Document
                                

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
 
ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2018

OR

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

For the transition period from ________to _________

Commission file number 001-13106 (Essex Property Trust, Inc.)
Commission file number 333-44467-01 (Essex Portfolio, L.P.)

ESSEX PROPERTY TRUST, INC.
ESSEX PORTFOLIO, L.P.
(Exact name of Registrant as Specified in its Charter)
Maryland (Essex Property Trust, Inc.)
California (Essex Portfolio, L.P.)
 
77-0369576 (Essex Property Trust, Inc.)
77-0369575 (Essex Portfolio, L.P.)
 
 
 
(State or Other Jurisdiction of Incorporation or Organization)
 
(I.R.S. Employer Identification Number)
1100 Park Place, Suite 200
San Mateo, California    94403
(Address of Principal Executive Offices including Zip Code)

(650) 655-7800
(Registrant's Telephone Number, Including Area Code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days.
Essex Property Trust, Inc.    Yes x   No o
Essex Portfolio, L.P.     Yes x   No o

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


i

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

Essex Property Trust, Inc.:
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o   (Do not check if a smaller reporting company)
Smaller reporting company o
 
 
 
Emerging growth company o


Essex Portfolio, L.P.:
Large accelerated filer o
Accelerated filer o
Non-accelerated filer x   (Do not check if a smaller reporting company)
Smaller reporting company o
 
 
 
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Essex Property Trust, Inc.    o  
Essex Portfolio, L.P.     o  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Essex Property Trust, Inc.    Yes o   No x
Essex Portfolio, L.P.     Yes o   No x
 
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 66,046,207 shares of Common Stock ($0.0001 par value) of Essex Property Trust, Inc. were outstanding as of April 30, 2018.
 

ii

EXPLANATORY NOTE

This report combines the reports on Form 10-Q for the three month period ended March 31, 2018 of Essex Property Trust, Inc. and Essex Portfolio, L.P. Unless stated otherwise or the context otherwise requires, references to “Essex” mean Essex Property Trust, Inc., a Maryland corporation that operates as a self-administered and self-managed real estate investment trust (“REIT”), and references to “EPLP” mean Essex Portfolio, L.P. References to the “Company,” “we,” “us” or “our” mean collectively Essex, EPLP and those entities/subsidiaries owned or controlled by Essex and/or EPLP.  References to the “Operating Partnership” mean collectively EPLP and those entities/subsidiaries owned or controlled by EPLP.

Essex is the general partner of EPLP and as the sole general partner of EPLP, Essex has exclusive control of EPLP's day-to-day management.

The Company is structured as an umbrella partnership REIT (“UPREIT”) and Essex contributes all net proceeds from its various equity offerings to the Operating Partnership. In return for those contributions, Essex receives a number of Operating Partnership limited partnership units (“OP Units”) equal to the number of shares of common stock it has issued in the equity offering. Contributions of properties to the Company can be structured as tax-deferred transactions through the issuance of OP Units, which is one of the reasons why the Company is structured in the manner outlined above. Based on the terms of EPLP's partnership agreement, OP Units can be exchanged into Essex common stock on a one-for-one basis. The Company maintains a one-for-one relationship between the OP Units issued to Essex and shares of common stock.

The Company believes that combining the reports on Form 10-Q of Essex and EPLP into this single report provides the following benefits:

•
enhances investors' understanding of Essex and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;
•
eliminates duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the disclosure applies to both Essex and the Operating Partnership; and
•
creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.

Management operates Essex and the Operating Partnership as one business. The management of Essex consists of the same members as the management of EPLP.

All of the Company's property ownership, development, and related business operations are conducted through the Operating Partnership and Essex has no material assets, other than its investment in EPLP. Essex's primary function is acting as the general partner of EPLP. As general partner with control of the Operating Partnership, Essex consolidates the Operating Partnership for financial reporting purposes. Therefore, the assets and liabilities of Essex and the Operating Partnership are the same on their respective financial statements. Essex also issues equity from time to time and guarantees certain debt of EPLP, as disclosed in this report. The Operating Partnership holds substantially all of the assets of the Company, including the Company's ownership interests in its joint ventures. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for the net proceeds from equity offerings by the Company, which are contributed to the capital of the Operating Partnership in exchange for OP Units (on a one-for-one share of common stock per OP Unit basis), the Operating Partnership generates all remaining capital required by the Company's business. These sources of capital include the Operating Partnership's working capital, net cash provided by operating activities, borrowings under its revolving credit facilities, the issuance of secured and unsecured debt and equity securities and proceeds received from disposition of certain properties and joint ventures.

The Company believes it is important to understand the few differences between Essex and EPLP in the context of how Essex and EPLP operate as a consolidated company. Stockholders' equity, partners' capital and noncontrolling interest are the main areas of difference between the condensed consolidated financial statements of Essex and those of the Operating Partnership. The limited partners of the Operating Partnership are accounted for as partners' capital in the Operating Partnership's condensed consolidated financial statements and as noncontrolling interest in Essex’s condensed consolidated financial statements. The noncontrolling interest in the Operating Partnership's consolidated financial statements include the interest of unaffiliated partners in various condensed consolidated partnerships and joint venture partners. The noncontrolling interest in Essex's consolidated financial statements include (i) the same noncontrolling interest as presented in the Operating Partnership’s consolidated financial statements and (ii) OP Unit holders. The differences between stockholders' equity and partners' capital result from differences in the equity issued at Essex and Operating Partnership levels.
 
To help investors understand the significant differences between Essex and the Operating Partnership, this report on Form 10-Q provides separate consolidated financial statements for Essex and the Operating Partnership; a single set of consolidated notes

iii

to such financial statements that includes separate discussions of stockholders' equity or partners' capital, and earnings per share/unit, as applicable; and a combined Management's Discussion and Analysis of Financial Condition and Results of Operations.

This report on Form 10-Q also includes separate Part I, Item 4. Controls and Procedures sections and separate Exhibits 31 and 32 certifications for each of Essex and the Operating Partnership in order to establish that the requisite certifications have been made and that Essex and the Operating Partnership are compliant with Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934 (the “Exchange Act”) and 18 U.S.C. §1350.

In order to highlight the differences between Essex and the Operating Partnership, the separate sections in this report on Form 10-Q for Essex and the Operating Partnership specifically refer to Essex and the Operating Partnership. In the sections that combine disclosure of Essex and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of the Company. Although the Operating Partnership is generally the entity that directly or indirectly enters into contracts and joint ventures and holds assets and debt, reference to the Company is appropriate because the Company is one business and the Company operates that business through the Operating Partnership. The separate discussions of Essex and the Operating Partnership in this report should be read in conjunction with each other to understand the results of the Company on a consolidated basis and how management operates the Company.

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

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the notes to such unaudited condensed consolidated financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations herein. Additionally, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 2017.

iv

ESSEX PROPERTY TRUST, INC.
ESSEX PORTFOLIO, L.P.
FORM 10-Q
INDEX

PART I. FINANCIAL INFORMATION
Page No.
 
 
 
Item 1.
Condensed Consolidated Financial Statements of Essex Property Trust, Inc. (Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Condensed Consolidated Financial Statements of Essex Portfolio, L.P. (Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
PART II. OTHER INFORMATION
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.
 
