1
                                           Filed Pursuant to Form 424(b)(5)
                                           Registration No. 333-21989
 
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED SEPTEMBER 4, 1997)
 
                                1,300,000 SHARES
                           ESSEX PROPERTY TRUST, INC.
                                  COMMON STOCK
                            ------------------------
 
     Essex Property Trust, Inc., a Maryland corporation (the "Company"), is a
fully integrated, self-administered real estate investment trust ("REIT")
focused on owning, operating, managing, leasing, acquiring, developing and
redeveloping multifamily residential properties located throughout the west
coast of the United States.
 
     All of the shares of common stock, $.0001 par value per share (the "Common
Stock"), offered hereby are being offered by the Company (the "Offering"). See
"Underwriting." The Common Stock is listed on the New York Stock Exchange (the
"NYSE") under the symbol "ESS." On September 4, 1997, the last reported sale
price of the Common Stock on the NYSE was $32.00 per share.
 
     The shares of Common Stock are subject to certain restrictions on ownership
designed to preserve the Company's status as a REIT for federal income tax
purposes. See "Description of Common Stock -- Restrictions on Transfer" in the
accompanying Prospectus.
                            ------------------------
 
     SEE "RISK FACTORS" BEGINNING ON PAGE 4 OF THE ACCOMPANYING PROSPECTUS FOR
CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE COMMON STOCK OFFERED
HEREBY.
                            ------------------------
 
  THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
 EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
   AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
                          RELATES. ANY REPRESENTATION
                     TO THE CONTRARY IS A CRIMINAL OFFENSE
                            ------------------------
 
     Lehman Brothers Inc. (the "Underwriter") has agreed to purchase from the
Company 1,300,000 shares of Common Stock for an aggregate purchase price of
$40.3 million or $31.00 per share. The Company has granted the Underwriter an
option for 30 days to purchase up to 195,000 additional shares of Common Stock
at a purchase price of $31.00 per share, solely to cover over-allotments. If
such option is exercised in full, the total proceeds to the Company will be
$46.345 million, before deducting expenses payable by the Company, estimated at
approximately $100,000.
 
     The Underwriter proposes to offer the 1,300,000 shares of Common Stock
included in the Offering from time to time for sale in one or more transactions
on the NYSE, in the over-the-counter market or otherwise, at market prices
prevailing at the time of sale, at prices related to prevailing market prices,
or at negotiated prices, subject to prior sale when, as and if delivered to and
accepted by the Underwriter. See "Underwriting."
 
     The Company and the Operating Partnership have agreed to indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
                            ------------------------
 
     The shares of Common Stock offered hereby are offered by Lehman Brothers
Inc., as specified herein, subject to receipt and acceptance by them and subject
to their right to reject any order in whole or in part. It is expected the
certificates for the shares will be ready for delivery in New York, New York on
or about September 10, 1997.
                            ------------------------
 
                                LEHMAN BROTHERS
 
September 4, 1997
   2
 
     THE UNDERWRITER MAY ENGAGE IN TRANSACTIONS THAT AFFECT THE PRICE OF THE
SHARES OF COMMON STOCK. SUCH TRANSACTIONS MAY INCLUDE THE PURCHASE OF SHARES OF
COMMON STOCK TO COVER A SHORT POSITION IN THE COMMON STOCK. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE "UNDERWRITING."
 
                                       S-2
   3
 
     The following is qualified in its entirety by the more detailed information
appearing in the accompanying Prospectus and incorporated herein and therein by
reference. The offering of 1,300,000 shares of Common Stock made hereby is
herein referred to as the "Offering." All references to the "Company" in this
Prospectus Supplement and the accompanying Prospectus include Essex Property
Trust, Inc., those entities controlled by Essex Property Trust, Inc. and
predecessors of Essex Property Trust, Inc., unless the context indicates
otherwise. All references to the "Operating Partnership" in this Prospectus
Supplement and the accompanying Prospectus refer to Essex Portfolio, L.P., a
California limited partnership in which the Company owns an approximate 87.9%
general partnership interest and senior members of the Company's management and
certain outside investors own an approximate 12.1% interest. This Prospectus
Supplement and the accompanying Prospectus and documents incorporated by
reference herein and therein contain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities and Exchange Act of 1934 and the documents incorporated by reference
herein and therein. In addition, when used herein and in the accompanying
Prospectus, the words "believes," "anticipates," "expects," and similar
expressions are intended to identify forward-looking statements. Such statements
involve a number of risks and uncertainties. Actual results in the future could
differ materially from those described in the forward-looking statements as a
result of certain factors including those under "Risk Factors" in the
accompanying Prospectus and elsewhere in this Prospectus Supplement, the
accompanying Prospectus and the documents incorporated by reference herein and
therein. The Company cautions the reader, however, that such risk factors may
not be exhaustive.
 
                                  THE COMPANY
 
     The Company is a fully integrated, self-administered REIT which was formed
to continue and expand the real estate investment and management operations
conducted by its predecessor since 1971. The Company has been engaged in owning,
managing, leasing, acquiring, developing and redeveloping multifamily
residential properties located throughout the west coast of the United States
for over 25 years through various cycles of the real estate market. The
Company's Chairman of the Board of Directors and four most senior executives
have worked at the Company for an average of 13 years and have an average of
approximately 20 years of experience in the real estate industry.
 
     The Company's multifamily residential portfolio currently consists of
ownership interests in 43 properties comprising 8,917 apartment units. Fourteen
of these properties are located in the San Francisco Bay Area, 14 are located in
Southern California, 13 are located in the Seattle Metropolitan Area and two are
located in the Portland Metropolitan Area. The Company also owns four retail
properties, which are located in the Portland Metropolitan Area and in Eugene,
Oregon, and an office building located in Palo Alto, California that houses the
Company's headquarters.
 
                                  THE OFFERING
 
                                            
Common Stock offered hereby..................  1,300,000 shares of Common Stock
Common Stock to be outstanding after the
  Offering...................................  14,909,866 shares of Common Stock(1)
Use of proceeds..............................  To fund acquisition and development activities
                                               and for general corporate purposes. See "Use
                                               of Proceeds."
New York Stock Exchange symbol...............  "ESS"


 
- ---------------
 
(1) If all of the partnership units in the Operating Partnership were exchanged
    for Common Stock, the total number of shares of Common Stock outstanding
    would be 16,783,339, excluding (i) shares of Common Stock that may be issued
    upon conversion of Convertible Preferred Stock (as defined in the
    accompanying Prospectus) and (ii) 592,434 shares of Common Stock that may be
    issued pursuant to the exercise of outstanding stock options granted to The
    Marcus & Millichap Company and pursuant to the exercise of outstanding
    employee stock options under the Essex Property Trust, Inc. 1994 Stock
    Incentive Plan.
 
                                       S-3
   4
 
                                USE OF PROCEEDS
 
     The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby are expected to be approximately $40.2 million. If the
over-allotment option is exercised in full, the net proceeds from the sale of
the shares of Common Stock are expected to be approximately $46.245 million. The
Company intends to contribute such proceeds to the Operating Partnership, of
which the Company is the sole general partner, and through which the Company
owns substantially all of its assets and conducts substantially all of its
operations, to purchase an additional general partnership interest in the
Operating Partnership. The Operating Partnership will use the net proceeds to
fund the acquisition and development of multifamily residential properties and
for general corporate purposes.
 
                  DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
 
     For a general description of the Company's capital stock, see "Description
of Common Stock" and "Description of Preferred Stock -- Convertible Preferred
Stock" in the accompanying Prospectus. The description of the Company's capital
stock in the accompanying Prospectus and of certain provisions of Maryland law
do not purport to be complete and are subject to and qualified in their entirety
by reference to the Company's Charter and Bylaws and Maryland law, and, with
respect to certain rights of holders of the shares of Convertible Preferred
Stock, the Stock Purchase Agreement (as defined in the accompanying Prospectus)
and the Registration Rights Agreement between the Company and Tiger/Westbrook
(as defined in the accompanying Prospectus) dated July 1, 1996, and, with
respect to the Acquisition Partnerships Partners (as defined in the accompanying
Prospectus), the respective limited partnership agreements and the Registration
Rights Agreement among the Company and the Acquisition Partnerships Partners,
dated January 1, 1997. Copies of such documents have been filed with the
Securities and Exchange Commission. See "Available Information" in the
accompanying Prospectus.
 
                                  UNDERWRITING
 
     Subject to the terms and conditions set forth in the Purchase Agreement
among the Underwriter, the Company and the Operating Partnership and the related
Pricing Agreement between the Underwriter and the Company (collectively, the
"Underwriting Agreement"), the Company has agreed to sell to Lehman Brothers
Inc., and Lehman Brothers Inc. has agreed to purchase from the Company,
1,300,000 shares of Common Stock.
 
     Under the terms and conditions of the Underwriting Agreement, the
Underwriter is committed to take and pay for all of the shares of Common Stock
included in the Offering, if any are taken.
 
     The Underwriter proposes to offer the 1,300,000 shares of Common Stock
included in the Offering from time to time for sale in one or more transactions
on the NYSE, in the over-the-counter market or otherwise, at market prices
prevailing at the time of sale, at prices related to prevailing market prices,
or at negotiated prices, subject to prior sale, when, as and if delivered to and
accepted by the Underwriter. In connection with the sale of the 1,300,000 shares
of Common Stock included in the Offering, the Underwriter may be deemed to have
received compensation from the Company in the form of underwriting discounts.
The Underwriter may effect such transactions by selling Common Stock to or
through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the Underwriter and/or the purchasers
of such Common Stock for whom they may act as agents or to whom they may sell as
principal.
 
     If the Underwriter creates a short position in the Common Stock in
connection with the Offering, (i.e., if the Underwriter sells more shares of
Common Stock than are set forth on the cover page of this Prospectus), the
Underwriter may reduce that short position by purchasing Common Stock in the
open market. The Underwriter also may elect to reduce any short position by
exercising all or part of the over-allotment option described herein. In
general, purchases of a security to reduce a short position could cause the
price of the security to be higher than it might otherwise be in the absence of
such purchases.
 
                                       S-4
   5
 
     Neither the Company nor the Underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor the Underwriter makes any representation that the Underwriter
will engage in such transactions or that such transactions, once commenced, will
not be discontinued without notice.
 
     The Company has granted the Underwriter an option, exercisable for 30 days
after the date of this Prospectus Supplement, to purchase up to 195,000
additional shares of Common Stock solely to cover over-allotments, if any.
 
     The Company, the Operating Partnership, the Marcus & Millichap Company and
certain officers and directors of the Company have agreed, subject to certain
exceptions (including, in the case of the Company, shares of Common Stock issued
(i) pursuant to the Underwriting Agreement, (ii) pursuant to the Company's stock
option plans as described herein, (iii) pursuant to the terms of the Convertible
Preferred Stock, and (iv) pursuant to the exchange of outstanding limited
partnership interests in the Operating Partnership in accordance with the terms
of the Operating Partnership as of the date hereof), not to sell or otherwise
dispose of any shares of Common Stock or securities convertible into or
exchangeable or exercisable for shares of Common Stock without the prior written
consent of the Underwriter for a period of 90 days after the date of this
Prospectus Supplement.
 
     The Company and the Operating Partnership have agreed to indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act of 1933.
 
                                 LEGAL MATTERS
 
     The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Morrison & Foerster LLP, Palo Alto, California. Morrison
& Foerster LLP will rely upon the opinion of Ballard Spahr Andrews & Ingersoll,
Baltimore, Maryland, as to certain matters of Maryland law. Certain legal
matters in connection with the Offering will be passed upon for the Underwriter
by Skadden, Arps, Slate, Meagher & Flom LLP, Los Angeles, California. Skadden,
Arps, Slate, Meagher & Flom LLP from time to time provides legal services to the
Company.
 
                                       S-5
   6
 
PROSPECTUS
 
                                  $141,714,250
 
                           ESSEX PROPERTY TRUST, INC.
 
                         COMMON STOCK, PREFERRED STOCK,
                         DEPOSITARY SHARES AND WARRANTS
                            ------------------------
 
     Essex Property Trust, Inc. ("Essex" or the "Company") may from time to time
offer in one or more series or classes (i) shares of its common stock, par value
$0.0001 per share (the "Common Stock"), (ii) shares or fractional shares of its
preferred stock (the "Preferred Stock"), (iii) shares of Preferred Stock
represented by Depositary Shares (the "Depositary Shares"), and (iv) warrants to
purchase Preferred Stock or Common Stock (the "Warrants"), in amounts, at prices
and on terms to be determined at the time of offering, with an aggregate public
offering price of up to $141,714,250. The Common Stock, Preferred Stock,
Depositary Shares and Warrants (collectively, the "Offered Securities") may be
offered, separately or together, in separate series in amounts, at prices and on
terms to be set forth in one or more supplements to this Prospectus (each a
"Prospectus Supplement"). To ensure that the Company maintains its qualification
as a real estate investment trust ("REIT"), the Charter of the Company (the
"Charter") provides that no person, with certain exceptions, may own more than
6.0% of the value of the outstanding shares of the Company's stock.
 
     The specific terms of the Offered Securities in respect to which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable (i) in the case of Common Stock,
the specific title and stated value and any initial public offering price; (ii)
in the case of Preferred Stock, the specific title and stated value, any
dividend, liquidation, redemption, conversion, voting and other rights, and any
initial public offering price; (iii) in the case of Depositary Shares, the
fractional share of Preferred Stock represented by each such Depositary Share;
and (iv) in the case of Warrants, the duration, offering price, exercise price
and detachability. In addition, such specific terms may include limitations on
direct or beneficial ownership and restrictions on transfer of the Offered
Securities, in each case as may be appropriate to preserve the status of the
Company as a REIT for federal income tax purposes.
 
     The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Offered Securities
covered by such Prospectus Supplement.
 
     The Offered Securities may be offered directly, through agents designated
from time to time by the Company, or to or through underwriters or dealers. If
any agents or underwriters are involved in the sale of any of the Offered
Securities, their names, and any applicable purchase price, fee, commission or
discount arrangement between or among them, will be set forth, or will be
calculable from the information set forth, in the applicable Prospectus
Supplement. See "Plan of Distribution." No Offered Securities may be sold
without delivery of the applicable Prospectus Supplement describing the method
and terms of the offering of such series of Offered Securities.
 
     FOR CERTAIN FACTORS RELEVANT TO AN INVESTMENT IN THE OFFERED SECURITIES,
SEE "RISK FACTORS," COMMENCING ON PAGE 4.
                            ------------------------
 
  THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
 EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
   AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
                               CRIMINAL OFFENSE.
                            ------------------------
 
               The date of this Prospectus is September 4, 1997.
   7
 
                             AVAILABLE INFORMATION
 
     The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith the Company files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed can be inspected and copied at the
Commission's Public Reference Section, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the following regional offices of the Commission: Seven World
Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission also maintains a
site on the World Wide Web at http://www.sec.gov that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission. In addition, the Common Stock is listed on
the New York Stock Exchange and similar information concerning the Company can
be inspected and copied at the offices of the New York Stock Exchange, Inc., 20
Broad Street, New York, New York 10005.
 
     The Company has filed with the Commission a registration statement on Form
S-3 (the "Registration Statement"), of which this Prospectus is a part, under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Offered Securities. This Prospectus does not contain all of the information
set forth in the Registration Statement, certain portions of which have been
omitted as permitted by the rules and regulations of the Commission. Statements
contained in this Prospectus as to the contents of any contract or other
documents are not necessarily complete, and in each instance reference is made
to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference and the exhibits and schedules thereto. For further information
regarding the Company and the Offered Securities, reference is hereby made to
the Registration Statement and such exhibits and schedules which may be obtained
from the Commission at its principal office in Washington, D.C. upon payment of
the fees prescribed by the Commission.
 
                INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
 
     The documents listed below have been filed by the Company under the
Exchange Act with the Commission and are incorporated herein by reference:
 
          a. The Company's Annual Report on Form 10-K for the year ended
     December 31, 1996 (including relevant portions of the Company's definitive
     proxy statement for the 1997 annual meeting of stockholders specifically
     incorporated by reference in Part III of such Form 10-K);
 
          b. The Company's Quarterly Reports on Form 10-Q for the quarters ended
     March 31, 1997 and June 30, 1997; and
 
          c. The Company's Forms 8-K filed with the Commission on April 3, 1997,
     June 26, 1997 and August 29, 1997.
 
     Each document filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of all Offered Securities to which this
Prospectus relates shall be deemed to be incorporated by reference in this
Prospectus and to be part hereof from the date of filing such documents.
 
     Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
(or in the applicable Prospectus Supplement) or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
 
     Copies of all documents which are incorporated herein by reference (not
including the exhibits to such information, unless such exhibits are
specifically incorporated by reference in such information) will be provided
without charge to each person, including any beneficial owner, to whom this
Prospectus is delivered upon written or oral request. Requests should be
directed to the Investor Service Manager of the Company at 777 California
Avenue, Palo Alto, California 94304, telephone number: (650) 494-3700.
 
                                        2
   8
 
     As used herein, the terms "Company" and "Essex" mean Essex Property Trust,
Inc., a Maryland corporation, those entities controlled by Essex Property Trust,
Inc. and predecessors of Essex Property Trust, Inc., unless the context
indicates otherwise. This Prospectus contains forward-looking statements which
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth under "Risk Factors" and
elsewhere in this Prospectus.
 
                                  THE COMPANY
 
     The Company is a self-administered and self-managed equity REIT that was
formed in 1994 to continue and expand the real estate investment and management
operations conducted by Essex Property Corporation since 1971. The Company's
multifamily residential portfolio currently consists of ownership interests in
43 properties comprising 8,917 apartment units, 14 of which are located in the
San Francisco Bay Area, 14 of which are located in Southern California, 13 of
which are located in the Seattle metropolitan area and two of which are located
in the Portland, Oregon, metropolitan area. The Company also owns four retail
properties, which are located in the Portland, Oregon, metropolitan area and in
Eugene, Oregon, and an office building located in Palo Alto, California that
houses the Company's headquarters (collectively, the "Commercial Properties,"
and together with the Company's 43 multifamily residential properties, the
"Properties").
 
     The Company conducts substantially all of its activities through Essex
Portfolio, L.P. (the "Operating Partnership") in which the Company owns an
approximate 87.9% general partnership interest. An approximate 12.1% limited
partnership interest in the Operating Partnership is owned by senior members of
the Company's management and certain outside investors. As the sole general
partner of the Operating Partnership, the Company has control over the
management of the Operating Partnership and over each of the Properties.
 
