased $0.5 million or 3.0% to $17.4 million in the six months ended June 30, 2020 compared to $16.9 million in the six months ended June 30, 2019, primarily due to an increase in corporate-level property management and staffing costs supporting the communities.


Depreciation and amortization expense increased by $25.2 million or 10.5% to $265.2 million for the six months ended June 30, 2020 compared to $240.0 million for the six months ended June 30, 2019, primarily due to the additions of six communities that were consolidated in the first quarter of 2020 as part of the Company's purchase of CPPIB's 45.0% co-investment interests.

Interest expense increased by $1.8 million or 1.7% to $109.6 million for the six months ended June 30, 2020 compared to $107.8 million for the six months ended June 30, 2019, primarily due to an increase in average outstanding debt primarily as a result of the issuance of $500.0 million of senior unsecured notes due March 1, 2029 in February and March 2019, $550.0 million of senior unsecured notes due January 15, 2030 in August and October 2019, and $650 million of senior unsecured notes due March 15, 2032 in February and June 2020, which resulted in an increase of $20.2 million interest expense for the second quarter of 2020. Additionally, there was a $3.3 million decrease in capitalized interest in the six months ended June 30, 2020, due to a decrease in development activity as compared to the same period in 2019. These increases to interest expense were partially offset by debt that was paid off or matured, regular principal amortization during and after the second quarter of 2019, and lower average interest rates, which resulted in a decrease in interest expense of $21.7 million for the six months ended June 30, 2020.

Total return swap income of $4.8 million for the six months ended June 30, 2020 consists of monthly settlements related to the Company's total return swap contracts that were entered into during 2015 in connection with issuing fixed rate tax-exempt mortgage notes.

Interest and other income decreased by $14.4 million or 69.9% to $6.2 million for the six months ended June 30, 2020 compared to $20.6 million for the six months ended June 30, 2019, primarily due to a decrease from unrealized gains on marketable securities of $8.2 million and a decrease of $5.5 million in marketable securities and other income.

Equity income from co-investments increased by $5.4 million or 16.3% to $38.6 million for the six months ended June 30, 2020 compared to $33.2 million for the six months ended June 30, 2019, primarily due to an increase of $5.6 million in promote income, an increase of $4.3 million primarily attributable to an unrealized gain of $4.7 million from an unconsolidated co-investment, and an increase of $3.6 million in income from preferred equity investments. The increase was partially offset by a $6.8 million decrease in equity income from co-investments and a $1.5 million decrease in gain on sale of co-investment communities and income from early redemption of preferred equity investments.

Deferred tax expense on unrealized gain on unconsolidated co-investment of $1.6 million for the six months ended June 30, 2020 resulted from a net unrealized gain of $4.7 million from an unconsolidated co-investment in the second quarter of 2020.

Loss on early retirement of debt, net of $4.7 million for the six months ended June 30, 2020 was primarily due to the early repayment of $297.7 million of secured mortgage notes payable in the first and second quarters of 2020.

Gain on remeasurement of co-investment of $234.7 million for the six months ended June 30, 2020 resulted from the Company's purchase of CPPIB's 45.0% co-investment interests.

Liquidity and Capital Resources

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

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As of June 30, 2020,March 31, 2021, the Company had $246.2$103.4 million of unrestricted cash and cash equivalents and $154.4$165.3 million in marketable securities, all of which $76.9 million were equity securities or available for sale debt securities. The Company believes that cash flows generated by its operations, existing cash and cash equivalents, marketable securities balances and availability under existing lines of credit are sufficient to meet all of its reasonably anticipated cash needs during the next twelve months. Additionally, the capital markets continue to be available and the Company is able to generate cash from the disposition of real estate assets to finance additional cash flow needs, including continued development and select acquisitions. DueIn the event that conditions become further exacerbated due to the COVID-19 pandemic and related economic disruptions, the Company anticipates that it may be required to augment decreased cash flows from operations withfurther utilize other resources such as its cash reserves, lines of credit, or decreased investment in redevelopment activities to supplement operating cash flows. The Company is carefully monitoring and it expects to carefully monitor and managemanaging 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 the Company's plans for acquisitions, dispositions, development and redevelopment activities.


As of June 30, 2020, Fitch Ratings,March 31, 2021, Moody’s Investor Service, and Standard and Poor's credit agencies rated the Company and the Operating Partnership, BBB+/Stable, Baa1/Stable, and BBB+/Stable, respectively.

As of June 30, 2020,March 31, 2021, the Company had two unsecured lines of credit aggregating $1.24 billion. As of June 30, 2020,March 31, 2021, there was no amount outstanding on the Company's $1.2 billion unsecured line of credit. The underlying interest rate is based on a tiered rate structure tied to the Company's credit ratings and was LIBOR plus 0.825% as of June 30, 2020.March 31, 2021. This facility is scheduled to mature in December 2023, with one 18-month extension, exercisable at the Company's option. As of June 30, 2020,March 31, 2021, there was no amount outstanding on the Company's $35.0 million working capital unsecured line of credit. The underlying interest rate on the $35.0 million line is based on a tiered rate structure tied to the Company's credit ratings and was LIBOR plus 0.825% as of June 30, 2020.March 31, 2021. This facility is scheduled to mature in February 2021.2023.

