XML 38 R19.htm IDEA: XBRL DOCUMENT
v3.22.4

Real Estate Investments | 12 Months Ended
--- | ---
Dec. 31, 2022
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, 2022 ($ in millions): For the year ended December 31, 2022, the Company purchased two communities consisting of 211 apartment homes for approximately $32.9 million.
Property Name |  | Location |  | Apartment Homes |  | Essex Ownership Percentage |  | Quarter in 2022 |  | Purchase Price
Regency Palm Court and Windsor Court (1) |  | Los Angeles, CA |  | 211 |  |  | 100 | % |  | Q3 |  | $ | 32.9 |
Total 2022 |  | 211 |  |  |  |  |  |  | $ | 32.9 |
(1) In July 2022, the Company acquired its joint venture partner's 49.8% minority interest in two apartment communities, consisting of 211 apartment homes located in Los Angeles, CA, for a contract price of $32.9 million. As a result of this acquisition, the Company realized a gain on remeasurement of co-investment of $17.4 million upon consolidation. The consolidated fair value of the acquisitions listed above was included on the Company's consolidated balance sheet as follows: $14.1 million was included in land and land improvements, $52.7 million was included in buildings and improvements, $0.3 million was included in prepaid expenses and other assets. For the year ended December 31, 2021, the Company purchased one apartment community consisting of 123 apartment homes and two commercial properties for approximately $133.6 million. Additionally, in June 2021, the Company purchased its joint venture partner's 50.0% membership interest in the BEX III, LLC's ("BEX III") co-investment that owned an apartment community consisting of 145 apartment homes, based on a property valuation of $63.5 million, for approximately $31.8 million. In conjunction with the acquisition, $29.5 million of mortgage debt that encumbered the property was paid off. As a result of this acquisition, the Company realized a gain on remeasurement of its existing co-investment of $2.3 million. The consolidated fair value of these acquisitions was included on the Company's consolidated balance sheet as follows: $103.3 million was included in land and land improvements, $90.2 million was included in buildings and improvements, $5.4 million was included in prepaid expenses and other assets, within the Company's consolidated balance sheets. (b) Sales of Real Estate Investments The table below summarizes the disposition activity for the year ended December 31, 2022 ($ in millions):
Property Name |  | Location |  | Apartment Homes |  | Ownership |  | Quarter in 2022 |  | Sales Price |
Anavia |  | Anaheim, CA |  | 250 |  |  | EPLP |  | Q4 |  | $ | 160.0 |  | (1)
Total 2022 |  | 250 |  |  |  |  |  |  | $ | 160.0 |  |
(1) The Company recognized a $94.4 million gain on sale. For the year ended December 31, 2021, the Company sold four apartment communities consisting of 912 apartment homes for $330.0 million, resulting in gains of $143.0 million. In conjunction with the sales, the Company repaid $29.7 million of mortgage debt that encumbered one of the properties. 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. (c) 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 typically own, operate, and develop apartment communities. Additionally, the Company has invested in six technology co-investments and as of December 31, 2022 the co-investment balance of these investments was $39.4 million and the aggregate commitment was $87.0 million. In January 2022, Wesco VI, LLC (“Wesco VI”), one of the Company's joint ventures with an institutional partner, acquired Vela, 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 related party bridge loan from the Company, with an interest rate of 2.64% that was paid off in January 2022 and replaced by permanent secured debt with an institutional lender. See Note 6, Related Party Transactions, for additional details. In March 2022, the Wesco III, LLC ("Wesco III") operating agreement was amended to extend the venture. As part of the amendment, the Company earned $17.1 million in promote interest. In April 2022, the Wesco IV, LLC ("Wesco IV") joint venture operating agreement was amended to extend the venture. As part of the amendment, the Company and the joint venture partner agreed that the Company earned a promote interest of approximately $37.5 million. The Company agreed to contribute the earned promote interest to the joint venture, resulting in an increase in the Company's ownership interest in Wesco IV to 65.1%. The carrying values of the Company’s co-investments as of December 31, 2022 and 2021 are as follows ($ in thousands, except in parenthetical):
| Weighted Average Essex Ownership |  | December 31,
| Percentage (1) |  | 2022 |  | 2021
Ownership interest in: |  |  |  |  |
Wesco I, Wesco III, Wesco IV, Wesco V and Wesco VI (2) | 54 | % |  | $ | 178,552 |  |  | $ | 168,198 |
BEXAEW, BEX II, BEX IV and 500 Folsom | 50 | % |  | 238,537 |  |  | 270,550 |
Other (3) | 52 | % |  | 74,742 |  |  | 126,503 |
Total operating and other co-investments, net |  |  | 491,831 |  |  | 565,251 |
Total development co-investments | 51 | % |  | 12,994 |  |  | 11,076 |
Total preferred interest co-investments (includes related party investments of $87.1 million and $71.1 million as of December 31, 2022 and December 31, 2021, respectively - Note 6 - Related Party Transactions for further discussion) |  |  | 580,134 |  |  | 565,930 |
Total co-investments, net |  |  | $ | 1,084,959 |  |  | $ | 1,142,257 |
