Essex Property Trust (ESS) 10-K risk factor changes: FY2015 vs FY2014

Risks Related to [added: Our] Real [added: Estate] Investments and [removed: Our] Operations

If the communities [added: and other real estate investments] do not generate sufficient income to meet operating expenses, including debt service and capital expenditures, cash flow and the ability to make distributions to stockholders will be adversely affected.

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

| • | [added: changes in] rent control or stabilization laws or other laws regulating housing; [removed: and] |

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

Income and real estate values also may be adversely affected by such factors as applicable laws [removed: (e.g.,] [added: (ex:] the Americans with Disabilities Act of 1990 and tax laws).

Short-term leases expose us to the effects of declining market [removed: rents.][added: rents, and the Company may be unable to renew leases or relet units as leases expire.]

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

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

[added: 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.

[removed: For example,] [added: In addition,] the integration of acquired businesses [added: or other acquisitions] may not be successful and could result in disruption to other parts of our business.

To integrate acquired [removed: businesses,] [added: businesses or other acquisitions,] 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 [removed: properties.][added: properties or as to any such other acquisitions.]

Any acquisition may also cause us to assume liabilities and ongoing lawsuits, acquire goodwill and other non-amortizable intangible assets that will be subject to impairment testing and potential impairment charges, incur amortization expense related [removed: to certain intangible assets, increase our expenses and working capital requirements, and subject us to litigation, which would reduce our return on invested capital.]

Any future acquisitions we make may also require significant additional debt or equity financing, which, in the case of debt financing, would increase our leverage and potentially affect our credit ratings and, in the case of equity or equity-linked financing, [removed: would] [added: could] be dilutive to our existing stockholders.

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

Acquisitions of communities [added: involve various risks and uncertainties and] may fail to meet expectations.

If the Company finances new acquisitions under existing lines of credit, there is a risk that, unless the Company obtains substitute financing, the Company may not be able to [removed: secure further lines of credit] [added: undertake additional borrowing] for [removed: new development] [added: further acquisitions] or [added: developments or] such [removed: lines of credit] [added: borrowing] may be not available on advantageous terms.

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

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

For further information regarding these risks, please see the risk factor [added: above] 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: 2014,] [added: 2015,] 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.

For the year ended December 31, [removed: 2014, 80%] [added: 2015, 83%] of the Company’s rental revenues were generated from communities located in California.

Such initiatives, if successful, [removed: would] [added: could] increase the assessed value and/or tax rates applicable to commercial property in California, including our apartment communities.

[removed: An increase] [added: Increases] in the [removed: assessed value of our] [added: Company’s expenses to own and maintain its] properties [removed: or our property tax rates] could adversely impact [removed: our] [added: the Company’s] financial condition and results of operations.

These include other apartment [removed: communities] [added: communities, condominiums] and single-family homes that are available for rent [added: or for sale] in the markets in which the communities are located.

[removed: Bond compliance] [added: Compliance] requirements [added: of tax-exempt financing and below market rent requirements] may limit income from certain communities.

At December 31, [removed: 2014,] [added: 2015,] the Company had approximately [removed: $179.2] [added: $281.7] million of variable rate tax-exempt financing.

The Company may invest in [added: equity, preferred equity or debt] securities related to real estate, which could adversely affect the Company’s ability to make distributions to stockholders.

The Company may purchase [added: or otherwise invest in] securities issued by entities which own real estate [removed: and] [added: and/or] invest in mortgages or unsecured debt obligations.

| • | that interest rates payable on the mortgages may be lower than the Company’s cost of funds; [removed: and] |

| • | in the case of junior mortgages, that foreclosure of a senior mortgage could eliminate the junior [removed: mortgage.] [added: mortgage; and] |

If any of the above were to occur, it could adversely affect [added: the Company’s] cash flows from [removed: operations and the Company’s ability to make expected dividends to stockholders and the Operating Partnership’s ability to make expected distributions to unit holders.][added: operations.]

Under various federal, state and local environmental and public health laws, regulations and ordinances we have been from time to time, and may be required in the future, regardless of knowledge or responsibility, to investigate and remediate the effects of hazardous or toxic substances or petroleum product releases at our properties (including in some cases naturally occurring substances such as methane and radon gas) and may be held liable under these laws or common law to a governmental entity or to third parties for response costs, property damage, personal injury or natural resources damages and for investigation and remediation costs incurred as a result of the [removed: contamination] [added: impacts] resulting from such releases.

While the Company is unaware of any such response action required or damage claims associated with its existing properties which individually or in aggregate would have a materially adverse effect on our business, assets, financial condition or results of operations, potential future costs and damage claims may be substantial and could exceed any insurance coverage we may [removed: or may not] have for such [removed: events.][added: events or such coverage may not exist.]

Further, the presence of such substances, or the failure to properly remediate [removed: the contamination,] [added: any such impacts,] may adversely affect our ability to borrow against, develop, sell or rent the affected property.

In addition, some environmental laws create or allow a government agency to impose a lien on the [removed: contaminated] [added: impacted] site in favor of the government for damages and costs it incurs as a result of [removed: the contamination.][added: responding to hazardous or toxic substance or petroleum product releases .]

Properties which we intend to acquire undergo a pre-acquisition Phase I environmental site [removed: assessment before acquisition] [added: assessment, which is] intended to afford the Company protection against so-called “owner liability” under the primary federal environmental law, as well as further environmental assessment, which generally does not involve invasive techniques such as soil or ground water sampling except where conditions warranting such further assessment are identified and seller’s consent is obtained.

While such assessments are conducted in accordance with applicable [removed: “appropriate] [added: “all appropriate] inquiry" standards, no assurance can be given that all environmental conditions present [added: on or beneath or emanating from a given property] will be discovered or that the full nature and extent of those conditions which are discovered will be adequately ascertained and quantified.

The Company does so [removed: under] [added: pursuant to] appropriate environmental regulatory requirements with the objective of obtaining regulatory closure or a no further action determination that will allow for future use, development and sale of any impacted community.

| • | changes in interest rates and availability of financing. |

If the Company is unable to promptly renew the leases or relet the units, or if the rental rates upon renewal or reletting are significantly lower than expected rates, then the Company’s results of operations and financial condition will be adversely affected.

For example, as a consequence of such transactions, we may assume unknown liabilities, which could ultimately lead to material costs for us.

to certain intangible assets, increase our expenses and working capital requirements, and subject us to litigation, which would reduce our return on invested capital.

Also, in connection with such acquisitions, we may assume unknown liabilities, which could ultimately lead to material costs for us.

Our apartment communities may be subject to unknown or contingent liabilities which could cause us to incur substantial costs.

The properties that the Company owns or may acquire are or may be subject to unknown or contingent liabilities for which the Company may have no recourse, or only limited recourse, against the sellers.

In general, the representations and warranties provided under the transaction agreements related to the sales of the properties may not survive the closing of the transactions.

While the Company will seek to require the sellers to indemnify us with respect to breaches of representations and warranties that survive, such indemnification may be limited and subject to various materiality thresholds, a significant deductible or an aggregate cap on losses.

As a result, there is no guarantee that we will recover any amounts with respect to losses due to breaches by the sellers of their representations and warranties.

In addition, the total amount of costs and expenses that may be incurred with respect to liabilities associated with apartment communities may exceed our expectations, and we may experience other unanticipated adverse effects, all of which may adversely affect our business, financial condition and results of operations.

| • | we may be unable to obtain, or experience a delay in obtaining, necessary zoning, occupancy, or other required governmental or third party permits and authorizations, which could result in increased costs or delay or abandonment of opportunities. |

Difficulty of selling apartment communities could limit liquidity and financial flexibility.

If we are found to have held, acquired or developed a community primarily with the intent to resell the community, federal tax laws may limit our ability to sell the community without incurring a 100% tax on the gain on the sale of the community and potentially adversely impacting our status as a real estate investment trust (“REIT”) unless we own the community through one of our taxable REIT subsidiaries (“TRSs”).

In addition, real estate in our markets can at times be difficult to sell quickly at prices we find acceptable.

These potential difficulties in selling real estate in our markets may limit our ability to change or reduce the apartment communities in our portfolio promptly in response to changes in economic or other conditions, which could have a material adverse effect on our financial condition and results of operations.

In general, factors that may adversely affect local market and economic conditions include the following:

| • | the economic climate, which may be adversely impacted by a reduction in jobs or income levels, industry slowdowns and other factors; |

| • | local conditions, such as oversupply of, or reduced demand for, apartment homes; |

| • | declines in household formation; |

| • | favorable residential mortgage rates; |

| • | rent control or stabilization laws, or other laws regulating rental housing, which could prevent the Company from raising rents to offset increases in operating costs; and |

| • | competition from other available apartments and other housing alternatives and changes in market rental rates. |

The Company may experience various increased costs, including increased property taxes, to own and maintain its properties.

The Company may experience increased costs associated with capital improvements and routine property maintenance, such as repairs to the foundation, exterior walls, and rooftops of its properties, as its properties advance through their life-cycles.

Competitive housing in a particular area and the increasing affordability of

owner occupied single and multi-family homes caused by lower housing prices, mortgage interest rates and government programs to promote home ownership could adversely affect the Company’s ability to retain its residents, lease apartment homes and increase or maintain rents.

The Company may acquire mezzanine loans, which take the form of subordinated loans secured by second mortgages on the underlying property or loans secured by a pledge of the ownership interests of either the entity owning the property or a pledge of the ownership interests of the entity or entities that owns the interest in the entity owning the property.

| • | delays in the collection of principal and interest if a borrower claims bankruptcy. |

For example, the Company has made preferred equity investments in third party entities that own real estate.

Noncompliance with these laws could result in the imposition of fines or an award of damages to private litigants and also could result in an order to correct any noncomplying feature, which could result in substantial capital expenditures.

impact mold might have on residents of the property.

Radon is also a naturally-occurring gas that is found below the surface and can pose a threat to human health requiring abatement action if present in sufficient concentration within occupied areas.

Purchasing seismic insurance coverage can be costly and such seismic insurance is in limited supply.

As a result, the Company may experience a shortage in desired coverage levels if market conditions are such that insurance is not available, or the cost of the insurance makes it, in managements view, not economically practical.

The Company purchases limited earthquake insurance for certain high-density properties and assets owned by the Company's co-investments.

We have significant investments in large metropolitan markets, such as the metropolitan markets in Southern California, the San Francisco Bay Area and Seattle.

These markets may in the future be the target of actual or threatened terrorist attacks.

Future terrorist attacks in these markets could directly or indirectly damage our communities, both physically and financially, or cause losses that exceed our insurance coverage.

Changes in building codes and ordinances, environmental

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

As a result of its merger with BRE Properties, Inc., the Company will face various additional risks, including, among others, the following:

| • | the Company has incurred substantial expenses related to the merger; |

| • | the Company may be unable to integrate BRE successfully and realize the anticipated synergies and other benefits of the merger or do so within the anticipated timeframe; |

| • | 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; |

| • | the Company's future results will suffer if the Company does not effectively manage its expanded operations resulting from the merger; and |

| • | joint ventures entered into in connection with the merger could be adversely affected by the Company’s lack of sole decision-making authority, its reliance on its joint venture partner’s financial condition and disputes between the Company and its joint venture partner. |

Any of these risks could adversely affect the Company's business and financial results.

