ESSEX PROPERTY TRUST, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-K)

The following discussion and analysis should be read in conjunction with the
accompanying consolidated financial statements and notes thereto. These
consolidated financial statements include all adjustments which are, in the
opinion of management, necessary to reflect a fair statement of the results and
all such adjustments are of a normal recurring nature.

                                    OVERVIEW

Essex is a self-administered and self-managed REIT that acquires, develops,
redevelops, and manages apartment communities in selected residential areas
located on the West Coast of the United States. Essex owns all of its interests
in its real estate investments, directly or indirectly, through the Operating
Partnership. Essex is the sole general partner of the Operating Partnership and,
as of December 31, 2021, had an approximately 96.6% general partner interest in
the Operating Partnership.

The Company's investment strategy has two components: constant monitoring of
existing markets, and evaluation of new markets to identify areas with the
characteristics that underlie rental growth. The Company's strong financial
condition supports its investment strategy by enhancing its ability to quickly
shift acquisition, development, redevelopment, and disposition activities to
markets that will optimize the performance of the Company's portfolio.

As of December 31, 2021, the Company owned or had ownership interests in 252
operating apartment communities, comprising 61,911 apartment homes, excluding
the Company's ownership in preferred equity co-investments, loan investments,
three operating commercial buildings, and a development pipeline comprised of
one consolidated project and one unconsolidated joint venture project.

The Company’s apartment communities are primarily located in the following major regions:

Southern California (primarily Los Angeles, Orange, San Diego, and Ventura
counties)
Northern California (the San Francisco Bay Area)
Seattle Metro (Seattle metropolitan area)

As of December 31, 2021, the Company's development pipeline was comprised of one
consolidated project under development, one unconsolidated joint venture project
under development, and various predevelopment projects aggregating 371 apartment
homes, with total incurred costs of $156.0 million, and estimated remaining
project costs of approximately $61.0 million, $32.6 million of which represents
the Company's estimated remaining costs, for total estimated project costs of
$217.0 million.

From December 31, 2021the Company also had an interest in three commercial properties in operation (totalling approximately 281,000 square feet).

By region, the Company's operating results for 2021 and 2020 and projection for
2022 new housing supply (defined as new multifamily apartment homes and single
family homes, excluding developments with fewer than 50 apartment homes as well
as student, senior and 100% affordable housing), projection for 2022 job growth,
and 2022 estimated Same-Property revenue growth are as follows:

Southern California Region:  As of December 31, 2021, this region represented
43% of the Company's consolidated operating apartment homes. Revenues for "2021
Same-Properties" (as defined below), or "Same-Property revenues," increased 3.2%
in 2021 as compared to 2020. In 2022, the Company projects new residential
supply of 31,750 apartment homes and single family homes, which represents 0.5%
of the total housing stock. The Company projects an increase of 310,000 jobs or
4.0% in the Southern California region.

Northern California Region:  As of December 31, 2021, this region represented
37% of the Company's consolidated operating apartment homes. Same-Property
revenues decreased 5.6% in 2021 as compared to 2020. In 2022, the Company
projects new residential supply of 18,250 apartment homes and single family
homes, which represents 0.8% of the total housing stock. The Company projects an
increase of 157,000 jobs or 4.7% in the Northern California region.

Seattle Metro Region: As of December 31, 2021, this region represented 20% of
the Company's consolidated operating apartment homes. Same-Property revenues
decreased 1.7% in 2021 as compared to 2020. In 2022, the Company projects new
residential supply of 14,800 apartment homes and single family homes, which
represents 1.1% of the total housing stock. The Company projects an increase of
63,000 jobs or 3.6% in the Seattle Metro region.

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In total, the Company projects an increase in 2022 Same-Property revenues of
between 7.0% to 8.5%. Same-Property operating expenses are projected to increase
in 2022 by 3.5% to 4.5%.

The Company’s consolidated operating communities are as follows:

                                                               As of                                         As of
                                                         December 31, 2021                             December 31, 2020
                                                Apartment Homes               %               Apartment Homes               %
Southern California                                     22,190                  43  %                 22,560                  43  %
Northern California                                     19,123                  37  %                 19,319                  37  %
Seattle Metro                                           10,341                  20  %                 10,217                  20  %
Total                                                   51,654                 100  %                 52,096                 100  %



Co-investments, including Wesco I, Wesco III, Wesco IV, Wesco V, Wesco VI,
BEXAEW, BEX II, BEX IV, and 500 Folsom communities, developments under
construction, and preferred equity interest co-investment communities are not
included in the table presented above for both periods. A community previously
held in the BEX III co-investment was consolidated in the second quarter of 2021
and is excluded from the December 31, 2020 table but included in the December
31, 2021 table.

