(Essex Property Trust, Inc.) | (Essex Property Trust, Inc.) | |
(Essex Portfolio, L.P.) | (Essex Portfolio, L.P.) | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Essex Property Trust, Inc. | ☒ | No | ☐ | Essex Portfolio, L.P. | ☒ | No | ☐ |
Essex Property Trust, Inc. | ☒ | No | ☐ | Essex Portfolio, L.P. | ☒ | No | ☐ |
☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | ||
Emerging growth company |
Large accelerated filer | ☐ | Accelerated filer | ☐ | ☒ | Smaller reporting company | ||
Emerging growth company |
Essex Property Trust, Inc. | ☐ | Essex Portfolio, L.P. | ☐ |
Essex Property Trust, Inc. | Yes | No | ☒ | Essex Portfolio, L.P. | Yes | No | ☒ |
• | enhances investors' understanding of Essex and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business; |
• | eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure applies to both Essex and the Operating Partnership; and |
• | creates time and cost efficiencies through the preparation of one combined report instead of two separate reports. |
PART I. FINANCIAL INFORMATION | Page No. | |
Item 1. | Condensed Consolidated Financial Statements of Essex Property Trust, Inc. (Unaudited) | |
Condensed Consolidated Financial Statements of Essex Portfolio, L.P. (Unaudited) | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
PART II. OTHER INFORMATION | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
ASSETS | June 30, 2020 | December 31, 2019 | |||||
Real estate: | |||||||
Rental properties: | |||||||
Land and land improvements | $ | $ | |||||
Buildings and improvements | |||||||
Less: accumulated depreciation | ( | ) | ( | ) | |||
Real estate under development | |||||||
Co-investments | |||||||
Real estate held for sale, net | |||||||
Cash and cash equivalents-unrestricted | |||||||
Cash and cash equivalents-restricted | |||||||
Marketable securities, net of allowance for credit losses of $13.6 million and zero as of June 30, 2020 and December 31, 2019, respectively | |||||||
Notes and other receivables, net of allowance for credit losses of $0.1 million and zero as of June 30, 2020 and December 31, 2019, respectively (includes related party receivables of $5.2 million and $90.2 million as of June 30, 2020 and December 31, 2019, respectively) | |||||||
Operating lease right-of-use assets | |||||||
Prepaid expenses and other assets | |||||||
Total assets | $ | $ | |||||
LIABILITIES AND EQUITY | |||||||
Unsecured debt, net | $ | $ | |||||
Mortgage notes payable, net | |||||||
Lines of credit | |||||||
Accounts payable and accrued liabilities | |||||||
Construction payable | |||||||
Dividends payable | |||||||
Operating lease liabilities | |||||||
Other liabilities | |||||||
Total liabilities | |||||||
Commitments and contingencies | |||||||
Redeemable noncontrolling interest | |||||||
Equity: | |||||||
Common stock; $.0001 par value, 670,000,000 shares authorized; 65,331,206 and 66,091,954 shares issued and outstanding, respectively | |||||||
Additional paid-in capital | |||||||
Distributions in excess of accumulated earnings | ( | ) | ( | ) | |||
Accumulated other comprehensive loss, net | ( | ) | ( | ) | |||
Total stockholders' equity | |||||||
Noncontrolling interest | |||||||
Total equity | |||||||
Total liabilities and equity | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Revenues: | |||||||||||||||
Rental and other property | $ | $ | $ | $ | |||||||||||
Management and other fees from affiliates | |||||||||||||||
Expenses: | |||||||||||||||
Property operating, excluding real estate taxes | |||||||||||||||
Real estate taxes | |||||||||||||||
Corporate-level property management expenses | |||||||||||||||
Depreciation and amortization | |||||||||||||||
General and administrative | |||||||||||||||
Expensed acquisition and investment related costs | |||||||||||||||
Gain on sale of real estate and land | |||||||||||||||
Earnings from operations | |||||||||||||||
Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Total return swap income | |||||||||||||||
Interest and other income | |||||||||||||||
Equity income from co-investments | |||||||||||||||
Deferred tax expense on unrealized gain on unconsolidated co-investment | ( | ) | ( | ) | |||||||||||
(Loss) gain on early retirement of debt, net | ( | ) | ( | ) | |||||||||||
Gain on remeasurement of co-investment | |||||||||||||||
Net income | |||||||||||||||
Net income attributable to noncontrolling interest | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net income available to common stockholders | $ | $ | $ | $ | |||||||||||
Comprehensive income | $ | $ | $ | $ | |||||||||||
Comprehensive income attributable to noncontrolling interest | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Comprehensive income attributable to controlling interest | $ | $ | $ | $ | |||||||||||
Per share data: | |||||||||||||||
Basic: | |||||||||||||||
Net income available to common stockholders | $ | $ | $ | $ | |||||||||||
Weighted average number of shares outstanding during the period | |||||||||||||||
Diluted: | |||||||||||||||
Net income available to common stockholders | $ | $ | $ | $ | |||||||||||
Weighted average number of shares outstanding during the period |
Common stock | Additional paid-in capital | Distributions in excess of accumulated earnings | Accumulated other comprehensive loss | Noncontrolling interest | Total | ||||||||||||||||||||||
Three Months Ended June 30, 2020 | Shares | Amount | |||||||||||||||||||||||||
Balances at March 31, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||
Net income | — | — | — | — | |||||||||||||||||||||||
Cash flow hedge losses reclassified to earnings | — | — | — | — | |||||||||||||||||||||||
Change in fair value of derivatives and amortization of swap settlements | — | — | — | — | |||||||||||||||||||||||
Change in fair value of marketable debt securities, net | — | — | — | — | |||||||||||||||||||||||
Issuance of common stock under: | |||||||||||||||||||||||||||
Stock option and restricted stock plans, net | — | — | — | — | |||||||||||||||||||||||
Sale of common stock, net | — | — | ( | ) | — | — | — | ( | ) | ||||||||||||||||||
Equity based compensation costs | — | — | — | — | |||||||||||||||||||||||
Retirement of common stock, net | ( | ) | ( | ) | — | — | — | ( | ) | ||||||||||||||||||
Changes in the redemption value of redeemable noncontrolling interest | — | — | ( | ) | — | — | ( | ) | ( | ) | |||||||||||||||||
Distributions to noncontrolling interest | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||
Redemptions of noncontrolling interest | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||
Common stock dividends ($2.0775 per share) | — | — | — | ( | ) | — | — | ( | ) | ||||||||||||||||||
Balances at June 30, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ |
Common stock | Additional paid-in capital | Distributions in excess of accumulated earnings | Accumulated other comprehensive loss | Noncontrolling interest | Total | ||||||||||||||||||||||
Six Months Ended June 30, 2020 | Shares | Amount | |||||||||||||||||||||||||
Balances at December 31, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||
Net income | — | — | — | — | |||||||||||||||||||||||
Cash flow hedge losses reclassified to earnings | |||||||||||||||||||||||||||
Change in fair value of derivatives and amortization of swap settlements | — | — | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Change in fair value of marketable debt securities, net | — | — | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Issuance of common stock under: | |||||||||||||||||||||||||||
Stock option and restricted stock plans, net | — | — | — | — | |||||||||||||||||||||||
Sale of common stock, net | — | — | ( | ) | — | — | — | ( | ) | ||||||||||||||||||
Equity based compensation costs | — | — | — | — | |||||||||||||||||||||||
Retirement of common stock, net | ( | ) | — | ( | ) | — | — | — | ( | ) | |||||||||||||||||
Cumulative effect upon adoption of ASU No. 2016-13 | — | — | — | ( | ) | — | — | ( | ) | ||||||||||||||||||
Changes in the redemption value of redeemable noncontrolling interest | — | — | — | — | ( | ) | |||||||||||||||||||||
Changes in noncontrolling interest from acquisition | — | — | — | — | — | ||||||||||||||||||||||
Distributions to noncontrolling interest | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||
Redemptions of noncontrolling interest | — | ( | ) | — | — | ( | ) | ( | ) | ||||||||||||||||||
Common stock dividends ($4.155 per share) | — | — | — | ( | ) | — | — | ( | ) | ||||||||||||||||||
Balances at June 30, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ |
Common stock | Additional paid-in capital | Distributions in excess of accumulated earnings | Accumulated other comprehensive loss, net | Noncontrolling Interest | Total | ||||||||||||||||||||||
Three Months Ended June 30, 2019 | Shares | Amount | |||||||||||||||||||||||||
Balances at March 31, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||
Net income | — | — | — | — | |||||||||||||||||||||||
Reversal of unrealized gains upon the sale of marketable debt securities | — | — | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Change in fair value of derivatives and amortization of swap settlements | — | — | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Change in fair value of marketable debt securities, net | — | — | — | — | |||||||||||||||||||||||
Issuance of common stock under: | |||||||||||||||||||||||||||
Stock option and restricted stock plans, net | — | — | — | — | |||||||||||||||||||||||
Sale of common stock, net | — | — | ( | ) | — | — | — | ( | ) | ||||||||||||||||||
Equity based compensation costs | — | — | — | — | |||||||||||||||||||||||
Changes in the redemption value of redeemable noncontrolling interest | — | — | — | — | |||||||||||||||||||||||
Changes in noncontrolling interest from acquisition | — | — | — | — | — | ||||||||||||||||||||||
Distributions to noncontrolling interest | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||
Redemptions of noncontrolling interest | — | — | ( | ) | — | — | ( | ) | ( | ) | |||||||||||||||||
Common stock dividends ($1.95 per share) | — | — | — | ( | ) | — | — | ( | ) | ||||||||||||||||||
Balances at June 30, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ |
Common stock | Additional paid-in capital | Distributions in excess of accumulated earnings | Accumulated other comprehensive loss, net | Noncontrolling Interest | Total | ||||||||||||||||||||||
Six Months Ended June 30, 2019 | Shares | Amount | |||||||||||||||||||||||||
Balances at December 31, 2018 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||
Net income | — | — | — | — | |||||||||||||||||||||||
Reversal of unrealized gains upon the sale of marketable debt securities | — | — | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Change in fair value of derivatives and amortization of swap settlements | — | — | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Change in fair value of marketable debt securities, net | — | — | — | — | |||||||||||||||||||||||
Issuance of common stock under: | |||||||||||||||||||||||||||
Stock option and restricted stock plans, net | — | — | — | — | |||||||||||||||||||||||
Sale of common stock, net | — | — | ( | ) | — | — | — | ( | ) | ||||||||||||||||||
Equity based compensation costs | — | — | — | — | |||||||||||||||||||||||
Retirement of common stock, net | ( | ) | ( | ) | — | — | — | ( | ) | ||||||||||||||||||
Cumulative effect upon adoption of ASU No. 2017-12 | — | — | — | — | |||||||||||||||||||||||
Changes in the redemption value of redeemable noncontrolling interest | — | — | ( | ) | — | — | ( | ) | |||||||||||||||||||
Changes in noncontrolling interest from acquisition | — | — | — | — | — | ||||||||||||||||||||||
Distributions to noncontrolling interest | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||||
Redemptions of noncontrolling interest | — | ( | ) | — | — | ( | ) | ( | ) | ||||||||||||||||||
Common stock dividends ($3.90 per share) | — | — | — | ( | ) | — | — | ( | ) | ||||||||||||||||||
Balances at June 30, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ |
Six Months Ended June 30, | |||||||
2020 | 2019 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | $ | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | |||||||
Amortization of discount on marketable securities | ( | ) | ( | ) | |||
Amortization of discount and debt financing costs, net | |||||||
Gain on sale of marketable securities | ( | ) | ( | ) | |||
Provision for credit losses | — | ||||||
Unrealized loss (gain) on equity securities recognized through income | ( | ) | |||||
Company's share of gain on the sales of co-investments | ( | ) | |||||
Earnings from co-investments | ( | ) | ( | ) | |||
Operating distributions from co-investments | |||||||
Accrued interest from notes and other receivables | ( | ) | ( | ) | |||
Gain on the sale of real estate and land | ( | ) | |||||
Equity-based compensation | |||||||
Loss (gain) on early retirement of debt, net | ( | ) | |||||
Gain on remeasurement of co-investment | ( | ) | ( | ) | |||
Changes in operating assets and liabilities: | |||||||
Prepaid expenses, receivables, operating lease right-of-use assets, and other assets | ( | ) | ( | ) | |||
Accounts payable, accrued liabilities, and operating lease liabilities | |||||||
Other liabilities | |||||||
Net cash provided by operating activities | |||||||
Cash flows from investing activities: | |||||||
Additions to real estate: | |||||||
Acquisitions of real estate and acquisition related capital expenditures, net of cash acquired | ( | ) | ( | ) | |||
Redevelopment | ( | ) | ( | ) | |||
Development acquisitions of and additions to real estate under development | ( | ) | ( | ) | |||
Capital expenditures on rental properties | ( | ) | ( | ) | |||
Investments in notes receivable | ( | ) | |||||
Collections of notes and other receivables | |||||||
Proceeds from insurance for property losses | |||||||
Proceeds from dispositions of real estate | |||||||
Contributions to co-investments | ( | ) | ( | ) | |||
Changes in refundable deposits | |||||||
Purchases of marketable securities | ( | ) | ( | ) | |||
Sales and maturities of marketable securities | |||||||
Non-operating distributions from co-investments | |||||||
Net cash used in investing activities | ( | ) | ( | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from unsecured debt and mortgage notes | |||||||
Payments on unsecured debt and mortgage notes | ( | ) | ( | ) | |||
Proceeds from lines of credit | |||||||
Repayments of lines of credit | ( | ) | ( | ) | |||
Retirement of common stock | ( | ) | ( | ) | |||
Additions to deferred charges | ( | ) | ( | ) | |||
Payments related to debt prepayment penalties | ( | ) |
Six Months Ended June 30, | |||||||
2020 | 2019 | ||||||
Net proceeds from issuance of common stock | ( | ) | ( | ) | |||
Net proceeds from stock options exercised | |||||||
Payments related to tax withholding for share-based compensation | ( | ) | ( | ) | |||
Distributions to noncontrolling interest | ( | ) | ( | ) | |||
Redemption of noncontrolling interest | ( | ) | ( | ) | |||
Redemption of redeemable noncontrolling interest | ( | ) | |||||
Common stock dividends paid | ( | ) | ( | ) | |||
Net cash provided by (used in) financing activities | ( | ) | |||||
Net increase (decrease) in unrestricted and restricted cash and cash equivalents | ( | ) | |||||
Unrestricted and restricted cash and cash equivalents at beginning of period | |||||||
Unrestricted and restricted cash and cash equivalents at end of period | $ | $ | |||||
