Essex Property Trust(ESS) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Presents the unaudited condensed consolidated financial statements and related disclosures for the reporting period Item 1. Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements for Essex Property Trust, Inc. and Essex Portfolio, L.P. for the three and six months ended June 30, 2025 and 2024, along with detailed notes. Key financial highlights include increased net income and significant gains on real estate sales for both entities, alongside changes in assets, liabilities, equity, and cash flows Condensed Consolidated Financial Statements of Essex Property Trust, Inc. (Unaudited) Provides the unaudited financial statements for Essex Property Trust, Inc., detailing its financial position, performance, and cash flows Condensed Consolidated Balance Sheets Presents the assets, liabilities, and equity of Essex Property Trust, Inc. at specific reporting dates Essex Property Trust, Inc. - Condensed Consolidated Balance Sheets (in thousands) | Metric | Dec 31, 2024 (in thousands) | Jun 30, 2025 (in thousands) | Change (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Total Assets | $12,927,359 | $13,181,490 | +$254,131 | | Total Liabilities | $7,176,120 | $7,342,654 | +$166,534 | | Total Equity | $5,720,390 | $5,805,914 | +$85,524 | Condensed Consolidated Statements of Income and Comprehensive Income Details the revenues, expenses, net income, and comprehensive income for Essex Property Trust, Inc. over the reporting periods Essex Property Trust, Inc. - Condensed Consolidated Statements of Income (in thousands, except per share) | Metric | 3 Months Ended Jun 30, 2024 (in thousands, except per share) | 3 Months Ended Jun 30, 2025 (in thousands, except per share) | Change (in thousands, except per share) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :----- | | Rental and other property revenues | $439,782 | $467,610 | +$27,828 | | Gain on sale of real estate and land | $0 | $126,174 | +$126,174 | | Net income available to common stockholders | $92,914 | $221,362 | +$128,448 | | Basic EPS | $1.45 | $3.44 | +$1.99 | | Diluted EPS | $1.45 | $3.44 | +$1.99 | Essex Property Trust, Inc. - Condensed Consolidated Statements of Income (in thousands, except per share) | Metric | 6 Months Ended Jun 30, 2024 (in thousands, except per share) | 6 Months Ended Jun 30, 2025 (in thousands, except per share) | Change (in thousands, except per share) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :----- | | Rental and other property revenues | $863,997 | $929,699 | +$65,702 | | Gain on sale of real estate and land | $0 | $237,204 | +$237,204 | | Net income available to common stockholders | $365,645 | $424,472 | +$58,827 | | Basic EPS | $5.69 | $6.60 | +$0.91 | | Diluted EPS | $5.69 | $6.59 | +$0.90 | Condensed Consolidated Statements of Equity Outlines changes in the equity section of Essex Property Trust, Inc.'s balance sheet, including stock and noncontrolling interests Essex Property Trust, Inc. - Condensed Consolidated Statements of Equity (in thousands) | Metric | Dec 31, 2024 (in thousands) | Jun 30, 2025 (in thousands) | Change (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Total Stockholders' Equity | $5,537,046 | $5,635,249 | +$98,203 | | Noncontrolling Interest | $183,344 | $170,665 | -$12,679 | | Total Equity | $5,720,390 | $5,805,914 | +$85,524 | - Common stock dividends paid for the six months ended June 30, 2025, totaled $330.96 million ($5.14 per share), an increase from $314.67 million ($4.90 per share) in the prior year[31][32] Condensed Consolidated Statements of Cash Flows Summarizes the cash inflows and outflows from operating, investing, and financing activities for Essex Property Trust, Inc Essex Property Trust, Inc. - Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | 6 Months Ended Jun 30, 2024 (in thousands) | 6 Months Ended Jun 30, 2025 (in thousands) | Change (in thousands) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :----- | | Net cash provided by operating activities | $533,782 | $497,632 | -$36,150 | | Net cash used in investing activities | $(622,322) | $(320,090) | +$302,232 | | Net cash provided by financing activities | $(247,643) | $(185,504) | +$62,139 | | Unrestricted and restricted cash and cash equivalents at end of period | $64,151 | $67,884 | +$3,733 | - Proceeds from dispositions of real estate were $364.16 million for the six months ended June 30, 2025, compared to none in the prior year[35] Condensed Consolidated Financial Statements of Essex Portfolio, L.P. (Unaudited) Provides the unaudited financial statements for Essex Portfolio, L.P., detailing its financial position, performance, and cash flows Condensed Consolidated