Essex Property Trust (ESS) 10-K risk factor changes: FY2014 vs FY2013

Our business, operating results, cash flows and financial condition are subject to various risks and uncertainties, including, without limitation, those set forth below, any one of which could cause [removed: the] our actual [added: operating] results to vary materially from recent results or from our anticipated future results.

[removed: If the merger is not completed,] [added: Any of] these risks could [removed: materially] [added: adversely] affect the [removed: business, financial results] [added: Company's business] and [removed: stock prices of Essex.][added: financial results.]

[removed: If the proposed merger closes, the Combined Company (the combination] [added: As a result] of [removed: Essex and] [added: its merger with] BRE [removed: pursuant to] [added: Properties, Inc.,] the [removed: merger)] [added: Company] will face various additional risks, including, among others, the following:

| [removed: | —] [added: •] | the [removed: Combined] Company [removed: expects to incur] [added: has incurred] substantial expenses related to the merger; |

| [removed: | —] [added: •] | [removed: following] the [removed: merger, the Combined] Company may be unable to integrate [removed: the businesses of Essex and] BRE successfully and realize the anticipated synergies and other benefits of the merger or do so within the anticipated timeframe; |

| [removed: | —] [added: •] | the [added: Company's] future results [removed: of the Combined Company] will suffer if the [removed: Combined] Company does not effectively manage its expanded operations [removed: following] [added: resulting from] the merger; [added: and] |

| [removed: | —] [added: •] | [removed: the Combined Company’s] joint [removed: ventures, including any joint venture] [added: ventures] entered into in connection with the [removed: asset sale (as described in the joint proxy statement/prospectus), assuming the asset sale occurs,] [added: merger] could be adversely affected by the [removed: Combined] Company’s lack of sole decision-making authority, its reliance on its joint venture partner’s financial condition and disputes between the [removed: Combined] Company and its joint venture partner. |

The Company’s [removed: strong] [added: current] balance sheet, the debt capacity available on the unsecured line of credit with a [added: diversified] bank [removed: group and] [added: group,] access to the public [removed: debt] and private placement [added: debt] markets and [added: secured debt financing providers such as] Fannie Mae and Freddie Mac [removed: secured debt financing] provides some insulation from volatile [added: capital] markets.

[removed: The Company has benefited from borrowing from Fannie Mae and Freddie Mac, and there] [added: There] are no assurances that these entities will lend to the Company in the future.

[removed: To] [added: In general, to] the extent that the Company’s access to capital and credit is at a higher cost than the Company has experienced in recent years (reflected in higher interest rates for debt financing or a lower stock price for equity [removed: financing)] [added: financing without corresponding change to investment cap rates)] the Company’s ability to make acquisitions, develop communities, obtain new financing, and refinance existing borrowing at competitive rates could [removed: be] adversely [removed: impacted.][added: impact the Company's financial standing and related credit rating.]

[removed: For the past two years] [added: Beginning in 2011,] the Company has primarily [removed: issued] [added: utilized] unsecured debt and [added: has] repaid secured debt [removed: when it] [added: at or near their respective maturity and] has [removed: matured to place] [added: placed] less reliance on [added: agency] mortgage debt financing.

At December 31, [removed: 2013,] [added: 2014,] the Company had approximately [removed: $3.0] [added: $5.1] billion of indebtedness (including [removed: $737.0] [added: $660.6] million of variable rate indebtedness, of which [removed: $300.0] [added: $225.0] million is subject to interest rate swaps effectively fixing the interest rate and [removed: $156.9] [added: $153.2] million is subject to interest rate [removed: protection agreements).][added: cap protection).]

| [removed: | —] [added: •] | cash flow may not be sufficient to meet required payments of principal and interest; |

| [removed: | —] [added: •] | inability to refinance maturing indebtedness on encumbered apartment communities; |

| [removed: | —] [added: •] | inability to comply with debt covenants could cause an acceleration of the maturity date; and |

| [removed: | —] [added: •] | [removed: repaying] [added: paying] debt before the scheduled maturity date could result in prepayment penalties. |

There is a risk that the cash flow from the communities will be insufficient to meet both debt payment obligations and the distribution requirements of the real estate investment trust provisions of the Internal Revenue Code of 1986, as [removed: amended.][added: amended (the “Code”).]

To a certain extent, our cash flow is subject to general economic, industry, regional, financial, competitive, operating, legislative, regulatory, [removed: taxation,] [added: taxation] and other factors, many of which are beyond our control.

As of December 31, [removed: 2013,] [added: 2014,] the Company had [removed: 49 of its 139] [added: 68] consolidated communities encumbered by debt.

With respect to the [removed: 49] [added: 68] communities encumbered by debt, all of them are secured by deeds of trust relating solely to those communities.

[removed: In order to] minimize counterparty credit risk, the Company enters into hedging arrangements only with financial institutions that have a current rating of A or higher.

At December 31, [removed: 2013,] [added: 2014,] the Company had approximately [removed: $167.6] [added: $179.2] million of variable rate tax-exempt financing.

The [removed: Internal Revenue] Code and rules and regulations thereunder impose various restrictions, conditions and requirements in order to allow the note holder to exclude interest on qualified bond obligations from gross income for federal income tax purposes.

The [removed: Internal Revenue] Code also requires that at least 20% of apartment units be made available to residents with gross incomes that do not exceed a specified percentage, generally 50%, of the median income for the applicable family size as determined by the Housing and Urban Development Department of the federal government.

| [removed: | —] [added: •] | the general economic climate; |

| [removed: | —] [added: •] | local economic conditions in which the communities are located, such as oversupply of housing or a reduction in demand for rental housing; |

| [removed: | —] [added: •] | the attractiveness of the communities to tenants; |

| [removed: | —] [added: •] | competition from other available housing; [removed: and] |

| [removed: | —] [added: •] | the Company’s ability to provide for adequate maintenance and insurance. |

During [added: the] recent [removed: years,] [added: past,] a confluence of factors has resulted in job losses, turmoil and volatility in the capital markets, and caused a national and global recession.

The [removed: Company’s] [added: Company's] forecast for the national economy assumes growth of the gross domestic product of the national economy and the economies of the [removed: western] [added: west coast] states.

In the event of another recession, the Company could incur [removed: reduction] [added: reductions] in rental rates, occupancy levels, property valuations and increases in operating costs such as advertising and turnover expenses.

The Company’s estimates of future income, expenses and the costs of improvements or redevelopment that [removed: is] [added: are] necessary to allow the Company to market an acquired apartment community as originally intended may prove to be inaccurate.

| [removed: | —] [added: •] | funds may be expended and [removed: management’s] [added: management's] time devoted to projects that may not be completed; |

| [removed: | —] [added: •] | construction costs of a project may exceed original estimates possibly making the project economically unfeasible; |

| [removed: | —] [added: •] | projects may be delayed due to, without limitation, adverse weather conditions, labor or material shortage; |

| [removed: | —] [added: •] | occupancy rates and rents at a completed project may be less than anticipated; and |

| [removed: | —] [added: •] | expenses at completed development projects may be higher than anticipated. |

For further information regarding these risks, please see the risk factor [added: titled] “General real estate investment risks may adversely affect property income and values.”

The Company generated significant amounts of rental revenues for the year ended December 31, [removed: 2013,] [added: 2014,] from the Company’s communities concentrated in Southern California (Los Angeles, Orange, Santa Barbara, San Diego, and Ventura counties), Northern California (the San Francisco Bay Area), and the Seattle metropolitan area.

Risks Related to Real Investments and Our Operations

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| • | rent control or stabilization laws or other laws regulating housing; and |

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Short-term leases expose us to the effects of declining market rents.

Substantially all of our apartment leases are for a term of one year or less.

Because these leases generally permit the residents to leave at the end of the lease term without penalty, our rental revenues are impacted by declines in market rents more quickly than if our leases were for longer terms.

The Company may not realize the expected benefits of its merger with BRE because of transition difficulties and other challenges.

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| • | properties acquired pursuant to the merger are subject to property value reassessments by taxing authorities, which may in turn lead to property tax increases that are higher than anticipated; |

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We may pursue acquisitions, dispositions, investments and joint ventures, which could adversely affect our results of operations.

We may make acquisitions of and investments in businesses that offer complementary properties and communities to augment our market coverage, or enhance our property offerings, such as our recent acquisition of BRE.

We may also enter into strategic alliances or joint ventures to achieve these goals.

We cannot assure you that we will be able to identify suitable acquisition, investment, alliance, or joint venture opportunities, that we will be able to consummate any such transactions or relationships on terms and conditions acceptable to us, or that such transactions or relationships will be successful.

In addition,

our original estimates and assumptions used in assessing any acquisition may be inaccurate, and we may not realize the expected financial or strategic benefits of any such acquisition.

From time to time, we may also divest portions of our business that are no longer strategically important or exit minority investments, which could materially affect our FFO, cash flows and results of operations.

These transactions or any other acquisitions or dispositions involve risks and uncertainties.

For example, the integration of acquired businesses may not be successful and could result in disruption to other parts of our business.

To integrate acquired businesses, we must implement our management information systems, operating systems and internal controls, and assimilate and manage the personnel of the acquired operations.

There can be no assurance that all pre-acquisition property due diligence will have identified all material issues that might arise with respect to such acquired business and its properties.

Risk Factors Relating to the Proposed Merger with BRE

The exchange ratio and the cash consideration will not be adjusted in the event of any change in the stock prices of either Essex or BRE.

Upon the consummation of the merger, each outstanding share of BRE common stock will be converted automatically into the right to receive 0.2971 shares of Essex common stock, with cash paid in lieu of any fractional shares, plus $12.33 in cash, without interest, each subject to certain adjustments provided for in the merger agreement.

The exchange ratio of 0.2971 and cash consideration will not be adjusted for changes in the market prices of either shares of Essex common stock or shares of BRE common stock.

Changes in the market price of shares of Essex common stock prior to the merger will affect the market value of the merger consideration that will be paid to BRE shareholders upon completion of the merger.

Stock price changes may result from a variety of factors (many of which are beyond the control of Essex and BRE), including the following factors:

| | — | market reaction to the announcement of the merger; |

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| | — | changes in the respective businesses, operations, assets, liabilities and prospects of Essex and BRE; |

| | — | changes in market assessments of the business, operations, financial position and prospects of either company or the Combined Company; |

| | — | market assessments of the likelihood that the merger will be completed; |

| | — | interest rates, general market and economic conditions and other factors generally affecting the market prices of Essex common stock and BRE common stock; |

| | — | federal, state and local legislation, governmental regulation and legal developments in the businesses in which Essex and BRE operate; and |

| | — | other factors beyond the control of Essex and BRE. |

The market price of shares of Essex common stock at the closing of the merger may vary from its price on the date the merger agreement was executed and thereafter.

As a result, the market value of the merger consideration represented by the exchange ratio will also vary.

Therefore, while the number of shares of Essex common stock to be issued per share of BRE common stock is fixed, Essex stockholders cannot be sure of the market value of the merger consideration that will be paid to BRE stockholders upon completion of the merger.

Essex stockholders and unitholders of the Operating Partnership will be diluted by the merger.

The merger will dilute the ownership position of Essex stockholders and unitholders of the Operating Partnership.

Upon completion of the merger, we estimate that continuing Essex stockholders will own approximately 62% of the issued and outstanding shares of Combined Company common stock, and former BRE stockholders will own approximately 38% of the issued and outstanding common stock of the Combined Company.

Consequently, Essex stockholders and unitholders of the Operating Partnership, as a general matter, will have less influence over the management and policies of the Combined Company after the effective time of the merger than they currently exercise over the management and policies of Essex.

Failure to complete the merger could negatively impact the stock prices and the future business and financial results of Essex.

If the merger is not completed, the ongoing business of Essex could be adversely affected and Essex will be subject to a variety of risks associated with the failure to complete the merger, including the following:

| | — | Essex being required, under certain circumstances, to pay to BRE up to $10 million in expense reimbursement; |

| | — | Essex having to pay certain costs relating to the proposed merger, such as legal, accounting, financial advisor, filing, printing and mailing fees; and |

| | — | diversion of Essex management focus and resources from operational matters and other strategic opportunities while working to implement the merger. |

The pendency of the merger could adversely affect the business and operations of Essex.

Prior to the effective time of the merger, some tenants or vendors of Essex may delay or defer decisions, which could negatively affect the revenues, earnings, cash flows and expenses of Essex, regardless of whether the merger is completed.

Similarly, current and prospective employees of Essex may experience uncertainty about their future roles with the Combined Company following the merger, which may materially adversely affect the ability of Essex to attract and retain key personnel during the pendency of the merger.

In addition, due to operating restrictions in the merger agreement, Essex may be unable, during the pendency of the merger, to pursue strategic transactions, undertake significant capital projects, undertake certain significant financing transactions and otherwise pursue other actions, even if such actions would prove beneficial.

There can be no assurance that Essex will be able to secure the financing necessary to pay the cash portion of the merger consideration on acceptable terms, in a timely manner, or at all.

In connection with the merger, Essex has obtained commitments for up to $1.0 billion in a senior unsecured bridge loan facility to finance the cash portion of the merger consideration.

In addition, Essex is exploring additional alternatives to fund the cash portion of the merger consideration including through existing unsecured credit facilities, asset sales, joint ventures or other financing arrangements.

However, Essex has not entered into a definitive agreement for the debt financing, nor has it secured alternative financing, nor has it entered into a definitive agreement for the potential asset sales (the “Asset Sale”) in connection with the merger.

There can be no assurance that Essex will be able to secure financing to pay the cash portion of the merger consideration on acceptable terms, in a timely manner, or at all.

If Essex is unable to secure such financing, Essex will nonetheless be required to close the merger under the terms of the merger agreement.

In addition, the bridge loan facility expires on April 18, 2014 (with a right to extend up to an additional 30 days in certain circumstances) whereas the merger agreement may not be terminable until June 17, 2014.

Risk Factors Relating to the Combined Company Following the Merger

If the proposed merger closes, we will face various additional risks.

| | — | following the merger, the Combined Company may be unable to retain key employees; |

Certain statements below discuss the Company’s estimates of its [removed: 2014] [added: 2015] regional Same-Property revenues; these estimates are for Essex on a standalone basis, excluding the impact of the [removed: proposed] merger with BRE.

ESS is the sole general partner of the Operating Partnership and, as of December 31, [removed: 2013,] [added: 2014,] had an approximately [removed: 94.6%] [added: 96.7%] general partner interest in the Operating Partnership.

[removed: As of December 31, 2013, the Company had ownership interests in 164 communities, comprising 34,079 apartment units, and the] [added: The Company’s] apartment communities are [added: predominately] located in the following major [removed: West Coast] regions:

Southern California (Los Angeles, Orange, Riverside, [removed: Santa Barbara,] San Diego, [added: Santa Barbara,] and Ventura counties)

As of December 31, [removed: 2013,] [added: 2014,] the Company also had ownership interests in four commercial buildings (with approximately [removed: 315,900] [added: 325,200] square feet).

As of December 31, [removed: 2013,] [added: 2014,] the Company’s development pipeline was comprised of two consolidated projects under development, [removed: nine] [added: ten] unconsolidated joint venture projects under development and [removed: one] [added: various] consolidated predevelopment [removed: project] [added: projects] aggregating [removed: 2,701] [added: 2,920] units, with total incurred costs of [removed: $696.7 million,] [added: $1.1 billion,] and estimated remaining project costs of approximately [removed: $407.0 million] [added: $0.4 billion] for total estimated project costs of [removed: $1.1] [added: $1.5] billion.

By region, the Company's operating results for [removed: 2013] [added: 2014] and [removed: 2012] [added: 2013] and projections for [removed: 2014] [added: 2015] new housing supply, job growth, and rental income are as follows:

Southern California Region: As of December 31, [removed: 2013,] [added: 2014,] this region represented [removed: 46%] [added: 47%] of the Company’s consolidated apartment units.

During the year ended December 31, [removed: 2013,] [added: 2014,] revenues for [removed: “2013/2012] [added: “2014/2013] Same-Properties” (as defined below), or “Same-Property revenues,” increased [removed: 4.4%] [added: 5.5%] in [removed: 2013] [added: 2014] as compared to [removed: 2012.][added: 2013.]

In [removed: 2014,] [added: 2015,] the Company expects new residential supply of [removed: 15,400] [added: 17,950] multifamily and [removed: 10,500] [added: 14,300] single family homes, which represents a total new multifamily supply of [removed: 0.7%] [added: 0.8%] and [removed: 0.5%] [added: 0.6%] of total housing stock, respectively.

The Company assumes an increase of [removed: 132,400] [added: 90,200] jobs or [removed: 1.9%,] [added: 2.9%,] and an increase in same-property revenues between [removed: 3.8%] [added: 8.25%] to [removed: 5.0%] [added: 9.25%] in [removed: 2014.][added: 2015.]

Northern California Region: As of December 31, [removed: 2013,] [added: 2014,] this region represented [removed: 32%] [added: 31%] of the Company’s consolidated apartment units.

Same-Property revenues increased [removed: 8.2%] [added: 9.6%] in [removed: 2013] [added: 2014] as compared to [removed: 2012.][added: 2013.]

In [removed: 2014,] [added: 2015,] the Company expects new residential supply of [removed: 10,800] [added: 11,400] multifamily and [removed: 5,225] [added: 7,000] single family homes, which represents a total new multifamily supply of 1.3% and [removed: 0.7%,] [added: 0.8%,] respectively, of total housing stock.

The Company assumes an increase of [removed: 73,000] [added: 150,000] jobs or [removed: 2.5%,] [added: 2.1%,] and an increase in same-property revenues between [removed: 6.3%] [added: 4.50%] to [removed: 7.8%] [added: 5.50%] in [removed: 2014.][added: 2015.]

Seattle Metro Region: As of December 31, [removed: 2013,] [added: 2014,] this region represented [removed: 22%] [added: 21%] of the Company’s consolidated apartment units.

Same-Property revenues increased [removed: 7.7%] [added: 7.5%] in [removed: 2013] [added: 2014] as compared to [removed: 2012.][added: 2013.]

In [removed: 2014,] [added: 2015,] the Company expects new residential supply of [removed: 8,500] [added: 9,000] multifamily and [removed: 6,500] [added: 7,500] single family homes, which represents a total new multifamily supply of 1.9% and [removed: 1.3%,] [added: 1.4%,] respectively, of total housing stock.

The Company assumes an increase of [removed: 39,000] [added: 43,300] jobs or [removed: 2.6%,] [added: 2.8%,] and an increase in same-property revenues between [removed: 5.5%] [added: 5.75%] to [removed: 7.0%] [added: 6.75%] in [removed: 2014.][added: 2015.]

The Company expects [removed: 2014] [added: 2015] Same-Property revenues to increase compared to [removed: 2013] [added: 2014] results, as renewal and new leases are signed at higher rents in [removed: 2014] [added: 2015] than [removed: 2013.][added: 2014.]

| | [removed: | As of December 31,] 2013 | | | [removed: | | | | | As of December 31,] 2012 | | [removed: | | | | |]

| | [removed: |] Apartment Units | | | [removed: |] % | | | [removed: |] Apartment Units | | | [removed: |] % | | [removed: |]

| Southern California | [removed: | | 13,855 |] [added: 22,168] | | | [removed: 46] [added: 47] | % | | [removed: | 13,656 |] [added: 13,855] | | | [removed: 47] [added: 46] | % |

| Northern California | [removed: | | 9,431 |] [added: 14,789] | | | [removed: 32] [added: 31] | % | | [removed: | 8,987 |] [added: 9,431] | | | [removed: 31] [added: 32] | % |

| Seattle Metro | [removed: | | 6,703 |] [added: 10,216] | | | [removed: 22] [added: 21] | % | | [removed: | 6,598 |] [added: 6,703] | | | 22 | % |

| Total | [removed: | | 29,989 |] [added: 47,725] | | | 100 | % | | [removed: | 29,241 |] [added: 29,989] | | | 100 | % |

Co-investments [removed: including Fund II, Wesco I and Wesco III] communities, [added: developments under construction] and [added: eight] preferred equity [added: interest] co-investment communities are not included in the table presented above for both [removed: years.][added: periods.]

The Company’s average financial occupancies for the Company’s stabilized apartment communities [removed: or] [added: for] “2013/2012 Same-Properties” (stabilized properties consolidated by the Company for the years ended December 31, 2013 and 2012) decreased 10 basis points to 96.2% in 2013 from 96.3% in 2012.

The regional breakdown of the Company’s [added: stabilized] 2013/2012 Same-Property portfolio for financial occupancy for the years ended December 31, 2013 and 2012 is as follows:

| | [removed: |] Years ended [removed: | |] [added: December 31,] | | | | |

| | | [removed: 2013] [added: 12/31/2014] | | | | [removed: 2012] [added: 12/31/2013] | | | [added: | 12/31/2012 | | |]

| Southern California | [removed: | |] 96.1 | % | | [removed: |] 96.1 | % |

| Northern California | [removed: | |] 96.3 | % | | [removed: |] 96.7 | % |

| Seattle Metro | [removed: | |] 96.1 | % | | [removed: |] 96.1 | % |

| | [removed: | | | | |] Years [removed: Ended | | | | | | | | | |] [added: ended December 31,] | | | | |

| | | Number of | | | [removed: |] [added: Years Ended] December 31, | | | | | | | | Dollar | | | | Percentage | | [removed: |]

| [removed: | | Properties] [added: 2013/2012 Same-Properties:] | | | | [removed: 2013] | | | | [removed: 2012] | | | | [removed: Change] | | | | [removed: Change] | | |

| Property Revenues ($ in thousands) | | [removed: | |] [added: Properties] | | | [added: 2014] | | | | [added: 2013] | | | | [added: Change] | | | | [added: Change] | |

| [removed: 2013/2012] [added: 2014/2013] Same-Properties: | | | | | | | | | | | | | | | | | | | [removed: | |]

| Southern California | | [removed: |] 58 | | | $ | 235,306 | | | $ | 225,435 | | | $ | 9,871 | | | [removed: |] 4.4 | % |

On April 1, 2014, we completed the merger with BRE Properties, Inc. (“BRE”).

For further details regarding the merger, see the discussion set forth under the caption “Current Business Activities - Merger with BRE Properties, Inc.” in Part I, Item 1 of this Annual Report on Form 10-K, which is incorporated herein by reference.

The net assets and results of operations of BRE are included in our consolidated financial statements as of April 1, 2014.

As of December 31, 2014, the Company had ownership interests in 239 communities, comprising 57,455 apartment units.

Same-Property operating expenses are expected to increase in 2015 by 3% to 4%.

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| | December 31, 2014 | | | | | | December 31, 2013 | | | | |

| Other real estate assets(1) | 552 | | | 1 | % | | — | | | — | % |

(1) Includes one property in Arizona.

With the sale of Pinnacle South Mountain, executed in January 2015, the Company has exited the Arizona apartment market (see Note 17, "Subsequent Events" for details).

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| Northern California | 96.3 | % | | 96.1 | % |

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| Southern California | | 58 | | | $ | 266,917 | | | $ | 253,007 | | | $ | 13,910 | | | 5.5 | % |

| Northern California | | 35 | | | 218,014 | | | | 198,832 | | | | $ | 19,182 | | | 9.6 | % |

| Seattle Metro | | 29 | | | 114,962 | | | | 106,982 | | | | 7,980 | | | | 7.5 | % |

| Total 2014/2013 Same-Property revenues | | 122 | | | 599,893 | | | | 558,821 | | | | 41,072 | | | | 7.3 | % |

| 2014/2013 Non-Same Property Revenues (1) | | | | | 79,978 | | | | 43,182 | | | | 36,796 | | | | 85.2 | % |

| 2014 BRE Legacy Property Revenues (2) | | | | | 280,087 | | | | — | | | | 280,087 | | | | | |

| Total property revenues | | | | | $ | 959,958 | | | $ | 602,003 | | | $ | 357,955 | | | 59.5 | % |

(2) Includes 55 stabilized properties acquired in connection with the BRE merger on April 1, 2014, and two development communities in lease-up.

2014/2013 Same-Property Revenues increased by $41.1 million or 7.3% to $599.9 million for 2014 compared to $558.8 million in 2013.

Financial occupancy increased 10 basis points in 2014 to 96.2% compared to 96.1% in 2013.

2014/2013 Non-Same Property Revenues increased by $36.8 million or 85.2% to $80.0 million in 2014 compared to $43.2 million to 2013.

The increase was primarily due to revenue generated from twelve communities acquired or consolidated since January 1, 2013.

The increase in management fees was offset by a reduction of $1.2 million in asset and property management fees from the sale of two Fund II communities in 2014.

Property operating expenses, excluding real estate taxes increased $64.3 million or 46.3% in 2014 compared to 2013, primarily due to properties acquired in connection with the BRE merger and six other communities in 2014.

Real estate taxes increased $50.6 million or 88.3% in 2014 compared to 2013, due primarily to properties acquired in connection with the BRE merger and six other communities in 2014.

2014/2013 Same-Property real estate taxes increased by $2.3 million or 4.5% for 2014 compared to 2013 due to a $1.6 million or 15.6% increase in property taxes for Seattle Metro due to higher assessed values for 2014.

Depreciation and amortization expense increased by $168.2 million or 87.4% in 2014 compared to 2013, due to the acquisition of BRE and six other communities.

The increase is due to the capitalization of approximately $313.1 million in additions to rental properties through 2014, including $152.8 million spent on acquisition of and additions to real estate under development, $81.4 million spent on redevelopment, and $78.9 million spent on capital expenditures on rental properties.

Approximately $122.0 million in additions to rental properties were capitalized for 2013, including $17.8 million spent on acquisition of and additions to real estate under development, $47.3 million spent on redevelopment, and $56.9 million spent on capital expenditures on rental properties.

General and administrative expense increased $14.2 million or 53.2% in 2014 compared to 2013 primarily due to additional corporate employees from the BRE merger and $2.8 million in expenses related to the cyber-intrusion.

On December 19, 2013, ESS and BRE Properties, Inc. (“BRE”) entered into a definitive agreement to combine the two companies.

Under the terms of the agreement, each BRE common share will be converted into 0.2971 newly issued shares of ESS common stock plus $12.33 in cash.

The merger is subject to customary closing conditions, including receipt of approval of ESS shareholders and BRE shareholders.

Additional information about the merger can be found in the Form S-4 filed with the SEC on January 29, 2014 and in other relevant documents that the Company files with the SEC, which are available free of charge on the Company’s website at www.essexpropertytrust.com and on the SEC’s website at www.sec.gov.

Same-Property operating expenses are expected to increase in 2014, and forecasted increases in property taxes account for approximately 56% of the forecasted increase in property expenses in 2014 compared to 2013.

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| | | December 31, | | | | | | |

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The increase is primarily due to the asset and property management fees earned from Wesco I and II co-investments formed during 2011, and development fees earned from the joint ventures formed during 2012, and development fees earned from the development joint venture formed in 2013 and 2012 to develop Epic, Expo, Connolly Station, Park 20 (fka Elkhorn), Mosso I and II, The Huxley, The Dylan, The Village and One South Market.

The loss for 2012 also included the Company’s pro-rata share of the write-off of deferred financing costs and prepayment penalties incurred for the prepayment of the secured debt for the Essex Skyline joint venture and seven Fund II communities sold in 2012.

| | | 2012 | | | | 2011 | | |

| Northern California | | | 96.7 | % | | | 96.6 | % |

| | | Properties | | | | 2012 | | | | 2011 | | | | Change | | | | Change | | |

| 2012/2011 Same-Properties: | | | | | | | | | | | | | | | | | | | | |

| Southern California | | | 56 | | | $ | 224,779 | | | $ | 215,738 | | | $ | 9,041 | | | | 4.2 | % |

| Northern California | | | 33 | | | | 159,993 | | | | 146,008 | | | | 13,985 | | | | 9.6 | |

| Seattle Metro | | | 27 | | | | 83,153 | | | | 76,650 | | | | 6,503 | | | | 8.5 | |

| Total 2012/2011 Same-Property revenues | | | 116 | | | | 467,925 | | | | 438,396 | | | | 29,529 | | | | 6.7 | |

| 2012/2011 Non-Same Property Revenues (1) | | | | | | | 58,771 | | | | 22,264 | | | | 36,507 | | | | 164.0 | |

| Total property revenues | | | | | | $ | 526,696 | | | $ | 460,660 | | | $ | 66,036 | | | | 14.3 | % |

2012/2011 Same-Property Revenues increased by $29.5 million or 6.7% to $467.9 million in 2012 compared to $438.4 million in 2011.

Occupancy was consistent between years at 96.3%.

2012/2011 Non-Same Property Revenues increased $36.5 million or 164% to $58.8 million in 2012 compared to $22.3 million in 2011.

The increase was primarily due to revenue generated from five development communities (Via, Allegro, Bellerive, Muse, and Santee Village), thirteen communities acquired or consolidated since January 1, 2011 (Bernard, 1000 Kiely, Delano/Bon Terra, Reed Square, Essex Skyline at MacArthur Place, Park Catalina, The Huntington, Montebello, Park West, Domaine, Ascent, Willow Lake, and Bennett Lofts).

Property operating expenses, excluding real estate taxes increased $10.1 million or 8.9% in 2012 compared to 2011, primarily due to the acquisition of thirteen communities and the lease-up of five development properties.

Real estate taxes increased $4.6 million or 10.5% in 2012 compared to 2011, due primarily to the acquisition of thirteen communities and expensing property taxes instead of capitalizing the cost for communities that were previously under development.

2012/2011 Same-Property real estate taxes increased by $0.9 million or 2.3% for 2012 compared to 2011 due to an increase of 5.3% in property taxes for the Seattle Metro and 2.0% in property taxes for the majority of properties located in California regulated by Proposition 13 offset by temporary reductions in assessed property valuations for selected communities located in California.

Depreciation expense increased by $19.2 million or 12.8% in 2012 compared to 2011, due to the acquisition of thirteen communities and the lease-up of five development properties.

The increase is due to the capitalization of approximately $92.0 million in additions to rental properties in 2012, including $39.0 million spent on redevelopment, $13.7 million spent on improvement to recent acquisitions, and $7.7 million spent on revenue generating capital expenditures.

Approximately $95.3 million in additions to rental properties was capitalized for 2011, including $45.1 million spent on redevelopment, $16.4 million spent on improvements to recent acquisitions, and $7.6 million spent on revenue generating capital expenditures.

General and administrative expense increased $2.6 million or 12.6% in 2012 compared to 2011 primarily due to an increase of acquisitions cost of $1.3 million compared to 2011 related to the increase in acquisitions in 2012 compared to 2011, annual compensation adjustments for merit, and the cost of hiring additional staff to manage the new acquisitions.

Cost of management and other fees increased $1.9 million or 41.3% in 2012 compared to 2011 primarily due to an increase in administrative costs due to hiring of additional staff to assist with the management of the Company’s co-investments including Wesco I and II and the development joint ventures formed in 2011 and 2012.

Interest expense before amortization increased $8.6 million or 9.3% in 2012 compared to 2011, primarily due to the payoff of the $250 million secured line of credit in the fourth quarter of 2011 which had an average interest rate of 1.3%.

The Company replaced the secured line with an unsecured term loan at an average interest rate of 2.7%.

Also, on March 31, 2011, the Company issued $150 million of private placement notes with an average interest rate of 4.5%, on August 15, 2012 the Company issued $300 million of new unsecured bonds with an interest rate of 3.625%, and the Company drew an additional $150 million on a bank term loan in the fourth quarter of 2012.

Thus, interest expense increased due to an increase in average outstanding debt for the funding of 2012 acquisitions and the development pipeline and a higher average interest rate for 2012 compared to 2011.

Interest and other income decreased by $3.3 million in 2012 primarily due to $2.3 million of promote income earned from achieving certain performance hurdles related to the Essex Skyline co-investment and the sale of marketable securities for a gain of $0.8 million in 2012, compared to a gain of $5.0 million from the sale of marketable securities, $0.2 million gain from the sale of a land parcel, and a $1.7 million income tax benefit from a taxable REIT subsidiary that met the “more likely than not” threshold in the fourth quarter of 2011.

This tax benefit relates to the write-off of an investment in a joint venture development project recognized during 2009.

Equity income (loss) in co-investments was income of $41.7 million in 2012 compared to a loss of $0.5 million in 2011.

To accomplish this objective, the Company [removed: uses] [added: entered into] interest rate swaps as part of its cash flow hedging strategy.

As of December 31, [removed: 2013,] [added: 2014,] the Company has [removed: entered into ten] [added: seven] interest rate swap contracts to mitigate the risk of changes in the interest-related cash outflows on [removed: $300.0] [added: $225.0] million of the five-year unsecured term debt.

As of December 31, [removed: 2013,] [added: 2014,] the Company also had [removed: $167.6] [added: $189.2] million of variable rate indebtedness, of which [removed: $156.9] [added: $153.2] million is subject to interest rate cap protection.

All of the Company’s derivative instruments are designated as cash flow hedges, and the Company does not have any fair value hedges as of December 31, [removed: 2013.][added: 2014.]

