8-K - ESS - Equibles

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

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

Date of Report (Date of Earliest Event Reported): August 3, 2020

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

1100 Park Place, Suite 200

San Mateo, CA 94403

(Address of principal executive offices, including zip code)

(650) 655-7800

(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)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading<br><br> <br>Symbol(s)	Name of each exchange on which registered
Common Stock, $.0001 par value (Essex Property Trust, Inc.)	ESS	New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter):

Essex Property Trust, Inc.	Emerging growth company	☐
Essex Portfolio, L.P.	Emerging growth company	☐

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. ☐

Item 2.02.	Results of Operations and Financial Condition.

On August 3, 2020, Essex Property Trust, Inc. (the “Company”) issued a press release and supplemental information announcing the Company’s financial results for the three and six months ended June 30, 2020. The Company has posted a copy of the press release and supplemental information on the Company’s website at www.essex.com. A copy of the press release and supplemental information is attached hereto as Exhibit 99.1 and incorporated by reference herein.

The information in this report (including Exhibit 99.1) is being furnished pursuant to Item 2.02 and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act.

Item 9.01.	Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.	Description
99.1	Press Release and Supplemental Information for the quarter and six months ended June 30, 2020.
104	Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrants have duly caused this report to be signed on their behalf by the undersigned, hereunto duly authorized.

Date: August 3, 2020	ESSEX PROPERTY TRUST, INC.
	/s/ Angela L. Kleiman
	Name:	Angela L. Kleiman
	Title:	Executive Vice President and Chief Financial Officer
	ESSEX PORTFOLIO, L.P.
	By:	Essex Property Trust, Inc.
	Its:	General Partner
	/s/ Angela L. Kleiman
	Name:	Angela L. Kleiman
	Title:	Executive Vice President and Chief Financial Officer

Exhibit 99.1

Essex Announces Second Quarter 2020 Results

San Mateo, California—August 3, 2020—Essex Property Trust, Inc. (NYSE: ESS) (the “Company”) announced today its second quarter 2020 earnings results and related business activities.

Net Income, Funds from Operations (“FFO”), and Core FFO per diluted share for the three and six months ended June 30, 2020 are detailed below.

	Three Months Ended<br><br> <br>June 30,				Six Months Ended<br><br> <br>June 30,
	2020				2020
Per Diluted Share
Net Income		1.29	1.40	-7.9%		6.07	3.21	89.1%
Total FFO		3.21	3.36	-4.5%		6.65	6.69	-0.6%
Core FFO		3.16	3.33	-5.1%		6.64	6.57	1.1%

All values are in US Dollars.

Second Quarter 2020 Highlights:

•	Reported Net Income per diluted share for the second quarter of 2020 of $1.29, compared to $1.40 in the second quarter of 2019.
•	Core FFO per diluted share declined by 5.1% compared to the second quarter of 2019.
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•	Same-property gross revenue and net operating income (“NOI”) declined by 3.8% and 7.4%,<br> respectively, compared to the second quarter of 2019. The Company recorded an additional $9.7 million of delinquencies in the second quarter compared to the prior year period. Excluding these delinquencies, same-property revenue and NOI<br> would have declined 0.9% and 3.5%, respectively.
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•	Same-property operating expenses increased 6.0% compared to the second quarter of 2019. The increase is largely due to a 9.6% increase in real estate taxes,<br> driven by higher taxes in Seattle.
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•	Disposed of two apartment communities during the second quarter for a total contract price of $232.0 million.
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•	Repurchased 87,988 shares of common stock totaling $20.1 million at an average price per share of $228.36 under the stock buyback program.
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•	In June 2020, the Company issued $150.0 million of 12-year senior unsecured notes due in March 2032 bearing an interest rate per annum of 2.65% and an effective yield of 2.09%.
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•	As of July 31, 2020, the Company’s immediately available liquidity exceeded $1.4 billion.
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1100 Park Place Suite 200 San Mateo California 94403 telephone 650 655 7800 facsimile 650 655 7810

www.essex.com

“The second quarter of 2020 proved to be one of the most challenging environments in company history and we are proud of how the Essex team responded to the COVID-19 pandemic, providing compassionate service, emphasizing safety, and complying with an unprecedented regulatory regime. Following a sharp decline in rental demand early in the quarter as a result of the COVID-19 pandemic and shelter-in-place ordinances, we saw employment trends significantly improve at the end of the quarter and we are cautiously optimistic that these trends will continue. The Company is well positioned with a strong balance sheet and ample liquidity, providing opportunity to create value for our shareholders through these unprecedented economic times,” commented Michael Schall, President and CEO of the Company.

Same-Property Operations

Same-property operating results exclude any properties that are not comparable for the periods presented. The table below illustrates the percentage change in same-property gross revenues for the quarter ended June 30, 2020 compared to the quarter ended June 30, 2019, and the sequential percentage change for the quarter ended June 30, 2020 compared to the quarter ended March 31, 2020, by submarket for the Company:

	Q2 2020 vs.<br><br> <br>Q2 2019		Q2 2020 vs.<br><br> <br>Q1 2020		% of Total
	Gross<br><br> <br>Revenues		Gross<br><br> <br>Revenues		Q2 2020<br><br> <br>Revenues
Southern California
Los Angeles County		-8.6%		-10.2%		18.3%
Orange County		-4.3%		-6.5%		11.0%
San Diego County		-2.0%		-4.5%		8.4%
Ventura County		-3.2%		-5.3%		4.4%
Total Southern California		-5.7%		-7.7%		42.1%
Northern California
Santa Clara County		-1.5%		-3.9%		19.3%
Alameda County		-4.9%		-6.5%		6.9%
San Mateo County		-4.6%		-7.3%		5.0%
Contra Costa County		-5.3%		-6.7%		4.8%
San Francisco		-6.5%		-7.8%		3.3%
Total Northern California		-3.4%		-5.5%		39.3%
Seattle Metro		-0.2%		-3.7%		18.6%
Same-Property Portfolio		-3.8%		-6.1%		100.0%

The table below illustrates the components that drove the change in Same-Property Revenues on a year-over-year basis.

Same-Property Revenue Components
Q2 2019 Same-Property Revenue
Scheduled Rents		2.0%
Delinquencies	)	-2.9%
Concessions	)	-1.0%
Vacancy	)	-1.7%
Other Income	)	-0.1%
Q2 2020 Same-Property Revenues/Growth		-3.8%

All values are in US Dollars.

	Year-Over-Year Growth						Year-Over-Year Growth
	Q2 2020 compared to Q2 2019						YTD 2020 compared to YTD 2019
	Gross<br><br> <br>Revenues		Operating<br><br> <br>Expenses		NOI		Gross<br><br> <br>Revenues		Operating<br><br> <br>Expenses		NOI
Southern California		-5.7%		3.1%		-9.1%		-1.5%		2.8%		-3.2%
Northern California		-3.4%		3.9%		-5.9%		-0.2%		2.8%		-1.2%
Seattle Metro		-0.2%		17.2%		-7.0%		2.2%		7.2%		0.1%
Same-Property Portfolio		-3.8%		6.0%		-7.4%		-0.3%		3.6%		-1.8%
	Sequential Growth
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	Q2 2020 compared to Q1 2020
	Gross<br><br> <br>Revenues		Operating<br><br> <br>Expenses		NOI
Southern California		-7.7%		0.1%		-10.7%
Northern California		-5.5%		0.9%		-7.6%
Seattle Metro		-3.7%		8.1%		-8.6%
Same-Property Portfolio		-6.1%		1.9%		-9.1%
	Financial Occupancies
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	Quarter Ended
	6/30/2020		3/31/2020		6/30/2019
Southern California		94.5%		96.6%		96.6%
Northern California		95.0%		96.9%		96.6%
Seattle Metro		95.4%		96.8%		96.4%
Same-Property Portfolio		94.9%		96.8%		96.6%

Investment Activity

Dispositions

In June 2020, the Company completed a portfolio sale which consisted of two apartment communities, One South Market and Museum Park, both located in San Jose, CA for a total contract price of $232.0 million. Combined, the two communities contain 429 apartment homes and approximately 6,534 sq. ft of retail. The Company recognized a $16.6 million gain on sale, which has been excluded from Core FFO.

Subsequent to quarter end, the Company sold a 126-unit apartment community located in Redmond, WA, at a total contract price of $51.5 million. The community was originally acquired in 2011 at a total contract price of $30.1 million.

Other Investments

In April 2020, the Company originated a subordinated loan investment totaling $29.2 million to fund the development of a multifamily community located in Northern California. The investment has an initial preferred return of 11.0% and matures in 2023. As of June 30, 2020, the Company had funded $6.7 million, with the full commitment expected to be funded by the second quarter of 2021.

Development Activity

In the second quarter of 2020, the Company entered into a joint venture to develop Scripps Mesa Apartments, a 264-unit apartment community located in the Scripps Ranch area of San Diego, CA. The Company has a 50.5% ownership in the development, which has a total projected cost of $102.0 million. The project will be financed with $89.3 million of tax-exempt bonds that mature in 2060. The joint venture has entered into a total return swap, converting the tax-exempt bonds to a variable rate of SIFMA + 0.75%. Construction on the project commenced in July 2020 with a projected opening in the fourth quarter of 2022.

The table below represents the development communities in lease-up and the current leasing status as of July 31, 2020.

Project Name	Location				Status
Station Park Green – Phase III	San Mateo, CA	172	100%	88.4%	In Lease-Up
500 Folsom	San Francisco, CA	537	50%	73.4%	In Lease-Up
Mylo	Santa Clara, CA	476	100%	45.8%	In Lease-Up
Patina at Midtown	San Jose, CA	269	50%	9.3%	In Lease-Up
Total/Average % Leased		1,454		54.3%

liquidity and balance sheet

Common Stock

In the second quarter of 2020, the Company repurchased 87,988 shares of its common stock totaling $20.1 million, including commissions, at an average price of $228.36 per share. Year-to-date through July 31, 2020, the Company repurchased 985,509 shares of its common stock totaling $223.0 million, including commissions, at an average price of $226.27 per share. As of July 31, 2020, the Company had $203.3 million of purchase authority remaining under the stock repurchase plan.

The Company did not issue any shares of common stock through its equity distribution program in the second quarter of 2020.

Balance Sheet

In April 2020, the Company originated a $200.0 million unsecured term loan, priced at LIBOR + 1.20% with a one-year maturity and two 12-month extension options, exercisable at the Company’s option. The proceeds were used to repay all remaining consolidated debt maturing in 2020.

In June 2020, the Company issued $150.0 million of 12-year senior unsecured notes due in March 2032 bearing an interest rate per annum of 2.65% and an effective yield of 2.09%. The notes were issued as additional notes pursuant to the notes previously issued in February 2020. The proceeds were used to repay indebtedness under the Company’s unsecured credit facilities and for other general corporate and working capital purposes.

As of July 31, 2020, the Company had $1.2 billion in undrawn capacity on its unsecured credit facilities.

COVID-19 Update

The Company has established the Essex Cares fund to support the Company’s residents and stakeholders that are experiencing financial hardships caused by the COVID-19 pandemic. Initially funded by donations from the Company’s employees, officers and directors, the Company intends to distribute up to $3.0 million dollars in financial assistance to those in need.

Due to the uncertain nature of the COVID-19 pandemic and evolving economic re-opening plans, the Company is not reinstating full-year 2020 guidance. Instead, the Company continues to provide additional disclosures related to its operations on page S-15 of the supplemental financial information.

Conference Call with Management

The Company will host an earnings conference call with management to discuss its quarterly results on Tuesday, August 4, 2020 at 10 a.m. PT (1 p.m. ET), which will be broadcast live via the Internet at www.essex.com, and accessible via phone by dialing toll-free, (877) 407-0784, or toll/international, (201) 689-8560. No passcode is necessary.

A rebroadcast of the live call will be available online for 30 days and digitally for 7 days. To access the replay online, go to www.essex.com and select the second quarter 2020 earnings link. To access the replay, dial (844) 512-2921 using the replay pin number 13706365. If you are unable to access the information via the Company’s website, please contact the Investor Relations Department at investors@essex.com or by calling (650) 655-7800.

Corporate Profile

Essex Property Trust, Inc., an S&P 500 company, is a fully integrated real estate investment trust (REIT) that acquires, develops, redevelops, and manages multifamily residential properties in selected West Coast markets. Essex currently has ownership interests in 247 apartment communities comprising approximately 60,000 apartment homes with an additional 7 properties in various stages of active development. Additional information about the Company can be found on the Company’s website at www.essex.com.

This press release and accompanying supplemental financial information has been furnished to the Securities and Exchange Commission electronically on Form 8-K and can be accessed from the Company’s website at www.essex.com. If you are unable to obtain the information via the Web, please contact the Investor Relations Department at (650) 655-7800.

FFO RECONCILIATION

FFO, as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), is generally considered by industry analysts as an appropriate measure of performance of an equity REIT. Generally, FFO adjusts the net income of equity REITs for non-cash charges such as depreciation and amortization of rental properties, impairment charges, gains on sales of real estate and extraordinary items. Management considers FFO and FFO which excludes non-core items, which is referred to as “Core FFO,” to be useful supplemental operating performance measures of an equity REIT because, together with net income and cash flows, FFO and Core FFO provide investors with additional bases to evaluate the operating performance and ability of a REIT to incur and service debt and to fund acquisitions and other capital expenditures and to pay dividends.

By excluding gains or losses related to sales of depreciated operating properties and excluding real estate depreciation (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO can help investors compare the operating performance of a real estate company between periods or as compared to different companies. By further adjusting for items that are not considered part of the Company’s core business operations, Core FFO allows investors to compare the core operating performance of the Company to its performance in prior reporting periods and to the operating performance of other real estate companies without the effect of items that by their nature are not comparable from period to period and tend to obscure the Company’s actual operating results. FFO and Core FFO do not represent net income or cash flows from operations as defined by U.S. generally accepted accounting principles (“GAAP”) and are not intended to indicate whether cash flows will be sufficient to fund cash needs. These measures should not be considered as alternatives to net income as an indicator of the REIT’s operating performance or to cash flows as a measure of liquidity. FFO and Core FFO do not measure whether cash flow is sufficient to fund all cash needs including principal amortization, capital improvements and distributions to stockholders. FFO and Core FFO also do not represent cash flows generated from operating, investing or financing activities as defined under GAAP. Management has consistently applied the NAREIT definition of FFO to all periods presented. However, there is judgment involved and other REITs’ calculation of FFO may vary from the NAREIT definition for this measure, and thus their disclosures of FFO may not be comparable to the Company’s calculation.

The following table sets forth the Company’s calculation of diluted FFO and Core FFO for the three and six months ended June 30, 2020 and 2019 (in thousands, except for share and per share amounts):

	Three Months Ended<br><br> <br>June 30,						Six Months Ended<br><br> <br>June 30,
Funds from Operations attributable to common<br><br> <br>stockholders and unitholders	2020			2019			2020			2019
Net income available to common stockholders	$	84,458		$	92,275		$	399,464		$	211,133
Adjustments:
Depreciation and amortization		133,609			119,465			265,168			240,033
Gains not included in FFO		(16,597	)		(870	)		(251,291	)		(32,405	)
Depreciation and amortization from unconsolidated co-investments		12,764			14,631			25,308			29,821
Noncontrolling interest related to Operating Partnership units		2,964			3,228			13,950			7,399
Depreciation attributable to third party ownership and other		(139	)		(236	)		(273	)		(466	)
Funds from Operations attributable to common<br><br> <br>stockholders and unitholders	$	217,059		$	228,493		$	452,326		$	455,515
FFO per share – diluted	$	3.21		$	3.36		$	6.65		$	6.69
Expensed acquisition and investment related costs	$	15		$	24		$	102		$	56
Deferred tax expense on unrealized gain on unconsolidated co-investment ^(1)^		1,636			-			1,636			-
Gain on sale of marketable securities		(46	)		(556	)		(33	)		(498	)
Unrealized (gains) losses on marketable securities		(7,623	)		56			1,073			(4,454	)
Provision for credit losses		147			-			97			-
Equity income from non-core co-investment ^(2)^		(4,696	)		-			(4,586	)		(314	)
Interest rate hedge ineffectiveness ^(3)^		-			-			-			181
Loss (gain) on early retirement of debt, net		5,027			(332	)		4,706			(1,668	)
Gain on early retirement of debt from unconsolidated co-investment		(38	)		-			(38	)		-
Co-investment promote income		-			-			(6,455	)		(809	)
Income from early redemption of preferred equity investments		-			(732	)		(210	)		(832	)
General and administrative and other, net		2,312			-			3,132			-
Insurance reimbursements, legal settlements, and other, net		(106	)		(38	)		(63	)		(248	)
Core Funds from Operations attributable to<br><br> <br>common stockholders and unitholders	$	213,687		$	226,915		$	451,687		$	446,929
Core FFO per share – diluted	$	3.16		$	3.33		$	6.64		$	6.57
Weighted average number of shares outstanding diluted ^(4)^		67,682,034			68,079,855			68,017,414			68,063,937
(1)	A deferred tax expense was recorded during the second quarter of 2020 related to the $4.7 million net unrealized gain on the Real Estate Technology Ventures, L.P. co-investment.
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(2)	Represents the Company’s share of co-investment income from Real Estate Technology Ventures, L.P. Income for the second quarter of 2020 includes a net unrealized gain of $4.7<br> million.
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(3)	On January 1, 2019, the Company adopted ASU No. 2017-12 “Derivatives and Hedging - Targeted Improvements to Accounting for Hedging Activities,” which resulted in a cumulative<br> effect adjustment of approximately $181,000 from interest expense to accumulated other comprehensive income. As a result of the adoption of this standard, the Company recognizes qualifying hedge ineffectiveness through accumulated other<br> comprehensive income as opposed to current earnings.
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(4)	Assumes conversion of all outstanding limited partnership units in Essex Portfolio, L.P. (the “Operating Partnership”) into shares of the Company’s common stock and excludes all<br> DownREIT limited partnership units for which the Operating Partnership has the ability and intention to redeem the units for cash and does not consider them to be common stock equivalents.
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Net Operating Income (“NOI”) and Same-Property NOI Reconciliations

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

	Three Months Ended<br><br> <br>June 30,						Six Months Ended<br><br> <br>June 30,
	2020			2019			2020			2019
Earnings from operations	$	119,736		$	124,560		$	250,573		$	240,255
Adjustments:
Corporate-level property management expenses		8,646			8,469			17,405			16,898
Depreciation and amortization		133,609			119,465			265,168			240,033
Management and other fees from affiliates		(2,348	)		(2,260	)		(4,965	)		(4,595	)
General and administrative		14,952			13,927			28,934			27,386
Expensed acquisition and investment related costs		15			24			102			56
Gain on sale of real estate and land		(16,597	)		-			(16,597	)		-
NOI		258,013			264,185			540,620			520,033
Less: Non-same property NOI		(30,333	)		(18,217	)		(62,445	)		(33,088	)
Same-Property NOI	$	227,680		$	245,968		$	478,175		$	486,945

Safe Harbor Statement Under The Private Litigation Reform Act of 1995:

This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are statements which are not historical facts, including statements regarding the Company’s expectations, estimates, assumptions, hopes, intentions, beliefs and strategies regarding the future. Words such as “expects,” “assumes,” “anticipates,” “may,” “will,” “intends,” “plans,” “projects,” “believes,” “seeks,” “future,” “estimates,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Such forward-looking statements include, among other things, statements regarding the Company’s expectations related to the impact of the COVID-19 pandemic on the Company’s business, financial condition and results of operations and the impact of any measures taken to mitigate the impact of the pandemic, the Company’s intent, beliefs or expectations with respect to the timing of completion of current development and redevelopment projects and the stabilization of such projects, the timing of lease-up and occupancy of its apartment communities, the anticipated operating performance of its apartment communities, the total projected costs of development and redevelopment projects, co-investment activities, qualification as a REIT under the Internal Revenue Code of 1986, as amended, the real estate markets in the geographies in which the Company’s properties are located and in the United States in general, the adequacy of future cash flows to meet anticipated cash needs, its financing activities and the use of proceeds from such activities, the availability of debt and equity financing, general economic conditions including the potential impacts from such economic conditions, including as a result of the COVID-19 pandemic, trends affecting the Company’s financial condition or results of operations, changes to U.S. tax laws and regulations in general or specifically related to REITs or real estate, changes to laws and regulations in jurisdictions in which communities the Company owns are located, and other information that is not historical information.

While the Company’s management believes the assumptions underlying its forward-looking statements are reasonable, such forward-looking statements involve known and unknown risks, uncertainties and other factors, many of which are beyond the Company’s control, which could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The Company cannot assure the future results or outcome of the matters described in these statements; rather, these statements merely reflect the Company’s current expectations of the approximate outcomes of the matters discussed. Factors that might cause the Company’s actual results, performance or achievements to differ materially from those expressed or implied by these forward-looking statements include, but are not limited to, the following: the impact of the COVID-19 pandemic, which remains inherently uncertain as the situation is unprecedented and continuously evolving, and other potential future outbreaks of infectious diseases or other health concerns, and measures taken to limit their impact, could adversely affect the Company’s business and its tenants, and cause a significant downturn in general economic conditions, the real estate industry, and the markets in which the Company’s communities are located; the Company may fail to achieve its business objectives; the actual completion of development and redevelopment projects may be subject to delays; the stabilization dates of such projects may be delayed; the Company may abandon or defer development or redevelopment projects for a number of reasons, including changes in local market conditions which make development less desirable, increases in costs of development, increases in the cost of capital or lack of capital availability, resulting in losses; the total projected costs of current development and redevelopment projects may exceed expectations; such development and redevelopment projects may not be completed; development and redevelopment projects and acquisitions may fail to meet expectations; estimates of future income from an acquired property may prove to be inaccurate; occupancy rates and rental demand may be adversely affected by competition and local economic and market conditions; there may be increased interest rates and operating costs; the Company may be unsuccessful in the management of its relationships with its co-investment partners; future cash flows may be inadequate to meet operating requirements and/or may be insufficient to provide for dividend payments in accordance with REIT requirements; changes in laws or regulations; the terms of any refinancing may not be as favorable as the terms of existing indebtedness; unexpected difficulties in leasing of development projects; volatility in financial and securities market; Company’s failure to successfully operate acquired properties; unforeseen consequences from cyber-intrusion; the Company’s inability to maintain our investment grade credit rating with the rating agencies; government approvals, actions and initiatives, including the need for compliance with environmental requirements; and those further risks, special considerations, and other factors referred to in the Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, and other reports that the Company files with the SEC from time to time. Additionally, the risks, uncertainties and other factors set forth above or otherwise referred to in the reports that the Company has filed with the SEC may be further amplified by the global impact of the COVID-19 pandemic. All forward-looking statements are made as of the date hereof, the Company assumes no obligation to update or supplement this information for any reason, and therefore, they may not represent the Company’s estimates and assumptions after the date of this press release.

Definitions and Reconciliations

Non-GAAP financial measures and certain other capitalized terms, as used in this earnings release, are defined and further explained on pages S-16.1 through S-16.4, “Reconciliations of Non-GAAP Financial Measures and Other Terms,” of the accompanying supplemental financial information. The supplemental financial information is available on the Company’s website at www.essex.com.

Contact Information

Rylan Burns

Vice President of Finance & Investor Relations

(650) 655-7800

rburns@essex.com

10 -

Q2 2020 Supplemental Table of Contents

	Page(s)
Consolidated Operating Results	S-1 – S-2
Consolidated Funds From Operations	S-3
Consolidated Balance Sheets	S-4
Debt Summary – June 30, 2020	S-5
Capitalization Data, Public Bond Covenants, Credit Ratings, and Selected Credit Ratios – June 30, 2020	S-6
Portfolio Summary by County – June 30, 2020	S-7
Operating Income by Quarter – June 30, 2020	S-8
Same-Property Revenue Results by County – Quarters ended June 30, 2020 and 2019, and March 31, 2020	S-9
Same-Property Revenue Results by County – Six months ended June 30, 2020 and 2019	S-9.1
Same-Property Operating Expenses – Quarter and Year to Date as of June 30, 2020 and 2019	S-10
Development Pipeline – June 30, 2020	S-11
Redevelopment Pipeline – June 30, 2020	S-12
Capital Expenditures – June 30, 2020	S-12.1
Co-investments and Preferred Equity Investments – June 30, 2020	S-13
Summary of Apartment Community Acquisitions and Dispositions Activity	S-14
Delinquencies, Operating Statistics, and Same-Property Portfolio Growth with Concessions on a GAAP basis	S-15
Reconciliations of Non-GAAP Financial Measures and Other Terms	S-16.1-S-16.4

E S S E X P R O P E R T Y T R U S T, I N C.

Consolidated Operating Results<br><br> <br>(Dollars in thousands, except share and per share amounts)	Three Months Ended<br><br> June 30,						Six Months Ended<br><br> June 30,
	2020			2019			2020			2019
Revenues:
Rental and other property	$	368,149		$	359,375		$	757,899		$	713,263
Management and other fees from affiliates		2,348			2,260			4,965			4,595
		370,497			361,635			762,864			717,858
Expenses:
Property operating		110,136			95,190			217,279			193,230
Corporate-level property management expenses		8,646			8,469			17,405			16,898
Depreciation and amortization		133,609			119,465			265,168			240,033
General and administrative		14,952			13,927			28,934			27,386
Expensed acquisition and investment related costs		15			24			102			56
		267,358			237,075			528,888			477,603
Gain on sale of real estate and land		16,597			-			16,597			-
Earnings from operations		119,736			124,560			250,573			240,255
Interest expense, net ^(1)^		(51,659	)		(52,137	)		(104,822	)		(103,735	)
Interest and other income		11,405			8,347			6,184			20,608
Equity income from co-investments		17,257			16,959			38,554			33,235
Deferred tax expense on unrealized gain on unconsolidated co-investment		(1,636	)		-			(1,636	)		-
(Loss) gain on early retirement of debt, net		(5,027	)		332			(4,706	)		1,668
Gain on remeasurement of co-investment		-			-			234,694			31,535
Net income		90,076			98,061			418,841			223,566
Net income attributable to noncontrolling interest		(5,618	)		(5,786	)		(19,377	)		(12,433	)
Net income available to common stockholders	$	84,458		$	92,275		$	399,464		$	211,133
Net income per share - basic	$	1.29		$	1.40		$	6.08		$	3.21
Shares used in income per share - basic		65,412,407			65,718,806			65,728,119			65,710,842
Net income per share - diluted	$	1.29		$	1.40		$	6.07		$	3.21
Shares used in income per share - diluted		65,427,935			65,821,815			65,855,347			65,802,417
^(1)^	Refer to page S-16.2, the section titled “Interest Expense, Net” for additional information.
---	---

See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information

S-1

E S S E X P R O P E R T Y T R U S T, I N C.

Consolidated Operating Results<br><br> <br>Selected Line Item Detail	Three Months Ended<br><br> <br>June 30,						Six Months Ended<br><br> <br>June 30,
(Dollars in thousands)	2020			2019			2020			2019
Rental and other property
Rental income	$	363,087		$	353,167		$	746,585		$	700,972
Other property		5,062			6,208			11,314			12,291
Rental and other property	$	368,149		$	359,375		$	757,899		$	713,263
Property operating expenses
Real estate taxes	$	44,994		$	36,285		$	88,006		$	75,703
Administrative		21,579			20,396			44,336			41,506
Maintenance and repairs		23,906			20,940			45,777			40,606
Utilities		19,657			17,569			39,160			35,415
Property operating expenses	$	110,136		$	95,190		$	217,279		$	193,230
Interest and other income
Marketable securities and other income	$	3,777		$	7,809		$	7,258		$	15,408
Gain on sale of marketable securities		46			556			33			498
Provision for credit losses		(147	)		-			(97	)		-
Unrealized gains (losses) on marketable securities		7,623			(56	)		(1,073	)		4,454
Insurance reimbursements, legal settlements, and other, net		106			38			63			248
Interest and other income	$	11,405		$	8,347		$	6,184		$	20,608
Equity income from co-investments
Equity income from co-investments	$	246		$	5,116		$	3,309		$	10,101
Income from preferred equity investments		12,277			10,241			23,956			20,309
Equity income from non-core co-investment		4,696			-			4,586			314
Gain on sale of co-investment communities		-			870			-			870
Gain on early retirement of debt from unconsolidated co-investment		38			-			38			-
Co-investment promote income		-			-			6,455			809
Income from early redemption of preferred equity investments		-			732			210			832
Equity income from co-investments	$	17,257		$	16,959		$	38,554		$	33,235
Noncontrolling interest
Limited partners of Essex Portfolio, L.P.	$	2,964		$	3,228		$	13,950		$	7,399
DownREIT limited partners’ distributions		2,134			1,645			4,270			3,209
Third-party ownership interest		520			913			1,157			1,825
Noncontrolling interest	$	5,618		$	5,786		$	19,377		$	12,433

See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information

S-2

E S S E X P R O P E R T Y T R U S T, I N C.

