filings.toolsEssex Property Trust 10-Q 2025-09-30
Filed 2025-10-30. 8 sections, 269K characters. Original on sec.gov · Markdown · JSON
Cover and table of contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2025
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________to _________
001-13106 (Essex Property Trust, Inc.)
333-44467-01 (Essex Portfolio, L.P.)
(Commission File Number)
ESSEX PROPERTY TRUST, INC.
ESSEX PORTFOLIO, L.P.
(Exact name of Registrant as Specified in its Charter)
| Maryland | 77-0369576 | |||||||
| (Essex Property Trust, Inc.) | (Essex Property Trust, Inc.) | |||||||
| California | 77-0369575 | |||||||
| (Essex Portfolio, L.P.) | (Essex Portfolio, L.P.) | |||||||
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number) |
1100 Park Place, Suite 200
San Mateo, California 94403
(Address of Principal Executive Offices, Including Zip Code)
(650) 655-7800
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
| Common Stock, $.0001 par value (Essex Property Trust, Inc.) | ESS | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
| Essex Property Trust, Inc. | Yes | ☒ | No | ☐ | Essex Portfolio, L.P. | Yes | ☒ | No | ☐ |
i
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
| Essex Property Trust, Inc. | Yes | ☒ | No | ☐ | Essex Portfolio, L.P. | Yes | ☒ | No | ☐ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Essex Property Trust, Inc.:
| Large accelerated filer | ☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | ☐ | ||||||||||||||||
| Emerging growth company | ☐ |
Essex Portfolio, L.P.:
| Large accelerated filer | ☐ | Accelerated filer | ☐ | Non-accelerated filer | ☒ | Smaller reporting company | ☐ | ||||||||||||||||
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
| Essex Property Trust, Inc. | ☐ | Essex Portfolio, L.P. | ☐ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
| Essex Property Trust, Inc. | Yes | ☐ | No | ☒ | Essex Portfolio, L.P. | Yes | ☐ | No | ☒ |
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 64,404,022 shares of Common Stock ($.0001 par value) of Essex Property Trust, Inc. were outstanding as of October 23, 2025.
ii
EXPLANATORY NOTE
This report combines the reports on Form 10-Q for the three and nine month periods ended September 30, 2025 of Essex Property Trust, Inc., a Maryland corporation, and Essex Portfolio, L.P., a California limited partnership of which Essex Property Trust, Inc. is the sole general partner.
Unless stated otherwise or the context otherwise requires, references to the “Company,” “we,” “us” or “our” mean collectively Essex Property Trust, Inc. and those entities/subsidiaries owned or controlled by Essex Property Trust, Inc., including Essex Portfolio, L.P., and references to the “Operating Partnership” or “EPLP” mean Essex Portfolio, L.P. and those entities/subsidiaries owned or controlled by Essex Portfolio, L.P. Unless stated otherwise or the context otherwise requires, references to “Essex” mean Essex Property Trust, Inc., not including any of its subsidiaries.
Essex operates as a self-administered and self-managed real estate investment trust (“REIT”), and is the sole general partner of the Operating Partnership. As of September 30, 2025, Essex owned approximately 96.6% of the ownership interest in the Operating Partnership with the remaining 3.4% interest owned by limited partners. As the sole general partner of the Operating Partnership, Essex has exclusive control of the Operating Partnership’s day-to-day management.
The Company is structured as an umbrella partnership REIT (“UPREIT”) and Essex contributes all net proceeds from its various equity offerings to the Operating Partnership. In return for those contributions, Essex receives a number of Operating Partnership limited partnership units (“OP Units,” and the holders of such OP Units, “Unitholders”) equal to the number of shares of common stock it has issued in the equity offerings. Contributions of properties to the Operating Partnership can be structured as tax-deferred transactions through the issuance of OP Units, which is one of the reasons why the Company is structured in the manner outlined above. Based on the terms of the Operating Partnership’s partnership agreement, OP Units can be exchanged into Essex common stock on a one-for-one basis. The Company maintains a one-for-one relationship between the OP Units issued to Essex and shares of common stock.
The Company believes that combining the reports on Form 10-Q of Essex and the Operating Partnership into this single report provides the following benefits:
-
enhances investors’ understanding of Essex and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;
-
eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure applies to both Essex and the Operating Partnership; and
-
creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.
Management operates Essex and the Operating Partnership as one business. The management of Essex consists of the same members as the management of the Operating Partnership.
All of the Company’s property ownership, development, and related business operations are conducted through the Operating Partnership and Essex has no material assets, other than its investment in the Operating Partnership. Essex’s primary function is acting as the general partner of the Operating Partnership. As general partner with control of the Operating Partnership, Essex consolidates the Operating Partnership for financial reporting purposes. Therefore, the assets and liabilities of Essex and the Operating Partnership are the same on their respective financial statements. Essex also issues equity from time to time and guarantees certain debt of the Operating Partnership, as disclosed in this report. The Operating Partnership holds substantially all of the assets of the Company, including the Company’s ownership interests in its co-investments. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for the net proceeds from equity offerings by the Company, which are contributed to the capital of the Operating Partnership in exchange for OP Units (on a one-for-one share of common stock per OP Unit basis), the Operating Partnership generates all remaining capital required by the Company’s business. These sources of capital include the Operating Partnership’s working capital, net cash provided by operating activities, borrowings under its revolving credit facilities, the issuance of secured and unsecured debt and equity securities and proceeds received from disposition of certain properties and co-investments.
iii
The Company believes it is important to understand the few differences between Essex and the Operating Partnership in the context of how Essex and the Operating Partnership operate as a consolidated company. Stockholders’ equity, partners’ capital and noncontrolling interest are the main areas of difference between the condensed consolidated financial statements of Essex and those of the Operating Partnership. The limited partners of the Operating Partnership are accounted for as partners’ capital in the Operating Partnership’s condensed consolidated financial statements and as noncontrolling interest in Essex’s condensed consolidated financial statements. The noncontrolling interest in the Operating Partnership’s condensed consolidated financial statements include the interest of unaffiliated partners in various consolidated partnerships and co-investment partners. The noncontrolling interest in Essex’s condensed consolidated financial statements include (i) the same noncontrolling interest as presented in the Operating Partnership’s condensed consolidated financial statements and (ii) OP Unitholders. The differences between stockholders’ equity and partners’ capital result from differences in the equity issued at Essex and Operating Partnership levels.
To help investors understand the significant differences between Essex and the Operating Partnership, this report on Form 10-Q provides separate condensed consolidated financial statements for Essex and the Operating Partnership; a single set of consolidated notes to such financial statements that includes separate discussions of stockholders’ equity or partners’ capital, and earnings per share/unit, as applicable; and a combined Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This report on Form 10-Q also includes separate Part I, Item 4. Controls and Procedures sections and separate Exhibits 31 and 32 certifications for each of Essex and the Operating Partnership in order to establish that the requisite certifications have been made and that Essex and the Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and 18 U.S.C. §1350.
In order to highlight the differences between Essex and the Operating Partnership, the separate sections in this report on Form 10-Q for Essex and the Operating Partnership specifically refer to Essex and the Operating Partnership. In the sections that combine disclosure of Essex and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of the Company. Although the Operating Partnership is generally the entity that directly or indirectly enters into contracts and co-investments and holds assets and debt, reference to the Company is appropriate because the Company is one business and the Company operates that business through the Operating Partnership. The separate discussions of Essex and the Operating Partnership in this report should be read in conjunction with each other to understand the results of the Company on a consolidated basis and how management operates the Company.
The information furnished in the accompanying unaudited condensed consolidated balance sheets, statements of income and comprehensive income, equity, capital, and cash flows of the Company and the Operating Partnership reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the aforementioned condensed consolidated financial statements for the interim periods and are normal and recurring in nature, except as otherwise noted.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the notes to such unaudited condensed consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations herein. Additionally, 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, 2024.
iv
ESSEX PROPERTY TRUST, INC.