The COVID-19 Pandemic

The United States and other countries around the world are continuing to
experience impacts related to the COVID-19 pandemic and its related variants
which has created considerable instability, disruption, and uncertainty.
Governmental authorities in impacted regions are taking extraordinary steps in
an effort to slow down the spread of the viruses and mitigate its impact on
affected populations. Federal, state and local jurisdictions have implemented
varying forms of requirements related to sponsors and patrons of public
gatherings and required businesses to make changes to their operations in a
manner that negatively affects profitability, resulting in job losses and
related financial impacts that may affect future operations to an unknown
extent. While the California eviction moratorium sunsetted during the third
quarter of 2021, other state and local eviction moratoriums and laws that limit
rent increases during times of emergency and prohibit the ability to collect
unpaid rent during certain timeframes continue to be in effect in various
formats at various regions in which Essex's communities are located, impacting
Essex and its properties. The Company is working to comply with the stated
intent of local, county, state and federal laws. In that regard, the Company has
implemented a wide range of practices to protect and support its employees and
residents. Such measures include instituting a hybrid work model for corporate
associates to work at the Company's corporate offices and remotely, and
transitioning many public interactions with leasing staff to on-line and
telephonic communications;

Due to the COVID-19 pandemic, some of the Company's residents, their health,
their employment, and, thus, their ability to pay rent, have been and may
continue to be impacted. To support residents, the Company has implemented the
following steps, including, but not limited to:
•assembling a Resident Response Team to effectively and efficiently respond to
resident needs and concerns with respect to the pandemic;
•structuring payment plans for residents who are unable to pay their rent as a
result of the outbreak and waiving late fees where required or applicable for
those residents; and
•establishing the Essex Cares fund for the purpose of supporting the Company's
residents and communities that are experiencing financial hardships caused by
the COVID-19 pandemic.

The impact of the COVID-19 pandemic on the U.S. and world economies generally,
and on the Company's results in particular, has been, and may continue to be
significant. The long-term impact will largely depend on future developments,
which are highly uncertain and cannot be predicted, including, but not limited
to, whether employees and employers will continue to promote remote work if and
when the pandemic concludes. This includes new information which may emerge
concerning the severity of COVID-19 and related variants, the success of actions
taken to contain or treat COVID-19, future laws that may be enacted, the impact
on job growth and the broader economy, and reactions by consumers, companies,
governmental entities and capital markets. The labor shortage due partly to
various government mandates and vaccine requirements implemented during the
COVID-19 pandemic and supply chain disruptions may negatively impact the
Company's results of operations.

Primarily as a result of the impact of the COVID-19 pandemic, the Company's cash
delinquencies as a percentage of scheduled rental income for the Company's
stabilized apartment communities or "Same-Property" (stabilized properties
consolidated by the Company for the years ended December 31, 2021 and 2020)
remained higher than the pre-pandemic period but improved from 2.5% for 2020 to
1.9% for 2021. The Company has executed some payment plans and will continue to
work with residents
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to collect such cash delinquencies. As a result of continued analysis of the
collectability of delinquencies, reported delinquencies as a percentage of
scheduled rent for the Company's Same-Property portfolio was 2.0% for the year
ended December 31, 2021. As of December 31, 2021, the delinquencies have not had
a material adverse impact to the Company's liquidity position.

The COVID-19 pandemic has not negatively impacted the Company's ability to
access traditional funding sources on the same or reasonably similar terms as
were available in recent periods prior to the pandemic, as demonstrated by the
Company's financing activity during the year ended December 31, 2021 discussed
in the "Liquidity and Capital Resources" section below. The Company is not at
material risk of not meeting the covenants in its credit agreements and is able
to timely service its debt and other obligations.

                             RESULTS OF OPERATIONS

Year Ended Comparison December 31, 2021 to the year ended December 31, 2020

The Company's average financial occupancy for the Company's stabilized apartment
communities or "2021 Same-Property" (stabilized properties consolidated by the
Company for the years ended December 31, 2021 and 2020) increased 40 basis
points to 96.4% in 2021 from 96.0% in 2020. Financial occupancy is defined as
the percentage resulting from dividing actual rental income by total scheduled
rental income. Actual rental income represents contractual rental income
pursuant to leases without considering delinquency and concessions. Total
scheduled rental income represents the value of all apartment homes, with
occupied apartment homes valued at contractual rental rates pursuant to leases
and vacant apartment homes valued at estimated market rents. The Company
believes that financial occupancy is a meaningful measure of occupancy because
it considers the value of each vacant apartment home at its estimated market
rate.

Market rates are determined using the recently signed effective rates on new
leases at the property and are used as the starting point in the determination
of the market rates of vacant apartment homes. The Company may increase or
decrease these rates based on a variety of factors, including overall supply and
demand for housing, concentration of new apartment deliveries within the same
submarket which can cause periodic disruption due to greater rental concessions
to increase leasing velocity, and rental affordability. Financial occupancy may
not completely reflect short-term trends in physical occupancy and financial
occupancy rates, and the Company's calculation of financial occupancy may not be
comparable to financial occupancy disclosed by other REITs.

