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Item 7. Management’s Discussion and Analysis

2026-02-20 compared with 2025-02-21 · 104 added, 94 removed, 245 unchanged (45% of the section changed)

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These consolidated financial statements include all adjustments which are, in the opinion of management, necessary to reflect a fair statement of the results and all such adjustments are of a normal recurring nature.

Essex is a self-administered and self-managed REIT that acquires, develops, redevelops, and manages apartment communities in selected residential areas located on the West Coast of the United States.

Essex is a self-administered and self-managed REIT that acquires, develops, redevelops, and manages apartment home communities in selected residential areas located on the West Coast of the United States.

Essex owns all of its interests in its real estate investments, directly or indirectly, through the Operating Partnership.

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The Company’s strong financial condition supports its investment strategy by enhancing its ability to quickly shift acquisition, development, redevelopment, and disposition activities to markets that will optimize the performance of the Company’s portfolio.

As of December 31, 2024, the Company owned or had ownership interests in 255 operating apartment communities, comprising 62,157 apartment homes, excluding the Company’s ownership in preferred equity co-investments, loan investments, and two operating commercial buildings.

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

As of December 31, 2025, the Company owned or had ownership interests in 259 operating apartment communities, comprising 63,077 apartment homes, excluding the Company’s ownership in preferred equity co-investments, loan investments, two operating commercial buildings and a development pipeline comprised of one consolidated project and various predevelopment projects.

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

Southern California (primarily Los Angeles, Orange, San Diego, and Ventura counties)

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2025 Same-Property revenues increased 2.8% in 2025 as compared to 2024.

In each of these regions, projected 2025 growth in new residential supply of apartment homes and single family homes is expected to be 1% or less of the total housing stock.

In each of these regions, projected 2026 growth in new residential supply of apartment homes and single family homes is expected to be less than 1% of the total housing stock.

The Company’s consolidated operating communities as of December 31, 2025 and 2024 were as follows:

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Co-investments, including Wesco I, Wesco III, Wesco IV, Wesco V, Wesco VI, BEX IV, and other co-investments, developments under construction, and preferred equity interest co-investment communities are not included in the table presented above for both periods.

The communities previously held in the BEXAEW, BEX II, Patina at Midtown, and Century

Towers co-investments, which were consolidated in 2024, are excluded from the table as December 31, 2023 but included in the table as of December 31, 2024.

Market Considerations

Elevated inflation in recent years has caused an increase in consumer prices, thereby reducing purchasing power and elevating the risks of a recession.

In response to increased inflation, the U.S.

Federal Reserve raised the federal funds rate throughout 2022 and 2023 resulting in a significant increase of market interest rates.

In the second half of 2024, the U.S.

Federal Reserve lowered the federal funds rate in conjunction with the softening of U.S.

inflation and short term market interest rates have declined.

Concurrently, geopolitical tensions and regional conflicts have increased uncertainty during recent years.

The long-term impact of these developments will largely depend on the impact on job growth, the broader economy, and reactions by consumers, companies, governmental entities and capital markets.

The foregoing macroeconomic conditions have not negatively impacted the Company’s ability to access traditional funding sources on the same or reasonably similar terms as were available in recent periods prior to the pandemic, as demonstrated by the Company’s financing activity during the year ended December 31, 2024 discussed in the “Liquidity and Capital Resources” section below.

The Company is not at material risk of not meeting the covenants in its credit agreements and is able to timely service its debt and other obligations .

Domestic and international policy actions, including tariff and trade policy, as well as continuing geopolitical tensions and regional conflicts have the potential to trigger broad market uncertainty.

The long-term impact of these developments on our company will largely depend on the impact on broader trends in job growth, inflation, the economy, and reactions by consumers, companies, governmental entities and capital market participants.

The foregoing macroeconomic conditions have not negatively impacted the Company’s ability to access traditional funding sources which have been historically available to it.

The Company is not at material risk of failing to meet the covenants in its credit agreements and is able to timely service its debt and other obligations.

RESULTS OF OPERATIONS

Comparison of Year Ended December 31, 2025 to the Year Ended December 31, 2024

The average financial occupancy for the Company’s 2024 Same-Property portfolio (stabilized properties consolidated by the Company for the years ended December 31, 2024 and 2023) was 96.1% and 96.5% for the years ended December 31, 2024 and 2023, respectively.

