What changed in this filing

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Item 1A. Risk Factors

2026-02-20 compared with 2025-02-21 · 106 added, 104 removed, 327 unchanged (39% of the section changed)

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Income and growth from the communities may be further materially adversely affected by, among other things, the following factors, in addition to the other risk factors listed in this Item 1A:

• changes in the general or local economic climate that could affect demand for housing, including an increase in the use of new technologies and artificial intelligence to replace workers, and other events negatively impacting local employment rates, tenant dispersion, wages and the local economy;

• changes in demand for rental housing due to a variety of factors, including changing demographics or policies governing legal immigration, which could lead to a relative decrease in the renting population;

• changes in the general or local economic climate that could affect demand for housing, including changing demographics or policies governing legal immigration, which could lead to a relative decrease in the renting population, an increase in the use of new technologies and artificial intelligence to replace workers, and other events negatively impacting local employment rates, tenant dispersion, wages and the local economy;

• changes in supply and cost of housing;

• changes in economic conditions, such as high or sustained inflationary periods in which our operating and financing costs may increase at a rate greater than our ability to increase rents, thereby compressing our operating margins which may have a material adverse effect on our business, or deflationary periods where rents may decline more quickly relative to operating and financing costs;

• the appeal and desirability of our communities to tenants relative to other housing alternatives, including the size and amenity offerings, safety and location convenience, and our technology offerings.

• the appeal and desirability of our communities to tenants relative to other housing alternatives, including cost, size and amenity offerings, safety and location convenience, and our technology offerings.

Short-term leases expose us to the effects of declining market rents, and the Company may be unable to renew leases or relet units as leases expire.

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Economic environments can negatively impact the Company’s liquidity and results of operations.

In the event of a recession or other negative economic effects, including slowing job growth in key markets, the Company could incur reductions in rental and occupancy rates, property valuations and increases in costs.

In the event of a recession, continued geopolitical uncertainty or other negative economic effects, including slowing job growth in key markets, the Company could incur reductions in rental and occupancy rates, property valuations and increases in costs.

Any such recession or economic downturn may also affect consumer confidence and spending and negatively impact the volume and pricing of real estate transactions, which could materially adversely affect the Company’s liquidity and its ability to vary its portfolio promptly in response to changes to the economy.

Rent control, or future or potential changes in applicable laws, or noncompliance with applicable laws, could materially adversely affect the Company’s stock price, business, financial condition and results of operations, and/or expose us to liability.

Rent control, eviction moratoria or potential changes in applicable laws, or noncompliance with applicable laws, could materially adversely affect the Company’s stock price, business, financial condition and results of operations, and/or expose us to liability.

The Company must own, operate, manage, acquire, develop and redevelop its properties in compliance with numerous federal, state and local laws and regulations, some of which may conflict with one another or be subject to limited judicial or regulatory interpretations.

These laws and regulations may include zoning laws, building codes, rent control or stabilization laws, emergency orders, laws benefiting disabled persons, federal, state and local tax laws, landlord tenant laws, environmental laws, employment laws, immigration laws and other laws regulating housing, revenue management software and practices, or laws that are generally applicable to the Company’s business and operations.

These laws and regulations include zoning laws, building codes, rent control or stabilization laws, fee transparency requirements, emergency orders, laws benefiting disabled persons, federal, state and local tax laws, landlord tenant laws, environmental laws, employment laws, immigration laws and other laws regulating housing, revenue management software and practices, or laws that are generally applicable to the Company’s business and operations.

Changes in, or noncompliance with, laws and regulations could expose the Company to liability and could require the Company to make significant unanticipated expenditures to address noncompliance.

Existing and future rent control or rent stabilization laws and regulations, along with similar laws and regulations that expand tenants’ rights or impose additional costs on landlords, including any such laws or regulations imposed in response to natural disasters and/or media attention on the housing industry, may reduce rental revenues or increase operating costs and thus such laws and regulations may materially adversely affect our stock price, business, financial condition and results of operations.

Such laws and regulations limit our ability to charge market rents, increase rents, evict tenants or recover increases in our

operating expenses and could reduce the value of our communities or make it more difficult for us to dispose of properties in certain circumstances.

Expenses associated with our investment in these communities, such as debt service, real estate taxes, insurance and maintenance costs, are generally not reduced when circumstances cause a reduction in rental income from the community.

Future pandemics could materially affect our business, financial condition, stock price, and results of operations.

Due to the national and global impacts of a pandemic or other health crisis, such as the COVID-19 pandemic, the Company may be subject to eviction moratoria, temporary or permanent legislative restrictions, limits on rent increases and collection efforts, or may be legally required to, or otherwise agree to, restructure tenants’ rent obligations on less favorable terms than those currently in place.

Existing and future eviction moratoria, rent control or rent stabilization laws and regulations, fee transparency requirements, along with similar laws and regulations that expand tenants’ rights or impose additional costs on landlords, including any such laws or regulations imposed on the housing industry in response to natural disasters, national and global pandemic or other any other health crisis, or local or national states of emergency, may reduce rental revenues or increase operating costs and thus such laws and regulations may materially adversely affect our stock price, business, financial condition and results of operations.

Such laws and regulations limit our ability to charge market rents, increase rents, evict tenants, limit our ability to

collect rent, or recover increases in our operating expenses and could reduce the value of our communities or make it more difficult for us to dispose of communities in certain circumstances.

Following the COVID-19 pandemic, governments have demonstrated a greater interest in eviction moratoria and strict housing controls.

We may be legally required to, or otherwise agree to, restructure tenants’ rent obligations on less favorable terms than those currently in place.

In the event of tenant nonpayment, default or bankruptcy, we may incur costs in protecting our investment, collecting delinquent rents, and re-leasing our property and we may have limited ability to renew existing leases or sign new leases at levels consistent with market rents.

A pandemic or other health crisis may cause increased costs, lower profitability and market fluctuations that may affect our ability to obtain necessary funds for our business or negatively impact the ability of the Company’s third-party mezzanine loan borrowers and preferred equity investment sponsors to repay the Company.

Expenses associated with our investment in communities impacted by such laws and regulations, such as debt service, real estate taxes, insurance and maintenance costs, are generally not reduced when circumstances cause a reduction in rental income from the community.

This could lead to lower profitability and market fluctuations that may affect our ability to obtain necessary funds for our business.

Acquisitions of communities involve various risks and uncertainties and may fail to meet expectations.

The Company’s acquisition of apartment communities may fail to meet the Company’s expectations due to factors including inaccurate estimates of future income, expenses, and the costs of improvements or redevelopment, which may be exacerbated by the lack of reliable market data due to inconsistent deal flow.

Further, the value and operational performance of an apartment community may be diminished if neighborhood changes occur before we are able to redevelop or sell the community.

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The use of equity financing for future developments or acquisitions could dilute the interest of the Company’s existing stockholders.

If the Company finances new acquisitions under existing lines of credit, there is a risk that, unless the Company obtains substitute financing, the Company may not be able to undertake additional borrowing for further acquisitions or developments or such borrowing may not be available on advantageous terms.

If the Company finances new acquisitions under existing lines of credit or commercial paper, there is a risk that, unless the Company obtains substitute financing or capital sources, the Company may not be able to undertake additional borrowing for further acquisitions or developments or such borrowing may not be available on advantageous terms.

Development and redevelopment activities may be delayed, not completed, and/or not achieve expected results.

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• occupancy rates and rents at a completed project may be less than anticipated;

• expenses may be higher than anticipated, including, without limitation, due to inflationary pressures (including potentially exacerbated by the imposition of tariffs), supply chain issues, costs of litigation over construction contracts, environmental remediation or increased costs for labor (including potentially related to any shrinkage in the labor force or labor shortages related to changing immigration policies), materials and leasing;

• we are reliant on third party contractors’ and vendors’ ability to deliver services and products as planned, and if the timeframe, quality or scope of such services and products are different than we expected, our projects may be subject to increased costs and our future income may be lower than expected;

• we may be unable to obtain, or experience a delay in obtaining, necessary governmental approvals or third party permits and authorizations, which could result in increased costs or delay or abandonment of opportunities;

• expenses may be higher than anticipated due to, without limitation, inflationary pressures (including potentially exacerbated by the imposition of tariffs), supply chain issues, litigation over construction, environmental remediation or increased costs for labor (including potentially related to any shrinkage in the labor force or labor shortages related to changing immigration policies, concerns regarding deportation or otherwise), materials and leasing;

• we may be unable to obtain financing with favorable terms, or at all, for the proposed development or redevelopment of a community, which may cause us to delay or abandon an opportunity;

• we may incur liabilities to third parties during the development process.

The geographic concentration of the Company’s communities and fluctuations in local markets may materially adversely affect the Company’s financial condition and results of operations.

The Company’s communities are concentrated in California and the Seattle metropolitan area, which exposes the Company to greater economic concentration risks.

Factors that may materially adversely affect local market and economic conditions include regionally specific acts of nature (e.g., earthquakes, wildfires, floods, etc.), layoffs affecting specific or broad sectors of the economy (such as technology-based companies), and those other factors listed in the risk factor titled “ General real estate investment risks may materially adversely affect property income and values ” and elsewhere in this Item 1A.

The geographic concentration of the Company’s communities and fluctuations in local markets may adversely affect the Company’s financial condition and results of operations.

The Company’s communities are concentrated on the West Coast in the metropolitan areas of California and Washington, which exposes the Company to greater economic concentration risks.

Factors that may materially adversely affect local market and economic conditions include regionally specific acts of nature (e.g., earthquakes, wildfires, floods, etc.), changes in specific or broad sectors of the economy (such as growth or decline in technology-based companies), and those other factors listed in the risk factor titled “General real estate investment risks may materially adversely affect property income and values” and elsewhere in this Item 1A.

The Company is susceptible to adverse developments in economic and regulatory environments, such as increases in real estate and other taxes, and increased costs of complying with governmental regulations.

The State of California is generally regarded as more litigious, highly regulated and taxed than many other states, which may reduce demand for the Company’s communities.

Any adverse developments in the economy or real estate markets in California or Washington, or any decrease in demand for the Company’s communities resulting from the California or Washington regulatory or business environments, could have an adverse effect on the Company’s business and results of operations.

California is generally regarded as more

litigious, highly regulated and subject to higher taxes than many other states, which may reduce demand for the Company’s communities.

Any adverse developments in the economic or real estate markets in California or Washington, or any decrease in demand for the Company’s communities resulting from the California or Washington regulatory or business environments, could have an adverse effect on the Company’s business and results of operations.

The Company may experience various increased costs, including increased property taxes, to own and maintain its properties.

Real property taxes on our properties may increase as our properties are reassessed by taxing authorities or as property tax rates change.

Our real estate taxes in Washington could increase as a result of property value reassessments or increased property tax rates.

Our real estate taxes in Washington and California could increase as a result of property value reassessments or increased property tax rates.

A California law commonly referred to as Proposition 13 (“Prop 13”) generally limits annual real estate tax increases on California properties to 2% of assessed value.

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Therefore, the amount of property taxes we are required to pay could increase substantially from the property taxes we currently pay or have paid in the past, including on a retroactive basis.

Various initiatives to repeal or amend Prop 13, to eliminate its application to commercial and residential property, to increase the permitted annual real estate tax increases, and/or to introduce split tax roll legislation could increase the assessed value and/or tax rates applicable to commercial property in California.

Further, changes in U.S.

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The Company may experience increased costs associated with capital improvements and property maintenance as its properties advance through their life cycles.

In some cases, we may spend more than budgeted amounts to make necessary improvements or maintenance, which could materially adversely affect the Company’s financial condition and results of operations.

In some cases, especially with respect to newly acquired properties, we may spend more than budgeted amounts to make necessary improvements or maintenance, which could materially adversely affect the Company’s financial condition and results of operations.

Competition in the apartment community market and other housing alternatives may materially adversely affect operations and the rental demand for the Company’s communities.

There are numerous housing alternatives that compete with the Company’s communities in attracting tenants, including other apartment communities, condominiums and single-family homes.

Competitive housing in a particular area and fluctuations in cost of owner-occupied single- and multifamily homes caused by a decrease in housing prices, mortgage interest rates and/or government programs to promote home ownership or create additional rental and/or other types of housing, or an increase in desire for more space due to work-from-home needs or increased time spent at home, could materially adversely affect the Company’s ability to retain its tenants, lease apartment homes and increase or maintain rents.

Competitive housing in a particular area and fluctuations in cost of owner-occupied single- and multifamily homes caused by a decrease in housing prices, mortgage interest rates and/or government programs to promote home ownership or create additional rental and/or other types of housing could materially adversely affect the Company’s ability to retain its tenants, lease apartment homes and increase or maintain rents.

If the demand for the Company’s communities is reduced, rental or occupancy rates may drop, which may have a material adverse effect on the Company’s financial condition and results of operations.

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delays in the collection of principal and interest if a borrower claims bankruptcy;

possible senior lender default or overconcentration of senior lenders in portfolio;

possible senior lender default or overconcentration of senior lenders in the portfolio;

and unanticipated early prepayments may limit the Company’s expected return on its investment.

If any of the above were to occur, it could materially adversely affect the Company’s cash flows from operations.

The Company’s ownership of co-investments, including joint ventures and joint ownership of communities, its ownership of properties with shared facilities with a homeowners’ association or other entity, its ownership of properties subject to a ground lease and its preferred equity investments and its other partial interests in entities that own communities, could limit the Company’s ability to control such communities and may restrict our ability to finance, refinance, sell or otherwise transfer our interests in these properties and expose us to loss of the properties if such agreements are breached by us or terminated.

The Company has entered into, and may continue in the future to enter into, certain co-investments, including joint

ventures or partnerships through which it owns an indirect economic interest in less than 100% of the community or land or other investments owned directly by the joint venture or partnership.

The Company’s ownership of co-investments, including joint ventures and joint ownership of communities, its ownership of properties with shared facilities with a homeowners’ association or other similar entity, its ownership of properties subject to a ground lease and its preferred equity investments and its other partial interests in entities that own communities, could limit the Company’s ability to control such communities and may restrict our ability to finance, refinance, sell or otherwise transfer our interests in these properties and expose us to loss of the properties if such agreements are breached by us or terminated.

The Company has entered into, and may continue in the future to enter into, certain co-investments, including joint ventures or partnerships through which it owns an indirect economic interest in less than 100% of the community or land or other investments owned directly by the joint venture or partnership.

Joint venture partners often have shared control over the development and operation of the joint venture assets, which may prevent the Company from taking action without the partners’ approval.

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Should a joint venture partner become bankrupt, the Company could become liable for such partner’s share of joint venture liabilities.

From time to time, the Company, through the Operating Partnership, makes certain co-investments in the form of preferred equity investments in third-party entities that have been formed for the purpose of acquiring, developing, financing, or managing real property.

From time to time, the Company, through the Operating Partnership, makes certain co-investments in the form of preferred equity or mezzanine investments in third-party entities that have been formed for the purpose of acquiring, developing, financing, or managing real property.

The Operating Partnership’s interest in these entities is typically less than a majority of the outstanding voting interests of that entity, which may limit the Operating Partnership’s ability to control the daily operations of such co-investment.

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The Company may also incur losses if any guarantees or indemnifications were made by the Company.

The Company also owns properties indirectly under “DownREIT” structures.

The Company also owns properties indirectly through partnerships commonly referred to as “DownREIT” structures.

The Company has entered into, and in the future may enter into, transactions that could require the Company to pay the tax liabilities of partners that contribute assets into DownREITs, joint ventures or the Operating Partnership, in the event that certain taxable events, which are generally within the Company’s control, occur.

Although the Company plans to hold the contributed assets or, if such assets consist of real property, defer recognition of gain on sale of such assets pursuant to the like-kind exchange rules under Section 1031 of the Internal Revenue Code of 1986, as amended (the “Code”), the Company may not be able to do so and if such tax liabilities were incurred they could have a material adverse effect on its financial position.

Also, from time to time, the Company invests in properties (i) which may be subject to certain shared facilities agreements with homeowners’ associations and other entities and/or (ii) subject to ground leases where a subtenant may have certain similar rights to that of a party under such a shared facilities agreements or where a master landlord may have certain rights to control the use, operation and/or repair of the property.

Also, from time to time, the Company invests in properties (i) which may be subject to certain shared facilities agreements with homeowners’ associations and other similar entities and/or (ii) subject to ground leases where a subtenant may have certain similar rights to that of a party under such a shared facilities agreements or where a master landlord may have certain rights to control the use, operation and/or repair of the property.

In these arrangements, we cannot guarantee that the terms of the shared facilities agreements will be enforced or interpreted in favor of the Company, and the Company’s inability to control expenditures, make necessary repairs and/or control certain decisions may materially adversely affect the Company’s financial condition and results of operations, and/or the property’s safety, compliance with applicable laws, marketability or market value.

We may pursue acquisitions of other REITs and real estate companies, which may not yield anticipated results and could materially adversely affect our results of operations.

We may make acquisitions of and/or investments in other REITs and real estate companies or enter into strategic alliances or joint ventures, which involves risks and uncertainties and may not be successful.

We may acquire and/or invest in other REITs and real estate companies or enter into strategic alliances or joint ventures, which involves risks and uncertainties and may not be successful.

We may not be able to identify suitable acquisition, investment, or joint venture opportunities, consummate any such transactions or relationships on terms and conditions acceptable to us, or realize the expected financial or strategic benefits of any such acquisition.

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Real estate investments are relatively illiquid and, therefore, the Company’s ability to vary its portfolio promptly in response to changes in economic or other conditions may be limited.

Real estate investments are illiquid and, in our markets, can at times be difficult to sell at prices we find acceptable, which may limit our ability to promptly reduce our portfolio in response to

changes in economic or other conditions and otherwise may materially adversely affect our financial condition and results of operations.

The Company may not be able to lease its commercial space consistent with its projections or at market rates and the longer-term leases for existing space could result in below market rents over time.

When leases for our existing commercial space expire, the space may not be relet on a timely basis, or at all, or the terms of reletting, including the cost of allowances and concessions to tenants, may be less favorable than the current lease terms.

Real estate investments are illiquid and, in our markets, can at times be difficult to sell at prices we find acceptable, which may limit our ability to promptly reduce our portfolio in response to changes in economic or other conditions and otherwise may materially adversely affect our financial condition and results of operations.

The Company’s portfolio may have environmental liabilities.

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Mold growth may occur when excessive moisture accumulates in buildings or on building materials.

The Company has adopted policies to address and resolve reports of mold when it is detected, and to minimize any impact mold might have on tenants of the affected property, however, the Company may not identify and respond to all mold occurrences.

The Company may incur general uninsured losses or may experience market conditions that impact the procurement of certain insurance policies.

The Company purchases general liability and property, including loss of rent, insurance coverage for each of its communities and cyber risk insurance.

The Company purchases general liability, employment practices liability, and property, including loss of rent, insurance coverage for each of its communities and cyber risk insurance.

The Company may also purchase limited earthquake, terrorism, environmental and flood insurance for some of its communities.

However, there are types of losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, wildfires, pollution, environmental matters or extreme weather conditions such as hurricanes and floods that are uninsurable or not economically insurable.

Some employment claims such as California private attorney general actions (“PAGA”) or class actions are also not insurable.

The Company utilizes a wholly owned insurance subsidiary, Pacific Western Insurance LLC (“PWI”), to self-insure certain earthquake and property losses for some of the communities in its portfolio.

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Our properties or markets may in the future be the target of actual or threatened terrorist attacks, shootings, or other acts of violence, which could directly or indirectly damage our communities both physically and financially, cause uninsured losses, materially adversely affect the value of and our ability to operate our communities, subject us to significant liability claims, or otherwise impair our ability to achieve our expected results.

Although the Company may carry insurance for potential losses associated with its communities, employees, tenants, and compliance with applicable laws, it may still incur material losses due to uninsured risks, deductibles, copayments or losses in

excess of applicable insurance coverage.

Although the Company may carry insurance for potential losses associated with its communities, employees, tenants, and compliance with applicable laws, it may still incur material losses due to class actions, uninsured risks, deductibles, copayments or losses in excess of applicable insurance coverage.

In the event of a substantial loss, insurance coverage may not be able to cover the full replacement cost of the Company’s lost investment, or the insurance carrier may become insolvent and not be able to cover the full amount of the insured losses.

Changes in building codes and ordinances, environmental considerations and other factors might also affect the Company’s ability to replace or renovate an apartment community after it has been damaged or destroyed.

In addition, a recently destabilized insurance market, and certain causalities and/or losses incurred may expose the Company in the future to higher insurance premiums.

In addition, a recently

destabilized insurance market, litigation financing, and certain causalities and/or losses incurred may expose the Company in the future to higher insurance premiums.

Climate change may materially adversely affect our business.

As a result of climate change, we may experience extreme weather, an increase in frequency and severity of natural disasters, changes in precipitation, temperature, wildfire and drought exposure, and impacts of sea-level rise, all of which may result in physical damage, a decrease in demand for our communities located in these areas or affected by these conditions, damage to our properties, disruption of services at our properties or increased costs associated with water or energy use and maintaining or insuring our communities.

As a result of climate change, we may experience extreme weather, an increase in frequency and severity of natural disasters, changes in precipitation, temperature, wildfire and drought exposure, and impacts of rising sea-levels, all of which may result in damage to our communities, a decrease in demand for our communities located in these areas or affected by these conditions, disruption of services at our communities or increased costs associated with water or energy use and maintaining or insuring our communities.

Transition risks associated with climate change may result in interruptions in energy access, increased energy costs, or increased regulatory requirements and stakeholder expectations regarding reporting and energy efficiency.

Should the impact of climate change be material in nature or occur for lengthy periods of time, even if not directly impacting the Company’s current markets, the types and pricing of insurance the Company is able to procure may be materially adversely affected and our financial condition or results of operations may be materially adversely affected.

We could experience increased costs related to further developing our communities to mitigate the effects of climate change or repairing damage related to the effects of climate change that may or may not be fully covered by insurance.

We could experience increased costs related to further developing our communities to mitigate or repair damage related to the effects of climate change that may or may not be fully covered by insurance.

In addition, changes in federal, state and local legislation and regulation on climate change or natural disaster response could result in temporary rent control, temporary eviction moratoria, increased operating costs and/or increased capital expenditures to improve the energy efficiency of our existing communities (for example, increased costs associated with meeting electric vehicle charging mandates) and could also require us to spend more on our new development communities without a corresponding increase in revenue.

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Changes in laws increasing the potential liability of the Company and/or its operating costs on a range of issues, including those regarding potential liability for other environmental conditions existing on properties or increasing the restrictions on discharges or other conditions, as well as changes in laws affecting development, construction and safety requirements, may result in significant unanticipated expenditures, including without limitation, those related to structural or seismic retrofit or more costly operational safety systems and programs, which could have a material adverse effect on the Company.

Failure to succeed in new markets or with new community operations formats may limit the Company’s growth.

The Company may make acquisitions or commence development activity outside of its existing market areas if appropriate opportunities arise, which may expose the Company to new risks, including, but not limited to an inability to evaluate accurately local apartment market conditions and local economies;

Failure to succeed in new markets or with new community operations formats may limit the Company’s growth, and additionally, the Company’s commercial leases could adversely affect us.

The Company may make acquisitions, pursue new business models, explore new capital sources or commence development activity outside of its existing market areas if appropriate opportunities arise, which may expose the Company to new risks, including, but not limited to an inability to evaluate accurately local apartment market conditions and local economies;

an inability to identify appropriate acquisition opportunities or to obtain land for development;

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and a lack of familiarity with local governmental and permitting procedures.

Additionally, we have adjusted our operating model to reduce the number of staff on-site at individual properties and instituted a hub model where specialized staff can service multiple properties from a central location and rely on certain technologies, such as virtual apartment tours, to further reduce the need for on-site staffing.

There may be resistance to such change from our residents, and if we experience difficulty in retaining residents, this could materially adversely affect the Company’s results of operations.

There has been resistance to such change from our residents, and if we experience difficulty in retaining residents, this could materially adversely affect the Company’s results of operations.

Further, there are unknown risks with relying on new technologies and operating models, such as whether there is consumer preference for in-person tours or if we are not able to as rapidly respond to resident demands, and we cannot guarantee that this model will be successful, which could materially adversely affect our results of operations.

Furthermore, the Company may not be able to lease its commercial space consistent with its projections or at market rates and the longer-term leases for existing space could result in below market rents over time.

Our business and reputation depend on our ability to continue providing high quality housing and consistent operation of our communities, the failure of which could materially adversely affect our business, financial condition and results of operations.

We provide tenants with reliable services, including water and electric power, along with the consistent operation of our communities, including a wide variety of amenities.

Public utilities, especially those that provide water and electric power, are fundamental for the consistent operation of our communities.

The delayed delivery or any prolonged interruption of these services may cause tenants to terminate their leases or may result in a reduction of rents and/or increase in our costs or other issues.

Public utilities, such as water and electric power providers, are fundamental for the consistent operation of our

Any delayed delivery or prolonged interruption of these services may cause tenants to terminate their leases or may result in a reduction of rents and/or increase in our costs or other issues.

In addition, we may fail to provide quality housing and continuous access to amenities as a result of other factors, including government mandated closures, mechanical failure, power outage, human error, vandalism, physical or electronic security breaches, war, terrorism or similar events.

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In addition, carrying costs can be significant and can result in losses or reduced profitability.

If there are changes in the fair value of our land holdings which we determine is less that the carrying basis of our land holdings reflected in our financial statements plus estimated costs to sell, we may be required to take impairment charges which could have a material adverse effect on our financial condition and results of operations.

If there are changes in the fair value of our land holdings which we determine is less than the carrying basis of our land holdings reflected in our financial statements plus estimated costs to sell, we may be required to take impairment charges which could have a material adverse effect on our financial condition and results of operations.

We are subject to laws and regulations relating to the handling of personal information and we rely on information technology to sustain our operations.

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Our business requires us and some of our vendors to use and store personal and other sensitive information of our tenants and employees, and our collection, use and other processing of personal information is governed by certain federal and state laws and regulations.

Privacy and cybersecurity laws continue to evolve, with several states passing new data privacy laws that govern the processing of information about state residents, and laws may be inconsistent from one jurisdiction to another.

The Company endeavors to comply with privacy laws and regulations applicable to it, including the California Consumer Privacy Act (“CCPA”) which governs the collection, use, disclosure and security of information about California residents.

The CCPA requires the Company to, among other things, provide certain disclosures to California residents, promptly respond to certain requests related to their data, and contractually impose certain obligations on vendors.

Privacy and cybersecurity laws continue to evolve, with a number of states passing data privacy laws that govern the processing of information about state residents, and laws may be inconsistent from one jurisdiction to another.

The Company endeavors to comply with privacy laws and regulations applicable to it, including the California Consumer Privacy Act and Washington State’s “My Health My Data Act”, which govern the collection, use, retention, disclosure and security of personal information about California and Washington residents, respectively.

Compliance with existing and future laws and regulations related to data privacy and protection may increase the Company’s operating costs and adversely impact the Company’s ability to market the Company’s properties and services, and any failure of our systems in place to comply with such laws and regulations could harm our business, reputation and financial condition.

Although we have taken steps to abide by applicable privacy and cybersecurity laws, and strive to protect the security of our IT Systems and Confidential Information, the compliance and security measures put in place by the Company and its vendors cannot guarantee perfect compliance or provide absolute security, and the Company and its vendors’ IT Systems may be vulnerable to numerous and evolving cybersecurity threats and risks that threaten the confidentiality, integrity and availability of our IT Systems and Confidential Information, including through social engineering/phishing, malware (including ransomware), distributed denial-of-service attempts, data theft, account takeovers, social engineering/phishing, technological

error, employee error, malfeasance by insiders, misconfigurations, “bugs”, or other vulnerabilities in Company, or vendor, IT Systems.

These threats may be amplified by emerging artificial intelligence technologies and can also come from diverse threat actors, such as state-sponsored organizations, opportunistic hackers and hacktivists.

Any incident could compromise the Company’s or our vendors’ IT Systems (or the IT Systems of third parties that facilitate the Company’s or such vendors’ business activities), and the Confidential Information stored by or on behalf of the Company or such vendors could be accessed, misused, publicly disclosed, corrupted, lost, or stolen, resulting in fraud, including wire fraud related to Company assets or tenant payments, or other harm.

Moreover, if there is a compliance failure, or if a cybersecurity incident affects the Company’s or vendors’ systems, whether through a breach of the Company’s IT Systems or a breach of the IT Systems of third parties, or results in the unauthorized release of Confidential Information, the Company’s reputation and brand could be materially damaged, which could increase our costs in attracting and retaining tenants, and other serious consequences may result.

Potential other consequences include potential exposure to litigation, including government enforcement actions, private litigation (including class actions), fines or criminal penalties, negative reputational impacts that cause us to lose existing or future customers, and/or significant incident response, system restoration or remediation and future compliance costs, and potential exposure to a risk of loss including loss related to the fact that agreements with such vendors, or such vendors’ financial condition, may not allow the Company to recover all costs related to a cybersecurity incident for which they alone or they and the Company should be jointly responsible for, which could result in a material adverse effect on the Company’s business, financial condition and results of operations.

These threats may be amplified by emerging artificial intelligence technologies, which are expected to pose new or unknown cybersecurity risks and challenges, including as integrated into our or any third party’s operations, products and services, and can also come from diverse threat actors, such as state-sponsored organizations, opportunistic hackers and hacktivists.

Moreover, if there is a compliance failure, or if a cybersecurity

incident affects the Company’s or vendors’ systems, whether through a breach of the Company’s IT Systems or a breach of the IT Systems of third parties, or results in the unauthorized release of Confidential Information, the Company’s reputation and brand could be materially damaged, which could increase our costs in attracting and retaining tenants, and other serious consequences may result.

Potential other consequences include exposure to litigation, including government enforcement actions, private litigation (including class actions), fines or criminal penalties, negative reputational impacts that cause us to lose existing or future customers, and/or significant incident response, system restoration or remediation and future compliance costs, and potential exposure to a risk of loss including loss related to the fact that agreements with such vendors, or such vendors’ financial condition, may not allow the Company to recover all costs related to a cybersecurity incident for which they alone or they and the Company should be jointly responsible for, which could result in a material adverse effect on the Company’s business, financial condition and results of operations.

