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Real Estate Investments | 12 Months Ended
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Dec. 31, 2021
Real Estate Investments, Net [Abstract] |
Real Estate Investments | 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. 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 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 $0.2 million due to distributions received in excess of the Company's investment. The weighted average Essex ownership percentage excludes our investments in non-core technology co-investments which are carried at fair value.. The combined summarized financial information of co-investments is as follows ($ 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 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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- Definition The entire disclosure for certain real estate investment financial statements, real estate investment trust operating support agreements, real estate owned, retail land sales, time share transactions, as well as other real estate related disclosures. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 970 -URI http://asc.fasb.org/topic&trid=2156125 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 978 -URI http://asc.fasb.org/topic&trid=2134977 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 976 -URI http://asc.fasb.org/topic&trid=2134846 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 974 -URI http://asc.fasb.org/topic&trid=2156429 Reference 5: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 972 -URI http://asc.fasb.org/topic&trid=2134617 + Details
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