Item 15. Exhibits and Financial Statement Schedules

(A) Financial Statements

(1) Consolidated Financial Statements of Essex Property Trust, Inc.	Page
Report of Independent Registered Public Accounting Firm	F-1
Consolidated Balance Sheets: As of December 31, 2013 and 2012	F-5
Consolidated Statements of Operations: Years ended December 31, 2013, 2012, and 2011	F-6
Consolidated Statements of Comprehensive Income: Years ended December 31, 2013, 2012, and 2011	F-7
Consolidated Statements of Equity: Years ended December 31, 2013, 2012, and 2011	F-8
Consolidated Statements of Cash Flows: Years ended December 31, 2013, 2012, and 2011	F-9
Notes to Consolidated Financial Statements	F-17
(2) Consolidated Financial Statements of Essex Portfolio, L.P.
Report of Independent Registered Public Accounting Firm	F-4
Consolidated Balance Sheets: As of December 31, 2013 and 2012	F-11
Consolidated Statements of Operations: Years ended December 31, 2013, 2012, and 2011	F-12
Consolidated Statements of Comprehensive Income: Years ended December 31, 2013, 2012, and 2011	F-13
Consolidated Statements of Capital: Years ended December 31, 2013, 2012, and 2011	F-14
Consolidated Statements of Cash Flows: Years ended December 31, 2013, 2012, and 2011	F-15
Notes to Consolidated Financial Statements	F-17
(3) Financial Statement Schedule – Schedule III – Real Estate and Accumulated Depreciation as of December 31, 2013.	F-47
(4) 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.

F-1

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, 2013 and 2012, and the related consolidated statements of operations, comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2013. 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, 2013 and 2012, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2013, 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, 2013, based on criteria established in Internal Control–Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 26, 2014 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 26, 2014

F-2

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, 2013, based on criteria established in Internal Control–Integrated Framework (1992) 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, 2013, based on criteria established in Internal Control–Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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, 2013 and 2012, and the related consolidated statements of operations, comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2013, and our report dated February 26, 2014, expressed an unqualified opinion on those consolidated financial statements.

	/S/ KPMG LLP
	KPMG LLP

San Francisco, California

February 26, 2014

F-3

Independent Registered Public Accounting Firm

The General Partner

Essex Portfolio, L.P.:

We have audited the accompanying consolidated balance sheets of Essex Portfolio, L.P. (the Operating Partnership) and subsidiaries as of December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive income, capital, and cash flows for each of the years in the three-year period ended December 31, 2013. 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 Operating Partnership’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 Portfolio, L.P. and subsidiaries as of December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2013, 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.

	/S/ KPMG LLP
	KPMG LLP

San Francisco, California

February 26, 2014

F-4

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2013 and 2012

(Dollars in thousands, except share amounts)

		2013				2012
ASSETS
Real estate:
Rental properties:
Land and land improvements		$	1,083,552			$	1,003,171
Buildings and improvements			4,360,205				4,030,501
			5,443,757				5,033,672
Less: accumulated depreciation			(1,254,886	)			(1,081,517	)
			4,188,871				3,952,155
Real estate under development			50,430				66,851
Co-investments			677,133				571,345
			4,916,434				4,590,351
Cash and cash equivalents-unrestricted			18,491				18,606
Cash and cash equivalents-restricted			35,275				23,520
Marketable securities			90,084				92,713
Notes and other receivables			68,255				66,163
Prepaid expenses and other assets			33,781				35,003
Deferred charges, net			24,519				20,867
Total assets		$	5,186,839			$	4,847,223
LIABILITIES AND EQUITY
Mortgage notes payable		$	1,404,080			$	1,565,599
Unsecured debt			1,410,023				1,112,084
Lines of credit			219,421				141,000
Accounts payable and accrued liabilities			67,183				64,858
Construction payable			8,047				5,392
Dividends payable			50,627				45,052
Derivative liabilities			2,682				6,606
Other liabilities			22,189				22,167
Total liabilities			3,184,252				2,962,758
Commitments and contingencies
Cumulative convertible 4.875% Series G preferred stock; $.0001 par value: 5,980,000 issued, and 178,249 outstanding			4,349				4,349
Equity:
Common stock; $.0001 par value, 656,020,000 shares authorized;37,421,219 and 36,442,994 shares issued and outstanding			4				3
Cumulative redeemable 7.125% Series H 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			2,345,763				2,204,778
Distributions in excess of accumulated earnings			(474,426	)			(444,466	)
Accumulated other comprehensive loss, net			(60,472	)			(69,261	)
Total stockholders' equity			1,884,619				1,764,804
Noncontrolling interest			113,619				115,312
Total equity			1,998,238				1,880,116
Total liabilities and equity		$	5,186,839			$	4,847,223

See accompanying notes to consolidated financial statements.

F-5

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

Years ended December 31, 2013, 2012 and 2011

(Dollars in thousands, except per share and share amounts)

		2013				2012				2011
Revenues:
Rental and other property		$	602,003			$	526,696			$	460,660
Management and other fees from affiliates			11,700				11,489				6,780
			613,703				538,185				467,440
Expenses:
Property operating, excluding real estate taxes			138,736				123,813				113,733
Real estate taxes			57,276				48,354				43,777
Depreciation			192,420				169,173				150,009
General and administrative			25,601				23,307				20,694
Cost of management and other fees			6,681				6,513				4,610
Merger expenses			4,284				-				-
			424,998				371,160				332,823
Earnings from operations			188,705				167,025				134,617
Interest expense before amortization			(104,600	)			(100,244	)			(91,694	)
Amortization expense			(11,924	)			(11,644	)			(11,474	)
Interest and other income			11,633				13,833				17,139
Equity income (loss) from co-investments			55,865				41,745				(467	)
Loss on early retirement of debt, net			(300	)			(5,009	)			(1,163	)
Gain on sale of land			1,503				-				-
Gain on remeasurement of co-investment			-				21,947				-
Income before discontinued operations			140,882				127,653				46,958
Income from discontinued operations			31,173				11,937				10,558
Net income			172,055				139,590				57,516
Net income attributable to noncontrolling interest			(15,772	)			(14,306	)			(10,446	)
Net income attributable to controlling interest			156,283				125,284				47,070
Dividends to preferred stockholders			(5,472	)			(5,472	)			(4,753	)
Excess of cash paid to redeem preferred stock and units over the carrying value			-				-				(1,949	)
Net income available to common stockholders		$	150,811			$	119,812			$	40,368
Per share data:
Basic:
Income before discontinued operations available to common stockholders		$	3.26			$	3.10			$	0.94
Income from discontinued operations available to common stockholders			0.79				0.32				0.30
Net income available to common stockholders		$	4.05			$	3.42			$	1.24
Weighted average number of shares outstanding during the year			37,248,960				35,032,491				32,541,792
Diluted:
Income before discontinued operations available to common stockholders		$	3.25			$	3.09			$	0.94
Income from discontinued operations available to common stockholders			0.79				0.32				0.30
Net income available to common stockholders		$	4.04			$	3.41			$	1.24
Weighted average number of shares outstanding during the year			37,335,295				35,124,921				32,628,714

See accompanying notes to consolidated financial statements.

F-6

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

Years ended December 31, 2013, 2012 and 2011

(Dollars in thousands)

		2013				2012				2011
Net income		$	172,055			$	139,590			$	57,516
Other comprehensive income (loss):
Changes in fair value of cash flow hedges and amortization of settlement swaps			12,614				3,402				7,707
Changes in fair value of marketable securities			(1,556	)			1,411				1,330
Reversal of unrealized gains upon the sale of marketable securities			(1,767	)			(1,082	)			(4,286	)
Total other comprehensive income			9,291				3,731				4,751
Comprehensive income			181,346				143,321				62,267
Comprehensive income attributable to noncontrolling interest			(16,274	)			(14,527	)			(10,751	)
Comprehensive income attributable to controlling interest		$	165,072			$	128,794			$	51,516

See accompanying notes to consolidated financial statements.

F-7

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Consolidated Statements of Equity

Years ended December 31, 2013, 2012 and 2011

(Dollars and shares in thousands)

		Preferred stock								Common stock								Additional paid-in				Distributions in excess of accumulated				Accumulated other comprehensive(loss) income,				Noncontrolling
		Shares				Amount				Shares				Amount				capital				earnings				net				Interest				Total
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
Net income			-				-				-				-				-				156,283				-				15,772				172,055
Reversal of unrealized gains upon the sale of marketable securities			-				-				-				-				-				-				(1,673	)			(94	)			(1,767	)
Changes in fair value of cash flow hedges and amortization of settlement swaps			-				-				-				-				-				-				11,934				680				12,614
Changes in fair value of marketable securities			-				-				-				-				-				-				(1,472	)			(84	)			(1,556	)
Issuance of common stock under:
Stock option plans			-				-				65				-				7,244				-				-				-				7,244
Sale of common stock			-				-				913				1				138,365				-				-				-				138,366
Equity based compensation costs			-				-				-				-				(907	)			-				-				2,515				1,608
Redemptions of noncontrolling interest			-				-				-				-				(3,717	)			-				-				(1,994	)			(5,711	)
Distributions to noncontrolling interest			-				-				-				-				-				-				-				(18,488	)			(18,488	)
Common and preferred stock dividends declared			-				-				-				-				-				(186,243	)			-				-				(186,243	)
Balances at December 31, 2013			2,950			$	73,750				37,421			$	4			$	2,345,763			$	(474,426	)		$	(60,472	)		$	113,619			$	1,998,238

See accompanying notes to consolidated financial statements.

F-8

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended December 31, 2013, 2012 and 2011

(Dollars in thousands)

		2013				2012				2011
Cash flows from operating activities:
Net income		$	172,055			$	139,590			$	57,516
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on sale of marketable securities			(1,767	)			(819	)			(4,956	)
Gain on remeasurement of co-investment			-				(21,947	)			-
Company's share of gain on the sales of co-investment			(41,252	)			(29,112	)			(919	)
Gain on the sales of real estate			(30,725	)			(10,870	)			(8,562	)
Loss on early retirement of debt			300				5,009				1,163
Co-investments			5,023				1,626				7,929
Amortization expense			12,216				11,644				11,474
Amortization of discount on notes receivables			(844	)			(1,832	)			(1,757	)
Amortization of discount on marketable securities			(6,556	)			(5,127	)			(4,794	)
Depreciation			193,518				170,686				152,542
Equity-based compensation			4,508				4,141				2,927
Changes in operating assets and liabilities:
Prepaid expenses and other assets			(1,588	)			(9,488	)			(1,172	)
Accounts payable and accrued liabilities			72				12,360				3,620
Other liabilities			22				1,638				1,560
Net cash provided by operating activities			304,982				267,499				216,571
Cash flows from investing activities:
Additions to real estate:
Acquisitions of real estate			(348,774	)			(393,771	)			(57,478	)
Improvements to recent acquisitions			(21,240	)			(13,704	)			(16,446	)
Redevelopment			(42,035	)			(39,027	)			(45,130	)
Revenue generating capital expenditures			(5,254	)			(7,620	)			(7,616	)
Lessor required capital expenditures			(8,641	)			(1,173	)			-
Non-revenue generating capital expenditures			(27,038	)			(30,491	)			(26,090	)
Acquisition of and additions to real estate under development			(17,757	)			(29,196	)			(79,194	)
Acquisition of membership interest in co-investment			-				(85,000	)			-
Dispositions of real estate			65,496				27,800				23,003
Changes in restricted cash and refundable deposits			(9,149	)			(6,069	)			(1,376	)
Purchases of marketable securities			(16,442	)			(73,735	)			(8,048	)
Sales and maturities of marketable securities			24,172				61,703				32,998
Purchases of and advances under notes and other receivables			(56,750	)			(26,000	)			(12,325	)
Collections of notes and other receivables			53,438				14,525				884
Contributions to co-investments			(162,578	)			(260,153	)			(246,106	)
Non-operating distributions from co-investments			118,856				49,773				17,141
Net cash used in investing activities			(453,696	)			(812,138	)			(425,783	)
Cash flows from financing activities:
Borrowings under debt agreements			969,061				1,745,853				1,514,684
Repayment of debt			(750,900	)			(1,371,317	)			(1,435,135	)
Additions to deferred charges			(7,402	)			(6,707	)			(5,533	)
Payments to settle derivative instruments			-				-				(2,395	)
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			(617	)			(309	)			(627	)
Net proceeds from stock options exercised			4,958				2,643				6,986
Net proceeds from issuance of common stock			138,366				357,720				323,931
Contributions from noncontrolling interest			-				2,400				-
Distributions to noncontrolling interest			(18,488	)			(16,691	)			(16,963	)
Redemption of noncontrolling interest			(5,711	)			(6,986	)			(5,387	)
Common and preferred stock dividends paid			(180,668	)			(156,250	)			(138,622	)
Net cash provided by financing activities			148,599				550,356				208,348
Net increase (decrease) in cash and cash equivalents			(115	)			5,717				(864	)
Cash and cash equivalents at beginning of year			18,606				12,889				13,753
Cash and cash equivalents at end of year		$	18,491			$	18,606			$	12,889

(Continued)

F-9

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended December 31, 2013, 2012 and 2011

(Dollars in thousands)