     The Company's Common Stock is listed on the New York Stock Exchange under
the symbol "ESS." The Company is a Maryland corporation. The Company's executive
offices are located at 777 California Avenue, Palo Alto, California 94304, and
its telephone number is (650) 494-3700.
 
                                USE OF PROCEEDS
 
     The Company intends to invest the net proceeds of any sale of Offered
Securities in the Operating Partnership. Unless otherwise indicated in the
applicable Prospectus Supplement, the Operating Partnership intends to use such
net proceeds for general corporate purposes including, without limitation, the
acquisition and development of multifamily residential properties and the
repayment of debt. Net proceeds from the sale of the Offered Securities
initially may be temporarily invested in short-term securities.
 
                       RATIO OF EARNINGS TO FIXED CHARGES
 
     The Company's ratio of earnings to combined fixed charges and preferred
stock dividends for the six months ended June 30, 1997 was approximately 2.56x
and for the fiscal year ended December 31, 1996 was approximately 2.11x. The
Company's ratio of earnings to fixed charges for the fiscal year ended December
31, 1995 and for the period of June 13, 1994 through December 31, 1994, was
approximately 2.14x and 1.87x, respectively. Prior to 1996, the Company did not
have any outstanding preferred stock. The ratio of earnings to fixed charges of
the Company's predecessor for the period of January 1, 1994 through June 12,
1994 and for the fiscal years ended December 31, 1993 and December 31, 1992, was
approximately 1.06x, 1.03x and 0.83x, respectively. For purposes of computing
these ratios, earnings have been calculated by adding fixed charges (including
capitalized interest) to income (loss) from operations, before gains on sales
and extraordinary items. Fixed charges consist of interest costs, whether
expensed or capitalized, and amortization of debt discounts and deferred
financing fees, whether expensed or capitalized.
 
                                        3
   9
 
                                  RISK FACTORS
 
     Prospective investors should carefully consider the following information
in conjunction with the other information contained in this Prospectus and the
applicable Prospectus Supplement before purchasing Offered Securities.
 
DEBT FINANCING; RISK OF RISING INTEREST RATES
 
     The Company is subject to the risks normally associated with debt
financing, including the risk that the Company's cash flow will be insufficient
to meet required payments of principal and interest, that the Company will not
be able to refinance existing indebtedness on the encumbered Properties or that
the terms of such refinancing will not be as favorable as the terms of existing
indebtedness. As of June 30, 1997, the Company had outstanding approximately
$179.9 million of indebtedness secured by certain of the Properties.
 
     As of June 30, 1997, the Company had approximately $42.8 million of
variable rate mortgage indebtedness, which bears interest at a floating rate
tied to the rate of short-term tax exempt securities. Although approximately
$29.2 million of such variable rate indebtedness is subject to interest rate
protection which may reduce the risks associated with fluctuations in interest
rates, an increase in interest rates will have an adverse effect on the
Company's net income and results of operations.
 
RISKS OF ACQUISITION AND DEVELOPMENT ACTIVITIES
 
     The Company intends to actively continue to acquire multifamily residential
properties. Acquisitions of such properties entail risks that investments will
fail to perform in accordance with expectations. Estimates of the costs of
improvements to bring an acquired property up to standards established for the
market position intended for that property may prove inaccurate. In addition,
there are general real estate investment risks associated with any new real
estate investment.
 
     The Company may also pursue multifamily residential property development
projects. Such projects generally require various governmental and other
approvals, the receipt of which cannot be assured. The Company's development
activities will entail certain risks, including the expenditure of funds on and
devotion of management's time to projects which may not come to fruition; the
risk that construction costs of a project may exceed original estimates,
possibly making the project not economical; the risk that occupancy rates and
rents at a completed project will be less than anticipated; and the risk that
expenses at a completed development will be higher than anticipated. These risks
may result in a development project causing a reduction in the funds available
for distribution.
 
DEBT FINANCING; UNCERTAINTY OF ABILITY TO REFINANCE BALLOON PAYMENTS
 
     The Company is subject to the risks normally associated with debt
financing, including the risk that the Company's cash flow will be insufficient
to meet required payments of principal and interest, that the Company will not
be able to refinance existing indebtedness on the encumbered Properties or that
the terms of such refinancing will not be as favorable as the terms of existing
indebtedness. As of June 30, 1997, the Company had outstanding approximately
$179.9 million of indebtedness secured by certain of the Properties.
 
     The Company is not expected to have sufficient cash flows from operations
to make all of the balloon payments of principal when due under its mortgage
indebtedness and lines of credit, which were, as of June 30, 1997, an aggregate
of approximately $179.9 million. As of June 30, 1997, such mortgage indebtedness
and lines of credit had the following scheduled maturity dates: 1997 -- $1.6
million; 1998 -- $3.6 million; 1999 -- $3.9 million; 2000 -- $4.2 million;
2001 -- $59.8 million; 2002 and thereafter -- $106.8 million. As a result, the
Company will be subject to risks that it will not be able to refinance such
mortgage indebtedness and the mortgaged properties could be foreclosed upon by
or otherwise transferred to the mortgagee with a consequent loss of income and
asset value to the Company, or, that the indebtedness, if any, refinanced will
have higher interest rates. An inability to make such payments when due could
cause the mortgage lender to foreclose on the Properties securing the mortgage,
which would have a material adverse effect on the Company.
 
                                        4
   10
 
GEOGRAPHIC CONCENTRATION
 
     Approximately 47%, 25%, 20%, and 8% of the Company's rental revenues for
the three months ended June 30, 1997, were derived from Properties located in
the San Francisco Bay, the Seattle metropolitan area, Southern California and
the Portland metropolitan area (including Eugene, Oregon), respectively. As a
result of this geographic concentration, if a local property market performs
poorly, the income from the Properties in that market could decrease and, in
turn, the ability of the Company to make expected dividends to stockholders
could be adversely affected. The performance of the economy in each of these
areas affects occupancy, market rental rates and expenses and, consequently, has
an impact on the income from the Properties and their underlying values. The
financial results of major local employers may have an impact on the cash flow
and value of certain of the properties.
 
RISKS ASSOCIATED WITH CONVERTIBLE PREFERRED STOCK AND CERTAIN OTHER RISKS
 
     Increase in Dividend Requirements as a Result of Convertible Preferred
Stock; Possible Inability to Sustain Dividends. On June 20, 1996, the Company
entered into a stock purchase agreement (the "Stock Purchase Agreement") to sell
up to $40.0 million of the Company's 8.75% convertible preferred stock, Series
1996A (the "Convertible Preferred Stock") at $25.00 per share to Tiger/Westbrook
Real Estate Fund, L.P., and Tiger/Westbrook Real Estate Co-Investment
Partnership, L.P. (collectively, "Tiger/Westbrook"). Pursuant to the Stock
Purchase Agreement, Tiger/Westbrook purchased 1,600,000 shares of Convertible
Preferred Stock for an aggregate purchase price of $40 million. For a summary of
the terms and conditions of the Convertible Preferred Stock see "Description of
Preferred Stock -- Convertible Preferred Stock."
 
     The cash dividends payable on the Convertible Preferred Stock substantially
increased the cash required to continue to pay cash dividends on the Common
Stock at current levels. The terms and conditions of the Convertible Preferred
Stock provide that dividends may be paid on shares of Common Stock in any fiscal
quarter only if full, cumulative cash dividends have been paid on all shares of
Convertible Preferred Stock in the annual amount equal to the greater of (i)
$2.1875 per share (8.75% of the $25.00 per share price), or (ii) the dividends
(subject to adjustment) paid with respect to the Common Stock plus, in both
cases, any accumulated but unpaid dividends on the Convertible Preferred Stock.
See "Description of Preferred Stock -- Convertible Preferred
Stock -- Dividends."
 
     Under certain circumstances, if, after June 20, 2001, the Company requires
a mandatory conversion of all of the Convertible Preferred Stock, but under no
other circumstances, each of the holders of the Convertible Preferred Stock may
cause the Company to redeem any or all of such holder's shares of Convertible
Preferred Stock. Such a redemption would decrease the amount of cash available
to pay cash dividends on the Common Stock. At such time as there ceases to be in
excess of 40,000 shares of Convertible Preferred Stock outstanding, the Company
may at its option purchase all of the outstanding shares of Convertible
Preferred Stock from the holders thereof. See "Description of Preferred
Stock -- Convertible Preferred Stock -- Redemption at Holder's Option After
Notice of Mandatory Conversion." If the Company is unable to pay dividends on
the Common Stock, the Company's status as a REIT may be jeopardized. See
"Federal Income Tax Considerations -- Requirements for Qualification -- Annual
Distribution Requirements."
 
     Any Common Stock or other Offered Securities that may in the future be
issued pursuant to this Prospectus, upon exercise of stock options or otherwise,
will further substantially increase the costs required to continue to pay cash
dividends at current levels. The Company's ability to pay dividends will depend
in large part on the performance of its Properties and other properties that it
may acquire in the future.
 
     The Company's ability to pay dividends on its stock is further limited by
the Maryland General Corporation Law ("MGCL"). Under the MGCL, the Company may
not make a distribution on its stock if, after giving effect to such
distribution, either (i) the Company would not be able to pay its indebtedness
as such indebtedness becomes due in the usual course of business or (ii) the
Company's total assets would be less than its total liabilities (which, in
accordance with the articles supplementary filed by the Company on July 1, 1996
(the "Articles Supplementary"), will not include amounts required to satisfy the
preferential rights of the Convertible Preferred Stock upon dissolution of the
Company). See "Description of Preferred Stock -- Convertible Preferred
Stock -- Liquidation Preference." If the Company is unable to pay dividends
 
                                        5
   11
 
on its stock, the Company's status as a REIT may be jeopardized. See "Federal
Income Tax Considerations -- Requirements for Qualification -- Annual
Distribution Requirements."
 
     Risk of Adverse Effect on Market Price Due to Registration Rights and
Preemptive Rights. Holders of the Convertible Preferred Stock have certain
registration rights with respect to the Convertible Preferred Stock or shares of
Common Stock issuable upon conversion of the Convertible Preferred Stock for
sale to the public. See "Description of Preferred Stock -- Convertible Preferred
Stock -- Registration Rights." Registration rights are also held by the senior
members of the Company's management and certain outside investors (collectively,
the "Founders") who own an approximate 12.0% limited partnership interest in the
Operating Partnership and have certain "demand" and "piggyback" registration
rights with respect to shares of Common Stock issuable in connection with the
exchange of their limited partnership interests in the Operating Partnership. In
addition, limited partnership interests in the Operating Partnership were issued
to certain limited partners (the "Limited Partners") of a partnership formed in
connection with the acquisition of a property. The Limited Partners have certain
"demand" and "piggyback" registration rights with respect to the shares of
Common Stock issued in exchange for such limited partnership interests. The
aggregate 12.1% limited partnership interest held by the Founders and the
Limited Partners is exchangeable for an aggregate of 1,873,473 shares of Common
Stock. Moreover, the Acquisition Partnerships Partners (as defined herein) have
certain "demand" registration rights with respect to shares of Common Stock
issuable in connection with the redemption of their units of limited
partnership. See "Description of Common Stock -- Registration Rights." The
registration rights of the holders of the Convertible Preferred Stock, the
Founders, the Limited Partners and the Acquisition Partnerships Partners could
have a material adverse effect on the market price for the Offered Securities.
In addition, the Stock Purchase Agreement provides Tiger/Westbrook with
preemptive rights to purchase a pro rata share of the Company's equity
offerings. The preemptive rights could have a material adverse effect on the
market price for the Offered Securities. See "Description of Preferred Stock --
Convertible Preferred Stock -- Right of Tiger/Westbrook to Participate in
Offerings."
 
     Risk of Substantial Dilution to the Holders of Common Stock. Subject to
certain quantity limitations, the shares of Convertible Preferred Stock are
convertible, at the option of the holders, into such number of shares of Common
Stock as is determined by dividing $25.00 (plus accrued and unpaid dividends) by
the conversion price then in effect. As of June 30, 1997, the then current
conversion price was $21.875 per share and, therefore, each share of Convertible
Preferred Stock was convertible into approximately 1.14 shares of Common Stock.
In order to provide certain antidilution protection to the holders of the
Convertible Preferred Stock, the conversion price is subject to reduction in
certain circumstances, including in the event that the Company issues Common
Stock at a price below the conversion price. Such reduction in the conversion
price could increase the dilution to holders of Common Stock that would arise if
and when the Convertible Preferred Stock is converted into Common Stock. Holders
of Common Stock could experience substantial dilution in their proportionate
ownership, voting power and earnings per share in the event that the Company
issues a substantial number of additional shares of Common Stock and/or
Preferred Stock, either upon conversion of the Convertible Preferred Stock, in
connection with future acquisitions or otherwise, which issuances could
adversely affect the market price of the Offered Securities. See "Description of
Preferred Stock -- Convertible Preferred Stock -- Conversion Rights."
 
     Concentration of Voting Power and Consent Requirements of the Holders of
the Convertible Preferred Stock. The holders of the Convertible Preferred Stock
have significant direct and indirect influence over the Company's affairs. The
approval of holders of two-thirds of the outstanding shares of Convertible
Preferred Stock, voting as a separate class, is required to, among other things,
make certain revisions to the corporate structure of the Company, including such
revisions that would affect the rights, priority and preferences of the
Convertible Preferred Stock, and for the Company or the Operating Partnership to
merge or consolidate with another entity or for the Company to sell all or
substantially all of its assets. In addition, the approval of holders of a
majority of the outstanding shares of Convertible Preferred Stock, voting as a
separate class, is required for the Company to, among other things, make
substantial sales of its assets, change the geographic concentration of its
portfolio of Properties, or undergo a change in control affecting the Company or
the Operating Partnership. See "Description of Preferred Stock -- Convertible
Preferred Stock -- Voting Rights."
 
                                        6
   12
 
     In addition, the holders of the Convertible Preferred Stock as a class
currently have the right to elect one director to the Company's Board of
Directors. Under certain circumstances, the holders of the Convertible Preferred
Stock will be entitled to elect up to four additional directors. Such
circumstances include the Company's failure to pay quarterly dividends on the
Convertible Preferred Stock for four quarters and the Company's breach of
certain provisions of the Charter and the Company's bylaws (the "Bylaws")
affecting the holders of the Convertible Preferred Stock. See "Description of
Preferred Stock -- Convertible Preferred Stock -- Voting Rights." Moreover, the
Company may not authorize or create any class or series of stock that ranks
equal or senior to the Convertible Preferred Stock with respect to the payment
of dividends or amounts upon liquidation, dissolution or winding up without the
consent of the holders of twothirds of the outstanding shares of Convertible
Preferred Stock, voting separately as a single class. There can be no assurance
that the interests of Tiger/Westbrook, and indirectly the director or directors
elected by the holders of the Convertible Preferred Stock, would not differ from
or conflict with the interests of the holders of Common Stock or other Offered
Securities.
 
     In addition, upon conversion of the Convertible Preferred Stock into shares
of Common Stock, the holders of the Convertible Preferred Stock would have
considerable influence with respect to the election of directors and the
approval or disapproval of significant corporate actions, since they would hold
approximately 2.9% of all outstanding shares of Common Stock (assuming exchange
of all partnership interests in the Operating Partnership into shares of Common
Stock), assuming that such conversion took place on the date of this Prospectus.
 
     As of the date of this Prospectus, Tiger/Westbrook was the sole holder of
all outstanding shares of the Convertible Preferred Stock. In view of the
substantial influence of the holders of the Convertible Preferred Stock over the
Company's affairs, it should be noted that Tiger/Westbrook's interests do not
necessarily coincide with those of the holders of the Common Stock and therefore
its actions with respect to the Company will not necessarily be in the best
interests of the holders of Common Stock or other Offered Securities.
 
     In addition, as of September 2, 1997, Mr. Marcus' beneficial ownership of
1,883,114 shares of Common Stock (including shares issuable upon exchange of
partnership interests in the Operating Partnership) represented approximately
12.2% of the outstanding shares of Common Stock (including shares issuable upon
exchange of partnership interests in the Operating Partnership). While, as of
the date of this Prospectus, Mr. Marcus does not have majority control of the
Company, 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.
 
     Exemption from the Maryland Business Combination Law. Under the MGCL,
certain "business combinations" (including certain issuances of equity
securities) between a Maryland corporation and any individual or entity which is
the beneficial owner of 10% or more of a corporation's outstanding stock which
is entitled to vote generally in the election of directors (the "Interested
Stockholder") or an affiliate of an Interested Stockholder are prohibited for
five years after the date on which the Interested Stockholder becomes an
Interested Stockholder. Thereafter, any such business combination between the
Company and the Interested Stockholder must be approved by a super-majority vote
of the stockholders unless, among other conditions, the Company's Common
Stockholders receive a Minimum Price (as defined in the MGCL) for their shares
and the consideration is received in cash or in the same form as previously paid
by the Interested Stockholder for its Common Stock. However, as permitted by the
statute, the Board of Directors irrevocably has elected to exempt any business
combination by the Company with Tiger/Westbrook and its affiliates from the
"business combination" provision of the MGCL. Consequently, the five-year
prohibition and the super-majority vote requirement described above will not
apply to any business combination between Tiger/Westbrook (or affiliates
thereof) and the Company. As a result, the Company may in the future enter into
business combinations with Tiger/Westbrook (or affiliates thereof), without
compliance by the Company with the super-majority vote requirements and other
provisions of the statute.
 
     Anti-Takeover Effect of the Charter, the Bylaws, the Convertible Preferred
Stock and Certain Provisions of Maryland Law. The Company's Charter authorizes
the Board of Directors to cause the Company to issue additional shares of Common
Stock or preferred stock and to set the preferences, rights and other terms of
 
                                        7
   13
 
such preferred stock without the approval of the holders of the Common Stock,
provided that the Company must obtain the approval of the holders of two-thirds
of the outstanding shares of Convertible Preferred Stock in order to authorize,
create or issue any class or series of stock that ranks equal or senior to the
Convertible Preferred Stock. See "Description of Preferred Stock -- Convertible
Preferred Stock -- Voting Rights." Although the Board of Directors has no
intention to issue any shares of Convertible Preferred Stock or other preferred
stock at the present time, subject to the consent of the requisite holders of
Convertible Preferred Stock, it may establish one or more series of preferred
stock that could, depending on the terms of such series, delay, defer or prevent
a transaction or a change in control of the Company that might involve a premium
price for the Company's stock or otherwise be in the best interests of the
holders of Offered Securities, or that could have dividend, voting or other
rights that could adversely affect the interest of holders of Offered
Securities.
 
