8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

(Amendment No. 2)

Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 31, 2014

ESSEX PROPERTY TRUST, INC.

ESSEX PORTFOLIO, L.P.

(Exact Name of Registrant as Specified in Its Charter)

001-13106 (Essex Property Trust, Inc.)

333-44467-01 (Essex Portfolio, L.P.)

(Commission File Number)

Maryland (Essex Property Trust, Inc.)	77-0369576 (Essex Property Trust, Inc.)
California (Essex Portfolio, L.P.)	77-0369575 (Essex Portfolio, L.P.)
(State or Other Jurisdiction of Incorporation)	(I.R.S. Employer Identification No.)

925 East Meadow Drive, Palo Alto, California 94303

(Address of Principal Executive Offices)

 (650) 494-3700

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Explanatory Note.

On April 1, 2014, Essex Property Trust, Inc., a Maryland corporation (“Essex”) filed a Current Report on Form 8-K in connection with the completion on April 1, 2014 of the transactions contemplated by that certain Agreement and Plan of Merger (the “Merger Agreement”), dated December 19, 2013, by and among Essex, BRE Properties, Inc., a Maryland corporation (“BRE”) and BEX Portfolio, Inc., formerly known as Bronco Acquisition Sub, Inc., a Delaware corporation and a direct wholly owned subsidiary of Essex (“Merger Sub”). Pursuant to the Merger Agreement, on April 1, 2014, BRE merged with and into Merger Sub, with Merger Sub continuing as the surviving corporation (the “Merger”).  Also on April 1, 2014, following the Merger, Merger Sub merged with and into BEX Portfolio, LLC, a Delaware limited liability company and a direct wholly owned subsidiary of Essex Portfolio, L.P.  On May 9, 2014, a Current Report on Form 8-K/A (Amendment No. 1) amended the Current Report on Form 8-K dated April 1, 2014 to provide the historical financial statements of BRE required by Item 9.01(a) and the pro forma financial information required by Item 9.01(b) related to the consummation of the Merger and the transactions contemplated by the Merger Agreement.

This Current Report on Form 8-K/A (Amendment No. 2) amends the Current Report on Form 8-K dated April 1, 2014 and the Current Report on Form 8-K/A dated May 9, 2014, respectively, to provide the updated historical financial statements of BRE through March 31, 2014 required by Item 9.01(a) and the pro forma financial information required by Item 9.01(b) related to the consummation of the Merger and the transactions contemplated by the Merger Agreement.

Item 9.01 Financial Statements and Exhibits.

(a) Financial Statements of Businesses Acquired.

The unaudited condensed consolidated financial statements of BRE Properties, Inc. as of March 31, 2014 and for the three months ended March 31, 2014 and 2013, and the notes related thereto are included in this Current Report on Form 8-K/A is attached as Exhibit 99.1.

(b) Pro Forma Financial Information.

The pro forma financial information required pursuant to Article 11 of Regulation S-X is attached as Exhibit 99.2 hereto and is incorporated by reference herein.

(d) Exhibits.

Exhibit No.	Description
99.1	Unaudited condensed consolidated financial statements of BRE Properties, Inc. as of March 31, 2014 and for the three months ended March 31, 2014 and 2013, and the notes related thereto.
99.2	Unaudited Pro Forma Condensed Consolidated Financial Information.

Forward Looking Statements

This Form 8-K/A contains forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act. These forward-looking statements which are based on current expectations, estimates and projections about the industry and markets in which Essex operates and beliefs of and assumptions made by management, involve uncertainties that could significantly affect the financial results of Essex. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words and similar expressions are intended to identify such forward-looking statements, which generally are not historical in nature. Such forward-looking statements include, but are not limited to, statements about the anticipated benefits of the Merger, including future financial and operating results, and Essex’s plans, objectives, expectations and intentions.  All statements that address operating performance, events or developments that we expect or anticipate will occur in the future – including statements relating to expected synergies, improved liquidity and balance sheet strength – are forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be attained and therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Some of the factors that may affect outcomes and results include, but are not limited to: (i) national, regional and local economic climates, (ii) changes in financial markets and interest rates, or to the business or financial condition of Essex or its business, (iii) changes in market demand for rental apartment homes and competitive pricing, (iv) risks associated with acquisitions, (v) maintenance of real estate investment trust (“REIT”) status, (vi) availability of financing and capital, (vii) risks associated with achieving expected revenue synergies or cost savings, and (viii) those additional risks and factors discussed in reports filed with the SEC by Essex from time to time, including those discussed under the heading “Risk Factors” in its most recently filed reports on Forms 10-K and 10-Q. Essex does not undertake any duty to update any forward-looking statements appearing in this Form 8-K/A.

SIGNATURE

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

Date: June 27, 2014	ESSEX PROPERTY TRUST, INC.
	By:	/s/ Michael T. Dance
	Name:	Michael T. Dance
	Title:	Executive Vice President and Chief Financial Officer
	ESSEX PORTFOLIO, L.P.
	By: Essex Property Trust, Inc.
	Its: General Partner
	By:	/s/ Michael T. Dance
	Name:	Michael T. Dance
	Title:	Executive Vice President and Chief Financial Officer

EXHIBIT INDEX

Exhibit No.	Description
99.1	Unaudited condensed consolidated financial statements of BRE Properties, Inc. as of March 31, 2014 and for the three months ended March 31, 2014 and 2013, and the notes related thereto.
99.2	Unaudited Pro Forma Condensed Consolidated Financial Information.

EX-99.1

Exhibit 99.1

BRE PROPERTIES, INC.

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2014

	Page No.
Financial Statements:
Condensed Consolidated Balance Sheet – March 31, 2014 (unaudited)	2
Condensed Consolidated Statements of Income (unaudited) – three months ended March 31, 2014 and 2013	3
Condensed Consolidated Statements of Cash Flows (unaudited) – three months ended March 31, 2014 and 2013	4-5
Notes to Condensed Consolidated Financial Statements (unaudited)	6-14

1

BRE Properties, Inc. and Subsidiaries

Condensed Consolidated Balance Sheet

(Unaudited)

(Amounts in thousands, except share data)

	March 31,
	2014
Assets
Real estate portfolio:
Direct investments in real estate:
Investments in rental communities	$	3,438,657
Construction in progress		344,810
Less: accumulated depreciation		(722,381	)
		3,061,086
Equity investments in real estate joint ventures		1,431,845
Land under development		66,108
Total real estate portfolio		4,559,039
Cash		140,259
Other assets		101,181
Total assets	$	4,800,479
Liabilities and Shareholders’ Equity
Liabilities:
Unsecured senior notes	$	900,000
Mortgage loans payable		711,319
Deposit related to operating partnership contribution		1,419,816
Accounts payable and accrued expenses		83,658
Other liabilities		58,741
Total liabilities		3,173,534
Redeemable noncontrolling interest		4,751
Shareholders’ equity:
Common stock, $0.01 par value, 100,000,000 shares authorized; 77,318,766 shares issued and outstanding		773
Additional paid-in capital		1,832,681
Cumulative dividends in excess of accumulated net income		(211,260	)
Total shareholders’ equity		1,622,194
Total liabilities and shareholders’ equity	$	4,800,479

See notes to unaudited condensed consolidated financial statements.

2

BRE Properties, Inc. and Subsidiaries

Condensed Consolidated Statements of Income (unaudited)

 (Amounts in thousands, except per share data)

	For the three months ended
	March 31,
	2014			2013
Revenues
Rental income	$	101,121		$	93,662
Ancillary income		3,980			3,531
Total revenues		105,101			97,193
Expenses
Real estate		33,126			30,804
Provision for depreciation		28,225			24,896
Interest		16,916			16,921
General and administrative		10,009			6,382
Merger expenses		15,290			-
Total expenses		103,566			79,003
Gain on sales of real estate		356,294			-
Other income		87			363
Income before noncontrolling interests, income from investments in unconsolidated entities and discontinued operations		357,916			18,553
Income from unconsolidated entities		100			318
Net gain on sales of unconsolidated entities		-			15,025
Income from continuing operations		358,016			33,896
Income from discontinued operations, net		-			1,090
Income from discontinued operations		-			1,090
Net income	$	358,016		$	34,986
Redeemable noncontrolling interest in income		(48	)		(48	)
Net income attributable to controlling interests	$	357,968		$	34,938
Dividends attributable to preferred stock		506			911
Write-off of preferred stock issuance cost upon redemption		2,069			-
Net income available to common shareholders	$	355,393		$	34,027
Per common share - Basic
Income from continuing operations (net of preferred dividends and redeemable noncontrolling interest in income)	$	4.60		$	0.43
Income from discontinued operations	$	-		$	0.01
Net income available to common shareholders	$	4.60		$	0.44
Weighted average common shares outstanding - basic		77,264			76,990
Per common share - Diluted
Income from continuing operations (net of preferred dividends and redeemable noncontrolling interest in income)	$	4.59		$	0.43
Income from discontinued operations	$	-		$	0.01
Net income available to common shareholders	$	4.59		$	0.44
Weighted average common shares outstanding - diluted		77,473			77,250

See notes to unaudited condensed consolidated financial statements.

3

BRE Properties, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited)

 (Amounts in thousands)

	For the three months ended
	March 31,
	2014			2013
Cash flows from operating activities:
Net income	$	358,016		$	34,986
Adjustments to reconcile net income to net cash flows provided by operating activities:
Net gain on sales of real estate assets		(356,294	)		-
Net gain on sales of unconsolidated entities		-			(15,025	)
Income from unconsolidated entities		(100	)		(318	)
Distributions of earnings from unconsolidated entities		149			317
Provision for depreciation		28,225			25,827
Amortization of deferred financing costs		787			806
Non cash stock based compensation expense		1,990			1,720
Change in other assets		(9,179	)		799
Change in accounts payable and accrued expenses		(7,902	)		(8,300	)
Net cash flows provided by operating activities		15,692			40,812
Cash flows from investing activities:
Additions to land under development and predevelopment cost		(2,106	)		(4,613	)
Additions to construction in progress		(52,693	)		(37,744	)
Rehabilitation expenditures and other		(8,241	)		(8,508	)
Capital expenditures		(2,835	)		(3,334	)
Proceeds from sale of unconsolidated entities, net of closing costs		-			47,393
Proceeds from sale of operating communities, net of closing costs		587,820			-
Distribution of capital from unconsolidated entities		232,295			-
Net cash flows provided by/( used in) investing activities		754,240			(6,806	)
Cash flows from financing activities:
Principal payments on mortgage loans		(109	)		(306	)
Repayment of unsecured notes		(50,000	)		(40,018	)
Unsecured revolving credit facility:
Advances		151,000			-
Repayments		(249,000	)		-
Cash dividends paid to common shareholders		(430,015	)		(30,516	)
Cash dividends paid to preferred shareholders		(506	)		(911	)
Distributions to redeemable noncontrolling interests		(48	)		(48	)
Shares retired for tax withholding		(5,540	)		(3,886	)
Proceeds from exercises of stock options and other, net		119			897
Proceeds from dividend reinvestment plan		-			221
Redemption of preferred stock		(54,006	)		-
Net cash flows used in financing activities		(638,105	)		(74,567	)
Increase/(decrease) in cash		131,827			(40,561	)
Cash balance at beginning of period		8,432			62,241
Cash balance at end of period	$	140,259		$	21,680
				(Continued)

4

BRE Properties, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited)

 (Amounts in thousands)

	For the three months ended
	March 31,
	2014			2013
Supplemental information
Cash paid for interest, net of amounts capitalized	$	16,916		$	28,759
Deposit in connection with contribution to Essex Portfolio, L.P. in equity investment in real estate joint ventures	$	1,419,816		$	-
Transfers of direct investments in real estate-construction in progress to investments in rental communities	$	114,784		$	14,992
Transfer of land under development to other assets	$	40,000			-
Change in accrued improvements to direct investments in real estate	$	898		$	1,070
Change in accrued development costs for construction in progress and land under development	$	(4,299	)	$	(5,563	)
Contribution of accounts payable and accrued expenses to joint ventures	$	(6,254	)	$	-
Transfer of land under development to direct investments in real estate-construction in progress	$	-		$	71,576

See notes to unaudited condensed consolidated financial statements.

