ESSEX PROPERTY TRUST, INC. - FORM 8-K - EX-99.2 - EXHIBIT 99.2

Attached files

file	filename
EX-99.1 - EXHIBIT 99.1 - ESSEX PROPERTY TRUST, INC.	s001798x1_ex99-1.htm
8-K - FORM 8-K - ESSEX PROPERTY TRUST, INC.	s001798x1_8k.htm

Exhibit 99.2

Q2 2017 Supplemental

Table of Contents

	Page(s)
Consolidated Operating Results	S-1 – S-2
Consolidated Funds From Operations	S-3
Consolidated Balance Sheets	S-4
Debt Summary - June 30, 2017	S-5
Capitalization Data, Public Bond Covenants, Credit Ratings, and Selected Credit Ratios - June 30, 2017	S-6
Portfolio Summary by County - June 30, 2017	S-7
Operating Income by Quarter - June 30, 2017	S-8
Same-Property Revenue Results by County - Quarters ended June 30, 2017 and 2016, and March 31, 2017	S-9
Same-Property Revenue Results by County - Six months ended June 30, 2017 and 2016	S-9.1
Same-Property Operating Expenses	S-10
Development Pipeline - June 30, 2017	S-11
Redevelopment Pipeline - June 30, 2017	S-12
Capital Expenditures - June 30, 2017	S-12.1
Co-Investments - June 30, 2017	S-13
Assumptions for 2017 FFO Guidance Range	S-14
Reconciliation of Projected EPS, FFO and Core FFO per diluted share	S-14.1
Summary of Apartment Community Acquisitions and Dispositions Activity	S-15
2017 MSA Level Forecast: Supply, Jobs and Apartment Market Conditions	S-16
Reconciliations of Non-GAAP Financial Measures and Other Terms	S-17.1 – S-17.4

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

Consolidated Operating Results	Three Months Ended						Six Months Ended
(Dollars in thousands, except share and per share amounts)	June 30,						June 30,
	2017			2016			2017			2016

Revenues:
Rental and other property	$	336,766		$	319,562		$	669,934		$	631,740
Management and other fees from affiliates		2,296			2,028			4,532			4,052
		339,062			321,590			674,466			635,792

Expenses:
Property operating		98,265			96,079			197,778			190,569
Depreciation and amortization		117,939			109,673			233,442			219,380
General and administrative		10,337			9,698			20,938			18,880
Acquisition and investment related costs		274			267			830			1,095
		226,815			215,717			452,988			429,924
Earnings from operations		112,247			105,873			221,478			205,868

Interest expense, net ⁽¹⁾		(54,281	)		(52,754	)		(106,280	)		(102,097	)
Interest and other income		5,362			9,409			12,126			14,617
Equity income from co-investments		10,308			14,296			21,207			29,364
Gain on sale of real estate and land		-			-			26,174			20,258
Deferred tax expense on gain on sale of real estate and land		-			-			-			(4,279	)
Gain on remeasurement of co-investment		2,159			-			88,641			-
Net income		75,795			76,824			263,346			163,731
Net income attributable to noncontrolling interest		(5,036	)		(4,811	)		(13,623	)		(9,882	)
Net income attributable to controlling interest		70,759			72,013			249,723			153,849
Dividends to preferred stockholders		-			-			-			(1,314	)
Excess of redemption value of preferred stock over the carrying value		-			-			-			(2,541	)
Net income available to common stockholders	$	70,759		$	72,013		$	249,723		$	149,994

Net income per share - basic	$	1.08		$	1.10		$	3.80		$	2.29

Shares used in income per share - basic		65,729,074			65,451,110			65,639,775			65,428,382

Net income per share - diluted	$	1.08		$	1.10		$	3.80		$	2.29

Shares used in income per share - diluted		65,819,694			65,575,378			65,942,018			65,558,811

⁽¹⁾	Refer to page S-17.2, the section titled “Interest Expense, Net” for additional information.

See Company’s 10-K and 10-Q for additional disclosures

S-1

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

Consolidated Operating Results	Three Months Ended				Six Months Ended
Selected Line Item Detail	June 30,				June 30,
(Dollars in thousands)	2017		2016		2017		2016

Rental and other property
Rental	$	314,546	$	298,942	$	624,668	$	591,461
Other property		22,220		20,620		45,266		40,279
Rental and other property	$	336,766	$	319,562	$	669,934	$	631,740

Property operating expenses
Real estate taxes	$	34,884	$	34,541	$	70,752	$	68,960
Administrative and insurance		20,690		19,927		41,245		38,961
Maintenance and repairs		18,575		18,449		37,476		36,467
Utilities		16,566		15,559		33,221		31,025
Property management		7,550		7,603		15,084		15,156
Property operating expenses	$	98,265	$	96,079	$	197,778	$	190,569


Interest and other income
Marketable securities and other interest income	$	5,044	$	4,296	$	9,924	$	8,764
Gain on sale of marketable securities and other investments		13		1,103		1,618		1,843
Insurance reimbursements and other		305		4,010		584		4,010
Interest and other income	$	5,362	$	9,409	$	12,126	$	14,617

Equity income from co-investments
Equity income from co-investments	$	4,395	$	4,804	$	9,648	$	9,756
Income from preferred equity investments		5,665		3,881		11,311		6,562
Gain on sale of co-investment communities		-		5,611		-		13,046
Income from early redemption of preferred equity investments		248		-		248		-
Equity income from co-investments	$	10,308	$	14,296	$	21,207	$	29,364

Noncontrolling interest
Limited partners of Essex Portfolio, L.P.	$	2,422	$	2,450	$	8,568	$	5,234
DownREIT limited partners’ distributions		1,695		1,425		3,245		2,859
Third-party ownership interest		919		936		1,810		1,789
Noncontrolling interest	$	5,036	$	4,811	$	13,623	$	9,882

See Company’s 10-K and 10-Q for additional disclosures

S-2

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

Consolidated Funds From Operations ⁽¹⁾	Three Months Ended									Six Months Ended
(Dollars in thousands, except share and per share amounts and in footnotes)	June 30,									June 30,
	2017			2016			% Change			2017			2016			% Change

Funds from operations attributable to common stockholders and unitholders (FFO)
Net income available to common stockholders	$	70,759		$	72,013					$	249,723		$	149,994
Adjustments:
Depreciation and amortization		117,939			109,673						233,442			219,380
Gains not included in FFO		(2,159	)		(5,611	)					(114,815	)		(33,304	)
Deferred tax expense on gain on sale of real estate and land - Taxable REIT Subsidiary activity		-			-						-			4,279
Depreciation add back from unconsolidated co-investments		13,627			12,457						26,481			24,480
Noncontrolling interest related to Operating Partnership units		2,422			2,450						8,568			5,234
Depreciation attributable to third party ownership and other ⁽²⁾		(26	)		(4	)					(51	)		2
Funds from operations attributable to common stockholders and unitholders	$	202,562		$	190,978					$	403,348		$	370,065
FFO per share-diluted	$	2.97		$	2.81			5.7	%	$	5.93		$	5.45			8.8	%