In April 2020,March 2021, the Company obtained a $200.0 million unsecured term loan with a one-year maturity and two 12-month extension options, exercisable at the Company’s option. The unsecured term loan bears a variable interest rate of LIBOR plus 1.20% and the proceeds were used to repay all remaining consolidated debt maturing in 2020.

In February 2020, the CompanyOperating Partnership issued $500.0$450.0 million of senior unsecured notes due on March 15, 2032,1, 2028 with a coupon rate of 2.650%1.700% per annum (the "2032"2028 Notes"), which are payable on March 151 and September 151 of each year, beginning on September 15, 2020.1, 2021. The 20322028 Notes were offered to investors at a price of 99.628%99.423% of par value. The 20322028 Notes are general unsecured senior obligations of the Operating Partnership, rank equally in right of payment with all other senior unsecured indebtedness of the Operating Partnership and are unconditionally guaranteed by Essex. The Company used the net proceeds of this offering to repay indebtedness under itsupcoming debt maturities, including all or a portion of certain unsecured lines of credit, which had been used to fund the buyout of CPPIB's 45.0% joint venture interests, as well as repay $100.3 million of secured debt during the quarter that ended March 31, 2020.

In June 2020, the Company issued an additional $150.0 million of the 2032 Notes at a price of 105.660% of par value, plus accrued interest from February 2020 up to, but not including, the date of delivery of the Notes, with an effective yield of 2.093%. These additional notes have substantially identical terms as the 2032 Notes issued in February 2020. The proceeds were used to repay indebtedness under the Company's unsecured credit facilitiesterm loans, and for other general corporate and working capital purposes.

In September 2018, the Company entered into an equity distribution agreement pursuant to which the Company may offer and sell shares of its common stock having an aggregate gross sales price of up to $900.0 million (the "2018 ATM Program"). In connection with the 2018 ATM Program, the Company may also enter into related forward sale agreements whereby, at the Company’s discretion, it may sell shares of its common stock under the 2018 ATM Program under forward sales agreements. The use of a forward salessale agreement would allow the Company to lock in a share price on the sale of shares of its common stock at the time the agreement is executed but defer receiving the proceeds from the sale of shares until a later date. During the sixthree months ended June 30, 2020,March 31, 2021, the Company did not issue any shares of common stock through the 2018 ATM Program. As of June 30, 2020,March 31, 2021, there are no outstanding forward purchase agreements, and $826.6 million of shares remain available to be sold under this program.

In December 2015, the Company’s boardBoard of directorsDirectors 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 boardBoard of directorsDirectors 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 boardBoard of directorsDirectors approved the replenishment of the stock repurchase plan such that, as of such date, the Company had $250.0 million of purchase authority remaining under the replenished plan. During the sixthree months ended June 30, 2020,March 31, 2021, the Company repurchased and retired 864,24940,000 shares of its common stock totaling $196.4$9.2 million, including commissions, at an average price of $227.25$229.30 per share. As of June 30, 2020,March 31, 2021, the Company had $229.9$214.5 million of purchase authority remaining under the stock repurchase plan.

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

Development and Predevelopment Pipeline

The Company defines development projects as new communities that are being constructed or are newly constructed and are in a phase of lease-up and have not yet reached stabilized operations. As of June 30, 2020,March 31, 2021, the Company’s development pipeline
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was comprised of fourthree consolidated projects under development, threetwo unconsolidated joint venture projects under development and various consolidated predevelopment projects, aggregating 2,0251,316 apartment homes, with total incurred costs of $1.0

$0.6 billion, and estimated remaining project costs of approximately $221.0$136.0 million, $162.0$90.0 million of which represents the Company's share of estimated remaining costs, for total estimated project costs of $1.2$0.7 billion.

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 June 30, 2020, the Company had ownership interests in four major redevelopment communities aggregating 1,327 apartment homes with estimated redevelopment costs of $132.7 million, of which approximately $9.9 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 andswaps, interest rate caps, and total return swap contracts to manage certain interest rate risks. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves. The fair values of interest rate swaps and total return swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements.

Alternative Capital Sources

The Company utilizes co-investments as an alternative source of capital for acquisitions of both operating and development communities. As of June 30, 2020,March 31, 2021, the Company had an interest in 1,070533 apartment homes in communities actively under development with joint ventures for total estimated costs of $0.7$0.3 billion. Total estimated remaining costs are approximately $120.0$94.0 million, of which the Company estimates its remaining investment in these development joint ventures will be approximately $60.5$47.8 million. In addition, the Company had an interest in 8,6529,189 apartment homes of operating communities with joint ventures for a total book value of $368.3$501.5 million as of June 30, 2020.March 31, 2021.

