ESSEX PROPERTY TRUST INC
S-3, 1998-12-07
REAL ESTATE INVESTMENT TRUSTS
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<PAGE>   1

    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 7, 1998
                                                     REGISTRATION NO. 333-______


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM S-3
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933

                           ESSEX PROPERTY TRUST, INC.

<TABLE>
<S>                                                                   <C>
                          MARYLAND                                                77-0369576
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)        (IRS EMPLOYER INDEMNIFICATION NO.)
</TABLE>

                               925 E. MEADOW DRIVE
                           PALO ALTO, CALIFORNIA 94303
                                 (650) 494-3700
   (ADDRESS AND TELEPHONE NUMBER OF REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)

                                KEITH R. GUERICKE
                      PRESIDENT AND CHIEF EXECUTIVE OFFICER
                              777 CALIFORNIA AVENUE
                           PALO ALTO, CALIFORNIA 94304
                                 (650) 494-3700
            (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
                   INCLUDING AREA CODE, OF AGENT FOR SERVICE)

                                   Copies to:
                            STEPHEN J. SCHRADER, ESQ.
                             JUSTIN L. BASTIAN, ESQ.
                             MORRISON & FOERSTER LLP
                               755 PAGE MILL ROAD
                           PALO ALTO, CALIFORNIA 94304
                                 (650) 813-5600

        APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
   From time to time after the effective date of this Registration Statement.


     If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]

     If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

     If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

     If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

<TABLE>
<CAPTION>
===============================================================================================================
                                       CALCULATION OF REGISTRATION FEE
===============================================================================================================
                                                       PROPOSED MAXIMUM     PROPOSED MAXIMUM
  TITLE OF SHARES TO BE             AMOUNT TO BE       AGGREGATE PRICE     AGGREGATE OFFERING      AMOUNT OF
        REGISTERED                   REGISTERED        PER SHARE(2)(3)        PRICE(2)(3)       REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------
<S>                               <C>                      <C>               <C>                    <C>
8.75% Convertible Preferred 
Stock, Series 1996A.............  1,600,000 shares         $35.1788
                                                                             $56,286,158            $16,605
Common Stock, $.0001 par value, 
issuable upon conversion of the 
8.75% Convertible Preferred       1,828,571(1) shares      $30.7815         
Stock, Series 1996A.............
- ---------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Includes (i) shares of Common Stock issuable upon conversion of shares of
     8.75% Convertible Preferred Stock, Series 1996A (the "Preferred Shares")
     and (ii) pursuant to Rule 416, an indeterminate number of additional shares
     of Common Stock as may from time become issuable pursuant to antidilution
     provisions of the Preferred Shares.


<PAGE>   2

(2)  Estimated solely for the purpose of calculating the registration fee in
     accordance with Rule 457(i) based on the average of the high and low
     reported sales prices on the New York Stock Exchange on November 30, 1998
     of the Common Stock into which the Preferred Shares may be converted
     pursuant to Rule 457(c).

(3)  The Company has agreed to indemnify the underwriters, if any, against
     certain liabilities, including liabilities under the Securities Act of
     1933, as amended.

     THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE AN AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

================================================================================


                                       2

<PAGE>   3

                              SUBJECT TO COMPLETION
                 PRELIMINARY PROSPECTUS DATED DECEMBER  , 1998

                                1,600,000 SHARES
                       8.75% CONVERTIBLE PREFERRED STOCK,
                                  SERIES 1996A
                                       AND
                                1,828,571 SHARES
                 COMMON STOCK ISSUABLE UPON CONVERSION THEREOF.
                           ESSEX PROPERTY TRUST, INC.

                            ------------------------

     This Prospectus relates to the offer and sale from time to time of (i) up
to 1,600,000 shares (the "Preferred Shares") of our 8.75% Convertible Preferred
Stock, Series 1996A (the "Convertible Preferred Stock") by the holders thereof
(the "Selling Stockholders"); (ii) up to 1,828,571 shares (the "Common Shares,"
and together with the Preferred Shares, the "Shares") of our Common Stock, par
value $.0001 per share (the "Common Stock"), which may be issued upon conversion
of the Preferred Shares; and (iii) an indeterminate number of Shares of Common
Stock which may be issued as a result of the anti-dilution provisions of the
Preferred Shares and in accordance with Rule 416 under the Securities Act of
1933, as amended (the "Securities Act"). We have registered the resale of the
Shares by the Selling Stockholders to provide the Selling Stockholders with
freely tradeable securities.

     Our Common Stock is listed on the New York Stock Exchange (the "NYSE")
under the symbol "ESS." The Shares are subject to certain restrictions on
ownership and transfer designed to assist us in maintaining our status as a real
estate investment trust for federal income tax purposes. See "Description of
Capital Stock -- Restrictions on Transfer."

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

     The Selling Stockholders from time to time may offer and sell the Shares
held by them directly or through agents or broker-dealers on terms to be
determined at the time of sale. To the extent required, the names of any agent
or broker-dealer and applicable commissions or discounts and any other required
information with respect to any particular offer will be set forth in an
accompanying Prospectus Supplement. See "Plan of Distribution." Each of the
Selling Stockholders reserves the sole right to accept or reject, in whole or in
part, any proposed purchase of the Shares to be made directly or through agents.

     We will not receive any of the proceeds from the sale of Shares by the
Selling Stockholders. We have, however, agreed to bear certain expenses of
registration of the Shares under Federal and state securities laws.

     The Selling Stockholders and any agents or broker-dealers that participate
with the Selling Stockholders in the distribution of Shares may be deemed to be
"underwriters" within the meaning of the Securities Act, and any commissions
received by them and any profit on the resale of the Shares may be deemed to be
underwriting commissions or discounts under the Securities Act. See
"Registration Rights" for indemnification arrangements between the Company and
the Selling Stockholders.

               The date of this Prospectus is ____________ , 1998

<PAGE>   4

                               TABLES OF CONTENTS

<TABLE>
<CAPTION>
                                                                                          Page
                                                                                          ----
<S>                                                                                       <C>
Available Information ..................................................................  2
Incorporation of Certain Documents By Reference.........................................  2
Risk Factors............................................................................  2
     Debt Financing.....................................................................  4 
     Uncertainty of Ability to Refinance Balloon Payments...............................  4
     Risk of Rising Interest Payments...................................................  4
     Acquisition Activities, Risks that Acquisitions Will Fail to Meet Expectations.....  4
     Risks that Development Activities Will Be Delayed or Not Completed.................  5
     The Geographic Concentration of the Properties and Fluctuations in
          Local Markets May Adversely Impact Our Income.................................  5
     Competition in the Multifamily Residential Market May Adversely Affect
          Our Operations and the Demand for Our Properties..............................  5
     Debt Financing on Properties May Result In Insufficient Cash Flow..................  5
     Increase In Dividend Requirements as a Result of the Convertible Preferred
          Stock May Lead to a Possible Inability to Sustain Dividends...................  6
     The Registration Rights and Preemptive Rights of the Convertible Preferred
          Stock May Have an Adverse Effect on the Market Price of the Shares............  7 
     Conversion of the Convertible Preferred Stock May Lead to Substantial Dilution
          to the Holders of Common Stock................................................  7
     Concentration of Voting Power and Consent Requirements of the Holders of the
          Convertible Preferred Stock May Be Detrimental to Holders of Common Stock.....  8
     Certain Voting Rights of the Series B Preferred Stock and Series C Preferred Stock   9
     Exemption of Westbrook from the Maryland Business Combination Law
          May Allow Certain Transactions Between the Company and Westbrook
          to Proceed Without Compliance With Such Law...................................  9
     Influence of Executive Officer, Directors and Significant Stockholders.............  9
     Anti-Takeover Provisions Contained In the Operating Partnership Agreement,
          Our Charter, Our By-Laws, the Convertible Preferred Stock and
          Certain Provisions of Maryland Law Could Delay, Defer or Prevent
          a Change in Control of Us..................................................... 10
     Bond Compliance Requirements May Limit Our Income From Certain Properties.......... 11
     Adverse Effect to Property Income and Value Due to General Real Estate
          Investment Risks.............................................................. 11
     Joint Ventures and Joint Ownership of Properties and Partial Interests In
          Corporations and Limited Partnerships Could Limit Our Ability to
          Control Such Properties and Partial Interests................................. 12
     Investments in Mortgages........................................................... 12
     Possible Environmental Liabilities................................................. 12
     General Uninsured Losses........................................................... 13
     Risk That Interest Rate Hedging Arrangements Cannot Be Refinanced or Replaced...... 13
     Changes In Real Estate Tax and other Laws.......................................... 13
     Changes In Financing Policy; No Limitation on Debt................................. 13
     Failure to Qualify As A Real Estate Investment Trust............................... 14
     Year 2000 Compliance............................................................... 14
The Company............................................................................. 15
Tax Status of the Company............................................................... 15
Securities To Be Offered................................................................ 15
Use of Proceeds......................................................................... 15
Description of Common Stock............................................................. 16
     Stock-General...................................................................... 16
     Common Stock....................................................................... 16
     Restrictions of Transfer........................................................... 16
Description of Convertible Preferred Stock, Series B Preferred Stock and Series 
 C Preferred Stock...................................................................... 18
     Convertible Preferred Stock........................................................ 18
</TABLE>


                                       i

<PAGE>   5

<TABLE>
<CAPTION>
                                                                                          Page
                                                                                          ----
<S>                                                                                       <C>
     Series B Preferred Stock and Series C Preferred Stock..............................  22
Shares Available For Future Sale........................................................  24
Registration Rights.....................................................................  25
     Registration Rights Agreement......................................................  25
Selling Stockholders....................................................................  25
Certain Provisions of the Company's Charter and By-Laws.................................  25
Federal Income Tax considerations.......................................................  26
     General............................................................................  26
     Taxation of the Company............................................................  27
     Requirements for Qualification.....................................................  27
     Tax Aspects of the Company's Investment in the Operating Partnership...............  31
     Taxation of Taxable U.S. Stockholders Generally....................................  32
     Taxation of Tax-Exempt Stockholders................................................  34
     Taxation of Non-U.S. Stockholders..................................................  34
     Other Tax Considerations...........................................................  36
Plan of Distribution....................................................................  37
Experts   ..............................................................................  38
Legal Matters...........................................................................  38
Part II   ..............................................................................  II-1
</TABLE>


                                       ii

<PAGE>   6

                              AVAILABLE INFORMATION

     The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith the Company files, reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information filed can be inspected and copied at the
Commission's Public Reference Section, 450 Fifth Street, N.W., Washington, D.C.,
20549, and at the following regional offices of the Commission: Seven World
Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission also maintains a
site on the World Wide Web at http://www.sec.gov that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission. In addition, the Common Stock of the Company
is listed on the New York Stock Exchange and similar information concerning the
Company can be inspected and copied at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005.

     The Company has filed with the Commission a registration statement on Form
S-3 (the "Registration Statement"), of which this Prospectus is a part, under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Shares. This Prospectus does not contain all of the information set forth in
the Registration Statement, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. Statements contained
in this Prospectus as to the contents of any contract or other documents are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference and the
exhibits and schedules thereto. For further information regarding the Company
and the Shares, reference is hereby made to the Registration Statement and such
exhibits and schedules, copies of which may be obtained from the Commission at
its principal office in Washington, D.C. upon payment of the fees prescribed by
the Commission.

                 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

     The documents listed below have been filed by the Company (File No.
1-13106) under the Exchange Act with the Commission and are incorporated herein
by reference:

     a.   The Company's Annual Report on Form 10-K for the year ended December
31, 1997;

     b.   The Company's Quarterly Reports on Form 10-Q for the Quarters ended
March 31, 1998, June 30, 1998 and September 30, 1998;

     c.   The Company's Current Reports on Form 8-K filed with the Commission on
April 23, 1998 and May 15, 1998.

     d.   The Company's Current Reports on Form 8-K/A filed June 24, 1998; and

     e.   The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A.

     Each document filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of all Offered Securities to which this
Prospectus relates shall be deemed to be incorporated by reference in this
Prospectus and to be part hereof from the date of filing such documents.

     Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
(or in the applicable Prospectus Supplement) or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.

     Copies of all documents which are incorporated herein by reference (not
including the exhibits to such information, unless such exhibits are
specifically incorporated by reference in such information) will be provided
without charge to 


                                       2

<PAGE>   7

each person, including any beneficial owner, to whom this Prospectus is 
delivered upon written or oral request. Requests should be directed to the
Investor Service Manager of the Company at 925 E. Meadow Drive, Palo Alto,
California 94303, telephone number: (650) 494-3700.


                                       3

<PAGE>   8

     This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Risk Factors" and elsewhere in this Prospectus.


                                  RISK FACTORS

     You should carefully consider the following information as well as the
other information contained in this Prospectus and the applicable Prospectus
Supplement before purchasing Shares.

DEBT FINANCING

     As of October 31, 1998, we had outstanding approximately $370.9 million of
indebtedness (including $103.6 million of variable rate mortgage indebtedness)
secured by certain of the properties we own.

     We are subject to the risks normally associated with debt financing,
including the following:

     o    our cash flow may not be sufficient to meet required payments of
          principal and interest;

     o    we may not be able to refinance existing indebtedness on encumbered
          Properties; and

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

UNCERTAINTY OF ABILITY TO REFINANCE BALLOON PAYMENTS

     As of October 31, 1998, the Company had an aggregate of approximately
$370.9 million of mortgage debt and lines of credit some of which are subject to
balloon payments of principal. We do not expect to have sufficient cash flows
from operations to make all of such balloon payments when due under these
mortgages and lines of credit. As of October 31, 1998, these mortgages and lines
of credit had the following scheduled maturity dates: 1998 - $600,000; 1999 -
$2.9 million 2000; - $47.1 million; 2001 - $20.5 million; 2002 and thereafter -
$299.8 million. As a result, we may not be able to refinance such mortgage
indebtedness. The Properties subject to these mortgages could be foreclosed upon
or otherwise transferred to the mortgagee. This could mean a loss to us of
income and asset value. Alternatively, we may be required to re-finance the debt
at higher interest rates. If we are unable to make such payments when due, a
mortgage lender could foreclose on the property securing the mortgage, which
could have a material adverse effect on our financial condition and results of
operations.

RISK OF RISING INTEREST PAYMENTS

     As of October 31, 1998, the Company had approximately $103.6 million of
variable rate mortgage indebtedness. This debt bears interest at a floating rate
tied to the rate of short-term tax exempt securities. Although approximately
$22.9 million of such variable rate debt is subject to an interest rate
protection agreement, which may reduce the risks associated with fluctuations in
interest rates, an increase in interest rates may have an adverse effect on our
net income and results of operations.

ACQUISITION ACTIVITIES; RISKS THAT ACQUISITIONS WILL FAIL TO MEET EXPECTATIONS

     We intend to continue to acquire multifamily residential properties. There
are risks that properties we acquire will fail to perform as expected. Our
estimates of the costs of improvements to allow us to market an acquired
property as intended may be inaccurate. In addition, we expect to finance future
acquisitions, in whole or in part, under various forms of secured or unsecured
financing or through the issuance of partnership units by the Operating
Partnership or additional equity by us. The use of equity financing, rather than
debt, for future developments or acquisitions could dilute the interest of our
existing stockholders. If we finance new acquisitions under existing lines of
credit, there is a risk that, unless substitute financing is obtained, further
availability under the lines of credit for new development may not be available
or may be available only on disadvantageous terms. Also, we may not be able to
refinance our existing lines of credit upon maturity, or the terms of such
refinancing may not be as favorable as the terms of the existing indebtedness.
Further, 


                                       4

<PAGE>   9

acquisitions of properties are subject to the general risks associated with real
estate investments. See "-- Adverse Effect to Property Income and Value Due to 
General Real Estate Investment Risks."

RISKS THAT DEVELOPMENT ACTIVITIES WILL BE DELAYED OR NOT COMPLETED

     We pursue multifamily residential property development projects from time
to time. Development projects generally require various governmental and other
approvals, the receipt of which cannot be assured. Our development activities
generally entail certain risks, including the following:

     o    we may expend funds on and devote management's time to projects which
          may not be completed;

     o    construction costs of a project may exceed original estimates possibly
          making the project economically infeasible;

     o    development projects may be delayed due to, among other things,
          adverse weather conditions;

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

     o    expenses at a completed development may be higher than anticipated.

     These risks may reduce the funds available for distribution to our
stockholders. Further, the development of properties is also subject to the
general risks associated with real estate investments. See "-- Adverse Effect to
Property Income and Value Due to General Real Estate Investment Risks."

THE GEOGRAPHIC CONCENTRATION OF THE PROPERTIES AND FLUCTUATIONS IN LOCAL MARKETS
MAY ADVERSELY IMPACT OUR INCOME

     Significant amounts of our rental revenues for the year ended December 31,
1997 and six months ended June 30, 1998, were derived from Properties
concentrated in the San Francisco Bay Area, the Seattle metropolitan area,
Southern California and the Portland metropolitan area. As a result of this
geographic concentration, if a local property market performs poorly, the income
from the Properties in that market could decrease. As a result of such a
decrease in income, we may be unable to make expected dividends to our
stockholders. The performance of the economy in each of these areas affects
occupancy, market rental rates and expenses and, consequently impacts on the
income from the Properties and their underlying values. The financial results of
major local employers may also impact the cash flow and value of certain of the
Properties. Economic downturns in the local markets in which we own properties
could have a negative impact on our financial condition and results from
operations.

COMPETITION IN THE MULTIFAMILY RESIDENTIAL MARKET MAY ADVERSELY AFFECT OUR
OPERATIONS AND THE DEMAND FOR OUR PROPERTIES

     There are numerous housing alternatives that compete with our multifamily
Properties in attracting residents. These include other multifamily rental
apartments and single family homes that are available for rent in the markets in
which the Properties are located. The Properties also compete for residents with
new and existing homes and condominiums that are for sale. In addition, other
competitors for development and acquisitions of properties may have greater
resources than we do. If the demand for our Properties is reduced or if our
competitors develop and/or acquire competing properties on a more cost-effective
basis than us, rental rates may drop, which may have a material adverse affect
on our financial condition and results of operations.

     We also face competition from other real estate investment trusts,
businesses and other entities in the acquisition, development and operation of
properties. Some of our competitors are larger and have greater financial
resources than we do. This competition may result in increased costs of
properties we wish to acquire and/or develop.

DEBT FINANCING ON PROPERTIES MAY RESULT IN INSUFFICIENT CASH FLOW

     Where possible, we intend to continue to use leverage to increase the rate
of return on our investments and to allow us to make more investments than we
otherwise could. There is a risk that the cash flow from the Properties will be
insufficient to meet both debt payment obligations and the distribution
requirements of the real estate investment trust 


                                       5

<PAGE>   10

provisions of the Internal Revenue Code of 1986, as amended. We may obtain
additional debt financing in the future, through mortgages on some or all of our
Properties. These mortgages may be on recourse, non-recourse, or
cross-collateralized bases. As of October 31, 1998, we had mortgages on 35
Properties which were secured by deeds of trust relating solely to those
Properties, one mortgage which was cross-collateralized by eight Properties and
two mortgages each of which were cross-collateralized by three Properties. We
also held a line of credit that was secured by three Properties. The holders of
this indebtedness will have a claim against these Properties and to the extent
indebtedness is cross-collateralized, lenders may seek to foreclose upon
properties which are not the primary collateral for their loan. This may, in
turn, accelerate other indebtedness secured by Properties. Foreclosure of
Properties would cause a loss to us of income and asset value.

INCREASE IN DIVIDEND REQUIREMENTS AS A RESULT OF THE CONVERTIBLE PREFERRED
STOCK, SERIES B PREFERRED STOCK, AND SERIES C PREFERRED STOCK MAY LEAD TO A
POSSIBLE INABILITY TO SUSTAIN DIVIDENDS

     On June 20, 1996, we agreed to sell up to $40.0 million of our 8.75%
convertible preferred stock, Series 1996A (the "Convertible Preferred Stock") at
$25.00 per share to Westbrook Real Estate Fund I, L.P. (formerly known as
Tiger/Westbrook Real Estate Fund, L.P.), and Westbrook Real Estate Co-Investment
Partnership I, L.P. (formerly known as Tiger/Westbrook Real Estate Co-Investment
Partnership, L.P.). Westbrook Real Estate Fund, L.P. and Westbrook Real Estate
Co-Investment Partnership I, L.P. are collectively referred to herein as
"Westbrook." These entities have purchased a total of 1,600,000 shares of
Convertible Preferred Stock. For a summary of the terms and conditions of the
Convertible Preferred Stock, see "Description of Preferred Stock -- Convertible
Preferred Stock."

     In addition, on February 6 and April 20, 1998, the Operating Partnership
completed the private placement of a total of 1,600,000 units of 7.875% Series B
Cumulative Redeemable Preferred Units (the "Series B Preferred Units"),
representing a limited partnership interest in the Operating Partnership, to an
institutional investor. The Series B Preferred Units will become exchangeable,
on a one for one basis, in whole or in part at any time on or after February 6,
2008 (or earlier under certain circumstances) for shares of the Company's 7.875%
Series B Cumulative Redeemable Preferred Stock, par value $.0001 per share (the
"Series B Preferred Stock"). Also, on November 24, 1998, the Operating
Partnership completed the private placement of 500,000 units of 9 1/8% Series C
Cumulative Redeemable Preferred Units (the "Series C Preferred Units"),
representing a limited partnership interest in the Operating Partnership, to an
institutional investor. The Series C Preferred Units will become exchangeable,
on a one for one basis, in whole or in part at any time on or after November 24,
2008 (or earlier under certain circumstances) for shares of the Company's 9 1/8%
Series C Cumulative Redeemable Preferred Stock, par value $.0001 per share (the
"Series C Preferred Stock"). For a summary of the terms and conditions of the
Series B Preferred Stock and the Series C Preferred Stock, see "Description of
Convertible Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock -- Series B Preferred Stock and Series C Preferred Stock."

