Ownership interest in partnership

[Table of Contents](#i4d39113ff6244e288fa572d2c8fbfe75_10)ESSEX PROPERTY TRUST, INC. AND SUBSIDIARIESESSEX PORTFOLIO, L.P. AND SUBSIDIARIESNotes to Condensed Consolidated Financial StatementsSeptember 30, 2022 and 2021 (Unaudited)  
(1) Organization and Basis of Presentation   
The accompanying unaudited condensed consolidated financial statements present the accounts of Essex Property Trust, Inc. ("Essex" or the "Company"), which include the accounts of the Company and Essex Portfolio, L.P. and its subsidiaries (the "Operating Partnership," which holds the operating assets of the Company), prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and in accordance with the instructions to Form 10-Q. In the opinion of management, all adjustments necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented have been included and are normal and recurring in nature. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 2021.  
All significant intercompany accounts and transactions have been eliminated in the unaudited condensed consolidated financial statements. Certain reclassifications have been made to conform to the current year's presentation.   
The unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2022 and 2021 include the accounts of the Company and the Operating Partnership. Essex is the sole general partner of the Operating Partnership, with a 96.6% general partnership interest as of both September 30, 2022 and December 31, 2021. Total Operating Partnership limited partnership units ("OP Units," and the holders of such OP Units, "Unitholders") outstanding were 2,272,496 and 2,282,464 as of September 30, 2022 and December 31, 2021, respectively, and the redemption value of the units, based on the closing price of the Company’s common stock totaled approximately $550.5 million and $804.0 million as of September 30, 2022 and December 31, 2021, respectively.   
As of September 30, 2022, the Company owned or had ownership interests in 253 operating apartment communities, comprising 62,397 apartment homes, excluding the Company’s ownership interest in preferred equity co-investments, loan investments, three operating commercial buildings, and a development pipeline comprised of one unconsolidated joint venture project. The operating apartment communities are located in Southern California (primarily Los Angeles, Orange, San Diego, and Ventura counties), Northern California (the San Francisco Bay Area) and the Seattle metropolitan areas.  
Accounting Pronouncements Adopted in the Current Year  
  
In January 2021, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2020-06 "Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity." The amendments in ASU 2020-06 modifies the if-converted method of calculating diluted earnings per share ("EPS"). For instruments that may be settled in cash or shares, and are not classified as a liability, the guidance requires entities to include the effect of potential share settlement in the diluted EPS calculation, if the effect is more dilutive. The Company adopted this guidance on January 1, 2022 on a prospective basis. This adoption did not have a material impact on the Company's consolidated results of operations or financial position.   
Revenues and Gains on Sale of Real Estate  
Revenues from tenants renting or leasing apartment homes are recorded when due from tenants and are recognized monthly as they are earned which generally approximates a straight-line basis, else, adjustments are made to conform to a straight-line basis. Apartment homes are rented under short-term leases (generally, lease terms of 9 to 12 months). Revenues from tenants leasing commercial space are recorded on a straight-line basis over the life of the respective lease. See Note 3, Revenues, for additional information regarding such revenues.  
The Company also generates other property-related revenue associated with the leasing of apartment homes, including storage income, pet rent, and other miscellaneous revenue. Similar to rental income, such revenues are recorded when due from tenants and recognized monthly as they are earned.  
Apart from rental and other property-related revenue, revenues from contracts with customers are recognized as control of the promised services is passed to the customer. For customer contracts related to management and other fees from affiliates (which includes asset management and property management), the transaction price and amount of revenue to be recognized is 18