Components of the change in FFO
Non-core items:
Acquisition and investment related costs	$	274		$	267					$	830		$	1,095
Gain on sale of marketable securities and other investments		(13	)		(1,103	)					(1,618	)		(1,843	)
Interest rate hedge ineffectiveness⁽³⁾		(14	)		-						(20	)		-
Income from early redemption of preferred equity investments		(248	)		-						(248	)		-
Excess of redemption value of preferred stock over the carrying value		-			-						-			2,541
Insurance reimbursements and legal settlements		-			(4,010	)					(25	)		(4,010	)
Core funds from operations attributable to common stockholders and unitholders		202,561			186,132						402,267			367,848
Core FFO per share-diluted	$	2.97		$	2.74			8.4	%	$	5.91		$	5.42			9.0	%

Changes in core items:
Same-property NOI	$	9,654								$	20,871
Non-same property NOI		5,364									10,114
Management and other fees, net		268									480
FFO from co-investments		2,545									6,642
Interest and other income		1,053									1,719
Interest expense		(1,513	)								(4,163	)
General and administrative		(639	)								(2,058	)
Other items, net		(303	)								814
	$	16,429								$	34,419

Weighted average number of shares outstanding diluted ⁽⁴⁾		68,145,911			67,877,202						68,058,495			67,864,255

⁽¹⁾	Refer to page S-17.1, the section titled “Funds from Operations (“FFO”)” for additional information on the Company’s definition and use of FFO and Core FFO.
⁽²⁾	The Company consolidates certain co-investments. Noncontrolling interest’s share of net operating income in these investments for the three and six months ended June 30, 2017 was $1.2 million and $2.4 million, respectively.
⁽³⁾	Interest rate swaps are generally adjusted to fair value through other comprehensive income (loss). However, because certain of our interest rate swaps do not have a 0% LIBOR floor, while related hedged debt in these cases is subject to a 0% LIBOR floor, the portion of the change in fair value of these interest rate swaps attributable to this mismatch is recorded as noncash interest rate hedge ineffectiveness through interest expense.
⁽⁴⁾	Assumes conversion of all outstanding limited partnership units in the Operating Partnership and excludes all DownREIT units for which the Operating Partnership has the ability and intention to redeem the DownREIT limited partnership units for cash and does not consider them to be common stock equivalents.

See Company’s 10-K and 10-Q for additional disclosures

S-3

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

Consolidated Balance Sheets
(Dollars in thousands)
	June 30, 2017			December 31, 2016
Real Estate:
Land and land improvements	$	2,719,064		$	2,559,743
Buildings and improvements		10,536,639			10,116,563
		13,255,703			12,676,306
Less: accumulated depreciation		(2,534,646	)		(2,311,546	)
		10,721,057			10,364,760
Real estate under development		263,284			190,505
Co-investments		1,081,084			1,161,275
Real estate held for sale, net		3,015			101,957
		12,068,440			11,818,497
Cash and cash equivalents, including restricted		199,876			170,302
Marketable securities		151,995			139,189
Notes and other receivables		54,660			40,970
Prepaid expenses and other assets		49,980			48,450
Total assets	$	12,524,951		$	12,217,408

Unsecured debt, net	$	3,540,802		$	3,246,779
Mortgage notes payable, net		2,122,593			2,191,481
Lines of credit		-			125,000
Distributions in excess of investments in co-investments		36,025			-
Other liabilities		342,423			317,227
Total liabilities		6,041,843			5,880,487
Redeemable noncontrolling interest		45,081			44,684
Equity:
Common stock		6			6
Additional paid-in capital		7,131,047			7,029,679
Distributions in excess of accumulated earnings		(785,939	)		(805,409	)
Accumulated other comprehensive loss, net		(28,341	)		(32,098	)
Total stockholders’ equity		6,316,773			6,192,178
Noncontrolling interest		121,254			100,059
Total equity		6,438,027			6,292,237
Total liabilities and equity	$	12,524,951		$	12,217,408

See Company’s 10-K and 10-Q for additional disclosures

S-4

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

Debt Summary - June 30, 2017
(Dollars in thousands, except in footnotes)


									Scheduled principal payments, unamortized premiums (discounts) and (debt issuance costs) are as follows - excludes lines of credit:

				Weighted Average
	Balance Outstanding			Interest Rate			Maturity in Years			Unsecured			Secured			Total			Weighted Average Interest Rate			Percentage of Total Debt
Unsecured Debt, net
Bonds private - fixed rate	$	315,000			4.5	%		3.1	2017	$	40,000		$	15,105		$	55,105			4.4	%		1.0	%
Bonds public - fixed rate		2,900,000			3.7	%		7.0	2018		-			257,108			257,108			5.5	%		4.5	%
Term loan ⁽¹⁾		350,000			2.3	%		4.6	2019		75,000			578,114			653,114			4.3	%		11.6	%
Unamortized net discounts and debt issuance costs		(24,198	)		-			-	2020		-			695,070			695,070			4.8	%		12.3	%
		3,540,802			3.6	%		6.4	2021		500,000			52,831			552,831			4.3	%		9.8	%
Mortgage Notes Payable, net									2022		650,000			42,649			692,649			3.0	%		12.3	%
Fixed rate - secured		1,806,220			4.7	%		3.7	2023		600,000			2,188			602,188			3.6	%		10.7	%
Variable rate - secured ⁽²⁾		281,217			1.6	%		18.9	2024		400,000			2,317			402,317			4.0	%		7.1	%
Unamortized premiums and debt issuance costs, net		35,156			-			-	2025		500,000			16,056			516,056			3.5	%		9.1	%
Total mortgage notes payable		2,122,593			4.3	%		5.7	2026		450,000			55,091			505,091			3.4	%		8.9	%
									2027		350,000			166,250			516,250			3.3	%		9.1	%
Unsecured Lines of Credit									Thereafter		-			204,658			204,658			2.1	%		3.6	%
Line of credit ⁽³⁾		-			1.9	%			Subtotal		3,565,000			2,087,437			5,652,437			3.9	%		100.0	%
Line of credit ⁽⁴⁾		-			1.9	%			Debt Issuance Costs		(19,390	)		(6,452	)		(25,842	)	NA			NA
Total lines of credit		-			1.9	%			Premiums/(Discounts)		(4,808	)		41,608			36,800		NA			NA
									Total	$	3,540,802		$	2,122,593		$	5,663,395			3.9	%		100.0	%
Total debt, net	$	5,663,395			3.9	%

Capitalized interest for the three and six months ended June 30, 2017 was approximately $3.3 million and $6.6 million, respectively.

⁽¹⁾	The unsecured term loan has a variable interest rate of LIBOR plus 0.95%. The Company has interest rate swap contracts with an aggregate notional amount of $200 million, which effectively converts the interest rate on $200 million of the term loan to a fixed rate of 2.3%.
⁽²⁾	$281.2 million of variable rate debt is tax exempt to the note holders. $20.7 million is subject to interest rate cap protection agreements.
⁽³⁾	The unsecured line of credit facility aggregates to $1 billion. The line matures in December 2020 with one 18-month extension, exercisable at the Company’s option. The underlying interest rate on this line is based on a tiered rate structure tied to the Company’s corporate ratings and is currently at LIBOR plus 0.90%.
⁽⁴⁾	The unsecured line of credit facility is $25 million and is scheduled to mature in January 2018. The underlying interest rate on this line is based on a tiered rate structure tied to the Company’s corporate ratings and is currently at LIBOR plus 0.90%.

See Company’s 10-K and 10-Q for additional disclosures

S-5

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

Capitalization Data, Public Bond Covenants, Credit Ratings and Selected Credit Ratios - June 30, 2017

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

Capitalization Data

Public Bond Covenants ⁽¹⁾

Actual

Requirement

Total debt, net

5,663,395

Adjusted Debt to Adjusted Total Assets:

38%

< 65%

Common stock and potentially dilutive securities

Common stock outstanding

65,989

Limited partnership units ⁽¹⁾

2,325

Options-treasury method

Secured Debt to Adjusted Total Assets:

14%

< 40%

Total shares of common stock and potentially dilutive securities

68,399

Common stock price per share as of June 30, 2017

257.27

Interest Coverage:

402%

> 150%

Total equity capitalization

17,597,011

Total market capitalization

23,260,406

Unsecured Debt Ratio ⁽²⁾:

289%

> 150%

Ratio of debt to total market capitalization

24.3

Selected Credit Ratios ⁽³⁾

Actual

Credit Ratings

Rating Agency

Rating

Outlook

Net IndebtednessDivided by Adjusted EBITDA, normalized and annualized:

5.6

Fitch

BBB+

Stable

Moody’s

Baa1

Stable

Unencumbered NOI to Adjusted Total NOI:

69%

Standard & Poor’s

BBB+

Stable

⁽¹⁾

Refer to page S-17.3 for additional information on the Company’s Public Bond Covenants.

⁽¹⁾

Assumes conversion of all outstanding limited partnership units in the Operating Partnership into shares of the Company’s common stock.

⁽²⁾

Unsecured Debt Ratio is unsecured assets (excluding investments in co-investments) divided by unsecured indebtedness.

⁽³⁾

Refer to pages S-17.1 to S-17.4, the section titled “Reconciliations of Non-GAAP Financial Measures and Other Terms” for additional information on the Company’s Selected Credit Ratios.

See Company’s 10-K and 10-Q for additional disclosures

S-6

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

Portfolio Summary as of June 30, 2017

	Apartment Homes								Average Monthly Rental Rate ⁽¹⁾						Percent of NOI ⁽²⁾
Region - County	Consolidated⁽³⁾		Unconsolidated Co-investments ⁽⁴⁾		Apartment Homes in Development ⁽⁵⁾		Total		Consolidated		Unconsolidated Co-investments⁽⁶⁾		Total ⁽⁷⁾		Consolidated			Unconsolidated Co-investments ⁽⁶⁾			Total ⁽⁷⁾

Southern California
Los Angeles County		9,387		1,418		-		10,805	$	2,365	$	2,041	$	2,342		19.5	%		12.4	%		18.8	%
Orange County		5,553		1,379		-		6,932		2,097		1,845		2,069		10.6	%		11.2	%		10.6	%
San Diego County		5,203		616		-		5,819		1,847		1,691		1,839		8.5	%		4.5	%		8.2	%
Ventura County		2,577		693		-		3,270		1,714		2,086		1,758		4.3	%		6.2	%		4.5	%
Other Southern CA		623		249		-		872		1,577		1,559		1,574		0.9	%		1.9	%		1.0	%
Total Southern California		23,343		4,355		-		27,698		2,093		1,909		2,077		43.8	%		36.2	%		43.1	%

Northern California
Santa Clara County		7,356		2,053		476		9,885		2,655		2,718		2,663		18.9	%		20.6	%		19.0	%
Alameda County		2,954		1,983		-		4,937		2,468		2,367		2,441		6.8	%		18.5	%		7.9	%
San Mateo County		1,830		197		320		2,347		2,834		2,839		2,835		5.1	%		2.5	%		4.9	%
Contra Costa County		2,270		49		-		2,319		2,267		4,456		2,291		5.0	%		0.7	%		4.6	%
San Francisco		1,342		463		545		2,350		3,050		3,336		3,095		3.7	%		7.2	%		4.0	%
Other Northern CA		96		-		-		96		2,738		-		2,738		0.3	%		-			0.3	%
Total Northern California		15,848		4,745		1,341		21,934		2,619		2,658		2,624		39.8	%		49.5	%		40.7	%

Seattle Metro		10,238		1,958		-		12,196		1,768		1,640		1,757		16.4	%		14.3	%		16.2	%

Total		49,429		11,058		1,341		61,828	$	2,194	$	2,195	$	2,194		100.0	%		100.0	%		100.0	%

⁽¹⁾	Average monthly rental rate is defined as the total potential monthly rental revenue (actual rent for occupied apartment homes plus market rent for vacant apartment homes) divided by the number of apartment homes.
⁽²⁾	Actual NOI for the quarter ended June 30, 2017. See the section titled “Net Operating Income (“NOI”) and Same-Property NOI Reconciliations” on page S-17.3.
⁽³⁾	Includes all apartment communities with rents.
⁽⁴⁾	Includes two rental income producing development communities in lease-up which consist of 627 apartment homes.
⁽⁵⁾	Includes development communities with no rental income.
⁽⁶⁾	Co-investment amounts weighted for Company’s pro rata share.
⁽⁷⁾	At Company’s pro rata share.

See Company’s 10-K and 10-Q for additional disclosures

S-7

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

Operating Income by Quarter ⁽¹⁾
(Dollars in thousands)

	Apartment Homes		Q2 ‘17			Q1 ‘17			Q4 ‘16			Q3 ‘16			Q2 ‘16

Rental and other property revenues:
Same-property		46,128	$	304,662		$	302,125		$	300,808		$	300,069		$	293,093
Acquisitions⁽²⁾		2,081		15,859			13,751			3,018			2,475			2,354
Development ⁽³⁾		360		4,462			4,334			4,270			4,303			4,062
Redevelopment		621		4,909			4,814			4,757			4,775			4,703
Non-residential/other, net⁽⁴⁾		239		6,874			8,144			14,052			15,456			15,350
Total rental and other property revenues		49,429		336,766			333,168			326,905			327,078			319,562

Property operating expenses:
Same-property				90,308			90,455			91,522			91,261			88,393
Acquisitions⁽²⁾				5,273			4,552			906			831			850
Development ⁽³⁾				1,448			1,576			1,528			1,569			1,497
Redevelopment				1,468			1,526			1,558			1,565			1,477
Non-residential/other, net^{(4) (5)}				(232	)		1,404			3,483			4,135			3,862
Total property operating expenses				98,265			99,513			98,997			99,361			96,079

Net operating income (NOI):
Same-property				214,354			211,670			209,286			208,808			204,700
Acquisitions⁽²⁾				10,586			9,199			2,112			1,644			1,504
Development ⁽³⁾				3,014			2,758			2,742			2,734			2,565
Redevelopment				3,441			3,288			3,199			3,210			3,226
Non-residential/other, net⁽⁴⁾				7,106			6,740			10,569			11,321			11,488
Total NOI			$	238,501		$	233,655		$	227,908		$	227,717		$	223,483

Same-property metrics
Operating margin				70	%		70	%		70	%		70	%		70	%
Annualized turnover ⁽⁶⁾				54	%		46	%		47	%		63	%		56	%
Financial occupancy ⁽⁷⁾				96.4	%		96.5	%		96.6	%		96.5	%		96.0	%

⁽¹⁾	Includes consolidated communities only.
⁽²⁾	Acquisitions include properties acquired which did not have comparable stabilized results as of January 1, 2016.
⁽³⁾	Development includes properties developed which did not have comparable stabilized results as of January 1, 2016.
⁽⁴⁾	Other real estate assets consists mainly of retail space, commercial properties, boat slips, held for sale properties, and disposition properties.
⁽⁵⁾	Includes other expenses and intercompany eliminations pertaining to self-insurance. In Q2’17 there were $2.0 million in reductions to operating expenses related to changes in prior period property tax estimates.
⁽⁶⁾	Annualized turnover is defined as the number of apartment homes turned over during the quarter, annualized, divided by the total number of apartment homes.
⁽⁷⁾	Financial occupancy is defined as the percentage resulting from dividing actual rental revenue by total potential rental revenue (actual rent for occupied apartment homes plus market rent for vacant apartment homes).

See Company’s 10-K and 10-Q for additional disclosures

S-8

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

Same-Property Results by County - Second Quarter 2017 vs. Second Quarter 2016 and First Quarter 2017

(Dollars in thousands, except average monthly rental rates)

						Average Monthly Rental Rate							Financial Occupancy									Gross Revenues							Sequential Gross Revenues
Region - County	Apartment Homes		Q2 '17 % of Actual NOI			Q2 '17		Q2 '16		% Change			Q2 '17			Q2 '16			% Change			Q2 '17		Q2 '16		% Change			Q1 '17		% Change

Southern California
Los Angeles County		8,523		19.3	%	$	2,364	$	2,293		3.1	%		95.9	%		95.7	%		0.2	%	$	60,389	$	58,769		2.8	%	$	60,392		0.0	%
Orange County		5,553		11.5	%		2,097		2,001		4.8	%		96.3	%		96.1	%		0.2	%		35,219		33,609		4.8	%		34,962		0.7	%
San Diego County		4,961		8.8	%		1,834		1,755		4.5	%		96.1	%		95.9	%		0.2	%		27,685		26,530		4.4	%		27,549		0.5	%
Ventura County		2,577		4.6	%		1,714		1,634		4.9	%		96.9	%		96.3	%		0.6	%		13,660		12,993		5.1	%		13,593		0.5	%
Other Southern CA		384		0.5	%		1,251		1,209		3.5	%		97.9	%		97.2	%		0.7	%		1,523		1,440		5.8	%		1,475		3.3	%
Total Southern California		21,998		44.7	%		2,081		2,002		3.9	%		96.2	%		95.9	%		0.3	%		138,476		133,341		3.9	%		137,971		0.4	%

Northern California
Santa Clara County		5,925		17.0	%		2,671		2,639		1.2	%		97.0	%		96.4	%		0.6	%		48,471		47,299		2.5	%		48,004		1.0	%
Alameda County		2,954		7.4	%		2,468		2,422		1.9	%		95.8	%		95.8	%		0.0	%		22,091		21,713		1.7	%		21,667		2.0	%
San Mateo County		1,830		5.5	%		2,834		2,753		2.9	%		96.7	%		96.1	%		0.6	%		15,881		15,332		3.6	%		15,861		0.1	%
Contra Costa County		2,270		5.4	%		2,267		2,208		2.7	%		97.3	%		96.6	%		0.7	%		15,751		15,274		3.1	%		15,635		0.7	%
San Francisco		817		1.9	%		2,486		2,422		2.6	%		95.4	%		94.7	%		0.7	%		6,092		5,833		4.4	%		5,994		1.6	%
Other Northern CA		96		0.3	%		2,738		2,495		9.7	%		98.5	%		97.7	%		0.8	%		814		726		12.1	%		801		1.7	%
Total Northern California		13,892		37.5	%		2,573		2,524		1.9	%		96.7	%		96.2	%		0.5	%		109,100		106,177		2.8	%		107,962		1.1	%

Seattle Metro		10,238		17.8	%		1,768		1,665		6.2	%		96.2	%		95.9	%		0.3	%		57,086		53,575		6.6	%		56,192		1.6	%

Total Same-Property		46,128		100.0	%	$	2,160	$	2,084		3.6	%		96.4	%		96.0	%		0.4	%	$	304,662	$	293,093		3.9	%	$	302,125		0.8	%

See Company’s 10-K and 10-Q for additional disclosures

S-9

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

Same-Property Revenue Results by County - Six months ended June 30, 2017 vs. Six months ended June 30, 2016

(Dollars in thousands, except average monthly rental rates)

			YTD			Average Monthly Rental Rate							Financial Occupancy									Gross Revenues
Region - County	Apartment Homes		2017 % of Actual NOI			YTD 2017		YTD 2016		% Change			YTD 2017			YTD 2016			% Change			YTD 2017		YTD 2016		% Change

Southern California
Los Angeles County		8,523		19.3	%	$	2,353	$	2,281		3.2	%		96.0	%		95.9	%		0.1	%	$	120,782	$	117,076		3.2	%
Orange County		5,553		11.4	%		2,084		1,986		4.9	%		96.4	%		96.1	%		0.3	%		70,181		66,713		5.2	%
San Diego County		4,961		8.9	%		1,822		1,741		4.7	%		96.2	%		95.8	%		0.4	%		55,233		52,512		5.2	%
Ventura County		2,577		4.7	%		1,703		1,624		4.9	%		97.1	%		96.3	%		0.8	%		27,254		25,807		5.6	%
Other Southern CA		384		0.5	%		1,239		1,193		3.9	%		96.9	%		97.0	%		-0.1	%		2,998		2,845		5.4	%
Total Southern California		21,998		44.8	%		2,070		1,989		4.1	%		96.3	%		96.0	%		0.3	%		276,448		264,953		4.3	%

Northern California
Santa Clara County		5,925		16.8	%		2,660		2,618		1.6	%		97.1	%		96.4	%		0.7	%		96,475		93,691		3.0	%
Alameda County		2,954		7.2	%		2,460		2,402		2.4	%		95.3	%		95.7	%		-0.4	%		43,758		42,934		1.9	%
San Mateo County		1,830		5.5	%		2,816		2,734		3.0	%		97.2	%		96.0	%		1.3	%		31,742		30,452		4.2	%
Contra Costa County		2,270		5.4	%		2,255		2,185		3.2	%		97.3	%		96.6	%		0.7	%		31,386		30,244		3.8	%
San Francisco		817		1.9	%		2,479		2,414		2.7	%		95.3	%		94.1	%		1.3	%		12,085		11,586		4.3	%
Other Northern CA		96		0.3	%		2,738		2,477		10.5	%		98.0	%		98.0	%		0.0	%		1,614		1,435		12.5	%
Total Northern California		13,892		37.1	%		2,562		2,504		2.3	%		96.7	%		96.1	%		0.6	%		217,060		210,342		3.2	%

Seattle Metro		10,238		18.1	%		1,751		1,642		6.6	%		96.4	%		95.8	%		0.6	%		113,279		105,648		7.2	%

Total Same-Property		46,128		100.0	%	$	2,147	$	2,067		3.9	%		96.4	%		96.0	%		0.4	%	$	606,787	$	580,943		4.4	%

See Company’s 10-K and 10-Q for additional disclosures

S-9.1

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

Same-Property Operating Expenses - Quarter and Year to Date as of June 30, 2017 and 2016

(Dollars in thousands)

	Based on 46,128 apartment homes
	Q2 '17		Q2 '16		% Change			% of Op. Ex.			YTD 2017		YTD 2016		% Change			% of Op. Ex.

Same-property operating expenses:
Real estate taxes	$	32,392	$	31,195		3.8	%		35.9	%	$	63,988	$	62,570		2.3	%		35.4	%
Maintenance and repairs		16,869		16,870		0.0	%		18.7	%		34,267		33,484		2.3	%		19.0	%
Administrative		16,048		16,326		-1.7	%		17.8	%		32,017		31,868		0.5	%		17.7	%
Utilities		15,119		14,116		7.1	%		16.7	%		30,126		28,104		7.2	%		16.7	%
Management fees		6,928		6,943		-0.2	%		7.7	%		13,857		13,880		-0.2	%		7.7	%
Insurance		2,952		2,943		0.3	%		3.2	%		6,508		5,884		10.6	%		3.5	%
Total same-property operating expenses	$	90,308	$	88,393		2.2	%		100.0	%	$	180,763	$	175,790		2.8	%		100.0	%

See Company’s 10-K and 10-Q for additional disclosures

S-10

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

Development Pipeline - June 30, 2017
(Dollars in millions, except per apartment home amounts in thousands and except in footnotes)

Project Name	Location	Ownership %			Estimated Apartment Homes		Estimated Commercial sq. feet		Incurred to Date		Remaining Costs		Estimated Total Cost		Essex Est. Total Cost ⁽¹⁾			Cost per Apartment Home ⁽²⁾		Average % Occupied ⁽³⁾			% Leased ⁽³⁾			Construction Start	Initial Occupancy	Stabilized Operations

Development Projects - Consolidated ⁽⁴⁾
Station Park Green - Phases I & II ⁽⁵⁾	San Mateo, CA		100	%		320		30,000	$	106	$	133	$	239	$	239		$	693		0.0	%		0.0	%	Q3 2015	Q1 2018	Q4 2018
Gateway Village ⁽⁶⁾	Santa Clara, CA		100	%		476		-		54		172		226		226			475		0.0	%		0.0	%	Q3 2016	Q3 2018	Q4 2019
Total Development Projects - Consolidated						796		30,000		160		305		465		465			584

Land Held for Future Development - Consolidated
Other Projects ⁽⁵⁾⁽⁷⁾	Various		100	%						115		-		115		115
Total Development Pipeline - Consolidated						796		30,000		275		305		580		580

Development Projects - Joint Venture ⁽⁴⁾
The Galloway (at Hacienda)	Pleasanton, CA		55	%		251		-		83		3		86		47			343		58.0	%		69.0	%	Q1 2015	Q1 2017	Q1 2018
Century Towers	San Jose, CA		50	%		376		2,006		155		17		172		86			456		54.0	%		58.8	%	Q3 2014	Q1 2017	Q1 2018
500 Folsom ⁽⁸⁾	San Francisco, CA		50	%		545		6,000		131		284		415		208			751		0.0	%		0.0	%	Q4 2015	Q2 2019	Q4 2020
Total Development Projects - Joint Venture						1,172		8,006		369		304		673		341		$	569

Land Held for Future Development - Joint Venture			50	%						13		1		14		7
Total Development Pipeline - Joint Venture						1,172		8,006		382		305		687		348

Grand Total - Development Pipeline						1,968		38,006	$	657	$	610	$	1,267		928
Essex Cost Incurred to Date - Pro Rata																(470	)
Essex Remaining Commitment															$	458

⁽¹⁾	The Company’s share of the estimated total costs of the project.
⁽²⁾	Net of the estimated allocation to the retail component of the project.
⁽³⁾	Calculations are based on multifamily operations only and are as of June 30, 2017. As of July 24, 2017, The Galloway (at Hacienda) was 78% leased and 70% occupied and Century Towers was 69% leased and 63% occupied.
⁽⁴⁾	For the second quarter of 2017, the Company’s cost includes $3.0 million of capitalized interest, $1.4 million of capitalized overhead and $0.4 million of development fees (such development fees reduced G&A expenses).
⁽⁵⁾	Development of phases one and two are reflected under Development Projects - Consolidated. Costs incurred for phases three and four, which consist of 279 apartment homes, are included in Land Held for Future Development - Consolidated.
⁽⁶⁾	Cost incurred to date does not include a deduction of $4.7 million for accumulated depreciation recorded during the period when the property was held as a retail operating asset.
⁽⁷⁾	Cost incurred to date does not include a deduction of $6.3 million for accumulated depreciation recorded during the period when one property was held as a retail operating asset.
⁽⁸⁾	Estimated costs incurred to date and total cost is net of a projected value for low income housing tax credit proceeds and the value of the tax exempt bond structure.

See Company’s 10-K and 10-Q for additional disclosures

S-11

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

Redevelopment Pipeline - June 30, 2017
(Dollars in thousands)

Region/Project Name	Apartment Homes		Total Incurred To Date		Estimated Remaining Cost		Estimated Total Cost		Project Start Date	NOI
										For the six months ended
										2017		2016

Same-Property - Redevelopment Projects ⁽¹⁾
Southern California
Hamptons		215	$	14,700	$	8,900	$	23,600	Q1 2014
Kings Road		196		1,700		10,500		12,200	Q4 2016
The Palms at Laguna Niguel		460		1,600		6,600		8,200	Q4 2016
Northern California
Crow Canyon		400		1,500		5,300		6,800	Q1 2017
Total Same-Property - Redevelopment Projects		1,271	$	19,500	$	31,300	$	50,800		$	11,362	$	10,541

Non-Same Property - Redevelopment Projects
Southern California
Bunker Hill Towers		456	$	62,900	$	24,500	$	87,400	Q3 2013
Total Non-Same Property - Redevelopment Projects		456	$	62,900	$	24,500	$	87,400		$	3,956	$	3,514

⁽¹⁾	Redevelopment activities are ongoing at these communities, but the communities have stabilized operations, therefore results are classified in same-property results.

See Company’s 10-K and 10-Q for additional disclosures

S-12

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

Capital Expenditures - June 30, 2017

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

Revenue Generating Capital Expenditures^{(1) (2)}		Q2 2017		Q1 2017		Q4 2016		Q3 2016	Trailing 4 Quarters
Same-property portfolio	$	16,519	$	9,345	$	14,910	$	13,534	$	54,308
Non-same property portfolio		3,987		2,310		5,114		6,691		18,102
Total revenue generating capital expenditures	$	20,506	$	11,655	$	20,024	$	20,225	$	72,410

Number of same-property interior renovations completed		760		589		511		731		2,591
Number of total consolidated interior renovations completed		768		594		581		855		2,798

Non-Revenue Generating Capital Expenditures ⁽³⁾		Q2 2017		Q1 2017		Q4 2016		Q3 2016	Trailing 4 Quarters

Non-revenue generating capital expenditures ⁽⁴⁾	$	16,473	$	9,381	$	19,224	$	18,520	$	63,598
Average apartment homes in quarter		49,429		48,900		48,712		49,053		49,024
Capital expenditures per apartment homes in the quarter	$	333	$	192	$	395	$	378	$	1,297

⁽¹⁾	The Company incurred $0.3 million of capitalized interest, $2.9 million of capitalized overhead and $0.2 million of co-investment fees related to redevelopment in Q2 2017.
⁽²⁾	Represents revenue generating or expense saving expenditures such as full-scale redevelopments shown on page S-12, interior unit turn renovations, enhanced amenities and certain resource management initiatives.
⁽³⁾	Represents roof replacements, paving, building and mechanical systems, exterior painting, siding, etc.
⁽⁴⁾	Non-revenue generating capital expenditures does not include expenditures incurred due to changes in governmental regulations that the Company would not have incurred otherwise.

See Company’s 10-K and 10-Q for additional disclosures

S-12.1

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

Co-investments - June 30, 2017	Essex Ownership Percentage	Apartment Homes		Total Undepreciated Book Value		Debt Amount		Essex Book Value			Weighted Average Borrowing Rate			Remaining Term of Debt (in Years)		For the Three Months Ended June 30, 2017			For the Six Months Ended June 30, 2017
(Dollars in thousands)


Operating Non-Consolidated Joint Ventures																NOI

Wesco I, LLC	50.0%		2,275	$	571,981	$	302,464	$	92,237			3.8	%		8.0	$	9,812		$	19,380
Wesco III, LLC	50.0%		993		251,126		132,859		47,496			3.4	%		3.5		4,021			7,919
Wesco IV, LLC	50.0%		1,116		305,380		198,000		40,272			3.7	%		4.4		4,933			9,816
BEXAEW, LLC	50.0%		2,191		406,525		280,000		46,728			3.5	%		4.4		7,232			14,204
BEX II, LLC⁽³⁾	50.1%		871		307,113		130,373		(36,025	)		3.2	%		4.4		4,196			8,191
CPPIB	50.0% - 55.0%		2,232		862,912		-		461,872			-			-		12,812			24,716
Other	50.0% - 55.0%		753		273,351		185,867		41,053			3.1	%		3.5		3,921			7,743
Total Operating Non-Consolidated Joint Ventures			10,431	$	2,978,388	$	1,229,563	$	693,633			3.5	%		5.1	$	46,927		$	91,969
Development Non-Consolidated Joint Ventures ⁽¹⁾	50.0% - 55.0%		1,172		382,103		93,878		126,119			3.3	%		4.4		194			250
Total Non-Consolidated Joint Ventures			11,603	$	3,360,491	$	1,323,441	$	819,752							$	47,121		$	92,219

																Essex Portion of NOI and Expenses
NOI																$	24,392		$	47,567
Depreciation																	(13,627	)		(26,481	)
Interest expense and other																	(6,370	)		(11,438	)
Net income from operating co-investments																$	4,395		$	9,648


											Weighted Average Preferred Return			Weighted Average Expected Term
											Weighted Average Preferred Return			Weighted Average Expected Term		Income from Preferred Equity Investments
Income from preferred equity investments																$	5,665		$	11,311
Income from early redemption of preferred equity investments																	248			248
Preferred Equity Investments⁽²⁾								$	225,307			10.6	%		2.7	$	5,913		$	11,559

Total Co-investments								$	1,045,059							$	10,308		$	21,207

⁽¹⁾	The Company has interests in three development co-investments, which are detailed on S-11.
⁽²⁾	As of June 30, 2017, the Company has invested in thirteen preferred equity investments.
⁽³⁾	This co-investment was classified as a liability as of June 30, 2017.

See Company’s 10-K and 10-Q for additional disclosures

S-13

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

Assumptions for 2017 FFO Guidance Range

Q2 2017 Earnings Results Supplement

The guidance projections below are based on current expectations and are forward-looking. See page S-14.1 for the reconciliations of earnings per share (“EPS”) to FFO per share and Core FFO per share. The guidance on this page is given for Net Operating Income and Total and Core FFO. See pages S-17.1 to S-17.4 for the definitions of non-GAAP financial measures and other terms.

($’s in thousands, except share and per share data)⁽¹⁾	Six Months Ended June 30, 2017			2017 Full-Year Guidance Range
	Six Months Ended June 30, 2017			Low End			High End			Comments About Guidance
Net Operating Income (“NOI”)
Total NOI from consolidated communities	$	472,156		$	939,500		$	951,500		Includes actual results through June and the revised range of same-property NOI growth of 3.3% to 4.6%.
Management Fees		4,532			8,900			9,300

Interest Expense

Interest expense, before capitalized interest		(112,885	)		(227,800	)		(226,200	)
Interest capitalized		6,585			13,400			14,400		Updated to reflect timing of development spend.
Net interest expense		(106,300	)		(214,400	)		(211,800	)

Recurring Income and Expenses
Interest and other income		10,483			21,700			22,300

FFO from co-investments		47,440			95,600			98,100		Reflects actual results through June and investment activity completed through July.
General and administrative expense		(20,938	)		(41,400	)		(42,600	)
Non-controlling interest		(5,106	)		(10,600	)		(10,200	)
Total recurring income and expenses		31,879			65,300			67,600
Non-Core Income and Expenses
Gain on sales of marketable securities		1,618			1,618			1,618
Acquisition and investment related costs		(830	)		(1,100	)		(1,700	)
Other non-core adjustments		293			293			293
Total non-core income and expenses		1,081			811			211

Funds from Operations	$	403,348		$	800,111		$	816,811

Funds from Operations per diluted share	$	5.93		$	11.71		$	11.96

% Change - Funds from Operations		8.8	%		5.3	%		7.6	%

Core Funds from Operations (excludes non-core items)	$	402,267		$	799,300		$	816,600

Core Funds from Operations per diluted share	$	5.91		$	11.70		$	11.96

% Change - Core Funds from Operations		9.0	%		6.0	%		8.3	%

EPS - Diluted	$	3.80		$	5.75		$	6.00

Weighted average shares outstanding - FFO calculation		68,058			68,300			68,300

⁽¹⁾	All non-core items are excluded from the YTD actuals and included in the non-core income and expense section of the FFO reconciliation.

See Company’s 10-K and 10-Q for additional disclosures

S-14

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

Reconciliation of Projected EPS, FFO and Core FFO per diluted share

Projected EPS, FFO and Core FFO per diluted share

With respect to the Company’s guidance regarding its projected FFO and Core FFO for the third quarter of 2017 and full-year 2017, which guidance is set forth in the earnings release for the second quarter of 2017 and on page S-14 of this supplement, a reconciliation of projected net income per share to projected FFO per share and projected Core FFO per share, as set forth in such guidance, is presented in the table below.

				2017 Guidance Range⁽¹⁾
	Six Months Ended June 30, 2017				3rd Quarter 2017						Full-Year 2017
	Six Months Ended June 30, 2017				Low			High			Low			High
EPS - diluted	$	3.80			$	0.96		$	1.06		$	5.75		$	6.00
Conversion from GAAP share count		(0.12	)			(0.03	)		(0.03	)		(0.20	)		(0.20	)
Depreciation & amortization expense		3.81				1.91			1.91			7.65			7.65
Noncontrolling interests related to Operating Partnership units		0.13				0.03			0.03			0.19			0.19
Gain on sale of real estate and remeasurement of co-investment		(1.69	)			-			-			(1.68	)		(1.68	)
FFO per share - diluted		5.93				2.87			2.97			11.71			11.96
Gain on sale of marketable securities		(0.02	)			-			-			(0.02	)		(0.02	)
Acquisition and investment related costs		0.01				0.01			0.01			0.02			0.03
Other non-core adjustments		(0.01	)			-			-			(0.01	)		(0.01	)
Core FFO per share - diluted	$	5.91			$	2.88		$	2.98		$	11.70		$	11.96

⁽¹⁾	2017 Guidance Range excludes projected gain on sale of real estate and land and projected gain on sale of marketable securities until they are realized within the reporting period presented in this report.

See Company’s 10-K and 10-Q for additional disclosures

S-14.1

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

Summary of Apartment Community Acquisitions and Dispositions Activity
Year to date as of June 30, 2017
(Dollars in thousands, except average rent amounts and in footnotes)

Acquisitions				Essex
		Apartment		Ownership					Contract		Price per		Average
Property Name	Location	Homes		Percentage			Entity	Date	Price		Apartment Home		Rent

Palm Valley⁽¹⁾	San Jose, CA		1,098		100.0	%	EPLP	Jan-17	$	183,000	$	333	$	2,566
Sage⁽²⁾	San Jose, CA		230		40.5	%	EPLP	Mar-17		90,000		391		2,485
	Q1 2017		1,328						$	273,000	$	343


Dispositions				Essex
		Apartment		Ownership					Sales		Price per
Property Name	Location	Homes		Percentage			Entity	Date	Price		Apartment Home

Jefferson at Hollywood	Hollywood, CA		270		100.0	%	EPLP	Jan-17	$	132,500	$	491
	Q1 2017		270						$	132,500	$	491

⁽¹⁾

In January 2017, the Company purchased the joint venture partner’s 50.0% membership interest in the Palm Valley co-investment for a purchase price of $183.0 million.

⁽²⁾

In March 2017, the Company converted its existing $15.3 million preferred equity investment in Sage at Cupertino into a 40.5% equity ownership interest in the property. The Company issued DownREIT units to the seller for the remaining equity based on an estimated property valuation of $90.0 million and an encumbrance of $52.0 million of mortgage debt. Based on a VIE analysis performed by the Company the property was consolidated.

See Company’s 10-K and 10-Q for additional disclosures

S-15

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

2017 MSA Level Forecast: Supply, Jobs, and Apartment Market Conditions
	Residential Supply ⁽¹⁾												Job Forecast ⁽²⁾					Market Forecast ⁽³⁾
Market	New MF Supply		New SF Supply		Total Supply		% of MF Supply to MF Stock			% of Total Supply to Total Stock			Est. New Jobs		% Growth			Economic Rent Growth

Los Angeles		10,750		6,550		17,300		0.7	%		0.5	%		69,800		1.6	%		3.7	%
Orange		6,550		4,650		11,200		1.6	%		1.0	%		15,850		1.0	%		3.5	%
San Diego		3,200		3,900		7,100		0.7	%		0.6	%		24,150		1.7	%		4.5	%
Ventura		450		375		825		0.7	%		0.3	%		7,500		2.5	%		4.5	%
So. Cal.		20,950		15,475		36,425		1.0	%		0.6	%		117,300		1.6	%		3.9	%

San Francisco		4,750		700		5,450		1.3	%		0.8	%		22,500		2.1	%		2.2	%
Oakland		2,850		5,250		8,100		0.9	%		0.8	%		19,000		1.7	%		2.4	%
San Jose		3,250		2,350		5,600		1.4	%		0.8	%		17,300		1.6	%		2.6	%
No. Cal.		10,850		8,300		19,150		1.2	%		0.8	%		58,800		1.7	%		2.5	%

Seattle		10,950		8,650		19,600		2.3	%		1.6	%		44,600		2.7	%		4.6	%

Weighted Average ⁽⁴⁾		42,750		32,425		75,175		1.3	%		0.9	%		220,700		1.8	%		3.5	%

All data are based on Essex Property Trust, Inc. forecasts.

U.S. Economic Assumptions: 2017 G.D.P. Growth: 2.2%, 2017 Job Growth: 1.6%

⁽¹⁾	New Residential Supply: total supply includes the Company’s estimate of actual multifamily deliveries including properties with 50+ units and excludes student, senior and 100% affordable housing communities. Single family estimates based on an average trailing 12 month single family permit. Previous presentations had included multifamily deliveries of 100+ units and excluded student, senior and 100% affordable housing.

⁽²⁾	Job Forecast: refers to the difference between total non-farm industry employment (not seasonally adjusted) projected 4Q over 4Q, expressed as total new jobs and growth rates.

⁽³⁾	Market Forecast: the estimated rent growth represents the forecasted change in effective market rents for full year 2017 vs 2016 (excludes submarkets not targeted by Essex).

⁽⁴⁾	Weighted Average: markets weighted by scheduled rent in the Company’s Portfolio.

See Company’s 10-K and 10-Q for additional disclosures

S-16

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

Reconciliations of Non-GAAP Financial Measures and Other Terms

Adjusted EBITDA Reconciliation

Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) is a component of the credit ratio, “Net Indebtedness Divided by Adjusted EBITDA”, presented on page S-6, in the section titled “Selected Credit Ratios”, and it is not intended to be a measure of free cash flow for our management’s discretionary use, as it does not consider certain cash requirements such as income tax payments, debt service requirements, capital expenditures and other fixed charges. Adjusted EBITDA is not a recognized measurement under U.S. generally accepted accounting principles (“GAAP”). Because not all companies use identical calculations, our presentation of Adjusted EBITDA may not be comparable to similarly titled measures of other companies.

The reconciliation of Adjusted EBITDA to Net Income available to common stockholders is presented in the table below (Dollars in thousands):

	Three Months Ended June 30, 2017
Net income available to common stockholders	$	70,759
Add: Net income attributable to noncontrolling interest		5,036
Net Income		75,795
Adjustments:
Acquisition and investment related costs		274
Depreciation and amortization		117,939
Equity income from co-investments		(4,395	)
Gain on sale of marketable securities		(13	)
Gain on remeasurement of co-investment		(2,159	)
Income from early redemption of preferred equity investments		(248	)
Interest expense, net ⁽¹⁾		54,281
Adjusted EBITDA	$	241,474

⁽¹⁾	Interest expense, net includes items such as gains on derivatives and the amortization of deferred charges.

Encumbered

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

Funds From Operations (“FFO”)

FFO, as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), is generally considered by industry analysts as an appropriate measure of performance of an equity REIT. Generally, FFO adjusts the net income of equity REITs for non-cash charges such as depreciation and amortization of rental properties, impairment charges, gains on sales of real estate and extraordinary items. Management considers FFO and FFO which excludes merger, integration and acquisition costs and items that are not routine or not related to the Company’s core business activities, which is referred to as “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 the operating performance and ability of a REIT to incur and service debt and to fund acquisitions and other capital expenditures and the ability to pay dividends.

See Company’s 10-K and 10-Q for additional disclosures

S-17.1

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

Reconciliations of Non-GAAP Financial Measures and Other Terms

Funds From Operations (“FFO”) - continued

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

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

Interest Expense, Net

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

	Three Months Ended June 30, 2017			Six Months Ended June 30, 2017
Interest expense	$	56,812		$	111,395
Adjustments:
Total return swap income		(2,531	)		(5,115	)
Interest expense, net	$	54,281		$	106,280

Net Indebtedness Divided by Adjusted EBITDA

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

Total debt, net	$	5,663,395
Adjustments:
Unamortized premiums, discounts, and debt issuance costs		(10,958	)
Cash and cash equivalents-unrestricted		(183,885	)
Marketable securities		(151,995	)
Net Indebtedness	$	5,316,557

Adjusted EBITDA, annualized ⁽¹⁾	$	965,896
Other EBITDA normalization adjustments, net, annualized ⁽²⁾		(8,312	)
Adjusted EBITDA, normalized and annualized	$	957,584

Net Indebtedness Divided by Adjusted EBITDA, normalized and annualized		5.6

⁽¹⁾	Based on the amount for the most recent quarter, multiplied by four.
⁽²⁾	Adjustments made for properties acquired or disposed of during the quarter, multiplied by four.

See Company’s 10-K and 10-Q for additional disclosures

S-17.2

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

Reconciliations of Non-GAAP Financial Measures and Other Terms

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

Net Operating Income (“NOI”) and same-property NOI are considered by management to be an 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 revenue less same-property operating expenses, including property taxes. Please see the reconciliation of earnings from operations to NOI and same-property NOI, which in the table below is the NOI for stabilized properties consolidated by the Company for the periods presented (Dollars in thousands):

	Three Months Ended June 30, 2017			Three Months Ended June 30, 2016			Six Months Ended June 30, 2017			Six Months Ended June 30, 2016
Earnings from operations	$	112,247		$	105,873		$	221,478		$	205,868
Adjustments:
Depreciation and amortization		117,939			109,673			233,442			219,380
Management and other fees from affiliates		(2,296	)		(2,028	)		(4,532	)		(4,052	)
General and administrative		10,337			9,698			20,938			18,880
Acquisition and investment related costs		274			267			830			1,095
NOI		238,501			223,483			472,156			441,171
Less: Non-same property NOI		(24,147	)		(18,783	)		(46,132	)		(36,018	)
Same-Property NOI	$	214,354		$	204,700		$	426,024		$	405,153

Public Bond Covenants

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

The ratios set forth on page S-6 in the section titled “Public Bond Covenants” are provided only to show the Company’s compliance with certain specified covenants that are contained in indentures related to the Company’s issuance of Senior Notes, which indentures are filed by the Company with the SEC. See, for example, the Indenture dated April 10, 2017, filed by the Company as Exhibit 4.1 to the Company’s Form 8-K, filed on April 10, 2017. These ratios should not be used for any other purpose, including without limitation to evaluate the Company’s financial condition or results of operations, nor do they indicate the Company’s covenant compliance as of any other date or for any other period. The capitalized terms in the disclosure are defined in the indentures filed by the Company with the SEC and may differ materially from similar terms used by other companies that present information about their covenant compliance.

Secured Debt

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

See Company’s 10-K and 10-Q for additional disclosures

S-17.3

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

Reconciliations of Non-GAAP Financial Measures and Other Terms

Unencumbered NOI to Adjusted Total NOI

This ratio is presented on page S-6 in the section titled “Selected Credit Ratios”. Unencumbered NOI means the sum of NOI for those real estate assets which are not subject to an Encumbrance securing Debt. The ratio of Unencumbered NOI to Adjusted Total NOI for the three months ended June 30, 2017, annualized, is calculated by dividing Unencumbered NOI, annualized for the three months ended June 30, 2017 and as further adjusted for pro forma NOI for properties acquired or sold during the recent quarter, by Adjusted Total NOI as annualized. The calculation and reconciliation of NOI is set forth in “Net Operating Income (“NOI”) and Same-Property NOI Reconciliation” above. This ratio is presented by the Company because it provides rating agencies and investors an additional means of comparing the Company’s ability to service debt obligations to that of other companies. The calculation of this ratio is presented in the table below (Dollars in thousands):

	Annualized Q2'17 ⁽¹⁾
NOI	$	954,004
Adjustments:
Other, net⁽²⁾		(11,915	)
Adjusted Total NOI		942,089
Less: Encumbered NOI		(288,159	)
Unencumbered NOI	$	653,930

Encumbered NOI	$	288,159
Unencumbered NOI		653,930
Adjusted Total NOI	$	942,089

Unencumbered NOI to Adjusted Total NOI		69	%

⁽¹⁾	This table is based on the amounts for the most recent quarter, multiplied by four.
⁽²⁾	Includes intercompany eliminations pertaining to self-insurance and other expenses.

See Company’s 10-K and 10-Q for additional disclosures

S-17.4

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