(1)Weighted average Company ownership percentages are as of December 31, 2022. (2)As of December 31, 2022, the Company's investments in Wesco I, Wesco III, and Wesco IV were classified as a liability of $41.7 million due to distributions received in excess of the Company's investment. 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)As of December 31, 2022, the Company's investments in Expo and Century Towers were classified as a liability of $0.8 million due to distributions received in excess of the Company's investment. 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,
| 2022 |  | 2021
Combined balance sheets: (1) |  |  |
Rental properties and real estate under development | $ | 4,955,051 |  |  | $ | 4,603,465 |
Other assets | 294,663 |  |  | 278,411 |
Total assets | $ | 5,249,714 |  |  | $ | 4,881,876 |
Debt | $ | 3,397,113 |  |  | $ | 3,046,765 |
Other liabilities | 264,872 |  |  | 200,129 |
Equity | 1,587,729 |  |  | 1,634,982 |
Total liabilities and equity | $ | 5,249,714 |  |  | $ | 4,881,876 |
Company's share of equity | $ | 1,084,959 |  |  | $ | 1,142,257 |
| Years ended December 31,
| 2022 |  | 2021 |  | 2020
Combined statements of income: (1) |  |  |  |  |
Property revenues | $ | 373,074 |  |  | $ | 289,680 |  |  | $ | 300,624 |
Property operating expenses | (140,175) |  |  | (115,023) |  |  | (108,682) |
Net operating income | 232,899 |  |  | 174,657 |  |  | 191,942 |
Interest expense | (100,913) |  |  | (65,172) |  |  | (78,962) |
General and administrative | (20,579) |  |  | (17,885) |  |  | (17,079) |
Depreciation and amortization | (164,186) |  |  | (133,787) |  |  | (117,836) |
Net income | $ | (52,779) |  |  | $ | (42,187) |  |  | $ | (21,935) |
Company's share of net income (2) | $ | 26,030 |  |  | $ | 111,721 |  |  | $ | 66,512 |
(1)Includes preferred equity investments held by the Company. (2)Includes the Company's share of equity income from joint ventures and preferred equity investments, gain on sales of co-investments, co-investment promote income and income from early redemption of preferred equity investments. Includes related party income of $7.4 million, $9.1 million, and $8.6 million for the years ended December 31, 2022, 2021, and 2020, respectively. Operating Co-investments As of December 31, 2022 and 2021, the Company, through several joint ventures, owned 10,425 and 10,257 apartment homes, respectively, in operating communities. The Company’s book value of these co-investments was $491.8 million and $565.3 million at December 31, 2022 and 2021, respectively. Predevelopment and Development Co-investments As of both December 31, 2022 and 2021, the Company, through several joint ventures, owned 264 apartment homes in predevelopment and development communities. The Company’s book value of these co-investments was $13.0 million and $11.1 million at December 31, 2022 and 2021, respectively. In 2020, the Company entered into a joint venture to develop LIVIA (fka 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 second quarter of 2023 and is projected to be fully stabilized in the first quarter of 2024. 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, 2022 and 2021, 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 $580.1 million and $565.9 million at December 31, 2022 and 2021, respectively, and is included in the co-investments line in the accompanying consolidated balance sheets. During 2022, the Company made commitments to fund $84.9 million of preferred equity investment in seven real estate ventures, including one with a related party. See Note 6, Related Party Transactions, for additional details. The investments have initial preferred returns ranging from 8.8% - 10.8%, with maturities ranging from January 2026 to September 2032. As of December 31, 2022, the Company had fully funded $84.9 million of the commitments. 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, 2022, the Company had fully funded $67.2 million of the 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, 2022, 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, 2022, 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, 2022, 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. During 2022, the Company received cash proceeds of $132.6 million, including an early redemption fee of $0.9 million, for the full redemption of three preferred equity investments and partial redemption of two preferred equity investments in joint ventures that hold properties located in California. The Company recorded a $2.1 million impairment loss from a preferred equity investment in an unconsolidated co-investment for the year ended December 31, 2022. 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%. (d) 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, 2022, the Company's development pipeline was comprised of one unconsolidated joint venture project under development aggregating 264 apartment homes and various predevelopment projects, with total incurred costs of $102.0 million.

X
- 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 https://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 https://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 https://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 https://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 https://asc.fasb.org/topic&trid=2134617 + Details
Name: | us-gaap_RealEstateDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_RealEstateInvestmentsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration