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FORM 10-Q

~~UNITED STATES~~
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR ~~15(d)~~15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~MARCH 31,~~JUNE 30, 2002

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR ~~15(d)~~15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 1-12252

EQUITY RESIDENTIAL ~~PROPERTIES TRUST~~
(Exact ~~Name~~name of ~~Registrant~~registrant as ~~Specified~~specified in ~~Its Charter)~~its charter)

EQUITY RESIDENTIAL PROPERTIES TRUST
(Former name of registrant, if changed since last report)

Maryland		13-3675988
(State or Other Jurisdiction of Incorporation or Organization)		~~13-3675988~~ (I.R.S. Employer Identification No.)

Two North Riverside Plaza, Chicago, Illinois		60606
(Address of Principal Executive Offices)		~~60606~~ (Zip Code)

(312) 474-1300
(Registrant's ~~Telephone Number, Including Area Code)~~telephone number, including area code)

http://www.equityapartments.com
(Registrant's web site)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý Noo

~~APPLICABLE ONLY TO CORPORATE USERS:~~

~~Indicate the~~The number of ~~shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:~~

~~At May 1, 2002, 274,583,528 of the Registrant's~~ Common Shares of Beneficial Interest, ~~were outstanding.~~$0.01 par value, outstanding on July 31, 2002 was 275,538,420.

EQUITY RESIDENTIAL ~~PROPERTIES TRUST~~

CONSOLIDATED BALANCE SHEETS

(Amounts in ~~thousands except for share amounts)~~thousands)

(Unaudited)

			March 31, 2002			December 31, 2001					June 30, 2002			December 31, 2001
ASSETS	ASSETS								ASSETS
Investment in real estate	Investment in real estate								Investment in real estate
	Land		$	1,844,098		$	1,840,170		Land		$	1,857,497		$	1,840,170
	Depreciable property			11,135,057			11,096,847		Depreciable property			11,205,307			11,096,847
	Construction in progress			104,158			79,166		Construction in progress			94,292			79,166

				13,083,313			13,016,183					13,157,096			13,016,183
	Accumulated depreciation			(1,831,277	)		(1,718,845	)	Accumulated depreciation			(1,929,115	)		(1,718,845	)

Investment in real estate, net of accumulated depreciation	Investment in real estate, net of accumulated depreciation			11,252,036			11,297,338		Investment in real estate, net of accumulated depreciation			11,227,981			11,297,338
Real estate held for disposition	Real estate held for disposition			3,505			3,371		Real estate held for disposition			—			3,371
Cash and cash equivalents	Cash and cash equivalents			249,762			51,603		Cash and cash equivalents			88,942			51,603
Investments in unconsolidated entities	Investments in unconsolidated entities			396,733			397,237		Investments in unconsolidated entities			423,529			397,237
Rents receivable	Rents receivable			1,355			2,400		Rents receivable			2,627			2,400
Deposits—restricted	Deposits—restricted			210,496			218,557		Deposits—restricted			149,927			218,557
Escrow deposits—mortgage	Escrow deposits—mortgage			72,595			76,700		Escrow deposits—mortgage			62,049			76,700
Deferred financing costs, net	Deferred financing costs, net			28,563			27,011		Deferred financing costs, net			32,964			27,011
Rental furniture, net	Rental furniture, net			—			20,168		Rental furniture, net			—			20,168
Property and equipment, net	Property and equipment, net			—			3,063		Property and equipment, net			—			3,063
Goodwill, net	Goodwill, net			47,122			47,291		Goodwill, net			47,122			47,291
Other assets	Other assets			66,086			90,886		Other assets			76,659			90,886

		Total assets	$	12,328,253		$	12,235,625			Total assets	$	12,111,800		$	12,235,625

LIABILITIES AND SHAREHOLDERS' EQUITY	LIABILITIES AND SHAREHOLDERS' EQUITY								LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:	Liabilities:								Liabilities:
	Mortgage notes payable		$	3,279,105		$	3,286,814		Mortgage notes payable		$	3,210,510		$	3,286,814
	Notes, net			2,556,358			2,260,944		Notes, net			2,438,974			2,260,944
	Line of credit			—			195,000		Line of credit			—			195,000
	Accounts payable and accrued expenses			99,669			108,254		Accounts payable and accrued expenses			116,192			108,254
	Accrued interest payable			72,323			62,360		Accrued interest payable			62,676			62,360
	Rents received in advance and other liabilities			87,219			83,005		Rents received in advance and other liabilities			65,226			83,005
	Security deposits			47,574			47,644		Security deposits			47,098			47,644
	Distributions payable			145,433			141,832		Distributions payable			145,880			141,832

		Total liabilities		6,287,681			6,185,853			Total liabilities		6,086,556			6,185,853

*Commitments and contingencies*	*Commitments and contingencies*								*Commitments and contingencies*
Minority Interests:	Minority Interests:								Minority Interests:
	Operating Partnership			368,372			379,898		Operating Partnership			364,233			379,898
	Preference Interests			246,000			246,000		Preference Interests			246,000			246,000
	Junior Preference Units			5,846			5,846		Junior Preference Units			5,846			5,846
	Partially Owned Properties			13,953			4,078		Partially Owned Properties			11,503			4,078

		Total Minority Interests		634,171			635,822			Total Minority Interests		627,582			635,822

Shareholders' equity:	Shareholders' equity:								Shareholders' equity:
	Preferred Shares of beneficial interest, $.01 par value; 100,000,000 shares authorized; 11,307,209 shares issued and outstanding as of March 31, 2002 and 11,344,521 shares issued and outstanding as of December 31, 2001			965,738			966,671		Preferred Shares of beneficial interest, $.01 par value; 100,000,000 shares authorized; 10,691,940 shares issued and outstanding as of June 30, 2002 and 11,344,521 shares issued and outstanding as of December 31, 2001			950,356			966,671
	Common Shares of beneficial interest, $.01 par value; 1,000,000,000 shares authorized; 273,836,367 shares issued and outstanding as of March 31, 2002 and 271,621,374 shares issued and outstanding as of December 31, 2001			2,738			2,716		Common Shares of beneficial interest, $.01 par value; 1,000,000,000 shares authorized; 275,467,781 shares issued and outstanding as of June 30, 2002 and 271,621,374 shares issued and outstanding as of December 31, 2001			2,755			2,716
	Paid in capital			4,931,601			4,892,744		Paid in capital			4,967,957			4,892,744
	Employee notes			(3,958	)		(4,043	)	Employee notes			(3,870	)		(4,043	)
	Deferred compensation			(36,865	)		(25,778	)	Deferred compensation			(31,607	)		(25,778	)
	Distributions in excess of accumulated earnings			(427,190	)		(385,320	)	Distributions in excess of accumulated earnings			(457,264	)		(385,320	)
	Accumulated other comprehensive loss			(25,663	)		(33,040	)	Accumulated other comprehensive loss			(30,665	)		(33,040	)

		Total shareholders' equity		5,406,401			5,413,950			Total shareholders' equity		5,397,662			5,413,950

		Total liabilities and shareholders' equity	$	12,328,253		$	12,235,625			Total liabilities and shareholders' equity	$	12,111,800		$	12,235,625

See accompanying notes

EQUITY RESIDENTIAL ~~PROPERTIES TRUST~~

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands except ~~for~~per share data)

(Unaudited)

				Quarter Ended March 31,								Six Months Ended June 30,						Quarter Ended June 30,
				2002			2001					2002			2001			2002			2001
REVENUES	REVENUES									REVENUES
	Rental income			$	510,376		$	510,675		Rental income		$	1,011,823		$	1,014,813		$	506,915		$	509,428
	Fee and asset management				1,718			1,972		Fee and asset management			4,310			4,140			2,592			2,168
	Interest and other income				4,107			6,502		Interest and other income			9,318			11,525			5,210			5,024
	Interest income—investment in mortgage notes				—			2,744		Interest income—investment in mortgage notes			—			8,763			—			6,019

		Total revenues			516,201			521,893			Total revenues		1,025,451			1,039,241			514,717			522,639

EXPENSES	EXPENSES									EXPENSES
	Property and maintenance				129,679			135,985		Property and maintenance			257,727			273,318			129,360			138,747
��										Real estate taxes and insurance			103,415			95,613			51,422			48,165
	Real estate taxes and insurance				52,560			47,937		Property management			37,289			36,364			18,256			17,686
	Property management				19,033			18,687		Fee and asset management			3,577			3,648			1,758			1,764
	Fee and asset management				1,819			1,875		Depreciation			232,721			221,797			117,509			111,296
	Depreciation				116,587			111,845		Interest:
	Interest:										Expense incurred, net		171,993			178,660			87,229			88,857
		Expense incurred, net			84,795			89,898			Amortization of deferred financing costs		2,988			2,810			1,597			1,413
		Amortization of deferred financing costs			1,391			1,397		General and administrative			22,327			14,079			11,527			7,325
	General and administrative				10,800			6,754		Impairment on technology investments			581			6,775			290			3,772
	Impairment on technology investments				291			3,003		Amortization of goodwill			—			1,281			—			638
	Amortization of goodwill				—			643
											Total expenses		832,618			834,345			418,948			419,663
			Total expenses		416,955			418,024

Income before allocation to Minority Interests, income from investments in unconsolidated entities, net gain on sales of unconsolidated entities, discontinued operations, extraordinary items and cumulative effect of change in accounting principle					99,246			103,869
Income before allocation to Minority Interests, income from investments in unconsolidated entities, net gain (loss) on sales of unconsolidated entities, discontinued operations, extraordinary items and cumulative effect of change in accounting principle										Income before allocation to Minority Interests, income from investments in unconsolidated entities, net gain (loss) on sales of unconsolidated entities, discontinued operations, extraordinary items and cumulative effect of change in accounting principle			192,833			204,896			95,769			102,976
Allocation to Minority Interests:	Allocation to Minority Interests:									Allocation to Minority Interests:
	Operating Partnership				(6,441	)		(9,796	)	Operating Partnership			(13,784	)		(16,474	)		(7,343	)		(6,678	)
	Partially Owned Properties				(806	)		(105	)	Partially Owned Properties			(1,325	)		(238	)		(519	)		(133	)
Income from investments in unconsolidated entities	Income from investments in unconsolidated entities				226			350		Income from investments in unconsolidated entities			233			960			7			610
Net gain on sales of unconsolidated entities					5,657			—
Net gain (loss) on sales of unconsolidated entities										Net gain (loss) on sales of unconsolidated entities			5,246			339			(411	)		339

Income before discontinued operations, extraordinary items and cumulative effect of change in accounting principle	Income before discontinued operations, extraordinary items and cumulative effect of change in accounting principle				97,882			94,318		Income before discontinued operations, extraordinary items and cumulative effect of change in accounting principle			183,203			189,483			87,503			97,114
Net gain on sales of discontinued operations	Net gain on sales of discontinued operations				2,816			41,778		Net gain on sales of discontinued operations			28,446			46,226			25,630			4,448
Discontinued operations, net	Discontinued operations, net				277			143		Discontinued operations, net			2,994			3,666			535			1,574

Income before extraordinary items and cumulative effect of change in accounting principle	Income before extraordinary items and cumulative effect of change in accounting principle				100,975			136,239		Income before extraordinary items and cumulative effect of change in accounting principle			214,643			239,375			113,668			103,136
Extraordinary items	Extraordinary items				(97	)		311		Extraordinary items			(468	)		106			(371	)		(205	)
Cumulative effect of change in accounting principle	Cumulative effect of change in accounting principle				—			(1,270	)	Cumulative effect of change in accounting principle			—			(1,270	)		—			—

Net income	Net income				100,878			135,280		Net income			214,175			238,211			113,297			102,931
Preferred distributions	Preferred distributions				(24,525	)		(28,526	)	Preferred distributions			(48,781	)		(57,419	)		(24,256	)		(28,893	)

Net income available to Common Shares	Net income available to Common Shares			$	76,353		$	106,754		Net income available to Common Shares		$	165,394		$	180,792		$	89,041		$	74,038

Net income per share—basic	Net income per share—basic			$	0.28		$	0.40		Net income per share—basic		$	0.61		$	0.68		$	0.33		$	0.28

Net income per share—diluted	Net income per share—diluted			$	0.28		$	0.40		Net income per share—diluted		$	0.60		$	0.67		$	0.32		$	0.27

Weighted average Common Shares outstanding—basic	Weighted average Common Shares outstanding—basic				271,094			265,198		Weighted average Common Shares outstanding—basic			272,126			265,781			273,146			266,357

Weighted average Common Shares outstanding—diluted	Weighted average Common Shares outstanding—diluted				297,229			297,184		Weighted average Common Shares outstanding—diluted			298,422			293,817			299,494			293,939

Distributions declared per Common Share outstanding	Distributions declared per Common Share outstanding			$	0.4325		$	0.4075		Distributions declared per Common Share outstanding		$	0.8650		$	0.8150		$	0.4325		$	0.4075

Comprehensive income:
	Net income			$	100,878		$	135,280
	Other comprehensive income (loss)—derivative instruments:
		Cumulative effect of change in accounting principle			—			(5,334	)
		Unrealized holding gains (losses) arising during the period			7,209			(11,754	)
		Losses reclassified into earnings from other comprehensive income			168			55

	Comprehensive income			$	108,255		$	118,247

See accompanying notes

Six Months Ended June 30,
Quarter Ended June 30,

2002
2001
2002
2001
Comprehensive income:
Net income $ 214,175 $ 238,211 $ 113,297 $ 102,931
Other comprehensive income (loss)—derivative instruments:
Cumulative effect of change in accounting principle — (5,334 ) — —
Unrealized holding gains (losses) arising during the period 1,990 (3,396 ) (5,219 ) 8,358
Losses reclassified into earnings from other comprehensive income 385 226 217 171

Comprehensive income $ 216,550 $ 229,707 $ 108,295 $ 111,460

See accompanying notes
4

EQUITY RESIDENTIAL ~~PROPERTIES TRUST~~

CONSOLIDATED STATEMENTS OF CASH FLOWS
~~(Amounts in thousands)~~
~~(Unaudited)~~

Quarter Ended March 31,

2002
2001

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 100,878 $ 135,280
Adjustments to reconcile net income to net cash provided by operating activities:
Allocation to Minority Interests:
Operating Partnership 6,441 9,796
Partially Owned Properties 806 105
Cumulative effect of change in accounting principle — 1,270
Depreciation 116,767 115,029
Amortization of deferred financing costs 1,391 1,397
Amortization of discount on investment in mortgage notes — (161 )
Amortization of goodwill — 933
Amortization of discounts and premiums on debt (327 ) (590 )
Amortization of deferred settlements on interest rate protection agreements (101 ) 101
Impairment on technology investments 291 3,003
Income from investments in unconsolidated entities (226 ) (350 )
Net gain on sales of discontinued operations (2,816 ) (41,778 )
Net gain on sales of unconsolidated entities (5,657 ) —
Extraordinary items 97 (311 )
Unrealized gain on interest rate protection agreements (62 ) (71 )
Book value of furniture sales and rental buyouts — 2,851
Compensation paid with Company Common Shares 4,964 2,867

Changes in assets and liabilities:

Decrease (increase) in rents receivable 1,045 (188 )
Decrease in deposits—restricted 14,133 5,343
Additions to rental furniture — (6,272 )
Decrease (increase) in other assets 18,446 (3,002 )
(Decrease) in accounts payable and accrued expenses (7,498 ) (9,153 )
Increase in accrued interest payable 9,963 19,752
Increase in rents received in advance and other liabilities 2,852 219
Increase in security deposits 287 343

Net cash provided by operating activities 261,674 236,413

CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate—acquisitions (26,100 ) (143,399 )
Investment in real estate—development (24,338 ) (13,758 )
Improvements to real estate (27,697 ) (28,166 )
Additions to non-real estate property (3,004 ) (1,830 )
Interest capitalized for real estate under development (5,884 ) (5,987 )
Proceeds from disposition of real estate, net 31,722 280,448
Proceeds from disposition of partial interest in real estate 1,715 —
Proceeds from disposition of furniture rental business 28,741 —
Investment in property and equipment — (673 )
Principal receipts on investment in mortgage notes — 2,998
Investments in unconsolidated entities (12,099 ) (16,613 )
Distributions from unconsolidated entities 14,765 8,364
Proceeds from disposition of unconsolidated entities 11,317 —
(Increase) in deposits on real estate acquisitions, net (6,288 ) (28,506 )
Decrease in mortgage deposits 4,105 870
Business combinations, net of cash acquired (207 ) (5,538 )
Other investing activities, net 193 (48 )

Net cash (used for) provided by investing activities (13,059 ) 48,162

4

~~EQUITY RESIDENTIAL PROPERTIES TRUST~~
~~CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)~~
(Amounts in thousands)

(Unaudited)

Quarter Ended March 31,

2002
2001

CASH FLOWS FROM FINANCING ACTIVITIES:
Loan and bond acquisition costs $ (3,040 ) $ (3,390 )
Mortgage notes payable:
Proceeds, net 20,772 29,052
Lump sum payoffs (18,267 ) (176,746 )
Scheduled principal repayments (8,469 ) (8,451 )
Prepayment premiums/fees (97 ) —
Notes, net:
Proceeds 397,064 299,316
Lump sum payoffs (100,000 ) —
Scheduled principal repayments — (119 )
Lines of credit:
Proceeds 245,000 176,686
Repayments (440,000 ) (532,148 )
Proceeds (payments) from settlement of interest rate protection agreements 835 (7,360 )
Proceeds from sale of Common Shares 4,236 3,266
Proceeds from sale of Preference Interests — 35,000
Proceeds from exercise of options 9,777 8,210
Payment of offering costs (141 ) (938 )
Distributions:
Common Shares (117,338 ) (416 )
Preferred Shares (16,441 ) (21,516 )
Preference Interests (5,080 ) (3,916 )
Junior Preference Units (81 ) —
Minority Interests—Operating Partnership (10,151 ) (9 )
Minority Interests—Partially Owned Properties (9,120 ) (108 )
Principal receipts on employee notes, net 85 71

Net cash (used for) financing activities (50,456 ) (203,516 )

Net increase in cash and cash equivalents 198,159 81,059
Cash and cash equivalents, beginning of period 51,603 23,772

Cash and cash equivalents, end of period $ 249,762 $ 104,831

SUPPLEMENTAL INFORMATION:

Cash paid during the period for interest $ 81,566 $ 76,777

Mortgage loans assumed through real estate acquisitions $ — $ 45,918

Mortgage loans (assumed) by purchaser in real estate and furniture rental business dispositions $ (1,680 ) $ (22,815 )

Transfers to real estate held for disposition $ 3,505 $ 21,886

Six Months Ended June 30,

2002
2001

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 214,175 $ 238,211
Adjustments to reconcile net income to net cash provided by operating activities:
Allocation to Minority Interests:
Operating Partnership 13,784 16,474
Partially Owned Properties 1,325 238
Cumulative effect of change in accounting principle — 1,270
Depreciation 234,846 230,805
Amortization of deferred financing costs 2,988 2,810
Amortization of discount on investment in mortgage notes — (2,256 )
Amortization of goodwill — 1,924
Amortization of discounts and premiums on debt (424 ) (1,007 )
Amortization of deferred settlements on interest rate protection agreements (176 ) 317
Impairment on technology investments 581 6,775
Income from investments in unconsolidated entities (233 ) (960 )
Net gain on sales of discontinued operations (28,446 ) (46,226 )
Net gain on sales of unconsolidated entities (5,246 ) (339 )
Extraordinary items 468 (106 )
Unrealized loss (gain) on interest rate protection agreements 483 (132 )
Book value of furniture sales and rental buyouts — 5,497
Compensation paid with Company Common Shares 10,061 6,741

Changes in assets and liabilities:

(Increase) in rents receivable (227 ) (705 )
Decrease (increase) in deposits—restricted 12,108 (12,574 )
Additions to rental furniture — (14,532 )
Decrease (increase) in other assets 3,898 (20,327 )
Increase in accounts payable and accrued expenses 9,026 597
Increase in accrued interest payable 316 11,626
(Decrease) in rents received in advance and other liabilities (9,972 ) (4 )
(Decrease) increase in security deposits (189 ) 522

Net cash provided by operating activities 459,146 424,639

CASH FLOWS FROM INVESTING ACTIVITIES:

Investment in real estate—acquisitions (153,034 ) (187,059 )
Investment in real estate—development (57,066 ) (31,472 )
Improvements to real estate (66,509 ) (63,269 )
Additions to non-real estate property (4,602 ) (3,520 )
Interest capitalized for real estate under development (4,369 ) (3,501 )
Interest capitalized for unconsolidated entities under development (7,954 ) (9,316 )
Proceeds from disposition of real estate, net 183,494 345,039
Proceeds from disposition of furniture rental business 28,741 —
Investment in property and equipment — (1,626 )
Principal receipts on investment in mortgage notes — 5,675
Investments in unconsolidated entities (42,441 ) (43,167 )
Distributions from unconsolidated entities 21,483 16,711
Proceeds from disposition of unconsolidated entities 11,317 359
Proceeds from refinancing of unconsolidated entities — 4,450
Decrease in deposits on real estate acquisitions, net 56,305 8,594
Decrease (increase) in mortgage deposits 14,651 (2,344 )
Business combinations, net of cash acquired (461 ) (7,603 )
Other investing activities, net 192 (29 )

Net cash (used for) provided by investing activities (20,253 ) 27,922

See accompanying notes
5

Six Months Ended June 30,

2002
2001

CASH FLOWS FROM FINANCING ACTIVITIES:
Loan and bond acquisition costs $ (9,124 ) $ (3,948 )
Mortgage notes payable:
Proceeds 47,213 45,118
Lump sum payoffs (119,386 ) (237,040 )
Scheduled principal repayments (16,322 ) (16,367 )
Prepayment premiums/fees (468 ) (202 )
Notes, net:
Proceeds 397,064 299,316
Lump sum payoffs (225,000 ) —
Scheduled principal repayments (253 ) (147 )
Lines of credit:
Proceeds 292,000 316,491
Repayments (487,000 ) (538,953 )
(Payments) from settlement of interest rate protection agreements (1,533 ) (7,360 )
Proceeds from sale of Common Shares 6,354 5,383
Proceeds from sale of Preference Interests — 48,500
Proceeds from exercise of options 27,030 29,468
Redemption of Preferred Shares — (210,500 )
Payment of offering costs (158 ) (1,317 )
Distributions:
Common Shares (235,548 ) (109,189 )
Preferred Shares (35,832 ) (49,898 )
Preference Interests (10,132 ) (8,496 )
Junior Preference Units (162 ) (109 )
Minority Interests—Operating Partnership (20,095 ) (9,949 )
Minority Interests—Partially Owned Properties (10,375 ) (665 )
Principal receipts on employee notes, net 173 145

Net cash (used for) financing activities (401,554 ) (449,719 )

Net increase in cash and cash equivalents

37,339

2,842

Cash and cash equivalents, beginning of period 51,603 23,772

Cash and cash equivalents, end of period $ 88,942 $ 26,614

SUPPLEMENTAL INFORMATION:

Cash paid during the period for interest

$
184,216

$
187,195

Mortgage loans assumed through real estate acquisitions

$
14,000

$
45,918

Mortgage loans (assumed) by purchaser in real estate and furniture rental business dispositions

$
(1,680
)
$
(27,358
)

Transfers to real estate held for disposition

$
—

$
38,741

See accompanying notes
6

EQUITY RESIDENTIAL ~~PROPERTIES TRUST~~

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)
1.    Business
        Equity Residential ~~Properties Trust~~ ("EQR"), formed in March 1993, is a fully integrated real estate company engaged in the acquisition, ownership, management and operation of multifamily properties. ~~As used herein, the term "Company" means EQR, and its subsidiaries.~~ The Company has elected to be taxed as a real estate investment trust ("REIT").
        EQR is the general partner of, and as of ~~March 31,~~June 30, 2002 owned an approximate ~~92.3%~~92.4% ownership interest in, ERP Operating Limited Partnership (the "Operating Partnership"). The Company conducts substantially all of its business and owns substantially all of its assets through the Operating Partnership. The Operating Partnership is, in turn, directly or indirectly, a partner, member or shareholder of numerous partnerships, limited liability companies and corporations which have been established primarily to own fee simple title to multifamily properties or to conduct property management activities and other businesses related to the ownership and operation of multifamily residential real estate. References to the ~~Company~~"Company" include EQR, the Operating Partnership and each of the partnerships, limited liability companies and corporations controlled by the Operating Partnership or EQR.
        As of ~~March 31,~~June 30, 2002, the Company owned or had interests in a portfolio of ~~1,073~~1,065 multifamily properties containing ~~225,000~~227,963 apartment units located in 36 states consisting of the following:

Number of
Properties
Number of
Units
Number of
Properties
Number
of Units
Wholly Owned Properties 951 199,305 943 198,676
Partially Owned Properties 37 7,231
Partially Owned Properties (Consolidated) 36 6,931
Unconsolidated Properties 85 18,464 86 22,356

Total Properties 1,073 225,000 1,065 227,963

2.    Summary of Significant Accounting Policies
Basis of Presentation
        The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of ~~the~~ Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) and certain reclassifications considered necessary for a fair presentation have been included. Certain reclassifications have been made to the prior period financial statements in order to conform to the current year presentation. Operating results for the ~~three~~six months ended ~~March 31,~~June 30, 2002 are not necessarily indicative of the results that may be expected for the year ~~ended~~ending December 31, 2002.
        The balance sheet at December 31, 2001 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.
        For further information, including definition of capitalized terms not defined herein, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2001.
67
Derivative Instruments and Hedging Activities
        ~~At March 31,~~The following table summarizes the Company's consolidated derivative instruments and hedging activities at June 30, 2002 the Company had entered into swaps which have been designated as cash flow hedges with a current aggregate notional amount of $614.7 million (notional amounts range from $610.4 million to $626.4 million over the terms of the swaps) at interest rates ranging from 3.65% to 6.15% maturing at various dates ranging from 2003 to 2007 with a net liability fair value of $19.0 million; and swaps which have been designated as fair value hedges with a current aggregate notional amount of $384.7 million (notional amounts range from $380.4 million to $396.4 million over the terms of the swaps) at interest rates ranging from 4.46% to 7.25% maturing at various dates ranging from 2003 to 2011 with a net asset fair value of $2.0 million.(amounts are in thousands):

Cash Flow
Hedges
Fair Value
Hedges
Offsetting
Swaps/Caps
Offsetting
Reverse
Swap/Caps

Current Notional Balance $ 400,000 $ 220,000 $ 255,117 $ 255,117
Lowest Possible Notional $ 400,000 $ 220,000 $ 251,410 $ 251,410
Highest Possible Notional $ 400,000 $ 220,000 $ 431,444 $ 431,444
Lowest Interest Rate 3.65125 % 5.3325 % 4.528 % 4.458 %
Highest Interest Rate 5.81000 % 7.2500 % 6.000 % 6.000 %
Earliest Maturity Date 2003 2005 2003 2003
Latest Maturity Date 2005 2011 2007 2007
Estimated Asset (Liability) Fair Value $ (14,664 ) $ 4,258 $ (5,093 ) $ 4,821
        At ~~March 31,~~June 30, 2002, certain ~~joint venture~~unconsolidated development partnerships in which the Company invested had entered into swaps to hedge the interest rate risk exposure on unconsolidated floating rate construction mortgage loans. The Company has recorded its proportionate share of these qualifying hedges on its consolidated balance sheets. These swaps have been designated as cash flow hedges with a current aggregate notional amount of ~~$329.4~~$379.3 million (notional amounts range from ~~$120.0~~$123.9 million to ~~$538.1~~$562.3 million over the terms of the swaps) at interest rates ranging from 2.28% to 6.94% maturing at various dates ranging from 2002 to 2005 with a net liability fair value of ~~$7.3~~$11.3 million.
        ~~As of March 31, 2002, there were approximately $25.5 million in deferred losses, net, included in accumulated other comprehensive loss.~~ On ~~March 31,~~June 30, 2002, the net derivative instruments were reported at their fair value as other liabilities of approximately ~~$17.0~~$10.7 million and as a reduction to investment in unconsolidated entities of approximately ~~$7.3~~$11.3 million. ~~The~~As of June 30, 2002, there were approximately $30.8 million in deferred losses, net, included in accumulated other comprehensive loss. Based on the estimated fair values of the net derivative instruments at June 30, 2002, the Company ~~expects to~~may recognize an estimated ~~$12.1~~$16.4 million of accumulated other comprehensive loss as additional interest expense during the twelve months ending ~~March 31,~~June 30, 2003, of which ~~$4.6~~$6.0 million is related to the unconsolidated development ~~joint venture swaps.~~partnerships.
Other
        In June 2001, the FASB issued SFAS No. 141,Business Combinations. SFAS No. 141 requires companies to account for all business combinations using the purchase method of accounting. SFAS No. 141 is effective for fiscal years beginning after December 15, 2001. The Company adopted the standard effective January 1, 2002, but it has not had any impact on the Company's financial condition and results of operations.
        In June 2001, the FASB issued SFAS No. 142,Goodwill and Other Intangible Assets. SFAS No. 142 requires companies to eliminate the amortization of goodwill in favor of a periodic impairment based approach. SFAS No. 142 is effective for the fiscal years beginning after December 15, 2001. The Company adopted the standard effective January 1, 2002, but it has not had a material impact on the Company's financial condition and results of operations.
        In April 2002, the FASB issued SFAS No. 145,Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections. SFAS No. 145, among other items, rescinds the automatic classification of costs incurred on debt extinguishment as extraordinary charges. Instead, gains and losses from debt extinguishment should only be classified as extraordinary if they meet the "unusual and infrequently occurring" criteria outlined in APB No. 30. SFAS No. 145 is effective for fiscal years beginning after May 15, 2002. The Company will adopt the standard effective
8

January 1, 2003, but does not expect it to have a material impact on its financial condition and results of operations.
7

3.    Shareholders' Equity and Minority Interests
        The following table presents the changes in the Company's issued and outstanding Common Shares for the ~~quarter~~six months ended ~~March 31,~~June 30, 2002:

2002
Common Shares outstanding at January 1, 271,621,374

Common Shares Issued:

Conversion of Series E Preferred Shares ~~40,710~~723,048
Conversion of Series H Preferred Shares ~~1,036~~4,050
Employee Share Purchase Plan ~~153,825~~212,395
Dividend Reinvestment—DRIP Plan ~~14,069~~26,843
Share Purchase—DRIP Plan ~~11,691~~21,819
Exercise of options ~~595,081~~1,301,917
Restricted share grants, net ~~922,280~~912,128
Conversion of OP Units ~~476,301~~644,207

Common Shares outstanding at ~~March 31,~~June 30, ~~273,836,367~~275,467,781

        The equity positions of various individuals and entities that contributed their properties to the Operating Partnership in exchange for a partnership interest are collectively referred to as the "Minority Interests—Operating Partnership". The Minority Interests—Operating Partnership held ~~22,720,891~~22,555,505 OP Units representing a ~~7.66%~~7.57% interest in the Operating Partnership at ~~March 31,~~June 30, 2002. Assuming conversion of all OP Units into Common Shares, total Common Shares outstanding at ~~March 31,~~June 30, 2002 would have been ~~296,557,258.~~298,023,286. Subject to applicable securities law restrictions, the Minority Interests—Operating Partnership may exchange their OP Units for EQR Common Shares on a one-for-one basis.
        Net proceeds from the Company's Common Share and Preferred Share offerings are contributed by the Company to the Operating ~~Partnership in~~Partnership. In return for ~~an increased ownership percentage and are treated as capital transactions~~those contributions, EQR receives a number of OP Units in the ~~Company's consolidated financial statements. As a result,~~Operating Partnership equal to the ~~net offering proceeds from~~number of Common Shares ~~are allocated between shareholders'~~it has issued in the equity ~~and Minority Interests—~~offering (or in the case of a preferred equity offering, a number of preference units in the Operating Partnership ~~to account for~~equal in number and having the ~~change~~same terms as the Preferred Shares issued in ~~their respective percentage ownership of~~ the ~~underlying~~ equity ~~of the Operating Partnership.~~offering).
        The Company's declaration of trust authorizes the Company to issue up to 100,000,000 preferred shares of beneficial interest, $0.01 par value per share (the "Preferred Shares"), with specific rights, preferences and other attributes as the Board of Trustees may determine, which may include preferences, powers and rights that are senior to the rights of holders of the Company's Common Shares.
89

        The following table presents the Company's issued and outstanding Preferred Shares as of ~~March 31,~~June 30, 2002 and December 31, 2001:

Amounts in thousands

Annual
Dividend
Rate per
Share(1)

March 31,
2002
December 31,
2001
Preferred Shares of beneficial interest, $.01 par value; 100,000,000 shares authorized:

9¹/8% Series B Cumulative Redeemable Preferred; liquidation value $250 per share; 500,000 shares issued and outstanding at March 31, 2002 and December 31, 2001

$
22.81252

$
125,000

$
125,000

9¹/8% Series C Cumulative Redeemable Preferred; liquidation value $250 per share; 460,000 shares issued and outstanding at March 31, 2002 and December 31, 2001

$
22.81252

115,000

115,000

8.60% Series D Cumulative Redeemable Preferred; liquidation value $250 per share; 700,000 shares issued and outstanding at March 31, 2002 and December 31, 2001

$
21.50000

175,000

175,000

Series E Cumulative Convertible Preferred; liquidation value $25 per share; 3,329,198 and 3,365,794 shares issued and outstanding at March 31, 2002 and December 31, 2001, respectively

$
1.75000

83,230

84,145

7¹/4% Series G Convertible Cumulative Preferred; liquidation value $250 per share; 1,264,700 shares issued and outstanding at March 31, 2002 and December 31, 2001

$
18.12500

316,175

316,175

7.00% Series H Cumulative Convertible Preferred; liquidation value $25 per share; 53,311 and 54,027 shares issued and outstanding at March 31, 2002 and December 31, 2001, respectively

$
1.75000

1,333

1,351

8.29% Series K Cumulative Redeemable Preferred; liquidation value $50 per share; 1,000,000 shares issued and outstanding at March 31, 2002 and December 31, 2001

$
4.14500

50,000

50,000

7.625% Series L Cumulative Redeemable Preferred; liquidation value $25 per share; 4,000,000 shares issued and outstanding at March 31, 2002 and December 31, 2001

$
1.90625

100,000

100,000

$ 965,738 $ 966,671

Amounts in thousands

Annual
Dividend
Rate per
Share(1)