 
 

1

Part I – Financial Information

Item 1. Condensed Consolidated Financial Statements

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except parenthetical and share amounts)
ASSETS
March 31, 2018
 
December 31, 2017
Real estate:
 
 
 
Rental properties:
 
 
 
Land and land improvements
$
2,719,064

 
$
2,719,064

Buildings and improvements
10,657,671

 
10,629,767

 
13,376,735

 
13,348,831

Less: accumulated depreciation
(2,888,130
)
 
(2,769,297
)
 
10,488,605

 
10,579,534

Real estate under development
395,710

 
355,735

Co-investments
1,290,957

 
1,155,984

 
12,175,272

 
12,091,253

Cash and cash equivalents-unrestricted
121,954

 
44,620

Cash and cash equivalents-restricted
17,124

 
16,506

Marketable securities
197,745

 
190,004

Notes and other receivables (includes related party receivables of $9.9 million and $41.2 million as of March 31, 2018 and December 31, 2017, respectively)
70,525

 
100,926

Prepaid expenses and other assets
60,047

 
52,397

Total assets
$
12,642,667

 
$
12,495,706

 
 
 
 
LIABILITIES AND EQUITY
 

 
 

Unsecured debt, net
$
3,797,923

 
$
3,501,709

Mortgage notes payable, net
1,921,047

 
2,008,417

Lines of credit
—

 
179,000

Accounts payable and accrued liabilities
179,641

 
127,501

Construction payable
48,223

 
51,770

Dividends payable
129,038

 
121,420

Distributions in excess of investments in co-investments
—

 
36,726

Other liabilities
33,477

 
33,132

Total liabilities
6,109,349

 
6,059,675

Commitments and contingencies


 


Redeemable noncontrolling interest
41,159

 
39,206

Equity:
 

 
 

Common stock; $0.0001 par value, 670,000,000 shares authorized; 66,044,441 and 66,054,399 shares issued and outstanding, respectively
7

 
7

Additional paid-in capital
7,127,248

 
7,129,571

Distributions in excess of accumulated earnings
(743,773
)
 
(833,726
)
Accumulated other comprehensive loss, net
(14,709
)
 
(18,446
)
Total stockholders' equity
6,368,773

 
6,277,406

Noncontrolling interest
123,386

 
119,419

Total equity
6,492,159

 
6,396,825

Total liabilities and equity
$
12,642,667

 
$
12,495,706


See accompanying notes to the unaudited condensed consolidated financial statements.

2


ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income and Comprehensive Income
(Unaudited)
(In thousands, except share and per share amounts)
 
Three Months Ended March 31,
 
2018
 
2017
Revenues:
 
 
 
Rental and other property
$
344,947

 
$
333,168

Management and other fees from affiliates
2,308

 
2,236

 
347,255

 
335,404

Expenses:
 

 
 

Property operating, excluding real estate taxes
57,250

 
56,136

Real estate taxes
37,713

 
35,868

Corporate-level property management expenses
7,770

 
7,509

Depreciation and amortization
119,105

 
115,503

General and administrative
14,813

 
10,601

Expensed acquisition and investment related costs
57

 
556

 
236,708

 
226,173

Earnings from operations
110,547

 
109,231

Interest expense
(54,861
)
 
(54,583
)
Total return swap income
2,270

 
2,584

Interest and other income
5,909

 
6,764

Equity income from co-investments
32,774

 
10,899

Gain on sale of real estate and land
—

 
26,174

Gain on remeasurement of co-investment
—

 
86,482

Net income
96,639

 
187,551

Net income attributable to noncontrolling interest
(5,721
)
 
(8,587
)
Net income available to common stockholders
$
90,918

 
$
178,964

Comprehensive income
$
102,815

 
$
189,764

Comprehensive income attributable to noncontrolling interest
(5,926
)
 
(8,661
)
Comprehensive income attributable to controlling interest
$
96,889

 
$
181,103

Per share data:
 

 
 

Basic:
 

 
 

Net income available to common stockholders
$
1.38

 
$
2.73

Weighted average number of shares outstanding during the period
66,044,022

 
65,549,484

Diluted:
 

 
 

Net income available to common stockholders
$
1.38

 
$
2.72

Weighted average number of shares outstanding during the period
66,082,517

 
65,859,490

Dividend per common share
$
1.86

 
$
1.75


See accompanying notes to the unaudited condensed consolidated financial statements.

3

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Equity for the three months ended March 31, 2018
(Unaudited)
(In thousands)
 
 
Common stock
 
Additional paid-in capital
 
Distributions
in excess of accumulated earnings
 
Accumulated
other
comprehensive loss, net
 
Noncontrolling Interest
 
 
 
 
Shares
 
Amount
 
 
 
 
 
Total
Balances at December 31, 2017
 
66,054

 
$
7

 
$
7,129,571

 
$
(833,726
)
 
$
(18,446
)
 
$
119,419

 
$
6,396,825

Net income
 
—

 
—

 
—

 
90,918

 
—

 
5,721

 
96,639

Reversal of unrealized gains upon the sale of marketable debt securities
 
—

 
—

 
—

 
—

 
(1
)
 
—

 
(1
)
Change in fair value of derivatives and amortization of swap settlements
 
—

 
—

 
—

 
—

 
6,046

 
208

 
6,254

Change in fair value of marketable debt securities, net
 
—

 
—

 
—

 
—

 
(74
)
 
(3
)
 
(77
)
Issuance of common stock under:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Stock option and restricted stock plans, net
 
7

 
—

 
1,222

 
—

 
—

 
—

 
1,222

Sale of common stock, net
 
—

 
—

 
(67
)
 
—

 
—

 
—

 
(67
)
Equity based compensation costs
 
—

 
—

 
2,253

 
—

 
—

 
277

 
2,530

Retirement of common stock, net
 
(17
)
 
—

 
(3,774
)
 
—

 
—

 
—

 
(3,774
)
Cumulative effect upon adoption of ASU 2016-01
 
—

 
—

 
—

 
2,234

 
(2,234
)
 
—

 
—

Cumulative effect upon adoption of ASU 2017-05
 
—

 
—

 
—

 
119,651

 
—

 
4,057

 
123,708

Changes in the redemption value of redeemable noncontrolling interest
 
—

 
—

 
(1,957
)
 
—

 
—

 
4

 
(1,953
)
Distributions to noncontrolling interest
 
—

 
—

 
—

 
—

 
—

 
(6,297
)
 
(6,297
)
Common stock dividends
 
—

 
—

 
—

 
(122,850
)
 
—

 
—

 
(122,850
)
Balances at March 31, 2018
 
66,044

 
$
7

 
$
7,127,248

 
$
(743,773
)
 
$
(14,709
)
 
$
123,386

 
$
6,492,159


See accompanying notes to the unaudited condensed consolidated financial statements.

4

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands) 
 
Three Months Ended March 31,
 
2018
 
2017
Cash flows from operating activities:
 
 
 
Net income
$
96,639

 
$
187,551

Adjustments to reconcile net income to net cash provided by operating activities:
 

 
 

Depreciation and amortization
119,105

 
115,503

Amortization of discount on marketable securities
(4,157
)
 
(3,573
)
Amortization of (premium) discount and debt financing costs, net
(664
)
 
(3,309
)
Gain on sale of marketable securities and other investments
(680
)
 
(1,605
)
Unrealized loss on equity securities recognized through income

876

 
—

Earnings from co-investments
(32,774
)
 
(10,899
)
Operating distributions from co-investments
40,437

 
12,358

Accrued interest from notes and other receivables
(1,294
)
 
(647
)
Gain on the sale of real estate and land
—

 
(26,174
)
Equity-based compensation
2,090

 
1,253

Gain on remeasurement of co-investment
—

 
(86,482
)
Changes in operating assets and liabilities:
 
 
 
   Prepaid expenses, receivables and other assets
(3,716
)
 
(3,889
)
Accounts payable and accrued liabilities
52,151

 
42,482

Other liabilities
345

 
737

Net cash provided by operating activities
268,358

 
223,306

Cash flows from investing activities:
 

 
 

Additions to real estate:
 

 
 

Acquisitions of real estate and acquisition related capital expenditures
(2,873
)
 
(187,917
)
Redevelopment
(15,893
)
 
(12,240
)
Development acquisitions of and additions to real estate under development
(38,203
)
 
(30,457
)
Capital expenditures on rental properties
(14,947
)
 
(10,885
)
Investments in notes receivable
—

 
(8,750
)
Collections of notes receivable
29,500

 
—

Proceeds from insurance for property losses
565

 
435

Proceeds from dispositions of real estate
—

 
131,230

Contributions to co-investments
(56,020
)
 
(120,816
)
Changes in refundable deposits
410

 
512

Purchases of marketable securities
(13,437
)
 
(20,939
)
Sales and maturities of marketable securities
9,579

 
24,903

Non-operating distributions from co-investments
2,330

 
55,025

Net cash used in investing activities
(98,989
)
 
(179,899
)
Cash flows from financing activities:
 

 
 

Proceeds from unsecured debt and mortgage notes
298,773

 
250,000

Payments on unsecured debt and mortgage notes
(83,748
)
 
(308,020
)
Proceeds from lines of credit
256,832

 
404,562

Repayments of lines of credit
(435,832
)
 
(353,329
)
Retirement of common stock
(3,774
)
 
—

Additions to deferred charges
(3,283
)
 
(1,014
)
Net proceeds from issuance of common stock
(67
)
 
(65
)
Net proceeds from stock options exercised
1,222

 
5,794

Payments related to tax withholding for share-based compensation
(11
)
 
(33
)
Distributions to noncontrolling interest
(5,926
)
 