5

BRE Properties, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

March 31, 2014

NOTE A – BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information. Accordingly, certain information and footnote disclosures normally included in the consolidated financial statements have been omitted. These condensed consolidated financial statements should be read in conjunction with the Annual Report on Form 10-K for the year ended December 31, 2013 of BRE Properties, Inc. (the “Company” or “BRE”). In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring adjustments only) necessary for a fair presentation of the Company’s condensed consolidated financial statements for the interim periods presented.

The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the dates of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

On April 1, 2014, BRE completed the merger with Essex Property Trust, Inc. (“Essex”).  In connection with the closing of the merger, (1) BRE merged into a wholly owned subsidiary of Essex, and (2) each outstanding share of BRE common stock was converted into (i) 0.2971 shares (the “Stock Consideration”) of Essex common stock, and (ii) $7.18 in cash, (the “Cash Consideration”), plus cash in lieu of fractional shares for total consideration of approximately $4.3 billion.  The Cash Consideration was adjusted as a result of the authorization and declaration of a special distribution to the shareholders of BRE of $5.15 per share of BRE common stock payable to BRE shareholders of record as of the close of business on March 31, 2014 (the “Special Dividend”).  The Special Dividend is payable as a result of the closing of the sale of certain interests in assets of BRE to certain parties designated by Essex, which closed on March 31, 2014.  Pursuant to the terms of the merger agreement, the amounts payable as a Special Dividend reduced the Cash Consideration of $12.33 payable by Essex in the merger to $7.18 per share of BRE common stock.  BRE shareholders received approximately 23.1 million shares of Essex common stock as Stock Consideration in the merger.

On March 31, 2014, BRE contributed 14 properties valued at approximately $1.4 billion to Essex for approximately 8.6 million Operating Partnership units (“OP units”).  This transaction was accounted for under the deposit method as the conditions to record under full accrual method have not been met as of March 31, 2014.  The OP units are presented within “equity investment in real estate joint ventures” with an offsetting credit to deposit related to operating partnership contribution.  The OP units were subsequently retired by Essex on April 1, 2014 upon completion of the merger.

 NOTE B – UPDATE OF SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Investments in Rental Communities

Rental communities are recorded at cost, less accumulated depreciation, less an adjustment, if any, for impairment. Costs associated with the purchase of operating communities are recorded to land, building and intangibles when applicable, based on their fair value in accordance with Financial Accounting Standards Board (FASB) business combination guidance. Land value is assigned based on the purchase price if land is acquired separately, or estimated fair market value based upon market comparables if acquired in a merger or in an operating community acquisition.

Where possible, the Company stages its construction to allow leasing and occupancy during the construction period, which BRE believes minimizes the duration of the lease up period following completion of construction. The Company’s accounting policy related to communities in the development and leasing phase is to expense all operating cost associated with completed apartment homes, including costs associated with the lease up of the development. Projects under development are carried at cost, including direct and indirect soft costs incurred to ready the assets for their intended use and which are specifically identifiable, including capitalized interest and property taxes until homes are placed in service. Interest is capitalized on the construction in progress at a rate equal to the Company’s weighted average cost of debt. The Company has a development group which manages the design, development and construction of apartment communities. Project costs related to the development and construction of apartment communities (including interest and related loan fees, property taxes, and other direct costs including municipal fees, permits, architecture, engineering and other professional fees) are capitalized as a cost of the project. Indirect development costs, including salaries and benefits, office rent, and associated costs for those individuals directly responsible for and who spend all of their time on development activities are also capitalized and allocated to the projects to which they relate. Capitalized development compensation totaled approximately $2,482,000 and $2,173,000 for the three months ended March 31, 2014 and March 31, 2013, respectively. Indirect costs not related to development and construction activity are expensed as incurred. Expenditures for ordinary maintenance and repairs are expensed to operations as incurred and significant renovations and improvements that increase the value of the community or extend its useful life are capitalized.

6

BRE Properties, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

March 31, 2014

Direct investment development projects are considered placed in service as certificates of occupancy are issued and the homes become ready for occupancy. Depreciation begins as homes are placed in service. Land acquired for development is capitalized and reported as land under development until the development plan for the land is finalized. Once the development plan is finalized, construction contracts are signed, and construction has commenced, the costs are transferred to the balance sheet line item construction in progress.

Depreciation is computed on a straight-line basis over the estimated useful lives of the assets, which generally range from 35 to 40 years for buildings and three to ten years for other property assets. The determination as to whether expenditures should be capitalized or expensed, and the period over which depreciation is recognized, requires management’s judgment.

In accordance with FASB guidance on accounting for the impairment or disposal of long-lived assets, the Company’s investments in real estate are evaluated for indicators of impairment. The evaluation of impairment and the determination of estimated fair value are based on several factors, and future events could occur which would cause management to conclude that indicators of impairment exist and a reduction in carrying value to estimate fair value is warranted. Impairment is first triggered when the carrying amount of an asset may not be recoverable. To determine impairment, the test consists of comparing the undiscounted net cash flows expected to be produced by the asset to the carrying value of the asset. If the total future undiscounted net cash flows are less than the carrying amount of the real estate, impairment exists. If impairment exists and the carrying amount of the real estate exceeds its fair value, an impairment loss is recognized equal to the amount of the excess carrying amount over the fair value.  For the three months ended March 31, 2014 and 2013, the Company did not record any impairment losses for wholly-owned operating real estate assets.

The Company also assesses land held for development for impairment if the intent changes with respect to the development of the land. There was no land held for development for which an adjustment for impairment in value was made for the three months ended March 31, 2014 and 2013.

On March 11, 2014, a fire broke out at one of the two buildings at the Company’s MB360 development located in San Francisco, California.  The MB360 development was written down in the amount of $40.0 million as a result of the fire.  There was comprehensive insurance on the development and we estimate the insurance claim will result in reimbursement for the replacement cost on the damaged construction.  We recorded a receivable of $40.0 million as of March 31, 2014 for this insurance claim and is presented within “Other assets” on the condensed consolidated balance sheet.

Reportable Segments

FASB guidance requires certain descriptive information to be provided about an enterprise’s reportable segments. BRE has determined that each of its operating communities represents an operating segment. The Company aggregates its operating segments into five reportable segments based upon geographical region with same-store communities aggregated into four reportable segments and non same-store communities aggregated into one reportable segment.

“Same-store” communities are defined as communities that have been completed, stabilized and owned by the Company for two comparable calendar year periods. The Company defines “stabilized” as communities that have reached a physical occupancy of at least 93%. Physical occupancy is calculated by dividing the total occupied homes by the total homes in the communities.

NOTE C – STOCK-BASED COMPENSATION

FASB guidance requires all share-based payments to employees to be recognized in the income statement based on their grant date fair values.

The Company measures the value of the service based restricted stock and performance based restricted stock without market conditions at fair value on the grant date, based on the number of units granted and the market value of its common stock on that date. Guidance requires compensation expense to be recognized with respect to the restricted stock if it is probable that the service or performance condition will be achieved. As a result, the Company records the fair value, net of estimated forfeitures, as stock-based compensation expense on a straight-line basis over the vesting period for service based restricted stock. For service based restricted stock awards, the Company evaluates its forfeiture rate at the end of each reporting period based on the probability of the service condition being met. For performance based restricted stock awards without market conditions, the Company records the fair value, net of estimated forfeitures, as stock-based compensation expense using the accelerated attribution method with each vesting tranche valued as a separate award. The fair value of performance based restricted stock awards with market conditions is determined using a Monte Carlo simulation to estimate the grant date fair value. The Company records the fair value of these awards with market conditions, net of estimated forfeitures, as stock-based compensation over the vesting period regardless of whether the market conditions are satisfied in accordance with share-based payment guidance.

7

BRE Properties, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

March 31, 2014

The Company estimates the fair value of its options using a Black-Scholes valuation model using various assumptions to determine their grant date fair value. The Company amortizes the fair value, net of estimated forfeitures, as stock-based compensation expense on a straight-line basis over the vesting period. The cost related to stock-based compensation included in the determination of consolidated net income for the three months ended March 31, 2014 and 2013 includes all awards outstanding and vested during these periods.

Stock based compensation awards under BRE’s plans vest over periods ranging from one to six years. At March 31, 2014, compensation cost related to unvested awards not yet recognized totaled approximately $12,710,000 and the weighted average period over which it is expected to be recognized is 3.73 years. During the three months ended March 31, 2014, 28,145 restricted shares were awarded and 142,260 restricted shares vested. During the three months ended March 31, 2014, zero stock options were awarded or exercised.

NOTE D – REAL ESTATE PORTFOLIO

Equity investments in real estate joint ventures

On March 31, 2014, the Company contributed 14 properties fair valued at approximately $1.4 billion to Essex for approximately 8.6 million of Essex Portfolio L.P.’s Operating Partnership units (“OP units”).  The Company could put the OP units back to Essex and retain the 14 properties if the merger did not close.  Accordingly, the contribution was accounted for under the deposit method in accordance with ASC 360, Property, Plant and Equipment.  As a result, the Company did not recognize any profits, and continues to report the 14 properties and their related debt in the direct investments in real estate and mortgage loans payable line item on the balance sheet at March 31, 2014.  The fair value of the OP units received of $1.4 billion is recorded in equity investments in real estate joint ventures with a corresponding deposit related to operating partnership contribution, on the condensed consolidated balance sheet at March 31, 2014.