Supplemental disclosure of cash flow information: | |||||||
Cash paid for interest (net of $9.0 million and $12.3 million capitalized in 2020 and 2019, respectively) | $ | $ | |||||
Cash paid for amounts included in the measurement of lease liabilities: | |||||||
Operating cash flows from operating leases | $ | $ | |||||
Supplemental disclosure of noncash investing and financing activities: | |||||||
Issuance of DownREIT units in connection with acquisition of real estate | $ | $ | |||||
Transfers between real estate under development and rental properties, net | $ | $ | |||||
Transfer from real estate under development to co-investments | $ | $ | |||||
Reclassifications (from) to redeemable noncontrolling interest to/from additional paid in capital and noncontrolling interest | $ | ( | ) | $ | |||
Initial recognition of operating lease right-of-use assets | $ | $ | |||||
Initial recognition of operating lease liabilities | $ | $ | |||||
Debt assumed in connection with acquisition | $ | $ |
ASSETS | June 30, 2020 | December 31, 2019 | |||||
Real estate: | |||||||
Rental properties: | |||||||
Land and land improvements | $ | $ | |||||
Buildings and improvements | |||||||
Less: accumulated depreciation | ( | ) | ( | ) | |||
Real estate under development | |||||||
Co-investments | |||||||
Real estate held for sale, net | |||||||
Cash and cash equivalents-unrestricted | |||||||
Cash and cash equivalents-restricted | |||||||
Marketable securities, net of allowance for credit losses of $13.6 million and zero as of June 30, 2020 and December 31, 2019, respectively | |||||||
Notes and other receivables, net of allowance for credit losses of $0.1 million and zero as of June 30, 2020 and December 31, 2019, respectively (includes related party receivables of $5.2 million and $90.2 million as of June 30, 2020 and December 31, 2019, respectively) | |||||||
Operating lease right-of-use assets | |||||||
Prepaid expenses and other assets | |||||||
Total assets | $ | $ | |||||
LIABILITIES AND CAPITAL | |||||||
Unsecured debt, net | $ | $ | |||||
Mortgage notes payable, net | |||||||
Lines of credit | |||||||
Accounts payable and accrued liabilities | |||||||
Construction payable | |||||||
Distributions payable | |||||||
Operating lease liabilities | |||||||
Other liabilities | |||||||
Total liabilities | |||||||
Commitments and contingencies | |||||||
Redeemable noncontrolling interest | |||||||
Capital: | |||||||
General Partner: | |||||||
Common equity (65,331,206 and 66,091,954 units issued and outstanding, respectively) | |||||||
Limited Partners: | |||||||
Common equity (2,295,510 and 2,301,653 units issued and outstanding, respectively) | |||||||
Accumulated other comprehensive loss | ( | ) | ( | ) | |||
Total partners' capital | |||||||
Noncontrolling interest | |||||||
Total capital | |||||||
Total liabilities and capital | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Revenues: | |||||||||||||||
Rental and other property | $ | $ | $ | $ | |||||||||||
Management and other fees from affiliates | |||||||||||||||
Expenses: | |||||||||||||||
Property operating, excluding real estate taxes | |||||||||||||||
Real estate taxes | |||||||||||||||
Corporate-level property management expenses | |||||||||||||||
Depreciation and amortization | |||||||||||||||
General and administrative | |||||||||||||||
Expensed acquisition and investment related costs | |||||||||||||||
Gain on sale of real estate and land | |||||||||||||||
Earnings from operations | |||||||||||||||
Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Total return swap income | |||||||||||||||
Interest and other income | |||||||||||||||
Equity income from co-investments | |||||||||||||||
Deferred tax expense on unrealized gain on unconsolidated co-investment | ( | ) | ( | ) | |||||||||||
(Loss) gain on early retirement of debt, net | ( | ) | ( | ) | |||||||||||
Gain on remeasurement of co-investment | |||||||||||||||
Net income | |||||||||||||||
Net income attributable to noncontrolling interest | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net income available to common unitholders | $ | $ | $ | $ | |||||||||||
Comprehensive income | $ | $ | $ | $ | |||||||||||
Comprehensive income attributable to noncontrolling interest | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Comprehensive income attributable to controlling interest | $ | $ | $ | $ | |||||||||||
Per unit data: | |||||||||||||||
Basic: | |||||||||||||||
Net income available to common unitholders | $ | $ | $ | $ | |||||||||||
Weighted average number of common units outstanding during the period | |||||||||||||||
Diluted: | |||||||||||||||
Net income available to common unitholders | $ | $ | $ | $ | |||||||||||
Weighted average number of common units outstanding during the period |
General Partner | Limited Partners | Accumulated other comprehensive loss | Noncontrolling interest | Total | |||||||||||||||||||||
Common Equity | Common Equity | ||||||||||||||||||||||||
Three months ended June 30, 2020 | Units | Amount | Units | Amount | |||||||||||||||||||||
Balances at March 31, 2020 | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||
Net income | — | — | — | ||||||||||||||||||||||
Cash flow hedge losses reclassified to earnings | — | — | — | — | — | ||||||||||||||||||||
Change in fair value of derivatives and amortization of swap settlements | — | — | — | — | — | ||||||||||||||||||||
Change in fair value of marketable debt securities, net | — | — | — | — | — | ||||||||||||||||||||
Issuance of common units under: | |||||||||||||||||||||||||
General partner's stock based compensation, net | — | — | — | — | |||||||||||||||||||||
Sale of common stock by general partner, net | ( | ) | — | — | — | — | ( | ) | |||||||||||||||||
Equity based compensation costs | — | — | — | ||||||||||||||||||||||
Retirement of common units, net | ( | ) | ( | ) | — | — | — | — | ( | ) | |||||||||||||||
Changes in the redemption value of redeemable noncontrolling interest | — | ( | ) | — | ( | ) | — | ( | ) | ( | ) | ||||||||||||||
Distributions to noncontrolling interest | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||
Redemptions | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
Distributions declared ($2.0775 per unit) | — | ( | ) | — | ( | ) | — | — | ( | ) | |||||||||||||||
Balances at June 30, 2020 | $ | $ | $ | ( | ) | $ | $ |
General Partner | Limited Partners | Accumulated other comprehensive loss | Noncontrolling interest | Total | |||||||||||||||||||||
Common Equity | Common Equity | ||||||||||||||||||||||||
Six months ended June 30, 2020 | Units | Amount | Units | Amount | |||||||||||||||||||||
Balances at December 31, 2019 | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||
Net income | — | — | — | ||||||||||||||||||||||
Cash flow hedge losses reclassified to earnings | — | — | — | — | — | ||||||||||||||||||||
Change in fair value of derivatives and amortization of swap settlements | — | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||
Change in fair value of marketable debt securities, net | — | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||
Issuance of common units under: | |||||||||||||||||||||||||
General partner's stock based compensation, net | — | — | — | — | |||||||||||||||||||||
Sale of common stock by general partner, net | ( | ) | — | — | — | — | ( | ) | |||||||||||||||||
Equity based compensation costs | — | — | — | ||||||||||||||||||||||
Retirement of common units, net | ( | ) | ( | ) | — | — | — | — | ( | ) | |||||||||||||||
Cumulative effect upon adoption of ASU No. 2016-13 | — | ( | ) | — | — | — | — | ( | ) | ||||||||||||||||
Changes in the redemption value of redeemable noncontrolling interest | — | — | ( | ) | — | ||||||||||||||||||||
Changes in noncontrolling interest from acquisition | — | — | — | — | — | ||||||||||||||||||||
Distributions to noncontrolling interest | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||
Redemptions | ( | ) | ( | ) | ( | ) | — | ( | ) | ( | ) | ||||||||||||||
Distributions declared ($4.155 per unit) | — | ( | ) | — | ( | ) | — | — | ( | ) | |||||||||||||||
Balances at June 30, 2020 | $ | $ | $ | ( | ) | $ | $ |
General Partner | Limited Partners | Accumulated other comprehensive loss | Noncontrolling interest | Total | |||||||||||||||||||||
Common Equity | Common Equity | ||||||||||||||||||||||||
Three months ended June 30, 2019 | Units | Amount | Units | Amount | |||||||||||||||||||||
Balances at March 31, 2019 | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||
Net income | — | — | — | ||||||||||||||||||||||
Reversal of unrealized gains upon the sale of marketable debt securities | — | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||
Change in fair value of derivatives and amortization of swap settlements | — | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||
Change in fair value of marketable debt securities, net | — | — | — | — | — | ||||||||||||||||||||
Issuance of common units under: | |||||||||||||||||||||||||
General partner's stock based compensation, net | — | — | — | — | |||||||||||||||||||||
Sale of common stock by general partner, net | — | ( | ) | — | — | — | — | ( | ) | ||||||||||||||||
Equity based compensation costs | — | — | — | ||||||||||||||||||||||
Changes in redemption value of redeemable noncontrolling interest | — | — | — | ||||||||||||||||||||||
Changes in noncontrolling interest from acquisition | — | — | — | — | — | ||||||||||||||||||||
Distributions to noncontrolling interest | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||
Redemptions | ( | ) | ( | ) | — | ( | ) | ( | ) | ||||||||||||||||
Distributions declared ($1.95 per unit) | — | ( | ) | — | ( | ) | — | — | ( | ) | |||||||||||||||
Balances at June 30, 2019 | $ | $ | $ | ( | ) | $ | $ |
General Partner | Limited Partners | Accumulated other comprehensive loss | Noncontrolling interest | Total | |||||||||||||||||||||
Common Equity | Common Equity | ||||||||||||||||||||||||
Six months ended June 30, 2019 | Units | Amount | Units | Amount | |||||||||||||||||||||
Balances at December 31, 2018 | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||
Net income | — | — | — | ||||||||||||||||||||||
Reversal of unrealized gains upon the sale of marketable debt securities | — | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||
Change in fair value of derivatives and amortization of swap settlements | — | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||
Change in fair value of marketable debt securities, net | — | — | — | — | — | ||||||||||||||||||||
Issuance of common units under: | |||||||||||||||||||||||||
General partner's stock based compensation, net | — | — | — | — | |||||||||||||||||||||
Sale of common stock by general partner, net | ( | ) | — | — | — | — | ( | ) | |||||||||||||||||
Equity based compensation costs | — | — | — | ||||||||||||||||||||||
Retirement of common units, net | ( | ) | ( | ) | — | — | — | — | ( | ) | |||||||||||||||
Cumulative effect upon adoption of ASU No. 2017-12 | — | — | — | — | |||||||||||||||||||||
Changes in redemption value of redeemable noncontrolling interest | — | ( | ) | — | — | ( | ) | ||||||||||||||||||
Changes in noncontrolling interest from acquisition | — | — | — | — | — | ||||||||||||||||||||
Distributions to noncontrolling interest | — | — | — | — | — | ( | ) | ( | ) | ||||||||||||||||
Redemptions | ( | ) | ( | ) | ( | ) | — | ( | ) | ( | ) | ||||||||||||||
Distributions declared ($3.90 per unit) | — | ( | ) | — | ( | ) | — | — | ( | ) | |||||||||||||||
Balances at June 30, 2019 | $ | $ | $ | ( | ) | $ | $ |
Six Months Ended June 30, | |||||||
2020 | 2019 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | $ | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | |||||||
Amortization of discount on marketable securities | ( | ) | ( | ) | |||
Amortization of discount and debt financing costs, net | |||||||
Gain on sale of marketable securities | ( | ) | ( | ) | |||
Provision for credit losses | |||||||
Unrealized loss (gain) on equity securities recognized through income | ( | ) | |||||
Company's share of gain on the sales of co-investment | ( | ) | |||||
Earnings from co-investments | ( | ) | ( | ) | |||
Operating distributions from co-investments | |||||||
Accrued interest from notes and other receivables | ( | ) | ( | ) | |||
Gain on the sale of real estate and land | ( | ) | |||||
Equity-based compensation | |||||||
Loss (gain) on early retirement of debt, net | ( | ) | |||||
Gain on remeasurement of co-investment | ( | ) | ( | ) | |||
Changes in operating assets and liabilities: | |||||||
Prepaid expenses, receivables, operating lease right-of-use assets, and other assets | ( | ) | ( | ) | |||
Accounts payable, accrued liabilities, and operating lease liabilities | |||||||
Other liabilities | |||||||
Net cash provided by operating activities | |||||||
Cash flows from investing activities: | |||||||
Additions to real estate: | |||||||
Acquisitions of real estate and acquisition related capital expenditures, net of cash acquired | ( | ) | ( | ) | |||
Redevelopment | ( | ) | ( | ) | |||
Development acquisitions of and additions to real estate under development | ( | ) | ( | ) | |||
Capital expenditures on rental properties | ( | ) | ( | ) | |||
Investments in notes receivable | ( | ) | |||||
Collections of notes and other receivables | |||||||
Proceeds from insurance for property losses | |||||||
Proceeds from dispositions of real estate | |||||||
Contributions to co-investments | ( | ) | ( | ) | |||
Changes in refundable deposits | |||||||
Purchases of marketable securities | ( | ) | ( | ) | |||
Sales and maturities of marketable securities | |||||||
Non-operating distributions from co-investments | |||||||
Net cash used in investing activities | ( | ) | ( | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from unsecured debt and mortgage notes | |||||||
Payments on unsecured debt and mortgage notes | ( | ) | ( | ) | |||
Proceeds from lines of credit | |||||||
Repayments of lines of credit | ( | ) | ( | ) | |||
Retirement of common units | ( | ) | ( | ) | |||
Additions to deferred charges | ( | ) | ( | ) | |||
Payments related to debt prepayments penalties | ( | ) |
Six Months Ended June 30, | |||||||
2020 | 2019 | ||||||
Net proceeds from issuance of common units | ( | ) | ( | ) | |||
Net proceeds from stock options exercised | |||||||
Payments related to tax withholding for share-based compensation | ( | ) | ( | ) | |||
Distributions to noncontrolling interest | ( | ) | ( | ) | |||
Redemption of noncontrolling interests | ( | ) | ( | ) | |||
Redemption of redeemable noncontrolling interests | ( | ) | |||||
Common units distributions paid | ( | ) | ( | ) | |||
Net cash provided by (used in) financing activities | ( | ) | |||||
Net increase (decrease) in unrestricted and restricted cash and cash equivalents | ( | ) | |||||
Unrestricted and restricted cash and cash equivalents at beginning of period | |||||||
Unrestricted and restricted cash and cash equivalents at end of period | $ | $ | |||||
Supplemental disclosure of cash flow information: | |||||||
Cash paid for interest (net of $9.0 million and $12.3 million capitalized in 2020 and 2019, respectively) | $ | $ | |||||
Cash paid for amounts included in the measurement of lease liabilities: | |||||||
Operating cash flows from operating leases | $ | $ | |||||
Supplemental disclosure of noncash investing and financing activities: | |||||||
Issuance of DownREIT units in connection with acquisition of real estate | $ | $ | |||||
Transfers between real estate under development and rental properties, net | $ | $ | |||||
Transfer from real estate under development to co-investments | $ | $ | |||||
Reclassifications (from) to redeemable noncontrolling interest to/from general and limited partner capital and noncontrolling interest | $ | ( | ) | $ | |||
Initial recognition of operating lease right-of-use assets | $ | $ | |||||
Initial recognition of operating lease liabilities | $ | $ | |||||
Debt assumed in connection with acquisition | $ | $ |
June 30, 2020 | |||||||||||||||
Amortized Cost/Cost | Gross Unrealized Gain (Loss) | Carrying Value | Allowance for Credit Losses | ||||||||||||
Equity securities: | |||||||||||||||
Investment funds - debt securities | $ | $ | $ | ||||||||||||
Common stock and stock funds | |||||||||||||||
Debt securities: | |||||||||||||||
Available for sale | |||||||||||||||
Investment-grade unsecured debt | ( | ) | |||||||||||||
Held to maturity | |||||||||||||||
Mortgage backed securities | |||||||||||||||
Total - Marketable securities | $ | $ | $ | $ |
December 31, 2019 | |||||||||||
Amortized Cost/Cost | Gross Unrealized Gain (Loss) | Carrying Value | |||||||||
Equity securities: | |||||||||||
Investment funds - debt securities | $ | $ | $ | ||||||||
Common stock and stock funds | |||||||||||
Debt securities: | |||||||||||
Available for sale | |||||||||||
U.S. treasury securities | |||||||||||
Investment-grade unsecured bonds | |||||||||||
Held to maturity | |||||||||||
Mortgage backed securities | |||||||||||
Total - Marketable securities | $ | $ | $ |
Balance at December 31, 2019 | $ | ||
Impact of adoption ASC 326 (1) | |||
Provision for credit losses | |||
Balance at June 30, 2020 | $ |
Change in fair value and amortization of swap settlements | Unrealized gain/(loss) on available for sale securities | Total | |||||||||
Balance at December 31, 2019 | $ | ( | ) | $ | $ | ( | ) | ||||
Other comprehensive loss before reclassification | ( | ) | ( | ) | ( | ) | |||||
Amounts reclassified from accumulated other comprehensive loss | ( | ) | ( | ) | |||||||
Other comprehensive loss | ( | ) | ( | ) | ( | ) | |||||
Balance at June 30, 2020 | $ | ( | ) | $ | ( | ) | $ | ( | ) |
Change in fair value and amortization of swap settlements | Unrealized gain/(loss) on available for sale securities | Total | |||||||||
Balance at December 31, 2019 | $ | ( | ) | $ | $ | ( | ) | ||||
Other comprehensive loss before reclassification | ( | ) | ( | ) | ( | ) | |||||
Amounts reclassified from accumulated other comprehensive loss | ( | ) | ( | ) | |||||||
Other comprehensive loss | ( | ) | ( | ) | ( | ) | |||||
Balance at June 30, 2020 | $ | ( | ) | $ | ( | ) | $ | ( | ) |
Balance at December 31, 2019 | $ | ||
Reclassification due to change in redemption value and other | ( | ) | |
Redemptions | |||
Balance at June 30, 2020 | $ |
June 30, 2020 | December 31, 2019 | June 30, 2019 | December 31, 2018 | ||||||||||||
Cash and cash equivalents - unrestricted | $ | $ | $ | $ | |||||||||||
Cash and cash equivalents - restricted | |||||||||||||||
Total unrestricted and restricted cash and cash equivalents shown in the condensed consolidated statement of cash flows | $ | $ | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Rental income | $ | $ | $ | $ | |||||||||||
Other property | |||||||||||||||
Management and other fees from affiliates | |||||||||||||||
Total revenues | $ | $ | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Southern California | $ | $ | $ | $ | |||||||||||
Northern California | |||||||||||||||
Seattle Metro | |||||||||||||||
Other real estate assets (1) | |||||||||||||||
Total rental and other property revenues | $ | $ | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Same-property (1) | $ | $ | $ | $ | |||||||||||
Acquisitions (2) | |||||||||||||||
Development (3) | |||||||||||||||
Redevelopment | |||||||||||||||
Non-residential/other, net (4) | |||||||||||||||
Total rental and other property revenues | $ | $ | $ | $ |
Weighted Average Company Ownership Percentage (1) | June 30, 2020 | December 31, 2019 | ||||||||
Ownership interest in: | ||||||||||
CPPIB (2) | % | $ | $ | |||||||
Wesco I, Wesco III, Wesco IV, and Wesco V | % | |||||||||
BEXAEW, BEX II, BEX III, and BEX IV | % | |||||||||
Other | % | |||||||||
Total operating and other co-investments, net | ||||||||||
Total predevelopment and development co-investments | % | |||||||||
Total preferred interest co-investments (includes related party investments of $77.3 million and $73.2 million as of June 30, 2020 and December 31, 2019, respectively) | ||||||||||
Total co-investments, net | $ | $ |
June 30, 2020 | December 31, 2019 | ||||||
Combined balance sheets: (1) | |||||||
Rental properties and real estate under development | $ | $ | |||||
Other assets | |||||||
Total assets | $ | $ | |||||
Debt | $ | $ | |||||
Other liabilities | |||||||
Equity | |||||||
Total liabilities and equity | $ | $ | |||||
Company's share of equity | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Combined statements of income: (1) | |||||||||||||||
Property revenues | $ | $ | $ | $ | |||||||||||
Property operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net operating income | |||||||||||||||
Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
General and administrative | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Depreciation and amortization | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Net income (loss) | $ | ( | ) | $ | $ | ( | ) | $ | |||||||
Company's share of net income (2) | $ | $ | $ | $ |
June 30, 2020 | December 31, 2019 | ||||||
Note receivable, secured, bearing interest at 9.00%, due May 2021 (Originated May 2017) (1) | $ | $ | |||||
Note receivable, secured, bearing interest at 9.90%, due November 2021 (Originated November 2018) | |||||||
Related party note receivable, secured, bearing variable rate interest, due February 2020 (Originated November 2019) (2)(3) | |||||||
Notes receivable, secured, bearing interest at 11.00%, due October 2023 (Originated April 2020) | |||||||
Notes and other receivables from affiliates (4) | |||||||
Other receivables | |||||||
Allowance for credit losses | ( | ) | |||||
Total notes and other receivables | $ | $ |
Mezzanine Loans | Bridge Loans | Total | |||||||||
Balance at December 31, 2019 | $ | $ | $ | ||||||||
Impact of adoption ASC 326 | |||||||||||
Provision for credit losses | ( | ) | ( | ) | ( | ) | |||||
Balance at June 30, 2020 | $ | $ | $ |
June 30, 2020 | December 31, 2019 | Weighted Average Maturity In Years as of June 30, 2020 | |||||||
Unsecured bonds private placement - fixed rate | $ | $ | |||||||
Term loan - variable rate | |||||||||
Bonds public offering - fixed rate | |||||||||
Unsecured debt, net (1) | |||||||||
Lines of credit (2) | |||||||||
Mortgage notes payable, net (3) | |||||||||
Total debt, net | $ | $ | |||||||
Weighted average interest rate on fixed rate unsecured bonds private placement and bonds public offering | % | % | |||||||
Weighted average interest rate on variable rate term loan | % | % | |||||||
Weighted average interest rate on lines of credit | % | % | |||||||
Weighted average interest rate on mortgage notes payable | % | % |
Remaining in 2020 | $ | ||
2021 | |||
2022 | |||
2023 | |||
2024 | |||
Thereafter | |||
Total | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Revenues: | |||||||||||||||
Southern California | $ | $ | $ | $ | |||||||||||
Northern California | |||||||||||||||
Seattle Metro | |||||||||||||||
Other real estate assets | |||||||||||||||
Total property revenues | $ | $ | $ | $ | |||||||||||
Net operating income: | |||||||||||||||
Southern California | $ | $ | $ | $ | |||||||||||
Northern California | |||||||||||||||
Seattle Metro | |||||||||||||||
Other real estate assets | |||||||||||||||
Total net operating income | |||||||||||||||
Management and other fees from affiliates | |||||||||||||||
Corporate-level property management expenses | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Depreciation and amortization | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
General and administrative | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Expensed acquisition and investment related costs | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Gain on sale of real estate and land | |||||||||||||||
Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Total return swap income | |||||||||||||||
Interest and other income | |||||||||||||||
Equity income from co-investments | |||||||||||||||
Deferred tax expense on unrealized gain on unconsolidated co-investment | ( | ) | ( | ) | |||||||||||
(Loss) gain on early retirement of debt, net | ( | ) | ( | ) | |||||||||||
Gain on remeasurement of co-investment | |||||||||||||||
Net income | $ | $ | $ | $ |
June 30, 2020 | December 31, 2019 | ||||||
Assets: | |||||||
Southern California | $ | $ | |||||
Northern California | |||||||
Seattle Metro | |||||||
Other real estate assets | |||||||
Net reportable operating segment - real estate assets | |||||||
Real estate under development | |||||||
Co-investments | |||||||
Real estate held for sale, net | |||||||
Cash and cash equivalents, including restricted cash | |||||||
Marketable securities | |||||||
Notes and other receivables | |||||||
Operating lease right-of-use assets | |||||||
Prepaid expenses and other assets | |||||||
Total assets | $ | $ |
Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | ||||||||||||||||||||
Income | Weighted- average Common Shares | Per Common Share Amount | Income | Weighted- average Common Shares | Per Common Share Amount | ||||||||||||||||
Basic: | |||||||||||||||||||||
Net income available to common stockholders | $ | $ | $ | $ | |||||||||||||||||
Effect of Dilutive Securities: | |||||||||||||||||||||
Stock options | — | — | |||||||||||||||||||
Diluted: | |||||||||||||||||||||
Net income available to common stockholders | $ | $ | $ | $ |
Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | ||||||||||||||||||||
Income | Weighted- average Common Shares | Per Common Share Amount | Income | Weighted- average Common Shares | Per Common Share Amount | ||||||||||||||||
Basic: | |||||||||||||||||||||
Net income available to common stockholders | $ | $ | $ | $ | |||||||||||||||||
Effect of Dilutive Securities: | |||||||||||||||||||||
Stock options | — | — | |||||||||||||||||||
DownREIT units | |||||||||||||||||||||
Diluted: | |||||||||||||||||||||
Net income available to common stockholders | $ | $ | $ | $ |
Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | ||||||||||||||||||||
Income | Weighted- average Common Units | Per Common Unit Amount | Income | Weighted- average Common Units | Per Common Unit Amount | ||||||||||||||||
Basic: | |||||||||||||||||||||
Net income available to common unitholders | $ | $ | $ | $ | |||||||||||||||||
Effect of Dilutive Securities: | |||||||||||||||||||||
Stock options | — | — | |||||||||||||||||||
Diluted: | |||||||||||||||||||||
Net income available to common unitholders | $ | $ | $ | $ |
Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | ||||||||||||||||||||
Income | Weighted- average Common Units | Per Common Unit Amount | Income | Weighted- average Common Units | Per Common Unit Amount | ||||||||||||||||
Basic: | |||||||||||||||||||||
Net income available to common unitholders | $ | $ | $ | $ | |||||||||||||||||
Effect of Dilutive Securities: | |||||||||||||||||||||
Stock options | — | — | |||||||||||||||||||
DownREIT units | |||||||||||||||||||||
Diluted: | |||||||||||||||||||||
Net income available to common unitholders | $ | $ | $ | $ |
As of June 30, 2020 | As of June 30, 2019 | ||||||||||
Apartment Homes | % | Apartment Homes | % | ||||||||
Southern California | 22,675 | 43 | % | 22,674 | 46 | % | |||||
Northern California | 19,319 | 37 | % | 16,749 | 34 | % | |||||
Seattle Metro | 10,343 | 20 | % | 10,238 | 20 | % | |||||
Total | 52,337 | 100 | % | 49,661 | 100 | % |
• | closing the Company's corporate offices and instituting “work from home” measures for corporate associates, |
• | closing leasing offices to non-Essex personnel, reducing on-site staff so that hygiene and “social distancing” standards can be effectively managed and applied, and requiring face coverings to be worn, |
• | transitioning most public interactions with leasing staff to on-line and telephonic communications, |
• | increasing cleaning practices for common areas and community amenities and temporarily closing common areas and community amenities or opening with limited hours, limited capacity or by reservation only, depending in part on jurisdictional requirements; and |
• | delaying the response to maintenance orders in certain circumstances in order to promote the protection of our employees and residents. |
• | assembling a Resident Response Team to effectively and efficiently respond to resident needs and concerns with respect to the pandemic, |
• | structuring payment plans for residents who are unable to pay their rent as a result of the outbreak and waiving late fees for those residents; and |
• | establishing the Essex Cares fund for the purpose of supporting the Company’s residents and communities that are experiencing financial hardships caused by the COVID-19 pandemic. |
Three Months Ended June 30, | |||||
2020 | 2019 | ||||
Southern California | 94.5 | % | 96.6 | % | |
Northern California | 95.0 | % | 96.6 | % | |
Seattle Metro | 95.4 | % | 96.4 | % |
Number of Apartment | Three Months Ended June 30, | Dollar | Percentage | |||||||||||||||
Property Revenues ($ in thousands) | Homes | 2020 | 2019 | Change | Change | |||||||||||||
Same-Property Revenues: | ||||||||||||||||||
Southern California | 21,354 | $ | 136,231 | $ | 144,440 | $ | (8,209 | ) | (5.7 | )% | ||||||||
Northern California | 15,638 | 127,326 | 131,815 | (4,489 | ) | (3.4 | )% | |||||||||||
Seattle Metro | 10,112 | 60,094 | 60,237 | (143 | ) | (0.2 | )% | |||||||||||
Total Same-Property Revenues | 47,104 | 323,651 | 336,492 | (12,841 | ) | (3.8 | )% | |||||||||||
Non-Same Property Revenues | 44,498 | 22,883 | 21,615 | 94.5 | % | |||||||||||||
Total Property Revenues | $ | 368,149 | $ | 359,375 | $ | 8,774 | 2.4 | % |
Six Months Ended June 30, | |||||
2020 | 2019 | ||||
Southern California | 95.6 | % | 96.7 | % | |
Northern California | 96.0 | % | 96.8 | % | |
Seattle Metro | 96.1 | % | 96.7 | % |
Number of Apartment | Six Months Ended June 30, | Dollar | Percentage | |||||||||||||||
Property Revenues ($ in thousands) | Homes | 2020 | 2019 | Change | Change | |||||||||||||
Same-Property Revenues: | ||||||||||||||||||
Southern California | 21,354 | $ | 283,752 | $ | 288,024 | $ | (4,272 | ) | (1.5 | )% | ||||||||
Northern California | 15,638 | 262,011 | 262,473 | (462 | ) | (0.2 | )% | |||||||||||
Seattle Metro | 10,112 | 122,524 | 119,890 | 2,634 | 2.2 | % | ||||||||||||
Total Same-Property Revenues | 47,104 | 668,287 | 670,387 | (2,100 | ) | (0.3 | )% | |||||||||||
Non-Same Property Revenues | 89,612 | 42,876 | 46,736 | 109.0 | % | |||||||||||||
Total Property Revenues | $ | 757,899 | $ | 713,263 | $ | 44,636 | 6.3 | % |
(a) | historical cost accounting for real estate assets in accordance with U.S. GAAP assumes, through depreciation charges, that the value of real estate assets diminishes predictably over time. NAREIT stated in its White Paper on Funds from Operations "since real estate asset values have historically risen or fallen with market conditions, many industry investors have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves." Consequently, NAREIT’s definition of FFO reflects the fact that real estate, as an asset class, generally appreciates over time and depreciation charges required by U.S. GAAP do not reflect the underlying economic realities. |
