Item 2. Properties

The Company’s Portfolio as of December 31, 2012 (including communities owned by unconsolidated joint ventures, but excluding communities underlying preferred equity investments) was comprised of 163 apartment communities (comprising 33,468 apartment units), of which 15,444 units are located in Southern California, 10,189 units are located in the San Francisco Bay Area, and 7,835 units are located in the Seattle metropolitan area. The Company’s apartment communities accounted for 98.4% of the Company’s revenues for the year ended December 31, 2012.

Occupancy Rates

The Company’s average financial occupancies for the Company’s stabilized communities or “2012/2011 Same-Properties” (stabilized properties consolidated by the Company for the years ended December 31, 2012 and 2011) was unchanged at 96.3% for the years ended December 31, 2012, and 2011. Financial occupancy is defined as the percentage resulting from dividing actual rental revenue by total possible rental revenue. When calculating actual rents for occupied units and market rents for vacant units, delinquencies and concessions are not taken into account. Total possible rental revenue represents the value of all apartment units, with occupied units valued at contractual rental rates pursuant to leases and vacant units valued at estimated market rents. The Company believes that financial occupancy is a meaningful measure of occupancy because it considers the value of each vacant unit at its estimated market rate. Financial occupancy may not completely reflect short-term trends in physical occupancy and financial occupancy rates as disclosed by other REITs may not be comparable to the Company’s calculation of financial occupancy. Market rates are determined using a variety of factors such as effective rental rates at the property based on recently signed leases and asking rates for comparable properties in the market. The recently signed effective rates at the property are used as the starting point in the determination of the market rates of vacant units. The Company then increases or decreases these rates based on the supply and demand in the apartment community’s market. The Company will check the reasonableness of these rents based on its position within the market and compare the rents against the asking rents by comparable properties in the market.

For communities that are development properties in lease-up without stabilized occupancy figures, the Company believes the physical occupancy rate is the appropriate performance metric. While a community is in the lease-up phase, the Company’s primary motivation is to stabilize the property which may entail the use of rent concessions and other incentives, and thus financial occupancy which is based on contractual revenue is not considered the best metric to quantify occupancy.

Communities

The Company’s communities are primarily suburban garden-style communities and town homes comprising multiple clusters of two and three-story buildings situated on three to fifteen acres of land. As of December 31, 2012, the Company’s communities include 117 garden-style, 43 mid-rise, and 3 high-rise communities. The communities have an average of approximately 206 units, with a mix of studio, one, two and some three-bedroom units. A wide variety of amenities are available at the Company’s communities, including covered parking, fireplaces, swimming pools, clubhouses with fitness facilities, volleyball and playground areas and tennis courts.

The Company hires, trains and supervises on-site service and maintenance personnel. The Company believes that the following primary factors enhance the Company’s ability to retain tenants:

	·	located near employment centers;

	●	attractive communities that are well maintained; and

	●	proactive customer service approach.

Commercial Buildings

The Company’s corporate headquarters is located in two office buildings with approximately 31,900 square feet located at 925/935 East Meadow Drive, Palo Alto, California. The Company owns an office building with approximately 110,000 square feet located in Irvine, California, of which the Company occupies approximately 7,150 square feet at December 31, 2012. The Company owns Essex-Hollywood, a 35,000 square foot commercial building as a future development site that is currently 100% leased as a production studio.

During 2011, the Company purchased a retail site in Santa Clara for $20.6 million. The plans for this project are to entitle the site for 494 apartment units. The site is currently improved with a 139,000 square foot retail space that is 100% leased.

The following tables describe the Company’s Portfolio as of December 31, 2012. The first table describes the Company’s communities and the second table describes the Company’s other real estate assets. (See Note 7 of the Company’s consolidated financial statements for more information about the Company’s secured mortgage debt and Schedule III for a list of secured mortgage loans related to the Company’s Portfolio.)

								Rentable
								Square				Year				Year
Communities (1)		Location		Units				Footage				Built				Acquired				Occupancy(2)
Southern California
Alpine Village		Alpine, CA			301				254,400				1971				2002				97	%
Anavia		Anaheim, CA			250				312,343				2009				2010				95	%
Barkley, The(3)(4)		Anaheim, CA			161				139,800				1984				2000				97	%
Bonita Cedars		Bonita, CA			120				120,800				1983				2002				96	%
Camarillo Oaks		Camarillo, CA			564				459,000				1985				1996				96	%
Camino Ruiz Square		Camarillo, CA			160				105,448				1990				2006				97	%
Cambridge		Chula Vista, CA			40				22,100				1965				2002				95	%
Mesa Village		Clairemont, CA			133				43,600				1963				2002				97	%
Regency at Encino		Encino, CA			75				78,487				1989				2009				97	%
Valley Park(4)		Fountain Valley, CA			160				169,700				1969				2001				97	%
Capri at Sunny Hills(4)		Fullerton, CA			100				128,100				1961				2001				95	%
Haver Hill(5)		Fullerton, CA			264				224,130				1973				2012				96	%
Wilshire Promenade		Fullerton, CA			149				128,000				1992				1997				96	%
Montejo(4)		Garden Grove, CA			124				103,200				1974				2001				97	%
CBC Apartments		Goleta, CA			148				91,538				1962				2006				95	%
Sweeps, The (Chimney Sweep Apartments)		Goleta, CA			91				88,370				1967				2006				84	%
416 on Broadway		Glendale, CA			115				126,782				2009				2010				95	%
Hampton Court		Glendale, CA			83				71,500				1974				1999				97	%
Hampton Place		Glendale, CA			132				141,500				1970				1999				97	%
Devonshire		Hemet, CA			276				207,200				1988				2002				92	%
Huntington Breakers		Huntington Beach, CA			342				241,700				1984				1997				95	%
The Huntington		Huntington Beach, CA			276				202,256				1975				2012				97	%
Axis 2300		Irvine, CA			115				170,714				2010	(6)			2010				95	%
Hillsborough Park		La Habra, CA			235				215,500				1999				1999				96	%
Trabuco Villas		Lake Forest, CA			132				131,000				1985				1997				96	%
Madrid Apartments(7)		Mission Viejo, CA			230				228,099				2000				2012				97	%
Marbrisa		Long Beach, CA			202				122,800				1987				2002				97	%
Pathways		Long Beach, CA			296				197,700				1975	(8)			1991				96	%
Belmont Station		Los Angeles, CA			275				225,000				2008				2008				96	%
Bellerive		Los Angeles, CA			63				79,296				2011				2011				98	%
Bunker Hill		Los Angeles, CA			456				346,600				1968				1998				96	%
Cochran Apartments		Los Angeles, CA			58				51,400				1989				1998				96	%
Kings Road		Los Angeles, CA			196				132,100				1979				1997				96	%
Marbella, The		Los Angeles, CA			60				50,108				1991				2005				96	%
Pacific Electric Lofts(7)		Los Angeles, CA			314				277,980				2006				2012				100	%
Park Catalina		Los Angeles, CA			90				72,864				2002				2012				98	%
Park Place		Los Angeles, CA			60				48,000				1988				1997				96	%
Renaissance, The(9)		Los Angeles, CA			169				154,268				1990	(10)			2006				98	%
Santee Court		Los Angeles, CA			165				132,040				2004				2010				97	%
Santee Village		Los Angeles, CA			73				69,817				2011				2010				97	%
Windsor Court		Los Angeles, CA			58				46,600				1988				1997				96	%
Marina City Club(11)		Marina Del Rey, CA			101				127,200				1971				2004				97	%
Mirabella		Marina Del Rey, CA			188				176,800				2000				2000				96	%
Mira Monte		Mira Mesa, CA			355				262,600				1982				2002				97	%
Hillcrest Park		Newbury Park, CA			608				521,900				1973				1998				97	%
Fairways(12)		Newport Beach, CA			74				107,100				1972				1999				95	%
Muse		North Hollywood, CA			152				135,292				2011				2011				96	%
Country Villas		Oceanside, CA			180				179,700				1976				2002				96	%
Mission Hills		Oceanside, CA			282				244,000				1984				2005				97	%
Mariners Place		Oxnard, CA			105				77,200				1987				2000				98	%
Monterey Villas		Oxnard, CA			122				122,100				1974				1997				97	%
Tierra Vista		Oxnard, CA			404				387,100				2001				2001				96	%
Arbors Parc Rose(7)		Oxnard, CA			373				503,196				2001				2011				96	%
Monterra del Mar		Pasadena, CA			123				74,400				1972				1997				97	%
Monterra del Rey		Pasadena, CA			84				73,100				1972				1999				97	%
Monterra del Sol		Pasadena, CA			85				69,200				1972				1999				97	%
Villa Angelina(4)		Placentia, CA			256				217,600				1970				2001				97	%

(continued)

								Rentable
								Square				Year				Year
Communities (1)		Location		Units				Footage				Built				Acquired				Occupancy(2)
Southern California (continued)
Fountain Park		Playa Vista, CA			705				608,900				2002				2004				97	%
Highridge(4)		Rancho Palos Verdes, CA			255				290,200				1972	(13)			1997				94	%
CentrePointe (The Bluffs II)		San Diego, CA			224				126,700				1974	(14)			1997				94	%
Summit Park		San Diego, CA			300				229,400				1972				2002				96	%
Vista Capri - North		San Diego, CA			106				51,800				1975				2002				97	%
Brentwood(4)		Santa Ana, CA			140				154,800				1970				2001				98	%
Essex Skyline at MacArthur Place (15)		Santa Ana, CA			349				512,791				2008	(6)			2010				95	%
Fairhaven (Treehouse)(4)		Santa Ana, CA			164				135,700				1970				2001				96	%
Hope Ranch Collection		Santa Barbara, CA			108				126,700			1965 &73					2007				98	%
Hidden Valley(16)		Simi Valley, CA			324				310,900				2004				2004				96	%
Meadowood		Simi Valley, CA			320				264,500				1986				1996				96	%
Shadow Point		Spring Valley, CA			172				131,200				1983				2002				96	%
Coldwater Canyon		Studio City, CA			39				34,125				1979				2007				96	%
Allegro		Valley Village, CA			97				127,812				2010	(6)			2010				97	%
Lofts at Pinehurst, The		Ventura, CA			118				71,100				1971				1997				96	%
Pinehurst(17		Ventura, CA			28				21,200				1973				2004				99	%
Woodside Village		Ventura, CA			145				136,500				1987				2004				97	%
Walnut Heights		Walnut, CA			163				146,700				1964				2003				96	%
Reveal(7)		Woodland Hills, CA			438				414,892				2010				2011				93	%
Avondale at Warner Center		Woodland Hills, CA			446				331,000				1970	(18)			1997				97	%
					15,444				13,717,248												96	%
Northern California
Belmont Terrace		Belmont, CA			71				72,951				1974				2006				98	%
Carlmont Woods(9)		Belmont, CA			195				107,200				1971				2004				96	%
Davey Glen(9)		Belmont, CA			69				65,974				1962				2006				96	%
Fourth and U		Berkeley, CA			171				146,255				2010				2010				96	%
Commons, The		Campbell, CA			264				153,168				1973				2010				97	%
Pointe at Cupertino, The		Cupertino, CA			116				135,200				1963	(19)			1998				97	%
Harbor Cove(9)		Foster City, CA			400				306,600				1971				2004				96	%
Stevenson Place		Fremont, CA			200				146,200				1971				1983				97	%
Boulevard		Fremont, CA			172				131,200				1978	(20)			1996				95	%
Briarwood(7)		Fremont, CA			160				111,160				1975				2011				96	%
The Woods(7)		Fremont, CA			160				105,280				1978				2011				97	%
City View		Hayward, CA			572				462,400				1975	(21)			1998				96	%
Alderwood Park(9)		Newark, CA			96				74,624				1987				2006				97	%
Bridgeport		Newark, CA			184				139,000				1987	(22)			1987				97	%
The Grand		Oakland, CA			243				205,026				2009				2009				99	%
San Marcos		Richmond, CA			432				407,600				2003				2003				98	%
Mt. Sutro		San Francisco, CA			99				64,000				1973				2001				96	%
Park West		San Francisco, CA			126				90,060				1958				2012				82	%
Bennett Lofts		San Francisco, CA			113				142,667				2004				2012				93	%
101 San Fernando		San Jose, CA			323				296,078				2001				2010				97	%
Willow Lake		San Jose, CA			508				471,744				1989				2012				95	%
Bella Villagio		San Jose, CA			231				227,511				2004				2010				98	%
Carlyle, The		San Jose, CA			132				129,200				2000				2000				97	%
Esplanade		San Jose, CA			278				279,000				2002				2004				97	%
Waterford, The		San Jose, CA			238				219,600				2000				2000				97	%
Hillsdale Garden		San Mateo, CA			697				611,505				1948				2006				97	%
Bel Air		San Ramon, CA			462				391,000				1988/2000				1997				96	%
Canyon Oaks		San Ramon, CA			250				237,894				2005				2007				97	%
Foothill Gardens		San Ramon, CA			132				155,100				1985				1997				95	%
Mill Creek at Windermere		San Ramon, CA			400				381,060				2005				2007				96	%
Twin Creeks		San Ramon, CA			44				51,700				1985				1997				95	%
1000 Kiely		Santa Clara, CA			121				128,486				1971				2011				96	%
Le Parc Luxury Apartments		Santa Clara, CA			140				113,200				1975				1994				97	%
Marina Cove(23)		Santa Clara, CA			292				250,200				1974	(24)			1994				96	%
Riley Square(7)		Santa Clara, CA			156				126,900				1972				2012				94	%
Chestnut Street		Santa Cruz, CA			96				87,640				2002				2008				95	%
Harvest Park		Santa Rosa, CA			104				116,628				2004				2007				97	%
Bristol Commons		Sunnyvale, CA			188				142,600				1989				1997				97	%

(continued)

								Rentable
								Square				Year				Year
Communities (1)		Location		Units				Footage				Built				Acquired				Occupancy(2)
Northern California (continued)
Brookside Oaks(4)		Sunnyvale, CA			170				119,900				1973				2000				96	%
Magnolia Lane(25)		Sunnyvale, CA			32				31,541				2001	(26)			2007				96	%
Montclaire, The		Sunnyvale, CA			390				294,100				1973	(27)			1988				97	%
Reed Square		Sunnyvale, CA			100				95,440				1970				2011				96	%
Summerhill Park		Sunnyvale, CA			100				78,500				1988				1988				98	%
Magnolia Square (4)		Sunnyvale, CA			156				110,824				1969	(26)			2007				96	%
Windsor Ridge		Sunnyvale, CA			216				161,800				1989				1989				97	%
Via		Sunnyvale, CA			284				309,421				2011				2011				97	%
Vista Belvedere		Tiburon, CA			76				78,300				1963				2004				96	%
Tuscana		Tracy, CA			30				29,088				2007				2007				93	%
					10,189				8,792,525												97	%
Seattle, Washington Metropolitan Area
Cedar Terrace		Bellevue, WA			180				174,200				1984				2005				96	%
Courtyard off Main		Bellevue, WA			109				108,388				2000				2010				97	%
Emerald Ridge		Bellevue, WA			180				144,000				1987				1994				96	%
Foothill Commons		Bellevue, WA			388				288,300				1978	(28)			1990				94	%
Palisades, The		Bellevue, WA			192				159,700				1977				1990				97	%
Sammamish View		Bellevue, WA			153				133,500				1986				1994				98	%
Woodland Commons		Bellevue, WA			236				172,300				1978	(29)			1990				88	%
Canyon Pointe		Bothell, WA			250				210,400				1990				2003				96	%
Inglenook Court		Bothell, WA			224				183,600				1985				1994				96	%
Salmon Run at Perry Creek		Bothell, WA			132				117,100				2000				2000				98	%
Stonehedge Village		Bothell, WA			196				214,800				1986				1997				98	%
Highlands at Wynhaven		Issaquah, WA			333				424,674				2000				2008				96	%
Park Hill at Issaquah		Issaquah, WA			245				277,700				1999				1999				97	%
Wandering Creek		Kent, WA			156				124,300				1986				1995				98	%
Ascent		Kirkland, WA			90				75,840				1988				2012				94	%
Bridle Trails		Kirkland, WA			108				99,700				1986	(30)			1997				97	%
Corbella at Juanita Bay		Kirkland, WA			169				103,339				1978				2010				97	%
Evergreen Heights		Kirkland, WA			200				188,300				1990				1997				95	%
Montebello		Kirkland, WA			248				272,734				1996				2012				96	%
Laurels at Mill Creek, The		Mill Creek, WA			164				134,300				1981				1996				95	%
Morning Run(9)		Monroe, WA			222				221,786				1991				2005				97	%
The Elliot at Mukilteo (Anchor Village)(4)		Mukilteo, WA			301				245,900				1981				1997				95	%
Castle Creek		Newcastle, WA			216				191,900				1997				1997				97	%
Delano/Bon Terra		Redmond, WA			126				116,340				2011/2005				2011/2012				96	%
Elevation		Redmond, WA			157				138,916				1986				2010				94	%
Vesta (Redmond Hill East)(7)		Redmond, WA			440				381,675				1998				2011				96	%
Redmond Hill West(7)		Redmond, WA			442				350,275				1985				2011				96	%
Brighton Ridge		Renton, WA			264				201,300				1986				1996				97	%
Fairwood Pond		Renton, WA			194				189,200				1997				2004				96	%
Forest View		Renton, WA			192				182,500				1998				2003				97	%
Bernard, The		Seattle, WA			63				43,151				2008				2011				97	%
Cairns, The		Seattle, WA			100				70,806				2006				2007				96	%
Domaine		Seattle, WA			92				79,421				2012				2012				88	%
Eastlake 2851(9)		Seattle, WA			133				234,086				2008				2008				96	%
Fountain Court		Seattle, WA			320				207,000				2000				2000				95	%
Joule (31)		Seattle, WA			295				191,109				2010				2010				96	%
Linden Square		Seattle, WA			183				142,200				1994				2000				96	%
Wharfside Pointe		Seattle, WA			142				119,200				1990				1994				95	%
					7,835				6,913,940												96	%
Total/Weighted Average					33,468				29,423,713												96	%

								Rentable
								Square				Year				Year
Other real estate assets(1)		Location		Tenants				Footage				Built				Acquired				Occupancy(2)
Office Buildings
925 / 935 East Meadow Drive(32)		Palo Alto, CA			1				31,900				1988 / 1962				1997 / 2007				100	%
6230 Sunset Blvd(33)		Los Angeles, CA			1				35,000				1938				2006				100	%
17461 Derian Ave(34)		Irvine, CA			6				110,000				1983				2000				93	%
Santa Clara Retail		Santa Clara, CA			3				139,000				1970				2011				100	%
Total Office Buildings					11				315,900												99	%

Footnotes to the Company’s Portfolio Listing as of December 31, 2012

	(1)	Unless otherwise specified, the Company has a 100% ownership interest in each community.

	(2)	For communities, occupancy rates are based on financial occupancy for the year ended December 31, 2012; for the commercial buildings or properties which have not yet stabilized, or have insufficient operating history, occupancy rates are based on physical occupancy as of December 31, 2012. For an explanation of how financial occupancy and physical occupancy are calculated, see “Properties-Occupancy Rates” in this Item 2.

	(3)	The community is subject to a ground lease, which, unless extended, will expire in 2082.

	(4)	The Company holds a 1% special limited partner interest in the partnerships which own these apartment communities. These investments were made under arrangements whereby EMC became the 1% sole general partner and the other limited partners were granted the right to require the applicable partnership to redeem their interest for cash. Subject to certain conditions, the Company may, however, elect to deliver an equivalent number of shares of the Company’s common stock in satisfaction of the applicable partnership’s cash redemption obligation.

	(5)	This community is owned by Wesco III. The Company has a 50% interest in Wesco III which is accounted for using the equity method of accounting.

	(6)	The Company completed development of the property in 2010.

	(7)	This community is owned by Wesco I. The Company has a 50% interest in Wesco I which is accounted for using the equity method of accounting.

	(8)	The Company completed a $10.8 million redevelopment in 2009.

	(9)	This community is owned by Fund II. The Company has a 28.2% interest in Fund II which is accounted for using the equity method of accounting.

	(10)	Fund II completed a $5.3 million redevelopment in 2008.

	(11)	This community is subject to a ground lease, which, unless extended, will expire in 2067.

	(12)	This community is subject to a ground lease, which, unless extended, will expire in 2027.

	(13)	The Company completed a $16.6 million redevelopment in 2009.

	(14)	The Company is in the process of performing a $10.2 million redevelopment.

	(15)	The Company has a 97% interest. A 50% voting interest was acquired in April 2012 when the Company acquired the joint venture partner’s membership interest.

	(16)	The Company and EMC have a 74.0% and a 1% member interest, respectively.

	(17)	The Community is subject to a ground lease, which, unless extended, will expire in 2028.

	(18)	The Company completed a $12.0 million redevelopment in 2008.

	(19)	The Company is in the process of performing a $10.0 million redevelopment

	(20)	The Company completed an $8.9 million redevelopment in 2008.

	(21)	The Company completed a $9.4 million redevelopment in 2009.

	(22)	The Company completed a $4.6 million redevelopment in 2009.

	(23)	A portion of this community on which 84 units are presently located is subject to a ground lease, which, unless extended, will expire in 2028.

	(24)	The Company is in the process of performing a $9.9 million redevelopment.

	(25)	The community is subject to a ground lease, which, unless extended, will expire in 2070.

	(26)	The Company is in the process of performing a $13.3 million redevelopment.

	(27)	The Company completed a $12.5 million redevelopment in 2009.

	(28)	The Company completed a $36.3 million redevelopment in 2012, which included the construction of 28 in-fill units in 2009.

	(29)	The Company completed the construction of 66 additional apartment homes in 2012 and is in the process of performing a redevelopment for a total cost of $21.6 million.

	(30)	The Company completed a $5.1 million redevelopment and completed construction of 16 units of the community’s 108 units in 2006.

	(31)	The Company has 99% ownership in this community.

	(32)	The Company occupies 100% of this property.

	(33)	The property is leased through July 2014 to a single tenant.

	(34)	The Company occupies 7% of this property.