Essex Property Trust (ESS) 10-K risk factor changes: FY2019 vs FY2018

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

[removed: General] [added: General] real estate investment risks may adversely affect property income and [removed: values.][added: values. Real estate investments are subject to a variety of risks.]

| • | changes in the general [removed: economic] or local [added: economic] climate, including layoffs, plant closings, industry slowdowns, relocations of significant local employers and other events negatively impacting local employment rates and wages and the local economy; |

[removed: Short-term] [added: Short-term] leases expose us to the effects of declining market rents, and the Company may be unable to renew leases or relet units as leases [removed: expire.][added: expire. Substantially all of our apartment leases are for a term of one year or less.]

[removed: National] [added: National] and regional economic environments can negatively impact the Company’s liquidity and operating [removed: results.][added: results. The Company's forecast for the national economy assumes growth of the gross domestic product of the national economy and the economies of the west coast states.]

[added: Rent control, or other changes in applicable laws, or noncompliance with applicable laws, could adversely affect the Company's operations or expose us to liability.] The Company must own, operate, manage, acquire, develop and redevelop its properties in compliance with numerous federal, state and local laws and regulations, some of which may conflict with one another or be subject to limited judicial or regulatory interpretations.

If the Company does not comply with any or all of these requirements, it may have to pay fines to government authorities or damage awards to private [removed: litigants.][added: litigants, and/or may have to decrease rents in order to comply with such requirements.]

[removed: Acquisitions] [added: Acquisitions] of communities involve various risks and uncertainties and may fail to meet [removed: expectations.][added: expectations. The Company intends to continue to acquire apartment communities.]

[added: Development and redevelopment activities may be delayed, not completed, and/or not achieve expected results.] The Company pursues development and redevelopment projects and these projects generally require various governmental and other approvals, which have no assurance of being received and/or the timing of which may be delayed from the Company’s expectations.

As of December 31, [removed: 2018,] [added: 2019,] the Company had [removed: four] [added: five] consolidated development projects and two [added: unconsolidated] joint venture development projects comprised of [removed: 1,861] [added: 1,960] apartment homes for an estimated cost of [removed: $1.2] [added: $1.3] billion, of which [removed: $417.0] [added: $222.0] million remains to be expended, and [removed: $310.0] [added: $193.0] million is the Company's share.

In addition, at December 31, [removed: 2018,] [added: 2019,] the Company had ownership interests in [removed: five] [added: four] major redevelopment projects aggregating [removed: 1,727] [added: 1,327] apartment homes with estimated redevelopment costs of [removed: $140.1] [added: $132.7] million, of which approximately [removed: $27.8] [added: $14.9] million remains to be expended.

These risks may reduce the funds available for distribution to [removed: the] Essex’s stockholders and the Operating Partnership's unitholders.

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

[removed: Investments] [added: Investments] in mortgages, mezzanine loans, subordinated debt, other real estate, and other marketable securities could adversely affect the Company’s cash flow from [removed: operations.][added: operations. The Company may purchase or otherwise invest in securities issued by entities which own real estate and/or invest in mortgages or unsecured debt obligations.]

[removed: Our] [added: Our] apartment communities may be subject to unknown or contingent liabilities which could cause us to incur substantial [removed: costs.][added: 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.]

[added: The geographic concentration of the Company’s communities and fluctuations in local markets may adversely impact the Company’s financial condition and operating results.] The Company generated significant amounts of rental revenues for the year ended December 31, [removed: 2018,] [added: 2019,] from the Company’s communities concentrated in Southern California [removed: (Los] [added: (primarily 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: 2018, 83%] [added: 2019, 82%] of the Company’s rental revenues were generated from communities located in California.

This geographic concentration could present risks if local property market performance falls [added: below expectations.]

Any adverse developments in the economy or real estate markets in California or Washington, or any decrease in demand for the Company’s communities resulting from the California [removed: or Washington regulatory or business environments, could have an adverse effect on the Company’s business and results of operations.]

[removed: The] [added: The] Company may experience various increased costs, including increased property taxes, to own and maintain its [removed: properties.][added: properties. Real property taxes on our properties may increase as our properties are reassessed by taxing authorities or as property tax rates change.]

[removed: Thus, our] [added: Our] real estate taxes in [removed: the State of] Washington could increase as a result of property value reassessments or increased property tax rates in that state.

[removed: Competition] [added: Competition] in the apartment community market and other housing alternatives may adversely affect operations and the rental demand for the Company’s [removed: communities.][added: communities. There are numerous housing alternatives that compete with the Company’s communities in attracting tenants.]

Competitive housing in a particular area and [removed: the increasing affordability] [added: fluctuations in cost] of owner-occupied single- and multifamily homes caused by [removed: lower] [added: a decrease in] housing prices, mortgage interest rates [removed: and] [added: and/or] government programs to promote home ownership or create additional rental and/or other types of housing, could adversely affect the Company’s ability to retain its tenants, lease apartment homes and increase or maintain rents.

[removed: The Company’s ownership of co-investments, including joint ventures and joint ownership of communities, its ownership of properties with shared facilities with a homeowners' association or other entity, its ownership of properties subject to a ground] [added: ground] lease and its preferred equity investments and its other partial interests in entities that own communities, could limit the Company’s ability to control such communities and may restrict our ability to finance, sell or otherwise transfer our interests in these properties and expose us to loss of the properties if such agreements are breached by us or [removed: terminated.][added: terminated.]

The Company has entered into, and may continue in the future to enter [removed: into] [added: into,] certain co-investments, including joint ventures or partnerships through which it owns an indirect economic interest in less than 100% of the community or land or other investments owned directly by the joint venture or partnership.

As of December 31, [removed: 2018,] [added: 2019,] the Company had, through several joint ventures, an interest in [removed: 10,613] [added: 10,672] apartment homes in [added: stabilized] operating communities for a total book value of [removed: $833.3] [added: $743.5] million.

In some instances, the Company and the joint venture partner may each have the right to trigger a buy-sell arrangement, which could cause the Company to sell its interest, or acquire a partner’s interest, at a time when the Company otherwise would [removed: have] not have initiated such a transaction.

[removed: For example, the] [added: The] Company [removed: has made] [added: makes certain] co-investments in the form of preferred equity investments in third party entities that own real [removed: estate and may continue in the future to make such preferred equity or other co-investments.][added: estate.]

In the event that such co-investment [removed: becomes] [added: or the partners in such co-investment become] insolvent or [removed: fails] [added: bankrupt or fail] to develop or operate the property in the manner anticipated and expected, the Operating Partnership may not receive the expected return in its expected timeframe or at all and may lose up to its entire investment in, and any advances to, the co-investment.

The Company has entered into, and in the future may enter into, transactions that could require the Company to pay the tax liabilities of [removed: partners, which] [added: partners that] contribute assets into DownREITs, joint ventures or the Operating Partnership, in the event that certain taxable events, which are within the Company’s control, occur.

[removed: We] [added: We] may pursue acquisitions of other REITs and real estate companies, which may not yield anticipated results and could adversely affect our results of [removed: operations.][added: operations. We may make acquisitions of and/or investments in other REITs and real estate companies that offer properties and communities to augment our market coverage or enhance our property offerings.]

There can be no assurance that we will be able to identify suitable acquisition, investment, [removed: alliance,] [added: alliance] or joint venture opportunities, that we will be able to consummate any such transactions or relationships on terms and conditions acceptable to us, or that such transactions or relationships will be [added: successful.]

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, could be dilutive to Essex's [removed: existing] stockholders and the Operating Partnership's unitholders.

These and other factors could [removed: harm] [added: affect] our ability to achieve anticipated levels of profitability at acquired operations or realize other anticipated benefits of an acquisition, and could adversely affect our business, financial condition and results of operations.

[removed: Real] [added: Real] estate investments are relatively illiquid and, therefore, the Company's ability to vary its portfolio promptly in response to changes in economic or other conditions may be [removed: limited.][added: limited. Real estate investments are illiquid and in our markets can at times be difficult to sell at prices we find acceptable.]

We may be unable to consummate [removed: such] dispositions [added: of properties or interests] in [added: properties in] a timely manner, on attractive terms, or at all.

In addition, if we are found to have held, acquired or developed a community as inventory or primarily for sale to customers in the ordinary course of business, 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 [removed: real estate investment trust ("REIT")] [added: REIT] unless we own the community through one of our taxable REIT subsidiaries ("TRSs").

[removed: Compliance] [added: Compliance] with laws benefiting disabled persons may require the Company to make significant unanticipated expenditures or impact the Company’s investment [removed: strategy.][added: strategy. Under the Disabilities Act, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons.]

[removed: The] [added: The] Company may not be able to lease its retail/commercial space consistent with its projections or at market [removed: rates.][added: rates. The Company has retail/commercial space in its portfolio, which represents approximately 2% of our total revenue.]

The retail/commercial space at our properties, among other things, [removed: serve] [added: serves] as [added: an] additional amenity for our tenants.

| • | the attractiveness and desirability of our communities to tenants, including, without limitation, our technology offerings and our ability to identify and cost effectively implement new, relevant technologies, and to keep up with constantly changing consumer demand for the latest innovations; |

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or Washington regulatory or business environments, could have an adverse effect on the Company’s business and results of operations.

The Company’s ownership of co-investments, including joint ventures and joint ownership of communities, its ownership of properties with shared facilities with a homeowners' association or other entity, its ownership of properties subject to a

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Additionally, the preferred return negotiated on these co-investments may be lower than the Company's cost of funds.

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Additionally, the value of these investments could decline for a variety of reasons.

We 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 impacts resulting from such releases.

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condition or results of operations, potential future costs and damage claims may be substantial and could exceed any insurance coverage we may have for such events or such coverage may not exist.

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Uncertainty relating to the LIBOR calculation process and potential phasing out of LIBOR after 2021 may materially adversely affect us. The interest rate on certain of the Company’s secured and unsecured debt obligations, including the Company’s two unsecured lines of credit, is based on the LIBOR.

In July 2017, the United Kingdom regulator that regulates LIBOR announced its intention to phase out LIBOR rates by the end of 2021.