(b) | REITs were created as a legal form of organization in order to encourage public ownership of real estate as an asset class through investment in firms that were in the business of long-term ownership and management of real estate. The exclusion, in NAREIT’s definition of FFO, of gains and losses from the sales of previously depreciated operating real estate assets allows investors and analysts to readily identify the operating results of the long-term assets that form the core of a REIT’s activity and assists in comparing those operating results between periods. |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Net income available to common stockholders | $ | 84,458 | $ | 92,275 | $ | 399,464 | $ | 211,133 | |||||||
Adjustments: | |||||||||||||||
Depreciation and amortization | 133,609 | 119,465 | 265,168 | 240,033 | |||||||||||
Gains not included in FFO attributable to common stockholders and unitholders | (16,597 | ) | (870 | ) | (251,291 | ) | (32,405 | ) | |||||||
Depreciation and amortization from unconsolidated co-investments | 12,764 | 14,631 | 25,308 | 29,821 | |||||||||||
Noncontrolling interest related to Operating Partnership units | 2,964 | 3,228 | 13,950 | 7,399 | |||||||||||
Depreciation attributable to third party ownership and other | (139 | ) | (236 | ) | (273 | ) | (466 | ) | |||||||
Funds from operations attributable to common stockholders and unitholders | $ | 217,059 | $ | 228,493 | $ | 452,326 | $ | 455,515 | |||||||
Funds from operations attributable to common stockholders and unitholders per share - diluted | $ | 3.21 | $ | 3.36 | $ | 6.65 | $ | 6.69 | |||||||
Non-core items: | |||||||||||||||
Expensed acquisition and investment related costs | 15 | 24 | 102 | 56 | |||||||||||
Deferred tax expense on unrealized gain on unconsolidated co-investment (1) | 1,636 | — | 1,636 | — | |||||||||||
Gain on sale of marketable securities | (46 | ) | (556 | ) | (33 | ) | (498 | ) | |||||||
Unrealized (gains) losses on marketable securities | (7,623 | ) | 56 | 1,073 | (4,454 | ) | |||||||||
Provision for credit losses | 147 | — | 97 | — | |||||||||||
Equity income from non-core co-investment (2) | (4,696 | ) | — | (4,586 | ) | (314 | ) | ||||||||
Interest rate hedge ineffectiveness (3) | — | — | — | 181 | |||||||||||
Loss (gain) on early retirement of debt, net | 5,027 | (332 | ) | 4,706 | (1,668 | ) | |||||||||
Gain on early retirement of debt from unconsolidated co-investment | (38 | ) | — | (38 | ) | — | |||||||||
Co-investment promote income | — | — | (6,455 | ) | (809 | ) | |||||||||
Income from early redemption of preferred equity investments | — | (732 | ) | (210 | ) | (832 | ) | ||||||||
General and administrative and other, net | 2,312 | — | 3,132 | — | |||||||||||
Insurance reimbursements, legal settlements, and other, net | (106 | ) | (38 | ) | (63 | ) | (248 | ) | |||||||
Core Funds from Operations attributable to common stockholders and unitholders | $ | 213,687 | $ | 226,915 | $ | 451,687 | $ | 446,929 | |||||||
Core Funds from Operations attributable to common stockholders and unitholders per share-diluted | $ | 3.16 | $ | 3.33 | $ | 6.64 | $ | 6.57 | |||||||
Weighted average number shares outstanding, diluted (4) | 67,682,034 | 68,079,855 | 68,017,414 | 68,063,937 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Earnings from operations | $ | 119,736 | $ | 124,560 | $ | 250,573 | $ | 240,255 | |||||||
Adjustments: | |||||||||||||||
Corporate-level property management expenses | 8,646 | 8,469 | 17,405 | 16,898 | |||||||||||
Depreciation and amortization | 133,609 | 119,465 | 265,168 | 240,033 | |||||||||||
Management and other fees from affiliates | (2,348 | ) | (2,260 | ) | (4,965 | ) | (4,595 | ) | |||||||
General and administrative | 14,952 | 13,927 | 28,934 | 27,386 | |||||||||||
Expensed acquisition and investment related costs | 15 | 24 | 102 | 56 | |||||||||||
Gain on sale of real estate and land | (16,597 | ) | — | (16,597 | ) | — | |||||||||
NOI | 258,013 | 264,185 | 540,620 | 520,033 | |||||||||||
Less: Non-Same Property NOI | (30,333 | ) | (18,217 | ) | (62,445 | ) | (33,088 | ) | |||||||
Same-Property NOI | $ | 227,680 | $ | 245,968 | $ | 478,175 | $ | 486,945 |
Notional Amount | Maturity Date Range | Carrying and Estimated Fair Value | Estimated Carrying Value | ||||||||||||||
+50 | -50 | ||||||||||||||||
($ in thousands) | Basis Points | Basis Points | |||||||||||||||
Cash flow hedges: | |||||||||||||||||
Interest rate swaps | $ | 175,000 | 2022 | $ | (3,434 | ) | $ | (2,038 | ) | $ | (4,869 | ) | |||||
Total cash flow hedges | $ | 175,000 | 2022 | $ | (3,434 | ) | $ | (2,038 | ) | $ | (4,869 | ) |
For the Years Ended | 2020 | 2021 | 2022 | 2023 | 2024 | Thereafter | Total | Fair value | ||||||||||||||||||
($ in thousands, except for interest rates) | ||||||||||||||||||||||||||
Fixed rate debt | $ | 1,650 | 530,940 | 342,408 | 602,093 | 402,177 | 3,666,884 | $ | 5,546,152 | $ | 6,006,010 | |||||||||||||||
Average interest rate | 3.9 | % | 4.3 | % | 3.7 | % | 3.7 | % | 4.0 | % | 3.5 | % | 3.6 | % | ||||||||||||
Variable rate debt (1) | $ | 333 | 713 | 350,780 | 200,852 | 932 | 251,499 | $ | 805,109 | $ | 799,808 | |||||||||||||||
Average interest rate | 1.4 | % | 1.4 | % | 1.9 | % | 1.6 | % | 1.4 | % | 1.3 | % | 1.6 | % |
Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of a Publicly Announced Program(1) | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program (in millions)(1) | |||||||||||
May 1, 2020 - May 31, 2020 | 1,061 | $ | 219.52 | 1,061 | $ | 249.8 | ||||||||
June 1, 2020 - June 30, 2020 | 86,927 | $ | 228.47 | 86,927 | $ | 229.9 | ||||||||
Total | 87,988 | $ | 228.36 | 87,988 | $ | 229.9 |
A. Exhibits | |
31.1* | |
31.2* | |
31.3* | |
31.4* | |
32.1* | |
32.2* | |
32.3* | |
32.4* | |
101.INS | XBRL Instance Document - the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
101.SCH | XBRL Taxonomy Extension Schema Document |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
ESSEX PROPERTY TRUST, INC. | |
(Registrant) | |
Date: August 5, 2020 | |
By: /s/ ANGELA L. KLEIMAN | |
Angela L. Kleiman | |
Executive Vice President, Chief Financial Officer (Authorized Officer, Principal Financial Officer) |
Date: August 5, 2020 | |
By: /s/ JOHN FARIAS | |
John Farias | |
Senior Vice President, Chief Accounting Officer |
ESSEX PORTFOLIO, L.P. By Essex Property Trust, Inc., its general partner | |
(Registrant) | |
Date: August 5, 2020 | |
By: /s/ ANGELA L. KLEIMAN | |
Angela L. Kleiman | |
Executive Vice President, Chief Financial Officer (Authorized Officer, Principal Financial Officer) |
Date: August 5, 2020 | |
By: /s/ JOHN FARIAS | |
John Farias | |
Senior Vice President, Chief Accounting Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Essex Property Trust, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Michael J. Schall | |
Michael J. Schall Chief Executive Officer and President Essex Property Trust, Inc. |
1. | I have reviewed this quarterly report on Form 10-Q of Essex Property Trust, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Angela L. Kleiman | |
Angela L. Kleiman Executive Vice President, Chief Financial Officer Essex Property Trust, Inc. |
1. | I have reviewed this quarterly report on Form 10-Q of Essex Portfolio, L.P.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Michael J. Schall | |
Michael J. Schall Chief Executive Officer and President Essex Property Trust, Inc., general partner of Essex Portfolio, L.P. |
1. | I have reviewed this quarterly report on Form 10-Q of Essex Portfolio, L.P.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Angela L. Kleiman | |
Angela L. Kleiman Executive Vice President, Chief Financial Officer Essex Property Trust, Inc., general partner of Essex Portfolio, L.P. |
Date: August 5, 2020 | /s/ Michael J. Schall | |
Michael J. Schall | ||
Chief Executive Officer and President | ||
Essex Property Trust, Inc. |
Date: August 5, 2020 | /s/ Angela L. Kleiman | |
Angela L. Kleiman | ||
Executive Vice President and Chief Financial Officer | ||
Essex Property Trust, Inc. |
Date: August 5, 2020 | /s/ Michael J. Schall | |
Michael J. Schall | ||
Chief Executive Officer and President | ||
Essex Property Trust, Inc., general partner of | ||
Essex Portfolio, L.P. |
Date: August 5, 2020 | /s/ Angela L. Kleiman | |
Angela L. Kleiman | ||
Executive Vice President, Chief Financial Officer | ||
Essex Property Trust, Inc., general partner of | ||
Essex Portfolio, L.P. |
Condensed Consolidated Statement of Equity (Parenthetical) - $ / shares |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Statement of Stockholders' Equity [Abstract] | ||||
Common stock dividends (in dollars per share) | $ 2.0775 | $ 1.95 | $ 4.155 | $ 3.90 |
Accounting standards update [Extensible List] | us-gaap:AccountingStandardsUpdate201613Member | us-gaap:AccountingStandardsUpdate201613Member | us-gaap:AccountingStandardsUpdate201613Member |
Condensed Consolidated Statement of Capital (Parenthetical) - $ / shares |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Accounting standards update [Extensible List] | us-gaap:AccountingStandardsUpdate201613Member | us-gaap:AccountingStandardsUpdate201613Member | us-gaap:AccountingStandardsUpdate201613Member | |
Essex Portfolio, L.P. | ||||
Distribution declared (in dollars per share) | $ 2.0775 | $ 1.95 | $ 4.155 | $ 3.90 |
Accounting standards update [Extensible List] | us-gaap:AccountingStandardsUpdate201613Member | us-gaap:AccountingStandardsUpdate201613Member | us-gaap:AccountingStandardsUpdate201613Member |
Condensed Consolidated Statements of Cash Flows (Parenthetical) - USD ($) $ in Millions |
6 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Interest capitalized | $ 9.0 | $ 12.3 |
Essex Portfolio, L.P. | ||
Interest capitalized | $ 9.0 | $ 12.3 |
Organization and Basis of Presentation |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization and Basis of Presentation | Organization and Basis of Presentation The accompanying unaudited condensed consolidated financial statements present the accounts of Essex Property Trust, Inc. ("Essex" or the "Company"), which include the accounts of the Company and Essex Portfolio, L.P. and its subsidiaries (the "Operating Partnership," which holds the operating assets of the Company), prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and in accordance with the instructions to Form 10-Q. In the opinion of management, all adjustments necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented have been included and are normal and recurring in nature. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 2019. All significant intercompany accounts and transactions have been eliminated in the unaudited condensed consolidated financial statements. Certain reclassifications have been made to conform to the current year’s presentation. The unaudited condensed consolidated financial statements for the three and six months ended June 30, 2020 and 2019 include the accounts of the Company and the Operating Partnership. Essex is the sole general partner of the Operating Partnership, with a 96.6% general partnership interest as of both June 30, 2020 and December 31, 2019. Total Operating Partnership limited partnership units ("OP Units," and the holders of such OP Units, "Unitholders") outstanding were 2,295,510 and 2,301,653 as of June 30, 2020 and December 31, 2019, respectively, and the redemption value of the units, based on the closing price of the Company’s common stock totaled approximately $526.1 million and $692.5 million as of June 30, 2020 and December 31, 2019, respectively. As of June 30, 2020, the Company owned or had ownership interests in 248 operating apartment communities, aggregating 60,341 apartment homes, excluding the Company’s ownership interest in preferred interest co-investments, loan investments, one operating commercial building, and a development pipeline comprised of four consolidated projects and three unconsolidated joint venture projects. The operating apartment communities are located in Southern California (primarily Los Angeles, Orange, San Diego, and Ventura counties), Northern California (the San Francisco Bay Area) and the Seattle metropolitan areas. Accounting Pronouncements Adopted in the Current Year In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-13 "Measurement of Credit Losses on Financial Instruments," which amends the current approach to estimate credit losses on certain financial assets, including trade and other receivables, available-for-sale securities, and other financial instruments. Generally, this amendment requires entities to establish a valuation allowance for the expected lifetime losses of these certain financial assets. Subsequent changes in the valuation allowance are recorded in current earnings and reversal of previous losses are permitted. Previously, U.S. GAAP required entities to write down credit losses only when losses were probable and loss reversals were not permitted. The FASB additionally issued various updates to clarify and amend the guidance provided in ASU No. 2016-13. In May 2019, the FASB issued ASU No. 2019-04, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments," which, with respect to credit losses, among other things, clarifies and addresses issues related to accrued interest, transfers between classifications of loans or debt securities, recoveries, and variable interest rates. Additionally, in May 2019, the FASB issued ASU No. 2019-05, "Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief," which allows entities to irrevocably elect the fair value option on certain financial instruments. The Company adopted ASU No. 2016-13, ASU No. 2019-04, and ASU No. 2019-05 as of January 1, 2020, using the modified retrospective approach by applying a cumulative effect adjustment of $0.2 million representing estimated accumulated credit losses to the opening balance of retained earnings. In August 2018, the FASB issued ASU No. 2018-13 "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement," which eliminates certain disclosure requirements affecting all levels of measurements, and modifies and adds new disclosure requirements for Level 3 measurements. The Company adopted ASU No. 2018-13 as of January 1, 2020. This adoption did not have a material impact on the Company's consolidated results of operations or financial position. In March 2020, the FASB issued ASU No. 2020-04 "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting," which contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU No. 