     The cash dividends payable on the Convertible Preferred Stock substantially
increased the cash required to continue to pay cash dividends on the Common
Stock at current levels. Dividends may be paid on shares of Common Stock in any
fiscal quarter only if full, cumulative cash dividends have been paid on all
shares of Convertible Preferred Stock in the annual amount equal to the greater
of (i) $2.1875 per share (8.75% of the $25.00 per share price), or (ii) the
dividends (subject to adjustment) paid with respect to the Common Stock plus, in
both cases, any accumulated but unpaid dividends on the Convertible Preferred
Stock. See "Description of Preferred Stock -- Convertible Preferred Stock --
Dividends."

     Further, if any of the Series B Preferred Units are exchanged for shares of
Series B Preferred Stock, the holders of Series B Preferred Stock will be
entitled to receive cumulative preferential cash distributions equal to $3.9375
(7.875% of the $50.00 liquidation preference) per share of Series B Preferred
Stock. So long as any Series B Preferred Stock is outstanding, no distribution
may be authorized, declared or paid on the Common Stock or any class or series
of other stock of the Corporation ranking junior to the Series B Preferred Stock
unless all distributions accumulated on all Series B Preferred Stock have been
paid in full. Also, if any of the Series C Preferred Units are exchanged for
shares of Series C Preferred Stock, the holders of Series C Preferred Stock will
be entitled to receive cumulative preferential cash distributions equal to
$4.5625 (9 1/8% of the $50.00 liquidation preference) per share of Series C
Preferred Stock. So long as any Series C Preferred Stock is outstanding, no
distribution may be authorized, declared or paid on the Common Stock or any
class or series of other stock of the Corporation ranking junior to the Series C
Preferred Stock unless all distributions accumulated on all Series C Preferred
Stock have been paid in full. The dividends payable on the Series B Preferred
Stock and Series C Preferred Stock could further increase the cash required to
continue to pay cash dividends on the Common Stock at current levels.


                                       6

<PAGE>   11

     The 1,600,000 outstanding shares of Convertible Preferred Stock are
convertible at the option of the holder into shares of Common Stock. If, after
June 20, 2001, we require a mandatory conversion of all of the Convertible
Preferred Stock, each of the holders of the Convertible Preferred Stock may
cause us to redeem any or all of their shares of Convertible Preferred Stock.
Such a redemption would decrease the amount of cash available to pay cash
dividends on the Common Stock. When there ceases to be in excess of 40,000
shares of Convertible Preferred Stock outstanding, we may purchase all of the
outstanding shares of Convertible Preferred Stock from the holders. See
"Description of Preferred Stock -- Convertible Preferred Stock -- Redemption at
Holder's Option After Notice of Mandatory Conversion." If we are unable to pay
dividends on the Common Stock, the Company's status as a real estate investment
trust may be jeopardized. See "Federal Income Tax Considerations -- Requirements
for Qualification -- Annual Distribution Requirements."

     If we wish to issue any Common Stock in the future (including, upon
exercise of stock options), the costs required to continue to pay cash dividends
at current levels will be substantially increased. Our ability to pay dividends
will depend in large part on the performance of our Properties and other
properties that we may acquire in the future.

     Our ability to pay dividends on our stock is further limited by the
Maryland General Corporation Law. Under the Maryland General Corporation Law, we
may not make a distribution on stock if, after giving effect to such
distribution, either

     o    we would not be able to pay our indebtedness as it becomes due in the
          usual course of business; or

     o    our total assets would be less than our total liabilities.

     If we cannot pay dividends on our stock, the Company's status as a real
estate investment trust may be jeopardized. See "Federal Income Tax
Considerations -- Requirements for Qualification -- Annual Distribution
Requirements."

THE REGISTRATION RIGHTS AND PREEMPTIVE RIGHTS OF THE CONVERTIBLE PREFERRED STOCK
MAY HAVE AN ADVERSE EFFECT ON THE MARKET PRICE OF THE SHARES

     Holders of the Convertible Preferred Stock have certain rights to register
the Convertible Preferred Stock or shares of Common Stock issuable upon
conversion of the Convertible Preferred Stock for sale to the public. See
"Description of Preferred Stock -- Convertible Preferred Stock -- Registration
Rights." Registration rights are also held by the senior members of the
Company's management and certain outside investors (collectively, the
"Founders") who as of the date of this Prospectus owned an approximate 10.1%
limited partnership interest in the Operating Partnership. These rights include
certain "demand" and "piggyback" registration rights with respect to shares of
Common Stock issuable in connection with the exchange of their limited
partnership interests in the Operating Partnership. The aggregate 10.1% limited
partnership interest held by the Founders in the Operating Partnership is
exchangeable for an aggregate of 1,873,473 shares of Common Stock. In addition,
the Operating Partnership has invested in certain real estate partnerships
(other than the Operating Partnership). Certain partners in such limited
partnerships have the right to have their limited partnership interests in such
partnerships redeemed for cash or, at our option, for 779,400 shares of our
Common Stock. These partners also have certain "demand" and "piggyback"
registration rights with respect to the shares of our Common Stock that may be
issued in exchange for such limited partnership interests. All of the
registration rights discussed above could materially adversely affect the market
price for the Shares. In addition, the holders of the Convertible Preferred
Stock have preemptive rights to purchase a pro rata share of shares of our
Common Stock we may offer in the future. These preemptive rights could have a
material adverse effect on the market price for the Shares. See "Description of
Preferred Stock -- Convertible Preferred Stock -- Right of Westbrook to
Participate in Offerings."

CONVERSION OF THE CONVERTIBLE PREFERRED STOCK MAY LEAD TO SUBSTANTIAL DILUTION
TO THE HOLDERS OF COMMON STOCK

     The shares of Convertible Preferred Stock are convertible, at the option of
the holders, into the number of shares of Common Stock that is determined based
on the number and price of common shares we issue. As of September 30, 1998, the
then current conversion price was $21.875 per share and, therefore, each share
of Convertible Preferred Stock was convertible into approximately 1.14 shares of
Common Stock. In order to protect the holders of the Convertible Preferred Stock
against dilution, the conversion price may be reduced in certain circumstances,
including if we issue shares of our 


                                       7

<PAGE>   12

Common Stock at a price below the conversion price. Such reduction in the
conversion price could increase the dilution to holders of shares of our Common
Stock if and when the Convertible Preferred Stock is converted into shares of
our Common Stock. The proportionate ownership, voting power and earnings per
share of the holders of Common Stock could be substantially diluted in the event
that we issue a substantial number of additional shares of Common Stock and/or
Preferred Stock, either upon conversion of the Convertible Preferred Stock, in
connection with future acquisitions or otherwise. This, in turn, could adversely
affect the market price of the shares offered by this Prospectus. See
"Description of Preferred Stock -- Convertible Preferred Stock -- Conversion
Rights."

CONCENTRATION OF VOTING POWER AND CONSENT REQUIREMENTS OF THE HOLDERS OF THE
CONVERTIBLE PREFERRED STOCK MAY BE DETRIMENTAL TO HOLDERS OF COMMON STOCK

     As of the date of this Prospectus, George M. Marcus, the Chairman of our
Board of Directors, beneficially owns 1,946,738 shares of Common Stock
(including shares issuable upon exchange of partnership interests in the
Operating Partnership). This represents approximately 10.5% of the outstanding
shares of Common Stock (including shares issuable upon exchange of partnership
interests in the Operating Partnership). Mr. Marcus currently does not have
majority control over us. However, he currently has, and likely will continue to
have, significant influence with respect to the election of our directors and
approval or disapproval of our significant corporate actions.

     The holders of the Convertible Preferred Stock have certain consent rights
to actions we may take. We may not, among other things, make certain revisions
to our corporate structure and operations, without the approval of holders of
two-thirds of the outstanding shares of Convertible Preferred Stock, voting as a
separate class. This includes (i) revisions that would affect the rights,
priority and preferences of the Convertible Preferred Stock, (ii) the merger or
consolidation of us or the Operating Partnership with another entity, (iii) the
sale of all or substantially all of our assets, (iv) changing the geographic
concentration of our portfolio of Properties, and (v) undergoing a change in
control of either us or the Operating Partnership. See "Description of
Convertible Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock -- Convertible Preferred Stock -- Voting Rights." As of the date of this
Prospectus, Westbrook holds all outstanding shares of the Convertible Preferred
Stock.

     Our Charter provides that the holders of the Convertible Preferred Stock,
voting as a class, have the right to elect one member of the Board of Directors.
The holders of the Convertible Preferred Stock elected Gregory J. Hartman to the
Board of Directors. Mr. Hartman is a managing principal of Westbrook Real Estate
Partners, L.L.C., the managing member of the sole general partner of Westbrook.

     Under certain circumstances, the holders of the Convertible Preferred Stock
will be entitled to elect up to four additional directors. Such circumstances
include our failure to pay quarterly dividends on the Convertible Preferred
Stock for four quarters and our breach of certain provisions of the Charter and
bylaws affecting the holders of the Convertible Preferred Stock. See
"Description of Preferred Stock -- Convertible Preferred Stock -- Voting
Rights." Moreover, we may not authorize or create any class or series of stock
that ranks equal or senior to the Convertible Preferred Stock with respect to
(i) the payment of dividends or (ii) amounts upon liquidation, dissolution or
winding up without the consent of the holders of two-thirds of the outstanding
shares of Convertible Preferred Stock, voting separately as a single class. The
interests of the holders of the Convertible Preferred Stock, and indirectly the
director or directors elected by the holders of the Convertible Preferred Stock,
may differ from or conflict with the interests of the holders of Common Stock.

     In addition, upon conversion of the Convertible Preferred Stock into shares
of Common Stock, the holders of Convertible Preferred Stock would hold
approximately 9.0% of all outstanding shares of Common Stock (assuming exchange
of all partnership interests in the Operating Partnership into shares of Common
Stock), assuming that such conversion took place on the date of this Prospectus.
Consequently, upon such conversion, the holders of Convertible Preferred Stock
would, as a class, be the second largest stockholder in the Company and could
have considerable influence with respect to the election of directors and the
approval or disapproval of significant corporate actions.

     In view of the substantial influence of the holders of the Convertible
Preferred Stock over our affairs, it should be noted that interests of the
holders of the Convertible Preferred Stock do not necessarily coincide with
those of the holders of the Common Stock. Therefore, actions by the holders of
the Convertible Preferred Stock will not necessarily be in the best interests of
the holders of Common Stock.


                                       8

<PAGE>   13

CERTAIN VOTING RIGHTS OF THE SERIES B PREFERRED STOCK AND SERIES C PREFERRED 
STOCK

     In general, the holders of the Series B Preferred Stock and Series C
Preferred Stock will not have any voting rights. However, if full distributions
are not made on any Series B Preferred Stock or Series C Preferred Stock for six
quarterly distribution periods, the holders of Series B Preferred Stock or
Series C Preferred Stock (as applicable) who have not received distributions,
voting together as a single class, will have the right to elect two additional
directors to serve on the Company's Board of Directors. These voting rights
continue until all distributions in arrears and distributions for the current
quarterly period on the Series B Preferred Stock and/or Series C Preferred Stock
have been paid in full. At that time, the holders of the Series B Preferred
Stock and/or Series C Preferred Stock are divested of these voting rights, and
the term and office of the directors so elected immediately terminates.

     In addition, we may not authorize or create any class or series of stock
that ranks senior to the Series B Preferred Stock or Series C Preferred Stock
with respect to (1) the payment of dividends, (2) rights upon liquidation,
dissolution or winding-up of the Company, or amend, alter or repeal the
provisions of the Company's Charter or Bylaws, that would materially and
adversely affect these rights without the consent of the holders of two-thirds
of the outstanding shares of Series B Preferred Stock or Series C Preferred
Stock (as applicable) each voting separately as a single class. Also, while any
shares of the Series B Preferred Stock or Series C Preferred Stock are
outstanding, we may not (1) merge or consolidate with another entity, or (2) or
transfer substantially all of our assets to any corporation or other entity,
without the affirmative vote of the holders of at least two-thirds of the Series
B Preferred Stock and Series C Preferred Stock, each voting separately as a
class, unless the transaction meets certain criteria. See "Description of
Convertible Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock -- Series B Preferred Stock and Series C Preferred Stock."

EXEMPTION OF WESTBROOK, GEORGE MARCUS, FROM THE MARYLAND BUSINESS COMBINATION 
LAW MAY ALLOW CERTAIN TRANSACTIONS BETWEEN THE COMPANY AND WESTBROOK TO PROCEED 
WITHOUT COMPLIANCE WITH SUCH LAW

     The Maryland General Corporation Law establishes special requirements for
"business combinations" between a Maryland corporation and "interested
stockholders" unless exemptions are applicable. An interested stockholder is any
person who beneficially owns ten percent or more of the voting power of our
then-outstanding voting stock. Among other things, the law prohibits for a
period of five years a merger and other similar transactions between us and an
interested stockholder unless our Board of Directors approved the transaction
prior to the party becoming an interested stockholder. The five year period runs
from the most recent date on which the interested stockholder became an
interested stockholder. The law also requires a supermajority stockholder vote
for such transactions after the end of the five year period. This means that the
transaction must be approved by at least:

     o    80% of the votes entitled to be cast by holders of outstanding voting
          shares; and

     o    66% of the votes entitled to be cast by holders of outstanding voting
          shares other than shares held by the interested stockholder with whom
          the business combination is to be effected.

     However, as permitted by the statute, our Board of Directors irrevocably
has elected to exempt any business combination by us with Westbrook and its
affiliates from the "business combination" provision of the Maryland General
Corporation Law. In addition, the Board of Directors similarly exempted George
M. Marcus, William A. Millichap, who are the chairman and a director of the
Company, respectively, and The Marcus & Millichap Company ("M&M") or any entity
owned or controlled by Messrs Marcus and Millichap and M&M. Consequently, the
five-year prohibition and the super-majority vote requirement described above
will not apply to any business combination between Westbrook (or its affiliates)
and us. As a result, we may in the future enter into business combinations with
Westbrook (or its affiliates), without our compliance with the super-majority
vote requirements and other provisions of the Maryland General Corporation Law.

INFLUENCE OF EXECUTIVE OFFICERS, DIRECTORS AND SIGNIFICANT STOCKHOLDERS

     Under the partnership agreement of the Operating Partnership, the consent
of the holders of limited partnership interests is generally required for any
amendment of the agreement and for certain extraordinary actions. Through their
ownership of limited partnership interests and their positions in Essex, Essex's
directors and executive officers, including Messrs. Marcus and Millichap, have
substantial influence on the Company. 


                                       9

<PAGE>   14
Consequently, influence could result in decisions that do not reflect the
interests of all stockholders of Essex. See "Risk Factors -- Conflicts of
Interest" and "Principal Stockholders."

ANTI-TAKEOVER PROVISIONS CONTAINED IN THE OPERATING PARTNERSHIP AGREEMENT, OUR 
CHARTER, OUR BYLAWS, THE CONVERTIBLE PREFERRED STOCK AND CERTAIN PROVISIONS OF 
MARYLAND LAW COULD DELAY, DEFER OR PREVENT A CHANGE IN CONTROL OF US

     While we are the sole general partner of the Operating Partnership, and
generally have full and exclusive responsibility and discretion in the
management and control of the Operating Partnership, certain provisions of the
Operating Partnership's Partnership Agreement place limitations on our ability
to act with respect to the Operating Partnership. Such limitations could delay,
defer or prevent a transaction or a change in control of us that might involve a
premium price for the stock or otherwise be in the best interest of the
stockholders or that could otherwise adversely affect the interest of the
stockholders. The Partnership Agreement provides that if the limited partners
own at least 5% of the outstanding units of limited partnership interest in the
Operating Partnership, we cannot, without first obtaining the consent of a
majority-in-interest of the limited partners in the Operating Partnership,
transfer all or any portion of our general partner interest in the Operating
Partnership to another entity. Such limitations on our ability to act may result
in our being precluded from taking action which our Board of Directors believes
is in the best interests of our stockholders. In addition, as of October 31,
1998, two individuals together held more than 50% of the outstanding units of
limited partnership interest in the Operating Partnership, allowing such actions
to be blocked by a small number of limited partners.

     Our Charter authorizes us to issue additional shares of Common Stock or
preferred stock and to set the preferences, rights and other terms of such
preferred stock without the approval of the holders of the Common Stock. We must
obtain the approval of the holders of two-thirds of the outstanding shares of
Convertible Preferred Stock in order to authorize, create or issue any class or
series of stock that ranks equal or senior to the Convertible Preferred Stock.
See "Description of Convertible Preferred Stock Series B Preferred Stock and
Series C Preferred Stock -- Convertible Preferred Stock -- Voting Rights."
Although we have no intention to issue any additional shares of Convertible
Preferred Stock or other preferred stock at the present time, we may, subject to
the consent of the holders of Convertible Preferred Stock, establish one or more
series of preferred stock that could delay, defer or prevent a transaction or a
change in control of us. Such a transaction might involve a premium price for
our stock or otherwise be in the best interests of the holders of Shares. Also,
such a class of preferred stock could have dividend, voting or other rights that
could adversely affect the interest of holders of Shares.

     Our Charter, as well as our Stockholder rights plan, also contains other
provisions that may delay, defer or prevent a transaction or a change in control
of the Company that might be in the best interest of our stockholders. Also, the
Bylaws may be amended by our Board of Directors (subject to the consent of the
holders of the Convertible Preferred Stock in certain circumstances) to include
provisions that would have a similar effect, although we presently have no such
intention. The Charter provides that we must obtain the approval of the holders
of the Convertible Preferred Stock holding two-thirds of the outstanding shares
of Convertible Preferred Stock before we or the Operating Partnership may merge
or consolidate with any other entity or sell all or substantially all of our
assets or the Operating Partnership's assets. Also, the terms of the Convertible
Preferred Stock require that we must obtain the approval of the holders of more
than 50% of the outstanding shares of Convertible Preferred Stock before we may
undergo a change in control (as defined in the Charter). Additionally, the
Charter contains ownership provisions limiting the transferability and ownership
of shares of our capital stock, which may have the effect of delaying, deferring
or preventing a transaction or a change in control us. For example, subject to
receiving an exemption from our Board of Directors (see "Description of Common
Stock -- Restrictions on Transfer"), potential acquirers may not purchase more
than 6% percent in value of the our stock (other than qualified pension trusts
which can acquire 9.9%). This may discourage tender offers which may be
attractive to the holders of our Common Stock and limit the opportunity for
stockholders to receive a premium for their shares of our Common Stock. See
"Description of Common Stock -- Restrictions on Transfer."

     In addition, the Maryland General Corporations Law restricts the voting
rights of shares deemed to be "control shares." Under the Maryland General
Corporations Law, "control shares" are those which, when aggregated with any
other shares held by the acquirer, entitle the acquirer to exercise voting power
within specified ranges. Although the Bylaws exempt us from the control share
provisions of the Maryland General Corporations Law, the provisions of the
Bylaws may be amended or eliminated by our Board of Directors at any time in the
future, provided that it obtains the approval of the holders of two-thirds of
the outstanding shares of the Convertible Preferred Stock. Moreover, any such


                                       10

<PAGE>   15

amendment or elimination of such provision of the Bylaws may result in the
application of the control share provisions of the Maryland General Corporations
Law not only to control shares which may be acquired in the future, but also to
control shares previously acquired. If the provisions of the Bylaws are amended
or eliminated, the control share provisions of the Maryland General Corporations
Law could delay, defer or prevent a transaction or change in control of us that
might involve a premium price for our stock or otherwise be in the best
interests of our stockholders.

BOND COMPLIANCE REQUIREMENTS MAY LIMIT OUR INCOME FROM CERTAIN PROPERTIES

     As of October 31, 1998, we had approximately $58.8 million of tax-exempt
financing relating to the Inglenook Court Apartments, Wandering Creek
Apartments, Treetops Apartments, Meadowood Apartments and Camarillo Oaks
Apartments. The tax-exempt financing subjects these Properties to certain deed
restrictions and restrictive covenants. We expect to engage in tax-exempt
financings in the future. In addition, the Internal Revenue Code of 1986, as
amended, and its related regulations impose various restrictions, conditions and
requirements excluding interest on qualified bond obligations from gross income
for federal income tax purposes. The Internal Revenue Code of 1986, as amended,
also requires that at least 20% of apartment units be made available to
residents with gross incomes that do not exceed 50% of the median income for the
applicable family size as determined by the Housing and Urban Development
Department of the federal government. In addition to federal requirements,
certain state and local authorities may impose additional rental restrictions.
These restrictions may limit our income from the tax-exempt financed properties
if we are required to lower our rental rates to attract residents who satisfy
the median income test. If we do not reserve the required number of apartment
homes for residents satisfying these income requirements, the tax-exempt status
of the bonds may be terminated, our obligations under the bond documents may be
accelerated and we may be subject to additional contractual liability.

ADVERSE EFFECT TO PROPERTY INCOME AND VALUE DUE TO GENERAL REAL ESTATE 
INVESTMENT RISKS

     Real property investments are subject to a variety of risks. The yields
available from equity investments in real estate depend on the amount of income
generated and expenses incurred. If the Properties do not generate sufficient
income to meet operating expenses, including debt service and capital
expenditures, our cash flow and ability to make distributions to our
stockholders will be adversely affected. The performance of the economy in each
of the areas in which the Properties are located affects occupancy, market
rental rates and expenses. Consequently, the income from the Properties and
their underlying values may be impacted. The financial results of major local
employers may have an impact on the cash flow and value of certain of the
Properties as well.

     Income from the Properties may be further adversely affected by, among
other things, the following factors:

     o    the general economic climate;

     o    local economic conditions in which the Properties are located, such as
          oversupply of space or a reduction in demand for rental space;

     o    the attractiveness of the Properties to tenants;

     o    competition from other available space;

     o    our ability to provide for adequate maintenance and insurance;

     o    increased operating expenses.

     Also, as leases on the Properties expire, tenants may enter into new leases
on terms that are less favorable to us. Income and real estate values may also
be adversely affected by such factors as applicable laws (e.g., the Americans
With Disabilities Act of 1990 and tax laws), interest rate levels and the
availability and terms of financing. In addition, real estate investments are
relatively illiquid and, therefore, our ability to vary our portfolio promptly
in response to changes in economic or other conditions may be adversely
affected.


                                       11

<PAGE>   16

JOINT VENTURES AND JOINT OWNERSHIP OF PROPERTIES AND PARTIAL INTERESTS IN
CORPORATIONS AND LIMITED PARTNERSHIPS COULD LIMIT OUR ABILITY TO CONTROL SUCH
PROPERTIES AND PARTIAL INTERESTS

     Instead of purchasing properties directly, we may invest as a co-venturer.
Joint venturers often have equal control over the operation of the joint venture
assets. Therefore, it is possible that the co-venturer in an investment might
become bankrupt, or have economic or business interests or goals that are
inconsistent with our business interests or goals, or be in a position to take
action contrary to our instructions or requests, or to our policies or
objectives. Consequently, a co-venturer's actions might subject property owned
by the joint venture to additional risk. Although we seek to maintain sufficient
control of any joint venture to achieve our objectives, we may be unable to take
action without our joint venture partners' approval, or our joint venture
partners could take actions binding on the joint venture without our consent.
Additionally, should a joint venture partner become bankrupt, we could become
liable for such partner's share of joint venture liabilities.

     From time to time, we, through the Operating Partnership, invest in
corporations or limited partnerships which have been formed for the purpose of
acquiring or managing real property. In certain circumstances, the Operating
Partnership's interest in a particular entity may be less than a majority of the
outstanding voting interests of that entity. Therefore, the Operating
Partnership's ability to control the daily operations of such an entity may be
limited. Furthermore, the Operating Partnership may not have the power to remove
a majority of the board of directors (in the case of a corporation) or the
general partner or partners (in the case of a limited partnership) of such an
entity in the event that its operations conflict with the Operating
Partnership's objectives. In addition, the Operating Partnership may not be able
to dispose of its interests in such an entity. In the event that such an entity
becomes insolvent, the Operating Partnership may lose up to its entire
investment in the entity.

INVESTMENTS IN MORTGAGES

     We may invest in mortgages, in part as a strategy for ultimately acquiring
the underlying property. These mortgages may be first, second or third mortgages
which may or may not be insured or otherwise guaranteed. We anticipate that such
investment in mortgage receivables will not in the aggregate be significant. In
March 1997, we acquired a mortgage receivable for approximately $785,000 which
had an outstanding balance of approximately $885,000 as of October 31, 1998.
This mortgage is secured by a multifamily property. This represents our only
mortgage receivable investment as of the date of this Prospectus. In general,
investments in mortgages include the following risks:

     o    that the value of mortgaged property may be less than the amounts
          owed;

     o    that interest rates payable on the mortgages may be lower than the
          Company's cost of funds; and

     o    in the case of junior mortgages, that foreclosure of a senior mortgage
          would eliminate the junior mortgage.

     If any of the above were to occur, cash flows from operations and our
ability to make expected dividends to stockholders could be adversely affected.

POSSIBLE ENVIRONMENTAL LIABILITIES

     Under various federal, state and local laws, an owner or operator of real
estate is liable for the costs of removal or remediation of certain hazardous or
toxic substances on or in such property. These laws often impose liability
whether or not the owner or operator knew of, or was responsible for, the
presence of the hazardous or toxic substances. The presence of these substances,
or the failure to properly clean them up, may adversely affect the owner's or
operator's ability to sell or rent the property. It may also limit the ability
to borrow money using such property as collateral. Persons who arrange for the
disposal or treatment of hazardous or toxic substances may also be liable for
the costs of removal or clean-up of such substances at a disposal or treatment
facility, whether or not such facility is owned or operated by such person.
Certain environmental laws impose liability for release of asbestos-containing
materials into the air, and third parties may seek recovery from owners or
operators of real properties for personal injuries associated with
asbestos-containing materials. Therefore, in connection with our ownership,
operation, financing, management and development of real properties, we may be
potentially liable for removal or clean-up costs, as well as certain other
costs. We may also be subject to governmental fines and costs related to
injuries to persons and property.


                                       12

<PAGE>   17

GENERAL UNINSURED LOSSES

     We carry comprehensive liability, fire, extended coverage and rental loss
insurance for each of the Properties. There are, however, certain types of
extraordinary losses for which we do not have insurance. Further, certain of the
Properties are located in areas that are subject to earthquake activity.
Although we have obtained certain limited earthquake insurance policies, should
a Property sustain damage as a result of an earthquake, we may sustain losses
due to insurance deductibles, co- payments on insured losses or uninsured
losses.

RISK THAT INTEREST RATE HEDGING ARRANGEMENTS CANNOT BE REFINANCED OR REPLACED

     We have, from time to time, entered into agreements to reduce the risks
associated with increases in interest rates, and we may continue to do so.
Although these agreements may partially protect us against rising interest
rates, these agreements also may reduce the benefits to us when interest rates
decline. There can be no assurance that any such hedging arrangements can be
refinanced or that we will be able to enter into other hedging arrangements to
replace existing ones if interest rates decline. Furthermore, interest rate
movements during the term of interest rate hedging arrangements may result in a
gain or loss on our investment in the hedging arrangement. In addition, if a
hedging arrangement is not indexed to the same rate as the indebtedness that is
hedged, we may be exposed to losses to the extent that the rate governing the
indebtedness and the rate governing the hedging arrangement change independently
of each other. Finally, nonperformance by the other party to the hedging
arrangement may subject us to increased credit risks. In order to minimize
counterparty credit risk, our policy is to enter into hedging arrangements only
with large financial institutions that maintain an investment grade credit
rating.

CHANGES IN REAL ESTATE TAX AND OTHER LAWS

     Generally we do not directly pass through costs resulting from changes in
real estate tax laws to residential property tenants. We also do not generally
pass through increases in income, service or other taxes, to tenants under
leases. These costs may adversely affect our funds from operations and our
ability to make distributions to stockholders. Similarly, compliance with
changes in (i) laws increasing the potential liability for environmental
conditions existing on properties or the restrictions on discharges or other
conditions or (ii) rent control or rent stabilization laws or other laws
regulating housing may result in significant unanticipated expenditures, which
would adversely affect our funds from operations and our ability to make
distributions to stockholders.

CHANGES IN FINANCING POLICY; NO LIMITATION ON DEBT

     We have adopted a policy of maintaining a
debt-to-total-market-capitalization ratio of less than 50%. We calculate
debt-to-total-market-capitalization as follows:

<TABLE>
<S>                                                         <C>
           total property indebtedness
- ---------------------------------------------------------   =  debt-to-total-market-capitalization
total property indebtedness + total mardet capitalization 
</TABLE>

     As used in the above formula, total market capitalization is equal to the
aggregate market value of the outstanding shares of our Common Stock (based on
the greater of current market price or the gross proceeds per share from public
offerings of our shares plus any undistributed net cash flow), assuming the
conversion of all limited partnership interests in the Operating Partnership
into shares of Common Stock and the conversion of all shares of Convertible
Preferred Stock into shares of Common Stock. Based on this calculation, our
debt-to-total-market-capitalization ratio was approximately 34.0% as of October
31, 1998.

     Our organizational documents and the organizational documents of the
Operating Partnership do not limit the amount or percentage of indebtedness that
may incurred. Accordingly, our Board of Directors could change our current
policies and the policies of the Operating Partnership regarding indebtedness.
If these policies were changed, we and the Operating Partnership could incur
more debt, resulting in an increased risk of default on our obligations and the
obligations of the Operating Partnership, and in an increase in debt service
requirements that could adversely affect our financial condition and results of
operations. Such increased debt could exceed the underlying value of the
Properties.


                                       13

<PAGE>   18

FAILURE TO QUALIFY AS A REAL ESTATE INVESTMENT TRUST

     We have operated so as to qualify as a real estate investment trust under
the Internal Revenue Code of 1986, as amended, commencing with the taxable year
ended December 31, 1994. Although we believe that we have operated in a manner
which satisfies the real estate investment trust qualification requirements, no
assurance can be given that we will continue to do so. A real estate investment
trust is generally not taxed on its net income distributed to its stockholders
so long as it annually distributes to its stockholders at least 95% of its
taxable income. Qualification as a real estate investment trust involves the
satisfaction of numerous requirements (some on an annual or quarterly basis)
established under highly technical and complex Internal Revenue Code of 1986, as
amended, provisions for which there are only limited judicial or administrative
interpretations and involves the determination of various factual matters and
circumstances not entirely within our control. See "Federal Income Tax
Considerations."

     If we fail to qualify as a real estate investment trust in any taxable
year, it would generally be subject to federal income tax (including any
applicable alternative minimum tax) at corporate rates on its taxable income for
such year. Moreover, unless entitled to relief under certain statutory
provisions, we would also be disqualified from treatment as a real estate
investment trust for the four taxable years following the year of
disqualification. This treatment would reduce our net earnings available for
investment or distribution to stockholders because of our additional tax
liability for the years involved. In addition, distributions would no longer be
required to be made. See "Federal Income Tax Considerations."

YEAR 2000 COMPLIANCE

     The Operating Partnership's State of Readiness. The Operating Partnership
utilizes a number of computer software programs and operating systems across its
entire organization, including applications used in financial business systems
and various administrative functions. To the extent that the Operating
Partnership's software applications contains source code that is unable to
appropriately interpret the upcoming calendar year "2000" and beyond, some level
of modification or replacement of such applications will be necessary. The
Operating Partnership currently believes that its "Year 2000" issues are limited
to information technology ("IT") systems (i.e., software programs and computer
operating systems). There are no non-IT systems (i.e., embedded systems such as
devices used to control, monitor or assist the operation of equipment and
machinery), the failure of which would have a material effect on the Operating
Partnership's operations.

     The Operating Partnership, employing a team made up of internal personnel
has completed its identification of IT systems that are not yet Year 2000
compliant and has commenced modification or replacement of such systems as
necessary. The Operating Partnership is currently communicating with third
parties with whom it does significant business, such as financial institutions
and vendors to determine their readiness for Year 2000 compliance. The Operating
Partnership has also completed its assessment of the Year 2000 compliance issues
presented by its hardware components.

     Costs of Addressing the Operating Partnership's Year 2000 issues. Given the
information known at this time about the Operating Partnership's systems that
are non-compliant, coupled with the Operating Partnership's ongoing, normal
course-of-business efforts to upgrade or replace critical systems, as necessary,
management does not expect Year 2000 compliance costs to have any material
adverse impact on the Operating Partnership's liquidity or ongoing results of
operation. The costs of such assessment and remediation will be included in the
Operating Partnerships general and administrative expenses.

     Risks of the Operating Partnership's Year 2000 issues. In light of the
Operating Partnership's assessment and remediation efforts to date, and the
planned, normal course-of-business upgrades, management believes that any
residual Year 2000 risk is limited to non-critical business applications and
support hardware. No assurance can be given, however, that all of the Operating
Partnership's systems will be year 2000 compliant or that compliance will not
have a material adverse effect on the Operating Partnership's future liquidity
or results of operations or ability to service debt.


                                       14

<PAGE>   19

     As used herein, the terms "Company" and "Essex" mean Essex Property Trust,
Inc., a Maryland real estate investment trust, those entities controlled by
Essex Property Trust, Inc. and Predecessors of Essex Property Trust, Inc.,
unless the context indicates otherwise and the term "Operating Partnership"
refers to Essex Portfolio, L.P., a California limited partnership, formed on
March 15, 1994, as to which the Company owns an approximate 89.9% general
partnership interest, as of the date of this Prospectus. The term "Properties"
refers to the 58 multifamily properties and two office properties which the
Company owns, and three retail properties in which the Company has ownership
interests, as of the date of this Prospectus.


                                   THE COMPANY

     The Company is a self-administered and self-managed equity real estate
investment trust that was formed in 1994 to continue and expand the real estate
investment and management operations conducted by Essex Property Corporation
since 1971. The Company's multi-family residential portfolio consists of 58
Properties comprising 12,266 apartment units, 22 of which are located in
Southern California, 15 of which are located in the San Francisco Bay Area, 17
of which are located in the Seattle metropolitan area, and four of which are
located in the Portland, Oregon, metropolitan area. The Company also owns two
office buildings located in Palo Alto, California, one of which houses the
Company's headquarters] and has ownership interests in three retail properties,
which are located in the Portland, Oregon, metropolitan area.

     The Company conducts substantially all of its activities through the
Operating Partnership in which the Company owns an approximate 89.9% general
partnership interest, as of the date of this Prospectus. An approximate 10.1%
limited partnership interest in the Operating Partnership is owned by senior
members of the Company's management and certain outside investors. As the sole
general partner of the Operating Partnership, the Company has control over the
management of the Operating Partnership and over each of the Properties. The
description of the Company's business and properties, set forth herein, and in
documents incorporated by reference herein, would apply, without material
differences, to the Operating Partnership's business and properties.

     The Company's Common Stock is listed on the New York Stock Exchange under
the Symbol "ESS." The Company is a Maryland corporation. The Company's executive
offices are located at 925 E. Meadow Drive, Palo Alto, California 94303.


                            TAX STATUS OF THE COMPANY

     The Company has elected to be taxed as a REIT under Sections 856 through
860 of the Internal Revenue Code of 1986, as amended (the "Code"), commencing
with its taxable year ended December 31, 1994. As a REIT, the Company generally
is not subject to Federal income tax on net income that it distributes to its
stockholders. See "Federal Income Tax Considerations."


                            SECURITIES TO BE OFFERED

     This Prospectus relates to the offer and sale from time to time by the
Selling Stockholders of (i) up to 1,600,000 Preferred Shares by the Selling
Stockholders; (ii) 1,828,571 Common Shares that may be issued by the Company
upon conversion of shares of Convertible Preferred Stock; and (iii) an
indeterminate number of Shares of Common Stock which may be issued as a result
of the anti-dilution provisions of the Preferred Shares and in accordance with
Rule 416 under the Securities Act. The Company is registering the Shares
pursuant to a Registration Rights Agreement, dated June 20, 1996, as amended
(the "Registration Rights Agreement"), to provide the Selling Stockholders with
freely tradable securities.


                                 USE OF PROCEEDS

     The Company will not receive any of the proceeds from the sale of Shares by
the Selling Stockholders but has agreed to bear certain expenses of registration
of the Shares under Federal and state securities laws.


                                       15

<PAGE>   20

                           DESCRIPTION OF COMMON STOCK

STOCK-GENERAL

     As of September 30, 1998, the total number of shares of all classes of
capital stock that the Company had authority to issue was 1,000,000,000 shares,
consisting of 668,400,000 shares of Common Stock, par value $0.0001 per share,
1,600,000 shares of Convertible Preferred Stock, par value $0.0001 per share,
and 330,000,000 shares of excess stock (the "Excess Stock").

     As of September 30, 1998, there were 16,635,966 shares of Common Stock
issued and outstanding. Up to 875,400 shares of Common Stock have been reserved
for issuance under the Essex Property Trust, Inc. 1994 Employee Stock Incentive
Plan, up to 70,000 shares of Common Stock have been reserved for issuance under
the Essex Property Trust, Inc. 1994 Non-Employee and Director Stock Incentive
Plan and up to 406,500 shares of Common have been reserved for issuance under
the Essex Property Trust, Inc. 1994 Employee Stock Purchase Plan. In addition,
220,000 shares of Common Stock have been reserved for issuance upon the exercise
of an option granted to The Marcus & Millichap Company (the "M&M Stock Option")
and an aggregate of 1,873,473 shares of Common Stock may be issued upon the
conversion of limited partnership interests in the Operating Partnership.

     As of September 30, 1998, there were 1,600,000 shares of Convertible
Preferred Stock issued and outstanding. All such shares are convertible at the
option of the holder thereof into shares of Common Stock. The 1,600,000 shares
of Convertible Preferred Stock are convertible, with adjustments in certain
circumstances, into 1,828,571 shares of Common Stock, and the Company has
reserved such shares of Common Stock for such purpose.

COMMON STOCK

     The following description of the Common Stock sets forth certain general
terms and provisions of the Common Stock. This description is in all respects
subject to and qualified in its entirety by reference to the applicable
provisions of the Company's Charter and the its Bylaws. The Common Stock is
listed on the New York Stock Exchange under the symbol "ESS." Boston EquiServe
is the Company's transfer agent.

     The holders of the outstanding Common Stock are entitled to one vote per
share on all matters voted on by stockholders, including elections of directors.
The Charter provides that shares of Common Stock do not have cumulative voting
rights.

     The shares of Common Stock offered hereby will, when issued, be fully paid
and nonassessable and will not be subject to preemptive or similar rights.
Subject to the preferential rights of any outstanding series of capital stock,
the holders of Common Stock are entitled to such distributions as may be
declared from time to time by the Board of Directors from funds available for
distribution to such holders. The Company currently pays regular quarterly
dividends to holders of Common Stock out of funds legally available for
distribution when, and if, declared by the Company's Board of Directors.

     In the event of a liquidation, dissolution or winding up of the Company,
the holders of Common Stock are entitled to receive ratably the assets remaining
after satisfaction of all liabilities and payment of liquidation preferences and
accrued dividends, if any, on any series of capital stock that has a liquidation
preference. The rights of holders of Common Stock are subject to the rights and
preferences established by the Board of Directors for any capital stock that may
subsequently be issued by the Company.

RESTRICTIONS ON TRANSFER

     In order for the Company to qualify as a REIT under the Code, among other
requirements (see "Federal Income Tax Considerations-Requirements for
Qualification"), not more than 50% of the value of the outstanding shares of
stock may be owned, directly or indirectly, by five or fewer individuals (as
defined in the Code) during the last half of a taxable year (other than the
first year) or during a proportionate part of a shorter taxable year. In
addition, shares of the Company's stock must be beneficially owned by 100 or
more persons during at least 335 days of a taxable year of 12 months (other than
the first year) or during a proportionate part of a shorter taxable year.


                                       16

<PAGE>   21

     Because the Board of Directors believes it is essential for the Company to
continue to qualify as a REIT, the Charter, subject to certain exceptions,
provides that no holder, other than George M. Marcus, may own, or be deemed to
own by virtue of the attribution provisions of the Code, more than 6.0% (the
"Ownership Limit") of the value of the issued and outstanding shares of stock of
the Company (the "Equity Stock"). However, the Ownership Limit Provisions
provide that a qualified trust (as defined in the Charter) generally may own up
to 9.9% of the value of the outstanding shares of Equity Stock. If George M.
Marcus converts his limited partnership interests in the Operating Partnership
into shares of Common Stock, he may exceed the Ownership Limit. The Ownership
Limit provision therefore provides that George M. Marcus may acquire additional
shares (up to 25% of the value of the outstanding shares of Equity Stock)
pursuant to conversion rights or from other sources so long as the acquisition
does not result in the five largest beneficial owners of Equity Stock holding
more than 50% of the value of the outstanding shares of Equity Stock. The Board
of Directors may exempt holders of Equity Stock from the Ownership Limit (the
"Board Exemption") if evidence satisfactory to the Board of Directors is
presented that such ownership will not jeopardize the Company's status as a
REIT. As a condition to providing a Board Exemption, the Board of Directors must
receive an opinion of counsel and representations and agreements from the
applicant with respect to preserving the REIT status of the Company; provided,
however, the Board of Directors may not grant a Board Exemption if the applicant
would own above 25% of the value of the outstanding shares of Equity Stock
unless, in addition to the foregoing, the Board of Directors receives a ruling
from the Internal Revenue Service (the "IRS") to the effect that such an
exemption will not jeopardize the Company's status as a REIT. The Board of
Directors may also increase the Ownership Limit (to a maximum of 9.9%) and, in
connection therewith, require opinions of counsel, affidavits, undertakings or
agreements as it may deem necessary or advisable in order to preserve the REIT
status of the Company. For example, consistent with the preceding conditions and
procedures, the Board of Directors effected a Board Exemption in connection with
the issuance and sale of shares of the Company's Convertible Preferred Stock to
Westbrook. The Ownership Limit will not apply if the Board of Directors and the
stockholders of the Company determine that it is no longer in the best interests
of the Company to attempt to qualify, or to continue to qualify, as a REIT. Any
transfer of shares of stock that would (i) create a direct ownership of shares
of Equity Stock in excess of the Ownership Limit (unless a Board Exemption is
obtained), (ii) result in the shares of stock being owned by fewer than 100
persons or (iii) result in the Company's being "closely held" under Section
856(h) of the Code, shall be null and void, and the intended transferee will
acquire no rights to the shares.

