Item 1. Business

OVERVIEW

Essex Property Trust, Inc. ("Essex"), a Maryland corporation, is an S&P 500 company that operates as a self-administered and self-managed real estate investment trust ("REIT"). Essex owns all of its interest in its real estate and other investments directly or indirectly through Essex Portfolio, L.P. (the "Operating Partnership" or "EPLP"). Essex is the sole general partner of the Operating Partnership and as of December 31, 2022, had an approximately 96.6% general partner interest in the Operating Partnership. In this report, the terms the "Company," "we," "us," and "our" also refer to Essex Property Trust, Inc., the Operating Partnership and those entities/subsidiaries owned or controlled by Essex and/or the Operating Partnership.

Essex has elected to be treated as a REIT for federal income tax purposes, commencing with the year ended December 31, 1994. Essex completed its initial public offering on June 13, 1994. In order to maintain compliance with REIT tax rules, the Company utilizes taxable REIT subsidiaries for various revenue generating or investment activities. All taxable REIT subsidiaries are consolidated by the Company for financial reporting purposes.

The Company is engaged primarily in the ownership, operation, management, acquisition, development and redevelopment of predominantly apartment communities, located along the West Coast of the United States. As of December 31, 2022, the Company owned or had ownership interests in 252 operating apartment communities, aggregating 62,147 apartment homes, excluding the Company's ownership in preferred equity co-investments, loan investments, three operating commercial buildings, and a development pipeline comprised of one unconsolidated joint venture project and various predevelopment projects aggregating 264 apartment homes (collectively, the "Portfolio").

The Company’s website address is http://www.essex.com. The Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports, and the Proxy Statement for its Annual Meeting of Stockholders are available, free of charge, on its website as soon as practicable after the Company files the reports with the U.S. Securities and Exchange Commission ("SEC"). The information contained on the Company's website shall not be deemed to be incorporated into this report.

BUSINESS STRATEGIES

The following is a discussion of the Company’s business strategies in regards to real estate investment and management.

Business Strategies

Research Driven Approach to Investments – The Company believes that successful real estate investment decisions and portfolio growth begin with extensive regional economic research and local market knowledge. The Company continually assesses markets where the Company operates, as well as markets where the Company considers future investment opportunities by evaluating markets and focusing on the following strategic criteria:

• Major metropolitan areas that have regional population in excess of one million;

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

• Rental demand enhanced by affordability of rents relative to costs of for-sale housing; and

• Housing demand based on job growth, proximity to jobs, high median incomes and the quality of life including related commuting factors.

Table of Contents

Recognizing that all real estate markets are cyclical, the Company regularly evaluates the results of its regional economic, and local market research, and adjusts the geographic focus of its portfolio accordingly. The Company seeks to increase its portfolio allocation in markets projected to have the strongest local economies and to decrease allocations in markets projected to have declining economic conditions. Likewise, the Company also seeks to increase its portfolio allocation in markets that have attractive property valuations and to decrease allocations in markets that have inflated valuations and low relative yields.

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. The Company intends to achieve this by utilizing the strategies set forth below:

• Property Management – Oversee delivery and quality of the housing provided to our tenants and manage the properties financial performance.

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

• Business Planning and Control – 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 managers, the operations leadership team, and senior management.

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

CURRENT BUSINESS ACTIVITIES

Acquisitions of Real Estate Interests

Acquisitions are an important component of the Company’s business plan. For the year ended December 31, 2022, the Company purchased or increased its interests in three communities consisting of 590 apartment homes for approximately $215.9 million. The table below summarizes acquisition activity for the year ended December 31, 2022 ($ in millions):

Property Name						Location						Apartment Homes						Essex Ownership Percentage						Ownership						Quarter in 2022						Purchase Price
Vela						Woodland Hills, CA						379						50		%				Wesco VI						Q1						$	183.0		(1)
Regency Palm Court and Windsor Court						Los Angeles, CA						211						100		%				EPLP						Q3						32.9			(2)
Total 2022												590																								$	215.9

(1) Represents the contract price for the entire property, not the Company’s share.

(2) In July 2022, the Company acquired its joint venture partner’s 49.8% minority interest in two apartment communities, consisting of 211 apartment homes located in Los Angeles, CA, for a contract price of $32.9 million.