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter of 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur. In April 2020, the FASB issued a Staff Question-and-Answer (Q&A) to clarify whether lease concessions related to the effects of COVID-19 require the application of the lease modification guidance under Accounting Standards Codification ("ASC") Topic 842, Leases. The Q&A allows companies to not apply the lease modification guidance to rent concessions that result in deferred rent where the total cash flows required by the modified lease agreement are materially the same as the cash flows required under the original lease and the changes to the lease do not result in a substantial increase to the rights of the lessor or the obligations of the lessee. The Company adopted the guidance during the three months ended June 30, 2020 for eligible residential lease concessions. The lease concessions that met the criteria of the Q&A are treated as if they were part of the enforceable rights and obligations of the parties under the existing lease contract. The amount of rent concessions subject to the Q&A were not material and this adoption did not have a material impact on the Company's consolidated results of operations or financial position. Revenues and Gains on Sale of Real Estate Revenues from tenants renting or leasing apartment homes are recorded when due from tenants and are recognized monthly as they are earned which generally approximates a straight-line basis, else, adjustments are made to conform to a straight-line basis. Apartment homes are rented under short-term leases (generally, lease terms of 9 to 12 months). Revenues from tenants leasing commercial space are recorded on a straight-line basis over the life of the respective lease. See Note 3, Revenues, for additional information regarding such revenues. The Company also generates other property-related revenue associated with the leasing of apartment homes, including storage income, pet rent, and other miscellaneous revenue. Similar to rental income, such revenues are recorded when due from tenants and recognized monthly as they are earned. Apart from rental and other property-related revenue, revenues from contracts with customers are recognized as control of the promised services is passed to the customer. For customer contracts related to management and other fees from affiliates (which includes asset management and property management), the transaction price and amount of revenue to be recognized is determined each quarter based on the management fee calculated and earned for that month or quarter. The contract will contain a description of the service and the fee percentage for management services. Payments from such services are one month or one quarter in arrears of the service performed. Subsequent to the adoption of ASC 610-20 "Gains and Losses from the Derecognition of Nonfinancial Assets" on January 1, 2018, the Company recognizes any gains on sales of real estate when it transfers control of a property and when it is probable that the Company will collect substantially all of the related consideration. Marketable Securities The Company reports its equity securities and available for sale debt securities at fair value, based on quoted market prices (Level 1 for the common stock and investment funds, Level 2 for the unsecured bonds and Level 3 for investments in mortgage backed securities, as defined by the FASB standard for fair value measurements). As of June 30, 2020 and December 31, 2019, $2.7 million and $3.6 million, respectively, of equity securities presented within common stock and stock funds in the tables below, represent investments measured at fair value, using net asset value as a practical expedient, and are not categorized in the fair value hierarchy. Any unrealized gain or loss in debt securities classified as available for sale is recorded as other comprehensive income. Unrealized gains and losses in equity securities, realized gains and losses in debt securities, interest income, and amortization of purchase discounts are included in interest and other income on the condensed consolidated statements of income and comprehensive income. As of June 30, 2020 and December 31, 2019, equity securities and available for sale debt securities consisted primarily of investment-grade unsecured bonds, U.S. treasury securities, common stock and stock funds. As of June 30, 2020 and December 31, 2019, the Company classified its mortgage backed security investment, which matures in September 2020, as held to maturity, and accordingly, this security is stated at its amortized cost. The discount on the mortgage backed security is being amortized to interest income based on an estimated yield and the maturity date of the security. As of June 30, 2020 and December 31, 2019, marketable securities consist of the following ($ in thousands):
The Company uses the specific identification method to determine the cost basis of a debt security sold and to reclassify amounts from accumulated other comprehensive income for such securities. For the three months ended June 30, 2020 and 2019, the proceeds from sales and maturities of marketable securities totaled $4.1 million and $33.4 million, respectively, which resulted in $46 thousand and $0.6 million in realized gains, respectively, for such periods. For the six months ended June 30, 2020 and 2019, the proceeds from sales and maturities of marketable securities totaled $4.3 million and $50.2 million, respectively, which resulted in $33 thousand and $0.5 million in realized gains, respectively, for such periods. For the three and six months ended June 30, 2020, the portion of equity security unrealized losses or gains that were recognized in income totaled $7.6 million in gains and $1.1 million in losses, respectively, and were included in interest and other income on the Company's condensed consolidated statements of income and comprehensive income. For the three and six months ended June 30, 2019, the portion of equity security unrealized losses or gains that were recognized in income totaled $56 thousand in losses and $4.5 million in gains, respectively, and were included in interest and other income on the Company's condensed consolidated statements of income and comprehensive income. Unrealized losses on Investment-grade unsecured bonds as of June 30, 2020 have not been recognized into income because the debts of the issuers are of high credit quality, management does not intend to sell the securities, it is likely that the Company will not be required to sell the securities prior to their anticipated recovery, and the decline in fair value is largely due to other market conditions. The Company monitors the credit quality of its held to maturity mortgage backed security through the review of remittance reports and individual loan watchlists, which are prepared quarterly and provide most recent debt service coverage ratios for each loan within the security, when available. The Company monitors such reports to determine the likelihood that a particular loan within the mortgage backed security may be foreclosed upon. The Company measures the expected credit loss on its held to maturity mortgage backed security based on the present value of expected future cash flows, which takes into account current market conditions and available credit information obtained from the individual loans held within the mortgage backed security. The following table presents the allowance for credit losses rollforward for the mortgage backed security ($ in thousands):
(1) As part of the adoption of ASC 326, effective January 1, 2020, the Company recorded a gross up of the mortgage backed security and related allowance for credit losses of $13.6 million. This gross up had no effect on the Company's consolidated results of operations or financial position. Variable Interest Entities In accordance with accounting standards for consolidation of variable interest entities ("VIEs"), the Company consolidated the Operating Partnership, 17 DownREIT entities (comprising nine communities), and five co-investments as of June 30, 2020. As of December 31, 2019, the Company consolidated the Operating Partnership, 17 DownREIT entities (comprising nine communities) and six co-investments. The Company consolidates these entities because it is deemed the primary beneficiary. Essex has no assets or liabilities other than its investment in the Operating Partnership. The consolidated total assets and liabilities related to the above consolidated co-investments and DownREIT entities, net of intercompany eliminations, were approximately $0.9 billion and $327.7 million, respectively, as of June 30, 2020 and $1.0 billion and $364.3 million, respectively, as of December 31, 2019. Noncontrolling interests in these entities were $121.5 million and $122.5 million as of June 30, 2020 and December 31, 2019, respectively. The Company's financial risk in each VIE is limited to its equity investment in the VIE. As of June 30, 2020 and December 31, 2019, the Company did not have any VIEs of which it was not deemed to be the primary beneficiary. Equity-based Compensation The cost of share- and unit-based compensation awards is measured at the grant date based on the estimated fair value of the awards. The estimated fair value of stock options and restricted stock granted by the Company are being amortized over the vesting period. The estimated grant date fair values of the long term incentive plan units (discussed in Note 14, "Equity Based Compensation Plans," in the Company’s annual report on Form 10-K for the year ended December 31, 2019) are being amortized over the expected service periods. Fair Value of Financial Instruments Management believes that the carrying amounts of the outstanding balances under its lines of credit, and notes and other receivables approximate fair value as of June 30, 2020 and December 31, 2019, because interest rates, yields, and other terms for these instruments are consistent with interest rates, yields, and other terms currently available for similar instruments. Management has estimated that the fair value of the Company’s fixed rate debt with a carrying value of $5.5 billion and $5.2 billion at June 30, 2020 and December 31, 2019, respectively, was approximately $6.0 billion and $5.4 billion, respectively. Management has estimated that the fair value of the Company’s $805.1 million and $660.4 million of variable rate debt at June 30, 2020 and December 31, 2019, respectively, was approximately $799.8 million and $655.8 million, respectively, based on the terms of existing mortgage notes payable, unsecured debt, and variable rate demand notes compared to those available in the marketplace. Management believes that the carrying amounts of cash and cash equivalents, restricted cash, accounts payable and accrued liabilities, construction payables, other liabilities, and dividends payable approximate fair value as of June 30, 2020 and December 31, 2019 due to the short-term maturity of these instruments. Marketable securities, except mortgage backed securities, are carried at fair value as of June 30, 2020 and December 31, 2019. At June 30, 2020, the Company’s investment in its mortgage backed security had a carrying value of $77.5 million and the Company estimated the fair value to be approximately $77.6 million. At December 31, 2019, the Company’s investment in its mortgage backed security had a carrying value of $72.7 million and the Company estimated the fair value to be approximately $72.7 million. The Company determines the fair value of the mortgage backed security based on unobservable inputs (level 3 of the fair value hierarchy) considering the assumptions that market participants would make in valuing this security. Assumptions such as estimated default rates and discount rates are used to determine the expected, discounted cash flows to estimate fair value. Capitalization of Costs The Company’s capitalized internal costs related to development and redevelopment projects were comprised primarily of interest and employee compensation and totaled $8.9 million and $10.4 million during the three months ended June 30, 2020 and 2019, respectively, and $18.8 million and $21.1 million for the six months ended June 30, 2020 and 2019, respectively. The Company capitalizes leasing commissions associated with the lease-up of development communities and amortizes the costs over the life of the leases. The amounts capitalized for leasing commissions are immaterial for all periods presented. Co-investments The Company owns investments in joint ventures in which it has significant influence, but its ownership interest does not meet the criteria for consolidation in accordance with U.S. GAAP. Therefore, the Company accounts for co-investments using the equity method of accounting. Under the equity method of accounting, the investment is carried at the cost of assets contributed, plus the Company's equity in earnings less distributions received and the Company's share of losses. The significant accounting policies of the Company’s co-investment entities are consistent with those of the Company in all material respects. Upon the acquisition of a controlling interest of a co-investment, the co-investment entity is consolidated and a gain or loss is recognized upon the remeasurement of co-investments in the consolidated statement of income equal to the amount by which the fair value of the co-investment interest the Company previously owned exceeds its carrying value. A majority of the co-investments, excluding the preferred equity investments, compensate the Company for its asset management services and some of these investments may provide promote income if certain financial return benchmarks are achieved. Asset management fees are recognized when earned, and promote fees are recognized when the earnings events have occurred and the amount is determinable and collectible. Any promote fees are reflected in equity income from co-investments. Changes in Accumulated Other Comprehensive Loss, Net by Component Essex Property Trust, Inc. ($ in thousands):
Changes in Accumulated Other Comprehensive Loss, by Component Essex Portfolio, L.P. ($ in thousands):
Amounts reclassified from accumulated other comprehensive loss in connection with derivatives are recorded in interest expense on the condensed consolidated statements of income and comprehensive income. Realized gains and losses on available for sale debt securities are included in interest and other income on the condensed consolidated statements of income and comprehensive income. Redeemable Noncontrolling Interest The carrying value of redeemable noncontrolling interest in the accompanying condensed consolidated balance sheets was $33.2 million and $37.4 million as of June 30, 2020 and December 31, 2019, respectively. The limited partners may redeem their noncontrolling interests for cash in certain circumstances. The changes to the redemption value of redeemable noncontrolling interests for the six months ended June 30, 2020 is as follows ($ in thousands):
Cash, Cash Equivalents and Restricted Cash Highly liquid investments with original maturities of three months or less when purchased are classified as cash equivalents. Restricted cash balances relate primarily to reserve requirements for capital replacement at certain communities in connection with the Company’s mortgage debt. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows ($ in thousands):
Accounting Estimates The preparation of condensed consolidated financial statements, in accordance with U.S. GAAP, requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to acquiring, developing and assessing the carrying values of its real estate portfolio, its investments in and advances to joint ventures and affiliates, its notes receivables, and its qualification as a real estate investment trust ("REIT"). The Company bases its estimates on historical experience, current market conditions, and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may vary from those estimates and those estimates could be different under different assumptions or conditions.