Privacy and cybersecurity risks have generally increased in recent years because of the proliferation of new techniques and tools that circumvent security tools, evade detection and remove forensic evidence, such as artificial intelligence, the increased sophistication, techniques and activities of threat actors, and the broader adoption of remote and hybrid work arrangements that introduce additional security vulnerabilities due to off-network access;

accordingly, the Company may be unable to anticipate these techniques or implement adequate preventative measures.

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Furthermore, given the nature of complex IT Systems we rely upon, and the scanning tools that we deploy across our networks and products, we regularly identify and track security vulnerabilities.

Additionally, remote and hybrid working arrangements at our company (and at many third-party providers) also increase cybersecurity risks due to the challenges associated with managing remote computing assets and security vulnerabilities that are present in many non-corporate and home networks.

We may be unable to comprehensively apply patches or confirm that measures are in place to mitigate all such vulnerabilities, or that patches will be applied before vulnerabilities are exploited by a threat actor.

We maintain cyber risk insurance which may be insufficient type or amount to cover us against claims related to a cybersecurity incident, and we cannot be certain that such insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claims.

In the future, the Company may expend additional resources to continue to enhance the Company’s cybersecurity measures to investigate and remediate any cybersecurity vulnerabilities and/or to further ensure compliance with privacy and cybersecurity laws.

We maintain cyber risk insurance, but this may be an insufficient type or amount to cover us against claims related to a cybersecurity incident, and we cannot be certain that such insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claims.

Furthermore, we use artificial intelligence technologies in our business and there are significant information technology risks involved in maintaining and deploying these technologies.

There can be no assurance that our investments in such technologies will always enhance our services or be beneficial to our business, including our efficiency or profitability.

In particular, if the models underlying our artificial intelligence technologies are:

incorrectly designed or implemented;

trained or reliant on incomplete, inadequate, inaccurate, biased or otherwise poor quality data;

used without sufficient oversight, governance or in violation of our internal guidelines, policies and procedures;

and/or adversely impacted by unforeseen defects, technical challenges, cybersecurity threats, data privacy concerns, or material performance issues, the performance of our services and business, as well as our reputation, could suffer or we could incur liability resulting from the violation of laws or contracts to which we are a party or civil claims.

Finally, in the future, the Company may expend additional resources to continue to enhance the Company’s cybersecurity measures to investigate and remediate any cybersecurity vulnerabilities and/or to further ensure compliance with privacy and cybersecurity laws.

Despite these steps, the Company may suffer a significant cybersecurity incident in the future, unauthorized parties may gain access to Confidential Information stored on the Company’s or its vendors’ IT Systems, and any such incident may not be discovered in a timely manner.

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Reliance on third party software providers to host systems is critical to our operations and to provide the Company with data, and regulation of those providers and practices may impact operational capabilities.

We rely on, or may rely on in the future, certain key software vendors to support business practices critical to our operations, including the collection and understanding of rent and ancillary income, including artificial intelligence platforms, communication with our tenants, interaction and evaluation and/or qualification of our prospective tenants, and to provide us with data.

The market is currently experiencing a consolidation of and increased scrutiny on these software vendors and algorithmic platforms, particularly in the multifamily space, which may negatively impact the Company’s choice of vendor and pricing options due to lack of optionality or litigation challenges of the vendor or the vendor’s underlying algorithmic platform.

We rely on, or may rely on in the future, certain key software vendors, including artificial intelligence platforms, to support business practices critical to our operations, including the collection and understanding of rent, leads and leasing, and ancillary income, communication with our tenants, interaction and evaluation and/or qualification of our prospective tenants, and to provide us with data.

The market is currently experiencing a consolidation of and increased scrutiny on these software vendors, particularly in the multifamily space and algorithmic platforms, which may negatively impact the Company’s choice of vendor and pricing options due to lack of optionality or litigation challenges of the vendor or the vendor’s underlying algorithmic platform.

Moreover, if any of these key vendors were to terminate our relationship or access to data, or fail, we could suffer losses while we seek to replace the services and information provided by the vendors.

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We may from time to time be subject to litigation or regulatory investigation, which could have a material adverse effect on our business, financial condition and results of operations.

Some of these claims may result in defense costs, settlements, fines or judgments against us, some of which are not, or cannot be, covered by insurance, the payment of which could have an adverse impact on our financial position and results of operations.

In addition, certain litigation or the resolution of certain litigation may affect the availability or cost of some of our insurance coverage and expose us to increased risks that would be

Some of these claims, which may be funded by litigation financing, may result in defense costs, settlements, fines or judgments against us, some of which are not, or cannot be, covered by insurance, the payment of which could have an adverse impact on our financial position and results of operations.

In addition, certain litigation or the resolution of certain litigation may affect the availability or cost of some of our insurance coverage and expose us to increased risks that would be uninsured.

Litigation, even if resolved in our favor, could materially adversely affect our reputation and divert the attention of our management, which could materially adversely affect our operations and cash flow.

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The Company is unable to predict the outcome or estimate the amount of loss, if any, that may result from such matters.

The Company is also subject to various other legal and/or regulatory proceedings arising in the normal course of its business operations, including California private attorney general actions (“PAGA Claims”).

The Company is also subject to various other legal and/or regulatory proceedings arising in the normal course of its business operations, including certain class actions and PAGA Claims.

The current political climate in California may continue to encourage plaintiffs’ attorneys to bring PAGA Claims and other class actions.

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Capital and credit market conditions and volatility, including significant fluctuations in the price of the Company’s stock, may affect the Company’s access to sources of capital and/or the cost of capital, which could materially adversely affect the Company’s business, stock price, results of operations, cash flows and financial condition.

Our current balance sheet, the debt capacity available on the unsecured line of credit with a diversified bank group, access to the public and private placement debt markets and secured debt financing providers provide some insulation from volatile capital markets.

Our current balance sheet, the debt capacity available on the commercial paper program and unsecured line of credit with a diversified bank group, access to the public and private placement debt markets and secured debt financing providers provide some insulation from volatile capital markets.

We primarily use external financing, including sales of debt and equity securities, to fund acquisitions, developments, and redevelopments and to refinance indebtedness as it matures.

If sufficient sources of external financing are not available to us on cost effective terms, we could be forced to limit our acquisition, development and redevelopment activity and/or take other actions to fund our business activities and repayment of debt, such as selling assets, reducing our cash dividend or distributing less than 100% of our REIT taxable income.