ESSEX PORTFOLIO, L.P.
FORM 10-Q
TABLE OF CONTENTS
Part I – Financial Information
Item 1. Condensed Consolidated Financial Statements
(ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share amounts)
| September 30, 2025 | December 31, 2024 | ||||||||||
| ASSETS | |||||||||||
| Real estate investments: | |||||||||||
| Rental properties: | |||||||||||
| Land and land improvements | $ | 3,325,394 | $ | 3,246,789 | |||||||
| Buildings and improvements | 14,745,049 | 14,342,729 | |||||||||
| 18,070,443 | 17,589,518 | ||||||||||
| Less: accumulated depreciation | (6,381,123) | (6,150,618) | |||||||||
| 11,689,320 | 11,438,900 | ||||||||||
| Real estate under development | 139,161 | 52,682 | |||||||||
| Co-investments | 808,238 | 935,014 | |||||||||
| 12,636,719 | 12,426,596 | ||||||||||
| Cash and cash equivalents-unrestricted | 65,959 | 66,795 | |||||||||
| Cash and cash equivalents-restricted | 9,284 | 9,051 | |||||||||
| Marketable securities | 84,116 | 69,794 | |||||||||
| Notes and other receivables, net of allowance for credit losses of $0.6 million and $0.5 million as of September 30, 2025 and December 31, 2024, respectively | 221,628 | 206,706 | |||||||||
| Operating lease right-of-use assets | 51,682 | 51,556 | |||||||||
| Prepaid expenses and other assets | 80,853 | 96,861 | |||||||||
| Total assets | $ | 13,150,241 | $ | 12,927,359 | |||||||
| LIABILITIES AND EQUITY | |||||||||||
| Unsecured debt, net | $ | 5,621,505 | $ | 5,473,788 | |||||||
| Mortgage notes payable, net | 795,404 | 989,884 | |||||||||
| Lines of credit and commercial paper | 245,000 | 137,945 | |||||||||
| Accounts payable and accrued liabilities | 250,745 | 212,747 | |||||||||
| Construction payable | 33,484 | 14,347 | |||||||||
| Dividends payable | 173,770 | 165,443 | |||||||||
| Distributions in excess of investments in co-investments | 95,893 | 79,273 | |||||||||
| Operating lease liabilities | 52,405 | 52,473 | |||||||||
| Other liabilities | 50,762 | 50,220 | |||||||||
| Total liabilities | 7,318,968 | 7,176,120 | |||||||||
| Commitments and contingencies (Note 11) | |||||||||||
| Redeemable noncontrolling interest | 29,746 | 30,849 | |||||||||
| Equity: | |||||||||||
| Common stock; $0.0001 par value, 670,000,000 shares authorized; 64,404,022 and 64,280,466 shares issued and outstanding, respectively | 6 | 6 | |||||||||
| Additional paid-in capital | 6,686,589 | 6,668,047 | |||||||||
| Distributions in excess of accumulated earnings | (1,063,135) | (1,155,662) | |||||||||
| Accumulated other comprehensive income, net | 7,856 | 24,655 | |||||||||
| Total stockholders’ equity | 5,631,316 | 5,537,046 | |||||||||
| Noncontrolling interest | 170,211 | 183,344 | |||||||||
| Total equity | 5,801,527 | 5,720,390 | |||||||||
| Total liabilities and equity | $ | 13,150,241 | $ | 12,927,359 | |||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
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 September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Rental and other property | $ | 470,942 | $ | 448,135 | $ | 1,400,641 | $ | 1,312,132 | |||||||||||||||
| Management and other fees from affiliates | 2,361 | 2,563 | 7,078 | 7,849 | |||||||||||||||||||
| 473,303 | 450,698 | 1,407,719 | 1,319,981 | ||||||||||||||||||||
| Expenses: | |||||||||||||||||||||||
| Property operating, excluding real estate taxes | 91,413 | 85,836 | 263,834 | 244,636 | |||||||||||||||||||
| Real estate taxes | 52,023 | 48,956 | 153,652 | 143,188 | |||||||||||||||||||
| Corporate-level property management expenses | 12,216 | 11,610 | 36,768 | 34,331 | |||||||||||||||||||
| Depreciation and amortization | 151,489 | 146,439 | 454,277 | 431,785 | |||||||||||||||||||
| General and administrative | 18,058 | 29,067 | 51,507 | 67,374 | |||||||||||||||||||
| Expensed acquisition and investment related costs | 25 | — | 25 | 68 | |||||||||||||||||||
| 325,224 | 321,908 | 960,063 | 921,382 | ||||||||||||||||||||
| Gain on sale of real estate and land | 62,320 | — | 299,524 | — | |||||||||||||||||||
| Earnings from operations | 210,399 | 128,790 | 747,180 | 398,599 | |||||||||||||||||||
| Interest expense | (64,660) | (59,232) | (192,654) | (174,285) | |||||||||||||||||||
| Total return swap income | 1,329 | 807 | 3,600 | 2,232 | |||||||||||||||||||
| Interest and other income | 5,900 | 11,449 | 16,997 | 78,292 | |||||||||||||||||||
| Equity income from co-investments | 17,798 | 11,649 | 39,984 | 33,667 | |||||||||||||||||||
| Tax benefit on unconsolidated technology co-investments | 1,958 | 441 | 2,353 | 1,199 | |||||||||||||||||||
| Loss on early retirement of debt | — | — | (762) | — | |||||||||||||||||||
| Gain on remeasurement of co-investment | — | 31,583 | 330 | 169,909 | |||||||||||||||||||
| Net income | 172,724 | 125,487 | 617,028 | 509,613 | |||||||||||||||||||
| Net income attributable to noncontrolling interest | (8,103) | (7,063) | (27,935) | (25,544) | |||||||||||||||||||
| Net income available to common stockholders | $ | 164,621 | $ | 118,424 | $ | 589,093 | $ | 484,069 | |||||||||||||||
| Comprehensive income | $ | 168,771 | $ | 104,054 | $ | 599,641 | $ | 493,688 | |||||||||||||||
| Comprehensive income attributable to noncontrolling interest | (7,969) | (6,333) | (27,347) | (25,001) | |||||||||||||||||||
| Comprehensive income attributable to controlling interest | $ | 160,802 | $ | 97,721 | $ | 572,294 |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the Company’s Condensed Consolidated Financial Statements and accompanying Notes thereto included elsewhere herein and with the Company’s 2024 annual report on Form 10-K for the year ended December 31, 2024. Capitalized terms not defined in this section have the meaning ascribed to them elsewhere in this quarterly report on Form 10-Q. The Company makes statements in this section that are forward-looking statements within the meaning of the federal securities laws. For a complete discussion of forward-looking statements, see the section in this Form 10-Q entitled “Forward-Looking Statements.”
Essex is a self-administered and self-managed REIT that acquires, develops, redevelops, and manages apartment home communities in selected residential areas located on the West Coast of the United States. Essex owns all of its interests in its real estate investments, directly or indirectly through the Operating Partnership. Essex is the sole general partner of the Operating Partnership and, as of September 30, 2025, had an approximately 96.6% general partner interest in the Operating Partnership.
The Company’s investment strategy has two components: constant monitoring of existing markets, and evaluation of new markets to identify areas with the characteristics that underlie rental growth. The Company’s strong financial condition supports its investment strategy by enhancing its ability to quickly shift acquisition, development, redevelopment, and disposition activities to markets that will optimize the performance of the Company’s portfolio.
As of September 30, 2025, the Company owned or had ownership interests in 257 operating apartment home communities, comprising 62,451 apartment homes, excluding the Company’s ownership in preferred equity co-investments, loan investments, two operating commercial buildings, and a development pipeline comprised of one consolidated project and various predevelopment projects.