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Significant Transactions During The Six Months Ended June 30, 2020 and Subsequent Events |
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Business Combinations [Abstract] | |
Significant Transactions During The Six Months Ended June 30, 2020 and Subsequent Events | Significant Transactions During The Six Months Ended June 30, 2020 and Subsequent Events Significant Transactions Acquisitions In January 2020, the Company purchased Canada Pension Plan Investment Board's ("CPPIB") 45.0% interest in each of a land parcel and six communities totaling 2,020 apartment homes, valued at $1.0 billion on a gross basis. As a result of this acquisition, the Company realized a gain on remeasurement of co-investment of $234.7 million. Furthermore, the Company recognized $6.5 million in promote income as a result of the transaction, which is included in equity income from co-investments on the condensed consolidated statements of income and comprehensive income. Dispositions In June 2020, the Company completed a portfolio sale which consisted of two apartment communities, One South Market and Museum Park, both located in San Jose, CA for a total contract price of $232.0 million. The Company recognized a $16.6 million gain on sale. As of June 30, 2020, the Company had one community totaling 126 apartment homes that qualified as held for sale. Co-Investments Preferred Equity Investments In the first quarter of 2020, the Company originated two preferred equity investments totaling $91.4 million in two multifamily communities located in California. The investments have a weighted average initial return of 11.3% with most of the proceeds expected to fund in late 2020 and early 2021. In March 2020, the Company received cash of $11.3 million, including an early redemption fee of $0.2 million, for the partial redemption of a preferred equity investment in a joint venture that holds property located in Southern California. Notes Receivable In January 2020, the Company received cash of $16.9 million for the full redemption of a mezzanine loan in a property located in Southern California. In January 2020, the Company received $85.8 million for the payoff of a related party bridge loan to Wesco V, LLC ("Wesco V"). See Note 6, Related Party Transactions, for additional details. In March 2020, the Company committed to fund an investment in mezzanine loans totaling $15.0 million as part of the development of a multifamily community located in Southern California. The investment has an initial 10.5% interest rate and maturity date of February 2023, with options to extend for up to two years. As of June 30, 2020, the Company had not funded this commitment. In April 2020, the Company committed to fund a $29.2 million mezzanine loan in a multifamily community located in Northern California, with an 11.0% interest rate and an initial maturity date of October 2023, with options to extend for up to two years. As of June 30, 2020, the Company had funded $6.7 million of this commitment. Common Stock During the three months ended March 31, 2020, the Company repurchased and retired 776,261 shares totaling $176.3 million, including commissions. In May 2020, the board of directors approved the replenishment of the stock repurchase plan such that, as of such date, the Company had $250.0 million of purchase authority remaining under the replenished plan. During the three months ended June 30, 2020, the Company repurchased and retired 87,988 shares totaling $20.1 million, including commissions, all of which were repurchased after the replenishment in May 2020. As a result, as of June 30, 2020, the Company had $229.9 million of purchase authority remaining under its $250.0 million stock repurchase plan. Senior Unsecured Debt In February 2020, the Operating Partnership issued $500.0 million of senior unsecured notes due on March 15, 2032 with a coupon rate of 2.650% per annum (the "2032 Notes"), which are payable on March 15 and September 15 of each year, beginning on September 15, 2020. The 2032 Notes were offered to investors at a price of 99.628% of par value. The 2032 Notes are general unsecured senior obligations of the Operating Partnership, rank equally in right of payment with all other senior unsecured indebtedness of the Operating Partnership and are unconditionally guaranteed by Essex. The Company used the net proceeds of this offering to repay indebtedness under its unsecured lines of credit, which had been used to fund the buyout of CPPIB's 45.0% joint venture interests discussed above, as well as repay $100.3 million of secured debt during the quarter. In April 2020, the Company originated a $200.0 million unsecured term loan with a one-year maturity and two 12-month extension options, exercisable at the Company’s option. The unsecured term loan bears a variable interest rate of LIBOR plus 1.20% and the proceeds were used to repay all remaining consolidated debt maturing in 2020. In June 2020, the Company issued an additional $150.0 million of the 2032 Notes at a price of 105.660% of par value, plus accrued interest from February 2020 up to, but not including, the date of delivery of the Notes, with an effective yield of 2.093%. These additional notes have substantially identical terms as the 2032 Notes issued in February 2020. The proceeds were used to repay indebtedness under the Company's unsecured credit facilities and for other general corporate and working capital purposes. Subsequent Events In July 2020, the Company sold Delano, a 126 apartment home community located in Redmond, WA, for a total contract price of $51.5 million.
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Revenues |
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Revenues | Revenues Disaggregated Revenue The following table presents the Company’s revenues disaggregated by revenue source ($ in thousands):
The following table presents the Company’s rental and other property revenues disaggregated by geographic operating segment ($ in thousands):
(1) Other real estate assets consists of revenues generated from retail space, commercial properties, held for sale properties, disposition properties and straight-line rent adjustments for concessions. The following table presents the Company’s rental and other property revenues disaggregated by current property category status ($ in thousands):
(1) Properties that have comparable stabilized results as of January 1, 2019 and are consolidated by the Company for the three and six months ended June 30, 2020 and 2019. A community is generally considered to have reached stabilized operations once it achieves an initial occupancy of 90%. (2) Acquisitions includes properties acquired which did not have comparable stabilized results as of January 1, 2019. (3) Development includes properties developed which did not have stabilized results as of January 1, 2019. (4) Non-residential/other, net consists of revenues generated from retail space, commercial properties, held for sale properties, disposition properties, student housing, properties undergoing significant construction activities that do not meet our redevelopment criteria, and three communities located in the California counties of Riverside, Santa Barbara, and Santa Cruz, which the Company does not consider its core markets and straight-line rent adjustments for concessions. Deferred Revenues and Remaining Performance Obligations When cash payments are received or due in advance of the Company’s performance of contracts with customers, deferred revenue is recorded. The total deferred revenue balance related to such contracts was $3.5 million and $3.9 million as of June 30, 2020 and December 31, 2019, respectively, and was included in accounts payable and accrued liabilities within the accompanying condensed consolidated balance sheets. The amount of revenue recognized for the six months ended June 30, 2020 that was included in the December 31, 2019 deferred revenue balance was $0.4 million, which was included in interest and other income within the condensed consolidated statements of income and comprehensive income. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in the revenue recognition accounting standard. As of June 30, 2020, the Company had $3.5 million of remaining performance obligations. The Company expects to recognize approximately 10% of these remaining performance obligations in 2020, an additional 42% through 2022, and the remaining balance thereafter. |
Co-investments |
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Investments in and Advance to Affiliates, Subsidiaries, Associates, and Joint Ventures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Co-investments | Co-investments The Company has joint ventures and preferred equity investments in co-investments which are accounted for under the equity method. The co-investments, including BEXAEW, BEX II, BEX III, and BEX IV, Wesco I, LLC ("Wesco I"), Wesco III, LLC ("Wesco III"), Wesco IV, LLC ("Wesco IV"), and Wesco V, own, operate, and develop apartment communities. The carrying values of the Company's co-investments as of June 30, 2020 and December 31, 2019 are as follows ($ in thousands, except parenthetical amounts):
(1) Weighted average Company ownership percentages are as of June 30, 2020. (2) In January 2020, the Company purchased CPPIB's 45.0% interest in each of a land parcel and six communities totaling 2,020 apartment homes. The combined summarized financial information of co-investments is as follows ($ in thousands):
(1) Includes preferred equity investments held by the Company. (2) Includes the Company's share of equity income from joint ventures and preferred equity investments, gain on sales of co-investments, co-investment promote income and income from early redemption of preferred equity investments. Includes related party income of $2.1 million and $1.8 million for the three months ended June 30, 2020 and 2019, respectively, and $4.2 million and $3.5 million for the six months ended June 30, 2020 and 2019, respectively.
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Notes and Other Receivables |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes and Other Receivables | Notes and Other Receivables Notes and other receivables consist of the following as of June 30, 2020 and December 31, 2019 ($ in thousands):
(1) In January 2020, the Company received cash of $16.9 million from the payoff of this note receivable. (2) See Note 6, Related Party Transactions, for additional details. (3) In January 2020, the Company received cash of $85.8 million from the payoff of this note receivable. (4) These amounts consist of short-term loans outstanding and due from various joint ventures as of June 30, 2020 and December 31, 2019. See Note 6, Related Party Transactions, for additional details. In the normal course of business, the Company originates and holds two types of loans: mezzanine loans issued to entities that are pursuing apartment development and short-term bridge loans issued to joint ventures with the Company. The Company categorizes development project mezzanine loans into risk categories based on relevant information about the ability of the borrowers to service their debt, such as: current financial information, credit documentation, public information, and previous experience with the borrower. The Company initially analyzes each mezzanine loan individually to classify the credit risk of the loan. On a periodic basis the Company evaluates and performs site visits of the development projects associated with the mezzanine loans to confirm whether they are on budget and whether there are any delays in development that could impact the Company's assessment of credit loss. All bridge loans that the Company issues are, by their nature, short-term and meant only to provide time for the Company’s joint ventures to obtain long-term funding for newly acquired communities. As the Company is a partner in the joint ventures that are borrowing such funds and has performed a detailed review of each community as part of the acquisition process, there is little to no credit risk associated with such loans. As such, the Company does not review credit quality indicators for bridge loans on an ongoing basis. The Company estimates the allowance for credit losses for each loan type using relevant available information from internal and external sources, relating to past events, current conditions, and reasonable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made, if necessary, for differences in current loan-specific risk characteristics. For example, in the case of mezzanine loans, adjustments may be made due to differences in track record and experience of the mezzanine loan sponsor as well as the percent of equity that the sponsor has contributed to the project. The following table presents the activity in the allowance for credit losses for notes and other receivables by loan type ($ in thousands):
No loans were placed on nonaccrual status or charged off during the six months ended June 30, 2020 or 2019.
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Related Party Transactions |
6 Months Ended |
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Jun. 30, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions The Company charges certain fees relating to its co-investments for asset management, property management, development and redevelopment services. These fees from affiliates totaled $2.6 million and $3.5 million during the three months ended June 30, 2020 and 2019, respectively, and $5.7 million and $6.9 million during the six months ended June 30, 2020 and 2019, respectively. All of these fees are net of intercompany amounts eliminated by the Company. The Company netted development and redevelopment fees of $0.3 million and $1.3 million against general and administrative expenses for the three months ended June 30, 2020 and 2019, respectively, and $0.8 million and $2.4 million for the six months ended June 30, 2020 and 2019, respectively. The Company’s Chairman and founder, Mr. George M. Marcus, is the Chairman of the Marcus & Millichap Company ("MMC"), which is a parent company of a diversified group of real estate service, investment, and development firms. Mr. Marcus is also the Co-Chairman of Marcus & Millichap, Inc. ("MMI"), and Mr. Marcus owns a controlling interest in MMI, a national brokerage firm listed on the New York Stock Exchange. For the three and six months ended June 30, 2020, the Company paid brokerage commissions totaling zero and $0.2 million, respectively, to MMC and its affiliates related to real estate transactions. In November 2019, the Company provided an $85.5 million related party bridge loan to Wesco V in connection with the acquisition of Velo and Ray. The note receivable accrued interest at LIBOR plus 1.30% and was scheduled to mature in February 2020, but was paid off in January 2020. The bridge loan was classified within notes and other receivables in the accompanying condensed consolidated balance sheets. In August 2019, the Company provided an $89.0 million related party bridge loan to Wesco V in connection with the acquisition of The Courtyards at 65th Street. The note receivable accrued interest at LIBOR plus 1.30% and was paid off in November 2019. In August 2019, the Company provided a $44.4 million related party bridge loan to BEX IV in connection with the acquisition of 777 Hamilton. The note receivable accrued interest at 3.25%. In November 2019, the term of the bridge loan was extended to February 2020, but was paid off in December 2019. In June 2019, the Company acquired Brio, a 300 unit apartment home community located in Walnut Creek, CA. The Company issued DownREIT units to an affiliate of MMC, based on a contract price of $164.9 million. The property was encumbered by $98.7 million of mortgage debt which was assumed by the Company at the time of acquisition. As a result of this transaction, the Company consolidated the property, based on a VIE analysis performed by the Company. In February 2019, the Company funded a $24.5 million preferred equity investment in an entity whose sponsor is an affiliate of MMC, which owns a multifamily development community located in Mountain View, CA. The investment has an initial preferred return of 11.0% and is scheduled to mature in February 2024. In October 2018, the Company funded a $18.6 million preferred equity investment in an entity whose sponsor is an affiliate of MMC. The entity wholly owns a 268 apartment home community development located in Burlingame, CA. This investment accrues interest based on an initial 12.0% preferred return. The investment is scheduled to mature in April 2024. In May 2018, the Company made a commitment to fund a $26.5 million preferred equity investment in an entity whose sponsors include an affiliate of MMC. The entity wholly owns a 400 apartment home community located in Ventura, CA. This investment accrues interest based on a 10.25% preferred return. The investment is scheduled to mature in May 2023. As of June 30, 2020, the Company had funded $23.1 million of the commitment. The remaining committed amount will be funded if and when requested by the sponsors. In November 2016, the Company provided a $6.6 million mezzanine loan to a limited liability company in which MMC holds a significant ownership interest through subsidiaries. The mezzanine loan was classified within notes and other receivables in the accompanying condensed consolidated balance sheets and was paid off in October 2019. In 2015, the Company made preferred equity investments totaling $20.0 million in three entities affiliated with MMC that own apartment communities in California. The Company earned a 9.5% preferred return on each such investment. One $5.0 million investment, which was scheduled to mature in 2022, was fully redeemed in 2017. Another $5.0 million investment, which was scheduled to mature in 2022, was fully redeemed in 2018. The remaining investment was fully redeemed in February 2019. As described in Note 5, Notes and Other Receivables, the Company has provided short-term loans to affiliates. As of June 30, 2020 and December 31, 2019, $5.2 million and $4.4 million, respectively, of short-term loans remained outstanding due from joint venture affiliates and is classified within notes and other receivables in the accompanying condensed consolidated balance sheets.
