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 ~~JUNE~~SEPTEMBER 30, 2005

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~~

(312) 474-1300

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file 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

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

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

June 30,
2005

December 31,
2004

September 30,
2005

December 31,
2004

ASSETS

Investment in real estate

Land

$
2,222,255

$
2,183,818

$
2,283,157

$
2,183,818

Depreciable property

12,565,622

12,350,900

12,670,716

12,350,900

Construction in progress (including land)

403,068

317,903

330,965

317,903

Investment in real estate

15,190,945

14,852,621

15,284,838

14,852,621

Accumulated depreciation

(2,765,550
)
(2,599,827
)

(2,805,552
)
(2,599,827
)
Investment in real estate, net

12,425,395

12,252,794

12,479,286

12,252,794

Cash and cash equivalents

102,752

83,505

306,933

83,505

Investments in unconsolidated entities

10,658

11,461

11,390

11,461

Rents receivable

942

1,681

940

1,681

Deposits – restricted

172,106

82,194

305,366

82,194

Escrow deposits – mortgage

34,586

35,800

36,389

35,800

Deferred financing costs, net

38,242

34,986

40,041

34,986

Goodwill, net

30,000

30,000

30,000

30,000

Other assets

93,355

112,854

101,484

112,854

Total assets

$
12,908,036

$
12,645,275

$
13,311,829

$
12,645,275

LIABILITIES AND PARTNERS’ CAPITAL

Liabilities:

Mortgage notes payable

$
3,203,644

$
3,166,739

$
3,323,932

$
3,166,739

Notes, net

3,021,015

3,143,067

3,443,588

3,143,067

Line of credit

428,000

150,000

Lines of credit

—

150,000

Accounts payable and accrued expenses

104,751

87,422

124,908

87,422

Accrued interest payable

71,251

70,411

64,201

70,411

Rents received in advance and other liabilities

272,284

227,588

490,894

227,588

Security deposits

49,995

49,501

49,977

49,501

Distributions payable

143,296

142,437

143,572

142,437

Total liabilities

7,294,236

7,037,165

7,641,072

7,037,165

Commitments and contingencies

Minority Interests – Partially Owned Properties

7,189

9,557

10,716

9,557

Partners’ capital:

Preference Units

632,893

636,216

504,741

636,216

Preference Interests

60,000

206,000

60,000

206,000

Junior Preference Units

184

184

184

184

General Partner

4,611,865

4,457,700

4,772,642

4,457,700

Limited Partners

333,545

319,841

340,037

319,841

Deferred compensation

—

(18
)

—

(18
)
Accumulated other comprehensive loss

(31,876
)
(21,370
)

(17,563
)
(21,370
)
Total partners’ capital

5,606,611

5,598,553

5,660,041

5,598,553

Total liabilities and partners’ capital

$
12,908,036

$
12,645,275

$
13,311,829

$
12,645,275

See accompanying notes

2

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

Six Months Ended June 30,

Quarter Ended June 30,

Nine Months Ended September 30,

Quarter Ended September 30,

2005

2004

2005

2004

2005

2004

2005

2004

REVENUES

Rental income

$
975,593

$
885,339

$
496,249

$
456,489

$
1,453,829

$
1,316,790

$
501,776

$
454,128

Fee and asset management

5,826

6,860

3,254

3,703

8,456

9,268

2,630

2,436

Total revenues

981,419

892,199

499,503

460,192

1,462,285

1,326,058

504,406

456,564

EXPENSES

Property and maintenance

273,341

240,866

139,646

124,728

411,187

362,372

146,341

129,612

Real estate taxes and insurance

105,589

99,538

52,822

50,612

162,711

159,407

59,701

62,480

Property management

41,457

38,294

20,482

20,517

63,254

56,850

21,924

18,865

Fee and asset management

4,930

4,383

2,411

2,333

7,518

6,500

2,595

2,144

Depreciation

254,450

223,927

128,957

115,876

378,123

334,352

129,701

116,170

General and administrative

31,271

22,546

14,211

12,876

45,012

34,778

14,243

11,961

Total expenses

711,038

629,554

358,529

326,942

1,067,805

954,259

374,505

341,232

Operating income

270,381

262,645

140,974

133,250

394,480

371,799

129,901

115,332

Interest and other income

62,625

4,159

3,151

2,512

65,471

6,841

2,878

2,655

Interest:

Expense incurred, net

(184,322
)
(161,224
)
(94,627
)
(82,893
)

(281,762
)
(242,361
)
(97,997
)
(81,862
)
Amortization of deferred financing costs

(3,294
)
(2,872
)
(1,597
)
(1,586
)

(4,996
)
(4,583
)
(1,730
)
(1,781
)

Income before allocation to Minority Interests, loss from investments in unconsolidated entities, net gain on sales of unconsolidated entities and discontinued operations

145,390

102,708

47,901

51,283

Income before allocation to Minority Interests, income (loss) from investments in unconsolidated entities, net gain on sales of unconsolidated entities and discontinued operations

173,193

131,696

33,052

34,344

Allocation to Minority Interests – Partially Owned Properties

2,296

296

819

443

672

1,107

(1,624
)
811

Loss from investments in unconsolidated entities

(215
)
(7,797
)
(157
)
(391
)

Income (loss) from investments in unconsolidated entities

(450
)
(7,468
)
(235
)
329

Net gain on sales of unconsolidated entities

124

4,405

—

1,971

124

4,407

—

2

Income from continuing operations

147,595

99,612

48,563

53,306

173,539

129,742

31,193

35,486

Net gain on sales of discontinued operations

259,824

149,259

108,559

77,760

513,419

207,653

254,178

58,394

Discontinued operations, net

(4,663
)
11,222

(2,646
)
4,322

2,585

21,866

1,416

5,288

Net income

$
402,756

$
260,093

$
154,476

$
135,388

$
689,543

$
359,261

$
286,787

$
99,168

ALLOCATION OF NET INCOME:

Preference Units

$
26,043

$
27,325

$
13,018

$
13,653

$
39,004

$
40,671

$
12,961

$
13,346

Preference Interests

$
5,272

$
10,106

$
1,388

$
5,053

$
6,431

$
15,158

$
1,159

$
5,052

Junior Preference Units

$
7

$
62

$
3

$
31

$
11

$
67

$
4

$
5

Premium on redemption of Preference Units

$
4,316

$
—

$
4,316

$
—

Premium on redemption of Preference Interests

$
4,112

$
—

$
2,384

$
—

$
4,134

$
1,117

$
22

$
1,117

General Partner

$
342,340

$
206,862

$
128,326

$
108,553

$
592,587

$
281,025

$
250,247

$
74,163

Limited Partners

24,982

15,738

9,357

8,098

43,060

21,223

18,078

5,485

Net income available to OP Units

$
367,322

$
222,600

$
137,683

$
116,651

$
635,647

$
302,248

$
268,325

$
79,648

Earnings per OP Unit – basic:

Income from continuing operations available to OP Units

$
0.37

$
0.21

$
0.10

$
0.12

$
0.39

$
0.24

$
0.04

$
0.05

Net income available to OP Units

$
1.20

$
0.74

$
0.45

$
0.39

$
2.08

$
1.01

$
0.87

$
0.26

Weighted average OP Units outstanding

305,793

299,438

306,190

299,847

306,171

299,929

306,915

300,900

Earnings per OP Unit – diluted:

Income from continuing operations available to OP Units

$
0.36

$
0.21

$
0.10

$
0.11

$
0.39

$
0.24

$
0.04

$
0.05

Net income available to OP Units

$
1.19

$
0.74

$
0.44

$
0.39

$
2.05

$
1.00

$
0.86

$
0.26

Weighted average OP Units outstanding

309,362

302,017

309,979

302,201

310,211

302,739

311,564

304,028

Distributions declared per OP Unit outstanding

$
0.8650

$
0.8650

$
0.4325

$
0.4325

$
1.2975

$
1.2975

$
0.4325

$
0.4325

See accompanying notes

3

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

Six Months Ended June 30,

Quarter Ended June 30,

Nine Months Ended September 30,

Quarter Ended September 30,

2005

2004

2005

2004

2005

2004

2005

2004

Comprehensive income:

Net income

$
402,756

$
260,093

$
154,476

$
135,388

$
689,543

$
359,261

$
286,787

$
99,168

Other comprehensive income (loss) – derivative and other instruments:

Unrealized holding gains (losses) arising during the period

(11,674
)
5,736

(14,842
)
15,890

2,010

(5,394
)
13,684

(11,130
)
Equity in unrealized holding gains arising during the period –unconsolidated entities

—

3,667

—

—

—

3,667

—

—

Losses reclassified into earnings from other comprehensive income

1,168

970

586

488

1,797

1,494

629

524

Comprehensive income

$
392,250

$
270,466

$
140,220

$
151,766

$
693,350

$
359,028

$
301,100

$
88,562

See accompanying notes

4

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

Six Months Ended June 30,

Nine Months Ended September 30,

2005

2004

2005

2004

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$
402,756

$
260,093

$
689,543

$
359,261

Adjustments to reconcile net income to net cash provided by operating activities:

Allocation to Minority Interests – Partially Owned Properties

(2,296
)
(296
)

(672
)
(1,107
)
Depreciation

259,268

241,761

391,151

367,882

Amortization of deferred financing costs

3,503

3,352

5,470

5,449

Amortization of discounts and premiums on debt

(813
)
(367
)

(1,677
)
(458
)
Amortization of deferred settlements on derivative instruments

478

590

761

769

Loss from investments in unconsolidated entities

215

7,797

450

7,468

Income from technology investments

(57,054
)
—

(57,054
)
—

Net (gain) on sales of unconsolidated entities

(124
)
(4,405
)

(124
)
(4,407
)
Net (gain) on sales of discontinued operations

(259,824
)
(149,259
)

(513,419
)
(207,653
)
Debt extinguishments

5,307

108

10,977

108

Unrealized loss on derivative instruments

3

73

10

249

Compensation paid with Company Common Shares

18,069

8,741

26,799

12,791

Other operating activities, net

1

10

480

(1,445
)

Changes in assets and liabilities:

Decrease (increase) in rents receivable

760

(949
)

762

(2,156
)
(Increase) in deposits – restricted

(1,094
)
(1,548
)
Decrease (increase) in deposits – restricted

12,319

(2,478
)
(Increase) in other assets

(3,923
)
(6,900
)

(1,468
)
(10,718
)
Increase in accounts payable and accrued expenses

8,192

11,883

29,462

35,244

Increase in accrued interest payable

828

1,075

(Decrease) in rents received in advance and other liabilities

(8,958
)
(7,702
)
(Decrease) increase in accrued interest payable

(6,146
)
7,323

(Decrease) increase in rents received in advance and other liabilities

(7,123
)
10,019

Increase in security deposits

469

943

452

2,050

Net cash provided by operating activities

365,763

365,000

580,953

578,191

CASH FLOWS FROM INVESTING ACTIVITIES:

Investment in real estate – acquisitions

(642,332
)
(398,084
)

(871,477
)
(585,153
)
Investment in real estate – development/other

(91,140
)
(36,458
)

(131,460
)
(77,613
)
Improvements to real estate

(93,431
)
(89,289
)

(167,274
)
(150,491
)
Additions to non-real estate property

(4,109
)
(2,234
)

(12,447
)
(4,181
)
Interest capitalized for real estate under development

(5,761
)
(4,568
)

(9,105
)
(7,995
)
Interest capitalized for unconsolidated entities under development

—

(2,282
)

—

(2,282
)
Proceeds from disposition of real estate, net

835,703

506,614

1,476,746

658,760

Proceeds from disposition of unconsolidated entities

124

7,451

124

7,453

Proceeds from technology and other investments

82,054

—

82,054

—

Investments in unconsolidated entities

(410
)
(406,297
)

(1,377
)
(406,370
)
Distributions from unconsolidated entities

330

23,416

330

26,389

(Increase) decrease in deposits on real estate acquisitions, net

(88,818
)
51,432

(235,491
)
53,682

Decrease in mortgage deposits

1,238

3,045

(Increase) decrease in mortgage deposits

(564
)
947

Consolidation of previously Unconsolidated Properties:

Via acquisition (net of cash acquired)

(65
)
(49,178
)

(65
)
(49,183
)
Via FIN 46 (cash consolidated)

—

3,628

—

3,628

Acquisition of Minority Interests – Partially Owned Properties

(1,143
)
(72
)

(1,712
)
(72
)
Other investing activities, net

—

(950
)

67,200

16,802

Net cash (used for) investing activities

(7,760
)
(393,826
)
Net cash provided by (used for) investing activities

195,482

(515,679
)

See accompanying notes

5

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

Six Months Ended June 30,

Nine Months Ended September 30,

2005

2004

2005

2004

CASH FLOWS FROM FINANCING ACTIVITIES:

Loan and bond acquisition costs

$
(6,759
)
$
(3,651
)

$
(10,525
)
$
(7,648
)
Mortgage notes payable:

Proceeds

149,129

264,495

249,491

395,361

Lump sum payoffs

(197,886
)
(168,911
)

(351,492
)
(395,671
)
Scheduled principal repayments

(14,392
)
(12,425
)

(21,060
)
(18,955
)
Prepayment premiums/fees

(5,307
)
(445
)

(10,977
)
(445
)
Notes, net:

Proceeds

—

298,629

499,435

898,014

Lump sum payoffs

(120,000
)
(375,000
)

(190,000
)
(475,000
)
Line of credit:

Scheduled principal repayments

(4,286
)
(4,286
)
Lines of credit:

Proceeds

2,037,800

1,067,000

3,573,300

1,209,500

Repayments

(1,759,800
)
(662,000
)

(3,723,300
)
(1,219,500
)
(Payments on) settlement of derivative instruments

—

(3,837
)

(7,823
)
(7,346
)
Proceeds from sale of OP Units

6,155

5,017

7,369

5,989

Proceeds from exercise of EQR options

20,781

25,679

34,610

44,113

Redemption of Preference Interests

(146,000
)
—

(146,000
)
—

Premium on redemption of Preference Interests

(300
)
—

(322
)
—

Payment of offering costs

(26
)
(24
)

(26
)
(24
)
Contributions – Minority Interests – Partially Owned Properties

1,756

—

1,746

100

Distributions:

OP Units – General Partner

(247,193
)
(240,894
)

(371,373
)
(362,244
)
Preference Units

(26,101
)
(27,354
)