Balance Sheets Presents the assets, liabilities, and capital of Essex Portfolio, L.P. at specific reporting dates Essex Portfolio, L.P. - Condensed Consolidated Balance Sheets (in thousands) | Metric | Dec 31, 2024 (in thousands) | Jun 30, 2025 (in thousands) | Change (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Total Assets | $12,927,359 | $13,181,490 | +$254,131 | | Total Liabilities | $7,176,120 | $7,342,654 | +$166,534 | | Total Capital | $5,720,390 | $5,805,914 | +$85,524 | Condensed Consolidated Statements of Income and Comprehensive Income Details the revenues, expenses, net income, and comprehensive income for Essex Portfolio, L.P. over the reporting periods Essex Portfolio, L.P. - Condensed Consolidated Statements of Income (in thousands, except per unit) | Metric | 3 Months Ended Jun 30, 2024 (in thousands, except per unit) | 3 Months Ended Jun 30, 2025 (in thousands, except per unit) | Change (in thousands, except per unit) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :----- | | Rental and other property revenues | $439,782 | $467,610 | +$27,828 | | Gain on sale of real estate and land | $0 | $126,174 | +$126,174 | | Net income available to common unitholders | $96,184 | $229,143 | +$132,959 | | Basic EPS | $1.45 | $3.44 | +$1.99 | | Diluted EPS | $1.45 | $3.44 | +$1.99 | Essex Portfolio, L.P. - Condensed Consolidated Statements of Income (in thousands, except per unit) | Metric | 6 Months Ended Jun 30, 2024 (in thousands, except per unit) | 6 Months Ended Jun 30, 2025 (in thousands, except per unit) | Change (in thousands, except per unit) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :----- | | Rental and other property revenues | $863,997 | $929,699 | +$65,702 | | Gain on sale of real estate and land | $0 | $237,204 | +$237,204 | | Net income available to common unitholders | $378,514 | $439,532 | +$61,018 | | Basic EPS | $5.69 | $6.60 | +$0.91 | | Diluted EPS | $5.69 | $6.59 | +$0.90 | Condensed Consolidated Statements of Capital Outlines changes in the capital section of Essex Portfolio, L.P.'s balance sheet, including partners' capital and noncontrolling interests Essex Portfolio, L.P. - Condensed Consolidated Statements of Capital (in thousands) | Metric | Dec 31, 2024 (in thousands) | Jun 30, 2025 (in thousands) | Change (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Total Partners' Capital | $5,615,238 | $5,704,378 | +$89,140 | | Noncontrolling Interest | $105,152 | $101,536 | -$3,616 | | Total Capital | $5,720,390 | $5,805,914 | +$85,524 | - Common unit distributions declared for the six months ended June 30, 2025, totaled $342.62 million ($5.14 per unit), an increase from $325.74 million ($4.90 per unit) in the prior year[46][47] Condensed Consolidated Statements of Cash Flows Summarizes the cash inflows and outflows from operating, investing, and financing activities for Essex Portfolio, L.P Essex Portfolio, L.P. - Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | 6 Months Ended Jun 30, 2024 (in thousands) | 6 Months Ended Jun 30, 2025 (in thousands) | Change (in thousands) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :----- | | Net cash provided by operating activities | $533,782 | $497,632 | -$36,150 | | Net cash used in investing activities | $(622,322) | $(320,090) | +$302,232 | | Net cash provided by financing activities | $(247,643) | $(185,504) | +$62,139 | | Unrestricted and restricted cash and cash equivalents at end of period | $64,151 | $67,884 | +$3,733 | - Proceeds from dispositions of real estate were $364.16 million for the six months ended June 30, 2025, compared to none in the prior year[50] Notes to Condensed Consolidated Financial Statements Provides supplementary information and explanations for the condensed consolidated financial statements (1) Organization and Basis of Presentation Details the company's structure, ownership, and the accounting principles used in preparing the financial statements - Essex Property Trust, Inc. is the sole general partner of Essex Portfolio, L.P., holding approximately 96.6% ownership interest as of June 30, 2025[56] - As of June 30, 2025, the Company owned or had ownership interests in 259 operating apartment communities, comprising 62,842 apartment homes, primarily located in Southern California, Northern California, and the Seattle metropolitan area[57] - The Company adopted ASU No. 2023-05 "Business Combinations—Joint Venture Formations" as of January 1, 2025, which did not have a material impact on its financial position[59] (2) Significant Transactions During the Six Months Ended June 30, 2025 and Subsequent Events Describes major business activities, including acquisitions, dispositions, and other material events occurring during and after the reporting period Acquisition Activity (Six Months Ended June 30, 2025) (in millions) | Property Name | Location | Apartment Homes | Contract Price at Pro Rata Share (in millions) | | :-------------------- | :------- | :-------------- | :----------------------------- | | The Plaza | CA | 307 | $161.4 | | One Hundred Grand | CA | 166 | $105.3 | | ROEN Menlo Park | CA | 146 | $78.8 | | Revere Campbell | CA | 168 | $118.0 | | The Parc at Pruneyard | CA | 252 | $122.5 | | Total Acquisitions | | 1,039 | $586.0 | Disposition Activity (Six Months Ended June 30, 2025) (in millions) | Property Name | Location | Apartment Homes | Sale Price at Pro Rata Share (in millions) | | :-------------------- | :------- | :-------------- | :----------------------------- | | Highridge | CA | 255 | $127.0 | | Essex Skyline | CA | 350 | $239.6 | | Total Dispositions | | 605 | $366.6 | - The Company recognized a $126.2 million gain on sale from the disposition of Essex Skyline and a $111.0 million gain from Highridge[87] - Subsequent to quarter end, the Company formed Wesco VII, a new joint venture with a $50.0 million commitment from each partner to fund structured finance investments, and sold a held-for-sale property for $97.5 million[96][97] (3) Revenues Provides a detailed breakdown of the company's revenue sources and their geographic and property category distribution Total Revenues by Source (in thousands) | Revenue Source | 3 Months Ended Jun 30, 2024 (in thousands) | 3 Months Ended Jun 30, 2025 (in thousands) | 6 Months Ended Jun 30, 2024 (in thousands) | 6 Months Ended Jun 30, 2025 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Rental income | $432,141 | $460,686 | $849,377 | $916,546 | | Other property | $7,641 | $6,924 | $14,620 | $13,153 | | Management and other fees from affiliates | $2,573 | $2,223 | $5,286 | $4,717 | | Total Revenues | $442,355 | $469,833 | $869,283 | $934,416 | Rental and Other Property Revenues by Geographic Segment (in thousands) | Geographic Segment | 3 Months Ended Jun 30, 2024 (in thousands) | 3 Months Ended Jun 30, 2025 (in thousands) | 6 Months Ended Jun 30, 2024 (in thousands) | 6 Months Ended Jun 30, 2025 (in thousands) | | :----------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Southern California | $179,488 | $189,744 | $348,378 | $378,366 | | Northern California | $164,083 | $191,026 | $324,523 | $373,209 | | Seattle Metro | $73,782 | $78,297 | $145,695 | $155,511 | | Other real estate assets | $22,429 | $8,543 | $45,401 | $22,613 | | Total | $439,782 | $467,610 | $863,997 | $929,699 | Rental and Other Property Revenues by Property Category (in thousands) | Property Category | 3 Months Ended Jun 30, 2024 (in thousands) | 3 Months Ended Jun 30, 2025 (in thousands) | 6 Months Ended Jun 30, 2024 (in thousands) | 6 Months Ended Jun 30, 2025 (in thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Same-property | $398,293 | $410,948 | $791,661 | $817,934 | | Acquisitions | $12,824 | $41,784 | $14,422 | $76,554 | | Non-residential/other, net | $29,176 | $14,711 | $58,488 | $35,432 | | Straight-line rent concessions | $(511) | $167 | $(574) | $(221) | | Total | $439,782 | $467,610 | $863,997 | $929,699 | (4) Co-investments Details the company's investments in unconsolidated entities and their summarized financial performance - As of June 30, 2025, the Company had investments in five unconsolidated technology co-investments with a balance of $67.1 million and an aggregate commitment of $86.0 million[102] Combined Summarized Financial Information of Co-investments (in thousands) | Metric | Dec 31, 2024 (in thousands) | Jun 30, 2025 (in thousands) | Change (in thousands) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Total Assets | $4,372,246 | $4,099,500 | -$272,746 | | Total Liabilities | $3,236,414 | $3,070,808 | -$165,606 | | Equity | $1,135,832 | $1,028,692 | -$107,140 | Combined Statements of Income for Co-investments (in thousands) | Metric | 6 Months Ended Jun 30, 2024 (in thousands) | 6 Months Ended Jun 30, 2025 (in thousands) | Change (in thousands) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :----- | | Property revenues | $204,928 | $170,875 | -$34,053 | | Net operating income | $126,011 | $107,019 | -$18,992 | | Net loss | $(55,066) | $(29,794) | +$25,272 | | Company's share of net income | $22,018 | $22,186 | +$168 | (5) Notes and Other Receivables Presents a breakdown of various notes and other receivables, including changes and specific items like the preferred equity investment sponsor receivable Notes and Other Receivables (in thousands) | Metric | Dec 31, 2024 (in thousands) | Jun 30, 2025 (in thousands) | Change (in thousands) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Note