Dispositions of Real Estate

As part of its strategic plan to own quality real estate in supply-constrained markets, the Company continually evaluates all of its communities and sells those communities that no longer meet the Company's strategic criteria. The Company may use the capital generated from the dispositions to invest in higher-return communities, other real estate investments or to fund other commitments. The Company believes that the sale of these communities will not have a material impact on its future results of operations or cash flows nor will the sale of these communities materially affect the Company's ongoing operations. In general, the Company seeks to offset the dilutive impact on long-term earnings and funds from operations from these dispositions through the positive impact of reinvestment of proceeds.

For the year ended December 31, 2022, the Company sold one community consisting of 250 apartment homes for approximately $160.0 million.

Property Name						Location						Apartment Homes						Ownership						Quarter in 2022						Sales Price (in millions)
Anavia						Anaheim, CA						250						EPLP						Q4						$	160.0		(1)
Total 2022												250																		$	160.0

Table of Contents

(1) The Company recognized a $94.4 million gain on sale.

Development Pipeline

The Company defines development projects as new communities that are being constructed, or are newly constructed and are in a phase of lease-up and have not yet reached stabilized operations. As of December 31, 2022, the Company's development pipeline was comprised of one unconsolidated joint venture project under development aggregating 264 apartment homes and various predevelopment projects, with total incurred costs of $102.0 million. The estimated remaining project costs are approximately $25.0 million, of which $12.8 million represents the Company's share of estimated remaining costs, for total estimated project costs of $127.0 million.

The Company defines predevelopment projects as proposed communities in negotiation or in the entitlement process with an expected high likelihood of becoming entitled development projects. As of December 31, 2022, the Company had various consolidated predevelopment projects. The Company may also acquire land for future development purposes or sale.

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

																								As of
																								12/31/2022
												Essex						Estimated						Incurred						Estimated
Development Pipeline						Location						Ownership%						Apartment Homes						Project Cost (1)						Project Cost**(1)**
Development Projects - Joint Venture
LIVIA (fka Scripps Mesa Apartments) (2)						San Diego, CA						51%						264						$	77					$	102
Total Development Projects - Joint Venture																		264						77						102
Predevelopment Projects - Consolidated
Other Projects						Various						100%						—						25						25
Total - Consolidated Predevelopment Projects																		—						25						25
Grand Total - Development and Predevelopment Pipeline																		264						$	102					$	127

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

(2)Incurred project cost and estimated project cost are net of a projected value for low income housing tax credit proceeds and the value of the tax-exempt bond structure.

Long Term Debt

During 2022, the Company made regularly scheduled principal payments and loan payoffs of $43.2 million to its secured mortgage notes payable at an average interest rate of 3.6%.

In October 2022, the Company obtained a $300.0 million unsecured term loan priced at Adjusted Secured Overnight Financing Rate ("SOFR") plus 0.85%. The loan has been swapped to an all-in fixed rate of 4.2% and matures in October 2024 with three 12-month extension options, exercisable at the Company's option. The loan includes a six-month delayed draw feature with the proceeds expected to be drawn in April 2023 to repay the Company's $300.0 million unsecured notes due in May 2023.

Bank Debt

As of December 31, 2022, Moody’s Investor Service and Standard and Poor's ("S&P") credit agencies rated Essex Property Trust, Inc. and Essex Portfolio, L.P. Baa1/Stable and BBB+/Stable, respectively.

At December 31, 2022, the Company had two unsecured lines of credit aggregating $1.24 billion. The Company's $1.2 billion credit facility had an interest rate of Adjusted SOFR plus 0.75% which is based on a tiered rate structure tied to the Company's credit ratings, adjusted for the Company's sustainability metric grid, and a scheduled maturity date of January 2027 with two six-month extensions, exercisable at the Company's option. The Company's $35.0 million working capital unsecured line of

Table of Contents

credit had an interest rate of Adjusted SOFR plus 0.75%, which is based on a tiered rate structure tied to the Company's credit ratings, adjusted for the Company's sustainability metric grid, and a scheduled maturity date of July 2024.

Equity Transactions

During the year ended December 31, 2022, the Company did not issue any shares of common stock through its equity distribution agreement entered into in September 2021 (the "2021 ATM Program"). As of December 31, 2022, there were no outstanding forward sale agreements, and $900.0 million of shares remain available to be sold under the 2021 ATM Program.