Furthermore, in the United States, the Alternative Reference Rates Committee of the Federal Reserve Board has proposed replacing U.S. dollar LIBOR with a new index calculated by short-term repurchase agreements - the Secured Overnight Financing Rate (SOFR).

At this time, no consensus exists as to what rate or rates may become accepted alternatives to LIBOR, and it is impossible to predict whether and to what extent banks will continue to provide LIBOR submissions to the administrator of LIBOR, whether LIBOR rates will cease to be published or supported before or after 2021 or whether any additional reforms to LIBOR may be enacted in the United Kingdom, the United States or elsewhere.

Any changes in the method used for determining LIBOR may result in a sudden or prolonged increase or decrease in LIBOR.

If a published U.S. dollar LIBOR rate is unavailable after 2021, the interest rates on certain of the Company’s debt obligations could change.

Uncertainty as to the nature of such potential changes, phase out, alternative reference rates or other reforms may materially adversely affect the trading market for LIBOR-based securities.

Any of these proposals or consequences could have a material adverse effect on our financing costs, and as a result, our financial condition and results of operations.

Although these agreements may partially protect against rising interest

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| • | the resale of substantial amounts of the Company's stock, or the anticipation of such resale, by large holders of our securities; |

| • | the issuance of ratings and scores related to corporate social responsibility ("CSR") and environmental, social and governance ("ESG") reports and disclosures. |

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In addition, stockholders are permitted to vote upon certain proposals submitted by stockholders to amend the Company's Bylaws, subject to various requirements and limitations set forth in the Bylaws.

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Corporate responsibility, specifically related to ESG factors, may impose additional costs and expose us to new risks. The Company and many of its investors and potential investors are focused on corporate responsibility, specifically related to ESG factors.

Some investors may use ESG factors to guide their investment strategies.

Many investment funds focus on positive ESG business practices and sustainability scores when making investments and may consider a company’s sustainability efforts and/or score when making an investment decision.

In addition, investors, particularly institutional investors, may use ESG or sustainability scores to benchmark companies against their peers.

Although the Company makes ESG disclosures and undertakes sustainability initiatives, there can be no assurance that the Company will score highly on ESG matters in the future.

In addition, the criteria by which companies are rated may change, which could cause the Company to perform differently or worse than it has in the past.

Real estate investments are subject to a variety of risks.

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| • | the attractiveness of our communities to tenants; |

| | |

| --- | --- |

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| --- | --- |

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

The Company's forecast for the national economy assumes growth of the gross domestic product of the national economy and the economies of the west coast states.

Rent control, or other changes in applicable laws, or noncompliance with applicable laws, could adversely affect the Company's operations or expose us to liability.

The Company intends to continue to acquire apartment communities.

Development and redevelopment activities may be delayed, not completed, and/or not achieve expected results.

The Company may invest in equity, preferred equity or debt securities related to real estate and/or other investment securities and/or cash investments, which could adversely affect the Company’s ability to make distributions to Essex's stockholders or the Operating Partnership's unitholders, including, without limitation, due to a decline in the value of such investments.

The Company may also purchase or otherwise invest in securities issued by entities which own real estate and/or invest in mortgages or unsecured debt obligations.

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.

The geographic concentration of the Company’s communities and fluctuations in local markets may adversely impact the Company’s financial condition and operating results.

below expectations.

Real property taxes on our properties may increase as our properties are reassessed by taxing authorities or as property tax rates change.

There are numerous housing alternatives that compete with the Company’s communities in attracting tenants.

We may make acquisitions of and investments in other REITs and real estate companies that offer properties and communities to augment our market coverage, or enhance our property offerings.

successful.

Real estate investments are illiquid and in our markets can at times be difficult to sell at prices we find acceptable.

Under the Disabilities Act, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons.

The Company has retail/commercial space in its portfolio, which represents approximately 2% of our total revenue.

The Company’s portfolio may have environmental liabilities.

resulting from such releases.

Methane gas is also associated with certain industrial activities, such as former municipal waste landfills.

The Company cannot assure you that it

The Company may incur general uninsured losses.

Climate change may adversely affect our business.

The accidental death or severe injuries of persons living in our communities due to fires, floods, other natural disasters or hazards could have a material adverse effect on our business and results of operations.

Adverse changes in laws may adversely affect the Company's liabilities and/or operating costs relating to its properties and its operations.

The soundness of financial institutions could adversely affect us.

The Company may make acquisitions or commence development activity outside of its existing market areas if appropriate opportunities arise.

Various estimates are used in the preparation of our financial statements, including estimates related to the fair value of tangible and intangible assets and the carrying value of our real estate investments.

[removed: OVERVIEW][added: OVERVIEW]

Essex is the sole general partner of the Operating Partnership and, as of December 31, [removed: 2018,] [added: 2019,] had an approximately 96.6% general partner interest in the Operating Partnership.

As of December 31, [removed: 2018,] [added: 2019,] the Company owned or had ownership interests in [removed: 245] [added: 250] operating apartment communities, comprising [removed: 59,661] [added: 60,570] apartment homes, excluding the Company's ownership in preferred equity co-investments, loan investments, one operating commercial building [removed: with approximately 106,716 square feet] and [removed: six active developments.][added: a development pipeline comprised of five consolidated projects and two unconsolidated joint venture projects.]

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

[removed: Northern California] [added: Northern California] (the San Francisco Bay Area)

[removed: Seattle Metro] [added: Seattle Metro] (Seattle metropolitan area)

As of December 31, [removed: 2018,] [added: 2019,] the Company’s development [removed: and predevelopment] pipeline was comprised of [removed: four] [added: five] consolidated projects under development, two unconsolidated joint venture projects under development, and various predevelopment projects aggregating [removed: 1,861] [added: 1,960] apartment homes, with total incurred costs of [removed: $812.0 million,] [added: $1.0 billion,] and estimated remaining project costs of approximately [removed: $417.0] [added: $222.0] million, [removed: $310.0] [added: $193.0] million of which represents the Company's estimated remaining costs, for total estimated project costs of [removed: $1.2] [added: $1.3] billion.

As of December 31, [removed: 2018,] [added: 2019,] the Company also had an ownership interest in one operating commercial building (totaling approximately 106,716 square feet).

By region, the Company's operating results for [removed: 2018] [added: 2019] and [removed: 2017] [added: 2018] and projection for [removed: 2019] [added: 2020] new housing supply (defined as new multifamily apartment homes and single family homes, excluding developments with fewer than 50 apartment homes as well as student, senior and 100% affordable housing), projection for [removed: 2019] [added: 2020] job growth, and [removed: 2019] [added: 2020] estimated Same-Property revenue growth are as follows:

[removed: Southern] [added: Southern] California [removed: Region:] [added: Region:] As of December 31, [removed: 2018,] [added: 2019,] this region represented [removed: 46%] [added: 45%] of the Company’s consolidated operating apartment homes.

Revenues for [removed: "2018] [added: "2019] Same-Properties" (as defined below), or "Same-Property revenues," increased [removed: 3.1%] [added: 3.0%] in [removed: 2018] [added: 2019] as compared to [removed: 2017.][added: 2018.]

In [removed: 2019,] [added: 2020,] the Company projects new residential supply of [removed: 33,500] [added: 31,400] apartment homes and single family homes, which represents [removed: 0.6%] [added: 0.5%] of the total housing stock.

[removed: The] Company projects an increase of [removed: 104,750] [added: 43,200] jobs or [removed: 1.3%,] [added: 2.4%,] and an increase in [removed: 2019] [added: 2020] Same-Property revenues of between [removed: 2.5% to] 3.5% [added: to 4.5%] in [removed: 2019.][added: 2020.]

[removed: Northern] [added: Northern] California [removed: Region:] [added: Region:] As of December 31, [removed: 2018,] [added: 2019,] this region represented [removed: 33%] [added: 35%] of the Company’s consolidated operating apartment homes.

[removed: Same-Property revenues] [added: *2018 Non-Same Property Revenues*] increased [removed: 2.4%] [added: by $1.6 million or 1.5% to $111.2 million] in 2018 [removed: as] compared to [added: $109.6 million in] 2017.

In [removed: 2019,] [added: 2020,] the Company projects new residential supply of [removed: 15,750] [added: 17,950] apartment homes and single family homes, which represents [removed: 0.7%] [added: 0.8%] of the total housing stock.

The Company projects an increase of [removed: 65,500] [added: 72,350] jobs or 2.0%, and an increase in [removed: 2019] [added: 2020] Same-Property revenues of between 2.6% to 3.6% in [removed: 2019.][added: 2020.]

[removed: Seattle] [added: Seattle] Metro [removed: Region:] [added: Region:] As of December 31, [removed: 2018,] [added: 2019,] this region represented [removed: 21%] [added: 20%] of the Company’s consolidated operating apartment homes.

[added: *2018] Same-Property [removed: revenues] [added: Revenues*] increased [removed: 2.9% in] [added: by $34.9 million or 2.8% to $1.3 billion for] 2018 [removed: as] compared to [added: $1.2 billion in] 2017.

In [removed: 2019,] [added: 2020,] the Company projects new residential supply of [removed: 17,000] [added: 13,400] apartment homes and single family homes, which represents [removed: 1.3%] [added: 1.0%] of the total housing stock.

The Company projects an increase of [removed: 45,900] [added: 91,850] jobs or [removed: 2.6%,] [added: 1.2%,] and an increase in [removed: 2019] [added: 2020] Same-Property revenues of between [removed: 2.3%] [added: 2.2%] to [removed: 3.3%] [added: 3.2%] in [removed: 2019.][added: 2020.]

In total, the Company projects an increase in [removed: 2019] [added: 2020] Same-Property revenues of between [removed: 2.5%] [added: 2.6%] to [removed: 3.5%,] [added: 3.6%,] as renewal and new leases are signed at higher rents in [removed: 2019] [added: 2020] than [removed: 2018.][added: 2019.]