receivable, secured, 9.00%, due Oct 2026 | $60,538 | $63,685 | +$3,147 | | Note receivable, secured, 11.25%, due Oct 2027 | $39,187 | $41,478 | +$2,291 | | Receivable from preferred equity investment sponsor | $72,002 | $0 | -$72,002 | | Other receivables from affiliates | $5,646 | $5,882 | +$236 | | Straight-line rent receivables | $9,235 | $8,886 | -$349 | | Other receivables | $17,460 | $18,705 | +$1,245 | | Allowance for credit losses | $(529) | $(540) | -$11 | | Total notes and other receivables | $206,706 | $138,096 | -$68,610 | - The $72.0 million receivable from a preferred equity investment sponsor was eliminated due to the consolidation of Artizan in January 2025 after the sponsor defaulted[108] (6) Related Party Transactions Discloses transactions and balances with affiliated entities, including management fees and outstanding loans Fees from Affiliates (in millions) | Period | 2024 (in millions) | 2025 (in millions) | Change (in millions) | | :-------------------------- | :--- | :--- | :----- | | Three Months Ended June 30 | $2.8 | $2.3 | -$0.5 | | Six Months Ended June 30 | $5.6 | $4.8 | -$0.8 | - As of June 30, 2025, $5.9 million in short-term loans remained outstanding from joint venture affiliates, classified within notes and other receivables[116] (7) Debt Provides a detailed breakdown of the company's debt structure, including unsecured debt, mortgage notes, and lines of credit, along with interest rates Debt (in thousands) | Metric | Dec 31, 2024 (in thousands) | Jun 30, 2025 (in thousands) | Change (in thousands) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Unsecured debt, net | $5,473,788 | $5,519,922 | +$46,134 | | Mortgage notes payable, net | $989,884 | $874,532 | -$115,352 | | Lines of credit and commercial paper | $137,945 | $365,000 | +$227,055 | | Total debt, net | $6,601,617 | $6,759,454 | +$157,837 | Weighted Average Interest Rates | Debt Type | Dec 31, 2024 | Jun 30, 2025 | | :-------------------------------------- | :----------- | :----------- | | Fixed rate unsecured bonds public offering | 3.4% | 3.6% | | Variable rate term loan | 4.2% | 4.2% | | Lines of credit | 5.7% | 5.3% | | Commercial paper | N/A | 4.6% | | Mortgage notes payable | 4.2% | 4.2% | - In May 2025, the Operating Partnership obtained a new $300.0 million unsecured term loan and established a $750.0 million commercial paper program with a maximum aggregate amount of $750.0 million[92][94] - In February 2025, the Operating Partnership issued $400.0 million of senior unsecured notes due April 1, 2035, with a 5.375% coupon rate, using proceeds to repay $500.0 million of maturing notes[95] (8) Segment Information Presents financial data disaggregated by the company's reportable geographic segments, including revenues, net operating income, and assets - The Company's Chief Operating Decision Maker (CODM) evaluates operating performance geographically, defining reportable segments as Southern California, Northern California, and Seattle Metro[124] Net Operating Income (NOI) by Segment (in thousands) | Segment | 3 Months Ended Jun 30, 2024 (in thousands) | 3 Months Ended Jun 30, 2025 (in thousands) | 6 Months Ended Jun 30, 2024 (in thousands) | 6 Months Ended Jun 30, 2025 (in thousands) | | :----------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Southern California | $128,077 | $134,780 | $247,235 | $268,772 | | Northern California | $116,381 | $132,198 | $226,554 | $257,617 | | Seattle Metro | $51,887 | $57,841 | $102,673 | $111,153 | | Other real estate assets | $16,903 | $7,362 | $34,503 | $18,107 | | Total NOI | $313,248 | $332,181 | $610,965 | $655,649 | Total Assets by Segment (in thousands) | Segment | Dec 31, 2024 (in thousands) | Jun 30, 2025 (in thousands) | Change (in thousands) | | :----------------- | :-------------------------- | :-------------------------- | :-------------------- | | Southern California | $4,162,462 | $4,094,046 | -$68,416 | | Northern California | $5,452,235 | $6,015,104 | +$562,869 | | Seattle Metro | $1,460,865 | $1,437,049 | -$23,816 | | Other real estate assets | $363,338 | $163,405 | -$199,933 | | Net reportable operating segments - real estate assets | $11,438,900 | $11,709,604 | +$270,704 | (9) Net Income Per Common Share and Net Income Per Common Unit Details the calculation of basic and diluted earnings per share for common stockholders and unitholders Essex Property Trust, Inc. - Net Income Per Common Share | Metric | 3 Months Ended Jun 30, 2024 | 3 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | | :-------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic EPS | $1.45 | $3.44 | $5.69 | $6.60 | | Diluted EPS | $1.45 | $3.44 | $5.69 | $6.59 | Essex Portfolio, L.P. - Net Income Per Common Unit | Metric | 3 Months Ended Jun 30, 2024 | 3 Months Ended Jun 30, 2025 | 6 Months Ended Jun 30, 2024 | 6 Months Ended Jun 30, 2025 | | :-------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic EPS | $1.45 | $3.44 | $5.69 | $6.60 | | Diluted EPS | $1.45 | $3.44 | $5.69 | $6.59 | - Weighted average convertible OP Units and certain stock options were excluded from diluted EPS calculations as they were anti-dilutive[134][135][138] (10) Derivative Instruments and Hedging Activities Describes the company's use of derivative financial instruments to manage interest rate risk and their accounting treatment - As of June 30, 2025, the Company had five interest rate swap contracts and one forward starting interest rate swap contract with an aggregate notional amount of $547.5 million, primarily fixing interest rates on unsecured term loans and variable rate mortgage notes[139] - The aggregate carrying value of interest rate swap contracts was an asset of $3.1 million as of June 30, 2025[140] - Total return swap contracts with a notional amount of $220.4 million convert fixed mortgage notes to floating rates but do not qualify for hedge accounting[203] (11) Commitments and Contingencies Discloses potential future obligations and legal matters that could impact the company's financial position or results - The Company is a defendant in purported class actions alleging collusion to artificially increase rents using RealPage, Inc. software[142] - Management believes that the ultimate disposition of current legal and regulatory proceedings will not result in a material adverse effect on the Company's financial condition, results of operations, or cash flows[142] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial performance, condition, and operational results. It details revenue and expense trends, liquidity, capital resources, and market considerations, highlighting significant increases in property revenues and net income, driven by acquisitions and gains on asset sales, while also discussing debt management and future development plans Overview and Market Considerations Provides an executive summary of the company's business, market presence, and the macroeconomic factors influencing its operations - Essex is a self-administered and self-managed REIT that acquires, develops, redevelops, and manages apartment communities on the West Coast of the United States[144] - As of June 30, 2025, the Company owned or had ownership interests in 259 operating apartment communities, comprising 62,842 apartment homes[146] - The Company's apartment communities are predominantly located in Southern California, Northern California, and the Seattle Metro area[147] - Macroeconomic conditions, including geopolitical tensions, have not negatively impacted the Company's ability to access traditional funding sources or meet credit covenants[149] Comparison of the Three Months Ended June 30, 2025 to the Three Months Ended June 30, 2024 Analyzes the company's financial performance and operational results for the three-month period compared to the prior year Same-Property Revenues (3 Months Ended June 30) (in thousands) | Metric | 2024 (in thousands) | 2025 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :----- | :------- | | Southern California | $164,177 | $169,282 | +$5,105 | 3.1% | | Northern California | $161,598 | $167,129 | +$5,531 | 3.4% | | Seattle Metro | $72,518 | $74,537 | +$2,019 | 2.8% | | Total Same-Property Revenues | $398,293 | $410,948 | +$12,655 | 3.2% | - Non-Same Property Revenues increased by $15.2 million (36.6%) to $56.7 million, primarily due to acquisitions in 2024 and 2025, partially offset by dispositions[154] - Property operating expenses (excluding real estate taxes) increased by 9.1% to $86.4 million, driven by acquisitions and increases in utilities, maintenance, and personnel costs[155] - Interest expense increased by 10.5% to $65.3 million, mainly due to new debt issuances and increased borrowing on credit facilities, partially offset by debt payoffs[159] Comparison of the Six Months Ended June 30, 2025 to the Six Months Ended June 30, 2024 Analyzes the company's financial performance and operational results for the six-month period compared to the prior year Same-Property Revenues (6 Months Ended June 30) (in thousands) | Metric | 2024 (in thousands) | 2025 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :----- | :------- | | Southern California | $326,405 | $337,705 | +$11,300 | 3.5% | | Northern California | $320,954 | $332,282 | +$11,328 | 3.5% | | Seattle Metro | $144,302 | $147,947 | +$3,645 | 2.5% | | Total Same-Property Revenues | $791,661 | $817,934 | +$26,273 | 3.3% | - Non-Same Property Revenues increased by $39.4 million (54.5%) to $111.8 