June 30,
2002
December 31, 2001
Preferred Shares of beneficial interest, $.01 par value; 100,000,000 shares authorized:

9¹/8% Series B Cumulative Redeemable Preferred; liquidation value $250 per share; 500,000 shares issued and outstanding at June 30, 2002 and December 31, 2001

$
22.81252

$
125,000

$
125,000

9¹/8% Series C Cumulative Redeemable Preferred; liquidation value $250 per share; 460,000 shares issued and outstanding at June 30, 2002 and December 31, 2001

$
22.81252

115,000

115,000

8.60% Series D Cumulative Redeemable Preferred; liquidation value $250 per share; 700,000 shares issued and outstanding at June 30, 2002 and December 31, 2001

$
21.50000

175,000

175,000

Series E Cumulative Convertible Preferred; liquidation value $25 per share; 2,716,012 and 3,365,794 shares issued and outstanding at June 30, 2002 and December 31, 2001, respectively

$
1.75000

67,900

84,145

7¹/4% Series G Convertible Cumulative Preferred; liquidation value $250 per share; 1,264,700 shares issued and outstanding at June 30, 2002 and December 31, 2001

$
18.12500

316,175

316,175

7.00% Series H Cumulative Convertible Preferred; liquidation value $25 per share; 51,228 and 54,027 shares issued and outstanding at June 30, 2002 and December 31, 2001, respectively

$
1.75000

1,281

1,351

8.29% Series K Cumulative Redeemable Preferred; liquidation value $50 per share; 1,000,000 shares issued and outstanding at June 30, 2002 and December 31, 2001

$
4.14500

50,000

50,000

7.625% Series L Cumulative Redeemable Preferred; liquidation value $25 per share; 4,000,000 shares issued and outstanding at June 30, 2002 and December 31, 2001

$
1.90625

100,000

100,000

$
950,356

$
966,671

(1)
Dividends on all series of Preferred Shares are payable quarterly at various dates. Dividend rates listed for Series B, C, D and G are Preferred Share rates and the equivalent Depositary Share annual dividend rates are $2.281252, $2.281252, $2.15 and $1.8125, respectively.
        The liquidation value of the Preference Interests and the Junior Preference Units ~~(both as defined~~(see below) are included as separate components of Minority Interests in the consolidated balance sheets and the distributions incurred are included in preferred distributions in the consolidated statements of operations.
910

        The following table presents the issued and outstanding Preference Interests as of ~~March 31,~~June 30, 2002 and December 31, 2001:

Amounts in thousands

Annual
Dividend
Rate per
Unit(1)

March 31,
2002
December 31,
2001
Preference Interests:

8.00% Series A Cumulative Redeemable Preference Interests; liquidation value $50 per unit; 800,000 units issued and outstanding at March 31, 2002 and December 31, 2001

$
4.0000

$
40,000

$
40,000

8.50% Series B Cumulative Redeemable Preference Units; liquidation value $50 per unit; 1,100,000 units issued and outstanding at March 31, 2002 and December 31, 2001

$
4.2500

55,000

55,000

8.50% Series C Cumulative Redeemable Preference Units; liquidation value $50 per unit; 220,000 units issued and outstanding at March 31, 2002 and December 31, 2001

$
4.2500

11,000

11,000

8.375% Series D Cumulative Redeemable Preference Units; liquidation value $50 per unit; 420,000 units issued and outstanding at March 31, 2002 and December 31, 2001

$
4.1875

21,000

21,000

8.50% Series E Cumulative Redeemable Preference Units; liquidation value $50 per unit; 1,000,000 units issued and outstanding at March 31, 2002 and December 31, 2001

$
4.2500

50,000

50,000

8.375% Series F Cumulative Redeemable Preference Units; liquidation value $50 per unit; 180,000 units issued and outstanding at March 31, 2002 and December 31, 2001

$
4.1875

9,000

9,000

7.875% Series G Cumulative Redeemable Preference Units; liquidation value $50 per unit; 510,000 units issued and outstanding at March 31, 2002 and December 31, 2001

$
3.9375

25,500

25,500

7.625% Series H Cumulative Convertible Redeemable Preference Units; liquidation value $50 per unit; 190,000 units issued and outstanding at March 31, 2002 and December 31, 2001

$
3.8125

9,500

9,500

7.625% Series I Cumulative Convertible Redeemable Preference Units; liquidation value $50 per unit; 270,000 units issued and outstanding at March 31, 2002 and December 31, 2001

$
3.8125

13,500

13,500

7.625% Series J Cumulative Convertible Redeemable Preference Units; liquidation value $50 per unit; 230,000 units issued and outstanding at March 31, 2002 and December 31, 2001

$
3.8125

11,500

11,500

$
246,000

$
246,000

Amounts in thousands

Annual
Dividend
Rate per
Unit(1)

June 30,
2002
December 31, 2001
Preference Interests:

8.00% Series A Cumulative Redeemable Preference Interests; liquidation value $50 per unit; 800,000 units issued and outstanding at June 30, 2002 and December 31, 2001

$
4.0000

$
40,000

$
40,000

8.50% Series B Cumulative Redeemable Preference Units; liquidation value $50 per unit; 1,100,000 units issued and outstanding at June 30, 2002 and December 31, 2001

$
4.2500

55,000

55,000

8.50% Series C Cumulative Redeemable Preference Units; liquidation value $50 per unit; 220,000 units issued and outstanding at June 30, 2002 and December 31, 2001

$
4.2500

11,000

11,000

8.375% Series D Cumulative Redeemable Preference Units; liquidation value $50 per unit; 420,000 units issued and outstanding at June 30, 2002 and December 31, 2001

$
4.1875

21,000

21,000

8.50% Series E Cumulative Redeemable Preference Units; liquidation value $50 per unit; 1,000,000 units issued and outstanding at June 30, 2002 and December 31, 2001

$
4.2500

50,000

50,000

8.375% Series F Cumulative Redeemable Preference Units; liquidation value $50 per unit; 180,000 units issued and outstanding at June 30, 2002 and December 31, 2001

$
4.1875

9,000

9,000

7.875% Series G Cumulative Redeemable Preference Units; liquidation value $50 per unit; 510,000 units issued and outstanding at June 30, 2002 and December 31, 2001

$
3.9375

25,500

25,500

7.625% Series H Cumulative Convertible Redeemable Preference Units; liquidation value $50 per unit; 190,000 units issued and outstanding at June 30, 2002 and December 31, 2001

$
3.8125

9,500

9,500

7.625% Series I Cumulative Convertible Redeemable Preference Units; liquidation value $50 per unit; 270,000 units issued and outstanding at June 30, 2002 and December 31, 2001

$
3.8125

13,500

13,500

7.625% Series J Cumulative Convertible Redeemable Preference Units; liquidation value $50 per unit; 230,000 units issued and outstanding at June 30, 2002 and December 31, 2001

$
3.8125

11,500

11,500

$
246,000

$
246,000

(1)
Dividends on all series of Preference Interests are payable quarterly on March 25^th, June 25^th, September 25^th, and December 25^th of each year.
1011
        The following table presents the Operating Partnership's issued and outstanding Junior Convertible Preference Units (the "Junior Preference Units") as of ~~March 31,~~June 30, 2002 and December 31, 2001:

Amounts in thousands

Annual
Dividend
Rate per
Unit(1)

March 31,
2002
December 31,
2001
Junior Preference Units:

Series A Junior Convertible Preference Units; liquidation value $100 per unit; 56,616 units issued and outstanding at March 31, 2002 and December 31, 2001

$
5.469344

$
5,662

$
5,662

Series B Junior Convertible Preference Units; liquidation value $25 per unit; 7,367 units issued and outstanding at March 31, 2002 and December 31, 2001

$
2.000000

184

184

$ 5,846 $ 5,846

Amounts in thousands

Annual
Dividend
Rate per
Unit(1)

June 30, 2002
December 31, 2001
Junior Preference Units:

Series A Junior Convertible Preference Units; liquidation value $100 per unit; 56,616 units issued and outstanding at June 30, 2002 and December 31, 2001

$
5.46934

$
5,662

$
5,662

Series B Junior Convertible Preference Units; liquidation value $25 per unit; 7,367 units issued and outstanding at June 30, 2002 and December 31, 2001

$
2.00000

184

184

$
5,846

$
5,846

(1)
Dividends on both series of Junior Preference Units are payable quarterly at various dates.
4.    Real Estate Acquisitions
        During the ~~quarter~~six months ended ~~March 31,~~June 30, 2002, the Company acquired ~~one property located in Sunrise, Florida~~the seven properties listed below from an unaffiliated ~~party, consisting of 368 units~~parties for a total purchase price of ~~approximately $26.0~~$166.5 million.
Date
Acquired
Property
Location
Number
of Units
Acquisition Price

(in thousands)

3/28/02 Isles at Sawgrass Sunrise, FL 368 $ 26,000
4/24/02 Center Pointe Beaverton, OR 264 19,100
4/30/02 Mira Flores Palm Beach Gardens, FL 352 29,250
5/15/02 Gramercy Park Houston, TX 384 26,000
5/31/02 Enclave at Winston Park Coconut Creek, FL 278 25,450
5/31/02 St. Andrews at Winston Park Coconut Creek, FL 284 25,450
6/21/02 Westside Villas VII Los Angeles, CA 53 15,250

1,983 $ 166,500

12
5.    Real Estate Dispositions
        During the ~~quarter~~six months ended ~~March 31,~~June 30, 2002, the Company disposed of the ~~four~~twenty-three properties listed below to unaffiliated ~~parties and~~parties. The Company recognized a net gain on sales of discontinued operations of approximately ~~$2.8 million on these sales.~~
Date
Disposed
Property
Location
Number Of
Units
Disposition Price
(in thousands)
01/17/02 Ravenwood Mauldin, SC 82 $ 2,425

01/24/02

Larkspur I & II

Moraine, OH

45

899

01/31/02

Springwood II

Austintown, OH

43

900

02/21/02

Scottsdale Courtyards

Scottsdale, AZ

274

26,500

444 $ 30,724

        ~~In addition, during the quarter ended March 31, 2002, the Company:~~
•
~~sold its entire interest in one Unconsolidated Property containing 296 units for approximately $11.3~~$28.4 million and ~~recognized~~ a net gain on ~~sale~~sales of ~~$5.7~~unconsolidated entities of approximately $5.2 million.
Date
Disposed
Property
Location
Number
Of Units
Disposition Price
(in thousands)
01/17/02 Ravenwood Mauldin, SC 82 $ 2,425
01/24/02 Larkspur I & II Moraine, OH 45 899
01/31/02 Springwood II Austintown, OH 43 900
02/21/02 Scottsdale Courtyards Scottsdale, AZ 274 26,500
04/11/02 Applegate Lordstown, OH 39 723
04/11/02 Applerun Warren, OH 48 1,054
04/11/02 Brunswick Cortland, OH 59 1,424
05/01/02 The Landings Memphis, TN 292 10,300
05/03/02 Waterbury Clarksville, TN 54 1,385
05/09/02 Arboretum Tucson, AZ 496 25,000
05/09/02 Orange Grove Village Tucson, AZ 400 17,400
05/09/02 Village at Tanque Verde Tucson, AZ 217 9,100
05/14/02 Canyon Crest Views Riverside, CA 178 20,450
05/14/02 Merrimac Woods Costa Mesa, CA 123 12,950
05/14/02 Sierra Canyon Santa Clarita, CA 232 23,500
05/15/02 Meadowood Wellsville, OH 40 812
05/23/02 Pine Meadow Greensboro, NC 204 7,550
05/23/02 Palms at South Shore League City, TX 240 12,850
05/31/02 California Gardens Jacksonville, FL 71 1,468
05/31/02 Westcreek Jacksonville, FL 86 2,282
06/19/02 Apple Run Hillsdale, MI 39 1,047
Various Four Lakes Condo Units Lisle, IL 57 5,851

Wholly Owned Properties 3,319 185,870

01/31/02 Mount Laurel Crossing* Mt. Laurel, NJ 296 11,317
04/23/02 Foxton* Seymour, IN 39 —

Unconsolidated Properties 335 11,317

Total 3,654 $ 197,187

*
Represents the Company's share of the net disposition proceeds.
6.    Commitments to Acquire/Dispose of Real Estate
        As of ~~March 31,~~June 30, 2002, in addition to the property that was subsequently acquired as discussed in Note 17, the Company had entered into separate agreements to acquire two multifamily properties containing ~~736~~603 units from unaffiliated parties. The Company expects a combined purchase price of approximately ~~$55.3 million, including the assumption of mortgage indebtedness of approximately $14.0~~$42.1 million.
11

        As of ~~March 31,~~June 30, 2002, in addition to the properties that were subsequently disposed of as discussed in Note 17, the Company had entered into separate agreements to dispose of ~~twenty-four~~fourteen multifamily properties containing ~~4,564~~2,756 units to unaffiliated parties. The Company expects a combined disposition price of approximately ~~$244.0~~$134.5 million.
13

        The closings of these pending transactions are subject to certain contingencies and ~~conditions,~~conditions; therefore, there can be no assurance that these transactions will be consummated or that the final terms thereof will not differ in material respects from those summarized in the preceding paragraphs.
7.    Investments in Unconsolidated Entities
        The Company has entered into various joint venture agreements with third party companies. The following table summarizes the Company's investments in unconsolidated entities as of ~~March 31,~~June 30, 2002 (amounts in thousands except for project and unit amounts):

Institutional
Joint
Ventures
Stabilized
Development
Joint Ventures(1)
Joint Venture
Projects
Under
Development
Lexford/
Other
Totals
Institutional
Joint
Ventures
Stabilized
Development
Projects(1)
Projects
Under
Development
Lexford/
Other
Totals

Total projects 45 10 16 (2) 27 98 45 10 18 26 99 (2)

Total units 10,846 3,038 5,179 (2) 3,348 22,411

10,846

3,038

5,523

3,313

22,720
(2)

EQR's percentage ownership of mortgage notes payable 25.0 % 85.4 % 100.0 % 15.6 % 25.0 % 96.4 % 100.0 % 19.5 %
EQR's share of mortgage notes payable(4) $ 121,200 $ 214,615 $ 285,655 (3) $ 10,509 $ 631,979 $ 121,200 $ 242,431 $ 341,703 $ 12,913 $ 718,247 (3)

(1)
The Company determines a project to be stabilized once it has maintained an average physical occupancy of 90% or more for a three-month period.

(2)
Includes ~~three~~four projects under development consisting of ~~1,232~~1,522 units, which are completed and not yet stabilized, but are included in the Company's property/unit counts at ~~March 31,~~June 30, 2002. The remaining 1314 development properties containing ~~3,947~~4,001 units are not included in the Company's property/unit counts at ~~March 31,~~June 30, 2002. Totals also exclude Fort Lewis Military Housing consisting of 1 property and 3,637 units.

(3)
A total of ~~$658,602~~$698,597 is available for funding under these construction loans, of which ~~$285,655~~$341,703 was funded and outstanding at ~~March 31,~~June 30, 2002.

(4)
As of ~~April~~July 30, 2002, EQR has funded $54.5 million as additional collateral for certain of these loans (see Note 8). All remaining debt is non-recourse to EQR.
        Investments in unconsolidated entities ~~includes~~include the Unconsolidated Properties as well as various ~~uncompleted~~ development ~~joint venture properties.~~properties under construction or pending construction. The Company does not consolidate these entities, as it does not have sole control of major decisions (such as sale and/or financing/refinancing). The Company's common equity ownership interests in these entities range from ~~1.5%~~4.5% to 57.0% at ~~March 31,~~June 30, 2002.
        These investments are accounted for utilizing the equity method of accounting. Under the equity method of accounting, the net equity investment of the Company is reflected on the consolidated balance sheets and after the project is completed, the consolidated statements of operations include the Company's share of net income or loss from the unconsolidated entity. Prior to the project being completed, the Company ~~capitalized~~capitalizes interest on its equity contribution in accordance with the provisions of SFAS No. 58,Capitalization of Interest Cost in Financial Statements That Include Investments Accounted for by the Equity Method. During the ~~quarters~~six months ended ~~March 31,~~June 30, 2002 and 2001, the Company capitalized ~~$3.8~~$8.0 million and ~~$4.3~~$9.3 million, respectively, in interest cost related to its
12

unconsolidated ~~joint venture~~ development projects (which reduced interest expense incurred in the consolidated statements of operations).
        The Company generally contributes between 25% and ~~30%~~35% of the project cost of the ~~joint ventures~~unconsolidated projects under development, with the remaining cost financed through third-party construction mortgages.
14

8.    Deposits—Restricted
        As of ~~March 31,~~June 30, 2002, deposits-restricted totaled ~~$210.5~~$149.9 million and primarily included the following:
•
deposits in the amount of ~~$57.5~~$54.5 million held in third party escrow accounts to provide collateral for third party construction financing in connection with unconsolidated development ~~joint venture agreements ($3.0 million was returned to the Company in April 2002);~~projects;

•
approximately ~~$92.0~~$32.9 million in tax-deferred ~~(1031)~~ exchange proceeds; and

•
approximately ~~$61.0~~$62.5 million for resident security, utility, and other deposits.
9.    Mortgage Notes Payable
        As of ~~March 31,~~June 30, 2002, the Company had outstanding mortgage indebtedness of approximately ~~$3.3~~$3.2 billion.
        During the ~~quarter~~six months ended ~~March 31,~~June 30, 2002, the Company:
•
repaid ~~$26.7~~$135.7 million of mortgage loans;

•
assumed $14.0 million of mortgage debt on one property in connection with its acquisition;

•
disposed of $1.7 million of mortgage debt assumed by the purchaser in connection with the disposition of certain properties and the furniture rental business; and

•
received ~~$20.8~~$47.2 million in construction loan draw proceeds on certain properties.
        As of ~~March 31,~~June 30, 2002, scheduled maturities for the Company's outstanding mortgage indebtedness were at various dates through October 1, 2033. The interest rate range on the Company's mortgage debt was ~~1.30%~~1.10% to 12.465% at ~~March 31,~~June 30, 2002. During the ~~quarter~~six months ended ~~March 31,~~June 30, 2002, the weighted average interest rate was ~~6.42%~~6.41%.
10.  Notes
        As of ~~March 31,~~June 30, 2002, the Company had outstanding unsecured notes of approximately ~~$2.6~~$2.4 billion.
        During the ~~quarter~~six months ended ~~March 31,~~June 30, 2002, the Company:
•
issued $400.0 million of ten-year 6.625% ~~fixed-rate~~fixed rate public notes, receiving net proceeds of $394.5 million; ~~and~~

•
repaid $100.0 million of 9.375% fixed rate public notes at maturity; and

•
repaid $125.0 million of 7.95% fixed rate pubic notes at maturity.
        As of ~~March 31,~~June 30, 2002, scheduled maturities for the Company's outstanding notes are at various dates through 2029. The interest rate range on the Company's notes was 4.75% to ~~7.95%~~7.75% at ~~March 31,~~June 30, 2002. During the ~~quarter~~six months ended ~~March 31,~~June 30, 2002, the weighted average interest rate was ~~6.39%~~6.50%.
11.  Line of Credit
        ~~The~~On May 30, 2002, the Company ~~has~~obtained a new three-year $700.0 million unsecured revolving credit facility ~~with potential borrowings~~maturing May 29, 2005. The new line of upcredit replaced the Company's $700.0 million unsecured revolving credit facility that was scheduled to ~~$700.0 million.~~expire in August 2002. Advances under the new credit facility bear interest at variable rates based upon LIBOR at various interest periods, plus a spread dependent upon the Operating Partnership's credit rating, or based upon bids received from the lending group. The prior existing revolving credit facility was terminated upon the closing of the new facility. As of ~~March 31,~~June 30, 2002, no amounts were outstanding and ~~$57.4~~$84.0 million was restricted (dedicated to support
13
letters of credit and not available for borrowing) on the line of credit. During the ~~quarter~~six months ended ~~March 31,~~June 30, 2002, the weighted average interest rate was 2.50%.
15

12.  Calculation of Net Income Per Weighted Average Common Share
        The following tables set forth the computation of net income per share—basic and net income per share—diluted:

Quarter Ended March 31,

Six Months Ended June 30,
Quarter Ended June 30,

2002
2001

2002
2001
2002
2001

(Amounts in thousands except
per share amounts)

(Amounts in thousands except per share amounts)

Numerator: Numerator: Numerator:
Income before allocation to Minority Interests, income from investments in unconsolidated entities, net gain on sales of unconsolidated entities, discontinued operations, extraordinary items, cumulative effect of change in accounting principle and preferred distributions $ 99,246 $ 103,869
Income before allocation to Minority Interests, income from investments in unconsolidated entities, net gain (loss) on sales of unconsolidated entities, discontinued operations, extraordinary items, cumulative effect of change in accounting principle and preferred distributions Income before allocation to Minority Interests, income from investments in unconsolidated entities, net gain (loss) on sales of unconsolidated entities, discontinued operations, extraordinary items, cumulative effect of change in accounting principle and preferred distributions $ 192,833 $ 204,896 $ 95,769 $ 102,976

Allocation to Minority Interests:
Allocation to Minority Interests:

Allocation to Minority Interests:

Operating Partnership (6,441 ) (9,796 ) Operating Partnership (13,784 ) (16,474 ) (7,343 ) (6,678 )
Partially Owned Properties (806 ) (105 ) Partially Owned Properties (1,325 ) (238 ) (519 ) (133 )
Income from investments in unconsolidated entities Income from investments in unconsolidated entities 226 350 Income from investments in unconsolidated entities 233 960 7 610
Preferred distributions Preferred distributions (24,525 ) (28,526 ) Preferred distributions (48,781 ) (57,419 ) (24,256 ) (28,893 )

Income before net gain on sales of unconsolidated entities, discontinued operations, extraordinary items and cumulative effect of change in accounting principle 67,700 65,792
Net gain on sales of unconsolidated entities 5,657 —

Income before net gain (loss) on sales of unconsolidated entities, discontinued operations, extraordinary items and cumulative effect of change in accounting principle
Income before net gain (loss) on sales of unconsolidated entities, discontinued operations, extraordinary items and cumulative effect of change in accounting principle

129,176

131,725

63,658

67,882

Net gain (loss) on sales of unconsolidated entities
Net gain (loss) on sales of unconsolidated entities

5,246

339

(411
)

339

Net gain on sales of discontinued operations Net gain on sales of discontinued operations 2,816 41,778 Net gain on sales of discontinued operations 28,446 46,226 25,630 4,448
Discontinued operations, net Discontinued operations, net 277 143 Discontinued operations, net 2,994 3,666 535 1,574
Extraordinary items Extraordinary items (97 ) 311 Extraordinary items (468 ) 106 (371 ) (205 )
Cumulative effect of change in accounting principle Cumulative effect of change in accounting principle — (1,270 ) Cumulative effect of change in accounting principle — (1,270 ) — —

Numerator for net income per share—basic Numerator for net income per share—basic 76,353 106,754 Numerator for net income per share—basic 165,394 180,792 89,041 74,038

Effect of dilutive securities:
Effect of dilutive securities:

Effect of dilutive securities:

Allocation to Minority Interests—Operating Partnership 6,441 9,796 Allocation to Minority Interests—Operating Partnership 13,784 16,474 7,343 6,678
Distributions on convertible preferred shares/units — 1,692 Distributions on convertible preferred shares/units — 242 22 —

Numerator for net income per share—diluted Numerator for net income per share—diluted $ 82,794 $ 118,242 Numerator for net income per share—diluted $ 179,178 $ 197,508 $ 96,406 $ 80,716

Denominator: Denominator:
Denominator:

Denominator for net income per share—basic Denominator for net income per share—basic 271,094 265,198 Denominator for net income per share—basic 272,126 265,781 273,146 266,357
Effect of dilutive securities: Effect of dilutive securities:
Effect of dilutive securities:

OP Units 23,012 24,461 OP Units 22,831 24,305 22,653 24,152
Convertible preferred shares/units — 4,370 Convertible preferred shares/units — 370 75 —
Share options/restricted shares 3,123 3,155 Share options/restricted shares 3,465 3,361 3,620 3,430

Denominator for net income per share—diluted Denominator for net income per share—diluted 297,229 297,184 Denominator for net income per share—diluted 298,422 293,817 299,494 293,939

Net income per share—basic Net income per share—basic $ 0.28 $ 0.40
Net income per share—basic

$
0.61

$
0.68

$
0.33

$
0.28

Net income per share—diluted Net income per share—diluted $ 0.28 $ 0.40
Net income per share—diluted

$
0.60

$
0.67

$
0.32

$
0.27

1416

Quarter Ended March 31,
Six Months Ended June 30,
Quarter Ended June 30,

2002
2001
2002
2001
2002
2001

(Amounts in thousands except
per share amounts)

(Amounts in thousands except per share amounts)

Net income per share—basic:
Income before net gain on sales of unconsolidated entities, discontinued operations, extraordinary items and cumulative effect of change in accounting principle per share—basic $ 0.25 $ 0.26
Net gain on sales of unconsolidated entities 0.02 —
Income before net gain (loss) on sales of unconsolidated entities, discontinued operations, extraordinary items and cumulative effect of change in accounting principle per share—basic $ 0.48 $ 0.51 $ 0.24 $ 0.26
Net gain (loss) on sales of unconsolidated entities 0.02 — — —
Net gain on sales of discontinued operations 0.01 0.14 0.10 0.16 0.09 0.02
Discontinued operations, net — — 0.01 0.01 — —
Extraordinary items — — — — — —
Cumulative effect of change in accounting principle — — — — — —

Net income per share—basic $ 0.28 $ 0.40 $ 0.61 $ 0.68 $ 0.33 $ 0.28

Net income per share—diluted:

Income before net gain on sales of unconsolidated entities, discontinued operations, extraordinary items and cumulative effect of change in accounting principle per share—diluted $ 0.25 $ 0.26
Net gain on sales of unconsolidated entities 0.02 —
Income before net gain (loss) on sales of unconsolidated entities, discontinued operations, extraordinary items and cumulative effect of change in accounting principle per share—diluted $ 0.48 $ 0.50 $ 0.24 $ 0.25
Net gain (loss) on sales of unconsolidated entities 0.01 — — —
Net gain on sales of discontinued operations 0.01 0.14 0.10 0.16 0.08 0.02
Discontinued operations, net — — 0.01 0.01 — —
Extraordinary items — — — — — —
Cumulative effect of change in accounting principle — — — — — —

Net income per share—diluted $ 0.28 $ 0.40 $ 0.60 $ 0.67 $ 0.32 $ 0.27

Convertible preferred shares/units that could be converted into ~~15,853,687~~15,648,034 and ~~10,831,704~~14,921,384 weighted average Common Shares for the six months ended June 30, 2002 and 2001, respectively, and 15,369,255 and 15,379,910 weighted average Common Shares for the quarters ended ~~March 31,~~June 30, 2002 and 2001, respectively, were outstanding but were not included in the computation of diluted earnings per share because the effects would be anti-dilutive.
On October 11, 2001, the Company effected a two-for-one split of its Common Shares and OP Units to shareholders and unitholders of record as of September 21, 2001. All per share and OP Unit data and numbers of Common Shares and OP Units have been retroactively adjusted to reflect the Common Share and OP Unit split.
13.  Discontinued Operations
        In August 2001, the FASB issued SFAS No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets, which is effective for fiscal years beginning after December 15, 2001. The Company adopted the standard effective January 1, 2002, which did not have a material effect on the Company's financial condition and results of operations.
        Under the provisions of SFAS No. 144, for long-lived assets to be held and used, the Company first determines whether any indicators of impairment exist. If indicators exist, the Company compares the expected future undiscounted cash flows for the long-lived asset against the carrying amount of that asset. If the sum of the estimated undiscounted cash flows is less than the carrying amount of the asset, an impairment loss would be recorded for the difference between the estimated fair value and the carrying amount of the asset.
17

        For long-lived assets to be disposed of, an impairment loss is recognized when the estimated fair value of the asset, less the estimated cost to sell, is less than the carrying amount of the asset measured at the time that the Company has determined it will sell the asset. Long-lived assets held for disposition are reported at the lower or their carrying amounts or their estimated fair values, less their costs to sell.
15

        Goodwill and investments in unconsolidated entities accounted for under the equity method of accounting are specifically excluded from the scope of SFAS No. 144.
        On January 11, 2002, the Company disposed of its furniture rental business for $30.0 million and received net proceeds of $28.7 million. No gain/loss on sale was recognized as the net book value at the sale date after giving effect to a previously recorded impairment loss approximated the sales price.
        The components of discontinued operations for the six months and quarters ended ~~March 31,~~June 30, 2002 and 2001, respectively, are outlined below and include the results of operations through the date of each respective sale for the six months and quarter ended ~~March 31,~~June 30, 2002, and a full six months and quarter of operations for the six months and quarter ended ~~March 31,~~June 30, 2001, for the following:
•
the sale of the furniture rental business;

•
~~the four properties sold (see Note 5);~~ and

•
the ~~three properties held for sale at March 31, 2002.~~twenty-one Wholly Owned Properties sold (see Note 5).

Quarter Ended March 31,

Six Months Ended June 30,
Quarter Ended June 30,

2002
2001

2002
2001
2002
2001

(Amounts in thousands)

(Amounts in thousands)

REVENUES REVENUES REVENUES
Rental income $ 666 $ 1,136 Rental income $ 8,762 $ 12,858 $ 2,628 $ 6,432
Interest and other income 3 — Interest and other income 3 26 1 25
Furniture income 1,365 14,872 Furniture income 1,361 30,027 (4 ) 15,155

Total revenues 2,034 16,008 Total revenues 10,126 42,911 2,625 21,612

EXPENSES EXPENSES
EXPENSES

Property and maintenance 208 301 Property and maintenance 2,787 3,332 1,267 1,617
Real estate taxes and insurance 60 84 Real estate taxes and insurance 881 1,162 254 589
Depreciation 181 303 Depreciation 2,125 3,309 569 1,662
Interest expense incurred, net 5 58 Interest expense incurred, net 36 300 — 147
Furniture expenses 1,303 14,829 Furniture expenses 1,303 30,499 — 15,670
Amortization of goodwill — 290 Amortization of goodwill — 643 — 353

Total expenses 1,757 15,865 Total expenses 7,132 39,245 2,090 20,038

Discontinued operations, net Discontinued operations, net $ 277 $ 143 Discontinued operations, net $ 2,994 $ 3,666 $ 535 $ 1,574

14.  Commitments and Contingencies
        The Company, as an owner of real estate, is subject to various environmental laws of Federal and local governments. Compliance by the Company with existing laws has not had a material adverse effect on the Company's financial condition and results of operations. However, the Company cannot predict the impact of new or changed laws or regulations on its current properties or on properties that it may acquire in the future.
        The Company does not believe there is any litigation threatened against the Company other than routine litigation arising out of the ordinary course of business, some of which is expected to be covered by liability insurance, none of which is expected to have a material adverse effect on the consolidated financial statements of the Company.
18

        In regards to the funding of properties in the development ~~and/or earnout~~ stage and the ~~joint venture~~ agreements with multifamily residential real estate developers, the Company funded a net total of ~~$5.6~~$40.3 million during the ~~quarter~~six months ended ~~March 31, 2002. The Company expects to fund approximately~~
16

~~$22.7 million in connection with these properties during the remainder of~~June 30, 2002. In connection with one ~~joint venture~~development agreement, the Company has an obligation to fund up to an additional ~~$6.5~~$9.5 million to guarantee third party construction financing. As of ~~March 31,~~June 30, 2002, the Company has 2021 projects under development (includes three consolidated projects) with estimated completion dates ranging ~~from June 30, 2002~~ through March 31, 2004.
        For one development ~~joint venture~~ agreement, the Company's ~~joint venture~~ partner has the right, at any time following completion of a project, to stipulate a value for such project and offer to sell its interest in the project to the Company based on such value. If the Company chooses not to purchase the interest, it must agree to a sale of the project to an unrelated third party at such value. The Company's ~~joint venture~~ partner must exercise this right as to all projects within five years after the receipt of the final certificate of occupancy on the last developed property.
        Under a second development ~~joint venture~~ agreement, the Company's ~~joint venture~~ partner has the right, at any time following completion of a project, to require the Company to purchase the ~~joint venture~~ partners' interest in that project at a mutually agreeable price. If the Company and the ~~joint venture~~ partner are unable to agree on a price, both parties will obtain appraisals. If the appraised values vary by more than 10%, both the Company and ~~the joint venture~~its partner will agree on a third appraiser to determine which original appraisal is closest to its determination of value. The Company may elect at that time not to purchase the property and instead, authorize ~~the joint venture~~its partner to sell the project at or above the agreed-upon value to an unrelated third party. Five years following the receipt of the final certificate of occupancy on the last developed property, any projects remaining unsold must be purchased by the Company at the agreed-upon price.
        The Company provided a credit enhancement with respect to certain tax-exempt bonds issued to finance certain public improvements at a multifamily development project. As of ~~March 31,~~June 30, 2002, this enhancement was still in effect at a commitment amount of $12.7 million.
15.  Asset Impairment
        For the ~~quarters~~six months ended ~~March 31,~~June 30, 2002 and 2001, the Company recorded approximately ~~$0.3~~$0.6 million and ~~$3.0~~$6.8 million, respectively, of asset impairment charges related to its technology investments. These charges were the result of review of the existing investments reflected on the consolidated balance sheet. ~~The Company reviewed the current relative value of each investment based on existing economic conditions and current events.~~ These impairment losses are reflected on the statement of operations in total expenses and include the write-down of assets classified as other assets and investments in unconsolidated entities.
16.  Reportable Segments
        Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by senior management. Senior management decides how resources are allocated and assesses performance on a monthly basis.
        The Company's primary business is owning, managing, and operating multifamily residential properties, which includes the generation of rental and other related income through the leasing of apartment units to residents. Senior management evaluates the performance of each of our apartment communities on an individual basis, however, each of our apartment communities has similar economic characteristics, residents, and products and services so they have been aggregated into one reportable segment. The Company's rental real estate segment ~~comprises~~comprised approximately ~~98.9%~~98.7% and ~~97.9%~~97.6% of total revenues for the six months ended June 30, 2002 and 2001, respectively, and approximately 98.5% and 97.5% of total revenues for the quarters ended ~~March 31,~~June 30, 2002 and 2001, respectively. The Company's rental real estate segment ~~comprises~~comprised approximately 99.6% and 99.4% of total assets at ~~March 31,~~June 30, 2002 and December 31, 2001, respectively.
1719

        The primary financial measure for the Company's rental real estate segment is net operating income ("NOI"), which represents rental income less: 1) property and maintenance expense; 2) real estate taxes and insurance expense; and 3) property management expense (all as reflected in the accompanying statements of operations). Current year NOI is compared to prior year NOI and current year budgeted NOI as a measure of financial performance. NOI from our rental real estate totaled approximately ~~$309.1~~$613.4 million and ~~$308.1~~$609.5 million for the six months ended June 30, 2002, and 2001, respectively, and approximately $307.9 million and $304.8 million for the quarters ended ~~March 31,~~June 30, 2002 and 2001, respectively.
        During the acquisition, development and/or disposition of real estate, the NOI return on total capitalized costs is the primary measure of financial performance ~~(capitalization rate)~~ the Company considers.
        The Company's fee and asset management activity ~~are~~is immaterial and dodoes not meet the threshold requirements of a reportable segment as provided for in SFAS No. 131.
17.  Subsequent ~~Events~~Events/Other
        ~~Subsequent to March 31, 2002 and through April 26,~~During the six months ended June 30, 2002, the ~~Company:~~
•
Company entered into ~~a joint venture~~an agreement with the U.S. Army with an initial cash ~~equity~~ investment of $10.0 million and assumed management of 3,637 multifamily units at Fort Lewis, ~~Washington;~~

Washington.
        Subsequent to June 30, 2002 and through July 29, 2002, the Company:
•
acquired one property consisting of ~~264~~466 units for approximately ~~$19.1~~$37.4 million;

•
disposed of ~~four~~seven properties ~~(including one Unconsolidated Property)~~ consisting of ~~188~~1,171 units for approximately ~~$3.5~~$67.2 million;

•
repaid ~~$65.2~~$25.2 million of mortgage loans;

•
~~repaid $125.0 million of 7.95% fixed rate public notes at maturity;~~ and

•
funded ~~$1.7~~a net of $41.8 million related to the unconsolidated development ~~earnout and joint venture~~ agreements.
1820

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
        For further information including definitions for capitalized terms not defined herein, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2001.
        Forward-looking statements in this report are intended to be made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words "believes", "expects" and "anticipates" and other similar expressions that are predictions of or indicate future events and trends and which do not relate solely to historical matters identify forward-looking statements. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results, performance, or achievements of the Company to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause such differences include, but are not limited to, the following:
•
alternative sources of capital to the Company are more expensive than anticipated;

•
occupancy levels and market rents may be adversely affected by national and local economic and market conditions, which are beyond the Company's control; and

•
additional factors as discussed in Part I of the Annual Report on Form 10-K, particularly those under "Risk Factors".
        Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly release any revisions to these forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
21

Results of Operations
        The following table summarizes the number of properties and related units for the year-to-date periods presented:

Properties
Units
Purchase/
Sale Price
$ Millions
At December 31, 2000 1,104 227,704
Q1 2001 Acquisitions 7 1,721 $ 189.2
Q1 2001 Dispositions (15 ) (2,272 ) $ 117.7

At March 31, 2001 1,096 227,153
Q2/Q3/Q4 2001 Acquisitions 7 1,702 $ 198.9
Q2/Q3/Q4 2001 Dispositions (34 ) (6,535 ) $ 299.2
Q2/Q3/Q4 2001 Completed Developments 7 2,505
Q4 2001 Unit Configuration Changes — (24 )

At December 31, 2001 1,076 224,801
Q1 2002 Acquisitions 1 368 $ 26.0
Q1 2002 Dispositions (5 ) (757 ) $ 43.7
Q1 2002 Completed Developments 1 588

At March 31, 2002 1,073 225,000

19

Properties
Units
Purchase/
Sale Price
$ Millions
At December 31, 2000 1,104 227,704
Q1/Q2 2001 Acquisitions 8 2,017 $ 232.2
Q1/Q2 2001 Dispositions (28 ) (4,189 ) $ 188.7
Q1/Q2 2001 Completed Developments 2 618

At June 30, 2001 1,086 226,150
Q3/Q4 2001 Acquisitions 6 1,406 $ 155.9
Q3/Q4 2001 Dispositions (21 ) (4,618 ) $ 228.2
Q3/Q4 2001 Completed Developments 5 1,887
Q4 2001 Unit Configuration Changes — (24 )

At December 31, 2001 1,076 224,801
Q1/Q2 2002 Acquisitions 7 1,983 $ 166.5
Q2 2002 Fort Lewis 1 3,637
Q1/Q2 2002 Dispositions (23 ) (3,654 ) $ 197.2
Q1/Q2 2002 Completed Developments 4 1,181
Q2 2002 Unit Configuration Changes — 15

At June 30, 2002 1,065 227,963

        The Company's acquisition and disposition activity has impacted overall results of operations for the six months and quarters ended ~~March 31,~~June 30, 2002 and 2001. Significant changes in revenues and expenses have resulted primarily from the consolidation of previously Unconsolidated Properties in July 2001, the disposition of the ~~Globe~~ furniture rental business on January 11, 2002, as well as the properties acquired and developments completed in 2001 ~~Acquisitions~~ and ~~Completed Development properties,~~2002, which have been partially offset by the ~~disposition of the 2002~~properties disposed in 2001 and ~~the 2001 Disposed properties.~~2002. Significant change in expenses has also resulted from an increase in insurance costs and general and administrative costs and reductions in variable interest rates, impairment charges and goodwill amortization. This impact is discussed in greater detail in the following paragraphs.
        Properties that the Company owned for all of both the six month periods ended June 30, 2002 and June 30, 2001 (the "Six-Month 2002 Same Store Properties"), which represented 194,491 units, and properties that the Company owned for all of both the quarters ended ~~March 31,~~June 30, 2002 and ~~March 31,~~June 30, 2001 (the ~~"First~~"Second Quarter 2002 Same Store Properties"), which represented ~~197,305~~196,211 units, also impacted the Company's results of ~~operations~~operations. Both the Six-Month 2002 Same Store Properties and Second Quarter 2002 Same Store Properties are discussed ~~as well~~ in the following paragraphs.
Comparison of the ~~quarter~~six months ended ~~March 31,~~June 30, 2002 to the ~~quarter~~six months ended ~~March 31,~~June 30, 2001
        For the ~~quarter~~six months ended ~~March 31,~~June 30, 2002, income before allocation to Minority Interests, income from investments in unconsolidated entities, net gain (loss) on sales of unconsolidated entities, discontinued operations, extraordinary items and cumulative effect of change in accounting principle decreased by approximately ~~$4.6~~$12.1 million when compared to the ~~quarter~~six months ended ~~March 31,~~June 30, 2001.
        Revenues from the ~~First Quarter~~Six-Month 2002 Same Store Properties decreased primarily as a result of lower rental rates charged new residents, increased concessions and lower occupancy at certain properties.
22

Property operating expenses from the ~~First Quarter~~Six-Month 2002 Same Store Properties, which include property and maintenance, real estate taxes and insurance and an allocation of property management expenses, remained relatively stable with increases in real estate taxes and insurance costs offset by ~~decreases~~a decrease in utility costs. The following tables provide comparative revenue, ~~expenses,~~expense, net operating income ("NOI") and weighted average occupancy for the ~~First Quarter~~Six-Month 2002 Same Store Properties:
June 30, 2002 Year-to-Date Same Store ~~Net Operating Income ("NOI")~~Results
$ in Millions—~~197,305~~194,491 Same Store Units
Description
Revenues
Expenses
NOI

Q1 2002 $ 466.0 $ 168.7 $ 297.3
Q1 2001 $ 467.7 $ 168.9 $ 298.8

Change $ (1.7 ) $ (0.2 ) $ (1.5 )

% Change (0.4 )% (0.1 )% (0.5 )%
Description
Revenues
Expenses
NOI

YTD 2002 $ 918.0 $ 336.8 $ 581.2
YTD 2001 $ 930.3 $ 335.4 $ 594.9

Change $ (12.3 ) $ 1.4 $ (13.7 )

% Change

(1.3
)%

0.4
%

(2.3
)%
Same Store Occupancy ~~Rates~~Statistics
Q1YTD 2002 ~~94.24~~93.98 %
Q1YTD 2001 ~~94.60~~94.63 %

Change (~~0.36~~0.65 )%
20
        For ~~2002~~ properties that the Company acquired prior to December 31, 2000 and ~~will~~expects to continue to own through December 31, 2002, the Company anticipates the following operating assumptions for the year ~~ended~~ending December 31, ~~2002 to see the following operating assumptions:~~2002:
2002 Operating Assumptions
Physical Occupancy 93.0%
Revenue ~~Growth~~Change ~~(1.25%)~~(2.3)% to ~~0.1%~~(2.0)%
Expense ~~Growth~~Change 1.0% to 1.5%
NOI ~~Growth~~Change ~~(2.9%)~~(4.5)% to ~~(0.7%)~~(3.75)%
Dispositions $500 million
Refinancing $200 million at 7.0%
        These 2002 operating assumptions are based on current expectations and are forward-looking.
        Rental income from properties other than ~~First Quarter~~Six-Month 2002 Same Store Properties increased by approximately ~~$1.4~~$9.3 million primarily as a result of revenue from properties the ~~Company's~~Company acquired in 2001 ~~Acquired Properties~~and 2002 and additional ~~2001~~ Partially Owned ~~Properties.~~Properties that the Company consolidated in 2001.
        Interest and other income decreased by approximately ~~$2.4~~$2.2 million, primarily as a result of lower balances available for investment and related interest rates being earned on the Company's short-term investment accounts along with lower balances on deposit in tax-deferred exchange accounts.
        Interest income—investment in mortgage notes decreased by ~~$2.7~~$8.8 million as a result of the Company consolidating ~~these~~ previously Unconsolidated Properties in July 2001. No additional interest income will be recognized on such mortgage notes in future years as the Company now consolidates the results related to these previously Unconsolidated Properties.
23

        Property management expenses include off-site expenses associated with the self-management of the Company's properties. These expenses increased by approximately $0.9 million or 2.5%. These expenses increased due to higher overall compensation costs related to a current period expense associated with restricted shares/awards granted to key employees. The Company continues to acquire properties in major metropolitan areas and dispose of assets in smaller multi-family rental markets where the Company does not have a significant management presence.
        Fee and asset management revenues, net of fee and asset management expenses, increased slightly as a result of the Company managing an additional 3,637 units at Fort Lewis starting in April 2002. As of June 30, 2002 and 2001, the Company managed 20,142 units and 19,844 units, respectively, for third parties and unconsolidated entities.
        The Company recorded impairment charges in 2002 totaling approximately $0.6 million, which is related to one investment in a technology entity. See Note 15 in the Notes to the Consolidated Financial Statements for further discussion.
        Interest expense, including amortization of deferred financing costs, decreased approximately $6.5 million primarily due to lower variable interest rates. During the six months ended June 30, 2002, the Company capitalized interest costs of approximately $12.3 million as compared to $12.8 million for the six months ended June 30, 2001. This capitalization of interest primarily related to investments in unconsolidated entities engaged in development activities. The effective interest cost on all of the Company's indebtedness for the six months ended June 30, 2002 was 6.63% as compared to 7.07% for the six months ended June 30, 2001.
        General and administrative expenses, which include corporate operating expenses, increased approximately $8.2 million between the six months under comparison. This increase was primarily due to higher state income taxes in Michigan and New Jersey as well as the income taxes incurred at one of the Company's taxable REIT subsidiaries which has an ownership interest in properties that in prior periods were classified as Unconsolidated Properties. In addition, retirement plan expenses for certain key executives, and higher overall compensation expenses including a current period expense associated with restricted shares/awards granted to key employees and additional compensation charges and costs associated with the Company's new President also contributed to the increase.
        Net gain (loss) on sales of unconsolidated entities increased by $4.9 million primarily as a result of the sale of one stabilized development property (296 units).
        Net gain on sales of discontinued operations decreased approximately $17.8 million between the periods under comparison. This decrease is primarily the result of approximately 3,500 fewer number of units sold during the six months ended June 30, 2002 as compared to the six months ended June 30, 2001 (includes approximately 3,000 units sold into a joint venture in February 2001).
24

Comparison of the quarter ended June 30, 2002 to the quarter ended June 30, 2001
        For the quarter ended June 30, 2002, income before allocation to Minority Interests, income from investments in unconsolidated entities, net gain (loss) on sales of unconsolidated entities, discontinued operations, extraordinary items and cumulative effect of change in accounting principle decreased by approximately $7.2 million when compared to the quarter ended June 30, 2001.
        Revenues from the Second Quarter 2002 Same Store Properties decreased primarily as a result of lower rental rates charged new residents, increased concessions and lower occupancy at certain properties. Property operating expenses from the Second Quarter 2002 Same Store Properties, which include property and maintenance, real estate taxes and insurance and an allocation of property management expenses, decreased primarily as a result of increases in real estate taxes and insurance costs partially offset by decreases in utility costs. The following tables provide comparative revenue, expense, NOI and weighted average occupancy for the Second Quarter 2002 Same Store Properties:
Second Quarter 2002 Same Store Results
$ in Millions—196,211 Same Store Units
Description
Revenues
Expenses
NOI

Q2 2002 $ 463.3 $ 173.3 $ 290.0
Q2 2001 $ 473.4 $ 170.6 $ 302.8

Change $ (10.1 ) $ 2.7 $ (12.8 )

% Change

(2.1
)%

1.6
%

(4.2
)%
Same Store Occupancy Statistics
Q2 2002 94.01 %
Q2 2001 94.60 %
Change (0.59 )%
        Rental income from properties other than Second Quarter 2002 Same Store Properties increased by approximately $7.6 million primarily as a result of revenue from properties the Company acquired in 2001 and 2002 and additional Partially Owned Properties that the Company consolidated in 2001.
        Interest and other income increased by approximately $0.2 million, primarily as a result of a $0.7 million one-time financing fee related to the Fort Lewis loan closing, net of lower balances available for investment and related rates being earned on the Company's short term investment accounts along with lower balances on deposit in tax-deferred exchange accounts.
        Interest income—investment in mortgage notes decreased by $6.0 million as a result of the Company consolidating previously Unconsolidated Properties in July 2001. No additional interest income will be recognized on such mortgage notes in future years as the Company now consolidates the results related to these previously Unconsolidated Properties.
        Property management expenses include off-site expenses associated with the self-management of the Company's properties. These expenses increased by approximately ~~$0.3~~$0.6 million or ~~less than 2%~~3.2%. These expenses increased due to higher overall compensation costs related to a current period expense associated with restricted shares/awards granted to key employees. The Company continues to acquire properties in major metropolitan areas and dispose of assets in smaller multi-family rental markets where the Company does not have a significant management presence. ~~As a result, the Company was able to maintain off-site management expenses at a constant level between the two reporting periods.~~
25

        Fee and asset management revenues, ~~and~~net of fee and asset management expenses, ~~decreased~~increased slightly as a result of the Company managing ~~fewer~~an additional 3,637 units ~~quarter over quarter for outside owners and unconsolidated entities.~~at Fort Lewis starting in April 2002. As of ~~March 31,~~June 30, 2002 and 2001, the Company managed ~~16,539~~20,142 units and ~~20,300~~19,844 units, respectively, for third parties and ~~the~~ unconsolidated ~~joint venture~~ entities.
        The Company recorded impairment charges in 2002 totaling approximately $0.3 million, which is related to one investment in a technology entity. See Note 15 in the Notes to the Consolidated Financial Statements for further discussion.
        Interest expense, including amortization of deferred financing costs, decreased approximately ~~$5.1~~$1.4 million primarily due to lower variable interest rates. During the quarter ended ~~March 31,~~June 30, 2002, the Company capitalized interest costs of approximately ~~$5.9~~$6.4 million as compared to ~~$6.0~~$6.8 million for the quarter ended ~~March 31,~~June 30, 2001. This capitalization of interest primarily related to ~~equity~~ investments in unconsolidated entities engaged in development activities. The effective interest cost on all of the Company's indebtedness for the quarter ended ~~March 31,~~June 30, 2002 was ~~6.51%~~6.75% as compared to 7.07% for the quarter ended ~~March 31,~~June 30, 2001.
        General and administrative expenses, which include corporate operating expenses, increased approximately ~~$4.0~~$4.2 million between the quarters under comparison. This increase was primarily due to ~~the addition of~~higher state income taxes ~~from previously~~in Michigan and New Jersey as well as the income taxes incurred at one of the Company's taxable REIT subsidiaries which has an ownership interest in properties that in prior periods were classified as Unconsolidated ~~Properties,~~Properties. In addition, retirement plan expenses for
21

certain key executives, and higher overall compensation expenses including a current period expense associated with restricted shares/awards granted to key ~~employees.~~
        ~~Net gain on sales of unconsolidated entities increased by $5.7 million as a result of~~employees and additional compensation charges and costs associated with the ~~sale of one stabilized development joint venture property (296 units).~~Company's new President also contributed to the increase.
        Net gain on sales of discontinued operations ~~decreased~~increased approximately ~~$39.0~~$21.2 million between the periods under comparison. This ~~decrease~~increase is primarily the result of ~~a fewer number of units~~more fully depreciated properties sold during the quarter ~~ended March 31, 2002 (461 units) as compared to the quarter ended March 31, 2001 (5,283~~and an increase of approximately 1,000 units ~~including interests in properties sold into institutional joint ventures).~~sold.
Liquidity and Capital Resources
        As of January 1, 2002, the Company had approximately $51.6 million of cash and cash equivalents and $505.0 million available under its line of credit, of which $59 million was restricted (not available for borrowings). After taking into effect the various transactions discussed in the following paragraphs and ~~for borrowings~~ the net cash provided by operating activities, the Company's cash and cash equivalents balance at ~~March 31,~~June 30, 2002 was approximately ~~$249.8~~$88.9 million and the amount available on the Company's line of credit was $700.0 million, of which ~~$57.4~~$84.0 million was restricted (not available for borrowings).
        Part of the Company's acquisition and development funding strategy and the funding of the Company's investment in various ~~joint ventures~~unconsolidated entities is to utilize its line of credit and to subsequently repay the line of credit from the disposition of properties, retained cash flows or the issuance of additional equity or debt securities. Continuing to utilize this strategy during the ~~quarter~~six months ended ~~March 31,~~June 30, 2002, the Company:
•
disposed of ~~five~~twenty-three properties (including ~~one~~two Unconsolidated ~~Property)~~Properties) and received net proceeds of approximately ~~$43.0 million;~~

•
~~sold a partial interest in one property and received net proceeds of approximately $1.7~~$194.8 million;

•
disposed of the furniture rental business on January 11, 2002 and received net proceeds of approximately $28.7 million;

•
issued $400.0 million of 6.625% fixed rate unsecured debt receiving net proceeds of $394.5 million;

•
issued approximately ~~0.8~~1.6 million Common Shares and received net proceeds of ~~$14.0~~$33.4 million; and

26
•
obtained ~~$20.8~~$47.2 million in new mortgage financing.
        All of these proceeds were utilized to either:
•
repay the line of credit;

•
repay mortgage indebtedness on selected properties;

•
repay public unsecured debt;

•
invest in unconsolidated entities; and

•
purchase additional properties.
22
        During the ~~quarter~~six months ended ~~March 31,~~June 30, 2002, the Company:
•
repaid $195.0 million on its line of credit;

•
repaid ~~$26.7~~$135.7 million of mortgage loans;

•
repaid $100.0 million of 9.375% fixed rate public notes at maturity;

•
repaid $125.0 million of 7.95% fixed rate public notes at maturity;

•
funded a net of ~~$5.6~~$40.3 million in accordance with its development ~~and joint venture~~ agreements;

•
funded $10.0 million in connection with its agreement with the U.S. Army; and

•
acquired ~~one property~~seven properties utilizing cash of ~~$26.1~~$153.0 million.
        The Company's total debt summary and debt maturity schedule, as of ~~March 31,~~June 30, 2002, are as follows:
Debt Summary as of ~~March 31,~~June 30, 2002

$ Millions
Weighted
Average Rate

$ Millions
Weighted
Average Rate

Secured Secured $ 3,279 6.29% Secured $ 3,210 6.28 %
Unsecured Unsecured 2,556 6.62% Unsecured 2,439 6.52 %

Total $ 5,835 6.44% Total $ 5,649 6.39 %
Fixed Rate Fixed Rate $ 5,130 6.94%
Fixed Rate

$
4,965

6.89
%
Floating Rate Floating Rate 705 2.79% Floating Rate 684 2.72 %

Total $ 5,835 6.44% Total $ 5,649 6.39 %
Above Totals Include: Above Totals Include:
Above Totals Include:

Total Tax Exempt
Total Tax Exempt

$
974

3.82% Total Tax Exempt $ 958 3.75 %
Unsecured Revolving Credit Facility Unsecured Revolving Credit Facility $ — — Unsecured Revolving Credit Facility $ — —
27
Debt Maturity Schedule as of ~~March 31,~~June 30, 2002
Year
Year
$ Millions
% of Total
$ Millions
% of Total

2002* $ 387 6.6%
2003 306 5.2%
2004 596 10.2%
2005 717 12.3%
2006 440 7.5%
2007 277 4.7%
2008 496 8.5%
2009 411 7.0%
2010 262 4.5%
2011+ 1,943 33.3%
2002 $ 245 4.3 %
2003 310 5.5 %
2004 592 10.5 %
2005* 684 12.1 %
2006 429 7.6 %
2007 273 4.8 %
2008 511 9.0 %
2009 405 7.2 %
2010 256 4.5 %
2011+ 1,944 34.4 %

Total Total $ 5,835 100.0% $ 5,649 100.0 %
*
~~for the period April 1, 2002 through December 31, 2002.~~Includes $300 million with a final maturity of 2015 that is putable/callable in 2005.
        The Company's "Consolidated Debt-to-Total Market Capitalization Ratio" as of ~~March 31,~~June 30, 2002 is presented in the following table. The Company calculates the equity component of its market capitalization as the sum of (i) the total outstanding Common Shares and assumed conversion of all OP Units at the equivalent market value of the closing price of the Company's Common Shares on the New York Stock Exchange; (ii) the "Common Share Equivalent" of all convertible preferred shares and
23

preference interests/units; and (iii) the liquidation value of all perpetual preferred shares and preference interests outstanding.
Capitalization as of ~~March 31,~~June 30, 2002
Total Debt $ 5,835,463,307 $ 5,649,483,792
Common Shares & OP Units 296,557,258

298,023,286

Common Share Equivalents (see below) 15,820,176 15,134,806

Total Outstanding at quarter-end 312,377,434 313,158,092
Price at March 28, 2002 $ 28.74

Common Share Price at June 28, 2002 $ 28.75
8,977,727,453 9,003,295,145
Perpetual Preferred Shares Liquidation Value 565,000,000 565,000,000
Perpetual Preference Interests Liquidation Value 211,500,000 211,500,000

Total Market Capitalization $ 15,589,690,760 $ 15,429,278,937
Debt/Total Market Capitalization 37.43 %

36.62
%
28
Convertible Preferred Shares, Preference Interests and Junior Preference Units
As of ~~March 31,~~June 30, 2002

Shares/Units
Conversion
Ratio
Common
Share
Equivalents

Shares/Units
Conversion
Ratio
Common
Share
Equivalents
Preferred Shares: Preferred Shares: Preferred Shares:
Series E 3,329,198 1.1128 3,704,732 Series E 2,716,012 1.1128 3,022,378
Series G 1,264,700 8.5360 10,795,479 Series G 1,264,700 8.5360 10,795,479
Series H 53,311 1.4480 77,194 Series H 51,228 1.4480 74,178
Preference Interests: Preference Interests: Preference Interests:
Series H 190,000 1.5108 287,052 Series H 190,000 1.5108 287,052
Series I 270,000 1.4542 392,634 Series I 270,000 1.4542 392,634
Series J 230,000 1.4108 324,484 Series J 230,000 1.4108 324,484
Junior Preference Units: Junior Preference Units: Junior Preference Units:
Series A 56,616 4.081600 231,084 Series A 56,616 4.081600 231,084
Series B 7,367 1.020408 7,517 Series B 7,367 1.020408 7,517

Total Convertible Total Convertible 5,401,192 15,820,176 Total Convertible 4,785,923 15,134,806

        The Company's policy is to maintain a ratio of consolidated debt-to-total market capitalization of less than 50%.
From ~~April~~July 1, 2002 through ~~April 26,~~July 29, 2002, the Company:
•
~~entered into a joint venture with the U.S. Army with an initial cash equity investment of $10.0 million and assumed management of 3,637 multifamily units at Fort Lewis, Washington;~~

•
acquired one property consisting of ~~264~~466 units for approximately ~~$19.1~~$37.4 million;

•
disposed of ~~four~~seven properties ~~(including one Unconsolidated Property)~~ consisting of ~~188~~1,171 units for approximately ~~$3.5~~$67.2 million;

•
repaid ~~$65.2~~$25.2 million of mortgage loans;

•
~~repaid $125.0 million~~funded a net of ~~7.95% fixed rate public notes at maturity;~~

•
~~funded $1.7~~$41.8 million related to the unconsolidated development ~~earnout and joint venture~~ agreements; and

•
~~received $3.0~~announced that its Board of Trustees has approved a share repurchase program under which it may repurchase, from time to time, up to $200.0 million ~~related to~~of its Common Shares through open market or privately negotiated transactions. This program would initially be funded using the ~~collateral on one joint venture agreement (see Note 8).~~Company's line of credit.
Investments in Unconsolidated Entities
24
        ~~During the remainder of 2002, the Company expects to fund approximately $22.7 million related to wholly owned developments and joint venture projects under development.~~        In connection with one ~~joint venture~~development agreement, the Company has an obligation to fund up to an additional ~~$6.5~~$9.5 million to guarantee third party construction financing. As of ~~March 31,~~June 30, 2002, the Company has 2018 projects under development with estimated completion dates ranging ~~from June 30, 2002~~ through March 31, 2004.
        For one development ~~joint venture~~ agreement, the Company's ~~joint venture~~ partner has the right, at any time following completion of a project, to stipulate a value for such project and offer to sell its interest in the project to the Company based on such value. If the Company chooses not to purchase the interest, it must agree to a sale of the project to an unrelated third party at such value. The Company's ~~joint venture~~ partner must exercise this right as to all projects within five years after the receipt of the final certificate of occupancy on the last developed property.
        Under a second development ~~joint venture~~ agreement, the Company's ~~joint venture~~ partner has the right, at any time following completion of a project, to require the Company to purchase the ~~joint venture~~ partners' interest in that project at a mutually agreeable price. If the Company and the ~~joint venture~~ partner are unable to agree on a price, both parties will obtain appraisals. If the appraised values vary by more than 10%, both the Company and ~~the joint venture~~its partner will agree on a third appraiser to determine which original appraisal is closest to its
29

determination of value. The Company may elect at that time not to purchase the property and instead, authorize ~~the joint venture~~its partner to sell the project at or above the agreed-upon value to an unrelated third party. Five years following the receipt of the final certificate of occupancy on the last developed property, any projects remaining unsold must be purchased by the Company at the agreed-upon price.
Capitalization of Fixed Assets and Improvements to Real Estate:
        ~~During~~Our policy with respect to capital expenditures is generally to capitalize expenditures that improve the ~~quarter ended March 31, 2002,~~value of the ~~Company's total~~property or extend the useful life of the component asset of the property. We track improvements to real estate ~~approximated $27.7~~in two major categories and several subcategories:
•
Replacements(inside the unit). These include:

•
carpets and hardwood floors;

•
appliances;

•
mechanical equipment such as individual furnace/air units, hot water heaters, etc;

•
furniture and fixtures such as kitchen/bath cabinets, light fixtures, ceiling fans, sinks, tubs, toilets, mirrors, countertops, etc;

•
flooring such as vinyl, linoleum or tile; and

•
blinds/shades
We capitalize approximately $260 to $270 per unit annually for inside the unit replacements. All replacements are depreciated over a five-year estimated useful life. We expense as incurred all maintenance and turnover costs such as cleaning, interior painting of individual units and the repair of any replacement item noted above.
•
Building improvements (outside the unit). These include:

•
roof replacement and major repairs;

•
paving or major resurfacing of parking lots, curbs, sidewalks;

•
amenities and common areas such as pools, exterior sports and playground equipment, lobbies, clubhouses, laundry rooms, alarm and security systems and offices;

•
major building mechanical systems;

•
interior and exterior structural repair, replacements and exterior painting;

•
major landscaping and grounds improvement;

•
vehicles and office and maintenance equipment.
We capitalize approximately $340 to $370 per unit annually for outside the unit building improvements. All building improvements are depreciated over a five to ten-year estimated useful life. We expense as incurred all recurring expenditures that do not improve the value of the asset or extend its useful life.
30
        For the six months ended June 30, 2002, our actual improvements to real estate totaled approximately $66.5 million. This includes the following detail (amounts in thousands except for unit and per unit amounts):
Capitalized Improvements to Real Estate
For the Six Months Ended June 30, 2002

Total Units(1)
Replacements(2)
Per
Unit
Building
Improvements(3)
Per
Unit
Total
Per
Unit
Established Properties(4) 178,870 $ 22,661 $ 127 $ 31,640 $ 177 $ 54,301 $ 304
New Acquisition Properties(5) 19,743 2,172 120 3,084 171 5,256 291
Other(6) 6,994 1,639 5,313 6,952

Total 205,607 $ 26,472 $ 40,037 $ 66,509

(1)
Total units exclude 22,356 unconsolidated units.

(2)
Replacements ~~which~~ include new ~~carpeting,~~expenditures inside the units such as carpets, appliances, mechanical equipment, fixtures and vinyl ~~floors and blinds inside the unit approximated $10.9 million, or $55 per unit.~~ flooring.

(3)
Building improvements ~~for the~~include roof replacement, paving, amenities and common areas, building mechanical equipment systems, exterior painting and siding, major landscaping, vehicles and office and maintenance equipment.

(4)
Wholly Owned Properties acquired prior to January 1, 2000.

(5)
Wholly Owned Properties acquired during 2000, 2001 and ~~2002 Acquired Properties approximated $1.5 million, or $89~~YTD 2002. Per unit amounts are based on a weighted average of 18,070 units.

(6)
Other includes Partially Owned and sold properties, commercial space and condominium conversions.
31
        We anticipate capitalizing an average of approximately $600 to $640 per ~~unit. Building improvements~~unit annually for ~~all of~~inside and outside the Company's pre-2000 Acquired Properties approximated $12.5 million or $69 per unit. In addition, approximately $1.1 million was spent on one specific asset related to major renovations and repositioning of this asset. Also included in totalunit capital improvements to our real ~~estate was approximately $1.7 million on commercial/other assets and Partially Owned Properties. Such improvements to real estate were primarily funded from net cash provided by operating activities.~~estate. Total improvements to real estate for the remainder of 2002 are estimated ~~at $100.0~~to be $65.0 million.
        During the ~~quarter~~six months ended ~~March 31,~~June 30, 2002, the Company's total non-real estate capital additions, such as computer software, computer equipment, and furniture and fixtures and leasehold improvements to the Company's property management offices and its corporate offices, was approximately ~~$3.0~~$4.6 million. ~~Such additions to non-real estate property were funded from net cash provided by operating activities.~~ Total additions to non-real estate property for the remainder of 2002 are estimated at ~~$3.8~~$2.2 million.
        Improvements to real estate and additions to non-real estate property for both 2002 and 2001 were funded from net cash provided by operating activities.
Other
        Minority Interests as of ~~March 31,~~June 30, 2002 decreased by ~~$1.7~~$8.2 million when compared to December 31, 2001. The primary factors that impacted this account in the Company's consolidated statements of operations and balance sheets during the ~~quarter~~six months were:
•
distributions declared to Minority Interests, which amounted to ~~$9.9~~$19.7 million for the ~~three~~six months ~~ending March 31,~~ended June 30, 2002 (excluding Junior Preference Unit and Preference Interest distributions);

•
the allocation of income from operations in the amount of ~~$6.4~~$13.8 million;

•
the allocation of Minority Interests from Partially Owned Properties in the amount of ~~$0.8~~$1.3 million;

25
•
the conversion of OP Units into Common Shares; and

•
the issuance of Common Shares during the ~~three~~six months ended ~~March 31,~~June 30, 2002.
        Total distributions paid in ~~April~~July 2002 amounted to ~~$147.3~~$147.7 million (excluding distributions on Partially Owned Properties), which included certain distributions declared during the quarter ended ~~March 31,~~June 30, 2002.
        The Company expects to meet its short-term liquidity requirements, including capital expenditures related to maintaining its existing properties and certain scheduled unsecured note and mortgage note repayments, generally through its working capital, net cash provided by operating activities and borrowings under its line of credit. The Company considers its cash provided by operating activities to be adequate to meet operating requirements and payments of distributions. The Company also expects to meet its long-term liquidity requirements, such as scheduled unsecured note and mortgage debt maturities, property acquisitions, financing of construction and development activities and capital improvements through the issuance of unsecured notes and equity securities, including additional OP Units, and proceeds received from the disposition of certain properties. In addition, the Company has certain unencumbered properties available to secure additional mortgage borrowings in the event that the public capital markets are unavailable to the Company or the cost of alternative sources of capital to the Company is too high. These unencumbered properties are in excess of the value of unencumbered properties the Company must maintain in order to comply with covenants under its unsecured notes and line of credit.
        On May 30, 2002 the Company obtained a new three-year $700.0 million unsecured revolving credit facility. The ~~Company has a~~new line of credit replaces the Company's $700.0 million unsecured revolving credit facility ~~with potential borrowings of up to $700.0 million. As of May 7, 2002, no amounts were outstanding under this facility. This credit facility is~~that was scheduled to expire in August ~~2002~~2002. The prior existing revolving credit facility terminated upon the closing of the new facility. This new facility matures in May 2005 and ~~the Company has begun the process of replacing its line of credit with a new line of credit, which it believes~~ will be ~~on at least as favorable terms.~~used to fund property acquisitions, costs for certain Properties under development and short term liquidity requirements. As of July 31, 2002, $40.0 million was outstanding under this new facility.
32

