Real Estate Investments

(a) Acquisitions of Real Estate

For the year ended December 31, 2015, the Company purchased seven communities consisting of 1,722 apartment homes for $638.1 million. The table below summarizes acquisition activity for the year ended December 31, 2015 ($ in millions):



Property Name	Location	Apartment Homes	Essex Ownership Percentage		Quarter in 2015	Purchase Price
8th & Hope	Los Angeles, CA	290	100	%	Q1	$	200.0
The Huxley ⁽¹⁾	Los Angeles, CA	187	100	%	Q1	48.8
The Dylan ⁽¹⁾	Los Angeles, CA	184	100	%	Q1	51.3
Reveal ⁽²⁾	Woodland Hills, CA	438	99.75	%	Q2	73.0
Avant	Los Angeles, CA	247	100	%	Q2	99.0
Avant II	Los Angeles, CA	193	100	%	Q4	73.0
Enso	San Jose, CA	183	100	%	Q4	93.0
Total 2015		1,722				$	638.1


⁽¹⁾	In March 2015, the Company purchased the joint venture partner's remaining membership interest in The Huxley and The Dylan co-investments for a purchase price of $100.1 million. The properties are now consolidated.


⁽²⁾	In April 2015, the Company purchased the joint venture partner's 49.5% membership interest in the Reveal co-investment for a purchase price of $73.0 million. The property is now consolidated.

The $638.1 million aggregate purchase price for the acquisitions listed above were included on the Company's consolidated balance sheet as follows: $117.9 million was included in land and land improvements, $513.3 million was included in buildings and improvements, $5.3 million was included in acquired in-place lease value, net, and $1.6 million was included in other financial statement line items within the Company's consolidated balance sheets.

For the year ended December 31, 2014, in additional to the BRE merger, the Company purchased six communities consisting of 1,480 apartment homes for $460.7 million.

(b) Sales of Real Estate Investments

For the year ended December 31, 2015, the Company sold two communities consisting of 848 apartment homes for $308.8 million resulting in gains totaling $44.9 million. The table below summarized disposition activity for the year ended December 31, 2015 ($ in millions):



Property Name	Location	Apartment Homes	Essex Ownership Percentage		Ownership	Quarter in 2015	Sales Price		Gains
Pinnacle South Mountain	Phoenix, AZ	552	100	%	EPLP	Q1	$	63.8	$	4.7
Sharon Green	Menlo Park, CA	296	100	%	EPLP	Q4	245.0		40.2
Total 2015		848					$	308.8	$	44.9

In March 2015, the Company sold two commercial buildings, located in Emeryville, CA for $13.0 million, resulting in a gain of $2.4 million.

During 2014, the Company sold four communities consisting of 594 apartment homes for $120.4 million resulting in gains totaling $43.6 million, which are included in the line item gains on sale of real estate and land in the Company's consolidated statement of income.

During 2013, the Company sold three communities consisting of 363 apartment homes for $57.5 million resulting in gains totaling $29.2 million, which are included in the line item gains on sale of real estate and land in the Company's consolidated statement of income.

The Company has joint ventures and preferred equity investments in co-investments which are accounted for under the equity method. The co-investments’ accounting policies are similar to the Company’s accounting policies. The co-investments own, operate, and develop apartment communities.

The carrying values of the Company’s co-investments as of December 31, 2015 and 2014 are as follows ($ in thousands):



	Ownership		December 31,
	Percentage		2015		2014
Membership interest/Partnership interest in:
CPPIB	50%-55%		$	329,723	$	336,977
Wesco I, III and IV	50	%	218,902		256,790
BEXAEW	50	%	88,850		97,686
Palm Valley	50	%	68,525		70,186
Other	28%-55%		32,927		50,438
Total operating co-investments			738,927		812,077
Total development co-investments	50%-55%		190,808		121,655
Total preferred interest co-investments (includes related party investments of $35.8 million and $40.8 million as of December 31, 2015 and December 31, 2014, respectively)			106,312		108,691
Total co-investments			$	1,036,047	$	1,042,423

The combined summarized financial information of co-investments is as follows ($ in thousands):



	December 31,
	2015		2014
Combined balance sheets:⁽¹⁾
Rental properties and real estate under development	$	3,360,360	$	3,426,574
Other assets	96,785		107,902
Total assets	$	3,457,145	$	3,534,476
Debt	$	1,499,601	$	1,568,398
Other liabilities	92,241		91,579
Equity	1,865,303		1,874,499
Total liabilities and equity	$	3,457,145	$	3,534,476
Company's share of equity	$	1,036,047	$	1,042,423



	Years ended December 31,
	2015			2014			2013
Combined statements of income: ⁽¹⁾
Property revenues	$	260,175		$	188,548		$	100,402
Property operating expenses	(93,067		)	(71,419		)	(37,518		)
Net operating income	167,108			117,129			62,884
Gain on sale of real estate	14			23,333			146,758
Interest expense	(44,834		)	(39,990		)	(24,155		)
General and administrative	(5,879		)	(6,321		)	(5,344		)
Equity income from co-investments ⁽²⁾	—			26,798			18,703
Depreciation and amortization	(103,613		)	(74,657		)	(36,831		)
Net income	$	12,796		$	46,292		$	162,015
Company's share of net income ⁽³⁾	$	21,861		$	39,893		$	55,865


⁽¹⁾	Includes preferred equity investments held by the Company.


⁽²⁾	Represents income from Wesco II's preferred equity investment in Park Merced.


⁽³⁾	Includes the Company's share of equity income from co-investments, income from preferred equity investments, gain on sale of co-investments, co-investment promote income, and income from early redemption of preferred equity investments. Includes income earned from investments with a related party of $3.7 million and $3.8 million for the years ended December 31, 2015 and 2014, respectively.

Operating Co-investments

As of December 31, 2015 and 2014, the Company, through several joint ventures, owned 10,520 and 9,983 apartment homes, respectively, in operating communities. The Company generally owns 50%-55% of these joint ventures and the Company’s book value of these co-investments was $738.9 million and $812.1 million at December 31, 2015 and 2014, respectively.

Development Co-Investments

As of December 31, 2015 and 2014, the Company, through several joint ventures, owned 1,676 and 2,296 apartment homes, respectively, in development communities. The Company generally owns 50%-55% of these joint ventures and the Company’s book value of these co-investments was $190.8 million and $121.7 million at December 31, 2015 and 2014, respectively.

In February 2015, the Company entered into a joint venture to develop 500 Folsom, a multi-family community comprised of 545 apartment homes located in San Francisco, California. The Company has a 50% ownership interest in the development which has a projected total cost of $381.0 million. Construction began in the fourth quarter of 2015 and the property is expected to open in the fourth quarter of 2018. At December 31, 2015, the total remaining estimated costs to be incurred on this project were $319.2 million, of which the Company’s portion of the remaining costs was $159.6 million.

In July 2014, the Company entered into a joint venture to develop Century Towers, a multi-family community containing 376 apartment homes located in San Jose, California. The Company has a 50% ownership interest in the development which has a projected total cost of $172.1 million. The Company has also committed to a $27.0 million preferred equity investment in the project, which accrues at an annualized preferred return of 8.1%. Construction began in the third quarter of 2014 and the property is expected to open in the first quarter of 2017. At December 31, 2015, the total remaining estimated costs to be incurred on this project were $78.9 million, of which the Company’s portion of the remaining costs was $39.4 million.

Preferred Equity Investments

As of December 31, 2015 and 2014, the Company held preferred equity investment interests in several joint-ventures which own real estate. The Company’s book value of these preferred equity investments was $106.3 million and $108.7 million at December 31, 2015 and 2014, respectively.

In March 2015, a multi-family property, located in Anaheim, CA that was owned by an entity affiliated with a related party, in which the Company held a $13.7 million preferred equity investment, was sold. That investment of $13.7 million plus an additional $1.3 million in cash was invested as outlined in the next paragraph. Prior to the property sale, the $13.7 million preferred equity investment earned a 9.0% preferred return and was scheduled to mature in September 2020.

In June 2015, the Company made $10.0 million and $5.0 million preferred equity investments in limited liability companies owned by a related party, that own properties located in San Jose and Concord, California, respectively. These investments earn a 9.5% preferred return and are scheduled to mature in June 2022.

In August 2015, the Company made a $5.0 million preferred equity investment in a limited liability company owned by a related party that owns a property located in Los Angeles, California. This investment earns a 9.5% preferred return and is scheduled to mature in August 2022.

In August 2015, the Company redeemed a preferred equity investment in a joint venture that holds a property in San Jose, California with a carrying value of $20.4 million. The Company recognized a gain of $1.5 million as a result of this redemption which is included in equity income from co-investments in the consolidated statements of income.

In October 2014, the Company received cash of $101.0 million for its share of the redemption of a preferred equity investment related to a property located in San Francisco, California. The Company recorded $5.3 million of income from penalties due to the early redemption of this preferred equity investment which is included in equity income from co-investments in the consolidated statements of income.

(d) Real Estate under Development

The Company defines development projects as new communities that are being constructed, or are newly constructed and are in a phase of lease-up and have not yet reached stabilized operations. As of December 31, 2015, the Company had two consolidated development projects, six unconsolidated joint venture development projects, and various consolidated predevelopment projects, aggregating 2,447 apartment homes for an estimated total cost of $1.4 billion, of which $787.0 million remains to be expended. The Company’s portion of the remaining costs was $542.0 million.