In general, to the extent that the Company continues to face a challenging investment environment as access to capital and credit lacks clear trends (reflected by a shifting interest rate environment for debt financing, a fluctuating stock price for equity financing without corresponding changes to investment cap rates, and an inconsistent transactional market flow) the Company’s ability to make acquisitions, develop or redevelop communities, obtain new financing, and refinance existing borrowing at competitive rates could be materially adversely affected, which would impact the Company’s financial standing and related credit rating.

In addition, if our ability to obtain financing is materially adversely affected, the Company’s stock price may be materially adversely affected, and we may be unable to satisfy scheduled maturities on existing financing through other sources of our liquidity, which, in the case of secured financings, could result in foreclosure.

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Our ability to make payments on and to refinance our indebtedness and to fund our operations, working capital and capital expenditures, depends on our ability to generate cash in the future.

There is a risk that we may not be able to refinance existing indebtedness or that a refinancing will not be done on as favorable terms, which in either case could have a material adverse effect on our financial condition, results of operations and cash flows.

There is a risk that we may not be able to refinance existing

indebtedness or that a refinancing will not be done on as favorable terms, which in either case could have a material adverse effect on our financial condition, results of operations and cash flows.

Compliance requirements of tax-exempt financing and below market rent requirements may limit income from certain communities.

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Certain state and local authorities may impose additional rental restrictions, which may limit income from the tax-exempt financed communities if the Company is required to decrease its rental rates.

If the Company does not reserve the required number of apartment homes for tenants satisfying these income requirements, the tax-exempt status of the bonds may be terminated, the obligations under the bond documents may be

accelerated and the Company may be subject to additional contractual liability.

Notwithstanding the limitations due to tax-exempt financing requirements, the income from certain communities may be limited due to below-market rent requirements imposed by local authorities in connection with the original development of the community.

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A downgrade in the Company’s investment grade credit rating could materially adversely affect its business and financial condition.

The Company plans to manage its operations to maintain its investment grade credit rating with a capital structure consistent with its current profile but there can be no assurance that it will be able to maintain its current credit ratings.

The Company intends to maintain its investment grade credit rating with a capital structure consistent with its current profile but there can be no assurance that it will be able to maintain its current credit ratings.

Any downgrades in terms of ratings or outlook by any of the rating agencies could have a material adverse effect on the Company’s cost and availability of capital, which could in turn have a material adverse effect on its financial condition, results of operations and liquidity, as well as the Company’s stock price.

Changes in the Company’s financing policy may lead to higher levels of indebtedness.

The Company manages its debt to be in compliance with debt covenants under its unsecured bank facilities and senior unsecured bonds.

The Company manages its debt in compliance with debt covenants under its unsecured bank facilities and senior unsecured bonds.

However, the Company may increase the amount of outstanding debt at any time without a concurrent improvement in the Company’s ability to service the additional debt, resulting in an increased risk of default on its debt covenants or on its debt obligations and in an increase in debt service requirements.

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If the Company or any of its subsidiaries defaults on an obligation to repay outstanding indebtedness when due, the default could trigger a cross-default or cross-acceleration under other indebtedness.

A default, including a default under mortgage indebtedness, lines of credit, bank term loan, the indenture for the Company’s outstanding senior notes, or the Company’s interest rate hedging arrangements that is not waived by the applicable required lenders, holders of outstanding notes or counterparties could trigger cross-default or cross-acceleration provisions under one or more agreements governing the Company’s indebtedness, which could cause an immediate default or allow the lenders to declare all funds borrowed thereunder to be due and payable.

A default, including a default under mortgage indebtedness, lines of credit, commercial paper program, bank term loan, the indenture for the Company’s outstanding senior notes, or the Company’s interest rate hedging arrangements that is not waived by the applicable required lenders, holders of outstanding notes or counterparties could trigger cross-default or cross-acceleration provisions under one or more agreements governing the Company’s indebtedness, which could cause an immediate default or allow the lenders to declare all funds borrowed thereunder to be due and payable.

The Company could be negatively impacted by the condition of Fannie Mae or Freddie Mac and by changes in government support for multifamily housing.

In the event that Fannie Mae and Freddie Mac discontinue providing liquidity to our sector, have their mandates changed or reduced or be disbanded or reorganized by the government or if there is reduced government support for multifamily housing more generally, it may adversely affect interest rates, capital availability, development of multifamily communities and the value of multifamily residential real estate and, as a result, may adversely affect the Company and its growth and operations.

multifamily communities and the value of multifamily residential real estate and, as a result, may adversely affect the Company and its growth and operations.

Risks Related to Personnel

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While conflict of interest protocols and agreements are in place, Mr.

Marcus and his affiliated entities may potentially compete with the Company in acquiring and/or developing apartment communities.

Due to potential competition for real estate investments, Mr.

Marcus and his affiliated entities may have a conflict of interest with the Company, which may be detrimental to the interests of Essex’s stockholders and the Operating Partnership’s unitholders.

Marcus and his affiliated entities may potentially compete with the Company in acquiring and/or developing apartment communities, which may be detrimental to the interests of Essex’s stockholders and the Operating Partnership’s unitholders.

The influence of executive officers, directors, and significant stockholders may be detrimental to holders of common stock.

Marcus currently does not have majority control over the Company.

However, he has, and likely will continue to have, significant influence with respect to the election of directors and approval or disapproval of significant corporate actions.

Consequently, his influence could result in decisions that do not reflect the interests of all the Company’s stockholders.

Under the partnership agreement of the Operating Partnership, the consent of the holders of limited partnership interests is generally required for certain amendments of the agreement and for certain extraordinary actions.

Through their ownership of limited partnership interests and their positions with the Company, the Company’s directors and executive officers, including Mr.

Marcus, have substantial influence on the Company.

Through their ownership of limited partnership interests, and their positions with the Company, certain directors and executive officers, including Mr.

Marcus, could have influence on the Company.

Consequently, their influence could result in decisions that may not reflect the interests of all stockholders.

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Essex may choose to pay dividends in its own stock, which could materially adversely affect its stockholders.

If Essex pays a stock dividend that is taxable for U.S.

federal income tax purposes, and a U.S.

stockholder sells the stock it receives as a dividend in order to pay applicable taxes, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our stock at the time of the sale.