     The Charter of the Company also contains other provisions that may delay,
defer or prevent a transaction or a change in control of the Company that might
involve a premium price for the stock or otherwise be in the best interest of
the stockholders or that could otherwise adversely affect the interests of the
stockholders, and the Bylaws may be amended by the Board of Directors (subject
to the consent of the holders of the Convertible Preferred Stock in certain
circumstances) to include provisions that would have a similar effect, although
the Board of Directors presently has no such intention. The Charter provides
that the Company must obtain the approval of the holders of the Convertible
Preferred Stock holding two-thirds of the outstanding shares of Convertible
Preferred Stock before the Company or the Operating Partnership may merge or
consolidate with any other entity or sell all or substantially all of the
Company's or the Operating Partnership's assets. Also, the terms of the
Convertible Preferred Stock require that the Company must obtain the approval of
holders of the Convertible Preferred Stock holding more than 50% of the
outstanding shares of Convertible Preferred Stock before it may undergo a change
in control (as defined in the Charter). Additionally, the Charter contains
ownership provisions limiting the transferability and ownership of shares of the
capital stock of the Company, which may have the effect of delaying, deferring
or preventing a transaction or a change in control of the Company. For example,
subject to receiving an exemption from the Board of Directors (see "Description
of Common Stock -- Restrictions on Transfer"), these ownership provisions
preclude any potential acquiror from purchasing more than 6% percent in value of
the Company's stock (other than qualified pension trusts which can acquire
9.9%), thereby discouraging any tender offer which may be attractive to the
holders of the Common Stock and limiting the opportunity for stockholders to
receive a premium for their Common Stock that might otherwise exist if an
investor were attempting to assemble a block of shares in excess of 6% of the
Company's stock, or to otherwise effect a change in control of the Company. See
"Description of Common Stock -- Restrictions on Transfer."
 
     In addition, the MGCL restricts the voting rights of shares deemed to be
"control shares." Under the MGCL, "control shares" are those which, when
aggregated with any other shares held by the acquiror, entitle the acquiror to
exercise voting power within specified ranges. Although the Bylaws provide that
the control share provisions of the MGCL shall not apply to any acquisition by
any person of shares of stock of the Company, the provisions of the Bylaws may
be amended or eliminated by the Board of Directors at any time in the future,
provided that it obtains the approval of the holders of two-thirds of the
outstanding shares of the Convertible Preferred Stock. Moreover, any such
amendment or elimination of such provision of the Bylaws may result in the
application of the control share provisions of the MGCL 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 MGCL could 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 interests of the
stockholders or that could otherwise adversely affect the interests of the
stockholders.
 
BOND COMPLIANCE REQUIREMENTS
 
     As of June 30, 1997, the Company had approximately $42.8 million of
tax-exempt financing relating to its Inglenook Court Apartments, Wandering Creek
Apartments, Treetops Apartments, Meadowood Apartments and Camarillo Oaks
Apartments. The tax-exempt financing subjects these Properties to certain deed
 
                                        8
   14
 
restrictions and restrictive covenants. The Company expects to engage in
tax-exempt financings in the future. In addition, the Internal Revenue Code of
1986, as amended (the "Code") and the regulations promulgated thereunder impose
various restrictions, conditions and requirements relating to the exclusion from
gross income for federal income tax purposes of interest on qualified bond
obligations, including requirements that at least 20% of apartment units be made
available to residents with gross incomes that do not exceed 50% of the median
income for the applicable family size as determined by the Housing and Urban
Development Department of the federal government. In addition to federal
requirements, certain state and local authorities may impose additional rental
restrictions. The bond compliance requirements and the requirements of any
future tax-exempt bond financing utilized by the Company may have the effect of
limiting the Company's income from the tax-exempt financed properties if the
Company is required to lower its rental rates to attract residents who satisfy
the median income test. If the required number of apartment homes are not
reserved for residents satisfying these income requirements, the tax-exempt
status of the bonds may be terminated, the obligations of the Company under the
bond documents may be accelerated and other contractual remedies against the
Company may be available.
 
GENERAL REAL ESTATE INVESTMENT RISKS
 
     Real property investments are subject to a variety of risks. The yields
available from equity investments in real estate depend on the amount of income
generated and expenses incurred. If the Properties do not generate sufficient
income to meet operating expenses, including debt service and capital
expenditures, the Company's cash flow and ability to make distributions to its
stockholders will be adversely affected. The performance of the economy in each
of the areas in which the Properties are located affects occupancy, market
rental rates and expenses and, consequently, has an impact on the income from
the Properties and their underlying values. The financial results of major local
employers may have an impact on the cash flow and value of certain of the
Properties.
 
     Income from the Properties may be further adversely affected by, among
other things, the general economic climate, local economic conditions in which
the Properties are located, such as oversupply of space or a reduction in demand
for rental space, the attractiveness of the Properties to tenants, competition
from other available space, the ability of the Company to provide for adequate
maintenance and insurance and increased operating expenses. There is also the
risk that as leases on the Properties expire, tenants will enter into new leases
on terms that are less favorable to the Company. Income and real estate values
may also be adversely affected by such factors as applicable laws (e.g., the
Americans With Disabilities Act of 1990 and tax laws), interest rate levels and
the availability and terms of financing. In addition, real estate investments
are relatively illiquid and, therefore, will tend to limit the ability of the
Company to vary its portfolio promptly in response to changes in economic or
other conditions. The Code also limits the Company's ability to sell properties
held for less than four years, which may effect the Company's ability to sell
properties without adverse tax effects on holders of Offered Securities.
 
RISKS INVOLVED IN INVESTMENTS IN MORTGAGES
 
     The Company may invest in mortgages, in part as a strategy for ultimately
acquiring the underlying property. In general, investments in mortgages include
the risk that the value of mortgaged property may be less than the amounts owed,
the risk that interest rates payable on the mortgages may be lower than the
Company's cost of funds, and, in the case of junior mortgages, the risk that
foreclosure of a senior mortgage would eliminate the junior mortgage. If any of
the above were to occur, cash flows from operations and the Company's ability to
make expected dividends to stockholders could be adversely affected.
 
POSSIBLE ENVIRONMENTAL LIABILITIES
 
     Under various federal, state and local laws, ordinances and regulations, an
owner or operator of real estate is liable for the costs of removal or
remediation of certain hazardous or toxic substances on or in such property.
Such laws often impose such liability without regard to whether the owner or
operator knew of, or was responsible for, the presence of such hazardous or
toxic substances. The presence of such substances, or the failure to properly
remediate such substances, may adversely affect the owner's or operator's
ability to sell or
 
                                        9
   15
 
rent such property or to borrow money using such property as collateral. Persons
who arrange for the disposal or treatment of hazardous or toxic substances may
also be liable for the costs or removal or remediation of such substances at a
disposal or treatment facility, whether or not such facility is owned or
operated by such person. Certain environmental laws impose liability for release
of asbestoscontaining materials into the air, and third parties may seek
recovery from owners or operators of real properties for personal injuries
associated with asbestos-containing materials. In connection with the ownership
(direct or indirect), operation, financing, management and development of real
properties, the Company may be considered an owner or operator of such
properties or as having arranged for the disposal or treatment of hazardous or
toxic substances and, therefore, may be potentially liable for removal or
remediation costs, as well as certain other costs, including governmental fines
and costs related to injuries to persons and property.
 
GENERAL UNINSURED LOSSES
 
     The Company carries comprehensive liability, fire, flood, extended coverage
and rental loss insurance for each of the Properties, with policy
specifications, limits and deductibles customarily carried for similar
properties. There are, however, certain types of extraordinary losses which are
either uninsurable or not economically insurable. Further, certain of the
Properties are located in areas that are subject to earthquake activity.
Although the Company has obtained certain limited earthquake insurance policies,
should a Property sustain damage as a result of an earthquake, the Company may
sustain losses due to insurance deductibles, co-payments on insured losses or
uninsured losses.
 
CHANGES IN REAL ESTATE TAX AND OTHER LAWS
 
     Costs resulting from changes in real estate tax laws generally are not
directly passed through to residential property tenants and increases in income,
service or other taxes, generally are also not passed through to tenants under
leases and may adversely affect the Company's funds from operations and its
ability to make distributions to stockholders. Similarly, compliance with
changes in (i) laws increasing the potential liability for environmental
conditions existing on properties or the restrictions on discharges or other
conditions or (ii) rent control or rent stabilization laws or other laws
regulating housing may result in significant unanticipated expenditures, which
would adversely affect the Company's funds from operations and its ability to
make distributions to stockholders.
 
CHANGES IN FINANCING POLICY
 
     The Company has adopted a policy of maintaining a
debt-to-total-market-capitalization ratio of less than 50%. The Company
calculates debt-to-total-market-capitalization based on the ratio of the total
property indebtedness to the sum of (i) the aggregate market value of the
outstanding shares of Common Stock (based on the greater of current market price
or the gross proceeds per share from public offerings of its shares plus any
undistributed net cash flow), assuming the conversion of all limited partnership
interests in the Operating Partnership into shares of Common Stock and the
conversion of all shares of Convertible Preferred Stock into shares of Common
Stock and (ii) the total property indebtedness. Based on this calculation, the
Company's debt-to-total-market-capitalization ratio was approximately 24% as of
June 30, 1997.
 
     The organizational documents of the Company and the Operating Partnership
do not limit the amount or percentage of indebtedness that they may incur. The
Company may from time to time modify its debt policy in light of then current
economic conditions, relative costs of debt and equity securities, fluctuations
in the fair market price of the Common Stock, growth and acquisition
opportunities and other factors. Accordingly, the Company may increase its
debt-to-totalmarket-capitalization ratio beyond the limits described above. If
the Board of Directors determines that additional funding is required, the
Company or the Operating Partnership may raise such funds through additional
equity offerings, debt financing or retention of cash flow (subject to
provisions in the Code concerning taxability of undistributed real estate
investment trust income), or a combination of these methods.
 
                                       10
   16
 
CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT
 
     The Company has operated so as to qualify as a REIT under the Code,
commencing with its taxable year ended December 31, 1994. Although the Company
believes that it has operated in a manner which satisfies the REIT qualification
requirements, no assurance can be given that the Company will continue to do so.
A REIT is generally not taxed on its net income distributed to its stockholders
so long as it annually distributes to its stockholders at least 95% of its
taxable income. Qualification as a REIT involves the satisfaction of numerous
requirements (some on an annual or quarterly basis) established under highly
technical and complex Code provisions for which there are only limited judicial
or administrative interpretations and involves the determination of various
factual matters and circumstances not entirely within the Company's control. See
"Federal Income Tax Considerations."
 
     If the Company fails to qualify as a REIT in any taxable year, the Company
would generally be subject to federal income tax (including any applicable
alternative minimum tax) at corporate rates on its taxable income for such year.
Moreover, unless entitled to relief under certain statutory provisions, the
Company would also be disqualified from treatment as a REIT for the four taxable
years following the year of disqualification as a REIT. This treatment would
reduce the net earnings of the Company available for investment or distribution
to stockholders because of the additional tax liability of the Company for the
years involved. In addition, distributions would no longer be required to be
made. See "Federal Income Tax Considerations."
 
                          DESCRIPTION OF COMMON STOCK
STOCK -- GENERAL
 
     As of June 30, 1997, the total number of shares of all classes of capital
stock that the Company had authority to issue was 1,000,000,000 shares,
consisting of 668,400,000 shares of Common Stock, par value $0.0001 per share,
1,600,000 shares of Convertible Preferred Stock, par value $0.0001 per share,
and 330,000,000 shares of excess stock (the "Excess Stock").
 
     As of June 30, 1997, there were 13,609,866 shares of Common Stock issued
and outstanding. Up to 875,400 shares of Common Stock have been reserved for
issuance under the Essex Property Trust, Inc. Employee Stock Incentive Plan. In
addition, 220,000 shares of Common Stock have been reserved for issuance upon
the exercise of an option granted to The Marcus & Millichap Company (the "M&M
Stock Option") and an aggregate of 1,873,473 shares of Common Stock may be
issued upon the conversion of limited partnership interests in the Operating
Partnership.
 
     As of June 30, 1997, there were 1,600,000 shares of Convertible Preferred
Stock issued and outstanding. COMMON STOCK
 
     The following description of the Common Stock sets forth certain general
terms and provisions of the Common Stock to which any Prospectus Supplement may
relate, including a Prospectus Supplement providing that Common Stock will be
issuable upon conversion of Preferred Stock or Depositary Shares or upon the
exercise of Warrants issued by the Company. This description is in all respects
subject to and qualified in its entirety by reference to the applicable
provisions of the Company's Charter and its Bylaws. The Common Stock is listed
on the New York Stock Exchange under the symbol "ESS." Boston EquiServe is the
Company's transfer agent.
 
     Subject to the provisions of the Charter regarding Excess Stock, the
holders of the outstanding Common Stock are entitled to one vote per share on
all matters voted on by stockholders, including elections of directors. The
Charter provides that shares of Common Stock do not have cumulative voting
rights.
 
     The shares of Common Stock offered hereby will, when issued, be fully paid
and nonassessable and will not be subject to preemptive or similar rights.
Subject to the preferential rights of any outstanding series of stock, the
holders of Common Stock are entitled to such distributions as may be declared
from time to time by
 
                                       11
   17
 
the Board of Directors from funds available for distribution to such holders.
The Company currently pays regular quarterly dividends to holders of Common
Stock.
 
     In the event of a liquidation, dissolution or winding up of the Company,
the holders of Common Stock are entitled to receive ratably the assets remaining
after satisfaction of all liabilities and payment of liquidation preferences and
accrued dividends, if any, on any series of stock that has a liquidation
preference. The rights of holders of Common Stock are subject to the rights and
preferences established by the Board of Directors for any stock that may
subsequently be issued by the Company.
 
     Subject to limitations prescribed by Maryland law and the Charter, the
Board of Directors is authorized to reclassify any unissued portion of the
authorized shares of stock to provide for the issuance of shares in other
classes or series, including other classes or series of Common Stock, to
establish the number of shares in each class or series and to fix the
designation and any preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption of such class or series. The rights, preferences,
privileges and restrictions of such class or series will be fixed by the
articles supplementary relating to such class or series. A Prospectus Supplement
will specify the terms of such class or series.
 
RESTRICTIONS ON TRANSFER
 
     In order for the Company to qualify as a REIT under the Code, among other
requirements (see Federal Income Tax Considerations -- Requirements for
Qualification), not more than 50% of the value of the outstanding shares of
stock may be owned, directly or indirectly, by five or fewer individuals (as
defined in the Code) during the last half of a taxable year (other than the
first year) or during a proportionate part of a shorter taxable year. In
addition, shares of the Company's stock must be beneficially owned by 100 or
more persons during at least 335 days of a taxable year of 12 months (other than
the first year) or during a proportionate part of a shorter taxable year.
 
     The Charter, subject to certain exceptions, provides that no holder, other
than George M. Marcus, may own, or be deemed to own by virtue of the attribution
provisions of the Code, more than 6.0% (the "Ownership Limit") of the value of
the issued and outstanding shares of stock of the Company (the "Equity Stock").
However, the Ownership Limit provisions provide that a qualified trust (as
defined in the Charter) generally may own up to 9.9% of the value of the
outstanding shares of Equity Stock. If George M. Marcus converts his limited
partnership interests in the Operating Partnership into shares of Common Stock,
he may exceed the Ownership Limit. The Ownership Limit provision therefore
provides that George M. Marcus may acquire additional shares (up to 25% of the
value of the outstanding shares of Equity Stock) pursuant to conversion rights
or from other sources so long as the acquisition does not result in the five
largest beneficial owners of Equity Stock holding more than 50% of the value of
the outstanding shares of Equity Stock. The Board of Directors may, but is not
required to, exempt holders of Equity Stock from the Ownership Limit (the "Board
Exemption") if evidence satisfactory to the Board of Directors is presented that
such ownership will not jeopardize the Company's status as a REIT. As a
condition to providing a Board Exemption, the Board of Directors must receive
either an opinion of counsel or a ruling from the Internal Revenue Service, and
representations and agreements from the applicant, in each case, with respect to
preserving the REIT status of the Company; provided, however, the Board of
Directors may not grant a Board Exemption if the applicant would own above 25%
of the value of the outstanding shares of Equity Stock unless, in addition to
the foregoing, the Board of Directors receives a ruling from the Internal
Revenue Service (the "IRS") to the effect that such an exemption will not
jeopardize the Company's status as a REIT. The Board of Directors may also
increase the Ownership Limit (to a maximum of 9.9%) and, in connection
therewith, require opinions of counsel, affidavits, undertakings or agreements
as it may deem necessary or advisable in order to preserve the REIT status of
the Company. The Ownership Limit will not apply if the Board of Directors and
the stockholders of the Company determine that it is no longer in the best
interests of the Company to attempt to qualify, or to continue to qualify, as a
REIT. Any transfer of shares of stock that would (i) create a direct ownership
of shares of Equity Stock in excess of the Ownership Limit (unless a Board
Exemption is obtained), (ii) result in the shares of stock being owned by fewer
than 100 persons or (iii) result in the
 
                                       12
   18
 
Company's being "closely held" under Section 856(h) of the Code, shall be null
and void, and the intended transferee will acquire no rights to the shares.
 
     The Charter also provides that shares involved in a transfer or change in
capital structure that results in a person owning in excess of the Ownership
Limit (unless a Board Exemption is obtained) or would cause the Company to
become "closely held" within the meaning of Section 856(h) of the Code, will
automatically be exchanged for shares of Excess Stock. All Excess Stock will be
automatically transferred, without action by the stockholder, to a person who is
unaffiliated with the Company, or the purported holder, as trustee (the
"Trustee") for the exclusive benefit of one or more organizations described in
Code Sections 170(b), 170(c) or 501(c)(3) as charitable beneficiary (the
"Charitable Beneficiary") and designated by resolution of the Board of
Directors. Such shares of Excess Stock held in trust are considered issued and
outstanding shares of stock of the Company. In general, the Trustee of such
shares is deemed to own the shares of Excess Stock held in trust for the
exclusive benefit of the Charitable Beneficiary on the day prior to the date of
the purported transfer or change in capital structure which resulted in the
automatic transfer.
 
     The Ownership Limit provision will not be automatically removed even if the
real estate investment trust provisions of the Code are changed so as to no
longer contain any ownership concentration limitation or if the ownership
concentration limitation is increased. Except as otherwise described above, any
change in the Ownership Limit would require an amendment to the Charter. Such
amendments to the Charter require the affirmative vote of holders owning a
majority of the outstanding shares of Common Stock. In addition to preserving
the Company's status as a REIT, the Ownership Limit may have the effect of
precluding an acquisition of control of the Company without the approval of the
Board of Directors.
 
     All certificates representing shares of Equity Stock will bear a legend
referring to the restrictions described above.
 
     In general, all persons who own, directly or by virtue of the attribution
provisions of the Code, more than 5% of the value of the outstanding shares of
Equity Stock (or generally 1% if there are fewer than 2,000 stockholders) must
file written notice with the Company containing the information specified in the
Charter by January 31 of each year. In addition, each stockholder shall upon
demand be required to disclose to the Company in writing such information with
respect to the direct, indirect and constructive ownership of shares of stock as
the Board of Directors deems necessary to determine the effect, if any, of such
ownership on the Company's status as a REIT and to ensure compliance with the
Ownership Limit. See "Federal Income Tax Considerations -- Requirements for
Qualification."
 
     The articles supplementary, if applicable, for the Offered Securities may
also contain provisions that further restrict the ownership and transfer of the
Offered Securities. The applicable Prospectus Supplement will specify any
additional ownership limitation relating to the Offered Securities.
 
REGISTRATION RIGHTS
 
     The Founders and the Limited Partners have certain "demand" and "piggyback"
registration rights with respect to shares of Common Stock issuable in
connection with the exchange of their limited partnership interests in the
Operating Partnership. The aggregate 12.1% limited partnership interest held by
the Founders and the Limited Partners is exchangeable for an aggregate of
1,873,473 shares of Common Stock. In addition, in connection with the
acquisition of certain properties, the Company entered into certain partnership
agreements, pursuant to which existing partnerships were reorganized for the
purpose of acquiring the properties. The partners of such existing partnerships
(the "Acquisition Partnerships Partners") have the right to require the
applicable partnership to redeem their units of limited partnership for cash.
The Company may, however, elect to deliver an equivalent number of unregistered
shares of the Common Stock to the Acquisition Partnerships Partners in
satisfaction of the applicable partnership's obligation to redeem the units of
limited partnership for cash. The Acquisition Partnerships Partners have certain
"demand" registration rights with respect to such shares of Common Stock
received pursuant to such election by the Company.
 
                                       13
   19
 
                         DESCRIPTION OF PREFERRED STOCK
GENERAL
 
     Subject to limitations prescribed by Maryland law and the Company's
Charter, the Board of Directors is authorized to issue, from the authorized but
unissued shares of stock of the Company, Preferred Stock in such classes or
series as the Board of Directors may determine and to establish from time to
time the number of shares of Preferred Stock to be included in any such class or
series and to fix the designation and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption of the shares of any such class or
series, and such other subjects or matters as may be fixed by resolution of the
Board of Directors. The issuance of Preferred Stock may have the effect of
delaying, deferring or preventing a change in control of the Company.
 
     Preferred Stock, upon issuance against full payment of the purchase price
therefor, will be fully paid and nonassessable. The specific terms of a
particular class or series of Preferred Stock will be described in the
Prospectus Supplement relating to that class or series, including a Prospectus
Supplement providing that Preferred Stock may be issuable upon the exercise of
Warrants issued by the Company. The description of Preferred Stock set forth
below and the description of the terms of a particular class or series of
Preferred Stock set forth in a Prospectus Supplement do not purport to be
complete and are qualified in their entirety by reference to the articles
supplementary relating to that class or series. The preferences and other terms
of the Preferred Stock of each class or series will be fixed by the articles
supplementary relating to such class or series. A Prospectus Supplement,
relating to each class or series, will specify the terms of the Preferred Stock
as follows:
 
           (1) The title and stated value of such Preferred Stock;
 
           (2) The number of shares of such Preferred Stock offered, the
     liquidation preference per share and the offering price of such Preferred
     Stock;
 
           (3) The dividend rate(s), period(s), and/or payment date(s) or
     method(s) of calculation thereof applicable to such Preferred Stock;
 
           (4) Whether such Preferred Stock is cumulative or not and, if
     cumulative, the date from which dividends on such Preferred Stock shall
     accumulate;
 
           (5) The provision for a sinking fund, if any, for such Preferred
     Stock;
 
           (6) The provision for redemption, if applicable, of such Preferred
     Stock;
 
           (7) Any listing of such Preferred Stock on any securities exchange;
 
           (8) The terms and conditions, if applicable, upon which such
     Preferred Stock will be converted into Common Stock of the Company,
     including the conversion price (or manner of calculation thereof);
 
           (9) A discussion of any material federal income tax considerations
     applicable to such Preferred Stock;
 
          (10) Any limitations on direct or beneficial ownership and
     restrictions on transfer, in each case as may be appropriate to preserve
     the status of the Company as a REIT;
 
          (11) The relative ranking and preferences of such Preferred Stock as
     to dividend rights and rights upon liquidation, dissolution or winding up
     of the affairs of the Company;
 
          (12) Any limitations on issuance of any class or series of preferred
     stock ranking senior to or on a parity with such class or series of
     Preferred Stock as to dividend rights and rights upon liquidation,
     dissolution or winding up of the affairs of the Company;
 
          (13) Any other specific terms, preferences, rights, limitations or
     restrictions of such Preferred Stock; and
 
          (14) Any voting rights of such Preferred Stock.
 
                                       14
   20
 
RANK
 
     Unless otherwise specified in the Prospectus Supplement, the Preferred
Stock will, with respect to dividend rights and rights upon liquidation,
dissolution or winding up of the Company, rank (i) senior to all classes or
series of Common Stock and Excess Stock of the Company, and to all equity
securities ranking junior to such Preferred Stock with respect to dividend
rights and rights upon liquidation, dissolution or winding up of the Company;
(ii) on a parity with all equity securities issued by the Company the terms of
which specifically provide that such equity securities rank on a parity with the
Preferred Stock with respect to dividends rights or rights upon liquidation,
dissolution or winding up of the Company; and (iii) junior to all equity
securities issued by the Company the terms of which specifically provide that
such equity securities rank senior to the Preferred Stock with respect to
dividend rights or rights upon liquidation, dissolution or winding up of the
Company.
 
CONVERSION RIGHTS
 
     The terms and conditions, if any, upon which any shares of any class or
series of Preferred Stock are convertible into Common Stock will be set forth in
the applicable Prospectus Supplement relating thereto. Such terms will include
the number of shares of Common Stock into which the shares of Preferred Stock
are convertible, the conversion price (or manner of calculation thereof), the
conversion period, provisions as to whether conversion will be at the option of
the holders of such class or series of Preferred Stock or the Company, the
events requiring an adjustment of the conversion price and provisions affecting
conversion in the event of the redemption of such class or series of Preferred
Stock.
 
RESTRICTIONS ON TRANSFER
 
     In order for the Company to qualify as a REIT under the Code, among other
requirements, not more than 50% in value of its outstanding stock may be owned,
directly or indirectly, by five or fewer individuals (as defined in the Code)
during the last half of a taxable year, the stock must be beneficially owned by
100 or more persons during at least 335 days of a taxable year of 12 months or
during a proportionate part of a shorter taxable year. See "Federal Income Tax
Considerations -- Requirements for Qualification." To enable the Company to
continue to qualify as a REIT, the Charter restricts the acquisition of shares
of common stock and preferred stock. The Charter provides that, subject to
certain exceptions specified in the Charter, no stockholder, other than George
M. Marcus, may own, or be deemed to own by virtue of the attribution provisions
of the Code, more than 6.0% of the value of the outstanding Equity Stock. See
"Description of Common Stock -- Restrictions on Transfer." The applicable
Prospectus Supplement will also specify any additional ownership limitations
relating to a series of Preferred Stock.
 
CONVERTIBLE PREFERRED STOCK
 
     Pursuant to the Stock Purchase Agreement, Tiger/Westbrook purchased
1,600,000 shares of Convertible Preferred Stock for an aggregate purchase price
of $40.0 million. On July 1, 1996, the Company filed articles supplementary
setting forth the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms or
conditions of redemption of the Convertible Preferred Stock. The following
summarizes certain rights of the holders of the Convertible Preferred Stock,
generally, and Tiger/Westbrook, its affiliates and its transferees,
specifically. These rights arise under the Stock Purchase Agreement, as amended,
and a registration rights agreement by and between the Company and
Tiger/Westbrook dated as of June 20, 1996 (the "Registration Rights Agreement"),
as well as the Articles Supplementary.
 
  Ranking
 
     The Convertible Preferred Stock ranks senior to the Common Stock with
respect to the payment of dividends and amounts upon liquidation, dissolution or
winding up of the Company. The Company may not authorize, create or increase the
authorized amount of any class or series of equity securities that ranks equal
with or senior to the Convertible Preferred Stock with respect to the payments
of dividends or amounts upon
 
                                       15
   21
 
liquidation, dissolution or winding up, without the consent of holders of
two-thirds of the outstanding shares of Convertible Preferred Stock, voting
together as a class.
 
  Dividends
 
     Holders of shares of Convertible Preferred Stock are entitled to receive
annual cumulative cash dividends, payable quarterly, in an amount equal to the
greater of (i) $2.1875 per share (8.75% of the $25.00 per share price) or (ii)
the dividend (subject to adjustment) paid with respect to the Common Stock plus,
in both cases, any accumulated but unpaid dividends on the Convertible Preferred
Stock.
 
     Unless and until all accrued dividends on the Convertible Preferred Stock
through the last preceding dividend payment date have been paid, the Company may
not (i) declare or pay any dividend, make any distribution (other than a
distribution payable solely in shares of Common Stock), or set aside any funds
or assets for payment or distribution with regard to any Common Stock (or any
other stock junior to the Convertible Preferred Stock, together with Common
Stock ("Junior Shares")), (ii) redeem or purchase (directly or through
subsidiaries), or set aside any funds or other assets for the redemption or
purchase of, any Junior Shares or (iii) authorize, take or cause to be taken any
action as general partner of the Operating Partnership that will result in (A)
the declaration or payment by the Operating Partnership of any distribution to
its partners (other than distributions payable to the Company as general partner
that will be used by the Company to fund the payment of dividends on the
Convertible Preferred Stock (such distributions to the Company being referred to
as "Authorized GP Distributions")), or set aside any funds or assets for payment
of any distributions (other than Authorized GP Distributions) or (B) the
redemption or purchase (directly or through subsidiaries), or the setting aside
of any funds or other assets for the redemption or purchase of, any partnership
interests in the Operating Partnership.
 
     In determining whether a distribution (other than upon voluntary or
involuntary liquidation) by dividend, redemption or other acquisition of shares
or otherwise, is permitted under the MGCL, amounts that would be needed if the
Company were to be dissolved at the time of the distribution to satisfy the
preferential rights upon dissolution of holders of the Company's Convertible
Preferred Stock whose preferential rights upon dissolution are superior to those
receiving the distribution shall not be added to the Company's total
liabilities.
 
  Liquidation Preference
 
     Upon the liquidation, dissolution or winding up of the Company, the holders
of the Convertible Preferred Stock will be entitled to receive out of the assets
of the Company available for distribution to its stockholders, before any
distribution is made to holders of the Common Stock, an amount per share (the
"Liquidation Preference") equal to 105% of the sum of (i) $25.00 (the "Stated
Value") plus (ii) all accrued dividends with respect to the Convertible
Preferred Stock to the date of final distribution (whether or not declared).
After payment of the full amount of the Liquidation Preference, the holders of
Convertible Preferred Stock will not be entitled to any further distribution of
assets of the Company.
 
     Until the holders of the Convertible Preferred Stock have been paid the
Liquidation Preference in full, no payment will be made to any holder of Common
Stock upon the liquidation, dissolution or winding up of the Company. If, upon
such liquidation, dissolution or winding up, the assets of the Company, or the
proceeds thereof, distributable among the holders of the shares of the
Convertible Preferred Stock are insufficient to pay in full the Liquidation
Preference, then such assets, or the proceeds thereof, will be distributed pro
rata to the holders of shares of the Convertible Preferred Stock in accordance
with their respective holdings thereof.
 
     Neither a consolidation or merger of the Company with another corporation,
nor a sale or transfer of all or any part of the Company's assets for cash or
securities, will be considered a liquidation, dissolution or winding up of the
Company.
 
  Voting Rights
 
     Except as indicated below with respect to the election of directors of the
Company, certain amendments to the Charter and certain other specified matters,
the holders of shares of Convertible Preferred Stock have
 
                                       16
   22
 
no voting rights. On those matters for which the holders of the Convertible
Preferred Stock have the right to vote, each share of the Convertible Preferred
Stock is entitled to one vote.
 
  Election of Directors
 
     The holders of the Convertible Preferred Stock as a class ordinarily have
the right to elect one director. Under the current Charter, the holders of the
Convertible Preferred Stock, voting as a separate class, have the right, to
elect up to four additional directors, as follows: (i) if the Company breaches
any of the protective provisions discussed in "-- Senior Securities; Amendments;
Other Matters" (a "Charter Breach"), the holders of the Convertible Preferred
Stock will be entitled to elect an aggregate of four directors; and (ii) in the
event of a Dividend Default (as hereinafter defined) or in the event of both a
Dividend Default and a Charter Breach, the holders of the Preferred Stock will
be entitled to elect an aggregate of five directors. All such additional
directors will be elected as soon as practicable after any such default. A
"Dividend Default" shall occur if, at any time, dividends are not paid in full
with respect to all shares of Convertible Preferred Stock on any four dividend
payment dates such that dividends due on such four dates have not been fully
paid and are outstanding in whole or in part at the same time.
 
     In the event of a Dividend Default and/or a Charter Breach, the number of
Directors elected by the holders of the Convertible Preferred Stock at each
subsequent annual meeting of stockholders shall be increased as provided in the
previous paragraph, e.g., if a Charter Breach has occurred, the holders of
Convertible Preferred Stock shall elect four Directors at subsequent annual
meetings and, if a Dividend Default has occurred, or if both a Dividend Default
and a Charter Breach have occurred, the holders of Convertible Preferred Stock
shall elect five directors at subsequent annual meetings, subject to
classification as provided in the Bylaws.
 
  Senior Securities; Amendments; Other Matters
 
     The approval of holders of two-thirds of the outstanding shares of
Convertible Preferred Stock, voting as a class, is required to (i) increase the
number of authorized shares of Convertible Preferred Stock or issue any shares
of Convertible Preferred Stock other than to existing holders of Convertible
Preferred Stock, (ii) increase the authorized number of shares of or create,
reclassify or issue any class of stock ranking prior to or on a parity with the
Convertible Preferred Stock either as to dividends or upon liquidation, (iii)
amend, alter or repeal any of the provisions of the Charter so as to impair the
rights and privileges of the Convertible Preferred Stock, (iv) amend, alter or
repeal certain provisions of the Bylaws in a manner which would adversely affect
the rights of the holders of the Convertible Preferred Stock, (v) authorize any
reclassification of the Convertible Preferred Stock, (vi) except pursuant to a
conversion of the Convertible Preferred Stock, require the exchange of
Convertible Preferred Stock for other securities, or (vii) effect a voluntary
liquidation, dissolution or winding up of the Company, the sale of substantially
all of the assets of the Company, the merger or consolidation or major
recapitalization of the Company or the Operating Partnership.
 
     In addition, the approval of holders of a majority of the outstanding
shares of Convertible Preferred Stock, voting as a class, is required for the
Company to take any of the following actions: (i) the sale, transfer or
assignment of beneficial interests in or voting rights with respect to assets of
the Company or the Operating Partnership in excess of $45,000,000 within any
90-day period or $125,000,000 within any 360-day period; (ii) the Company's
termination of its status as a REIT; (iii) any alteration in the Company's or
the Operating Partnership's business such that (A) less than 65% of the
Company's or the Operating Partnership's assets are located in the States of
California, Oregon and Washington, (B) less than 80% of the Company's or the
Operating Partnership's assets are located west of the Mississippi River or (C)
less than 80% of the Company's or the Operating Partnership's assets are
classified as multifamily residential properties; or (iv) any change in control
of the Company or the Operating Partnership.
 
  Conversion Rights
 
     The Convertible Preferred Stock is subject to both conversion at the option
of the holder thereof and mandatory conversion required by the Company, subject
to the terms and conditions described below.
 
                                       17
   23
 
     Optional Conversion. Currently, 400,000 shares of Convertible Preferred
Stock are convertible at the option of the holder thereof. At the beginning of
each of the three-month periods commencing September 20, 1997, an additional
400,000 shares of Convertible Preferred Stock will be eligible for conversion at
the option of the holder thereof. Each share of Convertible Preferred Stock
subject to conversion shall be generally convertible into a number of fully paid
and non-assessable shares of Common Stock (calculated as to each conversion to
the nearest 1/100 of a share) equal to Stated Value plus the amount, if any, of
accrued dividends as of the effective date of the conversion, divided by the
Conversion Price (as defined below) then in effect. Notwithstanding the
foregoing, in the case of the liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, shares of Convertible Preferred Stock
shall, at the option of the holder thereof, immediately become convertible into
Common Stock. As of the date hereof, no shares of Convertible Preferred Stock
have been converted.
 
     Mandatory Conversion. If after June 20, 2001, the closing price of the
Common Stock on each of at least 20 trading days (including the trading day
immediately before the notice of mandatory conversion is delivered by the
Company) out of the preceding period of 30 consecutive trading days immediately
prior to the notice of mandatory conversion shall be greater than the Conversion
Price in effect on each of such 20 trading days, the Company shall, subject to
the holders' redemption rights (see "Redemption at Holder's Option After Notice
of Mandatory Conversion"), have the right, to convert all, but not less than
all, of the outstanding shares of Convertible Preferred Stock into a number of
fully paid and nonassessable shares of Common Stock (calculated as to each
conversion to the nearest 1/100 of a share) equal to Stated Value plus the
amount, if any, of accrued dividends as of the effective date of the conversion,
divided by the Conversion Price then in effect.
 
     Fractional Shares. No fractional shares of Common Stock will be issued upon
conversion of shares of Convertible Preferred Stock. Any fractional interest in
a share of Common Stock resulting from conversion of shares of Convertible
Preferred Stock will be paid in cash (computed to the nearest cent) based on the
current market price of the Common Stock on the trading day preceding the day of
conversion.
 