In addition,

We also assumed a significant amount of debt in connection with our acquisition of BRE, which is secured by the substantial majority of the properties acquired.

All of the above factors apply to our acquisition of BRE.

During the recent 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 economic condition of these markets could adversely affect underlying asset values and the occupancy, property revenues, and expenses of the Company's communities.

The financial results of major local employers also may impact the cash flow and value of certain of the communities.

This could have a negative impact on the Company’s financial condition and operating results, which could affect the Company’s ability to pay expected dividends to its stockholders and the Operating Partnership’s ability to pay expected distributions to unit holders.

Our property taxes could increase due to reassessment or property tax rate changes.

Radon is also a naturally-occurring gas that is found below the surface.

The Company is subject to the risks normally associated with debt financing, including the following:

The Company may not be able to refinance its indebtedness.

This indebtedness includes secured mortgages, and the communities subject to these mortgages could be foreclosed upon or otherwise transferred to the lender.

This could cause the Company to lose income and asset value.

The Company may obtain additional debt financing in the future through mortgages on some or all of the communities.

These mortgages may be recourse, non-recourse, or cross-collateralized.

Periodically, the Company has entered into agreements to reduce the risks associated with increases in interest rates, and may continue to do so.

In order to

If the Company changed this policy, the Company could incur more debt, which could result in a default under the Company's existing indebtedness, thereby causing such indebtedness to become due and payable, and an increase in debt service requirements that could adversely affect the Company’s financial condition and results of operations.

Such increased debt could exceed the underlying value of the communities.

Future sales of common stock, preferred stock or convertible

corporate actions.

While any shares of the Company’s Series H Preferred Stock are outstanding, the Company may not, without the consent of the holders of two-thirds of the outstanding shares of Series H Preferred Stock:

| • | authorize or create any class or series of stock that ranks senior to the Series H Preferred Stock with respect to the payment of dividends, rights upon liquidation, dissolution or winding-up of the Company’s business; or |

| • | amend, alter or repeal the provisions of the Company’s Charter, including by merger or consolidation, that would materially and adversely affect the rights of the Series H Preferred Stock; provided that in the case of a merger or consolidation, so long as the Series H Preferred Stock remains outstanding with the terms thereof materially unchanged or the holders of shares of Series H Preferred Stock receive shares of stock or other equity securities with rights, preferences, privileges and voting powers substantially similar to that of the Series H Preferred Stock, the occurrence of such merger or consolidation shall not be deemed to materially and adversely affect the rights of the holders of the Series H Preferred Stock. |

The Maryland business combination law may not allow certain transactions between the Company and its affiliates to proceed without compliance with such law.

The investigation into this cyber-intrusion is ongoing, and the Company is working as quickly as possible to identify whether any employee or resident data may be at risk.

As a precaution, the Company has purchased identity protection services for all current residents and employees.

The Company has recorded $1.6 million and $2.8 million in cyber-intrusion expenses in the fourth quarter and year ended December 31, 2014, respectively, including legal fees, investigative fees, costs of communications with the Company’s residents and employees, and identity protection services.

The Company expects to incur additional costs as investigation and remediation efforts continue.

Such costs are not currently estimable but could be material to the Company’s future operating results.

Further, the

Since 2013, the Company accessed the commercial marketplace to purchase Earthquake insurance for certain high-density properties.

[removed: On April 1, 2014, we] [added: The Company] completed the merger with BRE [removed: Properties, Inc. (“BRE”).][added: on April 1, 2014.]

ESS is the sole general partner of the Operating Partnership and, as of December 31, [removed: 2014,] [added: 2015,] had an approximately 96.7% general partner interest in the Operating Partnership.

The Company’s strong financial condition supports its investment strategy by enhancing its ability to quickly shift acquisition, development, [added: redevelopment,] and disposition activities to markets that will optimize the performance of the portfolio.

As of December 31, [removed: 2014,] [added: 2015,] the Company had ownership interests in [removed: 239] [added: 246] communities, comprising [removed: 57,455] [added: 59,160] apartment [removed: units.][added: homes.]

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

As of December 31, [removed: 2014,] [added: 2015,] the Company’s development pipeline was comprised of two consolidated projects under development, [removed: ten] [added: six] unconsolidated joint venture projects under development and various consolidated predevelopment projects aggregating [removed: 2,920 units,] [added: 2,447 apartment homes,] with total incurred costs of [removed: $1.1] [added: $0.7] billion, and estimated remaining project costs of approximately [removed: $0.4] [added: $0.8] billion for total estimated project costs of [removed: $1.5] [added: $1.4] billion.

As of December 31, [removed: 2014,] [added: 2015,] the Company also had ownership interests in four commercial buildings (with approximately [removed: 325,200] [added: 319,079] square feet).

By region, the Company's operating results for [removed: 2014] [added: 2015] and [removed: 2013] [added: 2014] and projections for [removed: 2015] [added: 2016] new housing [removed: supply,] [added: supply (defined as new multi-family apartment homes and single family homes, excluding developments with fewer than 100 apartment homes as well as senior and student housing),] job growth, and rental income are as follows:

Southern California Region: As of December 31, [removed: 2014,] [added: 2015,] this region represented [removed: 47%] [added: 49%] of the Company’s consolidated apartment [removed: units.][added: homes.]

[removed: During the year ended December 31, 2014, revenues] [added: Revenues] for [removed: “2014/2013] [added: “2015/2014] Same-Properties” (as defined below), or “Same-Property revenues,” increased [removed: 5.5%] [added: 6.0%] in [removed: 2014] [added: 2015] as compared to [removed: 2013.][added: 2014.]

In [removed: 2015,] [added: 2016,] the Company [removed: expects] [added: projects] new residential supply of [removed: 17,950 multifamily] [added: 18,300 apartment homes] and [removed: 14,300] single family homes, which represents [removed: a total new multifamily supply of] 0.8% [removed: and 0.6%] of [added: the] total housing [removed: stock, respectively.][added: stock.]

The Company assumes an increase of [removed: 150,000] [added: 95,300] jobs or [removed: 2.1%,] [added: 2.9%,] and an increase in [removed: same-property] [added: Same-Property] revenues [added: of] between [removed: 4.50%] [added: 8.50%] to [removed: 5.50%] [added: 9.50%] in [removed: 2015.][added: 2016.]

Northern California Region: As of December 31, [removed: 2014,] [added: 2015,] this region represented [removed: 31%] [added: 30%] of the Company’s consolidated apartment [removed: units.][added: homes.]

[added: 2014/2013] Same-Property [removed: revenues] [added: Revenues] increased [removed: 9.6% in] [added: by $41.1 million or 7.3% to $601.2 million for] 2014 [removed: as] compared to [added: $560.1 million in] 2013.

In [removed: 2015,] [added: 2016,] the Company [removed: expects] [added: projects] new residential supply of [removed: 11,400 multifamily] [added: 16,050 apartment homes] and [removed: 7,000] single family homes, which represents [removed: a total new multifamily supply of] 1.3% [removed: and 0.8%, respectively,] of [added: the] total housing stock.

The Company assumes an increase of [removed: 90,200] [added: 43,100] jobs or [removed: 2.9%,] [added: 2.7%,] and an increase in [removed: same-property] [added: Same-Property] revenues [added: of] between [removed: 8.25%] [added: 6.00%] to [removed: 9.25%] [added: 7.00%] in [removed: 2015.][added: 2016.]

Seattle Metro Region: As of December 31, [removed: 2014,] [added: 2015,] this region represented 21% of the Company’s consolidated apartment [removed: units.][added: homes.]

[removed: Same-Property revenues] [added: 2014/2013 Non-Same Property Revenues] increased [removed: 7.5%] [added: by $36.9 million or 85.3% to $80.1 million] in 2014 [removed: as] compared to [added: $43.2 million to] 2013.

In [removed: 2015,] [added: 2016,] the Company [removed: expects] [added: projects] new residential supply of [removed: 9,000 multifamily] [added: 30,300 apartment homes] and [removed: 7,500] single family homes, which represents [removed: a total new multifamily supply of 1.9% and 1.4%, respectively,] [added: 0.5%] of [added: the] total housing stock.

The Company assumes an increase of [removed: 43,300] [added: 168,050] jobs or [removed: 2.8%,] [added: 2.2%,] and an increase in [removed: same-property] [added: Same-Property] revenues [added: of] between [removed: 5.75%] [added: 5.25%] to [removed: 6.75%] [added: 6.25%] in [removed: 2015.][added: 2016.]

The Company [removed: expects 2015] [added: projects 2016] Same-Property revenues to increase compared to [removed: 2014] [added: 2015] results, as renewal and new leases are signed at higher rents in [removed: 2015] [added: 2016] than [removed: 2014.][added: 2015.]

Same-Property operating expenses are expected to increase in [removed: 2015] [added: 2016] by [removed: 3%] [added: 3.25%] to [removed: 4%.][added: 4.25%.]

| | December 31, [removed: 2014] [added: 2015] | | | | | | December 31, [removed: 2013] [added: 2014] | | | | |

| Southern California | [removed: 22,168] [added: 23,707] | | | [removed: 47] [added: 49] | % | | [removed: 13,855] [added: 22,168] | | | [removed: 46] [added: 47] | % |

| Northern California | [removed: 14,789] [added: 14,694] | | | [removed: 31] [added: 30] | % | | [removed: 9,431] [added: 14,789] | | | [removed: 32] [added: 31] | % |

| Seattle Metro | [removed: 10,216] [added: 10,239] | | | 21 | % | | [removed: 6,703] [added: 10,216] | | | [removed: 22] [added: 21] | % |

| Total | [removed: 47,725] [added: 48,640] | | | 100 | % | | [removed: 29,989] [added: 47,725] | | | 100 | % |

[removed: Co-investments] [added: Co-investments, including Wesco I, LLC ("Wesco I"), Wesco III, LLC ("Wesco III"), Wesco IV, LLC (“Wesco IV”), Canadian Pension Plan Investment Board ("CPPIB" or "CPP"), Palm Valley and BEXAEW, LLC (“BEXAEW”)] communities, developments under construction and [removed: eight] preferred equity interest co-investment communities are not included in the table presented above for both periods.

The Company’s average financial occupancies for the Company’s stabilized apartment communities [removed: or] [added: for] “2014/2013 Same-Properties” (stabilized properties consolidated by the Company for the years ended December 31, 2014 and 2013) increased 10 basis points to 96.2% in 2014 from 96.1% in 2013.

Financial occupancy is defined as the percentage resulting from dividing actual rental revenue by total [removed: possible] [added: potential] rental [removed: revenue.][added: revenue (actual rental revenue for occupied apartment homes plus market rent for vacant apartment homes).]

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

Market rates are determined using the recently signed effective rates on new leases at the property and are used as the starting point in the determination of the market rates of vacant [removed: units.][added: apartment homes.]

