**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 September 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)





**California**
            
            **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





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Securities Exchange Act of 1934). Yes o No x





**ESSEX
      PORTFOLIO, L.P.**


**FORM
      10-Q**


**INDEX**





**Page
                No.****PART
                I. FINANCIAL INFORMATION**Item
                1.
            Financial
                Statements (Unaudited):
            3Consolidated
                Balance Sheets as of September 30, 2005 and December 31, 2004
            4Consolidated
                Statements of Operations for the three and nine months ended September
                30,
                2005 and 2004
            5Consolidated
                Statements of Partners' Capital and Comprehensive Income for the
                nine
                months ended September 30, 2005
            6Condensed
                Consolidated Statements of Cash Flows for the nine months ended September
                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
            28Item
                4.
            Controls
                and Procedures
            29**PART
                II. OTHER INFORMATION**Item
                1.
            Legal
                Proceedings
            29Item
                6.
            Exhibits
            30**Signature**
            31


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)


**September
                    30,**
                
                **December
                    31,****2005**
                
                **2004****Assets**Real
                    estate:Rental properties:Land and land improvements
                
                $
                554,028
                
                $
                536,600Buildings and improvements
                
                
                1,935,543
                
                
                1,834,5942,489,571
                
                
                2,371,194Less accumulated depreciation
                
                
                (380,772
                )
                
                (329,652
                )2,108,799
                
                
                2,041,542Real estate investments held for sale, net of accumulateddepreciation
                    of $496 as of December 31, 2004
                
                
                -
                
                
                14,445Investments
                
                
                27,637
                
                
                49,712Real
                    estate under development
                
                
                34,834
                
                
                38,3202,171,270
                
                
                2,144,019Cash
                    and cash equivalents-unrestricted
                
                
                19,365
                
                
                10,644Cash
                    and cash equivalents-restricted
                
                
                15,027
                
                
                21,255Notes
                    and other receivables from related parties
                
                
                1,202
                
                
                1,435Notes
                    and other receivables
                
                
                8,069
                
                
                9,535Prepaid
                    expenses and other assets
                
                
                20,968
                
                
                19,591Deferred
                    charges, net
                
                
                10,424
                
                
                10,738Total
                    assets
                
                $
                2,246,325
                
                $
                2,217,217**Liabilities
                    and Partners' Capital**Mortgage
                    notes payable
                
                $
                1,164,504
                
                $
                1,067,449Lines
                    of credit
                
                
                149,735
                
                
                249,535Accounts
                    payable and accrued liabilities
                
                
                45,024
                
                
                29,997Dividends
                    payable
                
                
                22,700
                
                
                21,976Other
                    liabilities
                
                
                12,522
                
                
                11,853Deferred
                    gain
                
                
                2,193
                
                
                5,000Total liabilities
                
                
                1,396,678
                
                
                1,385,810Minority
                    interests
                
                
                46,344
                
                
                49,254Redeemable
                    convertible limited partnership units
                
                
                4,750
                
                
                4,750Partners'
                    capital:General partner:Common equity
                
                
                593,967
                
                
                566,865Preferred equity (liquidation value of $25,000)
                
                
                24,412
                
                
                24,412618,379
                
                
                591,277Limited
                    partners:Common equity
                
                
                53,393
                
                
                59,436Preferred equity (liquidation value of $185,000)
                
                
                126,690
                
                
                126,690180,083
                
                
                186,126Accumulated
                    other comprehensive income
                
                
                91
                
                
                -Total partners' capital
                
                
                798,553
                
                
                777,403Commitments
                    and contingenciesTotal liabilities and partners' capital
                
                $
                2,246,325
                
                $
                2,217,217
 See
        accompanying notes to the unaudited consolidated financial
        statements.


4


**ESSEX
      PORTFOLIO, L.P. AND SUBSIDIARES**


Consolidated
      Statements of Operations


(Unaudited)


(Dollars
      in thousands, except per unit amounts)


**Three
                  Months Ended**
              
              **Nine
                  Months Ended****September
                  30,**
              
              **September
                  30,****2005**
              
              **2004**
              
              **2005**
              
              **2004**Revenues:Rental and other property
              
              $
              80,219
              
              $
              71,733
              
              $
              234,851
              
              $
              206,991Management and other fees from affiliates
              
              
              1,601
              
              
              15,701
              
              
              9,108
              
              
              18,31881,820
              
              
              87,434
              
              
              243,959
              
              
              225,309Expenses:Property
                  operating, excluding real estate taxes
              
              
              19,592
              
              
              18,673
              
              
              57,198
              
              
              52,494Real
                  estate taxes
              
              
              7,066
              
              
              6,253
              
              
              20,517
              
              
              17,821Depreciation
                  and amortization
              
              
              20,323
              
              
              18,061
              
              
              59,945
              
              
              53,428Interest
              
              
              18,566
              
              
              16,394
              
              
              54,866
              
              
              45,785Amortization
                  of
                  deferred financing costs
              
              
              451
              
              
              449
              
              
              1,490
              
              
              1,179General
                  and administrative
              
              
              4,560
              
              
              7,639
              
              
              13,574
              
              
              13,985Other
                  expenses
              
              
              1,400
              
              
              -
              
              
              2,900
              
              
              -71,958
              
              
              67,469
              
              
              210,490
              
              
              184,691Gain
                  on sale of real estate
              
              
              -
              
              
              7,909
              
              
              6,391
              
              
              7,909Interest
                  and other income
              
              
              4,978
              
              
              836
              
              
              7,932
              
              
              2,095Equity
                  income in co-investments
              
              
              21
              
              
              15,365
              
              
              17,575
              
              
              16,460Minority
                  interests
              
              
              (1,433
              )
              
              (877
              )
              
              (4,174
              )
              
              (2,526
              )Income
                  from continuing operations before incometax provision
              
              
              13,428
              
              
              43,198
              
              
              61,193
              
              
              64,555Income
                  tax provision
              
              
              (1,185
              )
              
              (122
              )
              
              (2,386
              )
              
              (208
              )Income
                  from continuing operations
              
              
              12,243
              
              
              43,076
              
              
              58,807
              
              
              64,347Discontinued
                  operationsOperating income from real estate sold
              
              
              -
              
              
              646
              
              
              1,861
              
              
              984Gain on sale of real estate
              
              
              -
              
              
              -
              
              
              29,219
              
              
              -Income from discontinued operations
              
              
              -
              
              
              646
              
              
              31,080
              
              
              984Net income
              
              
              12,243
              
              
              43,722
              
              
              89,887
              
              
              65,331Write off of Series E preferred unit offering costs
              
              
              -
              
              
              (1,575
              )
              
              -
              
              
              (1,575
              )Preferred return to general partner - Series F
              
              
              (488
              )
              
              (488
              )
              
              (1,465
              )
              
              (1,464
              )Distributions to preferred units - limited partners
              
              
              (2,559
              )
              
              (3,502
              )
              
              (7,678
              )
              
              (11,615
              )Net income available to common units
              
              $
              9,196
              
              $
              38,157
              
              $
              80,744
              
              $
              50,677Per
                  common unit data:Basic:Income from continuing operations available tocommon units
              
              $
              0.36
              
              $
              1.48
              
              $
              1.96
              
              $
              1.97Income from discontinued operations
              
              
              -
              
              
              0.03
              
              
              1.22
              
              
              0.04Net income available to common units
              
              $
              0.36
              
              $
              1.51
              
              $
              3.18
              
              $
              2.01Weighted average number of common unitsoutstanding during the period
              