		2013				2012				2011
Supplemental disclosure of cash flow information:
Cash paid for interest, net of $16,486, $10,346, and $8,240 capitalized in 2013, 2012 and 2011, respectively		$	103,516			$	95,597			$	89,691
Supplemental disclosure of noncash investing and financing activities:
Transfer from real estate under development to rental properties		$	68			$	6,632			$	165,214
Transfer from real estate under development to co-investments		$	27,906			$	-			$	54,472
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
Contribution of note receivable to co-investment		$	-			$	12,325			$	-
Change in accrual of dividends		$	5,575			$	5,441			$	3,206
Change in fair value of derivative liabilities		$	4,185			$	4,461			$	230
Change in fair value of marketable securities		$	3,222			$	459			$	2,836
Change in construction payable		$	2,655			$	1,113			$	2,518

See accompanying notes to consolidated financial statements

F-10

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2013 and 2012

(Dollars in thousands, except per unit amounts)

		2013				2012
ASSETS
Real estate:
Rental properties:
Land and land improvements		$	1,083,552			$	1,003,171
Buildings and improvements			4,360,205				4,030,501
			5,443,757				5,033,672
Less accumulated depreciation			(1,254,886	)			(1,081,517	)
			4,188,871				3,952,155
Real estate under development			50,430				66,851
Co-investments			677,133				571,345
			4,916,434				4,590,351
Cash and cash equivalents-unrestricted			18,491				18,606
Cash and cash equivalents-restricted			35,275				23,520
Marketable securities			90,084				92,713
Notes and other receivables			68,255				66,163
Prepaid expenses and other assets			33,781				35,003
Deferred charges, net			24,519				20,867
Total assets		$	5,186,839			$	4,847,223
LIABILITIES AND CAPITAL
Mortgage notes payable		$	1,404,080			$	1,565,599
Unsecured debt			1,410,023				1,112,084
Lines of credit			219,421				141,000
Accounts payable and accrued liabilities			67,183				64,858
Construction payable			8,047				5,392
Distributions payable			50,627				45,052
Derivative liabilities			2,682				6,606
Other liabilities			22,189				22,167
Total liabilities			3,184,252				2,962,758
Commitments and contingencies
Cumulative convertible Series G preferred interest (liquidation value of $4,456)			4,349				4,349
Capital:
General Partner:
Common equity (37,421,219 and 36,442,994 units issued and outstanding at December 31, 2013 and December 31, 2012, respectively)			1,873,882				1,762,856
Preferred interest (liquidation value of $73,750)			71,209				71,209
			1,945,091				1,834,065
Limited Partners:
Common equity (2,149,802 and 2,122,381 units issued and outstanding for the year ended December 31, 2013 and 2012, respectively)			45,957				45,593
Accumulated other comprehensive loss			(58,940	)			(68,231	)
Total partners' capital			1,932,108				1,811,427
Noncontrolling interest			66,130				68,689
Total capital			1,998,238				1,880,116
Total liabilities and capital		$	5,186,839			$	4,847,223

See accompanying notes to consolidated financial statements

F-11

ESSEX PORTFOLIO, L.P. AND SUBSIDIARES

Consolidated Statements of Operations

Years ended December 31, 2013, 2012, and 2011

(Dollars in thousands, except per unit and unit amounts)

		2013				2012				2011
Revenues:
Rental and other property		$	602,003			$	526,696			$	460,660
Management and other fees from affiliates			11,700				11,489				6,780
			613,703				538,185				467,440
Expenses:
Property operating, excluding real estate taxes			138,736				123,813				113,733
Real estate taxes			57,276				48,354				43,777
Depreciation			192,420				169,173				150,009
General and administrative			25,601				23,307				20,694
Cost of management and other fees			6,681				6,513				4,610
Merger Expenses			4,284				-				-
			424,998				371,160				332,823
Earnings from operations			188,705				167,025				134,617
Interest expense before amortization			(104,600	)			(100,244	)			(91,694	)
Amortization expense			(11,924	)			(11,644	)			(11,474	)
Interest and other income			11,633				13,833				17,139
Equity income (loss) from co-investments			55,865				41,745				(467	)
Loss on early retirement of debt, net			(300	)			(5,009	)			(1,163	)
Gain on sale of land			1,503				-				-
Gain on remeasurement of co-investment			-				21,947				-
Income before discontinued operations			140,882				127,653				46,958
Income from discontinued operations			31,173				11,937				10,558
Net income			172,055				139,590				57,516
Net income attributable to noncontrolling interest			(6,834	)			(6,347	)			(5,571	)
Net income attributable to controlling interest			165,221				133,243				51,945
Preferred interest distributions - Series F, G, & H			(5,472	)			(5,472	)			(4,753	)
Preferred interest distributions - limited partner			-				-				(1,650	)
Excess of the carrying amount of preferred interest redeemed over the cash paid to redeem preferred interest			-				-				(1,949	)
Net income available to common unitholders		$	159,749			$	127,771			$	43,593
Per unit data:
Basic:
Income before discontinued operations available to common unitholders		$	3.27			$	3.11			$	0.95
Income from discontinued operations			0.79				0.32				0.30
Net income available to common unitholders		$	4.06			$	3.43			$	1.25
Weighted average number of common units outstanding during the period			39,380,385				37,251,537				34,773,599
Diluted:
Income before discontinued operations available to common unitholders		$	3.26			$	3.10			$	0.95
Income from discontinued operations			0.79				0.32				0.30
Net income available to common unitholders		$	4.05			$	3.42			$	1.25
Weighted average number of common units outstanding during the period			39,466,720				37,343,967				34,860,521

See accompanying notes to consolidated financial statements

F-12

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

Years Ended December 31, 2013, 2012, and 2011

(Dollars in thousands)

		2013				2012				2011
Net income		$	172,055			$	139,590			$	57,516
Other comprehensive income (loss):
Changes in fair value of cash flow hedges and amortization of settlement swaps			12,614				3,402				7,707
Changes in fair value of marketable securities			(1,556	)			1,411				1,330
Reversal of unrealized gains upon the sale of marketable securities			(1,767	)			(1,082	)			(4,286	)
Total other comprehensive income			9,291				3,731				4,751
Comprehensive income			181,346				143,321				62,267
Comprehensive income attributable to noncontrolling interest			(6,834	)			(6,347	)			(5,571	)
Comprehensive income attributable to controlling interest		$	174,512			$	136,974			$	56,696

See accompanying notes to consolidated financial statements.

F-13

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Consolidated Statements of Capital

Years ended December 31, 2013, 2012, and 2011

(Dollars and units in thousands)

		General Partner												Limited Partners												Accumulated
										Preferred												Preferred				other
		Common Equity								Equity				Common Equity								Equity				comprehensive				Noncontrolling
		Units				Amount				Amount				Units				Amount				Amount				(loss) income				Interest				Total
Balances at December 31, 2010			31,325			$	1,202,751			$	24,412				2,201			$	54,065			$	80,000			$	(76,713	)		$	70,499			$	1,355,014
Net income			-				42,317				4,753				-				3,225				1,650				-				5,571				57,516
Reversal of unrealized gains upon the sale of marketable securities			-				-				-				-				-				-				(4,286	)			-				(4,286	)
Change in fair value of cash flow hedges and amortization of gain on settlement of swap			-				-				-				-				-								7,707								7,707
Changes in fair value of marketable securities			-				-				-				-				-				-				1,330				-				1,330
Issuance of common units under:
Stock and unit based compensation plans			103				8,412				-				-				-				-				-				-				8,412
Sale of common stock by the general partner			2,460				323,931				-				-				-				-				-				-				323,931
Stock and unit based compensation costs			-				(725	)			-				28				1,598				-				-				-				873
Issuance of Series H Preferred			-				-				71,209				-				-				-				-				-				71,209
Redemptions of Series F Preferred			-				(588	)			(24,412	)			-				-				-				-				-				(25,000	)
Redemptions of Series B Preferred			-				1,200				-				-				-				(80,000	)			-				-				(78,800	)
Redemptions			-				(1,134	)			-				-				(1,049	)			-				-				(3,204	)			(5,387	)
Distribution to noncontrolling interests			-				-				-				-				-				-				-				(6,052	)			(6,052	)
Distributions declared			-				(137,075	)			(4,753	)			-				(9,261	)			(1,650	)			-				-				(152,739	)
Balances at December 31, 2011			33,888				1,439,089				71,209				2,229				48,578				-				(71,962	)			66,814				1,553,728
Net income			-				119,812				5,472				-				7,959				-				-				6,347				139,590
Reversal of unrealized gains upon the sale of marketable securities			-				-				-				-				-				-				(1,082	)			-				(1,082	)
Change in fair value of cash flow hedges and amortization of gain on settlement of swap			-				-				-				-				-								3,402								3,402
Changes in fair value of marketable securities			-				-				-				-				-				-				1,411				-				1,411
Issuance of common units under:
Stock and unit based compensation plans			151				4,675				-				-				-				-				-				-				4,675
Sale of common stock by the general partner			2,404				357,720				-				-				-				-				-				-				357,720
Stock and unit based compensation costs			-				(430	)			-				(107	)			2,231				-				-				-				1,801
Capital contributions			-				-				-				-				-				-				-				4,232				4,232
Redemptions			-				(1,798	)			-				-				(3,441	)			-				-				(1,747	)			(6,986	)
Distribution to noncontrolling interests			-				-				-				-				-				-				-				(6,957	)			(6,957	)
Distributions declared			-				(156,212	)			(5,472	)			-				(9,734	)			-				-				-				(171,418	)
Balances at December 31, 2012			36,443				1,762,856				71,209				2,122				45,593				-				(68,231	)			68,689				1,880,116
Net income			-				150,811				5,472				-				8,938				-				-				6,834				172,055
Reversal of unrealized gains upon the sale of marketable securities			-				-				-				-				-				-				(1,767	)			-				(1,767	)
Change in fair value of cash flow hedges and amortization of settlement swaps			-				-				-				-				-				-				12,614				-				12,614
Changes in fair value of marketable securities			-				-				-				-				-				-				(1,556	)			-				(1,556	)
Issuance of common units under:
Stock and unit based compensation plans			65				7,244				-				-				-				-				-				-				7,244
Sale of common stock by the general partner			913				138,366				-				-				-				-				-				-				138,366
Stock and unit based compensation costs			-				(907	)			-				28				2,515				-				-				-				1,608
Redemptions			-				(3,717	)			-				-				(617	)			-				-				(1,377	)			(5,711	)
Distributions to noncontrolling interests			-				-				-				-				-				-				-				(8,016	)			(8,016	)
Distributions declared			-				(180,771	)			(5,472	)			-				(10,472	)			-				-				-				(196,715	)
Balances at December 31, 2013			37,421			$	1,873,882			$	71,209				2,150			$	45,957			$	-			$	(58,940	)		$	66,130			$	1,998,238

See accompanying notes to consolidated financial statements

F-14

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended December 31, 2013, 2012, and 2011

(Dollars in thousands)

		2013				2012				2011
Cash flows from operating activities:
Net income		$	172,055			$	139,590			$	57,516
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on sale of marketable securities			(1,767	)			(819	)			(4,956	)
Gain on remeasurement of co-investment			-				(21,947	)			-
Company's share of gain on the sales of co-investment			(41,252	)			(29,112	)			(919	)
Gain on the sales of real estate			(30,725	)			(10,870	)			(8,562	)
Loss on early retirement of debt			300				5,009				1,163
Co-investments			5,023				1,626				7,929
Amortization expense			12,216				11,644				11,474
Amortization of discount on notes receivables			(844	)			(1,832	)			(1,757	)
Amortization of discount on marketable securities			(6,556	)			(5,127	)			(4,794	)
Depreciation			193,518				170,686				152,542
Equity-based compensation			4,508				4,141				2,927
Changes in operating assets and liabilities:
Prepaid expenses and other assets			(1,588	)			(9,488	)			(1,172	)
Accounts payable and accrued liabilities			72				12,360				3,620
Other liabilities			22				1,638				1,560
Net cash provided by operating activities			304,982				267,499				216,571
Cash flows from investing activities:
Additions to real estate:
Acquisitions of real estate			(348,774	)			(393,771	)			(57,478	)
Improvements to recent acquisitions			(21,240	)			(13,704	)			(16,446	)
Redevelopment			(42,035	)			(39,027	)			(45,130	)
Revenue generating capital expenditures			(5,254	)			(7,620	)			(7,616	)
Lessor required capital expenditures			(8,641	)			(1,173	)			-
Non-revenue generating capital expenditures			(27,038	)			(30,491	)			(26,090	)
Acquisition of and additions to real estate under development			(17,757	)			(29,196	)			(79,194	)
Acquisition of membership interest in co-investment			-				(85,000	)			-
Dispositions of real estate			65,496				27,800				23,003
Changes in restricted cash and refundable deposits			(9,149	)			(6,069	)			(1,376	)
Purchases of marketable securities			(16,442	)			(73,735	)			(8,048	)
Sales and maturities marketable securities			24,172				61,703				32,998
Purchases of and advances under notes and other receivables			(56,750	)			(26,000	)			(12,325	)
Collections of notes and other receivables			53,438				14,525				884
Contributions to co-investments			(162,578	)			(260,153	)			(246,106	)
Non-operating distributions from co-investments			118,856				49,773				17,141
Net cash used in investing activities			(453,696	)			(812,138	)			(425,783	)
Cash flows from financing activities:
Borrowings under debt agreements			969,061				1,745,853				1,514,684
Repayment of debt			(750,900	)			(1,371,317	)			(1,435,135	)
Additions to deferred charges			(7,402	)			(6,707	)			(5,533	)
Payments to settle derivative instruments			-				-				(2,395	)
Net proceeds from issuance of Series H Preferred interests			-				-				71,209
Retirement of Series B preferred interests and Series F Preferred interests			-				-				(103,800	)
Equity related issuance cost			(617	)			(309	)			(627	)
Net proceeds from stock options exercised			4,958				2,643				6,986
Net proceeds from issuance of common units			138,366				357,720				323,931
Contributions from noncontrolling interest			-				2,400				-
Distributions to noncontrolling interest			(8,016	)			(6,957	)			(6,052	)
Redemption of limited partners units and noncontrolling interests			(5,711	)			(6,986	)			(5,387	)
Common units and preferred units and preferred interests distributions paid			(191,140	)			(165,984	)			(149,533	)
Net cash provided by financing activities			148,599				550,356				208,348
Net increase (decrease) in cash and cash equivalents			(115	)			5,717				(864	)
Cash and cash equivalents at beginning of year			18,606				12,889				13,753
Cash and cash equivalents at end of year		$	18,491			$	18,606			$	12,889

(Continued)

F-15

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended December 31, 2013, 2012, and 2011

(Dollars in thousands)

		2013				2012				2011
Supplemental disclosure of cash flow information:
Cash paid for interest, net of $16,486, $10,346, and $8,240capitalized in 2013, 2012 and 2011, respectively		$	103,516			$	95,597			$	89,691
Supplemental disclosure of noncash investing and financing activities:
Transfer from real estate under development to rental properties		$	68			$	6,632			$	165,214
Transfer from real estate under development to co-investments		$	27,906			$	-			$	54,472
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
Contribution of note receivable to co-investment			-				12,325				-
Change in accrual of distributions		$	5,575			$	5,441			$	3,206
Change in fair value of derivative liabilities		$	4,185			$	4,461			$	230
Change in fair value of marketable securities		$	3,222			$	459			$	2,836
Change in construction payable		$	2,655			$	1,113			$	2,518

See accompanying notes to consolidated financial statements

F-16

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

(1) Organization

The accompanying consolidated financial statements present the accounts of Essex Property Trust, Inc. (“Essex”, “ESS”, or the “Company”), which include the accounts of the Company and Essex Portfolio, L.P. and subsidiaries (the “Operating Partnership,” which holds the operating assets of the Company). Unless otherwise indicated, the notes to consolidated financial statements apply to both the Company and the Operating Partnership.

ESS is the sole general partner in the Operating Partnership with a 94.6% general partner interest and the limited partners owned a 5.4% interest as of December 31, 2013. The limited partners may convert their Operating Partnership units into an equivalent number of shares of common stock. Total Operating Partnership units outstanding were 2,149,802 and 2,122,381 as of December 31, 2013 and 2012, respectively, and the redemption value of the units, based on the closing price of the Company’s common stock totaled $308.5 million and $311.2 million, as of December 31, 2013 and 2012, respectively. The Company has reserved shares of common stock for such conversions.

As of December 31, 2013, the Company owned or had ownership interests in 164 apartment communities, (aggregating 34,079 units), four commercial buildings, and eleven 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

In December 2013, the Company and BRE Properties, Inc. (“BRE”) entered into a definitive agreement under which BRE will merge with Essex. Under the terms of the agreement, each BRE common share will be converted into 0.2971 newly issued shares of Essex common stock plus $12.33 in cash. The Company has obtained committed financing up to $1.0 billion (the “bridge loan”) which is available if needed to fund the cash portion of the purchase price. The bridge loan facility is structured as a 364-day unsecured loan facility available in a single draw on the closing date of the merger. The company is exploring several alternatives to fund the cash needs of the transaction including asset sales, joint ventures or new financing. The merger is subject to customary closing conditions, including receipt of approval of Essex and BRE shareholders. Additional information about the merger and the bridge loan can be found in the Form S-4 filed with the SEC on January 29, 2014.

(2) Summary of Critical and Significant Accounting Policies

(a) Principles of Consolidation and Basis of Presentation

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. Certain reclassifications have been made to conform to the current year’s presentation.

Noncontrolling interest includes the 5.4% and 5.5% limited partner interests in the Operating Partnership not held by the Company at December 31, 2013 and 2012, 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 eleven 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 $194.9 million and $178.3 million, respectively, as of December 31, 2013, and $201.1 million and $178.6 million, respectively, as of December 31, 2012.

The DownREIT VIEs collectively own eleven 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 1,007,879 and 1,039,431 as of December 31, 2013 and 2012 respectively, and the redemption value of the units, based on the closing price of the Company’s common stock totaled $144.6 million and $152.4 million, as of December 31, 2013 and 2012, respectively. As of December 31, 2013 and 2012, 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.

F-17

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

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, 2013 and 2012, the Company did not have any VIE’s of which it was not deemed to be the primary beneficiary.

(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 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 buildings;

	(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.

F-18

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

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, 2013 and 2012, no communities were classified as held for sale and no impairment charges were recorded in 2013, 2012 or 2011.

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 2013, 2012, and 2011).

(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.

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 fees are reflected in equity income (loss) from co-investments.

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

F-19

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

(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, 2013, 2012, and 2011. 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, 2013 and 2012, 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, 2013 and 2012, the Company classified its investments in mortgage backed securities, which mature in November 2019 and September 2020, as held to maturity, and accordingly, these securities are stated at their amortized cost. The discount on the mortgage backed securities is being amortized to interest income based on an estimated yield and the maturity date of the securities.

As of December 31, 2013 and 2012 marketable securities consist of the following ($ in thousands):

		December 31, 2013
						Gross
		Amortized				Unrealized				Carrying
		Cost				Gain (Loss)				Value
Available for sale:
Investment-grade unsecured bonds		$	15,446			$	509			$	15,955
Investment funds - US treasuries			3,675				3				3,678
Common stock			13,104				(1,304	)			11,800
Held to maturity:
Mortgage backed securities			58,651				-				58,651
Total		$	90,876			$	(792	)		$	90,084

		December 31, 2012
						Gross
		Amortized				Unrealized				Carrying
		Cost				Gain				Value
Available for sale:
Investment-grade unsecured bonds		$	15,475			$	826			$	16,301
Investment funds - US treasuries			3,788				1				3,789
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

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, 2013, 2012 and 2011, the proceeds from sales of available for sale securities totaled $24.2 million, $61.7 million and $33.0 million, respectively. These sales all resulted in gains, which totaled $1.8 million, $0.8 million and $5.0 million for the years ended December 31, 2013, 2012 and 2011, 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.

F-20

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

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 contractually due principal and interest. The Company does not accrue interest when a note is considered impaired and an 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, 2013 and 2012, no notes were impaired.

(h) Capitalization Policy

The Company capitalizes all direct and certain indirect costs, including interest, real estate taxes and insurance, 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 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 $7.5 million, $6.2 million and $4.3 million for the years ended December 31, 2013, 2012 and 2011, respectively, most of which relates to development projects. These totals include capitalized salaries of $2.6 million, $2.4 million and $2.2 million, for the years ended December 31, 2013, 2012 and 2011, respectively. The Company capitalizes leasing commissions associated with the lease-up of development communities and amortizes the costs over the life of the leases. The amounts capitalized are immaterial for all periods presented.

(i) 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, 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 Note 9. The Company uses Level 3 inputs to estimate the fair value of its mortgage backed securities. 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 the outstanding balances under its lines of credit and notes and other receivables approximate fair value as of December 31, 2013 and 2012, 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 $2.30 billion and $2.13 billion of fixed rate debt at December 31, 2013 and 2012, respectively, to be $2.33 billion and $2.24 billion. Management has estimated the fair value of the Company’s $737.0 million and $692.9 million of variable rate debt at December 31, 2013 and 2012, respectively, is $719.4 million and $671.7 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 payable, other liabilities and dividends payable approximate fair value as of December 31, 2013 and 2012 due to the short-term maturity of these instruments. Marketable securities and derivative liabilities are carried at fair value as of December 31, 2013 and 2012.

At December 31, 2013, the Company’s investments in mortgage backed securities had a carrying value of $58.7 million and the Company estimated the fair value to be approximately $86.2 million. At December 31, 2012, the estimated fair values of the mortgage backed securities were approximately equal to the carrying values. The Company determines the fair value of the mortgage backed securities based on unobservable inputs (level 3 of the fair value hierarchy) considering the assumptions that market participants would make in valuing these securities. Assumptions such as estimated default rates and discount rates are used to determine expected, discounted cash flows to estimate the fair value.

F-21

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

(j) 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. 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.

As of December 31, 2013 and 2012, there were no outstanding forward starting swaps. 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, 2013, 2012 and 2011.

(k) 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.

(l) Income Taxes

Generally in any year in which ESS 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, 2013 as ESS 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 ESS 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.

As a partnership, the Operating Partnership is not subject to federal or state income taxes except that in order to maintain ESS’s compliance with REIT tax rules that are applicable to ESS, the Operating Partnership utilizes taxable REIT subsidiaries for various revenue generating or investment activities. The taxable REIT subsidiaries are consolidated by the Operating Partnership.

F-22

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

The status of cash dividends distributed for the years ended December 31, 2013, 2012, and 2011 related to common stock, Series F, Series G, and Series H preferred stock are classified for tax purposes as follows:

		2013				2012				2011
Common Stock
Ordinary income			77.34	%			70.58	%			63.68	%
Capital gain			17.64	%			8.75	%			11.16	%
Unrecaptured section 1250 capital gain			5.02	%			7.97	%			0.74	%
Return of capital			0.00	%			12.70	%			24.42	%
			100.00	%			100.00	%			100.00	%

		2013				2012				2011
Series F, G, and H Preferred stock
Ordinary income			77.34	%			80.85	%			100.00	%
Capital gains			17.64	%			10.02	%			0.00	%
Unrecaptured section 1250 capital gain			5.02	%			9.13	%			0.00	%
			100.00	%			100.00	%			100.00	%

(m) 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 as of December 31, 2013 and 2012.

(n) 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.

(o) Changes in Accumulated Other Comprehensive Loss by Component

Essex Property Trust, Inc.

		Change in fair				Unrealized
						gains/(losses) on
		amortization				available for sale
		of derivatives				securities				Total
Balance at December 31, 2012, net of noncontrolling interest		$	(71,658	)		$	2,397			$	(69,261	)
Other comprehensive income (loss) before reclassification			3,468				(1,472	)			1,996
Amounts reclassified from accumulated other comprehensive loss			8,466				(1,673	)			6,793
Net other comprehensive income (loss)			11,934				(3,145	)			8,789
Balance at December 31, 2013, net of noncontrolling interest		$	(59,724	)		$	(748	)		$	(60,472	)

F-23

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

Essex Portfolio, L.P.

		Change in fair				Unrealized
		value and				gains/(losses) on
		amortization				available for sale
		of derivatives				securities				Total
Balance at December 31, 2012		$	(70,762	)		$	2,531			$	(68,231	)
Other comprehensive income (loss) before reclassification			4,148				(1,556	)			2,592
Amounts reclassified from accumulated other comprehensive loss			8,466				(1,767	)			6,699
Net other comprehensive income (loss)			12,614				(3,323	)			9,291
Balance at December 31, 2013		$	(58,148	)		$	(792	)		$	(58,940	)

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

(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.

(3) Real Estate Investments

(a) Acquisitions of Real Estate

For the year ended December 31, 2013, the Company purchased six communities consisting of 1,079 units for $349.1 million.

For the year ended December 31, 2012, the Company purchased eleven communities, comprising of 2,052 units for $551.1 million.

(b) Sales of Real Estate investments

During 2013, the Company sold three communities consisting of 363 units for $57.5 million resulting in gains totaling $29.2 million.

During the first quarter of 2013, the Company sold a land parcel held for future development located in Palo Alto, California for $9.1 million, which resulted in a gain of $1.5 million.

During 2012, the Company sold two communities consisting of 264 units for $28.3 million resulting in gains totaling $10.9 million.

(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.

F-24

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

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 targeted at approximately 50% of the cost to acquire and improve real estate. The Company has contributed $150.0 million to Wesco I, and as of December 31, 2013, Wesco I owned nine apartment communities with 2,713 units with an aggregate carrying value of approximately $670 million.

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 targeted at approximately 50% of the cost to acquire and improve real estate. The Company has contributed $39.7 million to Wesco III, and as of December 31, 2013, Wesco III owned three apartment communities with 657 units with an aggregate carrying value of approximately $164 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, 2013, Fund II owned two apartment communities.

During the year ended December 31, 2013, Fund II sold five communities for gross proceeds of $320.4 million. In connection with the 2013 sales, Fund II incurred a prepayment penalty on debt of which the Company’s pro rata share was $0.4 million. The total gain on the sales was $146.8 million, of which the Company’s pro rata share was $38.8 million, net of internal disposition costs. There are two remaining properties in the Fund II portfolio that are expected to be sold in 2014.

During the year ended December 31, 2012, Fund II sold seven communities for gross proceeds of $413.0 million. In connection with the 2012 sales, Fund II incurred a prepayment penalty on debt of which the Company’s pro rata share was $2.3 million. The total gain on the sales was $106.0 million, of which the Company’s pro rata share was $29.1 million.

Canada Pension Plan Investment Board – Joint Venture Developments

The Company has entered into six development joint ventures with the Canada Pension Plan Investment Board (“CPPIB”) to develop six apartment communities. For each joint venture the Company holds a 50% to 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 a 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.

As of December 31, 2013, the Company and CPPIB have six active developments projects comprised of 1,507 units for total estimated costs of $695.2 million. At December 31, 2013, the total remaining estimated costs to be incurred on these projects was $216.2 million of which the Company’s portion of the remaining costs were $118.9 million.

F-25

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

Epic – Phase I, a 280 unit community in San Jose, California, a development joint venture with CPPIB, stabilized its operations in the fourth quarter of 2013. Epic – Phase II and Phase III are currently still under development.

The Huxley and The Dylan – 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 Municipal Swap Index (“SIFMA Municipal Swap Index”) 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 Municipal Swap Index 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.

One South Market

During May 2013, the Company entered into a development joint venture to develop a 312 unit community in San Jose, California. 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. The co-investment is not a variable interest entity since it has sufficient equity without additional subordinated support, and the Company and the partner jointly have the power to direct activities that most significantly impact the co-investment economic performance. The co-investment has a single general partner, which is a subsidiary consolidated by the Company. However, the Company, as general partner of the co-investment, 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 the partner, and the Company records the co-investments on the equity method of accounting.

As of December 31, 2013, the project’s total estimated costs were $145.1 million. At December 31, 2013, the total remaining estimated costs to be incurred on this project was $114.2 million of which the Company’s portion of the remaining costs were $62.8 million.

Preferred Equity Investments

During the first quarter of 2013, the Company made an $8.6 million preferred equity interest investment in an apartment development located in Redwood City, California to a related party entity. The investment has a preferred return of 12% and matures in January 2016.

In March 2013, the Company received the redemption of $9.7 million of preferred equity related to two properties located in downtown Los Angeles, California. The Company recorded $0.4 million of income from redemption penalties due to the early redemption of these preferred equity investments.

F-26

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

During the second quarter of 2013, the Company received the redemption of $13.1 million of preferred equity related to a property located in downtown Los Angeles, California. The Company recorded $0.5 million of income from redemption penalties due to the early redemption of these preferred equity investments.

In August 2013, the Company made an $8.5 million preferred equity investment in a multifamily development project located in San Jose, California. The investment has a preferred return of 12% and matures in 3 years.

During the third quarter of 2013, the Company restructured the terms of a preferred equity investment with a related party entity on a property located in Anaheim, California, reducing the rate from 13% to 9%, while extending the maximum term by one year. The Company recorded a $0.4 million restructuring fee related to the restructured investment.

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.

The carrying values of the Company’s co-investments, all accounted for under the equity method of accounting as of December 31, 2013 and 2012 are as follows ($ in thousands):

		2013				2012
Membership interest in Wesco I		$	142,025			$	143,874
Membership interest in Wesco III			39,073				9,941
Partnership interest in Fund II			4,166				53,601
Membership interest in a limited liability company that owns Expo			12,041				18,752
Total operating co-investments			197,305				226,168
Membership interests in limited liability companies with CPPIB that own and are developing Epic, Connolly Station, Mosso I & II, Park 20 (fka Elkhorn) and The Village			301,538				186,362
Membership interests in limited liability companies that own and are developing The Huxley and The Dylan			18,545				16,552
Membership interest in a limited liability company that owns and is developing One South Market			17,115				-
Total development co-investments			337,198				202,914
Membership interest in Wesco II that owns a preferred equity interest in Parkmerced with a preferred return of 10.1%			94,711				91,843
Preferred interest in related party limited liability company that owns Sage at Cupertino with a preferred return of 9.5%			15,775				14,438
Preferred interest in a related party limited liability company that owns Madison Park at Anaheim with a preferred return of 9%			13,824				13,175
Preferred interest in related party limited liability company that owns an apartment development in Redwood City with a preferred return of 12%			9,455				-
Preferred interest in a limited liability company that owns an apartment development in San Jose with a preferred return of 12%			8,865				-
Preferred interests in limited liability companies that own apartment communities in downtown Los Angeles with preferred returns of 9% and 10% repaid in 2013			-				22,807
Total preferred interest investments			142,630				142,263
Total co-investments		$	677,133			$	571,345

F-27

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

The combined summarized financial information of co-investments, which are accounted for under the equity method, is as follows ($ in thousands):

		December 31,
		2013				2012
Balance sheets:
Rental properties and real estate under development		$	1,953,328			$	1,745,147
Other assets			61,578				168,061
Total assets		$	2,014,906			$	1,913,208
Debt		$	667,641			$	820,895
Other liabilities			125,479				91,922
Equity			1,221,786				1,000,391
Total liabilities and partners' equity		$	2,014,906			$	1,913,208
Company's share of equity		$	677,133			$	571,345

		Years ended
		December 31,
		2013				2012				2011
Statements of operations:
Property revenues		$	100,402			$	130,128			$	106,386
Property operating expenses			(37,518	)			(55,990	)			(43,066	)
Net operating income			62,884				74,138				63,320
Gain on sale of real estate			146,758				106,016				-
Interest expense			(24,155	)			(34,959	)			(27,843	)
General and administrative			(5,344	)			(3,697	)			(1,748	)
Depreciation and amortization			(36,831	)			(47,917	)			(44,412	)
Net income (loss)		$	143,312			$	93,581			$	(10,683	)
Company's share of net income (loss)		$	55,865			$	41,745			$	(467	)

(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, 2013, the Company had two consolidated development projects, and eight unconsolidated joint venture development projects aggregating 2,501 units for an estimated total cost of $1.1 billion, of which $407.0 million remains to be expended. The Company’s portion of the remaining costs was $249.2 million.

As of December 31, 2013, the Company had one consolidated predevelopment project consisting of 200 units.

F-28

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

(4) Notes and Other Receivables

Notes receivables, secured by real estate, and other receivables consist of the following as December 31, 2013 and 2012 ($ in thousands):

		2013				2012
Note receivable, secured, bearing interest at 4.0%, due December 2014 (1)		$	3,212			$	3,212
Notes and other receivables from affiliates (2)			60,968				28,896
Other receivables			4,075				3,785
Note receivable, secured, bearing interest at 8.0%, paid in full May 2013			-				971
Note receivable, secured, bearing interest at 8.8%, paid in full March 2013			-				10,800
Note receivable, secured, effective interest at 9.6%, paid in full March 2013			-				18,499
		$	68,255			$	66,163

	(1)	The borrower funds an impound account for capital replacement.

	(2)	During the second quarter of 2013, the Company provided a short-term bridge loans to Fund II $42.4 million at a rate of LIBOR + 1.75%. In July 2013, Fund II repaid the Company for $42.4 million in short term loans. The Company has provided two bridge loans totaling $56.8 million to Wesco III at a rate of LIBOR + 2.50%, permanent financing is expected to be placed on the Gas Company Lofts and Regency at Mt. View by the end of Q1 2014. In January 2014, Wesco III repaid the loan on Gas Company Lofts.

During the twelve months ended December 31, 2013, the Company received the repayment of three notes receivables totaling $30.5 million. One of the notes was repaid early, and as such the Company recorded $0.8 million of income related to a change in estimate on the discount to the note receivable.

During the first quarter of 2013, Wesco III repaid the Company for a $26.0 million short-term bridge loan to assist with the purchase of Haver Hill.

(5) Related Party Transactions

The Company has adopted written related party transaction guidelines that are intended to cover transactions in which the Company (including entities it controls) is a party and in which any “related person” has a direct or indirect interest. A “related person” means any Company director, director nominee, or executive officer, any beneficial owner of more than 5% of the Company’s outstanding common stock, and any immediate family member of any of the foregoing persons. A related person may be considered to have an indirect interest in a transaction if he or she (i) is an owner, director, officer or employee of or otherwise associated with another company that is engaging in a transaction with the Company, or (ii) otherwise, through one or more entities or arrangements, has an indirect financial interest in or personal benefit from the transaction.

The related person transaction review and approval process is intended to determine, among any other relevant issues, the dollar amount involved in the transaction; the nature and value of any related person’s direct or indirect interest (if any) in the transaction; and whether or not (i) a related person’s interest is material, (ii) the transaction is fair, reasonable, and serves the best interest of the Company and its shareholders, and (iii) whether the transaction or relationship should be entered into, continued or ended.

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 $11.5 million, $10.9 million, and $6.1 million for the years ended December 31, 2013, 2012, and 2011, respectively. All of these fees are net of intercompany amounts eliminated by the Company.

During 2013, the Company has provided short-term bridge loans to Wesco III and Fund II as discussed in Note 4 above. In January 2014, Wesco III repaid the short-term bridge loan to Gas Company Lofts in full.

The Company provided a $26.0 million short-term bridge loan to Wesco III at a rate of LIBOR plus 2.50%, to assist with the purchase of Haver Hill in 2012. The short term bridge loan was repaid in March 2013.

F-29

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

The Company’s Chairman and founder, Mr. George Marcus, is the Chairman of the Marcus & Millichap Company (“MMC”), which is a parent company of a diversified group of real estate service, investment, and development firms. Mr. Marcus is also the Co-Chairman of Marcus & Millichap, Inc. (“MMI”), and Mr. Marcus owns a controlling interest in MMI. MMI is a national brokerage firm listed on the NYSE that underwent its initial public offering in 2013. Fund II paid brokerage commissions totaling $0.6 million and $0.4 million, respectively, to an affiliate of MMI related to the sales of properties in 2013 and 2012, respectively, and there were no brokerage commissions paid during 2011. There were no brokerage commissions paid by the Company to MMI or its affiliates during 2013, 2012, and 2011.

As described in Note 3, the Company restructured the terms of a preferred equity investment in a property located in Anaheim, California, reducing the rate from 13% to 9%, while extending the maximum term by one year. The Company recorded $0.4 million of income related to the restructured investment. The entity that owns the property is an affiliate of MMC. Independent directors (other than Mr. Marcus) on the Company’s Board of Directors that serve on the Nominating and Corporate Governance and Audit Committees approved the restructuring of the investment in this entity.

In January 2013, the Company invested $8.6 million as a preferred equity interest investment in an entity affiliated with MMC that owns an apartment development in Redwood City, California. Independent directors (other than Mr. Marcus) on the Company’s Board of Directors that serve on the Nominating and Corporate Governance 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 MMC that owns an apartment community in Cupertino, California. The investment has a preferred return of 9.5% and matures in May 2016. The Company expects to 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.

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 MMC, 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 MMC. Independent directors (other than Mr. Marcus) on the Company’s Board of Directors approved the acquisitions of Montebello and Riley Square.

An Executive Vice President of the Company 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.

(6) Discontinued Operations

The Company classifies real estate as “held for sale” when the sale is considered probable and expected to sell within a year. During 2013, the Company sold Linden Square, a 183 unit community located in Seattle, Washington for $25.3 million, resulting in a gain of $12.7 million. Also during 2013, the Company sold Cambridge, a 40 unit property located in Chula Vista, California for $4.7 million, resulting in a gain of $2.5 million, and Brentwood, a 140 unit property located in Santa Ana, California for $27.5 million, resulting in a gain of $14.0 million. As of December 31, 2013 and 2012, no communities were held for sale.

During 2012, the Company sold two communities, Tierra Del Sol/Norte and Alpine Country, for a total of $28.3 million resulting in gains totaling $10.9 million.

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.

F-30

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

The Company has recorded the gains on sales 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):

		2013				2012				2011
Revenues		$	4,454			$	5,848			$	9,133
Property operating expenses			(1,406	)			(2,181	)			(3,584	)
Depreciation and amortization			(1,098	)			(1,513	)			(2,534	)
Expenses			(2,504	)			(3,694	)			(6,118	)
Operating income from real estate sold			1,950				2,154				3,015
Gain on sale of real estate			29,223				10,870				8,382
Internal disposition costs			-				(1,087	)			(839	)
Income from discontinued operations		$	31,173			$	11,937			$	10,558

(7) Mortgage Notes Payable

ESS does not have any indebtedness as all debt is incurred by the Operating Partnership. Mortgage notes payable consist of the following as of December 31, 2013 and 2012 ($ in thousands):

		2013				2012
Fixed rate mortgage notes payable		$	1,236,479			$	1,363,731
Variable rate mortgage notes payable(1)			167,601				201,868
		$	1,404,080			$	1,565,599
Number of properties securing mortgage notes			49				55
Remaining terms		1-26 years				1-27 years
Weighted average interest rate			5.6	%			5.4	%

The aggregate scheduled principal payments of mortgage notes payable at December 31, 2013 are as follows ($ in thousands):

2014		$	-
2015			67,461
2016			12,390
2017			182,731
2018			271,156
Thereafter			870,342
		$	1,404,080

(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 1.6% at December 2013 and 1.9% at December 2012) 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 May 2025 through December 2039. Of these bonds $156.9 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, 2013, monthly interest expense and principal amortization, excluding balloon payments, totaled approximately $6.1 million and $1.9 million, respectively. Second deeds of trust accounted for $58.4 million of the $1.4 billion in mortgage notes payable as of December 31, 2013. 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.

F-31

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

(8) Unsecured Debt and Lines of Credit

ESS does not have any indebtedness as all debt is incurred by the Operating Partnership. ESS guarantees the Operating Partnership’s unsecured debt including the revolving credit facilities up to the maximum amounts and for the full term of the facilities.

Unsecured debt and lines of credit consist of the following as of December 31, 2013 and 2012 ($ in thousands):

										Weighted Average
										Maturity
		2013				2012				In Years
Bonds private placement - fixed rate		$	465,000			$	465,000				5.2
Term loan - variable rate			350,000				350,000				3.2
Bonds public offering - fixed rate			595,023				297,084				9.0
Unsecured debt			1,410,023				1,112,084
Lines of credit			219,421				141,000				4.3
Total unsecured debt		$	1,629,444			$	1,253,084
Weighted average interest rate on fixed rate unsecured bonds			4.0	%			4.2	%
Weighted average interest rate on variable rate term loan			2.5	%			2.7	%
Weighted average interest rate on line of credit			2.2	%			2.3	%

As of December 31 2013 and 2012, the Company had $465 million of unsecured bonds outstanding at an average effective interest rate of 4.5%.

The following is a summary of the Company’s unsecured private placement bonds as of December 31, 2013 and 2012 ($ in thousands):

											Coupon
	Maturity		2013				2012				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				100,000				4.27	%
Senior unsecured private placement notes	June 2021			50,000				50,000				4.30	%
Senior unsecured private placement notes	August 2021			50,000				50,000				4.37	%
			$	465,000			$	465,000

As of December 31, 2013 and 2012, the Company had a $350 million unsecured term loan outstanding at an average interest rate of 2.5%. 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 $300 million of the term loan to a fixed rate.

In April 2013, the Company issued $300.0 million of senior unsecured notes due on May 1, 2023 with a coupon rate of 3.25% per annum and are payable on May 1st and November 1st of each year, beginning November 1, 2013 (the 2023 Notes). The 2023 Notes were offered to investors at a price of 99.152% of par value. The 2023 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. These bonds are included in the line “Bonds public offering-fixed rate” in the table above, and as of December 31, 2013, the carrying value of the 2023 Notes, net of discount was $297.7 million.

F-32

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

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. In May 2013, the Operating Partnership completed the exchange and these bonds are included in the line “Bonds public offering-fixed rate” in the table above. As of December 31, 2013 and 2012, the carrying value of the 2022 Notes, net of discount was $297.3 million and $297.1 million, respectively.

The Company has two lines of credit aggregating $625.0 million as of December 31, 2013. The Company has a $600 million credit facility with an underlying interest rate 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, 2013. As of December 31, 2013 and 2012, the balance of the $600 million credit facility was $199.0 million and $141.0 million, respectively. This facility matures in December 2015 with two one-year extensions, exercisable by the Company. The Company also 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. 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, 2013 and 2012, there was a $20.4 million and zero balance, respectively outstanding on this unsecured line.

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, 2013 and 2012.

(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.

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 2.29% through November 2016. These derivatives qualify for hedge accounting.

As of December 31, 2013 the Company also had nine interest rate cap contracts totaling a notional amount of $156.9 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 $156.9 million of the Company’s tax exempt variable rate debt.

As of December 31, 2013 and 2012, the aggregate carrying value of the interest rate swap contracts was a liability of $2.7 million and $6.6 million, respectively. The aggregate carrying value of the interest rate cap contracts was zero on the balance sheet as of December 31, 2013 and December 31, 2012.

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.

F-33

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

No hedge ineffectiveness on cash flow hedges occurred during the years ended December 31, 2013, 2012 and 2011.

(10) Lease Agreements

As of December 31, 2013 the Company is a lessor for three 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
2014		$	8,624
2015			7,104
2016			4,908
2017			4,158
2018			3,613
Thereafter			15,271
		$	43,678

(11) Equity Transactions

Preferred Securities Offerings

As of December 31, 2013 and 2012, the Company has the following cumulative preferred securities outstanding:

				Shares				Shares				Liquidation
Description		Issue Date		Authorized				Outstanding				Preference
4.875% Series G		July 2006			5,980,000				178,249			$	4,456
7.125% Series H		April 2011			8,000,000				2,950,000			$	73,750

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 ESS 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). ESS 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, 2013 and 2012, shares of Series G with an aggregate liquidation value of $4.5 million were outstanding.

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, ESS 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.

F-34

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

Common Stock Offerings

During 2013, ESS sold 913,344 shares of common stock for proceeds of $138.4 million, net of fees and commissions, at an average price of $152.92.

During 2012 and 2011, ESS issued 2.4 million shares of common stock in each period for proceeds of $357.7 million and $323.9 million, net of fees and commissions, respectively.

Operating Partnership Units and Long Term Incentive Plan (“LTIP”) Units

As of December 31, 2013, the Operating Partnership had outstanding 2,031,612 operating partnership units and 118,190 vested LTIP units. The Operating Partnership’s general partner, ESS, owned 94.6% of the partnership interests in the Operating Partnership at December 31, 2013, and ESS is responsible for the management of the Operating Partnership’s business. As the general partner of the Operating Partnership, ESS effectively controls the ability to issue common stock of ESS upon a limited partner’s notice of redemption. In addition, ESS has generally acquired OP units upon a limited partner’s notice of redemption in exchange for shares of its common stock. The redemption provisions of OP units owned by limited partners that permit ESS to settle in either cash or common stock at the option of ESS further evaluated in accordance with applicable accounting guidance to determine whether temporary or permanent equity classification on the balance sheet is appropriate. The Operating Partnership evaluated this guidance, including the requirement to settle in unregistered shares, and determined that these OP units meet the requirements to qualify for presentation as permanent equity.

LTIP units represent an interest in the Operating Partnership for services rendered or to be rendered by the LTIP unit holder in its capacity as a partner, or in anticipation of becoming a partner, in the Operating Partnership. Upon the occurrence of specified events, LTIP units may over time achieve full parity with common units of the Operating Partnership for all purposes. Upon achieving full parity, LTIP units may be redeemed for an equal number of the ESS’s common stock.

The redemption value of the OP units owned by the limited partners, not including ESS, had such units been redeemed at December 31, 2013, was approximately $308.5 million based on the closing price of ESS’s common stock as of December 31, 2013.

(12) Net Income Per Common Share and Net Income Per Common Unit

Essex Property Trust, Inc.

Basic and diluted income from continuing and discontinued operations per share is calculated as follows for the years ended December 31 ($ in thousands, except share and per share amounts):

F-35

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

		2013												2012												2011
						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		$	121,324				37,248,960			$	3.26			$	108,532				35,032,491			$	3.10			$	30,570				32,541,792			$	0.94
Income from discontinued operations available to common stockholders			29,487				37,248,960				0.79				11,280				35,032,491				0.32				9,798				32,541,792				0.30
		$	150,811							$	4.05			$	119,812							$	3.42			$	40,368							$	1.24
Effect of Dilutive Securities (1)			-				86,335								-				92,430								-				86,922
Diluted:
Income from continuing operations available to common stockholders (1)		$	121,324				37,335,295			$	3.25			$	108,532				35,124,921			$	3.09			$	30,570				32,628,714			$	0.94
Income from discontinued operations available to common stockholders			29,487				37,335,295				0.79				11,280				35,124,921				0.32				9,798				32,628,714				0.30
		$	150,811							$	4.04			$	119,812							$	3.41			$	40,368							$	1.24

	(1)	Weighted average convertible limited partnership units of 2,131,425, 2,219,046, and 2,231,807, which include vested Series Z and Series Z-1 incentive units, for the years ended December 31, 2013, 2012 and 2011, respectively, were not included in the determination of diluted earnings per share calculation 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 168,325; 263,613; and 175,500; for the years ended December 31, 2013, 2012, and 2011, 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 Series G preferred stock have been excluded from diluted earnings per share for the years ended 2013, 2012, and 2011 respectively, as the effect was anti-dilutive.

Essex Portfolio, L.P.

Basic and diluted income from continuing and discontinued operations per unit is calculated as follows for the years ended December 31 ($ in thousands, except unit and per unit amounts):

		2013												2012												2011
						Weighted-				Per								Weighted-				Per								Weighted-				Per
						average				Common								average				Common								average				Common
						Common				Unit								Common				Unit								Common				Unit
		Income				Units				Amount				Income				Units				Amount				Income				Units				Amount
Basic:
Income from continuing operations available to common unitholders		$	128,576				39,380,385			$	3.27			$	115,834				37,251,537			$	3.11			$	33,035				34,773,599			$	0.95
Income from discontinued operations			31,173				39,380,385				0.79				11,937				37,251,537				0.32				10,558				34,773,599				0.30
Income available to common unitholders		$	159,749							$	4.06			$	127,771							$	3.43			$	43,593							$	1.25
Effect of Dilutive Securities (1)			-				86,335								-				92,430								-				67,319
Diluted:
Income from continuing operations available to common unitholders (1)		$	128,576				39,466,720			$	3.26			$	115,834				37,343,967			$	3.10			$	33,035				34,860,521			$	0.95
Income from discontinued operations			31,173				39,466,720				0.79				11,937				37,343,967				0.32				10,558				34,860,521				0.30
Income available to common unitholders		$	159,749							$	4.05			$	127,771							$	3.42			$	43,593							$	1.25

	(1)	The Operating Partnership has the ability to redeem DownREIT limited partnership units for cash and does not consider them to be potentially dilutive securities.

Stock options of 168,325; 263,613; and 175,500; for the years ended December 31, 2013, 2012, and 2011, respectively, were not included in the diluted earnings per unit 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 units of cumulative convertible Series G preferred interest have been excluded from diluted earnings per unit for the years ended 2013, 2012, and 2011 respectively, as the effect was anti-dilutive.

F-36

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

(13) Equity Based Compensation Plans

Stock Options and Restricted Stock

In May 2013, stockholders approved the Company’s 2013 Stock Award and Incentive Compensation Plan (“2013 Plan”). The 2013 Plan became effective on June 1, 2013 and serves as the successor to the Company’s 2004 Stock Incentive Plan (the “2004 Plan”), and no additional equity awards can be granted under the 2004 Plan after the date the 2013 Plan became effective.

The Company’s 2013 Plan provides incentives to attract and retain officers, directors and key employees. The 2013 Plan provides for the grants of options to purchase shares of common stock, grants of restricted stock and other award types. Under the 2013 Plan, the maximum aggregate number of shares that may be issued is 1,000,000, plus any shares that have not been issued under the 2004 Plan, including shares subject to outstanding awards under the 2004 Plan that are not issued or delivered to a participant for any reason. The 2013 Plan is administered by the Compensation Committee of the Board of Directors and 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 five 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 $2.3 million, $2.0 million, and $1.5 million for years ended December 31, 2013, 2012 and 2011 respectively. Stock-based compensation capitalized for options and restricted stock totaled $0.4 million, $0.3 million, and $0.2 million for the years ended December 31, 2013, 2012 and 2011, respectively. The intrinsic value of the options exercised totaled $3.0 million, $2.9 million, and $3.8 million, for the years ended December 31, 2013, 2012, and 2011 respectively. The intrinsic value of the options outstanding and fully vested totaled $7.6 million, $9.9 million, and $10.6 million, for the years ended December 31, 2013, 2012 and 2011, respectively.

Total unrecognized compensation cost related to unvested stock options totaled $5.1 million as of December 31, 2013 and the unrecognized compensation cost is expected to be recognized over a period of 1 to 5 years.

The average fair value of stock options granted for the years ended December 31, 2013, 2012 and 2011 was $15.80, $12.64 and $14.49, respectively. Certain stock options grated in 2013, 2012, and 2011 included a $75 cap or 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:

		2013				2012				2011
Stock price		$	153.54			$	143.95			$	131.87
Risk-free interest rates			2.68	%			1.16	%			2.23	%
Expected lives		10 years				5 - 10 years				10 years
Volatility			18.03	%			20.05	%			19.63	%
Dividend yield			3.15	%			3.26	%			3.29	%

F-37

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

A summary of the status of the Company’s stock option plans as of December 31, 2013, 2012, and 2011 and changes during the years ended on those dates is presented below:

		2013								2012								2011
						Weighted-								Weighted-								Weighted-
						average								average								average
						exercise								exercise								exercise
		Shares				price				Shares				price				Shares				price
Outstanding at beginning of year			623,434			$	125.96				415,020			$	109.71				300,642			$	88.11
Granted			150,325				153.54				263,113				143.95				197,500				131.87
Exercised			(52,970	)			102.43				(41,603	)			77.21				(83,122	)			84.24
Forfeited and canceled			(25,301	)			135.25				(13,096	)			128.36				-				-
Outstanding at end of year			695,488				133.37				623,434				125.96				415,020				109.71
Options exercisable at year end			300,632				119.09				250,620				107.12				219,820				92.31

The following table summarizes information about stock options outstanding as of December 31, 2013:

			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			2013				life (years)				price				2013				price
$62.34 - $101.01				74,261				2.7			$	79.18				72,261			$	79.02
105.64 - 161.98				604,902				7.2				139.18				228,371				131.77
164.76 - 164.76				16,325				9.4				164.76				-				-
				695,488				6.8				133.37				300,632				119.09

During 2013, 2012, and 2011 the Company issued 1,556, 1,614 and 1,540 shares of restricted stock, respectively. The unrecognized compensation cost related to unvested restricted stock totaled $1.2 million as of December 31, 2013 and is expected to be recognized over a period of 1 to 7 years.

The following table summarizes information about restricted stock outstanding as of December 31, 2013, 2012 and 2011 and changes during the years ended:

		2013								2012								2011
						Weighted-								Weighted-								Weighted-
						average								average								average
						grant								grant								grant
		Shares				price				Shares				price				Shares				price
Unvested at beginning of year			24,922			$	104.52				35,219			$	98.57				44,877			$	102.46
Granted			1,556				158.75				1,614				149.68				1,540				134.44
Vested			(7,211	)			109.86				(8,641	)			106.69				(9,532	)			104.91
Forfeited and canceled			(3,091	)			100.84				(3,270	)			102.00				(1,666	)			94.35
Unvested at end of year			16,176				108.06				24,922				104.52				35,219				98.57

Long Term Incentive Plans – Z Units and 2014 LTIP Units

On December 10, 2013, the Operating Partnership issued 50,500 units under the 2014 Long-Term Incentive Plan Award agreements to twelve senior executives of the Company. Pursuant to the 2014 Long-Term Incentive Plan Awards, each recipient was initially granted a number of 2014 Long-Term Incentive Plan Units (the “2014 LTIP Units”), 90% of which are subject to performance-based vesting, and 10% of which are subject to service-based vesting based on continued employment. One-third of the performance-based vesting of the 2014 LTIP Units initially granted will be eligible to be earned by recipients based on Essex’s absolute total stockholder return and two-thirds will be eligible to be earned based on Essex’s relative total stockholder return, in each case, during a one-year performance period beginning on the initial grant date of the awards.

F-38

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

Prior to 2013, the Company 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. 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.

The issuance of Z Units and 2014 LTIP Units are 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 and 2014 LTIP Units.

Stock-based compensation expense for Z Units and 2014 LTIP Units under the fair value method totaled approximately $2.2 million, $2.1 million and $1.5 million for the years ended December 31, 2013, 2012 and 2011, respectively. Stock-based compensation capitalized for Z Units and 2014 LTIP Units totaled approximately $0.5 million, $0.5 million, and $0.3 million, for the years ended December 31, 2013, 2012, and 2011, respectively. The intrinsic value of the unvested Z Units and 2014 LTIP Units totaled $21.4 million as of December 31, 2013. Total unrecognized compensation cost related to the unvested Z Units and 2014 LTIP Units under the Z Units and 2014 LTIP Units plans totaled $7.6 million as of December 31, 2013. The unamortized cost for the Z Units and LTIP Units is recognized up to 14 years and four years, respectively, subject to the achievement of the stated performance criteria.

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 distributions, on vested units, that are approximately the same as dividends distributed to common stockholders.

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.

F-39

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

The following table summarizes information about the Z Units and 2014 LTIP Units outstanding as of December 31, 2013 ($ in thousands):

		Long Term Incentive Plan - Z Units and 2014 LTIP 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 (years)
Balance, December 2010			326,280				171,902			$	19,463				498,182			$	54.15				11.2
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
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
Granted			-				50,500								50,500
Vested			35,919				(35,919	)							-
Converted			(108,433	)			-								(108,433	)
Cancelled			-				(5,243	)							(5,243	)
Balance, December 2013			118,190				149,381			$	21,438				267,571			$	63.53				9.3

F-40

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

(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, 2013, 2012, and 2011 ($ in thousands):

		Years Ended December 31,
		2013				2012				2011
Revenues:
Southern California		$	265,226			$	246,534			$	220,416
Northern California			214,402				175,325				149,457
Seattle Metro			107,553				92,489				79,832
Other real estate assets			14,822				12,348				10,955
Total property revenues		$	602,003			$	526,696			$	460,660
Net operating income:
Southern California		$	176,675			$	164,092			$	145,353
Northern California			148,204				120,540				99,047
Seattle Metro			71,407				60,853				51,477
Other real estate assets			9,705				9,044				7,273
Total net operating income			405,991				354,529				303,150
Depreciation			(192,420	)			(169,173	)			(150,009	)
Interest expense before amortization			(104,600	)			(100,244	)			(91,694	)
Amortization expense			(11,924	)			(11,644	)			(11,474	)
Management and other fees from affiliates			11,700				11,489				6,780
General and administrative			(25,601	)			(23,307	)			(20,694	)
Cost of management and other fees			(6,681	)			(6,513	)			(4,610	)
Merger expenses			(4,284	)			-				-
Interest and other income			11,633				13,833				17,139
Loss on early retirement of debt			(300	)			(5,009	)			(1,163	)
Gain on sale of land			1,503				-				-
Equity income (loss) income from co-investments			55,865				41,745				(467	)
Gain on remeasurement of co-investment			-				21,947				-
Income before discontinued operations		$	140,882			$	127,653			$	46,958

F-41

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

Total assets for each of the reportable operating segments are summarized as follows as of December 31, 2013 and 2012 ($ in thousands):

		As of December 31,
Assets:		2013				2012
Southern California		$	1,746,434			$	1,675,265
Northern California			1,614,159				1,489,095
Seattle Metro			741,533				699,465
Other real estate assets			86,745				88,330
Net reportable operating segments - real estate assets			4,188,871				3,952,155
Real estate under development			50,430				66,851
Co-investments			677,133				571,345
Cash and cash equivalents, including restricted cash			53,766				42,126
Marketable securities			90,084				92,713
Notes and other receivables			68,255				66,163
Other non-segment assets			58,300				55,870
Total assets		$	5,186,839			$	4,847,223

(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, $0.2 million, and $0.3 million for the years ended December 31, 2013, 2012, and 2011, respectively.

(16) Commitments and Contingencies

As of December 31, 2013, the Company had five non-cancelable ground leases for certain apartment communities and buildings that expire between 2027 and 2082. Ground 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 ground 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-42

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

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, 2013, 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. There are, however, certain types of extraordinary losses, such as, for example, losses from terrorism or earthquakes, for which the Company does not have insurance coverage. Substantially all of the communities are located in areas that are subject to earthquake activity. The Company has established a wholly owned insurance subsidiary, Pacific Western Insurance LLC (“PWI”). Through PWI, the Company is self-insured as it relates to earthquake related losses. Additionally, since January 2008, PWI has provided property and casualty insurance coverage for the first $5.0 million of the Company’s property level insurance claims per incident. As of December 31, 2013, PWI has cash and marketable securities of approximately $40 million. These assets are consolidated in the Company’s financial statements. Beginning in 2013, the Company has obtained limited third party seismic insurance on selected assets in which it holds an ownership interest in.

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 and The Dylan 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, 2013 was $96.3 million based on the aggregate outstanding debt amount.

Since the announcement of the merger agreement on December 19, 2013, three putative class action and shareholder derivative actions have been filed on behalf of alleged BRE stockholders and/or BRE itself in the Circuit Court for Baltimore City, Maryland, under the following captions: Sutton v. BRE Properties, Inc., et al., No. 24-C-13-008425, filed December 23, 2013; Applegate v. BRE Properties, Inc., et al., No. 24-C-14-00002, filed December 30, 2013; and Lee v. BRE Properties, Inc., et al., No. 24-C-14-00046, filed January 3, 2014.

On February 7, 2014, Plaintiffs filed identical, amended complaints in the three pending actions. The amended complaints add allegations that disclosures regarding the proposed merger in the joint proxy statement/prospectus filed with the SEC on January 29, 2014 are inadequate.

All of these complaints name as defendants BRE, the BRE Board, Essex, and Merger Sub, and allege that the BRE Board breached its fiduciary duties to BRE’s stockholders and/or to BRE itself, and that the merger involves an unfair price, an inadequate sales process, and unreasonable deal protection devices that purportedly preclude competing offers. The complaints further allege that Essex, Merger Sub, and, in some cases, BRE aided and abetted those alleged breaches of duty. The complaints seek injunctive relief, including enjoining or rescinding the merger, and an award of other unspecified attorneys’ and other fees and costs, in addition to other relief. Essex management believes that the allegations in the complaints against them are without merit and intend to defend vigorously against them.

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.

F-43

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

(17) Subsequent Events

In January 2014, the Company sold Vista Capri, a 106 unit apartment community located in San Diego, CA for $14.4 million.

In January 2014, the Company expanded its unsecured revolving credit facility to $1.0 billion from $600 million, and included an accordion feature pursuant to which the Company could expand to $1.5 billion. The facility matures in December 2017, with one 18-month extension option, subject to specified conditions and the payment of an extension fee. The new facility carries an interest rate of LIBOR plus 0.95% based on the Company’s current credit ratings.

In January 2014, the Company extended the $25.0 million working capital unsecured line of credit for two additional years and reduced the pricing which carries an interest rate of LIBOR plus 0.95% based on a tiered rate structure tied to the Company’s current credit ratings.

In January 2014, the Company’s $350 million unsecured term loan was amended and the underlying interest rate on the term loan, which is based on a tiered rate structure tied to the Company’s corporate ratings, was reduced from LIBOR plus 1.20% to LIBOR plus 1.05%.

During the first quarter of 2014 through February 24, 2014, ESS sold 462,555 shares of common stock for $74.9 million, net of fees and commissions at an average price of $162.97.

F-44

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

(18) Quarterly Results of Operations (Unaudited)

Essex Property Trust, Inc.

The following is a summary of quarterly results of operations for 2013 and 2012 ($ in thousands, except per share and dividend amounts):

		Quarter ended				Quarter ended				Quarter ended				Quarter ended
		December 31				September 30				June 30				March 31
2013:
Total property revenues		$	155,986			$	152,177			$	148,783			$	145,057
Income before discontinued operations		$	20,020			$	62,718			$	28,983			$	29,161
Net income		$	36,903			$	75,875			$	29,575			$	29,702
Net income available to common stockholders		$	31,874			$	68,788			$	24,946			$	25,203
Per share data:
Net income:
Basic		$	0.85			$	1.84			$	0.67			$	0.68
Diluted		$	0.85			$	1.84			$	0.67			$	0.68
Market price:
High		$	165.44			$	172.16			$	171.11			$	156.36
Low		$	137.53			$	139.64			$	147.56			$	147.06
Close		$	143.51			$	147.70			$	158.92			$	150.58
Dividends declared		$	1.21			$	1.21			$	1.21			$	1.21
2012:
Total property revenues		$	140,294			$	133,760			$	128,465			$	124,177
Income before discontinued operations		$	49,158			$	19,731			$	42,050			$	16,714
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

F-45

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

Essex Portfolio, L.P.

The following is a summary of quarterly results of operations for 2013 and 2012 ($ in thousands, except per unit and distribution amounts):

		Quarter ended				Quarter ended				Quarter ended				Quarter ended
		December 31				September 30				June 30				March 31
2013:
Total property revenues		$	155,986			$	152,177			$	148,783			$	145,057
Income before discontinued operations		$	20,020			$	62,718			$	28,983			$	29,161
Net income		$	36,903			$	75,875			$	29,575			$	29,702
Net income available to common unitholders		$	33,776			$	72,777			$	26,493			$	26,703
Per unit data:
Net income:
Basic		$	0.87			$	1.84			$	0.67			$	0.68
Diluted		$	0.86			$	1.84			$	0.67			$	0.68
Distributions declared		$	1.21			$	1.21			$	1.21			$	1.21
2012:
Total property revenues		$	140,294			$	133,760			$	128,465			$	124,177
Income before discontinued operations		$	49,158			$	19,731			$	42,050			$	16,714
Net income		$	49,640			$	20,221			$	42,490			$	27,239
Net income available to common unitholders		$	46,581			$	17,296			$	39,580			$	24,314
Per unit data:
Net income:
Basic		$	1.23			$	0.46			$	1.08			$	0.67
Diluted		$	1.23			$	0.45			$	1.07			$	0.67
Distributions declared		$	1.10			$	1.10			$	1.10			$	1.10

F-46

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

																Costs
									Initial cost							capitalized subsequent			Gross amount carried at close of period
												Buildings and				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
The Elliot at Mukilteo		301		Mukilteo, WA		10,750			2,498				10,595			13,805			2,824			24,075			26,898			(11,185	)		1981		01/97		3-30
Avondale at Warner Center		446		Woodland Hills, CA		46,077			10,536				24,522			15,162			10,601			39,619			50,220			(21,737	)		1970		01/97		3-30
Bridgeport		184		Newark, CA		21,374			1,608				7,582			6,595			1,525			14,260			15,785			(10,670	)		1987		07/87		3-30
Barkley, The(2)		161		Anaheim, CA		16,534			-				8,520			4,817			2,353			10,984			13,337			(5,006	)		1984		04/00		3-30
Bel Air		462		San Ramon, CA		54,858			12,105				18,252			25,571			12,682			43,246			55,928			(21,280	)		1988		01/97		3-30
Belmont Station		275		Los Angeles, CA		30,045			8,100				66,666			3,262			8,267			69,760			78,027			(16,096	)		2008		12/08		3-30
Bella Villagio		231		San Jose, CA		36,992			17,247				40,343			1,735			17,247			42,079			59,325			(4,849	)		2004		09/10		3-30
Brookside Oaks		170		Sunnyvale, CA		19,652			7,301				16,310			20,824			10,328			34,107			44,435			(12,736	)		1973		06/00		3-30
Camino Ruiz Square		160		Camarillo, CA		21,110			6,871				26,119			940			6,931			26,999			33,930			(6,507	)		1990		12/06		3-30
Canyon Oaks		250		San Ramon, CA		28,559			19,088				44,473			1,512			19,088			45,985			65,073			(10,550	)		2005		05/07		3-30
Carlyle, The		132		San Jose, CA		18,274			3,954				15,277			9,956			5,801			23,387			29,187			(10,159	)		2000		04/00		3-30
City View		572		Hayward, CA		62,008			9,883				37,670			21,261			10,350			58,464			68,814			(32,305	)		1975		03/98		3-30
Coldwater Canyon		39		Studio City, CA		5,446			1,674				6,640			1,289			1,676			7,928			9,603			(2,308	)		1979		05/07		3-30
Courtyard off Main		109		Bellevue, WA		16,016			7,465				21,405			2,718			7,465			24,123			31,588			(2,752	)		2000		10/10		3-30
Domaine		92		Seattle, WA		16,336			9,059				27,177			375			9,059			27,552			36,611			(1,191	)		2009		09/12		3-30
Elevation		157		Redmond, WA		11,579			4,758				14,285			5,498			4,757			19,784			24,541			(3,054	)		1986		06/10		3-30
Esplanade		278		San Jose, CA		43,965			18,170				40,086			6,786			18,429			46,613			65,042			(15,128	)		2002		11/04		3-30
Fairhaven		164		Santa Ana, CA		16,954			2,626				10,485			5,561			2,957			15,715			18,672			(5,989	)		1970		11/01		3-30
Fairwood Pond		194		Renton, WA		13,024			5,296				15,564			2,111			5,297			17,674			22,971			(5,979	)		1997		10/04		3-30
Fountain Park		705		Playa Vista, CA		83,179			25,073				94,980			23,673			25,203			118,523			143,726			(41,416	)		2002		02/04		3-30
Harvest Park		104		Santa Rosa, CA		10,473			6,700				15,479			984			6,690			16,473			23,163			(4,043	)		2004		03/07		3-30
Hampton Place /Hampton Court		215		Glendale, CA		20,967			6,695				16,753			5,574			6,733			22,289			29,022			(10,899	)		1970		06/99		3-30
Hidden Valley		324		Simi Valley, CA		30,027			14,174				34,065			1,535			9,674			40,101			49,774			(12,830	)		2004		12/04		3-30
Highridge		255		Rancho Palos Verdes, CA		44,807			5,419				18,347			26,326			6,073			44,019			50,092			(19,916	)		1972		05/97		3-30
Highlands at Wynhaven		333		Issaquah, WA		32,793			16,271				48,932			5,541			16,271			54,473			70,744			(10,576	)		2000		08/08		3-30
Hillcrest Park		608		Newbury Park, CA		68,339			15,318				40,601			15,868			15,755			56,031			71,787			(27,474	)		1973		03/98		3-30
Hillsborough Park		235		La Habra, CA		37,218			6,291				15,455			1,625			6,272			17,099			23,371			(8,182	)		1999		09/99		3-30
Huntington Breakers		342		Huntington Beach, CA		38,108			9,306				22,720			7,218			9,315			29,929			39,244			(15,046	)		1984		10/97		3-30
Inglenook Court		224		Bothell, WA		8,300			3,467				7,881			5,766			3,474			13,640			17,114			(8,870	)		1985		10/94		3-30
Magnolia Square/Magnolia Lane(3)		188		Sunnyvale, CA		18,017			8,190				24,736			12,716			8,191			37,451			45,642			(8,282	)		1969		09/07		3-30
Mirabella		188		Marina Del Rey, CA		45,470			6,180				26,673			13,583			6,270			40,165			46,436			(16,059	)		2000		05/00		3-30
Mill Creek at Windermere		400		San Ramon, CA		49,212			29,551				69,032			1,975			29,551			71,008			100,558			(15,298	)		2005		09/07		3-30
Montclaire, The		390		Sunnyvale, CA		46,580			4,842				19,776			20,091			4,997			39,712			44,709			(29,766	)		1973		12/88		3-30
Montebello		248		Kirkland, WA		29,300			13,857				41,575			2,707			13,858			44,281			58,139			(2,351	)		1996		07/12		3-30
Montejo		124		Garden Grove, CA		13,064			1,925				7,685			2,420			2,194			9,835			12,030			(4,167	)		1974		11/01		3-30
Park Hill at Issaquah		245		Issaquah, WA		28,966			7,284				21,937			2,317			7,284			24,254			31,538			(7,853	)		1999		02/99		3-30
Palisades, The		192		Bellevue, WA		20,935			1,560				6,242			10,733			1,565			16,971			18,535			(11,333	)		1977		05/90		3-30
Pathways		296		Long Beach, CA		37,651			4,083				16,757			18,730			6,239			33,332			39,570			(22,575	)		1975		02/91		3-30
Stevenson Place		200		Fremont, CA		21,724			996				5,582			7,076			1,001			12,653			13,654			(9,216	)		1971		04/83		3-30
Stonehedge Village		196		Bothell, WA		12,390			3,167				12,603			4,726			3,201			17,296			20,496			(9,341	)		1986		10/97		3-30
Summerhill Park		100		Sunnyvale, CA		13,554			2,654				4,918			1,287			2,656			6,202			8,859			(4,814	)		1988		09/88		3-30
The Bernard		63		Seattle, WA		9,776			3,699				11,345			95			3,689			11,451			15,139			(887	)		2008		09/11		3-30
The Huntington		276		Huntington Beach, CA		33,121			10,374				41,495			2,026			10,374			43,522			53,895			(2,301	)		1975		06/12		3-30
Tierra Vista		404		Oxnard, CA		56,359			13,652				53,336			3,497			13,661			56,824			70,485			(18,565	)		2001		01/01		3-30
Valley Park		160		Fountain Valley, CA		22,180			3,361				13,420			3,319			3,761			16,339			20,100			(6,817	)		1969		11/01		3-30
																																			(Continued)

F-47

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

									Initial cost						Costs 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)
Villa Angelina		256		Placentia, CA		27,040			4,498			17,962			5,714			4,962			23,213			28,174			(8,818	)		1970		11/01		3-30
Wandering Creek		156		Kent, WA		5,300			1,285			4,980			3,569			1,296			8,538			9,834			(5,395	)		1986		11/95		3-30
Waterford, The		238		San Jose, CA		31,705			11,808			24,500			12,570			15,165			33,713			48,878			(15,024	)		2000		06/00		3-30
Wilshire Promenade		149		Fullerton, CA		17,975			3,118			7,385			7,245			3,797			13,951			17,748			(6,745	)		1992		01/97		3-30
						1,404,080			393,037			1,199,123			380,286			406,809			1,565,636			1,972,445			(564,341	)
Unencumbered communities
Allegro		97		Valley Village, CA					5,869			23,977			1,144			5,869			25,121			30,990			(3,944	)		2010		10/10		3-30
Alpine Village		301		Alpine, CA					4,967			19,728			4,511			4,982			24,224			29,206			(9,201	)		1971		12/02		3-30
Anavia		250		Anaheim, CA					15,925			63,712			5,633			15,925			69,345			85,270			(7,077	)		2009		12/10		3-30
Annaliese		56		Seattle, WA					4,727			14,229			67			4,726			14,297			19,023			(459	)		2009		01/13		3-30
Ascent		90		Kirkland, WA					3,924			11,862			1,344			3,924			13,206			17,130			(582	)		1988		10/12		3-30
Axis 2300		115		Irvine, CA					5,405			33,585			780			5,405			34,365			39,770			(5,348	)		2010		08/10		3-30
Bellerive		63		Los Angeles, CA					5,401			21,803			568			5,401			22,370			27,772			(2,378	)		2011		08/11		3-30
Belmont Terrace		71		Belmont, CA					4,446			10,290			2,454			4,473			12,717			17,190			(4,187	)		1974		10/06		3-30
Bennett Lofts		147		San Francisco, CA					21,771			50,800			23,304			28,371			67,503			95,875			(2,456	)		2004		12/12		3-30
Bonita Cedars		120		Bonita, CA					2,496			9,913			1,773			2,503			11,678			14,182			(4,608	)		1983		12/02		3-30
Boulevard		172		Fremont, CA					3,520			8,182			10,606			3,580			18,729			22,308			(11,311	)		1978		01/96		3-30
Bridle Trails		108		Kirkland, WA					1,500			5,930			5,388			1,531			11,287			12,818			(5,860	)		1986		10/97		3-30
Brighton Ridge		264		Renton, WA					2,623			10,800			3,086			2,656			13,852			16,509			(8,080	)		1986		12/96		3-30
Bristol Commons		188		Sunnyvale, CA					5,278			11,853			3,361			5,293			15,199			20,492			(8,004	)		1989		01/97		3-30
416 on Broadway		115		Glendale, CA					8,557			34,235			992			8,557			35,226			43,784			(3,750	)		2009		12/10		3-30
Bunker Hill		456		Los Angeles, CA					11,498			27,871			9,067			11,639			36,798			48,436			(17,548	)		1968		03/98		3-30
Cairns, The		100		Seattle, WA					6,937			20,679			443			6,939			21,121			28,059			(4,694	)		2006		06/07		3-30
Camarillo Oaks		564		Camarillo, CA					10,953			25,254			3,361			11,075			28,493			39,568			(16,613	)		1985		07/96		3-30
Canyon Pointe		250		Bothell, WA					4,692			18,288			3,856			4,693			22,143			26,836			(8,091	)		1990		10/03		3-30
Capri at Sunny Hills		100		Fullerton, CA					3,337			13,320			6,848			4,048			19,457			23,505			(7,745	)		1961		09/01		3-30
Castle Creek		216		Newcastle, WA					4,149			16,028			2,240			4,833			17,584			22,417			(10,037	)		1997		12/97		3-30
CBC Apartments		148		Goleta, CA					6,283			24,000			2,645			6,288			26,641			32,928			(7,948	)		1962		01/06		3-30
CentrePointe		224		San Diego, CA					3,405			7,743			17,571			3,442			25,277			28,719			(7,522	)		1974		06/97		3-30
Cedar Terrace		180		Bellevue, WA					5,543			16,442			4,065			5,652			20,397			26,050			(6,996	)		1984		01/05		3-30
Chestnut Street		96		Santa Cruz, CA					6,582			15,689			1,029			6,582			16,718			23,300			(3,249	)		2002		07/08		3-30
Commons, The		264		Campbell, CA					12,555			29,307			3,839			12,556			33,145			45,701			(4,451	)		1973		07/10		3-30
Corbella at Juanita Bay		169		Kirkland, WA					5,801			17,415			1,081			5,801			18,496			24,297			(2,070	)		1978		11/10		3-30
Country Villas		180		Oceanside, CA					4,174			16,583			2,650			4,187			19,220			23,407			(7,669	)		1976		12/02		3-30
Delano/Bon Terra		126		Redmond, WA					7,470			22,511			834			7,470			23,345			30,815			(1,585	)		2005/2011		12/11		3-30
Devonshire		276		Hemet, CA					3,470			13,786			2,400			3,482			16,174			19,656			(6,481	)		1988		12/02		3-30
Domain		379		San Diego, CA					23,848			95,394			17			23,848			95,411			119,259			(398	)		2013		11/13		3-30
Emerald Ridge		180		Bellevue, WA					3,449			7,801			2,992			3,449			10,793			14,242			(7,244	)		1987		11/94		3-30
Essex Skyline at MacArthur Place		349		Santa Ana, CA					21,537			146,099			1,216			21,537			147,314			168,852			(8,472	)		2008		04/12		3-30
Evergreen Heights		200		Kirkland, WA					3,566			13,395			3,654			3,649			16,966			20,615			(9,184	)		1990		06/97		3-30
Fairways(4)		74		Newport Beach, CA					-			7,850			5,290			9			13,131			13,140			(5,354	)		1972		06/99		3-30
Foothill Commons		388		Bellevue, WA					2,435			9,821			33,746			2,440			43,562			46,002			(22,333	)		1978		03/90		3-30
Foothill Gardens/Twin Creeks		176		San Ramon, CA					5,875			13,992			5,273			5,964			19,176			25,140			(10,015	)		1985		02/97		3-30
Forest View		192		Renton, WA					3,731			14,530			1,361			3,731			15,891			19,622			(5,742	)		1998		10/03		3-30
Fountain Court		320		Seattle, WA					6,702			27,306			7,607			6,985			34,631			41,615			(15,071	)		2000		03/00		3-30
Fourth & U		171		Berkeley, CA					8,879			52,351			2,227			8,879			54,577			63,457			(7,644	)		2010		04/10		3-30
Fox Plaza		444		San Francisco, CA					39,731			92,706			2,627			39,731			95,333			135,064			(2,771	)		1968		02/13		3-30
Hillsdale Garden		697		San Mateo, CA					22,000			94,681			18,717			22,244			113,154			135,398			(28,418	)		1948		09/06		3-30
Hope Ranch Collection		108		Santa Barbara, CA					4,078			16,877			2,394			4,208			19,141			23,349			(4,108	)		1965		03/07		3-30
																																		(Continued)

F-48

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

									Initial cost				Costs 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)
Joule		295		Seattle, WA					14,558		69,417		3,142		14,558		72,559		87,117		(10,435)		2010		03/10		3-30
1000 Kiely		121		Santa Clara, CA					9,359		21,845		5,118		9,359		26,963		36,322		(2,745)		1971		03/11		3-30
Kings Road		196		Los Angeles, CA					4,023		9,527		8,817		4,031		18,336		22,367		(8,792)		1979		06/97		3-30
Laurels at Mill Creek		164		Mill Creek, WA					1,559		6,430		5,107		1,595		11,501		13,096		(6,330)		1981		12/96		3-30
Le Parc Luxury Apartments		140		Santa Clara, CA					3,090		7,421		10,794		3,092		18,212		21,305		(10,219)		1975		02/94		3-30
Lofts at Pinehurst, The		118		Ventura, CA					1,570		3,912		4,346		1,618		8,210		9,828		(3,824)		1971		06/97		3-30
Marbrisa		202		Long Beach, CA					4,700		18,605		4,116		4,760		22,662		27,421		(8,395)		1987		09/02		3-30
Marina City Club(5)		101		Marina Del Rey, CA					-		28,167		17,390		-		45,557		45,557		(12,066)		1971		01/04		3-30
Marina Cove(6)		292		Santa Clara, CA					5,320		16,431		9,971		5,324		26,398		31,722		(15,114)		1974		06/94		3-30
Mariners Place		105		Oxnard, CA					1,555		6,103		1,813		1,562		7,909		9,471		(3,847)		1987		05/00		3-30
Meadowood		320		Simi Valley, CA					7,852		18,592		6,239		7,898		24,785		32,683		(13,426)		1986		11/96		3-30
Mesa Village		133		Clairemont, CA					1,888		7,498		1,099		1,894		8,592		10,485		(3,253)		1963		12/02		3-30
Mira Monte		355		Mira Mesa, CA					7,165		28,459		8,392		7,186		36,830		44,016		(15,701)		1982		12/02		3-30
Miracle Mile/Marbella		236		Los Angeles, CA					7,791		23,075		12,201		7,886		35,181		43,067		(17,228)		1988		08/97		3-30
Mission Hills		282		Oceanside, CA					10,099		38,778		4,009		10,167		42,719		52,886		(13,413)		1984		07/05		3-30
Monterra del Mar/Rey/Sol		292		Pasadena, CA					2,202		4,794		28,416		8,385		27,027		35,412		(13,253)		1972		04/99		3-30
Monterey Villas		122		Oxnard, CA					2,349		5,579		5,478		2,424		10,982		13,406		(5,199)		1974		07/97		3-30
Mt. Sutro		99		San Francisco, CA					2,334		8,507		3,450		2,809		11,482		14,291		(5,435)		1973		06/01		3-30
Muse		152		North Hollywood, CA					7,822		33,436		1,550		7,823		34,985		42,808		(4,888)		2011		02/11		3-30
Park Catalina		90		Los Angeles, CA					4,710		18,839		876		4,710		19,716		24,425		(1,051)		2002		06/12		3-30
Park West		126		San Francisco, CA					9,424		21,988		1,895		9,424		23,883		33,307		(1,060)		1958		09/12		3-30
Pinehurst(7)		28		Ventura, CA					355		1,356		453		6		2,159		2,164		(836)		1973		12/04		3-30
Pointe at Cupertino, The		116		Cupertino, CA					4,505		17,605		10,179		4,505		27,784		32,289		(8,131)		1963		08/98		3-30
Reed Square		100		Sunnyvale, CA					6,873		16,037		6,377		6,873		22,414		29,287		(1,490)		1970		01/12		3-30
Regency at Encino		75		Encino, CA					3,184		12,737		1,754		3,184		14,490		17,675		(2,407)		1989		12/09		3-30
Salmon Run at Perry Creek		132		Bothell, WA					3,717		11,483		1,263		3,801		12,662		16,463		(5,544)		2000		10/00		3-30
101 San Fernando		323		San Jose, CA					4,173		58,961		5,425		4,173		64,386		68,559		(7,966)		2001		07/10		3-30
Sammamish View		153		Bellevue, WA					3,324		7,501		5,868		3,331		13,361		16,693		(8,810)		1986		11/94		3-30
San Marcos		432		Richmond, CA					15,563		36,204		26,551		22,866		55,452		78,318		(19,483)		2003		11/03		3-30
Santee Court/Santee Village		238		Los Angeles, CA					9,581		40,317		2,967		9,582		43,283		52,865		(4,811)		2004		10/10		3-30
Shadow Point		172		Spring Valley, CA					2,812		11,170		1,833		2,820		12,995		15,815		(5,146)		1983		12/02		3-30
Slater 116		108		Kirkland, WA					7,379		22,138		158		7,379		22,296		29,675		(220)		2013		09/13		3-30
Summit Park		300		San Diego, CA					5,959		23,670		3,840		5,977		27,492		33,469		(10,845)		1972		12/02		3-30
The Grand		243		Oakland, CA					4,531		89,208		4,199		4,531		93,407		97,938		(17,784)		2009		Jan-09		3-30
The Sweeps		91		Goleta, CA					5,558		21,320		1,947		5,618		23,206		28,825		(7,273)		1967		01/06		3-30
Trabucco Villas		132		Lake Forest, CA					3,638		8,640		2,177		3,890		10,565		14,455		(5,485)		1985		10/97		3-30
Tuscana		30		Tracy, CA					2,828		6,599		162		2,870		6,719		9,589		(1,484)		2007		02/07		3-30
Via		284		Sunnyvale, CA					22,000		82,270		317		22,016		82,571		104,587		(8,246)		2011		07/11		3-30
Vista Belvedere		76		Tiburon, CA					5,573		11,901		5,224		5,573		17,125		22,698		(5,945)		1963		08/04		3-30
Vista Capri - North		106		San Diego, CA					1,663		6,609		901		1,668		7,505		9,173		(2,825)		1975		12/02		3-30
Vox		58		Seattle, WA					5,545		16,635		22		5,545		16,657		22,202		(116)		2013		10/13		3-30
Walnut Heights		163		Walnut, CA					4,858		19,168		2,592		4,887		21,731		26,618		(7,648)		1964		10/03		3-30
Wharfside Pointe		142		Seattle, WA					2,245		7,020		7,537		2,258		14,545		16,802		(7,773)		1990		06/94		3-30
Willow Lake		508		San Jose, CA					43,194		101,030		3,887		43,194		104,917		148,111		(4,365)		1989		10/12		3-30
Windsor Ridge		216		Sunnyvale, CA					4,017		10,315		8,365		4,021		18,676		22,697		(12,239)		1989		03/89		3-30
Woodland Commons		302		Bellevue, WA					2,040		8,727		18,174		2,044		26,897		28,941		(11,363)		1978		03/90		3-30
Woodside Village		145		Ventura, CA					5,331		21,036		3,242		5,341		24,268		29,609		(7,663)		1987		12/04		3-30
		29,989					1,404,080		1,021,942		3,474,800		863,981		1,059,824		4,300,898		5,360,723		(1,232,604)
																											(Continued)

F-49

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013, 2012, and 2011

																	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
Hollywood			35,000		Los Angeles, CA					10,200				13,800				2,441				10,200				16,241				26,441				(4,747	)			1938				07/06		3-30
Santa Clara Retail			139,000		Santa Clara, CA					6,472				11,704				3,616				6,472				15,320				21,792				(2,687	)			1970				09/11		3-30
925/935 East Meadow Drive			31,900		Palo Alto, CA					1,401				3,172				8,006				3,147				9,433				12,579				(4,561	)			1988				11/97		3-30
17461 Derian Ave			110,000		Irvine, CA					3,079				12,315				6,829				3,909				18,314				22,223				(10,286	)			1983				07/00		3-30
Consolidated Development Pipeline										10,658				-				39,772				50,430				-				50,430				-
Total apartment communities and other real estate assets							$ 1,404,080		$	1,053,752			$	3,515,791			$	924,645			$	1,133,982			$	4,360,205			$	5,494,188			$	(1,254,886	)

(1)	The aggregate cost for federal income tax purposes is approximately $4.6 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 2070.

(4)	The land is leased pursuant to a ground lease expiring 2027.

(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.

A summary of activity for rental properties and accumulated depreciation is as follows:

		2013				2012				2011					2013				2012				2011
Rental properties:													Accumulated depreciation:
Balance at beginning of year		$	5,033,672			$	4,313,064			$	3,964,561		Balance at beginning of year		$	1,081,517			$	920,026			$	775,553
Improvements			92,016				97,947				219,692		Depreciation expense - Acquisitions			6,203				3,744				1,279
Acquisition of real estate			344,476				619,743				103,300		Depreciation expense - Discontinued operations			12,290				2,108				315
Development of real estate			14,111				25,545				44,280		Depreciation expense - Rental properties			168,092				161,492				148,337
Disposition of real estate			(40,518	)			(22,627	)			(18,769	)	Dispositions			(13,216	)			(5,853	)			(5,458	)
Balance at the end of year		$	5,443,757			$	5,033,672			$	4,313,064		Balance at the end of year		$	1,254,886			$	1,081,517			$	920,026

F-50

SIGNATURES

Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange Act of 1934, each Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Palo Alto, State of California, on February 26, 2014.

.

	ESSEX PROPERTY TRUST, INC.
	By: /S/ MICHAEL T. DANCE
	Michael T. Dance
	Executive Vice President, Chief Financial Officer (Authorized Officer, Principal Financial and Accounting Officer)
	ESSEX PORTFOLIO, L.P. By: Essex Property Trust, Inc., its general partner
	By: /S/ MICHAEL T. DANCE
	Michael T. Dance
	Executive Vice President, Chief Financial Officer (Authorized Officer, Principal Financial and Accounting Officer)

S-1

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 each Registrant and in the capacity and on the date indicated.

Signature	Title	Date
/S/ MICHAEL J. SCHALL Michael J. Schall	Chief Executive Officer and President, and Director (Principal Executive Officer)	February 26, 2014
/S/ KEITH R. GUERICKE Keith R. Guericke	Director, and Vice Chairman of the Board	February 26, 2014
/S/ GEORGE M. MARCUS George M. Marcus	Director and Chairman of the Board	February 26, 2014
/S/ DAVID W. BRADY David W. Brady	Director	February 26, 2014
/S/ GARY P. MARTIN Gary P. Martin	Director	February 26, 2014
/S/ ISSIE N. RABINOVITCH Issie N. Rabinovitch	Director	February 26, 2014
/S/ THOMAS E. RANDLETT Thomas E. Randlett	Director	February 26, 2014
/S/ BYRON A. SCORDELIS. Byron A. Scordelis	Director	February 26, 2014
/S/ JANICE L. SEARS. Janice L. Sears	Director	February 26, 2014
/S/ CLAUDE J. ZINNGRABE Claude J. Zinngrabe	Director	February 26, 2014

S-2

EXHIBIT INDEX

Exhibit No.	Document
2.1	Agreement and Plan of Merger, dated as of December 19, 2013, by and among Essex Property Trust, Inc., BRE Properties, Inc. and Bronco Acquisition Sub, Inc., a Delaware corporation, attached as Exhibit 2.1 to the Company's Form 8-K, filed on December 20, 2013, and incorporated herein by reference.
3.1	Articles of Amendment and Restatement of Essex Property Trust, Inc., attached as Exhibit 3.1 to the Company's Current Report on Form 8-K, filed May 17, 2013, and incorporated herein by reference.
3.2	Third Amended and Restated Bylaws of Essex Property Trust, Inc., dated as of May 14, 2013, attached as Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed May 17, 2013, and incorporated herein by reference.
3.3	Certificate of Limited Partnership of Essex Portfolio, L.P. and amendments thereto.
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.
4.4	Indenture, dated April 15, 2013, among Essex Portfolio, L.P., Essex Property Trust, Inc., and U.S. Bank National Association, as trustee, including the form of 3.25% Senior Notes due 2023 and the guarantee thereof, attached as Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed April 15, 2013, and incorporated herein by reference.
4.5	Form of Common Stock Certificate of Essex Property Trust, Inc., filed as Exhibit 4.5 to the Company’s Form S-4 Registration Statement, filed January 29, 2014 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	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.*
10.7	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.†

10.8	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.†
10.9	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.*
10.10	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.
10.11	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. †
10.12	First Amendment to Amended and Restated Revolving Credit Agreement, dated May 31, 2012, by and among Essex Portfolio, L.P., PNC Bank, National Association, as Administrative Agent and L/C Issuer and the other lenders party thereto, attached 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.
10.13	Modification Agreement, dated July 30, 2012, attached 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
10.14	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.
10.15	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.
10.16	Essex Property Trust, Inc. Executive Severance Plan (as Amended and Restated effective March 12, 2013), attached as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed March 18, 2013, and incorporated herein by reference.*
10.17	Form of Equity Distribution Agreement, dated March 29, 2013, between Essex Property Trust, Inc. and various entities, attached as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed April 2, 2013, and incorporated herein by reference.
10.18	Second Amendment to Amended and Restated Revolving Credit Agreement, dated August 30, 2012, by and among Essex Portfolio, L.P., PNC Bank, National Association, as Administrative Agent and L/C Issuer and the other lenders party thereto, attached as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, and incorporated herein by reference.
10.19	Third Amendment to Amended and Restated Revolving Credit Agreement, dated January 22, 2013, by and among Essex Portfolio, L.P., PNC Bank, National Association, as Administrative Agent and L/C Issuer and the other lenders party thereto, attached as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, and incorporated herein by reference.
10.20	Essex Property Trust, Inc. 2013 Stock Award and Incentive Compensation Plan, attached as Appendix B to the Company's Definitive Proxy Statement on Schedule 14A for the Annual Meeting of Stockholders held May 14, 2013, filed April 1, 2013, and incorporated herein by reference.*

10.21	Essex Property Trust, Inc. 2013 Employee Stock Purchase Plan, attached as Appendix C to the Company's Definitive Proxy Statement on Schedule 14A for the Annual Meeting of Stockholders held May 14, 2013, filed April 1, 2013, and incorporated herein by reference.*
10.22	Forms of equity award agreements for officers under the 2013 Stock Award and Incentive Compensation Plan, attached as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, and incorporated herein by reference.*
10.23	Company’s Non-Employee Director Equity Award Program and forms of equity award agreements thereunder, attached as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, and incorporated herein by reference.*
10.24	Third Amended and Restated Agreement of Limited Partnership of Essex Portfolio, L.P., dated as of December 10, 2013, attached as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed December 12, 2013, and incorporated herein by reference.*
10.25	Fourth Amendment to Amended and Restated Revolving Credit Agreement, dated as of January 29, 2014, by and among Essex Portfolio, L.P., PNC Bank, National Association, as Administrative Agent and L/C Issuer and the other lenders party thereto, attached as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed January 31, 2014, and incorporated herein by reference.
10.26	Third Modification Agreement, dated as of January 29, 2014 by and among Essex Portfolio, L.P., U.S. Bank National Association, as Administrative Agent and Lender and the other lenders party thereto, attached as Exhibit 10.2 to the Company's Current Report on Form 8-K, filed January 31, 2014, 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 and Essex Portfolio, L.P.
23.1	Consent of KPMG LLP, Independent Registered Public Accounting Firm.
23.2	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.
31.3	Certification of Michael J. Schall, Principal Executive Officer of General Partner, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.4	Certification of Michael T. Dance, Principal Financial Officer of General Partner, 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.
32.3	Certification of Michael J. Schall, Principal Executive Officer of General Partner, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.4	Certification of Michael T. Dance, Principal Financial Officer of General Partner, 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.