FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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

For the quarterly period ended ~~SEPTEMBER 30, 2003~~MARCH 31, 2004

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

Commission File Number: 0-24920

ERP OPERATING LIMITED PARTNERSHIP

(Exact Name of Registrant as Specified in its Charter)

Illinois		36-3894853
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

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

~~(312) 474-1300~~

~~(Registrant’s Telephone Number, Including Area Code)~~

(312) 474-1300

(Registrant’s 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 No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes ý No o

ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
(Unaudited)

	September 30, 2003			December 31, 2002			March 31, 2004			December 31, 2003
ASSETS
Investment in real estate
Land	$	1,816,571		$	1,803,577		$	2,066,965		$	1,845,547
Depreciable property	11,062,709			11,240,245			11,901,855			11,018,326
Construction in progress	2,617			2,441
Construction in progress (including land)							386,655			10,506
Investment in real estate	12,881,897			13,046,263			14,355,475			12,874,379
Accumulated depreciation	(2,303,479		)	(2,112,017		)	(2,337,502		)	(2,296,013		)
Investment in real estate, net of accumulated depreciation	10,578,418			10,934,246
Investment in real estate, net							12,017,973			10,578,366

Cash and cash equivalents	372,586			29,875			71,527			49,579
Investments in unconsolidated entities	521,750			509,789			13,503			473,977
Rents receivable	1,038			2,926			2,584			426
Deposits – restricted	287,838			141,278			135,664			133,752
Escrow deposits – mortgage	44,648			50,565			42,158			41,104
Deferred financing costs, net	31,616			32,144			31,852			31,135
Goodwill, net	30,000			30,000			30,000			30,000
Other assets	122,204			80,094			111,967			128,554
Total assets	$	11,990,098		$	11,810,917		$	12,457,228		$	11,466,893

LIABILITIES AND PARTNERS’ CAPITAL
Liabilities:
Mortgage notes payable	$	2,818,321		$	2,927,614		$	3,221,993		$	2,693,815
Notes, net	2,748,345			2,456,085			2,656,105			2,656,674
Line of credit	—			140,000			420,000			10,000
Accounts payable and accrued expenses	89,545			64,369			90,204			55,463
Accrued interest payable	71,767			63,151			71,914			60,334
Rents received in advance and other liabilities	178,280			165,095			198,625			189,372
Security deposits	44,987			45,333			46,937			44,670
Distributions payable	145,214			140,844			141,231			140,195
Total liabilities	6,096,459			6,002,491			6,847,009			5,850,523

*Commitments and contingencie*s
*Commitments and contingencies*
Minority Interests – Partially Owned Properties	8,034			9,811			13,582			9,903

Partners’ capital:
Preference Units	994,661			946,157			669,750			670,913
Preference Interests	246,000			246,000			246,000			246,000
Junior Preference Units	5,846			5,846			2,217			2,217
General Partner	4,329,129			4,306,873			4,384,385			4,371,483
Limited Partners	344,766			349,646			326,332			342,809
Deferred compensation	(5,535		)	(12,118		)	(2,641		)	(3,554		)
Accumulated other comprehensive loss	(29,262		)	(43,789		)	(29,406		)	(23,401		)
Total partners’ capital	5,885,605			5,798,615			5,596,637			5,606,467
Total liabilities and partners’ capital	$	11,990,098		$	11,810,917		$	12,457,228		$	11,466,893

See accompanying notes

ERP OPERATING LIMITED PARTNERSHIP

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands except per OP Unit data)

(Unaudited)

	Nine Months Ended September 30,						Quarter Ended September 30,						Quarter Ended March 31,
	2003			2002			2003			2002			2004			2003
REVENUES
Rental income	$	1,393,278		$	1,396,069		$	469,893		$	466,379		$	459,654		$	435,803
Fee and asset management	10,961			6,957			3,083			2,647			3,007			2,488
Total revenues	1,404,239			1,403,026			472,976			469,026			462,661			438,291

EXPENSES
Property and maintenance	384,772			358,252			132,406			123,887			125,995			118,422
Real estate taxes and insurance	149,202			141,624			50,008			47,087			52,471			47,857
Property management	48,827			56,101			16,633			18,438			17,286			15,851
Fee and asset management	5,556			5,409			1,949			1,789			1,995			1,770
Depreciation	341,723			322,615			115,346			109,331			115,610			105,778
General and administrative	28,854			33,000			8,708			10,673			9,988			11,176
Impairment on technology investments	872			872			291			291			—			291
Impairment on corporate housing business	—			17,122			—			17,122
Total expenses	959,806			934,995			325,341			328,618			323,345			301,145

Operating income	444,433			468,031			147,635			140,408			139,316			137,146

Interest and other income	13,740			11,526			6,612			2,231			2,108			3,337
Interest:
Expense incurred, net	(246,793		)	(252,892		)	(82,792		)	(83,141		)	(79,858		)	(79,417		)
Amortization of deferred financing costs	(4,406		)	(4,267		)	(1,319		)	(1,344		)	(1,426		)	(1,338		)

Income before allocation to Minority Interests, loss from investments in unconsolidated entities, net gain (loss) on sales of unconsolidated entities and discontinued operations	206,974			222,398			70,136			58,154
Income before allocation to Minority Interests, income (loss) from investments in unconsolidated entities, net gain on sales of unconsolidated entities and discontinued operations													60,140			59,728
Allocation to Minority Interests – Partially Owned Properties	(77		)	(1,584		)	166			(259		)	(147		)	(115		)
Loss from investments in unconsolidated entities	(3,594		)	(1,746		)	(1,850		)	(1,979		)
Net gain (loss) on sales of unconsolidated entities	4,673			(626		)	(2		)	(5,872		)
Income (loss) from investments in unconsolidated entities													(7,406		)	107
Net gain on sales of unconsolidated entities													2,434			1,212
Income from continuing operations	207,976			218,442			68,450			50,044			55,021			60,932
Net gain on sales of discontinued operations	218,975			61,209			77,983			32,763			71,499			70,672
Discontinued operations, net	9,494			42,252			(7		)	11,137			(1,815		)	12,853
Net income	$	436,445		$	321,903		$	146,426		$	93,944		$	124,705		$	144,457

ALLOCATION OF NET INCOME:
Preference Units	$	57,713		$	57,568		$	19,564		$	19,055		$	13,672		$	19,046
Preference Interests	$	15,159		$	15,158		$	5,053		$	5,052		$	5,053		$	5,053
Junior Preference Units	$	243		$	243		$	81		$	81		$	31		$	81

General Partner	$	335,896		$	229,867		$	112,575		$	64,473		$	98,309		$	111,167
Limited Partners	27,434			19,067			9,153			5,283			7,640			9,110
Net income available to OP Units	$	363,330		$	248,934		$	121,728		$	69,756		$	105,949		$	120,277
Earnings per OP Unit – basic:
Income from continuing operations available to OP Units	$	0.46		$	0.49		$	0.15		$	0.09		$	0.12		$	0.13
Net income available to OP Units	$	1.24		$	0.84		$	0.41		$	0.24		$	0.35		$	0.41
Weighted average OP Units outstanding	293,900			295,483			295,032			296,519			299,028			292,950
Earnings per OP Unit – diluted:
Income from continuing operations available to OP Units	$	0.46		$	0.49		$	0.15		$	0.08		$	0.12		$	0.13
Net income available to OP Units	$	1.23		$	0.83		$	0.41		$	0.23		$	0.35		$	0.41
Weighted average OP Units outstanding	296,184			298,690			297,941			299,057			301,781			294,508

Distributions declared per OP Unit outstanding	$	1.2975		$	1.2975		$	0.4325		$	0.4325		$	0.4325		$	0.4325

See accompanying notes

ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS (Continued)
(Amounts in thousands except per OP Unit data)
(Unaudited)

	Nine Months Ended September 30,					Quarter Ended September 30,
	2003		2002			2003		2002			Quarter Ended March 31,
											2004			2003
Comprehensive income:

Net income	$	436,445	$	321,903		$	146,426	$	93,944		$	124,705		$	144,457
Other comprehensive income (losses) – derivative and other instruments:
Unrealized holding gains (losses) arising during the period	8,355		(10,602		)	6,476		(11,687		)	(10,154		)	137
Equity in unrealized holding gains (losses) arising during the period – unconsolidated entities	4,997		(2,003		)	2,238		(2,908		)
Equity in unrealized holding gains arising during the period –unconsolidated entities											3,667			1,194
Losses reclassified into earnings from other comprehensive income	1,175		615			474		230			482			230
Comprehensive income	$	450,972	$	309,913		$	155,614	$	79,579		$	118,700		$	146,018

See accompanying notes

ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)

	Nine Months Ended September 30,						Quarter Ended March 31,
	2003			2002			2004			2003
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	436,445		$	321,903		$	124,705		$	144,457
Adjustments to reconcile net income to net cash provided by operating activities:
Allocation to Minority Interests – Partially Owned Properties	77			1,584			147			115
Depreciation	354,898			353,206			117,185			118,918
Amortization of deferred financing costs	4,544			4,350			1,590			1,408
Amortization of discounts and premiums on debt	(728		)	(589		)	(216		)	(239		)
Amortization of deferred settlements on derivative instruments	556			(238		)	123			(68		)
Impairment on corporate housing business	—			17,122
Impairment on technology investments	872			872			—			291
Loss from investments in unconsolidated entities	3,594			1,746
Loss (income) from investments in unconsolidated entities							7,406			(107		)
Net (gain) on sales of discontinued operations	(218,975		)	(61,209		)	(71,499		)	(70,672		)
Net (gain) loss on sales of unconsolidated entities	(4,673		)	626
Net (gain) on sales of unconsolidated entities							(2,434		)	(1,212		)
Loss on debt extinguishments	1,465			468			93			183
Unrealized (gain) loss on derivative instruments	(115		)	383
Unrealized loss (gain) on derivative instruments							59			(44		)
Compensation paid with Company Common Shares	11,545			15,158			4,335			4,445

Changes in assets and liabilities:
Decrease (increase) in rents receivable	1,580			(551		)
(Increase) decrease in deposits – restricted	(2,002		)	8,186
(Increase) decrease in rents receivable							(1,534		)	1,516
(Increase) in deposits – restricted							(1,356		)	(2,283		)
(Increase) decrease in other assets	(19,530		)	11,849			(7,046		)	322
Increase in accounts payable and accrued expenses	25,189			32,102			5,888			1,865
Increase in accrued interest payable	8,619			5,365			9,159			1,836
(Decrease) in rents received in advance and other liabilities	(4,306		)	(579		)	(8,902		)	(6,788		)
(Decrease) in security deposits	(702		)	(1,037		)
Increase (decrease) in security deposits							287			(141		)
Net cash provided by operating activities	598,353			710,717			177,990			193,802

CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate – acquisitions	(308,689		)	(232,097		)	(187,996		)	(76,692		)
Investment in real estate – development/other	(6,818		)	(86,115		)	(4,722		)	(2,057		)
Improvements to real estate	(128,479		)	(110,291		)	(35,712		)	(33,602		)
Additions to non-real estate property	(2,307		)	(5,562		)	(667		)	(908		)
Interest capitalized for real estate under development	—			(6,952		)	(370		)	—
Interest capitalized for unconsolidated entities under development	(16,013		)	(12,492		)	(2,282		)	(5,437		)
Proceeds from disposition of real estate, net	750,433			291,368			291,527			190,906
Proceeds from disposition of furniture rental business	—			28,741
Proceeds from disposition of unconsolidated entities	8,595			34,796			4,729			1,213
Proceeds from refinancing of unconsolidated entities	—			4,375
Investments in unconsolidated entities	(13,587		)	(97,582		)	(406,115		)	(4,227		)
Distributions from unconsolidated entities	16,800			31,021			23,416			6,041
(Increase) decrease in deposits on real estate acquisitions, net	(144,565		)	42,046
Decrease (increase) in deposits on real estate acquisitions, net							565			(29,560		)
Decrease in mortgage deposits	6,062			19,605			2,653			5,877
Business combinations, net of cash acquired	(487		)	(658		)
Consolidation of previously Unconsolidated Properties	(827		)	—
Consolidation of previously Unconsolidated Properties:
Via acquisition (net of cash acquired)							(49,080		)	—
Via FIN 46 (cash consolidated)							3,628			—
Acquisition of Minority Interests – Partially Owned Properties	(125		)	—			(72		)	—
Other investing activities, net	(10,147		)	192			1,401			—
Net cash provided by (used for) investing activities	149,846			(99,605		)
Net cash (used for) provided by investing activities							(359,097		)	51,554

See accompanying notes

ERP OPERATING LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Amounts in thousands)
(Unaudited)

	Nine Months Ended September 30,						Quarter Ended March 31,
	2003			2002			2004			2003
CASH FLOWS FROM FINANCING ACTIVITIES:
Loan and bond acquisition costs	$	(4,416	)	$	(10,495	)	$	(707	)	$	(3,153	)
Mortgage notes payable:
Proceeds	48,680			104,572			16,450			48,680
Lump sum payoffs	(211,240		)	(283,681		)	(80,692		)	(101,793		)
Scheduled principal repayments	(23,958		)	(24,351		)	(6,145		)	(8,285		)
Prepayment premiums/fees	(1,557		)	(468		)	(430		)	(183		)
Notes, net:
Proceeds	398,816			397,064			—			398,816
Lump sum payoffs	(100,000		)	(225,000		)
Scheduled principal repayments	(4,480		)	(4,669		)	—			(192		)
Line of credit:
Proceeds	172,000			368,500			549,000			172,000
Repayments	(312,000		)	(528,500		)	(139,000		)	(312,000		)
(Payments on) settlement of derivative instruments	(12,999		)	(1,534		)	(3,107		)	(12,999		)
Proceeds from sale of OP Units	5,559			8,425			3,538			2,606
Proceeds from exercise of EQR options	50,669			28,542			20,923			4,270
Proceeds from sale of Preference Units	150,000			—
Payment of offering costs	(5,273		)	(170		)	(24		)	(71		)
Redemption of Preference Units	(100,000		)	—
Distributions:
OP Units – General Partner	(353,211		)	(354,683		)	(119,740		)	(117,242		)
Preference Units	(55,012		)	(57,919		)	(13,693		)	(19,048		)
Preference Interests	(15,158		)	(15,185		)	(5,053		)	(5,053		)
Junior Preference Units	(243		)	(243		)	(81		)	(81		)
OP Units – Limited Partners	(28,910		)	(29,859		)	(9,411		)	(9,645		)
Minority Interests – Partially Owned Properties	(2,755		)	(11,568		)	(8,773		)	(1,549		)
Principal receipts on employee notes, net	—			263
Net cash (used for) financing activities	(405,488		)	(640,959		)
Net increase (decrease) in cash and cash equivalents	342,711			(29,847		)
Net cash provided by financing activities							203,055			35,078
Net increase in cash and cash equivalents							21,948			280,434
Cash and cash equivalents, beginning of period	29,875			51,603			49,579			29,875
Cash and cash equivalents, end of period	$	372,586		$	21,756		$	71,527		$	310,309

SUPPLEMENTAL INFORMATION:
Cash paid during the period for interest	$	255,456		$	270,885		$	73,800		$	83,579

Real estate acquisitions/dispositions:
Mortgage loans assumed	$	81,024		$	14,000		$	36,943		$	34,968

Valuation of OP Units issued	$	105		$	—

Mortgage loans (assumed) by purchaser	$	(31,668	)	$	(8,840	)	$	(1,338	)	$	—

Consolidation of previously Unconsolidated Properties:
Consolidation of previously Unconsolidated Properties – Via acquisition:
Investment in real estate							$	(955,073	)	$	—
Mortgage loans assumed	$	28,084		$	—		$	270,285		$	—
Minority Interests – Partially Owned Properties							$	309		$	—
Investments in unconsolidated entities							$	608,200		$	—
Net other (assets) liabilities recorded							$	27,199		$	—

Valuation of OP Units issued	$	4,231		$	—

Consolidation of previously Unconsolidated Properties – Via FIN 46:
Investment in real estate							$	(548,342	)	$	—
Mortgage loans consolidated							$	294,722		$	—
Minority Interests – Partially Owned Properties							$	3,074		$	—
Investments in unconsolidated entities	$	1,159		$	—		$	234,984		$	—

Net (assets) liabilities recorded	$	579		$	—
Net other (assets) liabilities recorded							$	19,190		$	—

See accompanying notes

ERP OPERATING LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Business

ERP Operating Limited Partnership (“ERPOP”), an Illinois limited partnership, was formed in May 1993 to conduct the multifamily residential property business of Equity Residential (“EQR”). EQR is a Maryland real estate investment trust (“REIT”) formed in March 1993 and is a fully integrated real estate company engaged in the acquisition, development, ownership, management and operation of multifamily properties.

EQR is the general partner of, and as of ~~September 30, 2003~~March 31, 2004 owned an approximate ~~92.6%~~93.0% ownership interest in ERPOP. ERPOP is, 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. As used herein, the term “Operating Partnership” includes ERPOP and those entities owned or controlled by it. As used herein, the term “Company” means EQR and the Operating Partnership.

As of ~~September 30, 2003,~~March 31, 2004, the Operating Partnership, ~~owned~~directly or ~~had~~indirectly through investments in ~~990~~title holding entities, owned all or a portion of 952 properties in 34 states consisting of ~~212,147~~203,590 units. AnThe ownership breakdown includes:

	Number of Properties	Number of Units	Properties	Units
Wholly Owned Properties	867	182,163	849	179,115
Partially Owned Properties (Consolidated)	36	6,931	40	7,857
Unconsolidated Properties	87	23,053	63	16,618
Total Properties	990	212,147
			952	203,590

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 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 ~~nine months~~quarter ended ~~September 30, 2003~~March 31, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2003.~~2004.

The balance sheet at December 31, ~~2002~~2003 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 Operating Partnership’s annual report on Form 10-K for the year ended December 31, ~~2002.~~2003.

Stock-Based Compensation

~~Prior to 2003, the Company had chosen to account for its stock-based compensation in accordance with APB No. 25,~~ ~~Accounting for Stock Issued to Employees~~,~~which resulted in no~~

~~compensation expense for options issued with an exercise price equal to or exceeding the market value of EQR’s Common Shares on the date of grant (intrinsic method).~~ The Company has elected to expense its stock-based compensation in accordance with SFAS No. 123 and its amendment (SFAS No. 148), Accounting for Stock Based Compensation, effective in the first quarter of 2003, which resulted in compensation expense being recorded based on the fair value of the stock compensation ~~granted or modified.~~granted. Any Common Shares issued pursuant to EQR’s incentive equity compensation and employee share purchase plans will result in the Operating Partnership issuing units of limited partnership interest (“OP ~~Units~~Units”) to EQR on a one-for-one basis, with the Operating Partnership receiving the net cash proceeds of such issuances.

~~SFAS No. 148 provides three transition methods for entities that adopt the fair value recognition provisions of SFAS No. 123.~~ The Company has chosen to use the “Prospective Method”~~. This method~~ which requires ~~that companies~~the Company to apply the recognition provisions of SFAS No. 123 to only employee awards granted or modified after the beginning of the fiscal year in which the recognition provisions are first applied, or January 1, 2003. Compensation expense under all of the Company’s plans is generally recognized over periods ranging from three months to five years. Therefore, the cost related to stock-based employee compensation included in the determination of net income for both the ~~nine months~~quarters ended March 31, 2004 and ~~quarter ended September 30,~~ 2003 is less than that which would have been recognized if the fair value based method had been applied to all awards since the original effective date of SFAS No. 123.

The following table illustrates the effect on net income and earnings per OP Unit if the fair value based method had been applied to all outstanding and unvested awards in each period presented:

	Nine Months Ended September 30,						Quarter Ended September 30,						Quarter Ended March 31,
	2003			2002			2003			2002			2004			2003
	(Amounts in thousands except per OP Unit amounts)												(Amounts in thousands except per OP Unit amounts)

Net income available to OP Units – as reported	$	363,330		$	248,934		$	121,728		$	69,756		$	105,949		$	120,277
Add: Stock-based employee compensation expense included in reported net income:
EQR’s restricted/performance shares	8,157			15,204			2,911			5,060			2,882			2,334
EQR’s share options (1)	2,321			—			307			—			789			1,707
EQR’s ESPP discount	1,049			—			244			—			664			490
Deduct: Stock-based employee compensation expense determined under fair value based method for all awards:
EQR’s restricted/performance shares	(8,157		)	(15,204		)	(2,911		)	(5,060		)	(2,882		)	(2,334		)
EQR’s share options (1)	(5,503		)	(4,616		)	(1,338		)	(1,565		)	(1,558		)	(2,899		)
EQR’s ESPP discount	(1,049		)	(1,194		)	(244		)	(269		)	(664		)	(490		)
Net income available to OP Units – pro forma	$	360,148		$	243,124		$	120,697		$	67,922		$	105,180		$	119,085
Earnings per OP Unit:
Basic – as reported	$	1.24		$	0.84		$	0.41		$	0.24		$	0.35		$	0.41
Basic – pro forma	$	1.23		$	0.82		$	0.41		$	0.23		$	0.35		$	0.41

Diluted – as reported	$	1.23		$	0.83		$	0.41		$	0.23		$	0.35		$	0.41
Diluted – pro forma	$	1.22		$	0.81		$	0.41		$	0.23		$	0.35		$	0.40

(1) Share options for the ~~nine months~~quarter ended ~~September 30,~~March 31, 2003 included $1.4 million of expense recognition related to options granted in the first quarter of 2003 to EQR’s former chief executive officer. These options vested immediately upon grant.

Other

~~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 Operating Partnership adopted ~~the standard effective January 1, 2003.~~

~~In January 2003, the~~ FASB ~~issued~~ Interpretation (“FIN”) No. 46, Consolidation of Variable Interest Entities,.as required, effective March 31, 2004. The adoption required the consolidation of all previously unconsolidated development projects. FIN No. 46 requires the Operating Partnership to consolidate the assets, liabilities and results of operations of the activities of a variable interest entity, which for the Operating Partnership includes only its development partnerships, if the Operating Partnership is entitled to ~~be consolidated if~~receive a ~~company~~majority of the entity’s residual returns or is subject to a majority of the risk of loss from ~~the variable interest~~such entity’s activities or entitled to receive a majority of the entity’s residual returns or both. The Operating Partnership will adopt FIN No. 46 as required effective December 31, 2003. FASB Staff Position (“FSP”) No. FIN 46-6 deferred the effective date for applying the provisions of FIN No. 46 (for entities created before February 1, 2003) from July 1, 2003 to December 31, 2003. The Operating Partnership has preliminarily determined that its unconsolidated stabilized development projects and projects under development (see Note 7) are variable interest entities in which the Operating Partnership is the primary beneficiary~~as of the date~~activities. As of the original formation of therespective joint ~~ventures. On such respective formation dates,~~ventures, the Operating Partnership is considered to be the primary beneficiary and the fair value of the assets, liabilities and non-controlling interests of these development projects approximates carryover basis. IfDue to the March 31, 2004 effective date, the Operating Partnership has consolidated only the assets, liabilities and non-controlling interests of these development ~~projects had been~~properties. The results of operations will be consolidated as of September 30, 2003, the Operating Partnership’s investment in real estate and mortgage notes payable would have increased by $1.4 billion and $890.3 million, respectively, and investments in unconsolidated entities would have decreased by $514.6 million.beginning April 1, 2004. The ~~Operating Partnership does not anticipate that the~~ adoption of FIN No. 46 will not have any ~~material~~ effect on net ~~income.~~income as the aggregate results of operations of these development properties were previously taken into account in income (loss) from investments in unconsolidated entities. See Note 4 for additional discussion.

The Operating Partnership generally contributes between 25% and 35% of the project cost of the joint venture projects under development (constituting 100% of the equity), with the remaining cost financed through third-party construction mortgages. Voting rights are shared equally between the Operating Partnership and its respective development partners and accordingly, these projects were accounted for under the equity method prior to the adoption of FIN No. 46.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150 establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity. On November 7, 2003, the FASB issued FSP No. FAS 150-3, which deferred for an indefinite period the classification and measurement provisions, but not the disclosure provisions (see discussion below), of SFAS No. 150 as it relates to noncontrolling interests that are classified as equity in the financial statements of a subsidiary but would be classified as a liability in the parent’s financial statements under SFAS No. 150 (e.g., minority interests in consolidated limited-life subsidiaries). The Operating Partnership does not have any mandatorily redeemable preferred shares/units that fall within the scope of SFAS No. 150.

With regards to the aforementioned disclosure provisions, the Operating Partnership is presently the controlling partner in various consolidated partnerships consisting of 3640 properties and ~~6,931 units.~~7,857 units having a minority interest book value of $13.6 million at March 31, 2004. These partnerships contain provisions that require the partnerships to be liquidated through the ~~sale~~sales of ~~its~~their assets upon reaching a date specified in each respective partnership agreement. The Operating Partnership, as controlling partner, has an obligation to cause the property owning partnerships to distribute proceeds of liquidation to the Minority Interests in these Partially Owned Properties only to the extent that the net proceeds received by the partnerships from the sale of its assets warrant a distribution based on the partnership agreements. As of ~~September 30, 2003,~~March 31, 2004, the Operating Partnership estimates the value of Minority Interest distributions would have been approximately ~~$100~~$107 million (“Settlement Value”) had the partnerships been liquidated. This Settlement Value is based on estimated third party consideration realized by the partnerships upon disposition of the Partially Owned Properties and is net of all other assets and liabilities, including yield maintenance on the mortgages encumbering the properties, that would have been due on ~~September 30, 2003~~March 31, 2004 had those mortgages been prepaid. Due to, among other things, the inherent uncertainty in the sale of real estate assets, the amount of any potential distribution to the Minority Interests in the Operating Partnership’s Partially Owned Properties is subject to change. To the extent that the partnerships’ underlying assets are worth less than the underlying liabilities, the Operating Partnership has no obligation to remit any

consideration to the Minority Interests in Partially Owned Properties.

On July 31, 2003, the SEC clarified its position with respect to Emerging Issues Task Force (“EITF”) Topic D-42, The Effect on the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock. Under the SEC’s revised interpretation, in connection with the redemption of preferred shares/units, the original issuance costs of these shares/units must be treated in a manner similar to preferred distributions and deducted from net income in arriving at net income available to OP Units. The clarification of EITF Topic D-42 was required to be adopted effective July 1, 2003 on a retroactive basis by restating prior periods included in the current financial statements. The adoption of the clarification of EITF Topic D-42 did not have any impact on the Operating Partnership’s consolidated financial position or cash flows nor did it impact the reported consolidated results of operations for the periods presented herein.

3. Partners’ Capital

The following table presents the changes in the Operating Partnership’s issued and outstanding units of limited partnership interest (“OP Units”)Units for the nine monthsquarter ended September 30, 2003:
March 31, 2004:

	~~2003~~2004
OP Units outstanding at January 1,	299,551,617

~~Operating Partnership’s OP Units outstanding at January 1,~~	~~293,396,124~~

Issued to General ~~Partne~~Partner:r:
Conversion of Series E Preference Units	~~66,560~~51,633
Conversion of Series H Preference Units	144
Employee Share Purchase Plan	~~258,327~~142,145
Exercise of EQR options	~~2,472,322~~898,092
Restricted EQR share grants, net	~~938,361~~550,332
Other	(75
~~Issued to Limited Partners~~:
~~Issuance through acquisitions~~	~~159,427~~	)

~~Operating Partnership’s~~ OP Units outstanding at ~~September 30,~~March 31,	~~297,291,121~~301,193,888

The limited partners of the Operating Partnership as of ~~September 30, 2003~~March 31, 2004 include various individuals and entities that contributed their properties to the Operating Partnership in exchange for OP Units (the “Limited Partners”) and own an approximate ~~7.4%~~7.0% ownership interest (21,007,913 OP Units) in ERPOP. Subject to applicable securities law restrictions, the Limited Partners may exchange their OP Units for EQR Common Shares on a one-for-one basis.

EQR contributes all net proceeds from its various equity offerings (including proceeds from exercise of options for EQR Common Shares) to the Operating Partnership. In return for those contributions, EQR receives a number of OP Units in ERPOP equal to the number of Common Shares it has issued in the equity offering (or in the case of a preferred equity offering, a number of preference units in ERPOP equal in number and having the same terms as the preferred shares issued in the equity offering).

~~During the nine months ended September 30, 2003, the Operating Partnership issued 159,427 OP Units to various limited partners at an average price of $27.48 per unit.~~

The following table presents the Operating Partnership’s issued and outstanding ~~“Preference Units”~~Preference Units as of ~~September 30, 2003~~March 31, 2004 and December 31, ~~2002:~~2003:

Annual
Dividend
Rate per
Unit (1)

Amounts in thousands

September
30, 2003

December
31, 2002
Preference Units:

9 1/8% Series B Cumulative Redeemable Preference Units; liquidation value $250 per unit; 500,000 units issued and outstanding at September 30, 2003 and December 31, 2002

$
22.81252

$
125,000

$
125,000

9 1/8% Series C Cumulative Redeemable Preference Units; liquidation value $250 per unit; 460,000 units issued and outstanding at September 30, 2003 and December 31, 2002

$
22.81252

115,000

115,000

8.60% Series D Cumulative Redeemable Preference Units; liquidation value $250 per unit; 700,000 units issued and outstanding at September 30, 2003 and December 31, 2002

$
21.50

175,000

175,000

7.00% Series E Cumulative Convertible Preference Units; liquidation value $25 per unit; 2,488,290 and 2,548,114 units issued and outstanding at September 30, 2003 and December 31, 2002, respectively

$
1.75

62,207

63,703

7 1/4% Series G Convertible Cumulative Preference Units; liquidation value $250 per unit; 1,264,692 units issued and outstanding at September 30, 2003 and December 31, 2002

$
18.125

316,173

316,173

7.00% Series H Cumulative Convertible Preference Units; liquidation value $25 per unit; 51,228 units issued and outstanding at September 30, 2003 and December 31, 2002

$
1.75

1,281

1,281

8.29% Series K Cumulative Redeemable Preference Units; liquidation value $50 per unit; 1,000,000 units issued and outstanding at September 30, 2003 and December 31, 2002

$
4.145

50,000

50,000

7.625% Series L Cumulative Redeemable Preference Units; liquidation value $25 per unit; 0 and 4,000,000 units issued and outstanding at September 30, 2003 and December 31, 2002, respectively

(2
)
—

100,000

6.48% Series N Cumulative Redeemable Preference Units; liquidation value $250 per unit; 600,000 and 0 units issued and outstanding at September 30, 2003 and December 31, 2002, respectively (3)

$
16.20

150,000

—

$
994,661

$
946,157

	Annual Dividend Rate per Unit (1)		Amounts in thousands
			March 31, 2004		December 31, 2003
Preference Units:

9 1/8% Series B Cumulative Redeemable Preference Units; liquidation value $250 per unit; 500,000 units issued and outstanding at March 31, 2004 and December 31, 2003	$	22.81252	$	125,000	$	125,000

9 1/8% Series C Cumulative Redeemable Preference Units; liquidation value $250 per unit; 460,000 units issued and outstanding at March 31, 2004 and December 31, 2003	$	22.81252	115,000		115,000

8.60% Series D Cumulative Redeemable Preference Units; liquidation value $250 per unit; 700,000 units issued and outstanding at March 31, 2004 and December 31, 2003	$	21.50	175,000		175,000

7.00% Series E Cumulative Convertible Preference Units; liquidation value $25 per unit; 2,146,090 and 2,192,490 units issued and outstanding at March 31, 2004 and December 31, 2003, respectively	$	1.75	53,652		54,812

7.00% Series H Cumulative Convertible Preference Units; liquidation value $25 per unit; 43,928 and 44,028 units issued and outstanding at March 31, 2004 and December 31, 2003, respectively	$	1.75	1,098		1,101

8.29% Series K Cumulative Redeemable Preference Units; liquidation value $50 per unit; 1,000,000 units issued and outstanding at March 31, 2004 and December 31, 2003	$	4.145	50,000		50,000

6.48% Series N Cumulative Redeemable Preference Units; liquidation value $250 per unit; 600,000 units issued and outstanding at March 31, 2004 and December 31, 2003	$	16.20	150,000		150,000

			$	669,750	$	670,913

(1) Dividends on all series of Preference Units are payable quarterly at various pay dates. Dividend rates listed for Series B, C, D G and N are Preference Unit rates and the equivalent ~~depositary unit~~Depositary Unit annual dividend rates are $2.281252, $2.281252, $2.15 ~~$1.8125~~ and $1.62, respectively.

~~(2)~~ On June 19, 2003, the Operating Partnership redeemed all of its outstanding Series L Cumulative Redeemable Preference Units at liquidation value for total cash consideration of $100.0 million in conjunction with the concurrent redemption of the corresponding Preferred Shares of EQR. The Operating Partnership did not incur any original issuance costs as these units were issued by Merry Land and Investment Company, Inc. prior to its merger with the Company.

~~(3)~~ On June 19, 2003, EQR issued 600,000 Series N Cumulative Redeemable Preferred Shares in a public offering. The Company received $145.3 million in net proceeds from this offering after payment of the underwriters’ fee. These net proceeds were contributed by EQR to the Operating Partnership in exchange for 600,000 of the Operating Partnership’s 6.48% Series N Cumulative Redeemable Preference Units.

The following table presents the issued and outstanding ~~“Preference Interests”~~Preference Interests as of ~~September 30, 2003~~March 31, 2004 and December 31, ~~2002:~~2003:

Annual
Dividend
Rate per
Unit (1)

Amounts in thousands

September
30, 2003

December
31, 2002
Preference Interests:

8.00% Series A Cumulative Redeemable Preference Interests; liquidation value $50 per unit; 800,000 units issued and outstanding at September 30, 2003 and December 31, 2002

$
4.00

$
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 September 30, 2003 and December 31, 2002

$
4.25

55,000

55,000

8.50% Series C Cumulative Redeemable Preference Units; liquidation value $50 per unit; 220,000 units issued and outstanding at September 30, 2003 and December 31, 2002

$
4.25

11,000

11,000

8.375% Series D Cumulative Redeemable Preference Units; liquidation value $50 per unit; 420,000 units issued and outstanding at September 30, 2003 and December 31, 2002

$
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 September 30, 2003 and December 31, 2002

$
4.25

50,000

50,000

8.375% Series F Cumulative Redeemable Preference Units; liquidation value $50 per unit; 180,000 units issued and outstanding at September 30, 2003 and December 31, 2002

$
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 September 30, 2003 and December 31, 2002

$
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 September 30, 2003 and December 31, 2002

$
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 September 30, 2003 and December 31, 2002

$
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 September 30, 2003 and December 31, 2002

$
3.8125

11,500

11,500

$
246,000

$
246,000

	Annual Dividend Rate per Unit (1)		Amounts in thousands
			March 31, 2004		December 31, 2003
Preference Interests:

8.00% Series A Cumulative Redeemable Preference Interests; liquidation value $50 per unit; 800,000 units issued and outstanding at March 31, 2004 and December 31, 2003	$	4.00	$	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, 2004 and December 31, 2003	$	4.25	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, 2004 and December 31, 2003	$	4.25	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, 2004 and December 31, 2003	$	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, 2004 and December 31, 2003	$	4.25	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, 2004 and December 31, 2003	$	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, 2004 and December 31, 2003	$	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, 2004 and December 31, 2003	$	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, 2004 and December 31, 2003	$	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, 2004 and December 31, 2003	$	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^thof each year.

The following table presents the Operating Partnership’s issued and outstanding Junior Convertible Preference Units (the “Junior Preference Units”) as of ~~September 30, 2003~~March 31, 2004 and December 31, ~~2002:~~2003:

Annual
Dividend
Rate per
Unit (1)

Amounts in thousands

September
30, 2003

December
31, 2002
Junior Preference Units:

Series A Junior Convertible Preference Units; liquidation value $100 per unit; 56,616 units issued and outstanding at September 30, 2003 and December 31, 2002

$
5.46934

$
5,662

$
5,662

Series B Junior Convertible Preference Units; liquidation value $25 per unit; 7,367 units issued and outstanding at September 30, 2003 and December 31, 2002

$
2.00

184

184

$
5,846

$
5,846

	Annual Dividend Rate per Unit (1)		Amounts in thousands
			March 31, 2004		December 31, 2003
Junior Preference Units:

Series A Junior Convertible Preference Units; liquidation value $100 per unit; 20,333 units issued and outstanding at March 31, 2004 and December 31, 2003	$	5.46934	$	2,033	$	2,033

Series B Junior Convertible Preference Units; liquidation value $25 per unit; 7,367 units issued and outstanding at March 31, 2004 and December 31, 2003	$	2.00	184		184
			$	2,217	$	2,217

(1) Dividends on both series of Junior Preference Units are payable quarterly at various pay dates.

4.Real Estate ~~Acquisitions~~

During the ~~nine months~~quarter ended ~~September 30, 2003,~~March 31, 2004, the Operating Partnership acquired the entire equity interest in ~~the eight~~ fiveproperties ~~listed below~~containing 1,671 units from unaffiliated parties, ~~and two~~inclusive of three additional units at an existing property, for a total purchase price of ~~$389.7~~$224.4 million.

Date
Acquired

Property

Location

Number
of Units

Acquisition Price
(in thousands)

01/30/03

The Reserve at Eisenhower

Alexandria, VA

226

$
41,000

02/14/03

Artisan Square

Northridge, CA

140

27,466

03/05/03

LaSalle (1)

Beaverton, OR

554

43,000

05/01/03

Gateway at Malden Center (2)

Malden, MA

203

34,900

06/17/03

Mill Creek

Milpitas, CA

516

70,000

06/30/03

Carlyle Mill

Alexandria, VA

317

61,200

08/01/03

Gatewood

Pleasanton, CA

200

27,000

08/19/03

The Oaks of Santa Clarita

Santa Clarita, CA

520

85,000

Various

Rivers Bend (condo units)

Windsor, CT

2

125

2,678

$
389,691

~~(1)~~ ~~Includes 8,167 square feet of retail space.~~

~~(2)~~ ~~Includes 36,326 square feet of office space and a 324-space parking garage.~~

During the ~~nine months~~quarter ended ~~September 30, 2003,~~March 31, 2004, the Operating Partnership also acquired the majority of the remaining third party equity interests it did not previously own in sixteen properties, consisting of 4,739 completed units, 315 development units to be completed in the ~~following three properties:~~

• ~~Liberty Park, a 202-unit property located in Braintree, Massachusetts;~~

• ~~Hickory Mill II, a 44-unit property located in Hurricane, West Virginia (property was subsequently sold – see Note 5);~~second quarter of 2004 and

• ~~Winter Woods II, a 44-unit property located in Winter Garden, Florida.~~

two vacant land parcels. These properties were previously accounted for under the equity method of accounting and subsequent to each purchase were consolidated. The Operating Partnership recorded ~~$34.9~~$955.1 million in investment in real estate ~~at carryover basis~~ and the following:

•		Assumed $270.3 million in mortgage debt;
•		Recorded $0.3 million of minority interest in partially owned properties;
•		Reduced investments in unconsolidated entities by $608.2 million (inclusive of $339.7 million in mortgage debt paid off prior to closing);
•		Assumed $27.2 million of other liabilities net of other assets acquired; and
•		Paid cash of $49.1 million (net of cash acquired).

• ~~Assumed $28.1~~

As previously noted, the Operating Partnership adopted FIN No. 46, as required, effective March 31, 2004. The adoption required the consolidation of all previously unconsolidated development projects. Accordingly, the Operating Partnership consolidated five completed properties containing 1,360 units, six projects under development which are anticipated to contain 1,592 units upon completion and various other vacant land parcels held for future development. The Operating Partnership recorded $548.3 million in ~~mortgage debt;~~investment in real estate and the following:

• ~~Issued 153,851 OP Units having a value of $4.2 million;~~

•		Consolidated $294.7 million in mortgage debt;
•		Recorded $3.0 million of minority interest in partially owned properties;
•		Reduced investments in unconsolidated entities by $235.0 million;
•		Consolidated $19.2 million of other liabilities net of other assets acquired; and
•		Consolidated $3.6 million of cash.

• ~~Reduced investments in unconsolidated entities by $1.2 million;~~

During the quarter ended March 31, 2004, the Operating Partnership disposed of twenty-two properties containing 5,990 units to unaffiliated parties, inclusive of various individual condominium units, for a total sales price of $301.3 million allocated as follows:

• ~~Paid cash~~Wholly Owned Properties – 19 properties containing 5,239 units for a total sales price of ~~$0.8~~$269.4 million;

• Partially Owned Properties – 2 properties containing 487 units for a total sales price of $27.5 million; and

• ~~Assumed $0.6~~Unconsolidated Properties – 1 property containing 264 units for a total sales price of $4.4 million (represents the Operating Partnership’s allocated share of ~~other liabilities~~the net ~~of other assets acquired.~~disposition proceeds).

5. ~~Real Estate Dispositions~~

~~During the nine months ended September 30, 2003, the Operating Partnership disposed of the sixty-three properties and various individual condominium units listed below to unaffiliated parties.~~ The Operating Partnership recognized a net gain on sales of discontinued operations of approximately ~~$219.0~~$71.5 million and a net gain on sales of unconsolidated entities of approximately ~~$4.7 million.~~

Date
Disposed

Property

Location

Number
of Units

Disposition
Price

(in thousands)

01/14/03

Strawberry Place

Plant City, FL

55

$
1,400

01/14/03

Smoketree Polo Club

Indio, CA

288

18,900

01/29/03

Amberwood I

Lake City, FL

50

1,175

01/30/03

Emerald Place

Bermuda Dunes, CA

240

20,125

01/30/03

Rolido Parque

Houston, TX

369

14,660

02/27/03

Fox Hill Commons

Vernon, CT

74

4,700

02/27/03

The Landings

Winter Haven, FL

60

1,475

02/27/03

Morningside

Titusville, FL

183

3,980

03/04/03

Colony Woods

Birmingham, AL

414

25,000

03/04/03

Hearthstone

San Antonio, TX

252

7,700

03/04/03

Northgate Village

San Antonio, TX

264

10,150

03/19/03

Lincoln Green I, II & III

San Antonio, TX

680

24,900

03/20/03

Meadows on the Lake

Birmingham, AL

200

10,900

03/20/03

Meadows in the Park

Birmingham, AL

200

10,900

03/20/03

Shoal Run

Birmingham, AL

276

14,350

03/31/03

Colony Place

Fort Myers, FL

300

20,600

04/08/03

Mallgate (1)

Louisville, KY

540

15,500

04/15/03

Summit Chase

Coral Springs, FL

140

8,875

04/16/03

Bayside

Sebring, FL

59

885

04/30/03

Essex Place II (Vacant Land)

Tampa, FL

—

575

05/08/03

Pueblo Villas

Albuquerque, NM

232

9,250

05/14/03

Emerald Bay

Winter Park, FL

432

17,200

05/16/03

Meadowood

Flatwoods, KY

52

975

05/29/03

Spicewood Springs

Jacksonville, FL

512

28,000

05/30/03

Princeton Square

Jacksonville, FL

288

16,750

05/30/03

Boulder Creek

Wilsonville, OR

296

16,700

05/30/03

Bridge Creek

Wilsonville, OR

315

18,100

05/30/03

Settlers Point/Brookfield

Salt Lake City, UT

416

21,500

05/30/03

Ridgewood (2)

Russellville, KY

52

—

06/04/03

Lake Point

Charlotte, NC

296

12,401

06/05/03

Clearlake Pines II

Cocoa, FL

52

1,392

06/05/03

Sky Pines I & II

Orlando, FL

140

3,694

06/05/03

Brandywine East

Winter Haven, FL

38

884

06/05/03

Woodland I & II

Orlando, FL

169

5,175

06/12/03

Parkville

Parkersburg, WV

49

1,063

06/12/03

Cedarwood I

Belpre, OH

44

889

06/24/03

Greenwood Village

Tempe, AZ

270

14,600

06/25/03

Woodbine

Portsmouth, OH

41

660

06/26/03

Laurel Gardens

Coral Springs, FL

384

34,550

06/27/03

Crystal Creek

Phoenix, AZ

273

12,775

06/30/03

Harbor Pointe

Milwaukee, WI

595

27,800

Date
Disposed

Property

Location

Number
of Units

Disposition
Price

(in thousands)

06/30/03

Calais

Arlington, TX

264

$
12,500

07/25/03

Wood Lane Place I

Woodbury, MN

216

21,600

07/31/03

Cambridge Village

Lewisville, TX

200

9,400

08/05/03

Hickory Mill I & II

Hurricane, WV

92

2,050

08/26/03

Bear Canyon

Tucson, AZ

238

18,350

08/26/03

Harrison Park I & II

Tucson, AZ

360

23,875

08/26/03

La Reserve

Tucson, AZ

240

16,750

08/26/03

Suntree Village

Tucson, AZ

424

22,025

08/27/03

Carleton Court

Cross Lanes, WV

73

2,000

09/02/03

Waterford at Regency

Jacksonville, FL

159

8,650

09/17/03

Watermark Square

Portland, OR

390

18,400

09/22/03

Arbors at Century Center

Memphis, TN

420

14,800

09/22/03

Autumn Creek

Cordova, TN

210

8,439

09/22/03

Trinity Lakes

Cordova, TN

330

13,261

09/23/03

Breckinridge Court

Lexington, KY

382

17,800

09/30/03

Sunny Oak Village

Overland Park, KS

548

25,150

09/30/03

Copperfield

San Antonio, TX

258

11,933

09/30/03

Songbird

San Antonio, TX

262

13,933

09/30/03

Villas of Oak Creste

San Antonio, TX

280

10,133

09/30/03

Belmont Landing

Riverdale, GA

424

22,500

Various

Four Lakes (condo units)

Lisle, IL

156

19,075

Various

Pointe East (condo units)

Redmond, WA

54

10,269

Various

Squaw Peak (condo units)

Phoenix, AZ

103

10,863

Wholly Owned Properties

15,673

794,864

02/28/03

Kings Crossing I (3)

Jacksonville, FL

69

963

05/14/03

Culbreath Key (3)

Tampa, FL

254

7,382

Unconsolidated Properties

323

8,345

Total

15,996

$
803,209

~~(1)~~ ~~The Operating Partnership was leasing~~$2.4 million on the ~~land under a long-term operating ground lease.~~

~~(2)~~above sales. The Operating Partnership attempted to sell this property subject to assumption of the existing mortgage debt. When the lender would not accept a credit-worthy purchaser to assume the debt, title to this property was transferred to the lender in a deed-in-lieu of foreclosure transaction. The Operating Partnership recognized a net gain on debt extinguishment of approximately $92,000 as a component of interest and other income.

~~(3)~~ Disposition listed represents the Operating Partnership’s share of the net disposition proceeds. Culbreath Key was sold for $26.4 million with a portion of the net sales proceeds used to payoff the mortgage debt of $16.2 million.

6.5. Commitments to Acquire/Dispose of Real Estate

As of ~~November 4, 2003,~~April 28, 2004, in addition to the properties that were subsequently acquired as discussed in Note ~~18,~~16, the Operating Partnership had entered into a separate ~~agreements~~agreement to acquire ~~seven~~one multifamily ~~properties~~property containing ~~2,265~~144 units from an unaffiliated ~~parties.~~party. The Operating Partnership expects a ~~combined~~ purchase price of approximately ~~$220.4 million, including the assumption of mortgage debt of approximately $21.5~~$16.4 million.

As of ~~November 4, 2003,~~April 28, 2004, in addition to the properties that were subsequently disposed of as discussed in Note ~~18,~~16, the Operating Partnership had entered into separate agreements to dispose of ~~thirty-three~~

eight multifamily properties containing ~~8,404~~ 2,516units and one vacant land parcel to unaffiliated parties. The Operating Partnership expects a combined disposition price of approximately ~~$456.9~~$156.6 million.

The closings of these pending transactions are subject to certain contingencies and 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.

7.6. Investments in Unconsolidated Entities

The Operating Partnership has co-invested in various properties with unrelated third ~~parties.~~parties which are accounted for under the equity method of accounting. The following table summarizes the Operating Partnership’s investments in unconsolidated entities as of ~~September 30, 2003~~March 31, 2004 (amounts in thousands except for project and unit amounts):

Institutional
Joint
Ventures

Stabilized
Development
Projects (1)

Projects
Under
Development

Lexford/
Other

Totals

Total projects

45

12

16

22

95
(2)

Total units

10,846

3,812

4,336

2,616

21,610
(2)

Operating Partnership’s percentage share of outstanding debt

25.0
%
100.0
%
100.0
%
11.0
%

Operating Partnership’s share of outstanding debt (4)

$
121,200

$
331,063

$
559,201
(3)
$
5,089

$
1,016,553

	Institutional Joint Ventures			Lexford/ Other			Totals

Total projects	45			17			62		(1)

Total units	10,846			2,015			12,861		(1)

Operating Partnership’s ownership percentage of outstanding debt	25.0		%	12.7		%

Operating Partnership’s share of outstanding debt (2)	$	121,200		$	4,577		$	125,777

(1)The Operating Partnership determines a project to be stabilized once it has maintained an average physical occupancy of 90% or more for a three-month period or one year from the cessation of major development activities, whichever is earlier.

~~(2)Includes nine projects under development containing 2,356 units, which are not included in the Operating Partnership’s property/unit counts at September 30, 2003.~~ Totals exclude Fort Lewis Military Housing consisting of one property and ~~3,799~~3,757 units, which is not accounted for under the equity method of ~~accounting. The Fort Lewis Military Housing~~accounting but is included in the Operating Partnership’s property/unit counts ~~at September 30, 2003.~~as of March 31, 2004.

~~(3)~~(2) ~~A total of $706.3 million is available for funding under this construction debt, of which $559.2 million was funded and outstanding at September 30, 2003.~~

~~(4)As of November 4, 2003, the Operating Partnership has funded $44.0 million as additional collateral on selected debt (see Note 8).~~ All ~~remaining~~ debt is non-recourse to ~~EQR and~~ the Operating Partnership.

Investments in unconsolidated entities include the Unconsolidated Properties as well as various development properties under construction or pending construction. These investments are accounted for utilizing the equity method of accounting. Under the equity method of accounting, the net equity investment of the Operating Partnership is reflected on the consolidated balance sheets and after the project is completed, the consolidated statements of operations include the Operating Partnership’s share of net income or loss from the unconsolidated entity. Prior to the project being completed, the Operating Partnership 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 nine months ended September 30, 2003 and 2002, the Operating Partnership capitalized $16.0 million and $12.5 million, respectively, in interest cost related to its unconsolidated~~

~~development projects (which reduced interest expense incurred in the consolidated statements of operations).~~

The Operating Partnership generally contributes between 25% and 35% of the project cost of the unconsolidated projects under development (constituting 100% of the equity), with the remaining cost financed through third-party construction mortgages. Voting rights are shared equally between the Operating Partnership and its respective development partners.

~~See Note 2 for further discussion regarding FIN No. 46 and its anticipated effect on the Operating Partnership’s unconsolidated development projects.~~

8.7. Deposits - - Restricted

As of ~~September 30, 2003,~~March 31, 2004, deposits-restricted totaled ~~$287.8~~$135.7 million and primarily included the following:

• Deposits in the amount of ~~$51.0~~$32.0 million held in third party escrow accounts to provide collateral for third party construction financing in connection with ~~unconsolidated~~partially owned (consolidated) development projects;

• Approximately ~~$169.5~~$39.5 million in tax-deferred (1031) exchange proceeds; and

• Approximately ~~$67.3~~$64.2 million for resident security, utility, and other deposits.

9.8. Mortgage Notes Payable

As of ~~September 30, 2003,~~March 31, 2004, the Operating Partnership had outstanding mortgage indebtedness of approximately ~~$2.8~~$3.2 billion.

During the ~~nine months~~quarter ended ~~September 30, 2003,~~March 31, 2004, the Operating Partnership:

• Repaid ~~$235.2~~$86.8 million of mortgage loans;

• ~~Assumed $109.1~~Assumed/consolidated $601.9 million of mortgage debt on certain properties in connection with their ~~acquisitions~~acquisition and/or consolidation;

• Obtained ~~$48.7~~$16.5 million of mortgage loans on certain properties; and

• ~~Relinquished $31.7~~Was released from $1.3 million of mortgage debt assumed by the purchaser on disposed properties.

As of ~~September 30, 2003,~~March 31, 2004, scheduled maturities for the Operating Partnership’s outstanding mortgage indebtedness were at various dates through ~~October~~January 1, ~~2033.~~2034. At ~~September 30, 2003,~~March 31, 2004, the interest rate range on the Operating Partnership’s mortgage debt was ~~1.04%~~0.92% to 12.465%. During the ~~nine months~~quarter ended ~~September 30, 2003,~~March 31, 2004, the weighted average interest rate on the Operating Partnership’s mortgage debt was ~~5.84%~~5.59%.

~~10.~~9. Notes

As of ~~September 30, 2003,~~March 31, 2004, the Operating Partnership had outstanding unsecured notes of approximately $2.7 billion.

On June 5, 2003, the Operating Partnership filed a Form S-3 registration statement with the SEC to register $2.0 billion of debt securities. The SEC declared this registration statement effective on June 11, 2003. In addition, the Operating Partnership carried over $280.0 million related to the registration statement effective on September 8, 2000. As of ~~September 30, 2003, $2.28 billion remained available for issuance under this registration statement.~~

~~During the nine months ended September 30, 2003, the Operating Partnership:~~

• ~~Issued $400.0 million of ten-year 5.20% fixed-rate public notes, receiving net proceeds of $397.5~~

~~million;~~

• ~~Repaid $100.0 million of floating rate public notes at maturity; and~~

• ~~Repaid $4.5 million of other unsecured notes.~~

~~As of September 30, 2003,~~March 31, 2004, scheduled maturities for the Operating Partnership’s outstanding notes were at various dates through 2029. At ~~September 30, 2003,~~March 31, 2004, the interest rate range on the Operating Partnership’s notes was 4.75% to 7.75%. During the ~~nine months~~quarter ended ~~September 30, 2003,~~March 31, 2004, the weighted average interest rate on the Operating Partnership’s notes was ~~6.48%~~6.43%.

~~11.~~10. Line of Credit

The Operating Partnership has a revolving credit facility with potential borrowings of up to $700.0 million. As of ~~September 30, 2003, no amounts were~~March 31, 2004, $420.0 million was outstanding and ~~$57.0~~$56.7 million was restricted (dedicated to support letters of credit and not available for borrowing) on the ~~line of credit.~~credit facility. During the ~~nine months~~quarter ended ~~September 30, 2003,~~March 31, 2004, the weighted average interest rate was ~~1.85%~~1.51%. EQR has guaranteed the Operating Partnership’s ~~line of~~ credit facility up to the maximum amount and for the full term of the facility.

~~12.~~11. Derivative Instruments

The following table summarizes the consolidated derivative instruments at ~~September 30, 2003~~March 31, 2004 (dollar amounts are in thousands):

	Cash Flow Hedges			Fair Value Hedges			Forward Starting Swaps			Interest Rate Caps			Offsetting Receive Floating Swaps/Caps			Offsetting Pay Floating Swaps/Caps			Cash Flow Hedges			Fair Value Hedges			Forward Starting Swaps			Interest Rate Caps			Offsetting Receive Floating Swaps/Caps			Offsetting Pay Floating Swaps/Caps			Development Cash Flow Hedges
Current Notional Balance	$	150,000		$	120,000		$	150,000		$	37,000		$	255,121		$	255,121		$	150,000		$	320,000		$	250,000		$	37,000		$	255,082		$	255,082		$	137,409
Lowest Possible Notional	$	150,000		$	120,000		$	150,000		$	37,000		$	251,410		$	251,410		$	150,000		$	320,000		$	250,000		$	37,000		$	99,524		$	99,524		$	19,993
Highest Possible Notional	$	150,000		$	120,000		$	150,000		$	37,000		$	431,444		$	431,444		$	150,000		$	320,000		$	250,000		$	37,000		$	264,419		$	264,419		$	137,409
Lowest Interest Rate	3.683		%	7.25		%	4.34		%	6.50		%	4.53		%	4.46		%	3.68		%	3.25		%	4.34		%	6.50		%	4.90		%	4.83		%	1.93		%
Highest Interest Rate	3.683		%	7.25		%	4.48		%	6.50		%	6.00		%	6.00		%	3.68		%	7.25		%	4.90		%	6.50		%	6.00		%	6.00		%	5.23		%
Earliest Maturity Date	2005			2005			2014			2004			2003			2003			2005			2005			2014			2004			2004			2004			2004
Latest Maturity Date	2005			2005			2014			2004			2007			2007			2005			2009			2014			2004			2007			2007			2004
Estimated Asset (Liability) Fair Value	$	(7,433	)	$	7,464		$	2,576		$	—		$	478		$	(486	)	$	(5,652	)	$	3,815		$	(6,543	)	$	—		$	385		$	(385	)	$	(323	)

During the ~~nine months~~quarter ended ~~September 30, 2003,~~March 31, 2004, the Operating Partnership paid approximately ~~$13.0~~$3.1 million to terminate ~~eight forward starting~~four development interest rate swaps in conjunction with the ~~issuance of $400.0 million of ten-year unsecured notes. The $13.0 million payment has been deferred and will be recognized as additional interest expense over the ten-year life~~repayment of the ~~unsecured notes.~~

At September 30, 2003, certain unconsolidated development partnerships in which the Operating Partnership invested had entered into swaps to hedge the interest rate risk exposure on unconsolidated floating raterespective construction mortgage loans. The Operating Partnership ~~has recorded its proportionate share of~~recognized a $1.9 million loss in connection with these ~~hedges on its consolidated balance sheets. These swaps have been designated as cash flow hedges with a current aggregate notional amount of $307.5million (notional amounts range from $76.5million to $335.9million over the terms of the swaps) at interest rates ranging from 1.78% to 6.94% maturing at various dates ranging from 2003 to 2005 with a net liability fair value of $7.8~~million. During the nine months ended September 30, 2003, the Operating Partnership recognized an unrealized gain of $1.1 million due to ineffectiveness of certain of these unconsolidated development derivativesterminations (included in loss from investments in unconsolidated ~~entities)~~entities as the losses occurred prior to the acquisition and/or consolidation of the respective development properties – see further discussion in Notes 2 and 4).

On ~~September 30, 2003,~~March 31, 2004, the net derivative instruments were reported at their fair value as other assets of approximately ~~$10.0~~$5.5 million and as other liabilities of approximately ~~$7.4 million and as a reduction to investments in unconsolidated entities of approximately $7.8~~$14.2 million. As of ~~September 30, 2003,~~March 31, 2004, there were approximately ~~$28.9~~$29.3 million in deferred losses, net, included in accumulated other comprehensive loss.

Based on the estimated fair values of the net derivative instruments at ~~September 30, 2003,~~March 31, 2004, the Operating Partnership may recognize an estimated ~~$11.7~~$7.1 million of accumulated other comprehensive loss as additional interest expense ~~($6.1 million related to its consolidated derivatives) or as additional loss on investments in unconsolidated entities ($5.6 million related to its unconsolidated development partnerships)~~ during the twelve months ending ~~September 30, 2004.~~March 31, 2005.

~~13.~~12. ~~Calculation of Net Income~~ Earnings Per ~~Weighted Average~~ OP Unit

The following tables set forth the computation of net income per OP Unit – basic and net income per OP Unit – diluted:

													Quarter Ended March 31,
	Nine Months Ended September 30,						Quarter Ended September 30,						2004			2003
	2003			2002			2003			2002			(Amounts in thousands except per OP Unit amounts)
	(Amounts in thousands except per OP Unit amounts)
Numerator for net income per OP Unit – basic:
Income from continuing operations	$	207,976		$	218,442		$	68,450		$	50,044		$	55,021		$	60,932
Allocation to Preference Units	(57,713		)	(57,568		)	(19,564		)	(19,055		)	(13,672		)	(19,046		)
Allocation to Preference Interests	(15,159		)	(15,158		)	(5,053		)	(5,052		)	(5,053		)	(5,053		)
Allocation to Junior Preference Units	(243		)	(243		)	(81		)	(81		)	(31		)	(81		)

Income from continuing operations available to OP Units	134,861			145,473			43,752			25,856			36,265			36,752
Net gain on sales of discontinued operations	218,975			61,209			77,983			32,763			71,499			70,672
Discontinued operations, net	9,494			42,252			(7		)	11,137			(1,815		)	12,853

Numerator for net income per OP Unit – basic	$	363,330		$	248,934		$	121,728		$	69,756		$	105,949		$	120,277

Numerator for net income per OP Unit – diluted:
Income from continuing operations	$	207,976		$	218,442		$	68,450		$	50,044		$	55,021		$	60,932
Allocation to Preference Units	(57,713		)	(57,568		)	(19,564		)	(19,055		)	(13,672		)	(19,046		)
Allocation to Preference Interests	(15,159		)	(15,158		)	(5,053		)	(5,052		)	(5,053		)	(5,053		)
Allocation to Junior Preference Units	(243		)	(243		)	(81		)	(81		)	(31		)	(81		)
Effect of dilutive securities:
Distributions on convertible preference units/interests	—			—			—			—

Income from continuing operations available to OP Units	134,861			145,473			43,752			25,856			36,265			36,752
Net gain on sales of discontinued operations	218,975			61,209			77,983			32,763			71,499			70,672
Discontinued operations, net	9,494			42,252			(7		)	11,137			(1,815		)	12,853

Numerator for net income per OP Unit – diluted	$	363,330		$	248,934		$	121,728		$	69,756		$	105,949		$	120,277

Denominator for net income per OP Unit – basic and diluted:
Denominator for net income per OP Unit – basic	293,900			295,483			295,032			296,519			299,028			292,950

Effect of dilutive securities:
Convertible preference units/interests	—			—			—			—
Dilution for OP Units issuable upon assumed exercised/vesting of EQR’s share options/restricted shares	2,284			3,207			2,909			2,538

Dilution for OP Units issuable upon assumed exercise/vesting of EQR’s share options/restricted shares													2,753			1,558
Denominator for net income per OP Unit – diluted	296,184			298,690			297,941			299,057			301,781			294,508

Net income per OP Unit – basic	$	1.24		$	0.84		$	0.41		$	0.24		$	0.35		$	0.41

Net income per OP Unit – diluted	$	1.23		$	0.83		$	0.41		$	0.23		$	0.35		$	0.41

1917

									Quarter Ended March 31,
	Nine Months Ended September 30,				Quarter Ended September 30,				2004			2003
	2003		2002		2003		2002		(Amounts in thousands except per OP Unit amounts)
	(Amounts in thousands except per OP Unit amounts)
Net income per OP Unit – basic:
Income from continuing operations available to OP Units	$	0.46	$	0.49	$	0.15	$	0.09	$	0.12		$	0.13
Net gain on sales of discontinued operations	0.75		0.21		0.26		0.11		0.24			0.24
Discontinued operations, net	0.03		0.14		—		0.04		(0.01		)	0.04

Net income per OP Unit – basic	$	1.24	$	0.84	$	0.41	$	0.24	$	0.35		$	0.41

Net income per OP Unit – diluted:
Income from continuing operations available to OP Units	$	0.46	$	0.49	$	0.15	$	0.08	$	0.12		$	0.13
Net gain on sales of discontinued operations	0.74		0.20		0.26		0.11		0.24			0.24
Discontinued operations, net	0.03		0.14		—		0.04		(0.01		)	0.04

Net income per OP Unit – diluted	$	1.23	$	0.83	$	0.41	$	0.23	$	0.35		$	0.41

Convertible preference units/interests that could be converted into ~~14,932,069~~3,553,977 and ~~15,461,855~~14,945,776 weighted average Common Shares (which would be contributed to the Operating Partnership in exchange for OP Units) for the ~~nine months ended September 30, 2003 and 2002, respectively, and 14,911,158 and 15,095,576 weighted average Common Shares for the~~ quarters ended ~~September 30,~~March 31, 2004 and 2003, ~~and 2002,~~ respectively, were outstanding but were not included in the computation of diluted earnings per OP Unit because the effects would be anti-dilutive.

~~14.~~13. Discontinued Operations

The Operating Partnership has presented separately as discontinued operations in all periods the results of operations for all ~~wholly owned~~consolidated assets disposed of on or after January 1, 2002 (the date of adoption of SFAS No. 144).

The components of discontinued operations are outlined below and include the results of operations for the respective periods that the Operating Partnership owned such assets during each of the ~~nine months and~~ quarters ended ~~September 30, 2003~~March 31, 2004 and ~~2002, including the following:~~2003.

•~~The sixty-one Wholly Owned Properties and various individual condominium units containing 15,673 units sold during 2003 (see Note 5); and~~

•~~The fifty-two Wholly Owned Properties and various individual condominium units containing 9,586 units and the furniture rental business sold during 2002.~~

2018

													Quarter Ended March 31,
	Nine Months Ended September 30,						Quarter Ended September 30,						2004			2003
	2003			2002			2003			2002			(Amounts in thousands)
	(Amounts in thousands)
REVENUES
Rental income	$	51,306		$	127,964		$	8,050		$	37,069		$	5,440		$	49,442
Furniture income	—			1,361			—			—
Total revenues	51,306			129,325			8,050			37,069			5,440			49,442

EXPENSES (1)
Property and maintenance	20,639			37,680			4,345			12,031			4,477			16,730
Real estate taxes and insurance	5,994			13,504			777			3,745			604			5,163
Property management	103			123			(9		)	40			—			50
Depreciation	13,175			30,591			2,160			9,029			1,575			13,140
Furniture expenses	—			1,303			—			—
Total expenses	39,911			83,201			7,273			24,845			6,656			35,083

Discontinued operating income	11,395			46,124			777			12,224
Discontinued operating income (loss)													(1,216		)	14,359
	��
Interest and other income	175			26			53			—			20			17
Interest:
Expense incurred, net	(1,938		)	(3,815		)	(722		)	(1,069		)	(455		)	(1,453		)
Amortization of deferred financing costs	(138		)	(83		)	(115		)	(18		)	(164		)	(70		)

Discontinued operations, net	$	9,494		$	42,252		$	(7	)	$	11,137		$	(1,815	)	$	12,853

(1) Includes expenses paid in the current period for ~~Wholly Owned Properties~~properties sold in prior periods related to the Operating Partnership’s period of ownership.

For the properties sold during 2004, the investment in real estate, net and the mortgage notes payable balances at December 31, 2003 were $206.7 million and $43.1 million, respectively.

~~15.~~14. Commitments and Contingencies

The Operating Partnership, as an owner of real estate, is subject to various Federal, state and local environmental laws. Compliance by the Operating Partnership with existing laws has not had a material adverse effect on the Operating Partnership. However, the Operating Partnership 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 Operating Partnership is a party to a class action lawsuit in Florida state court alleging that several of the types of fees that the Operating Partnership charged when residents breached their leases were illegal, as ~~are~~were all efforts to collect them. ~~We are~~The Operating Partnership is vigorously contesting the plaintiffs’ claims and ~~will seek~~has sought immediate appellate review of the ~~recent~~2003 class action certification decision. Due to the ~~preliminary nature~~uncertainty of many critical factual and legal issues, including the viability of the ~~litigation,~~case as a class action, it is not possible to determine or predict the outcome. While no assurances can be given, ~~we do~~the Operating Partnership does not believe that this lawsuit, if adversely determined, will have a material adverse effect on the Operating Partnership.

The Operating Partnership does not believe there is any other litigation pending or threatened against the Operating Partnership which, individually or in the aggregate, reasonably may be expected to

have a material adverse effect on the Operating Partnership.

As of ~~September 30, 2003,~~March 31, 2004, the Operating Partnership has 16seven projects with joint venture partners in various stages of development with estimated completion dates ranging through December 31,2005 which are consolidated as of March 31, ~~2004.~~2004 as a result of FIN No. 46. The three development agreements currently in place have the following key terms:

• The first development 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 Operating Partnership based on such value. If the Operating Partnership chooses not to purchase the interest, it must agree to a sale of the project to an unrelated third party at such value. The Operating Partnership’s 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. In connection with this development ~~partner,~~agreement, the Operating Partnership has an obligation to provide up to $40.0 million in credit enhancements to guarantee a portion of the third party construction financing. As of ~~November 4, 2003,~~April 28, 2004, the Operating Partnership had set-aside ~~$20.0~~$10.0 million towards this credit enhancement. The Operating Partnership would be required to perform under this agreement only if there was a material default under a third party construction mortgage agreement. This agreement expires no later than December 31, 2018. Notwithstanding the termination of the agreement, the Operating Partnership shall have recourse against its development partner for any losses incurred.

• The second development partner has the right, at any time following completion of a project, to require the Operating Partnership to purchase the partners’ interest in that project at a mutually agreeable price. If the Operating Partnership and the partner are unable to agree on a price, both parties will obtain appraisals. If the appraised values vary by more than 10%, both the Operating Partnership and its partner will agree on a third appraiser to determine which original appraisal is closest to its determination of value. The Operating Partnership may elect at that time not to purchase the property and instead, authorize 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, the Operating Partnership must purchase, at the agreed-upon price, any projects remaining unsold.

• The third development partner has the exclusive right for six months following stabilization, ~~(generally~~as defined, ~~as having achieved 90% occupancy for three consecutive months following the substantial completion of a project)~~ to market a project for sale. Thereafter, either the Operating Partnership or its development partner may market a project for sale. If the Operating Partnership’s development partner proposes the sale, the Operating Partnership may elect to purchase the project at the price proposed by its partner or defer the sale until two independent appraisers appraise the project. If the two appraised values vary by more than 5%, a third appraiser will be chosen to determine the fair market value of the property. Once a value has been determined, the Operating Partnership may elect to purchase the property or authorize its development partner to sell the project at the agreed-upon value.

In connection with one of its mergers, the Operating Partnership ~~executed~~provided a guaranty of a credit enhancement agreement with respect to certain tax-exempt bonds issued to finance certain public improvements at a multifamily development project. The Operating Partnership has the obligation to ~~facilitate credit under~~provide this ~~agreement~~guaranty for a period of eight years from the consummation of the merger or through May 2005. The Operating Partnership would be required to perform under this agreement only if there was a ~~material default with respect to~~draw on the ~~tax-exempt bonds. If there should be any default in connection with this agreement,~~letter of credit issued by the credit enhancement party. The counterparty has also indemnified the Operating Partnership ~~has the right, among other remedies, to select an alternate interest rate on the bonds.~~for any losses suffered. As of ~~September 30, 2003,~~March 31, 2004, this ~~enhancement~~guaranty was still in effect at a commitment amount of $12.7 million and no current outstanding liability.

~~16.~~                               ~~Asset Impairment~~
For both the nine months ended September 30, 2003 and 2002, the Operating Partnership recorded $0.9 million of asset impairment charges related to its technology investments. These charges were the result of a review of the existing investments reflected on the consolidated balance sheet. These impairment losses are reflected on the consolidated statements of operations in total expenses and include the write-down of assets classified as other assets.
For the nine months ended September 30, 2002, the Operating Partnership recorded approximately $17.1 million of asset impairment charges related to its corporate housing business. Following the guidance in SFAS No. 142, these charges were the result of the Operating Partnership’s decision to reduce the carrying value of its corporate housing business to $30.0 million, given the continued weakness in the economy and management’s expectations for near-term performance. This impairment loss is reflected on the consolidated statements of operations as impairment on corporate housing business and on the consolidated balance sheets as a reduction in goodwill, net.

~~17.~~15.                               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.

20

The Operating Partnership’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 and includes Equity Corporate Housing (“ECH”). 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 Operating Partnership’s rental real estate segment comprises approximately ~~99.2% and 99.5% of total revenues for the nine months ended September 30, 2003 and 2002, respectively, and approximately 99.3% and~~ 99.4% of total revenues for both the quarters ended ~~September 30, 2003~~March 31, 2004 and ~~2002, respectively.~~2003. The Operating Partnership’s rental real estate segment comprises approximately 99.8% and 99.7% of total assets at ~~both September 30, 2003~~March 31, 2004 and December 31, ~~2002.~~2003, respectively.

The primary financial measure for the Operating Partnership’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 consolidated statements of operations). The Operating Partnership believes that NOI is helpful to investors as a supplemental measure of the operating performance of a real estate ~~Operating Partnership~~company because it is a direct measure of the actual operating results of the Operating Partnership’s apartment communities. 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 ~~$810.5~~$263.9 million and ~~$840.1 million for the nine months ended September 30, 2003 and 2002, respectively, and approximately $270.8 million and $277.0~~$253.7 million for the quarters ended ~~September 30,~~March 31, 2004 and 2003, ~~and 2002,~~ respectively.

During the acquisition, development and/or disposition of real estate, the Operating Partnership considers its NOI return on total investment as the primary measure of financial performance.

The Operating Partnership’s fee and asset management activity is immaterial and does not meet the threshold requirements of a reportable segment as provided for in SFAS No. 131.

All revenues are from external customers and there is no customer who contributed 10% or more of the Operating Partnership’s total revenues during the ~~nine months~~quarter ended ~~September 30, 2003~~March 31, 2004 or ~~2002.~~2003.
23

~~18.~~16.                               Subsequent Events/Other

Subsequent to ~~September 30, 2003~~March 31, 2004 and through ~~November 4, 2003,~~April 28, 2004, the Operating Partnership:

•                  Acquired ~~two~~four properties consisting of ~~432~~814 units for approximately ~~$79.2~~$98.8 million;
•                  Assumed ~~$9.6~~$14.0 million of mortgage debt on ~~certain properties~~one property in connection with ~~their acquisitions and/or consolidation;~~its acquisition;
•                  Disposed of ~~four~~three properties and various individual condominium units consisting of ~~561~~839 units for approximately ~~$28.4~~$53.7 million;
•                  ~~Repaid $23.5~~Obtained $220.0 million ofin new mortgage debt;
•                  ~~Relinquished $7.0~~Repaid $82.5 million of mortgage ~~debt assumed by the purchaser on disposed properties;~~debt; and
•                  Repaid ~~$40.0~~$75.0 million of ~~6.875%~~7.5% fixed rate ~~public~~ notes at ~~maturity; and~~
•                  ~~Purchased a third party’s $20.0 million participation interest in a floating rate construction loan secured by one of the Operating Partnership’s unconsolidated development properties.~~maturity.

2421

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 Operating Partnership’s annual report on Form 10-K for the year ended December 31, ~~2002.~~2003.

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”, “estimates”, “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 Operating Partnership 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:

•                  The total number of development units, cost of development and completion dates as well as anticipated capital expenditures for replacements and building improvements all reflect the Operating Partnership’s best estimates and are subject to uncertainties arising from changing economic conditions (such as the cost of labor and construction materials), competition and local government regulation;
•                  ~~Alternative sources~~Sources of capital to the Operating Partnership or labor and materials required for maintenance, repair, capital expenditure or development are more expensive than anticipated;
•                  Occupancy levels and market rents may be adversely affected by national and local economic and market conditions including, without limitation, new construction of multifamily housing, ~~continuing decline in~~slow employment growth, availability of low interest mortgages for single-family home buyers and the potential for geopolitical instability, all of which are beyond the Operating Partnership’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 Operating Partnership 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. Forward-looking statements and related uncertainties are also included in Notes 65 and 1211 to the Notes to Consolidated Financial Statements in this report.

2522

Results of Operations

The following table summarizes the number of properties and related units for the periods presented:

Properties

Units

Purchase /
Sale Price
$ Millions

At December 31, 2001

1,076

224,801

Q1/Q2/Q3 2002 Acquisitions

10

3,053

$
245.4

Ft. Lewis Military Housing

1

3,652

Q1/Q2/Q3 2002 Dispositions

(35
)
(6,046
)
$
338.9

Q1/Q2/Q3 2002 Completed Developments

7

1,966

At September 30, 2002

1,059

227,426

Q4 2002 Acquisitions

2

581

$
44.5

Q4 2002 Dispositions

(23
)
(4,667
)
$
207.3

Q4 2002 Completed Developments

1

235

Q4 2002 Unit Configuration Changes

—

16

At December 31, 2002

1,039

223,591

Q1/Q2/Q3 2003 Acquisitions

8

2,678

$
389.7

Q1/Q2/Q3 2003 Dispositions

(63
)
(15,996
)
$
803.2

Q1/Q2/Q3 2003 Completed Developments

6

1,745

Q1/Q2/Q3 2003 Unit Configuration Changes

—

129

At September 30, 2003

990

212,147

Properties

Units

Purchase /
Sale Price
$Millions

At December 31, 2002

1,039

223,591

Q1 2003 Acquisitions

3

920

$
111.5

Q1 2003 Dispositions

(17
)
(4,000
)
$
195.0

Q1 2003 Completed Developments

2

738

At March 31, 2003

1,027

221,249

Q2/Q3/Q4 2003 Acquisitions

14

4,280

$
572.6

Q2/Q3/Q4 2003 Dispositions

(79
)
(19,486
)
$
1,022.9

Q2/Q3/Q4 2003 Completed Developments

6

1,374

Q2/Q3/Q4 2003 Unit Configuration Changes

—

89

At December 31, 2003

968

207,506

��
Q1 2004 Acquisitions

5

1,671

$
224.4

Q1 2004 Dispositions

(22
)
(5,990
)
$
301.3

Q1 2004 Completed Developments

1

403

At March 31, 2004

952

203,590

~~Significant changes~~Properties that the Operating Partnership owned for both of the quarters ended March 31, 2004 and March 31, 2003 (the “First Quarter 2004 Same Store Properties”), which represented 170,836 units, impacted the Operating Partnership’s results of operations and are discussed in ~~revenues between~~ the nine months and quarters presented have resulted primarily from reduced rental income through increased concessions or reduced apartment rents and occupancy at many of our properties. Significant changes in expenses have resulted from increases in property and maintenance expenses including payroll, maintenance, building, utilities and leasing and advertising as well as real estate taxes, partially offset by decreases in property management expenses. In addition, thefollowing paragraphs.
The Operating Partnership’s acquisition, disposition and completed development ~~activity has~~activities also impacted overall results of operations for the ~~nine months and~~ quarters ended ~~September 30, 2003~~March 31, 2004 and ~~2002. These changes~~2003. The impacts of these activities are also discussed in greater detail in the following paragraphs.

Properties that the Operating Partnership owned for the entire nine month periods ended September 30, 2003 as well as September 30, 2002 (the “Nine-Month 2003 Same Store Properties”), which represented 179,233 units and properties that the Operating Partnership owned for all of both the quarters ended September 30, 2003 and September 30, 2002 (the “Third Quarter 2003 Same Store Properties”), which represented 181,656 units, also impacted the Operating Partnership’s results of operations. Both the Nine-Month 2003 Same Store Properties and Third Quarter 2003 Same Store Properties are discussed in the following paragraphs.
Comparison of the ~~nine months~~quarter ended ~~September 30, 2003~~March 31, 2004 to the ~~nine months~~quarter ended ~~September 30, 2002~~March 31, 2003

For the ~~nine months~~quarter ended ~~September 30, 2003,~~March 31, 2004, income before allocation to Minority Interests, ~~loss~~income (loss) from investments in unconsolidated entities, net gain ~~(loss)~~ on sales of unconsolidated entities and discontinued operations ~~decreased~~increased by approximately ~~$15.4~~$0.4 million when compared to the ~~nine months~~quarter ended ~~September 30, 2002.~~March 31, 2003.

~~Revenues from the Nine-Month 2003~~First Quarter 2004 Same Store Properties revenues decreased primarily as a result of lower ~~overall physical occupancy, increased concessions and lower~~ rental rates charged to ~~both new~~residents and ~~renewal residents. Property~~property operating expenses ~~from the Nine-Month 2003 Same Store Properties~~ increased
26

primarily due to higher payroll, ~~maintenance,~~ utility and real estate ~~taxes, leasing and advertising and building~~tax costs. The following tables provide comparative revenue, expense, net operating income (“NOI”) and weighted average occupancy for the ~~Nine-Month 2003~~First Quarter 2004 Same Store Properties (NOI represents rental income less: 1) property and maintenance expense; 2) real estate taxes and insurance expense; and 3) property management expense):
23
~~September YTD 2003~~
First Quarter 2004 vs. ~~September YTD 2002~~First Quarter 2003
~~For Nine-Month Same Store Properties~~Quarter over Quarter Same-Store Results
$ in Millions – ~~179,233~~170,836 Same-Store Units
Description
Description

Revenues

Expenses

NOI

Revenues

Expenses

NOI

YTD 2003

$
1,279.4

$
508.7

$
770.7

YTD 2002

$
1,316.2

$
482.6

$
833.6

Q1 2004

$
415.9

$
168.7

$
247.2

Q1 2003

$
416.9

$
163.8

$
253.1

Change

$
(36.8
)
$
26.1

$
(62.9
)

$
(1.0
)
$
4.9

$
(5.9
)
Change

(2.8
)%
5.4
%
(7.5
)%

(0.2
)%
3.0
%
(2.3
)%
Same Store Occupancy Statistics
~~YTD 2003~~Q1 2004

92.9
~~93.0~~
%
~~YTD 2002~~Q1 2003

92.6
~~94.0~~
%
Change

0.3
~~(1.0~~
)%
The Operating Partnership’s primary financial measure for evaluating each of its apartment communities is NOI. The Operating Partnership believes that NOI is helpful to investors as a supplemental measure of the operating performance of a real estate company because it is a direct measure of the actual operating results of the Operating Partnership’s apartment communities.
For properties that the Operating Partnership acquired prior to January 1, 2002 and expects to continue to own through December 31, 2003, the Operating Partnership anticipates the following same store results for the full year ending December 31, 2003:
~~2003 Same Store Assumptions~~
~~Physical Occupancy~~
~~93.0%~~
~~Revenue Change~~
~~(2.3%)~~
~~Expense Change~~
~~5.2%~~
~~NOI Change~~
~~(6.7%)~~
~~Dispositions~~
~~$1.0 to $1.2 billion~~
For properties that the Operating Partnership acquired prior to January 1, 2003 and expects to continue to own through December 31, 2004, the Operating Partnership anticipates the following same store results for the full year ending December 31, 2004:
2004 Same Store Assumptions
Physical Occupancy

93.0%
Revenue Change

(0.75%) to 1.50%
Expense Change

3.0% to 4.0%
NOI Change

(4.0%) to 0.5%
Acquisitions

$ 800 million
Dispositions

$~~800.0~~ 800 million
These ~~2003 and~~ 2004 assumptions are based on current expectations and are forward-looking.
Rental income from properties other than ~~Nine-Month 2003~~First Quarter 2004 Same Store Properties increased by
27

approximately ~~$34.0~~$24.9 million primarily as a result of ~~revenue from~~new properties acquired in ~~2002 and~~ 2003 ~~and additional Partially Owned Properties consolidated in the fourth quarter of 2002~~ and the first ~~nine months~~quarter of ~~2003.~~2004.
Fee and asset management revenues, net of fee and asset management expenses, increased by ~~$3.9~~$0.3 million primarily as a result of additional income allocated from Ft. ~~Lewis Military Housing.~~Lewis. As of ~~September 30,~~March 31, 2004 and 2003, ~~and 2002,~~ the Operating Partnership managed ~~18,897~~18,040 units and ~~20,142~~18,896 units, respectively, for third parties and unconsolidated entities.
Property management expenses include off-site expenses associated with the self-management of the Operating Partnership’s properties as well as management fees paid to third party management companies. These expenses ~~decreased~~increased by approximately ~~$7.3~~$1.4 million or ~~13.0%~~9.1%. This ~~decrease~~increase is primarily attributable to ~~a reversal of a profit sharing accrual in the first quarter of 2003 related to the 2002 calendar year as the Operating Partnership didn’t achieve its stated goals~~higher payroll costs and ~~management elected not to make a discretionary contribution to the plan. In addition, the Company recorded lower expense in connection with granting less~~increased expenses for additional restricted shares and ~~reducing the expense associated with the Company’s matched funding of its 401(k) plan during the first nine months of 2003 and not incurring an expense for any 2003 profit sharing.~~stock options granted.
24

Depreciation expense, which includes depreciation on non-real estate assets, increased ~~$19.1~~$9.8 million primarily as a result of properties acquired after ~~September 30, 2002~~March 31, 2003, many of which had significantly higher per unit acquisition costs than properties previously acquired, and additional depreciation on capital expenditures for all properties owned.

General and administrative expenses, which include corporate operating expenses, decreased approximately ~~$4.1~~$1.2 million between the periods under comparison. This decrease was primarily due to ~~lower expenses recorded~~$1.4 million of immediate expense recognition related to options granted in ~~connection with granting less restricted shares to employees during~~ the first ~~nine months~~quarter of 2003 ~~offset by approximately a $3.4 million increase related~~ to the Operating Partnership’s decision to expense its stock based compensation in accordance with SFAS No. 123 and its amendment (SFAS No. 148). In addition, lower state income and franchise taxes also contributed to this decrease.
EQR’s former chief executive officer. The Operating Partnership ~~recorded impairment charges on its technology investments~~anticipates that general and ~~its corporate housing business of approximately $0.9 million and $18.0~~administrative expenses could approximate up to $48.0 million for the ~~nine months ended September 30, 2003~~full year ending December 31, 2004 (an increase of approximately $9.0 million compared to 2003) as a result of consulting services contracted to enhance resident satisfaction/retention, unit pricing and ~~2002, respectively. See Note 16~~expense procurement/reduction. The Operating Partnership believes that these additional expenditures may be more than offset by increased rental revenues and/or reduced operating expenses in ~~the Notes to Consolidated Financial Statements for further discussion.~~future years. The above assumptions are based on current expectations and are forward-looking.

Interest and other income ~~increased~~decreased by approximately ~~$2.2~~$1.2 million, primarily as a result of ~~higher cash~~lower balances available for ~~short-term~~ investments ~~throughout 2003.~~including deposits in tax deferred exchange accounts and collateral agreements related to development projects.

Interest expense, including amortization of deferred financing costs, ~~decreased~~increased approximately ~~$6.0~~$0.5 ~~million primarily due to lower variable interest rates.~~million. During the ~~nine months~~quarter ended ~~September 30, 2003,~~March 31, 2004, the Operating Partnership capitalized interest costs of approximately ~~$16.0~~$2.7 million as compared to ~~$19.4~~$5.4 million for the ~~nine months~~quarter ended ~~September 30, 2002.~~March 31, 2003. This capitalization of interest primarily related to equity investments in unconsolidated entities engaged in development activities. The effective interest cost on all indebtedness for the ~~nine months~~quarter ended ~~September 30, 2003~~March 31, 2004 was ~~6.37%~~6.14% as compared to ~~6.60%~~6.39% for the ~~nine months~~quarter ended ~~September 30, 2002.~~March 31, 2003.

Loss from investments in unconsolidated entities increased approximately ~~$1.8~~$7.5 million between the periods under comparison. This increase is primarily the result of increased operating losses from equity investments ~~partially offset by unrealized gains~~and realized losses on the settlement of derivative ~~instruments.~~instruments (see Note 11 in the Notes to Consolidated Financial Statements).

Net gain on sales of discontinued operations increased approximately $157.8 million between the periods under comparison. This increase is primarily the result of a greater number of properties sold during the nine months ended September 30, 2003, as well as the fact that several properties were more fully
28

~~depreciated.~~
~~Discontinued operations, net, decreased approximately $32.8 million between the periods under comparison. See Note 14 in the Notes to Consolidated Financial Statements for further discussion.~~
~~Comparison of the quarter ended September 30, 2003 to the quarter ended September 30, 2002~~
For the quarter ended September 30, 2003, income before allocation to Minority Interests, loss from investments in unconsolidated entities, net gain (loss) on sales of unconsolidated entities and discontinued operations increased by approximately $12.0 million when compared to the quarter ended September 30, 2002.
Revenues from the Third Quarter 2003 Same Store Properties decreased primarily as a result of lower overall physical occupancy, increased concessions and lower rental rates charged to both new and renewal residents. Property operating expenses from the Third Quarter 2003 Same Store Properties increased mainly due to higher payroll, maintenance, utility, real estate taxes, building and leasing and advertising costs. The following tables provide comparative revenue, expense, NOI and weighted average occupancy for the Third Quarter 2003 Same Store Properties:
~~Third Quarter 2003 vs. Third Quarter 2002~~
~~For Third Quarter 2003 Same Store Properties~~
~~$ in Millions – 181,656 Same-Store Units~~
Description

Revenues

Expenses

NOI

Q3 2003

$
433.8

$
176.3

$
257.5

Q3 2002

$
442.2

$
169.1

$
273.1

Change

$
(8.4
)
$
7.2

$
(15.6
)
Change

(1.9
)%
4.3
%
(5.7
)%
~~Same Store Occupancy Statistics~~
~~Q3 2003~~
~~93.5~~
%
~~Q3 2002~~
~~93.9~~
%
~~Change~~
~~(0.4~~
)%
~~Rental income from properties other than Third Quarter 2003 Same Store Properties increased by approximately $11.9~~~~million primarily as a result of revenue from properties acquired in the fourth quarter of 2002 and throughout 2003.~~
Fee and asset management revenues, net of fee and asset management expenses, increased by $0.3 million primarily as a result of income from Ft. Lewis Military Housing. As of September 30, 2003 and 2002, the Operating Partnership managed 18,897~~units and 20,142 units, respectively, for third parties and unconsolidated entities.~~
Property management expenses include off-site expenses associated with the self-management of the Operating Partnership’s properties as well as management fees paid to third party management companies. These expenses decreased by approximately $1.8 million or 9.8%. The Company recorded lower expense in connection with granting less restricted shares and reducing the expense associated with the Company’s matched funding of its 401(k) plan during the first nine months of 2003 and not incurring an expense for any 2003 profit sharing.
~~Depreciation expense, which includes depreciation on non-real estate assets, increased $6.0 million~~
29

~~primarily as a result of properties acquired after September 30, 2002 and additional depreciation on capital expenditures for all properties owned.~~
General and administrative expenses, which include corporate operating expenses, decreased approximately $2.0 million between the periods under comparison. This decrease was primarily due to lower expenses recorded in connection with granting less restricted shares to employees and lower accrued expenses related to deferred compensation during the quarter ended September 30, 2003 offset by a $0.6 million increase related to the Operating Partnership’s decision to expense its stock based compensation.
The Operating Partnership recorded impairment charges on its technology investments and corporate housing business of approximately $0.3 million and $17.4 million for the quarters ended September 30, 2003 and 2002, respectively. See Note 16 in the Notes to Consolidated Financial Statements for further discussion.
~~Interest and other income increased by approximately $4.4 million, primarily as a result of higher cash balances available for short-term investments.~~
Interest expense, including amortization of deferred financing costs, decreased approximately $0.4 million primarily due to lower variable interest rates. During the quarter ended September 30, 2003, the Operating Partnership capitalized interest costs of approximately $5.1 million as compared to $7.1 million for the quarter ended September 30, 2002. This capitalization of interest primarily related to equity investments in unconsolidated entities engaged in development activities.�� The effective interest cost on all indebtedness for the quarter ended September 30, 2003 was 6.32% as compared to 6.52% for the quarter ended September 30, 2002.
Loss from investments in unconsolidated entities decreased approximately $0.1 million between the periods under comparison. This decrease is primarily the result of unrealized gains on derivative instruments.
~~Net gain on sales of discontinued operations increased approximately $45.2~~$0.8 million between the periods under comparison. This increase is primarily the result of a greater number of properties sold during the quarter ended ~~September 30, 2003,~~March 31, 2004, as well as the fact that several properties were more fully depreciated.

Discontinued operations, net, decreased approximately ~~$11.1~~$14.7 million between the periods under comparison. The decrease in revenues and expenses between periods results from the timing and size of the properties sold. Any property sold after April 1, 2003 will include a full quarter’s results in the first quarter of 2003 but minimal to no results in the first quarter of 2004. See Note 1413 in the Notes to Consolidated Financial Statements for further discussion.
The Operating Partnership adopted FIN No. 46, as required, effective March 31, 2004. See Notes 2 and 4 in the Notes to Consolidated Financial Statements for further discussion.

Liquidity and Capital Resources

As of January 1, ~~2003,~~2004, the Operating Partnership had approximately ~~$29.9~~$49.6 million of cash and cash equivalents and ~~$499.2~~$633.3 million available under its ~~line of~~revolving credit facility (net of ~~$60.8~~$56.7 million which was restricted/dedicated to support letters of credit and not available for borrowing). After taking into effect the various transactions discussed in the following paragraphs and the net cash provided by operating activities, the Operating Partnership’s cash and cash equivalents balance at ~~September 30, 2003~~March 31, 2004 was approximately ~~$372.6~~$71.5 million and the amount available on the Operating Partnership’s ~~line of~~revolving credit facility was ~~$643.0~~$223.3 million (net of ~~$57.0~~$56.7 million which was restricted/dedicated to support letters of credit and not available for borrowing).
25

During the ~~nine months~~quarter ended ~~September 30, 2003,~~March 31, 2004, the Operating Partnership generated ~~proceeds~~and/or obtained cash from various transactions, which included the following:

•                  Increased borrowings by the net amount of $410.0 million on its revolving credit facility;
•Disposed of ~~sixty-three~~twenty-two properties (including ~~two~~one Unconsolidated ~~Properties)~~Property) and received net proceeds of approximately ~~$759.0 million;~~
30

•                  ~~Issued $400.0 million of 5.20% fixed rate unsecured debt receiving net proceeds of $397.5 million;~~
•                  ~~Issued $150.0 million of 6.48% Series N Cumulative Redeemable Preference Units and received net proceeds of $145.3~~$296.3 million;
•                  Obtained ~~$48.7~~$16.5 million in new mortgage financing; and
•                  Issued approximately ~~2.7~~1.0 million OP Units and received net proceeds of ~~$56.2~~$24.5 million.

~~All of these~~During the quarter ended March 31, 2004, the above proceeds were ~~primarily~~ utilized to:

•                  ~~Purchase additional properties;~~Acquire the minority interests in fifteen previously unconsolidated development properties, two vacant land parcels and two other properties for $53.3 million in cash (prior to consideration of cash acquired of $4.2 million and the repayment of $339.7 million in mortgage debt prior to closing);
•                  ~~Repay~~Invest $406.1 million primarily in previously unconsolidated development projects prior to their consolidation (inclusive of $339.7 million in mortgage ~~indebtedness on selected properties;~~debt paid off prior to consolidation);
•                  ~~Repay the line of credit;~~
•                  ~~Repay public unsecured debt; and~~
•                  ~~Redeem the Series L Preference Units.~~
~~During the nine months ended September 30, 2003, the Operating Partnership:~~
•                  ~~Acquired eight~~Acquire five properties, and ~~two~~three additional units at an existing property, utilizing cash of ~~$308.7~~$188.0 million;
•                  ~~Repaid $235.2~~Pay OP Unit distributions of $129.2 million ($0.4325 per unit);
•                  Pay preference interest/unit distributions of $18.8 million; and
•                  Repay $86.8 million of mortgage ~~loans;~~loans.
•                  ~~Repaid $140.0 million on its line of credit;~~
•                  ~~Repaid $100.0 million of floating rate public notes at maturity;~~
•                  ~~Repaid $4.5 million of other unsecured notes; and~~
•~~Redeemed $100.0 million of 7.625% Series L Cumulative Redeemable Preference Units at liquidation value.~~
Depending on its analysis of market prices, economic conditions, and other opportunities for the investment of available capital, ~~the Company~~EQR may repurchase up to an additional $85.0 million of its Common Shares pursuant to its existing share buyback program authorized by ~~the~~its Board of Trustees. The Operating Partnership in turn would repurchase $85.0 million of its OP Units held by EQR. ~~The Company~~EQR did not repurchase any of its Common Shares during the ~~nine months~~quarter ended ~~September 30, 2003.~~March 31, 2004.
The Operating Partnership’s total debt summary and debt maturity schedule as of ~~September 30, 2003,~~March 31, 2004, are as follows:
3126

Debt Summary

As of 9/30/03
$ Millions (1)

For the Nine Months
Ended 9/30/03
Weighted
Average Rate (1)

$ Millions (1)

Weighted Average
Rate (1)

Secured

$
2,819

5.84
%

$
3,222

5.59
%
Unsecured

2,748

6.39
%

3,076

6.12
%
Total

$
5,567

6.11
%

$
6,298

5.86
%

Fixed Rate

$
4,835

6.64
%

$
4,965

6.71
%
Floating Rate

732

2.25
%

1,333

1.61
%
Total

$
5,567

6.11
%

$
6,298

5.86
%

Above Totals Include:

Tax Exempt:

Fixed

$
383

4.31
%

$
327

4.40
%
Floating

568

1.83
%

573

1.38
%
Total

$
951

3.02
%

$
900

2.47
%

Unsecured Revolving Credit Facility

$
—

1.85
%

$
420

1.51
%

(1) Net of the effect of any derivative instruments.

Debt Maturity Schedule as of ~~September 30, 2003~~March 31, 2004

Year

$ Millions

% of Total

$ Millions

% of Total

2003

$
121

2.2
%
2004

600

10.8
%

$
787

12.5
%
2005 (2)

594

10.7
%
2005 (1)(2)

1,065

16.9
%
2006 (3)

490

8.8
%

480

7.6
%
2007

297

5.3
%

355

5.6
%
2008

488

8.8
%

624

9.9
%
2009

247

4.4
%

291

4.6
%
2010

197

3.5
%

196

3.1
%
2011

689

12.4
%

704

11.2
%
2012+

1,844

33.1
%
2012

460

7.3
%
2013+

1,336

21.2
%
Total

$
5,567

100.0
%

$
6,298

100.0
%

~~(2)~~(1) Includes $300 million of unsecured debt with a final maturity of 2015 that is putable/callable in 2005.
(2) Includes $420 million outstanding on the Operating Partnership’s unsecured revolving credit facility.
(3) Includes $150 million of unsecured debt with a final maturity of 2026 that is putable in 2006.

On27

In June 5, 2003, the Operating Partnership filed and the SEC declared effective a Form S-3 registration statement ~~with the SEC~~ to register $2.0 billion of debt securities. ~~The SEC declared this registration statement effective on June 11, 2003.~~ In addition, the Operating Partnership carried over $280.0 million related to ~~the~~a prior registration ~~statement effective on September 8, 2000.~~statement. As of ~~September 30, 2003,~~April 28, 2004, $2.28 billion in debt securities remained available for issuance under this registration statement.
In February 1998, the Company filed and the SEC declared effective a Form S-3 registration statement to register $1.0 billion of equity securities. In addition, the Company carried over $272.4 million related to a prior registration statement. As of April 28, 2004, $956.5 million in equity securities remained available for issuance under this registration statement. Per the terms of ERPOP’s partnership agreement, EQR contributes the net proceeds of all equity offerings to the capital of the Operating Partnership in exchange for additional OP Units (on a one-for-one Common Share per OP Unit basis) or preference units (on a one-for-one preferred share per preference unit basis).
The Operating Partnership’s “Consolidated Debt-to-Total Market Capitalization Ratio” as of ~~September 30, 2003~~March 31, 2004 is presented in the following table. The Operating Partnership calculates the equity
32

component of its market capitalization as the sum of (i) the total outstanding OP Units at the equivalent market value of the closing price of EQR’s Common Shares on the New York Stock Exchange; (ii) the “OP Unit Equivalent” of all convertible preference interests/units; and (iii) the liquidation value of all perpetual preference interests/units outstanding.
Capitalization as of ~~September 30, 2003~~March 31, 2004
Total Debt

$
5,566,665,932

$
6,298,098,129

OP Units

297,291,121

301,193,888

OP Unit Equivalents (see below)

14,881,326

3,546,455

Total Outstanding at quarter-end

312,172,447

304,740,343

EQR Common Share Price at September 30, 2003

$
29.28

EQR Common Share Price at March 31, 2004

$
29.85

9,140,409,248

9,096,499,239

Perpetual Preference Units Liquidation Value

615,000,000

615,000,000

Perpetual Preference Interests Liquidation Value

211,500,000

211,500,000

Total Market Capitalization

$
15,533,575,180

$
16,221,097,368

Debt/Total Market Capitalization

36
%

39
%

Convertible Preference Units, Preference Interests
and Junior Preference Units
as of ~~September 30, 2003~~March 31, 2004

Units

Conversion
Ratio

OP Unit
Equivalents

Units

Conversion
Ratio

OP Unit
Equivalents

Preference Units:

Series E

2,488,290

1.1128

2,768,969

2,146,090

1.1128

2,388,169

Series G

1,264,692

8.5360

10,795,408

Series H

51,228

1.4480

74,178

43,928

1.4480

63,608

Preference Interests:

Series H

190,000

1.5108

287,052

190,000

1.5108

287,052

Series I

270,000

1.4542

392,634

270,000

1.4542

392,634

Series J

230,000

1.4108

324,484

230,000

1.4108

324,484

Junior Preference Units:

Series A

56,616

4.081600

231,084

20,333

4.081600

82,991

Series B

7,367

1.020408

7,517

7,367

1.020408

7,517

Total

14,881,326

3,546,455

28

The Operating Partnership’s policy is to maintain a ratio of consolidated debt-to-total market capitalization of less than 50%.

From ~~October~~April 1, ~~2003~~2004 through ~~November 4, 2003,~~April 28, 2004, the Operating Partnership:

•                  Acquired ~~two~~four properties consisting of ~~432~~814 units for approximately ~~$79.2~~$98.8 million;
•                  Assumed ~~$9.6~~$14.0 million of mortgage debt on ~~certain properties~~one property in connection with ~~their acquisitions and/or consolidation;~~its acquisition;
•                  Disposed of ~~four~~three properties and various individual condominium units consisting of ~~561~~839 units for approximately ~~$28.4~~$53.7 million;
•                  ~~Repaid $23.5~~Obtained $220.0 million ofin new mortgage debt;
•                  ~~Relinquished $7.0~~Repaid $82.5 million of mortgage ~~debt assumed by the purchaser on disposed properties;~~debt; and
•                  Repaid ~~$40.0~~$75.0 million of ~~6.875%~~7.5% fixed rate ~~public~~ notes at ~~maturity;~~maturity.
Capitalization of Fixed Assets and Improvements to Real Estate
Our policy with respect to capital expenditures is generally to capitalize expenditures that improve the value of the property or extend the useful life of the component asset of the property. We track improvements to real estate 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
•                  ~~Purchased~~blinds/shades.
All replacements are depreciated over a ~~third party’s $20.0~~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 and 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 equipment systems;
•                  interior and exterior structural repair and exterior painting and siding;
•                  major landscaping and grounds improvement; and
•                  vehicles and office and maintenance equipment.
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.
For the quarter ended March 31, 2004, our actual improvements to real estate totaled approximately $35.7 million. This includes the following detail (amounts in thousands except for unit and per unit amounts):
29

Capitalized Improvements to Real Estate
For the Quarter Ended March 31, 2004

Total Units
(1)

Replacements

Avg.
Per
Unit

Building
Improvements

Avg.
Per
Unit

Total

Avg.
Per
Unit

Established Properties (2)

161,070

$
12,308

$
76

$
16,584

$
103

$
28,892

$
179

New Acquisition Properties (3)

16,539

583

48

1,440

117

2,023

165

Other (4)

9,363

2,580

2,217

4,797

Total

186,972

$
15,471

$
20,241

$
35,712

(1)          Total units exclude 16,618 unconsolidated units.
(2)          Wholly Owned Properties acquired prior to January 1, 2002.
(3)           Wholly Owned Properties acquired during 2002, 2003 and 2004. Per unit amounts are based on a weighted average of 12,260 units.
(4)          Includes properties either Partially Owned or sold during the period, commercial space and, condominium conversions.
The Operating Partnership expects to fund approximately $125.0 million ~~participation interest in a floating rate construction loan secured by one~~for capital expenditures for replacements and building improvements for all consolidated properties for the remainder of 2004.
During the quarter ended March 31, 2004, the Operating Partnership’s ~~unconsolidated development properties.~~total non-real estate capital additions, such as computer software, computer equipment, and furniture and fixtures and leasehold improvements to the Operating Partnership’s property management offices and its corporate offices, was approximately $0.7 million. The Operating Partnership expects to fund approximately $5.8 million in total additions to non-real estate property for the remainder of 2004.
33Improvements to real estate and additions to non-real estate property were funded from net cash provided by operating activities.

~~Off-Balance Sheet Arrangements and Contractual Obligations~~Derivative Instruments

AsIn the normal course of ~~September 30, 2003,~~business, the Operating Partnership is exposed to the effect of interest rate changes. The Operating Partnership limits these risks by following established risk management policies and procedures including the use of derivatives to hedge interest rate risk on debt instruments.
The Operating Partnership has a policy of only entering into contracts with major financial institutions based upon their credit ratings and other factors. When viewed in conjunction with the underlying and offsetting exposure that the derivatives are designed to hedge, the Operating Partnership has 16not sustained a material loss from those instruments nor does it anticipate any material adverse effect on its net income or financial position in the future from the use of derivatives.
See Note 11 in the Notes to Consolidated Financial Statements for additional discussion of derivative instruments at March 31, 2004.
Other
Total distributions paid in April 2004 amounted to $142.9 million (excluding distributions on Partially Owned Properties), which included certain distributions declared during the first quarter ended March 31, 2004.
30

The Operating Partnership 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 revolving credit facility. The Operating Partnership considers its cash provided by operating activities to be adequate to meet operating requirements and payments of distributions. The Operating Partnership 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 Operating Partnership has certain unencumbered properties available to secure additional mortgage borrowings in the event that the public capital markets are unavailable or the cost of alternative sources of capital is too high. The fair value of and cash flow from these unencumbered properties are in excess of the requirements the Operating Partnership must maintain in order to comply with covenants under its unsecured notes and line of credit. Of the $12.0 billion in net investment in real estate on the Operating Partnership’s balance sheet at March 31, 2004, $7.2 billion (or 60.2%) was unencumbered.
The Operating Partnership has a revolving credit facility with potential borrowings of up to $700.0 million.    This facility matures in May 2005 and may, among other potential uses, be used to fund property acquisitions, costs for certain properties under development and short term liquidity requirements. As of April 28, 2004, $455.0 million was outstanding under this facility (and $63.7 million was restricted and dedicated to support letters of credit).
As of March 31, 2004, the Operating Partnership has seven projects with joint venture partners in various stages of development with estimated completion dates ranging through December 31, ~~2004.~~2005 which are consolidated as of March 31, 2004 as a result of FIN No. 46. The three development agreements currently in place have the following key terms:
•The first development 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 Operating Partnership based on such value. If the Operating Partnership chooses not to purchase the interest, it must agree to a sale of the project to an unrelated third party at such value. The Operating Partnership’s 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.   In connection with this development partner, the Operating Partnership has an obligation to provide up to $40.0 million in credit enhancements to guarantee a portion of the third party construction financing. As of ~~November 4, 2003,~~April 28, 2004, the Operating Partnership had set-aside ~~$20.0~~$10.0 million towards this credit enhancement. The Operating Partnership would be required to perform under this agreement only if there was a material default under a third party construction mortgage agreement. This agreement expires no later than December 31, 2018. Notwithstanding the termination of the agreement, the Operating Partnership shall have recourse against its development partner for any losses incurred.
•The second development partner has the right, at any time following completion of a project, to require the Operating Partnership to purchase the partners’ interest in that project at a mutually agreeable price. If the Operating Partnership and the partner are unable to agree on a price, both parties will obtain appraisals. If the appraised values vary by more than 10%, both the Operating Partnership and its partner will agree on a third appraiser to determine which original appraisal is closest to its determination of value. The Operating Partnership may elect at that time not to purchase the property and instead, authorize 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, the Operating Partnership must purchase, at the agreed-upon price, any projects remaining unsold.
31

•                  The third development partner has the exclusive right for six months following stabilization, ~~(generally~~as defined, ~~as having achieved 90% occupancy for three consecutive months following the substantial completion of a project)~~ to market a project for sale. Thereafter, either the Operating Partnership or its development partner may market a project for sale. If the Operating Partnership’s development partner proposes the sale, the Operating Partnership may elect to purchase the project at the price proposed by its partner or defer the sale until two independent appraisers appraise the project. If the two appraised values vary by more than 5%, a third appraiser will be chosen to determine the fair market value of the property. Once a value has been determined, the Operating Partnership may elect to purchase the property or authorize its development partner to sell the project at the agreed-upon value.

Off-Balance Sheet Arrangements and Contractual Obligations
The Operating Partnership has co-invested in various properties that are unconsolidated and accounted for under the equity method of accounting. Management does not believe these investments have a materially different impact upon the Operating Partnership’s liquidity, capital resources, credit or market risk than its property management and ownership activities. The nature and business purpose of these ventures are as follows:
•                  Institutional Ventures – During 2000 and 2001, the Operating Partnership entered into ventures with an unaffiliated partner.   At the respective closing dates, the Operating Partnership sold and/or contributed 45 properties containing 10,846 units to these ventures and retained a 25% ownership interest in the ventures. The Operating Partnership’s joint venture partner contributed cash equal to 75% of the agreed-upon equity value of the properties comprising the ventures, which was then distributed to the Operating Partnership. The Operating Partnership’s strategy with respect to these ventures was to reduce its concentration of properties in a variety of markets.
•                  Lexford/Other – As of March 31, 2004, the Operating Partnership has ownership interests in seventeen properties containing 2,015 units acquired in a prior merger. The current weighted average ownership percentage is 12.7%. The Operating Partnership’s strategy with respect to these interests is either to acquire a majority ownership or sell the Operating Partnership’s interest.

In connection with one of its mergers, the Operating Partnership ~~executed~~provided a guaranty of a credit enhancement agreement with respect to certain tax-exempt bonds issued to finance certain public improvements at a multifamily development project. The Operating Partnership has the obligation to ~~facilitate credit under~~provide this ~~agreement~~guaranty for a period of eight years from the consummation of the merger or through May 2005. The Operating Partnership would be required to perform under this ~~agreement~~guaranty only if there was a ~~material default with respect to~~draw on the ~~tax-exempt bonds. If there should be any default in connection with this agreement,~~letter of credit issued by the credit enhancement party. The counterparty has also indemnified the Operating Partnership ~~has the right, among other remedies, to select an alternate interest rate on the bonds.~~for any losses suffered. As of ~~November 4, 2003,~~April 28, 2004, this ~~enhancement~~guaranty was still in effect at a commitment amount of $12.7 million and no outstanding liability.

See also ~~Note~~Notes 2 and ~~Note 7 and the third paragraph of Note 15~~6 in the Notes to Consolidated

Financial Statements for additional discussion regarding the Operating Partnership’s investments in unconsolidated entities.

~~Capitalization of Fixed Assets and Improvements to Real Estate~~

Our policy with respect to capital expenditures is generally to capitalize expenditures that improve the value of the property or extend the useful life of the component asset of the property. We track improvements to real estate 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.~~

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 and 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 equipment systems;~~

•~~interior and exterior structural repair and exterior painting and siding;~~

•~~major landscaping and grounds improvement; and~~

•~~vehicles and office and maintenance equipment.~~

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.

For the nine months ended September 30, 2003, our actual improvements to real estate totaled approximately $128.5 million. This includes the following detail (amounts in thousands except for unit and per unit amounts):

~~Capitalized Improvements to Real Estate~~
~~For the Nine Months Ended September 30, 2003~~

Total Units
(1)

Replacements

Avg.
Per
Unit

Building
Improvements

Avg.
Per
Unit

Total

Avg.
Per
Unit

Established Properties (2)

169,402

$
44,960

$
265

$
53,768

$
317

$
98,728

$
582

New Acquisition Properties (3)

11,447

1,786

180

3,520

354

5,306

534

Other (4)

8,245

8,833

15,612

24,445

Total

189,094

$
55,579

$
72,900

$
128,479

~~(1)~~ ~~Total units exclude 23,053 unconsolidated units.~~

~~(2)~~ ~~Wholly Owned Properties acquired prior to January 1, 2001.~~

~~(3)~~ ~~Wholly Owned Properties acquired during 2001, 2002 and 2003. Per unit amounts are based on a weighted average of 9,931 units.~~

~~(4)~~ Includes properties either Partially Owned or sold during the period, commercial space, condominium conversions and $3.6 million included in building improvements spent on five specific assets related to major renovations and repositioning of these assets.

~~The Operating Partnership expects to fund approximately $30.0~~~~million for capital expenditures for replacements and building improvements for all consolidated properties for the remainder of 2003.~~

During the nine months ended September 30, 2003, the Operating Partnership’s total non-real estate capital additions, such as computer software, computer equipment, and furniture and fixtures and leasehold improvements to the Operating Partnership’s property management offices and its corporate offices, was approximately $2.3~~million. The Operating Partnership expects to fund approximately $1.6 million in total additions to non-real estate property for the remainder of 2003.~~

~~Improvements to real estate and additions to non-real estate property were funded from net cash provided by operating activities.~~

~~Derivative Instruments~~

In the normal course of business, the Operating Partnership is exposed to the effect of interest rate changes. The Operating Partnership limits these risks by following established risk management policies and procedures including the use of derivatives to hedge interest rate risk on debt instruments.

The Operating ~~Partnership has a policy of only entering into contracts with major financial institutions based upon their credit ratings~~Partnership’s contractual obligations for the next five years and ~~other factors. When viewed in conjunction with the underlying and offsetting exposure that the derivatives are designed to hedge, the Operating Partnership has~~thereafter have not ~~sustained a material loss from those instruments nor does it anticipate any material adverse effect on its net income or financial position in the future~~changed materially from the ~~use~~amounts and disclosures included in its annual report on Form 10-K, other than as it relates to scheduled debt maturities due to the assumption or consolidation of ~~derivatives.~~

mortgages on various completed and uncompleted development properties. See the updated debt maturity schedule included in Liquidity and Capital Resources and Note 124 in the Notes to Consolidated Financial Statements for ~~additional discussion of derivative instruments at September 30, 2003.~~

~~Other~~

Total distributions paid in October 2003 amounted to $147.8 million (excluding distributions on Partially Owned Properties), which included certain distributions declared during the third quarter ended September 30, 2003.

The Operating Partnership 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 Operating Partnership considers its cash provided by operating activities to be adequate to meet operating requirements and payments of distributions. The Operating Partnership 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 Operating Partnership has certain unencumbered properties available to secure additional mortgage borrowings in the event that the public capital markets are unavailable or the cost of alternative sources of capital is too high. The fair value of and cash flow from these unencumbered properties are in excess of the requirements the Operating Partnership must maintain in order to comply with covenants under its unsecured notes and line of credit.further discussion.

3632

~~The Operating Partnership has a revolving credit facility with potential borrowings of up to $700.0 million.~~ This facility matures in May 2005 and may, among other potential uses, be used to fund property acquisitions, costs for certain properties under development and short term liquidity requirements. As of November 4, 2003, no~~amounts were outstanding under this facility.~~

Critical Accounting Policies and Estimates

The Operating Partnership has identified six significant accounting policies as critical accounting policies. These critical accounting policies are those that have the most impact on the reporting of our financial condition and those requiring significant judgments and estimates. With respect to these critical accounting policies, management believes that the application of judgments and assessments is consistently applied and produces financial information that fairly presents the results of operations for all periods presented. The six critical accounting policies are:

Impairment of Long-Lived Assets, Including Goodwill

The Operating Partnership periodically evaluates its long-lived assets, including its investments in real estate and goodwill, for ~~impairment indicators.~~indicators of permanent impairment. The judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions, expected holding period of each asset and legal and environmental concerns. Future events could occur which would cause the Operating Partnership to conclude that impairment indicators exist and an impairment loss is warranted.

Depreciation of Investment in Real Estate

The Operating Partnership 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.

Cost Capitalization

See the Capitalization of Fixed Assets and Improvements to Real Estate section for discussion of the policy with respect to capitalization vs. expensing of fixed asset/repair and maintenance costs. In addition, the Operating Partnership capitalizes the payroll and associated costs of employees directly responsible for and who spend all of their time on the supervision of major capital projects. These costs are reflected on the balance sheet as an increase to depreciable property.

The Operating Partnership follows the guidance in SFAS No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects, for all development projects and uses its professional judgment in determining whether such costs meet the criteria for capitalization or must be expensed as incurred. The Operating Partnership capitalizes interest, real estate taxes and insurance and payroll and associated costs for those individuals directly responsible for and who spend all of their time on development activities. The Operating Partnership expenses as incurred all payroll costs of employees working directly at our properties, except for costs that are incurred during the initial lease-up phase on a development project. An allocated portion of payroll costs is capitalized based upon the occupancy of the project until ~~stabilized occupancy is achieved. Stabilized occupancy is always deemed to have occurred no later than one year from cessation of major development activities.~~the project becomes substantially complete and ready for its intended use. The incremental payroll and associated costs are capitalized to the projects under development based upon the effort directly identifiable with such projects. These costs are reflected on the balance sheet as ~~either~~ construction in ~~progress or a separate component of investments in unconsolidated entities.~~progress. The Operating Partnership ceases the capitalization of such costs as the property becomes substantially complete and ready for its intended use.

Fair Value of Financial Instruments, Including Derivative Instruments

The valuation of financial instruments under SFAS No. 107 and SFAS No. 133 and its amendments (SFAS Nos. 137/138/149) requires the Operating Partnership to make estimates and judgments that affect the fair value of the instruments. The Operating Partnership, 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 Operating Partnership bases its estimates on other factors relevant to the financial instruments.

Revenue Recognition

Rental income attributable to leases is recorded when due from residents and is recognized monthly as it is earned, which is not materially different than on a straight-line basis. Leases entered into between a resident and a property for the rental of an apartment unit are generally year-to-year, renewable upon consent of both parties on an annual or monthly basis. Interest income is recorded on an accrual basis.

Stock-Based Compensation

~~Prior to 2003, the Company had chosen to account for its stock-based compensation in accordance with APB No. 25,~~ ~~Accounting for Stock Issued to Employees~~,~~which resulted in no compensation expense for options issued with an exercise price equal to or exceeding the market value of EQR’s Common Shares on the date of grant (intrinsic method).~~ The Company has elected to expense its stock-based compensation in accordance with SFAS No. 123 and its amendment (SFAS No. 148), Accounting for Stock Based Compensation, effective in the first quarter of 2003, which resulted in compensation expense being recorded based on the fair value of the stock compensation ~~granted or modified.~~granted. Any Common Shares issued pursuant to EQR’s incentive equity compensation and employee share purchase plans will result in the Operating Partnership issuing OP Units to EQR on a one-for-one basis, with the Operating Partnership receiving the net cash proceeds of such issuances.

Funds From Operations

For the ~~nine months~~quarter ended ~~September 30, 2003,~~March 31, 2004, Funds From Operations (“FFO”) available to OP Units decreased ~~$39.8~~$12.5 million, or ~~7.3%, as compared to the nine months ended September 30, 2002.~~

~~For the quarter ended September 30, 2003, FFO available to OP Units increased $4.4 million, or 2.7%~~7.4%, as compared to the quarter ended ~~September 30, 2002.~~March 31, 2003.

The following is a reconciliation of net income to FFO available to OP Units for the ~~nine months and~~ quarters ended ~~September 30, 2003~~March 31, 2004 and ~~2002:~~2003:

3834

��

Funds From Operations
(Amounts in thousands)
(Unaudited)

	Nine Months Ended September 30,						Quarter Ended September 30,						Quarter Ended March 31,
	2003			2002			2003			2002			2004			2003
Net income	$	436,445		$	321,903		$	146,426		$	93,944		$	124,705		$	144,457
Adjustments:
Depreciation	341,723			322,615			115,346			109,331			115,610			105,778
Depreciation – Non-real estate additions	(6,524		)	(6,823		)	(1,926		)	(2,250		)	(1,300		)	(2,275		)
Depreciation – Partially Owned Properties	(6,240		)	(5,710		)	(2,124		)	(1,959		)
Depreciation – Unconsolidated Properties	15,618			14,468			5,468			5,563
Net (gain) loss on sales of unconsolidated entities	(4,673		)	626			2			5,872
Discontinued Operations:
Depreciation– Partially Owned Properties													(2,096		)	(2,039		)
Depreciation– Unconsolidated Properties													6,763			5,195
Net (gain) on sales of unconsolidated entities													(2,434		)	(1,212		)
Discontinued operations:
Depreciation	13,175			30,591			2,160			9,029			1,575			13,140
Net gain on sales of depreciable property	(211,488		)	(60,011		)	(73,383		)	(32,435		)
Net (gain) on sales of discontinued operations													(71,499		)	(70,672		)
Net incremental gain on sales of condominium units													3,524			443
Net gain on sales of vacant land													15			—

FFO (1)(2)	578,036			617,659			191,969			187,095			174,863			192,815

Preferred distributions	(73,115		)	(72,969		)	(24,698		)	(24,188		)	(18,756		)	(24,180		)

FFO available to OP Units	$	504,921		$	544,690		$	167,271		$	162,907		$	156,107		$	168,635

(1) The National Association of Real Estate Investment Trusts (“NAREIT”) defines funds from operations (“FFO”) (April 2002 White Paper) as net income (computed in accordance with accounting principles generally accepted in the United States), excluding gains (or losses) from sales of depreciable property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis. The April 2002 White Paper states that gain or loss on sales of property is excluded from FFO for previously depreciated operating properties only. Once the Operating Partnership commences the conversion of units to condominiums, it simultaneously discontinues depreciation of such property. Accordingly, the Operating Partnership included in FFO its incremental gains or losses from the sale of condominium units to third parties, which represented net gains of $7,487 and $1,198 for the nine months ended September 30, 2003 and 2002, respectively, and $4,600 and $328 for the quarters ended September 30, 2003 and 2002, respectively. Effective January 1, 2003, the Operating Partnership no longer adds back impairment losses when computing FFO in accordance with NAREIT’s definition. As a result, FFO for the nine months and quarter ended September 30, 2002 have been reduced by $17,994 and $17,413, respectively, to conform to the current year presentation.

(2) The Operating Partnership believes that FFO is helpful to investors as a supplemental measure of the operating performance of a real estate company because it provides investors an understanding of the ability of the Operating Partnership to incur and service debt and to make capital expenditures. FFO in and of itself does not represent net income or net cash flows from operating activities in accordance with GAAP. Therefore, FFO should not be exclusively considered as an alternative to net income or to net cash flows from operating activities as determined by GAAP or as a measure of liquidity. The Operating Partnership’s calculation of FFO may differ from other real estate companies due to, among other items, variations in cost capitalization policies for capital expenditures and, accordingly, may not be comparable to such other real estate companies.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Operating Partnership’s market risk has not changed materially from the amounts and information reported in Item 7A, Quantitative and Qualitative Disclosures About Market Risk, to the Operating Partnership’s Form 10-K for the year ended December 31, ~~2002.~~2003. See also Note ~~12 to~~11 in the Notes to Consolidated Financial Statements for additional discussion of derivative instruments.

3935

Item 4. Disclosure Controls and Procedures

Effective as of ~~September 30, 2003,~~March 31, 2004, the Operating Partnership carried out an evaluation, under the supervision and with the participation of the Operating Partnership’s management, including the Chief Executive Officer and Chief Financial Officer of EQR, of the effectiveness of the design and operation of the Operating Partnership’s disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective in timely alerting them to material information. During the fiscal quarter ended ~~September 30, 2003,~~March 31, 2004, there were no changes to the internal controls over financial reporting of the Operating Partnership identified in connection with the Operating Partnership’s evaluation or otherwise that has materially affected, or is reasonably likely to materially affect, the Operating Partnership’s internal controls over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

~~Except as disclosed above, there~~There have been no new or significant developments related to the legal proceedings that were discussed in Part I, Item III of the Operating Partnership’s Form 10-K for the year ended December 31, ~~2002.~~2003.

Item 6. Exhibits and Reports on Form 8-K

(A) Exhibits:

12 Computation of Ratio of Earnings to Combined Fixed Charges.

31.1 Certification of Bruce W. Duncan, Chief Executive Officer of ~~EQR.~~Registrant’s General Partner.

31.2 Certification of David J. Neithercut, Chief Financial Officer of ~~EQR.~~Registrant’s General Partner.

32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Bruce W. Duncan, Chief Executive Officer of Registrant’s General Partner.

32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of David J. Neithercut, Chief Financial Officer of Registrant’s General Partner.

(B) Reports Filed on Form 8-K:

None.

4136

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.

ERP OPERATING LIMITED PARTNERSHIP

By:

EQUITY RESIDENTIAL,

ITS GENERAL PARTNER

Date:

~~November 13, 2003~~May 7, 2004

By:

/s/

David J. Neithercut

Executive Vice President, ~~and~~
~~Chief Financial Officer~~

Corporate Strategy and

Chief Financial Officer

Date:

~~November 13, 2003~~May 7, 2004

By:

/s/

Michael J. McHugh

Executive Vice President,

Chief Accounting Officer
~~and Treasurer~~

and Treasurer

EXHIBIT INDEX

Exhibit		Document

12		Computation of Ratio of Earnings to Combined Fixed Charges.

31.1		Certification of Bruce W. Duncan, Chief Executive Officer of ~~EQR.~~Registrant’s General Partner.

31.2		Certification of David J. Neithercut, Chief Financial Officer of ~~EQR.~~Registrant’s General Partner.

32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Bruce W. Duncan, Chief Executive Officer of Registrant’s General Partner.

32.2		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of David J. Neithercut, Chief Financial Officer of Registrant’s General Partner.

	Annual Dividend Rate per Unit (1)			Amounts in thousands
				September 30, 2003		December 31, 2002
Preference Units:

9 1/8% Series B Cumulative Redeemable Preference Units; liquidation value $250 per unit; 500,000 units issued and outstanding at September 30, 2003 and December 31, 2002	$	22.81252		$	125,000	$	125,000

9 1/8% Series C Cumulative Redeemable Preference Units; liquidation value $250 per unit; 460,000 units issued and outstanding at September 30, 2003 and December 31, 2002	$	22.81252		115,000		115,000

8.60% Series D Cumulative Redeemable Preference Units; liquidation value $250 per unit; 700,000 units issued and outstanding at September 30, 2003 and December 31, 2002	$	21.50		175,000		175,000

7.00% Series E Cumulative Convertible Preference Units; liquidation value $25 per unit; 2,488,290 and 2,548,114 units issued and outstanding at September 30, 2003 and December 31, 2002, respectively	$	1.75		62,207		63,703

7 1/4% Series G Convertible Cumulative Preference Units; liquidation value $250 per unit; 1,264,692 units issued and outstanding at September 30, 2003 and December 31, 2002	$	18.125		316,173		316,173

7.00% Series H Cumulative Convertible Preference Units; liquidation value $25 per unit; 51,228 units issued and outstanding at September 30, 2003 and December 31, 2002	$	1.75		1,281		1,281

8.29% Series K Cumulative Redeemable Preference Units; liquidation value $50 per unit; 1,000,000 units issued and outstanding at September 30, 2003 and December 31, 2002	$	4.145		50,000		50,000

7.625% Series L Cumulative Redeemable Preference Units; liquidation value $25 per unit; 0 and 4,000,000 units issued and outstanding at September 30, 2003 and December 31, 2002, respectively	(2		)	—		100,000

6.48% Series N Cumulative Redeemable Preference Units; liquidation value $250 per unit; 600,000 and 0 units issued and outstanding at September 30, 2003 and December 31, 2002, respectively (3)	$	16.20		150,000		—

				$	994,661	$	946,157

Date Acquired	Property	Location	Number of Units	Acquisition Price (in thousands)
01/30/03	The Reserve at Eisenhower	Alexandria, VA	226	$	41,000
02/14/03	Artisan Square	Northridge, CA	140	27,466
03/05/03	LaSalle (1)	Beaverton, OR	554	43,000
05/01/03	Gateway at Malden Center (2)	Malden, MA	203	34,900
06/17/03	Mill Creek	Milpitas, CA	516	70,000
06/30/03	Carlyle Mill	Alexandria, VA	317	61,200
08/01/03	Gatewood	Pleasanton, CA	200	27,000
08/19/03	The Oaks of Santa Clarita	Santa Clarita, CA	520	85,000
Various	Rivers Bend (condo units)	Windsor, CT	2	125
			2,678	$	389,691

Date Disposed	Property	Location	Number of Units	Disposition Price
				(in thousands)
01/14/03	Strawberry Place	Plant City, FL	55	$	1,400
01/14/03	Smoketree Polo Club	Indio, CA	288	18,900
01/29/03	Amberwood I	Lake City, FL	50	1,175
01/30/03	Emerald Place	Bermuda Dunes, CA	240	20,125
01/30/03	Rolido Parque	Houston, TX	369	14,660
02/27/03	Fox Hill Commons	Vernon, CT	74	4,700
02/27/03	The Landings	Winter Haven, FL	60	1,475
02/27/03	Morningside	Titusville, FL	183	3,980
03/04/03	Colony Woods	Birmingham, AL	414	25,000
03/04/03	Hearthstone	San Antonio, TX	252	7,700
03/04/03	Northgate Village	San Antonio, TX	264	10,150
03/19/03	Lincoln Green I, II & III	San Antonio, TX	680	24,900
03/20/03	Meadows on the Lake	Birmingham, AL	200	10,900
03/20/03	Meadows in the Park	Birmingham, AL	200	10,900
03/20/03	Shoal Run	Birmingham, AL	276	14,350
03/31/03	Colony Place	Fort Myers, FL	300	20,600
04/08/03	Mallgate (1)	Louisville, KY	540	15,500
04/15/03	Summit Chase	Coral Springs, FL	140	8,875
04/16/03	Bayside	Sebring, FL	59	885
04/30/03	Essex Place II (Vacant Land)	Tampa, FL	—	575
05/08/03	Pueblo Villas	Albuquerque, NM	232	9,250
05/14/03	Emerald Bay	Winter Park, FL	432	17,200
05/16/03	Meadowood	Flatwoods, KY	52	975
05/29/03	Spicewood Springs	Jacksonville, FL	512	28,000
05/30/03	Princeton Square	Jacksonville, FL	288	16,750
05/30/03	Boulder Creek	Wilsonville, OR	296	16,700
05/30/03	Bridge Creek	Wilsonville, OR	315	18,100
05/30/03	Settlers Point/Brookfield	Salt Lake City, UT	416	21,500
05/30/03	Ridgewood (2)	Russellville, KY	52	—
06/04/03	Lake Point	Charlotte, NC	296	12,401
06/05/03	Clearlake Pines II	Cocoa, FL	52	1,392
06/05/03	Sky Pines I & II	Orlando, FL	140	3,694
06/05/03	Brandywine East	Winter Haven, FL	38	884
06/05/03	Woodland I & II	Orlando, FL	169	5,175
06/12/03	Parkville	Parkersburg, WV	49	1,063
06/12/03	Cedarwood I	Belpre, OH	44	889
06/24/03	Greenwood Village	Tempe, AZ	270	14,600
06/25/03	Woodbine	Portsmouth, OH	41	660
06/26/03	Laurel Gardens	Coral Springs, FL	384	34,550
06/27/03	Crystal Creek	Phoenix, AZ	273	12,775
06/30/03	Harbor Pointe	Milwaukee, WI	595	27,800

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

Total projects	45			12			16			22			95		(2)

Total units	10,846			3,812			4,336			2,616			21,610		(2)

Operating Partnership’s percentage share of outstanding debt	25.0		%	100.0		%	100.0		%	11.0		%

Operating Partnership’s share of outstanding debt (4)	$	121,200		$	331,063		$	559,201	(3)	$	5,089		$	1,016,553

	Properties		Units		Purchase / Sale Price $ Millions
At December 31, 2001	1,076		224,801
Q1/Q2/Q3 2002 Acquisitions	10		3,053		$	245.4
Ft. Lewis Military Housing	1		3,652
Q1/Q2/Q3 2002 Dispositions	(35	)	(6,046	)	$	338.9
Q1/Q2/Q3 2002 Completed Developments	7		1,966
At September 30, 2002	1,059		227,426
Q4 2002 Acquisitions	2		581		$	44.5
Q4 2002 Dispositions	(23	)	(4,667	)	$	207.3
Q4 2002 Completed Developments	1		235
Q4 2002 Unit Configuration Changes	—		16
At December 31, 2002	1,039		223,591
Q1/Q2/Q3 2003 Acquisitions	8		2,678		$	389.7
Q1/Q2/Q3 2003 Dispositions	(63	)	(15,996	)	$	803.2
Q1/Q2/Q3 2003 Completed Developments	6		1,745
Q1/Q2/Q3 2003 Unit Configuration Changes	—		129
At September 30, 2003	990		212,147

	Properties		Units		Purchase / Sale Price $Millions
At December 31, 2002	1,039		223,591
Q1 2003 Acquisitions	3		920		$	111.5
Q1 2003 Dispositions	(17	)	(4,000	)	$	195.0
Q1 2003 Completed Developments	2		738
At March 31, 2003	1,027		221,249
Q2/Q3/Q4 2003 Acquisitions	14		4,280		$	572.6
Q2/Q3/Q4 2003 Dispositions	(79	)	(19,486	)	$	1,022.9
Q2/Q3/Q4 2003 Completed Developments	6		1,374
Q2/Q3/Q4 2003 Unit Configuration Changes	—		89
At December 31, 2003	968		207,506				��
Q1 2004 Acquisitions	5		1,671		$	224.4
Q1 2004 Dispositions	(22	)	(5,990	)	$	301.3
Q1 2004 Completed Developments	1		403
At March 31, 2004	952		203,590

Description	Description	Revenues			Expenses			NOI			Revenues			Expenses			NOI

YTD 2003		$	1,279.4		$	508.7		$	770.7
YTD 2002		$	1,316.2		$	482.6		$	833.6
Q1 2004											$	415.9		$	168.7		$	247.2
Q1 2003											$	416.9		$	163.8		$	253.1
Change		$	(36.8	)	$	26.1		$	(62.9	)	$	(1.0	)	$	4.9		$	(5.9	)
Change		(2.8		)%	5.4		%	(7.5		)%	(0.2		)%	3.0		%	(2.3		)%

~~YTD 2003~~Q1 2004	92.9	~~93.0~~	%
~~YTD 2002~~Q1 2003	92.6	~~94.0~~	%
Change	0.3	~~(1.0~~	)%

~~Physical Occupancy~~		~~93.0%~~
~~Revenue Change~~		~~(2.3%)~~
~~Expense Change~~		~~5.2%~~
~~NOI Change~~		~~(6.7%)~~
~~Dispositions~~		~~$1.0 to $1.2 billion~~

Physical Occupancy		93.0%
Revenue Change		(0.75%) to 1.50%
Expense Change		3.0% to 4.0%
NOI Change		(4.0%) to 0.5%
Acquisitions		$ 800 million
Dispositions		$~~800.0~~ 800 million

~~Q3 2003~~	~~93.5~~	%
~~Q3 2002~~	~~93.9~~	%
~~Change~~	~~(0.4~~	)%

	As of 9/30/03 $ Millions (1)		For the Nine Months Ended 9/30/03 Weighted Average Rate (1)		$ Millions (1)		Weighted Average Rate (1)
Secured	$	2,819	5.84	%	$	3,222	5.59	%
Unsecured	2,748		6.39	%	3,076		6.12	%
Total	$	5,567	6.11	%	$	6,298	5.86	%

Fixed Rate	$	4,835	6.64	%	$	4,965	6.71	%
Floating Rate	732		2.25	%	1,333		1.61	%
Total	$	5,567	6.11	%	$	6,298	5.86	%

Above Totals Include:
Tax Exempt:
Fixed	$	383	4.31	%	$	327	4.40	%
Floating	568		1.83	%	573		1.38	%
Total	$	951	3.02	%	$	900	2.47	%

Unsecured Revolving Credit Facility	$	—	1.85	%	$	420	1.51	%

Year	$ Millions		% of Total		$ Millions		% of Total
2003	$	121	2.2	%
2004	600		10.8	%	$	787	12.5	%
2005 (2)	594		10.7	%
2005 (1)(2)					1,065		16.9	%
2006 (3)	490		8.8	%	480		7.6	%
2007	297		5.3	%	355		5.6	%
2008	488		8.8	%	624		9.9	%
2009	247		4.4	%	291		4.6	%
2010	197		3.5	%	196		3.1	%
2011	689		12.4	%	704		11.2	%
2012+	1,844		33.1	%
2012					460		7.3	%
2013+					1,336		21.2	%
Total	$	5,567	100.0	%	$	6,298	100.0	%

Total Debt			$	5,566,665,932				$	6,298,098,129

OP Units	297,291,121					301,193,888
OP Unit Equivalents (see below)	14,881,326					3,546,455
Total Outstanding at quarter-end	312,172,447					304,740,343
EQR Common Share Price at September 30, 2003	$	29.28
EQR Common Share Price at March 31, 2004						$	29.85
			9,140,409,248					9,096,499,239
Perpetual Preference Units Liquidation Value			615,000,000					615,000,000
Perpetual Preference Interests Liquidation Value			211,500,000					211,500,000
Total Market Capitalization			$	15,533,575,180				$	16,221,097,368

Debt/Total Market Capitalization			36		%			39		%

	Units	Conversion Ratio	OP Unit Equivalents	Units	Conversion Ratio	OP Unit Equivalents
Preference Units:
Series E	2,488,290	1.1128	2,768,969	2,146,090	1.1128	2,388,169
Series G	1,264,692	8.5360	10,795,408
Series H	51,228	1.4480	74,178	43,928	1.4480	63,608
Preference Interests:
Series H	190,000	1.5108	287,052	190,000	1.5108	287,052
Series I	270,000	1.4542	392,634	270,000	1.4542	392,634
Series J	230,000	1.4108	324,484	230,000	1.4108	324,484
Junior Preference Units:
Series A	56,616	4.081600	231,084	20,333	4.081600	82,991
Series B	7,367	1.020408	7,517	7,367	1.020408	7,517

Total			14,881,326			3,546,455

	Total Units (1)	Replacements		Avg. Per Unit		Building Improvements		Avg. Per Unit		Total		Avg. Per Unit

Established Properties (2)	161,070	$	12,308	$	76	$	16,584	$	103	$	28,892	$	179
New Acquisition Properties (3)	16,539	583		48		1,440		117		2,023		165
Other (4)	9,363	2,580				2,217				4,797
Total	186,972	$	15,471			$	20,241			$	35,712

The following table presents the changes in the Operating Partnership’s issued and outstanding units of limited partnership interest (“OP Units”)Units for the nine monthsquarter ended September 30, 2003:March 31, 2004:

EXHIBIT INDEX

The following table presents the changes in the Operating Partnership’s issued and outstanding units of limited partnership interest (“OP Units”)Units for the nine monthsquarter ended September 30, 2003:
March 31, 2004: