Item 1. Condensed Consolidated Financial Statements

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Item 1. Condensed Consolidated Financial Statements

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except parenthetical and share amounts)


ASSETS	June 30, 2023		December 31, 2022
Real estate:
Rental properties:
Land and land improvements	$	3,036,912	$	3,043,321
Buildings and improvements	12,984,143		12,922,906
	16,021,055		15,966,227
Less: accumulated depreciation	(5,390,935)		(5,152,133)
	10,630,120		10,814,094
Real estate under development	22,668		24,857
Co-investments	1,122,114		1,127,491

	11,774,902		11,966,442
Cash and cash equivalents-unrestricted	60,949		33,295
Cash and cash equivalents-restricted	8,165		9,386
Marketable securities, net of allowance for credit losses of zero as of both June 30, 2023 and December 31, 2022	102,131		112,743
Notes and other receivables, net of allowance for credit losses of $0.6 million and $0.3 million as of June 30, 2023 and December 31, 2022, respectively (includes related party receivables of $6.1 million and $7.0 million as of June 30, 2023 and December 31, 2022, respectively)	150,464		103,045
Operating lease right-of-use assets	65,505		67,239
Prepaid expenses and other assets	83,157		80,755
Total assets	$	12,245,273	$	12,372,905
LIABILITIES AND EQUITY
Unsecured debt, net	$	5,315,336	$	5,312,168
Mortgage notes payable, net	592,143		593,943
Lines of credit	34,429		52,073
Accounts payable and accrued liabilities	172,946		165,461
Construction payable	22,089		23,159
Dividends payable	155,739		149,166
Distributions in excess of investments in co-investments	47,934		42,532

Operating lease liabilities	66,857		68,696
Other liabilities	44,440		43,441
Total liabilities	6,451,913		6,450,639
Commitments and contingencies
Redeemable noncontrolling interest	31,355		27,150
Equity:
Common stock; $0.0001 par value, 670,000,000 shares authorized; 64,183,304 and 64,604,603 shares issued and outstanding, respectively	6		6
Additional paid-in capital	6,657,481		6,750,076
Distributions in excess of accumulated earnings	(1,123,594)		(1,080,176)
Accumulated other comprehensive income, net	51,385		46,466
Total stockholders' equity	5,585,278		5,716,372
Noncontrolling interest	176,727		178,744
Total equity	5,762,005		5,895,116
Total liabilities and equity	$	12,245,273	$	12,372,905

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income and Comprehensive Income

(Unaudited)

(In thousands, except share and per share amounts)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenues:
Rental and other property	$	413,265	$	397,240	$	822,921	$	776,456
Management and other fees from affiliates	2,778		2,738		5,543		5,427
	416,043		399,978		828,464		781,883
Expenses:
Property operating, excluding real estate taxes	73,843		69,761		147,725		138,619
Real estate taxes	45,381		43,759		91,911		91,001
Corporate-level property management expenses	11,451		10,176		22,883		20,348
Depreciation and amortization	136,718		134,517		273,065		268,050
General and administrative	13,813		13,127		29,124		25,369

Expensed acquisition and investment related costs	5		10		344		18
Casualty loss	—		—		433		—
	281,211		271,350		565,485		543,405
Gain on sale of real estate and land	—		—		59,238		—
Earnings from operations	134,832		128,628		322,217		238,478
Interest expense	(52,600)		(50,477)		(103,645)		(100,854)
Total return swap income	821		2,283		1,854		4,827
Interest and other income (loss)	12,199		(17,208)		24,649		(24,775)
Equity income (loss) from co-investments	12,237		(8,400)		23,108		12,771
Deferred tax (expense) benefit on unconsolidated co-investments	(1,733)		6,864		(833)		9,618


Net income	105,756		61,690		267,350		140,065
Net income attributable to noncontrolling interest	(6,136)		(4,636)		(14,198)		(9,757)


Net income available to common stockholders	$	99,620	$	57,054	$	253,152	$	130,308
Comprehensive income	$	121,142	$	73,400	$	272,442	$	172,256
Comprehensive income attributable to noncontrolling interest	(6,659)		(5,029)		(14,371)		(10,842)
Comprehensive income attributable to controlling interest	$	114,483	$	68,371	$	258,071	$	161,414
Per share data:
Basic:
Net income available to common stockholders	$	1.55	$	0.87	$	3.94	$	2.00
Weighted average number of shares outstanding during the period	64,182,555		65,262,517		64,319,783		65,269,109
Diluted:
Net income available to common stockholders	$	1.55	$	0.87	$	3.94	$	2.00
Weighted average number of shares outstanding during the period	64,183,675		65,289,603		64,320,898		65,307,572

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Equity for the three and six months ended June 30, 2023 and 2022

(Unaudited)

(In thousands)


	Common stock		Additional paid-in capital		Distributions in excess of accumulated earnings		Accumulated other comprehensive income, net		Noncontrolling interest		Total
Three Months Ended June 30, 2023		Shares	Amount
Balances at March 31, 2023		64,182	$	6	$	6,657,183	$	(1,074,930)	$	36,522	$	178,076	$	5,796,857
Net income		—	—		—		99,620		—		6,136		105,756


Change in fair value of derivatives and amortization of swap settlements		—	—		—		—		14,863		523		15,386

Issuance of common stock under:
Stock option and restricted stock plans, net		1	—		—		—		—		—		—
Sale of common stock, net		—	—		(53)		—		—		—		(53)
Equity based compensation costs		—	—		1,915		—		—		67		1,982


Changes in the redemption value of redeemable noncontrolling interest		—	—		(1,160)		—		—		13		(1,147)

Distributions to noncontrolling interest		—	—		—		—		—		(8,056)		(8,056)
Redemptions of noncontrolling interest		—	—		(404)		—		—		(32)		(436)
Common stock dividends ($2.31 per share)		—	—		—		(148,284)		—		—		(148,284)
Balances at June 30, 2023		64,183	$	6	$	6,657,481	$	(1,123,594)	$	51,385	$	176,727	$	5,762,005

Table of Contents


	Common stock		Additional paid-in capital		Distributions in excess of accumulated earnings		Accumulated other comprehensive income, net		Noncontrolling interest		Total
Six months ended June 30, 2023		Shares	Amount
Balances at December 31, 2022		64,605	$	6	$	6,750,076	$	(1,080,176)	$	46,466	$	178,744	$	5,895,116
Net income		—	—		—		253,152		—		14,198		267,350


Change in fair value of derivatives and amortization of swap settlements		—	—		—		—		4,919		173		5,092

Issuance of common stock under:
Stock option and restricted stock plans, net		3	—		—		—		—		—		—
Sale of common stock, net		—	—		(125)		—		—		—		(125)
Equity based compensation costs		—	—		7,387		—		—		259		7,646
Retirement of common stock, net		(437)	—		(95,657)		—		—		—		(95,657)

Changes in the redemption value of redeemable noncontrolling interest		—	—		(4,087)		—		—		(118)		(4,205)

Distributions to noncontrolling interest		—	—		—		—		—		(16,033)		(16,033)
Redemptions of noncontrolling interest		12	—		(113)		—		—		(496)		(609)
Common stock dividends ($4.62 per share)		—	—		—		(296,570)		—		—		(296,570)
Balances at June 30, 2023		64,183	$	6	$	6,657,481	$	(1,123,594)	$	51,385	$	176,727	$	5,762,005

Table of Contents


	Common stock		Additional paid-in capital		Distributions in excess of accumulated earnings		Accumulated other comprehensive income, net		Noncontrolling Interest		Total
Three Months Ended June 30, 2022		Shares	Amount
Balances at March 31, 2022		65,332	$	7	$	6,930,072	$	(987,333)	$	14,237	$	181,224	$	6,138,207
Net income		—	—		—		57,054		—		4,636		61,690

Change in fair value of derivatives and amortization of swap settlements		—	—		—		—		11,416		396		11,812
Change in fair value of marketable debt securities, net		—	—		—		—		(99)		(3)		(102)
Issuance of common stock under:
Stock option and restricted stock plans, net		3	—		172		—		—		—		172
Sale of common stock, net		—	—		(66)		—		—		—		(66)
Equity based compensation costs		—	—		2,572		—		—		90		2,662
Retirement of common stock, net		(219)	—		(60,830)		—		—		—		(60,830)
Changes in the redemption value of redeemable noncontrolling interest		—	—		6,065		—		—		230		6,295