Off-Balance Sheet Arrangements

The Company has various unconsolidated interests in certain joint ventures. The Company does not believe that these unconsolidated investments have a materially different impact on its liquidity, cash flows, capital resources, credit or market risk than its consolidated operations. See Note 4, Co-investments, in the Notes to Condensed Consolidated Financial Statements, for carrying values and combined summarized financial information of these unconsolidated investments.
 
Critical Accounting Policies and Estimates
 
The preparation of condensed consolidated financial statements, in accordance with U.S. GAAP, requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. The Company defines critical accounting policies as those accounting policies that require the Company’s management to exercise their most difficult, subjective and complex judgments. The Company’s critical accounting policies and estimates relate principally to the following key areas: (i) accounting for the acquisition of investments in real estate (specifically, the allocation between land and buildings); and (ii) evaluation of events and changes in circumstances indicating whether the Company’s rental properties may be impaired. The Company bases its estimates on historical experience, current market conditions, and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from those estimates made by management.


The Company’s critical accounting policies and estimates have not changed materially from the information reported in Note 2, Summary of Critical and Significant Accounting Policies, in the Company’s annual report on Form 10-K for the year ended December 31, 2019.2020.
  


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

While the Company's management believes the assumptions underlying its forward-looking statements are reasonable, such forward-looking statements involve known and unknown risks, uncertainties and other factors, many of which are beyond the Company’s control, which could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The Company cannot assure the future results or outcome of the matters described in these statements; rather, these statements merely reflect the Company’s current expectations of the approximate outcomes of the matters discussed. Factors that might cause the Company’s actual results, performance or achievements to differ materially from those expressed or implied by these forward-looking statements include, but are not limited to, the following: the continued impact of the COVID-19 pandemic, which remains inherently uncertain as the situation is unprecedentedto duration and continuously evolving,severity, and any additional governmental measures taken to limit its spread and other potential future outbreaks of infectious diseases or other health concerns and measures takencould continue to limit their impact, could adversely affect the Company’s business and its tenants, and cause a significant downturn in general economic conditions, the real estate industry, and the markets in which the Company's communities are located; the Company may fail to achieve its business objectives; the actual completion of development and redevelopment projects may be subject to delays; the stabilization dates of such projects may be delayed; the Company may abandon or defer development or redevelopment projects for a number of reasons, including changes in local market conditions which make development less desirable, increases in costs of development, increases in the cost of capital or lack of capital availability, resulting in losses; the total projected costs of current development and redevelopment projects may exceed expectations; such development and redevelopment projects may not be completed; development and redevelopment projects and acquisitions may fail to meet expectations; estimates of future income from an acquired property may prove to be inaccurate; occupancy rates and rental demand may be adversely affected by competition and local economic and market conditions; there may be increased interest rates and operating costs; the Company may be unsuccessful in the management of its relationships with its co-investment partners; future cash flows may be inadequate to meet operating requirements and/or may be insufficient to provide for dividend payments in accordance with REIT requirements; changes in laws or regulations; the terms of any refinancing may not be as favorable as the terms of existing indebtedness; unexpected difficulties in leasing of development projects; volatility in financial and securities markets; the Company’s failure to successfully operate acquired properties; unforeseen consequences from cyber-intrusion; the Company’s inability to maintain our investment grade credit rating with the rating agencies; government approvals, actions and initiatives, including the need for compliance with environmental requirements; and those further risks, special considerations, and other factors referred to in this quarterly report on Form 10-Q, in the Company's annual report on Form 10-K for the year ended December 31, 2019,2020, and those risk factors and special considerations set forth in the Company's other filings with the Securities and Exchange Commission (the "SEC") which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking

statements. Additionally, the risks, uncertainties and other factors set forth above or otherwise referred to in the reports that the Company has filed with the SEC may be further amplified by the global impact of the COVID-19 pandemic. All forward-looking statements are made as of the date hereof, the Company assumes no obligation to update or supplement this information for any reason, and therefore, they may not represent the Company’s estimates and assumptions after the date of this report.

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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 "Core FFO") as supplemental operating performance measures. FFO and Core FFO are not used by the Company as, nor should they be considered to be, alternatives to net income computed under U.S. GAAP as an indicator of the Company’s operating performance or as alternatives to cash from operating activities computed under U.S. GAAP as an indicator of the Company’s ability to fund its cash needs.

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

The Company considers FFO and Core FFO to be useful financial performance measurements of an equity REIT because, together with net income and cash flows, FFO and Core FFO provide investors with additional bases to evaluate operating performance and ability of a REIT to incur and service debt and to fund acquisitions and other capital expenditures and to pay dividends. By excluding gains or losses related to sales of depreciated operating properties and excluding real estate depreciation (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO can help investors compare the operating performance of a real estate company between periods or as compared to different companies. By further adjusting for items that are not considered part of the Company’s core business operations, Core FFO allows investors to compare the core operating performance of the Company to its performance in prior reporting periods and to the operating performance of other real estate companies without the effect of items that by their nature are not comparable from period to period and tend to obscure the Company’s actual operating results. The Company believes that its condensed consolidated financial statements, prepared in accordance with U.S. GAAP, provide the most meaningful picture of its financial condition and its operating performance.
 