million, primarily due to acquisitions in 2024 and 2025[163] - Interest and other income decreased by $55.7 million (83.4%) to $11.1 million, primarily due to a $42.6 million decrease in gains from legal settlements compared to the prior year[169] - Gain on sale of real estate and land of $237.2 million was attributable to the dispositions of Highridge and Essex Skyline in 2025[167] Liquidity and Capital Resources Discusses the company's ability to generate and obtain cash to meet its financial obligations and fund its operations and growth - As of June 30, 2025, the Company had $58.7 million of unrestricted cash and cash equivalents and $82.2 million in marketable securities[173] - The Company's credit ratings are Baa1/Stable (Moody's) and BBB+/Stable (Standard and Poor's)[174] - In July 2025, the Company amended its revolving credit facility, increasing borrowing capacity to $1.5 billion and extending maturity to January 2030[175] - The Company has a $750.0 million commercial paper program and a $900.0 million ATM program, with $302.7 million remaining under its $500.0 million stock repurchase plan[176][179][182] Development and Predevelopment Pipeline Outlines the company's ongoing and planned real estate development projects, including estimated costs and timelines - The development pipeline consists of one consolidated project (543 apartment homes) and various predevelopment projects[185] Development Pipeline Costs (in millions) | Metric | Amount (in millions) | | :-------------------------- | :----- | | Total Incurred Costs (as of Jun 30, 2025) | $105.6 | | Estimated Remaining Project Costs | $250.0 | | Total Estimated Project Costs | $356.0 | Derivative Activity Explains the company's use of derivative financial instruments to manage specific financial risks, primarily interest rate fluctuations - The Company uses interest rate swaps, interest rate caps, and total return swap contracts to manage interest rate risks and stabilize interest expense[187] - As of June 30, 2025, the Company had $547.5 million in notional amount of interest rate swaps and forward starting interest rate swaps designated as cash flow hedges[203] - The Company also has $220.4 million in notional amount of total return swap contracts that convert fixed mortgage notes to floating rates, but these do not qualify for hedge accounting[203] Alternative Capital Sources Describes the various non-traditional or supplementary methods the company uses to raise capital for its investments and operations - Co-investments serve as an alternative capital source for acquisitions of both operating and development communities[188] - As of June 30, 2025, the Company had an interest in 7,694 apartment homes in operating communities with joint ventures and technology co-investments, with a total book value of $360.9 million[188] Off-Balance Sheet Arrangements Discloses contractual arrangements that have a material effect on the company's financial condition but are not recognized on the balance sheet - The Company has unconsolidated interests in certain joint ventures[189] - The Company believes these unconsolidated investments do not have a materially different impact on its liquidity, cash flows, capital resources, credit, or market risk[189] Critical Accounting Estimates Identifies the accounting estimates that require significant judgment and could have a material impact on the company's financial statements - Critical accounting estimates relate principally to accounting for the acquisition of investments in real estate and evaluating the recoverability of rental property carrying values[190] - The Company's critical accounting policies and estimates have not changed materially from the information reported in its annual report on Form 10-K for the year ended December 31, 2024[191] Forward-Looking Statements Provides a cautionary statement regarding the inherent uncertainties and risks associated with future-oriented information presented in the report - Forward-looking statements involve known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from expectations[193] - Key risk factors include occupancy rates, rental demand, interest rates, inflation, geopolitical tensions, credit rating maintenance, and successful management of co-investment partnerships[193] Funds from Operations Attributable to Common Stockholders and Unitholders (FFO) Presents a non-GAAP measure of operating performance for REITs, adjusting net income for certain non-cash items - FFO and Core FFO are supplemental operating performance measures, not alternatives to GAAP net income or cash from operating activities[194][195] Funds from Operations (FFO) (in thousands, except per share) | Metric | 3 Months Ended Jun 30, 