On March 31, 2014, the Company contributed 17 properties to three joint ventures with a total estimated property fair value of approximately $888 million.  The properties were contributed to Wesco III BEX LLC (“Wesco III”), Wesco IV LLC (“Wesco IV”), and BEXAEW LLC (“AEW”) for approximately a 49.5% interest in each of the three joint ventures.   The net book value of the 17 properties was $371.0 million and the contribution of the properties to the joint ventures resulted in the Company recording its share of a gain on the properties of $252.6 million.  Upon formation of the joint ventures, each joint venture entity obtained third party secured loans totaling approximately $475 million and capital contributions totaling $201.4 million from the remaining investors. The joint ventures distributed $676.4 million of these proceeds to the Company.  Proceeds were used to pay the special dividend of $5.15 per share to shareholders of record as of March 31, 2014 that totaled $399.4 million and the Company’s unsecured revolving credit facility of $146.0 million. The distribution received by the Company exceeded the carrying value of the interest in certain joint ventures by $58.7 million, which is presented in other liabilities on the condensed consolidated balance sheet.

Discontinued operations and dispositions

In April 2014, the Financial Accounting Standards Board (“FASB”) issued ASU, No. 2014-018, Presentation of Financial Statements, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.  ASU 2014-018 changes the requirements for reporting discontinued operation under Subtopic 205-20, Presentation of Financial Statements—Discontinued Operations.  The amendment updates the definition of discontinued operation and defines discontinued operations to be those disposals of components of an entity that represent a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.  This ASU is effective for disposals of components of an entity that occur within annual periods beginning on or after December 15, 2014 with early adoption permitted, but only for disposal that have not been reported in financial statements previously issued.

No operating communities or land parcels were sold during the three months ended March 31, 2013.  The income from discontinued operations, net for the three months ended March 31, 2013 reflects the operating results of one community sold in the second quarter of 2013 and two communities sold in the fourth quarter of 2013.

The Company adopted ASU 2014-018 in its first quarter of 2014.  In January 2014, BRE sold three properties located in Sacramento, CA, Spring Valley, CA and San Diego, CA for total proceeds of $156,800,000.  The total gain on sales was $103,700,000. The Company determined that the disposal was not a discontinued operation in accordance with ASU 2014-018.  The gain is recorded in gains on sale of real estate in the condensed consolidated statements of income.

8

BRE Properties, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

March 31, 2014

NOTE E – EQUITY

On February 20, 2014, the Company redeemed its 6.75% Series D Cumulative Redeemable Preferred Stock at a redemption price of $25.23438 per share which resulted in excess cash paid of $2,069,000 over the carrying value of Series D due to the initial issuance costs.

Condensed Consolidated Statements of Stockholders’ Equity

(Dollar amounts in thousands, except share data)

Common Stock Shares	March 31, 2014
Balance at beginning of year		77,210,095
Stock options exercised, net of shares tendered		22,545
Vested restricted shares, net of shares tendered		86,126
Balance at end of period		77,318,766
Preferred stock shares
Balance at beginning of year		2,159,715
Redeemed Shares		(2,159,715	)
Balance at end of period		-
Common stock
Balance at beginning of year	$	772
Vested restricted shares, net of shares tendered		1
Balance at end of period	$	773
Preferred stock
Balance at beginning of year	$	22
Redeemed Shares		(22	)
Balance at end of period	$	-
Additional paid-in capital
Balance at beginning of year	$	1,888,028
Stock options exercised, net of shares tendered and other, net		119
Shares retired for tax withholding		(5,540	)
Stock based compensation		1,990
Preferred stock redemption		(53,971	)
Write-off of preferred stock issuance costs		2,055
Balance at end of period	$	1,832,681
Cumulative dividends in excess of accumulated net income
Balance at beginning of year	$	(136,638	)
Net income		358,016
Cash dividends declared and paid to common shareholders		(430,015	)
Cash dividends declared and paid to preferred shareholders		(506	)
Write-off of preferred stock issuance costs		(2,069	)
Other noncontrolling interest in income		(48	)
Balance at end of period	$	(211,260	)
Redeemable noncontrolling interests
Balance at beginning of year	$	4,751
Other noncontrolling interests in income		(48	)
Distributions to other noncontrolling interests		48
Balance at end of period	$	4,751

NOTE F – LEGAL MATTERS

The Company is involved in various legal actions arising in the ordinary course of business for which losses are expected to be covered under the Company’s insurance policies. As of March 31, 2014, the risk of material loss from such legal actions impacting the Company’s financial condition or results from operations has been assessed as remote.

9

BRE Properties, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

March 31, 2014

NOTE G – DEBT

During the first quarter 2014, the Company’s 4.7% senior notes came due and the aggregate principal balance of $50,000,000 was paid in full.

On January 4, 2012, the Company entered into a $750,000,000 unsecured revolving credit facility (the “Credit Agreement”). The unsecured revolving credit facility has an initial term of 39 months, terminates on April 3, 2015 and replaces its previous $750,000,000 unsecured revolving credit facility. Based on the Company’s current debt ratings, the unsecured revolving credit facility accrues interest at LIBOR plus 120 basis points. In addition, the Company pays a 0.20% annual facility fee on the total commitment of the facility. Majority owned subsidiaries no longer guarantee the unsecured revolving credit facility. There was no balance borrowed under the Company’s unsecured revolving credit facility at March 31, 2014. Borrowings under the unsecured revolving credit facility are used to fund acquisition and development activities as well as for general corporate purposes. Balances on the unsecured revolving credit facility are typically reduced with available cash balances. On April 1, 2014, the Credit Agreement was terminated upon completion of the merger with Essex.

On August 13, 2012, the Company completed an offering of $300,000,000 10.5-year senior unsecured notes. The notes will mature on January 15, 2023 and bear interest at a fixed coupon rate of 3.375%. Net proceeds from the offering, after all discounts, commissions, and issuance costs, totaled approximately $295,400,000 and were used for general corporate purposes including reducing the Company’s unsecured revolving credit facility balance.

The Company’s indebtedness contains financial covenants as to minimum net worth, interest coverage ratios, maximum secured debt, total debt to capital, and cash on hand among others. The Company was in compliance with all such financial covenants during the three months ended March 31, 2014.

The following is a consolidated summary of BRE’s total outstanding debt as of March 31, 2014 (amounts in thousands):

					Mortgage loans payable
Year of maturity	Unsecured senior notes		Unsecured  revolving  credit facility		Amortization		Balloon		Total mortgage loans  payable		Total		Weighted Avg Rate (1)
2014	$	-	$	-	$	3,981	$	-	$	3,981	$	3,981		5.62	%
2015		-		-		8,329		-		8,329		8,329		5.63	%
2016		-		-		8,712		-		8,712		8,712		5.63	%
2017		300,000		-		8,986		-		8,986		308,986		5.50	%
2018		-		-		10,218		-		10,218		10,218		5.64	%
2019		-		-		6,515		317,975		324,490		324,490		5.59	%
2020		-		-		2,957		343,646		346,603		346,603		5.61	%
2021		300,000		-		-		-		-		300,000		5.20	%
2022		-		-		-		-		-		-		0.00	%
2023		300,000		-		-		-		-		300,000		3.38	%
2024		-		-		-		-		-		-		0.00	%
	$	900,000	$	-	$	49,698	$	661,621	$	711,319	$	1,611,319		5.09	%

(1) Represents the weighted average coupon interest rates of debt maturities in the year in which they become due. These rates do not include the amortization of upfront issuance fees.

10

BRE Properties, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

March 31, 2014

NOTE H – FAIR VALUE MEASUREMENT

Under FASB guidance, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. the “exit price”) in an orderly transaction between market participants at the measurement date.

Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments’ complexity. Assets and liabilities recorded at fair value in the consolidated balance sheet are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, defined by the FASB and directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:

Level 1 — Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. The types of assets and liabilities classified as Level 1 fair value generally are G-7 government and agency securities, equities listed in active markets, investments in publicly traded mutual funds with quoted market prices and listed derivatives.

Level 2 — Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life. Fair valued assets that are generally included in this category are stock warrants for which there are market-based implied volatilities, unregistered common stock and thinly traded common stock.

Level 3 — Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. Generally, assets carried at fair value and included in this category include stock warrants for which market-based implied volatilities are not available.

Financial Instruments Not Carried at Fair Value

The fair values of the Company’s financial instruments including such items in the financial statement captions as cash, other assets, accounts payable and accrued expenses, and the unsecured revolving credit facility, approximate their carrying or contract values based on their nature, terms and interest rates. The fair value of debt is estimated using discounted cash flow analyses with an interest rate similar to that of current market borrowing arrangements with similar terms.

As of March 31, 2014, the Company has estimated that the fair value of its mortgage loans payables is approximately $790,859,000 (carrying value of $711,319,000). During the same period, the Company has estimated that the fair value of its unsecured senior notes is approximately $944,552,000 (carrying value of $900,000,000). These valuations were estimated using the rates of comparable debt instruments available in the market place, which are Level 2 measurements.

Fair Value Measurements

The estimated fair values of investment securities classified as deferred compensation plan investments are based on quoted market prices utilizing public information for the same transactions and are therefore classified as Level 1. The Company’s deferred compensation plan investments are recorded in other assets and totaled $4,767,000 at March 31, 2014.

There were no transfers of assets measured at fair value between Level 1 and Level 2 of the fair value hierarchy for the three months ended March 31, 2014.

NOTE I – SEGMENT REPORTING

FASB guidance requires certain descriptive information to be provided about an enterprise’s reportable segments. BRE has determined that each of its operating communities represents an operating segment. The Company aggregates its operating segments into reportable segments defined as the geographical regions in which its apartment communities are located: Southern California, San Francisco Bay Area and the Seattle area.

Segment reporting guidance requires that segment disclosures present the measure(s) used by the chief operating decision makers to decide how to allocate resources and for purposes of assessing such segments’ performance. The Company’s chief operating decision makers are comprised of several members of its executive management team who use net operating income (“NOI”) as a primary financial measure to assess the performance of the business.

11

BRE Properties, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

March 31, 2014

The Company’s operating and investment activities are primarily focused on the ownership, development and operation of multifamily communities in the major metropolitan markets within the state of California, and in the metropolitan area of Seattle, Washington. The Company evaluates performance and allocates resources primarily based on the NOI of an individual multifamily community. The Company defines NOI as the excess of all revenue generated by the community (primarily rental revenue) less direct real estate expenses. Accordingly, NOI does not take into account community-specific costs such as depreciation and interest expense.