     Conversion Price. The "Conversion Price" per share of Convertible Preferred
Stock will initially be $21.875, and will be equitably adjusted so as to
preserve the ownership interests of the holders of the Convertible Preferred
Stock if the Company (i) pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock, (ii) subdivides its outstanding Common
Stock into a greater number of shares, (iii) combines its outstanding Common
Stock into a smaller number of shares, (iv) issues rights or warrants to the
holders of its Common Stock as a class entitling them to purchase Common Stock
at a price per share less than the then Conversion Price, (v) distributes to the
holders of its Common Stock as a class any shares of stock of the Company (other
than Common Stock) or evidences of indebtedness or assets (other than cash
dividends or distributions) or rights or warrants (other than those referred to
in the previous clause) to purchase any of its securities, (vi) subject to
certain exceptions, issues or sells (or the Operating Partnership issues or
sells) any equity or debt securities which are convertible into or exchangeable
for shares of Common Stock ("Convertible Securities") or any rights, options or
warrants to purchase Common Stock at a price per share which is less than the
Conversion Price, or (vii) issues or sells any Common Stock (other than on
conversion or exchange of Convertible Securities or exercise of rights, options
or warrants to which any of the three preceding clauses applies) for a
consideration per share less than the Conversion Price.
 
     The Company will seek to list the shares of Common Stock required to be
delivered upon conversion of the Convertible Preferred Stock on each national
securities exchange, if any, on which the outstanding shares of Common Stock are
listed at the time of delivery of the Common Stock. The Company will pay any
documentary stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of shares of Common Stock on conversion of Convertible
Preferred Stock.
 
  Redemption at Holder's Option After Notice of Mandatory Conversion
 
     In the event that the Company exercises its right to require a mandatory
conversion of Convertible Preferred Stock (but in no other circumstances), each
holder of Convertible Preferred Stock will have the right to require the Company
to redeem any or all the shares of Convertible Preferred Stock owned of record
 
                                       18
   24
 
by the holder, at a redemption price per share (the "Redemption Price") equal to
the applicable Redemption Percentage as defined below, multiplied by the sum of
(i) Stated Value plus (ii) the sum of all accrued dividends with regard to the
Convertible Preferred Stock through the date of redemption. As used herein, the
"Redemption Percentage" means a percentage beginning at 105% and decreasing
annually by 1% to a floor of 100%.
 
     At such time as there are 40,000 shares or fewer of Convertible Preferred
Stock outstanding, the Company may at its option purchase all of the outstanding
shares of the Convertible Preferred Stock from the holders thereof at a price
equal to the greater of (a) 110% of the sum of the Stated Value of such shares
(together with all accrued dividends thereon) and (b) the fair market value of
such shares, which shall be equal to the fair market value of the Common Stock,
as of such date, issuable upon conversion of such shares, together with all
accrued dividends thereon.
 
  Right of Tiger/Westbrook to Participate in Offerings
 
     Pursuant to the terms of the Stock Purchase Agreement, Tiger/Westbrook has,
for so long as the Convertible Preferred Stock is outstanding, the preemptive
right to purchase a pro rata share on an as converted basis as of the date of
the Company Notice (as defined herein) of any stock (or options, warrants or
rights to purchase such stock or securities convertible into such stock)
(collectively, "Eligible Securities"), for the price and upon the terms
specified by the Company in its notice to Tiger/Westbrook (the "Company Notice")
of a Company issuance of Eligible Securities, which price cannot be greater than
that offered to third parties. If Tiger/Westbrook fails to timely exercise in
full its preemptive rights, then the Company may sell the unsold Eligible
Securities at any time within 180 days (60 days in the case of a public
offering) thereafter at a price and upon terms no more favorable to the
purchasers thereof than specified to Tiger/Westbrook. Tiger/Westbrook's
preemptive rights do not apply to any Eligible Securities, among other things,
(i) issuable in connection with stock splits, stock dividends or
recapitalizations as to the effects of which other adjustments are provided for,
or (ii) issuable to employees and prospective employees pursuant to any plan or
pattern of employee equity participation or issuable in connection with the
Company's dividend reinvestment plan. In addition, the Stock Purchase Agreement
provides Tiger/Westbrook with preemptive rights to purchase a pro rata share of
the Company's equity offerings.
 
  Registration Rights
 
     The outstanding shares of Convertible Preferred Stock, together with any
shares of Common Stock to which such shares of Convertible Preferred Stock may
be converted, are not registered under the Securities Act or the securities laws
of any state. Accordingly, such Convertible Preferred Stock or Common Stock may
be sold only in one or more transactions registered under the Securities Act
and, where applicable, state securities laws or as to which an exemption from
registration requirements of the Securities Act and, where applicable, state
securities laws is available. Pursuant to the Registration Rights Agreement,
Tiger/Westbrook may request the Company to register (at the Company's expense)
the then outstanding Convertible Preferred Stock and other Registrable
Securities (as defined herein), under the terms and conditions described below.
"Registrable Securities" means, subject to certain exceptions, (i) the
Convertible Preferred Stock, (ii) all Common Stock issuable or issued upon
conversion of the Convertible Preferred Stock, and (iii) any Common Stock of the
Company issued as a dividend or distribution or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as a dividend
or other distribution with respect to, or in exchange for or in replacement of,
such Convertible Preferred Stock or Common Stock.
 
     At Tiger/Westbrook's request, the Company will use its best efforts to
cause all outstanding Convertible Preferred Stock or all or a portion of shares
of Common Stock which are Registrable Securities to be registered under the
Securities Act (including, under certain circumstances pursuant to an offering
on a continuous or delayed basis in the future (a "Shelf Registration")),
subject to certain limitations, including, without limitation, as to the value
of the shares included in the registration (generally, a minimum of $7,000,000
or, in the case of a Shelf Registration, all of the applicable Registrable
Securities outstanding), size of the registration (the registration must be for
all of the outstanding Convertible Preferred Stock or at least 25% of
Tiger/Westbrook's Common Stock), and timing (the Company is not required to make
more than one
 
                                       19
   25
 
registration per year). With respect to a Shelf Registration, the Company shall
use its best efforts to keep the Shelf Registration continuously effective for
up to two years. Subject to certain limitations, if the Company registers (or
decides to issue under its current Shelf Registration) any Common Stock, at the
request of Tiger/Westbrook, the Company will use its best efforts to register
all (or any portion) of the shares of Common Stock (but not Convertible
Preferred Stock) as specified by Tiger/Westbrook. Tiger/Westbrook's registration
rights are assignable to any transferee of the Convertible Preferred Stock or
Common Stock owned by Tiger/Westbrook, provided, only Tiger/Westbrook may
request registration pursuant to the Registration Rights Agreement. As of the
date hereof, Tiger/Westbook has not requested registration of any Registrable
Securities.
 
                        DESCRIPTION OF DEPOSITARY SHARES
GENERAL
 
     The Company may issue Depositary Shares, each of which will represent a
fractional interest of a share of a particular class or series of Preferred
Stock, as specified in the applicable Prospectus Supplement. Shares of a class
or series of Preferred Stock represented by Depositary Shares will be deposited
under a separate deposit agreement (each, a "Deposit Agreement") among the
Company, the depositary named therein (the "Preferred Stock Depositary") and the
holders from time to time of the depositary receipts issued by the Preferred
Stock Depositary which will evidence the Depositary Shares ("Depositary
Receipts"). Subject to the terms of the Deposit Agreement, each owner of a
Depositary Receipt will be entitled, in proportion to the fractional interest of
a share of a particular class or series of Preferred Stock represented by the
Depositary Shares evidenced by such Depositary Receipt, to all the rights and
preferences of the class or series of the Preferred Stock represented by such
Depositary Shares (including dividend, voting, conversion, redemption and
liquidation rights).
 
     The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the applicable Deposit Agreement. Immediately following the issuance
and delivery of the Preferred Stock by the Company to a Preferred Stock
Depositary, the Company will cause such Preferred Stock Depositary to issue, on
behalf of the Company, the Depositary Receipts. Copies of the applicable form of
Deposit Agreement and Depositary Receipt may be obtained from the Company upon
request, and the statements made hereunder relating to the Deposit Agreement and
the Depositary Receipt to be issued thereunder are summaries of certain
anticipated provisions thereof and do not purport to be complete and are subject
to, and qualified in their entirety by reference to, all of the provisions of
the applicable Deposit Agreement and related Depositary Receipts.
 
DIVIDENDS AND OTHER DISTRIBUTIONS
 
     The Preferred Stock Depositary will distribute all cash dividends or other
cash distributions received in respect of a class or series of Preferred Stock
to the record holders of Depositary Receipts evidencing the related Depositary
Shares in proportion to the number of the Depositary Receipts owned by such
holders, subject to certain obligations of holders to file proofs, certificates
and other information and to pay certain charges and expenses to such Preferred
Stock Depositary.
 
     In the event of a distribution other than in cash, the Preferred Stock
Depositary will distribute property received by it to the record holders of
Depositary Receipts entitled thereto, subject to certain obligations of holders
to file proofs, certificates and other information and to pay certain charges
and expenses to the Preferred Stock Depositary, unless such Preferred Stock
Depositary determines that it is not feasible to make such distribution, in
which case the Preferred Stock Depositary may, with the approval of the Company,
sell such property and distribute the net proceeds from such sale to such
holders.
 
     No distribution will be made in respect of any Depositary Share to the
extent that it represents any class or series of Preferred Stock converted into
Excess Stock or otherwise converted or exchanged.
 
                                       20
   26
 
WITHDRAWAL OF STOCK
 
     Upon surrender of the Depositary Receipts at the corporate trust office of
the Preferred Stock Depositary (unless the related Depositary Shares have
previously been called for redemption or converted or converted into Excess
Stock or otherwise), the holders thereof will be entitled to delivery at such
office, to or upon each such holder's order, of the number of whole or
fractional shares of the class or series of Preferred Stock and any money or
other property represented by the Depositary Shares evidenced by such Depositary
Receipts. Holders of Depositary Receipts will be entitled to receive whole or
fractional shares of the related class or series of Preferred Stock on the basis
of the proportion of Preferred Stock represented by each Depositary Share as
specified in the applicable Prospectus Supplement, but holders of such shares of
Preferred Stock will not thereafter be entitled to receive Depositary Shares
therefor. If the Depositary Receipts delivered by the holder evidence a number
of Depositary Shares in excess of the number of Depositary Shares representing
the number of shares of Preferred Stock to be withdrawn, the Preferred Stock
Depositary will deliver to such holder at the same time a new Depositary Receipt
evidencing such excess number of Depositary Shares.
 
REDEMPTION OF DEPOSITARY SHARES
 
     Whenever the Company redeems shares of Preferred Stock held by the
Preferred Stock Depositary, the Preferred Stock Depositary will redeem as of the
same redemption date the number of the Depositary Shares representing shares of
such class or series of Preferred Stock so redeemed, provided the Company shall
have paid in full to the Preferred Stock Depositary the redemption price of the
Preferred Stock to be redeemed plus an amount equal to any accrued and unpaid
dividends thereon to the date fixed for redemption. The redemption price per
Depositary Share will be equal to the corresponding proportion of the redemption
price and any other amounts per share payable with respect to such class or
series of Preferred Stock. If fewer than all the Depositary Shares are to be
redeemed, the Depositary Shares to be redeemed will be selected pro rata (as
nearly as may be practicable without creating fractional Depositary Shares) or
by any other equitable method determined by the Company that will not result in
the issuance of any Excess Stock.
 
     From and after the date fixed for redemption, all dividends in respect of
the shares of a class of series of Preferred Stock so called for redemption will
cease to accrue, the Depositary Shares so called for redemption will no longer
be deemed to be outstanding and all rights of the holders of the Depositary
Receipts evidencing the Depositary Shares so called for redemption will cease,
except the right to receive any moneys payable upon such redemption and any
money or other property to which the holders of such Depositary Receipts were
entitled upon such redemption upon surrender thereof to the Preferred Stock
Depositary.
 
VOTING OF THE PREFERRED STOCK
 
     Upon receipt of notice of any meeting at which the holders of a class or
series of Preferred Stock deposited with the Preferred Stock Depositary are
entitled to vote, the Preferred Stock Depositary will mail the information
contained in such notice of meeting to the record holders of the Depositary
Receipts evidencing the Depositary Shares which represent such class or series
of Preferred Stock. Each record holder of Depositary Receipts evidencing
Depositary Shares on the record date (which will be the same date as the record
date for such class or series of Preferred Stock) will be entitled to instruct
the Preferred Stock Depositary as to the exercise of the voting rights
pertaining to the amount of Preferred Stock represented by such holder's
Depositary Shares. The Preferred Stock Depositary will vote the amount of such
class or series of Preferred Stock represented by such Depositary Shares in
accordance with such instructions, and the Company will agree to take all
reasonable action which may be deemed necessary by the Preferred Stock
Depositary in order to enable the Preferred Stock Depositary to do so. The
Preferred Stock Depositary will abstain from voting the amount of Preferred
Stock represented by such Depositary Shares to the extent it does not receive
specific instructions from the holders of Depositary Receipts evidencing such
Depositary Shares. The Preferred Stock Depositary will not be responsible for
any failure to carry out any instruction to vote, or for the manner or effect of
any such vote made, as long as any such action or non-action is in good faith
and does not result from negligence or willful misconduct of the Preferred Stock
Depositary.
 
                                       21
   27
 
LIQUIDATION PREFERENCE
 
     In the event of the liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, the holders of each Depositary Receipt will be
entitled to the fraction of the liquidation preference accorded each share of
Preferred Stock represented by the Depositary Share evidenced by such Depositary
Receipt as set forth in the applicable Prospectus Supplement.
 
CONVERSION OF PREFERRED STOCK
 
     The Depositary Shares, as such, will not be convertible into Common Stock
or any other securities or property of the Company, except in connection with
certain exchanges in connection with the preservation of the Company's status as
a REIT. See "Description of Common Stock -- Restrictions on Transfer."
Nevertheless, if so specified in the applicable Prospectus Supplement relating
to an offering of Depositary Shares, the Depositary Receipts may be surrendered
by holders thereof to the applicable Preferred Stock Depositary with written
instructions to the Preferred Stock Depositary to instruct the Company to cause
conversion of a class or series of Preferred Stock represented by the Depositary
Shares evidenced by such Depositary Receipts into whole shares of Common Stock,
other shares of a class or series of Preferred Stock (including Excess Stock) of
the Company or other shares of stock, and the Company has agreed that upon
receipt of such instructions and any amounts payable in respect thereof, it will
cause the conversion thereof utilizing the same procedures as those provided for
delivery of Preferred Stock to effect such conversion. If the Depositary Shares
evidenced by a Depositary Receipt are to be converted in part only, a Depositary
Receipt or Receipts will be issued for any Depositary Shares not to be
converted. No fractional shares of Common Stock will be issued upon conversion,
and if such conversion will result in a fractional share being issued, an amount
will be paid in cash by the Company equal to the value of the fractional
interest based upon the closing price of the Common Stock on the last business
day prior to the conversion.
 
AMENDMENT AND TERMINATION OF A DEPOSIT AGREEMENT
 
     The form of Depositary Receipt evidencing Depositary Shares which represent
the Preferred Stock and any provision of the Deposit Agreement may at any time
be amended by agreement between the Company and the Preferred Stock Depositary.
However, any amendment that materially and adversely alters the rights of the
holders of Depositary Receipts or that would be materially and adversely
inconsistent with the rights granted to the holders of the related Preferred
Stock will not be effective unless such amendment has been approved by the
existing holders of at least two-thirds of the applicable Depositary Shares
evidenced by the applicable Depositary Receipts then outstanding. No amendment
shall impair the right, subject to certain anticipated exceptions in the Deposit
Agreements, of any holder of Depositary Receipts to surrender any Depositary
Receipt with instructions to deliver to the holder the related class or series
of Preferred Stock and all money and other property, if any, represented
thereby, except in order to comply with law. Every holder of an outstanding
Depositary Receipt at the time any such amendment becomes effective shall be
deemed, by continuing to hold such Depositary Receipt, to consent and agree to
such amendment and to be bound by the applicable Deposit Agreement as amended
thereby.
 
     The Deposit Agreement may be terminated by the Company upon not less than
30 days' prior written notice to the Preferred Stock Depositary if (i) such
termination is necessary to preserve the Company's status as a REIT or (ii) a
majority of each series or class of Preferred Stock subject to such Deposit
Agreement consents to such termination, whereupon the Preferred Stock Depositary
will deliver or make available to each holder of Depositary Receipts, upon
surrender of the Depositary Receipts held by such holder, such number of whole
or fractional shares of each Preferred Stock as are represented by the
Depositary Shares evidenced by such Depositary Receipts together with any other
property held by Preferred Stock Depositary with respect to such Depositary
Receipts. The Company has agreed that if the Deposit Agreement is terminated to
preserve the Company's status as a REIT, then the Company will use its best
efforts to list each class or series of Preferred Stock issued upon surrender of
the related Depositary Shares. In addition, the Deposit Agreement will
automatically terminate if (i) all outstanding Depositary Shares shall have been
redeemed, (ii) there shall have been a final distribution in respect of each
class or series of Preferred Stock in connection with any liquidation,
dissolution or winding up of the Company and such distribution shall have been
distributed to the
 
                                       22
   28
 
holders of the Depositary Receipts evidencing the Depositary Shares representing
such class or series of Preferred Stock or (iii) each share of the related
Preferred Stock shall have been converted into stock of the Company not so
represented by Depositary Shares.
 
CHARGES OF A PREFERRED STOCK DEPOSITARY
 
     The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the Deposit Agreement. In addition, the
Company will pay the fees and expenses of the Preferred Stock Depositary in
connection with the performance of its duties under the Deposit Agreement.
However, holders of Depositary Receipts will pay the fees and expenses of the
Preferred Stock Depositary for any duties requested by such holders to be
performed which are outside of those expressly provided for in the Deposit
Agreement.
 
RESIGNATION AND REMOVAL OF DEPOSITARY
 
     The Preferred Stock Depositary may resign at any time by delivering to the
Company notice of its election to do so, and the Company may at any time remove
the Preferred Stock Depositary, any such resignation or removal to take effect
upon the appointment of a successor Preferred Stock Depositary. A successor
Preferred Stock Depositary must be appointed within 60 days after delivery of
the notice of resignation or removal and must be a bank or trust company having
its principal office in the United States and having a combined capital and
surplus of at least $50,000,000.
 
MISCELLANEOUS
 
     The Preferred Stock Depositary will forward to holders of Depositary
Receipts any reports and communications from the Company which are received by
the Preferred Stock Depositary with respect to the related Preferred Stock.
 