The following table summarizes the notional amount, carrying value, and estimated fair value of the Company’s derivative instruments used to hedge interest rates as of December 31, [removed: 2013.][added: 2014.]

The table also includes a sensitivity analysis to demonstrate the impact on the Company’s derivative instruments from an increase or decrease in 10-year Treasury bill interest rates by 50 basis points, as of December 31, [removed: 2013.][added: 2014.]

| | | | | | | | | [removed: | |] Carrying and | | | | Estimated Carrying Value | | | | | | |

| | | [removed: Notional] | | | | Maturity | | [removed: | |] Estimate [removed: Fair] | | | | \+ 50 | | | | \- 50 | | |

| ($ in thousands) | | [added: Notional] Amount | | | | Date Range | | [removed: | |] [added: Fair] Value | | | | Basis Points | | | | Basis Points | | |

| Cash flow hedges: | | | | | | | | | | | | | | | | | | | [removed: | |]

| Interest rate swaps | | $ | [removed: 300,000 |] [added: 225,000] | | | 2016-2017 | | [removed: |] $ | [removed: (2,682] [added: (1,767] | ) | | $ | [removed: 1,989] [added: 148] | | | $ | [removed: (6,500] [added: (3,846] | ) |

Management has estimated that the fair value of the Company’s [removed: $2.30 billion and $2.13] [added: $4.4] billion of fixed rate debt at December 31, [removed: 2013 and 2012 respectively,] [added: 2014,] to be [removed: $2.33 billion and $2.24] [added: $4.6] billion.

Management has estimated the fair value of the Company’s [removed: $737.0 million and $692.9] [added: $660.6] million of variable rate debt at December 31, [removed: 2013 and 2012, respectively,] [added: 2014,] is [removed: $719.4 million and $671.7] [added: $656.3] million based on the terms of existing mortgage notes payable and variable rate demand notes compared to those available in the marketplace ($ in thousands).

| | [removed: |] For the Years Ended December 31, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | [removed: | 2014 | | | |] 2015 | | | | 2016 | | | | 2017 | | | | 2018 | | | | [added: 2019 | | | |] Thereafter | | | | | Total | | | | Fair value | | |

| Average interest rate | [removed: |] [added: 5.1] | [removed: \-] | [added: %] | | [added: 4.5] | [removed: 5.2] | % | | [added: 3.3] | [removed: 4.5] | % | | [removed: |] 5.5 | [added: |] % | | [added: 4.3] | [removed: 5.9] | % | | [added: 3.9] | [removed: 5.0] | % | | | | | | | | | |

| Average interest rate | [removed: | | 2.2] [added: —] | [removed: %] | | | 2.2 | [added: |] % | | [added: 2.2] | [removed: 2.5] | % | | [added: —] | [removed: 2.5] | [removed: %] | | [added: 1.7] | [removed: \-] | [added: %] | | [added: 1.9] | [removed: 1.6] | % | | | | | | | | | |

| (1) | [removed: $156.9] [added: $153.2] million subject to interest rate caps. |

The table incorporates only those exposures that exist as of December 31, [removed: 2013;] [added: 2014;] it does not consider those exposures or positions that could arise after that date.

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| Interest rate caps | | 153,239 | | | | 2015-2019 | | — | | | | 50 | | | | — | | |

| Total cash flow hedges | | $ | 378,239 | | | 2015-2019 | | $ | (1,767 | ) | | $ | 198 | | | $ | (3,846 | ) |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Fixed rate debt | $ | 94,580 | | | $ | 191,481 | | | $ | 538,683 | | | $ | 320,080 | | | $ | 630,801 | | | $ | 2,562,324 | | | | $ | 4,337,949 | | | $ | 4,531,964 | |

| Variable rate debt | $ | — | | | $ | 216,577 | | | $ | 25,000 | | | $ | — | | | $ | 239,814 | | | $ | 179,202 | | (1 | ) | $ | 660,593 | | | $ | 656,345 | |

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| Interest rate caps | | | 156,904 | | | | 2014-2018 | | | | \- | | | | 48 | | | | \- | |

| Total cash flow hedges | | $ | 456,904 | | | | 2014-2018 | | | $ | (2,682 | ) | | $ | 2,037 | | | $ | (6,500 | ) |

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| Fixed rate debt | | $ | \- | | | $ | 67,461 | | | $ | 162,390 | | | $ | 222,731 | | | $ | 271,156 | | | $ | 1,572,764 | | | | $ | 2,296,502 | | | $ | 2,329,482 | |

| Variable rate debt | | $ | 20,421 | | | $ | 199,000 | | | $ | 200,000 | | | $ | 150,000 | | | $ | \- | | | $ | 167,601 | | (1 | ) | $ | 737,022 | | | $ | 719,414 | |

The Company is the sole general partner of the Operating Partnership and as of December 31, [removed: 2013] [added: 2014] owns a [removed: 94.6%] [added: 96.7%] general partnership interest.

As of December 31, [removed: 2013,] [added: 2014,] the Company owned or held an interest in [removed: 164] [added: 239] communities, aggregating [removed: 34,079] [added: 57,455] units, located along the West Coast, as well as four commercial buildings (totaling approximately [removed: 315,900] [added: 325,200] square feet), and [removed: eleven] [added: twelve] active development projects with [removed: 2,501] [added: 2,920] units in various stages of development (collectively, the “Portfolio”).

The Company’s website address is [removed: http://www.essexpropertytrust.com.][added: http://www.essex.com.]

| [removed: | ·] [added: •] | Focus on markets in major metropolitan areas that have regional population in excess of one million; |

| [removed: | ·] [added: •] | Constraints on new supply driven by: (i) low availability of developable land sites where competing housing could be economically built; (ii) political growth barriers, such as protected land, urban growth boundaries, and potential lengthy and expensive development permit processes; and (iii) natural limitations to development, such as mountains or waterways; |

| [removed: | ·] [added: •] | Rental demand is enhanced by affordability of rents relative to costs of for-sale housing; and |

| [removed: | ·] [added: •] | Housing demand that is based on job growth, proximity to jobs, high median incomes and the quality of life including related commuting factors. |

The Company seeks to increase its Portfolio allocation in markets projected to have the strongest local economies and to decrease such allocations in markets [removed: projected to have declining economic conditions.]

| [removed: | ·] [added: •] | Property Management – Oversee delivery of and quality of the housing provided to our residents and manage the properties financial performance. |

| [removed: | ·] [added: •] | Capital Preservation –Asset Management is responsible for the planning, budgeting and completion of major capital improvement projects at the Company’s communities. |

| [removed: | ·] [added: •] | Business Planning and Control – Comprehensive business plans are implemented in conjunction with [removed: every] [added: significant] investment [removed: decision.] [added: decisions.] These plans include benchmarks for future financial performance, based on collaborative discussions between on-site managers and senior management. |

| [removed: | ·] [added: •] | Development and Redevelopment – The Company focuses on acquiring and developing apartment communities in supply constrained markets, and redeveloping its existing communities to improve the financial and physical aspects of the Company’s communities. |

[removed: Summary of Proposed] Merger with BRE Properties, Inc.

Acquisitions are an important component of the Company’s business plan, and during [removed: 2013,] [added: 2014,] the Company and its co-investments acquired ownership interests in [removed: eight] [added: seven] communities comprising of [removed: 1,472] [added: 2,578] units for [removed: $462.5] [added: $640.7] million.

The following is a summary of [removed: 2013] [added: 2014] acquisitions ($ in millions):

| | | | | | | | Essex Ownership | | | | | | | [removed: | |] Purchase | | |

| Property Name | [added: |] Location | | Units | | | [removed: |] Percentage | | | Ownership | | [removed: Date | |] [added: Quarter in 2014] | | Price | | |

The Company may use the capital generated from the dispositions to invest in higher-return communities or other real estate investments, or repay [added: unsecured and line of credit] debts.

In connection with the [removed: sale,] [added: sales,] Fund II incurred a prepayment penalty on debt of which the Company’s pro rata share was $0.2 million.

The total gains on the transactions in [removed: 2013] [added: 2014] were [removed: $146.8] [added: $23.3] million, of which the Company’s [removed: pro-rata] share was [removed: $38.8 million net of internal disposition costs.][added: $6.6 million.]

As of December 31, [removed: 2013,] [added: 2014,] the Company had two consolidated development projects and [removed: nine] [added: ten] joint venture development projects comprised of [removed: 2,501] [added: 2,920] units for an estimated cost of [removed: $1.1] [added: $1.5] billion, of which [removed: $407.0] [added: $420.0] million remains to be expended.

As of December 31, [removed: 2013,] [added: 2014,] the Company had [removed: one] [added: various] consolidated predevelopment [removed: project comprised of 200 units.][added: projects.]

The following table sets forth information regarding the Company’s development [removed: pipeline:][added: pipeline ($ in millions):]

| | | | [removed: Ownership] | [removed: |] [added: Essex] | | | | | | Incurred | | | | Estimated | | |

| Development Pipeline | [removed: Location] | [added: Location] | [removed: %] | [added: Ownership%] | | | Units | | | [removed: |] Project Cost | | | | Project Cost(1) | | |

| Development Projects - Consolidated | | | | | | | | | | | | | | | | | [removed: |]

| The Avery [removed: (2)] | [added: |] Los Angeles, CA | | [removed: | 100 | %] [added: 121] | | | [removed: 121] [added: 100] | [added: %] | | [added: EPLP] | [removed: 2.5] | [added: Q1 2014] | | [added: $] | [removed: 37.6] [added: 35.0] | |

| Total - Consolidated Development Projects | | | | | | | [removed: | 311] [added: 624] | | | [added: 389] | [removed: 36.6] | | | [added: 447] | [removed: 99.2] | |

| Development Projects - Joint Venture | | | | | | | | | | | | | | | | | [removed: |]

| Epic - Phase [removed: II] [added: III] | [added: |] San Jose, CA | | [removed: |] 55 | % | | [removed: | 289] [added: 200] | | | [added: 64] | [removed: 87.1] | | | [added: 97] | [removed: 97.3] | |

| The Dylan | [added: |] West Hollywood, CA | | [removed: |] 50 | % | | [removed: |] 184 | | | [added: 78] | [removed: 64.6] | | | [added: 78] | [removed: 75.4] | |

| Park 20 [removed: (formerly Elkhorn)] | [added: |] San Mateo, CA | | [removed: |] 55 | % | | [removed: |] 197 | | | [added: 74] | [removed: 47.8] | | | [added: 77] | [removed: 76.1] | |

| One South Market | [added: |] San Jose, CA | | [removed: |] 55 | % | | [removed: |] 312 | | | [added: 120] | [removed: 30.9] | | | [added: 145] | [removed: 145.1] | |

| The Village | [added: |] Walnut Creek, CA | | [removed: |] 50 | % | | [removed: |] 49 | | | [added: 60] | [removed: 36.3] | | | [added: 89] | [removed: 81.0] | |

| Total - Joint Venture Development Projects | | | | | | | [removed: | 2,190] [added: 2,296] | | | [added: 683] | [removed: 646.3] | | | [added: 1,045] | [removed: 990.7] | |

| Predevelopment Projects - Consolidated | | | | | | | | | | | | | | | | | [removed: |]

| Other Projects | [removed: various] | [added: various] | | 100 | % | | [removed: | \-] [added: —] | | | [added: 45] | [removed: 2.2] | | | [added: 45] | [removed: 2.2] | |

| Total - Predevelopment Projects | | | | | | | [removed: | 200] [added: —] | | | [added: 45] | [removed: 13.8] | | | [added: 45] | [removed: 13.8] | |

| Grand Total - Development and Predevelopment Pipeline | | | | | | | [removed: | 2,701] [added: 2,920] | | | $ | [removed: 696.7] [added: 1,117] | | | $ | [removed: 1,103.7] [added: 1,537] | |

| [removed: |] (1) | Includes incurred costs and estimated costs to complete these development projects. [added: For predevelopment projects, only incurred costs are included in estimated costs.] |

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projected to have declining economic conditions.