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

The regional breakdown of the Company's 2021 Same-Property portfolio for
financial occupancy for the years ended December 31, 2021 and 2020 is as
follows:
                             Years ended
                            December 31,
                          2021           2020
Southern California         96.8  %     96.0  %
Northern California         96.2  %     96.1  %
Seattle Metro               96.2  %     96.0  %



The following table provides a breakdown of revenue amounts, including revenue attributable to 2021 comparable properties.

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                                                                                         Years Ended
                                                 Number of Apartment                    December 31,                      Dollar              Percentage
Property Revenues ($ in thousands)                      Homes                     2021                 2020               Change                Change
2021 Same-Properties:
Southern California                                    20,800                $   557,906          $   540,771          $  17,135                      3.2  %
Northern California                                    16,072                    490,513              519,746            (29,233)                    (5.6) %
Seattle Metro                                          10,218                    239,819              243,900             (4,081)                    (1.7) %
Total 2021 Same-Property Revenues                      47,090                  1,288,238            1,304,417            (16,179)                    (1.2) %
2021 Non-Same Property Revenues                                                  143,180              181,733            (38,553)                   (21.2) %
Total Property Revenues                                                      $ 1,431,418          $ 1,486,150          $ (54,732)                    (3.7) %



2021 Same-Property Revenues decreased by $16.2 million or 1.2% to $1.3 billion
for 2021. The decrease was primarily attributable to an additional $5.3 million
of cash concessions and $1.2 million in delinquencies compared to the prior year
and due to a decrease of 1.5% in average rental rates from $2,349 for 2020 to
$2,313 for 2021.

2021 Non-Same Property Revenues decreased by $38.6 million or 21.2% to $143.2
million in 2021 compared to $181.7 million in 2020. The decrease was primarily
due to property dispositions in 2020 and the sale of Hidden Valley, Axis 2300,
Park 20, and Devonshire Apartments in 2021 partially offset by the acquisition
of The Village at Toluca Lake.

Management and other fees from affiliates decreased by $0.5 million or 5.2% to
$9.1 million in 2021 from $9.6 million in 2020. The decrease was primarily due
to a decrease in revenues used to calculate management fees as well as a
decrease of the management fee rate for one of the joint ventures.

Property operating expenses, excluding real estate taxes increased by $1.5
million or 0.6% to $264.9 million in 2021 compared to $263.4 million in 2020,
primarily due to an increase of $3.8 million in utilities expenses offset by a
$2.4 million decrease in administrative expenses. 2021 Same-Property operating
expenses, excluding real estate taxes, increased by $5.3 million or 2.2% to
$241.8 million in 2021 compared to $236.5 million in 2020, primarily due to
increases of $4.1 million in utilities expenses, $2.2 million in insurance and
other expenses, and $1.2 million in maintenance and repairs expenses, offset by
a decrease of $2.2 million in administrative expenses.

Real estate taxes increased by $3.4 million or 1.9% to $180.4 million in 2021
compared to $177.0 million in 2020, primarily due to increases in assessed
valuations and tax rates. 2021 Same-Property real estate taxes increased by $3.6
million or 2.4% to $155.0 million in 2021 compared to $151.4 million in 2020
primarily due to increases in assessed valuations and tax rates.

Enterprise-level property management spending increased by $1.6 million i.e. 4.6% to $36.2 million in 2021 compared to $34.6 million in 2020 due to the costs of centralizing certain functions at the building level.

Depreciation and amortization expense decreased by $5.4 million or 1.0% to
$520.1 million in 2021 compared to $525.5 million in 2020, primarily due to a
decrease in amortization expense resulting from certain lease intangibles
becoming fully amortized during 2020 and the sale of Hidden Valley, Axis 2300,
Park 20, and Devonshire Apartments during 2021.

Gain on sale of real estate and land of $143.0 million in 2021 was attributable
to the sale of Hidden Valley, Axis 2300, Park 20, and Devonshire Apartments
during 2021. The Company's $65.0 million gain on sale of real estate and land in
2020 was primarily attributable to the portfolio sale of One South Market and
Museum Park, and the sales of Delano and 416 on Broadway during 2020.

Interest expense decreased by $17.5 million or 7.9% to $203.1 million in 2021
compared to $220.6 million in 2020, primarily due to various debt that was paid
off, matured, or regular principal payments during and after 2020, and lower
average interest rates, which resulted in a decrease in interest expense of
$49.8 million for 2021. These decreases in interest expense were partially
offset by the issuance of new senior unsecured notes which resulted in an
increase of $23.8 million interest expense for 2021 as compared to 2020.
Additionally, there was a $8.5 million decrease in capitalized interest in 2021,
due to a decrease in development activity as compared to the same period in
2020.

Total income from yield swaps of $10.8 million in 2021 consists of monthly settlements related to the Company’s four total return swap contracts with an aggregate notional amount of $224.4 million.

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Interest and other income increased by $57.7 million or 140.7% to $98.7 million
in 2021 compared to $41.0 million in 2020, primarily due to increases of $34.3
million in insurance reimbursements, legal settlements and other driven by a
one-time legal settlement claim, $20.6 million in unrealized gains on marketable
securities, $7.9 million in marketable securities and other income, $4.9 million
in income from early redemption of notes receivable, and $1.3 million in gain on
sale of marketable securities. These increases were offset by a $11.8 million
decrease in interest income resulting from the maturity of a mortgage backed
security investment in 2020.

Equity income from co-investments increased by $45.2 million or 68.0% to $111.7
million in 2021 compared to $66.5 million in 2020, primarily due to increases of
$50.3 million in equity income from non-core co-investments and $11.6 million in
income from preferred equity investments including income from early
redemptions. These increases were offset by decreases of $8.8 million in equity
income from co-investments and $6.5 million in co-investment promote income.

Deferred tax expense on unrealized gain on unconsolidated co-investment of $15.7
million in 2021 resulted from a net unrealized gain of $53.7 million from an
unconsolidated co-investments.

Loss on early retirement of debt, net of $19.0 million in 2021 was primarily due
to the early termination of the Company's
five interest rate swap contracts in conjunction with the partial repayment of
the Company's unsecured term debt and the early repayment of $300.0 million of
senior unsecured notes.

Gain on remeasurement of co-investment of $2.3 million in 2021 resulted from the
Company's purchase of BEX III's 50.0% interest in The Village at Toluca Lake
community in the second quarter of 2021. Gain on remeasurement of $234.7 million
in 2020 resulted from the Company's purchase of Canada Pension Plan Investment
Board's ("CPPIB") 45.0% co-investment interests during the first quarter of
2020.

Year Ended Comparison December 31, 2020 to the year ended December 31, 2019

For the comparison of the years ended December 31, 2020 and December 31, 2019,
refer to Part II, Item 7 "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on Form 10-K for the fiscal year ended
December 31, 2020, filed with the SEC on February 19, 2021 under the subheading
"Comparison of Year Ended December 31, 2020 to the Year Ended December 31,
2019."

Cash and capital resources

The following table sets forth the Company's cash flows for 2021, 2020 and 2019
($ in thousands):
                                             For the year ended December 31,
                                          2021             2020            2019
Cash flow provided by (used in):
Operating activities                  $   905,259      $  803,108      $  919,079
Investing activities                  $  (397,397)     $ (416,900)     $ (527,691)
Financing activities                  $  (533,265)     $ (383,261)     $ (461,689)



Essex's business is operated primarily through the Operating Partnership. Essex
issues public equity from time to time, but does not otherwise generate any
capital itself or conduct any business itself, other than incurring certain
expenses from operating as a public company which are fully reimbursed by the
Operating Partnership. Essex itself does not hold any indebtedness, and its only
material asset is its ownership of partnership interests of the Operating
Partnership. Essex's principal funding requirement is the payment of dividends
on its common stock and preferred stock. Essex's sole source of funding for its
dividend payments is distributions it receives from the Operating Partnership.

From December 31, 2021, Essex held a 96.6% general partner interest and the limited partners held the remaining 3.4% interest in the Operational partnership.

The liquidity of Essex is dependent on the Operating Partnership's ability to
make sufficient distributions to Essex. The primary cash requirement of Essex is
its payment of dividends to its stockholders. Essex also guarantees some of the
Operating Partnership's debt, as discussed further in Notes 7 and 8 to our
consolidated financial statements included in Part IV, Item 15 of this Annual
Report on Form 10-K. If the Operating Partnership fails to fulfill certain of
its debt requirements, which trigger Essex's guarantee obligations, then Essex
will be required to fulfill its cash payment commitments under such guarantees.
However, Essex's only significant asset is its investment in the Operating
Partnership.
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For Essex to maintain its qualification as a REIT, it must pay dividends to its
stockholders aggregating annually at least 90% of its REIT taxable income,
excluding net capital gains. While historically Essex has satisfied this
distribution requirement by making cash distributions to its stockholders, it
may choose to satisfy this requirement by making distributions of other
property, including, in limited circumstances, Essex's own stock. As a result of
this distribution requirement, the Operating Partnership cannot rely on retained
earnings to fund its ongoing operations to the same extent that other companies
whose parent companies are not REITs can. Essex may need to continue to raise
capital in the equity markets to fund the Operating Partnership's working
capital needs, acquisitions and developments.

At December 31, 2021, the Company had $48.4 million of unrestricted cash and
cash equivalents and $191.8 million in marketable securities. The Company
believes that cash flows generated by its operations, existing cash and cash
equivalents, marketable securities balances and availability under existing
lines of credit are sufficient to meet all of its anticipated cash needs during
2022. Additionally, the capital markets continue to be available and the Company
is able to generate cash from the disposition of real estate assets to finance
additional cash flow needs, including continued development and select
acquisitions. In the event that conditions become further exacerbated due to the
COVID-19 pandemic and related economic disruptions or otherwise, the Company may
further utilize other resources such as its cash reserves, lines of credit, or
decreased investment in redevelopment activities to supplement operating cash
flows. The Company is carefully monitoring and managing its cash position in
light of ongoing conditions and levels of operations. The timing, source and
amounts of cash flows provided by financing activities and used in investing
activities are sensitive to changes in interest rates and other fluctuations in
the capital markets environment, which can affect the Company's plans for
acquisitions, dispositions, development and redevelopment activities.

As of December 31, 2021, the Company had $5.4 billion of fixed rate public bonds
outstanding at an average interest rate of 3.3% with maturity dates ranging from
2023 to 2050.

As of December 31, 2021, the Company's mortgage notes payable totaled $639.0
million, net of unamortized premiums and debt issuance costs, which consisted of
$415.4 million in fixed rate debt at an average interest rate of 3.5% and
maturity dates ranging from 2022 to 2028 and $223.6 million of tax-exempt
variable rate demand notes with a weighted average interest rate of 1.1%. The
tax-exempt variable rate demand notes have maturity dates ranging from 2027 to
2046. $224.4 million is subject to total return swaps.

As of December 31, 2021, the Company had two unsecured lines of credit
aggregating $1.24 billion, including a $1.2 billion unsecured line of credit and
a $35.0 million working capital unsecured line of credit. As of December 31,
2021, there was $340.0 million amount outstanding on the $1.2 billion unsecured
line of credit. The interest rate is based on a tiered rate structure tied to
the Company's credit ratings and was LIBOR plus 0.775% as of December 31,
2021. There was $1.3 million outstanding on the Company's $35.0 million working
capital unsecured line of credit as of December 31, 2021. The interest rate on
the amended line is based on a tiered rate structure tied to the Company's
credit ratings and is currently at LIBOR plus 0.775%.

The Company's unsecured lines of credit and unsecured debt agreements contain
debt covenants related to limitations on indebtedness and liabilities and
maintenance of minimum levels of consolidated earnings before depreciation,
interest and amortization. The Company was in compliance with the debt covenants
as of December 31, 2021 and 2020.

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

Spin-off activity

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

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The Company has four total return swap contracts, with an aggregate notional
amount of $224.4 million, that effectively converts $224.4 million of mortgage
notes payable to a floating interest rate based on the Securities Industry and
Financial Markets Association Municipal Swap Index ("SIFMA") plus a spread. The
total return swaps provide fair market value protection on the mortgage notes
payable to our counterparties during the initial period of the total return swap
until the Company's option to call the mortgage notes at par can be exercised.
The Company can currently call all four of the total return swaps, with $224.4
million of the outstanding debt at par. These derivatives do not qualify for
hedge accounting.

As of December 31, 2021 and 2020, the aggregate carrying value of the interest
rate swap contracts was a liability of zero and $2.4 million, respectively. As
of December 31, 2021 and 2020, the swap contracts were presented in the
consolidated balance sheets as a liability of zero and $2.4 million,
respectively, and were included in other liabilities on the consolidated balance
sheets. The aggregate carrying and fair value of the total return swaps was zero
at both December 31, 2021 and 2020.

Hedge ineffectiveness related to cash flow hedges, which is reported in current
year income as interest expense, net was zero, zero, and a loss of $0.2 million,
for the years ended December 31, 2021, 2020, and 2019, respectively.

Issue of common shares

In September 2021, the Company entered into the 2021 ATM Program, a new equity
distribution agreement pursuant to which the Company may offer and sell shares
of its common stock having an aggregate gross sales price of up to $900.0
million. In connection with the 2021 ATM Program, the Company may also enter
into related forward sale agreements, and may sell shares of its common stock
pursuant to these agreements. The use of a forward sale agreement would allow
the Company to lock in a share price on the sale of shares of its common stock
at the time the agreement is executed, but defer receipt of the proceeds from
the sale of shares until a later date should the Company elect to settle such
forward sale agreement, in whole or in part, in shares of common stock.

The 2021 ATM Program replaces the prior equity distribution agreement entered
into in September 2018 (the "2018 ATM Program"), which was terminated upon the
establishment of the 2021 ATM Program. For the year ended December 31, 2021, the
Company did not sell any shares of its common stock through the 2021 ATM Program
or through the 2018 ATM Program. As of December 31, 2021, there were no
outstanding forward purchase agreements, and $900.0 million of shares remain
available to be sold under the 2021 ATM Program. For the year ended December 31,
2020, the Company did not issue any shares of its common stock through the 2018
ATM Program. For the year ended December 31, 2019, the Company issued 228,271
shares of common stock through the 2018 ATM Program at an average price of
$321.56 per share for proceeds of $73.4 million.