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Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt Essex does not have indebtedness as debt is incurred by the Operating Partnership. Essex guarantees the Operating Partnership’s unsecured debt including the revolving credit facilities for the full term of the facilities. Debt consists of the following ($ in thousands):
(1) Includes unamortized discount of $5.7 million and $12.2 million and unamortized debt issuance costs of $28.5 million and $24.5 million, as of June 30, 2020 and December 31, 2019, respectively. (2) Lines of credit, related to the Company's two lines of unsecured credit aggregating $1.24 billion as of June 30, 2020, excludes unamortized debt issuance costs of $4.2 million and $3.8 million as of June 30, 2020 and December 31, 2019, respectively. These debt issuance costs are included in prepaid expenses and other assets on the condensed consolidated balance sheets. As of June 30, 2020, the Company’s $1.2 billion credit facility had an interest rate of LIBOR plus 0.825%, which is based on a tiered rate structure tied to the Company’s credit ratings and a scheduled maturity date of December 2023 with one 18-month extension, exercisable at the Company’s option. As of June 30, 2020, the Company’s $35.0 million working capital unsecured line of credit had an interest rate of LIBOR plus 0.825%, which is based on a tiered rate structure tied to the Company’s credit ratings, and a scheduled maturity date of February 2021. (3) Includes total unamortized premium of $4.6 million and $5.9 million, reduced by unamortized debt issuance costs of $2.2 million and $2.6 million, as of June 30, 2020 and December 31, 2019, respectively. The aggregate scheduled principal payments of the Company’s outstanding debt, excluding lines of credit, as of June 30, 2020 are as follows ($ in thousands):
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Segment Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | Segment Information The Company's segment disclosures present the measure used by the chief operating decision makers for purposes of assessing each segment's performance. The Company's chief operating decision makers are comprised of several members of its executive management team who use net operating income ("NOI") to assess the performance of the business for the Company's reportable operating segments. NOI represents total property revenues less direct property operating expenses. The executive management team generally evaluates the Company's operating performance geographically. The Company defines its reportable operating segments as the three geographical regions in which its communities are located: Southern California, Northern California, and Seattle Metro. Excluded from segment revenues and NOI are management and other fees from affiliates and interest and other income. Non-segment revenues and NOI included in the following schedule also consist of revenues generated from commercial properties and properties that have been sold. Other non-segment assets include items such as real estate under development, co-investments, real estate held for sale, net, cash and cash equivalents, marketable securities, notes and other receivables, and prepaid expenses and other assets. The revenues and NOI for each of the reportable operating segments are summarized as follows for the three and six months ended June 30, 2020 and 2019 ($ in thousands):
Total assets for each of the reportable operating segments are summarized as follows as of June 30, 2020 and December 31, 2019 ($ in thousands):
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Net Income Per Common Share and Net Income Per Common Unit |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income Per Common Share and Net Income Per Common Unit | Net Income Per Common Share and Net Income Per Common Unit ($ in thousands, except share and unit data): Essex Property Trust, Inc.
The table above excludes from the calculations of diluted earnings per share weighted average convertible OP Units of 2,295,750 and 2,299,284, which include vested Series Z-1 Incentive Units, 2014 Long-Term Incentive Plan Units, and 2015 Long-Term Incentive Plan Units for the three months ended June 30, 2020 and 2019, respectively, and 2,297,966 and 2,302,158 for the six months ended June 30, 2020 and 2019, respectively, because they were anti-dilutive. The related income allocated to these convertible OP Units aggregated $3.0 million and $3.2 million for the three months ended June 30, 2020 and 2019, respectively, and $14.0 million and $7.4 million for the six months ended June 30, 2020 and 2019, respectively. Additionally, the table excludes all DownREIT units for which the Operating Partnership has the ability and intention to redeem the units for cash and does not consider them to be common stock equivalents. Stock options of 431,253 and zero for the three months ended June 30, 2020 and 2019, and 290,570 and 106,029 for the six months ended June 30, 2020 and 2019, respectively, were excluded from the calculation of diluted earnings per share because the assumed proceeds per share of such options plus the average unearned compensation were greater than the average market price of the common stock for the periods ended and, therefore, were anti-dilutive. Essex Portfolio, L.P.
Stock options of 431,253 and zero for the three months ended June 30, 2020 and 2019, respectively, and 290,570 and 106,029 for the six months ended June 30, 2020 and 2019, respectively, were excluded from the calculation of diluted earnings per unit because the assumed proceeds per unit of these options plus the average unearned compensation were greater than the average market price of the common unit for the period ended and, therefore, were anti-dilutive. Additionally, the table excludes all DownREIT units for which the Operating Partnership has the ability and intention to redeem the units for cash and does not consider them to be common stock equivalents.
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Derivative Instruments and Hedging Activities |
6 Months Ended |
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Jun. 30, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Instruments and Hedging Activities | Derivative Instruments and Hedging Activities As of June 30, 2020, the Company had interest rate swap contracts with an aggregate notional amount of $175.0 million that effectively fixed the interest rate on the $175.0 million unsecured term loan at 2.3%. These derivatives qualify for hedge accounting. As of June 30, 2020 and December 31, 2019, the aggregate carrying value of the interest rate swap contracts were a liability of $3.4 million and an asset of $0.8 million, respectively. As of June 30, 2020 and December 31, 2019, the swap contracts were presented in the condensed consolidated balance sheets as an asset of zero and $1.0 million, respectively, and were included in prepaid expenses and other assets on the condensed consolidated balance sheets, and a liability of $3.4 million and $0.2 million, respectively, and were included in other liabilities on the condensed consolidated balance sheets. Hedge ineffectiveness related to cash flow hedges, which is included in interest expense on the condensed consolidated statements of income and comprehensive income, was not significant for the three and six months ended June 30, 2020 and 2019. Additionally, the Company has four total return swap contracts, with an aggregate notional amount of $255.1 million, that effectively convert $255.1 million of mortgage notes payable to a floating interest rate based on the Securities Industry and Financial Markets Association Municipal Swap Index ("SIFMA") plus a spread. The total return swaps provide fair market value protection on the mortgage notes payable to the counterparties during the initial period of the total return swap until the Company's option to call the mortgage notes at par can be exercised. The Company can currently call all of its total return swaps, with $255.1 million of the outstanding debt at par. These derivatives do not qualify for hedge accounting and had a carrying and fair value of zero at both June 30, 2020 and December 31, 2019. These total return swaps are scheduled to mature between November 2022 and December 2024. The realized gains of $2.8 million and $2.0 million for the three months ended June 30, 2020 and 2019, respectively, and $4.8 million and $4.0 million for the six months ended June 30, 2020 and 2019, respectively, were reported in the condensed consolidated statements of income and comprehensive income as total return swap income.
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Commitments and Contingencies |
6 Months Ended |
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Jun. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies The Company is subject to various lawsuits in the normal course of its business operations. Such lawsuits have not had a material adverse effect on the Company's financial condition, results of operations or cash flows. While no assurances can be given, the Company does not believe there is any pending or threatened litigation against the Company that, individually or in the aggregate, would reasonably be expected to have a material adverse effect on the Company. |
Organization and Basis of Presentation (Policies) |
6 Months Ended |
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Jun. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Consolidation Policy | The accompanying unaudited condensed consolidated financial statements present the accounts of Essex Property Trust, Inc. ("Essex" or the "Company"), which include the accounts of the Company and Essex Portfolio, L.P. and its subsidiaries (the "Operating Partnership," which holds the operating assets of the Company), prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and in accordance with the instructions to Form 10-Q. In the opinion of management, all adjustments necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented have been included and are normal and recurring in nature. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 2019. |
New Accounting Pronouncements Adopted in the Current Year | Accounting Pronouncements Adopted in the Current Year In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-13 "Measurement of Credit Losses on Financial Instruments," which amends the current approach to estimate credit losses on certain financial assets, including trade and other receivables, available-for-sale securities, and other financial instruments. Generally, this amendment requires entities to establish a valuation allowance for the expected lifetime losses of these certain financial assets. Subsequent changes in the valuation allowance are recorded in current earnings and reversal of previous losses are permitted. Previously, U.S. GAAP required entities to write down credit losses only when losses were probable and loss reversals were not permitted. The FASB additionally issued various updates to clarify and amend the guidance provided in ASU No. 2016-13. In May 2019, the FASB issued ASU No. 2019-04, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments," which, with respect to credit losses, among other things, clarifies and addresses issues related to accrued interest, transfers between classifications of loans or debt securities, recoveries, and variable interest rates. Additionally, in May 2019, the FASB issued ASU No. 2019-05, "Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief," which allows entities to irrevocably elect the fair value option on certain financial instruments. The Company adopted ASU No. 2016-13, ASU No. 2019-04, and ASU No. 2019-05 as of January 1, 2020, using the modified retrospective approach by applying a cumulative effect adjustment of $0.2 million representing estimated accumulated credit losses to the opening balance of retained earnings. In August 2018, the FASB issued ASU No. 2018-13 "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement," which eliminates certain disclosure requirements affecting all levels of measurements, and modifies and adds new disclosure requirements for Level 3 measurements. The Company adopted ASU No. 2018-13 as of January 1, 2020. This adoption did not have a material impact on the Company's consolidated results of operations or financial position. In March 2020, the FASB issued ASU No. 2020-04 "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting," which contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU No. 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter of 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur. In April 2020, the FASB issued a Staff Question-and-Answer (Q&A) to clarify whether lease concessions related to the effects of COVID-19 require the application of the lease modification guidance under Accounting Standards Codification ("ASC") Topic 842, Leases. The Q&A allows companies to not apply the lease modification guidance to rent concessions that result in deferred rent where the total cash flows required by the modified lease agreement are materially the same as the cash flows required under the original lease and the changes to the lease do not result in a substantial increase to the rights of the lessor or the obligations of the lessee. The Company adopted the guidance during the three months ended June 30, 2020 for eligible residential lease concessions. The lease concessions that met the criteria of the Q&A are treated as if they were part of the enforceable rights and obligations of the parties under the existing lease contract. The amount of rent concessions subject to the Q&A were not material and this adoption did not have a material impact on the Company's consolidated results of operations or financial position. |
Revenues and Gains on Sale of Real Estate | Revenues and Gains on Sale of Real Estate Revenues from tenants renting or leasing apartment homes are recorded when due from tenants and are recognized monthly as they are earned which generally approximates a straight-line basis, else, adjustments are made to conform to a straight-line basis. Apartment homes are rented under short-term leases (generally, lease terms of 9 to 12 months). Revenues from tenants leasing commercial space are recorded on a straight-line basis over the life of the respective lease. See Note 3, Revenues, for additional information regarding such revenues. The Company also generates other property-related revenue associated with the leasing of apartment homes, including storage income, pet rent, and other miscellaneous revenue. Similar to rental income, such revenues are recorded when due from tenants and recognized monthly as they are earned. Apart from rental and other property-related revenue, revenues from contracts with customers are recognized as control of the promised services is passed to the customer. For customer contracts related to management and other fees from affiliates (which includes asset management and property management), the transaction price and amount of revenue to be recognized is determined each quarter based on the management fee calculated and earned for that month or quarter. The contract will contain a description of the service and the fee percentage for management services. Payments from such services are one month or one quarter in arrears of the service performed. Subsequent to the adoption of ASC 610-20 "Gains and Losses from the Derecognition of Nonfinancial Assets" on January 1, 2018, the Company recognizes any gains on sales of real estate when it transfers control of a property and when it is probable that the Company will collect substantially all of the related consideration. |
Marketable Securities | Marketable Securities The Company reports its equity securities and available for sale debt securities at fair value, based on quoted market prices (Level 1 for the common stock and investment funds, Level 2 for the unsecured bonds and Level 3 for investments in mortgage backed securities, as defined by the FASB standard for fair value measurements). As of June 30, 2020 and December 31, 2019, $2.7 million and $3.6 million, respectively, of equity securities presented within common stock and stock funds in the tables below, represent investments measured at fair value, using net asset value as a practical expedient, and are not categorized in the fair value hierarchy. Any unrealized gain or loss in debt securities classified as available for sale is recorded as other comprehensive income. Unrealized gains and losses in equity securities, realized gains and losses in debt securities, interest income, and amortization of purchase discounts are included in interest and other income on the condensed consolidated statements of income and comprehensive income. As of June 30, 2020 and December 31, 2019, equity securities and available for sale debt securities consisted primarily of investment-grade unsecured bonds, U.S. treasury securities, common stock and stock funds. As of June 30, 2020 and December 31, 2019, the Company classified its mortgage backed security investment, which matures in September 2020, as held to maturity, and accordingly, this security is stated at its amortized cost. The discount on the mortgage backed security is being amortized to interest income based on an estimated yield and the maturity date of the security.
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Variable Interest Entities | Variable Interest Entities In accordance with accounting standards for consolidation of variable interest entities ("VIEs"), the Company consolidated the Operating Partnership, 17 DownREIT entities (comprising nine communities), and five co-investments as of June 30, 2020. As of December 31, 2019, the Company consolidated the Operating Partnership, 17 DownREIT entities (comprising nine communities) and six co-investments. The Company consolidates these entities because it is deemed the primary beneficiary. Essex has no assets or liabilities other than its investment in the Operating Partnership. The consolidated total assets and liabilities related to the above consolidated co-investments and DownREIT entities, net of intercompany eliminations, were approximately $0.9 billion and $327.7 million, respectively, as of June 30, 2020 and $1.0 billion and $364.3 million, respectively, as of December 31, 2019. Noncontrolling interests in these entities were $121.5 million and $122.5 million as of June 30, 2020 and December 31, 2019, respectively. The Company's financial risk in each VIE is limited to its equity investment in the VIE. As of June 30, 2020 and December 31, 2019, the Company did not have any VIEs of which it was not deemed to be the primary beneficiary.
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Equity-based Compensation | Equity-based Compensation The cost of share- and unit-based compensation awards is measured at the grant date based on the estimated fair value of the awards. The estimated fair value of stock options and restricted stock granted by the Company are being amortized over the vesting period. The estimated grant date fair values of the long term incentive plan units (discussed in Note 14, "Equity Based Compensation Plans," in the Company’s annual report on Form 10-K for the year ended December 31, 2019) are being amortized over the expected service periods.
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Fair Value of Financial Instruments | Fair Value of Financial Instruments Management believes that the carrying amounts of the outstanding balances under its lines of credit, and notes and other receivables approximate fair value as of June 30, 2020 and December 31, 2019, because interest rates, yields, and other terms for these instruments are consistent with interest rates, yields, and other terms currently available for similar instruments. Management has estimated that the fair value of the Company’s fixed rate debt with a carrying value of $5.5 billion and $5.2 billion at June 30, 2020 and December 31, 2019, respectively, was approximately $6.0 billion and $5.4 billion, respectively. Management has estimated that the fair value of the Company’s $805.1 million and $660.4 million of variable rate debt at June 30, 2020 and December 31, 2019, respectively, was approximately $799.8 million and $655.8 million, respectively, based on the terms of existing mortgage notes payable, unsecured debt, and variable rate demand notes compared to those available in the marketplace. Management believes that the carrying amounts of cash and cash equivalents, restricted cash, accounts payable and accrued liabilities, construction payables, other liabilities, and dividends payable approximate fair value as of June 30, 2020 and December 31, 2019 due to the short-term maturity of these instruments. Marketable securities, except mortgage backed securities, are carried at fair value as of June 30, 2020 and December 31, 2019. At June 30, 2020, the Company’s investment in its mortgage backed security had a carrying value of $77.5 million and the Company estimated the fair value to be approximately $77.6 million. At December 31, 2019, the Company’s investment in its mortgage backed security had a carrying value of $72.7 million and the Company estimated the fair value to be approximately $72.7 million. The Company determines the fair value of the mortgage backed security based on unobservable inputs (level 3 of the fair value hierarchy) considering the assumptions that market participants would make in valuing this security. Assumptions such as estimated default rates and discount rates are used to determine the expected, discounted cash flows to estimate fair value.
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Capitalization of Costs | Capitalization of Costs The Company’s capitalized internal costs related to development and redevelopment projects were comprised primarily of interest and employee compensation and totaled $8.9 million and $10.4 million during the three months ended June 30, 2020 and 2019, respectively, and $18.8 million and $21.1 million for the six months ended June 30, 2020 and 2019, respectively. The Company capitalizes leasing commissions associated with the lease-up of development communities and amortizes the costs over the life of the leases. The amounts capitalized for leasing commissions are immaterial for all periods presented.
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Co-investments | Co-investments The Company owns investments in joint ventures in which it has significant influence, but its ownership interest does not meet the criteria for consolidation in accordance with U.S. GAAP. Therefore, the Company accounts for co-investments using the equity method of accounting. Under the equity method of accounting, the investment is carried at the cost of assets contributed, plus the Company's equity in earnings less distributions received and the Company's share of losses. The significant accounting policies of the Company’s co-investment entities are consistent with those of the Company in all material respects. Upon the acquisition of a controlling interest of a co-investment, the co-investment entity is consolidated and a gain or loss is recognized upon the remeasurement of co-investments in the consolidated statement of income equal to the amount by which the fair value of the co-investment interest the Company previously owned exceeds its carrying value. A majority of the co-investments, excluding the preferred equity investments, compensate the Company for its asset management services and some of these investments may provide promote income if certain financial return benchmarks are achieved. Asset management fees are recognized when earned, and promote fees are recognized when the earnings events have occurred and the amount is determinable and collectible. Any promote fees are reflected in equity income from co-investments. |
Changes in Accumulated Other Comprehensive Loss | Amounts reclassified from accumulated other comprehensive loss in connection with derivatives are recorded in interest expense on the condensed consolidated statements of income and comprehensive income. Realized gains and losses on available for sale debt securities are included in interest and other income on the condensed consolidated statements of income and comprehensive income.
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Cash, Cash Equivalents and Restricted Cash | Cash, Cash Equivalents and Restricted Cash Highly liquid investments with original maturities of three months or less when purchased are classified as cash equivalents. Restricted cash balances relate primarily to reserve requirements for capital replacement at certain communities in connection with the Company’s mortgage debt.
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Accounting Estimates | Accounting Estimates The preparation of condensed consolidated financial statements, in accordance with U.S. GAAP, requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to acquiring, developing and assessing the carrying values of its real estate portfolio, its investments in and advances to joint ventures and affiliates, its notes receivables, and its qualification as a real estate investment trust ("REIT"). The Company bases its estimates on historical experience, current market conditions, and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may vary from those estimates and those estimates could be different under different assumptions or conditions.
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Organization and Basis of Presentation (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of marketable securities | As of June 30, 2020 and December 31, 2019, marketable securities consist of the following ($ in thousands):
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Schedule of allowance for credit loss | The following table presents the allowance for credit losses rollforward for the mortgage backed security ($ in thousands):
(1) As part of the adoption of ASC 326, effective January 1, 2020, the Company recorded a gross up of the mortgage backed security and related allowance for credit losses of $13.6 million. This gross up had no effect on the Company's consolidated results of operations or financial position. The following table presents the activity in the allowance for credit losses for notes and other receivables by loan type ($ in thousands):
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Changes in accumulated other comprehensive income (loss) | Changes in Accumulated Other Comprehensive Loss, Net by Component Essex Property Trust, Inc. ($ in thousands):
Changes in Accumulated Other Comprehensive Loss, by Component Essex Portfolio, L.P. ($ in thousands):
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Schedule of changes to the redemption value of noncontrolling interests | The changes to the redemption value of redeemable noncontrolling interests for the six months ended June 30, 2020 is as follows ($ in thousands):
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Schedule of cash and cash equivalents | The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows ($ in thousands):
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Schedule of restricted cash and cash equivalents | The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows ($ in thousands):
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Revenues (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of revenue | The following table presents the Company’s revenues disaggregated by revenue source ($ in thousands):
The following table presents the Company’s rental and other property revenues disaggregated by geographic operating segment ($ in thousands):
(1) Other real estate assets consists of revenues generated from retail space, commercial properties, held for sale properties, disposition properties and straight-line rent adjustments for concessions. The following table presents the Company’s rental and other property revenues disaggregated by current property category status ($ in thousands):
(1) Properties that have comparable stabilized results as of January 1, 2019 and are consolidated by the Company for the three and six months ended June 30, 2020 and 2019. A community is generally considered to have reached stabilized operations once it achieves an initial occupancy of 90%. (2) Acquisitions includes properties acquired which did not have comparable stabilized results as of January 1, 2019. (3) Development includes properties developed which did not have stabilized results as of January 1, 2019. (4) Non-residential/other, net consists of revenues generated from retail space, commercial properties, held for sale properties, disposition properties, student housing, properties undergoing significant construction activities that do not meet our redevelopment criteria, and three communities located in the California counties of Riverside, Santa Barbara, and Santa Cruz, which the Company does not consider its core markets and straight-line rent adjustments for concessions
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Co-investments (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments in and Advance to Affiliates, Subsidiaries, Associates, and Joint Ventures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of co-investments | The carrying values of the Company's co-investments as of June 30, 2020 and December 31, 2019 are as follows ($ in thousands, except parenthetical amounts):
(1) Weighted average Company ownership percentages are as of June 30, 2020. (2) In January 2020, the Company purchased CPPIB's 45.0% interest in each of a land parcel and six communities totaling 2,020 apartment homes.
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Summarized financial information for co-investments accounted for under the equity method | The combined summarized financial information of co-investments is as follows ($ in thousands):
(1) Includes preferred equity investments held by the Company. (2) Includes the Company's share of equity income from joint ventures and preferred equity investments, gain on sales of co-investments, co-investment promote income and income from early redemption of preferred equity investments. Includes related party income of $2.1 million and $1.8 million for the three months ended June 30, 2020 and 2019, respectively, and $4.2 million and $3.5 million for the six months ended June 30, 2020 and 2019, respectively.
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Notes and Other Receivables (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes and other receivables | Notes and other receivables consist of the following as of June 30, 2020 and December 31, 2019 ($ in thousands):
(1) In January 2020, the Company received cash of $16.9 million from the payoff of this note receivable. (2) See Note 6, Related Party Transactions, for additional details. (3) In January 2020, the Company received cash of $85.8 million from the payoff of this note receivable. (4) These amounts consist of short-term loans outstanding and due from various joint ventures as of June 30, 2020 and December 31, 2019. See Note 6, Related Party Transactions, for additional details.
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Schedule of allowance for credit loss | The following table presents the allowance for credit losses rollforward for the mortgage backed security ($ in thousands):
(1) As part of the adoption of ASC 326, effective January 1, 2020, the Company recorded a gross up of the mortgage backed security and related allowance for credit losses of $13.6 million. This gross up had no effect on the Company's consolidated results of operations or financial position. The following table presents the activity in the allowance for credit losses for notes and other receivables by loan type ($ in thousands):
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Debt (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of debt and lines of credit | Debt consists of the following ($ in thousands):
(1) Includes unamortized discount of $5.7 million and $12.2 million and unamortized debt issuance costs of $28.5 million and $24.5 million, as of June 30, 2020 and December 31, 2019, respectively. (2) Lines of credit, related to the Company's two lines of unsecured credit aggregating $1.24 billion as of June 30, 2020, excludes unamortized debt issuance costs of $4.2 million and $3.8 million as of June 30, 2020 and December 31, 2019, respectively. These debt issuance costs are included in prepaid expenses and other assets on the condensed consolidated balance sheets. As of June 30, 2020, the Company’s $1.2 billion credit facility had an interest rate of LIBOR plus 0.825%, which is based on a tiered rate structure tied to the Company’s credit ratings and a scheduled maturity date of December 2023 with one 18-month extension, exercisable at the Company’s option. As of June 30, 2020, the Company’s $35.0 million working capital unsecured line of credit had an interest rate of LIBOR plus 0.825%, which is based on a tiered rate structure tied to the Company’s credit ratings, and a scheduled maturity date of February 2021. (3) Includes total unamortized premium of $4.6 million and $5.9 million, reduced by unamortized debt issuance costs of $2.2 million and $2.6 million, as of June 30, 2020 and December 31, 2019, respectively.
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Summary of aggregate scheduled principal payments | The aggregate scheduled principal payments of the Company’s outstanding debt, excluding lines of credit, as of June 30, 2020 are as follows ($ in thousands):
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Segment Information (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of revenues and operating profit (loss) from segments to consolidated | The revenues and NOI for each of the reportable operating segments are summarized as follows for the three and six months ended June 30, 2020 and 2019 ($ in thousands):
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Reconciliation of assets from segment to consolidated | Total assets for each of the reportable operating segments are summarized as follows as of June 30, 2020 and December 31, 2019 ($ in thousands):
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Net Income Per Common Share and Net Income Per Common Unit (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income Per Share and Net Income Per Unit [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of net income per common share | Essex Property Trust, Inc.
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Essex Portfolio, L.P. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income Per Share and Net Income Per Unit [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of net income per common share | Essex Portfolio, L.P.
|
Organization and Basis of Presentation - Allowance For Credit Loss (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jan. 01, 2020 |
|
Financing Receivable, Allowance for Credit Loss [Line Items] | ||
Beginning balance | $ 0 | |
Impact of adoption ASC 326 | 13,644 | |
Provision for credit losses | 97 | |
Ending balance | 13,644 | |
Mortgage Backed Securities | ||
Financing Receivable, Allowance for Credit Loss [Line Items] | ||
Beginning balance | 0 | |
Impact of adoption ASC 326 | 13,644 | |
Provision for credit losses | 0 | |
Ending balance | $ 13,644 | |
Cumulative Effect, Period Of Adoption, Adjustment | Mortgage Backed Securities | ||
Financing Receivable, Allowance for Credit Loss [Line Items] | ||
Impact of adoption ASC 326 | $ 13,644 |
Organization and Basis of Presentation - Redeemable Noncontrolling Interest (Details) $ in Thousands |
6 Months Ended |
---|---|
Jun. 30, 2020
USD ($)
| |
Stockholders' Equity Attributable to Noncontrolling Interest [Roll Forward] | |
Beginning balance | $ 37,410 |
Reclassification due to change in redemption value and other | (4,169) |
Redemptions | 0 |
Ending balance | $ 33,241 |
Organization and Basis of Presentation - Cash, Cash Equivalents and Restricted Cash And Cash Equivalents (Details) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
Cash and cash equivalents-unrestricted | $ 246,204 | $ 70,087 | $ 38,168 | $ 134,465 |
Cash and cash equivalents-restricted | 10,271 | 11,007 | 16,803 | 16,930 |
Total unrestricted and restricted cash and cash equivalents shown in the condensed consolidated statement of cash flows | $ 256,475 | $ 81,094 | $ 54,971 | $ 151,395 |
Debt - Future Principal Payments (Details) $ in Thousands |
Jun. 30, 2020
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
Remaining in 2020 | $ 1,983 |
2021 | 531,653 |
2022 | 693,188 |
2023 | 802,945 |
2024 | 403,109 |
Thereafter | 3,918,383 |
Long-term debt | $ 6,351,261 |
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