              
              25,405,930
              
              
              25,301,913
              
              
              25,381,534
              
              
              25,212,179Diluted:Income from continuing operations available tocommon units
              
              $
              0.36
              
              $
              1.47
              
              $
              1.94
              
              $
              1.95Income from discontinued operations
              
              
              -
              
              
              0.02
              
              
              1.21
              
              
              0.04Net income available to common units
              
              $
              0.36
              
              $
              1.49
              
              $
              3.15
              
              $
              1.99Weighted average number of common unitsoutstanding during the period
              
              
              25,711,320
              
              
              25,567,452
              
              
              25,671,923
              
              
              25,445,166Distribution
                  per Operating Partnership common unit
              
              $
              0.81
              
              $
              0.79
              
              $
              2.43
              
              $
              2.37


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 nine months ended


September
      30, 2005


(Unaudited)


(Dollars
      and units in thousands)


**General
                  Partner**
              
              **Limited
                  Partners**
              
              **Accumulated****Other****Common
                  Equity**
              
              **Preferred
                  Equity**
              
              **Common
                  Equity**
              
              **Preferred
                  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
              
              
              105
              
              
              4,662
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              4,662Redemption
                  of limited partnercommon units
              
              
              -
              
              
              -
              
              
              -
              
              
              (89
              )
              
              (2,698
              )
              
              -
              
              
              -
              
              
              (2,698
              )Vested
                  series Z and Z-1 incentive units
              
              
              -
              
              
              -
              
              
              -
              
              
              30
              
              
              362
              
              
              -
              
              
              -
              
              
              362Reallocation
                  of partners' capital (1)
              
              
              -
              
              
              5,509
              
              
              -
              
              
              -
              
              
              (5,509
              )
              
              -
              
              
              -
              
              
              -Comprehensive
                  income:Net income
              
              
              -
              
              
              73,039
              
              
              1,464
              
              
              -
              
              
              7,707
              
              
              7,677
              
              
              -
              
              
              89,887Change in fair value of cash flow hedges
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              91
              
              
              91Comprehensive
                  income
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              89,978Partners'
                  distributions
              
              
              -
              
              
              (56,108
              )
              
              (1,464
              )
              
              -
              
              
              (5,905
              )
              
              (7,677
              )
              
              -
              
              
              (71,154
              )Balances
                  at September 30, 2005
              
              
              23,139
              
              $
              593,967
              
              $
              24,412
              
              
              2,419
              
              $
              53,393
              
              $
              126,690
              
              $
              91
              
              $
              798,553





(1)
      During the nine months ended September 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 September 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)


**Nine
                  Months Ended****September
                  30,****2005**
              
              **2004**Net
                  cash provided by operating activities
              
              $
              106,652
              
              $
              87,867Cash
                  flows from investing activities:Additions to real estate:Acquisitions and improvements to recent acquisitions
              
              
              (30,968
              )
              
              (129,464
              )Capital expenditures and redevelopment
              
              
              (23,510
              )
              
              (11,557
              )Additions to real estate under development
              
              
              (22,540
              )
              
              (11,696
              )Dispositions of real estate and investments
              
              
              6,585
              
              
              91,735Change in restricted cash
              
              
              6,228
              
              
              (8,688
              )Additions to notes receivable from related parties and
                  other
                  receivables
              
              
              (3,278
              )
              
              (5,234
              )Repayment of notes receivable from related parties and
                  other
                  receivables
              
              
              4,925
              
              
              1,373Net distributions from (contributions to) limited
                  partnerships
              
              
              43,341
              
              
              17,356Net cash used in investing activities
              
              
              (19,217
              )
              
              (56,175
              )Cash
                  flows from financing activities:Proceeds from mortgage notes payable and lines of credit
              
              
              152,971
              
              
              321,702Repayment of mortgage notes payable and lines of credit
              
              
              (154,813
              )
              
              (215,051
              )Additions to deferred charges
              
              
              (1,167
              )
              
              (4,032
              )Net proceeds from stock options exercised
              
              
              4,143
              
              
              4,022Distributions to limited partners and minority interest
              
              
              (17,353
              )
              
              (21,299
              )Redemption of limited partnership units and minority
                  interest
              
              
              (5,463
              )
              
              (5,624
              )Redemption of Series E limited partnership units
              
              
              -
              
              
              (55,000
              )Distributions to general partner
              
              
              (57,032
              )
              
              (54,954
              )Net cash used in financing activities
              
              
              (78,714
              )
              
              (30,236
              )Net
                  increase in cash and cash equivalents
              
              
              8,721
              
              
              1,456Cash
                  and cash equivalents at beginning of period
              
              
              10,644
              
              
              14,768Cash
                  and cash equivalents at end of period
              
              $
              19,365
              
              $
              16,224Supplemental
                  disclosure of cash flow information:Cash paid for interest, net of $647 and $3,108 capitalizedin 2005 and 2004, respectively
              
              $
              54,245
              
              $
              44,352Assumption of mortgage loans payable in conjunction with the purchases
                  of
                  real estate
              
              $
              -
              
              $
              167,635Common stock issued pursuant to phantom stock plan
              
              $
              362
              
              $
              39Issuance of Limited partnership units in connection with the purchase
                  of
                  real estate
              
              $
              -
              
              $
              6,479Transfer of real estate under development to rental
                  properties
              
              $
              23,102
              
              $
              -Proceeds from disposition of real estate held by exchange
                  facilitator
              
              $
              62,000
              
              $
              9,536




See
      accompanying notes to the unaudited consolidated financial
      statements.


7


**ESSEX
      PORTFOLIO, L.P. AND SUBSIDIARIES**


**Notes
      to Consolidated Financial Statements**


**September
      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%
      and 90.3% general partnership interest as of September 30, 2005 and December
      31,
      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
      September 30, 2005, the Operating Partnership has ownership interests in 125
      multifamily properties (containing 25,950 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. The Operating Partnership
      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
      the
      Operating Partnership’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.




*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


8


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
      $232.2 million and $156.0 million, respectively, at September 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 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 $150.3 million and $151.3 million as of September
      30, 2005 and December 31, 2004, respectively.




As
      of
      September 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 September 30, 2005 were approximately $97.8
      million and $74.2 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 $308,000 and $169,000
      for
      the three months ended September 30, 2005 and 2004, respectively and $679,000
      and $496,000 for the nine months ended September 30, 2005 and 2004,
      respectively. There were 6,000 stock options granted during the three months
      ended September 30, 2005 and no options granted for the three months ended
      September 30, 2004. There were 143,800 and 20,000 options granted for the nine
      months ended September 30, 2005 and 2004, respectively. The average fair value
      of stock options granted was $12.07 for the three months ended September 30,
      2005, and $9.60 and $7.11 per share for the nine months ended September 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**
              
              **Nine
                  Months Ended****September
                  30,**
              
              **September
                  30,****2005**
              
              **2004**
              
              **2005**
              
              **2004**Stock
                  price
              $89.33
                  - $89.98
              
              $62.34
              
              $69.11
                  - $89.98
              
              $62.34Risk-free
                  interest rates
              3.94%
                  - 4.06%
              
              3.94%
              
              3.64%
                  - 4.30%
              
              3.94%Expected
                  lives
              6
                  years
              
              5
                  years
              
              5-6
                  years
              
              5
                  yearsVolatility
              18.54%
              
              19.07%
              
              18.09%
                  -18.54%
              
              19.07%Dividend
                  yield
              4.22%
                  - 4.24%
              
              5.07%
              
              4.22%
                  - 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
      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.


9
 *(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
      supersedes 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 September 30, 2005**


*(A)*  *Acquisitions*




On
      September 28, 2005, the Operating Partnership acquired Marbella Apartments,
      a
      60-unit apartment community, located in Los Angeles, California, for
      approximately $13.6 million. The community is in proximity to other existing
      properties.




*(B)
      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
      September 30, 2005, the Operating Partnership had ownership interests in three


10


development
      communities (excluding development
      projects owned by the Essex Apartment Value Fund, L.P. described below), aggregating 505 multifamily units. The estimated total cost
      of
      the three development communities is $122.8 million with $98.8 million remaining
      to be expended.




*(C)*
            *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 September 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 $19.3 million remains to be expended.





*(D)*  *Debt*





On
      July
      14, 2005, the Operating Partnership obtained a non-recourse mortgage loan on
      previously unencumbered property in the aggregate amount of $40.3 million with
      a
      fixed interest rate of 4.935% for a 10-year term that matures on August 1,
      2015.





*(E)*  *Equity*




On
      September 21, 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 December 1, 2005 to shareholders of
      record as of November 16, 2005.




On
      September 21, 2005, the Operating Partnership declared a regular quarterly
      cash
      distribution of $0.81 per common unit, which was payable on October 15, 2005
      to
      unitholders of record as of September 30, 2005. On an annualized basis, the
      distribution represents a distribution of $3.24 per common unit.




*(F)*
            *Interest
                and Other Income*




During
      2005, the Operating Partnership received from the developer at The Essex at
      Lake
      Merritt property approximately $4.3 million and $6.1 million of participating
      interest for the three and nine months ended September 30, 2005,
      respectively.




*(G)*
            *The
                Essex Apartment Value Fund ("Fund
                I")*





Fund
      I
      has sold all of its 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. The UDR sales included River Terrace, a newly developed 250-unit
      apartment community located in Santa Clara, California, which was sold on August
      3, 2005 for approximately $63.0 million.





Subsequent
      to the quarter, Fund I sold its remaining asset Kelvin Avenue, a land parcel,
      which is permitted for the development of a 132-unit multifamily community,
      located in Irvine, California, for a contract price of $10.5 million. Fund
      I has
      guaranteed to refund $500,000 to the buyer, if necessary entitlements are not
      obtained pursuant to the requirements of the purchase and sale
      agreement.





*(H)
      The Essex Apartment Value Fund II (“Fund II”)*




On
      September 1, 2005, Fund II acquired Echo Ridge Apartments, a 120-unit apartment
      community, located in Snoqualmie, Washington, for approximately $17.9 million.
      Echo Ridge is comprised of 21, 2-story apartment buildings, within a 1,300-acre
      master planned community.


11
 On
        September 30, 2005, Fund II
        acquired Morning Run Apartments, a 222-unit apartment community, located
        in
        Monroe, Washington, for approximately $19.75
        million.
        Morning Run consists of 20, two- and three-story buildings, located on 11
        acres.





**(3)**
            **Investments**





The
      following table details the Operating Partnership's investments (dollars in
      thousands):


**September
                  30,**
              
              **December
                  31,****2005**
              
              **2004**Investments
                  in joint ventures accounted for under the equitymethod of accounting: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)
              
              
              2,570
              
              
              14,140Limited
                  partnership interest of 27.2% and general partnerinterest of 1% in Essex Apartment Value Fund II, L.P (Fund
                  II)
              
              
              17,761
              
              
              17,242Preferred
                  limited partnership interests in Mountain VistaApartments (A)
              
              
              6,806
              
              
              6,80627,137
              
              
              49,712Investments
                  accounted for under the cost method of accounting:Series
                  A Preferred Stock interest in Multifamily TechnologySolutions, Inc.
              
              
              500
              
              
              -Total investments
              
              $
              27,637
              
              $
              49,712


(A)
            The
                investment is held in an entity that includes an affiliate of The
                Marcus
                & Millichap Company (“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).


**September
                  30,**
              
              
              **December
                  31,****2005**
              
              
              **2004**Balance
                  sheets:Real
                  estate and real estate under development
              $
              292,400
              
              $
              322,233Other
                  assets
              
              
              22,941
              
              
              36,709Total
                  assets
              
              $
              315,341
              
              $
              358,942Mortgage
                  notes payable
              
              $
              185,841
              
              $
              203,171Other
                  liabilities
              
              
              42,982
              
              
              21,276Partners'
                  capital
              
              
              86,518
              
              
              134,495Total
                  liabilities and partners' capital
              
              $
              315,341
              
              $
              358,942Operating
                  Partnership's share of capital
              
              $
              27,137
              
              $
              49,712**Three
                  Months Ended**
              
              
              **Nine
                  Months Ended****September
                  30,**
              
              
              **September
                  30,****2005**
              
              
              **2004**
              
              
              **2005**
              
              
              **2004**Statements
                  of operations:Total
                  property revenues
              
              $
              12,458
              
              $
              15,502
              
              $
              26,314
              
              $
              48,856Total
                  gain on the sales of real estate
              
              
              5,889
              
              
              91,089
              
              
              38,897
              
              
              91,089Total
                  expenses
              
              
              7,044
              
              
              13,203
              
              
              21,432
              
              
              46,119Total
                  net income
              
              $
              11,303
              
              $
              93,388
              
              $
              43,779
              
              $
              93,826Operating
                  Partnership's share of net income
              $
              21
              
              $
              15,365
              
              $
              17,575
              
              $
              16,460
 12




**(4)**
            **Related
                Party Transactions**




Notes
      and
      other receivables from related parties as of September 30, 2005 and December
      31,
      2004 consist of the following (dollars in thousands):


**September
                  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
              
              
              577
              
              
              810Total
                  notes and other receivable from related parties
              
              $
              1,202
              
              $
              1,435


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.




Management
      and other fees from affiliates includes property management, asset management,
      development and redevelopment fees from the Operating Partnership’s investees of
      $705,000 and $1,206,000 for the three months ended September 30, 2005 and 2004,
      respectively, and $3,098,000 and $3,823,000 for the nine months ended September
      30, 2005 and 2004, respectively, and promote income from the Operating
      Partnership’s investees of $896,000 and $14,495,000 for the three months ended
      September 30, 2005 and 2004, respectively, and $6,010,000 and $14,495,000 for
      the nine months ended September 30, 2005 and 2004, respectively.




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****September
                  30,****2005**
              
              **2004**Revenues:Southern
                  California
              
              $
              48,171
              
              $
              43,607Northern
                  California
              
              
              16,505
              
              
              15,123Pacific
                  Northwest
              
              
              14,491
              
              
              12,310Other
                  non-segment areas
              
              
              1,052
              
              
              693Total
                  property revenues
              
              $
              80,219
              
              $
              71,733Net
                  operating income:Southern
                  California
              
              $
              33,193
              
              $
              29,137Northern
                  California
              
              
              11,032
              
              
              9,991Pacific
                  Northwest
              
              
              9,243
              
              
              7,855Other
                  non-segment areas
              
              
              93
              
              
              (176
              )Total
                  net operating income
              
              
              53,561
              
              
              46,807Depreciation
                  and amortization:Southern
                  California
              
              
              (10,619
              )
              
              (9,724
              )Northern
                  California
              
              
              (4,023
              )
              
              (3,571
              )Pacific
                  Northwest
              
              
              (3,708
              )
              
              (3,193
              )Other
                  non-segment areas
              
              
              (1,973
              )
              
              (1,573
              )(20,323
              )
              
              (18,061
              )Interest
                  expense:Southern
                  California
              
              
              (7,750
              )
              
              (6,911
              )Northern
                  California
              
              
              (4,251
              )
              
              (3,749
              )Pacific
                  Northwest
              
              
              (1,964
              )
              
              (1,572
              )Other
                  non-segment areas
              
              
              (4,601
              )
              
              (4,162
              )(18,566
              )
              
              (16,394
              )Amortization
                  of deferred financing costs
              
              
              (451
              )
              
              (449
              )General
                  and administrative
              
              
              (4,560
              )
              
              (7,639
              )Other
                  expenses
              
              
              (1,400
              )
              
              -Management
                  and other fees from affiliates
              
              
              1,601
              
              
              15,701Gain
                  on sale of real estate
              
              
              -
              
              
              7,909Interest
                  and other income
              
              
              4,978
              
              
              836Equity
                  income in co-investments
              
              
              21
              
              
              15,365Minority
                  interests
              
              
              (1,433
              )
              
              (877
              )Income
                  tax provision
              
              
              (1,185
              )
              
              (122
              )Income
                  from continuing operations
              
              $
              12,243
              
              $
              43,076
 14
 **(5)**  **Segment
        Information (continued)**


**Nine
                  Months Ended****September
                  30,****2005**
              
              
              **2004**Revenues:Southern
                  California
              
              $
              139,869
              
              $
              122,558Northern
                  California
              
              
              49,286
              
              
              45,767Pacific
                  Northwest
              
              
              42,733
              
              
              36,697Other
                  non-segment areas
              
              
              2,963
              
              
              1,969Total
                  property revenues
              
              $
              234,851
              
              $
              206,991Net
                  operating income:Southern
                  California
              
              $
              95,209
              
              $
              82,111Northern
                  California
              
              
              33,370
              
              
              30,782Pacific
                  Northwest
              
              
              27,503
              
              
              23,498Other
                  non-segment areas
              
              
              1,054
              
              
              285Total
                  net operating income
              
              
              157,136
              
              
              136,676Depreciation
                  and amortization:Southern
                  California
              
              
              (31,115)
              
              
              (29,427)Northern
                  California
              
              
              (11,938)
              
              
              (11,908)Pacific
                  Northwest
              
              
              (11,042)
              
              
              (7,553)Other
                  non-segment areas
              
              
              (5,850)
              
              
              (4,540)(59,945)
              
              
              (53,428)Interest
                  expense:Southern
                  California
              
              
              (22,912)
              
              
              (19,809)Northern
                  California
              
              
              (11,818)
              
              
              (10,143)Pacific
                  Northwest
              
              
              (5,302)
              
              
              (4,841)Other
                  non-segment areas
              
              
              (14,834)
              
              
              (10,992)(54,866)
              
              
              (45,785)Amortization
                  of deferred financing costs
              
              (1,490)
              
              
              (1,179)General
                  and administrative
              
              
              (13,574)
              
              
              (13,985)Other
                  expenses
              
              
              (2,900)
              
              
              -Management
                  and other fees from affiliates
              
              9,108
              
              
              18,318Gain
                  on sale of real estate
              
              
              6,391
              
              
              7,909Interest
                  and other income
              
              
              7,932
              
              
              2,095Equity
                  income in co-investments
              
              
              17,575
              
              
              16,460Minority
                  interests
              
              
              (4,174)
              
              
              (2,526)Income
                  tax provision
              
              
              (2,386)
              
              
              (208)Income
                  from continuing operations
              
              $
              58,807
              
              $
              64,347
 **September
                    30,**
                
                
                **December
                    31,****2005**
                
                
                **2004**Assets:Net
                    real estate assets:Southern
                    California
                
                $
                1,292,846
                
                $
                1,162,803Northern
                    California
                
                
                397,880
                
                
                458,199Pacific
                    Northwest
                
                
                375,508
                
                
                358,219Other
                    non-segment areas
                
                
                42,565
                
                
                62,321Total
                    net real estate assets
                
                
                2,108,799
                
                
                2,041,542Other
                    non-segment assets
                
                
                137,526
                
                
                175,675Total
                    assets
                
                $
                2,246,325
                
                $
                2,217,217
  15


**(6)**
            **Net
                Income Per Common Unit**


(Amounts
                in thousands, except per unit data)




**Three
                  Months Ended**
              
              
              **Three
                  Months Ended****September
                  30, 2005**
              
              
              **September
                  30, 2004****Weighted**
              
              
              **Per**
              
              
              
              
              
              **Weighted**
              
              
              **Per****Average**
              
              
              **Common**
              
              
              
              
              
              **Average**
              
              
              **Common****Common**
              
              
              **Unit**
              
              
              
              
              
              **Common**
              
              
              **Unit****Income**
              
              **Units**
              
              
              **Amount**
              
              
              **Income**
              
              
              **Units**
              
              
              **Amount**Basic:Income
                  from continuing operations
                available to common units
              
              $
              9,196
              
              25,406
              
              $
              0.36
              
              $
              37,511
              
              
              25,302
              
              $
              1.48Income from discontinued operations
              
              
              -
              
              25,406
              
              
              -
              
              
              646
              
              
              25,302
              
              
              0.039,196
              
              
              
              $
              0.36
              
              
              38,157
              
              
              
              
              $
              1.51Effect
                  of Dilutive Securities:Stock options (1)
              
              
              --
              
              185
              
              
              
              
              
              --
              
              
              176Vested series Z incentive units
              
              
              --
              
              120
              
              
              
              
              
              --
              
              
              90-
              
              305
              
              
              
              
              
              -
              
              
              266Diluted:Income
                    from continuing operations
                  available to common units
              
              
              9,196
              
              25,711
              
              $
              0.36
              
              
              37,511
              
              
              25,568
              
              $
              1.47Income from discontinued operations
              
              
              -
              
              25,711
              
              
              -
              
              
              646
              
              
              25,568
              
              
              0.02$
              9,196
              
              
              
              $
              0.36
              
              $
              38,157
              
              
              
              
              $
              1.49**Nine
                  Months Ended**
              
              
              **Nine
                  Months Ended****September
                  30, 2005**
              
              
              **September
                  30, 2004****Weighted**
              
              
              **Per**
              
              
              
              
              
              **Weighted**
              
              
              **Per****Average**
              
              
              **Common**
              
              
              
              
              
              **Average**
              
              
              **Common****Common**
              
              
              **Unit**
              
              
              
              
              
              **Common**
              
              
              **Unit****Income**
              
              **Units**
              
              
              **Amount**
              
              
              **Income**
              
              **Units**
              
              
              **Amount**Basic:Income
                      from continuing operations
                    available to common units
              
              $
              49,664
              
              25,382
              
              $
              1.96
              
              $
              49,693
              
              
              25,212
              
              $
              1.97Income from discontinued operations
              
              
              31,080
              
              25,382
              
              
              1.22
              
              
              984
              
              
              25,212
              
              
              0.0480,744
              
              
              
              $
              3.18
              
              
              50,677
              
              
              
              
              $
              2.01Effect
                  of Dilutive Securities:Stock options (1)
              
              
              --
              
              171
              
              
              
              
              
              --
              
              
              155Vested series Z incentive units
              
              
              --
              
              119
              
              
              
              
              
              --
              
              
              78-
              
              290
              
              
              
              
              
              -
              
              
              233Diluted:Income
                      from continuing operations
                    available to common units
              
              
              49,664
              
              25,672
              
              $
              1.94
              
              
              49,693
              
              
              25,445
              
              $
              1.95Income from discontinued operations
              
              
              31,080
              
              25,672
              
              
              1.21
              
              
              984
              
              
              25,445
              
              
              0.04$
              80,744
              
              
              
              $
              3.15
              
              $
              50,677
              
              
              
              
              $
              1.99.