The Company’s apartment home communities are predominantly located in the following major regions:
Southern California (primarily Los Angeles, Orange, San Diego, and Ventura counties)
Northern California (the San Francisco Bay Area)
Seattle Metro (the Seattle metropolitan area)
The Company’s consolidated operating communities were as follows:
| As of September 30, 2025 | As of September 30, 2024 | ||||||||||||||||||||||
| Apartment Homes | % | Apartment Homes | % | ||||||||||||||||||||
| Southern California | 23,222 | 42 | % | 23,262 | 43 | % | |||||||||||||||||
| Northern California | 20,847 | 38 | % | 20,128 | 37 | % | |||||||||||||||||
| Seattle Metro | 10,899 | 20 | % | 10,555 | 20 | % | |||||||||||||||||
| Total | 54,968 | 100 | % | 53,945 | 100 | % |
Co-investments, including Wesco I, Wesco III, Wesco IV, Wesco V, Wesco VI, BEX IV and other co-investments, developments under construction, and preferred equity interest co-investment communities are not included in the table presented above for both periods. The communities previously held in the BEX II co-investment, which was consolidated in 2024, are excluded from the table as of September 30, 2024 but included in the table as of September 30, 2025.
Market Considerations
Domestic and international policy actions, including tariff and trade policy, as well as continuing geopolitical tensions and regional conflicts have the potential to trigger market uncertainty. The long-term impact of these developments on our company will largely depend on the impact on broader trends in job growth, inflation, the economy, and reactions by consumers, companies, governmental entities and capital markets.
The foregoing macroeconomic conditions have not negatively impacted the Company’s ability to access traditional funding sources which have been historically available to it. The Company is not at material risk of not meeting the covenants in its credit agreements and is able to timely service its debt and other obligations.
Comparison of the Three Months Ended September 30, 2025 to the Three Months Ended September 30, 2024
The average financial occupancy for the Company’s 2025 Same-Property portfolio (stabilized properties consolidated by the Company for the quarters ended September 30, 2025 and 2024) was 96.1% and 96.2% for the three months ended September 30, 2025 and 2024, respectively. Financial occupancy is defined as the percentage resulting from dividing actual rental income by total scheduled rental income. Actual rental income represents contractual rental income pursuant to leases without considering delinquency and concessions. Total scheduled rental income represents the value of all apartment homes, with occupied apartment homes valued at contractual rental rates pursuant to leases and vacant apartment homes valued at estimated market rents. The Company believes that financial occupancy is a meaningful measure of occupancy because it considers the value of each vacant apartment home at its estimated market rate.
Market rates are determined using the recently signed effective rates on new leases at the property and are used as the starting point in the determination of the market rates of vacant apartment homes. The Company may increase or decrease these rates based on a variety of factors, including overall supply and demand for housing, concentration of new apartment deliveries within the same submarket which can cause periodic disruption due to greater rental concessions to increase leasing velocity, and rental affordability. Financial occupancy may not completely reflect short-term trends in physical occupancy and financial occupancy rates, and the Company’s calculation of financial occupancy may not be comparable to financial occupancy disclosed by other REITs.
The Company does not take into account delinquency and concessions to calculate actual rent for occupied apartment homes and market rents for vacant apartment homes. The calculation of financial occupancy compares contractual rates for occupied apartment homes to estimated market rents for unoccupied apartment homes, and thus the calculation compares the gross value of all apartment homes excluding delinquency and concessions. For apartment home communities that are development properties in lease-up without stabilized occupancy figures, the Company believes the physical occupancy rate is the appropriate performance metric. While an apartment home community is in the lease-up phase, the Company’s primary motivation is to stabilize the property, which may entail the use of rent concessions and other incentives, and thus financial occupancy, which is based on contractual income, is not considered the best metric to quantify occupancy.
The regional breakdown of the Company’s Same-Property portfolio for financial occupancy for the three months ended September 30, 2025 and 2024 was as follows:
| Three Months Ended September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Southern California | 95.8 | % | 95.9 | % | |||||||
| Northern California | 96.3 | % | 96.4 | % | |||||||
| Seattle Metro | 96.2 | % | 96.6 | % |
The following table provides a breakdown of property revenue amounts, including the revenues attributable to the Same-Properties ($ in thousands):
| Number of Apartment Homes | Three Months Ended September 30, | Dollar Change | Percentage Change | |||||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||||||||
| Same-Property Revenues: | ||||||||||||||||||||||||||||||||
| Southern California | 20,654 | $ | 170,162 | $ | 166,244 | $ | 3,918 | 2.4 | % | |||||||||||||||||||||||
| Northern California | 18,037 | 167,042 | 162,217 | 4,825 | 3.0 | % | ||||||||||||||||||||||||||
| Seattle Metro | 10,341 | 75,506 | 73,300 | 2,206 | 3.0 | % | ||||||||||||||||||||||||||
| Total Same-Property Revenues | 49,032 | 412,710 | 401,761 | 10,949 | 2.7 | % | ||||||||||||||||||||||||||
| Non-Same Property Revenues | 58,232 | 46,374 | 11,858 | 25.6 | % | |||||||||||||||||||||||||||
| Total Property Revenues | $ | 470,942 | $ | 448,135 | $ | 22,807 | 5.1 | % |
Same-Property Revenues increased by $10.9 million or 2.7% to $412.7 million for the third quarter of 2025 from $401.8 million for the third quarter of 2024. The increase was primarily attributable to an increase of 2.5% in average rental rates from $2,653 per apartment home for the third quarter of 2024 to $2,718 per apartment home for the third quarter of 2025. Additionally, 0.2% of the increase is attributable to a decrease in delinquencies for the third quarter of 2025 compared to the third quarter of 2024.
Non-Same Property Revenues increased by $11.9 million or 25.6% to $58.2 million in the third quarter of 2025 from $46.4 million in the third quarter of 2024. The increase was primarily due to the acquisitions of The Plaza, One Hundred Grand, ROEN Menlo Park, Revere Campbell, The Parc at Pruneyard, and the consolidation of Artizan in 2025, as well as the acquisition of Beaumont along with the Company’s acquisition of its joint venture partner’s interests in the BEX II portfolio, and Century Towers in 2024. The increases were partially offset by the sale of Highridge, Essex Skyline, The Grand, and Fourth & U in 2025 and Hillsdale Garden in 2024.
Property operating expenses, excluding real estate taxes increased by $5.6 million or 6.5% to $91.4 million for the third quarter of 2025 compared to $85.8 million for the third quarter of 2024, primarily due to acquisitions in 2024 and 2025 identified in the Non-Same Property revenues section above and the increase of Same-Property operating expenses discussed below, partially offset by dispositions in 2024 and 2025. Same-Property operating expenses, excluding real estate taxes, increased by $4.1 million or 5.3% to $82.1 million in the third quarter of 2025 compared to $78.0 million in the third quarter of 2024, primarily due to increases of $2.1 million in utilities expenses resulting from increases in trash removal, water and sewer costs and $1.4 million in personnel costs due to wage inflation.
Real estate taxes increased by $3.0 million or 6.1% to $52.0 million for the third quarter of 2025 compared to $49.0 million for the third quarter of 2024, primarily due to acquisitions in 2024 and 2025 identified in the Non-Same Property revenues section above and an estimated 2025 net aggregate increase in combined real estate taxes with increases in California partially offset by decreases in the Seattle Metro region.
Depreciation and amortization expense increased by $5.1 million or 3.5% to $151.5 million for the third quarter of 2025 compared to $146.4 million for the third quarter of 2024, primarily due to acquisitions in 2025 and 2024 identified in the Non-Same Property revenues section above. The increase was partially offset by dispositions in 2025 and 2024.
Gain on sale of real estate and land of $62.3 million was attributable to the dispositions of The Grand and Fourth & U. There were no sales of real estate or land during the third quarter of 2024.
Interest expense increased by $5.5 million or 9.3% to $64.7 million for the third quarter of 2025 compared to $59.2 million for the third quarter of 2024, primarily due to the upsizing in August 2024 of $550.0 million senior unsecured notes due April 2034, the issuance in February 2025 of $400.0 million senior unsecured notes due April 2035, borrowing on the new $300.0 million unsecured term loan in June and September 2025, and increased borrowing during the quarter on the two unsecured lines of credit and commercial paper program which resulted in an increase in interest expense of $11.2 million for the third quarter of 2025. These increases to interest expense were partially offset by various debt that was paid off, matured, or regular principal amortization during and after the third quarter of 2024, but primarily due to the payoff of $500.0 million of senior unsecured notes due April 1, 2025, which resulted in a decrease in interest expense of $4.7 million for the third quarter of 2025. Additionally, there was an increase in capitalized interest of $1.0 million in the third quarter of 2025, due to an increase in development activity as compared to the same period in 2024.
Equity income from co-investments increased by $6.2 million or 53.4% to $17.8 million for the third quarter of 2025 compared to $11.6 million for the third quarter of 2024, primarily due to a $5.2 million gain on sale of co-investment communities in the third quarter of 2025, and increases of $3.8 million in unrealized and realized gains from unconsolidated technology co-investments as a result of change in fair value of investments held by the co-investments. The increases were offset by a decrease of $3.3 million in income from preferred equity investments due to fewer outstanding investments at September 30, 2025 compared to the same period in 2024.
Comparison of the Nine Months Ended September 30, 2025 to the Nine Months Ended September 30, 2024
The Company’s average financial occupancy for its stabilized apartment home communities or “Same-Property” (stabilized properties consolidated by the Company for the nine months ended September 30, 2025 and 2024) was 96.2% and 96.3% for the nine months ended September 30, 2025 and 2024, respectively.
The regional breakdown of the Company’s Same-Property portfolio for financial occupancy for the nine months ended September 30, 2025 and 2024 was as follows:
| Nine Months Ended September 30, 2025 | |||||||||||
| 2025 | 2024 | ||||||||||
| Southern California | 95.8 | % | 95.9 | % | |||||||
| Northern California | 96.6 | % | 96.3 | % | |||||||
| Seattle Metro | 96.3 | % | 96.9 | % |
The following table provides a breakdown of property revenue amounts, including the revenues attributable to Same-
Properties ($ in thousands):
| Number of Apartment Homes | Nine Months Ended September 30, | Dollar Change | Percentage Change | |||||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||||||||
| Same-Property Revenues: | ||||||||||||||||||||||||||||||||
| Southern California | 20,654 | $ | 507,867 | $ | 492,649 | $ | 15,218 | 3.1 | % | |||||||||||||||||||||||
| Northern California | 18,037 | 496,821 | 480,633 | 16,188 | 3.4 | % | ||||||||||||||||||||||||||
| Seattle Metro | 10,341 | 223,453 | 217,602 | 5,851 | 2.7 | % | ||||||||||||||||||||||||||
| Total Same-Property Revenues | 49,032 | 1,228,141 | 1,190,884 | 37,257 | 3.1 | % | ||||||||||||||||||||||||||
| Non-Same Property Revenues | 172,500 | 121,248 | 51,252 | 42.3 | % | |||||||||||||||||||||||||||
| Total Property Revenues | $ | 1,400,641 | $ | 1,312,132 | $ | 88,509 | 6.7 | % |
Same-Property Revenues increased by $37.3 million or 3.1% for the nine months ended September 30, 2025 compared to the same period in 2024. The increase was primarily attributable to an increase of 2.3% in average rental rates from $2,631 per apartment home for the nine months ended September 30, 2024 to $2,692 per apartment home for the nine months ended September 30, 2025 and 0.6% of the increase was attributable to a decrease in delinquencies for the nine months ended September 30, 2025 compared to nine months ended September 30, 2024.
Non-Same Property Revenues increased by $51.3 million or 42.3% to $172.5 million for the nine months ended September 30, 2025 from $121.2 million for the nine months ended September 30, 2024. The increase was primarily due to the acquisitions of The Plaza, One Hundred Grand, ROEN Menlo Park, Revere Campbell, The Parc at Pruneyard, and the consolidation of Artizan in 2025, as well as ARLO Mountain View, Maxwell Sunnyvale, and Beaumont, along with the Company’s acquisition of its joint venture partner’s interests in the BEXAEW and BEX II portfolios, Patina at Midtown, and Century Towers in 2024. The increases were partially offset by the sale of Highridge, Essex Skyline, The Grand, and Fourth & U in 2025 and Hillsdale Garden in 2024.
Property operating expenses, excluding real estate taxes increased by $19.2 million or 7.8% to $263.8 million for the nine months ended September 30, 2025 compared to $244.6 million for the nine months ended September 30, 2024, primarily due to acquisitions in 2024 and 2025 identified in the Non-Same Property revenues section above and the increase of Same-Property operating expenses discussed below, partially offset by dispositions in 2024 and 2025. Same-Property operating expenses, excluding real estate taxes, increased by $11.4 million or 5.1% to $236.7 million for the nine months ended September 30, 2025 compared to $225.3 million for the nine months ended September 30, 2024, primarily due to increases of $6.1 million in utilities expenses resulting from increases in trash removal, water and sewer costs and $3.4 million in personnel costs due to wage inflation.
Real estate taxes increased by $10.5 million or 7.3% to $153.7 million for the nine months ended September 30, 2025 compared to $143.2 million for the nine months ended September 30, 2024, primarily due to acquisitions in 2024 and 2025 identified in the Non-Same Property revenues section above and an estimated 2025 net aggregate increase in combined real estate taxes with increases in California partially offset by decreases in the Seattle Metro region.
Depreciation and amortization expense increased by $22.5 million or 5.2% to $454.3 million for the nine months ended September 30, 2025 compared to $431.8 million for the nine months ended September 30, 2024, primarily due to acquisitions
in 2025 and 2024 identified in the Non-Same Property revenues section above. The increase was partially offset by dispositions in 2025 and 2024.
Gain on sale of real estate and land of $299.5 million was attributable to the dispositions of Highridge, Essex Skyline, The Grand and Fourth & U in 2025. There were no sales of real estate or land during the nine months ended September 30, 2024.
Interest expense increased by $18.4 million or 10.6% to $192.7 million for the nine months ended September 30, 2025 compared to $174.3 million for the nine months ended September 30, 2024, primarily due to the issuance in March 2024 and August 2024 of $550.0 million senior unsecured notes due April 2034, the issuance in February 2025 of $400.0 million senior unsecured notes due April 2035, borrowing on the new $300.0 million unsecured term loan in June and September 2025, and increased borrowing on the two unsecured lines of credit and the commercial paper program which resulted in an increase in interest expense of $34.5 million for the nine months ended September 30, 2025. These increases to interest expense were partially offset by various debt that was paid off, matured, or due to regular principal amortization during and after the nine months ended September 30, 2024, primarily due to the payoff of $400.0 million of senior unsecured notes due May 1, 2024 and $500.0 million of senior unsecured notes due April 1, 2025, which resulted in a decrease in interest expense of $13.8 million for the third quarter of 2025. Additionally, there was an increase in capitalized interest of $2.3 million in the nine months ended September 30, 2025, due to an increase in development activity as compared to the same period in 2024.
Interest and other income decreased by $61.3 million or 78.3% to $17.0 million in income for the nine months ended September 30, 2025 compared to $78.3 million for the nine months ended September 30, 2024, primarily due to a decrease of $43.1 million in gains from legal settlements. During the first quarter of 2024, the Company settled two lawsuits related to construction defects at two communities and received cash recoveries of $42.5 million. The Company determined that all uncertainties were resolved upon receipt of cash and recorded a gain. There were no material gains from legal settlements during the nine months ended September 30, 2025.
Equity income from co-investments increased by $6.3 million or 18.7% to $40.0 million for the nine months ended September 30, 2025 compared to $33.7 million for the nine months ended September 30, 2024, primarily due to a $5.2 million gain recognized on sale of co-investment community in the third quarter of 2025. The increase was also attributable to a $3.7 million impairment loss on one of the Company’s preferred equity investments incurred during the first quarter of 2024 with no current year equivalent. These increases were offset by decreases of $6.5 million in income from preferred equity investments due to fewer outstanding investments at September 30, 2025 compared to the same period in 2024, $1.5 million of promote income recognized from the closing of the BEXAEW portfolio acquisition during the first quarter of 2024, with no current year equivalent, and reduced equity loss from the Company's operating co-investments.
Loss on early retirement of debt of $0.8 million was due to the payoff of debt in conjunction with the disposition of Highridge.
Gain on remeasurement of co-investment of $0.3 million resulted from the Company’s consolidation of its investment in Artizan.
Liquidity and Capital Resources
As of September 30, 2025, the Company had $66.0 million of unrestricted cash and cash equivalents and $84.1 million in marketable securities, all of which were equity securities or available for sale debt securities. The Company believes that cash flows generated by its operations, existing cash and cash equivalents, marketable securities balances and availability under existing lines of credit are sufficient to meet all of its anticipated cash needs during the next twelve months. Additionally, the capital markets continue to be available and the Company is able to generate cash from the disposition of real estate assets to finance additional cash flow needs, including continued development and select acquisitions. In the event that economic disruptions occur, the Company may further utilize other resources such as its cash reserves, lines of credit, commercial paper or decreased investment in redevelopment activities to supplement operating cash flows. The timing, source and amounts of cash flows provided by or used in financing activities and investing activities are sensitive to changes in interest rates and other fluctuations in the capital markets environment, which can affect the Company’s plans for acquisitions, dispositions, development and redevelopment activities.
As of September 30, 2025, Moody’s Investor Service, and Standard and Poor’s credit agencies rated Essex Property Trust, Inc. and Essex Portfolio, L.P. Baa1/Stable, and BBB+/Stable, respectively.
As of September 30, 2025, the Company had two unsecured lines of credit aggregating $1.58 billion. As of September 30, 2025, there was no outstanding balance on the Company’s $1.5 billion unsecured line of credit. The underlying interest rate is based on a tiered rate structure tied to the Company’s long-term unsecured credit ratings and was at Secured Overnight Financing Rate (“SOFR”) plus 0.775% as of September 30, 2025. This facility is scheduled to mature in January 2030, with two six-month extensions, exercisable at the Company’s option. The Company may elect to increase the facility by up to an additional $1.0 billion, to an aggregate size of $2.5 billion, if the lenders permit. As of September 30, 2025, there was no outstanding balance on the Company’s $75.0 million working capital unsecured line of credit. The underlying interest rate on the $75.0 million line is based on a tiered rate structure tied to the Company’s long-term unsecured credit ratings and was at SOFR plus 0.775% as of September 30, 2025. This facility is scheduled to mature in July 2026.
In May 2025, the Operating Partnership established an unsecured commercial paper program (the “Commercial Paper Program”) to issue unsecured commercial paper notes with varying maturities up to 397 days from the date of issue (the “Notes”). Amounts available under the Commercial Paper Program may be borrowed, repaid and re-borrowed from time to time, with the maximum aggregate face or principal amount outstanding at any one time not exceeding $750.0 million. The Company’s unsecured line of credit facilities serve as a liquidity backstop and any issuances under the Commercial Paper Program reduce the available borrowing capacity. The Notes rank equally in right of payment with all other senior unsecured senior obligations of the Operating Partnership and are unconditionally guaranteed by the Company. The Company has used and expects to continue to use the proceeds from the Notes for general corporate purposes and working capital purposes.
In May 2025, the Operating Partnership obtained a $300.0 million unsecured term loan priced at SOFR plus 0.850% and scheduled to mature in May 2028, with two one-year extension options, exercisable at the option of the Company. The loan includes a twelve-month delayed draw feature. The Company may elect to increase this facility by up to an additional $300.0 million, to an aggregate size of $600.0 million, if the lenders permit. The Company has entered into floating-to-fixed interest rate swaps to fix the interest rate for $247.5 million of the loan to an all-in rate of 4.1%.
In February 2025, the Operating Partnership issued $400.0 million of senior unsecured notes due on April 1, 2035 with a coupon rate of 5.375% per annum (the “2035 Notes”), which are payable on April 1 and October 1 of each year, beginning on October 1, 2025. The 2035 Notes were offered to investors at a price of 99.604% of the principal amount. The 2035 Notes are general unsecured senior obligations of the Operating Partnership, rank equally in right of payment with all other senior unsecured indebtedness of the Operating Partnership and are unconditionally guaranteed by Essex. The proceeds were used to repay the Company’s $500.0 million senior unsecured notes at maturity in April 2025.
In August 2024, the Company entered into a new equity distribution agreement pursuant to which the Company may offer and sell shares of its common stock having an aggregate gross sales price of up to $900.0 million (the “2024 ATM Program”). In connection with the 2024 ATM Program, the Company may also enter into related forward sale agreements whereby, at the Company’s discretion, it may sell shares of its common stock under the 2024 ATM Program under forward sale agreements. The use of a forward sale agreement would allow the Company to lock in a share price on the sale of shares of its common stock at the time the agreement is executed, but defer receipt of the proceeds from the sale of shares until a later date. Furthermore, it would permit the Company, at its election, to settle the agreements by issuing common stock in exchange for net proceeds at the then-applicable forward sale price specified by the agreement or, alternatively, to settle the agreements in whole or in part through the delivery or receipt of common stock or cash. Issuances of shares under these forward sale agreements are classified as equity transactions. Accordingly, no amounts relating to the forward sale agreements are recorded in the condensed consolidated financial statements until settlement occurs. Prior to any settlements, the only impact to the condensed consolidated financial statements is the inclusion of incremental shares, if any, within the calculation of diluted earnings per share and diluted earnings per unit using the treasury stock method. The actual forward price per share to be received by the Company upon settlement will be determined on the applicable settlement date based on adjustments made to the initial forward price to reflect the then-current overnight federal funds rate and the amount of dividends paid to holders of the Company’s common stock over the term of the forward sale agreement.
The 2024 ATM Program replaced the prior equity distribution agreement entered into in September 2021 (the “2021 ATM Program”), which was terminated upon the establishment of the 2024 ATM Program.
During the nine months ended September 30, 2025, the Company did not issue any shares of its common stock through the 2024 ATM Program.
During the nine months ended September 30, 2025, the Company entered into forward sale agreements with certain financial institutions acting as forward purchasers under the 2024 ATM program with respect to 52,600 shares of common stock at an initial gross weighted average forward price of $314.06 per share, which is to be settled by September 2026.
As of September 30, 2025, $900.0 million of shares remain available to be sold under the 2024 ATM Program, pending the settlement of outstanding forward sale agreements.
In September 2022, the Company announced that its Board of Directors approved a new stock repurchase plan, without an expiration date, to allow the Company to acquire shares of common stock up to an aggregate value of $500.0 million. During the nine months ended September 30, 2025, the Company did not repurchase any shares and as of September 30, 2025, the Company had $302.7 million of purchase authority remaining under its $500.0 million stock repurchase plan.
Essex pays quarterly dividends from cash available for distribution. Until it is distributed, cash available for distribution is invested by the Company primarily in investment grade securities held available for sale or is used by the Company to reduce balances outstanding under its lines of credit or commercial paper program.
Development and Predevelopment 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. 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. The Company may also acquire land for future development purposes or sale.
As of September 30, 2025, the Company’s development pipeline was comprised of one consolidated development project of 543 apartment homes and various predevelopment projects, with total incurred costs of $139.2 million, and estimated remaining project costs of approximately $218.0 million, for total estimated project costs of $357.2 million.