(5,425
)
Redemption of noncontrolling interest
—

 
(1,070
)

5

 
Three Months Ended March 31,
 
2018
 
2017
Common and preferred stock dividends paid
(115,603
)
 
(104,857
)
Net cash used in financing activities
(91,417
)
 
(113,457
)
Net increase (decrease) in unrestricted and restricted cash and cash equivalents
77,952

 
(70,050
)
Unrestricted and restricted cash and cash equivalents at beginning of period
61,126

 
170,302

Unrestricted and restricted cash and cash equivalents at end of period
$
139,078

 
$
100,252

 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid for interest, net of $4.2 million and $3.3 million capitalized in 2018 and 2017, respectively
$
40,306

 
$
48,397

Supplemental disclosure of noncash investing and financing activities:
 

 
 

Issuance of DownREIT units in connection with acquisition of real estate
$
—

 
$
22,506

Transfers between real estate under development to rental properties, net
$
1

 
$
747

Transfer from real estate under development to co-investments
$
365

 
$
2,080

Reclassifications to redeemable noncontrolling interest from additional paid in capital and noncontrolling interest
$
1,953

 
$
731

Debt assumed in connection with acquisition
$
—

 
$
51,882


See accompanying notes to the unaudited condensed consolidated financial statements.


6

ESSEX PORTFOLIO, L.P.  AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except parenthetical and unit amounts)
 
March 31, 2018
 
December 31, 2017
ASSETS
 
 
 
Real estate:
 
 
 
Rental properties:
 
 
 
Land and land improvements
$
2,719,064

 
$
2,719,064

Buildings and improvements
10,657,671

 
10,629,767

 
13,376,735

 
13,348,831

Less: accumulated depreciation
(2,888,130
)
 
(2,769,297
)
 
10,488,605

 
10,579,534

Real estate under development
395,710

 
355,735

Co-investments
1,290,957

 
1,155,984

 
12,175,272

 
12,091,253

Cash and cash equivalents-unrestricted
121,954

 
44,620

Cash and cash equivalents-restricted
17,124

 
16,506

Marketable securities
197,745

 
190,004

Notes and other receivables (includes related party receivables of $9.9 million and $41.2 million as of March 31, 2018 and December 31, 2017, respectively)
70,525

 
100,926

Prepaid expenses and other assets
60,047

 
52,397

Total assets
$
12,642,667


$
12,495,706

 
 
 
 
LIABILITIES AND CAPITAL
 

 
 

Unsecured debt, net
$
3,797,923

 
$
3,501,709

Mortgage notes payable, net
1,921,047

 
2,008,417

Lines of credit
—

 
179,000

Accounts payable and accrued liabilities
179,641

 
127,501

Construction payable
48,223

 
51,770

Distributions payable
129,038

 
121,420

Distributions in excess of investments in co-investments
—

 
36,726

Other liabilities
33,477

 
33,132

Total liabilities
6,109,349


6,059,675

Commitments and contingencies


 


Redeemable noncontrolling interest
41,159

 
39,206

Capital:
 

 
 

General Partner:
 
 
 
Common equity (66,044,441 and 66,054,399 units issued and outstanding, respectively)
6,383,482

 
6,295,852

 
6,383,482


6,295,852

Limited Partners:
 
 
 
Common equity (2,273,413 and 2,268,114 units issued and outstanding, respectively)
53,003

 
49,792

    Accumulated other comprehensive loss
(11,281
)
 
(15,229
)
Total partners' capital
6,425,204


6,330,415

Noncontrolling interest
66,955

 
66,410

Total capital
6,492,159


6,396,825

Total liabilities and capital
$
12,642,667


$
12,495,706


See accompanying notes to the unaudited condensed consolidated financial statements.

7

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Condensed Consolidated Statements of Income and Comprehensive Income
(Unaudited)
(In thousands, except unit and per unit amounts)
 
Three Months Ended March 31,
 
2018
 
2017
Revenues:
 
 
 
Rental and other property
$
344,947

 
$
333,168

Management and other fees from affiliates
2,308

 
2,236

 
347,255

 
335,404

Expenses:
 

 
 

Property operating, excluding real estate taxes
57,250

 
56,136

Real estate taxes
37,713

 
35,868

Corporate-level property management expenses
7,770

 
7,509

Depreciation and amortization
119,105

 
115,503

General and administrative
14,813

 
10,601

Expensed acquisition and investment related costs
57

 
556

 
236,708

 
226,173

Earnings from operations
110,547

 
109,231

Interest expense
(54,861
)
 
(54,583
)
Total return swap income
2,270

 
2,584

Interest and other income
5,909

 
6,764

Equity income from co-investments
32,774

 
10,899

Gain on sale of real estate and land
—

 
26,174

Gain on remeasurement of co-investment
—

 
86,482

Net income
96,639

 
187,551

Net income attributable to noncontrolling interest
(2,589
)
 
(2,441
)
Net income available to common unitholders
$
94,050

 
$
185,110

Comprehensive income
$
102,815

 
$
189,764

Comprehensive income attributable to noncontrolling interest
(2,589
)
 
(2,441
)
Comprehensive income attributable to controlling interest
$
100,226

 
$
187,323

Per unit data:
 

 
 

Basic:
 

 
 

Net income available to common unitholders
$
1.38

 
$
2.73

Weighted average number of common units outstanding during the period
68,317,435

 
67,801,718

Diluted:
 
 
 
Net income available to common unitholders
$
1.38

 
$
2.72

Weighted average number of common units outstanding during the period
68,355,930

 
68,111,724

Distribution per common unit
$
1.86

 
$
1.75


See accompanying notes to the unaudited condensed consolidated financial statements.

8

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Condensed Consolidated Statement of Capital for the three months ended March 31, 2018
(In thousands)
(Unaudited)
 
General Partner
 
Limited Partners
 
Accumulated other comprehensive loss
 
 
 
 
 
Common Equity
 
Common Equity
 
 
Noncontrolling Interest
 
 
 
Units
 
Amount
 
Units
 
Amount
 
 
 
Total
Balances at December 31, 2017
66,054

 
$
6,295,852

 
2,268

 
$
49,792

 
$
(15,229
)
 
$
66,410

 
$
6,396,825

Net income
—

 
90,918

 
—

 
3,132

 
—

 
2,589

 
96,639

Reversal of unrealized gains upon the sale of marketable debt securities
—

 
—

 
—

 
—

 
(1
)
 
—

 
(1
)
Change in fair value of derivatives and amortization of swap settlements
—

 
—

 
—

 
—

 
6,254

 
—

 
6,254

Change in fair value of marketable debt securities, net
—

 
—

 
—

 
—

 
(77
)
 
—

 
(77
)
Issuance of common units under:
 

 
 

 
 

 
 

 
 

 
 

 
 

General partner's stock based compensation, net
7

 
1,222

 
—

 
—

 
—

 
—

 
1,222

Sale of common stock by general partner, net
—

 
(67
)
 
—

 
—

 
—

 
—

 
(67
)
Equity based compensation costs
—

 
2,253

 
5

 
277

 
—

 
—

 
2,530

Retirement of common units, net
(17
)
 
(3,774
)
 
—

 
—

 
—

 
—

 
(3,774
)
Cumulative effect upon adoption of ASU 2016-01
—

 
2,234

 
—

 
(6
)
 
(2,228
)
 
—

 
—

Cumulative effect upon adoption of ASU 2017-05
—

 
119,651

 
—

 
4,057

 
—

 
—

 
123,708

Changes in redemption value of redeemable noncontrolling interest
—

 
(1,957
)
 
—

 
4

 
—

 
—

 
(1,953
)
Distributions to noncontrolling interest
—

 
—

 
—

 
—

 
—

 
(2,044
)
 
(2,044
)
Distributions declared
—

 
(122,850
)
 
—

 
(4,253
)
 
—

 
—

 
(127,103
)
Balances at March 31, 2018
66,044

 
$
6,383,482

 
2,273

 
$
53,003

 
$
(11,281
)
 
$
66,955

 
$
6,492,159


See accompanying notes to the unaudited condensed consolidated financial statements.