Same-Property operating expenses are projected to increase in [removed: 2019] [added: 2020] by 2.5% to 3.5%.

| | [removed: December 31, 2018 | | | | | | December 31, 2017] [added: 2018] | | | [added: 2017] | |

| | [removed: Apartment Homes] [added: Apartment Homes] | | | [removed: %] [added: %] | | | [removed: Apartment Homes] [added: Apartment Homes] | | | [removed: %] [added: %] | |

| Southern California | 22,674 | | | [removed: 46] [added: 45] | % | | [removed: 23,343] [added: 22,674] | | | [removed: 47] [added: 46] | % |

| Northern California | [removed: 16,136] [added: 17,556] | | | [removed: 33] [added: 35] | % | | [removed: 15,848] [added: 16,136] | | | [removed: 32] [added: 33] | % |

| Seattle Metro | [removed: 10,238] [added: 10,343] | | | [removed: 21] [added: 20] | % | | 10,238 | | | 21 | % |

| [removed: Total] [added: Total] | [removed: 49,048] [added: 50,573] | | | 100 | % | | [removed: 49,429] [added: 49,048] | | | 100 | % |

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

[removed: RESULTS] [added: RESULTS] OF [removed: OPERATIONS][added: OPERATIONS]

[removed: Comparison] [added: Comparison] of Year [removed: Ended December] [added: Ended December] 31, [removed: 2018 to] [added: 2018 to] the Year [removed: Ended December] [added: Ended December] 31, [removed: 2017][added: 2017]

The Company’s average financial [removed: occupancies] [added: occupancy] for the Company’s stabilized apartment communities or "2018 Same-Property" (stabilized properties consolidated by the Company for the years ended December 31, 2018 and 2017) increased 10 basis points to 96.7% in 2018 from 96.6% in 2017.

Financial occupancy is defined as the percentage resulting from dividing actual rental [removed: revenue] [added: income] by total potential rental [removed: revenue.][added: income.]

Actual rental [removed: revenue] [added: income] represents contractual rental [removed: revenue] [added: income] pursuant to leases without considering delinquency and concessions.

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

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 occupancy, which is based on contractual [removed: revenue] [added: income] is not considered the best metric to quantify occupancy.

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

| | [removed: 2018] | [added: 2019] | | [removed: 2017] | | [added: 2018 | | | | 2017 | | |]

The following table provides a breakdown of revenue amounts, including the revenues attributable to [removed: 2018] [added: 2019] Same-Properties.

Same-Property revenues increased 3.8% in 2019 as compared to 2018.

Same-Property revenues increased 3.8% in 2019 as compared to 2018.

The

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| | As of | | | | | | As of | | | | |

| | December 31, 2019 | | | | | | December 31, 2018 | | | | |

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| | 2019 | | | 2018 | |

| Seattle Metro | 96.6 | % | | 96.5 | % |

| Southern California | | 21,979 | | | $ | 590,943 | | | $ | 573,658 | | | $ | 17,285 | | | 3.0 | % |

| Northern California | | 15,685 | | | 530,970 | | | | 511,679 | | | | 19,291 | | | | 3.8 | % |

| Seattle Metro | | 10,238 | | | 245,398 | | | | 236,525 | | | | 8,873 | | | | 3.8 | % |

| Total 2019 Same-Property revenues | | 47,902 | | | 1,367,311 | | | | 1,321,862 | | | | 45,449 | | | | 3.4 | % |

| 2019 Non-Same Property Revenues | | | | | 83,317 | | | | 69,008 | | | | 14,309 | | | | 20.7 | % |

| Total property revenues | | | | | $ | 1,450,628 | | | $ | 1,390,870 | | | $ | 59,758 | | | 4.3 | % |

*2019* *Non-Same Property Revenues* increased by $14.3 million or 20.7% to $83.3 million in 2019 compared to $69.0 million in 2018.

The increase was primarily due to revenues generated from One South Market, which was consolidated in March 2019, Brio, which was acquired in June 2019, Marquis, which was consolidated in December 2018, and Station Park Green - Phase I, a development community that began producing rental income during the first quarter of 2018.

These increases were partially offset by the sales of Domain in the second quarter of 2018 and 8th & Hope in the fourth quarter of 2018.

The increase is primarily due to the addition of The Courtyards at 65th Street, 777 Hamilton, and Velo and Ray communities to the Company's joint venture portfolio in 2019, offset slightly by the disposition of Mosso joint venture community in the fourth quarter of 2019.

*Property operating expenses, excluding real estate taxes* increased by $8.7 million or 3.7% to $242.5 million in 2019 compared to $233.8 million in 2018, primarily due to an increase of $3.8 million in utilities expenses as well as an increase of $3.2 million in administrative expenses.

2019 Same-Property operating expenses, excluding real estate taxes, increased by $6.5 million or 2.9% to $232.5 million in 2019 compared to $226.0 million in 2018, primarily due to increases of $2.7 million in both administrative expenses and utilities expenses.

*Real estate taxes* increased by $3.6 million or 2.4% to $155.2 million in 2019 compared to $151.6 million in 2018, primarily due to increases in property valuations in Southern and Northern California and property tax expenses for Brio, which was acquired in the second quarter of 2019, offset by favorable tax assessments in the Seattle Metro region.

2019 Same-Property real estate taxes increased by $1.9 million or 1.3% to $145.3 million in 2019 compared to $143.4 million in 2018 primarily due to increases in property valuations in Southern and Northern California, offset by favorable tax assessments in the Seattle Metro region.

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*Depreciation and amortization expense* increased by $3.9 million or 0.8% to $483.8 million in 2019 compared to $479.9 million in 2018, primarily due to the completion of the Station Park Green - Phase I development during the first and second quarters of 2018, consolidation of Marquis in the fourth quarter of 2018, consolidation of One South Market in the first quarter of 2019, and the acquisition of Brio in the second quarter of 2019.

The increase was partially offset by the sales of Domain in the second quarter of 2018 and 8th & Hope in the fourth quarter of 2018.

*Impairment loss* of $7.1 million in 2019 related to a consolidated CPPIB co-investment that owned land held for future development in Moorpark, CA.

The impairment charge resulted from the Company’s offer to acquire the joint venture partner’s 45% interest in the co-investment of the land parcel at an amount lower than the carrying value.

*Loss on sale of real estate and land* of $3.2 million in 2019 was primarily attributable to the sale of land in San Mateo, CA that had been held for future development.

The Company's $61.9 million gain in 2018 was attributable to the sales of Domain in the second quarter of 2018 and 8th & Hope in the fourth quarter of 2018, which resulted in gains of $22.3 million and $39.6 million, respectively, for the Company.

These decreases in interest expense were partially offset by an increase in average outstanding debt primarily as a result of the issuance of $300.0 million of senior unsecured notes due March 15, 2048 in March 2018, $500.0 million of senior unsecured notes due March 1, 2029 in February and March 2019, and $550.0 million of senior unsecured notes due January 15, 2030 in August 2019 and October 2019, which resulted in an increase of $32.3 million interest expense for 2019 as compared to 2018.

*Interest and other income* increased $23.3 million or 101.3% to $46.3 million in 2019 compared to $23.0 million in 2018, primarily due to an increase from unrealized gains (losses) on marketable securities of $10.9 million, $7.0 million of accelerated interest income from the maturity of a mortgage backed security investment recognized in 2019, and an increase of $5.1 million in marketable securities and other income.

*Equity income from co-investments* increased by $23.0 million or 25.8% to $112.1 million in 2019 compared to $89.1 million in 2018, primarily due to an increase in gains from the sale of co-investment communities of $40.5 million from sale of the Mosso co-investment community in 2019, an increase of $7.3 million in income from preferred equity investments, and a net unrealized gain of $4.4 million from an unconsolidated co-investment during the third quarter of 2019.

The increase was partially offset by a decrease of $19.7 million in promote income and an $11.5 million other-than-temporary impairment charge on an unconsolidated CPPIB co-investment recognized in the fourth quarter of 2019.

*Deferred tax expense on unrealized gain on unconsolidated co-investment* of $1.5 million in 2019 resulted from a net unrealized gain of $4.4 million from an unconsolidated co-investment during the third quarter of 2019.

*Gain on early retirement of debt, net* of $3.7 million in 2019 was primarily due to early repayment of a $289.1 million secured mortgage note payable in September 2019, offset slightly by early repayment of approximately $122.5 million of secured mortgage notes in the fourth quarter of 2019.

*Gain on remeasurement of co-investment* of $31.5 million in 2019 resulted from the purchase of the Company's joint venture partner's 45.0% membership interest in the One South Market co-investment in March 2019.

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| | As of | | | | | | As of | | | | |

| | |

| --- | --- |

| (1) | Same-property excludes properties held for sale. |

2018 Non-Same Property Revenues increased by $1.6 million or 1.5% to $111.2 million in 2018 compared to $109.6 million in 2017.

| | 2017 | | | 2016 | |

| Seattle Metro | 96.4 | % | | 96.1 | % |

| Southern California | | 21,998 | | | $ | 559,113 | | | $ | 538,738 | | | $ | 20,375 | | | 3.8 | % |

| Northern California | | 13,892 | | | 436,876 | | | | 425,823 | | | | 11,053 | | | | 2.6 | % |

| Seattle Metro | | 10,238 | | | 229,871 | | | | 217,259 | | | | 12,612 | | | | 5.8 | % |

| Total 2017 Same-Property revenues | | 46,128 | | | 1,225,860 | | | | 1,181,820 | | | | 44,040 | | | | 3.7 | % |

| 2017 Non-Same Property Revenues | | | | | 128,465 | | | | 103,903 | | | | 24,562 | | | | 23.6 | % |

| Total property revenues | | | | | $ | 1,354,325 | | | $ | 1,285,723 | | | $ | 68,602 | | | 5.3 | % |

| | |

| --- | --- |

| (1) | Same-property excludes properties held for sale. |

2017 Same-Property Revenues increased by $44.0 million or 3.7% to $1.2 billion for 2017 compared to $1.2 billion in 2016.

2017 Non-Same Property Revenues increased by $24.6 million or 23.6% to $128.5 million in 2017 compared to $103.9 million in 2016.

