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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(MARK ONE)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
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

Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Essex Property Trust, Inc. | Yes | ☒ | No | ☐ | Essex Portfolio, L.P. | Yes | ☐ | No | ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Essex Property Trust, Inc. | Yes | ☐ | No | ☒ | Essex Portfolio, L.P. | Yes | ☐ | No | ☒

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 | ☐

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

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 Act).

Essex Property Trust, Inc. | Yes | ☐ | No | ☒ | Essex Portfolio, L.P. | Yes | ☐ | No | ☒

As of June 30, 2021, the aggregate market value of the voting stock held by non-affiliates of Essex Property Trust, Inc. was $19,372,879,492. The aggregate market value was computed with reference to the closing price on the New York Stock Exchange on the last trading day preceding such date. Shares of common stock held by executive officers, directors and holders of more than ten percent of the outstanding common stock have been excluded from this calculation because such persons may be deemed to be affiliates. This exclusion does not reflect a determination that such persons are affiliates for any other purposes. There is no public trading market for the common units of Essex Portfolio, L.P. As a result, the aggregate market value of the common units held by non-affiliates of Essex Portfolio, L.P. cannot be determined.
As of February 23, 2022, 65,278,686 shares of common stock ($.0001 par value) of Essex Property Trust, Inc. were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the definitive Proxy Statement to be filed with the Securities and Exchange Commission (the "SEC") pursuant to Regulation 14A in connection with the 2022 annual meeting of stockholders of Essex Property Trust, Inc. are incorporated by reference in Part III of this Annual Report on Form 10-K. Such Proxy Statement will be filed with the SEC within 120 days of December 31, 2021.
Auditor Name: KPMG LLP Location: San Francisco, California PCAOB ID: 185

EXPLANATORY NOTE
This report combines the annual reports on Form 10-K for the year ended December 31, 2021 of Essex Property Trust, Inc., a Maryland corporation, and Essex Portfolio, L.P., a Delaware limited partnership of which Essex Property Trust, Inc. is the sole general partner.
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 December 31, 2021, 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 Company 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-K 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.
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 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 consolidated financial statements and as noncontrolling interest in Essex's consolidated financial statements. The noncontrolling interest in the Operating Partnership's consolidated financial statements include the interest of unaffiliated partners in various consolidated partnerships and co-investment partners. The noncontrolling interest in Essex's
iii

consolidated financial statements include (i) the same noncontrolling interest as presented in the Operating Partnership’s 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-K provides separate 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-K also includes separate Part II, Item 9A. 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 (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-K 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 consolidated balance sheets, statements of income, 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 consolidated financial statements for the periods and are normal and recurring in nature, except as otherwise noted.
The accompanying consolidated financial statements should be read in conjunction with the notes to such consolidated financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations herein.
iv

ESSEX PROPERTY TRUST, INC.
ESSEX PORTFOLIO, L.P.
2021 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS

Part I. |  | Page
Item 1. | Business | 3
Item 1A. | Risk Factors | 11
Item 1B. | Unresolved Staff Comments | 29
Item 2. | Properties | 30
Item 3. | Legal Proceedings | 37
Item 4. | Mine Safety Disclosures | 37
Part II. |  |
Item 5. | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 38
Item 6. | [Reserved] | 42
Item 7. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 43
Item 7A. | Quantitative and Qualitative Disclosures About Market Risks | 55
Item 8. | Financial Statements and Supplementary Data | 56
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 56
Item 9A. | Controls and Procedures | 56
Item 9B. | Other Information | 57
Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 57
Part III. |  |
Item 10. | Directors, Executive Officers and Corporate Governance | 58
Item 11. | Executive Compensation | 58
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 58
Item 13. | Certain Relationships and Related Transactions, and Director Independence | 58
Item 14. | Principal Accounting Fees and Services | 58
Part IV. |  |
Item 15. | Exhibits and Financial Statement Schedules | 59
Item 16. | Form 10-K Summary | 59
Signatures |  | S-1

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PART I
Forward-Looking Statements
•This Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Exchange Act. Such forward-looking statements are described in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, "Forward-Looking Statements." Actual results could differ materially from those set forth in each forward-looking statement. Certain factors that might cause such a difference are discussed in this report, including in Item 1A, Risk Factors of this Form 10-K.
Risk Factors Summary
The following is a summary of the principal risks that could adversely affect our business, operating results, cash flows and financial conditions.
Risks Related to Our Real Estate Investments and Operations
•General real estate investment risks may adversely affect property income and values.
•Short-term leases expose us to the effects of declining market rents, and the Company may be unable to renew leases or relet units as leases expire.
•National and regional economic environments can negatively impact the Company’s liquidity and operating results.
•Rent control, or other changes in applicable laws, or noncompliance with applicable laws, could adversely affect the Company's operations, property values or expose us to liability.
•The current COVID-19 pandemic, or the future outbreak of other highly infectious or contagious diseases could materially and adversely affect our business, financial condition and results of operations.
•Acquisition of communities as well as development and redevelopment activities each involve various risks and may be delayed, not completed, and/or not achieve expected results.
•The geographic concentration of the Company’s communities and fluctuations in local markets may adversely impact the Company’s financial condition and operating results.
•The Company may experience various increased costs, including increased property taxes or costs associated with complying with legislation, to own and maintain its properties.
•Competition in the apartment community market and other housing alternatives may adversely affect operations and the rental demand for the Company’s communities.
•Investments in mortgages, mezzanine loans, subordinated debt, other real estate, and other marketable securities could adversely affect the Company’s cash flow from operations.
•The Company’s ownership of co-investments could limit the Company’s ability to control such communities and may restrict our ability to finance, sell or otherwise transfer our interests in these properties and expose us to loss of the properties if such agreements are breached by us or terminated.
•We may pursue acquisitions of other REITs and real estate companies, which may not yield anticipated results and could adversely affect our results of operations.
•Real estate investments are relatively illiquid and, therefore, the Company's ability to vary its portfolio promptly in response to changes in economic or other conditions may be limited.
•The Company may not be able to lease its retail/commercial space consistent with its projections or at market rates.
•Climate change may adversely affect our business.
•Accidental death or severe injuries at our communities due to fires, floods, other natural disasters or hazards could adversely affect our business and results of operations.
•Adverse changes in laws may adversely affect the Company's liabilities and/or operating costs relating to its properties and its operations.
•Failure to succeed in new markets may limit the Company’s growth.
•Our business and reputation depend on our ability to continue providing high quality housing and consistent operation of our communities, the failure of which could adversely affect our business, financial condition and results of operations.
•We rely on information technology in our operations, and any material failure, inadequacy, interruption or breach of the Company’s privacy or information security systems, or those of our vendors or other third parties, could materially adversely affect the Company’s business and financial condition.
•Reliance on third party software providers to host systems critical to our operations and to provide the Company with data.
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Risks Relating to Our Indebtedness and Financings
•Capital and credit market conditions may affect the Company’s access to sources of capital and/or the cost of capital, which could negatively affect the Company’s business, stock price, results of operations, cash flows and financial condition. Debt financing has inherent risks.
•The indentures governing our notes and other financing arrangements contain restrictive covenants that limit our operating flexibility.
•A downgrade in the Company's investment grade credit rating could materially and adversely affect its business and financial condition.
•The Company could be negatively impacted by the condition of Fannie Mae or Freddie Mac and by changes in government support for multifamily housing.
Risks Related to Personnel
•The Company depends on its key personnel, whose continued service is not guaranteed.
•The Company’s Chairman is involved in other real estate activities and investments, which may lead to conflicts of interest.
•The influence of executive officers, directors and significant stockholders may be detrimental to holders of common stock.
Risks Related to Taxes and REIT Status
•Failure to generate sufficient revenue or other liquidity needs could limit cash flow available for distributions to Essex's stockholders or the Operating Partnership's unitholders.
•The Maryland Business Combination Act and the Company’s governing documents may delay, defer or prevent a transaction or change in control of the Company that might involve a premium price for the Company's stock or otherwise be in the best interest of our stockholders.
•Loss of the Company's REIT status would have significant adverse consequences to the Company and the value of the Company's common stock.
•The tax imposed on REITs engaging in "prohibited transactions" may limit the Company’s ability to engage in transactions which would be treated as sales for federal income tax purposes.
•Dividends payable by REITs may be taxed at higher rates than dividends of non-REIT corporations, which could reduce the net cash received by stockholders and may be detrimental to the Company’s ability to raise additional funds through any future sale of its stock.
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Item 1. Business
OVERVIEW
Essex Property Trust, Inc. ("Essex"), a Maryland corporation, is an S&P 500 company that operates as a self-administered and self-managed real estate investment trust ("REIT"). Essex owns all of its interest in its real estate and other investments directly or indirectly through Essex Portfolio, L.P. (the "Operating Partnership" or "EPLP"). Essex is the sole general partner of the Operating Partnership and as of December 31, 2021, had an approximately 96.6% general partnership interest in the Operating Partnership. In this report, the terms the "Company," "we," "us," and "our" also refer to Essex Property Trust, Inc., the Operating Partnership and those entities/subsidiaries owned or controlled by Essex and/or the Operating Partnership.
Essex has elected to be treated as a REIT for federal income tax purposes, commencing with the year ended December 31, 1994. Essex completed its initial public offering on June 13, 1994. In order to maintain compliance with REIT tax rules, the Company utilizes taxable REIT subsidiaries for various revenue generating or investment activities. All taxable REIT subsidiaries are consolidated by the Company for financial reporting purposes.
The Company is engaged primarily in the ownership, operation, management, acquisition, development and redevelopment of predominantly apartment communities, located along the West Coast of the United States. As of December 31, 2021, the Company owned or had ownership interests in 252 operating apartment communities, aggregating 61,911 apartment homes, excluding the Company's ownership in preferred equity co-investments, loan investments, three operating commercial buildings, and a development pipeline comprised of one consolidated project and one unconsolidated joint venture project aggregating 371 apartment homes (collectively, the "Portfolio").
The Company’s website address is http://www.essex.com. The Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports, and the Proxy Statement for its Annual Meeting of Stockholders are available, free of charge, on its website as soon as practicable after the Company files the reports with the U.S. Securities and Exchange Commission ("SEC"). The information contained on the Company's website shall not be deemed to be incorporated into this report.
BUSINESS STRATEGIES
The following is a discussion of the Company’s business strategies in regards to real estate investment and management.
Business Strategies
Research Driven Approach to Investments – The Company believes that successful real estate investment decisions and portfolio growth begin with extensive regional economic research and local market knowledge. The Company continually assesses markets where the Company operates, as well as markets where the Company considers future investment opportunities by evaluating markets and focusing on the following strategic criteria:
•Major metropolitan areas that have regional population in excess of one million;
•Constraints on new supply driven by: (i) low availability of developable land sites where competing housing could be economically built; (ii) political growth barriers, such as protected land, urban growth boundaries, and potential lengthy and expensive development permit processes; and (iii) natural limitations to development, such as mountains or waterways;
•Rental demand enhanced by affordability of rents relative to costs of for-sale housing; and
•Housing demand based on job growth, proximity to jobs, high median incomes and the quality of life including related commuting factors.
Recognizing that all real estate markets are cyclical, the Company regularly evaluates the results of its regional economic, and local market research, and adjusts the geographic focus of its portfolio accordingly. The Company seeks to increase its portfolio allocation in markets projected to have the strongest local economies and to decrease allocations in markets projected to have declining economic conditions. Likewise, the Company also seeks to increase its portfolio allocation in markets that have attractive property valuations and to decrease allocations in markets that have inflated valuations and low relative yields.
Property Operations – The Company manages its communities by focusing on activities that may generate above-average rental growth, tenant retention/satisfaction and long-term asset appreciation. The Company intends to achieve this by utilizing the strategies set forth below:
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•Property Management – Oversee delivery and quality of the housing provided to our tenants and manage the properties financial performance.
•Capital Preservation – The Company's asset management services are responsible for the planning, budgeting and completion of major capital improvement projects at the Company’s communities.
•Business Planning and Control – Comprehensive business plans are implemented in conjunction with significant investment decisions. These plans include benchmarks for future financial performance based on collaborative discussions between on-site managers, the operations leadership team, and senior management.
•Development and Redevelopment – The Company focuses on acquiring and developing apartment communities in supply constrained markets, and redeveloping its existing communities to improve the financial and physical aspects of the Company’s communities.
CURRENT BUSINESS ACTIVITIES
Acquisitions of Real Estate Interests
Acquisitions are an important component of the Company’s business plan. The tables below summarize acquisition activity for the year ended December 31, 2021 ($ in millions):
For the year ended December 31, 2021, the Company purchased or increased its interests in six communities consisting of 1,033 apartment homes and two commercial properties for approximately $432.3 million.

Property Name (1) |  | Location |  | Apartment Homes |  | Essex Ownership Percentage |  | Ownership |  | Quarter in 2021 |  | Purchase Price |
The Village at Toluca Lake (2) |  | Burbank, CA |  | 145 |  |  | 100 | % |  | EPLP |  | Q2 |  | $ | 31.8 |  |
Martha Lake Apartments |  | Lynwood, WA |  | 155 |  |  | 50 | % |  | Wesco VI |  | Q3 |  | 53.0 | (3)
Monterra in Mill Creek |  | Mill Creek, WA |  | 139 |  |  | 50 | % |  | Wesco VI |  | Q4 |  | 55.0 | (3)
The Rexford |  | Fremont, CA |  | 203 |  |  | 50 | % |  | Wesco VI |  | Q4 |  | 112.5 | (3)
Silver (4) |  | San Jose, CA |  | 268 |  |  | 58 | % |  | GR Block C |  | Q4 |  | 132.4 | (3)
Canvas |  | Seattle, WA |  | 123 |  |  | 100 | % |  | EPLP |  | Q4 |  | 47.6 |
Total 2021 |  | 1,033 |  |  |  |  |  |  |  |  | $ | 432.3 |  |

(1)In November 2021, the Company purchased a managing interest in a single asset entity owning a 179-unit apartment home community located in Vista, CA, for a contract price of $44.0 million, at the Company’s pro rata share.
(2) In June 2021, the Company purchased the joint venture partner's 50.0% membership interest in the BEX III, LLC co-investment that owned The Village at Toluca Lake based on a property valuation of $63.5 million. In conjunction with the acquisition, $29.5 million of mortgage debt that encumbered the property was paid off.
(3) Represents the contact price for the entire property, not the Company’s share.
(4) In November 2021, the Company converted its existing $11.0 million preferred equity investment in Silver into a 58.0% equity ownership interest in the property. Based on a consolidation analysis, the Company accounts for this investment under the equity method investment.
For the year ended December 31, 2021, the Company purchased two fully-leased commercial properties for approximately $86.0 million.

Property Name |  | Location |  | Ownership |  | Quarter in 2021 |  | Purchase Price
7 South Linden |  | South San Francisco, CA |  | EPLP |  | Q3 |  | $ | 33.5 |
Third & Broad |  | Seattle, WA |  | EPLP |  | Q3 |  | 52.5 |
Total 2021 |  |  |  |  |  | $ | 86.0 |

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Dispositions of Real Estate
As part of its strategic plan to own quality real estate in supply-constrained markets, the Company continually evaluates all of its communities and sells those which no longer meet its strategic criteria. The Company may use the capital generated from the dispositions to invest in higher-return communities, other real estate investments or to fund other commitments. The Company believes that the sale of these communities will not have a material impact on its future results of operations or cash flows nor will their sale materially affect its ongoing operations. In general, the Company seeks to offset the dilutive impact on long-term earnings and funds from operations from these dispositions through the positive impact of reinvestment of proceeds.
For the year ended December 31, 2021, the Company sold four communities consisting of 912 apartment homes for approximately $330.0 million.

Property Name |  | Location |  | Apartment Homes |  | Ownership |  | Quarter in 2021 |  | Sales Price (in millions) |
Hidden Valley |  | Simi Valley, CA |  | 324 |  |  | EPLP |  | Q1 |  | $ | 105.0 |  | (1)
Park 20 |  | San Mateo, CA |  | 197 |  |  | EPLP |  | Q1 |  | 113.0 |  | (2)
Axis 2300 |  | Irvine, CA |  | 115 |  |  | EPLP |  | Q1 |  | 57.5 |  | (3)
Devonshire Apartments |  | Hemet, CA |  | 276 |  |  | EPLP |  | Q3 |  | 54.5 |  | (4)
Total 2021 |  | 912 |  |  |  |  |  |  | $ | 330.0 |  |

(1) The Company recognized a $69.2 million gain on sale. In conjunction with the sale, the Company repaid $29.7 million of mortgage debt that encumbered the property.
(2) The Company recognized an immaterial gain on sale.
(3) The Company recognized a $30.8 million gain on sale.
(4) The Company recognized a $42.9 million gain on sale.
Development Pipeline
The Company defines development projects as new communities that are being constructed, or are newly constructed and are in a phase of lease-up and have not yet reached stabilized operations. As of December 31, 2021, the Company's development pipeline was comprised of one consolidated project under development and one unconsolidated joint venture project under development aggregating 371 apartment homes, with total incurred costs of $156.0 million, and estimated remaining project costs of approximately $61.0 million, $32.6 million of which represents the Company's share of estimated remaining costs, for total estimated project costs of $217.0 million.
The Company defines predevelopment projects as proposed communities in negotiation or in the entitlement process with an expected high likelihood of becoming entitled development projects. As of December 31, 2021, the Company had various consolidated predevelopment projects. The Company may also acquire land for future development purposes or sale.
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The following table sets forth information regarding the Company’s development pipeline ($ in millions):

|  |  |  |  |  |  |  | As of
|  |  |  |  |  |  |  | 12/31/2021
|  |  |  | Essex |  | Estimated |  | Incurred |  | Estimated
Development Pipeline |  | Location |  | Ownership% |  | Apartment Homes |  | Project Cost (1) |  | Project Cost(1)
Development Projects - Consolidated |  |  |  |  |  |  |  |  |  |
Station Park Green - Phase IV |  | San Mateo, CA |  | 100% |  | 107 |  |  | $ | 91 |  |  | $ | 94 |
Total Development Projects - Consolidated |  |  |  |  |  | 107 |  |  | 91 |  |  | 94 |
Development Projects - Joint Venture |  |  |  |  |  |  |  |  |  |
Scripps Mesa Apartments (2) |  | San Diego, CA |  | 51% |  | 264 |  |  | 44 |  |  | 102 |
Total Development Projects - Joint Venture |  |  |  |  |  | 264 |  |  | 44 |  |  | 102 |
Predevelopment Projects - Consolidated |  |  |  |  |  |  |  |  |  |
Other Projects |  | Various |  | 100% |  | — |  |  | 21 |  |  | 21 |
Total - Consolidated Predevelopment Projects |  |  |  |  |  | — |  |  | 21 |  |  | 21 |
Grand Total - Development and Predevelopment Pipeline |  |  |  |  |  | 371 |  |  | $ | 156 |  |  | $ | 217 |

(1)Includes costs related to the entire project, including both the Company's and joint venture partners' costs. Includes incurred costs and estimated costs to complete these development projects. For predevelopment projects, only incurred costs are included in estimated costs.
(2)Incurred project cost and estimated project cost are net of a projected value for low income housing tax credit proceeds and the value of the tax-exempt bond structure.
Long Term Debt
During 2021, the Company made regularly scheduled principal payments and loan payoffs of $3.5 million to its secured mortgage notes payable at an average interest rate of 2.9%.
In March 2021, the Operating Partnership issued $450.0 million of senior unsecured notes due on March 1, 2028 with a coupon rate of 1.700% per annum (the "2028 Notes"), which are payable on March 1 and September 1 of each year, beginning on September 1, 2021. The 2028 Notes were offered to investors at a price of 99.423% of par value. The 2028 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 Company used the net proceeds of this offering to repay upcoming debt maturities, including all or a portion of certain unsecured term loans, and for general corporate and working capital purposes.
In June 2021, the Operating Partnership issued $300.0 million of senior unsecured notes due on June 15, 2031 with a coupon rate of 2.550% per annum (the "2031 Notes"), which are payable on June 15 and December 15 of each year, beginning on December 15, 2021. The 2031 Notes were offered to investors at a price of 99.367% of par value. The 2031 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 Company used the net proceeds of this offering to repay upcoming debt maturities, including to fund the redemption of $300.0 million aggregate principal amount (plus the make-whole amount and accrued and unpaid interest) of its outstanding 3.375% senior unsecured notes due January 2023, and for other general corporate and working capital purposes.
Bank Debt
As of December 31, 2021, Moody’s Investor Service and Standard and Poor's ("S&P") credit agencies rated Essex Property Trust, Inc. and Essex Portfolio, L.P. Baa1/Stable and BBB+/Stable, respectively.
At December 31, 2021, the Company had two unsecured lines of credit aggregating $1.24 billion. The Company's $1.2 billion credit facility had an interest rate of LIBOR plus 0.775%, with a scheduled maturity date in September 2025 with three 6-month extensions, exercisable at the Company's option. The Company's $35.0 million working capital unsecured line of credit had an interest rate of LIBOR plus 0.775%, with a scheduled maturity date in February 2023.
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Equity Transactions
In September 2021, 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 “2021 ATM Program”). In connection with the 2021 ATM Program, the Company may also enter into related forward sale agreements, and may sell shares of its common stock pursuant to these 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 should the Company elect to settle such forward sale agreement, in whole or in part, in shares of its common stock.
The 2021 ATM Program replaces the Company’s prior equity distribution agreement entered into in September 2018 (the “2018 ATM Program”), which was terminated upon the establishment of the 2021 ATM Program. During the year ended December 31, 2021, the Company did not issue any shares of common stock through the 2021 ATM Program or through the 2018 ATM Program. As of December 31, 2021, there were no outstanding forward sale agreements, and $900.0 million of shares remain available to be sold under the 2021 ATM Program.
During the year ended December 31, 2021, the Company repurchased and retired 40,000 shares totaling $9.2 million, including commissions. As of December 31, 2021, the Company had $214.5 million of purchase authority remaining under its $250.0 million stock repurchase plan.
Co-investments
The Company has entered into, and may continue in the future to enter into, joint ventures or partnerships (including limited liability companies) through which we own an indirect economic interest in less than 100% of the community or land or other investments owned directly by the joint venture or partnership. For each joint venture the Company holds a non-controlling interest in the venture and earns customary management fees and may earn development fees, asset property management fees, and a promote interest.
The Company has also made, and may continue in the future to make, preferred equity investments in various multifamily development projects. The Company earns a preferred rate of return on these investments.
HUMAN CAPITAL MANAGEMENT
Company Overview and Values
The Company is headquartered in San Mateo, CA, and has regional offices in Woodland Hills, CA; Irvine, CA and Bellevue, WA. As of December 31, 2021, the Company had 1,757 employees, ninety-nine percent (99%) of which were full-time employees, and of which 1,382 employees worked in operations and 375 were employed in the corporate offices. The Company's mission is to create quality communities in premier locations and it is critical to the Company's mission that it attracts, trains and retains a talented and diverse team by providing a better place to work and significant opportunities for professional growth. The Company's culture supports its mission and is guided by its core values: to act with integrity, to care about what matters, to do right with urgency, to lead at every level and to seek fairness. The Company seeks to reinforce those values within its workforce.
Workplace Diversity
The Company believes it has one of the most diverse workforces among its peers in the real estate industry. The Company believes that its robust and integrated diversity, equity, and inclusion strategy, which utilizes training programs, employee committees, and executive sponsorships to strengthen and promote diversity, equal opportunity, and fair treatment for all Company associates. As of December 31, 2021, the Company's workforce was approximately 43% Hispanic or Latino, 29% White, 12% Asian, 8% Black or African American, 1% Native Hawaiian or other Pacific Islander, 1% American Indian or Alaska Native, and 5% two or more races. 1% of employees chose to not disclose their race. As of December 31, 2021, the Company's workforce was 42% female and 58% male, of which corporate associates were 56% female and on-site operational associates were 38% female. The Company had 308 females in positions of manager or higher, representing 65% of managerial positions. Additionally, 50% of the Company’s executive officers are female and 56% of the Company’s senior executives are female. The tables below detail the Company's gender representation by position and the age diversity of its workforce.
The Company has a Diversity, Equity, and Inclusion ("DEI") Committee which directs the overarching goal setting, implementation, and follow-up for DEI initiatives and whose chairperson reports directly to the CEO on the Committee’s
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activities. The Company supports the employee-led affinity groups, Women at Essex and the LGBTQ+ focused Rainbow Alliance, which foster a sense of community and inclusion for a diverse mix of associates at the Company through discussions and activities that are intended to engage, educate, enable, and empower the Company's employees. All associates are offered training aimed at preventing workplace harassment, including harassment based on age, gender or ethnicity, and all managers are required to complete harassment training. In 2021, the Company provided 2,878 hours of training for all its employees covering the foundations of DEI and awareness of unconscious bias in the workplace.
The Company is committed to pay equity and conducts a pay equity analysis on an annual basis. The Company's pay equity analysis for 2021 indicated a zero percent (0%) pay gap between men and women.

Gender Representation by Position (1) |  | December 31, 2021
| Male # (2) |  | Female # (2) |  | Male % |  | Female %
Corporate - Top Executives, VPs, Assistant VPs, Directors, & Managers |  | 70 (3) |  | 66 (3) |  | 51% |  | 49%
Corporate - Below manager position |  | 94 |  | 145 |  | 39% |  | 61%
Field - Regional Directors/Managers, Community Managers and Assistant Managers |  | 96 |  | 242 |  | 28% |  | 72%
Field - Leasing Specialists, Leasing Managers, Relationship Reps, Bookkeepers |  | 119 |  | 194 |  | 38% |  | 62%
Field - Maintenance Supervisors and Techs |  | 534 |  | 10 |  | 98% |  | 2%
Field - Porter, Landscaper, Painter, Security Guard, Amenities Attendant |  | 103 |  | 82 |  | 56% |  | 44%

(1) Table excludes two employees that did not declare gender.
(2) Gender is labeled as how respondents elected to be self-identified.
(3) Includes one Field - VP Property Management position that oversees Operations.

Total Workforce by Age Group |  | December 31, 2021
| # |  | %
<= 25 |  | 172 |  | 10%
26-35 |  | 534 |  | 30%
36-45 |  | 417 |  | 24%
46-55 |  | 349 |  | 20%
56-65 |  | 248 |  | 14%
> 65 |  | 37 |  | 2%