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On April 1, 2014, Essex completed the merger with BRE Properties, Inc. (“BRE”).

In connection with the closing of the merger, (1) BRE merged into a wholly owned subsidiary of Essex, and (2) each outstanding share of BRE common stock was converted into (i) 0.2971 shares (the “Stock Consideration”) of Essex common stock, and (ii) $7.18 in cash, (the “Cash Consideration”), plus cash in lieu of fractional shares for total consideration of approximately $4.3 billion.

The Cash Consideration was adjusted as a result of the authorization and declaration of a special distribution to the stockholders of BRE of $5.15 per share of BRE common stock payable to BRE stockholders of record as of the close of business on March 31, 2014 (the “Special Dividend”).

The Special Dividend was payable as a result of the closing of the sale of certain interests in assets of BRE to certain parties, which closed on March 31, 2014.

Pursuant to the terms of the merger agreement, the amounts payable as a Special Dividend reduced the Cash Consideration of $12.33 payable by Essex in the merger to $7.18 per share of BRE common stock.

Essex issued approximately 23.1 million shares of Essex common stock as Stock Consideration in the merger.

For purchase accounting, the value of the common stock issued by Essex upon the consummation of the merger was determined based on the closing price of BRE’s common stock on the closing date of the merger.

As a result of Essex being admitted to the S&P 500 on the same date as the closing of the merger, Essex’s common stock price experienced significantly higher than usual trading volume and the closing price of $174 per share was significantly higher than its volume-weighted average trading price for the days before and after April 1, 2014.

BRE’s common stock did not experience the same proportionate increase in common stock price leading up to April 1, 2014.

As a result, given that a substantial component of the purchase price is an exchange of equity instruments, Essex used the closing price of BRE’s common stock on April 1, 2014 of $61 per share, less the Cash Consideration, as the fair value of the equity consideration.

After deducting the Special Dividend and the Cash Consideration per share, this resulted in a value of $48.67 per share of BRE common stock which is the equivalent of approximately $164 per share of Essex common stock issued.

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| Piedmont | | Bellevue, WA | | 396 | | | 100 | % | | EPLP | | Q2 2014 | | 76.8 | | |

| Collins on Pine | | Seattle, WA | | 76 | | | 100 | % | | EPLP | | Q2 2014 | | 29.2 | | |

| Paragon | | Fremont, CA | | 301 | | | 100 | % | | EPLP | | Q3 2014 | | 111.0 | | |

| Apex | | Milpitas, CA | | 366 | | | 100 | % | | EPLP | | Q3 2014 | | 150.0 | | |

| Ellington at Bellevue | | Bellevue, WA | | 220 | | | 100 | % | | EPLP | | Q3 2014 | | 58.7 | | |

| Palm Valley (1) | | San Jose, CA | | 1,098 | | | 50 | % | | JV | | Q4 2014 | | 180.0 | | |

| Total 2014 | | | | 2,578 | | | | | | | | | | $ | 640.7 | |

(1) The Palm Valley purchase price represents the Company's share of the property.

During 2014, the Company sold four apartment communities, Vista Capri, Coldwater Canyon, Mt.

| --- | --- | --- |

The board of directors of Essex Property Trust, Inc. and the board of directors of BRE Properties, Inc. have each unanimously approved an Agreement and Plan of Merger, dated as of December 19, 2013, as it may be amended from time to time, which we refer to as the merger agreement, by and among Essex, Bronco Acquisition Sub, Inc., a direct wholly owned subsidiary of Essex, which we refer to as Merger Sub, and BRE.

On February 5, 2014, Bronco Acquisition Sub, Inc. changed its name to BEX Portfolio, Inc. Pursuant to the merger agreement, Essex and BRE will combine through a merger of BRE with and into Merger Sub, with Merger Sub surviving the merger.

The combined company, which we refer to as the Combined Company, will retain the name “Essex Property Trust, Inc.” and will continue to trade on the New York Stock Exchange, or NYSE, under the symbol “ESS.” The executive officers of Essex immediately prior to the effective time of the merger will continue to serve as the executive officers of the Combined Company, with Michael J.

Schall continuing to serve as the President and Chief Executive Officer of the Combined Company.

The obligations of Essex and BRE to effect the merger are subject to the satisfaction or waiver of certain customary conditions set forth in the merger agreement (including the applicable approvals of each company’s stockholders).

If the merger is completed pursuant to the merger agreement, each share of BRE common stock outstanding immediately prior to the effective time of the merger will convert into the right to receive (i) 0.2971 shares of Essex common stock and (ii) $12.33 in cash, without interest, which we collectively refer to as the merger consideration, each subject to certain adjustments provided for in the merger agreement and subject to any applicable withholding tax.

As explained in more detail in the joint proxy statement/prospectus filed with a registration statement on Form S-4 filed with the SEC on January 29, 2014, by Essex (as the same may thereafter be amended), the cash amount of the merger consideration will be reduced to the extent a special distribution is authorized and declared to be paid to BRE stockholders of record as of the close of business on the business day immediately prior to the effective time of the merger as a result of any applicable asset sale (as described in the joint proxy statement/prospectus).

Essex stockholders will continue to hold their existing shares of Essex common stock.

The exchange ratio and cash amount will not be adjusted to reflect changes in the price of Essex common stock or the price of BRE common stock occurring prior to the completion of the merger.

Based on the closing price of Essex common stock on the NYSE of $147.70 on December 18, 2013, the last trading date before the announcement of the proposed merger, the merger consideration (based on the value of $43.88 in Essex common stock plus the $12.33 in cash per share) represented approximately $56.21 for each share of BRE common stock.

The value of the merger consideration will fluctuate with changes in the market price of Essex common stock.

The cash portion of the merger consideration will be reduced by the amount of any special distribution in connection with or as a result of any applicable asset sale.

Upon completion of the merger, we estimate that continuing Essex stockholders will own approximately 62% of the issued and outstanding common stock of the Combined Company, and former BRE stockholders will own approximately 38% of the issued and outstanding common stock of the Combined Company.

In connection with the proposed merger, Essex and BRE will each hold a special meeting of their respective stockholders.

At the Essex special meeting, Essex stockholders will be asked to vote on (i) a proposal to approve the issuance of Essex common stock to BRE stockholders in the merger and (ii) a proposal to approve one or more adjournments of the meeting to another date, time or place, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the issuance of shares of Essex common stock to BRE stockholders in the merger.

At the BRE special meeting, BRE stockholders will be asked to vote on (i) a proposal to approve the merger and the other transactions contemplated by the merger agreement, (ii) an advisory (non-binding) proposal to approve certain compensation that may be paid or become payable to the named executive officers of BRE in connection with the merger, and (iii) a proposal to approve one or more adjournments of the meeting to another date, time or place, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the merger and the other transactions contemplated by the merger agreement.

The merger agreement may also be terminated prior to the effective time of the merger by either BRE or Essex under certain conditions, including if the merger has not been consummated on or before June 17, 2014.

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Fox Plaza Apartments | San Francisco, CA | | | 444 | | | | 100 | % | EPLP | | | Q1 2013 | | | $ | 135.0 | |

| Bennett Lofts (formerly Q Lofts) (1) | San Francisco, CA | | | 34 | | | | 100 | % | EPLP | | | Q1 2013 | | | | 22.2 | |

| Annaliese | Seattle, WA | | | 56 | | | | 100 | % | EPLP | | | Q1 2013 | | | | 19.0 | |

| Gas Company Lofts | Los Angeles, CA | | | 251 | | | | 50 | % | Wesco III | | | Q2 2013 | | | | 71.0 | |

| Regency at Mountain View | Mountain View, CA | | | 142 | | | | 50 | % | Wesco III | | | Q2 2013 | | | | 42.5 | |

| Slater 116 | Kirkland, WA | | | 108 | | | | 100 | % | EPLP | | | Q3 2013 | | | | 29.6 | |

| Domain | San Diego, CA | | | 379 | | | | 100 | % | EPLP | | | Q4 2013 | | | | 121.0 | |

| Vox | Seattle, WA | | | 58 | | | | 100 | % | EPLP | | | Q4 2013 | | | | 22.2 | |

| Total 2013 | | | | 1,472 | | | | | | | | | | | | $ | 462.5 | |

| | (1) | The 147 unit apartment community was acquired in two phases for $96.0 million. Approximately 75% was acquired in December 2012 with the remainder in January 2013. |

During 2013, the Company sold three apartment communities, Linden Square, Cambridge, and Brentwood for a total of $57.5 million, resulting in total gains on the transactions of $29.2 million.

During the second quarter 2013, Essex Apartment Value Fund II, L.P. (“Fund II”) sold Morning Run for a total of $26.4 million.

In the third quarter 2013, Fund II sold four properties for gross proceeds of $294.0 million.

In connection with the sales in the third quarter, Fund II incurred prepayment penalties on debt of which the Company’s pro rata share was $0.2 million.

The two remaining properties in the Fund II portfolio are expected to be sold in 2014.

Also in 2013, the Company sold a land parcel held for future development located in Palo Alto, California for $9.1 million, resulting in a gain of $1.5 million.

| | | | Essex | | | | | | | | As of 12/31/13 ($ in millions) | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| The Emme (formerly 64th & Christie) | Emeryville, CA | | | 100 | % | | | 190 | | | $ | 34.1 | | | $ | 61.6 | |

| | | | | | | | | | | | | | | | | | |

| Epic - Phase III | San Jose, CA | | | 55 | % | | | 200 | | | | 28.0 | | | | 96.3 | |

[removed: Liabilities resulting from] [added: We believe that, with respect to] such [removed: mold related] matters [added: that we] are [added: currently a party to, the ultimate disposition of any such matter will] not [removed: expected to have] [added: result in] a material adverse effect on the Company’s financial condition, results of operations or cash flows.

The [removed: information] [added: information, which regards lawsuits, other proceedings and claims,] set forth [removed: and discussed regarding litigation relating to the merger transaction with BRE] in [removed: note] [added: Note] 16, “Commitments and Contingencies”, of our notes to consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K is incorporated by reference into this Item 3.

[removed: The] [added: In addition to such matters referred to in said Note 16, the] Company is subject to various other [removed: lawsuits] [added: legal and/or regulatory proceedings arising] in the [removed: normal] course of its business operations.

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 for promptly addressing and resolving 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.

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.

Such lawsuits are not expected to have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

For the fiscal year ended December 31, [removed: 2013][added: 2014]

As of June 30, [removed: 2013,] [added: 2014,] the aggregate market value of the voting stock held by non-affiliates of Essex Property Trust, Inc. was [removed: $5,855,449,673.][added: $11,430,740,862.]

As of February 24, [removed: 2014, 38,606,706] [added: 2015, 65,125,801] shares of common stock ($.0001 par value) of Essex Property Trust, Inc. were outstanding.

The following document is incorporated by reference in Part III of the Annual Report on Form 10-K: Proxy statement for the annual meeting of stockholders of Essex Property Trust, Inc. to be filed within 120 days of December 31, [removed: 2013.][added: 2014.]

This report combines the annual reports on Form 10-K for the year ended December 31, [removed: 2013] [added: 2014] of Essex Property Trust, [removed: Inc] [added: Inc.] and Essex Portfolio, L.P. Unless stated otherwise or the context otherwise requires, references to “ESS” mean Essex Property Trust, [added: Inc.,] a Maryland corporation that operates as a self-administered and self-managed real estate investment trust [removed: (“REIT ”),] [added: (“REIT”),] and references to “EPLP” mean Essex Portfolio, L.P. (the “Operating [removed: Partnership” ).][added: Partnership”).]

[removed: References] [added: Unless stated otherwise or the context otherwise requires, references] to the “Company,” [added: “Essex,”] “we,” “us” or “our” mean collectively ESS, EPLP and those entities/subsidiaries owned or controlled by ESS and/or EPLP.

ESS is the general partner of, and as of December 31, [removed: 2013] [added: 2014] owned an approximate [removed: 94.6%] [added: 96.7%] ownership interest in EPLP.

The remaining [removed: 5.4%] [added: 3.3%] interest is owned by limited partners.

Based on the terms of EPLP's partnership agreement, OP Units can be exchanged [removed: with] [added: for] ESS common stock on a one-for-one basis.

| [removed: | ·] [added: •] | enhances investors' understanding of the Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business; |

| [removed: | ·] [added: •] | eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure applies to both the Company and the Operating Partnership; and |

| [removed: | ·] [added: •] | creates time and cost efficiencies through the preparation of one combined report instead of two separate reports. |

[removed: The differences between] stockholders' equity and partners' capital result from differences in the equity issued at the Company and Operating Partnership levels.

[removed: 2013] [added: 2014] ANNUAL REPORT ON FORM 10-K

| Item 1. | [removed: [Business](#Item1.Business)] [added: [Business](#s9A04E7CD647AC3E0718235E1D40827A8)] | [removed: 1] [added: [1](#s9A04E7CD647AC3E0718235E1D40827A8)] |

| Item 1A. | [Risk [removed: Factors](#Item1A.RiskFactors)] [added: Factors](#s5FE29457777CDCB5CCE135E2049B0E81)] | [removed: 7] [added: [7](#s5FE29457777CDCB5CCE135E2049B0E81)] |

| Item 1B. | [Unresolved Staff [removed: Comments](#Item1B.UnresolvedStaffCom)] [added: Comments](#s0F4EAE1C3CED781C044335E204EC3617)] | [removed: 21] [added: [20](#s0F4EAE1C3CED781C044335E204EC3617)] |

| Item 2. | [removed: [Properties](#Item2.Properties)] [added: [Properties](#s7ED1C0D2454FC2E0599D35E1D16D7822)] | [removed: 21] [added: [20](#s7ED1C0D2454FC2E0599D35E1D16D7822)] |

| Item 3. | [Legal [removed: Proceedings](#Item3.LegalProceedings)] [added: Proceedings](#sC1992E9F731ECD4CD7E935E205C02735)] | [removed: 27] [added: [28](#sC1992E9F731ECD4CD7E935E205C02735)] |

| Item 4. | [Mine Safety [removed: Disclosures](#Item4.MineSafetyDisclosur)] [added: Disclosures](#s73AF8C51D50237DBF75D35E205DB20CB)] | [removed: 27] [added: [28](#s73AF8C51D50237DBF75D35E205DB20CB)] |

| Item 5. | [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#Item5.MarketforRegistrant)] [added: Securities](#s5F4583A67D2FD84A8B2F35E1D2D7A2AF)] | [removed: 28] [added: [28](#s5F4583A67D2FD84A8B2F35E1D2D7A2AF)] |

| Item 6. | [Selected Financial [removed: Data](#Item6.SelectedFinancialDa)] [added: Data](#sE77E6494199CF2B2694335E1D0C34016)] | [removed: 31] [added: [32](#sE77E6494199CF2B2694335E1D0C34016)] |

| Item 7. | [Management's Discussion and Analysis of Financial Condition and Results of [removed: Operations](#Item7.ManagementsDiscussi)] [added: Operations](#s25CD1916D58D017A72CA35E206A3EDDF)] | [removed: 34] [added: [36](#s25CD1916D58D017A72CA35E206A3EDDF)] |

| Item 7A. | [Quantitative and Qualitative Disclosures About Market [removed: Risks](#Item7A.QuantitativeandQua)] [added: Risks](#s9217F69AB6281C795DB535E1D1154CDD)] | [removed: 46] [added: [47](#s9217F69AB6281C795DB535E1D1154CDD)] |

| Item 8. | [Financial Statements and Supplementary [removed: Data](#Item8.FinancialStatements)] [added: Data](#sE049529F113AAD6570B735E207A707F9)] | [removed: 47] [added: [49](#sE049529F113AAD6570B735E207A707F9)] |

| Item 9. | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#Item9.ChangesinandDisagre)] [added: Disclosure](#s3E6B7C5A6E673D8CF48E35E207BB1447)] | [removed: 47] [added: [49](#s3E6B7C5A6E673D8CF48E35E207BB1447)] |

| Item 9A. | [Controls and [removed: Procedures](#Item9A.ControlsandProcedu)] [added: Procedures](#s25DA2C0DA934332EB8AB35E207D9F51A)] | [removed: 47] [added: [49](#s25DA2C0DA934332EB8AB35E207D9F51A)] |

| Item 9B. | [Other [removed: Information](#Item9B.OtherInformation)] [added: Information](#s7CD36F1FF6001620427435E207F6D0A1)] | [removed: 48] [added: [50](#s7CD36F1FF6001620427435E207F6D0A1)] |

| Item 10. | [Directors, Executive Officers and Corporate [removed: Governance](#Item10.DirectorsExecutive)] [added: Governance](#s6C20CA6D33DE4076BCED35E2082138E2)] | [removed: 48] [added: [50](#s6C20CA6D33DE4076BCED35E2082138E2)] |

| Item 11. | [Executive [removed: Compensation](#Item11.ExecutiveCompensat)] [added: Compensation](#s0AB20CFFAD036695A1F035E2083BB0DE)] | [removed: 48] [added: [50](#s0AB20CFFAD036695A1F035E2083BB0DE)] |

| Item 12. | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#Item12.SecurityOwnershipo)] [added: Matters](#s21436F91D9F9A768591335E2086D0635)] | [removed: 49] [added: [50](#s21436F91D9F9A768591335E2086D0635)] |

| Item 13. | [Certain Relationships and Related Transactions, and Director [removed: Independence](#Item13.CertainRelationshi)] [added: Independence](#s766388FC4F911371462235E20893F405)] | [removed: 49] [added: [50](#s766388FC4F911371462235E20893F405)] |

| Item 14. | [Principal Accounting Fees and [removed: Services](#Item14.PrincipalAccountin)] [added: Services](#s4817952F03B7FF8D1F5235E208C1F9A1)] | [removed: 49] [added: [50](#s4817952F03B7FF8D1F5235E208C1F9A1)] |

| Item 15. | [Exhibits and Financial Statement [removed: Schedules](#Item15.ExhibitsandFinanci)] [added: Schedules](#s792BB40ECE5A506C2B9B35E209115877)] | [removed: 50] [added: [51](#s792BB40ECE5A506C2B9B35E209115877)] |

| [removed: [Signatures](#SIGNATURES)] [added: [Signatures](#s176F8DE4FBD2F2EB68AA35E216355C88)] | | [removed: S-1] [added: [S-1](#s176F8DE4FBD2F2EB68AA35E216355C88)] |

10-K 1 ess-123114x10k.htm 10-K

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There is no public trading market for the common units of Essex Portfolio, L.P. As a result, the aggregate market value of the common units held by non-affiliates of Essex Portfolio, L.P., cannot be determined.

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The differences between

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10-K 1 form10k.htm ESSEX PROPERTY TRUST, INC 10-K 12-31-2013

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The Company’s Portfolio as of December 31, [removed: 2013] [added: 2014] (including communities owned by unconsolidated joint ventures, but excluding communities underlying preferred equity investments) was comprised of [removed: 164] [added: 239] apartment communities (comprising [removed: 34,079] [added: 57,455] apartment units), of which [removed: 15,725] [added: 27,125] units are located in Southern California, [removed: 10,494] [added: 17,604] units are located in the San Francisco Bay Area, and [removed: 7,860] [added: 12,174] units are located in the Seattle metropolitan area.

The Company’s apartment communities accounted for [removed: 97.5%] [added: 99.0%] of the Company’s revenues for the year ended December 31, [removed: 2013.][added: 2014.]

Total possible rental revenue represents the value of all apartment units, with occupied units valued at contractual [removed: rental rates pursuant to leases and vacant units valued at estimated market rents.]

As of December 31, [removed: 2013,] [added: 2014,] the Company’s communities include [removed: 113] [added: 163] garden-style, [removed: 46] [added: 72] mid-rise, and [removed: 5] [added: 4] high-rise communities.

The communities have an average of approximately [removed: 208] [added: 240] units, with a mix of studio, one, two and some three-bedroom units.

| [removed: | ·] [added: •] | located near employment centers; |

| [removed: | ·] [added: •] | attractive communities that are well maintained; and |

| [removed: | ·] [added: •] | proactive customer service. |

The Company’s corporate headquarters is located in two office buildings with approximately [removed: 31,900] [added: 39,600] square feet located at 925/935 East Meadow Drive, Palo Alto, California.

The Company owns an office building with approximately [removed: 110,000] [added: 107,720] square feet located in Irvine, California, of which the Company occupies approximately [removed: 7,150] [added: 5,000] square feet at December 31, [removed: 2013.][added: 2014.]

The Company owns Essex-Hollywood, a [removed: 35,000] [added: 34,000] square foot commercial building and a [removed: 139,000] [added: 138,915] square foot retail site in Santa Clara, California as future development sites that are currently 100% leased.

