filings.toolsItem 15. Exhibits and Financial Statement Schedules
194K characters. Original on sec.gov · Markdown
Item 15. Exhibits and Financial Statement Schedules
(A) Financial Statements
| (1) Consolidated Financial Statements | Page |
|---|---|
| Reports of Independent Registered Public Accounting Firm | F-1 |
| Consolidated Balance Sheets: As of December 31, 2012 and 2011 | F-4 |
| Consolidated Statements of Operations: Years ended December 31, 2012, 2011, and 2010 | F-5 |
| Consolidated Statements of Comprehensive Income (Loss): Years ended December 31, 2012, 2011, and 2010 | F-6 |
| Consolidated Statements of Equity: Years ended December 31, 2012, 2011, and 2010 | F-7 |
| Consolidated Statements of Cash Flows: Years ended December 31, 2012, 2011, and 2010 | F-8 |
| Notes to the Consolidated Financial Statements | F-10 |
| (2) Financial Statement Schedule - Schedule III - Real Estate and Accumulated Depreciation as of December 31, 2011 | F-38 |
| (3) See the Exhibit Index immediately following the signature page and certifications for a list of exhibits filed or incorporated by reference as part of this report. |
(B) Exhibits
The Company hereby files, as exhibits to this Form 10-K, those exhibits listed on the Exhibit Index referenced in Item 15(A)(3) above.
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Essex Property Trust, Inc.:
We have audited the accompanying consolidated balance sheets of Essex Property Trust, Inc. and subsidiaries as of December 31, 2012 and 2011, and the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for each of the years in the three-year period ended December 31, 2012. In connection with our audits of the consolidated financial statements, we have also audited the accompanying financial statement schedule III. These consolidated financial statements and the accompanying financial statement schedule III are the responsibility of Essex Property Trust Inc.’s management. Our responsibility is to express an opinion on these consolidated financial statements and the accompanying financial statement schedule III based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Essex Property Trust, Inc. and subsidiaries as of December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2012, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule III, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Essex Property Trust, Inc.’s internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 22, 2013 expressed an unqualified opinion on the effectiveness of Essex Property Trust, Inc.’s internal control over financial reporting.
| /S/ KPMG LLP | |
|---|---|
| KPMG LLP |
San Francisco, California
February 22, 2013
F-1
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Essex Property Trust, Inc.:
We have audited Essex Property Trust, Inc.’s internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Essex Property Trust, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting, appearing under Item 9A. Our responsibility is to express an opinion on Essex Property Trust Inc.'s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control, based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Essex Property Trust, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
F-2
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Essex Property Trust, Inc. and subsidiaries as of December 31, 2012 and 2011, and the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for each of the years in the three-year period ended December 31, 2012, and our report dated February 22, 2013, expressed an unqualified opinion on those consolidated financial statements.
| /S/ KPMG LLP | |
|---|---|
| KPMG LLP |
San Francisco, California
February 22, 2013
F-3
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 2012 and 2011
(Dollars in thousands, except share amounts)
| 2012 | 2011 | |||||||
| ASSETS | ||||||||
| Real estate: | ||||||||
| Rental properties: | ||||||||
| Land and land improvements | $ | 1,003,171 | $ | 860,661 | ||||
| Buildings and improvements | 4,030,501 | 3,452,403 | ||||||
| 5,033,672 | 4,313,064 | |||||||
| Less: accumulated depreciation | (1,081,517 | ) | (920,026 | ) | ||||
| 3,952,155 | 3,393,038 | |||||||
| Real estate under development | 66,851 | 44,280 | ||||||
| Co-investments | 571,345 | 383,412 | ||||||
| 4,590,351 | 3,820,730 | |||||||
| Cash and cash equivalents-unrestricted | 18,606 | 12,889 | ||||||
| Cash and cash equivalents-restricted | 23,520 | 22,574 | ||||||
| Marketable securities | 92,713 | 74,275 | ||||||
| Notes and other receivables | 66,163 | 66,369 | ||||||
| Prepaid expenses and other assets | 35,003 | 22,682 | ||||||
| Deferred charges, net | 20,867 | 17,445 | ||||||
| Total assets | $ | 4,847,223 | $ | 4,036,964 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Mortgage notes payable | $ | 1,565,599 | $ | 1,745,858 | ||||
| Unsecured debt | 1,112,084 | 465,000 | ||||||
| Lines of credit | 141,000 | 150,000 | ||||||
| Accounts payable and accrued liabilities | 64,858 | 48,324 | ||||||
| Construction payable | 5,392 | 6,505 | ||||||
| Dividends payable | 45,052 | 39,611 | ||||||
| Derivative liabilities | 6,606 | 3,061 | ||||||
| Other liabilities | 22,167 | 20,528 | ||||||
| Total liabilities | 2,962,758 | 2,478,887 | ||||||
| Commitments and contingencies | ||||||||
| Cumulative convertible 4.875% Series G preferred stock; $.0001 par value: 5,890,000 issued, and 178,249 outstanding | 4,349 | 4,349 | ||||||
| Equity: | ||||||||
| Common stock; $.0001 par value, 656,020,000 shares authorized; 36,442,994 and 33,888,082 shares issued and outstanding | 3 | 3 | ||||||
| Cumulative redeemable preferred stock at liquidation value | 73,750 | 73,750 | ||||||
| Excess stock, $.0001 par value, 330,000,000 shares authorized and no shares issued or outstanding | - | - | ||||||
| Additional paid-in capital | 2,204,778 | 1,844,611 | ||||||
| Distributions in excess of accumulated earnings | (444,466 | ) | (408,066 | ) | ||||
| Accumulated other comprehensive loss | (69,261 | ) | (72,771 | ) | ||||
| Total stockholders' equity | 1,764,804 | 1,437,527 | ||||||
| Noncontrolling interest | 115,312 | 116,201 | ||||||
| Total equity | 1,880,116 | 1,553,728 | ||||||
| Total liabilities and equity | $ | 4,847,223 | $ | 4,036,964 |
See accompanying notes to consolidated financial statements.
F-4
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31, 2012, 2011 and 2010
(Dollars in thousands, except per share and share amounts)
| 2012 | 2011 | 2010 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenues: | ||||||||||||
| Rental and other property | $ | 531,936 | $ | 465,713 | $ | 405,728 | ||||||
| Management and other fees from affiliates | 11,489 | 6,780 | 4,551 | |||||||||
| 543,425 | 472,493 | 410,279 | ||||||||||
| Expenses: | ||||||||||||
| Property operating, excluding real estate taxes | 125,437 | 115,528 | 104,049 | |||||||||
| Real estate taxes | 48,651 | 43,706 | 39,115 | |||||||||
| Depreciation | 170,592 | 151,428 | 128,221 | |||||||||
| General and administrative | 23,307 | 20,694 | 23,255 | |||||||||
| Cost of management and other fees | 6,513 | 4,610 | 2,707 | |||||||||
| Impairment and other charges | - | - | 2,302 | |||||||||
| 374,500 | 335,966 | 299,649 | ||||||||||
| Earnings from operations | 168,925 | 136,527 | 110,630 | |||||||||
| Interest expense before amortization | (100,244 | ) | (91,694 | ) | (82,756 | ) | ||||||
| Amortization expense | (11,644 | ) | (11,474 | ) | (4,828 | ) | ||||||
| Interest and other income | 13,833 | 17,139 | 27,841 | |||||||||
| Equity income (loss) from co-investments | 41,745 | (467 | ) | (1,715 | ) | |||||||
| Gain on remeasurement of co-investment | 21,947 | - | - | |||||||||
| Loss on early retirement of debt | (5,009 | ) | (1,163 | ) | (10 | ) | ||||||
| Income before discontinued operations | 129,553 | 48,868 | 49,162 | |||||||||
| Income from discontinued operations | 10,037 | 8,648 | 1,620 | |||||||||
| Net income | 139,590 | 57,516 | 50,782 | |||||||||
| Net income attributable to noncontrolling interest | (14,306 | ) | (10,446 | ) | (14,848 | ) | ||||||
| Net income attributable to controlling interest | 125,284 | 47,070 | 35,934 | |||||||||
| Dividends to preferred stockholders | (5,472 | ) | (4,753 | ) | (2,170 | ) | ||||||
| Excess of cash paid to redeem preferred stock and units over the carrying value | - | (1,949 | ) | - | ||||||||
| Net income available to common stockholders | $ | 119,812 | $ | 40,368 | $ | 33,764 | ||||||
| Per share data: | ||||||||||||
| Basic: | ||||||||||||
| Income before discontinued operations available to common stockholders | $ | 3.15 | $ | 0.99 | $ | 1.09 | ||||||
| Income from discontinued operations available to common stockholders | 0.27 | 0.25 | 0.05 | |||||||||
| Net income available to common stockholders | $ | 3.42 | $ | 1.24 | $ | 1.14 | ||||||
| Weighted average number of shares outstanding during the year | 35,032,491 | 32,541,792 | 29,667,064 | |||||||||
| Diluted: | ||||||||||||
| Income before discontinued operations available to common stockholders | $ | 3.14 | $ | 0.99 | $ | 1.09 | ||||||
| Income from discontinued operations available to common stockholders | 0.27 | 0.25 | 0.05 | |||||||||
| Net income available to common stockholders | $ | 3.41 | $ | 1.24 | $ | 1.14 | ||||||
| Weighted average number of shares outstanding during the year | 35,124,921 | 32,628,714 | 29,734,383 |
See accompanying notes to consolidated financial statements.
F-5
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss)
Years ended December 31, 2012, 2011 and 2010
(Dollars in thousands)
| 2012 | 2011 | 2010 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Net income | $ | 139,590 | $ | 57,516 | $ | 50,782 | ||||||
| Other comprehensive income (loss): | ||||||||||||
| Changes in fair value of cash flow hedges and amortization of settlement swaps | 3,402 | 7,707 | (50,437 | ) | ||||||||
| Changes in fair value of marketable securities | 1,411 | 1,330 | 5,357 | |||||||||
| Reversal of unrealized gains upon the sale of marketable securities | (1,082 | ) | (4,286 | ) | (12,027 | ) | ||||||
| Total other comprehensive income (loss) | 3,731 | 4,751 | (57,107 | ) | ||||||||
| Comprehensive income (loss) | 143,321 | 62,267 | (6,325 | ) | ||||||||
| Comprehensive income attributable to noncontrolling interest | (14,527 | ) | (10,751 | ) | (10,752 | ) | ||||||
| Comprehensive income (loss) attributable to the Company | $ | 128,794 | $ | 51,516 | $ | (17,077 | ) |
See accompanying notes to consolidated financial statements.
F-6
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
Consolidated Statements of Equity
Years ended December 31, 2012, 2011 and 2010
(Dollars and shares in thousands)
| Distributions | Accumulated | |||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Additional | in excess of | other | ||||||||||||||||||||||||||||||||||
| Preferred stock | Common stock | paid-in | accumulated | comprehensive | Noncontrolling | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | capital | earnings | (loss) income | Interest | Total | ||||||||||||||||||||||||||||
| Balances at December 31, 2009 | 1,000 | $ | 25,000 | 28,849 | $ | 3 | $ | 1,275,251 | $ | (222,952 | ) | $ | (24,206 | ) | $ | 220,445 | $ | 1,273,541 | ||||||||||||||||||
| Net income | - | - | - | - | - | 35,934 | - | 14,848 | 50,782 | |||||||||||||||||||||||||||
| Reversal of unrealized gains upon the sale of marketable securities | - | - | - | - | - | - | (11,163 | ) | (864 | ) | (12,027 | ) | ||||||||||||||||||||||||
| Changes in fair value of cash flow hedges and amortization of settlement swaps | - | - | - | - | - | - | (46,817 | ) | (3,620 | ) | (50,437 | ) | ||||||||||||||||||||||||
| Changes in fair value of marketable securities | - | - | - | - | - | - | 4,969 | 388 | 5,357 | |||||||||||||||||||||||||||
| Issuance of common stock under: | ||||||||||||||||||||||||||||||||||||
| Stock option plans | - | - | 122 | - | 5,803 | - | - | - | 5,803 | |||||||||||||||||||||||||||
| Sale of common stock | - | - | 2,354 | - | 251,455 | - | - | - | 251,455 | |||||||||||||||||||||||||||
| Equity based compensation costs | - | - | - | - | (260 | ) | - | - | 2,474 | 2,214 | ||||||||||||||||||||||||||
| Retirement of exchangeable bonds | - | - | - | - | (434 | ) | - | - | - | (434 | ) | |||||||||||||||||||||||||
| Contributions of noncontrolling interest | - | - | - | - | - | - | - | 4,038 | 4,038 | |||||||||||||||||||||||||||
| Redemptions of noncontrolling interest | - | - | - | - | (16,347 | ) | - | - | (7,839 | ) | (24,186 | ) | ||||||||||||||||||||||||
| Distributions to noncontrolling interest | - | - | - | - | - | - | - | (24,802 | ) | (24,802 | ) | |||||||||||||||||||||||||
| Common and preferred stock dividends declared | - | - | - | - | - | (126,290 | ) | - | - | (126,290 | ) | |||||||||||||||||||||||||
| Balances at December 31, 2010 | 1,000 | 25,000 | 31,325 | 3 | 1,515,468 | (313,308 | ) | (77,217 | ) | 205,068 | 1,355,014 | |||||||||||||||||||||||||
| Net income | - | - | - | - | - | 47,070 | - | 10,446 | 57,516 | |||||||||||||||||||||||||||
| Reversal of unrealized gains upon the sale of marketable securities | - | - | - | - | - | - | (4,011 | ) | (275 | ) | (4,286 | ) | ||||||||||||||||||||||||
| Changes in fair value of cash flow hedges and amortization of settlement swaps | - | - | - | - | - | - | 7,212 | 495 | 7,707 | |||||||||||||||||||||||||||
| Changes in fair value of marketable securities | - | - | - | - | - | - | 1,245 | 85 | 1,330 | |||||||||||||||||||||||||||
| Issuance of common stock under: | ||||||||||||||||||||||||||||||||||||
| Stock option plans | - | - | 103 | - | 8,412 | - | - | - | 8,412 | |||||||||||||||||||||||||||
| Sale of common stock | - | - | 2,460 | - | 323,931 | - | - | - | 323,931 | |||||||||||||||||||||||||||
| Equity based compensation costs | - | - | - | - | (725 | ) | - | - | 1,598 | 873 | ||||||||||||||||||||||||||
| Issuance of Series H Preferred | 2,950 | 73,750 | - | - | (2,541 | ) | - | - | - | 71,209 | ||||||||||||||||||||||||||
| Redemptions of Series F Preferred | (1,000 | ) | (25,000 | ) | - | - | - | - | - | - | (25,000 | ) | ||||||||||||||||||||||||
| Redemptions of Series B Preferred | - | - | - | - | 1,200 | - | - | (80,000 | ) | (78,800 | ) | |||||||||||||||||||||||||
| Redemptions of noncontrolling interest | - | - | - | - | (1,134 | ) | - | - | (4,253 | ) | (5,387 | ) | ||||||||||||||||||||||||
| Distributions to noncontrolling interest | - | - | - | - | - | - | - | (16,963 | ) | (16,963 | ) | |||||||||||||||||||||||||
| Common and preferred stock dividends declared | - | - | - | - | - | (141,828 | ) | - | - | (141,828 | ) | |||||||||||||||||||||||||
| Balances at December 31, 2011 | 2,950 | 73,750 | 33,888 | 3 | 1,844,611 | (408,066 | ) | (72,771 | ) | 116,201 | 1,553,728 | |||||||||||||||||||||||||
| Net income | - | - | - | - | - | 125,284 | - | 14,306 | 139,590 | |||||||||||||||||||||||||||
| Reversal of unrealized gains upon the sale of marketable securities | - | - | - | - | - | - | (1,018 | ) | (64 | ) | (1,082 | ) | ||||||||||||||||||||||||
| Changes in fair value of cash flow hedges and amortization of settlement swaps | - | - | - | - | - | - | 3,183 | 219 | 3,402 | |||||||||||||||||||||||||||
| Changes in fair value of marketable securities | - | - | - | - | - | - | 1,345 | 66 | 1,411 | |||||||||||||||||||||||||||
| Issuance of common stock under: | ||||||||||||||||||||||||||||||||||||
| Stock option plans | - | - | 151 | - | 4,675 | - | - | - | 4,675 | |||||||||||||||||||||||||||
| Sale of common stock | - | - | 2,404 | - | 357,720 | - | - | - | 357,720 | |||||||||||||||||||||||||||
| Equity based compensation costs | - | - | - | - | (430 | ) | - | - | 2,231 | 1,801 | ||||||||||||||||||||||||||
| Contributions from noncontrollong interest | - | - | - | - | - | - | - | 4,232 | 4,232 | |||||||||||||||||||||||||||
| Redemptions of noncontrolling interest | - | - | - | - | (1,798 | ) | - | - | (5,188 | ) | (6,986 | ) | ||||||||||||||||||||||||
| Distributions to noncontrolling interest | - | - | - | - | - | - | - | (16,691 | ) | (16,691 | ) | |||||||||||||||||||||||||
| Common and preferred stock dividends declared | - | - | - | - | - | (161,684 | ) | - | - | (161,684 | ) | |||||||||||||||||||||||||
| Balances at December 31, 2012 | 2,950 | $ | 73,750 | 36,443 | $ | 3 | $ | 2,204,778 | $ | (444,466 | ) | $ | (69,261 | ) | $ | 115,312 | $ | 1,880,116 |
See accompanying notes to consolidated financial statements.
F-7
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 2012, 2011 and 2010
(Dollars in thousands)
| 2012 | 2011 | 2010 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash flows from operating activities: | ||||||||||||
| Net income | $ | 139,590 | $ | 57,516 | $ | 50,782 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
| Gain on sale of marketable securities | (819 | ) | (4,956 | ) | (12,491 | ) | ||||||
| Gain on remeasurement of co-investment | (21,947 | ) | - | - | ||||||||
| Company's share of gain on the sales of co-investment | (29,112 | ) | (919 | ) | - | |||||||
| Gain on the sales of real estate | (10,870 | ) | (8,562 | ) | - | |||||||
| Loss on early retirement of debt | 5,009 | 1,163 | 10 | |||||||||
| Co-investments | 1,626 | 7,929 | 1,715 | |||||||||
| Amortization expense | 11,644 | 11,474 | 4,828 | |||||||||
| Amortization of discount on notes receivables | (1,832 | ) | (1,757 | ) | (4,806 | ) | ||||||
| Amortization of discount on marketable securities | (5,127 | ) | (4,794 | ) | (3,714 | ) | ||||||
| Loss on derivative instruments - ineffectiveness | - | - | 2,301 | |||||||||
| Depreciation | 170,686 | 152,542 | 129,711 | |||||||||
| Equity-based compensation | 4,141 | 2,927 | 3,251 | |||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Prepaid expenses and other assets | (9,488 | ) | (1,172 | ) | (2,771 | ) | ||||||
| Accounts payable and accrued liabilities | 12,360 | 3,620 | 4,302 | |||||||||
| Other liabilities | 1,638 | 1,560 | 2,412 | |||||||||
| Net cash provided by operating activities | 267,499 | 216,571 | 175,530 | |||||||||
| Cash flows from investing activities: | ||||||||||||
| Additions to real estate: | ||||||||||||
| Acquisitions of real estate | (393,771 | ) | (57,478 | ) | (279,607 | ) | ||||||
| Improvements to recent acquisitions | (13,704 | ) | (16,446 | ) | (6,388 | ) | ||||||
| Redevelopment | (40,200 | ) | (45,130 | ) | (14,096 | ) | ||||||
| Revenue generating capital expenditures | (7,620 | ) | (7,616 | ) | (1,584 | ) | ||||||
| Non-revenue generating capital expenditures | (30,491 | ) | (26,090 | ) | (29,278 | ) | ||||||
| Acquisition of and additions to real estate under development | (29,196 | ) | (79,194 | ) | (155,267 | ) | ||||||
| Acquisition of membership interest in co-investment | (85,000 | ) | - | - | ||||||||
| Dispositions of real estate | 27,800 | 23,003 | - | |||||||||
| Changes in restricted cash and refundable deposits | (6,069 | ) | (1,376 | ) | (4,414 | ) | ||||||
| Purchases of marketable securities | (73,735 | ) | (8,048 | ) | (49,974 | ) | ||||||
| Sales and maturities marketable securities | 61,703 | 32,998 | 102,039 | |||||||||
| Proceeds from tax investor | - | - | 1,223 | |||||||||
| Purchases of and advances under notes and other receivables | (26,000 | ) | (12,325 | ) | (37,627 | ) | ||||||
| Collections of notes and other receivables | 14,525 | 884 | 1,855 | |||||||||
| Contributions to co-investments | (260,153 | ) | (246,106 | ) | (79,450 | ) | ||||||
| Non-operating distributions from co-investments | 49,773 | 17,141 | 41,700 | |||||||||
| Net cash used in investing activities | (812,138 | ) | (425,783 | ) | (510,868 | ) | ||||||
| Cash flows from financing activities: | ||||||||||||
| Borrowings under debt agreements | 1,745,853 | 1,514,684 | 1,214,216 | |||||||||
| Repayment of debt | (1,371,317 | ) | (1,435,135 | ) | (882,646 | ) | ||||||
| Additions to deferred charges | (6,707 | ) | (5,533 | ) | (4,109 | ) | ||||||
| Payments to settle derivative instruments | - | (2,395 | ) | (81,282 | ) | |||||||
| Retirement of exchangeable bonds | - | - | (5,396 | ) | ||||||||
| Net proceeds from issuance of Preferred stock, Series H | - | 71,209 | - | |||||||||
| Retirement of Series B preferred units and Series F Preferred stock | - | (103,800 | ) | - | ||||||||
| Equity related issuance cost | (309 | ) | (627 | ) | - | |||||||
| Net proceeds from stock options exercised | 2,643 | 6,986 | 4,765 | |||||||||
| Net proceeds from issuance of common stock | 357,720 | 323,931 | 251,455 | |||||||||
| Contributions from noncontrolling interest | 2,400 | - | 4,038 | |||||||||
| Distributions to noncontrolling interest | (16,691 | ) | (16,963 | ) | (24,795 | ) | ||||||
| Redemption of noncontrolling interest | (6,986 | ) | (5,387 | ) | (24,186 | ) | ||||||
| Common and preferred stock dividends paid | (156,250 | ) | (138,622 | ) | (123,629 | ) | ||||||
| Net cash provided by financing activities | 550,356 | 208,348 | 328,431 | |||||||||
| Net increase (decrease) in cash and cash equivalents | 5,717 | (864 | ) | (6,907 | ) | |||||||
| Cash and cash equivalents at beginning of year | 12,889 | 13,753 | 20,660 | |||||||||
| Cash and cash equivalents at end of year | $ | 18,606 | $ | 12,889 | $ | 13,753 |
(Continued)
F-8
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 2012, 2011 and 2010
(Dollars in thousands)
| 2012 | 2011 | 2010 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Supplemental disclosure of cash flow information: | ||||||||||||
| Cash paid for interest, net of $10,346, $8,240, and $9,486 capitalized in 2012, 2011 and 2010, respectively | $ | 95,597 | $ | 89,691 | $ | 83,497 | ||||||
| Supplemental disclosure of noncash investing and financing activities: | ||||||||||||
| Transfer from real estate under development to rental properties | $ | 6,632 | $ | 165,214 | $ | 170,940 | ||||||
| Transfer from co-investments to rental properties | $ | 148,053 | $ | - | $ | - | ||||||
| Mortgage notes assumed in connection with purchases of real estate including the loan premiums recorded | $ | 82,133 | $ | 20,927 | $ | 87,336 | ||||||
| Transfer from real estate under development to co-investments | $ | - | $ | 54,472 | $ | - | ||||||
| Note receivable settled when the company purchased the property securing the note receivable | $ | - | $ | - | $ | 25,750 | ||||||
| Contribution of note receivable to co-investment | $ | 12,325 | $ | - | $ | - | ||||||
| Change in accrual of dividends | $ | 5,441 | $ | 3,206 | $ | 2,655 | ||||||
| Change in fair value of derivative liabilities | $ | 4,461 | $ | 230 | $ | 1,907 | ||||||
| Change in fair value of marketable securities | $ | 459 | $ | 2,836 | $ | 6,670 | ||||||
| Change in construction payable | $ | 1,113 | $ | 2,518 | $ | 1,304 |
See accompanying notes to consolidated financial statements.
F-9
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
(1) Organization
The accompanying consolidated financial statements present the accounts of Essex Property Trust, Inc. (the “Company”), which include the accounts of the Company and Essex Portfolio, L.P. (the “Operating Partnership,” which holds the operating assets of the Company).
The Company is the sole general partner in the Operating Partnership with a 94.5% general partner interest and the limited partners owned a 5.5% interest as of December 31, 2012. The limited partners may convert their Operating Partnership units into an equivalent number of shares of common stock. Total Operating Partnership units outstanding were 2,122,381 and 2,229,230 as of December 31, 2012 and 2011, respectively, and the redemption value of the units, based on the closing price of the Company’s common stock totaled $311.2 million and $313.2 million, as of December 31, 2012 and 2011, respectively. The Company has reserved shares of common stock for such conversions. These conversion rights may be exercised by the limited partners at any time through 2026.
As of December 31, 2012, the Company owned or had ownership interests in 163 apartment communities, (aggregating 33,468 units), five commercial buildings, and nine active development projects (collectively, the “Portfolio”). The communities are located in Southern California (Los Angeles, Orange, Riverside, Santa Barbara, San Diego, and Ventura counties), Northern California (the San Francisco Bay Area) and the Seattle metropolitan area.
(2) Summary of Critical and Significant Accounting Policies
(a) Principles of Consolidation
The accounts of the Company, its controlled subsidiaries and the variable interest entities (“VIEs”) in which it is the primary beneficiary are consolidated in the accompanying financial statements. All significant inter-company accounts and transactions have been eliminated.
Noncontrolling interest includes the 5.5% and 6.2% limited partner interests in the Operating Partnership not held by the Company at December 31, 2012 and 2011, respectively. These percentages include the Operating Partnership’s vested long term incentive plan units (see Note 13).
The Company consolidates 19 DownREIT limited partnerships (comprising twelve communities), since the Company is the primary beneficiary of these variable interest entities (“VIEs”). The consolidated total assets and liabilities related to these VIEs, net of intercompany eliminations, were approximately $201.1 million and $178.6 million, respectively, as of December 31, 2012, and $199.8 million and $171.5 million, respectively, as of December 31, 2011.
The DownREIT VIEs collectively own twelve apartment communities in which Essex Management Company (“EMC”) is the general partner, the Operating Partnership is a special limited partner, and the other limited partners were granted rights of redemption for their interests. Such limited partners can request to be redeemed and the Company can elect to redeem their rights for cash or by issuing shares of its common stock on a one share per unit basis. Conversion values will be based on the market value of the Company's common stock at the time of redemption multiplied by the number of units stipulated under the above arrangements. The other limited partners receive distributions based on the Company's current dividend rate times the number of units held. Total DownREIT units outstanding were 1,039,431 and 1,063,848 as of December 31, 2012 and 2011 respectively, and the redemption value of the units, based on the closing price of the Company’s common stock totaled $152.4 million and $149.5 million, as of December 31, 2012 and 2011, respectively. As of December 31, 2012 and 2011, the carrying value of the other limited partners' interests is presented at their historical cost and is classified within noncontrolling interest in the accompanying consolidated balance sheets.
Interest holders in VIEs consolidated by the Company are allocated a priority of net income equal to the cash payments made to those interest holders or distributions from cash flow. The remaining results of operations are generally allocated to the Company.
As of December 31, 2012 and 2011, the Company did not have any VIE’s of which it was not deemed to be the primary beneficiary.
F-10
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
(b) Real Estate Rental Properties
Significant expenditures, which improve or extend the life of an asset and have a useful life of greater than one year, are capitalized. Operating real estate assets are stated at cost and consist of land, buildings and improvements, furniture, fixtures and equipment, and other costs incurred during their development, redevelopment and acquisition. Expenditures for maintenance and repairs are charged to expense as incurred.
The depreciable life of various categories of fixed assets is as follows:
| Computer software and equipment | 3 - 5 years | |
|---|---|---|
| Interior unit improvements | 5 years | |
| Land improvements and certain exterior components of real property | 10 years | |
| Real estate structures | 30 years |
The Company capitalizes all costs incurred with the predevelopment, development or redevelopment of real estate assets or are associated with the construction or expansion of real property. Such capitalized costs include land, land improvements, allocated costs of the Company’s project management staff, construction costs, as well as interest and related loan fees, property taxes and insurance. Capitalization begins for predevelopment, development, and redevelopment projects when activity commences. Capitalization ends when the apartment home is completed and the property is available for a new resident or if the development activities are put on hold. The Company ceases to capitalize costs such as property taxes, insurance, and interest expenses once the development activities are put on hold.
The Company allocates the purchase price of real estate to land and building, and identifiable intangible assets, such as the value of above, below and in-place leases. The values of the above and below market leases are amortized and recorded as either a decrease (in the case of above market leases) or an increase (in the case of below market leases) to rental revenue over the remaining term of the associated leases acquired, which in the case of below market leases the Company assumes lessees will elect to renew their leases. The value of acquired in-place leases are amortized to expense over the term the Company expects to retain the acquired tenant, which is generally 20 months.
The Company performs the following evaluation for communities acquired:
| (1) | Adjust the purchase price for any fair value adjustments resulting from such things as assumed debt or contingencies. |
|---|
| (2) | estimate the value of the real estate “as if vacant” as of the acquisition date; |
|---|
| (3) | allocate that value among land and building; |
|---|
| (4) | compute the value of the difference between the “as if vacant” value and the adjusted purchase price, which will represent the total intangible assets; |
|---|
| (5) | compute the value of the above and below market leases and determine the associated life of the above market/ below market leases; |
|---|
| (6) | compute the value of the in-place leases and customer relationships, if any, and the associated lives of these assets. |
|---|
Whenever events or changes in circumstances indicate that the carrying amount of a property held for investment or held for sale may not be fully recoverable, the carrying amount will be evaluated for impairment. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount (including intangible assets) of a property held for investment, then the Company will recognize an impairment loss equal to the excess of the carrying amount over the fair value of the property. Fair value of a property is determined using conventional real estate valuation methods, such as discounted cash flow, the property’s unleveraged yield in comparison to the unleveraged yields and sales prices of similar communities that have been recently sold, and other third party information, if available. Communities held for sale are carried at the lower of cost and fair value less estimated costs to sell. As of December 31, 2012 and 2011, no communities were classified as held for sale and no impairment charges were recorded in 2012, 2011 or 2010.
In the normal course of business, the Company will receive purchase offers for its communities, either solicited or unsolicited. For those offers that are accepted, the prospective buyer will usually require a due diligence period before consummation of the transaction. It is not unusual for matters to arise that result in the withdrawal or rejection of the offer during this process. The Company classifies real estate as "held for sale" when all criteria under the accounting standard for the disposals of long-lived assets have been met. In accordance with the standard, the Company presents income and gains/losses on communities sold or held for sale as discontinued operations. The Company’s equity in income or loss from real estate investments accounted for under the equity method of accounting remain classified in continuing operations upon disposition. (See Note 6 for a description of the Company’s discontinued operations for 2012, 2011, and 2010).
F-11
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
(c) Co-investments
The Company owns investments in joint ventures (“co-investments”) in which it has significant influence, but its ownership interest does not meet the criteria for consolidation in accordance with the accounting standards. Therefore, the Company accounts for these investments using the equity method of accounting. Under the equity method of accounting, the investment is carried at the cost of assets contributed, plus the Company’s equity in earnings less distributions received and the Company’s share of losses. For preferred equity investments the Company recognizes its preferred interest as its equity in earnings.
A majority of the co-investments, excluding the preferred equity investments, compensate the Company for its asset management services and some of these investments may provide promote distributions if certain financial return benchmarks are achieved. Asset management fees are recognized when earned, and promote fees are recognized when the earnings events have occurred and the amount is determinable and collectible. Any promote distributions are reflected in equity (loss) income in co-investments. In 2012, the Company recorded a $2.3 million promote fee in connection with acquisition of our joint venture partner's remaining membership interest in the co-investment Essex Skyline at MacArthur Place for a purchase price of $85 million. The property is now consolidated. There were no promote fees recognized in 2011 and 2010 in the accompanying consolidated statements of operations.
(d) Revenues and Gains on Sale of Real Estate
Revenues from tenants renting or leasing apartment units are recorded when due from tenants and are recognized monthly as they are earned, which is not materially different than on a straight-line basis. Units are rented under short-term leases (generally, lease terms of 6 to 12 months) and may provide no rent for one or two months, depending on the market conditions and leasing practices of the Company’s competitors in each sub-market at the time the leases are executed. Revenues from tenants leasing commercial space are recorded on a straight-line basis over the life of the respective lease.
The Company recognizes gains on sales of real estate when a contract is in place, a closing has taken place, the buyer’s initial and continuing investment is adequate to demonstrate a commitment to pay for the property and the Company does not have a substantial continuing involvement in the property.
(e) Cash Equivalents and Restricted Cash
Highly liquid investments with 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.
(f) Marketable Securities
The Company reports its available for sale securities at fair value, based on quoted market prices (Level 2 for the unsecured bonds and Level 1 for the common stock and investment funds, as defined by the Financial Accounting Standards Board (“FASB”) standard for fair value measurements as discussed later in Note 2), and any unrealized gain or loss is recorded as other comprehensive income (loss). There were no other than temporary impairment charges for the years ended December 31, 2012, 2011 and 2010. Realized gains and losses, interest income, and amortization of purchase discounts are included in interest and other income on the consolidated statement of operations.
As of December 31, 2012 and 2011, marketable securities consisted primarily of investment-grade unsecured bonds, common stock, investments in mortgage backed securities and investment funds that invest in U.S. treasury or agency securities. As of December 31, 2012 and 2011, the Company classified its investments in mortgage backed securities, which mature in November 2019 and September 2020, as held to maturity, and accordingly, these securities are stated at their amortized cost. The estimated fair values of the mortgage backed securities (Level 2 securities) are approximately equal to the carrying values.
F-12
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
As of December 31, 2012 and 2011 marketable securities consist of the following ($ in thousands):
| December 31, 2012 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Gross | ||||||||||||
| Amortized | Unrealized | Carrying | ||||||||||
| Cost | Gain | Value | ||||||||||
| Available for sale: | ||||||||||||
| Investment-grade unsecured bonds | $ | 5,143 | $ | 98 | $ | 5,241 | ||||||
| Investment funds - US treasuries | 14,120 | 729 | 14,849 | |||||||||
| Common stock | 18,917 | 1,704 | 20,621 | |||||||||
| Held to maturity: | ||||||||||||
| Mortgage backed securities | 52,002 | - | 52,002 | |||||||||
| Total | $ | 90,182 | $ | 2,531 | $ | 92,713 | ||||||
| December 31, 2011 | ||||||||||||
| Gross | ||||||||||||
| Amortized | Unrealized | Carrying | ||||||||||
| Cost | Gain | Value | ||||||||||
| Available for sale: | ||||||||||||
| Investment-grade unsecured bonds | $ | 3,615 | $ | 399 | $ | 4,014 | ||||||
| Investment funds - US treasuries | 11,783 | 121 | 11,904 | |||||||||
| Common stock | 10,067 | 1,552 | 11,619 | |||||||||
| Held to maturity: | ||||||||||||
| Mortgage backed securities | 46,738 | - | 46,738 | |||||||||
| Total | $ | 72,203 | $ | 2,072 | $ | 74,275 |
The Company uses the specific identification method to determine the cost basis of a security sold and to reclassify amounts from accumulated other comprehensive income for securities sold. For the years ended December 31, 2012, 2011 and 2010, the proceeds from sales of available for sale securities totaled $61.7 million, $33.0 million and $102.0 million, respectively. These sales all resulted in gains, which totaled $0.8 million, $5.0 million and $12.5 million for the years ended December 31, 2012, 2011 and 2010, respectively.
(g) Notes Receivable
Notes receivable relate to real estate financing arrangements including mezzanine and bridge loans and are secured by real estate. Interest is recognized over the life of the note.
Each note is analyzed to determine if it is impaired. A note is impaired if it is probable that the Company will not collect all principal and interest contractually due. The Company does not accrue interest when a note is considered impaired and a loan allowance is recorded for any principal and previously accrued interest that are not believed to be collectable. All cash receipts on impaired notes are applied to reduce the principal amount of such notes until the principal has been recovered and, thereafter, are recognized as interest income. As of December 31, 2012 and 2011, no notes were impaired.
(h) Capitalization Policy
The Company capitalizes all direct and certain indirect costs, including interest and real estate taxes, incurred during development and redevelopment activities. Interest is capitalized on real estate assets that require a period of time to get them ready for their intended use. The amount of interest capitalized is based upon the average amount of accumulated development expenditures during the reporting period. Included in capitalized costs are management’s accounting estimates of the direct and incremental personnel costs and indirect project costs associated with the Company's development and redevelopment activities. Indirect project costs consist primarily of personnel costs associated with construction administration and development, including accounting, legal fees, and various office costs that clearly relate to projects under development. The Company’s capitalized internal costs related to development and redevelopment projects totaled $4.4 million, $4.3 million and $4.0 million for the years ended December 31, 2012, 2011 and 2010, respectively, most of which relates to development projects. These totals include capitalized salaries of $2.4 million, $2.2 million and $2.1 million, for the years ended December 31, 2012, 2011 and 2010, respectively.
F-13
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
(i) Interest and Other Income
Interest income is generated primarily from cash balances and marketable securities as well as notes receivables. Other income primarily consists of gains on sales of marketable securities. Total interest and other income is comprised of the following for the years ended December 31 ($ in thousands):
| 2012 | 2011 | 2010 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Interest income | $ | 10,715 | $ | 10,501 | $ | 15,350 | ||||||
| Co-investment promote fee | 2,299 | - | - | |||||||||
| Gains on sales of marketable securities | 819 | 4,956 | 12,491 | |||||||||
| Tax benefit - taxable REIT subsidiary | - | 1,682 | - | |||||||||
| $ | 13,833 | $ | 17,139 | $ | 27,841 |
(j) Fair Value of Financial Instruments
The Company values its financial instruments based on the fair value hierarchy of valuation techniques described in the FASB’s accounting standard for fair value measurements. Level 1 inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. Level 2 inputs include quoted prices for similar assets and liabilities in active markets and inputs other than quoted prices observable for the asset or liability. Level 3 inputs are unobservable inputs for the asset or liability. The Company uses Level 1 inputs for the fair values of its cash equivalents and its marketable securities except for unsecured bonds and mortgage backed securities. The Company uses Level 2 inputs for its investments in unsecured bonds, mortgage backed securities, notes receivable, notes payable, and derivative liabilities. These inputs include interest rates for similar financial instruments. The Company’s valuation methodology for derivatives is described in more detail in Note 9. The Company's valuation methodology for the swap related to the multifamily revenue refunding bonds for the 101 San Fernando community, which the Company terminated in 2012, is described in detail in Note 9. The Company does not use Level 3 inputs to estimate fair values of any of its financial instruments. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
Management believes that the carrying amounts of its amounts outstanding under lines of credit, notes receivable and other receivables approximate fair value as of December 31, 2012 and 2011, because interest rates, yields and other terms for these instruments are consistent with yields and other terms currently available for similar instruments. Management has estimated that the fair value of the Company’s $2.13 billion and $1.77 billion of fixed rate debt at December 31, 2012 and 2011, respectively, to be $2.24 billion and $1.88 billion. Management has estimated the fair value of the Company’s $692.9 million and $593.7 million of variable rate debt at December 31, 2012 and 2011, respectively, is $671.7 million and $572.3 million based on the terms of the Company’s existing variable rate debt compared to those available in the marketplace. Management believes that the carrying amounts of cash and cash equivalents, restricted cash, accounts payable and accrued liabilities, construction payables, other liabilities and dividends payable approximate fair value as of December 31, 2012 and 2011 due to the short-term maturity of these instruments. The fair values of the Company’s investments in mortgage backed securities are approximately equal to the amortized cost carrying value of these securities. Marketable securities and derivative liabilities are carried at fair value as of December 31, 2012.