The average financial occupancy for the Company’s 2025 Same-Property portfolio (stabilized properties consolidated by the Company for the years ended December 31, 2025 and 2024) was 96.2% for each of the years ended December 31, 2025 and 2024.

Financial occupancy is defined as the percentage resulting from dividing actual rental income by total scheduled rental income.

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Seattle Metro 96.2 % 96.7 %

The following table provides a breakdown of property revenue amounts, including the revenues attributable to 2024 Same-Properties ($ in thousands):

The following table provides a breakdown of rental and other property revenues, including the revenues attributable to 2025 Same-Properties ($ in thousands):

Number of Apartment Homes Year Ended

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Seattle Metro 10,341 298,363 290,294 8,069 2.8 %

Total 2024 Same-Property Revenues

50,187 1,636,531 1,585,007 51,524 3.3 %

2024 Non-Same Property Revenues

Total 2025 Same-Property 49,032 1,642,989 1,590,404 52,585 3.3 %

2025 Non-Same Property

234,975 173,781 61,194 35.2 %

Total Property Revenues $ 1,764,185 $ 1,658,264 $ 105,921 6.4 %

Total rental and other property revenues $ 1,877,964 $ 1,764,185 $ 113,779 6.4 %

2025 Same-Property Revenues increased by $52.6 million or 3.3%.

The increase was primarily attributable to increases of 1.9% in average rental rates from $2,605 for 2023 to $2,655 for 2024, 0.8% in other property income, and 0.9% from a decrease in delinquencies, partially offset by a decrease of 0.4% in occupancy.

The increase was primarily attributable to an increase of 2.3% in average rental rates from $2,638 for 2024 to $2,699 for 2025 and 0.5% from a decrease in delinquencies.

2025 Non-Same Property Revenues increased by $61.2 million or 35.2% to $235.0 million in 2025 compared to $173.8 million in 2024.

The increase was primarily due to acquisitions of Hacienda at Camarillo Oaks in 2023, as well as the acquisitions of ARLO Mountain View, Maxwell Sunnyvale, and Beaumont, and the acquisition of the Company’s joint venture partner’s interests in the BEXAEW and BEX II portfolios, Patina at Midtown, and Century Towers in 2024.

The increases were partially offset by the sale of Hillsdale Garden in 2024.

Property operating expenses, excluding real estate taxes increased by $26.4 million or 8.8% to $326.1 million in 2024 compared to $299.7 million in 2023, primarily due to increases of $10.6 million in utilities expenses, $7.8 million in administrative expenses, $7.3 million in personnel costs, and $0.7 million in maintenance and repairs expenses.

2024 Same-Property operating expenses, excluding real estate taxes, increased by $19.5 million or 6.7% to $308.8 million in 2024 compared to $289.3 million in 2023, primarily due to increases of $7.5 million in utilities expenses, $6.9 million in insurance and other expenses, $4.5 million in personnel costs, and $1.3 million in administrative expenses, offset by a decrease of $0.7 million in maintenance and repairs expenses.

Real estate taxes increased by $7.6 million or 4.1% to $193.4 million in 2024 compared to $185.8 million in 2023, primarily due to increases in tax rates in California and the Seattle Metro region and due to the purchase of Hacienda at Camarillo Oaks in 2023 and acquisitions in 2024.

2024 Same-Property real estate taxes increased by $3.4 million or 1.9% to $179.8 million in 2024 compared to $176.4 million in 2023 primarily due to increases in tax rates in California and

the Seattle Metro region.

Depreciation and amortization expense increased by $31.8 million or 5.8% to $580.2 million in 2024 compared to $548.4 million in 2023, primarily due to acquisitions in 2023 and 2024.

These increases were offset by the sale of CBC and The Sweeps in 2023 and Hillsdale Garden in 2024.

Gain on sale of real estate and land of $175.6 million in 2024 was attributable to the sale of Hillsdale Garden in 2024.

Interest expense increased by $22.6 million or 10.6% to $235.5 million in 2024 compared to $212.9 million in 2023 , primarily due to the issuance of $550.0 million senior unsecured notes in 2024 which resulted in an increase in interest expense of $20.1 million.

The increase was also due to borrowing on the $300.0 million unsecured term loan in April 2023, the $298.0 million of 10-year secured loans closed in July 2023, and increased borrowing on the Company’s unsecured lines of credit in 2024 resulting in a $16.2 million increase in interest expense.