The increase was primarily due to revenue generated by Palm Valley, which was consolidated in January 2017.

The increase is primarily due to property management fee revenue from joint venture development communities that went into lease-up from the third quarter of 2016 until the fourth quarter of 2017.

Property operating expenses, excluding real estate taxes increased $9.4 million or 4.3% to $229.1 million in 2017 compared to $219.7 million in 2016, primarily due to expenses generated by Palm Valley, which was consolidated in January 2017.

2017 Same-Property operating expenses excluding real estate taxes, increased by $5.5 million or 2.7% to $210.4 million in 2017 compared to $204.9 million in 2016, primarily due to a $4.3 million increase in utilities.

Real estate taxes increased $7.1 million or 5.1% to $146.3 million in 2017 compared to $139.2 million in 2016, primarily due to property taxes at Palm Valley, which was consolidated in January 2017 and due to increases in tax rates and property valuations.

2017 Same-Property real estate taxes increased by $4.1 million or 3.3% to $130.1 million in 2017 compared to $126.0 million in 2016 due to increases in tax rates and property valuations.

Depreciation and amortization expense increased by $27.2 million or 6.2% to $468.9 million in 2017 compared to $441.7 million in 2016, primarily due to depreciation at Palm Valley, which was consolidated in January 2017.

Interest expense increased $3.2 million or 1.5% to $222.9 million in 2017 compared to $219.7 million in 2016, due to an increase in average outstanding debt primarily due to the $350.0 million senior unsecured notes due May 1, 2027 issued in April 2017 and the $450.0 million senior unsecured notes due April 15, 2026 issued in April 2016, which resulted in $19.1 million of interest expense for 2017 compared to 2016.

Interest and other income decreased $2.7 million or 9.9% to $24.6 million in 2017 compared to $27.3 million in 2016, primarily due to a decrease of $3.8 million in income from the gain on sale of marketable securities combined with a decrease

of $3.5 million in income from insurance reimbursements, legal settlements, and other, partially offset by an increase of $4.6 million in marketable securities and other interest income.

Equity income from co-investments increased by $37.7 million or 77.4% to $86.4 million in 2017 compared to $48.7 million in 2016, primarily due to the sale of two properties by BEXAEW and one property by Wesco I during 2017, which resulted in a total gain of $44.8 million, as well as increases in preferred equity income of approximately $7.5 million.

In 2016, two co-investment properties were sold, resulting in gains of $13.0 million for the Company during 2016.

Gain on sale of real estate and land decreased by $128.2 million or 82.9% to $26.4 million in 2017 compared to $154.6 million in 2016.

The Company's 2017 gain was primarily attributable to the sale of Jefferson at Hollywood, which resulted in a gain of $26.2 million for the Company.

Deferred tax expense on gain on sale of real estate and land of $4.4 million for 2016 was recorded primarily due to the sale of Harvest Park, which was owned by our wholly owned taxable REIT subsidiary.

There was no current tax expense on the sale of real estate and land for 2016 as the Harvest Park proceeds were used in a like-kind exchange transaction.

There were no such transactions during 2017.

There were no such transactions during 2016.

Upon entering into the 2018 ATM Program, the Company simultaneously terminated its existing 2016 ATM Program.

For the year ended December 31, 2016, the Company did not issue any shares of common stock pursuant to the 2016 ATM Program.

| Mortgage notes payable | | $ | 515,658 | | | $ | 737,327 | | | $ | 42,030 | | | $ | 500,880 | | | $ | 1,795,895 | |

| Unsecured debt | | 75,000 | | | | 500,000 | | | | 1,250,000 | | | | 2,000,000 | | | | 3,825,000 | | |

[removed: Interest] [added: Interest] Rate Hedging [removed: Activities][added: Activities]

As of December 31, [removed: 2018,] [added: 2019,] the Company had entered into five interest rate swap contracts to mitigate the risk of changes in the interest-related cash outflows on $175.0 million of the unsecured term debt.

As of December 31, [removed: 2018,] [added: 2019,] the Company also had [removed: $269.6] [added: $255.4] million of secured variable rate [removed: indebtedness, of which $9.9 million is subject to interest rate cap protection.][added: indebtedness.]

All of the Company’s interest rate swaps are designated as cash flow hedges as of December 31, [removed: 2018.][added: 2019.]

The following table summarizes the notional amount, carrying value, and estimated fair value of the Company’s cash flow hedge derivative instruments used to hedge interest rates as of December 31, [removed: 2018.][added: 2019.]

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: 2018.][added: 2019.]

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

| | | | | | | [removed: Maturity] [added: Maturity] | | [removed: Estimated] [added: Estimated] | | | | [removed: \+ 50] [added: \+ 50] | | | | [removed: \- 50] [added: \- 50] | | |

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

| Interest rate swaps | | $ | 175,000 | | | 2022 | | $ | [removed: 5,844] [added: 794] | | | $ | [removed: 8,377] [added: 2,556] | | | $ | [removed: 3,324] [added: 989] | |

Additionally, the Company has entered into total return swap contracts, with an aggregate notional amount of [removed: $256.0] [added: $255.4] million that effectively convert [removed: $256.0] [added: $255.4] million of fixed mortgage notes payable to a floating interest rate based on the SIFMA plus a spread and have a carrying value of zero at December 31, [removed: 2018.][added: 2019.]

[removed: Interest] [added: Interest] Rate Sensitive [removed: Liabilities][added: Liabilities]

Management has estimated [removed: that] the fair value of the Company’s [removed: $5.0] [added: $5.2] billion of fixed rate debt at December 31, [removed: 2018,] [added: 2019,] to be [removed: $5.0] [added: $5.4] billion.

Management has estimated the fair value of the Company’s [removed: $619.6] [added: $660.4] million of variable rate debt at December 31, [removed: 2018,] [added: 2019,] to be [removed: $615.2] [added: $655.8] million based on the terms of existing mortgage notes payable and variable rate demand notes compared to those available in the marketplace.

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

| ($ in thousands, except for interest rates) | [removed: 2019 | | | | 2020 | | | | 2021 | | | | 2022 | | | | 2023] [added: 2020] | | [added: 2021] | | [removed: Thereafter] [added: 2022] | | [added: 2023] | [removed: Total] | [added: 2024] | | [added: Thereafter] | [removed: Fair value] [added: Total] | | [added: Fair value] |

| (1) | [removed: $184.9] [added: $175.0] million is subject to interest rate protection agreements ($175.0 million is subject to interest rate [removed: swaps and $9.9 million is subject to interest rate caps). $256.0] [added: swaps). $255.4] million is subject to total return swaps. |

The table incorporates only those exposures that exist as of December 31, [removed: 2018;] [added: 2019;] it does not consider those exposures or positions that could arise after that date.

| Total cash flow hedges | | $ | 175,000 | | | 2022 | | $ | 794 | | | $ | 2,556 | | | $ | 989 | |

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

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

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

| Fixed rate debt | $287,405 | | $530,940 | | $342,408 | | $602,093 | | $402,177 | | $3,016,884 | $5,181,907 | | $5,410,106 |

| Average interest rate | 5.8% | | 4.3% | | 3.7% | | 3.7% | | 4.0% | | 3.7% | | | |

| Variable rate debt (1) | $652 | | $713 | | $405,780 | | $852 | | $932 | | $251,499 | $660,428 | | $655,849 |

| Average interest rate | 2.4% | | 2.4% | | 2.7% | | 2.4% | | 2.4% | | 2.3% | | | |

| Interest rate caps | | 9,924 | | | | 2019 | | — | | | | — | | | | — | | |

| Total cash flow hedges | | $ | 184,924 | | | 2019-2022 | | $ | 5,844 | | | $ | 8,377 | | | $ | 3,324 | |

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

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

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

| Fixed rate debt | $590,061 | | | | $693,071 | | | | $542,891 | | | | $340,398 | | | | $600,000 | | | | $ | 2,234,849 | | $ | 5,001,270 | | | $ | 4,965,815 | |

| Average interest rate | 4.4 | | % | | 5.0 | | % | | 4.5 | | % | | 3.8 | | % | | 3.7 | | % | | 3.8 | | % | | | | | | | |

| Variable rate debt (1) | $ | 597 | | | $ | 652 | | | $ | 713 | | | $ | 350,780 | | | $ | 852 | | | $ | 266,031 | | $ | 619,625 | | | $ | 615,178 | |

| Average interest rate | 2.6 | | % | | 2.6 | | % | | 2.6 | | % | | 2.9 | | % | | 2.6 | | % | | 2.5 | | % | | | | | | | |

[removed: OVERVIEW][added: OVERVIEW]

Essex is the sole general partner of the Operating Partnership and as of December 31, [removed: 2018,] [added: 2019,] had an approximately 96.6% general partnership interest in the Operating Partnership.

As of December 31, [removed: 2018,] [added: 2019,] the Company owned or had ownership interests in [removed: 245] [added: 250] operating apartment communities, aggregating [removed: 59,661] [added: 60,570] apartment homes, excluding the Company's ownership in preferred equity co-investments, loan investments, one operating commercial [removed: building with approximately 106,716 square feet] [added: building,] and [removed: six active] [added: a] development [added: pipeline comprised of five consolidated] projects [removed: with 1,861] [added: and two unconsolidated joint venture projects aggregating 1,960] apartment homes [removed: in various stages of development] (collectively, the "Portfolio").

[removed: BUSINESS STRATEGIES][added: BUSINESS STRATEGIES]

[removed: Business Strategies][added: Business Strategies]

[removed: Research] [added: Research] Driven Approach to [removed: Investments –] [added: Investments *–*] The Company believes that successful real estate investment decisions and portfolio growth begin with extensive regional economic research and local market knowledge.

[removed: Property Operations] [added: Property Operations] – The Company manages its communities by focusing on activities that may generate above-average rental growth, tenant retention/satisfaction and long-term asset appreciation.

