**UNITED
        STATES**
 
 **SECURITIES
        AND EXCHANGE COMMISSION**
 
 **Washington,
        D.C. 20549**
 
 
 **FORM
        10-Q**
 
 
 x **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT
        OF 1934**
 
 **For
        the quarterly period ended June 30, 2005**
 
 **OR**
 
 o **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT
        OF 1934**
 
 **For
        the transition period from ________to _________**
 
 **Commission
        file number 333-44467-01** ****
 
 **ESSEX
        PORTFOLIO, L.P.** ****
 (Exact
        name of Registrant as Specified in its Charter)
 
 **Maryland**
              
              **77-0369575**(State
                  or Other Jurisdiction of Incorporation or Organization)
              
              (I.R.S.
                  Employer Identification Number)
 
 **925
        East Meadow Drive**
 **Palo
        Alto, California 94303**
 (Address
        of Principal Executive Offices including Zip Code)
 
 **(650)
        494-3700**
 (Registrant's
        Telephone Number, Including Area Code)
 
 Indicate
        by check mark whether the registrant (1) has filed all reports required to
        be
        filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
        the
        preceding 12 months (or for such shorter period that the registrant was required
        to file reports), and (2) has been subject to such filing requirements for
        the
        past 90 days. YES x NO o
 
 Indicate
        by check mark whether the registrant is an accelerated filer (as defined
        in Rule
        12b-2 of the Securities Exchange Act of 1934). Yes x No o
  
  **ESSEX
        PORTFOLIO, L.P.**
 **FORM
        10-Q**
 **INDEX**
 
 **Page
                  No.****PART
                  I. FINANCIAL INFORMATION**Item
                  1.
              Financial
                  Statements (Unaudited):
              3Consolidated
                  Balance Sheets as of June 30, 2005 and December 31, 2004
              4Consolidated
                  Statements of Operations for the three and six months ended June
                  30, 2005
                  and 2004
              5Consolidated
                  Statements of Partners’ Capital and Comprehensive Income for the six
                  months ended June 30, 2005
              6Condensed
                  Consolidated Statements of Cash Flows for the six months ended
                  June 30,
                  2005 and 2004
              7Notes
                  to Consolidated Financial Statements
              8Item
                  2.
              Management's
                  Discussion and Analysis of Financial Condition and Results of Operations
              19Item
                  3.
              Quantitative
                  and Qualitative Disclosures About Market Risk
              27Item
                  4.
              Controls
                  and Procedures
              28**PART
                  II. OTHER INFORMATION**Item
                  1.
              Legal
                  Proceedings
              29Item
                  6.
              Exhibits
              29**Signature**
              30


2


**Part
        I -- Financial Information**
 
 **Item
        1: Financial Statements (Unaudited)**
 
 Essex
        Portfolio, L.P., a California limited partnership, (the “Operating Partnership”)
        effectively holds the assets and liabilities and conducts the operating
        activities of Essex Property Trust, Inc. (“Essex” or the “Company”). Essex
        Property Trust, Inc., a real estate investment trust incorporated in the
        State
        of Maryland, is the sole general partner of the Operating
        Partnership.
 
 The
        information furnished in the accompanying consolidated unaudited balance
        sheets,
        statements of operations, partners' capital and cash flows of the Operating
        Partnership reflects all adjustments which are, in the opinion of management,
        necessary for a fair presentation of the aforementioned consolidated financial
        statements for the interim periods.
 
 The
        accompanying unaudited consolidated financial statements should be read in
        conjunction with the notes to such consolidated financial statements and
        Management's Discussion and Analysis of Financial Condition and Results of
        Operations herein. Additionally, these unaudited consolidated financial
        statements should be read in conjunction with the audited consolidated financial
        statements included in the Operating Partnership's annual report on Form
        10-K
        for the year ended December 31, 2004.
 
 3
  **ESSEX
        PORTFOLIO, L.P. AND SUBSIDIARIES**
 Consolidated
        Balance Sheets
 (Unaudited)
 (Dollars
        in thousands)
 **June
                    30,**
                
                **December
                    31,****2005**
                
                **2004****Assets**Real
                    estate:Rental
                    properties:Land
                    and land improvements
                
                $
                551,155
                
                $
                536,600Buildings
                    and improvements
                
                
                1,914,049
                
                
                1,834,5942,465,204
                
                
                2,371,194Less
                    accumulated depreciation
                
                
                (361,877
                )
                
                (329,652
                )2,103,327
                
                
                2,041,542Real
                    estate investments held for sale, net of accumulateddepreciation of $496 as of December 31, 2004
                
                
                -
                
                
                14,445Investments
                
                
                30,756
                
                
                49,712Real
                    estate under development
                
                
                27,311
                
                
                38,3202,161,394
                
                
                2,144,019Cash
                    and cash equivalents-unrestricted
                
                
                33,076
                
                
                10,644Cash
                    and cash equivalents-restricted
                
                
                13,609
                
                
                21,255Notes
                    and other receivables from related parties
                
                
                1,223
                
                
                1,435Notes
                    and other receivables
                
                
                8,149
                
                
                9,535Prepaid
                    expenses and other assets
                
                
                18,312
                
                
                19,591Deferred
                    charges, net
                
                
                10,593
                
                
                10,738Total
                    assets
                
                $
                2,246,356
                
                $
                2,217,217**Liabilities
                    and Partners' Capital**Mortgage
                    notes payable
                
                $
                1,127,659
                
                $
                1,067,449Lines
                    of credit
                
                
                185,535
                
                
                249,535Accounts
                    payable and accrued liabilities
                
                
                38,158
                
                
                29,997Dividends
                    payable
                
                
                22,664
                
                
                21,976Other
                    liabilities
                
                
                12,350
                
                
                11,853Deferred
                    gain
                
                
                2,193
                
                
                5,000Total
                    liabilities
                
                
                1,388,559
                
                
                1,385,810Minority
                    interests
                
                
                47,323
                
                
                49,254Redeemable
                    convertible limited partnership units
                
                
                4,750
                
                
                4,750Partners'
                    capital:General
                    partner:Common equity
                
                
                601,897
                
                
                566,865Preferred equity (liquidation value of $25,000)
                
                
                24,412
                
                
                24,412626,309
                
                
                591,277Limited
                    partners:Common
                    equity
                
                
                54,320
                
                
                59,436Preferred
                    equity (liquidation value of $185,000)
                
                
                126,690
                
                
                126,690181,010
                
                
                186,126Accumulated
                    other comprehensive income (loss)
                
                
                (1,595
                )
                
                -Total partners' capital
                
                
                805,724
                
                
                777,403Commitments
                    and contingenciesTotal liabilities and partners' capital
                
                $
                2,246,356
                
                $
                2,217,217
 See
            accompanying notes to the unaudited consolidated financial
            statements.
  4
  **ESSEX
        PORTFOLIO, L.P. AND SUBSIDIARIES**
 Consolidated
        Statements of Operations
 (Unaudited)
 (Dollars
        in thousands, except per unit amounts)
 **Three
                    Months Ended**
                
                **Six
                    Months Ended****June
                    30,**
                
                **June
                    30,****2005**
                
                **2004**
                
                **2005**
                
                **2004**Revenues:Rental
                    and other property
                
                $
                77,965
                
                $
                69,616
                
                $
                154,632
                
                $
                135,258Management
                    and other fees from affiliates
                
                
                931
                
                
                1,337
                
                
                7,507
                
                
                2,61778,896
                
                
                70,953
                
                
                162,139
                
                
                137,875Expenses:Property
                    operating, excluding real estate
                  taxes
                
                
                18,988
                
                
                17,681
                
                
                37,606
                
                
                33,821Real
                    estate taxes
                
                
                6,610
                
                
                6,110
                
                
                13,451
                
                
                11,568Depreciation
                    and amortization
                
                
                20,043
                
                
                17,526
                
                
                39,622
                
                
                35,367Interest
                
                
                18,153
                
                
                15,081
                
                
                36,300
                
                
                29,391Amortization
                    of deferred financing costs
                
                
                563
                
                
                457
                
                
                1,039
                
                
                730General
                    and administrative
                
                
                4,573
                
                
                3,479
                
                
                9,014
                
                
                6,346Legal
                    settlement
                
                
                1,500
                
                
                -
                
                
                1,500
                
                
                -70,430
                
                
                60,334
                
                
                138,532
                
                
                117,223Gain
                    on sale of real estate
                
                
                5,276
                
                
                -
                
                
                6,391
                
                
                -Interest
                    and other income
                
                
                2,431
                
                
                689
                
                
                2,954
                
                
                1,259Equity
                    income in co-investments
                
                
                2,843
                
                
                (5
                )
                
                17,554
                
                
                1,095Minority
                    interests
                
                
                (1,450
                )
                
                (881
                )
                
                (2,741
                )
                
                (1,649
                )Income
                    from continuing operations before
                  incometax
                    provision
                
                
                17,566
                
                
                10,422
                
                
                47,765
                
                
                21,357Income
                    tax provision
                
                
                (1,100
                )
                
                (23
                )
                
                (1,201
                )
                
                (86
                )Income
                    from continuing operations
                
                
                16,466
                
                
                10,399
                
                
                46,564
                
                
                21,271Discontinued
                    operationsOperating
                    income (loss) from real estate
                  sold
                
                
                460
                
                
                (41
                )
                
                1,861
                
                
                338Gain
                    on sale of real estate
                
                
                28,484
                
                
                -
                
                
                29,219
                
                
                -Income
                    (loss) from discontinued
                  operations
                
                
                28,944
                
                
                (41
                )
                
                31,080
                
                
                338Net
                    income
                
                
                45,410
                
                
                10,358
                
                
                77,644
                
                
                21,609Preferred
                    return to general partner - Series F
                
                
                (488
                )
                
                (488
                )
                
                (977
                )
                
                (976
                )Distributions
                    to preferred units - limited
                  partners
                
                
                (2,559
                )
                
                (4,009
                )
                
                (5,118
                )
                
                (8,113
                )Net
                    income available to common units
                
                $
                42,363
                
                $
                5,861
                
                $
                71,549
                
                $
                12,520Per
                    common unit data:Basic:Income
                    from continuing operationsavailable
                      to common units
                
                $
                0.53
                
                $
                0.23
                
                $
                1.59
                
                $
                0.49Income
                    (loss) from discontinued
                  perations
                
                
                1.14
                
                
                (0.00
                )
                
                1.23
                
                
                0.01Net
                    income available to common units
                
                $
                1.67
                
                $
                0.23
                
                $
                2.82
                
                $
                0.50Weighted
                    average number of commonunits
                    outstanding during the period
                
                
                25,368,981
                
                
                25,225,131
                
                
                25,369,134
                
                
                25,166,819Diluted:Income
                    from continuing operations availableto
                    common units
                
                $
                0.52
                
                $
                0.23
                
                $
                1.58
                
                $
                0.48Income
                    (loss) from discontinued operations
                
                
                1.13
                
                
                (0.00
                )
                
                1.21
                
                
                0.01Net
                    income available to common units
                
                $
                1.65
                
                $
                0.23
                
                $
                2.79
                
                $
                0.49Weighted
                    average number of common unitsoutstanding
                    during the period
                
                
                25,672,235
                
                
                25,446,751
                
                
                25,675,973
                
                
                25,386,274Distribution
                    per Operating Partnership common unit
                
                $
                0.81
                
                $
                0.79
                
                $
                1.62
                
                $
                1.58
 See
        accompanying notes to the unaudited consolidated financial
        statements.
 5
  **ESSEX
        PORTFOLIO, L.P. AND SUBSIDIARIES**
 Consolidated
        Statements of Partners’ Capital and
 Comprehensive
        Income for the six months ended
 June
        30,
        2005
 (Unaudited)
 (Dollars
        and units in thousands)
 **General
                    Partner**
                
                **Limited
                    Partners**
                
                **Accumulated****Preferred**
                
                
                
                
                
                **Preferred**
                
                **Other****Common
                    Equity**
                
                **Equity**
                
                **Common
                    Equity**
                
                **Equity**
                
                **Comprehensive****Units**
                
                **Amount**
                
                **Amount**
                
                **Units**
                
                **Amount**
                
                **Amount**
                
                **Income**
                
                **Total**Balances
                    at December 31, 2004
                
                
                23,034
                
                $
                566,865
                
                $
                24,412
                
                
                2,478
                
                $
                59,436
                
                $
                126,690
                
                $
                -
                
                $
                777,403Issuance
                    of common units understock-based compensation plan
                
                
                51
                
                
                2,117
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                2,117Redemption
                    of limited partnercommon units
                
                
                -
                
                
                -
                
                
                -
                
                
                (89
                )
                
                (2,698
                )
                
                -
                
                
                -
                
                
                (2,698
                )Vested
                    series Z and Z-1 incentive units
                
                
                -
                
                
                -
                
                
                -
                
                
                30
                
                
                263
                
                
                -
                
                
                -
                
                
                263Reallocation
                    of partners' capital (1)
                
                
                -
                
                
                5,509
                
                
                -
                
                
                -
                
                
                (5,509
                )
                
                -
                
                
                -
                
                
                -Comprehensive
                    income:Net income
                
                
                -
                
                
                64,780
                
                
                976
                
                
                -
                
                
                6,770
                
                
                5,118
                
                
                -
                
                
                77,644Change in fair value of cash flow hedges
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (1,595
                )
                
                (1,595
                )Comprehensive
                    income
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                76,049Partners'
                    distributions
                
                
                -
                
                
                (37,374
                )
                
                (976
                )
                
                -
                
                
                (3,942
                )
                
                (5,118
                )
                
                -
                
                
                (47,410
                )Balances
                    at June 30, 2005
                
                
                23,085
                
                $
                601,897
                
                $
                24,412
                
                
                2,419
                
                $
                54,320
                
                $
                126,690
                
                $
                (1,595
                )
                $
                805,724
  (1)
        During the six months ended June 30, 2005, the Operating Partnership recorded
        a
        true-up of the reallocation of minority interest as of December 31, 2004.
        This
        true-up was not material to partners’ capital at either June 30, 2005 or
        December 31, 2004.
 
 See
        accompanying notes to the unaudited consolidated financial
        statements.
  6
  **ESSEX
        PORTFOLIO, L.P. AND SUBSIDIARIES**
 Condensed
        Consolidated Statements of Cash Flows
 (Unaudited)
 (Dollars
        in thousands)
 **Six
                    Months Ended****June
                    30,****2005**
                
                **2004**Net
                    cash provided by operating activities
                
                $
                66,629
                
                $
                59,448Cash
                    flows from investing activities:Additions
                    to real estate:Acquisitions
                
                
                (13,817
                )
                
                (118,614
                )Improvements
                    to recent acquisitions
                
                
                (2,273
                )
                
                (6,032
                )Redevelopment
                
                
                (7,711
                )
                
                (2,452
                )Revenue
                    generating capital expenditures
                
                
                (115
                )
                
                (54
                )Other
                    capital expenditures
                
                
                (6,116
                )
                
                (4,380
                )Additions
                    to real estate under development
                
                
                (15,031
                )
                
                (8,184
                )Dispositions
                    of real estate and investments
                
                
                6,585
                
                
                -Change
                    in restricted cash
                
                
                7,646
                
                
                (5,009
                )Additions
                    to notes receivable from related parties and other
                    receivables
                
                
                (3,643
                )
                
                (171
                )Repayment
                    of notes receivable from related parties and other
                    receivables
                
                
                5,005
                
                
                1,496Net
                    distributions from (contributions to) limited partnerships
                
                
                41,336
                
                
                5,502Net
                    cash provided by/(used in) investing activities
                
                
                11,866
                
                
                (137,898
                )Cash
                    flows from financing activities:Proceeds
                    from mortgage notes payable and lines of credit
                
                
                96,629
                
                
                224,417Repayment
                    of mortgage notes payable and lines of credit
                
                
                (99,840
                )
                
                (93,364
                )Additions
                    to deferred charges
                
                
                (885
                )
                
                (3,466
                )Net
                    proceeds from stock options exercised
                
                
                1,881
                
                
                3,657Contributions
                    from minority interest partners
                
                
                -
                
                
                -Distributions
                    to limited partners and minority interest
                
                
                (11,545
                )
                
                (14,087
                )Redemption
                    of limited partnership units and minority interest
                
                
                (4,466
                )
                
                (5,455
                )Distributions
                    to general partner
                
                
                (37,837
                )
                
                (36,394
                )Net
                    cash (used in)/provided by financing activities
                
                
                (56,063
                )
                
                75,308Net
                    increase/(decrease) in cash and cash equivalents
                
                
                22,432
                
                
                (3,142
                )Cash
                    and cash equivalents at beginning of period
                
                
                10,644
                
                
                14,768Cash
                    and cash equivalents at end of period
                
                $
                33,076
                
                $
                11,626Supplemental
                    disclosure of cash flow information:Cash
                    paid for interest, net of $511 and $1,571 capitalizedin
                    2005 and 2004, respectively
                
                $
                35,600
                
                $
                27,224Assumption
                    of mortgage loans payable in conjunction with the purchases of
                    real
                    estate
                
                $
                -
                
                $
                134,456Common
                    stock issued pursuant to phantom stock plan
                
                $
                262
                
                $
                26Issuance
                    of limited partnership units in connection with the purchase
                    of real
                    estate
                
                $
                -
                
                $
                1,729Real
                    estate investment transferred to rental property
                
                $
                -
                
                $
                4,068Proceeds
                    from disposition of real estate held by exchange
                    facilitator
                
                $
                62,000
                
                $
                -
  See
        accompanying notes to the unaudited consolidated financial
        statements.
  7
  **ESSEX
        PORTFOLIO, L.P. AND SUBSIDIARIES**
 **Notes
        to Consolidated Financial Statements**
 **June
        30, 2005 and 2004**
 **(Unaudited)**
 
 **(1)**
              **Organization
                  and Basis of Presentation**
  The
        unaudited consolidated financial statements of the Operating Partnership
        are
        prepared in accordance with accounting principles generally accepted in the
        United States of America 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 consolidated financial
        statements should be read in conjunction with the audited consolidated financial
        statements included in the Operating Partnership's annual report on Form
        10-K
        for the year ended December 31, 2004.
   All
        significant intercompany balances and transactions have been eliminated in
        the
        consolidated financial statements. Certain prior year balances have been
        reclassified to conform to the current year presentation.
  The
        Company is the sole general partner in the Operating Partnership, with a
        90.5%,
        90.3% and 90.9% general partnership interest as of June 30, 2005, December
        31,
        2004 and June 30, 2004 respectively. See below for a description of entities
        consolidated by the Operating Partnership for all periods presented pursuant
        to
        its adoption of FIN 46 Revised.
  As
        of
        June 30, 2005, the Operating Partnership has ownership interests in 123
        multifamily properties (containing 25,798 units), three office buildings
        (with
        approximately 166,340 square feet), three recreational vehicle parks (comprising
        562 spaces) and one manufactured housing community (containing 157 sites),
        (collectively, the "Properties"). The Properties are located in Southern
        California (Los Angeles, Ventura, Orange, Riverside and San Diego counties),
        Northern California (the San Francisco Bay Area), the Pacific Northwest (the
        Seattle, Washington and Portland, Oregon metropolitan areas) and other areas
        (Houston, Texas).
  *Fund
        Activities*
   Essex
        Apartment Value Fund, L.P. ("Fund I"), is an investment fund organized by
        the
        Operating Partnership in 2001 to add value through rental growth and asset
        appreciation, utilizing the Operating Partnership's development, redevelopment
        and asset management capabilities. An affiliate of the Operating Partnership,
        Essex VFGP, L.P. ("VFGP"), is a 1% general partner and is a 20.4% limited
        partner. The Operating Partnership owns a 99% limited partnership interest
        in
        VFGP.
  On
        September 27, 2004 the Operating Partnership announced the final closing
        of
        partner equity commitments for Essex Apartment Value Fund II (“Fund II”). Fund
        II has eight institutional investors, including the Operating Partnership,
        with
        combined partner equity commitments of $265.9 million. Essex has committed
        $75.0
        million to Fund II, which represents a 28.2% interest as general partner
        and
        limited partner. Fund II expects to utilize leverage equal to approximately
        65%
        of the estimated value of the underlying real estate. Fund II will invest
        in
        multifamily properties in the Operating Partnership’s targeted West Coast
        markets with an emphasis on investment opportunities in Seattle and the San
        Francisco Bay Area. Subject to certain exceptions, Fund II will be Essex’s
        exclusive investment vehicle until October 31, 2006, or when Fund II’s committed
        capital has been invested, whichever occurs first. Consistent with Fund I,
        the
        Operating Partnership will record revenue for its asset management, property
        management, development and redevelopment services, and promote distributions
        should Fund II exceed certain financial return benchmarks.
 8
 *Variable
        Interest Entities*
  In
        accordance with Financial Accounting Standards Board (FASB) Interpretation
        No.
        46 Revised (FIN 46R), “Consolidation of Variable Interest Entities, an
        Interpretation of ARB No. 51”, the Operating Partnership consolidates Essex
        Management Corporation (EMC), Essex Fidelity I Corporation (EFC), 17 Down
        REIT
        limited partnerships (comprising ten properties), an office building that
        is
        subject to loans made by the Operating Partnership, and the multifamily
        improvements owned by a third party in which the Operating Partnership owns
        the
        land underlying these improvements and from which the Operating Partnership
        receives fees, including land lease, subordination and property management
        fees,
        and a joint venture to develop a building in Los Angeles, California. The
        Operating Partnership consolidated these entities because it is deemed the
        primary beneficiary under FIN 46R. The Operating Partnership's total assets
        and
        liabilities related to these variable interest entities (VIEs), net of
        intercompany eliminations, were approximately $232.9 million and $155.5 million,
        respectively, at June 30, 2005 and $238.1 million and $155.1 million,
        respectively, at December 31, 2004.
  Interest
        holders in VIEs consolidated by the Operating Partnership are allocated a
        priority of net income equal to the cash payments made to those interest
        holders
        for services rendered or distributions from cash flow. The remaining results
        of
        operations are generally allocated to the Operating Partnership.
  Properties
        consolidated in accordance with FIN 46R were encumbered by third party,
        non-recourse loans totaling $150.6 million and $151.3 million as of June
        30,
        2005 and December 31, 2004, respectively.
  As
        of
        June 30, 2005 the Operating Partnership is involved with four VIEs, of which
        it
        is not deemed to be the primary beneficiary. Total assets and liabilities
        of
        these entities as of June 30, 2005 were approximately $113.6 million and
        $73.3
        million, respectively. The Operating Partnership does not have a significant
        exposure to loss resulting from its involvement with these unconsolidated
        VIEs.
  *Stock-Based
        Compensation*
 
  Stock-based
        compensation expense under the fair value method was $115,000 and $191,000
        for
        the three months ended June 30, 2005 and 2004, respectively and $249,000
        and
        $327,000 for the six months ended June 30, 2005 and 2004, respectively. There
        were 53,000 and 20,000 stock options granted during the three months ended
        June
        30, 2005 and 2004, respectively and 117,800 and 20,000 stock options granted
        for
        the six months ended June 30, 2005 and 2004, respectively. The average fair
        value of stock options granted was $9.37 and $7.11 per share for the three
        months ended June 30, 2005 and 2004, respectively, and $9.96 and $7.11 per
        share
        for the six months ended June 30, 2005 and 2004, respectively. The fair value
        was estimated on the date of grant using the Black-Scholes option pricing
        model
        with the following weighted average assumptions used for grants:
  **Three
                    Months Ended**
                
                **Six
                    Months Ended****June
                    30,**
                
                **June
                    30,****2005**
                
                **2004**
                
                **2005**
                
                **2004**Stock
                    price
                $71.00
                    - $84.39
                
                $62.34
                
                $69.11
                    - $84.39
                
                $62.34Risk-free
                    interest rates
                3.76%
                    - 3.99%
                