In calculating FFO, the Company follows the definition for this measure published by the National Association of Real Estate Investment Trusts ("NAREIT"), which is the leading REIT industry association. The Company believes that, under the NAREIT FFO definition, the two most significant adjustments made to net income are (i) the exclusion of historical cost depreciation and (ii) the exclusion of gains and losses from the sale of previously depreciated properties. The Company agrees that these two NAREIT adjustments are useful to investors for the following reasons:
 
(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 is a reconciliation of net income available to common stockholders to FFO and Core FFO for the three and six months ended June 30,March 31, 2021 and 2020 and 2019 (in thousands, except share and per share amounts):


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EssexEssex Property Trust, Inc.
 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
Net income available to common stockholders$84,458
 $92,275
 $399,464
 $211,133
Adjustments: 
  
  
  
Depreciation and amortization133,609
 119,465
 265,168
 240,033
Gains not included in FFO attributable to common stockholders and unitholders(16,597) (870) (251,291) (32,405)
Depreciation and amortization from unconsolidated co-investments12,764
 14,631
 25,308
 29,821
Noncontrolling interest related to Operating Partnership units2,964
 3,228
 13,950
 7,399
Depreciation attributable to third party ownership and other(139) (236) (273) (466)
Funds from operations attributable to common stockholders and unitholders$217,059
 $228,493
 $452,326
 $455,515
Funds from operations attributable to common stockholders and unitholders per share - diluted$3.21
 $3.36
 $6.65
 $6.69
Non-core items: 
  
  
  
Expensed acquisition and investment related costs15
 24
 102
 56
Deferred tax expense on unrealized gain on unconsolidated co-investment (1)
1,636
 —
 1,636
 —
Gain on sale of marketable securities(46) (556) (33) (498)
Unrealized (gains) losses on marketable securities(7,623) 56
 1,073
 (4,454)
Provision for credit losses147
 —
 97
 —
Equity income from non-core co-investment (2)
(4,696) —
 (4,586) (314)
Interest rate hedge ineffectiveness (3)
—
 —
 —
 181
Loss (gain) on early retirement of debt, net5,027
 (332) 4,706
 (1,668)
Gain on early retirement of debt from unconsolidated co-investment(38) —
 (38) —
Co-investment promote income—
 —
 (6,455) (809)
Income from early redemption of preferred equity investments—
 (732) (210) (832)
General and administrative and other, net2,312
 —
 3,132
 —
Insurance reimbursements, legal settlements, and other, net(106) (38) (63) (248)
Core Funds from Operations attributable to common stockholders and unitholders$213,687
 $226,915

$451,687

$446,929
Core Funds from Operations attributable to common stockholders and unitholders per share-diluted$3.16
 $3.33
 $6.64
 $6.57
Weighted average number shares outstanding, diluted (4)
67,682,034
 68,079,855
 68,017,414
 68,063,937

Three Months Ended March 31,
20212020
Net income available to common stockholders$168,444 $315,006 
Adjustments:  
Depreciation and amortization128,587 131,559 
Gains not included in FFO attributable to common stockholders and unitholders(100,096)(234,694)
Depreciation and amortization from unconsolidated co-investments14,729 12,544 
Noncontrolling interest related to Operating Partnership units5,947 10,986 
Depreciation attributable to third party ownership and other(129)(134)
Funds from operations attributable to common stockholders and unitholders$217,482 $235,267 
Funds from operations attributable to common stockholders and unitholders per share - diluted$3.23 $3.44 
Non-core items:  
Expensed acquisition and investment related costs15 87 
Deferred tax expense on unrealized gain on unconsolidated co-investment (1)
508 — 
(Gain) Loss on sale of marketable securities(2,611)13 
Unrealized (gains) losses on marketable securities(6,276)8,696 
Provision for credit losses38 (50)
Equity (income) loss from non-core co-investment (2)
(1,627)110 
Loss (gain) on early retirement of debt, net2,517 (321)
Loss on early retirement of debt from unconsolidated co-investment3 — 
Co-investment promote income— (6,455)
Income from early redemption of preferred equity investments(3,513)(210)
General and administrative and other, net257 820 
Insurance reimbursements, legal settlements, and other, net(182)43 
Core Funds from Operations attributable to common stockholders and unitholders$206,611 $238,000 
Core Funds from Operations attributable to common stockholders and unitholders per share-diluted$3.07 $3.48 
Weighted average number shares outstanding, diluted (3)
67,272,839 68,359,698 