        The Company provided a credit enhancement with respect to certain tax-exempt bonds issued to finance certain public improvements at a multifamily development project. As of ~~May 1,~~July 31, 2002, this enhancement was still in effect at a commitment amount of $12.7 million.
Critical Accounting Policies and Estimates
        The Company's consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, which require the Company to make estimates and judgments that affect the reported amount of assets, liabilities, revenues and expenses, and the related disclosures. The Company believes that the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.
Impairment of Long-Lived Assets, Including Goodwill
        The Company periodically evaluates its long-lived assets, including its investments in real estate and goodwill, for impairment indicators. The judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions and legal factors. Future events could occur which would cause the Company to conclude that impairment indicators exist and an impairment loss is warranted.
Depreciation of Investment in Real Estate
        The Company depreciates the building component of its investment in real estate over a 30-year estimated useful life, building improvements over a 5-year to 10-year estimated useful life and both the furniture, fixtures and equipment and replacements components over a 5-year estimated useful life, all of which are judgmental determinations.
26

Fair Value of Financial Instruments, Including Derivative Instruments
        The valuation of financial instruments under SFAS No. 107 and SFAS No. 133 requires the Company to make estimates and judgments that affect the fair value of the instruments. The Company, where possible, bases the fair values of its financial instruments, including its derivative instruments, on listed market prices and third party quotes. Where these are not available, the Company bases its estimates on other factors relevant to the financial instruments.
Stock Option Compensation
        The Company has chosen to account for its stock option compensation in accordance with APB No. 25, which results in no compensation expense for options issued with an exercise price equal to or exceeding market value of the Company's Common Shares on the date of grant, instead of Statement No. 123, which would result in compensation expense being recorded based on the fair value of the stock option compensation issued.
Adjusted Net Income
        For the ~~quarter~~six months ended ~~March 31,~~June 30 2002, Adjusted Net Income ("ANI") available to Common Shares and OP ~~units~~Units decreased ~~$10.6~~$4.3 million as compared to the six months ended June 30, 2001.
        For the quarter ended June 30, 2002, ANI available to Common Shares and OP Units increased $6.4 million as compared to the quarter ended ~~March 31,~~June 30, 2001.
33

        The following is a reconciliation of net income available to Common Shares to ANI available to Common Shares and OP Units for the six months and quarters ended ~~March 31,~~June 30, 2002 and 2001:
Adjusted Net Income
(Amounts in thousands)
(Unaudited)

Quarter Ended March 31

Six Months Ended June 30,
Quarter Ended June 30,

2002
2001

2002
2001
2002
2001

Net income available to Common Shares Net income available to Common Shares $ 76,353 $ 106,754 Net income available to Common Shares $ 165,394 $ 180,792 $ 89,041 $ 74,038
Net income allocation to Minority Interests—Operating Partnership Net income allocation to Minority Interests—Operating Partnership 6,441 9,796 Net income allocation to Minority Interests—Operating Partnership 13,784 16,474 7,343 6,678
Adjustments: Adjustments: Adjustments:
Acquisition cost depreciation* 96,158 93,473 Acquisition cost depreciation* 192,005 187,797 95,847 94,324
Amortization of goodwill — 933 Amortization of goodwill — 1,924 — 991
Acquisition cost depreciation accumulated on sold properties (3,944 ) (26,199 ) Acquisition cost depreciation accumulated on sold properties (22,532 ) (34,774 ) (18,588 ) (8,575 )
Extraordinary items 97 (311 ) Extraordinary items 468 (106 ) 371 205
Cumulative effect of change in accounting principle — 1,270 Cumulative effect of change in accounting principle — 1,270 — —

ANI available to Common Shares and OP Units—basic** ANI available to Common Shares and OP Units—basic** $ 175,105 $ 185,716 ANI available to Common Shares and OP Units—basic** $ 349,119 $ 353,377 $ 174,014 $ 167,661

Depreciation for replacements and capital improvements Depreciation for replacements and capital improvements $ 21,252 $ 19,068 Depreciation for replacements and capital improvements $ 43,422 $ 38,830 $ 22,170 $ 19,762

*
Acquisition cost depreciation represents depreciation for the initial cost of the property, including buildings and furniture, fixtures and equipment and depreciation on capital improvements identified in the acquisition underwriting and incurred in the first twenty-four months of ownership when the total cost exceeds $2,000 per unit.

**
ANI represents net income (loss) (computed in accordance with accounting principles generally accepted in the United States ("GAAP")), including gains or losses from sales of real estate, plus acquisition cost depreciation, plus amortization of goodwill, minus the accumulated acquisition cost depreciation on sold properties, plus/minus extraordinary items and plus the cumulative effect of change in accounting principle. Depreciation associated with replacements and capital improvements is deducted in calculating ANI.

34
        The Company believes that ANI is helpful to investors as a supplemental measure of the operating performance of a real estate company because, along with cash flows from operating activities, financing activities and investing activities, it provides investors an understanding of the ability of the Company to incur and service debt and to make capital expenditures. ANI in and of itself does not represent cash generated from operating activities in accordance with GAAP and therefore should not
27
be considered an alternative to net income as an indication of the Company's performance or to net cash flows from operating activities as determined by GAAP as a measure of liquidity and is not necessarily indicative of cash available to fund cash needs. The Company's calculation of ANI may differ from the methodology for calculating ANI utilized by other real estate companies and may differ, for example, due to variations among the Company's and other real estate companies' accounting policies for replacement type items and, accordingly, may not be comparable to such other real estate companies.
Funds From Operations
        For the ~~quarter~~six months ended ~~March 31,~~June 30, 2002, Funds From Operations ("FFO") available to Common Shares and OP Units decreased ~~$0.1~~$4.4 million as compared to the six months ended June 30, 2001.
        For the quarter ended June 30, 2002, FFO available to Common Shares and OP Units decreased $4.3 million as compared to the quarter ended ~~March 31,~~June 30, 2001.
        The following is a reconciliation of net income available to Common Shares to FFO available to Common Shares and OP Units for the six months and quarters ended ~~March 31,~~June 30, 2002 and 2001:
Funds from Operations
(Amounts in thousands)
(Unaudited)

Quarter Ended March 31,

Six Months Ended June 30,
Quarter Ended June 30,

2002
2001

2002
2001
2002
2001

Net income available to Common Shares Net income available to Common Shares $ 76,353 $ 106,754 Net income available to Common Shares $ 165,394 $ 180,792 $ 89,041 $ 74,038
Net income allocation to Minority Interests—Operating Partnership Net income allocation to Minority Interests—Operating Partnership 6,441 9,796 Net income allocation to Minority Interests—Operating Partnership 13,784 16,474 7,343 6,678
Adjustments: Adjustments: Adjustments:
Depreciation/amortization 117,410 113,474 Depreciation/amortization 235,427 228,551 118,017 115,077
Net gain on sales of discontinued operations (2,816 ) (41,778 ) Net gain on sales of discontinued operations (27,576 ) (46,226 ) (24,760 ) (4,448 )
Net gain on sales of unconsolidated entities (5,657 ) — Net (gain) loss on sales of unconsolidated entities (5,246 ) (339 ) 411 (339 )
Extraordinary items 97 (311 ) Extraordinary items 468 (106 ) 371 205
Cumulative effect of change in accounting principle — 1,270 Cumulative effect of change in accounting principle — 1,270 — —
Impairment on technology investments 291 3,003 Impairment on technology investments 581 6,775 290 3,772

FFO available to Common Shares and OP Units—basic* FFO available to Common Shares and OP Units—basic* $ 382,832 $ 387,191 $ 190,713 $ 194,983
FFO available to Common Shares and OP Units—basic* $ 192,119 $ 192,208

*
FFO represents net income (loss) (computed in accordance with accounting principles generally accepted in the United States ("GAAP")), excluding gains or losses from sales of property, plus depreciation and amortization (after adjustments for Partially Owned Properties and Unconsolidated Properties), plus/minus extraordinary items, and plus the cumulative effect of change in accounting principle and impairment charges. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect FFO on the same basis.
        The Company believes that FFO is helpful to investors as a supplemental measure of the operating performance of a real estate company because, along with cash flows from operating activities,
35

financing activities and investing activities, it provides investors an understanding of the ability of the Company to incur and service debt and to make capital expenditures. FFO in and of itself does not represent cash generated from operating activities in accordance with GAAP and therefore should not be considered an alternative to net income as an indication of the Company's performance or to net cash flows from operating activities as determined by GAAP as a measure of liquidity and is not necessarily indicative of cash available to fund cash needs. The Company's calculation of FFO may differ from the methodology for calculating FFO utilized by other real estate companies and may differ, for example, due to variations among the Company's and other real estate companies' accounting policies for replacement type items and, accordingly, may not be comparable to such other real estate companies.
28

PART II. OTHER INFORMATION
Item 1. Legal Proceedings
        There have been no new or significant developments related to the legal proceedings that were discussed in Part I, Item III of the Company's Form 10-K for the year ended December 31, 2001.

Item 4. Submission of Matters to a Vote of Security Holders
        The Company held its Annual Meeting of Shareholders on May 15, 2002. Shareholders holding 241,525,692 Common Shares (being the only class of shares entitled to vote at the meeting), or 88.4% of the Company's issued and outstanding shares as of the record date for the meeting, attended the meeting or were represented by proxy. The Company's shareholders voted on three matters presented at the meeting and all three received the requisite number of votes to pass. The results of the shareholders vote on each of the three matters are as follows:
Proposal I—Election of four trustees to terms expiring in 2005.

Total Vote for Each Trustee*
Total Vote Withheld from Each Trustee*

John W. Alexander 98.30 % 1.70 %
Bruce W. Duncan 97.83 % 2.17 %
Boone A. Knox 98.28 % 1.72 %
Samuel Zell 97.80 % 2.20 %
*
This percentage represents the number of shares voting in this matter out of the total number of shares voted at the meeting, not out of the total shares outstanding. This matter required a plurality of the votes cast for approval.
Proposal II—Approval to change the Company's name to "Equity Residential" (this matter required the affirmative vote of two-thirds of all outstanding shares for approval).
For 88.14 %
Against 0.08 %
Abstain 0.14 %
Non-Votes 11.64 %
36
Proposal III—Approval of the Company's 2002 Share Incentive Plan (this matter required a majority of the votes cast for approval).
For 190,637,623 88.51 %
Against 24,759,248 11.49 %
Abstain 927,564 —
Broker Non-Votes 25,201,257 —

Item 6. Exhibits and Reports on Form 8-K
(A)
Exhibits:

~~10.1~~
~~Compensation agreement between Bruce Duncan and the Company dated March 14, 2002.~~

~~10.2~~
~~Compensation agreement between Douglas Crocker II and the Company dated April 10, 2002, but effective as of January 16, 2002.~~

12
~~Computation of Ratio of Earnings to Combined Fixed Charges~~

3.1

Articles of Amendment to the Second Amended and Restated Declaration of Trust, dated May 15, 2002.

10.1

Revolving Credit Agreement, dated as of May 29, 2002, among ERP Operating Limited Partnership, Banc of America Securities LLC, JP Morgan Securities Inc. and the Banks named therein.

10.2

Guaranty of Payment, dated as of May 29, 2002, between Equity Residential and Bank of America, N.A., as administrative agent.

12

Computation of Ratio of Earnings to Combined Fixed Charges.
(B)
Reports on Form 8-K:
        ~~None~~None.
2937

SIGNATURES
        Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf by the undersigned thereunto duly authorized.
EQUITY RESIDENTIAL
~~EQUITY RESIDENTIAL PROPERTIES TRUST~~

Date: ~~May~~August 13, 2002

By:
/s/  ~~BRUCE C. STROHM~~DAVID J. NEITHERCUT
~~Bruce C. Strohm~~David J. Neithercut
Executive Vice President ~~General Counsel~~ and ~~Secretary~~Chief Financial Officer

Date: ~~May~~August 13, 2002

By:
/s/ MICHAEL J. ~~MCHUGH~~      McHUGH
Michael J. McHugh
Executive Vice President, Chief Accounting Officer and Treasurer
3038

QuickLinks
EQUITY RESIDENTIAL ~~PROPERTIES TRUST~~ CONSOLIDATED BALANCE SHEETS (Amounts in ~~thousands except for share amounts)~~thousands) (Unaudited)
EQUITY RESIDENTIAL ~~PROPERTIES TRUST~~ CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands except ~~for~~per share data) (Unaudited)
EQUITY RESIDENTIAL ~~PROPERTIES TRUST~~ CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) (Unaudited)
EQUITY RESIDENTIAL ~~PROPERTIES TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (Amounts in thousands) (Unaudited)~~
~~EQUITY RESIDENTIAL PROPERTIES TRUST~~ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES

			Quarter Ended March 31,
			2002			2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income			$	100,878		$	135,280
Adjustments to reconcile net income to net cash provided by operating activities:
	Allocation to Minority Interests:
		Operating Partnership		6,441			9,796
		Partially Owned Properties		806			105
Cumulative effect of change in accounting principle				—			1,270
Depreciation				116,767			115,029
Amortization of deferred financing costs				1,391			1,397
Amortization of discount on investment in mortgage notes				—			(161	)
Amortization of goodwill				—			933
Amortization of discounts and premiums on debt				(327	)		(590	)
Amortization of deferred settlements on interest rate protection agreements				(101	)		101
Impairment on technology investments				291			3,003
Income from investments in unconsolidated entities				(226	)		(350	)
Net gain on sales of discontinued operations				(2,816	)		(41,778	)
Net gain on sales of unconsolidated entities				(5,657	)		—
Extraordinary items				97			(311	)
Unrealized gain on interest rate protection agreements				(62	)		(71	)
Book value of furniture sales and rental buyouts				—			2,851
Compensation paid with Company Common Shares				4,964			2,867
Changes in assets and liabilities:
	Decrease (increase) in rents receivable			1,045			(188	)
	Decrease in deposits—restricted			14,133			5,343
	Additions to rental furniture			—			(6,272	)
	Decrease (increase) in other assets			18,446			(3,002	)
	(Decrease) in accounts payable and accrued expenses			(7,498	)		(9,153	)
	Increase in accrued interest payable			9,963			19,752
	Increase in rents received in advance and other liabilities			2,852			219
	Increase in security deposits			287			343

	Net cash provided by operating activities			261,674			236,413

CASH FLOWS FROM INVESTING ACTIVITIES:
	Investment in real estate—acquisitions			(26,100	)		(143,399	)
	Investment in real estate—development			(24,338	)		(13,758	)
	Improvements to real estate			(27,697	)		(28,166	)
	Additions to non-real estate property			(3,004	)		(1,830	)
	Interest capitalized for real estate under development			(5,884	)		(5,987	)
	Proceeds from disposition of real estate, net			31,722			280,448
	Proceeds from disposition of partial interest in real estate			1,715			—
	Proceeds from disposition of furniture rental business			28,741			—
	Investment in property and equipment			—			(673	)
	Principal receipts on investment in mortgage notes			—			2,998
	Investments in unconsolidated entities			(12,099	)		(16,613	)
	Distributions from unconsolidated entities			14,765			8,364
	Proceeds from disposition of unconsolidated entities			11,317			—
	(Increase) in deposits on real estate acquisitions, net			(6,288	)		(28,506	)
	Decrease in mortgage deposits			4,105			870
	Business combinations, net of cash acquired			(207	)		(5,538	)
	Other investing activities, net			193			(48	)

	Net cash (used for) provided by investing activities			(13,059	)		48,162

		Quarter Ended March 31,
		2002			2001
CASH FLOWS FROM FINANCING ACTIVITIES:
Loan and bond acquisition costs		$	(3,040	)	$	(3,390	)
Mortgage notes payable:
	Proceeds, net		20,772			29,052
	Lump sum payoffs		(18,267	)		(176,746	)
	Scheduled principal repayments		(8,469	)		(8,451	)
	Prepayment premiums/fees		(97	)		—
Notes, net:
	Proceeds		397,064			299,316
	Lump sum payoffs		(100,000	)		—
	Scheduled principal repayments		—			(119	)
Lines of credit:
	Proceeds		245,000			176,686
	Repayments		(440,000	)		(532,148	)
Proceeds (payments) from settlement of interest rate protection agreements			835			(7,360	)
Proceeds from sale of Common Shares			4,236			3,266
Proceeds from sale of Preference Interests			—			35,000
Proceeds from exercise of options			9,777			8,210
Payment of offering costs			(141	)		(938	)
Distributions:
	Common Shares		(117,338	)		(416	)
	Preferred Shares		(16,441	)		(21,516	)
	Preference Interests		(5,080	)		(3,916	)
	Junior Preference Units		(81	)		—
	Minority Interests—Operating Partnership		(10,151	)		(9	)
	Minority Interests—Partially Owned Properties		(9,120	)		(108	)
Principal receipts on employee notes, net			85			71

Net cash (used for) financing activities			(50,456	)		(203,516	)

Net increase in cash and cash equivalents			198,159			81,059
Cash and cash equivalents, beginning of period			51,603			23,772

Cash and cash equivalents, end of period		$	249,762		$	104,831

SUPPLEMENTAL INFORMATION:
Cash paid during the period for interest		$	81,566		$	76,777

Mortgage loans assumed through real estate acquisitions		$	—		$	45,918

Mortgage loans (assumed) by purchaser in real estate and furniture rental business dispositions		$	(1,680	)	$	(22,815	)

Transfers to real estate held for disposition		$	3,505		$	21,886

	Number of Properties	Number of Units	Number of Properties	Number of Units
Wholly Owned Properties	951	199,305	943	198,676
Partially Owned Properties	37	7,231
Partially Owned Properties (Consolidated)			36	6,931
Unconsolidated Properties	85	18,464	86	22,356