Additionally, there was a $0.6 million decrease in capitalized interest in 2024, due to a decrease in development activity as compared to the same period in 2023.

These increases in interest expense were partially offset by regular principal payments and various debts that matured or were paid off, primarily due to the pay off of the $300.0 million of senior unsecured notes due May 1, 2023 and $400.0 million of senior unsecured notes due May 1, 2024 during and after 2023, which resulted in a decrease in interest expense of $14.3 million for 2024.

Interest and other income increased by $34.7 million or 74.9% to $81.0 million in 2024 compared to $46.3 million in 2023, primarily due to increases of $34.8 million in legal settlements and $1.3 million in interest income, offset by a decrease of $1.7 million in realized and unrealized gains on marketable securities.

Equity income from co-investments increased by $37.6 million or 354.7% to $48.2 million in 2024 compared to $10.6 million in 2023, primarily due to a decrease of $30.0 million in impairment losses from unconsolidated co-investments, increases of $8.7 million in equity income from non-core co-investments, $1.5 million in co-investment promote income, and a decrease of $4.8 million in equity loss from co-investments.

These increases were offset by a decrease of $6.5 million in income from preferred equity investments, including income from early redemption of preferred equity investments.

Gain on remeasurement of co-investments of $210.6 million resulted from the Company's acquisition of its joint venture partner's interests in the BEXAEW and BEX II portfolios, Patina at Midtown and Century Towers.

The increase was primarily due to the acquisitions of The Plaza, One Hundred Grand, ROEN Menlo Park, Revere

Campbell, The Parc at Pruneyard, ViO, 1250 Lakeside, and the consolidation of Artizan and TENTEN Downtown in 2025, as well as ARLO Mountain View, Maxwell Sunnyvale, and Beaumont, along with the Company’s acquisition of its joint venture partner’s interests in the BEXAEW and BEX II portfolios, Patina at Midtown, and Century Towers in 2024.

The increases were partially offset by the sale of Highridge, Essex Skyline, The Grand, and Fourth & U in 2025 and Hillsdale Garden in 2024.

Property operating expenses, excluding real estate taxes increased by $25.3 million or 7.7% to $353.4 million in 2025 compared to $328.1 million in 2024, primarily due to acquisitions in 2024 and 2025 identified in the Non-Same Property revenues section above and the increase of Same-Property operating expenses discussed below, partially offset by dispositions in 2024 and 2025.

2025 Same-Property operating expenses, excluding real estate taxes, increased by $16.4 million or 5.5% to $316.5 million in 2025 compared to $300.1 million in 2024, primarily due to increases of $8.1 million in utilities expenses resulting from increases in trash removal, water and sewer costs, $3.7 million in personnel costs due to wage inflation, and $2.6 million in maintenance and repairs expenses due to increases in water damage remediation costs.

Real estate taxes increased by $12.2 million or 6.3% to $205.6 million in 2025 compared to $193.4 million in 2024, primarily due to the net impact of acquisitions and dispositions in 2024 and 2025 identified in the Non-Same Property revenues section above.

2025 Same-Property real estate taxes increased by $0.4 million or 0.3% to $176.1 million in 2025 compared to $175.7 million in 2024 primarily due to increases in tax rates in California, partially offset by decreases in both assessed values and tax rates in the Seattle Metro region for 2025.

Depreciation and amortization expense increased by $27.3 million or 4.7% to $607.5 million in 2025 compared to $580.2 million in 2024, primarily due to acquisitions in 2024 and 2025 identified in the Non-Same Property revenues section above.

The increase was partially offset by dispositions in 2024 and 2025.

General and administrative expense decreased by $27.0 million or 27.3% to $71.9 million in 2025 compared to $98.9 million in 2024, primarily due to a decrease of $31.3 million in political advocacy costs, partially offset by an increase of $5.8 million in personnel costs due to wage inflation.

Gain on sale of real estate and land increased to $299.5 million in 2025 compared to $175.6 million in 2024.

The increase was primarily attributable to the dispositions of Highridge, Essex Skyline, The Grand and Fourth & U in 2025 compared to the disposition of Hillsdale Garden in 2024.