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

| • | [removed: Capital] [added: *Capital] Preservation [removed: –] [added: –*] The Company's asset management services are responsible for the planning, budgeting and completion of major capital improvement projects at the Company’s communities. |

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

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

[removed: CURRENT] [added: CURRENT] BUSINESS [removed: ACTIVITIES][added: ACTIVITIES]

[removed: Acquisitions] [added: Acquisitions] of Real Estate [added: Interests]

Acquisitions are an important component of the Company’s business plan, and during [removed: 2018,] [added: 2019,] the Company acquired ownership interests in [removed: two] [added: eight] communities comprised of [removed: 384] [added: 2,007] apartment homes for [removed: $139.4] [added: a total contract price of $856.5] million.

The following is a summary of [removed: 2018] [added: 2019] acquisitions ($ in millions):

| Property Name | | Location | | Apartment Homes | | | Essex Ownership Percentage | | | Ownership | | Quarter in [removed: 2018] [added: 2019] | | Purchase Price | | | |

| [removed: (1)] [added: (3)] | [removed: Meridian at Midtown contract price represents] [added: Contract prices represent] the total contract price at 100%. |

[removed: Dispositions] [added: Dispositions] of Real [removed: Estate][added: Estate]

Generally, the Company seeks to have any impact of [added: longer-term] earnings dilution resulting from these dispositions offset by the positive impact [removed: of its acquisitions, development and redevelopment activities.][added: from reinvesting proceeds.]

[removed: Development Pipeline][added: Development Pipeline]

As of December 31, [removed: 2018,] [added: 2019,] the Company's development pipeline was comprised of [removed: four] [added: five] consolidated projects under development and two [added: unconsolidated] joint venture projects under development aggregating [removed: 1,861] [added: 1,960] apartment homes, with total incurred costs of [removed: $812.0 million,] [added: $1.0 billion,] and estimated remaining project costs of approximately [removed: $417.0] [added: $222.0] million, [removed: $310.0] [added: $193.0] million of which represents the Company's estimated remaining costs, for total estimated project costs of [removed: $1.2] [added: $1.3] billion.

As of December 31, [removed: 2018,] [added: 2019,] the Company had various consolidated predevelopment projects.

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

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

| Station Park Green - Phase II | | San Mateo, CA | | 100% | | 199 | | | $ | [removed: 110] [added: 135] | | | $ | 141 | |

| Station Park Green - Phase III | | San Mateo, CA | | 100% | | 172 | | | [removed: 87] [added: 119] | | | | [removed: 124] [added: 134] | | |

| [removed: Gateway Village] [added: Mylo (2)] | | Santa Clara, CA | | 100% | | 476 | | | [removed: 155] [added: 197] | | | | 226 | | |

| [removed: Hollywood] [added: Wallace on Sunset (3)] | | Hollywood, CA | | 100% | | 200 | | | [removed: 43] [added: 70] | | | | 105 | | |

| Total [removed: - Consolidated] Development Projects [added: - Consolidated] | | | | | | [removed: 1,047] [added: 1,154] | | | [removed: 395] [added: 537] | | | | [removed: 596] [added: 700] | | |

| [removed: Ohlone] [added: Patina at Midtown (4)] | | San Jose, CA | | 50% | | 269 | | | [removed: 70] [added: 115] | | | | 136 | | |

| 500 Folsom [removed: (2)] [added: (5)] | | San Francisco, CA | | 50% | | [removed: 545] [added: 537] | | | [removed: 265] [added: 377] | | | | 415 | | |

| Total [added: Development Projects] - Joint Venture [removed: Development Projects] | | | | | | [removed: 814] [added: 806] | | | [removed: 335] [added: 492] | | | | 551 | | |

| Other Projects | | Various | | 100% | | — | | | [removed: 71] [added: 20] | | | | [removed: 71] [added: 20] | | |

| Total - Consolidated Predevelopment Projects | | | | | | — | | | [removed: 71] [added: 20] | | | | [removed: 71] [added: 20] | | |

| Grand Total - Development and Predevelopment Pipeline | | | | | | [removed: 1,861] [added: 1,960] | | | $ | [removed: 812] [added: 1,049] | | | $ | [removed: 1,229] [added: 1,271] | |

| [removed: (2)] [added: (5)] | Estimated project cost for this development is net of a projected value for low-income housing tax credit proceeds and the value of the tax exempt bond structure. |

[removed: Redevelopment Pipeline][added: Redevelopment Pipeline]

As of December 31, [removed: 2018,] [added: 2019,] the Company had ownership interests in [removed: five] [added: four] major redevelopment communities aggregating [removed: 1,727] [added: 1,327] apartment homes with estimated redevelopment costs of [removed: $140.1] [added: $132.7] million, of which approximately [removed: $27.8] [added: $14.9] million remains to be expended.

[removed: Long] [added: Long] Term [removed: Debt][added: Debt]

During [removed: 2018,] [added: 2019,] the Company made regularly scheduled principal payments and loan payoffs of [removed: $297.5] [added: $951.6] million of its secured mortgage notes payable at an average interest rate of [removed: 5.1%.][added: 4.2%.]

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| One South Market(1) | | San Jose, CA | | 312 | | | 100 | % | | EPLP | | Q1 | | $ | 80.6 | | |

| Brio(2) | | Walnut Creek, CA | | 300 | | | N/A | | | EPLP | | Q2 | | 164.9 | | | (3) |

| The Courtyards at 65th Street | | Emeryville, CA | | 331 | | | 50 | % | | WESCO V | | Q3 | | 178.0 | | | (3) |

| 777 Hamilton | | Menlo Park, CA | | 195 | | | 50 | % | | BEX IV | | Q3 | | 148.0 | | | (3) |

| Township | | Redwood City, CA | | 132 | | | 100 | % | | EPLP | | Q3 | | 88.7 | | | |

| Velo and Ray | | Seattle, WA | | 308 | | | 50 | % | | WESCO V | | Q4 | | 133.0 | | | (3) |

| Pure Redmond | | Redmond, WA | | 105 | | | 100 | % | | EPLP | | Q4 | | 39.1 | | | |

| Hidden Valley(4) | | Simi Valley, CA | | 324 | | | 100 | % | | EPLP | | Q4 | | 24.2 | | | |

| Total 2019 | | | | 2,007 | | | | | | | | | | $ | 856.5 | | |

| (1) | In March 2019, the Company purchased the joint venture partner's 45% membership interest in the One South Market co-investment based on an estimated property valuation of $179.0 million. In conjunction with the acquisition, $86.0 million of mortgage debt that encumbered the property was repaid. |

| (2) | In June 2019, the Company acquired Brio for a total contract price of $164.9 million in a DownREIT transaction. As part of the acquisition, the Company assumed $98.7 million of mortgage debt in the community. |

| (4) | In December 2019, the Company purchased the joint venture partner's 25% ownership interest in Hidden Valley, a consolidated community, based on an estimated property valuation of $97.0 million and an encumbrance of $29.7 million of mortgage debt. |

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In October 2019, a Canada Pension Plan Investment Board ("CPPIB" or "CPP") joint venture, in which the Company had a 55.0% ownership interest at the time, sold Mosso, a 463 unit apartment home community located in San Francisco, CA, for $311.0 million, resulting in a gain of $50.2 million for the Company.

In October 2019, the Company sold a land parcel adjacent to the Mylo development community located in Santa Clara, CA, for $10.8 million and recorded an immaterial gain.

In December 2019, the Company sold land located in San Mateo, CA, that had been held for future development for $12.5 million and recorded a loss of $3.2 million.

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| | | | | | | | | | As of | | | | | | |

| | | | | | | | | | 12/31/2019 | | | | | | |

| Station Park Green - Phase IV | | San Mateo, CA | | 100% | | 107 | | | 16 | | | | 94 | | |

| | |

| --- | --- |

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| --- | --- |

| (2) | Mylo was previously named Gateway Village. |

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| (3) | Wallace on Sunset was previously named Essex Hollywood. |

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| (4) | Patina at Midtown was previously named Ohlone. |

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In February 2019, the Company issued $350.0 million of senior unsecured notes due on March 1, 2029, with a coupon rate of 4.000% per annum (the "2029 Notes"), which are payable on March 1 and September 1 of each year, beginning on September 1, 2019.

The 2029 Notes were offered to investors at a price of 99.188% of the principal amount thereof.

The 2029 Notes are general unsecured senior obligations of the Operating Partnership, rank equally in right of payment with all other senior

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unsecured indebtedness of the Operating Partnership and are unconditionally guaranteed by Essex Property Trust, Inc. In March 2019, the Company issued an additional $150.0 million of the 2029 Notes at a price of 100.717% of the principal amount thereof.

These additional notes have substantially identical terms as the 2029 Notes issued in February 2019.

| Meridian at Midtown | | San Jose, CA | | 218 | | | 50 | % | | Wesco V | | Q4 | | 104.0 | | | (1) |

| Marquis(2) | | San Jose, CA | | 166 | | | 100 | % | | EPLP | | Q4 | | 35.4 | | | |

| Total 2018 | | | | 384 | | | | | | | | | | $ | 139.4 | | |

| (2) | In December 2018, the Company purchased the joint venture partner's 49.9% membership interest in the Marquis co-investment. As part of the acquisition, the Company paid $4.7 million in cash and issued Operating Partnership units for the remaining equity based on an estimated gross property valuation of $71.0 million and an encumbrance of $45.8 million of mortgage debt. |

In June 2018, the Company sold Domain, a 379 apartment home community located in San Diego, CA for $132.0 million, resulting in a gain of $22.3 million for the Company.

In November 2018, a Company co-investment, BEXAEW, LLC ("BEXAEW") sold Enclave at Town Square, a 124 apartment home community located in Chino Hills, CA, for $30.5 million, resulting in a gain of $5.4 million for the Company.

In November 2018, a Company co-investment, Wesco III, LLC ("Wesco III") sold The Summit, a 125 apartment home community located in Chino Hills, CA, for $34.8 million, resulting in a gain of $5.2 million for the Company.

In December 2018, the Company sold 8th & Hope, a 290 apartment home community located in Los Angeles, CA for $220.0 million, resulting in a gain of $39.6 million for the Company.

| | | | | | | | | | As of | | | | | | |

| | | | | | | | | | 12/31/2018 | | | | | | |

| Predevelopment Projects - Joint Venture | | | | | | | | | | | | | | | |

| Other Projects | | Various | | 50% | | — | | | 11 | | | | 11 | | |

| Total - Joint Venture Predevelopment Projects | | | | | | — | | | 11 | | | | 11 | | |

In March 2018, the Company issued $300.0 million of 30-year 4.500% senior unsecured notes that mature on March 15, 2048.

The interest is payable semi-annually in arrears on March 15 and September 15 of each year, commencing September 15, 2018, until the maturity date on March 15, 2048.

In September 2018, the Company entered into a new equity distribution agreement pursuant to which the Company may offer and sell shares of its common stock having an aggregate gross sales price of up to $900.0 million (the "2018 ATM Program").

In connection with the 2018 ATM Program, the Company may also enter into forward sale agreements whereby, at the Company’s discretion, it may sell shares of its common stock under the 2018 ATM Program under forward sales agreements.

The use of a forward sales agreement would allow the Company to lock in a share price on the sale of shares of its common stock at the time the agreement is executed, but defer receiving the proceeds from the sale of shares until a later date.

Upon entering into the 2018 ATM Program, the Company simultaneously terminated its existing equity distribution agreements, which were entered into in March 2016 in connection with its prior at-the-market equity offering program (the "2016 ATM Program").

During the year ended December 31, 2018, the Company did not sell any shares of its common stock through the 2018 ATM Program or through the 2016 ATM Program.

Since commencement of the 2018 ATM Program, as of December 31, 2018, the Company has not sold any shares of its common stock and there are no outstanding forward sale agreements, and $900.0 million of shares remains available to be sold under the 2018 ATM Program.

The information regarding lawsuits, other proceedings and claims, set forth in Note [removed: 16,] [added: 17,] "Commitments and Contingencies", to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K is incorporated by reference into this Item 3.

In addition to such matters referred to in Note [removed: 16,] [added: 17,] the Company is subject to various other legal and/or regulatory proceedings arising in the course of its business operations.

[removed: UNITED STATES][added: UNITED STATES]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: Washington,] [added: Washington,] D.C. [removed: 20549][added: 20549]

[removed: FORM 10-K][added: FORM 10-K]

[removed: | x | ANNUAL] [added: ☒ ANNUAL] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934 |][added: 1934]

[removed: For] [added: For] the fiscal year [removed: ended December] [added: ended December] 31, [removed: 2018][added: 2019]

[removed: | o | TRANSITION] [added: ☐ TRANSITION] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934 |][added: 1934]

[removed: FOR THE TRANSITION PERIOD FROM] [added: For the transition period from] ___________ [removed: TO _____________][added: to _____________]

[removed: Commission] [added: Commission] file [removed: number: 001-13106 (Essex] [added: number: 001-13106 (Essex] Property Trust, [removed: Inc.)][added: Inc.)]

[removed: Commission] [added: Commission] file [removed: number: 333-44467-01 (Essex] [added: number: 333-44467-01 (Essex] Portfolio, [removed: L.P.)][added: L.P.)]

[removed: ESSEX] [added: ESSEX] PROPERTY TRUST, [removed: INC.][added: INC.]

[removed: ESSEX] [added: ESSEX] PORTFOLIO, [removed: L.P.][added: L.P.]

| [removed: Maryland (Essex] [added: Essex] Property Trust, [removed: Inc.) California (Essex Portfolio, L.P.)] [added: Inc.] | [added: ☐] | [removed: 77-0369576 (Essex Property Trust, Inc.) 77-0369575 (Essex] [added: Essex] Portfolio, [removed: L.P.)] [added: L.P.] | [added: ☐ |]

[removed: 1100] [added: 1100] Park Place, Suite [removed: 200][added: 200]

[removed: San Mateo, California 94403][added: San Mateo, California 94403]

[removed: (650) 655-7800][added: (650) 655-7800]

| Title of each class | | [added: Trading Symbol(s) | |] Name of each exchange on which registered |

| Common Stock, $.0001 par value (Essex Property Trust, Inc.) | | [added: ESS | |] New York Stock Exchange |

Securities registered pursuant to Section 12(g) of the Act: [removed: None][added: None]

| Essex Property Trust, Inc. [added: |] Yes [removed: x] [added: | ☒ |] No [removed: o] | [added: ☐ |] Essex Portfolio, L.P. [added: |] Yes [removed: o] [added: | ☐ |] No [removed: x] | [added: ☒ |]

| Essex Property Trust, Inc. [added: |] Yes [removed: o] [added: | ☐ |] No [removed: x] | [added: ☒ |] Essex Portfolio, L.P. [added: |] Yes [removed: o] [added: | ☐ |] No [removed: x] | [added: ☒ |]

| Essex Property Trust, Inc. [added: |] Yes [removed: x] [added: | ☒ |] No [removed: o] | [added: ☐ |] Essex Portfolio, L.P. [added: |] Yes [removed: x] [added: | ☒ |] No [removed: o] | [added: ☐ |]

| Essex Property Trust, Inc. [added: |] Yes [removed: x] [added: | ☒ |] No [removed: o] | [added: ☐ |] Essex Portfolio, L.P. [added: |] Yes [removed: x] [added: | ☒ |] No [removed: o] | [added: ☐ |]

| Essex Property Trust, Inc. [removed: x] | [added: Yes | ☐ | No | ☒ |] Essex Portfolio, L.P. [removed: x] | [added: Yes | ☐ | No | ☒ |]

| Large accelerated filer [removed: x] | [added: ☒ |] Accelerated filer [removed: o] | [added: ☐ |] Non-accelerated filer [removed: o] | [added: ☐ |] Smaller reporting company [removed: o] | [added: ☐ |]

| | | | [added: | | |] Emerging growth company [removed: o] | [added: ☐ |]

| Large accelerated filer [removed: o] | [added: ☐ |] Accelerated filer [removed: o] | [added: ☐ |] Non-accelerated filer [removed: x] | [added: ☒ |] Smaller reporting company [removed: o] | [added: ☐ |]

| | | | [added: | | |] Emerging growth company [removed: o] | [added: ☐ |]

[removed: |] If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [removed: | | | |]

| [removed: Essex] [added: (Essex] Property Trust, [removed: Inc. o] [added: Inc.)] | [removed: Essex Portfolio, L.P. o] | [added: (Essex Property Trust, Inc.) |]

[removed: | Essex Property Trust, Inc. Yes o No x | Essex Portfolio, L.P. Yes o No x |][added: ESSEX PROPERTY TRUST, INC.]

As of June 30, [removed: 2018,] [added: 2019,] the aggregate market value of the voting stock held by non-affiliates of Essex Property Trust, Inc. was [removed: $15,684,127,225.][added: $19,060,937,030.]

The aggregate market value was computed with reference to the closing price on the New York Stock Exchange on [added: the last trading day preceding] such date.

As of February [removed: 15, 2019, 65,692,107] [added: 18, 2020, 66,172,080] shares of common stock ($.0001 par value) of Essex Property Trust, Inc. were outstanding.

Portions of the definitive Proxy Statement to be filed with the Securities and Exchange Commission (the "SEC") pursuant to Regulation 14A in connection with the [removed: 2019] [added: 2020] annual meeting of stockholders of Essex Property Trust, Inc. are incorporated by reference in Part III of this Annual Report on Form 10-K.

[removed: EXPLANATORY NOTE][added: EXPLANATORY NOTE]

This report combines the annual reports on Form 10-K for the year ended December 31, [removed: 2018] [added: 2019] of Essex Property Trust, Inc., a Maryland corporation, and Essex Portfolio, L.P., a Delaware limited partnership of which Essex Property Trust, Inc. is the sole general partner.

As of December 31, [removed: 2018,] [added: 2019,] Essex owned approximately 96.6% of the ownership interest in the Operating Partnership with the remaining 3.4% interest owned by limited partners.

All of the Company's property ownership, [removed: development] [added: development,] and related business operations are conducted through the Operating Partnership and Essex has no material assets, other than its investment in the Operating Partnership.

consolidated financial statements include (i) the same noncontrolling interest as presented in the Operating Partnership’s consolidated financial statements and (ii) OP [removed: Unit holders.][added: Unitholders.]

OR

| Maryland | | 77-0369576 |

| California | | 77-0369575 |

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December 31, 2019.

ESSEX PORTFOLIO, L.P.

| [Signatures](#s2215B4823ADE52B194C01613107E947D) | | [S-1](#s2215B4823ADE52B194C01613107E947D) |

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10-K 1 ess-123118x10k.htm 10-K

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OR

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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter)

is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K, or any amendment to this Form 10-K.

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December 31, 2018.

ESSEX PROPERTY TRUST, INC.

| [Signatures](#s20C0796778D95B25B5175F3B858A0E47) | | [S-1](#s20C0796778D95B25B5175F3B858A0E47) |

None.

[*Table of Contents*](#sAA0656F3DF2D5C48A16A28F9C5E99809)

None.

The Company’s portfolio as of December 31, [removed: 2018] [added: 2019] (including communities owned by unconsolidated joint ventures, but excluding communities underlying preferred equity investments) was comprised of [removed: 245] [added: 250 stabilized] operating apartment communities (comprising [removed: 59,661] [added: 60,570] apartment homes), of which 26,695 apartment homes are located in Southern California, [removed: 21,146] [added: 21,642] apartment homes are located in Northern California, and [removed: 11,820] [added: 12,233] apartment homes are located in the Seattle metropolitan area.

The Company’s apartment communities accounted for 99.3% of the Company’s revenues for the year ended December 31, [removed: 2018.][added: 2019.]

[removed: Occupancy Rates][added: Occupancy Rates]

Financial occupancy is defined as the percentage resulting from dividing actual rental [removed: revenue] [added: income] by total potential rental [removed: revenue.][added: income.]

Total potential rental [removed: revenue] [added: income] represents the value of all apartment homes, with occupied apartment homes valued at contractual 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 [removed: rates] [added: rates,] and the Company's calculation of financial occupancy may not be comparable to financial occupancy as disclosed by other REITs.