Capital expenditure

Non-revenue generating capital expenditures are improvements and upgrades that
extend the useful life of the property. For the year ended December 31, 2021,
non-revenue generating capital expenditures totaled approximately $1,914 per
apartment home. These expenditures do not include expenditures for deferred
maintenance on acquisition properties, expenditures for property renovations and
improvements which are expected to generate additional revenue or cost savings,
and do not include expenditures incurred due to changes in government
regulations that the Company would not have incurred otherwise, costs related to
the COVID-19 pandemic, retail, furniture and fixtures, or expenditures for which
the Company expects to be reimbursed. The Company expects that cash from
operations and/or its lines of credit will fund such expenditures.

Development and pre-development pipeline

The Company defines development projects as new communities that are being
constructed, or are newly constructed and are in a phase of lease-up and have
not yet reached stabilized operations. As of December 31, 2021, the Company's
development pipeline was comprised of one consolidated project under
development, one unconsolidated joint venture project under development and
various consolidated predevelopment projects, aggregating 371 apartment homes,
with total incurred costs of $156.0 million, and estimated remaining project
costs of approximately $61.0 million, $32.6 million of which represents the
Company's estimated remaining costs, for total estimated project costs of $217.0
million.

The Company defines predevelopment projects as proposed communities in
negotiation or in the entitlement process with an expected high likelihood of
becoming entitled development projects. The Company may also acquire land for
future development purposes or sale.

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The Company expects to fund the development and predevelopment communities by
using a combination of some or all of the following sources: its working
capital, amounts available on its lines of credit, construction loans, net
proceeds from public and private equity and debt issuances, and proceeds from
the disposition of assets, if any.

Other sources of capital

The Company utilizes co-investments as an alternative source of capital for
acquisitions of both operating and development communities. As of December 31,
2021, the Company had an interest in 264 apartment homes in communities actively
under development with joint ventures for total estimated costs of $102.0
million. Total estimated remaining costs total approximately $58.0 million, of
which the Company estimates that its remaining investment in these development
joint ventures will be approximately $29.6 million. In addition, the Company had
an interest in 10,257 apartment homes in operating communities with joint
ventures and other investments for a total book value of $565.3 million.

Real estate and other liabilities

The following table summarizes the Company’s unfunded real estate and other future commitments as of December 31, 2021 (in thousands of dollars):

                                                                                                                    Remaining
                                                               Number of Properties           Investment           Commitment
Joint ventures (1):
Preferred equity investments                                               4                $   128,000          $     27,867
Mezzanine loans                                                            2                    140,000                52,734
Non-core co-investments                                                    -                     37,000                16,020

Consolidated:
Real estate under development                                              1                     91,162                 3,000
                                                                                            $   396,162          $     99,621


(1) Excludes approximately $29.6 million from the Corporation of the estimated project costs for Scripps Mesa Apartments which were fully funded.

AT December 31, 2021the Company had operating lease commitments of $167.4 million for land, construction and garage leases expiring from 2025 to 2083. $7.0 million of this commitment is due within the next twelve months.

Variable interest entities

In accordance with accounting standards for consolidation of variable interest
entities ("VIEs"), the Company consolidates the Operating Partnership, 18
DownREIT entities (comprising nine communities) and six co-investments as of
December 31, 2021. As of December 31, 2020, the Company consolidated the
Operating Partnership, 17 DownREIT entities (comprising nine communities), and
five co-investments. The Company consolidates these entities because it is
deemed the primary beneficiary. Essex has no assets or liabilities other than
its investment in the Operating Partnership. The consolidated total assets and
liabilities related to the above consolidated co-investments and DownREIT
entities, net of intercompany eliminations, were approximately $909.3 million
and $320.1 million, respectively, as of December 31, 2021, and $898.5 million
and $326.8 million, respectively, as of December 31, 2020. Noncontrolling
interests in these entities were $122.4 million and $120.8 million as of
December 31, 2021 and 2020, respectively. The Company's financial risk in each
VIE is limited to its equity investment in the VIE. As of December 31, 2021, the
Company did not have any other VIEs of which it was deemed to be the primary
beneficiary and did not have any VIEs of which it was not deemed to be the
primary beneficiary.

Critical accounting estimates

The preparation of consolidated financial statements, in accordance with U.S.
GAAP, requires the Company to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses and related
disclosures of contingent assets and liabilities. The Company defines critical
accounting estimates as those estimates that involve a significant level of
estimation uncertainty and have had or are reasonably likely to have a material
impact on the financial condition or results of operations of the Company.  The
Company's critical accounting estimates relate principally to the following key
areas: (i) accounting for the acquisition of investments in real estate
(specifically, the allocation between land and buildings during the
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Table of contents year completed December 31, 2020); and (ii) the assessment of events and changes in circumstances indicating whether the Company’s rental properties may be impaired. The Company bases its estimates on historical experience, current market conditions and various other assumptions believed to be reasonable under the circumstances. Actual results may differ from estimates made by management.

The Company accounts for its acquisitions of investments in real estate by
assessing each acquisition to determine if it meets the definition of a business
or if it qualifies as an asset acquisition. We expect that acquisitions of
individual operating communities will generally be viewed as asset acquisitions,
and result in the capitalization of acquisition costs, and the allocation of
purchase price to the assets acquired and liabilities assumed based on the
relative fair value of the respective assets and liabilities.

In making estimates of fair values for purposes of allocating purchase price,
the Company utilizes a number of sources, including independent land appraisals
which consider comparable market transactions, its own analysis of recently
acquired or developed comparable properties in our portfolio for land
comparables and building replacement costs, and other publicly available market
data. In calculating the fair value of identified intangible assets of an
acquired property, the in-place leases are valued based on in-place rent rates
and amortized over the average remaining term of all acquired leases. The
allocation of the total consideration exchanged for a real estate acquisition
between the identifiable assets and liabilities and the depreciation we
recognize over the estimated useful life of the asset could be impacted by
different assumptions and estimates used in the calculation. The reasonable
likelihood that the estimate could have a material impact on the financial
condition of the Company is based on the total consideration exchanged for real
estate during any given year. The allocation of the value between land and
building was a critical accounting estimate during the year ended December 31,
2020 as result of the potential material impact of the Company's acquisition of
a land parcel and six communities for a total purchase price of $463.4 million.

The Company periodically assesses the carrying value of its real estate
investments for indicators of impairment. The judgments regarding the existence
of impairment indicators are based on monitoring investment market conditions
and performance for operating properties including the net operating income for
the most recent 12 month period, monitoring estimated costs for properties under
development, the Company's ability to hold and its intent with regard to each
asset, and each property's remaining useful life. Although each of these may
result in an impairment indicator, the shortening of an expected holding period
due to the potential sale of a property is the most likely impairment indicator.
Whenever events or changes in circumstances indicate that the carrying amount of
a property held for investment may not be fully recoverable, the carrying amount
is evaluated. If the sum of the property's expected future cash flows
(undiscounted and without interest charges) is less than the carrying amount of
the property, then the Company will recognize an impairment loss equal to the
excess of the carrying amount over the fair value of the property. Changes in
operating and market conditions may result in a change of our intent to hold the
property through the end of its useful life and may impact the assumptions
utilized to determine the future cash flows of the real estate investment.

The Company bases its accounting estimates on historical experience and various other assumptions believed to be reasonable under the circumstances. Actual results may differ from these estimates and these estimates may differ under different assumptions or conditions.

Funds from operations

Funds from Operations ("FFO") is a financial measure that is commonly used in
the REIT industry. The Company presents FFO and FFO excluding non-core items
(referred to as "Core FFO") as supplemental operating performance measures. FFO
and Core FFO are not used by the Company as, nor should they be considered to
be, alternatives to net income computed under U.S. GAAP as an indicator of the
Company's operating performance or as alternatives to cash from operating
activities computed under U.S. GAAP as an indicator of the Company's ability to
fund its cash needs.

FFO and Core FFO are not meant to represent a comprehensive system of financial
reporting and do not present, nor do they intend to present, a complete picture
of the Company's financial condition and operating performance. The Company
believes that net income computed under U.S. GAAP is the primary measure of
performance and that FFO and Core FFO are only meaningful when they are used in
conjunction with net income. The Company considers FFO and Core FFO to be useful
financial performance measurements of an equity REIT because, together with net
income and cash flows, FFO and Core FFO provide investors with additional bases
to evaluate 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
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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. The Company
believes that its consolidated financial statements, prepared in accordance with
U.S. GAAP, provide the most meaningful picture of its financial condition and
its operating performance.

In calculating FFO, the Company follows the definition of this measure published by NAREIT, which is the leading association for the REIT industry. The Company believes that, under the NAREIT FFO definition, the two most significant adjustments to net income are (i) the exclusion of amortization at historical cost and (ii) the exclusion of gains and losses from sale of previously depreciated properties. The Company agrees that these two NAREIT adjustments are useful to investors for the following reasons:

(a)historical cost accounting for real estate assets in accordance with U.S.
GAAP assumes, through depreciation charges, that the value of real estate assets
diminishes predictably over time. NAREIT stated in its White Paper on Funds from
Operations "since real estate asset values have historically risen or fallen
with market conditions, many industry investors have considered presentations of
operating results for real estate companies that use historical cost accounting
to be insufficient by themselves." Consequently, NAREIT's definition of FFO
reflects the fact that real estate, as an asset class, generally appreciates
over time and depreciation charges required by U.S. GAAP do not reflect the
underlying economic realities.

(b)REITs were created as a legal form of organization in order to encourage
public ownership of real estate as an asset class through investment in firms
that were in the business of long-term ownership and management of real estate.
The exclusion, in NAREIT's definition of FFO, of gains and losses from the sales
of previously depreciated operating real estate assets allows investors and
analysts to readily identify the operating results of the long-term assets that
form the core of a REIT's activity and assists in comparing those operating
results between periods.

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

The table below is a reconciliation of net income available to common shareholders to FFO and base FFO for the years ended December 31, 20212020 and 2019.