Consolidated Funds From Operations ^(1)^<br><br> <br>(Dollars in thousands, except share and per share amounts and in footnotes)	Three Months Ended<br><br> June 30,								Six Months Ended<br><br> June 30,
	2020			2019			% Change		2020			2019			% Change
Funds from operations attributable to common stockholders and unitholders (FFO)
Net income available to common stockholders	$	84,458		$	92,275				$	399,464		$	211,133
Adjustments:
Depreciation and amortization		133,609			119,465					265,168			240,033
Gains not included in FFO		(16,597	)		(870	)				(251,291	)		(32,405	)
Depreciation and amortization from unconsolidated co-investments		12,764			14,631					25,308			29,821
Noncontrolling interest related to Operating Partnership units		2,964			3,228					13,950			7,399
Depreciation attributable to third party ownership and other ^(2)^		(139	)		(236	)				(273	)		(466	)
Funds from operations attributable to common stockholders and unitholders	$	217,059		$	228,493				$	452,326		$	455,515
FFO per share-diluted	$	3.21		$	3.36			-4.5%	$	6.65		$	6.69			-0.6%
Components of the change in FFO
Non-core items:
Expensed acquisition and investment related costs	$	15		$	24				$	102		$	56
Deferred tax expense on unrealized gain on unconsolidated co-investment ^(3)^		1,636			-					1,636			-
Gain on sale of marketable securities		(46	)		(556	)				(33	)		(498	)
Unrealized (gains) losses on marketable securities		(7,623	)		56					1,073			(4,454	)
Provision for credit losses		147			-					97			-
Equity income from non-core co-investment^^^(4)^		(4,696	)		-					(4,586	)		(314	)
Interest rate hedge ineffectiveness^(5)^		-			-					-			181
Loss (gain) on early retirement of debt, net		5,027			(332	)				4,706			(1,668	)
Gain on early retirement of debt from unconsolidated co-investment		(38	)		-					(38	)		-
Co-investment promote income		-			-					(6,455	)		(809	)
Income from early redemption of preferred equity investments		-			(732	)				(210	)		(832	)
General and administrative and other, net		2,312			-					3,132			-
Insurance reimbursements, legal settlements, and other, net		(106	)		(38	)				(63	)		(248	)
Core funds from operations attributable to common stockholders and unitholders	$	213,687		$	226,915				$	451,687		$	446,929
Core FFO per share-diluted	$	3.16		$	3.33			-5.1%	$	6.64		$	6.57			1.1%
Changes in core items:
Same-property NOI	$	(18,288	)						$	(8,770	)
Non-same property NOI		12,116								29,357
Management and other fees, net		88								370
FFO from co-investments		(4,701	)							(7,658	)
Interest and other income		(4,032	)							(8,150	)
Interest expense		478								(1,268	)
General and administrative		1,287								1,584
Corporate-level property management expenses		(177	)							(507	)
Other items, net		1								(200	)
	$	(13,228	)						$	4,758
Weighted average number of shares outstanding diluted ^(6)^		67,682,034			68,079,855					68,017,414			68,063,937
^(1)^	Refer to page S-16.2, the section titled “Funds from Operations (“FFO”) and Core FFO” for additional information on the Company’s definition and use of FFO and Core FFO.
---	---
^(2)^	The Company consolidates certain co-investments. The noncontrolling interest’s share of net operating income in these investments for the three and six months ended June 30,<br> 2020 was $0.9 million and $2.3 million, respectively.
---	---
^(3)^	A deferred tax expense was recorded during the second quarter of 2020 related to the $4.7 million net unrealized gain on the Real Estate Technology Ventures, L.P.<br> co-investment discussed below.
---	---
^(4)^	Represents the Company’s share of co-investment income from Real Estate Technology Ventures, L.P. Income for the second quarter of 2020 includes a net unrealized gain of $4.7<br> million.
---	---
^(5)^	On January 1, 2019, the Company adopted ASU No. 2017-12 “Derivatives and Hedging - Targeted Improvements to Accounting for Hedging Activities,” which resulted in a cumulative<br> effect adjustment of approximately $181,000 from interest expense to accumulated other comprehensive income. As a result of the adoption of this standard, the Company recognizes qualifying hedge ineffectiveness through accumulated<br> other comprehensive income as opposed to current earnings.
---	---
^(6)^	Assumes conversion of all outstanding limited partnership units in the Operating Partnership into shares of the Company’s common stock and excludes all DownREIT limited<br> partnership units for which the Operating Partnership has the ability and intention to redeem the units for cash and does not consider them to be common stock equivalents.
---	---

See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information

S-3

E S S E X P R O P E R T Y T R U S T, I N C.

Consolidated Balance Sheets

(Dollars in thousands)

	June 30, 2020			December 31, 2019
Real Estate:
Land and land improvements	$	2,933,690		$	2,773,805
Buildings and improvements		12,088,080			11,264,337
		15,021,770			14,038,142
Less: accumulated depreciation		(3,927,746	)		(3,689,482	)
		11,094,024			10,348,660
Real estate under development		467,915			546,075
Co-investments		1,008,758			1,335,339
Real estate held for sale, net		24,495			-
		12,595,192			12,230,074
Cash and cash equivalents, including restricted cash		256,475			81,094
Marketable securities		154,433			144,193
Notes and other receivables		44,748			134,365
Operating lease right-of-use assets		73,669			74,744
Prepaid expenses and other assets		52,894			40,935
Total assets	$	13,177,411		$	12,705,405
Unsecured debt, net	$	5,615,795		$	4,763,206
Mortgage notes payable, net		703,617			990,667
Lines of credit		-			55,000
Operating lease liabilities		75,626			76,740
Other liabilities		396,251			378,878
Total liabilities		6,791,289			6,264,491
Redeemable noncontrolling interest		33,241			37,410
Equity:
Common stock		7			7
Additional paid-in capital		6,944,805			7,121,927
Distributions in excess of accumulated earnings		(760,028	)		(887,619	)
Accumulated other comprehensive loss, net		(18,710	)		(13,888	)
Total stockholders’ equity		6,166,074			6,220,427
Noncontrolling interest		186,807			183,077
Total equity6uj		6,352,881			6,403,504
Total liabilities and equity	$	13,177,411		$	12,705,405

See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information

S-4

E S S E X P R O P E R T Y T R U S T, I N C.

Debt Summary - June 30, 2020

(Dollars in thousands, except in footnotes)

									Scheduled principal payments, unamortized premiums (discounts) and (debt issuance costs) are as follows - excludes lines of credit:
				Weighted Average						Unsecured			Secured			Total			Weighted<br><br> <br>Average<br><br> <br>Interest Rate			Percentage<br><br> <br>of Total Debt
	Balance<br><br> <br>Outstanding			Interest<br><br> <br>Rate			Maturity<br><br> <br>in Years
Unsecured Debt, net
Bonds private - fixed rate	$	200,000			4.4	%		1.0	2020	$	-		$	1,983		$	1,983			3.5	%		0.0	%
Bonds public - fixed rate		4,900,000			3.6	%		7.6	2021		500,000			31,653			531,653			4.3	%		8.4	%
Term loan ^(1)^		550,000			1.8	%		2.1	2022		650,000			43,188			693,188			2.8	%		10.9	%
Unamortized net discounts and debt issuance costs		(34,205	)		-			-	2023		800,000			2,945			802,945			3.1	%		12.6	%
		5,615,795			3.5	%		6.8	2024		400,000			3,109			403,109			4.0	%		6.3	%
Mortgage Notes Payable, net									2025		500,000			133,054			633,054			3.5	%		10.0	%
Fixed rate - secured		446,152			3.6	%		5.5	2026		450,000			99,405			549,405			3.5	%		8.7	%
Variable rate - secured ^(2)^		255,109			1.3	%		16.7	2027		350,000			153,955			503,955			3.4	%		7.9	%
Unamortized premiums and debt issuance costs, net		2,356			-			-	2028		-			68,332			68,332			4.1	%		1.1	%
Total mortgage notes payable		703,617			2.8	%		9.5	2029		500,000			31,156			531,156			4.0	%		8.4	%
									2030		550,000			1,592			551,592			3.1	%		8.7	%
Unsecured Lines of Credit									Thereafter		950,000			130,889			1,080,889			3.0	%		17.0	%
Line of credit ^(3)^		-			1.0	%			Subtotal		5,650,000			701,261			6,351,261			3.4	%		100.0	%
Line of credit ^(4)^		-			1.0	%			Debt Issuance Costs		(28,496	)		(2,215	)		(30,711	)	NA			NA
Total lines of credit		-			1.0	%			(Discounts)/Premiums		(5,709	)		4,571			(1,138	)	NA			NA
									Total	$	5,615,795		$	703,617		$	6,319,412			3.4	%		100.0	%
Total debt, net	$	6,319,412			3.4	%

Capitalized interest for the three and six months ended June 30, 2020 was approximately $4.2 million and $9.0 million, respectively.

^(1)^	$350.0 million of the unsecured term loan has a variable interest rate of LIBOR plus 0.95%. The Company has interest rate swap contracts with an aggregate notional amount of<br> $175.0 million, which effectively converts the interest rate on $175.0 million of the term loan to a fixed rate of 2.3%. In April 2020, the Company obtained a $200.0 million unsecured term loan, that has an interest rate of LIBOR plus<br> 1.20% with a one-year maturity and two 12-month extension options, exercisable at the Company’s option.
^(2)^	$255.1 million of variable rate debt is tax exempt to the note holders.
---	---
^(3)^	This unsecured line of credit facility has a capacity of $1.2 billion, with a scheduled maturity date in December 2023 with one 18-month extension, exercisable at the<br> Company’s option. The underlying interest rate on this line is based on a tiered rate structure tied to the Company’s corporate ratings and is currently at LIBOR plus 0.825%.
---	---
^(4)^	This unsecured line of credit facility has a capacity $35.0 million, with a scheduled maturity date in February 2021 with one 18-month extension, exercisable at the Company’s<br> option. The underlying interest rate on this line is based on a tiered rate structure tied to the Company’s corporate ratings and is currently at LIBOR plus 0.825%.
---	---

See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information

S-5

E S S E X P R O P E R T Y T R U S T, I N C.

Capitalization Data, Public Bond Covenants, Credit Ratings and Selected Credit Ratios - June 30, 2020

(Dollars and shares in thousands, except per share amounts)

Capitalization Data						Public Bond Covenants ^(1)^	Actual	Requirement
Total debt, net			$	6,319,412
						Debt to Total Assets:	37%	< 65%
Common stock and potentially dilutive securities
Common stock outstanding				65,331
Limited partnership units ^(1)^				2,254
Options-treasury method				12		Secured Debt to Total Assets:	4%	< 40%
Total shares of common stock and potentially dilutive securities				67,597
Common stock price per share as of June 30, 2020			$	229.17
						Interest Coverage:	484%	> 150%
Total equity capitalization			$	15,491,204
Total market capitalization			$	21,810,616		Unsecured Debt Ratio ^(2)^:	265%	> 150%
Ratio of debt to total market capitalization				29.0	%
						Selected Credit Ratios ^(3)^	Actual
Credit Ratings
Rating Agency	Rating	Outlook				Net Indebtedness^^Divided by Adjusted EBITDAre, normalized and annualized:	6.4
Fitch	BBB+	Stable
Moody’s	Baa1	Stable				Unencumbered NOI to Adjusted Total NOI:	94%
Standard & Poor’s	BBB+	Stable
						^(1)^Refer to page S-16.4 for additional information on the Company’s Public Bond<br> Covenants.
^(1)^Assumes conversion of all outstanding limited partnership units in the Operating<br> Partnership into shares of the Company’s common stock.						^(2)^ Unsecured Debt Ratio is unsecured assets (excluding investments in<br> co-investments) divided by unsecured indebtedness.
						^(3)^ Refer to pages S-16.1 to S-16.4, the section titled “Reconciliations of Non-GAAP<br> Financial Measures and Other Terms” for additional information on the Company’s Selected Credit Ratios.

See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information

S-6

E S S E X P R O P E R T Y T R U S T, I N C.