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) 4,788
      and 26,930 stock options are not included in the diluted earnings per
      common unit calculation for three and nine months ended September 30,
      2005,
      respectively, because the exercise price of the option was greater than the
      average market price of the common unit for the quarter end and, therefore,
      the stock options were anti-dilutive.


16




**(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.




On
      August
      18, 2005, the Operating Partnership entered into a $50.0 million notional
      forward-starting swap with a commercial bank at a fixed rate of 4.869% and
      a
      settlement date between January 1 and December 1, 2008. 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 2008.




These
      transactions are considered highly effective at offsetting changes in future
      cash flows for forecasted transactions and qualify 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
      September 30, 2005, derivative instruments designated as cash flow hedges were
      recorded as a net derivative asset of $91,000 and were included in prepaid
      expenses and other assets. The net change in fair value of the derivative
      instruments for the nine months was a net unrealized gain of $91,000.
      Derivatives designated as cash flow hedges are separately disclosed in the
      statement of changes in partners’ capital and accumulated other comprehensive
      income.  No hedge ineffectiveness on cash flow hedges was recognized
      during
      2005. The Operating Partnership did not have accumulated other comprehensive
      income in 2004.




Amounts
      reported in accumulated other comprehensive income 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 39 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.
      The
      Operating Partnership 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 June 30, 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 $718,000. 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 $668,000 on the sale of these assets, net of minority
      interests. 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.




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. 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.




The
      components of discontinued operations are outlined below and include the results
      of operations for the respective periods that the Operating Partnership owned
      such assets, as described above.




**Three
                  Months Ended**
              
              **Nine
                  Months Ended****September
                  30,**
              
              **September
                  30,****2005**
              
              **2004**
              
              **2005**
              
              **2004**Rental
                  revenues
              
              $
              -
              
              $
              699
              
              $
              1,233
              
              $
              2,080Interest
                  and other
              
              
              -
              
              
              (175
              )
              
              1,134
              
              
              1,380Revenues
              
              
              -
              
              
              524
              
              
              2,367
              
              
              3,460Property
                  operating expenses
              
              
              -
              
              
              (421
              )
              
              (506
              )
              
              (1,758
              )Impairment
                  charge
              
              
              -
              
              
              543
              
              
              -
              
              
              (718
              )Operating
                  income from real estate sold
              
              
              -
              
              
              646
              
              
              1,861
              
              
              984Gain
                  on sale of real estate
              
              
              -
              
              
              -
              
              
              29,219
              
              
              -Income
                  from discontinued operations
              
              $
              -
              
              $
              646
              
              $
              31,080
              
              $
              984
 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. In June 2005, the Operating
      Partnership recorded $1.5 million for legal settlement costs. There has been
      no
      change to the settlement amount for the current quarter. 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.




Recently
      there has been an increasing number of lawsuits against owners and managers
      of
      multifamily properties alleging personal injury and property damage caused
      by
      the presence of mold in residential real estate. Some of these lawsuits have
      resulted in substantial monetary judgments or settlements. The Operating
      Partnership has been sued for mold related matters and has settled some, but
      not
      all, of such matters. Insurance carriers have reacted to mold related liability
      awards by excluding mold related claims from standard policies and pricing
      mold
      endorsements at prohibitively high rates. The Operating Partnership has,
      however, purchased pollution liability insurance, which includes coverage for
      mold. The Operating Partnership has adopted programs designed to manage the
      existence of mold in its properties as well as guidelines for promptly
      addressing and resolving reports of mold to minimize any impact mold might
      have
      on residents or the property. Liabilities resulting from such mold related
      matters and the costs of carrying insurance to address potential mold related
      claims may also be substantial.




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.




**(10)****Subsequent
      Event******




On
      October 28, 2005, the Operating Partnership closed on a $190 million
      exchangeable senior note offering with a coupon of 3.625%. Concurrent with
      the
      offering, the Operating Partnership acquired 286,073 shares of Essex’s common
      stock priced at $87.39. An additional $35 million aggregate principal amount
      of
      notes may be issued, at the option of the initial purchasers, within 30 days
      of
      the initial issuance of the notes. The notes are senior unsecured obligations
      of
      the Operating Partnership, and are fully and unconditionally guaranteed by
      the
      Operating Partnership. The notes were sold, on an over-night basis, to 33
      qualified institutional buyers in accordance with Rule 144A.




**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 nine months
      ended September 30, 2005. Unless otherwise noted, all dollar amounts are in
      thousands.*




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)


19


The
      Operating Partnership’s consolidated multifamily properties are as
      follows:


As
                  of September 30, 2005
              
              As
                  of September 30, 2004Number
                  of Apartment Homes
              %
              Number
                  of Apartment Homes
              *%*Southern
                  California
              12,784
              54%
              11,669
              52%Northern
                  California
              4,621
              20%
              4,411
              20%Pacific
                  Northwest
              5,831
              25%
              5,457
              25%Other
              302
              1%
              578
              3%**Total**
              23,538
              100%
              22,115
              100%


**Operating
      Results**





With
      respect to stabilized multifamily properties with sufficient operating history,
      occupancy figures are based on financial occupancy, which is defined as the
      percentage resulting from dividing actual rental revenue by total possible
      rental revenue. Actual rental revenue represents contractual revenue pursuant
      to
      leases without considering delinquency and concessions. Total possible rental
      revenue represents the value of all apartment units, with occupied units valued
      at contractual rental rates pursuant to leases and vacant units valued at
      estimated market rents. We believe that financial occupancy is a meaningful
      measure of occupancy because it considers the value of each vacant unit at
      its
      estimated market rate. Financial occupancy may not completely reflect short-term
      trends in physical occupancy and financial occupancy rates as disclosed by
      other
      REITs may not be comparable to our calculation of financial occupancy.





**Comparison
      of the Three Months Ended September 30, 2005 to the Three Months Ended September
      30, 2004**





Our
      average financial occupancies increased 1.2% to 97.3% as of September 30, 2005
      from 96.1% as of September 30, 2004 for the multifamily Quarterly Same Store
      Properties. The regional breakdown for the three months ended September 30,
      2005
      and 2004 is as follows:




**Three
                  months ended****September
                  30,****2005**
              
              **2004**Southern
                  California
              
              
              97.2%
              
              96.7%Northern
                  California
              
              
              97.3%
              
              96.0%Pacific
                  Northwest
              
              
              97.3%
              
              95.6%


*Total
      Property Revenues* increased 12% to $80.2 million in the third quarter of 2005 from $71.7 million
      in the third 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**
              
              **September
                  30,**
              
              **Dollar**
              
              **Percentage****Properties**
              
              **2005**
              
              **2004**
              
              **Change**
              
              **Change**Revenues:
              
              
              
              (Dollars
                  in thousands)Property
                  revenues - quarterlyQuarterly
                  Same Store PropertiesSouthern
                  California
              
              
              52
              
              $
              36,203
              
              $
              34,323
              
              $
              1,880
              
              
              5.5
              %Northern
                  California
              
              
              17
              
              
              13,351
              
              
              13,033
              
              
              318
              
              
              2.4Pacific
                  Northwest
              
              
              25
              
              
              12,084
              
              
              11,675
              
              
              409
              
              
              3.5Total
                  property revenuesSame Store Properties
              
              
              94
              
              
              61,638
              
              
              59,031
              
              
              2,607
              
              
              4.4Property
                  revenues - quarterlyProperties acquired subsequent toJune 30, 2004 (1)
              
              
              
              
              
              18,581
              
              
              12,702
              
              
              5,879
              
              
              46.3Total
                  property revenues
              
              
              
              
              $
              80,219
              
              $
              71,733
              
              $
              8,486
              
              
              11.8
              %
 20
 (1)
          Also
          includes three office buildings, three recreational vehicle parks, one
          multifamily property located in Houston, Texas, one manufactured housing
          community, and redevelopment and development
          communities.