Interest expense increased by $22.9 million or 9.7% to $258.4 million in 2025 compared to $235.5 million in 2024 , primarily due to the issuance in March 2024 and August 2024 of $550.0 million senior unsecured notes due April 2034, the issuance in February 2025 of $400.0 million senior unsecured notes due April 2035, borrowing on the new $300.0 million unsecured term loan in June and September 2025, and increased borrowing on the two unsecured lines of credit and the commercial paper program which resulted in an increase in interest expense of $46.2 million in 2025.

These increases to interest expense were partially offset by various debt that was paid off, matured, or due to regular principal amortization during and after 2024, primarily due to the payoff of $400.0 million of senior unsecured notes due May 1, 2024 and $500.0 million of senior unsecured notes due April 1, 2025, which resulted in a decrease in interest expense of $19.9 million in 2025.

Additionally, there

was an increase in capitalized interest of $3.4 million in 2025 due to an increase in development activity as compared to the same period in 2024.

Interest and other income decreased by $61.0 million or 75.3% to $20.0 million in 2025 compared to $81.0 million in 2024, primarily due to a decrease of $42.9 million in gains from legal settlements.

During the first quarter of 2024, the Company settled two lawsuits related to construction defects at two communities and received cash recoveries of $42.5 million.

The Company determined that all uncertainties were resolved upon receipt of cash and recorded a gain.

There were no material gains from legal settlements during 2025.

Equity income from co-investments decreased by $12.7 million or 26.3% to $35.5 million in 2025 compared to $48.2 million in 2024, primarily due to $12.6 million of impairment losses from unconsolidated co-investments in 2025 compared to $3.7 million in 2024.

Additionally, there was a decrease of $9.8 million in income from preferred equity investments due to a lower average outstanding investment balance in 2025 compared to 2024.

The overall decrease was offset by a $5.2 million gain recognized on the sale of a co-investment community during 2025 with no prior year equivalent.

Gain on remeasurement of co-investment of $0.3 million in 2025 resulted from the Company’s consolidation of its investment in Artizan.

Gain on remeasurement of $210.6 million in 2024 resulted from the Company’s acquisition of its joint venture partner’s interests in the BEXAEW and BEX II portfolios, Patina at Midtown and Century Towers.

Comparison of Year Ended December 31, 2024 to the Year Ended December 31, 2023

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For Essex to maintain its qualification as a REIT, it must pay dividends to its stockholders aggregating annually at least 90% of its REIT taxable income, excluding net capital gains.

While historically Essex has satisfied this distribution requirement by making cash distributions to its stockholders, it may choose to satisfy this requirement by making distributions of other property, including, in limited circumstances, Essex’s own stock.

While historically Essex has satisfied this distribution requirement by

making cash distributions to its stockholders, it may choose to satisfy this requirement by making distributions of other property, including, in limited circumstances, Essex’s own stock.

As a result of this distribution requirement, the Operating Partnership cannot rely on retained earnings to fund its ongoing operations to the same extent that other companies whose parent companies are not REITs can.

Essex may need to continue to raise capital in the equity markets to fund the Operating Partnership’s working capital needs, acquisitions and developments.

As of December 31, 2024, the Company had $66.8 million of unrestricted cash and cash equivalents and $69.8 million in marketable securities, all of which were equity securities.

The Company believes that cash flows generated by its operations, existing cash and cash equivalents, marketable securities balances and availability under existing lines of credit are sufficient to

meet all of its anticipated cash needs during 2025.

As of December 31, 2025, the Company had $76.2 million of unrestricted cash and cash equivalents and $98.1 million in marketable securities, all of which were equity securities or available for sale debt securities.

The Company believes that cash flows generated by its operations, existing cash and cash equivalents, marketable securities balances and availability under existing lines of credit are sufficient to meet all of its anticipated cash needs during 2026.

Additionally, the capital markets continue to be available and the Company is able to generate cash from the disposition of real estate assets to finance additional cash flow needs, including continued development and select acquisitions.

In the event that economic disruptions occur, the Company may further utilize other resources such as its cash reserves, lines of credit, or decreased investment in redevelopment activities to supplement operating cash flows.

The timing, source and amounts of cash flows provided by financing activities and used in investing activities are sensitive to changes in interest rates and other fluctuations in the capital markets environment, which can affect the Company’s plans for acquisitions, dispositions, development and redevelopment activities.

As of December 31, 2024, Moody’s Investor Service and Standard and Poor’s (“S&P”) credit agencies rated Essex Property Trust, Inc.

In the event that economic disruptions occur, the Company may further utilize other resources such as its cash reserves, lines of credit, commercial paper or decreased investment in redevelopment activities to supplement operating cash flows.

The timing, source and amounts of cash flows provided by or used in financing activities and investing activities are sensitive to changes in interest rates and other fluctuations in the capital markets environment, which can affect the Company’s plans for acquisitions, dispositions, development and redevelopment activities.

As of December 31, 2025, Moody’s Investor Service and S&P’s credit agencies rated Essex Property Trust, Inc.

and Essex Portfolio, L.P.

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As of December 31, 2025, the Company’s mortgage notes payable totaled $784.3 million, net of unamortized premiums and debt issuance costs, which consisted of $526.7 million in fixed rate debt at an average interest rate of 4.7% with maturity dates ranging from 2026 to 2033 and $257.7 million of variable rate debt at an average interest rate of 3.6% with maturity dates ranging from 2027 to 2046.

A total of $220.8 million of variable rate debt is tax-exempt demand notes which are subject to total return swaps and $95.0 million of variable rate mortgage notes payable has an interest rate swap that effectively converts $47.5 million to an all-in fixed rate of 2.83%.

A total of $258.8 million of variable rate debt is tax-exempt demand notes which are subject to total return swaps.

As of December 31, 2025, the Company had two unsecured lines of credit aggregating $1.58 billion, including a $1.5 billion unsecured line of credit and a $75.0 million working capital unsecured line of credit.

As of December 31, 2024, there was $75.0 million outstanding on the $1.2 billion unsecured line of credit.

The underlying interest rate is based on a tiered rate structure tied to the Company’s credit ratings, adjusted for the Company’s sustainability metric adjustment feature, and was at the Adjusted SOFR plus 0.765% as of December 31, 2024.

As of December 31, 2025, there was no amount outstanding on the $1.5 billion unsecured line of credit.

The underlying interest rate is based on a tiered rate structure tied to the Company’s long-term unsecured credit ratings and was at SOFR plus 0.775% as of December 31, 2025.

This facility is scheduled to mature in January 2030, with two six-month extensions, exercisable at the Company’s option.

As of December 31, 2024, there was $62.9 million outstanding on the Company’s $75.0 million working capital unsecured line of credit.

The underlying interest rate on the $75.0 million line is based on a tiered rate structure tied to the Company’s credit ratings, adjusted for the Company’s sustainability metric adjustment feature, and was at the Adjusted SOFR plus 0.765% as of December 31, 2024.

The Company may elect to increase the facility by up to an additional $1.0 billion, to an aggregate size of $2.5 billion, if the lenders permit.

As of December 31, 2025, there was no amount outstanding on the Company’s $75.0 million working capital unsecured line of credit.

The underlying interest rate on the $75.0 million line is based on a tiered rate structure tied to the Company’s credit ratings and was at Adjusted SOFR plus 0.775% as of December 31, 2025.

This facility is scheduled to mature in July 2026.

As of December 31, 2025, the Company had an unsecured commercial paper program (the “Commercial Paper Program”) to issue unsecured commercial paper notes with varying maturities up to 397 days from the date of issue (the “Notes”).

As of December 31, 2025, there was no amount of Notes outstanding under the Commercial Paper Program.

Amounts available under the Commercial Paper Program may be borrowed, repaid and re-borrowed from time to time, with the maximum aggregate face or principal amount outstanding at any one time not exceeding $750.0 million.

The Company’s $1.5 billion unsecured line of credit facility serves as a liquidity backstop and any issuances under the Commercial Paper Program reduce the available borrowing capacity.

The Notes rank equally in right of payment with all other senior unsecured senior obligations of the Operating Partnership and are unconditionally guaranteed by the Company.

The Company has used and expects to continue to use the proceeds from the Notes for general corporate purposes and working capital purposes.

The Company’s unsecured lines of credit and unsecured debt agreements contain debt covenants related to limitations on indebtedness and liabilities and maintenance of minimum levels of consolidated earnings before depreciation, interest and amortization.

The Company was in compliance with the debt covenants as of December 31, 2025 and 2024.

The Company pays quarterly dividends from cash available for distribution.

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

Essex pays quarterly dividends from cash available for distribution.

Derivative Activity

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The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements.

The Company has four total return swap contracts, with an aggregate notional amount of $220.8 million, that effectively converts $220.8 million of fixed mortgage notes payable to a floating interest rate based on the Securities Industry and Financial Markets Association Municipal Swap Index (“SIFMA”) plus a spread.

The Company has five total return swap contracts, with an aggregate notional amount of $258.8 million, that effectively convert mortgage notes payable to a floating interest rate based on the Securities Industry and Financial Markets Association Municipal Swap Index (“SIFMA”) plus a spread.

The total return swaps provide fair market value protection on the mortgage notes payable to our counterparties during the initial period of the total return swap until the Company’s option to call the mortgage notes at par can be exercised.

The Company can currently call all four of the total return swaps, with $220.8 million of the outstanding debt at par.

The Company can currently settle all five total return swaps, with $258.8 million of the outstanding debt at par.

These derivatives do not qualify for hedge accounting.

The aggregate carrying and fair value of the total return swaps was zero at both December 31, 2025 and 2024.

As of December 31, 2024 and 2023 the aggregate carrying value of the interest rate swap contracts are an asset of $5.5 million and $4.3 million, respectively, and is included in prepaid expenses and other assets in the consolidated balance sheets.

As of December 31, 2025 and 2024 the aggregate carrying value of the interest rate swap contracts is an asset of $2.0 million and $5.5 million, respectively, and is included in prepaid expenses and other assets in the consolidated balance sheets.

The Company had no interest rate cap agreements as of December 31, 2025 and 2024, respectively.

Hedge ineffectiveness related to cash flow hedges, which is reported in current year income as interest expense, net was zero for the years ended December 31, 2024, 2023 and 2022.

Issuance of Common Stock

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The use of a forward sale agreement would allow the Company to lock in a share price on the sale of shares of its common stock at the time the agreement is executed, but defer receipt of the proceeds from the sale of shares until a later date.

The 2024 ATM Program replaced the 2021 ATM Program, which was terminated upon the establishment of the 2024 ATM Program.

For the years ended December 31, 2024, 2023 and 2022, the Company did not sell any shares of common stock through the 2024 ATM Program nor 2021 ATM Program.

As of December 31, 2024, there were no outstanding forward purchase agreements, and $900.0 million of shares of common stock remained available to be sold under the 2024 ATM Program.

Furthermore, it would permit the Company, at its election, to settle the agreements by issuing common stock in exchange for net proceeds at the then-applicable forward sale price specified by the agreement or, alternatively, to settle the agreements in whole or in part through the delivery or receipt of common stock or cash.

Issuances of shares under these forward sale agreements are classified as equity transactions.

Accordingly, no amounts relating to the forward sale agreements are recorded in the consolidated financial statements until settlement occurs.

Prior to any settlements, the only impact to the consolidated financial statements is the inclusion of incremental shares, if any, within the calculation of diluted earnings per share and diluted earnings per unit using the treasury stock method.

The actual forward price per share to be received by the Company upon settlement will be determined on the applicable settlement date based on adjustments made to the initial forward price to reflect the then-current overnight federal funds rate and the amount of dividends paid to holders of the Company’s common stock over the term of the forward sale agreement.

The 2024 ATM Program replaced the prior equity distribution agreement entered into in September 2021 (the “2021 ATM Program”), which was terminated upon the establishment of the 2024 ATM Program.

For the years ended December 31, 2025, 2024 and 2023, the Company did not issue any shares of common stock through the 2024 ATM Program nor the 2021 ATM Program.

For the year ended December 31, 2025, the Company entered into forward sale agreements with certain financial institutions acting as forward purchasers under the 2024 ATM Program with respect to 52,600 shares of common stock at an initial gross weighted average forward price of $314.06 per share, which are to be settled by September 2026.

As of December 31, 2025, $900.0 million of shares of common stock remained available to be sold under the 2024 ATM Program, pending the settlement of outstanding forward sale agreements.

Capital Expenditures

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The Company expects that cash from operations and/or its lines of credit will fund such expenditures.

Development and Predevelopment Pipeline

Development Pipeline

The Company defines development projects as new communities that are being constructed, or are newly constructed and are in a phase of lease-up and have not yet reached stabilized operations.

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The Company may also acquire land for future development purposes or sale.

As of December 31, 2024, the Company’s development and predevelopment pipeline was comprised of various consolidated predevelopment projects, with total incurred costs of $52.7 million.