                3.94%
                
                3.64%
                    - 4.30%
                
                3.94%Expected
                    lives
                6
                    years
                
                5
                    years
                
                5-6
                    years
                
                5
                    yearsVolatility
                18.35%
                
                19.07%
                
                18.09%
                    -18.35%
                
                19.07%Dividend
                    yield
                4.28%
                    - 4.42%
                
                5.07%
                
                4.28%
                    - 5.13%
                
                5.07%
 *Accounting
        Changes*
 
 *(A)
        Depreciation*
  Beginning
        in 2003, the Operating Partnership implemented an upgrade to its subsidiary
        ledger for accounting for fixed assets. The Operating Partnership completed
        this
        system upgrade in the first quarter of 2004. In conjunction with this system
        upgrade, the Operating Partnership determined that cumulative
        depreciation
  9
  expense
        generated by consolidated or equity method rental properties was understated
        by
        approximately $2.1 million through December 31, 2003 and this amount was
        recorded during the quarter ended March 31, 2004.
  The
        Operating Partnership does not believe that the correction is material to
        any
        previously reported financial statements and is not material to any consolidated
        earnings trends.
  *(B)
        New Accounting Pronouncements Issued But Not Yet Adopted*
  In
        June
        2005, the FASB ratified the Emerging Issues Task Force (EITF) consensus on
        Issue
        No. 04-5 *“Determining
        Whether a General Partner, or the General Partners as a Group, Controls a
        Limited Partnership or Similar Entity When the Limited Partner Have Certain
        Rights.”* This
        consensus establishes the presumption that general partners in a limited
        partnership control that limited partnership regardless of the extent of
        the
        general partners’ ownership interest in the limited partnership. The consensus
        further establishes that the rights of the limited partners can overcome
        the
        presumption of control by the general partners, if the limited partners have
        either (a) the substantive ability to dissolve (liquidate) the limited
        partnership or otherwise remove the general partners without cause or (b)
        substantive participating rights. Whether the presumption of control is overcome
        is a matter of judgment based on the facts and circumstances, for which the
        consensus provides additional guidance. This consensus is currently applicable
        to the Operating Partnership for new or modified partnerships, and will
        otherwise be applicable to existing partnerships in 2006. This consensus
        applies
        to limited partnerships or similar entities, such as limited liability companies
        that have governing provisions that are the functional equivalent of a limited
        partnership. The Operating Partnership is currently evaluating the effect
        of
        this consensus on its consolidation policies.
  In
        December 2004, the FASB issued Statement of Financial Accounting Standards
        (SFAS) No. 123 revised, “ *Share-Based
        Payment”.* This
        statement is a revision of SFAS No. 123, *“Accounting
        for Stock-Based Compensation”,* and
        supercedes APB No. 25, *“Accounting
        for Stock Issued to Employees”.* The
        Statement requires companies to recognize in the income statement the grant-date
        fair value of stock options and other equity based compensation issued to
        employees. This Statement is effective for fiscal years beginning after June
        15,
        2005. We are in the process of evaluating the impact of this Statement on
        our
        future results of operations.
  In
        December 2004, the FASB issued SFAS No. 153, “Exchanges of
        Non-monetary Assets an amendment of APB No. 29”. This Statement amends APB
        Opinion No. 29, “Accounting for Non-monetary Transactions” to eliminate the
        exception for non-monetary exchanges of similar productive assets and replaces
        it with a general exception for exchanges of non-monetary assets that do
        not
        have commercial substance. That exception required that some non-monetary
        exchanges be recorded on a carryover basis versus this Statement, which requires
        that an entity record a non-monetary exchange at fair value and recognize
        any
        gain or loss if the transaction has commercial substance. This Statement
        is
        effective for fiscal years beginning after June 15, 2005. We do not
        believe
        that the adoption of SFAS No. 153 will have a material impact
        on our
        financial position, net earnings or cash flows.
  *Reclassifications*
  Certain
        other reclassifications have been made to prior periods in order to conform
        them
        to the current period presentation. Such reclassifications have no impact
        on
        reported earnings, total assets or total liabilities.
  **(2)**  **Significant
        Transactions for the Quarter Ended June 30, 2005**
  *(A)*  *Acquisitions*
 
 On
        June
        21, 2005, the Operating Partnership acquired Mission Hills Apartments, a
        282-unit apartment community, located in Oceanside, California, for
        approximately $50.5 million. The property is unencumbered. The
        Operating Partnership utilized the proceeds from the sale of Eastridge, a
        188-unit apartment community located in San Ramon, California to fund the
        transaction.
  10
 *(B)
        Dispositions*
 
 On
        June
        21, 2005, the Operating Partnership sold Eastridge Apartments, a 188-unit
        apartment community located in San Ramon, California for a contract price
        of
        approximately $47.5 million. The Operating Partnership acquired Eastridge
        in
        1996 for $19.2 million. In conjunction with the sale, the Operating Partnership
        deferred $2.2 million of the gain on the sale of Eastridge because an affiliate
        of the Operating Partnership originated a participating loan to the buyer
        in the
        amount of approximately $2.2 million, which allows the Operating Partnership
        to
        financially participate in the buyer’s condominium conversion plan.
  *(C)
        Development Communities*
  The
        Operating Partnership defines development communities as new apartment
        properties that are being constructed or are newly constructed, which are
        in a
        phase of lease-up and have not yet reached stabilized operations. As of June
        30,
        2005, the Operating Partnership had ownership interests in two development
        communities (excluding development
        projects owned by the Essex Apartment Value Fund, L.P. described below), aggregating 475 multifamily units. The estimated total
        cost is
        $114.3 million with $95.0 million remaining to be expended.
  *(D)*
              *Redevelopment
                  Communities*
  The
        Operating Partnership defines redevelopment communities as existing properties
        owned or recently acquired, which have been targeted for investment by the
        Operating Partnership with the expectation of increased financial returns
        through property improvement. Redevelopment communities typically have some
        apartment units that are not available for rent and, as a result, may have
        less
        than stabilized operations. At June 30, 2005, the Operating Partnership had
        ownership interests in six redevelopment communities, aggregating 1,905
        multifamily units with estimated redevelopment costs of $33.9 million, of
        which
        approximately $23.1 million remains to be expended.
  *(E)*  *Debt*
 
 On
        April
        15, 2005, the Operating Partnership obtained two non-recourse mortgage loans on
        previously unencumbered properties in the aggregate amount of $32.9 million
        with
        fixed interest rates of 5.44% for 10-year terms that mature on May 1,
        2014.
 
 On
        May
        19, 2005, the Operating Partnership obtained three non-recourse mortgage
        loans
        in the aggregate amount of $12.9 million, secured by second deeds of trusts,
        with an average interest rate of 5.32% and maturity dates ranging from May
        1,
        2009 to January 1, 2013.
 
 *(F)*  *Equity*
  On
        May
        17, 2005, the Operating Partnership declared a quarterly distribution of
        $0.48828 per share, which represents an annual distribution of $1.9531 per
        share
        on its 7.8125% Series F Cumulative Redeemable Preferred Shares. Distributions
        are or will be payable on September 1, 2005 to shareholders of record as
        of
        August 17, 2005.
  On
        May
        17, 2005, the Operating Partnership’s declared a regular quarterly cash
        distribution of $0.81 per common unit, which was payable on July 15, 2005
        to
        unitholders of record as of June 30, 2005. On an annualized basis, the
        distribution represents a distribution of $3.24 per common unit.
 
 *(G)*
              *The
                  Essex Apartment Value Fund ("Fund
                  I")*
 
 To-date,
        the Operating Partnership has sold all sixteen apartment communities,
        aggregating 4,646 units, which were provided for in the purchase and sale
        agreement with United Dominion Realty Trust, Inc. (UDR) for the agreed upon
        contract price of approximately $756 million. Fund I owns one remaining asset
        that is currently being marketed for sale - Kelvin Avenue, a land parcel,
        which
        is permitted for the development of a
 11
 132-unit
        multifamily community, located in Irvine, California.
 
 *(H)
        The Essex Apartment Value Fund II (“Fund II”)*
 
 On
        June
        2, 2005, Fund II acquired Tower @ 801, a 173-unit high-rise apartment community,
        located in downtown Seattle, Washington, for approximately $31.9 million.
        Tower
        @ 801 is a 25-story apartment community with a subterranean parking structure
        that was developed in 1970. The building is noteworthy for its circular design
        and views.
 
 **(3)**
              **Investments**
 
 The
        following table details the Operating Partnership's investments accounted
        for
        under the equity method of accounting (dollars in thousands):
 **June
                    30,**
                
                **December
                    31,****2005**
                
                **2004**Investments
                    in joint ventures:Direct
                    and indirect LLC member interests of approximately 49.9%in
                    Newport Beach South, LLC
                
                $
                -
                
                $
                11,524Limited
                    partnership interest of 20.4% and general partnerinterest
                    of 1% in Essex Apartment Value Fund, L.P (Fund I)
                
                
                7,137
                
                
                14,140Limited
                    partnership interest of 27.2% and general partnerinterest
                    of 1% in Essex Apartment Value Fund II, L.P (Fund II)
                
                
                16,813
                
                
                17,242Preferred
                    limited partnership interests in Mountain VistaApartments
                    (A)
                
                
                6,806
                
                
                6,806Total
                    investments
                
                $
                30,756
                
                $
                49,712
 (A)
              The
                  preferred limited partnership interest is held in an entity that
                  includes
                  an affiliate of The Marcus & Millichap Operating Partnership (“TMMC”).
                  TMMC’s Chairman is also the Chairman of the Operating
                  Partnership.
  The
        combined summarized financial information of investments, which are accounted
        for under the equity method, are as follows (dollars in thousands).
 **June
                    30,**
                
                
                **December
                    31,****2005**
                
                
                **2004**Balance
                    sheets:Real
                    estate and real estate under development
                
                $
                307,226
                
                $
                322,233Other
                    assets
                
                
                25,795
                
                
                36,709Total
                    assets
                
                $
                333,021
                
                $
                358,942Mortgage
                    notes payable
                
                $
                181,533
                
                $
                203,171Other
                    liabilities
                
                
                55,452
                
                
                21,276Partners'
                    capital
                
                
                96,036
                
                
                134,495Total
                    liabilities and partners' capital
                
                $
                333,021
                
                $
                358,942Operating
                    Partnership's share of capital
                
                $
                30,756
                
                $
                49,712**Three
                    Months Ended**
                
                
                **Six
                    Months Ended****June
                    30,**
                
                
                **June
                    30,****2005**
                
                
                **2004**
                
                
                **2005**
                
                
                **2004**Statements
                    of operations:Total
                    property revenues
                
                $
                6,354
                
                $
                15,997
                
                $
                13,854
                
                $
                33,354Total
                    gain on the sales of real estate
                
                
                4,422
                
                
                -
                
                
                33,008
                
                
                -Total
                    expenses
                
                
                7,336
                
                
                17,498
                
                
                14,388
                
                
                32,913Total
                    net income (loss)
                
                $
                3,440
                
                $
                (1,501)
                
                $
                32,474
                
                $
                441Operating
                    Partnership's share of net income (loss)
                $
                2,843
                
                $
                (5)
                
                $
                17,554
                
                $
                1,095
  12
 **(4)**
              **Related
                  Party Transactions**
  Notes
        and
        other receivables from related parties as of June 30, 2005 and December 31,
        2004
        consist of the following (dollars in thousands):
  Related
        party receivables consist primarily of accrued interest income on notes
        receivable from joint venture investees and loans to officers, and advances
        and
        accrued management fees from joint venture investees.
 
 **June
                    30,**
                
                
                **December
                    31,****2005**
                
                
                **2004**Related
                    party receivables, unsecured:Loans
                    to officers made prior to July 31, 2002, secured, bearing interest
                    at
                    8%,due
                    beginning April 2006
                
                $
                625
                
                $
                625Related
                    party receivables, substantially due on demand
                
                
                598
                
                
                810Total
                    notes and other receivable from related parties
                
                $
                1,223
                
                $
                1,435
 Management
        and other fees from affiliates includes property management, asset management,
        development and redevelopment fees from the Operating Partnership’s investees of
        $690,000 and $1,337,000 for the three months ended June 30, 2005 and 2004,
        respectively, and $2,393,000 and $2,617,000 for the six months ended June
        30,
        2005 and 2004, respectively, and promote income from the Operating Partnership’s
        investees of $241,000 for the three months ended June 30, 2005 and $5,114,000
        for the six months ended June 30, 2005.
  13
 
 **(5)**
              **Segment
                  Information**
 
 The
        Operating Partnership defines its reportable operating segments as the three
        geographical regions in which its properties are located: Southern California,
        Northern California and the Pacific Northwest. Excluded from segment revenues
        are properties outside of these regions, management and other fees from
        affiliates, and interest and other income. Non-segment revenues and net
        operating income included in the following schedule also consist of revenue
        generated from commercial properties, recreational vehicle parks, and
        manufactured housing communities. Other non-segment assets include investments,
        real estate under development, cash, notes receivable, other assets and deferred
        charges. The revenues, net operating income, and assets for each of the
        reportable operating segments are summarized as follows for the periods
        presented (dollars in thousands).
 
 **Three
                    Months Ended****June
                    30,****2005**
                
                **2004**Revenues:Southern
                    California
                
                $
                46,192
                
                $
                41,302Northern
                    California
                
                
                16,516
                
                
                15,493Pacific
                    Northwest
                
                
                14,230
                
                
                12,186Other
                    non-segment areas
                
                
                1,027
                
                
                635Total
                    property revenues
                
                $
                77,965
                
                $
                69,616Net
                    operating income:Southern
                    California
                
                $
                31,260
                
                $
                27,456Northern
                    California
                
                
                11,387
                
                
                10,540Pacific
                    Northwest
                
                
                9,317
                
                
                7,732Other
                    non-segment areas
                
                
                403
                
                
                97Total
                    net operating income
                
                
                52,367
                
                
                45,825Depreciation
                    and amortization:Southern
                    California
                
                
                (10,248
                )
                
                (9,337
                )Northern
                    California
                
                
                (4,110
                )
                
                (3,482
                )Pacific
                    Northwest
                
                
                (3,706
                )
                
                (3,182
                )Other
                    non-segment areas
                
                
                (1,979
                )
                
                (1,525
                )(20,043
                )
                
                (17,526
                )Interest
                    expense:Southern
                    California
                
                
                (7,692
                )
                
                (6,600
                )Northern
                    California
                
                
                (3,777
                )
                
                (3,343
                )Pacific
                    Northwest
                
                
                (1,888
                )
                
                (1,565
                )Other
                    non-segment areas
                
                
                (4,796
                )
                
                (3,573
                )(18,153
                )
                
                (15,081
                )Amortization
                    of deferred financing costs
                
                
                (563
                )
                
                (457
                )General
                    and administrative
                
                
                (4,573
                )
                
                (3,479
                )Legal
                    settlement
                
                
                (1,500
                )
                
                -Management
                    and other fees from affiliates
                
                
                931
                
                
                1,337Gain
                    on sale of real estate
                
                
                5,276
                
                
                -Interest
                    and other income
                
                
                2,431
                
                
                689Equity
                    income in co-investments
                
                
                2,843
                
                
                (5
                )Minority
                    interests
                
                
                (1,450
                )
                
                (881
                )Income
                    tax provision
                
                
                (1,100
                )
                
                (23
                )Income
                    from continuing operations
                
                $
                16,466
                
                $
                10,399
 14
 **Six
                      Months Ended****June
                      30,****2005**
                  
                  **2004**Revenues:Southern
                      California
                  
                  $
                  91,719
                  
                  $
                  78,951Northern
                      California
                  
                  
                  32,780
                  
                  
                  30,644Pacific
                      Northwest
                  
                  
                  28,242
                  
                  
                  24,385Other
                      non-segment areas
                  
                  
                  1,891
                  
                  
                  1,278Total
                      property revenues
                  
                  $
                  154,632
                  
                  $
                  135,258Net
                      operating income:Southern
                      California
                  
                  $
                  62,256
                  
                  $
                  53,130Northern
                      California
                  
                  
                  22,402
                  
                  
                  20,847Pacific
                      Northwest
                  
                  
                  18,309
                  
                  
                  15,690Other
                      non-segment areas
                  
                  
                  608
                  
                  
                  202Total
                      net operating income
                  
                  
                  103,575
                  
                  
                  89,869Depreciation
                      and amortization:Southern
                      California
                  
                  
                  (20,383
                  )
                  
                  (19,663
                  )Northern
                      California
                  
                  
                  (8,028
                  )
                  
                  (8,337
                  )Pacific
                      Northwest
                  
                  
                  (7,334
                  )
                  
                  (4,367
                  )Other
                      non-segment areas
                  
                  
                  (3,877
                  )
                  
                  (3,000
                  )(39,622
                  )
                  
                  (35,367
                  )Interest
                      expense:Southern
                      California
                  
                  
                  (15,161
                  )
                  
                  (12,665
                  )Northern
                      California
                  
                  
                  (7,568
                  )
                  
                  (6,394
                  )Pacific
                      Northwest
                  
                  
                  (3,338
                  )
                  
                  (3,270
                  )Other
                      non-segment areas
                  
                  
                  (10,233
                  )
                  
                  (7,062
                  )(36,300
                  )
                  
                  (29,391
                  )Amortization
                      of deferred financing costs
                  
                  
                  (1,039
                  )
                  
                  (730
                  )General
                      and administrative
                  
                  
                  (9,014
                  )
                  
                  (6,346
                  )Legal
                      settlement
                  
                  
                  (1,500
                  )
                  
                  -Management
                      and other fees from affiliates
                  
                  
                  7,507
                  
                  
                  2,617Gain
                      on sale of real estate
                  
                  
                  6,391
                  
                  
                  -Interest
                      and other income
                  
                  
                  2,954
                  
                  
                  1,259Equity
                      income in co-investments
                  
                  
                  17,554
                  
                  
                  1,095Minority
                      interests
                  
                  
                  (2,741
                  )
                  
                  (1,649
                  )Income
                      tax provision
                  
                  
                  (1,201
                  )
                  
                  (86
                  )Income
                      from continuing operations
                  
                  $
                  46,564
                  
                  $
                  21,271
 **June
                    30,**
                
                **December
                    31,****2005**
                
                **2004**Assets:Net
                    real estate assets:Southern
                    California
                
                $
                1,232,871
                
                $
                1,162,803Northern
                    California
                
                
                451,292
                
                
                458,199Pacific
                    Northwest
                
                
                376,143
                
                
                358,219Other
                    non-segment areas
                
                
                43,021
                
                
                62,321Total
                    net real estate assets
                
                
                2,103,327
                
                
                2,041,542Other
                    non-segment assets
                
                
                143,029
                
                
                175,675Total
                    assets
                
                $
                2,246,356
                
                $
                2,217,217
 **June
                    30,**
                
                **December
                    31,****2005**
                
                **2004**Assets:Net
                    real estate assets:Southern
                    California
                
                $
                1,232,871
                
                $
                1,162,803Northern
                    California
                
                
                451,292
                
                
                458,199Pacific
                    Northwest
                
                
                376,143
                
                
                358,219Other
                    non-segment areas
                
                
                43,021
                
                
                62,321Total
                    net real estate assets
                
                
                2,103,327
                
                
                2,041,542Other
                    non-segment assets
                
                
                143,029
                
                
                175,675Total
                    assets
                
                $
                2,246,356
                
                $
                2,217,217
 
 15
 
 **(6)**
              **Net
                  Income Per Common Unit**
 (Amounts
                  in thousands, except per unit data)
 **Three
                    Months Ended**
                
                **Three
                    Months Ended****June
                    30, 2005**
                
                **June
                    30, 2004****Weighted**
                
                **Per**
                
                
                
                **Weighted**
                
                **Per****Average**
                
                **Common**
                
                
                
                **Average**
                
                **Common****Common**
                
                **Units**
                
                
                
                **Common**
                
                **Unit****Income**
                
                **Units**
                
                **Amount**
                
                **Income**
                
                **Units**
                
                **Amount**Basic:Income
                      from continuing operations
                    available to common units
                
                $
                13,419
                
                
                25,369
                
                $
                0.53
                
                $
                5,902
                
                
                25,225
                
                $
                0.23Income
                      (loss) from discontinued operations
                
                
                28,944
                
                
                25,369
                
                
                1.14
                
                
                (41
                )
                
                25,225
                
                
                (0.00
                )42,363
                
                
                
                
                $
                1.67
                
                
                5,861
                
                
                
                
                $
                0.23Effect
                    of Dilutive Securities:Stock
                    options (1)
                
                
                --
                
                
                183
                
                
                
                
                
                --
                
                
                151Vested
                    series Z incentive units
                
                
                --
                
                
                120
                
                
                
                
                
                --
                
                
                71-
                
                
                
                
                
                303
                
                
                
                
                
                -
                
                
                222Diluted:Income
                    from continuing operations availableto
                    common units
                
                
                13,419
                
                
                25,672
                
                $
                0.52
                
                
                5,902
                
                
                25,447
                
                $
                0.23Income
                    (loss) from discontinued operations
                
                
                28,944
                
                
                25,672
                
                
                1.13
                
                
                (41
                )
                
                25,447
                
                
                (0.00
                )$
                42,363
                
                
                
                
                $
                1.65
                
                $
                5,861
                
                
                
                
                $
                0.23**Six
                    Months Ended**
                **Six
                    Months Ended****June
                    30, 2005**
                **June
                    30, 2004**Weighted
                
                
                **Per**
                
                
                
                
                
                **Weighted**
                
                
                **Per**Average
                
                
                **Common**
                
                
                
                
                
                **Average**
                
                
                **Common**Common
                
                
                **Unit**
                
                
                
                
                
                **Common**
                
                
                **Unit**Income
                
                
                **Units**
                
                
                **Amount**
                
                
                **Income
                    (1**
                **)**
                
                **Units**
                
                
                **Amount**Basic:Income
                    from continuing operations availableto
                    common units
                
                $
                40,469
                
                
                25,369
                
                $
                1.59
                
                $
                12,182
                
                
                25,167
                
                $
                0.49Income
                    (loss) from discontinued operations
                
                
                31,080
                
                
                25,369
                
                
                1.23
                
                
                338
                
                
                25,167
                
                
                0.0171,549
                
                
                
                
                $
                2.82
                
                
                12,520
                
                
                
                
                $
                0.50Effect
                    of Dilutive Securities:Stock
                    options (1)
                
                
                --
                
                
                188
                
                
                
                
                
                --
                
                
                149Vested
                    series Z incentive units
                
                
                --
                
                
                119
                
                
                
                
                
                --
                
                
                71-
                
                
                
                
                
                307
                
                
                
                
                
                -
                
                
                220Diluted:Income
                    from continuing operations availableto
                    common units
                
                
                40,469
                
                
                25,676
                
                $
                1.58
                
                
                12,182
                
                
                25,387
                
                $
                0.48Income
                    (loss) from discontinued operations
                
                
                31,080
                
                
                25,676
                
                
                1.21
                
                
                338
                
                
                25,387
                
                
                0.01$
                71,549
                
                
                
                
                $
                2.79
                
                $
                12,520
                
                
                
                
                $
                0.49
 The
        Operating Partnership has the ability and intent to redeem Down REIT Limited
        Partnership units for cash and does not consider them to be common stock
        equivalents.
  (1)  The
        following stock options are not included in the diluted earnings per share
        calculation because the exercise price of the option was greater than the
        average market price of the common shares for the quarter end and, therefore,
        the stock options were anti-dilutive.
  