Training and Development
The Company values leadership at every level and demonstrates such value with respect to its associates by providing opportunities for all associates to develop personal and professional skills and by offering programs to encourage employee retention and advancement. In 2021, over 36,000 hours of training and development programs were provided to associates, with our investment in training totaling almost $375,000. These programs include: leadership training, communication training, individual learning plans, Community Manager and Maintenance Manager training, and mentorship programs. Additionally, the Company provides its associates with outside educational benefits by offering an annual $3,000 tuition reimbursement to further support professional growth. To identify, retain and reward top performers, the Company offers a tenure program, which involves a cash gift for every five years of service, as well as excellence awards and a spot bonus recognition program to reward associates for good teamwork, good ideas and good service. The Company encourages internal promotions and hiring for open positions. In 2021, the Company promoted 16% of its employees to higher positions in the Company. Additionally, the Company engages in succession planning for its leadership and managerial positions and its executive team identifies and mentors the Company's top talent in order to ensure strong leadership at the Company for the future.
Employee Well-Being
The Company's compensation and benefits program and safety practices further reinforce its commitment to investing in the well-being of its associates while ensuring that its employees are fairly incentivized to ensure fulfillment of the Company’s mission. The Company offers competitive compensation and a standard suite of benefits, including health insurance, a retirement plan with a $6,000 annual matching potential benefit, life and disability coverage, and commuter benefits.
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Additionally, the Company offers a housing discount for associates that live at Company communities, and additionally offers retirement support, associate discount programs, and health benefit credits for participation in wellness programs. In 2021, the Company revised its wellness program to ensure associates had increased ability to rest and recharge including additional days off and resources to encourage physical, mental, and financial well-being. The Company engages in an annual compensation study to ensure that its compensation is aligned with market standards and that the Company is appropriately compensating its top performers.
Providing a safe working environment and ensuring employee safety is imperative to the Company. The Company has safety policies in place that coincide with an Injury & Illness Prevention Program, which seeks to prevent workplace accidents and protect the health and safety of the Company's associates. In 2021, the Company provided safety training to Community Managers, Maintenance Supervisors, and Maintenance Technicians on topics including Industrial Safety and Health, Confined Space Awareness, Electrical Safety and Protection, Active Shooter Event, Fire Extinguishing, Safety Data Sheets, Safe Lifting the E-Way, Ladder Safety, and Heat Stress in the Workplace.
As an essential business operating in 2021, the Company's on-site teams supported its residents by providing administrative, operational and maintenance assistance during the COVID-19 pandemic. Since the beginning of the COVID-19 pandemic, in order to best protect and support the Company's associates working on-site, the Company and its affiliates spent over $5.0 million on new COVID-19 related protocols and other costs. The Company undertook various COVID-19 safety measures, including implementing work from home where possible, purchasing personal protective equipment and establishing physical distancing and other health safety procedures for its on-site employees, providing paid leave to employees affected by COVID-19, increasing cleaning protocols at its sites and offices, prohibiting all non-essential work-related travel, requiring masks to be worn at all offices and when entering resident homes, and providing regular communication about COVID-19 impacts and protocols to its associates. Keeping the Company's associates healthy and safe continues to be critical, and the Company hopes its actions contributed toward minimizing the impact of the COVID-19 pandemic.
Community and Social Impact
The Company believes volunteering can create positive change in the communities where our associates live and work and that the Company's commitment to giving back helps it attract and retain associates. The Company's Volunteer Program is aimed at supporting and encouraging eligible associates to become actively involved in their communities through the Company's support of charity initiatives and offering paid hours for volunteer time. Additionally, in 2020 the Company established the Essex Cares program to provide direct aid to the Company’s residents, associates, and local communities. The programs created within Essex Cares provide assistance for in-need segments of the community, including those who have experienced financial hardships caused by the COVID-19 pandemic.
Employee Engagement
In order to engage and promote communication with our associates and solicit meaningful feedback on our efforts to create a positive work environment, the Company issues engagement pulse surveys to all associates annually. The results of the 2021 survey indicate that 94% of surveyed associates consider that their day-to-day work directly impacts the Company’s mission and vision, 94% believe that their opinions and ideas matter at Essex, and 94% feel that the Company supports diversity, equity and inclusion in the workplace.
INSURANCE
The Company purchases general liability and property insurance coverage, including loss of rent, for each of its communities. The Company also purchases limited earthquake, terrorism, environmental and flood insurance. There are certain types of losses which may not be covered or could exceed coverage limits. The insurance programs are subject to deductibles and self-insured retentions in varying amounts. The Company utilizes a wholly owned insurance subsidiary, Pacific Western Insurance LLC ("PWI") to self-insure certain earthquake and property losses. As of December 31, 2021, PWI had cash and marketable securities of approximately $198.1 million, and is consolidated in the Company's financial statements.
All of the Company's communities are located in areas that are subject to earthquake activity. The Company evaluates its financial loss exposure to seismic events by using actuarial loss models developed by the insurance industry and in most cases property vulnerability analysis based on structural evaluations by seismic consultants. The Company manages this exposure, where considered appropriate, desirable, and cost-effective, by upgrading properties to increase their resistance to forces caused by seismic events, by considering available funds and coverages provided by PWI and/or by purchasing seismic insurance. In most cases the Company also purchases limited earthquake insurance for certain properties owned by the Company's co-investments.
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In addition, the Company carries other types of insurance coverage related to a variety of risks and exposures.
Based on market conditions, the Company may change or potentially eliminate insurance coverages, or increase levels of self-insurance. Further, the Company may incur losses, which could be material, due to uninsured risks, deductibles and self-insured retentions, and/or losses in excess of coverage limits.
COMPETITION
There are numerous housing alternatives that compete with the Company’s communities in attracting tenants. These include other apartment communities, condominiums and single-family homes. If the demand for the Company’s communities is reduced or if competitors develop and/or acquire competing housing, rental rates and occupancy may drop which may have a material adverse effect on the Company’s financial condition and results of operations.
The Company faces competition from other REITs, businesses and other entities in the acquisition, development and operation of apartment communities. Some competitors are larger and have greater financial resources than the Company. This competition may result in increased costs of apartment communities the Company acquires and/or develops.
WORKING CAPITAL
The Company believes that cash flows generated by its operations, existing cash and cash equivalents, marketable securities balances, availability under existing lines of credit, access to capital markets and the ability to generate cash from the disposition of real estate are sufficient to meet all of its reasonably anticipated cash needs during 2022.
The timing, source and amounts of cash flows provided by financing activities and used in investing activities are sensitive to changes in interest rates, stock price, and other fluctuations in the capital markets environment, which can affect the Company’s plans for acquisitions, dispositions, development and redevelopment activities.
ENVIRONMENTAL CONSIDERATIONS
As a real estate owner and operator, we are subject to various federal, state and local environmental laws, regulations and ordinances and may be subject to liability and the costs of removal or remediation of certain potentially hazardous materials that may be present in our communities. See the discussion under the caption, "Risks Related to Real Estate Investments and Our Operations - The Company’s Portfolio may have environmental liabilities" in Item 1A, Risk Factors, for information concerning the potential effect of environmental regulations on its operations, which discussion is incorporated by reference into this Item 1.
OTHER MATTERS
Certain Policies of the Company
The Company intends to continue to operate in a manner that will not subject it to regulation under the Investment Company Act of 1940. The Company may in the future (i) issue securities senior to its common stock, (ii) fund acquisition activities with borrowings under its line of credit and (iii) offer shares of common stock and/or units of limited partnership interest in the Operating Partnership or affiliated partnerships as partial consideration for property acquisitions. The Company from time to time acquires partnership interests in partnerships and joint ventures, either directly or indirectly through subsidiaries of the Company, when such entities’ underlying assets are real estate.
The Company invests primarily in apartment communities that are located in predominantly coastal markets within Southern California, Northern California, and the Seattle metropolitan area. The Company currently intends to continue to invest in apartment communities in such regions. However, these practices may be reviewed and modified periodically by management.
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ITEM 1A: RISK FACTORS
For purposes of this section, the term "stockholders" means the holders of shares of Essex Property Trust, Inc.’s common stock. Set forth below are the risks that we believe are material to Essex Property Trust, Inc.’s stockholders and Essex Portfolio, L.P.’s unitholders. You should carefully consider the following factors in evaluating our Company, our properties and our business.
Our business, operating results, cash flows and financial condition are subject to various risks and uncertainties, including, without limitation, those set forth below, any one of which could cause our actual operating results to vary materially from recent results or from our anticipated future results.
Risks Related to Our Real Estate Investments and Operations
General real estate investment risks may adversely affect property income and values. Real estate investments are subject to a variety of risks. If the communities and other real estate investments, including development and redevelopment properties, do not generate sufficient income to meet operating expenses, including debt service and capital expenditures, cash flow and the ability to make distributions to Essex's stockholders or the Operating Partnership's unitholders will be adversely affected. Income from the communities may be further adversely affected by, among other things, the following factors, in addition to the other risk factors listed in this Item 1A:
•changes in the general or local economic climate, including layoffs, plant closings, industry slowdowns, relocations of significant local employers, changing demographics, increased worker locational flexibility from teleconferencing and video-conferencing technology, and other events negatively impacting local employment rates. wages and the local economy;
•local economic conditions in which the communities are located, such as oversupply of housing or a reduction in demand for rental housing;
•adverse economic, regulatory, or market conditions due to the COVID-19 pandemic leading to (1) a temporary or permanent move by tenants and/or prospective tenants from locations in which our communities are located, (2) increased costs or government limitations on revenue, and/or (3) delinquency due to various eviction moratoria;
•inflationary environments in which the costs to operate and maintain communities increase at a rate greater than our ability to increase rents, or deflationary environments where we may be exposed to declining rents more quickly under our short-term leases; and
•the appeal and desirability of our communities to tenants, including, without limitation, the size and amenity offerings of our apartment homes, the safety and convenience of their locations, our technology offerings and our ability to identify and cost effectively implement new, relevant technologies,.
Short-term leases expose us to the effects of declining market rents, and the Company may be unable to renew leases or relet units as leases expire. If the Company is unable to promptly renew the in place short-term leases or relet the units, or if the rental rates upon renewal or reletting are significantly lower than expected rates, then the Company’s results of operations and financial condition will be adversely affected. With these short-term leases, our rental revenues are impacted by declines in market rents more quickly than if our leases were for longer terms.
National and regional economic environments can negatively impact the Company’s liquidity and operating results. The Company’s forecast for the national economy assumes growth of the GDP of the national economy and the economies of the west coast states. In the event of a recession or other negative economic effects the Company could incur reductions in rental and occupancy rates, property valuations and increases in operating costs such as advertising and turnover expenses. Any such recession or similar event may affect consumer confidence and spending and negatively impact the volume and pricing of real estate transactions, which could negatively affect the Company’s liquidity and its ability to vary its portfolio promptly in response to changes to the economy. Furthermore, if residents do not experience increases in their income, they may be unable or unwilling to pay rent increases, and delinquencies in rent payments and rent defaults may increase.
Rent control, or other changes in applicable laws, or noncompliance with applicable laws, could adversely affect the Company's operations, property values or expose us to liability. The Company must own, operate, manage, acquire, develop and redevelop its properties in compliance with numerous federal, state and local laws and regulations, some of which may conflict with one another or be subject to limited judicial or regulatory interpretations. These laws and regulations may include zoning laws, building codes, rent control or stabilization laws, governmental emergency orders, laws benefiting disabled persons, including, without limitation, the Americans with Disabilities Act of 1990, federal, state and local tax laws, landlord tenant laws, environmental laws, employment laws, immigration laws and other laws regulating housing, including, without limitation, the Fair Housing Amendment Act of 1988, or that are generally applicable to the Company's business and operations. Noncompliance with laws could expose the Company to liability, including fines to government authorities or damage awards to private litigants, reduced income or increased costs in order to comply with such requirements. These
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requirements may change, or new requirements may be imposed. Changes in, or noncompliance with, these regulatory requirements could require the Company to make significant unanticipated expenditures to address noncompliance.
Rent control or rent stabilization laws, and new such laws that may be implemented, and other regulatory restrictions may limit our ability to increase rents and pass through new or increased operating costs to our tenants. These initiatives and any other future enactments of rent control or rent stabilization laws or other laws regulating multifamily housing, as well as any lawsuits against the Company arising from such rent control or other laws, may reduce rental revenues or increase operating costs. Such laws and regulations limit our ability to charge market rents, increase rents, evict tenants or recover increases in our operating expenses and could reduce the value of our communities or make it more difficult for us to dispose of properties in certain circumstances. Expenses associated with our investment in these communities, such as debt service, real estate taxes, insurance and maintenance costs, are generally not reduced when circumstances cause a reduction in rental income from the community. Furthermore, such regulations may negatively impact our ability to attract higher-paying tenants to such communities.
The COVID-19 pandemic, or the future outbreak of other highly contagious diseases, could materially affect our business, financial condition and results of operations. Uncertainty still surrounds COVID-19, and the potential short-term and long-term effects, including but not limited to shifts in consumer housing demand based on geography, affordability, housing type and unit type, mainly resulting from the paradigm shift of work culture, as well as economic uncertainty, volatility and increased regulation. As a result, our ability to make distributions to Essex’s stockholders and the Operating Partnership’s unitholders may be compromised and we could experience volatility with respect to the market value of our properties and common stock and Operating Partnership units. In some cases, we are subject to eviction moratoria or may be legally required to or otherwise agree to restructure tenants’ rent obligations and may not be able to do so on terms as favorable to us as those currently in place. Furthermore, various city, county and state laws restricting rent increases in times of emergency have come into effect in connection with the COVID-19 pandemic, and numerous state, local, federal and industry-initiated efforts have and may continue to affect our ability to collect rent or enforce remedies for the failure to pay rent, including, among others, limitations or prohibitions on evicting tenants unwilling or unable to pay rent and prohibitions on the ability to collect unpaid rent during certain timeframes. In the event of tenant nonpayment, default or bankruptcy, we may incur costs in protecting our investment and re-leasing our property and have limited ability to renew existing leases or sign new leases at projected rents.
Our properties may also incur significant costs or losses related to legislative mandates which may result in a negative impact on our occupancy levels. For example, many companies initially required, and now are continuing to allow or require, employees to “work from home” for an extended period of time, causing some tenants to move away from the urban centers temporarily or permanently. Some businesses many have permanently closed due to deteriorating economic conditions, which has contributed to the temporary, or possibly permanent, deterioration of neighborhoods in and around some of our urban communities, which may be further worsened by increases in homelessness and crime. There may also be an increased risk of material litigation due to the effects of the COVID-19 pandemic, including litigation brought by our residents or employees.
Market fluctuations as a result of the COVID-19 pandemic may affect our ability to obtain necessary funds for our operations, acquisitions, or re-financings. In addition, macro-economic factors have caused some worker shortages and construction delays which could increase costs and lower profitability. Market fluctuations and construction delays experienced by the Company’s third-party mezzanine loan borrowers and preferred equity investment sponsors may also negatively impact their ability to repay the Company. Further, while the Company carries general liability, pollution, and property insurance along with other insurance policies that may provide some coverage for any losses or costs incurred in connection with the COVID-19 pandemic, given the novelty of the issue and the scale of losses incurred throughout the world, there is no guarantee that we will be able to recover all or any portion of our losses and costs under these policies. We may be additionally impacted by changes in legislation relating to insurance coverages with respect to the pandemic, including, but not limited to, workers’ compensation. The occurrence of any of the foregoing events or any other related matters could have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows.
Acquisitions of communities involve various risks and uncertainties and may fail to meet expectations. The Company intends to continue to acquire apartment communities. However, there are risks that acquisitions will fail to meet the Company’s expectations. The Company’s estimates of future income, expenses and the costs of improvements or redevelopment that are necessary to allow the Company to market an acquired apartment community as originally intended may prove to be inaccurate. In addition, following an acquisition, the value and operational performance of an apartment community may be diminished if obsolescence or neighborhood changes occur before we are able to redevelop or sell the community. Also, in connection with such acquisitions, we may assume unknown or contingent liabilities, which could ultimately lead to material costs for us that we did not expect to incur and for which the Company may have no recourse, or only limited recourse, against the sellers due to limited and no indemnification requirements for a breach of representations and warranties. In addition, the total amount of costs and expenses that may be incurred with respect to liabilities associated with apartment communities may exceed our expectations, and we may experience other unanticipated adverse effects, all of which may adversely affect our business, financial condition and results of operations. The Company expects to finance future acquisitions under various forms of secured or unsecured financing or through the issuance of partnership units by the Operating Partnership or related partnerships
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or joint ventures or additional equity by the Company. The use of equity financing for future developments or acquisitions could dilute the interest of the Company’s existing stockholders. If the Company finances new acquisitions under existing lines of credit, there is a risk that, unless the Company obtains substitute financing, the Company may not be able to undertake additional borrowing for further acquisitions or developments or such borrowing may be not available on advantageous terms.
Development and redevelopment activities may be delayed, not completed, and/or not achieve expected results. The Company pursues development and redevelopment projects. 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, and redevelopment projects as existing properties owned or recently acquired that have been targeted for additional investment by the Company with the expectation of increased financial returns through property improvement. As of December 31, 2021, the Company had one consolidated development project and one unconsolidated joint venture development project comprised of 371 apartment homes for an estimated cost of $217.0 million, of which $61.0 million remains to be expended, and $32.6 million is the Company's share.
The Company’s development and redevelopment activities generally entail certain risks, including, among others:
•funds may be expended and management's time devoted to projects that may not be completed on time or at all;
•construction costs of a project may exceed original estimates possibly making the project economically unfeasible;
•projects may be delayed due to, without limitation, adverse weather conditions, labor or material shortage, municipal office closures and staff shortages, government recommended or mandated work stoppages due to health concerns, or environmental remediation;
•occupancy rates and rents at a completed project may be less than anticipated;
•expenses at completed development or redevelopment projects may be higher than anticipated, including, without limitation, due to costs of litigation over construction contracts by general contractors, environmental remediation or increased costs for labor, materials and leasing;
•we may be unable to obtain, or experience a delay in obtaining, necessary zoning, occupancy, or other required governmental or third party permits and authorizations, which could result in increased costs or delay or abandonment of opportunities;
•we may be unable to obtain financing with favorable terms, or at all, for the proposed development or redevelopment of a community, which may cause us to delay or abandon an opportunity; and
•we may incur liabilities to third parties during the development process, for example, in connection with managing existing improvements on the site prior to tenant terminations and demolition (such as commercial space) or in connection with providing services to third parties (such as the construction of shared infrastructure or other improvements.)
These risks may reduce the funds available for distribution to Essex’s stockholders and the Operating Partnership's unitholders.
The geographic concentration of the Company’s communities and fluctuations in local markets may adversely impact the Company’s financial condition and operating results. The Company generated significant amounts of rental revenues for the year ended December 31, 2021, from the Company’s communities concentrated in Southern California (primarily Los Angeles, Orange, San Diego, and Ventura counties), Northern California (the San Francisco Bay Area), and the Seattle metropolitan area. For the year ended December 31, 2021, 83% of the Company’s rental revenues were generated from communities located in California. This geographic concentration could present risks if local property market performance falls below expectations. Factors that may adversely affect local market and economic conditions include regional specific acts of nature (e.g., earthquakes, fires, floods, etc.) and those other factors listed in the risk factor titled “General real estate investment risks may adversely affect property income and values” and elsewhere in this Item 1A.
Because the Company’s communities are geographically concentrated, the Company is exposed to greater economic concentration risks than if it owned a more geographically diverse portfolio. The Company is susceptible to adverse developments in California and Washington economic and regulatory environments, such as increases in real estate and other taxes, and increased costs of complying with governmental regulations. In addition, the State of California is generally regarded as more litigious and more highly regulated and taxed than many states, which may reduce demand for the Company’s communities. California has also experienced increased relocation out of the state. Any adverse developments in the economy or real estate markets in California or Washington, or any decrease in demand for the Company’s communities resulting from the California or Washington regulatory or business environments, could have an adverse effect on the Company’s business and results of operations.
The Company may experience various increased costs, including increased property taxes, to own and maintain its properties. Real property taxes on our properties may increase as our properties are reassessed by taxing authorities or as property tax rates change. Our real estate taxes in Washington could increase as a result of property value reassessments or
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increased property tax rates in that state. A California law commonly referred to as Proposition 13 generally limits annual real estate tax increases on California properties to 2% of assessed value. However, under Proposition 13, property tax reassessment generally occurs as a result of a "change in ownership" of a property, as specially defined for purposes of those rules. Because the property taxing authorities may not determine whether there has been a "change in ownership" or the actual reassessed value of a property for a period of time after a transaction has occurred, we may not know the impact of a potential reassessment for a considerable amount of time following a particular transaction. Therefore, the amount of property taxes we are required to pay could increase substantially from the property taxes we currently pay or have paid in the past, including on a retroactive basis. In addition, from time to time voters and lawmakers have announced initiatives to repeal or amend Proposition 13 to eliminate its application to commercial and industrial property, increase the permitted annual real estate tax increases, and/or introduce split tax roll legislation. Such initiatives, if successful, could increase the assessed value and/or tax rates applicable to commercial property in California, including our apartment communities. Further, changes in U.S. federal tax law could cause state and local governments to alter their taxation of real property.
The Company may experience increased costs associated with capital improvements and routine property maintenance, such as repairs to the foundation, exterior walls, and rooftops of its properties, as its properties advance through their life-cycles. In some cases, we may spend more than budgeted amounts to make necessary improvements or maintenance. Increases in the Company’s expenses to own and maintain its properties could adversely impact the Company’s financial condition and results of operations.
Competition in the apartment community market and other housing alternatives may adversely affect operations and the rental demand for the Company’s communities. There are numerous housing alternatives that compete with the Company’s communities in attracting tenants. These include other apartment communities, condominiums and single-family homes that are available for rent or for sale in the markets in which our communities are located. Competitive housing in a particular area and fluctuations in cost of owner-occupied single- and multifamily homes caused by a decrease in housing prices, mortgage interest rates and/or government programs to promote home ownership or create additional rental and/or other types of housing, or an increase in desire for more space due to work from home needs or increased time spent at home, could adversely affect the Company’s ability to retain its tenants, lease apartment homes and increase or maintain rents. If the demand for the Company’s communities is reduced or if competitors develop and/or acquire competing apartment communities, rental rates may drop, which may have a material adverse effect on the Company’s financial condition and results of operations. The Company also faces competition from other companies, REITs, businesses and other entities in the acquisition, development and operation of apartment communities. This competition may result in an increase in prices and costs of apartment communities that the Company acquires and/or develops.
Investments in mortgages, mezzanine loans, subordinated debt, other real estate, and other marketable securities could adversely affect the Company’s cash flow from operations. The Company may purchase or otherwise invest in securities issued by entities which own real estate and/or invest in mortgages or unsecured debt obligations. Such mortgages may be first, second or third mortgages, and these mortgages and/or other investments may not be insured or otherwise guaranteed. The Company may make or acquire mezzanine loans, which take the form of subordinated loans secured by second mortgages on the underlying property or loans secured by a pledge of the ownership interests of either the entity owning the property or a pledge of the ownership interests of the entity or entities that owns the interest in the entity owning the property. In general, investing in mortgages may pose some risk, including but not limited to the value of mortgaged property may be less than the amounts owed, causing realized or unrealized losses; the borrower may not pay indebtedness under the mortgage when due, requiring the Company to foreclose, and the amount recovered in connection with the foreclosure may be less than the amount owed; that interest rates payable on the mortgages may be lower than the Company’s cost of funds; in the case of junior mortgages, that foreclosure of a senior mortgage could eliminate the junior mortgage; delays in the collection of principal and interest if a borrower claims bankruptcy; possible senior lender default or overconcentration of senior lenders in portfolio; and unanticipated early prepayments may limit the Company’s expected return on its investment. If any of the above were to occur, it could adversely affect the Company’s cash flows from operations.
The Company’s ownership of co-investments, including joint ventures and joint ownership of communities, its ownership of properties with shared facilities with a homeowners' association or other entity, its ownership of properties subject to a ground lease and its preferred equity investments and its other partial interests in entities that own communities, could limit the Company’s ability to control such communities and may restrict our ability to finance, sell or otherwise transfer our interests in these properties and expose us to loss of the properties if such agreements are breached by us or terminated. The Company has entered into, and may continue in the future to enter into, certain co-investments, including joint ventures or partnerships through which it owns an indirect economic interest in less than 100% of the community or land or other investments owned directly by the joint venture or partnership. As of December 31, 2021, the Company had, through several joint ventures, an interest in 10,257 apartment homes in stabilized operating communities for a total book value of $565.3 million.
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Joint venture partners often have shared control over the development and operation of the joint venture assets. Therefore, it is possible that a joint venture partner in an investment might become bankrupt, or have economic or business interests or goals that are inconsistent with the Company’s business interests or goals, or be in a position to take action contrary to the Company’s instructions or requests, or its policies or objectives. Consequently, a joint venture partner's actions might subject property owned by the joint venture to additional risk. Although the Company seeks to maintain sufficient influence over any joint venture to achieve its objectives, the Company may be unable to take action without its joint venture partners’ approval. Should a joint venture partner become bankrupt, the Company could become liable for such partner’s share of joint venture liabilities. In some instances, the Company and the joint venture partner may each have the right to trigger a buy-sell arrangement, which could cause the Company to sell its interest, or acquire a partner’s interest, at a time when the Company otherwise would not have initiated such a transaction.
From time to time, the Company, through the Operating Partnership, makes certain co-investments in the form of preferred equity investments in third-party entities that have been formed for the purpose of acquiring, developing, financing, or managing real property. With preferred equity investments and certain other co-investments, the Operating Partnership’s interest in a particular entity is typically less than a majority of the outstanding voting interests of that entity. Therefore, the Operating Partnership’s ability to control the daily operations of such co-investment may be limited. The Operating Partnership may not be able to dispose of its interests in such co-investment. In the event that such co-investment or the partners in such co-investment become insolvent or bankrupt or fail to develop or operate the property in the manner anticipated and expected, the Operating Partnership may not receive the expected return in its expected timeframe or at all and may lose up to its entire investment in, and any advances to, the co-investment. Additionally, the preferred return negotiated on these co-investments may be lower than the Company's cost of funds. The Company may also incur losses if any guarantees or indemnifications were made by the Company.
The Company also owns properties indirectly under "DownREIT" structures. The Company has entered into, and in the future may enter into, transactions that could require the Company to pay the tax liabilities of partners that contribute assets into DownREITs, joint ventures or the Operating Partnership, in the event that certain taxable events, which are within the Company’s control, occur. Although the Company plans to hold the contributed assets or, if such assets consist of real property, defer recognition of gain on sale of such assets pursuant to the like-kind exchange rules under Section 1031 of the Internal Revenue Code of 1986, as amended (the "Code"), the Company can provide no assurance that the Company will be able to do so and if such tax liabilities were incurred they could have a material impact on its financial position.
Also, from time to time, the Company invests in properties which may be subject to certain shared facilities agreements with homeowners’ associations and other entities and/or invests in properties subject to ground leases where a subtenant may have certain similar rights to that of a party under such a shared facilities agreement and the Company’s ability to control expenditures, make necessary repairs and control certain decisions may adversely affect the Company's business, financial condition and results of operations.
We may pursue acquisitions of other REITs and real estate companies, which may not yield anticipated results and could adversely affect our results of operations. We may make acquisitions of and/or investments in other REITs and real estate companies that offer properties and communities to augment our market coverage or enhance our property offerings. We may also enter into strategic alliances or joint ventures to achieve these goals. There can be no assurance that we will be able to identify suitable acquisition, investment, alliance or joint venture opportunities, that we will be able to consummate any such transactions or relationships on terms and conditions acceptable to us, or that such transactions or relationships will be successful. In addition, our original estimates and assumptions used in assessing any acquisition may be inaccurate, and we may not realize the expected financial or strategic benefits of any such acquisition.
These transactions or any other acquisitions involve risks and uncertainties. In addition, the integration of acquired businesses or other acquisitions may not be successful and could result in disruption to other parts of our business. To integrate acquired businesses or other acquisitions, we must implement our management information systems, operating systems and internal controls, and assimilate and manage the personnel of the acquired operations. There can be no assurance that all pre-acquisition property due diligence will have identified all material issues that might arise with respect to such acquired business and its properties or as to any such other acquisitions. Any future acquisitions we make may also require significant additional debt or equity financing, which, in the case of debt financing, would increase our leverage and potentially affect our credit ratings and, in the case of equity or equity-linked financing, could be dilutive to Essex's stockholders and the Operating Partnership's unitholders. Additionally, the value of these investments could decline for a variety of reasons. These and other factors could affect our ability to achieve anticipated levels of profitability at acquired operations or realize other anticipated benefits of an acquisition, and could adversely affect our business, financial condition and results of operations.
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Real estate investments are relatively illiquid and, therefore, the Company's ability to vary its portfolio promptly in response to changes in economic or other conditions may be limited. Real estate investments are illiquid and, in our markets, can at times be difficult to sell at prices we find acceptable. These potential difficulties in selling real estate in our markets may limit our ability to change or reduce the apartment communities in our portfolio promptly in response to changes in economic or other conditions, which could have a material adverse effect on our financial condition and results of operations.
The Company may not be able to lease its retail/commercial space consistent with its projections or at market rates. The Company has retail/commercial space in its portfolio, which represents approximately 2% of our total revenue. We may not be able to lease new space for rents that are consistent with our projections or at market rates, and the longer-term leases for existing space could result in below market rents over time. Also, when leases for our existing retail/commercial space expire, the space may not be relet on a timely basis, or at all, or the terms of reletting, including the cost of allowances and concessions to tenants, may be less favorable than the current lease terms.
The Company’s portfolio may have environmental liabilities. Under various federal, state and local environmental and public health laws, regulations and ordinances, we have been required, and may be required in the future, regardless of our knowledge or responsibility, to investigate and remediate the effects of hazardous or toxic substances or petroleum product releases at our properties (including in some cases naturally occurring substances such as methane and radon gas). We may be held liable under these laws or common law to a governmental entity or to third parties for response costs, property damage, personal injury or natural resources damages and for investigation and remediation costs incurred as a result of the impacts resulting from such releases. While the Company is unaware of any such response action required or damage claims associated with its existing properties which individually or in aggregate would have a material adverse effect on our business, assets, financial condition or results of operations, potential future costs and damage claims may be substantial and could exceed any insurance coverage we may have for such events or such coverage may not exist. Further, the presence of such substances, or the failure to properly remediate any such impacts, may adversely affect our ability to borrow against, develop, sell or rent the affected property. In addition, some environmental laws create or allow a government agency to impose a lien on the impacted property in favor of the government for damages and costs it incurs as a result of responding to hazardous or toxic substance or petroleum product releases.
Investments in real property create a potential for environmental liabilities on the part of the owner of such real property. The Company carries certain limited insurance coverage for this type of environmental risk as to its properties; however, such coverage is not fully available for all properties and, as to those properties for which limited coverage is fully available, it may not apply to certain claims arising from known conditions present on those properties. In general, in connection with the ownership (direct or indirect), operation, financing, management and development of its communities, the Company could be considered as the owner or operator of such properties or as having arranged for disposal or treatment of hazardous substances present there and therefore may be potentially liable for removal or clean-up costs, as well as certain other costs and environmental liabilities. The Company may also be subject to governmental fines, costs related to injuries to third parties and/or damage to a third party's property.
Properties which we plan to acquire undergo a pre-acquisition Phase I environmental site assessment, which is intended to afford the Company protection against so-called "owner liability" under the primary federal environmental law, as well as further environmental assessment, which may involve invasive techniques such as soil or ground water sampling where conditions warranting such further assessment are identified and seller’s consent is obtained. Despite these assessments, no assurance can be given that all environmental conditions present on or beneath or emanating from a given property will be discovered or that the full nature and extent of those conditions which are discovered will be adequately ascertained and quantified.
In connection with our ownership, operation and development of communities, from time to time we undertake remedial action in response to the presence of subsurface or other contaminants, including contaminants in soil, groundwater and soil vapor beneath or affecting our buildings. The Company does so pursuant to appropriate environmental regulatory requirements with the objective of obtaining regulatory closure or a no further action determination that will allow for future use, development and sale of any impacted community.
Certain environmental laws impose liability for release of asbestos-containing materials ("ACMs") into the air or exposure to lead-based paint ("LBP"), and third parties may seek recovery from owners or operators of apartment communities for personal injury associated with ACMs or LBP.
Mold growth may occur when excessive moisture accumulates in buildings or on building materials, particularly if the moisture problem remains undiscovered or is not addressed in a timely manner. Although the occurrence of mold at multifamily and other structures, and the need to remediate such mold, is not a new phenomenon, there has been increased awareness in recent
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years that certain molds may in some instances lead to adverse health effects, including allergic or other reactions. The Company has adopted policies for promptly addressing and resolving reports of mold when it is detected, and to minimize any impact mold might have on tenants of the affected property, however, no assurance can be provided that the Company has identified and responded to all mold occurrences.
California has enacted legislation, commonly referred to as "Proposition 65," requiring that covered businesses provide "clear and reasonable" warnings before knowingly exposing persons to chemicals known to the State of California to cause cancer or reproductive toxicity, including tobacco smoke. The legislation allows private persons to sue to enforce this warning requirement and recover their legal fees and costs for doing so. Although the Company has sought to comply with Proposition 65 requirements where it appears applicable, we cannot assure you that the Company will not be adversely affected by private enforcement litigation relating to Proposition 65.
Methane gas is a naturally-occurring gas that is commonly found below the surface in several areas, particularly in the Southern California coastal areas. Methane is a non-toxic gas, but is flammable and can be explosive at sufficient concentrations when in confined spaces and exposed to an ignition source. Naturally-occurring methane gas is regulated at the state and federal level as a greenhouse gas but is not otherwise regulated as a hazardous substance; however, some local governments, such as Los Angeles County, require that new buildings constructed in areas designated methane gas zones install detection and/or venting systems. Radon is also a naturally-occurring gas that is found below the surface and can pose a threat to human health requiring abatement action if present in sufficient concentration within occupied areas. The Company cannot assure that it will not be adversely affected by costs related to its compliance with methane or radon gas related requirements or litigation costs related to methane or radon gas. However, the Company is unaware of any pending or threatened alleged claim resulting from such matters which would have a material adverse effect on the Company’s financial condition, results of operations or cash flows.
The Company may incur general uninsured losses or may experience market conditions that impact the procurement of certain insurance policies. The Company purchases general liability and property, including loss of rent, insurance coverage for each of its communities. The Company may also purchase limited earthquake, terrorism, environmental and flood insurance for some of its communities. However, there are types of losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, pollution, environmental matters or extreme weather conditions such as hurricanes, fires and floods that are uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or co-payments. The Company utilizes a wholly owned insurance subsidiary, Pacific Western Insurance LLC ("PWI"), to self-insure certain earthquake and property losses for some of the communities in its portfolio. As of December 31, 2021, PWI, which is consolidated in the Company's financial statements, had cash and marketable securities of approximately $198.1 million. The value of the marketable securities of PWI could decline and adversely affect PWI’s ability to cover all or any portion of the amount of any insured losses.
All of our communities are located in areas that are subject to earthquake activity. The Company evaluates its financial loss exposure to seismic events by using actuarial loss models developed by the insurance industry and property vulnerability analyses based on structural evaluations by seismic consultants. The Company manages this exposure, where considered appropriate, desirable, and cost-effective, by upgrading properties to increase their resistance to seismic events, by considering available funds and coverages provided by PWI and/or, in some cases, by purchasing seismic insurance. Purchasing seismic insurance coverage can be costly and such seismic insurance is in limited supply. As a result, the Company may experience a shortage in desired coverage levels if market conditions are such that insurance is not available, or not economically practical. The Company may purchase limited earthquake insurance for certain high-density properties and, in most cases, properties owned by the Company's co-investments.
The Company carries other types of insurance coverage related to a variety of risks and exposures, including cyber risk insurance. There has been a reduction in the number of insurance companies in the market offering certain types of insurance the Company has previously purchased and premiums have materially increased for certain types of insurance coverage. Based on market conditions, the Company may change or potentially eliminate insurance coverages, or increase levels of self-insurance. Further, we cannot assure you that the Company will not incur losses, which could be material, due to uninsured risks, deductibles and self-insured retentions, and/or losses in excess of coverage limits.
We have significant investments in large metropolitan markets, such as the metropolitan markets in Southern California, Northern California, and Seattle. These markets may in the future be the target of actual or threatened terrorist attacks. Future terrorist attacks in these markets could directly or indirectly damage our communities, both physically and financially, or cause losses that exceed our insurance coverage. Our communities could also directly or indirectly be the location or target of actual or threatened terrorist attacks, crimes, shootings, other acts of violence or other incidents beyond our control, the occurrence of which could directly impact the value of our communities through damage, destruction, loss or increased security costs, as well as operational losses due to reduction of traffic and rental demand for our communities, and the availability of insurance for such acts may be limited or may be subject to substantial costs. If such an incident were to occur at one of our communities, we
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may also be subject to significant liability claims. Such events and losses could significantly affect our ability to operate those communities and materially impair our ability to achieve our expected results. Additionally, we may be obligated to continue to pay any mortgage indebtedness and other obligations relating to affected properties.
Although the Company may carry insurance for potential losses associated with its communities, employees, tenants, and compliance with applicable laws, it may still incur losses due to uninsured risks, deductibles, copayments or losses in excess of applicable insurance coverage and those losses may be material. In the event of a substantial loss, insurance coverage may not be able to cover the full replacement cost of the Company’s lost investment, or the insurance carrier may become insolvent and not be able to cover the full amount of the insured losses. Changes in building codes and ordinances, environmental considerations and other factors might also affect the Company’s ability to replace or renovate an apartment community after it has been damaged or destroyed. In addition, certain causalities and/or losses incurred may expose the Company in the future to higher insurance premiums.
Climate change may adversely affect our business. To the extent that climate change does occur, we may experience extreme weather and changes in precipitation, temperature and wild fire exposure, all of which may result in physical damage or a decrease in demand for our communities located in these areas or affected by these conditions. Should the impact of climate change be material in nature or occur for lengthy periods of time, our financial condition or results of operations may be adversely affected, and may negatively impact the types and pricing of insurance the Company is able to procure.
Our properties are located along the West Coast of the United States. To the extent climate change causes changes in weather patterns, the regions where our communities are located could experience increases in storm intensity, wild fires, rising sea levels and/or drought frequency. Over time, such conditions could result in reduced demand for housing in areas where our communities are located and increased costs related to further developing our communities to mitigate the effects of climate change or repairing damage related to the effects of climate change that may or may not be fully covered by insurance.
In addition, changes in federal, state and local legislation and regulation on climate change could result in increased operating costs (for example, increased utility costs) and/or increased capital expenditures to improve the energy efficiency of our existing communities and could also require us to spend more on our new development communities without a corresponding increase in revenue. Further, the impact of climate change may increase the cost of, or make unavailable, property insurance or other hazard insurance on terms we find acceptable or necessary to adequately protect our properties.
Accidental death or severe injuries at our communities due to fires, floods, other natural disasters or hazards could adversely affect our business and results of operations. Our insurance coverage may not cover all losses associated with such events, and we may experience difficulty marketing communities where any such events have occurred, which could have a material adverse effect on our business and results of operations.
Adverse changes in laws may adversely affect the Company's liabilities and/or operating costs relating to its properties and its operations. Increases in real estate taxes and income, service and transfer taxes cannot always be passed through to tenants or users in the form of higher rents, and may adversely affect the Company's cash available for distribution and its ability to make distributions to Essex's stockholders or the Operating Partnership's unitholders and pay amounts due on its debts. Additionally, ongoing political volatility may increase the likelihood of significant changes in laws, such as repeal of Proposition 13, that could affect the Company's overall strategy. Changes in laws increasing the potential liability of the Company and/or its operating costs on a range of issues, including those regarding potential liability for other environmental conditions existing on properties or increasing the restrictions on discharges or other conditions, as well as changes in laws affecting development, construction and safety requirements, may result in significant unanticipated expenditures, including without limitation, those related to structural or seismic retrofit or more costly operational safety systems and programs, which could have a material adverse effect on the Company.
Failure to succeed in new markets may limit the Company’s growth. The Company may make acquisitions or commence development activity outside of its existing market areas if appropriate opportunities arise. The Company may be exposed to a variety of risks if it chooses to enter new markets. These risks include but are not limited to an inability to evaluate accurately local apartment market conditions and local economies; an inability to identify appropriate acquisition opportunities or to obtain land for development; an inability to hire and retain key personnel; and lack of familiarity with local governmental and permitting procedures.
Our business and reputation depend on our ability to continue providing high quality housing and consistent operation of our communities, the failure of which could adversely affect our business, financial condition and results of operations. We also provide tenants with reliable services, including water and electric power, along with the consistent operation of our communities, including a wide variety of amenities such as covered parking, pools, gyms, playgrounds, and similar features.
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Public utilities, especially those that provide water and electric power, are fundamental for the consistent operation of our communities. The delayed delivery or any prolonged interruption of these services may cause tenants to terminate their leases or may result in a reduction of rents and/or increase in our costs or other issues. In addition, we may fail to provide quality housing and continuous access to amenities as a result of other factors, including government mandated closures, mechanical failure, power outage, human error, vandalism, physical or electronic security breaches, war, terrorism or similar events. Such events may also expose us to additional liability claims and damage our reputation and brand and could cause tenants to terminate or not renew their leases, or prospective tenants to seek housing elsewhere. Any such failures could impair our ability to continue providing quality housing and consistent operation of our communities, which could adversely affect our business, financial condition and results of operations.
The Company’s real estate assets may be subject to impairment charges. The Company continually evaluates the recoverability of the carrying value of its real estate assets under U.S. generally accepted accounting principles ("U.S. GAAP"). Factors considered in evaluating impairment of the Company’s existing multifamily real estate assets held for investment include significant declines in property operating profits, recurring property operating losses and other significant adverse changes in general market conditions that are considered permanent in nature. Generally, a multifamily real estate asset held for investment is not considered impaired if the undiscounted, estimated future cash flows of the asset over its estimated holding period are in excess of the asset’s net book value at the balance sheet date. Assumptions used to estimate annual and residual cash flow and the estimated holding period of such assets require the judgment of management. There can be no assurance that the Company will not take charges in the future related to the impairment of the Company’s assets. Any future impairment charges could have a material adverse effect on the Company’s results of operations.
We face risks associated with land holdings and related activities. We hold land for future development and may in the future acquire additional land holdings. The risks inherent in purchasing, owning and developing land increase as demand for apartments, or rental rates, decrease. Real estate markets are highly uncertain and, as a result, the value of undeveloped land may fluctuate significantly. In addition, carrying costs can be significant and can result in losses or reduced profitability. As a result, we hold certain land, and may, in the future acquire additional land, in our development pipeline at a cost we may not be able to fully recover or at a cost which may preclude our developing a profitable multifamily community. If there are subsequent changes in the fair value of our land holdings which we determine is less that the carrying basis of our land holdings reflected in our financial statements plus estimated costs to sell, we may be required to take future impairment changes which could have a material adverse effect on our results of operations.
We rely on information technology in our operations, and any material failure, inadequacy, interruption or breach of the Company’s privacy or information security systems, or those of our vendors or other third parties, could materially adversely affect the Company’s business and financial condition. We rely on information technology networks and systems, including the Internet, to process, transmit and store electronic information, and to manage or support a variety of business processes, including financial transactions and records, personally identifiable information, and tenant and lease data. Our business requires us, including some of our vendors, to use and store personally identifiable and other sensitive information of our tenants and employees. The collection and use of personally identifiable information is governed by federal and state laws and regulations. Privacy and information security laws continue to evolve and may be inconsistent from one jurisdiction to another. The Company endeavors to comply with all such laws and regulations, including by providing required disclosures, promptly responding to consumer requests for data, and seeking vendor compliance with applicable privacy and information security laws. Compliance with all such laws and regulations may increase the Company’s operating costs and adversely impact the Company’s ability to market the Company’s properties and services.
Although we have taken steps to abide by privacy and security laws, and to protect the security of our information systems and maintain confidential tenant, prospective tenant and employee information, the compliance and security measures put in place by the Company, and such vendors, cannot guarantee perfect compliance or provide absolute security, and the Company and our vendors' compliance systems and/or information technology infrastructure may be vulnerable to criminal cyber-attacks or data security incidents, including, ransom of data, such as, without limitation, tenant and/or employee information, due to employee error, malfeasance, or other vulnerabilities. Any such incident could compromise the Company’s or such vendors’ networks (or the networks or systems of third parties that facilitate the Company’s or such vendors’ business activities), and the information stored by the Company or such vendors could be accessed, misused, publicly disclosed, corrupted, lost, or stolen, resulting in fraud, including wire fraud related to Company assets, or other harm. Moreover, if there is a compliance failure, or if a data security incident or breach affects the Company’s systems or such vendors’ systems, whether through a breach of the Company’s systems or a breach of the systems of third parties, or results in the unauthorized release of personally identifiable information, the Company’s reputation and brand could be materially damaged, which could increase our costs in attracting and retaining tenants, and other serious consequences may result. Such potential other consequences include, without limitation, that the Company may be exposed to a risk of litigation, including, without limitation, government enforcement actions, private
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litigation or criminal penalties; and that the Company may be exposed to a risk of loss including, without limitation, loss related to the fact that agreements with such vendors, or such vendors’ financial condition, may not allow the Company to recover all costs related to a cyber breach for which they alone or they and the Company should be jointly responsible for, which could result in a material adverse effect on the Company’s business, results of operations, and financial condition.
Privacy and information security risks have generally increased in recent years because of the proliferation of new technologies, such as ransomware, and the increased sophistication and activities of perpetrators of cyber-attacks. We maintain cyber risk insurance which may provide some coverage for certain risks arising out of cyber breaches. However, there can be no assurance that our cyber risk insurance will be sufficient in the event of a cyber incident.
In the future, the Company may expend additional resources to continue to enhance the Company’s information security measures to investigate and remediate any information security vulnerabilities and/or to further ensure compliance with privacy and information security laws. Despite these steps, there can be no assurance that the Company will not suffer a significant data security incident in the future, that unauthorized parties will not gain access to sensitive data stored on the Company’s systems, or that any such incident will be discovered in a timely manner. Any failure in or breach of the Company’s information security systems, those of third party service providers, or a breach of other third party systems that ultimately impacts the operational or information security systems of the Company as a result of cyber-attacks or information security breaches could result in a wide range of potentially serious harm to our business and results of operations. Further, the techniques used by criminals to obtain unauthorized access to sensitive data, such as phishing are increasing in sophistication and are often novel or change frequently; accordingly, the Company may be unable to anticipate these techniques or implement adequate preventative measures.
Reliance on third party software providers to host systems critical to our operations and to provide the Company with data. We rely on certain key software vendors to support business practices critical to our operations, including the collection of rent and ancillary income and communication with our tenants, and to provide us with data, including data we use to set our rents and predict occupancies. The market is currently experiencing a consolidation of these software vendors particularly in the multi-family space, which may negatively impact the Company’s choice of vendor and pricing options. Moreover, if any of these key vendors were to terminate our relationship or access to data, or to fail, we could suffer losses while we sought to replace the services and information provided by the vendors.
Risks Related to Our Indebtedness and Financings
Capital and credit market conditions and volatility may affect the Company’s access to sources of capital and/or the cost of capital, which could negatively affect the Company’s business, stock price, results of operations, cash flows and financial condition. Our current balance sheet, the debt capacity available on the unsecured line of credit with a diversified bank group, access to the public and private placement debt markets and secured debt financing providers such as Fannie Mae and Freddie Mac provide some insulation from volatile capital markets. We primarily use external financing, including sales of debt and equity securities, to fund acquisitions, developments, and redevelopments and to refinance indebtedness as it matures. If sufficient sources of external financing are not available to us on cost effective terms, we could be forced to limit our acquisition, development and redevelopment activity and/or take other actions to fund our business activities and repayment of debt, such as selling assets, reducing our cash dividend or distributing less than 100% of our REIT taxable income. In general, to the extent that the Company’s access to capital and credit is at a higher cost than the Company has experienced in recent years (reflected in higher interest rates for debt financing or a lower stock price for equity financing without a corresponding change to investment cap rates) the Company’s ability to make acquisitions, develop or redevelop communities, obtain new financing, and refinance existing borrowing at competitive rates could be adversely affected, which would impact the Company's financial standing and related credit rating. In addition, if our ability to obtain financing is adversely affected, the Company’s stock price may be adversely affected, and we may be unable to satisfy scheduled maturities on existing financing through other sources of our liquidity, which, in the case of secured financings, could result in lender foreclosure on the apartment communities securing such debt.
Debt financing has inherent risks. At December 31, 2021, the Company had approximately $6.3 billion of indebtedness (including $565.6 million of variable rate indebtedness). Where appropriate, the Company intends to continue to use leverage to increase the rate of return on the Company’s investments and to provide for additional investments that the Company could not otherwise make. The Company is subject to the risks normally associated with debt financing, including, but not limited to cash flow may not be sufficient to meet required payments of principal and interest and the REIT distribution requirements of the Code; inability to renew, repay, or refinance maturing indebtedness on encumbered apartment communities on favorable terms or at all, possibly requiring the Company to sell a property or properties on disadvantageous terms; inability to comply with debt covenants could trigger cash management provisions limiting our ability to control cash flows, cause defaults, or an acceleration of maturity dates; and paying debt before the scheduled maturity date could result in prepayment penalties. Any of these risks might result in losses that could have an adverse effect on the Company and its ability to make distributions to
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Essex's stockholders or the Operating Partnership's unitholders and pay amounts due on its debt. Our ability to make payments on and to refinance our indebtedness and to fund our operations, working capital and capital expenditures, depends on our ability to generate cash in the future. There is a risk that we may not be able to refinance existing indebtedness or that a refinancing will not be done on as favorable terms, which in either case could have an adverse effect on our financial condition, results of operations and cash flows.
As of December 31, 2021, the Company had 12 consolidated communities encumbered by debt. With respect to such communities, all of them are secured by deeds of trust relating solely to those communities. The holders of this indebtedness will have rights with respect to these communities and, if debt payment obligations are not met, lenders may seek foreclosure of communities, or may appoint a receiver and exercise rights under an assignment of rents and leases, or pursue other remedies which would reduce the Company’s income and net asset value, and its ability to service other debt. Foreclosures could also create taxable income without accompanying cash proceeds, thereby hindering our ability to meet REIT distribution requirements.
Compliance requirements of tax-exempt financing and below market rent requirements may limit income from certain communities. At December 31, 2021, the Company had approximately $224.4 million of variable rate tax-exempt financing. This tax-exempt financing provides for certain deed restrictions and restrictive covenants. The Company expects to engage in tax-exempt financings in the future. If the compliance requirements of the tax-exempt financing restrict our ability to increase our rental rates to low or moderate income tenants, or eligible/qualified tenants, then our income from these properties may be limited. While we generally believe that the interest rate benefit attendant to properties with tax-exempt bonds more than outweigh any loss of income due to restrictive covenants or deed restrictions, this may not always be the case. Some of these requirements are complex and our failure to comply with them may subject us to material fines or liabilities. Certain state and local authorities may impose additional rental restrictions. These restrictions may limit income from the tax-exempt financed communities if the Company is required to decrease its rental rates to attract tenants who satisfy the median income test. If the Company does not reserve the required number of apartment homes for tenants satisfying these income requirements, the tax-exempt status of the bonds may be terminated, the obligations under the bond documents may be accelerated and the Company may be subject to additional contractual liability. Notwithstanding the limitations due to tax-exempt financing requirements, the income from certain communities may be limited due to below market rent requirements imposed by local authorities in connection with the original development of the community.
The indentures governing our notes and other financing arrangements contain restrictive covenants that limit our operating flexibility. The indentures that govern our publicly registered notes contain financial and operating covenants that, among other things, restrict our ability to take specific actions, even if we believe them to be in our best interests, including restrictions on our ability to consummate a merger, consolidation or sale of all or substantially all of our assets; and incur additional secured and unsecured indebtedness. The instruments governing our other unsecured indebtedness require us to meet specified financial covenants, including covenants relating to net worth, fixed charge coverage, debt service coverage, the amounts of total indebtedness and secured indebtedness, leverage and certain investment limitations. These covenants may restrict our ability to expand or fully pursue our business strategies. Our ability to comply with these provisions and those contained in the indentures governing the notes, may be affected by changes in our operating and financial performance, changes in general business and economic conditions, adverse regulatory developments or other events adversely impacting us. The breach of any of these covenants, including those contained in our indentures, could result in a default under our indebtedness, which could cause those and other obligations to become due and payable. If any of our indebtedness is accelerated, we may not be able to repay it.
Uncertainty relating to the LIBOR calculation process and potential phasing out of LIBOR after 2021 may materially adversely affect us. The interest rate on certain of the Company’s secured and unsecured debt obligations, including the Company’s two unsecured lines of credit, is based on the LIBOR. In July 2017, the United Kingdom regulator that regulates LIBOR announced its intention to phase out LIBOR rates by the end of 2021. On March 5, 2021, the United Kingdom regulator confirmed its intentions to cease the publication of the one week and two month U.S. dollar LIBOR immediately following the December 31, 2021 publications, and the remaining U.S. dollar LIBOR tenors immediately following the June 30, 2023 publications. At this time, no consensus exists as to what rate or rates may become accepted alternatives to LIBOR, and it is impossible to predict whether and to what extent banks will continue to provide LIBOR submissions to the administrator of LIBOR or whether any additional reforms to LIBOR may be enacted in the United Kingdom, the United States or elsewhere. Any changes in the method used for determining LIBOR may result in a sudden or prolonged increase or decrease in LIBOR. If a published U.S. dollar LIBOR rate is unavailable after June 2023, the interest rates on certain of the Company’s debt obligations could change. Uncertainty as to the nature of such potential changes, phase out, alternative reference rates or other reforms may adversely affect the trading market for LIBOR-based securities. Any of these proposals or consequences could have a material adverse effect on our financing costs, and as a result, our financial condition and results of operations.
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Interest rate hedging arrangements may result in losses. The Company from time to time uses interest rate swaps and interest rate caps contracts to manage certain interest rate risks. Although these agreements may partially protect against rising interest rates, they also may reduce the benefits to the Company if interest rates decline. If a hedging arrangement is not indexed to the same rate as the indebtedness that is hedged, the Company may be exposed to losses to the extent that the rate governing the indebtedness and the rate governing the hedging arrangement change independently of each other. Finally, nonperformance by the other party to the hedging arrangement may subject the Company to increased credit risks. In order to minimize counterparty credit risk, the Company enters into hedging arrangements only with investment grade financial institutions.
A downgrade in the Company's investment grade credit rating could materially and adversely affect its business and financial condition. The Company plans to manage its operations to maintain its investment grade credit rating with a capital structure consistent with its current profile, but there can be no assurance that it will be able to maintain its current credit ratings. Any downgrades in terms of ratings or outlook by any of the rating agencies could have a material adverse impact on the Company’s cost and availability of capital, which could in turn have a material adverse impact on its financial condition, results of operations and liquidity, as well as the Company's stock price.
Changes in the Company’s financing policy may lead to higher levels of indebtedness. The Company’s organizational documents do not limit the amount or percentage of indebtedness that may be incurred. The Company has adopted a policy of maintaining a limit on debt financing consistent with the existing covenants required to maintain the Company’s unsecured line of credit bank facility, unsecured debt and senior unsecured bonds. Although pursuant to this policy the Company manages its debt to be in compliance with the debt covenants, the Company may increase the amount of outstanding debt at any time without a concurrent improvement in the Company’s ability to service the additional debt. Accordingly, the Company could become more leveraged, resulting in an increased risk of default on its debt covenants or on its debt obligations and in an increase in debt service requirements. Any covenant breach or significant increase in the Company’s leverage could materially adversely affect the Company’s financial condition and ability to access debt and equity capital markets in the future.
If the Company or any of its subsidiaries defaults on an obligation to repay outstanding indebtedness when due, the default could trigger a cross-default or cross-acceleration under other indebtedness. A default under the agreements governing the Company’s or its subsidiaries’ indebtedness, including a default under mortgage indebtedness, lines of credit, bank term loan, or the indenture for the Company’s outstanding senior notes, that is not waived by the required lenders or holders of outstanding notes, could trigger cross-default or cross-acceleration provisions under one or more agreements governing the Company’s indebtedness, which could cause an immediate default or allow the lenders to declare all funds borrowed thereunder to be due and payable.
The Company could be negatively impacted by the condition of Fannie Mae or Freddie Mac and by changes in government support for multifamily housing. Historically, the Company has utilized borrowing from Fannie Mae and Freddie Mac. There are no assurances that these entities will lend to the Company in the future. The Company primarily utilizes unsecured debt and repays secured debt at or near its respective maturity and places less reliance on agency mortgage debt financing. Potential options have been proposed for the future of agency mortgage finance in the United States that could involve the phase out of Fannie Mae and Freddie Mac. While we believe Fannie Mae and Freddie Mac will continue to provide liquidity to our sector, should they discontinue doing so, have their mandates changed or reduced or be disbanded or reorganized by the government or if there is reduced government support for multifamily housing more generally, it may adversely affect interest rates, capital availability, development of multifamily communities and the value of multifamily residential real estate and, as a result, may adversely affect the Company and its growth and operations.
Risks Related to Personnel
The Company depends on its personnel, whose continued service is not guaranteed. The Company’s success depends on its ability to attract, train and retain executive officers, senior officers and company managers. There is substantial competition for qualified personnel in the real estate industry and the departure of any of the Company’s key personnel could have an adverse effect on the Company. While the Company engages in regular succession planning for key positions, the Company’s plans may be impacted and therefore adjusted due to the departure of any key personnel. Additionally, the Company must continue to recruit and train qualified operational staff at its properties. While the Company offers competitive pay and benefits, it may be difficult to appropriately staff our properties in a highly competitive job market.
The Company’s Chairman is involved in other real estate activities and investments, which may lead to conflicts of interest. The Company’s Chairman, George M. Marcus, is not an employee of the Company, and is involved in other real estate activities and investments, which may lead to conflicts of interest. Mr. Marcus owns interests in various other real estate-related businesses and investments. He is the Chairman of the Marcus & Millichap Company ("MMC"), which is a parent company of
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a diversified group of real estate service, investment and development firms. Mr. Marcus is also the Co-Chairman of Marcus & Millichap, Inc. ("MMI"), and Mr. Marcus owns a controlling interest in MMI. MMI is a national brokerage firm listed on the NYSE that underwent its initial public offering in 2013.
Mr. Marcus has agreed not to divulge any confidential or proprietary information that may be received by him in his capacity as Chairman of the Company to any of his affiliated companies and that he will absent himself from any and all discussions by Essex's Board of Directors regarding any proposed acquisition and/or development of an apartment community where it appears that there may be a conflict of interest with any of his affiliated companies. Notwithstanding this agreement, Mr. Marcus and his affiliated entities may potentially compete with the Company in acquiring and/or developing apartment communities, which competition may be detrimental to the Company. In addition, due to such potential competition for real estate investments, Mr. Marcus and his affiliated entities may have a conflict of interest with the Company, which may be detrimental to the interests of Essex's stockholders and the Operating Partnership's unitholders.
The influence of executive officers, directors, and significant stockholders may be detrimental to holders of common stock. As of December 31, 2021, Mr. Marcus wholly or partially owned approximately 1.9 million shares of common stock (including shares issuable upon exchange of limited partnership interests in the Operating Partnership and certain other partnerships, indirectly held shares of common stock). Mr. Marcus currently does not have majority control over the Company. However, he currently has, and likely will continue to have, significant influence with respect to the election of directors and approval or disapproval of significant corporate actions. Consequently, his influence could result in decisions that do not reflect the interests of all the Company’s stockholders.
Under the partnership agreement of the Operating Partnership, the consent of the holders of limited partnership interests is generally required for certain amendments of the agreement and for certain extraordinary actions. Through their ownership of limited partnership interests and their positions with the Company, the Company’s directors and executive officers, including Mr. Marcus, have substantial influence on the Company. Consequently, their influence could result in decisions that do not reflect the interests of all stockholders.
Our related party guidelines may not adequately address all of the issues that may arise with respect to related party transactions. The Company has adopted "Related Party Transaction Approval Process Guidelines" that provide generally that any transaction in which a director or executive officer has an interest must have the prior approval of the Audit Committee of Essex’s Board of Directors. The review and approval procedures in these guidelines are intended to determine whether a particular related party transaction is fair, reasonable and serves the interests of the Company’s stockholders. Pursuant to these guidelines, related party transactions have been approved from time to time. There is no assurance that this policy will be adequate for determining whether a particular related party transaction is suitable and fair for the Company. Also, the policy’s procedures may not identify and address all the potential issues and conflicts of interests with a related party transaction.
Employee theft or fraud could result in loss. Certain of our employees have access to, or signature authority with respect to, bank accounts or other Company assets, which exposes us to the risk of fraud or theft. In addition, certain employees have access to key information technology ("IT") infrastructure and to tenant and other information that is commercially valuable. Should any employee compromise our IT systems, or misappropriate tenant or other information, we could incur losses, including significant financial or reputational harm, from which full recovery cannot be assured. We also may not have insurance that covers any losses in full or that covers losses from particular criminal acts. Potential liabilities for theft or fraud are not quantifiable and an estimate of possible loss cannot be made.
Risks Related to Taxes and Status as a REIT
Failure to generate sufficient rental revenue or other liquidity needs and impacts of economic conditions could limit cash flow available for dividend distributions, as well as the form and timing of such distributions, to Essex's stockholders or the Operating Partnership's unitholders. Significant expenditures associated with each community such as debt service payments, if any, real estate taxes, insurance and maintenance costs are generally not reduced when circumstances cause a reduction in income from a community. The form, timing and/or amount of dividend distributions will be declared at the discretion of the Board of Directors and will depend on actual cash from operations, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code and other factors as the Board of Directors may consider relevant. The Board of Directors may modify our dividend policy from time to time.
Essex may choose to pay dividends in its own stock, in which case stockholders may be required to pay tax in excess of the cash they receive. If a U.S. stockholder sells the stock it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our stock at the time of the sale. Furthermore, with respect to non-U.S. stockholders, we may be required to withhold U.S. tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in stock. In addition, the trading price of
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Essex's stock would experience downward pressure if a significant number of our stockholders sell shares of Essex's stock in order to pay taxes owed on dividends.
The Maryland Business Combination Act may delay, defer or prevent a transaction or change in control of the Company that might involve a premium price for the Company's stock or otherwise be in the best interest of our stockholders. Under the Maryland General Corporation Law, certain "business combinations" between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, share exchange, or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. An interested stockholder is defined as any person (and certain affiliates of such person) who beneficially owns ten percent or more of the voting power of the then-outstanding voting stock of the corporation. The law also requires a two supermajority stockholder votes for such transactions. This means that the transaction must be approved by at least 80% of the votes entitled to be cast by holders of outstanding voting shares; and two-thirds of the votes entitled to be cast by holders of outstanding voting shares other than shares held by the interested stockholder with whom the business combination is to be effected.
The statute permits various exemptions from its provisions, including business combinations that are exempted by the board of directors prior to the time that the interested stockholder becomes an interested stockholder. These voting provisions do not apply if the stockholders receive a minimum price, as defined under the Maryland General Corporation Law. As permitted by the statute, the Board of Directors of Essex irrevocably has elected to exempt any business combination among the Company, George M. Marcus, who is the chairman of the Company, and MMC or any entity owned or controlled by Mr. Marcus and MMC. Consequently, the five-year prohibition and supermajority vote requirements described above will not apply to any business combination between the Company, Mr. Marcus, or MMC. As a result, the Company may in the future enter into business combinations with Mr. Marcus and MMC, without compliance with the supermajority vote requirements and other provisions of the Maryland Business Combination Act.
Certain provisions contained in the Operating Partnership agreement, Charter and Bylaws, and certain provisions of the Maryland General Corporation Law could delay, defer or prevent a change in control. While the Company is the sole general partner of the Operating Partnership, and generally has full and exclusive responsibility and discretion in the management and control of the Operating Partnership, certain provisions of the Operating Partnership agreement place limitations on the Company’s power to act with respect to the Operating Partnership. Such limitations could delay, defer or prevent a transaction or a change in control that might involve a premium price for the Company’s stock or otherwise be in the best interests of its stockholders or that could otherwise adversely affect their interests. The partnership agreement provides that if the limited partners own at least 5% of the outstanding units of partnership interest in the Operating Partnership, the Company may not, without first obtaining the consent of a majority in interest of the limited partners in the Operating Partnership, transfer all or any portion of the Company’s general partner interest in the Operating Partnership to another entity. Such limitations on the Company’s power to act may result in the Company’s being precluded from taking action that the Board of Directors otherwise believes is in the best interests of the Company or its stockholders.
The Company’s Charter authorizes the issuance of additional shares of common stock or preferred stock and the setting of the preferences, rights and other terms of such stock without the approval of the holders of the common stock. The Company may establish one or more classes or series of stock that could delay, defer or prevent a transaction or a change in control. Such a transaction might involve a premium price for the Company’s stock or otherwise be in the best interests of the holders of common stock. Also, such a class or series of stock could have dividend, voting or other rights that could adversely affect the interests of holders of common stock.
The Company’s Charter contains provisions limiting the transferability and ownership of shares of capital stock, which may delay, defer or prevent a transaction or a change in control. For example, subject to receiving an exemption from the Board of Directors, potential acquirers may not purchase more than 6% in value of the stock (other than qualified pension trusts which can acquire 9.9%). This may discourage tender offers that may be attractive to the holders of common stock and limit the opportunity for stockholders to receive a premium for their shares of common stock.
The Maryland General Corporation Law restricts the voting rights of holders of shares deemed to be "control shares." Under the Maryland General Corporation Law, "control shares" are those which, when aggregated with any other shares held by the acquirer, entitle the acquirer to exercise voting power within specified ranges. Although the Bylaws exempt the Company from the control share provisions of the Maryland General Corporation Law, the Board of Directors may amend or eliminate the provisions of the Bylaws at any time in the future. Moreover, any such amendment or elimination of such provision of the Bylaws may result in the application of the control share provisions of the Maryland General Corporation Law not only to control shares which may be acquired in the future, but also to control shares previously acquired. If the provisions of the Bylaws are amended or eliminated, the control share provisions of the Maryland General Corporation Law could delay, defer or
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prevent a transaction or change in control that might involve a premium price for the stock or otherwise be in the best interests of the Company’s stockholders.
The Company’s Charter and Bylaws as well as Maryland General Corporation Law also contain other provisions that may impede various actions by stockholders without approval of Essex’s Board of Directors, and that in turn may delay, defer or prevent a transaction, including a change in control that might involve a premium price for the stock or otherwise be in the best interests of the Company’s stockholders. Those provisions include, among others, directors may be removed by stockholders, without cause, only upon the affirmative vote of at least two-thirds of the votes entitled to be cast generally in the election of the directors, and with cause, only upon the affirmative vote of a majority of the votes entitled to be cast generally in the election of the directors; Essex’s Board of Directors can fix the number of directors and fill vacant directorships upon the vote of a majority of the directors and Essex's Board of Directors can classify the board such that the entire board is not up for re-election annually; stockholders must give advance notice to nominate directors or propose business for consideration at a stockholders’ meeting; and for stockholders to call a special meeting, the meeting must be requested by not less than a majority of all the votes entitled to be cast at the meeting.
Loss of the Company's REIT status would have significant adverse consequences to the Company and the value of the Company's common stock. The Company has elected to be taxed as a REIT under the Code. The Company’s qualification as a REIT requires it to satisfy various annual and quarterly requirements, including income, asset and distribution tests, established under highly technical and complex Code provisions for which there are only limited judicial or administrative interpretations. Although the Company intends that its current organization and method of operation enable it to qualify as a REIT, it cannot assure you that it so qualifies or that it will be able to remain so qualified in the future. If the Company fails to qualify as a REIT in any taxable year, the Company would be subject to U.S. federal corporate income tax on the Company’s taxable income (and the Company could be subject to the federal alternative minimum tax for taxable years prior to 2018), and the Company would not be allowed to deduct dividends paid to its stockholders in computing its taxable income. The Company would also be disqualified from treatment as a REIT for the four taxable years following the year in which the Company failed to qualify, unless we are entitled to relief under statutory provisions. The additional tax liability would reduce its net earnings available for investment or distribution to Essex stockholders and Operating Partnership unitholders, and the Company would no longer be required to make distributions to its stockholders for the purpose of maintaining REIT status. As a result of all these factors, the Company’s failure to qualify as a REIT also could impair its ability to expand its business and raise capital, and could adversely affect the value and market price of the Company’s common stock.
Complying with REIT requirements may affect our profitability and may force us to liquidate or forgo otherwise attractive investments. To qualify as a REIT, we must continually satisfy tests concerning, among other things, the nature and diversification of our assets, the sources of our income and the amounts we distribute to our stockholders. We may be required to liquidate or forgo otherwise attractive investments in order to satisfy the asset and income tests or to qualify under certain statutory relief provisions. We also may be required to make distributions to stockholders at disadvantageous times or when we do not have funds readily available for distribution. As a result, having to comply with the distribution requirement could cause us to: (1) sell assets in adverse market conditions; (2) borrow on unfavorable terms; or (3) distribute amounts that would otherwise be invested in future acquisitions, capital expenditures or repayment of debt. Accordingly, satisfying the REIT requirements could materially and adversely affect us. Moreover, if we are compelled to liquidate our investments to meet any of these asset, income or distribution tests, or to repay obligations to our lenders, we may be unable to comply with one or more of the requirements applicable to REITs or may be subject to a 100% tax on any resulting of debt. Accordingly, satisfying the REIT requirements could materially and adversely affect us. Moreover, if we are compelled to liquidate our investments to meet any of these asset, income or distribution tests, or to repay obligations to our lenders, we may be unable to comply with one or more of the requirements applicable to REITs or may be subject to a 100% tax on any resulting gain if such sales constitute prohibited transactions.
Legislative or other actions affecting REITs could have a negative effect on the Company or its stockholders. The rules dealing with federal income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Department of the Treasury. Changes to the tax laws, with or without retroactive legislation, could adversely affect the Company or its stockholders. New legislation, Treasury Regulations, administrative interpretations or court decisions could significantly and negatively affect the Company’s ability to qualify as a REIT, the federal income tax consequences of such qualification, or the federal income tax consequences of an investment in the Company. Also, the law relating to the tax treatment of other entities, or an investment in other entities, could change, making an investment in such other entities more attractive relative to an investment in a REIT.
The Company’s ownership of taxable REIT subsidiaries ("TRSs") is subject to certain restrictions, and it will be required to pay a 100% penalty tax on certain income or deductions if transactions with the Company’s TRSs are not conducted on arm’s length terms. The Company has established several TRSs. The TRSs must pay U.S. federal income tax on their taxable income as a regular C corporation. While the Company will attempt to ensure that its dealings with its TRSs do not adversely
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affect its REIT qualification, it cannot provide assurances that it will successfully achieve that result. Furthermore, the Company may be subject to a 100% penalty tax, to the extent dealings between the Company and its TRSs are not deemed to be arm’s length in nature. The Company intends that its dealings with its TRSs will be on an arm’s length basis. No assurances can be given, however, that the Internal Revenue Service will not assert a contrary position.
Failure of one or more of the Company’s subsidiaries to qualify as a REIT could adversely affect the Company’s ability to qualify as a REIT. The Company owns interests in multiple subsidiary REITs that have elected to be taxed as REITs under the Code. These subsidiary REITs are subject to the various REIT qualification requirements and other limitations that are applicable to the Company. If any of the Company’s subsidiary REITs were to fail to qualify as a REIT, then (i) the subsidiary REIT would become subject to federal income tax and (ii) the Company’s ownership of shares in such subsidiary REIT would cease to be a qualifying asset for purposes of the asset tests applicable to REITs. If any of the Company’s subsidiary REITs were to fail to qualify as REITs, it is possible that the Company could also fail to qualify as a REIT.
The tax imposed on REITs engaging in "prohibited transactions" may limit the Company’s ability to engage in transactions which would be treated as sales for federal income tax purposes. From time to time, the Company may transfer or otherwise dispose of some of its properties. Under the Code, unless certain exceptions apply, any gain resulting from transfers of properties that the Company holds as inventory or primarily for sale to customers in the ordinary course of business could be treated as income from a prohibited transaction subject to a 100% penalty tax from the gain on the sale of the community, which could potentially adversely impact our status as a REIT unless we own the community through one of our TRSs. Since the Company acquires properties for investment purposes, it does not believe that its occasional transfers or disposals of property should be treated as prohibited transactions. However, whether property is held for investment purposes depends on all the facts and circumstances surrounding the particular transaction. The Internal Revenue Service may contend that certain transfers or disposals of properties by the Company are prohibited transactions. If the Internal Revenue Service were to argue successfully that a transfer or disposition of property constituted a prohibited transaction, then the Company would be required to pay a 100% penalty tax on any gain allocable to it from the prohibited transaction, and the Company’s ability to retain proceeds from real property sales may be jeopardized.
Dividends payable by REITs may be taxed at higher rates than dividends of non-REIT corporations, which could reduce the net cash received by stockholders and may be detrimental to the Company’s ability to raise additional funds through any future sale of its stock. Dividends paid by REITs to U.S. stockholders that are individuals, trusts or estates are generally not eligible for the reduced tax rate applicable to qualified dividends received from non-REIT corporations. U.S. stockholders that are individuals, trusts and estates generally may deduct 20% of ordinary dividends from a REIT for taxable years beginning after December 31, 2017 and before January 1, 2026. Although this deduction reduces the effective tax rate applicable to certain dividends paid by REITs, such tax rate is still higher than the tax rate applicable to regular corporate qualified dividends. This may cause investors to view REIT investments as less attractive than investments in non-REIT corporations, which in turn may adversely affect the value of stock in REITs, including the Company's stock.
We may face risks in connection with Section 1031 exchanges. From time to time we dispose of real properties in transactions intended to qualify as "like-kind exchanges" under Section 1031 of the Code. If a transaction intended to qualify as a Section 1031 exchange is later determined to be taxable, we may face adverse consequences, and if the laws applicable to such transactions are amended or repealed, we may not be able to dispose of real properties on a tax deferred basis.
If the Operating Partnership failed to qualify as a partnership for federal income tax purposes, the Company could cease to qualify as a REIT and suffer other adverse consequences. The Company believes that the Operating Partnership will continue to be treated as a partnership for U.S. federal income tax purposes. As a partnership, the Operating Partnership is not subject to U.S. federal income tax on its income. Instead, each of its partners is required to pay tax on the partner’s allocable share of the income of the Operating Partnership. No assurances can be given, however, that the Internal Revenue Service will not challenge the Operating Partnership’s status as a partnership for U.S. federal income tax purposes, or that a court would not sustain such a challenge. If the Internal Revenue Service were successful in treating the Operating Partnership as a corporation for U.S. federal income tax purposes, the Company could fail to meet the income tests and/or the asset tests applicable to REITs and, accordingly, cease to qualify as a REIT. Also, the failure of the Operating Partnership to qualify as a partnership would cause it to become subject to federal and state corporate income tax, which would reduce significantly the amount of cash available for debt service and distribution to its partners, including us.
Partnership tax audit rules could have a material adverse effect on us. Under current federal partnership tax audit rules, subject to certain exceptions, any audit adjustment to items of income, gain, loss, deduction, or credit of a partnership (and a partner’s allocable share thereof) is determined, and taxes, interest, and penalties attributable thereto are assessed and collected, at the partnership level. Unless the partnership makes an election or takes certain steps to require the partners to pay their tax on their allocable shares of the adjustment, it is possible that partnerships in which we directly or indirectly invest would be
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required to pay additional taxes, interest, and penalties as a result of an audit adjustment. We, as a direct or indirect partner of these partnerships, could be required to bear the economic burden of those taxes, interest, and penalties even though Essex, as a REIT, may not otherwise have been required to pay additional corporate‑level taxes had we owned the assets of the partnership directly. The partnership tax audit rules apply to Essex Portfolio, L.P. and its subsidiaries that are classified as partnerships for U.S. federal income tax purposes. There can be no assurance that these rules will not have a material adverse effect on us.
General Risks
We may from time to time be subject to litigation, which could have a material adverse effect on our business, financial condition and results of operations. Some of these claims may result in defense costs, settlements, fines or judgments against us, some of which are not, or cannot be, covered by insurance. Payment of any such costs, settlements, fines or judgments that are not insured could have an adverse impact on our financial position and results of operations. In addition, certain litigation or the resolution of certain litigation may affect the availability or cost of some of our insurance coverage, which could adversely impact our reputation, our results of operations and cash flow, expose us to increased risks that would be uninsured.
Rising interest rates may affect the Company’s costs of capital and financing activities and results of operation and otherwise adversely affect the market price of our common stock. Interest rates could increase, which could result in higher interest expense on the Company’s variable rate indebtedness or increase interest rates when refinancing maturing fixed rate debt. Prolonged interest rate increases could negatively impact the Company’s ability to make acquisitions and develop apartment communities with positive economic returns on investment and the Company’s ability to refinance existing borrowings. In addition, an increase in market interest rates may lead purchasers of our common stock to demand a greater annual dividend yield, which could adversely affect the market price of our common stock.
The soundness of financial institutions could adversely affect us. We maintain cash and cash equivalent balances, including significant cash amounts at our wholly owned insurance subsidiary, PWI, as well as 401(k) plan assets in a limited number of financial institutions. Our cash balances are generally in excess of federally insured limits. The failure or collapse of one or more of these financial institutions may materially adversely affect our ability to recover our cash balances or the 401(k) assets. Certain financial institutions are lenders under our credit facilities, and, from time to time, we execute transactions with counterparties in the financial services industry. In the event that the volatility of the financial markets adversely affects these financial institutions or counterparties, we or other parties to the transactions with us may be unable to complete transactions as intended, which could adversely affect our business and results of operations. Additionally, certain of our tax-exempt bond financing documents require us to obtain a guarantee from a financial institution of payment of the principal and interest on the bonds. The guarantee may take the form of a letter of credit, surety bond, guarantee agreement or other additional collateral. If the financial institution defaults in its guarantee obligations, or if we are unable to renew the applicable guarantee or otherwise post satisfactory collateral, a default will occur under the applicable tax-exempt bonds and the community could be foreclosed upon if we do not redeem the bonds.
The price per share of the Company’s stock may fluctuate significantly. The market price per share of the Company’s common stock may fluctuate significantly in response to many factors, including without limitation:
•regional, national and global economic conditions;
•actual or anticipated variations in the Company’s quarterly operating results or dividends;
•changes in the Company’s funds from operations or earnings estimates;
•publication of research reports about the Company or the real estate industry;
•the general reputation of REITs and the attractiveness of their equity securities in comparison to other equity securities (including securities issued by other real estate based companies);
•general stock and bond market conditions, including changes in interest rates on fixed income securities, that may lead prospective purchasers of the Company’s stock to demand a higher annual yield from dividends;
•shifts in our investor base to a higher concentration of passive investors such as exchange traded fund and index funds, which may adversely affect our ability to communicate effectively with our investors;
•the resale of substantial amounts of the Company's stock, or the anticipation of such resale, by large holders of our securities;
•availability of capital markets and cost of capital;
•a change in analyst ratings or the Company’s credit ratings;
•terrorist activity, armed conflict or geopolitical impacts adversely affecting the markets in which the Company’s securities trade, possibly increasing market volatility and causing erosion of business and consumer confidence and spending;
•hazards such as natural disasters like earthquakes, wildfires, landslides or flooding; terrorism; an active shooter at a property or corporate office; an incident involving multiple key members of the executive team; or an epidemic or pandemic;
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•changes in public policy and tax law; and
•those other factors discussed in this Item 1A.
Many of the factors listed above are beyond the Company’s control. These factors may cause the market price of shares of the Company’s common stock to decline, regardless of the Company’s financial condition, results of operations, or business prospects.
The Company’s future issuances of common stock, preferred stock or convertible debt securities could be dilutive to current stockholders and adversely affect the market price of the Company’s common stock. In order to finance the Company’s acquisition and development activities, the Company could issue and sell common stock, preferred stock and convertible debt securities, including pursuant to its equity distribution program. In 2021, the Company filed a new shelf registration statement with the SEC, allowing the Company to sell an undetermined number of equity and debt securities as defined in the prospectus. Future sales of common stock, preferred stock or convertible debt securities may dilute stockholder ownership in the Company and could adversely affect the market price of the common stock. Additionally, the perception that such issuances might occur could adversely affect the market price of the common stock.
Stockholders have limited control over changes in our policies and operations. Essex’s Board of Directors determines our major policies, including our policies regarding investments, financing, growth, debt capitalization, REIT qualification and distributions. Essex’s Board of Directors may amend or revise these and other policies without a vote of the stockholders. In addition, pursuant to Maryland law, all matters other than the election or removal of a director must be declared advisable by Essex’s Board of Directors prior to a stockholder vote.
Our score or rating by proxy advisory firms or other corporate governance consultants advising institutional investors could have an adverse effect on the perception of our corporate governance, and thereby negatively impact the market price of our common stock. Various proxy advisory firms and other corporate governance consultants advising institutional investors provide scores or ratings of our governance measures, nominees for election as directors, executive compensation practices, environmental, social and governance (“ESG”) matters, and other matters that may be submitted to stockholders for consideration at our annual meetings. From time to time certain matters that we propose for approval may not receive a favorable score or rating, or may result in a recommendation against the nominee or matter proposed. These unfavorable scores or ratings may lead to rejected proposals or a loss of stockholder confidence in our corporate governance measures, which could adversely affect the market price of our common stock.
We continuously review our corporate governance measures, including our ESG business practices, and consider implementing changes that we believe are responsive to concerns that have been raised, but there may be times where we decide not to implement recommendations by proxy advisors or other corporate governance consultants that we believe are contrary to the best interests of our stockholders, notwithstanding the adverse effect this decision may have on our scores or ratings or the perception of our corporate governance, thereby negatively impacting the market price of our common stock.
Corporate responsibility, specifically related to ESG factors, may impose additional costs and expose us to new risks. The Company and many of its investors and potential investors are focused on corporate responsibility, specifically related to ESG factors. Some investors may use ESG factors to guide their investment strategies. Many investment funds focus on positive ESG business practices and sustainability scores when making investments and may consider a company’s sustainability efforts and/or score when making an investment decision. In addition, investors, particularly institutional investors, may use ESG or sustainability scores to benchmark companies against their peers. Although the Company makes ESG disclosures and undertakes sustainability and diversity initiatives, there can be no assurance that the Company will score highly on ESG matters in the future. In addition, the criteria by which companies are rated may change, which could cause the Company to perform differently or worse than it has in the past. The Company may face reputational damage in the event its corporate responsibility procedures or standards do not meet the standards set by various constituencies. The occurrence of any of the foregoing could have an adverse effect on the price of the Company’s stock and the Company’s business, financial condition and results of operations, including increased development costs, capital expenditures and operating expenses.
We could face adverse consequences as a result of actions of activist investors. Campaigns by stockholders to effect changes at publicly traded companies are sometimes led by investors seeking to increase short-term stockholder value through actions such as financial restructuring, increased debt, special dividends, stock repurchases or sales of assets or the entire company. Responding to stockholder activism or engaging in a process or proxy contest may be costly and time-consuming, disrupt our operations and divert the attention of our management team and our employees from executing our business plan, which could adversely affect our business and results of operations.
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Expanding social media vehicles present new risks. The use of social media could cause us to suffer brand damage or information leakage. Negative posts or comments about us on any social networking website could damage our reputation. In addition, employees or others might disclose non-public sensitive information relating to our business through external media channels. The continuing evolution of social media will present us with new challenges and risks.
Any material weaknesses identified in the Company's internal control over financial reporting could have an adverse effect on the Company’s stock price. Section 404 of the Sarbanes-Oxley Act of 2002 requires the Company to evaluate and report on its internal control over financial reporting. If the Company identifies one or more material weaknesses in its internal control over financial reporting, the Company could lose investor confidence in the accuracy and completeness of its financial reports, which in turn could have an adverse effect on the Company’s stock price.
Item 1B. Unresolved Staff Comments
None.
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Item 2. Properties
The Company’s portfolio as of December 31, 2021 (including communities owned by unconsolidated joint ventures, but excluding communities underlying preferred equity investments) was comprised of 252 stabilized operating apartment communities (comprising 61,911 apartment homes), of which 26,245 apartment homes are located in Southern California, 23,141 apartment homes are located in Northern California, and 12,525 apartment homes are located in the Seattle metropolitan area. The Company’s apartment communities accounted for 99.3% of the Company’s revenues for the year ended December 31, 2021.
Occupancy Rates
Financial occupancy is defined as the percentage resulting from dividing actual rental income by total scheduled rental income. 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. When calculating actual rents for occupied apartment homes and market rents for vacant apartment homes, delinquencies and concessions are not taken into account. The Company believes that financial occupancy is a meaningful measure of occupancy because it considers the value of each vacant unit at its estimated market rate. 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 as disclosed by other REITs. 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.
For 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 a community is in the lease-up phase, the Company’s primary motivation is to stabilize the property, which may entail the use of rent concessions and other incentives, and thus financial occupancy which is based on contractual income is not considered the best metric to quantify occupancy.
Communities
The Company’s communities are primarily urban and suburban high density wood frame communities comprising of three to seven stories above grade construction with structured parking situated on 1-10 acres of land with densities averaging between 30-80+ units per acre. As of December 31, 2021, the Company’s communities include 104 garden-style, 138 mid-rise, and 10 high-rise communities. Garden-style communities are generally defined as on-grade properties with two and/or three-story buildings with no structured parking while mid-rise communities are generally defined as properties with three to seven story buildings and some structured parking. High-rise communities are typically defined as properties with buildings that are greater than seven stories, are steel or concrete framed, and frequently have structured parking. The communities have an average of approximately 246 apartment homes, with a mix of studio, one-, two- and some three-bedroom apartment homes. A wide variety of amenities are available at the Company’s communities, including covered parking, fireplaces, swimming pools, clubhouses with fitness facilities, playground areas and dog parks.
The Company hires, trains and supervises on-site service and maintenance personnel. The Company believes that the following primary factors enhance the Company’s ability to retain tenants:
•located near employment centers;
•attractive communities that are well maintained; and
•proactive customer service.
Commercial Buildings
The Company owns three commercial buildings with approximately 281,000 square feet located in California and Washington, of which the Company occupied approximately 14,000 square feet as of December 31, 2021. Furthermore, as of December 31, 2021, the commercial buildings' physical occupancy rate was 98% consisting of 7 tenants, including the Company.
Operating Portfolio
The table below describes the Company’s operating portfolio as of December 31, 2021. (See Note 8, "Mortgage Notes Payable" to the Company’s consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K for more
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information about the Company’s secured mortgage debt and Schedule III thereto for a list of secured mortgage loans related to the Company’s portfolio.)

|  |  |  |  |  | Apartment |  | Year |  | Year |  |
Communities (1) |  | Location |  | Type |  | Homes |  | Built |  | Acquired |  | Occupancy(2)
Southern California |  |  |  |  |  |  |  |  |  |  |  |
Alpine Village |  | Alpine, CA |  | Garden |  | 301 |  |  | 1971 |  | 2002 |  | 98%
Anavia |  | Anaheim, CA |  | Mid-rise |  | 250 |  |  | 2009 |  | 2010 |  | 96%
Barkley, The (3)(4) |  | Anaheim, CA |  | Garden |  | 161 |  |  | 1984 |  | 2000 |  | 98%
Park Viridian |  | Anaheim, CA |  | Mid-rise |  | 320 |  |  | 2008 |  | 2014 |  | 97%
Bonita Cedars |  | Bonita, CA |  | Garden |  | 120 |  |  | 1983 |  | 2002 |  | 98%
The Village at Toluca Lake |  | Burbank, CA |  | Mid-rise |  | 145 |  |  | 1974 |  | 2017 |  | 98%
Camarillo Oaks |  | Camarillo, CA |  | Garden |  | 564 |  |  | 1985 |  | 1996 |  | 98%
Camino Ruiz Square |  | Camarillo, CA |  | Garden |  | 159 |  |  | 1990 |  | 2006 |  | 98%
Pinnacle at Otay Ranch I & II |  | Chula Vista, CA |  | Mid-rise |  | 364 |  |  | 2001 |  | 2014 |  | 97%
Mesa Village |  | Clairemont, CA |  | Garden |  | 133 |  |  | 1963 |  | 2002 |  | 94%
Villa Siena |  | Costa Mesa, CA |  | Garden |  | 272 |  |  | 1974 |  | 2014 |  | 97%
Emerald Pointe |  | Diamond Bar, CA |  | Garden |  | 160 |  |  | 1989 |  | 2014 |  | 98%
Regency at Encino |  | Encino, CA |  | Mid-rise |  | 75 |  |  | 1989 |  | 2009 |  | 96%
The Havens (5) |  | Fountain Valley, CA |  | Garden |  | 440 |  |  | 1969 |  | 2014 |  | 97%
Valley Park |  | Fountain Valley, CA |  | Garden |  | 160 |  |  | 1969 |  | 2001 |  | 98%
Capri at Sunny Hills (4) |  | Fullerton, CA |  | Garden |  | 102 |  |  | 1961 |  | 2001 |  | 97%
Haver Hill (6) |  | Fullerton, CA |  | Garden |  | 264 |  |  | 1973 |  | 2012 |  | 98%
Pinnacle at Fullerton |  | Fullerton, CA |  | Mid-rise |  | 192 |  |  | 2004 |  | 2014 |  | 97%
Wilshire Promenade |  | Fullerton, CA |  | Mid-rise |  | 149 |  |  | 1992 |  | 1997 |  | 97%
Montejo Apartments |  | Garden Grove, CA |  | Garden |  | 124 |  |  | 1974 |  | 2001 |  | 98%
The Henley I |  | Glendale, CA |  | Mid-rise |  | 83 |  |  | 1974 |  | 1999 |  | 97%
The Henley II |  | Glendale, CA |  | Mid-rise |  | 132 |  |  | 1970 |  | 1999 |  | 97%
CBC and The Sweeps |  | Goleta, CA |  | Garden |  | 239 |  |  | 1962 |  | 2006 |  | 95%
Huntington Breakers |  | Huntington Beach, CA |  | Mid-rise |  | 342 |  |  | 1984 |  | 1997 |  | 96%
The Huntington |  | Huntington Beach, CA |  | Garden |  | 276 |  |  | 1975 |  | 2012 |  | 97%
Hillsborough Park (7) |  | La Habra, CA |  | Garden |  | 235 |  |  | 1999 |  | 1999 |  | 98%
Village Green |  | La Habra, CA |  | Garden |  | 272 |  |  | 1971 |  | 2014 |  | 97%
The Palms at Laguna Niguel |  | Laguna Niguel, CA |  | Garden |  | 460 |  |  | 1988 |  | 2014 |  | 98%
Trabuco Villas |  | Lake Forest, CA |  | Mid-rise |  | 132 |  |  | 1985 |  | 1997 |  | 99%
Marbrisa |  | Long Beach, CA |  | Mid-rise |  | 202 |  |  | 1987 |  | 2002 |  | 97%
Pathways at Bixby Village |  | Long Beach, CA |  | Garden |  | 296 |  |  | 1975 |  | 1991 |  | 97%
5600 Wilshire |  | Los Angeles, CA |  | Mid-rise |  | 284 |  |  | 2008 |  | 2014 |  | 97%
Alessio |  | Los Angeles, CA |  | Mid-rise |  | 624 |  |  | 2001 |  | 2014 |  | 95%
Ashton Sherman Village |  | Los Angeles, CA |  | Mid-rise |  | 264 |  |  | 2014 |  | 2016 |  | 96%
Avant |  | Los Angeles, CA |  | Mid-rise |  | 440 |  |  | 2014 |  | 2015 |  | 95%
The Avery |  | Los Angeles, CA |  | Mid-rise |  | 121 |  |  | 2014 |  | 2014 |  | 97%
Bellerive |  | Los Angeles, CA |  | Mid-rise |  | 63 |  |  | 2011 |  | 2011 |  | 95%
Belmont Station |  | Los Angeles, CA |  | Mid-rise |  | 275 |  |  | 2009 |  | 2009 |  | 95%
Bunker Hill |  | Los Angeles, CA |  | High-rise |  | 456 |  |  | 1968 |  | 1998 |  | 95%
Catalina Gardens |  | Los Angeles, CA |  | Mid-rise |  | 128 |  |  | 1987 |  | 2014 |  | 95%
Cochran Apartments |  | Los Angeles, CA |  | Mid-rise |  | 58 |  |  | 1989 |  | 1998 |  | 96%
Emerson Valley Village |  | Los Angeles, CA |  | Mid-rise |  | 144 |  |  | 2012 |  | 2016 |  | 96%
Gas Company Lofts (6) |  | Los Angeles, CA |  | High-rise |  | 251 |  |  | 2004 |  | 2013 |  | 95%
The Blake LA |  | Los Angeles, CA |  | Mid-rise |  | 196 |  |  | 1979 |  | 1997 |  | 96%

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|  |  |  |  |  | Apartment |  | Year |  | Year |  |
Communities (1) |  | Location |  | Type |  | Homes |  | Built |  | Acquired |  | Occupancy(2)
Marbella |  | Los Angeles, CA |  | Mid-rise |  | 60 |  |  | 1991 |  | 2005 |  | 96%
Pacific Electric Lofts (8) |  | Los Angeles, CA |  | High-rise |  | 314 |  |  | 2006 |  | 2012 |  | 95%
Park Catalina |  | Los Angeles, CA |  | Mid-rise |  | 90 |  |  | 2002 |  | 2012 |  | 96%
Park Place |  | Los Angeles, CA |  | Mid-rise |  | 60 |  |  | 1988 |  | 1997 |  | 96%
Regency Palm Court (6) |  | Los Angeles, CA |  | Mid-rise |  | 116 |  |  | 1987 |  | 2014 |  | 94%
Santee Court |  | Los Angeles, CA |  | High-rise |  | 165 |  |  | 2004 |  | 2010 |  | 96%
Santee Village |  | Los Angeles, CA |  | High-rise |  | 73 |  |  | 2011 |  | 2011 |  | 96%
Tiffany Court |  | Los Angeles, CA |  | Mid-rise |  | 101 |  |  | 1987 |  | 2014 |  | 98%
Wallace on Sunset |  | Los Angeles, CA |  | Mid-rise |  | 200 |  |  | 2021 |  | 2021 |  | 96%
Wilshire La Brea |  | Los Angeles, CA |  | Mid-rise |  | 478 |  |  | 2014 |  | 2014 |  | 95%
Windsor Court (6) |  | Los Angeles, CA |  | Mid-rise |  | 95 |  |  | 1987 |  | 2014 |  | 95%
Windsor Court |  | Los Angeles, CA |  | Mid-rise |  | 58 |  |  | 1988 |  | 1997 |  | 96%
Aqua at Marina Del Rey |  | Marina Del Rey, CA |  | Mid-rise |  | 500 |  |  | 2001 |  | 2014 |  | 96%
Marina City Club (9) |  | Marina Del Rey, CA |  | Mid-rise |  | 101 |  |  | 1971 |  | 2004 |  | 96%
Mirabella |  | Marina Del Rey, CA |  | Mid-rise |  | 188 |  |  | 2000 |  | 2000 |  | 97%
Mira Monte |  | Mira Mesa, CA |  | Garden |  | 354 |  |  | 1982 |  | 2002 |  | 98%
Hillcrest Park |  | Newbury Park, CA |  | Garden |  | 608 |  |  | 1973 |  | 1998 |  | 97%
Fairway Apartments at Big Canyon (10) |  | Newport Beach, CA |  | Mid-rise |  | 74 |  |  | 1972 |  | 1999 |  | 98%
Muse |  | North Hollywood, CA |  | Mid-rise |  | 152 |  |  | 2011 |  | 2011 |  | 97%
Country Villas |  | Oceanside, CA |  | Garden |  | 180 |  |  | 1976 |  | 2002 |  | 99%
Mission Hills |  | Oceanside, CA |  | Garden |  | 282 |  |  | 1984 |  | 2005 |  | 97%
Renaissance at Uptown Orange |  | Orange, CA |  | Mid-rise |  | 460 |  |  | 2007 |  | 2014 |  | 97%
Mariner's Place |  | Oxnard, CA |  | Garden |  | 105 |  |  | 1987 |  | 2000 |  | 98%
Monterey Villas |  | Oxnard, CA |  | Garden |  | 122 |  |  | 1974 |  | 1997 |  | 99%
Tierra Vista |  | Oxnard, CA |  | Mid-rise |  | 404 |  |  | 2001 |  | 2001 |  | 98%
Arbors at Parc Rose (8) |  | Oxnard, CA |  | Mid-rise |  | 373 |  |  | 2001 |  | 2011 |  | 98%
The Hallie |  | Pasadena, CA |  | Mid-rise |  | 292 |  |  | 1972 |  | 1997 |  | 96%
The Stuart |  | Pasadena, CA |  | Mid-rise |  | 188 |  |  | 2007 |  | 2014 |  | 97%
Villa Angelina |  | Placentia, CA |  | Garden |  | 256 |  |  | 1970 |  | 2001 |  | 96%
Fountain Park |  | Playa Vista, CA |  | Mid-rise |  | 705 |  |  | 2002 |  | 2004 |  | 95%
Highridge (4) |  | Rancho Palos Verdes, CA |  | Mid-rise |  | 255 |  |  | 1972 |  | 1997 |  | 97%
Cortesia |  | Rancho Santa Margarita, CA |  | Garden |  | 308 |  |  | 1999 |  | 2014 |  | 98%
Pinnacle at Talega |  | San Clemente, CA |  | Mid-rise |  | 362 |  |  | 2002 |  | 2014 |  | 97%
Allure at Scripps Ranch |  | San Diego, CA |  | Mid-rise |  | 194 |  |  | 2002 |  | 2014 |  | 97%
Bernardo Crest |  | San Diego, CA |  | Garden |  | 216 |  |  | 1988 |  | 2014 |  | 98%
Cambridge Park |  | San Diego, CA |  | Mid-rise |  | 320 |  |  | 1998 |  | 2014 |  | 97%
Carmel Creek |  | San Diego, CA |  | Garden |  | 348 |  |  | 2000 |  | 2014 |  | 98%
Carmel Landing |  | San Diego, CA |  | Garden |  | 356 |  |  | 1989 |  | 2014 |  | 97%
Carmel Summit |  | San Diego, CA |  | Mid-rise |  | 246 |  |  | 1989 |  | 2014 |  | 97%
CentrePointe |  | San Diego, CA |  | Garden |  | 224 |  |  | 1974 |  | 1997 |  | 98%
Esplanade (5) |  | San Diego, CA |  | Garden |  | 616 |  |  | 1986 |  | 2014 |  | 96%
Form 15 |  | San Diego, CA |  | Mid-rise |  | 242 |  |  | 2014 |  | 2016 |  | 95%
Montanosa |  | San Diego, CA |  | Garden |  | 472 |  |  | 1990 |  | 2014 |  | 96%
Summit Park |  | San Diego, CA |  | Garden |  | 300 |  |  | 1972 |  | 2002 |  | 98%
Essex Skyline (11) |  | Santa Ana, CA |  | High-rise |  | 350 |  |  | 2008 |  | 2010 |  | 97%
Fairhaven Apartments (4) |  | Santa Ana, CA |  | Garden |  | 164 |  |  | 1970 |  | 2001 |  | 98%
Parkside Court (5) |  | Santa Ana, CA |  | Mid-rise |  | 210 |  |  | 1986 |  | 2014 |  | 97%

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|  |  |  |  |  | Apartment |  | Year |  | Year |  |
Communities (1) |  | Location |  | Type |  | Homes |  | Built |  | Acquired |  | Occupancy(2)
Pinnacle at MacArthur Place |  | Santa Ana, CA |  | Mid-rise |  | 253 |  |  | 2002 |  | 2014 |  | 97%
Hope Ranch |  | Santa Barbara, CA |  | Garden |  | 108 |  |  | 1965 |  | 2007 |  | 98%
Bridgeport Coast (12) |  | Santa Clarita, CA |  | Mid-rise |  | 188 |  |  | 2006 |  | 2014 |  | 97%
Meadowood (7) |  | Simi Valley, CA |  | Garden |  | 320 |  |  | 1986 |  | 1996 |  | 98%
Shadow Point |  | Spring Valley, CA |  | Garden |  | 172 |  |  | 1983 |  | 2002 |  | 98%
The Fairways at Westridge (12) |  | Valencia, CA |  | Mid-rise |  | 234 |  |  | 2004 |  | 2014 |  | 98%
The Vistas of West Hills (12) |  | Valencia, CA |  | Mid-rise |  | 220 |  |  | 2009 |  | 2014 |  | 98%
Allegro |  | Valley Village, CA |  | Mid-rise |  | 97 |  |  | 2010 |  | 2010 |  | 97%
Lofts at Pinehurst, The |  | Ventura, CA |  | Garden |  | 118 |  |  | 1971 |  | 1997 |  | 99%
Pinehurst (13) |  | Ventura, CA |  | Garden |  | 28 |  |  | 1973 |  | 2004 |  | 99%
Woodside Village |  | Ventura, CA |  | Garden |  | 145 |  |  | 1987 |  | 2004 |  | 99%
Passage Buena Vista (14) |  | Vista, CA |  | Garden |  | 179 |  |  | 2020 |  | 2021 |  | 97%
Walnut Heights |  | Walnut, CA |  | Garden |  | 163 |  |  | 1964 |  | 2003 |  | 98%
The Dylan |  | West Hollywood, CA |  | Mid-rise |  | 184 |  |  | 2014 |  | 2014 |  | 96%
The Huxley |  | West Hollywood, CA |  | Mid-rise |  | 187 |  |  | 2014 |  | 2014 |  | 96%
Reveal |  | Woodland Hills, CA |  | Mid-rise |  | 438 |  |  | 2010 |  | 2011 |  | 96%
Avondale at Warner Center |  | Woodland Hills, CA |  | Mid-rise |  | 446 |  |  | 1970 |  | 1999 |  | 97%
|  |  |  |  |  | 26,245 |  |  |  |  |  |  | 97%
Northern California |  |  |  |  |  |  |  |  |  |  |  |
Belmont Terrace |  | Belmont, CA |  | Mid-rise |  | 71 |  |  | 1974 |  | 2006 |  | 97%
Fourth & U |  | Berkeley, CA |  | Mid-rise |  | 171 |  |  | 2010 |  | 2010 |  | 95%
The Commons |  | Campbell, CA |  | Garden |  | 264 |  |  | 1973 |  | 2010 |  | 97%
Pointe at Cupertino |  | Cupertino, CA |  | Garden |  | 116 |  |  | 1963 |  | 1998 |  | 97%
Connolly Station |  | Dublin, CA |  | Mid-rise |  | 309 |  |  | 2014 |  | 2014 |  | 97%
Avenue 64 |  | Emeryville, CA |  | Mid-rise |  | 224 |  |  | 2007 |  | 2014 |  | 95%
The Courtyards at 65th Street (15) |  | Emeryville, CA |  | Mid-rise |  | 331 |  |  | 2004 |  | 2019 |  | 95%
Emme |  | Emeryville, CA |  | Mid-rise |  | 190 |  |  | 2015 |  | 2015 |  | 95%
Foster's Landing |  | Foster City, CA |  | Garden |  | 490 |  |  | 1987 |  | 2014 |  | 96%
Stevenson Place |  | Fremont, CA |  | Garden |  | 200 |  |  | 1975 |  | 2000 |  | 96%
Mission Peaks |  | Fremont, CA |  | Mid-rise |  | 453 |  |  | 1995 |  | 2014 |  | 96%
Mission Peaks II |  | Fremont, CA |  | Garden |  | 336 |  |  | 1989 |  | 2014 |  | 96%
Paragon Apartments |  | Fremont, CA |  | Mid-rise |  | 301 |  |  | 2013 |  | 2014 |  | 96%
Boulevard |  | Fremont, CA |  | Garden |  | 172 |  |  | 1978 |  | 1996 |  | 96%
Briarwood (8) |  | Fremont, CA |  | Garden |  | 160 |  |  | 1978 |  | 2011 |  | 98%
The Woods (8) |  | Fremont, CA |  | Garden |  | 160 |  |  | 1978 |  | 2011 |  | 97%
The Rexford (16) |  | Fremont, CA |  | Garden |  | 203 |  |  | 1973 |  | 2021 |  | 100%
City Centre (12) |  | Hayward, CA |  | Mid-rise |  | 192 |  |  | 2000 |  | 2014 |  | 97%
City View |  | Hayward, CA |  | Garden |  | 572 |  |  | 1975 |  | 1998 |  | 96%
Lafayette Highlands |  | Lafayette, CA |  | Garden |  | 150 |  |  | 1973 |  | 2014 |  | 95%
777 Hamilton (17) |  | Menlo Park, CA |  | Mid-rise |  | 195 |  |  | 2017 |  | 2019 |  | 97%
Apex |  | Milpitas, CA |  | Mid-rise |  | 367 |  |  | 2014 |  | 2014 |  | 96%
Regency at Mountain View (6) |  | Mountain View, CA |  | Mid-rise |  | 142 |  |  | 1970 |  | 2013 |  | 96%
Bridgeport (7) |  | Newark, CA |  | Garden |  | 184 |  |  | 1987 |  | 1987 |  | 96%
The Landing at Jack London Square |  | Oakland, CA |  | Mid-rise |  | 282 |  |  | 2001 |  | 2014 |  | 96%
The Grand |  | Oakland, CA |  | High-rise |  | 243 |  |  | 2009 |  | 2009 |  | 97%
The Galloway |  | Pleasanton, CA |  | Mid-rise |  | 506 |  |  | 2016 |  | 2016 |  | 97%
Radius |  | Redwood City, CA |  | Mid-rise |  | 264 |  |  | 2015 |  | 2015 |  | 96%

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|  |  |  |  |  | Apartment |  | Year |  | Year |  |
Communities (1) |  | Location |  | Type |  | Homes |  | Built |  | Acquired |  | Occupancy(2)
Township |  | Redwood City, CA |  | Mid-rise |  | 132 |  |  | 2014 |  | 2019 |  | 95%
San Marcos |  | Richmond, CA |  | Mid-rise |  | 432 |  |  | 2003 |  | 2003 |  | 96%
500 Folsom (14) |  | San Francisco, CA |  | High-rise |  | 537 |  |  | 2021 |  | 2021 |  | 100%
Bennett Lofts |  | San Francisco, CA |  | Mid-rise |  | 164 |  |  | 2004 |  | 2012 |  | 92%
Fox Plaza |  | San Francisco, CA |  | High-rise |  | 445 |  |  | 1968 |  | 2013 |  | 94%
MB 360 |  | San Francisco, CA |  | Mid-rise |  | 360 |  |  | 2014 |  | 2014 |  | 96%
Park West |  | San Francisco, CA |  | Mid-rise |  | 126 |  |  | 1958 |  | 2012 |  | 97%
101 San Fernando |  | San Jose, CA |  | Mid-rise |  | 323 |  |  | 2001 |  | 2010 |  | 95%
360 Residences (15) |  | San Jose, CA |  | Mid-rise |  | 213 |  |  | 2010 |  | 2017 |  | 95%
Bella Villagio |  | San Jose, CA |  | Mid-rise |  | 231 |  |  | 2004 |  | 2010 |  | 97%
Century Towers (14) |  | San Jose, CA |  | High-rise |  | 376 |  |  | 2017 |  | 2017 |  | 97%
Enso |  | San Jose, CA |  | Mid-rise |  | 183 |  |  | 2014 |  | 2015 |  | 97%
Epic |  | San Jose, CA |  | Mid-rise |  | 769 |  |  | 2013 |  | 2013 |  | 97%
Esplanade |  | San Jose, CA |  | Mid-rise |  | 278 |  |  | 2002 |  | 2004 |  | 97%
Fountains at River Oaks |  | San Jose, CA |  | Mid-rise |  | 226 |  |  | 1990 |  | 2014 |  | 97%
Marquis |  | San Jose, CA |  | Mid-rise |  | 166 |  |  | 2015 |  | 2016 |  | 97%
Meridian at Midtown (15) |  | San Jose, CA |  | Mid-rise |  | 218 |  |  | 2015 |  | 2018 |  | 96%
Mio |  | San Jose, CA |  | Mid-rise |  | 103 |  |  | 2015 |  | 2016 |  | 96%
Palm Valley |  | San Jose, CA |  | Mid-rise |  | 1,100 |  |  | 2008 |  | 2014 |  | 96%
Patina at Midtown (14) |  | San Jose, CA |  | Mid-rise |  | 269 |  |  | 2021 |  | 2021 |  | 80%
Sage at Cupertino (4) |  | San Jose, CA |  | Garden |  | 230 |  |  | 1971 |  | 2017 |  | 93%
Silver (14) |  | San Jose, CA |  | Mid-rise |  | 268 |  |  | 2019 |  | 2021 |  | 91%
The Carlyle (7) |  | San Jose, CA |  | Garden |  | 132 |  |  | 2000 |  | 2000 |  | 95%
The Waterford |  | San Jose, CA |  | Mid-rise |  | 238 |  |  | 2000 |  | 2000 |  | 97%
Willow Lake |  | San Jose, CA |  | Mid-rise |  | 508 |  |  | 1989 |  | 2012 |  | 96%
Lakeshore Landing |  | San Mateo, CA |  | Mid-rise |  | 308 |  |  | 1988 |  | 2014 |  | 96%
Hillsdale Garden (14) |  | San Mateo, CA |  | Garden |  | 697 |  |  | 1948 |  | 2006 |  | 94%
Station Park Green - Phases I, II, and III |  | San Mateo, CA |  | Mid-rise |  | 492 |  |  | 2018 |  | 2018 |  | 95%
Deer Valley |  | San Rafael, CA |  | Garden |  | 171 |  |  | 1996 |  | 2014 |  | 97%
Bel Air |  | San Ramon, CA |  | Garden |  | 462 |  |  | 1988 |  | 1995 |  | 97%
Canyon Oaks |  | San Ramon, CA |  | Mid-rise |  | 250 |  |  | 2005 |  | 2007 |  | 98%
Crow Canyon |  | San Ramon, CA |  | Mid-rise |  | 400 |  |  | 1992 |  | 2014 |  | 97%
Foothill Gardens |  | San Ramon, CA |  | Garden |  | 132 |  |  | 1985 |  | 1997 |  | 97%
Mill Creek at Windermere |  | San Ramon, CA |  | Mid-rise |  | 400 |  |  | 2005 |  | 2007 |  | 96%
Twin Creeks |  | San Ramon, CA |  | Garden |  | 44 |  |  | 1985 |  | 1997 |  | 97%
1000 Kiely |  | Santa Clara, CA |  | Garden |  | 121 |  |  | 1971 |  | 2011 |  | 97%
Le Parc |  | Santa Clara, CA |  | Garden |  | 140 |  |  | 1975 |  | 1994 |  | 96%
Marina Cove (18) |  | Santa Clara, CA |  | Garden |  | 292 |  |  | 1974 |  | 1994 |  | 96%
Mylo |  | Santa Clara, CA |  | Mid-rise |  | 476 |  |  | 2021 |  | 2021 |  | 96%
Riley Square (8) |  | Santa Clara, CA |  | Garden |  | 156 |  |  | 1972 |  | 2012 |  | 96%
Villa Granada |  | Santa Clara, CA |  | Mid-rise |  | 270 |  |  | 2010 |  | 2014 |  | 97%
Chestnut Street Apartments |  | Santa Cruz, CA |  | Garden |  | 96 |  |  | 2002 |  | 2008 |  | 99%
Bristol Commons |  | Sunnyvale, CA |  | Garden |  | 188 |  |  | 1989 |  | 1995 |  | 97%
Brookside Oaks (4) |  | Sunnyvale, CA |  | Garden |  | 170 |  |  | 1973 |  | 2000 |  | 97%
Lawrence Station |  | Sunnyvale, CA |  | Mid-rise |  | 336 |  |  | 2012 |  | 2014 |  | 97%
Magnolia Lane (19) |  | Sunnyvale, CA |  | Garden |  | 32 |  |  | 2001 |  | 2007 |  | 97%
Magnolia Square (4) |  | Sunnyvale, CA |  | Garden |  | 156 |  |  | 1963 |  | 2007 |  | 97%

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|  |  |  |  |  | Apartment |  | Year |  | Year |  |
Communities (1) |  | Location |  | Type |  | Homes |  | Built |  | Acquired |  | Occupancy(2)
Montclaire |  | Sunnyvale, CA |  | Mid-rise |  | 390 |  |  | 1973 |  | 1988 |  | 97%
Reed Square |  | Sunnyvale, CA |  | Garden |  | 100 |  |  | 1970 |  | 2011 |  | 96%
Solstice |  | Sunnyvale, CA |  | Mid-rise |  | 280 |  |  | 2014 |  | 2014 |  | 97%
Summerhill Park |  | Sunnyvale, CA |  | Garden |  | 100 |  |  | 1988 |  | 1988 |  | 97%
Via |  | Sunnyvale, CA |  | Mid-rise |  | 284 |  |  | 2011 |  | 2011 |  | 97%
Windsor Ridge |  | Sunnyvale, CA |  | Mid-rise |  | 216 |  |  | 1989 |  | 1989 |  | 96%
Vista Belvedere |  | Tiburon, CA |  | Mid-rise |  | 76 |  |  | 1963 |  | 2004 |  | 96%
Verandas (12) |  | Union City, CA |  | Mid-rise |  | 282 |  |  | 1989 |  | 2014 |  | 97%
Agora |  | Walnut Creek, CA |  | Mid-rise |  | 49 |  |  | 2016 |  | 2016 |  | 97%
Brio (4) |  | Walnut Creek, CA |  | Mid-rise |  | 300 |  |  | 2015 |  | 2019 |  | 96%
|  |  |  |  |  | 23,141 |  |  |  |  |  |  | 96%
Seattle, Washington Metropolitan Area |  |  |  |  |  |  |  |  |  |
Belcarra |  | Bellevue, WA |  | Mid-rise |  | 296 |  |  | 2009 |  | 2014 |  | 96%
BellCentre |  | Bellevue, WA |  | Mid-rise |  | 249 |  |  | 2001 |  | 2014 |  | 96%
Cedar Terrace |  | Bellevue, WA |  | Garden |  | 180 |  |  | 1984 |  | 2005 |  | 96%
Courtyard off Main |  | Bellevue, WA |  | Mid-rise |  | 110 |  |  | 2000 |  | 2010 |  | 95%
Ellington |  | Bellevue, WA |  | Mid-rise |  | 220 |  |  | 1994 |  | 2014 |  | 94%
Emerald Ridge |  | Bellevue, WA |  | Garden |  | 180 |  |  | 1987 |  | 1994 |  | 97%
Foothill Commons |  | Bellevue, WA |  | Mid-rise |  | 394 |  |  | 1978 |  | 1990 |  | 96%
Palisades, The |  | Bellevue, WA |  | Garden |  | 192 |  |  | 1977 |  | 1990 |  | 97%
Park Highland |  | Bellevue, WA |  | Mid-rise |  | 250 |  |  | 1993 |  | 2014 |  | 96%
Piedmont |  | Bellevue, WA |  | Garden |  | 396 |  |  | 1969 |  | 2014 |  | 96%
Sammamish View |  | Bellevue, WA |  | Garden |  | 153 |  |  | 1986 |  | 1994 |  | 97%
Woodland Commons |  | Bellevue, WA |  | Garden |  | 302 |  |  | 1978 |  | 1990 |  | 96%
Bothell Ridge (5) |  | Bothell, WA |  | Garden |  | 214 |  |  | 1988 |  | 2014 |  | 96%
Canyon Pointe |  | Bothell, WA |  | Garden |  | 250 |  |  | 1990 |  | 2003 |  | 97%
Inglenook Court |  | Bothell, WA |  | Garden |  | 224 |  |  | 1985 |  | 1994 |  | 96%
Pinnacle Sonata |  | Bothell, WA |  | Mid-rise |  | 268 |  |  | 2000 |  | 2014 |  | 96%
Salmon Run at Perry Creek |  | Bothell, WA |  | Garden |  | 132 |  |  | 2000 |  | 2000 |  | 97%
Stonehedge Village |  | Bothell, WA |  | Garden |  | 196 |  |  | 1986 |  | 1997 |  | 98%
Highlands at Wynhaven |  | Issaquah, WA |  | Mid-rise |  | 333 |  |  | 2000 |  | 2008 |  | 96%
Park Hill at Issaquah |  | Issaquah, WA |  | Garden |  | 245 |  |  | 1999 |  | 1999 |  | 97%
Wandering Creek |  | Kent, WA |  | Garden |  | 156 |  |  | 1986 |  | 1995 |  | 97%
Ascent |  | Kirkland, WA |  | Garden |  | 90 |  |  | 1988 |  | 2012 |  | 96%
Bridle Trails |  | Kirkland, WA |  | Garden |  | 108 |  |  | 1986 |  | 1997 |  | 97%
Corbella at Juanita Bay |  | Kirkland, WA |  | Garden |  | 169 |  |  | 1978 |  | 2010 |  | 97%
Evergreen Heights |  | Kirkland, WA |  | Garden |  | 200 |  |  | 1990 |  | 1997 |  | 97%
Slater 116 |  | Kirkland, WA |  | Mid-rise |  | 108 |  |  | 2013 |  | 2013 |  | 96%
Montebello |  | Kirkland, WA |  | Garden |  | 248 |  |  | 1996 |  | 2012 |  | 97%
Martha Lake Apartments (16) |  | Lynwood, WA |  | Mid-rise |  | 155 |  |  | 1991 |  | 2021 |  | 97%
Aviara (19) |  | Mercer Island, WA |  | Mid-rise |  | 166 |  |  | 2013 |  | 2014 |  | 96%
Laurels at Mill Creek |  | Mill Creek, WA |  | Garden |  | 164 |  |  | 1981 |  | 1996 |  | 98%
Monterra in Mill Creek (16) |  | Mill Creek, WA |  | Garden |  | 139 |  |  | 2003 |  | 2021 |  | 97%
Parkwood at Mill Creek |  | Mill Creek, WA |  | Garden |  | 240 |  |  | 1989 |  | 2014 |  | 97%
The Elliot at Mukilteo (4) |  | Mukilteo, WA |  | Garden |  | 301 |  |  | 1981 |  | 1997 |  | 96%
Castle Creek |  | Newcastle, WA |  | Garden |  | 216 |  |  | 1998 |  | 1998 |  | 98%
Elevation |  | Redmond, WA |  | Garden |  | 158 |  |  | 1986 |  | 2010 |  | 96%

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|  |  |  |  |  | Apartment |  | Year |  | Year |  |
Communities (1) |  | Location |  | Type |  | Homes |  | Built |  | Acquired |  | Occupancy(2)
Pure Redmond |  | Redmond, WA |  | Mid-rise |  | 105 |  |  | 2016 |  | 2019 |  | 96%
Redmond Hill (8) |  | Redmond, WA |  | Garden |  | 442 |  |  | 1985 |  | 2011 |  | 96%
Shadowbrook |  | Redmond, WA |  | Garden |  | 418 |  |  | 1986 |  | 2014 |  | 95%
The Trails of Redmond |  | Redmond, WA |  | Garden |  | 423 |  |  | 1985 |  | 2014 |  | 95%
Vesta (8) |  | Redmond, WA |  | Garden |  | 440 |  |  | 1998 |  | 2011 |  | 96%
Brighton Ridge |  | Renton, WA |  | Garden |  | 264 |  |  | 1986 |  | 1996 |  | 96%
Fairwood Pond |  | Renton, WA |  | Garden |  | 194 |  |  | 1997 |  | 2004 |  | 98%
Forest View |  | Renton, WA |  | Garden |  | 192 |  |  | 1998 |  | 2003 |  | 97%
Pinnacle on Lake Washington |  | Renton, WA |  | Mid-rise |  | 180 |  |  | 2001 |  | 2014 |  | 97%
8th & Republican (15) |  | Seattle, WA |  | Mid-rise |  | 211 |  |  | 2016 |  | 2017 |  | 96%
Annaliese |  | Seattle, WA |  | Mid-rise |  | 56 |  |  | 2009 |  | 2013 |  | 97%
The Audrey at Belltown |  | Seattle, WA |  | Mid-rise |  | 137 |  |  | 1992 |  | 2014 |  | 96%
The Bernard |  | Seattle, WA |  | Mid-rise |  | 63 |  |  | 2008 |  | 2011 |  | 96%
Cairns, The |  | Seattle, WA |  | Mid-rise |  | 99 |  |  | 2006 |  | 2007 |  | 95%
Collins on Pine |  | Seattle, WA |  | Mid-rise |  | 76 |  |  | 2013 |  | 2014 |  | 96%
Canvas |  | Seattle, WA |  | Mid-rise |  | 123 |  |  | 2014 |  | 2021 |  | 100%
Domaine |  | Seattle, WA |  | Mid-rise |  | 92 |  |  | 2009 |  | 2012 |  | 97%
Expo (14) |  | Seattle, WA |  | Mid-rise |  | 275 |  |  | 2012 |  | 2012 |  | 93%
Fountain Court |  | Seattle, WA |  | Mid-rise |  | 320 |  |  | 2000 |  | 2000 |  | 95%
Patent 523 |  | Seattle, WA |  | Mid-rise |  | 295 |  |  | 2010 |  | 2010 |  | 96%
Taylor 28 |  | Seattle, WA |  | Mid-rise |  | 197 |  |  | 2008 |  | 2014 |  | 96%
Velo and Ray (15) |  | Seattle, WA |  | Mid-rise |  | 308 |  |  | 2014 |  | 2019 |  | 96%
Vox Apartments |  | Seattle, WA |  | Mid-rise |  | 58 |  |  | 2013 |  | 2013 |  | 95%
Wharfside Pointe |  | Seattle, WA |  | Mid-rise |  | 155 |  |  | 1990 |  | 1994 |  | 97%
|  |  |  |  |  | 12,525 |  |  |  |  |  |  | 96%
Total/Weighted Average |  |  |  |  |  | 61,911 |  |  |  |  |  |  | 96%

Footnotes to the Company’s Portfolio Listing as of December 31, 2021
(1)Unless otherwise specified, the Company consolidates each community in accordance with U.S. GAAP.
(2)For communities, occupancy rates are based on financial occupancy for the year ended December 31, 2021, except for communities that were stabilized during the year, in which case occupancy as of December 31, 2021 was used. For an explanation of how financial occupancy is calculated, see "Occupancy Rates" in this Item 2.
(3)The community is subject to a ground lease, which, unless extended, will expire in 2083.
(4)Each of these communities is part of a DownREIT structure in which the Company is the general partner or manager and the other limited partners or members are granted rights of redemption for their interests.
(5)This community is owned by BEXAEW. The Company has a 50% interest in BEXAEW, which is accounted for using the equity method of accounting.
(6)This community is owned by Wesco III, LLC ("Wesco III"). The Company has a 50% interest in Wesco III, which is accounted for using the equity method of accounting.
(7)This community is owned by BEX II, LLC ("BEX II"). The Company has a 50% interest in BEX II, which is accounted for using the equity method of accounting.
(8)This community is owned by Wesco I, LLC ("Wesco I"). The Company has a 58% interest in Wesco I, which is accounted for using the equity method of accounting.
(9)This community is subject to a ground lease, which, unless extended, will expire in 2067.
(10)This community is subject to a ground lease, which, unless extended, will expire in 2027.
(11)The Company has a 97% interest and a former Executive Vice President of the Company has a 3% interest in this community.
(12)This community is owned by Wesco IV, LLC ("Wesco IV") The Company has a 50% interest in Wesco IV, which is accounted for using the equity method of accounting.
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(13)This community is subject to a ground lease, which, unless extended, will expire in 2028.
(14)The Company has an interest in a single asset entity owning this community.
(15)This community is owned by Wesco V, LLC ("Wesco V"). The Company has a 50% interest in Wesco V, which is accounted for using the equity method of accounting.
(16)This community is owned by Wesco VI, LLC ("Wesco VI"). The Company has a 50% interest in Wesco VI, which is accounted for using the equity method of accounting.
(17)This community is owned by BEX IV, LLC ("BEX IV"). The Company has a 50.1% interest in BEX IV, which is accounted for using the equity method of accounting.
(18)A portion of this community on which 84 apartment homes are presently located is subject to a ground lease, which, unless extended, will expire in 2028.
(19)The community is subject to a ground lease, which, unless extended, will expire in 2070.
Item 3. Legal Proceedings
The information regarding lawsuits, other proceedings and claims, set forth in Note 17, "Commitments and Contingencies", to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K is incorporated by reference into this Item 3. In addition to such matters referred to in Note 17, the Company is subject to various other legal and/or regulatory proceedings arising in the course of its business operations. We believe that, with respect to such matters that we are currently a party to, the ultimate disposition of any such matter will not result in a material adverse effect on the Company’s financial condition, results of operations or cash flows.
Item 4. Mine Safety Disclosures
Not Applicable.
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Part II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
The shares of the Company’s common stock are traded on the New York Stock Exchange under the symbol ESS.
There is no established public trading market for the Operating Partnership's limited partnership units ("OP Units").
Holders
The approximate number of holders of record of the shares of Essex's common stock was 1,121 as of February 23, 2022. This number does not include stockholders whose shares are held in investment accounts by other entities. Essex believes the actual number of stockholders is greater than the number of holders of record.
As of February 23, 2022, there were 65 holders of record of OP Units, including Essex.
Return of Capital
Under provisions of the Code, the portion of the cash dividend, if any, that exceeds earnings and profits is considered a return of capital. The return of capital is generated due to a variety of factors, including the deduction of non-cash expenses, primarily depreciation, in the determination of earnings and profits.
The status of the cash dividends distributed for the years ended December 31, 2021, 2020, and 2019 related to common stock are as follows:

|  | 2021 |  | 2020 |  | 2019
Common Stock |  |  |  |  |  |
Ordinary income |  | 70.92 | % |  | 85.23 | % |  | 83.81 | %
Capital gain |  | 22.07 | % |  | 10.68 | % |  | 13.78 | %
Unrecaptured section 1250 capital gain |  | 7.01 | % |  | 4.09 | % |  | 2.41 | %
|  | 100.00 | % |  | 100.00 | % |  | 100.00 | %

Dividends and Distributions
Future dividends/distributions by Essex and the Operating Partnership will be at the discretion of the Board of Directors of Essex and will depend on the actual cash flows from operations of the Company, its financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code, applicable legal restrictions and such other factors as the Board of Directors deems relevant. There are currently no contractual restrictions on Essex's and the Operating Partnership's present or future ability to pay dividends and distributions, and we do not anticipate that our ability to pay dividends/distributions will be impaired; however, there can be no assurances in that regard.
The Board of Directors declared a dividend/distribution for the fourth quarter of 2021 of $2.09 per share. The dividend/distribution was paid on January 14, 2022 to stockholders/unitholders of record as of January 3, 2022.
Dividend Reinvestment and Share Purchase Plan
Essex has adopted a dividend reinvestment and share purchase plan designed to provide holders of common stock with a convenient and economical means to reinvest all or a portion of their cash dividends in shares of common stock and to acquire additional shares of common stock through voluntary purchases. Computershare, LLC, which serves as Essex's transfer agent, administers the dividend reinvestment and share purchase plan. For a copy of the plan, contact Computershare, LLC at (312) 360-5354.
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Securities Authorized for Issuance under Equity Compensation Plans
The information required by this section is incorporated herein by reference from our Proxy Statement, relating to our 2022 Annual Meeting of Shareholders, under the headings "Equity Compensation Plan Information," to be filed with the SEC within 120 days of December 31, 2021.
Issuance of Registered Equity Securities
In September 2021, the Company entered into the 2021 ATM Program, 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. In connection with the 2021 ATM Program, the Company may also enter into related forward sale agreements, and may sell shares of its common stock pursuant to these 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 should the Company elect to settle such forward sale agreement, in whole or in part, in shares of its common stock.
During the year ended December 31, 2021, the Company did not issue any shares of common stock under the 2021 ATM Program or the 2018 ATM Program. As of December 31, 2021, there were no outstanding forward sale agreements, and $900.0 million of shares remain available to be sold under the 2021 ATM Program.
Issuer Purchases of Equity Securities
In December 2015, Essex's Board of Directors authorized a stock repurchase plan to allow Essex to acquire shares in an aggregate of up to $250.0 million. In February 2019, the Board of Directors approved the replenishment of the stock repurchase plan such that, as of such date, the Company had $250.0 million of purchase authority remaining under the stock repurchase plan. In each of May and December 2020, the Board of Directors approved the replenishment of the stock repurchase plan such that, as of each such date, Essex had $250.0 million of purchase authority remaining under the replenished plan. During the year ended December 31, 2021, the Company repurchased and retired 40,000 shares of its common stock totaling $9.2 million, including commissions, at an average price of $229.30 per share. All of such purchases occurred during the three months ended March 31, 2021, and the Company did not repurchase any shares in 2021 subsequent to March 31, 2021. As of December 31, 2021, the Company had $214.5 million of purchase authority remaining under the stock repurchase plan.
Performance Graph
The line graph below compares the cumulative total stockholder return on Essex's common stock for the last five years with the cumulative total return on the S&P 500 and the NAREIT All Equity REIT index over the same period. This comparison assumes that the value of the investment in the common stock and each index was $100 on December 31, 2016 and that all dividends were reinvested.
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|  | Period Ending
Index |  | 12/31/2016 |  | 12/31/2017 |  | 12/31/2018 |  | 12/31/2019 |  | 12/31/2020 |  | 12/31/2021
Essex Property Trust, Inc. |  | $ | 100.00 |  |  | $ | 106.82 |  |  | $ | 111.98 |  |  | $ | 141.00 |  |  | $ | 115.49 |  |  | $ | 176.01 |
NAREIT All Equity REIT Index |  | $ | 100.00 |  |  | $ | 108.67 |  |  | $ | 104.28 |  |  | $ | 134.17 |  |  | $ | 127.30 |  |  | $ | 179.87 |
S&P 500 Index |  | $ | 100.00 |  |  | $ | 121.83 |  |  | $ | 116.49 |  |  | $ | 153.17 |  |  | $ | 181.35 |  |  | $ | 233.41 |

(1)Common stock performance data is provided by S&P Global Market Intelligence.
The graph and other information furnished under the above caption "Performance Graph" in this Part II Item 5 of this Form 10-K shall not deemed to be "soliciting material" or to be "filed" with the SEC or subject to Regulation 14A or 14C, or to the liabilities of the Exchange Act.
Unregistered Sales of Equity Securities
During the years ended December 31, 2021 and 2020, the Operating Partnership issued OP Units in private placements in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, in the amounts and for the consideration set forth below:
During the years ended December 31, 2021 and 2020, Essex issued an aggregate of 248,725 and 70,802 shares of its common stock upon the exercise of stock options, respectively. Essex contributed the proceeds from the option exercises of $58.5 million and $14.9 million to the Operating Partnership in exchange for an aggregate of 248,725 and 70,802 OP Units, as required by the Operating Partnership’s partnership agreement, during the years ended December 31, 2021 and 2020, respectively.
During the years ended December 31, 2021 and 2020, Essex issued an aggregate of 30,360 and 24,666 shares of its common stock in connection with restricted stock awards for no cash consideration, respectively. For each share of common stock issued by Essex in connection with such awards, the Operating Partnership issued OP Units to Essex as required by the Operating
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Partnership's partnership agreement, for an aggregate of 30,360 and 24,666 OP Units during the years ended December 31, 2021 and 2020, respectively.
During the years ended December 31, 2021 and 2020, Essex issued an aggregate of 10,293 and 8,783 shares of its common stock in connection with the exchange of OP Units by limited partners into shares of common stock. For each share of common stock issued by Essex in connection with such exchange, the Operating Partnership issued OP Units to Essex as required by the Operating Partnership's partnership agreement, for an aggregate of 10,293 and 8,783 OP Units during the year ended December 31, 2021 and 2020, respectively.
Essex may sell shares through its equity distribution program, then contribute the net proceeds from these share issuances to the Operating Partnership in exchange for OP Units as required by the Operating Partnership's partnership agreement. During the year ended December 31, 2021 and 2020, the Company did not issue or sell any shares of common stock pursuant to the 2021 ATM Program or the 2018 ATM Program. As of December 31, 2021, there were no outstanding forward sale agreements.
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Item 6. [Reserved]
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and notes thereto. These consolidated financial statements include all adjustments which are, in the opinion of management, necessary to reflect a fair statement of the results and all such adjustments are of a normal recurring nature.
OVERVIEW
Essex is a self-administered and self-managed REIT that acquires, develops, redevelops, and manages apartment 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 December 31, 2021, 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 December 31, 2021, the Company owned or had ownership interests in 252 operating apartment communities, comprising 61,911 apartment homes, excluding the Company's ownership in preferred equity co-investments, loan investments, three operating commercial buildings, and a development pipeline comprised of one consolidated project and one unconsolidated joint venture project.
The Company’s apartment communities are predominately 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 (Seattle metropolitan area)
As of December 31, 2021, the Company’s development pipeline was comprised of one consolidated project under development, one unconsolidated joint venture project under development, and various predevelopment projects aggregating 371 apartment homes, with total incurred costs of $156.0 million, and estimated remaining project costs of approximately $61.0 million, $32.6 million of which represents the Company's estimated remaining costs, for total estimated project costs of $217.0 million.
As of December 31, 2021, the Company also had an ownership interest in three operating commercial buildings (totaling approximately 281,000 square feet).
By region, the Company's operating results for 2021 and 2020 and projection for 2022 new housing supply (defined as new multifamily apartment homes and single family homes, excluding developments with fewer than 50 apartment homes as well as student, senior and 100% affordable housing), projection for 2022 job growth, and 2022 estimated Same-Property revenue growth are as follows:
Southern California Region: As of December 31, 2021, this region represented 43% of the Company’s consolidated operating apartment homes. Revenues for "2021 Same-Properties" (as defined below), or "Same-Property revenues," increased 3.2% in 2021 as compared to 2020. In 2022, the Company projects new residential supply of 31,750 apartment homes and single family homes, which represents 0.5% of the total housing stock. The Company projects an increase of 310,000 jobs or 4.0% in the Southern California region.
Northern California Region: As of December 31, 2021, this region represented 37% of the Company’s consolidated operating apartment homes. Same-Property revenues decreased 5.6% in 2021 as compared to 2020. In 2022, the Company projects new residential supply of 18,250 apartment homes and single family homes, which represents 0.8% of the total housing stock. The Company projects an increase of 157,000 jobs or 4.7% in the Northern California region.
Seattle Metro Region: As of December 31, 2021, this region represented 20% of the Company’s consolidated operating apartment homes. Same-Property revenues decreased 1.7% in 2021 as compared to 2020. In 2022, the Company projects new residential supply of 14,800 apartment homes and single family homes, which represents 1.1% of the total housing stock. The Company projects an increase of 63,000 jobs or 3.6% in the Seattle Metro region.
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In total, the Company projects an increase in 2022 Same-Property revenues of between 7.0% to 8.5%. Same-Property operating expenses are projected to increase in 2022 by 3.5% to 4.5%.
The Company’s consolidated operating communities are as follows:

| As of |  | As of
| December 31, 2021 |  | December 31, 2020
| Apartment Homes |  | % |  | Apartment Homes |  | %
Southern California | 22,190 |  |  | 43 | % |  | 22,560 |  |  | 43 | %
Northern California | 19,123 |  |  | 37 | % |  | 19,319 |  |  | 37 | %
Seattle Metro | 10,341 |  |  | 20 | % |  | 10,217 |  |  | 20 | %
Total | 51,654 |  |  | 100 | % |  | 52,096 |  |  | 100 | %

Co-investments, including Wesco I, Wesco III, Wesco IV, Wesco V, Wesco VI, BEXAEW, BEX II, BEX IV, and 500 Folsom communities, developments under construction, and preferred equity interest co-investment communities are not included in the table presented above for both periods. A community previously held in the BEX III co-investment was consolidated in the second quarter of 2021 and is excluded from the December 31, 2020 table but included in the December 31, 2021 table.
The COVID-19 Pandemic
The United States and other countries around the world are continuing to experience impacts related to the COVID-19 pandemic and its related variants which has created considerable instability, disruption, and uncertainty. Governmental authorities in impacted regions are taking extraordinary steps in an effort to slow down the spread of the viruses and mitigate its impact on affected populations. Federal, state and local jurisdictions have implemented varying forms of requirements related to sponsors and patrons of public gatherings and required businesses to make changes to their operations in a manner that negatively affects profitability, resulting in job losses and related financial impacts that may affect future operations to an unknown extent. While the California eviction moratorium sunsetted during the third quarter of 2021, other state and local eviction moratoriums and laws that limit rent increases during times of emergency and prohibit the ability to collect unpaid rent during certain timeframes continue to be in effect in various formats at various regions in which Essex's communities are located, impacting Essex and its properties. The Company is working to comply with the stated intent of local, county, state and federal laws. In that regard, the Company has implemented a wide range of practices to protect and support its employees and residents. Such measures include instituting a hybrid work model for corporate associates to work at the Company's corporate offices and remotely, and transitioning many public interactions with leasing staff to on-line and telephonic communications;
Due to the COVID-19 pandemic, some of the Company's residents, their health, their employment, and, thus, their ability to pay rent, have been and may continue to be impacted. To support residents, the Company has implemented the following steps, including, but not limited to:
•assembling a Resident Response Team to effectively and efficiently respond to resident needs and concerns with respect to the pandemic;
•structuring payment plans for residents who are unable to pay their rent as a result of the outbreak and waiving late fees where required or applicable for those residents; and
•establishing the Essex Cares fund for the purpose of supporting the Company’s residents and communities that are experiencing financial hardships caused by the COVID-19 pandemic.
The impact of the COVID-19 pandemic on the U.S. and world economies generally, and on the Company's results in particular, has been, and may continue to be significant. The long-term impact will largely depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, whether employees and employers will continue to promote remote work if and when the pandemic concludes. This includes new information which may emerge concerning the severity of COVID-19 and related variants, the success of actions taken to contain or treat COVID-19, future laws that may be enacted, the impact on job growth and the broader economy, and reactions by consumers, companies, governmental entities and capital markets. The labor shortage due partly to various government mandates and vaccine requirements implemented during the COVID-19 pandemic and supply chain disruptions may negatively impact the Company's results of operations.
Primarily as a result of the impact of the COVID-19 pandemic, the Company's cash delinquencies as a percentage of scheduled rental income for the Company’s stabilized apartment communities or "Same-Property" (stabilized properties consolidated by the Company for the years ended December 31, 2021 and 2020) remained higher than the pre-pandemic period but improved from 2.5% for 2020 to 1.9% for 2021. The Company has executed some payment plans and will continue to work with residents
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to collect such cash delinquencies. As a result of continued analysis of the collectability of delinquencies, reported delinquencies as a percentage of scheduled rent for the Company's Same-Property portfolio was 2.0% for the year ended December 31, 2021. As of December 31, 2021, the delinquencies have not had a material adverse impact to the Company's liquidity position.
The COVID-19 pandemic has not negatively impacted the Company's ability to access traditional funding sources on the same or reasonably similar terms as were available in recent periods prior to the pandemic, as demonstrated by the Company's financing activity during the year ended December 31, 2021 discussed in the “Liquidity and Capital Resources" section below. 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.
RESULTS OF OPERATIONS
Comparison of Year Ended December 31, 2021 to the Year Ended December 31, 2020
The Company’s average financial occupancy for the Company’s stabilized apartment communities or "2021 Same-Property" (stabilized properties consolidated by the Company for the years ended December 31, 2021 and 2020) increased 40 basis points to 96.4% in 2021 from 96.0% in 2020. 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 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 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 2021 Same-Property portfolio for financial occupancy for the years ended December 31, 2021 and 2020 is as follows:

| Years ended December 31,
| 2021 |  | 2020
Southern California | 96.8 | % |  | 96.0 | %
Northern California | 96.2 | % |  | 96.1 | %
Seattle Metro | 96.2 | % |  | 96.0 | %

The following table provides a breakdown of revenue amounts, including the revenues attributable to 2021 Same-Properties.
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|  | Number of Apartment |  | Years Ended December 31, |  | Dollar |  | Percentage
Property Revenues ($ in thousands) |  | Homes |  | 2021 |  | 2020 |  | Change |  | Change
2021 Same-Properties: |  |  |  |  |  |  |  |  |  |
Southern California |  | 20,800 |  |  | $ | 557,906 |  |  | $ | 540,771 |  |  | $ | 17,135 |  |  | 3.2 | %
Northern California |  | 16,072 |  |  | 490,513 |  |  | 519,746 |  |  | (29,233) |  |  | (5.6) | %
Seattle Metro |  | 10,218 |  |  | 239,819 |  |  | 243,900 |  |  | (4,081) |  |  | (1.7) | %
Total 2021 Same-Property Revenues |  | 47,090 |  |  | 1,288,238 |  |  | 1,304,417 |  |  | (16,179) |  |  | (1.2) | %
2021 Non-Same Property Revenues |  |  |  | 143,180 |  |  | 181,733 |  |  | (38,553) |  |  | (21.2) | %
Total Property Revenues |  |  |  | $ | 1,431,418 |  |  | $ | 1,486,150 |  |  | $ | (54,732) |  |  | (3.7) | %

2021 Same-Property Revenues decreased by $16.2 million or 1.2% to $1.3 billion for 2021. The decrease was primarily attributable to an additional $5.3 million of cash concessions and $1.2 million in delinquencies compared to the prior year and due to a decrease of 1.5% in average rental rates from $2,349 for 2020 to $2,313 for 2021.
2021 Non-Same Property Revenues decreased by $38.6 million or 21.2% to $143.2 million in 2021 compared to $181.7 million in 2020. The decrease was primarily due to property dispositions in 2020 and the sale of Hidden Valley, Axis 2300, Park 20, and Devonshire Apartments in 2021 partially offset by the acquisition of The Village at Toluca Lake.
Management and other fees from affiliates decreased by $0.5 million or 5.2% to $9.1 million in 2021 from $9.6 million in 2020. The decrease was primarily due to a decrease in revenues used to calculate management fees as well as a decrease of the management fee rate for one of the joint ventures.
Property operating expenses, excluding real estate taxes increased by $1.5 million or 0.6% to $264.9 million in 2021 compared to $263.4 million in 2020, primarily due to an increase of $3.8 million in utilities expenses offset by a $2.4 million decrease in administrative expenses. 2021 Same-Property operating expenses, excluding real estate taxes, increased by $5.3 million or 2.2% to $241.8 million in 2021 compared to $236.5 million in 2020, primarily due to increases of $4.1 million in utilities expenses, $2.2 million in insurance and other expenses, and $1.2 million in maintenance and repairs expenses, offset by a decrease of $2.2 million in administrative expenses.
Real estate taxes increased by $3.4 million or 1.9% to $180.4 million in 2021 compared to $177.0 million in 2020, primarily due to increases in assessed valuations and tax rates. 2021 Same-Property real estate taxes increased by $3.6 million or 2.4% to $155.0 million in 2021 compared to $151.4 million in 2020 primarily due to increases in assessed valuations and tax rates.
Corporate-level property management expenses increased by $1.6 million or 4.6% to $36.2 million in 2021 compared to $34.6 million in 2020 due to costs pertaining to the centralization of certain property level functions.
Depreciation and amortization expense decreased by $5.4 million or 1.0% to $520.1 million in 2021 compared to $525.5 million in 2020, primarily due to a decrease in amortization expense resulting from certain lease intangibles becoming fully amortized during 2020 and the sale of Hidden Valley, Axis 2300, Park 20, and Devonshire Apartments during 2021.
Gain on sale of real estate and land of $143.0 million in 2021 was attributable to the sale of Hidden Valley, Axis 2300, Park 20, and Devonshire Apartments during 2021. The Company's $65.0 million gain on sale of real estate and land in 2020 was primarily attributable to the portfolio sale of One South Market and Museum Park, and the sales of Delano and 416 on Broadway during 2020.
Interest expense decreased by $17.5 million or 7.9% to $203.1 million in 2021 compared to $220.6 million in 2020, primarily due to various debt that was paid off, matured, or regular principal payments during and after 2020, and lower average interest rates, which resulted in a decrease in interest expense of $49.8 million for 2021. These decreases in interest expense were partially offset by the issuance of new senior unsecured notes which resulted in an increase of $23.8 million interest expense for 2021 as compared to 2020. Additionally, there was a $8.5 million decrease in capitalized interest in 2021, due to a decrease in development activity as compared to the same period in 2020.
Total return swap income of $10.8 million in 2021 consists of monthly settlements related to the Company's four total return swap contracts with an aggregate notional amount of $224.4 million.
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Interest and other income increased by $57.7 million or 140.7% to $98.7 million in 2021 compared to $41.0 million in 2020, primarily due to increases of $34.3 million in insurance reimbursements, legal settlements and other driven by a one-time legal settlement claim, $20.6 million in unrealized gains on marketable securities, $7.9 million in marketable securities and other income, $4.9 million in income from early redemption of notes receivable, and $1.3 million in gain on sale of marketable securities. These increases were offset by a $11.8 million decrease in interest income resulting from the maturity of a mortgage backed security investment in 2020.
Equity income from co-investments increased by $45.2 million or 68.0% to $111.7 million in 2021 compared to $66.5 million in 2020, primarily due to increases of $50.3 million in equity income from non-core co-investments and $11.6 million in income from preferred equity investments including income from early redemptions. These increases were offset by decreases of $8.8 million in equity income from co-investments and $6.5 million in co-investment promote income.
Deferred tax expense on unrealized gain on unconsolidated co-investment of $15.7 million in 2021 resulted from a net unrealized gain of $53.7 million from an unconsolidated co-investments.
Loss on early retirement of debt, net of $19.0 million in 2021 was primarily due to the early termination of the Company's
five interest rate swap contracts in conjunction with the partial repayment of the Company's unsecured term debt and the early repayment of $300.0 million of senior unsecured notes.
Gain on remeasurement of co-investment of $2.3 million in 2021 resulted from the Company's purchase of BEX III's 50.0% interest in The Village at Toluca Lake community in the second quarter of 2021. Gain on remeasurement of $234.7 million in 2020 resulted from the Company's purchase of Canada Pension Plan Investment Board's ("CPPIB") 45.0% co-investment interests during the first quarter of 2020.
Comparison of Year Ended December 31, 2020 to the Year Ended December 31, 2019
For the comparison of the years ended December 31, 2020 and December 31, 2019, refer to Part II, Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations" on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on February 19, 2021 under the subheading "Comparison of Year Ended December 31, 2020 to the Year Ended December 31, 2019."
Liquidity and Capital Resources
The following table sets forth the Company’s cash flows for 2021, 2020 and 2019 ($ in thousands):

|  | For the year ended December 31,
|  | 2021 |  | 2020 |  | 2019
Cash flow provided by (used in): |  |  |  |  |  |
Operating activities |  | $ | 905,259 |  |  | $ | 803,108 |  |  | $ | 919,079 |
Investing activities |  | $ | (397,397) |  |  | $ | (416,900) |  |  | $ | (527,691) |
Financing activities |  | $ | (533,265) |  |  | $ | (383,261) |  |  | $ | (461,689) |

Essex’s business is operated primarily through the Operating Partnership. Essex issues public equity from time to time, but does not otherwise generate any capital itself or conduct any business itself, other than incurring certain expenses from operating as a public company which are fully reimbursed by the Operating Partnership. Essex itself does not hold any indebtedness, and its only material asset is its ownership of partnership interests of the Operating Partnership. Essex’s principal funding requirement is the payment of dividends on its common stock and preferred stock. Essex’s sole source of funding for its dividend payments is distributions it receives from the Operating Partnership.
As of December 31, 2021, Essex owned a 96.6% general partner interest and the limited partners owned the remaining 3.4% interest in the Operating Partnership.
The liquidity of Essex is dependent on the Operating Partnership’s ability to make sufficient distributions to Essex. The primary cash requirement of Essex is its payment of dividends to its stockholders. Essex also guarantees some of the Operating Partnership’s debt, as discussed further in Notes 7 and 8 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K. If the Operating Partnership fails to fulfill certain of its debt requirements, which trigger Essex’s guarantee obligations, then Essex will be required to fulfill its cash payment commitments under such guarantees. However, Essex’s only significant asset is its investment in the Operating Partnership.
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For Essex to maintain its qualification as a REIT, it must pay dividends to its stockholders aggregating annually at least 90% of its REIT taxable income, excluding net capital gains. While historically Essex has satisfied this distribution requirement by making cash distributions to its stockholders, it may choose to satisfy this requirement by making distributions of other property, including, in limited circumstances, Essex’s own stock. As a result of this distribution requirement, the Operating Partnership cannot rely on retained earnings to fund its ongoing operations to the same extent that other companies whose parent companies are not REITs can. Essex may need to continue to raise capital in the equity markets to fund the Operating Partnership’s working capital needs, acquisitions and developments.
At December 31, 2021, the Company had $48.4 million of unrestricted cash and cash equivalents and $191.8 million in marketable 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 2022. 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 conditions become further exacerbated due to the COVID-19 pandemic and related economic disruptions or otherwise, the Company may further utilize other resources such as its cash reserves, lines of credit, or decreased investment in redevelopment activities to supplement operating cash flows. The Company is carefully monitoring and managing its cash position in light of ongoing conditions and levels of operations. The timing, source and amounts of cash flows provided by financing activities and used in 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 December 31, 2021, the Company had $5.4 billion of fixed rate public bonds outstanding at an average interest rate of 3.3% with maturity dates ranging from 2023 to 2050.
As of December 31, 2021, the Company’s mortgage notes payable totaled $639.0 million, net of unamortized premiums and debt issuance costs, which consisted of $415.4 million in fixed rate debt at an average interest rate of 3.5% and maturity dates ranging from 2022 to 2028 and $223.6 million of tax-exempt variable rate demand notes with a weighted average interest rate of 1.1%. The tax-exempt variable rate demand notes have maturity dates ranging from 2027 to 2046. $224.4 million is subject to total return swaps.
As of December 31, 2021, the Company had two unsecured lines of credit aggregating $1.24 billion, including a $1.2 billion unsecured line of credit and a $35.0 million working capital unsecured line of credit. As of December 31, 2021, there was $340.0 million amount outstanding on the $1.2 billion unsecured line of credit. The interest rate is based on a tiered rate structure tied to the Company's credit ratings and was LIBOR plus 0.775% as of December 31, 2021. There was $1.3 million outstanding on the Company's $35.0 million working capital unsecured line of credit as of December 31, 2021. The interest rate on the amended line is based on a tiered rate structure tied to the Company's credit ratings and is currently at LIBOR plus 0.775%.
The Company’s unsecured lines of credit and unsecured debt agreements contain debt covenants related to limitations on indebtedness and liabilities and maintenance of minimum levels of consolidated earnings before depreciation, interest and amortization. The Company was in compliance with the debt covenants as of December 31, 2021 and 2020.
The Company 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.
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.
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The Company has four total return swap contracts, with an aggregate notional amount of $224.4 million, that effectively converts $224.4 million of mortgage notes payable to a floating interest rate based on the Securities Industry and Financial Markets Association Municipal Swap Index ("SIFMA") plus a spread. The total return swaps provide fair market value protection on the mortgage notes payable to our counterparties during the initial period of the total return swap until the Company's option to call the mortgage notes at par can be exercised. The Company can currently call all four of the total return swaps, with $224.4 million of the outstanding debt at par. These derivatives do not qualify for hedge accounting.
As of December 31, 2021 and 2020, the aggregate carrying value of the interest rate swap contracts was a liability of zero and $2.4 million, respectively. As of December 31, 2021 and 2020, the swap contracts were presented in the consolidated balance sheets as a liability of zero and $2.4 million, respectively, and were included in other liabilities on the consolidated balance sheets. The aggregate carrying and fair value of the total return swaps was zero at both December 31, 2021 and 2020.
Hedge ineffectiveness related to cash flow hedges, which is reported in current year income as interest expense, net was zero, zero, and a loss of $0.2 million, for the years ended December 31, 2021, 2020, and 2019, respectively.
Issuance of Common Stock
In September 2021, the Company entered into the 2021 ATM Program, 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. In connection with the 2021 ATM Program, the Company may also enter into related forward sale agreements, and may sell shares of its common stock pursuant to these 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 should the Company elect to settle such forward sale agreement, in whole or in part, in shares of common stock.
The 2021 ATM Program replaces the prior equity distribution agreement entered into in September 2018 (the "2018 ATM Program"), which was terminated upon the establishment of the 2021 ATM Program. For the year ended December 31, 2021, the Company did not sell any shares of its common stock through the 2021 ATM Program or through the 2018 ATM Program. As of December 31, 2021, there were no outstanding forward purchase agreements, and $900.0 million of shares remain available to be sold under the 2021 ATM Program. For the year ended December 31, 2020, the Company did not issue any shares of its common stock through the 2018 ATM Program. For the year ended December 31, 2019, the Company issued 228,271 shares of common stock through the 2018 ATM Program at an average price of $321.56 per share for proceeds of $73.4 million.
Capital Expenditures
Non-revenue generating capital expenditures are improvements and upgrades that extend the useful life of the property. For the year ended December 31, 2021, non-revenue generating capital expenditures totaled approximately $1,914 per apartment home. These expenditures do not include expenditures for deferred maintenance on acquisition properties, expenditures for property renovations and improvements which are expected to generate additional revenue or cost savings, and do not include expenditures incurred due to changes in government regulations that the Company would not have incurred otherwise, costs related to the COVID-19 pandemic, retail, furniture and fixtures, or expenditures for which the Company expects to be reimbursed. The Company expects that cash from operations and/or its lines of credit will fund such expenditures.
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. As of December 31, 2021, the Company's development pipeline was comprised of one consolidated project under development, one unconsolidated joint venture project under development and various consolidated predevelopment projects, aggregating 371 apartment homes, with total incurred costs of $156.0 million, and estimated remaining project costs of approximately $61.0 million, $32.6 million of which represents the Company's estimated remaining costs, for total estimated project costs of $217.0 million.
The Company defines predevelopment projects as proposed communities in negotiation or in the entitlement process with an expected high likelihood of becoming entitled development projects. The Company may also acquire land for future development purposes or sale.
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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, construction loans, net proceeds from public and private equity and debt issuances, and proceeds from the disposition of assets, if any.
Alternative Capital Sources
The Company utilizes co-investments as an alternative source of capital for acquisitions of both operating and development communities. As of December 31, 2021, the Company had an interest in 264 apartment homes in communities actively under development with joint ventures for total estimated costs of $102.0 million. Total estimated remaining costs total approximately $58.0 million, of which the Company estimates that its remaining investment in these development joint ventures will be approximately $29.6 million. In addition, the Company had an interest in 10,257 apartment homes in operating communities with joint ventures and other investments for a total book value of $565.3 million.
Real Estate and Other Commitments
The following table summarizes the Company's unfunded real estate and other future commitments at December 31, 2021 ($ in thousands):

|  | Number of Properties |  | Investment |  | Remaining Commitment
Joint ventures (1): |  |  |  |  |  |
Preferred equity investments |  | 4 |  |  | $ | 128,000 |  |  | $ | 27,867 |
Mezzanine loans |  | 2 |  |  | 140,000 |  |  | 52,734 |
Non-core co-investments |  | — |  |  | 37,000 |  |  | 16,020 |
Consolidated: |  |  |  |  |  |
Real estate under development |  | 1 |  |  | 91,162 |  |  | 3,000 |
|  |  |  | $ | 396,162 |  |  | $ | 99,621 |

(1) Excludes approximately $29.6 million of the Company's share of estimated project costs for Scripps Mesa Apartments which have been fully funded.
At December 31, 2021, the Company had operating lease commitments of $167.4 million for ground, building and garage leases with maturity dates ranging from 2025 to 2083. $7.0 million of this commitment is due within the next twelve months.
Variable Interest Entities
In accordance with accounting standards for consolidation of variable interest entities ("VIEs"), the Company consolidates the Operating Partnership, 18 DownREIT entities (comprising nine communities) and six co-investments as of December 31, 2021. As of December 31, 2020, the Company consolidated the Operating Partnership, 17 DownREIT entities (comprising nine communities), and five co-investments. The Company consolidates these entities because it is deemed the primary beneficiary. Essex has no assets or liabilities other than its investment in the Operating Partnership. The consolidated total assets and liabilities related to the above consolidated co-investments and DownREIT entities, net of intercompany eliminations, were approximately $909.3 million and $320.1 million, respectively, as of December 31, 2021, and $898.5 million and $326.8 million, respectively, as of December 31, 2020. Noncontrolling interests in these entities were $122.4 million and $120.8 million as of December 31, 2021 and 2020, respectively. The Company's financial risk in each VIE is limited to its equity investment in the VIE. As of December 31, 2021, the Company did not have any other VIEs of which it was deemed to be the primary beneficiary and did not have any VIEs of which it was not deemed to be the primary beneficiary.
Critical Accounting Estimates
The preparation of 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 estimates 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 (specifically, the allocation between land and buildings during the
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year ended December 31, 2020); and (ii) evaluation of events and changes in circumstances indicating whether the Company’s rental properties may be impaired. The Company bases its estimates on historical experience, current market conditions, and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from those estimates made by management.
The Company accounts for its acquisitions of investments in real estate by assessing each acquisition to determine if it meets the definition of a business or if it qualifies as an asset acquisition. We expect that acquisitions of individual operating communities will generally be viewed as asset acquisitions, and result in the capitalization of acquisition costs, and the allocation of purchase price to the assets acquired and liabilities assumed based on the relative fair value of the respective assets and liabilities.
In making estimates of fair values for purposes of allocating purchase price, the Company utilizes a number of sources, including independent land appraisals which consider comparable market transactions, its own analysis of recently acquired or developed comparable properties in our portfolio for land comparables and building replacement costs, and other publicly available market data. In calculating the fair value of identified intangible assets of an acquired property, the in-place leases are valued based on in-place rent rates and amortized over the average remaining term of all acquired leases. The allocation of the total consideration exchanged for a real estate acquisition between the identifiable assets and liabilities and the depreciation we recognize over the estimated useful life of the asset could be impacted by different assumptions and estimates used in the calculation. The reasonable likelihood that the estimate could have a material impact on the financial condition of the Company is based on the total consideration exchanged for real estate during any given year. The allocation of the value between land and building was a critical accounting estimate during the year ended December 31, 2020 as result of the potential material impact of the Company's acquisition of a land parcel and six communities for a total purchase price of $463.4 million.
The Company periodically assesses the carrying value of its real estate investments for indicators of impairment. The judgments regarding the existence of impairment indicators are based on monitoring investment market conditions and performance for operating properties including the net operating income for the most recent 12 month period, monitoring estimated costs for properties under development, the Company's ability to hold and its intent with regard to each asset, and each property's remaining useful life. Although each of these may result in an impairment indicator, the shortening of an expected holding period due to the potential sale of a property is the most likely impairment indicator. Whenever events or changes in circumstances indicate that the carrying amount of a property held for investment may not be fully recoverable, the carrying amount is evaluated. If the sum of the property’s expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the property, then the Company will recognize an impairment loss equal to the excess of the carrying amount over the fair value of the property. Changes in operating and market conditions may result in a change of our intent to hold the property through the end of its useful life and may impact the assumptions utilized to determine the future cash flows of the real estate investment.
The Company bases its accounting estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may vary from those estimates and those estimates could be different under different assumptions or conditions.
Funds from Operations
Funds from Operations ("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 excluding real estate depreciation (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), 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
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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 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 years ended December 31, 2021, 2020, and 2019.
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|  | As of and for the years ended December 31,
|  | 2021 |  | 2020 |  | 2019
|  | ($ in thousands, except per share amounts)
OTHER DATA: |  |
Funds from operations attributable to common stockholders and unitholders: |  |  |  |  |  |
Net income available to common stockholders |  | $ | 488,554 |  |  | $ | 568,870 |  |  | $ | 439,286 |
Adjustments: |  |  |  |  |  |
Depreciation and amortization |  | 520,066 |  |  | 525,497 |  |  | 483,750 |
Gains not included in FFO attributable to common stockholders and unitholders |  | (145,253) |  |  | (301,886) |  |  | (79,468) |
Impairment loss |  | — |  |  | 1,825 |  |  | 7,105 |
Impairment loss from unconsolidated co-investments |  | — |  |  | — |  |  | 11,484 |
Depreciation and amortization from unconsolidated co-investments |  | 61,059 |  |  | 51,594 |  |  | 60,655 |
Noncontrolling interest related to Operating Partnership units |  | 17,191 |  |  | 19,912 |  |  | 15,343 |
Depreciation attributable to third party ownership and other |  | (571) |  |  | (539) |  |  | (1,805) |
Funds from operations attributable to common stockholders and unitholders |  | $ | 941,046 |  |  | $ | 865,273 |  |  | $ | 936,350 |
Non-core items: |  |  |  |  |  |
Expensed acquisition and investment related costs |  | 203 |  |  | 1,591 |  |  | 168 |
Deferred tax expense on unrealized gain on unconsolidated co-investment (1) |  | 15,668 |  |  | 1,531 |  |  | 1,457 |
Gain on sale of marketable securities |  | (3,400) |  |  | (2,131) |  |  | (1,271) |
Unrealized gains on marketable securities |  | (33,104) |  |  | (12,515) |  |  | (5,710) |
Provision for credit losses |  | 141 |  |  | 687 |  |  | — |
Equity income from non-core co-investment (2) |  | (55,602) |  |  | (5,289) |  |  | (4,143) |
Interest rate hedge ineffectiveness |  | — |  |  | — |  |  | 181 |
Loss (gain) on early retirement of debt, net |  | 19,010 |  |  | 22,883 |  |  | (3,717) |
Loss (gain) on early retirement of debt from unconsolidated co-investment |  | 25 |  |  | (38) |  |  | — |
Co-investment promote income |  | — |  |  | (6,455) |  |  | (809) |
Income from early redemption of preferred equity investments |  | (8,469) |  |  | (210) |  |  | (3,562) |
Accelerated interest income from maturity of investment in mortgage backed security |  | — |  |  | (11,753) |  |  | (7,032) |
General and administrative and other, net |  | 1,026 |  |  | 14,958 |  |  | 1,181 |
Insurance reimbursements, legal settlements, and other, net |  | (35,234) |  |  | (81) |  |  | (858) |
Core funds from operations attributable to common stockholders and unitholders |  | $ | 841,310 |  |  | $ | 868,451 |  |  | $ | 912,235 |
Weighted average number of shares outstanding, diluted (FFO) (3) |  | 67,335 |  |  | 67,726 |  |  | 68,199 |
Funds from operations attributable to common stockholders and unitholders per share - diluted |  | $ | 13.98 |  |  | $ | 12.78 |  |  | $ | 13.73 |
Core funds from operations attributable to common stockholders and unitholders per share - diluted |  | $ | 12.49 |  |  | $ | 12.82 |  |  | $ | 13.38 |

(1)Represents deferred tax expense related to net unrealized gains on technology co-investments.
(2)Represents the Company's share of co-investment income from technology co-investments.
(3)Assumes conversion of all outstanding OP Units into shares of the Company's common stock and excludes DownREIT units.
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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 consolidated statements of 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):

| 2021 |  | 2020 |  | 2019
Earnings from operations | $ | 529,995 |  |  | $ | 491,441 |  |  | $ | 481,112 |
Adjustments: |  |  |  |  |
Corporate-level property management expenses | 36,188 |  |  | 34,573 |  |  | 34,067 |
Depreciation and amortization | 520,066 |  |  | 525,497 |  |  | 483,750 |
Management and other fees from affiliates | (9,138) |  |  | (9,598) |  |  | (9,527) |
General and administrative | 51,838 |  |  | 65,388 |  |  | 54,262 |
Merger and integration expenses | — |  |  | — |  |  | — |
Expensed acquisition and investment related costs | 203 |  |  | 1,591 |  |  | 168 |
Impairment loss | — |  |  | 1,825 |  |  | 7,105 |
(Gain) Loss on sale of real estate and land | (142,993) |  |  | (64,967) |  |  | 3,164 |
NOI | 986,159 |  |  | 1,045,750 |  |  | 1,054,101 |
Less: Non Same-Property NOI | (94,755) |  |  | (129,158) |  |  | (77,204) |
Same-Property NOI | $ | 891,404 |  |  | $ | 916,592 |  |  | $ | 976,897 |

Forward-Looking Statements
Certain statements in this "Management's Discussion and Analysis of Financial Condition and Results of Operations," and elsewhere in this Annual Report on Form 10-K 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 (the Securities Act") and Section 21E of the Exchange Act, 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 the Company's expectations related to the continued impact of the COVID-19 pandemic and related variants on the Company's business, financial condition and results of operations and the impact of any additional measures taken to mitigate the impact of the pandemic, the Company's intent, beliefs or expectations with respect to the timing of completion of current development and redevelopment projects and the stabilization of such projects, the timing of lease-up and occupancy of its apartment communities, the anticipated operating performance of its apartment communities, the total projected costs of development and redevelopment projects, co-investment activities, qualification as a REIT under the Internal Revenue Code of 1986, as amended, 2022 Same-Property revenue and operating expenses generally and in specific regions, the real estate markets in the geographies in which the Company's properties are located and in the United States in general, the adequacy of future cash flows to meet anticipated cash needs, its financing activities and the use of proceeds from such activities, the availability of debt and equity financing, general economic conditions including the potential impacts from such economic conditions, including as a result of the COVID-19 pandemic and governmental measures intended to prevent its spread, trends affecting the Company's financial condition or results of operations, changes to U.S. tax laws and regulations in general or specifically related to REITs or real estate, changes to laws and regulations in jurisdictions in which communities the Company owns are located, and other information that is not historical information.
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
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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: the continued impact of the COVID-19 pandemic and related variants, which remains inherently uncertain as to duration and severity, and any additional governmental measures taken to limit its spread, and other potential future outbreaks of infectious diseases or other health concerns, which could continue to adversely affect the Company's business and its tenants, and cause a significant downturn in general economic conditions, the real estate industry, and the markets in which the Company's communities are located; uncertainty regarding ongoing hostility between Russia and the Ukraine and the related impact on macroeconomic conditions as a result of such conflict; the Company may fail to achieve its business objectives; the actual completion of development and redevelopment projects may be subject to delays; the stabilization dates of such projects may be delayed; the Company may abandon or defer development or redevelopment projects for a number of reasons, including changes in local market conditions which make development less desirable, increases in costs of development, increases in the cost of capital or lack of capital availability, resulting in losses; the total projected costs of current development and redevelopment projects may exceed expectations; such development and redevelopment projects may not be completed; development and redevelopment projects and acquisitions may fail to meet expectations; estimates of future income from an acquired property may prove to be inaccurate; occupancy rates and rental demand may be adversely affected by competition and local economic and market conditions; there may be increased interest rates and operating costs; the Company may be unsuccessful in the management of its relationships with its co-investment partners; 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; the terms of any refinancing may not be as favorable as the terms of existing indebtedness; unexpected difficulties in leasing of development projects; volatility in financial and securities markets; the Company’s failure to successfully operate acquired properties; unforeseen consequences from cyber-intrusion; the Company’s inability to maintain our investment grade credit rating with the rating agencies; government approvals, actions and initiatives, including the need for compliance with environmental requirements; and those further risks, special considerations, and other factors discussed in Item 1A, Risk Factors, of this Form 10-K, 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. Additionally, the risks, uncertainties and other factors set forth above or otherwise referred to in this Annual Report on Form 10-K and the other reports that the Company has filed with the SEC may be further amplified by the global impact of the COVID-19 pandemic and related variants. 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.
Item 7A. 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 December 31, 2021, the Company had no outstanding interest rate swap contracts.
Additionally, the Company has entered into total return swap contracts, with an aggregate notional amount of $224.4 million that effectively convert $224.4 million of fixed mortgage notes payable to a floating interest rate based on the SIFMA plus a spread and have a carrying value of zero at December 31, 2021. The Company is exposed to insignificant interest rate risk on these 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 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. Management has estimated the fair value of the Company’s $5.8 billion of fixed rate debt at December 31, 2021, to be $6.0 billion. Management has estimated the fair value of the Company’s $565.6 million of variable rate debt at December 31, 2021, to be $561.7 million based on the
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terms of existing mortgage notes payable and variable rate demand notes compared to those available in the marketplace. The following table represents scheduled principal payments ($ in thousands):

| For the Years Ended December 31,
($ in thousands, except for interest rates) | 2022 |  | 2023 |  | 2024 |  | 2025 |  | 2026 |  | Thereafter | Total |  | Fair value
Fixed rate debt | $42,408 |  | $302,093 |  | $402,177 |  | $632,035 |  | $548,291 |  | $3,836,558 | $5,763,562 |  | $5,996,335
Average interest rate | 3.6% |  | 3.4% |  | 4.0% |  | 3.5% |  | 3.5% |  | 3.2% |  |  |
Variable rate debt (1) | $780 |  | $2,109 |  | $932 |  | $1,019 |  | $1,114 |  | $559,666 | $565,620 |  | $561,670
Average interest rate | 1.2% |  | 1.1% |  | 1.2% |  | 1.2% |  | 1.2% |  | 1.1% |  |  |

(1)$224.4 million of variable rate debt is tax exempt to the note holders.
The table incorporates only those exposures that exist as of December 31, 2021; 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 8. Financial Statements and Supplementary Data
The response to this item is submitted as a separate section of this Form 10-K. See Item 15.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Essex Property Trust, Inc.
As of December 31, 2021, 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 December 31, 2021, Essex’s disclosure controls and procedures were effective 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 December 31, 2021, that have materially affected, or are reasonably likely to materially affect, Essex’s internal control over financial reporting.
Management’s Report on Internal Control Over Financial Reporting
Essex’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Essex’s management assessed the effectiveness of Essex’s internal control over financial reporting as of December 31, 2021. In making this assessment, Essex’s management used the criteria set forth in the report entitled "Internal Control-Integrated Framework (2013)" published by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Essex’s management has concluded that, as of December 31, 2021, its internal control over financial reporting was effective based on these criteria. Essex’s independent registered public accounting firm, KPMG LLP, has issued an attestation report over Essex’s internal control over financial reporting, which is included herein.
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Essex Portfolio, L.P.
As of December 31, 2021, 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 December 31, 2021, the Operating Partnership’s disclosure controls and procedures were effective 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 December 31, 2021, that have materially affected, or are reasonably likely to materially affect, the Operating Partnership’s internal control over financial reporting.
Management’s Report on Internal Control Over Financial Reporting
The Operating Partnership’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). The Operating Partnership’s management assessed the effectiveness of the Operating Partnership’s internal control over financial reporting as of December 31, 2021. In making this assessment, the Operating Partnership’s management used the criteria set forth in the report entitled "Internal Control-Integrated Framework (2013)" published by COSO. The Operating Partnership’s management has concluded that, as of December 31, 2021, its internal control over financial reporting was effective based on these criteria.
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this Item is incorporated herein by reference from our Proxy Statement, relating to our 2022 Annual Meeting of Stockholders, under the heading "Board and Corporate Governance Matters," to be filed with the SEC within 120 days of December 31, 2021.
Item 11. Executive Compensation
The information required by this Item is incorporated herein by reference from our Proxy Statement, relating to our 2022 Annual Meeting of Stockholders, under the headings "Executive Compensation" and "Director Compensation," to be filed with the SEC within 120 days of December 31, 2021.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item is incorporated herein by reference from our Proxy Statement, relating to our 2022 Annual Meeting of Stockholders, under the heading "Security Ownership of Certain Beneficial Owners and Management," to be filed with the SEC within 120 days of December 31, 2021.
Item 13. Certain Relationships and Related Transactions and Director Independence
The information required by this Item is incorporated herein by reference from our Proxy Statement, relating to our 2022 Annual Meeting of Stockholders, under the heading "Certain Relationships and Related Persons Transactions," to be filed with the SEC within 120 days of December 31, 2021.
Item 14. Principal Accounting Fees and Services
The information required by this Item is incorporated herein by reference from our Proxy Statement, relating to our 2022 Annual Meeting of Stockholders, under the headings "Report of the Audit Committee" and "Fees Paid to KPMG LLP," to be filed with the SEC within 120 days of December 31, 2021.
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PART IV
Item 15. Exhibits and Financial Statement Schedules
(A) Financial Statements

(1) Consolidated Financial Statements of Essex Property Trust, Inc. | Page
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 185) | F-1
Consolidated Balance Sheets: As of December 31, 2021 and 2020 | F-6
Consolidated Statements of Income: Years ended December 31, 2021, 2020, and 2019 | F-7
Consolidated Statements of Comprehensive Income: Years ended December 31, 2021, 2020, and 2019 | F-8
Consolidated Statements of Equity: Years ended December 31, 2021, 2020, and 2019 | F-9
Consolidated Statements of Cash Flows: Years ended December 31, 2021, 2020, and 2019 | F-11
Notes to Consolidated Financial Statements | F-20
(2) Consolidated Financial Statements of Essex Portfolio, L.P. |
Report of Independent Registered Public Accounting Firm | F-4
Consolidated Balance Sheets: As of December 31, 2021 and 2020 | F-13
Consolidated Statements of Income: Years ended December 31, 2021, 2020, and 2019 | F-14
Consolidated Statements of Comprehensive Income: Years ended December 31, 2021, 2020, and 2019 | F-15
Consolidated Statements of Capital: Years ended December 31, 2021, 2020, and 2019 | F-16
Consolidated Statements of Cash Flows: Years ended December 31, 2021, 2020, and 2019 | F-18
Notes to Consolidated Financial Statements | F-20
(3) Financial Statement Schedule – Schedule III – Real Estate and Accumulated Depreciation as of December 31, 2021 | F-58
(4) See the Exhibit Index immediately preceding the signature page and certifications for a list of exhibits filed or incorporated by reference as part of this report. |

(B) Exhibits
The Company hereby files, as exhibits to this Form 10-K, those exhibits listed on the Exhibit Index referenced in Item 15(A)(4) above.
Item 16. Form 10-K Summary
None.
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Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Essex Property Trust, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Essex Property Trust, Inc. and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes and financial statement schedule III (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 25, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Evaluation of events or changes in circumstances that indicate rental properties may be impaired
As discussed in Note 2 to the consolidated financial statements, the Company evaluates the carrying amount of rental properties for impairment whenever events or changes in circumstances indicate that the carrying amount of a rental property may not be fully recoverable. The Company had $11.0 billion in rental properties as of December 31, 2021.
We identified the evaluation of events or changes in circumstances that indicate rental properties may be impaired as a critical audit matter. Specifically, a high degree of subjective and complex auditor judgment was required to evaluate the intent regarding the expected period the Company will receive cash flows from the rental property. Changes to shorten the expected period the Company will receive cash flows from the rental property could indicate a potential impairment.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s process to evaluate events or
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changes in circumstances that would indicate rental properties may be impaired. This included controls over the process for determining the expected period the Company will receive cash flows from the rental property. We evaluated the Company’s assessment by (1) inquiring with the Company about events or changes in circumstances considered by the Company, (2) considering certain factors related to the current economic environment, and (3) reading board of director’s minutes and external communications with investors and analysts.

/s/ KPMG LLP

We have served as the Company’s auditor since 1994.
San Francisco, California
February 25, 2022
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Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Essex Property Trust, Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited Essex Property Trust, Inc. and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes and financial statement schedule III (collectively, the consolidated financial statements), and our report dated February 25, 2022 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP

San Francisco, California
February 25, 2022
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Report of Independent Registered Public Accounting Firm
To the Partners of Essex Portfolio, L.P. and the Board of Directors of Essex Property Trust, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Essex Portfolio, L.P. and subsidiaries (the Operating Partnership) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, capital, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes and financial statement schedule III (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Operating Partnership as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These consolidated financial statements are the responsibility of the Operating Partnership’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Operating Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Operating Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Operating Partnership’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Evaluation of events or changes in circumstances that indicate rental properties may be impaired
As discussed in Note 2 to the consolidated financial statements, the Operating Partnership evaluates the carrying amount of rental properties for impairment whenever events or changes in circumstances indicate that the carrying amount of a rental property may not be fully recoverable. The Operating Partnership had $11.0 billion in rental properties as of December 31, 2021.
We identified the evaluation of events or changes in circumstances that indicate rental properties may be impaired as a critical audit matter. Specifically, a high degree of subjective and complex auditor judgment was required to evaluate the intent regarding the expected period the Operating Partnership will receive cash flows from the rental property. Changes to shorten the expected period the Operating Partnership will receive cash flows from the rental property could indicate a potential impairment.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Operating Partnership’s process to evaluate
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events or changes in circumstances that would indicate rental properties may be impaired. This included controls over the process for determining the expected period the Operating Partnership will receive cash flows from the rental property. We evaluated the Operating Partnership’s assessment by (1) inquiring with the Operating Partnership about events or changes in circumstances considered by the Operating Partnership, (2) considering certain factors related to the current economic environment, and (3) reading board of director’s minutes and external communications with investors and analysts.

/s/ KPMG LLP

We have served as the Operating Partnership's auditor since 2013.
San Francisco, California
February 25, 2022
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ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 2021 and 2020
(Dollars in thousands, except share amounts)

| 2021 |  | 2020
ASSETS
Real estate: |  |  |
Rental properties: |  |  |
Land and land improvements | $ | 3,032,678 |  |  | $ | 2,929,009 |
Buildings and improvements | 12,597,249 |  |  | 12,132,736 |
| 15,629,927 |  |  | 15,061,745 |
Less: accumulated depreciation | (4,646,854) |  |  | (4,133,959) |
| 10,983,073 |  |  | 10,927,786 |
Real estate under development | 111,562 |  |  | 386,047 |
Co-investments | 1,177,802 |  |  | 1,018,010 |
Real estate held for sale | — |  |  | 57,938 |
| 12,272,437 |  |  | 12,389,781 |
Cash and cash equivalents-unrestricted | 48,420 |  |  | 73,629 |
Cash and cash equivalents-restricted | 10,218 |  |  | 10,412 |
Marketable securities, net of allowance for credit losses of zero as of both December 31, 2021 and December 31, 2020 | 191,829 |  |  | 147,768 |
Notes and other receivables, net of allowance for credit losses of $0.8 million as of both December 31, 2021 and December 31, 2020 (includes related party receivables of $176.9 million and $4.7 million as of December 31, 2021 and December 31, 2020, respectively) | 341,033 |  |  | 195,104 |
Operating lease right-of-use assets | 68,972 |  |  | 72,143 |
Prepaid expenses and other assets | 64,964 |  |  | 47,340 |
Total assets | $ | 12,997,873 |  |  | $ | 12,936,177 |
LIABILITIES AND EQUITY
Unsecured debt, net | $ | 5,307,196 |  |  | $ | 5,607,985 |
Mortgage notes payable, net | 638,957 |  |  | 643,550 |
Lines of credit | 341,257 |  |  | — |
Accounts payable and accrued liabilities | 180,751 |  |  | 152,855 |
Construction payable | 29,136 |  |  | 31,417 |
Dividends payable | 143,213 |  |  | 141,917 |
Operating lease liabilities | 70,675 |  |  | 74,037 |
Liabilities associated with real estate held for sale | — |  |  | 29,845 |
Distributions in excess of investments in co-investments | 35,545 |  |  | — |
Other liabilities | 39,969 |  |  | 39,140 |
Total liabilities | 6,786,699 |  |  | 6,720,746 |
Commitments and contingencies |  |  |
Redeemable noncontrolling interest | 34,666 |  |  | 32,239 |
Equity: |  |  |
Common stock; $0.0001 par value, 670,000,000 shares authorized; 65,248,393 and 64,999,015 shares issued and outstanding, respectively | 7 |  |  | 6 |
Additional paid-in capital | 6,915,981 |  |  | 6,876,326 |
Distributions in excess of accumulated earnings | (916,833) |  |  | (861,193) |
Accumulated other comprehensive loss, net | (5,552) |  |  | (14,729) |
Total stockholders' equity | 5,993,603 |  |  | 6,000,410 |
Noncontrolling interest | 182,905 |  |  | 182,782 |
Total equity | 6,176,508 |  |  | 6,183,192 |
Total liabilities and equity | $ | 12,997,873 |  |  | $ | 12,936,177 |

See accompanying notes to consolidated financial statements.
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ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 2021, 2020 and 2019
(Dollars in thousands, except per share and share amounts)

| 2021 |  | 2020 |  | 2019
Revenues: |  |  |  |  |
Rental and other property | $ | 1,431,418 |  |  | $ | 1,486,150 |  |  | $ | 1,450,628 |
Management and other fees from affiliates | 9,138 |  |  | 9,598 |  |  | 9,527 |
| 1,440,556 |  |  | 1,495,748 |  |  | 1,460,155 |
Expenses: |  |  |  |  |
Property operating, excluding real estate taxes | 264,892 |  |  | 263,389 |  |  | 241,357 |
Real estate taxes | 180,367 |  |  | 177,011 |  |  | 155,170 |
Corporate-level property management expenses | 36,188 |  |  | 34,573 |  |  | 34,067 |
Depreciation and amortization | 520,066 |  |  | 525,497 |  |  | 483,750 |
General and administrative | 51,838 |  |  | 65,388 |  |  | 54,262 |
Expensed acquisition and investment related costs | 203 |  |  | 1,591 |  |  | 168 |
Impairment loss | — |  |  | 1,825 |  |  | 7,105 |
| 1,053,554 |  |  | 1,069,274 |  |  | 975,879 |
Gain (loss) on sale of real estate and land | 142,993 |  |  | 64,967 |  |  | (3,164) |
Earnings from operations | 529,995 |  |  | 491,441 |  |  | 481,112 |
Interest expense | (203,125) |  |  | (220,633) |  |  | (217,339) |
Total return swap income | 10,774 |  |  | 10,733 |  |  | 8,446 |
Interest and other income | 98,744 |  |  | 40,999 |  |  | 46,298 |
Equity income from co-investments | 111,721 |  |  | 66,512 |  |  | 112,136 |
Deferred tax expense on unrealized gain on unconsolidated co-investment | (15,668) |  |  | (1,531) |  |  | (1,457) |
(Loss) gain on early retirement of debt, net | (19,010) |  |  | (22,883) |  |  | 3,717 |
Gain on remeasurement of co-investment | 2,260 |  |  | 234,694 |  |  | 31,535 |
Net income | 515,691 |  |  | 599,332 |  |  | 464,448 |
Net income attributable to noncontrolling interest | (27,137) |  |  | (30,462) |  |  | (25,162) |
Net income available to common stockholders | $ | 488,554 |  |  | $ | 568,870 |  |  | $ | 439,286 |
Per share data: |  |  |  |  |
Basic: |  |  |  |  |
Net income available to common stockholders | $ | 7.51 |  |  | $ | 8.69 |  |  | $ | 6.67 |
Weighted average number of shares outstanding during the year | 65,051,465 |  |  | 65,454,057 |  |  | 65,840,422 |
Diluted: |  |  |  |  |
Net income available to common stockholders | $ | 7.51 |  |  | $ | 8.69 |  |  | $ | 6.66 |
Weighted average number of shares outstanding during the year | 65,088,874 |  |  | 65,564,982 |  |  | 65,939,455 |

See accompanying notes to consolidated financial statements.
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ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
Years ended December 31, 2021, 2020 and 2019
(Dollars in thousands)

| 2021 |  | 2020 |  | 2019
Net income | $ | 515,691 |  |  | $ | 599,332 |  |  | $ | 464,448 |
Other comprehensive income (loss): |  |  |  |  |
Change in fair value of derivatives and amortization of swap settlements | 9,170 |  |  | (4,148) |  |  | (2,948) |
Cash flow hedge losses reclassified to earnings | — |  |  | 3,338 |  |  | 1,824 |
Change in fair value of marketable debt securities, net | 329 |  |  | (61) |  |  | 281 |
Reversal of unrealized gains upon the sale of marketable debt securities | — |  |  | — |  |  | (32) |
Total other comprehensive income (loss) | 9,499 |  |  | (871) |  |  | (875) |
Comprehensive income | 525,190 |  |  | 598,461 |  |  | 463,573 |
Comprehensive income attributable to noncontrolling interest | (27,459) |  |  | (30,432) |  |  | (25,133) |
Comprehensive income attributable to controlling interest | $ | 497,731 |  |  | $ | 568,029 |  |  | $ | 438,440 |

See accompanying notes to consolidated financial statements.
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ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
Consolidated Statements of Equity
Years ended December 31, 2021, 2020 and 2019
(Dollars and shares in thousands)

|  |  | Common stock |  | Additional paid-in capital |  | Distributions in excess of accumulated earnings |  | Accumulated other comprehensive loss, net |  | Noncontrolling interest |  | Total
|  |  |  |  | Shares |  | Amount |  |  |  |  |
Balances at December 31, 2018 |  |  |  |  | 65,890 |  |  | $ | 7 |  |  | $ | 7,093,079 |  |  | $ | (812,796) |  |  | $ | (13,217) |  |  | $ | 126,771 |  |  | $ | 6,393,844 |
Net income |  |  |  |  | — |  |  | — |  |  | — |  |  | 439,286 |  |  | — |  |  | 25,162 |  |  | 464,448 |
Reversal of unrealized gains upon the sale of marketable debt securities |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (31) |  |  | (1) |  |  | (32) |
Cash flow hedge losses reclassified to earnings |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,762 |  |  | 62 |  |  | 1,824 |
Change in fair value of derivatives and amortization of swap settlements |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (2,849) |  |  | (99) |  |  | (2,948) |
Change in fair value of marketable debt securities, net |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 272 |  |  | 9 |  |  | 281 |
Issuance of common stock under: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Stock option and restricted stock plans, net |  |  |  |  | 195 |  |  | — |  |  | 33,779 |  |  | — |  |  | — |  |  | — |  |  | 33,779 |
Sale of common stock, net |  |  |  |  | 228 |  |  | — |  |  | 72,539 |  |  | — |  |  | — |  |  | — |  |  | 72,539 |
Equity based compensation costs |  |  |  |  | — |  |  | — |  |  | 11,029 |  |  | — |  |  | — |  |  | 1,254 |  |  | 12,283 |
Retirement of common stock, net |  |  |  |  | (234) |  |  | — |  |  | (56,989) |  |  | — |  |  | — |  |  | — |  |  | (56,989) |
Cumulative effect upon adoption of ASU No. 2017-12 |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 175 |  |  | 6 |  |  | 181 |
Changes in the redemption value of redeemable noncontrolling interest |  |  |  |  | — |  |  | — |  |  | (3,427) |  |  | — |  |  | — |  |  | 1,419 |  |  | (2,008) |
Changes in noncontrolling interest from acquisition |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 65,472 |  |  | 65,472 |
Distributions to noncontrolling interest |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (28,493) |  |  | (28,493) |
Redemptions of noncontrolling interest |  |  |  |  | 13 |  |  | — |  |  | (28,083) |  |  | — |  |  | — |  |  | (8,485) |  |  | (36,568) |
Common stock dividends ($7.80 per share) |  |  |  |  | — |  |  | — |  |  | — |  |  | (514,109) |  |  | — |  |  | — |  |  | (514,109) |
Balances at December 31, 2019 |  |  |  |  | 66,092 |  |  | $ | 7 |  |  | $ | 7,121,927 |  |  | $ | (887,619) |  |  | $ | (13,888) |  |  | $ | 183,077 |  |  | $ | 6,403,504 |
Net income |  |  |  |  | — |  |  | — |  |  | — |  |  | 568,870 |  |  | — |  |  | 30,462 |  |  | 599,332 |
Cash flow hedge losses reclassified to earnings |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 3,225 |  |  | 113 |  |  | 3,338 |
Change in fair value of derivatives and amortization of swap settlements |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (4,007) |  |  | (141) |  |  | (4,148) |
Change in fair value of marketable debt securities, net |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (59) |  |  | (2) |  |  | (61) |
Issuance of common stock under: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Stock option and restricted stock plans, net |  |  |  |  | 95 |  |  | — |  |  | 9,201 |  |  | — |  |  | — |  |  | — |  |  | 9,201 |
Sale of common stock, net |  |  |  |  | — |  |  | — |  |  | (296) |  |  | — |  |  | — |  |  | — |  |  | (296) |