Distributions to noncontrolling interest		—	—		—		—		—		(7,622)		(7,622)
Redemptions of noncontrolling interest		8	—		(2,122)		—		—		(213)		(2,335)
Common stock dividends ($2.20 per share)		—	—		—		(143,298)		—		—		(143,298)
Balances at June 30, 2022		65,124	$	7	$	6,875,863	$	(1,073,577)	$	25,554	$	178,738	$	6,006,585

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	Common stock		Additional paid-in capital		Distributions in excess of accumulated earnings		Accumulated other comprehensive income (loss), net		Noncontrolling Interest		Total
Six months ended June 30, 2022		Shares	Amount
Balances at December 31, 2021		65,248	$	7	$	6,915,981	$	(916,833)	$	(5,552)	$	182,905	$	6,176,508
Net income		—	—		—		130,308		—		9,757		140,065

Change in fair value of derivatives and amortization of swap settlements		—	—		—		—		30,820		1,075		31,895
Change in fair value of marketable debt securities, net		—	—		—		—		286		10		296
Issuance of common stock under:
Stock option and restricted stock plans, net		87	—		17,039		—		—		—		17,039
Sale of common stock, net		—	—		(207)		—		—		—		(207)
Equity based compensation costs		—	—		4,952		—		—		173		5,125
Retirement of common stock, net		(219)	—		(60,830)		—		—		—		(60,830)
Changes in the redemption value of redeemable noncontrolling interest		—	—		1,051		—		—		172		1,223
Contributions from noncontrolling interest		—	—		—		—		—		125		125

Distributions to noncontrolling interest		—	—		—		—		—		(15,241)		(15,241)
Redemptions of noncontrolling interest		8	—		(2,123)		—		—		(238)		(2,361)
Common stock dividends ($4.40 per share)		—	—		—		(287,052)		—		—		(287,052)
Balances at June 30, 2022		65,124	$	7	$	6,875,863	$	(1,073,577)	$	25,554	$	178,738	$	6,006,585

See accompanying notes to the unaudited condensed consolidated financial statements.

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ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands, except parenthetical amounts)


	Six Months Ended June 30,
	2023		2022
Cash flows from operating activities:
Net income	$	267,350	$	140,065
Adjustments to reconcile net income to net cash provided by operating activities:
Straight-lined rents	170		4,570
Depreciation and amortization	273,065		268,050

Amortization of discount and debt financing costs, net	3,170		3,332
Realized and unrealized (gains) losses on marketable securities, net	(8,871)		34,011

Provision for credit losses	34		63



Earnings from co-investments	(23,108)		(12,771)
Operating distributions from co-investments	31,168		67,834
Accrued interest from notes and other receivables	(4,743)		(6,974)
Casualty loss	433		—
Gain on the sale of real estate and land	(59,238)		—



Equity-based compensation	3,795		4,788


Changes in operating assets and liabilities:
Prepaid expenses, receivables, operating lease right-of-use assets, and other assets	457		15,406
Accounts payable, accrued liabilities, and operating lease liabilities	3,646		(10,887)
Other liabilities	999		2,058
Net cash provided by operating activities	488,327		509,545
Cash flows from investing activities:
Additions to real estate:
Acquisitions of real estate and acquisition related capital expenditures, net of cash acquired	(23,182)		(223)
Redevelopment	(41,675)		(47,674)
Development acquisitions of and additions to real estate under development	(5,248)		(12,862)
Capital expenditures on rental properties	(56,025)		(62,576)

Investments in notes receivable	(44,984)		(136,513)
Collections of notes and other receivables	—		303,088
Proceeds from insurance for property losses	2,851		135
Proceeds from dispositions of real estate	99,388		—
Contributions to co-investments	(15,571)		(96,187)

Changes in refundable deposits	10,200		(16,318)
Purchases of marketable securities	(11,302)		(12,168)
Sales and maturities of marketable securities	39,372		30,025
Non-operating distributions from co-investments	11,655		152,924
Net cash (used in) provided by investing activities	(34,521)		101,651
Cash flows from financing activities:
Proceeds from unsecured debt and mortgage notes	300,000		—
Payments on unsecured debt and mortgage notes	(300,937)		(1,820)
Proceeds from lines of credit	728,709		670,758
Repayments of lines of credit	(746,354)		(948,840)
Changes in refundable deposits	(6,012)		—

Table of Contents


	Six Months Ended June 30,
	2023		2022
Retirement of common stock	(95,657)		(60,830)
Additions to deferred charges	(358)		—

Net (costs) proceeds from issuance of common stock	(125)		(207)

Net proceeds from stock options exercised	—		19,255
Payments related to tax withholding for share-based compensation	—		(2,216)
Contributions from noncontrolling interest	—		125
Distributions to noncontrolling interest	(15,622)		(14,858)
Redemption of noncontrolling interest	(609)		(2,361)
Redemption of redeemable noncontrolling interest	—		(230)
Common stock dividends paid	(290,408)		(280,147)
Net cash used in financing activities	(427,373)		(621,371)

Net increase (decrease) in unrestricted and restricted cash and cash equivalents	26,433		(10,175)
Unrestricted and restricted cash and cash equivalents at beginning of period	42,681		58,638
Unrestricted and restricted cash and cash equivalents at end of period	$	69,114	$	48,463

Supplemental disclosure of cash flow information:
Cash paid for interest (net of $0.5 million and $1.5 million capitalized in 2023 and 2022, respectively)	$	101,784	$	97,688
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	3,528	$	3,480
Supplemental disclosure of noncash investing and financing activities:


Transfers between real estate under development and rental properties, net	$	365	$	96,887
Transfers from real estate under development to co-investments	$	961	$	1,827







Reclassifications to (from) redeemable noncontrolling interest from additional paid in capital and noncontrolling interest	$	4,205	$	(1,223)

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except parenthetical and unit amounts)


ASSETS	June 30, 2023		December 31, 2022
Real estate:
Rental properties:
Land and land improvements	$	3,036,912	$	3,043,321
Buildings and improvements	12,984,143		12,922,906
	16,021,055		15,966,227
Less: accumulated depreciation	(5,390,935)		(5,152,133)
	10,630,120		10,814,094
Real estate under development	22,668		24,857
Co-investments	1,122,114		1,127,491

	11,774,902		11,966,442
Cash and cash equivalents-unrestricted	60,949		33,295
Cash and cash equivalents-restricted	8,165		9,386
Marketable securities, net of allowance for credit losses of zero as of both June 30, 2023 and December 31, 2022	102,131		112,743
Notes and other receivables, net of allowance for credit losses of $0.6 million and $0.3 million as of June 30, 2023 and December 31, 2022, respectively (includes related party receivables of $6.1 million and $7.0 million as of June 30, 2023 and December 31, 2022, respectively)	150,464		103,045
Operating lease right-of-use assets	65,505		67,239
Prepaid expenses and other assets	83,157		80,755
Total assets	$	12,245,273	$	12,372,905
LIABILITIES AND CAPITAL
Unsecured debt, net	$	5,315,336	$	5,312,168
Mortgage notes payable, net	592,143		593,943
Lines of credit	34,429		52,073
Accounts payable and accrued liabilities	172,946		165,461
Construction payable	22,089		23,159
Distributions payable	155,739		149,166
Distributions in excess of investments in co-investments	47,934		42,532
Operating lease liabilities	66,857		68,696

Other liabilities	44,440		43,441
Total liabilities	6,451,913		6,450,639
Commitments and contingencies
Redeemable noncontrolling interest	31,355		27,150

Capital:
General Partner:
Common equity (64,183,304 and 64,604,603 units issued and outstanding, respectively)	5,533,893		5,669,906
	5,533,893		5,669,906
Limited Partners:
Common equity (2,260,112 and 2,272,496 units issued and outstanding, respectively)	49,704		51,454
Accumulated other comprehensive income	57,102		52,010
Total partners' capital	5,640,699		5,773,370
Noncontrolling interest	121,306		121,746
Total capital	5,762,005		5,895,116
Total liabilities and capital	$	12,245,273	$	12,372,905

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Condensed Consolidated Statements of Income and Comprehensive Income

(Unaudited)

(In thousands, except unit and per unit amounts)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenues:
Rental and other property	$	413,265	$	397,240	$	822,921	$	776,456
Management and other fees from affiliates	2,778		2,738		5,543		5,427
	416,043		399,978		828,464		781,883
Expenses:
Property operating, excluding real estate taxes	73,843		69,761		147,725		138,619
Real estate taxes	45,381		43,759		91,911		91,001
Corporate-level property management expenses	11,451		10,176		22,883		20,348
Depreciation and amortization	136,718		134,517		273,065		268,050
General and administrative	13,813		13,127		29,124		25,369