Portfolio Summary by County as of June 30, 2020

	Apartment Homes								Average Monthly Rental Rate ^(1)^						Percent of NOI ^(2)^
Region - County	Consolidated^(3)^		Unconsolidated<br><br> <br>Co-investments ^(4)^		Apartment<br><br> <br>Homes in<br><br> <br>Development ^(5)^		Total		Consolidated		Unconsolidated<br><br> <br>Co-investments^(6)^		Total ^(7)^		Consolidated			Unconsolidated<br><br> <br>Co-investments ^(6)^			Total ^(7)^
Southern California
Los Angeles County		9,097		1,563		200		10,860	$	2,481	$	2,191	$	2,457		16.7	%		15.0	%		16.5	%
Orange County		5,554		1,149		-		6,703		2,252		1,975		2,226		9.9	%		11.0	%		10.0	%
San Diego County		4,824		616		264		5,704		2,002		1,890		1,995		7.9	%		5.5	%		7.7	%
Ventura County and Other		3,200		693		-		3,893		1,850		2,232		1,890		5.0	%		7.7	%		5.4	%
Total Southern California		22,675		4,021		464		27,160		2,234		2,093		2,222		39.5	%		39.2	%		39.6	%
Northern California
Santa Clara County^(8)^		8,747		1,237		269		10,253		2,895		2,960		2,899		21.0	%		16.2	%		20.6	%
Alameda County		3,959		1,309		-		5,268		2,576		2,498		2,565		8.1	%		16.4	%		8.7	%
San Mateo County		2,651		195		107		2,953		3,195		3,913		3,221		6.4	%		3.8	%		6.2	%
Contra Costa County		2,619		-		-		2,619		2,489		-		2,489		5.2	%		0.0	%		4.8	%
San Francisco		1,343		537		-		1,880		3,237		3,934		3,353		3.4	%		4.3	%		3.4	%
Total Northern California		19,319		3,278		376		22,973		2,839		2,984		2,851		44.1	%		40.7	%		43.7	%
Seattle Metro		10,343		1,890		-		12,233		1,947		1,944		1,947		16.4	%		20.1	%		16.7	%
Total		52,337		9,189		840		62,366	$	2,401	$	2,376	$	2,399		100.0	%		100.0	%		100.0	%
^(1)^	Average monthly rental rate is defined as the total scheduled monthly rental income (actual rent for occupied apartment homes plus market rent for vacant apartment homes)<br> divided by the number of apartment homes.
---	---
^(2)^	Represents the percentage of actual NOI for the quarter ended June 30, 2020. See the section titled “Net Operating Income (“NOI”) and Same-Property NOI Reconciliations” on<br> page S-16.3.
---	---
^(3)^	Includes two communities consisting of 648 apartment homes that are producing partial income due to lease-up.
---	---
^(4)^	Includes one community consisting of 537 apartment homes that is producing partial income due to lease-up.
---	---
^(5)^	Includes development communities with no rental income.
---	---
^(6)^	Co-investment amounts weighted for Company’s pro rata share.
---	---
^(7)^	At Company’s pro rata share.
---	---
^(8)^	Includes all communities in Santa Clara County and one community in Santa Cruz County.
---	---

See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information

S-7

E S S E X P R O P E R T Y T R U S T, I N C.

Operating Income by Quarter ^(1)^

(Dollars in thousands, except in footnotes)

	Apartment<br><br> <br>Homes		Q2 '20		Q1 '20		Q4 '19		Q3 '19		Q2 '19
Rental and other property revenues:
Same-property		47,104	$	323,651	$	344,636	$	344,404	$	338,613	$	336,492
Acquisitions^(2)^		2,557		19,885		18,879		4,238		2,991		475
Development ^(3)^		968		4,420		4,075		3,417		1,883		1,217
Redevelopment		621		5,096		5,401		5,317		5,272		5,240
Non-residential/other, net^(4)^		1,087		15,097		16,759		15,485		15,745		15,951
Total rental and other property revenues		52,337		368,149		389,750		372,861		364,504		359,375
Property operating expenses:
Same-property				95,971		94,141		92,914		94,867		90,524
Acquisitions^(2)^				6,714		5,804		1,200		961		103
Development ^(3)^				1,445		1,447		1,208		706		506
Redevelopment				1,752		1,663		1,725		1,734		1,586
Non-residential/other, net^(4) (5)^				4,254		4,088		4,077		3,905		2,471
Total property operating expenses				110,136		107,143		101,124		102,173		95,190
Net operating income (NOI):
Same-property				227,680		250,495		251,490		243,746		245,968
Acquisitions^(2)^				13,171		13,075		3,038		2,030		372
Development ^(3)^				2,975		2,628		2,209		1,177		711
Redevelopment				3,344		3,738		3,592		3,538		3,654
Non-residential/other, net^(4)^				10,843		12,671		11,408		11,840		13,480
Total NOI			$	258,013	$	282,607	$	271,737	$	262,331	$	264,185
Same-property metrics
Operating margin				70%		73%		73%		72%		73%
Annualized turnover ^(6)^				46%		39%		41%		55%		48%
Financial occupancy ^(7)^				94.9%		96.8%		97.1%		96.0%		96.6%
^(1)^	Includes consolidated communities only.
---	---
^(2)^	Acquisitions include properties acquired which did not have comparable stabilized results as of January 1, 2019.
---	---
^(3)^	Development includes properties developed which did not have comparable stabilized results as of January 1, 2019.
---	---
^(4)^	Non-residential/other, net consists of revenues generated from retail space, commercial properties, held for sale properties, disposition properties, student housing,<br> properties undergoing significant construction activities that do not meet our redevelopment criteria, and three communities located in the California counties of Riverside, Santa Barbara, and Santa Cruz, which the Company does not<br> consider its core markets and straight-line adjustments for concessions.
---	---
^(5)^	Includes other expenses and intercompany eliminations pertaining to self-insurance.
---	---
^(6)^	Annualized turnover is defined as the number of apartment homes turned over during the quarter, annualized, divided by the total number of apartment homes.
---	---
^(7)^	Financial occupancy is defined as the percentage resulting from dividing actual rental income by total scheduled rental income (actual rent for occupied apartment homes plus<br> market rent for vacant apartment homes).
---	---

See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information

S-8

E S S E X P R O P E R T Y T R U S T, I N C.

Same-Property Revenue Results by County - Second Quarter 2020 vs. Second Quarter 2019 and First Quarter 2020

(Dollars in thousands, except average monthly rental rates)

						Average Monthly Rental Rate							Financial Occupancy									Gross Revenues							Sequential Gross<br><br> <br>Revenues
Region - County	Apartment<br><br> <br>Homes		Q2 ‘20 %<br><br> <br>of Actual<br><br> <br>NOI			Q2 '20		Q2 '19		% Change			Q2 '20			Q2 '19			% Change			Q2 '20		Q2 '19		% Change			Q1 '20		% Change
Southern California
Los Angeles County		8,641		17.5	%	$	2,490	$	2,456		1.4	%		93.4	%		96.6	%		-3.3	%	$	59,232	$	64,790		-8.6	%	$	65,959		-10.2	%
Orange County		5,554		10.9	%		2,252		2,209		1.9	%		95.0	%		96.3	%		-1.3	%		35,565		37,182		-4.3	%		38,050		-6.5	%
San Diego County		4,582		8.4	%		1,996		1,951		2.3	%		96.1	%		97.1	%		-1.0	%		27,110		27,663		-2.0	%		28,381		-4.5	%
Ventura County		2,577		4.6	%		1,878		1,844		1.8	%		95.8	%		97.0	%		-1.2	%		14,324		14,805		-3.2	%		15,131		-5.3	%
Total Southern California		21,354		41.4	%		2,248		2,209		1.8	%		94.5	%		96.6	%		-2.2	%		136,231		144,440		-5.7	%		147,521		-7.7	%
Northern California
Santa Clara County		7,406		20.6	%		2,864		2,809		2.0	%		95.3	%		96.7	%		-1.4	%		62,618		63,559		-1.5	%		65,145		-3.9	%
Alameda County		2,954		7.0	%		2,612		2,588		0.9	%		94.4	%		96.1	%		-1.8	%		22,278		23,428		-4.9	%		23,818		-6.5	%
San Mateo County		1,830		5.3	%		3,095		3,024		2.3	%		95.1	%		96.3	%		-1.2	%		16,253		17,037		-4.6	%		17,525		-7.3	%
Contra Costa County		2,270		4.8	%		2,385		2,363		0.9	%		96.3	%		96.8	%		-0.5	%		15,609		16,487		-5.3	%		16,730		-6.7	%
San Francisco		1,178		3.1	%		3,122		3,101		0.7	%		92.9	%		96.5	%		-3.7	%		10,568		11,304		-6.5	%		11,467		-7.8	%
Total Northern California		15,638		40.8	%		2,794		2,749		1.6	%		95.0	%		96.6	%		-1.7	%		127,326		131,815		-3.4	%		134,685		-5.5	%
Seattle Metro		10,112		17.8	%		1,946		1,877		3.7	%		95.4	%		96.4	%		-1.0	%		60,094		60,237		-0.2	%		62,430		-3.7	%
Total Same-Property		47,104		100.0	%	$	2,364	$	2,317		2.0	%		94.9	%		96.6	%		-1.7	%	$	323,651	$	336,492		-3.8	%	$	344,636		-6.1	%

See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information

S-9

E S S E X P R O P E R T Y T R U S T, I N C.