In September 2022, the Company's Board of Directors approved a new stock repurchase plan to allow the Company to acquire shares of common stock up to an aggregate value of $500.0 million. The plan supersedes the Company's previous common stock repurchase plan announced in December 2015. During the year ended December 31, 2022, the Company repurchased and retired 740,053 shares of its common stock totaling $189.7 million, including commissions, of which 420,606 shares of common stock totaling $101.7 million were repurchased under the new plan after its approval. As of December 31, 2022, the Company had $398.3 million of purchase authority remaining under its $500.0 million stock repurchase plan.

Co-investments

The Company has entered into, and may continue in the future to enter into, joint ventures or partnerships (including limited liability companies) 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. For each joint venture the Company holds a non-controlling interest in the venture and, in most cases, may earn customary management fees, development fees, asset property management fees, and a promote interest.

The Company has also made, and may continue in the future to make, preferred equity investments in various multifamily development projects. The Company earns a preferred rate of return on these investments.

HUMAN CAPITAL MANAGEMENT

Company Overview and Values

The Company is headquartered in San Mateo, CA, and has regional corporate offices in Woodland Hills, CA; Irvine, CA and Bellevue, WA. As of December 31, 2022, the Company had 1,772 employees, 99.9% of whom were full-time employees. A total of 1,327 employees worked on-site at our operating communities and 445 worked in our corporate offices. The Company's mission is to create quality communities in premier locations and it is critical to the Company's mission that it attracts, trains and retains a talented and diverse team by providing a better place to work and significant opportunities for professional growth. The Company's culture supports its mission and is guided by its core values: to act with integrity, to care about what matters, to do right with urgency, to lead at every level and to seek fairness. The Company seeks to reinforce those values within its workforce.

Workplace Diversity

The Company believes it has one of the most diverse workforces among its peers in the real estate industry in part due to its robust and integrated diversity, equity, and inclusion strategy, which utilizes training programs, employee committees, and executive sponsorships to strengthen and promote diversity, equal opportunity, and fair treatment for all Company associates. As of December 31, 2022, the Company's workforce was, based on the voluntary self-identification of our employee base, approximately 45% Hispanic or Latino, 28% White, 12% Asian, 7% Black or African American, 1% Native Hawaiian or other Pacific Islander, 1% American Indian or Alaska Native, and 5% two or more races. 3% of employees chose to not disclose their race. 54% of the Company’s managerial level employees, 22% of its senior executives, and 20% of its named executive officers self-identified as Hispanic or Latino, Asian, Black or African American, Native Hawaiian or other Pacific Islander, American Indian or Alaska Native, or two or more races. As of December 31, 2022, the Company’s workforce was 41% female, 58% male, and 1% chose not to disclose their gender. 57% of our corporate associates and 36% of our on-site operational associates self-identified as female. The Company had 249 women in positions of manager or higher, representing 60% of managerial positions, a decrease from 65% in 2021. The slight decrease is primarily attributable to the Company’s new operational structure which resulted in 62 operational associates moving into non-managerial roles. While some oversight duties were realigned, salary and benefits were not impacted, and women continue to hold a majority of the managerial roles at the Company. Gender diversity within the Company’s leadership is similar to the overall gender diversity of the Company’s employees and managers, with women composing 60% of the Company’s executive officers and 56% of the Company’s senior executives. The tables below detail the Company’s gender representation by position and the age diversity of its workforce.

Table of Contents

The Company has a Diversity, Equity, and Inclusion ("DEI") Committee which directs the overarching goal setting, implementation, and follow-up for DEI initiatives and whose chairperson reports directly to the CEO on the Committee’s activities. The Company supports the employee-led affinity groups, Women at Essex and the LGBTQ+ focused Rainbow Alliance, which foster a sense of community and inclusion for a diverse mix of associates at the Company through discussions and activities that are intended to engage, educate, enable, and empower the Company's employees. All associates are offered training aimed at preventing workplace harassment, including harassment based on age, gender or ethnicity, training covering the foundations of DEI and awareness of unconscious bias in the workplace, and all managers are required to complete anti-harassment training.

The Company is committed to pay equity and conducts a pay equity analysis on an annual basis. The Company developed a robust, multiple regression analysis model, which confirmed that we continue to maintain our gender pay parity. Our robust statistical analysis confirmed that gender was not a significant factor in determining pay decisions in 2022.