F-14
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
(k) Interest Rate Protection, Swap, and Forward Contracts
The Company uses interest rate swaps, interest rate cap contracts, and forward starting swaps to manage interest rate risks. As of December 31, 2012, there were no outstanding forward starting swaps. The valuation of these derivative 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 forward starting interest rate swaps were 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) were 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. The Company records all derivatives on its consolidated balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.
For derivatives designated as fair value hedges, changes in the fair value of the derivative and the hedged item related to the hedged risk are recognized in earnings. For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially reported in other comprehensive income (outside of earnings) and subsequently reclassified to earnings when the hedged transaction affects earnings, and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings. The Company assesses the initial and ongoing effectiveness of each hedging relationship by comparing the changes in fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of the designated hedged item or transaction.
For derivatives not designated as cash flow hedges, changes in fair value are recognized in earnings. All of the Company’s interest rate swaps and interest rate caps are considered cash flow hedges except for the swap related to the multifamily revenue refunding bonds for the 101 San Fernando community that was terminated in 2012 as described in detail in Note 9. The Company did not have any fair value hedges during the years end December 31, 2012, 2011 and 2010.
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 primarily used interest rate swaps and interest rate forward-starting swaps as part of its cash flow hedging strategy. The Company was hedging its exposure to the variability in future cash flows for a portion of its forecasted transactions.
(l) Deferred Charges
Deferred charges are principally comprised of loan fees and related costs which are amortized over the terms of the related borrowing in a manner which approximates the effective interest method.
(m) Income Taxes
Generally in any year in which the Company qualifies as a real estate investment trust (“REIT”) under the Internal Revenue Code (the “IRC”), it is not subject to federal income tax on that portion of its income that it distributes to stockholders. No provision for federal income taxes, other than the taxable REIT subsidiaries discussed below, has been made in the accompanying consolidated financial statements for each of the years in the three-year period ended December 31, 2012 as the Company has elected to be and believes it qualifies under the IRC as a REIT and has made distributions during the periods in amounts to preclude the Company from paying federal income tax.
In order to maintain compliance with REIT tax rules, the Company utilizes taxable REIT subsidiaries for various revenue generating or investment activities. The taxable REIT subsidiaries are consolidated by the Company. The activities and tax related provisions, assets and liabilities are not material.
F-15
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
The status of cash dividends distributed for the years ended December 31, 2012, 2011, and 2010 related to common stock, Series F, Series G, and Series H preferred stock are classified for tax purposes as follows:
| 2012 | 2011 | 2010 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Common Stock | ||||||||||||
| Ordinary income | 70.58 | % | 63.68 | % | 82.46 | % | ||||||
| Capital gain | 8.75 | % | 11.16 | % | 5.61 | % | ||||||
| Unrecaptured section 1250 capital gain | 7.97 | % | 0.74 | % | 0.00 | % | ||||||
| Return of capital | 12.70 | % | 24.42 | % | 11.93 | % | ||||||
| 100.00 | % | 100.00 | % | 100.00 | % | |||||||
| 2012 | 2011 | 2010 | ||||||||||
| Series F, G, and H Preferred stock | ||||||||||||
| Ordinary income | 80.85 | % | 100.00 | % | 93.63 | % | ||||||
| Capital gains | 10.02 | % | 0.00 | % | 6.37 | % | ||||||
| Unrecaptured section 1250 capital gain | 9.13 | % | 0.00 | % | 0.00 | % | ||||||
| 100.00 | % | 100.00 | % | 100.00 | % |
(n) Preferred Stock
The Company’s Series G Cumulative Convertible Preferred Stock (“Series G Preferred Stock”) contains fundamental change provisions that allow the holder to redeem the preferred stock for cash if certain events occur. The redemption under these provisions is not solely within the Company’s control, thus the Company has classified the Series G Preferred Stock as temporary equity in the accompanying consolidated balance sheets.
The Company’s Series H Cumulative Redeemable Preferred Stock (“Series H Preferred Stock”), issued during 2011, contains fundamental change provisions that allow the holder to redeem the preferred stock for cash if certain events occur. The redemption under these provisions is within the Company’s control, and thus the Company has classified the Series H Preferred Stock as permanent equity in the accompanying consolidated balance sheets as of December 31, 2012 and 2011.
(o) 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 13) are being amortized over the expected service periods.
(p) Accounting Estimates
The preparation of consolidated financial statements, in accordance with U.S. generally accepted accounting principles (“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 receivable and its qualification as a 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.
F-16
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
(3) Real Estate Investments
(a) Acquisitions of Real Estate
For the year ended December 31, 2012, the Company purchased eleven communities consisting of 2,052 units for $551.1 million.
During the first quarter of 2012, the Company acquired Bon Terra, a 60 unit community located adjacent to Delano in Redmond, Washington for $16.0 million. The Company also acquired Reed Square, a 100 unit community located in Sunnyvale, California for $23.0 million.
During the second quarter of 2012, the Company purchased the joint venture partner’s membership interest in the co-investment Essex Skyline at MacArthur Place, a 349 unit premier high-rise apartment community located in Santa Ana, California, for a total purchase price of $85.0 million. The Company recorded promote income of $2.3 million included in interest and other income on the consolidated statements of operations, earned as a result of achieving certain performance hurdles as defined in the joint venture agreement. Upon the acquisition of partner’s membership interest, the property was consolidated and a gain on remeasurement of the Company’s co-investment interest of $21.9 million was recorded equal to the amount by which the fair value of the Company’s previously owned noncontrolling interest exceeded its carrying value. The secured $80.0 million loan was repaid early as part of this transaction.
Also during the second quarter 2012, the Company purchased Park Catalina, a 90 unit property located in the Koreatown submarket of Los Angeles, California for a total purchase price of $23.7 million. In addition, the Company purchased The Huntington, a 276 unit property located in Huntington Beach, California for a purchase price of $48.3 million. The Company assumed a $30.3 million loan secured by the property at a fixed rate of 5.7% for seven years. The interest rate on the loan was unfavorable compared to currently available market rates for mortgage loans, and thus in conjunction with the purchase price allocation, the Company recorded a $4.3 million loan premium to reflect the debt at fair value. This results in an effective interest rate for this loan of 3.3%.
During the third quarter of 2012, the Company purchased Montebello, a 248 unit property located in Kirkland, Washington, for a purchase price of $52.0 million from a related party entity. The Company assumed a $26.5 million mortgage loan secured by the property at a fixed rate of 5.6% for eight years. The interest rate on the loan was unfavorable compared to currently available market rates for mortgage loans, and thus in conjunction with the purchase price allocation, the Company recorded a $4.1 million loan premium to reflect the debt at fair value. This results in an effective interest rate for this loan of 3.1%.
Also during the third quarter 2012, the Company acquired Park West, a 126 unit apartment community located in San Francisco, California, for $31.6 million. The Company intends to renovate the exterior of the community for $8 million. In addition, the Company acquired Domaine, a 92 unit property located in Seattle, Washington for $34.0 million. In connection with the purchase, the Company assumed a $14.6 million loan at a fixed rate of 5.7% for an 8 year term. The interest rate on the loan was unfavorable compared to currently available market rates for mortgage loans, and thus in conjunction with the purchase price allocation, the Company recorded a $2.4 million loan premium to reflect the debt at fair value. This results in an effective interest rate for this loan of 3.0%.
During the fourth quarter 2012, the Company acquired Ascent, a 90 unit community located in Kirkland, Washington, for $15.9 million and Willow Lake Apartments, a 508 unit property located in San Jose, California for $148.0 million. Also during the fourth quarter 2012, the Company purchased Bennett Lofts (formerly Q Lofts), a 147 unit apartment community located in San Francisco, California, for a total purchase price of $96.0 million. Approximately 75% of the property was acquired in December for $73.8 million, and the remainder was purchased in January 2013 for $22.2 million.
F-17
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
For the year ended December 31, 2011, the Company purchased five communities for approximately $103.3 million, consisting of the following communities ($ in thousands):
| Communities | Location | Purchase Price | Units | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Delano | Redmond, WA | $ | 14,100 | 66 | ||||||
| Bernard | Seattle, WA | 13,800 | 63 | |||||||
| Bellerive | Los Angeles, CA | 27,000 | 63 | |||||||
| Santee Village | Los Angeles, CA | 17,000 | 73 | |||||||
| 1000 Kiely | Santa Clara, CA | 31,400 | 121 | |||||||
| Total 2011 purchases | $ | 103,300 | 386 |
(b) Sales of Real Estate investments
For the year ended December 31, 2012, the Company sold $28.3 million of real estate which resulted in a gain of $10.9 million.
During the first quarter of 2012, the Company sold Tierra Del Sol/Norte, a 156 unit community located in San Diego, California for $17.2 million for a gain of $7.0 million. The Company also sold Alpine Country, a 108 unit community located in San Diego metropolitan area, for $11.1 million for a gain of $3.9 million.
During the second quarter of 2011, the Company disposed of Woodlawn Colonial, a 159-unit community located in Chula Vista, California for $16.0 million which resulted in a gain of $5.2 million. The property was purchased in 2002 as part of the John M. Sachs, Inc. merger.
During the third quarter 2011, the Company sold the View Pointe land parcel located in Newcastle, Washington for net proceeds of $1.4 million and a gain of $0.2 million.
During the fourth quarter of 2011, the Company sold the Clarendon office building in Woodland Hills, California for $7.4 million which resulted in a gain of $3.2 million on the sale.
No communities were held for sale as of December 31, 2012 or 2011.
(c) Co-investments
The Company has joint venture investments in co-investments which are accounted for under the equity method. The co-investments’ accounting policies are similar to the Company’s accounting policies. The joint ventures own, operate, and develop apartment communities.
Wesco I, LLC
Wesco, I LLC (“Wesco I”) is a 50/50 programmatic joint venture with an institutional partner for a total equity commitment of $300.0 million. Each partner’s equity commitment is $150.0 million. Wesco I will utilize debt as leverage equal to approximately 50% of the underlying real estate. The Company has contributed $150.0 million to Wesco I, and as of December 31, 2012, Wesco I owned nine apartment communities with 2,713 units with an aggregate carrying value of $660.5 million.
During the third quarter 2012, Wesco I acquired Riley Square (formerly Waterstone Santa Clara) for $38.3 million from a related party entity. The property contains 156 units and is located in Santa Clara, California. Wesco I assumed a $17.5 million mortgage loan secured by the property at a fixed rate of 5.2% for a term of 8 years. The interest rate on the loan was unfavorable compared to currently available market rates for mortgage loans, and thus in conjunction with the purchase price allocation, Wesco I recorded a $2.3 million loan premium to reflect the debt at fair value. This results in an effective interest rate for this loan of 3.1%.
F-18
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
During the fourth quarter 2012, Wesco I acquired Madrid, a 230 unit community located in Mission Viejo, California for an undisclosed price (per an agreement with the seller). Also during the quarter, Wesco I acquired Pacific Electric Lofts for an undisclosed amount (per an agreement with the seller). The property contains 314 units along with 22,100 square feet of retail.
For the year ended December 31, 2011, the Company purchased five communities under the Wesco I joint venture for approximately $429.2 million, consisting of the following communities ($ in thousands):
| Communities | Location | Purchase Price | Units | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Arbors Parc Rose | Oxnard, CA | $ | 92,000 | 373 | ||||||
| Redmond Hill | Redmond, WA | 151,300 | 882 | |||||||
| Reveal | Woodland Hills, CA | 132,900 | 438 | |||||||
| Briarwood | Fremont, CA | 27,800 | 160 | |||||||
| The Woods | Fremont, CA | 25,200 | 160 | |||||||
| Total 2011 purchases | $ | 429,200 | 2,013 |
Wesco III, LLC
During 2012, the Company entered into a 50/50 programmatic joint venture, Wesco III LLC (“Wesco III”), with an institutional partner for a total equity commitment from the parties of $120.0 million. Each partner’s equity commitment is $60.0 million. Wesco III will utilize debt as leverage equal to approximately 50% of the underlying real estate. The Company has contributed $10.0 million to Wesco III, and provided a $26.0 million short term bridge loan to Wesco III at a rate of LIBOR + 2.5%.
During the fourth quarter 2012, Wesco III acquired Haver Hill, a 264 unit community located in Fullerton, California for $45.6 million.
Essex Apartment Value Fund II, L.P.
Essex Apartment Value Fund II, L.P. (“Fund II”), has eight institutional investors with combined partner equity contributions of $265.9 million. The Company contributed $75.0 million to Fund II, which represents a 28.2% interest as general partner and limited partner. Fund II utilized debt as leverage equal to approximately 55% upon the initial acquisition of the underlying real estate. Fund II invested in apartment communities in the Company’s targeted West Coast markets with an emphasis on investment opportunities in the Seattle metropolitan area and the San Francisco Bay Area. As of October 2006, Fund II was fully invested and closed for any future acquisitions or development. As of December 31, 2012, Fund II owned seven apartment communities.
During the fourth quarter 2012, Fund II sold seven communities for gross proceeds of $413.0 million, consisting of the following communities ($ in thousands):
| Communities | Location | Purchase Price | Units | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Parcwood | Corona, CA | $ | 42,200 | 312 | ||||||
| Regency Tower | Oakland, CA | 31,000 | 178 | |||||||
| Studio 40-41 | Studio City, CA | 56,300 | 149 | |||||||
| Tower @ 801 | Seattle, WA | 50,100 | 173 | |||||||
| Cielo | Chatsworth, CA | 33,100 | 119 | |||||||
| Echo Ridge | Snoqualmie, WA | 26,500 | 120 | |||||||
| The Enclave | San Jose, CA | 173,750 | 637 | |||||||
| Total 2012 sales | $ | 412,950 | 1,688 |
In conjunction with the sale of the assets, the Company incurred a prepayment penalty on debt obligations of $2.3 million during the fourth quarter 2012 for its pro-rata share of Fund II’s debt. The total gain on the transaction was $106 million, of which the Company’s pro rata share was $29.1 million.
F-19
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
Canada Pension Plan Investment Board – Joint Venture Developments
The Company has entered into four development joint ventures with the Canada Pension Plan Investment Board (“CPPIB”) to develop four apartment communities. For each joint venture the Company holds a 55% non controlling interest in the venture and will earn customary management fees and may earn development, asset, and property management fees. The Company may also earn a promote interest. These co-investments are not variable interest entities since they have sufficient equity without additional subordinated support, and the Company and CPPIB jointly have the power to direct activities that most significantly impact the co-investments’ economic performance. Each of the co-investments between the Company and CPPIB has a single general partner, which is subsidiary consolidated by the Company. However, the Company, as general partner of the co-investments, does not control the co-investments because the limited partners have substantive participating rights. Therefore, the presumption of control by the Company as general partner is overcome by the rights held by CPPIB, and the Company records the co-investments with CPPIB on the equity method of accounting.
The following are the CPPIB development joint ventures:
| Ownership | Estimated | Construction | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Development Projects - CPPIB Joint Venture | Location | % | Units | Total Cost | Start | |||||||||
| Epic - Phase I and II | San Jose, CA | 55% | 569 | $ | 191.6 | Aug-11 | ||||||||
| Connolly Station (fka Linc) | Dublin, CA | 55% | 309 | 94.5 | Aug-11 | |||||||||
| Folsom and Fifth | San Francisco, CA | 55% | 463 | 250.0 | Jun-12 | |||||||||
| Elkhorn | San Mateo, CA | 55% | 197 | 76.1 | Aug-12 | |||||||||
| Total - CPPIB Joint Venture Development Projects | 1,538 | $ | 612.2 |
The Huxley and The Dylan (formerly Fountain and Santa Monica at La Brea) – Joint Venture Developments
During the third quarter 2011, the Company entered into a development joint venture with a regional developer for the construction of The Huxley, a 187 unit community with approximately 18,200 square feet of retail located in West Hollywood, California. The regional developer contributed the land and the Company contributed approximately $9.0 million in cash for a 50% interest in the venture. The joint venture obtained bond financing for the project in the amount of $54.5 million with a maturity date of October 2046 and entered into an interest rate swap transaction with respect to the bonds that terminates in September 2016 that effectively converts the interest rate to the Securities Industry and Financial Market Association index (“SIFMA”) plus 150 basis points through December 2016.
In the fourth quarter 2011, the Company entered into another development joint venture with the same regional developer for the construction of The Dylan, a 184 unit apartment community with approximately 12,750 square feet of retail located in West Hollywood, California. The 50/50 joint venture was created with the contribution of $5.8 million by the Company and the contribution of entitled land by the regional developer. The joint venture secured bond financing in the amount of $59.9 million, maturing in December 2046. The joint venture entered into a total return swap agreement that effectively converts the interest rate to SIFMA plus 150 basis points through December 2016.
The bond financing for these two development projects have joint and several liability for the joint venture partners. Additionally, if either partner fails to make capital contributions to one of these joint ventures in certain instances, then the ownership interest of the defaulting partner in the other joint venture may be reduced.
Expo (formerly Queen Anne) – Joint Venture Development
During December 2010, the Company entered into a development joint venture with a partner who contributed a land parcel during the first quarter of 2011 in return for a 50% interest in the venture and the Company contributed cash equal to the value of the land in return for a 50% interest in the joint venture. The 275-unit community is under development in Seattle, Washington. The Expo joint venture obtained a $45.0 million construction loan at a rate of LIBOR plus 195 basis points, due July 2014, with two one-year extension options exercisable at the joint venture’s option.
F-20
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
Preferred Equity Investments
During the second quarter 2012, the Company made a $14 million preferred equity investment in an apartment community located in Cupertino, California to a related party entity. The investment has a preferred return of 9.5% and matures in May 2016. The preferred equity agreement provides for up to $4 million of additional funding for renovation costs.
During the first quarter 2011, the Company invested $9.7 million as preferred equity investments in two apartment communities located in downtown Los Angeles. The investments are for ten years with a preferred return of 9% for five years, increasing to a minimum of 10% and a maximum of 12.5% thereafter.
During the second quarter of 2011, the Company completed a $13.0 million preferred equity investment in an entity owning an apartment community located in downtown Los Angeles. The Company’s preferred return is 10% and the Company’s investment has a five-year term.
During the third quarter of 2011, the Company sold its preferred stock investments in MyNewPlace.com, a real estate technology company for net proceeds of $1.6 million and a gain of $0.9 million.
During the fourth quarter of 2011, the Company entered into a 50/50 joint venture with an institutional partner, Wesco II, LLC (“Wesco II”), which in turn closed a $175 million preferred equity investment in Park Merced, a 3,221-unit apartment community located in San Francisco, California. The preferred equity investment has a stated term of 7 years and a preferred return of 10.1%. The investment cannot be repaid during the first two years, and there is a prepayment penalty in the third through the fifth year of the investment. The community is encumbered with a $450 million senior mortgage loan with a fixed interest rate of 3.83% due in 2018. The senior loan represents roughly a 60% loan to value, and the projected debt service coverage is approximately 110% including Wesco II’s preferred equity investment (unaudited).
F-21
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
The carrying values of the Company’s co-investments as of December 31, 2012 and 2011 are as follows ($ in thousands):
| 2012 | 2011 | |||||||
|---|---|---|---|---|---|---|---|---|
| Investments in joint ventures accounted for under the equity method of accounting: | ||||||||
| Membership interest in Wesco I | $ | 143,874 | $ | 75,588 | ||||
| Partnership interest in Fund II | 53,601 | 64,294 | ||||||
| Membership interest in Wesco III | 9,941 | - | ||||||
| Membership interest in a limited liability company that owns Essex Skyline at MacArthur Place | - | 24,063 | ||||||
| Total operating co-investments | 207,416 | 163,945 | ||||||
| Membership interests in limited liability companies that own and are developing Epic, Connolly Station, Folsom and Fifth, and Elkhorn | 186,362 | 62,897 | ||||||
| Membership interest in a limited liability company that owns and is developing Expo | 18,752 | 17,981 | ||||||
| Membership interests in limited liability companies that own and are developing The Huxley and The Dylan | 16,552 | 15,194 | ||||||
| Total development co-investments | 221,666 | 96,072 | ||||||
| Membership interest in Wesco II that owns a preferred equity interest in Parkmerced with a perferred return of 10.1% | 91,843 | 88,075 | ||||||
| Preferred interests in limited liability companies that own apartment communities in downtown Los Angeles with preferred returns of 9% and 10% | 22,807 | 22,792 | ||||||
| Preferred interests in related party limited liability company that owns Sage at Cupertino with a preferred return of 9.5% | 14,438 | - | ||||||
| Preferred interest in a related party limited liability company that owns Madison Park at Anaheim with a preferred return of 13% | 13,175 | 12,528 | ||||||
| Total preferred interest investments | 142,263 | 123,395 | ||||||
| Total co-investments | $ | 571,345 | $ | 383,412 |
F-22
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
The combined summarized financial information of co-investments, which are accounted for under the equity method, is as follows ($ in thousands):
| December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2012 | 2011 | |||||||
| Balance sheets: | ||||||||
| Rental properties and real estate under development | $ | 1,745,147 | $ | 1,659,078 | ||||
| Other assets | 168,061 | 63,847 | ||||||
| Total assets | $ | 1,913,208 | $ | 1,722,925 | ||||
| Debt | $ | 820,895 | $ | 900,095 | ||||
| Other liabilities | 91,922 | 48,518 | ||||||
| Equity | 1,000,391 | 774,312 | ||||||
| Total liabilities and partners' equity | $ | 1,913,208 | $ | 1,722,925 | ||||
| Company's share of equity | $ | 571,345 | $ | 383,412 |
| Years ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31, | ||||||||||||
| 2012 | 2011 | 2010 | ||||||||||
| Statements of operations: | ||||||||||||
| Property revenues | $ | 130,128 | $ | 106,386 | $ | 54,699 | ||||||
| Property operating expenses | (55,990 | ) | (43,066 | ) | (24,098 | ) | ||||||
| Net operating income | 74,138 | 63,320 | 30,601 | |||||||||
| Gain on sale of real estate | 106,016 | - | - | |||||||||
| Interest expense | (34,959 | ) | (27,843 | ) | (13,619 | ) | ||||||
| General and administrative | (3,697 | ) | (1,748 | ) | (709 | ) | ||||||
| Depreciation and amortization | (47,917 | ) | (44,412 | ) | (20,850 | ) | ||||||
| Net income (loss) | $ | 93,581 | $ | (10,683 | ) | $ | (4,577 | ) | ||||
| Company's share of net income (loss) | $ | 41,745 | $ | (467 | ) | $ | (1,715 | ) |
(d) Real Estate for Development
The Company defines development activities as new properties that are being constructed, or are newly constructed and, in the case of development communities, are in a phase of lease-up and have not yet reached stabilized operations. As of December 31, 2012, the Company had two consolidated development projects, and seven unconsolidated joint venture development projects aggregating 2,495 units for an estimated total cost of $928.4 million, of which $463.9 million remains to be expended.
As of December 31, 2012, the Company had two consolidated predevelopment projects and one unconsolidated predevelopment joint venture project consisting of 449 units for a total cost of $59.6 million. In addition, the Company owned one land parcel held for future development or sale as of December 31, 2012. The Company expects to fund the development and predevelopment pipeline by using a combination of some or all of the following sources: its working capital, amounts available on its lines of credit, net proceeds from public and private equity and debt issuances, and proceeds from the disposition of properties, if any.
F-23
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
(4) Notes and Other Receivables
Notes receivables, secured by real estate, and other receivables consist of the following as December 31, 2012 and 2011 ($ in thousands):
| 2012 | 2011 | |||||||
|---|---|---|---|---|---|---|---|---|
| Note receivable, secured, bearing interest at 9.8%, paid in full January 2012 | $ | - | $ | 7,331 | ||||
| Note receivable, secured, bearing interest at 5.0%, due November 2012 (1) | - | 12,428 | ||||||
| Note receivable, secured, bearing interest at LIBOR + 8.0%, paid in full December 2012 | - | 6,422 | ||||||
| Note receivable, secured, bearing interest at 8.8%, due February 2014 (2) | 10,800 | 10,928 | ||||||
| Note receivable, secured, bearing interest at 8.0%, due November 2013 | 971 | 971 | ||||||
| Note receivable, secured, effective interest at 9.6%, due February 2014 | 18,499 | 17,646 | ||||||
| Note receivable, secured, bearing interest at 4.0%, due December 2014 (3) | 3,212 | 3,221 | ||||||
| Notes and other receivables from affiliates (4) | 28,896 | 2,734 | ||||||
| Other receivables | 3,785 | 4,688 | ||||||
| $ | 66,163 | $ | 66,369 |
| (1) | $12.4 million note receivable was contributed to the Elkhorn co-investment during the first quarter of 2012. |
|---|
| (2) | During the fourth quarter of 2012, the Company amended the loan to extend the maturity date to February 2014. |
|---|
| (3) | During the first quarter 2012, the Company amended the loan secured by Vacationer RV Park to extend the maturity date to December 2014. Beginning January 1, 2012 the note which has a carrying value of $3.2 million, bears interest at a rate of 4%, and the borrower funds an impound account for capital replacement. |
|---|
| (4) | The Company provided a $26.0 million short-term bridge loan to Wesco III at a rate of LIBOR + 2.5%. |
|---|
(5) Related Party Transactions
Management and other fees from affiliates is comprised primarily of asset management, property management, development and redevelopment fees from co-investments. These fees from affiliates total $10.9 million, $6.1 million, and $4.1 million for the years ended December 31, 2012, 2011, and 2010, respectively, and a property acquisition fee of $0.5 million from the limited liability company that owns Skyline at MacArthur Place for the year ended December 31, 2010. All of these fees are net of intercompany amounts eliminated by the Company.
The Company provided a $26.0 million short-term bridge loan to Wesco III at a rate of LIBOR + 2.5%, to assist with the purchase of Haver Hill.
The Company’s Chairman and founder, Mr. George Marcus, is the Chairman of The Marcus & Millichap Company (“TMMC”), which is a holding company for certain real estate brokerage services and other subsidiary companies. For further discussion of the Company’s policies and procedures with respect to related party transactions see the caption, “Certain Relationships and Related Persons Transactions” in the Company’s 2013 Definitive Proxy Statement which is incorporated by reference in Item 13 of the Company's December 31, 2012 Form 10-K. Fund II paid a brokerage commission totaling $0.4 million to an affiliate of TMMC related to the sale of a property in 2012 and no brokerage commissions during 2011 or 2010, and no brokerage commissions were paid by the Company to TMMC or its affiliates during 2012, 2011, and 2010.
In January 2013, the Company invested $8.6 million as a preferred equity interest investment in an entity affiliated with TMMC that owns an apartment development in Redwood City, California. The investment has a preferred return of 9.5% and matures in January 2016. Independent members of the Company’s Board of Directors that serve on the Nominating and Audit Committees approved the investment in this entity.
During the third quarter of 2012, the Company invested $14.0 million as a preferred equity interest investment in an entity affiliated with TMMC that owns an apartment community in Cupertino, California. The investment has a preferred return of 9.5% and matures in May 2016. The Company will invest an additional $4.0 million in preferred equity to fund renovation costs. Independent directors (other than Mr. Marcus) on the Company’s Board of Directors approved the investment in this entity.
F-24
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
Also during the third quarter of 2012, the Company acquired Montebello, a 248 unit apartment community in Kirkland, Washington for $52.0 million from an entity affiliated with TMMC, and Wesco I acquired Riley Square (formerly Waterstone Santa Clara), a 156 unit apartment community in Santa Clara, California for $38.3 million from an entity affiliated with TMMC. Independent directors (other than Mr. Marcus) on the Company’s Board of Directors approved the acquisitions of Montebello and Riley Square.
During the third quarter of 2010, the Company invested $12.0 million as a preferred equity interest investment in a related party entity that owns a 768-unit apartment community in Anaheim, California. The entity that owns the property is an affiliate of TMMC. The Company’s independent directors (other than Mr. Marcus) approved the investment in this entity. The preferred return for this investment during the first five years is 13% per annum, and the preferred return increases to 15% thereafter.
During the second quarter of 2010, the independent directors (other than Mr. Marcus) approved the partial redemption for cash by the Operating Partnership of limited Operating Partnership units that were held by Mr. Marcus, at $106.76 per unit representing a 2% discount from the closing price of the Company’s common stock on May 17, 2010. The Operating Partnership purchased 187,334 units from Mr. Marcus. Under the Operating Partnership’s partnership agreement, limited partnership units are exchangeable on a one-for-one basis into shares of the Company’s common stock.
An Executive Vice President of the Company has invested $4.0 million for a 3% limited partnership interest in a partnership with the Company that owns Essex Skyline at MacArthur Place. The Executive Vice President’s investment is equal to a pro-rata share of the contributions to the limited partnership. The Executive Vice President’s investment also receives pro-rata distributions resulting from distributable cash generated by the property if and when distributions are made. The Executive Vice President does not participate in fees paid to the Company by the property.
(6) Discontinued Operations
During 2012, the Company sold Tierra Del Sol/Norte, a 156 unit community located in the San Diego, California for $17.2 million for a gain of $7.0 million. Also during 2012, the Company sold Alpine Country, a 108 unit community located in San Diego metropolitan area, for $11.1 million for a gain of $3.9 million. As of December 31, 2012 and 2011 no communities were held for sale.
During 2011, the Company sold one apartment community, Woodlawn Colonial, and one office building, Clarendon, for a total of $23.4 million resulting in gains totaling $8.4 million.
The Company has recorded the gains and operations for these various assets sold described above as part of discontinued operations in the accompanying consolidated statements of operations. The components of discontinued operations are outlined below and include the results of operations for the respective periods that the Company owned such assets, as described above ($ in thousands):
| 2012 | 2011 | 2010 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenues | $ | 608 | $ | 4,081 | $ | 5,453 | ||||||
| Property operating expenses | (260 | ) | (1,861 | ) | (2,342 | ) | ||||||
| Depreciation and amortization | (94 | ) | (1,115 | ) | (1,491 | ) | ||||||
| Expenses | (354 | ) | (2,976 | ) | (3,833 | ) | ||||||
| Operating income from real estate sold | 254 | 1,105 | 1,620 | |||||||||
| Gain on sale of real estate | 10,870 | 8,382 | - | |||||||||
| Internal disposition costs | (1,087 | ) | (839 | ) | - | |||||||
| Income from discontinued operations | $ | 10,037 | $ | 8,648 | $ | 1,620 |
F-25
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
(7) Mortgage Notes Payable
Mortgage notes payable consist of the following as of December 31, 2012 and 2011 ($ in thousands):
| 2012 | 2011 | |||||||
|---|---|---|---|---|---|---|---|---|
| Fixed rate mortgage notes payable | $ | 1,363,731 | $ | 1,502,208 | ||||
| Variable rate mortgage notes payable(1) | 201,868 | 243,650 | ||||||
| $ | 1,565,599 | $ | 1,745,858 | |||||
| Number of properties securing mortgage notes | 55 | 68 | ||||||
| Remaining terms | 1-27 years | 1-28 years | ||||||
| Weighted average interest rate | 5.4 | % | 5.4 | % |
The aggregate scheduled principal payments of mortgage notes payable are as follows ($ in thousands):
| 2013 | $ | 57,621 | ||
|---|---|---|---|---|
| 2014 | 47,994 | |||
| 2015 | 68,926 | |||
| 2016 | 12,656 | |||
| 2017 | 185,301 | |||
| Thereafter | 1,193,101 | |||
| $ | 1,565,599 |
| (1) | Variable rate mortgage notes payable consists of multifamily housing mortgage revenue bonds secured by deeds of trust on rental properties and guaranteed by collateral pledge agreements, payable monthly at a variable rate as defined in the Loan Agreement (approximately 1.9% at December 2012 and 2.0% at December 2011) plus credit enhancement and underwriting fees ranging from approximately 1.2% to 1.9%. Among the terms imposed on the properties, which are security for the bonds, is a requirement that 20% of the units are subject to tenant income criteria. Principal balances are due in full at various maturity dates from September 2013 through December 2039. Of these bonds $187.8 million are subject to various interest rate cap agreements which limit the maximum interest rate to such bonds. |
|---|
For the Company’s mortgage notes payable as of December 31, 2012, monthly interest expense and principal amortization, excluding balloon payments, totaled approximately $7.0 million and $2.0 million, respectively. Second deeds of trust accounted for $87.3 million of the $1.6 billion in mortgage notes payable as of December 31, 2012. Repayment of debt before the scheduled maturity date could result in prepayment penalties. The prepayment penalty on the majority of the Company’s mortgage notes payable are computed by the greater of (a) 1% of the amount of the principal being prepaid or (b) the present value of the mortgage note payable which is calculated by multiplying the principal being prepaid by the difference between the interest rate of the mortgage note and the stated yield rate on a specified U.S. treasury security as defined in the mortgage note agreement. (See Schedule III for a list of mortgage loans related to each community in the Company’s Portfolio.)
(8) Unsecured Debt and Lines of Credit
Unsecured debt and lines of credit consist of the following as of December 31, 2012 and 2011 ($ in thousands):
| Weighted Average | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Maturity | ||||||||||||
| 2012 | 2011 | In Years | ||||||||||
| Bonds private placement - fixed rate | $ | 465,000 | $ | 265,000 | 6.2 | |||||||
| Term loan - variable rate | 350,000 | 200,000 | 4.2 | |||||||||
| Bonds public offering - fixed rate | 297,084 | - | 9.6 | |||||||||
| Unsecured debt | 1,112,084 | 465,000 | ||||||||||
| Lines of credit | 141,000 | 150,000 | 3.0 | |||||||||
| Total unsecured debt | $ | 1,253,084 | $ | 615,000 | ||||||||
| Weighted average interest rate on fixed rate unsecured bonds | 4.2 | % | 4.5 | % | ||||||||
| Weighted average interest rate on variable rate term loan | 2.7 | % | 2.7 | % | ||||||||
| Weighted average interest rate on line of credit | 2.3 | % | 2.5 | % |
F-26
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
The following is a summary of the Company’s unsecured private placement bonds as of December 31, 2012 and 2011 ($ in thousands):
| Coupon | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Maturity | 2012 | 2011 | Rate | ||||||||||
| Senior unsecured private placement notes | March 2016 | $ | 150,000 | $ | 150,000 | 4.36 | % | ||||||
| Senior unsecured private placement notes | September 2017 | 40,000 | 40,000 | 4.50 | % | ||||||||
| Senior unsecured private placement notes | December 2019 | 75,000 | 75,000 | 4.92 | % | ||||||||
| Senior unsecured private placement notes | April 2021 | 100,000 | - | 4.27 | % | ||||||||
| Senior unsecured private placement notes | June 2021 | 50,000 | - | 4.30 | % | ||||||||
| Senior unsecured private placement notes | August 2021 | 50,000 | - | 4.37 | % | ||||||||
| $ | 465,000 | $ | 265,000 |
The Company has two lines of credit aggregating $525.0 million as of December 31, 2012. The Company had a $500.0 million unsecured line of credit that was increased to $600.0 million in January 2013. As of December 31, 2012 there was a $141.0 million balance on this unsecured line. The underlying interest rate on the $500.0 million facility is based on a tiered rate structure tied to Fitch and S&P ratings on the credit facility and the rate was LIBOR plus 1.075% as of December 31, 2012. This facility matures in December 2015 with two one-year extensions, exercisable by the Company. The Company has a working capital unsecured line of credit agreement for $25.0 million. This facility matures in January 2014, with a one year extension option. As of December 31, 2012 there was no balance outstanding on this unsecured line. The underlying interest rate on the $25.0 million line is based on a tiered rate structure tied to Fitch and S&P ratings on the credit facility of LIBOR plus 1.075%.
As of December 31 2012, the Company had $465 million of unsecured bonds outstanding at an average effective interest rate of 4.5%. During the second quarter of 2012, the Company issued through private placements, $100 million of bonds and $50 million of bonds at 4.27% and 4.30%, respectively, due in 2021, and during the third quarter of 2012, $50 million of bonds at 4.37% due in 2021.
As of December 31, 2012, the Company had a $350 million unsecured term loan outstanding at an average interest rate of 2.7%. The term loan has a variable interest rate of LIBOR plus 1.2%. During the fourth quarter of 2012, the Company increased the size of the term loan from $200 million to $350 million. The Company entered into interest rate swap contracts for a term of five years with a notional amount totaling $300 million, which effectively converted the interest rate on the $300 million of the term loan to a fixed rate.
During the third quarter 2012, the Company issued $300.0 million of senior unsecured notes due August 2022 with a coupon rate of 3.625% per annum and are payable on February 15th and August 15th of each year, beginning February 15, 2013 (the 2022 Notes). The 2022 Notes were offered to investors at a price of 98.99% of par value. The 2022 Notes are general unsecured senior obligations of the Operating Partnership, rank equally in right of payment with all other senior unsecured indebtedness of the Operating Partnership and are fully and unconditionally guaranteed by Essex Property Trust, Inc.
On August 15th, 2012, in connection with the 2022 Notes issuance, the Company entered into a registration rights agreement whereby the Operating Partnership agreed to conduct an offer to exchange the 2022 Notes for a new series of publicly registered notes with substantially identical terms. If the Operating Partnership does not fulfill certain of its obligation under the registration rights agreement, it will be required to pay registration default damages to the holders of the 2022 Notes. No separate contingent obligation was recorded as no registration default damages became probable as of December 31, 2012.
The Company’s unsecured line of credit and unsecured debt agreements contain debt covenants related to limitations on indebtedness and liabilities and maintenance of minimum levels of consolidated earnings before depreciation, interest and amortization. The Company was in compliance with the debt covenants as of December 31, 2012 and 2011.
(9) Derivative Instruments and Hedging Activities
The Company uses interest rate swaps and interest rate cap contracts to manage certain interest rate risks. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the 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 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.
F-27
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
The Company has entered into interest rate swap contracts with an aggregate notional amount of $300 million that effectively fixed the interest rate on $300 million of the $350 million unsecured term loan at 2.7% through November 2016. These derivatives qualify for hedge accounting.
As of December 31, 2012 the Company also had twelve interest rate cap contracts totaling a notional amount of $187.8 million that qualify for hedge accounting as they effectively limit the Company’s exposure to interest rate risk by providing a ceiling on the underlying variable interest rate for $201.9 million of the Company’s tax exempt variable rate debt.
As of December 31, 2012 and December 31, 2011 the aggregate carrying value of the interest rate swap contracts was a liability of $6.6 million and $1.4 million, respectively. The aggregate carrying value of the interest rate cap contracts was zero on the balance sheet as of December 31, 2012, and was an asset of $0.2 million as of December 31, 2011.
During the third quarter 2012, the Company terminated a swap transaction with respect to the $38.0 million of tax-exempt bonds for the 101 San Fernando apartment community with Citibank because the bonds were repurchased by the Company at par.
During 2011, the Company settled its remaining $20.0 million forward starting swap contract for $2.3 million which was applied to the $32.0 million mortgage obtained in February 2011, increasing the effective borrowing rate from 5.4% to 6.2%.
During 2010, the Company settled $355 million in forward-starting swap contracts for $81.3 million, which was applied to 10-year mortgage loans obtained in 2010. The settlement of the forward-starting swaps increased the average effective interest rate on the 2010 mortgage loans from 4.5% to 6.8%. During 2010, the Company incurred $2.3 million in expense related to the ineffectiveness of certain of the settled forward-starting swap hedges, which is included in impairment and other charges in the accompanying consolidated statement of operations for the year ended December 31, 2010. No hedge ineffectiveness on cash flow hedges was incurred during the years ended December 31, 2012 and 2011.
(10) Lease Agreements
As of December 31, 2012 the Company is a lessor for four commercial buildings and the commercial portions of 20 mixed use communities. The tenants’ lease terms expire at various times through 2028. The future minimum non-cancelable base rent to be received under these operating leases for each of the years ending after December 31 is summarized as follows ($ in thousands):
| Future | ||||
|---|---|---|---|---|
| Minimum | ||||
| Rent | ||||
| 2013 | $ | 8,592 | ||
| 2014 | 8,395 | |||
| 2015 | 6,933 | |||
| 2016 | 4,512 | |||
| 2017 | 2,781 | |||
| Thereafter | 14,562 | |||
| $ | 45,775 |
F-28
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
(11) Equity Transactions
Preferred Securities Offerings
As of December 31, 2012, the Company has the following cumulative preferred securities outstanding:
| Shares | Shares | Liquidation | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Description | Issue Date | Authorized | Outstanding | Preference | ||||||
| 7.125% Series H | April 2011 | 8,000,000 | 2,950,000 | $ | 73,750 | |||||
| 4.875% Series G | July 2006 | 5,980,000 | 178,249 | $ | 4,456 |
During the second quarter of 2011, the Company issued 2,950,000 shares of 7.125% Series H Cumulative Redeemable Preferred Stock (“Series H”) at a price of $25.00 per share for net proceeds of $71.2 million, net of costs and original issuance discounts. The Series H has no maturity date and generally may not be called by the Company before April 13, 2016. Net proceeds from the Series H offering were used to redeem all of the 7.875% Series B Cumulative Redeemable Preferred Units of Essex Portfolio, L.P. (“Series B”) with a liquidation value of $80.0 million, which resulted in excess of cash paid of $1.0 million over the carrying value of Series B due to deferred offering costs and original issuance discounts.
Also during the second quarter of 2011, the Company redeemed its 7.8125% Series F Preferred Stock (“Series F”) at liquidation value for $25.0 million which resulted in excess of cash paid of $0.9 million over the carrying value of Series F due to deferred offering costs and original issuance discounts.
During the third quarter of 2006, the Company sold 5,980,000 shares of 4.875% Series G Cumulative Convertible Preferred Stock (“Series G”) for gross proceeds of $149.5 million. Holders may convert Series G into shares of the Company’s common stock subject to certain conditions. The conversion rate was initially .1830 shares of common stock per the $25 share liquidation preference, which is equivalent to an initial conversion price of approximately $136.62 per share of common stock (the conversion rate will be subject to adjustment upon the occurrence of specified events). The Company may, under certain circumstances, cause some or all of the Series G to be converted into that number of shares of common stock at the then prevailing conversion rate. As of December 31, 2012 and 2011, shares of Series G with an aggregate liquidation value of $4.5 million were outstanding.
Common Stock Offerings
During 2012, the Company sold 2.4 million shares of common stock for $357.7 million, net of fees and commissions, at an average price of $150.26. During the first quarter of 2013, through February 21, 2013, the Company sold 758,644 shares of common stock for $114.0 million, net of fees and commissions at an average price of $151.70.
During 2011 and 2010, the Company issued 2.5 million and 2.4 million shares of common stock for $323.9 million and $251.4 million, net of fees and commissions, respectively. The Company used the net proceeds from such sales to pay down debt, repurchase preferred stock, fund redevelopment and development pipelines, fund acquisitions, and for general corporate purposes.
F-29
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
(12) Net Income Per Common Share
Basic and diluted income from continuing operations per share are calculated as follows for the years ended December 31 ($ in thousands, except share and per share amounts):
| 2012 | 2011 | 2010 | ||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Weighted- | Per | Weighted- | Per | Weighted- | Per | |||||||||||||||||||||||||||||||
| average | Common | average | Common | average | Common | |||||||||||||||||||||||||||||||
| Common | Share | Common | Share | Common | Share | |||||||||||||||||||||||||||||||
| Income | Shares | Amount | Income | Shares | Amount | Income | Shares | Amount | ||||||||||||||||||||||||||||
| Basic: | ||||||||||||||||||||||||||||||||||||
| Income from continuing operations available to common stockholders | $ | 110,373 | 35,032,491 | $ | 3.15 | $ | 32,256 | 32,541,792 | $ | 0.99 | $ | 32,251 | 29,667,064 | $ | 1.09 | |||||||||||||||||||||
| Income from discontinued operations available to common stockholders | 9,439 | 35,032,491 | 0.27 | 8,112 | 32,541,792 | 0.25 | 1,513 | 29,667,064 | 0.05 | |||||||||||||||||||||||||||
| 119,812 | 3.42 | 40,368 | 1.24 | 33,764 | 1.14 | |||||||||||||||||||||||||||||||
| Effect of Dilutive Securities (1) | - | 92,430 | - | 86,922 | - | 67,319 | ||||||||||||||||||||||||||||||
| Diluted: | ||||||||||||||||||||||||||||||||||||
| Income from continuing operations available to common stockholders (1) | $ | 110,373 | 35,124,921 | $ | 3.14 | $ | 32,256 | 32,628,714 | $ | 0.99 | $ | 32,251 | 29,734,383 | $ | 1.09 | |||||||||||||||||||||
| Income from discontinued operations available to common stockholders | 9,439 | 35,124,921 | 0.27 | 8,112 | 32,628,714 | 0.25 | 1,513 | 29,734,383 | 0.05 | |||||||||||||||||||||||||||
| $ | 119,812 | $ | 3.41 | $ | 40,368 | $ | 1.24 | $ | 33,764 | $ | 1.14 |
| (1) | Weighted convertible limited partnership units of 2,219,046, 2,231,807 and 2,293,886, which include vested Series Z incentive units, for the years ended December 31, 2012, 2011 and 2010, respectively, were not included in the determination of diluted EPS because they were anti-dilutive. The Company has the ability to redeem DownREIT limited partnership units for cash and does not consider them to be potentially dilutive securities. |
|---|
Stock options of 263,613; 175,500; and 123,164; for the years ended December 31, 2012, 2011, and 2010, respectively, were not included in the diluted earnings per share calculation because the exercise price of these options were greater than the average market price of the common shares for the years ended and, therefore, were anti-dilutive.
All shares of cumulative convertible preferred stock Series G have been excluded from diluted earnings per share for the years ended 2012, 2011, and 2010 respectively, as the effect was anti-dilutive.
(13) Equity Based Compensation Plans
Stock Options and Restricted Stock
The Essex Property Trust, Inc. 2004 Stock Incentive Plan provides incentives to attract and retain officers, directors and key employees. The Stock Incentive Plan provides for the grants of options to purchase a specified number of shares of common stock or grants of restricted shares of common stock. Under the Stock Incentive Plan, the total number of shares available for grant is approximately 1,200,000. The 2004 Stock Incentive Plan is administered by the Compensation Committee of the Board of Directors. The Compensation Committee is comprised of independent directors. The Compensation Committee is authorized to establish the exercise price; however, the exercise price cannot be less than 100% of the fair market value of the common stock on the grant date. The Company’s options have a life of seven to ten years. Option grants for officers and employees fully vest between one year and five years after the grant date.
Stock-based compensation expense for options and restricted stock under the fair value method totaled $2.0 million, $1.5 million, and $1.0 million for years ended December 31, 2012, 2011 and 2010 respectively. Stock-based compensation capitalized for options and restricted stock totaled $0.3 million for the year ended December 31, 2012, and $0.2 million for each of the years ended December 31, 2011 and 2010. The intrinsic value of the options exercised totaled $2.9 million, $3.8 million, and $2.9 million, for the years ended December 31, 2012, 2011, and 2010 respectively. The intrinsic value of the options outstanding and fully vested totaled $9.9 million, $10.6 million, and $7.7 million, for the years ended December 31, 2012, 2011 and 2010, respectively.
Total unrecognized compensation cost related to unvested share-based compensation granted for stock options totaled $3.2 million as of December 31, 2012. The unrecognized compensation cost is expected to be recognized over a period of 1 to 5 years for the stock option plans.
F-30
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
The average fair value of stock options granted for the years ended December 31, 2012, 2011 and 2010 was $12.64, $14.49 and $18.39, respectively. The stock options granted during the fourth quarter of 2012 included a $75 cap on the appreciation of the market price over the exercise price. The stock options granted during 2011 and through the third quarter of 2012 included a $100 cap on the appreciation of the market price over the exercise price. The fair value of stock options was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants:
| 2012 | 2011 | 2010 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Stock price | $143.95 | $131.87 | $107.21 | ||||||
| Risk-free interest rates | 1.16% | 2.23% | 3.50% | ||||||
| Expected lives | 5 - 10 years | 10 years | 10 years | ||||||
| Volatility | 20.05% | 19.63% | 22.00% | ||||||
| Dividend yield | 3.26% | 3.29% | 3.85% |
A summary of the status of the Company’s stock option plans as of December 31, 2012, 2011, and 2010 and changes during the years ended on those dates is presented below:
| 2012 | 2011 | 2010 | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Weighted- | Weighted- | Weighted- | ||||||||||||||||||||||
| average | average | average | ||||||||||||||||||||||
| exercise | exercise | exercise | ||||||||||||||||||||||
| Shares | price | Shares | price | Shares | price | |||||||||||||||||||
| Outstanding at beginning of year | 415,020 | $ | 109.71 | 300,642 | $ | 88.11 | 378,542 | $ | 82.08 | |||||||||||||||
| Granted | 263,113 | 143.95 | 197,500 | 131.87 | 18,214 | 107.21 | ||||||||||||||||||
| Exercised | (41,603 | ) | 77.21 | (83,122 | ) | 84.24 | (78,381 | ) | 63.97 | |||||||||||||||
| Forfeited and canceled | (13,096 | ) | 128.36 | - | 0.00 | (17,733 | ) | 105.40 | ||||||||||||||||
| Outstanding at end of year | 623,434 | 125.96 | 415,020 | 109.71 | 300,642 | 88.11 | ||||||||||||||||||
| Options exercisable at year end | 250,620 | 107.12 | 219,820 | 92.31 | 265,770 | 86.28 |
The following table summarizes information about stock options outstanding as of December 31, 2012:
| Options outstanding | Options exercisable | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Number | Weighted- | Number | |||||||||||||||
| outstanding | average | Weighted- | exercisable | Weighted- | |||||||||||||
| as of | remaining | average | as of | average | |||||||||||||
| Range of | December 31, | contractual | exercise | December 31, | exercise | ||||||||||||
| exercise prices | 2012 | life | price | 2012 | price | ||||||||||||
| $51.01 - 79.05 | 34,973 | 3.0 years | $ | 69.97 | 34,973 | $ | 69.97 | ||||||||||
| 79.25 - 125.84 | 144,498 | 3.9 years | 99.10 | 130,498 | 98.69 | ||||||||||||
| 126.73 - 155.34 | 443,963 | 7.9 years | 139.10 | 85,149 | 135.31 | ||||||||||||
| 623,434 | 6.7 years | 125.96 | 250,620 | 107.12 |
During 2012, 2011, and 2010 the Company issued 1,614, 1,540, and 14,415 shares of restricted stock, respectively. The unrecognized compensation cost granted under the restricted stock program of $1.9 million as of December 31, 2012 will be recognized straight-line over a period of 1 to 7 years.
F-31
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
The following table summarizes information about restricted stock outstanding as of December 31, 2012, 2011 and 2010 and changes during the years ended:
| 2012 | 2011 | 2010 | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Weighted- | Weighted- | Weighted- | ||||||||||||||||||||||
| average | average | average | ||||||||||||||||||||||
| grant | grant | grant | ||||||||||||||||||||||
| Shares | price | Shares | price | Shares | price | |||||||||||||||||||
| Unvested at beginning of year | 35,219 | $ | 98.57 | 44,877 | $ | 102.46 | 37,727 | $ | 99.43 | |||||||||||||||
| Granted | 1,614 | 149.68 | 1,540 | 134.44 | 14,415 | 109.62 | ||||||||||||||||||
| Vested | (8,641 | ) | 106.69 | (9,532 | ) | 104.91 | (6,126 | ) | 102.27 | |||||||||||||||
| Forfeited and canceled | (3,270 | ) | 102.00 | (1,666 | ) | 94.35 | (1,139 | ) | 93.92 | |||||||||||||||
| Unvested at end of year | 24,922 | 104.52 | 35,219 | 98.57 | 44,877 | 102.46 |
Long Term Incentive Plan – Z Units
The Company has adopted an incentive program involving the issuance of Series Z Incentive Units and Series Z-1 Incentive Units (collectively referred to as “Z Units”) of limited partnership interest in the Operating Partnership. Vesting in the Z Units is based on performance criteria established in the plan. The criteria can be revised at the beginning of the year by the Board's Compensation Committee if the Committee deems that the plan's criterion is unachievable for any given year. The sale of Z Units is contractually prohibited. Z Units are convertible into Operating Partnership units which are exchangeable for shares of the Company’s common stock that have marketability restrictions. The estimated fair value of a Z Unit is determined on the grant date and considers the company's current stock price, the dividends that are not paid on unvested units and a marketability discount for the 8 to 15 years of illiquidity. Compensation expense is calculated by multiplying estimated vesting increases for the period by the estimated fair value as of the grant date less its $1.00 per unit purchase price.
Stock-based compensation expense for Z Units under the fair value method totaled approximately $2.1 million, $1.5 million and $2.3 million for the years ended December 31, 2012, 2011 and 2010, respectively. Stock-based compensation capitalized for Z Units totaled approximately $0.5 million, $0.3 million, and $0.6 million, for the years ended December 31, 2012, 2011, and 2010, respectively. The intrinsic value of the unvested Z Units totaled $20.8 million as of December 31, 2012. Total unrecognized compensation cost related to the unvested Z Units under the Z Units plans totaled $7.3 million as of December 31, 2012. The unamortized cost is recognized up to 14 years subject to the achievement of the stated performance criteria.
The issuance of Z Units is administered by the Compensation Committee which has the authority to select participants and determine the awards to be made up to a maximum of 600,000 Z Units. Effective January 1 of each year for each participating executive who remains employed by the Company if the Company has met a specified “funds from operations” per share target, or such other target as the Compensation Committee deems appropriate, for the prior year, up to a maximum conversion ratchet of 100%. Z units issued in 2011 and 2010 are discussed below.
During 2010, the Operating Partnership issued 108,000 Series Z-1 Incentive Units (the “2010 Z-1 Units”) of limited partner interest to twenty executives of the Company. The conversion ratchet (accounted for as vesting) of the 2010 Z-1 Units into common units, increased to 20 percent effective January 1, 2011 because the Company achieved the FFO minimum target of $4.75 per diluted share in 2010. Once the units are vested, Z-1 Unit holders receive quarterly distributions of approximately the dividend rate paid on common shares. Each year thereafter, vesting of the 2010 Z-1 Units will be consistent with the Company’s annual FFO growth, but is not to be less than zero or greater than 14 percent.
During 2011, the Operating Partnership issued 46,500 Series Z-1 Incentive Units (the “2011 Z-1 Units”) of limited partner interest to fourteen executives of the Company in exchange for cash from eight executive officers of the Company, and a capital commitment from the remaining six executives of $1.00 per 2011 Z-1 Unit. The 2011 Z-1 Units are convertible one-for-one into common units of the Operating Partnership (which, in turn, are convertible into common stock of the Company) upon the earlier to occur of 100 percent vesting of the units or the year 2026. The conversion ratchet (accounted for as vesting) of the 2011 Z-1 Units into common units, increased to 10 percent effective January 1, 2012 because the Company achieved the FFO minimum target of $5.65 per diluted share in 2011. Each year thereafter, vesting of the 2011 Z-1 Units will be consistent with the Company’s annual FFO growth, but is not to be less than zero or greater than 14 percent. The 2011 Z-1 Unit holders are entitled to receive approximately the same as dividends distributed to common stockholders on vested units.
F-32
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
The following table summarizes information about the Z Units outstanding as of December 31, 2012 ($ in thousands):
| Long Term Incentive Plan - Z Units | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Aggregate | Weighted- | |||||||||||||||||||||
| Intrinsic | Weighted- | average | ||||||||||||||||||||
| Total | Total | Value | Total | average | Remaining | |||||||||||||||||
| Vested | Unvested | of Unvested | Outstanding | Grant-date | Contractual | |||||||||||||||||
| Units | Units | Units | Units | Fair Value | Life | |||||||||||||||||
| Balance, December 2009 | 288,651 | 105,881 | $ | 8,751 | 394,532 | $ | 39.36 | 8.2 years | ||||||||||||||
| Granted | - | 108,000 | 108,000 | |||||||||||||||||||
| Vested | 37,629 | (37,629 | ) | - | ||||||||||||||||||
| Cancelled | (4,350 | ) | (4,350 | ) | ||||||||||||||||||
| Balance, December 2010 | 326,280 | 171,902 | 19,463 | 498,182 | 54.15 | 11.2 years | ||||||||||||||||
| Granted | - | 46,500 | 46,500 | |||||||||||||||||||
| Vested | 44,520 | (44,520 | ) | - | ||||||||||||||||||
| Converted | (191,718 | ) | - | (191,718 | ) | |||||||||||||||||
| Cancelled | - | (3,863 | ) | (3,863 | ) | |||||||||||||||||
| Balance, December 2011 | 179,082 | 170,019 | 23,719 | 349,101 | 58.17 | 12.3 years | ||||||||||||||||
| Granted | - | - | - | |||||||||||||||||||
| Vested | 28,163 | (28,163 | ) | - | ||||||||||||||||||
| Converted | (16,541 | ) | - | (16,541 | ) | |||||||||||||||||
| Cancelled | - | (1,813 | ) | (1,813 | ) | |||||||||||||||||
| Balance, December 2012 | 190,704 | 140,043 | $ | 20,800 | 330,747 | $ | 58.44 | 11.3 years |
F-33
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
(14) Segment Information
The Company defines its reportable operating segments as the three geographical regions in which its communities are located: Southern California, Northern California and Seattle Metro. Excluded from segment revenues are communities classified in discontinued operations, management and other fees from affiliates, and interest and other income. Non-segment revenues and net operating income included in the following schedule also consist of revenue generated from commercial properties. Other non-segment assets include real estate under development, co-investments, cash and cash equivalents, marketable securities, notes and other receivables, prepaid expenses and other assets and deferred charges.
The revenues and net operating income for each of the reportable operating segments are summarized as follows for the years ended December 31, 2012, 2011, and 2010 ($ in thousands):
| Years Ended December 31, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2012 | 2011 | 2010 | ||||||||||
| Revenues: | ||||||||||||
| Southern California | $ | 249,524 | $ | 223,304 | $ | 200,541 | ||||||
| Northern California | 175,325 | 149,457 | 127,302 | |||||||||
| Seattle Metro | 94,708 | 81,967 | 70,348 | |||||||||
| Other real estate assets | 12,379 | 10,985 | 7,537 | |||||||||
| Total property revenues | $ | 531,936 | $ | 465,713 | $ | 405,728 | ||||||
| Net operating income: | ||||||||||||
| Southern California | $ | 166,162 | $ | 146,519 | $ | 132,150 | ||||||
| Northern California | 120,540 | 99,047 | 82,288 | |||||||||
| Seattle Metro | 62,076 | 52,173 | 43,006 | |||||||||
| Other real estate assets | 9,070 | 8,740 | 5,120 | |||||||||
| Total net operating income | 357,848 | 306,479 | 262,564 | |||||||||
| Depreciation | (170,592 | ) | (151,428 | ) | (128,221 | ) | ||||||
| Interest expense before amortization | (100,244 | ) | (91,694 | ) | (82,756 | ) | ||||||
| Amortization expense | (11,644 | ) | (11,474 | ) | (4,828 | ) | ||||||
| Management and other fees from affiliates | 11,489 | 6,780 | 4,551 | |||||||||
| General and administrative | (23,307 | ) | (20,694 | ) | (23,255 | ) | ||||||
| Cost of management and other fees | (6,513 | ) | (4,610 | ) | (2,707 | ) | ||||||
| Impairment and other charges | - | - | (2,302 | ) | ||||||||
| Interest and other income | 13,833 | 17,139 | 27,841 | |||||||||
| Loss on early retirement of debt | (5,009 | ) | (1,163 | ) | (10 | ) | ||||||
| Equity income (loss) income from co-investments | 41,745 | (467 | ) | (1,715 | ) | |||||||
| Gain on remeasurement of co-investment | 21,947 | - | - | |||||||||
| Income before discontinued operations | $ | 129,553 | $ | 48,868 | $ | 49,162 |
F-34
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
Total assets for each of the reportable operating segments are summarized as follows as of December 31, 2012 and 2011 ($ in thousands):
| As of December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| Assets: | 2012 | 2011 | ||||||
| Southern California | $ | 1,675,265 | $ | 1,478,018 | ||||
| Northern California | 1,489,095 | 1,241,320 | ||||||
| Seattle Metro | 699,465 | 579,612 | ||||||
| Other real estate assets | 88,330 | 94,088 | ||||||
| Net reportable operating segments - real estate assets | 3,952,155 | 3,393,038 | ||||||
| Real estate under development | 66,851 | 44,280 | ||||||
| Co-investments | 571,345 | 383,412 | ||||||
| Cash and cash equivalents, including restricted cash | 42,126 | 35,463 | ||||||
| Marketable securities | 92,713 | 74,275 | ||||||
| Notes and other receivables | 66,163 | 66,369 | ||||||
| Other non-segment assets | 55,870 | 40,127 | ||||||
| Total assets | $ | 4,847,223 | $ | 4,036,964 |
(15) 401(k) Plan
The Company has a 401(k) benefit plan (the “Plan”) for all full-time employees who have completed six months of service. Employee contributions are limited by the maximum allowed under Section 401(k) of the Internal Revenue Code. The Company matches the employee contributions for non-highly compensated personnel, up to 50% of their contribution up to a specified maximum. Company contributions to the Plan were approximately $0.2 million, $0.3 million, and $0.3 million for the years ended December 31, 2012, 2011, and 2010, respectively.
(16) Commitments and Contingencies
As of December 31, 2012, the Company had six non-cancelable land leases for certain apartment communities and buildings that expire between 2027 and 2080. Land lease payments are typically the greater of a stated minimum or a percentage of gross rents generated by these apartment communities. Total minimum lease commitments, under land leases and operating leases, are approximately $1.7 million per year for the next five years.
To the extent that an environmental matter arises or is identified in the future that has other than a remote risk of having a material impact on the financial statements, the Company will disclose the estimated range of possible outcomes, and, if an outcome is probable, accrue an appropriate liability for remediation and other potential liability. The Company will consider whether such occurrence results in an impairment of value on the affected property and, if so, impairment will be recognized.
Except with respect to three communities, the Company has no indemnification agreements from third parties for potential environmental clean-up costs at its communities. The Company has no way of determining at this time the magnitude of any potential liability to which it may be subject arising out of unknown environmental conditions or violations with respect to the communities formerly owned by the Company. No assurance can be given that existing environmental studies with respect to any of the communities reveal all environmental liabilities, that any prior owner or operator of a Property did not create any material environmental condition not known to the Company, or that a material environmental condition does not otherwise exist as to any one or more of the communities. The Company has limited insurance coverage for the types of environmental liabilities described above.
The Company has entered into transactions that may require the Company to pay the tax liabilities of the partners in the Operating Partnership or in the DownREIT entities. These transactions are within the Company’s control. Although the Company plans to hold the contributed assets or defer recognition of gain on their sale pursuant to like-kind exchange rules under Section 1031 of the Internal Revenue Code the Company can provide no assurance that it will be able to do so and if such tax liabilities were incurred they may to have a material impact on the Company’s financial position.
F-35
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
There have been an increasing number of lawsuits against owners and managers of apartment communities alleging personal injury and property damage caused by the presence of mold in residential real estate. Some of these lawsuits have resulted in substantial monetary judgments or settlements. The Company has been sued for mold related matters and has settled some, but not all, of such matters. Insurance carriers have reacted to mold related liability awards by excluding mold related claims from standard policies and pricing mold endorsements at prohibitively high rates. The Company has, however, purchased pollution liability insurance, which includes some coverage for mold. The Company has adopted policies to promptly address and resolve reports of mold when it is detected, and to minimize any impact mold might have on residents of the property. The Company believes its mold policies and proactive response to address any known existence, reduces its risk of loss from these cases. There can be no assurances that the Company has identified and responded to all mold occurrences, but the company promptly addresses all known reports of mold. Liabilities resulting from such mold related matters are not expected to have a material adverse effect on the Company’s financial condition, results of operations or cash flows. As of December 31, 2012, potential liabilities for mold and other environmental liabilities are not quantifiable and an estimate of possible loss cannot be made.
The Company carries comprehensive liability, fire, extended coverage and rental loss insurance for each of the communities. Under comprehensive liability claims, the Company has insurance to cover claims in excess of $100,000 per incident. Under property casualty claims, the Company reinsures the primary carrier for losses up to $5.0 million deductible per incident. There are, however, certain types of extraordinary losses, such as, for example, losses from terrorism and earthquake, for which the Company does not have insurance. Substantially all of the communities are located in areas that are subject to earthquakes.
The Company provided a loan and construction completion guarantee to the lender in order to fulfill the lender’s standard financing requirements related to the construction of the Expo community. The outstanding balance for the construction loan is included in the debt line item in the balance sheet of the co-investments included in Note 3. The construction completion guarantee is for the life of the loan, which is scheduled to mature on July 1, 2014, with two, one-year extension options at the Expo joint venture’s option. As of December 31, 2012, the Company was in compliance with all terms of the construction loan and the construction of the community is expected to be completed on time and within budget. The maximum exposure of the guarantee as of December 31, 2012 was $70.0 million based on the construction costs that were budgeted to be incurred to complete the construction.
The Company provided a payment guarantee to the counterparties in relation to the total return swaps entered into by the joint venture responsible for the development of The Huxley (formerly Fountain at La Brea) and The Dylan (formerly Santa Monica at La Brea) communities. Further the Company has guaranteed completion of development and made certain debt service guarantees for The Huxley and The Dylan. The outstanding balance for the loans is included in the debt line item in the balance sheet of the co-investments included in Note 3. The payment guarantee is for the payment of the amounts due to the counterparty related total return swaps which are scheduled to mature in September and December 2016. The maximum exposure of the guarantee as of December 31, 2012 was $55.7 million based on the aggregate outstanding debt amount.
The Company is subject to various other lawsuits in the normal course of its business operations. Such lawsuits are not expected to have a material adverse effect on the Company’s financial condition, results of operations or cash flows.
(17) Subsequent Events
In January 2013, the Company sold the land parcel held for future development located in Palo Alto, California for $9.1 million, resulting in a gain of $1.5 million.
In January 2013, the Company acquired Annaliese, a 56 unit community located in Seattle, Washington for $19.0 million. The property was built in 2009 and located in the South Lake Union submarket.
In January 2013, the Company sold $20.3 million of a common stock investment for a gain of $1.8 million.
In February 2013, the Company acquired Fox Plaza, a 444 unit property located in San Francisco, California for $135.0 million. The 29 story high rise tower was built in 1968, and the Fox Plaza apartments are located on floors 14 through 29. The purchase did not include the 12 floors of commercial office space but did include an adjacent two story building comprised of 37,800 square feet of space leased to retail and office tenants and a two story underground parking garage comprised of 405 stalls.
F-36
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
(18) Quarterly Results of Operations (Unaudited)
The following is a summary of quarterly results of operations for 2012 and 2011 ($ in thousands, except per share and dividend amounts):
| Quarter ended | Quarter ended | Quarter ended | Quarter ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31 | September 30 | June 30 | March 31 | |||||||||||||
| 2012: | ||||||||||||||||
| Total property revenues | $ | 141,628 | $ | 135,070 | $ | 129,764 | $ | 125,474 | ||||||||
| Income before discontinued operations | $ | 49,640 | $ | 20,221 | $ | 42,490 | $ | 17,202 | ||||||||
| Net income | $ | 49,640 | $ | 20,221 | $ | 42,490 | $ | 27,239 | ||||||||
| Net income available to common stockholders | $ | 43,793 | $ | 16,219 | $ | 37,078 | $ | 22,722 | ||||||||
| Per share data: | ||||||||||||||||
| Net income: | ||||||||||||||||
| Basic | $ | 1.22 | $ | 0.46 | $ | 1.07 | $ | 0.67 | ||||||||
| Diluted | $ | 1.22 | $ | 0.45 | $ | 1.07 | $ | 0.67 | ||||||||
| Market price: | ||||||||||||||||
| High | $ | 150.71 | $ | 160.64 | $ | 161.53 | $ | 151.54 | ||||||||
| Low | $ | 136.38 | $ | 147.38 | $ | 146.05 | $ | 136.43 | ||||||||
| Close | $ | 146.65 | $ | 148.24 | $ | 153.92 | $ | 151.51 | ||||||||
| Dividends declared | $ | 1.10 | $ | 1.10 | $ | 1.10 | $ | 1.10 | ||||||||
| 2011: | ||||||||||||||||
| Total property revenues | $ | 122,373 | $ | 117,226 | $ | 114,906 | $ | 111,208 | ||||||||
| Income before discontinued operations | $ | 14,493 | $ | 11,767 | $ | 10,502 | $ | 12,106 | ||||||||
| Net income | $ | 17,868 | $ | 11,085 | $ | 16,052 | $ | 12,511 | ||||||||
| Net income available to common stockholders | $ | 13,937 | $ | 7,687 | $ | 10,326 | $ | 8,418 | ||||||||
| Per share data: | ||||||||||||||||
| Net income: | ||||||||||||||||
| Basic | $ | 0.42 | $ | 0.23 | $ | 0.32 | $ | 0.27 | ||||||||
| Diluted | $ | 0.42 | $ | 0.23 | $ | 0.32 | $ | 0.27 | ||||||||
| Market price: | ||||||||||||||||
| High | $ | 148.44 | $ | 145.40 | $ | 138.31 | $ | 124.41 | ||||||||
| Low | $ | 111.25 | $ | 119.15 | $ | 122.67 | $ | 109.98 | ||||||||
| Close | $ | 140.51 | $ | 120.04 | $ | 135.29 | $ | 124.00 | ||||||||
| Dividends declared | $ | 1.04 | $ | 1.04 | $ | 1.04 | $ | 1.04 |
F-37
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
| Costs | ||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Initial cost | capitalized | Gross amount carried at close of period | ||||||||||||||||||||||||
| Buildings and | subsequent to | Land and | Buildings and | Accumulated | Date of | Date | Lives | |||||||||||||||||||
| Property | Units | Location | Encumbrance | Land | improvements | acquisition | improvements | improvements | Total(1) | depreciation | construction | acquired | (years) | |||||||||||||
| Encumbered communities | ||||||||||||||||||||||||||
| Anchor Village(The Elliot at Mukilteo) | 301 | Mukilteo, WA | 10,750 | 2,498 | 10,595 | 11,861 | 2,824 | 22,130 | 24,954 | (9,585) | 1981 | 01/97 | 3-30 | |||||||||||||
| Avondale at Warner Center | 446 | Woodland Hills, CA | 46,761 | 10,536 | 24,522 | 14,571 | 10,601 | 39,028 | 49,629 | (19,625) | 1970 | 01/97 | 3-30 | |||||||||||||
| Bridgeport | 184 | Newark, CA | 21,724 | 1,608 | 7,582 | 6,107 | 1,525 | 13,772 | 15,297 | (9,783) | 1987 | 07/87 | 3-30 | |||||||||||||
| Barkley, The(2) | 161 | Anaheim, CA | 16,784 | - | 8,520 | 4,533 | 2,353 | 10,700 | 13,053 | (4,485) | 1984 | 04/00 | 3-30 | |||||||||||||
| Bel Air | 462 | San Ramon, CA | 55,835 | 12,105 | 18,252 | 22,959 | 12,682 | 40,634 | 53,316 | (18,970) | 1988 | 01/97 | 3-30 | |||||||||||||
| Belmont Station | 275 | Los Angeles, CA | 30,045 | 8,100 | 66,666 | 2,765 | 8,267 | 69,264 | 77,531 | (13,106) | 2008 | 12/08 | 3-30 | |||||||||||||
| Bella Villagio | 231 | San Jose, CA | 38,088 | 17,247 | 40,343 | 1,515 | 17,247 | 41,858 | 59,105 | (3,304) | 2004 | 09/10 | 3-30 | |||||||||||||
| Brentwood | 140 | Santa Ana, CA | 19,283 | 2,833 | 11,303 | 5,482 | 3,502 | 16,116 | 19,618 | (5,786) | 1970 | 11/01 | 3-30 | |||||||||||||
| Brighton Ridge | 264 | Renton, WA | 14,644 | 2,623 | 10,800 | 2,779 | 2,656 | 13,546 | 16,202 | (7,375) | 1986 | 12/96 | 3-30 | |||||||||||||
| Brookside Oaks | 170 | Sunnyvale, CA | 19,974 | 7,301 | 16,310 | 19,923 | 10,328 | 33,206 | 43,534 | (11,170) | 1973 | 06/00 | 3-30 | |||||||||||||
| Camarillo Oaks | 564 | Camarillo, CA | 47,350 | 10,953 | 25,254 | 2,634 | 11,075 | 27,766 | 38,841 | (15,403) | 1985 | 07/96 | 3-30 | |||||||||||||
| Camino Ruiz Square | 160 | Camarillo, CA | 21,110 | 6,871 | 26,119 | 831 | 6,931 | 26,890 | 33,821 | (5,525) | 1990 | 12/06 | 3-30 | |||||||||||||
| Canyon Oaks | 250 | San Ramon, CA | 28,989 | 19,088 | 44,473 | 1,338 | 19,088 | 45,811 | 64,899 | (8,857) | 2005 | 05/07 | 3-30 | |||||||||||||
| Canyon Pointe | 250 | Bothell, WA | 14,391 | 4,692 | 18,288 | 3,507 | 4,693 | 21,794 | 26,487 | (7,095) | 1990 | 10/03 | 3-30 | |||||||||||||
| Carlyle, The | 132 | San Jose, CA | 18,613 | 3,954 | 15,277 | 9,847 | 5,801 | 23,277 | 29,078 | (9,265) | 2000 | 04/00 | 3-30 | |||||||||||||
| City View | 572 | Hayward, CA | 63,159 | 9,883 | 37,670 | 20,699 | 10,350 | 57,902 | 68,252 | (29,059) | 1975 | 03/98 | 3-30 | |||||||||||||
| Coldwater Canyon | 39 | Studio City, CA | 5,538 | 1,674 | 6,640 | 1,178 | 1,676 | 7,816 | 9,492 | (1,972) | 1979 | 05/07 | 3-30 | |||||||||||||
| Courtyard off Main | 109 | Bellevue, WA | 16,261 | 7,465 | 21,405 | 2,627 | 7,465 | 24,032 | 31,497 | (1,806) | 2000 | 10/10 | 3-30 | |||||||||||||
| Domaine | 92 | Seattle, WA | 16,866 | 9,059 | 27,177 | 167 | 9,059 | 27,344 | 36,403 | (266) | 2009 | 09/12 | 3-30 | |||||||||||||
| Elevation | 157 | Redmond, WA | 11,839 | 4,758 | 14,285 | 4,666 | 4,757 | 18,951 | 23,708 | (2,019) | 1986 | 06/10 | 3-30 | |||||||||||||
| Esplanade | 278 | San Jose, CA | 44,928 | 18,170 | 40,086 | 5,765 | 18,429 | 45,592 | 64,021 | (13,226) | 2002 | 11/04 | 3-30 | |||||||||||||
| Fairhaven(Treehouse) | 164 | Santa Ana, CA | 17,269 | 2,626 | 10,485 | 4,806 | 2,957 | 14,960 | 17,917 | (5,128) | 1970 | 11/01 | 3-30 | |||||||||||||
| Fairwood Pond | 194 | Renton, WA | 13,307 | 5,296 | 15,564 | 2,054 | 5,297 | 17,617 | 22,914 | (5,257) | 1997 | 10/04 | 3-30 | |||||||||||||
| Fountain Park | 705 | Playa Vista, CA | 97,450 | 25,073 | 94,980 | 21,849 | 25,203 | 116,699 | 141,902 | (36,486) | 2002 | 02/04 | 3-30 | |||||||||||||
| Harvest Park | 104 | Santa Rosa, CA | 10,691 | 6,700 | 15,479 | 888 | 6,690 | 16,377 | 23,067 | (3,401) | 2004 | 03/07 | 3-30 | |||||||||||||
| Hampton Place /Hampton Court | 215 | Glendale, CA | 21,296 | 6,695 | 16,753 | 5,266 | 6,733 | 21,981 | 28,714 | (9,914) | 1970 | 06/99 | 3-30 | |||||||||||||
| Hidden Valley | 324 | Simi Valley, CA | 30,603 | 14,174 | 34,065 | 1,404 | 9,725 | 39,918 | 49,643 | (11,368) | 2004 | 12/04 | 3-30 | |||||||||||||
| Highridge | 255 | Rancho Palos Verdes, CA | 44,807 | 5,419 | 18,347 | 23,194 | 6,073 | 40,887 | 46,960 | (17,025) | 1972 | 05/97 | 3-30 | |||||||||||||
| Highlands at Wynhaven | 333 | Issaquah, WA | 33,343 | 16,271 | 48,932 | 4,331 | 16,271 | 53,263 | 69,534 | (8,371) | 2000 | 08/08 | 3-30 | |||||||||||||
| Hillcrest Park | 608 | Newbury Park, CA | 69,555 | 15,318 | 40,601 | 14,623 | 15,755 | 54,787 | 70,542 | (25,168) | 1973 | 03/98 | 3-30 | |||||||||||||
| Hillsborough Park | 235 | La Habra, CA | 37,909 | 6,291 | 15,455 | 1,414 | 6,272 | 16,888 | 23,160 | (7,487) | 1999 | 09/99 | 3-30 | |||||||||||||
| Huntington, The | 276 | Huntington Beach, CA | 34,121 | 10,374 | 41,495 | 646 | 10,374 | 42,141 | 52,515 | (757) | 1975 | 06/12 | 3-30 | |||||||||||||
| Huntington Breakers | 342 | Huntington Beach, CA | 38,734 | 9,306 | 22,720 | 5,399 | 9,315 | 28,110 | 37,425 | (13,781) | 1984 | 10/97 | 3-30 | |||||||||||||
| Inglenook Court | 224 | Bothell, WA | 8,300 | 3,467 | 7,881 | 5,494 | 3,474 | 13,368 | 16,842 | (8,091) | 1985 | 10/94 | 3-30 | |||||||||||||
| Magnolia Square | 156 | Sunnyvale, CA | 18,314 | 8,190 | 24,736 | 5,097 | 8,191 | 29,832 | 38,023 | (5,069) | 1969 | 09/07 | 3-30 | |||||||||||||
| Marbrisa | 202 | Long Beach, CA | 18,959 | 4,700 | 18,605 | 3,082 | 4,760 | 21,627 | 26,387 | (7,385) | 1987 | 09/02 | 3-30 | |||||||||||||
| Mirabella | 188 | Marina Del Rey, CA | 46,338 | 6,180 | 26,673 | 12,934 | 6,270 | 39,517 | 45,787 | (14,326) | 2000 | 05/00 | 3-30 | |||||||||||||
| Mill Creek at Windermere | 400 | San Ramon, CA | 50,027 | 29,551 | 69,032 | 1,594 | 29,551 | 70,626 | 100,177 | (12,721) | 2005 | 09/07 | 3-30 | |||||||||||||
| Montclaire, The | 390 | Sunnyvale, CA | 47,283 | 4,842 | 19,776 | 19,907 | 4,997 | 39,528 | 44,525 | (27,380) | 1973 | 12/88 | 3-30 | |||||||||||||
| Montebello | 248 | Kirkland, WA | 30,158 | 13,857 | 41,575 | 3,810 | 13,858 | 45,384 | 59,242 | (684) | 1996 | 07/12 | 3-30 | |||||||||||||
| Montejo | 124 | Garden Grove, CA | 13,307 | 1,925 | 7,685 | 2,264 | 2,194 | 9,680 | 11,874 | (3,760) | 1974 | 11/01 | 3-30 | |||||||||||||
| Park Hill at Issaquah | 245 | Issaquah, CA | 29,477 | 7,284 | 21,937 | 1,905 | 7,284 | 23,842 | 31,126 | (6,882) | 1999 | 02/99 | 3-30 | |||||||||||||
| Palisades, The | 192 | Bellevue, WA | 21,277 | 1,560 | 6,242 | 10,331 | 1,565 | 16,568 | 18,133 | (10,156) | 1977 | 05/90 | 3-30 | |||||||||||||
| Pathways | 296 | Long Beach, CA | 38,219 | 4,083 | 16,757 | 18,076 | 6,239 | 32,677 | 38,916 | (20,789) | 1975 | 02/91 | 3-30 | |||||||||||||
| Stevenson Place | 200 | Fremont, CA | 22,034 | 996 | 5,582 | 6,974 | 1,001 | 12,551 | 13,552 | (8,698) | 1971 | 04/83 | 3-30 |
(Continued)
F-38
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
| Costs | ||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Initial cost | capitalized | Gross amount carried at close of period | ||||||||||||||||||||||||
| Buildings and | subsequent to | Land and | Buildings and | Accumulated | Date of | Date | Lives | |||||||||||||||||||
| Property | Units | Location | Encumbrance | Land | improvements | acquisition | improvements | improvements | Total(1) | depreciation | construction | acquired | (years) | |||||||||||||
| Encumbered communities (continued) | ||||||||||||||||||||||||||
| Stonehedge Village | 196 | Bothell, WA | 12,657 | 3,167 | 12,603 | 4,531 | 3,201 | 17,100 | 20,301 | (8,471) | 1986 | 10/97 | 3-30 | |||||||||||||
| Summerhill Park | 100 | Sunnyvale, CA | 13,769 | 2,654 | 4,918 | 1,069 | 2,656 | 5,985 | 8,641 | (4,530) | 1988 | 09/88 | 3-30 | |||||||||||||
| The Bernard | 63 | Seattle, CA | 10,064 | 3,699 | 11,345 | 43 | 3,689 | 11,398 | 15,087 | (490) | 2008 | 09/11 | 3-30 | |||||||||||||
| Tierra Vista | 404 | Oxnard, CA | 57,444 | 13,652 | 53,336 | 3,030 | 13,661 | 56,357 | 70,018 | (16,376) | 2001 | 01/01 | 3-30 | |||||||||||||
| Valley Park | 160 | Fountain Valley, CA | 22,592 | 3,361 | 13,420 | 3,210 | 3,761 | 16,230 | 19,991 | (6,161) | 1969 | 11/01 | 3-30 | |||||||||||||
| Villa Angelina | 256 | Placentia, CA | 27,542 | 4,498 | 17,962 | 4,726 | 4,962 | 22,224 | 27,186 | (7,778) | 1970 | 11/01 | 3-30 | |||||||||||||
| Vista Belvedere | 76 | Tiburon, CA | 10,272 | 5,573 | 11,901 | 4,180 | 5,573 | 16,081 | 21,654 | (5,201) | 1963 | 08/04 | 3-30 | |||||||||||||
| Wandering Creek | 156 | Kent, WA | 5,300 | 1,285 | 4,980 | 3,366 | 1,296 | 8,335 | 9,631 | (4,945) | 1986 | 11/95 | 3-30 | |||||||||||||
| Waterford, The | 238 | San Jose, CA | 31,975 | 11,808 | 24,500 | 12,418 | 15,165 | 33,561 | 48,726 | (13,735) | 2000 | 06/00 | 3-30 | |||||||||||||
| Wilshire Promenade | 149 | Fullerton, CA | 18,276 | 3,118 | 7,385 | 6,683 | 3,797 | 13,389 | 17,186 | (6,013) | 1992 | 01/97 | 3-30 | |||||||||||||
| 1,565,599 | 424,411 | 1,295,274 | 366,352 | 439,119 | 1,646,917 | 2,086,036 | (541,466) | |||||||||||||||||||
| Unencumbered communities | ||||||||||||||||||||||||||
| Allegro | 97 | Valley Village, CA | 5,869 | 23,977 | 949 | 5,869 | 24,926 | 30,795 | (2,624) | 2010 | 10/10 | 3-30 | ||||||||||||||
| Alpine Village | 301 | Alpine, CA | 4,967 | 19,728 | 3,690 | 4,982 | 23,403 | 28,385 | (8,158) | 1971 | 12/02 | 3-30 | ||||||||||||||
| Anavia | 250 | Anaheim, CA | 15,925 | 63,712 | 5,469 | 15,925 | 69,181 | 85,106 | (4,704) | 2009 | 12/10 | 3-30 | ||||||||||||||
| Ascent | 90 | Kirkland, CA | 3,924 | 11,862 | 271 | 3,924 | 12,133 | 16,057 | (86) | 1988 | 10/12 | 3-30 | ||||||||||||||
| Axis 2300 | 115 | Irvine, CA | 5,405 | 33,585 | 518 | 5,405 | 34,103 | 39,508 | (3,659) | 2010 | 08/10 | 3-30 | ||||||||||||||
| Bellerive | 63 | Los Angeles, CA | 5,401 | 21,803 | 517 | 5,401 | 22,320 | 27,721 | (1,347) | 2011 | 08/11 | 3-30 | ||||||||||||||
| Belmont Terrace | 71 | Belmont, CA | 4,446 | 10,290 | 2,250 | 4,473 | 12,513 | 16,986 | (3,635) | 1974 | 10/06 | 3-30 | ||||||||||||||
| Bennett Lofts | 113 | San Francisco, CA | 21,771 | 50,800 | 80 | 21,771 | 50,880 | 72,651 | (212) | 2004 | 12/12 | 3-30 | ||||||||||||||
| Bonita Cedars | 120 | Bonita, CA | 2,496 | 9,913 | 1,584 | 2,503 | 11,490 | 13,993 | (4,124) | 1983 | 12/02 | 3-30 | ||||||||||||||
| Boulevard | 172 | Fremont, CA | 3,520 | 8,182 | 10,469 | 3,580 | 18,591 | 22,171 | (9,989) | 1978 | 01/96 | 3-30 | ||||||||||||||
| Bridle Trails | 108 | Kirkland, WA | 1,500 | 5,930 | 5,304 | 1,531 | 11,203 | 12,734 | (5,243) | 1986 | 10/97 | 3-30 | ||||||||||||||
| Bristol Commons | 188 | Sunnyvale, CA | 5,278 | 11,853 | 2,033 | 5,293 | 13,871 | 19,164 | (7,384) | 1989 | 01/97 | 3-30 | ||||||||||||||
| 416 on Broadway | 115 | Glendale, CA | 8,557 | 34,235 | 756 | 8,557 | 34,991 | 43,548 | (2,448) | 2009 | 12/10 | 3-30 | ||||||||||||||
| Bunker Hill | 456 | Los Angeles, CA | 11,498 | 27,871 | 7,472 | 11,639 | 35,202 | 46,841 | (15,732) | 1968 | 03/98 | 3-30 | ||||||||||||||
| Cairns, The | 100 | Seattle, WA | 6,937 | 20,679 | 364 | 6,939 | 21,041 | 27,980 | (3,941) | 2006 | 06/07 | 3-30 | ||||||||||||||
| Cambridge | 40 | Chula Vista, CA | 497 | 1,973 | 324 | 498 | 2,296 | 2,794 | (831) | 1965 | 12/02 | 3-30 | ||||||||||||||
| Capri at Sunny Hills | 100 | Fullerton, CA | 3,337 | 13,320 | 6,230 | 4,048 | 18,839 | 22,887 | (6,863) | 1961 | 09/01 | 3-30 | ||||||||||||||
| Castle Creek | 216 | Newcastle, WA | 4,149 | 16,028 | 2,097 | 4,833 | 17,441 | 22,274 | (9,292) | 1997 | 12/97 | 3-30 | ||||||||||||||
| CBC Apartments | 148 | Goleta, CA | 6,283 | 24,000 | 2,418 | 6,288 | 26,413 | 32,701 | (6,800) | 1962 | 01/06 | 3-30 | ||||||||||||||
| CentrePointe (The Bluffs II) | 224 | San Diego, CA | 3,405 | 7,743 | 14,218 | 3,442 | 21,924 | 25,366 | (5,977) | 1974 | 06/97 | 3-30 | ||||||||||||||
| Cedar Terrace | 180 | Bellevue, WA | 5,543 | 16,442 | 3,572 | 5,652 | 19,905 | 25,557 | (6,150) | 1984 | 01/05 | 3-30 | ||||||||||||||
| Chestnut Street | 96 | Santa Cruz, CA | 6,582 | 15,689 | 955 | 6,582 | 16,644 | 23,226 | (2,602) | 2002 | 07/08 | 3-30 | ||||||||||||||
| Commons, The | 264 | Campbell, CA | 12,555 | 29,307 | 3,566 | 12,556 | 32,872 | 45,428 | (3,067) | 1973 | 07/10 | 3-30 | ||||||||||||||
| Corbella at Juanita Bay | 169 | Kirkland, WA | 5,801 | 17,415 | 852 | 5,801 | 18,267 | 24,068 | (1,373) | 1978 | 11/10 | 3-30 | ||||||||||||||
| Country Villas | 180 | Oceanside, CA | 4,174 | 16,583 | 2,443 | 4,187 | 19,013 | 23,200 | (6,884) | 1976 | 12/02 | 3-30 | ||||||||||||||
| Delano/Bon Terra | 126 | Redmond, WA | 7,470 | 22,511 | 561 | 7,470 | 23,072 | 30,542 | (773) | 2005/2011 | 12/11 | 3-30 | ||||||||||||||
| Devonshire | 276 | Hemet, CA | 3,470 | 13,786 | 2,282 | 3,482 | 16,056 | 19,538 | (5,780) | 1988 | 12/02 | 3-30 | ||||||||||||||
| Emerald Ridge - North | 180 | Bellevue, WA | 3,449 | 7,801 | 2,828 | 3,449 | 10,629 | 14,078 | (6,697) | 1987 | 11/94 | 3-30 | ||||||||||||||
| Essex Skyline at MacAuthur Place | 349 | Santa Ana, CA | 21,537 | 146,099 | 463 | 21,537 | 146,562 | 168,099 | (3,536) | 2008 | 04/12 | 3-30 | ||||||||||||||
| Evergreen Heights | 200 | Kirkland, WA | 3,566 | 13,395 | 3,346 | 3,649 | 16,658 | 20,307 | (8,384) | 1990 | 06/97 | 3-30 | ||||||||||||||
| Fairways(3) | 74 | Newport Beach, CA | - | 7,850 | 4,218 | 9 | 12,059 | 12,068 | (4,634) | 1972 | 06/99 | 3-30 | ||||||||||||||
| Foothill Commons | 388 | Bellevue, WA | 2,435 | 9,821 | 30,872 | 2,440 | 40,688 | 43,128 | (18,651) | 1978 | 03/90 | 3-30 | ||||||||||||||
| Foothill Gardens/Twin Creeks | 176 | San Ramon, CA | 5,875 | 13,992 | 4,360 | 5,964 | 18,263 | 24,227 | (9,093) | 1985 | 02/97 | 3-30 | ||||||||||||||
| Forest View | 192 | Renton, WA | 3,731 | 14,530 | 1,212 | 3,731 | 15,742 | 19,473 | (5,132) | 1998 | 10/03 | 3-30 |
(Continued)
F-39
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
| Costs | ||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Initial cost | capitalized | Gross amount carried at close of period | ||||||||||||||||||||||||
| Buildings and | subsequent to | Land and | Buildings and | Accumulated | Date of | Date | Lives | |||||||||||||||||||
| Property | Units | Location | Encumbrance | Land | improvements | acquisition | improvements | improvements | Total(1) | depreciation | construction | acquired | (years) | |||||||||||||
| Unencumbered communities (continued) | ||||||||||||||||||||||||||
| Fountain Court | 320 | Seattle, WA | 6,702 | 27,306 | 4,214 | 6,985 | 31,237 | 38,222 | (13,626) | 2000 | 03/00 | 3-30 | ||||||||||||||
| Fourth & U | 171 | Berkeley, CA | 8,879 | 52,351 | 1,821 | 8,879 | 54,172 | 63,051 | (5,429) | 2010 | 04/10 | 3-30 | ||||||||||||||
| Hillsdale Garden Apartments | 697 | San Mateo, CA | 22,000 | 94,681 | 17,407 | 22,244 | 111,844 | 134,088 | (23,317) | 1948 | 09/06 | 3-30 | ||||||||||||||
| Hope Ranch Collection | 108 | Santa Barbara, CA | 4,078 | 16,877 | 2,291 | 4,208 | 19,038 | 23,246 | (3,366) | 1965 | 03/07 | 3-30 | ||||||||||||||
| Joule | 295 | Seattle, WA | 14,558 | 69,417 | 2,473 | 14,558 | 71,890 | 86,448 | (7,421) | 2010 | 03/10 | 3-30 | ||||||||||||||
| 1000 Kiely | 121 | Santa Clara, CA | 9,359 | 21,845 | 3,675 | 9,359 | 25,520 | 34,879 | (1,590) | 1971 | 03/11 | 3-30 | ||||||||||||||
| Kings Road | 196 | Los Angeles, CA | 4,023 | 9,527 | 7,646 | 4,031 | 17,165 | 21,196 | (7,801) | 1979 | 06/97 | 3-30 | ||||||||||||||
| Le Parc Luxury Apartments | 140 | Santa Clara, CA | 3,090 | 7,421 | 10,766 | 3,092 | 18,185 | 21,277 | (9,041) | 1975 | 02/94 | 3-30 | ||||||||||||||
| Linden Square | 183 | Seattle, WA | 4,374 | 11,588 | 1,886 | 4,202 | 13,646 | 17,848 | (5,673) | 1994 | 06/00 | 3-30 | ||||||||||||||
| Lofts at Pinehurst, The | 118 | Ventura, CA | 1,570 | 3,912 | 4,197 | 1,618 | 8,061 | 9,679 | (3,461) | 1971 | 06/97 | 3-30 | ||||||||||||||
| Magnolia Lane(4) | 32 | Sunnyvale, CA | - | 5,430 | 210 | - | 5,640 | 5,640 | (1,080) | 2001 | 06/07 | 3-30 | ||||||||||||||
| Marina City Club(5) | 101 | Marina Del Rey, CA | - | 28,167 | 6,696 | - | 34,863 | 34,863 | (10,453) | 1971 | 01/04 | 3-30 | ||||||||||||||
| Marina Cove(6) | 292 | Santa Clara, CA | 5,320 | 16,431 | 8,311 | 5,324 | 24,738 | 30,062 | (13,558) | 1974 | 06/94 | 3-30 | ||||||||||||||
| Mariners Place | 105 | Oxnard, CA | 1,555 | 6,103 | 1,748 | 1,562 | 7,844 | 9,406 | (3,476) | 1987 | 05/00 | 3-30 | ||||||||||||||
| Meadoweood | 320 | Simi Valley, CA | 7,852 | 18,592 | 5,498 | 7,898 | 24,044 | 31,942 | (12,206) | 1986 | 11/96 | 3-30 | ||||||||||||||
| Mesa Village | 133 | Clairemont, CA | 1,888 | 7,498 | 1,001 | 1,894 | 8,493 | 10,387 | (2,890) | 1963 | 12/02 | 3-30 | ||||||||||||||
| Mira Monte | 355 | Mira Mesa, CA | 7,165 | 28,459 | 7,652 | 7,186 | 36,090 | 43,276 | (14,088) | 1982 | 12/02 | 3-30 | ||||||||||||||
| Miracle Mile/Marbella | 236 | Los Angeles, CA | 7,791 | 23,075 | 10,885 | 7,886 | 33,865 | 41,751 | (15,215) | 1988 | 08/97 | 3-30 | ||||||||||||||
| Mission Hills | 282 | Oceanside, CA | 10,099 | 38,778 | 3,677 | 10,167 | 42,387 | 52,554 | (11,755) | 1984 | 07/05 | 3-30 | ||||||||||||||
| Monterra del Mar/Rey/Sol | 292 | Pasadena, CA | 2,202 | 4,794 | 28,101 | 8,385 | 26,712 | 35,097 | (12,072) | 1972 | 04/99 | 3-30 | ||||||||||||||
| Monterey Villas | 122 | Oxnard, CA | 2,349 | 5,579 | 5,217 | 2,424 | 10,721 | 13,145 | (4,670) | 1974 | 07/97 | 3-30 | ||||||||||||||
| Mt. Sutro | 99 | San Francisco, CA | 2,334 | 8,507 | 2,988 | 2,809 | 11,020 | 13,829 | (4,924) | 1973 | 06/01 | 3-30 | ||||||||||||||
| Muse | 152 | Hollywood, CA | 7,822 | 33,436 | 1,136 | 7,823 | 34,571 | 42,394 | (3,117) | 2011 | 02/11 | 3-30 | ||||||||||||||
| Park Catalina | 90 | Los Angeles, CA | 4,710 | 18,839 | 293 | 4,710 | 19,132 | 23,842 | (346) | 2002 | 06/12 | 3-30 | ||||||||||||||
| Park West | 126 | San Francisco, CA | 9,424 | 21,988 | 659 | 9,424 | 22,647 | 32,071 | (215) | 1958 | 09/12 | 3-30 | ||||||||||||||
| Pinehurst(7) | 28 | Ventura, CA | 355 | 1,356 | 377 | 6 | 2,082 | 2,088 | (733) | 1973 | 12/04 | 3-30 | ||||||||||||||
| Pointe at Cupertino, The | 116 | Cupertino, CA | 4,505 | 17,605 | 8,388 | 4,505 | 25,993 | 30,498 | (6,545) | 1963 | 08/98 | 3-30 | ||||||||||||||
| Reed Square | 100 | Sunnyvale, CA | 6,873 | 16,037 | 1,897 | 6,873 | 17,934 | 24,807 | (550) | 1970 | 01/12 | 3-30 | ||||||||||||||
| Regency at Encino | 75 | Encino, CA | 3,184 | 12,737 | 1,348 | 3,184 | 14,084 | 17,268 | (1,730) | 1989 | 12/09 | 3-30 | ||||||||||||||
| Salmon Run at Perry Creek | 132 | Bothell, WA | 3,717 | 11,483 | 1,119 | 3,801 | 12,518 | 16,319 | (5,024) | 2000 | 10/00 | 3-30 | ||||||||||||||
| 101 San Fernando | 323 | San Jose, CA | 4,173 | 58,961 | 3,678 | 4,173 | 62,639 | 66,812 | (5,392) | 2001 | 07/10 | 3-30 | ||||||||||||||
| Sammamish View | 153 | Bellevue, WA | 3,324 | 7,501 | 5,677 | 3,331 | 13,171 | 16,502 | (8,094) | 1986 | 11/94 | 3-30 | ||||||||||||||
| San Marcos | 432 | Richmond, CA | 15,563 | 36,204 | 26,282 | 22,866 | 55,183 | 78,049 | (17,358) | 2003 | 11/03 | 3-30 | ||||||||||||||
| Santee Court | 165 | Los Angeles, CA | 6,177 | 24,716 | 956 | 6,177 | 25,672 | 31,849 | (1,992) | 2004 | 10/10 | 3-30 | ||||||||||||||