Same-Property Revenue Results by County - Six months ended June 30, 2020 vs. Six months ended June 30, 2019

(Dollars in thousands, except average monthly rental rates)

			YTD			Average Monthly Rental Rate							Financial Occupancy									Gross Revenues
Region - County	Apartment<br><br> <br>Homes		2020 % of<br><br> <br>Actual<br><br> <br>NOI			YTD 2020		YTD 2019		% Change			YTD 2020			YTD 2019			% Change			YTD 2020		YTD 2019		% Change
Southern California
Los Angeles County		8,641		18.0	%	$	2,491	$	2,444		1.9	%		94.9	%		96.7	%		-1.9	%	$	125,191	$	129,353		-3.2	%
Orange County		5,554		10.9	%		2,250		2,199		2.3	%		95.7	%		96.5	%		-0.8	%		73,615		74,086		-0.6	%
San Diego County		4,582		8.3	%		1,992		1,942		2.6	%		96.6	%		96.8	%		-0.2	%		55,491		55,022		0.9	%
Ventura County		2,577		4.6	%		1,876		1,836		2.2	%		96.5	%		97.1	%		-0.6	%		29,455		29,563		-0.4	%
Total Southern California		21,354		41.8	%		2,247		2,199		2.2	%		95.6	%		96.7	%		-1.1	%		283,752		288,024		-1.5	%
Northern California
Santa Clara County		7,406		20.2	%		2,861		2,788		2.6	%		96.2	%		97.0	%		-0.8	%		127,763		126,565		0.9	%
Alameda County		2,954		7.0	%		2,612		2,573		1.5	%		95.4	%		96.4	%		-1.0	%		46,096		46,721		-1.3	%
San Mateo County		1,830		5.3	%		3,091		2,995		3.2	%		96.0	%		96.9	%		-0.9	%		33,778		33,997		-0.6	%
Contra Costa County		2,270		4.9	%		2,385		2,345		1.7	%		96.7	%		97.0	%		-0.3	%		32,339		32,871		-1.6	%
San Francisco		1,178		3.1	%		3,140		3,074		2.1	%		94.6	%		96.3	%		-1.8	%		22,035		22,319		-1.3	%
Total Northern California		15,638		40.5	%		2,793		2,729		2.3	%		96.0	%		96.8	%		-0.8	%		262,011		262,473		-0.2	%
Seattle Metro		10,112		17.7	%		1,939		1,862		4.1	%		96.1	%		96.7	%		-0.6	%		122,524		119,890		2.2	%
Total Same-Property		47,104		100.0	%	$	2,362	$	2,302		2.6	%		95.8	%		96.8	%		-1.0	%	$	668,287	$	670,387		-0.3	%

See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information

S-9.1

E S S E X P R O P E R T Y T R U S T, I N C.

Same-Property Operating Expenses - Quarter and Year to Date as of June 30, 2020 and 2019

(Dollars in thousands)

	Based on 47,104 apartment homes
	Q2 '20		Q2 '19		% Change			% of Op. Ex.			YTD 2020		YTD 2019		% Change			% of Op. Ex.
Same-property operating expenses:
Real estate taxes	$	37,628	$	34,317		9.6	%		39.2	%	$	74,343	$	71,121		4.5	%		39.1	%
Maintenance and repairs		21,165		19,590		8.0	%		22.1	%		40,358		38,079		6.0	%		21.2	%
Administrative		15,844		16,213		-2.3	%		16.5	%		32,389		32,617		-0.7	%		17.0	%
Utilities		17,152		16,178		6.0	%		17.9	%		34,238		33,005		3.7	%		18.0	%
Insurance and other		4,182		4,226		-1.0	%		4.3	%		8,784		8,620		1.9	%		4.7	%
Total same-property operating expenses	$	95,971	$	90,524		6.0	%		100.0	%	$	190,112	$	183,442		3.6	%		100.0	%

See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information

S-10

E S S E X P R O P E R T Y T R U S T, I N C.

Development Pipeline - June 30, 2020

(Dollars in millions, except per apartment home amounts in thousands and except in footnotes)

Project Name	Location					Incurred to<br><br> <br>Date		Remaining<br><br> <br>Costs		Estimated<br><br> <br>Total Cost		Essex Est.<br><br> <br>Total Cost ^(1)^			Cost per<br><br> <br>Apartment<br><br> <br>Home ^(2)^
Development Projects - Consolidated ^(4)^
Station Park Green - Phase III	San Mateo, CA	100	%	172	-		126		8		134		134			779	61	%	70	%	88	%	Q3 2017	Q1 2020	Q3 2020
Station Park Green - Phase IV	San Mateo, CA	100	%	107	-		37		57		94		94			879	0	%	0	%	0	%	Q3 2019	Q4 2021	Q2 2022
Mylo ^(5)^	Santa Clara, CA	100	%	476	-		209		17		226		226			475	30	%	40	%	46	%	Q3 2016	Q3 2019	Q2 2021
Wallace on Sunset ^(6)^	Hollywood, CA	100	%	200	4,700		86		19		105		105			500	0	%	0	%	0	%	Q4 2017	Q1 2021	Q4 2021
Total Development Projects - Consolidated				955	4,700		458		101		559		559			580
Land Held for Future Development - Consolidated
Other Projects	Various	100	%				21		-		21		21
Total Development Pipeline - Consolidated				955	4,700		479		101		580		580
Development Projects - Joint Venture ^(4)^
Patina at Midtown	San Jose, CA	50	%	269	-		133		3		136		68			506	0	%	0	%	9	%	Q3 2017	Q3 2020	Q2 2021
500 Folsom ^(7)^	San Francisco, CA	50	%	537	6,000		396		19		415		208			763	60	%	64	%	73	%	Q4 2015	Q3 2019	Q1 2021
Scripps Mesa Apartments ^(7)^	San Diego, CA	51	%	264	-		4		98		102		52			386	0	%	0	%	0	%	Q3 2020	Q4 2022	Q3 2023
Total Development Projects - Joint Venture				1,070	6,000		533		120		653		328		$	605
Grand Total - Development Pipeline				2,025	10,700	$	1,012	$	221	$	1,233		908
Essex Cost Incurred to Date - Pro Rata													(746	)
Essex Remaining Commitment												$	162
^(1)^	The Company’s share of the estimated total cost of the project.
---	---
^(2)^	Net of the estimated allocation to the retail component of the project.
---	---
^(3)^	Calculations are based on multifamily operations only.
---	---
^(4)^	For the second quarter of 2020, the Company’s cost includes $4.1 million of capitalized interest, $1.3 million of capitalized overhead and $0.3 million of development fees<br> (such development fees reduced G&A expenses).
---	---
^(5)^	Cost incurred to date does not include a deduction of $4.7 million for accumulated depreciation recorded during the period when the property was held as a retail operating<br> asset.
---	---
^(6)^	Cost incurred to date does not include a deduction of $6.3 million for accumulated depreciation recorded during the period when the property was held as a retail operating<br> asset.
---	---
^(7)^	Estimated cost incurred to date and total cost are net of a projected value for low income housing tax credit proceeds and the value of the tax exempt bond structure.
---	---

See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information

S-11

E S S E X P R O P E R T Y T R U S T, I N C.

Redevelopment Pipeline - June 30, 2020

(Dollars in thousands)

				Total		Estimated		Estimated				NOI
		Apartment		Incurred		Remaining		Total		Project		Six Months Ended
Region/Project Name	Location	Homes		To Date		Cost		Cost		Start Date		2020		2019
Consolidated - Redevelopment Projects
Same-Property ^(1)^
Southern California
The Henley	Glendale, CA		215	$	21,000	$	2,600	$	23,600		Q1 2014
The Blake LA	Los Angeles, CA		196		10,700		1,500		12,200		Q4 2016
The Palms at Laguna Niguel	Laguna Niguel, CA		460		6,700		2,800		9,500		Q4 2016
Total Same-Property - Redevelopment Projects			871	$	38,400	$	6,900	$	45,300			$	8,100	$	8,509
Non-Same Property
Southern California
Bunker Hill Towers	Los Angeles, CA		456	$	84,400	$	3,000	$	87,400		Q3 2013
Total Non-Same Property - Redevelopment Projects			456	$	84,400	$	3,000	$	87,400			$	4,277	$	4,310
^(1)^	Redevelopment activities are ongoing at these communities, but the communities have stabilized operations, therefore results are classified in same-property results.
---	---

See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information

S-12

E S S E X P R O P E R T Y T R U S T, I N C.

Capital Expenditures - June 30, 2020 ^(1)^

(Dollars in thousands, except in footnotes and per apartment home amounts)

Revenue Generating Capital Expenditures^(2)^	Q2 '20		Q1 '20		Q4 '19		Q3 '19		Trailing 4<br><br> <br>Quarters
Same-property portfolio	$	7,693	$	18,059	$	14,845	$	21,038	$	61,635
Non-same property portfolio		1,389		3,586		1,430		3,152		9,557
Total revenue generating capital expenditures	$	9,082	$	21,645	$	16,275	$	24,190	$	71,192
Number of same-property interior renovations		492		777		993		1,302		3,564
Number of total consolidated interior renovations		574		917		1,154		1,396		4,041
Non-Revenue Generating Capital Expenditures ^(3)^	Q2 '20		Q1 '20		Q4 '19		Q3 '19		Trailing 4<br><br> <br>Quarters
---	---	---	---	---	---	---	---	---	---	---
Non-revenue generating capital expenditures ^(4)^	$	16,559	$	15,315	$	26,282	$	25,273	$	83,429
Average apartment homes in quarter		52,552		51,670		50,521		50,065		51,202
Capital expenditures per apartment homes in the quarter	$	315	$	296	$	520	$	505	$	1,629
^(1)^	The Company incurred $0.1 million of capitalized interest, $3.2 million of capitalized overhead and $0.1 million of co-investment fees related to redevelopment in Q2<br> 2020.
---	---
^(2)^	Represents revenue generating or expense saving expenditures, such as full-scale redevelopments shown on page S-12, interior unit turn renovations, enhanced amenities<br> and certain resource management initiatives.
---	---
^(3)^	Represents roof replacements, paving, building and mechanical systems, exterior painting, siding, etc.
---	---
^(4)^	Non-revenue generating capital expenditures does not include expenditures incurred due to changes in governmental regulations that the Company would not have incurred<br> otherwise and retail, furniture and fixtures, and expenditures in which the Company expects to be reimbursed.
---	---

See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information

S-12.1

E S S E X P R O P E R T Y T R U S T, I N C.