Expensed acquisition and investment related costs	5		10		344		18
Casualty loss	—		—		433		—
	281,211		271,350		565,485		543,405
Gain on sale of real estate and land	—		—		59,238		—
Earnings from operations	134,832		128,628		322,217		238,478
Interest expense	(52,600)		(50,477)		(103,645)		(100,854)
Total return swap income	821		2,283		1,854		4,827
Interest and other income (loss)	12,199		(17,208)		24,649		(24,775)
Equity income (loss) from co-investments	12,237		(8,400)		23,108		12,771
Deferred tax (expense) benefit on unconsolidated co-investments	(1,733)		6,864		(833)		9,618


Net income	105,756		61,690		267,350		140,065
Net income attributable to noncontrolling interest	(2,630)		(2,646)		(5,288)		(5,204)



Net income available to common unitholders	$	103,126	$	59,044	$	262,062	$	134,861
Comprehensive income	$	121,142	$	73,400	$	272,442	$	172,256
Comprehensive income attributable to noncontrolling interest	(2,630)		(2,646)		(5,288)		(5,204)
Comprehensive income attributable to controlling interest	$	118,512	$	70,754	$	267,154	$	167,052
Per unit data:
Basic:
Net income available to common unitholders	$	1.55	$	0.87	$	3.94	$	2.00
Weighted average number of common units outstanding during the period	66,442,994		67,539,662		66,582,934		67,548,899
Diluted:
Net income available to common unitholders	$	1.55	$	0.87	$	3.94	$	2.00
Weighted average number of common units outstanding during the period	66,444,114		67,566,748		66,584,049		67,587,362

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Condensed Consolidated Statements of Capital for the three and six months ended June 30, 2023 and 2022

(Unaudited)

(In thousands)


	General Partner				Limited Partners				Accumulated other comprehensive income, net		Noncontrolling interest		Total
	Common Equity				Common Equity
Three Months Ended June 30, 2023	Units	Amount		Units		Amount
Balances at March 31, 2023	64,182	$	5,582,259		2,261		$	51,385	$	41,716	$	121,497	$	5,796,857
Net income	—	99,620			—		3,506		—		2,630		105,756


Change in fair value of derivatives and amortization of swap settlements	—	—			—		—		15,386		—		15,386

Issuance of common units under:
General partner's stock based compensation, net	1	—			—		—		—		—		—
Sale of common stock by general partner, net	—	(53)			—		—		—		—		(53)
Equity based compensation costs	—	1,915			—		67		—		—		1,982

Changes in the redemption value of redeemable noncontrolling interest	—	(1,160)			—		(26)		—		39		(1,147)

Distributions to noncontrolling interest	—	—			—		—		—		(2,835)		(2,835)
Redemptions	—	(404)			(1)		(7)		—		(25)		(436)
Distributions declared ($2.31 per unit)	—	(148,284)			—		(5,221)		—		—		(153,505)
Balances at June 30, 2023	64,183	$	5,533,893		2,260		$	49,704	$	57,102	$	121,306	$	5,762,005

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	General Partner				Limited Partners				Accumulated other comprehensive income, net		Noncontrolling interest		Total
	Common Equity				Common Equity
Six Months Ended June 30, 2023	Units	Amount		Units		Amount
Balances at December 31, 2022	64,605	$	5,669,906		2,272		$	51,454	$	52,010	$	121,746	$	5,895,116
Net income	—	253,152			—		8,910		—		5,288		267,350


Change in fair value of derivatives and amortization of swap settlements	—	—			—		—		5,092		—		5,092

Issuance of common units under:
General partner's stock based compensation, net	3	—			—		—		—		—		—
Sale of common stock by general partner, net	—	(125)			—		—		—		—		(125)
Equity based compensation costs	—	7,387			—		259		—		—		7,646
Retirement of common units, net	(437)	(95,657)			—		—		—		—		(95,657)
Changes in the redemption value of redeemable noncontrolling interest	—	(4,087)			—		(132)		—		14		(4,205)

Distributions to noncontrolling interest	—	—			—		—		—		(5,590)		(5,590)
Redemptions	12	(113)			(12)		(344)		—		(152)		(609)
Distributions declared ($4.62 per unit)	—	(296,570)			—		(10,443)		—		—		(307,013)
Balances at June 30, 2023	64,183	$	5,533,893		2,260		$	49,704	$	57,102	$	121,306	$	5,762,005

Table of Contents


	General Partner				Limited Partners				Accumulated other comprehensive income (loss), net		Noncontrolling interest		Total
	Common Equity				Common Equity
Three Months Ended June 30, 2022	Units	Amount		Units		Amount
Balances at March 31, 2022	65,332	$	5,942,746		2,282		$	54,112	$	18,677	$	122,672	$	6,138,207
Net income	—	57,054			—		1,990		—		2,646		61,690

Change in fair value of derivatives and amortization of swap settlements	—	—			—		—		11,812		—		11,812
Change in fair value of marketable debt securities, net	—	—			—		—		(102)		—		(102)
Issuance of common units under:
General partner's stock based compensation, net	3	172			—		—		—		—		172
Sale of common stock by general partner, net	—	(66)			—		—		—		—		(66)
Equity based compensation costs	—	2,572			—		90		—		—		2,662
Retirement of common units, net	(219)	(60,830)			—		—		—		—		(60,830)
Changes in redemption value of redeemable noncontrolling interest	—	6,065			—		136		—		94		6,295

Distributions to noncontrolling interest	—	—			—		—		—		(2,621)		(2,621)
Redemptions	8	(2,122)			(9)		(94)		—		(119)		(2,335)
Distributions declared ($2.20 per unit)	—	(143,298)			—		(5,001)		—		—		(148,299)
Balances at June 30, 2022	65,124	$	5,802,293		2,273		$	51,233	$	30,387	$	122,672	$	6,006,585

Table of Contents


	General Partner				Limited Partners				Accumulated other comprehensive income (loss), net		Noncontrolling interest		Total
	Common Equity				Common Equity
Six Months Ended June 30, 2022	Units	Amount		Units		Amount
Balances at December 31, 2021	65,248	$	5,999,155		2,282		$	56,502	$	(1,804)	$	122,655	$	6,176,508
Net income	—	130,308			—		4,553		—		5,204		140,065


Change in fair value of derivatives and amortization of swap settlements	—	—			—		—		31,895		—		31,895
Change in fair value of marketable debt securities, net	—	—			—		—		296		—		296
Issuance of common units under:
General partner's stock based compensation, net	87	17,039			—		—		—		—		17,039
Sale of common stock by general partner, net	—	(207)			—		—		—		—		(207)
Equity based compensation costs	—	4,952			—		173		—		—		5,125
Retirement of common units, net	(219)	(60,830)			—		—		—		—		(60,830)

Changes in redemption value of redeemable noncontrolling interest	—	1,051			—		122		—		50		1,223
Contributions from noncontrolling interest	—	—			—		—		—		125		125


Distributions to noncontrolling interest	—	—			—		—		—		(5,218)		(5,218)
Redemptions	8	(2,123)			(9)		(94)		—		(144)		(2,361)
Distributions declared ($4.40 per unit)	—	(287,052)			—		(10,023)		—		—		(297,075)
Balances at June 30, 2022	65,124	$	5,802,293		2,273		$	51,233	$	30,387	$	122,672	$	6,006,585

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands, except parenthetical amounts)


	Six Months Ended June 30,
	2023		2022
Cash flows from operating activities:
Net income	$	267,350	$	140,065
Adjustments to reconcile net income to net cash provided by operating activities:
Straight-lined rents	170		4,570
Depreciation and amortization	273,065		268,050

Amortization of discount and debt financing costs, net	3,170		3,332
Realized and unrealized (gains) losses on marketable securities, net	(8,871)		34,011

Provision for credit losses	34		63



Earnings from co-investments	(23,108)		(12,771)
Operating distributions from co-investments	31,168		67,834
Accrued interest from notes and other receivables	(4,743)		(6,974)
Casualty loss	433		—
Gain on the sale of real estate and land	(59,238)		—



Equity-based compensation	3,795		4,788


Changes in operating assets and liabilities:
Prepaid expenses, receivables, operating lease right-of-use assets, and other assets	457		15,406
Accounts payable, accrued liabilities, and operating lease liabilities	3,646		(10,887)
Other liabilities	999		2,058
Net cash provided by operating activities	488,327		509,545
Cash flows from investing activities:
Additions to real estate:
Acquisitions of real estate and acquisition related capital expenditures, net of cash acquired	(23,182)		(223)
Redevelopment	(41,675)		(47,674)
Development acquisitions of and additions to real estate under development	(5,248)		(12,862)
Capital expenditures on rental properties	(56,025)		(62,576)