     The Charter also provides that shares involved in a transfer or change in
capital structure that results in a person owning in excess of the Ownership
Limit (unless a Board Exemption is obtained) or would cause the Company to
become "closely held" within the meaning of Section 856(h) of the Code, will
automatically be exchanged for shares of Excess Stock. All Excess Stock will be
automatically transferred, without action by the stockholder, to a person who is
unaffiliated with the Company, or the purported holder, as trustee (the
"Trustee") for the exclusive benefit of one or more organizations described in
Sections 170(b), 170(c) or 501(c)(3) of the Code as charitable beneficiary (the
"Charitable Beneficiary") and designated by resolution of the Board of
Directors. Such shares of Excess Stock held in trust are considered issued and
outstanding shares of stock of the Company. In general, the Trustee of such
shares is deemed to own the shares of Excess Stock held in trust for the
exclusive benefit of the Charitable Beneficiary on the day prior to the date of
the purported transfer or change in capital structure which resulted in the
automatic transfer.

     The Ownership Limit provision will not be automatically removed even if the
real estate investment trust provisions of the Code are changed so as to no
longer contain any ownership concentration limitation or if the ownership
concentration limitation is increased. Except as otherwise described above, any
change in the Ownership Limit would require an amendment to the Charter. Such
amendments to the Charter require the affirmative vote of holders owning a
majority of the outstanding shares of Common Stock. In addition to preserving
the Company's status as a REIT, the Ownership Limit may have the effect of
precluding an acquisition of control of the Company without the approval of the
Board of Directors.

     All certificates representing shares of Equity Stock will bear a legend
referring to the restrictions described above.

     In general, all persons who own, directly or by virtue of the attribution
provisions of the Code, more than 5% of the value of the outstanding shares of
Equity Stock (or generally 1% if there are fewer than 2,000 stockholders) must
file written notice with the Company containing the information specified in the
Charter by January 31 of each year. In addition, each stockholder shall upon
demand be required to disclose to the Company in writing such information with
respect to the direct, indirect and constructive ownership of shares of stock as
the Board of Directors deems necessary to determine the effect, if any, of such
ownership on the Company's status as a REIT and to ensure compliance with the
Ownership Limit. See "Federal Income Tax Considerations-Requirements for
Qualification."


                                       17

<PAGE>   22

     The articles supplementary, if applicable, for the Offered Securities may
also contain provisions that further restrict the ownership and transfer of the
Offered Securities. The applicable Prospectus Supplement will specify any
additional ownership limitation relating to the Offered Securities.

STOCKHOLDER RIGHTS PLAN

     On October 13, 1998, the Board of Directors of the Company adopted a 
Stockholder Rights Plan and declared a dividend distribution of one "Right" for 
each outstanding share of its Common Stock to stockholders of record at the 
close of business on November 21, 1998, and authorized the issuance of one 
Right with each share of Common Stock issued thereafter. Each Right entitles 
the registered holder to purchase from the Company one one-hundredth of a share 
(a "Unit") of Series A Junior Participating Preferred Stock at a purchase price 
of $99.13 per Unit, subject to adjustment. In certain circumstances the Rights 
will entitle holders to purchase shares of Common Stock or the common stock of 
an Acquiring Person (as defined below). The description and terms of the Rights 
are set forth in a Rights Agreement between the Company and BankBoston, N.A., 
as Rights Agent, dated as of November 11, 1998.

     The Rights will separate from the Common Stock and the "Distribution Date" 
will occur upon the earlier of (i) ten (10) days following a public 
announcement that a person or group of affiliated or associated persons (an 
"Acquiring Person") has acquired, or obtained the right to acquire, beneficial 
ownership of fifteen percent (15%) or more of the outstanding shares of Common 
Stock (unless such person is or becomes the beneficial owner of 15% or more of 
the Company's outstanding common stock and had a contractual right or the 
approval of the Company's Board of Directors; provided that such percentage 
shall not be greater than nineteen and nine-tenths percent (19.9%)) (the "Stock 
Acquisition Date"), other than as a result of repurchases of stock by the 
Company, or (ii) ten (10) business days (or such later date as the Board shall 
determine) following the commencement of a tender offer or exchange offer that 
would result in a person or group becoming an Acquiring Person. Certain 
persons, including the Company and its subsidiaries are exempt from the 
definition of Acquiring Person.

     The Rights are not exercisable until the Distribution Date and will expire 
at the close of business on November 11, 2008 unless earlier redeemed or 
exchanged by the Company or terminated pursuant to a merger or other 
acquisition transaction involving the Company approved by the Company's Board 
of Directors. In general, at any time until ten (10) days following the Stock 
Acquisition Date, a majority of the Board of Directors may redeem the Rights in 
whole, but not in part, at a price of $.01 per Right (subject to adjustment in 
certain events); provided, however, that the Rights generally may not be 
redeemed for one hundred eighty (180) days following a change in a majority of 
the Board as a result of a proxy contest.

                   DESCRIPTION OF CONVERTIBLE PREFERRED STOCK,
              SERIES B PREFERRED STOCK AND SERIES C PREFERRED STOCK

CONVERTIBLE PREFERRED STOCK

     Pursuant to the Stock Purchase Agreement, Westbrook purchased 1,600,000
shares of Convertible Preferred Stock for an aggregate purchase price of $40.0
million. As of the date hereof, Westbrook is the sole stockholder of the
Convertible Preferred Stock. On July 1, 1996, the Company filed articles
supplementary setting forth the preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications and terms or
conditions of redemption of the Convertible Preferred Stock. The following
summarizes certain rights of the holders of the Convertible Preferred Stock.
These rights arise under the Stock Purchase Agreement, as amended, and a
registration rights agreement by and between the Company and Westbrook dated as
of June 20, 1996 (the "Registration Rights Agreement"), as well as the related
Articles Supplementary.

     No shares of the Convertible Preferred Stock shall be offered pursuant to
this Prospectus or any Prospectus Supplement relating thereto.

Ranking

     The Convertible Preferred Stock ranks senior to the Common Stock with
respect to the payment of dividends and amounts upon liquidation, dissolution or
winding up of the Company. The Company may not authorize, create or increase the
authorized amount of any class or series of equity securities that ranks equal
with or senior to the Convertible Preferred Stock with respect to the payments
of dividends or amounts upon liquidation, dissolution or winding up, without the
consent of holders of two-thirds of the outstanding shares of Convertible
Preferred Stock, voting together as a class.

Dividends

     The holders of shares of Convertible Preferred Stock are entitled to
receive annual cumulative cash dividends, payable quarterly, in an amount equal
to the greater of (i) $2.1875 per share (8.75% of the $25.00 per share price) or
(ii) the dividend (subject to adjustment) paid with respect to the Common Stock
plus, in both cases, any accumulated but unpaid dividends on the Convertible
Preferred Stock.

     Unless and until all accrued dividends on the Convertible Preferred Stock
through the last preceding dividend payment date have been paid, the Company may
not (i) declare or pay any dividend, make any distribution (other than a
distribution payable solely in shares of Common Stock), or set aside any funds
or assets for payment or distribution with regard to any Common Stock (or any
other stock junior to the Convertible Preferred Stock, together with Common
Stock ("Junior Shares")), (ii) redeem or purchase (directly or through
subsidiaries), or set aside any funds or other assets for the redemption or
purchase of, any Junior Shares or (iii) authorize, take or cause to be taken any
action as general partner of the Operating Partnership that will result in (A)
the declaration or payment by the Operating Partnership of any distribution to
its partners (other than distributions payable to the Company as general partner
that will be used by the Company to fund the payment of dividends on the
Convertible Preferred Stock (such distributions to the Company being referred to
as "Authorized GP Distributions")), or set aside any funds or assets for payment
of any distributions (other than Authorized GP Distributions) or (B) the
redemption or purchase (directly or through subsidiaries), or the setting aside
of any funds or other assets for the redemption or purchase of, any partnership
interests in the Operating Partnership.

     In determining whether a distribution (other than upon voluntary or
involuntary liquidation) by dividend, redemption or other acquisition of shares
or otherwise, is permitted under the MGCL, amounts that would be needed if the
Company were to be dissolved at the time of the distribution to satisfy the
preferential rights upon dissolution of holders of the Company's Convertible
Preferred Stock whose preferential rights upon dissolution are superior to those
receiving the distribution shall not be added to the Company's total
liabilities.


                                       18

<PAGE>   23

Liquidation Preference

     Upon the liquidation, dissolution or winding up of the Company, the holders
of the Convertible Preferred Stock, will be entitled to receive out of the
assets of the Company available for distribution to its stockholders, before any
distribution is made to holders of the Common Stock, an amount per share (the
"Liquidation Preference") equal to 105% of the sum of (i) $25.00 (the "Stated
Value") plus (ii) all accrued dividends with respect to the Convertible
Preferred Stock to the date of final distribution (whether or not declared).
After payment of the full amount of the Liquidation Preference, the holders of
Convertible Preferred Stock will not be entitled to any further distribution of
assets of the Company.

     Until the holders of the Convertible Preferred Stock have been paid the
Liquidation Preference in full, no payment will be made to any holder of Common
Stock upon the liquidation, dissolution or winding up of the Company. If, upon
such liquidation, dissolution or winding up, the assets of the Company, or the
proceeds thereof, distributable among the holders of the shares of the
Convertible Preferred Stock are insufficient to pay in full the Liquidation
Preference, then such assets, or the proceeds thereof, will be distributed pro
rata to the holders of shares of the Convertible Preferred Stock in accordance
with their respective holdings thereof.

     Neither a consolidation or merger of the Company with another corporation,
nor a sale or transfer of all or any part of the Company's assets for cash or
securities, will be considered a liquidation, dissolution or winding up of the
Company.

Voting Rights

     Except as indicated below with respect to the election of directors of the
Company, certain amendments to the Charter and certain other specified matters,
the holders of shares of Convertible Preferred Stock have no voting rights. On
those matters for which the holders of the Convertible Preferred Stock have the
right to vote, each share of the Convertible Preferred Stock is entitled to one
vote.

Election of Directors

     The holders of the Convertible Preferred Stock as a class ordinarily have
the right to elect one director. Under the current Charter, the holders of the
Convertible Preferred Stock, voting as a separate class, have the right, to
elect up to four additional directors, as follows: (i) if the Company breaches
any of the protective provisions discussed in "-- Senior Securities; Amendments;
Other Matters" (a "Charter Breach"), the holders of the Convertible Preferred
Stock will be entitled to elect an aggregate of four directors; and (ii) in the
event of a Dividend Default (as hereinafter defined) or in the event of both a
Dividend Default and a Charter Breach, the holders of the Preferred Stock will
be entitled to elect an aggregate of five directors. All such additional
directors will be elected as soon as practicable after any such default. A
"Dividend Default" shall occur if, at any time, dividends are not paid in full
with respect to all shares of Convertible Preferred Stock on any four dividend
payment dates such that dividends due on such four dates have not been fully
paid and are outstanding in whole or in part at the same time.

     In the event of a Dividend Default and/or a Charter Breach, the number of
Directors elected by the holders of the Convertible Preferred Stock at each
subsequent annual meeting of stockholders shall be increased as provided in the
previous paragraph, e.g., if a Charter Breach has occurred, the holders of
Convertible Preferred Stock shall elect four Directors at subsequent annual
meetings and, if a Dividend Default has occurred, or if both a Dividend Default
and a Charter Breach have occurred, the holders of Convertible Preferred Stock
shall elect five directors at subsequent annual meetings, subject to
classification as provided in the Bylaws.

Senior Securities; Amendments; Other Matters

     The approval of holders of two-thirds of the outstanding shares of
Convertible Preferred Stock, voting as a class, is required to (i) increase the
number of authorized shares of Convertible Preferred Stock or issue any shares
of Convertible Preferred Stock other than to existing holders of Convertible
Preferred Stock, (ii) increase the authorized number of shares of or create,
reclassify or issue any class of stock ranking prior to or on a parity with the
Convertible Preferred Stock either as to dividends or upon liquidation, (iii)
amend, alter or repeal any of the provisions of the Charter so as to impair the
rights and privileges of the Convertible Preferred Stock, (iv) amend, alter or
repeal certain provisions of the Bylaws in a manner which would adversely affect
the rights of the holders of the Convertible Preferred Stock, (v) authorize any
reclassification of the Convertible Preferred Stock, (vi) except pursuant to a
conversion of the Convertible Preferred 


                                       19

<PAGE>   24

Stock, require the exchange of Convertible Preferred Stock for other securities,
or (vii) effect a voluntary liquidation, dissolution or winding up of the 
Company, the sale of substantially all of the assets of the Company, the merger 
or consolidation or major recapitalization of the Company or the Operating 
Partnership.

     In addition, the approval of holders of a majority of the outstanding
shares of Convertible Preferred Stock, voting as a class, is required for the
Company to take any of the following actions: (i) the sale, transfer or
assignment of beneficial interests in or voting rights with respect to assets of
the Company or the Operating Partnership in excess of $45,000,000 within any
90-day period or $125,000,000 within any 360-day period; (ii) the Company's
termination of its status as a REIT; (iii) any alteration in the Company's or
the Operating Partnership's business such that (A) less than 65% of the
Company's or the Operating Partnership's assets are located in the States of
California, Oregon and Washington, (B) less than 80% of the Company's or the
Operating Partnership's assets are located west of the Mississippi River or (C)
less than 80% of the Company's or the Operating Partnership's assets are
classified as multi-family residential properties; or (iv) any change in control
of the Company or the Operating Partnership.

Conversion Rights

     The Convertible Preferred Stock is subject to both conversion at the option
of the holder thereof and mandatory conversion required by the Company, subject
to the terms and conditions described below.

     Optional Conversion. Currently, all of the 1,600,000 shares of Convertible
Preferred Stock are convertible at the option of the holder thereof. Each share
of Convertible Preferred Stock subject to conversion shall be generally
convertible into a number of fully paid and non-assessable shares of Common
Stock (calculated as to each conversion to the nearest 1/100 of a share) equal
to Stated Value plus the amount, if any, of accrued dividends as of the
effective date of the conversion, divided by the Conversion Price (as defined
below) then in effect. Notwithstanding the foregoing, in the case of the
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, shares of Convertible Preferred Stock shall, at the option of the
holder thereof, immediately become convertible into Common Stock. As of the date
hereof, no shares of Convertible Preferred Stock have been converted.

     Mandatory Conversion. If after June 20, 2001, the closing price of the
Common Stock on each of at least 20 trading days (including the trading day
immediately before the notice of mandatory conversion is delivered by the
Company) out of the preceding period of 30 consecutive trading days immediately
prior to the notice of mandatory conversion shall be greater than the Conversion
Price in effect on each of such 20 trading days, the Company shall, subject to
the holders' redemption rights (see "Redemption at Holder's Option After Notice
of Mandatory Conversion"), have the right, to convert all, but not less than
all, of the outstanding shares of Convertible Preferred Stock into a number of
fully paid and nonassessable shares of Common Stock (calculated as to each
conversion to the nearest 1/100 of a share) equal to Stated Value plus the
amount, if any, of accrued dividends as of the effective date of the conversion,
divided by the Conversion Price then in effect.

     Fractional Shares. No fractional shares of Common Stock will be issued upon
conversion of shares of Convertible Preferred Stock. Any fractional interest in
a share of Common Stock resulting from conversion of shares of Convertible
Preferred Stock will be paid in cash (computed to the nearest cent) based on the
current market price of the Common Stock on the trading day preceding the day of
conversion.

     Conversion Price. The "Conversion Price" per share of Convertible Preferred
Stock will initially be $21.875, and will be equitably adjusted so as to
preserve the ownership interests of the holders of the Convertible Preferred
Stock if the Company (i) pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock, (ii) subdivides its outstanding Common
Stock into a greater number of shares, (iii) combines its outstanding Common
Stock into a smaller number of shares, (iv) issues rights or warrants to the
holders of its Common Stock as a class entitling them to purchase Common Stock
at a price per share less than the then Conversion Price, (v) distributes to the
holders of its Common Stock as a class any shares of stock of the Company (other
than Common Stock) or evidences of indebtedness or assets (other than cash
dividends or distributions) or rights or warrants (other than those referred to
in the previous clause) to purchase any of its securities, (vi) subject to
certain exceptions, issues or sells (or the Operating Partnership issues or
sells) any equity or debt securities which are convertible into or exchangeable
for shares of Common Stock ("Convertible Securities") or any rights, options or
warrants to purchase Common Stock at a price per share which is less than the
Conversion Price, or (vii) issues or sells any Common Stock (other than on
conversion or exchange of 


                                       20

<PAGE>   25

Convertible Securities or exercise of rights, options or warrants to which any 
of the three preceding clauses applies) for a consideration per share less than 
the Conversion Price.

     The Company will seek to list the shares of Common Stock required to be
delivered upon conversion of the Convertible Preferred Stock on each national
securities exchange, if any, on which the outstanding shares of Common Stock are
listed at the time of delivery of the Common Stock. The Company will pay any
documentary stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of shares of Common Stock on conversion of Convertible
Preferred Stock.

Redemption at Holder's Option After Notice of Mandatory Conversion

     In the event that the Company exercises its right to require a mandatory
conversion of Convertible Preferred Stock (but in no other circumstances), each
holder of Convertible Preferred Stock will have the right to require the Company
to redeem any or all the shares of Convertible Preferred Stock owned of record
by the holder, at a redemption price per share (the "Redemption Price") equal to
the applicable Redemption Percentage as defined below, multiplied by the sum of
(i) Stated Value plus (ii) the sum of all accrued dividends with regard to the
Convertible Preferred Stock through the date of redemption. As used herein, the
"Redemption Percentage" means a percentage beginning at 105% and decreasing
annually by 1% to a floor of 100%.

     At such time as there are 40,000 shares or fewer of Convertible Preferred
Stock outstanding, the Company may at its option purchase all of the outstanding
shares of the Convertible Preferred Stock from the holders thereof at a price
equal to the greater of (a) 110% of the sum of the Stated Value of such shares
(together with all accrued dividends thereon) and (b) the fair market value of
such shares, which shall be equal to the fair market value of the Common Stock,
as of such date, issuable upon conversion of such shares, together with all
accrued dividends thereon.

Right of Westbrook to Participate in Offerings

     Pursuant to the terms of the Stock Purchase Agreement, Westbrook has, for
so long as the Convertible Preferred Stock is outstanding, the preemptive right
to purchase a pro rata share on an as converted basis as of the date of the
Company Notice (as defined herein) of any stock (or options, warrants or rights
to purchase such stock or securities convertible into such stock) (collectively,
"Eligible Securities"), for the price and upon the terms specified by the
Company in its notice to Westbrook (the "Company Notice") of a Company issuance
of Eligible Securities, which price cannot be greater than that offered to third
parties. If Westbrook fails to timely exercise in full its preemptive rights,
then the Company may sell the unsold Eligible Securities at any time within 180
days (60 days in the case of a public offering) thereafter at a price and upon
terms no more favorable to the purchasers thereof than specified to Westbrook.
Westbrook's preemptive rights do not apply to any Eligible Securities, among
other things, (i) issuable in connection with stock splits, stock dividends or
recapitalizations as to the effects of which other adjustments are provided for,
or (ii) issuable to employees and prospective employees pursuant to any plan or
pattern of employee equity participation or issuable in connection with the
Company's dividend reinvestment plan. In addition, the Stock Purchase Agreement
provides Westbrook with preemptive rights to purchase a pro rata share of the
Company's equity offerings.

Registration Rights

     When issued, the outstanding shares of Convertible Preferred Stock,
together with any shares of Common Stock to which such shares of Convertible
Preferred Stock may be converted, were not registered under the Securities Act
or the securities laws of any state. Accordingly, such Convertible Preferred
Stock or Common Stock could be sold only in one or more transactions registered
under the Securities Act and, where applicable, state securities laws or as to
which an exemption from registration requirements of the Securities Act and,
where applicable, state securities laws is available. Pursuant to the
Registration Rights Agreement, Westbrook, on behalf of the holders of the
Convertible Preferred Stock, may request the Company to register (at the
Company's expense) the then outstanding Convertible Preferred Stock and other
Registrable Securities (as defined herein), under the terms and conditions
described below. "Registrable Securities" means, subject to certain exceptions,
(i) the Convertible Preferred Stock, (ii) all Common Stock issuable or issued
upon conversion of the Convertible Preferred Stock, and (iii) any Common Stock
of the Company issued as a dividend or distribution or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as a dividend or other distribution with respect to, or in exchange for or in
replacement of, such Convertible Preferred Stock or Common Stock.


                                       21

<PAGE>   26

     Pursuant to the terms of the Registration Rights Agreement, at the request
of the holders of the Convertible Preferred Stock (which request must be made by
Westbrook), the Company will use its best efforts to cause all outstanding
Convertible Preferred Stock or all or a portion of shares of Common Stock which
are Registrable Securities to be registered under the Securities Act, subject to
certain limitations. The Company has registered the resale of the Shares to
satisfy its obligations under the Registration Rights Agreement.