Co-investments and Preferred Equity Investments – June 30, 2020

(Dollars in thousands)

	Weighted<br><br> Average Essex<br><br> Ownership<br><br> Percentage		Apartment<br><br> Homes		Total<br><br> <br>Undepreciated<br><br> Book Value		Debt<br><br> <br>Amount		Essex<br><br> Book<br><br> <br>Value		Weighted<br><br> Average<br><br> <br>Borrowing Rate				Three Months<br><br> <br>Ended<br><br> <br>June 30, 2020		Six Months<br><br> Ended<br><br> June 30, 2020
Operating and Other Non-Consolidated Joint Ventures															NOI
Wesco I, III, IV, and V		51%		5,310	$	1,723,805	$	1,062,237	$	186,509		3.5%	3.9		$	23,592	$	49,439
BEXAEW, BEX II, BEX III, and BEX IV		50%		2,691		825,809		422,506		155,759		3.4%	3.5			11,057		23,248
CPPIB ^(1)^		-		-		-		-		-		-	-			-		2,008
Other		47%		651		213,908		166,867		25,991		3.3%	3.5			3,131		6,726
Total Operating and Other Non-Consolidated Joint Ventures				8,652	$	2,763,522	$	1,651,610	$	368,259		3.5%	3.8		$	37,780	$	81,421
Pre-Development and Development Non-Consolidated Joint Ventures^(2)^		50%		1,070		533,317		272,367		167,774		2.1%	28.4	^(3)^^(4)^		1,778		3,643
Total Non-Consolidated Joint Ventures				9,722	$	3,296,839	$	1,923,977	$	536,033		3.3%	7.3		$	39,558	$	85,064
	Essex Portion of NOI and Expenses
---	---	---	---	---	---	---
NOI	$	20,544		$	44,229
Depreciation		(12,764	)		(25,308	)
Interest expense and other		(7,534	)		(15,612	)
Equity income from non-core co-investment		4,696			4,586
Gain on early retirement of debt from unconsolidated co-investment		38			38
Co-investment promote income		-			6,455
Net income from operating and other co-investments	$	4,980		$	14,388
			Weighted<br><br> <br>Average<br><br> <br>Preferred<br><br> <br>Return			Weighted<br><br> <br>Average<br><br> <br>Expected<br><br> <br>Term		Income from Preferred Equity<br><br> <br>Investments
---	---	---	---	---	---	---	---	---	---	---	---
Income from preferred equity investments								$	12,277	$	23,956
Income from early redemption of preferred equity investments									-		210
Preferred Equity Investments ^(5)^	$	472,725		10.1	%		2.2	$	12,277	$	24,166
Total Co-investments	$	1,008,758						$	17,257	$	38,554
^(1)^	In January 2020, the Company purchased CPPIB’s 45% interest in each of a land parcel and six communities totaling 2,020 apartment homes. The NOI<br> included in the six months ended June 30, 2020 represents the Company’s pro-rata share prior to the acquisition.
---	---
^(2)^	The Company has ownership interests in development co-investments, which are detailed on page S-11.
---	---
^(3)^	$132.0 million of the debt related to 500 Folsom, one of the Company’s development co-investments, is financed by tax exempt bonds with a maturity date<br> of January 2052.
---	---
^(4)^	Scripps Mesa Apartments has a $89.3 million of long-term tax-exempt bond debt that is subject to a total return swap that matures in 2025.
---	---
^(5)^	As of June 30, 2020, the Company has invested in 18 preferred equity investments.
---	---

See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information

S-13

E S S E X P R O P E R T Y T R U S T, I N C.

Summary of Apartment Community Acquisitions and Dispositions Activity

Year to date as of June 30, 2020

(Dollars in thousands)

Acquisitions<br><br> <br><br><br> <br>Property Name	Location	Apartment<br><br> <br>Homes		Essex<br><br> Ownership<br><br> Percentage	Entity	Date	Total<br><br> <br>Contract<br><br> Price		Price per<br><br> Apartment Home^(2)^		Average<br><br> Rent
CPPIB Portfolio ^(1)^	Various		2,020	100%	EPLP	Jan-20	$	463,400	$	497	$	2,732
	Q1 2020		2,020				$	463,400	$	497
Dispositions<br><br> <br><br><br> Property Name	Location	Apartment<br><br> <br>Homes		Essex<br><br> Ownership<br><br> Percentage	Entity	Date	Total<br><br> <br>Sales<br><br> <br>Price		Price per<br><br> Apartment Home^(2)^
---	---	---	---	---	---	---	---	---	---	---
One South Market and Museum Park	San Jose, CA		429	100%	EPLP	Jun-20	$	232,000	$	534
	Q2 2020		429				$	232,000	$	534
^(1)^	In January 2020, the Company purchased the joint venture partner’s 45% membership interest in a land parcel and six communities representing 2,020<br> apartments homes based on a total valuation of approximately $1.0 billion.
---	---
^(2)^	Price per apartment home excludes value allocated to retail space.
---	---

See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information

S-14

E S S E X P R O P E R T Y T R U S T, I N C.

Delinquencies, Operating Statistics, and Same-Property Portfolio Growth with Concessions on a GAAP basis

(Dollars in millions, except in footnotes and per share amounts)

Delinquencies for Second Quarter 2020	Same-Property			Non-Same<br><br> <br>Property and<br><br> <br>Co-investments			Total Operating<br><br> <br>Communities			Commercial				Total
Operating apartment community units		47,104			13,237			60,341			N/A				N/A
Cash delinquencies as % of scheduled rent		4.3	%		4.0	%		4.3	%		N/A				N/A
Reported delinquencies as % of scheduled rent ^(1)^		3.3	%		3.1	%		3.2	%		N/A				N/A
Reported delinquencies in 2Q 2020 ^(2)^	$	(10.9	)	$	(2.0	)	$	(12.9	)	$	(3.2	)	^(3)^	$	(16.1	)
Reported delinquencies in 2Q 2019 ^(2)^	$	(1.1	)	$	(0.1	)	$	(1.2	)	$	-			$	(1.2	)
Impact to 2Q 2020 Core FFO per share	$	(0.14	)	$	(0.03	)	$	(0.17	)	$	(0.05	)		$	(0.22	)
Impact to Core FFO per share growth		-4.3	%		-0.8	%		-5.2	%		-1.4	%			-6.6	%
^(1)^	Represents total residential portfolio delinquencies as a % of scheduled rent reflected in the financial statements for the three months ended June 30,<br> 2020.
---	---
^(2)^	Co-investment delinquencies reported at Company’s pro rata share.
---	---
^(3)^	Commercial delinquencies in 2Q 2020 includes a straight-line rent reserve of $1.4 million.
---	---
Operating Statistics							Same-Property Portfolio Growth with Concessions on a GAAP basis
---	---	---	---	---	---	---	---	---	---	---	---	---
Same-Property Portfolio (47,104 units)	July 2020			2Q 2020				2Q 2020			2Q 2019
Cash delinquencies as % of scheduled rent		2.7	%		4.3	%	Reported rental revenue (cash basis)	$	323.7		$	336.5
							Straight-line rent impact to rental revenue		2.9			-
New lease rates ^(1)^		-5.8	%		-1.9	%	GAAP rental revenue	$	326.6		$	336.5
Renewal rates ^(2)^		-1.9	%		0.4	%
							% change - cash rental revenue		-3.8	%
Financial occupancy		96.2	%		94.9	%	% change - GAAP rental revenue		-2.9	%
Physical occupancy		95.8	%		94.9	%
^(1)^	Represents % change on a gross basis and does not include leasing incentives, which were on average 4-8 weeks.
---	---
^(2)^	Represents % change in similar term lease tradeouts, excluding the impact of leasing incentives.
---	---

See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information

S-15

E S S E X P R O P E R T Y T R U S T, I N C.

Reconciliations of Non-GAAP Financial Measures and Other Terms

Adjusted EBITDAre Reconciliation

The National Association of Real Estate Investment Trusts (“NAREIT”) defines earnings before interest, taxes, depreciation and amortization for real estate (“EBITDAre”) (September 2017 White Paper) as net income (computed in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”)) before interest expense, income taxes, depreciation and amortization expense, and further adjusted for gains and losses from sales of depreciated operating properties, impairment write-downs of depreciated operating properties, impairment write-downs of investments in unconsolidated entities caused by a decrease in value of depreciated operating properties within the joint venture and adjustments to reflect the Company’s share of EBITDAre of investments in unconsolidated entities.

The Company believes that EBITDAre is useful to investors, creditors and rating agencies as a supplemental measure of the Company’s ability to incur and service debt because it is a recognized measure of performance by the real estate industry, and by excluding gains or losses related to sales or impairment of depreciated operating properties, EBITDAre can help compare the Company’s credit strength between periods or as compared to different companies.

Adjusted EBITDAre represents EBITDAre further adjusted for non-comparable items and is a component of the credit ratio, “Net Indebtedness Divided by Adjusted EBITDAre, normalized and annualized,” presented on page S-6, in the section titled “Selected Credit Ratios,” and it is not intended to be a measure of free cash flow for management’s discretionary use, as it does not consider certain cash requirements such as income tax payments, debt service requirements, capital expenditures and other fixed charges.

Adjusted EBITDAre is an important metric in evaluating the credit strength of the Company and its ability to service its debt obligations. The Company believes that Adjusted EBITDAre is useful to investors, creditors and rating agencies because it allows investors to compare the Company’s credit strength to prior reporting periods and to other companies without the effect of items that by their nature are not comparable from period to period and tend to obscure the Company’s actual credit quality.

EBITDAre and Adjusted EBITDAre are not recognized measurements under U.S. GAAP. Because not all companies use identical calculations, the Company’s presentation of EBITDAre and Adjusted EBITDAre may not be comparable to similarly titled measures of other companies.

The reconciliations of Net Income available to common stockholders to EBITDAre and Adjusted EBITDAre are presented in the table below (Dollars in thousands):

	Three Months Ended<br><br> June 30, 2020
Net income available to common stockholders	$	84,458
Adjustments:
Net income attributable to noncontrolling interest		5,618
Interest expense, net ^(1)^		51,659
Depreciation and amortization		133,609
Income tax provision		(290	)
Gain on sale of real estate and land		(16,597	)
Co-investment EBITDAre adjustments		20,117
EBITDAre		278,574
Gain on sale of marketable securities		(46	)
Unrealized gains on marketable securities		(7,623	)
Provision for credit losses		147
Equity income from non-core co-investment		(4,696	)
Deferred tax expense on unrealized gain on unconsolidated co-investment		1,636
General and administrative and other, net		2,312
Insurance reimbursements and legal settlements, net		(106	)
Expensed acquisition and investment related costs		15
Gain on early retirement of debt from unconsolidated co-investment		(38	)
Gain on early retirement of debt, net		5,027
Adjusted EBITDAre	$	275,202
^(1)^	Interest expense, net includes items such as gains on derivatives and the amortization of deferred charges.
---	---

See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information

S-16.1

E S S E X P R O P E R T Y T R U S T, I N C.

Reconciliations of Non-GAAP Financial Measures and Other Terms

Encumbered

Encumbered means any mortgage, deed of trust, lien, charge, pledge, security interest, security agreement or other encumbrance of any kind.

Funds From Operations (“FFO”) and Core FFO

FFO, as defined by NAREIT, is generally considered by industry analysts as an appropriate measure of performance of an equity REIT. Generally, FFO adjusts the net income of equity REITs for non-cash charges such as depreciation and amortization of rental properties, impairment charges, gains on sales of real estate and extraordinary items. Management considers FFO and FFO which excludes non-core items, which is referred to as “Core FFO,” to be useful supplemental operating performance measures of an equity REIT because, together with net income and cash flows, FFO and Core FFO provide investors with additional bases to evaluate the operating performance and ability of a REIT to incur and service debt and to fund acquisitions and other capital expenditures and to pay dividends. By excluding gains or losses related to sales of depreciated operating properties and excluding real estate depreciation (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO can help investors compare the operating performance of a real estate company between periods or as compared to different companies. By further adjusting for items that are not considered part of the Company’s core business operations, Core FFO allows investors to compare the core operating performance of the Company to its performance in prior reporting periods and to the operating performance of other real estate companies without the effect of items that by their nature are not comparable from period to period and tend to obscure the Company’s actual operating results.

FFO and Core FFO do not represent net income or cash flows from operations as defined by U.S. GAAP and are not intended to indicate whether cash flows will be sufficient to fund cash needs. These measures should not be considered as alternatives to net income as an indicator of the REIT’s operating performance or to cash flows as a measure of liquidity. FFO and Core FFO do not measure whether cash flow is sufficient to fund all cash needs including principal amortization, capital improvements and distributions to stockholders. FFO and Core FFO also do not represent cash flows generated from operating, investing or financing activities as defined under GAAP. Management has consistently applied the NAREIT definition of FFO to all periods presented. However, there is judgment involved and other REITs’ calculation of FFO may vary from the NAREIT definition for this measure, and thus their disclosures of FFO may not be comparable to the Company’s calculation.

The reconciliations of diluted FFO and Core FFO are detailed on page S-3 in the section titled “Consolidated Funds From Operations”.

Interest Expense, Net

Interest expense, net is presented on page S-1 in the section titled “Consolidated Operating Results”. Interest expense, net includes items such as gains on derivatives and the amortization of deferred charges and is presented in the table below (Dollars in thousands):

	Three Months Ended<br><br> June 30, 2020			Six Months Ended<br><br> June 30, 2020
Interest expense	$	54,447		$	109,594
Adjustments:
Total return swap income		(2,788	)		(4,772	)
Interest expense, net	$	51,659		$	104,822

Immediately Available Liquidity

The Company’s immediately available liquidity as of July 31, 2020, consisted of the following (Dollars in millions):

	July 31, 2020
Unsecured credit facility - committed	$	1,235
Balance outstanding		-
Undrawn portion of line of credit	$	1,235
Cash, cash equivalents & marketable securities ^(1)^		203
Total liquidity	$	1,438
^(1)^	Excludes an investment in a mortgage backed security.
---	---

See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information

S-16.2

E S S E X P R O P E R T Y T R U S T, I N C.

Reconciliations of Non-GAAP Financial Measures and Other Terms

Net Indebtedness Divided by Adjusted EBITDAre

This credit ratio is presented on page S-6 in the section titled “Selected Credit Ratios.” This credit ratio is calculated by dividing net indebtedness by Adjusted EBITDAre, as annualized based on the most recent quarter, and adjusted for estimated net operating income from properties acquired or disposed of during the quarter. This ratio is presented by the Company because it provides rating agencies and investors an additional means of comparing the Company’s ability to service debt obligations to that of other companies. Net indebtedness is total debt, net less unamortized premiums, discounts, debt issuance costs, unrestricted cash and cash equivalents, and marketable securities. The reconciliation of Adjusted EBITDAre is set forth in “Adjusted EBITDAre Reconciliation” on page S-16.1 The calculation of this credit ratio and a reconciliation of net indebtedness to total debt at pro rata share for co-investments, net is presented in the table below (Dollars in thousands):

Total consolidated debt, net	$	6,319,412
Total debt from co-investments at pro rata share		983,668
Adjustments:
Consolidated unamortized premiums, discounts, and debt issuance costs		31,849
Pro rata co-investments unamortized premiums, discounts, and debt issuance costs		4,245
Consolidated cash and cash equivalents-unrestricted		(246,204	)
Pro rata co-investment cash and cash equivalents-unrestricted		(18,733	)
Marketable securities ^(1)^		(121,993	)
Net Indebtedness	$	6,952,244
Adjusted EBITDAre, annualized ^(2)^	$	1,100,808
Other EBITDAre normalization adjustments, net, annualized ^(3)^		(8,943	)
Adjusted EBITDAre, normalized and annualized	$	1,091,865
Net Indebtedness Divided by Adjusted EBITDAre, normalized and annualized		6.4
^(1)^	Excludes investment in mortgage backed security
---	---
^(2)^	Based on the amount for the most recent quarter, multiplied by four.
---	---
^(3)^	Adjustments made for properties in lease-up, acquired, or disposed of during the most recent quarter<br> and other partial quarter activity, multiplied by four.
---	---

Net Operating Income (“NOI”) and Same-Property NOI Reconciliations

NOI and same-property NOI are considered by management to be important supplemental performance measures to earnings from operations included in the Company’s consolidated statements of income. The presentation of same-property NOI assists with the presentation of the Company’s operations prior to the allocation of depreciation and any corporate-level or financing-related costs. NOI reflects the operating performance of a community and allows for an easy comparison of the operating performance of individual communities or groups of communities.

In addition, because prospective buyers of real estate have different financing and overhead structures, with varying marginal impacts to overhead by acquiring real estate, NOI is considered by many in the real estate industry to be a useful measure for determining the value of a real estate asset or group of assets. The Company defines same-property NOI as same-property revenues less same-property operating expenses, including property taxes. Please see the reconciliation of earnings from operations to NOI and same-property NOI, which in the table below is the NOI for stabilized properties consolidated by the Company for the periods presented (Dollars in thousands):

	Three Months Ended<br><br> <br>June 30,<br><br> 2020			Three Months Ended<br><br> June 30,<br><br> 2019			Six Months Ended<br><br> June 30,<br><br> 2020			Six Months Ended<br><br> June 30,<br><br> 2019
Earnings from operations	$	119,736		$	124,560		$	250,573		$	240,255
Adjustments:
Corporate-level property management expenses		8,646			8,469			17,405			16,898
Depreciation and amortization		133,609			119,465			265,168			240,033
Management and other fees from affiliates		(2,348	)		(2,260	)		(4,965	)		(4,595	)
General and administrative		14,952			13,927			28,934			27,386
Expensed acquisition and investment related costs		15			24			102			56
Gain on sale of real estate and land		(16,597	)		-			(16,597	)		-
NOI		258,013			264,185			540,620			520,033
Less: Non-same property NOI		(30,333	)		(18,217	)		(62,445	)		(33,088	)
Same-Property NOI	$	227,680		$	245,968		$	478,175		$	486,945

See Company’s Form 10-K and Form 10-Qs filed with the SEC for additional information

S-16.3

E S S E X P R O P E R T Y T R U S T, I N C.

Reconciliations of Non-GAAP Financial Measures and Other Terms

                Public Bond Covenants

Public Bond Covenants refer to certain covenants set forth in instruments governing the Company’s unsecured indebtedness. These instruments require the Company to meet specified financial covenants, including covenants relating to net worth, fixed charge coverage, debt service coverage, the amounts of total indebtedness and secured indebtedness, leverage and certain investment limitations. These covenants may restrict the Company’s ability to expand or fully pursue its business strategies. The Company’s ability to comply with these covenants may be affected by changes in the Company’s operating and financial performance, changes in general business and economic conditions, adverse regulatory developments or other events adversely impacting it. The breach of any of these covenants could result in a default under the Company’s indebtedness, which could cause those and other obligations to become due and payable. If any of the Company’s indebtedness is accelerated, the Company may not be able to repay it. For risks related to failure to comply with these covenants, see “Item 1A: Risk Factors - Risks Related to Our Indebtedness and Financings” in the Company’s annual report on Form 10-K and other reports filed by the Company with the Securities and Exchange Commission (“SEC”).

The ratios set forth on page S-6 in the section titled “Public Bond Covenants” are provided only to show the Company’s compliance with certain specified covenants that are contained in indentures related to the Company’s issuance of Senior Notes, which indentures are filed by the Company with the SEC. See, for example, the Indenture dated February 11, 2020, filed by the Company as Exhibit 4.1 to the Company’s Form 8-K, filed on February 11, 2020. These ratios should not be used for any other purpose, including without limitation to evaluate the Company’s financial condition or results of operations, nor do they indicate the Company’s covenant compliance as of any other date or for any other period. The capitalized terms in the disclosure are defined in the indentures filed by the Company with the SEC and may differ materially from similar terms used by other companies that present information about their covenant compliance.

Secured Debt

Secured Debt means debt of the Company or any of its subsidiaries which is secured by an encumbrance on any property or assets of the Company or any of its subsidiaries. The Company’s total amount of Secured Debt is set forth on page S-5.

Unencumbered NOI to Adjusted Total NOI

This ratio is presented on page S-6 in the section titled “Selected Credit Ratios”. Unencumbered NOI means the sum of NOI for those real estate assets which are not subject to an encumbrance securing debt. The ratio of Unencumbered NOI to Adjusted Total NOI for the three months ended June 30, 2020, annualized, is calculated by dividing Unencumbered NOI, annualized for the three months ended June 30, 2020 and as further adjusted for pro forma NOI for properties acquired or sold during the recent quarter, by Adjusted Total NOI as annualized. The calculation and reconciliation of NOI is set forth in “Net Operating Income (“NOI”) and Same-Property NOI Reconciliations” above. This ratio is presented by the Company because it provides rating agencies and investors an additional means of comparing the Company’s ability to service debt obligations to that of other companies. The calculation of this ratio is presented in the table below (Dollars in thousands):

		Annualized<br><br> <br>Q2'20 ^(1)^
NOI	$	1,032,052
Adjustments:
NOI from real estate assets sold		(9,499	)
Other, net^(2)^		(14,443	)
Adjusted Total NOI		1,008,110
Less: Encumbered NOI		(65,595	)
Unencumbered NOI	$	942,515
Encumbered NOI	$	65,595
Unencumbered NOI		942,515
Adjusted Total NOI	$	1,008,110
Unencumbered NOI to Adjusted Total NOI		94	%
^(1)^	This table is based on the amounts for the most recent quarter, multiplied by four.
---	---
^(2)^	Includes intercompany eliminations pertaining to self-insurance and other expenses.
---	---

See Company's Form 10-K and Form 10-Qs filed with the SEC for additional information

S-16.4