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Equity based compensation costs |  |  |  |  | — |  |  | — |  |  | 12,453 |  |  | — |  |  | — |  |  | 460 |  |  | 12,913 |
Retirement of common stock, net |  |  |  |  | (1,197) |  |  | (1) |  |  | (269,314) |  |  | — |  |  | — |  |  | — |  |  | (269,315) |
Cumulative effect upon adoption of ASU No. 2016-13 |  |  |  |  | — |  |  | — |  |  | — |  |  | (190) |  |  | — |  |  | — |  |  | (190) |
Changes in the redemption value of redeemable noncontrolling interest |  |  |  |  | — |  |  | — |  |  | 4,375 |  |  | — |  |  | — |  |  | (76) |  |  | 4,299 |
Changes in noncontrolling interest from acquisition |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,349 |  |  | 1,349 |
Distributions to noncontrolling interest |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (31,367) |  |  | (31,367) |
Redemptions of noncontrolling interest |  |  |  |  | 9 |  |  | — |  |  | (2,020) |  |  | — |  |  | — |  |  | (1,093) |  |  | (3,113) |
Common stock dividends ($8.31 per share) |  |  |  |  | — |  |  | — |  |  | — |  |  | (542,254) |  |  | — |  |  | — |  |  | (542,254) |
Balances at December 31, 2020 |  |  |  |  | 64,999 |  |  | $ | 6 |  |  | $ | 6,876,326 |  |  | $ | (861,193) |  |  | $ | (14,729) |  |  | $ | 182,782 |  |  | $ | 6,183,192 |
Net income |  |  |  |  |  |  |  |  |  |  | 488,554 |  |  |  |  | 27,137 |  |  | 515,691 |
Change in fair value of derivatives and amortization of swap settlements |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 8,859 |  |  | 311 |  |  | 9,170 |
Change in fair value of marketable debt securities, net |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 318 |  |  | 11 |  |  | 329 |
Issuance of common stock under: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Stock option and restricted stock plans, net |  |  |  |  | 279 |  |  | 1 |  |  | 53,051 |  |  | — |  |  | — |  |  | — |  |  | 53,052 |
Sale of common stock, net |  |  |  |  | — |  |  | — |  |  | (455) |  |  | — |  |  | — |  |  | — |  |  | (455) |
Equity based compensation costs |  |  |  |  | — |  |  | — |  |  | 11,286 |  |  | — |  |  | — |  |  | 397 |  |  | 11,683 |
Retirement of common stock, net |  |  |  |  | (40) |  |  | — |  |  | (9,172) |  |  | — |  |  | — |  |  | — |  |  | (9,172) |
Changes in the redemption value of redeemable noncontrolling interest |  |  |  |  | — |  |  | — |  |  | (7,489) |  |  | — |  |  | — |  |  | 599 |  |  | (6,890) |
Contributions from noncontrolling interest |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,900 |  |  | 1,900 |
Distributions to noncontrolling interest |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (29,341) |  |  | (29,341) |
Redemptions of noncontrolling interest |  |  |  |  | 10 |  |  | — |  |  | (7,566) |  |  | — |  |  | — |  |  | (891) |  |  | (8,457) |
Common stock dividends ($8.36 per share) |  |  |  |  | — |  |  | — |  |  | — |  |  | (544,194) |  |  | — |  |  | — |  |  | (544,194) |
Balances at December 31, 2021 |  |  |  |  | 65,248 |  |  | $ | 7 |  |  | $ | 6,915,981 |  |  | $ | (916,833) |  |  | $ | (5,552) |  |  | $ | 182,905 |  |  | $ | 6,176,508 |

See accompanying notes to consolidated financial statements.
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ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 2021, 2020 and 2019
(Dollars in thousands)

| 2021 |  | 2020 |  | 2019
Cash flows from operating activities: |  |  |  |  |
Net income | $ | 515,691 |  |  | $ | 599,332 |  |  | $ | 464,448 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |
Straight-lined rents | 9,672 |  |  | (19,426) |  |  | (1,218) |
Depreciation and amortization | 520,066 |  |  | 525,497 |  |  | 483,750 |
Amortization of discount on marketable securities | — |  |  | (19,075) |  |  | (28,491) |
Amortization of discount and debt financing costs, net | 9,538 |  |  | 6,674 |  |  | 5,689 |
Gain on sale of marketable securities | (3,400) |  |  | (2,131) |  |  | (1,271) |
Income from early redemption of notes receivable | (4,939) |  |  | — |  |  | — |
Provision for credit losses | 141 |  |  | 687 |  |  | — |
Unrealized gains on equity securities recognized through income | (33,104) |  |  | (12,515) |  |  | (5,710) |
Company's share of gain on the sales of co-investments | — |  |  | (2,225) |  |  | (51,097) |
Earnings from co-investments | (111,721) |  |  | (64,287) |  |  | (61,039) |
Operating distributions from co-investments | 104,833 |  |  | 74,419 |  |  | 99,277 |
Accrued interest from notes and other receivables | (15,902) |  |  | (3,683) |  |  | (6,012) |
Impairment loss | — |  |  | 1,825 |  |  | 7,105 |
(Gain) loss on the sale of real estate and land | (142,993) |  |  | (64,967) |  |  | 3,164 |
Equity-based compensation | 7,308 |  |  | 8,157 |  |  | 7,010 |
Loss (gain) on early retirement of debt, net | 19,010 |  |  | 22,883 |  |  | (3,717) |
Gain on remeasurement of co-investment | (2,260) |  |  | (234,694) |  |  | (31,535) |
Changes in operating assets and liabilities: |  |  |  |  |
Prepaid expenses, receivables, operating lease right-of-use assets, and other assets | 4,878 |  |  | (3,730) |  |  | 6,969 |
Accounts payable, accrued liabilities, and operating lease liabilities | 22,298 |  |  | (10,382) |  |  | 29,551 |
Other liabilities | 6,143 |  |  | 749 |  |  | 2,206 |
Net cash provided by operating activities | 905,259 |  |  | 803,108 |  |  | 919,079 |
Cash flows from investing activities: |  |  |  |  |
Additions to real estate: |  |  |  |  |
Acquisitions of real estate and acquisition related capital expenditures, net of cash acquired | (153,481) |  |  | (460,421) |  |  | (133,825) |
Redevelopment | (61,671) |  |  | (48,980) |  |  | (70,295) |
Development acquisitions of and additions to real estate under development | (49,784) |  |  | (108,781) |  |  | (158,234) |
Capital expenditures on rental properties | (121,195) |  |  | (90,085) |  |  | (101,689) |
Investments in notes receivable | (245,144) |  |  | (135,343) |  |  | (231,400) |
Collections of notes and other receivables | 104,405 |  |  | 98,711 |  |  | 168,720 |
Proceeds from insurance for property losses | 879 |  |  | 723 |  |  | 3,734 |
Proceeds from dispositions of real estate | 297,454 |  |  | 339,165 |  |  | 23,214 |
Contributions to co-investments | (306,266) |  |  | (114,017) |  |  | (402,284) |
Changes in refundable deposits | (9,486) |  |  | 96 |  |  | 5 |
Purchases of marketable securities | (23,805) |  |  | (83,379) |  |  | (46,458) |
Sales and maturities of marketable securities | 16,577 |  |  | 113,465 |  |  | 147,531 |
Non-operating distributions from co-investments | 154,120 |  |  | 71,946 |  |  | 273,290 |

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Table of Contents

Net cash used in investing activities | (397,397) |  |  | (416,900) |  |  | (527,691) |
Cash flows from financing activities: |  |  |  |  |
Proceeds from unsecured debt and mortgage notes | 745,505 |  |  | 1,452,808 |  |  | 1,045,290 |
Payments on unsecured debt and mortgage notes | (1,053,501) |  |  | (916,209) |  |  | (1,026,616) |
Proceeds from lines of credit | 1,050,589 |  |  | 1,038,426 |  |  | 1,939,213 |
Repayments of lines of credit | (709,332) |  |  | (1,093,426) |  |  | (1,884,213) |
Retirement of common stock | (9,172) |  |  | (269,315) |  |  | (56,989) |
Additions to deferred charges | (8,350) |  |  | (13,772) |  |  | (10,898) |
Payments related to debt prepayment penalties | (18,342) |  |  | (19,605) |  |  | (1,406) |
Net proceeds from issuance of common stock | (455) |  |  | (296) |  |  | 72,539 |
Net proceeds from stock options exercised | 58,497 |  |  | 14,865 |  |  | 37,467 |
Payments related to tax withholding for share-based compensation | (5,445) |  |  | (5,664) |  |  | (3,688) |
Contributions from noncontrolling interest | 1,900 |  |  | — |  |  | — |
Distributions to noncontrolling interest | (29,379) |  |  | (30,990) |  |  | (27,993) |
Redemption of noncontrolling interest | (8,457) |  |  | (3,113) |  |  | (36,568) |
Redemption of redeemable noncontrolling interest | (4,463) |  |  | (872) |  |  | (73) |
Common stock dividends paid | (542,860) |  |  | (536,098) |  |  | (507,754) |
Net cash used in financing activities | (533,265) |  |  | (383,261) |  |  | (461,689) |
Net (decrease) increase in unrestricted and restricted cash and cash equivalents | (25,403) |  |  | 2,947 |  |  | (70,301) |
Unrestricted and restricted cash and cash equivalents at beginning of period | 84,041 |  |  | 81,094 |  |  | 151,395 |
Unrestricted and restricted cash and cash equivalents at end of period | $ | 58,638 |  |  | $ | 84,041 |  |  | $ | 81,094 |
Supplemental disclosure of cash flow information: |  |  |  |  |
Cash paid for interest, net of capitalized interest | $ | 194,203 |  |  | $ | 211,732 |  |  | $ | 194,418 |
Interest capitalized | $ | 6,153 |  |  | $ | 14,615 |  |  | $ | 24,169 |
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |  |
Operating cash flows from operating leases | $ | 6,963 |  |  | $ | 6,892 |  |  | $ | 6,811 |
Supplemental disclosure of noncash investing and financing activities: |  |  |  |  |
Issuance of DownREIT units in connection with acquisition of real estate | $ | — |  |  | $ | — |  |  | $ | 65,472 |
Transfers between real estate under development and rental properties, net | $ | 328,393 |  |  | $ | 253,039 |  |  | $ | 19,812 |
Transfer from real estate under development to co-investments | $ | 3,068 |  |  | $ | 1,739 |  |  | $ | 671 |
Reclassifications to (from) redeemable noncontrolling interest from additional paid in capital and noncontrolling interest | $ | 6,890 |  |  | $ | (4,299) |  |  | $ | 2,008 |
Initial recognition of operating lease right-of-use assets | $ | — |  |  | $ | — |  |  | $ | 77,645 |
Initial recognition of operating lease liabilities | $ | — |  |  | $ | — |  |  | $ | 79,693 |
Debt assumed in connection with acquisition | $ | — |  |  | $ | — |  |  | $ | 143,006 |

See accompanying notes to consolidated financial statements
F- 12

Table of Contents
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 2021 and 2020
(Dollars in thousands, except per unit amounts)

| 2021 |  | 2020
ASSETS
Real estate: |  |  |
Rental properties: |  |  |
Land and land improvements | $ | 3,032,678 |  |  | $ | 2,929,009 |
Buildings and improvements | 12,597,249 |  |  | 12,132,736 |
| 15,629,927 |  |  | 15,061,745 |
Less: accumulated depreciation | (4,646,854) |  |  | (4,133,959) |
| 10,983,073 |  |  | 10,927,786 |
Real estate under development | 111,562 |  |  | 386,047 |
Co-investments | 1,177,802 |  |  | 1,018,010 |
Real estate held for sale | — |  |  | 57,938 |
| 12,272,437 |  |  | 12,389,781 |
Cash and cash equivalents-unrestricted | 48,420 |  |  | 73,629 |
Cash and cash equivalents-restricted | 10,218 |  |  | 10,412 |
Marketable securities, net of allowance for credit losses of zero as of both December 31, 2021 and December 31, 2020 | 191,829 |  |  | 147,768 |
Notes and other receivables, net of allowance for credit losses of $0.8 million as of both December 31, 2021 and December 31, 2020 (includes related party receivables of $176.9 million and $4.7 million as of December 31, 2021 and December 31, 2020, respectively) | 341,033 |  |  | 195,104 |
Operating lease right-of-use assets | 68,972 |  |  | 72,143 |
Prepaid expenses and other assets | 64,964 |  |  | 47,340 |
Total assets | $ | 12,997,873 |  |  | $ | 12,936,177 |
LIABILITIES AND CAPITAL
Unsecured debt, net | $ | 5,307,196 |  |  | $ | 5,607,985 |
Mortgage notes payable, net | 638,957 |  |  | 643,550 |
Lines of credit | 341,257 |  |  | — |
Accounts payable and accrued liabilities | 180,751 |  |  | 152,855 |
Construction payable | 29,136 |  |  | 31,417 |
Distributions payable | 143,213 |  |  | 141,917 |
Operating lease liabilities | 70,675 |  |  | 74,037 |
Liabilities associated with real estate held for sale | — |  |  | 29,845 |
Distributions in excess of investments in co-investments | 35,545 |  |  | — |
Other liabilities | 39,969 |  |  | 39,140 |
Total liabilities | 6,786,699 |  |  | 6,720,746 |
Commitments and contingencies |  |  |
Redeemable noncontrolling interest | 34,666 |  |  | 32,239 |
Capital: |  |  |
General Partner: |  |  |
Common equity (65,248,393 and 64,999,015 units issued and outstanding, respectively) | 5,999,155 |  |  | 6,015,139 |
| 5,999,155 |  |  | 6,015,139 |
Limited Partners: |  |  |
Common equity (2,282,464 and 2,294,760 units issued and outstanding, respectively) | 56,502 |  |  | 58,184 |
Accumulated other comprehensive loss | (1,804) |  |  | (11,303) |
Total partners' capital | 6,053,853 |  |  | 6,062,020 |
Noncontrolling interest | 122,655 |  |  | 121,172 |
Total capital | 6,176,508 |  |  | 6,183,192 |
Total liabilities and capital | $ | 12,997,873 |  |  | $ | 12,936,177 |

See accompanying notes to consolidated financial statements
F- 13

Table of Contents
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 2021, 2020, and 2019
(Dollars in thousands, except per unit and unit amounts)

| 2021 |  | 2020 |  | 2019
Revenues: |  |  |  |  |
Rental and other property | $ | 1,431,418 |  |  | $ | 1,486,150 |  |  | $ | 1,450,628 |
Management and other fees from affiliates | 9,138 |  |  | 9,598 |  |  | 9,527 |
| 1,440,556 |  |  | 1,495,748 |  |  | 1,460,155 |
Expenses: |  |  |  |  |
Property operating, excluding real estate taxes | 264,892 |  |  | 263,389 |  |  | 241,357 |
Real estate taxes | 180,367 |  |  | 177,011 |  |  | 155,170 |
Corporate-level property management expenses | 36,188 |  |  | 34,573 |  |  | 34,067 |
Depreciation and amortization | 520,066 |  |  | 525,497 |  |  | 483,750 |
General and administrative | 51,838 |  |  | 65,388 |  |  | 54,262 |
Expensed acquisition and investment related costs | 203 |  |  | 1,591 |  |  | 168 |
Impairment loss | — |  |  | 1,825 |  |  | 7,105 |
| 1,053,554 |  |  | 1,069,274 |  |  | 975,879 |
Gain (loss) on sale of real estate and land | 142,993 |  |  | 64,967 |  |  | (3,164) |
Earnings from operations | 529,995 |  |  | 491,441 |  |  | 481,112 |
Interest expense | (203,125) |  |  | (220,633) |  |  | (217,339) |
Total return swap income | 10,774 |  |  | 10,733 |  |  | 8,446 |
Interest and other income | 98,744 |  |  | 40,999 |  |  | 46,298 |
Equity income from co-investments | 111,721 |  |  | 66,512 |  |  | 112,136 |
Deferred tax expense on unrealized gain on unconsolidated co-investment | (15,668) |  |  | (1,531) |  |  | (1,457) |
(Loss) gain on early retirement of debt, net | (19,010) |  |  | (22,883) |  |  | 3,717 |
Gain on remeasurement of co-investment | 2,260 |  |  | 234,694 |  |  | 31,535 |
Net income | 515,691 |  |  | 599,332 |  |  | 464,448 |
Net income attributable to noncontrolling interest | (9,946) |  |  | (10,550) |  |  | (9,819) |
Net income available to common unitholders | $ | 505,745 |  |  | $ | 588,782 |  |  | $ | 454,629 |
Per unit data: |  |  |  |  |
Basic: |  |  |  |  |
Net income available to common unitholders | $ | 7.51 |  |  | $ | 8.69 |  |  | $ | 6.67 |
Weighted average number of common units outstanding during the year | 67,340,856 |  |  | 67,750,665 |  |  | 68,140,900 |
Diluted: |  |  |  |  |
Net income available to common unitholders | $ | 7.51 |  |  | $ | 8.69 |  |  | $ | 6.66 |
Weighted average number of common units outstanding during the year | 67,378,265 |  |  | 67,861,590 |  |  | 68,239,933 |

See accompanying notes to consolidated financial statements
F- 14

Table of Contents
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
Years Ended December 31, 2021, 2020, and 2019
(Dollars in thousands)

| 2021 |  | 2020 |  | 2019
Net income | $ | 515,691 |  |  | $ | 599,332 |  |  | $ | 464,448 |
Other comprehensive income (loss): |  |  |  |  |
Change in fair value of derivatives and amortization of swap settlements | 9,170 |  |  | (4,148) |  |  | (2,948) |
Cash flow hedge losses reclassified to earnings | — |  |  | 3,338 |  |  | 1,824 |
Change in fair value of marketable debt securities, net | 329 |  |  | (61) |  |  | 281 |
Reversal of unrealized gains upon the sale of marketable debt securities | — |  |  | — |  |  | (32) |
Total other comprehensive income (loss) | 9,499 |  |  | (871) |  |  | (875) |
Comprehensive income | 525,190 |  |  | 598,461 |  |  | 463,573 |
Comprehensive income attributable to noncontrolling interest | (9,946) |  |  | (10,550) |  |  | (9,819) |
Comprehensive income attributable to controlling interest | $ | 515,244 |  |  | $ | 587,911 |  |  | $ | 453,754 |

See accompanying notes to consolidated financial statements.
F- 15

Table of Contents
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Consolidated Statements of Capital
Years ended December 31, 2021, 2020, and 2019
(Dollars and units in thousands)

|  |  |  |  | Accumulated other comprehensive loss, net |  |  |  |
| General Partner |  | Limited Partners |  |  | Noncontrolling interest |  | Total
| Common Equity |  |  |  | Common Equity |  |  |  |
| Units |  | Amount |  |  |  | Units |  | Amount |  |  |  |
Balances at December 31, 2018 | 65,890 |  |  | $ | 6,280,290 |  |  |  |  | 2,305 |  |  | $ | 59,061 |  |  |  | $ | (9,738) |  |  | $ | 64,231 |  |  | $ | 6,393,844 |
Net income | — |  |  | 439,286 |  |  |  |  | — |  |  | 15,343 |  |  |  | — |  |  | 9,819 |  |  | 464,448 |
Reversal of unrealized gains upon the sale of marketable debt securities | — |  |  | — |  |  |  |  | — |  |  | — |  |  |  | (32) |  |  | — |  |  | (32) |
Cash flow hedge losses reclassified to earnings | — |  |  | — |  |  |  |  | — |  |  | — |  |  |  | 1,824 |  |  | — |  |  | 1,824 |
Change in fair value of derivatives and amortization of swap settlements | — |  |  | — |  |  |  |  | — |  |  | — |  |  |  | (2,948) |  |  | — |  |  | (2,948) |
Change in fair value of marketable debt securities, net | — |  |  | — |  |  |  |  | — |  |  | — |  |  |  | 281 |  |  | — |  |  | 281 |
Issuance of common units under: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
General partner's stock based compensation, net | 195 |  |  | 33,779 |  |  |  |  | — |  |  | — |  |  |  | — |  |  | — |  |  | 33,779 |
Sale of common stock by general partner, net | 228 |  |  | 72,539 |  |  |  |  | — |  |  | — |  |  |  | — |  |  | — |  |  | 72,539 |
Equity based compensation costs | — |  |  | 11,029 |  |  |  |  | 10 |  |  | 1,254 |  |  |  | — |  |  | — |  |  | 12,283 |
Retirement of common units, net | (234) |  |  | (56,989) |  |  |  |  | — |  |  | — |  |  |  | — |  |  | — |  |  | (56,989) |
Cumulative effect upon adoption of ASU No. 2017-12 | — |  |  | — |  |  |  |  | — |  |  | — |  |  |  | 181 |  |  | — |  |  | 181 |
Changes in the redemption value of redeemable noncontrolling interest | — |  |  | (3,427) |  |  |  |  | — |  |  | 109 |  |  |  | — |  |  | 1,310 |  |  | (2,008) |
Changes in noncontrolling interest from acquisition | — |  |  | — |  |  |  |  | — |  |  | — |  |  |  | — |  |  | 65,472 |  |  | 65,472 |
Distributions to noncontrolling interest | — |  |  | — |  |  |  |  | — |  |  | — |  |  |  | — |  |  | (10,521) |  |  | (10,521) |
Redemptions | 13 |  |  | (28,083) |  |  |  |  | (13) |  |  | (436) |  |  |  | — |  |  | (8,049) |  |  | (36,568) |
Distributions declared ($7.80 per unit) | — |  |  | (514,109) |  |  |  |  | — |  |  | (17,972) |  |  |  | — |  |  | — |  |  | (532,081) |
Balances at December 31, 2019 | 66,092 |  |  | $ | 6,234,315 |  |  |  |  | 2,302 |  |  | $ | 57,359 |  |  |  | $ | (10,432) |  |  | $ | 122,262 |  |  | $ | 6,403,504 |
Net income | — |  |  | 568,870 |  |  |  |  | — |  |  | 19,912 |  |  |  | — |  |  | 10,550 |  |  | 599,332 |
Cash flow hedge losses reclassified to earnings | — |  |  | — |  |  |  |  | — |  |  | — |  |  |  | 3,338 |  |  | — |  |  | 3,338 |
Change in fair value of derivatives and amortization of swap settlements | — |  |  | — |  |  |  |  | — |  |  | — |  |  |  | (4,148) |  |  | — |  |  | (4,148) |
Change in fair value of marketable debt securities, net | — |  |  | — |  |  |  |  | — |  |  | — |  |  |  | (61) |  |  | — |  |  | (61) |
Issuance of common units under: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
General partner's stock based compensation, net | 95 |  |  | 9,201 |  |  |  |  | — |  |  | — |  |  |  | — |  |  | — |  |  | 9,201 |
Sale of common stock by general partner, net | — |  |  | (296) |  |  |  |  | — |  |  | — |  |  |  | — |  |  | — |  |  | (296) |

F- 16

Table of Contents

Equity based compensation costs | — |  |  | 12,453 |  |  |  |  | 2 |  |  | 460 |  |  |  | — |  |  | — |  |  | 12,913 |
Retirement of common units, net | (1,197) |  |  | (269,315) |  |  |  |  | — |  |  | — |  |  |  | — |  |  | — |  |  | (269,315) |
Cumulative effect upon adoption of ASU No. 2016-13 | — |  |  | (190) |  |  |  |  | — |  |  | — |  |  |  | — |  |  | — |  |  | (190) |
Changes in the redemption value of redeemable noncontrolling interest | — |  |  | 4,375 |  |  |  |  | — |  |  | (197) |  |  |  | — |  |  | 121 |  |  | 4,299 |
Changes in noncontrolling interest from acquisition | — |  |  | — |  |  |  |  | — |  |  | — |  |  |  | — |  |  | 1,349 |  |  | 1,349 |
Distributions to noncontrolling interest | — |  |  | — |  |  |  |  | — |  |  | — |  |  |  | — |  |  | (12,292) |  |  | (12,292) |
Redemptions | 9 |  |  | (2,020) |  |  |  |  | (9) |  |  | (275) |  |  |  | — |  |  | (818) |  |  | (3,113) |
Distributions declared ($8.31 per unit) | — |  |  | (542,254) |  |  |  |  | — |  |  | (19,075) |  |  |  | — |  |  | — |  |  | (561,329) |
Balances at December 31, 2020 | 64,999 |  |  | $ | 6,015,139 |  |  |  |  | 2,295 |  |  | $ | 58,184 |  |  |  | $ | (11,303) |  |  | $ | 121,172 |  |  | $ | 6,183,192 |
Net income | — |  |  | 488,554 |  |  |  |  | — |  |  | 17,191 |  |  |  | $ | — |  |  | 9,946 |  |  | 515,691 |
Change in fair value of derivatives and amortization of swap settlements | — |  |  | — |  |  |  |  | — |  |  | — |  |  |  | 9,170 |  |  | — |  |  | 9,170 |
Change in fair value of marketable debt securities, net | — |  |  | — |  |  |  |  | — |  |  | — |  |  |  | 329 |  |  | — |  |  | 329 |
Issuance of common units under: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
General partner's stock based compensation, net | 279 |  |  | 53,052 |  |  |  |  | — |  |  | — |  |  |  | — |  |  | — |  |  | 53,052 |
Sale of common stock by general partner, net | — |  |  | (455) |  |  |  |  | — |  |  | — |  |  |  | — |  |  | — |  |  | (455) |
Equity based compensation costs | — |  |  | 11,286 |  |  |  |  | — |  |  | 397 |  |  |  | — |  |  | — |  |  | 11,683 |
Retirement of common units, net | (40) |  |  | (9,172) |  |  |  |  | — |  |  | — |  |  |  | — |  |  | — |  |  | (9,172) |
Changes in the redemption value of redeemable noncontrolling interest | — |  |  | (7,489) |  |  |  |  | — |  |  | 152 |  |  |  | — |  |  | 447 |  |  | (6,890) |
Contributions from noncontrolling interest | — |  |  | — |  |  |  |  | — |  |  | — |  |  |  | — |  |  | 1,900 |  |  | 1,900 |
Distributions to noncontrolling interest | — |  |  | — |  |  |  |  | — |  |  | — |  |  |  | — |  |  | (10,215) |  |  | (10,215) |
Redemptions | 10 |  |  | (7,566) |  |  |  |  | (13) |  |  | (296) |  |  |  | — |  |  | (595) |  |  | (8,457) |
Distributions declared ($8.36 per unit) | — |  |  | (544,194) |  |  |  |  | — |  |  | (19,126) |  |  |  | — |  |  | — |  |  | (563,320) |
Balances at December 31, 2021 | 65,248 |  |  | $ | 5,999,155 |  |  |  |  | 2,282 |  |  | $ | 56,502 |  |  |  | $ | (1,804) |  |  | $ | 122,655 |  |  | $ | 6,176,508 |

See accompanying notes to consolidated financial statements
F- 17

Table of Contents
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 2021, 2020, and 2019
(Dollars in thousands)

| 2021 |  | 2020 |  | 2019
Cash flows from operating activities: |  |  |  |  |
Net income | $ | 515,691 |  |  | $ | 599,332 |  |  | $ | 464,448 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |
Straight-lined rents | 9,672 |  |  | (19,426) |  |  | (1,218) |
Depreciation and amortization | 520,066 |  |  | 525,497 |  |  | 483,750 |
Amortization of discount on marketable securities | — |  |  | (19,075) |  |  | (28,491) |
Amortization of discount and debt financing costs, net | 9,538 |  |  | 6,674 |  |  | 5,689 |
Gain on sale of marketable securities | (3,400) |  |  | (2,131) |  |  | (1,271) |
Income from early redemption of notes receivable | (4,939) |  |  | — |  |  | — |
Provision for credit losses | 141 |  |  | 687 |  |  | — |
Unrealized gains on equity securities recognized through income | (33,104) |  |  | (12,515) |  |  | (5,710) |
Company's share of gain on the sales of co-investments | — |  |  | (2,225) |  |  | (51,097) |
Earnings from co-investments | (111,721) |  |  | (64,287) |  |  | (61,039) |
Operating distributions from co-investments | 104,833 |  |  | 74,419 |  |  | 99,277 |
Accrued interest from notes and other receivables | (15,902) |  |  | (3,683) |  |  | (6,012) |
Impairment loss | — |  |  | 1,825 |  |  | 7,105 |
(Gain) loss on the sale of real estate and land | (142,993) |  |  | (64,967) |  |  | 3,164 |
Equity-based compensation | 7,308 |  |  | 8,157 |  |  | 7,010 |
Loss (gain) on early retirement of debt, net | 19,010 |  |  | 22,883 |  |  | (3,717) |
Gain on remeasurement of co-investment | (2,260) |  |  | (234,694) |  |  | (31,535) |
Changes in operating assets and liabilities: |  |  |  |  |
Prepaid expenses, receivables, operating lease right-of-use assets, and other assets | 4,878 |  |  | (3,730) |  |  | 6,969 |
Accounts payable, accrued liabilities, and operating lease liabilities | 22,298 |  |  | (10,382) |  |  | 29,551 |
Other liabilities | 6,143 |  |  | 749 |  |  | 2,206 |
Net cash provided by operating activities | 905,259 |  |  | 803,108 |  |  | 919,079 |
Cash flows from investing activities: |  |  |  |  |
Additions to real estate: |  |  |  |  |
Acquisitions of real estate and acquisition related capital expenditures, net of cash acquired | (153,481) |  |  | (460,421) |  |  | (133,825) |
Redevelopment | (61,671) |  |  | (48,980) |  |  | (70,295) |
Development acquisitions of and additions to real estate under development | (49,784) |  |  | (108,781) |  |  | (158,234) |
Capital expenditures on rental properties | (121,195) |  |  | (90,085) |  |  | (101,689) |
Investments in notes receivable | (245,144) |  |  | (135,343) |  |  | (231,400) |
Collections of notes and other receivables | 104,405 |  |  | 98,711 |  |  | 168,720 |
Proceeds from insurance for property losses | 879 |  |  | 723 |  |  | 3,734 |
Proceeds from dispositions of real estate | 297,454 |  |  | 339,165 |  |  | 23,214 |
Contributions to co-investments | (306,266) |  |  | (114,017) |  |  | (402,284) |
Changes in refundable deposits | (9,486) |  |  | 96 |  |  | 5 |
Purchases of marketable securities | (23,805) |  |  | (83,379) |  |  | (46,458) |
Sales and maturities of marketable securities | 16,577 |  |  | 113,465 |  |  | 147,531 |
Non-operating distributions from co-investments | 154,120 |  |  | 71,946 |  |  | 273,290 |

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Net cash used in investing activities | (397,397) |  |  | (416,900) |  |  | (527,691) |
Cash flows from financing activities: |  |  |  |  |
Proceeds from unsecured debt and mortgage notes | 745,505 |  |  | 1,452,808 |  |  | 1,045,290 |
Payments on unsecured debt and mortgage notes | (1,053,501) |  |  | (916,209) |  |  | (1,026,616) |
Proceeds from lines of credit | 1,050,589 |  |  | 1,038,426 |  |  | 1,939,213 |
Repayments of lines of credit | (709,332) |  |  | (1,093,426) |  |  | (1,884,213) |
Retirement of common units | (9,172) |  |  | (269,315) |  |  | (56,989) |
Additions to deferred charges | (8,350) |  |  | (13,772) |  |  | (10,898) |
Payments related to debt prepayment penalties | (18,342) |  |  | (19,605) |  |  | (1,406) |
Net proceeds from issuance of common units | (455) |  |  | (296) |  |  | 72,539 |
Net proceeds from stock options exercised | 58,497 |  |  | 14,865 |  |  | 37,467 |
Payments related to tax withholding for share-based compensation | (5,445) |  |  | (5,664) |  |  | (3,688) |
Contributions from noncontrolling interest | 1,900 |  |  | — |  |  | — |
Distributions to noncontrolling interest | (8,369) |  |  | (8,409) |  |  | (7,288) |
Redemption of noncontrolling interests | (8,457) |  |  | (3,113) |  |  | (36,568) |
Redemption of redeemable noncontrolling interests | (4,463) |  |  | (872) |  |  | (73) |
Common units distributions paid | (563,870) |  |  | (558,679) |  |  | (528,459) |
Net cash used in financing activities | (533,265) |  |  | (383,261) |  |  | (461,689) |
Net (decrease) increase in unrestricted and restricted cash and cash equivalents | (25,403) |  |  | 2,947 |  |  | (70,301) |
Unrestricted and restricted cash and cash equivalents at beginning of period | 84,041 |  |  | 81,094 |  |  | 151,395 |
Unrestricted and restricted cash and cash equivalents at end of period | $ | 58,638 |  |  | $ | 84,041 |  |  | $ | 81,094 |
Supplemental disclosure of cash flow information: |  |  |  |  |
Cash paid for interest, net of capitalized interest | $ | 194,203 |  |  | $ | 211,732 |  |  | $ | 194,418 |
Interest capitalized | $ | 6,153 |  |  | $ | 14,615 |  |  | $ | 24,169 |
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |  |
Operating cash flows from operating leases | $ | 6,963 |  |  | $ | 6,892 |  |  | $ | 6,811 |
Supplemental disclosure of noncash investing and financing activities: |  |  |  |  |
Issuance of DownREIT units in connection with acquisition of real estate | $ | — |  |  | $ | — |  |  | $ | 65,472 |
Transfers between real estate under development and rental properties, net | $ | 328,393 |  |  | $ | 253,039 |  |  | $ | 19,812 |
Transfer from real estate under development to co-investments | $ | 3,068 |  |  | $ | 1,739 |  |  | $ | 671 |
Reclassifications to (from) redeemable noncontrolling interest from general and limited partner capital and noncontrolling interest | $ | 6,890 |  |  | $ | (4,299) |  |  | $ | 2,008 |
Initial recognition of operating lease right-of-use assets | $ | — |  |  | $ | — |  |  | $ | 77,645 |
Initial recognition of operating lease liabilities | $ | — |  |  | $ | — |  |  | $ | 79,693 |
Debt assumed in connection with acquisition | $ | — |  |  | $ | — |  |  | $ | 143,006 |

See accompanying notes to consolidated financial statements
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ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
(1) Organization
The accompanying consolidated financial statements present the accounts of Essex Property Trust, Inc. ("Essex" or the "Company"), which include the accounts of the Company and Essex Portfolio, L.P. and its subsidiaries (the "Operating Partnership," which holds the operating assets of the Company). Unless otherwise indicated, the notes to consolidated financial statements apply to both the Company and the Operating Partnership.
Essex is the sole general partner of the Operating Partnership with a 96.6% general partner interest and the limited partners owned a 3.4% interest as of December 31, 2021. The limited partners may convert their Operating Partnership units into an equivalent number of shares of Essex common stock. Total Operating Partnership limited partnership units ("OP Units," and the holders of such OP Units, "Unitholders") outstanding were 2,282,464 and 2,294,760 as of December 31, 2021 and 2020, respectively, and the redemption value of the units, based on the closing price of the Company’s common stock, totaled approximately $804.0 million and $544.8 million, as of December 31, 2021 and 2020, respectively. The Company has reserved shares of common stock for such conversions.
As of December 31, 2021, the Company owned or had ownership interests in 252 operating apartment communities, comprising 61,911 apartment homes, excluding the Company's ownership interests in preferred interest co-investments, loan investments, three operating commercial building, and a development pipeline comprised of one consolidated project and one unconsolidated joint venture project. The operating apartment communities are located in Southern California (primarily Los Angeles, Orange, San Diego, and Ventura counties), Northern California (the San Francisco Bay Area) and the Seattle metropolitan areas.
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ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
(2) Summary of Critical and Significant Accounting Policies
(a) Principles of Consolidation and Basis of Presentation
The accounts of the Company, its controlled subsidiaries and the variable interest entities ("VIEs") in which it is the primary beneficiary are consolidated in the accompanying financial statements and prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"). In the opinion of management, all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented have been included and are normal and recurring in nature. All significant inter-company accounts and transactions have been eliminated.
Noncontrolling interest includes the 3.4% limited partner interests in the Operating Partnership not held by the Company at both December 31, 2021 and 2020. These percentages include the Operating Partnership’s vested long-term incentive plan units (see Note 14).
(b) Recently Adopted Accounting Pronouncements
In January 2021, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2021-01 "Reference Rate Reform (Topic 848): Scope." The amendments in ASU No. 2021-01 provide optional expedients to the current guidance on contract modifications and hedge accounting from the expected market transition from LIBOR and other interbank offered rates to alternative reference rates. The guidance generally can be applied to applicable contract modifications through December 31, 2022. The Company adopted this new guidance in January 2021 on a prospective basis. This adoption did not have a material impact on the Company's consolidated results of operations or financial position.
(c) Recent Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06 “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.” The amendments in ASU No. 2020-06 modifies the if-converted method of calculating diluted EPS. For instruments that may be settled in cash or shares, and are not classified as liability, the guidance requires entities to include the effect of potential share settlement in the diluted EPS calculation, if the effect is more dilutive. ASU No. 2020-06 is effective for the Company on January 1, 2022 and will be applied on a prospective basis. The Company does not expect this adoption to have a material impact on its consolidated results of operations or financial position.
(d) Real Estate Rental Properties
Significant expenditures, which improve or extend the life of an asset and have a useful life of greater than one year, are capitalized. Operating real estate assets are stated at cost and consist of land and land improvements, buildings and improvements, furniture, fixtures and equipment, and other costs incurred during their development, redevelopment and acquisition. Expenditures for maintenance and repairs are charged to expense as incurred.
The depreciable life of various categories of fixed assets is as follows:

Computer software and equipment | 3 - 5 years
Interior apartment home improvements | 5 years
Furniture, fixtures and equipment | 5 - 10 years
Land improvements and certain exterior components of real property | 10 years
Real estate structures | 30 years

The Company capitalizes all costs incurred with the predevelopment, development or redevelopment of real estate assets or are associated with the construction or expansion of real property. Such capitalized costs include land, land improvements, allocated costs of the Company’s project management staff, construction costs, as well as interest and related loan fees, property taxes and insurance. Capitalization begins for predevelopment, development, and redevelopment projects when activity commences. Capitalization ends when the apartment home is completed and the property is available for a new tenant or if the development activities cease.
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ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
The Company allocates the purchase price of real estate on a fair value basis to land and building including personal property, and identifiable intangible assets, such as the value of above, below and in-place leases. In making estimates of relative fair values for purposes of allocating purchase price, the Company utilizes a number of sources, including independent land and building appraisals which consider comparable market transactions, its own analysis of recently acquired or developed comparable properties in our portfolio for land comparables and building replacement costs, and other publicly available market data. In calculating the fair value of identified intangible assets of an acquired property, the in-place leases are valued based on in-place rent rates and amortized over the average remaining term of all acquired leases.
The values of the above and below market leases are amortized and recorded as either a decrease (in the case of above market leases) or an increase (in the case of below market leases) to rental revenue over the remaining term of the associated leases acquired. The value of acquired in-place leases are amortized to expense over the average remaining term of the leases acquired. The net carrying value of acquired in-place leases is $8.9 million and $4.7 million as of December 31, 2021 and 2020, respectively, and are included in prepaid expenses and other assets on the Company's consolidated balance sheets.
The Company periodically assesses the carrying value of its real estate investments for indicators of impairment. The judgments regarding the existence of impairment indicators are based on monitoring investment market conditions and performance compared to budget for operating properties including the net operating income for the most recent 12 month period, monitoring estimated costs for properties under development, the Company's ability to hold and its intent with regard to each asset, and each property's remaining useful life. Whenever events or changes in circumstances indicate that the carrying amount of a property held for investment may not be fully recoverable, the carrying amount is evaluated. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount (including intangible assets) of a property held for investment, then the Company will recognize an impairment loss equal to the excess of the carrying amount over the fair value of the property. Fair value of a property is determined using conventional real estate valuation methods, such as discounted cash flow, the property’s unleveraged yield in comparison to the unleveraged yields and/or sales prices of similar communities that have been recently sold, and other third party information, if available. Communities held for sale are carried at the lower of cost or fair value less estimated costs to sell. As of December 31, 2021, no properties were classified as held for sale. As of December 31, 2020, two properties were classified as held for sale. The Company did not record an impairment charge for the year ended December 31, 2021. The Company recorded an impairment charge of $1.8 million for the year ended December 31, 2020 related to one of the Company's consolidated properties as a result of a change in the Company's intent to hold the property for its remaining useful life. The Company recorded an impairment charge of $7.1 million for the year ended December 31, 2019 on a parcel of land that was part of a consolidated co-investment with Canada Pension Plan Investment Board ("CPPIB" or "CPP"). The impairment charge resulted from the Company's acquisition of CPPIB's 45% interest in the co-investment. The impairment analysis over the parcel’s fair value was determined using internally developed models based on market assumptions.
In the normal course of business, the Company will receive purchase offers for its communities, either solicited or unsolicited. For those offers that are accepted, the prospective buyer will usually require a due diligence period before consummation of the transaction. It is not unusual for matters to arise that result in the withdrawal or rejection of the offer during this process. The Company classifies real estate as "held for sale" when the Company has obtained necessary management approvals to sell a property and the sale of the property is expected to be completed within a year. Evaluating solicited or unsolicited offers generally does not cause properties to be classified as held for sale.
(e) Co-investments
The Company owns investments in joint ventures in which it has significant influence, but its ownership interest does not meet the criteria for consolidation in accordance with U.S. GAAP. Therefore, the Company accounts for co-investments using the equity method of accounting. Under the equity method of accounting, the investment is carried at the cost of assets contributed, plus the Company’s equity in earnings less distributions received and the Company’s share of losses. The significant accounting policies of the Company’s co-investment entities are consistent with those of the Company in all material respects.
Upon the acquisition of a controlling interest of a co-investment, the co-investment entity is consolidated and a gain or loss is recognized upon the remeasurement of co-investments in the consolidated statement of income equal to the amount by which the fair value of the Company's previously owned co-investment interest exceeds its carrying value. A majority of the co-investments, excluding most preferred equity investments, compensate the Company for its asset management services and some of these investments may provide promote income if certain financial return benchmarks are achieved. Asset management
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ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
fees are recognized when earned, and promote fees are recognized when the earnings events have occurred and the amount is determinable and collectible. Any promote fees are reflected in equity income from co-investments.
The Company recorded an other-than-temporary impairment charge of $11.5 million for the year ended December 31, 2019 on an unconsolidated co-investment with CPPIB which held Agora, a 49-unit apartment home community located in Walnut Creek, CA. The other-than-temporary impairment charge resulted from the Company's acquisition of CPPIB's 45% interest in the co-investment. The impairment analysis over the co-investments fair value was determined using internally developed models based on market assumptions. The impairment is reflected in equity income from co-investments on the consolidated statements of income. No other-than-temporary impairment charges were recorded for the years ended December 31, 2021 or 2020.
(f) Revenues and Gains on Sale of Real Estate and Land
Revenues from tenants renting or leasing apartment homes are recorded when due from tenants and are recognized monthly as they are earned, which generally approximates a straight-line basis, else, adjustments are made to conform to a straight-line basis. Apartment homes are rented under short-term leases (generally, lease terms of 9 to 12 months). Revenues from tenants leasing commercial space are recorded on a straight-line basis over the life of the respective lease. See Note 4, Revenues, and Note 10, Lease Agreements - Company as Lessor, for additional information regarding such revenues.
The Company also generates other property-related revenue associated with the leasing of apartment homes, including storage income, pet rent, and other miscellaneous revenue. Similar to rental income, such revenues are recorded when due from tenants and recognized monthly as they are earned.
Apart from rental and other property-related revenue, revenues from contracts with customers are recognized as control of the promised services is passed to the customer. For customer contracts related to management and other fees from affiliates (which includes asset management and property management), the transaction price and amount of revenue to be recognized is determined each quarter based on the management fee calculated and earned for that month or quarter. The contract will contain a description of the service and the fee percentage for management services. Payments from such services are one month or one quarter in arrears of the service performed.
The Company recognizes any gains on sales of real estate when it transfers control of a property and when it is probable that the Company will collect substantially all of the related consideration.
(g) Cash, Cash Equivalents and Restricted Cash
Highly liquid investments with original maturities of three months or less when purchased are classified as cash equivalents. Restricted cash balances relate primarily to reserve requirements for capital replacement at certain communities in connection with the Company’s mortgage debt.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows ($ in thousands):

| 2021 |  | 2020 |  | 2019
Cash and cash equivalents - unrestricted | $ | 48,420 |  |  | $ | 73,629 |  |  | $ | 70,087 |
Cash and cash equivalents - restricted | 10,218 |  |  | 10,412 |  |  | 11,007 |
Total unrestricted and restricted cash and cash equivalents shown in the consolidated statements of cash flows | $ | 58,638 |  |  | $ | 84,041 |  |  | $ | 81,094 |

(h) Marketable Securities
The Company reports its equity securities and available for sale debt securities at fair value, based on quoted market prices (Level 1 for the common stock and investment funds, Level 2 for the unsecured debt and Level 3, as defined by the FASB standard for fair value measurements as discussed later in Note 2). As of December 31, 2021 and 2020, $0.8 million and $2.5 million, respectively, of equity securities presented within common stock and stock funds in the tables below represent
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ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
investments measured at fair value, using net asset value as a practical expedient, and are not categorized in the fair value hierarchy.
Any unrealized gain or loss in debt securities classified as available for sale is recorded as other comprehensive income. There were no other than temporary impairment charges for the years ended December 31, 2021, 2020, and 2019. Unrealized gains and losses in equity securities, realized gains and losses in debt securities, interest income, and amortization of purchase discounts are included in interest and other income on the consolidated statements of income.
As of December 31, 2021 and 2020, equity securities and available for sale debt securities consisted primarily of investment-grade unsecured debt, and common stock and stock funds.
As of December 31, 2021 and 2020, marketable securities consist of the following ($ in thousands):

| December 31, 2021
| Amortized Cost |  | Gross Unrealized (Loss) Gain |  | Carrying Value |  |
Equity securities: |  |  |  |  |  |  |
Investment funds - debt securities | $ | 62,192 |  |  | $ | (502) |  |  | $ | 61,690 |  |  |
Common stock and stock funds | 79,155 |  |  | 49,592 |  |  | 128,747 |  |  |
Debt securities: |  |  |  |  |  |  |
Available for sale |  |  |  |  |  |  |
Investment-grade unsecured debt | 1,051 |  |  | 341 |  |  | 1,392 |  |  |
Total - Marketable securities | $ | 142,398 |  |  | $ | 49,431 |  |  | $ | 191,829 |  |  |

| December 31, 2020
| Amortized Cost |  | Gross Unrealized Gain |  | Carrying Value
Equity securities: |  |  |  |  |
Investment funds - debt securities | $ | 49,646 |  |  | $ | 985 |  |  | $ | 50,631 |
Common stock and stock funds | 81,074 |  |  | 15,001 |  |  | 96,075 |
Debt securities: |  |  |  |  |
Available for sale |  |  |  |  |
Investment-grade unsecured debt | 1,050 |  |  | 12 |  |  | 1,062 |
Total - Marketable securities | $ | 131,770 |  |  | $ | 15,998 |  |  | $ | 147,768 |

The Company uses the specific identification method to determine the cost basis of a debt security sold and to reclassify amounts from accumulated other comprehensive income for such securities.
For the years ended December 31, 2021, 2020 and 2019, the proceeds from sales and maturities of marketable securities totaled $16.6 million, $113.5 million and $147.5 million, respectively. For the years ended December 31, 2021, 2020 and 2019, these sales resulted in gains of $3.4 million, $2.1 million, and $1.3 million, respectively.
For the years ended December 31, 2021 and 2020, the portion of equity security unrealized gains recognized in income totaled $33.1 million and $12.5 million in gains, respectively, and were included in interest and other income on the Company's consolidated statements of income and comprehensive income.
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ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
(i) Notes Receivable
Notes receivable relate to real estate financing arrangements including mezzanine and bridge loans. Interest is recognized over the life of the note as interest income.
Each note is analyzed to determine if it is impaired. A note is impaired if it is probable that the Company will not collect all contractually due principal and interest. The Company does not accrue interest when a note is considered impaired and an allowance is recorded for any principal and previously accrued interest that are not believed to be collectible. All cash receipts on impaired notes are applied to reduce the principal amount of such notes until the principal has been recovered and, thereafter, are recognized as interest income. As of December 31, 2021 and 2020, no notes were impaired.
In the normal course of business, the Company originates and holds two types of loans: mezzanine loans issued to entities that are pursuing apartment development and short-term bridge loans issued to joint ventures with the Company.
The Company categorizes development project mezzanine loans into risk categories based on relevant information about the ability of the borrowers to service their debt, such as: current financial information, credit documentation, public information, and previous experience with the borrower. The Company initially analyzes each mezzanine loan individually to classify the credit risk of the loan. On a periodic basis the Company evaluates and performs site visits of the development projects associated with the mezzanine loans to confirm whether they are on budget and whether there are any delays in development that could impact the Company's assessment of credit loss.
All bridge loans that the Company issues are, by their nature, short-term and meant only to provide time for the Company’s joint ventures to obtain long-term funding for newly acquired communities. As the Company is a partner in the joint ventures that are borrowing such funds and has performed a detailed review of each community as part of the acquisition process, there is little to no credit risk associated with such loans. As such, the Company does not review credit quality indicators for bridge loans on an ongoing basis.
The Company estimates the allowance for credit losses for each loan type using relevant available information from internal and external sources, relating to past events, current conditions, and reasonable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made, if necessary, for differences in current loan-specific risk characteristics. For example, in the case of mezzanine loans, adjustments may be made due to differences in track record and experience of the mezzanine loan sponsor as well as the percent of equity that the sponsor has contributed to the project.
(j) Capitalization Policy
The Company capitalizes all direct and certain indirect costs, including interest, employee compensation costs, real estate taxes and insurance, incurred during development and redevelopment activities. Interest is capitalized on real estate assets that require a period of time to get them ready for their intended use. The amount of interest capitalized is based upon the average amount of accumulated development expenditures during the reporting period. Included in capitalized costs are management’s estimates of the direct and incremental personnel costs and indirect project costs associated with the Company's development and redevelopment activities. Indirect project costs consist primarily of personnel costs associated with construction administration and development, including accounting, legal fees, and various corporate and community onsite costs that clearly relate to projects under development. Those costs, inclusive of capitalized interest, as well as capitalized development and redevelopment fees totaled $23.6 million, $31.4 million and $42.1 million for the years ended December 31, 2021, 2020 and 2019, respectively, most of which relates to development projects. The Company capitalizes leasing costs associated with the lease-up of development communities and amortizes the costs over the life of the leases. The amounts capitalized are immaterial for all periods presented.
(k) Fair Value of Financial Instruments
The Company values its financial instruments based on the fair value hierarchy of valuation techniques described in the FASB’s accounting standard for fair value measurements. Level 1 inputs are unadjusted, quoted prices in active markets for identical
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ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
assets or liabilities at the measurement date. Level 2 inputs include quoted prices for similar assets and liabilities in active markets and inputs other than quoted prices observable for the asset or liability. Level 3 inputs are unobservable inputs for the asset or liability. The Company uses Level 1 inputs for the fair values of its cash equivalents and its marketable securities except for unsecured bonds and mortgage backed securities. The Company uses Level 2 inputs for its investments in unsecured debt, notes receivable, notes payable, and derivative assets/liabilities. These inputs include interest rates for similar financial instruments. The Company’s valuation methodology for derivatives is described in Note 9. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
Management believes that the carrying amounts of the outstanding balances under its lines of credit, and notes and other receivables approximate fair value as of December 31, 2021 and 2020, because interest rates, yields and other terms for these instruments are consistent with interest rates, yields and other terms currently available for similar instruments. Management has estimated that the fair value of fixed rate debt with a carrying value of $5.7 billion and $5.5 billion at December 31, 2021 and 2020, respectively, to be $6.0 billion at both December 31, 2021 and 2020. Management has estimated the fair value of the Company’s $564.9 million and $775.1 million of variable rate debt at December 31, 2021 and 2020, respectively, to be $561.7 million and $770.1 million at December 31, 2021 and 2020, respectively, based on the terms of existing mortgage notes payable, unsecured debt, and variable rate demand notes compared to those available in the marketplace. Management believes that the carrying amounts of cash and cash equivalents, restricted cash, accounts payable and accrued liabilities, construction payables, other liabilities and dividends payable approximate fair value as of December 31, 2021 and 2020 due to the short-term maturity of these instruments. Marketable securities are carried at fair value as of December 31, 2021 and 2020.
(l) Interest Rate Protection, Swap, and Forward Contracts
The Company uses interest rate swaps, interest rate caps, and total return swap contracts to manage interest rate risks. 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.
The Company records all derivatives on its consolidated balance sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.
For derivatives designated for accounting purposes as fair value hedges, changes in the fair value of the derivative and the hedged item related to the hedged risk are recognized in earnings. For derivatives designated for accounting purposes as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially reported in other comprehensive income (outside of earnings) and subsequently reclassified to earnings when the hedged transaction affects earnings, and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings. The Company assesses the initial and ongoing effectiveness of each hedging relationship by comparing the changes in fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of the designated hedged item or transaction.
For derivatives not designated for accounting purposes as cash flow hedges, changes in fair value are recognized in earnings. All of the Company’s interest rate swaps are considered cash flow hedges.
(m) Income Taxes
Generally in any year in which Essex qualifies as a real estate investment trust ("REIT") under the Internal Revenue Code (the "IRC"), it is not subject to federal income tax on that portion of its income that it distributes to stockholders. No provision for federal income taxes, other than the taxable REIT subsidiaries discussed below, has been made in the accompanying consolidated financial statements for each of the years in the three-year period ended December 31, 2021 as Essex has elected to be and believes it qualifies under the IRC as a REIT and has made distributions during the periods in amounts to preclude Essex from paying federal income tax.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
In order to maintain compliance with REIT tax rules, the Company utilizes taxable REIT subsidiaries for various revenue generating or investment activities. The taxable REIT subsidiaries are consolidated by the Company. In general, the activities and tax related provisions, assets and liabilities are not material.
As a partnership, the Operating Partnership is not subject to federal or state income taxes, except that in order to maintain Essex's compliance with REIT tax rules that are applicable to Essex, the Operating Partnership utilizes taxable REIT subsidiaries for various revenue generating or investment activities. The taxable REIT subsidiaries are consolidated by the Operating Partnership.
The status of cash dividends distributed for the years ended December 31, 2021, 2020, and 2019 related to common stock are classified for tax purposes as follows:

| 2021 |  | 2020 |  | 2019
Common Stock |  |  |  |  |
Ordinary income | 70.92 | % |  | 85.23 | % |  | 83.81 | %
Capital gain | 22.07 | % |  | 10.68 | % |  | 13.78 | %
Unrecaptured section 1250 capital gain | 7.01 | % |  | 4.09 | % |  | 2.41 | %
| 100.00 | % |  | 100.00 | % |  | 100.00 | %

(n) Equity-based Compensation
The cost of share- and unit-based compensation awards is measured at the grant date based on the estimated fair value of the awards. The estimated fair value of stock options and restricted stock granted by the Company are being amortized over the vesting period. The estimated grant date fair values of the long-term incentive plan units (discussed in Note 14) are being amortized over the expected service periods.
(o) Changes in Accumulated Other Comprehensive Loss, by Component
Changes in Accumulated Other Comprehensive Loss, Net, by Component
Essex Property Trust, Inc. ($ in thousands)

| Change in fair value and amortization of swap settlements |  | Unrealized gain on available for sale securities |  | Total
Balance at December 31, 2020 | $ | (14,771) |  |  | $ | 42 |  |  | $ | (14,729) |
Other comprehensive income before reclassification | 8,843 |  |  | 318 |  |  | 9,161 |
Amounts reclassified from accumulated other comprehensive loss | 16 |  |  | — |  |  | 16 |
Other comprehensive income | 8,859 |  |  | 318 |  |  | 9,177 |
Balance at December 31, 2021 | $ | (5,912) |  |  | $ | 360 |  |  | $ | (5,552) |

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
Changes in Accumulated Other Comprehensive Loss, by Component
Essex Portfolio, L.P. ($ in thousands)

| Change in fair value and amortization of swap settlements |  | Unrealized gain on available for sale securities |  | Total
Balance at December 31, 2020 | $ | (11,346) |  |  | $ | 43 |  |  | $ | (11,303) |
Other comprehensive income before reclassification | 9,153 |  |  | 329 |  |  | 9,482 |
Amounts reclassified from accumulated other comprehensive loss | 17 |  |  | — |  |  | 17 |
Other comprehensive income | 9,170 |  |  | 329 |  |  | 9,499 |
Balance at December 31, 2021 | $ | (2,176) |  |  | $ | 372 |  |  | $ | (1,804) |

Amounts reclassified from accumulated other comprehensive loss in connection with derivatives are recorded in interest expense on the consolidated statements of income. Realized gains and losses on available for sale debt securities are included in interest and other income on the consolidated statements of income.
(p) Redeemable Noncontrolling Interest
The carrying value of redeemable noncontrolling interest in the accompanying balance sheets was $34.7 million and $32.2 million as of December 31, 2021 and 2020, respectively. The limited partners may redeem their noncontrolling interests for cash in certain circumstances.
The changes in the redemption value of redeemable noncontrolling interests for the years ended December 31, 2021, 2020, and 2019 are as follows:

| 2021 |  | 2020 |  | 2019
Balance at January 1, | $ | 32,239 |  |  | $ | 37,410 |  |  | $ | 35,475 |
Reclassifications due to change in redemption value and other | 6,890 |  |  | (4,299) |  |  | 2,008 |
Redemptions | (4,463) |  |  | (872) |  |  | (73) |
Balance at December 31, | $ | 34,666 |  |  | $ | 32,239 |  |  | $ | 37,410 |

(q) Accounting Estimates
The preparation of consolidated financial statements, in accordance with U.S. GAAP, requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to acquiring, developing and assessing the carrying values of its real estate portfolio, its investments in and advances to joint ventures and affiliates, and its notes receivable. The Company bases its estimates on historical experience, current market conditions, and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may vary from those estimates and those estimates could be different under different assumptions or conditions.
(r) Variable Interest Entities
In accordance with accounting standards for consolidation of VIEs, the Company consolidated the Operating Partnership, 18 DownREIT entities (comprising nine communities), and six co-investments as of December 31, 2021. The Company consolidated the Operating Partnership, 17 DownREIT entities (comprising nine communities), and five co-investments as of December 31, 2020. The Company consolidates these entities because it is deemed the primary beneficiary. The Company has no assets or liabilities other than its investment in the Operating Partnership. The consolidated total assets and liabilities related to the above consolidated co-investments and DownREIT entities, net of intercompany eliminations, were approximately $909.3 million and $320.1 million, respectively, as of December 31, 2021, and $898.5 million and $326.8 million, respectively, as of December 31, 2020. Noncontrolling interests in these entities were $122.4 million and $120.8 million as of December 31, 2021 and 2020, respectively. The Company's financial risk in each VIE is limited to its equity investment in the VIE.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
The DownREIT VIEs collectively own nine apartment communities in which the Company is the general partner or manager of the DownREIT entity, the Operating Partnership is a special limited partner or member, and the other limited partners or members were granted rights of redemption for their interests. Such limited partners or members can request to be redeemed and the Company, subject to certain restrictions, can elect to redeem their rights for cash or by issuing shares of its common stock on a one share per unit basis. Conversion values will be based on the market value of the Company's common stock at the time of redemption multiplied by the number of units stipulated under various arrangements, as noted above. The other limited partners or members receive distributions based on the Company's current dividend rate times the number of units held. Total DownREIT units outstanding were 978,854 and 1,017,460 as of December 31, 2021 and 2020, respectively, and the redemption value of the units, based on the closing price of the Company’s common stock totaled approximately $344.8 million and $241.6 million, as of December 31, 2021 and 2020, respectively. The carrying value of redeemable noncontrolling interest in the accompanying balance sheets was $34.7 million and $32.2 million as of December 31, 2021 and 2020, respectively. Of these amounts, $7.7 million and $11.9 million as of December 31, 2021 and 2020, respectively, represent units of limited partners' or members' interests in DownREIT VIEs as to which it is outside of the Company’s control to redeem the DownREIT units with Company common stock and may potentially be redeemed for cash, and are presented at either their redemption value or historical cost, depending on the limited partner's or members' right to redeem their units as of the balance sheet date. The carrying value of DownREIT units as to which it is within the control of the Company to redeem the units with its common stock was $97.4 million as of both December 31, 2021 and 2020, and is classified within noncontrolling interests in the accompanying consolidated balance sheets.
Interest holders in VIEs consolidated by the Company are allocated a priority of net income equal to the cash payments made to those interest holders or distributions from cash flow. The remaining results of operations are generally allocated to the Company.
As of December 31, 2021 and 2020, the Company did not have any other VIEs of which it was deemed to be the primary beneficiary and did not have any VIEs of which it was not deemed to be the primary beneficiary.
(3) Real Estate Investments
(a) Acquisitions of Real Estate
The table below summarizes acquisition activity for the year ended December 31, 2021 ($ in millions):
For the year ended December 31, 2021, the Company purchased two communities consisting of 268 apartment homes and two commercial properties for approximately $165.4 million.

Property Name |  | Location |  | Apartment Homes |  | Essex Ownership Percentage |  | Quarter in 2021 |  | Purchase Price
The Village at Toluca Lake (1) |  | Burbank, CA |  | 145 |  |  | 100 | % |  | Q2 |  | $ | 31.8 |
7 South Linden (2) |  | South San Francisco, CA |  | — |  |  | 100 | % |  | Q3 |  | 33.5
Third & Broad (3) |  | Seattle, WA |  | — |  |  | 100 | % |  | Q3 |  | 52.5
Canvas |  | Seattle, WA |  | 123 |  |  | 100 | % |  | Q4 |  | 47.6
Total 2021 |  | 268 |  |  |  |  |  |  | $ | 165.4 |

(1) In June 2021, the Company purchased its joint venture partner's 50.0% membership interest in the BEX III, LLC co-investment that owned The Village at Toluca Lake based on a property valuation of $63.5 million. In conjunction with the acquisition, $29.5 million of mortgage debt that encumbered the property was paid off.
(2) The commercial property is fully-leased to two commercial tenants. The Company is currently pursuing entitlements to construct an apartment community on the property.
(3) The Company will hold the fully-leased commercial property for future apartment development.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
The consolidated fair value of the acquisitions listed above was included on the Company's consolidated balance sheet were as follows: $103.3 million was included in land and land improvements, $90.2 million was included in buildings and improvements, $5.4 million was included in prepaid expenses and other assets, within the Company's consolidated balance sheets.
For the year ended December 31, 2020, the Company purchased CPPIB's 45.0% interest in each of a land parcel and six communities totaling 2,020 apartment homes, valued at $1.0 billion on a gross basis, for approximately $463.4 million. As a result of this acquisition, the Company realized a gain on remeasurement of its existing co-investment of $234.7 million. Furthermore, the Company recognized $6.5 million in promote income as a result of the transaction, which is included in equity income from co-investments on the consolidated statements of income. The consolidated fair value of this acquisition was included on the Company's consolidated balance sheet as follows: $189.0 million was included in land and land improvements, $846.0 million was included in buildings and improvements, $10.0 million was included in prepaid expenses and other assets, within the Company's consolidated balance sheets.
(b) Sales of Real Estate Investments
The table below summarizes the disposition activity for the year ended December 31, 2021 ($ in millions):

Property Name |  | Location |  | Apartment Homes |  | Ownership |  | Quarter in 2021 |  | Sales Price |
Hidden Valley |  | Simi Valley, CA |  | 324 |  |  | EPLP |  | Q1 |  | $ | 105.0 |  | (1)
Park 20 |  | San Mateo, CA |  | 197 |  |  | EPLP |  | Q1 |  | 113.0 |  | (2)
Axis 2300 |  | Irvine, CA |  | 115 |  |  | EPLP |  | Q1 |  | 57.5 |  | (3)
Devonshire Apartments |  | Hemet, CA |  | 276 |  |  | EPLP |  | Q3 |  | 54.5 |  | (4)
Total 2021 |  | 912 |  |  |  |  |  |  | $ | 330.0 |  |

(1) The Company recognized a $69.2 million gain on sale. In conjunction with the sale, the Company repaid $29.7 million of mortgage debt that encumbered the property.
(2) The Company recognized an immaterial gain on sale.
(3) The Company recognized a $30.8 million gain on sale.
(4) The Company recognized a $42.9 million gain on sale.
For the year ended December 31, 2020, the Company sold four apartment communities consisting of 670 apartment homes for $343.5 million, resulting in gains of $65.0 million.
For the year ended December 31, 2019, the Company sold two land parcels for $23.3 million and recorded an immaterial gain on the sale of one land parcel and a loss of $3.2 million on the other land parcel.
(c) Real Estate Assets Held for Sale
As of December 31, 2021, the Company had no assets classified as held for sale. As of December 31, 2020, the Company had two communities totaling 439 apartment homes that were 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 September 2021, the Company formed a new joint venture entity, Wesco VI, LLC ("Wesco VI") with an institutional partner. Each partner has a 50.0% ownership interest in the joint venture and an initial equity commitment of $150.0 million. The joint venture is unconsolidated for financial reporting purposes. Also, in September 2021, Wesco VI acquired Martha Lake Apartments, a 155-unit apartment home community located in Lynwood, WA, for a total contract price of $53.0 million. The property is encumbered by a $29.2 million related party bridge loan from the Company, with an interest rate of 2.15% and was
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
scheduled to mature in December 2021. In December 2021, the scheduled maturity date for the related party bridge loan was extended to March 2022. See Note 6, Related Party Transactions, for additional details.
In October 2021, Wesco VI acquired Monterra in Mill Creek, a 139-unit apartment home community located in Mill Creek, WA, for a total contract price of $55.0 million. The property was encumbered by a $30.3 million related party bridge loan from the Company, with an interest rate of 2.30% and a maturity date of January 2022. In December 2021, the maturity date of the related party bridge loan was extended to April 2022. See Note 6, Related Party Transactions, for additional details.
In November 2021, the Company purchased a managing interest in a single asset entity owning a 179-unit apartment home community located in Vista, CA for a total contract price of $44.0 million, at the Company's pro rata share. The property was encumbered by a $48.4 million related party bridge loan from the Company, with an interest rate of 2.36% and a maturity date of February 2022. See Note 6, Related Party Transactions, for additional details.
In November 2021, Wesco VI acquired The Rexford, a 203-unit apartment home community located in Fremont, CA, for a total contract price of $112.5 million. The property was encumbered by a $61.9 million related party bridge loan from the Company, with an interest rate of 2.36% and a maturity date of February 2022. See Note 6, Related Party Transactions, for additional details.
In November 2021, the Company converted $11.0 million of its existing preferred equity investment in Silver, a 268-unit apartment home community located in San Jose, CA into a 58.0% equity ownership interest in the property. The Company will retain its remaining $13.5 million preferred equity investment in the property at a preferred return of 8.0%. The property is encumbered by $100.0 million of mortgage debt at a rate of 3.15%. Based on a consolidation analysis, the Company continues to account for its investment in this limited liability company under the equity method.
The carrying values of the Company’s co-investments as of December 31, 2021 and 2020 are as follows ($ in thousands, except in parenthetical):

| Weighted Average Essex Ownership |  | December 31,
| Percentage (1) |  | 2021 |  | 2020
Ownership interest in: |  |  |  |  |
Wesco I (2), Wesco III, Wesco IV, Wesco V and Wesco VI | 52 | % |  | $ | 168,198 |  |  | $ | 178,322 |
BEXAEW, BEX II, BEX III (3), BEX IV and 500 Folsom (4) | 50 | % |  | 270,550 |  |  | 152,309 |
Other (5) | 52 | % |  | 126,503 |  |  | 27,635 |
Total operating and other co-investments, net |  |  | 565,251 |  |  | 358,266 |
Total development co-investments | 50 | % |  | 11,076 |  |  | 157,433 |
Total preferred interest co-investments (includes related party investments of $71.1 million and $81.4 million as of December 31, 2021 and December 31, 2020, respectively - Note 6 - Related Party Transactions for further discussion) |  |  | 565,930 |  |  | 502,311 |
Total co-investments, net |  |  | $ | 1,142,257 |  |  | $ | 1,018,010 |

(1)Weighted average Company ownership percentages are as of December 31, 2021.
(2)As of December 31, 2021, the Company's investment in Wesco I was classified as a liability of $35.3 million due to distributions received in excess of the Company's investment.
(3)In June 2021, the Company purchased the additional 50% interest in BEX III.
(4)500 Folsom had not stabilized as of December 31, 2020. Its carrying value was included in the development co-investments balance as of December 31, 2020.
(5)As of December 31, 2021, the Company's investment in Expo was classified as a liability of $0.2 million due to distributions received in excess of the Company's investment. The weighted average Essex ownership percentage excludes our investments in non-core technology co-investments which are carried at fair value..
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
The combined summarized financial information of co-investments is as follows ($ in thousands):

| December 31,
| 2021 |  | 2020
Combined balance sheets: (1) |  |  |
Rental properties and real estate under development | $ | 4,603,465 |  |  | $ | 4,242,611 |
Other assets | 278,411 |  |  | 200,777 |
Total assets | $ | 4,881,876 |  |  | $ | 4,443,388 |
Debt | $ | 3,046,765 |  |  | $ | 2,611,365 |
Other liabilities | 200,129 |  |  | 189,515 |
Equity | 1,634,982 |  |  | 1,642,508 |
Total liabilities and equity | $ | 4,881,876 |  |  | $ | 4,443,388 |
Company's share of equity | $ | 1,142,257 |  |  | $ | 1,018,010 |

| Years ended December 31,
| 2021 |  | 2020 |  | 2019
Combined statements of income: (1) |  |  |  |  |
Property revenues | $ | 289,680 |  |  | $ | 300,624 |  |  | $ | 336,922 |
Property operating expenses | (115,023) |  |  | (108,682) |  |  | (115,658) |
Net operating income | 174,657 |  |  | 191,942 |  |  | 221,264 |
Gain on sale of real estate | — |  |  | — |  |  | 112,918 |
Interest expense | (65,172) |  |  | (78,962) |  |  | (65,665) |
General and administrative | (17,885) |  |  | (17,079) |  |  | (9,575) |
Depreciation and amortization | (133,787) |  |  | (117,836) |  |  | (121,006) |
Net income | $ | (42,187) |  |  | $ | (21,935) |  |  | $ | 137,936 |
Company's share of net income (2) | $ | 111,721 |  |  | $ | 66,512 |  |  | $ | 112,136 |

(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 $9.1 million, $8.6 million, and $7.5 million for the years ended December 31, 2021, 2020, and 2019, respectively.
Operating Co-investments
As of December 31, 2021 and 2020, the Company, through several joint ventures, owned 10,257 and 8,652 apartment homes, respectively, in operating communities. The Company’s book value of these co-investments was $565.3 million and $358.3 million at December 31, 2021 and 2020, respectively.
Predevelopment and Development Co-investments
As of December 31, 2021 and 2020, the Company, through several joint ventures, owned 264 and 1,070 apartment homes in predevelopment and development communities, respectively. The Company’s book value of these co-investments was $11.1 million and $157.4 million at December 31, 2021 and 2020, respectively.
In 2020, the Company entered into a joint venture to develop Scripps Mesa Apartments, a multifamily community comprised of 264 apartment homes located in San Diego, CA. The Company has a 51% ownership interest in the development which has a projected total cost of $102.0 million. Construction began in the third quarter of 2020. The property is projected to commence
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
initial occupancy in the fourth quarter of 2022 and is projected to be fully stabilized in the third quarter of 2023. The Company has a $5.9 million preferred equity investment in the project, which accrues an annualized preferred return of 10.0% until it is redeemed.
Preferred Equity Investments
As of December 31, 2021 and 2020, 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 $565.9 million and $502.3 million at December 31, 2021 and 2020, respectively, and is included in the co-investments line in the accompanying consolidated balance sheets.
During 2021, the Company made commitments to fund $67.2 million of preferred equity investment in four real estate ventures. The investments have initial preferred returns ranging from 10.0% - 12.5%, with maturities ranging from January 2026 to December 2026. As of December 31, 2021, the Company had funded $51.3 million of the $67.2 million commitments.
During 2020, the Company made commitments to fund $191.3 million of preferred equity investment in seven preferred equity investments. The investments have initial preferred returns ranging from 9.0%-11.5%, with maturities ranging from March 2022 to February 2030. As of December 31, 2021, the Company had funded $182.3 million of the $191.3 million of commitments.
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, 2021, the Company had fully funded $141.7 million of the commitments.
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, 2021, the Company had funded $42.1 million of the $45.1 million of commitments. The remaining committed amount is expected to be funded when requested by the sponsors.
In March 2021, the Company received cash of $10.0 million for the full redemption of a preferred equity investment in a joint venture that holds property located in Southern California.
In March 2021, the Company received cash of $110.2 million, including an early redemption fee of $3.5 million for the full redemption of a preferred equity investment in a joint venture that holds property located in Southern California.
In August 2021, the Company received cash of $21.6 million for the partial redemption of a preferred equity investment in a joint venture that holds property located in Northern California.
In November 2021, the Company received $18.3 million, for the partial redemption of a preferred equity investment in a joint venture that holds property located in Southern California.
In November 2021, the Company converted $11.0 million of its existing preferred equity investment in Silver, a 268-unit apartment home community located in San Jose, CA, into a 58.0% common equity interest in the property. The Company will retain its remaining $13.5 million preferred equity investment in the property at a preferred return of 8.0%. The property is encumbered by $100.0 million of mortgage debt at a rate of 3.15%.
(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, 2021, the Company's development pipeline was comprised of one consolidated project under development, one unconsolidated joint venture project under development and various predevelopment projects, aggregating 371 apartment homes, with total incurred costs of $156.0 million.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
(4) Revenues
Disaggregated Revenue
The following table presents the Company’s revenues disaggregated by revenue source ($ in thousands):

| 2021 |  | 2020 |  | 2019
Rental income | $ | 1,410,197 |  |  | $ | 1,462,161 |  |  | $ | 1,425,585 |
Other property | 21,221 |  |  | 23,989 |  |  | 25,043 |
Management and other fees from affiliates | 9,138 |  |  | 9,598 |  |  | 9,527 |
Total revenues | $ | 1,440,556 |  |  | $ | 1,495,748 |  |  | $ | 1,460,155 |

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

| 2021 |  | 2020 |  | 2019
Southern California | $ | 588,381 |  |  | $ | 566,553 |  |  | $ | 593,253 |
Northern California | 584,034 |  |  | 604,348 |  |  | 557,139 |
Seattle Metro | 239,839 |  |  | 243,900 |  |  | 243,060 |
Other real estate assets (1) | 19,164 |  |  | 71,349 |  |  | 57,176 |
Total rental and other property revenues | $ | 1,431,418 |  |  | $ | 1,486,150 |  |  | $ | 1,450,628 |

(1)Other real estate assets consist of revenue generated from retail space, commercial properties, held for sale properties, disposition properties and straight-line rent adjustments for concessions. Executive management does not evaluate such operating performance geographically.
The following table presents the Company’s rental and other property revenues disaggregated by current property category status ($ in thousands):

| 2021 |  | 2020 |  | 2019
Same-property (1) | $ | 1,288,238 |  |  | $ | 1,304,417 |  |  | $ | 1,346,394 |
Acquisitions (2) | 57,260 |  |  | 54,415 |  |  | — |
Development (3) | 31,268 |  |  | 20,050 |  |  | 7,675 |
Redevelopment | 17,667 |  |  | 19,054 |  |  | 21,058 |
Non-residential/other, net (4) | 47,796 |  |  | 66,358 |  |  | 75,501 |
Straight line rent concession (5) | (10,811) |  |  | 21,856 |  |  | — |
Total rental and other property revenues | $ | 1,431,418 |  |  | $ | 1,486,150 |  |  | $ | 1,450,628 |

(1)Properties that have comparable stabilized results as of January 1, 2020 and are consolidated by the Company for the years ended December 31, 2021, 2020, and 2019. A community is generally considered to have reach stabilized operations once it achieves an initial occupancy of 90%.
(2)Acquisitions include properties acquired which did not have comparable stabilized results as of January 1, 2020.
(3)Development includes properties developed which did not have stabilized results as of January 1, 2020.
(4)Non-residential/other, net consists of revenue generated from retail space, commercial properties, held for sale properties, disposition properties, student housing, properties undergoing significant construction activities that do not meet our redevelopment criteria, and two communities located in the California counties of Santa Barbara, and Santa Cruz, which the Company does not consider its core markets.
(5)Same-property revenues reflect concessions on a cash basis. Total rental and other property revenues reflect concessions on a straight-line basis in accordance with U.S. GAAP.
Deferred Revenues and Remaining Performance Obligations
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
When cash payments are received or due in advance of the Company’s performance of contracts with customers, deferred revenue is recorded. The total deferred revenue balance related to such contracts was $2.4 million and $3.1 million as of December 31, 2021 and December 31, 2020, respectively, and was included in accounts payable and accrued liabilities within the accompanying consolidated balance sheets. The amount of revenue recognized for the year ended December 31, 2021 that was included in the December 31, 2020 deferred revenue balance was $0.7 million, which was included in interest and other income within the consolidated statements of income and comprehensive income.
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in the new revenue recognition accounting standard. As of December 31, 2021, the Company had $2.4 million of remaining performance obligations. The Company expects to recognize approximately 31% of these remaining performance obligations in 2022, an additional 56% through 2024, and the remaining balance thereafter.
Practical Expedients
The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less or when variable consideration is allocated entirely to a wholly unsatisfied performance obligation.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
(5) Notes and Other Receivables
Notes and other receivables consist of the following as of December 31, 2021 and 2020 ($ in thousands):

| 2021 |  | 2020
Note receivable, secured, bearing interest at 9.90%, due November 2021 (Originated November 2018) (1) | $ | — |  |  | $ | 14,216 |
Notes receivable, secured, bearing interest at 10.50%, due February 2023 (Originated March 2020) | 17,051 |  |  | 15,299 |
Note receivable, secured, bearing interest at 11.00%, due October 2023 (Originated April 2020) (2) | — |  |  | 25,461 |
Note receivable, secured, bearing interest at 9.00%, due December 2023 (Originated November 2020) | 87,365 |  |  | 79,827 |
Note receivable, secured, bearing interest at 11.50%, due November 2024 (Originated November 2020) | 29,729 |  |  | 15,423 |
Related party note receivable, secured, bearing interest at 2.15%, due March 2022 (Originated September 2021) (3) | 29,314 |  |  | — |
Related party note receivable, secured, bearing interest at 2.30%, due April 2022 (Originated October 2021) (3) | 30,399 |  |  | — |
Related party note receivable, secured, bearing interest at 2.36%, due February 2022 (Originated November 2021) (3) | 62,058 |  |  | — |
Related party note receivable, secured, bearing interest at 2.36%, due February 2022 (Originated November 2021) (3) | 48,562 |  |  | — |
Notes and other receivables from affiliates (4) | 6,556 |  |  | 4,744 |
Straight line rent receivables (5) | 15,523 |  |  | 25,214 |
Other receivables | 15,232 |  |  | 15,671 |
Allowance for credit losses | (756) |  |  | (751) |
Total notes and other receivables | $ | 341,033 |  |  | $ | 195,104 |

(1)In November 2021, the Company received cash of $15.7 million, including an early redemption fee of $0.2 million, from the payoff of this note receivable.
(2)In June 2021, the Company received cash of $36.5 million, including an early redemption fee of $4.7 million, from the payoff of this note receivable.
(3)See Note 6, Related Party Transactions, for additional details.
(4)These amounts consist of short-term loans outstanding and due from various joint ventures as of December 31, 2021 and December 31, 2020, respectively. See Note 6, Related Party Transactions, for additional details.
(5)These amounts are receivables from lease concessions recorded on a straight-line basis for the Company's operating properties.
The following table presents the activity in the allowance for credit losses for notes and other receivables by loan type ($ in thousands):

| Mezzanine Loans |  | Bridge Loans |  | Total
Balance at December 31, 2020 | $ | 751 |  |  | $ | — |  |  | $ | 751 |
Provision for credit losses | (80) |  |  | 85 |  |  | 5 |
Balance at December 31, 2021 | $ | 671 |  |  | $ | 85 |  |  | $ | 756 |

No loans were placed on nonaccrual status or charged off during the year ended December 31, 2021 or 2020.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
(6) Related Party Transactions
The Company has adopted written related party transaction guidelines that are intended to cover transactions in which the Company (including entities it controls) is a party and in which any "related person" has a direct or indirect interest. A "related person" means any person who is or was (since the beginning of the last fiscal year) a Company director, director nominee, or executive officer, any beneficial owner of more than 5% of the Company’s outstanding common stock, and any immediate family member of any of the foregoing persons. A related person may be considered to have an indirect interest in a transaction if he or she (i) is an owner, director, officer or employee of or otherwise associated with another company that is engaging in a transaction with the Company, or (ii) otherwise, through one or more entities or arrangements, has an indirect financial interest in or personal benefit from the transaction.
The related person transaction review and approval process is intended to determine, among any other relevant issues, the dollar amount involved in the transaction; the nature and value of any related person’s direct or indirect interest (if any) in the transaction; and whether or not (i) a related person’s interest is material, (ii) the transaction is fair, reasonable, and serves the best interest of the Company and its shareholders, and (iii) whether the transaction or relationship should be entered into, continued or ended.
The Company’s Chairman and founder, Mr. George Marcus, is the Chairman of the Marcus & Millichap Company ("MMC"), which is a parent company of a diversified group of real estate service, investment, and development firms. Mr. Marcus is also the Co-Chairman of Marcus & Millichap, Inc. ("MMI"), and Mr. Marcus owns a controlling interest in MMI, a national brokerage firm listed on the NYSE that underwent its initial public offering in 2013. For the year ended December 31, 2021 and 2019, there were no brokerage commission fees paid by the Company to MMC and its affiliates related to real estate transactions. For the year ended December 31, 2020, the Company paid brokerage commissions of $0.2 million to MMC and its affiliates related to real estate transactions.
The Company charges certain fees relating to its co-investments for asset management, property management, development and redevelopment services. These fees from affiliates totaled $10.3 million, $11.3 million, and $13.8 million for the years ended December 31, 2021, 2020 and 2019, respectively. All of these fees are net of intercompany amounts eliminated by the Company. The Company netted development and redevelopment fees of $1.1 million, $1.7 million, and $4.3 million against general and administrative expenses for the years ended December 31, 2021, 2020 and 2019, respectively.
As described in Note 5, Notes and Other Receivables, the Company has provided short-term loans to affiliates. As of December 31, 2021 and 2020, $6.6 million and $4.7 million, respectively, of short-term loans remained outstanding due from joint venture affiliates and are classified within notes and other receivables in the accompanying consolidated balance sheets. In November 2016, the Company provided a $6.6 million mezzanine loan to a limited liability company in which MMC holds a significant ownership interest through subsidiaries. The mezzanine loan was classified within notes and other receivables in the accompanying consolidated balance sheets and was paid off in October 2019.
In November 2021, the Company provided a $48.4 million related party bridge loan in connection with the purchase of an interest in a single asset entity owning an apartment home community in Vista, CA. The note receivable accrues interest at 2.36% and is scheduled to mature in February 2022. The bridge loan is classified within notes and other receivables in the accompanying consolidated balance sheets and had an outstanding balance of $48.6 million as of December 31, 2021.
In November 2021, the Company provided a $61.9 million related party bridge loan to Wesco VI in connection with the acquisition of The Rexford. The note receivable accrues interest at 2.36% and is scheduled to mature in February 2022. The bridge loan is classified within notes and other receivables in the accompanying consolidated balance sheets and had an outstanding balance of $62.1 million as of December 31, 2021.
In October 2021, the Company provided a $30.3 million related party bridge to Wesco VI in connection with the acquisition of Monterra in Mill Creek. The note receivable accrues interest at 2.30% and is scheduled to mature in April 2022. The bridge loan is classified within notes and other receivables in the accompanying consolidated balance sheets and had an outstanding balance of $30.4 million as of December 31, 2021.
In September 2021, the Company provided a $29.2 million related party bridge loan to Wesco VI in connection with the acquisition of Martha Lake Apartments. The note receivable accrues interest at 2.15% and was scheduled to mature in
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
December 2021. In December 2021, the maturity date of the note receivable was extended to March 2022. The bridge loan is classified within notes and other receivables in the accompanying consolidated balance sheets and had an outstanding balance of $29.3 million as of December 31, 2021.
In March 2021, the Company provided a $52.5 million related party bridge loan to Wesco I in connection with the payoff of a debt related to one of its properties located in Southern California. The note receivable accrued interest at 2.55% and was paid off in July 2021.
In November 2019, the Company provided an $85.5 million related party bridge loan to Wesco V in connection with the acquisition of Velo and Ray. The note receivable accrued interest at LIBOR plus 1.30% and was scheduled to mature in February 2020, but was paid off in January 2020.
In August 2019, the Company provided an $89.0 million related party bridge loan to Wesco V in connection with the acquisition of The Courtyards at 65th Street. The note receivable accrued interest at LIBOR plus 1.30% and was paid off in November 2019.
In August 2019, the Company provided a $44.4 million related party bridge loan to BEX IV in connection with the acquisition of 777 Hamilton. The note receivable accrued interest at 3.25%. In November 2019, the term of the bridge loan was extended to February 2020, but was paid off in December 2019.
In June 2019, the Company acquired Brio, a 300-unit apartment home community located in Walnut Creek, CA. The Company issued DownREIT units to an affiliate of MMC, based on a contract price of $164.9 million. The property was encumbered by $98.7 million of mortgage debt which was assumed by the Company at the time of acquisition. As a result of this transaction, the Company consolidated the property, based on a VIE analysis performed by the Company.
In February 2019, the Company funded a $24.5 million preferred equity investment in an entity whose sponsor is an affiliate of MMC, which owns a multifamily development community located in Mountain View, CA. The investment has an initial preferred return of 11.0% and is scheduled to mature in February 2024.
In October 2018, the Company funded a $18.6 million preferred equity investment in an entity whose sponsor is an affiliate of MMC. The entity wholly owns a 268 apartment home community development located in Burlingame, CA. This investment accrues interest based on an initial 12.0% preferred return. The investment is scheduled to mature in April 2024.
In May 2018, the Company made a commitment to fund a $26.5 million preferred equity investment in an entity whose sponsors include an affiliate of MMC. The entity wholly owns a 400 apartment home community located in Ventura, CA. This investment accrued interest based on a 10.25% initial preferred return. The investment was scheduled to mature in May 2023. In November 2021, the Company received cash of $18.3 million, for the partial redemption of this preferred equity investment, and the maturity of the remaining commitment was extended to December 2028. As of December 31, 2021, the Company had a remaining commitment of $13.0 million. The remaining committed amount is expected to be funded if and when requested by the sponsors.
In March 2017, the Company converted its existing $15.3 million preferred equity investment in Sage at Cupertino, a 230 apartment home community located in San Jose, CA, into a 40.5% common equity ownership interest in the property. The Company issued DownREIT units to the other members, including an MMC affiliate, based on an estimated property valuation of $90.0 million. At the time of the conversion, the property was encumbered by $52.0 million of mortgage debt. As a result of this transaction, the Company consolidates the property, based on a consolidation analysis performed by the Company.
In 2015, the Company made preferred equity investments totaling $20.0 million in three entities affiliated with MMC that own apartment communities in California. The Company earned a 9.5% preferred return on each such investment. One $5.0 million investment, which was scheduled to mature in 2022, was fully redeemed in 2017. Another $5.0 million investment, which was scheduled to mature in 2022, was fully redeemed in 2018. The remaining investment was fully redeemed in February 2019.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
(7) Unsecured Debt
Essex does not have any indebtedness as all debt is incurred by the Operating Partnership. Essex guarantees the Operating Partnership’s unsecured debt including the revolving credit facilities up to the maximum amounts and for the full term of the facilities.
Unsecured debt consists of the following as of December 31, 2021 and 2020 ($ in thousands):

| 2021 |  | 2020 |  | Weighted Average Maturity In Years as of December 31, 2021
Unsecured bonds private placement - fixed rate | $ | — |  |  | $ | 199,950 |  |  | N/A
Term loan - variable rate | — |  |  | 549,380 |  |  | N/A
Bonds public offering - fixed rate | 5,307,196 |  |  | 4,858,655 |  |  | 8.7
Unsecured debt, net (1) | 5,307,196 |  |  | 5,607,985 |  |  |
Lines of credit (2) | 341,257 |  |  | — |  |  | N/A
Total unsecured debt | $ | 5,648,453 |  |  | $ | 5,607,985 |  |  |
Weighted average interest rate on fixed rate unsecured bonds private placement and bonds public offering | 3.3 | % |  | 3.4 | % |  |
Weighted average interest rate on variable rate term loan | — | % |  | 1.7 | % |  |
Weighted average interest rate on lines of credit | 1.0 | % |  | 1.0 | % |  |

(1)Includes unamortized discount, net of premiums, of $9.9 million and $10.1 million and unamortized debt issuance costs of $32.9 million and $31.9 million as of December 31, 2021 and 2020, respectively.
(2)Lines of credit, related to the Company's two lines of unsecured credit aggregating $1.24 billion, excludes unamortized debt issuance costs of $4.4 million and $3.7 million as of December 31, 2021 and 2020, respectively. These debt issuance costs are included in prepaid expenses and other assets on the consolidated balance sheets. As of December 31, 2021, the Company's $1.2 billion credit facility had an interest rate of LIBOR plus 0.775%, which is based on a tiered rate structure tied to the Company's credit ratings and a scheduled maturity date of September 2025 with three six-month extensions, exercisable at the Company's option. As of December 31, 2021, the Company's $35.0 million working capital unsecured line of credit had an interest rate of LIBOR plus 0.775%, which is based on a tiered rate structure tied to the Company's credit ratings, and a scheduled maturity date of February 2023.
As of December 31, 2021 the Company had no amount of private placement unsecured bonds outstanding. As of December 31, 2020, the Company had $200.0 million of private placement unsecured bonds outstanding at an average effective interest rate of 4.4%.
The following is a summary of the Company’s unsecured private placement bonds as of December 31, 2021 and 2020 ($ in thousands):

| Maturity |  | 2021 |  | 2020 |  | Coupon Rate
Senior unsecured private placement notes | April 2021 |  | $ | — |  |  | $ | 100,000 |  |  | 4.27 | %
Senior unsecured private placement notes | June 2021 |  | — |  |  | 50,000 |  |  | 4.30 | %
Senior unsecured private placement notes | August 2021 |  | — |  |  | 50,000 |  |  | 4.37 | %
|  |  | $ | — |  |  | $ | 200,000 |  |  |

As of December 31, 2021 and 2020, the Company's unsecured term loans had no amount outstanding and $550.0 million, respectively, at an average interest rate of none and 1.7%, respectively. These loans are included in the line "Term loan -
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
variable rate" in the table above, and as of December 31, 2021 and 2020, the carrying value, net of debt issuance costs, was no amount outstanding and $549.4 million, respectively.
In March 2021, the Operating Partnership issued $450.0 million of senior unsecured notes due on March 1, 2028 with a coupon rate of 1.700% per annum (the "2028 Notes"), which are payable on March 1 and September 1 of each year, beginning on September 1, 2021. The 2028 Notes were offered to investors at a price of 99.423% of par value. The 2028 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 Company used the net proceeds of this offering to repay upcoming debt maturities, including all or a portion of certain unsecured term loans, and for general corporate and working capital purposes. These bonds are included in the line "Bonds public offering-fixed rate" in the table above, the carrying value of the 2028 Notes, net of discount and debt issuance costs, was $444.4 million.
In June 2021, the Operating Partnership issued $300.0 million of senior unsecured notes due on June 15, 2031 with a coupon rate of 2.550% per annum (the "2031 Notes"), which are payable on June 15 and December 15 of each year, beginning on December 15, 2021. The 2031 Notes were offered to investors at a price of 99.367% of par value. The 2031 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 Company used the net proceeds of this offering to repay upcoming debt maturities, including to fund the redemption of $300.0 million aggregate principal amount (plus the make-whole amount and accrued and unpaid interest) of its outstanding 3.375% senior unsecured notes due January 2023, and for other general corporate and working capital purposes. These bonds are included in the line "Bonds public offering-fixed rate" in the table above, the carrying value of the 2031 Notes, net of discount and debt issuance costs, was $295.7 million.
In February 2020, the Operating Partnership issued $500.0 million of senior unsecured notes due on March 15, 2032, with a coupon rate of 2.650% (the "2032 Notes"), which are payable on March 15 and September 15 of each year, beginning on September 15, 2020. The 2032 Notes were offered to investors at a price of 99.628% of par value. The 2032 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 Company used the net proceeds of this offering to repay indebtedness under its unsecured lines of credit, which had been used to fund the buyout of CPPIB's 45.0% joint venture interests, as well as repay $100.3 million of secured debt during the quarter that ended March 31, 2020. In June 2020, the Operating Partnership issued an additional $150.0 million of the 2032 Notes at a price of 105.660% of par value, plus accrued interest from February 2020 up to, but not including, the date of delivery of the additional notes, with an effective yield of 2.093%. These additional notes have substantially identical terms as the 2032 Notes issued in February 2020. The proceeds were used to repay indebtedness under the Company's unsecured credit facilities and for other general corporate and working capital purposes. These bonds are included in the line "Bonds public offering-fixed rate" in the table above, and as of December 31, 2021, and 2020, the carrying value of the 2032 Notes, net of premiums and debt issuance costs, was $650.6 million and $650.7 million respectively.
In April 2020, the Company obtained a $200.0 million unsecured term loan with a one-year maturity and two 12-month extension options, exercisable at the Company’s option. The unsecured term loan bears a variable interest rate of LIBOR plus 1.20% and the proceeds were used to repay all remaining consolidated debt maturing in 2020.
In August 2020, the Operating Partnership issued $600.0 million of senior unsecured notes, consisting of $300.0 million aggregate principal amount due on January 15, 2031 with a coupon rate of 1.650% (the “2031 Notes”) and $300.0 million aggregate principal amount due on September 1, 2050 with a coupon rate of 2.650% (the “2050 Notes” and together with the 2031 Notes, the “Notes”). The 2031 Notes were offered to investors at a price of 99.035% of par value and the 2050 Notes at 99.691% of par value. Interest is payable on the 2031 Notes semiannually on January 15 and July 15 of each year, beginning on January 15, 2021. Interest is payable on the 2050 Notes semiannually on March 1 and September 1 of each year, beginning on March 1, 2021. The 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 Company used the net proceeds of this offering to repay debt maturities, including certain unsecured private placement notes, secured mortgage notes, and to fund the redemption of $300.0 million aggregate principal amount of
its outstanding 3.625% senior unsecured notes due August 2022, and for other general corporate and working capital purposes. These bonds are included in the line "Bonds public offering-fixed rate" in the table above, the carrying value of the 2031 Notes
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
and 2050 Notes, net of discount and debt issuance costs was $295.1 million and $295.8 million respectively as of December 31, 2021, and $294.5 million and $295.7 million respectively as of December 31, 2020.
In August 2019, the Operating Partnership issued $400.0 million of senior unsecured notes due on January 15, 2030, with a coupon rate of 3.000% per annum (the "2030 Notes"), which are payable on January 15 and July 15 of each year, beginning on January 15, 2020. The 2030 Notes were offered to investors at a price of 98.632% of the principal amount thereof. The 2030 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 Property Trust, Inc. In October 2019, the Operating Partnership issued an additional $150.0 million of the 2030 notes at a price of 101.685% of the principal amount thereof. These additional notes have substantially identical terms as the 2030 Notes issued in August 2019. The Company used the net proceeds of these offerings to prepay, with no prepayment penalties, certain secured indebtedness under outstanding mortgage notes, to repay indebtedness under its unsecured lines of credit and for other general corporate and working capital purposes. These bonds are included in the line "Bonds public offering-fixed rate" in the table above, and as of December 31, 2021, and 2020, the carrying value of the 2030 Notes, net of discount and debt issuance costs, was $543.9 million and $543.1 million, respectively.
In February 2019, the Operating Partnership issued $350.0 million of senior unsecured notes due on March 1, 2029, with a coupon rate of 4.000% per annum (the "2029 Notes"), which are payable on March 1 and September 1 of each year, beginning on September 1, 2019. The 2029 Notes were offered to investors at a price of 99.188% of the principal amount thereof. The 2029 Notes are general unsecured senior obligations of the Operating Partnership, rank equally in right of payment with all other senior unsecured indebtedness of the Operating Partnership and are unconditionally guaranteed by Essex Property Trust, Inc. In March 2019, the Operating Partnership issued an additional $150.0 million of the 2029 Notes at a price of 100.717% of the principal amount thereof. These additional notes have substantially identical terms as the 2029 Notes issued in February 2019. The Company used the net proceeds of these offerings to repay indebtedness under its unsecured lines of credit and for other general corporate and working capital purposes. These bonds are included in the line "Bonds public offering-fixed rate" in the table above, and as of December 31, 2021, and 2020, the carrying value of the 2029 Notes, net of discount and debt issuance costs was $495.4 million and $494.8 million, respectively.
In March 2018, the Operating Partnership issued $300.0 million of senior unsecured notes due on March 15, 2048 with a coupon rate of 4.500% per annum and are payable on March 15 and September 15 of each year, beginning on September 15, 2018 (the "2048 Notes"). The 2048 Notes were offered to investors at a price of 99.591% of par value. The 2048 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 fully and unconditionally guaranteed by Essex Property Trust, Inc. These bonds are included in the line "Bonds public offering-fixed rate" in the table above, and as of December 31, 2021 and 2020, the carrying value of the 2048 Notes, net of discount and debt issuance costs was $295.9 million and $295.8 million, respectively.
In April 2017, the Operating Partnership issued $350.0 million of senior unsecured notes due on May 1, 2027 with a coupon rate of 3.625% per annum and are payable on May 1 and November 1 of each year, beginning on November 1, 2017 (the "2027 Notes"). The 2027 Notes were offered to investors at a price of 99.423% of par value. The 2027 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 fully and unconditionally guaranteed by Essex Property Trust, Inc. These bonds are included in the line "Bonds public offering-fixed rate" in the table above, and as of December 31, 2021 and 2020, the carrying value of the 2027 Notes, net of discount and debt issuance costs was $347.3 million and $346.8 million, respectively.
In April 2016, the Operating Partnership issued $450.0 million of senior unsecured notes due on April 15, 2026 with a coupon rate of 3.375% per annum and are payable on April 15 th and October 15 th of each year, beginning October 15, 2016 (the "2026 Notes"). The 2026 Notes were offered to investors at a price of 99.386% of par value. The 2026 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 fully and unconditionally guaranteed by Essex Property Trust, Inc. These bonds are included in the line "Bonds public offering-fixed rate" in the table above, and as of December 31, 2021 and 2020, the carrying value of the 2026 Notes, net of discount and debt issuance costs was $447.1 million and $446.4 million, respectively.
In March 2015, the Operating Partnership issued $500.0 million of senior unsecured notes due on April 1, 2025 with a coupon rate of 3.5% per annum and are payable on April 1 st and October 1 st of each year, beginning October 1, 2015 (the "2025
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
Notes"). The 2025 Notes were offered to investors at a price of 99.747% of par value. The 2025 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 fully and unconditionally guaranteed by Essex Property Trust, Inc. These bonds are included in the line "Bonds public offering-fixed rate" in the table above, and as of December 31, 2021 and 2020, the carrying value of the 2025 Notes, net of discount and debt issuance costs was $498.2 million and $497.6 million, respectively.
In April 2014, the Company assumed $900.0 million aggregate principal amount of BRE Property Inc.’s 5.500% senior notes due 2017; 5.200% senior notes due 2021; and 3.375% senior notes due 2023 (together the "BRE Notes"). These notes are included in the line "Bonds public offering-fixed rate" in the table above, and as of December 31, 2021, the BRE Notes had no amount outstanding. As of December 31, 2020, the carrying value of the BRE Notes, plus unamortized premium was $296.8 million. In March 2017, the Company paid off $300.0 million of 5.500% senior notes, at maturity. In December 2020, the Company paid off $300.0 million of 5.200% senior notes. In June 2021, the Company paid off the remaining $300.0 million of 3.375% senior notes due 2023.
In April 2014, the Operating Partnership issued $400.0 million of senior unsecured notes due on May 1, 2024 with a coupon rate of 3.875% per annum and are payable on May 1 st and November 1 st of each year, beginning November 1, 2014 (the "2024 Notes"). The 2024 Notes were offered to investors at a price of 99.234% of par value. The 2024 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 fully and unconditionally guaranteed by Essex Property Trust, Inc. These bonds are included in the line "Bonds public offering-fixed rate" in the table above, and as of December 31, 2021 and 2020, the carrying value of the 2024 Notes, net of discount and debt issuance costs was $398.5 million and $397.8 million, respectively.
In April 2013, the Operating Partnership issued $300.0 million of senior unsecured notes due on May 1, 2023 with a coupon rate of 3.25% per annum and are payable on May 1 st and November 1 st of each year, beginning November 1, 2013 (the "2023 Notes"). The 2023 Notes were offered to investors at a price of 99.152% of par value. The 2023 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 fully and unconditionally guaranteed by Essex Property Trust, Inc. These bonds are included in the line "Bonds public offering-fixed rate" in the table above, and as of December 31, 2021 and 2020, the carrying value of the 2023 Notes, net of discount and debt issuance costs was $299.3 million and $298.7 million, respectively.
The following is a summary of the Company’s senior unsecured notes as of December 31, 2021 and 2020 ($ in thousands):

| Maturity |  | 2021 |  | 2020 |  | Coupon Rate
Senior notes | January 2023 |  | $ | — |  |  | $ | 300,000 |  |  | 3.375 | %
Senior notes | May 2023 |  | 300,000 |  |  | 300,000 |  |  | 3.250 | %
Senior notes | May 2024 |  | 400,000 |  |  | 400,000 |  |  | 3.875 | %
Senior notes | April 2025 |  | 500,000 |  |  | 500,000 |  |  | 3.500 | %
Senior notes | April 2026 |  | 450,000 |  |  | 450,000 |  |  | 3.375 | %
Senior notes | May 2027 |  | 350,000 |  |  | 350,000 |  |  | 3.625 | %
Senior notes | March 2028 |  | 450,000 |  |  | — |  |  | 1.700 | %
Senior notes | March 2029 |  | 500,000 |  |  | 500,000 |  |  | 4.000 | %
Senior notes | January 2030 |  | 550,000 |  |  | 550,000 |  |  | 3.000 | %
Senior notes | January 2031 |  | 300,000 |  |  | 300,000 |  |  | 1.650 | %
Senior notes | June 2031 |  | 300,000 |  |  | — |  |  | 2.550 | %
Senior notes | March 2032 |  | 650,000 |  |  | 650,000 |  |  | 2.650 | %
Senior notes | March 2048 |  | 300,000 |  |  | 300,000 |  |  | 4.500 | %
Senior notes | September 2050 |  | 300,000 |  |  | 300,000 |  |  | 2.650 | %
|  |  | $ | 5,350,000 |  |  | $ | 4,900,000 |  |  |

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ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
The aggregate scheduled principal payments of unsecured debt payable, excluding lines of credit, at December 31, 2021 are as follows ($ in thousands):

2022 | $ | — |
2023 | 300,000 |
2024 | 400,000 |
2025 | 500,000 |
2026 | 450,000 |
Thereafter | 3,700,000 |
| $ | 5,350,000 |

As of December 31, 2021, the Company had two unsecured lines of credit aggregating $1.24 billion, including a $1.2 billion unsecured line of credit and a $35.0 million working capital unsecured line of credit. As of December 31, 2021, there was $340.0 million outstanding on the $1.2 billion unsecured line of credit. As of December 31, 2020, there was no amount outstanding on this line. The interest rate is based on a tiered rate structure tied to the Company's credit ratings and was LIBOR plus 0.775% as of December 31, 2021. The $1.2 billion unsecured line of credit has a scheduled maturity date in September 2025 with three 6-month extensions, exercisable at the Company's option. As of December 31, 2021, there was $1.3 million outstanding on the Company's $35.0 million working capital unsecured line of credit. As of December 31, 2020, there was no amount outstanding on this line. The interest rate on the amended line is based on a tiered rate structure tied to the Company's credit ratings and is currently at LIBOR plus 0.775%.
The Company’s unsecured lines of credit and unsecured debt agreements contain debt covenants related to limitations on indebtedness and liabilities, and maintenance of minimum levels of consolidated earnings before depreciation, interest and amortization. The Company was in compliance with the debt covenants as of December 31, 2021 and 2020.
(8) Mortgage Notes Payable
Essex does not have any indebtedness as all debt is incurred by the Operating Partnership. Mortgage notes payable consist of the following as of December 31, 2021 and 2020 ($ in thousands):

| 2021 |  | 2020
Fixed rate mortgage notes payable | $ | 415,350 |  |  | $ | 419,323 |
Variable rate mortgage notes payable (1) | 223,609 |  |  | 224,227 |
Total mortgage notes payable (2) | $ | 638,959 |  |  | $ | 643,550 |
Number of properties securing mortgage notes | 12 |  |  | 12 |
Remaining terms | 1-25 years |  | 1-26 years
Weighted average interest rate | 2.7 | % |  | 2.7 | %

The aggregate scheduled principal payments of mortgage notes payable at December 31, 2021 are as follows ($ in thousands):

2022 | $ | 43,188 |
2023 | 2,945 |
2024 | 3,109 |
2025 | 133,054 |
2026 | 99,405 |
Thereafter | 356,224 |
| $ | 637,925 |

(1)Variable rate mortgage notes payable, including $224.4 million in bonds that have been converted to variable rate through total return swap contracts, consists of multifamily housing mortgage revenue bonds secured by deeds of trust on rental properties and guaranteed by collateral pledge agreements, payable monthly at a variable rate as defined in the Loan Agreement (approximately 1.1% at December 2021 and 1.2% at December 2020) including credit enhancement and
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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
underwriting fees. Among the terms imposed on the properties, which are security for the bonds, is a requirement that 20% of the apartment homes are subject to tenant income criteria. Once the bonds have been repaid, the properties may no longer be obligated to comply with such tenant income criteria. Principal balances are due in full at various maturity dates from December 2027 through December 2046. The Company had no interest rate cap agreements as of December 31, 2021 and 2020, respectively.
(2)Includes total unamortized premium, net of discounts, of $2.5 million and $3.9 million and reduced by unamortized debt issuance costs of $1.5 million and $1.8 million as of December 31, 2021 and 2020, respectively.
For the Company’s mortgage notes payable as of December 31, 2021, monthly interest expense and principal amortization, excluding balloon payments, totaled approximately $2.3 million and $0.3 million, respectively. Second deeds of trust accounted for none of the mortgage notes payable balance as of both December 31, 2021 and 2020. Repayment of debt before the scheduled maturity date could result in prepayment penalties. The prepayment penalty on the majority of the Company’s mortgage notes payable are computed by the greater of (a) 1% of the amount of the principal being prepaid or (b) the present value of the principal being prepaid multiplied by the difference between the interest rate of the mortgage note and the stated yield rate on a U.S. treasury security which generally has an equivalent remaining term as the mortgage note.
(9) Derivative Instruments and Hedging Activities
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.
In November 2016, the Company replaced its $225.0 million term loan with a $350.0 million five-year term loan with a delayed draw feature that carries a variable interest rate of LIBOR plus 95 basis points. In 2016, the Company entered into four forward starting interest rate swaps (settlement payments commenced in March 2017) and in 2017, the Company entered into one forward starting interest rate swap (settlement payments commenced in March 2017) all related to the $350.0 million term loan. These five swaps, with a total notional amount of $175.0 million were terminated during the year-ended December 31, 2021.
As of December 31, 2021 and 2020, the Company had no interest rate caps.
As of December 31, 2021 and 2020, the aggregate carrying value of the interest rate swap contracts were a liability of zero and an asset of $2.4 million, respectively. As of December 31, 2021 and 2020, the swap contracts were presented in the consolidated balance sheets as a liability of zero and $2.4 million, respectively, and were included in other liabilities on the consolidated balance sheets. The Company had no interest rate caps on the balance sheets as of December 31, 2021 and 2020.
Hedge ineffectiveness related to cash flow hedges, which is included in interest expense on the consolidated statements of income, was zero, zero, and a loss of $0.2 million for the years ended December 31, 2021, 2020, and 2019 respectively.
The Company has four total return swap contracts, with an aggregate notional amount of $224.4 million, that effectively convert $224.4 million of mortgage notes payable to a floating interest rate based on the Securities Industry and Financial Markets Association Municipal Swap Index ("SIFMA") plus a spread. The total return swaps provide fair market value protection on the mortgage notes payable to our counterparties during the initial period of the total return swap until the Company's option to call the mortgage notes at par can be exercised. The Company can currently call all four of the total return swaps with $224.4 million of the outstanding debt at par. These derivatives do not qualify for hedge accounting and had a carrying and fair value of zero at both December 31, 2021 and 2020, respectively. These total return swaps are scheduled to mature between November 2022 and December 2024. The realized gains of $10.8 million, $10.7 million, and $8.4 million as of December 31, 2021, 2020, and 2019, respectively, were reported on the consolidated statements of income as total return swap income.
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ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
(10) Lease Agreements - Company as Lessor
As of December 31, 2021, the Company is a lessor of apartment homes at all of its consolidated operating and lease-up communities, three commercial buildings, and commercial portions of mixed use communities. The apartment homes are rented under short-term leases (generally, lease terms of 9 to 12 months) while commercial lease terms typically range from 5 to 20 years. All such leases are classified as operating leases.
Although the majority of the Company’s apartment home and commercial leasing income is derived from fixed lease payments, some lease agreements also allow for variable payments. The primary driver of variable leasing income comes from utility reimbursements from apartment home leases and common area maintenance reimbursements from commercial leases. A small number of commercial leases contain provisions for lease payments based on a percentage of gross retail sales over set hurdles.
At the end of the term of apartment home leases, unless the lessee decides to renew the lease with the Company at the market rate or gives notice not to renew, the lease will be automatically renewed on a month-to-month term. Apartment home leases include an option to terminate the lease, however the lessee must pay the Company for expected or actual downtime to find a new tenant to lease the space or a lease-break fee specified in the lease agreement. Most commercial leases include options to renew, with the renewal periods extending the term of the lease for no greater than the same period of time as the original lease term. The initial option to renew for commercial leases will typically be based on a fixed price while any subsequent renewal options will generally be based on the current market rate at the time of the renewal. Certain commercial leases contain lease termination options that would require the lessee to pay termination fees based on the expected amount of time it would take the Company to re-lease the space.
The Company’s apartment home and commercial lease agreements do not contain residual value guarantees. As the Company is the lessor of real estate assets which tend to either hold their value or appreciate, residual value risk is not deemed to be substantial. Furthermore, the Company carries comprehensive liability, fire, extended coverage, and rental loss insurance for each of its communities as well as limited insurance coverage for certain types of extraordinary losses, such as, for example, losses from terrorism or earthquakes.
A maturity analysis of undiscounted future minimum non-cancelable base rent to be received under the above operating leases as of December 31, 2021 is summarized as follows ($ in thousands):

| Future Minimum Rent
2022 | $ | 681,245 |
2023 | 23,932 |
2024 | 18,749 |
2025 | 16,293 |
2026 | 12,934 |
Thereafter | 34,016 |
| $ | 787,169 |

Practical Expedients
The Company has elected to account for operating lease (e.g., fixed payments including rent) and non-lease components (e.g., utility reimbursements and common-area maintenance costs) as a single combined lease component under ASC 842 "Leases" as the lease components are the predominant elements of the combined components.
(11) Lease Agreements - Company as Lessee
As of December 31, 2021, the Company is a lessee of corporate office space, ground leases and a parking lease associated with various consolidated properties, and equipment. Lease terms for the Company's office leases, in general, range between 5 to 10 years while ground leases and the parking lease have terms typically ranging from 20 to 85 years. The corporate office leases occasionally contain renewal options of approximately five years while certain ground leases contain renewal options that can extend the lease term from approximately 10 to 39 years.
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ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
A majority of the Company’s ground leases and the parking lease are subject to changes in the Consumer Price Index ("CPI"). Furthermore, certain of the Company’s ground leases include rental payments based on a percentage of gross or net income. While lease liabilities are not remeasured as a result of changes in the CPI or percentage of gross or net income, such changes are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred.
The Company’s lease agreements do not contain any residual value guarantees or restrictive covenants.
Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Because most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.
As of December 31, 2021 and 2020, the Company had no material finance leases.
Supplemental consolidated balance sheet information related to leases as of December 31, 2021 and 2020 is as follows ($ in thousands):

| Classification |  | December 31, 2021 |  | December 31, 2020 |  |
Assets |  |  |  |  |  |  |
Operating lease right-of-use assets | Operating lease right-of-use assets |  | $ | 68,972 |  |  | $ | 72,143 |  |  |
Total leased assets |  |  | $ | 68,972 |  |  | $ | 72,143 |  |  |
Liabilities |  |  |  |  |  |  |
Operating lease liabilities | Operating lease liabilities |  | $ | 70,675 |  |  | $ | 74,037 |  |  |
Total lease liabilities |  |  | $ | 70,675 |  |  | $ | 74,037 |  |  |

The components of lease expense for the years ended December 31, 2021 and 2020 were as follows ($ in thousands):

| December 31, 2021 |  | December 31, 2020
Operating lease cost | $ | 6,729 |  |  | $ | 6,749 |
Variable lease cost | 1,639 |  |  | 1,436 |
Short-term lease cost | 287 |  |  | 432 |
Sublease income | (438) |  |  | (438) |
Total lease cost | $ | 8,217 |  |  | $ | 8,179 |

A maturity analysis of lease liabilities as of December 31, 2021 is as follows ($ in thousands):

| Operating Leases |  |  |  |
2022 | $ | 6,987 |  |  |  |  |
2023 | 6,962 |  |  |  |  |
2024 | 6,690 |  |  |  |  |
2025 | 6,310 |  |  |  |  |
2026 | 4,440 |  |  |  |  |
Thereafter | 135,977 |  |  |  |  |
Total lease payments | $ | 167,366 |  |  |  |  |
Less: Imputed interest | (96,691) |  |  |  |  |
Present value of lease liabilities | $ | 70,675 |  |  |  |  |

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ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
Lease term and discount rate information for leases at December 31, 2021 and 2020 are as follows:

| December 31, 2021 | December 31, 2020
Weighted-average of remaining lease terms (years) |  |
Operating Leases | 40 | 39
Weighted-average of discount rates |  |
Operating Leases | 5.01 | % | 5.00 | %

Practical Expedients
Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes the lease expense for such leases on a straight-line basis over the lease term.
The Company has elected to account for lease components (e.g., fixed payments including rent) and non-lease components (e.g., common-area maintenance costs) as a single combined lease component as the lease components are the predominant elements of the combined components.
(12) Equity Transactions
Common Stock Offerings
In September 2021, 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 "2021 ATM Program"). In connection with the 2021 ATM Program, the Company may also enter into related forward sale agreements, and may sell shares of its common stock pursuant to these 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 should the Company elect to settle such forward sale agreement, in whole or in part, in shares of its common stock.
The 2021 ATM Program replaces the Company's prior equity distribution agreement entered into in September 2018 ("the "2018 ATM Program") which was terminated upon the establishment of the 2021 ATM Program.
For the year ended December 31, 2021, the Company did not sell any shares of its common stock through the 2021 ATM Program or through the 2018 ATM Program. For the year ended December 31, 2020, the Company did not sell any shares of its common stock through the 2018 ATM Program. For the year ended December 31, 2019, the Company issued 228,271 shares of common stock through the 2018 ATM Program at an average price of $321.56 per share for proceeds of $73.4 million. As of December 31, 2021, there are no outstanding forward sale agreements, and $900.0 million of shares remain available to be sold under the 2021 ATM Program.
Operating Partnership Units and Long-Term Incentive Plan ("LTIP") Units
As of December 31, 2021 and 2020, the Operating Partnership had outstanding 2,176,327 and 2,188,623 OP Units respectively. As of both December 31, 2021 and 2020 the Operating Partnership had 106,137 vested LTIP units. The Operating Partnership’s general partner, Essex, owned 96.6% of the partnership interests in the Operating Partnership as of both December 31, 2021 and 2020, and Essex is responsible for the management of the Operating Partnership’s business. As the general partner of the Operating Partnership, Essex effectively controls the ability to issue common stock of Essex upon a limited partner’s notice of redemption. Essex has generally acquired OP Units upon a limited partner’s notice of redemption in exchange for shares of its common stock. The redemption provisions of OP Units owned by limited partners that permit Essex to settle in either cash or common stock at the option of Essex were further evaluated in accordance with applicable accounting guidance to determine whether temporary or permanent equity classification on the balance sheet is appropriate. The Operating Partnership evaluated this guidance, including the requirement to settle in unregistered shares, and determined that, with few exceptions, these OP Units meet the requirements to qualify for presentation as permanent equity.
LTIP units represent an interest in the Operating Partnership for services rendered or to be rendered by the LTIP unitholder in its capacity as a partner, or in anticipation of becoming a partner, in the Operating Partnership. Upon the occurrence of specified
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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
events, LTIP units may over time achieve full parity with common units of the Operating Partnership for all purposes. Upon achieving full parity, LTIP units will be exchanged for an equal number of the OP Units.
The collective redemption value of OP Units and LTIP units owned by the limited partners, not including Essex, was approximately $804.0 million and $544.8 million based on the closing price of Essex's common stock as of December 31, 2021 and 2020, respectively.
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ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
(13) Net Income Per Common Share and Net Income Per Common Unit
Essex Property Trust, Inc.
Basic and diluted income per share is calculated as follows for the years ended December 31 ($ in thousands, except share and per share amounts):

| 2021 |  | 2020 |  | 2019
| Income |  | Weighted- average Common Shares |  | Per Common Share Amount |  | Income |  | Weighted- average Common Shares |  | Per Common Share Amount |  | Income |  | Weighted- average Common Shares |  | Per Common Share Amount
Basic: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income available to common stockholders | $ | 488,554 |  |  | 65,051,465 |  |  | $ | 7.51 |  |  | $ | 568,870 |  |  | 65,454,057 |  |  | $ | 8.69 |  |  | $ | 439,286 |  |  | 65,840,422 |  |  | $ | 6.67 |
Effect of Dilutive Securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Stock options | — |  |  | 37,409 |  |  |  |  | — |  |  | 16,678 |  |  |  |  | — |  |  | 99,033 |  |  |
DownREIT units | — |  |  | — |  |  |  |  | 783 |  |  | 94,247 |  |  |  |  | — |  |  | — |  |  |
Diluted: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income available to common stockholders | $ | 488,554 |  |  | 65,088,874 |  |  | $ | 7.51 |  |  | $ | 569,653 |  |  | 65,564,982 |  |  | $ | 8.69 |  |  | $ | 439,286 |  |  | 65,939,455 |  |  | $ | 6.66 |

The table above excludes from the calculations of diluted earnings per share weighted average convertible OP Units of 2,289,391, 2,296,608 and 2,300,478, which include vested Series Z-1 Incentive Units, 2014 Long-Term Incentive Plan Units, and 2015 Long-Term Incentive Plan Units, for the years ended December 31, 2021, 2020 and 2019, respectively, because they were anti-dilutive. The related income allocated to these convertible OP Units aggregated $17.2 million, $20.0 million and $15.3 million for the years ended December 31, 2021, 2020 and 2019, respectively.
Stock options of 116,380, 403,458, and 115,066 for the years ended December 31, 2021, 2020, and 2019, respectively, were excluded from the calculation of diluted earnings per share because the assumed proceeds per share of such options plus the average unearned compensation were greater than the average market price of the common stock for the years ended and, therefore, were anti-dilutive.
Essex Portfolio, L.P.
Basic and diluted income per unit is calculated as follows for the years ended December 31 ($ in thousands, except unit and per unit amounts):

| 2021 |  | 2020 |  | 2019
| Income |  | Weighted- average Common Units |  | Per Common Unit Amount |  | Income |  | Weighted- average Common Units |  | Per Common Unit Amount |  | Income |  | Weighted- average Common Units |  | Per Common Unit Amount
Basic: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income available to common unitholders | $ | 505,745 |  |  | 67,340,856 |  |  | $ | 7.51 |  |  | $ | 588,782 |  |  | 67,750,665 |  |  | $ | 8.69 |  |  | $ | 454,629 |  |  | 68,140,900 |  |  | $ | 6.67 |
Effect of Dilutive Securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Stock options | — |  |  | 37,409 |  |  |  |  | — |  |  | 16,678 |  |  |  |  | — |  |  | 99,033 |  |  |
DownREIT units | — |  |  | — |  |  |  |  | 783 |  |  | 94,247 |  |  |  |  | — |  |  | — |  |  |
Diluted: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income available to common unitholders | $ | 505,745 |  |  | 67,378,265 |  |  | $ | 7.51 |  |  | $ | 589,565 |  |  | 67,861,590 |  |  | $ | 8.69 |  |  | $ | 454,629 |  |  | 68,239,933 |  |  | $ | 6.66 |

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ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
Stock options of 116,380, 403,458, and 115,066, for the years ended December 31, 2021, 2020, and 2019, respectively, were excluded from the calculation of diluted earnings per unit because the assumed proceeds per unit of these options plus the average unearned compensation were greater than the average market price of the common unit for the years ended and, therefore, were anti-dilutive.
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ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
(14) Equity Based Compensation Plans
Stock Options and Restricted Stock
In May 2018, stockholders approved the Company’s 2018 Stock Award and Incentive Compensation Plan ("2018 Plan"). The 2018 Plan serves as the successor to the Company’s 2013 Stock Incentive Plan (the "2013 Plan"). The Company’s 2018 Plan provides incentives to attract and retain officers, directors and key employees. The 2018 Plan provides for the grant of stock-based awards to employees, directors and consultants of the Company and its affiliates. The aggregate number of shares of the Company’s common stock available for issuance pursuant to awards granted under the 2018 Plan is 2,000,000 shares, plus the number of shares authorized for grants and available for issuance under the 2013 Plan as of the effective date of the 2018 Plan and the number of shares subject to outstanding awards under the 2013 Plan that are forfeited or otherwise not issued under such awards. No further awards will be granted under the 2013 Plan and the shares that remained available for future issuance under the 2013 Plan as of the effective date of the 2018 Plan will be available for issuance under the 2018 Plan. In connection with the adoption of the 2018 Plan, the Board delegated to the Compensation Committee of the Board the authority to administer the 2018 Plan.
Equity-based compensation costs for options and restricted stock under the fair value method totaled $11.7 million, $12.9 million, and $11.4 million for years ended December 31, 2021, 2020 and 2019, respectively. For each of the years ended December 31, 2021, 2020 and 2019 equity-based compensation costs included $3.5 million related to restricted stock for bonuses awarded based on asset dispositions, which is recorded as a cost of real estate and land sold, respectively. Stock-based compensation for options and restricted stock related to recipients who are direct and incremental to projects under development were capitalized and totaled $0.9 million, $1.3 million, and $1.6 million for the years ended December 31, 2021, 2020 and 2019, respectively. The intrinsic value of the options exercised totaled $25.7 million, $7.4 million, and $18.7 million, for the years ended December 31, 2021, 2020, and 2019 respectively. The intrinsic value of the options exercisable totaled $22.5 million and $3.4 million as of December 31, 2021 and 2020, respectively.
Total unrecognized compensation cost related to unvested stock options totaled $3.9 million as of December 31, 2021 and the unrecognized compensation cost is expected to be recognized over a period of 2.2 years.
The average fair value of stock options granted for the years ended December 31, 2021, 2020 and 2019 was $24.68, $20.69 and $24.02, respectively. Certain stock options granted in 2021, 2020, and 2019 included a $100 cap, $100 cap, and, $125 cap on the appreciation of the market price over the exercise price. The fair value of stock options was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants:

| 2021 |  | 2020 |  | 2019
Stock price | $ | 329.71 |  |  | $ | 244.74 |  |  | $ | 304.85 |
Risk-free interest rates | 1.22 | % |  | 0.83 | % |  | 2.01 | %
Expected lives | 6 years |  | 6 years |  | 6 years
Volatility | 27.00 | % |  | 25.72 | % |  | 19.56 | %
Dividend yield | 2.90 | % |  | 2.93 | % |  | 2.72 | %

A summary of the status of the Company’s stock option plans as of December 31, 2021, 2020, and 2019 and changes during the years ended on those dates is presented below:
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019

| 2021 |  | 2020 |  | 2019
| Shares |  | Weighted- average exercise price |  | Shares |  | Weighted- average exercise price |  | Shares |  | Weighted- average exercise price
Outstanding at beginning of year | 613,109 |  |  | $ | 255.86 |  |  | 572,971 |  |  | $ | 251.10 |  |  | 612,954 |  |  | $ | 224.57 |
Granted | 99,479 |  |  | 329.71 |  |  | 149,020 |  |  | 244.74 |  |  | 148,147 |  |  | 304.85 |
Exercised | (248,725) |  |  | 231.37 |  |  | (70,802) |  |  | 208.57 |  |  | (182,817) |  |  | 205.25 |
Forfeited and canceled | — |  |  | — |  |  | (38,080) |  |  | 228.64 |  |  | (5,313) |  |  | 257.87 |
Outstanding at end of year | 463,863 |  |  | 284.82 |  |  | 613,109 |  |  | 255.86 |  |  | 572,971 |  |  | 251.10 |
Options exercisable at year end | 274,244 |  |  | 270.11 |  |  | 361,985 |  |  | 245.83 |  |  | 305,379 |  |  | 223.90 |

The following table summarizes information about restricted stock outstanding as of December 31, 2021, 2020 and 2019 and changes during the years ended:

| 2021 |  | 2020 |  | 2019
| Shares |  | Weighted- average grant price |  | Shares |  | Weighted- average grant price |  | Shares |  | Weighted- average grant price
Unvested at beginning of year | 132,603 |  |  | $ | 214.34 |  |  | 114,877 |  |  | $ | 197.62 |  |  | 91,058 |  |  | $ | 180.99 |
Granted | 50,349 |  |  | 337.52 |  |  | 45,196 |  |  | 248.16 |  |  | 41,643 |  |  | 235.93 |
Vested | (22,387) |  |  | 229.90 |  |  | (15,116) |  |  | 170.61 |  |  | (13,222) |  |  | 143.56 |
Forfeited and canceled | (1,164) |  |  | 219.30 |  |  | (12,354) |  |  | 184.11 |  |  | (4,602) |  |  | 158.06 |
Unvested at end of year | 159,401 |  |  | 251.03 |  |  | 132,603 |  |  | 214.34 |  |  | 114,877 |  |  | 197.62 |

The unrecognized compensation cost related to unvested restricted stock totaled $14.4 million as of December 31, 2021 and is expected to be recognized over a period of 1.8 years.
Long-Term Incentive Plans – LTIP Units
On December 9, 2014, the Operating Partnership issued 44,750 LTIP units under the 2015 Long-Term Incentive Plan Award agreements to executives of the Company. The 2015 Long-Term Incentive Plan Units (the "2015 LTIP Units") are subject to forfeiture based on performance-based and service based conditions. An additional 24,000 LTIP units were granted subject only to performance-based criteria and were fully vested on the date granted. The 2015 LTIP Units, that are subject to vesting, vested at 20% per year on each of the first five anniversaries of the initial grant date. The 2015 LTIP Units performance conditions measurement ended on December 9, 2015 and 95.75% of the units awarded were earned by the recipients. 2015 LTIP Units not earned based on the performance-based criteria were automatically forfeited by the recipients. The 2015 LTIP Units are convertible one-for-one into OP Units which, in turn, are convertible into common stock of the Company subject to a ten-year liquidity restriction.
In December 2013, the Operating Partnership issued 50,500 LTIP units under the 2014 Long-Term Incentive Plan Award agreements to executives of the Company. The 2014 Long-Term Incentive Plan Units (the "2014 LTIP Units") were subject to forfeiture based on performance-based conditions and are currently subject to service based vesting. The 2014 LTIP Units vested 25% per year on each of the first four anniversaries of the initial grant date. In December 2014, the Company achieved the performance criteria and all of the 2014 LTIP Units awarded were earned by the recipients, subject to satisfaction of service based vesting conditions. The 2014 LTIP Units are convertible one-for-one into OP Units which, in turn, are convertible into common stock of the Company subject to a ten year liquidity restriction.
The estimated fair value of the 2015 LTIP Units and 2014 LTIP Units were determined on the grant date using Monte Carlo simulations under a risk-neutral premise and considered Essex’s stock price on the date of grant, the unpaid dividends on unvested units and the discount factor for ten years of illiquidity.
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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
Prior to 2013, the Company issued Series Z Incentive Units and Series Z-1 Incentive Units (collectively referred to as "Z Units") of limited partnership interest in the Operating Partnership. Vesting in the Z Units is based on performance criteria established in the plan. The criteria can be revised by the Compensation Committee of the Board of Directors if the Committee deems that the plan's criterion is unachievable for any given year. The sale of Z Units is contractually prohibited. Z Units are convertible into Operating Partnership units which are exchangeable for shares of the Company’s common stock that have marketability restrictions. The estimated fair value of Z Units were determined on the grant date and considered the Company's stock price on the date of grant, the dividends that are not paid on unvested units and a marketability discount for the 8 to 15 years of illiquidity. Compensation expense is calculated by multiplying estimated vesting increases for the period by the estimated fair value as of the grant date.
During 2011 and 2010, the Operating Partnership issued 154,500 Series Z-1 Incentive Units (the "Z-1 Units") of limited partner interest to executives of the Company. The Z-1 Units are convertible one-for-one into common units of the Operating Partnership (which, in turn, are convertible into common stock of the Company) upon the earlier to occur of 100 percent vesting of the units or the year 2026. The conversion ratchet (accounted for as vesting) of the Z-1 Units into common units, is to increase consistent with the Company’s annual FFO growth, but is not to be less than zero or greater than 14 percent. Z-1 Unitholders are entitled to receive distributions, on vested units, that are now equal to dividends distributed to common stockholders.
Equity-based compensation costs for LTIP and Z Units under the fair value method totaled approximately zero, zero and $0.9 million for the years ended December 31, 2021, 2020 and 2019, respectively. Equity-based compensation costs related to LTIP Units attributable to recipients who are direct and incremental to these projects was capitalized to real estate under development and totaled approximately zero, zero, and $0.2 million, for the years ended December 31, 2021, 2020, and 2019, respectively. The intrinsic value of the vested and unvested LTIP Units totaled $37.4 million as of December 31, 2021. Total unrecognized compensation cost related to the unvested LTIP Units under the LTIP Units plans was zero as of December 31, 2021.
The following table summarizes information about the LTIP Units outstanding as of December 31, 2021:

| Long-Term Incentive Plan - LTIP Units
| Total Vested Units |  | Total Unvested Units |  | Total Outstanding Units |  | Weighted- average Grant-date Fair Value |  | Weighted- average Remaining Contractual Life (years)
Balance, December 31, 2018 | 134,081 |  |  | 11,161 |  |  | 145,242 |  |  | $ | 75.03 |  |  | 6.5
Granted | — |  |  | — |  |  | — |  |  |  |  |
Vested | 9,176 |  |  | (9,176) |  |  | — |  |  |  |  |
Converted | — |  |  | — |  |  | — |  |  |  |  |
Cancelled | — |  |  | (95) |  |  | (95) |  |  |  |  |
Balance, December 31, 2019 | 143,257 |  |  | 1,890 |  |  | 145,147 |  |  | $ | 75.03 |  |  | 5.2
Granted | — |  |  | — |  |  | — |  |  |  |  |
Vested | 1,890 |  |  | (1,890) |  |  | — |  |  |  |  |
Converted | (39,010) |  |  | — |  |  | (39,010) |  |  |  |  |
Cancelled | — |  |  | — |  |  | — |  |  |  |  |
Balance, December 31, 2020 | 106,137 |  |  | — |  |  | 106,137 |  |  | $ | 84.47 |  |  | 3.6
Granted | — |  |  | — |  |  | — |  |  |  |  |
Vested | — |  |  | — |  |  | — |  |  |  |  |
Converted | — |  |  | — |  |  | — |  |  |  |  |
Cancelled | — |  |  | — |  |  | — |  |  |  |  |
Balance, December 31, 2021 | 106,137 |  |  | — |  |  | 106,137 |  |  | $ | 84.47 |  |  | 2.6

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ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
(15) Segment Information
The Company's segment disclosures present the measure used by the chief operating decision makers for purposes of assessing each segment's performance. The Company's chief operating decision makers are comprised of several members of its executive management team who use net operating income ("NOI") to assess the performance of the business for the Company's reportable operating segments. NOI represents total property revenues less direct property operating expenses.
The executive management team generally evaluates the Company's operating performance geographically. The Company defines its reportable operating segments as the three geographical regions in which its communities are located: Southern California, Northern California and Seattle Metro.
Excluded from segment revenues and NOI are management and other fees from affiliates and interest and other income. Non-segment revenues and NOI included in the following schedule also consist of revenues generated from commercial properties and properties that have been sold. Other non-segment assets include items such as real estate under development, co-investments, real estate held for sale, cash and cash equivalents, marketable securities, notes and other receivables, and prepaid expenses and other assets.
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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
The revenues and NOI for each of the reportable operating segments are summarized as follows for the years ended December 31, 2021, 2020, and 2019 ($ in thousands):

| Years Ended December 31,
| 2021 |  | 2020 |  | 2019
Revenues: |  |  |  |  |
Southern California | $ | 588,381 |  |  | $ | 566,553 |  |  | $ | 593,253 |
Northern California | 584,034 |  |  | 604,348 |  |  | 557,139 |
Seattle Metro | 239,839 |  |  | 243,900 |  |  | 243,060 |
Other real estate assets | 19,164 |  |  | 71,349 |  |  | 57,176 |
Total property revenues | $ | 1,431,418 |  |  | $ | 1,486,150 |  |  | $ | 1,450,628 |
Net operating income: |  |  |  |  |
Southern California | $ | 408,207 |  |  | $ | 391,095 |  |  | $ | 423,177 |
Northern California | 401,862 |  |  | 431,124 |  |  | 412,706 |
Seattle Metro | 160,954 |  |  | 166,847 |  |  | 172,601 |
Other real estate assets | 15,136 |  |  | 56,684 |  |  | 45,617 |
Total net operating income | 986,159 |  |  | 1,045,750 |  |  | 1,054,101 |
Management and other fees from affiliates | 9,138 |  |  | 9,598 |  |  | 9,527 |
Corporate-level property management expenses | (36,188) |  |  | (34,573) |  |  | (34,067) |
Depreciation and amortization | (520,066) |  |  | (525,497) |  |  | (483,750) |
General and administrative | (51,838) |  |  | (65,388) |  |  | (54,262) |
Expensed acquisition and investment related costs | (203) |  |  | (1,591) |  |  | (168) |
Impairment loss | — |  |  | (1,825) |  |  | (7,105) |
Gain (loss) on sale of real estate and land | 142,993 |  |  | 64,967 |  |  | (3,164) |
Interest expense | (203,125) |  |  | (220,633) |  |  | (217,339) |
Total return swap income | 10,774 |  |  | 10,733 |  |  | 8,446 |
Interest and other income | 98,744 |  |  | 40,999 |  |  | 46,298 |
Equity income from co-investments | 111,721 |  |  | 66,512 |  |  | 112,136 |
Deferred tax expense on unrealized gain on unconsolidated co-investment | (15,668) |  |  | (1,531) |  |  | (1,457) |
(Loss) gain on early retirement of debt, net | (19,010) |  |  | (22,883) |  |  | 3,717 |
Gain on remeasurement of co-investment | 2,260 |  |  | 234,694 |  |  | 31,535 |
Net income | $ | 515,691 |  |  | $ | 599,332 |  |  | $ | 464,448 |

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ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
Total assets for each of the reportable operating segments are summarized as follows as of December 31, 2021 and 2020 ($ in thousands):

| As of December 31,
| 2021 |  | 2020
Assets: |  |  |
Southern California | $ | 4,018,839 |  |  | $ | 3,981,650 |
Northern California | 5,460,701 |  |  | 5,405,102 |
Seattle Metro | 1,407,033 |  |  | 1,403,678 |
Other real estate assets | 96,500 |  |  | 137,356 |
Net reportable operating segments - real estate assets | 10,983,073 |  |  | 10,927,786 |
Real estate under development | 111,562 |  |  | 386,047 |
Co-investments | 1,177,802 |  |  | 1,018,010 |
Real estate held for sale | — |  |  | 57,938 |
Cash and cash equivalents, including restricted cash | 58,638 |  |  | 84,041 |
Marketable securities | 191,829 |  |  | 147,768 |
Notes and other receivables | 341,033 |  |  | 195,104 |
Operating lease right-of-use assets | 68,972 |  |  | 72,143 |
Prepaid expenses and other assets | 64,964 |  |  | 47,340 |
Total assets | $ | 12,997,873 |  |  | $ | 12,936,177 |

(16) 401(k) Plan
The Company has a 401(k) benefit plan (the "Plan") for all eligible employees. Employee contributions are limited by the maximum allowed under Section 401(k) of the Internal Revenue Code. The Company matches 50% of the employee contributions up to a specified maximum. Company contributions to the Plan were approximately $3.3 million, $2.7 million, and $2.4 million for the years ended December 31, 2021, 2020, and 2019, respectively.
(17) Commitments and Contingencies
The Company's total minimum lease payment commitments, underground leases, parking leases, and operating leases are disclosed in Note 11, Lease Agreements - Company as Lessee.
To the extent that an environmental matter arises or is identified in the future that has other than a remote risk of having a material impact on the financial statements, the Company will disclose the estimated range of possible outcomes associated with it and, if an outcome is probable, accrue an appropriate liability for that matter. The Company will consider whether any such matter results in an impairment of value on the affected property and, if so, the impairment will be recognized.
The Company has no way of determining the magnitude of any potential liability to which it may be subject arising out of unknown environmental conditions with respect to the communities currently or formerly owned by the Company. No assurance can be given that: existing environmental assessments conducted with respect to any of these communities have revealed all environmental conditions or potential liabilities associated with such conditions; any prior owner or operator of a property did not create any material environmental condition not known to the Company; or a material unknown environmental condition does not otherwise exist as to any one or more of the communities. The Company has limited insurance coverage for some of the types of environmental conditions and associated liabilities described above.
The Company has entered into transactions that may require the Company to pay the tax liabilities of the partners or members in the Operating Partnership or in the DownREIT entities. These transactions are within the Company’s control. Although the Company plans to hold the contributed assets or defer recognition of gain on their sale pursuant to like-kind exchange rules under Section 1031 of the Internal Revenue Code, the Company can provide no assurance that it will be able to do so and if such tax liabilities were incurred they may have a material impact on the Company’s financial position.
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ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021, 2020, and 2019
There continue to be lawsuits against owners and managers of certain of the Company's apartment communities alleging personal injury and property damage caused by the presence of mold in the residential units and common areas of those communities. Some of these lawsuits have resulted in substantial monetary judgments or settlements in the past. The Company has been sued for mold related matters and has settled some, but not all, of such suits. Insurance carriers have reacted to the increase in mold related liability awards by excluding mold related claims from standard general liability policies and pricing mold endorsements at prohibitively high rates. The Company has, however, purchased pollution liability insurance which includes coverage for some mold claims. The Company has also adopted policies intended to promptly address and resolve reports of mold and to minimize any impact mold might have on tenants of its properties. The Company believes its mold policies and proactive response to address reported mold exposures reduces its risk of loss from mold claims. While no assurances can be given that the Company has identified and responded to all mold occurrences, the Company promptly addresses and responds to all known mold reports. Liabilities resulting from such mold related matters are not expected to have a material adverse effect on the Company’s financial condition, results of operations or cash flows. As of December 31, 2021, potential liabilities for mold and other environmental liabilities are not quantifiable and an estimate of possible loss cannot be made.
The Company carries comprehensive liability, fire, extended coverage and rental loss insurance for each of the communities. There are, however, certain types of extraordinary losses, such as, for example, losses from terrorism or earthquakes, for which the Company has limited insurance coverage. Substantially all of the communities are located in areas that are subject to earthquake activity. The Company has established a wholly-owned insurance subsidiary, Pacific Western Insurance LLC ("PWI"). Through PWI, the Company is self-insured for earthquake related losses. Additionally, since January 2008, PWI has provided property and casualty insurance coverage for the first $5.0 million of the Company’s property level insurance claims per incident. As of December 31, 2021, PWI has cash and marketable securities of approximately $198.1 million. These assets are consolidated in the Company’s financial statements. Beginning in 2013, the Company has obtained limited third party seismic insurance on selected assets in the Company's co-investments.
The Company is subject to various other legal and/or regulatory proceedings arising in the course of its business operations. The Company believes that, with respect to such matters that it is currently a party to, the ultimate disposition of any such matter will not result in a material adverse effect on the Company’s financial condition, results of operations or cash flows.
(18) Subsequent Events
In January 2022, Wesco VI acquired Vela on Ox, a 379-unit apartment home community located in Woodland Hills, CA for a total contract price of $183.0 million. The property was encumbered by a $100.7 million bridge loan from the Company, with an interest rate of 2.64% and was paid off in January 2022.
In January 2022, the Company received cash of $121.3 million to pay off the outstanding principal balance of related party bridge loans to Wesco VI.
Subsequent to year end, the Company received cash of $87.9 million for the full redemption of two preferred equity investments in joint ventures that hold property in Southern California and $17.6 million for the partial redemption of a preferred equity investment in a joint venture that holds property in Northern California.
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ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
FINANCIAL STATEMENT SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2021
(Dollars in thousands)

|  |  |  |  |  | Costs |  |  |  |  |  |  |
|  |  |  | Initial cost | capitalized | Gross amount carried at close of period |  |  |  |
| Apartment |  |  |  | Buildings and | subsequent to | Land and | Buildings and |  | Accumulated | Date of | Date | Lives
Property | Homes | Location | Encumbrance | Land | improvements | acquisition | improvements | improvements | Total (1) | depreciation | construction | acquired | (years)
Encumbered communities |  |  |  |  |  |  |  |  |  |  |  |  |
Belmont Station | 275 |  | Los Angeles, CA | 29,753 |  | 8,100 |  | 66,666 |  | 8,524 |  | 8,267 |  | 75,023 |  | 83,290 |  | (36,537) |  | 2009 | Mar-09 | 3-30
Brio | 300 |  | Walnut Creek, CA | 96,310 |  | 16,885 |  | 151,741 |  | 2,703 |  | 16,885 |  | 154,444 |  | 171,329 |  | (14,287) |  | 2015 | Jun-19 | 3-30
Form 15 | 242 |  | San Diego, CA | 40,865 |  | 24,510 |  | 72,221 |  | 12,459 |  | 25,540 |  | 83,650 |  | 109,190 |  | (17,211) |  | 2014 | Mar-16 | 3-30
Fountain Park | 705 |  | Playa Vista, CA | 82,775 |  | 25,073 |  | 94,980 |  | 38,986 |  | 25,203 |  | 133,836 |  | 159,039 |  | (86,456) |  | 2002 | Feb-04 | 3-30
Highridge | 255 |  | Rancho Palos Verdes, CA | 69,380 |  | 5,419 |  | 18,347 |  | 34,262 |  | 6,073 |  | 51,955 |  | 58,028 |  | (43,677) |  | 1972 | May-97 | 3-30
Magnolia Square/Magnolia Lane (2) | 188 |  | Sunnyvale, CA | 52,335 |  | 8,190 |  | 24,736 |  | 18,868 |  | 8,191 |  | 43,603 |  | 51,794 |  | (28,268) |  | 1963 | Sep-07 | 3-30
Marquis | 166 |  | San Jose, CA | 44,382 |  | 20,495 |  | 47,823 |  | 337 |  | 20,495 |  | 48,160 |  | 68,655 |  | (4,939) |  | 2015 | Dec-18 | 3-30
Sage at Cupertino | 230 |  | San Jose, CA | 51,792 |  | 35,719 |  | 53,449 |  | 11,506 |  | 35,719 |  | 64,955 |  | 100,674 |  | (12,988) |  | 1971 | Mar-17 | 3-30
The Barkley (3) | 161 |  | Anaheim, CA | 14,890 |  | — |  | 8,520 |  | 8,261 |  | 2,353 |  | 14,428 |  | 16,781 |  | (10,973) |  | 1984 | Apr-00 | 3-30
The Dylan | 184 |  | West Hollywood, CA | 58,145 |  | 19,984 |  | 82,286 |  | 1,938 |  | 19,990 |  | 84,218 |  | 104,208 |  | (21,208) |  | 2015 | Mar-15 | 3-30
The Huxley | 187 |  | West Hollywood, CA | 52,936 |  | 19,362 |  | 75,641 |  | 2,028 |  | 19,371 |  | 77,660 |  | 97,031 |  | (19,851) |  | 2014 | Mar-15 | 3-30
Township | 132 |  | Redwood City, CA | 45,394 |  | 19,812 |  | 70,619 |  | 1,456 |  | 19,812 |  | 72,075 |  | 91,887 |  | (5,814) |  | 2014 | Sep-19 | 3-30
| 3,025 |  |  | $ | 638,957 |  | $ | 203,549 |  | $ | 767,029 |  | $ | 141,328 |  | $ | 207,899 |  | $ | 904,007 |  | $ | 1,111,906 |  | $ | (302,209) |  |  |  |
Unencumbered Communities |  |  |  |  |  |  |  |  |  |  |  |  |
Agora | 49 |  | Walnut Creek, CA | — |  | 4,932 |  | 60,423 |  | 296 |  | 4,934 |  | 60,717 |  | 65,651 |  | (4,084) |  | 2016 | Jan-20 | 3-30
Alessio | 624 |  | Los Angeles, CA | — |  | 32,136 |  | 128,543 |  | 15,445 |  | 32,136 |  | 143,988 |  | 176,124 |  | (44,124) |  | 2001 | Apr-14 | 5-30
Allegro | 97 |  | Valley Village, CA | — |  | 5,869 |  | 23,977 |  | 3,227 |  | 5,869 |  | 27,204 |  | 33,073 |  | (12,316) |  | 2010 | Oct-10 | 3-30
Allure at Scripps Ranch | 194 |  | San Diego, CA | — |  | 11,923 |  | 47,690 |  | 2,901 |  | 11,923 |  | 50,591 |  | 62,514 |  | (14,257) |  | 2002 | Apr-14 | 5-30
Alpine Village | 301 |  | Alpine, CA | — |  | 4,967 |  | 19,728 |  | 10,820 |  | 4,982 |  | 30,533 |  | 35,515 |  | (19,816) |  | 1971 | Dec-02 | 3-30
Anavia | 250 |  | Anaheim, CA | — |  | 15,925 |  | 63,712 |  | 10,627 |  | 15,925 |  | 74,339 |  | 90,264 |  | (28,240) |  | 2009 | Dec-10 | 3-30
Annaliese | 56 |  | Seattle, WA | — |  | 4,727 |  | 14,229 |  | 936 |  | 4,726 |  | 15,166 |  | 19,892 |  | (4,754) |  | 2009 | Jan-13 | 3-30
Apex | 367 |  | Milpitas, CA | — |  | 44,240 |  | 103,251 |  | 7,635 |  | 44,240 |  | 110,886 |  | 155,126 |  | (27,525) |  | 2014 | Aug-14 | 3-30
Aqua Marina Del Rey | 500 |  | Marina Del Rey, CA | — |  | 58,442 |  | 175,326 |  | 19,162 |  | 58,442 |  | 194,488 |  | 252,930 |  | (60,202) |  | 2001 | Apr-14 | 5-30
Ascent | 90 |  | Kirkland, WA | — |  | 3,924 |  | 11,862 |  | 2,542 |  | 3,924 |  | 14,404 |  | 18,328 |  | (5,432) |  | 1988 | Oct-12 | 3-30
Ashton Sherman Village | 264 |  | Los Angeles, CA | — |  | 23,550 |  | 93,811 |  | 2,126 |  | 23,550 |  | 95,937 |  | 119,487 |  | (17,140) |  | 2014 | Dec-16 | 3-30
Avant | 440 |  | Los Angeles, CA | — |  | 32,379 |  | 137,940 |  | 4,731 |  | 32,379 |  | 142,671 |  | 175,050 |  | (31,839) |  | 2014 | Jun-15 | 3-30
Avenue 64 | 224 |  | Emeryville, CA | — |  | 27,235 |  | 64,403 |  | 16,702 |  | 27,235 |  | 81,105 |  | 108,340 |  | (21,921) |  | 2007 | Apr-14 | 5-30
Aviara (4) | 166 |  | Mercer Island, WA | — |  | — |  | 49,813 |  | 2,306 |  | — |  | 52,119 |  | 52,119 |  | (15,548) |  | 2013 | Apr-14 | 5-30
Avondale at Warner Center | 446 |  | Woodland Hills, CA | — |  | 10,536 |  | 24,522 |  | 27,959 |  | 10,601 |  | 52,416 |  | 63,017 |  | (39,034) |  | 1970 | Jan-99 | 3-30
Bel Air | 462 |  | San Ramon, CA | — |  | 12,105 |  | 18,252 |  | 45,326 |  | 12,682 |  | 63,001 |  | 75,683 |  | (47,118) |  | 1988 | Jan-95 | 3-30

F- 58

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
FINANCIAL STATEMENT SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2021
(Dollars in thousands)

|  |  |  |  |  | Costs |  |  |  |  |  |  |
|  |  |  | Initial cost | capitalized | Gross amount carried at close of period |  |  |  |
| Apartment |  |  |  | Buildings and | subsequent to | Land and | Buildings and |  | Accumulated | Date of | Date | Lives
Property | Homes | Location | Encumbrance | Land | improvements | acquisition | improvements | improvements | Total (1) | depreciation | construction | acquired | (years)
Belcarra | 296 |  | Bellevue, WA | — |  | 21,725 |  | 92,091 |  | 3,756 |  | 21,725 |  | 95,847 |  | 117,572 |  | (26,579) |  | 2009 | Apr-14 | 5-30
Bella Villagio | 231 |  | San Jose, CA | — |  | 17,247 |  | 40,343 |  | 5,204 |  | 17,247 |  | 45,547 |  | 62,794 |  | (18,493) |  | 2004 | Sep-10 | 3-30
BellCentre | 249 |  | Bellevue, WA | — |  | 16,197 |  | 67,207 |  | 6,721 |  | 16,197 |  | 73,928 |  | 90,125 |  | (21,787) |  | 2001 | Apr-14 | 5-30
Bellerive | 63 |  | Los Angeles, CA | — |  | 5,401 |  | 21,803 |  | 1,467 |  | 5,401 |  | 23,270 |  | 28,671 |  | (9,362) |  | 2011 | Aug-11 | 3-30
Belmont Terrace | 71 |  | Belmont, CA | — |  | 4,446 |  | 10,290 |  | 7,531 |  | 4,473 |  | 17,794 |  | 22,267 |  | (11,348) |  | 1974 | Oct-06 | 3-30
Bennett Lofts | 164 |  | San Francisco, CA | — |  | 21,771 |  | 50,800 |  | 32,121 |  | 28,371 |  | 76,321 |  | 104,692 |  | (25,807) |  | 2004 | Dec-12 | 3-30
Bernardo Crest | 216 |  | San Diego, CA | — |  | 10,802 |  | 43,209 |  | 6,290 |  | 10,802 |  | 49,499 |  | 60,301 |  | (14,756) |  | 1988 | Apr-14 | 5-30
Bonita Cedars | 120 |  | Bonita, CA | — |  | 2,496 |  | 9,913 |  | 6,447 |  | 2,503 |  | 16,353 |  | 18,856 |  | (10,534) |  | 1983 | Dec-02 | 3-30
Boulevard | 172 |  | Fremont, CA | — |  | 3,520 |  | 8,182 |  | 14,926 |  | 3,580 |  | 23,048 |  | 26,628 |  | (19,910) |  | 1978 | Jan-96 | 3-30
Brookside Oaks | 170 |  | Sunnyvale, CA | — |  | 7,301 |  | 16,310 |  | 27,812 |  | 10,328 |  | 41,095 |  | 51,423 |  | (28,453) |  | 1973 | Jun-00 | 3-30
Bridle Trails | 108 |  | Kirkland, WA | — |  | 1,500 |  | 5,930 |  | 6,923 |  | 1,531 |  | 12,822 |  | 14,353 |  | (9,891) |  | 1986 | Oct-97 | 3-30
Brighton Ridge | 264 |  | Renton, WA | — |  | 2,623 |  | 10,800 |  | 7,844 |  | 2,656 |  | 18,611 |  | 21,267 |  | (14,331) |  | 1986 | Dec-96 | 3-30
Bristol Commons | 188 |  | Sunnyvale, CA | — |  | 5,278 |  | 11,853 |  | 10,788 |  | 5,293 |  | 22,626 |  | 27,919 |  | (18,121) |  | 1989 | Jan-95 | 3-30
Bunker Hill | 456 |  | Los Angeles, CA | — |  | 11,498 |  | 27,871 |  | 99,814 |  | 11,639 |  | 127,544 |  | 139,183 |  | (89,600) |  | 1968 | Mar-98 | 3-30
Camarillo Oaks | 564 |  | Camarillo, CA | — |  | 10,953 |  | 25,254 |  | 9,169 |  | 11,075 |  | 34,301 |  | 45,376 |  | (28,193) |  | 1985 | Jul-96 | 3-30
Cambridge Park | 320 |  | San Diego, CA | — |  | 18,185 |  | 72,739 |  | 5,616 |  | 18,185 |  | 78,355 |  | 96,540 |  | (22,506) |  | 1998 | Apr-14 | 5-30
Camino Ruiz Square | 159 |  | Camarillo, CA | — |  | 6,871 |  | 26,119 |  | 2,975 |  | 6,931 |  | 29,034 |  | 35,965 |  | (14,907) |  | 1990 | Dec-06 | 3-30
Canvas | 123 |  | Seattle, WA | — |  | 10,489 |  | 36,924 |  | 56 |  | 10,489 |  | 36,980 |  | 47,469 |  | (46) |  | 2014 | Dec-21 | 3-30
Canyon Oaks | 250 |  | San Ramon, CA | — |  | 19,088 |  | 44,473 |  | 7,995 |  | 19,088 |  | 52,468 |  | 71,556 |  | (25,767) |  | 2005 | May-07 | 3-30
Canyon Pointe | 250 |  | Bothell, WA | — |  | 4,692 |  | 18,288 |  | 10,200 |  | 4,693 |  | 28,487 |  | 33,180 |  | (18,548) |  | 1990 | Oct-03 | 3-30
Capri at Sunny Hills | 102 |  | Fullerton, CA | — |  | 3,337 |  | 13,320 |  | 10,017 |  | 4,048 |  | 22,626 |  | 26,674 |  | (16,217) |  | 1961 | Sep-01 | 3-30
Carmel Creek | 348 |  | San Diego, CA | — |  | 26,842 |  | 107,368 |  | 9,452 |  | 26,842 |  | 116,820 |  | 143,662 |  | (34,832) |  | 2000 | Apr-14 | 5-30
Carmel Landing | 356 |  | San Diego, CA | — |  | 16,725 |  | 66,901 |  | 11,985 |  | 16,725 |  | 78,886 |  | 95,611 |  | (23,860) |  | 1989 | Apr-14 | 5-30
Carmel Summit | 246 |  | San Diego, CA | — |  | 14,968 |  | 59,871 |  | 5,485 |  | 14,968 |  | 65,356 |  | 80,324 |  | (18,885) |  | 1989 | Apr-14 | 5-30
Castle Creek | 216 |  | Newcastle, WA | — |  | 4,149 |  | 16,028 |  | 6,116 |  | 4,833 |  | 21,460 |  | 26,293 |  | (16,945) |  | 1998 | Dec-98 | 3-30
Catalina Gardens | 128 |  | Los Angeles, CA | — |  | 6,714 |  | 26,856 |  | 2,749 |  | 6,714 |  | 29,605 |  | 36,319 |  | (8,556) |  | 1987 | Apr-14 | 5-30
CBC Apartments & The Sweeps | 239 |  | Goleta, CA | — |  | 11,841 |  | 45,320 |  | 7,309 |  | 11,906 |  | 52,564 |  | 64,470 |  | (30,261) |  | 1962 | Jan-06 | 3-30
Cedar Terrace | 180 |  | Bellevue, WA | — |  | 5,543 |  | 16,442 |  | 9,084 |  | 5,652 |  | 25,417 |  | 31,069 |  | (15,207) |  | 1984 | Jan-05 | 3-30
CentrePointe | 224 |  | San Diego, CA | — |  | 3,405 |  | 7,743 |  | 22,728 |  | 3,442 |  | 30,434 |  | 33,876 |  | (24,211) |  | 1974 | Jun-97 | 3-30
Chestnut Street Apartments | 96 |  | Santa Cruz, CA | — |  | 6,582 |  | 15,689 |  | 2,356 |  | 6,582 |  | 18,045 |  | 24,627 |  | (8,572) |  | 2002 | Jul-08 | 3-30
City View | 572 |  | Hayward, CA | — |  | 9,883 |  | 37,670 |  | 34,786 |  | 10,350 |  | 71,989 |  | 82,339 |  | (56,516) |  | 1975 | Mar-98 | 3-30
Collins on Pine | 76 |  | Seattle, WA | — |  | 7,276 |  | 22,226 |  | 879 |  | 7,276 |  | 23,105 |  | 30,381 |  | (6,037) |  | 2013 | May-14 | 3-30
Connolly Station | 309 |  | Dublin, CA | — |  | 19,949 |  | 123,428 |  | 3,187 |  | 19,949 |  | 126,615 |  | 146,564 |  | (8,762) |  | 2014 | Jan-20 | 3-30

F- 59

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
FINANCIAL STATEMENT SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2021
(Dollars in thousands)

|  |  |  |  |  | Costs |  |  |  |  |  |  |
|  |  |  | Initial cost | capitalized | Gross amount carried at close of period |  |  |  |
| Apartment |  |  |  | Buildings and | subsequent to | Land and | Buildings and |  | Accumulated | Date of | Date | Lives
Property | Homes | Location | Encumbrance | Land | improvements | acquisition | improvements | improvements | Total (1) | depreciation | construction | acquired | (years)
Corbella at Juanita Bay | 169 |  | Kirkland, WA | — |  | 5,801 |  | 17,415 |  | 4,364 |  | 5,801 |  | 21,779 |  | 27,580 |  | (9,249) |  | 1978 | Nov-10 | 3-30
Cortesia | 308 |  | Rancho Santa Margarita, CA | — |  | 13,912 |  | 55,649 |  | 4,062 |  | 13,912 |  | 59,711 |  | 73,623 |  | (17,177) |  | 1999 | Apr-14 | 5-30
Country Villas | 180 |  | Oceanside, CA | — |  | 4,174 |  | 16,583 |  | 6,534 |  | 4,187 |  | 23,104 |  | 27,291 |  | (14,946) |  | 1976 | Dec-02 | 3-30
Courtyard off Main | 110 |  | Bellevue, WA | — |  | 7,465 |  | 21,405 |  | 5,208 |  | 7,465 |  | 26,613 |  | 34,078 |  | (11,438) |  | 2000 | Oct-10 | 3-30
Crow Canyon | 400 |  | San Ramon, CA | — |  | 37,579 |  | 87,685 |  | 13,903 |  | 37,579 |  | 101,588 |  | 139,167 |  | (31,438) |  | 1992 | Apr-14 | 5-30
Deer Valley | 171 |  | San Rafael, CA | — |  | 21,478 |  | 50,116 |  | 4,996 |  | 21,478 |  | 55,112 |  | 76,590 |  | (15,897) |  | 1996 | Apr-14 | 5-30
Domaine | 92 |  | Seattle, WA | — |  | 9,059 |  | 27,177 |  | 1,676 |  | 9,059 |  | 28,853 |  | 37,912 |  | (9,441) |  | 2009 | Sep-12 | 3-30
Elevation | 158 |  | Redmond, WA | — |  | 4,758 |  | 14,285 |  | 8,183 |  | 4,757 |  | 22,469 |  | 27,226 |  | (11,902) |  | 1986 | Jun-10 | 3-30
Ellington | 220 |  | Bellevue, WA | — |  | 15,066 |  | 45,249 |  | 4,958 |  | 15,066 |  | 50,207 |  | 65,273 |  | (13,947) |  | 1994 | Jul-14 | 3-30
Emerald Pointe | 160 |  | Diamond Bar, CA | — |  | 8,458 |  | 33,832 |  | 2,837 |  | 8,458 |  | 36,669 |  | 45,127 |  | (10,712) |  | 1989 | Apr-14 | 5-30
Emerald Ridge | 180 |  | Bellevue, WA | — |  | 3,449 |  | 7,801 |  | 7,327 |  | 3,449 |  | 15,128 |  | 18,577 |  | (12,609) |  | 1987 | Nov-94 | 3-30
Emerson Valley Village | 144 |  | Los Angeles, CA | — |  | 13,378 |  | 53,240 |  | 1,623 |  | 13,378 |  | 54,863 |  | 68,241 |  | (9,894) |  | 2012 | Dec-16 | 3-30
Emme | 190 |  | Emeryville, CA | — |  | 15,039 |  | 80,532 |  | 862 |  | 15,039 |  | 81,394 |  | 96,433 |  | (5,594) |  | 2015 | Jan-20 | 3-30
Enso | 183 |  | San Jose, CA | — |  | 21,397 |  | 71,135 |  | 2,269 |  | 21,397 |  | 73,404 |  | 94,801 |  | (15,853) |  | 2014 | Dec-15 | 3-30
Epic | 769 |  | San Jose, CA | — |  | 89,111 |  | 307,769 |  | 1,236 |  | 89,111 |  | 309,005 |  | 398,116 |  | (21,058) |  | 2013 | Jan-20 | 3-30
Esplanade | 278 |  | San Jose, CA | — |  | 18,170 |  | 40,086 |  | 16,663 |  | 18,429 |  | 56,490 |  | 74,919 |  | (35,389) |  | 2002 | Apr-04 | 3-30
Essex Skyline | 350 |  | Santa Ana, CA | — |  | 21,537 |  | 146,099 |  | 14,867 |  | 21,537 |  | 160,966 |  | 182,503 |  | (54,862) |  | 2008 | Apr-10 | 3-30
Evergreen Heights | 200 |  | Kirkland, WA | — |  | 3,566 |  | 13,395 |  | 7,687 |  | 3,649 |  | 20,999 |  | 24,648 |  | (16,769) |  | 1990 | Jun-97 | 3-30
Fairhaven Apartments | 164 |  | Santa Ana, CA | — |  | 2,626 |  | 10,485 |  | 10,846 |  | 2,957 |  | 21,000 |  | 23,957 |  | (14,951) |  | 1970 | Nov-01 | 3-30
Fairway Apartments at Big Canyon (5) | 74 |  | Newport Beach, CA | — |  | — |  | 7,850 |  | 8,838 |  | — |  | 16,688 |  | 16,688 |  | (13,662) |  | 1972 | Jun-99 | 3-28
Fairwood Pond | 194 |  | Renton, WA | — |  | 5,296 |  | 15,564 |  | 4,968 |  | 5,297 |  | 20,531 |  | 25,828 |  | (12,391) |  | 1997 | Oct-04 | 3-30
Foothill Commons | 394 |  | Bellevue, WA | — |  | 2,435 |  | 9,821 |  | 42,736 |  | 2,440 |  | 52,552 |  | 54,992 |  | (48,909) |  | 1978 | Mar-90 | 3-30
Foothill Gardens/Twin Creeks | 176 |  | San Ramon, CA | — |  | 5,875 |  | 13,992 |  | 12,942 |  | 5,964 |  | 26,845 |  | 32,809 |  | (21,358) |  | 1985 | Feb-97 | 3-30
Forest View | 192 |  | Renton, WA | — |  | 3,731 |  | 14,530 |  | 4,323 |  | 3,731 |  | 18,853 |  | 22,584 |  | (11,443) |  | 1998 | Oct-03 | 3-30
Foster's Landing | 490 |  | Foster City, CA | — |  | 61,714 |  | 144,000 |  | 13,398 |  | 61,714 |  | 157,398 |  | 219,112 |  | (47,256) |  | 1987 | Apr-14 | 5-30
Fountain Court | 320 |  | Seattle, WA | — |  | 6,702 |  | 27,306 |  | 14,395 |  | 6,985 |  | 41,418 |  | 48,403 |  | (31,728) |  | 2000 | Mar-00 | 3-30
Fountains at River Oaks | 226 |  | San Jose, CA | — |  | 26,046 |  | 60,773 |  | 7,233 |  | 26,046 |  | 68,006 |  | 94,052 |  | (20,492) |  | 1990 | Apr-14 | 3-30
Fourth & U | 171 |  | Berkeley, CA | — |  | 8,879 |  | 52,351 |  | 4,549 |  | 8,879 |  | 56,900 |  | 65,779 |  | (23,644) |  | 2010 | Apr-10 | 3-30
Fox Plaza | 445 |  | San Francisco, CA | — |  | 39,731 |  | 92,706 |  | 40,959 |  | 39,731 |  | 133,665 |  | 173,396 |  | (49,126) |  | 1968 | Feb-13 | 3-30
The Henley I/The Henley II | 215 |  | Glendale, CA | — |  | 6,695 |  | 16,753 |  | 29,753 |  | 6,733 |  | 46,468 |  | 53,201 |  | (33,723) |  | 1970 | Jun-99 | 3-30
Highlands at Wynhaven | 333 |  | Issaquah, WA | — |  | 16,271 |  | 48,932 |  | 16,389 |  | 16,271 |  | 65,321 |  | 81,592 |  | (33,737) |  | 2000 | Aug-08 | 3-30
Hillcrest Park | 608 |  | Newbury Park, CA | — |  | 15,318 |  | 40,601 |  | 23,567 |  | 15,755 |  | 63,731 |  | 79,486 |  | (47,883) |  | 1973 | Mar-98 | 3-30

F- 60

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
FINANCIAL STATEMENT SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2021
(Dollars in thousands)

|  |  |  |  |  | Costs |  |  |  |  |  |  |
|  |  |  | Initial cost | capitalized | Gross amount carried at close of period |  |  |  |
| Apartment |  |  |  | Buildings and | subsequent to | Land and | Buildings and |  | Accumulated | Date of | Date | Lives
Property | Homes | Location | Encumbrance | Land | improvements | acquisition | improvements | improvements | Total (1) | depreciation | construction | acquired | (years)
Hillsdale Garden | 697 |  | San Mateo, CA | — |  | 22,000 |  | 94,681 |  | 35,010 |  | 22,000 |  | 129,691 |  | 151,691 |  | (69,587) |  | 1948 | Sep-06 | 3-30
Hope Ranch | 108 |  | Santa Barbara, CA | — |  | 4,078 |  | 16,877 |  | 3,291 |  | 4,208 |  | 20,038 |  | 24,246 |  | (10,325) |  | 1965 | Mar-07 | 3-30
Huntington Breakers | 342 |  | Huntington Beach, CA | — |  | 9,306 |  | 22,720 |  | 24,559 |  | 9,315 |  | 47,270 |  | 56,585 |  | (37,323) |  | 1984 | Oct-97 | 3-30
Inglenook Court | 224 |  | Bothell, WA | — |  | 3,467 |  | 7,881 |  | 8,968 |  | 3,474 |  | 16,842 |  | 20,316 |  | (14,569) |  | 1985 | Oct-94 | 3-30
Lafayette Highlands | 150 |  | Lafayette, CA | — |  | 17,774 |  | 41,473 |  | 5,714 |  | 17,774 |  | 47,187 |  | 64,961 |  | (13,685) |  | 1973 | Apr-14 | 5-30
Lakeshore Landing | 308 |  | San Mateo, CA | — |  | 38,155 |  | 89,028 |  | 10,707 |  | 38,155 |  | 99,735 |  | 137,890 |  | (30,522) |  | 1988 | Apr-14 | 5-30
Laurels at Mill Creek | 164 |  | Mill Creek, WA | — |  | 1,559 |  | 6,430 |  | 8,812 |  | 1,595 |  | 15,206 |  | 16,801 |  | (12,054) |  | 1981 | Dec-96 | 3-30
Lawrence Station | 336 |  | Sunnyvale, CA | — |  | 45,532 |  | 106,735 |  | 4,742 |  | 45,532 |  | 111,477 |  | 157,009 |  | (34,531) |  | 2012 | Apr-14 | 5-30
Le Parc | 140 |  | Santa Clara, CA | — |  | 3,090 |  | 7,421 |  | 14,363 |  | 3,092 |  | 21,782 |  | 24,874 |  | (18,258) |  | 1975 | Feb-94 | 3-30
Marbrisa | 202 |  | Long Beach, CA | — |  | 4,700 |  | 18,605 |  | 10,670 |  | 4,760 |  | 29,215 |  | 33,975 |  | (20,160) |  | 1987 | Sep-02 | 3-30
Marina City Club (6) | 101 |  | Marina Del Rey, CA | — |  | — |  | 28,167 |  | 34,252 |  | — |  | 62,419 |  | 62,419 |  | (34,917) |  | 1971 | Jan-04 | 3-30
Marina Cove (7) | 292 |  | Santa Clara, CA | — |  | 5,320 |  | 16,431 |  | 16,681 |  | 5,324 |  | 33,108 |  | 38,432 |  | (29,473) |  | 1974 | Jun-94 | 3-30
Mariner's Place | 105 |  | Oxnard, CA | — |  | 1,555 |  | 6,103 |  | 3,073 |  | 1,562 |  | 9,169 |  | 10,731 |  | (6,703) |  | 1987 | May-00 | 3-30
MB 360 | 360 |  | San Francisco, CA | — |  | 42,001 |  | 212,648 |  | 13,804 |  | 42,001 |  | 226,452 |  | 268,453 |  | (58,207) |  | 2014 | Apr-14 | 3-30
Mesa Village | 133 |  | Clairemont, CA | — |  | 1,888 |  | 7,498 |  | 3,068 |  | 1,894 |  | 10,560 |  | 12,454 |  | (6,649) |  | 1963 | Dec-02 | 3-30
Mill Creek at Windermere | 400 |  | San Ramon, CA | — |  | 29,551 |  | 69,032 |  | 9,770 |  | 29,551 |  | 78,802 |  | 108,353 |  | (37,918) |  | 2005 | Sep-07 | 3-30
Mio | 103 |  | San Jose, CA | — |  | 11,012 |  | 39,982 |  | 1,286 |  | 11,012 |  | 41,268 |  | 52,280 |  | (8,583) |  | 2015 | Jan-16 | 3-30
Mirabella | 188 |  | Marina Del Rey, CA | — |  | 6,180 |  | 26,673 |  | 18,074 |  | 6,270 |  | 44,657 |  | 50,927 |  | (29,785) |  | 2000 | May-00 | 3-30
Mira Monte | 354 |  | Mira Mesa, CA | — |  | 7,165 |  | 28,459 |  | 13,643 |  | 7,186 |  | 42,081 |  | 49,267 |  | (28,485) |  | 1982 | Dec-02 | 3-30
Miracle Mile/Marbella | 236 |  | Los Angeles, CA | — |  | 7,791 |  | 23,075 |  | 17,041 |  | 7,886 |  | 40,021 |  | 47,907 |  | (30,850) |  | 1988 | Aug-97 | 3-30
Mission Hills | 282 |  | Oceanside, CA | — |  | 10,099 |  | 38,778 |  | 12,891 |  | 10,167 |  | 51,601 |  | 61,768 |  | (29,576) |  | 1984 | Jul-05 | 3-30
Mission Peaks | 453 |  | Fremont, CA | — |  | 46,499 |  | 108,498 |  | 9,841 |  | 46,499 |  | 118,339 |  | 164,838 |  | (34,708) |  | 1995 | Apr-14 | 5-30
Mission Peaks II | 336 |  | Fremont, CA | — |  | 31,429 |  | 73,334 |  | 9,673 |  | 31,429 |  | 83,007 |  | 114,436 |  | (24,914) |  | 1989 | Apr-14 | 5-30
Montanosa | 472 |  | San Diego, CA | — |  | 26,697 |  | 106,787 |  | 10,525 |  | 26,697 |  | 117,312 |  | 144,009 |  | (33,373) |  | 1990 | Apr-14 | 5-30
Montclaire | 390 |  | Sunnyvale, CA | — |  | 4,842 |  | 19,776 |  | 30,760 |  | 4,997 |  | 50,381 |  | 55,378 |  | (44,965) |  | 1973 | Dec-88 | 3-30
Montebello | 248 |  | Kirkland, WA | — |  | 13,857 |  | 41,575 |  | 9,748 |  | 13,858 |  | 51,322 |  | 65,180 |  | (18,121) |  | 1996 | Jul-12 | 3-30
Montejo Apartments | 124 |  | Garden Grove, CA | — |  | 1,925 |  | 7,685 |  | 5,002 |  | 2,194 |  | 12,418 |  | 14,612 |  | (8,161) |  | 1974 | Nov-01 | 3-30
Monterey Villas | 122 |  | Oxnard, CA | — |  | 2,349 |  | 5,579 |  | 7,515 |  | 2,424 |  | 13,019 |  | 15,443 |  | (9,753) |  | 1974 | Jul-97 | 3-30
Muse | 152 |  | North Hollywood, CA | — |  | 7,822 |  | 33,436 |  | 6,129 |  | 7,823 |  | 39,564 |  | 47,387 |  | (16,657) |  | 2011 | Feb-11 | 3-30
Mylo | 476 |  | Santa Clara, CA | — |  | 6,472 |  | 206,098 |  | 255 |  | 6,472 |  | 206,353 |  | 212,825 |  | (15,746) |  | 2021 | Jun-21 | 3-30
1000 Kiely | 121 |  | Santa Clara, CA | — |  | 9,359 |  | 21,845 |  | 9,120 |  | 9,359 |  | 30,965 |  | 40,324 |  | (15,344) |  | 1971 | Mar-11 | 3-30
Palm Valley | 1,100 |  | San Jose, CA | — |  | 133,802 |  | 312,205 |  | 22,714 |  | 133,802 |  | 334,919 |  | 468,721 |  | (62,857) |  | 2008 | Jan-17 | 3-30
Paragon Apartments | 301 |  | Fremont, CA | — |  | 32,230 |  | 77,320 |  | 2,998 |  | 32,230 |  | 80,318 |  | 112,548 |  | (20,711) |  | 2013 | Jul-14 | 3-30

F- 61

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
FINANCIAL STATEMENT SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2021
(Dollars in thousands)

|  |  |  |  |  | Costs |  |  |  |  |  |  |
|  |  |  | Initial cost | capitalized | Gross amount carried at close of period |  |  |  |
| Apartment |  |  |  | Buildings and | subsequent to | Land and | Buildings and |  | Accumulated | Date of | Date | Lives
Property | Homes | Location | Encumbrance | Land | improvements | acquisition | improvements | improvements | Total (1) | depreciation | construction | acquired | (years)
Park Catalina | 90 |  | Los Angeles, CA | — |  | 4,710 |  | 18,839 |  | 3,971 |  | 4,710 |  | 22,810 |  | 27,520 |  | (8,980) |  | 2002 | Jun-12 | 3-30
Park Highland | 250 |  | Bellevue, WA | — |  | 9,391 |  | 38,224 |  | 14,401 |  | 9,391 |  | 52,625 |  | 62,016 |  | (19,678) |  | 1993 | Apr-14 | 5-30
Park Hill at Issaquah | 245 |  | Issaquah, WA | — |  | 7,284 |  | 21,937 |  | 12,573 |  | 7,284 |  | 34,510 |  | 41,794 |  | (20,312) |  | 1999 | Feb-99 | 3-30
Park Viridian | 320 |  | Anaheim, CA | — |  | 15,894 |  | 63,574 |  | 5,414 |  | 15,894 |  | 68,988 |  | 84,882 |  | (20,073) |  | 2008 | Apr-14 | 5-30
Park West | 126 |  | San Francisco, CA | — |  | 9,424 |  | 21,988 |  | 13,419 |  | 9,424 |  | 35,407 |  | 44,831 |  | (16,014) |  | 1958 | Sep-12 | 3-30
Parkwood at Mill Creek | 240 |  | Mill Creek, WA | — |  | 10,680 |  | 42,722 |  | 3,840 |  | 10,680 |  | 46,562 |  | 57,242 |  | (13,892) |  | 1989 | Apr-14 | 5-30
Patent 523 | 295 |  | Seattle, WA | — |  | 14,558 |  | 69,417 |  | 6,545 |  | 14,558 |  | 75,962 |  | 90,520 |  | (32,488) |  | 2010 | Mar-10 | 3-30
Pathways at Bixby Village | 296 |  | Long Beach, CA | — |  | 4,083 |  | 16,757 |  | 22,439 |  | 6,239 |  | 37,040 |  | 43,279 |  | (33,954) |  | 1975 | Feb-91 | 3-30
Piedmont | 396 |  | Bellevue, WA | — |  | 19,848 |  | 59,606 |  | 15,648 |  | 19,848 |  | 75,254 |  | 95,102 |  | (24,127) |  | 1969 | May-14 | 3-30
Pinehurst (8) | 28 |  | Ventura, CA | — |  | — |  | 1,711 |  | 793 |  | — |  | 2,504 |  | 2,504 |  | (1,772) |  | 1973 | Dec-04 | 3-24
Pinnacle at Fullerton | 192 |  | Fullerton, CA | — |  | 11,019 |  | 45,932 |  | 5,679 |  | 11,019 |  | 51,611 |  | 62,630 |  | (15,335) |  | 2004 | Apr-14 | 5-30
Pinnacle on Lake Washington | 180 |  | Renton, WA | — |  | 7,760 |  | 31,041 |  | 4,519 |  | 7,760 |  | 35,560 |  | 43,320 |  | (10,763) |  | 2001 | Apr-14 | 5-30
Pinnacle at MacArthur Place | 253 |  | Santa Ana, CA | — |  | 15,810 |  | 66,401 |  | 7,228 |  | 15,810 |  | 73,629 |  | 89,439 |  | (21,501) |  | 2002 | Apr-14 | 5-30
Pinnacle at Otay Ranch I & II | 364 |  | Chula Vista, CA | — |  | 17,023 |  | 68,093 |  | 6,313 |  | 17,023 |  | 74,406 |  | 91,429 |  | (21,532) |  | 2001 | Apr-14 | 5-30
Pinnacle at Talega | 362 |  | San Clemente, CA | — |  | 19,292 |  | 77,168 |  | 4,788 |  | 19,292 |  | 81,956 |  | 101,248 |  | (23,314) |  | 2002 | Apr-14 | 5-30
Pinnacle Sonata | 268 |  | Bothell, WA | — |  | 14,647 |  | 58,586 |  | 7,482 |  | 14,647 |  | 66,068 |  | 80,715 |  | (18,985) |  | 2000 | Apr-14 | 5-30
Pointe at Cupertino | 116 |  | Cupertino, CA | — |  | 4,505 |  | 17,605 |  | 13,270 |  | 4,505 |  | 30,875 |  | 35,380 |  | (22,156) |  | 1963 | Aug-98 | 3-30
Pure Redmond | 105 |  | Redmond, WA | — |  | 7,461 |  | 31,363 |  | 802 |  | 7,461 |  | 32,165 |  | 39,626 |  | (2,388) |  | 2016 | Dec-19 | 3-30
Radius | 264 |  | Redwood City, CA | — |  | 11,702 |  | 152,336 |  | 2,532 |  | 11,702 |  | 154,868 |  | 166,570 |  | (44,224) |  | 2015 | Apr-14 | 3-30
Reed Square | 100 |  | Sunnyvale, CA | — |  | 6,873 |  | 16,037 |  | 8,867 |  | 6,873 |  | 24,904 |  | 31,777 |  | (12,639) |  | 1970 | Jan-12 | 3-30
Regency at Encino | 75 |  | Encino, CA | — |  | 3,184 |  | 12,737 |  | 4,453 |  | 3,184 |  | 17,190 |  | 20,374 |  | (8,439) |  | 1989 | Dec-09 | 3-30
Renaissance at Uptown Orange | 460 |  | Orange, CA | — |  | 27,870 |  | 111,482 |  | 8,293 |  | 27,870 |  | 119,775 |  | 147,645 |  | (34,600) |  | 2007 | Apr-14 | 5-30
Reveal | 438 |  | Woodland Hills, CA | — |  | 25,073 |  | 121,314 |  | 4,512 |  | 25,073 |  | 125,826 |  | 150,899 |  | (32,292) |  | 2010 | Apr-15 | 3-30
Salmon Run at Perry Creek | 132 |  | Bothell, WA | — |  | 3,717 |  | 11,483 |  | 3,175 |  | 3,801 |  | 14,574 |  | 18,375 |  | (10,175) |  | 2000 | Oct-00 | 3-30
Sammamish View | 153 |  | Bellevue, WA | — |  | 3,324 |  | 7,501 |  | 7,819 |  | 3,331 |  | 15,313 |  | 18,644 |  | (13,561) |  | 1986 | Nov-94 | 3-30
101 San Fernando | 323 |  | San Jose, CA | — |  | 4,173 |  | 58,961 |  | 15,936 |  | 4,173 |  | 74,897 |  | 79,070 |  | (33,391) |  | 2001 | Jul-10 | 3-30
San Marcos | 432 |  | Richmond, CA | — |  | 15,563 |  | 36,204 |  | 35,460 |  | 22,866 |  | 64,361 |  | 87,227 |  | (39,572) |  | 2003 | Nov-03 | 3-30
Santee Court/Santee Village | 238 |  | Los Angeles, CA | — |  | 9,581 |  | 40,317 |  | 15,514 |  | 9,582 |  | 55,830 |  | 65,412 |  | (22,674) |  | 2004 | Oct-10 | 3-30
Shadow Point | 172 |  | Spring Valley, CA | — |  | 2,812 |  | 11,170 |  | 5,400 |  | 2,820 |  | 16,562 |  | 19,382 |  | (10,422) |  | 1983 | Dec-02 | 3-30
Shadowbrook | 418 |  | Redmond, WA | — |  | 19,292 |  | 77,168 |  | 6,721 |  | 19,292 |  | 83,889 |  | 103,181 |  | (24,714) |  | 1986 | Apr-14 | 5-30
Slater 116 | 108 |  | Kirkland, WA | — |  | 7,379 |  | 22,138 |  | 1,632 |  | 7,379 |  | 23,770 |  | 31,149 |  | (6,962) |  | 2013 | Sep-13 | 3-30
Solstice | 280 |  | Sunnyvale, CA | — |  | 34,444 |  | 147,262 |  | 7,311 |  | 34,444 |  | 154,573 |  | 189,017 |  | (47,229) |  | 2014 | Apr-14 | 5-30

F- 62

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
FINANCIAL STATEMENT SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2021
(Dollars in thousands)

|  |  |  |  |  | Costs |  |  |  |  |  |  |
|  |  |  | Initial cost | capitalized | Gross amount carried at close of period |  |  |  |
| Apartment |  |  |  | Buildings and | subsequent to | Land and | Buildings and |  | Accumulated | Date of | Date | Lives
Property | Homes | Location | Encumbrance | Land | improvements | acquisition | improvements | improvements | Total (1) | depreciation | construction | acquired | (years)
Station Park Green - Phases I, II, and III | 492 |  | San Mateo, CA | — |  | 54,782 |  | 314,694 |  | 11,710 |  | 54,782 |  | 326,404 |  | 381,186 |  | (38,705) |  | 2018 | Mar-18 | 3-30
Stevenson Place | 200 |  | Fremont, CA | — |  | 996 |  | 5,582 |  | 14,597 |  | 1,001 |  | 20,174 |  | 21,175 |  | (16,780) |  | 1975 | Apr-00 | 3-30
Stonehedge Village | 196 |  | Bothell, WA | — |  | 3,167 |  | 12,603 |  | 10,006 |  | 3,201 |  | 22,575 |  | 25,776 |  | (17,191) |  | 1986 | Oct-97 | 3-30
Summerhill Park | 100 |  | Sunnyvale, CA | — |  | 2,654 |  | 4,918 |  | 11,319 |  | 2,656 |  | 16,235 |  | 18,891 |  | (13,756) |  | 1988 | Sep-88 | 3-30
Summit Park | 300 |  | San Diego, CA | — |  | 5,959 |  | 23,670 |  | 9,528 |  | 5,977 |  | 33,180 |  | 39,157 |  | (21,395) |  | 1972 | Dec-02 | 3-30
Taylor 28 | 197 |  | Seattle, WA | — |  | 13,915 |  | 57,700 |  | 4,287 |  | 13,915 |  | 61,987 |  | 75,902 |  | (17,851) |  | 2008 | Apr-14 | 5-30
The Audrey at Belltown | 137 |  | Seattle, WA | — |  | 9,228 |  | 36,911 |  | 2,517 |  | 9,228 |  | 39,428 |  | 48,656 |  | (10,962) |  | 1992 | Apr-14 | 5-30
The Avery | 121 |  | Los Angeles, CA | — |  | 6,964 |  | 29,922 |  | 1,114 |  | 6,964 |  | 31,036 |  | 38,000 |  | (8,214) |  | 2014 | Mar-14 | 3-30
The Bernard | 63 |  | Seattle, WA | — |  | 3,699 |  | 11,345 |  | 954 |  | 3,689 |  | 12,309 |  | 15,998 |  | (4,577) |  | 2008 | Sep-11 | 3-30
The Blake LA | 196 |  | Los Angeles, CA | — |  | 4,023 |  | 9,527 |  | 25,098 |  | 4,031 |  | 34,617 |  | 38,648 |  | (23,033) |  | 1979 | Jun-97 | 3-30
The Cairns | 99 |  | Seattle, WA | — |  | 6,937 |  | 20,679 |  | 2,683 |  | 6,939 |  | 23,360 |  | 30,299 |  | (11,846) |  | 2006 | Jun-07 | 3-30
The Commons | 264 |  | Campbell, CA | — |  | 12,555 |  | 29,307 |  | 10,799 |  | 12,556 |  | 40,105 |  | 52,661 |  | (18,984) |  | 1973 | Jul-10 | 3-30
The Elliot at Mukilteo | 301 |  | Mukilteo, WA | — |  | 2,498 |  | 10,595 |  | 19,215 |  | 2,824 |  | 29,484 |  | 32,308 |  | (24,239) |  | 1981 | Jan-97 | 3-30
The Galloway | 506 |  | Pleasanton, CA | — |  | 32,966 |  | 184,499 |  | 3,632 |  | 32,966 |  | 188,131 |  | 221,097 |  | (12,985) |  | 2016 | Jan-20 | 3-30
The Grand | 243 |  | Oakland, CA | — |  | 4,531 |  | 89,208 |  | 8,096 |  | 4,531 |  | 97,304 |  | 101,835 |  | (44,341) |  | 2009 | Jan-09 | 3-30
The Hallie | 292 |  | Pasadena, CA | — |  | 2,202 |  | 4,794 |  | 55,901 |  | 8,385 |  | 54,512 |  | 62,897 |  | (42,729) |  | 1972 | Apr-97 | 3-30
The Huntington | 276 |  | Huntington Beach, CA | — |  | 10,374 |  | 41,495 |  | 7,703 |  | 10,374 |  | 49,198 |  | 59,572 |  | (17,940) |  | 1975 | Jun-12 | 3-30
The Landing at Jack London Square | 282 |  | Oakland, CA | — |  | 33,554 |  | 78,292 |  | 8,633 |  | 33,554 |  | 86,925 |  | 120,479 |  | (26,682) |  | 2001 | Apr-14 | 5-30
The Lofts at Pinehurst | 118 |  | Ventura, CA | — |  | 1,570 |  | 3,912 |  | 5,833 |  | 1,618 |  | 9,697 |  | 11,315 |  | (7,072) |  | 1971 | Jun-97 | 3-30
The Palisades | 192 |  | Bellevue, WA | — |  | 1,560 |  | 6,242 |  | 14,942 |  | 1,565 |  | 21,179 |  | 22,744 |  | (18,824) |  | 1977 | May-90 | 3-30
The Palms at Laguna Niguel | 460 |  | Laguna Niguel, CA | — |  | 23,584 |  | 94,334 |  | 13,829 |  | 23,584 |  | 108,163 |  | 131,747 |  | (32,672) |  | 1988 | Apr-14 | 5-30
The Stuart | 188 |  | Pasadena, CA | — |  | 13,574 |  | 54,298 |  | 3,987 |  | 13,574 |  | 58,285 |  | 71,859 |  | (16,886) |  | 2007 | Apr-14 | 5-30
The Trails of Redmond | 423 |  | Redmond, WA | — |  | 21,930 |  | 87,720 |  | 7,991 |  | 21,930 |  | 95,711 |  | 117,641 |  | (27,650) |  | 1985 | Apr-14 | 5-30
The Village at Toluca Lake | 145 |  | Burbank, CA | — |  | 14,634 |  | 48,297 |  | 1,028 |  | 14,634 |  | 49,325 |  | 63,959 |  | (946) |  | 1974 | Nov-17 | 3-30
The Waterford | 238 |  | San Jose, CA | — |  | 11,808 |  | 24,500 |  | 18,305 |  | 15,165 |  | 39,448 |  | 54,613 |  | (27,513) |  | 2000 | Jun-00 | 3-30
Tierra Vista | 404 |  | Oxnard, CA | — |  | 13,652 |  | 53,336 |  | 8,926 |  | 13,661 |  | 62,253 |  | 75,914 |  | (36,922) |  | 2001 | Jan-01 | 3-30
Tiffany Court | 101 |  | Los Angeles, CA | — |  | 6,949 |  | 27,796 |  | 2,628 |  | 6,949 |  | 30,424 |  | 37,373 |  | (8,740) |  | 1987 | Apr-14 | 5-30
Trabuco Villas | 132 |  | Lake Forest, CA | — |  | 3,638 |  | 8,640 |  | 4,792 |  | 3,890 |  | 13,180 |  | 17,070 |  | (9,981) |  | 1985 | Oct-97 | 3-30
Valley Park | 160 |  | Fountain Valley, CA | — |  | 3,361 |  | 13,420 |  | 6,898 |  | 3,761 |  | 19,918 |  | 23,679 |  | (13,354) |  | 1969 | Nov-01 | 3-30
Via | 284 |  | Sunnyvale, CA | — |  | 22,000 |  | 82,270 |  | 5,344 |  | 22,016 |  | 87,598 |  | 109,614 |  | (33,896) |  | 2011 | Jul-11 | 3-30
Villa Angelina | 256 |  | Placentia, CA | — |  | 4,498 |  | 17,962 |  | 9,009 |  | 4,962 |  | 26,507 |  | 31,469 |  | (18,042) |  | 1970 | Nov-01 | 3-30
Villa Granada | 270 |  | Santa Clara, CA | — |  | 38,299 |  | 89,365 |  | 2,095 |  | 38,299 |  | 91,460 |  | 129,759 |  | (26,047) |  | 2010 | Apr-14 | 5-30

F- 63

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
FINANCIAL STATEMENT SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2021
(Dollars in thousands)

|  |  |  |  |  | Costs |  |  |  |  |  |  |
|  |  |  | Initial cost | capitalized | Gross amount carried at close of period |  |  |  |
| Apartment |  |  |  | Buildings and | subsequent to | Land and | Buildings and |  | Accumulated | Date of | Date | Lives
Property | Homes | Location | Encumbrance | Land | improvements | acquisition | improvements | improvements | Total (1) | depreciation | construction | acquired | (years)
Villa Siena | 272 |  | Costa Mesa, CA | — |  | 13,842 |  | 55,367 |  | 10,134 |  | 13,842 |  | 65,501 |  | 79,343 |  | (21,056) |  | 1974 | Apr-14 | 5-30
Village Green | 272 |  | La Habra, CA | — |  | 6,488 |  | 36,768 |  | 4,839 |  | 6,488 |  | 41,607 |  | 48,095 |  | (12,868) |  | 1971 | Apr-14 | 5-30
Vista Belvedere | 76 |  | Tiburon, CA | — |  | 5,573 |  | 11,901 |  | 9,240 |  | 5,573 |  | 21,141 |  | 26,714 |  | (14,041) |  | 1963 | Aug-04 | 3-30
Vox Apartments | 58 |  | Seattle, WA | — |  | 5,545 |  | 16,635 |  | 458 |  | 5,545 |  | 17,093 |  | 22,638 |  | (4,776) |  | 2013 | Oct-13 | 3-30
Wallace on Sunset | 200 |  | Los Angeles, CA | — |  | 24,005 |  | 80,466 |  | 1,388 |  | 24,005 |  | 81,854 |  | 105,859 |  | (7,718) |  | 2021 | Dec-21 | 3-30
Walnut Heights | 163 |  | Walnut, CA | — |  | 4,858 |  | 19,168 |  | 6,113 |  | 4,887 |  | 25,252 |  | 30,139 |  | (15,929) |  | 1964 | Oct-03 | 3-30
Wandering Creek | 156 |  | Kent, WA | — |  | 1,285 |  | 4,980 |  | 5,580 |  | 1,296 |  | 10,549 |  | 11,845 |  | (8,845) |  | 1986 | Nov-95 | 3-30
Wharfside Pointe | 155 |  | Seattle, WA | — |  | 2,245 |  | 7,020 |  | 13,713 |  | 2,258 |  | 20,720 |  | 22,978 |  | (16,922) |  | 1990 | Jun-94 | 3-30
Willow Lake | 508 |  | San Jose, CA | — |  | 43,194 |  | 101,030 |  | 17,866 |  | 43,194 |  | 118,896 |  | 162,090 |  | (43,068) |  | 1989 | Oct-12 | 3-30
5600 Wilshire | 284 |  | Los Angeles, CA | — |  | 30,535 |  | 91,604 |  | 6,477 |  | 30,535 |  | 98,081 |  | 128,616 |  | (27,411) |  | 2008 | Apr-14 | 5-30
Wilshire La Brea | 478 |  | Los Angeles, CA | — |  | 56,932 |  | 211,998 |  | 14,717 |  | 56,932 |  | 226,715 |  | 283,647 |  | (67,716) |  | 2014 | Apr-14 | 5-30
Wilshire Promenade | 149 |  | Fullerton, CA | — |  | 3,118 |  | 7,385 |  | 13,435 |  | 3,797 |  | 20,141 |  | 23,938 |  | (14,239) |  | 1992 | Jan-97 | 3-30
Windsor Ridge | 216 |  | Sunnyvale, CA | — |  | 4,017 |  | 10,315 |  | 17,174 |  | 4,021 |  | 27,485 |  | 31,506 |  | (25,104) |  | 1989 | Mar-89 | 3-30
Woodland Commons | 302 |  | Bellevue, WA | — |  | 2,040 |  | 8,727 |  | 25,794 |  | 2,044 |  | 34,517 |  | 36,561 |  | (25,895) |  | 1978 | Mar-90 | 3-30
Woodside Village | 145 |  | Ventura, CA | — |  | 5,331 |  | 21,036 |  | 6,295 |  | 5,341 |  | 27,321 |  | 32,662 |  | (16,023) |  | 1987 | Dec-04 | 3-30
| 48,629 |  |  | $ | — |  | $ | 2,705,854 |  | $ | 9,644,002 |  | $ | 2,054,750 |  | $ | 2,742,712 |  | $ | 11,661,894 |  | $ | 14,404,606 |  | $ | (4,327,622) |  |  |  |

|  |  |  |  |  | Costs |  |  |  |  |  |  |
|  |  |  | Initial cost | capitalized | Gross amount carried at close of period |  |  |  |
|  |  |  |  | Buildings and | subsequent | Land and | Buildings and |  | Accumulated |  |  |
|  | Property | Encumbrance | Land | improvements | to acquisition | improvements | improvements | Total(1) | depreciation |  |  |
|  | Other real estate assets | — |  | 80,706 |  | 16,587 |  | 16,122 |  | 82,067 |  | 31,348 |  | 113,415 |  | (17,023) |  |  |  |
|  |  | $ | — |  | $ | 80,706 |  | $ | 16,587 |  | $ | 16,122 |  | $ | 82,067 |  | $ | 31,348 |  | $ | 113,415 |  | $ | (17,023) |  |  |  |
Total | $ | 638,957 |  | $ | 2,990,109 |  | $ | 10,427,618 |  | $ | 2,212,200 |  | $ | 3,032,678 |  | $ | 12,597,249 |  | $ | 15,629,927 |  | $ | (4,646,854) |  |  |  |

(1) The aggregate cost for federal income tax purposes is approximately $12.2 billion (unaudited).
(2) A portion of land is leased pursuant to a ground lease expiring 2070.
(3) The land is leased pursuant to a ground lease expiring 2083.
(4) The land is leased pursuant to a ground lease expiring 2070.
(5) The land is leased pursuant to a ground lease expiring 2027.
(6) The land is leased pursuant to a ground lease expiring 2067.
(7) A portion of land is leased pursuant to a ground lease expiring in 2028.
(8) The land is leased pursuant to a ground lease expiring in 2028.
F- 64

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
FINANCIAL STATEMENT SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2021
(Dollars in thousands)
A summary of activity for rental properties and accumulated depreciation is as follows:

| 2021 |  | 2020 |  | 2019 |  | 2021 |  | 2020 |  | 2019
Rental properties: |  |  |  |  |  | Accumulated depreciation: |  |  |  |  |
Balance at beginning of year | $ | 15,061,745 |  |  | $ | 14,038,142 |  |  | $ | 13,366,101 |  | Balance at beginning of year | $ | 4,133,959 |  |  | $ | 3,689,482 |  |  | $ | 3,209,548 |
Acquisition, development, and improvement of real estate | 707,267 |  |  | 1,426,505 |  |  | 672,041 |  | Depreciation expense | 528,613 |  |  | 518,629 |  |  | 479,934 |
Disposition of real estate and other | (139,085) |  |  | (402,902) |  |  | — |  | Depreciation expense - Disposals and other | (15,718) |  |  | (74,152) |  |  | — |
Balance at the end of year | $ | 15,629,927 |  |  | $ | 15,061,745 |  |  | $ | 14,038,142 |  | Balance at the end of year | $ | 4,646,854 |  |  | $ | 4,133,959 |  |  | $ | 3,689,482 |

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| EXHIBIT INDEX
Exhibit No. | Document
3.1 | Articles of Amendment and Restatement of Essex Property Trust, Inc., attached as Exhibit 3.2 to the Company's Current Report on Form 8-K, filed May 23, 2016, and incorporated herein by reference.
3.2 | Sixth Amended and Restated Bylaws of Essex Property Trust, Inc. (as of February 21, 2017), attached as Exhibit 3.2 to the Company's Current Report on Form 8-K, filed February 27, 2017, and incorporated herein by reference.
3.3 | First Amendment to Sixth Amended and Restated Bylaws of Essex Property Trust, Inc., dated February 20, 2018, attached as Exhibit 3.2 to the Company's Current Report on Form 8-K, filed February 21, 2018, and incorporated herein by reference.
3.4 | Certificate of Limited Partnership of Essex Portfolio, L.P. and amendments thereto.
4.1 | Indenture, dated April 15, 2013, among Essex Portfolio, L.P., Essex Property Trust, Inc., and U.S. Bank National Association, as trustee, including the form of 3.25% Senior Notes due 2023 and the guarantee thereof, attached as Exhibit 4.1 to the Company's Current Report on Form 8-K, filed April 15, 2013, and incorporated herein by reference.
4.2 | Form of Common Stock Certificate of Essex Property Trust, Inc., filed as Exhibit 4.5 to the Company's Form S-4 Registration Statement, filed January 29, 2014, and incorporated herein by reference.
4.3 | Indenture, dated April 15, 2014, among Essex Portfolio, L.P., Essex Property Trust, Inc., and U.S. Bank National Association, as trustee, including the form of 3.875% Senior Notes due 2024 and the guarantee thereof, attached as Exhibit 4.1 to Essex Property Trust, Inc.'s Current Report on Form 8-K, filed April 16, 2014, and incorporated herein by reference.
4.4 | Indenture, dated March 17, 2015, among Essex Portfolio, L.P., Essex Property Trust, Inc., and U.S. Bank National Association, as trustee, including the form of 3.500% Senior Notes due 2025 and the guarantee thereof, attached as Exhibit 4.1 to the Company's Current Report on Form 8-K, filed March 17, 2015, and incorporated herein by reference.
4.5 | Indenture, dated April 11, 2016, among Essex Portfolio, L.P., Essex Property Trust, Inc., and U.S. Bank National Association, as trustee, including the form of the 3.375% Senior Notes due 2026 and the guarantee thereof, attached as Exhibit 4.1 to the Company's Current Report on Form 8-K, filed April 11, 2016, and incorporated herein by reference.
4.6 | Indenture, dated April 10, 2017, among Essex Portfolio, L.P., Essex Property Trust, Inc., and U.S. Bank National Association, as trustee, including the form of the 3.625% Senior Notes due 2027 and the guarantee thereof, attached as Exhibit 4.1 to the Company's Current Report on Form 8-K, filed April 10, 2017, and incorporated herein by reference.
4.7 | Indenture, dated March 8, 2018, among Essex Portfolio, L.P., Essex Property Trust, Inc., and U.S. Bank National Association, as trustee, including the form of the 4.500% Senior Notes due 2048 and the guarantee thereof, attached as Exhibit 4.1 to the Company's Current Report on Form 8-K, filed March 8, 2018, and incorporated herein by reference.
4.8 | Indenture, dated February 11, 2019, among Essex Portfolio, L.P., Essex Property Trust, Inc., and U.S. Bank National Association, as trustee, including the form of 4.000% Senior Notes due 2029 and the guarantee thereof, attached as Exhibit 4.1 to the Company's Current Report on Form 8-K, filed February 11, 2019, and incorporated herein by reference.
4.9 | Indenture, dated August 7, 2019, among Essex Portfolio, L.P., Essex Property Trust, Inc., and U.S. Bank National Association, as trustee, including the form of 3.000% Senior Notes due 2030 and the guarantee thereof, attached as Exhibit 4.1 to the Company's Current Report on Form 8-K, filed August 7, 2019, and incorporated herein by reference.
4.10 | Indenture, dated February 11, 2020, among Essex Portfolio, L.P., Essex Property Trust, Inc., and U.S. Bank National Association, as trustee, including the form of 2.650% Senior Notes due 2032 and the guarantee thereof, attached as Exhibit 4.1 to the Company's Current Report on Form 8-K, filed February 11, 2020, and incorporated herein by reference.
4.11 | Indenture, dated August 24, 2020, among Essex Portfolio, L.P., Essex Property Trust, Inc., and U.S. Bank National Association, as trustee, including the form of 1.650% Senior Notes due 2031, the form of 2.650% Senior Notes due 2050 and the guarantees thereof, attached as Exhibit 4.1 to the Company's Current Report on Form 8-K, filed August 24, 2020, and incorporated herein by reference.

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4.12 | Indenture, dated March 1, 2021, among Essex Portfolio, L.P., Essex Property Trust, Inc., and U.S. Bank National Association, as trustee, including the form of 1.700% Senior Notes due 2028 and the guarantee thereof, attached as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed March 1, 2021, and incorporated herein by reference.
4.13 | Indenture, dated June 1, 2021, among Essex Portfolio, L.P., Essex portfolio Trust, Inc. and U.S. Bank National Association, as trustee, including the form of 2.550% Senior Notes due 2031 and the guarantee thereof, attached as Exhibit 4.1 to the Company's Current Report on Form 8-K filed June 1, 2021, and incorporated herein by reference.
4.14 | Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934, attached as Exhibit 4.14 to the Company’s Annual Report on Form 10-K, filed February 20, 2020, and incorporated herein by reference.
10.1 | Agreement between Essex Property Trust, Inc. and George M. Marcus, dated March 27, 2003 attached as Exhibit 10.32 to the Company's Form 10-K for the year ended December 31, 2002, and incorporated herein by reference.
10.2 | Essex Property Trust, Inc. Deferred Compensation Plan, As Amended and Restated As of January 1, 2021.
10.3 | Form of Indemnification Agreement between Essex Property Trust, Inc. and its directors and officers, attached as Exhibit 10.4 to the Company's Annual Report on Form 10-K, filed February 21, 2019, and incorporated herein by reference.*
10.4 | Modification Agreement, dated July 30, 2012, attached as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, and incorporated herein by reference.
10.5 | Amendment to Agreement, dated as of September 11, 2012, between the Company and George Marcus, attached as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, and incorporated herein by reference.
10.6 | Essex Property Trust, Inc. Executive Severance Plan (as Amended and Restated effective March 12, 2013), attached as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed March 18, 2013, and incorporated herein by reference.*.
10.7 | Essex Property Trust, Inc. 2013 Stock Award and Incentive Compensation Plan, attached as Appendix B to the Company's Definitive Proxy Statement on Schedule 14A for the Annual Meeting of Stockholders held May 14, 2013, filed April 1, 2013, and incorporated herein by reference.*
10.8 | Essex Property Trust, Inc. 2013 Employee Stock Purchase Plan, attached as Appendix C to the Company's Definitive Proxy Statement on Schedule 14A for the Annual Meeting of Stockholders held May 14, 2013, filed April 1, 2013, and incorporated herein by reference.*
10.9 | Forms of equity award agreements for officers under the 2013 Stock Award and Incentive Compensation Plan, attached as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, and incorporated herein by reference.*
10.10 | Amended and Restated Non-Employee Director Equity Award Program, dated May 17, 2016, attached as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed May 23, 2016, and incorporated herein by reference.*
10.11 | Fourth Amended and Restated Agreement of Limited Partnership of Essex Portfolio, L.P., dated as of December 20, 2018, attached as Exhibit 10.14 to the Company's Annual Report on Form 10-K, filed February 21, 2019, and incorporated herein by reference.
10.12 | Third Modification Agreement, dated as of January 29, 2014 by and among Essex Portfolio, L.P., U.S. Bank National Association, as Administrative Agent and Lender and the other lenders party thereto, attached as Exhibit 10.2 to the Company's Current Report on Form 8-K, filed January 31, 2014, and incorporated herein by reference.
10.13 | Forms of Essex Property Trust, Inc., Essex Portfolio L.P., Long-Term Incentive Plan Award Agreements, attached as Exhibit 10.28 to the Company's Annual Report on Form 10-K, filed March 2, 2015, and incorporated herein by reference.*
10.14 | Terms Agreement dated as of May 20, 2015, among Essex Property Trust, Inc. and Citigroup Global Markets Inc., attached as Exhibit 1.1 to the Company's Current Report on Form 8-K, filed May 26, 2015, and incorporated herein by reference.
10.15 | Essex Property Trust, Inc. 2018 Stock Award and Incentive Compensation Plan, attached as Appendix A to the Company's Definitive Proxy Statement on Schedule 14A for the Annual Meeting of Stockholders held May 15, 2018, filed March 23, 2018, and incorporated herein by reference.*

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10.16 | Form of Non-Employee Director Restricted Stock Award Agreement, attached as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q, filed August 3, 2018, and incorporated herein by reference.*
10.17 | Form of Non-Employee Director Stock Option Award Agreement, attached as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q, filed August 3, 2018, and incorporated herein by reference.*
10.18 | Forms of Essex Property Trust, Inc. Long-Term Incentive Award Agreements pursuant to the 2018 Stock Award and Incentive Compensation Plan.*
10.19 | Third Amended and Restated Revolving Credit Agreement, dated as of September 30, 2021, among Essex Portfolio, L.P., PNC Bank, National Association, as Administrative Agent and L/C Issuer and other lenders party thereto, attached as E xhibit 10.1 to the Compa ny's Quarterly Report on Form 10-Q for the quarter ended Sept ember 30, 2021, and incorporated herein by reference.†
10.20 | Deferred Compensation Plan for Non-Employee Directors, attached as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed May 7, 2020 and incorporated herein by reference.*
10.21 | Executive Transition Services Agreement, dated as of December 22, 2020, by and between Essex Property Trust, Inc. and John Burkart, attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed December 29, 2020 and incorporated herein by reference.*
21.1 | List of Subsidiaries of Essex Property Trust, Inc. and Essex Portfolio, L.P.
23.1 | Consent of KPMG LLP, Independent Registered Public Accounting Firm.
23.2 | Consent of KPMG LLP, Independent Registered Public Accounting Firm.
24.1 | Power of Attorney (see signature page)
31.1 | Certification of Michael J. Schall, Principal Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 | Certification of Barbara Pak, Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.3 | Certification of Michael J. Schall, Principal Executive Officer of General Partner, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.4 | Certification of Barbara Pak, Principal Financial Officer of General Partner, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 | Certification of Michael J. Schall, Principal Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 | Certification of Barbara Pak, Principal Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.3 | Certification of Michael J. Schall, Principal Executive Officer of General Partner, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.4 | Certification of Barbara Pak, Principal Financial Officer of General Partner, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS | XBRL Instance Document - the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH | XBRL Taxonomy Extension Schema Document
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document
101.LAB | XBRL Taxonomy Extension Label Linkbase Document
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

* Management contract or compensatory plan or arrangement.

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† 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.

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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, each Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Mateo, State of California, on February 25, 2022.

| ESSEX PROPERTY TRUST, INC.
| By: /s/ BARBARA PAK
| Barbara Pak
| Executive Vice President, Chief Financial Officer (Authorized Officer, Principal Financial Officer)
| By: /s/ JOHN FARIAS
| John Farias
| Senior Vice President, Chief Accounting Officer
| ESSEX PORTFOLIO, L.P. By: Essex Property Trust, Inc., its general partner
| By: /s/ BARBARA PAK
| Barbara Pak
| Executive Vice President, Chief Financial Officer (Authorized Officer, Principal Financial Officer)
| By: /s/ JOHN FARIAS
| John Farias
| Senior Vice President, Chief Accounting Officer

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KNOWN ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Michael J. Schall and Barbara Pak, and each of them, his or her attorney-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorney-in-fact, or his or her or substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of each Registrant and in the capacities and on the dates indicated.

Signature | Title | Date
/s/ GEORGE M. MARCUS George M. Marcus | Director and Chairman of the Board | February 25, 2022
/s/ KEITH R. GUERICKE Keith R. Guericke | Director, and Vice Chairman of the Board | February 25, 2022
/s/ IRVING F. LYONS, III Irving F. Lyons, III | Lead Director | February 25, 2022
/s/ MARIA R. HAWTHORNE Maria R. Hawthorne | Director | February 25, 2022
/s/ AMAL M. JOHNSON Amal M. Johnson | Director | February 25, 2022
/s/ MARY KASARIS Mary Kasaris | Director | February 25, 2022
/s/ THOMAS E. ROBINSON Thomas E. Robinson | Director | February 25, 2022
/s/ MICHAEL J. SCHALL Michael J. Schall | Chief Executive Officer and President, and Director (Principal Executive Officer) | February 25, 2022
/s/ BYRON A. SCORDELIS Byron A. Scordelis | Director | February 25, 2022

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