The Company monitors the operating results of each community on a “same-store” and “non same-store” basis. “Same-store” communities are defined as communities that have been completed, stabilized and owned by the Company for two comparable calendar year periods. The company defines “stabilized” as communities that have reached a physical occupancy of at least 93%. A comparison of operating results for same-store communities is meaningful as these communities have stabilized occupancy and operating expenses, there is no plan to conduct significant redevelopment activities and the community is not held for disposition within the current year.

To better understand the Company’s overall results, the 55 wholly or majority owned apartment communities can be characterized as follows:

· 13,743 homes in 47 communities were owned, completed and stabilized for all of 2014 and 2013 (“same-store”) communities;

· 1,260 homes in three completed and one partially completed development communities, which are experiencing lease-up and stabilization during 2014 and 2013 and as a result did not have comparable year-over-year operating results (“non same-store”); and

· 270 homes in one community acquired on September 30, 2013, which as a result did not have comparable year-over-year operating results (“non same-store”).

· 902 homes in two communities in Phoenix, AZ that are planned for sale.

· 224 homes in one community in Emeryville, CA are undergoing reconstruction.

Operating results are aggregated into five reportable segments based upon geographical region with same-store communities aggregated into four reportable segments and non same-store communities aggregated into one reportable segment.

12

BRE Properties, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

March 31, 2014

The following table details rental income and NOI for the Company’s reportable segments for the three months ended March 31, 2014 and 2013 months, and reconciles NOI to net income available to common shareholders per the consolidated statements of income:

	For the three months ended
	March 31,
(amounts in thousands)	2014		2013
Revenues (1):
Southern California (2)	$	52,461	$	50,784
San Francisco Bay Area		25,051		23,139
Seattle		14,816		13,916
Same-store revenues		92,328		87,839
Non same-store communities(3)		12,773		9,354
Total community revenues	$	105,101	$	97,193
Net operating income:
Southern California (2)	$	36,383	$	35,305
San Francisco Bay Area		18,600		17,141
Seattle		9,765		9,011
Same-store net operating income		64,748		61,457
Non Same-store communities(3)		7,227		4,932
Total community net operating income	$	71,975	$	66,389
Gain on sales of real estate		356,294		-
Other income		87		363
Income from unconsolidated entities		100		318
Gain on sale of unconsolidated entities		-		15,025
Income from discontinued operations, net		-		1,090
Net operating income	$	428,456	$	83,185
Less:
Provision for depreciation		28,225		24,896
Interest		16,916		16,921
General and administrative		10,009		6,382
Merger expenses		15,290		-
Dividends attributable to preferred stock		506		911
Write-off of preferred stock issuance cost upon redemption		2,069		-
Redeemable noncontrolling interests in income		48		48
Net income available to common shareholders	$	355,393	$	34,027

13

BRE Properties, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

March 31, 2014

The following table details the assets of the Company’s reportable segments:

	As of March 31, 2014
(amounts in thousands)	Communities		Homes		Total Asset Carrying Value
Assets
Southern California(2)		25		7,589	$	1,577,043
San Francisco Bay Area		12		3,499		715,734
Seattle		10		2,655		477,613
Total Same-store communities		47		13,743		2,770,390
Non Same-store communities(3)		8		2,656		668,267
Total investment in rental communities		55		16,399	$	3,438,657
Accumulated depreciation						(722,381	)
Construction in progress						344,810
Equity investments in real estate joint ventures						1,431,845
Land under development						66,108
Cash						140,259
Other assets						101,181
Total  assets					$	4,800,479

(1) All revenues are from external customers and no single tenant or related group of tenants contributed 10% or more of the Company’s total revenue during the three months ended March 31, 2014 and 2013.

(2) Consists of 8 communities in San Diego, 1 in Inland Empire, 7 in Los Angeles, and 9 in Orange County.

(3) 2013 Non same-store communities’ totals includes one community fully delivered  in 2012, one community fully delivered in the second quarter of 2013, one community acquired during the third quarter of 2013 and commercial properties that will be later developed as multi-family.  Also, included is one community in Sacramento, California sold in the first quarter of 2014 and two communities in Phoenix, Arizona that are plan for sale.

14

EX-99.2

Exhibit 99.2

INDEX TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED

FINANCIAL INFORMATION

	Page
Introduction	2
Unaudited Pro Forma Condensed Consolidated Financial Statements of Essex Property Trust, Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2014	5
Unaudited Pro Forma Condensed Consolidated Statement of Income for the quarter ended March 31, 2014	6
Unaudited Pro Forma Condensed Consolidated Statement of Income for the year ended December 31, 2013	7
Unaudited Pro Forma Condensed Consolidated Financial Statements of Essex Portfolio, L. P.
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2014	8
Unaudited Pro Forma Condensed Consolidated Statement of Income for the quarter ended March 31, 2014	9
Unaudited Pro Forma Condensed Consolidated Statement of Income for the year ended December 31, 2013	10
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements	11

1

ESSEX PROPERTY TRUST, INC.

ESSEX PORTFOLIO, L. P.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Introduction

BRE Properties, Inc. (“BRE”), merged with and into BEX Portfolio, Inc. (“Merger Sub”), a direct wholly owned subsidiary of Essex Property Trust, Inc. (“Essex”), with Merger Sub continuing as the surviving corporation and a wholly owned direct subsidiary of Essex. We refer to this merger as the Merger. The Merger is part of the transactions contemplated by the Agreement and Plan of Merger entered into on December 19, 2013 among Essex, Merger Sub and BRE, which we refer to as the Merger Agreement. The Merger became effective on April 1, 2014. Also on April 1, 2014, following the Merger, Merger Sub merged with and into BEX Portfolio, LLC (“BEX LLC”), a Delaware limited liability company and a directly wholly owned subsidiary of Essex Portfolio, L.P. (“EPLP”), with BEX LLC continuing as the surviving entity and a direct wholly owned subsidiary of EPLP.

On April 1, 2014, Essex completed the Merger which resulted in: (1) BRE merging with and into Merger Sub, and (2) each share of BRE common stock was converted into (i) 0.2971 shares of Essex common stock (the “Stock Consideration”) which totaled approximately 23.1 million shares of Essex common stock, which were valued at $3.8 billion, and (ii) $7.18 in cash,  and cash in lieu of fractional shares (the “Cash Consideration”), which totaled approximately $558.1 million for total consideration of approximately $4.3 billion.  Prior to the Merger, BRE authorized and declared a special distribution to the stockholders of BRE of $5.15 per share of BRE common stock payable to BRE stockholders of record on March 31, 2014 (the “Special Dividend”).  The Special Dividend was payable as a result of the closing of the sale of certain interests in assets of BRE to certain third-party institutional investors designated by Essex, which closed on March 31, 2014, as described below.  Pursuant to the terms of the Merger Agreement, the amounts payable as a Special Dividend reduced the initial Cash Consideration of $12.33 payable by Essex in the Merger to $7.18 per share of BRE common stock.

On February 20, 2014, BRE redeemed all outstanding shares of BRE preferred stock at $25.00 per share plus any accrued and unpaid dividends, in accordance with their terms and as contemplated by the Merger Agreement.

On March 31, 2014, as contemplated by the Merger Agreement, BRE formed three new joint ventures with two separate third-party institutional joint venture partners and contributed 17 BRE properties with an aggregate estimated value of approximately $888.3 million to the joint ventures.  As a result of the contribution of the properties to the joint ventures, BRE deconsolidated these properties and retained a 50% non-controlling interest in each of the joint ventures. Additionally, in connection with the contribution of the properties, the joint ventures placed approximately $475 million in mortgage financings on the properties contributed to the joint ventures. As a result, BRE received proceeds of approximately $676.4 million from the joint ventures representing its share of the proceeds from the mortgage financings and contributions from the joint venture partners in order to bring its ownership interest down to 50%. As a result of the closing of these joint ventures, BRE authorized and paid the Special Dividend described above.

On March 31, 2014, BRE contributed 14 properties with a fair value of approximately $1.4 billion to Essex (the ''OP Trade'') for approximately 8.6 million of EPLPs operating partnership units (“OP units”). BRE could put the OP units back to Essex and retain the 14 properties if the merger did not close.  Accordingly, the OP Trade was accounted for under the deposit method in accordance with ASC 360, Property, Plant and Equipment.  As a result, BRE did not recognize any profits, and continued to report the 14 properties and their related debt in rental properties and other; real estate under development; and mortgage loans payable line item on BRE’s consolidated balance sheet at March 31, 2014.  The fair value of the OP units received of $1.4 billion is recorded in co-investments and a corresponding deposit liability, on BRE’s consolidated balance sheet at March 31, 2014.

Essex recorded the 14 properties in the OP Trade at a fair value of $1.4 billion and is reflected in the rental properties and other; real estate under development; and prepaid expenses and other assets with a corresponding $1.4 billion in noncontrolling interest on Essex’s consolidated balance sheet at March 31, 2014.

2

As contemplated by the Merger Agreement, on March 5, 2014, Essex, through EPLP, commenced an offer to exchange (the “Exchange Offer”) $900.0 million aggregate principal amount of BRE’s 5.500% senior notes due 2017, 5.200% senior notes due 2021 and 3.375% senior notes due 2023 (the “BRE Notes”).  Pursuant to the terms of the Exchange Offer, on April 4, 2014, $843.2 million aggregate principal amount of BRE Notes were exchanged for new 5.500% senior notes due 2017, 5.200% senior notes due 2021 and 3.375% senior notes due 2023 issued by EPLP and guaranteed by Essex.  The remaining $56.8 million aggregate principal amount of BRE Notes which were not exchanged pursuant to the Exchange Offer are obligations of BEX Portfolio, LLC.  Since the closing of the BRE Exchange Offer, EPLP issued $4.6 million aggregate principal amount of 3.375% senior notes due 2023 Notes in exchange for the same aggregate principal amount of 3.375% senior notes due 2023 that became obligations of BEX Portfolio, LLC. Also, in connection with the Merger, Essex assumed approximately $711.3 million of secured debt with remaining loan terms ranging from one to seven years and a weighted average interest rate of 5.6%.Under the terms of the Merger Agreement, each option to purchase shares of BRE common stock was assumed by Essex and converted into an option exercisable for a number of shares of Essex common stock calculated based on the exchange ratio set forth in the Merger Agreement, subject to the same economic terms and conditions as were applicable to the corresponding option immediately prior to the Merger. All BRE restricted stock awards outstanding at the effective time of the Merger were assumed by Essex and converted into an award of a number of shares of Essex restricted common stock calculated based on the exchange ratio set forth in the Merger Agreement, subject to the same economic terms and conditions as were applicable to the corresponding award immediately prior to the Merger, but subject to certain adjustments to the vesting terms of performance-based BRE restricted stock awards. 

The following unaudited pro forma condensed consolidated financial statements are based on Essex’s historical consolidated financial statements and BRE’s historical consolidated financial statements and have been adjusted in the statements below to give effect to the Merger and the other transactions contemplated by the Merger Agreement. The unaudited pro forma condensed consolidated statements of income for the quarter ended March 31, 2014 and for the year ended December 31, 2013 give effect to the Merger as if it had occurred on January 1, 2013. The unaudited pro forma condensed consolidated balance sheet as of March 31, 2014 gives effect to the Merger as if it had occurred on March 31, 2014. The historical consolidated financial statements of BRE have been adjusted to reflect certain reclassifications in order to conform to Essex’s financial statement presentation.

The unaudited pro forma condensed consolidated financial statements were prepared using the acquisition method of accounting with Essex considered the accounting acquirer of BRE. Under the acquisition method of accounting, the acquired net tangible and identifiable intangible assets and liabilities assumed of BRE are recorded based on their respective fair values with the excess purchase price, if any, recorded to goodwill.

The pro forma adjustments and the purchase accounting adjustments as presented are based on estimates and certain information that is currently available. For purchase accounting, the value of the Stock Consideration issued by Essex upon the consummation of the Merger was determined based on the closing price of BRE’s common stock on the closing date of the Merger. As a result of Essex being admitted to the S&P 500 on the same date as the closing of the Merger, Essex’s common stock price experienced significantly higher than usual trading volume and the closing price of $174 per share was significantly higher than its volume-weighted average trading price for the days before and after April 1, 2014.  BRE’s common stock did not experience the same proportionate increase in common stock price leading up to April 1, 2014.  As a result, given that a substantial component of the purchase price is an exchange of equity instruments, Essex used the closing price of BRE’s common stock on April 1, 2014 of $61 per share, less the Special Dividend, as the fair value of the Stock Consideration.   The  assignment of fair values to BRE’s assets acquired and liabilities assumed has not been finalized, is subject to change, could vary materially from the actual amounts at the time the purchase accounting is completed, and may not have identified all adjustments necessary to conform BRE’s accounting policies to Essex’s accounting policies. Essex is currently in the measurement period and performing procedures to accumulate the necessary information to measure the fair value of BRE’s assets and liabilities acquired.  A final determination of the fair value of BRE’s assets and liabilities, including intangible assets, will be based on the actual net tangible and intangible assets and liabilities of BRE that exist as of the closing date of the Merger and, therefore, cannot be made with certainty prior to the completion of the purchase accounting measurement period, which may extend up to one-year from the closing of the Merger.

3

As a result of the foregoing, the pro forma adjustments are preliminary and are subject to change as additional information becomes available and additional analyses are performed. The preliminary pro forma adjustments have been made solely for the purpose of providing the unaudited pro forma condensed consolidated financial statements presented below. Essex estimated the fair value of BRE’s assets and liabilities based on discussions with BRE’s management, preliminary valuation studies, due diligence and information presented in BRE’s public filings. Any increases or decreases in the fair value of relevant balance sheet amounts upon completion of the final valuations will result in adjustments to the pro forma balance sheet and/or statement of income. The final purchase accounting may be different than that reflected in the pro forma purchase accounting presented herein, and this difference may be material.

Assumptions and estimates underlying the unaudited adjustments to the unaudited pro forma condensed consolidated financial statements are described in the accompanying notes. The historical consolidated financial statements have been adjusted in the unaudited pro forma condensed consolidated financial statements to give effect to pro forma events that are: (1) directly attributable to the Merger, (2) factually supportable, and (3) expected to have a continuing impact on the results of income of Essex following the Merger. This information is presented for illustrative purposes only and is not indicative of the consolidated operating results or financial position that would have occurred if such transactions had occurred on the dates described above and in accordance with the assumptions described below, nor is it indicative of future operating results or financial position.

The unaudited pro forma condensed consolidated financial statements, although helpful in illustrating the financial characteristics of Essex following the Merger under one set of assumptions, do not reflect the benefits of expected cost savings (or associated costs to achieve such savings), opportunities to earn additional revenue, or other factors that may result as a consequence of the Merger and do not attempt to predict or suggest future results. Specifically, the unaudited pro forma condensed consolidated statements of income exclude anticipated operating efficiencies and synergies which may be achieved as a result of the Merger. The anticipated operating synergies are expected to substantially offset the expected increase in property taxes primarily due to California’s Proposition 13 reassessments of the acquired properties. The unaudited pro forma condensed consolidated financial statements also exclude the effects of costs associated with any restructuring or integration activities or asset dispositions resulting from the Merger as they are currently not known. To the extent they occur, such items are expected to be non-recurring and have not been incurred at the closing date of the Merger. However, such costs could affect Essex following the Merger when such costs are incurred or recorded. Further, the unaudited pro forma condensed consolidated financial statements do not reflect the effect of any regulatory actions that may impact the results of Essex following the Merger.

The unaudited pro forma condensed consolidated financial statements have been developed from and should be read in conjunction with:

• the accompanying notes to the unaudited pro forma condensed consolidated financial statements;

• the historical audited consolidated financial statements of Essex and EPLP as of and for the year ended December 31, 2013, as presented in Essex’s Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 26, 2014;

• the historical unaudited condensed consolidated financial statements of Essex and EPLP as of and for the quarter ended March 31, 2014, as presented in Essex’s Quarterly Report on Form 10-Q, filed with the SEC on May 12, 2014;

• the historical audited consolidated financial statements of BRE as of and for the year ended December 31, 2013, as presented in BRE’s Annual Report on Form 10-K, filed with the SEC on February 18, 2014; and

• the historical unaudited condensed consolidated financial statements of BRE as of and for the quarter ended March 31, 2014, filed as exhibit 99.1 to this Current Report on Form 8-K/A.

4

ESSEX PROPERTY TRUST, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

MARCH 31, 2014

(Dollars in thousands)

	Essex			BRE			Pro Forma				Combined
Assets	Historical			as reclassified (A)			Adjustments				Pro Forma
Real estate:
Rental properties and other	$	6,640,781		$	3,429,852		$	440,595		(B)	$	10,511,228
Less accumulated depreciation		(1,300,793	)		(722,381	)		722,381		(C)		(1,300,793	)
		5,339,988			2,707,471			1,162,976				9,210,435
Real estate under development		308,266			429,787			(24,085	)	(B)		713,968
Co-investments		716,443			1,431,845			(1,208,777	)	(D)		939,511
		6,364,697			4,569,103			(69,886	)			10,863,914
Cash and cash equivalents-unrestricted		19,918			140,259			(140,259	)	(E)		19,918
Cash and cash equivalents-restricted		28,753			-			-				28,753
Marketable securities		100,348			-			-				100,348
Notes and other receivables		36,105			47,515			-				83,620
Prepaid expenses and other assets		54,024			32,888			40,272		(F)		127,184
Deferred charges, net		29,197			10,714			(10,714	)	(G)		29,197
Total assets	$	6,633,042		$	4,800,479		$	(180,587	)		$	11,252,934
Liabilities and  Equity
Mortgage notes payable	$	1,408,232		$	711,319		$	79,541		(H)	$	2,199,092
Unsecured debt		1,410,162			900,000			44,552		(H)		2,354,714
Lines of credit		135,903			-			417,855		(I)		553,758
Accounts payable and accrued liabilities		116,992			83,658			39,767		(J)		240,417
Deposit related to operating partnership contribution		-			1,419,816			(1,419,816	)	(K)		-
Other liabilities		-			58,741			(58,741	)	(L)		-
Total liabilities		3,071,289			3,173,534			(896,842	)			5,347,981
Redeemable noncontrolling interest		-			4,751			-				4,751
Cumulative convertible preferred stock		4,349			-			-				4,349
Equity:
Cumulative redeemable preferred stock		73,750			-			-				73,750
Common stock		4			773			(771	)	(I)		6
Additional paid-in capital		2,505,003			1,832,681			1,950,523		(I)		6,288,207
Distributions in excess of accumulated earnings		(498,368	)		(211,260	)		186,319		(I)		(523,309	)
Accumulated other comprehensive loss, net		(56,395	)		-			-				(56,395	)
Total stockholders' equity		2,023,994			1,622,194			2,136,071				5,782,259
Noncontrolling interest		1,533,410			-			(1,419,816	)	(K)		113,594
Total equity		3,557,404			1,622,194			716,255				5,895,853
Total liabilities and equity	$	6,633,042		$	4,800,479		$	(180,587	)		$	11,252,934

5

ESSEX PROPERTY TRUST, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

FOR THE QUARTER ENDED MARCH 31, 2014

(Dollars in thousands, except per share data)

	Essex			BRE			Pro Forma				Combined
	Historical			as reclassified (A)			Adjustments				Pro Forma
Revenues:
Rental and other property	$	159,017		$	105,101		$	(18,232	)	(M)	$	245,886
Management and other fees		2,628			29			593		(M)		3,250
		161,645			105,130			(17,639	)			249,136
Expenses:
Property operating, excluding real estate taxes		36,634			22,792			(3,546	)	(M)		55,880
Real estate taxes		15,339			10,334			4,929		(N)		30,602
Depreciation and amortization		50,312			28,225			15,670		(O)		94,207
General and administrative		7,075			10,009			-		(P)		17,084
Cost of management and other fees		1,477			-			-				1,477
Merger expenses		16,059			15,290			(31,349	)	(Q)		-
Acquisition and disposal costs		975			-			-				975
		127,871			86,650			(14,296	)			200,225
												-
Earnings from operations		33,774			18,480			(3,343	)			48,911
Interest expense before amortization		(26,055	)		(15,749	)		5,056		(R)		(36,748	)
Amortization expense		(2,986	)		(1,167	)		862		(S)		(3,291	)
Interest and other income		2,879			58			-				2,937
Equity income in co-investments		10,526			100			269		(M)		10,895
Gains on sale of real estate and land		8,268			356,294			(252,631	)	(U)		111,931
Income from continuing operations		26,406			358,016			(249,787	)			134,635
Net income attributable to noncontrolling interest		(3,126	)		(48	)		(2,523	)	(FF)		(5,697	)
Net income attributable to controlling interest		23,280			357,968			(252,310	)			128,938
Dividends to preferred stockholders		(1,368	)		(506	)		506		(T)		(1,368	)
Write-off of preferred stock issuance cost		-			(2,069	)		2,069		(T)		-
Net income from continuing operations available to common stockholders	$	21,912		$	355,393		$	(249,735	)		$	127,570
Per common share data:
Basic:
Income from continuing operations available to common stockholders	$	0.58		$	4.60					(V)	$	2.10
Weighted average number of common shares outstanding during the period		37,685			77,264			23,094		(V)		60,779
Diluted:
Income from continuing operations available to common stockholders	$	0.58		$	4.59					(V)	$	2.08
Weighted average number of common shares outstanding during the period		37,931			77,473			25,366		(V)		63,297

6

ESSEX PROPERTY TRUST, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 2013

(Dollars in thousands, except per share data)

	Essex			BRE			Pro Forma				Combined
	Historical			as reclassified (A)			Adjustments				Pro Forma
Revenues:
Rental and other property	$	602,003		$	404,028		$	(70,810	)	(W)	$	935,221
Management and other fees		11,700			384			2,300		(W)		14,384
		613,703			404,412			(68,510	)			949,605
Expenses:
Property operating, excluding real estate taxes		138,736			88,512			(14,090	)	(W)		213,158
Real estate taxes		57,276			35,792			20,412		(X)		113,480
Depreciation and amortization		192,420			105,371			76,375		(Y)		374,166
General and administrative		25,601			23,037			-		(Z)		48,638
Cost of management and other fees		6,681			-			-				6,681
Merger expenses		4,284			3,401			(7,685	)	(AA)		-
Impairment and other charges		-			585			-				585
		424,998			256,698			75,012				756,708
Earnings from operations		188,705			147,714			(143,522	)			192,897
Interest expense before amortization		(104,600	)		(61,170	)		20,784		(BB)		(144,986	)
Amortization expense		(11,924	)		(4,697	)		3,477		(CC)		(13,144	)
Interest and other income		11,633			20,230			-				31,863
Equity income in co-investments		55,865			19,258			(2,777	)	(W)		72,346
Loss on early retirement of debt		(300	)		-			-				(300	)
Gains on sale of real estate and land		1,503			-			-				1,503
Income from continuing operations		140,882			121,335			(122,038	)			140,179
Net income attributable to noncontrolling interest		(14,086	)		(190	)		3,422		(FF)		(10,854	)
Net income attributable to controlling interest		126,796			121,145			(118,616	)			129,325
Dividends to preferred stockholders		(5,472	)		(3,645	)		3,645		(DD)		(5,472	)
Net income from continuing operations available to common stockholders	$	121,324		$	117,500		$	(114,971	)		$	123,853
Per common share data:
Basic:
Income from continuing operations available to common stockholders	$	3.26		$	1.52					(EE)	$	2.05
Weighted average number of common shares outstanding during the period		37,249			77,111			23,094		(EE)		60,343
Diluted:
Income from continuing operations available to common stockholders	$	3.25		$	1.52					(EE)	$	2.04
Weighted average number of common shares outstanding during the period		37,335			77,340			25,225		(EE)		62,560

7

ESSEX PORTFOLIO, L. P.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

MARCH 31, 2014

(Dollars in thousands)

	EPLP			BRE			Pro Forma				Combined
Assets	Historical			as reclassified (A)			Adjustments				Pro Forma
Real estate:
Rental properties:
Rental properties and other		6,640,781			3,429,852			440,595		(B)		10,511,228
Less accumulated depreciation	$	(1,300,793	)	$	(722,381	)	$	722,381		(C)	$	(1,300,793	)
		5,339,988			2,707,471			1,162,976				9,210,435
Real estate under development		308,266			429,787			(24,085	)	(B)		713,968
Co-investments		716,443			1,431,845			(1,208,777	)	(D)		939,511
		6,364,697			4,569,103			(69,886	)			10,863,914
Cash and cash equivalents-unrestricted		19,918			140,259			(140,259	)	(E)		19,918
Cash and cash equivalents-restricted		28,753			-			-				28,753
Marketable securities		100,348			-			-				100,348
Notes and other receivables		36,105			47,515			-				83,620
Prepaid expenses and other assets		54,024			32,888			40,272		(F)		127,184
Deferred charges, net		29,197			10,714			(10,714	)	(G)		29,197
Total assets	$	6,633,042		$	4,800,479		$	(180,587	)		$	11,252,934
Liabilities and  Capital
Mortgage notes payable	$	1,408,232		$	711,319		$	79,541		(H)	$	2,199,092
Unsecured debt		1,410,162			900,000			44,552		(H)		2,354,714
Lines of credit		135,903			-			417,855		(I)		553,758
Accounts payable and accrued liabilities		116,992			83,658			39,767		(J)		240,417
Deposit related to operating partnership contribution		-			1,419,816			(1,419,816	)	(K)		-
Other liabilities		-			58,741			(58,741	)	(L)		-
Total liabilities		3,071,289			3,173,534			(896,842	)			5,347,981
Commitments and contingencies
Redeemable noncontrolling interest		-			4,751			-				4,751
Cumulative convertible preferred interest		4,349			-			-				4,349
Capital:
General Partner:
Common equity		2,009,181			1,622,194			2,136,071		(I)		5,767,446
Preferred interest		71,209			-			-				71,209
		2,080,390			1,622,194			2,136,071				5,838,655
Limited Partners - Common equity		1,465,127			-			(1,419,816	)	(K)		45,311
Accumulated other comprehensive loss, net		(54,617	)		-			-				(54,617	)
Total partners capital		3,490,900			1,622,194			716,255				5,829,349
Noncontrolling interest		66,504			-			-				66,504
Total capital		3,557,404			1,622,194			716,255				5,895,853
Total liabilities and capital	$	6,633,042		$	4,800,479		$	(180,587	)		$	11,252,934

8

ESSEX PORTFOLIO, L. P.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

FOR THE QUARTER ENDED MARCH 31, 2014

(Dollars in thousands, except per unit data)

	EPLP			BRE			Pro Forma				Combined
	Historical			as reclassified (A)			Adjustments				Pro Forma
Revenues:
Rental and other property	$	159,017		$	105,101		$	(18,232	)	(M)	$	245,886
Management and other fees		2,628			29			593		(M)		3,250
		161,645			105,130			(17,639	)			249,136
Expenses:
Property operating, excluding real estate taxes		36,634			22,792			(3,546	)	(M)		55,880
Real estate taxes		15,339			10,334			4,929		(N)		30,602
Depreciation and amortization		50,312			28,225			15,670		(O)		94,207
General and administrative		7,075			10,009			-		(P)		17,084
Cost of management and other fees		1,477			-			-				1,477
Merger expenses		16,059			15,290			(31,349	)	(Q)		-
Acquisition and disposal costs		975			-			-				975
		127,871			86,650			(14,296	)			200,225
Earnings from operations		33,774			18,480			(3,343	)			48,911
Interest expense before amortization		(26,055	)		(15,749	)		5,056		(R)		(36,748	)
Amortization expense		(2,986	)		(1,167	)		862		(S)		(3,291	)
Interest and other income		2,879			58			-				2,937
Equity income in co-investments		10,526			100			269		(M)		10,895
Gains on sale of real estate and land		8,268			356,294			(252,631	)	(U)		111,931
Income from continuing operations		26,406			358,016			(249,787	)			134,635
Net income attributable to noncontrolling interest		(1,709	)		(48	)		-				(1,757	)
Net income attributable to controlling interest		24,697			357,968			(249,787	)			132,878
Dividends to preferred stockholders		(1,368	)		(506	)		506				(1,368	)
Write-off of preferred stock issuance cost					(2,069	)		2,069		(T)		-
Net income from continuing operations available to common unitholders	$	23,329		$	355,393		$	(247,212	)		$	131,510
Per common share data:
Basic:
Income from continuing operations available to common unitholders	$	0.58		$	4.60					(V)	$	2.09
Weighted average number of common units outstanding during the period		39,957			77,264			23,094		(V)		63,051
Diluted:
Income from continuing operations available to common unitholders	$	0.58		$	4.59					(V)	$	2.08
Weighted average number of common units outstanding during the period		40,204			77,473			23,094		(V)		63,297

9

ESSEX PORTFOLIO, L. P.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 2013

(Dollars in thousands, except per unit data)

	EPLP			BRE			Pro Forma				Combined
	Historical			as reclassified (A)			Adjustments				Pro Forma
Revenues:
Rental and other property	$	602,003		$	404,028		$	(70,810	)	(W)	$	935,221
Management and other fees		11,700			384			2,300		(W)		14,384
		613,703			404,412			(68,510	)			949,605
Expenses:
Property operating, excluding real estate taxes		138,736			88,512			(14,090	)	(W)		213,158
Real estate taxes		57,276			35,792			20,412		(X)		113,480
Depreciation and amortization		192,420			105,371			76,375		(Y)		374,166
General and administrative		25,601			23,037			-		(Z)		48,638
Cost of management and other fees		6,681			-			-				6,681
Merger expenses		4,284			3,401			(7,685	)	(AA)		-
Impairment and other charges		-			585			-				585
		424,998			256,698			75,012				756,708
Earnings from operations		188,705			147,714			(143,522	)			192,897
Interest expense before amortization		(104,600	)		(61,170	)		20,784		(BB)		(144,986	)
Amortization expense		(11,924	)		(4,697	)		3,477		(CC)		(13,144	)
Interest and other income		11,633			20,230			-				31,863
Equity income in co-investments		55,865			19,258			(2,777	)	(W)		72,346
Loss on early retirement of debt		(300	)		-			-				(300	)
Gains on sale of real estate and land		1,503			-			-				1,503
Income from continuing operations		140,882			121,335			(122,038	)			140,179
Net income attributable to noncontrolling interest		(6,834	)		(190	)		-				(7,024	)
Net income attributable to controlling interest		134,048			121,145			(122,038	)			133,155
Distributions to preferred interests		(5,472	)		(3,645	)		3,645		(DD)		(5,472	)
Net income from continuing operations available to common unitholders	$	128,576		$	117,500		$	(118,393	)		$	127,683
Per common share data:
Basic:
Income from continuing operations available to common unitholders	$	3.27		$	1.52					(EE)	$	2.04
Weighted average number of common units outstanding during the period		39,380			77,111			23,094		(EE)		62,474
Diluted:
Income from continuing operations available to common unitholders	$	3.26		$	1.52					(EE)	$	2.04
Weighted average number of common units outstanding during the period		39,467			77,340			23,094		(EE)		62,560

10

ESSEX PROPERTY TRUST, INC.

ESSEX PORTFOLIO, L. P.

NOTES TO UNAUDITED PRO FORMA

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Overview

The accompanying notes were prepared to support the unaudited pro forma condensed consolidated financial statements for both Essex Property Trust, Inc. (Essex) and Essex Portfolio, L.P. (EPLP).  Unless stated otherwise or the context otherwise requires, references to Essex mean collectively Essex, EPLP and those entities/subsidiaries owned or controlled by Essex and/or EPLP. References to EPLP mean collectively EPLP and those entities/subsidiaries owned or controlled by EPLP.

For purposes of the unaudited pro forma condensed consolidated financial statements, which we refer to as the pro forma financial statements, we have assumed a total preliminary purchase price for the Merger of approximately $4.3 billion, which consists of the Stock Consideration and the Cash Consideration.

The pro forma condensed consolidated financial statements have been prepared assuming the Merger is accounted for using the acquisition method of accounting under U.S. GAAP, which we refer to as acquisition accounting, with Essex as the acquiring entity. Accordingly, under acquisition accounting, the acquired net tangible and identifiable intangible assets and liabilities assumed of BRE are recorded based on their respective fair values, as further described below.

To the extent identified, certain reclassifications have been reflected in the pro forma adjustments to conform BRE’s financial statement presentation to that of Essex, as described in footnote (A) below. However, the unaudited pro forma condensed consolidated financial statements may not reflect all adjustments necessary to conform BRE’s accounting policies to those of Essex due to limitations on the availability of information as of the date of this Current Report on Form 8-K/A.

The pro forma adjustments represent Essex management’s estimates based on information available as of the date of this Current Report on Form 8-K/A and are subject to change as additional information becomes available and additional analyses are performed. The pro forma financial statements do not reflect the impact of possible revenue or earnings enhancements, cost savings from operating efficiencies or synergies, or asset dispositions not contemplated by the Merger Agreement. Also, the pro forma condensed consolidated financial statements do not reflect possible adjustments related to restructuring or integration activities that have yet to be determined, including transaction or other costs following the Merger that are not expected to have a continuing impact. Further, one-time transaction-related expenses anticipated to be incurred prior to, or concurrent with, closing the Merger are excluded from the pro forma condensed consolidated statement of income.

The pro forma condensed consolidated statements of income for the year ended December 31, 2013 and for the quarter ended March 31, 2014 combines the historical consolidated statements of income of Essex and BRE, giving effect to the Merger as if it had been consummated on January 1, 2013, the beginning of the earliest period presented. The pro forma condensed consolidated balance sheet combines the historical consolidated balance sheets of Essex and BRE as of March 31, 2014, giving effect to the Merger as if it had been consummated on March 31, 2014.

Preliminary Estimated Purchase Accounting

The total preliminary estimated purchase price of approximately $4.3 billion was determined based on the total Stock Consideration (based on the number of shares of BRE’s common stock outstanding as of April 1, 2014) and the Cash Consideration. See (I) below for discussion regarding the valuation of the Stock Consideration.   For purposes of the pro forma condensed consolidated financial statements, such shares of BRE common stock are assumed to remain outstanding as of the closing date of the Merger, and no effect has been given to any new shares of BRE common stock that may be issued, granted or retired subsequent to March 31, 2014 through the closing date of the Merger on April 1, 2014.

11

For purposes of these pro forma condensed consolidated financial statements, BRE’s tangible and identifiable intangible assets acquired and liabilities assumed have been recorded based on their estimated fair values assuming the Merger was completed on the pro forma condensed consolidated balance sheet date presented. The final fair values will be based upon valuations and other analyses for which there is currently insufficient information to make a definitive valuation. Accordingly, the purchase price adjustments are preliminary and have been made solely for the purpose of providing pro forma condensed consolidated financial statements. The final purchase accounting adjustments will be determined after completion of a thorough analysis to determine the fair value of BRE’s tangible assets and liabilities, including identifiable intangible assets and liabilities. As a result, the final purchase accounting adjustments, including those resulting from conforming BRE’s accounting policies to those of Essex, could differ materially from the pro forma adjustments presented herein.

The fair value adjustment based on the total preliminary purchase price was as follows (in thousands):

Asset/Liability	BRE as reclassified			Pro Forma Adjustment				BRE Adjusted			Fair Value Adjustment			BRE Estimated Fair Value
Real estate assets, net, excluding co-investments	$	3,137,258		$	-			$	3,137,258		$	1,138,891		$	4,276,149
Co-investments		1,431,845			-				1,431,845			(1,208,777	)		223,068
Cash and cash equivalents		140,259			-				140,259			-			140,259
Notes and other receivables, prepaid expenses and other assets and deferred charges, net		91,117			-				91,117			29,558			120,675
Mortgage notes payable, unsecured debt and lines of credit		(1,611,319	)		-				(1,611,319	)		(124,093	)		(1,735,412	)
Other liabilities		(1,562,215	)		(16,710	)	(i)		(1,578,925	)		1,480,441			(98,484	)
Redeemable noncontrolling interest		(4,751	)		-				(4,751	)		-			(4,751	)
Preliminary Purchase Price, net of OP Trade															2,921,504
Fair value of assets contributed in OP Trade (ii)															1,419,816
Total Preliminary Purchase Price														$	4,341,320

 (i) BRE’s historical book value for other liabilities was increased by $16.7 million related to the $14.7 million accrual of BRE’s portion of the Merger transaction costs, and approximately $2.0 million accrual for certain BRE employees in connection with the change in control resulting from the completion of the Merger and their contractual employment agreements.

(ii) Fair value of the 14 properties contributed in the OP Trade on March 31, 2014. On April 1, 2014, the OP units were retired as part of the merger.

12

Balance sheet and statement of income reclassification adjustments:

(A) BRE historical amounts include the reclassifications of certain balances in order to conform to Essex’s presentation as noted below:

The balance sheet reclassifications are as follows:

	BREas previously reported		Reclassifications				BRE as reclassified
Rental properties	$	3,438,657	$	(8,805	)	(i)	$	3,429,852
Real estate under development		410,918		18,869		(ii)		429,787
Notes and other receivables		-		47,515		(ii)		47,515
				(77,098	)	(ii)
				8,805		(i)
Prepaid expenses and other assets		101,181		(68,293	)			32,888
Deferred charges, net		-		10,714		(ii)		10,714

(i) Approximately $8.8 million related to in-place lease intangible assets has been reclassified to the line item entitled “Prepaid expenses and other assets.”

(ii) Approximately $77.1 million have been reclassified from prepaid expenses and other assets to the following:

Real estate under development	$	18,869
Notes and other receivables		47,515
Deferred charges, net		10,714

The statement of income reclassifications for the quarter ended March 31, 2014 are as follows:

	BREas previously reported		Reclassifications			BRE as reclassified
Rental income	$	101,121	$	3,980		$	105,101
Ancillary income		3,980		(3,980	)		-
Property operating, excluding real estate taxes		33,126		(10,334	)		22,792
Real estate taxes		-		10,334			10,334
Other income		87		(29	)		58
Management and other fees		-		29			29
Interest		16,916		(1,167	)		15,749
Amortization expense		-		1,167			1,167

13

The statement of income reclassifications for the year ended December 31, 2013 are as follows:

	BREas previously reported		Reclassifications			BRE as reclassified
Rental income	$	388,300	$	15,728		$	404,028
Ancillary income		15,728		(15,728	)		-
Property operating, excluding real estate taxes		124,304		(35,792	)		88,512
Real estate taxes		-		35,792			35,792
Other income		20,614		(384	)		20,230
Management and other fees		-		384			384
Impairment and other charges		-		585			585
Merger expenses		-		3,401			3,401
Other expenses		3,986		(3,986	)		-
Interest		65,867		(4,697	)		61,170
Amortization expense		-		4,697			4,697

 Balance Sheet Adjustments:

(B) BRE’s rental properties and other have been increased by $440.6 million to adjust to their estimated fair values as of March 31, 2014. Real estate under development was decreased by $24.1 million to adjust to their estimated fair values as of March 31, 2014. The estimated fair value was derived by applying a capitalization rate to estimated net operating income, using recent third party appraisals, or other available market data.

(C) Accumulated depreciation was adjusted to eliminate BRE’s historical accumulated depreciation.

(D) BRE’s co-investments have been: (i) decreased by approximately $1,419.8 million related to the retirement of the OP units in connection with the OP Trade and the closing of the Merger; (ii) increased by $259.6 million to adjust its 50% non-controlling interest in the three joint ventures to their estimated fair value; and (iii) increased by $10.2 million to adjust the existing historical co-investment to its estimated fair value as of March 31, 2014, using valuation techniques similar to those used to estimate the fair value of wholly-owned assets as discussed in (B) above.

(E) Cash and cash equivalents-unrestricted decreased by $140.3 million due to the application of cash assumed from BRE to paydown borrowing under Essex’s unsecured line of credit.

(F) The prepaid expenses and other asset adjustment includes $56.2 million for acquisition of acquired in-place leases. The estimated fair value of in-place leases was calculated based on the estimated cost to replace such leases, including foregone rents during an assumed lease-up period. These costs were offset by the elimination of BRE’s historical in-place lease intangible assets of $8.8 million. Prepaid expenses and other assets were further decreased by approximately $7.1 million to adjust assets to its estimated fair value as of March 31, 2014.

14

(G) Deferred financing costs were adjusted by $10.7 million, to eliminate BRE’s historical financing costs.

(H) BRE’s debt balances have been adjusted by $124.1 million to reflect the estimated fair values at March 31, 2014. Fair value was estimated based on contractual future cash flows discounted using borrowing spreads and market interest rates that would have been available as of April 1, 2014 for debt with similar terms and maturities.

(I) Essex:

Adjustment represents the issuance of approximately 23.1 million shares of Essex common stock with a fair value of $3.78 billion as of April 1, 2014; the elimination of all historical BRE equity balances; the increase to Essex’s unsecured line of credit to finance a portion of the Cash Consideration and debt assumption fees totaling $417.9 million partially offset by BRE cash assumed of approximately $140.3 million in connection with the Merger, and the payoff of BRE’s line of credit and transaction costs.

For purchase accounting, the value of the common stock issued by Essex upon the consummation of the Merger was determined based on the closing price of BRE’s common stock on the closing date of the Merger. As a result of Essex being admitted to the S&P 500 on the same date as the closing of the Merger, Essex’s common stock price experienced significantly higher than usual trading volume and the closing price of $174 per share was significantly higher than its volume-weighted average trading price for the days before and after April 1, 2014.  BRE’s common stock did not experience the same proportionate increase in common stock price leading up to April 1, 2014.  As a result, given that a substantial component of the purchase price is an exchange of equity instruments, Essex used the closing price of BRE’s common stock on April 1, 2014 of $61 per share, less the Special Dividend, as the fair value of the Stock Consideration.

The following table provides detail of adjustments impacting additional paid in capital (APIC), common stock and distributions in excess of accumulated earnings (in thousands):

	Common stock			APIC			Distributions in excess of accumulated earnings
Issuance of Essex common stock	$	2		$	3,783,204			-
Removal of BRE's historical balances		(773	)		(1,832,681	)		211,260
Transaction costs of Essex		-			-			(24,941	)
Total adjustment	$	(771	)	$	1,950,523		$	186,319

EPLP:

Adjustment represents the issuance of approximately 23.1 million of EPLP common units with a fair value of $3.78 billion as of April 1, 2014; the elimination of all historical BRE equity balances; the increase to Essex’s unsecured line of credit to finance a portion of the Cash Consideration and debt assumption fees totaling $417.9 million partially offset by BRE cash assumed of approximately $140.1 million in connection with the Merger, and the payoff of BRE’s line of credit and transaction costs.

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For purchase accounting, the value of the common units issued by EPLP upon the consummation of the Merger was determined based on the closing price of BRE’s common stock on the closing date of the Merger. As a result of Essex being admitted to the S&P 500 on the same date as the closing of the Merger, Essex’s common stock price experienced significantly higher than usual trading volume and the closing price of $174 per share was significantly higher than its volume-weighted average trading price for the days before and after April 1, 2014.  BRE’s common stock did not experience the same proportionate increase in common stock price leading up to April 1, 2014.  As a result, given that a substantial component of the purchase price is an exchange of equity instruments, EPLP used the closing price of BRE’s common stock on April 1, 2014 of $61 per share, less the Special Dividend, as the fair value of the Stock Consideration.

The following table provides detail of adjustments impacting general partner common equity and general partner preferred interest (in thousands):

	General Partner Common Equity
Issuance of EPLP common units		3,783,206
Removal of BRE's historical balances		(1,622,194	)
Transaction costs of Essex		(24,941	)
Total adjustment	$	2,136,071

(J) Adjustment represents estimated transaction costs estimated to have been incurred by Essex and BRE prior to or concurrent with the closing of the Merger of approximately $37.8 million, consisting primarily of fees for investment bankers, legal, accounting, tax, and certain filings to be paid to third parties based on actual expenses incurred to date and each party’s best estimate of its remaining fees as provided to Essex and BRE.

(K) Adjustment represents elimination of deposit recorded by BRE in connection with the OP Trade and elimination of Essex’s noncontrolling interest upon the retirement of OP units as part of the merger.

(L) Adjustment represents elimination of distributions in excess of equity investment in real estate joint ventures, as these are included in the fair value adjustment noted in (D) above.

Statement of Income Adjustments—for the Quarter Ended March 31, 2014

(M) Adjustments represent: (i) the removal of the operating results upon the deconsolidation of the 17 BRE properties contributed to the three joint ventures (see removal of real estate taxes and depreciation in (N) and (O)), (ii) the equity income from co-investments of $0.3 million and (iii) management fee income of $0.6 million to be generated for managing these 17 properties.  The equity income from co-investments represented 50% of the historical earnings of these 17 properties as adjusted for BRE’s 50% share of: (i) the increased depreciation and amortization expense based on the fair value of the 17 properties contributed, (ii) the increased real estate tax expense resulting from the fair value of the properties exceeding historical property tax basis pursuant to California’s Proposition 13, and (iii) increased interest expense as a result of the $475 million in mortgage financing placed on these contributed properties.

(N) Real estate tax expense was adjusted to: (i) the remove BRE’s historical real estate tax expense of $10.3 million and (ii) recognize $16.8 million of real estate tax expense based on the estimated fair value of BRE’s real estate assets multiplied by the applicable property tax rate partially offset by a reduction of $1.4 million related to the 17 BRE properties contributed to the three joint ventures.

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(O) Depreciation and amortization expense was adjusted to: (i) eliminate $28.2 million of BRE’s historical depreciation and amortization expense and (ii) to recognize $32.3 million of depreciation based on the estimated fair value of BRE’s real estate assets and $11.7 million of amortization of the intangible assets recognized at estimated fair value. This depreciation and amortization adjustment is computed on a straight-line basis over the estimated useful lives of the related assets, which range from 30 years for land improvements and buildings and 20 months amortization for acquired in-place residential leases, all of which are preliminary determinations.

(P) Essex expects the Merger to create general and administrative cost efficiencies but there can be no assurance that such costs will be achieved. The unaudited pro forma condensed consolidated financial statements do not include any estimate of projected cost savings.

(Q) Merger expenses are one-time transaction-related expenses and are excluded from the pro forma condensed consolidated statement of income.

(R) Interest expense was reduced by $6.2 million as a result of the amortization of the debt premium associated with the pro forma adjustment to record BRE’s debt at fair value. The reduction is offset by $1.1 million increase in interest expense in connection Essex’s increased unsecured line of credit to finance a portion of the Cash Consideration in connection with the Merger.

(S) Amortization expense of deferred financing cost was reduced by $1.2 million to eliminate BRE’s historical amortization, partially offset by $0.3 million of amortization expense of loan assumption fees, paid in connection with the assumption of BRE debt balances discussed in (H), which are amortized over a weighted-average life of five years.

(T) BRE’s dividends/distributions to preferred stockholders/interests were eliminated with the redemption of its Series D preferred stock as contemplated by the Merger Agreement.

(U) Gain on sale of real estate and land was adjusted to eliminate gain recorded by BRE as a result of the contribution of 17 properties to the three new joint ventures.

(V) Essex:

The calculation of basic and diluted income from continuing operations per share of common stock was as follows:

Quarter Ended March 31, 2014
	(Dollars in thousands, except per share data)
	Essex Historical			BRE as reclassified			Essex Pro Forma
Net income from continuing operations available to common stockholders, basic		$	21,912		$	355,393		$	127,570
Net income from continuing operations available to common stockholders, diluted			21,912			355,393			131,510
Weighted average common shares outstanding, basic			37,685			77,264			60,779
Weighted average common shares outstanding, diluted			37,931			77,473			63,297
Income from continuing operations available to common stockholders per common share, basic		$	0.58		$	4.60		$	2.10
Income from continuing operations available to common stockholders per common share, diluted		$	0.58		$	4.59		$	2.08

Note: The pro forma weighted average shares of common stock assumes that the Essex shares of common stock issued to BRE stockholders in connection with the Merger were issued as of January 1, 2013.

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EPLP:

The calculation of basic and diluted income from continuing operations per common unit was as follows:

Quarter Ended March 31, 2014
	(Dollars in thousands, except per unit data)
	EPLP Historical			BRE as reclassified			EPLP Pro Forma
Net income from continuing operations available to common unitholders, basic and diluted		$	23,329		$	355,393		$	131,510
Weighted average common units outstanding, basic			39,957			77,264			63,051
Weighted average common units outstanding, diluted			40,204			77,473			63,297
Income from continuing operations available to common unitholders per common unit, basic		$	0.58		$	4.60		$	2.09
Income from continuing operations available to common unitholders per common unit, diluted		$	0.58		$	4.59		$	2.08

Note: The pro forma weighted average EPLP common units assumes that the EPLP common units issued to the general partner in connection with the Merger were issued as of January 1, 2013.

Statement of Income Adjustments—for the Year Ended December 31, 2013

(W) Adjustments represent: (i) the removal of the operating results upon the deconsolidation of the 17 BRE properties contributed to the three joint ventures (see removal of real estate taxes and depreciation in (X) and (Y)), (ii) the equity loss from co-investments of $2.8 million and (iii) management fee income of $2.3 million to be generated for managing these 17 properties.  The equity loss from co-investments represented 50% of the historical earnings of these 17 properties as adjusted for BRE’s 50% share of: (i) the increased depreciation and amortization expense based on the fair value of the 17 properties contributed, (ii) the increased real estate tax expense resulting from the fair value of the properties exceeding historical property tax basis pursuant to California’s Proposition 13, and (iii) increased interest expense as a result of the $475 million in mortgage financing placed on these contributed properties.

(X) Real estate tax expense was adjusted to: (i) the remove BRE’s historical real estate tax expense of $35.8 million and (ii) recognize $56.2 million of real estate tax expense based on the estimated fair value of BRE’s real estate assets multiplied by the applicable property tax rate.

(Y) Depreciation and amortization expense was adjusted to: (i) eliminate $105.4 million of BRE’s historical depreciation and amortization expense and (ii) to recognize $133.2 million of depreciation based on the estimated fair value of BRE’s real estate assets and $48.6 million of amortization of the intangible assets recognized at estimated fair value. This depreciation and amortization adjustment is computed on a straight-line basis over the estimated useful lives of the related assets, which range from 30 years for land improvements and buildings and 20 months amortization for acquired in-place residential leases, all of which are preliminary determinations.

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(Z) Essex expects the Merger to create general and administrative cost efficiencies but there can be no assurance that such costs will be achieved. The unaudited pro forma condensed consolidated financial statements do not include any estimate of projected cost savings.

(AA) Merger expenses are one-time transaction-related expenses and are excluded from the pro forma condensed consolidated statement of income.

(BB) Interest expense was reduced by $25.4 million as a result of the amortization of the debt premium associated with the pro forma adjustment to record BRE’s debt at fair value and the elimination of interest expense on BRE’s line of credit as a result of the payoff of BRE’s line of credit. The reduction is offset by $4.8 million increase in interest expense in connection Essex’s increased unsecured line of credit to finance a portion of the Cash Consideration in connection with the Merger.

(CC) Amortization expense of deferred financing cost was reduced by $4.7 million to eliminate BRE’s historical amortization, partially offset by $1.2 million of amortization expense of the loan assumption fees, paid in connection with the assumption of BRE debt balances discussed in (H), which are amortized over a weighted-average life of five years.

(DD) BRE’s dividends/distributions to preferred stockholders/interests were eliminated with the redemption of its Series D preferred stock as required by the Merger Agreement.

(EE) Essex:

The calculation of basic and diluted income from continuing operations per share of common stock was as follows:

Year Ended December 31, 2013
	(Dollars in thousands, except per share data)
	Essex Historical			BRE as reclassified			Essex Pro Forma
Net income from continuing operations available to common stockholders, basic		$	121,324		$	117,500		$	120,431
Net income from continuing operations available to common stockholders, diluted			121,324			117,500			127,683
Weighted average common shares outstanding, basic			37,249			77,111			60,343
Weighted average common shares outstanding, diluted			37,335			77,340			62,560
Income from continuing operations available to common stockholders per common share, basic		$	3.26		$	1.52		$	2.05
Income from continuing operations available to common stockholders per common share, diluted		$	3.25		$	1.52		$	2.04

Note: The pro forma weighted average shares of common stock assumes that the Essex shares of common stock issued to BRE stockholders in connection with the Merger were issued as of January 1, 2013.

(FF) Adjustment reflects the allocation of pro forma net income to noncontrolling interests.

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EPLP:

The calculation of basic and diluted income from continuing operations per common unit was as follows:

Year Ended December 31, 2013
	(Dollars in thousands, except per share data)
	Essex Historical			BRE as reclassified			Essex Pro Forma
Net income from continuing operations available to common unitholders, basic and diluted		$	128,576		$	117,500		$	127,683
Weighted average common units outstanding, basic			39,380			77,111			62,474
Weighted average common units outstanding, diluted			39,467			77,340			62,560
Income from continuing operations available to common unitholders per common unit, basic		$	3.27		$	1.52		$	2.04
Income from continuing operations available to common unitholders per common unit, diluted		$	3.26		$	1.52		$	2.04

Note: The pro forma weighted average EPLP common units assumes that the EPLP common units issued to the general partner in connection with the Merger were issued as of January 1, 2013.

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