(39,118
)
(41,006
)
Preference Interests

(5,444
)
(10,106
)

(6,603
)
(15,158
)
Junior Preference Units

(7
)
(113
)

(11
)
(144
)
OP Units – Limited Partners

(17,897
)
(18,499
)

(26,926
)
(27,499
)
Minority Interests – Partially Owned Properties

(7,265
)
(15,062
)

(9,116
)
(25,249
)
Net cash (used for) provided by financing activities

(338,756
)
122,499

Net cash (used for) financing activities

(553,007
)
(47,098
)
Net increase in cash and cash equivalents

19,247

93,673

223,428

15,414

Cash and cash equivalents, beginning of period

83,505

49,579

83,505

49,579

Cash and cash equivalents, end of period

$
102,752

$
143,252

$
306,933

$
64,993

See accompanying notes

6

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

Six Months Ended June 30,

Nine Months Ended
September 30,

2005

2004

2005

2004

SUPPLEMENTAL INFORMATION:

Cash paid during the period for interest

$
192,691

$
171,912

$
303,071

$
254,863

Valuation of OP Units issued – Other transactions

$
18,190

$
—

$
19,164

$
9,087

Real estate acquisitions/dispositions:

Mortgage loans assumed

$
122,267

$
50,942

$
318,424

$
50,942

Valuation of OP Units issued

$
1,800

$
—

$
1,800

$
—

Mortgage loans (assumed) by purchaser

$
24,999

$
(1,338
)

$
(35,031
)
$
(16,778
)

Consolidation of previously Unconsolidated Properties – Via acquisition:

Investment in real estate

$
(2,892
)
$
(958,606
)

$
(2,892
)
$
(960,331
)

Mortgage loans assumed

$
2,012

$
273,467

$
2,012

$
274,818

Minority Interests – Partially Owned Properties

$
59

$
432

$
59

$
445

Investments in unconsolidated entities

$
668

$
608,333

$
668

$
608,681

Net other liabilities recorded

$
88

$
27,196

$
88

$
27,204

Consolidation of previously Unconsolidated Properties – Via FIN 46:

Investment in real estate

$
—

$
(548,342
)

$
—

$
(548,342
)

Mortgage loans consolidated

$
—

$
294,722

$
—

$
294,722

Minority Interests – Partially Owned Properties

$
—

$
3,074

$
—

$
3,074

Investments in unconsolidated entities

$
—

$
234,984

$
—

$
234,984

Net other liabilities recorded

$
—

$
19,190

$
—

$
19,190

See accompanying notes

7

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 ~~June~~September 30, 2005 owned an approximate ~~93.2%~~93.3% ownership interest in ERPOP. EQR is structured as an umbrella partnership REIT (“UPREIT”), under which all property ownership and business operations are conducted through ERPOP and its subsidiaries. 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 ~~June~~September 30, 2005, the Operating Partnership, directly or indirectly through investments in title holding entities, owned all or a portion of ~~933~~922 properties in 32 states and the District of Columbia consisting of ~~198,420~~195,575 units. The ownership breakdown includes:

Properties

Units

Properties

Units

Wholly Owned Properties

837

175,498

829

173,411

Partially Owned Properties (Consolidated)

39

6,805

36

6,134

Unconsolidated Properties

57

16,117

57

16,030

933

198,420

922

195,575

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 ~~six~~nine months ended ~~June~~September 30, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005.

The balance sheet at December 31, 2004 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, 2004.

Stock-Based Compensation

The Company elected to account for 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.

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”) to EQR on a one-for-one basis, with the Operating Partnership receiving the net cash proceeds of such issuances.

The Company will adopt SFAS No. 123(R), Share-Based Payment, as required effective January 1, 2006. SFAS No. 123(R) will require all companies to expense stock-based compensation (such as stock options), as well as making other ~~more minor~~ revisions to SFAS No. 123. As the Company began expensing all stock-based compensation effective January 1, 2003, it does not anticipate that the adoption of SFAS No. 123(R) will have a material effect on its consolidated statements of operations or financial position.

The cost related to stock-based employee compensation included in the determination of net income for the ~~six~~nine months and quarter ended ~~June~~September 30, 2005 is equal to 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 cost related to stock-based employee compensation included in the determination of net income for the ~~six~~nine months and quarter ended ~~June~~September 30, 2004 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 for the ~~six~~nine months and quarter ended ~~June~~September 30, 2004 (amounts in thousands except per OP Unit amounts):

	Six Months Ended			Quarter Ended			Nine Months Ended			Quarter Ended
	June 30, 2004			June 30, 2004			September 30, 2004			September 30, 2004
Net income available to OP Units – as reported	$	222,600		$	116,651		$	302,248		$	79,648
Add: Stock-based employee compensation expense included in reported net income:
EQR’s restricted/performance shares	6,256			3,374			9,399			3,144
EQR’s share options	1,547			758			2,266			718
EQR’s ESPP discount	938			274			1,126			188
Deduct: Stock-based employee compensation expense determined under fair value based method for all awards:
EQR’s restricted/performance shares	(6,256		)	(3,374		)	(9,399		)	(3,144		)
EQR’s share options	(3,006		)	(1,448		)	(4,207		)	(1,200		)
EQR’s ESPP discount	(938		)	(274		)	(1,126		)	(188		)
Net income available to OP Units – pro forma	$	221,141		$	115,961		$	300,307		$	79,166
Earnings per OP Unit:
Basic – as reported	$	0.74		$	0.39		$	1.01		$	0.26
Basic – pro forma	$	0.74		$	0.39		$	1.00		$	0.26
Diluted – as reported	$	0.74		$	0.39		$	1.00		$	0.26
Diluted – pro forma	$	0.73		$	0.38		$	0.99		$	0.26

Other

The Operating Partnership adopted FASB 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 receive a majority of the entity’s residual returns and/or is subject to a majority of the risk of loss from such entity’s activities. Due to the March 31, 2004 effective date, the Operating Partnership has only consolidated the results of operations beginning April 1, 2004. The adoption of FIN No. 46 did not have any effect on net income as the aggregate results of operations of these development properties were previously included in ~~loss~~income (loss) from investments in unconsolidated entities.

The Operating Partnership adopted the disclosure provisions of SFAS No. 150 and FSP No. FAS 150-3, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, effective December 31, 2003. SFAS No. 150 and FSP No. FAS 150-3 require the Operating Partnership to make certain disclosures regarding 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~~Partnership is presently the controlling partner in various consolidated partnerships consisting of 3936 properties and ~~6,805~~6,134 units and various uncompleted development properties having a minority interest book value of ~~$7.2~~$10.7 million at ~~June~~September 30, 2005. Some of these partnerships contain provisions that require the partnerships to be liquidated through the sale of its 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 ~~June~~September 30, 2005, the Operating Partnership estimates the value of Minority Interest distributions would have been approximately ~~$70.2~~$75.9 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 ~~June~~September 30, 2005 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.

In June 2005, the FASB ratified the consensus in EITF Issue No. 04-5, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights (“Issue 04-5”), which provides guidance in determining whether a general partner controls a limited partnership. Issue 04-5 states that the general partner in a limited partnership is presumed to control that limited partnership. The presumption may be overcome if the limited partners have either (1) the substantive ability to dissolve the limited partnership or otherwise remove the general partner without cause or (2) substantive participating rights, which provide the limited partners with the ability to effectively participate in significant decisions that would be expected to be made in the ordinary course of the limited partnership’s business and thereby preclude the general partner from exercising unilateral control over the partnership. If the criteria in Issue 04-5 are met, the Operating Partnership could be required to consolidate certain of its existing Unconsolidated Properties. The adoption of Issue 04-5 by the Operating Partnership is required for new or modified limited partnership arrangements effective June 30, 2005 and existing limited partnership arrangements effective January 1, ~~2006~~2006. The adoption is not expected to have a material effect on the results of operations or financial position nor is it expected to have any effect on net equity or net income as the aggregate results of ~~operations of~~ any Unconsolidated

Properties required to be consolidated are already included in ~~loss~~investments in unconsolidated entities and income (loss) from investments in unconsolidated ~~entities.~~entities, respectively.

3. Partners’ Capital

The following table presents the changes in the Operating Partnership’s issued and outstanding OP Units and the limited partners’ OP Units for the sixnine months ended JuneSeptember 30, 2005:

		~~2005~~
~~OP Units outstanding at January 1,~~		~~305,629,855~~

~~Issued to General Partner~~:
~~Conversion of Series E Preference Units~~		~~146,132~~
~~Conversion of Series H Preference Units~~		~~2,314~~
~~Employee Share Purchase Plan~~		~~220,272~~
~~Exercise of EQR options~~		~~923,196~~
~~Restricted EQR share grants, net~~		~~534,356~~

~~Issued to Limited Partners~~:
~~Issuance – Other transactions~~		~~544,732~~
~~Issuance – Acquisitions~~		~~55,197~~

~~OP Units outstanding at June 30,~~		~~308,056,054~~

				2005

OP Units outstanding at January 1,				305,629,855

Issued to General Partner:
Conversion of Series E Preference Units				286,005
Conversion of Series H Preference Units				2,893
Employee Share Purchase Plan				258,379
Exercise of EQR options				1,437,668
Restricted EQR share grants, net				531,767

Issued to Limited Partners:
Issuance – Other transactions				570,812
Issuance – Acquisitions				55,197
OP Units outstanding at September 30,				308,772,576

				2005
	2005
Limited Partner OP Units outstanding at January 1,	20,552,940			20,552,940

Limited Partner OP Units Issued:
Other transactions	544,732			570,812
Acquisitions	55,197			55,197
Conversion of Limited Partner OP Units to EQR Common Shares	(241,148		)	(572,137		)
Limited Partner OP Units Outstanding at June 30,	20,911,721
Limited Partner OP Units Outstanding at September 30,				20,606,812
Limited Partner OP Units Ownership Interest in Operating Partnership	6.8		%	6.7		%

Limited Partner OP Units Issued:
Other transactions – per unit	$	33.39		$	33.57
Other transactions – valuation	$	18.2 million		$	19.2 million
Acquisitions – per unit	$	32.61		$	32.61
Acquisitions – valuation	$	1.8 million		$	1.8 million

The limited partners of the Operating Partnership as of ~~June~~September 30, 2005 include various individuals and entities that contributed their properties to the Operating Partnership in exchange for OP Units. Subject to certain 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).

The following table presents the Operating Partnership’s issued and outstanding Preference Units as of ~~June~~September 30, 2005 and December 31, 2004:

Annual

Amounts in thousands

Redemption
Date (1) (2)

Conversion
Rate (2)

Dividend
Rate per
Unit (3)

June
30, 2005

December
31, 2004

Preference Units:

9 1/8% Series B Cumulative Redeemable Preference Units; liquidation value $250 per unit; 500,000 units issued and outstanding at June 30, 2005 and December 31, 2004 (4)

10/15/05

N/A

$
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 June 30, 2005 and December 31, 2004 (4)

9/9/06

N/A

$
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 June 30, 2005 and December 31, 2004 (4)

7/15/07

N/A

$
21.50

175,000

175,000

7.00% Series E Cumulative Convertible Preference Units; liquidation value $25 per unit; 680,396 and 811,724 units issued and outstanding at June 30, 2005 and December 31, 2004, respectively

11/1/98

1.1128

$
1.75

17,010

20,293

7.00% Series H Cumulative Convertible Preference Units; liquidation value $25 per unit; 35,334 and 36,934 units issued and outstanding at June 30, 2005 and December 31, 2004, respectively

6/30/98

1.4480

$
1.75

883

923

8.29% Series K Cumulative Redeemable Preference Units; liquidation value $50 per unit; 1,000,000 units issued and outstanding at June 30, 2005 and December 31, 2004

12/10/26

N/A

$
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 June 30, 2005 and December 31, 2004 (4)

6/19/08

N/A

$
16.20

150,000

150,000

$
632,893

$
636,216

			Annual
			Dividend			Amounts in thousands
	Redemption Date (1) (2)	Conversion Rate (2)	Rate per Unit (3)			September 30, 2005		December 31, 2004
Preference Units

9 1/8% Series B Cumulative Redeemable Preference Units; liquidation value $250 per unit; 0 and 500,000 units issued and outstanding at September 30, 2005 and December 31, 2004, respectively	10/15/05	N/A			(5)	$	—	$	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, 2005 and December 31, 2004 (4)	9/9/06	N/A	$	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, 2005 and December 31, 2004 (4)	7/15/07	N/A	$	21.50		175,000		175,000

7.00% Series E Cumulative Convertible Preference Units; liquidation value $25 per unit; 554,696 and 811,724 units issued and outstanding at September 30, 2005 and December 31, 2004, respectively	11/1/98	1.1128	$	1.75		13,868		20,293

7.00% Series H Cumulative Convertible Preference Units; liquidation value $25 per unit; 34,934 and 36,934 units issued and outstanding at September 30, 2005 and December 31, 2004, respectively	6/30/98	1.4480	$	1.75		873		923

8.29% Series K Cumulative Redeemable Preference Units; liquidation value $50 per unit; 1,000,000 units issued and outstanding at September 30, 2005 and December 31, 2004	12/10/26	N/A	$	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 September 30, 2005 and December 31, 2004 (4)	6/19/08	N/A	$	16.20		150,000		150,000
						$	504,741	$	636,216

(1)	On or after the redemption date, redeemable preference units (Series C, D, K and N) may be redeemed for cash at the option of the Operating Partnership, in whole or in part, at a redemption price equal to the liquidation price per unit, plus accrued and unpaid distributions, if any, in conjunction with the concurrent redemption of the corresponding EQR Preferred Shares.

(2)	On or after the redemption date, convertible preference units (Series E & H) may be redeemed under certain circumstances at the option of the Operating Partnership for cash (in the case of Series E) or OP Units (in the case of Series H), in whole or in part, at various redemption prices per unit based upon the contractual rate, plus accrued and unpaid distributions, if any, in conjunction with the concurrent redemption/conversion of the corresponding EQR Preferred Shares.

(3)	~~(1)~~ On or after the redemption date, redeemable preference units (Series B, C, D, K and N) may be redeemed for cash at the option of the Operating Partnership, in whole or in part, at a redemption price equal to the liquidation price per unit, plus accrued and unpaid distributions, if any, in conjunction with the concurrent redemption of the corresponding EQR Preferred Shares. ~~(2)~~ On or after the redemption date, convertible preference units (Series E & H) may be redeemed under certain circumstances at the option of the Operating Partnership for cash or OP Units, in whole or in part, at various redemption prices per unit based upon the contractual rate, plus accrued and unpaid distributions, if any, in conjunction with the concurrent redemption/conversion of the corresponding EQR Preferred Shares. ~~(3)~~Dividends on all series of Preference Units are payable quarterly at various pay dates. Dividend rates listed for Series C, D and N are Preference Unit rates and the equivalent depositary unit annual dividend rates are $2.281252, $2.15 and $1.62, respectively.

(4)	Series ~~B, C, D and N are Preference Unit rates and the equivalent depositary unit annual dividend rates are $2.281252, $2.281252, $2.15 and $1.62, respectively.~~ ~~(4)~~ ~~Series B,~~ C, D and N Preference Units each have a corresponding depositary unit that consists of ten times the number of units and one-tenth the liquidation value and dividend rate per unit.

(5)	On September 14, 2005, the Company issued an irrevocable notice to redeem for cash on October 17, 2005 all 500,000 shares of its Series B Preferred Shares. The Operating Partnership elected to redeem for cash

its corresponding Series B Preference Units. The liquidation value of $125.0 million was included as a separate component of rents received in advance and other liabilities in the accompanying consolidated balance sheets at September 30, 2005. Additionally, the Operating Partnership recorded the write-off of approximately $4.3 million in original issuance costs as a premium on redemption of Preference Units in the accompanying consolidated statements of operations.

The following table presents the issued and outstanding Preference Interests as of ~~June~~September 30, 2005 and December 31, 2004:

Redemption
Date (1) (2)

Conversion
Rate (2)

Annual
Dividend
Rate per
Unit (3)

Amounts in thousands

June
30, 2005

December
31, 2004
Preference Interests:

8.50% Series B Cumulative Redeemable Preference Units; liquidation value $50 per unit; 0 and 1,100,000 units issued and outstanding at June 30, 2005 and December 31, 2004, respectively

03/03/05

N/A

(4)
$
—

$
55,000

8.50% Series C Cumulative Redeemable Preference Units; liquidation value $50 per unit; 0 and 220,000 units issued and outstanding at June 30, 2005 and December 31, 2004, respectively

03/23/05

N/A

(4)
—

11,000

8.375% Series D Cumulative Redeemable Preference Units; liquidation value $50 per unit; 0 and 420,000 units issued and outstanding at June 30, 2005 and December 31, 2004, respectively

05/01/05

N/A

(4)

21,000

8.50% Series E Cumulative Redeemable Preference Units; liquidation value $50 per unit; 0 and 1,000,000 units issued and outstanding at June 30, 2005 and December 31, 2004, respectively

08/11/05

N/A

(4)
—

50,000

8.375% Series F Cumulative Redeemable Preference Units; liquidation value $50 per unit; 0 and 180,000 units issued and outstanding at June 30, 2005 and December 31, 2004, respectively

05/01/05

N/A

(4)
—

9,000

7.875% Series G Cumulative Redeemable Preference Units; liquidation value $50 per unit; 510,000 units issued and outstanding at June 30, 2005 and December 31, 2004

03/21/06

N/A

$
3.9375

25,500

25,500

7.625% Series H Cumulative Convertible Redeemable Preference Units; liquidation value $50 per unit; 190,000 units issued and outstanding at June 30, 2005 and December 31, 2004

03/23/06

1.5108

$
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 atJune 30, 2005 and December 31, 2004

06/22/06

1.4542

$
3.8125

13,500

13,500

7.625% Series J Cumulative Convertible Redeemable Preference Units; liquidation value $50 per unit; 230,000 units issued and outstanding at June 30, 2005 and December 31, 2004

12/14/06

1.4108

$
3.8125

11,500

11,500

$
60,000

$
206,000

			Annual
			Dividend			Amounts in thousands
	Redemption Date (1) (2)	Conversion Rate (2)	Rate per Unit (3)			September 30, 2005		December 31, 2004
Preference Interests:

8.50% Series B Cumulative Redeemable Preference Units; liquidation value $50 per unit; 0 and 1,100,000 units issued and outstanding at September 30, 2005 and December 31, 2004, respectively	03/03/05	N/A			(4)	$	—	$	55,000

8.50% Series C Cumulative Redeemable Preference Units; liquidation value $50 per unit; 0 and 220,000 units issued and outstanding at September 30, 2005 and December 31, 2004, respectively	03/23/05	N/A			(4)	—		11,000

8.375% Series D Cumulative Redeemable Preference Units; liquidation value $50 per unit; 0 and 420,000 units issued and outstanding at September 30, 2005 and December 31, 2004, respectively	05/01/05	N/A			(4)	—		21,000

8.50% Series E Cumulative Redeemable Preference Units; liquidation value $50 per unit; 0 and 1,000,000 units issued and outstanding at September 30, 2005 and December 31, 2004, respectively	08/11/05	N/A			(4)	—		50,000

8.375% Series F Cumulative Redeemable Preference Units; liquidation value $50 per unit; 0 and 180,000 units issued and outstanding at September 30, 2005 and December 31, 2004, respectively	05/01/05	N/A			(4)	—		9,000

7.875% Series G Cumulative Redeemable Preference Units; liquidation value $50 per unit; 510,000 units issued and outstanding at September 30, 2005 and December 31, 2004	03/21/06	N/A	$	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, 2005 and December 31, 2004	03/23/06	1.5108	$	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, 2005 and December 31, 2004	06/22/06	1.4542	$	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, 2005 and December 31, 2004	12/14/06	1.4108	$	3.8125		11,500		11,500
						$	60,000	$	206,000

(1)On or after the fifth anniversary of the respective issuance (the “Redemption Date”), all of the Preference Interests may be redeemed for cash at the option of the Operating Partnership, in whole or in part, at any time or from time to time, at a redemption price equal to the liquidation preference of $50.00 per unit plus the cumulative amount of accrued and unpaid distributions, if any.

~~(2)~~On or after the tenth anniversary of the respective issuance (the “Conversion Date”), all of the Preference Interests are exchangeable at the option of the holder (in whole but not in part) on a one-for-one basis for a respective reserved series of EQR Preferred Shares. In addition, on or after the Conversion Date, the convertible Preference Interests (Series H, I & J) may be converted under certain circumstances at the option of the holder (in whole but not in part) to Common Shares based upon the contractual conversion rate, plus accrued and unpaid distributions, if any.

~~(3)Dividends on all series of Preference Interests are payable quarterly on March 25~~^th~~, June 25~~^th~~, September 25~~^th,~~and December 25~~^th~~of each year.~~

~~(4)~~During the six months ended June 30, 2005, the Operating Partnership redeemed or repurchased for cash all of its Series B through F Preference Interests with a liquidation value of $146.0 million. The Operating Partnership recorded approximately $4.1 million as premiums on redemption of Preference

On or after the fifth anniversary of the respective issuance (the “Redemption Date”), all of the Preference Interests may be redeemed for cash at the option of the Operating Partnership, in whole or in part, at any time or from time to time, at a redemption price equal to the liquidation preference of $50.00 per unit plus the cumulative amount of accrued and unpaid distributions, if any.

(2)

On or after the tenth anniversary of the respective issuance (the “Conversion Date”), all of the Preference Interests are exchangeable at the option of the holder (in whole but not in part) on a one-for-one basis for a respective reserved series of EQR Preferred Shares. In addition, on or after the Conversion Date, the convertible Preference Interests (Series H, I & J) may be converted under

~~Interests in the accompanying consolidated statements of operations, which included $3.8 million in original insurance~~
certain circumstances at the option of the holder (in whole but not in part) to Common Shares based upon the contractual conversion rate, plus accrued and unpaid distributions, if any.
(3)
Dividends on all series of Preference Interests are payable quarterly on March 25^th, June 25^th, September 25^thand December 25^thof each year.
(4)
During the nine months ended September 30, 2005, the Operating Partnership redeemed or repurchased for cash all of its Series B through F Preference Interests with a liquidation value of $146.0 million. The Operating Partnership recorded approximately $4.1 million as premiums on redemption of Preference Interests in the accompanying consolidated statements of operations, which included $3.8 million in original issuance costs and $0.3 million in cash redemption charges.

The following table presents the Operating Partnership’s issued and outstanding Junior Convertible Preference Units (the “Junior Preference Units”) as of ~~June~~September 30, 2005 and December 31, 2004:

Redemption
Date

Conversion
Rate

Annual
Dividend
Rate per
Unit (1)

Amounts in thousands

June
30, 2005

December
31, 2004
Junior Preference Units:

Series B Junior Convertible Preference Units; liquidation value $25 per unit; 7,367 units issued and outstanding at June 30, 2005 and December 31, 2004

(2)

(2)
$
2.00

$
184

$
184

$
184

$
184

					Annual
					Dividend		Amounts in thousands
	Redemption Date		Conversion Rate		Rate per Unit (1)		September 30, 2005		December 31, 2004
Junior Preference Units:

Series B Junior Convertible Preference Units; liquidation value $25 per unit; 7,367 units issued and outstanding at September 30, 2005 and December 31, 2004		(2)		(2)	$	2.00	$	184	$	184
							$	184	$	184

(1)

Dividends on the Junior Preference Units are payable quarterly at various pay dates.

(2)

~~(1)~~ ~~Dividends on the Junior Preference Units are payable quarterly at various pay dates.~~

~~(2)~~On or after the tenth anniversary of the issuance (the “Redemption Date”), the Series B Junior Preference Units may be converted into OP Units at the option of the Operating Partnership based on the contractual conversion rate. Prior to the Redemption Date, the holders may elect to convert the Series B Junior Preference Units to OP Units under certain circumstances based on the contractual conversion rate. The contractual rate is based upon a ratio dependent upon the closing price of EQR’s Common Shares.

4. Real Estate

During the ~~six~~nine months ended ~~June~~September 30, 2005, the Operating Partnership acquired the entire equity interest in ~~twenty~~twenty-six properties containing ~~4,874~~7,168 units and ~~two~~three land parcels from unaffiliated parties for a total purchase price of ~~$775.1 million.~~$1.2 billion.

During the ~~six~~nine months ended ~~June~~September 30, 2005, the Operating Partnership acquired additional ownership interests in ~~eleven~~twelve Partially Owned Properties, all of which remain partially owned. The ~~acquisition was~~acquisitions were funded using ~~$18.2~~$20.3 million in cash and through the issuance of ~~544,732~~570,812 OP Units valued at ~~$18.2~~$19.2 million, with ~~$35.3~~$37.8 million recorded as additional building basis and ~~$1.1~~$1.7 million recorded as a reduction of Minority Interests – Partially Owned Properties. The Operating Partnership also acquired the majority of the remaining third party equity interests it did not previously own in two properties, consisting of 120 units. The properties were previously accounted for under the equity method of accounting and subsequent to the purchase were consolidated.

During the ~~six~~nine months ended ~~June~~September 30, 2005, the Operating Partnership disposed of the following to unaffiliated parties (including two land parcels and various individual condominium units) (sales price in ~~thousands)~~millions):

Properties

Units

Sales Price

Wholly Owned Properties

25

6,088

$
713.4

Partially Owned Properties (Consolidated)

2

678

165.2

27

6,766

$
878.6

	Properties	Units	Sales Price
Wholly Owned Properties	39	10,452	$	1,230.9
Partially Owned Properties (Consolidated)	5	1,349	310.6
	44	11,801	$	1,541.5

The Operating Partnership recognized a net gain on sales of discontinued operations of approximately ~~$259.8~~$513.4 million on the above ~~sales.~~sales (amount is net of $5.8 million of income taxes incurred on condominium sales – see additional discussion in Note 13).

5. Commitments to Acquire/Dispose of Real Estate

As of ~~July 27,~~November 3, 2005, in addition to the properties there were subsequently acquired as discussed in Note 16, the Operating Partnership had entered into separate agreements to acquire five multifamily properties containing ~~3,021~~1,750 units and two land parcels from unaffiliated parties. The Operating Partnership expects a combined purchase price of approximately ~~$1.1 billion.~~$333.4 million.

As of ~~July 27,~~November 3, 2005, in addition to the properties that were subsequently disposed of as discussed in Note 16, the Operating Partnership had entered into separate agreements to dispose of ~~twelve~~eight multifamily properties containing ~~3,357~~1,895 units ~~and one land parcel~~ to unaffiliated parties. The Operating Partnership expects a combined disposition price of approximately ~~$357.9~~$222.4 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.

6. Investments in Unconsolidated Entities

The Operating Partnership has co-invested in various properties with unrelated third 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 ~~June~~September 30, 2005 (amounts in thousands except for project and unit amounts):

	Institutional Joint Ventures			Other			Totals			Institutional Joint Ventures			Other			Totals

Total projects	45			11			56		(1)	45			11			56		(1)

Total units	10,846			1,451			12,297		(1)	10,846			1,451			12,297		(1)

Operating Partnership’s ownership percentage of outstanding debt	25.0		%	10.7		%
Operating Partnership’s ownership percentage										25.0		%	10.7		%

Operating Partnership’s share of outstanding debt (2)	$	121,200		$	2,861		$	124,061		$	121,200		$	2,847		$	124,047

(1)

Totals exclude Fort Lewis Military Housing consisting of one property and 3,733 units, which is not accounted for under the equity method of accounting but is included in the Operating Partnership’s property/unit counts as of September 30, 2005.

(2)

~~(1)~~ Totals exclude Fort Lewis Military Housing consisting of one property and 3,820 units, which is not accounted for under the equity method of accounting but is included in the Operating Partnership’s property/unit counts as of June 30, 2005.

~~(2)~~All debt is non-recourse to the Operating Partnership.

7. Deposits – Restricted

The following table presents the deposits – restricted as of ~~June~~September 30, 2005 and December 31, 2004 (amounts in thousands):

June
30, 2005

December
31, 2004

Collateral enhancement for partially owned development loans

$
12,000

$
12,000

Tax-deferred (1031) exchange proceeds

61,062

—

Earnest money on pending acquisitions

31,023

3,267

Resident security, utility and other

68,021

66,927

Totals

$
172,106

$
82,194

	September 30, 2005		December 31, 2004

Collateral enhancement for partially owned development loans	$	5,000	$	12,000
Tax-deferred (1031) exchange proceeds	217,766		—
Earnest money on pending acquisitions	27,992		3,267
Resident security, utility and other	54,608		66,927
Totals	$	305,366	$	82,194

8. Mortgage Notes Payable

As of ~~June~~September 30, 2005, the Operating Partnership had outstanding mortgage indebtedness of approximately ~~$3.2~~$3.3 billion.

During the ~~six~~nine months ended ~~June~~September 30, 2005, the Operating Partnership:

• Repaid ~~$212.3~~$372.6 million of mortgage loans;

• Assumed/consolidated ~~$124.3~~$320.4 million of mortgage debt on certain properties in connection with their acquisitions and/or consolidations;

• Obtained ~~$149.1~~$249.5 million of new mortgage loans on certain properties; and

• Was released from ~~$25.0~~$35.0 million of mortgage debt assumed by the purchaser on disposed properties.

As of ~~June~~September 30, 2005, scheduled maturities for the Operating Partnership’s outstanding mortgage indebtedness were at various dates through ~~December~~February 1, ~~2034.~~2041. At ~~June~~September 30, 2005, the interest rate range on the Operating Partnership’s mortgage debt was ~~2.14%~~2.22% to 12.465%. During the ~~six~~nine months ended ~~June~~September 30, 2005, the weighted average interest rate on the Operating Partnership’s mortgage debt was ~~5.71%~~5.65%.

9. Notes

As of ~~June~~September 30, 2005, the Operating Partnership had outstanding unsecured notes of approximately ~~$3.0~~$3.4 billion.

During the ~~six~~nine months ended ~~June~~September 30, 2005, the Operating ~~Partnership repaid $120.0~~Partnership:

• Repaid $190.0 million of fixed rate public notes at maturity.

• Issued $500.0 million of ten and one-half year 5.125% fixed rate public notes, receiving net proceeds of $496.2 million.

As of ~~June~~September 30, 2005, scheduled maturities for the Operating Partnership’s outstanding notes were at various dates through 2029. At ~~June~~September 30, 2005, the interest rate range on the Operating Partnership’s notes was 4.75% to ~~7.75%~~7.625%. During the ~~six~~nine months ended ~~June~~September 30, 2005, the weighted average interest rate on the Operating Partnership’s notes was ~~6.18%~~6.14%.

10. ~~Line~~Lines of Credit

On April 1, 2005, the Operating Partnership obtained a new three-year $1.0 billion unsecured

revolving credit facility maturing on May 29, 2008, and terminated the $700.0 million credit facility that was scheduled to expire in May 2005. The Operating Partnership has the ability to increase available borrowings up to $500.0 million under certain circumstances. Advances under the new credit facility bear interest at variable rates based upon LIBOR at various interest periods plus a spread dependent upon the Operating Partnership’s credit rating or based on bids received from the lending group. EQR has guaranteed the Operating Partnership’s credit facility up to the maximum amount and for the full term of the facility.

On August 30, 2005, the Operating Partnership obtained a new one-year $600.0 million revolving credit facility maturing on August 29, 2006. Advances under the new facility bear interest at variable rates based on LIBOR at various interest periods plus a spread dependent upon the Operating Partnership’s credit rating. EQR has guaranteed this credit facility up to the maximum amount and for its full term.

As of ~~June~~September 30, 2005, ~~$428.0 million was~~there were no outstanding borrowings and ~~$52.2~~$47.3 million was restricted (dedicated to support letters of credit and not available for borrowing) on the revolving credit ~~facility.~~facilities. During the ~~six~~nine months ended ~~June~~September 30, 2005, the weighted average interest rate under the credit ~~facility~~facilities was ~~3.11%~~3.52%.

11. Derivative Instruments

The following table summarizes the consolidated derivative instruments at ~~June~~September 30, 2005 (dollar amounts are in thousands):

	Cash Flow Hedges (1)			Fair Value Hedges (2)			Forward Starting Swaps (3)			Offsetting Receive Floating Swaps/Caps			Offsetting Pay Floating Swaps/Caps			Development Cash Flow Hedges (1)			Fair Value Hedges (1)			Forward Starting Swaps (2)			Development Cash Flow Hedges (3)
Current Notional Balance	$	150,000		$	370,000		$	400,000		$	255,069		$	255,069		$	24,175		$	370,000		$	300,000		$	30,018
Lowest Possible Notional	$	150,000		$	370,000		$	400,000		$	91,052		$	91,052		$	6,700		$	370,000		$	300,000		$	18,568
Highest Possible Notional	$	150,000		$	370,000		$	400,000		$	255,069		$	255,069		$	34,625		$	370,000		$	300,000		$	65,739
Lowest Interest Rate	3.683		%	3.245		%	4.435		%	6.000		%	6.000		%	3.310		%	3.245		%	4.435		%	3.310		%
Highest Interest Rate	3.683		%	3.787		%	5.179		%	6.000		%	6.000		%	3.500		%	3.787		%	4.589		%	4.530		%
Earliest Maturity Date	2005			2009			2015			2007			2007			2005			2009			2016			2006
Latest Maturity Date	2005			2009			2016			2007			2007			2006			2009			2017			2007
Estimated Asset (Liability) Fair Value	$	(301	)	$	(8,072	)	$	(13,767	)	$	4		$	(4	)	$	34		$	(14,134	)	$	7,226		$	24

(1) ~~Cash Flow~~Fair Value Hedges ~~and~~– Converts outstanding fixed rate debt to a floating interest rate.

(2) Forward Starting Swaps – Designed to partially fix the interest rate in advance of a planned future debt issuance.

(3) Development Cash Flow Hedges – Converts outstanding floating rate debt to a fixed interest rate.

~~(2) Fair Value Hedges – Converts outstanding fixed rate debt to a floating interest rate.~~

~~(3) Forward Starting Swaps – Designed to partially fix the interest rate in advance of a planned debt issuance.~~

On ~~June~~September 30, 2005, the net derivative instruments were reported at their fair value as other assets of approximately ~~$34,000~~$7.3 million and as other liabilities of approximately ~~$22.1~~$14.2 million. As of ~~June~~September 30, 2005, there were approximately ~~$32.1~~$18.0 million in deferred losses, net, included in accumulated other comprehensive loss. Based on the estimated fair values of the net derivative instruments at ~~June~~September 30, 2005, the Operating Partnership may recognize an estimated ~~$4.1~~$3.3 million of accumulated other comprehensive loss as additional interest expense during the twelve months ending ~~June~~September 30, 2006.

During the nine months ended September 30, 2005, the Operating Partnership paid approximately $7.8 million to terminate eight forward starting swaps in conjunction with the issuance of $500.0 million of ten and one-half year unsecured notes. The $7.8 million cost has been deferred and will be recognized as additional interest expense over the life of the unsecured notes.

12. Earnings Per OP Unit

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

OP Unit – diluted (amounts in thousands except per OP Unit amounts):

	Six Months Ended June 30,						Quarter Ended June 30,						Nine Months Ended September 30,						Quarter Ended September 30,
	2005			2004			2005			2004			2005			2004			2005			2004
Numerator for net income per OP Unit – basic:
Income from continuing operations	$	147,595		$	99,612		$	48,563		$	53,306		$	173,539		$	129,742		$	31,193		$	35,486
Allocation to Preference Units	(26,043		)	(27,325		)	(13,018		)	(13,653		)	(39,004		)	(40,671		)	(12,961		)	(13,346		)
Allocation to Preference Interests	(5,272		)	(10,106		)	(1,388		)	(5,053		)	(6,431		)	(15,158		)	(1,159		)	(5,052		)
Allocation to Junior Preference Units	(7		)	(62		)	(3		)	(31		)	(11		)	(67		)	(4		)	(5		)
Allocation to premium on redemption of Preference Units													(4,316		)	—			(4,316		)	—
Allocation to premium on redemption of Preference Interests	(4,112		)	—			(2,384		)	—			(4,134		)	(1,117		)	(22		)	(1,117		)

Income from continuing operations available to OP Units	112,161			62,119			31,770			34,569			119,643			72,729			12,731			15,966
Net gain on sales of discontinued operations	259,824			149,259			108,559			77,760			513,419			207,653			254,178			58,394
Discontinued operations, net	(4,663		)	11,222			(2,646		)	4,322			2,585			21,866			1,416			5,288
Numerator for net income per OP Unit – basic	$	367,322		$	222,600		$	137,683		$	116,651		$	635,647		$	302,248		$	268,325		$	79,648

Numerator for net income per OP Unit – diluted:
Income from continuing operations	$	147,595		$	99,612		$	48,563		$	53,306		$	173,539		$	129,742		$	31,193		$	35,486
Allocation to Preference Units	(26,043		)	(27,325		)	(13,018		)	(13,653		)	(39,004		)	(40,671		)	(12,961		)	(13,346		)
Allocation to Preference Interests	(5,272		)	(10,106		)	(1,388		)	(5,053		)	(6,431		)	(15,158		)	(1,159		)	(5,052		)
Allocation to Junior Preference Units	(7		)	(62		)	(3		)	(31		)	(11		)	(67		)	(4		)	(5		)
Allocation to premium on redemption of Preference Units													(4,316		)	—			(4,316		)	—
Allocation to premium on redemption of Preference Interests	(4,112		)	—			(2,384		)	—			(4,134		)	(1,117		)	(22		)	(1,117		)

Income from continuing operations available to OP Units	112,161			62,119			31,770			34,569			119,643			72,729			12,731			15,966
Net gain on sales of discontinued operations	259,824			149,259			108,559			77,760			513,419			207,653			254,178			58,394
Discontinued operations, net	(4,663		)	11,222			(2,646		)	4,322			2,585			21,866			1,416			5,288
Numerator for net income per OP Unit – diluted	$	367,322		$	222,600		$	137,683		$	116,651		$	635,647		$	302,248		$	268,325		$	79,648

Denominator for net income per OP Unit – basic and diluted:
Denominator for net income per OP Unit – basic													306,171			299,929			306,915			300,900
Effect of dilutive securities:
Dilution for OP Units issuable upon assumed exercise/vesting of EQR’s share options/restricted shares													4,040			2,810			4,649			3,128

Denominator for net income per OP Unit – diluted													310,211			302,739			311,564			304,028

Net income per OP Unit – basic													$	2.08		$	1.01		$	0.87		$	0.26

Net income per OP Unit – diluted													$	2.05		$	1.00		$	0.86		$	0.26

1718

	Six Months Ended June 30,					Quarter Ended June 30,					Nine Months Ended September 30,				Quarter Ended September 30,
	2005			2004		2005			2004

Denominator for net income per OP Unit – basic and diluted:
Denominator for net income per OP Unit – basic	305,793			299,438		306,190			299,847
Effect of dilutive securities:
Dilution for OP Units issuable upon assumed exercise/vesting of EQR’s share options/restricted shares	3,569			2,579		3,789			2,354

Denominator for net income per OP Unit – diluted	309,362			302,017		309,979			302,201

Net income per OP Unit – basic	$	1.20		$	0.74	$	0.45		$	0.39

Net income per OP Unit – diluted	$	1.19		$	0.74	$	0.44		$	0.39
											2005		2004		2005		2004
Net income per OP Unit – basic:
Income from continuing operations available to OP Units	$	0.367		$	0.207	$	0.104		$	0.115	$	0.391	$	0.242	$	0.041	$	0.053
Net gain on sales of discontinued operations	0.850			0.499		0.355			0.260		1.678		0.692		0.828		0.194
Discontinued operations, net	(0.015		)	0.037		(0.009		)	0.014		0.008		0.073		0.005		0.017

Net income per OP Unit – basic	$	1.202		$	0.743	$	0.450		$	0.389	$	2.077	$	1.007	$	0.874	$	0.264

Net income per OP Unit – diluted:
Income from continuing operations available to OP Units	$	0.363		$	0.206	$	0.103		$	0.114	$	0.386	$	0.240	$	0.041	$	0.053
Net gain on sales of discontinued operations	0.840			0.494		0.350			0.258		1.655		0.686		0.816		0.192
Discontinued operations, net	(0.015		)	0.037		(0.009		)	0.014		0.008		0.072		0.004		0.017

Net income per OP Unit – diluted	$	1.188		$	0.737	$	0.444		$	0.386	$	2.049	$	0.998	$	0.861	$	0.262

Convertible preference ~~interests/units~~units/interests that could be converted into ~~1,851,982~~1,807,587 and ~~3,544,867~~3,462,296 weighted average Common Shares (which would be contributed to the Operating Partnership in exchange for OP Units) for the ~~six~~nine months ended ~~June~~September 30, 2005 and 2004, respectively, and ~~1,832,986~~1,720,246 and ~~3,535,758~~3,298,945 weighted average Common Shares for the quarters ended ~~June~~September 30, 2005 and 2004, respectively, were outstanding but were not included in the computation of diluted earnings per OP Unit because the effects would be anti-dilutive.

13. Discontinued Operations

The Operating Partnership has presented separately as discontinued operations in all periods the results of operations for all 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 the ~~six~~nine months and quarters ended ~~June~~September 30, 2005 and 2004 (amounts in thousands).

	Nine Months Ended September 30,						Quarter Ended September 30,
	2005			2004			2005			2004
REVENUES
Rental income	$	59,432		$	131,939		$	12,026		$	39,796
Total revenues	59,432			131,939			12,026			39,796

EXPENSES (1)
Property and maintenance	25,380			49,077			5,219			14,993
Real estate taxes and insurance	8,758			15,710			1,486			4,851
Property management	338			374			135			182
Depreciation	13,028			33,530			2,182			9,951
Total expenses	47,504			98,691			9,022			29,977

Discontinued operating income	11,928			33,248			3,004			9,819

Interest and other income	210			142			64			43
Interest (2):
Expense incurred, net	(9,079		)	(10,658		)	(1,415		)	(4,258		)
Amortization of deferred financing costs	(474		)	(866		)	(237		)	(316		)

Discontinued operations, net	$	2,585		$	21,866		$	1,416		$	5,288

Six Months Ended June 30,

Quarter Ended June 30,

2005

2004

2005

2004

REVENUES

Rental income

$
23,866

$
69,466

$
8,029

$
32,860

Total revenues

23,866

69,466

8,029

32,860

EXPENSES (1)

Property and maintenance

11,679

25,979

5,114

11,799

Real estate taxes and insurance

4,693

8,248

1,143

4,099

Property management

137

126

55

126

Depreciation

4,818

17,834

1,243

8,700

Total expenses

21,327

52,187

7,555

24,724

Discontinued operating income

2,539

17,279

474

8,136

Interest and other income

114

98

78

55

Interest (2):

Expense incurred, net

(7,107
)
(5,675
)
(3,104
)
(3,693
)
Amortization of deferred financing costs

(209
)
(480
)
(94
)
(176
)

Discontinued operations, net

$
(4,663
)
$
11,222

$
(2,646
)
$
4,322

(1)	~~(1)~~Includes expenses paid in the current period for properties sold in prior periods related to the Operating Partnership’s period of ownership.
(2)	Includes only interest expense specific to secured mortgage notes payable for properties sold.

The Operating Partnership generally is not liable for Federal income taxes as the partners recognize their proportionate share of the Operating Partnership’s ~~period~~income or loss in their tax returns; therefore no provision for Federal income taxes is made in the consolidated financial statements of ~~ownership.~~the Operating Partnership. Due to the structure of the Company as a REIT and the nature of the operations of its operating properties, no provision for federal income taxes has been made at the EQR level. The Operating Partnership has generally only incurred certain state and local income, excise and franchise taxes.

~~(2)~~ ~~Interest includes only specific~~

The Operating Partnership has elected Taxable REIT Subsidiary (“TRS”) status for certain of its corporate subsidiaries, primarily those entities engaged in condominium conversion and sale activities. The Operating Partnership recognized a provision for income taxes of $5.8 million and $5.3 million for the nine months and quarter ended September 30, 2005, respectively. These amounts ~~from each property sold.~~were classified as reductions of the net gain on sales of discontinued operations in the accompanying consolidated statements of operations. In addition, the aggregate results of operations (primarily net operating income) of the Operating Partnership’s condominium conversion properties are included in discontinued operations, net, in the accompanying consolidated statements of operations. As of September 30, 2005, the net real estate basis of the Operating Partnership’s condominium conversion activities, which was included in investment in real estate, net, in the consolidated balance sheets, was $144.7 million.

For the properties sold during the ~~six~~nine months ended ~~June~~September 30, 2005 (excluding condominium conversion properties), the investment in real estate, net, and the mortgage notes payable balances at December 31, 2004 were ~~$437.7~~$664.1 million and ~~$72.7~~$107.6 million, respectively.

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.

In August 2004, the Operating Partnership tried a class action lawsuit in Palm Beach County, Florida regarding certain charges made to residents who terminated their leases early or failed to provide sufficient notice of intent to vacate. In December 2004, the Court issued a Findings of Fact and Conclusions of Law holding those fees legally uncollectible under Florida law. In recognition of the Findings of Fact and Conclusions of Law, which awarded damages and interest to the class in the amount of approximately $1.6 million, the Operating Partnership established a reserve of approximately $1.6 million and correspondingly recorded this as a general and administrative expense in December 2004. Due to a pending ~~appeals,~~appeal, the award is neither final nor enforceable. Accordingly, it is not possible to determine or predict the ultimate outcome of the case. While no assurances can be given, the Operating Partnership does not believe that this lawsuit, if the ultimate outcome is unfavorable, 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.

During the year ended December 31, 2004, the Operating Partnership established a reserve and

recorded a corresponding expense of $15.2 million for estimated uninsured property damage at certain of its properties primarily located in Florida caused by Hurricanes Charley, Frances, Ivan and Jeanne. ~~Of this amount, approximately $15.0 million~~The entire reserve had been spent for hurricane related repairs through ~~June~~September 30, 2005.

During the quarter ended September 30, 2005, the Operating Partnership established a reserve and recorded a corresponding expense of $6.2 million for estimated uninsured property damage at certain of its properties caused by Hurricane Katrina and unrelated fire damage at three properties. Of this amount, approximately $0.7 million had been spent for hurricane and fire damage related repairs through September 30, 2005. The ~~$0.2~~remaining $5.5 million ~~remaining~~ reserve is included in rents received in advance and other liabilities on the consolidated balance sheets.

Hurricane Wilma landed in South Florida during late October 2005 and has caused damages across the state affecting many of our properties. As of the date of this filing, we have yet to quantify the damages and/or amounts covered by insurance.

As of ~~June~~September 30, 2005, the Operating Partnership has ~~four~~five projects totaling ~~1,165~~1,465 units in various stages of development with estimated completion dates ranging through ~~December~~March 31, ~~2006.~~2007. 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 subject to the agreement, 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 subject to the agreement within five years after the receipt of the final certificate of occupancy on the last developed property. In connection with this development 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 ~~July 27,~~November 1, 2005, the Operating Partnership had ~~set-aside $5.0 million towards~~no amounts outstanding related to 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 subject to the agreement, 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, as defined, to market a subject project for sale. Thereafter, either the Operating Partnership or its development partner may market a subject 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.

terminated effective May 2, 2005 as the tax-exempt bonds were redeemed in full and the associated letter of credit was cancelled.

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.

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 99.4% and ~~99.2%~~99.3% of total revenues for the ~~six~~nine months ended ~~June~~September 30, 2005 and 2004, respectively, and approximately ~~99.3% and 99.2%~~99.5% of total revenues for both the quarters ended ~~June~~September 30, 2005 and ~~2004, respectively.~~2004. The Operating Partnership’s rental real estate segment comprises approximately 99.8% of total assets at both ~~June~~September 30, 2005 and December 31, 2004.

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~~(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 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. The following table presents the NOI from our rental real estate from continuing operations for the ~~six~~nine months and quarters ended ~~June~~September 30, 2005 and 2004 (amounts in thousands):

	Six Months Ended June 30,						Quarter Ended June 30,						Nine Months Ended September 30,						Quarter Ended September 30,
	2005			2004			2005			2004			2005			2004			2005			2004
Rental income	$	975,593		$	885,339		$	496,249		$	456,489		$	1,453,829		$	1,316,790		$	501,776		$	454,128
Property and maintenance expense	(273,341		)	(240,866		)	(139,646		)	(124,728		)	(411,187		)	(362,372		)	(146,341		)	(129,612		)
Real estate taxes and insurance expense	(105,589		)	(99,538		)	(52,822		)	(50,612		)	(162,711		)	(159,407		)	(59,701		)	(62,480		)
Property management expense	(41,457		)	(38,294		)	(20,482		)	(20,517		)	(63,254		)	(56,850		)	(21,924		)	(18,865		)

Net operating income	$	555,206		$	506,641		$	283,299		$	260,632		$	816,677		$	738,161		$	273,810		$	243,171

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 ~~six~~nine months ended ~~June~~September 30, 2005 or 2004.

16. Subsequent Events/Other

Subsequent to ~~June~~September 30, 2005 and through ~~July 27,~~November 1, 2005, the Operating Partnership:

• ~~Disposed of~~Acquired three properties consisting of ~~700~~516 units, including one land parcel, for approximately $88.2 million and assumed $16.6 million in mortgage debt and obtained $6.8 million in new

mortgage debt on two of those properties;

• Disposed of two properties consisting of 544 units (excluding condominium units) and two land parcels for approximately ~~$98.3~~$111.2 million; and

• ~~Was released from $10.0~~Repaid $48.0 million of mortgage ~~debt assumed by~~loans.

On November 3, 2005, the ~~purchaser~~Operating Partnership closed on ~~disposed properties.~~the acquisition of three high-rise apartment towers, known as Trump Place, located at 140, 160 and 180 Riverside Boulevard on the Upper West Side of Manhattan. The purchase price was $808.8 million and was financed through a combination of available unrestricted cash, tax-deferred (1031) exchange proceeds from property dispositions and the Operating Partnership’s revolving credit facilities. The properties contain 1,325 residential apartment units, approximately 40,000 square feet of retail space and 424 parking spaces.

During the ~~six~~nine months ended ~~June~~September 30, 2005, the Operating Partnership received proceeds from technology and other investments of $82.1 million from the ~~following investments:~~following:

• $25.0 million in full redemption of its 1,000,000 shares of 8.25% Convertible Trust Preferred Securities; and

• $57.1 million for its ownership interest in Rent.com in connection with the acquisition of Rent.com by eBay, Inc. The $57.1 million was recorded as interest and other income in the accompanying consolidated statements of operations.

On March 28, 2005, the Company and Bruce W. Duncan, the Company’s Chief Executive Officer (“CEO”), entered into an Amended and Restated Employment Agreement (as further amended effective June 30, 2005, the “Amendment”) to reflect changes required in view of Mr. Duncan’s planned retirement as CEO and trustee to be effective December 31, 2005. The Amendment also amended Mr. Duncan’s Deferred Compensation Agreement entered into in January 2003. The Company recorded approximately ~~$5.2~~$7.5 million of additional general and administrative expense during the ~~six~~nine months ended ~~June~~September 30, 2005, and expects to record approximately ~~$4.7~~$2.3 million during the remainder of 2005, primarily related to accelerated vesting of share options and restricted/performance shares.

Effective February 28, 2005, the Company and Edward Geraghty, the President of the Company’s Eastern Division, entered into a Separation Agreement and General Release reflecting Mr. Geraghty’s resignation effective February 28, 2005. The Company recorded approximately $3.3 million of severance as additional general and administrative expense during the quarter ended March 31, 2005.

2223

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, 2004.

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:

•	We intend to actively acquire and develop multifamily properties for rental operations and/or conversion into condominiums, as well as upgrade and sell existing properties as individual condominiums. We may underestimate the costs necessary to bring an acquired or condominium conversion property up to standards established for its intended market position or to otherwise develop a property. Additionally, we expect that other major real estate investors with significant capital will compete with us for attractive investment opportunities or may also develop properties in markets where we focus our development efforts. This competition may increase prices for multifamily properties or decrease the price at which we expect to sell individual condominiums. Upon conversion of properties to condominiums, we have increased our risk related to construction performed during the conversion. Condominium associations may assert that the construction performed was defective, resulting in litigation and/or settlement discussions. We may not be in a position or have the opportunity in the future to make suitable property acquisitions on favorable terms. We also plan to develop more properties ourselves over the next few years in addition to co-investing with our development partners for either the rental or condominium market, depending on opportunities in each sub-market. This may increase the overall level of risk associated with our developments. The total number of development units, cost of development and estimated completion dates are subject to uncertainties arising from changing economic conditions (such as the cost of labor and construction materials), competition and local government regulation.
•	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, 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
•	• We intend to actively acquire and develop multifamily properties for rental operations and/or conversion into condominiums, as well as upgrade and sell existing properties as individual condominiums. We may underestimate the costs necessary to bring an acquired or condominium conversion property up to standards established for its intended market position or to otherwise develop a property. Additionally, we expect that other major real estate investors with significant capital will compete with us for attractive investment opportunities or may also develop properties in markets where we focus our development efforts. This competition may increase prices for multifamily properties or decrease the price at which we expect to sell individual condominiums. We may not be in a position or have the opportunity in the future to make suitable property acquisitions on favorable terms. We also plan to develop more properties ourselves over the next few years in addition to co-investing with our development partners for either the rental or condominium market, depending on opportunities in each sub-market. This may increase the overall level of risk associated with our developments. The total number of development units, cost of development and estimated completion dates are subject to uncertainties arising from changing economic conditions (such as the cost of labor and construction materials), competition and local government regulation. • ~~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, 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 5, 11, 14 and 16 to the Notes to Consolidated Financial Statements in this report.

2324

Results of Operations

In conjunction with our business objectives and operating strategy, the Operating Partnership has continued to invest or recycle its capital investment in apartment communities located in strategically targeted markets during the ~~six~~nine months ended ~~June~~September 30, 2005. In summary, during the ~~six~~nine months ended ~~June~~September 30, 2005, we acquired ~~twenty~~twenty-six properties, consisting of ~~4,874~~7,168 units, for an aggregate purchase price of ~~$729.8 million~~$1.1 billion and ~~two~~three land parcels for ~~$45.3~~$46.7 million, all of which we deem to be in high barrier to entry markets. The Operating Partnership sold 2439 properties, consisting of ~~5,994~~10,212 units, for an aggregate sales price of ~~$644.0 million, 772~~$1.1 billion, 1,341 condominium units ~~(and three properties)~~ for ~~$198.3~~$382.2 million, a 248-unit property in the process of being converted to condominiums for $45.9 million and two land parcels for $36.3 million during the ~~six~~nine months ended ~~June~~September 30, 2005.

The Operating Partnership’s primary financial measure for evaluating each of its apartment communities is net operating income (“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. The Operating Partnership defines NOI as rental income less: 1) property and maintenance expense; 2) real estate taxes and insurance expense; and 3) property management expense.

Properties that the Operating Partnership owned for all of both the ~~six~~nine month periods ended ~~June~~September 30, 2005 and 2004 (the ~~“Six-Month~~“Nine-Month 2005 Same Store Properties”), which represented ~~162,598~~158,005 units and properties that the Operating Partnership owned for all of both the quarters ended ~~June~~September 30, 2005 and 2004 (the ~~“Second~~“Third Quarter 2005 Same Store Properties”), which represented ~~168,385~~165,673 units, also impacted the Operating Partnership’s results of operations. Both the ~~Six-Month~~Nine-Month 2005 Same Store Properties and ~~Second~~Third Quarter 2005 Same Store Properties are discussed in the following paragraphs.

The Operating Partnership’s acquisition, disposition, completed development and consolidation of previously unconsolidated property activities also impacted overall results of operations for the ~~six~~nine months and quarters ended ~~June~~September 30, 2005 and 2004. The impacts of these activities are also discussed in greater detail in the following paragraphs.

Comparison of the ~~six~~nine months ended ~~June~~September 30, 2005 to the ~~six~~nine months ended ~~June~~September 30, 2004

For the ~~six~~nine months ended ~~June~~September 30, 2005, income before allocation to Minority Interests, ~~loss~~income (loss) from investments in unconsolidated entities, net gain on sales of unconsolidated entities and discontinued operations increased by approximately ~~$42.7~~$41.5 million when compared to the ~~six~~nine months ended ~~June~~September 30, 2004.

~~Six-Month~~Nine-Month 2005 Same Store Properties revenues increased primarily as a result of higher rental rates charged to residents, increased occupancy and lower concessions. ~~Six-Month~~Nine-Month 2005 Same Store Properties expenses increased primarily due to higher payroll, utility costs, maintenance costs and real estate taxes. The following tables provide comparative revenue, expense, NOI and weighted average occupancy for the ~~Six-Month~~Nine-Month 2005 Same Store Properties:

YTD September 2005 vs. YTD September 2004
YTD over YTD Same-Store Results

$ in Millions – 158,005 Same-Store Units

YTD June 2005 vs. YTD June 2004
YTD over YTD Same-Store Results
$ in Millions – 162,598 Same-Store Units

Description	Revenues			Expenses			NOI			Revenues			Expenses			NOI

YTD 2005	$	849.2		$	348.0		$	501.2		$	1,240.3		$	512.9		$	727.4
YTD 2004	$	826.9		$	332.0		$	494.9		$	1,201.5		$	485.8		$	715.7
Change	$	22.3		$	16.0		$	6.3		$	38.8		$	27.1		$	11.7
Change	2.7		%	4.8		%	1.3		%	3.2		%	5.6		%	1.6		%

2425

Same Store Occupancy Statistics

~~Same Store Occupancy Statistics~~

YTD 2005	~~93.8%~~94.2	%
YTD 2004	~~93.3%~~93.5	%
Change	~~0.5%~~0.7	%

The following table presents a reconciliation of operating income per the consolidated statements of operations to NOI for the ~~Six-Month~~Nine-Month 2005 Same Store Properties:

	Six Months Ended June 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
	(Amounts in millions)						(Amounts in millions)

Operating income	$	270.4		$	262.6		$	394.5		$	371.8
Adjustments:
Insurance (hurricane property damage)							—			14.1
Non-same store operating results	(54.1		)	(11.6		)	(89.2		)	(36.6		)
Fee and asset management revenue	(5.8		)	(6.9		)	(8.5		)	(9.3		)
Fee and asset management expense	4.9			4.4			7.5			6.5
Depreciation	254.5			223.9			378.1			334.4
General and administrative	31.3			22.5			45.0			34.8

Same store NOI	$	501.2		$	494.9		$	727.4		$	715.7

For properties that the Operating Partnership acquired prior to January 1, 2004 and expects to continue to own through December 31, 2005, the Operating Partnership anticipates the following same store results for the full year ending December 31, 2005:

2005 Same Store Assumptions

~~2005 Same Store Assumptions~~Physical Occupancy	94.3		%
Revenue Change	3.6		%
~~Physical Occupancy~~Expense Change	~~94.0%~~5.3		%
~~Revenue~~NOI Change	~~2.00% to 3.25%~~2.5		%
~~Expense Change~~Acquisitions	~~3.6% to 5.0%~~$	2.0 billion
~~NOI Change~~Dispositions	~~0.0% to 3.0%~~$
~~Acquisitions~~1.4 billion	~~$2.0 billion~~
~~Dispositions~~	~~$1.4 billion~~

These 2005 assumptions are based on current expectations and are forward-looking.

Rental income from properties other than ~~Six-Month~~Nine-Month 2005 Same Store Properties increased by approximately ~~$68.0~~$98.2 million primarily as a result of new properties acquired/consolidated in 2004 and the first ~~six~~nine months of 2005.

Fee and asset management revenues, net of fee and asset management expenses, decreased by ~~$1.6~~$1.8 million primarily as a result of lower income earned from Ft. Lewis. As of ~~June~~September 30, 2005 and 2004, the Operating Partnership managed ~~17,539~~17,148 units and ~~17,798~~17,714 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 increased by approximately ~~$3.2~~$6.4 million. This increase is primarily attributable to higher payroll costs, including bonus and long-term compensation costs, during 2005.

Depreciation expense, which includes depreciation on non-real estate assets, increased ~~$30.5~~$43.8 million primarily as a result of additional depreciation expense on newly acquired properties and capital expenditures for all properties owned.

General and administrative expenses, which include corporate operating expenses, increased approximately ~~$8.7~~$10.2 million between the periods under comparison. This increase is primarily attributable to higher executive compensation expense due to the previously announced December 2005 planned retirement of Bruce W. Duncan, EQR’s Chief Executive Officer, and the March 2005 resignation of Edward Geraghty, EQR’s former Eastern Division President, and additional accruals for certain management incentive programs as a result of the Rent.com gain (see discussion below). The Operating Partnership anticipates that general and administrative expenses will approximate ~~$63.0~~$57.1 million for the year ending December 31, 2005. This above assumption is based on current expectations and is forward-looking.

Interest and other income increased by approximately ~~$58.5~~$58.6 million, primarily as a result of the $57.1 million in cash received for the Operating Partnership’s ownership interest in Rent.com, which was acquired by eBay, Inc.

Interest expense, including amortization of deferred financing costs, increased approximately ~~$23.5~~$39.8 million primarily as a result of higher overall debt balances as well as higher variable interest rates. During the ~~six~~nine months ended ~~June~~September 30, 2005, the Operating Partnership capitalized interest costs of approximately ~~$5.8~~$9.1 million as compared to ~~$6.9~~$10.3 million for the ~~six~~nine months ended ~~June~~September 30, 2004. This capitalization of interest related specifically to our consolidated projects under development. The effective interest cost on all indebtedness for the ~~six~~nine months ended ~~June~~September 30, 2005 was ~~6.18%~~6.23% as compared to ~~5.95%~~5.86% for the ~~six~~nine months ended ~~June~~September 30, 2004.

Loss from investments in unconsolidated entities decreased approximately ~~$7.6~~$7.0 million between the periods under comparison. This decrease is primarily the result of the consolidation of properties that were previously unconsolidated in the first quarter of 2004.

Net gain on sales of discontinued operations increased approximately ~~$110.6~~$305.8 million between the periods under ~~comparison~~comparison. This increase is primarily the result of higher per unit sales prices and lower real estate net book values for properties sold during the nine months ended September 30, 2005 as compared to the same period in 2004, and due to the sale of Water Terrace, a 450-unit high rise luxury apartment building in Marina del Rey, California.

Discontinued operations, net, decreased approximately ~~$15.9~~$19.3 million between the periods under comparison. The decrease in revenues and expenses between periods results from the timing, size and number of properties sold. Any property sold after ~~June~~September 30, 2004 will include a full period’s results in the ~~six~~nine months of 2004 but minimal to no results in the ~~six~~nine months of 2005. See Note 13 in the Notes to Consolidated Financial Statements for further discussion.

Comparison of the quarter ended ~~June~~September 30, 2005 to the quarter ended ~~June~~September 30, 2004

For the quarter ended ~~June~~September 30, 2005, income before allocation to Minority Interests, ~~loss~~income (loss) from investments in unconsolidated entities, net gain on sales of unconsolidated entities and discontinued operations decreased by approximately ~~$3.4~~$1.3 million when compared to the quarter ended ~~June~~September 30, 2004.

~~Second~~27

Third Quarter 2005 Same Store Properties revenues increased primarily as a result of higher rental rates charged to residents, increased occupancy and lower concessions provided residents. ~~Second~~Third Quarter 2005 Same Store Properties expenses increased primarily due to higher utilities, maintenance, ~~payroll,~~insurance and real estate tax costs. The following tables provide comparative revenue, expense, NOI and weighted average occupancy for the ~~Second~~Third Quarter 2005 Same Store Properties:

26Third Quarter 2005 vs. Third Quarter 2004
Quarter over Quarter Same-Store Results

$ in Millions – 165,673 Same-Store Units

Second Quarter 2005 vs. Second Quarter 2004
Quarter over Quarter Same-Store Results
$ in Millions – 168,385 Same-Store Units

Description

Revenues

Expenses

NOI

Q2 2005

$
448.8

$
182.6

$
266.2

Q2 2004

$
435.5

$
174.2

$
261.3

Change

$
13.3

$
8.4

$
4.9

Change

3.0
%
4.9
%
1.8
%

Description	Revenues			Expenses			NOI

Q3 2005	$	446.6		$	187.4		$	259.2
Q3 2004	$	428.2		$	176.5		$	251.7
Change	$	18.4		$	10.9		$	7.5
Change	4.3		%	6.2		%	3.0		%

Same Store Occupancy Statistics

~~Same Store Occupancy Statistics~~

Q2Q3 2005	~~94.1~~94.7	%
Q2Q3 2004	~~93.7~~93.6	%
Change	~~0.4~~1.1	%

The following table presents a reconciliation of operating income per the consolidated statements of operations to NOI for the ~~Second~~Third Quarter 2005 Same Store Properties:

	Quarter Ended June 30,						Quarter Ended September 30,
	2005			2004			2005			2004
	(Amounts in millions)						(Amounts in millions)

Operating income	$	141.0		$	133.3		$	129.9		$	115.3
Adjustments:
Insurance (hurricane property damage)							—			14.1
Non-same store operating results	(17.1		)	0.6			(14.6		)	(5.6		)
Fee and asset management revenue	(3.3		)	(3.7		)	(2.6		)	(2.4		)
Fee and asset management expense	2.4			2.3			2.6			2.1
Depreciation	129.0			115.9			129.7			116.2
General and administrative	14.2			12.9			14.2			12.0

Same store NOI	$	266.2		$	261.3		$	259.2		$	251.7

Rental income from properties other than ~~Second~~Third Quarter 2005 Same Store Properties increased by approximately ~~$26.4~~$29.3 million primarily as a result of new properties acquired/consolidated in 2004 and the first ~~six~~nine months of 2005.

Fee and asset management revenues, net of fee and asset management expenses, decreased by ~~$0.5~~$0.3 million primarily as a result of lower income earned from Ft. Lewis and managing fewer properties 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 ~~were comparable for the periods presented.~~increased by approximately $3.1 million. This increase is primarily attributable to higher payroll costs, including long-term compensation costs.

Depreciation expense, which includes depreciation on non-real estate assets, increased ~~$13.1~~$13.5 million primarily as a result of additional depreciation expense on newly acquired properties and capital expenditures for all properties owned.

General and administrative expenses, which include corporate operating expenses, increased approximately ~~$1.3~~$2.3 million between the periods under comparison. This increase is primarily attributable to higher executive compensation expense due to the previously announced December 2005 planned retirement of Bruce W. Duncan, EQR’s Chief Executive Officer, and additional accruals for certain

management incentive programs as a result of the Rent.com gain (see discussion above), offset by reduced consulting services incurred in the ~~second~~third quarter of ~~2005.~~2005 as compared to the third quarter of 2004.

Interest and other income increased by approximately ~~$0.6~~$0.2 million, primarily as a result of higher balances available for investments including deposits in tax deferred exchange accounts.

Interest expense, including amortization of deferred financing costs, increased approximately ~~$11.7~~$16.1 million primarily as a result of higher overall debt balances as well as higher variable interest rates. During the quarter ended ~~June~~September 30, 2005, the Operating Partnership capitalized interest costs of approximately ~~$2.9~~$3.3 million as compared to ~~$4.2~~$3.4 million for the quarter ended ~~June~~September 30, 2004. This capitalization of interest related specifically to our consolidated projects under development. The effective interest cost on all indebtedness for the quarter ended ~~June~~September 30, 2005 was ~~6.20%~~6.28% as compared to ~~5.80%~~5.69% for the quarter ended ~~June~~September 30, 2004.

Loss from investments in unconsolidated entities ~~decreased~~increased approximately ~~$0.2~~$0.6 million between the periods under comparison. This ~~decrease~~increase is primarily the result of ~~improved operations~~increased equity losses at selected unconsolidated properties for the ~~respective unconsolidated properties.~~third quarter of 2005 as compared to the third quarter of 2004.

Net gain on sales of discontinued operations increased approximately ~~$30.8~~$195.8 million between the periods under comparison. This increase is primarily the result of higher per unit sales prices and lower real estate net book values for properties sold during the quarter ended ~~June~~September 30, 2005 as compared to the same period in 2004.

Discontinued operations, net, decreased approximately ~~$7.0~~$3.9 million between the periods under comparison. The decrease in revenues and expenses between periods results from the timing, size and number of properties sold. Any property sold after ~~June~~September 30, 2004 will include a full quarter’s results in the ~~second~~third quarter of 2004 but minimal to no results in the ~~second~~third quarter of 2005. See Note 13 in the Notes to Consolidated Financial Statements for further discussion.

Liquidity and Capital Resources

As of January 1, 2005, the Operating Partnership had approximately $83.5 million of cash and cash equivalents and $484.6 million available under its revolving credit facility (net of $65.4 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 ~~June~~September 30, 2005 was approximately ~~$102.8~~$306.9 million and the amount available on the Operating Partnership’s revolving credit ~~facility~~facilities was ~~$519.8~~$1,552.7 million (net of ~~$52.2~~$47.3 million which was restricted/dedicated to support letters of credit and not available for borrowing).

During the ~~six~~nine months ended ~~June~~September 30, 2005, the Operating Partnership generated and/or obtained cash from various transactions, which included the following:

• Disposed of 2744 properties, two land parcels and various individual condominium units receiving

net proceeds of approximately ~~$835.8 million;~~

• ~~Increased borrowings by the net amount of $278.0 million on its revolving credit facility;~~$1.5 billion;

• Obtained ~~$149.1~~$496.2 million in net proceeds from the issuance of $500.0 million of ten and one-half year 5.125% fixed rate public notes;

• Obtained $249.5 million in new mortgage financing;

• Obtained $57.1 million for its ownership interest in Rent.com;

• Received $25.0 million in full redemption of its 1,000,000 shares of 8.25% Convertible Trust Preferred Securities; and

• Issued approximately ~~1.1~~1.7 million OP Units and received net proceeds of ~~$26.9~~$42.0 million.

During the ~~six~~nine months ended ~~June~~September 30, 2005, the above proceeds were primarily utilized to:

• Invest ~~$91.1~~$131.5 million primarily in development projects;

• Acquire 2026 properties and ~~two~~three land parcels, utilizing cash of ~~$642.3~~$871.5 million;

• Repay ~~$120.0~~$190.0 million of fixed rate public notes at maturity;

• Repay ~~$212.3~~$372.6 million of mortgage loans; and

•Redeem or repurchase the Series B through F Preference Interests at a liquidation value of $146.0 million.

Depending on its analysis of market prices, economic conditions, and other opportunities for the investment of available capital, the Company may repurchase up to an additional ~~$85.0~~$585.0 million of its Common Shares pursuant to ~~its~~an existing $200.0 million share buyback program authorized by the Board of ~~Trustees.~~Trustees in July 2002 and a new $500.0 million share buyback program authorized by the Board of Trustees in November 2005. The Operating Partnership in turn would repurchase ~~$85.0~~$585.0 million of its OP Units held by EQR. EQR did not repurchase any of its Common Shares during the ~~six~~nine months ended ~~June~~September 30, 2005.

The Operating Partnership’s total debt summary and debt maturity schedule as of ~~June~~September 30, 2005, are as follows:

Debt Summary

$ Millions (1)

Weighted Average
Rate (1)

Secured

$
3,204

5.71
%
Unsecured

3,449

5.96
%
Total

$
6,653

5.84
%

Fixed Rate

$
5,215

6.46
%
Floating Rate

1,438

3.59
%
Total

$
6,653

5.84
%

Above Totals Include:

Tax Exempt:

Fixed

$
285

3.58
%
Floating

466

2.91
%
Total

$
751

3.15
%

Unsecured Revolving Credit Facility

$
428

3.11
%

Debt Summary

	$ Millions (1)		Weighted Average Rate (1)
Secured	$	3,324	5.65	%
Unsecured	3,443		5.93	%
Total	$	6,767	5.80	%

Fixed Rate	$	5,679	6.39	%
Floating Rate	1,088		3.61	%
Total	$	6,767	5.80	%

Above Totals Include:
Tax Exempt:
Fixed	$	135	3.80	%
Floating	616		2.83	%
Total	$	751	3.14	%

Unsecured Revolving Credit Facility	$	—	3.52	%

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

2930

Debt Maturity Schedule as of September 30, 2005

Debt Maturity Schedule as of June 30, 2005

Year	$ Millions		% of Total			$ Millions		% of Total
2005	$	199	3.0	%	2005	$	39	0.6	%
2006 (1)	579		8.7	%	2006 (1)	596		8.8	%
2007	397		6.0	%	2007	378		5.6	%
2008 (2)	1,036		15.6	%
2008					2008	616		9.1	%
2009	839		12.6	%	2009	860		12.7	%
2010	216		3.2	%	2010	262		3.9	%
2011	717		10.8	%	2011	721		10.6	%
2012	519		7.8	%	2012	523		7.7	%
2013	451		6.8	%	2013	567		8.4	%
2014+ (3)	1,700		25.5	%
2014+					2014+	2,205		32.6	%
Total	$	6,653	100.0	%	Total	$	6,767	100.0	%

(1) Includes $150 million of unsecured debt with a final maturity of 2026 that is putable in 2006.

~~(1) Includes $150 million of unsecured debt with a final maturity of 2026 that is putable in 2006.~~

(2) Includes $428 million outstanding on the Operating Partnership’s unsecured revolving credit facility. The Operating Partnership entered into a new credit facility on April 1, 2005 that matures on May 29, 2008.

~~(3) Includes $300 million of unsecured debt with a final maturity of 2015 that was putable/callable on April 13, 2005. Debt was remarketed and remains outstanding until April 13, 2015.~~

As of the date of this filing, ~~$1.48 billion~~$980.0 million in debt securities remains available for issuance by the Operating Partnership under a registration statement the SEC declared effective in June 2003 and $956.5 million in equity securities remains available for issuance by the Company under a registration statement the SEC declared effective in February 1998. 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 ~~June~~September 30, 2005 is presented in the following table. The Operating Partnership calculates the equity 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;~~units/interests; and (iii) the liquidation value of all perpetual preference ~~interests/units~~units/interests outstanding.

Capital Structure as of September 30, 2005

(Amounts in thousands except for unit and per unit amounts)

Secured Debt			$	3,323,932	49	%
Unsecured Debt			3,443,588		51	%
Lines of Credit			—		—
Total Debt			$	6,767,520	100	%	36	%

OP Units	308,772,576
OP Unit Equivalents (see below)	1,679,537
Total outstanding at quarter-end	310,452,113
EQR Common Share Price at September 30, 2005	$	37.85
			11,750,612		96	%
Perpetual Preference Units/Interests (see below)			515,500		4	%
Total Equity			12,266,112		100	%	64	%

Total Market Capitalization			$	19,033,632			100	%

Market Capitalization as of June 30, 2005

Total Debt

$
6,652,659,406

OP Units

308,056,054

OP Unit Equivalents (see below)

1,819,996

Total outstanding at quarter-end

309,876,050

EQR Common Share Price at June 30, 2005

$
36.82

11,409,636,161

Perpetual Preference Units Liquidation Value

615,000,000

Perpetual Preference Interests Liquidation Value

25,500,000

Total Market Capitalization

$
18,702,795,567

Total Debt/Total Market Capitalization

36
%

Convertible Preference Units/Interests as of September 30, 2005

(Amounts in thousands except for unit and per unit amounts)

				Annual		Annual		Weighted
	Outstanding	Liquidation		Dividend Rate		Dividend		Average		Conversion	OP Unit
Series	Units	Value		Per Unit		Amount		Rate		Ratio	Equivalents
Preference Units:
7.00% Series E	554,696	$	13,868	$	1.75	$	971			1.1128	617,266
7.00% Series H	34,934	873		1.75		61				1.4480	50,584
Preference Interests:
7.625% Series H	190,000	9,500		3.8125		724				1.5108	287,052
7.625% Series I	270,000	13,500		3.8125		1,029				1.4542	392,634
7.625% Series J	230,000	11,500		3.8125		877				1.4108	324,484
Junior Preference Units:
8.00% Series B	7,367	184		2.00		15				1.020408	7,517
Total Convertible Preference Units/Interests	1,286,997	$	49,425			$	3,677	7.44	%		1,679,537

Perpetual Preference Units/Interests as of September 30, 2005 (1)

(Amounts in thousands except for unit and per unit amounts)

				Annual		Annual
	Outstanding	Liquidation		Dividend Rate		Dividend		Weighted
Series	Units	Value		Per Unit		Amount		Average Rate
Preference Units:
9 1/8% Series C	460,000	$	115,000	$	22.81252	$	10,494
8.60% Series D	700,000	175,000		21.50		15,050
8.29% Series K	1,000,000	50,000		4.145		4,145
6.48% Series N	600,000	150,000		16.20		9,720
Preference Interests:
7.875% Series G	510,000	25,500		3.9375		2,008
Total Perpetual Preference Units/Interests	3,270,000	$	515,500			$	41,417	8.03	%

Convertible Preference Units, Preference Interests
and Junior Preference Units
as of June 30, 2005

Units

Conversion Ratio

OP Unit Equivalents

Preference Units:

Series E

680,396

1.1128

757,145

Series H

35,334

1.4480

51,164

Preference Interests:

Series H

190,000

1.5108

287,052

Series I

270,000

1.4542

392,634

Series J

230,000

1.4108

324,484

Junior Preference Units:

Series B

7,367

1.020408

7,517

Total

1,819,996

~~The Operating Partnership’s policy is to maintain a ratio of~~(1) Excludes $125.0 million for the 9 1/8% Series B Preference Units which was redeemed for cash on 10/17/05 and was included in rents received in advance and other liabilities in the consolidated ~~debt-to-total market capitalization of less than 50%.~~balance sheets at 9/30/05.

See Note 16 in the Notes to Consolidated Financial Statements for discussion of the events which occurred subsequent to ~~June~~September 30, 2005.

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.

• ~~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 ~~six~~nine months ended ~~June~~September 30, 2005, our actual improvements to real estate totaled approximately ~~$93.4~~$167.3 million. This includes the following detail (amounts in thousands except for unit and per unit amounts):

Capitalized Improvements to Real Estate
For the Six Months Ended June 30, 2005

Total Units
(1)

Replacements

Avg. Per
Unit

Building
Improvements

Avg. Per
Unit

Total

Avg. Per
Unit

Established Properties (2)

151,934

$
26,532

$
175

$
33,635

$
221

$
60,167

$
396

New Acquisition Properties (3)

21,282

2,168

115

7,046

374

9,214

489

Other (4)

9,087

10,035

14,015

24,050

Total

182,303

$
38,735

$
54,696

$
93,431

Capitalized Improvements to Real Estate
For the Nine Months Ended September 30, 2005

	Total Units (1)	Replacements		Avg. Per Unit		Building Improvements		Avg. Per Unit		Total		Avg. Per Unit
Established Properties (2)	148,198	$	43,850	$	296	$	63,303	$	427	$	107,153	$	723
New Acquisition Properties (3)	23,468	4,022		204		12,557		637		16,579		841
Other (4)	7,879	16,719				26,823				43,542
Total	179,545	$	64,591			$	102,683			$	167,274

(1) Total units exclude ~~16,117~~16,030 unconsolidated units.

(2) Wholly Owned Properties acquired prior to January 1, 2003.

(3) Wholly Owned Properties acquired during 2003, 2004 and 2005. Per unit amounts are based on a weighted average of ~~18,823~~19,707 units.

(4) Includes properties either Partially Owned or sold during the period, commercial space, condominium conversions and ~~$2.8~~$4.5 million included in building improvements spent on ~~six~~eight specific assets related to major renovations and repositioning of these assets.

The Operating Partnership expects to fund approximately ~~$67.0~~$60.0 million for capital expenditures for replacements and building improvements for all consolidated properties, exclusive of condominium conversion properties, for the remainder of 2005.

During the ~~six~~nine months ended ~~June~~September 30, 2005, 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, were approximately ~~$4.1~~$12.4 million. The Operating Partnership expects to fund approximately ~~$13.7~~$5.5 million in total additions to non-real estate property for the remainder of 2005, the majority of which includes software licenses and hardware related to the Operating Partnership’s pricing and procurement initiatives.

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

3233

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 and other factors. When viewed in conjunction with the underlying and offsetting exposure that the derivatives are designed to hedge, the Operating Partnership has 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 from the use of derivatives.

See Note 11 in the Notes to Consolidated Financial Statements for additional discussion of derivative instruments at ~~June~~September 30, 2005.

Other

Total distributions paid in ~~July~~October 2005 amounted to ~~$145.2~~$145.5 million (excluding distributions on Partially Owned Properties), which included certain distributions declared during the ~~second~~third quarter ended ~~June~~September 30, 2005.

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.~~facilities. 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 significant 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 revolving credit ~~facility.~~facilities. Of the ~~$15.2~~$15.3 billion in investment in real estate on the Operating Partnership’s balance sheet at ~~June~~September 30, 2005, ~~$9.7~~$9.6 billion or ~~63.7%~~62.8%, was unencumbered.

The Operating Partnership has a revolving credit facility with potential borrowings of up to $1.0 billion. This facility matures in May 2008 and may, among other potential uses, be used to fund property acquisitions, costs for certain properties under development and short term liquidity requirements. In addition, the Operating Partnership closed on a new one-year revolving credit facility expiring on August 29, 2006 with potential borrowings of $600.0 million. As of ~~July 27,~~November 4, 2005, ~~$449.0~~$705.0 million was outstanding under ~~this facility~~these facilities (and ~~$47.0~~$40.5 million was restricted and dedicated to support letters of credit).

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.

•Other – As of ~~June~~September 30, 2005, the Operating Partnership has ownership interests in eleven properties containing 1,451 units acquired in a prior merger. The current weighted average ownership percentage is 10.7%. The Operating Partnership’s strategy with respect to these interests is either to acquire a majority ownership or sell the Operating Partnership’s interest.

As of ~~June~~September 30, 2005, the Operating Partnership has ~~four~~five projects totaling ~~1,165~~1,465 units in various stages of development with estimated completion dates ranging through ~~December~~March 31, ~~2006.~~2007. The ~~three~~ development agreements currently in place are discussed in detail in Note 14 of the Operating Partnership’s Consolidated Financial Statements.

See also Notes 2 and 6 in the Notes to Consolidated Financial Statements for additional discussion regarding the Operating Partnership’s investments in unconsolidated entities.

The Operating Partnership’s guaranty of a credit enhancement agreement with respect to certain tax-exempt bonds issued to finance certain public improvements at a multifamily development project was terminated effective May 2, 2005 as the tax-exempt bonds were redeemed in full and the associated letter of credit was cancelled.

The Operating Partnership’s contractual obligations for the next five years and thereafter have not changed materially from the amounts and disclosures included in its annual report on Form 10-K, other than as it relates to scheduled debt maturities. See the updated debt maturity schedule included in Liquidity and Capital Resources for further discussion.

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 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, with capitalization ceasing no later than 90 days following issuance of the certificate of occupancy. These costs are reflected on the balance sheet as construction in progress for each specific property. The Operating Partnership expenses as incurred all payroll costs of on-site employees working directly at our properties, except as noted above on our development properties prior to certificate of occupancy issuance and on specific major renovation at selected properties when additional incremental employees are hired.

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. Fee and asset management revenue and interest income are recorded on an accrual basis.

Stock-Based Compensation

The Company elected to account for 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.

The Company elected the “Prospective Method” which requires expensing of employee awards granted or modified after January 1, 2003. Compensation expense under all of the Company’s plans is generally recognized over periods ranging from three months to five years. See Note 2 in the Notes to Consolidated Financial Statements for further discussion and comparative information regarding application of the fair value method to all outstanding employee awards.

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 ~~six~~nine months ended ~~June~~September 30, 2005, Funds From Operations (“FFO”) available to OP Units increased ~~$77.6~~$100.5 million, or ~~23.8%~~21.0%, as compared to the ~~six~~nine months ended ~~June~~September 30, 2004.

For the quarter ended ~~June~~September 30, 2005, FFO available to OP Units increased ~~$3.9~~$22.9 million, or ~~2.3%~~15.0%, as compared to the quarter ended ~~June~~September 30, 2004.

The following is a reconciliation of net income to FFO available to OP Units for the ~~six~~nine months and quarters ended ~~June~~September 30, 2005 and 2004:

Funds From Operations
(Amounts in thousands)
(Unaudited)

Six Months Ended June 30,

Quarter Ended June 30,

2005

2004

2005

2004

Net income

$
402,756

$
260,093

$
154,476

$
135,388

Adjustments:

Depreciation

254,450

223,927

128,957

115,876

Depreciation – Non-real estate additions

(2,685
)
(2,717
)
(1,391
)
(1,417
)
Depreciation – Partially Owned Properties

(2,685
)
(4,171
)
(1,362
)
(2,075
)
Depreciation – Unconsolidated Properties

2,047

7,879

975

1,116

Net (gain) on sales of unconsolidated entities

(124
)
(4,405
)
—

(1,971
)
Discontinued operations:

Depreciation

4,818

17,834

1,243

8,700

Net (gain) on sales of discontinued operations

(259,824
)
(149,259
)
(108,559
)
(77,760
)
Net incremental gain on sales of condominium units

29,619

8,470

15,944

4,946

Net gain on sales of vacant land

10,366

5,536

(2
)
5,521

FFO (1)(2)

438,738

363,187

190,281

188,324

Preferred distributions

(31,322
)
(37,493
)
(14,409
)
(18,737
)
Premium on redemption of Preference Interests

(4,112
)
—

(2,384
)
—

FFO available to OP Units

$
403,304

$
325,694

$
173,488

$
169,587

~~(1) The National Association of Real Estate Investment Trusts (“NAREIT”) defines funds from operations (“FFO”) (April 2002 White Paper) as net income (computed~~Funds From Operations
(Amounts in accordance with accounting principles generally accepted in the United States (“GAAP”)), 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.

(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 is a recognized measure of performance by the real estate industry and by excluding gains or losses related to dispositions of depreciable property and excluding real estate depreciation (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO can help compare the operating performance of a company’s real estate between periods or as compared to different companies. FFO in and of itself does not represent net income or net cash flows from operating activities in accordance withthousands)
(Unaudited)

	Nine Months Ended September 30,						Quarter Ended September 30,
	2005			2004			2005			2004
Net income	$	689,543		$	359,261		$	286,787		$	99,168
Adjustments:
Depreciation	378,123			334,352			129,701			116,170
Depreciation – Non-real estate additions	(3,928		)	(4,025		)	(1,243		)	(1,308		)

Depreciation – Partially Owned and Unconsolidated Properties	2,136			2,828			2,774			(880		)
Net (gain) on sales of unconsolidated entities	(124		)	(4,407		)	—			(2		)
Discontinued operations:
Depreciation	13,028			33,530			2,182			9,951
Net (gain) on sales of discontinued operations	(513,419		)	(207,653		)	(254,178		)	(58,394		)
Net incremental gain on sales of condominium units	56,667			15,669			27,631			7,199
Net gain on sales of land parcels	10,366			5,483			—			(53		)

FFO (1)(2)	632,392			535,038			193,654			171,851

Preferred distributions	(45,446		)	(55,896		)	(14,124		)	(18,403		)
Premium on redemption of Preference Units	(4,316		)	—			(4,316		)	—
Premium on redemption of Preference Interests	(4,134		)	(1,117		)	(22		)	(1,117		)
FFO available to OP Units	$	578,496		$	478,025		$	175,192		$	152,331

*(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 (“GAAP”)), 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.

*(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 is a recognized measure of performance by the real estate industry and by excluding gains or losses related to dispositions of depreciable property and excluding real estate depreciation (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO can help compare the operating performance of a company’s real estate between periods or as compared to different companies. 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 in accordance with GAAP. 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, 2004. See also Note 11 in the Notes to Consolidated Financial Statements for additional discussion of derivative instruments.

Item 4. Controls and Procedures

Effective as of ~~June~~September 30, 2005, 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 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 ~~June~~September 30, 2005, 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

recorded this as a general and administrative expense in December 2004. Due to a pending ~~appeals,~~appeal, the award is neither final nor enforceable. Accordingly, it is not possible to determine or predict the ultimate outcome of the case. While no assurances can be given, the Operating Partnership does not believe that this lawsuit, if the ultimate outcome is unfavorable, will have a material adverse effect on the Operating Partnership.

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, 2004.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

OP Units Issued in the Quarter Ended ~~June~~September 30, 2005

The Operating Partnership issued ~~55,197~~26,080 OP Units having a value of ~~$1.8~~$1.0 million during the ~~second~~third quarter of 2005.

These OP Units were issued in exchange for direct or indirect interests in multifamily properties in private placement transactions under section 4(2) of the Securities Act of 1933, as amended (the ~~“Securites~~“Securities Act”). OP Units are generally exchangeable into Common Shares of EQR on a one-for-one basis or, at the

option of EQR and the Operating Partnership, the cash equivalent thereof at any time one year after the date of issuance.

Item 6. Exhibits

10.1*		~~First Amendment to Amended and Restated Employment Agreement between Equity Residential and Bruce W. Duncan, dated June 30, 2005.~~

10.2**		Revolving Credit Agreement dated as of ~~April 1,~~August 30, 2005 among ERP Operating Limited Partnership, Bank of America, N.A., as administrative agent ~~JPMorgan Chase~~and a bank, Deutsche Bank ~~N.A.,~~Trust Company Americas, as syndication agent J.P. Morgan Securities Inc. and Banc of America Securities LLC, as joint lead arrangers and joint book runners, Commerzbank AG, New York and Grand Cayman Branches, Wachovia Bank, National Association, Wells Fargo Bank, N.A., Suntrust Bank, and US Bank National Association, as co-documentation agents, and a ~~syndicate of other banks~~bank, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as documentation agent, and Merrill Lynch Bank USA, as a bank (the “Credit Agreement”).

10.3*10.2		Guaranty of Payment made as of ~~April 1,~~August 30, 2005 between Equity Residential and Bank of America, N.A., as administrative agent for the banks party to the Credit Agreement.

10.410.3		~~Third Amendment~~Summary of Changes to Equity ~~Residential 2002 Share Incentive Plan.~~Residential’s Trustee Compensation.

10.5***		~~Second Amendment to Amended and Restated Compensation Agreement between Equity Residential and Samuel Zell dated April 25, 2005.~~

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

31.2		Certification of Donna Brandin, Chief Financial Officer of 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 Donna Brandin, Chief Financial Officer of Registrant’s General Partner.

* Included as an exhibit to EQR’s Form 10-Q for the quarterly period ended June 30, 2005.

** Included as an exhibit to EQR’s Form 8-K dated April 1, 2005, filed on April 4, 2005.

*** Included as an exhibit to EQR’s Form 10-Q for the quarterly period ended March 31,
*
Included as an exhibit to the Operating Partnership’s Form 8-K dated August 30, 2005, filed on September 2, 2005.
**
Included as an exhibit to the Operating Partnership’s Form 8-K dated September 21, 2005, filed on September 27, 2005.

3839

SIGNATURES
Pursuant to the requirements of 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:
~~August 8,~~November 7, 2005

By:
/s/
Donna Brandin

Donna Brandin

Executive Vice President and

Chief Financial Officer

Date:
~~August 8,~~November 7, 2005

By:
/s/
Mark L. Wetzel

Mark L. Wetzel

Senior Vice President and

Chief Accounting Officer

3940

EXHIBIT INDEX
Exhibit

Document

31.1

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

31.2

Certification of Donna Brandin, Chief Financial Officer of 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 Donna Brandin, Chief Financial Officer of Registrant’s General Partner.

	June 30, 2005			December 31, 2004			September 30, 2005			December 31, 2004
ASSETS
Investment in real estate
Land	$	2,222,255		$	2,183,818		$	2,283,157		$	2,183,818
Depreciable property	12,565,622			12,350,900			12,670,716			12,350,900
Construction in progress (including land)	403,068			317,903			330,965			317,903
Investment in real estate	15,190,945			14,852,621			15,284,838			14,852,621
Accumulated depreciation	(2,765,550		)	(2,599,827		)	(2,805,552		)	(2,599,827		)
Investment in real estate, net	12,425,395			12,252,794			12,479,286			12,252,794

Cash and cash equivalents	102,752			83,505			306,933			83,505
Investments in unconsolidated entities	10,658			11,461			11,390			11,461
Rents receivable	942			1,681			940			1,681
Deposits – restricted	172,106			82,194			305,366			82,194
Escrow deposits – mortgage	34,586			35,800			36,389			35,800
Deferred financing costs, net	38,242			34,986			40,041			34,986
Goodwill, net	30,000			30,000			30,000			30,000
Other assets	93,355			112,854			101,484			112,854
Total assets	$	12,908,036		$	12,645,275		$	13,311,829		$	12,645,275

LIABILITIES AND PARTNERS’ CAPITAL
Liabilities:
Mortgage notes payable	$	3,203,644		$	3,166,739		$	3,323,932		$	3,166,739
Notes, net	3,021,015			3,143,067			3,443,588			3,143,067
Line of credit	428,000			150,000
Lines of credit							—			150,000
Accounts payable and accrued expenses	104,751			87,422			124,908			87,422
Accrued interest payable	71,251			70,411			64,201			70,411
Rents received in advance and other liabilities	272,284			227,588			490,894			227,588
Security deposits	49,995			49,501			49,977			49,501
Distributions payable	143,296			142,437			143,572			142,437
Total liabilities	7,294,236			7,037,165			7,641,072			7,037,165

Commitments and contingencies
Minority Interests – Partially Owned Properties	7,189			9,557			10,716			9,557

Partners’ capital:
Preference Units	632,893			636,216			504,741			636,216
Preference Interests	60,000			206,000			60,000			206,000
Junior Preference Units	184			184			184			184
General Partner	4,611,865			4,457,700			4,772,642			4,457,700
Limited Partners	333,545			319,841			340,037			319,841
Deferred compensation	—			(18		)	—			(18		)
Accumulated other comprehensive loss	(31,876		)	(21,370		)	(17,563		)	(21,370		)
Total partners’ capital	5,606,611			5,598,553			5,660,041			5,598,553
Total liabilities and partners’ capital	$	12,908,036		$	12,645,275		$	13,311,829		$	12,645,275

	Redemption Date (1) (2)	Conversion Rate (2)	Annual Dividend Rate per Unit (3)			Amounts in thousands
	Redemption Date (1) (2)	Conversion Rate (2)	Annual Dividend Rate per Unit (3)			June 30, 2005		December 31, 2004
Preference Interests:

8.50% Series B Cumulative Redeemable Preference Units; liquidation value $50 per unit; 0 and 1,100,000 units issued and outstanding at June 30, 2005 and December 31, 2004, respectively	03/03/05	N/A			(4)	$	—	$	55,000

8.50% Series C Cumulative Redeemable Preference Units; liquidation value $50 per unit; 0 and 220,000 units issued and outstanding at June 30, 2005 and December 31, 2004, respectively	03/23/05	N/A			(4)	—		11,000

8.375% Series D Cumulative Redeemable Preference Units; liquidation value $50 per unit; 0 and 420,000 units issued and outstanding at June 30, 2005 and December 31, 2004, respectively	05/01/05	N/A			(4)			21,000

8.50% Series E Cumulative Redeemable Preference Units; liquidation value $50 per unit; 0 and 1,000,000 units issued and outstanding at June 30, 2005 and December 31, 2004, respectively	08/11/05	N/A			(4)	—		50,000

8.375% Series F Cumulative Redeemable Preference Units; liquidation value $50 per unit; 0 and 180,000 units issued and outstanding at June 30, 2005 and December 31, 2004, respectively	05/01/05	N/A			(4)	—		9,000

7.875% Series G Cumulative Redeemable Preference Units; liquidation value $50 per unit; 510,000 units issued and outstanding at June 30, 2005 and December 31, 2004	03/21/06	N/A	$	3.9375		25,500		25,500

7.625% Series H Cumulative Convertible Redeemable Preference Units; liquidation value $50 per unit; 190,000 units issued and outstanding at June 30, 2005 and December 31, 2004	03/23/06	1.5108	$	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 atJune 30, 2005 and December 31, 2004	06/22/06	1.4542	$	3.8125		13,500		13,500

7.625% Series J Cumulative Convertible Redeemable Preference Units; liquidation value $50 per unit; 230,000 units issued and outstanding at June 30, 2005 and December 31, 2004	12/14/06	1.4108	$	3.8125		11,500		11,500
						$	60,000	$	206,000

	certain circumstances at the option of the holder (in whole but not in part) to Common Shares based upon the contractual conversion rate, plus accrued and unpaid distributions, if any.

(3)	Dividends on all series of Preference Interests are payable quarterly on March 25^th, June 25^th, September 25^thand December 25^thof each year.

(4)	During the nine months ended September 30, 2005, the Operating Partnership redeemed or repurchased for cash all of its Series B through F Preference Interests with a liquidation value of $146.0 million. The Operating Partnership recorded approximately $4.1 million as premiums on redemption of Preference Interests in the accompanying consolidated statements of operations, which included $3.8 million in original issuance costs and $0.3 million in cash redemption charges.

	Redemption Date		Conversion Rate		Annual Dividend Rate per Unit (1)		Amounts in thousands
	Redemption Date		Conversion Rate		Annual Dividend Rate per Unit (1)		June 30, 2005		December 31, 2004
Junior Preference Units:

Series B Junior Convertible Preference Units; liquidation value $25 per unit; 7,367 units issued and outstanding at June 30, 2005 and December 31, 2004		(2)		(2)	$	2.00	$	184	$	184
							$	184	$	184

Second Quarter 2005 vs. Second Quarter 2004
Quarter over Quarter Same-Store Results
$ in Millions – 168,385 Same-Store Units

Description	Revenues			Expenses			NOI

Q2 2005	$	448.8		$	182.6		$	266.2
Q2 2004	$	435.5		$	174.2		$	261.3
Change	$	13.3		$	8.4		$	4.9
Change	3.0		%	4.9		%	1.8		%

Market Capitalization as of June 30, 2005

Total Debt			$	6,652,659,406

OP Units	308,056,054
OP Unit Equivalents (see below)	1,819,996
Total outstanding at quarter-end	309,876,050
EQR Common Share Price at June 30, 2005	$	36.82
			11,409,636,161
Perpetual Preference Units Liquidation Value			615,000,000
Perpetual Preference Interests Liquidation Value			25,500,000
Total Market Capitalization			$	18,702,795,567

Total Debt/Total Market Capitalization			36		%

Convertible Preference Units, Preference Interests and Junior Preference Units as of June 30, 2005

	Units	Conversion Ratio	OP Unit Equivalents
Preference Units:
Series E	680,396	1.1128	757,145
Series H	35,334	1.4480	51,164
Preference Interests:
Series H	190,000	1.5108	287,052
Series I	270,000	1.4542	392,634
Series J	230,000	1.4108	324,484
Junior Preference Units:
Series B	7,367	1.020408	7,517
Total			1,819,996

Capitalized Improvements to Real Estate For the Six Months Ended June 30, 2005

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

Established Properties (2)	151,934	$	26,532	$	175	$	33,635	$	221	$	60,167	$	396

New Acquisition Properties (3)	21,282	2,168		115		7,046		374		9,214		489

Other (4)	9,087	10,035				14,015				24,050

Total	182,303	$	38,735			$	54,696			$	93,431

*	Included as an exhibit to the Operating Partnership’s Form 8-K dated August 30, 2005, filed on September 2, 2005.

**	Included as an exhibit to the Operating Partnership’s Form 8-K dated September 21, 2005, filed on September 27, 2005.