The following tables describe the Company’s [removed: Portfolio] [added: operating portfolio] as of December 31, [removed: 2013.][added: 2014.]

| | | | | | | [added: |] Rentable | | | | | [added: Year] | | [added: |]

| | | | | | | Square | | [added: |] Year | | Year | | |

| Communities (1) | | Location | | Units | | [added: | Square] Footage | | [added: | Year] Built | | Acquired | | Occupancy(2) |

| Southern California | | | | | | | | | | | | | [added: | |]

| Alpine Village | | Alpine, CA | | 301 | | [added: |] 254,400 | | [added: |] 1971 | | 2002 | | 97% |

| Anavia | | Anaheim, CA | | 250 | | [added: |] 312,343 | | [added: |] 2009 | | 2010 | | 96% |

| Barkley, [removed: The(3)(4)] [added: The (3)(4)] | | Anaheim, CA | | 161 | | [added: |] 139,800 | | [added: |] 1984 | | 2000 | | 97% |

| Bonita Cedars | | Bonita, CA | | 120 | | [added: |] 120,800 | | [added: |] 1983 | | 2002 | | 97% |

| Camarillo Oaks | | Camarillo, CA | | 564 | | [added: |] 459,000 | | [added: |] 1985 | | 1996 | | 96% |

| Camino Ruiz Square | | Camarillo, CA | | 160 | | [added: |] 105,448 | | [added: |] 1990 | | 2006 | | [removed: 98%] [added: 97%] |

| Mesa Village | | Clairemont, CA | | 133 | | [added: |] 43,600 | | [added: |] 1963 | | 2002 | | 97% |

| Regency at Encino | | Encino, CA | | 75 | | [added: |] 78,487 | | [added: |] 1989 | | 2009 | | [removed: 97%] [added: 96%] |

| Valley [removed: Park(4)] [added: Park] | | Fountain Valley, CA | | 160 | | [added: |] 169,700 | | [added: |] 1969 | | 2001 | | 98% |

| Capri at Sunny [removed: Hills(4)] [added: Hills (4)] | | Fullerton, CA | | 100 | | [added: |] 128,100 | | [added: |] 1961 | | 2001 | | [removed: 94%] [added: 97%] |

| Haver [removed: Hill(5)] [added: Hill (5)] | | Fullerton, CA | | 264 | | [added: |] 224,130 | | [added: |] 1973 | | 2012 | | [removed: 94%] [added: 96%] |

| Wilshire Promenade | | Fullerton, CA | | 149 | | [added: |] 128,000 | | [added: |] 1992 | | 1997 | | 96% |

| [removed: Montejo(4)] [added: Montejo (4)] | | Garden Grove, CA | | 124 | | [added: |] 103,200 | | [added: |] 1974 | | 2001 | | [removed: 96%] [added: 97%] |

| CBC Apartments | | Goleta, CA | | 148 | | [added: |] 91,538 | | [added: |] 1962 | | 2006 | | [removed: 95%] [added: 97%] |

| The Sweeps | | Goleta, CA | | 91 | | [added: |] 88,370 | | [added: |] 1967 | | 2006 | | [removed: 95%] [added: 97%] |

| 416 on Broadway | | Glendale, CA | | 115 | | [added: |] 126,782 | | [added: |] 2009 | | 2010 | | 97% |

| Hampton Court | | Glendale, CA | | 83 | | [added: |] 71,500 | | [added: |] 1974 | | 1999 | | [removed: 97%] [added: 95%] |

| Hampton Place | | Glendale, CA | | 132 | | [added: |] 141,500 | | [added: |] 1970 | | 1999 | | [removed: 97%] [added: 95%] |

| Devonshire | | Hemet, CA | | 276 | | [added: |] 207,200 | | [added: |] 1988 | | 2002 | | [removed: 91%] [added: 96%] |

| Huntington Breakers | | Huntington Beach, CA | | 342 | | [added: |] 241,700 | | [added: |] 1984 | | 1997 | | [removed: 96%] [added: 94%] |

| The Huntington | | Huntington Beach, CA | | 276 | | [added: |] 202,256 | | [added: |] 1975 | | 2012 | | [removed: 96%] [added: 97%] |

| Axis 2300 | | Irvine, CA | | 115 | | [added: |] 170,714 | | [added: |] 2010 | | 2010 | | [removed: 96%] [added: 95%] |

| Hillsborough Park | | La Habra, CA | | 235 | | [added: |] 215,500 | | [added: |] 1999 | | 1999 | | 97% |

| Trabuco Villas | | Lake Forest, CA | | 132 | | [added: |] 131,000 | | [added: |] 1985 | | 1997 | | [removed: 97%] [added: 98%] |

rental rates pursuant to leases and vacant units valued at estimated market rents.

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| Park Viridian | | Anaheim, CA | | 320 | | | 254,600 | | | 2008 | | 2014 | | 96% |

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| | | | | | | | Rentable | | | | | Year | | |

| Communities (1) | | Location | | Units | | | Square Footage | | | Year Built | | Acquired | | Occupancy(2) |

| Enclave at Town Square (34) | | Chino Hills, CA | | 124 | | | 89,948 | | | 1987 | | 2014 | | 97% |

| The Heights I & II (34) | | Chino Hills, CA | | 332 | | | 324,370 | | | 2004 | | 2014 | | 96% |

| The Summit (5) | | Chino Hills, CA | | 125 | | | 98,420 | | | 1989 | | 2014 | | 96% |

| Pinnacle at Otay Ranch | | Chula Vista, CA | | 364 | | | 384,192 | | | 2001 | | 2014 | | 95% |

| Villa Siena | | Costa Mesa, CA | | 272 | | | 262,842 | | | 1974 | | 2014 | | 96% |

| Emerald Pointe | | Diamond Bar, CA | | 160 | | | 134,816 | | | 1989 | | 2014 | | 96% |

| The Havens (34) | | Fountain Valley, CA | | 440 | | | 414,040 | | | 1969 | | 2014 | | 96% |

| Pinnacle at Fullerton | | Fullerton, CA | | 192 | | | 174,336 | | | 2004 | | 2014 | | 96% |

| Jefferson at Hollywood | | Hollywood, CA | | 270 | | | 238,119 | | | 2010 | | 2014 | | 94% |

| Village Green | | La Habra, CA | | 272 | | | 175,762 | | | 1971 | | 2014 | | 96% |

| The Palms at Laguna Niguel | | Laguna Niguel, CA | | 460 | | | 362,136 | | | 1988 | | 2014 | | 96% |

| 5600 Wilshire | | Los Angeles, CA | | 284 | | | 243,910 | | | 2008 | | 2014 | | 95% |

| Alessio | | Los Angeles, CA | | 624 | | | 552,716 | | | 2001 | | 2014 | | 95% |

| The Avery (4) | | Los Angeles, CA | | 121 | | | 129,393 | | | 2014 | | 2014 | | 73% |

| Catalina Gardens | | Los Angeles, CA | | 128 | | | 117,585 | | | 1987 | | 2014 | | 97% |

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| | | | | | | | Rentable | | | | | Year | | |

| Communities (1) | | Location | | Units | | | Square Footage | | | Year Built | | Acquired | | Occupancy(2) |

| Regency Palm Court (5) | | Los Angeles, CA | | 116 | | | 54,844 | | | 1987 | | 2014 | | 96% |

| Tiffany Court | | Los Angeles, CA | | 101 | | | 74,538 | | | 1987 | | 2014 | | 98% |

| Wilshire La Brea | | Los Angeles, CA | | 478 | | | 354,972 | | | 2014 | | 2014 | | 65% |

| Windsor Court (5) | | Los Angeles, CA | | 95 | | | 51,266 | | | 1987 | | 2014 | | 96% |

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| | | | | | | | | | | | | (continued) |

| Southern California (continued) | | | | | | | | | | | | |

| Vista Capri - North | | San Diego, CA | | 106 | | 51,800 | | 1975 | | 2002 | | 97% |

| Coldwater Canyon | | Studio City, CA | | 39 | | 34,125 | | 1979 | | 2007 | | 97% |

| | | | | 15,725 | | 13,957,790 | | | | | | 96% |

| Davey Glen(16) | | Belmont, CA | | 69 | | 65,974 | | 1962 | | 2006 | | 96% |

| Alderwood Park(16) | | Newark, CA | | 96 | | 74,624 | | 1987 | | 2006 | | 97% |

| Mt. Sutro | | San Francisco, CA | | 99 | | 64,000 | | 1973 | | 2001 | | 93% |

| Epic, Phase I(21) | | San Jose, CA | | 280 | | 249,080 | | 2013 | | 2013 | | 49% |

| Northern California (continued) | | | | | | | | | | | | |

| | | | | 10,494 | | 9,027,362 | | | | | | 96% |

| | | | | 7,860 | | 6,725,614 | | | | | | 96% |

| Total/Weighted Average | | | | 34,079 | | 29,710,766 | | | | | | 96% |

| | | | | | | | | | | | | |

| | | | | 11 | | 315,900 | | | | | | 99% |

The closing price of ESS stock as of February 24, [removed: 2014] [added: 2015] was [removed: $166.38.][added: $223.17.]

The approximate number of holders of record of the shares of ESS common stock was [removed: 256] [added: 1,551] as of February 24, [removed: 2014.][added: 2015.]

As of February 24, [removed: 2014,] [added: 2015,] there were [removed: 45] [added: 174] holders of record of Essex Portfolio, L.P.’s OP Units, including ESS.

The status of the cash dividends distributed for the years ended December 31, [added: 2014,] 2013, [removed: 2012,] and [removed: 2011] [added: 2012] related to common stock, and Series F, G and H preferred stock for tax purposes are as follows:

| | | [removed: 2013 | | |] [added: 2014] | [removed: 2012] | | [added: 2013] | | [removed: 2011] | [added: 2012] | |

| Common Stock | | | | | | | | | | [removed: | | |]

| Ordinary income | | [removed: | 77.34] [added: 70.03] | % | | [removed: | 70.58] [added: 77.34] | % | | [removed: | 63.68] [added: 70.58] | % |

| Capital gain | | [removed: | 17.64] [added: 21.95] | % | | [removed: | 8.75] [added: 17.64] | % | | [removed: | 11.16] [added: 8.75] | % |

| Unrecaptured section 1250 capital gain | | [removed: | 5.02] [added: 8.02] | % | | [removed: | 7.97] [added: 5.02] | % | | [removed: | 0.74] [added: 7.97] | % |

| Return of capital | | [removed: | 0.00] [added: —] | % | | [removed: | 12.70] [added: —] | % | | [removed: | 24.42] [added: 12.70] | % |

| | | [removed: |] 100.00 | % | | [removed: |] 100.00 | % | | [removed: |] 100.00 | % |

| | | [removed: | 2013 | |] [added: 2014] | | [removed: 2012] | [added: 2013] | | | [removed: 2011] [added: 2012] | |

| Series F, G, and H Preferred stock | | | | | | | | | | [removed: | | |]

| Ordinary income | | [removed: | 77.34] [added: 70.03] | % | | [removed: | 80.85] [added: 77.34] | % | | [removed: | 100.00] [added: 80.85] | % |

| Capital gains | | [removed: | 17.64] [added: 21.95] | % | | [removed: | 10.02] [added: 17.64] | % | | [removed: | 0.00] [added: 10.02] | % |

| Unrecaptured section 1250 capital gain | | [removed: | 5.02] [added: 8.02] | % | | [removed: | 9.13] [added: 5.02] | % | | [removed: | 0.00] [added: 9.13] | % |

| Year Ended | | Annual Dividend/Distribution | | | [added: |] Quarter Ended | | [removed: 2013] [added: 2014] | | [added: 2013] | | 2012 | [removed: | | | 2011 | | |]

| 1999 | | $ | 2.15 | | | | | | | | | | [removed: | | | | |]

| 2000 | | $ | 2.38 | | [added: |] Annual Dividend/Distribution | | [removed: $ | 4.84 | | | $ | 4.40 |] [added: $5.11] | | [removed: $] [added: $4.84] | [removed: 4.16] | [added: $4.40] |

| 2001 | | $ | 2.80 | | | | | | | | | | [removed: | | | | |]

| 2002 | | $ | 3.08 | | | | | | | | | | [removed: | | | | |]

| 2003 | | $ | 3.12 | | | | | | | | | | [removed: | | | | |]

| 2004 | | $ | 3.16 | | | | | | | | | | [removed: | | | | |]

| 2005 | | $ | 3.24 | | | | | | | | | | [removed: | | | | |]

| 2006 | | $ | 3.36 | | | | | | | | | | [removed: | | | | |]

| 2007 | | $ | 3.72 | | | | | | | | | | [removed: | | | | |]

| 2008 | | $ | 4.08 | | | | | | | | | | [removed: | | | | |]

| 2009 | | $ | 4.12 | | | | | | | | | | [removed: | | | | |]

| 2010 | | $ | 4.13 | | | | | | | | | | [removed: | | | | |]

The Board of Directors has declared a dividend/distribution for the first quarter of [removed: 2014] [added: 2015] of [removed: $1.21] [added: $1.44] per share.

The dividend/distribution will be payable on [removed: March 31, 2014] [added: April 15, 2015] to shareholders/unitholders of record as of March [removed: 14, 2014.][added: 31, 2015.]

See the Company’s disclosure in the [removed: 2014] [added: 2015] Proxy Statement under the heading “Equity Compensation Plan Information”, which disclosure is incorporated herein by reference.

During [removed: 2013,] [added: 2014,] ESS sold [removed: 913,344] [added: 2,964,315] shares of common stock for proceeds of [removed: $138.4] [added: $534.0] million, net of commissions, at an average price of [removed: $152.92.][added: $181.56.]

During the first quarter of [removed: 2014] [added: 2015] through February 24, [removed: 2014,] [added: 2015,] ESS has issued [removed: 462,555] [added: 636,021] shares of common stock at an average price of [removed: $162.97] [added: $224.76] for proceeds of [removed: $74.9] [added: $142.0] million, net of fees and commissions.

ESS did not repurchase any shares during [removed: 2013, 2012] [added: 2014, 2013] and [removed: 2011.][added: 2012.]

Since ESS announced the inception of the stock repurchase plan, ESS [removed: has] repurchased and retired 816,659 shares [removed: for] [added: totaling] $66.6 million at an average stock price of $81.56 per share, including commissions as of December 31, [removed: 2013.][added: 2014.]

This comparison assumes that the value of the investment in the common stock and each index was $100 on December 31, [removed: 2008] [added: 2009] and that all dividends were reinvested (1).

[removed: ][added: ]

| | | [removed: |] Period Ending | | | | | | | | | | | | | | | | | [removed: | | | | | |]

During the [removed: year] [added: years] ended December 31, [added: 2014 and] 2013, the Operating Partnership issued partnership units in private placements in reliance on the exemption from registration provided by Section 4(2) of the Securities Act, in the amounts and for the consideration set forth below:

| December 31, 2014 | | $ | 211.91 | | | $ | 206.35 | | | $ | 206.60 | |

| September 30, 2014 | | $ | 180.65 | | | $ | 178.27 | | | $ | 178.75 | |

| June 30, 2014 | | $ | 185.66 | | | $ | 183.36 | | | $ | 184.91 | |

| March 31, 2014 | | $ | 171.70 | | | $ | 166.95 | | | $ | 170.05 | |

| | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | |

| | | | | | | | | | |

| | | 100.00 | % | | 100.00 | % | | 100.00 | % |

| | | | | | | | | | | | | |

| 1995 | | $ | 1.69 | | | March 31, | | $1.21 | | $1.21 | | $1.10 |

| 1996 | | $ | 1.72 | | | June 30, | | $1.30 | | $1.21 | | $1.10 |

| 1997 | | $ | 1.77 | | | September 30, | | $1.30 | | $1.21 | | $1.10 |

| 1998 | | $ | 1.95 | | | December 31, | | $1.30 | | $1.21 | | $1.10 |

| 2011 | | $ | 4.16 | | | | | | | | | |

In April 2014, Essex issued approximately 23,067,446 shares of Essex common stock as Stock Consideration in the BRE merger at an average price of $163.82.

| | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | |

| Index | | 12/31/2009 | | | 12/31/2010 | | | 12/31/2011 | | | 12/31/2012 | | | 12/31/2013 | | | 12/31/2014 | |

| Essex Property Trust, Inc. | | 100.00 | | | 142.12 | | | 180.57 | | | 194.12 | | | 196.17 | | | 290.34 | |

| NAREIT All Equity REIT Index | | 100.00 | | | 127.95 | | | 138.55 | | | 165.84 | | | 170.58 | | | 218.38 | |

| S&P 500 | | 100.00 | | | 115.06 | | | 117.49 | | | 136.30 | | | 180.44 | | | 205.14 | |

During the years ended December 31, 2014 and 2013, Essex Property Trust, Inc. issued and sold an aggregate of 2,964,315 and 913,344 shares of its common stock, respectively, pursuant to a registration statement and its equity distribution program.

Essex Property Trust, Inc. contributed the net proceeds from these share issuances of $534.0 million and $138.4 million in exchange for an aggregate of 2,964,315 and 913,344 common OP Units, respectively, as required by the Operating Partnership's partnership agreement.

| December 31, 2012 | | $ | 150.71 | | | $ | 136.38 | | | $ | 146.65 | |

| September 30, 2012 | | $ | 160.64 | | | $ | 147.38 | | | $ | 148.24 | |

| June 30, 2012 | | $ | 161.53 | | | $ | 146.05 | | | $ | 153.92 | |

| March 31, 2012 | | $ | 151.54 | | | $ | 136.43 | | | $ | 151.51 | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| 1995 | | $ | 1.69 | | March 31, | | $ | 1.21 | | | $ | 1.10 | | | $ | 1.04 | |

| 1996 | | $ | 1.72 | | June 30, | | $ | 1.21 | | | $ | 1.10 | | | $ | 1.04 | |

| 1997 | | $ | 1.77 | | September 30, | | $ | 1.21 | | | $ | 1.10 | | | $ | 1.04 | |

| 1998 | | $ | 1.95 | | December 31, | | $ | 1.21 | | | $ | 1.10 | | | $ | 1.04 | |

The timing of the first quarter dividend/distribution is coordinated with BRE’s first quarter dividend, pursuant to the merger agreement.

On February 18, 2014, the ESS Board of Directors acknowledged management’s recommendation to increase the quarterly dividend by 9 cents to $1.30 per share/unit an annualized cash dividend/distribution of $5.20 per share/unit.

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Index | | | 12/31/08 | | | | 12/31/09 | | | | 12/31/10 | | | | 12/31/11 | | | | 12/31/12 | | | | 12/31/13 | | |

| Essex Property Trust, Inc. | | | | 100.00 | | | | 115.60 | | | | 164.28 | | | | 208.73 | | | | 224.40 | | | | 226.77 | |

| NAREIT All Equity REIT Index | | | | 100.00 | | | | 127.99 | | | | 163.76 | | | | 177.32 | | | | 212.26 | | | | 218.32 | |

| S&P 500 | | | | 100.00 | | | | 126.46 | | | | 145.51 | | | | 148.59 | | | | 172.37 | | | | 228.19 | |

The following tables set forth summary financial and operating information for the Company and the Operating Partnership from January 1, [removed: 2009] [added: 2010] through December 31, [removed: 2013.][added: 2014.]

| | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | | | [removed: 2011] [added: 2012] | | | | [removed: 2010] [added: 2011] | | | | [removed: 2009] [added: 2010] | | |

| Rental and other property | | $ | [removed: 602,003] [added: 959,958] | | | $ | [removed: 526,696] [added: 602,003] | | | $ | [removed: 460,660] [added: 526,696] | | | $ | [removed: 400,841] [added: 460,660] | | | $ | [removed: 396,498] [added: 400,841] | |

| Income before discontinued operations | | $ | [removed: 140,882] [added: 134,438] | | | $ | [removed: 127,653] [added: 140,882] | | | $ | [removed: 46,958] [added: 127,653] | | | $ | [removed: 47,424] [added: 46,958] | | | $ | [removed: 41,244] [added: 47,424] | |

| Income from discontinued operations | | [added: —] | [added: | | |] 31,173 | | | | 11,937 | | | | 10,558 | | | | 3,358 | | | [removed: | 12,495 | |]

| Net income | | [added: 134,438] | [added: | | |] 172,055 | | | | 139,590 | | | | 57,516 | | | | 50,782 | | | [removed: | 53,739 | |]

| Net income available to common stockholders | | $ | [removed: 150,811] [added: 116,859] | | | $ | [removed: 119,812] [added: 150,811] | | | $ | [removed: 40,368] [added: 119,812] | | | $ | [removed: 33,764] [added: 40,368] | | | $ | [removed: 82,200] [added: 33,764] | |

| Income before discontinued operations available to common stockholders | | $ | [removed: 3.26] [added: 2.07] | | | $ | [removed: 3.10] [added: 3.26] | | | $ | [removed: 0.94] [added: 3.10] | | | $ | [removed: 1.03] [added: 0.94] | | | $ | [removed: 2.59] [added: 1.03] | |

| Net income available to common stockholders | | $ | [removed: 4.05] [added: 2.07] | | | $ | [removed: 3.42] [added: 4.05] | | | $ | [removed: 1.24] [added: 3.42] | | | $ | [removed: 1.14] [added: 1.24] | | | $ | [removed: 3.01] [added: 1.14] | |

| Weighted average common stock outstanding | | [added: 56,547] | [added: | | |] 37,249 | | | | 35,032 | | | | 32,542 | | | | 29,667 | | | [removed: | 27,270 | |]

| Income before discontinued operations available to common stockholders | | $ | [removed: 3.25] [added: 2.06] | | | $ | [removed: 3.09] [added: 3.25] | | | $ | [removed: 0.94] [added: 3.09] | | | $ | [removed: 1.03] [added: 0.94] | | | $ | [removed: 2.51] [added: 1.03] | |

| Net income available to common stockholders | | $ | [removed: 4.04] [added: 2.06] | | | $ | [removed: 3.41] [added: 4.04] | | | $ | [removed: 1.24] [added: 3.41] | | | $ | [removed: 1.14] [added: 1.24] | | | $ | [removed: 2.91] [added: 1.14] | |

| Weighted average common stock outstanding | | [added: 56,697] | [added: | | |] 37,335 | | | | 35,125 | | | | 32,629 | | | | 29,734 | | | [removed: | 29,747 | |]

| Cash dividend per common share | | $ | [removed: 4.84] [added: 5.11] | | | $ | [removed: 4.40] [added: 4.84] | | | $ | [removed: 4.16] [added: 4.40] | | | $ | [removed: 4.13] [added: 4.16] | | | $ | [removed: 4.12] [added: 4.13] | |