9

ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 
Three Months Ended March 31,
 
2018
 
2017
Cash flows from operating activities:
 
 
 
Net income
$
96,639

 
$
187,551

Adjustments to reconcile net income to net cash provided by operating activities:
 

 
 

Depreciation and amortization
119,105

 
115,503

Amortization of discount on marketable securities
(4,157
)
 
(3,573
)
Amortization of (premium) discount and debt financing costs, net
(664
)
 
(3,309
)
Gain on sale of marketable securities and other investments
(680
)
 
(1,605
)
Unrealized loss on equity securities recognized through income
876

 
—

Earnings from co-investments
(32,774
)
 
(10,899
)
Operating distributions from co-investments
40,437

 
12,358

Accrued interest from notes and other receivables
(1,294
)
 
(647
)
Gain on the sale of real estate and land
—

 
(26,174
)
Equity-based compensation
2,090

 
1,253

Gain on remeasurement of co-investment
—

 
(86,482
)
Changes in operating assets and liabilities:
 

 
 

Prepaid expense, receivables and other assets
(3,716
)
 
(3,889
)
Accounts payable and accrued liabilities
52,151

 
42,482

Other liabilities
345

 
737

Net cash provided by operating activities
268,358

 
223,306

Cash flows from investing activities:
 

 
 

Additions to real estate:
 

 
 

Acquisitions of real estate and acquisition related capital expenditures
(2,873
)
 
(187,917
)
Redevelopment
(15,893
)
 
(12,240
)
Development acquisitions of and additions to real estate under development
(38,203
)
 
(30,457
)
Capital expenditures on rental properties
(14,947
)
 
(10,885
)
Investments in notes receivable
—

 
(8,750
)
Collections of notes receivable
29,500

 
—

Proceeds from insurance for property losses
565

 
435

Proceeds from dispositions of real estate
—

 
131,230

Contributions to co-investments
(56,020
)
 
(120,816
)
Changes in refundable deposits
410

 
512

Purchases of marketable securities
(13,437
)
 
(20,939
)
Sales and maturities of marketable securities
9,579

 
24,903

Non-operating distributions from co-investments
2,330

 
55,025

Net cash used in investing activities
(98,989
)
 
(179,899
)
Cash flows from financing activities:
 

 
 

Proceeds from unsecured debt and mortgage notes
298,773

 
250,000

Payments on unsecured debt and mortgage notes
(83,748
)
 
(308,020
)
Proceeds from lines of credit
256,832

 
404,562

Repayments of lines of credit
(435,832
)
 
(353,329
)
Retirement of common units
(3,774
)
 
—

Additions to deferred charges
(3,283
)
 
(1,014
)
Net proceeds from issuance of common units
(67
)
 
(65
)
Net proceeds from stock options exercised
1,222

 
5,794

Payments related to tax withholding for share-based compensation
(11
)
 
(33
)
Distributions to noncontrolling interest
(2,267
)
 
(5,425
)
Redemption of noncontrolling interest
—

 
(1,070
)

10

 
Three Months Ended March 31,
 
2018
 
2017
Common and preferred units and preferred interest distributions paid
(119,262
)
 
(104,857
)
Net cash used in financing activities
(91,417
)
 
(113,457
)
Net increase (decrease) in unrestricted and restricted cash and cash equivalents
77,952

 
(70,050
)
Unrestricted and restricted cash and cash equivalents at beginning of period
61,126

 
170,302

Unrestricted and restricted cash and cash equivalents at end of period
$
139,078

 
$
100,252

  
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid for interest, net of $4.2 million and $3.3 million capitalized in 2018 and 2017, respectively
$
40,306

 
$
48,397

Supplemental disclosure of noncash investing and financing activities:
 

 
 

Issuance of DownREIT units in connection with acquisition of real estate
$
—

 
$
22,506

Transfers between real estate under development to rental properties, net
$
1

 
$
747

Transfer from real estate under development to co-investments
$
365

 
$
2,080

Reclassifications to redeemable noncontrolling interest from general partner capital and noncontrolling interest
$
1,953

 
$
731

  Debt assumed in connection with acquisition
$
—

 
$
51,882


See accompanying notes to the unaudited condensed consolidated financial statements.

11

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2018 and 2017
(Unaudited)

(1) Organization and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements present the accounts of Essex Property Trust, Inc. (“Essex” or the “Company”), which include the accounts of the Company and Essex Portfolio, L.P. and its subsidiaries (the “Operating Partnership,” which holds the operating assets of the Company), prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q. In the opinion of management, all adjustments necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented have been included and are normal and recurring in nature. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 2017.

All significant intercompany accounts and transactions have been eliminated in the unaudited condensed consolidated financial statements. Certain reclassifications have been made to conform to the current year’s presentation, including the reclassification of corporate-level property management expenses out of property operating, excluding real estate taxes to its own line item on the Company's condensed consolidated statements of income and comprehensive income.

The unaudited condensed consolidated financial statements for the three months ended March 31, 2018 and 2017 include the accounts of the Company and the Operating Partnership. Essex is the sole general partner of the Operating Partnership, with a 96.7% general partnership interest as of both March 31, 2018 and December 31, 2017. Total Operating Partnership limited partnership units (“OP Units”) outstanding were 2,273,413 and 2,268,114 as of March 31, 2018 and December 31, 2017, respectively, and the redemption value of the units, based on the closing price of the Company’s common stock totaled approximately $547.2 million and $547.5 million as of March 31, 2018 and December 31, 2017, respectively.

As of March 31, 2018, the Company owned or had ownership interests in 247 operating apartment communities, aggregating 60,240 apartment homes, excluding the Company’s ownership in preferred interest co-investments (collectively, the “Communities,” and individually, a “Community”), one operating commercial building and seven active developments (collectively, the “Portfolio”). The Communities are located in Southern California (Los Angeles, Orange, San Diego, and Ventura counties), Northern California (the San Francisco Bay Area) and the Seattle metropolitan areas.

Accounting Pronouncements Adopted in the Current Year

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 “Revenue from Contracts with Customers.” The new standard provides a single comprehensive revenue recognition model for contracts with customers (excluding certain contracts, such as lease contracts) to improve comparability within industries. The new standard requires an entity to recognize revenue to reflect the transfer of goods or services to customers at an amount the entity expects to be paid in exchange for those goods and services and provide enhanced disclosures, all to provide more comprehensive guidance for transactions such as service revenue and contract modifications. The new standard is effective for interim and annual periods beginning after December 15, 2017. The new standard may be applied using either a full retrospective or a modified approach upon adoption. The Company adopted ASU No. 2014-09 as of January 1, 2018 using the modified retrospective approach. See Note 3, Revenues, for further details.

In January 2016, the FASB issued ASU No. 2016-01 “Recognition and Measurement of Financial Assets and Financial Liabilities,” which requires changes to the classification and measurement of investments in certain equity securities and to the presentation of certain fair value changes for financial liabilities measured at fair value. The new standard is effective for interim and annual periods beginning after December 15, 2017. The Company adopted ASU No. 2016-01 as of January 1, 2018 using the modified retrospective method by applying a cumulative effect adjustment to retained earnings and partners' capital of $2.2 million, representing accumulated net unrealized gains of certain equity securities held by the Company. Furthermore, as a result of the adoption of this standard, the Company will recognize changes in the fair value of equity investments with readily determinable fair values through net income as opposed to comprehensive income.

In August 2016, the FASB issued ASU No. 2016-15 “Classification of Certain Cash Receipts and Cash Payments,” which requires entities to adhere to a uniform classification and presentation of certain cash receipts and cash payments in the statement of cash flows. The amendments in this update provide guidance on eight specific cash flow issues. The new standard

12

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2018 and 2017
(Unaudited)

is effective for interim and annual periods beginning after December 15, 2017. The Company adopted ASU No. 2016-15 as of January 1, 2018 using the retrospective transition method. This amendment did not have a material impact on the Company's consolidated results of operations or financial position.

In November 2016, the FASB issued ASU No. 2016-18 “Statement of Cash Flows,” which requires entities to include restricted cash and restricted cash equivalents in the reconciliation of beginning-of-period to the end-of-period of cash and cash equivalents in the statement of cash flows. This new standard seeks to eliminate the current diversity in practice in how changes in restricted cash and restricted cash equivalents is presented in the statement of cash flows. The new standard is effective for interim and annual periods beginning after December 15, 2017. The Company adopted ASU No. 2016-18 as of January 1, 2018 using the retrospective transition method. This amendment did not have a material impact on the Company's consolidated results of operations or financial position.