 16
 **Three
                    Months Ended**
                
                **Six
                    Months Ended****June
                    30,**
                
                **June
                    30,****2005**
                
                **2004**
                
                **2005**
                
                **2004**Number
                    of options
                39,274
                
                --
                
                33,356
                
                --Range
                    of exercise prices
                $69.82
                    - $84.50
                
                n/a
                
                $69.69
                    - $85.50
                
                n/a
  **(7)**
              **Derivative
                  Instruments and Hedging
                  Activities**
  On
        February 16, 2005, the Operating Partnership entered into a $50.0 million
        notional forward-starting swap with a commercial bank at a fixed rate of
        4.927%
        and a settlement date on or around October 1, 2007. This 10-year forward
        starting interest rate swap is used to hedge the cash flows associated with
        the
        forecasted issuance of debt expected to occur in 2007. The transaction is
        considered highly effective at offsetting changes in future cash flows for
        forecasted transactions and qualifies for hedge accounting.
  The
        Operating Partnership records all derivatives on the balance sheet at fair
        value.  The accounting for changes in the fair value of derivatives
        depends
        on the intended use of the derivative and the resulting designation. Derivatives
        used to hedge the exposure to changes in the fair value of an asset, liability,
        or firm commitment attributable to a particular risk, such as interest rate
        risk, are considered fair value hedges. Derivatives used to hedge the exposure
        to variability in expected future cash flows, or other types of forecasted
        transactions, are considered cash flow hedges.
  For
        derivatives designated as fair value hedges, changes in the fair value of
        the
        derivative and the hedged item related to the hedged risk are recognized
        in
        earnings. For derivatives designated as cash flow hedges, the effective portion
        of changes in the fair value of the derivative is initially reported in other
        comprehensive income (outside of earnings) and subsequently reclassified
        to
        earnings when the hedged transaction affects earnings, and the ineffective
        portion of changes in the fair value of the derivative is recognized directly
        in
        earnings. The Operating Partnership assesses the effectiveness of each hedging
        relationship by comparing the changes in fair value or cash flows of the
        derivative hedging instrument with the changes in fair value or cash flows
        of
        the designated hedged item or transaction. For derivatives not designated
        as
        hedges, changes in fair value are recognized in earnings.
  The
        Operating Partnership’s objective in using derivatives is to add stability to
        interest expense and to manage its exposure to interest rate movements or
        other
        identified risks.  To accomplish this objective, the Operating Partnership
        primarily uses interest rate swaps as part of its cash flow hedging strategy.
        Interest rate swaps designated as cash flow hedges involve the receipt of
        variable-rate amounts in exchange for fixed-rate payments over the life of
        the
        agreements without exchange of the underlying principal amount.
  At
        June
        30, 2005, derivative instruments designated as cash flow hedges were recorded
        as
        a net derivative liability of $1.6 million and were included in accounts
        payable
        and other liabilities. The net change in fair value of the derivative
        instruments for the six months was a net unrealized loss of $1.6 million.
        Derivatives designated as cash flow hedges is separately disclosed in the
        statement of changes in partners’ capital and accumulated other comprehensive
        income (loss).  No hedge ineffectiveness on cash flow hedges was recognized
        during 2005. The Operating Partnership did not have accumulated other
        comprehensive income (loss) in 2004.
  Amounts
        reported in accumulated other comprehensive income (loss) related to derivatives
        will be reclassified to interest expense as interest payments are made on
        the
        Operating Partnership’s hedged debt. The Operating Partnership is hedging its
        exposure to the variability in future cash flows for forecasted transactions
        over a maximum period of 27 months (excluding forecasted transactions related
        to
        the payment of variable interest on existing financial
        instruments).
 17
 **(8)**
              **Discontinued
                  Operations**
  In
        the
        normal course of business, the Operating Partnership will receive offers
        for
        sale of its properties, either solicited or unsolicited. For those offers
        that
        are accepted, the prospective buyer will usually require a due diligence
        period
        before consummation of the transaction. It is not unusual for matters to
        arise
        that result in the withdrawal or rejection of the offer during this process.
        Essex classifies real estate as "held for sale" when all criteria under SFAS
        No.
        144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS
        144)
        have been met.
  At
        June
        30, 2004, Golden Village Recreational Vehicle Park, a property located in
        Hemet,
        California and acquired as part of the John M. Sachs merger in December 2002,
        met the "held for sale" criteria under SFAS 144. In accordance with SFAS
        144,
        assets and liabilities and the results of operations of the property were
        presented as discontinued operations in the consolidated financial statements
        for the period ended March 31, 2004. Upon reclassification as held for sale
        at
        June 30, 2004, the Operating Partnership presented Golden Village at its
        estimated fair value less disposal costs which resulted in an impairment
        charge
        of approximately $756,000. Such fair value was determined using the contractual
        sales price pursuant to the contract with the buyer of the property. On July
        18,
        2004, the Operating Partnership sold Golden Village for $6.7 million. No
        gain or
        loss was recognized on the sale
  In
        January 2005, the Operating Partnership sold four non-core assets that were
        acquired in conjunction with the John M. Sachs’s merger in 2002 for $14.9
        million. The four non-core assets were: The Riviera Recreational Vehicle
        Park
        and a Manufactured Home Park, located in Las Vegas, Nevada, for which the
        Operating Partnership had previously entered into master lease and option
        agreements with an unrelated entity; and two small office buildings, located
        in
        San Diego California, aggregating 7,200 square feet. The Operating Partnership
        recorded a gain of $735,000 on the sale of these assets. As of December 31,
        2004
        Riviera RV Resort and Riviera Mobile Home Park met the “held for sale” criteria
        under SFAS 144. In accordance with SFAS 144, assets and liabilities and the
        results of operations of the properties are presented as discontinued operations
        in the consolidated financial statements for all periods presented.
  The
        Operating Partnership sold the Eastridge Apartments during June 2005, and
        the
        Operating Partnership has recorded the operations and gain on sale of Eastridge
        Apartments as part of discontinued operations in the accompanying consolidated
        statement of operations for all periods presented (see Note 2 for more details).
  The
        components of discontinued operations for Eastridge Apartments and the
        properties held for sale as of December 31, 2004 are outlined below and include
        the results of operations for the respective periods that the Operating
        Partnership owned such assets.
 **Three
                    Months Ended**
                
                **Six
                    Months Ended****June
                    30,**
                
                **June
                    30,****2005**
                
                **2004**
                
                **2005**
                
                **2004**Rental
                    revenues
                
                $
                574
                
                $
                693
                
                $
                1,233
                
                $
                1,381Interest
                    and other
                
                
                -
                
                
                526
                
                
                1,134
                
                
                1,555Revenues
                
                
                574
                
                
                1,219
                
                
                2,367
                
                
                2,936Property
                    operating expenses
                
                
                (114
                )
                
                (504
                )
                
                (506
                )
                
                (1,337
                )Impairment
                    charge
                
                
                -
                
                
                (756
                )
                
                -
                
                
                (1,261
                )Operating
                    income (loss) from real estate sold
                
                
                460
                
                
                (41
                )
                
                1,861
                
                
                338Gain
                    on sale of real estate
                
                
                28,484
                
                
                -
                
                
                29,219
                
                
                -Income
                    (loss) from discontinuedoperations
                
                $
                28,944
                
                $
                (41
                )
                $
                31,080
                
                $
                338
 18
 **(9)**  **Commitments
        and Contingencies** ****
  In
        April
        2004, an employee lawsuit was filed against the Company in the California
        Superior Court in the County of Alameda. In this lawsuit, two former Operating
        Partnership maintenance employees seek unpaid wages, associated penalties
        and
        attorneys’ fees on behalf of a putative class of the Operating Partnership’s
        current and former maintenance employees who were required to wear a pager
        while
        they were on call during evening and weekend hours. During the three and
        six
        months ended June 30, 2005, the Operating Partnership recorded $1.5 million
        for
        legal settlement costs. However, litigation is subject to inherent
        uncertainties, and such amount represents management’s best estimate of the
        total cost of the litigation at this time.
  The
        Operating Partnership is subject to various other lawsuits in the normal
        course
        of its business operations. Accordingly, such lawsuits, as well as the class
        action lawsuit described above, could result in substantial costs and diversion
        of resources and could have a material adverse effect on the Operating
        Partnership’s financial condition, results of operations or cash
        flows.
  **Item
        2: Management's Discussion and Analysis of Financial Condition and Results
        of
        Operations**
  *The
        following discussion should be read in conjunction with our Consolidated
        Condensed Financial Statements and accompanying Notes thereto included elsewhere
        herein and with our 2004 Annual Report on Form 10-K for the year ended
        December 31, 2004 and our Current Report on Form 10-Q for the six
        months
        ended June 30, 2005. Unless otherwise noted, all dollar amounts are in
        millions.*
  Essex
        is
        a fully integrated Real Estate Investment Trust (REIT), property revenues
        are
        generated primarily from multifamily property operations, which are located
        in
        three major West Coast regions:
  **Southern
        California** (Los
        Angeles, Ventura, Orange, Riverside and San Diego counties)
 **Northern
        California** (the San
        Francisco Bay Area)
 **Pacific
        Northwest** (Seattle, Washington and Portland, Oregon metropolitan areas)
 As
                    of June 30, 2005
                
                As
                    of June 30, 2004Number
                    of Apartment Homes
                %
                Number
                    of Apartment Homes
                *%*Southern
                    California
                12,724
                54%
                11,669
                53%Northern
                    California
                4,621
                20%
                4,605
                21%Pacific
                    Northwest
                5,831
                25%
                5,212
                24%Other
                302
                1%
                578
                3%**Total**
                23,478
                100%
                22,064
                100%
  **Operating
        Results**
 
 **Comparison
        of the Three Months Ended June 30, 2005 to the Three Months Ended June 30,
        2004**
 
 Our
        average financial occupancies increased 1.0% to 96.7% as of June 30, 2005
        from
        95.7% as of June 30, 2004 for the multifamily Quarterly Same Store Properties.
        The regional breakdown for the three months ended June 30, 2005 and 2004
        is as
        follows:
 **Three
                    months ended****June
                    30,****2005**
                
                **2004**Southern
                    California
                
                
                96.5%
                
                95.3%Northern
                    California
                
                
                97.2%
                
                96.9%Pacific
                    Northwest
                
                
                96.8%
                
                95.6%
 19
 *Total
        Property Revenues* increased 12% to $78.0 million in the second quarter of 2005 from $69.6 million
        in the second quarter of 2004. The following table illustrates a breakdown
        of
        these revenue amounts, including revenues attributable to the same store
        properties.
  **Three
                    Months Ended****Number
                    of**
                
                
                **June
                    30,**
                
                
                **Dollar**
                
                **Percentage****Properties**
                
                
                **2005**
                
                
                **2004**
                
                
                **Change**
                
                **Change**Revenues:
                
                
                
                (Dollars
                    in thousands)Property
                    revenues - quarterlyQuarterly
                    Same Store PropertiesSouthern
                    California
                49
                
                $
                31,834
                
                $
                30,169
                
                $
                1,665
                
                5.5
                %Northern
                    California
                16
                
                
                12,597
                
                
                12,524
                
                
                73
                
                0.6Pacific
                    Northwest
                26
                
                
                12,058
                
                
                11,776
                
                
                282
                
                2.4Total
                    property revenuesSame Store Properties
                91
                
                
                56,489
                
                
                54,469
                
                
                2,020
                
                3.7Property
                    revenues - propertiesacquired subsequent toMarch 31, 2004 (1)
                
                
                
                21,476
                
                
                15,147
                
                
                6,329
                
                41.8Total
                    property revenues
                
                
                $
                77,965
                
                $
                69,616
                
                $
                8,349
                
                12.0
                %
  (1)
        Also includes three office
        buildings, three recreational vehicle parks, one manufactured housing community,
        redevelopment and development communities.
  *Same
        Store Property Revenues* increased by $2,020,000 or 3.7% to $56,489,000 in the second quarter of 2005
        from $54,469,000 in the second quarter of 2004. The increase was primarily
        attributable to increased occupancy in all regions and a reduction in
        concessions in Southern California and the Pacific Northwest.
  *Non
        Same Store Property Revenues* increased by $6,329,000 or 41.8% to 21,476,000 in the second quarter of 2005
        from $15,147,000 in the second quarter of 2004. The increase was primarily
        generated from communities acquired and or developed and increased rents
        from
        redeveloped properties. Subsequent to March 31, 2004, we acquired 4,959 units,
        redeveloped units and completed the construction of 756 units.
  *Total
        Expenses* increased 17% to $70,430,000 in the second quarter of 2005 from $60,334,000
        in
        the second quarter of 2004. The increase was due to depreciation and
        amortization, interest, and general and administrative expenses related to
        the
        non-same store units referenced above. Depreciation and amortization increased
        14% to $20,043,000 in the second quarter from $17,526,000 in the second quarter
        of 2004 due to increase in properties. General and administrative expense
        was
        $4,573,000 or an increase of 31% in the second quarter of 2005 from $3,479,000
        in the second quarter of 2004. The increase in 2005 is primarily due to an
        increase in compensation expense.
  *Legal
        settlement* increased
        to $1,500,000 for the second quarter of 2005 due to a legal settlement recorded
        for $1,500,000.
  *Gain
        on sale of real estate* increased to $5,276,000 for the second quarter of 2005 resulting from $3.8
        million recognition of deferred gain from the sale of The Essex at Lake Merritt
        and $1.4 million from our taxable REIT subsidiaries.
  *Interest
        expense* increased
        by 20% in the second quarter of 2005 to $18,153,000, net of interest capitalized
        as a cost of apartment communities under development of $454,000, compared
        to
        $15,081,000 for the second quarter of 2004. The increase was mainly due to
        increase in short term rates and paying down lines of credit with permanent
        financing in the second quarter.
  *Income
        tax provision* increased
        by $1.1 million in the second quarter of 2005 to $1.1 million from $23,000
        in
        the second quarter of 2004 due to sale transactions related to our taxable
        REIT
        subsidiaries.
  *Discontinued
        operations* increased by $28,985,000 to $28,944,000 from the three months ended June
        30,
        2005 from a loss of $41,000 for the three months ended June 30, 2004. The
        increase was due mainly to a gain on sale of the Eastridge property of
        $30,525,000 offset by a deferred gain of $2.2 million relating to a
        participating loan with the buyer.
   20
 **Operating
        Results**
 
 **Comparison
        of the Six Months Ended June 30, 2005 to the Six Months Ended June 30,
        2004**
 
 Our
        average financial occupancies increased 0.9% to 96.6% for the six months
        ended
        June 30, 2005 from 95.7% for the six months ended June 30, 2004 for the
        multifamily Same Store Properties. The regional breakdown for the six months
        ended June 30, 2005 and 2004 is as follows:
 
 **Six
                      Months Ended****June
                      30,****2005**
                  
                  
                  **2004**Southern
                      California
                  
                  
                  96.3%
                  
                  
                  95.6%Northern
                      California
                  
                  
                  97.0%
                  
                  
                  96.3%Pacific
                      Northwest
                  
                  
                  96.7%
                  
                  
                  95.6%
 *Total
        Property Revenues* increased by $19.4 million or 14.3% to $154.6 million in the six months ended
        June 30, 2005 from $135.3 million in the six months ended June 30, 2004.
        The
        following table illustrates a breakdown of these revenue amounts, including
        revenues attributable to the Same Store Properties.
 **Six
                    Months Ended****Number
                    of**
                
                **June
                    30,**
                
                
                **Dollar**
                
                **Percentage****Properties**
                
                **2005**
                
                
                **2004**
                
                
                **Change**
                
                **Change**Revenues:
                
                
                
                (Dollars
                    in thousands)Property
                    revenuesSame
                    Store PropertiesSouthern
                    California
                49
                
                $
                63,290
                
                $
                60,168
                
                $
                3,122
                
                5.2
                %Northern
                    California
                16
                
                
                24,994
                
                
                24,983
                
                
                11
                
                -Pacific
                    Northwest
                26
                
                
                24,075
                
                
                23,559
                
                
                516
                
                2.2Total
                    property revenuesSame Store Properties
                91
                
                
                112,359
                
                
                108,710
                
                
                3,649
                
                3.4Property
                    revenues - propertiesacquired subsequent toDecember 31, 2003 (1)
                
                
                
                42,273
                
                
                26,548
                
                
                15,725
                
                59.2Total
                    property revenues
                
                
                $
                154,632
                
                $
                135,258
                
                $
                19,374
                
                14.3
                %
  (1)
        Also
        includes three office buildings, three recreational vehicle parks, one
        manufactured housing community, redevelopment and development
        communities.
  *Same
        Store Property Revenues* increased by $3,649,000 or 3.4% to $112,359,000 for the six months ended
        June
        30, 2005 from $108,710,000 for the six months ended June 30, 2004. The increase
        was primarily attributable to increased occupancy in all regions and a reduction
        in concessions in Southern California and the Pacific Northwest.
  *Non
        Same Store Property Revenues* increased
        by $15,725,000 or 59.2% to 42,273,000 for the six months ended June 30, 2005
        from $26,548,000 for the six months ended June 30, 2004. The increase was
        primarily generated from communities acquired and or developed and increase
        rents from redeveloped properties. Subsequent to December 31, 2003, we acquired
        4,959 units, redeveloped units and completed the construction of 756
        units.
  *Total
        Expenses* increased 18% to $138,532,000 for the six months ended June of 2005 from
        $117,223,000 for the six months ended June of 2004. The increase was mainly
        due
        to depreciation and amortization, interest, and general and administrative
        expenses related to the non-same store units referenced above. Depreciation
        and
        amortization increased 12% to $39,622,000 for the six months ended June of
        2005
        from $35,367,000 for the six months ended June of 2004 due to increase in
        properties. General and administrative totaled $9,014,000 or 42% for the
        six
        months ended June of 2005 from $6,346,000 for the six months ended June of
        2004.
        The increase in 2005 is primarily due to an increase in compensation expense.
  21
 *Legal
        settlement* increased
        to $1,500,000 for the six months ended June 30, 2005 as compared to $0 for
        the
        six months ended June 30, 2004, due to a legal settlement recorded for
        $1,500,000 in the second quarter of 2005.
  *Gain
        on sale of real estate* increased to $6,391,000 for the six months ended June 30, 2005 as compared
        to $0
        for the six months ended June 30, 2004 resulting from $5.0 million recognition
        of deferred gain from the sale of The Essex at Lake Merritt and $1.4 million
        from our taxable REIT subsidiaries.
  *Interest
        expense* increased
        by 24% for the six months ended June of 2005 to $36,300,000, net of interest
        capitalized cost of apartment communities under development of $511,000,
        as
        compared to $29,391,000 for the six months ended June of 2004. The increase
        was
        mainly due to an increase in short term rates and paying down lines of credit
        with permanent financing in the six months ended June of 2005.
  *Discontinued
        operations* increased by $30,742,000 to $31,080,000 for the six months ended June 30,
        2005
        from $338,000 for the six months ended June 30, 2004. The increase was due
        mainly to an increase in operating income for real estate sold of $1,523,000
        and
        a gain on sale of the Eastridge property of $30,525,000 offset by a deferred
        gain of $2.2 million relating to a participating loan with the
        buyer.
  *Liquidity
        and Capital Resources*
  Standard
        and Poor's has an existing issuer credit ratings of BBB/Stable for Essex
        Property Trust, Inc. and Essex Portfolio L.P., and BBB- for the Senior Unsecured
        Debt for Essex Portfolio L.P.
  Cash
        flows from operations are a vital source of liquidity and are generated through
        property operations, working capital, lines of credit, net proceeds from
        public
        and private debt and equity issuances, refinancing of maturing loans, and
        proceeds generated from the sale of properties. 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 our plans for acquisitions, dispositions,
        development and redevelopment activities.
 
 The
        Operating Partnership had an $185,000,000 unsecured line of credit as of
        June
        30, 2005, and $91,800,000 was outstanding with an interest rate of approximately
        4.03%. This facility matures in April 2007, with an option for a one-year
        extension. The underlying interest rate on this line is based on a tiered
        rate
        structure tied to our corporate ratings and is currently LIBOR plus 1.0%.
        We
        also have a $100 million credit facility from Freddie Mac, which is secured
        by
        six of Essex's multifamily communities. As of June 30, 2005, we had $94 million
        outstanding under this line of credit, which bears a 3.1 percent interest
        rate
        and matures in January 2009. The underlying interest rate on this line is
        between 55 and 59 basis points over the Freddie Mac Reference Rate. Fund
        II
        obtained a credit facility during the first quarter of 2005, aggregating
        $50,000,000, and during the second quarter of 2005 Fund II amended the credit
        facility increasing the facility to $115 million. This line bears interest
        at
        LIBOR plus 0.875%, and matures in June 2007. At
        the
        end of the second quarter, the Company had the capacity to issue up to
        $219,455,250 in equity securities, and the Operating Partnership had the
        capacity to issue up to $250,000,000 of debt securities under our existing
        shelf
        registration statements. Subsequent to June 30, 2005, the Operating Partnership originated a mortgage
        loan secured by the Esplanade Apartment property in the amount of $40.3 million,
        with an interest rate of 4.93%, which matures on August 1, 2015.
 
 We
        believe that funds from operations, the unused portions of our lines of credits,
        credit facilities, and the $33,077,000 of unrestricted cash and cash equivalents
        as of June 30, 2005, will adequately fulfill our liquidity requirements to
        fund:
 
 §
              recurring
                  operating requirements;
 §
              debt
                  service and maturity payments;
 §
              preferred
                  stock dividends and DownREIT partnership unit
                  distributions;
 §
              the
                  minimum dividend payments required to maintain our REIT qualification
                  under the Internal Revenue Code of
                  1986;
 §
              development
                  and redevelopment projects currently underway;
                  and
 §
              investment
                  opportunities through acquisitions of improved
                  property.
 
 22
 As
        of
        June 30, 2005, our total mortgage notes payable totaled $1,127,660,000 which
        consisted of $932,761,000 in fixed rate debt with interest rates varying
        from
        4.25% to 8.18% and maturity dates ranging from 2006 to 2034 and $194,899,000
        of
        tax-exempt variable rate demand bonds with a weighted average interest rate
        of
        3.6%. The tax-exempt variable rate demand bonds have maturity dates ranging
        from
        2006 to 2034, and are subject to interest rate caps.
 
 The
        Operating Partnership pays quarterly dividends from cash available for
        distribution. Until it is distributed, cash available for distribution is
        invested by the Operating Partnership primarily in short-term investment
        grade
        securities or is used by the Operating Partnership to reduce balances
        outstanding under its line of credit.
 
 In
        an
        effort to hedge the cash flows associated with the forecasted issuance of
        debt
        expected to occur in 2007, Essex entered into a $50.0 million notional
        forward-starting swap with a commercial bank at a fixed rate of 4.927%, with
        a
        settlement date on or around October 1, 2007. We believe that this will be
        effective in offsetting changes in future cash flows for forecasted transactions
        and qualifies for hedge accounting.
 
 There
        can
        be no assurance that the Operating Partnership will have access to the debt
        and
        equity markets in a timely fashion to meet such future funding requirements.
        Future working capital and borrowings under the lines of credit may not be
        available, or if available, may not be sufficient to meet the Operating
        Partnership's requirements, and we may not be able to sell properties in
        a
        timely manner and under terms and conditions that we deem
        acceptable.
 
 *Capital
        Expenditures*
 Non-revenue
        generating capital expenditures are costs associated with improvements and/or
        upgrades that extend the useful life of the property. These expenses do not
        include the improvement costs that are related to (a) improvements required
        as a
        condition to funding mortgage loans, (b) expenditures for acquisition
        properties' renovations and/or improvements, and (c) renovation expenditures
        required pursuant to redevelopment and other revenue generating capital
        improvements. We expect to spend approximately $410 per weighted average
        occupancy unit in non-revenue generating capital expenditures for the year
        ending December 31, 2005. It is expected that cash from operations and/or
        the Operating
        Partnership lines of
        credit will fund these expenditures. However, actual expenditures and/or
        funding
        for 2005 could be significantly different than our current expectations.
 
 *Development*
 We
        currently have two development projects in our pipeline, aggregating 475
        units,
        with total incurred costs to-date of $19.3 million and estimated remaining
        costs
        of approximately $95.0 million. There
        are
        two consolidated development projects:
 ·
              Northwest
                  Gateway, which is located in Los Angeles, California and will consist
                  of
                  275 units.
 ·
              Moorpark,
                  which is located in Ventura County, California and will consist
                  of 200
                  units.
 