As of December 31, 2025, the Company’s development pipeline was comprised of one consolidated development project and various predevelopment projects, with total incurred costs of $157.1 million, and estimated remaining project costs of approximately $200.9 million, for total estimated project costs of $358.0 million.

The Company expects to fund the development and predevelopment communities by using a combination of some or all of the following sources:

its working capital, amounts available on its lines of credit, construction loans, net proceeds from public and private equity and debt issuances, and proceeds from the disposition of assets, if any.

its working capital, amounts available on its lines of credit, commercial paper, construction loans, net proceeds from public and private equity and debt issuances, and proceeds from the disposition of assets, if any.

Alternative Capital Sources

The Company utilizes co-investments as an alternative source of capital for acquisitions of both operating and development communities.

As of December 31, 2024, the Company had an interest in 7,694 apartment homes in operating communities with joint ventures and technology co-investments for a total book value of $379.5 million.

The Company had an interest in 7,483 apartment homes in operating communities with joint ventures and technology co-investments for a total book value of $304.4 million as of December 31, 2025.

Real Estate and Other Commitments

The following table summarizes the Company’s unfunded real estate and other future commitments as of December 31, 2025 ($ in thousands):

Number of Properties Investment Remaining Commitment

Number of Properties Investment Remaining Unfunded Commitment

Joint ventures:

Preferred equity investments 1 $ 85,000 $ 35,000

Non-core co-investments — 86,000 34,465

Technology co-investments N/A 86,000 23,215

Consolidated:

Real estate under development 1 157,122 200,883

$ 328,122 $ 259,098

As of December 31, 2025, the Company had remaining unfunded commitments of $94.8 million for operating co-investments.

As of December 31, 2025, the Company had operating lease commitments of $122.0 million for ground, building and garage leases with maturity dates ranging from 2026 to 2083.

$6.4 million of these commitments are due within the next twelve months.

$6.3 million of these commitments are due during the year ended December 31, 2026.

Variable Interest Entities

In accordance with accounting standards for consolidation of variable interest entities (“VIEs”), the Company consolidated the Operating Partnership, 18 DownREIT entities (comprising nine communities) and five co-investments as of December 31, 2024.

As of December 31, 2023, the Company consolidated the Operating Partnership, 18 DownREIT entities (comprising nine communities) and six co-investments.

The Company consolidates these entities because it is deemed the primary beneficiary.

In accordance with accounting standards for consolidation of variable interest entities (“VIEs”), the Company consolidated the Operating Partnership, 18 DownREIT entities (comprising ten communities) and four co-investments as of December 31, 2025.

As of December 31, 2024, the Company consolidated the Operating Partnership, 18 DownREIT entities (comprising nine

communities) and five co-investments.

The Company consolidates these entities because it is the primary beneficiary.

Essex has no assets or liabilities other than its investment in the Operating Partnership.

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The Company’s financial risk in each VIE is limited to its equity investment in the VIE.

As of December 31, 2024, the Company was not deemed to be the primary beneficiary of any other VIEs.

As of December 31, 2025, the Company did not have any VIEs of which it was not the primary beneficiary.

Critical Accounting Estimates

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The Company periodically assesses its real estate investments for events or changes in circumstances that indicate the carrying value may not be recoverable.

12 month period, monitoring estimated costs for properties under development, the Company’s ability to hold and its intent with regard to each asset, and each property’s remaining useful life.

The judgments regarding the existence of impairment indicators are based on monitoring investment market conditions and performance for operating properties including the net operating income for the most recent 12 month period, monitoring estimated costs for properties under development, the Company’s ability to hold and its intent with regard to each asset, and each property’s remaining useful life.

Although each of these may result in an impairment indicator, the shortening of an expected holding period due to the potential sale of a property is the most likely impairment indicator.