(1) ARepresents deferred tax expense was recorded during the second quarter of 2020 related to the $4.7 million net unrealized gaingains on the Real Estate Technology Ventures, L.P. co-investment.technology co-investments.
(2) Represents the Company's share of co-investment income from Real Estate Technology Ventures, L.P. Income for the second quarter of 2020 includes a net unrealized gain of $4.7 million.technology co-investments.
(3) On January 1, 2019, the Company adopted ASU No. 2017-12 "Derivatives and Hedging - Targeted Improvements to Accounting for Hedging Activities," which resulted in a cumulative effect adjustment of approximately $181,000 from interest expense to accumulated other comprehensive income. As a result of the adoption of this standard, the Company recognizes
qualifying hedge ineffectiveness through accumulated other comprehensive income as opposed to current earnings.
(4)(2) Assumes conversion of all outstanding Operating Partnership limited partnership units ("OP Units") into shares of the Company's common stock and excludes all DownREIT units for which the Operating Partnership has the ability and intention to redeem the units for cash and does not consider them to be common stock equivalents.


Net Operating Income

Net operating income ("NOI") and Same-Property NOI are considered by management to be important supplemental performance measures to earnings from operations included in the Company’s condensed consolidated statements of income and comprehensive income. The presentation of Same-Property NOI assists with the presentation of the Company’s operations prior to the allocation of depreciation and any corporate-level or financing-related costs. NOI reflects the operating performance of a community and allows for an easy comparison of the operating performance of individual communities or groups of communities. In addition, because prospective buyers of real estate have different financing and overhead structures, with varying marginal impacts to overhead by acquiring real estate, NOI is considered by many in the real estate industry to be a useful measure for determining the value of a real estate asset or group of assets. The Company defines Same-Property NOI as Same-Property revenues less Same-Property operating expenses, including property taxes. Please see the reconciliation of earnings from operations to NOI and Same-Property NOI, which in the table below is the NOI for stabilized properties consolidated by the Company for the periods presented ($ in thousands):

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Three Months Ended June 30, Six Months Ended June 30, Three Months Ended March 31,
2020 2019 2020 2019 20212020
Earnings from operations$119,736
 $124,560
 $250,573
 $240,255
Earnings from operations$197,381 $130,837 
Adjustments: 
  
  
  
Adjustments:  
Corporate-level property management expenses8,646
 8,469
 17,405
 16,898
Corporate-level property management expenses8,947 8,759 
Depreciation and amortization133,609
 119,465
 265,168
 240,033
Depreciation and amortization128,587 131,559 
Management and other fees from affiliates(2,348) (2,260) (4,965) (4,595)Management and other fees from affiliates(2,249)(2,617)
General and administrative14,952
 13,927
 28,934
 27,386
General and administrative9,812 13,982 
Expensed acquisition and investment related costs15
 24
 102
 56
Expensed acquisition and investment related costs15 87 
Gain on sale of real estate and land(16,597) —
 (16,597) —
Gain on sale of real estate and land(100,096)— 
NOI258,013

264,185

540,620

520,033
NOI242,397 282,607 
Less: Non-Same Property NOI(30,333) (18,217) (62,445) (33,088)Less: Non-Same Property NOI(22,416)(31,834)
Same-Property NOI$227,680
 $245,968
 $478,175
 $486,945
Same-Property NOI$219,981 $250,773 

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 June 30, 2020, theThe Company has entered intopreviously had five interest rate swap contracts to mitigateswaps that were designated as cash flow hedges of interest rate risk and were terminated as of March 31, 2021 in conjunction with the risk of changes in the interest-related cash outflows on $175.0 millionpartial repayment of the Company's unsecured term debt. As of June 30, 2020,March 31, 2021, the Company also had $255.1$224.9 million of secured variable rate indebtedness. All of the Company's interest rate swaps are designated as cash flow hedges as of June 30, 2020. 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 June 30, 2020. 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 June 30, 2020.
 
Notional
Amount
 
Maturity
Date Range
 
Carrying and
Estimated
Fair Value
 Estimated Carrying Value
    +50 -50
($ in thousands)   Basis Points Basis Points
Cash flow hedges:       
  
Interest rate swaps$175,000
 2022 $(3,434) $(2,038) $(4,869)
Total cash flow hedges$175,000
 2022 $(3,434) $(2,038) $(4,869)


Additionally, the Company has entered into four total return swap contracts, with an aggregate notional amount of $255.1$224.9 million that effectively convert $255.1$224.9 million of fixed mortgage notes payable to a floating interest rate based on the SIFMA plus a spread and have a carrying value of zero at June 30, 2020.March 31, 2021. The Company is exposed to insignificant interest rate risk on these swaps as the related mortgages are callable, at par, by the Company, co-terminus with the termination of any related swap. These derivatives do not qualify for hedge accounting.