Investments in notes receivable	(44,984)		(136,513)
Collections of notes and other receivables	—		303,088
Proceeds from insurance for property losses	2,851		135

Proceeds from dispositions of real estate	99,388		—
Contributions to co-investments	(15,571)		(96,187)
Changes in refundable deposits	10,200		(16,318)
Purchases of marketable securities	(11,302)		(12,168)
Sales and maturities of marketable securities	39,372		30,025
Non-operating distributions from co-investments	11,655		152,924
Net cash (used in) provided by investing activities	(34,521)		101,651
Cash flows from financing activities:
Proceeds from unsecured debt and mortgage notes	300,000		—
Payments on unsecured debt and mortgage notes	(300,937)		(1,820)
Proceeds from lines of credit	728,709		670,758
Repayments of lines of credit	(746,354)		(948,840)
Changes in refundable deposits	(6,012)		—

Table of Contents


	Six Months Ended June 30,
	2023		2022
Retirement of common units	(95,657)		(60,830)
Additions to deferred charges	(358)		—

Net (costs) proceeds from issuance of common units	(125)		(207)

Net proceeds from stock options exercised	—		19,255
Payments related to tax withholding for share-based compensation	—		(2,216)
Contributions from noncontrolling interest	—		125
Distributions to noncontrolling interest	(4,228)		(4,197)
Redemption of noncontrolling interests	(609)		(2,361)
Redemption of redeemable noncontrolling interests	—		(230)
Common units distributions paid	(301,802)		(290,808)
Net cash used in financing activities	(427,373)		(621,371)

Net increase (decrease) in unrestricted and restricted cash and cash equivalents	26,433		(10,175)
Unrestricted and restricted cash and cash equivalents at beginning of period	42,681		58,638
Unrestricted and restricted cash and cash equivalents at end of period	$	69,114	$	48,463

Supplemental disclosure of cash flow information:
Cash paid for interest (net of $0.5 million and $1.5 million capitalized in 2023 and 2022, respectively)	$	101,784	$	97,688
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	3,528	$	3,480
Supplemental disclosure of noncash investing and financing activities:


Transfers between real estate under development and rental properties, net	$	365	$	96,887
Transfers from real estate under development to co-investments	$	961	$	1,827







Reclassifications to (from) redeemable noncontrolling interest from general and limited partner capital and noncontrolling interest	$	4,205	$	(1,223)

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023 and 2022

(Unaudited)

(1) Organization and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements present the accounts of Essex Property Trust, Inc. ("Essex" or the "Company"), which include the accounts of the Company and Essex Portfolio, L.P. and its subsidiaries (the "Operating Partnership," which holds the operating assets of the Company), prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and in accordance with the instructions to Form 10-Q. In the opinion of management, all adjustments necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented have been included and are normal and recurring in nature. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 2022.

All significant intercompany accounts and transactions have been eliminated in the unaudited condensed consolidated financial statements.

The unaudited condensed consolidated financial statements for the three and six months ended June 30, 2023 and 2022 include the accounts of the Company and the Operating Partnership. Essex is the sole general partner of the Operating Partnership, with a 96.6% general partnership interest as of both June 30, 2023 and December 31, 2022. Total Operating Partnership limited partnership units ("OP Units," and the holders of such OP Units, "Unitholders") outstanding were 2,260,112 and 2,272,496 as of June 30, 2023 and December 31, 2022, respectively, and the redemption value of the units, based on the closing price of the Company’s common stock totaled approximately $529.5 million and $481.6 million as of June 30, 2023 and December 31, 2022, respectively.

As of June 30, 2023, the Company owned or had ownership interests in 252 operating apartment communities, comprising 61,997 apartment homes, excluding the Company’s ownership interest in preferred equity co-investments, loan investments, three operating commercial buildings, and a development pipeline comprised of one unconsolidated joint venture project. The operating apartment communities are located in Southern California (primarily Los Angeles, Orange, San Diego, and Ventura counties), Northern California (the San Francisco Bay Area) and the Seattle metropolitan areas.

Revenues and Gains on Sale of Real Estate

Revenues from tenants renting or leasing apartment homes are recorded when due from tenants and are recognized monthly as they are earned which generally approximates a straight-line basis, else, adjustments are made to conform to a straight-line basis. Apartment homes are rented under short-term leases (generally, lease terms of 9 to 12 months). Revenues from tenants leasing commercial space are recorded on a straight-line basis over the life of the respective lease. See Note 3, Revenues, for additional information regarding such revenues.

The Company also generates other property-related revenue associated with the leasing of apartment homes, including storage income, pet rent, and other miscellaneous revenue. Similar to rental income, such revenues are recorded when due from tenants and recognized monthly as they are earned.

Apart from rental and other property-related revenue, revenues from contracts with customers are recognized as control of the promised services is passed to the customer. For customer contracts related to management and other fees from affiliates (which includes asset management and property management), the transaction price and amount of revenue to be recognized is determined each quarter based on the management fee calculated and earned for that month or quarter. The contract will contain a description of the service and the fee percentage for management services. Payments from such services are one month or one quarter in arrears of the service performed.

The Company recognizes any gains on sales of real estate when it transfers control of a property and when it is probable that the Company will collect substantially all of the related consideration.

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023 and 2022

(Unaudited)

Marketable Securities

The Company reports its equity securities at fair value, based on quoted market prices (Level 1 for the common stock and investment funds and Level 2 for the unsecured debt, and as defined by the FASB standard for fair value measurements). As of June 30, 2023 and December 31, 2022, $0.1 million and $0.2 million of equity securities presented within common stock, preferred stock, and stock funds in the tables below represent investments measured at fair value, using net asset value as a practical expedient, and are not categorized in the fair value hierarchy.

Realized and unrealized gains and losses in equity securities and interest income are included in interest and other income on the condensed consolidated statements of income and comprehensive income.

As of June 30, 2023 and December 31, 2022, equity securities consisted primarily of investment funds-debt securities, common stock, preferred stock and stock funds.

As of June 30, 2023 and December 31, 2022, marketable securities consisted of the following ($ in thousands):


	June 30, 2023
	Cost		Gross Unrealized Gain		Carrying Value
Equity securities:
Investment funds - debt securities	$	38,692	$	(5,604)	$	33,088
Common stock, preferred stock, and stock funds	56,325		12,718		69,043









Total - Marketable securities	$	95,017	$	7,114	$	102,131


	December 31, 2022
	Cost		Gross Unrealized Loss		Carrying Value
Equity securities:
Investment funds - debt securities	$	43,155	$	(6,771)	$	36,384
Common stock, preferred stock, and stock funds	78,481		(2,122)		76,359









Total - Marketable securities	$	121,636	$	(8,893)	$	112,743

The Company uses the specific identification method to determine the cost basis of a debt security sold and to reclassify amounts from accumulated other comprehensive income for such securities.

For the three and six months ended June 30, 2023, the portion of unrealized gains recognized on equity securities still held as of June 30, 2023 totaled $4.6 million and $6.0 million, respectively, and were included in interest and other income (loss) on the Company's condensed consolidated statements of income and comprehensive income. For the three and six months ended June 30, 2022, the portion of unrealized losses recognized on equity securities still held as of June 30, 2022 totaled $14.7 million and $18.6 million respectively, and were included in interest and other income (loss) on the Company's condensed consolidated statements of income and comprehensive income.

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023 and 2022

(Unaudited)

Variable Interest Entities

In accordance with accounting standards for consolidation of variable interest entities ("VIEs"), the Company consolidated the Operating Partnership, 18 DownREIT entities (comprising nine communities), and six co-investments as of June 30, 2023 and December 31, 2022. The Company consolidates these entities because it is the primary beneficiary. The Company has no assets or liabilities other than its investment in the Operating Partnership. The consolidated total assets and liabilities related to the above consolidated co-investments and DownREIT entities, net of intercompany eliminations, were approximately $948.4 million and $324.7 million, respectively, as of June 30, 2023 and $939.4 million and $324.3 million, respectively, as of December 31, 2022. Noncontrolling interests in these entities was $121.2 million and $121.5 million as of June 30, 2023 and December 31, 2022, respectively. The Company's financial risk in each VIE is limited to its equity investment in the VIE. As of June 30, 2023 and December 31, 2022, the Company did not have any VIEs of which it was not the primary beneficiary.

Equity-based Compensation

The cost of share- and unit-based compensation awards is measured at the grant date based on the estimated fair value of the awards. The estimated fair value of stock options and restricted stock granted by the Company are being amortized over the vesting period. The estimated grant date fair values of the long term incentive plan units (discussed in Note 14, "Equity Based Compensation Plans," in the Company’s annual report on Form 10-K for the year ended December 31, 2022) are being amortized over the expected service periods.