| Santee Village | 73 | Los Angeles, CA | 3,404 | 15,601 | 1,391 | 3,404 | 16,992 | 20,396 | (997) | 2011 | 07/11 | 3-30 | ||||||||||||||
| Shadow Point | 172 | Spring Valley, CA | 2,812 | 11,170 | 1,747 | 2,820 | 12,909 | 15,729 | (4,606) | 1983 | 12/02 | 3-30 | ||||||||||||||
| Summit Park | 300 | San Diego, CA | 5,959 | 23,670 | 3,273 | 5,977 | 26,925 | 32,902 | (9,704) | 1972 | 12/02 | 3-30 | ||||||||||||||
| The Laurels at Mill Creek | 164 | Mill Creek, WA | 1,559 | 6,430 | 4,945 | 1,595 | 11,339 | 12,934 | (5,607) | 1981 | 12/96 | 3-30 | ||||||||||||||
| The Grand | 243 | Oakland, CA | 4,531 | 89,208 | 3,969 | 4,531 | 93,177 | 97,708 | (13,803) | 2009 | 01/09 | 3-30 | ||||||||||||||
| The Sweep Apartments | 91 | Goleta, CA | 5,558 | 21,320 | 1,866 | 5,618 | 23,126 | 28,744 | (6,481) | 1967 | 01/06 | 3-30 | ||||||||||||||
| Trabucco Villas | 132 | Lake Forest, CA | 3,638 | 8,640 | 2,035 | 3,890 | 10,423 | 14,313 | (4,949) | 1985 | 10/97 | 3-30 | ||||||||||||||
| Tuscana | 30 | Tracy, CA | 2,828 | 6,599 | 154 | 2,870 | 6,711 | 9,581 | (1,260) | 2007 | 02/07 | 3-30 | ||||||||||||||
| Via | 284 | Sunnyvale, CA | 22,000 | 82,270 | 169 | 22,016 | 82,423 | 104,439 | (4,617) | 2011 | 07/11 | 3-30 | ||||||||||||||
| Vista Capri - North | 106 | San Diego, CA | 1,663 | 6,609 | 830 | 1,668 | 7,434 | 9,102 | (2,526) | 1975 | 12/02 | 3-30 | ||||||||||||||
| Walnut Heights | 163 | Walnut, CA | 4,858 | 19,168 | 2,212 | 4,887 | 21,351 | 26,238 | (6,775) | 1964 | 10/03 | 3-30 | ||||||||||||||
| Wharfside Pointe | 142 | Seattle, WA | 2,245 | 7,020 | 6,010 | 2,258 | 13,017 | 15,275 | (6,954) | 1990 | 06/94 | 3-30 | ||||||||||||||
| Willow Lake | 508 | San Jose, CA | 43,194 | 101,030 | 857 | 43,194 | 101,887 | 145,081 | (707) | 1989 | 10/12 | 3-30 | ||||||||||||||
| Windsor Ridge | 216 | Sunnyvale, CA | 4,017 | 10,315 | 6,281 | 4,021 | 16,592 | 20,613 | (11,252) | 1989 | 03/89 | 3-30 | ||||||||||||||
| Woodland Commons | 236 | Bellevue, WA | 2,040 | 8,727 | 16,655 | 2,044 | 25,378 | 27,422 | (10,043) | 1978 | 03/90 | 3-30 | ||||||||||||||
| Woodside Village | 145 | Ventura, CA | 5,331 | 21,036 | 2,828 | 5,341 | 23,854 | 29,195 | (6,678) | 1987 | 12/04 | 3-30 | ||||||||||||||
| 29,207 | 1,565,599 | 948,416 | 3,263,992 | 740,286 | 980,247 | 3,972,447 | 4,952,694 | (1,062,438) |
(Continued)
F-40
ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012, 2011, and 2010
| Costs | ||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Rentable | Initial cost | capitalized | Gross amount carried at close of period | |||||||||||||||||||||||||||||||
| Square | Buildings and | subsequent to | Land and | Buildings and | Accumulated | Date of | Date | Lives | ||||||||||||||||||||||||||
| Property | Footage | Location | Encumbrance | Land | improvements | acquisition | improvements | improvements | Total(1) | depreciation | construction | acquired | (years) | |||||||||||||||||||||
| Other real estate assets | ||||||||||||||||||||||||||||||||||
| Office Buildings | ||||||||||||||||||||||||||||||||||
| Essex Hollywood | 35,000 | Los Angeles, CA | 10,200 | 13,800 | 2,177 | 10,200 | 15,977 | 26,177 | (4,243) | 1938 | 07/06 | 3-30 | ||||||||||||||||||||||
| Santa Clara Square retail | 139,000 | Santa Clara, CA | 6,472 | 11,704 | 2,636 | 6,472 | 14,340 | 20,812 | (1,711) | 1970 | 09/11 | 3-30 | ||||||||||||||||||||||
| 925/935 East Meadow | 31,900 | Palo Alto, CA | 1,401 | 3,172 | 7,985 | 3,147 | 9,411 | 12,558 | (3,866) | 1988 | 11/97 | 3-30 | ||||||||||||||||||||||
| 17461 Derian | 110,000 | Irvine, CA | 3,079 | 12,315 | 6,037 | 3,105 | 18,326 | 21,431 | (9,259) | 1983 | 07/00 | 3-30 | ||||||||||||||||||||||
| Consolidated Development Pipeline | 31,957 | - | 34,894 | 66,851 | - | 66,851 | - | |||||||||||||||||||||||||||
| Total apartment communities and other real estate assets | $ | 1,565,599 | $ | 1,001,525 | $ | 3,304,983 | $ | 794,015 | $ | 1,070,022 | $ | 4,030,501 | $ | 5,100,523 | $ | (1,081,517) |
| (1) | The aggregate cost for federal income tax purposes is approximately $4.0 billion (unaudited). |
|---|
| (2) | The land is leased pursuant to a ground lease expiring 2082. |
|---|
| (3) | The land is leased pursuant to a ground lease expiring 2027. |
|---|
| (4) | The land is leased pursuant to a ground lease expiring 2070. |
|---|
| (5) | The land is leased pursuant to a ground lease expiring 2067. |
|---|
| (6) | A portion of land is leased pursuant to a ground lease expiring in 2028. |
|---|
| (7) | The land is leased pursuant to a ground lease expiring in 2028. |
|---|
| 2012 | 2011 | 2010 | 2012 | 2011 | 2010 | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Rental properties: | Accumulated depreciation: | ||||||||||||||||||||||||
| Balance at beginning of year | $ | 4,313,064 | $ | 3,964,561 | $ | 3,310,152 | Balance at beginning of year | $ | 920,026 | $ | 775,553 | $ | 646,686 | ||||||||||||
| Improvements | 97,947 | 219,692 | 51,101 | Depreciation expense - Acquisitions | 3,744 | 1,279 | 2,505 | ||||||||||||||||||
| Acquisition of real estate | 619,743 | 103,300 | 387,300 | Depreciation expense - Discontinued operations | 2,108 | 315 | 700 | ||||||||||||||||||
| Development of real estate | 25,545 | 44,280 | 216,008 | Depreciation expense - Rental properties | 161,492 | 148,337 | 125,662 | ||||||||||||||||||
| Disposition of real estate | (22,627 | ) | (18,769 | ) | - | Dispositions | (5,853 | ) | (5,458 | ) | - | ||||||||||||||
| Balance at the end of year | $ | 5,033,672 | $ | 4,313,064 | $ | 3,964,561 | Balance at the end of year | $ | 1,081,517 | $ | 920,026 | $ | 775,553 |
See accompanying report of independent registered public accounting firm.
F-41
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ESSEX PROPERTY TRUST, INC. | |
|---|---|
| (Registrant) | |
| Date: February 22, 2013 | |
| By: /S/ MICHAEL T. DANCE | |
| Michael T. Dance | |
| Executive Vice President, Chief Financial Officer | |
| (Authorized Officer, Principal Financial Officer) | |
| By: /S/ BRYAN G. HUNT | |
| Bryan G. Hunt | |
| First Vice President, Chief Accounting Officer |
KNOWN ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Michael J. Schall and Michael T. Dance, and each of them, his attorney-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacity and on the date indicated.
| Signature | Title | Date |
|---|---|---|
| /S/ MICHAEL J. SCHALL | Chief Executive Officer and President, and Director | February 22, 2013 |
| Michael J. Schall | (Principal Executive Officer) | |
| /S/ KEITH R. GUERICKE | Director, and Vice Chairman of the Board | February 22, 2013 |
| Keith R. Guericke | ||
| /S/ GEORGE M. MARCUS | Director and Chairman of the Board | February 22, 2013 |
| George M. Marcus | ||
| /S/ DAVID W. BRADY | Director | February 22, 2013 |
| David W. Brady | ||
| /S/ GARY P. MARTIN | Director | February 22, 2013 |
| Gary P. Martin | ||
| /S/ ISSIE N. RABINOVITCH | Director | February 22, 2013 |
| Issie N. Rabinovitch |
S-1
| Signature | Title | Date |
|---|---|---|
| /S/ THOMAS E. RANDLETT | Director | February 22, 2013 |
| Thomas E. Randlett | ||
| /S/ BYRON A. SCORDELIS. | Director | February 22, 2013 |
| Byron A. Scordelis | ||
| /S/ JANICE L. SEARS. | Director | February 22, 2013 |
| Janice L. Sears | ||
| /S/ CLAUDE J. ZINNGRABE | Director | February 22, 2013 |
| Claude J. Zinngrabe |
S-2
EXHIBIT INDEX
| Exhibit No. | Document |
|---|---|
| 3.1 | Articles of Restatement of Essex Property Trust, Inc., attached as Exhibit 3.1 to the Company's Current Report on Form 8-K, filed February 16, 2012, and incorporated herein by reference. |
| 3.2 | Second Amended and Restated Bylaws of Essex Property Trust, Inc., dated as of September 16, 2008, attached as Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed September 22, 2008, and incorporated herein by reference. |
| 4.1 | Form of 4.875% Series G Cumulative Convertible Preferred Stock Certificate, attached as Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed July 27, 2006, and incorporated herein by reference. |
| 4.2 | Form of 7.125% Series H Cumulative Redeemable Preferred Stock Certificate, attached as Exhibit 4.1 to the Company's Current Report on Form 8-K, filed April 13, 2011, and incorporated herein by reference. |
| 4.3 | Indenture, dated August 15, 2012, among Essex Portfolio, L.P., Essex Property Trust, Inc., and U.S. Bank National Association, as trustee, including the form of 3.625% Senior Notes due 2022 and the guarantee thereof, attached as Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed August 15, 2012, and incorporated herein by reference. |
| 10.1 | Essex Property Trust, Inc. 1994 Stock Incentive Plan, (amended and restated), attached as Exhibit 10.1 to the Company's Form 10-Q for the quarter ended June 30, 2000 and incorporated herein by reference.* |
| 10.2 | Form of Essex Property Trust, Inc. 1994 Non-Employee and Director Stock Incentive Plan, attached as Exhibit 10.3 to the Company's Registration Statement on Form S-11 (Registration No. 33-76578), which became effective on June 6, 1994, and incorporated herein by reference.* |
| 10.3 | Agreement between Essex Property Trust, Inc. and George M. Marcus, dated March 27, 2003 attached as Exhibit 10.32 to the Company's Form 10-K for the year ended December 31, 2002 and incorporated herein by reference. |
| 10.4 | Essex Property Trust, Inc. 2004 Stock Incentive Plan, attached as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, and incorporated herein by reference.* |
| 10.5 | 2005 Deferred Compensation Plan (as amended and restated) of Essex Portfolio, L.P., dated as of December 2, 2008, attached as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed December 8, 2008, and incorporated herein by reference.* |
| 10.6 | Executive Severance Plan of Essex Property Trust, Inc., amended and restated effective as of December 31, 2008, attached as Exhibit 10.2 to the Company's Current Report on Form 8-K, filed December 8, 2008, and incorporated herein by reference.* |
| 10.7 | Second Amended and Restated Agreement of Limited Partnership of Essex Portfolio, L.P., dated as of May 27, 2009, attached as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed May 27, 2009, and incorporated herein by reference.* |
| 10.8 | First Amendment to the Second Amended and Restated Agreement of Limited Partnership of Essex Portfolio, L.P., dated as of December 23, 2009, attached as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed December 30, 2009, and incorporated herein by reference.* |
| 10.9 | Form of Indemnification Agreement between Essex Property Trust, Inc. and its directors and officers, attached as Exhibit 99.1 to the Company's Current Report on Form 8-K, filed February 25, 2011, and incorporated herein by reference.* |
| 10.10 | Note Purchase Agreement, dated as of March 31, 2011, among Essex Portfolio, L.P., Essex Property Trust, Inc. and the purchasers of the notes party thereto (including the form of the 4.36% Senior Guaranteed Notes, due March 31, 2016), attached as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed April 1, 2011, and incorporated herein by reference.† |
| 10.11 | Second Amendment to the Second Amended and Restated Agreement of Limited Partnership of Essex Portfolio, L.P., dated as of April 13, 2011, attached as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed April 13, 2011, and incorporated herein by reference. |
|---|---|
| 10.12 | Note Purchase Agreement, dated as of June 30, 2011, among Essex Portfolio, L.P., Essex Property Trust, Inc. and the purchasers of the notes party thereto (including the forms of the 4.50% Senior Guaranteed Notes, Series A, due September 30, 2017, and the 4.92% Senior Guaranteed Notes, Series B, due December 30, 2019) , attached as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed July 5, 2011, and incorporated herein by reference.† |
| 10.13 | Amended and Restated 2004 Non-Employee Director Equity Award Program, dated May 1, 2011, attached as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, and incorporated herein by reference.* |
| 10.14 | Amended and Restated Revolving Credit Agreement, dated as of September 16, 2011, by and among Essex Portfolio, L.P., PNC Bank, National Association, as Administrative Agent, Swing Line Lender and L/C Issuer, and other lenders as specified therein, attached as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, and incorporated herein by reference. |
| 10.15 | Equity Distribution Agreement between the Company and Cantor Fitzgerald & Co. dated March 5, 2012 (relating to common stock), attached as exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on March 7, 2012, and incorporated herein by reference. |
| 10.16 | Equity Distribution Agreement between the Company and Cantor Fitzgerald & Co. dated March 5, 2012 (relating to preferred stock), attached as exhibit 10.2 to the Company’s Current Report on Form 8-K, filed on March 7, 2012, and incorporated herein by reference. |
| 10.17 | Note Purchase Agreement, dated as of March 14, 2012, among Essex Portfolio, L.P., the Company and the purchasers of the notes party thereto (including the forms of the 4.27% Senior Guaranteed Notes, Series C, due April 30, 2021, the 4.30% Senior Guaranteed Notes, Series D, due June 29, 2021, and the 4.37% Senior Guaranteed Notes, Series E, due August 30, 2021), attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on March 20, 2012, and incorporated herein by reference. † |
| 10.18 | First Amendment to Amended and Restated Revolving Credit Agreement, dated May 31, 2012, filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, and incorporated herein by reference. |
| 10.19 | Modification Agreement, dated July 30, 2012, filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, and incorporated herein by reference |
| 10.20 | Registration Rights Agreement, dated August 15, 2012, among Essex Portfolio, L.P., the Company and Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Wells Fargo Securities, LLC as representatives of the several initial purchasers, attached as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed on August 15, 2012, and incorporated herein by reference. |
| 10.21 | Amendment to Agreement, dated as of September 11, 2012, between the Company and George Marcus, attached as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, and incorporated herein by reference. |
| 10.22 | Third Amendment to the Second Amended and Restated Agreement of Limited Partnership of Essex Portfolio, L.P., as amended, dated December 4, 2012, attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on December 10, 2012, and incorporated herein by reference. |
| 12.1 | Schedule of Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends. |
| 14.1 | Code of Business Conduct and Ethics, attached as Exhibit 14.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, and incorporated herein by reference. |
| 21.1 | List of Subsidiaries of Essex Property Trust, Inc. |
| 23.1 | Consent of KPMG LLP, Independent Registered Public Accounting Firm. |
|---|---|
| 24.1 | Power of Attorney (see signature page) |
| 31.1 | Certification of Michael J. Schall, Principal Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 31.2 | Certification of Michael T. Dance, Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 32.1 | Certification of Michael J. Schall, Principal Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 32.2 | Certification of Michael T. Dance, Principal Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 101.INS** | XBRL Instance Document |
| 101.SCH** | XBRL Taxonomy Extension Schema Document |
| 101.CAL** | XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF** | XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB** | XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE** | XBRL Taxonomy Extension Presentation Linkbase Document |
- Management contract or compensatory plan or arrangement.
† The schedules and certain exhibits to this agreement, as set forth in the agreement, have not been filed herewith. The Company agrees to furnish supplementally a copy of any omitted schedule or exhibit to the Securities and Exchange Commission upon request.
** XBRL (Extensible Business Reporting Language) information is furnished and not filed herewith, is not part of a registration statement or Prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.
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