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, 2021.

The unaudited condensed consolidated financial statements for the three months ended March 31, 2022 and 2021 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 March 31, 2022 and December 31, 2021. Total Operating Partnership limited partnership units ("OP Units," and the holders of such OP Units, "Unitholders") outstanding were 2,282,464 as of both March 31, 2022 and December 31, 2021, and the redemption value of the units, based on the closing price of the Company’s common stock totaled approximately $788.5 million and $804.0 million as of March 31, 2022 and December 31, 2021, respectively.

As of March 31, 2022, the Company owned or had ownership interests in 253 operating apartment communities, comprising 62,290 apartment homes, excluding the Company’s ownership interest in preferred equity co-investments, loan investments, three operating commercial buildings, and a development pipeline comprised of one consolidated project and one unconsolidated joint venture project. 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.

In January 2021, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2020-06 "Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity." The amendments in ASU 2020-06 modifies the if-converted method of calculating diluted earnings per share ("EPS"). For instruments that may be settled in cash or shares, and are not classified as a liability, the guidance requires entities to include the effect of potential share settlement in the diluted EPS calculation, if the effect is more dilutive. The Company adopted this guidance on January 1, 2022 on a prospective basis. This adoption did not have a material impact on the Company's consolidated results of operations or financial position.

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.

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.

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 and Level 2 for the unsecured debt, as defined by the FASB standard for fair value measurements). As of both March 31, 2022 and December 31, 2021, $0.8 million 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.


	March 31, 2022
	Cost		Gross Unrealized Gain (Loss)		Carrying Value
Equity securities:
Investment funds - debt securities	$	62,382	$	(4,638)	$	57,744
Common stock and stock funds	81,026		29,143		110,169

Debt securities:
Available for sale

Investment-grade unsecured debt	1,050		739		1,789




Total - Marketable securities	$	144,458	$	25,244	$	169,702


	December 31, 2021
	Cost		Gross Unrealized (Loss) Gain		Carrying Value
Equity securities:
Investment funds - debt securities	$	62,192	$	(502)	$	61,690
Common stock and stock funds	79,155		49,592		128,747

Debt securities:
Available for sale

Investment-grade unsecured debt	1,051		341		1,392




Total - Marketable securities	$	142,398	$	49,431	$	191,829

For the three months ended March 31, 2022, and 2021 the portion of equity security unrealized gains and losses that were recognized in income totaled $24.6 million in losses and $6.3 million in gains, respectively, and were included in interest and other (loss) income on the Company's condensed consolidated statements of income and comprehensive income.

In accordance with accounting standards for consolidation of variable interest entities ("VIEs"), the Company consolidated the Operating Partnership, 18 DownREIT entities (comprising nine communities), and six co-investments as of March 31, 2022 and December 31, 2021. The Company consolidates these entities because it is deemed the primary beneficiary. The Company 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 $900.6 million and $323.7 million, respectively, as of March 31, 2022 and $909.3 million and $320.1 million, respectively, as of December 31, 2021. Noncontrolling interests in these entities were $122.5 million and $122.4 million as of March 31, 2022 and December 31, 2021, respectively. The Company's financial risk in each VIE is limited to its equity investment in the VIE. As of March 31, 2022 and December 31, 2021, the Company did not have any VIEs of which it was not deemed to be the primary beneficiary.

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, 2021) are being amortized over the expected service periods.

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 March 31, 2022 and December 31, 2021, 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 $5.7 billion as of both March 31, 2022 and December 31, 2021, was approximately $5.6 billion and $6.0 billion, respectively. Management has estimated that the fair value of the Company’s $321.4 million and $564.9 million of variable rate debt at March 31, 2022 and December 31, 2021, respectively, was approximately $319.4 million and $561.7 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 March 31, 2022 and December 31, 2021 due to the short-term maturity of these instruments. Marketable securities are carried at fair value as of March 31, 2022 and December 31, 2021.

The Company’s capitalized internal costs related to development and redevelopment projects were comprised primarily of interest and employee compensation and totaled $5.4 million and $6.4 million during the three months ended March 31, 2022 and 2021, 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.

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 Company's previously owned co-investment interest exceeds its carrying value. A majority of the co-investments, excluding most 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.


	Change in fair value and amortization of swap settlements		Unrealized gain on available for sale securities		Total
Balance at December 31, 2021	$	(5,912)	$	360	$	(5,552)

Other comprehensive income before reclassification	19,399		385		19,784
Amounts reclassified from accumulated other comprehensive loss	5		—		5
Other comprehensive income	19,404		385		19,789
Balance at March 31, 2022	$	13,492	$	745	$	14,237


	Change in fair value and amortization of swap settlements		Unrealized gain on available for sale securities		Total
Balance at December 31, 2021	$	(2,176)	$	372	$	(1,804)

Other comprehensive income before reclassification	20,078		398		20,476
Amounts reclassified from accumulated other comprehensive loss	5		—		5
Other comprehensive income	20,083		398		20,481
Balance at March 31, 2022	$	17,907	$	770	$	18,677

Amounts reclassified from accumulated other comprehensive income 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.

The carrying value of redeemable noncontrolling interests in the accompanying condensed consolidated balance sheets was $39.7 million and $34.7 million as of March 31, 2022 and December 31, 2021, respectively. The limited partners may redeem their noncontrolling interests for cash in certain circumstances.

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.


	March 31, 2022		December 31, 2021		March 31, 2021		December 31, 2020
Cash and cash equivalents - unrestricted	$	98,107	$	48,420	$	103,442	$	73,629
Cash and cash equivalents - restricted	10,446		10,218		9,918		10,412
Total unrestricted and restricted cash and cash equivalents shown in the condensed consolidated statement of cash flows	$	108,553	$	58,638	$	113,360	$	84,041

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.