2024 (in thousands, except per share) | 3 Months Ended Jun 30, 2025 (in thousands, except per share) | 6 Months Ended Jun 30, 2024 (in thousands, except per share) | 6 Months Ended Jun 30, 2025 (in thousands, except per share) | | :-------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income available to common stockholders | $92,914 | $221,362 | $365,645 | $424,472 | | FFO attributable to common stockholders and unitholders | $258,787 | $268,838 | $564,331 | $533,486 | | FFO per share-diluted | $3.89 | $4.03 | $8.49 | $8.00 | | Core FFO attributable to common stockholders and unitholders | $261,965 | $268,554 | $516,648 | $533,088 | | Core FFO per share-diluted | $3.94 | $4.03 | $7.77 | $8.00 | Net Operating Income (NOI) Presents a key operational performance metric for real estate, reflecting property-level profitability before depreciation and financing costs - NOI and Same-Property NOI are important supplemental performance measures, reflecting the operating performance of communities before depreciation and corporate/financing costs[201] Net Operating Income (NOI) (in thousands) | Metric | 3 Months Ended Jun 30, 2024 (in thousands) | 3 Months Ended Jun 30, 2025 (in thousands) | 6 Months Ended Jun 30, 2024 (in thousands) | 6 Months Ended Jun 30, 2025 (in thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Earnings from operations | $137,450 | $279,700 | $269,809 | $536,781 | | NOI | $313,248 | $332,181 | $610,965 | $655,649 | | Same-Property NOI | $281,581 | $290,856 | $556,107 | $574,519 | Item 3. Quantitative and Qualitative Disclosures About Market Risks This section details the Company's exposure to market risks, primarily interest rate fluctuations, and its strategies to mitigate these risks. It highlights the use of derivative instruments like interest rate swaps and forward starting interest rate swaps to manage variable rate debt and stabilize interest expense Interest Rate Hedging Activities Details the company's strategies and use of financial instruments to mitigate exposure to fluctuations in interest rates - The Company uses interest rate swaps and forward starting interest rate swaps as cash flow hedges to manage interest rate risk[203] Cash Flow Hedge Derivative Instruments (as of June 30, 2025, in thousands) | Instrument | Notional Amount (in thousands) | Maturity Date | Carrying and Estimated Fair Value (in thousands) | | :-------------------------------- | :-------------- | :------------ | :-------------------------------- | | Interest rate swaps | $497,500 | 2026-2030 | $3,100 | | Forward starting interest rate swap | $50,000 | 2030 | $0 | | Total cash flow hedges | $547,500 | 2026-2030 | $3,100 | - A sensitivity analysis shows that a +50 basis point change in 10-year Treasury bill interest rates would result in an estimated fair value change of +$9.18 million, while a -50 basis point change would result in -$3.17 million[203] Interest Rate Sensitive Liabilities Identifies and quantifies the company's liabilities that are subject to changes in interest rates, and the associated risk management objectives - The Company's interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs[204] Interest Rate Sensitive Liabilities (as of June 30, 2025, in thousands) | Debt Type | Total Principal Amount (in thousands) | Average Interest Rate | Fair Value (in thousands) | | :---------------- | :--------------------- | :-------------------- | :--------- | | Fixed rate debt | $5,660,880 | 3.6% | $5,387,534 | | Variable rate debt | $1,131,301 | 4.2% | $1,124,063 | Item 4. Controls and Procedures This section confirms the effectiveness of disclosure controls and procedures for both Essex Property Trust, Inc. and Essex Portfolio, L.P. as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter. It also acknowledges the inherent limitations of any control system Essex Property Trust, Inc. Controls and Procedures Confirms the effectiveness of disclosure controls and internal control over financial reporting for Essex Property Trust, Inc - Essex Property Trust, Inc.'s disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[206] - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[207] Essex Portfolio, L.P. Controls and Procedures Confirms the effectiveness of disclosure controls and internal control over financial reporting for Essex Portfolio, L.P - Essex Portfolio, L.P.'s disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[209] - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[210] Limitations on Effectiveness of Controls Acknowledges the inherent limitations of any internal control system, emphasizing that it provides reasonable, not absolute, assurance - Management recognizes that controls and procedures can only provide reasonable assurance due to inherent limitations and resource constraints[208][211] PART II. OTHER INFORMATION Contains additional information not covered in the financial statements, including legal proceedings, risk factors, and equity sales Item 1. Legal Proceedings The Company is involved in various lawsuits, including purported class actions related to revenue management software. However, management does not believe any current legal proceedings, individually or in aggregate, would have a material adverse effect on the Company's financial condition, results of operations, or cash flows - The Company is a party to various lawsuits, including purported class actions against RealPage, Inc. and multifamily housing lessors[212] - Management does not believe any current legal proceedings would have a material adverse effect on the Company's financial condition, results of operations, or cash flows[212] Item 1A. Risk Factors There have been no material changes to the risk factors disclosed in the Company's annual report on Form 10-K for the year ended December 31, 2024. Investors should carefully consider these factors, as well as additional unknown or immaterial risks, which could materially affect the Company's financial condition, results of operations, or cash flows - No material changes to the risk factors disclosed in the Company's annual report on Form 10-K for the year ended December 31, 2024[213] - Investors should consider all disclosed risk factors, as well as additional unknown risks, which could materially affect the Company's financial condition, results of operations, or cash flows[213] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the Company's unregistered sales of equity securities, primarily through stock option exercises, restricted stock vesting, and OP unit exchanges, and outlines the status of its stock repurchase plan Unregistered Sales of Equity Securities; Essex Portfolio, L.P. Details the issuance of equity securities by Essex Portfolio, L.P. that were not registered under the Securities Act - During the three months ended June 30, 2025, Essex issued 45,768 shares of common stock through stock option exercises, restricted stock vesting, and OP unit exchanges[215] - Net proceeds of $2.9 million from option exercises were contributed to the Operating Partnership in exchange for 13,418 OP Units[215] Stock Repurchases Provides information on the company's stock repurchase program, including authorization, activity, and remaining capacity - The Company has a $500.0 million stock repurchase plan approved in September 2022[216] - No shares were repurchased during the three months ended June 30, 2025, with $302.7 million of purchase authority remaining[216] Item 3. Defaults Upon Senior Securities The Company reported no defaults upon senior securities - No defaults upon senior securities were reported[217] Item 4. Mine Safety Disclosures This item is not applicable to the Company - Mine Safety Disclosures are not applicable to the Company[218] Item 5. Other Information This section provides details on securities trading plans of directors and executive officers and updates on federal income tax considerations Securities Trading Plans of Directors and Executive Officers Discloses information about Rule 10b5-1 trading plans adopted by the company's directors and executive officers - Rylan Burns, EVP and CIO, entered a Rule 10b5-1 trading arrangement on May 22, 2025[220] - The plan allows for the potential exercise of stock options and sale of up to 1,289 shares of common stock, expiring May 22, 2026[220] Federal Income Tax Considerations Provides an updated discussion on the material federal income tax implications relevant to the company and its investors - The discussion on "Material Federal Income Tax Considerations" in Exhibit 99.1 replaces and supersedes previous information due to recent changes in applicable tax law[221] Item 6. Exhibits This section lists all exhibits filed or furnished with the Form 10-Q, including credit agreements, certifications (Sarbanes-Oxley Act), tax considerations, and XBRL documents - Exhibits include the Sixth Amended and Restated Revolving Credit Agreement, Term Loan Agreement, and Sarbanes-Oxley Act certifications[222] - Exhibit 99.1 provides updated "Material Federal Income Tax Considerations"[222] Signatures The report is signed by authorized officers of Essex Property Trust, Inc. and Essex Portfolio, L.P., including Barbara Pak (EVP and CFO) and Brennan McGreevy (Group VP and Chief Accounting Officer), on July 30, 2025 - The report was signed by Barbara Pak, Executive Vice President and Chief Financial Officer, and Brennan McGreevy, Group Vice President and Chief Accounting Officer, on July 30, 2025[227]