*Quarterly
      Same Store Property Revenues* increased by $2.6 million or 4.4% to $61.6 million in the third quarter of
      2005
      from $59.0 million in the third quarter of 2004. Quarterly Same Store Properties
      include those stabilized properties owned by the Operating Partnership during
      each of the three months ended September 30, 2005 and 2004. The increase in
      third quarter 2005 was primarily attributable to an increase of rents of $1.8
      million, and an increase in financial occupancy of 1.2% or $625,000.




*Quarterly
      Non-Same Store Property Revenues* increased by $5.9 million or 46.3% to $18.6 million in the third quarter of
      2005
      from $12.7 million in the third quarter of 2004. Quarterly Non-Same Store
      Properties include properties acquired subsequent to June 30, 2004, three office
      buildings, three recreational vehicle parks, one manufactured housing community,
      and development and redevelopment communities. The increase was primarily
      generated from communities acquired and or developed and increased rents from
      redeveloped properties. Subsequent to June 30, 2004, we acquired 4,726 units
      and
      completed the construction of 756 units.




*Management
      and other fees from affiliates* decreased
      by approximately $14.1 million in the quarter due primarily to the promote
      distributions from Fund I being reduced from $14.5 million in 2004 to $900,000
      in 2005.




*Total
      Expenses* increased 7% to $72.0 million in the third quarter of 2005 from $67.5 million
      in
      the third quarter of 2004. The increase was due to depreciation and
      amortization, interest, and other expenses. Depreciation and amortization
      increased 13% to $20.3 million in the third quarter from $18.0 million in the
      third quarter of 2004 due to an increase in the number of owned properties.
      Total expenses were offset in the third quarter of 2005 by a reduction in
      general and administrative expense in the amount of $3.1 million as a result
      of
      a $4.0 million accrual in employee incentive compensation related to promote
      distributions from Fund I, recorded during the third quarter of 2004.




*Interest
      expense* increased
      by 13% in the third quarter of 2005 to $18.6 million, net of $136,000 in
      capitalized interest, compared to $16.4 million for the third quarter 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 third quarter.




*Other
      expenses* increased
      $1.4 million for the third quarter of 2005. As a result of the $6.1 million
      pretax gain realized in 2005 from the $5 million participating loan at The
      Essex
      at Lake Merritt, management has accrued $1.4 million incentive compensation
      expense to reward the key members of the management team that contributed to
      the
      success of this investment.




*Gain
      on sale of real estate* was
      $0
      for the third quarter of 2005 compared to a gain of $7.9 million recorded in
      third quarter of 2004 related to the sale of The Essex at Lake
      Merritt.




*Interest
      and other income* increased
      to $5.0 million in the third quarter of 2005 compared to $836,000 in third
      quarter of 2004. During the third quarter of 2005, the Operating Partnership
      recorded interest income of $4.3 million relating to The Essex at Lake Merritt
      participating loan.




*Equity
      income in co-investments* decreased $15.3 million in the third quarter of 2005 due to the fact the
      Operating Partnership recorded $14.0 million in equity income related to the
      sale of Fund I properties during the third quarter of 2004.




*Income
      tax provision* increased
      by $1.1 million in the third quarter of 2005 to $1.2 million from $122,000
      in
      the third quarter of 2004 due to taxable income related to The Essex at Lake
      Merritt participating loan and our other taxable REIT subsidiaries.




*Discontinued
      operations* were
      $646,000 for the third quarter of 2004 related to the Eastridge Property sold
      during the second quarter of 2005 and four assets sold during first quarter
      of
      2005 that were non-core assets to the Operating Partnership. There were no
      assets held for sale during the three months ended September 30,
      2005.


21


**Operating
      Results**





**Comparison
      of the Nine Months Ended September 30, 2005 to the Nine Months Ended September
      30, 2004**





Our
      average financial occupancies increased 0.9% to 96.8% for the nine months ended
      September 30, 2005 from 95.9% for the nine months ended September 30, 2004
      for
      the multifamily Same Store Properties. The regional breakdown for the nine
      months ended September 30, 2005 and 2004 is as follows:




**Nine
                  Months Ended****September
                  30,****2005**
              
              
              **2004**Southern
                  California
              
              
              96.6%
              
              
              95.9%Northern
                  California
              
              
              97.1%
              
              
              96.2%Pacific
                  Northwest
              
              
              97.0%
              
              
              95.5%


*Total
      Property Revenues* increased by $25.2 million or 13.5% to $234.9 million in the nine months ended
      September 30, 2005 from $207.0 million in the nine months ended September 30,
      2004. The following table illustrates a breakdown of these revenue amounts,
      including revenues attributable to the Same Store Properties.


**Nine
                  Months Ended****Number
                  of**
              
              **September
                  30,**
              
              
              **Dollar**
              
              **Percentage****Properties**
              
              **2005**
              
              
              **2004**
              
              
              **Change**
              
              **Change**Revenues:
              
              
              
              (Dollars
                  in thousands)Property
                  revenuesSame
                  Store PropertiesSouthern
                  California
              49
              
              $
              95,788
              
              $
              91,084
              
              $
              4,704
              
              5.2
              %Northern
                  California
              16
              
              
              37,777
              
              
              37,517
              
              
              260
              
              0.7Pacific
                  Northwest
              25
              
              
              35,712
              
              
              34,773
              
              
              939
              
              2.7Total property revenuesSame Store Properties
              90
              
              
              169,277
              
              
              163,374
              
              
              5,903
              
              3.6Property
                  revenues - propertiesacquired subsequent toDecember
                  31, 2003 (1)
              
              
              
              65,574
              
              
              43,617
              
              
              21,957
              
              50.3Total property revenues
              
              
              $
              234,851
              
              $
              206,991
              
              $
              27,860
              
              13.5
              %


(1)
      Also
      includes three office buildings, three recreational vehicle parks, one
      multifamily property located in Houston, Texas, one manufactured housing
      community, and redevelopment and development communities.




*Same
      Store Property Revenues* increased by $5.9 million or 3.6% to $169.3 million for the nine months ended
      September 30, 2005 from $163.4 million for the nine months ended September
      30,
      2004. Same Store Properties include those stabilized properties owned by the
      Operating Partnership during each of the nine months ended September 30, 2004
      and September 30, 2005. The increase was primarily attributable an increase
      in
      rents of 3.9% for Southern California of $3.7 million, an increase in occupancy
      of .9%, or $1.4 million, an increase in other property revenues of $415,000,
      and
      a decrease in concessions of $152,000.