Interest Rate Sensitive Liabilities

The Company is exposed to interest rate changes primarily as a result of its lines of credit and long-term debt used to maintain liquidity and fund capital expenditures and expansion of the Company's real estate investment portfolio and operations. The Company’s interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows and to lower its overall borrowing costs. To achieve its objectives, the Company borrows primarily at fixed rates and may enter into derivative financial instruments such as interest rate swaps, caps, and treasury locks in order to mitigate its interest rate risk on a related financial instrument. The Company does not enter into derivative or interest rate transactions for speculative purposes.

The Company’s interest rate risk is monitored using a variety of techniques. The table below presents the principal amounts and weighted average interest rates by year of expected maturity to evaluate the expected cash flows.
 
For the Years Ended2020 2021 2022 2023 2024 Thereafter Total Fair valueFor the Years Ended20212022202320242025ThereafterTotalFair value
($ in thousands, except for interest rates)($ in thousands, except for interest rates)          ($ in thousands, except for interest rates)
Fixed rate debt$1,650
 530,940
 342,408
 602,093
 402,177
 3,666,884
 $5,546,152
 $6,006,010
Fixed rate debt$52,103 42,408 602,093 402,177 632,035 4,084,849 $5,815,665 $6,063,439 
Average interest rate3.9% 4.3% 3.7% 3.7% 4.0% 3.5% 3.6%  
Average interest rate4.4 %3.7 %3.7 %4.0 %3.5 %3.1 %3.5 % 
Variable rate debt (1)
$333

713

350,780
 200,852
 932
 251,499

$805,109
 $799,808
Variable rate debt (1)
$541 100,780 852 932 1,019 220,780 $324,904 $322,154 
Average interest rate1.4% 1.4% 1.9% 1.6% 1.4% 1.3% 1.6%  
Average interest rate1.0 %1.2 %1.0 %1.0 %1.0 %0.9 %1.0 % 
 
(1) $175.0 million is subject to interest rate protection agreements ($255.1$224.9 million is subject to total return swaps).swaps.

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The table incorporates only those exposures that exist as of June 30, 2020.March 31, 2021. It does not consider those exposures or positions that could arise after that date. As a result, the Company's ultimate realized gain or loss, with respect to interest rate fluctuations and hedging strategies would depend on the exposures that arise prior to settlement.

Item 4: Controls and Procedures

Essex Property Trust, Inc.

As of June 30, 2020,March 31, 2021, Essex carried out an evaluation, under the supervision and with the participation of management, including Essex’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Essex's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based upon that evaluation, Essex’s Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2020,March 31, 2021, Essex's disclosure controls and procedures were effective to ensure that the information required to be disclosed by Essex in the reports that Essex files or submits under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that such disclosure controls and procedures were also effective to ensure that information required to be disclosed in the reports that Essex files or submits under the Exchange Act is accumulated and communicated to Essex’s management, including Essex’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

There were no changes in Essex's internal control over financial reporting, that occurred during the quarter ended June 30, 2020,March 31, 2021, that have materially affected, or are reasonably likely to materially affect, Essex’s internal control over financial reporting.


Essex Portfolio, L.P.

As of June 30, 2020,March 31, 2021, the Operating Partnership carried out an evaluation, under the supervision and with the participation of management, including Essex's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Operating Partnership's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2020,March 31, 2021, the Operating Partnership's disclosure controls and procedures were effective to ensure that the information required to be disclosed by the Operating Partnership in the reports that the Operating Partnership files or submits under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that such disclosure controls and procedures were also effective to ensure that information required to be disclosed in the reports that the Operating Partnership files or submits under the Exchange Act is accumulated and communicated to the Operating Partnership’s management, including Essex's Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

There were no changes in the Operating Partnership's internal control over financial reporting, that occurred during the quarter ended June 30, 2020,March 31, 2021, that have materially affected, or are reasonably likely to materially affect, the Operating Partnership’s internal control over financial reporting.
 