In January 2017, the FASB issued ASU No. 2017-01 “Business Combinations: Clarifying the Definition of a Business,” (“ASU No. 2017-01”) which provides a new framework for determining whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Previously, U.S. GAAP did not specify the minimum inputs and processes required for an integrated set of assets and activities to meet the definition of a business, causing a broad interpretation of the definition of a business. The new standard is effective for interim and annual periods beginning after December 15, 2017. The Company adopted ASU No. 2017-01 as of January 1, 2018 prospectively. The Company expects that substantially all of its acquisitions of communities will qualify as asset acquisitions and transaction costs related to these acquisitions will be capitalized upon adoption.

In February 2017, the FASB issued ASU No. 2017-05 “Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets,” (“ASU No. 2017-05”) which adds guidance for partial sales of nonfinancial assets, including partial sales of real estate. Historically, U.S. GAAP contained several different accounting models to evaluate whether the transfer of certain assets qualified for sale treatment. This new standard reduces the number of potential accounting models that might apply and clarifies which model does apply in various circumstances. Partial sales of nonfinancial assets are common in the real estate industry and include transactions in which the seller retains an equity interest in the entity that owns the assets or has an equity interest in the buyer. The new standard is effective for interim and annual periods beginning after December 15, 2017. Management performed an evaluation of all of the Company's contracts that may be affected by the new standard. The Company adopted ASU No. 2017-05 concurrently with the adoption of ASU No. 2014-09 “Revenue from Contracts with Customers” as of January 1, 2018 using the modified-retrospective method by applying a cumulative effect adjustment to retained earnings and partners' capital of $123.7 million, representing the partial sale of its membership interest in BEX II, LLC (“BEX II”) during the fourth quarter of 2016.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02 “Leases,” which requires an entity that is a lessee to classify leases as either finance or operating and to recognize a lease liability and a right-of-use asset for all leases that have a duration of greater than 12 months. Leases of 12 months or less will be accounted for similar to existing guidance for operating leases today. For lessors, accounting for leases under the new standard will be substantially the same as existing guidance for sales-type leases, direct financing leases, and operating leases, but eliminates current real estate specific provisions and changes the treatment of initial direct costs. The new standard will be effective for the Company beginning on January 1, 2019 and early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact of this amendment on its consolidated results of operations and financial position.

In June 2016, the FASB issued ASU No. 2016-13 “Measurement of Credit Losses on Financial Instruments,” which amends the current approach to estimate credit losses on certain financial assets, including trade and other receivables, available-for-sale securities, and other financial instruments. Generally, this amendment requires entities to establish a valuation allowance for the expected lifetime losses of these certain financial assets. Subsequent changes in the valuation allowance are recorded in current earnings and reversal of previous losses are permitted. Currently, U.S. GAAP requires entities to write down credit losses only when losses are probable and loss reversals are not permitted. The new standard will be effective for the Company beginning on January 1, 2020 and early adoption is permitted. The Company is currently evaluating the impact of this amendment on its consolidated results of operations and financial position.


13

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2018 and 2017
(Unaudited)

In August 2017, the FASB issued ASU No. 2017-12 “Derivatives and Hedging - Targeted Improvements to Accounting for Hedging Activities,” which, among other things, requires entities to present the earnings effect of hedging instruments in the same income statement line item in which the earnings effect of the hedged item is reported. The new standard also adds new disclosure requirements. This new standard will be effective for the Company beginning January 1, 2019 and early adoption is permitted. The Company is currently evaluating the impact of this amendment on its consolidated results of operations and financial position.

Marketable Securities

The Company reports its equity securities and available for sale debt securities at fair value, based on quoted market prices (Level 1 for the common stock and investment funds, Level 2 for the unsecured bonds and Level 3 for investments in mortgage backed securities, as defined by the FASB standard for fair value measurements). Any unrealized gain or loss in debt securities classified as available for sale is recorded as other comprehensive income. Unrealized gains and losses in equity securities, realized gains and losses in debt securities, interest income, and amortization of purchase discounts are included in interest and other income on the condensed consolidated statements of income and comprehensive income.

As of March 31, 2018 and December 31, 2017, equity securities and available for sale debt securities consisted primarily of investment-grade unsecured bonds, common stock, investments in mortgage backed securities, and investment funds that invest in U.S. treasury or agency securities. As of March 31, 2018 and December 31, 2017, the Company classified its investments in mortgage backed securities, which mature in November 2019 and September 2020, as held to maturity, and accordingly, these securities are stated at their amortized cost. The discount on the mortgage backed securities is being amortized to interest income based on an estimated yield and the maturity date of the securities.

As of March 31, 2018 and December 31, 2017, marketable securities consist of the following ($ in thousands):

 
March 31, 2018
 
Amortized
Cost
 
Gross
Unrealized
Gain (Loss)
 
Carrying Value
Equity securities:
 
 
 
 
 
Investment funds - debt securities
$
26,946

 
$
(360
)
 
$
26,586

Investment funds - U.S. treasuries
11,250

 
(86
)
 
11,164

Common stock and stock funds
39,620

 
2,459

 
42,079

 
 
 
 
 
 
Debt securities:
 
 
 
 
 
Available for sale
 
 
 
 
 
Investment-grade unsecured bonds
4,324

 
(118
)
 
4,206

Held to maturity
 
 
 

 
 

Mortgage backed securities
113,710

 
—

 
113,710

Total - Marketable securities
$
195,850

 
$
1,895

 
$
197,745



14

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2018 and 2017
(Unaudited)

 
December 31, 2017
 
Amortized
Cost
 
Gross
Unrealized
Gain (Loss)
 
Carrying Value
Equity securities:
 
 
 
 
 
Investment funds - debt securities
$
27,914

 
$
(29
)
 
$
27,885

Investment funds - U.S. treasuries
10,999

 
(55
)
 
10,944

Common stock and stock funds
34,329

 
2,973

 
37,302

 
 
 
 
 


Debt securities:
 
 
 
 
 
Available for sale
 
 
 
 
 
Investment-grade unsecured bonds
4,365

 
(40
)
 
4,325

Held to maturity
 

 
 

 
 

Mortgage backed securities
109,548

 
—

 
109,548

Total - Marketable securities
$
187,155

 
$
2,849

 
$
190,004


The Company uses the specific identification method to determine the cost basis of a debt security sold and to reclassify amounts from accumulated other comprehensive income for such securities. 

For the three months ended March 31, 2018 and 2017, the proceeds from sales and maturities of marketable securities totaled $9.6 million and $24.9 million, respectively, which resulted in $0.7 million and $1.6 million in realized gains, respectively, for such periods.

For the three months ended March 31, 2018, the portion of equity security unrealized gains and losses that were recognized in income totaled $0.9 million in unrealized losses and is included in interest and other income on the Company's condensed consolidated statements of income and comprehensive income.

Variable Interest Entities

In accordance with accounting standards for consolidation of variable interest entities (“VIEs”), the Company consolidates the Operating Partnership, 16 limited partnerships, comprising eight communities, (the “DownREIT limited partnerships,”) and eight co-investments as of March 31, 2018. The Company consolidates these entities because it is deemed the primary beneficiary. The Company has no assets or liabilities other than its investment in the Operating Partnership. The consolidated total assets and liabilities related to the eight consolidated co-investments and 16 DownREIT limited partnerships, net of intercompany eliminations, were approximately $845.7 million and $266.4 million, respectively, as of March 31, 2018 and $837.7 million and $265.5 million, respectively, as of December 31, 2017. Noncontrolling interests in these entities were $67.2 million and $66.7 million as of March 31, 2018 and December 31, 2017, respectively. The Company's financial risk in each VIE is limited to its equity investment in the VIE. As of March 31, 2018 and December 31, 2017, the Company did not have any other VIEs of which it was deemed to be the primary beneficiary and did not have any VIEs of which it was not deemed to be the primary beneficiary.

Equity-based Compensation

The cost of share- and unit-based compensation awards is measured at the grant date based on the estimated fair value of the awards. The estimated fair value of stock options and restricted stock granted by the Company are being amortized over the vesting period. The estimated grant date fair values of the long term incentive plan units (discussed in Note 12, “Equity Based Compensation Plans,” in the Company’s annual report on Form 10-K for the year ended December 31, 2017) are being amortized over the expected service periods.