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Contents

                                                                       As 

from and for the years ended the 31st of December,

                                                                      2021                  2020                2019
                                                                       ($ in thousands, except per share amounts)
OTHER DATA:
Funds from operations attributable to common
stockholders and unitholders:
Net income available to common stockholders                    $       488,554          $  568,870          $  439,286
Adjustments:
Depreciation and amortization                                          520,066             525,497             483,750
Gains not included in FFO attributable to common
stockholders and unitholders                                          (145,253)           (301,886)            (79,468)
Impairment loss                                                              -               1,825               7,105
Impairment loss from unconsolidated co-investments                           -                   -              11,484

Depreciation and amortization from unconsolidated
co-investments                                                          61,059              51,594              60,655

Minority interests related to Operational partnership
units

                                                                   17,191              19,912              15,343

Depreciation attributable to third-party ownership and other

                                                                     (571)               (539)             (1,805)
Funds from operations attributable to common
stockholders and unitholders                                   $       941,046          $  865,273          $  936,350
Non-core items:

Expensed acquisition and investment related costs                          203               1,591                 168
Deferred tax expense on unrealized gain on
unconsolidated co-investment (1)                                        15,668               1,531               1,457
Gain on sale of marketable securities                                   (3,400)             (2,131)             (1,271)
Unrealized gains on marketable securities                              (33,104)            (12,515)             (5,710)
Provision for credit losses                                                141                 687                   -
Equity income from non-core co-investment (2)                          (55,602)             (5,289)             (4,143)
Interest rate hedge ineffectiveness                                          -                   -                 181
 Loss (gain) on early retirement of debt, net                           19,010              22,883              (3,717)
Loss (gain) on early retirement of debt from
unconsolidated co-investment                                                25                 (38)                  -
Co-investment promote income                                                 -              (6,455)               (809)
Income from early redemption of preferred equity
investments                                                             (8,469)               (210)             (3,562)

Accelerated interest income from the maturity of the investment in mortgage-backed securities

                                                  -             (11,753)             (7,032)

General and administrative and other, net                                1,026              14,958               1,181

Insurance reimbursements, legal and other settlements, net

                                                                    (35,234)                (81)               (858)
Core funds from operations attributable to common
stockholders and unitholders                                   $       

841 310 $868,451 $912,235
Weighted average number of shares outstanding, diluted (FFO) (3)

                                                               67,335              67,726              68,199
Funds from operations attributable to common
stockholders and unitholders per share - diluted               $         13.98          $    12.78          $    13.73
Core funds from operations attributable to common
stockholders and unitholders per share - diluted               $         

12:49 $12.82 $13.38



(1)Represents deferred tax expense related to net unrealized gains on technology
co-investments.
(2)Represents the Company's share of co-investment income from technology
co-investments.
(3)Assumes conversion of all outstanding OP Units into shares of the Company's
common stock and excludes DownREIT units.

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Net Operating Income

Net operating income ("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 ($ in thousands):
                                                       2021            2020            2019
Earnings from operations                            $ 529,995      $  491,441      $  481,112
Adjustments:
Corporate-level property management expenses           36,188          34,573          34,067
Depreciation and amortization                         520,066         525,497         483,750
Management and other fees from affiliates              (9,138)         (9,598)         (9,527)
General and administrative                             51,838          65,388          54,262
Merger and integration expenses                             -               -               -

Acquisition and investment costs expensed 203 1,591

             168
Impairment loss                                             -           1,825           7,105
(Gain) Loss on sale of real estate and land          (142,993)        (64,967)          3,164
NOI                                                   986,159       1,045,750       1,054,101
Less: Non Same-Property NOI                           (94,755)       (129,158)        (77,204)
Same-Property NOI                                   $ 891,404      $  916,592      $  976,897



Forward-Looking Statements

Certain statements in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and elsewhere in this Annual Report on
Form 10-K which are not historical facts may be considered forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended (the Securities Act") and Section 21E of the Exchange Act, 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 continued impact
of the COVID-19 pandemic and related variants on the Company's business,
financial condition and results of operations and the impact of any additional
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, 2022 Same-Property revenue and operating expenses generally and in
specific regions, 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 and governmental measures intended to prevent its spread, 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
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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 continued impact of the
COVID-19 pandemic and related variants, which remains inherently uncertain as to
duration and severity, and any additional governmental measures taken to limit
its spread, and other potential future outbreaks of infectious diseases or other
health concerns, which could continue to 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; uncertainty regarding ongoing hostility between Russia
and the Ukraine and the related impact on macroeconomic conditions as a result
of such conflict; 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 markets; the 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 discussed in Item 1A,
Risk Factors, of this Form 10-K, and those risk factors and special
considerations set forth in the Company's other filings with the SEC which may
cause the actual results, performance or achievements of the Company to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Additionally, the
risks, uncertainties and other factors set forth above or otherwise referred to
in this Annual Report on Form 10-K and the other reports that the Company has
filed with the SEC may be further amplified by the global impact of the COVID-19
pandemic and related variants. 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 report.

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