SERIES B PREFERRED STOCK AND SERIES C PREFERRED STOCK

General

     On February 6, 1998 and April 20, 1998, the Operating Partnership completed
private placements of 1,200,000 and 400,00 units, respectively, of 7.875% Series
B Preferred Limited Partnership Units (the "Series B Preferred Units"),
representing a limited partnership interest in the Operating Partnership, to an
institutional investor in return for contributions to the Operating Partnership
of $60 million and $20 million, respectively. The Series B Preferred Units will
become exchangeable, on a one for one basis, in whole or in part at any time on
or after February 6, 2008 for shares of the Company's 7.875% Series B Cumulative
Redeemable Preferred Stock, par value $.0001 per share (the "Series B Preferred
Stock"); provided, however, that the Series B Preferred Units will become
immediately exchangeable if (i) full distributions for such Units with respect
to six quarterly distribution periods have not been fully paid, (ii) the holders
of such Units are notified that the Operating Partnership will become a
"publicly traded partnership" (a "PTP") within the meaning of Section 7704 of
the Code, (iii) after the third anniversary of the private placement, the
holders are notified that such exchange would not cause the Series B Preferred
Units to be considered "stock and securities" within the meaning of Section
351(e) of the Code, or (iv) if there is a substantial risk that the interest in
the Partnership of the holder of Series B Preferred Units represents more than
19.5% of the total profits or capital interest, in the Partnership for a taxable
year. Pursuant to the terms of a registration rights agreement, entered into in
connection with this private placement, the holders of Series B Preferred Stock
will have certain rights to cause the Company to register such shares of Series
B Preferred Stock. On February 10, 1998, the Company filed Articles
Supplementary reclassifying 2,000,000 shares of its Common Stock, par value
$.0001 per share, as 2,000,000 shares of Series B Preferred Stock and setting
forth the rights, preferences and privileges of the Series B Preferred Stock.
Presently, no shares of Series B Preferred Stock are outstanding. Upon the
exchange of all the Series B Preferred Units, there would be 1,600,000 shares of
Series B Preferred Stock outstanding.

     On November 24, 1998, the Operating Partnership completed a private
placement of 500,000 units, of 9 1/8% Cumulative Redeemable Series C Preferred
Limited Partnership Units (the "Series C Preferred Units"), representing a
limited partnership interest in the Operating Partnership, to institutional
investors in return for contributions to the Operating Partnership of $25
million. The Series C Preferred Units will become exchangeable, on a one for one
basis, in whole or in part at any time on or after November 24, 2008 for shares
of the Company's 9 1/8% Series C Cumulative Redeemable Preferred Stock, par
value $.0001 per share (the "Series C Preferred Stock"); provided, however, that
the Series C Preferred Units will become immediately exchangeable if (i) full
distributions for such Units with respect to six quarterly distribution periods
have not been fully paid, (ii) the holders of such Units are notified that the
Operating Partnership will become a "publicly traded partnership" (a "PTP")
within the meaning of Section 7704 of the Code and such failure would cause a
meaningful risk that a holder of the Series C Preferred Units would fail to
maintain its qualification as a real estate investment trust, or (iii) after the
third anniversary of the private placement, the holders are notified that such
exchange would not cause the Series C Preferred Units to be considered "stock
and securities" within the meaning of Section 351(e) of the Code Pursuant to the
terms of a registration rights agreement, entered into in connection with this
private placement, the holders of Series C Preferred Stock will have certain
rights to cause the Company to register such shares of Series C Preferred Stock.
On November [ ], 1998, the Company filed Articles Supplementary reclassifying
500,000 shares of its Common Stock, par value $.0001 per share, as 500,000
shares of Series C Preferred Stock and setting forth the rights, preferences and
privileges of the Series C Preferred Stock. Presently, no shares of Series C
Preferred Stock are outstanding. Upon the exchange of all the Series C Preferred
Units, there would be 500,000 shares of Series C Preferred Stock outstanding.

     The following description of the Series B Preferred Stock and Series C
Preferred Stock is in all respects subject to and qualified in its entirety by
reference to the applicable provisions of the Charter, including the respective
Articles Supplementary applicable to the Series B Preferred Stock and Series C
Preferred Stock, and Bylaws. Subject to the rights of holders of the Convertible
Preferred Stock and any other parity preferred stock as to the payment of
distributions, holders of Series B Preferred Stock are entitled to receive,
when, as and if declared by the Company, out of funds legally 


                                       22

<PAGE>   27

available for the payment of distributions, cumulative preferential cash
distributions at the rate per annum of 7.875% of the $50.00 liquidation
preference per share of Series B Preferred Stock, and the holders of Series C
Preferred Stock are entitled to receive, when, as and if declared by the
Company, out of funds legally available for the payment of distributions,
cumulative preferential cash distributions at the rate of 9 1/8% of $50.00
liquidation preference per share of Series C Preferred Stock. Such distributions
are cumulative, accrue from the original date of issuance and are payable
quarterly in arrears, on or before the 15th of February, May, August and
November of each year (each a "Preferred Stock Distribution Payment Date"),
commencing in each case on the first Preferred Stock Distribution Payment Date
after the original date of issuance.

  Redemption

     The Series B Preferred Stock may be redeemed, at the Company's option, on
and after February 6, 2003, from time to time, at a redemption price payable in
cash equal to $50.00 per share of Series B Preferred Stock, plus any accumulated
and unpaid dividends to the date of redemption. The redemption price of the
Series B Preferred Stock (other than the portions thereof consisting of
accumulated but unpaid dividends) will be payable solely out of the sale
proceeds of capital stock of the Company.

     The Series C Preferred Stock may be redeemed, at the Company's option, on
and after November 24, 2003, from time to time, at a redemption price payable in
cash equal to $50.00 per share of Series C Preferred Stock, plus any accumulated
and unpaid dividends to the date of redemption. The redemption price of the
Series C Preferred Stock (other than the portions thereof consisting of
accumulated but unpaid dividends) will be payable solely out of the sale
proceeds of capital stock of the Company.

     The Corporation may not redeem fewer than all of the outstanding shares of
Series B Preferred Stock unless all accumulated and unpaid distributions have
been paid on all Series B Preferred Stock for all quarterly distribution periods
terminating on or prior to the date of redemption.

     The Corporation may not redeem fewer than all of the outstanding shares of
Series C Preferred Stock unless all accumulated and unpaid distributions have
been paid on all Series C Preferred Stock for all quarterly distribution periods
terminating on or prior to the date of redemption.

Limited Voting Rights

     If at any time full distributions shall not have been timely made on any
Series B Preferred Stock or Series C Preferred Stock with respect to any six (6)
prior quarterly distribution periods, whether or not consecutive, the holders of
such Series B Preferred Stock or Series C Preferred Stock, voting together as a
single class with the holders of each class or series of parity preferred stock,
will have the right to elect two additional directors to the Board of Directors
at a special meeting called by the holders of record of at least 10% of the then
outstanding shares of Series B Preferred Stock and Series C Preferred Stock, or
any parity preferred stock, or at the next annual meeting of stockholders, and
at each subsequent annual meeting of stockholders or special meeting held in
place thereof, until all such distributions in arrears and distributions for the
current quarter have been paid in full. Thereafter, the holders of Series B
Preferred Stock and Series C Preferred Stock will be divested of their voting
rights and the term of any member of the Board of Directors elected by the
holders of Series B Preferred Stock and Series C Preferred Stock and holders of
any shares of parity preferred stock shall terminate.

     In addition, while any shares of the Series B Preferred Stock or Series C
Preferred Stock are outstanding, the Company shall not, without the affirmative
vote of the holders of at least two-thirds (2/3) of the Series B Preferred Stock
and Series C Preferred Stock outstanding at the time (i) authorize or create, or
increase the authorized or issued amount of, any class or series of shares
ranking prior to the Series B Preferred Stock or Series C Preferred Stock with
respect to payment of distributions or rights upon liquidation, dissolution or
winding-up or reclassify any authorized shares of the Company into any such
shares, or create, authorize or issue any obligations or security convertible
into or evidencing the right to purchase any such shares or (ii) either amend,
alter or repeal the provisions of the Company's Charter (including the Articles
Supplementary pertaining to the Series B Preferred Stock and Series C Preferred
Stock) or Bylaws, that would materially and adversely affect the preferences,
other rights, voting powers, restrictions, limitations as to dividends and other
distributions, qualifications, or terms and conditions of redemption, of any
outstanding shares of the Series B Preferred Stock and Series C Preferred Stock.
Further, while any shares of the Series B Preferred Stock and Series C 


                                       23

<PAGE>   28

Preferred Stock are outstanding, the Company shall not, without the affirmative
vote of the holders of at least two-thirds (2/3) of the Series B Preferred Stock
and Series C Preferred Stock outstanding at the time consolidate, amalgamate,
merge with or into, or convey, transfer or lease its assets substantially as an
entirety to, any corporation or other entity, unless (a) the Company is the
surviving entity and the shares of the Series B Preferred Stock and Series C
Preferred Stock remain outstanding with the terms thereof unchanged, (b) the
resulting, surviving or transferee entity is a corporation or other entity
organized under the laws of any state and substitutes for the Series B Preferred
Stock and Series C Preferred Stock other preferred stock having substantially
the same terms and same rights as the Series B Preferred Stock and Series C
Preferred Stock, including with respect to distributions, voting rights and
rights upon liquidation, dissolution or winding-up, or (c) such merger,
consolidation, amalgamation or asset transfer does not adversely affect the
powers, special rights, preferences and privileges of the holders of the Series
B Preferred Stock and Series C Preferred Stock in any material respect.

     The Series B Preferred Stock and Series C Preferred Stock will have no
voting rights other than as discussed above and as otherwise provided by
applicable law.

Liquidation Preference

     Subject to the rights of the holders of the Convertible Preferred Stock and
any other parity preferred stock, each share of Series B Preferred Stock and
Series C Preferred Stock is entitled to a liquidation preference of $50.00 per
share, plus any accrued and unpaid dividends, in preference to any other class
or series of capital stock of the Company.


                        SHARES AVAILABLE FOR FUTURE SALE

     As of October 31, 1998, the Company had approximately (i) 16,635,966 shares
of Common Stock outstanding, (ii) 1,600,000 shares of Convertible Preferred
Stock outstanding (iii) no shares of Series B Preferred Stock outstanding and
(iv) no shares of Series C Preferred Stock outstanding, and the Operating
Partnership had 1,873,473 Units outstanding. There are approximately 1,873,473
shares of Common Stock reserved for issuance upon redemption of limited
partnership interests in the Operating Partnership and 1,828,571 shares of
Common Stock reserved for issuance upon conversion of outstanding shares of
Convertible Preferred Stock. If, in the future, the Company issues Units in
connection with the acquisition of properties, a number of shares of Common
Stock for which such Units are exchangeable will be reserved for issuance upon
redemption of such Units. In addition, in aggregate of 875,400 shares of Common 
Stock have been reserved for issuance under the Essex Property Trust, Inc. 1994 
Employee Stock Incentive Plan, 70,000 shares of Common Stock have been reserved 
for issuance under the Essex Property Trust, Inc. 1994 Non-Employee and 
Director Stock Incentive Plan and up to 406,500 shares of Common have been 
reserved for issuance under the Essex Property Trust, Inc. 1994 Employee Stock 
Purchase Plan. In addition, 220,000 shares of Common Stock have been reserved 
for issuance upon the exercise of an option granted to The Marcus Millichap 
Company.

     As of October 31, 1998, George M. Marcus owned shares of Common Stock and
Operating Partnership interests which may be converted into shares of Common
Stock, which in the aggregate represent approximately 10.5% of the outstanding
Common Stock including units of the Operating Partnership which may be converted
into shares of Common Stock. Such shares of Common Stock may be sold by Mr.
Marcus without the consent of the Company. After the expiration of any
applicable lock-up period, Mr. Marcus may sell shares, pursuant to the
Registration Statement of which this Prospectus is a part. See "Registration
Rights" below. Mr. Marcus and other Affiliates of the Company also may sell
Restricted Shares after their respective lock-up periods without registration in
accordance with the exemptions provided by Rule 144 under the Securities Act.

     In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated in accordance with the Rule) who has beneficially
owned his or her shares for at least one year, as well as any persons who may be
deemed "affiliates" of the Company (as defined in the Securities Act), would be
entitled to sell within any three month period a number of shares of Common
Stock that does not exceed the greater of 1% of the then outstanding number of
shares or the average weekly trading volume of the shares during the four
calendar weeks preceding each such sale. After shares are held for two years, a
person who is not deemed an "affiliate" of the Company is entitled to sell such
shares under Rule 144 without regard to the volume limitations. As defined in
Rule 144, an "affiliate" of an issuer is a person that directly or indirectly,
through the use of one or more intermediaries, controls, or is controlled by, or
is under common control with, such issuer.


                                       24

<PAGE>   29

     No prediction can be made as to the effect, if any, that future sales of
shares of Common Stock, or the availability of shares for future sale, will have
on the market price prevailing from time to time. Sales of substantial amounts
of shares of Common Stock (including shares issued upon the redemption of Units
or the exercise of options), or the perception that such sales could occur,
could adversely affect prevailing market price of the Shares.


                               REGISTRATION RIGHTS

     The Company has filed the Registration Statement of which this Prospectus
is a part pursuant to its obligations under the Registration Rights Agreement.
The following summary does not purport to be complete and is qualified in its
entirety by reference to the Registration Rights Agreement.

THE REGISTRATION RIGHTS AGREEMENT

     Pursuant to the Registration Rights Agreement, Westbrook, on behalf of the
holders of the Convertible Preferred Stock, may request the Company to register
(at the Company's expense) the then outstanding Convertible Preferred Stock and
other Registrable Securities (as defined herein), under the terms and conditions
described below. "Registrable Securities" means, subject to certain exceptions,
(i) the Convertible Preferred Stock, (ii) all Common Stock issuable or issued
upon conversion of the Convertible Preferred Stock, and (iii) any Common Stock
of the Company issued as a dividend or distribution or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as a dividend or other distribution with respect to, or in exchange for or in
replacement of, such Convertible Preferred Stock or Common Stock. The Company
has agreed to bear the expenses of satisfying the registration requirements
resulting from the registration rights except that the expenses do not include
any underwriting discounts or commissions or transfer taxes. In addition, the
Company has agreed to indemnify the underwriters, if any, against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.


                              SELLING STOCKHOLDERS

     The following table provides the names of the Selling Stockholders and the
number and percentage of Shares beneficially owned by each Selling Stockholder,
and the number and percentage of Shares beneficially owned by such Selling
Stockholder upon completion of the offering or offerings pursuant to this
prospectus, assuming (x) each share of Convertible Preferred Stock is converted
into a Common Share and (y) each Selling Stockholder sells all of its respective
Common Shares.

<TABLE>
<CAPTION>
                                      Beneficial Ownership                           Beneficial Ownership
                                      Prior to Offering(1)                           After the Offering(2)
                                  ----------------------------                    --------------------------
                                                  Percentage        Number of                   Percentage
                                  Number of       of Shares      Shares Offered   Number of     of Shares
                                  Shares(2)     Outstanding(3)       Hereby       Shares(2)   Outstanding(3)
                                  ---------     --------------   --------------   ---------   --------------
<S>                               <C>               <C>             <C>              <C>           <C>
WBP I Holding Corporation         1,640,272         9.0%            1,640,272         0             0

WBP II Holding Corporation          188,208         1.1%              188,208         0             0
</TABLE>
- ------------------

(1)  Assumes the conversion of all shares of Convertible Preferred Stock into
     shares of Common Stock.

(2)  Assumes the conversion of all shares of Convertible Preferred Stock into
     shares of Common Stock, and the sale of all shares of Common Stock.

(3)  Assumes conversion of all shares of Convertible Preferred Stock of the
     holder thereof into shares of Common Stock. The total number of shares
     outstanding used in calculating the percentage assumes no other shares of
     Convertible Preferred Stock have been converted into shares of Common
     Stock, and does not assume exchange of all partnership interests in the
     Operating Partnership into shares of Common Stock.


             CERTAIN PROVISIONS OF THE COMPANY'S CHARTER AND BYLAWS

     Certain provisions of the Company's Charter and Bylaws might discourage
certain types of transactions that involve an actual or threatened change of
control of the Company. The Charter provides that the Company must seek the
consent 


                                       25

<PAGE>   30

of holders of two-thirds of the issued and outstanding shares of Convertible
Preferred Stock before the Company or the Operating Partnerships may merge or
consolidate with any other entity or sell all or substantially all of the
Company's or the Operating Partnership's assets. Also, the Charter requires that
the Company must obtain the consent of holders of more than 50% of the issued
and outstanding shares of Convertible Preferred Stock before it may undergo a
change in control. See "Description of Preferred Stock-Convertible Preferred
Stock-Senior Securities; Amendments; Other Matters." The Ownership Limit may
delay or impede a transaction or a change in control of the Company that might
involve a premium price for the Company's capital stock or otherwise be in the
best interest of the stockholders. See "Description of Common Stock-Restrictions
on Transfer." Pursuant to the Company's Charter and Bylaws, the Company's Board
of Directors is divided into three classes of directors, each class serving
staggered three-year terms. The staggered terms of directors may reduce the
possibility of a tender offer or an attempt to change control of the Company.
The issuance of Preferred Stock by the Board of Directors may also have the
effect of delaying, deferring or preventing a change in control of the Company.
See "Description of Preferred Stock-General."


                        FEDERAL INCOME TAX CONSIDERATIONS

     The following summary of material federal income tax considerations is
based on current law and does not purport to deal with all aspects of taxation
that may be relevant to particular stockholders in light of their personal
investment or tax circumstances, or to certain types of stockholders (including
insurance companies, financial institutions and broker-dealers, tax exempt
organizations, foreign corporations and persons who are not citizens or
residents of the United States) subject to special treatment under the federal
income tax laws. Certain federal income tax considerations relevant to holders
of the Offered Securities may be provided in the applicable Prospectus
Supplement relating thereto.

     EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT HIS OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OF THE PURCHASE, OWNERSHIP AND
SALE OF THE OFFERED SECURITIES AND OF THE COMPANY'S ELECTION TO BE TAXED AS A
REAL ESTATE INVESTMENT TRUST, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN
INCOME AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND
ELECTION, AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.

GENERAL

     The Company believes that since its formation it has operated, and intends
to continue to operate, in a manner that permits it to satisfy the requirements
for taxation as a REIT under the applicable provisions of the Code. No assurance
can be given, however, that such requirements will be met.

     The provisions of the Code relating to qualification and operation as a
REIT are highly technical and complex. The following sets forth the material
aspects of the Code provisions that govern the federal income tax treatment of a
REIT and its stockholders. This summary is qualified in its entirety by the
applicable Code provisions, rules and regulations thereunder, and administrative
and judicial interpretations thereof, all of which are subject to change with
retroactive effect. Morrison & Foerster LLP has acted as tax counsel to the
Company in connection with Company's election to be taxed as a REIT.

     In the opinion of Morrison & Foerster LLP, commencing with the Company's
taxable year ended December 31, 1994, the Company has been organized in
conformity with the requirements for qualification as a REIT, and its method of
operation has and will enable it to continue to meet the requirements for
qualification and taxation as a REIT under the Code. It must be emphasized that
this opinion is based upon various assumptions and is conditioned upon certain
representations made by the Company as to factual matters. Such representations
are set forth in a certificate of the Company filed with the opinion of Morrison
& Foerster LLP relating to certain tax matters which has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part.
Moreover, such qualification and taxation as a REIT depends upon the Company's
ability to meet, through actual annual operating results, distribution levels
and diversity of stock ownership, the various qualification tests imposed under
the Code discussed below, the results of which will not be reviewed by Morrison
& Foerster LLP. Accordingly, no assurance can be given that the actual results
of the Company's operations for any particular taxable year will satisfy such
requirements. See "-Requirements for Qualification-Failure to Qualify." An
opinion of counsel is not binding on the IRS, and no assurance can be given that
the IRS will not challenge the Company's eligibility for taxation as a REIT.


                                       26

<PAGE>   31

     If the Company fails to qualify as a REIT in any year, it will be subject
to federal income tax as if it were a domestic corporation, and its stockholders
will be taxed in the same manner as stockholders of ordinary corporations. In
this event, the Company could be subject to potentially significant tax
liabilities and the amount of cash available for distribution to its
stockholders could be reduced.

TAXATION OF THE COMPANY

     In any year in which the Company qualifies as a REIT, it will generally not
be subject to federal income tax on that portion of its net income that it
distributes to stockholders. This treatment substantially eliminates the "double
taxation" on income at the corporate and stockholder levels that generally
results from investment in a corporation. However, a REIT will be subject to
federal income tax as follows. First, a REIT will be taxed at regular corporate
rates on any undistributed REIT taxable income, including undistributed net
capital gains. (However, a REIT can elect to "pass through" any of its taxes
paid on retained capital gains to its shareholders on a pro rata basis.) Second,
under certain circumstances, a REIT may be subject to the "alternative minimum
tax" on its items of tax preference. Third, if a REIT has (i) net income from
the sale or other disposition of "foreclosure property" which is held primarily
for sale to customers in the ordinary course of business or (ii) other
nonqualifying income from foreclosure property, it will be subject to tax at the
highest corporate rate on such income. Fourth, if a REIT has net income from
"prohibited transactions," such income will be subject to a 100% tax. A
"prohibited transaction" is a sale of "dealer property" (defined below),
excluding certain property held by the Company for at least four years,
foreclosure property and property involuntarily converted. Fifth, if a REIT
should fail to satisfy the 75% gross income test or the 95% gross income test
(as discussed below), and has nonetheless maintained its qualification as a REIT
because certain other requirements have been met, it will be subject to a 100%
tax on the net income attributable to the greater of the amount by which the
REIT fails the 75% or 95% test. Sixth, if a REIT should fail to distribute
during each calendar year at least the sum of (i) 85% of its REIT ordinary
income for such year, (ii) 95% of its REIT capital gain net income for such
year, and (iii) any undistributed taxable income from prior periods, the REIT
would be subject to a 4% excise tax on the excess of such required distribution
over the amounts actually distributed. For purposes of the excise tax, dividends
declared in October, November, or December of one calendar year and paid by
January 31 of the following calendar year are deemed paid December 31 of the
initial calendar year. Seventh, if a REIT acquires any asset from a C
corporation (i.e., generally a corporation subject to full corporate-level tax)
in a transaction in which the basis of the asset in the REIT's hands is
determined by reference to the basis of the asset (or any other property) in the
hands of the C corporation, and the REIT recognizes gain on the disposition of
such asset during the 10 year period beginning on the date on which such asset
was acquired by the REIT, then, to the extent of any built-in gain at the time
of acquisition, such gain will be subject to tax at the highest regular
corporate rate.

REQUIREMENTS FOR QUALIFICATION

     The Code defines a real estate investment trust as a corporation, trust or
association (1) which is managed by one or more trustees or directors; (2) the
beneficial ownership of which is evidenced by transferable shares, or by
transferable certificates of beneficial interest; (3) which would be taxable as
a domestic corporation, but for Sections 856 through 860 of the Code; (4) which
is neither a financial institution nor an insurance company subject to certain
provisions of the Code; (5) the beneficial ownership of which is held by 100 or
more persons; (6) not more than 50% in value of the outstanding stock of which
is owned, directly or indirectly, by five or fewer individuals (as defined in
the Code) at any time during the last half of each taxable year; and (7) which
meets certain other tests, described below, regarding the nature of income and
assets. The Code provides that conditions (1) to (4), inclusive, must be met
during the entire taxable year and that condition (5) must be met during at
least 335 days of a taxable year of 12 months, or during a proportionate part of
a taxable year of less than 12 months. A REIT must also report its income based
on the calendar year. In addition, the U.S. Treasury Department has proposed
legislation that would also prevent any "person" (i.e., an individual,
corporation, partnership or trust) from possessing more than 50% of the total
combined voting power of all classes of voting stock or more than 50% of the
total value of shares of all classes of stock of a REIT.

     In order to ensure compliance with the ownership tests described above, the
Company has placed certain restrictions on the transfer of the common stock and
preferred stock to prevent further concentration of stock ownership. Moreover,
to evidence compliance with these requirements, the Company must maintain
records which disclose the actual ownership of its outstanding common stock and
preferred stock. In fulfilling its obligations to maintain records, the Company
must and will demand written statements each year from the record holders of
designated percentages of its common stock and preferred stock disclosing the
actual owners of such common stock and preferred stock. A list of those persons
failing or refusing to comply with such demand must be maintained as part of the
Company's records. A stockholder failing or 


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<PAGE>   32

refusing to comply with the Company's written demand must submit with his tax 
returns a similar statement disclosing the actual ownership of common stock and 
preferred stock and certain other information. In addition, the Charter provides
restrictions regarding the transfer of its shares that are intended to assist 
the Company in continuing to satisfy the share ownership requirements. See 
"Description of Common Stock-Restrictions on Transfer." Furthermore, the Company
reports its income based on the calendar year.

     Although the Company intends to satisfy the shareholder demand letter rules
described in the preceding paragraph, beginning in 1998, its failure to satisfy
these requirements will not result in its disqualification as a REIT but may
result in the imposition of IRS penalties against the Company. In addition,
beginning in 1998, a REIT's failure to satisfy the requirement that not more
than 50% of the value of its outstanding stock be owned by five or fewer
individuals (as defined in the Code) during a taxable year would not result in
its disqualification as a REIT under the Code as long as (i) the REIT satisfied
the shareholder demand letter rules, and (ii) the REIT did not know, and
exercising due diligence, would not have known, whether it had failed the
requirement.

     In the case of a REIT that is a partner in a partnership, Treasury
Regulations provide that the REIT will be deemed to own its proportionate share
of the assets of the partnership and will be deemed to be entitled to the income
of the partnership attributable to such share. In addition, the character of the
assets and gross income of the partnership shall retain the same character in
the hands of the REIT for purposes of Section 856 of the Code, including
satisfying the gross income tests and the asset tests, described below. Thus,
the Company's proportionate share of the assets, liabilities and items of income
of the Operating Partnership will be treated as assets, liabilities and items of
income of the Company for purposes of applying the requirements described below.

  Asset Tests

     At the close of each quarter of the Company's taxable year, the Company
must satisfy two tests relating to the nature of its assets. First, at least 75%
of the value of the Company's total assets must be represented by interests in
real property, interests in mortgages on real property, shares in other REITs,
cash, cash items and government securities (as well as certain temporary
investments in stock or debt instruments purchased with the proceeds of new
capital raised by the Company). Second, although the remaining 25% of the
Company's assets generally may be invested without restriction, securities in
this class may not exceed either (i) 5% of the value of the Company's total
assets as to any one non-government issuer, or (ii) 10% of the outstanding
voting securities of any one issuer. The U.S. Treasury Department has proposed
legislation that also would prohibit investment in securities of any one issuer
that would exceed 10% of the value of all classes of stock of such issuer. The
Company believes its investments in the Properties through its interest in the
Operating Partnership constitute qualified assets for purposes of the 75% asset
test. In addition, the Company may own 100% of a "qualified REIT subsidiary" as
defined in the Code. All assets, liabilities, and items of income, deduction,
and credit of a qualified REIT subsidiary will be treated as owned and realized
directly by the Company.

     The Operating Partnership owns 100% of the non-voting preferred stock of
Essex Management Corporation, Essex Sacramento, Inc. and Essex Fidelity I
Corporation (the "Essex Preferred Stock Subsidiaries") and none of the voting
common stock of the Essex Preferred Stock Subsidiaries. By virtue of its
partnership interest in the Operating Partnership, the Company will be deemed to
own its pro rata share of the assets of the Operating Partnership, including the
securities of the Essex Preferred Stock Subsidiaries, as described above.
Because the Operating Partnership will not own any of the voting securities of
Essex Management Corporation, Essex Sacramento, Inc. and Essex Fidelity I
Corporation and, in each case, the preferred stock's approval right is limited
to certain fundamental corporate actions that could adversely affect the
preferred stock as a class, the 10% limitation on holdings of voting securities
of any one issuer will not be exceeded by the Company.

     Based upon its analysis of the total estimated value of the securities of
the Essex Preferred Stock Subsidiaries owned by the Operating Partnership
relative to the estimated value of the total assets owned by the Operating
Partnership and the other assets of the Company, the Company believes that its
pro rata share of the preferred non-voting stock of each of the Essex Preferred
Stock Subsidiaries held by the Operating Partnership represents, in each case,
less than 5% of the Company's total assets and, together with any other
nonqualifying assets represents less than 25% of the Company's total assets.
Although the Company plans to take steps to ensure that it satisfies the 5%
value test for any quarter with respect to which retesting is to occur, there
can be no assurance that such steps will always be successful or will not
require a reduction in the Company's overall interest in the Operating
Partnership.


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<PAGE>   33

  Gross Income Tests

     There are three (two beginning in 1998) separate percentage tests relating
to the sources of the Company's gross income which must be satisfied for each
taxable year. For purposes of these tests, where the Company invests in a
partnership, the Company will be treated as receiving its share of the income
and loss of the partnership, and the gross income of the partnership will retain
the same character in the hands of the Company as it has in the hands of the
partnership. See "-Tax Aspects of the Company's Investment in the Operating
Partnerships-General."

     THE 75% TEST. At least 75% of the Company's gross income for the taxable
year must be "qualifying income." Qualifying income generally includes (i) rents
from real property (except as modified below); (ii) interest on obligations
collateralized by mortgages on, or interests in, real property; (iii) gains from
the sale or other disposition of interests in real property and real estate
mortgages, other than gain from property held primarily for sale to customers in
the ordinary course of the Company's trade or business ("dealer property"); (iv)
dividends or other distributions on shares in other REITs, as well as gain from
the sale of such shares; (v) abatements and refunds of real property taxes; (vi)
income from the operation, and gain from the sale, of property acquired at or in
lieu of a foreclosure of the mortgage collateralized by such property
("foreclosure property"); and (vii) commitment fees received for agreeing to
make loans collateralized by mortgages on real property or to purchase or lease
real property.

     For purposes of determining whether the Company complies with the 75% test
(and 95% test described below), gross income does not include income from
prohibited transactions. See "-- Taxation of the Company" and "-- Tax Aspects of
the Company's Investment in the Operating Partnership -- Sale of the
Properties."

     In addition, rents received from a tenant will not qualify as rents from
real property in satisfying the 75% test (or the 95% test described below) if
the Company, or an owner of 10% or more of the Company, directly or
constructively owns 10% or more of such tenant (a "related party tenant"). In
addition, if rent attributable to personal property, leased in connection with a
lease of real property, is greater than 15% of the total rent received under the
lease, then the portion of rent attributable to such personal property will not
qualify as rents from real property. Moreover, an amount received or accrued
will generally not qualify as rents from real property (or as interest income)
for purposes of the 75% and 95% tests if it is based in whole or in part on the
income or profits of any person. Rent or interest will not be disqualified,
however, solely by reason of being based on a fixed percentage or percentages of
receipts or sales. Finally, for rents received to qualify as rents from real
property, the Company must generally not operate or manage the property or
furnish or render services to tenants, other than through an "independent
contractor" from whom the Company derives no revenue. The "independent
contractor" requirement, however, does not apply to the extent that the services
provided by the Company are "usually or customarily rendered" in connection with
the rental of space for occupancy only, and are not otherwise considered
"rendered to the occupant." For both the related party tenant rules and
determining whether an entity qualifies as an independent contractor, certain
attribution rules of the Code apply, pursuant to which shares of a REIT held by
one entity are deemed held by another.

     If a REIT provides impermissible services to its tenants, all of the rent
from those tenants can be disqualified from satisfying the 75% and 95% tests.
Beginning in 1998, rents will not be disqualified if a REIT provides de minimis,
impermissible services. For this purpose, services provided to tenants of a
property are considered de minimis where income derived from the services
rendered equals 1% or less of all income derived from the property (threshold
determined on a property-by-property basis). For purposes of the 1% threshold,
the amount treated as received for any service shall not be less than 150% of
the direct cost incurred in furnishing or rendering the service.

     The Company, through the Operating Partnership (which will not be an
independent contractor), will provide certain services with respect to the
Properties and any newly acquired Properties. The Company believes that the
services provided by the Operating Partnership are usually or customarily
rendered in connection with the rental of space of occupancy only, and therefore
that the provision of such services will not cause the rents received with
respect to the Properties to fail to qualify as rents from real property for
purposes of the 75% and 95% tests. Essex does not intend to rent to any related
party (other than with respect to the Headquarters Building), to base any rent
on the income or profits of any person (other than rents that are based on a
fixed percentage or percentages of receipts or sales), or to charge rents that
would otherwise not qualify as rents from real property. Essex rents a portion
of its Headquarters Building to M&M, who is considered to be a related party
tenant. Rent received by Essex from M&M will therefore not qualify as rents from
real property for purposes of satisfying the 75% and 95% tests. It is not
expected that the rent received from any related 


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<PAGE>   34

party (including M&M), together with other income not qualifying for the 95% 
test described below, will constitute in the aggregate more than 4% of Essex's 
gross income with respect to any taxable year.

     THE 95% TEST. In addition to deriving 75% of its gross income from the
sources listed above, at least 95% of the Company's gross income for the taxable
year must be derived from the above-described qualifying income, or from
dividends, interest or gains from the sale or disposition of stock or other
securities that are not dealer property. Dividends and interest on any
obligation not collateralized by an interest on real property are included for
purposes of the 95% test, but not for purposes of the 75% test. Furthermore,
income earned on interest rate swaps and caps entered into as liability hedges
against variable rate indebtedness qualify for the 95% test (but not the 75%
test). Beginning in 1998, income earned on liability hedges against all of a
REIT's indebtedness, such as options, futures, and forward contracts, will
qualify for the 95% test (but not the 75% test). In certain cases, Treasury
Regulations treat a debt instrument and a liability hedge as a synthetic debt
instrument for all purposes of the Code. If a liability hedge entered into by a
REIT is subject to these Treasury Regulations, income earned on the liability
hedge will operate to reduce its interest expense, and, therefore, such income
will not affect the REIT's compliance with either the 75% or 95% tests.

     Essex Management Corporation also anticipates receiving fee income in
consideration of the performance of property management and other services with
respect to properties not owned by Essex or the Operating Partnership; however,
substantially all income derived by Essex from Essex Management Corporation will
be in the form of dividends on Essex Management Corporation's preferred stock
owned by the Operating Partnership. Such dividends, together with dividends from
the other Essex Preferred Stock Subsidiaries, will satisfy the 95%, but not the
75%, tests (as discussed above). Essex intends to closely monitor its
non-qualifying income, but the Company anticipates that such income, including
such dividend income and liability hedge income (if any), will not result in
Essex's failing either the 75% or the 95% tests.

     Even if the Company fails to satisfy one or both of the 75% or 95% tests
for any taxable year, it may still qualify as a REIT for such year if it is
entitled to relief under certain provisions of the Code. These relief provisions
will generally be available if: (i) the Company's failure to comply was due to
reasonable cause and not to willful neglect; (ii) the Company reports the nature
and amount of each item of its income included in the 75% and 95% tests on a
schedule attached to its tax return; and (iii) any incorrect information on this
schedule is not due to fraud with intent to evade tax. It is not possible,
however, to state whether in all circumstances the Company would be entitled to
the benefit of these relief provisions. If these relief provisions apply, the
Company will, however, still be subject to a special tax upon the greater of the
amount by which it fails either the 75% or 95% test for that year.

     THE 30% TEST. Prior to January 1, 1998, the Company must have derived less
than 30% of its gross income for each taxable year from the sale or other
disposition of (i) real property held for less than four years (other than
foreclosure property and involuntary conversions), (ii) stock or securities held
for less than one year, and (iii) property in a prohibited transaction. For tax
years beginning after December 31, 1997, the 30% Test has been repealed.

  Annual Distribution Requirements

     The Company, in order to qualify as a REIT, is required to distribute
dividends (other than capital gain dividends) to its stockholders each year in
an amount at least equal to (A) the sum of (i) 95% of the Company's REIT taxable
income (computed without regard to the dividends paid deduction and the REIT's
net capital gain) and (ii) 95% of the net income (after tax, if any) from
foreclosure property, minus (B) the sum of certain items of non-cash income.
Such distributions must be paid in the taxable year to which they relate, or in
the following taxable year if declared before the Company timely files its tax
return for such year and if paid on or before the first regular dividend payment
after such declaration. To the extent that the Company does not distribute all
of its net capital gain or distributes at least 95%, but less than 100%, of its
REIT taxable income, as adjusted, it will be subject to tax on the undistributed
amount at regular capital gains or ordinary corporate tax rates, as the case may
be. Furthermore, if the Company should fail to distribute during each calendar
year at least the sum of (i) 85% of its REIT ordinary income for such year, (ii)
95% of its REIT capital gain income for such year, and (iii) any undistributed
taxable income from prior periods, the Company would be subject to a 4% excise
tax on the excess of such required distribution over the amounts actually
distributed. For this and other purposes, dividends declared on a date in
October, November, or December to stockholders of record of such month of one
calendar year and paid by January 31 of the following calendar year are deemed
paid December 31 of the initial calendar year.


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<PAGE>   35

     The Company believes that it has made timely distributions sufficient to
satisfy the annual distribution requirements. In this regard, the partnership
agreement of the Operating Partnership authorizes the Company, as general
partner, to take such steps as may be necessary to cause the Operating
Partnership to distribute to its partners an amount sufficient to permit the
Company to meet these distribution requirements. It is possible that in the
future the Company may not have sufficient cash or other liquid assets to meet
the 95% distribution requirement, due to timing differences between the actual
receipt of income and actual payment of expenses on the one hand, and the
inclusion of such income and deduction of such expenses in computing the
Company's REIT taxable income on the other hand. Further, as described below, it
is possible that, from time to time, the Company may be allocated a share of net
capital gain attributable to the sale of depreciated property that exceeds its
allocable share of cash attributable to that sale. The Company will closely
monitor the relationship between its REIT taxable income and cash flow and,
where necessary, will borrow funds (or cause the Operating Partnership or other
affiliates to borrow funds) to satisfy the 95% distribution requirement. The
Company (through the Operating Partnership) may be required to borrow funds at
times when market conditions are not favorable.

     Under certain circumstances, the Company may be able to rectify a failure
to meet the distribution requirement for a year as a result of an adjustment to
the Company's tax return by the IRS by paying "deficiency dividends" to
shareholders in a later year, which may be included in the Company's deduction
for dividends paid for the earlier year. Thus, the Company will be able to
maintain its REIT status and avoid being taxed on amounts distributed as
deficiency dividends following an IRS adjustment; however, the Company will be
required to pay interest and possibly penalties based on the amount of any
deduction taken for deficiency dividends.

  Failure to Qualify

     If the Company fails to qualify for taxation as a REIT in any taxable year
and the relief provisions do not apply, the Company will be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to stockholders in any year in which the
Company fails to qualify will not be deductible by the Company, nor will they be
required to be made. In such event, to the extent of the Company's current and
accumulated earnings and profits, all distributions to stockholders will be
taxable as ordinary income, and, subject to certain limitations in the Code,
corporate distributees may be eligible for the dividends received deduction.
Unless entitled to relief under specific statutory provisions, the Company will
also be disqualified from taxation as a REIT for the four taxable years
following the year during which qualification was lost. It is not possible to
state whether the Company would be entitled to such statutory relief.

TAX ASPECTS OF THE COMPANY'S INVESTMENT IN THE OPERATING PARTNERSHIP

     The following discussion summarizes certain federal income tax
considerations applicable solely to the Company's investment in the Operating
Partnership. The discussion does not cover state or local tax laws or any
federal tax laws other than income tax laws. It should be noted that the Company
has not received an opinion of counsel with respect to the following discussion.

  General

     The Company holds a direct ownership interest in the Operating Partnership.
In general, partnerships are "pass-through" entities which are not subject to
federal income tax. Rather, partners are allocated their proportionate shares of
the items of income, gain, loss, deduction and credit of a partnership, and are
potentially subject to tax thereon, without regard to whether the partners
receive a distribution from the partnership. The Company includes its
proportionate share of the foregoing Operating Partnership items for purposes of
the various REIT income tests and in the computation of its REIT taxable income.
See "--Taxation of the Company" and "--Requirements for Qualification -- Gross
Income Tests." Any resultant increase in the Company's REIT taxable income
increases its distribution requirements (see "--Requirements for Qualification
- -- Annual Distribution Requirements"), but is generally not subject to federal
income tax in the hands of the Company, if such income is distributed by the
Company to its stockholders. Moreover, for purposes of the REIT asset tests (see
"--Requirements for Qualification-Asset Tests"), the Company includes its
proportionate share of assets held by the Operating Partnership.


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<PAGE>   36

  Tax Allocations with Respect to the Properties

     Pursuant to Section 704(c) of the Code, income, gain, loss and deduction
attributable to appreciated or depreciated property that is contributed to a
partnership in exchange for an interest in the partnership (such as the
Properties), must be allocated in a manner such that the contributing partner is
charged with, or benefits from, respectively, the unrealized gain or unrealized
loss associated with the property at the time of the contribution. The amount of
such unrealized gain or unrealized loss is generally equal to the difference
between the fair market value of contributed property at the time of
contribution, and the adjusted tax basis of such property at the time of
contribution (the "Book -- Tax Difference"). Such allocations are solely for
federal income tax purposes and do not affect the book capital accounts or other
economic or legal arrangements among the partners. The Operating Partnership was
formed by way of contributions of appreciated property (including the
Properties). Consequently, the partnership agreement of the Operating
Partnership requires such allocations to be made in a manner consistent with
Section 704(c) of the Code.

     In general, the limited partners of the Operating Partnership will be
allocated lower amounts of depreciation deductions for tax purposes and
increased taxable income and gain on sale by the Operating Partnership of the
contributed assets (including the Properties). This will tend to eliminate the
Book -- Tax Difference over the life of the Operating Partnership. However, the
special allocation rules under Code Section 704(c) do not always entirely
rectify the Book -- Tax Difference on an annual basis or with respect to a
specific taxable transaction such as a sale. Thus, the carryover basis of the
contributed assets in the hands of the Operating Partnership may cause the
Company to be allocated lower depreciation and other deductions, and possibly
greater amounts of taxable income in the event of a sale of such contributed
assets in excess of the economic or book income allocated to it as a result of
such sale. This may cause the Company to recognize taxable income in excess of
cash proceeds, which might adversely affect the Company's ability to comply with
the REIT distribution requirements. See "--Requirements for Qualification --
Annual Distribution Requirements." With respect to any property purchased or to
be purchased by the Operating Partnership (other than through the issuance of
interests in the Operating Partnership) subsequent to the formation of the
Company, such property will initially have a tax basis equal to its fair market
value and the special allocation provisions described above will not apply.

  Sale of the Properties

     Generally, any gain realized by the Operating Partnership on the sale of
real property held by the Operating Partnership for more than one year will be
long-term capital gain. The Company's share of any gain realized by the
Operating Partnership on the sale of any dealer property will generally be
treated as income from a prohibited transaction that is subject to a 100% tax.
See "--Taxation of the Company" and "--Requirements for Qualification -- Gross
Income Tests -- The 95% Test." Under existing law, whether property is dealer
property is a question of fact that depends on all the facts and circumstances
with respect to the particular transaction. The Operating Partnership intends to
hold the Properties for investment with a view to long-term appreciation, to
engage in the business of acquiring, developing, owning and operating the
Properties, and to make such occasional sales of the Properties as are
consistent with the Company's investment objectives. Based upon such investment
objectives, the Company believes that in general the Properties should not be
considered dealer property and that the amount of income from prohibited
transactions, if any, will not be material.

TAXATION OF TAXABLE U.S. STOCKHOLDERS GENERALLY

  Dividends; Generally

    As used herein, the terms "U.S. Stockholder" means a holder of shares of
Company stock who (for U.S. federal income tax purposes) (i) is a citizen or
resident of the United States, (ii) is a corporation, partnership, or other
entity created or organized in or under the laws of the United States or of any
political subdivision thereof (except, in the case of a partnership, regulations
provide otherwise), (iii) is an estate the income of which is subject to U.S.
federal income taxation regardless of its source or (iv) is a trust whose
administration is subject to the primary supervision of a U.S. court and which
has one or more U.S. persons who have the authority to control all substantial
decisions of the trust. Notwithstanding the preceding sentence, to the extent
provided in regulations, certain trusts in existence on August 20, 1996, and
treated as U.S. persons prior to such date that elect to continue to be treated
as U.S. persons, shall also be considered U.S. Stockholders.


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<PAGE>   37

     As long as the Company qualifies as a REIT, distributions made by the
Company out of its current or accumulated earnings and profits (and not
designated as capital gain dividends) will constitute dividends taxable to its
taxable U.S. Stockholders as ordinary income. Such distributions will not be
eligible for the dividends-received deduction otherwise available with respect
to dividends received by U.S. Stockholders that are corporations. Distributions
made by the Company that are properly designated by the Company as capital gain
dividends will be taxable to taxable U.S. Stockholders as gains (to the extent
that they do not exceed the Company's actual net capital gain for the taxable
year) from the sale or disposition of a capital asset. Depending on the period
of time the Company held the assets which produced such gains, and on certain
designations, if any, which may be made by the Company, such gains may be
taxable to noncorporate U.S. Stockholders at a 20% or 25% rate. U.S.
Stockholders that are corporations may, however, be required to treat up to 20%
of certain capital gain dividends as ordinary income. To the extent that the
Company makes distributions (not designated as capital gain dividends) in excess
of its current and accumulated earnings and profits, such distributions will be
treated first as a tax-free return of capital to each U.S. Stockholder, reducing
the adjusted basis which such U.S. Stockholder has in his shares of Company
stock for tax purposes by the amount of such distribution (but not below zero),
with distributions in excess of a U.S. Stockholder's adjusted basis in his
shares taxable as capital gain, provided that the shares have been held as a
capital asset. Dividends declared by the Company in October, November, or
December of any year and payable to a stockholder of record on a specified date
in any such month shall be treated as both paid by the Company and received by
the stockholder on December 31 of such year, provided that the dividend is
actually paid by the Company on or before January 31 of the following calendar
year. Stockholders may not include in their own income tax returns any net
operating losses or capital losses of the Company.

     Distributions made by the Company and gain arising from the sale or
exchange by a U.S. Stockholder of shares of Company stock will not be treated as
passive activity income, and, as a result, U.S. Stockholders generally will not
be able to apply any "passive losses" against such income or gain. Distributions
made by the Company (to the extent they do not constitute a return of capital)
generally will be treated as investment income for purposes of computing the
investment interest limitation. Gain arising from the sale or other disposition
of Company stock (or distributions treated as such), however, will not be
treated as investment income under certain circumstances. The Company may elect
to retain, rather than distribute as a capital gain dividend, its net capital
gain. In such event, the Company would pay tax on such retained net capital
gain. In addition to the extent designated by the Company, a U.S. Stockholder
generally would (i) include his proportionate share of such undistributed net
capital gain in computing his long-term capital gains in his return for his
taxable year in which the last day of the Company's taxable year falls (subject
to certain limitations as to the amount so includable), (ii) be deemed to have
paid his pro rata share of the capital gains tax imposed on the Company on the
designated amounts included in such U.S. Stockholder's long-term capital gains,
(iii) receive a credit or refund for such amount of tax deemed paid by him, (iv)
increase the adjusted basis of his shares by the difference between the amount
of such includable gains and the tax deemed to have been paid by him, and (v),
in the case of a U.S. Stockholder that is a corporation, appropriately adjust
its earnings and profits for the retained capital gains in accordance with
regulations (which have not yet been issued).

     Upon any sale or other taxable disposition of Company stock, a U.S.
Stockholder will recognize gain or loss for federal income tax purposes in an
amount equal to the difference between (i) the amount of cash and the fair
market value of any property received on such sale or other disposition and (ii)
the holder's adjusted basis in such shares of Company stock for tax purposes.
Such gain or loss will be capital gain or loss if the shares have been held by
the U.S. Stockholder as a capital asset and will be long-term gain or loss if
such shares have been held for more than one year. In general, any loss
recognized by a U.S. Stockholder upon the sale or other disposition of shares of
Common Stock that have been held for six months or less (after applying certain
holding period rules) will be treated as a long-term capital loss, to the extent
of capital gain dividends received by such U.S. Stockholder from the Company
which were required to be treated as long-term capital gains.

  Backup Withholding

     The Company must report annually to the IRS and to each stockholder the
amount of dividends paid to and the amount of tax withheld, if any, with respect
to, each stockholder. Under the backup withholding rules, a stockholder may be
subject to backup withholding at the rate of 31% with respect to dividends paid
and redemption proceeds unless such stockholder (a) is a corporation or comes
within certain other exempt categories and, when required, demonstrates this
fact, or (b) provides a correct taxpayer identification number, certifies as to
no loss of exemption from backup withholding, and otherwise complies with
applicable requirements of the backup withholding rules. The Company will 


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<PAGE>   38

also institute backup withholding with respect to a stockholder if instructed to
do so by the IRS. A stockholder that does not provide the Company with its 
correct taxpayer identification number may also be subject to penalties imposed 
by the IRS. Any amount paid as backup withholding will be creditable against the
stockholder's federal income tax liability.

TAXATION OF TAX-EXEMPT STOCKHOLDERS

     The IRS has issued a revenue ruling in which it held that amounts
distributed by a REIT to a tax-exempt employees' pension trust do not constitute
unrelated business taxable income ("UBTI"). Revenue rulings, however, are
interpretive in nature and are subject to revocation or modification by the IRS.
Based upon the ruling and the analysis therein, distributions by the Company to
a stockholder that is a tax-exempt entity should not constitute UBTI, provided
that the tax-exempt entity has not financed the acquisition of its shares of the
Company's stock with "acquisition indebtedness" within the meaning of the Code,
and that the shares of the Company's stock are not otherwise used in an
unrelated trade or business of the tax-exempt entity. In addition, REITs
generally treat the beneficiaries of qualified pension trusts as the beneficial
owners of REIT shares owned by such pension trusts for purposes of determining
if more than 50% of the REIT's shares are owned by five or fewer individuals.
However, if a pension trust owns more than 10% of the REIT's shares, it can be
subject to UBTI on all or a portion of REIT dividends made to it, if the Company
is treated as a "pension-held REIT." In view of the Ownership Limit, the Company
does not expect to be treated as a "pension-held REIT." See "Description of
Common Stock -- Restrictions on Transfer."

TAXATION OF NON-U.S. STOCKHOLDERS

     The rules governing U.S. federal income taxation of the ownership and
disposition of Company stock by persons that are not U.S. stockholders
("Non-U.S. Stockholders") are complex, and no attempt is made herein to provide
more than a brief summary of such rules. Accordingly, the discussion does not
address all aspects of U.S. federal income tax and does not address state, local
or foreign tax consequences that may be relevant to a Non-U.S. Stockholder in
light of his particular circumstances. In addition, this discussion is based on
current law, which is subject to change, and assumes that the Company qualifies
for taxation as a REIT. The discussion addresses only certain aspects of U.S.
federal income taxation and does not address the impact of any applicable
treaty. Prospective Non-U.S. Stockholders should consult with their own tax
advisors to determine the impact of federal, state, local and foreign income tax
laws with regard to an investment in Company stock, including any reporting
requirements.

  Distributions From the Company.

     1.   Ordinary Dividends. Distributions that are not attributable to gain
from sales or exchanges by the Company or the Operating Partnership of "United
States real property interests" ("USRPIs"), as defined in the Code, and not
designated by the Company as capital gains dividends will be treated as
dividends of ordinary income to the extent they are made out of current or
accumulated earnings and profits of the Company. Unless such distributions are
effectively connected with the Non-U.S. Stockholder's conduct of a U.S. trade or
business (or, if an income tax treaty applies, is attributable to a U.S.
permanent establishment of the Non-U.S. Holder), the gross amount of the
distributions will ordinarily be subject to U.S. withholding tax at a 30% or
lower treaty rate. In general, Non-U.S. Stockholders will not be considered
engaged in a U.S. trade or business (or, in the case of an income tax treaty, as
having a U.S. permanent established) solely by reason of their ownership of the
Company's stock. If income on the Company's stock is treated as effectively
connected with the Non-U.S. Stockholder's conduct of a U.S. trade or business
(or, if an income tax treaty applies, is attributable to a U.S. permanent
establishment of the Non-U.S. Stockholder), the Non-U.S. Stockholder generally
will be subject to a tax at graduated rates in the same manner as U.S.
Stockholders are taxed with respect to such distributions (and may also be
subject to the 30% branch profits tax in the case of a Non-U.S. Stockholder that
is a foreign corporation).

     The Company expects to withhold U.S. income tax at the rate of 30% on the
gross amount of any distributions of ordinary income made to a Non-U.S.
Stockholder unless (i) a lower treaty rate applies and proper certification is
provided or (ii) the Non-U.S. Stockholder files an IRS Form 4224 with the
Company claiming that the distribution is effectively connected with the
Non-U.S. Stockholder's conduct of a U.S. trade or business (or, if an income tax
treaty applies, is attributable to a U.S. permanent establishment of the
Non-U.S. Stockholder). Pursuant to current Treasury Regulations, dividends paid
to an address in a country outside the United States are generally presumed to
be paid to a resident of such country for purposes of ascertaining the
requirement of withholding discussed above and the applicability of an income
tax treaty rate. Under temporary Treasury Regulations, however, certain Non-U.S.
Stockholders who seek to claim the benefit of an applicable treaty rate are
required to satisfy certain certification and other requirements.


                                       34

<PAGE>   39

     2.   Non-Dividend Distributions. Unless the Company's stock constitutes a
USRPI, distributions in excess of current and accumulated earnings and profits
of the Company will not be taxable to a Non-U.S. Stockholder to the extent that
such distributions do not exceed the adjusted basis of the Non-U.S.
Stockholder's shares but rather will reduce the adjusted basis of such shares.
To the extent that such distributions exceed the adjusted basis of a Non-U.S.
Stockholder's shares of the Company's capital stock, such distributions will
give rise to tax liability if the Non-U.S. Stockholder would otherwise be
subject to tax on any gain from the sale or disposition of his shares, as
described below. If it cannot be determined at the time a distribution is made
whether or not such distribution will be in excess of current and accumulated
earnings and profits, the distributions will be subject to withholding at the
same rate as dividends. If, however, the Company's stock is treated as a USRPI,
any distributions in excess of current or accumulated earnings and profits will
generally be subject to 10% withholding and, to the extent such distributions
also exceed the adjusted basis of a Non-U.S. Stockholder's stock, they will also
give rise to gain from the sale or exchange of the stock, the tax treatment of
which is described below. Amounts withheld may be refundable if it is
subsequently determined that such amounts are in excess of the Non-U.S.
Stockholder's tax liability.

     3.   Capital Gain Dividends. Distributions that are attributable to gain
from sales or exchanges by the Company of USRPIs ("USRPI Capital Gains"), such
as properties beneficially owned by the Company, will be taxed to a Non-U.S.
Stockholder under the provisions of the Foreign Investment in Real Property Tax
Act of 1980 ("FIRPTA"). Under FIRPTA, such distributions are taxed to a Non-U.S.
Stockholder as gain effectively connected with a U.S. trade or business,
regardless of whether such dividends are designated as capital gain dividends.
Non-U.S. Stockholders would thus be taxed at the normal capital gain rates
applicable to U.S. Stockholders (subject to applicable alternative minimum tax
and a special alternative minimum tax in the case of non-resident alien
individuals) on such distributions. Also, distributions from USRPI Capital Gains
may be subject to a 30% branch profits tax in the hands of a corporate Non-U.S.
Stockholder not entitled to treaty exemption or rate reduction. The Company is
required by applicable Treasury Regulations to withhold 35% of any distribution
consisting of USRPI Capital Gains. This amount may be creditable against the
Non-U.S. Stockholder's FIRPTA tax liability.

     Other distributions attributable to the Company's capital gains, other than
its USRPI Capital Gains, generally will not be subject to taxation, unless (i)
investment in the shares is effectively connected with the Non-U.S.
Stockholder's U.S. trade or business (or, if an income tax treaty applies, it is
attributable to a U.S. permanent establishment of the Non-U.S. Stockholder), in
which case the Non-U.S. Stockholder will be subject to the same treatment as
U.S. Stockholders with respect to such gain (except that a foreign corporate
Non-U.S. Stockholder may also be subject to the 30% branch profits tax), or (ii)
the Non-U.S. Stockholder is a non-resident alien individual who is present in
the United States for 183 days or more during the taxable year and either has a
"tax home" in the United States or sold his or her shares of Company stock under
circumstances in which the sale was attributable to a U.S. office, in which case
the non-resident alien individual will be subject to a 30% tax on the
individual's capital gains.

     Disposition of Stock of the Company. Gain recognized by a Non-U.S.
Stockholder upon a sale of shares of Company stock generally will not be taxed
under FIRPTA if the shares do not constitute a USRPI. Shares of Company stock
will not be considered a USRPI if the Company is a "domestically controlled
REIT," or if the shares are part of a class of stock that is regularly traded on
an established securities market and the holder owned less than 5% of the class
of stock sold during a specified testing period. A "domestically controlled
REIT" is defined generally as a REIT in which at all times during a specified
testing period less than 50% in value of the stock was held directly or
indirectly by foreign persons. The Company believes that it is, and expects that
it will continue to be, a "domestically controlled REIT," and therefore the sale
of shares will not be subject to taxation under FIRPTA. However, since the
Company's Common Stock is publicly traded, no assurance can be given to this
effect. If the gain on the sale of shares were to be subject to taxation under
FIRPTA, the Non-U.S. Stockholder would be subject to the same treatment as U.S.
Stockholders with respect to such gain (subject to applicable alternative
minimum tax and a special alternative minimum tax in the case of non-resident
alien individuals).

     Gain not subject to FIRPTA will be taxable to a Non-U.S. Stockholder if (i)
investment in the shares is effectively connected with a United States trade or
business of the Non-U.S. Stockholder (or, if an income tax treaty applies, is
attributable to a U.S. permanent establishment of the Non-U.S. Stockholder), in
which case the Non-U.S. Stockholder will be subject to the same treatment as
U.S. Stockholders with respect to such gain, or (ii) the Non-U.S. Stockholder is
a non-resident alien individual who was present in the United States for 183
days or more during the taxable year and has a "tax home" in the United States,
in which case the non-resident alien individual will be subject to a 30% tax on
the individual's capital gains.


                                       35

<PAGE>   40

     Estate Tax. Stock of the Company owned or treated as owned by an individual
who is not a citizen or resident (as specially defined for U.S. federal estate
tax purposes) of the United States at the time of death will be includable in
the individual's gross estate for U.S. federal estate tax purposes, unless an
applicable estate tax treaty provides otherwise. Such individual's estate may be
subject to U.S. federal estate tax on the property includable in the estate for
U.S. federal estate tax purposes.

     Information Reporting and Backup Withholding. The Company must report
annually to the IRS and to each Non-U.S. Stockholder the amount of dividends
(including any capital gain dividends) paid to, and the tax withheld with
respect to, each Non-U.S. Stockholder. These reporting requirements apply
regardless of whether withholding was reduced or eliminated by an applicable tax
treaty. Copies of these returns may also be made available under the provisions
of a specific treaty or agreement with the tax authorities in the country in
which the Non-U.S. Stockholder resides.

     U.S. backup withholding, which generally is imposed at the rate of 31% on
certain payments to persons that fail to furnish the information required under
the U.S. information reporting requirements, generally will not apply to
dividends (including any capital gain dividends) paid on stock of the Company to
a Non-U.S. Holder at an address outside the United States. However, the payment
of the proceeds from the disposition of stock of the Company to or though a U.S.
office of a broker will be subject to information reporting and backup
withholding unless the owner, under penalty of perjury, certifies, among other
things, its status as a Non-U.S. Holder, or otherwise establishes an exemption.
The payment of the proceeds from the disposition of stock to or through a
non-U.S. office of a non-U.S. broker generally will not be subject to backup
withholding and information reporting.

     New Withholding Regulations. Final regulations with withholding tax on
income paid to foreign persons and related matters (the "New Withholding
Regulations") were promulgated in 1997. In general, the New Withholding
Regulations do not significantly alter the substantive withholding and
information reporting requirements, but unify current certification procedures
and forms and clarify reliance standards. For example, the New Withholding
Regulations adopt a certification rule which was in the proposed regulations
under which a Non-U.S. Stockholder who wishes to claim the benefit of an
applicable treaty rate with respect to dividends received from a U.S.
corporation will be required to satisfy certain certification and other
requirements. In addition, the New Withholding Regulations require a corporation
that is a REIT to treat as a dividend the portion of a distribution that is not
designated as a capital gain dividend or return of basis and apply the 30%
withholding tax (subject to any applicable deduction or exemption) to such
portion, and to apply the FIRPTA withholding rules (discussed above) with
respect to the portion of the distribution designated by the REIT as capital
gain dividend. The New Withholding Regulations generally will be effective for
payments made after December 31, 1999, subject to certain transition rules.
EXCEPT AS PROVIDED IN THIS PARAGRAPH, THE DISCUSSION SET FORTH ABOVE UNDER
"TAXATION OF NON-U.S. STOCKHOLDERS" DOES NOT TAKE THE NEW WITHHOLDING
REGULATIONS INTO ACCOUNT. PROSPECTIVE NON-U.S. STOCKHOLDERS ARE STRONGLY URGED
TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE IMPACT TO THEM OF THE NEW
WITHHOLDING REGULATIONS.

OTHER TAX CONSIDERATIONS

  Essex Preferred Stock Subsidiaries

     A portion of the cash to be used by the Operating Partnership to fund
distributions to partners, including Essex, is expected to come from the Essex
Preferred Stock Subsidiaries through dividends on the non-voting stock of the
Essex Preferred Stock Subsidiaries held by the Operating Partnership. The Essex
Preferred Stock Subsidiaries will pay federal and state income tax at the full
applicable corporate rates. The Essex Preferred Stock Subsidiaries will attempt
to minimize the amount of such taxes, but there can be no assurance whether or
to what extent measures taken to minimize taxes will be successful. Because
Essex, the Operating Partnership and the Essex Preferred Stock Subsidiaries are
related through stock or partnership ownership, the allocation of certain
expenses and reimbursements thereof among Essex, the Essex Preferred Stock
Subsidiaries and the Operating Partnership could be subject to additional
scrutiny by the IRS. To the extent that the Essex Preferred Stock Subsidiaries
are required to pay federal, state or local taxes, the cash available for
distribution by Essex to stockholders will be reduced accordingly.


                                       36

<PAGE>   41

  Dividend Reinvestment Program

     Under the Company's dividend reinvestment program, stockholders
participating in the program will be deemed to have received the gross amount of
any cash distributions which would have been paid by the Company to such
stockholders had they not elected to participate. These deemed distributions
will be treated as actual distributions from the Company to the participating
stockholders and will retain the character and tax effect applicable to
distributions from the Company generally. See "Federal Income Tax
Considerations-Taxation of Taxable U.S. Stockholders Generally." Participants in
the dividend reinvestment program are subject to federal income tax on the
amount of the deemed distributions to the extent that such distributions
represent dividends (including capital gains dividends) of the Company, even
though they receive no cash. Shares of Company stock received under the program
will have a holding period beginning with the day after purchase, and a tax
basis equal to their cost (which is the gross amount of the deemed
distribution).

  Possible Legislative or Other Actions Affecting Tax Consequences

     Prospective investors should recognize that the present federal income tax
treatment of an investment in the Company may be modified by legislative,
judicial or administrative action at any time, and that any such action may
affect investments and commitments previously made. The rules dealing with
federal income taxation are constantly under review by persons involved in the
legislative process and by the IRS and the U.S. Treasury Department, resulting
in revisions of regulations and revised interpretations of established concepts
as well as statutory changes. Revisions in federal tax laws and interpretations
thereof could adversely affect the tax consequences of an investment in the
Company.

  State and Local Taxes

     The Company and its stockholders may be subject to state or local taxation
in various jurisdictions, including those in which it or they transact business
or reside. The state and local tax treatment of the Company and its stockholders
may not conform to the federal income tax consequences discussed above.
Consequently, prospective stockholders should consult their own tax advisers
regarding the effect of state and local tax laws on an investment in the Common
Stock of the Company.

     It should be noted that the Company has not obtained an opinion of counsel
with respect to the foregoing disclosure in subsections entitled "Taxation of
Taxable Domestic Stockholders," "Taxation of Tax-Exempt Stockholders," "Taxation
of Foreign Stockholders" and "Other Tax Considerations".

                              PLAN OF DISTRIBUTION

     This Prospectus relates to the offer and sale from time to time of (i) up
to 1,600,000 shares of Convertible Preferred Stock by the Selling Stockholders,
or by pledges, donees, transferees or other successors in interest; (ii) up to
1,828,571 Common Shares issuable upon conversion of the Preferred Shares; and
(iii) an indeterminate number of shares of Common Stock which may be issued as a
result of the anti-dilution provisions of the Preferred Shares and in accordance
with Rule 416 under the Securities Act. The Company has registered the Shares
for sale pursuant to certain registration rights agreements, but registration of
such Shares does not necessarily mean that any of such Shares will be offered
and sold by the holders thereof.

     The Company will not receive any proceeds from the offering by the Selling
Stockholders. The Shares may be sold from time to time to purchasers directly by
any of the Selling Stockholders. Alternatively, the Selling Stockholders may
from time to time offer the Shares through dealers or agents, who may receive
compensation in the form of commissions from the Selling Stockholders and/or the
purchasers of Shares for whom they may act as agent. The Selling Stockholders
and any dealers or agents that participate in the distribution of Shares may be
deemed to be "underwriters" within the meaning of the Securities Act and any
profit on the sale of Shares by them and any commissions received by any such
dealers or agents might be deemed to be underwriting commissions under the
Securities Act.

     The distribution of the Shares also may be effected from time to time in
one or more underwritten transactions at a fixed price or prices, which may be
changed, or at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. Any such underwritten
offering may be on a "best efforts" or a "firm 


                                       37

<PAGE>   42

commitment" basis. In connection with any such underwritten offering, 
underwriters or agents may receive compensation in the form of discounts,
concessions or commissions from the Selling Stockholders or from purchasers of
Shares for whom they may act as agents. Underwriters may sell Shares to or
through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters and/or commissions
from the purchasers for whom they may act as agents. The Company has agreed to
indemnify the underwriters, if any, against certain liabilities, including
liabilities under the Securities Act of 1933, as amended.

     At a time a particular offer of Shares is made, a Prospectus Supplement,
may, if required, be distributed that will set forth the name and names of any
dealers or agents and any commissions and other terms constituting compensation
from the Selling Stockholders and any other required information. The Shares may
be sold from time to time at varying prices determined at the time of sale or at
negotiated prices.

     In order to comply with the securities laws of certain states, if
applicable, the Shares may be sold only through registered or licensed brokers
or dealers. In addition, in certain states, the Shares may not be sold unless
they have been registered or qualified for sale in such state or an exemption
from such registration or qualification requirement is available and is complied
with.

     The Shares may also be sold in one or more of the following transactions:
(a) block transactions (which may involve crosses) in which a broker-dealer may
sell all or a portion of such stock as agent but may position and resell all or
a portion of the block as principal to facilitate the transaction; (b) purchases
by any such broker-dealer as principal and resale by such broker-dealer for its
own account pursuant to a Prospectus Supplement; (c) a special offering, an
exchange distribution or a secondary distribution in accordance with applicable
NYSE or other stock exchange rules; (d) ordinary brokerage transactions and
transactions in which any such broker-dealer solicits purchasers; (e) sales "at
the market" to or through a market maker or into an existing trading market, on
an exchange or otherwise, for such shares; and (f) sales in other ways not
involving market makers or established trading markets, including direct sales
to purchasers. In effecting sales, broker-dealers engaged by the Selling
Stockholders may arrange for other broker-dealers to participate.

                                     EXPERTS

     The consolidated financial statements and schedule of the Company as of
December 31, 1997 and 1996 and for the years ended December 31, 1997, 1996 and
1995, and audited Combined Statement of Revenues and Certain Expenses of
Wimbledon Woods and Bunker Hill Towers for the year ended December 31, 1997 have
been incorporated by reference herein and in the registration statement in
reliance upon the reports of KPMG Peat Marwick LLP, independent certified
accountants, and upon the authority of said firm as experts in accounting and
auditing. The Combined Statement of Revenues and Certain Expenses of Wimbledon
Woods and Bunker Hill Towers was prepared to comply with the requirements of
Rule 3-14 of Regulation S-X of the Securities and Exchange Commission and
excludes certain expenses that would not be comparable to those resulting from
the proposed future operations of the properties. It is not intended to be a
complete presentation of the operations of the properties.

                                  LEGAL MATTERS

     The validity of the Offered Securities will be passed upon for the Company
by Morrison & Foerster LLP, Palo Alto, California. In addition, the description
of the Company's qualification and taxation as a REIT under the Code contained
in this Prospectus under the caption entitled "Federal Income Tax
Considerations-General" is based upon the opinion of Morrison & Foerster LLP.


                                       38

<PAGE>   43

                                     PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS


ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

     The expenses, other than underwriting discounts and commissions, in
connection with the offering of the securities being registered are set forth
below. All of such expenses are estimates, except the Securities Act
registration fee.

<TABLE>
<S>                                                             <C>
    Securities Act Registration Fee..........................   $16,605
    Printing and duplicating fees............................     1,500 
    Legal fees and expenses..................................    25,000
    Accounting fees and expenses.............................     3,000
    Miscellaneous expenses...................................     3,895
                                                                ------- 
       Total.................................................   $50,000
                                                                =======
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

     The Maryland General Corporation Law (the "MGCL") permits a Maryland
corporation to include in its charter a provision limiting the liability of its
directors and officers to the corporation and its stockholders for money damages
except for (i) actual receipt of an improper benefit or profit in money,
property or services or (ii) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. The Charter contains
such a provision which limits such liability to the maximum extent permitted by
the MGCL.

     The Charter authorizes the Company to obligate itself to indemnify its
present and former officers and directors and to pay or reimburse reasonable
expenses for such individuals in advance of the final disposition of a
proceeding to the maximum extent permitted from time to time by the laws of
Maryland. The Bylaws of the Company obligate it to indemnify, and advance
expenses to present, former and proposed directors and officers to the maximum
extent permitted by Maryland law. The MGCL permits a corporation to indemnify
its present and former directors and officers, among others, against judgments,
penalties, fines, settlements and reasonable expenses actually incurred by them
in connection with any proceeding to which they may be made a party by reason of
their services in those or other capacities unless it is established that (a)
the act or omission of the director or officer was material to the matter giving
rise to the proceeding and (i) was committed in bad faith or (ii) was the result
of active and deliberate dishonesty, (b) the director or officer actually
received an improper personal benefit in money, property or services, or (c) in
the case of any criminal proceeding, the director or officer had reasonable
cause to believe that the act or omission was unlawful. However, a corporation
may not indemnify for an adverse judgment in a suit by or in the right of the
corporation. In addition, the MGCL requires the Company, as conditions to
advancing expenses, to obtain (i) a written affirmation by the director or
officer of his good-faith belief that he has met the standard of conduct
necessary for indemnification by the Company as authorized by the applicable
Bylaws and (ii) a written statement by him or on his behalf to repay the amount
paid or reimbursed by the Company if it shall ultimately be determined that the
standard of conduct was not met. The Bylaws of the Company also permit the
Company to provide indemnification and advance or expenses to a present or
former director or officer who served a predecessor of the Company in such
capacity, and to any employee or agent of the Company or a predecessor of the
Company. Finally, the MGCL requires a corporation (unless its charter provides
otherwise, which the Company's charter does not) to indemnify a director or
officer who has been successful, on the merits or otherwise, in the defense of
any proceedings to which he is made a party by reason of his service in that
capacity.

     The Company has entered into indemnification agreements with each of the
directors and executive officers of the Company to provide them with
indemnification to the full extent permitted by the Charter and Bylaws of the
Company.

     The Company maintains an insurance policy which provides liability coverage
for directors and officers of the Company.


                                      II-1

<PAGE>   44

ITEM 16. EXHIBITS


<TABLE>
<S>     <C>
   3.1  Article of Amendment and Restatement of Essex dated June 22, 1995,
        attached as Exhibit 3.1 to Essex's Quarterly Report on Form 10-Q for the
        quarter ended June 30, 1995, and hereby incorporated herein by reference

   3.2  Articles Supplementary of Essex Property Trust, Inc. for the 8.75%
        Convertible Preferred Stock, Series 1996A attached as Exhibit 3.1 to
        Essex's Current Report on Form 8-K, filed August 13, 1996, and hereby
        incorporated herein by reference

   3.3  First Amendment to Article of Amendment and Restatement of Essex Property 
        Trust, Inc., attached as Exhibit 3.1 to Essex's 10-Q as of September 30, 
        1996, and hereby incorporated herein by reference

   3.4  Amended and Restated Bylaws of Essex Property Trust, Inc., attached as
        Exhibit 3.2 to Essex's Current Report on Form 8-K, filed August 13, 1996, 
        and hereby incorporated herein by reference

   3.5  Certificate of Amendment of the Bylaws of Essex Property Trust, Inc.,
        dated December 17, 1996, attached as Exhibit 3.6 to the Annual Report on
        Form 10-K for the year ended December 31, 1997, and hereby incorporated
        herein by reference

   3.6  Articles Supplementary for the 7.875% Series B Cumulative Redeemable
        Preferred Stock, attached as Exhibit 3.1 to Essex's Current Report on
        Form 8-K, filed March 3, 1998, and hereby incorporated herein by 
        reference

   5.1  Opinion of Morrison & Foerster LLP

   8.1  Opinion of Morrison & Foerster LLP relating to certain tax matters

  23.1  Consent of Independent Certified Public Accountants

  23.2  Consent of Morrison & Foerster  LLP  (included in Exhibits 5.1 and 8.1)

  24.1  Power of Attorney (included on page II-4)
</TABLE>


ITEM 17. UNDERTAKINGS

     The undersigned Registrant hereby undertakes:

     (1)  To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

          (i)  To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

          (ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high and of
the estimated maximum offering price may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and

          (iii) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or any
material change to such information in this registration statement; provided,
however, that subparagraphs (i) and (ii) do not apply if the information
required to be included in a post-effective amendment by those paragraphs is
contained in the periodic reports filed by the Registrants pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in this registration statement.

     (2)  That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.


                                      II-2

<PAGE>   45

     (3)  To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.

     The undersigned Registrant hereby further undertakes that, for the purposes
of determining any liability under the Securities Act of 1933, each filing of
the Registrants' annual reports pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

    The undersigned Registrant hereby further undertakes that:

     (1)  For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance under Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4), or 497(h)
under the Securities Act of 1933 shall be deemed to be part of this registration
statement as of the time it was declared effective.

     (2)  For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

     The undersigned Registrant undertakes that insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the Registrant pursuant to the
provisions described under Item 15 of this registration statement, or otherwise
(other than insurance), the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in such Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the Securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in such Act and
will be governed by the final adjudication of such issue.


                                      II-3

<PAGE>   46

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Palo Alto, State of California, on the 7th day of
December, 1998.

                                        ESSEX PROPERTY TRUST, INC.


                                        By:       /s/ KEITH R. GUERICKE
                                           -------------------------------------
                                                     Keith R. Guericke
                                           Chief Executive Officer and President


     We, the undersigned officers and directors of Essex Property Trust, Inc. do
hereby constitute and appoint George M. Marcus, Keith R. Guericke, Michael J.
Schall and Mark J. Mikl, and each of them, our true and lawful attorneys-in-fact
and agents, each with full power of substitution and resubstitution, for him and
in his name, place and stead, in any and all capacities, to sign any and all
amendments to this Registration Statement, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that each of said attorneys-in-fact and agents, or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.

    Pursuant to the requirements of the Securities Act of 1933, the Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:

<TABLE>
<CAPTION>
         SIGNATURE                          TITLE                         DATE
         ---------                          -----                         ----
<S>                           <C>                                    <C>
/s/ GEORGE M. MARCUS          Chairman of the Board of Directors     December 7, 1998
- ----------------------------
George M. Marcus

                              Director                               December  , 1998
- ----------------------------
William A. Millichap

/s/ KEITH R. GUERICKE         Director, Chief Executive Officer      December 7, 1998
- ----------------------------  and President (Principal Executive
Keith R. Guericke             Officer)

/s/ MICHAEL J. SCHALL         Director, Executive Vice President     December 7, 1998
- ----------------------------  and Chief Financial Officer
Michael J. Schall             (Principal Financial Officer)

/s/ MARK J. MIKL              Controller (Principal Accounting       December 7, 1998
- ----------------------------  Officer)
Mark J. Mikl

                              Director                               December  , 1998
- ----------------------------
David W. Brady
</TABLE>


                                      II-4

<PAGE>   47

<TABLE>
<CAPTION>
         SIGNATURE                          TITLE                         DATE
         ---------                          -----                         ----
<S>                           <C>                                    <C>
/s/ ROBERT E. LARSON          Director                               December 7, 1998
- ----------------------------
Robert E. Larson

                              Director                               December  , 1998
- ----------------------------
Gary P. Martin

                              Director                               December  , 1998
- ----------------------------
Issie N. Rabinovitch

/s/ THOMAS E. RANDLETT        Director                               December 7, 1998
- ----------------------------
Thomas E. Randlett

/s/ WILLARD H. SMITH, JR.     Director                               December 7, 1998
- ----------------------------
Willard H. Smith, Jr.

                              Director                               December  , 1998
- ----------------------------
Gregory J. Hartman

/s/ ANTHONY DOWNS             Director                               December 7, 1998
- ----------------------------
Anthony Downs
</TABLE>

<PAGE>   1

                                                                     EXHIBIT 5.1


December __, 1998



Essex Property Trust, Inc.
925 East Meadow Drive
Palo Alto, California  94303

Dear Sirs:

     We are acting as counsel to Essex Property Trust, Inc., a Maryland
corporation (the "Company"), in connection with the offer and sale from time to
time by the holders of up to 1,600,000 shares of the Company's 8.75% Convertible
Preferred Stock, Series 1996A (the "Preferred Shares") and 1,828,571 shares of
the Company's common stock, par value $.0001 per share (the "Common Shares")
which may be issued by the Company upon conversion of the Preferred Shares. The
Preferred Shares and the Common Shares are the subject of a Registration
Statement (the "Registration Statement") filed by the Company on Form S-3 under
the Securities Act of 1933, as amended (the "Act").

     In our capacity as your counsel in connection with such registration, we
are familiar with the proceedings taken and proposed to be taken by the Company
in connection with the authorization and issuance of the Common Shares, and for
the purposes of this opinion, have assumed such proceedings will be timely
completed in the manner presently proposed. In addition, we have made such legal
and factual examinations and inquiries, including an examination of originals or
copies certified or otherwise identified to our satisfaction of such documents,
corporate records and instruments, as we have deemed necessary or appropriate
for purposes of this opinion.

     Based upon and subject to the foregoing, it is our opinion that the Company
has authority pursuant to its Articles of Incorporation to issue the Common
Shares upon compliance with the applicable provisions of the Act and such state
"blue sky" or securities laws as may be applicable and upon issuance and
delivery of and payment for

<PAGE>   2

Essex Property Trust, Inc.
December __, 1998
Page 2


the Common Shares in the manner contemplated by the Registration Statement, the 
Common Shares will be legally issued, fully paid, and nonassessable.

                                             Very truly yours,

                                             /s/ Morrison & Foerster

<PAGE>   1

                                                                     EXHIBIT 8.1


December 7, 1998



Essex Property Trust, Inc.
925 East Meadow Drive
Palo Alto, California  94303

Ladies and Gentlemen:

     We have acted as special tax counsel to Essex Property Trust, Inc., a
Maryland corporation (the "Company"), in connection with the offer and sale from
time to time by the holders of up to 1,600,000 shares of the Company's 8.75%
Convertible Preferred Stock, Series 1996A (the "Preferred Shares") and 1,828,571
shares of the Company's common stock, par value $.0001 per share (the "Common
Shares") which may be issued by the Company upon conversion of the Preferred
Shares. The Preferred Shares and the Common Shares are the subject of a
Registration Statement (the "Registration Statement") filed by the Company on
Form S-3 under the Securities Act of 1933, as amended. Capitalized terms not
defined herein shall have the meanings ascribed to them in the certificate (or
incorporated therein by reference), dated December 7, 1998 (the "Certificate"),
delivered to Morrison & Foerster LLP which provides certain representations of
fact by the Company relevant to this opinion.

     You have requested our opinion as to whether the Company has operated in a
manner to qualify it as a real estate investment trust ("REIT"), within the
meaning of Section 856(a) of the Internal Revenue Code of 1986, as amended (the
"Code"). This opinion is solely for the benefit of the Company and may not be
relied upon by, nor may copies be delivered to, any other person without our
prior written consent.

     In our capacity as special tax counsel to the Company and for purposes of
rendering this opinion, we have examined and relied upon the following, with
your consent: (i) the Certificate; (ii) the Registration Statement and (iii)
such other documents we have considered relevant to our analysis. In our
examination of such documents, we have assumed the authenticity of original
documents, the accuracy of copies, the genuineness of signatures, and the legal
capacity of signatories. We have also assumed that all parties to such documents
have acted, and will act, in accordance with the terms of such documents.

     Furthermore, our opinion is based on (a) our understanding of the facts as
represented to us in the Certificate and (b) the assumption that (I) the Company
is operated and will continue to be operated in the manner described in the
Certificate, (II) the facts contained in the Registration Statement are true and
complete in all material respects, and


<PAGE>   2

Essex Property Trust, Inc.
December 7, 1998
Page 2


(III) all representations of fact contained in the Certificate are true and
complete in all material respects. We have not undertaken any independent
inquiry into or verification of these facts either in the course of our
representation of the Company or for the purpose of rendering this opinion.
While we have reviewed all representations made to us to determine their
reasonableness, we have no assurance that they are or will ultimately prove to
be accurate.

     We also note that the tax consequences addressed herein depend upon the
actual occurrence of events in the future, which events may or may not be
consistent with any representations made to us for purposes of this opinion. In
particular, qualification and taxation of the Company as a REIT under the Code
depends upon the Company's ability to meet on a continuing basis certain
distribution levels, diversity of stock ownership, and the various qualification
tests imposed by the Code. To the extent that the facts differ from those
represented to us or assumed by us herein, our opinion should not be relied
upon.

     Our opinion herein is based on existing law as contained in the Code, the
Treasury Regulations promulgated thereunder, administrative pronouncements of
the IRS and court decisions as of the date hereof. The provisions of the Code
and the Treasury Regulations, IRS administrative pronouncements and case law
upon which this opinion is based could be changed at any time, perhaps with
retroactive effect. In addition, some of the issues under existing law that
could significantly affect our opinion have not yet been authoritatively
addressed by the IRS or the courts, and our opinion is not binding on the IRS or
the courts. Hence, there can be no assurance that the IRS will not challenge or
that the courts will agree with our conclusions.

     Based upon, and subject to, the foregoing and the next paragraph below, we
are of the opinion that, commencing with the Company's taxable year ending
December 31, 1994 through its taxable year ending December 31, 1997, the Company
has been organized in conformity with the requirements for qualification as a
REIT under the Code and its method of operation has enabled it to so qualify,
and if it operates after December 31, 1997 in the same manner as it has prior to
that date, it will continue to so qualify.

<PAGE>   3

Essex Property Trust, Inc.
December 7, 1998
Page 3


     We undertake no obligation to update this opinion, or to ascertain after
the date hereof whether circumstances occurring after such date may affect the
conclusions set forth herein. We express no opinion as to matters governed by
any laws other than the Code, the Treasury Regulations, published administrative
announcements and rulings of the IRS and case law.

                                Very truly yours,

                                /s/ Morrison & Foerster

<PAGE>   1
                                                                    EXHIBIT 23.1

              CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



The Board of Directors
Essex Property Trust, Inc.:

We consent to incorporation by reference in the registration statement and
prospectus dated December 4, 1998 on Form S-3 of Essex Property Trust, Inc. of
our report dated January 30, 1998, relating to the consolidated balance sheets
of Essex Property Trust, Inc. as of December 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows of
Essex Property Trust, Inc. for the years ended December 31, 1997, 1996 and 1995
and related financial statement schedule, which report appears in the December
31, 1997, annual report on Form 10-K of Essex Property Trust, Inc.

We also consent to incorporation by reference in the aforementioned registration
statement and prospectus of our report dated March 31, 1998, relating to the
Combined Statement of Revenues and Certain Expenses of Wimbledon Woods and
Bunker Hill Towers for the year ended December 31, 1997, which report appears in
Form 8-K dated May 14, 1998, as amended by Form 8-K/A dated June 24, 1998. Such
Combined Statement of Revenues and Certain Expenses of Wimbledon Woods and
Bunker Hill Towers was prepared to comply with the requirements of Rule 3-14 of
Regulation S-X of the Securities and Exchange Commission and excludes certain
expenses that would not be comparable to those resulting from the proposed
future operations of the properties. It is not intended to be a complete
presentation of the operations of the properties.

We also consent to the reference to our firm under the heading "Experts" in the
prospectus.



San Francisco, California 
December 4, 1998
 


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