The Company expects to fund the development and predevelopment communities by using a combination of some or all of the following sources: its working capital, amounts available on its lines of credit, commercial paper, construction loans, net proceeds from public and private equity and debt issuances, and proceeds from the disposition of assets, if any.
Derivative Activity
The Company uses interest rate swaps, interest rate caps, and total return swap contracts to manage certain interest rate risks. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves. The fair values of interest rate swaps and total return swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements.
Alternative Capital Sources
The Company utilizes co-investments as an alternative source of capital for acquisitions of both operating and development communities. The Company had an interest in 7,483 apartment homes in operating communities with joint ventures and technology co-investments for a total book value of $311.4 million as of September 30, 2025.
Off-Balance Sheet Arrangements
The Company has various unconsolidated interests in certain joint ventures. The Company does not believe that these unconsolidated investments have a materially different impact on its liquidity, cash flows, capital resources, credit or market risk than its consolidated operations. See Note 4, Co-investments, in the Notes to Condensed Consolidated Financial Statements, for carrying values and combined summarized financial information of these unconsolidated investments.
Critical 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. The Company defines critical accounting estimates as those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations of the Company. The Company’s critical accounting estimates relate principally to the following key areas: (i) accounting for the acquisition of investments in real estate; and (ii) evaluation of events and changes in circumstances indicating that the carrying value of any of the Company’s rental properties may not be recoverable.
The Company’s critical accounting policies and estimates have not changed materially from the information reported in Note 2, Summary of Critical and Significant Accounting Policies, in the Company’s annual report on Form 10-K for the year ended December 31, 2024.
Forward-Looking Statements
Certain statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this quarterly report on Form 10-Q which are not historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding the Company’s expectations, estimates, assumptions, hopes, intentions, beliefs and strategies regarding the future. Words such as “expects,” “assumes,” “anticipates,” “may,” “will,” “intends,” “plans,” “projects,” “believes,” “seeks,” “future,” “estimates,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Such forward-looking statements include, among other things, statements regarding expected operating performance and results, qualification as a REIT under the Internal Revenue Code of 1986, as amended, property stabilizations, property acquisition and disposition activity, joint venture and co-investment activity, development and redevelopment activity and other capital expenditures, capital raising and financing activity, revenue and expense growth, financial occupancy, interest rate and other economic expectations, included estimated remaining and total project costs related to the Company’s development pipeline.
While the Company’s management believes the assumptions underlying its forward-looking statements are reasonable, such forward-looking statements involve known and unknown risks, uncertainties and other factors, many of which are beyond the Company’s control, which could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The Company cannot assure the future results or outcome of the matters described in these statements; rather, these statements merely reflect the Company’s current expectations of the approximate outcomes of the matters discussed. Factors that might cause the Company’s actual results, performance or achievements to differ materially from those expressed or implied by these forward-looking statements include, but are not limited to, the following: occupancy rates and rental demand may be adversely affected by competition and local economic and market conditions; there may be increased interest rates, inflation, escalated operating costs and possible recessionary impacts, including from tariffs imposed by the current presidential administration and the threat of such tariffs; geopolitical tensions and regional conflicts, and the related impacts on macroeconomic conditions, including, among other things, interest rates and inflation; the terms of any refinancing may not be as favorable as the terms of existing indebtedness; the Company’s inability to maintain its investment grade credit rating with the rating agencies; the Company may be unsuccessful in the management of its relationships with its co-investment partners; the Company may fail to achieve its business objectives; time of actual completion and/or stabilization of development and redevelopment projects, including potential delays due to supply shortages related to tariffs and/or labor shortages related to deportations or threat of deportations; estimates of future income from an acquired property may prove to be inaccurate; future cash flows may be inadequate to meet operating requirements and/or may be insufficient to provide for dividend payments in accordance with REIT requirements; changes in laws or regulations and the anticipated or actual impact of future changes in laws or regulations, including eviction moratoria; unexpected difficulties in leasing of future development projects; volatility in financial and securities markets; the Company’s failure to successfully operate acquired properties; unforeseen consequences from cyber-intrusion; government approvals, actions and initiatives, including the need for compliance with environmental requirements; and those further risks, special considerations, and other factors referred to in this quarterly report on Form 10-Q, in the Company’s annual report on Form 10-K for the year ended December 31, 2024, and those risk factors and special considerations set forth in the Company’s other filings with the SEC which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. All forward-looking statements are made as of the date hereof, the Company assumes no obligation to update or supplement this information for any reason, and therefore, they may not represent the Company’s estimates and assumptions after the date of this report.
Funds from Operations Attributable to Common Stockholders and Unitholders
Funds from Operations Attributable to Common Stockholders and Unitholders (“FFO”) is a financial measure that is commonly used in the REIT industry. The Company presents FFO and FFO excluding non-core items (referred to as “Core FFO”) as supplemental operating performance measures. FFO and Core FFO are not used by the Company as, nor should they be considered to be, alternatives to net income computed under U.S. GAAP as an indicator of the Company’s operating performance or as alternatives to cash from operating activities computed under U.S. GAAP as an indicator of the Company’s ability to fund its cash needs.
FFO and Core FFO are not meant to represent a comprehensive system of financial reporting and do not present, nor do they intend to present, a complete picture of the Company’s financial condition and operating performance. The Company believes that net income computed under U.S. GAAP is the primary measure of performance and that FFO and Core FFO are only meaningful when they are used in conjunction with net income.
The Company considers FFO and Core FFO to be useful financial performance measurements of an equity REIT because, together with net income and cash flows, FFO and Core FFO provide investors with additional bases to evaluate operating performance and ability of a REIT to incur and service debt and to fund acquisitions and other capital expenditures and to pay dividends. By excluding gains or losses related to sales of depreciated operating properties and land, excluding real estate depreciation (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates) and excluding impairment write-downs from operating real estate and unconsolidated co-investments driven by a measurable decrease in the fair value of real estate held by the co-investment, FFO can help investors compare the operating performance of a real estate company between periods or as compared to different companies. By further adjusting for items that are not considered part of the Company’s core business operations, Core FFO allows investors to compare the core operating performance of the Company to its performance in prior reporting periods and to the operating performance of other real estate companies without the effect of items that by their nature are not comparable from period to period and tend to obscure the Company’s actual operating results. The Company believes that its condensed consolidated financial statements, prepared in accordance with U.S. GAAP, provide the most meaningful picture of its financial condition and its operating performance.
In calculating FFO, the Company follows the definition for this measure published by NAREIT, which is the leading REIT industry association. The Company believes that, under the NAREIT FFO definition, the two most significant adjustments made to net income are (i) the exclusion of historical cost depreciation and (ii) the exclusion of gains and losses from the sale of previously depreciated properties. The Company agrees that these two NAREIT adjustments are useful to investors for the following reasons:
(a)historical cost accounting for real estate assets in accordance with U.S. GAAP assumes, through depreciation charges, that the value of real estate assets diminishes predictably over time. NAREIT stated in its White Paper on Funds from Operations “since real estate asset values have historically risen or fallen with market conditions, many industry investors have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves.” Consequently, NAREIT’s definition of FFO reflects the fact that real estate, as an asset class, generally appreciates over time and depreciation charges required by U.S. GAAP do not reflect the underlying economic realities.
(b)REITs were created as a legal form of organization in order to encourage public ownership of real estate as an asset class through investment in firms that were in the business of long-term ownership and management of real estate. The exclusion, in NAREIT’s definition of FFO, of gains and losses from the sales of previously depreciated operating real estate assets allows investors and analysts to readily identify the operating results of the long-term assets that form the core of a REIT’s activity and assists in comparing those operating results between periods.
Management believes that it has consistently applied the NAREIT definition of FFO to all periods presented. However, there is judgment involved and other REITs’ calculation of FFO may vary from the NAREIT definition for this measure, and thus their disclosure of FFO may not be comparable to the Company’s calculation.
The table below is a reconciliation of net income available to common stockholders to FFO and Core FFO for the periods presented ($ in thousands, except per share amounts):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Net income available to common stockholders | $ | 164,621 | $ | 118,424 | $ | 589,093 | $ | 484,069 | |||||||||||||||
| Adjustments: | |||||||||||||||||||||||
| Depreciation and amortization | 151,489 | 146,439 | 454,277 | 431,785 | |||||||||||||||||||
| Gains not included in FFO | (67,509) | (31,583) | (305,043) | (169,909) | |||||||||||||||||||
| Impairment loss from unconsolidated co-investments | — | — | — | 3,726 | |||||||||||||||||||
| Depreciation and amortization from unconsolidated co-investments | 14,343 | 16,417 | 43,127 | 52,267 | |||||||||||||||||||
| Noncontrolling interest related to Operating Partnership units | 5,767 | 4,206 | 20,827 | 17,075 | |||||||||||||||||||
| Depreciation attributable to third party ownership and other | (38) | (370) | (122) | (1,149) | |||||||||||||||||||
| Funds from operations attributable to common stockholders and unitholders | $ | 268,673 | $ | 253,533 | $ | 802,159 | $ | 817,864 | |||||||||||||||
| FFO per share-diluted | $ | 4.03 | $ | 3.81 | $ | 12.03 | $ | 12.30 | |||||||||||||||
| Non-core items: | |||||||||||||||||||||||
| Expensed acquisition and investment related costs | $ | 25 | $ | — | $ | 25 | $ | 68 | |||||||||||||||
| Tax benefit on unconsolidated technology co-investments | (1,958) | (441) | (2,353) | (1,199) | |||||||||||||||||||
| Realized and unrealized gains on marketable securities, net | (1,658) | (5,697) | (4,059) | (10,645) | |||||||||||||||||||
| Provision for credit losses | 50 | (182) | 61 | (116) | |||||||||||||||||||
| Equity loss from unconsolidated technology co-investments | (4,393) | (555) | (6,005) | (6,282) | |||||||||||||||||||
| Loss on early retirement of debt | — | — | 762 | — | |||||||||||||||||||
| Co-investment promote income | — | — | — | (1,531) | |||||||||||||||||||
| Income from early redemption of preferred equity investments and notes receivable | (70) | — | (70) | — | |||||||||||||||||||
| General and administrative and other, net (1) | 3,926 | 13,956 | 7,863 | 22,403 | |||||||||||||||||||
| Insurance reimbursements, legal settlements, and other, net (2) | (89) | (612) | (789) | (43,912) | |||||||||||||||||||
| Core funds from operations attributable to common stockholders and unitholders | $ | 264,506 | $ | 260,002 | $ | 797,594 | $ | 776,650 | |||||||||||||||
| Core FFO per share-diluted | $ | 3.97 | $ | 3.91 | $ | 11.96 | $ | 11.68 | |||||||||||||||
| Weighted average number of shares outstanding, diluted (3) | 66,674,655 | 66,551,838 | 66,667,571 | 66,500,412 |
(1)Includes political advocacy costs of $1.6 million and $2.0 million for the three and nine months ended September 30, 2025, respectively, and $11.3 million and $18.5 million for the three and nine months ended September 30, 2024, respectively.
(2)There were no material gains from legal settlements during the three and nine months ended September 30, 2025 and the three months ended September 30, 2024. During the nine months ended September 30, 2024, the Company settled two lawsuits related to construction defects at two communities and received cash recoveries of $42.5 million. The Company determined that all uncertainties were resolved upon receipt of cash and recorded a gain which was excluded from Core FFO.
(3)Assumes conversion of all outstanding limited partnership units in the Operating Partnership into shares of the Company’s common stock and excludes DownREIT limited partnership units.
Net Operating Income
Net operating income (“NOI”) and Same-Property NOI are considered by management to be important supplemental performance measures to earnings from operations included in the Company’s condensed consolidated statements of income and comprehensive income. The presentation of Same-Property NOI assists with the presentation of the Company’s operations prior to the allocation of depreciation and any corporate-level or financing-related costs. NOI reflects the operating performance of a community and allows for an easy comparison of the operating performance of individual communities or groups of communities. In addition, because prospective buyers of real estate have different financing and overhead structures, with varying marginal impacts to overhead by acquiring real estate, NOI is considered by many in the real estate industry to be a useful measure for determining the value of a real estate asset or group of assets. The Company defines Same-Property NOI as Same-Property revenues less Same-Property operating expenses, including property taxes. Please see the reconciliation of earnings from operations to NOI and Same-Property NOI, which in the table below is the NOI for stabilized properties consolidated by the Company for the periods presented ($ in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Earnings from operations | $ | 210,399 | $ | 128,790 | $ | 747,180 | $ | 398,599 | |||||||||||||||
| Adjustments: | |||||||||||||||||||||||
| Corporate-level property management expenses | 12,216 | 11,610 | 36,768 | 34,331 | |||||||||||||||||||
| Depreciation and amortization | 151,489 | 146,439 | 454,277 | 431,785 | |||||||||||||||||||
| Management and other fees from affiliates | (2,361) | (2,563) | (7,078) | (7,849) | |||||||||||||||||||
| General and administrative | 18,058 | 29,067 | 51,507 | 67,374 | |||||||||||||||||||
| Expensed acquisition and investment related costs | 25 | — | 25 | 68 | |||||||||||||||||||
| Gain on sale of real estate and land | (62,320) | — | (299,524) | — | |||||||||||||||||||
| NOI | 327,506 | 313,343 | 983,155 | 924,308 | |||||||||||||||||||
| Less: Non-Same Property NOI | (41,619) | (34,060) | (124,002) | (90,214) | |||||||||||||||||||
| Same-Property NOI | $ | 285,887 | $ | 279,283 | $ | 859,153 | $ | 834,094 |
Item 3. Quantitative and Qualitative Disclosures About Market Risks
Interest Rate Hedging Activities
The Company’s objective in using derivatives is to add stability to interest expense and to manage its exposure to interest rate movements or other identified risks. To accomplish this objective, the Company uses interest rate swaps as part of its cash flow hedging strategy. As of September 30, 2025, the Company had five interest rate swap contracts and one forward starting interest rate swap contract to mitigate the risk of changes in the interest-related cash outflows on the Company’s $550.0 million unsecured term loan. In June 2025, the Company entered into a $50.0 million forward starting interest rate swap that effectively fixes $50.0 million of the term loan to be drawn at a future date. The Company’s interest rate swaps were designated as a cash flow hedge as of September 30, 2025. The following table summarizes the notional amount, carrying value, and estimated fair value of the Company’s cash flow hedge derivative instruments used to hedge interest rates as of September 30, 2025. The notional amount represents the aggregate amount of a particular security that is currently hedged at one time, but does not represent exposure to credit, interest rates or market risks. The table also includes a sensitivity analysis to demonstrate the impact on the Company’s derivative instruments from an increase or decrease in 10-year Treasury bill interest rates by 50 basis points, as of September 30, 2025 ($ in thousands):
| Notional Amount | Maturity Date | Carrying and Estimated Fair Value | Estimated Carrying Value | ||||||||||||||||||||||||||
| +50 | -50 | ||||||||||||||||||||||||||||
| Basis Points | Basis Points | ||||||||||||||||||||||||||||
| Cash flow hedges: | |||||||||||||||||||||||||||||
| Interest rate swaps | $ | 497,500 | 2026-2030 | $ | 1,842 | $ | 6,443 | $ | (2,855) | ||||||||||||||||||||
| Forward starting interest rate swap | 50,000 | 2030 | (21) | 943 | (1,019) | ||||||||||||||||||||||||
| Total cash flow hedges | $ | 547,500 | 2026-2030 | $ | 1,821 | $ | 7,386 | $ | (3,874) |
Additionally, the Company has entered into total return swap contracts, with an aggregate notional amount of $259.0 million that effectively convert $259.0 million of fixed mortgage notes payable to a floating interest rate based on the Securities Industry and Financial Markets Association Municipal Swap Index plus a spread and had a carrying value of zero as of September 30, 2025. The Company is exposed to insignificant interest rate risk on these total return swaps as the related mortgages are callable, at par, by the Company, co-terminus with the termination of any related swap. These derivatives do not qualify for hedge accounting.