The following aligns with the Company’s EE0-1 data for 2022:

Gender Representation by Position (1)						December 31, 2022
			Male # (2)						Female # (2)						Male %						Female %
Corporate - Top Executives, VPs, Assistant VPs, Directors, & Managers						74						76						49%						51%
Corporate - Below manager position						100						173						37%						63%
Field - Regional Directors/Managers, Community Managers						89						173						34%						66%
Field - Leasing Specialists, Leasing Managers, Relationship Reps, Bookkeepers						110						216						34%						66%
Field - Maintenance Supervisors and Techs						548						11						98%						2%
Field - Porter, Landscaper, Painter, Security Guard, Amenities Attendant						109						89						55%						45%

(1) Table excludes 4 associates that did not declare gender and does not include board directors and consultants.

(2) Gender is labeled as how respondents elected to be self-identified.

Total Workforce by Age Group						December 31, 2022
			#						%
<= 25						166						9%
26-35						534						30%
36-45						422						24%
46-55						348						20%
56-65						262						15%
> 65						40						2%

Training and Development

The Company values leadership at every level and demonstrates such value with respect to its associates by providing opportunities for all associates to develop personal and professional skills and by offering programs to encourage employee retention and advancement. These programs include leadership training, communication training, individual learning plans, Community Manager and Maintenance Manager training, investments in learning technology, and mentorship programs. Additionally, the Company provides its associates with outside educational benefits by offering an annual $3,000 tuition reimbursement to further support professional growth. To identify, retain and reward top performers, the Company offers a tenure program, which involves a cash gift for every five years of service, as well as excellence awards and a spot bonus recognition program to reward associates for good teamwork, good ideas and good service. The Company encourages internal promotions and hiring for open positions. In 2022, the Company promoted 12% of its employees to higher positions in the Company, a slight decrease from 2021 when the Company promoted 16% of its employees primarily due to the Company’s focus on ensuring proper fit for its associates entering into new roles in the new operational structure. The Company engages in succession planning for its leadership and managerial positions and its executive team identifies and mentors the Company's top talent in order to ensure strong leadership at the Company for the future.

Table of Contents

Employee Well-Being and Safety

The Company's compensation and benefits program and safety practices further reinforce its commitment to investing in the well-being of its associates while incentivizing its employees to promote fulfillment of the Company’s mission. The Company offers competitive compensation and a standard suite of benefits, including health insurance, a retirement plan with a $6,000 annual matching potential benefit, life and disability coverage, paid parental leave, and commuter benefits. Additionally, the Company offers a housing discount for associates that live at Company communities, and additionally offers retirement support, associate discount programs, mental health support, including a mental health program and refresh days for our operations teams, and health benefit credits for participation in wellness programs. The Company engages in an annual compensation study to align compensation with market standards and to ensure the Company is appropriately compensating its top performers.

Providing a safe working environment and promoting employee safety is imperative to the Company, and the Company continued to prioritize its associates’ health and safety throughout 2022. The Company has safety policies in place that align with an Injury & Illness Prevention Program, which seeks to proactively prevent workplace accidents and protect the health and safety of the Company's associates through training and analysis of incident reports. The Company provides safety training to Community Managers, Maintenance Supervisors, and Maintenance Technicians on a wide-range of topics, including Industrial Safety and Health, Confined Space Awareness, Electrical Safety and Protection, Active Shooter Event, Fire Extinguishing, Safety Data Sheets, Safe Lifting the E-Way, Ladder Safety, and Heat Stress in the Workplace. Additionally, in 2022, the Company continued to provide associates with additional paid time off for COVID-19 related illness and care through its Special Circumstances Leave policy in order to enable associates with adequate time to recover and to help prevent the spread of COVID-19.

Community and Social Impact

The Company believes volunteering can create positive change in the communities where our associates live and work and that the Company's commitment to giving back helps it attract and retain associates. The Company's Volunteer Program is aimed at supporting and encouraging eligible associates to become actively involved in their communities through the Company's support of charity initiatives and offering paid hours for volunteer time. Additionally, the Company’s “Essex Cares” program provides direct aid to the Company’s residents, associates, and local communities, including those who have experienced financial hardships.