Total Properties	1,073	225,000	1,065	227,963

	Cash Flow Hedges			Fair Value Hedges			Offsetting Swaps/Caps			Offsetting Reverse Swap/Caps
Current Notional Balance	$	400,000		$	220,000		$	255,117		$	255,117
Lowest Possible Notional	$	400,000		$	220,000		$	251,410		$	251,410
Highest Possible Notional	$	400,000		$	220,000		$	431,444		$	431,444
Lowest Interest Rate		3.65125	%		5.3325	%		4.528	%		4.458	%
Highest Interest Rate		5.81000	%		7.2500	%		6.000	%		6.000	%
Earliest Maturity Date		2003			2005			2003			2003
Latest Maturity Date		2005			2011			2007			2007
Estimated Asset (Liability) Fair Value	$	(14,664	)	$	4,258		$	(5,093	)	$	4,821

		2002
Common Shares outstanding at January 1,		271,621,374
Common Shares Issued:
Conversion of Series E Preferred Shares		~~40,710~~723,048
Conversion of Series H Preferred Shares		~~1,036~~4,050
Employee Share Purchase Plan		~~153,825~~212,395
Dividend Reinvestment—DRIP Plan		~~14,069~~26,843
Share Purchase—DRIP Plan		~~11,691~~21,819
Exercise of options		~~595,081~~1,301,917
Restricted share grants, net		~~922,280~~912,128
Conversion of OP Units		~~476,301~~644,207

Common Shares outstanding at ~~March 31,~~June 30,		~~273,836,367~~275,467,781

			Amounts in thousands
	Annual Dividend Rate per Share(1)		Amounts in thousands
	Annual Dividend Rate per Share(1)		March 31, 2002		December 31, 2001
Preferred Shares of beneficial interest, $.01 par value; 100,000,000 shares authorized:
9¹/8% Series B Cumulative Redeemable Preferred; liquidation value $250 per share; 500,000 shares issued and outstanding at March 31, 2002 and December 31, 2001	$	22.81252	$	125,000	$	125,000
9¹/8% Series C Cumulative Redeemable Preferred; liquidation value $250 per share; 460,000 shares issued and outstanding at March 31, 2002 and December 31, 2001	$	22.81252		115,000		115,000
8.60% Series D Cumulative Redeemable Preferred; liquidation value $250 per share; 700,000 shares issued and outstanding at March 31, 2002 and December 31, 2001	$	21.50000		175,000		175,000
Series E Cumulative Convertible Preferred; liquidation value $25 per share; 3,329,198 and 3,365,794 shares issued and outstanding at March 31, 2002 and December 31, 2001, respectively	$	1.75000		83,230		84,145
7¹/4% Series G Convertible Cumulative Preferred; liquidation value $250 per share; 1,264,700 shares issued and outstanding at March 31, 2002 and December 31, 2001	$	18.12500		316,175		316,175
7.00% Series H Cumulative Convertible Preferred; liquidation value $25 per share; 53,311 and 54,027 shares issued and outstanding at March 31, 2002 and December 31, 2001, respectively	$	1.75000		1,333		1,351
8.29% Series K Cumulative Redeemable Preferred; liquidation value $50 per share; 1,000,000 shares issued and outstanding at March 31, 2002 and December 31, 2001	$	4.14500		50,000		50,000
7.625% Series L Cumulative Redeemable Preferred; liquidation value $25 per share; 4,000,000 shares issued and outstanding at March 31, 2002 and December 31, 2001	$	1.90625		100,000		100,000

			$	965,738	$	966,671

				Amounts in thousands
		Annual Dividend Rate per Share(1)		Amounts in thousands
		Annual Dividend Rate per Share(1)		June 30, 2002		December 31, 2001
Preferred Shares of beneficial interest, $.01 par value; 100,000,000 shares authorized:
	9¹/8% Series B Cumulative Redeemable Preferred; liquidation value $250 per share; 500,000 shares issued and outstanding at June 30, 2002 and December 31, 2001	$	22.81252	$	125,000	$	125,000
	9¹/8% Series C Cumulative Redeemable Preferred; liquidation value $250 per share; 460,000 shares issued and outstanding at June 30, 2002 and December 31, 2001	$	22.81252		115,000		115,000
	8.60% Series D Cumulative Redeemable Preferred; liquidation value $250 per share; 700,000 shares issued and outstanding at June 30, 2002 and December 31, 2001	$	21.50000		175,000		175,000
	Series E Cumulative Convertible Preferred; liquidation value $25 per share; 2,716,012 and 3,365,794 shares issued and outstanding at June 30, 2002 and December 31, 2001, respectively	$	1.75000		67,900		84,145
	7¹/4% Series G Convertible Cumulative Preferred; liquidation value $250 per share; 1,264,700 shares issued and outstanding at June 30, 2002 and December 31, 2001	$	18.12500		316,175		316,175
	7.00% Series H Cumulative Convertible Preferred; liquidation value $25 per share; 51,228 and 54,027 shares issued and outstanding at June 30, 2002 and December 31, 2001, respectively	$	1.75000		1,281		1,351
	8.29% Series K Cumulative Redeemable Preferred; liquidation value $50 per share; 1,000,000 shares issued and outstanding at June 30, 2002 and December 31, 2001	$	4.14500		50,000		50,000
	7.625% Series L Cumulative Redeemable Preferred; liquidation value $25 per share; 4,000,000 shares issued and outstanding at June 30, 2002 and December 31, 2001	$	1.90625		100,000		100,000

				$	950,356	$	966,671

			Amounts in thousands
	Annual Dividend Rate per Unit(1)		Amounts in thousands
	Annual Dividend Rate per Unit(1)		March 31, 2002		December 31, 2001
Preference Interests:
8.00% Series A Cumulative Redeemable Preference Interests; liquidation value $50 per unit; 800,000 units issued and outstanding at March 31, 2002 and December 31, 2001	$	4.0000	$	40,000	$	40,000
8.50% Series B Cumulative Redeemable Preference Units; liquidation value $50 per unit; 1,100,000 units issued and outstanding at March 31, 2002 and December 31, 2001	$	4.2500		55,000		55,000
8.50% Series C Cumulative Redeemable Preference Units; liquidation value $50 per unit; 220,000 units issued and outstanding at March 31, 2002 and December 31, 2001	$	4.2500		11,000		11,000
8.375% Series D Cumulative Redeemable Preference Units; liquidation value $50 per unit; 420,000 units issued and outstanding at March 31, 2002 and December 31, 2001	$	4.1875		21,000		21,000
8.50% Series E Cumulative Redeemable Preference Units; liquidation value $50 per unit; 1,000,000 units issued and outstanding at March 31, 2002 and December 31, 2001	$	4.2500		50,000		50,000
8.375% Series F Cumulative Redeemable Preference Units; liquidation value $50 per unit; 180,000 units issued and outstanding at March 31, 2002 and December 31, 2001	$	4.1875		9,000		9,000
7.875% Series G Cumulative Redeemable Preference Units; liquidation value $50 per unit; 510,000 units issued and outstanding at March 31, 2002 and December 31, 2001	$	3.9375		25,500		25,500
7.625% Series H Cumulative Convertible Redeemable Preference Units; liquidation value $50 per unit; 190,000 units issued and outstanding at March 31, 2002 and December 31, 2001	$	3.8125		9,500		9,500
7.625% Series I Cumulative Convertible Redeemable Preference Units; liquidation value $50 per unit; 270,000 units issued and outstanding at March 31, 2002 and December 31, 2001	$	3.8125		13,500		13,500
7.625% Series J Cumulative Convertible Redeemable Preference Units; liquidation value $50 per unit; 230,000 units issued and outstanding at March 31, 2002 and December 31, 2001	$	3.8125		11,500		11,500

			$	246,000	$	246,000

Date Acquired	Property	Location	Number of Units	Acquisition Price
				(in thousands)
3/28/02	Isles at Sawgrass	Sunrise, FL	368	$	26,000
4/24/02	Center Pointe	Beaverton, OR	264		19,100
4/30/02	Mira Flores	Palm Beach Gardens, FL	352		29,250
5/15/02	Gramercy Park	Houston, TX	384		26,000
5/31/02	Enclave at Winston Park	Coconut Creek, FL	278		25,450
5/31/02	St. Andrews at Winston Park	Coconut Creek, FL	284		25,450
6/21/02	Westside Villas VII	Los Angeles, CA	53		15,250

			1,983	$	166,500

Date Disposed	Property	Location	Number Of Units	Disposition Price (in thousands)
01/17/02	Ravenwood	Mauldin, SC	82	$	2,425
01/24/02	Larkspur I & II	Moraine, OH	45		899
01/31/02	Springwood II	Austintown, OH	43		900
02/21/02	Scottsdale Courtyards	Scottsdale, AZ	274		26,500

			444	$	30,724

	Institutional Joint Ventures			Stabilized Development Joint Ventures(1)			Joint Venture Projects Under Development			Lexford/ Other			Totals		Institutional Joint Ventures			Stabilized Development Projects(1)			Projects Under Development			Lexford/ Other			Totals
Total projects		45			10			16	(2)		27			98		45			10			18			26			99	(2)

Total units		10,846			3,038			5,179	(2)		3,348			22,411		10,846			3,038			5,523			3,313			22,720	(2)

EQR's percentage ownership of mortgage notes payable		25.0	%		85.4	%		100.0	%		15.6	%				25.0	%		96.4	%		100.0	%		19.5	%
EQR's share of mortgage notes payable(4)	$	121,200		$	214,615		$	285,655	(3)	$	10,509		$	631,979	$	121,200		$	242,431		$	341,703		$	12,913		$	718,247	(3)

		Properties		Units		Purchase/ Sale Price $ Millions
	At December 31, 2000	1,104		227,704
Q1 2001 Acquisitions		7		1,721		$	189.2
Q1 2001 Dispositions		(15	)	(2,272	)	$	117.7

	At March 31, 2001	1,096		227,153
Q2/Q3/Q4 2001 Acquisitions		7		1,702		$	198.9
Q2/Q3/Q4 2001 Dispositions		(34	)	(6,535	)	$	299.2
Q2/Q3/Q4 2001 Completed Developments		7		2,505
Q4 2001 Unit Configuration Changes		—		(24	)

	At December 31, 2001	1,076		224,801
Q1 2002 Acquisitions		1		368		$	26.0
Q1 2002 Dispositions		(5	)	(757	)	$	43.7
Q1 2002 Completed Developments		1		588

	At March 31, 2002	1,073		225,000

Description	Revenues			Expenses			NOI
Q1 2002	$	466.0		$	168.7		$	297.3
Q1 2001	$	467.7		$	168.9		$	298.8

Change	$	(1.7	)	$	(0.2	)	$	(1.5	)

% Change		(0.4	)%		(0.1	)%		(0.5	)%

Description		Revenues			Expenses			NOI
YTD 2002		$	918.0		$	336.8		$	581.2
YTD 2001		$	930.3		$	335.4		$	594.9

	Change	$	(12.3	)	$	1.4		$	(13.7	)

% Change			(1.3	)%		0.4	%		(2.3	)%

Q1YTD 2002		~~94.24~~93.98	%
Q1YTD 2001		~~94.60~~94.63	%

	Change	(~~0.36~~0.65	)%

Physical Occupancy		93.0%
Revenue ~~Growth~~Change		~~(1.25%)~~(2.3)% to ~~0.1%~~(2.0)%
Expense ~~Growth~~Change		1.0% to 1.5%
NOI ~~Growth~~Change		~~(2.9%)~~(4.5)% to ~~(0.7%)~~(3.75)%
Dispositions		$500 million
Refinancing		$200 million at 7.0%

Description		Revenues			Expenses			NOI
Q2 2002		$	463.3		$	173.3		$	290.0
Q2 2001		$	473.4		$	170.6		$	302.8

	Change	$	(10.1	)	$	2.7		$	(12.8	)

% Change			(2.1	)%		1.6	%		(4.2	)%

		$ Millions		Weighted Average Rate		$ Millions		Weighted Average Rate
Secured	Secured	$	3,279	6.29%	Secured	$	3,210	6.28	%
Unsecured	Unsecured		2,556	6.62%	Unsecured		2,439	6.52	%

	Total	$	5,835	6.44%	Total	$	5,649	6.39	%
Fixed Rate	Fixed Rate	$	5,130	6.94%	Fixed Rate	$	4,965	6.89	%
Floating Rate	Floating Rate		705	2.79%	Floating Rate		684	2.72	%

	Total	$	5,835	6.44%	Total	$	5,649	6.39	%
Above Totals Include:	Above Totals Include:				Above Totals Include:
Total Tax Exempt	Total Tax Exempt	$	974	3.82%	Total Tax Exempt	$	958	3.75	%
Unsecured Revolving Credit Facility	Unsecured Revolving Credit Facility	$	—	—	Unsecured Revolving Credit Facility	$	—	—

Year	Year	$ Millions		% of Total	$ Millions		% of Total
	2002*	$	387	6.6%
	2003		306	5.2%
	2004		596	10.2%
	2005		717	12.3%
	2006		440	7.5%
	2007		277	4.7%
	2008		496	8.5%
	2009		411	7.0%
	2010		262	4.5%
	2011+		1,943	33.3%
2002					$	245	4.3	%
2003						310	5.5	%
2004						592	10.5	%
2005*						684	12.1	%
2006						429	7.6	%
2007						273	4.8	%
2008						511	9.0	%
2009						405	7.2	%
2010						256	4.5	%
2011+						1,944	34.4	%

Total	Total	$	5,835	100.0%	$	5,649	100.0	%

Total Debt			$	5,835,463,307				$	5,649,483,792
Common Shares & OP Units		296,557,258					298,023,286
Common Share Equivalents (see below)		15,820,176					15,134,806

Total Outstanding at quarter-end		312,377,434					313,158,092
Price at March 28, 2002	$	28.74

Common Share Price at June 28, 2002						$	28.75
				8,977,727,453					9,003,295,145
Perpetual Preferred Shares Liquidation Value				565,000,000					565,000,000
Perpetual Preference Interests Liquidation Value				211,500,000					211,500,000

Total Market Capitalization			$	15,589,690,760				$	15,429,278,937
Debt/Total Market Capitalization				37.43	%				36.62	%

		Shares/Units	Conversion Ratio	Common Share Equivalents		Shares/Units	Conversion Ratio	Common Share Equivalents
Preferred Shares:	Preferred Shares:				Preferred Shares:
	Series E	3,329,198	1.1128	3,704,732	Series E	2,716,012	1.1128	3,022,378
	Series G	1,264,700	8.5360	10,795,479	Series G	1,264,700	8.5360	10,795,479
	Series H	53,311	1.4480	77,194	Series H	51,228	1.4480	74,178
Preference Interests:	Preference Interests:				Preference Interests:
	Series H	190,000	1.5108	287,052	Series H	190,000	1.5108	287,052
	Series I	270,000	1.4542	392,634	Series I	270,000	1.4542	392,634
	Series J	230,000	1.4108	324,484	Series J	230,000	1.4108	324,484
Junior Preference Units:	Junior Preference Units:				Junior Preference Units:
	Series A	56,616	4.081600	231,084	Series A	56,616	4.081600	231,084
	Series B	7,367	1.020408	7,517	Series B	7,367	1.020408	7,517

Total Convertible	Total Convertible	5,401,192		15,820,176	Total Convertible	4,785,923		15,134,806

	Total Units(1)	Replacements(2)		Per Unit		Building Improvements(3)		Per Unit		Total		Per Unit
Established Properties(4)	178,870	$	22,661	$	127	$	31,640	$	177	$	54,301	$	304
New Acquisition Properties(5)	19,743		2,172		120		3,084		171		5,256		291
Other(6)	6,994		1,639				5,313				6,952

Total	205,607	$	26,472			$	40,037			$	66,509

	Total Vote for Each Trustee*		Total Vote Withheld from Each Trustee*
John W. Alexander	98.30	%	1.70	%
Bruce W. Duncan	97.83	%	2.17	%
Boone A. Knox	98.28	%	1.72	%
Samuel Zell	97.80	%	2.20	%

For	190,637,623	88.51	%
Against	24,759,248	11.49	%
Abstain	927,564	—
Broker Non-Votes	25,201,257	—

3.1		Articles of Amendment to the Second Amended and Restated Declaration of Trust, dated May 15, 2002.
10.1		Revolving Credit Agreement, dated as of May 29, 2002, among ERP Operating Limited Partnership, Banc of America Securities LLC, JP Morgan Securities Inc. and the Banks named therein.
10.2		Guaranty of Payment, dated as of May 29, 2002, between Equity Residential and Bank of America, N.A., as administrative agent.
12		Computation of Ratio of Earnings to Combined Fixed Charges.

			EQUITY RESIDENTIAL
	~~EQUITY RESIDENTIAL PROPERTIES TRUST~~

Date: ~~May~~August 13, 2002	By:	/s/ ~~BRUCE C. STROHM~~DAVID J. NEITHERCUT ~~Bruce C. Strohm~~David J. Neithercut Executive Vice President ~~General Counsel~~ and ~~Secretary~~Chief Financial Officer


Date: ~~May~~August 13, 2002	By:	/s/ MICHAEL J. ~~MCHUGH~~ McHUGH Michael J. McHugh Executive Vice President, Chief Accounting Officer and Treasurer