Interest Rate Sensitive Liabilities
The Company is exposed to interest rate changes primarily as a result of its lines of credit, commercial paper, and long-term debt used to maintain liquidity and fund capital expenditures and expansion of the Company’s real estate investment portfolio and operations. The Company’s interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows and to lower its overall borrowing costs. To achieve its objectives, the Company borrows primarily at fixed rates and may enter into derivative financial instruments such as interest rate swaps, caps, and treasury locks in order to mitigate its interest rate risk on a related financial instrument. The Company does not enter into derivative or interest rate transactions for speculative purposes.
The Company’s interest rate risk is monitored using a variety of techniques. The table below presents the principal amounts and weighted average interest rates by year of expected maturity to evaluate the expected cash flows ($ in thousands):
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2026 | 2027 | 2028 | 2029 | Thereafter | Total | Fair value | ||||||||||||||||||||||||||||||||||||||||
| Fixed rate debt | $ | 11,000 | 548,291 | 350,000 | 517,000 | 500,000 | 3,713,000 | $ | 5,639,291 | $ | 5,417,555 | ||||||||||||||||||||||||||||||||||||
| Average interest rate | 4.0 | % | 3.5 | % | 3.8 | % | 2.2 | % | 4.1 | % | 3.8 | % | 3.6 | % | |||||||||||||||||||||||||||||||||
| Variable rate debt (1) | $ | 245,263 | 1,114 | 384,397 | 1,332 | 1,456 | 420,481 | $ | 1,054,043 | $ | 1,047,478 | ||||||||||||||||||||||||||||||||||||
| Average interest rate | 4.3 | % | 3.3 | % | 4.0 | % | 3.3 | % | 3.3 | % | 3.8 | % | 4.0 | % |
(1)$259.0 million of variable rate debt is tax exempt to the note holders.
The table incorporates only those exposures that exist as of September 30, 2025. It does not consider those exposures or positions that could arise after that date. As a result, the Company’s ultimate realized gain or loss, with respect to interest rate fluctuations and hedging strategies would depend on the exposures that arise prior to settlement.
Item 4. Controls and Procedures
Essex Property Trust, Inc.
As of September 30, 2025, Essex carried out an evaluation, under the supervision and with the participation of management, including Essex’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Essex’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based upon that evaluation, Essex’s Chief Executive Officer and Chief Financial Officer concluded that as of September 30, 2025, Essex’s disclosure controls and procedures were effective at a reasonable assurance level to ensure that the information required to be disclosed by Essex in the reports that Essex files or submits under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such disclosure controls and procedures were also effective to ensure that information required to be disclosed in the reports that Essex files or submits under the Exchange Act is accumulated and communicated to Essex’s management, including Essex’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
There were no changes in Essex’s internal control over financial reporting, that occurred during the quarter ended September 30, 2025, that have materially affected, or are reasonably likely to materially affect, Essex’s internal control over financial reporting.
Limitations on Effectiveness of Controls
In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, Essex’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Essex Portfolio, L.P.
As of September 30, 2025, the Operating Partnership carried out an evaluation, under the supervision and with the participation of management, including Essex’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Operating Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of September 30, 2025, the Operating Partnership’s disclosure controls and procedures were effective at a reasonable assurance level to ensure that the information required to be disclosed by the Operating Partnership in the reports that the Operating Partnership files or submits under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such disclosure controls and procedures were also effective to ensure that information required to be disclosed in the reports that the Operating Partnership files or submits under the Exchange Act is accumulated and communicated to the Operating Partnership’s management, including Essex’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
There were no changes in the Operating Partnership’s internal control over financial reporting, that occurred during the quarter ended September 30, 2025, that have materially affected, or are reasonably likely to materially affect, the Operating Partnership’s internal control over financial reporting.
Limitations on Effectiveness of Controls
In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, the Operating Partnership’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Part II -- Other Information
Item 1: Legal Proceedings
The information regarding lawsuits, other proceedings and claims, set forth in Note 11, Commitments and Contingencies, in the Notes to Condensed Consolidated Financial Statements, is incorporated by reference into this Item 1. In addition to such matters referred to in Note 11, the Company is subject to various lawsuits in the normal course of its business operations. While the resolution of any such matter cannot be predicted with certainty, the Company is not currently a party to any legal proceedings nor is any legal proceeding currently threatened against the Company that the Company believes, individually or in the aggregate, would have a material adverse effect on the Company’s financial condition, results of operations or cash flows.
Item 1A. Risk Factors
In addition to the other information set forth in this quarterly report on Form 10-Q, you should carefully consider the factors discussed in “Part I. Item 1A. Risk Factors” in the Company’s annual report on Form 10-K for the year ended December 31, 2024, which could materially affect the Company’s financial condition, results of operations or cash flows. There have been no material changes to the Risk Factors disclosed in Item 1A of the Company’s annual report on Form 10-K for the year ended December 31, 2024, as filed with the SEC and available at www.sec.gov. The risks described in the Company’s annual report on Form 10-K and subsequent quarterly reports on Form 10-Q are not the only risks facing the Company. Additional risks and uncertainties not currently known or that the Company currently deems to be immaterial may also materially adversely affect the Company’s financial condition, results of operations or cash flows.
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities; Essex Portfolio, L.P.
During the three months ended September 30, 2025, the Operating Partnership issued OP Units in private placements in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, in the amounts and for the consideration set forth below:
During the three months ended September 30, 2025, Essex issued an aggregate of 157 shares of its common stock upon the vesting of restricted stock awards. For each share of common stock issued by Essex in connection with vesting of restricted stock awards, the Operating Partnership issued 157 OP Units to Essex, as required by the partnership agreement.
Stock Repurchases
In September 2022, the Company announced that its Board of Directors approved a stock repurchase plan, without an expiration date, to allow the Company to acquire shares of common stock up to an aggregate of $500.0 million. During the three months ended September 30, 2025, the Company did not repurchase any shares. As of September 30, 2025, the Company had $302.7 million of purchase authority remaining under the stock repurchase plan.
Item 3: Defaults Upon Senior Securities
None.
Item 4: Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Securities Trading Plans of Directors and Executive Officers
During the three months ended September 30, 2025, none of our officers or directors adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non Rule 105b-1 trading arrangement”.
Item 6. Exhibits
- Filed or furnished herewith.
** In accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.
† The schedules and certain exhibits to this agreement, as set forth in the agreement, have not been filed herewith. The Company agrees to furnish supplementally a copy of any omitted schedule or exhibit to the Securities and Exchange Commission upon request.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.
| ESSEX PROPERTY TRUST, INC. | |||||
| (Registrant) | |||||
| Date: October 30, 2025 | |||||
| By: /s/ BARBARA PAK | |||||
| Barbara Pak | |||||
| Executive Vice President and Chief Financial Officer (Authorized Officer, Principal Financial Officer) |
| Date: October 30, 2025 | |||||
| By: /s/ BRENNAN MCGREEVY | |||||
| Brennan McGreevy | |||||
| Group Vice President and Chief Accounting Officer |
| ESSEX PORTFOLIO, L.P. By Essex Property Trust, Inc., its general partner | |||||
| (Registrant) | |||||
| Date: October 30, 2025 | |||||
| By: /s/ BARBARA PAK | |||||
| Barbara Pak | |||||
| Executive Vice President and Chief Financial Officer (Authorized Officer, Principal Financial Officer) |
| Date: October 30, 2025 | |||||
| By: /s/ BRENNAN MCGREEVY | |||||
| Brennan McGreevy | |||||
| Group Vice President and Chief Accounting Officer |