15

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2018 and 2017
(Unaudited)


Fair Value of Financial Instruments

Management believes that the carrying amounts of the outstanding balances under its lines of credit, and notes and other receivables approximate fair value as of March 31, 2018 and December 31, 2017, because interest rates, yields, and other terms for these instruments are consistent with yields and other terms currently available for similar instruments. Management has estimated that the fair value of the Company’s fixed rate debt with a carrying value of $5.1 billion and $4.9 billion, including premiums, discounts and debt financing costs, at March 31, 2018 and December 31, 2017, respectively, was approximately $5.1 billion and $5.0 billion. Management has estimated that the fair value of the Company’s $612.1 million and $792.9 million of variable rate debt, net of debt financing costs, at March 31, 2018 and December 31, 2017, respectively, was approximately $615.6 million and $793.9 million based on the terms of existing mortgage notes payable, unsecured debt, and variable rate demand notes compared to those available in the marketplace. Management believes that the carrying amounts of cash and cash equivalents, restricted cash, accounts payable and accrued liabilities, construction payables, other liabilities, and dividends payable approximate fair value as of March 31, 2018 and December 31, 2017 due to the short-term maturity of these instruments. Marketable securities, except mortgage backed securities, and derivatives are carried at fair value as of March 31, 2018 and December 31, 2017.

At March 31, 2018, the Company’s investments in mortgage backed securities had a carrying value of $113.7 million and the Company estimated the fair value to be approximately $122.8 million. At December 31, 2017, the Company’s investments in mortgage backed securities had a carrying value of $109.5 million and the Company estimated the fair value to be approximately $120.7 million. The Company determines the fair value of the mortgage backed securities based on unobservable inputs (level 3 of the fair value hierarchy) considering the assumptions that market participants would make in valuing these securities. Assumptions such as estimated default rates and discount rates are used to determine the expected discounted cash flows to estimate fair value.
 
Capitalization of Costs

The Company’s capitalized internal costs related to development and redevelopment projects were comprised primarily of employee compensation and totaled $5.0 million and $4.8 million during the three months ended March 31, 2018 and 2017, respectively. The Company capitalizes leasing commissions associated with the lease-up of development communities and amortizes the costs over the life of the leases. The amounts capitalized for leasing commissions are immaterial for all periods presented.

Co-investments

The Company owns investments in joint ventures (“co-investments”) in which it has significant influence, but its ownership interest does not meet the criteria for consolidation in accordance with U.S. GAAP. Therefore, the Company accounts for co-investments using the equity method of accounting. Under the equity method of accounting, the investment is carried at the cost of assets contributed, plus the Company's equity in earnings less distributions received and the Company's share of losses. The significant accounting policies of the Company’s co-investment entities are consistent with those of the Company in all material respects.

Upon the acquisition of a controlling interest of a co-investment, the co-investment entity is consolidated and the transaction will be accounted for as a business combination if the entity meets the definition of a business pursuant to ASU No. 2017-01, or an asset acquisition if the entity is not determined to be a business. A majority of the co-investments, excluding the preferred equity investments, compensate the Company for its asset management services and some of these investments may provide promote income if certain financial return benchmarks are achieved. Asset management fees are recognized when earned, and promote fees are recognized when the earnings events have occurred and the amount is determinable and collectible. Any promote fees are reflected in equity income from co-investments.

The Company reports investments in co-investments where accumulated distributions have exceeded the Company’s investment as distributions in excess of investments in co-investments in the accompanying condensed consolidated balance sheets. As of December 31, 2017, the net investment of one of the Company’s co-investments was less than zero as a result of financing distributions in excess of the Company's investment in that co-investment. As a result of the Company's adoption of ASU No. 2017-05 on January 1, 2018, the carrying value of this co-investment was greater than zero as of March 31, 2018.

16

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2018 and 2017
(Unaudited)


Changes in Accumulated Other Comprehensive Loss, Net by Component

Essex Property Trust, Inc.
($ in thousands):
 
Change in fair
value and amortization
of swap settlements
 
Unrealized
gains/(losses) on
available for sale securities
 
Total
Balance at December 31, 2017
$
(20,641
)
 
$
2,195

 
$
(18,446
)
Cumulative effect upon adoption of ASU 2016-01
—

 
(2,234
)
 
(2,234
)
Other comprehensive income before reclassification
8,031

 
(74
)
 
7,957

Amounts reclassified from accumulated other comprehensive loss
(1,985
)
 
(1
)
 
(1,986
)
Other comprehensive income
6,046

 
(2,309
)
 
3,737

Balance at March 31, 2018
$
(14,595
)
 
$
(114
)
 
$
(14,709
)

Changes in Accumulated Other Comprehensive Loss, by Component

Essex Portfolio, L.P.
($ in thousands):
 
Change in fair
value and amortization
of swap settlements
 
Unrealized
gains/(losses) on
available for sale securities
 
Total
Balance at December 31, 2017
$
(17,417
)
 
$
2,188

 
$
(15,229
)
Cumulative effect upon adoption of ASU 2016-01
—

 
(2,228
)
 
(2,228
)
Other comprehensive income before reclassification
8,307

 
(77
)
 
8,230

Amounts reclassified from accumulated other comprehensive loss
(2,053
)
 
(1
)
 
(2,054
)
Other comprehensive income
6,254

 
(2,306
)
 
3,948

Balance at March 31, 2018
$
(11,163
)
 
$
(118
)
 
$
(11,281
)

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

Redeemable Noncontrolling Interest

The carrying value of redeemable noncontrolling interest in the accompanying condensed consolidated balance sheets was $41.2 million and $39.2 million as of March 31, 2018 and December 31, 2017, respectively. The limited partners may redeem their noncontrolling interests for cash in certain circumstances.

The changes to the redemption value of redeemable noncontrolling interests for the three months ended March 31, 2018 is as follows ($ in thousands):
Balance at December 31, 2017
$
39,206

Reclassification due to change in redemption value and other
1,953

Redemptions
—

Balance at March 31, 2018
$
41,159



17

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2018 and 2017
(Unaudited)

Cash, Cash Equivalents and Restricted Cash

Highly liquid investments with original maturities of three months or less when purchased are classified as cash equivalents. Restricted cash balances relate primarily to reserve requirements for capital replacement at certain communities in connection with the Company’s mortgage debt.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows ($ in thousands):
 
March 31, 2018
 
December 31, 2017
 
March 31, 2017
 
December 31, 2016
Cash and cash equivalents - unrestricted
$
121,954

 
$
44,620

 
$
84,344

 
$
64,921

Cash and cash equivalents - restricted
17,124

 
16,506

 
15,908

 
105,381

Total unrestricted and restricted cash and cash equivalents shown in the condensed consolidated statement of cash flows
$
139,078

 
$
61,126

 
$
100,252

 
$
170,302


Accounting Estimates

The preparation of condensed consolidated financial statements, in accordance with U.S. GAAP, requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to acquiring, developing and assessing the carrying values of its real estate portfolio, its investments in and advances to joint ventures and affiliates, its notes receivables, and its qualification as a real estate investment trust (“REIT”). The Company bases its estimates on historical experience, current market conditions, and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may vary from those estimates and those estimates could be different under different assumptions or conditions.

(2)  Significant Transactions During The Three Months Ended 2018 and Subsequent Events

Significant Transactions

Preferred Equity Investments

In January 2018, the Company received cash of $2.4 million for the full redemption of a preferred equity investment in a co-investment that holds property in Seattle, WA.

Notes Receivable

In January 2018, the Village at Toluca Lake, a property located in Burbank, CA and owned by BEX III, LLC (“BEX III”), a Company co-investment, paid off a $29.5 million bridge loan provided by the Company in November 2017. See Note 6, Related Party Transactions, for additional details related to the related party bridge loan.
 
Co-Investments

In March 2018, the BEXAEW, LLC (“BEXAEW”) joint venture operating agreement was amended, and the joint venture was extended. Under the amendment, the Company received a cash payment for promote income of $20.5 million, which is included in equity income from co-investments on the condensed consolidated statements of income and comprehensive income.

Senior Unsecured Debt

In March 2018, the Company issued $300.0 million of 30-year 4.500% senior unsecured notes. The interest is paid semi-annually in arrears on March 15 and September 15 of each year commencing on September 15, 2018 until the maturity date of

18

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2018 and 2017
(Unaudited)

March 15, 2048. The Company used the net proceeds of this offering to repay indebtedness under its unsecured lines of credit and for other general corporate and working capital purposes.

Common Stock

In January 2018, the Company repurchased and retired 16,834 shares totaling $3.8 million, including commissions. As of March 31, 2018, the Company had $245.2 million of purchase authority remaining under the stock repurchase plan authorized by the Company's board of directors.