Fair Value of Financial Instruments

Management believes that the carrying amounts of the outstanding balances under its lines of credit, and notes and other receivables approximate fair value as of June 30, 2023 and December 31, 2022, because interest rates, yields, and other terms for these instruments are consistent with interest rates, yields, and other terms currently available for similar instruments. Management has estimated that the fair value of the Company’s fixed rate debt with a carrying value of $5.4 billion and $5.7 billion as of June 30, 2023 and December 31, 2022. respectively, was approximately $4.9 billion and $5.2 billion, respectively. Management has estimated that the fair value of the Company’s $554.6 million and $274.2 million of variable rate debt at June 30, 2023 and December 31, 2022, respectively, was approximately $553.7 million and $273.2 million, respectively, based on the terms of existing mortgage notes payable, unsecured debt, and variable rate demand notes compared to those available in the marketplace. Management believes that the carrying amounts of cash and cash equivalents, restricted cash, accounts payable and accrued liabilities, construction payables, other liabilities, and dividends payable approximate fair value as of June 30, 2023 and December 31, 2022 due to the short-term maturity of these instruments. Marketable securities are carried at fair value as of June 30, 2023 and December 31, 2022.

Capitalization of Costs

The Company’s capitalized internal costs related to development and redevelopment projects were comprised primarily of interest and employee compensation and totaled $4.6 million and $5.8 million during the three months ended June 30, 2023 and 2022, respectively, and $9.4 million and $11.2 million, for the six months ended June 30, 2023 and 2022, respectively. The Company capitalizes leasing commissions associated with the lease-up of development communities and amortizes the costs over the life of the leases. The amounts capitalized for leasing commissions are immaterial for all periods presented.

Co-investments

The Company owns investments in joint ventures in which it has significant influence, but its ownership interest does not meet the criteria for consolidation in accordance with U.S. GAAP. Therefore, the Company accounts for co-investments using the equity method of accounting. Under the equity method of accounting, the investment is carried at the cost of assets contributed, plus the Company's equity in earnings, less distributions received and the Company's share of losses. The significant accounting policies of the Company’s co-investment entities are consistent with those of the Company in all material respects.

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023 and 2022

(Unaudited)

Upon the acquisition of a controlling interest of a co-investment, the co-investment entity is consolidated and a gain or loss is recognized upon the remeasurement of co-investments in the consolidated statement of income equal to the amount by which the fair value of the Company's previously owned co-investment interest exceeds its carrying value. A majority of the co-investments, excluding most preferred equity investments, compensate the Company for its asset management services and some of these investments may provide promote income if certain financial return benchmarks are achieved. Asset management fees are recognized when earned, and promote fees are recognized when the earnings events have occurred and the amount is determinable and collectible. Any promote fees are reflected in equity income from co-investments.

Changes in Accumulated Other Comprehensive Income, Net by Component

Essex Property Trust, Inc.

($ in thousands):


	Change in fair value and amortization of swap settlements
Balance at December 31, 2022	$	46,466

Other comprehensive income before reclassification	4,909
Amounts reclassified from accumulated other comprehensive income	10
Other comprehensive income	4,919
Balance at June 30, 2023	$	51,385

Essex Portfolio, L.P.

($ in thousands):


	Change in fair value and amortization of swap settlements
Balance at December 31, 2022	$	52,010

Other comprehensive income before reclassification	5,082
Amounts reclassified from accumulated other comprehensive income	10
Other comprehensive income	5,092
Balance at June 30, 2023	$	57,102

Amounts reclassified from accumulated other comprehensive income in connection with derivatives are recorded in interest expense on the condensed consolidated statements of income and comprehensive income.

Redeemable Noncontrolling Interest

The carrying value of redeemable noncontrolling interests in the accompanying condensed consolidated balance sheets was $31.4 million and $27.2 million as of June 30, 2023 and December 31, 2022, respectively. The limited partners may redeem their noncontrolling interests for cash in certain circumstances.

The changes in the redemption value of redeemable noncontrolling interests for the six months ended June 30, 2023 is as follows ($ in thousands):


Balance at December 31, 2022	$	27,150
Reclassification due to change in redemption value and other	4,205


Balance at June 30, 2023	$	31,355

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023 and 2022

(Unaudited)

Cash, Cash Equivalents and Restricted Cash

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

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows ($ in thousands):


	June 30, 2023		December 31, 2022		June 30, 2022		December 31, 2021
Cash and cash equivalents - unrestricted	$	60,949	$	33,295	$	37,756	$	48,420
Cash and cash equivalents - restricted	8,165		9,386		10,707		10,218
Total unrestricted and restricted cash and cash equivalents shown in the condensed consolidated statement of cash flows	$	69,114	$	42,681	$	48,463	$	58,638

Accounting Estimates

The preparation of condensed consolidated financial statements, in accordance with U.S. GAAP, requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to acquiring, developing and assessing the carrying values of its real estate portfolio, its investments in and advances to joint ventures and affiliates, its notes receivables, and its qualification as a real estate investment trust ("REIT"). The Company bases its estimates on historical experience, current market conditions, and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may vary from those estimates and those estimates could be different under different assumptions or conditions.

(2) Significant Transactions During the Six Months Ended June 30, 2023 and Subsequent Events

Significant Transactions

Acquisitions

In April 2023, the Company acquired Hacienda at Camarillo Oaks, a 73-unit apartment home community located in Camarillo, CA, for a total contract price of $23.1 million.

Dispositions

In March 2023, the Company sold CBC and The Sweeps, a non-core apartment home community with 239 apartment homes, located in Goleta, CA, for a total contract price of $91.7 million. The Company recognized a $54.5 million gain on sale.

Preferred Equity Investments

In April 2023, the Company received cash of $11.2 million for the partial redemption of a preferred equity investment whose sponsors include a related party, in a joint venture that holds property located in Northern California. See Note 6, Related Party Transactions, for additional details.

In June 2023, the Company received cash of $14.7 million, including an early redemption fee of $0.3 million, for the full redemption of a preferred equity investment in a joint venture that holds property located in Southern California.

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023 and 2022

(Unaudited)

Common StockDuring the six months ended June 30, 2023, the Company repurchased and retired 437,026 shares of the Company's common stock through the Company's stock repurchase plan, totaling $95.7 million, including commissions, at an average price per share of $218.88. As a result, as of June 30, 2023, the Company had $302.7 million of purchase authority remaining under the Company's $500.0 million stock repurchase plan.

Subsequent events

Subsequent to quarter end, the Company closed $298.0 million in 10-year secured loans priced at 5.08% fixed interest rates. The proceeds are intended to repay a majority of the Company’s $400.0 million unsecured notes due in May 2024 at maturity.

(3) Revenues

Disaggregated Revenue

The following table presents the Company’s revenues disaggregated by revenue source ($ in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Rental income	$	407,786	$	391,778	$	812,421	$	765,203
Other property	5,479		5,462		10,500		11,253
Management and other fees from affiliates	2,778		2,738		5,543		5,427
Total revenues	$	416,043	$	399,978	$	828,464	$	781,883

The following table presents the Company’s rental and other property revenues disaggregated by geographic operating segment ($ in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Southern California	$	169,857	$	160,809	$	336,734	$	314,147
Northern California	166,415		160,513		330,039		313,258
Seattle Metro	70,216		67,707		140,255		131,910
Other real estate assets (1)	6,777		8,211		15,893		17,141
Total rental and other property revenues	$	413,265	$	397,240	$	822,921	$	776,456

(1) Other real estate assets consist of revenues generated from retail space, commercial properties, held for sale properties, disposition properties and straight-line rent adjustments for concessions. Executive management does not evaluate such operating performance geographically.

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023 and 2022

(Unaudited)

The following table presents the Company’s rental and other property revenues disaggregated by current property category status ($ in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Same-property (1)	$	394,204	$	378,874	$	783,099	$	740,289
Acquisitions (2)	1,332		—		2,353		—
Development (3)	5,710		5,371		11,210		9,598
Redevelopment	1,595		1,491		3,132		2,926
Non-residential/other, net (4)	11,099		14,597		23,226		29,620
Straight line rent concession (5)	(675)		(3,093)		(99)		(5,977)
Total rental and other property revenues	$	413,265	$	397,240	$	822,921	$	776,456

(1) Same-property includes properties that have comparable stabilized results as of January 1, 2022 and are consolidated by the Company for the three and six months ended June 30, 2023 and 2022. A community is considered to have reached stabilized operations once it achieves an initial occupancy of 90%.

(2) Acquisitions include properties acquired which did not have comparable stabilized results as of January 1, 2022.

(3) Development includes properties developed which did not have stabilized results as of January 1, 2022.

(4) Non-residential/other, net consists of revenues generated from retail space, commercial properties, held for sale properties, disposition properties, student housing, properties undergoing significant construction activities that do not meet our redevelopment criteria, and two communities located in the California counties of Santa Barbara and Santa Cruz, which the Company does not consider its core markets.

(5) Represents straight-line concessions for residential operating communities. Same-property revenues reflect concessions on a cash basis. Total rental and other property revenues reflect concessions on a straight-line basis in accordance with U.S. GAAP.

Deferred Revenues and Remaining Performance Obligations

When cash payments are received or due in advance of the Company’s performance of contracts with customers, deferred revenue is recorded. The total deferred revenue balance related to such contracts was $1.3 million and $1.7 million as of June 30, 2023 and December 31, 2022, respectively, and was included in accounts payable and accrued liabilities within the accompanying condensed consolidated balance sheets. The amount of revenue recognized for the six months ended June 30, 2023 that was included in the December 31, 2022 deferred revenue balance was $0.4 million, which was included in rental and other property revenue within the condensed consolidated statements of income and comprehensive income.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in the revenue recognition accounting standard. As of June 30, 2023, the Company had $1.3 million of remaining performance obligations. The Company expects to recognize approximately 25% of these remaining performance obligations in 2023, an additional 60% through 2025, and the remaining balance thereafter.

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023 and 2022

(Unaudited)

(4) Co-investments

The Company has joint ventures and preferred equity investments in co-investments which own, operate, and develop apartment communities and are accounted for under the equity method. As of June 30, 2023, the Company had invested in six technology co-investments and the co-investment balance of these investments was $37.3 million, and the aggregate commitment was $86.0 million. As of December 31, 2022, the Company had six technology co-investments and the co-investment balance of these investments was $39.4 million and the aggregate commitment was $87.0 million.

The carrying values of the Company's co-investments as of June 30, 2023 and December 31, 2022 are as follows ($ in thousands, except parenthetical amounts):


	Weighted Average Company Ownership Percentage (1)		June 30, 2023		December 31, 2022
Ownership interest in:
Wesco I, Wesco III, Wesco IV, Wesco V, and Wesco VI (2)	54	%	$	169,501	$	178,552
BEXAEW, BEX II, BEX IV, and 500 Folsom	50	%	233,588		238,537
Other (3)	52	%	68,713		74,742
Total operating and other co-investments, net			471,802		491,831
Total development co-investments	51	%	14,028		12,994
Total preferred interest co-investments (includes related party investments of $79.6 million and $87.1 million as of June 30, 2023 and December 31, 2022, respectively. See Note 6 - Related Party Transactions for further discussion)			588,350		580,134
Total co-investments, net			$	1,074,180	$	1,084,959

(1) Weighted average Company ownership percentages are as of June 30, 2023.

(2) As of June 30, 2023 and December 31, 2022, the Company's investments in Wesco I, Wesco III, and Wesco IV were classified as a liability of $45.8 million and $41.7 million, respectively, due to distributions in excess of the Company's investment.

(3) As of June 30, 2023 and December 31, 2022, the Company's investments in Expo and Century Towers were classified as a liability of $2.1 million and $0.8 million, respectively, due to distributions received in excess of the Company's investment. The weighted average Company ownership percentage excludes the Company's investments in non-core technology co-investments which are carried at fair value.

The combined summarized financial information of co-investments is as follows ($ in thousands):


	June 30, 2023		December 31, 2022
Combined balance sheets: (1)
Rental properties and real estate under development	$	5,066,160	$	4,955,051
Other assets	279,816		294,663
Total assets	$	5,345,976	$	5,249,714
Debt	$	3,511,734	$	3,397,113
Other liabilities	294,947		264,872
Equity	1,539,295		1,587,729
Total liabilities and equity	$	5,345,976	$	5,249,714
Company's share of equity	$	1,074,180	$	1,084,959

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023 and 2022

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Combined statements of income: (1)
Property revenues	$	99,954	$	93,576	$	200,547	$	178,176
Property operating expenses	(36,868)		(29,509)		(78,946)		(65,302)
Net operating income	63,086		64,067		121,601		112,874

Interest expense	(37,314)		(21,779)		(69,998)		(40,081)
General and administrative	(8,556)		(6,392)		(11,536)		(10,359)
Depreciation and amortization	(42,917)		(39,381)		(84,305)		(78,188)
Net loss	$	(25,701)	$	(3,485)	$	(44,238)	$	(15,754)
Company's share of net income (2)	$	12,237	$	(8,400)	$	23,108	$	12,771

(1) Includes preferred equity investments held by the Company and excludes investments in technology co-investments.

(2) Includes the Company's share of equity income from joint ventures and preferred equity investments, gain on sales of co-investments, co-investment promote income and income from early redemption of preferred equity investments. Includes related party income of $1.9 million and $1.8 million for the three months ended June 30, 2023 and 2022, respectively, and $3.9 million and $3.6 million for the six months ended June 30, 2023 and 2022, respectively.

(5) Notes and Other Receivables

Notes and other receivables consist of the following as of June 30, 2023 and December 31, 2022 ($ in thousands):


	June 30, 2023		December 31, 2022
Note receivable, secured, bearing interest at 11.50%, due November 2024 (Originated November 2020)	$	35,500	$	33,477
Note receivable, secured, bearing interest at 11.00%, due October 2025 (Originated October 2021)	34,520		21,452
Note receivable, secured, bearing interest at 12.00%, due August 2024 (Originated August 2022)	11,021		10,350
Note receivable, secured, bearing interest at 11.25%, due October 2027 (Originated October 2022)	32,332		—
Notes and other receivables from affiliates (1)	6,053		6,975
Straight line rent receivables (2)	11,975		12,164
Other receivables	19,648		18,961
Allowance for credit losses	(585)		(334)
Total notes and other receivables	$	150,464	$	103,045

(1) These amounts consist of short-term loans outstanding and due from various joint ventures as of June 30, 2023 and December 31, 2022, respectively. See Note 6, Related Party Transactions, for additional details.

(2) These amounts are receivables from lease concessions recorded on a straight-line basis for the Company's operating properties.

The following table presents the activity in the allowance for credit losses for notes receivable, secured ($ in thousands):


	Notes Receivable, Secured
Balance at December 31, 2022	$	334
Provision for credit losses	251
Balance at June 30, 2023	$	585

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023 and 2022

(Unaudited)

No loans were placed on nonaccrual status or charged off during the six months ended June 30, 2023 or 2022.

(6) Related Party Transactions

The Company charges certain fees relating to its co-investments for asset management, property management, development and redevelopment services. These fees from affiliates totaled $3.2 million and $3.5 million during the three months ended June 30, 2023 and 2022, respectively, and $6.4 million and $6.6 million during the six months ended June 30, 2023 and 2022, respectively. All of these fees are net of intercompany amounts eliminated by the Company. The Company netted development and redevelopment fees of approximately $0.5 million and $0.7 million against general and administrative expenses for the three months ended June 30, 2023 and 2022, respectively, and $1.0 million and $1.1 million for the six months ended June 30, 2023 and 2022, respectively.

The Company’s Chairman and founder, Mr. George M. Marcus, is the Chairman of the Marcus & Millichap Company ("MMC"), which is a parent company of a diversified group of real estate service, investment, and development firms. Mr. Marcus is also the Chairman of Marcus & Millichap, Inc. ("MMI"), and Mr. Marcus owns a controlling interest in MMI, a national brokerage firm listed on the New York Stock Exchange. For the three and six months ended June 30, 2023 and 2022, the Company did not pay brokerage commissions related to real estate transactions to MMC and its affiliates.

In August 2022, the Company funded an $11.2 million preferred equity investment in an entity whose sponsor includes an affiliate of MMC. The entity owns three multifamily communities located in Azusa, CA. The investment initially accrues interest based on a 9.5% preferred return and is scheduled to mature in August 2027.

In February 2022, the Company provided a $32.8 million related party bridge loan to BEX II in connection with the payoff of a debt related to one of its properties located in Southern California. The note receivable was scheduled to mature in March 2022, but was subsequently paid off in April 2022.

In January 2022, the Company provided a $100.7 million related party bridge loan to Wesco VI in connection with the acquisition of Vela. The note receivable accrued interest at 2.64% and was scheduled to mature in February 2022, but was paid off in January 2022. Additionally, the Company received cash of $121.3 million in January 2022 for the payoff of the remaining related party bridge loans to Wesco VI as detailed below.

In November 2021, the Company provided a $48.4 million related party bridge loan in connection with the purchase of an interest in a single asset entity owning an apartment home community in Vista, CA. The note receivable accrued interest at 2.36% and was scheduled to mature in February 2022, but was paid off in January 2022.

In November 2021, the Company provided a $61.9 million related party bridge loan to Wesco VI in connection with the acquisition of The Rexford. The note receivable accrued interest at 2.36% and was scheduled to mature in February 2022, but was paid off in January 2022.

In October 2021, the Company provided a $30.3 million related party bridge loan to Wesco VI in connection with the acquisition of Monterra in Mill Creek. The note receivable accrued interest at 2.30% and was scheduled to mature in April 2022, but was paid off in January 2022.

In September 2021, the Company provided a $29.2 million related party bridge loan to Wesco VI in connection with the acquisition of Martha Lake Apartments. The note receivable accrued interest at 2.15% and was scheduled to mature in December 2021. In December 2021, the maturity date of the note receivable was extended to March 2022, and in January 2022, the note receivable was paid off.

In June 2019, the Company acquired Brio, a 300-unit apartment home community located in Walnut Creek, CA. The Company issued DownREIT units to an affiliate of MMC, based on a contract price of $164.9 million. The property was encumbered by $98.7 million of mortgage debt which was assumed by the Company at the time of acquisition. As a result of this transaction, the Company consolidated the property based on a VIE analysis performed by the Company.

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023 and 2022

(Unaudited)

In February 2019, the Company funded a $24.5 million preferred equity investment in an entity whose sponsor is an affiliate of MMC, which owns a multifamily development community located in Mountain View, CA. The investment initially accrued interest based on an 11.0% preferred return which was reduced to 9.0% upon completion and lease-up of the project. The investment is scheduled to mature in February 2024.

In October 2018, the Company funded an $18.6 million preferred equity investment in an entity whose sponsor is an affiliate of MMC. The entity wholly owns a 268-unit apartment home community development located in Burlingame, CA. The investment initially accrued interest based on a 12.0% preferred return which was reduced to 9.0% upon completion and lease-up of the project. In April 2023, the investment's maturity date was extended from April 2024 to May 2026 with the investment accruing interest based on a 11.0% preferred return. In April 2023, the Company received cash of $11.2 million for the partial redemption of this preferred equity investment.

In May 2018, the Company made a commitment to fund a $26.5 million preferred equity investment in an entity whose sponsors include an affiliate of MMC. The entity wholly owns a 400-unit apartment home community located in Ventura, CA. The investment accrued interest based on a 10.25% initial preferred return. The investment was scheduled to mature in May 2023. In November 2021, the Company received cash of $18.3 million for the partial redemption of this preferred equity investment, and the maturity of the remaining commitment was extended to December 2028. As of June 30, 2023, the Company had a remaining commitment of $13.0 million and continues to accrue interest on a 9.0% preferred return. The remaining committed amount is expected to be funded if and when requested by the sponsors.

In March 2017, the Company converted its existing $15.3 million preferred equity investment in Sage at Cupertino, a 230-unit apartment home community located in San Jose, CA, into a 40.5% common equity ownership interest in the property. The Company issued DownREIT units to the other members, including an MMC affiliate, based on an estimated property valuation of $90.0 million. At the time of the conversion, the property was encumbered by $52.0 million of mortgage debt. As a result of this transaction, the Company consolidates the property based on a consolidation analysis performed by the Company.

As described in Note 5, Notes and Other Receivables, the Company has provided short-term loans to affiliates. As of June 30, 2023 and December 31, 2022, $6.1 million and $7.0 million, respectively, of short-term loans remained outstanding due from joint venture affiliates and is classified within notes and other receivables in the accompanying condensed consolidated balance sheets.

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023 and 2022

(Unaudited)

(7) Debt

Essex does not have indebtedness as debt is incurred by the Operating Partnership. Essex guarantees the Operating Partnership’s unsecured debt including the revolving credit facilities for the full term of the facilities.

Debt consists of the following ($ in thousands):


	June 30, 2023			December 31, 2022			Weighted Average Maturity In Years as of June 30, 2023

Term loan - variable rate, net (1)	$	298,359		$	(1,611)		4.3
Bonds public offering - fixed rate, net	5,016,977			5,313,779			7.6
Unsecured debt, net (2)	5,315,336			5,312,168
Lines of credit (3)	34,429			52,073
Mortgage notes payable, net (4)	592,143			593,943			7.5
Total debt, net	$	5,941,908		$	5,958,184
Weighted average interest rate on fixed rate unsecured bonds private placement and bonds public offering	3.3		%	3.3		%
Weighted average interest rate on variable rate term loan (1)	4.2		%	—		%
Weighted average interest rate on lines of credit	5.9		%	4.4		%
Weighted average interest rate on mortgage notes payable	3.8		%	3.5		%

(1) In October 2022, the Operating Partnership obtained a $300.0 million unsecured term loan priced at Adjusted SOFR plus 0.85% and matures in October 2024 with three 12-month extension options, exercisable at the Company's option. This loan has been swapped to an all-in fixed rate of 4.2% and the swap has a termination date of October 2026. In April 2023, the Company has drawn on the $300.0 million unsecured term loan and in May 2023 used the proceeds to repay the Company's $300.0 million unsecured notes due in May 2023. The unsecured term loan includes unamortized debt issuance costs of $1.6 million as of both June 30, 2023 and December 31, 2022, respectively.

(2) Unsecured debt, net, consists of fixed rate public bond offerings and variable rate term loan which includes unamortized discount, net of premiums, of $7.0 million and $7.9 million and unamortized debt issuance costs of $27.7 million and $29.9 million, as of June 30, 2023 and December 31, 2022, respectively.

(3) Lines of credit, related to the Company's two lines of unsecured credit aggregating $1.24 billion as of June 30, 2023, excludes unamortized debt issuance costs of $4.5 million and $5.1 million as of June 30, 2023 and December 31, 2022, respectively. These debt issuance costs are included in prepaid expenses and other assets on the condensed consolidated balance sheets. As of June 30, 2023, the Company’s $1.2 billion credit facility had an interest rate at the Adjusted Secured Overnight Financing Rate ("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. As of June 30, 2023, the Company’s $35.0 million working capital unsecured line of 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.

(4) Includes total unamortized premium, net of discounts of $0.9 million and $1.2 million, reduced by unamortized debt issuance costs of $2.0 million as of each of June 30, 2023 and December 31, 2022.

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023 and 2022

(Unaudited)

The aggregate scheduled principal payments of the Company’s outstanding debt, excluding lines of credit, as of June 30, 2023 are as follows ($ in thousands):


2023 (1)	$	1,492
2024	403,109
2025	633,054
2026	549,405
2027	803,955
Thereafter	3,552,269
Total	$	5,943,284

(1) In April 2023, the Company has drawn on the $300.0 million unsecured term loan and in May 2023 used the proceeds to repay the Company’s $300.0 million unsecured notes due in May 2023.

(8) Segment Information

The Company's segment disclosures present the measure used by the chief operating decision makers for purposes of assessing each segment's performance. The Company's chief operating decision makers are comprised of several members of its executive management team who use net operating income ("NOI") to assess the performance of the business for the Company's reportable operating segments. NOI represents total property revenues less direct property operating expenses.

The executive management team generally evaluates the Company's operating performance geographically. The Company defines its reportable operating segments as the three geographical regions in which its communities are located: Southern California, Northern California, and Seattle Metro.

Excluded from segment revenues and NOI are management and other fees from affiliates and interest and other income. Non-segment revenues and NOI included in the following schedule also consist of revenues generated from commercial properties and properties that have been sold. Other non-segment assets include items such as real estate under development, co-investments, real estate held for sale, cash and cash equivalents, marketable securities, notes and other receivables, and prepaid expenses and other assets.

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023 and 2022

(Unaudited)

The revenues and NOI for each of the reportable operating segments are summarized as follows for the three and six months ended June 30, 2023 and 2022 ($ in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenues:
Southern California	$	169,857	$	160,809	$	336,734	$	314,147
Northern California	166,415		160,513		330,039		313,258
Seattle Metro	70,216		67,707		140,255		131,910
Other real estate assets	6,777		8,211		15,893		17,141
Total property revenues	$	413,265	$	397,240	$	822,921	$	776,456
Net operating income:
Southern California	$	121,923	$	115,176	$	238,865	$	222,978
Northern California	116,184		113,095		230,635		218,235
Seattle Metro	50,388		49,268		100,283		92,564
Other real estate assets	5,546		6,181		13,502		13,059
Total net operating income	294,041		283,720		583,285		546,836
Management and other fees from affiliates	2,778		2,738		5,543		5,427
Corporate-level property management expenses	(11,451)		(10,176)		(22,883)		(20,348)
Depreciation and amortization	(136,718)		(134,517)		(273,065)		(268,050)
General and administrative	(13,813)		(13,127)		(29,124)		(25,369)

Expensed acquisition and investment related costs	(5)		(10)		(344)		(18)
Casualty loss	—		—		(433)		—
Gain on sale of real estate and land	—		—		59,238		—
Interest expense	(52,600)		(50,477)		(103,645)		(100,854)
Total return swap income	821		2,283		1,854		4,827
Interest and other income (loss)	12,199		(17,208)		24,649		(24,775)
Equity income (loss) from co-investments	12,237		(8,400)		23,108		12,771
Deferred tax (expense) benefit on unconsolidated co-investments	(1,733)		6,864		(833)		9,618


Net income	$	105,756	$	61,690	$	267,350	$	140,065

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023 and 2022

(Unaudited)

Total assets for each of the reportable operating segments are summarized as follows as of June 30, 2023 and December 31, 2022 ($ in thousands):


	June 30, 2023		December 31, 2022
Assets:
Southern California	$	3,855,167	$	3,892,003
Northern California	5,324,254		5,414,467
Seattle Metro	1,354,592		1,374,379
Other real estate assets	96,107		133,245
Net reportable operating segment - real estate assets	10,630,120		10,814,094
Real estate under development	22,668		24,857
Co-investments	1,122,114		1,127,491

Cash and cash equivalents, including restricted cash	69,114		42,681
Marketable securities	102,131		112,743
Notes and other receivables	150,464		103,045
Operating lease right-of-use assets	65,505		67,239
Prepaid expenses and other assets	83,157		80,755
Total assets	$	12,245,273	$	12,372,905

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

($ in thousands, except share and unit data):

Essex Property Trust, Inc.


	Three Months Ended June 30, 2023					Three Months Ended June 30, 2022
	Income		Weighted- average Common Shares	Per Common Share Amount		Income		Weighted- average Common Shares	Per Common Share Amount
Basic:
Net income available to common stockholders	$	99,620	64,182,555	$	1.55	$	57,054	65,262,517	$	0.87
Effect of Dilutive Securities:
Stock options	—		1,120			—		27,086

Diluted:
Net income available to common stockholders	$	99,620	64,183,675	$	1.55	$	57,054	65,289,603	$	0.87

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023 and 2022

(Unaudited)


	Six Months Ended June 30, 2023					Six Months Ended June 30, 2022
	Income		Weighted- average Common Units	Per Common Unit Amount		Income		Weighted- average Common Units	Per Common Unit Amount
Basic:
Net income available to common unitholders	$	253,152	64,319,783	$	3.94	$	130,308	65,269,109	$	2.00
Effect of Dilutive Securities:
Stock options	—		1,115			—		38,463

Diluted:
Net income available to common unitholders	$	253,152	64,320,898	$	3.94	$	130,308	65,307,572	$	2.00

The table above excludes from the calculations of diluted earnings per share weighted average convertible OP Units of 2,260,439 and 2,277,145, which include vested 2014 Long-Term Incentive Plan Units and 2015 Long-Term Incentive Plan Units, for the three months ended June 30, 2023 and 2022, respectively, and 2,263,151 and 2,279,790 for the six months ended June 30, 2023 and 2022, respectively, because they were anti-dilutive. The related income allocated to these convertible OP Units aggregated $3.5 million and $2.0 million for the three months ended June 30, 2023 and 2022, respectively, and $8.9 million and $4.6 million for the six months ended June 30, 2023 and 2022, respectively.

Stock options of 505,037 and 230,326 for the three months ended June 30, 2023 and 2022, respectively, and 490,970 and 124,892 for the six months ended June 30, 2023 and 2022, respectively, were excluded from the calculation of diluted earnings per share because the assumed proceeds per share of such options plus the average unearned compensation were greater than the average market price of the common stock for the periods ended and, therefore, were anti-dilutive.

Essex Portfolio, L.P.


	Three Months Ended June 30, 2023					Three Months Ended June 30, 2022
	Income		Weighted- average Common Units	Per Common Unit Amount		Income		Weighted- average Common Units	Per Common Unit Amount
Basic:
Net income available to common unitholders	$	103,126	66,442,994	$	1.55	$	59,044	67,539,662	$	0.87
Effect of Dilutive Securities:
Stock options	—		1,120			—		27,086

Diluted:
Net income available to common unitholders	$	103,126	66,444,114	$	1.55	$	59,044	67,566,748	$	0.87

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023 and 2022

(Unaudited)


	Six Months Ended June 30, 2023					Six Months Ended June 30, 2022
	Income		Weighted- average Common Units	Per Common Unit Amount		Income		Weighted- average Common Units	Per Common Unit Amount
Basic:
Net income available to common unitholders	$	262,062	66,582,934	$	3.94	$	134,861	67,548,899	$	2.00
Effect of Dilutive Securities:
Stock options	—		1,115			—		38,463

Diluted:
Net income available to common unitholders	$	262,062	66,584,049	$	3.94	$	134,861	67,587,362	$	2.00

Stock options of 505,037 and 230,326 for the three months ended June 30, 2023 and 2022, respectively, and 490,970 and 124,892 for the six months ended June 30, 2023 and 2022, respectively, were excluded from the calculation of diluted earnings per unit because the assumed proceeds per unit of these options plus the average unearned compensation were greater than the average market price of the common unit for the periods ended and, therefore, were anti-dilutive.

(10) Derivative Instruments and Hedging Activities

As of June 30, 2023, the Company had an interest rate swap contract with an aggregate notional amount of $300.0 million that effectively fixed the interest rate on the $300.0 million unsecured term loan at 4.2%. This derivative qualifies for hedge accounting.

As of June 30, 2023 and December 31, 2022, the swap contracts were presented in the consolidated balance sheets as an asset of $9.1 million and $5.6 million, respectively, and were included in prepaid expenses and other assets on the consolidated balance sheets.

As of June 30, 2023 and December 31, 2022, the Company had no interest rate caps.

The Company has four total return swap contracts, with an aggregate notional amount of $223.2 million, that effectively convert $223.2 million of mortgage notes payable to a floating interest rate based on the Securities Industry and Financial Markets Association Municipal Swap Index ("SIFMA") plus a spread. The total return swaps provide fair market value protection on the mortgage notes payable to the counterparties during the initial period of the total return swap until the Company's option to call the mortgage notes at par can be exercised. The Company can currently call all four of its total return swaps, with $223.2 million of the outstanding debt at par. These derivatives do not qualify for hedge accounting and had a carrying and fair value of zero at both June 30, 2023 and December 31, 2022. These total return swaps are scheduled to mature between December 2024 and November 2033. The realized gains of $0.8 million and $2.3 million for the three months ended June 30, 2023 and 2022, respectively, and $1.9 million and $4.8 million for the six months ended June 30, 2023 and 2022, respectively, were reported in the condensed consolidated statements of income and comprehensive income as total return swap income.

(11) Commitments and Contingencies

The Company is subject to various lawsuits in the normal course of its business operations. Such lawsuits have not had a material adverse effect on the Company's financial condition, results of operations or cash flows. While no assurances can be given, the Company does not believe there is any pending or threatened litigation against the Company that, individually or in the aggregate, would reasonably be expected to have a material adverse effect on the Company.

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2023 and 2022

(Unaudited)

In late 2022 and early 2023, a number of purported class actions were filed against RealPage, Inc., a seller of revenue management software, and various lessors of multifamily housing which utilize this software, including the Company. The complaints allege collusion among defendants to artificially increase rents of multifamily residential real estate above competitive levels. The Company believes these lawsuits are without merit and intends to vigorously defend against them. Given their early stage, the Company is unable to predict the outcome or estimate the amount of loss, if any, that may result from such matters. The Company is also subject to various other legal and/or regulatory proceedings arising in the normal course of its business operations. The Company believes that, with respect to such matters that it is currently a party to, the ultimate disposition of any such matter will not result in a material adverse effect on the Company’s financial condition, results of operations or cash flows. To the extent that such a matter arises or is identified in the future that has other than a remote risk of having a material impact on the condensed consolidated financial statements, the Company will disclose the estimated range of possible outcomes associated with it, and, if an outcome is probable, accrue an appropriate liability for that matter. The Company will consider whether any such matter results in an impairment of value on the affected property and, if so, impairment will be recognized.

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