*Non
      Same Store Property Revenues* increased
      by $22.0 million or 50.3% to $65.6 million for the nine months ended September
      30, 2005 from $43.6 million for the nine months ended September 30, 2004.
      Non-Same Store Properties include properties acquired subsequent to December
      31,
      2003, three office buildings, three recreational vehicle parks, one manufactured
      housing community, and development and redevelopment communities. The increase
      was primarily generated from communities acquired and or developed and increased
      rents from redeveloped properties. Subsequent to December 31, 2003, we acquired
      5,453 units and completed the construction of 756 units.




*Management
      and other fees from affiliates* decreased
      by approximately $9.2 million during the nine months ended September 30,
      2005 due primarily to the promote distributions from Fund I being reduced
      from $14.5 million in 2004 to $6 million in 2005 as the Fund finishes its
      liquidation of assets. Development and redevelopment fees from Fund I decreased
      by $800,000 as the expenditures for the Fund's development asset
      decreased.


22


*Total
      Expenses* increased 14% to $210.5 million for the nine months ended September 30, 2005
      from $184.7 million for the nine months ended September 30, 2004. The increase
      was mainly due to depreciation and amortization, interest expense, real estate
      taxes, and other expenses. Depreciation and amortization increased 12% to $59.9
      million for the nine months ended September 30, 2005 from $53.4 million for
      the
      nine months ended September 30, 2004, and real estate taxes increased $2.7
      million during the nine months ended 2005 due to an increase in the number
      of
      owned properties.




*Interest
      expense* increased
      by 20% for the nine months ended September 30, 2005 to $54.9 million, net of
      $647,000 of capitalized interest, as compared to $45.8 million for the nine
      months ended September 30, 2004. The increase was primarily due to an increase
      in short term rates and paying down lines of credit with permanent financing
      in
      the nine months ended September 30, 2005.




*Other
      expenses* increased
      to $2.9 million for the nine months ended September 30, 2005 due to a provision
      of $1.5 million for a legal settlement recorded in the second quarter of 2005,
      see Item 1 in Part II - Other Information for additional information. As a
      result of the $6.1 million pretax gain realized in 2005 from the $5 million
      participating loan at The Essex at Lake Merritt, management has accrued $1.4
      million incentive compensation expense to reward the key members of the
      management team that contributed to the success of this investment. There were
      no other expense items in the nine months ended September 30, 2004.




*Gain
      on sale of real estate* decreased by $1.5 million for the nine months ended September 30, 2005 to $6.4
      million compared to $7.9 million recorded during the nine months ended September
      30, 2004. During 2005, Essex recognized $5.0 million in gains deferred on the
      sale of Essex at Lake Merritt and $1.4 million in gains related to additional
      real estate sales. The gain of $7.9 million was recorded in third quarter of
      2004 and related to the sale of The Essex at Lake Merritt.




*Interest
      and other income* increased
      to $7.9 million for the nine months ended September 30, 2005 compared to $2.1
      million for the nine months ended September 30, 2004. The increase relates
      primarily to interest income of $4.3 million related to The Essex at Lake
      Merritt participating loan in 2005.




*Equity
      income in co-investments* increased $1.1 million for the nine months ended September 30, 2005 as a result
      of the sale of Fund I properties during the first two quarters of 2005, and
      $575,000 in equity income related to earnings generated from Funds I and II
      and
      other joint ventures.




*Income
      tax provision* increased
      by $2.2 million during the nine months ended September 30, 2005 compared to
      $208,000 for the nine months ended September 30, 2004 due to taxable income
      related to our taxable REIT subsidiaries.




*Discontinued
      operations* increased by $30.1 million to $31.0 million for the nine months ended September
      30, 2005 from $984,000 for the nine months ended September 30, 2004. The
      increase was due mainly to a gain on sale of the Eastridge property during
      the
      second quarter of 2005, for $30.5 million net of minority interest 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 and Fitch ratings have existing issuer credit ratings of BBB/Stable
      for Essex Portfolio L.P.




We
      believe that cash flows generated by our operations, existing cash balances,
      availability under existing lines of credit, access to capital markets and
      the
      ability to generate cash gains from the disposition of real estate are
      sufficient to meet all of our reasonably anticipated cash needs during 2005.
      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
      September 30, 2005, and $56,000,000 was outstanding with an average interest
      rate of approximately 4.4%. 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 the Operating Partnership's multifamily communities. As
      of
      September 30, 2005, we had


23


$94
      million outstanding under this line of credit, which bears an average interest
      rate of 3.1 percent 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 30, 2007. At
      the
      end of the third quarter, we 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. On July
      14, 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 4.935%, which matures on August 1, 2015.





On
      October 28, 2005, the Operating Partnership closed on a $190 million
      exchangeable senior note offering with a coupon of 3.625%. Concurrent with
      the
      offering, the Company acquired 286,073 shares of Essex’s common stock
      priced at $87.39. An additional $35 million aggregate principal amount of notes
      may be issued, at the option of the initial purchasers, within 30 days of the
      initial issuance of the notes. The notes are senior unsecured obligations of
      the
      Operating Partnership, and are fully and unconditionally guaranteed by the
      Operating Partnership. The notes were sold, on an over-night basis, to 33
      qualified institutional buyers in accordance with Rule 144A.




The
      notes
      are due on November 1, 2025. On or after November 1, 2020, and earlier upon
      the
      occurrence of specified events, the notes will be exchangeable at the option
      of
      the holder into cash and, in certain circumstances at the Operating
      Partnership’s option, shares of Essex’s common stock at an initial exchange rate
      of 9.6852 shares per $1,000 principal amount of notes (or an initial exchange
      price of approximately $103.25 per share). The initial exchange rate is subject
      to adjustment in certain circumstances. After November 4, 2010, the Operating
      Partnership may redeem all or a portion of the notes at a redemption price
      equal
      to the principal amount plus accrued and unpaid interest (including additional
      interest, if any).




Note
      holders may require the Operating Partnership to repurchase all or a portion
      of
      the notes at a purchase price equal to the principal amount plus accrued and
      unpaid interest (including additional interest, if any) on the notes on November
      1, 2010, November 1, 2015 and November 1, 2020, or after the occurrence of
      a
      fundamental change.




Concurrent
      with or subsequent to the closing of the above mentioned $190 million
      exchangeable senior note offering, the Operating Partnership executed the
      following transactions with the use of proceeds from the senior note
      offering:




§
            Repaid
                $73.5 million in outstanding indebtedness under the unsecured line
                of
                credit;


§
            Repaid
                $56.9 million in outstanding indebtedness under the credit facility
                from
                Freddie Mac;


§
            Repaid
                $21.3 million on the outstanding mortgage loan for Park Hill
                apartments;


§
            Repaid
                $8.1 million on the outstanding mortgage loan for Peregrine Point
                apartments.




Concurrent
      with the closing of the above mentioned $190 million
      exchangeable senior note offering, the Company executed the following
      transaction with the use of proceeds from the senior note offering:




§
            Repurchased
                $25.0 million of Essex’s common
                stock.




As
      of September 30, 2005, our mortgage notes payable
      totaled $1,164,504,000, which consisted of $969,602,000 in fixed rate debt
      with
      interest rates varying from 4.14% to 8.18% and maturity dates ranging from
      2006
      to 2026 and $194,902,000 of tax-exempt variable rate demand bonds with a
      weighted average interest rate of 3.7%. 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 and 2008, 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%, with a settlement date on or around
      October 1, 2007. Additionally, on August 18, 2005, the Operating Partnership
      entered into a $50.0 million notional forward-starting swap with a commercial
      bank at a fixed rate of 4.869% and a settlement date between January 1 and
      December 1, 2008. We believe that these transactions will be effective in
      offsetting changes in future cash flows for forecasted transactions and qualify
      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.


