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Real Estate Investments | 12 Months Ended
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Dec. 31, 2019
Real Estate Investments, Net [Abstract] |
Real Estate Investments | Real Estate Investments (a) Acquisitions of Real Estate For the year ended December 31, 2019, the Company purchased four communities consisting of 849 apartment homes for approximately $373.3 million. The table below summarizes acquisition activity for the year ended December 31, 2019 ($ in millions):
Property Name | Location | Apartment Homes | Essex Ownership Percentage | Quarter in 2019 | Purchase Price
One South Market(1) | San Jose, CA | 312 |  | 100 | % | Q1 | $ | 80.6 |
Brio(2) | Walnut Creek, CA | 300 |  | N/A |  | Q2 | 164.9 |
Township | Redwood City, CA | 132 |  | 100 | % | Q3 | 88.7 |
Pure Redmond | Redmond, WA | 105 |  | 100 | % | Q4 | 39.1 |
Total 2019 | 849 |  |  |  |  | $ | 373.3 |
(1) | In March 2019, the Company purchased the joint venture partner's 45% membership interest in the One South Market co-investment based on an estimated property valuation of $179.0 million. In conjunction with the acquisition, $86.0 million of mortgage debt that encumbered the property was repaid.
(2) | In June 2019, the Company acquired Brio for a total contract price of $164.9 million in a DownREIT transaction. As part of the acquisition, the Company assumed $98.7 million of mortgage debt in the community. Based on a VIE analysis performed by the Company, the property was consolidated.
The consolidated fair value of the acquisitions listed above were included on the Company's consolidated balance sheet as follows: $72.4 million was included in land and land improvements, $402.4 million was included in buildings and improvements, $3.3 million was included in prepaid expenses and other assets, and $149.0 million was included in mortgage notes payable, within the Company's consolidated balance sheets. In December 2019, the Company purchased the joint venture partner's 25% ownership interest in Hidden Valley, a consolidated community consisting of 324 apartment homes, for a contract price of $24.2 million based on an estimated property valuation of $97.0 million and an encumbrance of $29.7 million of mortgage debt. The purchase was recorded as a redemption of noncontrolling interest in the consolidated statements of equity. For the year ended December 31, 2018, the Company purchased a partial interest in one community consisting of 166 apartment homes for $35.4 million. (b) Sales of Real Estate Investments For the year ended December 31, 2019, the Company sold a land parcel adjacent to the Mylo development project located in Santa Clara, CA, for $10.8 million and recorded an immaterial gain as well as land located in San Mateo, CA, that had been held for future development for $12.5 million and recorded a loss of $3.2 million. For the year ended December 31, 2018, the Company sold two communities consisting of 669 apartment homes for $352.0 million resulting in gains totaling $61.9 million. During 2017, the Company sold one community consisting of 270 apartment homes for $132.5 million resulting in a gain of $26.2 million. (c) Real Estate Assets Held for Sale, net As of December 31, 2019 and 2018, the Company had no assets classified as held for sale. (d) Co-investments The Company has joint ventures which are accounted for under the equity method. The co-investments’ accounting policies are similar to the Company’s accounting policies. The co-investments own, operate, and develop apartment communities. In August 2019, the Company formed a new joint venture entity, BEX IV, LLC ("BEX IV"), with an institutional partner. The Company has a 50.1% ownership interest in the joint venture and an initial equity commitment of $52.2 million. The joint venture is unconsolidated for financial reporting purposes. Also, in August 2019, BEX IV acquired 777 Hamilton, a 195 unit apartment home community located in Menlo Park, CA, for a total contract price of $148.0 million. The property was encumbered by a $44.4 million related party bridge loan from the Company, with an interest rate of 3.25% and a maturity date of November 2019. See Note 6, Related Party Transactions, for additional details. The scheduled maturity was extended to February 2020 but the related party bridge loan was paid off in December 2019 when BEX IV assumed $44.4 million of mortgage debt, with an interest rate of 3.23% and a maturity date of January 2030. In August 2019, Wesco V, LLC ("Wesco V"), one of the Company's joint ventures, acquired The Courtyards at 65th Street, a 331 unit apartment home community located in Emeryville, CA, for a total contract price of $178.0 million. The property was encumbered by an $89.0 million related party bridge loan from the Company, with an interest rate of the London Interbank Offered Rate ("LIBOR") plus 1.30% and a maturity date of December 2019. See Note 6, Related Party Transactions, for additional details. The related party bridge loan was paid off in November 2019 when Wesco V assumed $89.0 million of mortgage debt, with an interest rate of LIBOR plus 1.30% and a maturity date of January 2027. In October 2019, a CPP joint venture, in which Essex had a 55.0% ownership interest, sold Mosso, a 463 unit apartment home community located in San Francisco, CA, for $311.0 million, resulting in a gain of $50.2 million for the Company. In November 2019, Wesco V acquired Velo and Ray Apartments, a 308 unit apartment home community located in Seattle, WA, for a total contract price of $133.0 million. The property was encumbered by an $85.5 million related party bridge loan from the Company, with an interest rate of LIBOR plus 1.30% and a maturity date of February 2020. See Note 6, Related Party Transactions, for additional details. The carrying values of the Company’s co-investments as of December 31, 2019 and 2018 are as follows ($ in thousands, except in parenthetical):
| Weighted Average Essex Ownership |  | December 31,
| Percentage (1) |  | 2019 |  | 2018
Ownership interest in: |  |  |  |  |
CPPIB | 55 | % |  | $ | 345,466 |  |  | $ | 482,507 |
Wesco I, Wesco III, Wesco IV, and Wesco V | 51 | % |  | 216,756 |  |  | 194,890 |
BEXAEW, BEX II, BEX III, and BEX IV | 50 | % |  | 160,888 |  |  | 121,780 |
Other | 48 | % |  | 20,351 |  |  | 34,093 |
Total operating and other co-investments, net |  |  | 743,461 |  |  | 833,270 |
Total predevelopment and development co-investments | 50 | % |  | 146,944 |  |  | 94,060 |
Total preferred interest co-investments (includes related party investments of $73.2 million and $51.8 million as of December 31, 2019 and December 31, 2018, respectively - Note 6 - Related Party Transactions for further discussion) |  |  | 444,934 |  |  | 372,810 |
Total co-investments, net |  |  | $ | 1,335,339 |  |  | $ | 1,300,140 |
(1) | Weighted average Company ownership percentages are as of December 31, 2019.
The combined summarized financial information of co-investments is as follows ($ in thousands):
| December 31,
| 2019 |  | 2018
Combined balance sheets: (1) |  |  |
Rental properties and real estate under development | $ | 4,733,762 |  |  | $ | 4,367,987 |
Other assets | 139,562 |  |  | 104,119 |
Total assets | $ | 4,873,324 |  |  | $ | 4,472,106 |
Debt | $ | 2,442,213 |  |  | $ | 2,190,764 |
Other liabilities | 117,160 |  |  | 106,316 |
Equity | 2,313,951 |  |  | 2,175,026 |
Total liabilities and equity | $ | 4,873,324 |  |  | $ | 4,472,106 |
Company's share of equity | $ | 1,335,339 |  |  | $ | 1,300,140 |
| Years ended December 31,
| 2019 |  | 2018 |  | 2017
Combined statements of income: (1) |  |  |  |  |
Property revenues | $ | 336,922 |  |  | $ | 332,164 |  |  | $ | 312,841 |
Property operating expenses | (115,658 | ) |  | (107,584 | ) |  | (110,583 | )
Net operating income | 221,264 |  |  | 224,580 |  |  | 202,258 |
Gain on sale of real estate | 112,918 |  |  | 24,218 |  |  | 90,663 |
Interest expense | (65,665 | ) |  | (63,913 | ) |  | (62,844 | )
General and administrative | (9,575 | ) |  | (6,379 | ) |  | (9,091 | )
Depreciation and amortization | (121,006 | ) |  | (126,485 | ) |  | (118,048 | )
Net income | $ | 137,936 |  |  | $ | 52,021 |  |  | $ | 102,938 |
Company's share of net income (2) | $ | 112,136 |  |  | $ | 89,132 |  |  | $ | 86,445 |
(1) | Includes preferred equity investments held by the Company.
(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 $7.5 million, $2.0 million, and $1.9 million for the years ended December 31, 2019, 2018, and 2017, respectively.
Operating Co-investments As of December 31, 2019 and 2018, the Company, through several joint ventures, owned 10,672 and 10,613 apartment homes, respectively, in operating communities. The Company’s book value of these co-investments was $743.5 million and $833.3 million at December 31, 2019 and 2018, respectively. Predevelopment and Development Co-investments As of December 31, 2019 and 2018, the Company, through several joint ventures, owned 806 and 814 apartment homes in predevelopment and development communities, respectively. The Company’s book value of these co-investments was $146.9 million and $94.1 million at December 31, 2019 and 2018, respectively. In 2017, the Company entered into a joint venture to develop Patina at Midtown (formerly known as Ohlone), a multifamily community comprised of 269 apartment homes located in San Jose, CA. The Company has a 50% ownership interest in the development which has a projected total cost of $136.0 million. Construction began in the third quarter of 2017 and the community is expected to open in the first quarter of 2020. The Company has also committed to a $28.9 million preferred equity investment in the project, which accrues an annualized preferred return of 10.0% and matures in 2020. In 2015, the Company entered into a joint venture to develop 500 Folsom, a multifamily community comprised of 537 apartment homes located in San Francisco, CA. The Company has a 50% ownership interest in the development which has a projected total cost of $415.0 million. The property began initial occupancy in the third quarter of 2019 and is expected to be fully stabilized by the fourth quarter of 2020. Preferred Equity Investments As of December 31, 2019 and 2018, the Company held preferred equity investment interests in several joint ventures which own real estate. The Company’s book value of these preferred equity investments was $444.9 million and $372.8 million at December 31, 2019 and 2018, respectively, and is included in the co-investments line in the accompanying consolidated balance sheets. During 2019, the Company made commitments to fund $141.7 million of preferred equity investment in five preferred equity investments, some of which include related party sponsors. See Note 6, Related Party Transactions, for additional details. The investments have initial preferred returns ranging from 10.15%-11.3%, with maturities ranging from July 2022 to October 2024. As of December 31, 2019, the Company had funded $125.4 million of the $141.7 million of commitments. The remaining committed amount is expected to be funded in 2020. During 2018, the Company made commitments to fund $45.1 million of preferred equity investment in two preferred equity investments, some of which include related party sponsors. See Note 6, Related Party Transactions, for additional details. The investments have initial preferred returns ranging from 10.25%-12.0%, with maturities ranging from May 2023 to April 2024. As of December 31, 2019, the Company had funded $41.1 million of the $45.1 million of commitments. The remaining committed amount will be funded when requested by the sponsors. In February 2019, the Company received cash of $10.9 million, including an early redemption fee of $0.1 million, for the full redemption of a related party preferred equity investment in a joint venture that holds property in San Jose, CA. See Note 6, Related Party Transactions, for additional details. In April 2019, the Company received cash of $16.3 million, including an early redemption fee of $0.7 million, for the full redemption of a preferred equity investment in a joint venture that holds property in Santa Ana, CA. In September 2019, the Company received cash of $14.8 million, including an early redemption fee of $0.3 million, for the full redemption of a preferred equity investment in a property located in Redmond, WA. In September 2019, the Company received cash of $16.3 million, including an early redemption fee of $1.4 million, for the full redemption of a preferred equity investment in a property located in Seattle, WA. In October 2019, the Company received cash of $15.8 million, including an early redemption fee of $0.2 million, for the full redemption of a preferred equity investment in a property located in San Jose, CA. In November 2019, the Company received cash of $16.0 million, including an early redemption fee of $0.9 million, for the full redemption of a preferred equity investment in a property located in Bellevue, WA. (e) Real Estate under Development The Company defines development projects as new communities that are being constructed, or are newly constructed and are in a phase of lease-up and have not yet reached stabilized operations. As of December 31, 2019, the Company's development pipeline was comprised of five consolidated projects under development, two unconsolidated joint venture projects under development and various predevelopment projects, aggregating 1,960 apartment homes, with total incurred costs of $1.0 billion.

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- Definition The entire disclosure for certain real estate investment financial statements, real estate investment trust operating support agreements, real estate owned, retail land sales, time share transactions, as well as other real estate related disclosures. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 970 -URI http://asc.fasb.org/topic&trid=2156125 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 978 -URI http://asc.fasb.org/topic&trid=2134977 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 976 -URI http://asc.fasb.org/topic&trid=2134846 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 974 -URI http://asc.fasb.org/topic&trid=2156429 Reference 5: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 972 -URI http://asc.fasb.org/topic&trid=2134617 + Details
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