     Neither the Preferred Stock Depositary nor the Company will be liable if it
is prevented from or delayed in, by law or any circumstances beyond its control,
performing its obligations under the Deposit Agreement. The obligations of the
Company and the Preferred Stock Depositary under the Deposit Agreement will be
limited to performing their duties thereunder in good faith and without
negligence (in the case of any action or inaction in the voting of a class or
series of Preferred Stock represented by the Depositary Shares), gross
negligence or willful misconduct, and the Company and the Preferred Stock
Depositary will not be obligated to prosecute or defend any legal proceeding in
respect of any Depositary Receipts, Depositary Shares or shares of a class or
series of Preferred Stock represented thereby unless satisfactory indemnity is
furnished. The Company and the Preferred Stock Depositary may rely on written
advice of counsel or accountants, or information provided by persons presenting
shares of Preferred Stock represented thereby for deposit, holders of Depositary
Receipts or other persons believed in good faith to be competent to give such
information, and on documents believed in good faith to be genuine and signed by
a proper party.
 
     In the event a Preferred Stock Depositary shall receive conflicting claims,
requests or instructions from any holders of Depositary Receipts, on the one
hand, and the Company, on the other hand, the Preferred Stock Depositary shall
be entitled to act on such claims, requests or instructions received from the
Company.
 
                            DESCRIPTION OF WARRANTS
 
     The Company has no Warrants outstanding (other than options issued under
the Company's stock option plans and the M&M Stock Option, see "Description of
Common Stock -- Stock -- General"). The Company may issue Warrants for the
purchase of Preferred Stock or Common Stock. Warrants may be issued
independently or together with any other Offered Securities offered by any
Prospectus Supplement and may be attached to or separate from such Offered
Securities. Each series of Warrants will be issued under a separate warrant
agreement (each, a "Warrant Agreement") to be entered into between the Company
and a warrant agent specified in the applicable Prospectus Supplement (the
"Warrant Agent"). The Warrant Agent will act solely as an agent of the Company
in connection with the Warrants of such series and will not assume
 
                                       23
   29
 
any obligation or relationship of agency or trust for or with any provisions of
the Warrants offered hereby. Further terms of the Warrants and the applicable
Warrant Agreements will be set forth in the applicable Prospectus Supplement.
 
     The applicable Prospectus Supplement will describe the terms of the
Warrants in respect of which this Prospectus is being delivered, including,
where applicable, the following: (1) the title of such Warrants; (2) the
aggregate number of such Warrants; (3) the price or prices at which such
Warrants will be issued; (4) the designation, terms and number of shares of
Preferred Stock or Common Stock purchasable upon exercise of such Warrants; (5)
the designation and terms of the Offered Securities, if any, with which such
Warrants are issued and the number of such Warrants issued with each such
Offered Security; (6) the date, if any, on and after which such Warrants and the
related Preferred Stock or Common Stock will be separately transferable; (7) the
price at which each share of Preferred Stock or Common Stock purchasable upon
exercise of such Warrants may be purchased; (8) the date on which the right to
exercise such Warrants shall commence and the date on which such right shall
expire; (9) the minimum or maximum amount of such Warrants which may be
exercised at any one time; (10) information with respect to book-entry
procedures, if any; (11) a discussion of certain federal income tax
considerations; and (12) any other terms of such Warrants, including terms,
procedures and limitations relating to the exchange and exercise of such
Warrants.
 
             CERTAIN PROVISIONS OF THE COMPANY'S CHARTER AND BYLAWS
 
     Certain provisions of the Company's Charter and Bylaws might discourage
certain types of transactions that involve an actual or threatened change of
control of the Company. The Charter provides that the Company must obtain the
approval of holders of two-thirds of the issued and outstanding shares of
Convertible Preferred Stock before the Company or the Operating Partnerships may
merge or consolidate with any other entity or sell all or substantially all of
the Company's or the Operating Partnership's assets. Also, the Charter requires
that the Company must obtain the approval of holders of more than 50% of the
issued and outstanding shares of Convertible Preferred Stock before it may
undergo a change in control. See "Description of Preferred Stock -- Preferred
Stock -- Senior Securities; Amendments; Other Matters." The Ownership Limit may
delay or impede a transaction or a change in control of the Company that might
involve a premium price for the Company's capital stock or otherwise be in the
best interest of the stockholders. See "Description of Common
Stock -- Restrictions on Transfer." Pursuant to the Company's Charter and
Bylaws, the Company's Board of Directors is divided into three classes of
directors, each class serving staggered three-year terms. The staggered terms of
directors may reduce the possibility of a tender offer or an attempt to change
control of the Company. The issuance of Preferred Stock by the Board of
Directors may also have the effect of delaying, deferring or preventing a change
in control of the Company. See "Description of Preferred Stock -- General."
 
                       FEDERAL INCOME TAX CONSIDERATIONS
 
     The following summary of material federal income tax considerations is
based on current law and does not purport to deal with all aspects of taxation
that may be relevant to particular stockholders in light of their personal
investment or tax circumstances, or to certain types of stockholders (including
insurance companies, financial institutions and broker-dealers, tax exempt
organizations, foreign corporations and persons who are not citizens or
residents of the United States) subject to special treatment under the federal
income tax laws. Certain federal income tax considerations relevant to holders
of the Offered Securities may be provided in the applicable Prospectus
Supplement relating thereto.
 
     EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT HIS OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OF THE PURCHASE, OWNERSHIP AND
SALE OF THE OFFERED SECURITIES AND OF THE COMPANY'S ELECTION TO BE TAXED AS A
REAL ESTATE INVESTMENT TRUST, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN
INCOME AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND
ELECTION, AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
 
                                       24
   30
 
GENERAL
 
     The Company believes that since its formation it has operated, and intends
to continue to operate, in a manner that permits it to satisfy the requirements
for taxation as a REIT under the applicable provisions of the Code. No assurance
can be given, however, that such requirements will be met.
 
     The provisions of the Code relating to qualification and operation as a
REIT are highly technical and complex. The following sets forth the material
aspects of the Code provisions that govern the federal income tax treatment of a
REIT and its stockholders. This summary is qualified in its entirety by the
applicable Code provisions, rules and regulations thereunder, and administrative
and judicial interpretations thereof, all of which are subject to change with
retroactive effect. Morrison & Foerster LLP has acted as tax counsel to the
Company in connection with Company's election to be taxed as a REIT.
 
     In the opinion of Morrison & Foerster LLP, commencing with the Company's
taxable year ended December 31, 1994, the Company has been organized in
conformity with the requirements for qualification as a REIT, and its method of
operation has and will enable it to continue to meet the requirements for
qualification and taxation as a REIT under the Code. It must be emphasized that
this opinion is based on various assumptions and is conditioned upon certain
representations made by the Company as to factual matters. Such representations
are set forth in a certificate of the Company filed with the opinion of Morrison
& Foerster LLP relating to certain tax matters which has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part.
Moreover, such qualification and taxation as a REIT depends upon the Company's
ability to meet, through actual annual operating results, distribution levels
and diversity of stock ownership, the various qualification tests imposed under
the Code discussed below, the results of which will not be reviewed by Morrison
& Foerster LLP. Accordingly, no assurance can be given that the actual results
of the Company's operations for any particular taxable year will satisfy such
requirements. See "-- Requirements for Qualification -- Failure to Qualify." An
opinion of counsel is not binding on the IRS, and no assurance can be given that
the IRS will not challenge the Company's eligibility for taxation as a REIT.
 
     If the Company fails to qualify as a REIT in any year, it will be subject
to federal income tax as if it were a domestic corporation, and its stockholders
will be taxed in the same manner as stockholders of ordinary corporations. In
this event, the Company could be subject to potentially significant tax
liabilities and the amount of cash available for distribution to its
stockholders could be reduced.
 
TAXATION OF THE COMPANY
 
     In any year in which the Company qualifies as a REIT, in general it will
not be subject to federal income tax on that portion of its net income that it
distributes to stockholders. This treatment substantially eliminates the "double
taxation" on income at the corporate and stockholder levels that generally
results from investment in a corporation. However, a REIT will be subject to
federal income tax as follows. First, a REIT will be taxed at regular corporate
rates on any undistributed REIT taxable income, including undistributed net
capital gains. (However, beginning in 1998, a REIT can elect to "pass through"
any of its taxes paid on retained capital gains to its shareholders on a pro
rata basis.) Second, under certain circumstances, a REIT may be subject to the
"alternative minimum tax" on its items of tax preference. Third, if a REIT has
(i) net income from the sale or other disposition of "foreclosure property"
which is held primarily for sale to customers in the ordinary course of business
or (ii) other nonqualifying income from foreclosure property, it will be subject
to tax at the highest corporate rate on such income. Fourth, if a REIT has net
income from "prohibited transactions," such income will be subject to a 100%
tax. A "prohibited transaction" is a sale of "dealer property" (defined below),
excluding certain property held by the Company for at least four years,
foreclosure property, and, beginning in 1998, property involuntarily converted.
Fifth, if a REIT should fail to satisfy the 75% gross income test or the 95%
gross income test (as discussed below), and has nonetheless maintained its
qualification as a REIT because certain other requirements have been met, it
will be subject to a 100% tax on the net income attributable to the greater of
the amount by which the REIT fails the 75% or 95% test. Sixth, if a REIT should
fail to distribute during each calendar year at least the sum of (i) 85% of its
REIT ordinary income for such year, (ii) 95% of its REIT capital gain net income
for such year, and (iii) any undistributed
 
                                       25
   31
 
taxable income from prior periods, the REIT would be subject to a 4% excise tax
on the excess of such required distribution over the amounts actually
distributed. For purposes of the excise tax, dividends declared in October,
November, or December of one calendar year and paid by January 31 of the
following calendar year are deemed paid December 31 of the initial calendar
year. Seventh, if a REIT acquires any asset from a C corporation (i.e.,
generally a corporation subject to full corporate-level tax) in a transaction in
which the basis of the asset in the REIT's hands is determined by reference to
the basis of the asset (or any other property) in the hands of the C
corporation, and the REIT recognizes gain on the disposition of such asset
during the 10 year period beginning on the date on which such asset was acquired
by the REIT, then, to the extent of any built-in gain at the time of
acquisition, such gain will be subject to tax at the highest regular corporate
rate.
 
REQUIREMENTS FOR QUALIFICATION
 
     The Code defines a real estate investment trust as a corporation, trust or
association (1) which is managed by one or more trustees or directors; (2) the
beneficial ownership of which is evidenced by transferable shares, or by
transferable certificates of beneficial interest; (3) which would be taxable as
a domestic corporation, but for Sections 856 through 860 of the Code; (4) which
is neither a financial institution nor an insurance company subject to certain
provisions of the Code; (5) the beneficial ownership of which is held by 100 or
more persons; (6) not more than 50% in value of the outstanding stock of which
is owned, directly or indirectly, by five or fewer individuals (as defined in
the Code) at any time during the last half of each taxable year; and (7) which
meets certain other tests, described below, regarding the nature of income and
assets. The Code provides that conditions (1) to (4), inclusive, must be met
during the entire taxable year and that condition (5) must be met during at
least 335 days of a taxable year of 12 months, or during a proportionate part of
a taxable year of less than 12 months. Conditions (5) and (6) do not apply until
after the first taxable year for which an election is made to be taxed as a
REIT. A REIT must also report its taxable income based on the calendar year.
 
     In order to ensure compliance with the ownership tests described above, the
Company has placed certain restrictions on the transfer of the common stock and
preferred stock to prevent further concentration of stock ownership. Moreover,
to evidence compliance with these requirements, the Company must maintain
records which disclose the actual ownership of its outstanding common stock and
preferred stock. In fulfilling its obligations to maintain records, the Company
must and will demand written statements each year from the record holders of
designated percentages of its common stock and preferred stock disclosing the
actual owners of such common stock and preferred stock. A list of those persons
failing or refusing to comply with such demand must be maintained as part of the
Company's records. A stockholder failing or refusing to comply with the
Company's written demand must submit with his tax returns a similar statement
disclosing the actual ownership of common stock and preferred stock and certain
other information. In addition, the Charter provides restrictions regarding the
transfer of its shares that are intended to assist the Company in continuing to
satisfy the share ownership requirements. See "Description of Common
Stock -- Restrictions on Transfer." Furthermore, the Company reports its taxable
income based on the calendar year.
 
     Although the Company intends to satisfy the shareholder demand letter rules
described in the preceding paragraph, beginning in 1998, its failure to satisfy
these requirements will not result in its disqualification as a REIT but may
result in the imposition of IRS penalties against the Company. In addition,
beginning in 1998, a REIT's failure to satisfy the requirement that not more
than 50% of the value of its outstanding stock be owned by five or fewer
individuals (as defined in the Code) during a taxable year would not result in
its disqualification as REIT under the Code as long as (i) the REIT satisfied
the shareholder demand letter rules, and (ii) the REIT did not know, and
exercising due diligence, would not have known, whether it had failed the
requirement.
 
     In the case of a REIT that is a partner in a partnership, Treasury
Regulations provide that the REIT will be deemed to own its proportionate share
of the assets of the partnership and will be deemed to be entitled to the income
of the partnership attributable to such share. In addition, the character of the
assets and gross income of the partnership shall retain the same character in
the hands of the REIT for purposes of Section 856 of the Code, including
satisfying the gross income tests and the asset tests, described below. Thus,
 
                                       26
   32
 
the Company's proportionate share of the assets, liabilities and items of income
of the Operating Partnership will be treated as assets, liabilities and items of
income of the Company for purposes of applying the requirements described below.
 
  Asset Tests
 
     At the close of each quarter of the Company's taxable year, the Company
must satisfy two tests relating to the nature of its assets. First, at least 75%
of the value of the Company's total assets must be represented by interests in
real property, interests in mortgages on real property, shares in other REITs,
cash, cash items and government securities (as well as certain temporary
investments in stock or debt instruments purchased with the proceeds of new
capital raised by the Company). Second, although the remaining 25% of the
Company's assets generally may be invested without restriction, securities in
this class may not exceed either (i) 5% of the value of the Company's total
assets as to any one non-government issuer, or (ii) 10% of the outstanding
voting securities of any one issuer. The Company believes its investments in the
Properties through its interest in the Operating Partnership constitute
qualified assets for purposes of the 75% asset test. In addition, the Company
may own 100% of a "qualified real estate investment trust subsidiary" as defined
in the Code. All assets, liabilities, and items of income, deduction, and credit
of a qualified real estate investment trust subsidiary will be treated as owned
and realized directly by the Company.
 
     The Operating Partnership owns 100% of the non-voting preferred stock of
Essex Management Corporation, Essex Sacramento, Inc. and Essex Fidelity I
Corporation (the "Essex Preferred Stock Subsidiaries") and none of the voting
common stock of the Essex Preferred Stock Subsidiaries. By virtue of its
partnership interest in the Operating Partnership, the Company will be deemed to
own its pro rata share of the assets of the Operating Partnership, including the
securities of the Essex Preferred Stock Subsidiaries, as described above.
Because the Operating Partnership will not own any of the voting securities of
Essex Management Company, Essex Sacramento, Inc. and Essex Fidelity I
Corporation and, in each case, the preferred stock's approval right is limited
to certain fundamental corporate actions that could adversely affect the
preferred stock as a class, the 10% limitation on holdings of voting securities
of any one issuer will not be exceeded by the Company.
 
     Based upon its analysis of the total estimated value of the securities of
the Essex Preferred Stock Subsidiaries owned by the Operating Partnership
relative to the estimated value of the total assets owned by the Operating
Partnership and the other assets of the Company, the Company believes that its
pro rata share of the preferred non-voting stock of each of the Essex Preferred
Stock Subsidiaries held by the Operating Partnership represents, in each case,
less than 5% of the Company's total assets and, together with any other
nonqualifying assets represents less than 25% of the Company's total assets.
Although the Company plans to take steps to ensure that it satisfies the 5%
value test for any quarter with respects to which retesting is to occur, there
can be no assurance that such steps will always be successful or will not
require a reduction in the Company's overall interest in the Operating
Partnership.
 
  Gross Income Tests
 
     There are three separate percentage tests relating to the sources of the
Company's gross income which must be satisfied for each taxable year. For
purposes of these tests, where the Company invests in a partnership, the Company
will be treated as receiving its share of the income and loss of the
partnership, and the gross income of the partnership will retain the same
character in the hands of the Company as it has in the hands of the partnership.
See "-- Tax Aspects of the Company's Investment in the Operating Partnerships --
General."
 
     THE 75% TEST. At least 75% of the Company's gross income for the taxable
year must be "qualifying income." Qualifying income generally includes (i) rents
from real property (except as modified below); (ii) interest on obligations
collateralized by mortgages on, or interests in, real property; (iii) gains from
the sale or other disposition of interests in real property and real estate
mortgages, other than gain from property held primarily for sale to customers in
the ordinary course of the Company's trade or business ("dealer property"); (iv)
dividends or other distributions on shares in other REITs, as well as gain from
the sale of
 
                                       27
   33
 
such shares; (v) abatements and refunds of real property taxes; (vi) income from
the operation, and gain from the sale, of property acquired at or in lieu of a
foreclosure of the mortgage collateralized by such property ("foreclosure
property"); and (vii) commitment fees received for agreeing to make loans
collateralized by mortgages on real property or to purchase or lease real
property.
 
     For purposes of determining whether the Company complies with the 75% test
(and 95% test described below), gross income does not include income from
prohibited transactions. See "-- Taxation of the Company" and "-- Tax Aspects of
the Company's Investment in the Operating Partnership -- Sale of the
Properties."
 
     In addition, rents received from a tenant will not qualify as rents from
real property in satisfying the 75% test (or the 95% test described below) if
the Company, or an owner of 10% or more of the Company, directly or
constructively owns 10% or more of such tenant (a "related party tenant"). In
addition, if rent attributable to personal property, leased in connection with a
lease of real property, is greater than 15% of the total rent received under the
lease, then the portion of rent attributable to such personal property will not
qualify as rents from real property. Moreover, an amount received or accrued
will generally not qualify as rents from real property (or as interest income)
for purposes of the 75% and 95% tests if it is based in whole or in part on the
income or profits of any person. Rent or interest will not be disqualified,
however, solely by reason of being based on a fixed percentage or percentages of
receipts or sales. Finally, for rents received to qualify as rents from real
property, the Company must generally not operate or manage the property or
furnish or render services to tenants, other than through an "independent
contractor" from whom the Company derives no revenue. The "independent
contractor" requirement, however, does not apply to the extent that the services
provided by the Company are "usually or customarily rendered" in connection with
the rental of space for occupancy only, and are not otherwise considered
"rendered to the occupant." For both the related party tenant rules and
determining whether an entity qualifies as an independent contractor, certain
attribution rules of the Code apply, pursuant to which shares of a REIT held by
one entity are deemed held by another.
 
     Under current law, if a REIT provides impermissible services to its
tenants, all of the rent from those tenants can be disqualified from satisfying
the 75% and 95% tests. Beginning in 1998, rents will not be disqualified if a
REIT provides de minimis, impermissible services. For this purpose, services
provided to tenants of a property are considered de minimis where income derived
from the services rendered equals 1% or less of all income derived from the
property (threshold determined on a property-by-property basis).
 
     The Company, through the Operating Partnership (which will not be an
independent contractor), will provide certain services with respect to the
Properties and any newly acquired Properties. The Company believes that the
services provided by the Operating Partnership are usually or customarily
rendered in connection with the rental of space of occupancy only, and therefore
that the provision of such services will not cause the rents received with
respect to the Properties to fail to qualify as rents from real property for
purposes of the 75% and 95% tests. Essex does not intend to rent to any related
party (other than with respect to the Headquarters Building), to base any rent
on the income or profits of any person (other than rents that are based on a
fixed percentage or percentages of receipts or sales), or to charge rents that
would otherwise not qualify as rents from real property. Essex rents a portion
of its Headquarters Building to M&M, who is considered to be a related party
tenant. Rent received by Essex from M&M will therefore not qualify as rents from
real property for purposes of satisfying the 75% and 95% tests. It is not
expected that the rent received from any related party (including M&M), together
with other income not qualifying for the 95% test (described below), will
constitute in the aggregate more than 4% of gross income with respect to any
taxable year.
 
     THE 95% TEST. In addition to deriving 75% of its gross income from the
sources listed above, at least 95% of the Company's gross income for the taxable
year must be derived from the above-described qualifying income, or from
dividends, interest or gains from the sale or disposition of stock or other
securities that are not dealer property. Dividends and interest on any
obligation not collateralized by an interest on real property are included for
purposes of the 95% test, but not for purposes of the 75% test. Furthermore,
income earned on interest rate swaps and caps entered into as liability hedges
against variable rate indebtedness qualify for the 95% test (but not the 75%
test). Beginning in 1998, income earned on liability hedges against all of the
 
                                       28
   34
 
REIT's indebtedness, such as options, futures, and forward contracts, will
qualify for the 95% test (but not the 75% test). In certain cases, Treasury
Regulations treat a variable rate debt instrument and a liability hedge as a
synthetic debt instrument for all purposes of the Code. If a liability hedge
entered into by a REIT is subject to these Treasury Regulations, income earned
on the liability hedge will operate to reduce its interest expense, and,
therefore such income will not affect the REIT's compliance with either the 75%
or 95% tests.
 
     Essex Management Corporation also anticipates receiving fee income in
consideration of the performance of property management and other services with
respect to properties not owned by Essex or the Operating Partnership; however,
substantially all income derived by Essex from Essex Management Corporation will
be in the form of dividends on Essex Management Corporation's preferred stock
owned by the Operating Partnership. Such dividends together with dividends from
the other Essex Preferred Stock Subsidiaries will satisfy the 95%, but not the
75%, tests (as discussed above). Essex intends to closely monitor its non-
qualifying income, but the Company anticipates that such income, including such
dividend income and liability hedge income (if any), will not result in Essex's
failing either the 75% or the 95% tests.
 
     Even if the Company fails to satisfy one or both of the 75% or 95% tests
for any taxable year, it may still qualify as a REIT for such year if it is
entitled to relief under certain provisions of the Code. These relief provisions
will generally be available if: (i) the Company's failure to comply was due to
reasonable cause and not to willful neglect; (ii) the Company reports the nature
and amount of each item of its income included in the 75% and 95% tests on a
schedule attached to its tax return; and (iii) any incorrect information on this
schedule is not due to fraud with intent to evade tax. It is not possible,
however, to state whether in all circumstances the Company would be entitled to
the benefit of these relief provisions. If these relief provisions apply, the
Company will, however, still be subject to a special tax upon the greater of the
amount by which it fails either the 75% or 95% test for that year.
 
     THE 30% TEST. The Company must derive less than 30% of its gross income for
each taxable year from the sale or other disposition of (i) real property held
for less than four years (other than foreclosure property and involuntary
conversions), (ii) stock or securities held for less than one year, and (iii)
property in a prohibited transaction. Beginning in 1998, the 30% Test is
repealed. Prior to its repeal, however, the Company does not anticipate that it
will have any substantial difficulty in complying with this test.
 
  Annual Distribution Requirements
 
     The Company, in order to qualify as a REIT, is required to distribute
dividends (other than capital gain dividends) to its stockholders each year in
an amount at least equal to (A) the sum of (i) 95% of the Company's REIT taxable
income (computed without regard to the dividends paid deduction and the REIT's
net capital gain) and (ii) 95% of the net income (after tax, if any) from
foreclosure property, minus (B) the sum of certain items of non-cash income.
Such distributions must be paid in the taxable year to which they relate, or in
the following taxable year if declared before the Company timely files its tax
return for such year and if paid on or before the first regular dividend payment
after such declaration. To the extent that the Company does not distribute all
of its net capital gain or distributes at least 95%, but less than 100%, of its
REIT taxable income, as adjusted, it will be subject to tax on the undistributed
amount at regular capital gains or ordinary corporate tax rates, as the case may
be. Furthermore, if the Company should fail to distribute during each calendar
year at least the sum of (i) 85% of its REIT ordinary income for such year, (ii)
95% of its REIT capital gain income for such year, and (iii) any undistributed
taxable income from prior periods, the Company would be subject to a 4% excise
tax on the excess of such required distribution over the amounts actually
distributed. For purposes of the excise tax, dividends declared in October,
November, or December of one calendar year and paid by December 31 of the
following calendar year are deemed paid December 31 of the initial calendar
year.
 
     The Company believes that it has made timely distributions sufficient to
satisfy the annual distribution requirements. In this regard, the partnership
agreement of the Operating Partnership authorizes the Company, as general
partner, to take such steps as may be necessary to cause the Operating
Partnership to distribute to its partners an amount sufficient to permit the
Company to meet these distribution requirements. It is possible that in the
future the Company may not have sufficient cash or other liquid assets to meet
the 95% distribution
 
                                       29
   35
 
requirement, due to timing differences between the actual receipt of income and
actual payment of expenses on the one hand, and the inclusion of such income and
deduction of such expenses in computing the Company's REIT taxable income on the
other hand. Further, as described below, it is possible that, from time to time,
the Company may be allocated a share of net capital gain attributable to the
sale of depreciated property that exceeds its allocable share of cash
attributable to that sale. The Company will closely monitor the relationship
between its REIT taxable income and cash flow and, where necessary, will borrow
funds (or cause the Operating Partnership or other affiliates to borrow funds)
to satisfy the 95% distribution requirement. The Company (through the Operating
Partnership) may be required to borrow funds at times when market conditions are
not favorable.
 
     Under certain circumstances, the Company may be able to rectify a failure
to meet the distribution requirement for a year as a result of an adjustment to
the Company's tax return by the IRS by paying "deficiency dividends" to
shareholders in a later year, which may be included in the Company's deduction
for dividends paid for the earlier year. Thus, the Company will be able to
maintain its REIT status and avoid being taxed on amounts distributed as
deficiency dividends following an IRS adjustment; however, the Company will be
required to pay interest and possibly penalties based on the amount of any
deduction taken for deficiency dividends.
 
  Failure to Qualify
 
     If the Company fails to qualify for taxation as a REIT in any taxable year
and the relief provisions do not apply, the Company will be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to stockholders in any year in which the
Company fails to qualify will not be deductible by the Company, nor will they be
required to be made. In such event, to the extent of the Company's current and
accumulated earnings and profits, all distributions to stockholders will be
taxable as ordinary income, and, subject to certain limitations in the Code,
corporate distributees may be eligible for the dividends received deduction.
Unless entitled to relief under specific statutory provisions, the Company will
also be disqualified from taxation as a REIT for the four taxable years
following the year during which qualification was lost. It is not possible to
state whether the Company would be entitled to such statutory relief.
 
TAX ASPECTS OF THE COMPANY'S INVESTMENT IN THE OPERATING PARTNERSHIP
 
     The following discussion summarizes certain federal income tax
considerations applicable solely to the Company's investment in the Operating
Partnership. The discussion does not cover state or local tax laws or any
federal tax laws other than income tax laws. It should be noted that the Company
has not received an opinion of counsel with respect to the following discussion.
 
  General
 
     The Company holds a direct ownership interest in the Operating Partnership.
In general, partnerships are "pass-through" entities which are not subject to
federal income tax. Rather, partners are allocated their proportionate shares of
the items of income, gain, loss, deduction and credit of a partnership, and are
potentially subject to tax thereon, without regard to whether the partners
receive a distribution from the partnership. The Company includes its
proportionate share of the foregoing Operating Partnership items for purposes of
the various REIT income tests and in the computation of its REIT taxable income.
See "-- Taxation of the Company" and "-- Requirements for Qualification -- Gross
Income Tests." Any resultant increase in the Company's REIT taxable income
increases its distribution requirements (see "-- Requirements for
Qualification -- Annual Distribution Requirements"), but is generally not
subject to federal income tax in the hands of the Company, if such income is
distributed by the Company to its stockholders. Moreover, for purposes of the
REIT asset tests (see "-- Requirements for Qualification -- Asset Tests"), the
Company includes its proportionate share of assets held by the Operating
Partnership.
 
                                       30
   36
 
TAX ALLOCATIONS WITH RESPECT TO THE PROPERTIES
 
     Pursuant to Section 704(c) of the Code, income, gain, loss and deduction
attributable to appreciated or depreciated property that is contributed to a
partnership in exchange for an interest in the partnership (such as the
Properties), must be allocated in a manner such that the contributing partner is
charged with, or benefits from, respectively, the unrealized gain or unrealized
loss associated with the property at the time of the contribution. The amount of
such unrealized gain or unrealized loss is generally equal to the difference
between the fair market value of contributed property at the time of
contribution, and the adjusted tax basis of such property at the time of
contribution (the "Book-Tax Difference"). Such allocations are solely for
federal income tax purposes and do not affect the book capital accounts or other
economic or legal arrangements among the partners. The Operating Partnership was
formed by way of contributions of appreciated property (including the
Properties). Consequently, the partnership agreement of the Operating
Partnership requires such allocations to be made in a manner consistent with
Section 704(c) of the Code.
 
     In general, the limited partners of the Operating Partnership will be
allocated lower amounts of depreciation deductions for tax purposes and
increased taxable income and gain on sale by the Operating Partnership of the
contributed assets (including the Properties). This will tend to eliminate the
Book-Tax Difference over the life of the Operating Partnership. However, the
special allocation rules under Section 704(c) do not always entirely rectify the
Book-Tax Difference on an annual basis or with respect to a specific taxable
transaction such as a sale. Thus, the carryover basis of the contributed assets
in the hands of the Operating Partnership may cause the Company to be allocated
lower depreciation and other deductions, and possibly greater amounts of taxable
income in the event of a sale of such contributed assets in excess of the
economic or book income allocated to it as a result of such sale. This may cause
the Company to recognize taxable income in excess of cash proceeds, which might
adversely affect the Company's ability to comply with the REIT distribution
requirements. See "-- Requirements for Qualification -- Annual Distribution
Requirements." With respect to any property purchased or to be purchased by the
Operating Partnership (other than through the issuance of interests in the
Operating Partnership) subsequent to the formation of the Company, such property
will initially have a tax basis equal to its fair market value and the special
allocation provisions described above will not apply.
 
SALE OF THE PROPERTIES
 
     Generally, any gain realized by the Operating Partnership on the sale of
real property held by the Operating Partnership for more than one year will be
long-term capital gain. The Company's share of any gain realized by the
Operating Partnership on the sale of any dealer property will generally be
treated as income from a prohibited transaction that is subject to a 100% tax.
See "-- Taxation of the Company" and "-- Requirements for Qualification -- Gross
Income Tests -- The 95% Test." Under existing law, whether property is dealer
property is a question of fact that depends on all the facts and circumstances
with respect to the particular transaction. The Operating Partnership intends to
hold the Properties for investment with a view to long-term appreciation, to
engage in the business of acquiring, developing, owning and operating the
Properties, and to make such occasional sales of the Properties as are
consistent with the Company's investment objectives. Based upon such investment
objectives, the Company believes that in general the Properties should not be
considered dealer property and that the amount of income from prohibited
transactions, if any, will not be material.
 
TAXATION OF TAXABLE DOMESTIC STOCKHOLDERS
 
  Dividends; Generally
 
     As long as the Company qualifies as a REIT, distributions made to the
Company's taxable domestic stockholders out of current or accumulated earnings
and profits (and not designated as capital gain dividends) will be taken into
account by them as ordinary income. Stockholders that are corporations will not
be entitled to a dividends received deduction with respect to any distributions
by the Company. To the extent that the Company makes distributions in excess of
current and accumulated earnings and profits, these distributions are treated
first as tax-free returns of capital to the stockholder, reducing the tax basis
of a stockholder's stock
 
                                       31
   37
 
by the amount of such distributions (but not below zero), with distributions in
excess of the stockholders' tax basis taxable as capital gains (if the stock is
held as a capital asset). In addition, any dividend declared by the Company in
October, November or December of any year and payable to a stockholder of record
on a specific date in any such month shall be treated as both paid by the
Company and received by the stockholder on December 31 of such year, provided
that the dividend is actually paid by the Company during January of the
following calendar year. Stockholders may not include in their individual income
tax returns any net operating losses or capital losses of the Company.
 
     Distributions which are designated by the Company as capital gain dividends
will be taxed to stockholders as long-term term capital gains (to the extent
such dividends do exceed the Company's actual net capital gain for the taxable
year) without regard to the period for which a stockholder has held his stock
upon which the capital gain dividend is paid. However, corporate stockholders
may be required to treat up to 20% of certain capital gain dividends as ordinary
income.
 
     With respect to individuals, trusts and estates, the Taxpayer Relief Act of
1997 provides for a maximum 28% rate for "mid-term gain," which is gain on the
sale of property held for more than one year and 18 months or less. A new 25%
rate applies to certain real property gains for dispositions by individuals,
trusts and estates after May 7, 1997. A maximum 20% rate applies to gains
recognized by individuals, trusts and estates in excess of the purchase price of
property held more than 18 months. The Treasury is authorized to issue
regulations for application of the reduced rates to pass-through entities,
including REITs. Individual, trust and estate stockholders of the Company may
therefore qualify for the reduced rate of tax on capital gain dividends paid by
the Company to the extent such dividends are attributable to the Company's
dispositions after May 7, 1997.
 
     Beginning in 1998, an election will be available under which a REIT may
retain its capital gains and pay tax thereon, and its stockholders will be
deemed to have received the capital gains and paid the tax. If the Company makes
this election, a stockholder will be deemed to have received his pro rata share
of the Company's capital gains and may claim a credit against his federal income
tax liability for his share of taxes paid by the Company on such gains.
 
     In general, any loss upon a sale or exchange of the Company's stock by a
stockholder who has held such stock for six months or less (after applying
certain holding period rules) will be treated as a long-term capital loss, to
the extent of distributions from the Company required to be treated by such
stockholder as long-term capital gains.
 
  Backup Withholding
 
     The Company must report annually to the IRS and to each domestic
stockholder the amount of dividends paid to and the amount of tax withheld, if
any, with respect to, each domestic stockholder. Under the backup withholding
rules, a stockholder may be subject to backup withholding at the rate of 31%
with respect to dividends paid and redemption proceeds unless such stockholder
(a) is a corporation or comes within certain other exempt categories and, when
required, demonstrates this fact, or (b) provides a correct taxpayer
identification number, certifies as to no loss of exemption from backup
withholding, and otherwise complies with applicable requirements of the backup
withholding rules. The Company may nonetheless institute backup withholding with
respect to a stockholder if instructed to do so by the IRS. A stockholder that
does not provide the Company with its correct taxpayer identification number may
also be subject to penalties imposed by the IRS. Any amount paid as backup
withholding will be creditable against the stockholder's federal income tax
liability.
 
TAXATION OF TAX-EXEMPT STOCKHOLDERS
 
     The IRS has issued a revenue ruling in which it held that amounts
distributed by a REIT to a tax-exempt employees' pension trust do not constitute
unrelated business taxable income ("UBTI"). Revenue rulings, however, are
interpretive in nature and are subject to revocation or modification by the IRS.
Based upon the ruling and the analysis therein, distributions by the Company to
a stockholder that is a tax-exempt entity should not constitute UBTI, provided
that the tax-exempt entity has not financed the acquisition of its shares
 
                                       32
   38
 
of the Company's stock with "acquisition indebtedness" within the meaning of the
Code, and that the shares of the Company's stock are not otherwise used in an
unrelated trade or business of the tax-exempt entity. In addition, REITs
generally treat the beneficiaries of qualified pension trusts as the beneficial
owners of REIT shares owned by such pension trusts for purposes of determining
if more than 50% of the REIT's shares are owned by five or fewer individuals.
However, if a pension trust owns more than 10% of the REIT's shares, it can be
subject to UBTI on all or a portion of REIT dividends made to it, if the Company
is treated as a "pension-held REIT." In view of the Ownership Limit, the Company
does not expect to be treated as a "pension-held REIT." See "Description of
Common Stock -- Restrictions on Transfer."
 
TAXATION OF FOREIGN STOCKHOLDERS
 
     The following is a discussion of certain anticipated U.S. federal income
and estate tax consequences of the ownership and disposition of the Company's
stock applicable to Non-U.S. Holders of such stock. A "Non-U.S. Holder" is any
person other than (i) a citizen or resident of the United States, (ii) a U.S.
corporation or entity taxable as such for U.S. federal income tax purposes or
partnership created or organized in the United States or under the laws of the
United States or of any state thereof, (iii) an estate whose income is
includable in gross income for U.S. federal income tax purposes regardless of
its source, or (iv) a trust subject to the primary supervision of a court within
the United States and the control of one or more United States fiduciaries. The
discussion is based on current law and is for general information only. The
discussion addresses only certain aspects of U.S. federal income and estate
taxation and does not address the impact of any applicable treaty.
 
  Distributions From the Company
 
     1. Ordinary Dividends. Distributions that are not attributable to gain from
sales or exchanges by the Company or the Operating Partnership of "United States
real property interests" ("USRPIs"), as defined in the Code, and not designated
by the Company as capital gains dividends will be treated as dividends of
ordinary income to the extent they are made out of current or accumulated
earnings and profits of the Company. Unless such distributions are effectively
connected with the Non-U.S. Holder's conduct of a U.S. trade or business (or, if
an income tax treaty applies, is attributable to a U.S. permanent establishment
of the Non-U.S. Holder), the gross amount of the distributions will ordinarily
be subject to U.S. withholding tax at a 30% or lower treaty rate. In general,
Non-U.S. Holders will not be considered engaged in a U.S. trade or business (or,
in the case of an income tax treaty, as having a U.S. permanent established)
solely by reason of their ownership of the Company's stock. If income on the
Company's stock is treated as effectively connected with the Non-U.S. Holder's
conduct of a U.S. trade or business (or, if an income tax treaty applies, is
attributable to a U.S. permanent establishment of the Non-U.S. Holder), the
Non-U.S. Holder generally will be subject to a tax at graduated rates in the
same manner as U.S. stockholders are taxed with respect to such distributions
(and may also be subject to the 30% branch profits tax in the case of a
stockholder that is a foreign corporation).
 
     The Company expects to withhold U.S. income tax at the rate of 30% on the
gross amount of any distributions of ordinary income made to a Non-U.S. Holder
unless (i) a lower treaty rate applies and proper certification is provided or
(ii) the Non-U.S. Holder files an IRS Form 4224 with the Company claiming that
the distribution is effectively connected with the Non-U.S. Holder's conduct of
a U.S. trade or business (or, if an income tax treaty applies, is attributable
to a U.S. permanent establishment of the Non-U.S. Holder). Pursuant to current
Treasury Regulations, dividends paid to an address in a country outside the
United States are generally presumed to be paid to a resident of such country
for purposes of ascertaining the requirement of withholding discussed above and
the applicability of an income tax treaty rate. Under proposed Treasury
Regulations, not currently in effect, however, a Non-U.S. Holder who seeks to
claim the benefit of an applicable treaty rate would be required to satisfy
certain certification and other requirements.
 
     2. Non-Dividend Distributions. Unless the Company's stock constitutes a
USRPI, distributions in excess of current and accumulated earnings and profits
of the Company will not be taxable to a stockholder to the extent that such
distributions do not exceed the adjusted basis of the stockholder's shares but
rather will reduce the adjusted basis of such shares. To the extent that such
distributions exceed the adjusted basis of a
 
                                       33
   39
 
Non-U.S. Holder's shares of the Company's capital stock, such distributions will
give rise to tax liability if the Non-U.S. Holder would otherwise be subject to
tax on any gain from the sale or disposition of his shares, as described below.
If it cannot be determined at the time a distribution is made whether or not
such distribution will be in excess of current and accumulated earnings and
profits, the distributions will be subject to withholding at the same rate as
dividends. If, however, the Company's stock is treated as a USRPI, any
distributions in excess of current or accumulated earnings and profits will
generally be subject to 10% withholding and, to the extent such distributions
also exceed the adjusted basis of a Non-U.S. Holder's stock, they will also give
rise to gain from the sale or exchange of the stock, the tax treatment of which
is described below. Amounts withheld may be refundable if it is subsequently
determined that such amounts are in excess of the NonU.S. Holder's U.S. tax
liability.
 
     3. Capital Gain Dividends. For any year in which the Company qualifies as a
REIT, distributions that are attributable to gain from sales or exchanges by the
Company of USRPIs ("USRPI Capital Gains"), such as properties beneficially owned
by the Company, will be taxed to a Non-U.S. Holder under the provisions of the
Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA"). Under FIRPTA,
such distributions are taxed to a Non-U.S. Holder as gain effectively connected
with a U.S. trade or business, regardless of whether such dividends are
designated as capital gain dividends. Non-U.S. Holders would thus be taxed at
the normal capital gain rates applicable to U.S. stockholders (subject to
applicable alternative minimum tax and a special alternative minimum tax in the
case of non-resident alien individuals) on such distributions. Also,
distributions from USRPI Capital Gains may be subject to a 30% branch profits
tax in the hands of a foreign corporate stockholder not entitled to treaty
exemption or rate reduction. The Company is required by applicable Treasury
Regulations to withhold 35% of any distribution consisting of USRPI Capital
Gains. This amount may be creditable against the Non-U.S. Holder's FIRPTA tax
liability.
 
     Other distributions attributable to the Company's capital gains, other than
its USRPI Capital Gains, generally will not be subject to taxation, unless (i)
investment in the shares is effectively connected with the Non-U.S. Holder's
U.S. trade or business (or, if an income tax treaty applies, it is attributable
to a U.S. permanent establishment of the Non-U.S. Holder), in which case the
Non-U.S. Holder will be subject to the same treatment as U.S. stockholders with
respect to such gain (except that a stockholder that is a foreign corporation
may also be subject to the 30% branch profits tax), or (ii) the Non-U.S. Holder
is a non-resident alien individual whose is present in the United States for 183
days or more during the taxable year and either has a "tax home" in the United
States or sold his or her shares of Company stock under circumstances in which
the sale was attributable to a U.S. office, in which case the non-resident alien
individual will be subject to a 30% tax on the individual's capital gains.
 
     Disposition of Stock of the Company. Gain recognized by a Non-U.S. Holder
upon a sale of shares of Company stock will generally not be taxed under FIRPTA
if the shares do not constitute a USRPI. Shares of the Company will not be
considered a USRPI if the Company is a "domestically controlled REIT," or if the
shares are part of a class of stock that is regularly traded on an established
securities market and the holder owned less 5% of the class of stock sold during
a specified testing period. A "domestically controlled REIT" is defined
generally as a real estate investment trust in which at all times during a
specified testing period less than 50% in value of the stock was held directly
or indirectly by foreign persons. The Company believes that it is, and expects
that it will continue to be, a "domestically controlled REIT," and therefore the
sale of shares will not be subject to taxation under FIRPTA. However, since the
Company's Common Stock is publicly traded, no assurance can be given to this
effect. If the gain on the sale of shares were to be subject to taxation under
FIRPTA, the Non-U.S. Holder would be subject to the same treatment as U.S.
stockholders with respect to such gain (subject to applicable alternative
minimum tax and a special alternative minimum tax in the case of non-resident
alien individuals), and the purchaser of the stock may be required to withhold
10% of the purchase price and remit such amount to the IRS.
 
     Gain not subject to FIRPTA will be taxable to a Non-U.S. Holder if (i)
investment in the shares is effectively connected with a United States trade or
business of the Non-U.S. Holder (or, if an income tax treaty applies, is
attributable to a U.S. permanent establishment of the Non-U.S. Holder), in which
case the Non-U.S. Holder will be subject to the same treatment as U.S. Holders
with respect to such gain, or (ii) the Non-U.S. Holder is a non-resident alien
individual who was present in the United States for 183 days or more
 
                                       34
   40
 
during the taxable year and has a "tax home" in the United States, in which case
the non-resident alien individual will be subject to a 30% tax on the
individual's capital gains.
 
     Estate Tax. Stock of the Company owned or treated as owned by an individual
who is not a citizen or resident (as specially defined for U.S. federal estate
tax purposes) of the United States at the time of death will be includable in
the individual's gross estate for U.S. federal estate tax purposes, unless an
applicable estate tax treaty provides otherwise. Such individual's estate may be
subject to U.S. federal estate tax on the property includable in the estate for
U.S. federal estate tax purposes.
 
     Information Reporting and Backup Withholding. The Company must report
annually to the IRS and to each Non-U.S. Holder the amount of dividends
(including any capital gain dividends) paid to, and the tax withheld with
respect to, each Non-U.S. Holder. These reporting requirements apply regardless
of whether withholding was reduced or eliminated by an applicable tax treaty.
Copies of these returns may also be made available under the provisions of a
specific treaty or agreement with the tax authorities in the country in which
the Non-U.S. Holder resides.
 
     U.S. backup withholding, which generally is imposed at the rate of 31% on
certain payments to persons that fail to furnish the information required under
the U.S. information reporting requirements, will generally not apply to
dividends (including any capital gain dividends) paid on stock of the Company to
a Non-U.S. Holder at an address outside the United States. However, the payment
of the proceeds from the disposition of stock of the Company to or through a
U.S. office of a broker will be subject to information reporting and backup
withholding unless the owner, under penalty of perjury, certifies, among other
things, its status as a Non-U.S. Holder, or otherwise establishes an exemption.
The payment of the proceeds from the disposition of stock to or through a
Non-U.S. office of a non-U.S. broker generally will not be subject to backup
withholding and information reporting.
 
     These information reporting, backup withholding and withholding rules are
under review by the United States Treasury and their application to the
Company's stock could be changed by future regulations. Proposed Treasury
regulations have been issued concerning the withholding of tax and reporting for
certain amounts paid to non-resident individuals and foreign corporations. These
proposed regulations, if adopted in their present form, would be effective for
payments made after December 31, 1997. Prospective investors should consult
their tax advisors concerning the potential adoption of such proposed Treasury
regulations and the potential effect on their ownership of the Company's stock.
 
OTHER TAX CONSIDERATIONS
 
  Essex Preferred Stock Subsidiaries
 
     A portion of the cash to be used by the Operating Partnership to fund
distributions to partners, including Essex, is expected to come from the Essex
Preferred Stock Subsidiaries through dividends on the non-voting stock of the
Essex Preferred Stock Subsidiaries held by the Operating Partnership. Essex
Preferred Stock Subsidiaries will pay federal and state income tax at the full
applicable corporate rates. The Essex Preferred Stock Subsidiaries will attempt
to minimize the amount of such taxes, but there can be no assurance whether or
to what extent measures taken to minimize taxes will be successful. Because
Essex, the Operating Partnership and the Essex Preferred Stock Subsidiaries are
related through stock or partnership ownership, the allocation of certain
expenses and reimbursements thereof among Essex, the Essex Preferred Stock
Subsidiaries and the Operating Partnership could be subject to additional
scrutiny by the IRS. To the extent that the Essex Preferred Stock Subsidiaries
are required to pay federal, state or local taxes, the cash available for
distribution by Essex to stockholders will be reduced accordingly.
 
  Dividend Reinvestment Program
 
     Under the Company's dividend reinvestment program, stockholders
participating in the program will be deemed to have received the gross amount of
any cash distributions which would have been paid by the Company to such
stockholders had they not elected to participate. These deemed distributions
will be treated as actual distributions from the Company to the participating
stockholders and will retain the character and
 
                                       35
   41
 
tax effect applicable to distributions from the Company generally. See "Federal
Income Tax Considerations -- Taxation of Taxable Domestic Stockholders."
Participants in the dividend reinvestment program are subject to federal income
tax on the amount of the deemed distributions to the extent that such
distributions represent dividends (including capital gains dividends) of the
Company, even though they receive no cash. Shares of Common Stock received under
the program will have a holding period beginning with the day after purchase,
and a tax basis equal to their cost (which is the gross amount of the deemed
distribution).
 
  Possible Legislative or Other Actions Affecting Tax Consequences
 
     Prospective investors should recognize that the present federal income tax
treatment of an investment in the Company may be modified by legislative,
judicial or administrative action at any time, and that any such action may
affect investments and commitments previously made. The rules dealing with
federal income taxation are constantly under review by persons involved in the
legislative process and by the IRS and the U.S. Treasury Department, resulting
in revisions of regulations and revised interpretations of established concepts
as well as statutory changes. Revisions in federal tax laws and interpretations
thereof could adversely affect the tax consequences of an investment in the
Company.
 
  State and Local Taxes
 
     The Company and its stockholders may be subject to state or local taxation
in various jurisdictions, including those in which it or they transact business
or reside. The state and local tax treatment of the Company and its stockholders
may not conform to the federal income tax consequences discussed above.
Consequently, prospective stockholders should consult their own tax advisers
regarding the effect of state and local tax laws on an investment in the Common
Stock of the Company.
 
     It should be noted that the Company has not obtained an opinion of counsel
with respect to the foregoing disclosure in subsections entitled "Taxation of
Taxable Domestic Stockholders," "Taxation of Tax -- Exempt Stockholders,"
"Taxation of Foreign Stockholders" and "Other Tax Considerations".
 
                              PLAN OF DISTRIBUTION
 
     The Company may sell the Offered Securities to one or more underwriters for
public offering and sale by them or may sell the Offered Securities to investors
directly or through agents, which agents may be affiliated with the Company. Any
such underwriter or agent involved in the offer and sale of the Offered
Securities will be named in the applicable Prospectus Supplement.
 
     Sales of Offered Securities offered pursuant to any applicable Prospectus
Supplement may be effected from time to time in one or more transactions at a
fixed price or prices which may be changed, at prices related to the prevailing
market prices at the time of sale, or at negotiated prices. The Company also
may, from time to time, authorize underwriters acting as the Company's agents to
offer and sell the Offered Securities upon the terms and conditions as set forth
in the applicable Prospectus Supplement. In connection with the sale of Offered
Securities, underwriters may be deemed to have received compensation from the
Company in the form of underwriting discounts or commissions and may also
receive commissions from purchasers of Offered Securities for whom they may act
as agent. Underwriters may sell Offered Securities to or through dealers, and
such dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agent.
 
     Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Offered Securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in the applicable Prospectus Supplement. Underwriters, dealers
and agents participating in the distribution of the Offered Securities may be
deemed to be underwriters, and any discounts and commissions received by them
and any profit realized by them on resale of the Offered Securities may be
deemed to be underwriting discounts and commissions under the Securities Act.
Underwriters, dealers and agents may be entitled, under agreements entered into
with the Company, to indemnification against and contribution toward certain
civil liabilities, including liabilities under the
 
                                       36
   42
 
Securities Act. Any such indemnification agreements will be described in the
applicable Prospectus Supplement.
 
     Unless otherwise specified in the related Prospectus Supplement, each
series of Offered Securities will be a new issue with no established trading
market, other than the Common Stock which is listed on the New York Stock
Exchange. Any shares of Common Stock sold pursuant to a Prospectus Supplement
will be listed on such exchange, subject to official notice of issuance. The
Company may elect to list any series of Preferred Stock, Depositary Shares or
Warrants on any exchange, but it is not obligated to do so. It is possible that
one or more underwriters may make a market in a series of Offered Securities,
but will not be obligated to do so and may discontinue any market making at any
time without notice. Therefore, no assurance can be given as to the liquidity of
the trading market for the Offered Securities.
 
     If so indicated in the applicable Prospectus Supplement, the Company may
authorize dealers acting as the Company's agent to solicit offers by certain
institutions to purchase Offered Securities from the Company at the public
offering price set forth in such Prospectus Supplement pursuant to delayed
delivery contracts ("Contracts") providing for payment and delivery on the date
or dates stated in such Prospectus Supplement. Each Contract will be for an
amount not less than, and the aggregate principal amount of Offered Securities
sold pursuant to Contracts shall be not less nor more than, the respective
amounts stated in the applicable Prospectus Supplement. Institutions with whom
Contracts, when authorized, may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions, and other institutions but will in all cases be subject
to the approval of the Company. Contracts will not be subject to any conditions
except (i) the purchase by an institution of the Offered Securities covered by
its Contracts shall not at the time of delivery be prohibited under the laws of
any jurisdiction in the United States to which such institution is subject, and
(ii) if the Offered Securities are being sold to underwriters, the Company shall
have sold to such underwriters the total principal amount of the Offered
Securities less the principal amount thereof covered by Contracts.
 
     Certain of the underwriters and their affiliates may be customers of,
engage in transactions with and perform services for, the Company in the
ordinary course of business.
 
                                    EXPERTS
 
     The consolidated financial statements and schedule of the Company as of
December 31, 1996 and 1995, and for the years ended December 31, 1996 and 1995,
and for the period June 13, 1994 through December 31, 1994 and of Essex Partners
Properties for the period January 1, 1994 through June 12, 1994, and the audited
Combined Historical Summary of Gross Income and Direct Operating Expenses for
the year ended December 31, 1996 of Wilshire Promenade, Tara Village, Evergreen
Heights, The Bluffs II, The Village Apartments, Camarillo Lots 7, 8 and 9, and
Huntington Breakers Apartments, have been incorporated by reference herein and
in the registration statement in reliance upon the reports of KPMG Peat Marwick
LLP, independent certified accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
 
                                 LEGAL MATTERS
 
     The validity of the Offered Securities will be passed upon for the Company
by Morrison & Foerster LLP, Palo Alto, California. Morrison & Foerster LLP will
rely upon the opinion of Ballard Spahr Andrews & Ingersoll, Baltimore, Maryland,
as to certain matters of Maryland law. In addition, the description of the
Company's qualification and taxation as a REIT under the Code contained in this
Prospectus under the caption entitled "Federal Income Tax
Consideration -- General" is based upon the opinion of Morrison & Foerster LLP.
 
                                       37
   43
 
======================================================
 
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY, THE COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON WHOM, IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS SUPPLEMENT OR THE
ACCOMPANYING PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
 
                            ------------------------
 
                               TABLE OF CONTENTS
                             PROSPECTUS SUPPLEMENT
 


                                         PAGE
                                         -----
                                      
The Company...........................     S-3
The Offering..........................     S-3
Use of Proceeds.......................     S-4
Description of Capital Stock of the
  Company.............................     S-4
Underwriting..........................     S-4
Legal Matters.........................     S-5
                  PROSPECTUS
Available Information.................       2
Incorporation of Certain Documents by
  Reference...........................       2
The Company...........................       3
Use of Proceeds.......................       3
Ratio of Earnings to Fixed Charges....       3
Risk Factors..........................       4
Description of Common Stock...........      11
Description of Preferred Stock........      14
Description of Depositary Shares......      20
Description of Warrants...............      23
Certain Provisions of the Company's
  Charter and Bylaws..................      24
Federal Income Tax Considerations.....      24
Plan of Distribution..................      36
Experts...............................      37
Legal Matters.........................      37

 
======================================================
======================================================
 
                                1,300,000 SHARES
 
                                 ESSEX PROPERTY
                                  TRUST, INC.
 
                                  COMMON STOCK
 
                            ------------------------
                             PROSPECTUS SUPPLEMENT
                               SEPTEMBER 4, 1997
 
                            ------------------------
                                LEHMAN BROTHERS
 
======================================================