Financial occupancy may not completely reflect short-term trends in physical occupancy and financial occupancy [removed: rates, as disclosed by other REITs,] [added: rates and the Company's calculation of financial occupancy] may not be comparable to [removed: the Company’s calculation of] financial [removed: occupancy.][added: occupancy as disclosed by other REITs.]

The Company does not take into account delinquency and concessions to calculate actual rent for occupied [removed: units] [added: apartment homes] and market rents for vacant [removed: units.][added: apartment homes.]

The calculation of financial occupancy compares contractual rates for occupied [removed: units] [added: apartment homes] to estimated market rents for unoccupied [removed: units,] [added: apartment homes, and] thus the calculation compares the gross value of all apartment [removed: units] [added: homes] excluding delinquency and concessions.

While an apartment community is in the lease-up phase, the Company’s primary motivation is to stabilize the property which may entail the use of rent concessions and other incentives, and thus financial [removed: occupancy] [added: occupancy,] which is based on contractual revenue is not considered the best metric to quantify occupancy.

The regional breakdown of the Company’s [added: stabilized] 2014/2013 Same-Property portfolio for financial occupancy for the years ended December 31, 2014 and 2013 is as follows:

| Southern California | | 58 | | | $ | [removed: 266,917] [added: 267,413] | | | $ | [removed: 253,007] [added: 253,503] | | | $ | 13,910 | | | 5.5 | % |

| Northern California | | 35 | | | [removed: 218,014 |] [added: 218,577] | | | [removed: 198,832] | [added: 199,395] | | | [removed: $] | 19,182 | | | [added: |] 9.6 | % |

| Total 2014/2013 Same-Property revenues | | 122 | | | [removed: 599,893] [added: 601,209] | | | | [removed: 558,821] [added: 560,123] | | | | [removed: 41,072] [added: 41,086] | | | | 7.3 | % |

Same-Property revenues increased 10.5% in 2015 as compared to 2014.

Same-Property revenues increased 7.7% in 2015 as compared to 2014.

| | Apartment Homes | | | % | | | Apartment Homes | | | % | |

| Arizona | — | | | — | % | | 552 | | | 1 | % |

| | 2015 | | | 2014 | |

| 2015/2014 Same-Properties: (1) | | | | | | | | | | | | | | | | | | |

| Southern California | | 58 | | | $ | 283,435 | | | $ | 267,413 | | | $ | 16,022 | | | 6.0 | % |

| Northern California | | 37 | | | 250,478 | | | | 226,679 | | | | $ | 23,799 | | | 10.5 | % |

| Seattle Metro | | 34 | | | 124,143 | | | | 115,219 | | | | 8,924 | | | | 7.7 | % |

| Total 2015/2014 Same-Property revenues | | 129 | | | 658,056 | | | | 609,311 | | | | 48,745 | | | | 8.0 | % |

| 2015/2014 Non-Same Property Revenues | | | | | 527,442 | | | | 352,280 | | | | 175,162 | | | | 49.7 | % |

| Total property revenues | | | | | $ | 1,185,498 | | | $ | 961,591 | | | $ | 223,907 | | | 23.3 | % |

| (1) | Same-property excludes BRE properties acquired April 1, 2014 and properties held for sale. |

The increase was primarily attributable to an increase of 8.1% in average rental rates from $1,741 per apartment home for 2014 to $1,882 per apartment home for 2015.

The increase was primarily due to the BRE merger and the acquisition or consolidation of ten communities, net of dispositions and properties held for sale, since January 1, 2014.

Property operating expenses, excluding real estate taxes increased $30.3 million or 14.8% in 2015 compared to 2014, primarily due to the BRE merger and the acquisition or consolidation of ten communities, net of dispositions and properties held for sale, since January 1, 2014.

Real estate taxes increased $20.7 million or 19.2% in 2015 compared to 2014, due primarily due to the BRE merger and the acquisition or consolidation of ten communities, net of dispositions and held for sale, since January 1, 2014.

2015/2014 Same-Property real estate taxes increased by $1.7 million or 3.2% for 2015 compared to 2014.

Depreciation and amortization expense increased by $92.8 million or 25.7% in 2015 compared to 2014, primarily due to the BRE merger and the acquisition or consolidation of ten communities, net of dispositions and properties held for sale, since January 1, 2014.

Interest expense increased $40.3 million or 24.5% in 2015, due to an increase in average outstanding debt primarily due to assumed debt in connection with the BRE merger in addition to a $6.8 million decrease in capitalized interest in 2015 compared to 2014, which was due to a decrease in development costs as compared to the same period in 2014.

Total return swap income of $5.7 million in 2015 consists of monthly settlements related to the Company's total return swap contracts that were entered into during the year, in connection with $257.3 million of tax-exempt mortgage notes payable.

The Company had no total return swap income in 2014.

Interest and other income increased $7.3 million or 62.1% in 2015, due to an increase in the investment of mortgage backed securities, an increase of $3.1 million in insurance proceeds and $0.6 million in income from the sale of an investment.

Equity income from co-investments decreased by $18.0 million to $21.9 million in 2015 compared to $39.9 million in 2014, primarily due to events in 2014 which did not recur in 2015, including the Company’s share of the gain on the sale of two co-investment communities of $6.6 million, promote income of $10.6 million, and income from the early redemption of preferred equity investments of $5.3 million in 2014, partially offset by $2.0 million in income from the early redemption of two preferred equity investments during 2015 and an increase of $7.4 million in equity income from co-investment operations.

Additionally, income from preferred equity investments decreased by approximately $5.1 million from 2014 to 2015.

Gains on sale of real estate and land increased by $1.3 million or 2.8% in 2015 compared to 2014, due primarily to $7.1 million in gains on the sales of Pinnacle South Mountain and two commercial buildings as well as a $40.2 million gain on the sale of Sharon Green during 2015 as compared to approximately $16.8 million in gains on the sales of Vista Capri North, Coldwater Canyon, Pinnacle Town Center, and a land parcel adjacent to the Company's Park Viridian property, as well as a $29.2 million gain on the sale of Mt.

Sutro during 2014.

Gains on remeasurement of co-investment increased by $34.0 million in 2015 compared to 2014, due to the remeasurement of the Company's investments, as a result of the Company's acquisition of a controlling interest in The Huxley and The Dylan properties, resulting in a gain of $21.3 million, and Reveal, resulting in a gain of $12.7 million.

| Seattle Metro | | 29 | | | 115,219 | | | | 107,225 | | | | 7,994 | | | | 7.5 | % |

| Total property revenues | | | | | $ | 961,591 | | | $ | 603,327 | | | $ | 358,264 | | | 59.4 | % |

| | |

| --- | --- |

| | |

| --- | --- |

| Operating activities | | $ | 617,410 | | | $ | 493,312 | | | $ | 304,982 | |

In January 2016, $150.0 million of these bonds bearing an interest rate of 4.36% were repaid.

As of December 31, 2015, the Company had $2.4 billion of fixed rate public bonds, net of unamortized premiums, discounts and debt issuance costs, with interest rates varying from 3.25% to 5.50% and maturity dates ranging from 2017 to 2025.

The $200 million tranche of this unsecured term loan has a maturity date of November 2016 and the $25 million tranche has a maturity date of August 2017.

In January 2016 the maturity date was extended to January 2018 and the interest rate was lowered to LIBOR plus 0.90%.

The Company has entered into four total return swap contracts, with an aggregate notional amount of $257.3 million, that effectively converts $257.3 million of mortgage notes payable to a floating interest rate based on SIFMA plus a spread.

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.

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

| | Apartment Units | | | % | | | Apartment Units | | | % | |

| 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).

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

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

| | 2013 | | | 2012 | |

| 2013/2012 Same-Properties: | | | | | | | | | | | | | | | | | | |

| Southern California | | 58 | | | $ | 235,306 | | | $ | 225,435 | | | $ | 9,871 | | | 4.4 | % |

| Northern California | | 35 | | | 184,508 | | | | 170,578 | | | | $ | 13,930 | | | 8.2 | % |

| Seattle Metro | | 29 | | | 93,139 | | | | 86,483 | | | | $ | 6,656 | | | 7.7 | % |

| Total 2013/2012 Same-Property revenues | | 122 | | | 512,953 | | | | 482,496 | | | | $ | 30,457 | | | 6.3 | % |

| 2013/2012 Non-Same Property Revenues (1) | | | | | 89,050 | | | | 44,200 | | | | $ | 44,850 | | | 101.5 | % |

| Total property revenues | | | | | $ | 602,003 | | | $ | 526,696 | | | $ | 75,307 | | | 14.3 | % |

(1) Includes fifteen communities acquired after January 1, 2012, two redevelopment communities, and three commercial buildings.

2013/2012 Same-Property Revenues increased by $30.5 million or 6.3% to $513.0 million for 2013 compared to $482.5 million in 2012.

The increase was primarily attributable to an increase in scheduled rents of $29.6 million as reflected in an increase of 6.3% in average rental rates from $1,502 per unit for 2012 to $1,597 per unit for 2013.

Scheduled rents increased in all regions by 4.1%, 8.4%, and 7.7% in Southern California, Northern California, and Seattle Metro, respectively.

Income from utility billings and other income increased by $1.0 million and $1.2 million, respectively in 2013 compared to 2012.

Occupancy decreased 10 basis points in 2013 to 96.2% compared to 96.3% in 2012.

2013/2012 Non-Same Property Revenues increased by $44.9 million or 102% to $89.1 million in 2013 compared to $44.2 million to 2012.

The increase was primarily due to revenue generated from fifteen communities acquired or consolidated since January 1, 2012 (Annaliese, Ascent, Bennett Lofts, Domain, Domaine, Essex Skyline at MacArthur Place, Fox Plaza, Montebello, Park Catalina, Park West, Reed Square, Slater 116, The Huntington, Vox and Willow Lake).

Management and other fees from affiliates decreased $1.2 million or 14.1% to $7.3 million in 2013 compared to $8.5 million in 2012.

The decrease is primarily due to a reduction of $2.3 million in asset and property management fees from the sale of eight Fund II communities since the fourth quarter of 2012.

An additional four communities owned by Fund II were sold in 2013.

Property operating expenses, excluding real estate taxes increased $14.9 million or 12.1% in 2013 compared to 2012, primarily due to the acquisition of fifteen communities.

Real estate taxes increased $8.9 million or 18.5% in 2013 compared to 2012, due primarily to the acquisition of fifteen communities.

2013/2012 Same-Property real estate taxes increased by $2.6 million or 6.0% for the 2013 compared to 2012 due to $1.3 million or 17.5% increase in property taxes for Seattle Metro due to higher assessed values for 2013, and an increase of 3.7% in property taxes for the properties located in California.

Depreciation and amortization expense increased by $23.2 million or 13.7% in 2013 compared to 2012, due to the acquisition of fifteen communities.

The increase is due to the capitalization of approximately $122.0 million in additions to rental properties through 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.

Approximately $121.2 million in additions to rental properties were capitalized for 2012, including $29.2 million spent on acquisitions of and additions to real estate under development, $46.6 million spent on redevelopment, and $45.4 million spent on capital expenditures on rental properties.

General and administrative expense increased $2.1 million or 8.6% in 2013 compared to 2012 offset by annual compensation increases for merit, investments in technology, and the addition of staff.

The Company entered into a definitive agreement to combine with BRE in December 2013.

Interest expense increased $4.6 million or 4.1% in 2013, primarily due to an increase in average outstanding debt for the funding of 2012 and 2013 acquisitions and costs incurred on the development pipeline.

Interest and other income decreased by $2.2 million in 2013 primarily due to $2.3 million of promote income earned from achieving certain performance hurdles related to the Essex Skyline co-investment in 2012.

Equity income from co-investments increased by $14.2 million to $55.9 million in 2013 compared to $41.7 million in 2012.

The increase was primarily due to the Company’s share of the gain on the sale of five Fund II communities of $38.8 million, net of internal disposition costs, and $1.4 million income earned from the early prepayment of a preferred equity investment in 2013.

As of December 31, [removed: 2014,] [added: 2015,] the Company has seven interest rate swap contracts to mitigate the risk of changes in the interest-related cash outflows on $225.0 million of the five-year unsecured term debt.

As of December 31, [removed: 2014,] [added: 2015,] the Company also had [removed: $189.2] [added: $291.7] million of variable rate indebtedness, of which [removed: $153.2] [added: $20.7] million is subject to interest rate cap protection.

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: 2014.][added: 2015.]

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: 2014.][added: 2015.]

| Interest rate swaps | | $ | 225,000 | | | 2016-2017 | | $ | [removed: (1,767] [added: (1,032] | ) | | $ | [removed: 148] [added: (56] | [added: )] | | $ | [removed: (3,846] [added: (2,003] | ) |

| Interest rate caps | | [removed: 153,239] [added: 20,674] | | | | [removed: 2015-2019] [added: 2018-2019] | | — | | | | [removed: 50] [added: —] | | | | — | | |

Management has estimated that the fair value of the Company’s [removed: $4.4] [added: $4.8] billion of fixed rate debt at December 31, [removed: 2014,] [added: 2015,] to be [removed: $4.6] [added: $4.8] billion.

Management has estimated the fair value of the Company’s [removed: $660.6] [added: $525.3] million of variable rate debt at December 31, [removed: 2014,] [added: 2015,] is [removed: $656.3] [added: $527.6] million based on the terms of existing mortgage notes payable and variable rate demand notes compared to those available in the marketplace ($ in thousands).

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

| | [removed: 2015 | | | |] 2016 | | | [removed: |] 2017 | | | | 2018 | | | | 2019 | | | | [added: 2020 | | | |] Thereafter | | | | | Total | | | | Fair value | | |

| Average interest rate | [removed: 5.1 |] [added: 4.5] | % | | [removed: 4.5] [added: 3.3] | | % | | [removed: 3.3] [added: 5.5] | | % | | [removed: 5.5] [added: 4.3] | | % | | [removed: 4.3] [added: 5.0] | | % | | [removed: 3.9] [added: 3.8] | | % | | | | | | | | | |

| [removed: (1)] [added: (2)] | [removed: $153.2] [added: $245.7] million [added: is] subject to interest rate [removed: caps.] [added: protection agreements.] |

The table incorporates only those exposures that exist as of December 31, [removed: 2014;] [added: 2015;] it does not consider those exposures or positions that could arise after that date.

All of the Company’s interest rate swaps are designated as cash flow hedges as of December 31, 2015.

| | | | | | | Maturity | | Estimated | | | | \+ 50 | | | | \- 50 | | |

| Total cash flow hedges | | $ | 245,674 | | | 2016-2019 | | $ | (1,032 | ) | | $ | (56 | ) | | $ | (2,003 | ) |

Additionally, the Company has entered into total return swap contracts, with an aggregate notional amount of $257.3 million, that effectively converts $257.3 million of mortgage notes payable to a floating interest rate based on SIFMA plus a spread and had a carrying value of $4 thousand at December 31, 2015.

These derivatives do not qualify for hedge accounting.

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

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

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

| Fixed rate debt (1) | $179,677 | | | $538,685 | | | | $320,080 | | | | $650,620 | | | | $692,440 | | | | $ | 2,350,056 | | | | $ | 4,731,558 | | | $ | 4,835,891 | |

| Variable rate debt (1) | $200,038 | | | $ | 25,495 | | | $ | 542 | | | $ | 25,592 | | | $ | 647 | | | $ | 279,395 | | (2 | ) | $ | 531,709 | | | $ | 527,592 | |

| Average interest rate | 2.3 | % | | 2.3 | | % | | 1.1 | | % | | 1.8 | | % | | 1.1 | | % | | 1.2 | | % | | | | | | | | | |

| (1) | Represents scheduled principal payments. |

| | |

| --- | --- |

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, 2014.

| | | | | | | Maturity | | Estimate | | | | \+ 50 | | | | \- 50 | | |

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

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

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

| 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 | |

| Average interest rate | — | | | | 2.2 | | % | | 2.2 | | % | | — | | | | 1.7 | | % | | 1.9 | | % | | | | | | | | | |

Essex Property Trust, Inc. [removed: (“Essex”] [added: (“Essex”, "ESS",] or the “Company”) [removed: is] a Maryland [removed: corporation] [added: corporation, is an S&P 500 company] that operates as a self-administered and self-managed real estate investment trust (“REIT”).

The Company owns all of its interest in its real estate [added: and other] investments directly or indirectly through Essex Portfolio, L.P. (the “Operating Partnership” or “EPLP”).

The Company is the sole general partner of the Operating Partnership and as of December 31, [removed: 2014] [added: 2015] owns a 96.7% general partnership interest.

As of December 31, [removed: 2014,] [added: 2015,] the Company owned or held an interest in [removed: 239] [added: 246] communities, aggregating [removed: 57,455 units,] [added: 59,160 apartment homes,] located along the West Coast, as well as four commercial buildings (totaling approximately [removed: 325,200] [added: 319,079] square feet), and [removed: twelve] [added: eight] active development projects with [removed: 2,920 units] [added: 2,447 apartment homes] in various stages of development (collectively, the “Portfolio”).

Merger with BRE Properties, Inc. [added: in 2014]

Acquisitions are an important component of the Company’s business plan, and during [removed: 2014,] [added: 2015,] the Company [removed: and its co-investments] acquired ownership interests in seven communities [removed: comprising] [added: comprised] of [removed: 2,578 units] [added: 1,722 apartment homes] for [removed: $640.7] [added: $638.1] million.

The following is a summary of [removed: 2014] [added: 2015] acquisitions ($ in millions):

| Property Name | | Location | | [removed: Units] [added: Apartment Homes] | | | [added: Essex Ownership] Percentage | | | Ownership | | Quarter in [removed: 2014] [added: 2015] | | [added: Purchase] Price | | |

| The [removed: Avery] [added: Huxley (1)] | | Los Angeles, CA | | [removed: 121] [added: 187] | | | 100 | % | | EPLP | | Q1 [removed: 2014] | | [removed: $] [added: 48.8] | [removed: 35.0] | |

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

As of December 31, [removed: 2014,] [added: 2015,] the Company had two consolidated development projects and [removed: ten] [added: six] joint venture development projects comprised of [removed: 2,920 units] [added: 2,447 apartment homes] for an estimated cost of [removed: $1.5] [added: $1.4] billion, of which [removed: $420.0] [added: $787] million remains to be [removed: expended.][added: expended, of which $542 million is the Company's share.]

The Company defines [removed: the] predevelopment projects as proposed communities in negotiation or in the entitlement process with an expected high likelihood of becoming entitled development projects.

As of December 31, [removed: 2014,] [added: 2015,] the Company had various consolidated predevelopment projects.

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

| MB 360 [added: - Phase II] | | San Francisco, CA | | 100 | % | | [removed: 360] [added: 172] | | | $ | [removed: 226] [added: 119] | | | $ | [removed: 275] [added: 135] | |

| Total - Consolidated Development Projects | | | | | | | [removed: 624] [added: 771] | | | [removed: 389] [added: 202] | | | | [removed: 447] [added: 489] | | |

| Epic - Phase III | | San Jose, CA | | 55 | % | | 200 | | | [removed: 64] [added: 84] | | | | [removed: 97] [added: 92] | | |

| [removed: The Village] [added: Agora(2)] | | Walnut Creek, CA | | [removed: 50] [added: 51] | % | | 49 | | | [removed: 60] [added: 84] | | | | [removed: 89] [added: 95] | | |

| Owens | | Pleasanton, CA | | 55 | % | | 255 | | | [removed: 26] [added: 55] | | | | 89 | | |

| Hacienda | | Pleasanton, CA | | 55 | % | | 251 | | | [removed: 16] [added: 37] | | | | 86 | | |

| Century Towers | | San Jose, CA | | 50 | % | | 376 | | | [removed: 40] [added: 93] | | | | 172 | | |

| Total - Joint Venture Development Projects | | | | | | | [removed: 2,296] [added: 1,676] | | | [removed: 683] [added: 415] | | | | [removed: 1,045] [added: 915] | | |

| Other Projects | | various | | 100 | % | | — | | | [removed: 45] [added: 40] | | | | [removed: 45] [added: 40] | | |

| Total - Predevelopment Projects | | | | | | | — | | | [removed: 45] [added: 40] | | | | [removed: 45] [added: 40] | | |

| Grand Total - Development and Predevelopment Pipeline | | | | | | | [removed: 2,920] [added: 2,447] | | | $ | [removed: 1,117] [added: 657] | | | $ | [removed: 1,537] [added: 1,444] | |

| (1) | Includes [added: costs related to the entire project, including both the Company's and joint venture partners' costs. Includes] incurred costs and estimated costs to complete these development projects. For predevelopment projects, only incurred costs are included in estimated costs. |

The Company defines [added: the] redevelopment pipeline as existing properties owned or recently acquired, which have been targeted for additional investment by the Company with the expectation of increased financial returns through property improvement.

During redevelopment, apartment [removed: units] [added: homes] may not be available for rent and, as a result, may have less than stabilized operations.

As of December 31, [removed: 2014,] [added: 2015,] the Company had ownership interests in [removed: three] [added: five major] redevelopment communities aggregating [removed: 963] [added: 1,313] apartment [removed: units] [added: homes] with estimated redevelopment costs of [removed: $122.0] [added: $159.8] million, of which approximately [removed: $96.4] [added: $82.5] million remains to be expended.

In [removed: April 2014,] [added: March 2015,] the Company issued [removed: $400] [added: $500] million of [removed: 3.875%] [added: 3.5%] senior unsecured notes that mature in [removed: May 2024.][added: April 2025.]

The interest is payable semi-annually in arrears on [removed: May 1] [added: April 1st] and [removed: November 1] [added: October 1st] of each year, commencing [removed: November] [added: October] 1, [removed: 2014] [added: 2015,] until the maturity date in [removed: May 2024.][added: April 2025.]

The Company used the net proceeds of this offering to repay indebtedness under the [removed: Company’s] [added: Company's] $1.0 billion unsecured line of credit [removed: facility] [added: facility, its $25.0 million unsecured working capital line] and for other general corporate purposes.