Part II -- Other Information

Item 1: Legal Proceedings

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

Item 1A: Risk Factors

In addition to the other information set forth in this quarterly report on Form 10-Q, you should carefully consider the factors discussed in "Part I. Item 1A. Risk Factors" in the Company's annual report on Form 10-K for the year ended December 31, 2019,2020, which could materially affect the Company's financial condition, results of operations or cash flows. Except as disclosed in "Part II. Item 1A. Risk Factors" in the Company's quarterly report on Form 10-Q for the quarter ended March 31, 2020 as filed with the SEC on May 7, 2020 or as set forth below, thereThere 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, 2019,2020, as filed with the SEC and available at www.sec.gov. The risks described in the Company's annual report on Form 10-K and subsequent quarterly reports on Form 10-Q are not the only risks facing the Company. Additional risks and
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uncertainties not currently known or that the Company currently deems to be immaterial may also materially adversely affect the Company's financial condition, results of operations or cash flows.
The current COVID-19 pandemic, or the future outbreak of other highly infectious or contagious diseases, could materially and adversely affect our business, financial condition and results of operations.
The outbreak of COVID-19, which has rapidly spread to a growing number of countries, including the United States and the specific regions in which our apartment communities are located, has created considerable instability and disruption in the U.S. and world economies. Considerable uncertainty still surrounds COVID-19 and its potential effects, and the extent of and effectiveness of any responses taken on a national and local level. However, measures taken to limit the impact of COVID-19, including “social distancing” and other restrictions on travel, congregation and business operations have already resulted in significant negative economic impacts. The long-term impact of COVID-19 on the U.S. and world economies remains uncertain, but is likely to result in a world-wide economic downturn, the duration and scope of which cannot currently be predicted. The extent to which the Company’s financial condition or operating results will continue to be affected by the COVID-19 pandemic will largely depend on future developments, which are highly uncertain and cannot be accurately predicted.
The Company’s operating results depend, in large part, on revenues derived from leasing space in our apartment communities to residential tenants and the ability of tenants to generate sufficient income to pay their rents in a timely manner. The market and economic challenges created by the COVID-19 pandemic, and measures implemented to prevent its spread, have, and may continue to, adversely affect our returns and profitability. As a result, our ability to make distributions to Essex’s stockholders and the Operating Partnership’s unitholders may be compromised and we could experience volatility with respect to the market value of our properties and common stock and Operating Partnership units. The continued spread of COVID-19 could result in

further increases in unemployment, and tenants that experience deteriorating financial conditions as a result of the pandemic may be unwilling or unable to pay rent on a timely basis, or at all. In some cases, we may be legally required to or otherwise agree to restructure tenants’ rent obligations, and may not be able to do so on terms as favorable to us as those currently in place. Numerous state, local, federal and industry-initiated efforts have and may continue to affect our ability to collect rent or enforce remedies for the failure to pay rent, including, among others, limitations or prohibitions on evicting tenants unwilling or unable to pay rent and prohibitions on the ability to collect unpaid rent during certain timeframes. Additionally, eviction moratoriums have passed in various formats at every level of government, with considerable differences between county and state orders, as well as between individual county orders and how cities are interpreting and enforcing them. Various city, county and state laws restricting rent increases in times of emergency may have applicability to the pandemic as well. This patchwork of conflicting standards may continue to create a great deal of confusion and challenges with compliance. While the Company believes it is in compliance and intends to comply with the framework of local, county, state and federal laws, given the confusion, strict compliance might be difficult. In the event of tenant nonpayment, default or bankruptcy, we may incur costs in protecting our investment and re-leasing our property, and have limited ability to renew existing leases or sign new leases at projected rents.
Our properties may also incur significant costs or losses related to legislative mandates, including shelter-in-place orders, business shut-downs, quarantines, infection or other related factors, which may result in a negative impact on our occupancy levels. For example, many companies have ordered employees to “work from home” for an extended period of time, causing some tenants to relocate further away from the urban centers temporarily or permanently. Some businesses have been ordered to temporarily shut down, such as indoor dining, which has contributed to the shuttering of some commercial spaces in downtown areas, and the temporary deterioration of neighborhoods in and around some of our urban communities. Moreover, we typically conduct aspects of our leasing activity on-site at our apartment communities. Reductions in the ability and willingness of prospective residents to visit our communities due to the COVID-19 pandemic could reduce rental revenue and ancillary operating revenue produced by our properties. Additionally, in connection with an outbreak that directly impacts one or more of our corporate offices or apartment communities, we may experience negative publicity and/or an unwillingness of prospective residents to visit or ultimately choose to live in our communities, which could directly affect our rental revenue. In addition, we have incurred costs associated with protecting our employees and residents and disinfecting our properties and those costs may continue to increase. There may also be an increased risk of litigation due to the effects of the COVID-19 pandemic. To the extent our management or personnel are impacted in significant numbers by the COVID-19 pandemic and are not available or allowed to conduct work, our business and operating results may be negatively impacted.
Additionally, market fluctuations as a result of the COVID-19 pandemic may affect our ability to obtain necessary funds for our operations from current lenders or new borrowings. We may be unable to obtain financing for the acquisition of investments on satisfactory terms, or at all. In addition, moratoriums on construction and macro-economic factors have caused some construction delays and may cause construction contractors to be unable to perform, which may cause the delivery date of certain development projects or investments in third-party development projects to be materially extended. Market fluctuations and construction delays experienced by the Company’s third-party mezzanine loan borrowers and preferred equity investment sponsors may also negatively impact their ability to repay the Company. Further, while the Company carries general liability, pollution, and property insurance along with other insurance policies that may provide some coverage for any losses or costs incurred in connection with the COVID-19 pandemic, given the novelty of the issue and the scale of losses incurred throughout the world, there is no guarantee that we will be able to recover all or any portion of our losses and costs under these policies. We may be additionally impacted by changes in legislation relating to insurance coverages with respect to the pandemic, including, but not limited to, workers' compensation. The occurrence of any of the foregoing events or any other related matters could have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.
The global impact of the COVID-19 pandemic continues to evolve rapidly, and the extent of its effect on our operational and financial performance will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration, scope and severity of the pandemic, the actions taken to contain or mitigate its impact, and the direct and indirect economic effects of the pandemic and related containment measures, among others. However, the COVID-19 pandemic presents material uncertainty and risk with respect to our business, financial condition and results of operations. Moreover, to the extent any of these risks and uncertainties adversely impact us in the ways described above or otherwise, they may also have the effect of heightening many of the other risks set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. In addition, if in the future there is an outbreak of another highly infectious or contagious disease or other health concern, the Company and our properties may be subject to similar risks as posed by COVID-19.