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

[removed: Communities][added: Communities]

As of December 31, [removed: 2018,] [added: 2019,] the Company’s communities include 103 garden-style, [removed: 129] [added: 137] mid-rise, and [removed: 13] [added: 10] high-rise communities.

The communities have an average of approximately [removed: 244] [added: 242] apartment homes, with a mix of studio, one-, two- and some three-bedroom apartment homes.

A wide variety of amenities are available at the Company’s communities, including covered parking, fireplaces, swimming pools, clubhouses with fitness facilities, [removed: volleyball and] playground areas and [removed: tennis courts.][added: dog parks.]

[removed: Commercial Buildings][added: Commercial Buildings]

The Company owns an office building with approximately 106,716 square feet located in Irvine, CA, of which the Company [removed: occupies] [added: occupied] approximately 14,000 square feet [removed: at] [added: as of] December 31, [removed: 2018.][added: 2019.]

[removed: Operating Portfolio][added: Operating Portfolio]

(See Note 8, "Mortgage Notes Payable" to the Company’s consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K for more [removed: information about the Company’s secured mortgage debt and Schedule III thereto for a list of secured mortgage loans related to the Company’s portfolio.)]

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

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

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

| Alpine Village | | Alpine, CA | | Garden | | 301 | | | [removed: 254,400 | | |] 1971 | | 2002 | | [removed: 96%] [added: 97%] |

| Anavia | | Anaheim, CA | | Mid-rise | | 250 | | | [removed: 312,343 | | |] 2009 | | 2010 | | [removed: 96%] [added: 97%] |

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

| Park Viridian | | Anaheim, CA | | Mid-rise | | 320 | | | [removed: 254,600 | | |] 2008 | | 2014 | | 97% |

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

| Village at Toluca Lake (5) | | Burbank, CA | | Mid-rise | | 145 | | | [removed: 132,144 | | |] 1974 | | 2017 | | [removed: 98%] [added: 96%] |

| Camarillo Oaks | | Camarillo, CA | | Garden | | 564 | | | [removed: 459,000 | | |] 1985 | | 1996 | | [removed: 98%] [added: 97%] |

| Camino Ruiz Square | | Camarillo, CA | | Garden | | 159 | | | [removed: 105,448 | | |] 1990 | | 2006 | | [removed: 98%] [added: 97%] |

| Pinnacle at Otay Ranch I & II | | Chula Vista, CA | | Mid-rise | | 364 | | | [removed: 384,192 | | |] 2001 | | 2014 | | [removed: 97%] [added: 96%] |

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

| Villa Siena | | Costa Mesa, CA | | Garden | | 272 | | | [removed: 262,842 | | |] 1974 | | 2014 | | [removed: 97%] [added: 96%] |

| Emerald Pointe | | Diamond Bar, CA | | Garden | | 160 | | | [removed: 134,816 | | |] 1989 | | 2014 | | [removed: 97%] [added: 98%] |

| Regency at Encino | | Encino, CA | | Mid-rise | | 75 | | | [removed: 78,487 | | |] 1989 | | 2009 | | [removed: 99%] [added: 97%] |

| The Havens (6) | | Fountain Valley, CA | | Garden | | 440 | | | [removed: 414,040 | | |] 1969 | | 2014 | | [removed: 97%] [added: 96%] |

| Valley Park | | Fountain Valley, CA | | Garden | | 160 | | | [removed: 169,700 | | |] 1969 | | 2001 | | 97% |

| Capri at Sunny Hills (4) | | Fullerton, CA | | Garden | | 102 | | | [removed: 128,100 | | |] 1961 | | 2001 | | 96% |

| Haver Hill (7) | | Fullerton, CA | | Garden | | 264 | | | [removed: 224,130 | | |] 1973 | | 2012 | | 97% |

| Pinnacle at Fullerton | | Fullerton, CA | | Mid-rise | | 192 | | | [removed: 174,336 | | |] 2004 | | 2014 | | [removed: 97%] [added: 96%] |

| Wilshire Promenade | | Fullerton, CA | | Mid-rise | | 149 | | | [removed: 128,000 | | |] 1992 | | 1997 | | 97% |

| Montejo Apartments | | Garden Grove, CA | | Garden | | 124 | | | [removed: 103,200 | | |] 1974 | | 2001 | | 98% |

| CBC [removed: Apartments &] [added: and] The Sweeps | | Goleta, CA | | Garden | | 239 | | | [removed: 179,908 | | |] 1962 | | 2006 | | [removed: 97%] [added: 98%] |

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

Garden-style communities are generally defined as on-grade properties with two and/or three-story buildings with no structured parking while mid-rise communities are generally defined as properties with three to seven story buildings and some structured parking.

High-rise communities are typically defined as properties with buildings that are greater than seven stories, are steel or concrete framed, and frequently have structured parking.

Furthermore, as of December 31, 2019, the office building's physical occupancy rate was 83% consisting of 6 tenants, including the Company.

The table below describes the Company’s operating portfolio as of December 31, 2019.

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information about the Company’s secured mortgage debt and Schedule III thereto for a list of secured mortgage loans related to the Company’s portfolio.)

[*Table of Contents*](#sAA0656F3DF2D5C48A16A28F9C5E99809)

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| The Courtyards at 65th Street (16) | | Emeryville, CA | | Mid-rise | | 331 | | | 2004 | | 2019 | | 96% |

| 777 Hamilton (17) | | Menlo Park, CA | | Mid-rise | | 195 | | | 2017 | | 2019 | | 94% |

| Township | | Redwood City, CA | | Mid-rise | | 132 | | | 2014 | | 2019 | | 97% |

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| Brio (4) | | Walnut Creek, CA | | Mid-rise | | 300 | | | 2015 | | 2019 | | 97% |

| | | | | | | 21,642 | | | | | | | 96% |

| Pure Redmond | | Redmond, WA | | Mid-rise | | 105 | | | 2016 | | 2019 | | 99% |

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| Velo and Ray (16) | | Seattle, WA | | Mid-rise | | 308 | | | 2014 | | 2019 | | 96% |

| | | | | | | 12,233 | | | | | | | 97% |

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| (1) | Unless otherwise specified, the Company consolidates each community in accordance with U.S. GAAP. |

| (4) | Each of these communities is part of a DownREIT structure in which the Company is the general partner or manager and the other limited partners or members are granted rights of redemption for their interests. |

[*Table of Contents*](#sAA0656F3DF2D5C48A16A28F9C5E99809)

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The following tables describe the Company’s operating portfolio as of December 31, 2018.

The first table describes the Company’s communities and the second table describes the Company’s other real estate assets.

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| Mosso (16) | | San Francisco, CA | | High-rise | | 463 | | | 373,181 | | | 2014 | | 2014 | | 97% |

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| | | | | | | 21,146 | | | 18,777,392 | | | | | | | 96% |

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| | | | | | | 11,820 | | | 10,166,093 | | | | | | | 97% |

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| | | | | | | Square | | | Year | | Year | | |

| Other real estate assets (1) | | Location | | Tenants | | Footage | | | Built | | Acquired | | Occupancy (2) |

| Derian Office Building (26) | | Irvine, CA | | 6 | | 106,716 | | | 1983 | | 2000 | | 83% |

| | | | | 6 | | 106,716 | | | | | | | 83% |

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

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

| (14) | The Company has a 75% member interest in this community. |

| (25) | The Company has 99% ownership in this community. |

| (26) | The Company occupies 13% of space in this property. |

[removed: Part II][added: Part II]

[*Table of Contents*](#sAA0656F3DF2D5C48A16A28F9C5E99809)

[removed: Market Information][added: Market Information]

The shares of the Company’s common stock are traded on the New York Stock Exchange [removed: ("NYSE")] under the symbol ESS.

[removed: Holders][added: Holders]

The approximate number of holders of record of the shares of Essex's common stock was [removed: 1,313] [added: 1,248] as of February [removed: 15, 2019.][added: 18, 2020.]

As of February [removed: 15, 2019,] [added: 18, 2020,] there were [removed: 184] [added: 65] holders of record of OP Units, including Essex.

[removed: Return] [added: Return] of [removed: Capital][added: Capital]

The status of the cash dividends distributed for the years ended December 31, [added: 2019,] 2018, [removed: 2017,] and [removed: 2016] [added: 2017] related to common [removed: stock, and Series H preferred] stock [removed: for tax purposes] are as follows:

| | | [removed: 2018] [added: 2019] | | | [removed: 2017] [added: 2018] | | | [removed: 2016] [added: 2017] | |

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

| Ordinary income | | [removed: 79.72] [added: 83.81] | % | | [removed: 84.04] [added: 79.72] | % | | [removed: 86.68] [added: 84.04] | % |

| Capital gain | | [removed: 15.35] [added: 13.78] | % | | [removed: 13.20] [added: 15.35] | % | | [removed: 7.11] [added: 13.20] | % |

| Unrecaptured section 1250 capital gain | | [removed: 4.93] [added: 2.41] | % | | [removed: 2.76] [added: 4.93] | % | | [removed: 6.21] [added: 2.76] | % |

| [added: Index] | | [removed: 2018] [added: 12/31/2014] | | | [removed: 2017] [added: 12/31/2015] | | | [removed: 2016] [added: 12/31/2016] | | [added: | 12/31/2017 | | | 12/31/2018 | | | 12/31/2019 | |]

[removed: Dividends] [added: Dividends] and [removed: Distributions][added: Distributions]

The Board of Directors declared a dividend/distribution for the fourth quarter of [removed: 2018] [added: 2019] of [removed: $1.86] [added: $1.95] per share.

The dividend/distribution was paid on January 15, [removed: 2019] [added: 2020] to stockholders/unitholders of record as of January 2, [removed: 2019.][added: 2020.]

[removed: Dividend] [added: Dividend] Reinvestment and Share Purchase [removed: Plan][added: Plan]

[removed: Securities] [added: Securities] Authorized for Issuance under Equity Compensation [removed: Plans][added: Plans]

The information required by this section is incorporated herein by reference from our Proxy Statement, relating to our [removed: 2019] [added: 2020] Annual Meeting of Shareholders, under the headings "Equity Compensation Plan Information," to be filed with the SEC within 120 days of December 31, [removed: 2018.][added: 2019.]

[removed: Issuance] [added: Issuance] of Registered Equity [removed: Securities][added: Securities]

[removed: On] [added: In] February [removed: 19,] 2019, [removed: Essex’s] [added: the] Board of Directors approved the replenishment of the stock repurchase plan such that, as of such date, the Company had $250.0 million of purchase authority remaining under the [removed: replenished] [added: stock repurchase] plan.

[removed: Issuer] [added: Issuer] Purchases of Equity [removed: Securities][added: Securities]

[removed: Under this program, through December 31, 2018,] [added: In January 2019, pursuant to such authorization,] the Company [removed: had] repurchased and retired [removed: 215,583] [added: 234,061] shares of [added: its] common stock totaling [removed: $52.3] [added: $57.0] million, including commissions, at an average [removed: stock] price of [removed: $242.49] [added: $243.48] per share.

[removed: Performance Graph][added: Performance Graph]

This comparison assumes that the value of the investment in the common stock and each index was $100 on December 31, [removed: 2013] [added: 2014] and that all dividends were reinvested.

[removed: ][added: ]

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

[removed: Unregistered] [added: Unregistered] Sales of Equity [removed: Securities][added: Securities]

During the years ended December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] the Operating Partnership issued OP Units in private placements in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, in the amounts and for the consideration set forth below:

During the years ended December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] Essex issued an aggregate of [removed: 39,175] [added: 178,675] and [removed: 176,489] [added: 39,175] shares of its common stock upon the exercise of stock options, respectively.

Essex contributed the proceeds from the option exercises of [removed: $6.2] [added: $37.5] million and [removed: $26.6] [added: $6.2] million to the Operating Partnership in exchange for an aggregate of [removed: 39,175] [added: 178,675] and [removed: 176,489] [added: 39,175] OP Units, as required by the Operating Partnership’s partnership agreement, during the years ended December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] respectively.

During the years ended December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] Essex issued an aggregate of [removed: 1,981] [added: 16,114] and [removed: 2,973] [added: 1,981] shares of its common stock in connection with restricted stock awards for no cash consideration, respectively.

For each share of common stock issued by Essex in connection with such awards, the Operating Partnership issued OP Units to Essex as required by the Operating [added: Partnership's partnership agreement, for an aggregate of 16,114 and 1,981 OP Units during the years ended December 31, 2019 and 2018, respectively.]

During the years ended December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] Essex issued an aggregate of [removed: 5,250] [added: 12,633] and [removed: 1,500] [added: 5,250] shares of its common stock in connection with the exchange of OP Units and DownREIT [removed: limited partnership] units by limited partners [added: or members] into shares of common stock.

For each share of common stock issued by Essex in connection with such exchange, the Operating Partnership issued OP Units to Essex as required by the Operating Partnership's partnership agreement, for an aggregate of [removed: 5,250] [added: 12,633] and [removed: 1,500] [added: 5,250] OP Units during the year ended December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] respectively.

[removed: No] [added: During the year ended December 31, 2018, no] shares of the Company's common stock were issued or sold by Essex pursuant to [removed: the 2018 ATM Program or the prior 2016 ATM Program during the year ended December 31, 2018.][added: its equity distribution programs.]

[removed: For] [added: During] the year ended December 31, [removed: 2017,] [added: 2019,] the Company issued [removed: 345,444] [added: 228,271] shares of [removed: Essex's] common stock through [removed: the 2016 ATM Program.][added: its equity distribution program.]

Essex contributed the net proceeds from these share issuances of [removed: $89.1] [added: $73.4] million to the Operating Partnership in exchange for an aggregate of [removed: 345,444] [added: 228,271] OP units, as required by the Operating Partnership's partnership agreement.

[removed: On February 19, 2019, Essex’s Board of Directors approved the replenishment of the stock] [added: The Company did not] repurchase [removed: plan] [added: any additional shares during the year ended December 31, 2019,] such [removed: that,] [added: that] as of [removed: such date,] [added: December 31, 2019,] the Company had $250.0 million of purchase authority remaining under the [removed: replenished] [added: stock repurchase] plan.

[*Table of Contents*](#sAA0656F3DF2D5C48A16A28F9C5E99809)

During the year ended December 31, 2019, the Company issued 228,271 shares of common stock through its equity distribution program at an average price of $321.56 per share for proceeds of $73.4 million.

As of December 31, 2019, there were no outstanding forward sale agreements, and $826.6 million of shares remains available to be sold under this program.

[*Table of Contents*](#sAA0656F3DF2D5C48A16A28F9C5E99809)

| Essex Property Trust, Inc. | | 100.00 | | | 118.87 | | | 118.71 | | | 126.79 | | | 132.83 | | | 167.25 | |

| NAREIT All Equity REIT Index | | 100.00 | | | 102.83 | | | 111.70 | | | 121.39 | | | 116.48 | | | 149.86 | |

| S&P 500 Index | | 100.00 | | | 101.38 | | | 113.51 | | | 138.29 | | | 132.23 | | | 173.86 | |

As of December 31, 2019, there are no outstanding forward purchase agreements.

[*Table of Contents*](#sAA0656F3DF2D5C48A16A28F9C5E99809)

Essex's common stock has been traded on the NYSE since June 13, 1994.

The closing price of Essex's common stock as reported by the NYSE on February 15, 2019 was $278.82.

| | | | | | | | | | |

| Series H Preferred stock | | | | | | | | | |

| Ordinary income | | — | % | | — | % | | 86.68 | % |

| Capital gains | | — | % | | — | % | | 7.11 | % |

| Unrecaptured section 1250 capital gain | | — | % | | — | % | | 6.21 | % |

| | | — | % | | — | % | | 100.00 | % |

In September 2018, the Company entered into a new equity distribution agreement in connection with the 2018 ATM Program pursuant to which the Company may offer and sell shares of its common stock having an aggregate gross sales price of up to $900.0 million.

In connection with the 2018 ATM Program, the Company may also enter into related forward sale agreements whereby, at the Company’s discretion, it may sell shares of its common stock under the 2018 ATM Program under forward sales agreements.

The use of a forward sale agreement would allow the Company to lock in a share price on the sale of shares of its common stock at the time the agreement is executed, but defer receiving the proceeds from the sale of shares until a later date.

During 2018, the Company issued no shares of common stock under the 2018 ATM Program or the prior 2016 ATM Program.

As of December 31, 2018, the Company had no outstanding forward sale agreements to sell any shares of common stock.

As of December 31, 2018, the Company had $197.7 million of purchase authority remaining under the plan.

| Index | | 12/31/2013 | | | 12/31/2014 | | | 12/31/2015 | | | 12/31/2016 | | | 12/31/2017 | | | 12/31/2018 | |

| Essex Property Trust, Inc. | | 100.00 | | | 148.00 | | | 175.93 | | | 175.70 | | | 187.65 | | | 196.60 | |

| NAREIT All Equity REIT Index | | 100.00 | | | 128.03 | | | 131.64 | | | 143.00 | | | 155.41 | | | 149.12 | |

| S&P 500 Index | | 100.00 | | | 113.69 | | | 115.26 | | | 129.05 | | | 157.22 | | | 150.33 | |

Partnership's partnership agreement, for an aggregate of 1,981 and 2,973 OP Units during the years ended December 31, 2018 and 2017, respectively.

As of December 31, 2018, the Company had no outstanding forward purchase agreements to sell any shares of common stock.

Stock Repurchases

The following table summarizes the Company’s purchases of its common stock during the three months ended December 31, 2018:

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

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

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

| | | Total Number of Shares Purchased | | | Average Price Paid Per Share | | | | | Total Number of Shares Purchased as Part of a Publicly Announced Program(1) | | | | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program (in Millions) | | | |

| October 1, 2018 - October 31, 2018 | | — | | | — | | | | | — | | | | — | | | |

| November 1, 2018 - November 30, 2018 | | 74,811 | | | 249.20 | | | | | 74,811 | | | | 226.5 | | | |

| December 1, 2018 - December 31, 2018 | | 118,838 | | | 242.48 | | | | | 118,838 | | | | 197.7 | | | |

| Total | | 193,649 | | | $ | 245.08 | | | | 193,649 | | | | $ | 197.7 | | |

(1) In December 2015, Essex’s Board of Directors authorized a stock repurchase plan to allow Essex to acquire shares in an aggregate of up to $250.0 million.

Under this program, as of December 31, 2018, the Company had $197.7 million of purchase authority remaining.

The following tables set forth summary financial and operating information for Essex and the Operating Partnership from January 1, [removed: 2014] [added: 2015] through December 31, [removed: 2018.][added: 2019.]

[removed: Essex] [added: *Essex] Property Trust, Inc. and [removed: Subsidiaries][added: Subsidiaries*]

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

| | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | |

| | | [removed: ($] [added: ($] in thousands, except per share [removed: amounts)] [added: amounts)] | | | | | | | | | | | | | | | | | | |

| [removed: OPERATING DATA:] [added: OPERATING DATA:] | | | | | | | | | | | | | | | | | | | | |

| Rental and other property | | $ | [removed: 1,390,870] [added: 1,450,628] | | | $ | [removed: 1,354,325] [added: 1,390,870] | | | $ | [removed: 1,285,723] [added: 1,354,325] | | | $ | [removed: 1,185,498] [added: 1,285,723] | | | $ | [removed: 961,591] [added: 1,185,498] | |

| Management and other fees from affiliates | | [removed: 9,183] [added: 9,527] | | | | [removed: 9,574] [added: 9,183] | | | | [removed: 8,278] [added: 9,574] | | | | [removed: 8,909] [added: 8,278] | | | | [removed: 9,347] [added: 8,909] | | |

| Net income | | [removed: 413,599] [added: 464,448] | | | | [removed: 458,043] [added: 413,599] | | | | [removed: 438,410] [added: 458,043] | | | | [removed: 248,239] [added: 438,410] | | | | [removed: 134,438] [added: 248,239] | | |