As of December 31, [removed: 2014,] [added: 2015,] Fitch Ratings ("Fitch"), Moody’s Investor Service, and Standard and Poor's (“S&P”) credit agencies rated Essex Property Trust, Inc. and Essex Portfolio, L.P. BBB+/Stable, [removed: Baa2/Stable,] [added: Baa2/Positive,] and [removed: BBB/Stable,] [added: BBB/Positive,] respectively.

[removed: Excluding shares issued in connection with the BRE merger, during 2014,] [added: During 2015,] ESS issued [removed: 2,964,315] [added: 1,481,737] shares of common stock at an average share price of [removed: $181.56] [added: $226.46] for proceeds of [removed: $534.0] [added: $332.3] million, net of fees and commissions.

ESS contributed the net proceeds to the Operating Partnership and used the proceeds to [added: pay down debt,] fund [removed: external growth] [added: the development] and [added: redevelopment pipeline, fund acquisitions, and] for general corporate purposes.

The Company has also made, and may continue in the future to make, preferred equity investments in various [removed: multifamily] [added: multi-family] development projects.

The Company is headquartered in [removed: Palo Alto,] [added: San Mateo,] California, and has regional offices in Woodland Hills, California; [added: San Jose, California;] Irvine, California; San Diego, California and Bellevue, Washington.

As of December 31, [removed: 2014,] [added: 2015,] the Company had [removed: 1,725] [added: 1,806] employees.

As of December 31, [removed: 2014,] [added: 2015,] PWI has cash and marketable securities of approximately [removed: $57.6] [added: $60.3] million, and is consolidated in the Company's financial statements.

All [added: of] the [added: Company's] communities are located in areas that are subject to earthquake activity.

| 8th & Hope | | Los Angeles, CA | | 290 | | | 100 | % | | EPLP | | Q1 | | $ | 200.0 | |

| The Dylan (1) | | Los Angeles, CA | | 184 | | | 100 | % | | EPLP | | Q1 | | 51.3 | | |

| Reveal (2) | | Woodland Hills, CA | | 438 | | | 99.75 | % | | EPLP | | Q2 | | 73.0 | | |

| Avant | | Los Angeles, CA | | 247 | | | 100 | % | | EPLP | | Q2 | | 99.0 | | |

| Avant II | | Los Angeles, CA | | 193 | | | 100 | % | | EPLP | | Q4 | | 73.0 | | |

| Enso | | San Jose, CA | | 183 | | | 100 | % | | EPLP | | Q4 | | 93.0 | | |

| Total 2015 | | | | 1,722 | | | | | | | | | | $ | 638.1 | |

| (1) | In March 2015, the Company purchased the joint venture partner's remaining membership interest in The Huxley and The Dylan co-investments for a purchase price of $100.1 million. The properties are now consolidated. |

| | |

| --- | --- |

| (2) | In April 2015, the Company purchased the joint venture partner's 49.5% membership interest in the Reveal co-investment for a purchase price of $73.0 million. The property is now consolidated. |

During 2015, the Company sold two apartment communities, Pinnacle South Mountain and Sharon Green, for a total of $308.8 million, resulting in total gains of $44.9 million.

Additionally, in March 2015, the Company sold two commercial buildings, aggregating 120,000 square feet, located in Emeryville, CA, for $13.0 million, resulting in gains of $2.4 million.

The Company defines development projects as new communities that are being constructed or are newly constructed and are in a phase of lease-up and have not yet reached stabilized operations.

| | | | | | | | | | | 12/31/2015 | | | | | | |

| Station Park Green | | San Mateo, CA | | 100 | % | | 599 | | | 83 | | | | 354 | | |

| 500 Folsom (3) | | San Francisco, CA | | 50 | % | | 545 | | | 62 | | | | 381 | | |

| | |

| --- | --- |

| | |

| --- | --- |

| (2) | Estimated project costs for this development include costs to develop both residential and commercial space. |

| | |

| --- | --- |

| (3) | Estimated project cost for this development is net of a projected value for low-income housing tax credit proceeds and savings from tax exempt bonds. |

During 2015, the Company made regularly scheduled principal payments and loan payoffs of $118.3 million of its secured mortgage notes payable at an average interest rate of 5.3%.

At December 31, 2015, the Company's $1.0 billion credit facility had an interest rate of LIBOR plus 0.95%, which is based on a tiered rate structure tied to the Company's credit ratings.

In January 2016, the Company extended the maturity date on its $1.0 billion unsecured line of credit facility from December 2017 to December 2019, with one 18-month extension, exercisable by the Company and lowered the interest rate to LIBOR plus 0.90%.

During the first quarter of 2016 through February 22, 2016, ESS has not issued any shares under its equity distribution program.

The Company also purchases limited earthquake insurance for certain properties owned by the Company's co-investments.

| | | | | | | | Essex Ownership | | | | | | | Purchase | | |

| 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.

Sutro, and Pinnacle Town Center for a total of $120.4 million, resulting in total gains of $43.6 million.

During 2014, Essex Apartment Value Fund II, L.P. (“Fund II”) sold Davey Glen for $23.8 million and Alderwood Park for $23.5 million.

In connection with the 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 2014 were $23.3 million, of which the Company’s share was $6.6 million.

The Company defines development projects as new communities that are in various stages of active development, or are in the process of leasing activities prior to stabilization.

| | | | | | | | | | | 12/31/2014 | | | | | | |

| Radius | | Redwood City, CA | | 100 | % | | 264 | | | 163 | | | | 172 | | |

| The Dylan | | West Hollywood, CA | | 50 | % | | 184 | | | 78 | | | | 78 | | |

| Mosso II | | San Francisco, CA | | 55 | % | | 282 | | | 143 | | | | 150 | | |

| Park 20 | | San Mateo, CA | | 55 | % | | 197 | | | 74 | | | | 77 | | |

| One South Market | | San Jose, CA | | 55 | % | | 312 | | | 120 | | | | 145 | | |

| Emme | | Emeryville, CA | | 55 | % | | 190 | | | 62 | | | | 62 | | |

During 2014, the Company repaid $24.1 million of principal outstanding on its secured mortgage debt at an average interest rate of 4.9%.

The carrying value of the 2024 Notes, net of discount was $397.2 million as of December 31, 2014.

In April 2014, the Company, assumed $900.0 million aggregate principal amount of BRE’s 5.500% senior notes due 2017; 5.200% senior notes due 2021; and 3.375% senior notes due 2023 (together “BRE Notes”).

The carrying value of the BRE Notes, net of premium, was $934.7 million as of December 31, 2014.

Also, in connection with the Merger, the Company assumed approximately $711.3 million of secured debt with remaining loan terms ranging from one to seven years and a weighted average interest rate of 5.6%.

In January 2014, the Company increased the capacity of the unsecured line of credit facility from $600.0 million to $1.0 billion and included an accordion feature pursuant to which the Company could expand to $1.5 billion.

This facility matures in December 2017 with one 18-month extension, exercisable at the Company's option.

In January 2015, the facility maturity date was extended to December 31, 2018 with one 18-month extension, exercisable by the Company.

The facility carries an interest rate based on its current credit ratings of LIBOR plus 0.95%.

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

In January 2014, the Company reduced the pricing on its $350.0 million unsecured term loan by 15 basis points to LIBOR plus 1.05%.

In December 2014, the Company repaid $125.0 million outstanding on this term loan.

Essex issued approximately 23,067,446 shares of Essex common stock as Stock Consideration in the BRE merger.

During the first quarter of 2015 through February 24, 2015, ESS has issued 636,021 shares of common stock at an average price of $224.76 for proceeds of $142.0 million, net of fees and commissions.

Since 2013, the Company accessed the commercial marketplace to purchase Earthquake insurance for certain properties.

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

For the fiscal year ended December 31, [removed: 2014][added: 2015]

As of June 30, [removed: 2014,] [added: 2015,] the aggregate market value of the voting stock held by non-affiliates of Essex Property Trust, Inc. was [removed: $11,430,740,862.][added: $13,717,739,025.]

As of February [removed: 24, 2015, 65,125,801] [added: 22, 2016, 65,411,581] 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: 2014.][added: 2015.]

This report combines the annual reports on Form 10-K for the year ended December 31, [removed: 2014] [added: 2015] of Essex Property Trust, Inc. and Essex Portfolio, L.P. Unless stated otherwise or the context otherwise requires, references to “ESS” mean Essex Property Trust, Inc., a Maryland corporation that operates as a self-administered and self-managed real estate investment trust (“REIT”), and references to “EPLP” mean Essex Portfolio, L.P. (the “Operating Partnership”).

ESS is the general partner of, and as of December 31, [removed: 2014] [added: 2015] owned an approximate 96.7% ownership interest in EPLP.

[removed: 2014] [added: 2015] ANNUAL REPORT ON FORM 10-K

| Item 1. | [removed: [Business](#s9A04E7CD647AC3E0718235E1D40827A8)] [added: [Business](#s1677A140348A50C18F90856CE3499668)] | [removed: [1](#s9A04E7CD647AC3E0718235E1D40827A8)] [added: [1](#s1677A140348A50C18F90856CE3499668)] |

| Item 1A. | [Risk [removed: Factors](#s5FE29457777CDCB5CCE135E2049B0E81)] [added: Factors](#s4E5AD4E8B19158CAA5438F6C4DE74D1B)] | [removed: [7](#s5FE29457777CDCB5CCE135E2049B0E81)] [added: [7](#s4E5AD4E8B19158CAA5438F6C4DE74D1B)] |

| Item 1B. | [Unresolved Staff [removed: Comments](#s0F4EAE1C3CED781C044335E204EC3617)] [added: Comments](#s4A6DFAB319A95ACFB6D4216C117DE9A3)] | [removed: [20](#s0F4EAE1C3CED781C044335E204EC3617)] [added: [22](#s4A6DFAB319A95ACFB6D4216C117DE9A3)] |

| Item 2. | [removed: [Properties](#s7ED1C0D2454FC2E0599D35E1D16D7822)] [added: [Properties](#s28B509F96F445E11BC68B91B562C3E77)] | [removed: [20](#s7ED1C0D2454FC2E0599D35E1D16D7822)] [added: [22](#s28B509F96F445E11BC68B91B562C3E77)] |

| Item 3. | [Legal [removed: Proceedings](#sC1992E9F731ECD4CD7E935E205C02735)] [added: Proceedings](#sD8320BBDF76C5AA39E3666B8C1336E09)] | [removed: [28](#sC1992E9F731ECD4CD7E935E205C02735)] [added: [30](#sD8320BBDF76C5AA39E3666B8C1336E09)] |

| Item 4. | [Mine Safety [removed: Disclosures](#s73AF8C51D50237DBF75D35E205DB20CB)] [added: Disclosures](#s6F65896D50BF594FB8358B99F28F69AF)] | [removed: [28](#s73AF8C51D50237DBF75D35E205DB20CB)] [added: [30](#s6F65896D50BF594FB8358B99F28F69AF)] |

| Item 5. | [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#s5F4583A67D2FD84A8B2F35E1D2D7A2AF)] [added: Securities](#s00F49083ACA251E08D5AA07F227A4538)] | [removed: [28](#s5F4583A67D2FD84A8B2F35E1D2D7A2AF)] [added: [30](#s00F49083ACA251E08D5AA07F227A4538)] |

| Item 6. | [Selected Financial [removed: Data](#sE77E6494199CF2B2694335E1D0C34016)] [added: Data](#s3A9B7234C8FD5B24BA9A2B219D2BBC14)] | [removed: [32](#sE77E6494199CF2B2694335E1D0C34016)] [added: [34](#s3A9B7234C8FD5B24BA9A2B219D2BBC14)] |

| Item 7. | [Management's Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s25CD1916D58D017A72CA35E206A3EDDF)] [added: Operations](#sFC994E84361D54E0B80AB508B47AECEC)] | [removed: [36](#s25CD1916D58D017A72CA35E206A3EDDF)] [added: [38](#sFC994E84361D54E0B80AB508B47AECEC)] |

| Item 7A. | [Quantitative and Qualitative Disclosures About Market [removed: Risks](#s9217F69AB6281C795DB535E1D1154CDD)] [added: Risks](#sF4AD270A745B5F45963CF1376D0CEBE1)] | [removed: [47](#s9217F69AB6281C795DB535E1D1154CDD)] [added: [49](#sF4AD270A745B5F45963CF1376D0CEBE1)] |

| Item 8. | [Financial Statements and Supplementary [removed: Data](#sE049529F113AAD6570B735E207A707F9)] [added: Data](#s32B29CE1A7545B289E7974DEC4EDBB95)] | [removed: [49](#sE049529F113AAD6570B735E207A707F9)] [added: [50](#s32B29CE1A7545B289E7974DEC4EDBB95)] |

| Item 9. | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#s3E6B7C5A6E673D8CF48E35E207BB1447)] [added: Disclosure](#sC7D741F9A329516C9FC55070DC1F3BF1)] | [removed: [49](#s3E6B7C5A6E673D8CF48E35E207BB1447)] [added: [50](#sC7D741F9A329516C9FC55070DC1F3BF1)] |

| Item 9A. | [Controls and [removed: Procedures](#s25DA2C0DA934332EB8AB35E207D9F51A)] [added: Procedures](#s132FF528209458ECB81EE138C2254912)] | [removed: [49](#s25DA2C0DA934332EB8AB35E207D9F51A)] [added: [50](#s132FF528209458ECB81EE138C2254912)] |

| Item 9B. | [Other [removed: Information](#s7CD36F1FF6001620427435E207F6D0A1)] [added: Information](#sCD5CCB7BA1445B66BA95B8B90920EB1F)] | [removed: [50](#s7CD36F1FF6001620427435E207F6D0A1)] [added: [51](#sCD5CCB7BA1445B66BA95B8B90920EB1F)] |

| Item 10. | [Directors, Executive Officers and Corporate [removed: Governance](#s6C20CA6D33DE4076BCED35E2082138E2)] [added: Governance](#s5F069CAC6918596299E9C5993745A3FF)] | [removed: [50](#s6C20CA6D33DE4076BCED35E2082138E2)] [added: [51](#s5F069CAC6918596299E9C5993745A3FF)] |

| Item 11. | [Executive [removed: Compensation](#s0AB20CFFAD036695A1F035E2083BB0DE)] [added: Compensation](#s2D1C494A61A7559D97F64D76B321DCFB)] | [removed: [50](#s0AB20CFFAD036695A1F035E2083BB0DE)] [added: [51](#s2D1C494A61A7559D97F64D76B321DCFB)] |

| Item 12. | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#s21436F91D9F9A768591335E2086D0635)] [added: Matters](#s211D95EE07B157D084E677BFB19E6EF6)] | [removed: [50](#s21436F91D9F9A768591335E2086D0635)] [added: [51](#s211D95EE07B157D084E677BFB19E6EF6)] |

| Item 13. | [Certain Relationships and Related Transactions, and Director [removed: Independence](#s766388FC4F911371462235E20893F405)] [added: Independence](#s394A6021E009588D9B4BD8F23F3337DA)] | [removed: [50](#s766388FC4F911371462235E20893F405)] [added: [51](#s394A6021E009588D9B4BD8F23F3337DA)] |

| Item 14. | [Principal Accounting Fees and [removed: Services](#s4817952F03B7FF8D1F5235E208C1F9A1)] [added: Services](#s573C3A25FF8759CD81E68B521820DCB6)] | [removed: [50](#s4817952F03B7FF8D1F5235E208C1F9A1)] [added: [51](#s573C3A25FF8759CD81E68B521820DCB6)] |

| Item 15. | [Exhibits and Financial Statement [removed: Schedules](#s792BB40ECE5A506C2B9B35E209115877)] [added: Schedules](#s9B0CC40B902A58A586BDCD55B94D6860)] | [removed: [51](#s792BB40ECE5A506C2B9B35E209115877)] [added: [52](#s9B0CC40B902A58A586BDCD55B94D6860)] |

Certain factors that might cause such a difference are discussed in this report, including [removed: Item] in [added: Item] 1A, Risk Factors of this Form 10-K.

10-K 1 ess-123115x10k.htm 10-K

1100 Park Place, Suite 200

San Mateo, California 94403

(650) 655-7800

| [Signatures](#s5B0AD76C76435AEA9780EEBE7FC4C58E) | | [S-1](#s5B0AD76C76435AEA9780EEBE7FC4C58E) |

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

925 East Meadow Drive

Palo Alto, California 94303

(650) 494-3700

| [Signatures](#s176F8DE4FBD2F2EB68AA35E216355C88) | | [S-1](#s176F8DE4FBD2F2EB68AA35E216355C88) |

The Company’s [removed: Portfolio] [added: portfolio] as of December 31, [removed: 2014] [added: 2015] (including communities owned by unconsolidated joint ventures, but excluding communities underlying preferred equity investments) was comprised of [removed: 239] [added: 246] apartment communities (comprising [removed: 57,455] [added: 59,160] apartment [removed: units),] [added: homes),] of which [removed: 27,125 units] [added: 28,039 apartment homes] are located in Southern California, [removed: 17,604 units] [added: 18,924 apartment homes] are located in the San Francisco Bay Area, and [removed: 12,174 units] [added: 12,197 apartment homes] are located in the Seattle metropolitan area.

The Company’s apartment communities accounted for [removed: 99.0%] [added: 99.3%] of the Company’s revenues for the year ended December 31, [removed: 2014.][added: 2015.]

Financial occupancy is defined as the percentage resulting from dividing actual rental revenue by total [removed: possible] [added: potential] rental [removed: revenue.][added: revenue (actual rental revenue for occupied apartment homes plus market rent for vacant apartment homes).]

When calculating actual rents for occupied [removed: units] [added: apartment homes] and market rents for vacant [removed: units,] [added: apartment homes,] delinquencies and concessions are not taken into account.

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

Financial occupancy may not completely reflect short-term trends in physical occupancy and financial occupancy rates [removed: as disclosed by other REITs] [added: and the Company's calculation of financial occupancy] may not be comparable to [removed: the Company’s calculation of] financial [removed: occupancy.][added: occupancy as disclosed by other REITs.]

The recently signed effective rates at the property are used as the starting point in the determination of the market rates of vacant [removed: units.][added: apartment homes.]

As of December 31, [removed: 2014,] [added: 2015,] the Company’s communities include [removed: 163] [added: 162] garden-style, [removed: 72] [added: 78] mid-rise, and [removed: 4] [added: 6] high-rise communities.

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

The Company’s [added: former] corporate headquarters [removed: is] [added: was] located in two office buildings with approximately 39,600 square feet located at 925/935 East Meadow Drive, Palo Alto, [removed: California.][added: California and was classified as held for sale at December 31, 2015.]

The Company owns an office building with approximately [removed: 107,720] [added: 106,564] square feet located in Irvine, California, of which the Company occupies approximately [removed: 5,000] [added: 8,000] square feet at December 31, [removed: 2014.][added: 2015.]

The following tables describe the Company’s operating portfolio as of December 31, [removed: 2014.][added: 2015.]

(See Note [removed: 7] [added: 8] of the Company’s consolidated financial statements for more information about the Company’s secured mortgage debt and Schedule III for a list of secured mortgage loans related to the Company’s [removed: Portfolio.)][added: portfolio.)]

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

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

| Barkley, The (3)(4) | | Anaheim, CA | | 161 | | | 139,800 | | | 1984 | | 2000 | | [removed: 97%] [added: 98%] |

| Enclave at Town Square [removed: (34)] [added: (21)] | | Chino Hills, CA | | 124 | | | 89,948 | | | 1987 | | 2014 | | 97% |

| The Heights I & II [removed: (34)] [added: (21)] | | Chino Hills, CA | | 332 | | | 324,370 | | | 2004 | | 2014 | | 96% |

| The Summit (5) | | Chino Hills, CA | | 125 | | | 98,420 | | | 1989 | | 2014 | | [removed: 96%] [added: 98%] |

| Mesa Village | | Clairemont, CA | | 133 | | | 43,600 | | | 1963 | | 2002 | | [removed: 97%] [added: 98%] |

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

| The Havens [removed: (34)] [added: (21)] | | Fountain Valley, CA | | 440 | | | 414,040 | | | 1969 | | 2014 | | 96% |

| Valley Park [added: (4)] | | Fountain Valley, CA | | 160 | | | 169,700 | | | 1969 | | 2001 | | [removed: 98%] [added: 97%] |

| 416 on Broadway | | Glendale, CA | | 115 | | | 126,782 | | | 2009 | | 2010 | | [removed: 97%] [added: 96%] |

| Hampton Court | | Glendale, CA | | 83 | | | 71,500 | | | 1974 | | 1999 | | [removed: 95%] [added: 93%] |

| Hampton Place | | Glendale, CA | | 132 | | | 141,500 | | | 1970 | | 1999 | | [removed: 95%] [added: 93%] |

| Jefferson at Hollywood | | [removed: Hollywood,] [added: Los Angeles,] CA | | 270 | | | 238,119 | | | 2010 | | 2014 | | 94% |

| Huntington Breakers | | Huntington Beach, CA | | 342 | | | 241,700 | | | 1984 | | 1997 | | [removed: 94%] [added: 95%] |

| Axis 2300 | | Irvine, CA | | 115 | | | 170,714 | | | 2010 | | 2010 | | [removed: 95%] [added: 97%] |

| Village Green | | La Habra, CA | | 272 | | | 175,762 | | | 1971 | | 2014 | | [removed: 96%] [added: 97%] |