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

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


During the three months ended June 30, 2020,March 31, 2021, the Operating Partnership issued OP Units in private placements in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, in the amounts and for the consideration set forth below:

During the three months ended June 30, 2020,March 31, 2021, Essex issued an aggregate of 6,83939,895 shares of its common stock upon the exercise of stock options, the vesting of restricted stock awards, and the exchange of OP Units and DownREIT units by limited partners or members into shares of common stock. Essex contributed the net proceeds of $0.5$1.7 million from the option exercises during the three months ended June 30, 2020March 31, 2021 to the Operating Partnership in exchange for an aggregate of 5,00010,516 OP Units, as required by the Operating Partnership’s partnership agreement. Furthermore, for each share of commoncommon stock issued by Essex in connection with vesting of restricted stock awards and the exchange of OP Units and DownREIT units, the Operating Partnership issued OP Units to Essex, as required by the partnership agreement. During the three months ended June 30, 2020, 1,839March 31, 2021, 29,379 OP Units were issued to Essex pursuant to this mechanism.

Stock Repurchases

The following table summarizes the Company's purchases of its common stock during the three months ended June 30, 2020.March 31, 2021.

Total Number of
Shares Purchased		Average Price
Paid Per Share
Total Number of Shares
Purchased as Part of a
Publicly Announced
Program(1)
Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program (in millions)(1)
January 1, 2021 - January 31, 202140,000 $229.30 40,000 $214.5 
Total40,000 $229.30 40,000 $214.5 
  
Total Number of
Shares Purchased
 
Average Price
Paid Per Share
 
Total Number of Shares
Purchased as Part of a
Publicly Announced
Program(1)
 
Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program (in millions)(1)
May 1, 2020 - May 31, 2020 1,061
 $219.52
 1,061
 $249.8
June 1, 2020 - June 30, 2020 86,927
 $228.47
 86,927
 $229.9
Total 87,988
 $228.36
 87,988
 $229.9

(1) In MayDecember 2020, the boardBoard of directorsDirectors approved the replenishment of the Company's stock repurchase plan such that, as of such date, the Company had $250.0 million of purchase authority remaining under the replenished plan. As a result of the replenishment, as of June 30, 2020, the Company had $229.9 million of purchase authority remaining under the stock repurchase plan.

Item 3: Defaults Upon Senior Securities

None.

Item 4: Mine Safety Disclosures

Not applicable.applicable.

Item 5: Other Information

None.

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Table of Contents
Item 6: Exhibits
A. Exhibits
4.1
Indenture, dated February 11, 2020,March 1, 2021, among Essex Portfolio, L.P., Essex Property Trust, Inc., and U.S. Bank National Association, as trustee, including the form of 2.650%1.700% Senior Notes due 20322028 and the guarantee thereof, attached as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed February 11, 2020,March 1, 2021, and incorporated herein by reference.
31.1*
Certification of Michael J. Schall, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of 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, 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, 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*
Certification of Michael J. Schall, Principal Executive Officer of General Partner, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
32.4*
Certification of 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).

* Filed or furnished herewith.

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

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SIGNATURES
Table of Contents
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.
ESSEX PROPERTY TRUST, INC.
(Registrant)
ESSEX PROPERTY TRUST, INC.Date: April 28, 2021
(Registrant)
Date: August 5, 2020
By: /s/ ANGELA L. KLEIMANBARBARA PAK
Angela L. KleimanBarbara Pak
Executive Vice President, Chief Financial Officer

(Authorized Officer, Principal Financial Officer)

Date: April 28, 2021
Date: August 5, 2020
By: /s/ JOHN FARIAS
John Farias
Senior Vice President, Chief Accounting Officer

ESSEX PORTFOLIO, L.P.
By Essex Property Trust, Inc., its general partner
(Registrant)
Date: August 5, 2020April 28, 2021
By: /s/ ANGELA L. KLEIMANBARBARA PAK
Angela L. KleimanBarbara Pak
Executive Vice President, Chief Financial Officer

(Authorized Officer, Principal Financial Officer)

Date: April 28, 2021
Date: August 5, 2020
By: /s/ JOHN FARIAS
John Farias
Senior Vice President, Chief Accounting Officer


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