40 unchanged sentences

Depreciation attributable to third party ownership and other (160) 31,191 (1,474)

31,191 (1,474) (1,421)

Funds from operations attributable to common stockholders and unitholders $ 1,065,136 $ 1,063,878 $ 1,013,713

2 unchanged sentences

Expensed acquisition and investment related costs $ 25 $ 72 $ 595

Tax (benefit) expense on unconsolidated co-investments (2)

(929) 697 (10,236)

Realized and unrealized (gains) losses on marketable securities, net (8,347) (10,006) 45,547

Tax (benefit) expense on unconsolidated technology co-investments (2,096) (929) 697

Realized and unrealized gains on marketable securities, net (3,809) (8,347) (10,006)

Provision for credit losses 26 (179) 70

Equity (income) loss from non-core co-investments (3)

(10,344) (1,685) 38,045

Loss on early retirement of debt, net — — 2

Loss on early retirement of debt from unconsolidated co-investment — — 988

Equity income from unconsolidated technology co-investments (6,552) (10,344) (1,685)

Loss on early retirement of debt 762 — —

Loss on early retirement of debt from unconsolidated co-investments 122 — —

Co-investment promote income — (1,531) —

8 unchanged sentences

66,669,649 66,533,908 66,514,456

(1) The Company consolidates certain co-investments.

The noncontrolling interest’s share of net operating income in these investments for the years ended December 31, 2024, 2023 and 2022 were $2.9 million, $3.3 million, and $3.3 million, respectively.

For the year ended December 31, 2024, the amount includes $32.4 million of gain on sale attributable to noncontrolling interest.

(2) Represents tax related to net unrealized gains or losses on technology co-investments.

(3) Represents the Company’s share of co-investment income or loss from technology co-investments.

(1) Includes political advocacy costs of $2.0 million, $33.3 million, and $4.1 million for the years ended December 31, 2025, 2024 and 2023, respectively.

(5) Includes legal settlement gains of $42.5 million, $7.7 million, and $4.2 million for the for the years ended December 31, 2024, 2023 and 2022 respectively.

(2) There were no material gains from legal settlements for the year ended December 31, 2025.

For the year ended December 31, 2024, the Company settled two lawsuits related to construction defects at two communities and received cash recoveries of $42.5 million.

For the year ended December 31, 2023, the Company settled a lawsuit related to construction defects at one of its communities and received cash recovery of $7.7 million.

The Company determined that all uncertainties were resolved upon receipt of cash and recorded a gain which was excluded from Core FFO.

(3) Assumes conversion of all outstanding OP Units into shares of the Company’s common stock and excludes DownREIT limited partnership units.

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Words such as “expects,” “assumes,” “anticipates,” “may,” “will,” “intends,” “plans,” “projects,” “believes,” “seeks,” “future,” “estimates,” and variations of such words and similar expressions are intended to identify such forward-looking statements.

Such forward-looking statements include, among other things, statements regarding expected operating performance and results (including projected Same-Property revenues and expenses), qualification as a REIT under the Internal Revenue Code of 1986, as amended, property stabilizations, property acquisition and disposition activity, joint venture and co-investment activity, development and redevelopment activity and other capital expenditures, capital raising and financing activity, revenue and expense growth, financial occupancy, interest rate and other economic expectations, included projected new housing supply.

While the Company’s management believes the assumptions underlying its forward-looking statements are reasonable, such forward-looking statements involve known and unknown risks, uncertainties and other factors, many of which are beyond the Company’s control, which could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

2 unchanged sentences

Factors that might cause the Company’s actual results, performance or achievements to differ materially from those expressed or implied by these forward-looking statements include, but are not limited to, the following:

the short and long-term impact of the January 2025 California wildfires, including in relation to regulation, insurance, tenant demand and other factors;

occupancy rates and rental demand may be adversely affected by competition and local economic and market conditions;

there may be increased interest rates, inflation, escalated operating costs and possible recessionary impacts;

including from tariffs imposed by the current presidential administration and the threat of such tariffs;

geopolitical tensions and regional conflicts, and the related impacts on macroeconomic conditions, including, among other things, interest rates and inflation;

the terms of any refinancing may not be as favorable as the terms of existing indebtedness;

the terms of any refinancing may not be as favorable as the terms of

existing indebtedness;

the Company’s inability to maintain its investment grade credit rating with the rating agencies;

the Company may be unsuccessful in the management of its relationships with its

co-investment partners;

the Company may be unsuccessful in the management of its relationships with its co-investment partners;

the Company may fail to achieve its business objectives;

time of actual completion and/or stabilization of development and redevelopment projects;

including potential delays due to supply shortages related to tariffs and/or labor shortages related to deportations or threat of deportations;

estimates of future income from an acquired property may prove to be inaccurate;

1 unchanged sentence

changes in laws or regulations and the anticipated or actual impact of future changes in laws or regulations;

including eviction moratoria;

unexpected difficulties in leasing of future development projects;

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis