10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________to _________

Commission file number 001-13106

ESSEX PROPERTY TRUST, INC.

(Exact name of Registrant as Specified in its Charter)

Maryland	77-0369576
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)

925 East Meadow Drive

Palo Alto, California    94303

(Address of Principal Executive Offices including Zip Code)

(650) 494-3700

(Registrant's Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days. YES  x NO  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x NO 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” ”accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  x	Accelerated filer  o	Non-accelerated filer  o	Smaller reporting company  o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o No  x

 APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:  38,032,560 shares of Common Stock as of August 1, 2013.

ESSEX PROPERTY TRUST, INC.

FORM 10-Q

INDEX

		Page No.
PART I. FINANCIAL INFORMATION
Item 1.	Condensed Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012	4
	Condensed Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2013 and 2012	5
	Condensed Consolidated Statement of Equity for the six months ended June 30, 2013	6
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and 2012	7
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risks	30
Item 4.	Controls and Procedures	31
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	32
Item 6.	Exhibits	32
Signatures		33

2

Part I -- Financial Information

Item 1: Condensed Financial Statements (Unaudited)

"Essex" or the "Company" means Essex Property Trust, Inc., a real estate investment trust incorporated in the State of Maryland, or where the context otherwise requires, Essex Portfolio, L.P., a limited partnership (the "Operating Partnership") in which Essex Property Trust, Inc. is the sole general partner.

The information furnished in the accompanying unaudited condensed consolidated balance sheets, statements of operations and comprehensive income, equity, and cash flows of the Company reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the aforementioned condensed consolidated financial statements for the interim periods and are normal and recurring in nature, except as otherwise noted.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the notes to such unaudited condensed consolidated financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations herein.  Additionally, 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, 2012.

3

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

(Dollars in thousands, except per share amounts)

	June 30,			December 31,
Assets	2013			2012
Real estate:
Rental properties:
Land and land improvements	$	1,054,178		$	1,003,171
Buildings and improvements		4,194,092			4,030,501
		5,248,270			5,033,672
Less accumulated depreciation		(1,173,333	)		(1,081,517	)
		4,074,937			3,952,155
Real estate under development		70,242			66,851
Co-investments		618,259			571,345
		4,763,438			4,590,351
Cash and cash equivalents-unrestricted		20,217			18,606
Cash and cash equivalents-restricted		25,167			23,520
Marketable securities		88,734			92,713
Notes and other receivables		110,544			66,163
Prepaid expenses and other assets		27,890			35,003
Deferred charges, net		23,008			20,867
Total assets	$	5,058,998		$	4,847,223
Liabilities and  Equity
Mortgage notes payable	$	1,511,502		$	1,565,599
Unsecured debt		1,409,744			1,112,084
Lines of credit		4,370			141,000
Accounts payable and accrued liabilities		76,410			64,858
Construction payable		7,731			5,392
Dividends payable		50,488			45,052
Derivative liabilities		1,928			6,606
Other liabilities		22,432			22,167
Total liabilities		3,084,605			2,962,758
Commitments and contingencies
Cumulative convertible Series G preferred stock		4,349			4,349
Equity:
Cumulative redeemable Series H preferred stock at liquidation value		73,750			73,750
Common stock, $.0001 par value, 656,020,000 shares authorized 37,317,622 and 36,442,994 shares issued and outstanding		3			3
Additional paid-in capital		2,331,830			2,204,778
Distributions in excess of accumulated earnings		(484,615	)		(444,466	)
Accumulated other comprehensive loss, net		(62,813	)		(69,261	)
Total stockholders' equity		1,858,155			1,764,804
Noncontrolling interest		111,889			115,312
Total equity		1,970,044			1,880,116
Total liabilities and equity	$	5,058,998		$	4,847,223

See accompanying notes to the unaudited condensed consolidated financial statements.

4

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARES

Condensed Consolidated Statements of Operations and Comprehensive Income

(Unaudited)

(Dollars in thousands, except per share amounts)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
Revenues:
Rental and other property	$	150,170		$	129,765		$	296,565		$	255,238
Management and other fees		3,234			2,796			6,182			5,240
		153,404			132,561			302,747			260,478
Expenses:
Property operating, excluding real estate taxes		34,489			30,718			67,097			59,470
Real estate taxes		14,248			11,699			28,404			23,112
Depreciation		48,031			41,801			95,175			82,535
General and administrative		6,224			5,764			12,850			11,164
Cost of management and other fees		1,733			1,611			3,434			3,251
		104,725			91,593			206,960			179,532
Earnings from operations		48,679			40,968			95,787			80,946
Interest expense before amortization		(26,325	)		(24,659	)		(51,536	)		(49,316	)
Amortization expense		(3,002	)		(2,882	)		(5,932	)		(5,754	)
Interest and other income		1,917			5,455			6,939			7,868
Equity income in co-investments		7,282			3,111			11,493			5,451
Gain (loss) on early retirement of debt		1,024			(1,450	)		1,024			(1,450	)
Gain on sale of land		-			-			1,503			-
Gain on remeasurement of co-investment		-			21,947			-			21,947
Income from continuing operations		29,575			42,490			59,278			59,692
Income from discontinued operations		-			-			-			10,037
Net income		29,575			42,490			59,278			69,729
Net income attributable to noncontrolling interest		(3,261	)		(4,044	)		(6,393	)		(7,193	)
Net income attributable to controlling interest		26,314			38,446			52,885			62,536
Dividends to preferred stockholders		(1,368	)		(1,368	)		(2,736	)		(2,736	)
Net income available to common stockholders	$	24,946		$	37,078		$	50,149		$	59,800
Comprehensive income	$	35,355		$	39,983		$	66,094		$	69,575
Comprehensive income attributable to noncontrolling interest		(3,574	)		(3,887	)		(6,761	)		(7,183	)
Comprehensive income attributable to controlling interest	$	31,781		$	36,096		$	59,333		$	62,392
Per common share data:
Basic:
Income from continuing operations	$	0.67		$	1.07		$	1.35		$	1.47
Income from discontinued operations		-			-			-			0.27
Net income available to common stockholders	$	0.67		$	1.07		$	1.35		$	1.74
Weighted average number of common shares outstanding during the period		37,292,720			34,570,772			37,149,120			34,299,331
Diluted:
Income from continuing operations	$	0.67		$	1.07		$	1.35		$	1.47
Income from discontinued operations		-			-			-			0.27
Net income available to common stockholders	$	0.67		$	1.07		$	1.35		$	1.74
Weighted average number of common shares outstanding during the period		37,390,987			34,708,240			37,241,968			34,430,571
Dividend per common share	$	1.21		$	1.10		$	2.42		$	2.20

See accompanying notes to the unaudited condensed consolidated financial statements.

5

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Equity for the six months ended June 30, 2013

(Unaudited)

(Dollars and shares in thousands)

												Distributions			Accumulated
	Series H								Additional			in excess of			other
	Preferred stock				Common stock				paid-in			accumulated			comprehensive			Noncontrolling
	Shares		Amount		Shares		Amount		capital			earnings			loss, net			Interest			Total
Balances at December 31, 2012		2,950	$	73,750		36,443	$	3	$	2,204,778		$	(444,466	)	$	(69,261	)	$	115,312		$	1,880,116
Net income		-		-		-		-		-			52,885			-			6,393			59,278
Reversal of unrealized gains upon the sale of marketable securites		-		-		-		-		-			-			(1,673	)		(94	)		(1,767	)
Change in fair value of cash flow hedges and amortization of swap settlements		-		-		-		-		-			-			8,551			486			9,037
Change in fair value of marketable securities		-		-		-		-		-			-			(430	)		(24	)		(454	)
Issuance of common stock under:
Stock option and restricted stock plans		-		-		58		-		5,308			-			-			-			5,308
Sale of common stock		-		-		817		-		122,905			-			-			-			122,905
Equity based compensation costs		-		-		-		-		(615	)		-			-			1,098			483
Distributions to noncontrolling interest		-		-		-		-		-			-			-			(9,811	)		(9,811	)
Redemptions of noncontrolling interest		-		-		-		-		(546	)		-			-			(1,471	)		(2,017	)
Common and preferred stock dividends		-		-		-		-		-			(93,034	)		-			-			(93,034	)
Balances at June 30, 2013		2,950	$	73,750		37,318	$	3	$	2,331,830		$	(484,615	)	$	(62,813	)	$	111,889		$	1,970,044

See accompanying notes to the unaudited condensed consolidated financial statements.

6

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Dollars in thousands)

	Six Months Ended
	June 30,
	2013			2012
Cash flows from operating activities:
Net income	$	59,278		$	69,729
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on sale of marketable securities		(1,767	)		(521	)
Gain on remeasurement of co-investment		-			(21,947	)
Company's share of gain on the sales of co-investment		(2,366	)		-
Gain on the sales of real estate		(1,503	)		(10,870	)
(Gain) loss on early retirement of debt		(1,024	)		1,450
Co-investments		(280	)		3,770
Amortization expense		5,932			5,754
Amortization of discount on notes receivables		(844	)		(917	)
Amortization of discount on marketable securities		(2,776	)		(2,518	)
Depreciation		95,175			82,629
Equity-based compensation		2,126			1,925
Changes in operating assets and liabilities:
Prepaid expenses and other assets		802			(4,420	)
Accounts payable and accrued liabilities.		(2,433	)		5,133
Other liabilities		266			195
Net cash provided by operating activities		150,586			129,392
Cash flows from investing activities:
Additions to real estate:
Acquisitions of real estate		(175,950	)		(80,502	)
Improvements to recent acquisitions		(6,288	)		(3,569	)
Redevelopment		(17,616	)		(17,223	)
Revenue generating capital expenditures		(742	)		(1,638	)
Lessor required capital expenditures		(3,557	)		-
Non-revenue generating capital expenditures		(12,349	)		(7,040	)
Acquisitions of and additions to real estate under development		(9,290	)		(17,166	)
Acquisition of membership interest in co-investment		-			(85,000	)
Dispositions of real estate		9,051			27,800
Changes in restricted cash and deposits		18,290			(1,805	)
Purchases of marketable securities		(14,002	)		(34,363	)
Sales and maturities of marketable securities		20,335			5,070
Purchases of and advances under notes and other receivables		(99,164	)		(875	)
Collections of notes and other receivables		53,438			7,449
Contributions to co-investments		(101,295	)		(114,746	)
Distributions from co-investments		57,458			7,430
Net cash used in investing activities		(281,681	)		(316,178	)
Cash flows from financing activities:
Borrowings under debt agreements		604,472			762,580
Repayment of debt		(495,072	)		(671,153	)
Additions to deferred charges		(3,838	)		(2,622	)
Equity related issuance cost		(525	)		(274	)
Net proceeds from stock options exercised		4,190			1,400
Net proceeds from issuance of common stock		122,905			170,944
Contributions from noncontrolling interest		-			2,400
Distributions to noncontrolling interest		(9,811	)		(9,134	)
Redemption of noncontrolling interest		(2,017	)		(681	)
Common and preferred stock dividends paid		(87,598	)		(75,431	)
Net cash provided by financing activities		132,706			178,029
Net increase in cash and cash equivalents		1,611			(8,757	)
Cash and cash equivalents at beginning of year		18,606			12,889
Cash and cash equivalents at end of period	$	20,217		$	4,132

(Continued)

7

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Dollars in thousands)

	2013		2012
Supplemental disclosure of cash flow information:
Cash paid for interest, net of $8.1 million, and $3.9 million capitalized in 2013 and 2012, respectively	$	50,053	$	47,575
Supplemental disclosure of noncash investing and financing activities:
Transfer from real estate under development to rental properties	$	67	$	4,294
Transfer from real estate under development to co-investments	$	-	$	148,053
Mortgage notes assumed in connection with purchases of real estate including the loan premiums recorded	$	-	$	30,298
Contribution of note receivable to co-investment	$	-	$	12,325
Change in accrual of dividends	$	5,436	$	4,097
Change in fair value of derivative liabilities	$	4,820	$	2,841
Purchase of marketable securities pending settlement	$	-	$	8,340
Change in fair value of marketable securities	$	2,256	$	845
Change in construction payable	$	2,339	$	2,930

See accompanying notes to the unaudited condensed consolidated financial statements

8

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2013 and 2012

(Unaudited)

(1)  Organization and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements present the accounts of Essex Property Trust, Inc. (the “Company”), which include the accounts of the Company and Essex Portfolio, L.P. (the “Operating Partnership,” which holds the operating assets of the Company), prepared in accordance with U.S. generally accepted accounting principles 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, 2012.

All significant intercompany balances and transactions have been eliminated in the condensed consolidated financial statements.

The unaudited condensed consolidated financial statements for the three and six months ended June 30, 2013 and 2012 include the accounts of the Company and the Operating Partnership.  The Company is the sole general partner in the Operating Partnership, with a 94.6% general partnership interest as of June 30, 2013.  Total Operating Partnership units outstanding were 2,147,970 and 2,122,381 as of June 30, 2013 and December 31, 2012, respectively, and the redemption value of the units, based on the closing price of the Company’s common stock totaled $341.4 million and $311.2 million, as of June 30, 2013 and December 31, 2012, respectively.

As of June 30, 2013, the Company owned or had ownership interests in 167 apartment communities, aggregating 34,514 units, excluding the Company’s ownership in preferred interest co-investments,  (collectively, the “Communities”, and individually, a “Community”), five commercial buildings and nine active development projects (collectively, the “Portfolio”).  The Communities are located in Southern California (Los Angeles, Orange, Riverside, San Diego, Santa Barbara, and Ventura counties), Northern California (the San Francisco Bay Area) and the Seattle metropolitan area.

Marketable Securities

The Company reports its available for sale securities at fair value, based on quoted market prices (Level 2 for the unsecured bonds and Level 1 for the common stock and investment funds, as defined by the Financial Accounting Standards Board (“FASB”) standard for fair value measurements as discussed later in Note 1), and any unrealized gain or loss is recorded as other comprehensive income (loss).  Realized gains and losses, interest and dividend income, and amortization of purchase discounts are included in interest and other income on the condensed consolidated statement of operations and comprehensive income.

As of June 30, 2013 and December 31, 2012, marketable securities consisted primarily of investment-grade unsecured bonds, common stock, investments in mortgage backed securities and investment funds that invest in U.S. treasury or agency securities.  As of June 30, 2013 and December 31, 2012, the Company classified its investments in mortgage backed securities, which mature in November 2019 and September 2020, as held to maturity, and accordingly, these securities are stated at their amortized cost.  The estimated fair values of the mortgage backed securities (Level 2 securities) are approximately equal to the carrying values.

9

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2013 and 2012

(Unaudited)

As of June 30, 2013and December 31, 2012 marketable securities consist of the following ($ in thousands):

	June 30, 2013
	Cost/ Amortized  Cost		Gross Unrealized Gain (Loss)			Carrying Value
Available for sale:
Investment-grade unsecured bonds	$	5,083	$	62		$	5,145
Investment funds - US treasuries		15,360		549			15,909
Common stock		13,104		(269	)		12,835
Held to maturity:
Mortgage backed securities		54,845		-			54,845
Total	$	88,392	$	342		$	88,734

	December 31, 2012
	Cost/ Amortized  Cost		Gross  Unrealized  Gain		Carrying Value
Available for sale:
Investment-grade unsecured bonds	$	5,143	$	98	$	5,241
Investment funds - US treasuries		14,120		729		14,849
Common stock		18,917		1,704		20,621
Held to maturity:
Mortgage backed securities		52,002		-		52,002
Total	$	90,182	$	2,531	$	92,713

The Company uses the specific identification method to determine the cost basis of a security sold and to reclassify amounts from accumulated other comprehensive income for securities sold.  For the three months ended June 30, 2013, there were no sales of available for sale securities.  For the three months ended June 30, 2012, the proceeds from sales of available for sale securities totaled $5.1 million which resulted in a realized gain of $0.5 million.  For the six months ended June  30, 2013, and 2012,  the proceeds from sales of available for sale securities totaled $20.3 million and $5.1 million, respectively, which resulted in gains of $1.8 million and $0.5 million, respectively.

Variable Interest Entities

The Company consolidates 19 DownREIT limited partnerships (comprising twelve communities) since the Company is the primary beneficiary of these variable interest entities (“VIEs”).  Total DownREIT units outstanding were 1,029,095 and 1,039,431 as of June 30, 2013 and December 31, 2012, respectively, and the redemption value of the units, based on the closing price of the Company’s common stock totaled $163.5 million and $152.4 million, as of June 30, 2013 and December 31, 2012, respectively.  The consolidated total assets and liabilities related to these VIEs, net of intercompany eliminations, were approximately $203.0 million and $183.4 million, respectively, as of June 30, 2013 and $201.1 million and $178.6 million, respectively, as of December 31, 2012.  Interest holders in VIEs consolidated by the Company are allocated income equal to the cash payments made to those interest holders.  The remaining results of operations are allocated to the Company.  As of June 30, 2013 and December 31, 2012, the Company did not have any other VIEs of which it was deemed to be the primary beneficiary.

Equity Based Compensation

The Company accounts for equity based compensation using the fair value method of accounting.  The estimated fair value of stock options granted by the Company is being amortized over the vesting period of the stock options.  The estimated grant date fair values of the long term incentive plan units (discussed in Note 13, “Equity Based Compensation Plans,” in the Company’s Form 10-K for the year ended December 31, 2012) are being amortized over the expected service periods.

10

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2013 and 2012

(Unaudited)

Stock-based compensation expense for options and restricted stock totaled $0.5 million and $0.4 million for the three months ended June 30, 2013 and 2012, respectively, and $1.1 million and $0.8 million for the six months ended June 30, 2013 and 2012, respectively.  The intrinsic value of the stock options exercised during the three months ended June 30, 2013 and 2012 totaled $1.9 million and $0.7 million, respectively, and $2.8 million and $1.8 million for the six months ended June 30, 2013 and 2012, respectively.  As of June 30, 2013, the intrinsic value of the stock options outstanding totaled $17.7 million.  As of June 30, 2013, total unrecognized compensation cost related to unvested share-based compensation granted under the stock option and restricted stock plans totaled $5.2 million.  The cost is expected to be recognized over a weighted-average period of 1 to 5 years for the stock option plans and is expected to be recognized straight-line over a period of 1 to 7 years for the restricted stock awards.

The Company has adopted an incentive program involving the issuance of Series Z-1 Incentive Units of limited partnership interest in the Operating Partnership.  Stock-based compensation expense for Z-1 Units totaled $0.5 million and $0.5 million for the three months ended June 30, 2013 and 2012, respectively, and $1.0 million and $1.1 million for the six months ended June 30, 2013 and 2012, respectively.  Stock-based compensation for Z-1 units capitalized totaled $0.1 million and $0.2 million for the three months ended June 30, 2013, and 2012, respectively, and $0.2 million and $0.3 million for the six months ended June 30, 2013, and 2012, respectively.  As of June 30, 2013, the intrinsic value of the Z-1 Units subject to future vesting totaled $17.0 million.  As of June 30, 2013, total unrecognized compensation cost related to Z-1 Units subject to future vesting totaled $6.3 million.  The unamortized cost is expected to be recognized up to 14 years subject to the achievement of the stated performance criteria.

Fair Value of Financial Instruments

Management believes that the carrying amounts of outstanding lines of credit, notes receivable and notes and other receivables approximate fair value as of June 30, 2013 and December 31, 2012, because interest rates, yields and other terms for these instruments are consistent with yields and other terms currently available for similar instruments.  Management has estimated that the fair value of the Company’s $2.38 billion of fixed rate debt, including unsecured bonds, at June 30, 2013 is approximately $2.43 billion and the fair value of the Company’s $537.3 million of variable rate debt, excluding borrowings under the lines of credit, at June 30, 2013 is $517.6 million based on the terms of existing mortgage notes payable, unsecured bonds 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, 2013 due to the short-term maturity of these instruments.  The fair values of the Company’s investments in mortgage backed securities are approximately equal to the amortized cost carrying value of these securities.  Marketable securities and derivatives are carried at fair value as of June 30, 2013.

Capitalization of Costs

The Company’s capitalized internal costs related to development and redevelopment projects totaled $1.7 million and $1.5 million during the three months ended June 30, 2013 and 2012, respectively, and  $3.3 million and $2.9 million during the six months ended June 30, 2013 and 2012, respectively,  most of which relates to development projects.  These totals include capitalized salaries of $0.6 million and $0.6 million for the three months ended June 30, 2013 and 2012, respectively, and $1.2 million and $1.3 million for the six months ended June 30, 2013 and 2012, respectively.  The Company expenses leasing commissions as incurred associated with the lease-up of a development community.

Co-investments

The Company owns investments in joint ventures (“co-investments”) in which it has significant influence, but its ownership interest does not meet the criteria for consolidation in accordance with the accounting standards.  Therefore, the Company accounts for these 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-investments entities are consistent with those of the Company in all material respects.  For preferred equity investments the Company recognizes its preferred interest as equity in earnings.

11

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2013 and 2012

(Unaudited)

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 operations 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 may provide promote distributions 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.

Changes in Accumulated Other Comprehensive Loss, Net by Component

	Change in fair  value and amortization  of derivatives			Unrealized  gains/(losses) on  available for sale  securities			Total
Balance at December 31, 2012	$	(71,658	)	$	2,397		$	(69,261	)
Other comprehensive income (loss) before reclassification		4,528			(430	)		4,098
Amounts reclassified from accumulated other  comprehensive loss		4,023			(1,673	)		2,350
Net other comprehensive income (loss)		8,551			(2,103	)		6,448
Balance at June 30, 2013	$	(63,107	)	$	294		$	(62,813	)

Amounts reclassified from accumulated other comprehensive loss in connection with derivatives are recorded in interest expense before amortization on the condensed consolidated statement of operations and comprehensive income.  Realized gains and losses on available for sale securities are included in interest and other income on the condensed consolidated statement of operations and comprehensive income.

Accounting Estimates

The preparation of condensed consolidated financial statements, in accordance with U.S. generally accepted accounting principles, 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.

(2)  Significant Transactions During the Second Quarter of 2013 and Subsequent Events

Acquisitions

In May, the Wesco III, LLC (“Wesco III”) joint venture of which the Company has a 50% interest, acquired Regency at Mountain View located in Mountain View, California for $42.5 million.  Built in 1970, the property has 142 units and is located in close proximity to high tech jobs, retail and entertainment venues.

In late June, Wesco III purchased Gas Company Lofts located in Los Angeles, California for $71.0 million.  The property contains 251 apartment homes in three buildings which were built in 1924, 1940 and 1959, respectively, and the property went through a full adaptive reuse renovation in 2004 to convert space into loft-style apartments.

Dispositions

In May, the Essex Apartment Value Fund II L.P. (“Fund II”) joint venture of which the Company has a 28.2% ownership interest, sold Morning Run which has 222 apartment homes for gross proceeds of $26.4 million.  In connection with the sale, Fund II incurred a prepayment penalty on debt of which the Company’s pro rata share was $0.2 million.

Subsequent to quarter end, Fund II sold three additional properties for gross proceeds of $244.0 million.

12

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2013 and 2012

(Unaudited)

Secured Debt

During the quarter, the Company repaid two secured loans totaling $27.3 million and incurred $0.2 million loss on early retirement of debt.  In addition, the Company repaid $14.2 million of Mello Roos bonds related to one property which resulted in a $1.5 million gain on early retirement of debt.  As of June 30, 2013, the Company had $621 million in undrawn capacity on its unsecured credit facilities.

Structured Financing

In June, the Company received cash of $13.1 million from the redemption of a preferred equity investment related to one property located in Los Angeles.  The Company recorded $0.5 million of income from prepayment penalties due to the early termination of the agreement.

(3) Co-investments

The Company has co-investments, which are accounted for under the equity method.  The co-investments own, operate and develop apartment communities.  The following table details the Company's co-investments (dollars in thousands):

	June 30,		December 31,
	2013		2012
Membership interest in Wesco I	$	142,704	$	143,874
Membership interest in Wesco III		37,917		9,941
Partnership interest in Fund II		23,945		53,601
Membership interest in a limited liability company that owns Expo		18,989		18,752
Total operating co-investments		223,555		226,168
Membership interests in limited liability companies that own and are developing Epic, Connolly Station, Mosso I & II and Elkhorn		229,095		186,362
Membership interests in limited liability companies that own and are developing The Huxley and The Dylan		17,381		16,552
Membership interest in a limited liability company that owns and is developing One South Market		16,908		-
Total development co-investments		263,384		202,914
Membership interest in Wesco II that owns a preferred equity interest in Parkmerced with a preferred return of 10.1%		93,273		91,843
Preferred interest in related party limited liability company that owns Sage at Cupertino with a preferred return of  9.5%		15,493		14,438
Preferred interest in a related party limited liability company that owns Madison Park at Anaheim with a preferred return of 13%		13,536		13,175
Preferred interest in related party limited liability company that owns an apartment development in Redwood City with a preferred return of 9.5%		9,018		-
Preferred interests in limited liability companies that own apartment communities in downtown Los Angeles with preferred returns of 9% and 10% repaid in 2013		-		22,807
Total preferred interest investments		131,320		142,263
Total co-investments	$	618,259	$	571,345

In January 2013, the Company invested $8.6 million as a preferred equity interest investment in an apartment development in Redwood City, California.  The investment has a preferred return of 9.5% and matures in January 2016.

13

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2013 and 2012

(Unaudited)

In March 2013, the Company received the redemption of $9.7 million of preferred equity related to two properties located in downtown Los Angeles.  The Company recorded $0.4 million in redemption penalties due to the early redemption of these preferred equity investments. 

In June 2013, the Company received the redemption of $13.1 million of preferred equity related to a property located in downtown Los Angeles.  The Company recorded $0.5 million in redemption penalties due to the early redemption of these preferred equity investments. 

The combined summarized balance sheet and statements of operations for co-investments are as follows (dollars in thousands).

	June 30,		December 31,
	2013		2012
Balance sheets:
Rental properties and real estate under development	$	1,769,246	$	1,745,147
Other assets		65,238		168,061
Total assets	$	1,834,484	$	1,913,208
Debt	$	663,830	$	820,895
Other liabilities		147,356		91,922
Equity		1,023,298		1,000,391
Total liabilities and equity	$	1,834,484	$	1,913,208
Company's share of equity	$	618,259	$	571,345

`	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
Statements of operations:
Property revenues	$	26,258		$	28,233		$	54,117		$	62,556
Property operating expenses		(9,874	)		(10,029	)		(19,702	)		(23,166	)
Net property operating income		16,384			18,204			34,415			39,390
Interest expense		(6,094	)		(7,792	)		(12,872	)		(16,337	)
General and administrative		(1,539	)		(920	)		(3,053	)		(1,716	)
Depreciation and amortization		(9,577	)		(8,876	)		(20,596	)		(22,772	)
Net (loss) income	$	(826	)	$	616		$	(2,106	)	$	(1,435	)
Company's share of net income	$	7,282		$	3,111		$	11,493		$	5,451

14

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2013 and 2012

(Unaudited)

(4) Notes and Other Receivables

Notes receivable secured by real estate, and other receivables consist of the following as of June 30, 2013 and December 31, 2012 (dollars in thousands):

	June 30,		December 31,
	2013		2012
Note receivable, secured, bearing interest at 4.0%, due December 2014 (1)	$	3,212	$	3,212
Notes and other receivables from affiliates (2)		103,869		28,896
Other receivables		3,463		3,785
Note receivable, secured, bearing interest at 8.0%, paid in full in May 2013		-		971
Note receivable, secured, bearing interest at 8.8%, paid in full March 2013		-		10,800
Note receivable, secured, effective interest at 9.6%, paid in full March 2013		-		18,499
	$	110,544	$	66,163

(1) The borrower funds an impound account for capital replacement.

(2) During the second quarter of 2013, the Company provided short-term bridge loans to Fund II and Wesco III of $42.4 million and $56.8 million, respectively, at rates of LIBOR + 1.75% and LIBOR + 2.50%, respectively.

During the six months ended June 30, 2013,  the Company received the repayment of three notes receivables totaling $30.5 million.  One of the notes was repaid early, and as such the Company recorded $0.8 million of income related to a change in estimate on the discount to the note receivable.

In March 2013, Wesco III repaid the Company for a $26.0 million short-term bridge loan to assist with the purchase of Haver Hill.  Wesco III used the proceeds from a $27.3 million loan secured by Haver Hill at 3.1% for a term of seven years to repay the bridge loan.

In July 2013, Fund II repaid the Company for $42.4 million in short-term loans.

(5) Related Party Transactions

Fees earned from affiliates include management, development and redevelopment fees from co-investments of $3.2 million and $2.6 million during the three months ended June 30, 2013 and 2012, respectively, and $6.0 million and $4.9 million during the six months ended June 30, 2013 and 2012, respectively .  All of these fees are net of intercompany amounts eliminated by the Company.

The Company’s Chairman and founder, Mr. George Marcus, is the Chairman of The Marcus & Millichap Company (“TMMC”), which is a holding company for certain real estate brokerage services and other subsidiary companies.  Fund II paid a brokerage commission totaling $0.6 million to an affiliate of TMMC related to the sale of a property in July 2013.  No brokerage commissions were paid to TMMC by the Company during the three and six months ended June 30, 2013 and 2012, respectively.  As described in Note 3, the Company invested $8.6 million as a preferred equity interest investment in an entity affiliated with TMMC that owns an apartment development in Redwood City, California.  Independent members of the Company’s Board of Directors that serve on the Nominating and Corporate Governance and Audit Committees approved the investment in this entity.

As described in Note 4, the Company has provided short-term bridge loans to affiliates.  As of July 31, 2013, two loans have been repaid and two loans remain outstanding totaling $56.8 million.  The bridge loans to Wesco III are expected to be repaid by September 30, 2013.

15

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2013 and 2012

(Unaudited)

(6) Unsecured Debt and Lines of Credit

Unsecured debt and lines of credit consist of the following as of June 30, 2013 and December 31, 2012 ($ in thousands):

	June 30,			December 31,			Weighted Average Maturity
	2013			2012			In Years
Bonds private placement - fixed rate	$	465,000		$	465,000			5.7
Term loan - variable rate		350,000			350,000			3.7
Bonds public offering - fixed rate		594,744			297,084			9.5
Unsecured debt		1,409,744			1,112,084
Lines of credit		4,370			141,000			0.6
Total unsecured debt and lines of credit	$	1,414,114		$	1,253,084
Weighted average interest rate on fixed rate unsecured bonds		4.0	%		4.2	%
Weighted average interest rate on variable rate term loan		2.6	%		2.7	%
Weighted average interest rate on line of credit		2.3	%		2.3	%

In April 2013, the Company issued $300 million aggregate principal amount of its 3.25% Senior Notes due on May 1, 2023.

(7) Segment Information

The Company defines its reportable operating segments as the three geographical regions in which its apartment communities are located: Southern California, Northern California and Seattle Metro.  Excluded from segment revenues are properties classified in discontinued operations, management and other fees from affiliates, and interest and other income.  Non-segment revenues and net operating income included in the following schedule also consist of revenue generated from commercial properties.  Other non-segment assets include real estate under development, co-investments, cash and cash equivalents, marketable securities, notes and other receivables, prepaid expenses and other assets and deferred charges.

16

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2013 and 2012

(Unaudited)

The revenues, net operating income, and assets for each of the reportable operating segments are summarized as follows for the three and six months ended June 30, 2013 and 2012 (dollars in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
Revenues:
Southern California	$	66,232		$	61,356		$	132,061		$	119,916
Northern California		53,089			42,570			103,859			84,192
Seattle Metro		27,081			22,668			53,408			44,977
Other real estate assets		3,768			3,171			7,237			6,153
Total property revenues	$	150,170		$	129,765		$	296,565		$	255,238
Net operating income:
Southern California	$	44,464		$	41,106		$	88,897		$	80,937
Northern California		36,462			29,226			71,746			58,168
Seattle Metro		17,792			14,841			35,164			29,673
Other real estate assets		2,715			2,175			5,257			3,878
Total net operating income		101,433			87,348			201,064			172,656
Management and other fees		3,234			2,796			6,182			5,240
Depreciation		(48,031	)		(41,801	)		(95,175	)		(82,535	)
General and administrative		(6,224	)		(5,764	)		(12,850	)		(11,164	)
Cost of management and other fees		(1,733	)		(1,611	)		(3,434	)		(3,251	)
Interest expense before amortization		(26,325	)		(24,659	)		(51,536	)		(49,316	)
Amortization expense		(3,002	)		(2,882	)		(5,932	)		(5,754	)
Interest and other income		1,917			5,455			6,939			7,868
Equity income from co-investments		7,282			3,111			11,493			5,451
Gain (loss) on early retirement of debt		1,024			(1,450	)		1,024			(1,450	)
Gain on sale of land		-			-			1,503			-
Gain on remeasurement of co-investment		-			21,947			-			21,947
Income from continuing operations	$	29,575		$	42,490		$	59,278		$	59,692

Total assets for each of the reportable operating segments are summarized as follows as of June 30, 2013 and December 31, 2012:

	June 30,		December 31,
	2013		2012
Assets:
Southern California	$	1,654,746	$	1,675,265
Northern California		1,625,567		1,489,095
Seattle Metro		707,473		699,465
Other real estate assets		87,151		88,330
Net reportable operating segment - real estate assets		4,074,937		3,952,155
Real estate under development		70,242		66,851
Co-investments		618,259		571,345
Cash and cash equivalents, including restricted cash		45,384		42,126
Marketable securities		88,734		92,713
Notes and other receivables		110,544		66,163
Other non-segment assets		50,898		55,870
Total assets	$	5,058,998	$	4,847,223

17

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2013 and 2012

(Unaudited)

(8)  Net Income Per Common Share

(Amounts in thousands, except per share and unit data)

	Three Months Ended						Three Months Ended
	June 30, 2013						June 30, 2012
	Income		Weighted- average Common Shares		Per Common Share Amount		Income		Weighted- average Common Shares		Per Common Share Amount
Basic:
Income from continuing operations available to common stockholders	$	24,946		37,293	$	0.67	$	37,078		34,571	$	1.07
Effect of Dilutive Securities (1)		-		98				54		137
Diluted:
Income from continuing operations available to common stockholders	$	24,946		37,391	$	0.67	$	37,132		34,708	$	1.07

	Six Months Ended						Six Months Ended
	June 30, 2013						June 30, 2012
	Income		Weighted Average Common Shares		Per Common Share Amount		Income		Weighted Average Common Shares		Per Common Share Amount
Basic:
Income before discontinued operations available to common stockholders	$	50,149		37,149	$	1.35	$	50,379		34,299	$	1.47
Income from discontinued operations     available to common stockholders		-		37,149		-		9,421		34,299		0.27
		50,149			$	1.35		59,800			$	1.74
Effect of Dilutive Securities (1)		-		93				108		132
Diluted:
Income from continuing operations available to common stockholders (1)		50,149		37,242		1.35	$	50,487		34,431		1.47
Income from discontinued operations available to common stockholders		-		37,242		-		9,421		34,431		0.27
	$	50,149			$	1.35	$	59,908			$	1.74

(1) Weighted average convertible limited partnership units of 2,151,494 and 2,239,057, which include vested Series Z-1 incentive units, for the three months ended June 30, 2013, and 2012, respectively, and 2,115,670 and 2,242,112 for the six months ended June 30, 2013 and 2012, respectively, were not included in the determination of diluted EPS because they were anti-dilutive.  Income allocated to convertible limited partnership units, which includes vested Series Z-1 units, aggregating $1.5 million and $2.5 million for the three months ended June 30, 2013 and 2012, respectively, and $3.0 million and $4.1 million for the six months ended June 30, 2013 and 2012, respectively, have been excluded from income available to common stock holders for the calculation of diluted income per common share since these units are excluded from the diluted weighted average common shares for the period as the effect was anti-dilutive.  The Company has the ability to redeem DownREIT limited partnership units for cash and does not consider them to be potentially dilutive securities.

Stock options of 20,825 and 41,557 for the three and six months ended June 30, 2013, respectively, were not included in the diluted earnings per share calculation because the effects on earnings per share were anti-dilutive.

All shares of Series G cumulative convertible preferred stock have been excluded in diluted earnings per share for the three and six months ended June 30, 2013, respectively, as the effect was anti-dilutive.

18

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2013 and 2012

(Unaudited)

(9)  Derivative Instruments and Hedging Activities

The Company has entered into interest rate swap contracts with an aggregate notional amount of $300 million that effectively fixed the interest rate on $300 million of the $350 million unsecured term loan at 2.29%.  These derivatives qualify for hedge accounting.

As of June 30, 2013 the Company also had eleven interest rate cap contracts totaling a notional amount of $186.1 million that qualify for hedge accounting as they effectively limit the Company’s exposure to interest rate risk by providing a ceiling on the underlying variable interest rate for substantially all of the Company’s tax exempt variable rate debt.

As of June 30, 2013 and December 31, 2012 the aggregate carrying value of the interest rate swap contracts was a liability of $1.9 million and $6.6 million, respectively. The aggregate carrying value of the interest rate cap contracts was zero on the balance sheet as of June 30, 2013 and December 31, 2012, respectively.

(10)  Discontinued Operations

The Company classifies real estate as "held for sale" when the sale is considered to be probable.  The Company had no communities sold or held for sale for the six months ended June 30, 2013.

During the first quarter of 2012, the Company sold Tierra Del Sol/Norte, a 156 unit community located in San Diego, California for $17.2 million for a gain of $7.0 million.  Also in the first quarter of 2012, the Company sold Alpine Country, a 108 unit community located in San Diego metropolitan area, for $11.1 million for a gain of $3.9 million.

The components of discontinued operations are outlined below and include the results of operations for the respective periods that the Company owned such assets, as described above (dollars in thousands).

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Rental revenues	$	-	$	-	$	-	$	608
Property operating expenses		-		-		-		(260	)
Depreciation and amortization		-		-		-		(94	)
Income from real estate sold		-		-		-		254
Gain on sale		-		-		-		10,870
Internal dispositon costs and taxes		-		-		-		(1,087	)
Income from discontinued operations	$	-	$	-	$	-	$	10,037

(11)  Commitments and Contingencies

As of June 30, 2013, the Company had six non-cancelable ground leases for certain apartment communities and buildings that expire between 2027 and 2080.  Ground lease payments are typically the greater of a stated minimum or a percentage of gross rents generated by these apartment communities.  Total minimum lease commitments, under ground leases and operating leases, are approximately $1.7 million per year for the next five years.

To the extent that an environmental matter arises or is identified in the future that has other than a remote risk of having a material impact on the financial statements, the Company will disclose the estimated range of possible outcomes, and, if an outcome is probable, accrue an appropriate liability for remediation and other potential liability. The Company will consider whether such occurrence results in an impairment of value on the affected property and, if so, impairment will be recognized.

The Company provided a payment guarantee to the counterparties in relation to the total return swaps entered into by the joint venture responsible for the development of The Huxley (formerly Fountain at La Brea) and The Dylan (formerly Santa Monica at La Brea) communities.  Further the Company has guaranteed completion of development and made certain debt service guarantees for The Huxley and The Dylan.  The outstanding balance for the loans is included in the debt line item in the balance sheet of the co-investments included in Note 3.  The payment guarantee is for the payment of the amounts due to the counterparty related to the total return swaps which are scheduled to mature in September and December 2016.  The maximum exposure of the guarantee as of June 30, 2013 was $79.1 million based on the aggregate outstanding debt amount.

19

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2013 and 2012

(Unaudited)

The Company is subject to various other lawsuits in the normal course of its business operations.  Such lawsuits are not expected to have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the Company’s Condensed Consolidated Financial Statements and accompanying Notes thereto included elsewhere herein and with the Company’s 2012 Annual Report on  Form 10-K for the year ended December 31, 2012.

The Company is a fully integrated Real Estate Investment Trust (“REIT”), and its property revenues are generated primarily from apartment community operations.  The Company’s investment strategy has two components:  constant monitoring of existing markets, and evaluation of new markets in the Company’s current three geographical regions to identify areas with the characteristics that underlie rental growth.  The Company’s strong financial condition supports its investment strategy by enhancing its ability to quickly shift the Company’s acquisition, development, and disposition activities to markets that will optimize the performance of the portfolio.

As of June 30, 2013, the Company had ownership interests in 167 apartment communities, comprising 34,514 apartment units, excluding the Company’s ownership in preferred equity interest co-investments, and the Company also had ownership interests in five commercial buildings with approximately 315,900 square feet.  The Company’s apartment communities are located in the following major West Coast regions:

Southern California (Los Angeles, Orange, Riverside, San Diego, Santa Barbara, and Ventura counties)

Northern California (the San Francisco Bay Area)

Seattle Metro (Seattle metropolitan area)

As of June 30, 2013, the Company’s development pipeline was comprised of two consolidated projects under development, seven unconsolidated joint venture projects under development, two consolidated predevelopment projects, and one unconsolidated joint venture predevelopment project, all aggregating 2,981 units, with total incurred costs of $625.7 million, and estimated remaining project costs of approximately $446.7 million for total estimated project costs of $1.07 billion.

The Company’s consolidated apartment communities are as follows:

	As of June 30, 2013					As of June 30, 2012
	Apartment Units		%			Apartment Units		%
Southern California		13,656		46	%		13,656		49	%
Northern California		9,431		32	%		8,206		29	%
Seattle Metro		6,720		22	%		6,168		22	%
Total		29,807		100	%		28,030		100	%

Co-investments, including Essex Apartment Value Fund II, L.P. ("Fund II"), and Wesco I, LLC ("Wesco I")  and Wesco III, LLC ("Wesco III")  communities, and preferred equity interest co-investment communities are not included in the table presented above for both periods.

Comparison of the Three Months Ended June 30, 2013 to the Three Months Ended June 30, 2012

The Company’s average financial occupancies for the Company’s stabilized apartment communities or “Quarterly Same-Property” (stabilized properties consolidated by the Company for the quarters ended June 30, 2013 and 2012) decreased 30 basis points to 96.0% as of June 30, 2013 from 96.3% as of June 30, 2012.  Financial occupancy is defined as the percentage resulting from dividing actual rental revenue by total possible rental revenue.  Actual rental revenue represents contractual rental revenue pursuant to leases without considering delinquency and concessions.  Total possible rental revenue represents the value of all apartment units, with occupied units valued at contractual rental rates pursuant to leases and vacant units valued at estimated market rents.  We believe that financial occupancy is a meaningful measure of occupancy because it considers the value of each vacant unit at its estimated market rate.

20

Market rates are determined using a variety of factors such as effective rental rates at the property based on recently signed leases and asking rates for comparable properties in the market.  The recently signed effective rates at the property are used as the starting point in the determination of the market rates of vacant units.  The Company then increases or decreases these rates based on the supply and demand in the apartment community’s market.  The Company will check the reasonableness of these rents based on its position within the market and compare the rents against the asking rents by comparable properties in the market.  Financial occupancy may not completely reflect short-term trends in physical occupancy and financial occupancy rates as disclosed by other REIT, which may not be comparable to the Company’s calculation of financial occupancy.

The Company does not take into account delinquency and concessions to calculate actual rent for occupied units and market rents for vacant units.  The calculation of financial occupancy compares contractual rates for occupied units to estimated market rents for unoccupied units, thus the calculation compares the gross value of all apartment units excluding delinquency and concessions. For apartment communities that are development properties in lease-up without stabilized occupancy figures, the Company believes the physical occupancy rate is the appropriate performance metric.  While an apartment community is in the lease-up phase, the Company’s primary motivation is to stabilize the property which may entail the use of rent concessions and other incentives, and thus financial occupancy which is based on contractual revenue is not considered the best metric to quantify occupancy.

The regional breakdown of the Company’s Quarterly Same-Property portfolio for financial occupancy for the three months ended June 30, 2013 and 2012 is as follows:

	Three months ended
	June 30,
	2013			2012
Southern California		95.8	%		96.0	%
Northern California		96.4	%		96.8	%
Seattle Metro		96.0	%		96.2	%

The following table provides a breakdown of revenue amounts, including revenues attributable to the Quarterly Same-Property portfolio:

			Three Months Ended
	Number of		June 30,				Dollar		Percentage
	Properties		2013		2012		Change		Change
Property Revenues(dollars in thousands)
Quarterly Same-Property:
Southern California		61	$	61,299	$	58,805	$	2,494		4.2	%
Northern California		35		45,460		42,128		3,332		7.9
Seattle Metro		30		23,615		21,903		1,712		7.8
Total Quarterly Same-Property revenues		126		130,374		122,836		7,538		6.1
Quarterly Non-Same Property Revenues (1)				19,796		6,929		12,867		185.7
Total property revenues			$	150,170	$	129,765	$	20,405		15.7	%

(1) Includes twelve communities acquired after January 1, 2012, one redevelopment community and one commercial building.

Quarterly Same-Property Revenues increased by $7.5 million or 6.1% to $130.4 million in the second quarter of 2013 from $122.8 million in the second quarter of 2012.  The increase was primarily attributable to an increase in scheduled rents of $7.4 million as reflected in an increase of 6.2% in average rental rates from $1,483 per unit in the second quarter of 2012 to $1,574 per unit in the second quarter of 2013.  Scheduled rents increased by 4.1%, 8.3%, and 7.7% in Southern California, Northern California, and Seattle Metro, respectively.  Quarterly Same-Property financial occupancy decreased 30 basis points from the second quarter of 2012 which offset the increase in Quarterly Same-Property Revenues by $1.2 million.   Vacancy loss of $0.4 million was caused by additional redevelopment activity at the properties compared to the second quarter of 2012.  On a sequential basis the Company experienced Quarterly Same-Property revenue growth from the first quarter of 2013 to the second quarter of 2013 of $1.8 million or 1.4%, resulting from sequential revenue growth in all three regions mainly driven by a 1.8% increase in scheduled rents and an offset by a decrease of 60 basis points in occupancy compared to the first quarter of 2013.

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Quarterly Non-Same Property Revenues increased by $12.9 million or 186% to $19.8 million in the second quarter of 2013 from $6.9 million in the second quarter of 2012.  The increase was primarily due to revenue generated from twelve communities acquired or consolidated since January 1, 2012 (Reed Square, Essex Skyline at MacArthur Place, Park Catalina, The Huntington, Montebello, Park West, Domaine, Ascent, Willow Lake, Bennett Lofts, Annaliese and Fox Plaza).

Management and Other Fees increased by $0.4 million in the second quarter of 2013 as compared to the second quarter of 2012.  The increase is primarily due to the asset and property management fees earned from Wesco I and III co-investments formed during 2012, and development fees earned from the joint ventures formed in 2012 and 2013 to develop Epic, Expo, Connolly Station, Elkhorn, Mosso I and II, The Huxley, The Dylan, The Village, and One South Market.  The increase in management fees was offset by a reduction of $0.4 million in asset and property management fees from the sale of eight Fund II communities since the fourth quarter of 2012.  Three communities owned by Fund II were sold in July 2013, and the remaining three communities are expected to be sold in the next twelve months.

Property operating expenses, excluding real estate taxes increased $3.8 million or 12.3% to $34.5 million in the second quarter of 2013 from $30.7 million in the second quarter of 2012, primarily due to the acquisition of twelve communities.  Quarterly Same-Property operating expenses excluding real estate taxes, increased by $1.0 million or 3.5% for the second quarter of 2013 compared to the second quarter of 2012, due to a $0.5 million increase in repairs and maintenance expense, and a $0.4 million increase in utility expense.

Real Estate taxes increased by $2.5 million or 21.8% for the second quarter of 2013 compared to the second quarter of 2012, due primarily to the acquisition of twelve communities.  Quarterly Same-Property real estate taxes increased by $0.7 million or 6.3% for second quarter of 2013 compared to the second quarter of 2012 due to $0.4 million or a 21% increase in property taxes for the Seattle Metro due to higher assessed values for 2013, and an increase of 2% in property taxes for the majority of the properties located in California.

Depreciation expense increased by $6.2 million or 14.9% for the second quarter of 2013 compared to the second quarter of 2012, due to the acquisition of twelve communities.  Also, the increase is due to the capitalization of approximately $40.6 million in additions to rental properties through the second quarter of 2013, including $17.6 million spent on redevelopment, and $6.3 million on improvements to recent acquisitions, and the capitalization of approximately $97.9 million in additions to rental properties in 2012, including $40.2 million spent on redevelopment, $13.7 million spent on improvement to recent acquisitions, and $7.7 million spent on revenue generating capital expenditures.

General and administrative expense increased $0.5 million or 8.0% for second quarter of 2013 compared to the second quarter of 2012 primarily due to annual compensation adjustments for merit, investments in technology, and the cost of hiring additional staff.

Interest expense before amortization increased $1.7 million or 6.8% for second quarter of 2013 compared to the second quarter of 2012 due to an increase in average outstanding debt for the funding of 2012 and 2013 acquisitions and development pipeline.

Interest and other income decreased by $3.5 million for the second quarter of 2013 compared to 2012 primarily due to $2.3 million of promote income earned from achieving performance hurdles related to the Essex Skyline co-investment and the sale of marketable securities for a gain of $0.5 million in the second quarter of 2012, and a decrease in interest income in 2013 due to the repayment of the Reserve Lofts note receivable at the end of the first quarter of 2013.

Equity income in co-investments increased $4.2 million in the second quarter of 2013 compared to the second quarter of 2012 primarily due to the gain on $2.4 million from the sale of a Fund II community and $0.5 million income earned from the early prepayment of a preferred equity investment, and income earned from four communities acquired by the Wesco joint ventures in the second half of 2012 and two communities in the second quarter of 2013.  The increases in equity income in the second quarter of 2013 were offset by the sale of eight communities owned by Fund II since the fourth quarter of 2012.

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Gain (loss) on early retirement of debt was a loss of $1.5 million for the second quarter of 2012 due to the prepayment of secured debt.  A gain of $1.5 million was recognized during the quarter ended June 30, 2013 from the redemption of the Mello Roos bonds related to one community.  This gain was offset by $0.4 million loss incurred from prepayment of secured debt in the three months ended June 30, 2013.  The loss included the write-off of deferred financing and prepayment penalties associated with the prepayment of secured debt.

Gain on remeasurement of co-investment of $21.9 million for the second quarter of 2012was due to the Company’s acquisition of the joint venture partner’s membership interest in Essex Skyline at MacArthur Place which the Company subsequently consolidated.  Upon consolidation, a gain was recorded equal to the amount by which the fair value of the Company’s noncontrolling interest exceeded its carrying value.

Comparison of the Six Months Ended June 30, 2013 to the Six Months Ended June 30, 2012

Our average financial occupancies for the Company’s stabilized apartment communities or “2013/2012 Same-Property” (stabilized properties consolidated by the Company for the six months ended June 30, 2013 and 2012) decreased 30 basis points to 96.3% for the six months ended June 30, 2013 from 96.6% for the six months ended June 30, 2012.

The regional breakdown of the Company’s 2013/2012 Same-Property portfolio for financial occupancy for the six months ended June 30, 2013 and 2012 is as follows:

	Six Months Ended
	June 30,
	2013			2012
Southern California		96.2	%		96.3	%
Northern California		96.6	%		97.0	%
Seattle Metro		96.3	%		96.5	%

The following table provides a breakdown of revenue amounts, including revenues attributable to the 2013/2012 Same-Property portfolio:

			Six Months Ended
	Number of		June 30,				Dollar		Percentage
	Properties		2013		2012		Change		Change
Property Revenues(dollars in thousands)
2013/2012 Same-Properties:
Southern California		61	$	122,288	$	117,365	$	4,923		4.2	%
Northern California		35		89,996		83,464		6,532		7.8
Seattle Metro		30		46,660		43,469		3,191		7.3
Total 2013/2012 Same-Property revenues		126		258,944		244,298		14,646		6.0
2013/2012 Non-Same Property Revenues (1)				37,621		10,940		26,681		243.9
Total property revenues			$	296,565	$	255,238	$	41,327		16.2	%

(1) Includes twelve communities acquired after January 1, 2012, one redevelopment community and one commercial building.

2013/2012 Same-Property Revenues increased by $14.6 million or 6.0% to $258.9 million for the six months ended June 30, 2013 from $244.3 million for the six months ended June 30, 2012.  The increase was primarily attributable to an increase in scheduled rents of $14.6 million as reflected in an increase of 6.2% in average rental rates from $1,469 per unit for the six months ended June 30, 2012 to $1,560 per unit for the six months ended June 30, 2013.  Scheduled rents increased by 4.0%, 8.3%, and 7.7% in Southern California, Northern California, and Seattle Metro, respectively.  Income from utility billings and other income also increased $0.9 million, compared to the six months ended June 30, 2012.  2013/2012 Same-Property financial occupancy decreased 30 basis points from the first six months ended June 30, 2012 which offset the increase in 2013/2012 Same-Property Revenues by $1.7 million.   Vacancy loss of $0.6 million was caused by additional redevelopment activity at the properties compared to the first six months ended June 30, 2012.

2013/2012 Non-Same Property Revenues increased by $26.7 million or 244% to $37.6 million for the six months ended June 30, 2013 from $10.9 million for the six months ended June 30, 2012.  The increase was primarily due to revenue generated from twelve communities acquired or consolidated since January 1, 2012 (Reed Square, Essex Skyline at MacArthur Place, Park Catalina, The Huntington, Montebello, Park West, Domaine, Ascent, Willow Lake, Bennett Lofts, Annaliese and Fox Plaza).

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Management and Other Fees increased by $0.9 million for the six months ended June 30, 2013 as compared to the six months ended June 30, 2012.  The increase is primarily due to the asset and property management fees earned from Wesco I and II co-investments formed during 2012, and development fees earned from the development joint ventures formed in 2013 and 2012 to develop Epic, Expo, Connolly Station, Elkhorn, Mosso I and II, The Huxley, The Dylan, The Village, and One South Market.  The increase in management fees was offset by a reduction of $0.9 million in asset and property management fees from the sale of eight Fund II communities since the fourth quarter of 2012.  Three communities owned by Fund II were sold in July 2013, and the remaining three communities are expected to be sold in the next twelve months.

Property operating expenses, excluding real estate taxes increased $7.6 million or 12.8% to $67.1 million for the six months ended June 30, 2013 from $59.5 million for the six months ended June 30, 2012, primarily due to the acquisition of twelve communities.  2013/2012 Same-Property operating expenses excluding real estate taxes, increased by $2.3 million or 4.1% for the six months ended June 30, 2013 compared to 2012, due to a $1.2 million increase in repairs and maintenance expense, a $0.6 million increase in utility expense and administrative costs, respectively.

Real Estate taxes increased by $5.3 million or 22.9% for the six months ended June 30, 2013 compared to the six months ended June 30, 2012, due primarily to the acquisition of twelve communities.  2013/2012 Same-Property real estate taxes increased by $1.5 million or 6.7% for the six months ended June 30, 2013 compared to June 30, 2012 due to $0.9 million or a 23% increase in property taxes for the Seattle Metro due to higher assessed values for 2013, and an increase of 2% in property taxes for the majority of the properties located in California.

Depreciation expense increased by $12.6 million or 15.3% for the six months ended June 30, 2013 compared to the six months ended June 30, 2012, due to the acquisition of twelve communities.  Also, the increase is due to the capitalization of approximately $40.6 million in additions to rental properties through the second quarter of 2013, including $17.6 million spent on redevelopment, and $6.3 million on improvements to recent acquisitions, and the capitalization of approximately $97.9 million in additions to rental properties in 2012, including $40.2 million spent on redevelopment, $13.7 million spent on improvement to recent acquisitions, and $7.7 million spent on revenue generating capital expenditures.

General and administrative expense increased $1.7 million or 15.1% for six months ended June 30, 2013 compared to the six months ended June 30, 2012, primarily due to annual compensation adjustments for merit, investments in technology, and the cost of hiring additional staff.

Interest expense before amortization increased $2.2 million or 4.5% for six months ended June 30, 2013 compared to the six months ended June 30, 2012, due to an increase in average outstanding debt for the funding of 2012 and 2013 acquisitions and development pipeline.

Interest and other income decreased by $0.9 million for the six months ended June 30, 2013 compared to the six months ended June 30, 2012, due to $2.3 million of promote income earned from achieving certain performance hurdles related to the Essex Skyline co-investment and the sale of marketable securities for a gain of $0.5 million for the six months ended June 30, 2012, compared to a gain of $1.8 million earned from the sale of marketable securities during the first six months ended June 30, 2013.

Equity income (loss) in co-investments increased $6.0 million for the six months ended June 30, 2013 compared to the six months ended June 30, 2012, primarily due to the gain on $2.4 million from the sale of a Fund II community and $0.9 million income earned from the early prepayment of a preferred equity investments in 2013, and income earned from four communities acquired by the Wesco joint ventures in the second half of 2012 and two communities in the second quarter of 2013.  The increases in equity income in 2013 were offset by the sale of eight communities owned by Fund II since the fourth quarter of 2012.

Gain (loss) on early retirement of debt was a gain of $1.0 million for the six months ended June 30, 2013 compared to a loss of $1.5 million for the six months ended June 30, 2012 due to the gain of $1.5 million earned from the redemption of Mello Roos bonds related to one community in 2013.  This gain was offset by $0.4 million loss incurred from prepayment of secured debt, and for the six months ended June 30, 2013.  The loss included the write-off of deferred financing and prepayment penalties associated with the prepayment of secured debt.

Gain on remeasurement of co-investment of $21.9 million for the first six months of June 30, 2012was due to the Company’s acquisition of the joint venture partner’s membership interest in Essex Skyline at MacArthur Place which the Company subsequently consolidated.  Upon consolidation, a gain was recorded equal to the amount by which the fair value of the Company’s noncontrolling interest exceeded its carrying value.

Income from discontinued operations for the first six months of June 30, 2013 was $0 compared to income for the six months ended June 30, 2012 of $10.0 million and included a gain of $9.8 million from the sale of Tierra del Sol/Norte and Alpine Country along with the operating results for these properties net of internal disposition costs.

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Liquidity and Capital

As of June 30, 2013, Fitch Ratings ("Fitch"), Moody’s Investor Service, and Standard and Poor's (“S&P”) credit agencies rated Essex Property Trust, Inc. and Essex Portfolio, L.P. BBB+/Stable, Baa2/Stable, and BBB/Stable, respectively.

As of June 30, 2013, the Company had $20.2 million of unrestricted cash and cash equivalents and $88.7 million in marketable securities, of which $33.9 million were held available for sale.  We believe that cash flows generated by our operations, existing cash, cash equivalents, and marketable securities balances, availability under existing lines of credit, access to capital markets and the ability to generate cash from the disposition of real estate are sufficient to meet all of our reasonably anticipated cash needs during the next twelve months.  The timing, source and amounts of cash flows provided by financing activities and used in investing activities are sensitive to changes in interest rates and other fluctuations in the capital markets environment, which can affect our plans for acquisitions, dispositions, development and redevelopment activities.

The Company has two lines of unsecured credit aggregating $625.0 million.  As of June 30, 2013 there was no balance outstanding on the $600 million unsecured line.  The underlying interest rate on the $600 million line is based on a tiered rate structure tied to the Company's credit ratings on the credit facility and the rate was LIBOR + 1.075% as of June 30, 2013.  This facility matures in December 2015 with two one-year extensions, exercisable by the Company.  The Company has a working capital unsecured line of credit agreement for $25.0 million.  This facility matures in January 2014, with a one year extension option.  As of June 30, 2013, there was a $4.4 million outstanding balance on the $25 million unsecured line.  The underlying interest rate on the $25.0 million line is based on a tiered rate structure tied to Fitch and S&P ratings on the credit facility of LIBOR plus 1.075%.

On March 29, 2013, the Company entered into equity distribution agreements with Cantor Fitzgerald & Co, Barclays Capital Inc., BMO Capital Markets Corp., BNP Paribas Securities Corp., Liquidnet, Inc., Mitsubishi UFJ Securities (USA), Inc., and Citigroup Global Markets Inc., which superseded the equity distribution agreements entered into in March 2012 with Cantor Fitzgerald & Co, KeyBanc Capital Markets Inc., Barclays Capital Inc., BMO Capital Markets Corp., Liquidnet, Inc., Mitsubishi UFJ Securities (USA), Inc., and Citigroup Global Markets Inc.  For the six months ended June 30, 2013, the Company sold 817,445 shares of common stock for $122.9 million, net of commissions, at an average per share price of $151.82.  During the second quarter of 2013 and July 2013, the Company did not sell any shares of common stock.  Under this program, the Company may from time to time sell shares of common stock into the existing trading market at current market prices, and the Company anticipates using the net proceeds to potentially acquire, develop, or redevelop properties, which primarily will be apartment communities, to make other investments and for working capital or general corporate purposes, which may include the repayment of indebtedness.  As of August 2, 2013, the Company may sell an additional 5,000,000 shares under the current equity distribution program.

During March 2013, the Company filed a new shelf registration statement with the SEC, allowing the Company to sell an undetermined number or amount of certain equity and debt securities as defined in the prospectus.

During April 2013, the Company, through its Operating Partnership, issued $300 million of senior unsecured bonds due May 1, 2023 with a coupon rate of 3.25% per annum.  The interest is payable semi-annually in arrears on May 1 and November 1 of each year, commencing November 1, 2013 until the maturity date of May 1, 2023.  The Company used the net proceeds of this offering to repay indebtedness under the Company’s $600 million unsecured line of credit facility and for other general corporate and working capital purposes.

As of June 30, 2013, the Company’s mortgage notes payable totaled $1.5 billion which consisted of $1.3 billion in fixed rate debt with interest rates varying from 4.3% to 6.4% and maturity dates ranging from 2013 to 2021 and $187.3 million of tax exempt variable rate debt with a weighted average interest rate of 1.6%.  The tax-exempt variable rate demand notes have maturity dates ranging from 2013 to 2039, and $186.1 million are subject to interest rate caps.

The Company pays quarterly dividends from cash available for distribution. Until it is distributed, cash available for distribution is invested by the Company primarily in investment grade securities held available for sale or is used by the Company to reduce balances outstanding under its line of credit.

The Company has benefited from borrowing from Fannie Mae and Freddie Mac, and there are no assurances that these entities will lend to the Company in the future.  To the extent that the Company’s access to capital and credit is at a higher cost than the Company has experienced in recent years (reflected in higher interest rates for debt financing or a lower stock price for equity financing) the Company’s ability to make acquisitions, develop communities, obtain new financing, and refinance existing borrowing at competitive rates could be adversely impacted.  For the past two years the Company has primarily issued unsecured debt and repaid secured debt when it has matured to place less reliance on mortgage debt financing, and to unencumber more of the Company's communities.

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Derivative Activity

The Company uses interest rate swaps and interest rate cap contracts to manage certain interest rate risks. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements.

As of June 30, 2013 and December 31, 2012 the aggregate carrying value of the interest rate swap contracts was a liability of $1.9 million and $6.6 million, respectively. The aggregate carrying value of the interest rate cap contracts was zero on the balance sheet as of June 30, 2013 and December 31, 2012, respectively.

Development and Predevelopment Pipeline

The Company defines development activities as new properties that are being constructed, or are newly constructed and, in the case of development communities, are in a phase of lease-up and have not yet reached stabilized operations.  As of June 30, 2013, the Company had two consolidated development projects, and seven unconsolidated joint venture development projects aggregating 2,532 units for an estimated cost of $1.01 billion, of which $446.7 million remains to be expended.

The Company had two predevelopment projects and one unconsolidated joint venture predevelopment projects aggregating 449 units with an aggregate carrying value of $65.5 million as of June 30, 2013.  The Company expects to fund the development and predevelopment pipeline by using a combination of some or all of the following sources: its working capital, amounts available on its lines of credit, net proceeds from public and private equity and debt issuances, and proceeds from the disposition of properties, if any.

Alternative Capital Sources

Fund II has eight institutional investors, and the Company, with combined partner equity contributions of $265.9 million.  The Company contributed $75.0 million to Fund II, which represents a 28.2% interest as general partner and limited partner, and the Company uses the equity method of accounting for its investment in Fund II.  Fund II utilized leverage equal to approximately 55% upon the initial acquisition of the underlying real estate.  Fund II invested in apartment communities in the Company’s targeted West Coast markets and, as of December 31, 2012, owned seven apartment communities.  The Company records revenue for its asset management, property management, development and redevelopment services when earned, and promote income when realized if Fund II exceeds certain financial return benchmarks.  Seven communities were sold during 2012 from Fund II, four additional properties were sold through July 2013, and the Company expects to sell the remaining three communities within the next 12 months.  The Company has exercised its one-year extension which provides for the option to extend Fund II to September 2014.  In July 2013, Fund II repaid the Company for $42.4 million in short-term bridge loans at LIBOR + 1.75% from the proceeds from the sale of two properties.

Wesco I is a 50/50 programmatic joint venture with an institutional partner formed in 2011 for a total equity commitment of $300.0 million.  Each partner’s equity commitment is $150.0 million.  Wesco I utilizes debt as leverage equal to approximately 50% of the underlying real estate.  The Company has contributed $150.0 million to Wesco I, and as of June 30, 2013, Wesco I owned nine apartment communities with 2,713 units with an aggregate carrying value of $663.8 million.

Wesco III is a 50/50 programmatic joint venture with an institutional partner formed in 2012 for a total equity commitment of $120.0 million.  Each partner’s commitment is $60.0 million.  Wesco III utilizes debt as leverage equal to approximately 50% of the underlying real estate.  The Company has contributed $38.4 million to Wesco III, and as of June 30, 2013, Wesco III owned three apartment communities with 657 units with an aggregate carrying value of $160.0 million.

In March 2013, Wesco III repaid the Company for a $26.0 million short-term bridge loan.  Wesco III used the proceeds from a $27.3 million loan secured by Haver Hill at 3.1% for a term of seven years to repay the bridge loan.  In the second quarter of 2013, the Company provided short-term bridge loans to Wesco III of $56.8 million at a rate of LIBOR + 2.50% to assist with the purchase of Regency at Mountain View and Gas Company Lofts apartment communities.  The bridge loans to Wesco III are expected to be repaid by the end of the third quarter when secured financing is originated for these properties.

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Critical Accounting Policies and Estimates

The preparation of consolidated financial statements, in accordance with U.S. generally accepted accounting principles 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. The Company defines critical accounting policies as those accounting policies that require the Company’s management to exercise their most difficult, subjective and complex judgments. The Company’s critical accounting policies and estimates relate principally to the following key areas: (i) consolidation under applicable accounting standards for entities that are not wholly owned; (ii) assessing the carrying values of our real estate properties and investments in and advances to joint ventures and affiliates; (iii) internal cost capitalization; and (iv) qualification as a 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 differ from those estimates made by management.

The Company’s critical accounting policies and estimates have not changed materially from information reported in Note 2, “Summary of Critical and Significant Accounting Policies,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

Forward Looking Statements

Certain statements in this "Management's Discussion and Analysis of Financial Condition and Results of Operations," and elsewhere in this quarterly report on Form 10-Q which are not historical facts may be considered forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended, including statements regarding the Company's expectations, hopes, intentions, beliefs and strategies regarding the future. Forward looking statements include statements regarding the Company’s expectations as to the total projected costs of predevelopment, development and redevelopment projects, the Company’s reduced risk of loss from mold cases, beliefs as to our ability to meet our cash needs during the next twelve months, expectations as to the sources for funding the Company’s development and redevelopment pipeline, the timing and proceeds of the sale of the Fund II properties and statements regarding the Company's financing activities.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors including, but not limited to, that the Company will fail to achieve its business objectives, that the total projected costs of current predevelopment, development and redevelopment projects exceed expectations, that such development and redevelopment projects will not be completed, that development and redevelopment projects and acquisitions will fail to meet expectations, that estimates of future income from an acquired property may prove to be inaccurate, that future cash flows will be inadequate to meet operating requirements, that there may be a downturn in the markets in which the Company's properties are located, that the terms of any refinancing may not be as favorable as the terms of existing indebtedness, and that mold lawsuits will be more costly than anticipated, as well as those risks, special considerations, and other factors referred to in Item 1A, “Risk Factors,” of the Company's Annual Report on Form 10-K for the year ended December 31, 2012, and those risk factors and special considerations set forth in the Company's other filings with the Securities and Exchange Commission (the “SEC”) which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  All forward-looking statements are made as of the date hereof, and the Company assumes no obligation to update this information.

Funds from Operations (“FFO”)

FFO is a financial measure that is commonly used in the REIT industry.  The Company presents funds from operations as a supplemental operating performance measure.  FFO is not used by the Company as, nor should it be considered to be, an alternative to net earnings computed under GAAP as an indicator of the Company’s operating performance or as an alternative to cash from operating activities computed under GAAP as an indicator of the Company’s ability to fund its cash needs.

FFO is not meant to represent a comprehensive system of financial reporting and does not present, nor does it intend to present, a complete picture of the Company's financial condition and operating performance.  The Company believes that net earnings computed under GAAP remain the primary measure of performance and that FFO is only meaningful when it is used in conjunction with net earnings.  The Company considers FFO and FFO excluding non-recurring items and acquisition costs (referred to as “Core FFO”) to be useful financial performance measurements of an equity REIT because, together with net income and cash flows, FFO provides investors with an additional basis to evaluate operating performance and ability of a REIT to incur and service debt and to fund acquisitions and other capital expenditures and ability to pay dividends.  Further, the Company believes that its consolidated financial statements, prepared in accordance with GAAP, provide the most meaningful picture of its financial condition and its operating performance.

27

In calculating FFO, the Company follows the definition for this measure published by the National Association of REITs (“NAREIT”), which is a REIT trade association.  The Company believes that, under the NAREIT FFO definition, the two most significant adjustments made to net income are (i) the exclusion of historical cost depreciation and (ii) the exclusion of gains and losses (including impairment charges on depreciable real estate) from the sale of previously depreciated properties.  The Company agrees that these two NAREIT adjustments are useful to investors for the following reason:

(a)  historical cost accounting for real estate assets in accordance with 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 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 (including impairment charges on depreciable real estate) 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.

Management believes that it has consistently applied the NAREIT definition of FFO to all periods presented.  However, there is judgment involved and other REITs’ calculation of FFO may vary from the NAREIT definition for this measure, and thus their disclosure of FFO may not be comparable to the Company’s calculation.

28

The following table sets forth the Company’s calculation of FFO and Core FFO for the three and six months ended June 30, 2013 and 2012 (in thousands except for per share data):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
Net income available to common stockholders	$	24,946		$	37,078		$	50,149		$	59,800
Adjustments:
Depreciation and amortization		48,031			41,801			95,175			82,628
Gains not included in FFO, net of internal    disposition costs		(2,366	)		(21,947	)		(2,366	)		(31,730	)
Depreciation add back from unconsolidated     co-investments, and add back convertible preferred dividend - Series G		3,777			3,366			7,619			7,750
Noncontrolling interests related to Operating Partnership units		1,547			2,502			3,048			4,092
Depreciation attributable to noncontrolling    interest		(327	)		(303	)		(654	)		(592	)
Funds from operations	$	75,608		$	62,497		$	152,971		$	121,948
Funds from operations per share - diluted	$	1.91		$	1.69		$	3.88		$	3.33
Non-core items:
(Gain) loss on early retirement of debt		(1,024	)		1,450			(1,024	)		1,450
Income from early redemption of preferred    equity investments		(523	)		-			(946	)
Acquisition costs		168			312			555			498
Gain on sales of marketable securities and note prepayment		-			(521	)		(2,611	)		(521	)
Gain on sale of land		-			-			(1,503	)		-
Co-investment promote income		-			(2,299	)		-			(2,299	)
Core FFO	$	74,229		$	61,439		$	147,442		$	121,076
Core FFO per share-diluted	$	1.88		$	1.66		$	3.74		$	3.30
Weighted average number shares outstanding diluted (1)		39,576,663			36,947,477			39,391,820			36,672,683

(1) Assumes conversion of all dilutive outstanding operating partnership interests in the Operating Partnership.

29

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2013 and 2012

(Unaudited)

Net Operating Income (“NOI”)

Same-property net operating income (“NOI”)is considered by management to be an important supplemental performance measure to earnings from operations included in the Company’s consolidated statements of operations.   The presentation of same-property NOI assists with the presentation of the Company’s operations prior to the allocation of depreciation and any corporate-level or financing-related costs.  NOI reflects the operating performance of a community and allows for an easy comparison of the operating performance of individual communities or groups of communities.  In addition, because prospective buyers of real estate have different financing and overhead structures, with varying marginal impacts to overhead by acquiring real estate, NOI is considered by many in the real estate industry to be a useful measure for determining the value of a real estate asset or group of assets.  The Company defines same-property NOI as same-property revenue less same-property operating expenses, including property taxes.  Please see the reconciliation of earnings from operations to same-property NOI, which in the table below is the NOI for stabilized properties consolidated by the Company for the periods presented:

	Three months ended June 30,						Six months ended June 30,
	2013			2012			2013			2012
Earnings from operations	$	48,679		$	40,968		$	95,787		$	80,946
Adjustments:
General and administrative		6,224			5,764			12,850			11,164
Cost of management and other fees		1,733			1,611			3,434			3,251
Depreciation		48,031			41,801			95,175			82,535
Management and other fees		(3,234	)		(2,796	)		(6,182	)		(5,240	)
NOI		101,433			87,348			201,064			172,656
Less: Non same-property NOI		(12,755	)		(4,492	)		(24,379	)		(6,851	)
Same-property NOI	$	88,678		$	82,856		$	176,685		$	165,805

Item 3: Quantitative and Qualitative Disclosures About Market Risks

Interest Rate Hedging Activities

The Company’s objective in using derivatives is to add stability to interest expense and to manage its exposure to interest rate movements or other identified risks.  To accomplish this objective, the Company uses interest rate swaps as part of its cash flow hedging strategy.  As of June 30, 2013, the Company has entered into ten interest rate swap contracts to mitigate the risk of changes in the interest-related cash outflows on $300.0 million of the variable rate five-year unsecured term debt.  As of June 30, 2013, the Company also had $187.3 million of variable rate indebtedness, of which $186.1 million is subject to interest rate cap protection.   All of the Company’s derivative instruments are designated as cash flow hedges, and the Company does not have any fair value hedges as of June 30, 2013.  The following table summarizes the notional amount, carrying value, and estimated fair value of the Company’s derivative instruments used to hedge interest rates as of June 30, 2013.  The notional amount represents the aggregate amount of a particular security that is currently hedged at one time, but does not represent exposure to credit, interest rates or market risks.  The table also includes a sensitivity analysis to demonstrate the impact on the Company’s derivative instruments from an increase or decrease in 10-year Treasury bill interest rates by 50 basis points, as of June 30, 2013.

					Carrying and			Estimated Carrying Value
(Dollars in thousands)	Notional Amount		Maturity Date Range		Estimated Fair Value			+ 50 Basis Points		- 50 Basis Points
Cash flow hedges:
Interest rate swaps	$	300,000		2016-2017	$	(1,928	)	$	3,461	$	(6,347	)
Interest rate caps		186,124		2013-2018		-			71		5
Total cash flow hedges	$	486,124		2013-2018	$	(1,928	)	$	3,532	$	(6,342	)

Interest Rate Sensitive Liabilities

The Company is exposed to interest rate changes primarily as a result of its lines of credit and long-term tax exempt variable rate debt and unsecured term debt.  The Company’s interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows and to lower its overall borrowing costs. To achieve its objectives the Company borrows primarily at fixed rates and may enter into derivative financial instruments such as interest rate swaps, caps and treasury locks in order to mitigate its interest rate risk on a related financial instrument. The Company does not enter into derivative or interest rate transactions for speculative purposes.

30

The Company’s interest rate risk is monitored using a variety of techniques. The table below presents the principal amounts and weighted average interest rates by year of expected maturity to evaluate the expected cash flows.

For the Years Ended	2013				2014			2015			2016				2017				Thereafter				Total			Fair value
(In thousands)
Fixed rate debt	$	10,152				47,450			68,198			162,524				224,021				1,871,592			$	2,383,937		$	2,431,707
Average interest rate		5.4	%			5.2	%		5.2	%		4.5	%			5.5	%			5.1	%			5.1	%
Variable rate debt	$	19,420		(1)		4,370			-			200,000		(2)		150,000		(2)		167,889		(1)	$	541,679		$	521,995
Average interest rate		1.3	%			2.3	%		0.0	%		2.6	%			2.6	%			1.7	%			2.3	%

(1) $186.1 million subject to interest rate caps.

(2) $300.0 million subject to interest rate swap agreements.

The table incorporates only those exposures that exist as of June 30, 2013; it does not consider those exposures or positions that could arise after that date. As a result, our ultimate realized gain or loss, with respect to interest rate fluctuations and hedging strategies would depend on the exposures that arise prior to settlement.

Item 4: Controls and Procedures

As of June 30, 2013, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)).  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2013, our disclosure controls and procedures were effective to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that such disclosure controls and procedures were also effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

There were no changes in the Company's internal control over financial reporting, that occurred during the quarter ended June 30, 2013, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Part II -- Other Information

Item 1: Legal Proceedings

Recently there has been an increasing number of lawsuits against owners and managers of apartment communities alleging personal injury and property damage caused by the presence of mold in residential real estate.  Some of these lawsuits have resulted in substantial monetary judgments or settlements.  The Company has been sued for mold related matters and has settled some, but not all, of such matters.  Insurance carriers have reacted to mold related liability awards by excluding mold related claims from standard policies and pricing mold endorsements at prohibitively high rates.  The Company has, however, purchased pollution liability insurance, which includes some coverage for mold.  The Company has adopted policies for promptly addressing and resolving reports of mold when it is detected, and to minimize any impact mold might have on residents of the property.  The Company believes its mold policies and proactive response to address any known existence, reduces its risk of loss from these cases.  There can be no assurances that the Company has identified and responded to all mold occurrences, but the Company promptly addresses all known reports of mold.  Liabilities resulting from such mold related matters are not expected to have a material adverse effect on the Company’s financial condition, results of operations or cash flows.  As of June 30, 2013, no potential liabilities for mold and other environmental liabilities are quantifiable and an estimate of possible loss cannot be made.

31

The Company carries comprehensive liability, fire, extended coverage and rental loss insurance for each of the Company’s communities.  Insured risks for comprehensive liability covers claims in excess of $100,000 per incident, and property insurance covers losses in excess of a $5.0 million deductible per incident.  There are, however, certain types of extraordinary losses, such as, for example, losses for earthquake, for which the Company does not have insurance. Substantially all of the Company’s properties are located in areas that are subject to earthquakes.

The Company is subject to various other lawsuits in the normal course of its business operations.  Such lawsuits could, but are not expected to, have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

Item 1A: Risk Factors

There were no material changes to the Risk Factors disclosed in Item IA of the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 as filed with the SEC and available at www.sec.gov.

Item 6: Exhibits

A. Exhibits

3.1 Articles of Amendment and Restatement of Essex Property Trust, Inc., attached as exhibit 3.1 to the Company’s 8-K, filed on May 17, 2013, and incorporated herein by reference.

3.2 Third Amended and Restated Bylaws of Essex Property Trust, Inc. (as of May 14, 2013), attached as exhibit 3.2 to the Company’s 8-K, filed on May 17, 2013, and incorporated herein by reference.

4.1 Indenture, dated April 15, 2013, among Essex Portfolio, L.P., Essex Property Trust, Inc., and U.S. Bank National Association, as trustee, including the form of 3.25% Senior Notes due 2023 and the guarantee thereof, attached as Exhibit 4.1 to the Form 8-K, filed on April 15, 2013, and incorporated herein by reference.

10.1 Essex Property Trust, Inc. 2013 Stock Award and Incentive Compensation Plan, attached as Appendix B to the Company's definitive proxy statement on Schedule 14A, filed on April 1, 2013, and incorporated herein by reference.*

10.2 Essex Property Trust, Inc. 2013 Employee Stock Purchase Plan, attached as Appendix C to the Company's definitive proxy statement on Schedule 14A, filed on April 1, 2013, and incorporated herein by reference.*

12.1 Ratio of Earnings to Fixed Charges.

31.1 Certification of Michael J. Schall, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of Michael T. Dance, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of Michael J. Schall, Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Certification of Michael T. Dance, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Management contract or compensatory plan or arrangement

32

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ESSEX PROPERTY TRUST, INC.
(Registrant)
Date: August 2, 2013
	By:  /S/ BRYAN G. HUNT
Bryan G. Hunt
First Vice President, Chief Accounting Officer
	By:  /S/ MICHAEL T. DANCE
Michael T. Dance
Executive Vice President, Chief Financial Officer
(Authorized Officer, Principal Financial Officer)

33

EX-12.1

Exhibit 12.1

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES

Schedule of computation of Ratio and Earnings to Fixed Charges and Preferred Stock Dividends

(Dollars in thousands, except ratios)

	Quarter ended June 30			Years ended December 31
	2013			2012			2011			2010			2009				2008
Earnings:
Income before discontinued operations	$	29,575		$	129,553		$	48,868		$	49,162		$	43,279			$	78,625
Gain on sales of real estate		-			-			-			-			(103	)			(4,578	)
Interest and amortization expense		29,327			111,888			103,168			87,584			86,016				85,063
Total earnings	$	58,902		$	241,441		$	152,036		$	136,746		$	129,192			$	159,110
Fixed charges:
Interest and amortization expense	$	29,327		$	111,888		$	103,168		$	87,584		$	86,016			$	85,063
Capitalized interest		4,383			10,346			8,240			9,486			10,463				10,908
Preferred stock dividends		1,368			5,472			4,753			2,170			4,860				9,241
Perpetual preferred unit distributions		-			-			1,650			6,300			6,300				9,909
Total fixed charges and preferred  stock dividends and preferred unit distributions	$	35,078		$	127,706		$	117,811		$	105,540		$	107,639			$	115,121
Ratio of earnings to fixed charges (excluding preferred stock dividends and preferred unit distributions)		1.75	X		1.98	X		1.36	X		1.41	X		1.34		X		1.66		X
Ratio of earnings to combined fixed charges and preferred stock dividends and preferred unit distributions		1.68	X		1.89	X		1.29	X		1.30	X		1.20		X		1.38		X

EX-31.1

EXHIBIT 31.1

ESSEX PROPERTY TRUST, INC.

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Michael J. Schall, certify that:

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 control 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 controls 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.

Date:August 2, 2013

/s/    Michael J. Schall

Michael J. Schall

Chief Executive Officer and President,

Essex Property Trust, Inc.

EX-31.2

EXHIBIT 31.2

ESSEX PROPERTY TRUST, INC.

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Michael T. Dance, certify that:

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 control 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 controls 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.

Date:August 2, 2013

/s/    Michael T. Dance

Michael T. Dance

Chief Financial Officer, Executive Vice President,

Essex Property Trust, Inc.

EX-32.1

Exhibit 32.1

ESSEX PROPERTY TRUST, INC.

Certification of Chief Executive Officer

Pursuant to 18 U.S.C. Section 1350 as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, chapter 63 of title 18, United States Code), I, Michael J. Schall, hereby certify, to the best of my knowledge, that the Quarterly Report on Form 10-Q for the period ended June 30, 2013 (the “Form 10-Q”) of Essex Property Trust, Inc. fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Essex Property Trust, Inc. at the dates of and for the periods presented.

Date: August 2, 2013	/s/ Michael J. Schall
	Michael J. Schall
	Chief Executive Officer and President,
	Essex Property Trust, Inc.

EX-32.2

Exhibit 32.2

ESSEX PROPERTY TRUST, INC.

Certification of Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350 as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, chapter 63 of title 18, United States Code), I, Michael T. Dance, hereby certify, to the best of my knowledge, that the Quarterly Report on Form 10-Q for the period ended June 30, 2013 (the “Form 10-Q”) of Essex Property Trust, Inc. fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Essex Property Trust, Inc. at the dates of and for the periods presented.

Date: August 2, 2013	/s/ Michael T. Dance
	Michael T. Dance
	Chief Financial Officer, Executive Vice President,
	Essex Property Trust, Inc.

XML

Discontinued Operations

6 Months Ended

Jun. 30, 2013

Discontinued Operations [Abstract]

Discontinued Operations

(10)  Discontinued Operations

The Company classifies real estate as "held for sale" when the sale is considered to be probable.  The Company had no communities sold or held for sale for the six months ended June 30, 2013.

During the first quarter of 2012, the Company sold Tierra Del Sol/Norte, a 156 unit community located in San Diego, California for $17.2 million for a gain of $7.0 million.  Also in the first quarter of 2012, the Company sold Alpine Country, a 108 unit community located in San Diego metropolitan area, for $11.1 million for a gain of $3.9 million.

The components of discontinued operations are outlined below and include the results of operations for the respective periods that the Company owned such assets, as described above (dollars in thousands).

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Rental revenues	$	-	$	-	$	-	$	608
Property operating expenses		-		-		-		(260	)
Depreciation and amortization		-		-		-		(94	)
Income from real estate sold		-		-		-		254
Gain on sale		-		-		-		10,870
Internal dispositon costs and taxes		-		-		-		(1,087	)
Income from discontinued operations	$	-	$	-	$	-	$	10,037

XML

Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Revenues:
Rental and other property	$ 150,170	$ 129,765	$ 296,565	$ 255,238
Management and other fees	3,234	2,796	6,182	5,240
Total revenues	153,404	132,561	302,747	260,478
Expenses:
Property operating, excluding real estate taxes	34,489	30,718	67,097	59,470
Real estate taxes	14,248	11,699	28,404	23,112
Depreciation	48,031	41,801	95,175	82,535
General and administrative	6,224	5,764	12,850	11,164
Cost of management and other fees	1,733	1,611	3,434	3,251
Total expenses	104,725	91,593	206,960	179,532
Earnings from operations	48,679	40,968	95,787	80,946
Interest expense before amortization	(26,325)	(24,659)	(51,536)	(49,316)
Amortization expense	(3,002)	(2,882)	(5,932)	(5,754)
Interest and other income	1,917	5,455	6,939	7,868
Equity income in co-investments	7,282	3,111	11,493	5,451
Gain (loss) on early retirement of debt	1,024	(1,450)	1,024	(1,450)
Gain on sale of land	0	0	1,503	0
Equity Method Investment, Realized Gain (Loss) on Remeasurement	0	21,947	0	21,947
Income from continuing operations	29,575	42,490	59,278	59,692
Income from discontinued operations	0	0	0	10,037
Net income	29,575	42,490	59,278	69,729
Net income attributable to noncontrolling interest	(3,261)	(4,044)	(6,393)	(7,193)
Net income attributable to controlling interest	26,314	38,446	52,885	62,536
Dividends to preferred stockholders	(1,368)	(1,368)	(2,736)	(2,736)
Net income available to common stockholders	24,946	37,078	50,149	59,800
Comprehensive income	35,355	39,983	66,094	69,575
Comprehensive income attributable to noncontrolling interest	(3,574)	(3,887)	(6,761)	(7,183)
Comprehensive income attributable to controlling interest	$ 31,781	$ 36,096	$ 59,333	$ 62,392
Basic:
Income from continuing operations (in dollars per share)	$ 0.67	$ 1.07	$ 1.35	$ 1.47
Income from discontinued operations (in dollars per share)	$ 0	$ 0	$ 0	$ 0.27
Net income available to common stockholders (in dollars per share)	$ 0.67	$ 1.07	$ 1.35	$ 1.74
Weighted average number of common shares outstanding during the period (in shares)	37,292,720	34,570,772	37,149,120	34,299,331
Diluted:
Income from continuing operations (in dollars per share)	$ 0.67	$ 1.07	$ 1.35	$ 1.47
Income from discontinued operations (in dollars per share)	$ 0	$ 0	$ 0	$ 0.27
Net income available to common stockholders (in dollars per share)	$ 0.67	$ 1.07	$ 1.35	$ 1.74
Weighted average number of common shares outstanding during the period (in shares)	37,390,987	34,708,240	37,241,968	34,430,571
Dividends per common share (in dollars per share)	$ 1.21	$ 1.10	$ 2.42	$ 2.2

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Co-investments

6 Months Ended

Jun. 30, 2013

Co-investments [Abstract]

Co-investments

(3) Co-investments

The Company has co-investments, which are accounted for under the equity method.  The co-investments own, operate and develop apartment communities.  The following table details the Company's co-investments (dollars in thousands):

	June 30,		December 31,
	2013		2012
Membership interest in Wesco I	$	142,704	$	143,874
Membership interest in Wesco III		37,917		9,941
Partnership interest in Fund II		23,945		53,601
Membership interest in a limited liability company that owns Expo		18,989		18,752
Total operating co-investments		223,555		226,168
Membership interests in limited liability companies that own and are developing Epic, Connolly Station, Mosso I & II and Elkhorn		229,095		186,362
Membership interests in limited liability companies that own and are developing The Huxley and The Dylan		17,381		16,552
Membership interest in a limited liability company that owns and is developing One South Market		16,908		-
Total development co-investments		263,384		202,914
Membership interest in Wesco II that owns a preferred equity interest in Parkmerced with a preferred return of 10.1%		93,273		91,843
Preferred interest in related party limited liability company that owns Sage at Cupertino with a preferred return of  9.5%		15,493		14,438
Preferred interest in a related party limited liability company that owns Madison Park at Anaheim with a preferred return of 13%		13,536		13,175
Preferred interest in related party limited liability company that owns an apartment development in Redwood City with a preferred return of 9.5%		9,018		-
Preferred interests in limited liability companies that own apartment communities in downtown Los Angeles with preferred returns of 9% and 10% repaid in 2013		-		22,807
Total preferred interest investments		131,320		142,263
Total co-investments	$	618,259	$	571,345

In January 2013, the Company invested $8.6 million as a preferred equity interest investment in an apartment development in Redwood City, California.  The investment has a preferred return of 9.5% and matures in January 2016.

In March 2013, the Company received the redemption of $9.7 million of preferred equity related to two properties located in downtown Los Angeles.  The Company recorded $0.4 million in redemption penalties due to the early redemption of these preferred equity investments. 

In June 2013, the Company received the redemption of $13.1 million of preferred equity related to a property located in downtown Los Angeles.  The Company recorded $0.5 million in redemption penalties due to the early redemption of these preferred equity investments. 

The combined summarized balance sheet and statements of operations for co-investments are as follows (dollars in thousands).

	June 30,		December 31,
	2013		2012
Balance sheets:
Rental properties and real estate under development	$	1,769,246	$	1,745,147
Other assets		65,238		168,061
Total assets	$	1,834,484	$	1,913,208
Debt	$	663,830	$	820,895
Other liabilities		147,356		91,922
Equity		1,023,298		1,000,391
Total liabilities and equity	$	1,834,484	$	1,913,208
Company's share of equity	$	618,259	$	571,345

`	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
Statements of operations:
Property revenues	$	26,258		$	28,233		$	54,117		$	62,556
Property operating expenses		(9,874	)		(10,029	)		(19,702	)		(23,166	)
Net property operating income		16,384			18,204			34,415			39,390
Interest expense		(6,094	)		(7,792	)		(12,872	)		(16,337	)
General and administrative		(1,539	)		(920	)		(3,053	)		(1,716	)
Depreciation and amortization		(9,577	)		(8,876	)		(20,596	)		(22,772	)
Net (loss) income	$	(826	)	$	616		$	(2,106	)	$	(1,435	)
Company's share of net income	$	7,282		$	3,111		$	11,493		$	5,451

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2013

Segment Information [Abstract]

Reconciliation of Revenues and Operating Profit Loss from Segments to Consolidated

The revenues, net operating income, and assets for each of the reportable operating segments are summarized as follows for the three and six months ended June 30, 2013 and 2012 (dollars in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
Revenues:
Southern California	$	66,232		$	61,356		$	132,061		$	119,916
Northern California		53,089			42,570			103,859			84,192
Seattle Metro		27,081			22,668			53,408			44,977
Other real estate assets		3,768			3,171			7,237			6,153
Total property revenues	$	150,170		$	129,765		$	296,565		$	255,238
Net operating income:
Southern California	$	44,464		$	41,106		$	88,897		$	80,937
Northern California		36,462			29,226			71,746			58,168
Seattle Metro		17,792			14,841			35,164			29,673
Other real estate assets		2,715			2,175			5,257			3,878
Total net operating income		101,433			87,348			201,064			172,656
Management and other fees		3,234			2,796			6,182			5,240
Depreciation		(48,031	)		(41,801	)		(95,175	)		(82,535	)
General and administrative		(6,224	)		(5,764	)		(12,850	)		(11,164	)
Cost of management and other fees		(1,733	)		(1,611	)		(3,434	)		(3,251	)
Interest expense before amortization		(26,325	)		(24,659	)		(51,536	)		(49,316	)
Amortization expense		(3,002	)		(2,882	)		(5,932	)		(5,754	)
Interest and other income		1,917			5,455			6,939			7,868
Equity income from co-investments		7,282			3,111			11,493			5,451
Gain (loss) on early retirement of debt		1,024			(1,450	)		1,024			(1,450	)
Gain on sale of land		-			-			1,503			-
Gain on remeasurement of co-investment		-			21,947			-			21,947
Income from continuing operations	$	29,575		$	42,490		$	59,278		$	59,692

Reconciliation of Assets from Segment to Consolidated

Total assets for each of the reportable operating segments are summarized as follows as of June 30, 2013 and December 31, 2012:

	June 30,		December 31,
	2013		2012
Assets:
Southern California	$	1,654,746	$	1,675,265
Northern California		1,625,567		1,489,095
Seattle Metro		707,473		699,465
Other real estate assets		87,151		88,330
Net reportable operating segment - real estate assets		4,074,937		3,952,155
Real estate under development		70,242		66,851
Co-investments		618,259		571,345
Cash and cash equivalents, including restricted cash		45,384		42,126
Marketable securities		88,734		92,713
Notes and other receivables		110,544		66,163
Other non-segment assets		50,898		55,870
Total assets	$	5,058,998	$	4,847,223

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2013

Commitments and Contingencies [Abstract]

Commitments and Contingencies

(11)  Commitments and Contingencies

As of June 30, 2013, the Company had six non-cancelable ground leases for certain apartment communities and buildings that expire between 2027 and 2080.  Ground lease payments are typically the greater of a stated minimum or a percentage of gross rents generated by these apartment communities.  Total minimum lease commitments, under ground leases and operating leases, are approximately $1.7 million per year for the next five years.

To the extent that an environmental matter arises or is identified in the future that has other than a remote risk of having a material impact on the financial statements, the Company will disclose the estimated range of possible outcomes, and, if an outcome is probable, accrue an appropriate liability for remediation and other potential liability. The Company will consider whether such occurrence results in an impairment of value on the affected property and, if so, impairment will be recognized.

The Company provided a payment guarantee to the counterparties in relation to the total return swaps entered into by the joint venture responsible for the development of The Huxley (formerly Fountain at La Brea) and The Dylan (formerly Santa Monica at La Brea) communities.  Further the Company has guaranteed completion of development and made certain debt service guarantees for The Huxley and The Dylan.  The outstanding balance for the loans is included in the debt line item in the balance sheet of the co-investments included in Note 3.  The payment guarantee is for the payment of the amounts due to the counterparty related to the total return swaps which are scheduled to mature in September and December 2016.  The maximum exposure of the guarantee as of June 30, 2013 was $79.1 million based on the aggregate outstanding debt amount.

The Company is subject to various other lawsuits in the normal course of its business operations.  Such lawsuits are not expected to have a material adverse effect on the Company's financial condition, results of operations or cash flows.

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Organization and Basis of Presentation (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013 Apartment Partnership Community Building Project	Jun. 30, 2012	Jun. 30, 2013 Apartment Partnership Community Building Project	Jun. 30, 2012	Dec. 31, 2012
Organization and Basis of Presentation [Abstract]
General partner ownership interest (in hundredths)	94.60%
Operating Partnership units outstanding (in shares)	21,479,701		21,479,701		2,122,381
Redemption value of Operating Partnership units outstanding	$ 341,400,000		$ 341,400,000		$ 311,200,000
Number of apartment communities owned	167		167
Apartment units owned (in units)	34,514		34,514
Ownership interests, number of commercial buildings	5		5
Ownership interests, number of active development projects	9		9
Schedule of Available-for-sale Securities [Line Items]
Total Amortized Cost	88,392,000		88,392,000		90,182,000
Total Gross Unrealized Gain	342,000		342,000		2,531,000
Total Carrying Value	88,734,000		88,734,000		92,713,000
Proceeds from sales of available for sale securities	0	5,100,000	20,300,000	5,100,000
Gain from sales of available-for-sale securities	0		1,800,000	500,000
Variable Interest Entities [Abstract]
Number of DownREIT limited partnerships the company consolidates	19		19
Number of communities within the DownREIT partnership	12		12
Total DownREIT Partnership's Outstanding units (shares)	1,029,095		1,029,095		1,039,431
Redemption value of the variable interest entities	163,500,000		163,500,000		152,400,000
Assets related to variable interest entities, net intercompany eliminations	203,000,000		203,000,000		201,100,000
Liabilities related to variable interest entities, net of intercompany eliminations	183,400,000		183,400,000		178,600,000
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expense for options and restricted stock	500,000	400,000	1,100,000	800,000
Intrinsic value of the stock options exercised	1,900,000	700,000	2,800,000	1,800,000
Intrinsic value of the stock options outstanding and fully vested	17,700,000		17,700,000
Unrecognized compensation cost related to unvested share-based compensation granted under the stock option and restricted stock plans	5,200,000		5,200,000
Stock-based compensation expense for the Series Z Units	500,000	500,000	1,000,000	1,100,000
Capitalization of stock based compensation for Z units	100,000	200,000	200,000	300,000
Intrinsic value of Series Z Units outstanding	17,000,000		17,000,000
Total unrecognized compensation cost related to Z-1 Units subject to future vesting	6,300,000		6,300,000
Unamortized cost recognition period range (in years)	14 years
Fair Value of Financial Instruments [Abstract]
Fixed rate debt carrying amount	2,380,000,000		2,380,000,000
Fixed rate debt fair value	2,430,000,000		2,430,000,000
Variable rate debt, carrying amount	537,300,000		537,300,000
Variable rate debt fair value	517,600,000		517,600,000
Capitalization Policy [Abstract]
Capitalized internal costs related to development and redevelopment projects	1,700,000	1,500,000	3,300,000	2,900,000
Capitalized salaries	600,000	600,000	1,200,000	1,300,000
Change in fair value and amortization of derivatives [Abstract]
Balance at beginning			(71,658,000)
Other comprehensive income (loss) before reclassification, derivative	4,528,000
Amounts reclassified from accumulated other comprehensive loss	4,023,000
Net other comprehensive income (loss)	8,551,000
Balance at the end	(63,107,000)		(63,107,000)
Unrealized gains/(losses) on available for sale securities [Abstract]
Balance at beginning	294,000		294,000		2,397,000
Other comprehensive income (loss) before reclassification, available for sale securities, total	(430,000)
Amounts reclassified from accumulated other comprehensive loss	(1,673,000)
Net other comprehensive income (loss)	(2,103,000)
Balance at the end	294,000		294,000		2,397,000
Accumulated other comprehensive loss, net by component [Abstract]
Balance at beginning	(62,813,000)		(62,813,000)		(69,261,000)
Other comprehensive income (loss) before reclassification	4,098,000
Amounts reclassified from accumulated other comprehensive loss	2,350,000
Net other comprehensive income (loss)	6,448,000
Balance at the end	(62,813,000)		(62,813,000)		(69,261,000)
Minimum [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Range of weighted average period on recognition of compensation cost for stock options	1 year
Range of weighted average period on recognition of compensation cost for restricted stock	1 year
Maximum [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Range of weighted average period on recognition of compensation cost for stock options	5 years
Range of weighted average period on recognition of compensation cost for restricted stock	7 years
Investment-Grade Unsecured Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost/Amortized Cost	5,083,000		5,083,000		5,143,000
Gross Unrealized Gain	62,000		62,000		98,000
Carrying Value	5,145,000		5,145,000		5,241,000
Investment Funds - US Treasuries [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost/Amortized Cost	15,360,000		15,360,000		14,120,000
Gross Unrealized Gain	549,000		549,000		729,000
Carrying Value	15,909,000		15,909,000		14,849,000
Common Stock [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost/Amortized Cost	13,104,000		13,104,000		18,917,000
Gross Unrealized Gain	(269,000)		(269,000)		1,704,000
Carrying Value	12,835,000		12,835,000		20,621,000
Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Cost/Amortized Cost	54,845,000		54,845,000		52,002,000
Gross Unrealized Gain	0		0		0
Carrying Value	$ 54,845,000		$ 54,845,000		$ 52,002,000

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Discontinued Operations (Tables)

6 Months Ended

Jun. 30, 2013

Discontinued Operations [Abstract]

Schedule of Components from Discontinued Operations

The components of discontinued operations are outlined below and include the results of operations for the respective periods that the Company owned such assets, as described above (dollars in thousands).

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Rental revenues	$	-	$	-	$	-	$	608
Property operating expenses		-		-		-		(260	)
Depreciation and amortization		-		-		-		(94	)
Income from real estate sold		-		-		-		254
Gain on sale		-		-		-		10,870
Internal dispositon costs and taxes		-		-		-		(1,087	)
Income from discontinued operations	$	-	$	-	$	-	$	10,037

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Net Income Per Common Share (Details) (USD $)	3 Months Ended				6 Months Ended
	Jun. 30, 2013		Jun. 30, 2012		Jun. 30, 2013		Jun. 30, 2012
Basic:
Income from continuing operations available to common stockholders	$ 24,946,000		$ 37,078,000		$ 50,149,000		$ 50,379,000
Income from continuing operations available to common stockholders (in shares)	37,292,720		34,570,772		37,149,120		34,299,331
Income from continuing operations available to common stockholders (in dollars per share)	$ 0.67		$ 1.07		$ 1.35		$ 1.47
Income from discontinued operations					0		9,421,000
Income from discontinued operations (in shares)					37,149		34,299,000
Income from discontinued operations (in dollars per share)	$ 0		$ 0		$ 0		$ 0.27
Income available to common stockholders	24,946,000		37,078,000		50,149,000		59,800,000
Income available to common stockholders (in dollars per share)	$ 0.67		$ 1.07		$ 1.35		$ 1.74
Effect of Dilutive Securities	0	[1]	54,000	[1]	0	[1]	108,000	[1]
Effect of Dilutive Securities (in shares)	98,000	[1]	137,000	[1]	93	[1]	132,000	[1]
Diluted:
Income from continuing operations available to common stockholders	25,203,000		37,132,000		50,149,000		50,487,000
Adjusted income from continuing operations available to common stockholders (in shares)	37,092,000		34,708,000		37,242		34,431,000
Adjusted income from continuing operations available to common stockholders (in dollars per share)	$ 0.67		$ 1.07		$ 1.35		$ 1.47
Adjusted income from discontinued operations available to common stockholders					0		9,421,000
Adjusted income from discontinued operations available to common stockholders (in shares)					37,242		34,431,000
Adjusted income from discontinued operations available to common stockholders (in dollars per share)	$ 0		$ 0		$ 0		$ 0.27
Total income (Diluted)					50,149,000		59,908,000
Total income per common share amount (in dollars per share)	$ 0.67		$ 1.07		$ 1.35		$ 1.74
Convertible Limited Partnership Units [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Weighted convertible limited partnership units (in shares)	2,151,494		2,239,057		2,115,670		2,242,112
Net Income (Loss) Allocated to Limited Partners	$ 1,500,000		$ 2,500,000		$ 3,000,000		$ 4,100,000
Anti-dilutive securities (in shares)	2,151,494		2,239,057		2,115,670		2,242,112
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Weighted convertible limited partnership units (in shares)	20,825		41,557		20,825		41,557
Anti-dilutive securities (in shares)	20,825		41,557		20,825		41,557

[1] Weighted average convertible limited partnership units of 2,151,494 and 2,239,057, which include vested Series Z-1 incentive units, for the three months ended June 30, 2013, and 2012, respectively, and 2,151,670 and 2,242,112 for the six months ended June 30, 2013 and 2012, respectively, were not included in the determination of diluted EPS because they were anti-dilutive.  Income allocated to convertible limited partnership units, which includes vested Series Z-1 units, aggregating $1.5 million and $2.5 million for the three months ended June 30, 2013 and 2012, respectively, and $3.0 million and $4.1 million for the six months ended June 30, 2013 and 2012, respectively, have been excluded from income available to common stock holders for the calculation of diluted income per common share since these units are excluded from the diluted weighted average common shares for the period as the effect was anti-dilutive.  The Company has the ability to redeem DownREIT limited partnership units for cash and does not consider them to be potentially dilutive securities.

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Related Party Transactions (Details) (USD $) In Millions, unless otherwise specified	1 Months Ended	3 Months Ended		6 Months Ended
	Jul. 31, 2013	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Related Party Transactions [Abstract]
Management and other fees from affiliates including management, property management, development and redevelopment fees from co-investments, net of intercompany amounts eliminated by company		$ 3.2	$ 2.6	$ 6.0	$ 4.9
Related Party Transaction [Line Items]
Notes to affiliates which have been repaid	2
Notes to affiliates outstanding	2
Short term bridge loan	56.8
Marcus and Millichamp Company TMMC Affiliate [Member]
Related Party Transaction [Line Items]
Brokerage commission paid to affiliate	0.6	0	0	0	0
Related party preferred equity interest investment	$ 8.6

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Net Income Per Common Share (Tables)

6 Months Ended

Jun. 30, 2013

Net Income Per Common Share [Abstract]

Net Income Per Common Share

(Amounts in thousands, except per share and unit data)

	Three Months Ended								Three Months Ended
	June 30, 2013								June 30, 2012
	Income			Weighted- average Common Shares		Per Common Share Amount			Income			Weighted- average Common Shares		Per Common Share Amount
Basic:
Income from continuing operations available to common stockholders		$	24,946		37,293		$	0.67		$	37,078		34,571		$	1.07
Effect of Dilutive Securities (1)			-		98						54		137
Diluted:
Income from continuing operations available to common stockholders		$	24,946		37,391		$	0.67		$	37,132		34,708		$	1.07

	Six Months Ended						Six Months Ended
	June 30, 2013						June 30, 2012
	Income		Weighted Average Common Shares		Per Common Share Amount		Income		Weighted Average Common Shares		Per Common Share Amount
Basic:
Income before discontinued operations available to common stockholders	$	50,149		37,149	$	1.35	$	50,379		34,299	$	1.47
Income from discontinued operations     available to common stockholders		-		37,149		-		9,421		34,299		0.27
		50,149			$	1.35		59,800			$	1.74
Effect of Dilutive Securities (1)		-		93				108		132
Diluted:
Income from continuing operations available to common stockholders (1)		50,149		37,242		1.35	$	50,487		34,431		1.47
Income from discontinued operations available to common stockholders		-		37,242		-		9,421		34,431		0.27
	$	50,149			$	1.35	$	59,908			$	1.74

(1) Weighted average convertible limited partnership units of 2,151,494 and 2,239,057, which include vested Series Z-1 incentive units, for the three months ended June 30, 2013, and 2012, respectively, and 2,115,670 and 2,242,112 for the six months ended June 30, 2013 and 2012, respectively, were not included in the determination of diluted EPS because they were anti-dilutive.  Income allocated to convertible limited partnership units, which includes vested Series Z-1 units, aggregating $1.5 million and $2.5 million for the three months ended June 30, 2013 and 2012, respectively, and $3.0 million and $4.1 million for the six months ended June 30, 2013 and 2012, respectively, have been excluded from income available to common stock holders for the calculation of diluted income per common share since these units are excluded from the diluted weighted average common shares for the period as the effect was anti-dilutive.  The Company has the ability to redeem DownREIT limited partnership units for cash and does not consider them to be potentially dilutive securities.

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Cash flows from operating activities:
Net income	$ 59,278	$ 69,729
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on sale of marketable securities	(1,767)	(521)
Gain on remeasurement of co-investment	0	(21,947)
Company's share of gain on the sales of co-investment	(2,366)	0
Gain on the sales of real estate	(1,503)	(10,870)
(Gain) loss on early retirement of debt	(1,024)	1,450
Co-investments	(280)	3,770
Amortization expense	5,932	5,754
Amortization of discount on notes receivables	(844)	(917)
Amortization of discount on marketable securities	(2,776)	(2,518)
Depreciation	95,175	82,629
Equity-based compensation	2,126	1,925
Changes in operating assets and liabilities:
Prepaid expenses and other assets	802	(4,420)
Accounts payable and accrued liabilities	(2,433)	5,133
Other liabilities	266	195
Net cash provided by operating activities	150,586	129,392
Additions to real estate:
Acquisitions of real estate	(175,950)	(80,502)
Improvements to recent acquisitions	(6,288)	(3,569)
Redevelopment	(17,616)	(17,223)
Revenue generating capital expenditures	(742)	(1,638)
Lessor required capital expenditure	(3,557)	0
Non-revenue generating capital expenditures	(12,349)	(7,040)
Acquisitions of and additions to real estate under development	(9,290)	(17,166)
Acquisition of membership interest in co-investment	0	(85,000)
Dispositions of real estate	9,051	27,800
Changes in restricted cash and deposits	18,290	(1,805)
Purchases of marketable securities	(14,002)	(34,363)
Sales and maturities of marketable securities	20,335	5,070
Purchases of and advances under notes and other receivables	(99,164)	(875)
Collections of notes and other receivables	53,438	7,449
Contributions to co-investments	(101,295)	(114,746)
Distributions from co-investments	57,458	7,430
Net cash used in investing activities	(281,681)	(316,178)
Cash flows from financing activities:
Borrowings under debt agreements	604,472	762,580
Repayment of debt	(495,072)	(671,153)
Additions to deferred charges	(3,838)	(2,622)
Equity related issuance cost	(525)	(274)
Net proceeds from stock options exercised	4,190	1,400
Net proceeds from issuance of common stock	122,905	170,944
Contributions from noncontrolling interest	0	2,400
Distributions to noncontrolling interest	(9,811)	(9,134)
Redemption of noncontrolling interest	(2,017)	(681)
Common and preferred stock dividends paid	(87,598)	(75,431)
Net cash provided by financing activities	132,706	178,029
Net increase in cash and cash equivalents	1,611	(8,757)
Cash and cash equivalents at beginning of year	18,606	12,889
Cash and cash equivalents at end of period	20,217	4,132
Supplemental disclosure of cash flow information:
Cash paid for interest, net of $8.1 million, and $3.9 million capitalized in 2013 and 2012, respectively	50,053	47,575
Supplemental disclosure of noncash investing and financing activities:
Transfer from real estate under development to rental properties	67	4,294
Transfer From Real Estate Under Development To Co Investment Properties	0	148,053
Mortgage notes assumed in connection with purchases of real estate including the loan premiums recorded	0	30,298
Contribution of note receivable to co-investment	0	12,325
Change in accrual of dividends	5,436	4,097
Change in fair value of derivative liabilities	4,820	2,841
Purchase of marketable securities pending settlement	0	8,340
Change in fair value of marketable securities	2,256	845
Change in construction payable	$ 2,339	$ 2,930

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Organization and Basis of Presentation

6 Months Ended

Jun. 30, 2013

Organization and Basis of Presentation [Abstract]

Organization and Basis of Presentation

(1)  Organization and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements present the accounts of Essex Property Trust, Inc. (the "Company"), which include the accounts of the Company and Essex Portfolio, L.P. (the "Operating Partnership," which holds the operating assets of the Company), prepared in accordance with U.S. generally accepted accounting principles 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, 2012.

All significant intercompany balances and transactions have been eliminated in the condensed consolidated financial statements.

The unaudited condensed consolidated financial statements for the three and six months ended June 30, 2013 and 2012 include the accounts of the Company and the Operating Partnership.  The Company is the sole general partner in the Operating Partnership, with a 94.6% general partnership interest as of June 30, 2013.  Total Operating Partnership units outstanding were 2,147,970 and 2,122,381 as of June 30, 2013 and December 31, 2012, respectively, and the redemption value of the units, based on the closing price of the Company's common stock totaled $341.4 million and $311.2 million, as of June 30, 2013 and December 31, 2012, respectively.

As of June 30, 2013, the Company owned or had ownership interests in 167 apartment communities, aggregating 34,514 units, excluding the Company's ownership in preferred interest co-investments,  (collectively, the "Communities", and individually, a "Community"), five commercial buildings and nine active development projects (collectively, the "Portfolio").  The Communities are located in Southern California (Los Angeles, Orange, Riverside, San Diego, Santa Barbara, and Ventura counties), Northern California (the San Francisco Bay Area) and the Seattle metropolitan area.

Marketable Securities

The Company reports its available for sale securities at fair value, based on quoted market prices (Level 2 for the unsecured bonds and Level 1 for the common stock and investment funds, as defined by the Financial Accounting Standards Board ("FASB") standard for fair value measurements as discussed later in Note 1), and any unrealized gain or loss is recorded as other comprehensive income (loss).  Realized gains and losses, interest and dividend income, and amortization of purchase discounts are included in interest and other income on the condensed consolidated statement of operations and comprehensive income.

As of June 30, 2013 and December 31, 2012, marketable securities consisted primarily of investment-grade unsecured bonds, common stock, investments in mortgage backed securities and investment funds that invest in U.S. treasury or agency securities.  As of June 30, 2013 and December 31, 2012, the Company classified its investments in mortgage backed securities, which mature in November 2019 and September 2020, as held to maturity, and accordingly, these securities are stated at their amortized cost.  The estimated fair values of the mortgage backed securities (Level 2 securities) are approximately equal to the carrying values.

As of June 30, 2013and December 31, 2012 marketable securities consist of the following ($ in thousands):

	June 30, 2013
	Cost/ Amortized Cost		Gross Unrealized Gain (Loss)			Carrying Value
Available for sale:
Investment-grade unsecured bonds	$	5,083	$	62		$	5,145
Investment funds - US treasuries		15,360		549			15,909
Common stock		13,104		(269	)		12,835
Held to maturity:
Mortgage backed securities		54,845		-			54,845
Total	$	88,392	$	342		$	88,734

	December 31, 2012
	Cost/ Amortized Cost		Gross Unrealized Gain		Carrying Value
Available for sale:
Investment-grade unsecured bonds	$	5,143	$	98	$	5,241
Investment funds - US treasuries		14,120		729		14,849
Common stock		18,917		1,704		20,621
Held to maturity:
Mortgage backed securities		52,002		-		52,002
Total	$	90,182	$	2,531	$	92,713

The Company uses the specific identification method to determine the cost basis of a security sold and to reclassify amounts from accumulated other comprehensive income for securities sold.  For the three months ended June 30, 2013, there were no sales of available for sale securities.  For the three months ended June 30, 2012, the proceeds from sales of available for sale securities totaled $5.1 million which resulted in a realized gain of $0.5 million.  For the six months ended June  30, 2013, and 2012,  the proceeds from sales of available for sale securities totaled $20.3 million and $5.1 million, respectively, which resulted in gains of $1.8 million and $0.5 million, respectively.

Variable Interest Entities

The Company consolidates 19 DownREIT limited partnerships (comprising twelve communities) since the Company is the primary beneficiary of these variable interest entities ("VIEs").  Total DownREIT units outstanding were 1,029,095 and 1,039,431 as of June 30, 2013 and December 31, 2012, respectively, and the redemption value of the units, based on the closing price of the Company's common stock totaled $163.5 million and $152.4 million, as of June 30, 2013 and December 31, 2012, respectively.  The consolidated total assets and liabilities related to these VIEs, net of intercompany eliminations, were approximately $203.0 million and $183.4 million, respectively, as of June 30, 2013 and $201.1 million and $178.6 million, respectively, as of December 31, 2012.  Interest holders in VIEs consolidated by the Company are allocated income equal to the cash payments made to those interest holders.  The remaining results of operations are allocated to the Company.  As of June 30, 2013 and December 31, 2012, the Company did not have any other VIEs of which it was deemed to be the primary beneficiary.

Equity Based Compensation

The Company accounts for equity based compensation using the fair value method of accounting.  The estimated fair value of stock options granted by the Company is being amortized over the vesting period of the stock options.  The estimated grant date fair values of the long term incentive plan units (discussed in Note 13, "Equity Based Compensation Plans," in the Company's Form 10-K for the year ended December 31, 2012) are being amortized over the expected service periods.

Stock-based compensation expense for options and restricted stock totaled $0.5 million and $0.4 million for the three months ended June 30, 2013 and 2012, respectively, and $1.1 million and $0.8 million for the six months ended June 30, 2013 and 2012, respectively.  The intrinsic value of the stock options exercised during the three months ended June 30, 2013 and 2012 totaled $1.9 million and $0.7 million, respectively, and $2.8 million and $1.8 million for the six months ended June 30, 2013 and 2012, respectively.  As of June 30, 2013, the intrinsic value of the stock options outstanding totaled $17.7 million.  As of June 30, 2013, total unrecognized compensation cost related to unvested share-based compensation granted under the stock option and restricted stock plans totaled $5.2 million.  The cost is expected to be recognized over a weighted-average period of 1 to 5 years for the stock option plans and is expected to be recognized straight-line over a period of 1 to 7 years for the restricted stock awards.

The Company has adopted an incentive program involving the issuance of Series Z-1 Incentive Units of limited partnership interest in the Operating Partnership.  Stock-based compensation expense for Z-1 Units totaled $0.5 million and $0.5 million for the three months ended June 30, 2013 and 2012, respectively, and $1.0 million and $1.1 million for the six months ended June 30, 2013 and 2012, respectively.  Stock-based compensation for Z-1 units capitalized totaled $0.1 million and $0.2 million for the three months ended June 30, 2013, and 2012, respectively, and $0.2 million and $0.3 million for the six months ended June 30, 2013, and 2012, respectively.  As of June 30, 2013, the intrinsic value of the Z-1 Units subject to future vesting totaled $17.0 million.  As of June 30, 2013, total unrecognized compensation cost related to Z-1 Units subject to future vesting totaled $6.3 million.  The unamortized cost is expected to be recognized up to 14 years subject to the achievement of the stated performance criteria.

Fair Value of Financial Instruments

Management believes that the carrying amounts of outstanding lines of credit, notes receivable and notes and other receivables approximate fair value as of June 30, 2013 and December 31, 2012, because interest rates, yields and other terms for these instruments are consistent with yields and other terms currently available for similar instruments.  Management has estimated that the fair value of the Company's $2.38 billion of fixed rate debt, including unsecured bonds, at June 30, 2013 is approximately $2.43 billion and the fair value of the Company's $537.3 million of variable rate debt, excluding borrowings under the lines of credit, at June 30, 2013 is $517.6 million based on the terms of existing mortgage notes payable, unsecured bonds 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, 2013 due to the short-term maturity of these instruments.  The fair values of the Company's investments in mortgage backed securities are approximately equal to the amortized cost carrying value of these securities.  Marketable securities and derivatives are carried at fair value as of June 30, 2013.

Capitalization of Costs

The Company's capitalized internal costs related to development and redevelopment projects totaled $1.7 million and $1.5 million during the three months ended June 30, 2013 and 2012, respectively, and  $3.3 million and $2.9 million during the six months ended June 30, 2013 and 2012, respectively,  most of which relates to development projects.  These totals include capitalized salaries of $0.6 million and $0.6 million for the three months ended June 30, 2013 and 2012, respectively, and $1.2 million and $1.3 million for the six months ended June 30, 2013 and 2012, respectively.  The Company expenses leasing commissions as incurred associated with the lease-up of a development community.

Co-investments

The Company owns investments in joint ventures ("co-investments") in which it has significant influence, but its ownership interest does not meet the criteria for consolidation in accordance with the accounting standards.  Therefore, the Company accounts for these 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-investments entities are consistent with those of the Company in all material respects.  For preferred equity investments the Company recognizes its preferred interest as equity in earnings.

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 operations 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 may provide promote distributions 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.

Changes in Accumulated Other Comprehensive Loss, Net by Component

	Change in fair value and amortization of derivatives			Unrealized gains/(losses) on available for sale securities			Total
Balance at December 31, 2012	$	(71,658	)	$	2,397		$	(69,261	)
Other comprehensive income (loss) before reclassification		4,528			(430	)		4,098
Amounts reclassified from accumulated other  comprehensive loss		4,023			(1,673	)		2,350
Net other comprehensive income (loss)		8,551			(2,103	)		6,448
Balance at June 30, 2013	$	(63,107	)	$	294		$	(62,813	)

Amounts reclassified from accumulated other comprehensive loss in connection with derivatives are recorded in interest expense before amortization on the condensed consolidated statement of operations and comprehensive income.  Realized gains and losses on available for sale securities are included in interest and other income on the condensed consolidated statement of operations and comprehensive income.

Accounting Estimates

The preparation of condensed consolidated financial statements, in accordance with U.S. generally accepted accounting principles, 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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Notes and Other Receivables

6 Months Ended

Jun. 30, 2013

Notes and Other Receivables [Abstract]

Notes and Other Receivables

(4) Notes and Other Receivables

Notes receivable secured by real estate, and other receivables consist of the following as of June 30, 2013 and December 31, 2012 (dollars in thousands):

	June 30,		December 31,
	2013		2012
Note receivable, secured, bearing interest at 4.0%, due December 2014 (1)	$	3,212	$	3,212
Notes and other receivables from affiliates (2)		103,869		28,896
Other receivables		3,463		3,785
Note receivable, secured, bearing interest at 8.0%, paid in full in May 2013		-		971
Note receivable, secured, bearing interest at 8.8%, paid in full March 2013		-		10,800
Note receivable, secured, effective interest at 9.6%, paid in full March 2013		-		18,499
	$	110,544	$	66,163

(1) The borrower funds an impound account for capital replacement.

(2) During the second quarter of 2013, the Company provided short-term bridge loans to Fund II and Wesco III of $42.4 million and $56.8 million, respectively, at rates of LIBOR + 1.75% and LIBOR + 2.50%, respectively.

During the six months ended June 30, 2013,  the Company received the repayment of three notes receivables totaling $30.5 million.  One of the notes was repaid early, and as such the Company recorded $0.8 million of income related to a change in estimate on the discount to the note receivable.

In March 2013, Wesco III repaid the Company for a $26.0 million short-term bridge loan to assist with the purchase of Haver Hill.  Wesco III used the proceeds from a $27.3 million loan secured by Haver Hill at 3.1% for a term of seven years to repay the bridge loan.

In July 2013, Fund II repaid the Company for $42.4 million in short-term loans.

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Significant Transactions During the First Quarter of 2013 and Subsequent Events

6 Months Ended

Jun. 30, 2013

Significant Transactions During the First Quarter of 2013 and Subsequent Events [Abstract]

Significant Transactions During the First Quarter of 2013 and Subsequent Events

(2)  Significant Transactions During the Second Quarter of 2013 and Subsequent Events

Acquisitions

In May, the Wesco III, LLC ("Wesco III") joint venture of which the Company has a 50% interest, acquired Regency at Mountain View located in Mountain View, California for $42.5 million.  Built in 1970, the property has 142 units and is located in close proximity to high tech jobs, retail and entertainment venues.

In late June, Wesco III purchased Gas Company Lofts located in Los Angeles, California for $71.0 million.  The property contains 251 apartment homes in three buildings which were built in 1924, 1940 and 1959, respectively, and the property went through a full adaptive reuse renovation in 2004 to convert space into loft-style apartments.

Dispositions

In May, the Essex Apartment Value Fund II L.P. ("Fund II") joint venture of which the Company has a 28.2% ownership interest, sold Morning Run which has 222 apartment homes for gross proceeds of $26.4 million.  In connection with the sale, Fund II incurred a prepayment penalty on debt of which the Company's pro rata share was $0.2 million.

Subsequent to quarter end, Fund II sold three additional properties for gross proceeds of $244.0 million.

Secured Debt

During the quarter, the Company repaid two secured loans totaling $27.3 million and incurred $0.2 million loss on early retirement of debt.  In addition, the Company repaid $14.2 million of Mello Roos bonds related to one property which resulted in a $1.5 million gain on early retirement of debt.  As of June 30, 2013, the Company had $621 million in undrawn capacity on its unsecured credit facilities.

Structured Financing

In June, the Company received cash of $13.1 million from the redemption of a preferred equity investment related to one property located in Los Angeles.  The Company recorded $0.5 million of income from prepayment penalties due to the early termination of the agreement.

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Significant Transactions During the First Quarter of 2013 and Subsequent Events (Details) (USD $)	3 Months Ended		6 Months Ended		3 Months Ended
	Jun. 30, 2013 Unit	Jun. 30, 2012	Jun. 30, 2013 Unit	Jun. 30, 2012	Jun. 30, 2013 Secured Debt [Member]	Jun. 30, 2013 Mello Roos Bonds [Member]	Jun. 30, 2013 Essex Apartment Value Fund II, LP [Member]	May 30, 2013 Regency at Mountain View [Member] Unit	May 30, 2013 Gas Company Lofts [Member] Unit
Acquisitions [Abstract]
Cost of acquired entity								$ 42,500,000	$ 71,000,000
Number of units	222		222					142	251
Dispositions [Abstract]
Sale of land held for future development	244,000,000						26,400,000
Ownership percentage in Fund II							28.20%	50.00%
Number of units disposed of	222		222					142	251
Gain on sale of land	0	0	1,503,000	0			2,400,000
Penalty paid on repayment of debt							200,000
Sale of land, subsequent event	244,000,000						26,400,000
Secured Debt [Abstract]
Early extinguishment of debt					27,300,000	14,200,000
(Gain) loss on early retirement of debt	(1,024,000)	1,450,000	(1,024,000)	1,450,000	(200,000)	1,500,000
Line of Credit Facility, Remaining Borrowing Capacity	621,000,000		621,000,000
Structured Financing [Abstract]
Cash proceeds from redemption of preferred equity investment	13,100,000
Early redemption of investment penalty	$ (500,000)

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Unsecured Debt and Lines of Credit (Details) (USD $)	Jun. 30, 2013	Apr. 30, 2013	Dec. 31, 2012
Unsecured debts and line of credit [Abstract]
Unsecured debt	$ 1,409,744,000		$ 1,112,084,000
Lines of credit	4,370,000		141,000,000
Total unsecured debt and lines of credit	1,414,114,000		1,253,084,000
Senior Notes [Abstract]
Senior Notes		300,000,000
Coupon Rate (in hundredths)		3.25%
Bonds Private Placement - Fixed Rate [Member]
Unsecured debts and line of credit [Abstract]
Unsecured debt	465,000,000		465,000,000
Weighted Average Maturity	5 years 8 months 12 days
Term Loan - Variable Rate [Member]
Unsecured debts and line of credit [Abstract]
Unsecured debt	350,000,000		350,000,000
Weighted Average Maturity	3 years 8 months 12 days
Weighted average interest rate (in hundredths)	2.60%		2.70%
Bonds Public Offering - Fixed Rate [Member]
Unsecured debts and line of credit [Abstract]
Unsecured debt	$ 594,744,000		$ 297,084,000
Weighted Average Maturity	9 years 6 months
Weighted average interest rate (in hundredths)	4.00%		4.20%
Line of Credit [Member]
Unsecured debts and line of credit [Abstract]
Weighted Average Maturity, Line of credit	7 months 6 days
Weighted average interest rate (in hundredths)	2.30%		2.30%

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Commitments and Contingencies (Details) (USD $) In Millions, unless otherwise specified	Jun. 30, 2013 Lease
Commitments and Contingencies [Abstract]
Number of non cancelable ground leases	6
Total minimum lease commitments under land leases and operating leases for next five years	$ 1.7

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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Liabilities and Equity
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (in shares)	656,020,000	656,020,000
Common stock, shares issued (in shares)	37,317,622	36,442,994
Common stock, shares outstanding (in shares)	37,317,622	36,442,994

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Segment Information

6 Months Ended

Jun. 30, 2013

Segment Information [Abstract]

Segment Information

(7) Segment Information

The Company defines its reportable operating segments as the three geographical regions in which its apartment communities are located: Southern California, Northern California and Seattle Metro.  Excluded from segment revenues are properties classified in discontinued operations, management and other fees from affiliates, and interest and other income.  Non-segment revenues and net operating income included in the following schedule also consist of revenue generated from commercial properties.  Other non-segment assets include real estate under development, co-investments, cash and cash equivalents, marketable securities, notes and other receivables, prepaid expenses and other assets and deferred charges.

The revenues, net operating income, and assets for each of the reportable operating segments are summarized as follows for the three and six months ended June 30, 2013 and 2012 (dollars in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
Revenues:
Southern California	$	66,232		$	61,356		$	132,061		$	119,916
Northern California		53,089			42,570			103,859			84,192
Seattle Metro		27,081			22,668			53,408			44,977
Other real estate assets		3,768			3,171			7,237			6,153
Total property revenues	$	150,170		$	129,765		$	296,565		$	255,238
Net operating income:
Southern California	$	44,464		$	41,106		$	88,897		$	80,937
Northern California		36,462			29,226			71,746			58,168
Seattle Metro		17,792			14,841			35,164			29,673
Other real estate assets		2,715			2,175			5,257			3,878
Total net operating income		101,433			87,348			201,064			172,656
Management and other fees		3,234			2,796			6,182			5,240
Depreciation		(48,031	)		(41,801	)		(95,175	)		(82,535	)
General and administrative		(6,224	)		(5,764	)		(12,850	)		(11,164	)
Cost of management and other fees		(1,733	)		(1,611	)		(3,434	)		(3,251	)
Interest expense before amortization		(26,325	)		(24,659	)		(51,536	)		(49,316	)
Amortization expense		(3,002	)		(2,882	)		(5,932	)		(5,754	)
Interest and other income		1,917			5,455			6,939			7,868
Equity income from co-investments		7,282			3,111			11,493			5,451
Gain (loss) on early retirement of debt		1,024			(1,450	)		1,024			(1,450	)
Gain on sale of land		-			-			1,503			-
Gain on remeasurement of co-investment		-			21,947			-			21,947
Income from continuing operations	$	29,575		$	42,490		$	59,278		$	59,692

Total assets for each of the reportable operating segments are summarized as follows as of June 30, 2013 and December 31, 2012:

	June 30,		December 31,
	2013		2012
Assets:
Southern California	$	1,654,746	$	1,675,265
Northern California		1,625,567		1,489,095
Seattle Metro		707,473		699,465
Other real estate assets		87,151		88,330
Net reportable operating segment - real estate assets		4,074,937		3,952,155
Real estate under development		70,242		66,851
Co-investments		618,259		571,345
Cash and cash equivalents, including restricted cash		45,384		42,126
Marketable securities		88,734		92,713
Notes and other receivables		110,544		66,163
Other non-segment assets		50,898		55,870
Total assets	$	5,058,998	$	4,847,223

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Condensed Consolidated Statements of Equity (Unaudited) (USD $) In Thousands, unless otherwise specified	Series H Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Distributions in Excess of Accumulated Earnings [Member]	Accumulated Other Comprehensive Loss, Net [Member]	Noncontrolling Interest [Member]	Total
Balances at Dec. 31, 2012	$ 73,750	$ 3	$ 2,204,778	$ (444,466)	$ (69,261)	$ 115,312	$ 1,880,116
Balances (in shares) at Dec. 31, 2012	2,950	36,443
Net income	0	0	0	52,885	0	6,393	59,278
Reversal of unrealized gains upon the sale of marketable securities	0	0	0	0	(1,673)	(94)	(1,767)
Change in fair value of cash flow hedges and amortization of swap settlements	0	0	0	0	8,551	486	9,037
Changes in fair value of marketable securities	0	0	0	0	(430)	(24)	(454)
Issuance of common stock under:
Stock option and restricted stock plans	0	0	5,308	0	0	0	5,308
Stock option and restricted stock plans shares (in shares)	0	58
Sale of common stock	0	0	122,905	0	0	0	122,905
Sale of common stock (in shares)	0	817
Equity based compensation costs	0	0	(615)	0	0	1,098	483
Distributions to noncontrolling interest	0	0	0	0	0	(9,811)	(9,811)
Redemptions of noncontrolling interest	0	0	(546)	0	0	(1,471)	(2,017)
Common and preferred stock dividends	0	0	0	(93,034)	0	0	(93,034)
Balances at Jun. 30, 2013	$ 73,750	$ 3	$ 2,331,830	$ (484,615)	$ (62,813)	$ 111,889	$ 1,970,044
Balances (in shares) at Jun. 30, 2013	2,950	37,318

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Condensed Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Rental properties:
Land and land improvements	$ 1,054,178	$ 1,003,171
Buildings and improvements	4,194,092	4,030,501
Total Rental Properties	5,248,270	5,033,672
Less accumulated depreciation	(1,173,333)	(1,081,517)
Net Real Estate	4,074,937	3,952,155
Real estate under development	70,242	66,851
Co-investments	618,259	571,345
Total Real Estate	4,763,438	4,590,351
Cash and cash equivalents-unrestricted	20,217	18,606
Cash and cash equivalents-restricted	25,167	23,520
Marketable securities	88,734	92,713
Notes and other receivables	110,544	66,163
Prepaid expenses and other assets	27,890	35,003
Deferred charges, net	23,008	20,867
Total assets	5,058,998	4,847,223
Liabilities and Equity
Mortgage notes payable	1,511,502	1,565,599
Unsecured debt	1,409,744	1,112,084
Lines of credit	4,370	141,000
Accounts payable and accrued liabilities	76,410	64,858
Construction payable	7,731	5,392
Dividends payable	50,488	45,052
Derivative liabilities	1,928	6,606
Other liabilities	22,432	22,167
Total liabilities	3,084,605	2,962,758
Commitments and contingencies
Cumulative convertible Series G preferred stock	4,349	4,349
Equity:
Cumulative redeemable Series H preferred stock at liquidation value	73,750	73,750
Common stock, $.0001 par value, 656,020,000 shares authorized 37,317,622 and 36,442,994 shares issued and outstanding	3	3
Additional paid-in capital	2,331,830	2,204,778
Distributions in excess of accumulated earnings	(484,615)	(444,466)
Accumulated other comprehensive loss, net	(62,813)	(69,261)
Total stockholders' equity	1,858,155	1,764,804
Noncontrolling interest	111,889	115,312
Total equity	1,970,044	1,880,116
Total liabilities and equity	$ 5,058,998	$ 4,847,223

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Co-investments (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Investments in joint ventures accounted for under the equity method of accounting [Abstract]
Total co-investment	$ 618,259,000		$ 618,259,000		$ 571,345,000
Preferred return rate (in hundredths)			9.50%
Preferred equity redemption	13,100,000		9,700,000
Early redemption penalties	500,000		400,000
Balance sheets: [Abstract]
Rental properties and real estate under development	70,242,000		70,242,000		66,851,000
Other Liabilities	22,432,000		22,432,000		22,167,000
Statement of operations: [Abstract]
Interest expense	(26,325,000)	(24,659,000)	(51,536,000)	(49,316,000)
General and administrative	(6,224,000)	(5,764,000)	(12,850,000)	(11,164,000)
Depreciation and Amortization	(3,002,000)	(2,882,000)	(5,932,000)	(5,754,000)
Membership interest in Wesco I [Member]
Investments in joint ventures accounted for under the equity method of accounting [Abstract]
Total co-investment	142,704,000		142,704,000		143,874,000
Partnership interest in Fund II [Member]
Investments in joint ventures accounted for under the equity method of accounting [Abstract]
Total co-investment	23,945,000		23,945,000		53,601,000
Membership interest in Wesco III [Member]
Investments in joint ventures accounted for under the equity method of accounting [Abstract]
Total co-investment	37,917,000		37,917,000		9,941,000
Total operating co investments [Member]
Investments in joint ventures accounted for under the equity method of accounting [Abstract]
Total co-investment	223,555,000		223,555,000		226,168,000
Statement of operations: [Abstract]
Net Loss			(2,106,000)	(1,435,000)
Membership interests in limited liability companies that own and are developing Epic, Connolly Station, Mosso I. & II. , and Elkhorn [Member]
Investments in joint ventures accounted for under the equity method of accounting [Abstract]
Total co-investment	229,095,000		229,095,000		186,362,000
Membership interests in a limited liability company that owns and is developing Expo [Member]
Investments in joint ventures accounted for under the equity method of accounting [Abstract]
Total co-investment	18,989,000		18,989,000		18,752,000
Membership interests in limited liability companies that own and are developing The Huxley and The Dylan [Member]
Investments in joint ventures accounted for under the equity method of accounting [Abstract]
Total co-investment	17,381,000		17,381,000		16,552,000
Preferred return rate (in hundredths)			10.00%
Membership interests in limited liability companies that owns and is developing One South Market [Member]
Investments in joint ventures accounted for under the equity method of accounting [Abstract]
Total co-investment	16,908,000		16,908,000		0
Total development co investments [Member]
Investments in joint ventures accounted for under the equity method of accounting [Abstract]
Total co-investment	263,384,000		263,384,000		202,914,000
Membership interest in Wesco II that owns a preferred equity interest in Park Merced with a preferred return of 10.1% [Member]
Investments in joint ventures accounted for under the equity method of accounting [Abstract]
Total co-investment	93,273,000		93,273,000		91,843,000
Preferred return rate (in hundredths)			10.10%
Preferred interests in related party limited liability companies that owns Sage at Cupertino with a preferred return of 9.5% [Member]
Investments in joint ventures accounted for under the equity method of accounting [Abstract]
Total co-investment	15,493,000		15,493,000		14,438,000
Preferred return rate (in hundredths)			9.50%
Preferred interest in a related limited liability company that owns Madison Park at Anaheim with a preferred return of 13% [Member]
Investments in joint ventures accounted for under the equity method of accounting [Abstract]
Total co-investment	13,536,000		13,536,000		13,175,000
Preferred return rate (in hundredths)			13.00%
Preferred interests in limited liability companies that own apartment communities in downtown Los Angeles with preferred returns of 9% repaid in March 2013 [Member]
Investments in joint ventures accounted for under the equity method of accounting [Abstract]
Total co-investment	0		0		22,807,000
Preferred return rate (in hundredths)			9.00%
Preferred interest in related limited liability company that owns an apartment deveopment in Redwood City with a preferred return of 9.5% [Member]
Investments in joint ventures accounted for under the equity method of accounting [Abstract]
Total co-investment	9,018,000		9,018,000		0
Preferred return rate (in hundredths)			9.50%
Total preferred interest investments [Member]
Investments in joint ventures accounted for under the equity method of accounting [Abstract]
Total co-investment	131,320,000		131,320,000		142,263,000
Preferred equity Interest investment [Member]
Investments in joint ventures accounted for under the equity method of accounting [Abstract]
Total co-investment	8,600,000		8,600,000
Total co investment [Member]
Balance sheets: [Abstract]
Rental properties and real estate under development	1,769,246,000		1,769,246,000		1,745,147,000
Other Assets	65,238,000		65,238,000		168,061,000
Total assets	1,834,484,000		1,834,484,000		1,913,208,000
Debt	663,830,000		663,830,000		820,895,000
Other Liabilities	147,356,000		147,356,000		91,922,000
Equity	1,023,298,000		1,023,298,000		1,000,391,000
Total liabilities and equity	1,834,484,000		1,834,484,000		1,913,208,000
Company's share of equity	618,259,000		618,259,000		571,345,000
Statement of operations: [Abstract]
Property revenues	26,258,000	28,233,000	54,117,000	62,556,000
Property operating expenses	(9,874,000)	(10,029,000)	(19,702,000)	(23,166,000)
Net property operating income	16,384,000	18,204,000	34,415,000	39,390,000
Interest expense	(6,094,000)	(7,792,000)	(12,872,000)	(16,337,000)
General and administrative	(1,539,000)	(920,000)	(3,053,000)	(1,716,000)
Depreciation and Amortization	(9,577,000)	(8,876,000)	(20,596,000)	(22,772,000)
Net Loss	(826,000)	616,000
Company's share of net income (loss)	$ 7,282,000	$ 3,111,000	$ 11,493,000	$ 5,451,000

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Unsecured Debt and Lines of Credit (Tables)

6 Months Ended

Jun. 30, 2013

Unsecured Debt and Lines of Credit [Abstract]

Schedule of unsecured debt and lines of credit

Unsecured debt and lines of credit consist of the following as of June 30, 2013 and December 31, 2012 ($ in thousands):

	June 30,			December 31,			Weighted Average Maturity
	2013			2012			In Years
Bonds private placement - fixed rate	$	465,000		$	465,000			5.7
Term loan - variable rate		350,000			350,000			3.7
Bonds public offering - fixed rate		594,744			297,084			9.5
Unsecured debt		1,409,744			1,112,084
Lines of credit		4,370			141,000			0.6
Total unsecured debt and lines of credit	$	1,414,114		$	1,253,084
Weighted average interest rate on fixed rate unsecured bonds		4.0	%		4.2	%
Weighted average interest rate on variable rate term loan		2.6	%		2.7	%
Weighted average interest rate on line of credit		2.3	%		2.3	%

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Derivative Instruments and Hedging Activities (Details) (Designated as Hedging Instrument [Member], USD $) In Millions, unless otherwise specified	Jun. 30, 2013 Instrument	Dec. 31, 2012
Interest Rate Cap [Member]
Derivative [Line Items]
Notional amount of interest rate contracts	$ 186.1
Number of derivative instruments held	11
Aggregate carrying value of the interest rate cap contracts	0	0
Interest Rate Swap [Member]
Derivative [Line Items]
Notional amount of interest rate contracts	300.0
Total amount of unsecured loan	350
Interest rate (in hundredths)	2.29%
Aggregate carrying value of the interest rate swap contracts	$ 1.9	$ 6.6

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Discontinued Operations (Details) (USD $)	3 Months Ended		6 Months Ended		3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Mar. 31, 2012 Tierra Del Sol/Norte [Member] Unit	Mar. 31, 2012 Alpine Country [Member] Unit
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Units in the community					156	108
Sales price of communities sold					$ 17,200,000	$ 11,100,000
Gain on sale of real estate					7,000,000	3,900,000
Schedule of components from discontinued operations [Abstract]
Rental revenues	0	0	0	608,000
Property operating expenses	0	0	0	(260,000)
Depreciation and amortization	0	0	0	(94,000)
Income from real estate sold	0	0	0	254,000
Gain on sale	0	0	0	10,870,000
Internal disposition costs and taxes	0	0	0	(1,087,000)
Income from discontinued operations	$ 0	$ 0	$ 0	$ 10,037,000

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Unsecured Debt and Lines of Credit

6 Months Ended

Jun. 30, 2013

Unsecured Debt and Lines of Credit [Abstract]

Unsecured Debt Lines of Credit

(6) Unsecured Debt and Lines of Credit

Unsecured debt and lines of credit consist of the following as of June 30, 2013 and December 31, 2012 ($ in thousands):

	June 30,			December 31,			Weighted Average Maturity
	2013			2012			In Years
Bonds private placement - fixed rate	$	465,000		$	465,000			5.7
Term loan - variable rate		350,000			350,000			3.7
Bonds public offering - fixed rate		594,744			297,084			9.5
Unsecured debt		1,409,744			1,112,084
Lines of credit		4,370			141,000			0.6
Total unsecured debt and lines of credit	$	1,414,114		$	1,253,084
Weighted average interest rate on fixed rate unsecured bonds		4.0	%		4.2	%
Weighted average interest rate on variable rate term loan		2.6	%		2.7	%
Weighted average interest rate on line of credit		2.3	%		2.3	%

In April 2013, the Company issued $300 million aggregate principal amount of its 3.25% Senior Notes due on May 1, 2023.

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Notes and Other Receivables (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013 Notes		Jun. 30, 2013 Notes		Mar. 31, 2013	Dec. 31, 2012
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes receivable	$ 110,544,000		$ 110,544,000			$ 66,163,000
Income related acceleration			800,000
Variable rate basis	LIBOR + 1.75%		LIBOR + 2.5%
Basis spread on rate (in hundredths)	2.50%		2.50%
Number of notes for which payment was received	3		3
Proceeds from notes receivable	26,000,000		30,500,000
Short term Bridge Loan	42,400,000		42,400,000		26,000,000
Secured Due December 2014 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes receivable	3,212,000	[1]	3,212,000	[1]		3,212,000	[1]
Stated interest rate (in hundredths)			4.00%
Secured Due May 2013 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes receivable	0		0			971,000
Stated interest rate (in hundredths)			8.00%
Secured Due March 2013 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes receivable	0		0			10,800,000
Stated interest rate (in hundredths)			8.80%
Secured Effective March 2013 [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes receivable	0		0			18,499,000
Stated interest rate (in hundredths)			9.60%
Wesco III [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Stated interest rate (in hundredths)	3.10%
Variable rate basis	LIBOR + 2.50%
Basis spread on rate (in hundredths)	2.50%		2.50%
Proceeds from notes receivable	27,300,000
Short term Bridge Loan	56,800,000		56,800,000
Term of loan	7 years
Note and Other Receivables From Affiliates [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes receivable	103,869,000	[2]	103,869,000	[2]		28,896,000	[2]
Other Receivables [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes receivable	$ 3,463,000		$ 3,463,000			$ 3,785,000

[1] The borrower funds an impound account for capital replacement.

[2] During the second quarter of 2013, the Company provided short-term bridge loans to Fund II and Wesco III of $42.4 million and $56.8 million, respectively, at rates of LIBOR + 1.75% and LIBOR + 2.50%, respectively.

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Derivative Instruments and Hedging Activities

6 Months Ended

Jun. 30, 2013

Derivative Instruments and Hedging Activities [Abstract]

Derivative Instruments and Hedging Activities

(9)  Derivative Instruments and Hedging Activities

The Company has entered into interest rate swap contracts with an aggregate notional amount of $300 million that effectively fixed the interest rate on $300 million of the $350 million unsecured term loan at 2.29%.  These derivatives qualify for hedge accounting.

As of June 30, 2013 the Company also had eleven interest rate cap contracts totaling a notional amount of $186.1 million that qualify for hedge accounting as they effectively limit the Company's exposure to interest rate risk by providing a ceiling on the underlying variable interest rate for substantially all of the Company's tax exempt variable rate debt.

As of June 30, 2013 and December 31, 2012 the aggregate carrying value of the interest rate swap contracts was a liability of $1.9 million and $6.6 million, respectively. The aggregate carrying value of the interest rate cap contracts was zero on the balance sheet as of June 30, 2013 and December 31, 2012, respectively.

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Related Party Transactions

6 Months Ended

Jun. 30, 2013

Related Party Transactions [Abstract]

Related Party Transactions

(5) Related Party Transactions

Fees earned from affiliates include management, development and redevelopment fees from co-investments of $3.2 million and $2.6 million during the three months ended June 30, 2013 and 2012, respectively, and $6.0 million and $4.9 million during the six months ended June 30, 2013 and 2012, respectively .  All of these fees are net of intercompany amounts eliminated by the Company.

The Company's Chairman and founder, Mr. George Marcus, is the Chairman of The Marcus & Millichap Company ("TMMC"), which is a holding company for certain real estate brokerage services and other subsidiary companies.  Fund II paid a brokerage commission totaling $0.6 million to an affiliate of TMMC related to the sale of a property in July 2013.  No brokerage commissions were paid to TMMC by the Company during the three and six months ended June 30, 2013 and 2012, respectively.  As described in Note 3, the Company invested $8.6 million as a preferred equity interest investment in an entity affiliated with TMMC that owns an apartment development in Redwood City, California.  Independent members of the Company's Board of Directors that serve on the Nominating and Corporate Governance and Audit Committees approved the investment in this entity.

As described in Note 4, the Company has provided short-term bridge loans to affiliates.  As of July 31, 2013, two loans have been repaid and two loans remain outstanding totaling $56.8 million.  The bridge loans to Wesco III are expected to be repaid by September 30, 2013.

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Condensed Consolidated Statements of Cash Flows (Unaudited) (Parenthetical) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Supplemental disclosure of cash flow information:
Cash paid for interest, capitalized	$ 8.1	$ 3.9

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Segment Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013 Segment	Jun. 30, 2012	Dec. 31, 2012
Segment Information [Abstract]
Number of reportable operating segments defined by geographical regions			3
Revenues from External Customers and Long-Lived Assets [Line Items]
Property revenues	$ 150,170	$ 129,765	$ 296,565	$ 255,238
Net operating income	101,433	87,348	201,064	172,656
Management and other fees	3,234	2,796	6,182	5,240
Depreciation	(48,031)	(41,801)	(95,175)	(82,535)
General and administrative	(6,224)	(5,764)	(12,850)	(11,164)
Cost of management and other fees	(1,733)	(1,611)	(3,434)	(3,251)
Interest expense before amortization	(26,325)	(24,659)	(51,536)	(49,316)
Amortization expense	(3,002)	(2,882)	(5,932)	(5,754)
Interest and other income	1,917	5,455	6,939	7,868
Equity income from co-investments	7,282	3,111	11,493	5,451
Gain (loss) on early retirement of debt	1,024	(1,450)	1,024	(1,450)
Gain on sale of land	0	0	1,503	0
Gain on remeasurement of co-investment	0	21,947	0	21,947
Income from continuing operations	29,575	42,490	59,278	59,692
Net reportable operating segment - real estate assets	4,074,937		4,074,937		3,952,155
Real estate under development	70,242		70,242		66,851
Co-investments	618,259		618,259		571,345
Cash and cash equivalents, including restricted cash	45,384		45,384		42,126
Marketable securities	88,734		88,734		92,713
Notes and other receivables	110,544		110,544		66,163
Other non-segment assets	50,898		50,898		55,870
Total assets	5,058,998		5,058,998		4,847,223
Southern California [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Property revenues	66,232	61,356	132,061	119,916
Net operating income	44,464	41,106	88,897	80,937
Net reportable operating segment - real estate assets	1,654,746		1,654,746		1,675,265
Northern California [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Property revenues	53,089	42,570	103,859	84,192
Net operating income	36,462	29,226	71,746	58,168
Net reportable operating segment - real estate assets	1,625,567		1,625,567		1,489,095
Seattle Metro [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Property revenues	27,081	22,668	53,408	44,977
Net operating income	17,792	14,841	35,164	29,673
Net reportable operating segment - real estate assets	707,473		707,473		699,465
Other Real Estate Assets [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Property revenues	3,768	3,171	7,237	6,153
Net operating income	2,715	2,175	5,257	3,878
Net reportable operating segment - real estate assets	$ 87,151		$ 87,151		$ 88,330

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Organization and Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2013

Organization and Basis of Presentation [Abstract]

Marketable Securities

Marketable Securities

The Company reports its available for sale securities at fair value, based on quoted market prices (Level 2 for the unsecured bonds and Level 1 for the common stock and investment funds, as defined by the Financial Accounting Standards Board ("FASB") standard for fair value measurements as discussed later in Note 1), and any unrealized gain or loss is recorded as other comprehensive income (loss).  Realized gains and losses, interest and dividend income, and amortization of purchase discounts are included in interest and other income on the condensed consolidated statement of operations and comprehensive income.

As of June 30, 2013 and December 31, 2012, marketable securities consisted primarily of investment-grade unsecured bonds, common stock, investments in mortgage backed securities and investment funds that invest in U.S. treasury or agency securities.  As of June 30, 2013 and December 31, 2012, the Company classified its investments in mortgage backed securities, which mature in November 2019 and September 2020, as held to maturity, and accordingly, these securities are stated at their amortized cost.  The estimated fair values of the mortgage backed securities (Level 2 securities) are approximately equal to the carrying values.

As of June 30, 2013and December 31, 2012 marketable securities consist of the following ($ in thousands):

	June 30, 2013
	Cost/ Amortized Cost		Gross Unrealized Gain (Loss)			Carrying Value
Available for sale:
Investment-grade unsecured bonds	$	5,083	$	62		$	5,145
Investment funds - US treasuries		15,360		549			15,909
Common stock		13,104		(269	)		12,835
Held to maturity:
Mortgage backed securities		54,845		-			54,845
Total	$	88,392	$	342		$	88,734

	December 31, 2012
	Cost/ Amortized Cost		Gross Unrealized Gain		Carrying Value
Available for sale:
Investment-grade unsecured bonds	$	5,143	$	98	$	5,241
Investment funds - US treasuries		14,120		729		14,849
Common stock		18,917		1,704		20,621
Held to maturity:
Mortgage backed securities		52,002		-		52,002
Total	$	90,182	$	2,531	$	92,713

The Company uses the specific identification method to determine the cost basis of a security sold and to reclassify amounts from accumulated other comprehensive income for securities sold.  For the three months ended June 30, 2013, there were no sales of available for sale securities.  For the three months ended June 30, 2012, the proceeds from sales of available for sale securities totaled $5.1 million which resulted in a realized gain of $0.5 million.  For the six months ended June  30, 2013, and 2012,  the proceeds from sales of available for sale securities totaled $20.3 million and $5.1 million, respectively, which resulted in gains of $1.8 million and $0.5 million, respectively.

Variable Interest Entities

Variable Interest Entities

The Company consolidates 19 DownREIT limited partnerships (comprising twelve communities) since the Company is the primary beneficiary of these variable interest entities ("VIEs").  Total DownREIT units outstanding were 1,029,095 and 1,039,431 as of June 30, 2013 and December 31, 2012, respectively, and the redemption value of the units, based on the closing price of the Company's common stock totaled $163.5 million and $152.4 million, as of June 30, 2013 and December 31, 2012, respectively.  The consolidated total assets and liabilities related to these VIEs, net of intercompany eliminations, were approximately $203.0 million and $183.4 million, respectively, as of June 30, 2013 and $201.1 million and $178.6 million, respectively, as of December 31, 2012.  Interest holders in VIEs consolidated by the Company are allocated income equal to the cash payments made to those interest holders.  The remaining results of operations are allocated to the Company.  As of June 30, 2013 and December 31, 2012, the Company did not have any other VIEs of which it was deemed to be the primary beneficiary.

Equity Based Compensation

Equity Based Compensation

The Company accounts for equity based compensation using the fair value method of accounting.  The estimated fair value of stock options granted by the Company is being amortized over the vesting period of the stock options.  The estimated grant date fair values of the long term incentive plan units (discussed in Note 13, "Equity Based Compensation Plans," in the Company's Form 10-K for the year ended December 31, 2012) are being amortized over the expected service periods.

Stock-based compensation expense for options and restricted stock totaled $0.5 million and $0.4 million for the three months ended June 30, 2013 and 2012, respectively, and $1.1 million and $0.8 million for the six months ended June 30, 2013 and 2012, respectively.  The intrinsic value of the stock options exercised during the three months ended June 30, 2013 and 2012 totaled $1.9 million and $0.7 million, respectively, and $2.8 million and $1.8 million for the six months ended June 30, 2013 and 2012, respectively.  As of June 30, 2013, the intrinsic value of the stock options outstanding totaled $17.7 million.  As of June 30, 2013, total unrecognized compensation cost related to unvested share-based compensation granted under the stock option and restricted stock plans totaled $5.2 million.  The cost is expected to be recognized over a weighted-average period of 1 to 5 years for the stock option plans and is expected to be recognized straight-line over a period of 1 to 7 years for the restricted stock awards.

The Company has adopted an incentive program involving the issuance of Series Z-1 Incentive Units of limited partnership interest in the Operating Partnership.  Stock-based compensation expense for Z-1 Units totaled $0.5 million and $0.5 million for the three months ended June 30, 2013 and 2012, respectively, and $1.0 million and $1.1 million for the six months ended June 30, 2013 and 2012, respectively.  Stock-based compensation for Z-1 units capitalized totaled $0.1 million and $0.2 million for the three months ended June 30, 2013, and 2012, respectively, and $0.2 million and $0.3 million for the six months ended June 30, 2013, and 2012, respectively.  As of June 30, 2013, the intrinsic value of the Z-1 Units subject to future vesting totaled $17.0 million.  As of June 30, 2013, total unrecognized compensation cost related to Z-1 Units subject to future vesting totaled $6.3 million.  The unamortized cost is expected to be recognized up to 14 years subject to the achievement of the stated performance criteria.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Management believes that the carrying amounts of outstanding lines of credit, notes receivable and notes and other receivables approximate fair value as of June 30, 2013 and December 31, 2012, because interest rates, yields and other terms for these instruments are consistent with yields and other terms currently available for similar instruments.  Management has estimated that the fair value of the Company's $2.38 billion of fixed rate debt, including unsecured bonds, at June 30, 2013 is approximately $2.43 billion and the fair value of the Company's $537.3 million of variable rate debt, excluding borrowings under the lines of credit, at June 30, 2013 is $517.6 million based on the terms of existing mortgage notes payable, unsecured bonds 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, 2013 due to the short-term maturity of these instruments.  The fair values of the Company's investments in mortgage backed securities are approximately equal to the amortized cost carrying value of these securities.  Marketable securities and derivatives are carried at fair value as of June 30, 2013.

Capitalization Policy

Capitalization of Costs

The Company's capitalized internal costs related to development and redevelopment projects totaled $1.7 million and $1.5 million during the three months ended June 30, 2013 and 2012, respectively, and  $3.3 million and $2.9 million during the six months ended June 30, 2013 and 2012, respectively,  most of which relates to development projects.  These totals include capitalized salaries of $0.6 million and $0.6 million for the three months ended June 30, 2013 and 2012, respectively, and $1.2 million and $1.3 million for the six months ended June 30, 2013 and 2012, respectively.  The Company expenses leasing commissions as incurred associated with the lease-up of a development community.

Co-investments

Co-investments

The Company owns investments in joint ventures ("co-investments") in which it has significant influence, but its ownership interest does not meet the criteria for consolidation in accordance with the accounting standards.  Therefore, the Company accounts for these 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-investments entities are consistent with those of the Company in all material respects.  For preferred equity investments the Company recognizes its preferred interest as equity in earnings.

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 operations 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 may provide promote distributions 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.

Accounting Estimates and Reclassifications

Accounting Estimates

The preparation of condensed consolidated financial statements, in accordance with U.S. generally accepted accounting principles, 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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Net Income Per Common Share

6 Months Ended

Jun. 30, 2013

Net Income Per Common Share [Abstract]

Net Income Per Common Share

(8)  Net Income Per Common Share

(Amounts in thousands, except per share and unit data)

	Three Months Ended								Three Months Ended
	June 30, 2013								June 30, 2012
	Income			Weighted- average Common Shares		Per Common Share Amount			Income			Weighted- average Common Shares		Per Common Share Amount
Basic:
Income from continuing operations available to common stockholders		$	24,946		37,293		$	0.67		$	37,078		34,571		$	1.07
Effect of Dilutive Securities (1)			-		98						54		137
Diluted:
Income from continuing operations available to common stockholders		$	24,946		37,391		$	0.67		$	37,132		34,708		$	1.07

	Six Months Ended						Six Months Ended
	June 30, 2013						June 30, 2012
	Income		Weighted Average Common Shares		Per Common Share Amount		Income		Weighted Average Common Shares		Per Common Share Amount
Basic:
Income before discontinued operations available to common stockholders	$	50,149		37,149	$	1.35	$	50,379		34,299	$	1.47
Income from discontinued operations     available to common stockholders		-		37,149		-		9,421		34,299		0.27
		50,149			$	1.35		59,800			$	1.74
Effect of Dilutive Securities (1)		-		93				108		132
Diluted:
Income from continuing operations available to common stockholders (1)		50,149		37,242		1.35	$	50,487		34,431		1.47
Income from discontinued operations available to common stockholders		-		37,242		-		9,421		34,431		0.27
	$	50,149			$	1.35	$	59,908			$	1.74

(1) Weighted average convertible limited partnership units of 2,151,494 and 2,239,057, which include vested Series Z-1 incentive units, for the three months ended June 30, 2013, and 2012, respectively, and 2,115,670 and 2,242,112 for the six months ended June 30, 2013 and 2012, respectively, were not included in the determination of diluted EPS because they were anti-dilutive.  Income allocated to convertible limited partnership units, which includes vested Series Z-1 units, aggregating $1.5 million and $2.5 million for the three months ended June 30, 2013 and 2012, respectively, and $3.0 million and $4.1 million for the six months ended June 30, 2013 and 2012, respectively, have been excluded from income available to common stock holders for the calculation of diluted income per common share since these units are excluded from the diluted weighted average common shares for the period as the effect was anti-dilutive.  The Company has the ability to redeem DownREIT limited partnership units for cash and does not consider them to be potentially dilutive securities.

Stock options of 20,825 and 41,557 for the three and six months ended June 30, 2013, respectively, were not included in the diluted earnings per share calculation because the effects on earnings per share were anti-dilutive.

All shares of Series G cumulative convertible preferred stock have been excluded in diluted earnings per share for the three and six months ended June 30, 2013, respectively, as the effect was anti-dilutive.

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Notes and Other Receivables (Tables)

6 Months Ended

Jun. 30, 2013

Notes and Other Receivables [Abstract]

Notes and Other Receivables

Notes receivable secured by real estate, and other receivables consist of the following as of June 30, 2013 and December 31, 2012 (dollars in thousands):

	June 30,		December 31,
	2013		2012
Note receivable, secured, bearing interest at 4.0%, due December 2014 (1)	$	3,212	$	3,212
Notes and other receivables from affiliates (2)		103,869		28,896
Other receivables		3,463		3,785
Note receivable, secured, bearing interest at 8.0%, paid in full in May 2013		-		971
Note receivable, secured, bearing interest at 8.8%, paid in full March 2013		-		10,800
Note receivable, secured, effective interest at 9.6%, paid in full March 2013		-		18,499
	$	110,544	$	66,163

(1) The borrower funds an impound account for capital replacement.

(2) During the second quarter of 2013, the Company provided short-term bridge loans to Fund II and Wesco III of $42.4 million and $56.8 million, respectively, at rates of LIBOR + 1.75% and LIBOR + 2.50%, respectively.

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Organization and Basis of Presentation (Tables)

6 Months Ended

Jun. 30, 2013

Organization and Basis of Presentation [Abstract]

Components of Marketable Securities

As of June 30, 2013and December 31, 2012 marketable securities consist of the following ($ in thousands):

	June 30, 2013
	Cost/ Amortized Cost		Gross Unrealized Gain (Loss)			Carrying Value
Available for sale:
Investment-grade unsecured bonds	$	5,083	$	62		$	5,145
Investment funds - US treasuries		15,360		549			15,909
Common stock		13,104		(269	)		12,835
Held to maturity:
Mortgage backed securities		54,845		-			54,845
Total	$	88,392	$	342		$	88,734

	December 31, 2012
	Cost/ Amortized Cost		Gross Unrealized Gain		Carrying Value
Available for sale:
Investment-grade unsecured bonds	$	5,143	$	98	$	5,241
Investment funds - US treasuries		14,120		729		14,849
Common stock		18,917		1,704		20,621
Held to maturity:
Mortgage backed securities		52,002		-		52,002
Total	$	90,182	$	2,531	$	92,713

Changes in Accumulated Other Comprehensive Loss, Net by Component

Changes in Accumulated Other Comprehensive Loss, Net by Component

	Change in fair value and amortization of derivatives			Unrealized gains/(losses) on available for sale securities			Total
Balance at December 31, 2012	$	(71,658	)	$	2,397		$	(69,261	)
Other comprehensive income (loss) before reclassification		4,528			(430	)		4,098
Amounts reclassified from accumulated other  comprehensive loss		4,023			(1,673	)		2,350
Net other comprehensive income (loss)		8,551			(2,103	)		6,448
Balance at June 30, 2013	$	(63,107	)	$	294		$	(62,813	)

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Document and Entity Information	6 Months Ended
	Jun. 30, 2013	Aug. 01, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	ESSEX PROPERTY TRUST INC
Entity Central Index Key	0000920522
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		38,032,560
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2013

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Co-investments (Tables)

6 Months Ended

Jun. 30, 2013

Co-investments [Abstract]

Summary of Co Investment

The Company has co-investments, which are accounted for under the equity method.  The co-investments own, operate and develop apartment communities.  The following table details the Company's co-investments (dollars in thousands):

	June 30,		December 31,
	2013		2012
Membership interest in Wesco I	$	142,704	$	143,874
Membership interest in Wesco III		37,917		9,941
Partnership interest in Fund II		23,945		53,601
Membership interest in a limited liability company that owns Expo		18,989		18,752
Total operating co-investments		223,555		226,168
Membership interests in limited liability companies that own and are developing Epic, Connolly Station, Mosso I & II and Elkhorn		229,095		186,362
Membership interests in limited liability companies that own and are developing The Huxley and The Dylan		17,381		16,552
Membership interest in a limited liability company that owns and is developing One South Market		16,908		-
Total development co-investments		263,384		202,914
Membership interest in Wesco II that owns a preferred equity interest in Parkmerced with a preferred return of 10.1%		93,273		91,843
Preferred interest in related party limited liability company that owns Sage at Cupertino with a preferred return of  9.5%		15,493		14,438
Preferred interest in a related party limited liability company that owns Madison Park at Anaheim with a preferred return of 13%		13,536		13,175
Preferred interest in related party limited liability company that owns an apartment development in Redwood City with a preferred return of 9.5%		9,018		-
Preferred interests in limited liability companies that own apartment communities in downtown Los Angeles with preferred returns of 9% and 10% repaid in 2013		-		22,807
Total preferred interest investments		131,320		142,263
Total co-investments	$	618,259	$	571,345

Summarized Financial Statement for Co Investment Accounted for Under the Equity Method

The combined summarized balance sheet and statements of operations for co-investments are as follows (dollars in thousands).

	June 30,		December 31,
	2013		2012
Balance sheets:
Rental properties and real estate under development	$	1,769,246	$	1,745,147
Other assets		65,238		168,061
Total assets	$	1,834,484	$	1,913,208
Debt	$	663,830	$	820,895
Other liabilities		147,356		91,922
Equity		1,023,298		1,000,391
Total liabilities and equity	$	1,834,484	$	1,913,208
Company's share of equity	$	618,259	$	571,345

`	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
Statements of operations:
Property revenues	$	26,258		$	28,233		$	54,117		$	62,556
Property operating expenses		(9,874	)		(10,029	)		(19,702	)		(23,166	)
Net property operating income		16,384			18,204			34,415			39,390
Interest expense		(6,094	)		(7,792	)		(12,872	)		(16,337	)
General and administrative		(1,539	)		(920	)		(3,053	)		(1,716	)
Depreciation and amortization		(9,577	)		(8,876	)		(20,596	)		(22,772	)
Net (loss) income	$	(826	)	$	616		$	(2,106	)	$	(1,435	)
Company's share of net income	$	7,282		$	3,111		$	11,493		$	5,451