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The Company’s future issuances of common stock, preferred stock or convertible debt securities could be dilutive to current stockholders and materially adversely affect the market price of the Company’s common stock.

In order to finance the

Company’s acquisition and development activities, the Company could issue and sell common stock, preferred stock and convertible debt securities, including pursuant to its equity distribution program, issue partnership units in the Operating Partnership, or enter into joint ventures which may dilute stockholder ownership in the Company and could materially adversely affect the market price of the common stock.

In order to finance the Company’s acquisition and development activities, the Company could issue and sell common stock, preferred stock and convertible debt securities, including pursuant to its equity distribution program, issue partnership units in the Operating Partnership, or enter into joint ventures which may dilute stockholder ownership in the Company and could materially adversely affect the market price of the common stock.

The Maryland Business Combination Act may delay, defer or prevent a transaction or change in control of the Company that might involve a premium price for the Company’s stock or otherwise be in the best interest of our stockholders.

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If the Company fails to qualify as a REIT in any taxable year, the Company would be subject to U.S.

federal corporate income tax on the Company’s taxable income, and the Company would not be allowed to deduct dividends

paid to its stockholders in computing its taxable income.

The Company would also be disqualified from treatment as a REIT for the four taxable years following the year in which the Company failed to qualify, unless it is entitled to relief under statutory provisions.

federal corporate income tax on the Company’s taxable income, and the Company would not be allowed to deduct dividends paid to its stockholders in computing its taxable income.

The Company would also be disqualified from electing treatment as a REIT for the four taxable years following the year in which the Company failed to qualify, unless it is entitled to relief under statutory provisions.

The additional tax liability would reduce its net earnings available for investment or distributions, and the Company would no longer be required to make distributions to its stockholders for the purpose of maintaining REIT status.

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Failure of one or more of the Company’s subsidiaries to qualify as a REIT could materially adversely affect the Company’s ability to qualify as a REIT.

The Company owns interests in multiple subsidiary REITs that have elected to be taxed as REITs under the Code.

The Company owns interests in multiple subsidiaries that have elected to be taxed as REITs under the Code.

These subsidiary REITs are subject to the various REIT qualification requirements and other limitations that are applicable to the Company.

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However, if the Internal Revenue Service successfully contends that certain transfers or disposals of properties by the Company are prohibited transactions, then the Company would be required to pay a 100% penalty tax on any gain allocable to it from the prohibited transaction, and the Company’s ability to retain proceeds from real property sales may be jeopardized.

Dividends payable by REITs may be taxed at higher rates than dividends of non-REIT corporations, which could reduce the net cash received by stockholders and may be detrimental to the Company’s ability to raise additional funds through any future sale of its stock.

future sale of its stock.

Dividends paid by REITs to U.S.

stockholders that are individuals, trusts or estates are generally not eligible for the reduced tax rate applicable to qualified dividends received from non-REIT corporations.

stockholders that are individuals, trusts and estates generally may deduct 20% of ordinary dividends from a REIT for taxable years beginning before January 1, 2026.

stockholders that are individuals, trusts and estates generally may deduct 20% of ordinary dividends from a REIT.

Although this deduction reduces the effective tax rate applicable to certain dividends paid by REITs, such tax rate is still higher than the tax rate applicable to regular corporate qualified dividends.

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Some investors and potential investors are focused on positive corporate responsibility and sustainability scores and business practices to guide their investment strategies, including whether to invest in our common stock.

Additionally, rules and regulations continue to evolve relating to climate risk disclosures, human capital management and other corporate responsibility matters, and other regulatory bodies, such as the State of California, have issued laws or regulations relating to climate disclosures, despite a lack of emerging support and, in some cases, open opposition, from investors and potential investors for such rules and regulations.

Additional local, state and federal laws and rules with respect to corporate responsibility and sustainability matters may be enacted in the future and the extent and scope of their requirements and impact on our business are unknown.

If the criteria by which companies are scored changes, the Company may perform differently or worse than it has in the past, or it may become more expensive for the Company to access capital.

The Company may face reputational damage in the event its corporate responsibility procedures, its board structure, or the reputations of its individual

board members do not meet the standards set by various constituencies.

Further, if we fail to comply with new laws, regulations, expectations or reporting requirements related to sustainability, or if we are perceived as failing, our reputation and business could be materially adversely affected.

In addition, both advocates and opponents to such matters are increasingly resorting to a range of activism forms, including media campaigns, shareholder activism, and litigation, to advance their perspectives, and certain jurisdictions are adopting or considering adopting laws seeking to limit the use of corporate responsibility and sustainability initiatives in certain contexts.

To the extent we are subject to such activism or fragmented regulation with respect to corporate responsibility or sustainability considerations, it may require us to incur costs to implement compliant initiatives or otherwise materially adversely affect our business.

Additionally, expectations continue to evolve relating to climate disclosures, human capital management and lawmakers and corporate

responsibility matters, and other regulatory bodies, such as in California, have issued rules regarding climate disclosures.

Additional local, state and federal laws and rules with respect to corporate responsibility and sustainability matters may be enacted and the scope of their requirements and impact on our business are unknown.

If we fail to comply with new laws, regulations or expectations related to sustainability, or if we are perceived as failing, our reputation and business could be materially adversely affected.

In addition, both advocates and opponents to such matters may resort to activism, including media campaigns, shareholder activism, and litigation, to advance their perspectives, and certain jurisdictions are adopting or considering adopting laws seeking to limit the use of corporate responsibility and sustainability initiatives in certain contexts.

Anti-ESG advocates, including certain state attorneys general outside of the Company’s current geographic locations, have also brought legal challenges regarding corporate climate initiatives and commitments.

To the extent we are subject to any such challenges, it may require us to incur costs to implement compliant initiatives or otherwise materially adversely affect our business.

Finally, if the criteria by which companies are scored on corporate responsibility may change, and the Company may perform differently or worse than it has in the past, and it may become more expensive for the Company to access capital.

The Company may face reputational damage if its corporate responsibility procedures, board structure, or individual board members’ reputations do not meet the standards set by various constituencies.

The occurrence of any of the foregoing could have a material adverse effect on the price of the Company’s stock and the Company’s financial condition and results of operations.

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What changed 10-K

Item 1A. Risk Factors