 *Redevelopment*
 Our
        redevelopment strategy strives to improve the financial and physical aspects
        of
        our redevelopment apartment communities targeting a 15 percent return on
        the
        incremental renovation investment. Many of the Operating Partnership’s
        properties are older and in excellent neighborhoods, providing lower density
        and
        larger floor plans that represent excellent redevelopment conditions. As
        of June
        30, 2005, we had six communities, aggregating 1,905 units in various stages
        of
        redevelopment. Total redevelopment costs incurred at these projects as of
        June
        30, 2005 were approximately $33.9 million, of which $23.1 million estimated
        remains to be expended.
 
 *Alternative
        Capital Sources*
 The
        Essex
        Apartment Value Fund II (“Fund II”), a value added discretionary fund, is
        utilized as Essex’s investment vehicle (subject to certain exceptions) until
        October 31, 2006, or when Fund II’s committed capital has been invested,
        whichever occurs first. Fund II invests in multifamily properties in the
        Operating Partnership’s targeted West Coast markets with a focus on investment
        opportunities in the Seattle Metropolitan Area and the San Francisco Bay
        Area.
        Fund II announced its final closing on partner equity commitments on September
        27, 2004. There are eight institutional investors including Essex with combined
        partner equity commitments of $265.9 million. Essex has committed $75.0 million,
        which represents a 28.2% interest as general partner and limited partner.
        Fund
        II expects to utilize leverage equal to approximately 65% of the estimated
        value
        of the underlying real estate. Consistent with Fund I, the Operating Partnership
        will record revenue for its asset management, property management, development
        and redevelopment services, and promote distributions should Fund II exceed
        certain financial return benchmarks.
 
 23
 
 **Consolidated
        Variable Interest Entities**
 Essex
        consolidates Essex Management Corporation (EMC), Essex Fidelity I Corporation
        (EFC), 17 Down REIT limited partnerships (comprising ten properties), an
        office
        building that is subject to loans made by the Operating Partnership, and
        the
        multifamily improvements owned by a third party in which the Operating
        Partnership owns the land underlying these improvements and from which the
        Operating Partnership receives fees, including land lease, subordination
        and
        property management fees, and a joint venture to develop a building in Los
        Angeles, California. The Operating Partnership consolidated these entities
        because it is deemed the primary beneficiary under FIN 46R. The Operating
        Partnership's total assets and liabilities related to these VIEs, net of
        intercompany eliminations, were approximately $232.9 million and $155.5 million,
        respectively, as of June 30, 2005 and $238.1 million and $155.1 million,
        respectively, at December 31, 2004.
  Interest
        holders in VIEs consolidated by the Operating Partnership are allocated a
        priority of net income equal to the cash payments made to those interest
        holders
        for services rendered or distributions from cash flow. The remaining results
        of
        operations are generally allocated to the Operating Partnership.
  Consolidated
        properties were encumbered by third party, non-recourse loans totaling $150.6
        million and $151.3 million as of June 30, 2005 and December 31, 2004,
        respectively.
 
 **Unconsolidated
        Variable Interest Entities**
 As
        of
        June 30, 2005 the Operating Partnership is involved with four VIEs, of which
        it
        is not deemed to be the primary beneficiary. Total assets and liabilities
        of
        these entities as of June 30, 2005 were approximately $113.6 million and
        $73.3
        million, respectively. The Operating Partnership does not have a significant
        exposure to loss resulting from its involvement with these unconsolidated
        VIEs.
  **Contractual
        Obligations and Commercial Commitments**
 The
        following table summarizes our contractual obligations and other commitments
        as
        of June 30, 2005, and the effect these obligations could have on our liquidity
        and cash flow in future periods:
 
 **2006
                    and**
                
                **2008
                    and****(In
                    thousands)**
                
                **2005**
                
                **2007**
                
                **2009**
                
                **Thereafter**
                
                **Total**Mortgage
                    notes payable
                
                $
                6,493
                
                $
                151,446
                
                $
                208,728
                
                $
                760,992
                
                $
                1,127,659Lines
                    of credit
                
                
                -
                
                
                91,800
                
                
                93,735
                
                
                -
                
                
                185,535Development
                    commitments (1)
                
                
                16,000
                
                
                79,000
                
                
                -
                
                
                -
                
                
                95,000Redevelopment
                    commitments (2)
                
                
                12,000
                
                
                11,066
                
                
                -
                
                
                -
                
                
                23,066Essex
                    Apartment Value Fund II, L.P.capital commitment (3)
                
                
                20,717
                
                
                37,500
                
                
                -
                
                
                -
                
                
                58,217$
                55,210
                
                $
                370,812
                
                $
                302,463
                
                $
                760,992
                
                $
                1,489,477
  (1)  $191
        of
        these commitments relate to actual contracts as of June 30, 2005.
  (2)  $7,399
        of
        these commitments relate to actual contracts as of June 30, 2005.
  (3)
        The
        Operating Partnership has a total commitment of $58,217, as of June 30, 2005.
        The amounts provided by year are management’s best estimate of the timing
        of the funding of such commitments. These estimates could change if the timing
        of Fund II’s acquisition of real estate changes.
  **Critical
        Accounting Policies and Estimates**
  The
        preparation of consolidated financial statements, in accordance with accounting
        principles generally accepted in the United States of America, requires the
        Operating Partnership to make estimates and judgments that affect the reported
        amounts of assets, liabilities, revenues and expenses and related disclosures
        of
        contingent assets and liabilities. We define critical accounting policies
        as
        those accounting policies that require our management to exercise their most
        difficult, subjective and complex judgments. Our critical accounting policies
        relate principally to the following key areas: (i) consolidation under
        applicable accounting standards of various entities; (ii) assessing the carrying
        values of our real estate properties and investments in and advances to joint
        ventures and affiliates;(iii) internal cost capitalization; (iv) and
        qualification as a REIT. The Operating Partnership bases its estimates on
        historical experience, current market conditions, and on various other
        assumptions that are believed to be reasonable under the circumstances. Actual
        results may differ from those estimates made by management.
 
 24
 The
        Operating Partnership assesses each entity in which it has an investment
        or
        contractual relationship to determine if it may be deemed to be a VIE. If
        such
        an entity is a VIE, then the Operating Partnership analyzes the expected
        residual returns and expected losses to determine who is the primary
        beneficiary. If the Operating Partnership is the primary beneficiary, then
        the
        entity is consolidated. The analysis required to identify VIEs and primary
        beneficiaries is complex and judgmental, and the analysis must be applied
        to
        various types of entities and legal structures.
 
 Rental
        properties are recorded at cost less accumulated depreciation. Depreciation
        components on rental properties have been provided over estimated useful
        lives
        ranging from 3 to 30 years using the straight-line method. Development costs
        include acquisition, direct and indirect construction costs, interest and
        real
        estate taxes incurred during the construction and property stabilization
        periods. Maintenance and repair expenses that do not add to the value or
        prolong
        the useful life of the property are expensed as incurred. Asset replacements
        and
        improvements are capitalized and depreciated over their estimated useful
        lives.
 
 The
        Operating Partnership assesses the carrying value of its real estate investments
        by monitoring investment market conditions and performance compared to budget
        for operating properties and joint ventures, and by monitoring estimated
        costs
        for properties under development. Local market knowledge and data is used
        to
        assess carrying values of properties and the market value of acquisition
        opportunities. Whenever events or changes in circumstances indicate that
        the
        carrying amount of a property held for investment may not be fully recoverable,
        the carrying amount is evaluated. If the sum of the property’s expected future
        cash flows (undiscounted and without interest charges) is less than the carrying
        amount of the property, then the Operating Partnership will recognize an
        impairment loss equal to the excess of the carrying amount over the fair
        value
        of the property. Adverse changes in market conditions or poor operating results
        of real estate investments could result in impairment charges. When the
        Operating Partnership determines that a property is held for sale, it
        discontinues the periodic depreciation of that property. The criteria for
        determining when a property is held for sale requires judgment and has potential
        financial statement impact as depreciation would cease and an impairment
        loss
        could occur upon determination of held for sale status. Assets held for sale
        are
        reported at the lower of the carrying amount or estimated fair value less
        costs
        to sell. With respect to investments in and advances to joint ventures and
        affiliates, the Operating Partnership looks to the underlying properties
        to
        assess performance and the recoverability of carrying amounts for those
        investments in a manner similar to direct investments in real estate properties.
        An impairment charge or investment valuation charge is recorded if the carrying
        value of the investment exceeds its fair value.
 
 The
        Operating Partnership capitalizes all direct and certain indirect costs,
        including interest and real estate taxes, incurred during development and
        redevelopment activities. Interest is capitalized on real estate assets that
        require a period of time to get them ready for their intended use. The amount
        of
        interest capitalized is based upon the average amount of accumulated development
        expenditures during the reporting period. Included in capitalized costs are
        management’s estimates of the direct and incremental personnel costs and
        indirect project costs associated with our development and redevelopment
        activities. Indirect project costs consist primarily of personnel costs
        associated with construction administration and development accounting, legal
        fees, and various office costs that clearly relate to projects under
        development.
 
 The
        Operating Partnership bases its estimates on historical experience and on
        various other assumptions that are believed to be reasonable under the
        circumstances. Actual results may vary from those estimates and those estimates
        could be different under different assumptions or conditions.
  **New
        Accounting Pronouncements Issued But Not Yet Adopted**
  In
        June
        2005, the FASB ratified the EITF’s consensus on Issue No. 04-5 *“Determining
        Whether a General Partner, or the General Partners as a Group, Controls a
        Limited Partnership or Similar Entity When the Limited Partner Have Certain
        Rights.”* This
        consensus establishes the presumption that general partners in a limited
        partnership control that limited partnership regardless of the extent of
        the
        general partners’ ownership interest in the limited partnership. The consensus
        further establishes that the rights of the limited partners can overcome
        the
        presumption of control by the general partners, if the limited partners have
        either (a) the substantive ability to dissolve (liquidate) the limited
        partnership or otherwise remove the general partners without cause or (b)
        substantive participating rights. Whether the presumption of control is overcome
        is a matter of judgment based on the facts and circumstances, for which the
        consensus provides additional guidance. This consensus is currently applicable
        to the Operating Partnership for new or modified partnerships, and will
        otherwise be applicable to existing partnerships in 2006. This consensus
        applies
        to limited partnerships or similar entities, such as limited liability companies
        that have governing provisions that are the functional equivalent of a limited
        partnership. The Operating Partnership is currently evaluating the effect
        of
        this consensus on its consolidation policies.
  25
 In
        December 2004, the FASB issued SFAS No. 123 revised, “Share-Based Payment”. This
        statement is a revision of SFAS No. 123, “Accounting for Stock-Based
        Compensation”, and supercedes APB No. 25, “Accounting for Stock Issued to
        Employees”. The Statement requires companies to recognize in the income
        statement the grant-date fair value of stock options and other equity based
        compensation issued to employees. This Statement is effective for fiscal
        years
        beginning after June 15, 2005. We are in the process of evaluating the impact
        of
        this Statement on our future results of operations.
  In
        December 2004, the FASB issued SFAS No. 153, “Exchanges of
        Non-monetary Assets an amendment of APB No. 29”. This Statement amends APB
        Opinion No. 29, “Accounting for Non-monetary Transactions” to eliminate the
        exception for non-monetary exchanges of similar productive assets and replaces
        it with a general exception for exchanges of non-monetary assets that do
        not
        have commercial substance. That exception required that some non-monetary
        exchanges be recorded on a carryover basis versus this Statement, which requires
        that an entity record a non-monetary exchange at fair value and recognize
        any
        gain or loss if the transaction has commercial substance. This Statement
        is
        effective for fiscal years beginning after June 15, 2005. We are in
        the
        process of evaluating the impact of this Statement on our future results
        of
        operations.
  **Forward
        Looking Statements**
  Certain
        statements in this "Management's Discussion and Analysis of Financial Condition
        and Results of Operations," and elsewhere in this quarterly report on Form
        10-Q
        which are not historical facts may be considered forward looking statements
        within the meaning of Section 27A of the Securities Act of 1933, as amended,
        and
        Section 21E of the Securities and Exchange Act of 1934, as amended, including
        statements regarding the Operating Partnership's expectations, hopes,
        intentions, beliefs and strategies regarding the future. Forward looking
        statements include statements regarding the Operating Partnership's expectations
        as to the timing of completion of current development and redevelopment projects
        and the stabilization dates of such projects, expectation as to the total
        projected costs and rental rates of acquisition and development projects,
        beliefs as to the adequacy of future cash flows to meet operating requirements
        and to provide for dividend payments in accordance with REIT requirements,
        expectations as to the amount of capital expenditures, expectations as to
        the
        amount of non-revenue generating capital expenditures, future acquisitions,
        developments, and redevelopment, the Operating Partnership's anticipated
        development projects in 2005, the anticipated sale of the remaining properties
        of the Essex Apartment Value Fund, L.P.("Fund I"), and estimate of the resulting
        incentive and promote interest, the anticipated performance of the second
        Essex
        Apartment Value Fund ("Fund II"), the anticipated performance of existing
        properties, anticipated results from various geographic regions and the
        Operating Partnership's investment focus in such regions, statements regarding
        the Operating Partnership's financing activities and the use of proceeds
        from
        such activities.
  Such
        forward-looking statements involve known and unknown risks, uncertainties
        and
        other factors including, but not limited to, that the Operating Partnership
        will
        fail to achieve its business objectives, that the actual completion of
        development projects will be subject to delays, that the stabilization dates
        of
        such projects will be delayed, that the total projected costs of current
        development projects will exceed expectations, that the Operating Partnership's
        2005 development strategy will change, that such development projects will
        not
        be completed, that development projects and acquisitions will fail to meet
        expectations, that estimates of future income from an acquired property may
        prove to be inaccurate, that future cash flows will be inadequate to meet
        operating requirements and/or will be insufficient to provide for dividend
        payments in accordance with REIT requirements, that the actual non-revenue
        generating capital expenditures will exceed the Operating Partnership's current
        expectations, that the sale of the remaining property of Fund I will not
        occur
        or will generate proceeds that are less than anticipated, that the Operating
        Partnership's partners in Fund II fail to fund capital commitments as
        contractually required, that there may be a downturn in the markets in which
        the
        Operating Partnership's properties are located, that the terms of any
        refinancing may not be as favorable as the terms of existing indebtedness,
        as
        well as those risks, special considerations, and other factors discussed
        under
        the caption "Potential Factors Affecting Future Operating Results" below
        and
        those discussed under the caption "Other Matters/Risk Factors" in Item 1
        of the
        Operating Partnership's Annual Report on Form 10-K for the year ended December
        31, 2004, and those other risk factors and special considerations set forth
        in
        the Operating Partnership's other filings with the Securities and Exchange
        Commission (the "SEC") which may cause the actual results, performance or
        achievements of the Operating Partnership to be materially different from
        any
        future results, performance or achievements expressed or implied by such
        forward-looking statements. All forward-looking statements are made as of
        today,
        and the Operating Partnership assumes no obligation to update this
        information.
  26
 **Potential
        Factors Affecting Future Operating Results**
  Many
        factors affect the Operating Partnership’s actual financial performance and may
        cause the Operating Partnership’s future results to be different from past
        performance or trends. These factors include those set forth under the caption
        “Risk Factors” in Item I of the Operating Partnership’s Annual Report on Form
        10-K for the year ended December 31, 2004 and the following:
  *Development
        and Redevelopment Activities*
  The
        Operating Partnership pursues multifamily residential properties and development
        and redevelopment projects from time to time. These projects generally require
        various government and other approvals, the receipt of which cannot be assured.
        The Operating Partnership's development and redevelopment activities generally
        entail certain risks, including the following:
  •
              
              funds
                may be expended and management's time devoted to projects that may
                not be
                completed;•
              
              construction
                  costs of a project may exceed original estimates possibly making
                  the
                  project economically unfeasible;•
              
              projects
                may be delayed due to, among other things, adverse weather conditions;•
              
              occupancy
                rates and rents at a completed project may be less than anticipated;
                and•
              
              expenses
                at a completed development project may be higher than anticipated.
  These
        risks may reduce the funds available for distribution to the Operating
        Partnership's stockholders. Further, the development and redevelopment of
        properties is also subject to the general risks associated with real estate
        investments.
  **Interest
        Rate Fluctuations**
  The
        Operating Partnership monitors changes in interest rates and believes that
        it is
        well positioned from both a liquidity and interest rate risk perspective.
        However, current interest rates are at historic lows and potentially could
        increase rapidly to levels more in line with higher historical levels. The
        immediate effect of significant and rapid interest rate increases would result
        in higher interest expense on the Operating Partnership's variable interest
        rate
        debt. The effect of prolonged interest rate increases could negatively impact
        the Operating Partnership's ability to make acquisitions and develop properties
        at economic returns on investment and the Operating Partnership's ability
        to
        refinance existing borrowings at acceptable rates. During the second quarter
        of
        2005, the Operating Partnership originated mortgage loans totaling $45.8
        million
        on five of its wholly-owned properties. The mortgage loans consisted of two
        loans aggregating $32.9 million with interest rates of 5.44% maturing on
        May 1,
        2014, two loans aggregating $6.5 million with a 5.39% interest rate maturing
        on
        January 1, 2013, and a loan in the amount of $6.4 million with a 5.18% interest
        rate maturing on May 1, 2009.
  **Item
        3: Quantitative and Qualitative Disclosures About Market Risk**
  The
        Operating Partnership is exposed to interest rate changes primarily as a
        result
        of its line of credit and long-term debt used to maintain liquidity and to
        fund
        capital expenditures and expansion of the Operating Partnership’s real estate
        investment portfolio and operations. The Operating Partnership’s interest rate
        risk management objectives are to limit the impact of interest rate changes
        on
        earnings and cash flows and to lower its overall borrowing costs. To achieve
        its
        objectives the Operating Partnership borrows primarily at fixed rates and
        may
        enter into derivative financial instruments such as interest rate swaps,
        caps
        and treasury locks in order to mitigate its interest rate risk on a related
        financial instrument. The Operating Partnership does not enter into derivative
        or interest rate transactions for speculative purposes.
  The
        Operating Partnership’s interest rate risk is monitored using a variety of
        techniques. The table below presents the principal amounts and weighted average
        interest rates by year of expected maturity to evaluate the expected cash
        flows.
        Management believes that the carrying amounts of its variable LIBOR debt
        approximates fair value as of June 30, 2005 because interest rates, yields
        and
        other terms for these instruments are consistent with yields and other terms
        currently available to the Operating Partnership for similar instruments.
  27
 **Estimated****For
                    the Years Ended**
                
                **2005**
                
                **2006**
                
                **2007**
                
                **2008**
                
                **2009**
                
                **Thereafter**
                
                **Total**
                
                **Fair
                    value**Fixed
                    rate debt(In
                    thousands)Amount
                
                $
                7,487
                
                $
                17,536
                
                $
                125,830
                
                $
                155,480
                
                $
                532,478
                
                $
                93,950
                
                $
                932,761
                
                $
                1,170,055Average
                    interest rate
                
                
                6.6
                %
                
                6.6
                %
                
                6.6
                %
                
                6.6
                %
                
                6.6
                %
                
                6.6
                %Variable
                    rate debt(In
                    thousands)Amount
                
                $
                --
                
                $
                8,080
                
                $
                91,800
                
                $
                --
                
                $
                93,735
                
                $
                186,818
                
                $
                380,433
                
                $
                380,433Average
                    interest
                
                
                --
                
                
                3.8
                %
                
                3.8
                %
                
                --
                
                
                3.1
                %
                
                3.8
                %
 The
        table
        incorporates only those exposures that exist as of June 30, 2005; it does
        not
        consider exposures or positions that could arise after that date. As a result,
        our ultimate realized gain or loss, with respect to interest rate fluctuations,
        would depend on the exposures that arise during the period, our hedging
        strategies at the time, and interest rates.
  On
        February 16, 2005, the Operating Partnership entered into a $50.0 million
        notional forward-starting swap with a commercial bank at a fixed rate of
        4.927%
        and a settlement date on or around October 1, 2007. This 10-year forward
        starting interest rate swap is used to hedge the cash flows associated with
        the
        forecasted issuance of debt expected to occur in 2007. At June 30, 2005,
        this
        transaction is considered highly effective at offsetting changes in future
        cash
        flows for forecasted transactions and qualifies for hedge accounting.
  As
        of
        June 30, 2005, the Operating Partnership owns interest rate cap agreements,
        which expire at various dates through 2010 and which allow the Operating
        Partnership to be reimbursed in the event the interest rate on $138.9 million
        of
        its variable rate debt exceeds approximately 6.5%. Currently, the interest
        rate
        in effect on this debt is approximately 3.9%.
  **Item
        4: Controls and Procedures**
  As
        of
        June 30, 2005, we carried out an evaluation, under the supervision and with
        the
        participation of management, including our Chief Executive Officer and Chief
        Financial Officer, of the effectiveness of the design and operation of our
        disclosure controls and procedures pursuant to Rules 13a-15 of the Securities
        Exchange Act of 1934, as amended. Based upon that evaluation, the Chief
        Executive Officer and Chief Financial Officer concluded that our disclosure
        controls and procedures are effective in timely alerting management to material
        information relating to the Operating Partnership that is required to be
        included in our periodic filings with the Securities and Exchange Commission.
        There were no changes in the Operating Partnership’s internal control over
        financial reporting, that occurred during the quarter ended June 30, 2005,
        that
        have materially affected, or are reasonably likely to materially affect,
        the
        Operating Partnership’s internal control over financial reporting.
  28
  **Part
        II -- Other Information**
 
 **Item
        1: Legal Proceedings**
  In
        April
        2004, an employee lawsuit was filed against the Operating Partnership in
        the
        California Superior Court in the County of Alameda. In this lawsuit, two
        former
        Operating Partnership maintenance employees seek unpaid wages, associated
        penalties and attorneys’ fees on behalf of a putative class of the Operating
        Partnership’s current and former maintenance employees who were required to wear
        a pager while they were on call during evening and weekend hours. At
        June
        30, 2005, the Operating Partnership recorded $1.5 million for legal settlement
        costs. However, litigation is subject to inherent uncertainties, and such
        amount
        represents management’s best estimate of the total cost of the litigation at
        this time.
  The
        Operating Partnership is subject to various other lawsuits in the normal
        course
        of its business operations. Accordingly, such lawsuits, as well as the class
        action lawsuit described above, could result in substantial costs and diversion
        of resources and could have a material adverse effect on the Operating
        Partnership’s financial condition, results of operations or cash
        flows.
 
 **Item
        6: Exhibits**
 
 *A.*
              *Exhibits*
 
 31.1
              Certification
                  of Keith R. Guericke, Chief Executive Officer, pursuant to Section
                  302 of
                  the Sarbanes-Oxley Act of 2002.
 
 31.2
              Certification
                  of Michael T. Dance, Chief Financial Officer, pursuant to Section
                  302 of
                  the Sarbanes-Oxley Act of 2002.
 
 32.1
              Certification
                  of Keith R. Guericke, Chief Executive Officer, pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act of 2002.
 
 32.2
              Certification
                  of Michael T. Dance, Chief Financial Officer, pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act of 2002.
 _________
   29
 **SIGNATURE**
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, the Registrant
        has
        duly caused this report to be signed on its behalf by the undersigned thereunto
        duly authorized.
 
 ESSEX
                  PORTFOLIO, L.P.*(Registrant)*Date:
                  August 9, 2005By:
              By:
                  Essex Property Trust, Inc.
                Its
                  General Partner
                
                By:
                  /S/ MICHAEL T. DANCEMichael
                  T. Dance*Executive
                  Vice President, Chief Financial Officer*
                *(Authorized
                  Officer and Principal Accounting Officer)*