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

| Pathways | | Long Beach, CA | | 296 | | | 197,700 | | | 1975 [removed: (7)] | | 1991 | | 96% |

| 5600 Wilshire | | Los Angeles, CA | | 284 | | | 243,910 | | | 2008 | | 2014 | | [removed: 95%] [added: 96%] |

| The Avery (4) | | Los Angeles, CA | | 121 | | | 129,393 | | | 2014 | | 2014 | | [removed: 73%] [added: 97%] |

| Belmont Station | | Los Angeles, CA | | 275 | | | 225,000 | | | [removed: 2008] [added: 2009] | | [removed: 2008] [added: 2009] | | 97% |

| Bunker Hill | | Los Angeles, CA | | 456 | | | 346,600 | | | 1968 | | 1998 | | [removed: 92%] [added: 88%] |

| Kings Road | | Los Angeles, CA | | 196 | | | 132,100 | | | 1979 | | 1997 | | [removed: 95%] [added: 96%] |

| Gas Company Lofts (5) | | Los Angeles, CA | | 251 | | | 226,666 | | | 2004 | | 2013 | | [removed: 96%] [added: 97%] |

| [removed: Marbella, The] [added: Marbella] | | Los Angeles, CA | | 60 | | | 50,108 | | | 1991 | | 2005 | | 97% |

| Wilshire La Brea | | Los Angeles, CA | | 478 | | | 354,972 | | | 2014 | | 2014 | | [removed: 65%] [added: 95%] |

| | | | | Apartment | | | Rentable | | | Year | | Year | | |

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

| 8th & Hope | | Los Angeles, CA | | 290 | | | 298,437 | | | 2014 | | 2015 | | 79% |

| Avant | | Los Angeles, CA | | 440 | | | 305,989 | | | 2014 | | 2015 | | 95% |

| | | | | Apartment | | | Rentable | | | Year | | Year | | |

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

| | | | | Apartment | | | Rentable | | | Year | | Year | | |

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

| The Dylan | | West Hollywood, CA | | 184 | | | 150,678 | | | 2014 | | 2014 | | 92% |

| | | | | 28,039 | | | 24,850,294 | | | | | | | 96% |

| Emme (23) | | Emeryville, CA | | 190 | | | 148,935 | | | 2015 | | 2015 | | 81% |

| | | | | Apartment | | | Rentable | | | Year | | Year | | |

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

| Radius | | Redwood City, CA | | 264 | | | 245,862 | | | 2015 | | 2015 | | 94% |

| MB 360 Phase I | | San Francisco, CA | | 188 | | | 222,810 | | | 2014 | | 2014 | | 96% |

| Mosso (23) | | San Francisco, CA | | 463 | | | 607,549 | | | 2014 | | 2014 | | 87% |

| Enso | | San Jose, CA | | 183 | | | 179,562 | | | 2014 | | 2015 | | 100% |

| One South Market (23) | | San Jose, CA | | 312 | | | 283,268 | | | 2015 | | 2015 | | 46% |

| Park 20 (23) | | San Mateo, CA | | 197 | | | 140,547 | | | 2015 | | 2015 | | 79% |

| | | | | Apartment | | | Rentable | | | Year | | Year | | |

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

| | | | | 18,924 | | | 17,173,129 | | | | | | | 95% |

| | | | | Apartment | | | Rentable | | | Year | | Year | | |

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

| | | | | 12,197 | | | 10,503,985 | | | | | | | 96% |

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

| Derian Office Building (20) | | Irvine, CA | | 8 | | 106,564 | | | 1983 | | 2000 | | 100% |

| | | | | 12 | | 319,079 | | | | | | | 88% |

| (18) | This property was the Company's previous headquarters until December 2015 and was unoccupied at December 31, 2015. |

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

| | |

| --- | --- |

| | | | | 27,125 | | | 24,095,190 | | | | | | | 95% |

| Sharon Green | | Menlo Park, CA | | 296 | | | 328,024 | | | 1970 | | 2014 | | 95% |

| Mosso I | | San Francisco, CA | | 181 | | | 223,222 | | | 2014 | | 2014 | | 32% |

| | | | | 17,604 | | | 15,895,842 | | | | | | | 95% |

| | | | | 12,174 | | | 10,508,726 | | | | | | | 96% |

| Pinnacle South Mountain (36) | | Phoenix, AZ | | 552 | | | 569,876 | | | 1988 | | 2014 | | 94% |

| 17461 Derian Ave (33) | | Irvine, CA | | 8 | | 107,720 | | | 1983 | | 2000 | | 98% |

| | | | | 13 | | 320,235 | | | | | | | 99% |

| (7) | The Company completed a $10.8 million redevelopment in 2009. |

| (10) | The Company completed a $16.6 million redevelopment in 2010. |

| (11) | The Company is in the late phases of performing a $13.0 million redevelopment. |

| (15) | The Company completed a $12.0 million redevelopment in 2008. |

| (17) | The Company is in the process of performing a $10.0 million redevelopment. |

| (18) | The Company completed an $8.9 million redevelopment in 2008. |

| (19) | The Company completed a $9.4 million redevelopment in 2009. |

| (20) | The Company completed a $4.6 million redevelopment in 2009. |

| (23) | The Company is in the process of performing a $14.1 million redevelopment. |

| (25) | The Company completed a $12.5 million redevelopment in 2009. |

| (26) | The Company completed a $36.3 million redevelopment in 2012, which included the construction of 28 in-fill units in 2009. |

| (27) | The Company completed the construction of 66 additional apartment homes in 2012 and is in the process of performing a redevelopment for a total cost of $15.4 million. |

| (28) | The Company completed a $5.1 million redevelopment and completed construction of 16 units of the community’s 108 units in 2006. |

| (33) | The Company occupies 5% of space in this property. |

| December 31, 2014 | | $ | [removed: 211.91] [added: 214.43] | | | $ | [removed: 206.35] [added: 176.70] | | | $ | 206.60 | |

| September 30, 2014 | | $ | [removed: 180.65] [added: 196.08] | | | $ | [removed: 178.27] [added: 177.68] | | | $ | 178.75 | |

| June 30, 2014 | | $ | [removed: 185.66] [added: 185.99] | | | $ | [removed: 183.36] [added: 164.76] | | | $ | 184.91 | |

| March 31, 2014 | | $ | [removed: 171.70] [added: 173.01] | | | $ | [removed: 166.95] [added: 141.79] | | | $ | 170.05 | |

The closing price of ESS stock as of February [removed: 24, 2015] [added: 22, 2016] was [removed: $223.17.][added: $209.53.]

The approximate number of holders of record of the shares of ESS common stock was [removed: 1,551] [added: 1,395] as of February [removed: 24, 2015.][added: 22, 2016.]

As of February [removed: 24, 2015,] [added: 22, 2016,] there were [removed: 174] [added: 172] 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: 2015,] 2014, [removed: 2013,] and [removed: 2012] [added: 2013] related to common stock, and Series [removed: F,] G and H preferred stock for tax purposes are as follows:

| | | [removed: 2014] [added: 2015] | | | [removed: 2013] [added: 2014] | | | [removed: 2012] [added: 2013] | |

| Ordinary income | | [removed: 70.03] [added: 99.28] | % | | [removed: 77.34] [added: 70.03] | % | | [removed: 70.58] [added: 77.34] | % |

| Capital gain | | [removed: 21.95] [added: 0.72] | % | | [removed: 17.64] [added: 21.95] | % | | [removed: 8.75] [added: 17.64] | % |

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

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

| Ordinary income | | [removed: 70.03] [added: 99.28] | % | | [removed: 77.34] [added: 70.03] | % | | [removed: 80.85] [added: 77.34] | % |

| Capital gains | | [removed: 21.95] [added: 0.72] | % | | [removed: 17.64] [added: 21.95] | % | | [removed: 10.02] [added: 17.64] | % |

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

| Year Ended | | Annual Dividend/Distribution | | | | Quarter Ended | | [removed: 2014] [added: 2015] | | [removed: 2013] [added: 2014] | | [removed: 2012] [added: 2013] |

| 1995 | | $ | 1.69 | | | March 31, | | [removed: $1.21] [added: $1.44] | | $1.21 | | [removed: $1.10] [added: $1.21] |

| 1996 | | $ | 1.72 | | | June 30, | | [removed: $1.30] [added: $1.44] | | [removed: $1.21] [added: $1.30] | | [removed: $1.10] [added: $1.21] |

| 1997 | | $ | 1.77 | | | September 30, | | [removed: $1.30] [added: $1.44] | | [removed: $1.21] [added: $1.30] | | [removed: $1.10] [added: $1.21] |

| 1998 | | $ | 1.95 | | | December 31, | | [removed: $1.30] [added: $1.44] | | [removed: $1.21] [added: $1.30] | | [removed: $1.10] [added: $1.21] |

| 2000 | | $ | 2.38 | | | Annual Dividend/Distribution | | [removed: $5.11] [added: $5.76] | | [removed: $4.84] [added: $5.11] | | [removed: $4.40] [added: $4.84] |

The Board of Directors has declared a dividend/distribution for the first quarter of [removed: 2015] [added: 2016] of [removed: $1.44] [added: $1.60] per share.

The dividend/distribution will be payable on April 15, [removed: 2015] [added: 2016] to shareholders/unitholders of record as of March 31, [removed: 2015.][added: 2016.]

See the Company’s disclosure in the [removed: 2015] [added: 2016] Proxy Statement under the heading “Equity Compensation Plan Information”, which disclosure is incorporated herein by reference.

During [removed: 2014,] [added: 2015,] ESS sold [removed: 2,964,315] [added: 1,481,737] shares of common stock for proceeds of [removed: $534.0] [added: $332.3] million, net of commissions, at an average price of [removed: $181.56.][added: $226.46.]

[removed: These] [added: Common stock] sales were [added: made] pursuant to a registration statement and ESS used the net proceeds from the stock offerings to pay down debt, fund redevelopment and development pipelines, fund acquisitions, and for general corporate purposes.

Issuer Purchases of Equity Securities [removed: – Common Stock, Series G Cumulative Convertible Preferred Stock]

In [removed: August 2007,] [added: December 2015,] ESS Board of Directors authorized a stock repurchase plan to allow ESS to acquire shares in an aggregate of up to [removed: $200] [added: $250] million.

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

This comparison assumes that the value of the investment in the common stock and each index was $100 on December 31, [removed: 2009] [added: 2010] and that all dividends were reinvested (1).

[removed: ][added: ]

| Index | | [removed: 12/31/2009 | | |] 12/31/2010 | | | 12/31/2011 | | | 12/31/2012 | | | 12/31/2013 | | | 12/31/2014 | | [added: | 12/31/2015 | |]

[added: |] (1) [added: |] Common stock performance data is provided by SNL Financial. [added: |]

During the years ended December 31, [removed: 2014] [added: 2015] and [removed: 2013,] [added: 2014,] 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:

During the year ended December 31, [removed: 2014] [added: 2015] and [removed: 2013, Essex Property Trust, Inc.] [added: 2014, ESS] issued an aggregate of [removed: 185,387] [added: 203,556] and [removed: 52,970] [added: 185,387] shares of its common stock upon the exercise of stock options, respectively.

[removed: Essex Property Trust, Inc.] [added: ESS] contributed the proceeds from the option exercises of [removed: $11.0] [added: $26.5] million and [removed: $5.0] [added: $11.0] million to our Operating Partnership in exchange for an aggregate of [removed: 185,387] [added: 203,556] and [removed: 52,970] [added: 185,387] common OP Units, as required by the Operating Partnership’s partnership agreement, respectively.

During the year ended December 31, [removed: 2014] [added: 2015] and [removed: 2013, Essex Property Trust, Inc.] [added: 2014, ESS] issued an aggregate of [removed: 126,931] [added: 22,939] and [removed: 7,211] [added: 126,931] shares of its common stock in connection with restricted stock awards for no cash consideration, respectively.

[removed: For each share of common stock issued] by [removed: Essex Property Trust, Inc.] [added: ESS] in connection with such awards, our [removed: operating partnership] [added: Operating Partnership] issued [removed: a] common [removed: unit] [added: OP units] to [removed: Essex Property Trust, Inc.] [added: ESS] as required by the partnership agreement, for an aggregate of [removed: 126,931] [added: 22,939] and [removed: 7,211] [added: 126,931] units during the year ended December 31, [removed: 2014] [added: 2015] and [removed: 2013,] [added: 2014,] respectively.

During the years ended December 31, [removed: 2014] [added: 2015] and [removed: 2013, Essex Property Trust, Inc.] [added: 2014, ESS] issued and sold an aggregate of [removed: 2,964,315] [added: 1,481,737] and [removed: 913,344] [added: 2,964,315] shares of its common stock, respectively, pursuant to a registration statement and its equity distribution program.

| December 31, 2015 | | $ | 244.71 | | | $ | 214.29 | | | $ | 239.41 | |

| September 30, 2015 | | $ | 232.20 | | | $ | 205.72 | | | $ | 223.42 | |

| June 30, 2015 | | $ | 231.90 | | | $ | 208.85 | | | $ | 212.50 | |

| March 31, 2015 | | $ | 243.17 | | | $ | 207.26 | | | $ | 229.90 | |

| | | 2015 | | | 2014 | | | 2013 | |

| 2012 | | $ | 4.40 | | | | | | | | | |

During the first quarter of 2016 through February 22, 2016, ESS has not issued any shares of common stock.

The program supersedes the common stock repurchase plan that Essex announced on August 30, 2007.

| Essex Property Trust, Inc. | | 100.00 | | | 127.06 | | | 136.59 | | | 138.04 | | | 204.30 | | | 242.85 | |

| NAREIT All Equity REIT Index | | 100.00 | | | 108.28 | | | 129.62 | | | 133.32 | | | 170.68 | | | 175.51 | |

| S&P 500 | | 100.00 | | | 102.11 | | | 118.45 | | | 156.82 | | | 178.28 | | | 180.75 | |

| | |

| --- | --- |

For each share of common stock issued

| December 31, 2013 | | $ | 165.44 | | | $ | 137.53 | | | $ | 143.51 | |

| September 30, 2013 | | $ | 172.16 | | | $ | 139.64 | | | $ | 147.70 | |

| June 30, 2013 | | $ | 171.11 | | | $ | 147.56 | | | $ | 158.92 | |

| March 31, 2013 | | $ | 156.36 | | | $ | 147.06 | | | $ | 150.58 | |

| Return of capital | | — | % | | — | % | | 12.70 | % |

Future distributions by Essex Portfolio, L.P., will be at the discretion of the Board of Directors of Essex Portfolio, L.P.’s general partner, Essex Property Trust, Inc. and will depend on our actual cash flows from operations, our financial condition, capital requirements, Essex Property Trust, Inc.’s annual distribution requirements under the REIT provisions of the Internal Revenue Code, applicable legal restrictions and such other factors as the Board of Directors deem relevant.

There are currently no contractual restrictions on Essex Portfolio, L.P.’s present or future ability to pay distributions.

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.

During the first quarter of 2015 through February 24, 2015, ESS has issued 636,021 shares of common stock at an average price of $224.76 for proceeds of $142.0 million, net of fees and commissions.

ESS did not repurchase any shares during 2014, 2013 and 2012.

| 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 | |

On December 10, 2014, Essex Portfolio, L.P. issued 68,750 units under the 2015 Long-Term Incentive Plan Award agreements to eighteen senior executives of the Company for no cash consideration.

The following tables set forth summary financial and operating information for the [removed: Company] [added: ESS] and the Operating Partnership from January 1, [removed: 2010] [added: 2011] through December 31, [removed: 2014.][added: 2015.]

| | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | | | [removed: 2011] [added: 2012] | | | | [removed: 2010] [added: 2011] | | |

| OPERATING [removed: DATA:] [added: DATA:(1)] | | | | | | | | | | | | | | | | | | | | |

| Management and other fees from [removed: affiliates(1)] [added: affiliates] | | [removed: 9,347] [added: 8,909] | | | | [removed: 7,263] [added: 9,347] | | | | [removed: 8,457] [added: 7,263] | | | | [removed: 5,428] [added: 8,457] | | | | [removed: 3,836] [added: 5,428] | | |

| Income before discontinued operations | | $ | [removed: 134,438] [added: 248,239] | | | $ | [removed: 140,882] [added: 134,438] | | | $ | [removed: 127,653] [added: 140,882] | | | $ | [removed: 46,958] [added: 127,653] | | | $ | [removed: 47,424] [added: 46,958] | |

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

| Net income | | [removed: 134,438] [added: 248,239] | | | | [removed: 172,055] [added: 134,438] | | | | [removed: 139,590] [added: 172,055] | | | | [removed: 57,516] [added: 139,590] | | | | [removed: 50,782] [added: 57,516] | | |

| Net income available to common stockholders | | $ | [removed: 116,859] [added: 226,865] | | | $ | [removed: 150,811] [added: 116,859] | | | $ | [removed: 119,812] [added: 150,811] | | | $ | [removed: 40,368] [added: 119,812] | | | $ | [removed: 33,764] [added: 40,368] | |

| Income before discontinued operations available to common stockholders | | $ | [removed: 2.07] [added: 3.50] | | | $ | [removed: 3.26] [added: 2.07] | | | $ | [removed: 3.10] [added: 3.26] | | | $ | [removed: 0.94] [added: 3.10] | | | $ | [removed: 1.03] [added: 0.94] | |

| Net income available to common stockholders | | $ | [removed: 2.07] [added: 3.50] | | | $ | [removed: 4.05] [added: 2.07] | | | $ | [removed: 3.42] [added: 4.05] | | | $ | [removed: 1.24] [added: 3.42] | | | $ | [removed: 1.14] [added: 1.24] | |

| Weighted average common stock outstanding | | [removed: 56,547] [added: 64,872] | | | | [removed: 37,249] [added: 56,547] | | | | [removed: 35,032] [added: 37,249] | | | | [removed: 32,542] [added: 35,032] | | | | [removed: 29,667] [added: 32,542] | | |

| Income before discontinued operations available to common stockholders | | $ | [removed: 2.06] [added: 3.49] | | | $ | [removed: 3.25] [added: 2.06] | | | $ | [removed: 3.09] [added: 3.25] | | | $ | [removed: 0.94] [added: 3.09] | | | $ | [removed: 1.03] [added: 0.94] | |

| Net income available to common stockholders | | $ | [removed: 2.06] [added: 3.49] | | | $ | [removed: 4.04] [added: 2.06] | | | $ | [removed: 3.41] [added: 4.04] | | | $ | [removed: 1.24] [added: 3.41] | | | $ | [removed: 1.14] [added: 1.24] | |

| Weighted average common stock outstanding | | [removed: 56,697] [added: 65,062] | | | | [removed: 37,335] [added: 56,697] | | | | [removed: 35,125] [added: 37,335] | | | | [removed: 32,629] [added: 35,125] | | | | [removed: 29,734] [added: 32,629] | | |

| Cash dividend per common share | | $ | [removed: 5.11] [added: 5.76] | | | $ | [removed: 4.84] [added: 5.11] | | | $ | [removed: 4.40] [added: 4.84] | | | $ | [removed: 4.16] [added: 4.40] | | | $ | [removed: 4.13] [added: 4.16] | |

| BALANCE SHEET [removed: DATA:] [added: DATA:(1)] | | | | | | | | | | | | | | | | | | | | |

| Investment in rental properties (before accumulated depreciation) | | $ | [removed: 11,252,511] [added: 12,331,469] | | | $ | [removed: 5,443,757] [added: 11,244,681] | | | $ | [removed: 5,033,672] [added: 5,443,757] | | | $ | [removed: 4,313,064] [added: 5,033,672] | | | $ | [removed: 3,964,561] [added: 4,313,064] | |

| Net investment in rental properties | | [removed: 9,687,705] [added: 10,381,577] | | | | [removed: 4,188,871] [added: 9,679,875] | | | | [removed: 3,952,155] [added: 4,188,871] | | | | [removed: 3,393,038] [added: 3,952,155] | | | | [removed: 3,189,008] [added: 3,393,038] | | |

| Real estate under development | | [removed: 434,371] [added: 242,326] | | | | [removed: 50,430] [added: 429,096] | | | | [removed: 66,851] [added: 50,430] | | | | [removed: 44,280] [added: 66,851] | | | | [removed: 217,531] [added: 44,280] | | |

| Co-investments | | [removed: 1,036,411] [added: 1,036,047] | | | | [removed: 677,133] [added: 1,042,423] | | | | [removed: 571,345] [added: 677,133] | | | | [removed: 383,412] [added: 571,345] | | | | [removed: 107,840] [added: 383,412] | | |

| Redeemable noncontrolling interest | | [removed: 23,256] [added: 45,452] | | | | [removed: —] [added: 23,256] | | | | — | | | | — | | | | — | | |

| Cumulative convertible preferred stock | | — | | | | [removed: 4,349] [added: —] | | | | 4,349 | | | | 4,349 | | | | 4,349 | | |

| Cumulative redeemable preferred stock | | 73,750 | | | | 73,750 | | | | 73,750 | | | | 73,750 | | | | [removed: 25,000] [added: 73,750] | | |

| Stockholders' equity | | [removed: 6,022,672] [added: 6,237,733] | | | | [removed: 1,884,619] [added: 6,022,672] | | | | [removed: 1,764,804] [added: 1,884,619] | | | | [removed: 1,437,527] [added: 1,764,804] | | | | [removed: 1,149,946] [added: 1,437,527] | | |

| Funds from operations [removed: (FFO)(1):] [added: (FFO)(1) attributable to common stockholders and unitholders:] | | | | | | | | | | | | | | | | | | | | |

| Depreciation and amortization | | [removed: 360,592] [added: 453,423] | | | | [removed: 193,518] [added: 360,592] | | | | [removed: 170,686] [added: 193,518] | | | | [removed: 152,543] [added: 170,686] | | | | [removed: 129,711] [added: 152,543] | | |

| Gains not included in [removed: FFO, net of internal disposition costs] [added: FFO attributable to common stockholders and unitholders] | | [removed: (50,064] [added: (81,347] | | ) | | [removed: (67,975] [added: (50,064] | | ) | | [removed: (60,842] [added: (67,975] | | ) | | [removed: (7,543] [added: (60,842] | | ) | | [removed: —] [added: (7,543] | | [added: )] |

| Funds from operations [added: attributable to common stockholders and unitholders] | | $ | [removed: 464,942] [added: 654,059] | | | $ | [removed: 299,731] [added: 464,942] | | | $ | [removed: 250,850] [added: 299,731] | | | $ | [removed: 200,172] [added: 250,850] | | | $ | [removed: 171,368] [added: 200,172] | |