24


*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. It is expected that cash from operations and/or the
      Operating Partnership ’s
      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 three development projects in our pipeline, aggregating 505
      units, with total incurred costs to-date of $34.8 million and estimated
      remaining costs of approximately $98.8 million. These
      consolidated development projects are:


·
            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.


·
            Tracy,
                which is located in Tracy, California and will consist of 30
                units.





*Redevelopment*


Our
      redevelopment strategy strives to improve the financial and physical aspects
      of
      our redevelopment apartment communities and to target a 10 to 15 percent return
      on the incremental renovation investment. Many of the Operating Partnership’s
      properties are older and in excellent neighborhoods, providing lower density
      with large floor plans that represent attractive redevelopment opportunities.
      As
      of September 30, 2005, we had six communities, aggregating 1,905 units in
      various stages of redevelopment. Total redevelopment cost of these projects
      as
      of September 30, 2005 is approximately $33.9 million, of which $19.3 million
      remains to be expended.





*Alternative
      Capital Sources*


The
      Essex
      Apartment Value Fund II (“Fund II”), a value added discretionary fund, is
      utilized as the Operating Partnership’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 the
      Operating Partnership with combined partner equity commitments of $265.9
      million. the Operating Partnership 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.





**Consolidated
      Variable Interest Entities**




In
      accordance FIN 46R, the Operating Partnership consolidates EMC, 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 $232.2 million and $156.0 million, respectively, at September
      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 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 $150.3 million and $151.3 million as of September
      30, 2005 and December 31, 2004, respectively.


25


**Unconsolidated
      Variable Interest Entities**


As
      of
      September 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 September 30, 2005 were approximately $97.8
      million and $74.2 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 September 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
            
            $
            6,480
            
            $
            152,643
            
            $
            210,044
            
            $
            795,337
            
            $
            1,164,504Lines
                of credit
            
            
            -
            
            
            56,000
            
            
            93,735
            
            
            -
            
            
            149,735Development
                commitments (1)
            
            
            4,500
            
            
            94,300
            
            
            -
            
            
            -
            
            
            98,800Redevelopment
                commitments (2)
            
            
            8,000
            
            
            11,342
            
            
            -
            
            
            -
            
            
            19,342Essex
                Apartment Value Fund II, L.P.capital commitment (3)
            
            
            1,900
            
            
            55,161
            
            
            -
            
            
            -
            
            
            57,061$
            20,880
            
            $
            369,446
            
            $
            303,779
            
            $
            795,337
            
            $
            1,489,442


(1)  $45,748
      of these commitments relate to actual contracts as of September 30,
      2005.




(2)  $7,863
      of
      these commitments relate to actual contracts as of September 30,
      2005.




(3)
            The
                Operating Partnership has a total commitment of $57,061, as of September
                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; (iiii) 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, and those estimates
      could be different under different assumptions and conditions.





The
      Operating Partnership’s critical accounting policies and estimates have not
      changed materially from information reported in Note 2, *Summary
      of Critical and Significant Accounting Policies* ,
      in the
      Operating Partnership’s Form 10-K for the year ended December 31,
      2004.




**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


26


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 SFAS No. 123, “ *Share-Based
      Payment, revised* ”.
      This
      statement is a revision of SFAS No. 123, “ *Accounting
      for Stock-Based Compensation* ”,
      and
      supersedes 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.




**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 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 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.




**Potential
      Factors Affecting Future Operating Results**




Many
      factors affect the Operating Partnership’s actual financial performance and may
      cause the Operating


27
 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 higher than
              anticipated•
            
            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 unitholders. 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 third quarter
      of
      2005, the Operating Partnership originated a mortgage loan totaling $40.3
      million on one of its wholly-owned properties. The mortgage loan has a fixed
      interest rate of 4.935% and matures August 1, 2015. Subsequent to September
      30,
      2005, the Operating Partnership closed on a $190 million exchangeable senior
      note offering with a coupon of 3.625%. The notes are due on November 1,
      2025.




**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 September 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.


28


The
      table
      incorporates only those exposures that exist as of September 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.


**Estimated****For
                  the Years Ended**
              
              **2005**
              
              **2006**
              
              **2007**
              
              **2008**
              
              **2009**
              
              **Thereafter**
              
              **Total**
              
              **Fair
                  value**Fixed
                  rate debt(In
                  thousands)Amount
              
              $
              6,480
              
              $
              18,120
              
              $
              126,443
              
              $
              156,119
              
              $
              53,925
              
              $
              608,515
              
              $
              969,602
              
              $
              1,007,832Average
                  interest rate
              
              
              6.5
              %
              
              6.5
              %
              
              6.5
              %
              
              6.5
              %
              
              6.5
              %
              
              6.5
              %Variable
                  rate debt(In
                  thousands)Amount
              
              $
              --
              
              $
              8,080
              
              $
              56,000
              
              $
              --
              
              $
              93,735
              
              $
              186,822
              
              $
              344,637
              
              $
              344,637Average
                  interest rate
              
              
              --
              
              
              3.7
              %
              
              5.3
              %
              
              --
              
              
              3.1
              %
              
              3.7
              %


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.




On
      August
      18, 2005, the Operating Partnership entered into a $50.0 million notional
      forward-starting swap with a commercial bank at a fixed rate of 4.869% and
      a
      settlement date between January 1 and December 1, 2008. 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 2008.




At
      September 30, 2005, these transactions are considered highly effective at
      offsetting changes in future cash flows for forecasted transactions and qualify
      for hedge accounting.




As
      of
      September 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
      September 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 September 30, 2005,
      that have materially affected, or are reasonably likely to materially affect,
      the Operating Partnership’s internal control over financial
      reporting.





**Part
      II -- Other Information**





**Item
      1: Legal Proceedings**




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. In June 2005, the Operating
      Partnership recorded $1.5 million for legal settlement costs. There has been
      no
      change to the settlement amount for the current quarter. 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.




Recently
      there has been an increasing number of lawsuits against owners and managers
      of
      multifamily properties


29


alleging
      personal injury and property damage caused by the presence of mold in
      residential real estate. Some of these lawsuits have resulted in substantial
      monetary judgments or settlements. The Operating Partnership has been sued
      for
      mold related matters and has settled some, but not all, of such matters.
      Insurance carriers have reacted to mold related liability awards by excluding
      mold related claims from standard policies and pricing mold endorsements at
      prohibitively high rates. The Operating Partnership has, however, purchased
      pollution liability insurance, which includes coverage for mold. The Operating
      Partnership has adopted programs designed to manage the existence of mold in
      its
      properties as well as guidelines for promptly addressing and resolving reports
      of mold to minimize any impact mold might have on residents or the property.
      Liabilities resulting from such mold related matters and the costs of carrying
      insurance to address potential mold related claims may also be
      substantial.




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*





10.1
            Indenture,
                dated October 28, 2005, by and among Essex Property Trust, Inc.,
                as
                Guarantor, Essex Portfolio, L.P., as the Issuer, and Wells Fargo
                Bank,
                N.A., attached as Exhibit 10.1 to the Operating Partnership’s current
                report on Form 8-K, filed November 2, 2005, and incorporated herein
                by
                reference.





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.


__________








30





**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:
                November 9, 2005By:
            By:
                /S/ MICHAEL T. DANCEMichael
                T. Dance*Executive
                Vice President, Chief Financial Officer*
              *(Authorized
                Officer, Principal Financial Officer)*





31