Employee Engagement

In order to engage and promote communication with our associates and solicit meaningful feedback on our efforts to create a positive work environment, the Company issues engagement surveys to all associates to measure 10 key drivers of employee experience including organizational fit, DEI, freedom of opinion, meaningful work, management support and recognition, among others. Engagement surveys are split into three phases: new hire surveys, Company-wide bi-annual surveys, and exit surveys. 89% of Company employees participated in the surveys in 2022. The Company’s overall score on the surveys was 8.3 out of 10.

INSURANCE

The Company purchases general liability and property insurance coverage, including loss of rent, for each of its communities. The Company also purchases limited earthquake, terrorism, environmental and flood insurance. There are certain types of losses which may not be covered or could exceed coverage limits. The insurance programs are subject to deductibles and self-insured retentions in varying amounts. The Company utilizes a wholly owned insurance subsidiary, Pacific Western Insurance LLC ("PWI"), to self-insure certain earthquake and property losses. As of December 31, 2022, PWI had cash and marketable securities of approximately $107.6 million, and is consolidated in the Company's financial statements.

All of the Company's communities are located in areas that are subject to earthquake activity. The Company evaluates its financial loss exposure to seismic events by using actuarial loss models developed by the insurance industry and in most cases property vulnerability analysis based on structural evaluations by seismic consultants. The Company manages this exposure, where considered appropriate, desirable, and cost-effective, by upgrading properties to increase their resistance to forces caused by seismic events, by considering available funds and coverages provided by PWI and/or by purchasing seismic insurance. In most cases the Company also purchases limited earthquake insurance for certain properties owned by the Company's co-investments.

In addition, the Company carries other types of insurance coverage related to a variety of risks and exposures.

Table of Contents

Based on market conditions, the Company may change or potentially eliminate insurance coverages, or increase levels of self-insurance. Further, the Company may incur losses, which could be material, due to uninsured risks, deductibles and self-insured retentions, and/or losses in excess of coverage limits.

COMPETITION

There are numerous housing alternatives that compete with the Company’s communities in attracting tenants. These include other apartment communities, condominiums and single-family homes. If the demand for the Company’s communities is reduced or if competitors develop and/or acquire competing housing, rental rates and occupancy may drop which may have a material adverse effect on the Company’s financial condition and results of operations.

The Company faces competition from other REITs, businesses and other entities in the acquisition, development and operation of apartment communities. Some competitors are larger and have greater financial resources than the Company. This competition may result in increased costs of apartment communities the Company acquires and/or develops.

WORKING CAPITAL

The Company believes that cash flows generated by its operations, existing cash and cash equivalents, marketable securities balances, availability under existing lines of credit, access to capital markets and the ability to generate cash from the disposition of real estate are sufficient to meet all of its reasonably anticipated cash needs during 2023.

The timing, source and amounts of cash flows provided by financing activities and used in investing activities are sensitive to changes in interest rates, stock price, and other fluctuations in the capital markets environment, which can affect the Company’s plans for acquisitions, dispositions, development and redevelopment activities.

ENVIRONMENTAL CONSIDERATIONS

As a real estate owner and operator, we are subject to various federal, state and local environmental laws, regulations and ordinances and may be subject to liability and the costs of removal or remediation of certain potentially hazardous materials that may be present in our communities. See the discussion under the caption, "Risks Related to Real Estate Investments and Our Operations - The Company’s Portfolio may have environmental liabilities" in Item 1A, Risk Factors, for information concerning the potential effect of environmental regulations on its operations, which discussion is incorporated by reference into this Item 1.

OTHER MATTERS

Certain Policies of the Company

The Company intends to continue to operate in a manner that will not subject it to regulation under the Investment Company Act of 1940. The Company may in the future (i) issue securities senior to its common stock, (ii) fund acquisition activities with borrowings under its line of credit and (iii) offer shares of common stock and/or units of limited partnership interest in the Operating Partnership or affiliated partnerships as partial consideration for property acquisitions. The Company from time to time acquires partnership interests in partnerships and joint ventures, either directly or indirectly through subsidiaries of the Company, when such entities’ underlying assets are real estate.

The Company invests primarily in apartment communities that are located in predominantly coastal markets within Southern California, Northern California, and the Seattle metropolitan area. The Company currently intends to continue to invest in apartment communities in such regions. However, the geographical composition of the portfolio is evaluated periodically and may be modified by management.

Table of Contents