(3)  Revenues

On January 1, 2018, the Company adopted ASU 2014-09, “Revenue from Contracts with Customers” using a modified retrospective transition method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods after January 1, 2018 are presented under the new standard, while prior period amounts are not adjusted and continue to be reported in accordance with the old revenue recognition standard.

Based on a full analysis of applicable contracts, the Company determined that the new standard did not have an impact to reported revenues from prior or current periods.

Revenue Recognition

Revenue from Leasing

The Company generates revenues primarily from leasing apartment homes to tenants. Such leasing revenues are recorded when due from tenants and are recognized monthly as they are earned, which is not materially different than on a straight-line basis. Apartment homes are rented under short-term leases (generally, lease terms of 6 to 12 months). Revenues from tenants leasing commercial space are recorded on a straight-line basis over the life of the respective lease.

The Company also generates other property-related revenue through the leasing of apartment homes, including storage income, pet rent, and other miscellaneous revenue. Similar to rental income, such revenues are recorded when due from tenants and recognized monthly as they are earned.

Revenue from Contracts with Customers

Apart from rental and other property-related revenue, revenues from contracts with customers are recognized as control of the promised services is passed to the customer.

For customer contracts related to management and other fees from affiliates (which includes asset management and property management), the transaction price and amount of revenue to be recognized is determined each quarter based on the management fee calculated and earned for that month or quarter. The contract will contain a description of the service and the fee percentage for management services. Payments from such services are one month or one quarter in arrears of the service performed.

Disaggregated Revenue

The following table presents the Company’s revenues disaggregated by revenue source ($ in thousands):
 
Three Months Ended March 31,
 
2018
 
2017
Rental
$
321,661

 
$
310,122

Other property leasing revenue
23,286

 
23,046

Management and other fees from affiliates
2,308

 
2,236

Total revenues
$
347,255

 
$
335,404


19

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2018 and 2017
(Unaudited)


The following table presents the Company’s rental and other property-related revenues disaggregated by geographic operating segment ($ in thousands):
 
Three Months Ended March 31,
 
2018
 
2017
Southern California
$
152,060

 
$
147,099

Northern California
128,622

 
123,308

Seattle Metro
58,713

 
56,192

Other real estate assets (1)
5,552

 
6,569

Total rental and other property revenues
$
344,947

 
$
333,168


(1) Other real estate assets consists of revenue generated from retail space, commercial properties, held for sale properties, and disposition properties. Executive management does not evaluate such operating performance geographically.

The following table presents the Company’s rental and other property-related revenues disaggregated by current property category status ($ in thousands):
 
Three Months Ended March 31,
 
2018
 
2017
Same-property (1)
$
322,385

 
$
312,024

Acquisitions (2)
10,383

 
8,186

Development (3)
19

 
—

Redevelopment
5,024

 
4,814

Non-residential/other, net (4)
7,136

 
8,144

Total rental and other property revenues
$
344,947

 
$
333,168


(1) Stabilized properties consolidated by the Company for both the quarters ended March 31, 2018 and 2017.
(2) Acquisitions includes properties acquired which did not have comparable stabilized results as of January 1, 2017.
(3) Development includes properties developed which did not have stabilized results as of January 1, 2017.
(4) Non-residential/other, net consists of revenue generated from retail space, commercial properties, held for sale properties, disposition properties and student housing.

Deferred Revenues and Remaining Performance Obligations

When cash payments are received or due in advance of the Company’s performance of contracts with customers, deferred revenue is recorded. The total deferred revenue balance related to such contracts was $8.5 million and $9.3 million as of March 31, 2018 and December 31, 2017, respectively, and was included in accounts payable and accrued liabilities within the accompanying consolidated balance sheets. The amount of revenue recognized in the period that was included in the beginning deferred revenue balance was $0.8 million, which was included in interest and other income within the condensed consolidated statements of income and comprehensive income.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in the new revenue accounting standard. As of March 31, 2018, the Company had $8.5 million of remaining performance obligations. The Company expects to recognize approximately 28% of these remaining performance obligations in 2018, an additional 36% through 2020, and the remaining balance thereafter.

Practical Expedients

The Company does not disclose the value of unsatisfied performance obligations for contracts within an original expected length of one year or less or when variable consideration is allocated entirely to a wholly unsatisfied performance obligation.

20

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2018 and 2017
(Unaudited)


(4) Co-investments

The Company has joint ventures and preferred equity investments in co-investments which are accounted for under the equity method. The co-investments own, operate, and develop apartment communities. The carrying values of the Company's co-investments as of March 31, 2018 and December 31, 2017 are as follows ($ in thousands, except in parenthetical):
 
Weighted Average Essex Ownership Percentage (1)
 
March 31, 2018
 
December 31, 2017
Membership interest/Partnership interest in:
 
 
 
 
 
CPPIB
54
%
 
$
496,512

 
$
500,287

Wesco I, III, IV, and V
53
%
 
214,650

 
214,408

BEXAEW, BEX II and BEX III (2)
50
%
 
135,174

 
13,827

Other
52
%
 
50,209

 
51,810

Total operating and other co-investments, net
 
 
896,545

 
780,332

Total development co-investments, net
50
%
 
75,092

 
73,770

Total preferred interest co-investments (includes related party investments of $15.6 million and $15.7 million as of March 31, 2018 and December 31, 2017, respectively)
 
 
319,320

 
265,156

Total co-investments, net
 
 
$
1,290,957

 
$
1,119,258

 
(1) Weighted average Essex ownership percentages are as of March 31, 2018.
(2) As of December 31, 2017, the Company's investment in BEX II was classified as a liability of $36.7 million.

The combined summarized entity financial information of co-investments is as follows ($ in thousands).
 
March 31, 2018
 
December 31, 2017
Combined balance sheets: (1)
 
 
 
Rental properties and real estate under development
$
3,794,212

 
$
3,722,778

Other assets
161,538

 
110,333

Total assets
$
3,955,750

 
$
3,833,111

Debt
$
1,744,663

 
$
1,705,051

Other liabilities
69,782

 
45,515

Equity
2,141,305

 
2,082,545

Total liabilities and equity
$
3,955,750

 
$
3,833,111

Company's share of equity
$
1,290,957

 
$
1,155,984



21

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2018 and 2017
(Unaudited)

 
Three Months Ended March 31,
 
2018
 
2017
Combined statements of income: (1)
 
 
 
Property revenues
$
80,842

 
$
75,905

Property operating expenses
(27,069
)
 
(25,408
)
Net operating income
53,773

 
50,497

Interest expense
(16,735
)
 
(11,921
)
General and administrative
(1,492
)
 
(1,778
)
Depreciation and amortization
(31,162
)
 
(27,904
)
Net income
$
4,384

 
$
8,894

Company's share of net income (2)
$
32,774

 
$
10,899

 
(1) Includes preferred equity investments held by the Company.
(2) Includes the Company's share of equity income from co-investments and preferred equity investments, gain on sales of co-investments, co-investment promote income and income from early redemption of preferred equity investments. Includes related party income of $0.4 million and $0.5 million for the three months ended March 31, 2018 and 2017, respectively.

(5) Notes and Other Receivables
 
Notes and other receivables consist of the following as of March 31, 2018 and December 31, 2017 ($ in thousands):
 
March 31, 2018
 
December 31, 2017
Notes receivable, bearing interest at 10.00%, due May 2021
$
14,110

 
$
13,762

Notes receivable, bearing interest at 10.75%, due September 2020
30,107

 
29,318

Related party note receivable, bearing interest at 9.50%, due October 2019(1)
6,608

 
6,656

Related party note receivable, bearing interest at 3.50%, due March 2018(1)
—

 
29,500

Notes and other receivables from affiliates (2)
3,314

 
5,061

Other receivables
16,386

 
16,629

Total notes and other receivables
$
70,525

 
$
100,926


(1) See Note 6, Related Party Transactions, for additional details.
(2) These amounts consist of short-term loans outstanding and due from various joint ventures as of March 31, 2018 and December 31, 2017, respectively. See Note 6, Related Party Transactions, for additional details.

(6) Related Party Transactions

The Company charges certain fees relating to its co-investments for asset management, property management, development and redevelopment services. These fees from affiliates totaled $3.2 million and $3.0 million during the three months ended March 31, 2018 and 2017, respectively. All of these fees are net of intercompany amounts eliminated by the Company. The Company netted development and redevelopment fees of $0.9 million and $0.8 million against general and administrative expenses for the three months ended March 31, 2018 and 2017, respectively.

In November 2017, the Company provided a $29.5 million related party bridge loan to a property acquired by BEX III. The note receivable accrued interest at 3.5% and was paid off in January 2018. The bridge loan was classified within notes and other receivables in the accompanying condensed consolidated balance sheets and had no amount outstanding as of March 31, 2018.

The Company’s Chairman and founder, Mr. George M. Marcus, is the Chairman of the Marcus & Millichap Company (“MMC”), which is a parent company of a diversified group of real estate service, investment, and development firms. Mr.

22

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2018 and 2017
(Unaudited)

Marcus is also the Co-Chairman of Marcus & Millichap, Inc. (“MMI”), and Mr. Marcus owns a controlling interest in MMI, a national brokerage firm listed on the New York Stock Exchange. 

In March 2017, the Company converted its existing $15.3 million preferred equity investment in Sage at Cupertino, a 230 apartment home community located in San Jose, CA, into a 40.5% common equity ownership interest in the property. The Company issued DownREIT units to the other members, including an MMC affiliate, based on an estimated property valuation of $90.0 million. At the time of the conversion, the property was encumbered by $52.0 million of mortgage debt. As a result of this transaction, the Company consolidates the property, based on a VIE analysis performed by the Company.

In 2015, the Company made preferred equity investments totaling $20.0 million in three entities affiliated with MMC that own apartment communities in California. The Company earns a 9.5% preferred return on each such investment. One $5.0 million investment, which was scheduled to mature in 2022, was fully redeemed in 2017. The remaining two investments are scheduled to mature in 2022.

As described in Note 5, Notes and Other Receivables, the Company has provided short-term loans to affiliates. As of March 31, 2018 and December 31, 2017, $3.3 million and $5.1 million, respectively, of short-term loans remained outstanding due from joint venture affiliates and is classified within notes and other receivables in the accompanying condensed consolidated balance sheets. In November 2016, the Company provided a $6.6 million mezzanine loan to a limited liability company in which MMC holds a significant ownership interest through subsidiaries. The mezzanine loan is classified within notes and other receivables in the accompanying condensed consolidated balance sheets and had an outstanding balance of $6.6 million and $6.7 million as of March 31, 2018 and December 31, 2017, respectively.

(7) Debt
 
The Company does not have indebtedness as debt is incurred by the Operating Partnership. The Company guarantees the Operating Partnership’s unsecured debt including the revolving credit facilities for the full term of the facilities.

Debt consists of the following ($ in thousands):
 
March 31, 2018
 
December 31, 2017
 
Weighted Average
Maturity
In Years as of March 31, 2018
Unsecured bonds private placement - fixed rate
$
274,476

 
$
274,427

 
2.8
Term loan - variable rate
348,525

 
348,545

 
3.9
Bonds public offering - fixed rate
3,174,922

 
2,878,737

 
8.4
Unsecured debt, net (1)
3,797,923

 
3,501,709

 
 
Lines of credit (2)
—

 
179,000

 

Mortgage notes payable, net (3)
1,921,047

 
2,008,417

 
5.3
Total debt, net
$
5,718,970

 
$
5,689,126

 
 
Weighted average interest rate on fixed rate unsecured bonds private placement and bonds public offering
3.8
%
 
3.7
%
 
 
Weighted average interest rate on variable rate term loan
2.5
%
 
2.5
%
 
 
Weighted average interest rate on lines of credit
2.5
%
 
2.3
%
 
 
Weighted average interest rate on mortgage notes payable
4.2
%
 
4.2
%
 
 

(1) Includes unamortized discount of $6.6 million and $5.2 million and unamortized debt issuance costs of $20.5 million and $18.1 million, as of March 31, 2018 and December 31, 2017, respectively.
(2) Lines of credit, related to the Company's two lines of unsecured credit aggregating $1.24 billion as of March 31, 2018, excludes unamortized debt issuance costs of $4.9 million and $3.2 million as of March 31, 2018 and December 31, 2017, respectively. These debt issuance costs are included in prepaid expenses and other assets on the condensed consolidated balance sheets. As of March 31, 2018, the Company’s $1.2 billion credit facility had an interest rate of LIBOR plus 0.875%, which is based on a tiered rate structure tied to the Company’s credit ratings and a scheduled maturity date of December 2021 with one

23

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2018 and 2017
(Unaudited)

18-month extension, exercisable at the Company’s option. As of March 31, 2018, the Company’s $35.0 million working capital unsecured line of credit had an interest rate of LIBOR plus 0.875%, which is based on a tiered rate structure tied to the Company’s credit ratings and a scheduled maturity date of January 2020.
(3) Includes total unamortized premium of $29.2 million and $33.2 million, reduced by unamortized debt issuance costs of $4.9 million and $5.4 million, as of March 31, 2018 and December 31, 2017, respectively.

The aggregate scheduled principal payments of the Company’s outstanding debt as of March 31, 2018 are as follows (excluding lines of credit) ($ in thousands):
Remaining in 2018
$
126,740

2019
627,016

2020
694,921

2021
544,846

2022
692,466

Thereafter
3,035,808

Total
$
5,721,797


(8) Segment Information

The Company's segment disclosures present the measure used by the chief operating decision makers for purposes of assessing each segment's performance. Essex's chief operating decision makers are comprised of several members of its executive management team who use net operating income (“NOI”) to assess the performance of the business for the Company's reportable operating segments. NOI represents total property revenue less direct property operating expenses.

The executive management team evaluates the Company's operating performance geographically. The Company defines its reportable operating segments as the three geographical regions in which its communities are located: Southern California, Northern California, and Seattle Metro.

Excluded from segment revenues and NOI are management and other fees from affiliates and interest and other income. Non-segment revenues and NOI included in the following schedule also consist of revenue generated from commercial properties and properties that have been sold. Other non-segment assets include items such as real estate under development, co-investments, real estate held for sale, net, cash and cash equivalents, marketable securities, notes and other receivables, and prepaid expenses and other assets.

The revenues and NOI for each of the reportable operating segments are summarized as follows for the three months ended March 31, 2018 and 2017 ($ in thousands):

24

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2018 and 2017
(Unaudited)

 
Three Months Ended March 31,
 
2018
 
2017
Revenues:
 
 
 
Southern California
$
152,060

 
$
147,099

Northern California
128,622

 
123,308

Seattle Metro
58,713

 
56,192

Other real estate assets
5,552

 
6,569

Total property revenues
$
344,947

 
$
333,168

Net operating income:
 
 
 
Southern California
$
107,932

 
$
104,501

Northern California
94,717

 
89,743

Seattle Metro
42,012

 
40,388

Other real estate assets
5,323

 
6,532

Total net operating income
249,984

 
241,164

Management and other fees from affiliates
2,308

 
2,236

Corporate-level property management expenses
(7,770
)
 
(7,509
)
Depreciation and amortization
(119,105
)
 
(115,503
)
General and administrative
(14,813
)
 
(10,601
)
Expensed acquisition and investment related costs
(57
)
 
(556
)
Interest expense
(54,861
)
 
(54,583
)
Total return swap income
2,270

 
2,584

Interest and other income
5,909

 
6,764

Equity income from co-investments
32,774

 
10,899

Gain on sale of real estate and land
—

 
26,174

Gain on remeasurement of co-investment
—

 
86,482

Net income
$
96,639

 
$
187,551


Total assets for each of the reportable operating segments are summarized as follows as of March 31, 2018 and December 31, 2017 ($ in thousands):
 
March 31, 2018
 
December 31, 2017
Assets:
 
 
 
Southern California
$
4,744,730

 
$
4,788,225

Northern California
4,182,261

 
4,215,449

Seattle Metro
1,506,405

 
1,520,372

Other real estate assets
55,209

 
55,488

Net reportable operating segment - real estate assets
10,488,605

 
10,579,534

Real estate under development
395,710

 
355,735

Co-investments
1,290,957

 
1,155,984

Cash and cash equivalents, including restricted cash
139,078

 
61,126

Marketable securities
197,745

 
190,004

Notes and other receivables
70,525

 
100,926

Prepaid expenses and other assets
60,047

 
52,397

Total assets
$
12,642,667

 
$
12,495,706




25

ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIES
ESSEX PORTFOLIO, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2018 and 2017
(Unaudited)

(9) Net Income Per Common Share and Net Income Per Common Unit
 
($ in thousands, except share and unit data):

Essex Property Trust, Inc.